Zimbabwe Infrastructure Dialogue (ZID) in Roads, Railways, Water, Energy and Telecommunication

Report No. 43855-ZW

Zimbabwe Infrastructure Dialogue in Roads, Railways, Water, Energy, and Telecommunication Sub-Sectors

June, 2008

Africa

Transport Sector (AFTTR)

Document of the World Bank

1

Currency Equivalents

(Exchange Rate Effective April 30, 2007)

Current Unit – ZW$

US$ 1 = ZW$30,000 (Government official rate)

US$ 1 = ZW$255,771,415.87 (Interbank market exchange rate)

FISCAL YEAR

January 1 – December 31

ACRONYMS AND ABBREVIATIONS

ABOM / Agreement Between Operating Members
AfDB / African Development Bank
BAZ / Broadcasting Authority of Zimbabwe
BBR / Bulawayo to Beitbridge Railway
BCC / Bulawayo City Council
BMED / Bulawayo Municipality Electricity Department
BOT / Build Operate Transfer
BoP / Balance of Payments
BVIP / Blair Ventilated Improved Pit Latrine
CAPC / Central African Power Pool
CC / Catchment Council
CIE / Córas Iompair Éireann (an Irish Consulting firm)
CM / Catchment Manager
COMESA / Common Market for Eastern and Southern Africa
COP / Catchment Outline Plan
COSITU / ITU model for the Calculation of Costs, Tariffs and Rates for Telephone Services
CPI / Consumer Price Index
DANIDA / Danish International Development Agency
DDF / District Development Fund
DIS / Department of Infrastructure Services
DoR / Department of Roads
DoWR / Department of Water Resources
DRC / Democratic Republic of the Congo
DWR / Department of Water Resources
EIA / Environmental Impact Assessment
ESAP / Economic Structural Adjustment Programme
ESC / Electricity Supply Commission
ESW / Economic and Sector Work
Forex / Foreign currency
GDP / Gross Domestic Product
GIS / Geographic Information System
GMED / Gweru Municipality Electricity Department
GoZ / Government of Zimbabwe
GSM / Global System for Mobile Communications
GTKM / Gross Tone Kilometre
GWh / Gigawatt hour
HAP / Higher Authority for Power
HCB / Hidroelectrica de Cahora Bassa
HCC / Harare City Council
HDM / Highway Design Model
HIV/AIDS / Human Immunodeficiency Virus/ Acquired Immunodeficiency Syndrome
HMED / Harare Municipality Electricity Department
IAP / Internet Access Provider
IBRD / International Bank for Reconstruction and Development
ICT / Information and Communication Technology
IDA / International Development Association
IGMoU / Inter-Governmental Memorandum Of Understanding
ILO / International Labour Organization
IMF / International Monetary Fund
IPP / Independent Power Producer
IPT / Independent Power Transmitter
IRWS&SP / Integrated Rural Water Supply and Sanitation Program
ISN / Interim Strategy Note
ISO / Independent System Operator
ISP / Internet Service Provider
ITU / International Telecommunications Union
IUMoU / Inter-Utility Memorandum Of Understanding
IWRM / Integrated Water Resources Management
IWSD / Institute of Water and Sanitation Development
kV / Kilovolt
KW / Kilowatt
LICUS / Low-income country under stress
MDC / Movement for Democratic Change
MDG(s) / Millennium Development Goal(s)
MOED / Ministry of Economic Development
MH&CW / Ministry of Health and Child Welfare
MIPT / Ministry of Information, Post and Telecommunications
MIS / Management Information System
MMED / Mutare Municipality Electricity Department
MMR&E / Ministry of Mineral Resources and Energy
MoF / Ministry of Finance
MoLGPW&UD / Ministry of Local Government, Public Works and Urban Development
MoTC / Ministry of Transport and Communication
MoWRID / Ministry of Water Resources and Infrastructure Development
MPSLSW / Ministry of the Public Service, Labour and Social Welfare
