Africa Growing Together Fund provides $42 million loan for Dodoma City Outer Ring Road Construction Project (Linked to Umbrella Project ID#36104)

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 Project 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 August 19, 2019, AGTF signed an $42 million loan agreement (ID#5050200000801) with the Government of Tanzania for the Dodoma City Outer Ring Road Construction Project. On the same day, the African Development Bank (AfDB) issued a $138 million loan (ID#2000200003901) to the Government of Tanzania for the same project. The borrowing terms of these loans, which entered into force on November 18, 2019, are follows: a 24-year maturity, a 4-year grace period, an interest rate of 6-month LIBOR plus 0.89%, a 0.25% commitment fee, and a 0.25% upfront (management) fee. The purpose of the project is to improve transport within Dodoma City and decongest the city by constructing a new dual-carriageway Outer Ring Road (measuring 110.2 km in length). The project has two road construction subcomponents (or ‘lots’): Lot 1: Nala-Veyula-Mtumba-Ihumwa Dry Port (50.2 km); and Lot 2: Ihumwa Dry Port-Matumbulu-Nala (60.0 km). The project also includes several complementary interventions, including: (i) consulting services related to the road works and road studies; (ii) various specially-tailored social infrastructure benefitting women and youth; (iii) institutional capacity building; (iv) urban development related activities aimed at transforming Dodoma into a sustainable City in Tanzania, development of a water and sanitation master plan for Dodoma; and (v) compensation for Project Affected People (PAPs). Significant expected outcomes include: (a) improved overall accessibility to, around and from Dodoma (i.e., increased ability of businesses to provide goods and services, and people’s ability to access education, employment and services); (b) a reduction in transportation costs (including travel time, vehicle operating costs, road and parking facility costs, accident and pollution damages); (c) improved urban planning and management; (d) increased economic productivity, employment generation and, in turn, regional economic development; and (e) a boost to regional integration – a crucial national and continental development objective. The immediate expected beneficiaries of the project include the residents in Dodoma City, its suburbs and the surrounding rural areas with a population of approximately 2.4 million people (2018), of which about a third (0.8 million people) live in the city. CCECC is the contractor responsible for implementation of Lot 1 and AVIC INTL Project Engineering Company is the contractor responsible for implementation of Lot 2. The first AfDB and AGTF loan disbursements took place on November 29, 2019. Civil works contracts were signed by the Tanzania National Roads Agency (TANROADS) and China Civil Engineering Construction Corporation (CCECC) and AVIC INTL Project Engineering Company on July 10, 2020 for Lot 1 and on July 4, 2020. However, advance payments have not yet been requested by the contractors. The project is planned to be implemented over a four-year period (including the Defects Liability Period).

Additional details

1. The AfDB project identification number is P-TZ-DB0-025. 2. This project is also known as the Dodoma City Outer Dual Carriageway Ring Road Project or the Construction Works of Dodoma City Outer Ring Road Project to Dual Carriageway (110.2 km). 3. The total project cost is USD 214.69 million. The project was financed with a USD 138 million AfDB loan, a USD 42 million AGTF loan, and USD 34.69 million of funding from the Government of Tanzania. 4. The methodology for the economic analysis is based on cost-benefit analysis (CBA) by comparing the “with” and “counterfactual” project scenarios for Dodoma City Outer Ring Road (110.2km), over a period of 20 years, using the Highway Development and Management Model (HDM-4). A discount rate of 12%, a standard conversion factor (SCF) of 0.82%, and construction period of 3 years starting in 2019 were adopted. The economic costs consist of: (i) the capital investment costs and (ii) the routine and periodic maintenance expenses. The benefits consist of savings in: (i) vehicle operating costs; (ii) motorized traffic travel time for passenger and cargo; and (iii) maintenance costs. The current (2017) Annual Average Daily Traffic (AADT) on the different Project road sections range from 4,901 to 15,667 vehicles per day. 5. The all-in interest rate (2.947%) was calculated by adding an 0.89% margin to the average 6-month LIBOR rate in August 2019 (2.057%). 6. The margin of 0.89% is calculated by adding the Financing Margin (-0.01%) to the Lending Spread (0.8%) and Maturity Premium (0.1%).

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