AFRICAN DEVELOPMENT BANK. PROJECT: THE NEW PORT OF WALVIS BAY
CONTAINER. TERMINAL PROJECT. COUNTRY: THE REPUBLIC OF NAMIBIA.
AFRICAN DEVELOPMENT BANK
PROJECT: THE NEW PORT OF WALVIS BAY CONTAINER TERMINAL PROJECT COUNTRY: THE REPUBLIC OF NAMIBIA PROJECT APPRAISAL REPORT
Sector Director: Appraisal Team
Amadou Oumarou, Officer-In-Charge, OITC
Regional Director: Ebrima Faal, SARC Sector Manager:
Amadou Oumarou, OITC.2
Team Leader:
Mam Tut Wadda-Senghore, OITC.2
OITC DEPARTMENT July 2013
TABLE OF CONTENTS Currency Equivalents ............................................................................................................................... i Acronyms and Abbreviations ................................................................................................................... i Loan Information..................................................................................................................................... ii Project Summary .................................................................................................................................... iii Results Based Logical Framework ......................................................................................................... iv Project Timeframe ................................................................................................................................... v I - STRATEGIC THRUST & RATIONALE ....................................................................................... 1 1.1 PROJECT BACKGROUND ............................................................................................................. 1 1.2 PROJECT LINKAGES WITH COUNTRY STRATEGY AND OBJECTIVES ............................................. 2 1.3 RATIONALE FOR BANK’S INVOLVEMENT ................................................................................... 2 1.4 DONORS COORDINATION ............................................................................................................ 3 II - PROJECT DESCRIPTION ............................................................................................................. 4 2.1 PROJECT DEVELOPMENT OBJECTIVES ......................................................................................... 4 2.2 PROJECT DESCRIPTION AND COMPONENTS ................................................................................. 4 2.3 TECHNICAL SOLUTION RETAINED AND OTHER ALTERNATIVES EXPLORED ................................ 4 2.4 PROJECT TYPE............................................................................................................................. 5 2.5 PROJECT COST AND FINANCING ARRANGEMENTS ...................................................................... 5 2.6 PROJECT’S TARGET AREA AND BENEFICIARIES .......................................................................... 7 2.7 PARTICIPATORY PROCESS FOR PROJECT DESIGN AND IMPLEMENTATION .................................. 7 2.8 BANK GROUP EXPERIENCE, LESSONS REFLECTED IN PROJECT DESIGN ...................................... 8 2.9 KEY PERFORMANCE INDICATORS ............................................................................................... 8 III - PROJECT FEASIBILITY ............................................................................................................... 8 3.1 ECONOMIC AND FINANCIAL PERFORMANCE ............................................................................... 8 3.2 ENVIRONMENTAL AND SOCIAL IMPACTS ................................................................................. 11 IV - IMPLEMENTATION ................................................................................................................... 12 4.1 IMPLEMENTATION ARRANGEMENTS ......................................................................................... 12 4.2 MONITORING ............................................................................................................................ 15 4.3 GOVERNANCE ........................................................................................................................... 16 4.4 SUSTAINABILITY....................................................................................................................... 16 4.5 RISK MANAGEMENT.................................................................................................................. 17 4.6 KNOWLEDGE BUILDING ............................................................................................................ 17 V - LEGAL INSTRUMENTS AND AUTHORITY ........................................................................... 18 5.1 LEGAL INSTRUMENT ................................................................................................................. 18 5.2 CONDITIONS ASSOCIATED WITH BANK’S INTERVENTION ........................................................ 18 5.3 COMPLIANCE WITH BANK POLICIES ......................................................................................... 19 VI - RECOMMENDATION ................................................................................................................. 19 Appendix I. Country’s Comparative Socio-Economic Indicators Appendix II. Table of ADB’s Portfolio in the Country Appendix III. Key Projects Financed by the Bank and other DP in the Country Appendix IV. Map of the Project Area
Currency Equivalents March 2013
1.00 UA = ZAR 13.5555 NAD 1.00 = ZAR 1.00
Fiscal Year 01 April – 31 March
Weights and Measures 1metric tonne 1 kilogramme (kg) 1 metre (m) 1 millimetre (mm) 1 kilometre (km) 1 hectare (ha)
= = = = = =
2204 pounds (lbs) 2.200 lbs 3.28 feet (ft) 0.03937 inch (“) 0.62 mile 2.471 acres
Acronyms and Abbreviations AfDB B/C CSP DFI DRC EIRR E&S ESIA
African Development Bank Benefits to Cost Ratio Country Strategy Paper Development Finance Institution Democratic Republic of the Congo Economic Internal Rate of Return Environmental & Social Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan EPC Engineering Procurement Construction EPZ Export Processing Zone FIATA International Federation of Freight Forwarders Associations FIDIC International Federation of Consulting Engineers FIRR Financial Internal Rate of Return GDP Gross Domestic Product GON Government of Namibia HSE Health, Safety and Environment IRR Internal Rate of Return JAR Joint Annual Review JIBAR Johannesburg Interbank Agreed Rate JICA Japan International Cooperation Agency ICB International Competitive Bid KfW Kreditanstalt fur Wiederaufbau MIC Middle Income Country NAD /N$ Namibian Dollar Namport Namibia Ports Authority
NDP NPV PCR PESC
National Development Plan Net Present Value Project Completion Report Project Executive Steering Committee PIC Project Implementation Committee PIDA Programme for Infrastructure Development in Africa PIU Project Implementation Unit PPP Public-Private Partnership QGC Quay Gantry Crane RAMSAR Convention on Wetlands of International Importance, especially as Waterfowl Habitat RTG Rubber Tyred Gantry Crane SACU South African Customs Unit SADC Southern African Development Community STS Ship to Shore Cranes SWAp Sector-Wide Approach TEU Twenty-foot Equivalent Unit TIPEEG Targeted Intervention Programme for Employment and Economic Growth US$ United States Dollar UA Unit of Account WBCG Walvis Bay Corridor Group WBNLD CMC Walvis Bay Ndola Lubumbashi Development Management Committee ZAR South African Rand (currency)
LOAN INFORMATION Client’s information BORROWER:
Namibian Ports Authority (Namport), with Sovereign Guarantee from the Republic of Namibia PROJECT NAME: The New Port of Walvis Bay Container Terminal Project LOCATION: Walvis Bay, Namibia EXECUTING AGENCY: Namibia Ports Authority (Namport) Financing plan Source ADB loan ADB MIC TA Grant Namport Government Grant TOTAL COST
Amount (ZAR) 2,982 million (87.2%) 14.00 million (0.4%) 173 million (5.1%) 250 million (7.3%) 3,419.00 million
Amount (UA) 219.91 million 1.00 million 12.77 million 18.44 million 252.12 million
Instrument Project Loan Technical Assistance Counterpart Funding Counterpart Funding
ADB’s key financing information Financing Details Loan currency Loan Type Lending Rate Base Rate Funding Cost Margin Lending Spread Commitment fee* Other fees* Repayment Tenor Grace period FIRR, NPV (base case) EIRR (base case)
Loan South African Rand (ZAR) Enhanced Variable Spread Loan Base Rate + Funding Cost Margin + Lending Base Spread Floating rate based on 3 month Jibar with free option to fix the Base rate. *1 60 basis points (0.60%) N/A N/A Semi-Annual Up to 20 years Up to 5 years 15%, NAD216 million 14.6%
Grant UA MIC TA Grant NA NA NA NA NA NA NA NA NA
Timeframe - Main Milestones (expected) Concept Note approval Project approval Effectiveness Completion Grant closing date Last Disbursement (loan) First Repayment (loan) Last repayment
March 2013 July 2013 January 2014 June 2019 December 2017 December 2019 August 2019 August 2033
1
The six-month adjusted average of the difference between (i) the refinancing rate of the Bank as to the borrowings linked to 3-month JIBAR and allocated to all its floating interest loans denominated in ZAR and (ii) 3-month JIBAR ending on 30 June and on 31 December. This spread shall apply to 3-month JIBAR which resets on 1 February, 1 May, 1 August and 1 November. The Funding Cost Margin shall be determined twice per year on 1 July for the semester ending on 30 June and on 1 January for the semester ending on 31 December.
ii
PROJECT SUMMARY Project Overview The Port of Walvis Bay is operated by the Namibian Port Authority (Namport) and serves as a gateway linking some of southern Africa’s major trading regions to international markets. In response to increased trade-related traffic volumes, Namport is embarking on an expansion program to raise the container throughput capacity from 355,000 TEUs to 1,005,000 TEUs. The project scope comprises the construction of a new container terminal on reclaimed land from the Walvis Bay channel supported by complementary initiatives on logistics and capacity building. The total project cost estimate is ZAR3,419 million (UA252.12 million), with 87.6% financed by the Bank through an ADB Sovereign Guarantee Loan of ZAR2,982 million (UA219.91 million) and a MIC TA Grant of UA1.00 million (ZAR14 million). The remaining 12.4% of the total project estimate, or ZAR423 million (UA31.21) will be financed by Namport including a grant from the Government of Namibia of ZAR250 million (7.3%). The project implementation is over a period of three (3) years. The expected project outcomes include improved efficiency of the port and increase in cargo volumes as a result of increased trade in the region, spurring inter regional trade and regional integration, private sector development, employment creation and promotion of inclusion, economic growth and poverty reduction. The project’s beneficiaries are extensive, ranging from the populations and governments of Namibia and the SADC countries, the trade and logistics industry, consumers and exporters at national, regional and international level. Needs Assessment The necessity to expand the container terminal at the Port of Walvis Bay arises from the significant growth in freight traffic in recent years and increasing demand for port capacity due to increasing economic activities and trade in the SADC region and in Africa in general. This trend is expected to continue and Namibia aims to maximise its potential and strategic location to become a trade hub for the region thereby enhancing trade and regional integration and yielding high and sustained economic growth; alleviating poverty in the country and the SADC region as a whole. The port is currently operating at capacity and timing and urgency are of the essence to take advantage of the opportunities on offer before this is lost to competing ports / countries in the region. Bank’s Added Value The rationale for the Bank’s involvement is multifaceted: i) the Bank is proactive in the development of major regional trade corridors, and brings to the project a wealth of experience, providing a holistic outlook and wider reach in connecting the continent’s key infrastructure and missing links; ii) the Bank is assisting in the diversification and distribution of port facilities on the southern-west coast of Africa and provides the much needed alternative (to South African ports) for the SADC landlocked countries to access international markets; iii) the project is potentially serving up to seven major economies in the SADC region influencing increased inter-regional and international trade and related activities. Through this project, the Bank is promoting regional integration, private sector development and jobs creation leading to significant economic development in the SADC region. Knowledge Management The project provides an excellent opportunity for new skills to be developed both within the Bank and in Namibia. Within the Bank, it is an opportunity to further strengthen its knowledge on ports and regional integration which will feed into the Bank’s knowledge series. In Namibia, the project provides opportunities for trainings, skills transfers and capacity building which help to increase the skills base in the country, help create sustainable employment and reduce poverty. iii
RESULTS BASED LOGICAL FRAMEWORK Country and Project Name: Namibia – The Strategic Expansion of the Walvis Bay Container Terminal Purpose of the Project: Establish the Port of Walvis Bay as the preferred African West coast port for southern and central African logistics operations PERFORMANCE INDICATORS
KEY ACTIAVITIES
OUTPUTS
OUTCOMES
IMPACT
RESULTS CHAIN
Indicator
Baseline
Target
Improved economic performance
Real GDP Growth
3.8% (2011)
5% - 6% (2020)
1.1 Improved efficiency of the Port
1.1 i) Berthing moves per hour (BMPH); ii) Vessel waiting time; iii) Dwell time 1.2 Volume of containers handled 1.3 LPI: Logistics Performance Index
1.1 i) BMPH = 20; ii) 8 hours; iii) 14.5 days average 1.2 334,000 TEU 1.3LPI = 2.65 out of 5 (89th out of 155 countries) (2012)
1.1 i) BMPH = 60; ii) less than 8 hrs; iii) 8-10 days average 1.2 70% growth TEU 1.3 LPI – at least 3.00/5
2.1 TEU = 0; STS = 0 2.2 RTGs = 0 2.3 Pilots = 0, STS Operators = 0, 2.4 Nationals = 0 2.5 Logistics report = 0 2.6 Permanent secretariat =0 2.7 Road safety action pan = 0 2.8 Freight forwarders trained = 0
