Document of
The World Bank                        ;        V
FOR OFFICIAL USE ONLY
Report No. P-3431-ZA
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL DEVELOPMENT ASSOCIATION
TO THE EXECUTIVE DIRECTORS
ON A
PROPOSED CREDIT
IN AN AMOUNT EQUIVALENT TO US$4.3 MILLION
TO THE REPUBLIC OF ZAMBIA
FOR A
MAAMBA COAL ENGINEERING PROJECT
February 18, 1983
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.



CURRENCY EQUIVALENTS
Currency Unit                             Zambian Kwacha (K)
SDR 1.00                                     K   1.28
US$ 1.00                                      K   1.20
K   1.00                                      US$ 0.83
(As the Zambian Kwacha is officially valued in terms of the SDR, the US
Dollar/Zambian Kwacha exchange rate is subject to change. The US
Dollar/Kwacha Rate expressed above was the rate prevailing in mid-February
1983).
FISCAL YEAR
Government: January 1 to December 31
MCL          April 1 to March 31
ABBREVIATIONS
HFO     -   heavy fuel oil
MCL     -   Maamba Collieries Ltd.
mtoe    -   million tonne of oil equivalent
MW      -   Megawatt
tpy     -   tonne per year
UDI     -   Unilateral Declaration of Independence
ZCCM    -   Zambia Consolidated Copper Mines, Ltd.
ZESCO   -   Zambia Electricity Supply Corporation
ZIMCO   -   Zambia Industrial & Mining Corporation, Ltd.



FOR OFFICIAL USE ONLY
REPUBLIC OF ZAMBIA
MAAMBA COAL ENGINEERING PROJECT
CREDIT AND PROJECT SUMMARY
Borrower:            Republic of Zambia.
Beneficiaries:       Zambia Industrial and Mining Corporation Limited
(ZIMCO) and Maamba Collieries Limited (MCL).
Amount:              SDR 4.0 million (US$4.3 million equivalent).
Terms:               Standard.
Relending Terms:    The proceeds of the Credit would be onlent by the
Borrower to ZIMCO repayable in 15 years, including three
years of grace, at a fixed interest rate equal to the
IBRD rate at the time of Credit signing. ZIMCO would
pass on to MCL as a contribution to equity those portions
of the Credit directed to finance the feasibility study
and training (US$ 1.3 million). The remainder of the
Credit directed to finance the cost of critical spare
parts and components and quality control equipment
(US$3.0 million) would be onlent by ZIMCO to MCL for a
period of seven years, including two years of grace,
without addition of any service charge by ZIMCO. The
Borrower will bear the foreign exchange risk. The
Association would reserve the right to refinance the
Credit under any subsequent credit or loan the Bank Group
may provide to finance a coal mine rehabilitation
project.
Project
Description:         The Project would support the Government's efforts to
diversify Zambia's energy consumption away from high cost
petroleum fuels by determining the technical and economic
viability of rehabilitating the Maamba coal mining
operation in southern Zambia. The Project would consist
of the following components:
(i)  technical and economic feasibility study for
reorganizing and rehabilitating the Maamba mining
complex, including an examination of coal pricing
and marketing and a review of Maamba Collieries'
technical and managerial constraints and personnel
training needs;
(ii)  procurement of critical spare parts and components
needed to keep the mining complex operating during
the study period and quality control equipment for
the coal preparation plant; and
(iii)  training of key technical personnel for the
implementation of the repair and maintenance
program.
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.



-ii-
The Project would help the Zambian authorities to
determine if additional investment for a major
rehabilitation of the colliery is economically and
technically justified, while providing spare parts to
ensure that the mining complex continues to operate
during the study period.
Special Risks:       The risks facing the Project relate to the weak and
inexperienced management of MCL and the possibility of
non-availability of foreign exchange resources to match
IDA financing for spare parts. The technical assistance
and other implementation arrangements included in the
Project address these risks.
Estimated Cost:      The estimated cost of the Project, exclusive of taxes and
duties from which the Project is exempt, is as follow:
Foreign   Local    Total
…_--…(in US$ 000s)…
A. Review of technical, economic and
managerial constraints and preparation
of feasibility report for rehabilitation
program                                              770      240      1,010
B. Procurement of:
(a)  critical spare parts and components          3,150       460      3,610
(b) quality control equipment for coal
preparation plant                              200        45        245
C.  Training of engineering personnel                     50       -           50
Base cost estimate                           4,170       745      4,915
Physical contingency                                 420       110       530
Price contingency                                    460       195       655
Total project cost                           5,050    1,050       6,100
Financing Plan:                                        ------(in US$ OOs)-----
IDA                         4,050       250     4,300
ZIMCO/MCL                   1,000       800      1,800
5,050    1,050      6,100



-iii-
--(in US$ OOs)--
Estimated Disbursement of IDA Credit (IDA FY):              84           85
Annual                         2,500        1,800
Cumulative                     2,500        4,300
Rate of Return:            Not Applicable.
Staff Appraisal Report:  No Separate Report.
Map:                       IBRD No. 16844



I



INTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT AND RECOMMENDATION OF THE PRESIDENT
TO THE EXECUTIVE DIRECTORS
ON A PROPOSED CREDIT TO THE REPUBLIC OF ZAMBIA
FOR THE MAAMBA COAL ENGINEERING PROJECT
1.        I submit the following report and recommendation on a proposed
credit to The Republic of Zambia (the Borrower) of SDR 4.0 million
(approximately US$4.3 million equivalent) on standard terms to help finance
the Maamba Coal Engineering Project. The credit proceeds would be onlent
to ZIMCO for 15 years, including three years' grace, at a fixed interest
rate equal to the IBRD rate at the time of credit signing. ZIMCO would
provide that part of the credit (US$1.3 million) directed to finance the
feasibility study and training to MCL as an equity contribution. The
remainder of the credit (US$3.0 million), designated to finance critical
spare parts, components, and quality control equipment, would be onlent by
ZIMCO to MCL repayable in seven years, including two years grace, without
the addition of any service charge. The Borrower would bear the foreign
exchange risk.
PART I - THE ECONOMY
2.        A Country Economic Memorandum on Zambia (Report No. 3007-ZA) was
distributed to the Executive Directors on March 17, 1981. This part is
based on the report's findings and on those of more recent economic
missions to Zambia. Country data sheets are attached as Annex I.
3.        With its mineral resources and plentiful land area suitable for
crops and livestock, Zambia, though landlocked, has the potential for rapid
and sustained development. Economic and social goals since independence in
1964 have been security of transport routes to the sea, reduction of
dependency on copper through agricultural and industrial development, more
equitable distribution of income, and expanded educational and training
opportunities. Progress toward achieving these goals has been below
potential due to structural imbalances in the economy, prolonged turmoil
within the region and, since 1975, a severe economic depression. Increased
educational opportunities and construction of the TAZARA Railway through
Tanzania to Dar es Salaam are the main areas in which substantial progress
has been made.
4.        The economy is heavily dependent on external trade and on
government activity. Imports and exports range between 40 and 45 percent
of GDP. Government expenditures have amounted to about 40 percent of GDP
in recent years and the Government owns a majority share of mining and most
manufacturing enterprises. Much economic activity is dependent on
*     ~    expatriate technical, managerial, and administrative skills.  Despite high
rates of savings and investment, real growth has been disappointing,
averaging only about 2.8 percent a year before the onset of a continuing
period of economic depression starting in 1975.



- 2 -
5.        Diversification efforts have lagged; mining still provides over
90 percent of foreign exchange earnings and 30 percent of gross value
added.1 Agriculture accounts for about 15 percent of current GDP, about
the same as at independence. Manufacturing grew quickly through 1975, but
has since stagnated, due to foreign exchange scarcity and a heavy
dependence on imported inputs. The service sector also grew quickly, to
about 45 percent of GDP, due to Zambia's success in expanding education and
to increased government activity. Income is concentrated in urban areas as
a result of high wages throughout the modern sector and a progressive
deterioration in the rural-urban terms of trade. These factors have caused
major rural-to-urban migration (about 40 percent of the population is
urban) and have contributed to high urban unemployment.
The Current Economic Crisis
6.        Zambia continues to experience an economic and financial crisis
initiated by a 40 percent decline in copper prices in 1975. Unremunerative
producer policies, difficulties in transporting goods to and from the sea
and a decline in copper production exacerbated the situation during the
late 1970s. Real GDP stagnated between 1974 and 1978, and declined by 8
percent in 1979, with mining down 19 percent and agriculture down 10
percent. There was little, if any, growth during the subsequent two years,
although agriculture recovered following two years of poor weather. Real
GNP per capita (US$560 in 1980) is 25 percent below that in 1974.
7.        The balance of payments has been in chronic disequilibrium since
1975, with current account deficits averaging 8 to 10 percent of GDP. In
spite of heavy external borrowing, a build-up in arrears on import payments
and a draw-down on reserves, foreign exchange has been insufficient to
maintain the real value of imports, currently about one-half its level in
1975.   As a result, there persists an economy-wide problem of
underutilization of capacity. This has seriously affected production and
investment especially in the crucial mining sector which has accumulated a
large backlog of maintenance and rehabilitation requirements contributing
directly to recent declines in copper production and exports.
8.        The decline in copper prices severely affected Zambia's fiscal
and monetary positions. In the past, mineral taxes provided a large share
of government revenue, but they have been negligible since 1976. This
contributed to large fiscal deficits, which required domestic bank
borrowing averaging 13 percent of GDP in 1975-77 and 5 percent in 1978-80.
At first, the shortfall in mineral revenue was perceived to be temporary
and expenditure grew rapidly, in part carried by the momentum of large
capital projects already underway. Subsequently, successful efforts have
been made to raise non-mineral revenues, but these efforts have been offset
by large increases in expenditure on defense and subsidies, mostly for
maize imports resulting from poor harvests in 1979 and 1980. Deficit
lIn constant prices. In current prices, however, the contribution
of mining has fallen to about 18 percent of GDP in recent years, due to low
copper prices.



- 3 -
financing absorbed 88 percent of net domestic credit creation between 1975
and 1980, and contributed to a sharp rise in domestic prices, averaging 18
percent per annum during 1976-78 and 11 percent per annum in 1979-81.
9.        A three-year Extended Fund Facility (EFF) of SDR 800 million was
approved by the International Monetary Fund in May 1981. Under the EFF,
the Government was committed to eliminate the maize subsidy and reduce the
fertilizer subsidy by the end of 1983; to increase sorely needed recurrent
expenditure for operations and maintenance in the productive sectors; to
implement economic pricing for products subject to price control; to raise
agricultural producer prices towards world price equivalents; to provide a
larger share of domestic credit to the private sector; and to allocate
sufficient foreign exchange to repay most of the external arrears.
Implementation of the EFF has been difficult; drawings were delayed in
1981, agreement was not reached on a program for 1982, and the EFF was
officially cancelled in July 1982. Since then, the Government and the Fund
have been working towards a new Standby arrangement for 1983.
10.       The Government has recently taken a number of steps to stabilize
Zambia's financial position and improve the incentives for production. The
Kwacha was devalued by 20 percent in January 1983, and interest rates were
raised across the board. The method of price control was changed from
ex-ante approval of most price increases to post-facto review of prices set
by the producing firms themseleves. The budget for 1983 contains large
increases for operations and maintenance for the agriculture and works
ministries; also, substantial reductions are budgeted in the allocations
for subsidies. These measures, together with additional actions being
taken to restructure the external debt, are expected to enable the
Government to reestablish equilibrium within the economy. Together, these
measures indicate that the Government has adopted a more pragmatic and
flexibile approach to the country's macroeconomic problems, which is a
reassuring sign.
Creditworthiness
11.       Zambia's creditworthiness is inextricably linked to the
production and price of copper. Estimates of economically recoverable ore
reserves indicate that copper production could be maintained at present
levels through the mid-1990s, but that depletion of reserves is expected to
cause production to fall off sharply towards the turn of the century.
Thus, Zambia's long-term creditworthiness requires strong measures to
diversify the economy and to develop viable sources of non-mineral
exports. A start has been made during the past three years in the form of
real increases in agricultural producer prices and special tax incentives
which have resulted in increased acreage under cultivation. If sustained,
these measures should help to develop Zambia's long-term potential in this
sector. In addition, the measures noted in the previous paragraph will
assist in laying the groundwork for economic diversification and indicate
that the Government is serious in getting the process underway.
12.       Prior to 1975, Zambia's external public debt was relatively
small, and the debt service ratio was less than 10 percent of exports.
Since then, long-term debt has risen sharply, to an estimated US$2,300



