Docment of

The World Bank

FOR OFFMCIUL USE ONLY

Report No. P-4334-ZR

REPORT AND RECOMHENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED DEVELOPMENT CREDIT

IN AN AMOUNT EQUIVALENT TO SDR 37.3 MILLION

TO THE

REPUBLIC OF ZAIRE

FOR A

SECOND POWER PROJECT

May 29, 1986

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its conients may not otherwise be disclosed without World Bank authorization.

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CUJRENCY EQUIVALENTS

Currency Unit - Zaire (Z)

March 1986

Zaire 1.00 = US$0.02US$ 1.00 = Z 55.0

FISCAL YEAR

January 1 - December 31

WEIGHTS AND MEASURES

I meter (m) 3.28 feetI kilometer (km) = 0.62 mile1 sq kilometer (km2) 0.386 square milesI sq meter (m2) = 10.76 square feetI cubic meter (m3) = 1.13 cubic yards1 metric ton (ton) = 2,204 pounds1 gigawatt hour (GWh) 1,000,000 kilowatt hours

ACRONYMS AND ABBREVIATIONS

CAT£3 Center for the Adaptation of Wood Energy TechnologyCCCE Caisse centrale de cooperation economique1iE D6partement des mines et de l t &nergieEdi? Electricite de FranceNEC National Energy CommissionNKLS National Reforestation ServicePetrozaire Entreprise petroliare du ZaireKEGIDESO Regie de distribution dreau (Zaire)SINELAC Societe internationale d t electricit6 des pays des

grands lacssis Systame Inga-ShabaSNEL Societe nationale d'electriciteSONATRAD National Procurement CompanySOZIR Societe Zaire-Italienne de RaffinageSPE Service prgsidentiel d'etudesZOFI Zone franche d'Inga

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ZAIRE

SECOND POWER PROJECT

Credit and Project Summary

Borrower: The Republic of Zaire

Amount: IDA Credit SDR 37.3 million (US$37 millionequivalent)

Terms: Standard

Cofinancing: UNDP grant of US$600,000 equivalent.

Beneficiary: Societe Nationale d'Electricitfe (SNEL)

Onlending Terms: The Government would onlend SDR 37.2 million(US$36.9 million equivalent) from the proceedsof the Credits to SNEL at 8.5 percent interestper annum with a 20 year repayment period,including five years' grace. SNEL will bearthe foreign exchange risk. UNDP funds would beon a grant basis.

Project Description: The project would seek to:(a) ensure reliability of supply to the main

interconnected networks, by (i)rehabilitating the existing Ruzizi I plantand the distribution networks of Bukavu,Goma, Uvira and Kiliba; (ii) completingthe rehabilitation of the generationstations and transmission and distributionsystem in the Shaba Region; and (iii)carrying out urgent maintenance works and

improving operation of the Inga hydropowercomplex;

(b) make optimal use of the electric energywithin the Zaire(Kivu)-Rwanda-Burundiinterconnected system by increasing thetransmission and distribution capacity ofthe elecetricity network in that portion ofthe Kivu region where there is

considerable suppressed demand; and(c) strengthen SNEL as an institution through

better planning, rational pricing,improved financial policies, and trainingof its staff. An urban household energystudy to be supervised by SNEL on behalfof the Government would determine thesubstitutability of electricity fortraditional household fuels.

[ This document has a restricted distribution and may be used by recipients only in the performance of |their official duties. Its contenst may not otherwise be disclosed without World Bank authorization.

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Benerits and Risks; The principal benefits of the proposed projectwould result from continued use of some ofZaire's earlier major power investments andfrom optimal use of power supplied throughZaire's interconnected networks. Completion ofthe rehabilitation of the Shaba power plantsand transmission system and assistance to SNELin operating and maintaining the Inga I andInga II hydropower plants would improve relia-bility of supply to the main electrified areasand to the vital mining industry. Physicalrisks of the project are minimal. A risk liesin the Government's lack of coherent policiesfor planning and pricing, but by seekingadvice through an Energy Sector Assessment andcommitting itself to exchange views with IDA onthese subjects in the future, the Governmenthas demonstrated its intention to improve inthese areas. SNEL's lack of skilled manpoweris also a risk, but this is addressed by theprovision of consultants and training.

Estimate of Project Cost: March 1986

Project Components Local Foreign TotalUS$ thousand-

I. Rehabilitation and Extension ofthe Kivu Power System1. Rehabilitation of the Ruzizi I

hydropower plant 500 6,045 6,5452. Kivu transmission and distribution

networks and terminal to Ruzizi II 1,090 9,200 10,2903. Radio-Communication equipment 10 70 80

II. Rehabilitation ofthe Shaba Power System 700 3,975 4,675

lII. Emergency repairs and operationalimprovements for the Inga complex 345 1,795 2,140

IV. 'rechnical Assistance and Studies 1/ 710 8,370 9,080

V. Training 70 590 660

Total: base Costs 3,425 30,045 33,470Physical Coutingencies 365 3,240 3,605

- Subtotal 3,790 33,285 37,075

Price Contingencies 510 4,315 4,825

Total Cost of the Project 4,300 37,600 41,900

Iaterest During Construction 6,500 - 6,500

Total Financing Required 10,80U 37,600 48,400

1/ Including an advance from the PPF of US$1 million equivalent.

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Proposed Financing Plan; Local Foreign TotalUS$ thousand-----

LlA - 37,000 37,000UNDe 600 600SNEL 10,800 - 10,800TotaL 10,800 37,600 48,400

Estimated Disbursements: (IDA FY) FY87 FY88 FY89 FY90 FY91US$ million --

Annual 7.0 13.0 11.0 5.3 0.7Cumulative 7.0 Z0.0 31.0 36.3 37.0

Economic Rate of Return: 9.5 percent for components representing 70 percentof total cost.

Map: IBRD No. 18989 - Zaire Power II Project

REPORT AND RECOMMENDATION OF THE PRESIDENTTo THE EXECUTIVE DIRECTORS ON A PROPOSED

CREDIT TO THE REPUBLIC OF ZAIREFOR A SECOND POWER PROJECT

1. I submit the following report and recommendation on a proposeddevelopment credit to the Republic of Zaire in the amount of SDR 37.3million equivalent (USS37.U million) on standard IDA terms to finance aSecond Power Project. The Government would onlend SDR 37.2 million (US036.9million equivalent) from the proceeds of the Credit to SNEL at 8.5 percentinterest per ann-m with a 20 year repayment period, including five years'grace. SNEL would bear the foreign exchange risk. The Project would beco-financed, on t parallel basis, with a UNDP grant of US$ 600,000equivalent.

PART I - THE ECONOHYI/

2. The latest country economic memorandum entitled 'Zaire: EconomicChange and External Assistance" dated March 29, 1985 (Report No. 5417-ZR)was distributed to the Executive Directors in April 1965. A Bank missionto assess recent economic developments and to review the Public InvestmentProgram visited Zaire in March/April 1986 and its report is underpreparation. The following section is updated to reflect the findings ofthe mission.

Background

3. Zaire is the third largest country in Africa in terms of its areaand the fifth largest in terms of its population, but its GNP per capitaestimated at US$140 in 1984, ranks among the lowest in the continent. Witha population of about 30 milion, Zaire has a low population densityestimated at 12 persons per square kilometer. About a third of itspopulation lives in urban areas. Although agriculture (commercialized andsubsistance) accounts for only 30 percent of GDP, it provides employmentand income for more than three-quarters of the population. Mining andmineral processing accounts for a third of GDP and about two-thirds of thecountry's export earnings. Mining has traditionally been a major source ofpublic sector revenues.

4. When Zaire gained independence in 1960, it was ill-prepared forthe change, both technically and institutionally. The first six years

1/ This section, remains substantially the same as Part I of thePresident's Report for the Industrial Sector Adjustment Credit(P-4227-ZR) dated May 19, 1986.

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following independence were marked by a violent political strife and asevere disruption of the economy. After the restoration of political orderin 19b7, however, the country enjoyed a period of relative stability andeconomic growth which lasted until 1974. During this period, GDP grew at arate of about seven percent a year in real terms.

The Crisis Period

5. The first signs of crisis began to emerge in 1975 as copperprices started to weaken. Between 1975 and 1983, the performance of theZairian economy was characterized by a series of crises and short-livedrecoveries, severe underutilization and deterioration of productivecapacity and infrastructure, the emergence of significant economic andfinancial imbalances, high inflation, and a decline in per capita income.Several factors, some of them predating 1975, contributed to thesedifficulties. Among these are: the zairianization and nationalizationmeasures of 1973/74, which though rescinded since, destroyed thedistribution network and undermined private sector confidence; the heavyexternal borrowing of the early 1970s, much of it at unfavorable terms andfor projects with questionable economic justification; and the deficienciesin economic management. The weakness and volatility of world copper pricesduring most of this period contributed to the severity of the crisis. By1979, GDP contracted by about 10 percent below the pre-crisis (1972-74)level; inflation soared to more than 100 percent with chronic shortages ofessential consumer goods, fuel and intermediate goods. With the balance ofpayments under strain, external payments arrears continued to accumulate.Although two stabilization programs supported by the IME were adopted, andthree Paris Club reschedulings were concluded during the 1975-79 period,these coul' not be implemented.

6. Systematic efforts to cope with the crisis did not start until1979. These included a new stabilization program supported by the IMF, newdebt rescheduling agreements with the Paris Club (December 1979) and withthe London Club (April 1980); the preparation of a public investmentprogram (PIP) for the 1979-81 period with the support of the Bank, theinstallation of external advisors at the Central Bank and the Ministry ofFinance, the revamping of some institutions (the Customs Office, theministry of Agriculture, the Investment Commission) and the creation ofothers (a Ceatral Pay Directorate in the Ministry of Finance). Along witha strong recovery of copper production, these measures resulted in aconsiderable improvement of the economic situation in 1980.

7. Largely on the strength of this improved performance, inmid-1981, Zaire adopted a three-year program of economic and financialadjustment supported by an "Extended Fund Facility" (EFF). Zaire alsoconcluded another rescheduling agreement with the Paris Club in July 1981.Further weakening of copper and cobalt markets, however, caused exports tofall by US$540 million (about 25 percent in nominal terms). The immediateshortage cf foreign exchange resulted in a sudden decline in imports whichin real terms were half of the pre-crisis level. With weakening financial

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discipline, the budget deficit quadrupled in nominal terms, reaching 7percent of &DP. Zaire could not comply with either the criteria under theEFF' or the Paris Club agreement. The EFF was formally cancelled. Thefailure of the EFF meant the collapse of the premises on which the hopes ofrecovery had been built. These comprised: (i) improved economic andfinancial performance with the help of IMF supported programs; (ii) majorexternal debt rescheduling; (iii) systematic institutional reform; (iv)implementation of the public investment program; and (v) well focusedexternal aid in support of a realistic PIP.

8. In 1982, copper prices continued to decline, GDP contractedfurther and the overall balance of payments deficit reached a record high.By end 1982, external payments arrears totalled US$940 million. On thedomestic front, the budget defirit continued to remain high as a percent ofGDP. Both external and domestic confidence were at a low ebb: a grosslyovervalued exchange rate, pervasive price controls, and high inflation werethe manifestations of widespread distortions in the economy.- Faced with asevere economic and financial crisis, the Government began efforts toreestablish conditions for recovery at the end of 1982. These effortsincluded implementation in the first half of 1983 of a "shadow program", asa precondition for a formal stand-by arrangement with the IMF.

The Stabilization Period

9. The turning point for the Zairian economy came in 1983 when theGovernment finalized, within the context of a formal IMF program, a seriesof far-reaching measures, begun under the "shadow program'. These measuresincluded: (i) immediate devaluation of the zaire by 78 percent vis-a-visthe SDR; (ii) introduction of a transitional dual exchange rate regime,with unification of the two rates in February 1984 and "floating"thereafter; (iii) a substantial liberalization and simplification of theexchange and trade system, including a revision of customs duties; (iv)decontrol of most prices, including agricultural producers' prices and mostinterest rates; (v) tight expenditure controls, including reduction ofpublic sector employment; and (vi) a series of actions to reduce the burdenof parastatals on the budget, including the sale of some assets. Theadoption of these policies was followed by a substantive reschedulingagreement with the Paris Club creditors and a meeting of the ConsultativeGroup in December 1983. At the Consultative Group meeting, theparticipants took two important steps relevant to the execution of the1983-85 PIP. They agreed on the appropriateness of convening co-lendermeetings on transport (highways) and Gecamines, and they endorsed Zaire'sdecision to reactivate the External Resources Coordinating Committee (whichhad not met for about two years). The co-lenders meetings were heldsuccessfully on highways in March 1985 and on Gecamines in September 1985and March 1986.

10. The Government's stabilization-cum-liberalization program wasalso a man!festation of the growing recognition of the importance ofprivate initiative and of the need to reduce Government intervention in theeconomy. The measures taken since 1983 were successful in putting the

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Zairian economy onto a stabilization path: the budget deficit (taking intoaccount rescheduling of interest payments on external debt), which was 6percent of GDP in 1982, turned into a budget surplus (about 1 percent ofGDP) in 1985; the balance of payments current account deficit (afterreschedulings) declined from 4.8 percent of GDP in 1982 to 1.8 percent in1985; and the rate of inflation which so,red to 76 percent in 1983 wasestimated at around 30 percent in 1985. Some of these measures had animmediFte impact. Many price distortions were eliminated so that privatesector activities could be redirected from renta-seeking activities towardsdirectly productive sectors. The supply response in the fooderop sectorwas impressive, but the results were mixed in the manufacturing sector.While short-run supply-side constraints, with the exception of the availa-bility of credit, were by and large eased, capacity utilization rates inthe industrial sector remained low. In addition, demand for manufacturedproducts was curtailed by the sharp reduction in purchasing pow-r in urban

areas. Following a real GDP decline of 2.6 percent in 1982, growth pickedup in 1983 and reached 2.8 percent in 1984. According to preliminaryestimates, GDP growth was around two percent in 1985. This slowdown wasdue largely to lower import growth as the foreign exchange shortageworsened.