MTPA / Million Ton per Annum
MVA / Megavolt Amperes
MW / Megawatt
MWRIS / Ministry of Water Resources and Infrastructure Services
NAC / National Action Council
NCU / National Co-ordination Unit
NECF / National Economic Consultative Forum
NECF / National Economic Consultative Forum
NEDPP / National Economic Development Priority Plan
NGO / Non Governmental Organization
NMPRWS&S / National Master Plan for Rural Water Supply and Sanitation
NORAD / Norwegian Agency for Development Cooperation
NRZ / National Railways of Zimbabwe
NSC / National Steering Committee (on water)
NTKM / Net Ton Kilometre
OPRC / Output Performance based Road Contracts
PC / Powertel Communications
PoP / Point of Presence
POTRAZ / Postal and Telecommunications Regulatory Authority of Zimbabwe
PPP / Public Private Partnership
PSIP / Public Service Investment Program
PSO / Public Service Obligations
PSP / Private Sector Participation
PTC / Post and Telecommunications Corporation
RBZ / Reserve Bank of Zimbabwe
RCDF / Rural Capital Development Fund
RDC / Rural District Council
RDCCBP / Rural DistrictCouncilCapacityBuilding Program
RE / Rural Electrification
REA / Rural Electrification Agency
REF / Rural Electrification Fund
RF / Road Fund
RMI / Road Maintenance Initiative
RMRP / Road Maintenance and Reform Project
RPC / Rusitu Power Company
RSA / Republic of South Africa
RSRDP / Road Sector Reform and Development Program
RTRN / Regional Trunk Road Network
SADC / Southern African Development Community
SATCC / Southern Africa Transport and Communications Commission
SCC / Sub-Catchments Council
SHA / State Highway Authority
SI / Statutory Instrument
SIDA / Swedish International Development Agency
SMS / Short Message Service
SSA / Sub-Saharan Africa
SSATP / Sub-Saharan Africa Transport Policy Program
STEM / Short Term Energy Market
Telecom / Telecommunication
TKM / Ton Kilometre
TOR / Terms of Reference
TSCZ / Traffic Safety Council of Zimbabwe
UC / Urban Council
UNICEF / United Nations International Children’s Emergency Fund
US$ / United States dollar
USAID / United States Agency for International Development
USF / Universal Service Fund
VID / Vehicle Inspection Department
VIP / Ventilated Improved Pit
VoIP / Voice over Internet Protocol
WATSAN / Water and Sanitation
WRMS / Water Resources Management Strategy
WSP / Water and Sanitation Program
WSS / Water Supply and Sanitation
Z$ / Zimbabwe dollar
ZCIC / Zimbabwe Construction Industry Council
ZE / Zesa Enterprises
ZEDC / Zimbabwe Electricity Distribution Company
ZERC / Zimbabwe Electricity Regulatory Commission
ZESA / Zimbabwe Electricity Supply Authority
ZESB / Zimbabwe Electricity Supply Board
ZETCO / Zimbabwe Electricity Transmission Company
ZETDC / Zimbabwe Electricity Transmission and Distribution Company
ZH / Zesa Holdings
ZIAN / Zimbabwe Infrastructure Assessment Note
ZID / Zimbabwe Infrastructure Dialogue
ZINARA / Zimbabwe National Road Administration
ZINWA / Zimbabwe National Water Authority
ZPC / Zimbabwe Power Company
ZRP / ZimbabweRepublic Police
Vice President: / Obiageli Katryn Ezekwesili
Country Director: / Michael Baxter
Sector Manager: / C. Sanjivi Rajasingham
Task Team Leader: / Kavita Sethi

Contact Details

Name / Designation / Telephone / Email
Kavita Sethi / Team Leader / +202 458 7558 /
Davies Makasa / Transport Specialist / + 260 1 252811 /
Subhash Seth / Senior Highways Engineer
Consultant / +202 458 7391 /
Robert Geddes / Lead Infrastructure Consultant / +263 4 708624
+263 11 608312 /
Ramson Mbetu / Water Consultant / +263 4 861741
+263 91 234293 /