million outstanding and disbursed by end of June 1982. The IBRD and the
People's Republic of China are Zambia's largest official creditors, with
about 15 and 13 percent, respectively, of contractual debt outstanding and
disbursed. In addition, arrears on import payments and external
remittances stood at US$640 million, and net drawings from the IMF at about
US$650 million, as of June 1982.
13.       The servicing of debt became more difficult in the last two years
as a result of continued declines in the price of copper. In nominal
terms, the price of copper fell by 20 percent in 1981 and by a further 15
percent in 1982. In real terms, the 1982 price was the lowest in the
post-World War II era. These developments have caused Zambia's export
earnings to fall sharply, resulting in delays in the servicing of debt. In
addition, large repurchases of drawings under the 1978-79 IMF Standby
arrangement have come due. In all, it is estimated that total debt
service, including interest on arrears and payments to the IMF, were 35
percent of exports in 1981 and approached 50 percent of exports in 1982.
14.       Service on external debt will remain high for the next few years,
even with a projected increase in copper prices. Recovery in prices is
likely for the fundamental reason that the current price of copper is about
15 percent below average world production costs and should tend to rise
towards the long-run supply price. The timing of this increase, however,
is dependent on the speed of recovery in industrial production in the OECD
countries. In the interim, Zambia will continue to experience difficulty
in meeting its debt service obligations and has already announced, at the
time of devaluation, that it would seek relief through rescheduling of
bilateral and private debt. The Government is thus aware of the magnitude
of the problem and has taken various steps to improve its management of
this situation, including the establishment of a new national debt unit to
centralize information on all external debt. At present, Zambia has little
scope for taking on an increase in its debt-servicing obligations due in
the next few years. Hence, additional borrowing should carry grace periods
and maturities such that its servicing can be accommodated within the
country's projected balance of payments constraint. Continued improvements
in macroeconomic policies are expected to improve considerably Zambia's
prospects for diversification and growth over the larger term and, hence,
its capacity to service debt on commercial terms.
PART II - BANK GROUP OPERATIONS IN ZAMBIA
15.       Since 1956, the Bank Group has made 30 loans and 7 credits to
Zambia, totalling about US$619.94 million (net of cancellations). Fourteen
loans and two credits have financed energy, transportation and
communication projects. Four loans and one credit for education have
helped expand Zambia's secondary and higher education systems, teacher
training, and commercial, agricultural and technical education systems.
Two program loans have helped Zambia maintain its development program in
periods of severe economic dislocation. In agriculture and forestry, seven
loans and three credits have been for industrial forest plantations,
livestock, commercial crops, integrated family farming, coffee production



-5-
and smallholder dairy development. Agricultural projects in the Eastern
and Southern Provinces are assisting smallholder farmers. Other loans have
assisted Zambia's urban development program and, through the Development
Bank of Zambia, its manufacturing, agricultural and industrial sectors. A
technical assistance credit is helping the Government improve its planning
and project preparation.
16.       The International Finance Corporation (IFC) has invested about
US$71 million in nine projects in Zambia since 1972. Two investments were
in shoe manufacturing, two in a packaging materials plant, and one each in
the Development Bank of Zambia, cobalt production, textiles and copper
production. The latest IFC investment was approved by the Executive
Directors on June 24, 1982. This investment (US$4.1 million equivalent) is
helping to finance a plant to produce ethanol from biomass (for blending
into gasoline). Summary statements of Bank Group loans, credits and
investments and notes on the execution of ongoing projects are in Annex II.
17.       Until recently, implementation of Bank-assisted projects in
Zambia has proceeded reasonably well. Currently, however, serious delays
are being experienced in the execution of a number of projects,
particularly in agriculture. This is due, in part, to a tight budgetary
situation and the Government's limited ability to mobilize local resources
for its contribution to project financing and for the prefinancing of local
expenditures, which are subsequently to be reimbursed by the Bank/IDA. It
is also partly due to ineffective coordination among government agencies
and lack of timely appointment of counterpart staff.
18.       The deterioration in project implementation has, as expected,
substantially reduced the rate of disbursements on Bank Group loans and
credits. During the first four years of the five year period (FY77-81),
the disbursement rate on loans and credits to Zambia averaged slightly over
25 percent per annum, higher than the Bankwide average of 21.2 percent, or
the 21.5 percent average for the Eastern Africa Region, and well above the
22.2 percent for Tanzania, 23.4 percent for Senegal and 20.2 percent for
Bolivia. In FY81, however, the rate dropped to just over 16 percent,
compared with 20 percent Bankwide, 16.5 percent for Eastern Africa, 22.2
percent for Tanzania, 20.8 percent for Senegal and 21.2 percent for
Bolivia, and a further drop may have occurred in FY82. This problem is
being addressed through provision of technical assistance in projects to
strengthen implementing agencies, more frequent supervision missions, and
increased use of the Resident Mission in monitoring project execution. In
addition, consideration is being given to the establishment of special
project accounts under ongoing projects which should substantially
accelerate disbursements while easing the Government's financial burden.
19.       The Bank Group expects to continue supporting government programs
to reduce dependence on copper, improve the efficiency of the copper
sector, reduce the energy import bill, narrow the urban-rural income gap
and develop local managerial and technical skills. Anticipated lending
reflects the Government's emphasis on directly productive sectors,
particularly agriculture-related activities, and on reducing the burden of
imported energy on the country's foreign exchange earnings. Continued
assistance to education, transportation and industry is also contemplated.



- 6 -
The proposed project is a significant step in assisting Zambia reduce the
future burden of imported petroleum fuels on the country's foreign exchange
earnings, and is the Bank's third operation, outside of electric power, in
the energy sector.
PART III - ENERGY AND COAL SECTORS
A. Energy Base
20.       Zambia is well-endowed with energy resources, most of which are
still only partly explored. The main energy resources are hydropower and
coal, but there are also large amounts of uranium, as well as renewable
resources such as wood, bagasse, molasses, wind, solar and geothermal.
There is as yet no firm indication of exploitable hydrocarbons. The
present hydroelectric generating capacity is about 1,608 MW and the annual
power generation (over 90 percent utilization) is equal to 2.2 million
tonnes of oil equivalent (mtoe). It meets the national demand fully and
part of the demand of Zaire and Zimbabwe. There is sufficient potential
(estimated at 4,000 MW) for further development of hydroelectric power to
meet the country's requirements for decades ahead. Zambia also has ample
coal resources, though most of it is still unexplored.
21.       Fuel wood is the major source of household energy, supplying the
cooking, heating and lighting needs of about 85 percent of the country's
population. The Zambia Sugar Corporation uses the residue bagasse it
produces as an energy source for sugar milling.
22.       Existing geophysical data suggest that certain parts of the
country, in particular the Barotseland basin in the Western Province, have
geological structures favorable to petroleum and/or natural gas. Surveys
are currently underway to determine the country's potential in petroleum
fuels. Large uranium deposits have been found in several parts of the
country, particulary around the Copperbelt and in the rift zone in the
South. Zambia also has several hot springs, some of which were identified
under a UNDP project, but detailed geothermal investigations would have to
be undertaken to provide the basis for establishing their commercial
potential.
23.       Commercial energy consumption in 1981 is estimated at 2.5 mtoe,
of which 1.4 and 0.3 mtoe were met by domestic hydropower and coal,
respectively, and the balance by imported oil and a small amount of
imported coke. In 1980/81, the per capita consumption of electricity was
900 kwh (172 kwh excluding mining); while coal and oil consumption per
capita were about 100 kg and 120 kg, respectively. This compares with 928
kwh of electricity, 350 kg of coal and 100 kg of oil per capita in
Zimbabwe. Hydropower is the main source of industrial energy, constituting
55.4 percent of the total consumption, followed by petroleum products (30.6
percent), coal (11.2 percent) and coke (2.8 percent). Over 80 percent of
the domestic consumption of hydropower, 60 percent of coal consumption and
34 percent of petroleum products consumption are by the mining sector
alone.



24.       Despite conservation efforts by the Government and other
organizations, the share of oil in overall energy demand has been rising.
On the other hand, coal's share of the energy market declined from 16
percent in 1974 to 11 percent in 1981, partly as a result of stagnant
production and rising costs. Coal is used primarily as a heat source in
mining and mineral processing, and not for power generation. It could
replace gradually much of the petroleum products used in the copper
smelters and other industries, and thus make a valuable contribution in the
saving of foreign exchange.
Institutional Structure
25.       The structure of Zambia-s energy sector evolved rapidly over the
last decade and a half, largely in response to the effects of the
Unilateral Declaration of Independence (UDI) in 1965 in neighboring
Zimbabwe, then Southern Rhodesia. Prior to that period nearly all of
Zambia's commercial energy supplies originated from or were imported
through Zimbabwe: petroleum products were shipped by rail from the Feruka
Refinery near Mutare in Zimbabwe; coal for both industrial use and power
generation came from the Hwange (formerly Wankie) coalfield, also in
Zimbabwe; and hydroelectricity was supplied by the Kariba South Power
Station, which, although jointly owned by both-countries, has its
generating facilities and the control centers for the interconnected
systems located within Zimbabwe. In early 1966, as a result of events
subsequent to the UDI, Zambia found itself unable to rely on these
arrangements to meet its commercial energy requirements and had to set up
institutions to develop domestic energy to reduce dependence on external
energy supply sources.
26.       One of the first institutions established was the Zambia
Electricity Supply Corporation with responsbility for the development of
hydroelectric energy. Other institutions established for the development
of other energy resources were the Maamba Collieries Ltd. (MCL), for the
mining of domestic coal, and the Tazama Pipelines, Ltd. for the transport
of crude petroleum from Dar es Salaam in Tanzania to Ndola in Zambia for
refining at the INDENI Petroleum Refinery.
27.       Authority for the development of the country's energy resources
is shared among the above institutions on the one hand, and the Ministry of
Power, Transport and Communications, which is responsible for coordinating
government policy on energy; the Ministry of Mines, responsible for
geothermal and hydrocarbons development; and the Ministry of Agriculture,
which oversees exploitation of biomass energy resources. Partly as a
result of this sharing of authority, development of the individual domestic
energy resources has not been guided by an integrated strategy for the
sector, resulting in less than optimum use of some resources and greater
than optimum use of others. There is also a paucity of reliable and
systematic data on the sector's resource potential, and a lack of
managerial and technical skills needed to undertake the assessment required
for optimization of energy use and for policy consideration.
28.       As a first step in initiating coordinated planning for the energy
sector, the Government, in April 1981, established the National Energy



Council with responsibility for integrating the plans of the various
sectorial institutions. To strengthen this new agency's capacity to carry
out its responsibility, the Government proposed that it act as the
counterpart agency for the Bank's energy assessment work. The need for an
integrated energy development strategy and streamlining of the authority
for the future development of the sector has been a subject of discussion
between the Government and the Bank. At the request of the Government, a
Bank mission visited Zambia in early 1982 to assess the country's energy
resources and assist the Government in preparing a strategy for energy
development within the framework of the country's long-term development
goals. The report2 of the mission is expected to provide important inputs
to the macro-economic aspects of the energy sector.
Bank Involvement in the Sector
29.       The Bank has extended several loans for the development of
hydroelectric power and the transmission network in Zambia (Annex II). The
first loan was made in 1956 (Loan 145-RN, of June 21, 1956), prior to
Zambia's independence, to assist with construction of the Kariba dam and
the South Bank power station. The second loan (Loan 392-RN, of October 2,
1964), the first to independent Zambia, was to help finance a 330 kv high
tension transmission line, while the third loan (Loan 701-ZA, of July 29,
1970) was for the Kariba North power station. A fourth loan (Loan 919-ZA,
of July 16, 1973) helped construct the Kafue Stage II hydroelectric project
and was followed by a supplementary loan for Kariba North in 1974. In May
1982, an engineering loan was approved (Loan 2151-ZA of June 14, 1982) to
study the technical and economic feasibility of modifying the INDENI
Refinery to change its product mix, particularly with the view to
increasing the production of diesel and kerosene oil and reducing the
production of heavy fuel oil (HFO). The project will also consider
Zambia's potential for meeting the petroleum products requirements of
neighboring countries which have no operating refinery. The Bank, under
the ongoing Technical Assistance Credit (Credit 873-ZA, of January 26,
1979), has financed a feasibility study for a project designed to use
residue molasses, produced as a by-product by the Zambia Sugar Corporation,
to manufacture ethanol for blending into gasoline. The IFC has approved
financing for the project (Investment 632-ZA, of June 24, 1982). The Bank
also extended a loan (Loan 2152-ZA, of June 14, 1982) for a project
designed to carry out detailed aeromagnetic and gravity surveys to provide
data to attract exploration of hydrocarbons by foreign oil companies.
B. The Coal Sector
Exploration and Resource Base
30.       Although the first records of occurrence of coal in Zambia were
made as early as 1865 by David Livingstone, systematic prospecting did not
begin until the middle of the present century, subsequent to the setting up
2Zambia: Issues and Options in Energy Sector, Report No. 4110-ZA,
November 1982.