I1. With the floating exchange rate and the liberalization ofexchange restrictions, both the volume of transactions and the premium onthe parallel foreign exchange market were substantially reduced. In thenon-copper export sector, significant export volumes were restored toofficial channels. Nevertheless, developments in the external sectorduring 1983-85 were characterized by weak export prices and net capitaloutflows. The primary source of strain on the balance of payments has beenon the capital account. First, disbursements on grants and medium- andlong-term loans have declined precipitously since 1980. Second, privatecapital flows, including new direct foreign investment, have remained atnegligible levels even after the 1983 reforms. Third, the debt serviceburden has continued to increase notwithstanding debt reschedulings. Therapid decline in disbursements on medium- and long-term (M&LT) loans toZaire can be traced back to fluctuations in the commitments before 1983 andtheir continuous decline thereafter. Since 1983, the major source ofcommitments and disbursements has been multilateral donors which haveincreased their lending to Zaire both individually and as a group.Transfers from bilateral sources as a group have been negative since 1983.

12. Zaire successfully concluded another rescheduling agreement withthe Paris Club creditors in May 1985 and, to date, has met all of itsexternal debt obligations under the Paris and London Club agreements. Lnspite of these reschedulings, the impact of debt service and of the rapiddepreciation of the zaire on fiscal management has been drastic. Thecombined effects of exchange rate depreciation and revenue measures takensince 1983 have been significant: the ratio of fiscal revenues to GDP rosefrom 10 percent in 1982 to 17 percent in 1985. The tax base, however,remains heavily dependent on export-based activities such as the copper andoil sectors. Despite significant revenue increases, the budget has beenunder immense pressure because of the increasing debt service burden since

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1982. Soaring debt service payments in local currency terms have necessi-tated massive cuts in salaries, expenditures on goods and services, andinvestment expenditures in real terms. The share of debt service payments(after reschedulings and including arrears and domestic debt service) rosefrom 17 percent of total expenditures in 1982 to 73 percent (of which 55percent was for external debt service payments) in 1985, thus considerablyreducing the Coverument's latitude in allocating budgetary resources.

13. The brunt of financial adjustment fell on the investment budgetwhich financed 10-15 percent of the public investment program. As a shareof total budgetary expenditures, investment spending declined from 12percent in 1982 to less than 3 percent in 1985. This corresponded to 0.4percent of GDP. Overall financial execution of the 1983-85 PIP was 65percent, with a much lower physical execution rate. ImpLementation of theprogram varied significantly among sectors. Agencies which used self-generated funds were able to implement a larger proportion of theirprograms than those which depended on the investment budget for domesticfunds.

Medium Term Prospects

14. Despite Zaire's stabilization efforts and major policy reformssince 1983, the country's external situation will remain difficult in theyears to come. For the 1986-90 period, the prospects of real export growthare not favorable. The volume of copper, cobalt, and zinc exports,accounting for more than half of export revenues, is expected to remainunchanged. Much of the growth in exports is expected from gold, silver,coffee and, increasingly, from manufactures. In terms of volume, exportgrowth is not expected to exceed 3 percent during the 1986-90 period. Atthe same time, the projected evolution of Zaire's export prices indicates aslight decline in the terms of trade for the 1986-90 period. External debtservice payments will continue to represent a major burden on the balanceof payments. Of Zaire's total external debt outstanding, estimated atUS$5.4 billion at the end of 1985, almost two thirds have been rescheduledat near market terms. The debt service payments on past medium and long-term debt falling due in the 1986-90 period is US$4 billion, excluding theobligations to the IMF. As a result, Zaire's ratio of external debtservice payments to exports of goods and non-factor services beforerescheduling could increase from 27 percent in 1985 to 35 percent in 1988.

15. In addition to the external financial situation, several otherconstraints will continue to hamper the country's ability to resume growthin the medium term. First, the domestic financial situation will continueto remain tight. In 1985, debt service after rescheduling represented 50percent of budgetary expenditures and it will continue to limit theresources available for compensation of public servants and public invest-ment. Second, despite improvements in recent years, the institutions incharge of economic and financial management as well as some of the majorparastatals need further strengthening. Third, there is a need to improveupon the maintenance of an inadequate physical infrastructure.

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16. The GovernmentIs growth strategy, as expressed in the 1986-90Five-Year Plan, is aimed at achieving a minimum growth rate of GDP of 3.5 ayear over the 1986-9U period, mainly by promoting private sector activi-ties and by focusing on the rehabilitation of public infrastructures. Thisshould allow !or a real increase in per capita income. The Government'sstrategy is basically sound, but its success rests on the concerted effortsof Zaire and its international partners. For GDP to grow at 3.5 percent ayear, an annual import growth of 4.6 percent during 1986-90 would berequired. Overall import requirements are estimated at US$2.2 billion in1986, US$2.4 billion in 1987 and US$2.7 billion in 1988. Given the limitedexport prospects and debt service payments, the external financing gap willaverage US$1.1 billion between 1?86 and 1989. Zaire will thereforecontinue to need increased, financial assistance from the internationalcommunity in the form of grants, concessional borrowings and debt relief.The last meeting of the Consultative Group (April 1986) was encouraging:aid indications from the donor community for the 1986-87 period weresubstantially larger than the disbursements of the 1983-85 period but, inspite of this favorable development, public grants and loans will not beenough to fill Zaire's external financing gap until the end of thedecade. Private capital flows, especially in the form of direct investmentby Zairian and foreign entrepreneurs alike, will have to play a major role.

17. The growth path of the Zairian economy will largely depend alsoon the efforts made by the Government at pursuing financial disciplinewhile implementing a structural adjustment program with two major goals:the first would be to put in place an appropriate incentive framework,designed to redirect resources away from rent seeking towards productiveactivities; and the second would be to improve public sector management byinstitutionalizing a public expenditure programming process, by definingmore clearly the role of public enterprises in the Zairian economy, and byimproving the day-to-day operations of public administration. The Govern-ment is continuing to take measures that go in the right direction. First,it has requested the support of the IMF for a 22-month stand-by that hasbeen approved in principle by the IMF Board of Directors. Second, it hasprepared a core public investment program that has been reviewed by theBank and endorsed by the Consultative Group on Zaire, with an emphasis onthe rehabilitation of infrastructures and on selected new investments.Continued efforts to maintain internal and external equilibria in thecontext of a program of adjustment with growth could lead to a turnaroundin the balance of payments situation by the early 1990's.

PART II - BANK GROUP OPERATIONS IN ZAIRE

18. From 1969 to date, the Association has approved 40 IDA creditstotalling about US$650.0 million for agriculture, transport, developmenttinance company operations, water supply, power, petroleum technicalassistance and education projects. The Association also approved a US$30million African Facility Credit as a supplemental contribution to the SixthHighway Project. The Bank Group has also extended grants totalling

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US$40U,000 as contributions toward the cost of two planning assistance-rojects in Zaire.

19. In 1975, the Bank made a loan ot US$100 million for the GecaminesMining Expansion Project, which was confinanced by the European InvestmentBank and by the Libyan Arab Foreign Bank, and which provided for specialrepayment arrangements linked to the project's export earnings. ATechnical Assistance Credit was approved in 1983 to assist Gecamines withits efforts to restructure its organization, improve its manpower andprepare a long-term rehabilitation and expansion program.

2U. The IFC, which has a US$1.3 million equity participation in theSociete Financiere de Developpement (SOFIDE), approved a US$4.1 millionloan in 1978 for an offshore oil production project, and a US$230,000 loanin 1982 for studies related to the development of an aluminium complex atBanana. In 1985, IFC approved a US$6.25 million loan to, and a US$528,000equity participation, in a textile company (SOTEXKI); a US$15.0 millionloan to the -Grands H8tels du Zaire"; and a US$100,000 equity participationin a cotton farming operation. Annex II contains a summary statement ofBank loans, IDA Credits and IFC investments as of March 31, 1986.

21. A main objective of Bank Group operations in Zaire has beeninstitution building. The development finance company (SOFIDE) wasestablished in 1970 with assistance from IFC and IDA. The major transportagencies, ONATRA, Societe Nationale des Chemins de Fer Zairois (SNCZ),Rfgie des Voies Fluviales (RVF), R0gie des Voies Maritimes (RVM) and Officedes Routes (OK), have received technical and financial assistance from theAssociation, which also helped establish the National Livestock DevelopmentAuthority (ONDE). In the case of Gecamines, the Bank loan originated adialogue, stil ongoing and now supported by a technical assistance credit,intended to define ways and means to strengthen the management, financialposition and planning of the company.

22. Project implementation has been satisfactory despite difficultiesresulting from the country's inadequate manpower and management capabilityand, in recent years, from the economic crisis. In the last two or threeyears, release of the required budgetary funds has been difficult period-ically becauLse of budgetary constraints. Lack of Loreign exchange tofinance spare parts and fuel, and the deterioration of the transport net-work and marketing system have resulted in severe supply problems for mostprojects. Recruiting and retaining adequate staff have also beendifficult.

23. In January 1980, the Bank, together with Zairian officials,undertook. an overall review of Bank Group projects which, for the firsttime, provided an integrated view of implementation problems; this resultedin an acceleration and improvement in the utilization of Bank Groupassistance, particularly in the agricultural sector. A second overallreview, focussing on macro-economic and sectoral issues and on their impacton project implementation, took place in May 1983 and assisted the Govern-ment in formulating the important economic measures of September 1983(para. 12).

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24. Sixteen credits and one loan have been totally disbursed.Completion reports have been issued for all these projects. PerformanceAudit Reports have been issued for the first three SOFIDE and HighwayProjects, the River Transport Project, the Rail/River Project and the FirstEducation Project. The conclusion of the audit and completion reports wasthat the Bank Group's impact on institution buildiug had been mixed. Withthe e4ception of SOFIDE, all other project entities had encounteredoperating difficulties beyond their control as the economy deteriorated,financial resources grew scarcer and the problems besetting the investmentenvironment were exacerbated by the Government's zairianization/radicali-zation measures.

25. Nonetheless, effective administrations had evolved in REGIDESO,SUFIDE and the Office des Routes, the highway agency. Performance ofONATRA, the port and river transport agency, had uot improved as a resultot the first River Transport Project but did improve under the Rail/RiverProject. More attention to institution building activities would have beenbeneficial in the education sector; administrative weaknesses in theDepartment of Education were cited as partly responsible for poor perform-ance under the First Project and the inability to implement investmentcomponents under the Second Education Project which resulted in cancella-tion of US$18.8 million in February 1983.

26. In the case of G&eamines, the delay in project implementation andreorientation of proj ect scope from expansion/rehabilitation to rehabilita-tion only were not attributable to institutional weaknesses, but rather toa combination of external forces (copper price decline, Shaba invasion) anddomestic economic crisis; nevertheless, positive results were achieved inthe areas of tax reform, marketing and management and are being continuedunder a Technical Assistance Project (Cr. 1336-ZR). Partly as a result oftie project, Gecamines' production has returned to near capacity level.Baok Group support to all of the above mentioned entities is continuingthrough follow-on projects designed to address the issues raised by thecompletion and audit reDorts.

27. The rate of disbursement to Zaire (about 20 percent for fiscalyears 1983-85) is average for the Eastern Africa Region. While disburse-ment performance in general is satisfactory, difficult'es have arisen inseveral projects. In the case of early credits for transport, educationand livestock (Credits 255-ZR, 272-ZR and 398-ZR), the lack of a strongproject entity caused delays. Economic conditions were also a factor inslowing implementation in instances where government counterpart funds werenot available (Third Highway Credit 660-Zk; Second Education, Credit624-ZR) and where the investment environment experienced slow recovery inthe aftermath of abrupt nationalization (Fourth SOFIDE, Credit 710-ZR).Implementation of ongoing projects should be less affected by the aboveinfluences given the strengthening of institutions under subsequentprojects and efforts by the Government to improve budgetary support ofIDA-financed projects. As of December 31, 1985, the Bank Group's share ofZaire's total debt disbursed and outstanding was about 13.0 percent.

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28. In the past three years, the Bank Group's main efforts have beendirected towards assisting in the rehabilitation and development of theagriculture, industry/mining and transport sectors, in part through thedesign and implementation of appropriate new policies. Initial efforts insupport of the energy sector include the Shaba Power System RehabilitationProject (Cr. 1224-ZR) and the Ruzizi II Regional Hydroelectric PowerProject (Cr. 1421-ZR). Our lending will continue co assist the developmentot the agriculture sector, including policy reforms under the agriculturalcomponent of a proposed Structural Adjustment Credit, and to support theefficient functioning of the industrial, mining and transport sectors.

29. A rehabilitation project for Gecamines and a SOFIDE project tosupport rehabilitation and new investments in the productive sectors wereapproved recently. In addition, further assistance will be considered forthe energy sector to aevelop the power and fuelvood subsectors.Preparation is underway for a technical assistance project to improveinvestment planning, budgetary procedures, and parastatal management, andfor a navigation improvement project. In addition to investment projects,a quick-disbursing Structural Adjustment Credit is also under preparationto address cross-sectoral issues and pave the way for medium-term recovery.