TABLE OF Contents

Acknowledgements

Executive Summary

A.Economic Review

B.Roads Sector

C.Rail Sector

D.Water Sector

E.Telecommunications Sector

F.Energy Sector

Background

Section 1: Economic Review

Section 2: Roads Sector

A.Background

B.Action Plan to Implement ZIAN Recommendations

B.1Methodology used for developing action plan

B.2Immediate Action Plan

B.3Long Term Action Plan

B.4Monitoring the action plan

C.Public Private Partnerships

C.1Government policy

C.2Benefits from PPP in the Road Sector

C.3Key issues in PPP

C.4Potential projects in PPP

C.5Next Steps in promoting PPP

D.Regional Integration

D.1Importance of regional integration

D.2Projects Supporting Regional Integration

D.3Next steps in promoting regional integration

Section 3: Rail Sector

A.Background

B.Action Plan to Implement ZIAN Recommendations

B.1Methodology used for developing action plan

B.2Immediate Action Plan

B.3Long Term Action Plan

B.4Action Plan, Budget and Monitoring

C.Private Sector Participation

C.1PSP Experiences in Sub-Sahara Africa Railways

C.2Key Railway PSP Recommendations

C.3Bulawayo Beitbridge Railway

C.4Zimbabwe Government Policy on PSP

C.5Benefits from PSP in Railway Sector

C.6Key Issues in PSP in Zimbabwe

C.7Potential Projects for PSP

C.8Next Steps

D.Regional Integration

Section 4: Water and Sanitation Sector

A.Background

B.Action Plan to Implement ZIAN Recommendations

B.1Methodology used for developing action plan

B.2Critical Areas, Recommendations and Constraints

C.Private Sector Participation

C.1The Government Policy

C.2Public Private Partnership in the Water Sector

D.Regional Integration

D.1Why Regional Integration is Important and Current Initiatives

D.2Potential Projects in Regional Integration

D.3Next Steps in Promoting Regional Integration

Section 5: Telecommunications Sector

A.Historical Background

B.Sector Policies

B.1SADC Protocol on Transport, Telecommunications and Meteorology

B.2Sector Reform Policy, 1996

B.3Postal and Telecommunications Act, Chapter 12:05 of 2000

B.4Ministry of Transport and Communications

B.5National ICT Policy Framework

C.Institutional Reforms

C.1Regulatory Authority

C.2Sector Liberalization

D.Condition of Infrastructure

D.1Telecommunications Network Statistics

D.2International and Regional Infrastructure

D.3VoIP Telephony

D.4Fixed Line Network

D.5Mobile Operators

D.6Internet Services

D.7Enforcement of License Conditions

E.Financing

E.1POTRAZ

E.2Tariffs

E.3Universal Services Fund

F.Management Capacity

F.1POTRAZ

F.2Network Operators

G.Critical Areas

Section 6: Energy Sector

A.Introduction

A.1Historical Background

A.2Current challenges

B.Sector Policies

B.1SADC Energy Protocol

B.2Southern African Power Pool (SAPP)

B.3Power Sector Policies and Legal Framework

B.4Electricity Act No. 6 of 1985

B.5Rural Electrification Fund Act of 2002

B.6Electricity Act No. 4 of 2002 and Electricity Amendment Act No. 3 of 2003

B.7Tariff policy

C.Institutional Structure

C.1Intended Structure under the Electricity Act of 2002

C.2Ministry of Energy and Power Development

C.3Zimbabwe Electricity Regulatory Commission

C.4ZESA Holdings

C.5Independent Power Producers

D.Condition of Infrastructure

D.1Generation Infrastructure

D.2Imports

D.3Transmission Infrastructure

D.4Distribution Infrastructure

D.5Metering

D.6Telecommunication infrastructure

E.Customer Base and Tariffs

E.1Number of Customers

E.2Power and Energy Demand

E.3Quality of Service

E.4Tariffs and financial status

F.Management Capacity

F.1ZERC

F.2ZESA Holdings

G.Critical Areas

Annex 1: ROADS - POLICY OPTION PAPERS

A.Policy Option Papers to Address Critical Areas

A.1Financing Road Maintenance

A.2Strengthening Institutional Capacity in the Road Sector

Annex 2: RAILWAYS – POLICY OPTION PAPERS

A.1“Reducing Railways’ Fiscal Deficit”