- 9 -
of the Geological Survey Department in 1952. However, work was carried out
by many individual prospectors and companies during the previous decades.
Coal exploration efforts were accelerated in 1965 by the Geological Survey
Department and Anglo-American Corporation, resulting in development of the
present coal mining area in the Mid-Zambezi basin, west of Kariba Lake.
Other locations where coal is known to occur are the Luangwa Valley in the
Northern Province and the Western basin in the Western Province (Map IBRD
No. 16844).
31.       There is no proper assessment of Zambia's coal resources.
According to the Geological Survey Department, proven reserves in the
Mid-Zambezi basin are of the order of 250 million tonnes, of which 70
million tonnes are within the Maamba mining concession. The resources in
both Western and Luangwa basins are estimated to be of the order of 100
million tonnes each. All coals are of the non-coking type, although it is
surmised that the Western basin is a northern extension of the Hwange
coal field of Zimbabwe, and could contain coal with coking properties.
32.       The Mid-Zambezi basin sustains the only coal mine in the country
operated by the Maamba Collieries Ltd., a wholly-owned subsidiary of
ZIMCO. The colliery is located 60 km southeast of Choma, a road and rail
junction in the southeastern part of Zambia. As mentioned (paras. 25 and
26), the mine was opened under exceptional circumstances in 1966 to ensure
continued supply of coal to Zambia. It was planned to produce 1.5 million
tonnes of run-of-mine coal and 1.2 million tonnes of clean saleable coal
with a 15 to 16 percent ash content. The clean coal is transported by an
aerial ropeway over hilly terrain to the nearest railhead at Masuku. The
mine was designed by Sofremines of France; the beneficiation plant by
Austrominerals of Austria; and the aerial ropeway by Pohlig, Heckel,
Bleichart Vereinigte Maschinenfabriken AG, of the FR of Germany. The mine
complex was financed by French, Austrian and German assistance.
Coal Demand
33.       The total domestic coal consumption in 1981/82 was about 539,000
tonnes. It is estimated that if coal had been readily available,
consumption would have been 10 to 15 percent higher, at existing price
levels. The shortfall was covered mainly by additional use of heavy fuel
oil. The main consumers were the copper industry (252,000 tonnes), the
lead and zinc industries (70,000 tonnes), and the fertilizer (82,000
tonnes) and cement (65,000 tonnes) industries, which together account for
over 87 percent of the total consumption.
34.       Coal demand by the copper industry is likely to continue more or
less at the present level until around the year 2000. Lead and zinc
industry demand on the other hand is expected to start declining before the
end of the decade as a result of falling production levels. At present,
the mining industry also consumes about 140,000 tonnes per year (tpy) of
HFO and if the refinery modification (para. 29) is carried out and coal
substituted, the additional demand for coal would be about 200,000 tpy.
Another important consumer is Nitrogen Chemicals of Zambia whose new
fertilizer plant, completed in 1981, is not yet in full operation. The new
and old plants are expected to consume about 200,000 tpy of coal at full



- 10 -
capacity. The demand by the cement and other miscellaneous industries,
whose consumption is about 145,000 tpy at present, has not been surveyed in
detail, but is expected to grow at a modest rate of 3 to 3.5 percent per
annum. Under these assumptions, the projected potential demand for coal by
1990 is likely to be about one million tpy assuming coal is substituted for
heavy fuel oil in the copper industry. Although this market forecast would
need to be reviewed in detail, demand of this order (one million tpy) seems
realistic, and may indeed be higher if some of the coal demand of Zaire,
Malawi or Tanzania can be met by Zambia. Exports to Zaire have been
increasing in recent months, although they are still at a low level.
Maamba Collieries Limited (MCL)
35.       Performance and Bottlenecks. The production of saleable coal by
Maamba Collieries rose from 100,000 tonnes in 1966 to about 820,000 tonnes
in 1972, but declined thereafter. It has been fluctuating around 600,000
tpy for the last 5-6 years. Production constraints at the mining complex
have contributed to the low output and resulted in relatively high unit
production costs. In turn, these high costs have kept retail prices high
and had a depressing effect on coal demand.
36.       In part, the constraint on production *is a result of weaknesses
in the original mine design. There is, for example, no mining plan nor
coal blending facility to take advantage of low ash coal in the top section
of the seam, or to ensure an optimum level of coal ash input to the
preparation plant. Also, there is no apparatus to continuously monitor the
ash content of raw and washed coal, and the copper smelters and fertilizer
industries have complained about the wide variation in ash content of
supposedly clean coal. There is no plan for rehabilitating excavated
surface area. Consequently, the overburden containing carbonaceous
material often catches fire and has become a hazard. Moreover, there is no
provision for beneficiation of the coal fines, which are now allowed to go
to waste, causing a pollution problem.
37.       The design of the aerial ropeway is also deficient.  The ropeway
traverses about 12 km of very rough terrain and rises 700 meters above the
mine level before going down to the railhead at Masuku. The design did not
adequately considet the adverse effects on operation of the ropeway caused
by wide spans between steel towers located on widely scattered hilltops.
Because of frequent electrical and mechanical breakdowns and derailment of
buckets, the ropeway has never been operating at more than 40 percent of
its normal capacity of 90,000 tons per month, although there has been some
improvement of late. When the ropeway does not operate properly, clean
coal is dumped on the ground and there is no method of reclaiming this coal
without further contamination. Because of the ropeway's poor performance,
much of the mine's production must be transported by road from Maamba to
Masuku, and sometimes coal is carried by road all of the way to the
customer, often hundreds of kilometers away.
38.       Another important technical/physical constraint to increased
production is the low availability of earth-moving equipment and their poor
functioning due to shortage of spare parts and, to some extent, inadequate



- 11 -
repair and maintenance services resulting from insufficient technical skill
of maintenance personnel. All spare parts, components and consumable
stores are imported.
39.       At present, the coal mine has a stores inventory valued at about
US$8 million, mainly consisting of slow-moving and obsolete items
accumulated over the years because of improper materials management and
lack of procurement expertise. In addition, a coal mine like Maamba would
normally require about US$5 million per year for spare parts and consumable
stores. Against this, MCL received foreign exchange authorizations of only
US$1.3 million in FY81 and US$1.5 million in FY82, i.e., less than
one-third of its requirements. No foreign exchange was allocated during
the first quarter of FY83, and the backlog of orders has already amounted
to about US$8 million, of which about US$4 million are considered
critical. Putting the most critical equipment back to work requires an
immediate provision of foreign exchange to purchase the spare parts needed.
40.       The coal preparation plant was designed to treat run-of-mine coal
to yield about 75 percent clean coal with 15-16 percent ash content.
However, the average washery yield has declined, while ash content has gone
up to 17-19 percent. In the absence of systematic repair and maintenance
services, stoppage of the plant for attention. to breakdown and repair is
more than 50 percent of scheduled operating time.
41.       Ownership and Management.  MCL is a wholly owned subsidiary of
ZIMCO, which owns partly or wholly about 100 companies. Under the present
organizational structure, a non-technical Managing Director posted at
Maamba is the chief executive of MCL, with the heads of various departments
reporting directly to him. Of the six high level technical positions, two
are vacant, while the other incumbents do not have the requisite
professional training and experience. More importantly, there is no senior
technical person to coordinate the activities of the mine-washery-ropeway-
workshop complex. As the poor management structure and weak technical
capability at Maamba have been identified as among the main causes for the
present low level of performance, any rehabilitation effort at the mine
should include strengthening of Maamba's technical management team.
Another subsidiary of ZIMCO, Zambia Consolidated Copper Mines Ltd. (ZCCM),
which operates large open pit copper mines in the Copperbelt and has staff
experienced in mining and associated activities, has agreed to enter into a
technical management contract with MCL to take over the colliery's
technical management. The colliery would have a General Manager for the
overall technical coordination and two other specialists for mine planning
and design and maintenance of equipment. One or two specialists, including
the General Manager, would be seconded from ZCCM's own operational staff,
while the other, specialized in coal mine planning and operations, would
have to be recruited abroad.
42.       Manpower and Training.  MCL employs about 1,300 persons of whom
less than 200 are directly related to mine production and 450 are allocated
to various engineering services. The number of persons engaged in
administrative and miscellaneous social infrastructure services is
disproportionately large, in part, because MCL must bear the full cost of
township operation and maintenance. Productivity at the mine level is



- 12 -
about 4 tonnes per manshift and overall productivity about 2 tonnes per
manshift. If the rehabilitation project is successful, mine productivity
is expected to go up to about 6 tonnes per manshift and overall
productivity to about 3 tonnes per manshift. Overall productivity of open
pit mines is in excess of 7 tonnes per manshift in Zimbabwe, 9 tonnes in
South Africa and over 24 tonnes in the USA.
43.       The Company has set up classrooms and workshops for on-the-job
training of new entrants, but these arrangements are inadequate to meet the
requirements. Although major equipment suppliers also have their own
facilities within the country for training operational and maintenance
crews, no arrangements exist for training junior or senior technical
supervisory personnel for whom in-house training alone is not sufficient.
Also, middle level supervisors and senior technical managers have no
experience in, nor receive exposure to modern mining practices to improve
their own knowledge and performance.
44.       Costs and Pricing.  The price of coal is controlled by the
Government through ZIMCO. Though the price has been revised from time to
time, it has never been adequate to cover production costs. When the
latest price increase to US$41.35 per tonne was announced in September
1981, Maamba's production cost was about US$45 per tonne. At the current
level of production (600,000 tonnes) and coal price, the mine does not
generate enough funds to service the loans and provide an adequate return
on equity. The Government has now adopted a more flexible pricing policy
(para. 10), and once the results of the examination of coal pricing to be
undertaken under this project are known, it should prove easier to make the
appropriate price adjustments.
45.       Although the present cost of production at Maamba is high, Maamba
coal is still cheaper than either HFO produced from imported crude oil or
coal imported from Zimbabwe or South Africa. Maamba coal delivered at the
copper smelters 700 km away costs about US$60 per tonne. This is
equivalent in fuel value to US$96 per tonne of HFO, while the current price
of HFO also delivered at the Copperbelt is US$161 per tonne. The next best
alternative source of coal supply could be the Hwange coalfield in
Zimbabwe, where the production cost of a much superior grade coal is
considerably lower than at Maamba. However, with an international price of
US$55 charged at the Zambian border, such coal cannot be delivered at the
Copperbelt 900 km away at prices comparable to that of the Maamba coal,
even after allowing for its higher fuel value.
46.       Financial Position.  The annual accounts of MCL up to FY82 have
been audited by independent auditors. At March 31, 1982 the authorized and
issued capital of MCL was about US$38 million,,held entirely by ZIMCO.
Long- and short-term loans totalled about US$35 million, including a bank
overdraft of US$8.0 million, and long-term loans from the Federal Republic
of Germany (US$5.6 million) and from ZIMCO (US$3.9 million). Fixed and
current assets stood at US$33 million and US$18 million, respectively
(Annex IV).
47.       Because of the low level of production arising out of various
technological and managerial shortcomings, MCL has experienced



- 13 -
considerable financial problems in the past. It incurred losses in every
year from FY78 to FY82, except in FY81 when it made a marginal profit of
US$0.7 million. At the end of FY82 the accumulated losses amounted to
US$22 million and during FY83, on the basis of a planned production of
605,000 tonnes and a coal price of US$41 per tonne, MCL expects to make a
loss of about US$3.1 million. In order to service its debt, MCL has had to
receive considerable government support in the form of debt capitalization
(totalling US$21 million from FY79 to FY82), and interest-free loans, in
some cases with no fixed repayment terms, such as the ZIMCO and German
loans.
48.       Since coal pricing policy will be a major factor in determining
MCL's future financial viability, MCL, ZIMCO and the Government will need
to establish a price consistent with MCL's production cost, the
international coal price and the cost of alternative energy sources.
PART IV - THE PROJECT
49.       The proposed project was identified by the Bank's energy
assessment mission which visited Zambia in January-February 1982. At that
time, the Government expressed interest in rehabilitating the mine complex
in order to increase production and substitute coal for oil, wherever
feasible. The project was appraised in June 1982, and negotiations were
held in Washington from February 1 to February 3, 1983. The Zambian
delegation was headed by Mr. M. Imutowana, Managing Director, Maamba
Collieries, Ltd. There is no separate appraisal report for this project.
Supplemental data are contained in Annex III.
50.       The Maamba colliery and its supporting infrastructure of
workshop, stores, and housing colony were hastily conceived and developed
in 1966.  Since then major technological problems, such as inadequate
exploration of geology and raw coal quality, poor planning and design of
the mine, coal preparation plant, aerial ropeway, and repair and
maintenance facilities, and managerial shortcomings have become apparent.
As a result, except for a brief period when the mining equipment was
comparatively new (para. 35), production has seldom exceeded 50-60 percent
of design capacity. Since coal is an essential input to several of the
country's major industries, efficient operation of the colliery is of
national importance. About US$20 million has already been spent over the
years to improve its performance, and the Company has plans to invest
another US$30 million during the next five-year period. Past efforts
focused on improving the performance of individual sections of the
operation and have lacked overall perspective. Consequently, there has
been no concerted action as yet to resolve the operation's basic
weaknesses.
Project Objective
51.       The objective of this project is to foster the substitution of
indigenous coal for expensive imported oil products and to provide low-cost
energy to meet growing demand from Zambian industrial and other consumers.