2.1 Capacity = 650,000 TEUs, STS cranes = 4 2.2 RTGs = 8 2.3 Pilots = 6, STS Operators = 16 2.4 Nationals employed = 900 (including 300 women) 2.5 Logistics report = 1 2.6 Permanent secretariat =1 2.7 1 road safety action plan = 1 2.8 freight forwarders trained = 70 (40 women) (2017)
1.2 Increased trade 1.3 Improved logistics competence Component A: New container terminal constructed and STS cranes installed and operational Component B: RTG equipment installed & operational Component C: i) Pilots and STS Operators trained for new terminal and equipment; ii) Nationals employed Component D: i) Logistics master plan study, ii) Road Safety study, iii) Capacity Building for WBNLD CMC and WBCG completed, iv)Freight forwarders trained
2.1 Size / capacity of new terminal and No. of operational STS cranes supplied 2.2 No. of operational RTG cranes supplied 2.3 No. of Pilots and STS crane operators trained; 2.4 No of Nationals employed in the project 2.5 Logistics report 2.6 road safety action plan 2.7 Permanent Secretariat for Walvis Bay-Ndola-Lubumbashi Corridor established 2.8 No. of freight forwarders trained
COMPONENTS Component A: Terminal construction Component B: Equipment Component C: Ancillary Activities Component D: Logistics & Capacity Building
(2012)
Costs ( UA million) Terminal Construction 179.32 Equipment 12.84 Ancillary Activities 20.51 Logistics & Trade Facilitation 0.83 Base Cost 213.50 Physical Contingency (10%) 21.35 Price Contingency (2%FE, 5%LC) 17.27 Total
252.12
(2020)
( ZAR million) 2,431.00 174.00 278.00 12.00 2,895.00 290.00 234.00 3,419.00
iv
MEANS OF VERIFICATION
RISKS/MITIGATION MEASURES
African Economic Outlook database
Outcome Risks i) Competing routes/ ports take over trade volumes; ii) Government fails to implement its plans iii) Regional logistics environment gets worse Mitigation measures Port Statistics i) sound strategies/ business plan; complementary Corridor Group Data infrastructure; promote port and corridor use ii) implement NDP4 action plan, develop and World Bank Data implement logistics master plan. iii) strengthen capacity on advocacy tackling regional non-tariff barriers on corridors Progress reports, Bank supervision reports, Audit reports, Midterm review reports, Namport quarterly reports
Output Risks i) Procurement delays and late project start up; ii) Construction risks; iii) Environmental risks Mitigation measures i) Use of Advanced Contracting reduces procurement delays; ii) Use of EPC fixed price lump-sum and time certain contract plus effective project and risk management mitigates against construction risks; iii) Close supervision and effective implementation of ESMP & E&S action plan mitigates against environmental risks. (refer to section 4.5 for more details)
INPUTS Sources of financing: ADB loan ADB MIC Grant Namport Government Grant Total
% [87.2%] [0.4%] [5.1%] [7.3%] [100%]
UA million 219.91 1.00 12.77 18.44 252.12
ZAR million 2,982.00 14.00 173.00 250.00 3,419.00
PROJECT TIMEFRAME
v
REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE ADB GROUP TO THE BOARD OF DIRECTORS ON A PROPOSED LOAN & GRANT TO NAMIBIAN PORTS AUTHORITY (NAMPORT) FOR THE NEW PORT OF WALVIS BAY CONTAINER TERMINAL PROJECT
Management submits the following Report and Recommendation on a proposed loan for ZAR 2,982 million (UA219.91 million) to the Namibian Ports Authority (Namport) to finance the New Port of Walvis Bay Container Terminal Project in Namibia and a proposed MIC Technical Assistance Fund Grant for UA1.00 million to the Republic of Namibia to finance Logistics and Capacity Building activities complementing the Port Project.
I-
STRATEGIC THRUST & RATIONALE
1.1 Project Background 1.1.1 Namibia is strategically located on the west coast of Southern Africa with 1,600km of coastline on the Atlantic and bordering on the north, east and south with Angola, Zambia, Botswana and South Africa respectively. The Ports of Walvis Bay and Lüderitz are Namibia’s only ports with the former being Namibia’s main commercial port, located on the main trading maritime corridor on the Atlantic. The Walvis Bay port is a sheltered deep-water harbour protected by a natural bay and benefiting from a temperate climate with no delays due to bad weather. The port has a designed container terminal capacity of 355,000 TEU and is served by well maintained, safe and secure transit corridors providing fast and easy access to the hinterland and neighbouring countries (see map in appendix iv). The port positions as transhipment hub along the western African coastline and preferred access point into SADC providing the shortest direct route to Europe and the Americas without the congestion delays faced by competing ports in the region. 1.1.2 The Walvis Bay Port is operated and managed by a State Owned Enterprise (SOE) the Namibian Ports Authority (Namport) - under the “service port” model. Namport reports to the Minister of Works and Transport as well as the State Owned Enterprises Governance Council (SOEGC), which control its operations and port policies and regulations. As part of ongoing reforms, Namport is investigating to further improve its efficiency by adopting the “landlord port” model whereby the functions of the authority and operator are separated and port operations are handled by a private entity. 1.1.3 The traffic at the Port of Walvis Bay and along its transport corridors has grown significantly in the past few years. Cargo volumes almost doubled from 145,000 TEUs to 337,000TEUs between 2005 and 2012 with a record increase in revenue of N$755 million in 2012 (N$ 647 million in 2011), against a target of N$653 million. The increasing trade is mainly in transit and transhipment which make the bulk of container traffic at the port. Transshipment traffic has grown from 92,000 TEUs in 2006 to 218,000 TEUs in 2012 with an average annual growth rate (AAGR) of 55%. Transit traffic has also grown over the same period from 25,000 TEUs to 65,000TEUs with AAGR of 25%. 1.1.4 Namport’s strategy centers on adopting a hub and spoke distribution model for transshipment serving the South, Central and West African coastline and a Gateway for transit traffic for the SADC landlocked countries. To achieve this strategy and in order to sustain future growth and attract new businesses, the expansion of the port and related facilities is required. The port is currently operating at capacity and equipment use is at a maximum. It is against this background that the Namibian Ports Authority submitted a request to the African Development Bank to finance the expansion of the Walvis Bay container terminal to accommodate additional 650,000 TEUs capacity. 1
1.2 Project linkages with country strategy and objectives 1.2.1 The Walvis Bay port features as a regional hub in the SADC Regional Infrastructure Development Master plan providing the region with the much needed west coast direct access to regional and international markets and easing the exclusive dependence on the eastern ports in South Africa, Mozambique and Tanzania. Namibia’s Vision 2030, the National Poverty Reduction Action Plan and the National Development Plan (NDP 4) (2012/13 – 2016/17) attributes considerable significance to the logistics and transport sector, geared towards economic development and poverty reduction. This strategy is expanded in the transport sector’s Integrated Transport Master Plan (2013-2023) and the Namport Business Plan 20132017 (Corporate), of which this project is a priority, has been developed in the spirit of the above national strategies. 1.2.2 The Southern African Development Community (SADC) is currently one of the strongest RECs in Africa in terms of economic strength by country GDP. Economic growth rates during the past few years averaged 5.9% making it one of the fastest growing developing sub-regions with direct linkage to growth in trade. Total SADC trade almost quadrupled between 2000 and 2011 from US$91,089.52 million in 2000, to US$353,636.4 million in 2011. Africa’s potential for growth is quite high and future freight demand is expected to double by 2020 and increase by a factor of 6 by 2040. This corresponds to an average GDP growth of 6% per year. Transit traffic from landlocked countries is expected to increase by 10-14 times over the next 30 years and for the SADC, this traffic will increase from 13 million to 148 million tons. This is a very large increase in demand and is the context and rationale of the Namibian government’s efforts to maximise its potential and strategic location to become a trade hub for the region. Timing and urgency are of essence in this regard, as other countries within the region are also developing plans to take advantage of the opportunities on offer. 1.2.3 One of the great opportunities for Namibia to be positioned as a logistics hub is its strategic location within the SADC region, offering a gateway for trade. Secondly, Namibia’s transport and communication infrastructure remains competitive in relation to what is available in the region. Notwithstanding the developments of ports in the region, the Port of Walvis Bay remains one of Africa’s most efficient and best equipped. Thirdly, safety and security in the country also ensure that goods transported via road and rail, reach their intended destinations without tampering. In addition to the facilitation of flows of imports, exports and trans-shipments via Namibia, the availability of a good international logistics network will also attract other industries to Namibia. Namibia’s business environment is relatively conducive, thus logistics has the ability to create sustainable employment opportunities, and contribute to economic prosperity and poverty reduction.
1.3 Rationale for Bank’s involvement 1.3.1 The port expansion project addresses three core operational priorities of the Bank’s Ten Year Strategy (2013-2022). These are infrastructure development, regional integration and private sector development. i) Infrastructure development: the port of Walvis Bay is Namibia’s main commercial port and links the country’s multimodal transport corridors to local, regional and international markets. This project will bring a better distribution of port facilities on the west coast of Africa and provides the much needed alternative (to South African ports) for the SADC landlocked countries. It stimulates the development and upgrade of multimodal transport corridors linking the port to the hinterland and to the SADC region; improving the country’s transport and logistics chains, reducing transportation costs and stimulating economic growth. 2
ii) Regional integration: the project is potentially serving up to seven major economies (Namibia, Angola, DRC, Zambia, Botswana, Zimbabwe and South Africa), each of trade significance to the economy of the sub-Saharan sub-continent. One of the rationales for the Bank’s involvement is geographical coverage of the economic developmental impact that the project brings to the region through trade activities and spill overs on business and jobs creation. The project also serves to foster South-South cooperation, and provides the opportunity to strengthen commercial linkages and promote new trading partners for the region. iii) Private sector development: the spillover effects of this intervention are private sector development and employment creation principally in the trade and logistics industry but also in tourism. The project promotes the emergence of small to medium size enterprises, scaling up of private investments, increasing productivity and competitiveness, creation of employment opportunities and promotion of inclusion and economic transformation. 1.3.2 Apart from the Bank’s ten year strategy, the project also aligns with the Southern Africa Regional Integration Strategy Paper (RISP) 2011-2015 and the CSP 2009-2013, through increased competitiveness and promoting intra and inter-regional trade. It is amongst the PIDA priorities responding to Southern Africa’s challenge in developing sufficient port capacity to handle future demand from both coastal and landlocked countries under the Southern Africa Hub Port and Rail Programme.
1.4 Donors coordination 1.4.1 Donor coordination in Namibia is carried out at national and at sector level. At the national level the National Planning Commission NPC (Director-General) co-chairs the Annual High Level Development Partner Forum attended by Ministers of relevant Line Ministries and representatives from Donors. At the sector level, sector working group meetings are held bi-annually and key issues emanating from these discussions then feed into the high level Forum. The Bank’s newly opened South Africa Resource Centre (SARC) provides closer proximity to the Namibian clients and will permit stronger dialogue and Bank presence in Namibia. 1.4.2 The World Bank and many of the UN Agencies scaled down their support to Namibia following its classification as an upper MIC in 2009. Between 2008 and 2012, Germany featured as the country’s largest donor (over N$2 billion), followed by the U.S. (NS$1.8 billion), China (N$1.6 billion), the European Commission (N$0.75 billion), Finland, Japan, France (approximately N$0.5 billion each), the World Bank (N$0.1 billion) and others including the African Development Bank (N$0.2 billion total). 1.4.3 In the roads subsector, the Government moved to Sector-Wide Approach (SWAp) with the German Government and the European Union (EU) being the main partners. In aviation, the Bank is providing support through a MIC TA Grant (UA0.59million) for a study of 8 Namibian Airports including the main international airport. In maritime, financial support has mainly come from the government and through loans from local commercial banks. The German cooperation (KfW), JICA and the EIB have provided grants for various studies for the Walvis Bay port expansion project. The Government allocates between 8% - 10% of the national budget to the transport sector and over the Medium-Term Expenditure Framework covering the period 2011/12-2013/14 allocated NAD8.2 billion for, among others:- expansion of the port of Walvis Bay, rehabilitation and railway infrastructure management, and development and maintenance of national roads infrastructure.
