Document of The World Bank FOR OMCIAL USE ONLY MICROFICHE COPY Report No. 10619-ZR Type: (PCR) ReportNo. 10619 ANDERSON, / X31676 / T9 111/ OEDD2 PROJECT COMPLETION REPORT ZAIRE FOURTH, FIFTH AND SIXTH DEVELOPMENT FINANCE PROJECTS (CREDITS 710-ZR, 998-ZR AND 1273-ZR) APRIL 30, 1992 Industry and Energy Operations Division South-Central and Indian Ocean Department Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS 1 Special Drawing Right (SDR) = 1.15 US Year Value of USS 1985 61.3 1986 87.0 1987 186.6 1988 368.7 1989 597.4 1990 2845.3 ACRONYMS AND ABBREVIATIONS DFI - Development Finance Institution GDP - Gross Domestic Product IDA - International Development Association IFC - International Finance Corporation SME - Small-and Medium-Scale Enterprises SOFIDE - Societe Financiere de D6veloppement FISCAL YFAR January 1 - December 31 FOR OFFCIAL USE, ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Directnr-Gerwal Oper ati Evauatin April 30, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECTs Project Completion Report on Zaire Fourth, Fifth and Sixth Development Finance Projects (Credits 710-ZR. 998-ZR and 1273-ZR) Attached, for information, is a copy of a report entitled "Project Completion Report on Zaire - Fourth, Fifth and Sixth Development Finance Projects (Credits 710-ZR, 998-ZR and 1273-ZR)" prepared by the Industry and Energy Operations Division, South-Central and Indian Ocean Department of the Africa Regional Office, with Part II contributed by the Borrower. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFMFCUAL USE ONLY PROJECT COMPLETION REPORT ZAIRE FOURTHR FIFTH AND SIXTH DEVELOPMENT FINANCE PROJECTS CREDITS 710-ZR, 998-ZR AND 1273-ZR TABLE OF CONTENTS Pare No Preface . . . . . . ............. . * * * * * * * * * * * * * * * * * * * ±...... Evaluation Summary lii Part . PROJECT REVIEW FROM BANK' S PERSPECTIVE 1. Project Identity 1 2. Background .1 Introduction1 Economic Background ................. 2 3. Project Objectives . . . . . . . . . . . . . . . . . . * 4 4. Project Implementation . . . . . . . . . . . . . . . . . 7 5. Project Results . 8 . . . . . . . . . . . . . . . . . . . 8 Subprojects . . . . . . . . . . . . . . . . . . . . . 10 6. Project Sustainability . . . . . . . . . . . . . . a . . 11 7. Lessons of Experience . . . . . . . . . . . . . . . . . 12 jolt 1. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . . . 15 Part II. STATISTICAL INFORMATION Annex It Related Bank Loans and/or Credits . 19 Annex 2: Project Timetable . . . . . . 20 Annex 3: Loan Disbursements *........... 21 Annex 4: Status of Compliance with Major Covenants . . . 22 Annex 5: Mission Data . . . . . * . . . . . . . . . . . . 23 Annex 6: Evolution of Share Capital Structvre . a . . . . 24 Annex 7: Projected and Actual Financial Performance . . . 25 Annex 8: Evolution of Arrears Situation . . . . . . . . . 32 Annex 9: Chronology of Events and Performance, 1980-89 * 33 Annex 10: Lending and Profitability . . . . . * . . . . . 36 Annex Ils Impact of Inflation on Capital Requirements . . 37 Annex 12: Experience with Subprojects . . . . . . a . . . 38 This document has a restricted distribution and may be used by recipients only in the perfiormance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization. - i - PROJECI COMPLETION REPORT ZAIRE FOURTH. FIFT3 AND SIXTH DEVELOPMENT FINANCE PROJECTS (CREDITS 710-ZR, 998-ZR AND 1273-ZR) PREFACE This is the Project Completion Report (PCR) for the Fourth, Fifth and Sixth Development Finance Projects in Zaire, for which Credits 710-ZR, 998-ZR and 1273-ZR were approved (in 1977, 1980 and 1982, respectively). The Credits totalled US$10 million, US$20 million and SDR 20 million, respectively. The sixth Credit closed in December, 1988 and was fully disbursed. The PCR covers the period 1980-89. The Evaluation Summary and Parts I and III of the PCR were prepared by the Industry and Energy Operations Division of the Africa Country Department III. Preparation began in October, 1990 and is based on inter alia, the Staff Appraisal Reports, Credit and Project Agreements, Supervision reports, r( orts by cofinanciers, correspondence between the Bank and SOFIDE and internal Bank memoranda. Part II was prepared by SOFIDE after reviewing the draft of the sections prepared by the Bank. Part II is SOFIDE's unedited product. iii - PROJECT CONPLETION REPORT ZAIRE FOURTE, FIFTH AND SIXTH DEVELOPMENT FINANCE PROJECTS (CREDITS 710-ZR, 998-ZR AND 1273-ZR) EVALUATION SIMWARY 1. Obiectives. The Fourth, Fifth and Sixth Development Finance Projects provided foreign exchange term finance to the Societ6 Financibre de Developpement (SOFIDE), and represented a continuation of the assistance provided under three earlier lines of credit (annexes in Part III provide project details, including the project timetables, mission and disbursement data and compliance with credit covenants, as well as projected and actual financial performance). Both IDA and IFC have been involved w.ith SOFIDE since its inception in 1970. The fourth, fifth and sixth Credits used SOFIDE as IDA's exclusive intermediary for foreign exchange loans to industry, agriculture and services in Zaire (para. 3.01). These credit lines also sought to implement some institutional reforms within SOFIDE, including the diversification of its lending activities (para. 3.02). 2. Implementation Experience. In general, IDA's experience with these Credits was disappointing. SOFIDE played an important role in the development of the industrial sector in Zaire by providing investment financing and foreign exchange resources and by supporting new enterprises when other financial institutions were unwilling to take risks (para. 5.04). In addition, SOFIDE developed technical expertise in project evaluation and supervision, and enjoying considerable prestige in Zaire until the mid- eighties, provided a training ground for managers that moved on to run other zairian institutions.11 However, SOFIDE's performance during the period under review (1980-89) was worse than projected (see Annex 7 for projected and actual financial results). The main reason for the disappointing performance was the lack of consistency in the management of the economy and the apparent lack of commitment of the Government to reform (para. 2.05). Big swings in macroeconomic and sectoral policies made it almost impossible for an institution such as SOFIDE to operate satisfactorily. Other problems related to the relative weakness of SOFIDE'S management which was either unwilling or unable to improve collections and portfolio quality (para 4.02). In addition, the effects of passing the foreign exchange risk to the final beneficiary which began under the Fifth IDA Credit were not sufficiently taken into account by the Government, SOFIDE and the Bank (para. 4.01). Lastly, IDA staff was consistently optimistic in its assessment of the macroeconomic conditions and of SOFIDE's ability to operate in Zaire's uncertain environment (para. 4.01). Bank staff viewed SOFIDE as a well l/ Takes into account SOFIDE's comments to initial draft of the PCR. - iv _ functioning institution in the Zairian context, and introduced few tough conditions in the operations (para 3.04). SOFIDE's management has not be-n able to come to grips the difficulties of working in Zaire's volatile environment, and the institution has not evolved from its original objectives. It still requires considerable technical assistance, it has not successfully diversified into new areas, or been an innovator in the provision of financial services. However, SOFIDE's performance needs to be viewed in the context of the development of DFI's in Africa, most of which have performed poorly. Given the macroenvironment in which SOFIDE operated, it is not surprising that its performance was below expectations (para. 4.04). A chronology of events and of SOFIDE's performance in the 1980-89 period is given in Annex 9. 3. Re ults. SOFIDE's portfolio deteriorated dramatically during the 19809, with the percentage of the portfolio affected by arrears increasing from 202 at the beginning of the decade to over 9O0 by 1989, while arrears as a percent of the outstanding portfolio increased from 13Z to 28Z during the same period (para. 5.01). Profitability has also suffered, particularly in 1989 when SOFIDE took long o-verdue loan loss provisions (with provisions expense in that year exceeding revenues). The poor portfolio condition and persistently high inflation have eroded SOFIDE's capital base: in 1991, it has negative net worth. A primary reason that SOFIDE has been able to survive this long has been IDA's agreeing to "roll over" its lines of creait into *quasi-equity*, thus shoring up SOFIDE's balance sheet. This technique worked until 1989, when the massive loan provisions ate into all of SOFIDE's paid-in and quasi equity. 4. SOFIDE also did not achieve what was expected in the way of institutional development (para. 5.02). Progress was made in developing technical expertise in project appraisal and supervision. However, appraisal of projects in distorted environments is difficult to carry out, a problem which was compounded by the optimistic evaluation of markets and management capabilities of clients of SOFIDE's staff. A more important weakness has been the inadequacy of financial management. SOFIDE's problems are now more intractable than they were 10 years ago. The new management has made a serious effort and has succeeded in improving collections, and carried out an administrative reorganization and cutbacks in staff. However, a more comprehensive program would be required if SOFIDE is to operate as a viable financial institution. 5. As mentioned above, SOFIDE played an important role in the development of the industrial sector in Zaire. The performance of enterprises financed under the credits appears to have been mixed. IDA- financed projects seem to have followed the trend for SOFIDE as a wholet large marufacturing projects in the main urban centers fared bettez than projects in the rural areas. Given that SOFIDE was not well equipped for lending for small projects in the rural areas, and that Zaire has massive problems of transportation and communications, this result is not difficult to explain (para 5.05). - v - 6. The credits had little impact on the financial sector, since they worked exclusively with SOFIDE and included no general sector conditionality. In an attempt to shift the orientation of its financial sector work, in 1985, IA began a dialogue on sector issues, and in 1987 made a first credit to the batnking secl;or through an APEX institution. However, the unstable macroeconomJc environment has hampered these efforts. 7. Sustainability. SOFIDE's future is in questinn at this point (para. 6.01). IDA suspended commitments on the 8th line of credit in 1989, other donors have delayed increasing their share capital and SOFIDE has undergone a change in management in the past year. If SOFIDE is to have a future in .re, it will need to undergo fundamental restructuring, well beyond a financial recapitalization. Serious consideration must be given to whether or not a DFI can survive in the present macroeconomic and political environment. Even if the answer to that question is positive, fundamental changes in staffing, organization, internal incentives, its cost structure and lending rates as well as the legal framework will be necessary. 