- 14 -
As the first step towards achieving this objective, the project would
review the existing operation and performance of Maamba collieries, analyze
its various technological, marketing, economic, financial and managerial
constraints, and prepare a feasibility report for the rehabilitation of the
mine complex. During the review period, the essential plant and equipment
will be provided with the critical spare parts and components needed to
keep the mine running (para. 39). Also, training that should not await
completion of the feasibility study will be provided to operation,
maintenance and other key technical personnel. Identification of the
critical spare parts and components and preparation of a detailed training
program would be important elements of the proposed technical assistance
scheme.
Project Description
52.       The project has three basic components as detailed below:
A. Feasibility Study
(i) assessment of coal demand for the next two decades;
(ii) updating of geological information and determining
additional exploration needs;
(iii) review of the functioning of the mining operation,
beneficiation plant and ropeway transport system;
(iv) survey of all plant and equipment and preparation of
a maintenance manual for repair and overhaul;
(v) review of MCL's staffing pattern, identification of its
long-term training needs and formulation of a training
program;
(vi) review of the stock of spare parts, components and
consumable stores, and the drawing up of a plan for
inventory management, including the determination of
optimum stocking levels and the disposal of surplus,
slow moving or obsolete stock;
(vii) review of MCL's financial and accounting practices and
management structure, and recommendations for improving
the company's organizational structure for effective
technical management and coordination; and
(viii)  preparation of a feasibility report for rehabilitation
of the mine complex to meet projected demand; assessment
of investment needs; projection of operating costs and
recommendation on a realistic pricing policy, to make
MCL economically and financial viable.



- 15 -
B.  Spare Parts and Components and Quality Control Equipment
Procurement of critical spare parts and components needed
to keep the mine complex operating during the study period
and of quality control equipment for the coal preparation
plant.
C.  Training
Training of key technical persons, estimated at about 8
man-months, for the implementation of repair and maintenance
program during the review period and that should not await
completion of the feasibility study.
The terms of reference of the feasibility study in A above have been agreed
upon during negotiations.
Project Cost and Financing
53.       The total cost of the project, net of taxes and duties from which
the project would be exempt, is estimated at about US$6.1 million, of
which US$5.1 million is in foreign exchange.
Estimated Project Cost
(in US$ 000s)
Total
As % of
Foreign    Local    Amount   Base Cost
Feasibility Study                         770        240    1,010         21
Critical Spare Parts and Components   3,150          460    3,610          73
Quality Control Equipment                 200         45       245          5
Training of Engineering Personnel           50        -         50          1
Base Cost Estimate                 4,170        745    4,915        100
Physical Contingencies                    420        110       530         11
Price Contingencies                       460        195       655         13
Total Financing Required           5,050      1,050    6,100
54.       An estimated 51 man-months of foreign consultants and 14
man-months of local consultants would be required. The average cost of the
specialized foreign consultancy firm, which would carry out the technical
review and the feasibility study, has been estimated at US$11,750 per
man-month, and the cost of the local consultants is about US$3,400 per
man-month. Participation of local consultants is considered necessary to
provide the required intimate knowledge of local conditions, e.g., in the
market and transport surveys and in the formulation of a training program.



- 16 -
The cost estimates are based on September 1982 prices, and include physical
contingencies of 10 percent for the foreign costs and 15 percent for the
local costs. Price contingencies are based on escalation for foreign
rates, in US dollar terms, of 8 percent in 1983 and 7.5 percent in 1984.
55.       The proposed IDA Credit, about 70 percent of the total project
costs, would cover the full cost of foreign and local consultancy services,
100 percent of the foreign exchange cost of training, and about 75 percent
of the foreign exchange cost of critical spare parts and components and
quality control equipment. The proceeds of the Credit would be onlent by
The Republic of Zambia to ZIMCO repayable in 15 years, including three
years of grace, at a fixed interest rate, equal to the IBRD rate prevailing
at the time of signing of the Credit Agreement. In view of the cumulative
losses suffered by MCL, and its inability to pay the interest charges on
the past loans (para. 47), ZIMCO has agreed to pass on to MCL as a
contribution to equity those portions of the Credit directed to finance the
feasibility study and training (US$1.3 million). The remainder of the
Credit required to procure critical spare parts and components and quality
control equipment (US$3.0 million) would be onlent by ZIMCO to MCL
repayable in seven years, including two years of grace, at the same
interest rate as ZIMCO pays to the Borrower. Based on projected inflation
levels, the interest rate charged ZIMCO on the onlent amount is expected to
be slightly positive in real terms. Agreements containing the terms and
conditions of onlending the Credit proceeds to ZIMCO and those of onlending
from ZIMCO to MCL would be subject to prior IDA approval (Section 3.01 (b)
of the draft Credit Agreement) and the execution of onlending agreements
would be conditions of effectiveness (Section 6.01 (a) and (b) of the draft
Credit Agreement). The Republic of Zambia would bear the foreign exchange
risk.
56.       With total assets of about US$682 million as of March 31, 1982,
ZIMCO is a state-owned holding company with about 100 subsidiaries
operating in the mining, industrial, agricultural sectors, as well as in
trading, hotels, transport, energy and financial services. Many of its
subsidiaries, such as ZCCM and the INDENI Refinery, are owned in
joint-venture partnership with foreign operating companies. ZIMCO-s net
after tax profit on operations was US$9.1 million in FY81 and US$3.4
million in FY82.
57.       During the past five years, MCL's financial standing has shown
marked improvement from an accounting point of view, with the current ratio
increasing from about 0.8 in FY78/FY80 to 1.1 in FY82. The long-term
debt/equity ratio also improved from 96:4 in FY78, to 71:29 in FY80, and to
55:45 in FY82. This was possible, however, only because the Government and
ZIMCO took on the interest and long-term debt repayment which were
capitalized as equity in the company (para. 47). While a financial
restructuring of MCL will be imperative in order to prepare for the
rehabilitation program, for the purpose of this study, ZIMCO would be
required to allow MCL to maintain a minimum current ratio of 1.2 (Section
3.01 (b)(iii) of the draft Credit Agreement). In addition, for the
duration of the project, and until decisions are taken about the
rehabilitation project, the Government would be required to permit MCL



- 17 -
access to foreign exchange for spare parts and components, as well as for
normal mining stores and consumables (Section 3.02 (a) and 4.01 of the
draft Credit Agreement). To match, on a one-to-three basis, IDA's
financing of the critical spare parts and components during this study
period, MCL would require, as a minimum, US$1.0 million in foreign exchange
(Schedule 1, Para. 4 (ii) of the draft Credit Agreement).
Project Implementation and Scheduling
58.       MCL does not have any senior experienced technical staff, and
almost all expatriate engineers have left the company recently due to lower
levels of remuneration compared to the Copperbelt, and the physical
remoteness of the colliery . In order to build up an effective management
structure, ZIMCO and MCL are required to enter into a technical management
contract with ZCCM, acceptable to IDA, (para. 41) which is valid for at
least three years (Section 4.01 (b) of the draft Project Agreement). The
appointment of senior staff (General Manager, Mine Planning Engineer and
Equipment Maintenance Engineer) would be a condition of effectiveness
(Section 6.01 (d) of the draft Credit Agreement). IDA would be consulted
on the qualifications and experience of new staff for appointment to the
above positions (Section 4.01(c) of the draft Project Agreement).
59.       The technical review of the existing operations and the
preparation of a feasibility report on rehabilitation of the mine complex
would be carried out by an experienced foreign consultancy firm,
supplemented, to the extent possible, by the services of a local
consultancy firm (para. 54 (Section 2.02 (a) of the draft Project
Agreement)). The consultants would also identify short-term and long-term
training needs.
60.       The project would be supervised by a special Project Unit set up
within ZIMCO, headed by a senior ZIMCO staff member. The membership of the
Project Unit would include senior staff of MCL (Managing Director, General
Manager and Finance Manager), ZIMCO and representatives of ZCCM, along with
an adequate number of qualified and experienced professional and support
staff (Section 2.01 (b) of the draft Project Agreement). The Managing
Director of MCL would be the coordinating link between the Project Unit at
Lusaka and the operation at Maamba. At the colliery level, the Managing
Director would be assisted by a General Manager (Technical) having
experience in operation and management of large open-pit mines, who would,
in turn, be assisted by engineers experienced in planning and operating
open-pit mines and in repair/maintenance of plant and equipment. The
General Manager would also be assisted by experts conversant with workshop
practices, materials management and training of technical personnel. The
appointment of competent specialists to staff the Project Unit would be a
condition of effectiveness (Section 6.01 (c) of the draft Credit
Agreement), and during the project implementation period ZIMCO would
maintain the Unit in existence and keep it adequately staffed with
competent, experienced professionals. In order to better define MCL's
corporate objectives and policies and to set a rational pricing policy for
coal, ZIMCO and MCL would, during project implementation, regularly
exchange views with IDA .



- 18 -
61.       Project implementation is estimated to take about 20 months from
February 1983 (Annex V). The technical specialist provided by ZCCM under
the technical management contract would submit to MCL a proposal for an
emergency equipment repair program, together with a list of critical spare
parts and components and quality control equipment to carry out such
program. The consultants appointed to review the existing operation and
prepare the feasibility study would be asked to review the list should they
be in place in time. The consultants would also submit to MCL, within two
months after the start of their review, a proposal for an emergency
training program. Further, ZIMCO and MCL have agreed that they would not
place any orders, award any contracts, nor incur any debts for equipment
and spare parts until the abovementioned activities have been carried out.
Finalization of the list of critical spare parts, components, and quality
control equipment and of the training program would require prior IDA
approval (Sections 2.04 of the draft Project Agreement and Schedule 1,
para. 4 (ii) and (iii) of the draft Credit Agreement). This approval would
be a condition of disbursement for expenditures under Parts B and C of the
project.
62.       ZIMCO would submit  progress reports to IDA within one month of
the end of each quarter, and a project completion report no later than six
months after the closing date of the Credit. After completion of the this
project, and before taking a decision to proceed with any coal
rehabilitation project, the Government, ZIMCO and MCL would exchange views
with IDA on the proposed coal rehabilitation project (Sections 3.03 and
2.02 (d)(ii) of the draft Credit and Project Agreements, respectively).
Procurement
63.       Procurement under the project would be carried out in two main
contracts, namely (i) the contract for securing consultant services for
technical review of present working conditions and preparation of a
feasibility report for rehabilitation of the mine complex; and (ii)
contracts for procurement of critical spare parts and components and
quality control equipment for the coal preparation plant. Consultants
under (i) would be employed in accordance with Bank/IDA guidelines.
64.       All spare parts and components and quality control equipment
valued at about US$2.1 million would be procured on the basis of
international competitive bidding consistent with Bank/IDA guidelines. In
order to save time in the procurement procedure, bid invitations for the
initial supply of critical items would start ahead of the signing of the
Credit Agreement. Orders would be placed only after approval of the list
by IDA (para. 61). Some critical spare parts and components required for
the rehabilitation of production equipment are proprietary in nature and
would be procured directly from the original manufacturers or their
accredited agents. The value of such goods is expected to be about US$0.9
million. Packages costing less than US$300,000 equivalent could be
purchased following limited international tendering procedures for an
aggregate value not to exceed US$800,000 equivalent.
Disbursements
65.       Disbursements would be fully documented.  The Credit would
finance 100 percent of expenditures for consultancy services, including