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II -
PROJECT DESCRIPTION
2.1 Project development objectives 2.1.1 The sector goal of the project is to promote trade and regional integration. The expected long-term impact of the project includes increased and sustained trade between SADC and the outside world. 2.1.2 The objective of the project is to increase the capacity and efficiency of the Walvis Bay Port to respond to the growing freight demand whilst promoting an alternative maritime access on the Southwestern coast of Africa to serve the SADC landlocked countries. The expected outcomes of the project include: improved port efficiency, increased cargo volumes, improved logistics performance and increased inter-regional and international trade.
2.2 Project description and components The project will expand the Walvis Bay port container terminal on reclaimed land from the Walvis Bay channel, to increase the annual throughput capacity from 355,000TEUs to 1,005,000TEUs. The Project will also include a logistics and capacity building component to complement the port expansion project. The project components are presented in Table 2.1. Table 2.1 : Project Components (ZAR (UA Million) Million) A. New terminal 2,871 211.75 construction on reclaimed land B. Equipment 206 15.15 Component
C. Ancillary activities
328
24.22
D. Logistics and Capacity Building
14
1.00
3,419
252.12
Total Project Cost
Component Description Construction of a modern container terminal consisting of quay walls, STS (ship-to-shore) cranes, paved areas, buildings, roads, railway lines and services reticulation. Supply and installation of RTG (rubber tired gantry) cranes and relocation of the existing from the current container terminal. Supply and installation of terminal operating system, communication system, workstations, electricity supply upgrade, pilot and operator trainings, etc. to complete the terminal expansion project The component includes i) developing a national logistics master plan, ii) a road safety program on transit corridors, iii) capacity building for the Walvis Bay Corridor Group and the Walvis BayNdola-Lubumbashi Development Corridor Management Committee and iv) a specialised training for freight forwarders (FIATA training)
2.3 Technical solution retained and other alternatives explored The technical solution retained was influenced by three determining factors: i) project location, ii) contract type and iii) financing package. The solution retained was after series of studies, investigations and consultations by Namport and its consultants. The solution retained is a port expansion project located southwest of the current port terminal on reclaimed land from the Walvis Bay channel. The project location allows fulltime works with minimal disruption to normal operation and scope for future expansion. The contract type for the main civil works is an EPC contract allowing an integrated solution, whilst the financing is an ADB Sovereign Guarantee loan to Namport which responds to the urgency to implement the project without any further delays. Private financing would have required the finalisation of the PPP framework and reform of the port to transfer its operations to a private developer. This solution was found to be technically, economically, financially and environmentally the most sustainable. Table 2.2 summarises the alternatives explored and reasons for their rejection.
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Table 2.2 : Project Alternatives Considered and Reasons for Rejection Alternative Brief Description Reasons For Rejection Project location Current Extending the existing Limited length of quay extension terminal container quays north Significant impact on port operations and existing eastwards factories Enormous costs for expropriations and compensation Little scope for future expansions Fishing port Developing a new Significant environment and social impacts on the area container terminal at the fishing business fishing port area Enormous costs for expropriations and compensation Little scope for future expansions Project contract Traditional Procuring detailed Significant risk exposure due to technical complexity Contracts design and construction of the project separately No overlap of design and construction Lengthy process Financing package PPP – Full private sector–sponsored To privatize such a strategic national asset at this concession project developing the point in time was seen not to be in the country’s best new container terminal interest as a standalone business There is currently no PPP legal framework for port unit projects in Namibia Time to setup the legal framework is a lengthy process; when the project is urgently needed Possible backlash with labour organisation
2.4 Project type The ADB financing will support the construction and rehabilitation of identified economic and social infrastructure. The investments against which funds are to be disbursed are well defined and specific. Therefore, the specific project loan has been chosen as the most appropriate instrument for the intervention of the Bank in this port expansion project. In the same regard, the MIC TA Grant has been determined to be the most appropriate instrument to finance the logistics and capacity building activities.
2.5 Project cost and financing arrangements 2.5.1 The total project cost at appraisal (net of all taxes/duties) including physical and price contingencies, is ZAR3,419 million (UA252.12 million) of which ZAR2,083 million (UA153.63 million) or 61% of the total cost estimate is in foreign exchange and ZAR1,336 million (UA98.5 million) or 39% of the total cost estimate is in local currency. 2.5.2 The project cost estimates were based on feasibility studies conducted in 2010, by the design consultants; taking into account international norms, prevailing rates and contract risk distributions. The costs were updated in 2012 after series of supplementary studies conducted to reconfirm the project’s feasibility. Also, during appraisal, the Mission and Namport carefully reviewed and confirmed the quantities and unit rates of each project component and included contingencies for execution and price escalation. The project components and costs are presented in table 2.3.
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Table 2.3: Project costs by component (Net of Taxes) ZAR (million) Components A. New terminal construction B. Equipment C. Ancillary activities D. Logistics & Capacity Building Total Base Cost Physical contingencies Price escalation
Local Currency 69.61
Total
2,431
Foreign Exchange 109.71
Foreign Exchange %
179.32
61%
20 160
174 278
11.36 8.71
1.48 11.80
12.84 20.51
89% 42%
5
7
12
0.31
0.52
0.83
37%
1,764 176 143
1,131 114 91
2,895 290 234
130.10 13.01 10.52
83.41 8.34 6.75
213.50 21.35 17.27
61%
2,083
1,336
3,419
153.63
98.50
252.12
61%
Foreign Exchange 1,487
Local Currency 944
154 118
Total Project Cost
UA (million) Total
2.5.3 The expansion of the port will be co-financed by the Bank, Namport and the Government of Namibia. The Bank will finance 87.6% of the total project cost amounting to ZAR 2,996 million or UA220.91 million. The Bank’s financing will be in the form of an ADB Sovereign Guarantee Loan of ZAR 2,982 million (UA219.91 million) and MIC TA Grant of UA1.00 million (ZAR14 million). Namport’s counterpart contribution is 12.4% of total project cost estimate, comprising a grant from the Government of Namibia of ZAR250 million (UA18.44million) or 7.3% of total project cost estimate and Namport contribution of ZAR173 million (UA12.77 million). Namport has indicated that there are other project activities up to a total of ZAR300 million which will be financed by Namport. The source of financing and the project expenditure schedule are summarised in table 2.4 and 2.5 respectively and justification of the Bank’s contribution of more than 50% of total project cost estimate is provided in annex I. Table 2.4: Sources of financing ZAR (million) Source ADB (Loan ) ADB (MIC Grant) Namport Government Grant Total Project Cost
Foreign Exchange 1,839.00 5.00 98.16. 141.84 2,083.00
Local Currency 1,143.00 9.00 74.84 108.16 1,336.00
UA (million) Total 2,982.00 14.00 173.00 250.00 3,419.00
Foreign Exchange 135.60 0.40 7.21 10.42 153.63
Local Currency 84.31 0.60 5.56 8.02 98.50
Total
Total Project (%)
219.91 1.00 12.77 18.44 252.12
87.2% 0.4% 5.1% 7.3% 100%
Table 2.5: Source of financing by component Components A. New terminal construction B. Equipment C. Ancillary activities D. Logistics & Capacity Building Total base cost Physical contingencies Price escalation Total Project Cost
Total Cost 2,431 174 278 12 2,895 290 234 3,419
ZAR (million) ADB MIC TA Loan Grant 2,236 171 118 12 2,525 253 204 2,982
12 1 1 14
6
% Bank % Namport contribution & GON Namport contribution & GON 195 92% 8% 3 98% 2% 160 42% 58% 100% 0% 358 36 29 423
87.6%
12.4%
87.6%
12.4%
Table 2.6: Project cost by category of expenditure Category Goods Works Services Total Base Cost Physical contingencies Price escalation Total Project Cost
ZAR (million) Foreign Local Total Exchange Currency 191.00 59.00 250.00 1,487.00 1,031.00 2,518.00 86.00 41.00 127.00 1,764.00 1,131.00 2,895.00
UA (million) Foreign Local Exchange Currency 14.06 4.33 109.71 76.04 6.33 3.03 130.10 83.41
18.39 185.75 9.36 213.50
% of total base cost 9% 87% 4% 100%
Total
176.00
114.00
290.00
13.01
8.34
21.35
10%
143.00 2,083.00
91.00 1,336.00
234.00 3,419.00
10.52 153.63
6.75 98.50
17.27 252.12
7%
2.6 Project’s target area and beneficiaries 2.6.1 In general, the project will affect the SADC region and countries on the southern West African coastline up to Ghana; therefore the project impact footprint covers the Southern, Central and West Africa subcontinent. 2.6.2 Poverty is one of the major development challenges in Africa including the SADC region and is reflected in the high level of unemployment, low levels of income and high levels of human deprivation with 40% of the SADC’s population living below the international poverty line of US$1 per day. The main economic objective of the SADC region is therefore on the development of an environment, conducive to regional integration, economic growth, poverty eradication and establishment of a sustainable path of development. By so doing, the region will emerge as competitive in the world economy. The development prospects by the project contribute towards the development agenda above as the project will directly benefit the people, the governments and the private sector in Namibia, Angola, Zambia, Botswana, DRC, Zimbabwe and South Africa. The benefits include increased opportunities for trade, jobs creation and capacity building resulting in inclusive growth and economic transformation promoting poverty alleviation in the SADC region.
2.7 Participatory process for project design and implementation 2.7.1 The formulation, design and financing of the project benefited from the wide consultations carried out by Namport and its consultants and the Bank project appraisal team, through bilateral and town hall meetings, and sharing of interim and final project reports. The key stakeholders consulted include government ministries and agencies relating to the sector, municipal and regional government, the logistics industry including freight forwarders, international shipping lines, other ports in the region, transport operators and shippers associations, corridor group, local businesses, local residents, NGOs and specific interest and the donor community. The consultations served to inform stakeholders of the project and its direct and indirect impacts and to obtain the stakeholders’ perspectives. The project’s design and implementation modalities have been shaped by the concerns that were raised. 2.7.2 Amongst the outcomes of these consultations is the confirmation of the Namibian Government that the project is a national priority and that the government will provide a guarantee for the ADB loan to Namport. It has also influenced the technical solution retained to ensure minimal disruption to the ports operations and avoid negative impacts to neighbouring businesses with adequate measures put in place for environment and social monitoring. The consultations also resulted in the inclusion of the MIC TA Grant into the project to support the government’s efforts in logistics and capacity building.
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2.8 Bank Group experience, lessons reflected in project design 2.8.1 The Bank has extensive operational knowledge in developing infrastructure projects in Africa. In the maritime subsector, the Bank has experience in design and implementation of the following port projects: – Lekki Tolaram Port, Lomé container terminal, Djibouti bulk terminal, Damietta port, Dakar container terminal, and Banjul port. The Bank’s African Development Report 2010 also provides valuable information on ports in Africa. 2.8.2 In Namibia, the Bank commenced operations since 1992 and financed a total of five operations in the transport sector amounting to UA71 million including the Trans-Kalahari road study, Northern railway extension project, Aush-Rosh Pinah Road project, Kamanjab Omakange Road Project and the Namibian Airports study. All the operations have been completed except the airports study which is currently on-going. These operations have significantly contributed to strengthening Namibia’s transport network and have led to opening up of isolated areas to access markets as well as link with neighbouring countries. 2.8.3 Through the interventions mentioned above, the Bank has gained significant experience in the design, preparation and implementation of transport projects in Namibia. Lessons drawn from the Bank’s previous interventions were taken into consideration in the design of this project by making the following provisions: i) advanced procurement is used on the main civil works which helps to gain time of up to 12 months; ii) the main civil works is packaged under an EPC contract including the supply and installation of STS cranes to ensure a smooth interface and assign a single point of responsibility for the project delivery; iii) Namport will continuously monitor the ESMP and outcome indicators to ensure timely response to any emerging concerns and facilitate measurement of the project’s outcomes; and v) the Bank is providing a MIC TA Grant for logistics and capacity building to help increase the skills base in the sector.
