AFRICAN DEVELOPMENT FUND

GHANA

BOARD MEMORANDUM

SUPPLEMENTARY LOANS

FOR

THREE (3) ON-GOING ROAD PROJECTS

A. TEMA-AFLAO REHABILITATION ROAD PROJECT (LOT 2: AGBOZUME-AFLAO SECTION & AKATSI BYPASS)

B. AKATSI-DZODZE-NOEPE ROAD UPGRADING PROJECT

(LOT 2: DZODZE- AKANU SECTION & OVERLAY FOR AKATSI-DZODZE SECTION)

C. UEMOA/ Ghana (MULTINATIONAL) ROAD PROGRAMME 1

(LOT 2: APAASO- KINTAMPO SECTION)

INFRASTRUCTURE DEPARTMENT OINF TRANSPORT DIVISION. 1 November 2008

TABLE OF CONTENTS Page

EQUIVALENTS AND ABBREVIATIONS, LIST OF ANNEXES, (i-vii) LOANS INFORMATION, UPDATED PROJECT MATRIX 1. INTRODUCTION 1 2. THE INITIAL PROJECTS 2 TEMA-AFLAO ROAD/ AKATSI- AKANU ROAD/UEMOA-GHANA ROAD PROGRAMME 1 2.1 Objectives and Description of Components 2/5/7 2.2 Initial Cost and Financing Conditions 2/5/8 2.3 Fulfillment of Initial Loan Conditions 3/6/9 2.4 Project Implementation Status 3/6/9 3. THE PROJECTS AT RE-APPRAISAL FOR THE SUPPLEMENTARY LOAN 10 TEMA-AFLAO ROAD/ AKATSI- -AKANU ROAD/UEMOA-GHANA ROAD PROGRAMME 1 3.1 Objectives and Description 10/12/15 3.2 Revised Project Cost Estimates 10/13/15 3.3 Sources of Finance 11/14/16 3.4 Revised Implementation Schedule for Lot 2 section 12/14/17 3.5 Revised Expenditure Schedule 12/14/17 3.6 Summary of Supplementary Loans 17 3.7 Environmental and Social Impact Assessment 18 3.8 Executing Agency 19 3.9 Procurement Arrangements 19 3.10 Disbursement Arrangements 20 4. BANK’S POLICY AND STRATEGIC CONTEXT 20 5. PROJECT SUSTAINABILITY AND RISKS 20 6. TECHNICAL AND ECONOMIC JUSTIFICATION 21 6.1 Technical Justification 21 6.2 Economic Re-Evaluation 22 7. CONCLUSIONS AND RECOMMENDATIONS 22 7.1 Conclusions 23 7.2 Recommendations 23 __________________________________________________________________________________ This report was written by Ms. L. Ehouman, (Transport Economist ) and Mr. D. R. Rao (Transport Engineer, Consultant) following their appraisal mission to Ghana from 14th to 29th August, 2008. Enquiries on this report should be referred to the authors or to Mr. A. Kies, Division Manager, OINF.1 (Extension 2282) and Mr. G. Mbesherubusa, Director, OINF (Extension 2034).

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EQUIVALENTS AND ABBREVIATIONS CURRENCY EQUIVALENTS

( September 2001/August 2008 Exchange Rates)

Currency Unit = New Ghana Cedis (GHC) 1 UA = GHC 0.895879 equivalent / GHC 1.57045 1 UA = USD 1.24565/ USD 1.62088 1 USD = GHC 0.719206037 equivalent /GHC 0.96888 WEIGHTS AND MEASURES 1 metric tonne (t) = 2,205 lbs 1 kilogramme (kg) = 2.205 lbs 1 metre (m) = 3.281 ft 1 foot (ft) = 0.305 m 1 kilometre (km) = 0.621 mile 1 square kilometre (km2) = 0.386 square mile 1 hectare (ha) = 0.01 km2 ̀ = 2.471 acres FISCAL YEAR Jan 1st – December 31st

ABBREVIATIONS

AADT Annual Average Daily Traffic ADB African Development Bank ADF African Development Fund AFD French Development Agency APA Advance Procurement Action DUR Department of Urban Roads ECOWAS Economic Community Of West African States EIRR Economic Internal Rate of Return ESAL Equivalent Standard Axle Load GEPA Ghana Environmental Protection Agency GHA Ghana Highway Authority GHC Ghana cedi (new) GOG Government of Ghana GRF Ghana Road Fund HDM Highway Development Model ICB International Competitive Bidding MoFEP Ministry of Finance and Economic Planning MoT Ministry of Transportation RSDP Road Sector Development Programme TSDP Transport Sector Development Programme UEMOA Union Economique et Monétaire Ouest Africaine VOC Vehicle Operating Costs

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LIST OF TABLES A. TEMA-AFLAO REHABILITATION ROAD PROJECT (ADF SECTIONS: LOT 1:AKATSI-

AGBOZUME, 31.55 KM AND LOT 2: AGBOZUME- AFLAO SECTION, 19.86 KM & 7.2 KM BYPASS AT AKATSI JUNCTION, TOTAL LENGTH 58.60 KM)

1. Initial Project Costs Estimates by Component – Civil works 2 2. Initial Project Costs Estimates by Category – Civil works 3 3. Initial Overall Project Costs by Sources of Finance 3 4. Revised Total Project Cost (Lot 1 &2) Estimates by Components 11 5. Comparative Analysis between Initial and Revised Costs Estimates of the Project (Lot 1 and Lot 2) net of taxes 11 6. Revised Financing Plan by Source 12 7. Expenditure Schedule by Category 12 8. Expenditure Schedule by Source of Finance 13 B. AKATSI-DZODZE-NOEPE ROAD UPGRADING PROJECT (ADF SECTIONS: LOT 1:AKATSI--

DZODZE, 25 KM AND LOT 2: DZODZE-AKANU SECTION, 5 KM & AC OVERLAY FOR LOT 1 SECTION, 25 KM)

1. Initial Project Costs Estimates by Component – Civil works 5 2. Initial Project Costs Estimates by Category – Civil works 6 3. Initial Overall Project Costs by Sources of Finance 6 4. Revised Total Project Cost (Lot 1 &2) Estimates by Components 13 5. Comparative Analysis between Initial and Revised Costs Estimates of the Project (Lot 1 and Lot 2) net of taxes 14 6. Revised Financing Plan by Source 14 7. Expenditure Schedule by Category 15 8. Expenditure Schedule by Source of Finance 15 C. UEMOA-GHANA ROAD PROGRAME 1 : ADF ROAD SECTION IN GHANA ( LOT 1: TECHIMAN-

- APAASO SECTION, 53.7 KM AND LOT 2 : APAASO- KINTAMPO SECTION, 6.3 KM) 1. Initial Project Costs Estimates by Category – Civil works 8 2. Initial Overall Project Costs by Sources of Finance 9 3. Revised Total Project Cost (Lot 1 &2) Estimates by Components 16 4. Comparative Analysis between Initial and Revised Costs Estimates of the Project (Lot 1 and Lot 2) net of taxes 16 5. Revised Financing Plan by Source 17 6. Expenditure Schedule by Category 17 7. Expenditure Schedule by Source of Finance 17

LIST OF ANNEXES Annex 1 : Project Location Map Annex 2 : Revised Project Implementation Schedule Annex 3 : Provisional List of Works and Services Annex 4 : Calculation of Economic Internal Rate of Return and Sensitivity Analysis Annex 5A : Comparative Analysis on Road Unit Costs Annex 5B : Cost Overruns Mitigation Plan Annex 6A : Loan Conditions for TEMA-AFLAO REHABILITATION ROAD PROJECT Annex 6B : Loan Conditions for AKATSI-DZODZE-NOEPE ROAD UPGRADING PROJECT Annex 6C : Loan Conditions for UEMOA-GHANA ROAD PROGRAMME 1

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LOANS INFORMATION

1. Client’s information BORROWER : REPUBLIC OF GHANA EXECUTING AGENCY : GHANA HIGHWAY AUTHORITY

2. Financing Plan

Source

TEMA- AFLAO REHABILITATION

ROAD PROJECT ( Lot 2: Agbozume- Aflao Section plus

Akatsi Bypass)

Amount in UA Million

AKATSI – AKANU-

NOEPE ROAD UPGRADING

PROJECT ( Lot 2: Dzodze- Akanu section Plus Overlay)

Amount in UA

Million

UEMOA/GHANA ROAD

PROGRAMME 1 ( Lot 2: Apaaso- Kintampo Section)

Amount in UA

Million Instrument ADF LOAN 25.40 13.40 4.30 Project Loan GOVERNMENT OF GHANA 2.80 1.50 0.50 Capital Budget

TOTAL 28.20

14.90

4.80

3. Important Financial Information* Loan/Grant currency Unit of Account (UA) Interest rate margin Not applicable Service charge for ADF loan 0.75% per year on loan amount disbursed and outstanding Commitment charge for ADF loan 0.5% of the undisbursed amount of the loan starting one hundred and

twenty (120) days from the date of signature of the Loan Agreement Other charges Not applicable ADF loan duration 40 years ADF loan grace period and repayment The Borrower shall repay the principal of the Loan over a period of

thirty (30) years, after a ten (10) year grace period commencing from the date of this Agreement, at the rate of two per cent (2%) per annum from the 11th to the 20th year inclusive and at the rate of four per cent (4%) per annum thereafter.

FIRR, NPV (base case) Not applicable EIRR, NPV (base case) 16.5% for Akatsi-Agbozume (Lot 1 of Tema-Aflao road); 24.5% for

Agbozume-Aflao (Lot 2 of Tema-Aflao road); 13.6% for Akatsi-Dzodze (Lot 1 of Akatsi-Dzodze-Akanu road); 17.2% for Dzodze-Akanu (Lot 2 of Akatsi-Dzodze-Akanu road); 41.2% for Techiman-Kintampo (UEMOA’s Ghana Road Section).

The ADF Policy on Non-Concessional Debt Accumulation which was approved by the Board on May 22nd, 2008 was applied

4. Timeframe – Main Milestones (expected) Activities TEMA- AFLAO

REHABILITATION ROAD PROJECT (month, year)

AKATSI – DZODZE- AKANU- NOEPE ROAD UPGRADING PROJECT(month, year)

UEMOA/GHANA ROAD PROGRAMME 1 (month, year)

Approval of concept note August 2008 August 2008 August 2008 Project approval December 2008 December 2008 December 2008 Effectiveness January 2009 January 2009 January 2009 Completion June 2011 December 2010 March 2010 Last disbursement December 2012 December 2011 December 2011 Last repayment date 2048 2048 2048

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GHANA

1)TEMA- AFLAO REHABILITATION ROAD PROJECT (AKATSI- AFLAO SECTION) LOT 2: AGBOZUME- AFLAO SECTION, 19.86 km + Akatsi Bypass, 7.2km)

2) AKATSI- DZODZE –NOEPE ROAD UPGRADING PROJECT (AKATSI- AKANU SECTION)

(LOT 2: DZODZE – AKANU SECTION, 5 km, Plus an Overlay for Lot 1 section, 25km REVISION DATE: DESIGN TEAM: L. Ehouman and Dr.R Rao

Hierarchy of Objectives

Expected Results

Reach Performance Indicators Source Method

Indicative Targets Timeframe Assumptions / Risks

1 – Goal 1.1 To provide an integrated, viable and sustainable transport infrastructure to meet the goals of poverty reduction and ECOWAS regional integration goals in order to establish a safe , reliable, effective and efficient movement of people and goods.

Impact - Long Term Results 1.1 Increase in trade between Ghana and other ECOWAS countries

Beneficiaries 1.1 ECOWAS zone

Indicators 1.1 Percent increase in trade between Ghana and ECOWAS countries Sources / Method: National & ECOWAS Statistics, , Ministry of Transportation, Ministry of Trade and Industry, Ghana Export Promotion Council

Target 1.1 At least 10% increase in Non Traditional Exports values between Ghana and ECOWAS, from US$ 365,million in 2007 to US$ 402 million in 2012

Assumptions 1.1.Effecttive implementation of Ghana’s Growth and Poverty Reduction Strategy (GPRS II, 2006-2009) 1.2 Efficient implementation of the Transport Sector Development Programme ( 2008- 2012) 1.3 Pursuit of ECOWAS Regional Integration Policy

2. Project Purpose (Objective): 2.1 To promote regional integration as well as contribute towards the Government’s goal of poverty reduction and economic development by reducing travel time and vehicle operating costs (VOCs) , resulting in reduced road user costs for both passengers and freight.

Outcome - Medium Term Results 2.1 Improved traffic level of service with reduced travel time and reduced VOCs 2.2 Increased trade between Ghana and Togo

Beneficiaries 2.1 Population in Southeast Ghana 2.2 Transport operators 2.3 Importers 2.4 Road users 2.5 Agriculture, trade and processing industries sectors

Indicators 2.1 Traffic levels on the project roads 2.2 Vehicle operating costs (VOCs) on the project roads 2.3 Travel time on the project roads Source/Method: Districts, National Statistics, MoT , Ghana Highway Authority

Target 2.1. At least 5.5% increase in traffic from 2007 to 2012 2.2 At least 20% reduction in VOCs from 2007 to 2012 2.3 At least 20% reduction in travel time from 2007 to 2012.

Assumptions 2.1 GOG allocates sufficient funds for routine and periodic maintenance of completed roads will be optimum 2.2 Government’s commitment to provide a sustainable environment for the road sector

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3. Resources and Activities: A. Civil Works 3.1 Issue and Receipt of Tenders 3.2 Evaluation , negotiation and Award of Contracts 3.3 Commencement of Works

(Rehabilitate/ upgrade the Lot 2 sections of the projects

Inputs – TEMA- AFLAO (Lot 2: Agbozume- Aflao + Akatsi bypass)

Inputs - millions UA: Civil Works 20.83 Consultancy (supervision) 1.16 Audit consultancy service 0.06 Base Cost 22.05 Physical Contingencies 2.2 Price escalation 3.95 Total Project cost 28.20 Resources (million UA) ADF Loan 25.4 GOG 2.8 Total 28.20

Inputs – AKATSI- AKANU (Lot 2:Dzodze- Akanu + Overlay of Lot 1)

Inputs - millions UA:

Civil Works 11.05 Consultancy (supervision) 0.66 Audit consultancy service 0.05 Base Cost 11.76 Physical Contingencies 1.17 Price escalation 1.97 Total Project cost 14.90 Resources (million UA) ADF Loan 13.4 GOG 1.5 Total 14.90

Short Term Outputs: 3.1 A two lane asphalt concrete road of 20 km with 7.3 m wide carriageway and two 2.5 m shoulders between Agbozume to Aflao and a bypass of 7 km at Akatsi Junction . 3.2 A two lane asphalt concrete road with 7.3 m carriageway and two 2 m shoulders between Dzodze to Akanu and an A/C overlay for the Lot 1 section from Akatsi- Dzodze

Beneficiaries 3.1 Regional and international contractors, local communities, consultants and suppliers 3.2 Local traders and producers 3.3 Construction workers, and Road users 3.4 Project Affected Persons

Indicators 3.1 Length of road upgraded/rehabilitated including the bypass at Akatsi junction Source / Method : Appraisal Report, Quarterly reports, Technical and Financial Audit reports, Disbursement Records, Bank Supervision missions and Mid– Term review

Target 3.1 20 km of asphalt concrete paved road between Agbozume- to Aflao and the bypass of 7 km at Akatsi Junction , completed by 2012 3.2 5 km of asphalt concrete paved road between Dzodze to Akanu and a 10cm overlay on the 25 km Akatsi- Dzodze section by 2012 3.3 100% loan disbursement by end of 2012 3.4 Delivery of detailed quarterly reports on a timely basis .

Assumptions/ Risks 3.1 Financing requirement for each project will be met in time 3.2 No major price escalation and unforeseen volatility in oil based input prices. 3.3 Effective supervision by GOG, consultants and the Bank 3.4 Competent contractors and consultants respond to bids resulting in competition 3.5 No implementation delays 3.6 Regular and constant supervision of consultants by GOG 3.7 GOG to implement the Axle Load Control Measures as programmed including the installation of weigh bridges on the Akatsi-Aflao road.

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GHANA

MULTINATIONAL UEMOA- GHANA ROAD PROGRAMME I (TECHIMAN – KINTAMPO SECTION) (LOT 2: APAASO – KINTAMPO section, 6.3 km)

Hierarchy of Objectives

Expected Results

Reach Performance Indicators

Source Method Indicative Targets

Timeframe Assumptions /

Risks

1 – Goal 1.1 Contribute to the strengthening of economic integration and sub-regional cooperation of UEMOA and ECOWAS member countries, and improved accessibility to countries in the hinterland.