PART III - THE ENERGY SECTOR

30. Energy Resources. Zaire's abundant energy resources remainunexplored and underexploited. The country's hydroelectric potential(774,000 GWh/yr) represents almost half the hydroelectric potential for theentire African continent, and about 12 percent of estimated annualhydroelectric production worldwide. Oil and coal resources are largelyunexplored except for oil resources at the coast and some coal mines in theShaba region. Commercially recoverable crudes are estimated at about 74million barrels, and commercially mineable beds of coal (principally in theShaba region) at 720 million tons. Uranium has been exported for manyyears. The country contains over half the forest resources of Sub-SaharanAfrica. While their bulk remains unexploited, forests near the mainpopulation centers are close to depletion due to excessive felling. Otherpotential energy sources include shale deposits, tar sands, the natural gasof Lake Kivu, and solar energy. Finally, promising sources of geothermalenergy and non-wood biomass energy have been identified, but their fullpotential as well as the extent of actual and potential biomass utilizationhave yet to be defined.

31. Energy Demand, Imports and Exports. In 1983, final energyconsumption totalled about 8.6 million toe (280 kg toe per capita).Traditional energy sources (wood, charcoal, and biomass wastes) provided 86percent of total energy consumption, most of it as household energy(cooking, heating and lighting). The remainder was provided by petroleum

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(8 percent), power (4 percent), and coal (2 percent). The main consumersof these modern energy forms were: the mining industry (39 percent),transportation (36 percent), and manufacturing (9 percent). Agriculture,commerce, and private households accounted for the remaining 16 percent ofmodern energy consumption. Zaire is a net exporter of electric power (netexports of 117 GWh in 1985), and an importer of coal and coke for thecopper smelters in the Shaba region. Zaire is a net petroleum exporter involume, but, in value, the net surplus is modest (para. 36).

Sector Organization and Plau-ing

32. Numerous government ministries and public and semi-publicagencies are concerned with the energy sector, but they are not organizedto ensure coordination. None has access to all the information required todefine sector policies, nor the capacity to implement them.

33. The Ministry of Mines and Energy (DME), with a staff of 400,about half of whom are professionals, is responsible for the supervision ofthe electric utility (SNEL, paras. 51-61), and the regulation of import,refining and marketing of petroleum products through a public company(Petrozaire). Petrozaire holds a product processing contract with SocieteZairo-Italienne de Raffinage (SOZIR), and minority shares in foursemi-public companies responsible for the marketing of petroleum products,and a service company. In general, DME's overall energy responsibilitiesreceive lower priority than those relating to the mining sector. BesidesDME, other Government agencies have reponsibilities in the energy sector:the Department of National Economy and Industry determines the prices ofelectricity and oil products, the Department of Finance, Budget, andPortfolio manages the Government's holdings in the petroleum explorationand refining companies, and the Ministry of Environment, NatureConservation and Tourism administers Zaire's forestry and fuelwood sector.In addition, the National Reforestation Service (MRS), and the Center forthe Adaptation of Wood Energy Technology (CATEB) are also active in theenergy sector.

34. The Government attempts to define a coherent approach to theenergy sector started in 1981 with the creation of a National EnergyCommission (NEC) responsible for sectoral coordination and the definitionof a national energy policy. Its members are officials from DME, theDepartment of National Economy and Industry, REGIDESO (the wate-r supplycompany), and the Presidential Study Bureau. An energy eixpert, financed bythe CCCE contribution to the Association's Shaba Power SystemRehabilitation Project (Cr. 1224-ZR, para. 67), has been providingassistance to NEC since December 1985 for a two-year term.

35. To jointly develop their common hydro resources, Burundi, Rwandaand Zaire have created two international institutions, Energie des pays desgrands lacs (EGL) and SocietS Internationale d'Electricite des Pays desGrands Lacs to implement the Ruzizi II hydroelectric project (SINELAC,para. 68).

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Main Sector Issues

36. Petroleum supply. In 1983, Zaire imported 44,700 toe of crudeoil and 685,000 toe of refined products and exported over 1.2 million toeof crude. Since the late 1970's, petroleum product consumption remainednearly constant at about 700,000 tons yearly with foreign exchange scarcityas the main constraint to supply. Measures were introduced in June 1985which eliminated PetroZaire's import monopoly, the fixed market quotas ofthe five marketing companies, and the uniform national prices forproducts. Additional savings could be achieved through furthermarket-oriented reforms which are still needed to encourage entry of newsuppliers, price competitition among marketing companies, and competitivebidding for product imports. Product movement is also costly andunreliable because of inefficient lightering by barges, the deterioratedstate of the Matadi-Kinshasa pipeline, lack of adequate storage, andlogistical problems along the distribution route, particularly on the VoieNationale on the Zaire river. Some pipeline rehabilitation and storageadditions are being financed with private capital from the marketingcompanies, and improved product unloading and other storage needs are alsounder review.

37. Fuelwood. Firewood is the major fuel for rural populations andhouseholds in urban peripheries, and charcoal dominates in the urbancenters. Even those urban households who have access to electricity orkerosene continue to prefer woodfuels for cooking, because of lower costsat present relative prices, and of the persistence of traditional cookinghabits. Growing fuel-wood demand from urban populations is, however,putting increased pressure on the forests, and sources of supply aredepleted as far as 150 km from Kinshasa and 100 km from Kolwezi andLubumbashi. Charcoal prices in Kinshasa are four to five times as high as35 km outside the capital.

38. The only attempts to date to address the deforestation problemhave been in the Kinshasa region, for which Government has plans toaccelerate electrification in an attempt to reduce the pressure ontraditional fuelwood resources. Apart from the question of its financialfeasibility, accelerated electrification is too optimistically expected tohave a major impact on the demand for charcoal in the medium-term (tenyears). After long delays, a complementary plan to supply Kinshasa withfuelwood through the carefully controlled exploitation of existing forestreserves and the possible development, if necessary, of fuelwoodplantations, within easy reach of the capital, is now under preparation,and the Association is considering financing such an operation. A study ofhousehold energy needs, to be conducted under the proposed project(para. 75), would help analyze the costs of alternative fuel options, andcontribute o the design of the project.

39. On a country-wide scale, the establishment of fuelwoodplantations under the National Reforestation Service (NRS) around citiesthreatened with deforestatioa seems justifiable, particularly in connectionwith the production and use of high-yield charcoal kilus. More efficient

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forestry exploitation combined with more efficient charcoal production,transport, and marketing should help to limit deforestation and hold downthe increasing cost of household energy. In addition, an energyconservation measure with potential national significance would be thewidespread adoptiou of prototype wood burning stoves. Available models arecapable of providing considerable energy savings, but extensive publicityand information would be needed to encourage their purchase and use. Theproposed project's study on household energy would review the prospects forthe production and distribution of such stoves.

The Power Subsector

4u. Access to Electricity. In 1985 only about 3 percent of thepopulation had access to electricity, the highest percentage (13 percent)being in Kinshasa. Kinshasa and the surrounding area of Bas-Zaire in thewest, and the Shaba region in the south-eastern part of the country,consume about 95 percent of electric power. The Shaba region aloneaccounts for about 73 percent of consumption, with 61 percent attributableto Gecamines, the state owned copper mining company. Except in theseregions, less than 1 percent of the remaining 19 million inhabitants haveaccess to electricity. The situation is even worse in the Kivu region wherethe transmission and distribution network is isolated and limited. Zaire'saverage estimated per capita consumption of electrical energy was 144 kWhin 1985, but only 8 kWh per capita ia the Kivu region.

41. Existing Generation Facilities. Zaire's total installed capacity(2,599 NW) is 95 percent hydro and 5 percent thermal, mainly diesel.SNEL's installed capacity represents about 95 percent of the nationaltotal, and most of it is hydro. In addition, private companies operatetheir own small hydro (total of 80 MW) and thermal (total of 59 MW) powerplants. The largest hydroelectric plants are concentrated in theBas-Zaire/Kinshasa and Shaba regions. SNEL also owns and operates 5 hydro(58 MW) and 32 diesel (58 MW) power stations which supply other cities. InKivu, the Ruzizi I plant (28.2 MW) serves the Bukavu and Uvira areas, whichutilize about 40 percent of the plant capacity; the remainder is exportedto Rwanda and Burundi. The town of Goma in the northern part of the Kivuregion has recently been connected to the system supplied from Ruzizi I.

42. The Inga-Shaba System. In 1974, Government decided to constructthe Inga II hydroelectric station (1,424 MW), together with the Inga-Shabatransmission system (SIS), comprising a 1,700 km, 1,000 kV direct current(DC) line running from the Inga II power station in western Zaire toKolwezi (Shaba), with converter stations at Inga and Kolwezi. Works werecommissioned in 1982-1983, at a total cost of about US$2 billion in 1983prices, primarily financed by a consortium of banks led by the US Exim-Bankand the Governments of Italy and Sweden. The expectations on which theproject was based (expansion of the copper mines and smelters, rapidexpansion of the economy, and new industrial development in a free zone tobe set up --Zone Franche d'Inga, ZOFI) proved overly optimistic. Today,Inga II generates only about 200 KW (about 14 percent of capacity) to

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supply the DC transmission line to Shaba. This underutilization involvesboth inefficient use of expensive capital and physical deterioration. Inmid 1985, the Association recommended an independent study by a panel ofinternational experts to: (i) correct the operating problems and establishrehabilitation and maintenance procedures to improve system reliability;and ('i) develop a long-term strategy to eliminate the technical problemsdue to operating with excess capacity. A preliminary report of the panelhds identified emergency measures to prevent further deterioration(para. 74).

43. Nearly all SNEL's power plants, including the largest ones (IngaI and Inga II), but particularly the isolated plants dating from the1960's, are in need of rehabilitation because of the company's limitedtechnical capability and irregular maintenance during periods of foreignexchange scarcity. The four hydro power plants of the Shaba region arebeing rehabilitated under the Shaba Power System Rehabilitation Project(CR. 1224-ZR). The Ruzizi I hydroplant in Kivu would be rehabilitatedunder the proposed project, which would also include funds for thesystematic review of further maintenance needs for supplemental work on theShaba plants, and for urgent repairs of the Inga complex.

44. The Government wishes to increase the utilization of existingcapacity by increasing the demand for power. Among the alternatives underconsideration are: (i) the establishment of power intensive industriesunder ZOFI; (ii) accelerated expansion of the distribution network inKinshasa; (iii) replacement of gasoil and fuel oil industrial boilers andfurnaces by electric ones, particularly in the Kinshasa area; (iv) powerexports to the Congo; and (v) increased utilization of the SIS (tapping atKananga and exports to Zimbabwe). Besides the cost of additionalinfrastructure, the viability of the schemes depends to a large extent uponthe offer of Inga's surplus power at a low cost, and a variety ofpromotional rates are associated with these schemes. While promotionalrates would be acceptable while electricity is in surplus, long-termmarginal cost pricing should be introduced when approaching full capacityutilization to avoid subsidizing consumers. Government has agreed thattariffs for power supplied to ZOFI from Inga II would be adjusted toreflect long-term marginal cost at the time when Inga's capacity is fullycommitted and investments in additional facilities for the supply ofelectricity are required.

45. Assets Transfer. The large infrastructure investments undertakenby Government, with its own financing (para. 42) have been operated bySNEL since their commissioning in 1982/83. Government has, however,retained ownership of the Inga II plant and the Inga-Shaba line, servicedthe debt for both, and paid maintenance charges for the Inga-Shaba line.In 1983, the Government decided that the plant and the line should becomeSNEL's assets, but no legal cession or rational transfer prices wereagreed. As the country's sole power utility, S?EL is charged withoperation, maintenance and renewal obligations for all power sector assets,and the asset transfer is justified. These assets are, however, used wellbelow their capacity (14 percent for Inga II, and 24 percent for SIS), andtheir costs (other than debt service and foreign exchange expenditures for

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the maintenance of SIS) and reveaues are accruing to SNEL. If the fullcosts associated with the transrerred assets were passed on to SNEL, theycould not be borne by consumers during the transition period toward fullcapacity utilization. Utilization is, currently, not expected to increaseabove 50 percent of capacity for Inga II until 1991, and may, in fact,decline in the case of SIS as demand in the Shaba region is once again metfrom local hydropower stations currently under rehabilitation. Todistribute the financial burdea equitably between SNEL and Government, thetransfer price of these assets would be based on their value in use. SNELand the Government would conclude, by June 30, 1987, a legal agreement to(i) determine ownership of all assets financed by the Government butoperated by SNEL; (ii) establish responsibility for payment of existingdebt service until all outstanding loans are fully repaid; (iii) define thebroad objectives of SNEL's tariff policy so that SNEL's operation andmaintenance costs as well as the renewal and expansion of SNEL 's assets arecovered by SNEL's owa resources; and (iv) transfer the Inga II hydro plantand the Inga Shaba line to SNEL at a transfer price based oa their value inuse. SNEL would also, beginning in 1987, cover from its own resources alloperating and maintenance charges associated with the Inga II hydro plantand Inga-Shaba transmission line and, beginning in that same year,reimburse over a ten-year period, a portion of the original debt related toconstruction of the Inga II hydro plant corresponding to its value in use.

46. Transmission. The total length of SNEL's transmission lines atthe end of 1984 was 4,970 km composed of various voltage levels. Thetransmission system in the Kivu region is primarily composed of two 70-kVlines and requires only minor rehabilitation. The Inga-Shaba line (SIS,para. 42) represents more than 34 percent of the total network. The linehas a design load of 1,120 MW, but is presently transmitting 24 percent ofits design capacity, with steadily improving reliability since it was putinto service in 1982. Maintenance and operation of the SIS are carried outby a private company at a cost of about US$1.2 million per month. The SISwill be used through 1985-1988 to make up for power shortfalls duringrehabilitation of the Shaba power system and to balance the system, andalternative uses would be reviewed under the proposed project to determinelong-term options (para. 75).