8. Lessons Learned. Section 7 of the text provides a lengthy list of lessons learned. Experience in Zaire confirms the view, broadly held in the Bank now, that financial intermediation loans in highly distorted environments are likely to be troubled projects. These projects will also require significant supervision resourcen. IDA should also discourage government from propping up failing institutions unless the Government and the institution demonstrate their commitment to serious reforms in the enabling environment and within the institution. The subsidies provided to SOFIDE reduced accountability and delayed action on collections. At the institutional level, an important lesson is the need to examine carefully the full implications in a change of strategy -- in the case of SOFIDE, from large, stable industrialists located in the main urban centers to small and medium-scale enterprises often located in isolated areas. SOFIDE proved that it did not have the staff, nor the financial strength to handle this diversification of its portfolio. Another important lesson learned on the institutional side is that the management oc institutions operating in uncertain environments need to be especially conservative and knowledgeable of the financial implications of decisions taken. Lastly, DFIs are probably ill-advised to borrow in foreign currency in a high inflation environment, unless their paid-in capital is also denominated in foreign exchange - which is not the case for SOFIDE. Even if the economy were to stabilize, SOFIDE should probably borrow as much as possible in local currency. In general, when borrowing from bilateral and multilateral sources, SOFIDE should pay a fee to the Government for bearing the foreign exchange risk of the loans. PROJECT COMPLETION REPORT ZAIRE FOURTH. FIRTH AND SIXTH DEVELOPMENT FINANCE PROJECTS (CREDITS 710-ZR, 998-ZR, and 1273-ZR) PART It PROJECT REVIEW FROM WORLD BANK'S PERSPECTIVE 1. Prolect Identity Name i Fourth, Fifth and Sixth Development Finance Projects Credit Numbers : 710-ZR, 998-ZR, 1273-ZR RVP Unit : Africa Region Country : Zaire Sector : Industry and Finance 2. Background 2.01 Introduction. The World Bank Group has been intimately linked with the development of the Soci6t6 FinanciAre de D6veloppement (SOFIDE) since its inception in 1970. SOlIDE is the only development finance institution (DFI) in Zaire and is jointly owned by the Government of Zaire (40S), several international donors (including IFC) and local Zairian shareholders (see Annex 6 for details of shareholding). Over the years, SOFIDE has weathered numerous difficulties, not the least being the highly uncertain economic environment in which it has operated. In addition, from the beginning it has experienced managerial difficulties, and had to satisfy the often conflicting aspirations of its many donors. 2.02 This Project Completion Report covers the period 1980-89 and the fourth, fifth and sixth IDA credits to SOFIDE. Subsequent to the Credits under review, IDA approved two additional lines of credit to SOFIDE and included it in a small-scale enterprise project (Annex 1). Because of its poor performance, IDA finally suspended new commtments to SOFIDE in 1989 under DPI VIII. 2.03 At the time that the fourth line of credit was approved (1977), SOFIDE's fin.ncial position and managerial capabilities were weak. It was hoped that continued IDA support would enable SOlIDE to become a stronger institution. Unfortunately, SOFIDS's performance continued to deteriorate and today, SOlIDE is bankrupt. (See Annex 9 for a brief chronology). The story of SOFIDE is filled with lessons for DFI managers, donors and governments. Perhaps most distressingly, many of the warning signs of SOlIDE's difficulties emerged long ago. The two previous Project Completion Reports noted the deficiencies in project appraisal and supervision, the inadequate loan loss provisions and the difficulties of operating in the Zairian economy. Only in 1989, with the suspension of commitments from of interest rates closer to the market and improve access of the private sector to credit and foreign exchange. It w&s far less successiul, however, in improving the allocation and control of public expenditure, incluiding puolic investment. In 1990, the Government again discontinued its adjustment efforts, especially as regards public expenliture, inflation and credit targets, avoidance of external and domestic arrears and parapublic sector reform. 2.06 Concurrent strong stabilization and adjustment measures yielded pnsitive result6 during the initial phase of t5'e adjustment program. Over the 1984-86 period, most key indicators showed sign icant improvements. GDP growth averaged 3.31 p.a., up from 0.7% in !he preceding three years; gross domestic investment expanded by 91 p.a., compared vith 41 p.a. in the preceding three years; export earnings grew by 4.8Z p.a. on average in current dollar tarms while imports contracted by 1.11 pa.; Government's net recourse to d=*mistic credit averaged 1.11 of GDP, compared to 3Z in the preceding three-year period; inflation decelerated from 762 to 241; and the overall fiscal deficit averaged 0.31 of GDP, compared to 2.1Z during the 1981-83 period. 2.07 Equally swift was the negative response to the reversal of adjustment in late 1986. In 1987-89, despite expanding export revenues and a significant increase in net external transfers, GDP growth averaged only 0.61 p.a.; the current account deficit, at 7.61 of GDP, was 7OZ higher than in the preceding three-year period; and inflation soared, particularly in 1987-88. Economic performance reflected the uncertain economic environment, thc rapid deterioration of infrastructure and public services, and the deteriorating public finance situation. 2.08 Because revenues declined without a similar adjustment in expenditures, the overall fiscal deficit of 0.3Z of GDP in 1984-86 increased to 2.4Z in 1987 and peaked at 6.31 in 1988. Since most of the def4 1t was financed with domestic bank credit, money supply more than quadrupled between 1986-88, inflation (year-end) reached 106.5% in 1987 and 92.51 in 1988, and the availability of domestic credit (in real terms) and foreign exchange to the private sector declined sharply. Government's attempt in 1988 to control inflation by delaying exchange rate adjustments and restricting interest rates and p-.. ^es backfired, furthe- depressing economic activity. 2.09 The resumption of the stabilization program in 1989 and the favorable external environment yielded some positive financial results, but could not generate growth because it was short-lived. Higher taxes and improved tax administrasion spurred revenues and expenditures dropped with lower debt service payments. Monetary creation was sharply curtailed and inflation declined to 601 on an annual oasis. However, private investment and growth remained sluggish. GDP is estimated to have declined by 21 in 1989, and per capita inuome contracted by about 5Z, 4 2.10 Given the extreme variability of economic condition., the severe shortrges of foreign exchange and ktgh and variable inflation, it is not surprising taat SOFIDE's portfolio deteriorated over the 1980-89 period. Even the most sophl.sticated bankers would have found operating in this onvironment challenging. The persistently high inflation contributed to SOPIDS'. decline in two way.: (1) its equity base was eroded in real te me despite three capital infusion., relatively high lending spreads and low (relative to t.e health of the portfolis) loan loss provisions; and (ii) the highly volatile environment increased the default risk emanating from individual projects. In particular, once the Government (with the concurrence of IDA and other donors) decided in 1980 that SOFIDE borroweas would have to carry the foreign exchange risk of their loans"1, the default risk of the portfolio increased significantly. 3. Pro4ect Objectives 3.01 The fourth, fifth and sixth lines of credit to SOFIDr (approved in 1977, 1980 and 1982, respectively) were a continuation of the support provided to the institution since its incepto6on. (See Annexes 2-5 for the project timetable, mission and disbursement data, and compliance with credit covenants for these three creditn). These projects used SOFIDE as IDA's exclusive intermediary for foreigiu exchange loans to industry, agriculture and services, and sought to strengthen it through institutional reforms. IDA did not begin to use other intermediaries until 1988 with the approval of the small-scale Jtndustry project. 3.02 An ancillary objective of the IDA Credits was to assist SOFIDE in diversifying its lending operations. In its early years, SOlIDE focused its efforts on serving large industrial concerns in the major cities (primarily Kinshasa).21 Because many of these original clients were at least partially foreign-owned, it became more and more difficult for SOFIDE (especially after the zair±anization measures) to continue lending only to this market segment, even th-sugh it was probably the most profitable. Moreover, other donors were encouraging SOFIDE to assist small-scale entrepreneurs and move into other regions. The steps taken to diversify SOFIDE's operations were taken without making substantive changes in its mode of operations in support of this new lending strategy. Thus, SOlIDE began to make loans in areas of the country in which it had no presence and no way to communicate with borrowers; it began to lend to small enterprises just as it began to pass on the foreign exchange risk to its borrowers; and it appears that SOFIDE never prepared a comprehensive business plan or funding strategy to support these changes in ', Prior to 1980, Government had borne the forelgn exchange risk. As the currency continued to devalue, the Government apparently decided that it could not afford that cost. To this day, SOFIDE's portfolio remains highly concentrated with 10% of the number of loans comprising 70% of amounts outstanding. -5- operatione.. Thus, an important part of any DPI project, eepecially one which is dedicated to the development of a single institution, is the preparation of a sustainable strategy and business plan, agreed with all the shareholders and donors (and the financial and managerial implications of any changes thoroughly votted). 3.03 Another weakness with project design was the reliance on a single institution. IDA's exclusive relationship with SOFIDE for so many years limited its Impact on the financial sector as a whole, both in building relationships vith other institutions as well as in influencing financial sector policy. This was evidenced by the fact that throughout most of the period interest rates for loans in domestic currency were negative in real term. IDA began working on a financial sector adjustment credit in the mid- eighties, and provided a first APEX line in 1986. The problems associated with the reliance on one institution were compounded by the fact that SOPIDE had become isolated from the financial system: its effective lending rates were much higher than the other Zairian banks, it offered only one product, and thus less and less aleievant to its clients. Moreover, increasingly, it was able to operate because of substantial subsidies.'1 3.04. Adeauacv of Project Preparation. As noted above, the lack of a clearly articulated st:'ategy for SOFIDE hampered its performance during the 1980s. Some of the gaps in project preparation include: u ptimistic assumptions about achieving macroeconomic stability in Zaire. The appraisals predicted that inflation would be reduced to levels below 252. In spite of actual performance (in which inflation averaged SO) none of the appraisals seem to have prepared projections for SOFIDE assuming similar rates of inflationg o despite the poor collections and portfolio condition, none of the three lines of credit under review called for strict measures for improving loan supervision and collections. Only the seventh line of credit showed any muscle vis-a-vis reform of the portfolio management systems;'" 3/ Had it done so, chances are that its interest rates would have been increased substantially, and its staff would have been redeployed to the regions. "/ 80sFIDB borrowing costs are effectively subsidized in a variety of ways: the rollovers of IDA lines of credit at very low (grossly negative in real terms) ratesc low borrowing costs on some of Lts other doaor funds; it pays no income tax; many of its loans are guaranteed by the Government of Zaire. S/ It required SOFIDE to prepare action plans for some of its larger troubled project.. It did not set specific performance targets for collectLons or Lmproving arrears ratios. 