2.9 Key performance indicators The performance indicators linked to the project’s outcome will be determined under the following areas: (i) berthing moves per hour (BMPH); (ii) vessel waiting time; (iii) dwell time; iv) volume of containers handled; and (v) logistics competence. The output indicators include amongst others: i) size of the new port, ii) equipment supplied, iii) pilots and operators trained for the new terminal, iv) nationals employed, and v) reports from the logistics and road safety studies. The baseline data for these indicators are readily available from the port’s data records which are periodically collected as part of the port’s operations. Collection, monitoring and evaluation of the indicators (disaggregated by gender) will be under the responsibility of the Namport Project Manager and his team. The Bank will also monitor during supervision missions, mid-term review and at project completion.
III - PROJECT FEASIBILITY 3.1 Economic and financial performance Traffic Demand 3.1.1 A consultant commissioned by Namport, undertook a market study for the project in 2011. The study assessed the overall competitiveness of Namport vis-à-vis other competing ports in the Southern Africa region, namely, the ports of Luanda and Lobito in Angola and ports of Durban and Cape Town in South Africa. While ports in Angola face congestion in the foreseeable future, those in South Africa cater mostly for local and transit cargo. Neither will pose a major threat to Namport which is oriented to being a transhipment hub and an alternative gateway for transit trade in the SADC region.
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3.1.2 The consultant prepared traffic forecasts that are disaggregated by three submarkets: domestic, transit and transhipment. Transhipment accounts for a major share of the traffic (60% of container traffic) and has increased rapidly in recent years with an average annual growth of 55%. In the base case, Namibia is expected to have a compounded GDP growth rate of 6% from 2014 to 2030. Without the expansion project, Namport will be constrained by its maximum capacity of 355k TEU. Table 3.1 : Base Case Volume Traffic Projections (kTEU) Import Export Transhipment Total
2013
2014
2015
2016
2017
2018
2019
2020
2025
2030
78 62 186 327
80 69 190 339
110 95 223 428
125 114 254 493
142 134 284 561
159 151 315 625
171 161 346 678
183 172 377 732
230 230 369 829
230 230 403 863
Economic Analysis 3.1.3 Three major sources of direct economic benefits have been identified: i) time costs savings for vessels calling at the port; ii) new employment opportunities for nationals; iii) time costs savings for freight trucks that transport cargo from and to the port. Estimation of the third benefit is constrained by the scarcity of relevant statistics and is therefore omitted. However, given that 50% of the total traffic is transshipment that requires no intermodal operations, the omission of the time savings to trucks is unlikely to lead to a significant underestimation of the total economic benefits. 3.1.4 Time costs savings is expected to be shared by Namibian and regional consumers and exporters, and by international shipping lines. Additional traffic translates into higher earnings for Namport and its staff, which contribute to additional corporate income tax and labour income tax for the government. The government will also collect more value added tax revenue from traffic, and indirect taxes, that would otherwise not materialize in the project’s absence. While taxes are transfers and should not be counted as an economic benefit, they have a distributional impact and are thus captured in the stakeholder analysis, to explore how the economic benefits are distributed among stakeholders. These are summarized in table 3.2. Table 3.2 : Allocation of Projected Benefits among Stakeholders (Present Value, million NAD) 2,839 Namibia Government 323 Additional labour income 12 Consumers 1,503 Exporters 1,002 1,252 Southern African Region Consumers 877 Exporters 376 1,252 International shipping lines
3.1.5 The expansion will attract new customers and greater volume from existing ones, further strengthening Namport’s role as a transshipment hub and spurring economic activities in related industries. While the foregoing is important in its own right, the benefits identified in the previous paragraphs are the most immediate, and can be reasonably well quantified. In this analysis, additional benefits are omitted thus yielding a more conservative estimate. In general, the expansion project is estimated to generate for Namibia externalities equivalent to NAD2,839 million with an economic NPV of NAD498 million and EIRR of 14.6%.
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Financial Analysis 3.1.6 From Namport’s recent audited financial statements, revenues show the impact of the world trade slow-down owing to the financial crisis. Thus, revenues decreased from NAD 616 million in 2009 to NAD566 million in 2010, but bounced up to NAD755 million in 2012. The EBITDA exhibited a similar pattern. For the past several years, the debt-equity ratio has been at low healthy levels and dropped to 0.21 in 2012, indicating strong capacity for additional borrowing. Since 2011, Namport has been assigned a long term credit rating at A- by Fitch Ratings and in May 2013, Fitch Ratings reaffirmed Namport’s credit rating and further upgraded their outlook from Stable to Positive on account of strong government support and Namport’s strategic importance in the Namibian economy. The company has maintained a high level of liquidity; on average, cash or cash equivalent has been 61% of sales. The following table presents Namport’s historical financial indicators and their forecasts. Table 3.3 : Namport Selected Financial Indicators (million NAD)
TEU (000s) Total Revenue EBITDA Debt to Equity Ratio CF available for debt service Total debt service DSCR
2009 266 616 342 0.31 N/A 75 N/A
Actual 2010 2011 256 224 566 647 241 119 0.35 0.34 N/A N/A 113 171 N/A N/A
2012 292 755 423 0.21 N/A 205 N/A
2014 339 856 687 0.19 622 254 2.45
Forecast 2016 2018 2020 2022 2024 493 625 732 779 822 1,046 1,622 2,030 2,449 2,917 259 671 737 1,175 1,494 1.50 1.61 1.04 0.63 0.35 435 586 619 1,036 1,328 253 228 281 441 407 1.72 2.57 2.21 2.35 3.27
3.1.7 A detailed financial model for Namport corporate financial flows was developed by their financial advisor for this project. Cash flows of the expansion project were integrated into the corporate financials. The key indicators for financial and economic performance are derived from the consolidated corporate model of Namport. The average DSCR, based on consolidated cash flows and both existing and new debt, is estimated to be 2.02x and the minimum DSCR is 1.30x in 2015. The second debt service period starts with the first principal repayment of the new loan in 2019, until 2034. Overall, the projections confirm the strong debt service capacity of Namport. 3.1.8 While debt service capacity has been evaluated based on overall Namport financials, the investment viability of the expansion plan is assessed on incremental basis, ensuring that the expansion decision is judged on its own merit, independently from the existing operations of the port. Under the base case scenario, the Equity NPV for the expansion project is NAD216 million at a 12% discount rate (real). The Project IRR for the expansion project is calculated to be 8.5% while the Equity IRR is estimated to be 15.0% in real terms. 3.1.9 Table 3.4 summarises the key financial and economic indicators for the expansion project confirming that the new terminal expansion is economically and financially viable. The forecasts indicate that the project generates sufficient operating cash flow to recoup initial investment costs and to service debt. The project will also bring additional benefits to other stakeholders. Furthermore, sensitivity analysis results presented in the technical annex shows that the project is viable despite adverse shocks. Table 3.4 : Key Financial Performance Indicators Economic NPV at 12% EOCK (real) Economic IRR (real) Equity NPV at 12% ROE (real) Equity IRR (real) Project IRR (real)
10
498 million NAD 14.6% 216 million NAD 15.0% 8.5%
3.2 Environmental and Social impacts 3.2.1 The project has been classified as Category 1 in accordance with the Bank’s Environmental and Social (E&S) Assessment Procedures. Relevant E&S documentation was prepared, and an Executive Summary of the Environmental and Social Impact Assessment (ESIA) was disclosed on the Bank’s website on 22nd March 2013. The project will result in environmental and social (E&S) impacts, although some of these will be low in the nature of their significance. 3.2.2 An Environmental Management Plan (EMP) has been prepared by Namport to address these impacts. The Bank has requested Namport to develop a more comprehensive Environmental and Social Management Plan (ESMP) which would integrate a detailed waste management plan; a business continuity plan; baseline studies on the effects on the lagoon; a hazards (especially technological) management plan; an emergency response plan; and a detailed plan for better assessing and monitoring the socio-economic impacts, amongst other features. Namport will also undertake additional measures, such as a cumulative impacts assessment; detailed baselines studies on the effects on the lagoon (siltation and inflow and outflow rates), sea level rise and climate change impacts; and detailed analysis of the project’s impacts on utilities. Namport has engaged the services of a consulting firm and is currently addressing the E&S gaps. The outstanding E&S reports and plans will be submitted to the Bank as part of the E&S Action Plan, by 30th September 2013. Once a comprehensive ESMP is developed building upon the existing EMP, the ultimate costs for mitigating and enhancing E&S impacts will be known with greater certainty. Climate Change 3.2.3 The Walvis Bay area is characterized by a chance of 30 cm sea level rise, which highlights the importance of climate change considerations by the project. A national climate change action plan has been prepared, and includes strategies for addressing disasters. Namport is undertaking baseline studies to examine climate change impacts linked to the project and its business continuity plan and emergency preparedness plan will be aligned to the National Climate Change Action Plan. Gender 3.2.4 Following the Bank’s recommendation, Namport is undertaking a gender analysis to better understand the gender considerations it should appropriately address through the project and its Corporate Social Responsibility (CSR) initiatives. The project area is characterized by gender inequities and disparities. To ensure that women benefit from the project, considerations will need to be introduced, such as job profiles and potential quotas, to encourage women’s participation in the project’s employment opportunities. Gender-based violence and the influence of patrilineal traditions are of national concern. Measures will be enacted to limit a potential rise in the commercial sex industry by the project. Awareness campaigns on sexually transmitted infections, such as HIV/ AIDS, will integrate gender sensitive components targeting Namport employees and local communities. The training of women freight forwarders is an initiative included in the project following concerns raised during stakeholder consultations whilst further initiatives on gender mainstreaming will be assessed upon completion of the gender analysis mentioned above. Social 3.2.5 The project is expected to result in multiple socio-economic benefits including direct and indirect employment opportunities for Namibians during the construction and operational phases; educational and training opportunities; skills development options; the promotion of entrepreneurship; increased trade and economic activities benefiting the construction,
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transport, hospitality and tourism industries; a growth in new small and medium size enterprises; and an increased scope for the marina development. 3.2.6 The project will also result in social risks, such as an influx of workers, truckers and sailors which would add pressure on available resources and infrastructure; an increased risk of communicable diseases like HIV/AIDS; behavioural changes leading to greater theft, prostitution and alcoholism; road safety concerns due to increased traffic; and an inability of local businesses, with leases in the area being targeted for the marina development, to realize the full value of their recent investments. Through the comprehensive ESMP it is developing and the CSR initiatives initiated through Namport’s Social Investment Fund, Namport will work to address and diminish the impact of these social risks. Involuntary Resettlement 3.2.7 The project will not involve either the physical or economic displacement of any project affected persons. The expansion works will be undertaken on land belonging to the Government of Namibia with the terminal facility built on reclaimed land inside current port limits.