47. Distribution. Forty-eight towns had distribution networks byend-1984, with major networks in Kinshasa and Lubumbashi. Lack ofmaintenance and technical expertise, resulting in high losses andunreliable supply, characterize the transmission and distribution (T&D)systems. Funds included in the proposed project for a systematic review ofrehabilitation needs would also cover T&V systems. The distributionnetworks in the Kivu region require extensive rehabilitation and need to beextended to meet presently unserved demand as well as expected growth.

48. Connections and Sales. At the end of 1985, the total number ofconsumers was 116,500. Analysis of low voltage consumption (17 percent)shows it consists mainly of commercial enterprises and households withrelatively high incomes. In Kivu, 8,760 out of 8,840 consumers were, in1985, connected to the low voltage distribution network, and accounted for

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53 percent of total sales (40.4 GWh). Medium voltage sales accounted forthe remaining 47 percent.

49. Losses. In 1985, losses represented about 5.4 percent of totalsupply, a relatively low percentage due to the large share (62 percent) ofpower supplied from high voltage lines. In all regions, anomalies inmetering, collection, and billing are evidenced by wide variations inlosses: in the Kivu area, for example, losses varied from 25 percent in1981 to 8.4 percent in 1984, reflecting unbilled and unmetered connectionsas well as inaccurate readings. The rehabilitation and expansion of thedistribution networks will alleviate the technical losses. As foradministrative losses caused by underbilling, a special effort to identifycustomers, conduct field checks, and ensure timely billing, supported underthe Shaba project, is showing positive results: in 1984 medium and lowvoltage sales have greatly increased above the 1983 levels. SNEL hasexpanded to the Kivu region, this on-going consumer inventory/collectionimprovement program, with a target completion date of December 31, 1986.

50. Historical Demand. The total demand for electrical energy inZaire follows general economic trends and, in particular, those of thecopper industry. In 1985, total sales within Zaire reached an all timemaximum. The average annual increase in sales was 2.4 percent between 1974and 1985, and 4.1 percent between 1979 and 1985, with Gecamines continuingto account for about 56 percent of total sales. In 1985, medium voltagesales amounted to 20 percent of total sales, and low voltage to 17percent. In Kivu, total demand in the Bukavu-Uvira areas increased by about13 percent yearly between 1979 and 1985, mainly as a result of the entryinto operation in December 1981 of an electrical boiler at the brewery inBukavu. Excluding the boiler, demand in the area increased at an averagerate of 15 percent yearly between 1979 and 1985, reflecting Kivu'srelatively high potential for growth. If the town of Goma is included, theaverage annual increase for the region over the same period was 8 percent.

The Societe Nationale d'Electricite (SNEL)

51. The Societe Nationale d'ElectricitE (SNEL), wholly Governmentowned, is responsible for the generation, transmission, and distribution ofelectricity throughout Zaire.

52. SNEL's Structure. In 1982, SNEL replaced its top he~-horizontal organization with a pyramidal hierachy, which has improvedcommunication and clarified responsibilities. SNEL's newly establishedOrganization and Methods Committee (OC) is defining guidelines toidentify, train or recruit competent managers so as to decentralizeresponsibilities further. OMC receives the assistance of managementconsultants under Credit 1224-ZR. Under the proposed project, theseactivities would be extended to personnel management, procurement,inventory control, accounting, and internal control procedures (para. 75).

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53. Regional Organization. SNEL, with headquarters in Kinshasa, isorganized into six geographical regions and one administrative "region"managing the operations of the Inga-Shaba transmission system (para. 42).The Eastern Region typifies SNEL's regional structure: the regional office(Kisangani) is largely responsible for local technical management, whiledecisions on personnel and finance are made in Kinshasa. Within theEastern Region, the Kivu subregion is in charge of operations of the RuziziI hydropower plant and exports to Rwanda and Burundi. The Kivu local staffand management, mostly Zairian nationals, are competent and operations havebeen smooth. Power failures in Kivu have been mainly due to shortages ofequipment and to poor maintenance for lack of foreign exchange.

54. SNEL's Management. SNEL operates under the supervision of twoDepartments (Mines and Energy, and Finance, Budget and Portfolio) through anine member Board of Directors chaired by the Director General. Dailymanagement is under the responsibility of a management committee. TheBoard is nominally responsible for all operational and financial decisions,and it has taken prompt and effective decisions on tariff adjustments andorganizational restructuring. Government has, however, interfered with thecompany 's management through its mandatory review and approval of tariffadjustments, and, through its undertaking major investments in the 1970'swith inadequate attention to their impact on the company. A four memberexternal audit commission, reporting to the Minister of Finance, has notbeen effective and SNEL has therefore appointed independent externalauditors for the auditing of its accounts (para. 57).

55. Staffing. SNEL employs a total of 4,700 staff (end of 1985)

serving some 116,500 consumers. There are about 950 managers, universitygraduates and skilled technicians and 3,750 unskilled workers. Theemployee/customer ratio of 25 is acceptable by regional standards, in viewof SNEL's diverse operations and their geographical dispersion, but thecompany is attempting to streamline its operations further by graduallyreducing its staff. In general, SNEL staff lack the theoretical knowledgenecessary to perform technical tasks effectively and are furtherconstrained by equipment shortages. In addition, staff motivation suffersfrom inadequate remuneration and undefined career prospects. Under Credit1224-ZR, SNEL is designing an incentive system to improve staffperformance, to be financed from savings achieved through reduction instaff size. The lack of skills would be remedied, under the proposedproject, through comprehensive assistance to the company's training centerin Sanga (para. 76).

56. SNEL's full time expatriate staff have been reduced from 67 ini975 to 30 in 1986, of whom 8 hold key managerial positions. Theexpatriates' daily operational responsibilities have, however, limitedtheir availability for training national staff. Arrangements permitting aneffective transfer of skills would be emphasized in the training andmanagement assistance activities of the proposed project (para. 76). SNELalso continues to rely heavily on short-term consultants, especially forits financial, commercial, design and procurement activities as well as forproject studies.

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57. Accounting and Audits. Accounts are kept separately for the headoffice, all regions, and certain subregions. Consultants have helped SNELimprove its accounting and, in compliance with conditions established underCredit 1224-ZR, independent auditors have audited the companyts accountsannually. SNEL's 1981, 1982 and 1983 audits were qualified, and the 1984audit received certification with qualification. The auditors have notedimprovements in inter-regional coordination, billing of high and mediumvoltage clients and some accounting practices, but problems in inte-nalcontrol, inventory management, and the qualifications of accounting staffhave led to qualification of the accounts. SNEL is making efforts, throughthe general management assistance program, to correct the anomaliesidentified by its auditors and to improve its accounting practices. The1985 audit is due in September 1986 and certification is expected.

58. SNEL's Financial Positioju. Ia i985, cash generation improvedfollowing several rate increases throughout the year. The positive effectwas, however, offset by adjustments to revalue SNEL's assets to reflecttheir utility value (adjusted replacement cost) and value in use, as wellas other non-recurring adjustments to accounts recommended by the auditors,resulting in a negative rate of return. Under the project, SNEL would (i)take all necessary measures including the adjustment of its tariffs, toproduce for each of its fiscal years beginning in 1986, funds from internalsources equivalent to about 30 percent of the annual average of capitalexpenditures incurred or to be incurred during that year and the next twofiscal years; and (ii) review before June 30 in each of its fiscal years,on the basis of forecasts satisfactory to the Association, the adequacy ofits tariffs to meet the requirement for cash generation against capitalexpenditures and furnish to the Association a copy of the review upon itscompletion. Financial projections, based on revalued assets and theprinciples above, show that SNEL would earn a low rate of return on itsinvestments in 1986, but indicate improvements which would result in a 6percent rate of return in 1991. Gradual tariff adjustments would help toimprove SNEL's financial situation and avoid large increases which occurredin the past due to delays in the approval of adjustments. To provide thenecessary analytic background, the project would finance the updating ofthe long run marginal cost (LRMC) and electricity tariff study undertakenby Electricitg de France under Credit 1224-ZR.

59. Rate increases to obtain these results would be 86 percent in1987, 24 percent in 1988, 22 percent in 1989, and 15 percent in 1990 and1991. In 1986, high voltage rates to Gecamines were raised by 22 percent,effective March 1, and a series of increases for other categories of userswas agreed, resulting in an additioial average increase of 13 percent whichbrings the overall average rate to ZO.795 (US$0.013) per Kwh. The 1986increase is acceptable in view of the difficult current economic situation,and as the first step of a comprehensive multi-year program of adjustmentsto reach long term marginal cost pricing. The large increase needed in1987 is due mainly to the elimination of past Government subsidies for SISoperations and for borrowings on SNEL's behalf, and will raise the averagetariff from Z 0.795 to Z 1.48 (US$0.021), a level still relatively lowcompared with other countries of the region and the preliminary estimate of

LRMC of about US$0.05. The 1987 increase will be phased in two steps,

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following the principle of semi-annual reviews and adjustments agreed withGovernment and SNEL.

60. Other financial indicators show an improving situation. SNEL'sreceivables declined to 4.1 months of sales at the end of 1985, compared toan average of 5.5 months in 1983-84, and an average of 10 months for the1980-82 period. Receivables would not exceed 4 monthst sales by end-1986, 3months' sales by end-1987, and 2.5 months sales by end-1988 andthereafter. To bring receivables down to these levels, SNEL and Governmentwould agree on an action program acceptable to the Association. Submissionof the action program would be a condition of Credit Effectiveness. SNEL's1984 debt equity ratio (11/89) reflects the Government's past practice offinancing infrastructure and social investments in the power sector onSNEL's behalf. Since budgetary constraints now prevent Government fromcontinuing to incur new debt, the company will have to assume increasingfinancial responsibility for past and future power sector investments.While Government would bear debt service related to the Inga II hydroplant,and Inga-Shaba line until outstanding loans are fully repaid, SNEL wouldreimburse Government over a ten-year period beginning in 1987 the portionof the original debt incurred for the construction of thc3e facilitiescorresponding to their value in use when transferred.

61. With all loans and credits (including the proposed credit) toSNEL reflected in the accounts as liabilities to SNEL, the debt/equityratio would average 35/65 over the 1986-92 period, which is an acceptablelevel. The current assets/current liabilities ratio would vary between 1.3and 2.1 for the years 1986 through 1992. In order to move toward a policyof Government on-lending to SNEL at commercial rates (in contrast to therecent practice of on-lending at the same concessional rates obtained byGovernment), Government and SNEL have agreed that all grants, credits andloans obtained by the Government for the purpose of financing SNEL's1985-1992 investment program would not, without the Association's priorconsent, be on-lent to SNEL at less than 5 percent interest and that theforeign exchange risk would be assumed by SNEL. In addition, SNEL wouldnot incur debt unless the internal cash generated for the twelve monthspreceding incurrence of the debt is at least 1.5 times the maximum debtservice requirement for any succeeding year.

62. Insurance. To date, SNEL's risks nave been covered by Governmenton a self insurance basis without any provision for an insurance fund.This practice is not satisfactory, and Government has agreed to review itunder the management assistance program with a view to providing a suitableinsurance coverage for SNEL's assets.

Purchasing Arrangements

63. The Government, aware of procurement problems in all its publicenterprises, chose to address them through the creation in March 1985 of acentral procurement agency, the Societe Nationale de Trading (SONATRAD), toserve all large public enterprises, including SNEL. SONATRAD's mandate is

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to permit substantial improvements in procurement through improvednegotiation techniques, grouped orders from several public enterprises,standardization of equipment, elimination of certain purchasingintermediaries, diversification of supply sources, and promotion ofcompetitive local producers.

b4. Extensive discussions have taken place since March 1985 betweenthe Government, SNEL, SONATRAD and the Association to develop SONATRAD intoan institution that can effectively play its role, and to have therespective roles and responsibilities of SNEL and SONATRAD clearly spelledout. A Purchasing Agreement between SNEL and SONATRAD, agreed as a resultof these discussions, was signed on April 7, 1986.2/ It is a satisfactorydocument which adequately addresses the weaknesses of the present systemand would not be amended without prior Bank approval. In addition, SNELwould maintain control over its purchasing, and quarterly external auditsof SONATRAD would apprise SNEL, and the Association, of progress in theimplementation of the Purchasing Agreement.

O5. Investment Planning and Programming. Government is aware of thepast lack of systematic planning for the power subsector. To helpintroduce a more rational planning process, the Association is financing(Credit 1224-ZR) the establishment and strengthening of a planning unit andthe preparation of a long-term development plan to the year 2000. In May1984, the planning unit began to define a 1986-1990 program of investmentsdesigned to respond to the needs of the productive sectors, and to developindustrial and household sales. Under the proposed project, SNEL wouldcomplete and furnish to the Association for comment by September 30, 1986its long-term development plan, and would thereafter and annually untilJune 30, 1990 exchange views with the Association on the updating of theplan.

66. After a review of SNELts investment program (1984-1992), theAssociation recommended that it be scaled down from US$1,750 million toreflect reasonable growth in demand for electricity and available local andforeign funds. Awaiting the recommendations of the long-term developmentplan, the Government, SNEL, and the Association have agreed on anindicative investment program totalling US$700 million equivalent over the1986-1992 period. This revised program would be kept under constant reviewin the context of the preparation of the long-term development plan

Z/ The draft agreement stipulates that SONATKAD will act as SNEL'spurchasing agent for: (i) goods common to various public enterprises(so as to promote bulk discounts and equipment normalization), and (ii)contracts specific to SNEL estimated to cost more than US$3 million.The USO3 million threshold would give SONATRAD a limited number oflarge contracts in 1986 and it will be reviewed every six months. SNELwill purchase directly for its other needs. SONATIAD will play anaudit function for purchases by SNEL on its own account.