Impact - Long Term Results 1.1 Increase in local products trade in the UEMOA zone 1.2 Increase in the overseas trade of the landlocked countries through the ports of UEMOA countries and Ghana

Beneficiaries ECOWAS zone

Indicators 1.1 Percent Increase in local products trade in the UEMOA zone 1.2 Percent Increase in the overseas trade of the landlocked countries through the ports of UEMOA countries and Ghana Sources: Ministries in charge of trade in the 3 countries and UEMOA Method: Statistics from Trade Ministries and ECOWAS. Economic, agricultural, import/export and transport statistics.

Target 1.1 At least 10% Percent Increase in local products trade in the UEMOA zone in 2011 1.2 At least 15% Percent Increase in the overseas trade of the landlocked countries through the ports of UEMOA countries and Ghana in 2011 Sources: Ministries in charge of trade in the 3 countries and UEMOA Method: Statistics from Trade Ministries and ECOWAS. Economic, agricultural, import/export and transport statistics

Assumptions 2.1. Continued commitment of the countries to regional integration. 2.2. Proper implementation of the transport policies adopted by the countries.

2. Project Purpose (Objective): 2.1 Improve the accessibility of land-locked countries (Burkina, Mali and Niger) to Ghanaian ports due to reduced transport costs and enhanced state of corridor road;

Outcome - Medium Term Results There are available alternative and efficient corridors for landlocked countries to conduct their trade related activities. Medium Term Effects 1 Improved transit conditions at border posts 2. Efficient control and enhanced monitoring of road transit 3. Improved road quality and security

Beneficiaries 2.1 Transport operators 2.2 Importators 2.3 Road users 2.4 Agriculture, trade and processing industries sectors

Indicators 2.1 Percent Increase in traffic in the Ghanaian corridor 2.2 Improvement in the quality of the level of service of the Bamako-Ouagadougou –Tema Road corridor 2.3 Percent Reduction in journey time and invisible costs on the corridor for traffic by container, tanker and sealed trucks 2.4 Percent Reduction in vehicle operating costs on the programme road 2.5 Percent Reduction in the rate of overload trucks on the corridor Sources: Ministries in charge of trade in the 3 countries and UEMOA Method: Statistics from Trade Ministries and ECOWAS. Economic, agricultural,

Target 2.1 At least 15% Percent Increase in traffic in the Ghanaian corridor in 2011 2.2 From 2011, improvement in the quality of the level of service of the Bamako-Ouagadougou –Tema Road corridor from fair to good 2.3 From 2011, at least 50% Percent Reduction in journey time and between 15 and 20% reduction invisible costs on the corridor for traffic by container, tanker and sealed trucks 2.4 At least 30% Percent Reduction in vehicle operating costs on the programme road from 2011 2.5 At least 40% Percent

Assumptions 3.1 Harmonization of road maintenance policies such as Second Generation Road funds in the 3 countries 3.2 Actual implementation of the Inter-State transit and transport facilitation agreements. 3.3 Sustainability of the structures (observatory on the practices, regional data bank, etc.

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import/export and transport statistics Reduction in the rate of overload trucks on the corridor from 2011 Sources: Ministries in charge of trade in the 3 countries and UEMOA Method: Statistics from Trade Ministries and ECOWAS. Economic, agricultural, import/export and transport statistics

3. Activities: 3.1 A. Civil Works 3.1 Initiate Addendum to the existing Contract 3.2 Review, Evaluation and Approval 3.4 Commencement of Works

(Rehabilitation of Lot 2 sections of the project)

Inputs ( For Ghana’s section) : (Lot 2: Apaaso- Kintampo Section, 6.3 km)

Inputs - millions UA:

Civil Works 3.79 Consultancy (supervision) 0.20 Audit consultancy service 0.02 Base Cost 4.01 Physical Contingencies 0.40 Price escalation 0.39 Total Project cost 4.80 Resources (million UA) ADF Loan 4.30 GOG 0.50 Total 4.80

Short Term Outputs: 3.1 Paved roads of the Bamako-Ouaga-Tema corridor rehabilitated. 3.2. Juxtaposed control posts at the borders are constructed and equipped; Tema port is equipped with a weighbridge. 3.3. Advance Cargo Information System (ACIS) and radio communication put in place. 3.4Institutional control and monitoring mechanisms to facilitate road transport and transit made operational. 3.5 Technical assistance to UEMOA is set up for at least 2 years

Beneficiaries 3.1 Population living near the rehabilitated roads and suppliers 3.2 Local traders and producers

Indicators 3.1 Number of km of community roads rehabilitated in 2010 with length of road upgraded on the Ghana segment 3.2. Number of juxtaposed control posts at the borders constructed and operational in 2008. 3.3.Year of the setting up of the Radio communication and on the corridor 3.4. Regulatory measures on transport facilitation adopted. Year when the Measures to facilitate efficient Inter-State transport/transit are taken 3.5 Additional personnel recruited and trained by UEMOA Source: Status, supervision, audit and completion reports of the programme, facilitation Committees and statistics of the Observatory on the practices.

Target 3.1. About 1,050 km of community roads rehabilitated in 2011. 6.3 km of A/C road by 2010 3.2. Two juxtaposed control posts at the borders constructed and operational in 2011. 3.3. Radio communication and ACIS installed on the corridor in 2011 3.4. Measures to facilitate efficient Inter-State transport/transit taken in 2011 3.5 At least 1 engineer and 1 transport Economist recruited in 2007 (UEMOA) Source: Status, supervision, audit and completion reports of the programme, facilitation Committees and statistics of the Observatory on the practices.

Assumptions 3.1 Coordination of implementation of components and the programme donors 3.2. Compliance with schedules 3.3. Efficient monitoring by ADF, UEMOA and the countries. 3.4. Risk of cost overrun connected with the programme approach; 3.5. Availability of the counterpart contributions in accordance with the disbursement profile;, and Availability of all the funds required.

1. INTRODUCTION 1.1 The Government of Ghana (GOG) has been implementing major road improvement programmes as a part of its transport policy, which included construction, rehabilitation/reconstruction and maintenance of rural, trunk and urban infrastructure. The importance attached to the road network is mainly to (i) reduce the waiting and travel times (ii) improve the transport services, with consequent reduction in poverty and developmental impact in all parts of the hinterland, and (iii) enhance regional integration and cooperation between Ghana and the Economic Community of West African States (ECOWAS). In recognition, donors actively participated in the formulation of Road Sector Development Programmes, such as Highway Sector Investment Programme (1996- 2001), Road Sector Development Programmes, RSDP (2002- 2008), the aim of which was to contribute to poverty reduction by improving sustainable road access to all rural and urban areas of the country. Major donors including the Bank Group, World Bank, EU, KfW and DFID provided financial assistance in the implementation of the projects under the programmes. The importance of transport infrastructure is highlighted in Ghana’s Growth and Poverty Reduction Strategy (GPRS II, 2006-2009) as an enabler for economic growth and poverty reduction. As a follow up, Government is now implementing a “Transport Sector Development Programme (TSDP)” for the next five years (2008- 2012) estimated at USD 4.82 billion (of which US$ 3.1 billion is allocated to the Roads sub-sector) which again aims at an integrated, efficient, cost-effective and sustainable transportation system supporting growth, poverty reduction and promoting regional integration. 1.2 In pursuance of economic growth, regional trade and integration, Government identified three projects for financing by the Bank under the programme (including one Multi-national), namely (i) Tema- Aflao Road Rehabilitation Project, (ii) Akatsi – Dzodze - Noepe Trunk Road Project and (iii) UEMOA/ Ghana Road Programme 1 (Techiman- Kintampo Section in Ghana), and requested for Bank’s financial assistance to implement these projects. Accordingly, the three projects were appraised in July 2001, August 2001 and August 2003 respectively and the Bank approved the three loans under ADF financing as under. (i) Tema - Aflao Road Rehabilitation Project : UA 14.70 million (Approved in April, 2002) (Loan No: 2100150006848) (ii) Akatsi - Dzodze- Noepe Trunk road project : UA 12.72 million (Approved in December, 2002) (Loan No: 2100150007013) iii) UEMOA/ Ghana Road Programme 1 : UA 24.49 million (Approved in November, 2003)

(Techiman- Kintampo Section in Ghana) (Loan No: 2100150007165)

1.3 The implementation of the above three projects experienced substantial initial delays (from 12 to 40 months) in fulfilling loan conditions and the recruitment of the design review consultants. Due to prolonged delays, the approved appraisal cost estimates became obsolete, these were accordingly revised based on the inflation and market prices, during which it was noted that the revised cost estimates far exceeds the appraisal estimates. This is mainly attributable to a considerable global increase in the prices of various inputs required for road construction materials, such as bitumen, cement and steel,, with escalation ranging from 56% to 212% (Annex 5A). These significant price increases led to first unsuccessful tendering and then necessitated re-packaging of the project roads with reduced scope, in order for the works to be accommodated within the approved loan amounts. More information on the reasons for the delays and its effect on the appraisal cost estimates is given in section 2 of the Memorandum. 1.4 The above increases in the prices of materials significantly affected the road projects not only in Ghana, but in all countries of the African continent. In order to justify the unusual price increases observed in road construction contracts, the Bank in 2007, undertook a study “Road Unit Cost Study for Africa”, to assess and identify the reasons for such cost overruns. The outcome of the unit cost study with a mitigation action plan was circulated to the Board of Directors in February, 2008. Annex 5B of this report includes the mitigation action plan undertaken within the framework of the Present Proposed Supplementary Loan. 1.5 Having realized that the originally appraised projects could not be implemented within the envelope of the approved loans, the GOG with the approval of the Bank decided to split the projects into lots, viz. Lot 1 and Lot 2, to accommodate at least one lot within the approved funds. Tenders were floated accordingly for the first Lot ( Lot 1) of all three projects, and contracts were awarded for all three projects, namely,

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Tema- Aflao Road project ( Akatsi- Agbozume section), Akatsi—Akanu Road project (Akatsi- Dzodze section),and UEMOA/ Ghana Road programme 1 (Ghana: Techiman- Apaaso Section). The GOG, after assessing that the financing gap to implement the projects as originally envisaged could not be bridged using its own resources, requested the Bank in June 2008 for supplementary loans to implement and complete the remaining parts (Lot 2 sections) of the projects, as initially conceived. 1.6 Upon GOG’s request, the Bank fielded a mission from August 14th to 29th, 2008 to re-appraise the three above-mentioned projects after updating the studies ( i.e. engineering designs and cost estimates etc.) with a view to securing supplementary loans to cover the cost-overruns to achieve the objectives of the initial projects. This memorandum is based on the findings of the mission. 2. THE INITIAL PROJECTS A. TEMA- AFLAO REHABILITATION ROAD PROJECT (ADF COMPONENT : AKATSI-

AFLAO SECTION, 41 KM AND 7 KM BYPASS AT AKATSI JUNCTION)

2.1 Objectives and Description of Components 2.1.1 Objectives: The objective of the project is to promote regional integration as well as contribute towards the Government’s goal of poverty reduction and economic development by reducing the travel time and vehicle operating cost, resulting in reduced road user costs for both passengers and freight. 2.1.2 Description of Components: As appraised in July 2001, the project outputs of the ADF financed component consist of:

a) Civil Works : The reconstruction of a 41 km of trunk road between Akatsi and Aflao with a single carriageway of 7.3 m width and 2.5 m surface dressed shoulders on either side of the road. It also included construction of a 7- kilometer by-pass starting at the Akatsi town entrance and ending at the Abor town entrance with the cross section as mentioned. b) Consultancy Services: i) Supervision of civil works and ii) External audit of the Project.

2.2 Initial Cost and Financing Conditions

Initial Cost

2.2.1 The ADF financed project was estimated at UA 21.15 million including UA 15.03 million in foreign cost and UA 6.12 million in local cost. The estimated project cost was based on the quantities and unit prices provided by the Consultant in liaison with the Ghana Highway Authority and on rates from contracts awarded in the country prior to July 2001. The supervision cost was derived by applying 6% to the cost of physical works. A provision of 10% was made to accommodate physical contingency and another 3% per annum were made for price escalation for foreign and local costs respectively. 2.2.2 The initial project cost estimates (net of taxes) by component and by category are summarized in the Tables below.

Initial Project Cost Estimates by Component–Civil Works US$ Million UA Million

COMPONENTS F. E. L. C. TOTAL FE LC TOTAL B. AKATSI-AFLAO SECTION a) Civil Works 15.34 6.26 21.60 12.31 5.03 17.34b) Consultancy Services (i) Supervision 6% 0.92 0.38 1.30 0.74 0.30 1.04 (ii) Audit 0.05 0.00 0.05 0.04 0.00 0.04Sub-Total Consultancy Services 0.97 0.38 1.35 0.78 0.30 1.08Base Cost Sub-Total 16.31 6.64 22.95 13.09 5.33 18.42Physical Contingency 10% 1.63 0.66 2.30 1.31 0.53 1.84Price Contingency 3 %/Annum 0.78 0.32 1.10 0.63 0.26 0.89Contingency Sub-Total 2.41 0.98 3.39 1.94 0.79 2.73TOTAL ADF PROJECT COST 18.72 7.62 26.34 15.03 6.12 21.15

NB : Appraisal Exchange Rates ( July 2001): 1 UA= old Cedi 8958.79 = GHC 0.895879; 1 UA=US$ 1.24565

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Initial Project Cost Estimates by Category–Civil Works

US$ Million UA Million Categories F. E. L. C. TOTAL F. E. L. C. TOTAL

A. Civil Works 17.61 7.19 24.80 14.14 5.77 19.91B. Consultancy Services Sub-Total (i) Supervision 1.06 0.43 1.49 0.85 0.35 1.20 (ii) Audit 0.05 0.00 0.05 0.04 0.00 0.04Category B Sub-Total 1.11 0.43 1.54 0.89 0.35 1.24Total 18.72 7.62 26.35 15.03 6.12 21.15

Financing Conditions 2.2.3 The ADF, ECOWAS Fund and the Government of Ghana were to finance the ADF section. The ADF loan was to finance the total cost of its project audit, along with 100% and 69.3% of the foreign exchange of its project supervision and civil works respectively. The ADF contribution to the foreign cost of its project was UA 14.70 million. The Government contribution of UA 1.63 million represented 10 per cent of the total cost to be financed by the ADF. The project local cost was calculated in USD due to the high fluctuation and constant devaluation of the then national currency (Cedis). In brief, out of a total cost of UA 21.15 million for the ADF component, ADF was to finance 69.50% of the total cost (i.e. UA 14.70 million) while GOG and ECOWAS were to finance the remaining 30.50% share of the total cost (i.e., UA 6.45 million) The financing plan of the project by source of finance is presented in the following Table .

Initial Overall Project Cost by Sources of Finance (UA Million)

UA MILLION

Source F. E. L. C TOTAL % of Total

ADF 14.70 0.00 14.70 69.50ECOWAS FUND 0.33 4.49 4.82 22.79GOG 0.00 1.63 1.63 7.71TOTAL 15.03 6.12 21.15 100.00 2.3 Fulfillment of Initial Loan Conditions 2.3.1 The loan agreement for the project was signed on August 2nd, 2002. All loan conditions were fulfilled and it was declared effective on December 5th, 2002. The conditions are reproduced in Annex 6 of this Report. 2.4 Project Implementation Status 2.4.1 There has been substantial delay in the implementation of the project, which in turn significantly affected the appraisal project cost estimates. These delays could be attributed mainly to the following reasons:

• An initial delay of about 9 months from approval to the loan effectiveness ; • Delay of about 36 months from approval for fulfillment of Conditions precedent to first

disbursement; This had to do with the conditions related to the axle load policy and the road arrears. Ghana’s Parliament took a long time to ratify the axle load policy and GOG could not pay outstanding arrears to one contractor who had been taken to court by a third party.