0 there was an underestimation of the financial difficulties that SOFIDE was experiencing because of the low collection rates. SOFIDE appears to have experienced liquidity problems as far back as 1981. These liquidity problems were masked for the past decade by the "rollover" of the IDA lines of credit (allowing SOFIDE to retain those funds for operations rather than repay the government). Thus, SOFIDE was relying on a mismatch of assets and liabilities for its survival (borrowing long at concessional rates and lending short at market rates). Appraisal reports noted the mismatch, but did not seem to worry that this reduced the incentives for SOFIDE to take corrective action and was the seed of future trouble; during the 1980s, IP4 staff argued for higher spreads for SOFIDE, citing the high administrative costs of its lending program, the need to cross-subsidize certain lines of credit from other donors which had higher interest rates, and the high loan losses. This increase in interest rates (to a spread of over 122 by 1981) effectively priced SOFIDE out of the market, especially vis-a-vis its original, relatively creditworthy client base. As noted above, other structural changes to support the move to small-scale lending were not taken, so that SOFIDE was unable to implement the change in strategy successfully. Then, realizing it had priced itself out of the market,s SOFIDE (with IDA's approval) began in 1984 to bring lending rates (and spreads) down -- just at the time when it needed those spreads to cover the growing loan losses in the portfolio. These moves show very little consideration given to the market-impact of financial changes, and then, the financial impact of a change in market. 0 insufficient financial assessment of SOFIDE. As noted above, IDA did not act in the early part of the decade even though it was clear that SOFIDE's operations had become unsustainable without the IDA rollovers. In addition, some appraisal reports projected a return on assets of 42 -- when the most efficient financial institutions in the world generally operate on a 1-2Z return on assets. Appraisals also did not do a detailed assessment of the quality of the portfolio, the impact of continued low collections on cashflow and the equity base and the impact of inflation and devaluations on the balance sheet, all key aspects of SOFIDE's operations. '/ Much of the problem vis-a-vis other lenders was the foreign exchange risk, which effectively pushed the SOFIDE loan rates well above any other in Zaire. -7- 4. Project Imolementation 4.01 SOFIDE's performance during the 1980-89 period was disappointlng. The main reason for the disappointing performance was the lack of consistency in the management of the economy and the apparent lack of commitment of the Government to reform. Big swings in macroeconomic and sectoral policies made it difficult for an institution such as SOFIDE to operate satisfactorily. However, the relative weakness of SOFIDE'S management reflected in its inability or unwillingness to improve collections and portfolio quality, also contributed to the problem. In addition, the effects of passing the foreign exchange risk to the final beneficiary, which began under the Fifth IDA Credit, were not sufficiently taken into account by the Government, SOFIDE and the Bank. Lastly, IDA was consistently optimistic in its assessment of the macroeconomic conditions and of SOFIDE's ability to operate in Zaire's uncertain environment. Bank staff viewed SOFIDE as a generally well functioning institution in the Zairian context, and introduced few tough conditions in the operations. IDA's appraisal reports projected solid and improving profitability during the 1980s (Annex 7) -- it ended up with a bankrupt institution. 4.02 One of the greatest disappointments during the 1980. was SOlIDE's persistent deterioration in collections performance. Various measures were taken during the period to strengthen this aspect of SOFIDE's operations -- organization changeo, assignment of additional staff to supervision, etc. -- with no tangible results. A major factor in the portfolio problems was the brutal change in borrowers' obligations brought about by passing the foreign exchange risk to the borrower, and the regular devaluation of the Zaire starting with the massive devaluation of 1983. Other factors affecting portfolio performance were the weak appraisals, Inadequate information systems (particularly information about projects beyond Kinshasa), insufficient collateral, weak management and a legal environment which makes foreclosures difficult. SOPIDE appears to have relied heavily on rescheduling as a means of working out loan repayment problems, thus further masking the difficulties in the portfolio. It does not have the technical staff to prepare sustainable workout programs with distressed clients. Also, although, SOPIDS has been able to operate with substantial independence by Zairian standards, it has not been immune to political influence as demonstrated by the fact that it has a few clients which simply have been unwilling (rather than unable) to pay. 4.03 Another gap in project Implementation was the lack of strong management. Throughout the 19700, SOlIDE was run with the help of expatriate managers and advisors, but slowly moved toward a completely local management team which tended not to take into account the views of foreign partners and advisors. In the early 1980s, IDA staff pointed to weaknesses in SOPIDE's accounting and computer systema, and provided technical assistance (both staff and equipment) to cure this deficiency. While SOPIDP's accounting systems seem to have improved because of this assistance, it never developed a strong financial planning capability. This is an unfortunate gap for an institution operating in such a volatile and complex environment. Had SOPIDE had a stronger financial management capability In place, perhaps its liquidity problem would have come to light much earlier and greater urgency -8- attached to improving collectioas. Management information systems remain weak, particularly in providing coniistent and accurate information about the portfolio and between the regions and headquarters. 4.04 Most unfortunately, after nearly 20 years existence, SOFIDE is still not a mature institution. Its appraisal and supervision capabilities remain underdeveloped; it has continued to rely exclusively on Government and donors for funding; its information systems are still ubn.ophisticatedl and it has not developed any additional products or services for its clients. At this polnt, if it is restructured, it will still need to concentrate on basic lending operations. It should be noted that the experience with SOPIDE is similar to that of most development banks in Sub-Saharan Africa. 5. Proiect Results 5.01 Annex 7 details SOFIDE's projected and actual financial operations during 1980-89. The key aspects of its performance are highlighted below: gortfolio Performance: SOFIDE's portfolio deteriorated dramatically during the 1980s, with the percentage of the portfolio affected by arrears increasing from 202 at the beginning of the decade to over 902 by 1989, while arrears as a percent of the outstanding portfolio increased from 132 at the beginning of the decade to 282 at the end (Annex 8) Collections have averaged about 602 of amounts falling due during the period, and SOFIDE has not yet seen a sustained period (i. e. , more than a year) of improved collections. Loan loss provisions were generally well below the necessary levels. When a portfolio audit was done in 1989 and substantial provisions taken, they wiped out SOFIDE's capital base.'1 The poor portfolio performance lies in (i) inadequate project appraisal and supervision: (il) passing on of foreign exchange risk to borrowers unable to carry the risk5 (111) high nominal and real rates of interest, which over time attracted only the most marginal borrowers, and thus further undermined portfolio quality; and (iv) the difficult and erratic economic environment, which would have weakened any institution's portfolio. Although banks in Zaire are probably profitable, they incur in little risk by concentrating in trade financing. ° profitabilitv: SOFIDE's book profitability, as measured by return on assets and equity, averaged 1.12 and 182, respectively between 1980 and 1988. The relatively high return on equity arises because of the low capital base. In 1989, both ratios turned sharply negative because of the large portfolio losses which were recognized in that year. Annex 10, however, shows that when the low collections performance is factored in, the actual profitability was much lower in the years before 1989. Indeed, 7 lt Le expected that addltLonal provlsions wlll be necessary, as collection remaln low and a signifLcant portion of the portfolio remairs nonperformlng, wlth questionable underlying collateral. - 9 - because of relatively high administrative costs in its early years (averaging over 51 even between 1980 and 1984), to remain profitable SOFIDE needed to collect at least 751 of amounts falling due with a 7.51 spread. Since SOFIDE's collections averaged about 601, SOPIDF continually pressed for higher spreads. The high spreads reduced the incentive for collections. Later, when it had priced itself out of the market and brought down both its lending rates and its spreads, it failed to increase collections and thus further eroded Its real profitability. The impact of this poor performance was finally realized in 1989, when SOFIDE's loan loss provisions exceeded revenues and simultaneously wiped out its capital*' ° canital structuret In 1989, the massive loan loss provisions wiped out SOFIDE's capital base. This accounting step, however, was simply a long-overdue recognition of the decapitalization which had been happening for years. In addition to the loan losses, SOlIDE's capital structure was inappropriate to economic conditions. SOFIDE's debts were denominated primarily in foreign exchange, while its capital was In zaires. The continuous cycles of inflation/devaluation ensured that SOFIDF's capital was being eroded each year, whether or not it made losses on its lending operations. Aa shown in Annex 11, with inflation averaging 501 per year for 5 years, SOlIDE would have had to increase its capital by 50001 just to maintain a 3:l debt:equity ratio (assuming that operations remain at the same level in real terms). SOFIDF had two sources of capital: (L) its shareholders, who made two contributions during the period under review; and (ii) IDA, in the form of rollovers (which were treated as "quasi-equity"). By 1988, before the loan write-offo, the quasi-equity from IDA represented nearly 901 of SOFIDE', total capital and quasi-equity (thus makir3 IDA de facto SOFIDE'a largest shareholder, even though the liability remains with the Government). This quasi- equity also represented a subsidy to SOlIDS in its borrowing costs, as SOlIDF only needed to pay 2-4Z in zaires on the funds, while Inflation has averaged over 501 per annum. 5.02 In addition t, the poor financial performance, SOlIDE did not achieve all that was expected in the way of institutional development. SOFIDE achieved Improvements In accounting and computer systems. Progress was made in developing technical expertise in project appraisal and supervision. However, appraisal of projects in distorted environments is difficult to carry out, a problem that was compounded by the fact that SOlIDE staff, often motivated by what some perceived as SOlIDS's development role, tended to be optimistic in their evaluation of markets and management capabilities. A more important weakness has been the inadequacy of financial management. Administrati's costs were not excessive, given the high transaction costs (smaller loans, long dLitances), and may have been inappropriately curtailed in the latter portion of the decade to help reduce costs. - 10 - SOFIDE'. problem, are now more intractable than they were 10 years ago. As noted earlier, the lack of good management allowed SOFIDE to drift along in this condition for over a decade. Indeed, the rollovers and additional equity infusions papered over the liquidity crises in 1981 and 1986, rather than imposing tougher portfolio management efforts. In retrospect, it appears that the Government propped up the institution by allowing increased spreads on IDA lines of credit and the rollovers of IDA funds. At the same time, the other donors (at least those who were shareholders) were being repaid their lines of credit and receiving dividends.91 The projects have also had little impact on the financial sector as a whole. IDA began discussions on sector issues in 1985, but these were not tied to the SOFIDE operations. 