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(para. 65). In particular, Government, SNEL and the Association wouldexamine and exchange views on the timing and financial impact of theelectrification program of Kinshasa, taking into account, inter alia, theresults of the study nn household energy needs. Before undertal'ing anyinvestment exceeding the equivalent of US$5 million, SNEL would furnish forthe Association's approval a justification that the investment is leastcost and has an assured financing plan which spells out SNEL's andGovernment's obligations for financial charges, including debt service,operation, maintenance, and depreciation.

67. Bank Group Experience in the Sector. The Shaba Power SystemRehabilitation Project (CR 1224-ZR; April 1, 1982; USS 19 million) was theBank Group's first lending operation in the energy sector. The project isco-finauced with the Belgian Government and the French Caisse Centrale deCooperation Economique (CCCE). The project (rehabilitation of the hydrogenerators and transmission system, maintenance for the Shaba region, andtechnical assistance) aims at ensuring an efficient supply of power toGecamines. After start-up delays, the project is proceedingsatisfactorily. Rehabilitation works are now well advanced and haverevealed the need for supplementary rehabilitation and replacement whichexceed the provisions for unforeseen repairs made under Credit 1224. Thenecessary financing for the supplemental work has been included under theproject proposed in this report. In addition to rehabilitation, the ShabaPower Project addresses the development of SNEL as an institution, but itsphysical and financial aspects are limited to the Southern Region. Projectimplementation together with the joint Bank/UNDP Energy Assesment hashelped establish a fruitful dialogue with Government and SNEL on energyissues.

68. Rationale for Involvement. The Kivu Region in eastern Zaireshares an interconnected power network with Burundi and Rwanda which issupplied primarily by Zaire's Ruzizi I hydroplant and several smallerhydroplants in Rwanda and Burundi. To meet growing commercial andhousehold demand, the supply of power to this network will be expanded overthe 1987-9U period through the construction of Burundi's Rwegura hydroplantand the joint effort of the three countries to further develop thepotential of the Ruzizi River. In 19%2, the Association approved financingfor the Ruzizi II hydroelectric Project (Credits 1419-BU, 1420-RW and1421-ZR), recognizing that regional development offered the least-costsolution to the needs of the two countries and Zaire's Kivu Region. It wasalso realized that in order to make optimal use of the power from Ruzizi IIand within the interconnected network, the three national transmission anddistribution systems would require rehabilitation and expansion. IDAfinancing for this purpose is being provided under the Rwanda Power Project(Credit 1495-RW) and the Burundi Power and Transmission Project (Credit1593-BU). The use of IDA funds to rehabilitate and expand the KivuRegion's transmission and distribution system and renovate the Ruzizi Ihydropower plant would complete the second phase of the regionaldevelopment effort by increasing the availability of power to Kivu andmaking supply more reliable to the interconnected network as a whole.IDA's involvement would thus foster least-cost power planning and

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development through regional cooperation, as well as have an impact onpower tariff policy and institutional streugthening in the threecountries. The proposed project would also help finance other priorityrehabilitation needs outside the Kivu region (supplemental work whichproved necessary when the units of the Shaba Power system rehabilitatedunder Credit 1224-ZR were opened, and urgent repairs of the Inga complex).

PART IV. THE PROJECT

69. The proposed project was appraised by the Association in November1984. The project was prepared with the assistance of consultants financedby a US$440,000 equivalent advance under the Project Preparation Facility(P-246). Negotiations started in Washington on July 2, 1985 but could notbe completed until April 30, 1986 after clarification of the role ofSONATKAD (the procurement agency) and an updating mission in March 1986.Mr. Kasongo Mutuale, Ambassador of Zaire to Washington, led the Zairiandelegation. A report entitled 'Staff Appraisal Report, Zaire, Second PowerProject', No. 5706-ZR, is being distributed separately. A supplementarydata sheet is provided in Annex III.

70. Objectives. The project main objectives are:

Ca) to ensure a reliable supply of electrical energy to the maininterconnected networks (Inga-Bas Zaire-Shaba, and Kivu) throughrehabilitation of existing facilities;

(b) to make optimal use of the electric energy generated in the Kivu(Zaire)-Rwanda-Burundi interconnected system;

gc) to continue the institutional development of SNEL throughstrengthening its planning capabilities, developing a rationaltariff system, improving financial policies, and upgrading staffskills; and

(d) to improve the reliability of the isolated portions of Zaire'snational network through a systematic assessment of diesel andsmall hydropower stations, with a view to determining, in thecontext of a long-term development plan, their needs forrehabilitation, efficiency improvement, expansion, orsubstitution and the necessary follow-up actions.

Project Description

71. The main components of the project are:

(a) rehabilitation of the Ruzizi I hydropower plant; rehabilitationand expansion of the transmission and distribution network in thethe towns it serves (Bukavu, Goma, and Uvira'; installation of a

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terminal for interconnection of this network with the. Ruzizi II110 kV transmission network; and radio-communication equipmentfor SNEL's urgent operational needs;

(b) supplemental rehabilitation of the Shaba system (turbine repairsin the four generatirg stations, and selected replacement andmaintenance of the various units);

(c) emergency repairs and operational improvements for the Inga I andInga II hydropower facilities;

(d) technical and institutional assistance to SNEL, includingstudies; and

te) a training program for SNEL's staff.

72. Rehabilitation and Construction. After detailed inspection ofthe 26 year old Ruzizi I dam, powerhouse and equipment, consultantsconcluded, and the Association agreed, that, without urgent rehabilitation,operations of the plant would become unacceptably unreliable. In addition,most of the electromechanical equipment would have to be replaced later ata cost greater than that of the proposed rehabilitation. The project wouldfinance urgent works for the generating units (cooling system, spare partsfor windings, relays, and signalisation) prior to their completeoverhauling, including the construction of new stator windings for 2 of the4 units. The project would also finance a phased rehabilitation program(lines, transformers, antennae) of the transmission and distributionnetworks served by the plant (Bukavu, Goma, and Uvira), and theconstruction of 83km of medium voltage, and 150 km of low voltage lines.Finally, the project would finance the installation of a terminal tointerconnect the Ruzizi I and Ruzizi II networks.

73. For the Shaba system, the project would finance the followingsupplemental work: (i) further repairs to the turbines, generators,hydromechanical and electric systems in all four generating stations; (ii)modernization of the turbine speed regulation systems; (iii) replacement ofthe No. 4 unit shaft at the Nseke power station; (iv) repair andreplacement ot the valves at Nzilo and Nseke dams; and (v) additionalinstallation works and engineering services.

74. At the Inga complex, limited preventive maintenance for lack offoreign exchange and underutilization of the overdimensioned facilitieshave created serious technical problems which need to be addressedurgently. The project would finance the supervision, procurement, andinstallation of selected equipment and spares responding to highestpriority needs over the next eighteen months as identified by the panel ofexperts financed by the Association under Credit 1224-ZR (civil worksstructures, rehabilitation of Inga I units, instruments and equipment tosynchronize operations of the AC and DC systems, and initiation of aload-shedding program in the Shaba region to minimize disturbance toGecamines).

- 23 -

75. Technical and Institutional Assistance. SNEL is currentlyreceiving asistance through Credit 1224-ZR. Its objectives are tostrengthen accounting and management control systems, to prepare along-term development plan, to revalue assets, and to carry out a tariffstudy. Technical assistance under the proposed project would continue andcomplement on-going efforts, and include: (i) assistance for personnelmanagement, developing financial policies, promoting commercial activities,and improvirg procurement and project supervision; (ii) completion andrevision of the long term development plan; (iii) revision of therevaluation exercises; (iv) audits of SNEL's 1985, 1986 and 1987 accounts;(v) update of the 1984-1985 tariff study; (vi) audit of the operations ofthe Inga-Shaba system and study of the long-term options for the Inga-Shabasystem; (vii) prefeasibility studies for projects included in thelong-term power development plan; (viii) preparation of a contract for thetransfer from the Government to SNEL of ownership rights of assets financedand presently owned by Government, but operated by SNEL; and (ix) studiesof urban household energy needs, supply and feasibility of variousoptions. This assistance would be provided, inter alia, by eight expertswhose job descriptions were agreed at negotiations.

7b. Training. SNEL's training center at Sanga requires somerehabilitation, management support and upgrading of the skills of thetwelve instructors. SNEL has recently signed an agreemeat with EDFInternational for the services in 1986 and 1987 of a short-term trainingspecialist to prepare and implement an interim action plan for stafftraining (1986-87). These services are financed from the CCCE loan whichco-finances the Stiaba Power System Rehabilitation Project (para. 67). SNELwould prepare by July 31, 1986, an interim action plan for trainingtechnical personnel as well as managers, consult with the Association onthe proposed master plan, and, no later than September 1, 1986, put theagreed plan into effect. A long-term Training Master Plan would besubmitted for comments to the Association by November 1, 1986.

77. Cost Estimates. Total project costs have been estimated atUS$41.9 million, without duties and taxes, and excluding interest duringconstruction (estimated at US$6.5 million, to be paid by SNEL). The foreignexchange component is estimated to be US$37.6 million, or about 90 percentof total project cost. Cost estimates for the consulting services,technical assistance and training have been prepared by IDA, while thecosts of the other components have been estimated by the consultants whoprepared the project and are acceptable. The costs of consultant serviceshave been estimated on the basis of existing contracts and prevailingmarket rates. Cost estimates are given in March 1986 prices. Physicalcontingencies of 10 percent have been included. Price contingencies arebased on recent Bank estimates of inflation rates as follows: 1986 - 7.2percent; 1987-1988 - 6.8 percent; and 1989 - 7.0 percent. The samepercentages for local and foreign costs have been used under the assumptionthat the difference between local and international inflation will becompensated for by exchange rate adjustments. A detailed project cost tableis in the Credit and Project Summary at the beginning of this report.

- 24 -

78. Financing Plan. The proposed IDA credit of US$37.0 million wouldcover about 88 percent of the estimated project cost, aud about 98 percentof the estimated foreign exchange requirement. UNDP would finance thetraining activities (US$0.6 million). Of the proceeds of the IDA Credit,US$3b.9 million would be onlent to SNEL at 8.5 percent interest per annumfor a period of 20 years including five years' grace, with SNEL assumingthe foreign exchange risk. SNEL would also pay interest duringconstruction, and finance local currency requirements. The remainingUS$l00,000 of the IDA Credit would finance the household energy study, tobe supervised by SNEL on behalf of the Ministry of Mines and Energy. Theexecution of (i) a subsidiary loan agreement between SNEL and theGovernment and (ii) the UNDP agreement would be conditions ofeffectiveness.

79. Implementation. SNEL would be responsible for the implementationof the rehabilitation and extension components of the project and would beassisted by engineering consultants. Works would be carried out bycontractors. Preliminary designs and tender documents would be completedby September 1, 1986, rehabilitation and extension of the Kivu distributionnetwork by end-1988, and rehabilitation of the Shaba power system and theRuzizi I Power Plant by end-1989. SNEL would complete and furnish to theAssociation for comment, by September 30, 1986, a systematic review of itsneeds for rehabilitation of the physical facilities, improvement inefficiency of operations, and substitution feasibility between diesel andhydroelectric stations. The Project implementation schedule has beenagreed.

80. Procurement. For items of a proprietary nature, particularly forthe rehabilitation of the Ruzizi I, Shaba, Inga I and Inga II plants, SNELwould negotiate directly with the original manufacturer for the supply ofthis equipment, its installation, and all the necessary guarantees. Thetotal cost of items to be purchased in this manner would not exceedUS$5 million. Nevertheless, attempts would be made to obtain as broad aresponse as possible for the supply of this type of equipment. Othermaterials, equipment, and installation services would be procured inaccordance with the Association's guidelines for international competitivebidding. Procurement for cofinanced items would follow the colenders'normal practices. Consultants would be selected and employed following theBank Group's guidelines. A procurement table can be found in Annex IV.

81. Disbursements. The proceeds of the IDA credit would be disbursedover five fiscal years to finance:

(a) 100 percent of foreign expenditures and 90 percent of localexpenditures for rehabilitation and extension of the Kivutransmission and distribution network and the interconnectionterminal to Ruzizi II;

(b) 100 percent of foreign and 90 percent of local expenditures formaterials and works for the rehabilitation of the Huzizi I,Shaba, Inga I, and Inga II hydroplants;

(c) 100 percent of foreign expenditures and 90 percent of localexpenditures for radio communication equipment; and

- 25 -

(d) 100 percent of foreign expenditures for engineering services,technical assistance and studies.

The Project would be completed by June 30, 1990, and the closing date wouldbe December 31, 1990. The disbursement profile does not differ fromstandard power project profiles since funding covers mostly rehabilitationand extension of transmission and distribution networks, and technicalassistance, with virtually no construction where delays are usuallyincurred.

82. Parts and equipment urgently needed for the rehabilitation of thehydroplants and the distribution network in Bukavu and Goma would befinanced retroactively for a total amount not exceeding US$600,000equivalent, for work posterior to August 1, 1985. All claims would befully documented except for claims relating to any contract or purchaseorder whose value is less than US$20,000, that would be submitted understatements of expenditures. The documentation for these claims would beheld in SNEL and made available for inspection by the Association. In orde-rto expedite and facilitate disbursements, a Special Account would -be openedin a financial establishment acceptable to the Association.The Association would deposit an amount of US$1 million equivalent inforeign exchange. All IDA financed expenditures would be financed underthe Special Accounet, uless otherwise agreed by the Association. TheAccount would be replenished monthly.