2.4.2 As a consequence of the above delays in fulfilling the loan conditions, the award and commencement of Consultancy for Pre-contract and Supervision services was delayed. The Consultant was finally able to commence the services only in June 2006 , i.e. a delay of more than four years after the approval of the loan. These initial delays had a significant effect on the approved appraisal cost estimates,

4

that ultimately led to cost overruns. These increases in the costs is due to a number of reasons, but mainly attributable to a considerable global increase in the prices of various inputs required for road construction materials, such as bitumen, cement and steel, as the manufacture of these items is highly dependent on oil. However, in case of Ghana, the increase in the international oil price and the knock-on to domestic diesel and construction materials prices, together with increased demand for contractors’ services, are some of the strong contributory factors for these costs overruns. This increase in construction input costs in the country was further compounded by domestic inflation and currency appreciation of the GHC against the US dollars. Between 2001 and 2006 alone, the exchange rate between the US dollars rose by 27% (from 0.72 GHC to 0.21 GHC) and the prices of constructional materials in Cedis increased from 98% to 297%. In addition, due to lack of competition in Ghana, it was noted that there were either no bids submitted or a single bid with exorbitant price during tendering. Consultancy Services ( Pre-contract and Supervision) 2.4.3 In addition to the initial delays as stated in para 2.4.1 above, the design review took longer time (about 18 months) than expected. The existing design was reviewed in relation to the current site surveys and the cost estimates were updated accordingly with increased prices of materials. Some of the notable changes to the initial design are given hereunder:

• An increase in the length of project road by 10.6 km ( i.e. from 48 km to 58.6 km), in order to achieve the envisaged objectives to commence the project from Akatsi Junction.;

• Revision to the pavement structure ( i.e. increase in the thickness) due to significant increase in the traffic from the time of appraisal (2002) to the time of review (2006) , and its consequent effect on the equivalent standard axle load (ESAL) for the pavement design;

2.4.4 As a result of the above changes, coupled with increase in the prices of road construction materials, a revision to the appraisal cost estimates were undertaken. This revision concluded that the updated cost estimates far exceeds the approved loan amount, and it was almost 75% over the appraisal cost estimates, resulting thus in significant cost overruns. 2.4.5 In order to implement the project within the approved loan amount, the project was therefore split into two lots. Revised cost estimates and tender documents were prepared accordingly for the two lots as follows to facilitate floating of tenders. Lot 1 : Akatsi- Agbozume Section ( 31.55 km) Lot 2 : Agbozume- Aflao Section ( 20 km) and Akatsi Junction Bypass (7 km) Civil Works 2.4.6 From the revised cost estimates, only the Lot 1 (Akatsi- Agbozume section, 31.55 km) could be accommodated within the approved loan amount. The Bank gave its no-objection to launch the bids for the Lot 1 (Akatsi- Agbozume section, 31.55 km ). Following pre-qualification for the civil works of the road project, tenders were called in December 2007 from the pre-qualified contractors, however no bids were received by the closing date. At the request of the GOG, the Bank approved a re-launch of the bids with post-qualification method of procurement. Upon receipt of bids, it was noted that the Lot 1 section works could be accommodated within the approved loan amount and the contract was awarded to the lowest evaluated bidder. Since Lot 2 section was a continuation and part of the overall project, with no funds to implement under the approved loan due to the reasons stated under 2.4.1 above, GOG requested the Bank to assist them with a supplementary loan for the second lot. 2.4.7 Status of Funds: The funds allocated to the road works and consultancy services under the approved loan (ADF, ECOWAS and GOG) inclusive of physical and price contingencies is UA 19.91 million. The total cost for works (as per the lowest bid) of UA 19.79 million (net of taxes) for Lot 1 Section is just within in the available funds under the approved loan. The total cost of the overall project (58.6 km including the bypass) for civil works and consultancy services as per the current estimate (2008) is about UA 44.53 million. In order to achieve the objectives of the project, the implementation of the remaining two lots (Lot 2 and 3) are necessary. An additional amount of UA 28.20 million (shared by ADF and GOG), is therefore required to complete the remaining section of the project.

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2.4.8 The Bank’s no-objection was given for the award of the contract of Lot 1 section. and disbursements will commence soon. B. AKATSI – DZODZE- AKANU- NOEPE ROAD UPGRADING PROJECT (ADF COMPONENT: AKATSI- DZODZE- AKANU SECTION, 30 KM ) 2.1 Objectives and Description of Components 2.1.1 Objectives: The objective of the project is to contribute towards the Governments’ goal of poverty reduction, regional integration and economic development by reducing the travel time and vehicle operating cost, resulting in reduced road user costs for both passengers and freight. 2.1.2 Description of Components: As appraised in July 2001, the project outputs of the ADF financed components consist of:

a) Civil Works : The ADF financed component of the project which involves i) Akatsi Akanu Road (29.75 km) Rehabilitation with a single carriageway of 7.3-m width and asphaltic concrete surfacing with 2.0-m surface dressed shoulders on each side of the road. It would also include the reconstruction of a 12-m reinforced concrete bridge over the Aka River between Akanu and Noepé. b) Consultancy Services i) Pre-contract and Supervision of civil works, and (ii) External audit of the project.

2.2 Initial Cost and Financing Conditions Initial Cost

2.2.1 The ADF financed components of project (Akatsi- Akanu Section, 30 km plus the bridge over Aka river) was estimated at UA 14.13 million with UA 11.32 million in foreign cost and UA 2.81 million in local cost. The estimated project cost was based on the quantities and unit prices provided by the Consultant in liaison with the Ghana Highway Authority and on rates from contracts awarded in the country prior to re-appraisal in August 2002. The supervision cost was derived by applying 6% to the cost of physical works. A provision of 10% was made to accommodate physical contingency and another 3% per annum were made for price escalation for foreign and local costs respectively. 2.2.2 The initial ADF project components cost estimates (net of taxes) and the initial project cost estimates by category are given in the Tables below.

Initial Project Cost Estimates by Component–Civil Works

US$ Million UA Million COMPONENTS F. E. L. C. TOTAL FE LC TOTAL B. AKATSI-AKANU SECTION a) Civil Works 11.55 2.88 14.43 9.28 2.31 11.59b) Consultancy Services (i) Supervision 6% 0.69 0.17 0.87 0.56 0.14 0.70 (ii) Audit 0.06 0.00 0.06 0.05 0.00 0.05Sub-Total Consultancy Services 0.76 0.17 0.93 0.61 0.14 0.75Base Cost Sub-Total 12.32 3.05 15.37 9.89 2.45 12.34Physical Contingency 10% 1.23 0.31 1.54 0.99 0.25 1.24Price Contingency 3 %/Annum 0.55 0.14 0.69 0.44 0.11 0.55Contingency Sub-Total 1.78 0.44 2.23 1.43 0.36 1.79TOTAL ADF PROJECT COST 14.10 3.49 17.60 11.32 2.81 14.13

NB : Appraisal Exchange Rates ( Sept 2002): 1 UA= Cedi 8958.79 / GHC 0.895879; 1 UA=US$ 1.2799

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Initial Project Cost Estimates by Category–Civil Works

US$ Million UA Million Categories F. E. L. C. TOTAL F. E. L. C. TOTAL

A. Civil Works 13.23 3.30 16.53 10.62 2.65 13.27B. Consultancy Services Sub-Total

(i) Supervision 0.81 0.20 1.01 0.65 0.16 0.81 (ii) Audit 0.06 0.00 0.06 0.05 0.00 0.05Category B Sub-Total 0.87 0.20 1.07 0.70 0.16 0.86TOTAL A + B 14.10 3.50 17.60 11.32 2.81 14.13

Financing Conditions 2.2.3 The ADF and the Government of Ghana will finance the ADF Component of the Project. The ADF will finance 90% of the total cost while GOG will finance the remaining 10%. The ADF contribution to the foreign and local costs will be UA 11.32 million and 1.40 million respectively, while that of the GOG contribution will be UA 1.41 million. In brief, out of a total cost of UA 14.13 million for the ADF component, ADF contribution was 90% of the total cost (i.e., UA 12.72 million) while GOG was to finance the remaining share of the total cost (i.e. UA 1.41 million). The financing plan of the project by source of finance is presented in the Table below.

Initial Overall Project Cost by Sources of Finance (UA Million)

Source UA MILLION % OF TOTAL F. E. L. C TOTAL

ADF 11.32 1.40 12.72 90 GOG 0.00 1.41 1.41 10 TOTAL 11.32 2.81 14.13 100

2.3 Fulfillment of Initial Loan Conditions LOAN: 2.3.1 The loan agreement for the project was signed on July 18th, 2003. All loan conditions were fulfilled and it was declared effective on July 23rd, 2004. The conditions are reproduced in Annex 6 of this Report. 2.4 Project Implementation Status 2.4.1 Similar to Tema- Aflao Road Project, this project also experienced substantial delay in the implementation of the project, which in turn affected the appraisal project cost estimates. These delays could be attributed mainly to the following reasons:

• An initial delay ( about 18 months) from approval to the loan effectiveness; • Delay of about 33 months from approval for fulfillment of Conditions precedent to first

disbursement; This was caused by the same reasons as per Tema-Aflao project.

2.4.2 As a result of the above, the consultancy services award for design review and supervision was delayed by 42 months from approval.. During design review, it was noted that these initial delays had significantly effected the appraisal cost estimates, which ultimately led to cost overruns. The reasons for the increase in the costs are the same as for the Tema – Aflao Project ( see section 2.4.2 of Tema- Aflao). Consultancy Services ( Pre-contract and Supervision) 2.4.3 In addition to the initial delays as stated in para. 2.4.1 above, the design review took longer time (about 18 months) than expected. The existing design was reviewed in relation to additional requirements

7

of the GHA and cost estimates were updated accordingly with the increased prices of materials. The additional requirements included (i.e. pavement structure, safety features, shoulders width, etc) due to GHA policy changes in relation to Road safety, pavement design and axle load control, which increased the costs apart from the other increases. As a consequence, the revised estimated cost of the project was almost increased by 40% over the appraisal estimates, resulting thus in cost overruns. 2.4.4 In order to implement the project, within the approved loan amount, the project was split into two lots as under with reduced specification for the wearing course, i.e. from Asphalt Concrete (A/C) to Double Bitumen Surface Treatment (DBST) for the first Lot (Lot 1). Revised cost estimates and tender documents were prepared accordingly for these two lots to facilitate floating of tenders. Lot 1 : Akatsi- Dzodze Section (25 km) Lot 2 : Dzodze – Akanu Section (5 km) Civil Works 2.4.5 From the revised costs, only Lot 1 (Akatsi- Dzodze section, 25 km with DBST surface treatment) can be accommodated within the approved loan amount. The Bank gave its no-objection accordingly to launch the bids for the Lot 1 (Akatsi- Dzodze section, 25 km with DBST surface treatment). Following the pre-qualification for the civil works of the road project, tenders were called from pre-qualified contractors in December 2007, however only one firm submitted the bid by the closing date. The GOG after a review noted that the tender price of the sole bidder was found to be about 100% more than the estimated cost. At the request of the GOG, the Bank approved a re-launch of the bids with post-qualification method of procurement. Upon preliminary evaluation of bids, it was noted that the bid prices for Lot 1 section works was slightly higher than the approved loan amount. However, upon detailed evaluation and negotiations, it is expected that contract would be finalized and awarded to the lowest evaluated bidder. Since Lot 2 section is a continuation and part of the overall project, with no funds to implement it under the approved loan, the Government of Ghana (GOG) therefore requested the Bank to assist them with a supplementary loan for the second lot. 2.4.6 Status of Funds: The estimated cost of the project for works and consultancy services was UA 14.13 million. The cost of civil works for Lot 1 section (as per the received bids) is UA 13.34 million, which is just sufficient. No funds are available under the approved loan for implementation of the remaining Lot 2 section. The cost of the overall project (30 km with AC overlay ) including consultancy services has been estimated to be UA 29.03 million (2008 prices). In order to achieve the objectives of the project, the implementation of the Lot 2 section is necessary. Additional funds of about UA 14.90 million ( shared by ADF and GOG) are therefore required to complete the remaining section of the project. 2.4.7 The Bank’s no-objection was given for the award of the contract of Lot 1 section. and disbursements will commence soon. C. UEMOA-/GHANA ROAD PROGRAMME 1 (ADF ROAD COMPONENT IN GHANA :

TECHIMAN- KINTAMPO SECTION, 60 KM ) 2.1 Objectives and Description of Components 2.1.1 At the sectoral level, the programme objective is to contribute to the strengthening of economic integration and sub-regional co-operation of UEMOA and ECOWAS member countries, and to improving accessibility to the countries in the hinterland. Specifically, the programme seeks to: (i) improve the accessibility of land-locked countries (Burkina Faso, Mali and Niger) to Ghanaian ports; (ii) promote economic activities and private sector development; (iii) reduce general transport costs through actions and measures to facilitate road transit and transport; (iii) improve the sustainability of investments through the control of axle loads; and (iv) strengthen programme monitoring capacities.

2.1.2 Description of Components: Basically there are four main components under the programme as under:

i. Road and Facilitation Studies ii. Reinforcement of the Roads of the Corridor and Related Developments

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iii. Sensitization and Facilitation Activities and Measures iv. Programme Management

The ADF financed project in Ghana, i.e. Techiman- Kintampo Road Section, 60 km is under Component B of the programme. As appraised in July/ August 2003, the project outputs of the ADF financed component in Ghana consist of:

a) Civil Works : The rehabilitation of 60 km of road between Techiman and Kintampo with a single carriageway of 7.3 m width with AC wearing course and 2.5 m surface dressed shoulders on either side of the road. b) Consultancy Services for Supervision of civil works

2.2 Initial Cost and Financing Conditions Initial Cost

2.2.1 The estimated cost of the whole programme, net of taxes and customs duties, based on the preliminary and detailed sketches for certain sections, was UA 182.39 million, comprising UA 144.77 million in foreign cost and UA 37.62 million in local cost. The estimated cost of the components proposed for ADF financing under the programme for Works, Goods and Consultancy services for the three countries of Mali, Burkina Faso and Ghana was UA 64.50 million, comprising UA 58.46 million in foreign exchange and UA 6.04 million in local currency. The supervision cost was derived by applying 6% to the cost of physical works. A provision of 12% was made to accommodate physical contingency and another 8% per annum of base costs were made for price escalation for foreign and local costs respectively. 2.2.2 The initial summary project cost estimates (net of taxes) for the ADF financed road component works in Ghana are given in the table below:

Initial Project Cost Estimates by Category (for Road works in Ghana)

UA Million Categories F. E. L. C. TOTAL

A. Civil Works 16.73 4.19 20.92 B. Consultancy Services -Supervision 0.91 0.23 1.14 C. Contingencies - Physical - Price Sub- Total

2.21 1.71 3.92

0.58 0.44 1.02

2.79 2.15 4.94

Total A+B+C 21.56 5.44 27.00 Financing Conditions 2.2.3 The ADF and the GOG will jointly finance the road works project in Ghana. The ADF will finance 86.95% of the total cost while GOG will finance the remaining 13.05%. The ADF contribution to the foreign and local costs will be UA 21.56 million and 1.92 million respectively, (Total UA 23.48 million) while that of the GOG contribution will be UA 3.52 million. In brief, out of a total cost of UA 27 million for the ADF component, ADF was to finance 86.95% of the total cost (i.e., UA 23.48 million) while GOG was to finance the remaining share of the total cost (i.e. UA 3.52 million). The financing plan of the project by source of finance for ADF components is presented in table below.

