Report No. 423a-CM FILE COPYAppraisal of aSecond Railway ProjectCameroonJune 13, 1974

Western Africa Projects DepartmentPorts, Railways, & Aviation Division

Not for Public Use

M

Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for officiai use only by the Bank Croup. it may not be published,quoted or cited without Bank Group authorization. The Bank Croup does not accept responsibilityfor the accuracy or completeness of the report.

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Carrency Equivalents

Currency Unit - CFA franc (CFAF)

us$1.00 = CFA! 250CFA? 1 million = Us$j, Oo.

FisCal Year: July 1 - June 30

sy sm of Weights and Measures: Metrio

Nbtric BritishAUS eouivalents

1 meter (r) = 3.28 feet (ft)1 kilojuter (lm) = 0.62 mile (mi)1 kilogram (kg) 2.2 pounds (lb)i metric ton (m ton) - 2,24 pounds (lb)

Abbreviations and AÀrOnyma

BCD - Banque Camerounaise de DeveloppemntCCΠ- Caisse Centrale de Cooperation EconomiqueCOFACE - Compagnie Francaise de Credit pour l'ExportationEIB - European Investment Bank -FAC - Fonds d'Aide et de CooperationTED - Fonds Europeen de DeveloppementOCFT - Office du Chemin de Fer TranscamerounaisOFEROM - Office Central des Chemins de Fer d'Outre-MerRegifercam- Regie des Chemins de Fer du CamerounUSAIm - United States Agency for International Development

CAMEROON

APPRAISAL OF A SECOND RAILWAY PROJECT

Table of Contents

Page No.

SUMKARY ............................. i-vi

1. INTRODUCTION . .............. .......... * 1

2. THE TRANSPORT SECTOR ...... 3

A. Background .......... 3.. . . . .. ... .. 3B. The Transport System. . .. ....... . ... 3C. Transport Policy, Planning, and Coordination ... 6

3. REGIFERCAM .7. ...... o ........ ... .... . 7

A. Organization and Management. 7B. Staff ....... 8C. Property ..... .. ............ 9D. Operations .9.... . . 9E. Traffic .......... , .... 10F. Costing ...................., ...... ,., ,., il

4. TUE PROJECT ................ ..... ... .. . 12

A. Description and Cost .... 12B. Project Execution, Procurement, and Disbursement 16

5. ECONOMIC EVALUATION . ........ .. ..... o..... 17

A. General ... .. 17B. Construction of the New Japoma Bridge 17C. Track Renewal ....... ........... 18D. Breakdown Crane ...... ........ ,..... ..... ... 18E. Freight-cars and Bogies . 18F. Radio Link and Single Turn-outs .. 19G. Sensitivity Analysis ....... . .19

H. Conclusion ..... .. .. .......... ,., 19I. Economic Justification for Continued Operation

of Regifercam ......... ..... . .19

This report has been prepared by Messrs. H. Apitz (Financial Analyst),M. Dick (Economist), and H. Georg (Railway Engineer).

Table of Contents (Contd.)

Page No.

6. FINANCIAL EVALUATION .... ...... .... .... ................ .. 20

A. Past and Present Financial Position ............ 20B. Future Financial Position ...................... 22C. Sensitivity Analysis of Financial Forecasts .... 26D. Audit ................................................ 27

7. AGREEMENTS REACHED AND RECOMOENDATION ............... 27

TABLES

1. Future Freight Traffic (in ton-km)2. Freight Traffic - Average Distances carried by Rail3. Future Freight Traffic (in tons)4. Passenger Traffic5. Douala Port - Operational Statistics for General Cargo6. Comparison between traffic of Regifercam and of Douala Port7. Estimated Schedule of Disbursements8. Freight-car Requirements9. Income Accouants, 1963/64 - 1972/7310. Summary Balance Sheets, 1964-7311. Debt Position as of June 30, 197312. Financing of Transcameroon Extension Line13. Forecast Income Accounts, 1973/74 - 1979/8014. Pro Forma Summary Balance Sheets, 1973-8015. Forecast Long-Term Debt, 1973/74 - 1979/8016. Statement of Sources and Application of Funds, 1973/74 - 1979/8017. Improved Road Edea-Younde - Forecast Income Account 1975/76-1979/8018. Financial Sensitivity to Low Traffic Forecasts

ANNEXES

1. Third Railway Development Plan, 1970/71 - 1975/762. Analysis of Cost Estimates of First Railway Project3. Brief Description of Railvay Property4. Summary of Operating Statistics, 1970/71 - 1972/735. Operational Plan of Action6. Traffic Forecasts7. Construction of the New Japoma Bridge8. Tentative Terme of Reference for Consulting Services9. Details of Economic Evaluation10. Economic Justification for Continued Operation of Regifercam

Table of Contents (Contd.)

CHARTS

1. Railway Organization2. Track Characteristice

MAP

Cameroon - Second Railway Project - IBRD 11058

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CAMEROON

APPRAISAL OF A SECOND RAILWAY PROJECT

SUMMARY

i. The United Republic of Cameroon was formed in 1962 through theamalgamation of two distinct colonial entities, each with a separate andlimited transport infrastructure. From its inception, therefore, the countrywas faced with the problem of a transport network which was totally inadequateto meet the political and economic needs of a small population scatteredthrough three main economic areas (West, South, and North) and separated bylarge uninhabited and undeveloped regions. Recognizing that the economicpotential of the country could not be realized without an adequately developedtrunk transport system linking the capital of Yaounde and the major commercialand import/export outlet of Douala with the important production areas, Cameroonhas, in recent years, devoted a very significant portion of public expendi-tures to the development of trunk road and rail links.

ii. As a result of these efforts, the basic structure of the transportsystem is now nearing a stage where it can be considered generally adequate toserve the overall needs of the country. Focussed on the port of Douala,transport links to the rest of the country are now provided along two princi-pal corridors: (i) the Transcameroon rail/road route which runs the entirelength of the country (about 1,700 km) and which also provides an outlet tothe sea for neighboring landlocked Chad; and (ii) the Douala-Bafoussam-Foumbanroad (about 330 km). However, considerable additional investments are requiredon this system; for while resources and energy have been directed to makingadditions and extensions to the original routes, older sections are deteriorat-ing, and their capacity is being strained by the additional traffic generatedby the growing economy and improvements to the basic transport network.

iii. This is particularly true of the railway system. Until recently,the railway in Cameroon was quite small, and the furthest penetration fromthe port of Douala was to Yaounde, a distance of about 300 km; however, con-struction has recently been completed of a 628 km extension to N'Gaounderewhich is expected to accelerate development of the northern region of thecountry. This extension has been built to high standards of design andengineering, and its cost of about US$98 million has been financed primarilyby bilateral lending agencies either in the form of grants or of loans onconcessionary terms. While this new construction was advancing, however, theold lines -- in particular the critical Douala-Yaounde link which was origi-nally constructed to much lower design standards -- were deteriorating underthe impact of growing traffic volumes. At the same time, additional motivepower and rolling stock were required to meet traffic demands.

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iv. The Bank's involvement with the railway system has focussed onîmprovements to the Douala-Yaounde line, and the equipment needed to main-tain and augment the railway's overall carrying capacity. The First RailwayProject (Loan 687-CM, US$5.2 million, 1970) resulted from a Government requestfor Bank support of the Third Railway Development Plan covering the period1970/71 -. 1975/76. This Third Plan contained provision for major extensionof the railway system and a complete realignment of the Douala-Yaounde line.The Bank reserved its position on these proposals, most of which were notadequately supported by engineering and economic studies, and in fact stipu-lated in the ensuing Loan Agreement certain restrictions on investments anddebt obligations which effectively prevented implementation of these plansuntil further study and review had been undertaken. The Bank did, however,agree to assist with items related to improvement of existing facilitiesand services during the first three years of the Plan period. Consequently,the Bank financed rolling stock, reconstruction of the Japoma bridge nearDouala, track renewal on sections of the Douala-Yaounde line, and consultingservices to study the feasibility of the Douala-Yaounde realignment. Otherproject items not financed by the Bank included purchase of main-line andshunting locomotives and miscellaneous service vehicles, reconstruction ofthe Douala railway station and shunting yard, and extension of the railway'sTraining Center.

v. The Bank-financed project elements have been successfully completed,with the exception of the Japoma bridge reconstruction. Studies undertaken inthe course of preparing bidding documents for the works proved that the intendedsolution was unacceptable because of difficult soil conditions, and a new sitefor an entirely new bridge had to be found; since the total cost estimated fornew construction far exceeded the amount available under the Loan, it was de-cided to delay the work and seek further financing. Outstanding also are con-struction of a new Douala railway station for which work and financing arrange-ments are still incomplete, and extension of the Training Center, financingfor which has only recently been arranged with the French Fonds d'Aide et deCoperation (FAC). The other Third Plan items not included in the First RailwayProject -- largely major railway extensions (exclusive of the final Belabo-N'Gaoundere Transcameroon extension now complete) - have been postponed ordropped.

vi. Pending development of a new Plan, the Government and the railwayhave requested further Bank assistance to finance urgent needs through 1976.Therefore, the Bank has prepared a Second Railway Project consisting of:(î) construction of a new Japoma bridge; (ii) completion of track renewal(42 km) on the Douala-Yaounde line; (iii) installation of 50 new turn-outs;(±v) înstallation of a radio link on the Douala-Yaounde-N'Gaoundere lîne;(v) purchase of 100 flat-cars, 25 box-cars, 100 freight-car bogies, a break-down crane, and spare parts for locomotives and rolling stock; (vi) purchaseof 4 main-lîne and 3 shunting locomotives; and (vii) provision of consultingservices in the fields of railway operations, costing, commercial activitiesand management, and for a detailed review of the solution to foreseeable capa-city constraints on the Douala-Yaounde transport corridor (road constructionvs. railway realignment).

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vii. The proposed Loan would meet the foreign exchange requirements ofitems (i) - (v), and item (vii). Caisse Centrale de Cooperation Economique(CCCE) would finance the foreign costs of locomotive purchase under item (vi).

The total cost of the project, net of taxes, is estimated at about US$23million equivalent, including foreign exchange costs of about US$20.72 million

(90%) which would be covered by the Bank Loan (US$14.56 million), the remainingfunds of Loan 687-CM (US$0.87 million), and the CCCE loan (US$5.29 million).

Regifercam would provide the local costs of the project, estimated at US$2.28million equivalent. The Bank Loan would include US$1.44 million for interestduring the first two years of the project to ease the debt burden on the rail-

way prior to receipt of additional revenues generated by project items; the

total amount of the Loan would therefore be US$16 million.

viii. ConcTirrently with the proposed project, the Government is plan-ning construction of the new Douala Station and extension of the TrainîngCenter.

ix. The railway management, if necessary assisted by the Office du Cheminde Fer Transcamerounias (OCFT), will handle procurement and supervise the con-

struction under the project. Track renewal will be carried out by Regifercan's

own labor force. Execution is expected to start during 1974 and to take three

years to complete. All Bank-financed items (except for the spare diesel gen-erator to be manufactured by the locomotive supplier) will be procured by

international competitive bidding in accordance with Bank Group guidelines.Domestic or regional preferences in bid evaluation are not applicable, asno local tender has been received for the bridge construction, and other items

will be of foreign origin. The Government is in principle prepared to waiveduties and taxes on all goods financed and imported under the project, upon

application by Regifercam.

x. The railway enjoys sufficient autonomy în its day-to-day operationsto permit effective management. The quality of top management, strongly sup-

ported by French technical assistance, is generally satisfactory; there ls,however, a need for increased participation of local staff in the decision-making process, and for extended training in view of progressing Africanîzation.