83. Auditing and Reporting Requirements. SNEL is a public sectorenterprise and 'as such is required to prepare accounts according to Zaire'sgeneral commercial accounting standards. SNEL would continue to have itsannual accounts and financial statements audited by independent auditorsacceptable to the Association for submission to the Association, 6 monthsat most after the end of its financial year. SNEL would prepare progressreports and a project completion report in a form acceptable to theAssociation.

Benefits and Risks

84. Economic rates of return (ERR) have been calculated for the majorcomponents of the project, benefits have been based on electricity pricingprinciples set forth in paragraph 59. The overall ERR, covering 70 percentof project costs, has been estimated at 9.5 percent and is acceptable. TheERR is sensitive to increases in costs and delays. For the rehabilitationof the Kivu network, because the proposed project is an important componentof a regional program (para. 68) designed to provide electrical energy tothe Great Lakes Region (Burundi, Rwanda, and Zaire-Kivu), an economic rateof return (ERR) was calculated on the total investments for electricalenergy in the Region, and is 9 percent: This rate is acceptable as powertariffs do not capture the full benefits of the project. When taking intoaccount the economic benefits from the use of hydropower rather than dieselgeneration, which some 15 percent of consumers would buy, the ERR increasesto 11.5 percent. These rates of return are comparable to those for theRuzizi II Regional Hydroelectric Power Project (Staff Appraisal Report 4303EAP; May 1982). For the Shaba system, the ERR was calculated at 16 percentfor the original Shaba Power System Rehabilitation Project (Staff Appraisal

-26-

Report No. 3400-a-ZR of March 15, 1982). It was recomputed to take accountof the costs and rate changes in the intervening period and of theadditional work proposed and is now estimated at an acceptable 12 percent.

85. No negative environmental effects are anticipated. The physicalrisk associated with the rehabilitation and extension components of thisproject is small. Bids would be received after Board presentation, but asthe contracts would cover routine material and equipment and erectionservices, the risk of cost overruns is small. The main risks are linked tothe evolving nature of SNEL as an institution, and would be alleviated byprovision of competent consultants to assist the company. An additionalrisk relates to the Government's willingness to maintain a rationalinvestment planning and pricing policy for the sector. Government hasrecently demionstrated its commitment to improving the current situation byseeking, and responding to, the Association t s advice in the context of theEnergy Assessment and of our continuing dialogue with Zaire.

PART V - RECOMMENDATION

86. I am satisfied that the proposed Credit would comply with theArticles of Agreement of the Association. I recommend that the ExecutiveDirectors approve the proposed IDA Credit.

A. W. ClausenPresident

Attachments

Washington, D. C.May 29, 1986

- 27 -

ANNEX I.A a 1- i Page I of 6

ZAIRE - SOCAtL umOIC*TOsq fAtS SNERTZAIRE *uIRKCEg CoUps (4E1IJTED aua) I

'aST (MST NE'?a ESTMATP: lbR(CbJ LIN tlCOe AFRICA StMOLl thut

tIndk tiwt? EMTDLIATdO. sUor" or SAN5*M AVEICA S. uV SAKARA

AURA sqwzSAU t. @0iTOTL 2345.4 2345.6 2341.4ACRICULIURAL 146.4 151.2 135*.

cWP PER CAITA Cuss) .. .. 170.0 236.4 1063.6

ENEMY C0NH5TIO PER CATActILOCnAS or OIL sQUIVALENT) 65.0 50.0 82.0 62.3 5631.

POULATION AND VITSAL StAtSTICSPOrULATON.NEm-ZAR (muusamu) 17754.0 21*38.0 29671.0URBAN rornLATtau CZ or oTAL) 15.7 21.6 3P.0 20.1 32.0

POPULATION PROJ EClUUISPULATION IN WAR 2000 (HILL) 49.9STATtONARY POPULATION C.tLL) 145.0POPULATION WNSNM 1

POPULATtON DENS ITsPER so. M. 7.6 9.2 12.7 33.2 05.1PER SQ. I0. ACRI. LAND 121.3 143.1 134.2 112.3 124.8

POPULATION AGE STNCUE (I)0-14 YRS 44.1 44.2 45.4 46.0 45.6

15-" TRS 52.3 52.9 51.2 50.3 51.563 AND ABOVE 2.9 2.3 3.2 2.9 2.7

POP tAT0ll GROWt RATE CZ)TOTAL 2.2 2.0 2.4 2.3 2.9UIlA .. 5.2 7.6 6.4 5.1

CR2u1 BIRTH RATE (PER Tt5OUS) 46.3 41.8 #6.0 *7.2 41.0CRUDE DEATH RATE (PO NHOUS) 24.3 20.3 15.5 17.3 15.0CROSS REIPRO0ErtON RATE 2.9 3.0 3.1 3.3 3.2

FUaL PULNNPINGACCETORS, ANUVAL (IHOi..)USERS (X OF HAlRID WMOi) 3. .. 3A 3.3 6.4

FOOD AND NURIO,SE or FOOD PMO. PER CAPTrA

(1969-71-100l 101.0 101.0 35.0 33.3 SL9

P!R CAPITA SULY OFCALoRIES CX OF RwUIRIETS) 94.0 IOLA IOLO 67.t 96.5PROTEINS (Catls PER DAY) 34.0 3I.0 35.0 51.1 55.4Or WJCN am7AL AND PULSZ 12.0 13.0 10.0 /c 18.7 16.5

CHILD CAGES 1-4) CASN RATE 32.3 Z7.2 20.0 23. 16.6

JEZAlLIFE EXPECS. AT BIRTH liAuS) 42.9 45.3 50.7 47.8 52.0:irAn MOr. RATE (M THoUS) 150.0 132.0 IU4.D 119.5 IUd.8

ACCESS To SAAn WATER (iWo?)TOTAL *- 11.0 17.9 27.1 42.4URIL*1 .. 33.0 40.0 63.5 67.1vUimL 4.0 5.0 19.3 35.3

ACCSS Tro ENCrA DISPOSALC: OF ?0PDLATIOS)

TOTAL 5.0 26.5 28.9URBAN .. 5.0 .. 45.4 57.7RURAL 5.0 20.5 20.7

POPULATION PEt PP.YSTC 79620.0 30140.0 13940.0 Id 27901.7 11791.7PUP. PER NURSING P7RSON 35LC.0 2290.0 1810.0 /d 330IL. 2459.8POP. PER HOSPItAL IED

TOTAL 230.0 320.0 330.0 /d 1273.b 951.1URBA.t 60.0 100.0 150.0 W 425.2 365.8RURAL 770.0 1070.0 2530.0 r 3292.5 4371.9

AWKISSIONS PER HOSPITAL BED .. .. .. .. 27.2

aOUszrAVERSGE S7E OF HOUSWIOLD

roTL .. ..

URRAN .. 6.1RRAL .. ... 0

AVERAGE 40. Or PFRSOISIRO7OTOTAL .. ..asN .. ..

RUAL .. ..

PERCENTAGE OF DwELLINGS f1 ELECt.TOTAL .. ..URBMN .. ..URA . .

ANNEX IPage 2 of 6

. L 9 7^

ZAIRE - SOILL 1UOICATORs K4A SNtElZAIRE nrEFImcE OUPS (C1ITCD AWEmAa L

3DI ("DST Cot" S amoa) Ahi? LOW. I1 N Or AFRICA WOOLf USIE

1,96A 197uLb irmUThAk SOUTH or SAHARA AtFICA S. 0t SA414

w zwoaT inAOJIJ3IZIi EUROUENAT RfOSPK21ARt TmTAL 60.0 .0 90.0 I 67.6 95.7

KIZ U..0 110.0 1040* ii 77.6 10t.bVDILE 32.0 66.0 75.0 ff54.9 1.2

SECONDARY& fOSIL 3.0 9.0 23.0 IL 13.5 17.3KALI 4.0 13.0 33.0 J 17.9 25.0,3WLE 1.0 4.0 13.0 h; 9.1 14.3

VUCATIONAL n OF SECNMW) 26.5 9.6 10.0 IC 13.2 5.1

PVIIL-TWACEk RO10PRDIAI 40.0 43.0 3u.U id 44.9 41.1scaoa 20.0 20.0 21.0 r 27.4 25.5

PASSUGUR CAUSPKUOIAD POP 2.5 3.0 .. 3.A 20.5iDANO SECElZRsjTMOUA N P .. 29.1 *6.8 55.6 107.8

TV XWvmRS/TNOUSAD .. 0.3 0.4 /f 2.6 20.8IUESPAIU ("DAILY WUAL

IUESIrT) CIUULATIONPER TIIOUSMD POPuWATION 1.2 9.2 1.6 5.0 16.4

CIAM ANNAL ATrENDANCE/cAITA 0.1 0.1 .. 0.5 0.4

LAM NUWETOTAL IAWDR bUCK (T113S) 8216.0 9465.0 12616.0

PUPLE (lCEIaT) 46.4 44.5 42.2 34.2 36.2AGKICWLTURZ (PERCENT) 83.0 79.0 75.0 If 77.5 54.5INSTRT (PERET) 9.0 11.0 13.0r 9.7 18.3

PARTCIATION RATE (Pxw)TOTAL 46.3 43.7 39.9 39.3 36.8KAL 51.9 69.8 47.3 5.9 47.1111AlLE 41.2 38.0 33.4 26.1 27.2

Z-OKIC DrnDECT RUATIO 1.0 1.1 1.2 1.3 1.3

loom uiinIwPErII OF PRIVATE DCOERECiED n

EigUi SX OF LOSEOLDS ..WIGHEST 20X OF HOUSEHOLDS ..LOUEST 20 O0 WoUSEoLDS ...LoSST 4020 oOUSOLD .. ...

Pm T -ESTDMTED A"SOLUTE PVEY INCOEL7VYL (USS PER CAPITA)

URnt .. .. .. 165.5 590.7RURAL .. .. .. 95.0 27S.3

ZSTRtALED REIATIVE POVERIT IIICOMELEML (USS PE CAITA)

URtW .. .. .. 113.1 545.6WRtAL .. .. 43.0 Ic 67.6 201.1

ESTRATIW POP. ELOW ASOLUTMPOVERTY INCOE LEVEL (C)

UN .. .. .. 36.6RURAL .. .. .. 61.8

MO AVAILAJEIWD APPLICAU.E

N0 TE S

I bhe grasp average. for each nditcator are populatiow-m Uted aritbetic mans. COvera aF couantries-ong the indicators dapends On avallabl3ty of data ad La not snlfor_.

lb Unlear othewls. noted, 'Data for 1960r refer to any year betweer 195v and 1961; DatL for 1970" be reen1969 and 1971; and data for 'Nat Recant stlmte betimen 1981 end 1983.

1c 1977; Id 19/9; I. 1978; If 1980.

JUlE. I9B5

-29- ANNEX IPnpo I nf 6

DERNmONS OF SOCLAL INDICATORSNotes. Although hedata aedrawn from oumn geally juded the not authoritative and reliable it should also be noted that they my not be interntiionallycomprable beause o the lack of standardized deiti and concpta used by different countris in colcting the data. The data art nonelheless ueful todescribe orden of magnitude. indic te rds, and dhamctize eatin major difrnc between countriesThe ulef-n poups are (1) the sme country poup of the subject country sad (2) a omuntry group with somewhat higher averae income than the countrygpp ofthe bjectcountry (xapt for'HiH Income Ol Exporter" group where Middle Income North Africa and Middle Eat" is chose because orstrongerodoiulturd aainitie). In the refience group data the avrges are population weighted arithnctic men for each indicator and shwn only when majority

ofthe countie in a oup hu data for that indicator Since the coverage ofcountries anng the indicator depecn on the availaility ofdata and is not uniformcaution must beexeried in reating averages ofone indicator to mther. Tese avera ae only useful in coumpaing the value orone indicator at a time amongthe country and rerence omupL

AREA (thousand sq.kn.) Crudk Iieh Rate (perthousnd)-Numberorlive births in the yearTotal-Total surface area comprising land area and inland watcrs; per thousand of mid-year population: 1960. 1970, and 1983 data.1960,1970 and 1983 data. Crh Death Rate (per thsJasud)-Number or deaths in the year

A sgiricakral-Fstimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970, and 1983 data.peranently for crops, pastures, market and kitchen gardens or to Grss Reproducton Rate-Average number ofdaughters a womanle fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive period if she cxperiences

present age-specific fertility ratcs; usually five-year averages endingGNP PER CAPITA (USS)-NP per capita estimates at current in 1960, 1970. and 1983.market prices cakulated by same conversion method as World a anil Pauia,-Accepers, Ammo! (ehouands 1-Annual num-Bank Atlas (1981-83 basis): 1983 data. ber of acceptors of birth-control devices under auspices of national

ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program.consumption of commrcial pfimary energy (coal and lignite, fdy Pasia-Users (percest of marid uroae-The pec-petroleum, natural gas and hydrr*. nudear and geothermal ekec- tage or married women ofcbild-bearing age who are practicing ortricity) in kilograms of oil equivalent per capita; 1960. 1970, and whose husbands are practicing any form ofcontraception. WOmen1982 data. ofchild-bearing age are generally women aged 15-49. although for

some countries contraceptive usage is measured for other agePOPULATION AND VITAL STATISTICS groups.