5.03 The decision to move SOFIDE away from large industrialists to smaller entrepreneurs also shows mixed results. At first glance, SOFIDE's own poor financial state as well as the poor record of the SMEs that it financed would argue that this move was a strategic mistake (at the end of June 1990, the ratio of arrears to total outstanding averaged 19Z for the large clients and 452 for the small- and medium-sized clients. At that time, large enterprises accounted for 382 of the total outstanding portfolio). Given the poor project preparation and the weak capabilities within SOFIDE, however, perhaps this was simply a failing in implementation. Given the need to create jobs in Zaire, the move to SMEs and local resource-based projects may have been the right step for SOFIDE in contributing to the economy. Because of Weaknesses in the institution, poor entrepreneur selection, the lack of internal controls and comprehensive planning, and the lack of appropriate resources, SOFIDE was not organized for the task. Had it been structured differently (far more decentralized, domestically-sourced finance, different cost structure and lending rate structure, etc.), and paid greater attention to making good loans to worthy entrepreneurs, SOFIDE may have had better success with SMEs. The poor transportation and communications in Zaire would have required special efforts for the strategy to succeed. Subnroiects 5.04 The main characteristics of the subprojects financed under the fourth, fifth and sixth lines of tedit are given in Annex 12. A review of the subprojects, which include so. ie of the most important manufacturing enterprises In the country, confirms the view that SOFIDE played an important role in the develcpment of Zaire's industrial sector by providing investment finance and foreign exchange resources at a time when few financial institutions were extending much domestic credit. The provision of foreign exchange fund. for rehabilitation and working capital loans was also important during the period, given the scarcity of foreign exchange in Zaire (the fifth line of credit provided working capital resources to 13 out of 45 projects). Moreover, the fifth and sixth lines of credit assisted new entrepreneurs (about 202 of the loans extended under the fifth line and one- '/ Given the poor collections performance, SOFIDE should not have been paying dividends during the 1980. -- another sign that no one was looking at cash flow management. - 11 - half of those under the sixth). Finally, during the period covered by these three project., SOFIDE began to give 8reater emphasis to non-manufacturing projects, such as agriculture, forestry and local services. While the fourth 1 ne financed almost exclusively manufacturing projects, by the time of the sixth, manufacturing accounted for only about 1/3 of the projects financed. 5.05 It appears that the IDA subprojects suffered many of the same difficulties of other projects financed by SOFIDE: weak management, insufficient initial capitalization and inadequate working capital (often because of insufficient funds on the part of the entrepreneurs). Indeed, the lack of sufficient risk capital, coupled with continued devaluations and denominating the subloans in foreign exchange, dealt a severe blow to a large portion of SOFIDE's portfolio, including the IDA subprojects. In general, IDA-financed projects seem to have followed the trend for SOEIDE as a whole: large manufacturing projects in the main urban centers fared better than projects in the rural areas. 6. Proiect Sustainabilitv 6.01 SOFIDE's future is highly uncertain at present. IDA suspended commitments in January 1989, the other donors have delayed increasing their share capital, and SOFIDE underwent a change in top management in April 1989. If SOEIDE is to have a future in Zaire, it will need to undergo fundamental restructuring, well beyond a write-off and recapitalization exercise. Government, SOFIDE management and the donor community should consider seriously the following issues in reconstituting SOlIDE: o Can any financial institution be successful in Zaire as long as the macroeconomic framework is so distorted and variable? Is the Government serious about macroeconomic reform? If not, financial intermediation loans are probably inappropriate. ° Does Zaire need a development bank? Can it be put on a profit- making basis, or will it remain (at least partially) a channel for Government and donor programs? If SOFIDE's goals are to be principally welfare-oriented, there may be less expensive ways to make these transfer payments, such as grants through NGOs. o Can SOPIDE survive if the rest of the financial sector is in disarray? Is there a m -ket segment in which SOFIDE can be competitive? Would SOlIDE be more successful if it were making short-term rather then long-term loans? 6.02 The reptructuring of SOFIDE would need to go well beyond a reconstitution of its balance sheet. Depending on the market segments selected, serious consideration will need to be given to (i) the pricing and sourcing of funds for SOEIDE -- making sure that it does not continue to rely on subsidized funding, and ensuring that it has appropriate funds for the types of products it is offering; (ii) assembling an appropriate cadre of staff (and probably including expatriates); (iii) the legal framework in Zaire, and SOFIDE's ability to secure its loans and enforce its interest when the loans go bad; (iv) sufficient managerial autonomy to reduce political - 12 - influence in the institutions and (v) the ability to price loans at market rates and still cover its administrative and funding costs. As implied above, the macroeconomic and sectoral environment in Zaire may be so distorted that it would be foolhardy to expect an institution to survive until those distortions are removed. 7. Lessons of Experience 7.01 Don't make financial intermediation loans in hiahlv distorted environments: IDA started to address broader financial sector issues in the mid-eighties. Although progress was made in introducing some reforms in the sector, work was frustrated by the deterioration in economic management and the macroeconomic environment. A quick glance at the Zairian financial sector shows that the entire system is weak, reflecting the severe instability of the economy. The best use of IDA funds (particularly in the near future) might be technical assistance to the financial sector to sort out institutional weaknesses (portfolio audits, training, better information systems, etc.) in preparation for more stable times. 7.02 Foreian exchante risk: DFIs are probably ill-advised to borrow in foreign currency in a high inflation environment, unless their paid-in capital is also denominated in foreign exchange - which is not the case for SOFIDE. Even if the economy were to stabilize, SOFIDE should probably borrow as much as possible in local currency. In general, when borrowing from bilateral and multilateral sources, SOFIDE should pay a fee to the Government for bearing the foreign exchange risk of the loans. 7.03 Plversifv institutional base for intermediation loans: IDA has relied on SOFIDE as its vehicle for financial Intermediation loans in Zaire for some 16 years, and is still developing an alternative channel for future operations. Considering IDA'. financial contributions, it had limited influence on the evolution of SOFIDE, whose course was determined to a considerable extent by the wishes of other donors who were shareholders. 7.04 Examine carefullv changes In stratety and manate conservatively: SOFIDE diversified away from a relatively strong customer franchise just as the economy was on the brink of collapse. It then moved into market segments for which it was ill-prepared (not close enough to the client, wrong type of funds). The same way that sub-borrowers are expected to prepare feasibility studies for new projects, DFIs also need to explore fully the implications for any change in strategy. The diversification may haxa been the right idea -- but it was poorly executed in the case of SOPIDE. A related lesson is that the management of institutions operating in volatile environments needs to be especially conservative and knowledgeable of the financial implications of decisions taken. These institutions should not grow fast, and should stay close to their original client base during periods of extreme instability. 7.05 Need to do more rigorous financial assessments of institutions: DPI analysis should include cash flow scenarios (especially in inflationary environments and with institutions with low collections), not rely on debttoquity ratios and "resource statements" as measures of liquidity. The - 13 - relative profitability of various lines of business should be examined as well. 7.06 Remove subsidies: High spreads and the rollover of IDA credits provided a comfortable cushion which forestalled any significant efforts to reform the institution. The first mistake was providing this cushion, rather than making SOFIDE compete on an equal footing with other institutions. This was compounded by providing the subsidies without any concrete and sustained lmprovements in SOFIDE's performance. 7.07 Accountability: Pscause of the subsidies, SOFIDE had little incentive to take responsibility for its own performance. Most of the actions taken until 1989 seemed designed to soften the blow and delay the "day of reckoning." These steps, however, distanced SOFIDE further and further from any market tests of viability. 7.08 Lendlnz rate policies: It is not good enough to look at whether lending rates for a DFI are sufficient to cover costs and are positive in real terms. As SOFIDE continued to push up its lending rates to cover its (unrecognized) loan losses, it priced itself out of the market, at least for good credit risks. By attracting the marginal borrowers, it contributed to the deterioration of the portfolio and further losses. In addition, as interest rates for SOFIDE were positive, IDA did not dwell on the overall level of interest rates, which was negative for most of the decade. - 15 - PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE COMMENTS ON THE COMPLETION REPORT ON THE FOURTH. FIFTH AND SIXTH IDA CREDITS 1. ECONOMIC ENVIRONMENT The Fourth, Fifth and Sixth credits were negotiated during the eighties when, because of a tiumber of factors (inflation, difficulties of supplying the country with fuel and spare parts, export problems, shortage of foreign exchange, etc.), the country's economy was already showing obvious signs of serious deterioration. 2. LACK OF AN OPERATING POLICY APPROPRIATE TO THE MACROECONOMIC SITUATION Bowing to pressure from donors and from the government, and taking no account of the uncertainties of the economic environment, SOFIDE stepped up its operations in high-risk sectors (SMEs and agriculture). In addition, efforts were made to decentralize its activities in favor of regional projects, while the economic situation should have counseled greater caution and greater project concentration in urban centers, targeting sectors with relatively little vulnerability to the factors mentioned above. 3. FOREIGN EXCHANGE RISK When the Government decided on February 18, 1980 to pass on the exchange risk to the final borrower, and on September 9, 1983 to allow the zaire to fluctuate, SOPIDE was unable to tailor its operations accordingly. It continued to operate without making appropriate arrangements to adapt its resources, or the way in which they were used, to take account of the possible impact of the exchange risk on the cash flow of projects which, being executed in an uncertain economic environment, presented a greater risk of losing than of gaining foreign exchange. In light of that experience, - SOFIDE's future operating policy should definitely be based on selective exchange risk coverage. Oualitv of evaluation - SOFIDE succeeded in setting up teams of well-trained local analytical technicians that many similar African institutions would envy. - 16 - The main problem with its management teams has been a lack of contact with reality, a situation explained by the fact that monitoring and evaluation have been treated as separate functions and the supervision reports have been consistently disregarded. A further factor has been the absence of a coherent evaluation policy and the comparative inexperience of the team members, all relatively young because of the constant drive to "entice" the best workers into senior positions in the public sector. - Thus, the eighties were characterized by the departure of the first-generation managers, people who would have been able to serve as the General Manager's "support group" in the areas of evaluation, monitoring and financial management. If it does not adopt a policy to attract experienced staff, SOPIDE will remain a young inetitution, inexperienced, and in need of outside assistance to prevent a decline in the quality of its reports. 