At the departmental level in railway headquarters and throughout the network,there is considerable scope for improvements in administrative and technicalpractices to ensure improved staff efficiency and the availability of necessary

transport capacity of the railway. The proposed project provides for consulting

services for operational planning and control, costing, marketing, administra-tive organization, management training, and corporate planning. Regifercamhas agreed that it will consult promptly with the Government and the Bank re-

garding the decisions it proposes to take in light of the recommendationssubmitted by the consultants, and the means of their implementation.

xi. The railway's physical assets are generally well maintained. About628 km of track constructed to high technical standards have been opened to

traffic in recent years. Efforts are being made to keep,the older trael ln

good repair, but the maintenance costs are rather high due to excessive 7.,ear

of rails in narrow curves. Training of staff is given continuous attentionin anticipation of a continuing rapid growth in traffic. Efficiency of opera-tions has been somewhat low, but should improve following completion of the

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track reneval program and the installation of longer sidinge on the Douala-Yaoundeline, coupled with the railway's ongoing program to reinforce bridges and thedelivery of additional rolling stock and locomotives. The consulting servicesoutlined in para. x above are, of course, also designed to help improveefficiency.

xii. The openin* of the first section (Yaounde-Belabo) of the Trans-cameroon railway resulted in a sharp increase in traffic in 1969-71. Overthe longer period 1968-72, passenger traffic increased at an average rate of12% annually în terms of passenger-km, but then dropped sharply in 1972-73,mainly because of operating constraints on the Douala-Yaounde line, and thefact that rolling stock utilization was limited. Freight traffic over theperiod 1968-73 increased at the rate of 13% annually in ton-km; the averagehaul rose from 209 km in 1968/69 to 305 km in 1972/73. Freight traffictonnage i forecast to double between 1972/73-1979/80, and passenger trafficto increase by about one-third.

xiii. Since most of the freight traffic originates or terminates at theport of Douala, a volumetric increase of these proportions will increase thealready apparent strain on the poorly aligned Douala-Yaounde line which pre-sently has a virtual monopoly of freight movements in the critical Douala-Yaounde transport corridor. Major elements of the proposed project (notablytrack renewal, extended sidings, better communications, and additional rollingstock, together with higher operating efficiency) are designed to increase thecapacity of this line to the maximum possible without a complete realignment.These measures ehould be sufficient to meet traffic requirements until 1980or slightly beyond, and there is no doubt that the proposed railway investmentsrepresent the economic least-cost solution to meeting transport requirementsin the Douala-Yaounde corridor during this period. However, the Douala-Yaounderailway line i paralleled by the Douala-Edea-Yaounde road which, between Edeaand Yaounde (about 181 km) is poorly aligned and gravel-surfaced. Road trafficover this stretch is limited to vehicles with'an overall gross weight of 10 tons(4 tons during the wet season). The Government is considering up-grading thisroad section. Were this to be done within the next three years, and existingtraffic restrictions lifted, road competition could be very effective, particu-larly for general cargo movements between Douala and Yaounde. Under thesecircuitstances, railway traffic would probably not attain the forecast levels,some investmente under the proposed project (particularly some rolling stockîtems) could be deferred, and, at lesst until 1980, the railway would not befinancially viable without subsidy support.

xiv. It is probable, however, that by the early 1980's, overall trafficgreth will re-introduce a capacity constraint on the Douala-Yaounde corridor,;rLd steps muet be taken to relieve this future congestion. The railway andthe Gov-ernment propose a major realignment of the Douala-Yaounde line (at acost in excess of US$100 million) to accomplish this and to reduce railwayoperating costs. Bank assistance with the project has been requested. If amajor ïmprovement to the road is also undertaken, however, there i likely tobe excess capacity in the Douala-Yaounde corridor. A study of the railwayrealignment vas financed under the First Railway Project, but this does notgo deeply enough into the problems of the least-cost solution to the long-term

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question of capacity on the Douala-Yaounde corridor. The Government hasagreed not to change the existing vehicle weight limitations or the restrictionson timber transport on the Douala-Yaounde road, until a further examination,to be financed under the proposed Loan, has been carried out.

xv. During the period 1965-68, the railway's financial situation wassatisfactory, with rates of return on net fixed assets in use ranging from5% to 7.3%. Subsequently, the position deteriorated, until in 1972 and 1973the rate of return declined to zero, and the Government was forced to sub-sidize the railway. The essential reasons for the deterioration were: (i)a sharp increase in operating costs (including depreciation) arising fromopening of the first section (Yaounde-Belabo) of the Transcameroon extension,and from inflationary pressures with no compensating increases in rates andfares; and (ii) a fall-off in the growth of traffic due to capacity constraintsand a deterioration of service quality.

xvi. It is now proposed that the railway will regain a sound financialposition, mainly by several substantial tariff increases designed to recoverlost ground and cope with inflationary pressures. This is in line with theGovernment's policy not to subsidize railway traffic on a regular basls. Thexecution of this policy, tariff increases were introduced in January andApril 1974, and tariffs will continue to be raised annually so that the rail-way's position will gradually improve to a point where, no later than 1979/80,the railway will be able to meet all its cash requirements including debt ser-vice and a reasonable contribution to its investment program (exclusive ofmajor re-alignnents or extensions). On the basis of present asset valuations,a suitable target rate of return would be 4%. However, the railway's assets(particularly motive power and rolling stock which will need replacing in theforeseeable future) need to be re-valued, after which the suitability of therate of return to meet the basic requirements will have to be reconsidered.Agreements have been reached with the Government and the railway on the reval-uation of assets and the renegotiation of the rate of return.

xvii. The railway's cash position, although now being eased by Governmentsubsidies and bank overdrafts, will remain tight until 1976. The debt/equityratio is satisfactory because construction of the Transcameroon extension,which accounts for about 60% of the railway's assets, was financed mainly bygrants. The Loan Agreement for the proposed project makes adequate provisionfor limitation of the railway's indebtedness.

xviii. The forecasts of the railway's financial future depend on a numberof factors: (i) an improvement in operational efficiency, for which consultingservices are provided in the proposed project; (ii) no increase in road com-petition for the Douala-Yaounde line in the period up to 1980, as already dis-cussed; and (iii) no substantial shortfall in the forecast traffic, and rotime-lag in the tariff increases. There is a risk that one or more of tfactors above will not meet expectations, in which case the railwayts financlaiposition may be significantly weakened. The Government has agreed that it willprotect the railway's financial position through subsidies or other approprîatemeasures in the event that a cash shortfall should materialize.

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xix. The economic case for the several elements of the project is welljustified. For the Japoma bridge, it was determined since appraisal of thefirst project that the economic losses that vould result from rupture of theexisting bridge would be so great that construction of a nev facility wasjustified iimmediately. Although cost estimates have increased since then,that conclusion remains firm in view of continuing traffic increases and therailway's vital role 'in the economy. Completion of the track reneval programis now imperative, vith the main benefits being reduced operating and mainte-nance costs, by avoidance of operating accidents, and resulting in increasedline capacity. The economic return on this project item amounts to a satis-factory 12%. The small investments in turn-outs and installation of a radiolink are expected to contribute to improved operational efficiency. Thepurchase of additional freight-cars and traction power is necessary to avoidexpensive transportation by road; the return on this investment amounts toabout 16%. The cost of purchasing bogies for existing freight-cars vouldbe 50% less than that of new cars, and this item is justified on the basisof this least-cost solution. The investment in purchase of a new crane isexpected to yield an economic return of 24% derived from savings in timelost by frequent operating accidents. The overall economic return on theproject, excluding the Japoma bridge and the bogies, is 13%.

xx. The project provides a suitable basis for a Loan of US$16 millionfor a period of 25 years including three years of grace, at an annual interestrate of 7-1/4% to be capitalized for a period of two years. The proposed Loanvould be made to the railway vith the guarantee of the Government of the UnitedRepublic of Cameroon.

1. INTRODWCTION

1.01 The Regie des Chemins de Fer du Cameroun (Regifercam) and theGovernment have requested Bank assistance in financing a project to meet theurgent needs of the railway through 1976. The project would consist of:(i) construction of a new bridge at Japoma near Douala on the railway lineto Yaounde; (ii) completion of track renewal (42 km) on the Douala-Yaoundeline; (iii) installation of 50 single turn-outs; (iv) installation of a radiolink throughout the Transcameroon line between Douala and N'Gaoundere; (v)purchase of 100 flat-cars, 25 box-cars, 100 freight-car bogies, a breakdowncrane, and spare parts for locomotives and rolling stock; (vi) purchase of4 main-line and 3 shunting locomotives; and (vii) provision of consultingservices in the fields of railway operations, costing, commercial activitiesand management, and for a detailed review of the solution to foreseeablecapacity constraints in the Douala-Yaounde transport corridor.

1.02 The total cost of the project, net of taxes, is estimated at US$23million, including foreign exchange costs of US$20.72 million. Of this latteramount, US$14.56 million will be financed by the proposed Loan, and US$5.29million by CCCE for the purchase of locomotives under item (vi) above; theremaining US$0.87 million vill be met from funds remaining under the FirstRailway Project (Loan 687-CM) for construction of the Japoma bridge (para. 1.04).The local costs of the project (US$2.28 million equivalent) will be met byRegifercam. The Bank Loan will include US$1.44 million for interest duringthe first two years of the project, making an overall amount of US$16 million.

1.03 This would be the second railway project for the Bank in Cameroon.The first project (Loan 687-CM, US$5.2 million, May 1970) was designed to

meet certain specific investment requirements, essentially the improvement andrehabilitation of existing facilities and purchase of rolling stock and motivepower, relating to the first three years of Regifercam's Third Railway Develop-ment Plan (1970/71-1975/76). The Plan itself also included completion of on-going works on the Transcameroon extension (Belabo to N'Gaoundere) financedlargely through bilateral loans and grants, two additional major line exten-sions, and a complete re-alignment of the Douala-Yaounde section of the exist-ing railway. The Bank reserved judgement on the latter items, and stipulatedin the Loan Agreement that no major debt obligation (beyond that applicableto the Transcameroon extension) should be incurred without Bank approval. Sincethen, the two line extensions (Yaounde-Yokadouma and Douala-Victoria) have beenshelved by the Government as premature. The Douala-Yaounde realignment wasstudied by consultants financed under the First Railway Project, but in thelight of the substantial costs of this undertaking and the possibility of com-petition from a proposed parallel road project, further study of the implica-tions are required (see para. 4.10). In consequence, those items of the ThirdRailway Plan (other than the Transcameroon extension) that were not includedin the First Railway Project have been postponed beyond the Plan period, andthe remaining portion of the Plan itself is therefore no longer valid.

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1.04 The Bank-financed portion of the First Railway Project, namely,(i) track renewal and rehabilitation; (ii) purchase of 185 freight-cars andspares; (iii) reconstruction of a bridge at Japoma near Douala; and (iv) con-sulting services for the Douala-Yaounde re-alignment, has been completed asplanned, except for the Japoma bridge. Further site investigations in pre-paration for the bridge vorks revealed that, because of extremely bad subsoilconditions, a new bridge at a different site was necessary at a much highercost. The additional foreign exchange required to permit this work is includedin the proposed project.

1.05 Equipment items in the first project financed by bilateral sources(six main-line locomotives, four shunters, one railcar, and miscellaneous ser-vice vehicles) have been purchased and placed in service. Still outstanding,however, are reconstruction of the Douala passenger and freight terminal, andexpansion of Regifercam's Training Center. The former has been delayed byslow progress on site approval, engineering studies, and financing uncertain-ties, the latter by lack of financing which has now been assured by FAC.