- 19 -
local consultancy cost (excluding daily subsistence), and 100 percent of
the foreign expenditures for critical spare parts and components of plant
and equipment, quality control equipment and overseas training. IDA's
share of US$3 million for the spare parts and components would be disbursed
in two tranches of US$2 million and US$1 million each. MCL would
contribute its share of about US$1 million during the first tranche, and
the disbursement of IDA's second tranche would be contingent upon MCL
fulfilling its commitment to the first tranche (Schedule 1, para. 4(ii) of
the draft Credit Agreement). The Government would give MCL, through ZIMCO,
access to the foreign exchange required to meet this commitment (Section
3.02(a) of the draft Credit Agreement). Disbursements for spare parts and
components and quality control equipment, and disbursements for training
would start only after IDA has approved the list of items and the content
of the training program (para. 61, Schedule 1, para. 4 (ii) and (iii) of
the draft Credit Agreement). ZIMCO and MCL would keep separate project
accounts which would be audited by independent auditors acceptable to IDA.
The estimated yearly disbursement schedule is indicated in page ii of the
Credit and Project Summary. The Credit is expected to be fully disbursed
within 24 months of effectiveness.
Benefits and Risks
66.       The project would, for the first time, provide an opportunity to
assess whether Zambia's coal sector has the built-in capacity to produce
the required quantity and quality of coal. The feasibility report would
assess to what extent any additional investment made to improve the mine
complex could contain or reduce the cost of production compared to the
imported coal from neighboring Zimbabwe and whether Zambia's coal sector
can be economically and financially viable. The report would also bring
out the options available to the country to develop this indigenous energy
resource.
67.       The supply of spare parts would help repair and restore some of
the critical production equipment which would contribute to increased
production and productivity. The quality control equipment would help
improve the performance of the coal preparation plant and ensure that a
better quality coal is supplied to customers. Training of key personnel
will ensure better operation and maintenance of plant and equipment.
68.       The feasibility study to be carried out under the project is
expected to recommend a full-scale rehabilitation project which could
substantially increase Zambia's coal production and reduce its petroleum
import bill.
69.       Due to the present weak and inexperienced management structure in
MCL, there could be delay in implementing the project. The installation of
new technical management in MCL (para. 41), as well as the setting up of a
Project Unit within ZIMCO (para. 60) would considerably alleviate MCL's
present management difficulties and permit prompt resolution of problems.
There is also the risk that MCL may not have access to adequate matching
foreign exchange funding from the Government because of acute foreign
exchange shortage in the country . Under the proposed project, this would



- 20 -
be monitored closely, particularly since inadequate foreign exchange
allocation would adversely affect the success of the rehabilitation
project. There is the risk that ZCCM, being itself in a difficult
situation and undergoing a major reduction in engineering staff, may be
unable or unwilling to second the best available personnel to MCL. This
will require close scrutiny by IDA when approving the qualifications of
the seconded personnel. Finally, there is the risk that the feasibility
study may indicate that the mining complex at Maamba should not be
rehabilitated, but that rather Zambia should import coal from external
sources. Because of the high transport cost of importing coal, this result
is considered unlikely.
PART V - LEGAL INSTRUMENT AND AUTHORITY
70.       The draft Development Credit Agreement between The Republic of
Zambia and the Association, the draft Project Agreement among the
Association and ZIMCO and MCL, and the Recommendation of the Committee
provided for in Article V, Section l(d) of the Articles of Agreement of the
Association are being distributed to the Executive Directors separately.
71.       Special Conditions of the credit are listed in Annex III of this
report. Additional conditions of effectiveness are: (a) execution of the
Subsidiary Loan Agreement between the Borrower and ZIMCO (para. 55); (b)
execution of the Loan Agreement between ZIMCO and MCL (para. 55); (c)
staffing of the Project Unit to be established within ZIMCO (para. 60); and
(d) appointment to MCL of a qualified and experienced specialists in mine
planning and design, maintenance of open pit equipment and materials
management (para. 58).
72.       I am satisfied that the proposed credit would comply with the
Articles of Agreement of the Association.
PART VI - RECOMMENDATION
73.       I recommend that the Executive Directors approve the proposed
credit.
A. W. Clausen
President
Attachments
Washington, D.C.
February 18, 1983



- 21 -                                 ANNEX I
Page 1 O f 5
TABLE 3A
ZAMBBIIr1lTAL INDICATORS DATA SHEET
ZAMBIA                           REFERENCE GROUPS (WEIGHTED AVTEflGES
AREA (THOUSAND SQ . KM.)                                                               - MOST RECENT ESTIMAT '!!
TOTAL            752.6                                  MOST RECENT           MIDDLE INCOME            MIDDLE INCOME
AGRICULTURAL     400.6               1960  /b    1970 /b ESTIMATE /b   AFRICA SOUTH OF SAHARA  NORTH AFRICA &  IDD1J EAST
GNP PER CAPITA (US$)                  230.0        380.0     560.0                1053.2                   12S1.6
ENERGY CONSUMPTION PER CAPITA
(KILOGRAMS OF COAL EQUIVALENT)         ..       692.3      831.9                 610.1                    ½. ,
POPULATION AND VITAL STATISTICS
POPULATION, MID-YEAR (THOUSANDS) 3207.0        4242.0    5766.0
URBAN POPULATION (PERCENT OF TOTAL) 23.1          30.0      43.0                  28.3                     47.3
POPULATION PROJECTIONS
POPULATION IN YEAR 2000 (MILLIONS)                        11.5
STATIONARY POPULATION (MILLIONS)                          35.9
YEAR STATIONARY POPULATION IS REACHED                   2105
POPULATION DENSITY
PER SQ. XM4.                        4.3          5.6       7.4                  54.7                     35.5
PER SQ. EM. AGRICULTURAL LAND       8.1         10.6      13.9                 129.9                    420.9
POPULATION AGE STRUCTURE (PERCENT)
0-14 YRS.                          45.0        46.1       47.2                  46.0                     44.3
15-64 YRS.                          52.5        51.4       50.2                  51.1                     52.4
65 YRS. AND ABOVE                    2.5         2.5        2.6                   2.8                      3.3
POPULATION GROWTH RATE (PERCENT)
TOTAL                               2.4         2.8        3.1                   2.8                      2.8
URBAN                               5.3         5.4        6.7                   5.2                      4.6
CRUDE BIRTH RATE (PER THOUSAND)      50.6        49.6       49.1                  47.2                     41.2
CRUDE DEATH RATE (PER TNOUSAND)      24.4        20.1       16.5                  15.7                     12.2
GROSS REPRODUCTION RATE               3.4         3.4        3.4                   3.2                      2.9
FAMILY PLANNING
ACCEPTORS, ANNUAL (THOUSANDS)
USERS (PERCENT OF MARRIED WOMEN)    ..            ..        ..
FOOD AND NUTRITION
INDEX OF FOOD PRODUCTION
PER CAPITA (1969-71-100)           99.0        96.0       93.0                  90.7                    100.4
PER CAPITA SUPPLY OF
CALORIES (PERCENT OF
REQUIREMENTS)                    86.5        86.5       90.0/c                93.9                    108.5
PROTEINS (GRAMS PER DAY)           58.3        57.5       57.87T                54.8                     71.9
OF WHICH ANIMAL AND PULSE        13.5        16.0       14.17W                17.0                     18.0
CHILD (AGES 1-4) MORTALITY RATE      33.0        25.6       20.3                  23.9                     15.1
HEALTH
LIFE EXPECTANCY AT BIRTH (YEARS)    39.7         44.6       49.5                  51.8                     56.9
INFANT MORTALITY RATE (PER
THOUSAND)                           151.3       125.2      106.0                 118.5                    104.3
ACCESS TO SAFE WATER (PERCENT OF
POPULATION)
TOTAL                                ..        37.0       42.0/d                  ..                     59.1
URBAN                                ..        70.0       86.o7                   ..                     83.1
RURAL                                ..        22.0       16.oT                   ..                     39.8
ACCESS TO EXCRETA DISPOSAL (PERCENT
OF PQPULATION)
TOTAL                                ..         16.0      42.0/d
URBAN                                ..        12.0       87.071.
RURAL                                ..        18.0       16.Ol/d
POPULATION PER PHYSICIAN           9544.6      8288.4   10406.8/d              14185.2                   4015.5
POPULATION PER NURSING PERSON      9915.0/e    2479.0    1972.771               2213.2                   1802.2
POPULATION PER HOSPITAL BED
TOTAL                             364.4       311.3      269.6                1036.4                    641.7
URBAN                             181.0/e         ..     357.4                 430.8                    538.3
RURAL                             468.07        ..      247.4               ,3678.6                   2403.3
ADMISSIONS PER HOSPITAL BED            ..           ..      31.0                    ..         '           25.5
HOUS ING
AVERAGE SIZE OP HOUSEHOLD
TOTAL                                ..         4.4
URBAN                                ..           ..
RURAL                                ..           ..
AVERAGE NUMBER OF PERSONS PER ROOM
TOTAL                                ..         2.6
URBAN                                ..           ..
RURAL                                ..           ..
ACCESS TO ELECTRICITY (PERCENT
OF DWELLINGS)
TOTAL                                ..           ..
URBAN                              27.5           ..
RURAL                                ..           ..



ANNEX I
-  22                                        Page2  of  5
TABLE 3A
ZAMSIA - SOCIAL INDICATORS DATA SHEET
ZAMBIA                          REFERENCE GROUPS (WEIGHTED AVE AGES
- MOST RECENT ESTIMATE)-
MOST RECENT          MIDDLE INCOME            MIDDLE INCOME
1960  /b    1970 /b ESTIMATE /b   AFRICA SOL'TH OF SAHARA  NORTH AFRICA & MIDDLE EAST
EDUCATION
ADJUSTED ENROLLMENT RATIOS
PRIMARY:     TOTAL                42.0         91.0      95.0                  83.3                    88.7
MALE                 51.0        101.0     101.0                  96.1                   104.5
FEMALE               34.0        80.0       89.0                 80.4                     72.0
SECONDARY:   TOTAL                  2.0        13.0      17.0                  15.3                    39.7
MALE                  3.0         18.0      22.0                  19.4                    49.3
FEMALE                1.0          8.0      12.0                  11.3                    29.0
VOCATIONAL ENROL. (% OF SECONDARY) 27.8           3.2       3.0/c                 4.7                     10.1
PUPIL-TEACHER RATIO
PRIMARY                           50.5         46.8      47.6/f                38.6                    34.1
SECONDARY                          13.5        22.5      21.07?                23.4                    23.7
ADULT LITERACY RATE (PERCENT)        28.5/e        ..      44.0                  35.6                     43.3
CONSUMPTION
PASSENGER CARS PER THOUSAND
POPULATION                        10.2         14.3      18.5/f                31.9                    17.8
RADIO RECEIVERS PER THOUSAND
POPULATION                         4.7         17.7      22.4                  71.8                   131.3
TV RECEIVERS PER THOUSAND
POPULATION                           ..         4.0        ..                  17.9                    44.1
NEWSPAPER ("DAILY GENERAL
INTEREST") CIRCULATION PER
THOUSAND POPULATION                   5.0        13.4      19.4                  19.1                     31.5
CINEMA ANNUAL ATTENDANCE PER CAPITA   ..           ..       0.3/f                 0.6                      1.7
LABOR FORCE
TOTAL LABOR FORCE (THOUSANDS)     1322.0       1653.6    2095.1
FEMALE (PERCENT)                  33.3         32.6      31.9                  36.5                     10.6
AGRICULTURE (PERCENT)              79.0        73.0      67.0                  56.5                     42.4
INDUSTRY (PERCENT)                  7.0         9.0      11.0                  17.7                    27.8
PARTICIPATION RATE (PERCENT)
TOTAL                                41.2        39.0      36.3                  37.0                     26.0
MALE                                 55.3        52.9      49.8                  46.9                     46.2
FEMALE                               27.3        25.2      23.1                  27.2                      5.6
ECONOMIC DEPENDENCY RATIO               1.2         1.2       1.4                   1.3                      1.9
INCOME DISTRIBUTION
PERCENT OF PRIVATE INCOME
RECEIVED BY
HIGHEST 5 PERCENT OF HOUSEHOLDS   33.7         23.0°/S
HIGHEST 20 PERCENT OF HOUSEHOLDS  58.2         63.07j    56.7/f
LOWEST 20 PERCENT OF HOUSEHOLDS    5.4          3.87J     3.67T
LOWEST 40 PERCENT OF HOUSEHOLDS   13.0         10.17     11.17Tf
POVERTY TARGET GROUPS
ESTIMATED ABSOLUTE POVERTY INCOME
LEVEL (US$ PER CAPITA)
URBAN                               ..           ..     247.0                 507.0                   279.2
RURAL                               ..           ..     168.0                 200.6                   178.6
ESTIMATED RELATIVE POVERTY INCOME
LEVEL (US$ PER CAPITA)
URBAN                               ..           ..     126.0                 523.9                   403.6
RURAL                               ..           ..      85.0                 203.6                   285.6
ESTIMATED POPULATION BELOW ABSOLUTE
POVERTY INCOME LEVEL (PERCENT)
URBAN                               ..           ..      25.0                    ..                     22.1
RURAL                               ..           ..        ..                    ..                     30.9
Not available
Not applicable.
NOTES
/a   The group averages for each indicator are population-weighted arithmretic means.  Coverage of countries
among the indicators depends on availability of data and is not uniform.
/b   Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969
and 1971; and for Most Recent Estimate, between 1978 and 1980.
/c   1977; /d 1975; /e 1963; /f 1976; /g 1973.
May, 1982