4. JUSTIFICATION OF SUBSIDIES The indirect subsidization of SOPIDE by the Government, represented by the consolidation of IDA credits and the very favorable cost of those credits, may be explained by the very high cost of financial intermediation linked to the (almost public) development function entrusted to SOFIDE. Until the very recent past, SOFIDE was regarded as the only credible national structure available to the Government and donors for the channeling of resources intended for investment promotion and development. 5. INTEREST RATE POLICY SOFIDE's interest rate policy is justified by the quasi-public function entrusted to it, whereas banks carry on activities that are basically commercial and highly profitable. Moreover, it is significant that before 1984 SOFIDE's foreign exchange loans were granted on the same terms as loans in local currency, for the following reasons: - up until 1980, the Government assumed the entire foreign exchange risk; customers' obligations were denominated in zaires; - from 1980 to 1983, although taking over the foreign exchange risk, SOPIDE's customers enjoyed an 801 subsidy on the actual cost of their foreign exchange purchases, by reason of very strong overvaluation of the Zaire. The monetary reform of September 1983 logically enabled SOLIDE to adjust interest rates on foreign exchange loans, bringing them down from 201 - 17 - to 13.52 a year. At that lovel, there was still a margin doemed relatively excessive, but justifiable on the basis of th need for stronger provisiona* 6. SO01DB ES AT PRESENT IN SUSPENSION OF PAThENTS"1 We do not subscribe to this affirmation. S0PIDE pays its debt. regularly under the contracts signed with its donors. 7. - It Is certainly true that at the beginning of 1989 SOFIDE'a *ltuation was viewed as very precarious, if not uncertain, In light of the deterioration of the principal financial ratios, and, more particularly, of the recovery rate, which reached Its lowest level (42Z) in 1987. But it is also true that the absence of a rapid reaction to this situation was the main reason why the situation continued to deteriorate. - The recovery program, set up In 1989 and completed In June 1990, made it possiblo not only to arrest the deterioration but to stabilize and even Improve the portfolio situation. Tho measures taken made it possible to raise the recovery rate quite spectacularly, from 56.252 in 1988 to 752 in 1989. In 1990, despite further deterioration in the macroeconomic environment, this rate was maintained, and may have even been slightly exeeded. Moreover, SO1IDZ's seriously shaken111financial structure is tending to right itself, thanks to a policy of spending curbs and to the decision to on-lend to SOFIDE the benefits of cancellation of bilateral governmental debts (at least those carried by 80ID). Coumment by World Bank staffs SOVIDE's comment refers to para. 4.01 of Part 1, which discusses SOPIDE'S bankruptcy, but which was initially translated into French as cessation of payments. SOlIDE is correct that lt has never stopped honoring its obllgations. 'V flZU&hft (sketched out) presumed in error for branl60 (shaken) - Translator. - 18 - 8. CONCLUSIONS AND FUTURE PROSPECTS - In light of the situation prevailing during the eighties, and considering the causes of the deterioration of that situation, it is important to study SOFIDE's structure in this new decade, its field of activities, the nature of its resources, the structure of its organization, and the extent of the involvement of the Government, SOFIDE's principal partner. Pending such a study, we can already state with certainty that: 1. SOFIDE will no longer be the traditional development bsJe it was designed to be in the seventies. 2. The Government needs to opt between a SOFIDE specializing in the financing of large and medium- sized enterorises, sufficiently well structured and offering a greater guarantee of repayment, and a SOFIDE geared to the financing of industrial and aaricultural SMEs, scattered throughout regions very remote from the capital, difficult to reach, and presenting a very real risk of insolvency. If the Government and the external partners opt for this latter solution, SOFIDE will need to be given certain guarantees, both financial (nature and cost of resources, operating terms, etc.) and legal (constraints and privileges pertaining to borrower ties) to avoid a return to the present situation. 3. SOFIDE will have to give very serious consideration to diversifying its instruments in order to reduce the risks of medium- and long-term financing. Opportunities to be explored include the money and capital market, and the use of local resources to finance the working capital requirements of credible large enterprises. 4. SOFIDE will also need to look for opportunities for coasortium financing with local banks and international financial institutions (IFC, EIB, CCCE, ADB, etc.) in order to reduce the risks of insolvency. Pending consultations in greater detail concerning SOFIDE's future, and taking account of the country's economic environment, it is essential to continue the freeze on all new operations. - 19- Annex 1 PART m: STATISTICAL INFORMATION POURTH pUI AND SATH DEVElLOPMENT FINANCE PROJCTS (Credits 710-ZR, 998-ZR and 1273-ZR) Related Bank Credits Credt TIe Pupose Year of Statu Approval 190-ZR Funding for coumencement of operations. 1970 Fully disbursed 271-ZR Long-term finance for productive 1971 Fully Investments; strengthen SOFIDEfs appralsal disbursed capabilities. 463-zR Long-term f Inance for productive 1973 Fully lnvestments; strengthen SOFIDE's appraisal disbursed capabilities. 710-ZR Funding for Import content of SOFIDE 1977 Fully subtrojects. disbursed 998-ZR Funding for foreign exchange cost of 1980 Fully productive Investments In Zaire; staff disbursed training, technical assistance & equipment for SOFIDE. 1273-ZR Funding for foreign exchange cost of 1982 Fully productive Investments In Zaire; technical disbursed assistance & policy studies for Coverrment; trainsig, equipment & seminars for SOFIDE & CEPETEDE. 1492-ZR Foreign exchange ffnancing for investment. 1984 Disburse- ments to close December, 1990 1685-ZR Foreign exchange financing for Investment. 1986 Comnitments suspended January, 1989 -20- Annex 2 Project Timetable a. 710-ZR Item Planned Revised Aatual Identification 12/75 Appraisal Mission 5/76 5/76 Postappraisal Mission 8/76 8/76 Credit negotiations 2/77 3/77' Board Approval 5/77 5/77 Credit Signature 8/77 8/77 Credit Effectiveness 10/77 11/77 12/77* Credit Closing 6/81 12/81 12/82 Credit Completion 6/79 1/81 1/81 b. 998-ZR Item Planned Revised Actual Identification 12/77 Preappraisal Mission 5/78 Appraisat Mfssion 9/78 s9/7r Credit negotiations 3/79 4/79P 5/794 Board Approval 7/79 318e Credit Signature f/80 6/80 Credit Effectiveness 8/80 11/80 1/81' Credit CLosing 6/84 6/86 12/86 Credit Completion 6/81 6/83 12/86 a. 1273-ZR Item Planned Revied Actua Preappraisal 5/81 A4praisal Mission 9/81 9/81 Credit negotiations 4/82 4/82 Board Approval 7/82 6/82 Credit Signature 8/82 8/82 Credit Effectiveness 9/82 3/837 Credit Closing 12/84 12/87 12/88 Credit Completion 12/84 12/85 12/88 1. Staff constraints within the World qank. 2. Delays due to missing Presidential (rdonnance and legal opinlons. 3. Macsoeconomic conditions to be evaluated before beginning of negotiations. 4. Delayed to fit with Zairian officials' schedules. S. IDA waited for Goverrnent to reimburse SOFIDE for past foreign exchange losses on all its direct and Indirect borrowings and to establish OGEDEP mechanism for covering foreign exchange risk. 6. Delays due to missing subsidiary loan agreement and legal opinion. 7. Delays due to missing subsidiary loan agreement and legal opinion. - 21 - Annex 3 Loan Disbursements a. 710-ZR Disbursements (in $ millon) Fiscal Year Estbiated Actual Actual as % Actual as X Cumulative Cumulative of Esthkated o f I D A Standard 1978 1.5 1.4 93.3% 700.0% 1979 3.9 6.4 164.1% 918.6% 1980 7.2 8.4 116.7% 644.6% 1981 9.4 9.3 98.9% 309.3% 1982 10.0 9.7 97.0% 197.8% 1983 9.8 98.0% 149.1% 1984 10.0 100.0% 124.8% b. 998-ZR Disbursements (in S million) Fiscal Year EstImated Actual Actual as % Actual as % Cumulative Cumulative of Estimated o f I D A Standard 1981 3.2 0.0 0.0% 0.0% 1982 9.6 4.2 43.8% 301.4% 1983 17.2 12.1 70.3% 466.2% 1984 20.0 15.3 76.5% 254.3% 1985 16.9 84.5% 172.2% 1986 18.8 94.0% 142.4% 1987 20.0 100.0% 113.6% c. 1273-ZR Disbursements (in SDR million) Fiscal Yea Estilated Actual Actual as X Actual as % Cwnulative Cumulative of Estknated o f I D A Standard 1983 1.0 0.0 0.0% 0.0% 1984 8.8 3.7 42.0% 267.1% 1985 16.8 10.8 64.8% 414.6% 1986 20.0 15.7 78.5% 262.0% 1987 16.5 82.5% 168.2% 1988 16.7 83.5% 126.2% 1989 20.0 100.0% 106.6% -22- Annex 4 Status of Compliance with Major Covenants Covenant Stat. of Complnc 1. SOFEDBsa cany out to Project in In compliance aocordance with its Statutes dnd Statement of Policy. 2. SOPIDsh furish to the Asociation all In compliance. iwh inomaton a th Assoiaton shall raonbly requst co nin the adminisaon, operations and finanial condition of SOPIDE. 3. SOFIDE hal funish to the Asociadon In complia Wauid financi dsaements not dte tn six monhs after the and of the fiscl year. 4. Ihe ratio of SOPIDE's long-term debt to its Generally not in compliance becs of equity pls quas-equity shal not exceed 5:1. devaluations. hmo briy in 1984 with capital nwbsrption wmoramd sediy fthouh 1989 (native net worth). S. SONDE sa take steps atdsfty to the In compliaone. n 1980, th Goveronnt d up Asoato a shl be necery to protectiself though OGEDP an administative mechanism agnt risk of loss ret from chnges in the to trnsfr to it al liabilie isg out of past ate of echa betwee thvarous c ncis fiovign xchag borrwing of SOPID. (including Zaidw) usd in its borrwing and SOPIDE e ben to p aon all foign lendn opoeation excag risk to its boe 6. SOFIDE's total invesment in a singl Gally in complianc entepris in limited to not more thn 20% of SOFIDE' paidd-n shae capital, unimpaired reees ad qua-qi ty. - 23 - Annex 6 Use of S.k eoutroe - ieisa Doaw Stage of Date No. of Days In Sp lllzation Prformance Typos of Proj3et Cycle mo/yr persons tfold Reprrsented Rating Status Problem CREDIT nO-UR Throush Agoralal Appralsal 06/76 2 14 Post Apprasal 06/76 1 28 Suoervision Supervision 07/79 2 12 Op. Off icr 2 F Suporvision 08-09/79 4 14 Op. Officer, 2 F/M Financial Analyst Suporvision 08/S0 8 10 Op. Officer/VP 2 F Supervision 12/60 2 10 Op. Officer/YP 2 F/U Suporvision and 06/81 8 14 Op. Officer 2 F/" Preappralsal IDA VI Suporvision 09/82 2 10 Op. Officer 2 F/U Suporvuison 08/88 1 6 Op. Offlcer 2 U CREDIT 90-DR Throuch Aaoratlal Preappralsal 05/76 8 10 Appraisal 09/76 8 12 Op. Officer Suporvision Superviston and 05/81 8 14 Op. Officer 2 F/U Preappralsal IDA VI Suporvision 09/62 2 10 Op. Officer 2 F/U Supervision 08/88 1 8 Op. Officer 2 U Suporvision and 10/88 6 21 Op. Officer, Consultant, 2 F/O Appraisal IDA VII Agriculturalist Supervision 09/64 2 12 Op. Officer/VP 2 F/" Supervision 07/86 2 a Op. Officer 2 F/U Suporvision 11/86 8 4 Op. Officer 2 F/U Suporvision 08/87 1 10 Op. Officer 2 F/U CREDIT 1273-UR Throuch Appraisal Preappralsal 05/81 8 14 Op. Officer Appraisal 09/S1 4 21 Op. Officer, Consultant, Agricultural ist Suoervision Suporvision 09/62 2 10 Op. Officer 2 F/U Suporvision 08/88 1 6 Op. Officer 2 U Supervision and 10/88 6 21 Op. Officer, Consultant, 2 F/O Appraisal IDA VII Agriculturalist Suporvision 09/84 2 12 Op. Officer/YP 2 F/O Suporvision 07/86 2 a Op. Officer 2 F/M Supervision 11/86 8 4 Op. Officer 2 F/U Supervision 08/87 1 10 Op. Officer 2 F/U Supervision 07/88 8 16 Op. Officer 8 F/M Supervision 04/89 S 10 Op. Officer 8 F/M Supervision 09/89 2 21 Op. Officer 8 F Suporvision 02/00 2 14 Op. Officer 8 F -24- Annex 6 SOFDE: Eoduidn of Sare Capitd Structue (in portges) I" 1k end-1989 Totd Share Cpital (mnlion anim) 2 260 Shareholder -arian Public Secto 35.00 40.00 Govemment of Zaire 12.50 20.00 Bak of Zaire 12.50 20.00 ComercWi banks 10.00 0.00 Zairian Privae Sector 20.00 27.20 Commercial Baks 0.00 13.85 Other privat iuveaom 20.00 13.35 Foregn Aid ntfituions 20.94 27.88 CCCE 2.19 7.50 DEG 0.00 7.88 IFC 18.75 10.00 BED 0.00 2.50 Foinp Bnks 24.06 4.92 SWfIDE: Projected and Actual Lending Operations (1977-199) 1] (Z mi lion) 1977 1976 1979 1980 1981 1982 1988 PrjVL. Actual Pro3. ctual Proj. Actual Projl98. AC Pro . Actua P' oj. A Proj. Actual' APPROVALS -Actual _____ ___ -- ___ -G-ans 10.8 21.7 9.4 22.4 10.4 50.4 11.5 66.9 12.8 134.9 98.2 100.4 128.5 416.0 Equity Investents 0.2 0.4 0.2 0.2 0.2 1.3 0.2 0.2 0.3 0.0 0.8 3.1 1.1 0.0 Total Approval. 