Initial Overall Project Cost by Sources of Finance (UA Million)

UA Million Source F. E. L. C TOTAL

% of Total

ADF 21.56 1.92 23.48 86.95 GOG 0.00 3.52 3.52 13.05 TOTAL 21.56 5.44 27.00 100

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2.3 Fulfillment of Initial Loan Conditions LOAN: 2.3.1 The loan agreement for the project was signed on December 18th , 2003. All loan conditions were fulfilled and it was declared effective on November 14th, 2005. The conditions are reproduced in Annex 6 of this Report. 2.4 Project Implementation Status 2.4.1 Similar to other two road projects, this project also experienced substantial delay in the implementation of the project, which in turn affected the appraisal project cost estimates. These delays could be attributed mainly to the following reasons:

• An initial delay ( about 18 months) from approval for the loan effectiveness; • Delay of about 24 months from approval for fulfillment of Conditions precedent to first

disbursement; 2.4.2 Furthermore, the procurement of the Consultancy services for Design Review and Supervision had to be cancelled and re-launched, due to a complaint by one of the shortlisted consultants.. As a result, the Consultancy services award for Design Review and Supervision was delayed by 36 months from approval.. These initial delays had a significant effect on the appraisal cost estimates, which ultimately led to cost overruns. The reasons for the increase in the costs are the same as for the Tema – Aflao Project ( see section 2.4.2 of Tema- Aflao). 2.4.3 It is to be noted that similar to Ghana, Burkina Faso and Mali were also faced with delays and cost overruns. In spite of launching separate lots and bid packages, Burkina Faso and Mali each had a financing gap of CFAF 10 billion for the works between the lowest evaluated bidder and amount available for this works package in the approved loans. A Supplementary Loan for Burkina Faso is under consideration by the Board and another one for Mali is planned for early 2009. Consultancy Services ( Pre-contract and Supervision) 2.4.4 In addition to the initial delays as stated in para 2.4.1 above, the design review took longer time (about 15 months) than expected. The existing design was reviewed in relation to additional requirements of the GHA. During design review, some changes were considered necessary to the pavement structure, i.e. reinforcement of the original pavement design to cater for increased traffic and raising of the finished road levels at many sections due to flood prone areas to avoid flooding which ultimately resulted in the increase of principal quantities. As a result of these changes to the design coupled with the price increases of the materials, the revised estimated cost of the project was almost increased by 42% over the appraisal estimates, resulting thus in cost overruns. 2.4.5 In order to implement the project within the approved loan amount, the project was split into two lots as under. Revised cost estimates and tender documents were prepared accordingly for these two lots to facilitate floating of tenders. Lot 1 : Techiman- Apaaso Section (53.7 km) Lot 2 : Apaaso – Kintampo (6.3 km) Civil Works 2.4.6 From the revised cost estimates, only the Lot 1 section (Techiman- Apaaso section, 53.7 km ) can be accommodated within the approved loan amount. The Bank had given its no-objection to launch the bids for the Lot 1 section (Techiman- Apaaso Section ) using Post qualification method of procurement. 2.4.7 A Contract for Lot 1 section was signed on July 31st, 2008 and the works have commenced.. Since Lot 2 ( Apaaso- Kintampo section, 6.3 km) is a continuation and part of the overall project, having no funds

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to implement under the approved loan due to the reasons stated under 2.4.1 above, the Government of Ghana (GOG) therefore requested the Bank to assist them with a supplementary loan. 2.4.8 Status of Funds: The estimated cost of the road component in Ghana (for works and Consultancy services) is UA 27 million. The cost of civil works (as per the bids received) for Lot 1 section is UA 20.95 million ( USD 32.88 million), the balance funds would be sufficient for any unexpected price escalation during implementation. The total cost of the project (60 km) has been estimated to be UA 31.80 million (2008 prices). In order to achieve the objectives of the project, the implementation of the Lot 2 section is necessary. Additional funds of UA 4.80 million (shared by ADF and GOG) are therefore required to complete the remaining section of the project. 2.4.9 Since the contract has now been awarded, disbursements will soon commence. 3. THE PROJECTS AT RE-APPRAISAL AND THE SUPPLEMENTARY LOAN General Having established that the approved loan amounts would be insufficient to implement the three projects as originally appraised for the reasons given in previous section, revised cost estimates for implementation of these three projects were prepared to determine the financing gap. This section gives the details of re-appraised projects with supplementary funds required to meet the shortfalls. A. TEMA-AFLAO REHABILITATION ROAD PROJECT (ADF SECTIONS: LOT 1:AKATSI- AGBOZUME, 31.55 KM AND LOT 2: AGBOZUME- AFLAO SECTION, 19.86 KM & 7.2 KM BYPASS AT AKATSI JUNCTION); TOTAL LENGTH 58.60 KM 3.1 Objectives and Description of Components 3.1.1 There are no changes to the sectoral and specific objectives of the re-appraised project. The objectively verifiable performance indicators are presented in the project matrix. Also, the initial project components remain unchanged. However, in accordance with Ghana’s National ICT Development Policy and Bank’s proposal on the inclusion of passive backbone infrastructure in the transport infrastructure projects, provision was made in the projects design for the total project ( Lots 1 and 2) for protective ducts to cater for future installation of fiber optic cable. 3.2 Revised Project Cost Estimates 3.2.1 The overall project cost estimate (net of all taxes and duties) at re-appraisal for the civil works and consultancy services of Lot 1 and Lot 2 sections (58.6 km) to be financed by ADF and GOG has been estimated at UA 44.53 million, comprising 55% in foreign cost (i.e. UA 24.25 million) and 45% in local cost (i.e. UA 20.28 million). The revised project cost estimate has been essentially derived from (i) the actual tender prices received for Lot 1 section of the project (lowest bid), (ii) physical contingencies of 10% and (iii) price contingency (5% on FE and 15% on local costs) that has been obtained through simulation of a price adjustment formula. The revised total project cost estimate at re-appraisal for the total project (Lot 1 & Lot 2) is summarized in the Table below.

Revised Total Project Cost ( Lot 1 & 2) Estimates by Components

GHC (million) UA (million) Components F.E L.C Total F.E L.C TotalA. Civil Works 29.87 23.99 53.86 19.02 15.28 34.30B. Consultancy Services - Supervision - Audit

2.89 0.16

0.19

-

3.08 0.16

1.84 0.10

0.12

-

1.96 0.10

Base Cost Sub- total 32.92 24.18 57.10 20.96 15.40 36.36

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C. Contingencies - Physical Contingency (10%) - Price

3.28 1.88

2.41 5.26

5.69 7.14

2.09 1.20

1.53 3.35

3.62 4.55

TOTAL 38.08 31.85 69.93 24.25

20.28 44.53

Appraisal Exchange Rates ( July 2001): 1 UA= Cedi 8958.79; 1 UA=US$ 1.24565 Re- Appraisal Exchange Rates (Aug 2008): 1 UA = GHC 1.57045; 1 UA = USD 1.62088; 1 USD= 0.9689 GHC Comparative Analysis between Initial and Revised Cost Estimates of the Project (Lot 1 and Lot 2)

( Net of Taxes ) Project Cost at Appraisal

In UA million Project Cost at Re-appraisal

In UA million Difference

In UA million

Components

F.E. L.C. Total F.E. L.C. Total F.E. L.C. Total

A. Civil works 12.04 1.43 13.47 19.02 15.28 34.30

6.98 13.85 20.83

B. Consulting Services -Supervision - Audit

0.80 0.04

--

0.800.04

1.840.10

0.12-

1.960.10

1.04 0.06

0.12-

1.160.06

Base Cost 12.88 1.43 14.31 20.96 15.40 36.36

8.08 13.97 22.05C. Contingencies - Physical (10%) - Price

1.28 0.54

0.140.06

1.420.60

2.091.20

1.533.35

3.624.55

0.81 0.66

1.393.29

2.203.95

Total Cost 14.70 1.63 16.33 24.25 20.28 44.53

9.55 18.65 28.20

Percentage

Appraisal Exchange Rates ( July 2001): 1 UA= Cedi 8958.79; 1 UA=US$ 1.24565 Re- Appraisal Exchange Rates (Aug 2008): 1 UA = GHC 1.57045; 1 UA = USD 1.62088; 1 USD= 0.9689 GHC 3.3 Sources of Finance 3.3.1 It is noted that the loan amount approved in August 2002 for the project is just sufficient to implement a section of the project (i.e. Lot 1 section Akatsi- Agbozume, 31.55 km) and implementation of this section is underway. An additional ADF resources of UA 25.40 million through a supplementary loan are required to implement the remaining section, i.e. Lot 2 ( i.e. Agbozume- Aflao, 19.86 km plus Akatsi bypass, 7.2 km). The revised financing plan for the works and consulting services with supplementary funds, is given hereunder:

Revised Financing Plan by Source

Project Cost at Appraisal In UA million

Project Cost at Re-Appraisal In UA million

Supplementary loan for Lot 2 Section

In UA million

Category

ADF GOG Total ADF GOG Total ADF GOG Total A. Civil Works 12.04 1.43 13.47 31.48 2.82 34.30 18.59 2.24 20.83 B. Consultancy -Supervision 0.80 - 0.80 1.96 - 1.96 1.16 - 1.16 -Audit 0.04 - 0.04 0.10 - 0.10 0.06 - 0.06 Sub-Total-Consultancy 0.84 - 0.84 2.06 - 2.06 1.22 - 1.22 C. Unallocated 1.82 0.20 2.02 7.50 0.67 8.17 5.59 0.56 6.15 TOTAL 14.70 1.63 16.63 41.04 3.49 44.53 25.40 2.80 28.20

3.3.2 The overall project cost estimate of the ADF and GOG financed component (both civil works and consultancy services) have increased by 173% from UA 16.33 million at appraisal in July 2001 to UA 44.53 million in August 2008. With a supplementary loan of UA 25.40 million from ADF, the revised ADF

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contribution will increase by 179% from UA 14.70 million to UA 41.04 million, while the GOG contribution will increase by 72% from UA 1.63 million to UA 2.80 million. 3.3.3 The Counterpart Fund (GOG) requirement for the total project is UA 3.49 million which is 8% of the total cost is exclusive of taxes and import duties. The rest of the financing, amounting to 92% of the project cost shall be provided under a supplementary ADF loan. 3.4 Revised Implementation Schedule for Lot 2 Section 3.4.1 The implementation of civil works for the Lot 2 section is independent of the Lot 1 section works which are currently in progress. The schedule as presented in Annex 2 for Lot 2 section works shows that the project would be completed in twenty four months, i.e. by June 2011, followed by a 12-month defects liability period. The tentative schedule is given hereunder : • Approval of APA : November, 2008 • Board Presentation : December, 2008 • Procurement process including Award of Contract for civil Works : Jan 2009- June 2009 • Commencement of Works : July, 2009 • Completion of Works : June, 2011 3.5 Revised Expenditure Schedule 3.5.1 The expenditure schedule for Lot 2 section has been evolved from the total estimated cost of civil works spread over the implementation programme in proportion to the works and services programmed for each year of project implementation. The yearly expenditure plans by category and by sources of finance are shown in the Tables below.

Expenditure Schedule by Category (UA Million)

Category 2009 2010 2011 Total A. Civil Works 5.35 13.36 8.04 26.75 B. Consultancy Services

0.29 0.72 0.44 1.45

Total 5.64 14.08 8.48

28.20

Expenditure Schedule by Source of Finance (UA Million)

Source 2009 2010 2011 Total ADF 5.08 12.68 7.64 25.40 GOG 0.56 1.40 0.84 2.80 Total 5.64 14.08 8.48 28.20

B. AKATSI-DZODZE-NOEPE ROAD UPGRADING PROJECT (ADF SECTIONS: LOT 1:AKATSI- DZODZE, 25 KM AND LOT 2: DZODZE-AKANU SECTION, 5 KM & AC OVERLAY FOR LOT 1 SECTION, 25 KM) 3.1 Objectives and Description of Components 3.1.1 There are no changes to the sectoral and specific objectives of the re-appraised project. The objectively verifiable performance indicators are presented in the project matrix. Also, the initial project components remain unchanged. However, in accordance with Ghana’s National ICT Development Policy and Bank’s proposal on the inclusion of passive backbone infrastructure in the transport infrastructure

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projects, provision was made in the design for the total project (Lots 1 and 2) for protective ducts to cater for future installation of fiber optic cable. 3.2 Revised Project Cost Estimates 3.2.1 The overall project cost estimate (net of all taxes and duties) at re-appraisal for the civil works and consultancy services of Lot 1 and Lot 2 sections to be financed by ADF and GOG has been estimated at UA 29.03 million, comprising 66% in foreign exchange cost (i.e. UA 19.07 million) and 34% in local cost (i.e. UA 9.96 million). The revised project cost estimate has been essentially derived from (i) the actual tender prices received for Lot 1 section of the project (lowest bid), (ii) physical contingencies of 10% and (iii) price contingency (5% on FE and 15% on local costs) that has been obtained through simulation of a price adjustment formula. The revised total project cost estimate at re-appraisal for the total project (Lot 1 & Lot 2) is summarized in the Table below.

Revised Total Project Cost ( Lot 1 & 2) Estimates by Components

GHC (million) UA (million)

Components F.E L.C Total F.E L.C TotalA. Civil Works 23.82 11.74 35.56 15.17 7.47 22.64B. Consultancy Services - Supervision - Audit

1.82 0.16

0.31

-

2.13 0.16

1.16 0.10

0.20

-

1.36 0.10

Base Cost Sub- total 25.80 12.05 37.85 16.43 7.67 24.10C. Contingencies - Physical Contingency (10%) - Price

2.58 1.57

1.20 2.39

3.78 3.96

1.64 1.00

0.77 1.52

2.41 2.52

TOTAL 29.95 15.64 45.59 19.07

9.96 29.03

Appraisal Exchange Rates ( Sept 2002): 1 UA= Cedi 8958.79; 1 UA=US$ 1.2799 Re- Appraisal Exchange Rates (Aug 2008): 1 UA = GHC 1.57045; 1 UA = USD 1.62088; 1 USD= 0.9689 GHC Comparative Analysis between Initial and Revised Cost Estimates of the Project (Lot 1 and Lot 2)

( Net of Taxes )

Project Cost at Appraisal In UA million

Project Cost at Re-appraisal In UA million

Difference In UA million

Components

F.E. L.C. Total F.E. L.C. Total F.E. L.C. Total

A. Civil works 9.28 2.31 11.59 15.17 7.47 22.64

5.89 5.16 11.05

B. Consulting Services -Supervision - Audit

0.56 0.05

0.14-

0.700.05

1.160.10

0.20-

1.360.10

0.60 0.05

0.06-

0.660.05

Base Cost 9.89 2.45 12.34 16.43 7.67 24.10

6.54 5.22 11.76C. Contingencies - Physical (10%) - Price

0.99 0.44

0.250.11

1.240.55

1.641.00

0.711.52

2.412.52

0.65 0.56

0.521.41

1.171.97

Total Cost 11.32 2.81 14.13 19.07 9.96 29.03

7.75 7.15 14.90

Percentage

Appraisal Exchange Rates ( July 2001): 1 UA= Cedi 8958.79; 1 UA=US$ 1.24565 Re- Appraisal Exchange Rates (Aug 2008): 1 UA = GHC 1.57045; 1 UA = USD 1.62088; 1 USD= 0.9689 GHC

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3.3 Sources of Finance 3.3.1 It is to be noted that the loan amount approved in August 2002 for the project is just sufficient to implement a section of the project (i.e. Lot 1 section Akatsi- Dzodze, 25 km) and implementation of this section is currently underway. An additional ADF resources of UA 13.40 million through a supplementary loan are required to implement the remaining section, i.e. Lot 2 ( i.e. Dzodze – Akanu, 5 km plus an overlay for Lot 1 section, 25 km). The revised financing plan for the works and consulting services with supplementary funds, is given hereunder:

Revised Financing Plan by Source

Project Cost at Appraisal

In UA million Project Cost at Re-Appraisal

In UA million Supplementary loan

for Lot 2 Section In UA million

Category

ADF GOG Total ADF GOG Total ADF GOG Total A. Civil Works 10.17 1.27 12.44 20.10 2.39 22.49 9.93 1.12 11.05 B. Consultancy -Supervision 0.69 - 0.69 1.29 0.06 1.35 0.60 0.06 0.66 -Audit 0.05 - 0.05 0.10 - 0.10 0.05 - 0.05 Sub-Total-Consultancy 0.74 - 0.74 1.39 0.06 1.45 0.65 0.06 0.71 C. Unallocated 1.81 0.14 1.95 4.63 0.46 5.09 2.82 0.32 3.14 TOTAL 12.72 1.41 14.13 26.12 2.91 29.03 13.40 1.50 14.90

3.3.2 The overall project cost estimate of the ADF and GOG financed component (both civil works and consultancy services) have increased by 105% from UA 14.13 million at appraisal in August 2001 to UA 29.03 million in August 2008. With a Supplementary loan of UA 13.40 million from ADF, the revised ADF contribution will increase by 105% from UA 12.72 million to UA 26.12 million, while the GOG contribution will increase by 106% from UA 1.41 million to UA 2.91 million. 3.3.3 The Counterpart Fund (GOG) requirement for the total project is UA 2.91 million which is 10% of the total cost is exclusive of taxes and import duties. The rest of the financing, amounting to 90% of the project cost shall be provided under supplementary ADF loan. 3.4 Revised Implementation Schedule for Lot 2 Section 3.4.1 The implementation of civil works for the Lot 2 section is independent of the Lot 1 section works which are currently in progress. The schedule as presented in Annex 2 for Lot 2 section works shows that the project would be completed in eighteen months, i.e. by December 2010, followed by a 12-month defects liability period. A tentative schedule is given hereunder: • Approval of APA : November, 2008 • Board Presentation : December, 2008 • Procurement process including Award of Contract for civil Works : Jan 2009- June 2009 • Commencement of Works : July, 2009 • Completion of Works : December, 2010 3.5 Revised Expenditure Schedule 3.5.1 The expenditure schedule for Lot 2 section has been evolved from the total estimated cost of civil works spread over the implementation programme in proportion to the works and services programmed for each year of project implementation. The yearly expenditure plans by category and by sources of finance are shown in the Tables below.