IV - IMPLEMENTATION 4.1 Implementation arrangements Borrower and Executing Agencies 4.1.1 Namport, a body corporate established under the Namibian Ports Authority Act, 1994 (Act No. 2 of 1994) and operating under the State-owned Enterprises Governance Act, 2006 (Act No. 2 of 2006), will be the sole beneficiary of the loan. Namport has operated as the National Port Authority in Namibia since 1994, and manages the Port of Walvis Bay, the Port of Lüderitz, and a Syncrolift (dry dock facility). Under the terms of the Namibian Ports Authority Act, 1994, Namport has, in addition to the specific powers vested in it under the Act, all the powers that may be exercised by a company under Namibia’s Companies Act. These powers include, among others, the power to enter into contracts, including contracts outside of Namibia, and the power to borrow. 4.1.2 Namport has a two-tier governance structure consisting of the Board of Directors and the executive management. The Minister of Works and Transport appoints Namports’s Board of Directors. The Board of Directors has overall responsibility for the affairs of Namport. The Board comprises five independent non-executive directors whose terms of office are three years each. The Board of Directors appoints a Chief Executive Officer (CEO) on a five-year contract that is renewable at the discretion of the Board. The CEO is responsible for the execution of strategy and management at Namport, and is assisted by members of senior management. Under the State-owned Enterprises Governance Act, the Minister of Works and Transport must enter into a Governance Agreement with Namport’s Board of Directors that sets out the roles, responsibilities and obligations of the Ministry and Namport; the latest such Governance Agreement was entered into on 20th May 2010 for a period of five years. 4.1.3 The implementation arrangements for the Loan and the MIC TA Grant would be separated whereby Namport would be the executing agency for all the project components financed under the ADB Loan and the Walvis Bay Corridor Group (WBCG) would be the executive agency for the component on logistics and capacity building financed under the MIC TA Grant. 4.1.4 Namport has an existing structure comprising a Project Executive Steering Committee (PESC) chaired by Namport’s CEO who oversee strategic decision making and report to the Board of Directors. The Project Implementation Committee (PIC), headed by the Port
12
Engineer and Projects Manager is responsible for the day to day management and supervision of project activities and report to the PESC. The PIC comprises Namport experts in all disciplines for the project’s activities, supported by external consultants providing specialist advisory service. The PESC and PIC already exist and most key appointments have been made with the remaining positions expected to be filled prior to project commencement. The Walvis Bay Corridor Group has experience in the implementation of DFI financed projects and the Project Manager for Spatial Development Initiatives will head the implementation unit for supervision of this project. The Ministry of Works and Transport and the Ministry of Finance have identified focal persons who will be responsible for ministerial oversight and support for this project. Procurement 4.1.5 Procurement activities will be carried out by Namport and by the WBCG for project components financed under the ADB Loan and the MIC TA Grant respectively. 4.1.6 The Procurement Unit in Namport is still in the formative stage as it is only 3 years old and Namport is in the process of filling up the vacant positions. Given the complexity of the current EPC tender for the port expansion project (detailed below), a specialized team of consultants have helped Namport to design the EPC procurement process and is currently carrying out the evaluation. The consultants work under the supervision of the Project Executive Steering Committee with recommendations presented to the Namport Board for final decision at each stage. Procurement for the EPC Works Contract to Construct the New Container Port Terminal 4.1.7 The procurement action for the expansion of the container terminal was initiated in September 2012. At that time, Namport and the Government of Namibia expected project financing to be arranged by the bidders though finance from development financial institutions was also being contemplated. It did not appear that, at that time Namport had any intention of seeking financing from the African Development Bank and therefore had no reason to follow the Bank’s procurement policies and procedures. The situation changed when the identification mission from the Bank visited them in December 2012 and they were made aware of the more attractive conditions (including loans in ZAR) that the Bank was offering. Namport and the Government of Namibia then approached the Bank to provide finance to the extent of almost 87.6% of the cost of the project. 4.1.8 Invitations to bid for this procurement were locally and internationally advertised in the print media and online on the Namport website. The bids were received on 18th February 2013 and are under evaluation. The bidding process has gone through stringent diligence including a mandatory pre-bid meeting and site-inspection by the bidders. The questions from the bidders were promptly answered. 4.1.9 The current situation that Namport is facing is unprecedented- the Bank’s support has been requested for an important para-statal midway through a large and nationally (and regionally) critical project and the Bank has had no major previous engagement in the country for large investment lending in this sub-sector. The project is already delayed and the Authorities have made a compelling case that re-launching of the tender will be very costly for Namport and Namibia. 4.1.10 As the GoN and Namport have requested the Bank to finance a procurement that has not been conducted using the Bank’s Procurement Rules, the Bank undertook independent reviews and due diligence of the procurement process to ascertain if the procurement is likely to meet global industry standards and the Bank’s procurement principles. For this purpose, the Bank commissioned two independent procurement consultants to support Bank Procurement Specialists in carrying out the due diligence. The review has concluded that while the 13
procurement process was rigorous and detailed, and did not appear to deliberately favor any bidder or set of bidders, there were departures from the Bank’s procurement principles. (Some of the deviations included (i) Namibian dollars as the payment currency irrespective of the nationality of the bidder;(ii) the contract prices being fixed despite the contract period being three years; (iii) bid-evaluation that allowed Namport to use unspecified criteria if it felt it was in its best interest; (iv) bespoke contract provisions that transferred significant risks to contractors; (v) commercial arbitration to take place in Namibia and not in a neutral place. 4.1.11 The Walvis Bay expansion project has evident economic benefits for the region and timely completion of the project is key for such benefits to be realized. The preferred alternative (of the Bank) of rebidding of this procurement would mean a delay of many months in the commissioning schedule for the project. This would have serious and unacceptable impact on the economy of Namibia and the region and is not acceptable to Namport and the Government of Namibia. A flexible and pragmatic approach, may therefore, be necessary for this first time engagement with Namport. It would, therefore, appear that there might be merit to allow the present process to be completed as started and to ask for modifications in some key contractual provisions to include Bank’s rights with respect to Fraud and Corruption and for the Bank’s right to audit. 4.1.12 Given on the need to speedily execute the above project and the diligence to ensure that the contractors and subcontractors who would be awarded the contracts are not debarred or suspended at the time of contract award or signing, and the incorporation of F&C and Audit Rights provisions in the contracts before signature, Board approval is sought to grant a waiver from the application of the Bank’s Procurement Rules and to approve to finance the EPC works contract for construction of the new container terminal at Walvis-Bay to be awarded by Namport using a bespoke procurement process and contract. This waiver is being sought only for the EPC works contract. Procurement of equipment, ancillary services and logistics and capacity building 4.1.13 With the exception of the EPC main works contract, the procurement of all project components namely: equipment, ancillary services and logistics and capacity building support will be done in accordance with the applicable Bank’s Rules and Procedures for the procurement of Goods and Works and the Bank’s Rules for the use of Consultants. The details of the procurement arrangements are summarised in the technical annex. Financial Management 4.1.14 The Project loan’s financial management will be implemented by Namport within its existing set-up for project implementation under the overall management of the Board of Directors whereas WBCG will be responsible for the Grant. An assessment of Namport’s and WBCG’s financial management arrangements for the implementation of the project (which included a review of the budgeting, accounting, internal controls, flow of funds, financial reporting and auditing arrangements) indicates that they satisfy the Bank’s minimum requirements to ensure that the funds made available for the financing of the project are used economically and efficiently and for the purpose intended. In addition, internal and external audit requirements are further measures towards effective corporate governance. 4.1.15 In accordance with the Bank’s reporting and auditing requirements, Namport and WBCG will be required to submit Quarterly Progress Reports (within 30 days after the end of each quarter) and annual audit reports with financial information for the Loan and Grant respectively. Furthermore, separate annual audit reports with financial information (with the audit done in accordance with a Bank approved audit ToR) will be prepared by the respective implementing entities in compliance with their internal legal requirements. The audit costs will be borne by the respective implementing entity and the audit reports together with the
14
auditor’s management letter indicating any weakness in internal control including the responses from management will be sent to the Bank within six (6) months of the end of the respective fiscal year. (A draft audit TOR that can be used as a guide has been availed to Namport). In addition, Namport’s annual audited financial statements will also be submitted together with the project audit report and the project management letter. Disbursement Arrangements 4.1.16 The Loan will be disbursed for two categories of expenditure including Works and Goods with a provision for future consulting services, if any. The MIC TA Grant will be disbursed for two categories of expenditure including Goods and Services. The Direct Payment and Reimbursement Guarantee Methods will be used as payment method under the ADB loan and the Special Account method will be applied for the MIC TA Grant. Disbursements under the Loan and Grant would be made in accordance with the list of goods, works and services and the Bank’s rules and procedures as laid-out in the Disbursement Handbook insofar as may be applicable.
4.2 Monitoring 4.2.1 The outline of the project implementation schedule takes into account the relevant experience of the PIC and WBCG in managing works implementation deadlines and that of the Bank in processing previous similar projects. According to the estimates, project activities will start (upon approval of the loan and grant) in the last quarter of 2013 and end towards the end of 2016. The grant and loan closing dates are scheduled for end of 2017 and 2019 respectively. At the level of the Bank, the activities planned following loan and grant approval will be closely monitored, in accordance with the schedule in Table 4.1 below. Table 4.1 : Schedule for Project Monitoring
Timeframe
Milestone
Monitoring process / feedback loop
Q4 – 2013 Q2 – 2014 Q4 – 2014 Q2 – 2015 Q4 – 2015 Q2 – 2016 Q4 – 2016 Q4 – 2017
Project Launching Construction start + 6 months Construction + 14 months Construction start + 20 months Construction start + 26 months Construction start + 32 months Construction start + 36 months Defects Liability and end of 1st yr
Field Mission, Field Mission, Field Mission, Mid-Term Review, Field Mission, Field Mission, Project Completion, Project Evaluation,
Progress Reporting Progress Reporting Progress Reporting Progress Reporting Progress Reporting Progress Reporting Completion Report M & E Report
4.2.2 Apart from the schedule for monitoring activities, the PIC will regularly provide the Bank with quarterly project progress reports covering all project activities including implementation of the ESMP and the status of the log-frame indicators, annual audit reports as well as the final project report; all in the Bank’s standard format. The comprehensive ESMP and other actions in the E&S Action Plan will be implemented by Namport (by the Environmental Manager and Officer) and the selected contractor (by Environment, Health and Safety, Fire and Waste Management Officers). The Ministry of Environment and Tourism as the ESIA licencing authority will monitor environmental and social performance on the basis of the required ESMP compliance reports. Project monitoring will be carried out by the Bank’s supervision missions, in line with the Bank’s Operations Manual.
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4.3 Governance 4.3.1 Namibia has consistently ranked among the top African countries on good governance. The country has consistently scored at least 4 out of 5 in all the categories of Bank Group’s Country Policy and Institutional Assessment (CPIA), with the exception of property rights and rule based governance. In addition, Namibia has been ranked: i) between the 50th-75th percentile out of the 212 countries by the World Bank’s 2011 Worldwide Governance Indicators; ii) 6th out of 53 African countries, with an overall score of 67.3 out of 100, by the 2010 Mo Ibrahim Index of African Governance; and iii) 4th and 5th least corrupt country in Southern Africa and SSA, respectively, by the 2010 Corruption Perception Index by Transparency International. 4.3.2 Namport has adopted the principles of good corporate governance as contained in the King Report 2009 (“King III”). The Authority is overseen, managed and controlled by a Board of Directors on behalf of the government and has overall responsibility and accountability for the affairs and performance of the Authority. The Authority’s Board is appointed by the portfolio Minister of Works and Transport (MWT) who has the overall responsibility for policy and regulation, and the Ministry of Finance who has an oversight role in Namport’s financial and project development activities. The specific governance risk mitigation measures of the present project include: (i) the appointment of financial and technical audit firms to ensure that funds are used efficiently and for the intended purposes; (ii) Bank prior review and approval of all project procurement activities; and (iii) the use of direct disbursement methods to channel project funds to contractors and service providers.