Foald Puplatia, Mid-tYear (housamur)-As of July 1: 1960, 1970. FOOD AND NUTRITIONand 1983 data.

UrbmPophWo (pecen oftora)-Rtioof urban to total Index of Food Prodmnion Per Ciapita (1969-71 = 100)-I odex ofpUruat bini efpn t of otu-Ratio Of may t cota capita annual production of all food commodities. Productionpopulation: different definitions of urban areas may affect compar- excudes animal feed and see fo agiulue Fodcmmdteability of data among countries; 1960. 1970. and 1983 data. include primary commodidtiesed or ariculture. Food cofmditr)

Populaton PIejeciou which are edible and contain nutrients (e.g. coffee and tea arePopulation in year 2000-The projection of population for 2000. exduded): they comprise cereals, root crops. pulses. oil seeds.made for each economy separatdy. Starting with infornation on vegetabes fruits. nuts. sugar.ane and supr beets, livestock. andtotal population by age and sex fertility rates, mortality rates, and livestock products. Aggregate production of each country is basedinternational migration in the base year 1980. these parameters on national avenge producer price weights; 1961-65. 1970. andwere projected at five-year intervals on the basis of generalizd 1982 data.assumptions until the population became stationary. Per Cap Spp C rs (peremt ofrequmrements)-Comput-Szationary popuaton-Is one in which age- and sex-specific mor- ed from caloric equivalent of net food supplies available in countrytalty rates have not changed over a long period, while age-specific per capita per day. Available supplies comprise domestic produc-fertility rates have simultaneously remained at replacement levd tion. imports less exports. and changes in stock. Nd supplies(net reproduction rate= 1). In such a population. the birth rate is exdudc animal feed. seeds for use in agriculture. quantities used inconstant and equal to the death mte. the age structure is also food processing. and losses in distribution. Requirements wereconstant, and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activitysize was estimated on the basis of the projected characteristics of and health considering environmental temperature. body weights.the population in the year 2000. and the rate of decline of fertility age and sex distribution ofpopulation. and allowing 10 percent forrate to replacement level. wasteathouseholdlevet 1961. 1970and 19S2data.Population Monenrwn-ls the tendency for population growth to Pr Capita Suppjly of Proein (grace per day)-Protein content ofcontinue beyond the time that replacement-level fertility has been percapita net supply of food per day. Net supply of food is definedachieved that is. even after the net reproduction rate has reached as above. Requirements for all countries established by USDAunity. The momentum of a population in the year r is measured as provide for minimum allowances of 60 gr-sns of total protein pera ratio of the ultimate stationary population to the population in day and 20 grams ofanimal and pulse protein. of which 10 gramsthe year t, given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those ofment level from year t onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as an

Pep ,gj D,,*ty average for the world. proposed by FAO in the Third World FoodPer sq.km.-Mid-year population per square kilometer (100 hec- Supply. 1961. 1970 and 1982 data.tans) of total area; 1960. 1970, and 1983 data. Per Capita Prein Sippy Fres ANIDI and Pulse-Protein supplyPer sq.km agrkiultura land-Computed as above for agricultural of food derived from animals and pulses in grams per day: 1961-65.landonly, 1960.1970,and 1982data. 1970and 1977data.

Populatior Age Strnr (percast)-Children (0-1 4 years). work- Child (ages 1-4) Death Rate (per trousand)-Number ofdeaths ofing age (I5-64 years), and retired (65 years and over) as percentage children aged 14 years per thousand children in the same ageof mid-year population; 1960. 1970, and 1983 data. group in a given year. For most developing countries data derived

from Eifec tables: 1960. 1970 and 1983 data.Popultion Growt Rare (perceser,-total-Annual growth rates oftotal mid-year population for 1950-60. 1960-70. and 1970-83. HEAbIIH

Popous Growt Rate (percemr)-uhaur-Annual growth rates Lie Erpectawy at Birth (years)-Number of years a newbornof urban population for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing patterns of mortality for all people

-30 - ANNEX IPage4 of 6

at the time or of its birth were to stay the same throughout its life: Pupli reacher Ratio - primary. and secondary-Total studentc en-1960, 1970 and 1983 data. rolled in primary and secondary levels divided by numbers oflufuuw Mortarity Rate (per thousand)-Number of infants who die teachers in the corresponding levels.before reaching one year of age per thousand live births in a givenyear, 1960, 1970 and 1983 data. CONSUMPTIONAccs to Safe Water (percet of popidadon)-toral, urbn, axd Pasenger Cns (per thomsd popuatiou)-Passenger cars coi-ruraL-Number of people (totaL urban, and rural) with reasonable prise motor cars seating less than eight persons; exdudes ambul-acces to safe water supply (includes treated surrace waters or ances, hearses and military vehicles.untreated but uncontaminated water such as that from protected Radio Receirs (per thousand ppuladon)-AlI types of rceiversborehcs, spnngs and sanitary wells) as pentages of their respec- for radio broadcasts to general public per thousand of population;tive populations. In an urban area a pubc fountain or standpost excludes un-liensed receivers in countries and in years whenlocated not more than 200 meters from a house may be considered registration of radio sets was in effect; data for recent years mayas being within reasonable access of that house. In rural areas not be comparble since most countries abolished licesing.reasonable access would imply that the housewife or members orf thehouselhold do not have to spend a dispropontionate part of the day TVRecen eics (per thusandpop ulution;V receives for broadcast

in fetching the famly's water neets. - to general public per thousand population; excludes unlicensed TVin fetching the family's water ncds . receivers in countries and in years wben registration of TV sets wasAccess to Excrete Disposl (percent of poplwtrion)-total, urba, in ctand rural-Number of people (total, urban. and rural) served byexcreta disposal as percentages of their respective populations. pcpPer Crcuate (,per trhoxad pepul)soh)-Shows the aver-Excreta disposal may include the collection and disposal. with or age circulation of "daily general interest newspaper.' defined as awithout treatment, of human excreta and waste-water by water- periodical publication devoted primarily to recording general news.borne systems or the use of pit privies and similar installations. It is considered to be 'daily' if it appears at least four tines a week.Populti per Physician-1opulation divided by number of prac- Cma An_ Atendace per Capita per Yerased on thetising physicians qualified from a medical school at university level. number or tickets sold during the year. including admissions toPopuNtiom per Nursing Person-Population divided by number of drive-in cinemas and mobile units.practicing maile and female graduate nurses, assistant nurses.practical nurses and nursing auxiliaries. LABOR FORCEr_pera n a nursig airc Total Labor Force (shousands4 (-Economically active persons, in-(total, urban, and rural) divided by their reive number Of cluding armed forces and unemployed but excluding housewives,htosptal urban. availablpublic and private, general andt speciaof students. etc.. covering population of all ages. Definitions inhospital beds available in pbianprvt.ecalndsvarious countries are not comparale 1960. 1970 and 1983 data.hospitals and rehabilitation cente. Hospitals are establishmentspermanently staffed by at least one physician. Establishments prov- Feaku (percent)-Fcnale labor force as percentage of total laboriding principally custodial care are not included. Rural hospitals. fo.however, include health and medical centers not pennanentlv staffed Agrzatne (percent)-Labor force in farming. forestry, huntingby a physician (but by a medical assistant. nurse, midwife, etc.) and fishing as percentage of total labor force; 1960, 1970 and 1980which offer in-patient accommodation and provide a limited range data.ofn medical facilities. Indutry (percent)-l-abor force in mining. construction, manu-Adanissims per Hospital Brd-Total number of admissions to or racturing and electricity, water and gas as percentage of total labordischarges from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data.

Pwaipo Rare (percent) -rral, aek, mdfaPae-PrticipationHOUSING or activity rates are computed as total. miale and female labor forceAveae Sila of Household (perso pe houedol)-total. wab,. as percentages of total, male and female population of all agesandrral-A household consists of a group of individuals who share respectively; 1960. 1970. and 1983 data. These are based on ILO-sliving quarters and their main meal. A boarder or lodger may or participation rates reflecting age-scx structure of the population, andmay not be included in the household for statistical purposes. long time trend. A few estimates are from national sources.Aveae Numkr of Persons per Room-total, arbat, and rural- Ecoaommic Dependency Reto-Ratio of population under 15. andAverage numnber of persons per room in all urban. and rural 65 and over. to the vorking age population (those aged 15-64).occupied conventional dwellings. respectively. Dwellings excludenon-permanent structures and unoccupied parts. INCOME DISTRIBUTIONPercentage of Dweligs wrth Ekctricity-total, urban, and rural- Parcrage of Total Dspsabke Income (both in cash and kind)-Conventional dwellings with electricity in livingquartersat percen- Accruing to percentile group, or households ranked by total house-tage of total. urban. and rural dwellings respectively. hold income.

EDUCAT1ON POVERTY TARGET GROUPSAdjted Earolmext Ratios The following estimates are very approximate measures of povertyPrimw school - rotal, male and female-Gross total. male and levels. and ehould be interprcted with considerable caution.female enrollment of all ages at the primary level as percentages of Estimated Absolute Poverty Ineoeme Level (USSper cpi*a)-urbanrespective primary school-age populations. While many countries and rural-Absolute poverty income level is that income klvelconsider primary school age to be 6-11 years. others do not. The below which a minimal nutritionally adequate diet plus essentialdifferences in country practices in the ages and duration of school non-food requirements is not affordable.are reflected in the ratios given. For some countries with universal Estimated Relatire Pover Inco1ie Level (USS per capira)-rbaneducation, gross enrollnent may exceed 100 percent since some and rural-Rural relative poverty income kvel is one-third ofpupils are below or above the countr's standard primary-school average per capita personal income of the country. Urban level isage. derived from the rural level with adjustment for higher cost ofSecovdary school - total. male and female-Computed as above iving in urban areas.secondary education requires at least four years of approved pri- Estimated Popultion Below Absolae Poverty Income Levd (per-mary instruction: provies general. vocational, or teacher training cent)-urban and rua- Prcent of population (urban and ruralinstructions for pupils usually of 12 to 17 years or age correspond- who are "absolute poor.-ence courses are generally excluded.Vocational Enrollment (percent of secandary)-Vocational institu- Comparative Analysis and Data Divisiontions include technicaL irndustriaL or other programs which operate Economic Analysis and Projecions Departmentindependently or as departments of secondary institutions. June 1985

- 31 -

ANNEX IPage 5 of 6

ZAIRE Economic IndicatorsNATIONAL ACCOUNTS

Annual Growth RIates (X)US S Mili;ons As percent of GDP at 1980 prices

1984 1984 1913 1984 1986

GDP Market P-ie.s 49S2.2 101.6 0.8 2.8 2.S

CDP Factor Cost 4872.6 97.B 1.4 3.1 2.5Agr;cultere 1566.4 32.0 2.0 3.0 3.0rndustry 1755.0 38.0 4.1 2.6 1.6Other 1657.1 32.8 -0.9 3.6 3.1

Not Export of CNFS 8.2 4.1rmport of CNFS 2031.8 36.9 .. 8.9 2.0Export of GNFS 2046.6 41.0 .. 4.7 -1.3

Cross Fixed Investment 811.6 16.2 6.6 -3.3Consumption 4162.4 77.6 .. 3.0 4.8Cross Domestic Savings 819.8 22.6 .. 1.6 -6.9Grose Notional Savings 483.3 12. 0 -27 o 2.7

PUBLIC FrNANCE (Central Government)

Zaire Mi lions X of GDP

1983 1984 1986- 1983 1984 1986

Current revenues 10998 25994 '1356 11.4 14.4 17.2Current expend;tures 11459 26193 376s4 11.9 14.6 1S.7Current deficit -461 -:99 3696 -0.6 -6.1 1.SCapital expenditures 647 1019 956 -1.1 -O.7 1.1Overall deficit -1108 -1218 2740 -1.1 -0.7 1.1

MONEY, CREDIT AND PRICES 1986 1981 1982 :983 1984 1985

Uoney and Quasi-money 3367.3 464A.9 aos7.0 '162 19792 23926Bank credit to public sector 2329.4 3783.6 7s88.6 10252 13396 14147eank cred;t to private sect. 1061.1 1435.4 2666.0 3997 5947 9687

Money A Quas;-ffoney ({ GDP) 11.7 11.7 16.S 14.5 10.4 16.0Consamer Price Idrex :975=10 1 313.3 1813.1 2487.9 4375.3 6854.8 9aS1.3

Arnual cercertage cl1angesConsumer Pric- Index 38.1 37.2 76.e 52.1 30.0Bank credit to public sec. 62.4 108.5 30.0 30.7 10.8Bank credit to private sec. 36.6 85.7 46.2 52.8 62.9

NOTE: All conversions to dollars in this table are at the average excange rateprevaling in the period covered.