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Expenditure Schedule by Category (UA Million)

Category 2009 2010 Total A Civil Works 4.92 9.14 14.06 B Consultancy Services

0.29 0.55 0.84

Total 5.21 9.69

14.90

Expenditure Schedule by Source of Finance (UA Million)

Source 2009 2010 Total ADF 4.69 8.71 13.40 GOG 0.52 0.98 1.50 Total 5.21 9.69 14.90

C. UEMOA-GHANA Road Programme 1 : ADF Road section in Ghana ( Lot 1: Techiman- Apaaso Section, 53.7 km and Lot 2 : Apaaso- Kintampo Section, 6.3 km) 3.1 Objectives and Description of Components 3.1.1 There are no changes to the sectoral and specific objectives of the re-appraised project. The objectively verifiable performance indicators are presented in the project matrix. Also, the initial project components remain unchanged. However, in accordance with Ghana’s National ICT Development Policy and Bank’s proposal on the inclusion of passive backbone infrastructure in the transport infrastructure projects, provision was made in the design for the total project ( Lots 1 and 2) for protective ducts to cater for future installation of fiber optic cable. 3.2 Revised Project Cost Estimates 3.2.1 The overall project cost estimate (net of all taxes and duties) at re-appraisal for the civil works and consultancy services of Lot 1 and Lot 2 sections (60 km) to be financed by ADF and GOG has been estimated at UA 31.80 million comprising 73% of the foreign exchange cost (i.e. UA 23.16 million) and 27% in local cost (i.e. UA 8.64 million). The revised project cost estimate has been essentially derived from (i) the actual tender prices received for Lot 1 section of the project (lowest bid), (ii) physical contingencies of 10% and (iii) price contingency (5% on FE and 15% on local costs) that has been obtained through simulation of a price adjustment formulae. The revised total project cost estimate at re-appraisal for the total project (Lot 1 & Lot 2) is summarized in the Table below.

Revised Total Project Cost ( Lot 1 & 2) Estimates by Components

GHC (million) UA (million)

Components F.E L.C Total F.E L.C TotalA. Civil Works 28.14 10.67 38.81 17.92 6.79 24.71B. Consultancy Services - Supervision

1.75

0.38

-

2.13

1.11

0.25

-

1.36

Base Cost Sub- total 29.89 11.05 40.94 19.03 7.04 26.07C. Contingencies - Physical Contingency (10%) - Price

3.69 2.79

1.32 1.20

5.01 3.99

2.35 1.78

0.84 0.76

3.19 2.54

TOTAL 36.37 13.57 49.94 23.16

8.64 31.80

Appraisal Exchange Rates ( July 2001): 1 UA= Cedi 8958.79; 1 UA=US$ 1.24565 Re- Appraisal Exchange Rates (Aug 2008): 1 UA = GHC 1.57045; 1 UA = USD 1.62088; 1 USD= 0.9689 GHC

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Comparative Analysis between Initial and Revised Cost Estimates of the Project (Lot 1 and Lot 2) ( Net of Taxes )

Cost at Appraisal In UA million

Revised Cost at Re-appraisal In UA million

Difference In UA million

Components

F.E. L.C. Total F.E. L.C. Total F.E. L.C. Total

A. Civil works 16.73 4.19 20.92 17.92 6.79 24.71

1.19

2.60 3.79

B. Consulting Services -Supervision

0.91

0.23

1.14

1.11

0.25-

1.36

0.20

0.02 -

0.22

Base Cost 17.64 4.42 22.06 20.96 15.40 36.36

1.39

2.62 4.01 C. Contingencies - Physical - Price

2.21 1.71

0.580.44

2.79 2.15

2.351.78

0.840.76

3.192.54

0.14 0.07

0.26 0.32

0.40 0.39

Total Cost 21.56 5.44 27.00 23.16 8.64 31.80

1.60

3.20 4.80

Percentage

Appraisal Exchange Rates ( July 2001): 1 UA= Cedi 8958.79; 1 UA=US$ 1.24565 Re- Appraisal Exchange Rates (Aug 2008): 1 UA = GHC 1.57045; 1 UA = USD 1.62088; 1 USD= 0.9689 GHC 3.3 Sources of Finance 3.3.1 It is to be noted that the loan amount approved in November 2003 for the project in Ghana is just sufficient to implement a section of the project (i.e. Lot 1 section Techiman- Apaaso, 53.7 km) and implementation of this section is underway. Additional ADF resources of UA 4.3 million through a supplementary loan are required to implement the remaining section, i.e. Lot 2 ( i.e. Apaaso- Kintampo, 6.3 km ). The revised financing plan for the works and consulting services with supplementary funds, is given hereunder:

Revised Financing Plan by Source

Project Cost at Appraisal In UA million

Project Cost at Re-Appraisal In UA million

Supplementary loan for Lot 2 Section

In UA million

Category

ADF GOG Total ADF GOG Total ADF GOG Total A. Civil Works 18.19 2.69 13.47 21.58 3.09 24.67 3.39 0.40 3.79 B. Consultancy -Supervision 1.00 - 1.00 1.20 0.02 1.22 0.20 0.02 0.22

Sub-Total-Consultancy 1.00 - 1.00 1.20 0.02 1.22 0.20 0.02 0.22 C. Unallocated 4.29 0.83 5.12 5.00 0.91 5.91 0.71 0.08 0.79 TOTAL 23.48 3.52 27.00 27.78 4.02 31.80 4.30 0.50 4.80

3.3.2 The overall project cost estimate of the ADF and GOG financed Component (both civil works and consultancy services) have increased by 17.7% from UA 27 million at appraisal in July/ August 2003 to UA 31.80 million in August 2008. With a Supplementary loan of UA 4.30 million from ADF, the revised ADF contribution will increase by 18.3% from UA 23.48 million to UA 27.78 million, while the GOG contribution will increase by 14.2% from UA 3.52 million to UA 4.02 million. 3.3.3 The Counterpart Fund (GOG) requirement for the total project is UA 4.02 million which is about 13% of the total cost is exclusive of taxes and import duties. The rest of the financing, amounting to about 87% of the project cost shall be provided under supplementary ADF loan.

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3.4 Revised Implementation Schedule for Lot 2 Section 3.4.1 The implementation of civil works for the Lot 2 section is independent of the Lot 1 section works which are currently in progress. An Addendum to the existing contract would be initiated for approval by the Bank and the works will be completed within nine months after the commencement. A tentative implementation schedule is given in Annex 2 attached. 3.5 Revised Expenditure Schedule 3.5.1 The expenditure schedule for Lot 2 section has been evolved from the total estimated cost of civil works spread over the implementation programme in proportion to the works and services programmed for each year of project implementation. The yearly expenditure plans by category and by sources of finance are shown in the Tables below.

Expenditure Schedule by Category (UA Million)

Category 2009 2010 Total A Civil Works 3.18 1.37 4.55 B Consultancy Services 0.18 0.07 0.25 Total 3.36 1.44

4.80

Expenditure Schedule by Source of Finance (UA Million)

Source 2009 2010 Total ADF 3.01 1.29 4.30 GOG 0.35 0.15 0.50 Total 3.36 1.44 4.80

3.6 Summary of Supplementary Loans 3.6.1 An overall summary of Supplementary funds (UA 43.10 million) required for the implementation of Lot 2 sections of the three projects is given in the table below:

Name of the Project and Project Section Supplementary loan (UA million)

Base Cost of Project Road Civil Works (UA million)

Cost per km UA ‘000

A. . B. C.

Tema–Aflao Rehabilitation Road Project (Lot 2 Section: Agbozume – Aflao and Akatsi Bypass) :Length 27 km Akatsi– Dzodze- Noepe Road Upgrading Project (Lot 2 Section: Dzodze– Akanu and Overlay for Lot 1 section, Akatsi- Dzodze): Project road Length 5 km + widening of 1.42 km UEMOA-Ghana Road Programme 1(Ghana Section: Techiman- Kintampo) Lot 2 Section: Apaaso-Kintampo: Length 6.3 km

25.40 13.40 4.30

20.83 6.30 3.79

771 981 602

TOTAL 43.10 Average Cost/ Km: UA 785,000 (USD 1,272,000)

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Justification of Costs 3.6.2 From the above table, it can be noted that the basic cost per km of the three roads under supplementary loans ranges between UA 602,000 to UA 981,000. The variation in these costs are justified due to the following reasons: A. Lot 2 Section: Agbozume – Aflao and Akatsi Bypass, Length 27 km The Construction of this road follows the existing alignment where the terrain is flat to rolling and partly passing through flood plains. Additional precautions to protect the structure by raising of the pavement and stabilization of the weak soils in particular at the flood prone areas was considered in the pavement structure design, which led in the increase of the cost of the road. B. Lot 2 Section: Dzodze– Akanu: Project road Length 5 km + widening of 1.42 km Similar to the section A above, the construction of this road follows the existing alignment which has mostly a rolling terrain and passing through low level areas and flood plains. In order to protect the pavement structure, additional precautions such as, provision of embankments and stabilization of the weak soils at these low level and flood prone areas was considered in design of the pavement structure. In addition, provision was made in the design for safety measures at the towns of Dzodze and Akanu by pavement widening and drainage. Apart from above, this road section also includes construction of a major concrete bridge . All the above elements contributed significantly to the increase in the cost of the project. C. UEMOA-Ghana Road Programme 1( Ghana Section: Lot 2 Section: Apaaso-Kintampo: Length 6.3 km The construction of this road is on existing alignment which has plain terrain with no major drainage structures. As such, the design of the pavement structure was based on the minimum standard requirements and the cost per km is the minimum. 3.7 Environmental and Social Impacts Assessment 3.7.1 At appraisal, all the three projects were classified under Category II according to the Bank’s environmental guidelines. The projects have minor negative environmental impacts which can be mitigated during the road construction phase. The loan conditions precedent to first disbursement, including the ones related to the environment were fulfilled. For each of the three projects, the environmental and social management plans indicating the monitoring and mitigating measures, were prepared and found acceptable. Since, the three projects deal with existing roads, the improvement of the road conditions will reduce the negative environmental impacts such as erosion, air pollution, dust. Furthermore, as a result of the climate change phenomenon, provision for raising of the road levels and additional culverts with larger capacities have been made in the design of these sections, especially for the Akatsi – Aflao and Akatsi- Akanu road corridors which pass through several flood plains. 3.7.2 The socio-economic impacts as well as the mitigation measures remain the same as described in the initial appraisal reports. The projects will have positive socio-economic impacts and improve the living conditions of the people living in the zone of influence. The roads will also improve the well being of the local population through improved access to socio-economic facilities and markets. The main economic activities are farming, fishing and trading. The improved road conditions will lead to a substantial increase in traffic levels resulting in improved transport of goods and people in and outside Ghana. Trade with neighboring ECOWAS countries such as Burkina Faso, Mali and Togo will increase and Tema port activities especially with the landlocked nations will also augment. Given that Aflao is contiguous to Lome, the construction of the Akatsi-Akanu road will give the opportunity for road users to bypass the Togolese capital. Upon completion of the Akatsi-Aflao and Akatsi -Akanu roads, two corridors towards Togo will be operational, thereby increasing movement of goods, people and services with Togo, Benin and Nigeria. This will have a great impact on women who are mainly traders in the region. In addition, the projects are expected to provide employment opportunities through provision of casual laborers and side businesses during construction and road maintenance. During the projects implementation, HIV/AIDS and malaria diseases prevention education campaigns will be provided. Road safety being a major public health issues in

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Ghana, major safety features such as weighbridges, gantry signs, guards rails, pedestrian walkways, reflectors, stop signs, speed bumpers will be installed along the roads. 3.8 Executing Agency 3.8.1 The Ghana Highway Authority ( GHA) of Ministry of Transportation (MoT), is still the Executing Agency for all the three projects. GHA is a well established organization with adequate professional staff and has been implementing several similar projects funded by the donors including the Bank. It has still the overall responsibility for planning, design and construction, construction supervision, and maintenance of all trunk roads as well as preparation of short and long term plans for trunk roads construction and maintenance. The implementation, institutional and project coordination arrangements have not changed and will be extended as well to the proposed Lot 2 sections of the projects . 3.8.2 Implementation: The estimated duration of the implementation of the Lot 2 sections of three projects are as under :

(i) Tema-Aflao Road Rehabilitation Project (ADF Section: Lot 2: Agbozume- Aflao Section and bypass at Akatsi junction, Total length 27 km) : 24 months

(ii) Akatsi- Dzodze- Akanu Road Upgrading Project ( ADF Section : Lot 2: Dzodze- Akanu Section, 5 km & AC overlay for Lot 1 Section, 25 km): 18 months

(iii) UEMOA-GHANA Road Programme 1 (ADF Road section in Ghana) : Lot 2 section : Apaaso- Kintampo Section, 6.3 km) : 9 months

3.9 Procurement of Goods and Services Civil Works 3.9.1 Procurement of civil works for Lot 2 sections of the two projects (i.e. Agbozume- Aflao & Akatsi bypass and Dzodze- Akanu Sections) will be carried out following International Competitive Bidding (ICB) procedures in accordance with the Bank’s “Rules of Procedure for Procurement of Goods and works”. 3.9.2 In order to ensure timely completion of the projects and to minimize the time required in the procurement process, the Borrower had requested the Bank to authorize for Lots 2 sections of the Akatsi-Aflao and Akatsi-Akanu road projects, “Advance Procurement Action (APA)” for initiating and processing the procurement of Works up to the selection of contractors. The Bank after a review of the justification provided, had approved authorizing APA, keeping in mind the limitations and safe guards as stipulated in the Bank’s procurement Rules.

3.9.3 Given that Lot 2 of UEMOA/Ghana Road Programme 1 (Ghana Section: Lot 2: Apaaso – Kintampo 6.3 km), being relatively small (about 23 % of the existing contract), and in order to save time on procurement process, this can be handled through an addendum to the existing Lot 1 contract. 3.9.4 The Borrower will ensure that the addendum is carried out in accordance with the contractual provisions and that the rates in the Bill of Quantities will apply unless otherwise a particular item is not provided for in the Bill of Quantity, in which case reasonable rates will be agreed upon by the parties. Failure to reach an agreement between the Borrower and the contractor regarding an addendum to include the execution of the remaining portion of the road works (6.3 Km) under the existing contract for lot 1, tenders for these works will be carried out through NCB. Supervision and Audit 3.9.5 Supervision of Works: Contracts for supervision consultancy services for all the three initially approved projects were awarded and are ongoing. However, provision has been made in the estimates to cater for any additional services which may be needed during implementation. 3.9.6 Audit Services: Similarly, provision has been made for audit of the Tema-Aflao and Akatsi-Dzodze-Akanu projects, the selection will be in accordance with the Bank’s “Rule .of Procedure for the Use

20

of Consultants”. As for UEMOA-Ghana Road Programme I, UEMOA is responsible for the audit of the whole programme. 3.10 Disbursement Arrangements 3.10.1 The direct payment method will be used for consulting firms, contractors, and audit services, similar to the initial projects. 4. BANK’S POLICY AND STRATEGIC CONTEXT 4.1 The supplementary loans proposal is in line with the Bank Group Policy and Procedures for Supplementary Financing, ref no. ADF/BD/WP97/90 of 11 August 1997. The supplementary loans proposal meets the general conditions for supplementary financing in that the implementation of the initially approved projects have just commenced. The project cost overruns is essentially due to the reasons cited under 2.4.6 above (steep increase in price of crude oil, bitumen, road construction materials etc,) and is outside the control of the Government of Ghana. The proposed Supplementary Loans for the three projects amounting to UA 43.10 million could be funded from ADF XI resources allocated to the country. Furthermore, the projects are still technically sound, environmentally sustainable, socially desirable and economically viable. Its completion will enable the Bank and the Government to achieve the envisaged developmental objectives set forth at appraisal stage. 4.2 In addition to the supplementary loans, the Borrower is committed to the projects and will provide resources for the counterpart funding. As the three roads under the proposed supplementary loans will improve regional economic cooperation and integration, the proposal is in line with NEPAD priorities. Furthermore, the proposed Supplementary Loans’ is consistent with the Bank Group’s intervention strategy in the transport sector as contained in the mid-term review of the Ghana Country Strategy Paper (2009-2011). 5. PROJECT SUSTAINABILITY AND RISKS 5.1 The realization of the total project objectives depends on the following assumptions: (i) Government Counterpart Funds: This is considered critical and should its availability on a regular basis become unattainable, the project will experience delays in its implementation. In order to secure the Government’s counterpart funding to the projects, opening of special accounts by GOG and undertaking to deposit Government contributions were already fulfilled under the original projects loans conditions. GOG is in the process of depositing the counterpart funds in the special accounts for the Lots 1 contracts which have been awarded. (ii) Adequate Maintenance: Road projects sustainability depends for the most part on its level of maintenance. Funds for the maintenance activities are budgeted by GOG mainly through its Road Fund. GOG maintenance expenditure for trunk roads has more than tripled over the years, from US$ 23.2 million in 2000 to US$ 77.1 million in 2007. Development Partners’ contribution to road maintenance has been quite significant reaching US$ 53.9 million in 2007. As a result, the percentage of roads in good condition increased from 30% to 53 %. As the road network is increasing, the Government is determined to raise Roads Fund annual revenues. It is expected that Road Funds annual releases to GHA ( about US$ 39.78 million in 2007) would be increased to US$ 51.41 million and US$ 68.34 million in 2009 and 2012 respectively. With the above measures for the increases, the majority of GHA maintenance requirements will be met. (iii) Axle load control measures: The sustainability of the roads will also depend on the implementation of axle load control measures. Government’s failure to implement the Axle Load Control measures as programmed including the installation of weigh-bridges on the project roads, and the enforcement of the ECOWAS effective axle load limit of 11.5 tonnes, would be another risk. The implementation of the Axle Load Control policy is being closely monitored by the Development Partners. The provision of axle load