4.4 Sustainability The expansion of the port is expected to be a long-term self-sustaining economic activity that generates sufficient financial return to cover all operating costs, taxes, maintenance expenses, and repayment of debt and recovery of capital costs. While regular maintenance costs for both terminals are planned to be funded by operating cash flows, the business plan for the new terminal explicitly makes a provision for a Maintenance Reserve Account (MRA) that will be accumulating the necessary amount of funds for equipment replacement and purchases of additional equipment. The accumulation of funds will be spread over five years prior to the expected time of maintenance activities, which minimizes the risk of dependency on cash flows of a single year. Table 4.2 presents the actual, past and projected maintenance costs, for the existing and the new terminal. It is noted that the same trend of maintenance expenditures is expected to continue. Table 4.2 : Historic and Projected Terminal Maintenance Costs Maintenance costs
2009
Actual 2010 2011
2012
2016
2017
Existing terminal New terminal Revenue Operating costs Assets As % of revenue As % of operating costs As % of assets
24 N/A 616 280 2,031 3.8%
34 N/A 566 344 2,288 6.0%
29 N/A 647 362 2,879 4.5%
32 N/A 755 465 2,606 4.3%
42 27 1,046 701 5,553 6.6%
44 114 1,418 865 5,355 11.2%
53 137 2,030 1,063 6,002 9.3%
71 214 3,118 1,447 9,395 9.1%
95 286 4,239 1,909 16,372 9.0%
8.4%
10.0%
8.1%
6.9%
6.0%
5.1%
5.0%
4.9%
5.0%
1.2%
1.5%
1.0%
1.2%
0.8%
0.8%
0.9%
0.8%
0.6%
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Projection 2020 2025
2030
4.5 Risk management 4.5.1 The successful implementation of the project and achievement of its development objectives predicates on several assumptions, each of which may constitute a potential risk: 4.5.2 Risk posed by competing Routes and Ports: The risk of competing ports and corridors in the region taking over transhipment and transit trade from the Port of Walvis Bay is mitigated through: i) comprehensive analysis of the competition and market trends and development of sound strategies to meet the planned objectives; ii) the Government and Namport consolidating efforts to develop the entire transport and logistics chain and soft issues to enable safe and efficient transport through the Walvis Bay corridors and across the borders; iii) appointment of the Walvis Bay Corridor Group to promote the corridors and spearhead tri-partite agreements and partnerships, to foster closer collaboration and promote the use of the Walvis Bay port and corridors. These initiatives are already yielding positive results translating to increased trade volumes and motivating further efforts by the country. 4.5.3 Risk of Government failure to implement its infrastructure development plans that complement the project: The Government of Namibia is committed to its development plans in NDP4 and has developed a detailed action plan for implementing these initiatives and allocated the budget to commence the implementation of these actions. It has also incorporated Monitoring and Evaluation on a periodic basis to inform on progress. In addition, the Bank is providing support through a MIC TA Grant. 4.5.4 Risk of an adverse regional logistics environment: Road transport operators need workable access to other countries regionally. If non-tariff barriers hinder operations too much, transport rates may be increased and the overall competitiveness of the corridors may be compromised. As mitigation measure the Project will support the Walvis Bay Corridor Group, which will increase the capacity to deal with these problems. 4.5.5 Risk of procurement delays and late project start up: in order to avoid delays due to procurement, the project has opted for advanced procurement for the main terminal construction as well as EPC contract for the main civil works to avoid separate procurements for design and construction gaining almost 12 months in the procurement timeline. 4.5.6 Construction risks (including technical risks, delays and cost overrun): the selection process for contractors ensures that only skilled and specialised companies with sufficient capacity and financial standing are awarded this contract and the use of a fixed price lump sum contract with a defined completion date will mitigate against cost overrun and delays. The dedicated Project Implementation Unit constituting various experts for project control and supervision as well as a Bank supervision team for monitoring of project progress also builds on mitigating against construction risks. 4.5.7 Environmental and social risks: The comprehensive ESMP and the E&S Action Plan will be implemented and monitored by the E&S specialists of Namport, authorities and the selected contractor. The Bank’s task team will follow up on a periodic basis. In addition, the Bank’s decentralization strategy will also have positive impact in assisting the Executing Agency.
4.6 Knowledge building 4.6.1 The project provides an excellent opportunity for new skills to be developed both within the Bank and in Namibia. Within the Bank, it is an opportunity to further strengthen its knowledge on ports and regional integration which will feed into the Bank’s knowledge series. At Namport level, the project incorporates specialised training which helps to build the skills-base of the company. The project has influence to build-up local capacity through employment of nationals for skilled and unskilled jobs related to the project’s activities. 17
4.6.2 The logistics master plan will provide a comprehensive logistics policy and system development plan for Namibia with the target year of 2030 that will be a shared vision and common implementation platform for the public and private sectors. Freight forwarders are often the “one-stop-shop” interface between shipping lines, customs and road carriers. It is therefore important to ensure that the professional competence of the industry is up-to-date and meets customers’ requirements. The Project will address this by organizing FIATA training particularly for female in-service freight forwarders and persons who intend to enter this business.
V-
LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal instrument The Bank instruments to finance this project are: (i) a loan agreement between Namport and the Bank for a loan to Namport with a sovereign guarantee provided by the Republic of Namibia, (ii) a guarantee agreement between the Republic of Namibia and the Bank, and (iii) a letter of agreement between the Republic of Namibia and the Bank for a MIC Technical Assistance Fund Grant to the Republic of Namibia.
5.2 Conditions associated with Bank’s intervention 5.2.1 Conditions Precedent to the Entry into Force of the ADB Loan Agreement & Guarantee Agreement: The Loan Agreement and the Guarantee Agreement shall enter into force upon signature by the parties thereto in accordance with the provisions of Section 12.01 of the General Conditions Applicable to the African Development Bank Loan Agreements and Guarantee Agreements (Non Sovereign Entities). 5.2.2 Conditions Precedent to the Entry into Force of the MIC Grant Letter of Agreement: The Letter of Agreement shall enter into force upon signature by the parties thereto. 5.2.3 Conditions Precedent to First Disbursement of the ADB Loan: The obligation of the Bank to make the first disbursement of the Loan shall be conditional upon: (i) entry into force of the Loan Agreement and the Guarantee Agreement in accordance with Section 5.2.1 above and (ii) fulfillment by the Borrower and Guarantor of the provisions of Section 12.02 of the General Conditions. 5.2.4 Conditions Precedent to First Disbursement of the MIC Grant: The obligation of the Bank to make the first disbursement of the MIC Grant shall be conditional upon: (i) entry into force of the Letter of Agreement in accordance with Section 5.2.2 above and the fulfillment, in form and substance satisfactory to the Bank, of the following conditions: (ii) a United States Dollar special account (the “Special Account”) has been opened in a bank acceptable to the Bank for receipt of the proceeds of the Grant; (iii) entry into force of the Loan Agreement between the Namibian Ports Authority (Namport) and the Bank and the Guarantee Agreement between the Recipient and the Bank for the New Port of Walvis Bay Container Terminal Project; (iv) the Recipient providing the Bank with the names of the person(s) authorized to sign withdrawal applications for the Grant on behalf of the Recipient together with authenticated specimen signatures of each such designated person. 18
5.2.5 Other Conditions of the Loan: (i) The Borrower shall, not later than 30th September 2013, submit to the Bank each item listed under the Environment and Social Action Plan set forth as annex V hereto, each in form and substance satisfactory to the Bank; (ii) The Borrower shall, within one (1) month of the closing of each budget cycle commencing with its 2012-2013 budget and throughout the duration of the Project, provide evidence in form and substance satisfactory to the Bank of the annual budgetary allocation for the Namport contribution to project financing; (iii) The Borrower shall, within three (3) months of the signing of this Agreement, provide evidence in form and substance satisfactory to the Bank that the grant to the Borrower from the Guarantor has been duly concluded, together with evidence of annual budgetary allocations on the part of the Guarantor for such grant amount. 5.2.6 Undertakings: (i) implement, and report to the Bank on a semi-annual basis in a form acceptable to the Bank, on the implementation of the comprehensive Environmental and Social Management Plan; (ii) inform the Bank of any significant environmental and social incidents within ten (10) days of their occurrence and, within thirty (30) days of such occurrence, provide details on corrective actions which the Borrower will implement to address each such incident; (iii) maintain (a) the Project Implementation Committee with terms of reference, composition and a Project Manager acceptable to the Bank and (b) the Project Executive Steering Committee with terms of reference and composition acceptable to the Bank; (iv) incorporate the Bank’s standard provisions on Fraud and Corruption and Audit Rights in the EPC works contract for the construction of the new terminal prior to its signature with the successful bidder; and (v) promptly notify the Bank of any material modifications to the EPC works contract.
5.3 Compliance with Bank Policies This project complies with all applicable Bank policies except for the waiver being requested for the EPC main works contract.
VI - RECOMMENDATION 6.1.1 Management recommends that the Board of Directors approve: (i) the proposed loan of ZAR 2,982 million to Namibia Ports Authority (Namport), with the guarantee of the Republic of Namibia for the purposes and subject to the conditions stipulated in this report; and (ii) the proposed MIC Technical Assistance Fund grant of UA 1.00 million to the Republic of Namibia for the purposes and subject to the conditions stipulated in this report; and (iii) a waiver from application of the Bank Group’s Rules and Procedures for Procurement of Goods and Works solely with respect to the EPC main works contract for the construction of the new terminal which was procured using a bespoke procurement process and contract adopted by the Borrower.
19
Appendix I. Country’s comparative socio-economic indicators Namibia Comparative Socio-Economic Indicators Indicator
Year
Namibia
Developing Countries
Africa
Developed Countries
Charts
Basic Indicators Area ('000 Km²)
GNI per Capita (US $)
824.3
30,046.4
80,976.0
54,658.4
Total Population (millions)
2012
2.4
1,068.4
5,628.5
1,068.7
Urban Population (% of Total)
2012
39.2
40.8
44.8
77.7
4000
Population Density (per Km²)
2012
2.8
34.5
66.6
23.1
3000
GNI per Capita (US $)
2010
4,500.0
1,548.9
2,780.3
39,688.1
2000
Labor Force Participation - Total (%)
2012
40.3
37.8
0.0
0.0
1000
Labor Force Participation - Female (%)
2012
46.2
42.5
39.8
43.3
Gender -Related Development Index Value
2007
0.7
0.5
..
0.9
Human Develop. Index (Rank among 169 countries)
2012
128.0
3,972.0
..
..
Popul. Living Below $ 1 a Day (% of Population)
2004
31.9
158.1
25.0
..
Population Growth Rate - Total (%)
2012
1.7
2.3
1.4
0.7
Population Growth Rate - Urban (%)
2012
3.3
3.4
2.4
1.0
Population < 15 years (%)
2012
35.5
40.0
29.2
17.7
Population >= 65 years (%)
2012
3.8
3.6
6.0
15.3
Dependency Ratio (%)
2012
64.8
77.3
52.8
..
Sex Ratio (per 100 female)
2012
98.9
100.0
934.9
948.3
Female Population 15-49 years (% of total population)
2012
26.0
48.6
53.3
47.2
Life Expectancy at Birth - Total (years)
2012
62.6
58.1
65.7
79.8
Life Expectancy at Birth - Female (years)
2012
63.0
59.4
68.9
82.7
Crude Birth Rate (per 1,000)
2012
25.4
34.2
21.5
12.0
Crude Death Rate (per 1,000)
2012
8.2
10.9
8.2
8.3
Infant Mortality Rate (per 1,000)
2012
30.4
70.8
53.1
5.8
Child Mortality Rate (per 1,000)
2012
40.6
111.3
51.4
6.3
Total Fertility Rate (per woman)
2012
3.1
4.3
2.7
1.8
Maternal Mortality Rate (per 100,000)
2010
200.0
402.3
440.0
10.0
Women Using Contraception (%)
2012
57.1
31.6
61.0
75.0
5000
0
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
Namib ia
Africa
Demographic Indicators
Population Growth Rate - Total (%) 2.5
2
1.5
1
0.5
0 2012
2011
2010
Namib ia
Africa
Health & Nutrition Indicators
Access to Safe Water (% of Population)
Physicians (per 100,000 people)
2010
37.4
53.6
77.0
287.0
Nurses (per 100,000 people)*
2007
277.5
905.0
98.0
782.0
Births attended by Trained Health Personnel (%)
2007
81.4
1,472.2
39.0
99.3
Access to Safe Water (% of Population)
2010
93.0
65.7
84.0
99.6
Access to Health Services (% of Population)
2000
59.0
65.2
80.0
100.0
Access to Sanitation (% of Population)
2010
32.0
39.8
54.6
99.8
Percent. of Adults (aged 15-49) Living with HIV/AIDS
2011
13.4
4.6
161.9
14.1
Incidence of Tuberculosis (per 100,000)
2011
723.0
234.6
..
..
Child Immunization Against Tuberculosis (%)
2011
89.0
81.7
89.0
99.0
Child Immunization Against Measles (%)
2011
74.0
76.6
76.0
92.6
Underweight Children (% of children under 5 years)
2007
17.5
63.6
27.0
0.1
Daily Calorie Supply per Capita
2009
2,151.0
2,568.8
2,675.2
3,284.7
Public Expenditure on Health (as % of GDP)
2010
6.8
5.9
4.0
6.9
..
..
..
..
Primary School - Total
2010
106.8
101.9
106.0
101.5
Primary School - Female
2010
106.1
98.1
104.6
101.2
140
Secondary School - Total
2007
64.0
42.3
62.3
100.3
120
Secondary School - Female
2007
69.3
38.5
60.7
100.0
Primary School Female Teaching Staff (% of Total)
2010
68.2
43.7
..
..
Adult Literacy Rate - Total (%)
2010
88.8
67.0
19.0
..
80
Adult Literacy Rate - Male (%)
2010
88.5
58.3
..
..
60
Adult Literacy Rate - Female (%)
2010
89.0
75.8
..
..
Percentage of GDP Spent on Education
2010
8.3
5.3
..