A.2Railway Safety and Environmental Regulation

Annex 3:WATER – POLICY OPTION PAPERS

A.1Critical policy review of the ZINWA take over of water and sanitation/sewerage functions from cities and municipalities

A.2Policy on Peri-Urban Water and Sanitation Infrastructure Provision through Public Private Partnership Policy

Annex 4:Members of the Task Force

Annex 5:ZESA Tariffs Effective 1 February 2007

Annex 6:Terms of Reference: Zimbabwe Infrastructure Dialogue (ZID)

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Acknowledgements

The “Zimbabwe Infrastructure Dialogue” (ZID)was undertaken in collaboration with the government of Zimbabwe (GoZ). The process was overseen by the Ministry of Finance (MoF), who delegated responsibility for day-to-day management of the study to the Ministry of Transport and Communication (MoTC). The MoTC established a Task Force of representatives of key government agencies from the three sectors chosen for the study. The Task Force was chaired by Mr. N Mudzinganyama, the Acting Director of Policy, Planning, and Coordination of the MoTC, who was very ably supported by his colleagues Mr. G. Sibanda and Mr. J. Madya.

The ZID was carried out under the general guidance of Mr. Michael Baxter, the World Bank’s Country Director, and Mr. Nginya Mungai Lenneiye, the Acting Country Manger for Zimbabwe. We wish to thank the Water and Sanitation Program (WSP), Africa Region, for providing financial support for the Water and Sanitation Sector and Mr. C. Sanjivi Rajasingham, Sector Manager, Transport, Mr. Piers Cross, Manager, WSP, and Mr. S. Vijay Iyer, Sector Manager Energy for their support.

Executive Summary

A.Economic Review

1. In the 1990s, Zimbabwe’s economic growth began to slow following a balance of payments crisis and repeated droughts. By the late 1990s Zimbabwe’s economy was in serious trouble driven by economic mis-management, political violence, and the wider impact of the land reform program on food production. During 2007 GDP contracted by more than 6 percent, making the cumulative output decline over 35 percent since 1999. The unrelenting economic deterioration is doing long-term damage to the foundations of the Zimbabwean economy – private sector investment is virtually zero, infrastructure has deteriorated, and skilled professionals have left the country.

1. With inflation accelerating, the Government introduced, in 2007, blanket price controls and ordered businesses to cut prices by half. Despite the strict price controls inflation continues to rise as the root cause of high inflation – monetization of the large public sector financing needs, remains unaddressed. A large part of the high public sector deficit is due to quasi-fiscal spending by the central bank onmainly concessional credits and subsidized foreign exchange for priority sectors, unrealized exchange rate losses, and losses incurred by the central bank’s open market operations to mop up liquidities.

B.Roads Sector

1. Zimbabwehas a classified road network of about 88,300 kilometers (km), of which about 15,000 kmis paved. The national paved road network has largely remained in fair or good condition but significant deterioration is occurring on urban and unpaved rural roads. About 24 percent of the entire road network was estimated to be in good condition in 2005.

1. The Southern African Development Community Protocol on Transport, Communications and Meteorology (1996)commits Member States to the reform of road sector institutions. The Zimbabwe Road Sector Reform and Development Processresulted in the creation of the Zimbabwe National Road Administration (ZINARA) and the Road Fund in 2001. Since the creation of ZINARA, slow progress has been made with further institutional reforms, including the transformation of the Department of Roads (DoR) into a semi-autonomous State Highway Authority (SHA). Commercialization of road sector activities is constrained by uncertain funding, hyper-inflation and foreign exchange shortages. Road Fundrevenues currently provide less than 10 percent of network maintenance requirements. Meanwhile social and environmental issues are not mainstreamed in road sector activities and road accident rates are high due to inadequate coordination between government and private sector agencies.

