Narrative
Full Description
Project narrative
On May 22, 2014, the African Development Bank (AfDB) and the People's Bank of China (PBOC) signed an agreement for the Africa Growing Together Fund (AGTF) (see Umbrella Record ID#36104). The purpose of this $2 billion loan facility was to finance large development projects in Africa between 2014 and 2024. The AGTF is sponsored by the PBOC and the administered by AfDB. Then, on January 18, 2019, AGTF signed an EUR 43.19 million loan agreement (ID#5050200000601) with the Government of Benin for the Kérou-Banikoara Section of the Djougou-Péhunco-Kérou-Banikoara Road Project. On the same day, the African Development Bank (AfDB) issued an EUR 119.93 million loan (ID#2000200003551) to the Government of Benin for the same project. The borrowing terms of these loans are follows: a 25-year maturity, an 8-year grace period, an interest rate of EURIBOR plus a 1% margin, a 0% default (penalty) interest rate, a 0.25% commitment fee, and a 0.25% upfront (management) fee. The purpose of the project is upgrade and tar the 64.26 km Kérou-Banikoara section of the Djougou-Péhunco-Kérou-Banikoara Road (or ‘Cotton Road’). The 64.26 km road section is divided into 2 lots (a 41 km lot and a 23.26 km lot). The 41 km lot is being financed by AGTF and AfDB and the 23.26 km lot is being financed by BOAD and the Government of Benin. This modern earth road is in a very poor state. Its geometric and structural features are not appropriate for traffic and the rainfall and topographic environment. The purpose of the project is, therefore, to improve the level of service of the road. The expected outcomes of upgrading and tarring the road are increase in traffic and trade, reduction in generalized transportation costs and improvement of the living conditions of the population along the road. The reduction in generalized transportation costs on the road will lead to a fall in the cost of production and export of cotton, Benin’s main export crop, and, hence, an improvement in the country’s competitiveness. The expected project beneficiaries are transport service users and the municipalities of Djougou, Péhunco, Kérou and Banikoara. Sinohydro Corporation Ltd. is the contractor responsible for implementation. The project’s environmental categorization was established on November 17, 2015. The project’s Environmental and Social Impact Assessment (ESIA) and the Full Resettlement Plan (FRP) were updated in April 2018 and approved through the issuance of a compliance certificate on July 31, 2018. Project implementation officially commenced on October 28, 2021.
Staff comments
1. The AfDB project identification number is P-BJ-DB0-017. 2. This project is also known as the Djougou-Pehunco-Kerou-PK 183+980 (183.98 km) Road Project and the 209.68 km Djougou-Péhunco-Kérou-Banikoara Road Project. The French project title is travaux d'aménagement et de bitumage de la route Djougou-Péhunco-Kérou-Banikoara (section PK 184-Banikoara). 3. The total project cost is EUR 195.32 million. The project was financed with an EUR 119.93 million AfDB loan, an EUR 43.19 million AGTF loan, an EUR 9.41 million EU-AITF loan, an CFAF 10,000.00 million BOAD loan, and funding from the Government of Benin. 4. The Djougou-Péhunco-Kérou-Banikoara road starts from Djougou, the headquarters of Djougou municipality in Donga Division, crosses Péhunco and Kérou municipalities in Atacora Department, and ends in Banikoara, the headquarters of Banikoara municipality in Alibori Division. 5. An economic analysis was carried out based on the HDM IV model entailing a cost-benefit analysis between the “with project” and “without project” situations over a twenty-year period, and a 12% discount rate. The analysis showed economic rates of return (ERR) by road section ranging from 14.60% to 21.20% and an average net present value (NPV) of CFAF 38.82 billion. 6. The all-in interest rate (0.764%) was calculated by adding an 1% margin to the average 6-month EURIBOR rate in January 2019 (-0.236%). 7. The margin of 1.0% is calculated by adding the Funding Cost Margin (unknown) to the Loan Margin (0.8%) and Maturity Bonus (0.2%). 8. The AGTF loan agreement can be accessed in its entirety via https://www.dropbox.com/s/littkhgv9bjaw2j/0192584001559137801.pdf?dl=0.