1.06 The proposed Second Railway Project would be the fifth Bank Groupoperation in Cameroon's transport sector. Two of these have been projectsfor highway construction nov under execution. The (First) Highway Project(Loan 663-CM/Credit 180-CM, US$19 million, 1970) provided for improvement ofthe roads N'Gaoundere-Garoua (285 km) and Tiko-Victoria (24 km), as well asconsulting services for studies and engineering for improvement of Garoua-Mora(260 km) and Douala-Pont du N'Kam (175 km). Works on these latter roads, aswell as on Bafoussam-Foumban (50 km), are being carried out under the SecondHighway Project (Loan 935-CM/Credit 429-CM, US$48 million, 1974). Thisproject als provides consulting services for: (a) a feasiblity study offorestry feeder roads, to be conbined with assistance for formulation offorestry development policies; and (b) a road maintenance study which wouldals consider requirements for betterment of feeder roads. Additionally, theproject includes technical assistance to strengthen the staffs of the Minis-tries of Planning and Transport, and further consulting services to studyspecific transport problems.

1.07 The Association has also helped finance a port project (Credit 229-CM,US$1.5 million, January 1971) which includes: (a) construction of a deep-waterquay at Bonaberi (port of Douala) primarily for handling lndustrial raw mate-rial; (b) improvement of log-handling facilities; (c) provision of a emallcutter suction dredger; and (d) services of a port costing adviser. The projectls virtually complete, about nine months behind schedule following an initialdelay in obtaining Government approval and signature of several contracts.A second project for expansion of the Port of Douala is now under considerationIn the Bank.

1.08 This appraisal report is based on data provided by consultantsOCCR/Sofrerail (France) 1/, on the findings of a Bank mission which visitedCameroon in February/March 1973, and on subsequent data received from Regi-fercam. The report has been prepared by Messrs. H. Apitz (Financial Analyst),M. Dick (Economist), and H. Georg (Railway Engineer).

1/ "L#Etude de l'Amenagement de la ligne centrale Douala-Yaounde," September1973.

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2, THE TRANSPORT SECTOR

A. Background

2.01 Cameroon became a United Republic in 1962 following a union of theformer East and West federated states. The country's location on the Gulfof Guinea between West and Equatorial Africa makes it an important transitpoint for its landlocked neighbors, Chad and to a lesser extent, the CentralAfrican Republic (CAR). Because of Cameroon's peculiar elongated shape andthe variety of its terrain, climate, and vegetation, the problems of trans-port development vary considerably within the country. In the south, denseforest and heavy rainfall make road construction and maintenance expensive.In the south-west, the north/south mountain range hampers transport. Inthe far north, excessive flooding and poor road-making soils make roadconstruction and upkeep difficult and costly.

2.02 The economy is primarily rural, with about 75% of the 6 millioninhabitants engaged in agriculture. The important areas of socio-economicactivity are around four main poles: (i) the coastal region near the portsof Douala and Tiko-Victoria where most industrial activity is concentrated;(ii) the densely populated, rich agricultural western region around N'Kong-samba and Bafoussam; (iii) the cocoa-producing region near Yaounde, thecapital; and (iv) the densely populated cotton- and rice-producing areasin the north, around Maroua. The long distances from the three agriculturalcenters abovementioned to the port of Douala make the provision of low-costtransportation critical to the country's economic growth.

2.03 There is a lack of transport infrastructure in the vast tropicalforest area of southeast Cameroon, at present only sparsely populated butwith good logging potential. The Government intends to commence large-scaleexploitation of this vast timber resource, and has over recent years com-missioned several studies directed at formulating a rational exploitation andtaxation policy. The Second Highway Project provides technical assistance forforestry policy formulation. To allow the exploitation of forest resources,improvement and extension of feeder roads will be required in these regions,and the abovementioned project also provides for feasibility study of about400 km of feeder roads. The results of this study will be used in conjunctionwith the Government's schedule for implementation of a forestry policy as thebasis for timing of the construction of feeder roads.

B. The Transport System

2.04 Transport infrastructure is currently approaching adequacy in termsof accessibility to vital economic areas. The system includes 23,000 kmnofroads of which about 1,500 km are paved, about 1,200 km of railways, threeports, one navigable waterway, and five airports, two of which provide inter-national services (see Map). The export/import-oriented system is focussedon the commercial center of Douala which has both a deep-water port and aninternational airport; links to the rest of the country are provided along twoprincipal corridors--the Transcameroon rail/road route, and the north/southDouala-Bafoussam-Foumban axis.

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2.05 The recently completed Transcameroon route runs the entire lengthof the country (about 1,700 km). It consists of a 930 km railroad fromDouala to N'Gaoundere, and a road from there through Maroua to the Chadianborder. The last 330 km of the railway (Belabo-N'Gaoundere) vere fullyopened to traffic in February 1974 after completion of construction financedby the European Development Fund (FED), the French Fonds d'Aide et deCooperation (FAC), the European Investment Bank (EIB), and the United StatesAgency for International Development (USAID). The Transcameroon route servesthe productive southern region of the country, as well as the cotton, rice,and groundnut areas in the north. It also provides an economic outlet tothe sea for landlocked Chad. At present about 25% of Chad's import/exporttraffic (40,000 tons annually) goes through Cameroon, and this amount isexpected to double upon completion of the route, if the road link betweenMoundou and N'Gaoundere is constructed as planned. The Government of Cameroonhas accorded this route priority in its development strategy. In addition tothe railway extension abovementioned, different sections of the road portionof the route are being improved with financing primarily from the Bank Groupand the Federal Republic of Germany.

2.06 The axis Douala-Bafoussam-Foumban consista of about 330 km of road,with a parallel railway between Douala and N'Kongsamba (about 172 km). Theroad is the most heavily trafficked ln the country (about 2,000 vehicles perday (vpd)), and carries much of the production of cocoa, coffee, and bananas.Two road sections on the axis are to be reconstructed under the Second High-way Project.

Railways

2.07 The railway network consista of two main lines originating fromDouala: (i) the Northern Line to N'Kongaamba (172 km), with a branch fromMbanga to Kumba (28 km); and (ii) the Central Line to Yaounde (308 km), withan extension to N'Gaoundere (628 km), and a branch from Otele to Mbalmayo(37 km). Details on the railway system and its administration are discussedin Chapter 3 of this report.

2.08 The railway carries about 60% of all traffic into and out of Doualaport; about half of the remaining traffic (especially importe) is local, withthe rest being road traffic. The two other transport alternatives availableto Cameroon are the Nigerian route by way of Maiduguri and the Nigerian Rail-ways to serve the extreme northern area, and the Transequatorial route throughCAR and Congo for the southeastern region; both these routes are expected todecrease in relative importance nov that the Transcameroon Railway i completed.

Ports

2.09 Douala, the principal port, handled in 1972 about 1.9 million tonsof cargo, and a sharp growth rate of about 9% annually is forecast. In thatsame year, the volume of timber handled in the port was less than 400,000tons, but with the anticipated increase in logging activity, this total isexpected to double vithin three years.

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2.10 Although productivity of the port remains low, it is expected to

improve partly due to Credit 229-CM which helped improve log-handling andbuild a berth for industrial raw materials, and partly due to drasticmeasures taken to improve the efficiency of the log-stacking area. Theport is now reaching the point where constraints are beginning to appear in

the system of transfer from the railway. Plans are being prepared for portdevelopment, lack of which will cause a serious bottleneek if forestry exploita-tion grows on the scale envisaged, and in turn affect the economy adversely.If the demand for rail service continues to rise, it will inhibit the growthof railway revenues, and increase the pressure on Regifercam's finances.Both the Government and the Bank Group therefore consider the development of

port facilities at Douala and elsewhere in the Wouri delta area to be of high-est priority, and a second port project is tentatively included in the FY 76lending program for Cameroon. This project would include provision of facli-ties for evacuating logs, construction of new general cargo berths, re-siting

of workshops, development of fishing ports, and deepening of the necessary

access channels.

2.11 Traffic through the secondary port of Tiko-Victoria has been declining,

due mainly to inadequate facilities and lack of transport links. Any future

improvement of this port will be in the context of the abovementioned projectfor the delta area as a whole. The port of Kribi, and the small private port

of Campo in the south-west, are lighterage facilities used mainly for logexports. Traffic through Kribi has been increasing recently, and is expècted

to grow still further with development of the forestry industry in southern

Cameroon.

Roads and Road Transport

2.12 The road network totals about 23,000 km, of which about 1,500 l:m

are paved and 6,000 km are all-weather gravel or laterite roads; the remninderare dry-weather roads. The main national roads radiate out of Douala toaard3the north.

2.13 The motor vehicle fleet has grown at an average of about 10% annual-ly over the past five years to about 50,000 units, of which slightly more thanhalf are cars. Fuel consumption has increased at about 8% yearly during thesame period. Road traffie volumes are highest on the Douala-Kekem-Bafoursanstretch, various sections of which carry from 2,000 to 4,000 vpd in the coastal

zone. The annual traffic growth rate is estimated to 4verage about 6-7%. Ifthe network is to cater effectively to present needs and to anticipated traffic,then both the physical system and its maintenance will have to be improved.The Bank Group has contributed to this effort by two highway projects nowunderway.

Aviation

2.14 International air service is provided through Douala by foreigncompanies and by Cameroon Airlines which also offers efficient connectin,îservices to other major cities and to Chad. Air freight is limited tohigh-value goods and perishables, and is minimal in comparison to totalfreight traffic carried by all modes.

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C. Transport Policy, Planning, and Coordination

2.15 The Mnistry of Transport created in 1970 has overall responsibilityfor the determinatiou of policy, planning, and coordination in the sector,though the Ministry of Planning and Development has a subsidiary planningrole. This responsibility covers transport agencies such as Regifercam, theNational Ports and Waterways Authority, and Cameroon Airlines, including reviewof their investment proposals and approval of tariffs. In the past, the plan-ning function was re]%tive1y simple since transport needs were readily identi-fiable; in the future-, more careful planning will be required to evaluateprojects and establish priorities. Cameroon' s capacity to do thïs needsstrengthening, and the Second Highway Project provides assistance to theMinistries of Planninrg and Transport in setting up a permanent planning organ-ization.

2.16 The Covernnent's present transport policy aims at: (i) developingand improving the Douala port, the Transcameroon route, and the Douala-Foumbanaxis, all of which serve export-import traffic; and (ii) improving road linksthat specifically co*ribute to socio-economic integration of the two formerstates which now forw Cameroon. The transport investments in the Third Five-Year Plan (1971/72-1975/76) are designed to achieve these goals, and if com-pleted as planned (by around 1981), these two major policy objectives wouldbe achieved. The im*prtance of improving and developing feeder roads, as wellas of strengthening rtoad maintenance, is recognissd, and vill in future be theprincipal foeus of aètention.

2.17 A complex transport coordination problem is pending with respect tothe vital Douala-Yaounde transport corridor. At present, freight on this cor-ridor moves largely by rail. The proposed project is partially designed toincrease capacity on this railway close to its maximum, beyond which a majorrealignment vill be required. On the basis of existing traffic forecasts,the rail section vill reach this capacity stage by about 1980. However, theDouala-Edea-Yaounde road roughly parallels the railway, although the Edea-Yaounde portion of fhee road is poorly aligned and gravel-surfaced, and conse-quently is subject to severe restrictions which limit vehicle weight to 10 tons(4 tons in the vet season). The Government is considering upgrading this roadat a time and to a level as yet unspecified. Were this to be done, and trafficrestrictions lifted +cordingly, a considerable amount of traffic would be di-verted from rail to road, particularly general cargo between Douala and Yaounde.Since the road improvement vill require a major investment to make it suitablefor year-round heavy traffic movements, and since, in addition, the road trans-port facilities vill also require substantial outlays, improvements en theexîsting railway line as proposed in the project are undoubtedly the lower-costsolution to present corridor traffic constraints. However, beyond 1980 whenconstraints will ag*in arise if current traffic forecasts are achieved, theissue of rail versus road investment takes on new significance because, ineither case, the outliay will be considerable, and the development of bothmodes might lead to oiver-capacity.