-23    -                                                     ~~~~~~~ANNEX  I:
Pg)of  5
DNFnAITIANS OP SOCIAL I5tICAThOa
ra   hn-gh the data tea dratt  ftnaoeaa- -erlly Ittdgd lIa mea  -t.t.o..ta....otd rnlal,hesnadaahaatdiarhymysebe                                                    t-
thla,ue   edescribe  -rd-ta If  -ni-'da  indicate  trend. and ohara.teroe certin  -Ja) orifflerere-                      enorce
The reeec    roe   r   L  the n-m   --cy er..apnf th -tbje-   -onty and (2) a  onr  gnrrc   suen-het higher   argeIncome ih-  the coutrygrc
of tIe aatennoectcrv Accent tar 'ffigh  Iroer   all tarrtern   er-i   hler   Stiddle  ncn  NorhAir -a    d CUddle tgst" Is citr.te heoaefstone
aNS  (tosn    qk.                                                                                      aahn  e   eptlfd-tn)  neha, and .                    e-ig) -h Pepi1 te I  raaf
-usr   ysa Eleero   mto  an   l.cdis. -dla -ple            y-ge -Nhho 1)YOI                  so    edc)  eceane   arer  Ly staffed by a" IPhysIc Inc P(bus  Id
tr.,an - Lifi d-     --oto.1,h                   l.           llf11            99d1-          ~      eIcal aalatat_. nea,  ldlfa  ale. l finkhoffe  hr-paste e"Igt
dsletd y       ed         Crled-ag   f   d            da eththsg    Ptatra
trioItt  it itugan         attg- nih oelenntl car  koAlte    OC 11978-8    end. 19)                   enea    ielair  bopiai  se   niddni   mr rI.b
date.                                                                       .~~~~~I-dh  ... I       lleag  ilee1 hf  oostn fI resr  ee  bishl)-diocal uIca  and carey
d   Ileen   kilhul-is  of -ragnqctn   mayl Pollect costtebLlh   of70    dal                    er79   le_lt mela aai.d  hoarder.1  us lo1dger mayIo  may no-b   ncncg
dunnocIa;II1  lO.  nd1Ad Jt,                                                                         h  h.carI.oi  foe siorSI inL  pt.f_otfes.                             i-.P
ing lila  sepencenc   at itlrtn  icteroluf etch ocnrcry'  yet capten  manse itroeteta PtertAllsy g  mmeItl0-  deltlh-h)1- s -itl,  ritan, aid rural 
A                         goib cunaSpy~~~~~~_   _ Is; thin. nasle-d  1;oaofsernnnshuirsf a,tatc                       ilIdTl b..lldflppl
and iretihity  cren     I_sIfor gtnfoctIP pupoes                                       AAlSAer)iet  nse
--tnar   tuitn   -h    staioer.oltii- bheey I                     n  goeh sichycIra  chok-iota,  et ea fmae    C050tnol  mle_ndfeal
theItit   aeI   yc)I   iedat   ae   t t                    cit -   il   raesrcueI-etLea  of-i.                    a-ll  gsa   irpier   ae    sgretee    frse
Z,thyar10  sedbooc   of dehine of-1fnailicygadle  replace-                                  Ifconteecanb.e) -totl,l. sa.lea gd -eah-liIlyuraahvetc dr
Scer sill_ ha                                                l suclad-.                           icea P i.ly  ofh11 t  17 .tal s II   d age;    -G- ureudrte  cnrle  orel feerclo
Pes."-La. erulturbo)i Iun  -  Posy-ted as h-ne Ine  ag fiousea PtdInlPOtA  departments af aec-eder     l1ntisutio,,-
on ly; _196    0. 190ed 1979         f  ll-I   flii,                 .lp. dae3sl--n-ga-het  pai- r                              1isrzad secodar  - Totald a-dnt  enenir_
lactr  1960b. 1911,hed Sf01  et.                                                                d        lL 1St Iaf cone. 17rcnt   If Litre    dis   al   sredmdei
koaoco.Cot her  (ri ece-   e  - Ioh-       kutsilpseh cSe (1      f atfa cool-            la.i....lee
lioofr1009-OS   101T,   ad  911N.                                                       Paegs  at   e  he            s           Ityla lol  I-gPe -  esa h onescompise   eto
ruetrtllOt (e  citna-     d   -   eca  hina  h         -rtlo par  th n.d. ri aI.d-yl           cr_ nat egltste P         r.pI Igk I ef uo1 tlodeahkme,hatt
papuhotlun;  lObe  '971. td.if  data-                                                            siltrary. d-caittt1atrs.
Crae ea   SleIce -bestl) -  Chnil do-h   err1 cbaurea   of -  nidE-ytae1                had-la tcecn  free. rh-san   dipooloten   - Ill tynIf t pshalnairthfrrai
papla 6len  190 1970,  ned  byfO-.                                                              Aj dei. rodcat  Yt -toee public pe il.t-snd. of(bl poptt  le;et luds  s-i
frotIgpodctonfer-neng    enthet of asagt hc  afae   ilbe   alaueeoiesi   nnee  aid Cs1I                                                yesesli   shea celaetl      frai
ynil  Laooc-th    rles  Aeua  fthe-oa -a   g-          thua  a-he  of ancetoe               to, COSearTIONer  perosn   aeair      OrcIesfehrda
of    lteRk-etre)      lb  ...ar    nder- AnsIIe1  of, sIilos  rabeh. ttgpege.gPea-ubI   e  thhsed e-iair;dccSaeeu                                        hlcn       Ie rcenea
maser -C  thll -hta8se   l-t  yeacu  she~ sue  lh  ..tt-ae faoliaenitnIc" esse    lrclsgn(r toae  pa                                    Aellc    ilam  tIe A- erag  ti-d
all 6mcrinde 7me   to som   sg   adu.                                                      netu tbal   ant   o ratnVppe~   elr    apeale
itta df-uafuich te  edib-ple no   nuennclei  e g   ufe 
tee ens eucladeaf. Iggegc  pcdcirtoec   reryC   orIn dO   01
Per capIt tuplo u  citrlrs (p1rcen y-   reqa berme -ta    -  outd  ro                              spee  faces ra.n  nctlnye thu .       a.d, ug heoSh-ee  stadm-tg, eita
eeg ehitt)tn  ufec  odacpis  nlsheI  ooty  ePapt                                               onre  Ieaet    nf tl   apes   le ilot    in tatlud  coamlels  e
meA Itfraeslae    y  l   ae  oc ptysololoe  urda Our Pama -                    cc-  -lPIl-Ahtgseaetg    f  na    abtfne;1-.101   t  10   aa
n-icy     .  f  er   .d a1 tolb  usdacg  acauete    Iyeanc,bd-     ma- tsd     n                  idacyLras f- ao force  St alutag.                    nnrtl,mauaneg
sadesuSsrcluclorurrrultti.....oc(.g    ....onule,sirccfpscs                                  -nde-loatn.ity..mlendesepcelgo    u.le                               fre
hanselcd  seal;  il-t    IA  endl 197  hans           -101, 170  ed 100 afe
alotre   tI  grs   fttlyieo-prdyad0   rs  at anmalpsd                                     1961.i19ht    en 1961daca.Thes  see based' orY         Pl-la oe ict0len    ate
teee psrrrantuneag    urth  spi,ereaedbyPd  n  keIbo                                  icuml iyodeo  Sac                 IdnS  of sod ein mtn1.ed6   ndee
doiaP -dl-ncep    91-hi          PIhad1)   ae.t  h   en   ao   Ifapgar                                                               D
csardyfe  slel   e  reat  I  senbpt  ay p9-d-lI),101ad17    es                                INltt  .ITIpilabm   90   1.
bidltahId    ethSl lb,      r lteusud)   heoaldeci    atebaPn  I                           Pe-cma-d    of female ancIm  .bntl tollsbgs p l.l.l I - teallm  by richest
aggcu d- araro                      dI ..IlI  di-aildeeicblsgeenl    Rfrme i -oetsgoo-     tectt,ihmeytce.ecscl ece,  nynecig prra
gigille                                                                                    payIA.rerI py~.I,-1-~   _  _  _:f tshiet  pottllot ftl1   %,17   I.9U
ibit;16.1961  65, 1990 daIs                                                              er7a-.190 ebou 0 ht  1eeerer  sIghcn eai   etSn
.lotb Ofttlcy I  fete lEercoand   -  uam)y   fdeah  of d efi-dssarder auc pec                      -timetra.bect   set Inom  Ltc  10  eec  telta   l-ao  and rue
of tgepee   etaud  Sne brths; 196, 190ye 1090 -ilna.,                                   Abmlot  pget inasm  htl  aba l              ecta-1   lee-hit    -fie        i-iye
Macm tobeeAstr (ecree o  rfIdalt_ - y tual unar sad rua --1 Staid                            19teltis9tl  ede1980  dIn..Th- -bId plnntaIie    Oe-ne   seqlipme-ts Sino
bet uC penolei fet, ohrba1, end- ratld aI SaN  tamuthlt a.,oTancoasee                             rfl frale.   -.-              - fth   .l.i.   .d1&i                      
etrestais oflIse tspettes   ottltl19  .  S  am ubasFateIAtpablc                        eernes)Inem      -ethecaei.  Ifbe  lee   sdeelee  d fro    c-e enra
fenstoseoentadtdnrertsaelstrdemaoaS-ya16y6le9  dIsnrlstitadjsatb encIeI                                                           rfetetafitgin                sAra
cneldeadt  blegetala  eaonala  cces   F -sis es.   Irppl    esl aenta doSae   euams  en                             nsnConc  nseleS  eret    ea
reamrebl  aeata  ntl  S-ey tee ce        961ae 6fe  t meber  at    19be  hasiad-    tndOI  ruSRalB-TPaNmatpplsaaIesamrul)aeee'                                sae
Cldt s:ee-as  ta),F armed    dtsectoatleaent-t1h dsp  ho fet-.he_uhint- rho                         sbyoirh
famly.   eater smeds.0 P
Aetma  a frtta  ieea.  ferra of peaair -'I toal a-me andIi rare) -                                                                                           p    -l40p--
ParsasSa P.r Phestild I- Parthlatten0 d1o7d0 by t198e  sOpesaafpyt.esaS e.f.e   ttsAesa
Al.em.  qmhf a  frAnw-   m' - iatoa- ac .tti at       .tl     b,  l    .r1-N amfrreattp  Sneer.                                    feegenPi e I ma... t  ate Peejarsi- e   Ns      t
Pamelala    ...e 1,ras   arbte -d Papeanta  diehl:lsa  by tne -- pesttaag                                                                       fayl9
mal.sd          --degedbmatesat.sa.- a  atatast aa-r(US$ prse-prtat-mreeses sad
nast btthlaItae.       rtId   -.l,Iil                                                                                                        -hl    tI     gp             .i



- 24 -
ANNEX I
ZAMBIA                                     Page 4 of 5
ECONOMIC INOICATORS
GROSS NATIONAL PRODUCT IN 1981                                    ANNUAL AVERAGE RATE OF GROWTH
(%, constant 1970 prices)
USS Mln.    %                         1970-1975         1975-1980
GNP at Market Prices             3,140       100                          3.2             -1.7
Gross Domestic Investment           799       25                          4.1            -22.4
Gross Natlonal Saving               208        7
Current Account Balance            -732     -23
Exports of Goods, NFS             1,219       39                          0.5             -5.3
Imports of Goods, NFS            1,590       51                         -1.2              -9.6
OUTPUT, LABOR FORCE AND
PRODUCTIVITY IN 1980 (preliminary)
Value Added               Labor Force'             V.A. Per Worker
USS Min.        S             Min.      %              USS    % of Ave.
Agriculture                         562        17.9           0.873    52.0              644       34.4
Industry                         1,005        32.0           0.252    15.0             3,988     213.3
Services                         1,520        48.4            0.428    25.5            3,551      189.9
Unallocated                         53          1.7           0.126      7.5               -          -
3,140       100.0           1,679   100.0            1,870      100.0
GOVERNMENT FINANCE                General Government2                   Central Government (1980)
(K Mln.         % of GDP        ( K MWn.)                % of GOP
1980       1971 - 79
Current Receipts                                                    808               27            26
Current Expenditures                                              1,082               36            27
Current Surplus                                                    -274              -9            - 2
Capital Expenditures                                                220                7             6
External Assistance (net)                                           138                5             3
MONEY, CREDIT and PRICES                     1970    1975    1978    1979    1980    1981
(MilIIon K Outstanding End Period)
Money and Quasi Money                          356     493      640      832      907     978
Bank Credit to Public Sector                 -164      373    1062    1122    1354
Bank Credit to Private Sector3                 137     335      422      483     505
(Percentage of Index Numbers)
Money and Quasi Money as % of GDP            27.8    31.1    29.1    31.7    29.9    32.7
General Price Index (1963=100)              102.6   145.4   240.9   264.3   295.2   336.5
Annual percentage changes In:
General Price Index                            2.6    10.1    16.4       9.7    11.7    14.0
Bank Credit to Public Sector                         378.2    34.3       5.6    20.7
Bank Credit to Private Sector3               21.9    17.0   -10.2    14.5        4.6
I Total labor force as of June 1978, distrlbuted by sector according to 1974 pattern;
unemployment are allocated to sector of their normal occupation. "Unallocated" consists mainly
of unemployed workers seeking their first Job.
2 Flgures do not differ significantly from "Central Government".
3 Includes parastatal organizations
not available
not appilcable
February 1983