21

control facilities is included in the projects. Furthermore, GHA adopted the use of 13 tonnes axle load in the pavement design to avoid any premature pavement failures. (iv) No Delays in Commencement of works: Another risk could be a delay in starting the works, which could potentially lead to an increase in the cost. Under the proposed supplementary loan, these delays are not likely to occur since there is neither fulfillment of conditions nor revision of the design. In addition, the approval of Advance Procurement Action (APA) would expedite the procurement of works, so that implementation could commence without any delay. Apart from the above, the presence of field office in Ghana will further help to minimize delays during implementation. (v) Price escalation: Another possible risk could be the price escalation during implementation than anticipated at appraisal, and this risk is taken care of by the fact that the estimates are prepared in local costs with inclusion of adequate price contingencies in the re-assessed project costs. 6. TECHNICAL AND ECONOMIC JUSTIFICATION 6.1 Technical Justification 6.1.1 The key factor that has contributed to price increases beyond what could have been reasonably foreseen at appraisal is the rising inflation resulting in price increases of road construction materials. 6.1.2 Petroleum-based products such as fuel and bitumen, as well as other materials such as cement and steel are significant components of road construction cost. The prices of these materials have increased tremendously from the time of appraisals (in 2002/2003) to the reception of the bids in 2007. The increase in monthly price indices and schedule of prices for essential road construction materials in Ghana as per the statistics available are referenced in Annex 5A attached. 6.1.3 The unit cost per km of any road varies and is dependent on the topography of the terrain, climatic phenomena and the specifications adopted. An overall cost increase from the time of their appraisals of recent paved road construction works in Ghana vary from +67% to +250% for time lapses between 2 to 7 years. A comparative analysis of recent (2006/2008) Unit Costs per km for Road Construction in Africa (including Ghana) for selected rehabilitation/upgrading works contracts for two lane medium/ heavily trafficked roads that have similar characteristics as the project roads are indicated in Annex 5A attached. 6.1.4 It can be noted from the table in Annex 5A, the average unit cost for paved roads of the projects in Ghana, is about USD 1,305,000 / km. From section 3.6, this analysis shows that the estimated unit cost of the three projects under the supplementary funds is closer to this average. 6.1.5 Given the upsurges in price trends of fuel and other road construction materials in the global market coupled with poor condition of the road corridors, it is reasonable and justified to expect the revised cost estimates of the three project roads to increase from their initial appraisals in 2002/2003 to their re-appraisals in August 2008. 6.2 Economic Re- evaluation Traffic analysis 6.2.1 The HDM-IV model was used to analyze the available data, such as traffic volume and composition traffic flows, speed etc. The Akatsi-Aflao section is part of the N1 route in Ghana which is currently the principal southwest to southeast paved trading route that links Ghana with neighboring Togo. The Akatsi-Akanu road is located in the south-east part of Ghana and runs from Akatsi on the Tema-Aflao road to Akanu the Ghanaian border town with Togo, about 40 km north of Aflao. It is also a section of the Trans-West African Highway, and as such is an important link to socio-economic activities between Ghana and its ECOWAS trading partners such as Togo, Niger, Benin, Burkina Faso and Nigeria.

22

6.2.2 For both Akatsi-Aflao and Akatsi-Akanu, the re-appraised motorized traffic counts when compared with the appraisal projections shows similar patterns. The overall traffic on the Akatsi-Aflao has been assumed to grow at 5.5% per annum. At appraisal, it was projected that the Akatsi-Aflao’s Annual Average Daily Traffic (AADT) was 3327 in the year 2000 and would increase to 3493 by the end of 2001, of which 8.13% are truck traffic. Recent (2007) traffic counts show AADTs of 2902 on Akatsi-Agbozume section and 4635 on Agbozume-Aflao section. 6.2.3 As for Akatsi-Akanu, the AADT of 603 in the year 2000 was to increase to 633 by the end of 2001, of which 12% are trucks and truck trailers. It was projected that traffic will grow at an average annual growth rate of 5%. AADT for the Akatsi-Akanu section was at 1186 in 2007. With improved road condition of the Akatsi-Akanu, traffic proportion especially for freight is projected to rise to around 6% per annum. Diverted traffic from Akatsi-Aflao to Akatsi-Akanu will be on the rise given that the latter section is aimed at curbing direct entry into the Togolese capital of Lome for security and traffic flow reasons. Furthermore, with the intended construction of a joint border post in Togo, funded by the European Commission, most of the international traffic especially heavy trucks are expected to be diverted to the Akatsi-Akanu road. From Origin-Destination surveys, it has been estimated that 16% of the traffic in the base year will be diverted from Akatsi-Aflao to Akatsi-Akanu. 6.2.4 Traffic assumptions made at the time of appraisal for the Techiman-Kintampo section (UEMOA Ghana Road Programme 1 section in Ghana) are still valid. AADT in both 2002 and 2007 still stands at around 5000 on the section. However, traffic composition has changed between 2002 and 2007 with heavy duty trucks counts decreasing from 26% to 13%. This decline of heavy vehicles on the corridor is due to the bad condition of the road. Economic analysis 6.2.5 The economic re-evaluation analysis was conducted through the standard methodology of cost-benefit analysis comparing the situations “with” and “without” project scenarios over a 20 year period covering the useful life of the projects roads. HDM-IV model was used in the analysis in order to estimate the road projects viability through the Economic Internal Rate of Return (EIRR). The calculation of the EIRR is based on the estimated levels of traffic, economic costs and benefits of the projects. The economic costs of the projects were reassessed to include updated construction costs, routine and periodic maintenance costs, and construction supervision, audit, as well as contingency costs. The actualized projects benefits such as Vehicle Operating Cost (VOC), travel time saving, construction schedule and salvage value were also inputted in HDM. The HDM inputs have been updated and the result of the comparison of quantifiable project benefits and costs during the design life of 20-years of the project, “with” and “without” project scenario, yields Economic Internal Rate of Returns (EIRR) of 16.5% for Akatsi-Agbozume (Lot 1 of Tema-Aflao road); 24.5% for Agbozume-Aflao (Lot 2 of Tema-Aflao road); 13.6% for Akatsi-Dzodze (Lot 1 of Akatsi-Dzodze-Akanu road); 17.2% for Dzodze-Akanu (Lot 2 of Akatsi-Dzodze-Akanu road); 41.2% for Techiman-Kintampo (UEMOA’s Ghana Road Section). All these sections give an EIRR above the opportunity cost of capital in Ghana of 12% and consequently the investments on the three roads are economically justified. 6.2.6 For the Akatsi-Akanu and the Techiman-Kintampo projects, the EIRRs at re-appraisal are higher than the ones estimated at appraisal. At Appraisal, the EIRRs were as follows: 24% for Akatsi-Aflao road section, 18% for Akatsi-Dzodze road section, and 23% for Techiman-Kintampo road section. Despites the rise in construction costs, the re-appraised EIRRs have improved since time of appraisal. This is due mainly to the accrued savings in Vehicle Operating Cost (VOC). The VOC differences between the with and without project cases have significantly increased due to: i) the accelerated degradation of the roads as a result of the delay in the start of works and ii) the value gains on fuel consumption due to the increase of fuel price. Sensitivity analysis 6.2.7 The robustness of the investment is shown by the sensitivity tests. By varying the investment costs upward by 10%, reducing the benefits downwards by 10%, and concurrently increasing cost and decreasing benefits by 10% each, it is found that the EIRRs for all the road sections and case scenarios are above 12%.

23

In the worst case scenario (10% cost increase and 10% benefit reduction), the EIRR are 10.25% for Akatsi-Agbozume); 16.11% for Agbozume-Aflao; 12.5% for Akatsi-Dzodze (Lot 1 of Akatsi-Dzodze-Akanu road); 13.3% for Dzodze-Akanu; 33.6% for Techiman-Kintampo. It is therefore concluded that the investments in the project roads are still viable. Annex 4F shows the sensitivity analysis for the road sections. 7. CONCLUSIONS AND RECOMMENDATIONS 7.1 Conclusions 7.1.1 The projects cost overrun is largely due to the unforeseen global general price hike of petroleum products and other road construction materials during the period under consideration (2003- 2006). Other factors contributed to this increase, notably the rise in labor costs and the significant currency appreciation over the period. All these factors have impacted severely on the cost of the road construction works. Although the evaluated unit cost of the roads are higher than the appraisal estimates, it is still within the range for similar African road projects in regions tendered in recent time. 7.1.2 With all the concrete measures taken, such as, a thorough revision to the original cost estimates (based on the global market trend of price increases and the bid prices received for the current contracts) coupled with reduced time delays for fulfillment of conditions, it is anticipated that the projects under the Supplementary funds will be implemented with no delay and with no further cost overruns. 7.1.3 In spite of the increase in their costs, the projects are still technically sound, economically viable and environmentally sustainable and socially desirable. The successful implementation of these projects will be facilitated by the provision of the supplementary loans in order to achieve their developmental objectives. 7.2 Recommendations 7.2.1 It is therefore recommended that the Fund extends to the Government of Ghana a supplementary loan not exceeding UA 43.10 million for the following three projects, to be divided as follows: a) Agbozume - Aflao: UA 25.40 million, b) Dzodze- Akanu: UA 13.40 million, and c) Apaaso- Kintampo : UA 4.30 million), to complete the civil works of the remaining sections of the overall projects. The extension of the supplementary loan shall be subject to the following conditions: A. Condition Precedent to Entry Into Force:

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

B. Condition Precedent to First Disbursement:

The conditions precedent to the first disbursement of the three initial loans were already fulfilled. It is not necessary to provide for additional conditions for the first disbursement of the Proposed Supplementary Loans. First disbursements under the Supplementary Loans will be made upon the entry into force of the respective Loan Agreement.

C. Other Conditions The other conditions under the initial loans will be passed on to the Supplementary Loans.

ANNEX 1

GHANA

THREE (3) ON-GOING ROAD PROJECTS (SUPPLEMENTARY LOANS)

PROJECT MAP

This map was provided by the African Development Bank exclusively for the use of the readers of the report to which

it is attached. The names used and the borders shown do not imply on the part of the Bank and its members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders

ANNEX 2

GHANA

THREE (3) ON-GOING ROAD PROJECTS (SUPPLEMENTARY LOANS)

IMPLEMENTATION SCHEDULE FOR LOT 2 SECTIONS

Source: GHA and ADB Mission, Aug, 2008 Legend: Construction & Supn: Maintenance:

YEAR PROJECTS AND COMPONENTS 2009 2010 2011 2012

Agbozume – Aflao & Akatsi Bypass

(i) Procurement Process

(ii) Civil Works Construction

(iii) Supervision Consultancy

Dzodze–Akanu and overlay for Akatsi-Dzodze Section

(i) Procurement Process

(ii) Civil Works Construction

(iii) Supervision Consultancy

Apaaso– Kintampo Section

(i) Initiation & Approval of Addendum

(ii) Civil Works Construction

(iii) Supervision Consultancy

ANNEX 3 GHANA

THREE ( 3) ON -GOING ROAD PROJECTS

Supplementary Loans (ADF Loan Components)

PROVISIONAL LIST OF GOODS AND SERVICES A. LOT 2: AGBOZUME-AFLAO SECTION & AKATSI BYPASS

GHC (million) UA (million) Source ( UA million) Components

F.E

L.C

Total

F.E

L.C

Total

ADF

GOG A. Civil Works 10.96 21.75 32.71 6.98 13.85 20.83 18.59 2.24 B. Consultancy Services - Supervision - Audit

1.63 0.10

0.19 -

1.82 0.10

1.04 0.06

0.12

-

1.16 0.06

1.16 0.06

- -

Base Cost Sub- total ( A+B) 12.69 21.94 34.63 8.08 13.97 22.05 19.81 2.24 C. Unallocated 2.31 7.35 9.66 1.47 4.68

6.15

5.59 0.56

TOTAL (A+B+C) 15.00 29.29 44.29 9.55 18.65

28.20

25.40 2.80

B. LOT 2: DZODZE- AKANU SECTION & OVERLAY FOR AKATSI-DZODZE SECTION

GHC (million) UA (million) Source (UA million)

Components F.E

L.C

Total

F.E

L.C

Total

ADF

GOG

A. Civil Works 9.25 8.10 17.35 5.89 5.16 11.05 9.93 1.12 B. Consultancy Services - Supervision - Audit

0.94 0.08

0.10

-

1.04 0.08

0.60 0.05

0.06 -

0.66 0.05

0.60 0.05

0.06

- Base Cost Sub- total ( A+B) 10.27 8.20 18.47 6.54 5.22 11.76 10.58 1.18 C. Unallocated 1.90 3.03 4.93 1.21 1.93

3.14

2.82 0.32

TOTAL (A+B+C) 12.17 11.23 23.40 7.75 7.15

14.90

13.40 1.50

C. LOT 2: APAASO- KINTAMPO SECTION

GHC (million) UA (million) Source (UA million)

Components F.E

L.C

Total

F.E

L.C

Total

ADF

GOG

A. Civil Works 1.87 4.08 5.95 1.19 2.60 3.79 3.39 0.40 B. Consultancy Services - Supervision - Audit

0.29 0.03

0.03

-

0.32 0.03

0.18 0.02

0.02 -

0.20 0.02

0.18 0.02

0.02

- Base Cost Sub- total ( A+B) 2.19 4.11 6.30 1.39 2.62 4.01 3.59 0.42 C. Unallocated 0.33 0.91 1.24 0.21 0.58

0.79

0.71 0.08

TOTAL (A+B+C) 2.52 5.02 7.54 1.60 3.20

4.80

4.30 0.50

ANNEX 4A ECONOMIC ANALYSIS

IN MILLION US$ AKATSI- AGBOZUME (Lot 1 of Tema- Aflao road)

Road Agency Costs User Cost Savings Net Benefits

Year Investment Operating costs Special VOC

savings

Time cost

savings

VOC + Time

savings. Non

motorized

Accidents Net ExogenousBenefits

Net Economic Benefits

2008 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2009 8.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -8.06