5.4
100 90 80 70 60 50 40 30 20 10 0 2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
Namib ia
Africa
Education Indicators Gross Enrolment Ratio (%)
Secondary School - Total
100
40 20
Environmental Indicators
0
0.9
0.6
0.4
-0.2
..
..
..
..
1.6
1.2
..
..
Per Capita CO2 Emissions (metric tons)
2009
Sources : ADB Statistics Department Databases; World Bank: World Development Indicators UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports. Note :
n.a. : Not Applicable ; … : Data Not Available.
Namib ia
2007
2000
Annual Rate of Reforestation (%)
2006
Annual Rate of Deforestation (%)
2005
11.6
2004
9.9
2003
8.4
2002
1.0
2001
2011
2000
Land Use (Arable Land as % of Total Land Area)
Africa
Last update: April 2013
Appendix II. Table of ADB’s Portfolio in the Country Project Name
Support to Aquaculture Development Namibia Airport Study Human Resources Development Plan Statistical Capacity Building (SCB-II) TRUSTCO Finance
MIC Grant Application for Establishment of the National Medical Benefit Fund Total
Main Sector
Window Approval Date
Disburse Deadline
Amount Approved (UA m)
Amount Disbursed (UAm)
Disbursed Rate (%)
05.06.09
30.05.12
0.26
0.26
99.2
20.07.10
31.12.12
0.59
0.08
13.1
MIC Fund
09.10.09
31.03.12
0.60
0.54
89.5
MIC Fund
07.07.11
31.12.13
0.49
0.00
0.00
Agriculture (OSAN) Transport (OITC) Institutional Support (OSHD) Institutional Support (ESTA) Private Sector (OPSM)
MIC Fund MIC Fund
Private Sector
07.12.12
TBD
4.8
3.29
68.5
Health (OSHD)
MIC Fund
12.03.12
31.12.13
0.50
0.00
0
7.24
4.16
57.5%
Appendix III. Key Projects financed by the Bank and other DP in the country Table Summarising Grants Development Partner
Subsectors/Programmes
China
Aquaculture, Construction, Equipment, Defence, Capacity building & Health
132,752,400.00
France Germany
Social Development Fund, Decentralization, ICT, Culture, Governance National Parks, Community Forest, Land Reform, Water Resource Management, Environment and tourism, Education, Capacity Building, Roads, Transport, Public Finance Management, HIV/AIDS Fishery, Health, Water, Education, Disaster Management & HIV/AIDS Human rights and Democracy, Environment and Climate, Gender Equality and Economic Growth USAID, MCA, PEPFAR, Health, Education, Environment Agriculture, Housing, Education & Training, Safety & Security, Gender Equality & Women Employment, Child Protection & Welfare, Health, Tourism, Emergency Preparedness and Impact Mitigation, Immigration and Refugees Affairs, Social Development, Governance, Skills Transfer and Capacity Development, and Environment. Water Supply & Sanitation, Parliamentary Support Programme, Performance Management System, Public Finance Management Programme, Rehabilitation of Roads in the North, MDG Initiative, Civil Society Capacity Building Programme Namibia National Statistical System, National Integrated Resource Plan, Namibia Crisis Management Plan, Corridor Facilitation Programme, Open Africa North South Tourism Corridor
5,374,469.38 425,014,800.00
Spain Sweden USA Multilateral UN
European Union World Bank
GRAND TOTAL
Development Partner
Commitments for 2011/2012 (N$)
55,216,179.00 35,790,045.69 401,808,861.00 91,685,175.00
256,161,168.00
20,130,273.09
1,423,933,371.16
Table Summarising Concessional Loans Subsectors / Programmes
Commitments for 2011/2012 (N$)
China
Construction
177,680,000.00
Finland
Fisheries
320,000,000.00
Germany
Transport, Finance, Energy
285,207,300.00
Japan
Transport
343,096,716.53
TOTAL
1,125,984,016.53
Appendix IV. Map of the Project Area
Annex I I. REVIEW OF COUNTRY PARAMETERS FOR ELIGIBILITY FOR BANK FINANCING 1.1 Country’s Commitment Has the Government demonstrated willingness to participate in project financing by efficiently mobilizing Counterpart Funding? Yes. The Government is providing: i) a Sovereign Guarantee against the ADB loan to Namport and ii) providing a grant to the project of 250 million NAD (7.3% of total project cost). Is the Government interested and actively involved in the implementation of the project? Yes. Namport is under the purview of the Ministry of Works and Transport and its board is appointed by the Minister and regularly reports to him. The project also includes a component on logistics and trade facilitation funded by a Bank MIC TA Grant. This activity will involve different government stakeholders including the National Planning Commission and Ministry of Works and Transport during project implementation. Is the project in a sector of priority under the Poverty Reduction Strategy? Yes. The development agenda of the Government is contained in the Fourth National Development Plan (NDP4), covering the period 2012/13-2016/17. NDP4 has identified logistics, as one of the economic priorities and the Walvis Bay Port Expansion Project is clearly identified as one of the national priorities under the Logistics pillar. Has there been progress in achieving the Poverty Reduction Strategy objectives? Yes. Namibia has made significant progress in addressing many development challenges. Access to basic education, primary health care services, and safe water is high and growing. Sound public policies are helping to lay the foundation for gender equality. Namibia maintains social safety net programs for the elderly, disabled, orphans, vulnerable children, and war veterans, and has enacted a Social Security Act that provides for maternity leave, sick leave, and medical benefits to Namibians. Although Namibia is on track to meet the Millennium Development Goals on education, environment and gender, the severity of the HIV/AIDS epidemic is frustrating efforts to meet the Millennium Development Goals (MDGs) to reduce child mortality (MDG4), improve maternal health (MDG5), and combat HIV/AIDS, malaria and other diseases (MDG6). 1.2 Country’s Financial Allocation to Sector Is the country’s public expenditure allocation giving high priority to the sector concerned? Yes. The Government has in the past few years allocated between 8%-10% of the national budget to the transport sector. The sector is allocated NAD8.2 billion over the Medium-Term Expenditure Framework covering the period 2011/12-2013/14 for, among others:- expansion of the port of Walvis Bay, rehabilitation and railway infrastructure management, and development and maintenance of national roads infrastructure. 1.3 Country’s Debt Level and Budget Situation Can the country sustain additional debt and how is the current debt being managed? The authorities project total debt stock to remain at about 27% of GDP in 2012, below Namibia’s 35% statutory debt-to-GDP threshold. Namibia’s debt levels remain sustainable, and can therefore sustain additional debt. For Namport, an analysis on its capacity to borrow for this project shows high debt service coverage ratios (DSCRs). For the existing loans that fully mature in 2018, the average DSCR is 2.02x while the minimum is 1.30x. For the new loan, the average DSCR is 3.55x and the minimum is 1.82x. The project is self-sufficient in debt servicing and no additional debt burden is expected to fall on the government. To what extent is the Government receiving co-financing from other donors? Many bilateral donors scaled down their support to the country following its classification as an upper MIC. The level of co-financing from donors is not significant relative to the national budget.
Annex II II. NAMIBIA - COUNTRY OUTLOOK General Overview Namibia is a middle income country that has enjoyed considerable successes since it gained independence from South Africa in 1990 resulting from sound economic management, good governance, basic civic freedoms, and respect for human rights. Namibia inherited a well-functioning physical infrastructure, a market economy, rich natural resources, and a relatively strong public administration. The country also inherited extreme social and economic inequities, however, which have left Namibia with a highly dualistic society. Namibia’s per capita income of US$4,700 (2011, Atlas method) places it in the World Bank’s upper-middle income grouping. However income distribution is among the most unequal in the world, with a Gini coefficient estimated at 0.5971 by the latest (2009/10) household survey. Poverty incidence is high, although it has declined somewhat during the past decade: 29% of individuals had consumption below the national poverty line in 2009, compared to 69% in 1993.2 Economic Overview Namibia’s economy is closely linked to South Africa’s economy through trade, investment, and common monetary policies. The Namibian dollar is pegged to the South African rand, making economic trends (including inflation) closely follow those in South Africa. The Namibian economy slowed down in 2011 with a GDP growth rate of 3.8%3, down from 6.6% in 2010, reflecting modest performances in mining and agricultural activities. Prospects for the medium-term remain favourable with GDP growth projected to continue on its path of recovery to an average of 4.2 percent for the years 2012 and 2013, driven by construction, livestock and crop farming, manufacturing and mining. After years of fiscal surpluses arising from prudent macroeconomic policies, the fiscal situation has deteriorated substantially, reflecting the global economic crisis and expansionary policies to support growth. The budget for 2011/12 provides for the continuation of the expansionary fiscal policy for the fourth successive year as the Government commences the implementation of the three-year Targeted Intervention Programme for Employment and Economic Growth (TIPEEG), totaling 14.7 billion Namibian dollars (NAD), aimed at creating and retaining 104, 000 jobs. As a result, the fiscal deficit is expected to widen, averaging nearly 6.5% of GDP between 2011/12 and 2012/13. The deficit is financed by domestic borrowing and foreign debt. Namibia’s debt levels have risen in recent years, but remain sustainable and below the 30% threshold, despite the expansionary fiscal policy. Development Plans In July 2012, the GRN launched the Fourth National Development Plan (NDP4), which will guide policies through 2017. Economic growth, job creation, and increased income equality are the three overarching objectives of NDP4. It proposes to achieve these objectives through industrial policies to stimulate growth in tourism, regional trade logistics, agriculture and manufacturing (primarily through greater processing of primary commodities). Reducing extreme poverty and improving education, health, infrastructure, and the business environment enter into NDP4 as “basic enablers” that support the economic priorities. NDP4 presents ten “desired outcomes,” each accompanied by an indicator for measuring attainment of the outcome, broad strategies expected to achieve the outcome, and a ministry that will serve as the champion. This selectivity stands are in stark contrast to previous NDPs, whose agendas spanned the entire public policy space.
2 3
World Bank Country Overview – Namibia 2013 African Economic Outlook – Namibia 2012
Annex III III. THE WALVIS BAY PORT Ports and maritime in Namibia Namport operates as the National Port Authority in Namibia since 1994 and manages both the Port of Walvis Bay and the Port of Lüderitz in Namibia. The Port of Walvis Bay is situated at the west Coast of Africa and provides an easier and much faster transit route between Southern Africa, Europe and the Americas. The Port of Walvis Bay is Namibia's largest commercial port, receiving approximately 3,000 vessel calls each year and handling about 5 million tonnes of cargo. The port has good port infrastructures which can be ranked among the best in Africa; together with tariffs which are still competitive compared with their main competitors. These enable Walvis Bay to take advantage of the congestion and poor productivity in Eastern and Southern African Ports (Tanzania, Mozambique, Angola and to a lesser extent South Africa). Recent performance Namport achieved a record throughput of containers in 2012 of more than 337,000 TEU’s4 and overall cargo volumes exceeding the 6 million ton mark for the first time ever. Revenue concomitantly also exceeded N$700 million. Namport has regained higher volumes per vessel and the number of container vessels has plateaued at around 46 per month on average (annualised at 560). This is the maximum number of vessels that can be handled at present.