2.18 Alloving fot construction lead time for either railway realignmentor road improvement, a decision on this important matter seems unnecessarybefore 1976. This wil] allow ample time to review and analyze the existing

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report on the railway realignment, and to examine further the full implicationsof rail/road competition in the corridor. Funds have been provided in theproposed project for additional consulting inputs into this problem (para.4.10). Meanwhile, the Government has agreed that no change will be made inthe existing vehicle weight limitations or in restrictions on timber transporton the Douala-Yaounde road, pending completion of the abovementioned studiesand their review with the Bank.

2.19 Regifercam has now signed an agreement between itself and the truck-ers' association which regulates rail trans-shipment of transit traffic toand from northern Cameroon and Chad, in order to avoid uneconomic rail/roadcompetition between N'Gaoundere and Douala. In view of the major investmentsin the Transcameroon Railway, the Bank is in favor of this agreement, and theGovernment has confirmed that this îs in accordance with its general policies.

2.20 The railway parallels the paved road on the Douala-Bafoussam-Foumbanaxis up to N'Kongsamba (172 km). The locomotives and rolling stock in useare items retired from the central line, so that only marginal costs have tobe attributed to the traffic, thus maintaining the competitiveness of therailway within its limited capacity. Major capital expenditure on track toincrease capacity would probably not be justified in view of the short-haulnature (average 130 km) of traffic. No change in operational policy for thisline is presently contemplated, and the Government has agreed that it willmake no major capital investments on the line, unless in prior consultationwith the Bank.

3. REGIFERCAM

A. Organization and Management

3.01 Under a 1965 Presidential Decree (amended November 18, 1972) Regi-fercam is administered by a Board (currently chaired by the Minister of Trans-port) consisting of 12 members, two of whom represent railway users. Boarddecisions are subject to Government approval on a "no objection" basis. TheBoard has adequate authority in all spheres of railway business, and can dele-gate substantial powers to a "Comite de Direction" and or to the GeneralManager. Past experience inditates that the Board does not interfere undulyin the railway's day-to-day operations which are the responsibility of aGeneral Manager and two Deputy General Managers, all appointed by Presi-dential Decree.

3.02 The internal organization of Regifercam is shown in Chart 1. Thereis nothing fundamentally unsatisfactory about this structure, but, as willbecome evident later in this report, Regifercam is faced with many criticalproblems relating to operations, equipment maintenance, costing, marketing,planning, training, and administrative control, all of which are ultimatelyreflected in a marginal financial position. Provision has been made in theproposed project for consulting services to analyze Regifercam's managementand its organizational structure, in order to determine where improvementswould bolster efficiency and improve the railway's position in these vital areas.

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B. Staff

3.03 Operational staff has increased about 10% over the period 1970-73,from 3,525 to 3,867. Management has made strenuous efforts to limit staffgrowth in the face of the requirements of line extension. Staff costs (approxi-mately CFAF 1.65 billion in 1972/73) have been maintained throughout the periodat 59% of total working expenses, which is reasonably satisfactory.

Technical Assistance Staff, Africanization

3.04 The French Government provides management assistance to Regifercamwith staff seconded from its Office Central des Chemins de Fer d'Outre-Mer(OFEROM); of the 46 persons now assigned to the railway, 39 work in adminis-tration and in various technical departments, and 7 are instructors employedin training local staff. Meanwhile, Africanization is progressing steadily,and although the General Manager and one of the Deputy General Managersare still French engineers, local counterparts work in close collaborationwith them; also, Cameroonese railway officers (with French advisors assisting)head most of Regifercam's departments: Personnel, Finance, Legal and Claims,Operations, Permanent Way, and Motive Power and Rolling Stock.

3.05 As Africanization progresses and the role of French technicalassistance generally shifts from executive to advisory services, the questionof capability and efficiency of local managers becomes an important issue.For the time being, however, Regifercam's operations are still dependent onthe presence of expatriates, and the Government has agreed that it will notreduce either the present level of technical assistance or the responsibilitiesof technical assistants in line positions, without prior approval of the Bank.Actual and future needs of Regifercam's management will be more clearly assessedwithin the context of the consulting services to be provided under the proposedproject (para. 4.10).

Training Program

3.06 In response to the increasing Africanization and the general im-provements required in staff efficiency, as well as to the particular needsgenerated by expansion of the network and anticipated development of traffic,Regifercam's training programs have developed considerably over recent years,and now consist of: (a) beginner and refresher courses in train operationsand in locomotive driving; (b) on-the-job training in the maintenance andrenewal of track and buildings; (c) a four-year course in the apprenticeshipcenter for beginner mechanics; (d) a three-year advanced training course fortechnicians at the Douala Regional Training Center 1/ in mechanical engineering,track works, and telecommunications maintenance; and (e) correspondence courses,

1/ During 1972/73, 18 trainees from Cameroon and 12 from Congo, Gabon andZaire, attended these courses; outstanding graduates are sent to Francefor six months of further training. Extended facilities at this Centerto meet future demanda for Regifercam and for railway systems of neighboringcountries are considered as a regional effort, with possible involvementof the United Nations Development Programme (UNDP).

especially for administrative work, offered by the "Centre National Francaisde Tele-Enseignement," and locally organized seminars on specific technicalmatters. The above courses, arranged and supervised by technical assistancestaff, will be reorganized during 1974 on the basis of a model developed forIvory Coast railways.

3.07 Regifercam has been planning since 1971 on an extension of facili-ties to allow continuing refresher courses and training of foremen to becometrack section chiefs; these plans are now about to materialize, with construc-tion of buildings and purchase of equipment financed by a FAC grant due tostart in mid-1974, and courses by early 1975. Until then, facilities at Belaboare being utilized temporarily.

3.08 Considering all the above, Regifercam is clearly aware of the needfor qualified staff, and the training programs to achieve this are adequate.The proposed project therefore makes no special provision for additionaltraining, but the consultants employed to provide general management assist-ance will be expected to carry out an assessment of the existing programs(para 4.10).

C. Property

3.09 A brief description of railway track, structures, equipment, andother property is presented in Chart 2 and in Annex 3. Out of a total ofabout 1,147 km of main line, 628 km (Yaounde-N'Gaoundere) have been recentlyconstructed to high technical standards, and low marginal operating costs onthis line can be expected. Track on the Douala-Yaounde lîne is generally wellmaintained, but the sections due for total renewal are in extremely poor con-dition. Installations on the Northern Line Douala-N'Kongsamba (172 km) arebeing left in their present deteriorating condition, as the line is expectedto be phased out in the near future. The overall signalling system is appro-priate to present traffic, but communication facilities along the Douala-Yaoundeline are inadequate. Since good communications are vital in operations, manage-ment, and commercial activities, a new radio link with voice and telex circuitsis proposed in the project. This will enable improved operations, and willalso contribute to consultants' efforts to raise efficiency of management andstaff.

D. Operations

3.10 Annex 4 presents a summary of operating statistics for Regifercamfor 1970/71-1972/73. In general, operations have improved slightly over thepast years; however, most indices are still on the low side, a result mainlyof the difficult profile of the line Douala-Yaounde, poor track conditionsin some sections which cause frequent derailments, and insufficient communica-tions over this part of the system. Punctuality was low in both 1970/71 and1971/72, and has since dropped further to an average delay of 99 minutes forpassenger trains and 493 minutes for freight trains. This situation is expectedto improve in the near future with completion of track renewal and longer sid-ings which will lessen train crossing time, and when the communications systemis improved and further intensive staff training undertaken. Staff producti-vity is presently 134,000 traffic units per employee; this is 5% less than in

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1971/72, due to a 12% decrease in pass-km which occurred as poor railway ser-vice led to increased bus competition between Douala and Yaounde.

3.11 Compared with the previous year, the availability of motive powerin 1972/73 decreased from 68% to 51% for main line CC 2400 locomotives, andfrom 87.5% to 62% for BB 1200 locomotives. However, a utilization of 81%was achieved with the six new 4B 3600 locomotives (Annexes 3 and 4). Thegenerally limited availability vas the result of several accidents whichimmobilized three locomotives for a long time. The low figure for theCC 2400 cannot be expected to increase much above the present level becausethe inadequate bogie design necessitates frequent difficult repaire. Utili-zation of railcars has improved after bogie problems were resolved by themanufacturera. Average turnaround time for freight-cars has increased over1970/71-1972/73 from 6.5 to 9.8 days for box-cars, from 12.1 to 19.2 days forgondolas, and from 9.1 to 10 days for flat-cars. The higher figures reflectpartly the effect of the newly-constructed 628 km extension Yaounde-N'Gaoundere.Since early 1974, better wagon turnaround has occurred with the operation of newunloading facilities for log-cars at Douala; further gains are expected fromimprovements in track, operations, communications, and staff performance. Aplan of action is shown at Annex 5 which sets the operational targets expectedover the next three years.

E. Traffic

3.12 Over the period 1968/69 - 1972/73, freight traffic increased from205 to 326 million ton-km, at an average rate of 13% p.a. (Table 1). Actualtonnage carried grew much more slowly at only 3% p.a., from 980,000 to 1.1million tons. The average haul increased from 209 km in 1968/69 to 305 kmin 1972/73 due to completion of the Transcameroon extension to Belabo (Table2).

3.13 The tonnage recorded in 1972/73 was close to appraisal forecastsof the First Railway Project except for timber, which was substantially lowerthan the estimated 640,000 tons. This was to some extent a result of slownessin delivery of rolling stock, a problem partially solved in 1972 with deliveryof 6 locomotives and 185 flat-cars financed under Loan 687-CM, and which wasthen reflected in a 24% increase in timber tonnage between 1971/72 and 1972/73to 282,000 tons (Table 3).

3,14 Non-timber tonnages increased over 1968-73 by about 4% p.a. forexportes and 2-1/2% p.a. for imports. Although this rate is lower than the6% p.a. recorded in the previous four-year period, the shortfall in trafficvas partially due to operational limitations, for example, poor availabilitycf equipment and effective capacity. These probleme are expected to berectified under the present project.

3.15 Passenger traffic increased from 157 to 221 million pass-km over1968/69 - 1971/72, then declined sharply to 193 million pass-km in 1972/73.Most of the three-year increase is attributable to the opening of theYaounde-Belabo section of the railway; the decline probably resulted mainlyfrom increased bus competition between Douala and Yaounde, and a decline intrain punctuality and service reliability (Table 4).

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Future Traffic

3.16 Forecasts of future traffic are outlined in Tables 3 and 4, anddiscussed in detail in Annex 6. In essence, these forecasts are concernedwith: (a) the potential growth in the railway's traffic demand, and (b) theconstraints within and external to the railway's system which inhibit itsability to meet this potential demand prior to 1979/80. Annex 6 also analyzesthe results of increased road competition for freight traffic in the Douala-Yaounde corridor should it be allowed to develop in the period 1975-80, inorder to indicate the importance to the railway of the proposed continuationof current road restrictions pending a decision on road/rail competition inthis corridor in the period beyond 1980.