1. An action plan for the road sector was developed by a ZID Working Group reporting to the ZID Task Force under the Ministry of Transport and Communications (MoTC), for implementation by the MoTC. The plan developed by the working group included short, medium and long term actions. The activities included in the present report have been re-grouped into those that could be completed in the near future and those that will take a longer time to prepare and implement. The proposed long-term actions cannot realistically be undertaken without stability in the local economy. The timeframe for the latter could be reduced once the political climate in the country has changed.

1. Immediate Action Plan

• Finalize the National Transport Policy document for submission to Cabinet;
• Adopt the Road Safety Review Report (2005)with a mandate to proceed with preparation of a Strategic Plan for road safety;
• Review possible measures to increase revenues accruing to the Road Fund;and
• Promote community participation on a pilot basis, in rural road maintenance through self-help initiatives and food-for-work, supported by non-government organizations.

1. Long Term Action Plan

• Prepare enabling legislation for the transformation of the Department of Roads into a semi-independent State Highway Authority;
• Prepare aNational Road Network Development Plan;
• Installa road network management system; and
• Rebuild technical capacity in road sector institutions through appointment of qualified staff to vacant positions, and revival of intensive training programs to strengthen sector capacity.

Private Sector Participation

1. The government published the Public Private Partnerships (PPP) Policy and Guidelines in 2004 to promote economic growth through collaboration with the private sector in the provision of infrastructure. The legal instruments required to support policy implementation are still in draft form. PPPsare a mechanism to mobilize potential private sector funding and expertise in the roads sector. Some forms of private participation such as performance based maintenance contracts (PBMC) could be piloted immediately. Other forms of PPP are less likely to attract private interest in the current inflationary environment with low and declining traffic. However, steps may be taken to prepare the ground for private participation in the roads sector, as and when the economy stabilizes. The following next steps are suggested for promotion of PPPs in the roads sector.

• Enact proposed PPP legislation;
• Ensure clear allocation of responsibility between the MoTC and the proposed State Highway Authority for the promotion and regulation of PPPs; and
• Pilot the PBMC approach for road maintenance.

Regional Integration

1. The corridor development concept has been adopted by the Southern African Development Community (SADC) member states to promote regional economic integration. Infrastructure development along these corridors supports economic development, in particular the implementation of “Anchor Projects” in the mining, agriculture and manufacturing sectors. Zimbabwe is currently participating in the Trans-Limpopo Spatial Development Initiative (SDI), the Beira Development Corridor and the Zambezi Valley Spatial Development Initiative. The government is seeking donor support for feasibility studies, GIS mapping, stakeholder workshops, and an investor conference linked to the SDI process.

1. Zimbabwe is also committed to a range of road sector activities promoted by SADC to enhance regional integration. These include harmonization of road signs and drivers’ licenses, provision of one-stop border posts, axle load control, and upgrading of trunk roads to comply with SADC standards. The rate of progress on all of these initiatives is constrained by ashortage of funds and inadequate management capacity in road authorities, and slow progress with implementing PPPs in the road sector.

C.Rail Sector

1. The National Railways of Zimbabwe (NRZ) rail network has a single track route length of 2,590km. The total locomotive fleet size in 2006 was 213. NRZ has more than 10,500 wagons, of which about half are sidelined. Over the past five yearsNRZ’s technical, operational, and financial performance has been adversely affected by the instabilities in the Zimbabwean economy. There is a critical shortage of foreign currency required for the procurement of essential items such as fuel and spare parts. The declining economyand provision of uncompensated public service obligationshave led to poor fiscal performance. As a quasi-government organization, NRZcannot always respond to market dynamics. This hasculminated in loss of network capacity leading to reduced traffic, reduced revenues, and reduced availability of funds for infrastructure maintenance and renewal. The dilapidated state of infrastructure has resulted in some major accidents and derailments.

1. The following actions are proposed to address key issues impacting performance of the railway sector; these were developed by the railway working group reporting to the ZID Task Force in the MoTC. Most of them are proposed for implementation by NRZ.

Immediate Action Plan