_ 25 _
ANNEX I
Page 5 of 5
ZAMBIA
TRADE PAYMENTS AND CAPITAL FLOWS
BALANCE OF PAYMENTS                                                         MERCHANDISE EXPORTS 1981
1978     1979      1980      1981                                 ,S$ Mln.    %
(Mllilons US $)
Exports of Goods, NFS                934    1,556    1,367    1,219         Copper                        929     88
Imports of Goods, NFS                986    1,188    1,555    1,590        Cobalt                         45       4
Resource Gap (deficit = -)           -52       368     -188      -371       Lead and Zinc                  32      3
All other commodities          52      5
Total                    1,058    100
Non-factor Services (net)           -145     -124      -231      -246
Net Transfers                       -112     -111      -112      -115
Balance on Current Account          -309       133     -531      -732       EXTERNAL DEBT, June 20, 1982
USS Mln.
t        Direct Foreign Investment                        ..
Capital Grants                        23        35       25        27       Public Debt, incl. guarantee       2,293
Net MLT Borrowing                                                          Non-Guaranteed Private Debt
Disbursements                      105      217       688       336      Total Outstanding & Disbursed    2,293
Amortization                       145       90       219       196
Subtotal                           -40      127       469       140      DEBT SERVICE RATIO FOR 19822
Net IMF                              204        94        8       369                                             %
Other Items (n.e.t.)                 104     -260       -98       224
Change In Reserves (- = Increase)   16       -129       127       -28      Pubilc Debt, Incl. guaranteed
Non-Guaranteed Private Debt
Total Outstanding & Disbursed       31.1
(est.)
IBRD/IDA LENDING, Sept. 30, 1982
(Million USS)
RATES OF EXCHANGEI                                                                                       IBRD    IDA
SDR' s
Outstanding & Disbursed   340.73  10.00
July 1976 - March 1978             1.0848                                  Undisbursed                  90.37  77.75
April 1978 - December 1982         0.9763                                  Outstanding Incl.
January 1983 - present            0.7810                                       Undisbursed             431.10  87.75
1 The Kwacha has been pegged to the SDR since July 1976.
2 Ratio of estimated debt service, excluding arrears and IMF repayments, to exports of goods and non-factor
services.
not available
not applIcable
February 1983



- 26 -                                  ANNEX II
Page 1 of 9
STATUS OF BANK GROUP OPERATIONS IN ZAMBIA
A.  STATEMENT OF BANK LOANS AND IDA CREDITS
as of September 30, 1982
Amount in US$ Million
Loan   Credit                                                          (Less Cancellation)
No.    No.       Year   Borrower           Purpose                                 Undisbursed
Bank    IDAa  Loan Credit
19 Loans fully
disbursed                                 248.14
900-1            1973   Zambia             Education                33.00          7.94
919              1973   Zambia Elec-       Hydroelectric
tricity           Power                   115.00          4.28
Supply Corp.
1131             1975   Posts & Tele.    Telecommunications        32.00          6.61
1356             1977   Zambia            Education                13.30          6.02
1424             1977   Zambia            Industrial Forestry    16.80            2.98
1566    798      1978   Zambia            Third Highway            11.25  11.25 11.25  10.66
863     1979   Zambia             Coffee Production                6.00           2.45
873     1979   Zambia             Technical Assistance              5.00          4.21
1790    973      1980   Zambia            Third Railway -          25.00  15.00 24.35   9.93
1923             1981   Development       Second Development
Bank of Zambia   Finance Company           15.00          5.20
2001a            1981   Zambia            Eastern Province
Agric. Development       11.00         10.55
1193     1982   Zambia             Southern Province
Agric. Development              18.00         18.00
1196     1982   Zambia             Smallholder Dairy Dev.           7.50          7.50
1251     1982   Zambia             Fifth Education                 25.00         25.00
2151             1982   Zambia Indus-
trial & Mining
Company           Oil Refinery              5.10          5.02
2152             1982   Zambia            Pet. Exploration          6.60           6.17
Total                                            532.19  87.75 90.37  77.75
of which has been repaid                        100.09    -      -       -
Total now outstanding                            432.10  87.75   -        -
Amounts sold                        28.58
of which has been repaid           27.58          1.00    -      -
Total now held by Bank/IDA                       431.10  87.75   -
of which is undisbursed                          90.37  77.75
a Prior to exchange adjustment



- 27 -                                   ANNEX II
Page 2 of 9
B. STATEMENT OF IFC INVESTMENTS
as of September 30, 1982
Investment                                                        US$ Million Equivalent
No.      Year                        Type of Business         Loan Equity   Total
216-ZA     1972   Zambia Bata Shoe
Company Limited    Shoe Manufacturing       0.85   0.23    1.08
250-ZA     1973   Zambia Bata Shoe   Shoe Manufacturing
Company Limited    and Tannery               1.20    -      1.20
307-ZA     1975   Century Packages
Limited             Packaging Materials    0.78   0.21    0.99
324-ZA     1976   Development Bank   Development Finance
of Zambia           Company                  -      0.54    0.54
394-ZA     1978   Century Packages
Limited             Packaging Materials    0.10    -        0.10
483-ZA     1979   Zambia Consoli-    Copper and Cobalt
dated Copper Mines Production              28.00    -      28.00
527-ZA     1980   Kafue Textiles of
Zambia Limited      Textiles & Fibers       7.60    -       7.60
600-ZA     1981   Zambia Consoli-    Copper Production
dated Copper Mines                         27.69    -      27.69
632-ZA     1982   Ethanol Company of Chemicals and
Zambia Limited      Petrochemicals          3.46   0.59    4.05
Total gross commitments                    69.68   1.57   71.25
Less cancellations, terminations,
repayment and sales                    10.49   0.21   10.70
Total now held by IFC                      59.19   1.36   60.55
Total undisbursed                          50.15   0.59   50.74



- 28 -                           ANNEX II
Page 3 of 9
C. STATUS OF PROJECTS IN EXECUTION
as of September 30, 1982
Loan No. 900-ZA       Third Education Project:  US$33.0 million Loan of June
6, 1973; Effectiveness Date: August 9, 1973; Closing
Date: March 31, 1983
The project, as originally approved (excluding certain university
components and technical assistance that were deleted at Government's re-
quest), was completed in March 1980, about six months after the original
completion date. The Closing Date, originally September 30, 1979, was
postponed to March 31, 1983 to enable the Borrower to utilize savings to
finance construction of twelve primary schools originally included under
the Lusaka Squatter Upgrading and Sites and Services Project (Loan 1057-ZA)
and a maintenance program for secondary schools. Five of the primary
schools are under construction, however, construction of the seven
remaining schools has been delayed due to lack of counterpart funds. The
maintenance program is progressing well with most of the five experts in
post.
Loan No. 919-ZA       Kafue Hydroelectric Project (Stage II):  US$115.0 mil-
lion Loan of July 16, 1973; Effectiveness Date: Jan-
uary 15, 1974; Closing Date: December 31, 1982
The two 150-MW units at the Kafue Gorge power station were com-
missioned in mid-1977. Construction of the main dam has been completed and
the reservoir filled. The project is expected to be completed within the
appraisal cost estimates. The Zambia Electricity Supply Corporation's
(ZESCO) financial performance has not been satisfactory, however, due to
delays in approving tariff increases. Largely because of the economic
recession affecting Zambia, ZESCO has been experiencing a shortage of spare
parts and the departure of some expatriate staff. The Closing Date was
extended to December 31, 1982 to enable additional civil works on the
control of artesianal pressures to be carried out.
Loan No. 1131-ZA      Telecommunications Project:  US$32.0 million Loan of
June 24, 1975; Effectiveness Date: December 10, 1975;
Closing Date: December 31, 1983
About US$3.2 million of the loan still remains to be disbursed.
Project completion is now expected by mid-1985, four and one-half years
behind schedule, due to delays in installing and commissioning telephone
exchange equipment. Although tariffs have tended to lag behind cost
increases, creating financial problems for the telecommunications company,
increases in tariffs in August 1979, averaging 75 percent and in 1980
(about 60 percent), have alleviated the problem. The problem of large
accounts receivable by PTC from Government and its agencies continues,



- 29 -                           ANNEX II
Page 4 of 9
however. Operational difficulties with the semi-electronic main telephone
exchange in Lusaka also have severely affected PTC's revenues by limiting
new connections, however, these problems are also being worked ous:. The
Closing Date was postponed from Decembwer 31, 1981 to December 19.2.
Loan No. 1356-ZA      Fourth Education Project:  US$13.3 million Loan of
January 17, 1977; Effectiveness Date:  March 8, i977;
Closing Date: March 31, 1983
The physical facilities are completed and have been handed over.
Nearly all furniture and equipment has been delivered.  The NESC and the
Farmer Institutes and Training Centers are underutilized because of
recurrent budget shortages. About US$3 million of the loan allocated for
technical assistance is uncommitted due to the Government's reluctance to
hire foreign consultants on high salaries and a lack of suitable candidates
for the fellowship program. The project unit is well staffed and manages
implementation well.
Loan No. 1424-ZA      Second Industrial Forestry Project:  US$16.8 million
Loan of May 12, 1977; Effectiveness Date: November
15, 1977; Closing Date: December 31, 1983
Project implementation continues to be satisfactory despite
staffiing and management problems, and most targets for the plantation
program are being met or surpassed. The Industrial Plantations Division
has now been incorporated under Zambian law, and the project's accounts
(unaudited) for FY1981/82 show a modest profit compared with the previous
years' considerable loss. On the other hand, the project's performance in
sawmilling and logging continues to experience operational problems, and
plantation fires are occuring with increasing frequency. Project
management is preparing measures to overcome these difficulties.
Loan No. 1566         Third Highway Project:  US$22.5 million (US$11.25
and                   million Loan and US$11.25 million Credit) of June 27,
Credit 798-ZA         1978; Effectiveness Date:  November 26, 1979; Closing
Date: June 30, 1983
Due to delays in loan and credit effectiveness and employment of
technical assistance personnel, project implementation is behind schedule
and completion is expected by the end of 1985, 18 months behind reappraisal
(July 1979) estimates. Progress in recruiting technical assistance
personnel has improved. The Bank is currently reassessing the project
scope in light of the Government's difficulties in providing the local
recurrent funds for road maintenance.



- 30 -                           ANNEX II
Page 5 of 9
Credit No. 863-ZA    Coffee Production Project:  US$6.0 million Credit of
December 14, 1978; Effectiveness Date: July 26, 1979;
Closing Date: June 30, 1984
Expatriate and counterpart staffing have been satisfactory, and
the planting and rehabilitation program for coffee and maize, as well as
disbursements, are ahead of schedule. Implementation under the smallholder
component, which had been slow and haphazard, has improved. The coffee
research component is processing satisfactorily. The estate component has
encountered financial difficulties, with a shortfall of about US$5.0
million, because costs have been much higher than expected. The Government
is expected to provide the additional local cost financing required.
Additional financing is being sought for the coffee processing plant, which
has risen in costs more rapidly than expected. Also, there is concern over
possible departure of the Plantation Manager due to low renumeration.
Credit No. 873-ZA    Technical Assistance Project:  US$5.0 million Credit
of December 21, 1978; Effectiveness Date: July 12,
1979; Closing Date: June. 30, 1984
A planning expert and a project evaluation expert have been hired
to work in the Project Preparation Unit of the National Commission for De-
velopment Planning and a second project evaluation expert is being recruit-
ed. Phase I of feasibility studies for a fuel alcohol project has been
completed; preparation of a possible fisheries project is in progress; a
request to finance Zambia's contribution to the joint operational and staf-
fing study of Zambia Railways and TAZARA has been approved; and a request
for financing feasibility studies for a rural electrification project is
being considered.
Loan No. 1790-ZA      Third Railway Project:  US$25.0 million Loan and US$15
Credit No. 973-ZA    million Credit of June 16, 1980; Effectiveness Date:
March 31, 1981; Closing Date: September 30, 1984
The project is cofinanced by the EEC (through a Special Action
credit), AfDB, Japan, OPEC Special Fund, KfW, SIDA and ODA (UK).
Procurement is proceeding well and disbursement, which lagged due to delays
in issuing letters of credit, is expected to regain momentum. Technical
assistance for project implementation is proceeding well and, likewise,
training. Due to TAZARA's limited capacity, much copper has been sent to
Dar-es-Salaam by road rather than by rail, thus reducing Zambia Railways'
(ZR) share.  This, combined with an increase in working expenses and the
lack of tariff revision, has caused financial difficulties for ZR. The
Government is considering a tariff increase and the Bank is discussing its
possible assistance for improving TAZARA with the Governments of Tanzania
and Zambia.