3.17 The forecasts of potential traffic have been estimated by Bank staff,drawing from the results of the railway's consultants' analyses of trafficdemand on the Douala-Yaounde section which carries 80% of total traffic. Themost important element is timber traffic, which is expected to increase from282,000 tons in 1972/73 to one million tons in 1979/80, reflecting a 5-6% p.a.growth in world demand, and the probable substitution of Cameroonian timberfor declining Ivory Coast exports of first-quality timber after 1975. Theaverage haul of Cameroonian timber is increasing (to over 400 km), reflectingthe exploitation of areas around Belabo as a result of the Transcameroon ex-tension. Other traffic is forecast to grow at a rate slightly in excess ofthe growth of GDP, a relationship which held true from 1962/63 until 1968/69when the railway first encountered capacity constraint difficulties on theDouala-Yaounde section. Total traffic demand is therefore expected to growfrom 1.1 million tons in 1972/73 to 2.3 million tons in 1979/80. Passengertraffic is expected to grow slowly from 193 million pass-km in 1972/73 to 259million pass-km in 1978/79, reflecting a continuing decline on the Douala-Yaoundeuine, offset by slow growth on Douala-N'Kongsamba and Yaounde-Belabo, and by

new traffic on the Belabo-N'Gaoundere extension.

3.18 The growth pattern for freight traffic will be subject to capacityconstraints on the Douala-Yaounde railway line through 1975 until the pro-posed project items begin to have a beneficial effect. Thereafter, physicalconstraints in the port of Douala's handling facilities will inhibit trafficdevelopment until 1979, when the proposed investment in port facilities (nowunder consideration for a Bank Group lending operation) is completed. Thus,traffic forecast for the years 1975/76 to 1978/79 is below potential as measuredby a uniform rate of growth from 1974/75 to 1979/80, particularly in 1975/76(85% of potential) and1977/78 (89%).

3.19 Should road freight competition be allowed to develop on the Douala-Yaounde corridor as previously described, the freight diversion over theperiod 1975-80 would probably average 15%.

F. Costing

3.20 Section 5.08 of the Loan Agreement (687-C4) for the First RailwayProject provides for instituting a costing system which would enable Regifer-cam to assess on a continuing basis the economic justification and the appro-priate pricing of its services by line and by commodity. Compliance with the

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covenant has nlot yet been met. Staff assigned to costing has until recentlydevoted much of its time only to computerization of the payroll. In addition,the expertise requîred to properly execute the costing system is lacking, themethodology is inadequate, and cost assessment is confusing, particularly forthe recently opened Belabo-N'Gaoundere extension. This situation is all themore unfortunate since contracts for Chad transit traffic are beîng negotiated.The consulting services under the present project provide external assistancefor completing a costing study and instituting a costing system along the linesproposed for the first project. Regifercam has agreed to furnish to the Banknot later than June 30, 1975 the preliminary findings of the study, and tocomplete the study and institute the system by June 30, 1976.

4. THE PROJECT

A. Description and Cost

4.01 All the items to be provided under the proposed project are neededto meet the railway's most urgent requirements through 1976, through improve-ment of fixed installations on the Douala-Yaounde line, and provision of addi-tional capacity. The project would consist of: (i) construction of a newbridge at Japoma near Douala on the abovementioned railway line; (ii) completioncf the track renewal program; (iii) înstallation of 50 new single turn-outs;(iv) installation of a radio link between Douala and N'Gaoundere; (v) purchaseof 100 flat-cars, 25 box-cars, 100 freight-car bogies, a breakdown crane, andspare parts for locomotives and rolling stock; (vi) purchase of 4 main-line and3 shunting locomotives; and (vii) provision of consulting services. The pro-ject will be carried out concurrently with the extension of the Training Centerfor which FAC financing is now assured. Furthermore, construction of a newDouala Station (which the African Development Bank (ADB) is considering forfinancing in 1975) is planned. Both these items had been included as part ofthe First Railway Project. Implementation of the proposed project and of thetwo items abovementioned are expected to cover Regifercam's needs during theproject period (1974-77).

4.02 The total cost of the project, net of taxes, would be about US$23million equivalent, including a foreign exchange cost of US$20.72 million(90%). Of this latter anount, US$14.56 million would be financed by theproposed Loan, US$0.87 million from remaining funds of Loan 687-CM (for theJapoma bridge), and US$5.29 million by CCCE (for locomotives). Local costs ofUS$2.28 million equivalent would be provided by Regifercam. To help lmproveRegifercam's present tight financial situation, the sum of US$1.44 millionrepresenting interest charges on the proposed Loan during its first two yearswould be included in the Loan which would total US$16 million. A breakdown ofproject costs is shown below:

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-- CFAF million- US$ million ---- % of Total Propo dLocal Foreign Total Local Foreign Total Expenditure Loan -

-______ - - _______ - (US$*illions)

1. Construction of JapomaBridge 215 645 860 0.86 2.58 3.44 15.0 1.71

2. Track renewal (42 km) - 165 700 865 0.66 2.80 3.46 15.1 2.80

3. 50 turn-outs 2/ 13 90 103 0.05 0.36 0.41 1.8 0.36

4. Radio Link 13 75 88 0.05 0030 0.35 1.5 0.30

5. 4 main-line locomotives - 895 895 - 3.58 3.58 15.6 _

6. 3 shunting locomotives - 213 213 - 0.85 0.85 3.7 -

7. Spares for locomotives - 83 83 - 0.33 0.33 1.4 0.33

8. 100 flat-cars & spare parts - 1,345 1,345 - 5.38 5.38 23.4 5.38

9. 25 box-cars & spare partc 205 205 - 0.82 082 3.5 0.82

10. 100 freight-car bogies2 - 100 100 - 0.40 0.40 1.7 0.h40

11. Breakdown crane - 130 130 - 0.52 0.52 2.3 0.52

12. Consulting services 42 173 215 0.17 0.69 0.86 3.7 0.69

Sub-total 448 4h654 5,102 1.79 18,61 20.40 88.7 13.31

13. Contingencie s(i) 2nwsical

(abou; ,C% on item lj 22 63 85 0.C9 0.26 0.35 1.5 0.26(iî) Pricea' J to 463 563 0.40 1,85 2.25 9.8 0.99

TOTAL 570 50 m5,5 2.28 20.72 23.00 100.0 14.56

Froposed Sources of Fundso

1. Remaining funds of Loan 687-C0 (Item 1) - 0.87 0.872. Proposed Loan / - 14.56 14.563. CCCE (Items 5,6,and parts of 13) - 5.29 5.294. Regifercam 2.28 - 2.28

TOTAL 2.28 20.72 23.00

1/ Excluding interest (US$1.44 }illion).2/ Costs based on firm price o.ffers received May 1974.3/ Price contingencies:

Item 1974 1975 1976 1977 Total contingency

1 18% 15% 12% 28.3%4 14% 11% - - 13.4%5 and 6 14% 11% - - 19.4%7 and 12 14% 11% 7.5% 15.0%

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4.03 The costs of most of the project items reflect firm offers receivedin May 1974. For the remainder, estimates are based on early 1974 quotationsobtained by Regifercam for similar items.A physical contingency of 10% has beenprovided for construction of the Japoma bridge in view of possible technicaldifficulties. Tenders for construction of the bridge were submitted in March1974, and the contract in expected to be awarded in July 1974. Price contingen-cies are based on the latest revised Bank guidelines. and have been providedas shown in the above table.

Additional Financing for Construction of the New Japoma Bridge

4.04 The existing Japoma bridge is a single-track steel structure offive spans and a total length of 320-m across the Dibamba River, near Douala.The bridge is of vital importance in the railway system, as it carries alltraffic to and from the capital city of Yaounde as well as northern Cameroon.Its girders are in poor repair, and stability is endangered by the sinking andtilting of one of the bridge piers. Reconstruction of the existing bridge, oralternatively of a new bridge, had been provided for under the First RailwayProject, but further investigations revealed that neither reconstruction norconstruction on the proposed site was technically feasible; the preferred solu-tion was to build a new bridge 150 m downstream from the present site, althoughat a considerably higher cost. A description of the bridge and its constructioncosts are given in Annex 7. All funds available under Loan 687-CM (aboutUSS870,000) would be applied to this bridge construction, leaving additionalforeign exchange financing required at US$1.71 million excluding contingencies.There would thus be parallel financing under Loan 687-CM and the proposed Loan,with funds under the former being disbursed first. To facilitate this operation,the Closing Date for Loan 687-CM is being extended from June 30, 1974 to June30, 1975.

Track Renewal (42 km)

4.05 Following renewal of 101 km of track between Douala and Yaounde(53 km under the First Railwav Project and 48 km under short-term financing),42 km between Otele and Yaounde still remain in need of urgent renewal with36 kg/m rail, steel sleepers, heavy ballasting, and long rail welding. Suchrenewal will improve train movements which are now disturbed by frequent railbreakage, derailments, and speed limitation caused by poor track condition.In the event that realignment of the Douala-Yaounde line is carried out, anyserviceable track equipment would be reused. The proposed track renewal pro-gram, combined with the extension of sidings for which turn-outs are beingprovided (para. 4.06), will bring the critical Douala-Yaounde line close toits maximum capacity. Any significant improvement in capacity beyond thiswill require a major realignment.

50 Single Turn-outs

4.06 M'any single turn-outs in stations are old and in very poor condi-tion, causing speed restriction and derailments. In order to cope with normalrenewals, extension of sidings, and construction of new Drivate sidings toserve the developing industrial areas, the immediate needs for new singleturn-outs have been estimated at 50 units (30 kg/m rail on steel sleepers),and these are provided for under the proposed project.

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Radio Link

4.07 In order to improve communications for managerial, operational andcommercial activities, the proposed project includes a radio link throughoutthe Transcameroon line between Douala and N'Gaoundere to supplement the presenttelephone system. Provision is also made for purchase of spares for the exist-ing system.

Motive Power and Rolling Stock

4.08 Taking into account the traffic forecasts over the project period,as well as the presently available fleet of motive power and rolling stockunits (Annex 3) and the anticipated improvement in productivity, Regifercarnwill need additional equipment as follows:

(a) 4 main-line diesel locomotives, type 4B 3600 HP. Toassure standardization of Regifercam's fleet, theseFrench-manufactured locomotives will be identical tothe six which are now in operation and performingsatisfactorily.

(b) 3 shunting locomotives. This is the estimated numberrequired for the development of log transport.

(c) Spares for Locomotives. To improve the utilization of thetype 4B 3600 locomotives, of which Regifercam already hassix, the project provides for a second spare diesel generatorunit as replacement in the event of major repairs or generalmaintenance.

(d) 100 flat-cars. In view of the favorable prospects for logtraffic, Regifercam has proposed increasing its fleet offlat-cars, adding the four-bogie type (21 m long, with a tareweight of 28 t and a maximum load of 80 t). This car ispreferable to the present two-bogie type; its adoption willrequire a lower investment cost than a larger number of two-bogie type cars for the same load, allow reduction in thenumber of daily trains from six to three (with consequentreduction in train crew expenditures), and reduce the mainte-nance cost of flat-cars.

(e) 25 box-cars. These are required to meet future trafficdemands, and to compensate for cars written off because ofmajor deficiencies or accidents.

(f) 100 freight-car bogies. About 50 freight-cars are unusablebecause the effects of accidents and normal wear and tearhave caused deterioration of bogies. These freight-cars willbe urgently needed to help carry the forecast traffic, and thepurchase of 100 bogies as provided for under the presentproject would permit reactivating them.