2010 16.13 -0.01 0.00 1.19 0.04 0.00 0.00 0.00 -14.89

2011 16.13 -0.01 0.00 3.25 0.17 0.00 0.00 0.00 -12.69

2012 0.00 -0.02 0.00 8.81 0.46 0.00 0.00 0.00 9.29

2013 0.00 -0.02 0.00 13.08 0.87 0.00 0.00 0.00 13.98

2014 0.00 -0.03 0.00 14.55 1.09 0.00 0.00 0.00 15.66

2015 0.00 -0.03 0.00 12.24 0.95 0.00 0.00 0.00 13.21

2016 0.00 -0.03 0.00 8.25 0.64 0.00 0.00 0.00 8.92

2017 0.00 -0.03 0.00 3.00 0.24 0.00 0.00 0.00 3.26

2018 0.00 -0.03 0.00 -0.02 0.00 0.00 0.00 0.00 0.01

2019 0.00 -0.03 0.00 -0.04 0.00 0.00 0.00 0.00 -0.01

2020 0.00 -0.03 0.00 -0.04 0.00 0.00 0.00 0.00 -0.02

2021 0.00 -0.03 0.00 -0.05 0.00 0.00 0.00 0.00 -0.02

2022 0.00 -0.03 0.00 -0.05 0.00 0.00 0.00 0.00 -0.02

2023 0.00 -0.03 0.00 -0.05 0.00 0.00 0.00 0.00 -0.02

2024 0.00 -0.03 0.00 -0.07 0.00 0.00 0.00 0.00 -0.04

2025 0.00 -0.03 0.00 -0.09 -0.01 0.00 0.00 0.00 -0.06

2026 0.00 -0.03 0.00 -0.10 -0.01 0.00 0.00 0.00 -0.07

2027 0.00 -0.03 0.00 -0.10 -0.01 0.00 0.00 0.00 -0.08

2028 0.00 -0.03 0.00 -0.11 -0.01 0.00 0.00 0.00 -0.08

2029 0.00 -0.03 0.00 -0.11 -0.01 0.00 0.00 0.00 -0.09

2030 0.00 -0.03 0.00 -0.12 -0.01 0.00 0.00 0.00 -0.09

2031 0.00 -0.03 0.00 -0.12 -0.01 0.00 0.00 0.00 -0.10

2032 -6.05 -0.04 0.00 -0.13 -0.01 0.00 0.00 0.00 5.94

Total: 34.27 -0.63 0.00 63.17 4.38 0.00 0.00 0.00 33.91

EIRR = 16.50% NPV= 4.22 Million $US

ANNEX 4B

ECONOMIC ANALYSIS IN MILLION US$

AGBOZUME - AFLAO(Lot 2 of Tema- Aflao road)

Road Agency Costs User Cost Savings Net Benefits

Year Investment Operating costs Special VOC

savings

Time cost

savings

VOC + Time

savings. Non

motorized

Accidents Net ExogenousBenefits

Net Economic Benefits

2008 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2009 7.58 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -7.57

2010 15.15 -0.01 0.00 1.76 0.07 0.00 0.00 0.00 -13.31

2011 15.15 -0.02 0.00 5.25 0.32 0.00 0.00 0.00 -9.57

2012 0.00 -0.02 0.00 13.64 0.82 0.00 0.00 0.00 14.48

2013 0.00 -0.03 0.00 16.74 1.19 0.00 0.00 0.00 17.95

2014 0.00 -0.03 0.00 14.48 1.11 0.00 0.00 0.00 15.62

2015 0.00 -0.03 0.00 10.54 0.82 0.00 0.00 0.00 11.38

2016 0.00 -0.03 0.00 4.60 0.36 0.00 0.00 0.00 4.98

2017 0.00 -0.03 0.00 0.58 0.05 0.00 0.00 0.00 0.65

2018 0.00 -0.03 0.00 -0.08 -0.01 0.00 0.00 0.00 -0.06

2019 0.00 -0.03 0.00 -0.08 -0.01 0.00 0.00 0.00 -0.06

2020 0.00 -0.03 0.00 -0.09 -0.01 0.00 0.00 0.00 -0.06

2021 0.00 -0.03 0.00 -0.09 -0.01 0.00 0.00 0.00 -0.07

2022 0.00 -0.03 0.00 -0.10 -0.01 0.00 0.00 0.00 -0.07

2023 0.00 -0.03 0.00 -0.10 -0.01 0.00 0.00 0.00 -0.08

2024 0.00 -0.03 0.00 -0.11 -0.01 0.00 0.00 0.00 -0.08

2025 0.00 -0.03 0.00 -0.11 -0.01 0.00 0.00 0.00 -0.09

2026 0.00 -0.03 0.00 -0.12 -0.01 0.00 0.00 0.00 -0.09

2027 0.00 -0.03 0.00 -0.12 -0.01 0.00 0.00 0.00 -0.10

2028 0.00 -0.04 0.00 -0.13 -0.01 0.00 0.00 0.00 -0.10

2029 0.00 -0.04 0.00 -0.13 -0.01 0.00 0.00 0.00 -0.11

2030 0.00 -0.04 0.00 -0.14 -0.01 0.00 0.00 0.00 -0.11

2031 0.00 -0.04 0.00 -0.15 -0.01 0.00 0.00 0.00 -0.12

2032 -5.68 -0.04 0.00 -0.15 -0.01 0.00 0.00 0.00 5.56

Total: 32.20 -0.66 0.00 65.89 4.61 0.00 0.00 0.00 39

EIRR = 24.48% NPV= 9.55 Million $US

ANNEX 4C ECONOMIC ANALYSIS

IN MILLION US$ AKATSI- DZODZE (Lot 1 of Akatsi-Akanu road)

Road Agency Costs User Cost Savings Net Benefits

Year Investment Operating costs Special VOC

savings

Time cost

savings

VOC + Time

savings. Accidents Net

ExogenousBenefits

Net Economic Benefits

2008 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2009 4.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -4.20

2010 8.40 -0.01 0.00 0.03 0.00 0.00 0.00 0.00 -8.36

2011 8.40 -0.01 0.00 0.05 0.00 0.00 0.00 0.00 -8.34

2012 0.00 0.10 0.00 3.05 0.20 0.00 0.00 0.00 3.14

2013 0.00 0.10 0.00 3.33 0.22 0.00 0.00 0.00 3.44

2014 0.00 0.10 0.00 3.57 0.23 0.00 0.00 0.00 3.69

2015 0.00 0.10 0.00 3.82 0.25 0.00 0.00 0.00 3.96

2016 0.00 0.10 0.00 3.94 0.26 0.00 0.00 0.00 4.09

2017 0.00 0.10 0.00 4.06 0.26 0.00 0.00 0.00 4.22

2018 9.38 0.10 0.00 4.17 0.27 0.00 0.00 0.00 -5.04

2019 0.00 0.10 0.00 4.27 0.28 0.00 0.00 0.00 4.44

2020 0.00 0.10 0.00 4.38 0.29 0.00 0.00 0.00 4.56

2021 0.00 0.10 0.00 4.49 0.30 0.00 0.00 0.00 4.69

2022 0.00 0.10 0.00 4.60 0.31 0.00 0.00 0.00 4.81

2023 0.00 0.10 0.00 4.71 0.32 0.00 0.00 0.00 4.93

2024 0.00 0.10 0.00 4.83 0.33 0.00 0.00 0.00 5.05

2025 9.38 0.10 0.00 4.94 0.34 0.00 0.00 0.00 -4.20

2026 0.00 0.10 0.00 5.34 0.36 0.00 0.00 0.00 5.59

2027 0.00 0.10 0.00 5.47 0.37 0.00 0.00 0.00 5.73

2028 0.00 0.10 0.00 5.61 0.38 0.00 0.00 0.00 5.88

2029 0.00 0.10 0.00 5.74 0.39 0.00 0.00 0.00 6.03

2030 0.00 0.10 0.00 5.87 0.40 0.00 0.00 0.00 6.17

2031 0.00 0.10 0.00 6.00 0.42 0.00 0.00 0.00 6.32

2032 6.23 0.10 0.00 6.13 0.43 0.00 0.00 0.00 0.23

Total: 45.98 2.16 0.00 98.37 6.62 0.00 0.00 0.00 57

EIRR = 13.55% NPV= 1.78 Million $US

ANNEX 4D

ECONOMIC ANALYSIS IN MILLION US$

DZODZE - AKANU(Lot 2 of Akatsi-Akanu road)

Road Agency Costs User Cost Savings Net Benefits

Year Investment Operating costs Special VOC

savings

Time cost

savings

VOC + Time

savings. Accidents Net

ExogenousBenefits

Net Economic Benefits

2008 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2009 4.03 -0.03 0.00 0.00 0.00 0.00 0.00 0.00 -4.01

2010 8.06 -0.03 0.00 0.02 0.00 0.00 0.00 0.00 -8.02

2011 8.06 -0.03 0.00 0.04 0.00 0.00 0.00 0.00 -7.99

2012 0.00 0.10 0.00 3.70 0.24 0.00 0.00 0.00 3.84

2013 0.00 0.10 0.00 4.04 0.26 0.00 0.00 0.00 4.20

2014 0.00 0.10 0.00 4.32 0.28 0.00 0.00 0.00 4.50

2015 0.00 0.10 0.00 4.62 0.30 0.00 0.00 0.00 4.82

2016 0.00 0.10 0.00 4.76 0.31 0.00 0.00 0.00 4.97

2017 0.00 0.10 0.00 4.91 0.32 0.00 0.00 0.00 5.13

2018 11.25 0.09 0.00 5.06 0.33 0.00 0.00 0.00 -5.95

2019 0.00 0.09 0.00 5.14 0.34 0.00 0.00 0.00 5.38

2020 0.00 0.09 0.00 5.28 0.35 0.00 0.00 0.00 5.54

2021 0.00 0.09 0.00 5.43 0.36 0.00 0.00 0.00 5.70

2022 0.00 0.09 0.00 5.58 0.37 0.00 0.00 0.00 5.87

2023 0.00 0.09 0.00 5.74 0.39 0.00 0.00 0.00 6.03

2024 0.00 0.09 0.00 5.89 0.40 0.00 0.00 0.00 6.20

2025 11.25 0.09 0.00 6.05 0.41 0.00 0.00 0.00 -4.87

2026 0.00 0.09 0.00 6.40 0.43 0.00 0.00 0.00 6.74

2027 0.00 0.09 0.00 6.57 0.44 0.00 0.00 0.00 6.93

2028 0.00 0.08 0.00 6.75 0.45 0.00 0.00 0.00 7.12

2029 0.00 0.08 0.00 6.94 0.47 0.00 0.00 0.00 7.32

2030 0.00 0.08 0.00 7.13 0.48 0.00 0.00 0.00 7.53

2031 0.00 0.08 0.00 7.32 0.50 0.00 0.00 0.00 7.74

2032 8.23 0.08 0.00 7.51 0.52 0.00 0.00 0.00 -0.28

Total: 50.89 1.81 0.00 119.20 7.96 0.00 0.00 0.00 74.46

EIRR = 17.20% NPV= 6.00 Million $US

ANNEX 4E

ECONOMIC ANALYSIS IN MILLION US$

TECHIMAN-KINTAMPO (Ghana’s section of UEMOA Ghana’s road section)

Road Agency Costs User Cost Savings Net Benefits

Year Investment Operating costs Special VOC

savings

Time cost

savings

VOC + Time

savings. Accidents Net

ExogenousBenefits

Net Economic Benefits

2008 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2009 8.79 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -8.79

2010 17.58 -0.01 0.00 2.07 0.09 0.00 0.00 0.00 -15.42

2011 17.58 -0.01 0.00 5.41 0.37 0.00 0.00 0.00 -11.79

2012 0.00 -0.02 0.00 14.39 0.96 0.00 0.00 0.00 15.36

2013 0.00 -0.02 0.00 21.36 1.78 0.00 0.00 0.00 23.16

2014 0.00 -0.03 0.00 27.46 2.58 0.00 0.00 0.00 30.06

2015 0.00 -0.03 0.00 29.25 2.93 0.00 0.00 0.00 32.20

2016 0.00 -0.03 0.00 26.09 2.67 0.00 0.00 0.00 28.79

2017 0.00 -0.03 0.00 21.14 2.17 0.00 0.00 0.00 23.33

2018 0.00 -0.03 0.00 13.97 1.42 0.00 0.00 0.00 15.42

2019 0.00 -0.03 0.00 4.92 0.50 0.00 0.00 0.00 5.45

2020 0.00 -0.03 0.00 -0.04 -0.01 0.00 0.00 0.00 -0.02

2021 0.00 -0.03 0.00 -0.05 -0.01 0.00 0.00 0.00 -0.03

2022 0.00 -0.03 0.00 -0.05 -0.01 0.00 0.00 0.00 -0.03

2023 0.00 -0.03 0.00 -0.05 -0.01 0.00 0.00 0.00 -0.03

2024 0.00 -0.03 0.00 -0.06 -0.01 0.00 0.00 0.00 -0.04

2025 0.00 -0.03 0.00 -0.06 -0.01 0.00 0.00 0.00 -0.04

2026 0.00 -0.04 0.00 -0.07 -0.01 0.00 0.00 0.00 -0.04

2027 0.00 -0.04 0.00 -0.07 -0.02 0.00 0.00 0.00 -0.05

2028 0.00 -0.04 0.00 -0.07 -0.02 0.00 0.00 0.00 -0.05

2029 0.00 -0.04 0.00 -0.08 -0.02 0.00 0.00 0.00 -0.06

2030 0.00 -0.04 0.00 -0.08 -0.02 0.00 0.00 0.00 -0.06

2031 0.00 -0.04 0.00 -0.09 -0.02 0.00 0.00 0.00 -0.07

2032 -6.59 -0.04 0.00 -0.09 -0.02 0.00 0.00 0.00 6.52

Total 37.36 -0.69 0.00 165.17 15.26 0.00 0.00 0.00 143.77

EIRR = 41.19% NPV= 45.63 Million $US

ANNEX 4F

SENSITIVITY ANALYSIS IN MILLION US$

Section Akatsi-Agzobume Section Agbozume-Aflao Section Akatsi-Dzodze Section Dzodze-Akanu Section Techiman-Kintampo

Base Case

10% cost

increase

10% benefit

reduction

10% cost increase and 10% benefit

reduction Base Case

10% cost

increase

10% benefit

reduction

10% cost increase and 10% benefit

reduction Base Case

10% cost

increase

10% benefit

reduction

10% cost increase and 10% benefit

reduction Base Case

10% cost

increase

10% benefit

reduction

10% cost increase and 10% benefit

reduction Base Case

10% cost

increase

10% benefit

reduction

10% cost increase and 10% benefit

reduction

Opportunity Cost (%) 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0

Multiplier Factor for net benefits

*Capital and recurrent costs 1.00 1.10 1.00 1.10 1.00 1.10 1.00 1.10 1.00 1.10 1.00 1.10 1.00 1.10 1.00 1.10 1.00 1.10 1.00 1.10

*Vehicle Operating Costs 1.00 1.00 0.90 0.90 1.00 1.00 0.90 0.90 1.00 1.00 0.90 0.90 1.00 1.00 0.90 0.90 1.00 1.00 0.90 0.90 ------- ------ ------ ------ ------ ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------

Net Benefits ($US million) 4.2 1.44 1.02 -1.76 9.55 6.93 5.98 3.37 1.78 2.99 2.51 0.61 6.00 4.08 3.48 1.55 45.63 42.60 38.04 35.01

EIRR (%) 16.50% 13.41% 13.10% 10.25% 24.48% 20.37% 19.95% 16.11% 13.55% 14.34% 14.16% 12.50% 17.20% 15.33% 15.13% 13.32% 41.19% 37.47% 37.09% 33.57%

ANNEX 5A Page 1 of 2

GHANA

COMPARATIVE ANALYSIS ON ROAD UNIT COSTS

Recent Road Unit Costs for Works in Africa (2006 - 2008), Bank funded Projects, Paved Roads Country

From

To

Description of Works

Topography

Surfacing

Unit Cost USD/km

Cost increase over Appraisal

Months Since appraisal

Average annual cost increase

Uganda**

Kabale

Bunagina Kyanika

Upgrading from gravel to bitu-men standard

50% flat and 50% mountaneous

Asphalt Concrete (A/C)

789,778

122%

22

54%

Rwanda**

Lot 2 Mayange

Nemba

Upgrading from gravel to bitu-men standard

Mountaneous

Asphalt Concrete (A/C)

808,080

20%

6

40%

Burundi**

Lot 3 Nemba

Kirundu

Upgrading from gravel to bitu-men standard

Flat to rolling

DBST Pavement

368,000

16%

6

32%

Lesotho**

Likalaneng

Thaba Tseka

Upgrading from gravel to bitu-men standard

Mountaneous

Asphalt Concrete (A/C)

730,075

80%

36

27%

Ghana***

Nsawam

Apedwa

Bitumen road re-construction and new bypass

Flat and Rolling

Asphalt Concrete (A/C)

1,180,390

67%

48

17%

Ghana**

Nsawam

Apedwa Bypass 9.3 km Plus 3 bridges

Bitumen road re-construction and new bypass

Flat and Rolling

Asphalt Concrete (A/C)

3,107,000

250%

48

63%

Ghana***

Akatsi- Dzodze-

Akanu Border Togo (30 km)

Upgrading from gravel to bitum-en standard (30 km) incl. bridge at Akanu

Flat flood plains

Asphalt Concrete (A/C)

1,441,000

124%

72

21%

Ghana**

Akatsi

Dzodze (25 km)

Upgrading from gravel to bitu-men standard

Flat flood plains

DBST Pavement

941,000

71%

84

11%

Ghana***

Akatsi- Agbozume

Aflao(58.6 km) with a bypass at Akatsi

Bitumen road re-construction

Flat flood plains and and Rolling

Asphalt Concrete (A/C)