- 31 -                          ANNEX II
Page 6 of 9
Loan No. 1923-ZA      Second Development Bank of Zambia Project:  US$15.0
million Loan of January 8, 1981; Effectiveness Date:
May 1, 1981; Closing Date: June 30, 1987
The loan is almost fully committed for 17 sub-projects in manu-
facturing, agriculture and transport.
Loan No. 2001-ZA      Eastern Province Agricultural Development Project:
US$11.0 million Loan of November 23, 1981; Effective-
ness Date: Scheduled for June 23, 1982; Closing Date:
June 30, 1987
This loan became effective in June 1982, and considerable
progress has been made since that time. However, lack of coordination
among implementing agencies and poor integration into local institutions of
the counsultants has led to some confusion as to the project's direction.
This is being rectified. A recent increase in producer prices has given
incentives to agriculture in the Eastern Province, and so disbursements are
expected to pick up in the near future. Progress continues slow in
establishing the Agricultural Development Bank due to lack of clarity as to
its function.
Credit No. 1196-ZA   Smallholder Dairy Development Project:  US$7.5 million
Loan of March 24, 1982; Effectiveness Date: November
23, 1982; Closing Date: June 30, 1988
The project is designed to increase milk production and raise
incomes of smallholder dairy farmers in Mazabuka, Monze and Kabwe Districts
by increasing use of modern farm techniques and improving marketing
services. Credit will be extended to smallholders for on-farm development
and animal husbandry and veterinary extension services will be provided.
The loan has only recently become effective.
Credit No. 1193-ZA   Southern Province Agriculture Development Project:
US$18.0 million Credit of May 18, 1982; Effectiveness
Date: November 16, 1982; Closing Date: December 31,
1987
Effectiveness of this credit was substantially delayed as a
result of difficulties with subsidiary loan agreements, selection and
appointment of consultants and preparation of legal opinions.  Otherwise,
implementation progress is satisfactory.



- 32 -                         ANNEX II
Page 7 of 9
Credit No. 1251-ZA   Fifth Education Project:  US$25.0 Million Credit of
June 14, 1982; Effectiveness Date: September 14,
1982; Closing DateL March 31, 1988
This project is off to a good start, except for a proposed Study
of the Implications of the Education Reform. Discussions are underway with
the Ministry of Eduction with the view to getting the study underway as
soon as possible. Construction of three of the eight junior secondary
schools is expected to begin in April, and the five remaining schools are
to be tendered in April and completed by March 1985.
Loan No. 2151-ZA      INDENI Refinery Modification Engineering Project:
US$5.1 Million Loan of June 14, 1982; Effectiveness
Date: September 13, 1982; Closing Date: September
30, 1984
Implementation of this Project is proceeding satisfactorily. The
initial field work for the Engineering Study has been completed and the
consultants are working on the report.
Loan No. 2152-ZA      Petroleum Exploration Promotion Project:  US$6.6
Million Loan of June 14, 1982; Effectiveness Date:
August 6, 1982; Closing Date: December 31, 1986
Implementation of this project is proceeding satisfactorily. The
airmag survey has been flown, and the consultants are analyzing the data
collected. If the analysis shows favorable geological structures, a
gravity survey, also financed under the loan, will be carried out.



ANNEX II
Pa>e " of 9
D. IFC PROJECTS IN EXECUTION
as of September 30, 1982
Zambia Bata Shoe Company Ltd. (216-ZA and 250-ZA) - Shoes ard laitnery
IFC's investment in 1972 helped finance an exparsion project to
triple shoe production to 2.9 million pairs. The project also opened up
the ownership of the company to local investors. In 1973 IFC's investment
helped finance a tannery to process 300 hides per day to meet the company's
requirement for leather. The foreign exchange situation of Zambia
continued to limit raw material imports by the company. However, mor'a
local materials are now used by the company, and this resulted in a 14
percent increase in production during 1980. The company has been operating
profitably.
Century Packages Ltd. (307-ZA and 394-ZA) - Packaging Materials
The plant was completed in 1977, about a year later than
originally anticipated, with an increase in project cost equivalent to 26
percent of total costs. Increased project cost has been met largely
through provision of additional financing acquired under the Project Funds
Agreement. Sales during the fiscal year ended March 31, 1981 were stagnant
at the previous year's level. Increases in administrative expenses,
especially provision for doubtful debts, and interest cost contributed to
the loss recorded for the year.
Development Bank of Zambia (DBZ) (324-ZA) - Development Banking
DBZ' principal objective is to provide medium- and long-term
loans and equity financing for productive enterprises in manufacturing,
agriculture and tourism. Since 1979, the volume of DBZ business has been
increasing. Loan approvals, which had stagnated around US$9.5 million per
year in 1976-78, increased to about US$28 million in FY80 and US$49 million
in FY81. Profitability has also improved: between FY80 and FY81, net
profit rose from US$1.7 million to US$2.7 million, a roughly 60 percent
increase. At the end of FY81, the total portfolio of DBZ was US$41 million
as compared with US$28 million at the end of FY80.
Nchanga Consolidated Copper Mines Ltd. (NCCM) (483-ZA) - Cobalt Production
The IFC loan of US$28 million (of which US$20 milion is for IFC's
account) to NCCM for a cobalt production production project was approved on
September 4, 1979. The project will more than triple NCCM's finished
cobalt production capacity to about 6,600 tpa by 1983. Physical
construction of the Project has been completed and commercial operations
are expected to begin shortly.



ANNEX II
- 34                             Page 9 of 9
Nchanga Consolidated Copper Mines Ltd. (NCCM) (600-ZA) - Copper Production
IFC's second investment in NCCM was a loan of DM 70 million
(equivalent to about US$30 million). IFC's loan which was approved on
December 3, 1981, will help finance a major expansion of the company's
tailings treatment capacity. The project will produce an average of about
35,000 tpa of finished copper starting in late 1985, equivalent to about
six percent of projected total company output, at a cost far below the
company's existing operations.
Kafue Textile of Zambia Ltd. (KTZ) (527-ZA) - Textiles
A loan investment of US$7.3 million and a contingent commitment
of US$0.3 million were approved in 1980 to assist KTZ' US$28 million
expansion. In the expansion, the company's production capacity will be
increased from 10.6 million meters of finished fabrics per year to 18.9
million meters and diversification into the production of cotton blended
fabrics will be carried out. The project is still under implementation and
is scheduled for completion in June 1983.
Ethanol Company of Zambia Limited (632-ZA) - Chemicals and Petrochemicals
A loan/equity investment of US$4.1 million to help finance
construction and operation of a plant to convert molasses from the Zambia
Sugar Corporation Limited into ethanol for blending with gasoline as motor
fuel. The plant will produce about 11.5 million liters of ethanol per
year, or the equivalent of 7.7 percent of current gasoline consumption.
Project implementation has just begun and the plant is expected to be
operating at the beginning of the 1984 sugar cane milling season which
starts in April/May.



- 35 -                         ANNEX III
SUPPLEME qTARY PROJECT DATA SHEET
I.   Ti'ietzble of Key Events
(a)  Time taken to prepare project :  Approximately 4 months
(b)  Project prepared by                 Zambia Industrial and Mining
Corporation Limited (ZIMCO)
and Maamba Collieries
Limited (MCL)
(c)  First presentation to the Bank:   May 1982
(d)  Departure of Appraisal Mission:   June 1982
(e)  Negotiations                    :  February 1983
(f)  Planned date of effectiveness :  July 1983
II.   Special IDA Implementation Action  :  None
III.   Special Conditions:
(a) Execution of Subsidiary Loan Agreement between Borrower and
ZIMCO and a Loan Agreement between ZIMCO and MCL (condition of
effectiveness, para. 55).
(b) During the implementation of the project, the Government to
permit ZIMCO/MCL access to a minimum of US$1 million in
foreign exchange to match IDA's contribution on a one-to-three
basis. IDA's share of US$3 million for the procurement of
spare parts and components to be disbursed in two tranches of
US$2 million and US$1 million each. MCL to contribute its
share of US$1 million during the first tranche, and
disbursement of the IDA's second tranche to be contingent upon
MCL fulfilling its commitment to the first tranche (para.
65).
(c) Execution of technical management contract between ZCCM and
ZIMCO and MCL and appointment of staff (condition of
effectiveness, para. 58).
(d) ZIMCO and MCL to obtain prior approval of IDA for the proposed
training program and list of spare parts, components and
quality control equipment (para. 61).
(e) Staffing of Project Unit to be established within ZIMCO
(condition of effectiveness, para. 60).



- 36 -
ANNEX IV
FINkNCIAL STATEMENTS/-
M&MMBA COLLIERIES LIMITFD
(Million Kwacha, Current Terms)
Income Statement
Year ended March 31,                1978        1979       1980       1981        1982
Sales - Tons                       666,400   576,900   588,500   571,000   539,100
Realized Selling Price K/Ton        19.5       25.8        26.6       32.2       35.2
Sales                               13.0       14.9        15.7       18.4        19.0
Cost of Production                   9.3       10.6        10.3        9.5       10.6
Administration                       1.0         1.2        1.2        1.4         1.5
Infrastructure Service
Depts. & Miscellaneous             1.9        2.4         1.7        2.1        3.3
Interest                              .9          .6        1.0        1.0         1.8
Insurance                             .3          .3         .3          .4         .5
Depreciation                         2.1         1.9        2.3        3.4         3.8
Profit before taxes/(loss)          (2.5)      (2.1)       (1.L)         .6      (2.5)
Taxes & Equity Levy 2                 -           -          -          -5
Profit/(loss)                       (2.5)      (2.1)       (1.1)         .6       (3.0)
Balance Sheet
Assets
Fixed Assets                        18.5       18.7        24.0       29.1       29.3
Current Assets:
Cash                               .2         .6          .1         .1         .1
Stocks                            4.4        4.6        5.9         8.2       10.8
Receivables                       3.1        3.9        3.6         3.3        5.0
7.1        9.1        9.6       11.6        15.9
Total Assets                        26.2       27.8        33.6       40.7       45.2
Liability and Equity
Current Liabilities:
Payable                           3.7        3.5         5.4        4.2        4.6
Taxation                           -          -           -          -           .5
Short term portion
of L.T. Debt                     .4        2.3        2.7        2.7         2.2
Bank Overdraft                    4.6        4.5        4.6         6.8        7.1
8.7       10.3       12.7        13.7       14.4
Long Term Debt                      16.8       10.3        14.8       14.3       16.9
Equity:
Share Capital                   15.0        23.6       23.6       29.8        34.0
Accumulated Profit/
(Losses)                     (14.3)     (16.4)      (17.5)     (17.1)     (20.1)
0.7        7.2        6.1        12.7       13.9
Total Liabilities and Equity    26.2           27.8        33,6       40.7       45.2
Current Ratio                        0.8        0.9         0.8        0.8        1.1
LT Debt/Equity Ratio                96/4       59/41       71/29      53/47      55/45
1/ Audited Statements.
2t 1.5% of share capital.
February 1983



MAAMBA COAL ENGINEERING PROJECT
Project Implementation Schedule
Month
.  1   2     3      4      5      6      7      8      9     10    11    12    13        14      15    16     17    18       19    20
Activities                        .__ -             -     -.__                ________                             -    ______ -                        ___        -
Activitles  Feb  -  May                  Aug                  Nov                  Feb                  May                 Aug
83                  83 .                 83 _   _    83                            84  __               84                   84
Preparation Period                                             Project Period
1. Restructuring MCL Management                                  -      -      -     -                     -   ___
2. Establishing Project Unit
3. Appointment of Consultant               I I
4. Technical Review and Feasibility Study
5. Spare Parts and Components
(a) Processing                                                     -                 t7
ib) Actual Supply
(c) Repairs to Equipment                                                                            I                                                  -      -      - r
6. Training
(a) Selection of Training Parties                                                                   I _
(b) Selection of Candidates                                                                         I _
(c) Actual Training
O   Enquirey
*   Bid Invitation
7    Bid Closing
e   Bid Evaluation Completed
_   Contract Award
World Bank-24365






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