10.7 22.0 9.6 22.6 10.6 61.7 11.7 66.1 12.9 184.9 98.9 103.5 129.6 416.0 = = = = == COMIT - nS Loing 10.3 16.6 9.9 17.6 10.0 17.8 11.0 38.6 12.1 148.8 70.4 83.2 115.0 620.9 Equity investments 0.2 0.0 0.2 0.2 0.2 0.0 0.2 0.2 0.3 0.0 0.8 0.0 1.1 0.0 Total Comitments 10.4 16.8 10.1 17.8 10.2 17.6 11.3 38.8 12.4 148.8 71.2 83.2 116.1 520.9 == = = = = = DISBIUSEMENTS Loans 9.1 6.4 10.1 11.0 10.0 28.2 10.5 64.6 11.6 48.4 148.3 93.8 146.9 617.8 Equity investment. 0.2 0.2 0.2 0.5 0.2 0.2 0.2 0.3 0.0 0.8 0.0 1.1 0.0 Total 9.8 6.0 10.8 11.6 10.2 23.2 10.7 64.6 11.6 48.4 149.0 93.8 147.0 617.8 1 = = - =3 - =n 1984 1986 1966 1987 1988 1989 APROVALS LProi Actual Proi. Actual Proi. A Proj. Actual ProjL Actua fPo. Actual Loans 169.0 941.6 179.8 1689.9 1780.0 1288.9 2488.0 4820.4 3126.0 6972.4 4116.0 1196.0 Equity investments 1.6 8.2 2.1 0.0 10.0 0.0 14.0 0.0 16.0 0.0 26.0 0.0 Total Approvals 160.5 944.8 161.4 1689.9 1740.0 1238.9 2447.0 4320.4 3144.0 6972.4 4142.0 1196.0 =_== = = = COIZITMENTS Lons- 145.2 683.8 169.6 1900.0 2050.0 2642.0 2816.0 2781.0 2977.0 4742.0 8925.0 1682.6 Equity lnvestment. 1.6 8.2 2.1 0.0 10.0 0.0 14.0 0.0 16.0 0.0 26.0 0.0 Total Comitments 146.7 567 171.7 1900.0 2080.0 2842.0 2880.0 2781.0 2995.0 4742.0 3961.0 1582.6 = == = == DISBWSEMENTS Loans 112.4 761.5 146.6 1795.0 1971.0 4764.0 1998.0 8946.1 2640.0 6688.1 8480.0 11,011.1 Equity Investment. 1.5 5.4 2.1 0.0 10.0 6.1 14.0 0.0 18.0 0.0 26.0 0.0 Total 118.9 756.9 148.9 1795.0 1961.0 4770.1 2012.0 8946.1 2a68.0 6686.1 8506.0 11,011.1 = = - =- = X___ 11 SWIRCES: _ Pro ected Data: 1977-81, IDA appraisal of SOfIDE IV; 1962-65, IDA appraisal of SOFIDE VI; 1988-69, IDA appraisal of SOfIDE VIII. Actual Date 1977-79, Supervision Report of 07/27/81; 1980-83, Supervision Report of 11/19/84; 1984-88, Supervision Report of 05/28/89; 1969, the corresponding Annual Report. SIKEs Projecte Ins Statemsts (116O - 160 11 l960 1961 1962 ls6 1094 1965 196s 1097 1908 199 Loan Portfolto Intersts and Commissions on Loans 13 22.07 87.61 56.01 67.71 60.22 u9s 1196 1804 2077 Investment Intr.st 0.9 0.21 0.51 1.02 1.31 1.04 14 19 44 70 DivIdbdI 0.1 0.06 0.06 0.11 0.16 0.22 } ) ) ) Otr Inc- - - - - - 18 20 }6 a40 Total Ineo 14 22.84 38.2 56.14 69.16 81.48 671 1288 1684 2167 EXPES Administration Coste 4.8 11.29 16.86 22.78 81.1 41.69 121 155 194 244 Provisions 2] 1.5 1.6 6.4 8.85 1.88 2.1 269 860 447 517 Depreciation 0.1 0.66 0.65 0.75 0.86 0.99 10 80 43 54 Borrowing Cost 6 8.89 18.66 28.22 29.89 88.88 288 487 616 865 Total Expenses 6.4 22.34 87.08 50.1 62.68 76.51 708 982 1300 ls6 Net Profit 7.6 - 1.12 6.04 6.5 2.97 168 256 884 519 Allocated to: Logal Resrve - - 0.11 0.6 0.66 0.8 Dividends 8.6 - 1.01 1.2 1.2 1.2 40 46 5588 1] For 1900 as per IDA appraisal of SOFIDE V, for 1981-45 as per IDA appraisal of SOFIDE VI, for 1906-1989 as per IDA appraisal of SOFIDE VIII, FOR 1990 as per SOFIDE Budget. 23 Provisions include the Provision for General Risks. x SOfIDE: Actual looono Statemennt (1960 - 190) (Z Pi Iion) 1980 1981 1982 1903 1984 1986 1986 1987 1988 1969 Loan Portfolio Inter es and Commissions on Loans 10.1 22.8 86.4 92.8 216.7 488.0 844.0 1978.5 t882.0 5302.8 (interst) (8.7) (19.1) (80.8) (89.1) (198.1) (444.5) (821.2) (1905.6) (3218.4) (5189.4) Invostment Interest 0.8 0.4 0.7 7.0 16.1 82.7 15.0 20.2 164.7 786.8 Othrr Inco 1.0 1.3 1.9 36.9 20.1 28.4 32.8 114.1 264.4 1680.2 Total Inoe 12.0 24.4 38.0 186.7 262.9 644.1 M.8 2107.6 3811.1 7649.9 EXPNSES I Administration Costr 6.7 9.1 14.9 28.9 06.7 103.8 164.8 286.6 616.8 128.7 Provisions 0.8 5.0 4.9 46.2 90.4 226.0 858.1 1026.4 1996.0 9019.8 Depredatton 0.8 0.6 0.7 5.9 9.6 18.0 12.2 22.3 69.7 160.0 Borrowing Costs 3.9 9.6 15.4 41.1 68.1 160.5 295.1 698.1 1087.8 2606.1 Other Expns .8 - - 15.8 0.9 Total Expenrm 10.8 24.2 85.9 122.1 226.8 502.1 815.2 2081.4 3788.6 18111.6 Net Profit, 1.2 0.8 2.1 14.6 24.1 42.0 77.1 76.4 77.6 -6461.6 A l ocated to: LgPI Resrv 0.4 2.4 4.2 7.7 7.6 7.7 - DIVIdende 1.1 ) 2.6 14.8 81.2 - - 39.0 - Retaine Erniugs 0.6 12.0 6.9 6.6 69.4 68.6 80.8 - x SOFIDE: Projected Balono Sheat. (1900-90) 1] 196 1981 102 106 1984 1986 1986 1907 1906 1989 i'iU rrent Asets 2 83] 12.2 (18.1) (7.6) 24.6 52.7 c4.4 286.0 1115.0 1687.0 8078.0 Loan Portfolio 06.8 154.5 265.8 849.2 862.4 484.6 4682.0 6626.0 9265.0 11868.0 Lee Provisions (8.5) (4.21) (10.61) (18.96) (15.29) (17.89) (620) (960) (1427) (1944) Not Loan Portfolio 06.8 160.8 254.6 886.2 387.1 417.8 4212.0 5646.0 7829.0 9909.0 Equity Investment 4.2 2.0 2.7 3.7 6.2 7.8 49.0 68.0 61.0 107.0 Not Fixed Asset. 0.9 5.7 6.2 6.9 7.6 6.6 807.0 208.0 275.0 255.0 Tot l 112.6 144.6 265.9 870.5 482.6 486.1 4865.0 7117.0 9022.0 18842.0 ASLITIESM Special Fund for Agriculture 0.6 10.7 11.6 10.5 9.2 7.9) Term Foreign Currency Loans 67.9 69.6 190.9 281.0 811.2 847.7 8787.0 56s6.0 6006.0 10872.0 - not Indexed - 20.6 22.5 24.5 20.4 16.8 -- - - - Indexed - 69.1 168.4 256.6 290.9 881.5 -- - Sub-total 67.9 89.6 190.9 201.0 811.2 847.7 8737.0 5669.0 6005.0 10872.0 galS ELU M gov rn nt L5o 6.0 5.0 5.0 5.0 6.0 5.0 6.0 5.0 5.0 5.0 Government advanc 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Rolled Over IDA 18.1 24.4 88.0 68.9 81.8 102.7 706.0 608.0 666.0 1070.0 Sub-total 19.1 80.4 89.0 69.9 87.8 106.7 712.0 614.0 874.0 1076.0 3!ir--Capital 4.0 12.0 12.0 12.0 12.0 12.0 260.0 26.0 M2600 260.0 Reserves *nd Retained Earnings 1.0 2.1 2.2 7.1 12.4 18.8 144.0 854.0 668.0 1184.0 Sub-total 6.0 14.1 14.2 19.1 24.4 26.1 404.0 614.0 943.0 1894.0 Tot.l 112.6 144.6 255.9 870.5 482.6 490.5 4865.0 7117.0 9622.0 18842.0 1] For 1980 as per IDA appraisal of SOFIDE V, for 1981-865 as per IDA appraisal of SOFIDE VI, for 1986-1989 as per IDA appraisal of SOFIDE VIII, FOR 1990 as per SOFIDE Budget. As a consequence,from 1980 to 1981 and froe 1986 to 1986 there C are Inconsi stencies betsen Salanco Shoots and Incom Statements due to changes In the structure of the expectations X 21 Net Current Assets Include current maturities on term debt and portfolio. 8] The negative current asse t refl ct minly short torn obilgations of tho government to SOFIDE in respect of the foreign exchange risk guaranteed by Government. These are covered adequately In tho Protocol- d'Accord negotiated between SOFIDE and the OC£DEP acting for the Governmnt. SOFIDE: Actual Balance Sheets (1980-90) 1980 1961. 1962. 1963 1964 1965 1986 1967 196s 1989 ASSETS 2rrt Aemato 83.9 86.8 180.0 672.8 766.0 1579.5 1407.7 8174.1 772s.7 11414.0 Net Current Assto 18.7 61.1 66.8 677.6 5 65.7 1208.0 940.6 1969.6 6615.0 8704.0 Loan Portfolio 13 90.2 123.5 173.1 590.5 1276.3 2495.2 5900.0 14044.1 24967.7 60606.0 Less Provisions 23 2.7 7.7 10.8 58.9 142.9 67.0 720.1 1618.9 8690.6 20784.4 Net Loan Portfolio 67.5 116.6 162.8 563.S 1185.4 2128.2 5179.8 12280.2 21277.1 29628.6 Equity Investment. 1.6 2.0 2.3 26.2 81.6 40.1 46.1 77.6 86.6 78.0 loe specific Provisions - - - - 1.5 8.3 3.8 8.8 8.8 21.4 Other AssWs 83 0.1 0.4 0.6 47.9 825.2 664.6 490.4 Not Fixed Asst 5.t8 6.4 7.7 5.8 . 6.1 161.4 268.4 506.7 842.2 4780.6 Total 128.6 212.9 802.7 1286.7 2015.5 3953.6 7218.6 16649.9 80420.6 46020.0 LBULMTES Current Liabilities 20.2 27.7 44.7 96.8 110.4 876.5 467.1 11U4.5 2118.6 2710.0 Term Foreign Currency Loans 78.1 144.2 207.9 1016.9 1581.8 3065.5 5817.6 12982.5 23068.1 88984.0 (not Indexed) - - - 167.4 174.5 264.7 66.8 622.6 1641.3 5088.0 (Indexed) - - - 646.6 1866.8 2600.8 5762.1 12459.7 21421.6 83951.0 Other LiabiItites 43 1.0 2.5 2.9 S.1 9.6 19.9 42.3 116.0 Sub-total 99.8 171.9 252.6 1118.6 1644.6 8460.1 6294.0 14186.9 25219.0 41610.0 GowrWn tlGoamn 5.0 5.0 5.0 12.5 15.0 40.0 13.8 12.9 11.2 9.0 Govrnmnt advace 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Rolled Over IDA 9.2 20.7 29.8 66.6 64.8 161.6 652.5 1869.9 4611.7 9296.0 Rolled Over ACDI - - - - - - - 124.9 175.8 - Sub-total 15.2 26.7 35.3 79.0 100.6 222.6 66. 2028.7 4799.7 9306.0 W-RCapital 12.0 12.0 12.0 12.0 260.0 260.0 260.0 260.0 260.0 260.0 Reserv and Retained Earnings 2.1 2.8 2.6 68.9 10.2 20.9 97.9 174.8 141.6 -58S5.0 Sub-total 14.1 14.8 14.6 95.9 270.2 260.9 867.9 484.8 401.6 -5096.0 Total 126.8 212.6 802.7 1266.6 2015.5 3958.6 7216.7 16649.6 80420.5 46020.0 1] Including the bed debt., with the exception of 1961 and 192 where thy are part of the Current Assets. Se not. below. 9 include the Provision for General Risk. m 8 consits of guarantAe granted. x 43 consiotr of guarantee received, subsidies, social funds and of an outstanding Central Bank participation >4 to SOFIDE's recent capital Increase. m SOURCE: S.A.R. of IDA VII. Under this formet the trm foreign currency loans Include the amounts coming due. SIFUEa Projee Finanlial Iti.. (1990) 13 Ia190 261 1082 190 1984 1968 199e 1907 19s8 1909 Inco s t8e.0mnt *n X of Averats TotaI Asset. Intersts and Commisions on Lomns 14.4 17.0 16.7 17.5 16.3 17.4 19.5 18.7 18.0 16.9 Invt bnk Intrest 1.0 0.2 0.3 0.8 0.8 0.2 0.8 0.8 0.5 0.6 Other Inco. 0.1 0.06 0.04 0.04 0.04 0.06 0.4 0.4 0.4 0.8 Toa l Inco. 15.5 17.8 19.0 17.9 17.2 17.7 20.2 19.4 18.9 17.8 Ad inIstr.tivo ExLps. 5.3 9.0 8.2 7.3 7.7 9.0 2.8 2.4 2.2 2.0 Prowisions 1.7 1.8 8.2 1.1 0.8 0.5 6.7 6.6 5.0 4.2 D)preciation 0.1 0.4 0.8 0.2 0.2 0.2 0.2 0.5 0.5 0.4 Borrowing Cost* 6.6 7.1 6.8 7.4 7.8 7.8 6.7 6.8 6.9 6.9 Total Exposs 18.7 17.8 18.5 16.0 16.6 17.1 16.4 15.4 14.6 18.6 1 0 Not ProfIt 1.8 0.0 0.6 1.9 1.6 0.6 3.8 4.0 4.3 4.2 0 Profltability Indicator (X) Income from Loans as X of Averoe Loan Portfolio 18.0 17.6 18.2 16.8 18.9 19.9 88.1 21.6 21.2 20.7 Financial Exponrs as * of Averge Loan Portfolio 7.7 7.0 6.5 7.6 8.0 8.8 10.9 7.6 7.8 8.1 Average Sprsad 10.8 10.6 11.7 10.7 10.9 11.7 22.1 14.0 13.4 12.6 Return on Equity 82.0 0.0 7.9 81.7 26.7 11.4 40.8 41.? 40.7 37.2 Return on Aseste 1.4 0.0 0.4 1.6 1.5 0.6 3.7 4.0 4.8 4.2 Financial Structure Indicators Term D.bt/Ovorall Equity 8.6 2.0 386 8.0 2.8 2.6 83. 4.0 4.4 4.4 x SIFIDE: Actual Fitsoclal Ratios (1960-40) 1] 1960 1981 1962 1968 1964 19865 1996 1967 1988 1969 Income Statemnt as X of Averae Total Asset Interes and Conmissions on Loans 11.1 14.5 14.9 17.1 15.2 18.5 17.8 16.4 16.1 18.1 Investmont Interest 0.9 0.2 0.8 1.8 1.1 1.2 0.8 0.2 0.7 1.9 Other Incom 1.1 0.8 0.8 6.6 1.4 0.9 0.7 0.9 1.8 8.9 Total Incu . 13.1 15.6 16.0 26.2 17.6 20.6 18.3 16.4 17.1 10.9 Administrative Expense 6.2 5.8 6.8 5.8 4.6 8.9 8.2 2.2 2.8 8.8 Provisions 0.6 3.2 2.1 8.5 6.4 6.6 7.2 8.0 9.0 22.8 D1preciation 0.4 0.4 0.3 1.1 0.7 0.7 0.2 0.2 0.a 0.4 Borrowing Costs 4.8 6.1 6.5 7.6 4.4 5.7 6.0 6.4 4.7 6.4 Total Expenses 11.6 16.4 15.1 22.6 16.1 19.0 16.7 15.6 16.8 82.4 Net Profit 1.8 0.2 0.9 2.7 1.7 1.6 1.0 0.6 0.3 -18.5 w 1 Profitability Indicetor, (X) Incom from Loans as X of Average Loan Portfolio 14.5 19.6 28.4 28.9 28.4 25.6 22.2 18.5 18.2 18.7 Financial Expenss as X of Average Loan Portfolio 6.7 6.2 10.2 12.6 6.8 7.9 7.6 6.5 S.6 6.7 Averag Spread 6.9 11.6 18.2 16.1 16.6 17.7 14.4 12.0 12.6 7.0 Reurn on Equity 9.0 2.2 14.2 86.6 10.0 16.7 25.7 20.6 28.8 127.7 Return on Assoet 1.1 0.2 0.7 8.2 1.5 1.4 1.8 0.6 0.4 -14.1 Financial Structure Indicator, Term Debt/Overall Equity 2.1 2.8 8.7 4.6 8.6 5.1 6.8 6.8 4.4 9.8 oo -32- Annex 8 Evoluto of Amrars Siuation (Z moon) Poiffoli Can xUiLDd Loan9 Affem W 1980 1981 148 13% 46% 1982 211 7% 25% 1983 804 4% 17% 1984 1,312 9% 38% 1985 2,809 12% 53% 1986 5,943 23% 65% 1987 12,995 27% 79% 1988 31,107 29% 88% 1989 50,808 28% 90% Qolaotiau kn bdw ~~~~~Congu Ratio 1983 67% 1984 62% 1985 71% 1986 52% 1987 40% 1988 49% 1989 75% 1. Armw dhe miha or am a pmeretap of total portfolio. 