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One Breakdown Crane *

4.09 The poor alignment and consequent maintenance difficulties on theDouala-Yaounde line contribute to numerous derailments, and resumption oftraffic is often delayed because Regifercam has only one breakdown crane tocover its entire system. It can therefore take up to eight days to re-rail aheavy locomotive, and this results in traffic diaruption and loss of revenue.Now that the Transcameroon extension to N'Gaoundere has been completed, thecrane based at Douala will be insufficient to meet emergency situations. Theproposed acquisition of a second crane, to be based at Yaounde, vill speedup track clearance and improve line capacity.

Consulting Services

4.10 Provision is made for financing about 120 man-months of consultingservices in the fields of railway operations, commercial activities andmanagement. An outline of the Terms of Reference is given at Annex 8. Regi-fercam has agreed that it vill consult promptly with the Government and theBank regarding the decisions that it proposes to take in light of the consul-tantst recommendations, and the means of their implementation. Further pro-vision is made for a study of the least-cost solution to capacity constraintson the Douala-Yaounde transport corridor, including a comparison of the costsand benefits of a complete or partial railway realignment with those of up-grading the road Douala-Edea-Yaounde and the provision of associated roadservices. There is a possibility that bilateral technical assistance will beobtained to finance all or part of the above consulting services, in whichcase the funds released from the Loan may be re-allocated to other items with-in the project, or cancelled.

B. Project Execution, Procurement and Disbursemnent

4.11 Regifercam is competent to carry out and supervise the project whichis expected to start during 1974 and be completed by mid-1977.

4.12 All Bank-financed items (except for the spare diesel generator to bemanufactured by the locomotive supplier) will be procured by international com-petitive bidding in accordance with Bank Group guidelines. No bids for con-struction of the Japoma bridge, which involves highly sophlsticated techniques,have been received from local or regional contractors. Other items under theproposed project are materials and equipment available only in industrializedcountrîes. The consultants will be experts from modern railway systems out-aide Africa. The track reneval program is to be carried out by Regifercam'sown labor force. Domestic or regional preferences in bid evaluation do nottherefore apply to goode or services financed under the proposed loan.

4.13 The United Republic of Cameroon is an associated member of theEuropean Economic Community (EEC), and in this capacity has waived customsduties and taxes on goods imported from member countries of the Community. Asimilar exemption was granted by the Government for goods imported under Loan687-CM, regardless of their country of origin. The Government is in principleprepared to apply these arrangements to goods financed and imported under thepresent project, upon application from Regifercam.

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4.14 Disbursements from the Loan account will be made on the followingbasis:

(a) c.i.f. costs of rails, sleepers, fastenings, mechanical trackmaintenance equipment, turn-outs, freight-cars, bogies, spareparts, and equipment for a radio communications system;

(b) actual foreign exchange costs of consulting services; and

(c) actual foreign exchange costs of construction of the JapomaBridge (estimated at 75% of total cost of the item).

As the locomotives and freight-cars in the project are associated in the pro-vision of additional capacity, no expenditures vill be made under the proposedLoan for acquisition of the freight-cars until Regifercam has obtained anassurance of financing for purchase of the locomotives, and made arrangementssatisfactory to the Bank for their delivery. Regifercam will finance all thelocal costs of the project.

4.15 The estimated schedule of disbursements from the proposed Loan isshown in Table 7. Any funds remaining in the Loan account upon completionof the project will be cancelled.

5. ECONOMIC EVALUATION

A. General

5.01 The demand for railway freight traffic is expected to double between1972/73 and 1979/1980. The existing railway capacity, however, is inadequateto carry the forecast traffic beyond 1975/76, and accordingly the items inthis project are designed to enable Regifercam to improve its productivity,provide some additional rolling stock capacity, and increase line capacity onthe critical Douala-Yaounde line to a point near its maximum. Because thetraffic forecasts are very sensitive to growth in timber shipments, and thesein turn are closely linked to world demand factors outside Cameroonian control,the rolling stock items (flat-cars, box-cars, and freight-car bogies) have beenkept to the level required to meet short-term needs to 1977. The radio linkhas both a cost-saving and capacity-increasing role, and the other items (con-struction of the Japoma bridge, track renewal, and purchase of the breakdowncrane) will improve line capacity and save costs. Details of the economicevaluation are given in Annex 9.

B. Construction of the Japoma Bridge

5.02 In the appraisal report of the First Railway Project 1/, it wasestimated that such great economic losses would result from rupture ofthe bridge that construction of a new bridge was justified immediately.Indeed, without the bridge, there would be no rail service. Thus the

1/ Report No. PTR-50a, May 12, 1970.

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alternative to its construction would be to transport by road a substantialproportion of the present and forecast Regifercam traffic. To assess thecost of this alternative would require a detailed study of the additionalcapital investment required in trucks, roads and ancillary facilities forwhich currently available information is inadequate. Although cost estimatesfor the bridge construction have increased, it seems clear that the costwould be lower than that of the road transport investment.

C. Track Renewal

5.03 As explained previously, the Douala-Yaounde lïne is a vital linkin Cameroon's transport system, and the only route for bulk traffic. How-ever, the capacity of the line could be seriously impaired because of thepoor condition of existing rails. Renewal of the track is necessary andvital, even if major realignment is realized by end-1981. This short timehorizon has been used in the economic evaluation. The major benefits fromrenewal would be the avoidance of costly derailments, as well as reducedmaintenance.

5.04 Renewal of the remaining 42 km of track on the Douala-Yaounde line,as proposed in the present project, is now essential. The economic returnon these works, as calculated on the assumptions outlined in para. 5.03,amounts to 12%.

D. Breakdown Crane

5.05 Purchase of a new heavy-duty crane will help reduce the time lostwith each derailment, especially if the new heavier equipment is involved.The need for this crane becomes increasingly vital as the line nears capacity,since the railway is being deprived of an important potential input. Theinvestment on the purchase of a new breakdown crane is expected to yield aneconomic return of 24%.

E. Freight-cars and Bogies

Flat-cars

5.06 As shown in Table 8, the present fleet of flat-cars is inadequateto handle all timber traffic up to 1976177. The existing rolling stock,some of which is 45 years old, cannot be expected to give marked increasesin productivity. A phasing out of six cars annually has been assumed. Adetailed schedule of productivity targets is given in Annex 4.

5.07 The project provides for the purchase of 100 flat-cars with anaverage capacity of 60 tons, together with the motive power required to operateand maneuver the cars. The economic return on the total expenditure for carsand locomotives would be about 13%. This assumes no return traffie from southto north, which is conservative, as some traffic in construction material maybe expected. The rate of return is therefore considered acceptable.

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Box-cars

5.08 The box-car fleet requires a small addition of 25 cars to cater forgrowth of general cargo traffic and to replace inoperative rolling stock.The rate of return on the item is 19%.

Bogies

5.09 At present, there are 50 freight cars which cannot be utilizedbecause bogies are inadequate or non-existent. Purchase of the 100 bogiesrequired to make the cars operational would be nearly 50% less expensivethan car replacement. As new car provision is economically justified, itfollows that the least-cost solution of bogîe purchase would yield a higherrate of return than new car purchase, and is thus also economically justified.

F. Radio Link and Single Turn-outs

5.10 These items are necessary to enable productivity targets to be metthrough improving communications within the expanded railway system, and pro-viding additional operating flexibility. The cost of these items is low rela-tive to the systems which they complement, and no separate economic analysiswas possible.

G. Sensitivity Analysis

5.11 The major components of the project have been separately subjectedto sensitivity analysis. For flat-cars, timber traffic growth at only thelong-term rate applying to the last 20 years (7-1/2% p.a.) reduces the rate ofreturn from 13% to 10%. For box-cars, an assumed traffic growth at a rateno greater than that anticipated for the GDP reduces the rate from 19% to 14%.For track renewal, the effect of the above reductions in timber and generalcargo traffic is to reduce the rate of return from 12% to 9-1/2%. All theresulting minimum rates of return are satisfactory.

H. Conclusion

5.12 The above evaluation shows the project and each of its componentsto be economically justified. The track renewal and Japoma bridge investmentsare essentially replacement items; the crane, radio link, and turn-outs arejustified by resultant productivity improvements; and the flat-cars, box-carsand bogies are required to cater for forecast traffic growth. The overalleconomic return of the project, excluding the Japoma bridge and the bogies,is 13%, which reduces to 10% under the above sensitivity analysis.

1. Economic Justification for Continued Operation of Regifercam

5.13 The alternative to the project is the eventual closure of Regifercam.However, even with improvements to the Edea-Yaounde road, the railway will beable to provide goods transport at lower cost than truckers. This appliesparticularly to long-haul timber and other bulk traffic, but also to shorter-haul timber and general cargo where the margin of advantage is limited byroad/rail transfer costs. Overall, the railway cost advantage is substantial

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for about two-thirds of its traffic. The situation is analyzed in detail inAnnex 10.

6. FINANCIAL EVALUATION

A. Past and Present Financial Position

6.01 The current financial structure of Regifercam was established by aPresidential Decree of August 18, 1965 and its amendment of November 18, 1972.The railway is obliged to present a balanced budget which thereafter is madeeffective by Government decree. This reflects the policy of the Governmentnot to subsidize railway traffic on a regular and continuing basis. The financialequilibrium of Regifercam is to be maintained by measures appropriate for acommercial enterprise, namely cost control and tariff increases. Within theselimits, Regifercam has adequate financial autonomy.

6.02 Regifercam's income accounts and balance sheets for the period1963/64 - 1972/73 are given in detail in Tables 9 and 10, and summarized below:

(in CFAF millions)1963/64 1967/68 1970/71 1972/73

Income Accounts

Operating revenue 1,721 2,385 3,056 3,567Working expenses 1,262 1,678 2,255 2,818

Cash generation from operations 459 707 801 749Depreciation 232 269 607 744Net operating revenue 227 438 194 5Interest charges - 22 112 260Net surplus (loss) 227 416 82 (255) /1

Working ratio 73% 70% 74% 79%Operating ratio 87% 82% 94% 100%Debt service coverage ratio 45.9 4.3 4.8 1.8Rate of return 4.3% 6.7% 1.3% 0%

Cash flow(Net surplus plus depreciation) 459 685 689 489

Cash flow in Z of operating revenue 27% 29% 23% 14%

Balance Sheets

Net fixed assets 5,766 7,096 17,613 20,327Current assets 765 655 1,378 1,822Current liabilities 192 459 805 1,793Long-term debt 743 834 5,476 7,302Equity equivalent 5,647 6,509 12,761 13,120

Ratio of current assetsto current liabilities 4.0 1.4 1.7 1.0

Ratio of liquid assetsto current liabilities 2.7 0.6 0.9 0.5

Debt/equity ratio 12/88 11/89 30/70 36/64

/1 Not including subsidies of CFAF 224 million paid by the Government.

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The figures show that operating revenue doubled over the period under review.The amount of cash generated from operations was satisfactory until 1968; how-ever, it has since then not kept pace with the increase in revenue, and in thefiscal year 1972/73 was insufficient for the railway's cash needs. This deter-ioration of earnings coincided with very heavy new investments, and depreciationand interest charges therefore rose sharply; as a result, the railway has, since1971/72, been experiencing substantial losses.

6.03 The decline of cash generation from operations in recent years, andthe corresponding increase in the working ratio, can be attributed to severalfactors, of which the most significant are:

(a) until very recently, no serious effort was made to compensatefor inflationary pressure on costs by appropriate tariff in-creases. This is particularly true for freight traffic,Regifercam's main source of revenue, where because of an in-creasing proportion of low-rated commodities carried and thetaper in tariff scales for longer hauls (following opening ofthe Yaounde-Belabo extension), average revenue per ton-kmdropped from CFAF 8.3 in 1963/64 to CFAF 7.6 in 1971/72 com-pared to fully distributed costs in that year of CFAF 8.1 perton-km. For passenger traffic, however, revenue per pass-kmdid rise over time, and now largely covers fully distributed costs;

(b) the possibilities have not been fully exploited for increasingthe productivity of labor, motive power, and rolling stocknormally associated with growing traffic volumes; and

(c) Regifercam has not always been able to meet the existing trafficdemand either in the quantity or quality of service provided.This is particularly true for passenger traffic and the trans-port of timber logs and petroleum products.