1,256,000

191%

72

32%

Ghana**

Akatsi

Agbozume (31.55km)

Bitumen road re-construction

Flat flood plains and Rolling

Asphalt Concrete (A/C)

1,034,550

140%

84

20%

Ghana***

Techiman- Apaaso

Kintampo ( 60 km)

Bitumen road re-construction

Rolling

Asphalt Concrete (A/C)

777,350

47%

48

12%

Ghana**

Techiman

Apaaso (53.7 km)

Bitumen road re-construction

Rolling

Asphalt Concrete (A/C)

700,500

33%

60

7%

Cameroun*

Numba

Bachuo Akagbe

Upgrading from gravel to bitu-men standards

Mountaneous rolling

DBST Pavement

779,269

Sources: * Appraisal Report; ** Lowest bids; *** Revised Engineer’s Cost Estimates Average Unit Cost per Km of Paved Roads for projects in Africa : USD 995,000/ km

Average Unit Cost per Km of Paved Roads in Ghana : USD 1,305,000/ km

ANNEX 5A Page 2 of 2

GHANA

MONTHLY PRICE INDICES OF ESSENTIAL MATERIALS FOR ROAD CONSTRUCTION

Year

Material/ labor

Jan 2004

Jan 2005

Jan 2006

Jan 2007

Jul 2008

% Increase from Jan 2004 to Jul 2008

Fuel

38,889

38,889

64,390

77,080

120,000

208%

Bitumen

109,150

109,150

166,160

187,830

342,100

214%

Reinforcement Steel

14,110

19,950

19,680

19,314

41,830

196%

Cement

44,610

45,900

50,855

59,225

75,900

70%

Labor

4,221

5,280

6,506

7,705

9,200

118%

Source: Government of Ghana, Aug 2008

GHANA

2001- 2008 SCHEDULE OF PRICES OF ESSENTIAL ROAD CONSTRUCTION MATERIALS

(In US$)

Year Material

Unit 2001 2006 2008 % Increase

from 2001 to 2006 % Increase from 2001 to 2008

Fuel

Litre

0.26

0.81

1.12

212%

331%

Bitumen

Litre

57.63

96.62

172.5

68%

199%

Reinforcement Steel

Tonne 318.4

585.77

1023.50

84%

221%

Cement

Bag

4.05

6.32

6.93

56%

71%

Source: Government of Ghana and Consultants, October 2008

ANNEX 5B

COST OVERRUNS MITIGATION PLAN BASED ON THE STUDY ON UNIT COSTS FOR ROAD CONSTRUCTION WORKS IN AFRICA

OBJECTIVES/RECOMMENDATIONS ACTIONS

Objective 1: Ensuring accuracy of project cost estimates

• Ascertain that project design or design review is made by renowned consulting firms recruited under appropriate selection process as per Bank guidelines and with TORs requesting specifically a supply chain analysis of contractors’ market as well as of key inputs availability and projected prices in determining the engineer’s cost estimates (Countries and Bank)

The designs for the three roads were prepared by reputable and competent national consulting firms following an appropriate selection procedure by the Government and in accordance to Bank’s procurement rules. The estimated costs determined reflect the current economic conditions and the anticipated rise in the costs of inputs in Ghana. Bid prices for Lots 1 sections of the three projects were quite close to engineers estimates.

• Require sufficient level of geotechnical investigation at design stage (Bank and countries)

The geotechnical studies were completed in accordance with international Standards, these were reviewed and found acceptable.

• Conduct systematic updates of cost estimates in case of project delays, thorough cost review at appraisal and full design reviews if more than 2 years have elapsed since initial design (Bank and countries)

The Design Review was completed in 2007 with revised cost estimates, which were updated again for lots 2 in August 2008.

• Encourage, if warranted, the standardization of project design requirements at national level or at regional level in the case of multinational corridors (Bank and other donors)

The Road standards used complies with both ECOWAS and GHA standards. GHA has been adopting international standards, such as AASHTO since 1999.

Objective 2: Further enhancing competition in tenders

• Systematically review on a country basis the merits of promoting participation of local contractors, and define associated measures in the project design by the appraisal team - e.g. tender packaging, national preference, prequalification criteria, etc. (Bank and countries)

Bidding for the projects is open to international competitive bidding.

• Continue ensuring appropriate tender advertising and execution, as well as thorough review of implementing agencies’ procurement procedures and capacity (Bank)

GHA is familiar with the Bank’s procurement procedures and can obtain assistancdocuments are also reviewed by the GOG / the national Tender Board before anyis given.

• Monitor procurement for competitiveness, and intervene when tenders veer towards limited competition (Bank and countries)

Bidding for the projects is open for International Competitive Bidding. When tenders were issued for Lot 1 section of the two projects (i.e. Akatsi- Dzodze- Akanu and Akatsi- Agbozume-Aflao) to pre-qualified contractors, limited competition was observed . At the request of the Government and with approval from the Bank, bids for Lot 1 section of the two projects were re-launched with post qualification method of procurement. For Lots 2 sections of the 2 above-mentioned projects, GOG requested for APA with Post qualification method of procurement. Given that Lot 2 of UEMOA/Ghana Road Programme 1 (Ghana’s Section: Techiman – Kintampo road, Apaaso-Kintampo Section 6.3 km), is relatively small, an addendum to the awarded contract of Lot 1 can be considered.

Objective 3: Strengthening knowledge management on road cost and construction industry

3 Support development of updated national databases on contractors active in the road and construction markets, using information from project implementation and PCRs (countries, Bank and donors)

A comprehensive road database in Ghana is being set up under the Transport Indicators Database Project which is an initiative of the Ministry of Transportation and Ghana Statistical Service, funded by the Embassy of Denmark in Ghana

4 Monitor changes of international and local prices of key inputs, as early warning signal of contract price increases (countries)

Monitoring of projects will be continued

5 Systematically apply FIDIC conditions for price adjustment formula in contracts (countries and Bank)

Standard Bidding Document with Price Adjustment Formula, as per FIDIC will be applied for the Projects

6 Organize internal and external workshops on findings/recommendations of the study and the proposed action plan (Bank)

Will be followed-up by the Bank

Objective 4: Minimizing project implementation delays

• Assess in depth the capacity of implementing agencies and include adequate capacity strengthening in project components as needed (Bank and countries)

GHA is fully competent and cognizant of Bank’s rules and procedures.

• Ensure effective project supervision and compliance with realistic procurement timetables (Bank)

2 supervision missions per year will be carried out for the projects and regular discussions will be held with GHA on the procurement timetables

• Continue, as far as possible, minimizing non-essential conditions All the loan conditions were fulfilled at the initial appraisal. As such no additional

precedent to loan effectiveness or disbursement, e.g. by excluding conditions linked to sector policy reform that should be advanced through development policy or sector reform loans (Bank)

Conditions are proposed to Supplementary Loans

• Consider systematically using advanced procurement actions (Bank and countries)

At the request of GOG, Advanced Procurement Action (APA) with Post Qualification Method of Procurement for the Lots 2 sections of the Akatsi- Dzodze- Akanu and Akatsi- Agbozume-Aflao Roads is being considered by the Bank . Given that Lot 2 of UEMOA/Ghana Road Programme 1 (Ghana’s Section: Techiman – Kintampo road, Apaaso-Kintampo Section 6.3 km), is relatively small, an addendum to the awarded contract of Lot 1 can be considered.

• Ensure that appropriate procedures are used for bidders’ qualification evaluation (Bank and countries)

Projects financed by the Bank are governed by its procurement rules..

• Maintain continuity in project supervision and implementation staff (Bank and countries)

There is continuity with regard to staff in charge of project supervision at GHA

• Assess the possible use of alternative procurement methods, such as the design-build-maintenance approach, and the way forward towards improvement/harmonization of associated procurement guidelines (Bank and other donors)

BOT approach cannot be considered in these types of roads under the Proposed Supplementary Loan

• Continue supporting road sector institutional reform and capacity building (Bank and countries)

Will be followed up

Objective 5: Preparing better for possible price increases

• Agree with Borrowers on a mitigation plan in case of price increases higher than the projects’ contingencies, including options such as increased counterpart funds and other measures. (Countries and Bank)

Will be closely monitored

• Justify price and physical contingencies in project cost estimates to reflect adequately the projects’ and countries’ specifics, the perceived soundness of design cost estimates, and the expected future variations in prices of key inputs (Bank)

The contingencies are applied, taking into account the country specifics and are justified

ANNEX 6A LOAN CONDITIONS UNDER ORIGINAL PROJECT

A. TEMA- AFLAO REHABILITATION ROAD PROJECT (ADF COMPONENT : AKATSI-

AFLAO SECTION, 41 KM AND 7 KM BYPASS AT AKATSI JUNCTION) A. Conditions Precedent to the Entry into Force of the Loan Agreement

i) The entry into force of the loan agreement will be subject to the fulfillment by the Borrower of the conditions set forth in Section 5.01 of the General Conditions Applicable to Loan Agreement and Guarantee Agreements of the Bank

ii) The Government shall submit to the Fund, documentary evidence that the ECOWAS Fund commitment to fund its contribution to the project has been concluded with the Government..

B. Conditions Precedent to First Disbursement

The obligations of the Fund to make the first disbursement of the loan will be conditional upon entry into force of this Loan Agreement as provided for in A above, and the borrower will have to the satisfaction of the Fund: i) Provided evidence of having appointed a project coordinator and counterpart

resident engineer both whose qualifications and experience shall be subject to the approval of the Fund prior to their appointment;

(ii) Submitted documentary evidence satisfactory to the Fund that a co-financing arrangement has been concluded with the ECOWAS FUND for the financing of the project and that such agreement is effective in accordance with it’s terms and that ECOWAS FUND has accepted to use the Fund’s rules for procurement of goods, works and services;

iii) Provided evidence of opening a Special Account to be managed by Ghana Highway Authority in a Bank acceptable to the ADF, where counterpart funds will be deposited and also provided a written undertaking to deposit its own contribution in the Special Account in accordance with the financing plan;

iv) Submitted a policy letter to the Fund describing Government’s policy towards future increases of the Fuel Levy and the Government’s plans to achieve Road Fund target amount of USD 130 million per annum by attaining a fuel levy target level of USD 0.095 per liter or by increasing other revenue sources of the Road Fund

v) Provided evidence of the full payment by the Borrower of the Road Contract Arrears of approximately USD 22 million to eligible contractors;

vi) Submitted a policy letter to the Fund describing the measures Government shall implement to manage and operate the Axle Load Control System to be established throughout Ghana;

vii) Submitted an Environmental and Social Management Plan acceptable to the Fund. C. Other Conditions

i) Disburse to the project , counterpart funds for each year of project implementation, in accordance with the financing plan agreed with the Fund.

ii) Ensure that mitigating measures relating to environmental impact of the project are implemented and monitored.

ANNEX 6B LOAN CONDITIONS UNDER ORIGINAL PROJECT

B. AKATSI – DZODZE- AKANU- NOEPE ROAD UPGRADING (ADF COMPONENT: AKATSI- DZODZE- AKANU SECTION, 30 KM ) A. Conditions Precedent to the Entry into Force of the Loan Agreement

i) The entry into force of the loan agreement will be subject to the fulfillment by the Borrower of the conditions set forth in Section 5.01 of the General Conditions Applicable to Loan Agreement and Guarantee Agreements of the Bank.

B. Conditions Precedent to First Disbursement

The obligations of the Fund to make the first disbursement of the loan will be conditional upon entry into force of this Loan Agreement as provided for in A above, and the borrower will have to the satisfaction of the Fund: i) Provided evidence of having appointed a Project Coordinator and a Counterpart

Resident Engineer both of whose qualifications and experience shall be subject to the written approval of the Fund prior to their appointment;

ii) Provided evidence of the opening of a Special Account to be managed by Ghana Highway Authority in a bank acceptable to the Fund, where counterpart funds will be deposited and also provide a written undertaking to deposit its own contribution in that Special Account in accordance with the Financing Plan;

iii) Submitted a Policy Letter to the Fund describing Government’s policy towards future increases of the fuel levy, and the Government’s plans to achieve the Road Fund target amount of USD 130 million per annum by attaining a fuel levy target of USD 0.095 per litre and/or by increasing other revenue sources of the Road Fund;

iv) Provided evidence of the full payment by the Borrower of the Road Contract Arrears of approximately USD 22 million to eligible contractors as at August 2001;

v) Submitted a Policy Letter to the Fund describing the measures that the Government shall implement to manage and operate the Axle Load Control System to be established throughout Ghana;

vi) Submitted an Environmental and Social Management Plan acceptable to the Fund.

C. Other Conditions The Borrower shall during the implementation of the Project:

i) Disburse to the Project, counterpart funds for each year of Project implementation, in accordance with the financing plan agreed with the Fund;

(ii) Ensure that mitigating measures relating to environmental impact of the Project are implemented and monitored.

(iii) Undertaking that the Protocol of co-operation shall be binding upon the Borrower

and the Government of Togo for the period that all or any part of the Loan remains outstanding, and, shall constitute an integral part of the Loan.

ANNEX 6C LOAN CONDITIONS UNDER ORIGINAL PROJECT

C. UEMOA-/GHANA ROAD PROGRAMME 1 (ADF ROAD COMPONENT IN GHANA :

TECHIMAN- KINTAMPO SECTION, 60 KM ) A. Conditions Precedent to the Entry into Force of the Loan Agreement

i) The entry into force of the loan agreement will be subject to the fulfillment by the Borrower of the conditions set forth in Section 5.01 of the General Conditions Applicable to Loan Agreement and Guarantee Agreements of the Bank.

B. Conditions Precedent to First Disbursement

The obligations of the Fund to make the first disbursement shall be conditional upon

the entry into force of this Agreement, as provided in Section 4.01, above and the

fulfillment by the Borrowers of the following conditions:

(i) Provide evidence to the Fund of the preparation and implementation, by the

Borrowers, of statutory texts to limit control on the corridor at the points of

departure, at the borders and at destination for transport by container, tanker and

sealed trucks under certain conditions;

(ii) Provide evidence to the Fund of the undertaking by the West African

Development Bank (WADB) and the other donors to participate in the financing of

the Project;

(iii) Provide evidence to the Fund of the annual budgeting of the contributions of

the Borrowers to the financing of the Project;

(iv) Appoint a road project manager, by country, whose qualifications and

experience shall be submitted to the Fund for its prior non-objection; and

(v) Provide evidence to the Fund of the setting up of the Joint Technical

Committee (JTC) by UEMOA decision and of the designation, by statutory texts of

the Ministers in charge of the roads and transport of the Borrowers of the members

of this committee.

Undertakings under this Agreement:

i) Burkina Faso undertakes to conduct the feasibility study for the

establishment of a second generation road fund, and to implement the

recommendations of the said study;

- 2 -

(ii) The Governments of Burkina Faso and Ghana undertake to find funds for

works on the remaining sections of the roads of the corridor in their respective

territories, which are not rehabilitated under RP-1; and

(iii) The Borrowers undertake to (a) set up, as at 31 December 2007, a corridor

management committee, (ii) elaborate and adopt before 31 December 2005 an

appropriate legal status for the juxtaposed control posts between Mali and Burkina

Faso and between Burkina Faso and Ghana; (c) entrust to a private enterprise the

management of the juxtaposed control posts at the borders, and (iii) allocate the

required resources to the road maintenance budget.

C. Other conditions

In addition, the Borrowers shall jointly fulfill the following Conditions:

(i) Provide evidence to the Fund , by 31 December 2005, of the mobilization of

supplementary resources necessary for the complete rehabilitation of the whole

corridor;

(ii) Provide evidence to the Fund , not later than 31 December 2005, of an agreement

between the Borrowers on the utilization of a single ISRT booklet for crossing their

territories;

(iii) Provide evidence to the Fund, before 31 December 2007, of the setting up of the

Corridor Management Committee;

(iv) Submit to the Fund, every year before 31 December, the results of traffic counts

on the roads of the corridor;

(v) Provide the Fund, before 31 December 2006, with evidence of the steps taken to

entrust a private structure with the management of the juxtaposed control posts at

the borders;

(vi) Provide evidence to the Fund, before 31 December 2004, of the implementation of

the measures limiting the axle load on the roads of the corridor; and

(vii) Provide evidence to the Fund, before 31 December 2006, of the harmonization of

the customs transit procedures of the three countries to facilitate transport on the

corridor.

viii) Provide evidence to the Fund of the preparation and adoption before 31

December 2005 an appropriate legal status for the juxtaposed control posts at the

borders between Mali and Burkina Faso and between Burkina Faso and Ghana.