- 32 - ANNEX IPage 6 of 6

ZAIRE: Economic IndicatorsBALANCE OF PAYMENTS

U5 a Millions1980 1061 192 1983 1934 2986

Exports of Goods A Services 2371.4 1772.3 1668.2 1775.6 206s.0 2006.3of which Merchand;ia(FOB) . 2143.6 1499.8 1476.8 1697.3 1893.2 1989.0

Imports of Goods A Servicos 2436.9 2270.1 2036.8 1941.3 1877.8 1886.9of which Merchandise(FOB) 1761.0 1636.7 1436.3 1329.3 1321.2 1376.4

Private transfers (net) -79.4 -3.S -8.8 3.2 -91.2 -61.1Current Account Balance

(before rescheduling) -291.6 -503 7 -690.6 -349.6 -349.6 -366.3(after rescheduling) -291.6 -460.1 -647.6 -181.7 -136.6 -212.2

Officiat Grants (not) 266.8 247.6 160.1 173.2 174.3 169.2Public Capital (not) -22.1 -168.6 -178.8 -196.7 -296.2 -299.3Priv.C&pit l(net),Err.& Omiss. 68.6 31.8 91.6 -16.0 102.6 174.2.SDR Allocation 20.8 18.9 17.7 0.0 0.0 0.0Increase (-)in Int. Reserves -48.2 113.2 35.3 -8.6 33.8 -2.0Reduction (-) in Arreors -1347.1 129.7 380.9 -613.1 -76.9 -61.1Other Financing 1629.6 470.7 244.0 1082.9 694.3 477.6of which Debt Rescheduling 1612.6 371.4 150.1 971.7 477.7 411.4

EXCHANGE RATE

Zlires/USs AVG. EXCH. RAITATE (ZIUSZ)

Aug.24,1979-Feb. 22,1980 2.1 1980 2.9--Feb.22.19860-June 19,1981 3.1 1981 4.4June.19,1981-Septem.12,1983 5.6 1982 6.8September 12,1983 [1] 26.9 1983 12.9February 24,1984 33.a 1984 36.1

1986 47.0

EXlEANAL DEBT (Outstanding Dec. 1985,Mill.USI)Medium Long Term 6380.

1981 1981 1982 1983 1984 1985Debt service ratio 22.7 21.9 13.9 14.3 26.4 27.7

MERCHANDISE EXPORT (Mill.USS) 1980 1981 1982 1983 1984 1985

Copper 1032.5 758.6 790.7 781.2 715.5 697.6Cebait 377.3 158.3 182.8 121.4 226.6 249.0Dimonds 113.8 77.2 76.2 138.9 220.4 222.0Other Metals 113.1 115.7 84.2 127.2 166.6 76.0Coffee 163.1 111.8 1065.0 116.6 212.2 189.0Crud- oil 226.1 273.5 274.3 236.6 322.9 369.0Other 157.8 112.9 127.2 115.6 128.2 148.6Marketing Cost h Adjustments -39.9 -106.2 -163.6 -40.0 2.1 6.6Total exports FOB 2143.6 1499.8 1476.8 1597.3 1893.2 1889.0

(1] On September 12,1983 Zaire introduced a transitional dual exchange rate regimeconsisting of an official rate and a free market rate ,shown in parentheses above.The two rates were unifiod on February 24,1984; henceforth the rats is fluctuatingand its market price determined in the interbank market were Commercial Bankscan buy and soll for.ign exchange and the Bank of Zaire can intervene toregulate the market.

_33 - ANEX IIPage 1 of 2

Sr1US OF EM (RI OPERII III ZAIE

A. SThaMer OF BANK LaS AND MA, CEwITs (As of March 31, 1986)

Ioan orCredit Year Amournt in US$ MiUonNxmer Si Borzwr Bank MiD I/ 1kdisbursed

Priorto June Wo & Trasport 91.58 2/1960 Otraco infrastrucwure

One Ia Fuly Disbursed 100.00Sixteen Credits FuUy Dishse 200.34

796 1978 ZAIR Otl Palm 8.48 5.16902 1979 ZABE Railays 20.00 3.99998 1980 ZAIR IfUth Dev. Einane 18.50 1.20

1040 1980 ZAIE sailier Maiz 11.00 4.181089 1981 ZAR Mlu Iboogo Skgar 26.40 1.281152 1981 ZAIRE ilaogowidu Tecmical Assistance 2.90 0.131180 1982 ZARE ONARA !tdeizati 26.00 12.831224 1982 ZAIE Siaba Poer System elitaion 19.00 3.731241 1982 ZAIRE Water Suply II 18.00 3.451244 1982 ZAIRE Agriculture T.A. 5.00 1.871264 1982 ZAIRE Second Cotton 11.30 9.851273 1982 ZAIRE Sixth DFC 21.50 4.561290 1982 ZAIRE Highway V 43.50 10.851325 19&L ZAIRE North East Rural Development 13.00 9.581335 1983 ZAIRE Pbrts Rehabilitation 25.00 18.331336 1983 ZAIRE Gecanes T.A_ 7.00 3.931409 1983 ZAIRE Petrolen Sector T.A. 4.50 3.491421 1984 ZAIRE Ruzizi II eectrlc 15.00 10.781475 1984 ZAIRE Railways II 26.00 25.951492 1984 ZAIE Seventh DFC 36.00 23.191519 1984 ZARE Educatio Tedmical Assistle 9.00 6.381540 1985 ZAIRE Tlilia Agricultiral Deelopmet 12.50 12.471609 1985 ZAIRE Seed 14.90 14.90A006 3/ 1986 ZAIRE Sixth Eighway 30.00 30.001608 3/ 1986 ZAIRE Sxth Highway 55.00 55.00

Total (less cance.llatiins): 191.58 679.82 277.08- of which has been repid_ 144.98 3.48Total now outstanding: 46.60 676.34Amount sold: 54.47

of whidh has been repaid 54.47Total w helid by RBak and IDA, 1/ 46.60 676.34Total Lkdisbursed: 0.0 277.08 Z77.08

1/ US doll ar znits for credits 108-R and Oards are auuted at tie rate of Credit-egotnti OOS dates.

2/ Guaranteed by the Kirgdm of Belgiin-3 Signed but not yet effective.

- 34 - ANNEX IIPage 2 of 2

B. SCka1 OF IFC INESDEaS (as of March 31, 1986)

Fiscal hozt in US$ MiLlonsYear aBJgar BusineSs low Eut Total

1970 Soci&A Fienaridre de DFC - 0.8 0.8Dkveloppemnnt (SOFIE)

1984 Socii Financire de DFC - 0.5 0.5Dflveloppement (SOFIDE)

1985 Soci&t Textile de Textile 8.3 0.6 8.9Kisagaran CGany

1985 Grands Hotels ch Zaire Hotel 15.0 - 15.0Company

1985 (Compary In foati) Cot - 0.1 0.1y in frmatio) FatMin

Total gross camitments 23.3 2.0 25.3

less: - - -

- undishbused 12.3 0.3 12.6

Eld by IE 11.0 1.7 12.7

ANNEX IIIPage 1 of 3

SUPPLIMENTARY PROJECT DATA SHEET

Section I: Timetable of Key Events

(a) Appraisal Mission: November 1984(b) Post-Appraisal Mission: April 1985(c) Negotiations: Started in July 1985 and concluded

in April 1986 after resolution ofprocurement issues linked to SONATRAD

(d) Planned date of Effectiveness: December 1986

Section II: Special Project Implementation Actions

(a) SNEL would complete and furnish to the Association for comment, bySeptember 30, 1986, a systematic review of its needs forrehabilitation of the physical facilities, improvement in efficiencyof operations, and substitution feasibility between diesel andhydroelectric stations (para. 79).

Section III: Special Conditions

(a) SNEL and the Government would conclude, by June 30, 1987, a legalagreement to (i) determine ownership of all assets financed by theGovernment but operated by SNEL: (ii) establish responsibility forpayment of existing debt service until aU outstandiog loans are fullyrepaid; (iii) define the broad objectives of SNEL's tariff policy sothat SNEL's operation and maintenance costs as well as the renewal andexpansion of SNEL s assets are covered by SNEL's own resources; and(iv) transfer the Inga II hydro plant and the Inga Shaba line to SNELat a transfer price based on their value in use (para. 45).

(b) SNEL would, beginning in 1986, cover from its own resources -11

onerati and maintenance charges associated with the Inga II hydrolant axd Inga-Shaba transmission line and, beginning in 1987,

reimburse over a ten-year period, a portion of the original debtrelated to construction of the Inga II hydro plant corresponding toits value in use (para. 45).

(c) SNEL would (i) take all necessary measures including the adjustment ofits tariffs, to produce for each of its fiscal years beginning in1986, funds from internal sources equivalent to about 30 percent ofthe annual average of capital expenditures incurred or to be incurredduring that year and the next two fiscal years; and (ii) review beforeJune 30 in each of its fiscal years, on the basis of forecasts

-36 - ANNEX IIIPage 2 of 3

satisfactory to tne Association, the adequacy of its tari.lfs to meetthe requirement for cash generation against cepital expenditures andfurnish to the Association a copy of the review upon its completion(para. 57).

(d) SNEL's receivables would not exceed 4 months' sales by end-1986, 3months' sales by end-1987, and 2.5 months sales by end-1988 andthereafter. To bring receivables down to these levels, SNEL andGovernment would agree on an action program acceptable to theAssociation. Submission of the action program would be a condition ofCredit Effectiveness (para. 60).

(e) While Government would bear debt service related to the Inga IIhydroplant, and Inga-Shaba line antil outstanding loans are fullyrepaid, SNEL would reimburse Government over a ten-year periodbeginning in 1987 the portion of the original debt incurred for theconstruction of these facilities corresponding to their value in usewhen transferred (para. 60).

(f) Government and SNEL have agreed that all grants, credits and loanscl,tained by the Government for the purpose of financing SNEL's1985-1992 investment program would not, without the Association'sprior consent, be on-lent to SNEL at less than 5 percent interest andthat the foreign exchange risk would be assumed by SNEL. In addition,SNEL would not incur debt unless the internal cash generated for thetwelve months preceding incurrence of the debt is at least 1.5 timesthe maximum debt service requirement for any succeeding year (para.bi).

(g) SNEL would complete and furnish to the Association for comment bySeptember 30, 1986 its long-term development plan, and wouldthereafter and annually until June 30, 1990 exchange views with theAssociation on the updating of the plan (para. 65).

(h) Before undertaking any investment exceeding the equivalent of US$5million, SNEL would furnish for the Association's approval ajustification that the investment is least cost and has an assuredfinancing plan which spells out SNEL's and Government 's obligationsfor financial charges, including debt service, operation, maintenance,and depreciation (para. 66).

(i) SNEL would prepare by July 31, 1986, an interim action plan fortraining technical personnel as well as managers, consult with theAssociation on the proposed master plan, and, no later than September1, 1986, put the agreed plan iato effect. A long-term Training MasterPlan would be submitted for comments to the Association by November 1,1986.

_ 37 _ ANNEX IIIPage 3 of 3

Effectiveness Conditions

Special conditions of effectiveness would be:

(a) the execution of a subsidiary loan agreement between SNEL and theGovernment (para. 78);

(b) the execution of UNDP agreements (para. 78); and

(ce) the submission of the action program to reduce the level of SNF.L'sreceivables to specified levels (para. 60).

- 38 -

ANNEX IV

Procuremnt M4ethod al(USs thousand)

Bank Guidelines Other Cf DisbursementsProject Items b/ ICB for Consultants LCB Methods Total from IDk Credit

1. Rehabilitation of theRuzlai I poDwr plant 7,920 (7,320) - - - 7,920) 100I of foreign or

90X of total2. Rehabilitation & extension

of the Kivu netmorks

- Bukavu 8,530 (7,650) - - - 8,530) 100l of foreign- Goma 1,730 (1,550) - - - 1,730) or 90Z of total- Uvira 1,330 (1,200) - - - 1,330)

- Kiliba 1,735 (1,556) - - - 1,735)

3. Radio-com.micationequipment 100 (90) - - - 100 100 of foreign or

90Z total

4. Supplementary material,equipment and works for theShaba Power Systemrehabilitation 1,590 (1,345) 300 (250) - 4,038 (3,379) d/ 5 , 92 8 100 of foreigm or

901 total5. Emergency repairs and

operational improvementsat Inga I and Inga II 1,200 (1,000) 1,000 (800) el 2,200 100 of foreign or

901 total

6. Engineering services el - 2,760 (2,670) - - 2,760 100l of foreign

7. Technical assistanceand studies 8,849 (8,072) - - 8,849 1001 of foreign

8. Training - - 818 (118) el 818 100% of foreignTotal 22,935 (20,711) 13,109 (11,902) - 5,856 (4,297) 41,900

aJ Figures in parentbeses are the amounts proposed to be financed by IDA; totalling US$37.0 million.b/ Estimates of costs including contingencies; engineering services shbow separately on item 6.c/ Inclding feasibility studies and preparation of bid specifications carried out under PEF.dl Items of proprietary nature to be supplied by the originadl umfacturer, method already approved for

CR 1224-ZR: plus additional wDrks by the general contractor waich wis selected according to Bank gaidelizue/ Items of proprietary nature to be supplied by the original manufacturer.fJ In accordance with UNDP guidelines.

IBRD 1898

ZAIRE IC CENTRAL AFRICAN REP. i SUDANSECOND POWER PROJECT ' CTSL Pr wATE

_ c u Etkn Hydaopsr PbFI fo tl1FhYft Po l mn. Ff 5tEOF

_ PToloF.ld HY&qFo,F PbFFF Sl | f -, MEoIsFg ThP-Pl . PI... C-

- VDC Png-Shob.= 220 kV

50-70 kV A-- PosoFdTFFhvioL; , , XXt. . __

FOOT GDIL /00000 / -W- f / z -* F IFIILITAIIOOOFU jZI I ........... V1 r n01SQ.,i_

* REHA,L,TTI,ON OF TUEOISTRIFUTION__j ,E31tUAD T ] w w ae e p 15 RWUGANDA

~~~~~~~~~~~~~- ' I- \ oFjI 5 '- t

Cof.. Pp.Paon-' - RAD'

A i \ ( - I T

OF THE CONGO I_ \ - - - (

t: Fi00 \S r EOOS 1 IX

l N SInsH ANGOLA K ANGOLA i \

-: - Lik7.i ! {,, _ , .......ZAMBIA0 t____Sj ! ,_ _ _.d ~~~~-J