2. Portfolo dtDhixd by anemrs of dthe months or nxmo. 3. Axunts rpaid a a percentae of amounts failing due duing the year. SOFIDE - Chronology of Events nd Performmn, 1960-69 YER MACRO SITUATION MY6 EVENTS/ACTIONS SOFIDE PERFORMANCE 196O Promise of improvem_te. Inflation SOFIDE capital Increased throe-fold. Arrears affected portfolio 50-651(down frorm 1OO); CDP growth Chief Accountant die:, with disastrous M. Liquidity threatened. 1.61. results for financial managomnt. IDA D/E ratio 2.7:1. 5 approved. 1961 Continued improvements in performance SOFIDE implements maor reorganization Arrears affected portfolio In early portion of yer, yielding to delegate authority. Improve quality 28X. D/E ratio 3:1. 2.69 CDP growth and inflation at 38%. of appraisols and followup, improve Evidence of local currency Reversals towards end of year result coordination and information. Lending gap. in suspension of EFF, acceleration of rates increased to 171 for fx Inflation, increas In budget reources, 20X for local (local Is deficit. Currency devalued by 071. still negativo in real term). Subsequntly Increased again to 201 and 80X, respectively to cover increased administrative costs and cross-subsidize other line of credit with lmer spreads. CEPETEDE creoted. 1982 ODP contracts 2.6 percent. Inflation IDA 6 approved. SOFIDE encountering Arrers affected portfolio running at noerly 80X with the budget delays in project implementation 35s. 10X of loans deficit at 9X of GDP. because of difficult economic rescheduled in one year. environment. Arrival of now DOM and Local currency and general Belgian accountant results In major liquidity problems noted. improveents In accounting systems. D/E ratio 8:1. Operations down In real terns. IDA decides SOFIDE Is not a Oproblem' project and plans yearly rathor than *sI-annual supervision isWsions. 1968 sInflation 76, GDP growth a scant IDA 6 credit rolled over to SOFIDE to Collections 765. D/E ratio 0 0.9X. Covernmet implemten msosiv provide liquidity, cover Governnmnt increases to 7:1 after _ devaluation (1261) as beginning of contribution to capital increase and devaluation, prompting adjustmnt progrm with IF. Government guarantes on som failing recapital lizatio. ° project. YEAR MuaCO SrITATION KEY EVENTS/ACTIONS SOFIDE PERFORMANCE 1964 IIF Standby In pice* as Governmt SOFIDE lmplebente another Collections 50. D/E ratio continue with adjustment progrm. reorganization, creating 8 divisions 3:1 after nrw capital. Interbank market In fx created. CP for the 7 deprtmnts. DOM becomes Arrears affected portfolio growth recovoe to 2.7X, Inflation advisor. Capital incr"se completed. 3e8. slws to M2X. FX rates lowered to 15.5X to offst unattractiveness of fx risk to borrowers. IDA 7 approved. SOFIDE prepes action progrm to deal with arrers. 19" Inflation vlews further to 24X, owing Continuation of focus on action Arrears affected portfolio in port to vre credilt squeeze by progrm for reduction in arrears, 623, collections 71X. lovernms.-st (incrase in rserve including reschodulings, indexstlon, Because of continued requirements, higher interest rates). lgl stpa. SOFIDE reduces FX currency dpreciation, D/E UDP growth 2.5. lending rate to 14X. SOFIDE decides ratio worsen to B:1. that It cannot pay dividends until after providing for at lenst 7X of the potfolilo. 1966 GP growth slows to 1K., Inflation IDA 8 approved, with continuation of Collections 525, arrears accelerates to 47X. ISAC approved, actlon program for arrrear, agreed affected portfolio 75X. D/E ove r-ment suspends foreign exchange collection targets. SOFIDE finding It ratio 18:1. Local currency auction. difficult to place fx loans and has gap identiflid. negligible local currency resources. Preoccupied with spiralling collections probleme. 1987 Massive devaluation (88K). Inflation SOFIDE and IDA staff pushing fx risk Collections drop to 40X, running at over 90X. Govrranmnt as major problem confronting with 79X of the portfolio considers taking foreign exchange risk institution. SOFIDE requ*st. and affected. D/E ratio 38:1. on foreign borrowings (including for secure approval of reduction In fx SOFIDE). lending rate to 18X. IDA 8 A 7 rolled over, Without formal IDA approval. 00 0 X YEAR MACRO SITUATION KEY EVENTS/ACTI ONS SOFIDE PERFORMANCE 1963 Adjustmnt progrm abandoned and many IDA supervision mission notes that Over 9OX of portfolio prior reform (Including thom under portfolio difficulties not confined to affected, collections 49X. the ISAC) reversed. In financial tx loans. Appralsal quality declining markets, Central Coemittee announc with departure of key staff. SOFIDE maximu 20X interest rate, despite denied request for IDA 9. Inflation at -x. 1969 Neb GM appointed. IDA suspends Ovor 901 of portfolio disburemente on IDA 8. SOFIDE remains affected, despite creates separate collections Increase In collections to department. Shareholders agre to 7?g. Increrad provisions recapitalize, wipe out existing capital. -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ In 0io 0 - 36 - Annex 10 Lending and Profitability Loan Amount 100 Loan Term 7 years Grace Period 2 years Onlending Rate 14.2% Average Cost of Funds 6.7% operating Expenses 3.3% Bebt Funding 90% Tax 0% Collection Ratio 75% Cash Zlowa Year 0 1 2 3 4 5 6 7 Interest Received 10.6 10.6 9.9 8.3 6.7 5.1 3.5 Cost of Funds _§._Q 6.0 _5.4 4.2 3.0- _ L 0.6 Net Interest Income 4.6 4.6 4.4 4.0 3.6 3.2 2.9 Cash Operating Costs 3.3 3.3 3.1 2.6 2.1 1.6 1.1 Loan Write-Off 0. 0,0 0-R 10 10 1 .0 -1 0 21 Profit Before Tax 1.3 1.3 0.4 0.5 0.6 0.7 0.8 Tax _C0 0.0 _.Q 0.0 .QQ 0.0 0.. Profit After Tax 1.3 1.3 0.4 0.5 0.6 0.7 0.8 Add Back Non-Cash Charges 0.0 0.0 5.0 S.0 5.0 5.0 5.0 Cash from Operations 1.3 1.3 5.4 5.5 5.6 5.7 5.8 Add Principal Collected 0.0 0.0 15.0 15.0 15.0 15.0 15.0 Loes Principal Repayments 0.0 0.0 18.0 18.0 18.0 18.0 18.0 Equity Invested tl.O Q , _ _ Not Cash Flow to Equity (10.0) 1.3 1.3 2.4 2.5 2.6 2.7 2.8 memo tms Principal Outstanding 100 100 85 70 55 40 25 - 37 - Annex 11 impact of inflation on Capital Requlremeats Year 1 2 3 4 5 InflatLon index 100.0 150.0 225.0 337.5 506.3 Debt:ZquLty Ratio 3:1 Net ROA 2.0% Total Assets 20,000 30,000 67,500 227,813 1.153,302 Total Debt 15,000 22,500 50,625 170,859 864,976 Total Equity 5,000 7,500 16,875 56,953 288,325 Retained Earnings 400 S00 975 2,953 13,811 New Pald-In Capital 4,600 2,000 8,400 37,125 217,561 growth ln Total gquity (%) 150 337.5 1139.1 5766.5 - 38 - Annex 12a Experience with Subprojects Summary: Chaacteistics of Subprojects A. Credit 710-ZR (US $ 10 million) .19 projects financed .14 above fiee-limit, 5 below .all but dtree in manufacturing .average above free limit loan - US $695,000 .average below fee limit loan = US $ 61,000 .5 rebabilitation, 11 expansions, 3 new projects B. Cledit 998-ZR (US $ 20 million) .45 projects financed (including 2 for technical assistance) .14 above free-limit, 16 below, 13 workdng capital loans .in investment loans: 11 rehabilitation, 8 new, 11 expansions , average loan by category: Above free limit industry = US $ 1.0 million Above free limit agriculture = US $ 1.0 million Below fre limit industry - US $ 150,500 Below fee limit agriculture = US $ 150,000 Working Capital = US $ 205,000 .secto-l distribution: Manufacturng and Mining = 23 Agrculture and Forestry = 16 Services 4 C. Credit 1273-ZR (SDR 20 million) .71 projects financed (including 28 technical assistance - 14 of which to CEPETEDE) .21 above free-limit; 22 below .im investment loans: 14 rehabilitation; 14 expansions; 14 new; 1 working capital average loan by category: Above free limit industry - SDR 768,000 Above free limit agriculture - SDR 1.0 million Below fcee limit industry = SDR 79,000 Below free limit agriculture - SDR 63,000 Technical assistance - SDR 49,600 .actord distribution: Manufaturing and Mining - 17 Agriculture and Forestry - 18 Seruvics 8 39 - Annox 12b Pop 1 of 2 Experionce with Subprojoe- Credits 710-ZR# 99O-ZR and 1278-ZR Project No X Ovorrun ROl Comments A. Credit 710-ZR COBEGA 28X 1.85 Inflation ralsed Investment coats. TISSAKIN 109X 88X Change In project concept; devaluation. ZAPAK 85X .9X Devaluation Increoasd costs. BATA-ZAIRE 116X soX Local costs Incrased by Inflation. CIMSHABA 841 2X Delays In project lmplementation; devaluation. CIZA 100X 8X Devaluation Incroaed Investment costs. IUPRIZA OX no no B. Credit OW-ZR COBECA 28X 1.81 Inflation. SWANEPOEL 743X 48.C4 Investments Incresed by 1098 devaluation. LENOSRAM 266 OX Affected by 1988 devalutalon. SOCOBE 12X 9X Dolays In imple mntation. BIKARI 785X 24S Implementation delays; changs In project delgn; foreign exchange risk. YUNCERS 292X na Devaluations. EQUATEUR FROID 2400% na Devaluations; delays In Implemetatlon; Insufficient wo: king capital. FERME ELEFERC OX na no SUCRIERE 1021 .6X Dwaviuations. LLI OX no no SAGRICAF 427X 61.1X Inflation; change In equip mnt. EXFORZAM 01 811 na DELTA 122X OX Devaluation; change In lnvoestmnt plan. BONAL 881x 2.8X Devaluation. SIR 114X no Devaluation. COTTONIERE 0% 8X no BKTF 66M 1X Need for additional generators. CAP 1881 8.56 198J devaluation. VANOSCA no no Project never Implemented. MC DESIGN 178X no Local costs of construction rising. SBC ?.8X no Dovaluation. SAVINKAS 421X no Devaluation. PLASTICA 421 no Purchase of additlonal equipment. BOUKIN 826X 98X Devaluation. MEUBLEFLEX no no No data; uncooperative promoter. NDUNCU 961 18.8X Delays In project implemntation; lack of working capital; Inflation. CAMEZA soX no Increase In local coset; devaluation. UFUENI 2781 67.7X Long delays in project lmplemntation and lack of working capital, exposing project to Inflation and depreciation. SAT no no no TF'8ET 431 8.26X Inflation. FITRACO 19791 na Long delay In Implementation; Inflotion. - 40 - Annex 12b Page 2 of 2 Project Nam X Overrun ROl Comments C. Credit 1278-ZR DINTU BLOC 86.5X .61 Inflation. LUJEIIE 10X .41 Devaluation. IMPAZA 48UX 82 1988 devaluation; Inflation. SOKIBOIS 871X 8.7X 19088 devluation; Increased costs. MAZAL 120X .1X Devaluation. KAWANA 8X 28X Inflation. TELA NKOSI 40X 66x Local Inflation. PLEMICO 449X no no UTN 8091 n Projoct not completed. EXFORKA 4X >OX Local Inflation. SCZ BIN"A 8640X no Project delays; devaluation; wek entreprenour. MATSU 820X s6o Devaluation; higher prices for equipmnt. ACEC-ZAIRE 261X -5.4% Doevluation. ITENCO MARBREZA 846X 14X Change In Invoetmnt plan; long delays. ZAIRE ENGINEERING 47X -15X Inflatlon; devaluation; delys in registering securitlie. KABINDA 1B88 no Delays; loan cancelled. COPRA ZAIRE 212X no Devaluation. SOEXfORCO 6.5X 40X Inflation; devaluatlon. TIIK 688X 62x Dovaluation. CIMENT-LACS 670X -64X Devaluation. ACP-SAKU 259X 820X Long delays; devaluation; change In equipmnt. LUNQUANA no 19X no MKL 218X 19X no ACOMAR 0% 4.91 no SWANEPOEL 75X 9.61 Dovalustion. TSHISIDZI 62X no Devaluation; long delays. SIPROCOL 112X no Dovaluation; delays. RIMAKI na no no MURA SWANEPOEL 0OOX 2.61 Devaluation. BAT OX :.6X Partnor pulled out bause of exchange rate risk. CARRICES OX .8X Partial lmplmentatlon. SCAM no no na SDK no no Change of site and project concept; uncooperative client. SCIZAC OX no Lack of working capital credit. SATRAFCOM 82X 28.8X Doveluation. SIFA 20X 14X 1968 devaluation; inflation. STEWERING 7X 27.45 Change In project equipmnt. Characterltice of Subprojects Finwnced Under Credit no-ZR IDA Credit Date of IDA IDA Credlt/ No. of Jobs Subprol ct No. Typ USO thousa Approval Total Costs Sector Activity Locatlon Employees Created IRR ZAPAC A-1 Exp. 1.122 12/19/77 75s Manuf. Paper K Inshasa 113 30 lx MAMA POTO A-2 Rehab. 0.744 12/19/77 48x Manuf. Food Kinshasa es - 85.6x BATA A- Rehab. 0.920 12/19/77 01X Manuf. Shoes Kinshasa 1,465 228 >sox CIZA A-4 Rohab. 1.265 12/19/77 6ox Manuf. Cement L. Zaire 600 -- 15.4X SAVDNKAS A-S New 0.951 12/29/77 37x Manuf. Soap W. Kasai 166 24.3x SOUICl A-6 Rehab. 0.605 01/18/78 47X Minin Gold Kivu 16,168 -- 23a TISSAKIN A-7 Exp. 0.472 02/18/78 27x anuf. Textile Kinshasa 80 20 21X FNNA A- Rehab. 