6.04 The sharp increase in depreciation and interest charges has beencaused by a 250% growth of the asset base over the period, due mainly (forabout 55%) to construction of the First Transcameroon Extension (Yaounde-Belabo). The combined factors of increasing depreciation and unsatisfactorycash generation from operations resulted in severe deterioration of the oper-ating ratio and the rate of return. The latter particularly had averaged afavorable 5.7% over the period 1963/64-1967/68, but thereafter dropped sharplyand continuously to zero in 1972/73.

6.05 About 40% of the above decline in the rate of return can be attri-buted to opening of the Yaounde-Belabo extension, and the remainder to factorsmentioned in para. 6.03. Regifercam's actual cash shortage has however notbeen aggravated by the operation of this extension, since revenue generated onthe new line was in 1972/73 approximately equal to the cash expenses (includingdebt service) connected with its operation. In'1973/74 it is expected thatservices on the extension will make a positive contribution to Regifercam'scash flow, but it will be at least three years before they will also coverdepreciation allowances.

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6.06 For the present report, the calculation of Regifercam's depreciationallowances has been based on an assumed average service life of the differentitems of fixed assets in use. The resulting depreciation allowance for recentyears is roughly the same as the amount shown in Regifercam's books; it wouldprobably be higher if that part of the fixed assets in use which will bereplaced in the foreseeable future (mainly motive pover and rolling stock)were revalued at replacement costs. Regifercam has agreed that such a revalua-tion will be undertaken and reflected in its balance sheet and income accountfor 1973/74, and thereafter repeated at least every third year. The averageservice life of the different items of fixet assets in use will also be assessedto allow a more precise calculation of depreciation allowances.

6.07 Regifercam received substantial grants for construction of theFirst Transcameroon Extension, and these, together with some self-financing,limited the increase of long-term debt to about half that of fixed assets; thedebt/equity ratio therefore remains at a reasonable 36/64. Regifercam's pre-sent debt terms range from medium-soft to soft, with the exception of Loan687-CM and a credit from the Compagnie Francaise de Credit pour l'Exportation(COFACE). Table 11 gives details of the railway's debt position as of June 30,1973.

6.08 Regifercam's actual cash shortage, as reflected in the criticallylow levels of the current ant liquid ratios, occurret principally because muchof an already low cash flow was devoted to financing new investments; theshortage is nov being eased by bank overdrafts and subsidies from theGovernment.

6.09 The balance sheet as of June 30, 1973 does not include the SecondTranscameroon Extension (Belabo-N'Gaoundere) on which service commenced February1, 1974, nor the subventions received and debt incurred to build it. Theseelements are introduced in the last column of Table 10, and they are usedlater in this report (para. 6.17 for balance sheet projections. Financing ofthe entire Transcameroon extension is shown in detail in Table 12. Regifercammade no contribution towards financing the second section of the extension line.

B. Future Financial Position

6.10 Projections of Regifercam's income accounts and balance sheets forthe period 1973/74 - 1979/80 are shown in Tables 13 and 14 and summarizedbelow:

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(in CFAF millions)

l9ZâZ74 1975/76 1977/78 1979/80Income Accounts

Operating revenue 4,315 7,681 10,648 15,111Working expenses 3,512 5,830 7,837 11.569

Cash generation from operatiens 803 1,851 2,811 3,542Depreciation 970 1 311 1i450 1 652Net operating revenue (loss) 5 0 1,3611Interest charges 385 653 888 978Net surplus (los) (M) 1/ (113) 73 912

Working ratio 81% 76% 74% 76%Operating ratio 104% 93% 87% 87%Debt service ceverage ratio 1.3 1.8 1.7 1.8Rate of return (0.6%) 1.4% 3.5% 4.5%

Cash flow(net surplus plus depreciation) 418 ?/ 1,198 1,923 2,564

Cash flow in % of operating revenue 10% 2/ 16% 18% 17%

Balance Sheets

Net fixed assets 34,645 38,991 38,350 42,311Net current assets 741 1,132 2,291 3,061Long-term debt 11,880 17,216 18,723 20,228Equity equivalent 24,672 24,273 24,784 26,310

Ratio of current assetsto current liabilities 1.6 1.5 2.0 1.9

Ratio of liquid assetste current liabilities 0.8 0.7 1.0 0.9

Debt/equity ratio 33/67 41/59 43/57 43/57

1/ Not including subsidies of CFAF 786 million paid by the Government.

Table 13 also shows the assumptions used in the projections. They include:(a) traffic volumes as shown in Tables 1 and 4; (b) a 9% p.a. rate of inflationin working expenses, including staff costs; (c) a cost increase caused byhigher fuel prices; (d) certain improvements in operational efficiency (seeAnnex 4); and (e) important tariff increases in five consecutive years startingin 1975.

6.11 Concerning (e) above, the proposed increases, which are vital to theprojected improvement of Regifercam's financial situation, are discussed indetail in the Annex to Table 13; they consist essentially of five increases infreight tariffs (two of 15% and three of 10%), and three in passenger tariffs(of 10% each). These are likely to be the maximum attainable, given current

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and anticipated levels of road competition, and the fact that fairly substan-tial tariff increases averaging about 12% and 7% were implemented as recentlyas January and April 1974, the latter one as compensation for increased fuelcosts. If inflationary pressure on working expenses were higher or lower thanthe 9% p.a. assumed in (b) above, the proposed tariff increases could be adjustedaccordingly, since the operating costs of competitive road transport, and conse-quently the tariffs in that mode, wil probably be affected by roughly the sameinflationary pressure. Tariff increases will take into account market conditions,especially with regard to road competition. The increase in the average haul ofrailway timber traffic (para. 3.18) will probably reduce its overall sensitivityto road competition. The above arrangements have been discussed with the Gov-ernment and Regifercam, and an understanding reached on implementation of apolicy based on the principle of regular and substantial tariff increases.

6.12 Regifercam's expected earning situation and financial viability willimprove continuously over the forecast period, and can be considered satisfac-tory from 1978/79 onwards. The situation will nevertheless remain difficultuntil 1976, before which time only the debt service coverage will be acceptablyhigh. Ihe Loan Agreement therefore provides for a minimum debt service cov-erage of 1.2 from 1973/74 onwards.

6.13 Since the projected improvement in the rate of return depends largelyon adoption of the proposed tariff policy, the Loan Agreement makes provisionsfor Regifercam to apply tariff increases (or other measures satisfactory tothe Bank) so as to obtain rates of return on its net fixed assets in operationof at least: 1Z in 1975/76, 1.5% in 1976/77, 2.5% in 1977/78, 3.5% in 1978/79,and 4% in the fiscal years thereafter. These rates of return are based onpresent asset valuations, and vill therefore have to be reviewed in 1975 aftermuch of the railway's fixed assets have been revalued (para. 6.06). Since thisrevaluation will considerably increase the asset base for the rate of returncovenant and the annual depreciation allowance, the rate of return equivalentto the railway's earning ability will probably decrease to some extent as aresult of this exercise.

6.14 The above rate of return targets reflect for the earlier years therailway's earning ability, and shall serve as guidance for its annual planning.The final rate of 4% which is to be kept constantly after 1978/79, would besufficient to cover all the railway's cash needs connected with working expenses,debt service coverage, replacement of worn-out equipment at current marketprices, and increase of net working capital. In addition, a substantial con-tribution to future investment would be possible, except for the very largeoutlays required for the proposed realignment of the railway between Doualaand Yaounde, or for major expansions of the railway systems (para. 6.22).

6.15 The increase of fixed assets shown in the balance sheet projectionsis due mainly to the proposed project, as well as to construction of theDouala Station, and purchase of additional motive power and rolling stock.Long-term debt is increasing more rapidly than fixed assets, because grantsand self-financing vill cover only 25% of capital investment (Table 15). Thedebt/equity ratio vill therefore increase to 43/57 in 1980, which is acceptable.

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6.1.6 mhe.currént position shows considerable improvement as compared to1972/73. The balance sheets show a reduction of receivables from theirpresentlevel of about 20% of annual gross operating revenue to about 15%. mis 15%level had been consistently kept until 1969/70, and Regifercam has agreed thatthis same level vill be maintained as from 1974/75. The liquid ratio willoscillate over the forecast period between 0.6 and 1.0. Since any furtherreduction of this ratio would lead to a cash shortage, the Loan Agreementprovides for a minimum working cash (including avaialble bank overdraft facili-ties) of 8Z of annual working expenses.

6.17 A statement of sources and application of funds for the period1973/74 - 1979/80, together with the assumptions used, is shown in Table 16and summarized below:

Project Period Rest of Forecast Period(1973/74 - 1976/77) (1977/78 - 1979/80)

Z of funds % of fundsCFAF million applied CFAF million applied

Sources of fundsCash generationfrom operations 6,171 53 9,442 119Less debt service 3,732 32 5,475 69Net cash generation 2,439 21 3,967 50Subsidies 904 8 - 0Borrowing 8,509 73 4,300 54

Total funds available 11.852 102 _8,267 104

Application of fundsCapital investment 10,227 88 6,860 86Net increase inworking capital 686 6 910 2Repayment of bankoverdraft 724 6 193 2

Total funds applied 11,637 100 7,963 100

Cash surplus for theperiod 215 2 304 4

After repayment of bank overdrafts and provision for increases in cash andworking capital, participation by Regifercam in capital investment out ofits own net cash generation wil be only 8% during the project period. Inthe last years of the forecast period, self-financing of capital investmentwill increase to an acceptable 37%.

6.18 Because of the tight cash flow during the project period, the LoanAgreement provides for limitations of indebtedness as follows:

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(a) the Bank's acceptance of specified terms and conditionsfor external borrowing to cover items under the projectwhich are not Bank-financed; and

(b) the Bank's prior approval for Regifercam to undertakeduring the praject period any investment estimated tocost more than US$1.0 million equivalent, or to incurany debt for such investment.

6.19 The cash flow makes no allovance either for the proposed realign-ment of the Douala-Yaounde line (about US$112 million in 1973 prices), orfor proposed investments in major line extensions as originally included inthe Railway Plan for 1971/72 - 1975/76. During the period under review,Regifercam is not in a position to contribute to such investments out of itsown funds, nor vill it be able to service the corresponding debt if it isincurred at commercial teris. The Loan and the Guarantee Agreements there-fore stipulate that Regifercam should not carry out, or incur any debt inrespect of, the realignment of the Douala-Yaounde main-line, unlesa in con-sultation with the Government and the Bank, and unless the works are provento be economically and technically sound.

C. Sensitivity Analysis of Financial Forecasts

6.20 The foreca8t income account diaregards the possible financial impacton Regifercam from a major improvement of the road Edea-Yaounde which wouldeffectively parallel the Douala-Yaounde rail line. A separate projectionassuming the improvement of this road is given in Table 17. A comparison ofRegifercam's financial position under the two alternatives -- with and with-out the competitive road - shows that the loss of traffic and the limitationsimposed on tariff increases due to road competition would lead during thefive-year review period (1975/76 - 1979/80) to an accumulated net los ofCFA! 1.6 billion instead of an accumulated net surplus of CFAF 1.9 billion.Also, the net cash generation from operations (after payment of debt service)would be reduced by CFA! 3.7 billion. Since, under these conditions, the rail-way would barely be able to meet debt service and working capital requirements,and would have no funds for equipment replacement and other necessary capitaloutlays, substantial Government subsidies would be required.