Namport’s opportunity and key differentiator remains in the SADC region. The economic growth in the region exceeds that of most traditional markets and is the key to the company’s sustainability. The opportunity remains in expanding intra-regional trade which is currently well below potential due to poor infrastructure, lack of harmonisation of trade policies and cumbersome border procedures. The appointment of the Walvis Bay Corridor Group to spearhead the recently established tri-partite Walvis Bay – Ndola – Lubumbashi Development Corridor is testimony to the commitment of Namibia’s neighbouring countries to regional integration. Nature of the Transhipment Business at Namport A significant share of the traffic in Walvis Bay is transhipment traffic (constituting 60% of container traffic) particularly to / from ports in western and central Africa (including Angola) and transit traffic to/from neighbouring countries (mainly South Africa and Angola) constitutes 34% of total shipments. The main trading partner for imports are China (34%), Germany (16%) and USA (4%) and exports Spain (27%), 4
Namport Annual Report 2012
-1-
China (11%), Germany and UK (7% each). Transshipment traffic has grown from 92,000 TEUs in 2006 to 218,000 TEUs in 2012 with an average annual growth rate (AAGR) of 55%. Transit traffic has also grown over the same period from 25,000 TEUs to 65,000TEUs with AAGR of 25%. Some of the capacity issues that Namport experience are largely a result of the increasing transhipment business. Transhipment demand relates to a broader, regional market and in Namport’s case to the development of the countries to the north of Namibia, right up to Ghana in West Africa. It is a function of the hub-and-spoke distribution model, employed increasingly by the large international shipping lines. African Shipping Activity There are 24 container liner shipping operators in the West Coast of Africa region. This trade is dominated by 3 large shipping lines: Maersk, CMA CGM and MSC in order of their respective share of trade capacity. Combined, they offer 73% of all trade capacity in this region with Maersk and CMA CGM being the most dominant. These 24 shipping lines operate 71 services to-and-from the region with a calculated trade capacity of 3 656 000 TEU’s annually. The largest carrier by trade capacity is Maersk with 38% market share. i) This region is further separated into service types of: ii) West Africa – Far East iii) West Africa – Middle East / Indian Subcontinent iv) West Africa – Southern Africa It is in the latter region that Walvis Bay dominates. Walvis Bay and Cape Town account for 80% of the region’s trade capacity. This goes some way towards explaining Namport and Walvis Bay’s rapid improvement in another important shipping index: Liner Shipping Connectivity Index. In the past 7 years, Namibia has improved from position 102 (out of 148 countries surveyed) to position 75. That is the same positioning as countries like Kenya and Tanzania that enjoy centuries’ old trade routes Competing Ports Walvis Bay port has good port infrastructures which can be ranked among the best in Africa together with tariffs which are still competitive compared with their main competitors. This enables the port to take advantage of the congestion and poor productivity in Eastern and Southern African Ports (Mozambique, Angola and to a lesser extent South Africa) and position itself as a transhipment port whilst also competing for transit traffic with the other ports in the region. Out of South Africa’s eight ports, two are likely competitors for Namibian ports, namely, Durban (for the traffic generated by the Gauteng province via the trans-Kalahari) and Cogea for the transhipment traffic. The ports of Luanda, Lobito and Namib are Angola’s main ports but considered not to pose significant threat in the short term due to its obsolete infrastructure and inefficiencies (40 days waiting before berthing has been reported). A market study conducted by Nathan Associates on the competing ports in the region has shown Walvis Bay’s potential to become a regional hub port if it takes advantage of its current window of opportunity to expand and capture the rising market demand whilst the government provides the complementary support of hard and soft infrastructure. Other ports considered include the ports of Lagos/Apapa, Dar es Salaam Port, Port of Cape Town, Port Elizabeth and Port of East London. Whereas some of these ports mostly serve local import/export or transit, Walvis Bay is mainly focusing on transhipment cargo whilst also promoting the use of its transport corridors to transit cargo for its landlocked neighbours and including the hinterlands of Angola though the transcunene corridor. Although Cape Town is the closest South African port to Walvis Bay and therefore could be considered its main competitor, it handles a very small volume of transshipment and its capacity is limited. The Walvis Bay Corridors and Group The Walvis Bay Corridor Group is a public-private partnership established to promote the utilisation of the Walvis Bay Corridors. This allows it to pool resources and authorities of both transport regulators and transport operators, thus effectively serving as a facilitation center and one-stop shop coordinating trade along the Walvis Bay Corridors and linking Namibia and its ports to the rest of the Southern African region. -2-
The Walvis Bay Corridor Group, is governed by a Board of Directors drawn from the different public and private stakeholders within the transport and logistics sector. The Strategic focus and mandate of the WBCG is: Business Development, Trade Facilitation, Infrastructure Development, Wellness service and Spatial Development Initiatives (SDI’S) for the Walvis Bay Corridors Logistics and Trade Facilitation International comparisons show that, Namibia is one of the most efficient logistic environments of southern Africa ranked 89th worldwide (and 3rd position in the SADC region in 2012) after South-Africa (ranked 24th) and Botswana (ranked 68th)). Many improvements have been made in the last few years on infrastructures, logistics competences and customs facilitation. Logistics issues in Namibia relate more with international than with domestic traffics. In this regard, Namibia promotes several international transport corridors crossing the country mainly from the port of Walvis Bay. Since Namibian roads along these transport corridors are still in relatively good condition, in particular as compared with African standards, the main challenge is the improvement of cross-border facilitation procedures. Namibian authorities are very proactive and significant progresses have been made to simplify and harmonize custom procedures. The following main achievements and on-going projects must be mentioned: A Single Administrative Document (SAD) has been adopted and is used on the trans-Kalahari corridor. The development of a One-Stop Border Post (OSBP) is on-going on the main corridor (trans-Kalahari) as a “pilot project”. It is planned to be operational in 2013 and it is contemplated that this system is extended in the future to other border crossing on the trans-Cunene and trans- Caprivi. Implementation of an electronic data exchange system between countries is under discussion and is planned to be operational in 2013 at the OSBP between Namibia and Botswana. The development of dry ports has started within the port of Walvis Bay. Even though the opportunity of developing such dry ports within the perimeter of the port where there is a serious shortage of storage areas, in particular for dry cargo, may be questionable, it is time now to take full benefit of these facilities and to optimize their functioning. Creation of the Walvis Bay Corridor Group (WBCG), a public and private sector collaboration, is aimed to promote development of corridor infrastructure, businesses and trade facilitation, corridor best practices and safe trade and transport corridors is continuing to yield results Increasing presence in the region and internationally through WBCG regional offices in Lusaka, Johannesburg, Lubumbashi and Sao Paulo is increasingly drawing businesses through the Walvis Bay corridors; Formulation of formal tripartite MoUs and partnerships on the Trans-Kalahari and Trans-Caprivi corridors The next steps forward include the following: i) Increase volume and speed to maximize advantage: Port of Walvis Bay becomes a regional hub port Increase transportation capacity to inland (strengthen resource based bulk cargo) Better trade facilitation (set up OSBP at all borders) ii) Preparation for Strategic Master Plans for Logistics and Regional Urban Centres iii) Global promotion of Walvis Bay to attract logistics/ distribution companies. iv) Implementation of Development of Strategic Hubs Development of logistics hubs based upon “National Logistics Master Plan”, further promotion of trade facilitation (Single Window & Port Community System). Development of regional urban centres based upon “Master plan on development of regional urban centres” (Land Use Plan, Urban Infrastructure). v) Diversification of Industries Attract diverse industries due to excellent position as an international logistics hub. Optimise growth of transit as well as transhipment traffic via the Port of Walvis Bay. -3-
Annex IV IV. PROJECT DESCRIPTION New Terminal Construction: The proposed project is the strategic expansion of the Walvis Bay Container Terminal that will see the creation of 30 hectares of new land reclaimed from channel at Walvis Bay. The new reclaimed land will be created by dredging/deepening the port and using the sand obtained from deepening to form the new land. The reclaimed land will be linked to the existing port land by a causeway. A new modern container terminal will then be built on top of the newly reclaimed land and will consist of quay walls, paved areas, buildings, roads, railway lines, ship to shore quay cranes, rubber tired gantry cranes, etc. The new container terminal will have a capacity of 650,000TEU p.a. to complement the 355,000TEU p.a. capacity of the existing container terminal, giving the Port a total capacity of 1,050,000TEUs with adequate space for optimisation and future expansion. The project will not only provide increased container handling capacity in Walvis Bay, but will also increase the port’s bulk and break handling capacity by freeing up the existing container terminal to become a multi-purpose terminal. Once built, the conversion of the existing container berths into a multipurpose terminal would open the port up for increased scope to accommodate a wide range of additional bulk cargo vessels and even passenger liners. Most of the quay wall infrastructure in the Port of Walvis Bay is very old and some of these reinforced concrete structures have already reached the end of their design life. Namport has thus scheduled major rehabilitation of these structures to occur within the next 10 years. The new container terminal project will add an additional 600m of quay wall length to the existing 1800m and this will enable major rehabilitation of existing quay walls to occur with minimal disruption to normal operations. The business case for the project has been proven in a number of comprehensive studies that were undertaken as far back as 1980 and of which the last of these preparatory studies were completed in November 2011. To date more than N$60 million has been committed to this project in conducting preparatory studies and investigations. The project implementation period is three years Logistics and Capacity Building financed by the Bank’s MIC TA Grant: National Logistics Master Plan: The study will provide a comprehensive logistics policy and a system development plan for Namibia with the target year of 2030. The activity includes amongst others: 1) review of current situation of logistics; 2) analysis on prevailing business models of international logistics in SADC; 3) analysis of commodity flow service in Namibia; 4) analysis of potential industries and business models; 5) prefeasibility study on inland logistics park and on “One Stop Border Post”; 6) Integration of ICT to facilitate and accelerate the growth in the transport and logistics sector and 7) Formulation of an Action Plan for implementation and monitoring of the Logistics Master plan. The period of implementation is 9 months. Road Safety Program in SADC: The road safety program will replicate the Safe Trade and Transport Corridors Project (executed on the Trans-Kalahari and Trans-Caprivi Corridors) on the Trans-Cunene Corridor (TCuC) between Namibia and Angola. The activity will include: 1) support WBCG for the design and implementation of a road safety action plan; 2) design and implementation of a road safety assessments/audits; 3) design and implement a monitoring system to measure the impact of the road safety action plan in the TCuC; 4) organize meetings with the authorities concerned and the public parties involved to ensure adequate cooperation; and 5) disseminate information about the road safety action plans. The project implementation is 9 months spread over a period of three years. Capacity & Institutional Building for Walvis Bay-Ndola-Lubumbashi Corridor Management Committee (WBNLD CMC): The WBNL or Trans Caprivi Corridor via Namibia is important for the Democratic Republic of the Congo and Zambia. The Walvis Bay Corridor Group (WBCG) serve as the secretariat for this corridor co-operation and hosts dialogue and meetings among the three countries based on a trilateral Memorandum of Understanding. The Interim Secretariat hosted by the WBCG will be supported by
providing technical assistance over a period of three years. This activity will also cover coordination, hosting of meetings, travel and procurement of Information Technology Equipment and Software, Digital Cameras, Scanners, Data Projectors and DVD Player / Recorders for the Committee. Capacity and Institutional Building for WBCG Projects Development & Funding Department: This activity builds capacity and support to the Walvis Bay Corridor Group Projects Development & Funding Department to ensure ongoing transport facilitation advocacy activities on the country’s regional corridors. The activity includes: 1) Technical assistance during three years, 2) travel & lodging, 3) organizing and participating in conferences / Workshops / Seminars to present WBCG project portfolio, 4) Short-term trainings and 5) Procurement of Information Technology Equipment and Project Management Software, and Digital Cameras, Scanners, Data Projectors and DVD Player / Recorders. The implementation is over a period of 3 years. FIATA Training Program for Freight Forwarders: This activity will strengthen the professional competence of Namibian freight forwarders in order to ensure that affordable and high-quality logistics services are available for the needs of the users of the Walvis Bay corridors. The activity will: 1) assess detailed training needs of registered freight forwarders in Namibia, 2) provide minimum 70 freight forwarders with FIATA certified training, 3) compile a report for future actions in promoting logistics competence among freight forwarders in Namibia. Priority in access to the training will be given to (i) female in-service freight forwarders, (ii) female persons in related industries that are likely to benefit from the FIATA training and (iii) female persons who intend to enter freight forwarding business. The target number of women to receive the FIATA training is 40 out of the 70 trainees.
Annex V V. ENVIRONMENT AND SOCIAL Environment and Social Action Plan (to be fulfilled before 30th September 2013 as a condition of the Loan): i)
A consultation/communications plan for the entire life of the project.
ii)
A report on the analysis of the impacts of the project on services such as water, electricity, health services. A plan of how the inclusion of the projects workforce will be serviced by the currently existing HIV/AIDS programs. An comprehensive Environmental and Social Management Plan (ESMP), that must among others entail a detailed waste management plan; a business continuity plan; a hazards (especially technological) management plan; and a detailed plan for better assessing and monitoring the socioeconomic impacts of the project. A report on the cumulative impact assessment for the project considering all other developments planned for the foreseeable future. A report on gender analysis and a plan in order to align with the country’s gender equality plans and if none exist in the country, the regional or international best standards to be applied. A climate change adaptation plan for the project that is in line with the National Climate Change Action Plan.
iii) iv)
v) vi) vii)