0.880 02/28/78 3ax Manuf. Metal Work Kinshasa 676 -- 20.71 s8K A-9 Exp. 1.7s 08/06/78 26X Manuf . Beverage. Shaba 259 40 27X VA? A-10 Exp. 0.402 08/11/78 34x Manuf. Food 122 38 >501 IPRIMERIES DU ZAIRE A-11 Exp. 0.23 09/01/78 6ox Manuf. Printing Kinshasa 125 -- a5.2x SIFORZAL A-12 Ne_ 0.318 11/14/78 1X Forestry Sawmil Ma luku n.n. n.a. 81.7x UPAK A-13 Exp. 0.278 12/06/78 42x Manuf. Bakery Kinshasa 71 4 >SOX CHANIMETAL A-14 Exp. 0.170 02/03/81 12X Manuf. Metal Work Kinshasa 2,826 163 >sox MAROZA B-1 Exp. 0.075 01/18/78 70X Manuf. Loathor Kinshasa n.a. 20 81.2X TCHIANA B-2 N. 0.080 01/18/78 8X Manuf. Tyro Repair Kinshasa 1S 7 >SOX ZAIRE TRAVEL SERVICE B-8 Exp. 0.07 08/13/78 47X Tranap. Land Tranep. Kivu 89 8 >SOX TORMAT 8-4 Exp. 0.057 03/18/78 76X Manuf. Metal Work Kinshasa 68 28 >SO5 COBEGA B-S Exp. 0.088 10/10/78 821 Manuf. Bottle Cape Kinshasa 248 40.4% XC n- Characteristics of Subproje.te Financed Under Credit US-ZR IDA Credit Date of IDA IDA Credit/ EmpI- Jobs SubDroiect No. Typ (US1 thou*) Approval Total Coats Sector Activity Location oy Created IRR ALDION B-1 Rehab. 67 04/02/01 S8u Transp. Land Transport Kinshasa 62 - >)60 TRABET 0-2 Rehab. 174 04/10/81 745 Mining Sand extraction Kinshasa no - >60X SONAL 8-a Rehab. 200 04/28/01 09X Manuf. Soft drinks Kinshasa 150 - >60X B.K.T.F. B-4 Nbo 240 08/21/81 41X Manuf. Ice Manuf. Kinshasa 27 24 88X NDENW B-6 Rehab. 100 09/29/81 18X Agric. Land Transport Kwilu 40 - 37X UFUENI B-6 New 100 04/08/82 40X Retail Kinshasa 73 9 >505 EqAATEUR FRO0D B-7 New 245 02/17/88 51x Manuf. Ice Manuf. Equateur 0 18 >50X 1E11LEFLEX B-8 Rehab. 78.3 09/16/85 15X Manuf. Furniture Kinshasa na 100 >60X SAVDINKAS W-A-I - 860 11/11/81 Work. Cap. Manuf. Soap W. Kasai 40 - -- MOBIMETAL W-A-2 -- 294.4 12/01/81 Work. Cap Manuf. Framwork Kinshasa 179 -_ __ L _NSWtAU 1-A-3 800 01/28/88 Work. Cap. Manuf. Light BuIbe Kinshaosa 0 -- -- MAROZA W-B-1 - 16O 10/07/81 Work. Cap. Manuf. Leather Products Kinshasa 196 - -- LADHA 1-8-2 __ 208 10/07/81 Work. Cap. Manuf. Shoe Kinshasa 88 -- - CASTOZA-SOUDOM -8- -- 239.9 10/07/81 Work. Cap. Manuf. Electrodes solder na na - _ COBEGA W-4-4 - 270 10/22/81 Work. Cap. Manuf. bottle caps Kinshasa 118 - -- TORMUT W-B-6 - 100 10/29/81 Work. Cap. Manuf. Bolt-and-nut works Ki nuhasa aS -_ __ TUBETRA 86 _ 267 10/29/81 Work. Cap. Manuf. Steel A PVC tuobe Kinshasa na o __ SOGAKOR W-8-7 --- 90 06/17/82 Work. Cap. Manuf. Soft drinks E. Kasai 120 - -- BATA W4-8 -- 288 09/27/82 Work. Cap. Manuf. Shoes Kinshasa 990 -- -- SIR W-B-9 - 40 10/07/82 Work. Cap. Manuf. Shoos Lubumbashi na - _ SBC W-8-10 -- 76 06/12/83 Work. Cap. Manuf. Soft drinks Bag-Zaire 91 -- -- SWANEPOEL A-1 Rehab. 978 03/20/81 76% Constr. Civil engin- ring Shaba 1,000 - 456 PLASTICA A-3 Rehab. 1,170 09/14/81 78% Manuf. Plastic products Kinshasa 614 48 >S0O BOUKIN A-4 Exp. 2,300 09/28/81 609 Manuf. Bottles Kinshasa 288 - 20% CAMEZA A-6 Exp. 1,200 02/02/82 56X Manuf. Rubber/plastic prod. Kinshasa 226 64 27X LLI A-6 Nsu 297 01/06/84 68X Manuf. Shoes Kinshasa 429 22 86X SDK e A-7 Nea 195 01/28/85 3e6 Foretry I" 'Isai na -- >S0X OTCZ * A-8 Rehab. 1,200 11/06/85 Transp. Pass. land transp. .t4hasa na )S >0X LA COTONNIERE AGR-A-1 Rehab. 1,176 02/06/81 64X Agric. Land transport Kivu/Kasai 1,400 - 42X BIKARI AGR-A-2 Exp. 690 02/06/81 50X Forestry Bandundu 68 13 46X KWILU-NOONGO AGR-A-3 Exp. 2,400 03/18/81 76X Agric. Maize/Manioc/Soja Kwilu-Ngongo 4,600 -- 12X DELTA AGR-A-4 Now 573 06/09/81 245 Fishing Fish farming Lebida 70 44 26X FITRACO ACR-A-S New 1,875 08/19/81 34x Fishing Fish trading N. Shaba 264 120 17X SOCOBE AQR-A-8 Rehab. 269 04/08/82 47X Agric. Land transport Equateur 90 -- >60X KIDUE so AGR-A-7 Exp. 255 03/16/83 Manuf. Mil IA transport Shaba 127 - >S0X ELEFERC AGR-B-I Exp. 105 11/24/81 50X Livestock Shaba 62 18 48X SAT AGR-B-2 New 215 04/02/82 32X Agric. Land transport W. Kasai no -- >605 RUKIMIRA AGR-8-3 Exp. 216 02/17/83 68X Agric. Land transport N. Kivu 21 -- -- CAP AOR-B-4 Exp. 73.6 03/15/88 lOX Livestock Kitobola Bas-Zaire 206 63 37X YUNQI KIMENOA AGR-S-6 Exp. 106 03/16/83 48X Agric. Transp. A *quip. Kinshasa 30 -- -- DM5080 AGR-B-8 Exp. 79 03/16/88 42X Livestock Haut-Zaire 68 3 20X COCETRA AGR-B-7 Rehab. 190 03/15/83 65X Agric. Land transport Kivu 86 6 -- VANOS CARROLIDES AGR-8-8 Exp. 217 09/06/86 76X Agric. Coffee_land transp. Haut-Zalre 462 24 >60X 5 MATERIEL de PHONIE T-2 New 32.1 01/14/86 1OO% SOFIDE x TECHNICAL ASSIST. 4 630.7 SOFIDE NOTE : s Becouse of specific delays tho overall amount of these loans was not fully disbursed under this line of credit. The undisbursed balance (US3180,000) was transferred on CR 1273-ZR. os Plus SOR 1,976,000 under Cr. 1492-ZR. Thes amounts represnt 63X of the total costs of the investment. s Plus US8140,000 under Cr. 1273-ZR. Thes amounts represent 55X of the total costs of the investment. CharacOeristics of Subprojects Finmnced Under Credit 1273-ZR IDA Credit Date IDA IDA Credit/ Empl- t Jobs Subproloct No. Typ (SDR thous) Approval Total Costs Sector Activity Location oyeos Created IRR ACEC A-1 Exp. 1000 03/18/83 471 Manuf. Elec. Mach. Kinshasa 244 72 >50% IMPAZA A-2 Rehab. 670 06/30/82 73X Manuf. Printing Shaba 125 - >5O% TMK III A-3 Exp. 1406 07/11/83 671 Transp. Petro. Prod. Kivu 555 na >5O% CARRIAGRES A-4 Rehab. 494.7 02/02/84 S8X Mining Stone Quarry Kinshasa 181 - >SOX CIMENTS LACS A-5 Rehab. 1450 11/10/83 63X Manuf. Cement Shaba 427 - >50% SWANEPOEL A-8 Rehab. 1145 11/16/83 8SX Constr. Civil Works Shaba 620 98 19% SAT-ZAIRE A-7 Rehab. 1142.3 01/31/84 24X Manuf. Cigarette Kinshasa 1031 na 49% ELBEMA A-8 Exp. 364 05/11/84 80% Manuf. Palo Oil Sao-Zaire 175 - >50% UTN A-9 New 808.8 08/02/84 6O% Manuf. Hydroelec. Bar-Zairo 459 na 271 SATRAF A-10 New 424.4 08/27/84 471 Transp. Land A Water Bandundu - 65 381 SOEXFORCO A-11 Exp. 460 10/06/84 281 Forestry SawmI I Bandundu 103 120 261 ZAIRE ENGINEERINO A-12 Rehab. 422 12/10/84 751 Constr. Civil Works Kinshasa 808 - >5SO KINSHASA MOTORS A-13 Ne 51S 02/26/87 621 Manuf. Brako Fluid Kinshasa - 18 >501 SDK sc A-14 New 195 (USIthous) 01/28/85 386 For try W-Knsai - _ >60X BATA c A-1i -- 283 (USIthous) 09/27/82 Work. Cap. Manuf. Shoes Kinshasa 990 - - SOKI8OIS AOR-A-1 New 1400 06/27/83 321 Forestry Sawmill Bandundu 206 371 LUKOLELA PLANTON AGR-A-2 Rehab. 423 07/0/83 57X Agric. Cocoa Equateur 463 47 271 SCZ AGR-A-3 Rehab. 1900 11/09/83 761 Agro-ind. Palm Oil singe 6S10 - 261 DRALO AGR-A-4 New 1420 12/11/84 50X Manuf. Mill Kinshasa - 98 32X SIFA ACR-A-6 Ne 710 07/08/84 51X Forestry Sanmill Equateur - 97 271 MURA-SWANEPOEL AGR-A-6 Exp. 407 07/27/84 661 Agric. maize Shaba 19 39 811 TELA KOSI NGOO AOR-B-1 New 24 04/19/83 - Agric. Cassava/Orndnut Bae-Zaire 23 1 41X KAWANAc ACR-B-2 Exp. 27.8 04/19/83 -- Agric. Coffee Haut-Zaire 101 70 >5O% g PLEMICO. AOR-B-8 Exp. 28.1 04/19/88 - Agric. Coffee/Maize Kivu 20 2 43X TSHIISHADIc AGR-8-4 New 27.8 04/19/83 - Fishing Kinshasa - 9 82X W COPRA ZAIREc AGR-B-5 Exp. 64.6 04/19/83 - Agric. Transport Bas-Zair, na na >60% OCWVI RUSSINGAc AGR-B-6 Exp. 76 04/19/88 -- Livestock Cottle Haut-Zaire 26 na >60X MATSU* AR-B-7 Now 80.3 07/26/88 - Manuf ./Transp. Coffee Bas-Zaire - na 386 LUEMBE. AOR-B-8 Nw 57.2 04/19/83 Livostock Chicken Kinshasa -- na - UKL. AOR-B-9 Exp. 6.6 04/19/83 Forest/Transp. W-Kasai 67 22 >5OX LUNGUANA AOR-S-10 Exp. 28.1 04/19/88 - Agric. Cassava/Maize/Orndnut Bso-Zaire 200 - 391 SIPROCOL* AGR-8-11 Now 66.4 04/19/88 - Agric. Maize/Grndnut/Jute Boa-Zaire - 88 31x ESCO ZAIRE AOR-8-12 cancellation of the SR 162 000 granted to this sub-project. NOUVELLE EXFORCA AGR-3-18 Rehab. 292 09/09/88 731 Forestry Railway Sleepers W-Kasai 600 - >60X RIMAKI ACR-8-14 Rebab. 75 06/10/86 18X Manuf. Paddy Kivu e6 - 43X DIN7U BLOC. 8-1 New 18.1 04/19/88 8X Manuf. Salt (Livestock) Bee-Zaire 26 441 BOUULNC. KABINDAc 9-2 Ne 43.4 04/19/88 s0X Manuf. Bakery W.Kasai - 15 47X ACP SAKU. B- Exp. 41.6 04/19/83 281 Manuf. Woodwork Kinshasa 50 71 37x BOUIJNA. TSHOPOc B-4 Exp. 8.4 04/22/88 7% Manuf. Bakery Haut-Zaire 26 14 >60X MAZAL B-6 Rehab. 162 05/18/83 31X Manuf. matches Kinshasa 427 - >60% SAMUA-SAM B-6 Rehab. 60 07/18/88 28X Agric. Land Transp. Kuilu 8o - )S0X ITEFCC-UARSREZA B-7 Ex 217.6 04/06/86 75X Constr. Marbre Kinshasa 490 15 >S0X oo MAZAI. 8-8 Rehb. 161 04/15/86 64x Manuf Match.r Kinshasa 427 4 >60% ETSMIW 9-9 Rehab. 16 02/26/87 61 Tranup. Rivor Transp. Kinshasa 32 - >60% M 0 NOTE: c These subprojects wre cancelled under OPEC 75 line of credit and approved under Cr 1273-ZR. For ACR-B-1,2,6,7,10 and 11, the amounts quoted take into account the previous disbursemnts under OPEC 76. se Because of specific delays thw noans, approved under the line of credit 998-ZR (respectively Nos.A-7 and WB8), were not fully disburosd at its closing date. Therefore the undisbursed balance (US$ 180 000) was transferred under this line of credit. Cheauo ia" ttes of Ssb$poJeea Fi_ed Usdr Credit 1278-Z sDA Credit Doa .t oDA Credit/ ________cS Nb. T t(SODR thoud) IDA Anoroval Total Coot. Swctor INDUSTRY CASE STUDIES CEPETEDE S-1 - 2.86 12/15/83 0OOX W.J.L.ALLIEZ S-2 - 216 12/16/83 l0S Ministry of Planning ) 228.8 *so V.M.VAN WICHELEN S- - 230 12/19/83 lOO1 Ministry of Planning } 138.5 ** * 05/17/86 STUSY ON LOCAL CONSTRUCTIN MATERIALS S-6 - 12.8 04/11/85 12.1SX Ministry of Planning RECENSEIENT NATIONAL DES ENTREPRISES S-4 - 103.26 01/16/84 1005 Mlnlstry of Planning KMN AUDIT-4SSETS REEVAUUATION STUDY S-6 - 46.72 02/20165 1005 Ministry of Planning GODICAS S-7 - 16.3 10/22/87 100X SOFIDE COWUTER T-1 NM 62 04/11/88 100X SOFIDE CONS. FOR SYSTEM ANAL. ACCT T-2 NM. 14.46 04/11/63 1005 SOFIDE SOBEMAP-SOfTIARE DEVLPT. T-3 N.. 126 05/29/84 1005 SOFIDE STAFF TRAINDNO IN COMUTER. T-4 18 05/29/84 100X SOFIDE TUHILODOB T-5 2.98 100X SOFIDE SWIODE'S PART TC-14 SDR 246.68 T-8 PROJET INFOhhlAIQUE SOP]DE T-7 84.7 06/25/85 1005 SOFIDE DDLI SEMINAR FOR CIT. MANGALA T-8 15.8 09/13/85 1005 SOFIDE BUSSERY CEPETEDE TC-1 6.2 11/07/83 1005 SOFIDE KAYAMBALA CEPETEDE TC-2 4.00 11/09/83 1005 SWIDE IVES BOU.ET CEPETEDE TC-a 18.4 02/06/84 1OOX SOFIDE DILOUTREMER CEPETEDE TC-4 27.11 SOFIDE APPLE II A EqUIPMENT CEPETEDE TC-5 13.9 05/11/84 100s SOFIDE KANDOLO-KABUA CEPETEDE TC-8 18.47 SOFIDE FRANCOIS CANTERINI TC-7 10 01/80/84 OOX SOFIDE COEUGNAS-CEPETEDE TC-8/TC-11 4.65 07/27/84 lOOX SWIDE LUTROT VAWK ECHNIqUE SEMINAR TC-9 8.95 07/27/U4 1OOX SOFIDE SOULET MANAGEMENT CONTROL SEMNDAR TC-10 7.5 07/27/84 1OOX SOFIDE BUSSERY COURSE PROJECT APPRAISAL TC-12 8.2 10/04/84 lOO1 SOFIDE BOULET-EN. ACCOWTIN SEIINR TC-1U 9.4 01/18/84 1005 SOFIDE BOULET-S ACCOWTNDO SEMINAR TC-14 9.4 01/18/84 1005 SOFIDE NOTE: so. To fInane the extension of Mr. ALLIEZ's contract froe 12/01/85 to 11/30/87. _l Mr. VAN WICHELEN had his appointment extended f ro 07/01/68 to 0C/80/90. rhlis mount represents 68.5X of the lnducd costa.Th. other part was ref Inanced under the line of credit 1492-ZR. O x 0 - 45 - Annex 12t SWIdiM Fac_d Unde r CedIt l87-s o Year of Studies Asoroval Pursxs. as Defined at Appraisal Status msect of StUdV 1. Industry 1W8 - To be used by a sector mission Completed Ueeful Input to Case and by CEPETEDE for training appraisal mission. Studles purpos"s. 2. Companlos 19t4 e - A complete census of the ZsirIan Completed National companies. An appropriate Census tr tment of the co looted date. A rapid communication of the reulIt to the uers. S. Assets lo"S - To aosess the enforcement of Completed Revaluation the late Reevaluation Laws and Study the accounting effecta of the firs' indebtednos. 4. Study loS - To Identify viable projectt to Completed on Local lmprovo the quality and supply Construction of construction materlsle In Materials Konongr (W-Kasai), MBuji-Uavi E-Kasal). Kisangani (U-Zaire) and Uukavu (Kivu). 5. Special 19 7 Completed Audit of SOFIDE * They constituted a full cosponent of this lIno of credit. They were selected by an ad hoc Coelittee that Included senior officerc of the Ministry of Planning, of SOWDE and a representlvo of the National Association of Zairian Entrepreneurs. This component also financed teo recruitment of two technical assistants: M r. ALLIE2 appoint as an Industrial Policy Advisor In the productive Sector Division of the Planning Mlnletry, to assist In the formulation and implementateon of an industrlal poiiOV for Zaire. - r. VAN WICHELEN, appointed as an Industrial RhabilIltation Advisor In the Planning Minitry, to strengthen the Ministry's capacity for Industrial policy review and analysis. s This subproject had two components - Data proceolng (accessorios and maintennce) - Training (locally and abroad).