6.21 An additional sensitivity analysis has been carried out assumingthat the traffic forecast vill not be achieved for reasons other than in-creased road competition. It is assumed that growth of traffic in general,and for the railway in particular, will fall below the long-term trend, re-sulting for 1979/80 in 25% lower railway freight traffic as compared to theforecast in Table 1. Road transport competition is assumed to remain at thepresent level, and therefore the tariff increases outlined in para. 6.11 areproposed. The financial result shown in Table 18 would be an accumulatednet losa of CFAF 0.6 billion instead of an accumulated net surplus of CFAF1.5 billion for the period 1974/75 - 1979/80. The financial situation wouldimprove over time, and during the last years of the forecast period, Regifercamwould have small but increasing net surpluses. However, self-financing ofeven a minimum program of necessary investment for replacements and the likewould be limited to about 20%, which is critically low, and a need for Govern-ment support could not be over-ruled.

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6.22 There are therefore elements of risk involved either in a significantshortfall in traffic from forecast levels, or an inability to match infla-tionary cost increases with timely and adequate tariff increases. The analysis,while presenting a pessimistic approach to the railway's future development,indicates that the need for a temporary subsidy from the Government cannot beentirely ruled out. The Guarantee Agreement for the proposed Loan thereforemakes provision for subsidies or such other financial support by the Govern-ment as may be appropriate to protect the railway's cash position should theneed arise.

D. Audit

6.23 Until recently, the audit of Regifercam's accounts was carried outby a Government-appointed "Commissaire aux Comptes". This arrangement wasaccepted under the First Railway Project, and was considered adequate forthe purpose of the auditing requirements set forth in the Loan Agreement forthat project. The Government recently appointed a new auditor whose reportfor fiscal 1972/73 has now been received; however, the report does not con-form with generally accepted auditing principles. The Loan Agreement forthe proposed Second Railway Project therefore makes specific provisions thatthe audit of Regifercam's books should be carried out in accordance withappropriate auditing principles consistently applied, and that the report ofthat audit should be of such hscope and detail as the Bank reasonably requests.

7. AGREEMENTS REACHED AND RECOMMENDATION

7.01 During negotiations on the proposed Loan, agreements were reachedon the following principal items:

(a) with the Government:

(i) no change will be made in the existing vehicleweight limitations or in restrictions on timbertransport on the Douala-Youande road, pendingcompletion of additional studies under the pre-sent project, and their review with the Bank(para. 2.18);

(ii) the agreement between Regifercam and the truckers'association which regulates rail trans-shipmentof transit traffic to and from northern Cameroonand Chad is in accordance with the Government'sgeneral policies of avoiding uneconomic rail/roadcompetition between N'Gaoundere and Douala (para.2.19);

(iii) the present level of technical assistance availableto Regifercam will not be reduced, nor will the re-sponsibilities of technical assistants in line posi-tions, without prior approval of the Bank (para. 3.05);

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(iv) upon application from Regifercam, the Governmentis in principle prepared to vaive customs dutiesand taxes on all goods financed and imported underthe project, regardless of their country of origin(para. 4.13); and

(v) subsidies vill be provided, or such other financialsupport as may be appropriate, to protect the rail-way's cash position (paras. 6.11 and 6.22).

(b) with Regifercam:

(i) in order to allow a calculation of depreciation allow-ances, an assessment will be made of the average ser-vice life of fixed assets in use, and a periodic re-valuation at replacement costs of motive power androlling stock vill be undertaken (para. 6.06);

(ii) a minimum debt service coverage of 1.2 vill beachieved from 1973/74 onwards (para. 6.12);

(iii) tariff increases or other measures satisfactory tothe Bank vill be applied 80 as to obtain rates ofreturn on net fixed assets in operation of at least:1% ln 1975/76, 1.5% in 1976/77, 2.5Z in 1977/78,3.5% in 1978/79, and 4% in the fiscal years there-after (para. 6.13);

(iv) accounts receivable wil be maintained at a levelof 15% of annual gross operating revenue from1974/75 onwards (para. 6.16);

(v) a minimum working cash (including available bankoverdraft facilities) of 8% of annual working ex-penses vill be maintained (para. 6.16); and

(vi) limitations of indebtedness are specified concerning;(a) Bank acceptance of external borrowing for non-Bank-financed project items; (b) Bank approval forundertaking investments for incurring debt of morethan US$1 million equivalent during the project period;and (c) consultation with Government and the Bankbefore execution or incurring debt in respect ofrealignment of the Douala-Yaounde main-line (paras.6.18 and 6.19).

7.02 The project provides a suitable basis for a Loan of US$16 millionfor a period of 25 years, including three years of grace, at an annual interestrate of 7-1/4%, to be capitalized for a period of about two years. The Loanwould be made to Regifercam with the guarantee of the Government of the UnitedRepublic of Cameroon.

June 13, 1974

CAMEROON RAILWAYS

Future Freight Traffie(million of TKm)

1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Direction of Exports

16.5 18.1 17.6 20.3 16.8 18 19 20 20 20 22 25

Cocoa9.8 15.2 16.2 14.4 19.0 25 34 43 51 56 62 78

Cot tonAluminum 3.5 3.5 3.3 2.9 2.6 3 4 4 4 4 4 4Aluminux

Timber: legs n.a. .a. .. a. n.a. .. a. 109 162 213 253 272 322 385

sawn n.a. n,a, C.a. n.a. n.a. 12 17 19 24 27 32 41

sub-total timber 55.5 67.4 69.3 66.6 98.0 121 179 232 277 299 354 426

Other Agrit. products 13.1 16.2 18,7 16.9 20.7 19 21 23 25 28 32 33

Miscellaneeca Total 11.3 13.4 15.4 19.1 18.0 21 22 26 28 29 33 40

Dircti.o 1ToLtal 109.7 133.8 140.5 140.2 177.2 i7 269 348 40 'i36 37-Direction cf Importa

Petroleum products 27.9 29.2 40.3 39.3 42.7 51 64 70 73 77 86 101

Construction materials 11.9 13.6 33.6 33.3 21.1 19 20 22 23 23 26 30

Alucam materials 10.5 12.1 12.1 11.2 10.5 12 13 13 14 13 14 15

Transit North Cameron 15.2 19.5 18.5 28.4 29.8 39 51 55 58 60 66 76

Miscellane... 30.0 45.8 39.9 50.5 46.8 55 62 66 73 76 87 99

Total 95.5 110.3 144.4 162.7 161.6 176 210 226 241 249 279 326

GRAND TOTAL 205.2 244.1 284.9 303.0 338.8 383 492 574 644 683 775 931

n.a. = ot available

Source: Regifercam and mission estimates

January 1974

CAMEROON RAILWAYS

Freight Traffir

Average Distance

(km)

----__t-_-----------------Actual-------------------- -------------- r-----t--------------------------------Forecasts --------------------------------------------------

1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Direction of Exporta

Coroa 292 284 296 301 300 300 300 300 300 300 300 300

Cotton 307 483 570 590 600 850 930 930 930 930 930 930

Aluminum 86 84 84 85 85 85 85 85 85 85 85 85

Timber 204 252 280 292 350 350 373 400 405 410 420 425

Other Agric. products 195 240 250 260 270 320 400 410 410 410

Miscellaneous 251 282 255 297 300 330 340 360 370 380 390 400

Total 206 242 258 264 294 325 345 360 375 390 400 410

Direction of Importa

Petroleum products 277 288 378 366 370 400 485 495 495 495 495 500

Construction materials 270 317 454 407 340 300 320 320 330 330 330 330

Alocam materiala 85 85 85 85 85 85 85 85 85 85 85 85

Transit North Cameroon 307 510 599 600 600 739 935 935 935 935 935 935

Miscellaneous 251 252 255 297 300 320 325 330 335 340 345 350

T zP1 212 235 283 302 292 318 358 363 370 378 385 392

GRAND TOTAL 209 239 270 283 3 322 350 362 373 386 395 404

Source: Regifercan

January 1974 k

CAMEROON RAILWAYS

Future Freight Traffic(000 tons)

1968/69 1969/70 1970/71 1971/72 1972/73Adosl Appraisal Actuel Appraisal Actual Appraisal Actual Appraisal Actual 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Direction nf Exports

Cocos 56.6 60.0 63.8 60.0 59.5 62.0 67.4 62.0 55.7 58.0 64.0 67.0 68.0 70.0 75.0 85.0

Cotton 31.9 35.0 31.5 38.0 28.4 42.0 24.4 46.0 31.6 30.0 38.0 47.0 55,0 61.0 71.0 85.0

Alunin.im 40.6 42.0 41.6 42.0 39.2 45.0 34.0 45.0 30.5 35.0 45.0 46.0 44.0 43.0 45.0 48.0

Timber; log. n.a. 0.a. 0.a. n.a. .. a. n.a. 207.2 .. a. n.a. 3100 430.0 525.0 630.0 667.0 767.0 905.0sawn n.a. n,a. 0.a. n.a. n.a. n.a. 21.0 n.a. n.a. 35.0 50.0 55.0 61.0 57.0 80.0 97.0

Sub-total timber 272.0 303.0 267.4 410.0 247.7 530.0 228.2 640.0 282.0 345.0 480.0 580.0 691.0 734.0 847.0 1,002.0

Other agricultoral products 85.8 92.5 96.4 96.0 109.9 105.0 113.0 109.5 125.0 116.0 130.0 134.0 138.0 142.0 150.0 170.0

Miscellaneous 44.9 47.5 53.2 54.0 60.3 56.0 64.7 67,5 62.0 65.0 66.0 72.0 76.0 79.0 85.0 100.0

Total 531.8 580.0 553.9 700.0 545.0 840.0 531.7 970.0 588.0 649.0 823.0 946.0 1,072.0 1,128.0 1,273.0 1,489.0

Direction of lIports

Petroleum products 100.7 105.0 101.5 112.0 106.0 120.0 107.4 127.0 111.0 127.0 132.0 142.0 148.0 156.0 174.0 202.0

Construction materials 44.0 80.0 42.9 90.0 74.0 90.0 81.9 90.0 64.7 65.0 63.0 66.0 69.0 72.0 79.0 91.0

Alucam materials 128.9 129.0 143.7 129.0 142.8 135.0 132.0 135.0 124.9 135.0 153.0 163.0 164.0 159.0 164.0 176.0

Transit North Cameroon,Chad and CAR 49.4 - 38.2 - 30.9 - 47.3 - 49.5 51.0 57.0 60.0 62.0 64.0 71.0 82.0

Miscellaneous 112.8 13t.0 133.6 123.2 151.4 125.2 162.4 134.0 162.0 171.0 191.0 200.0 218.0 223.0 252.0 284.0

Total 449.8 460.0 469.4 470.0 510.2 487.0 539.4 504.0 513.0 549.0 595.0 631.0 661.0 679.0 740.0 835.0

GRAND TOTAL 981.6 1.040.0 1.023.3 11_70.0 1.055.2 1,327.0 1.071.1 1.474.0 l1,10.0 1,198.0 1.418.0 1.577.0 1.733.0 1,807.0 2,013.0 2_324.0

1007, 987. 100% 90% 100% 81% 100% 82%

Total without timber (rounded) 709.6 737.0 755.9 760.0 750.0 797.0 843.0 834.0 819.0 850.0 940.0 1,000.0 1,040.0 1,070.0 1,170.0 1,320.0

100% 103% 100% 99% 100% 106% 100% 89%

.. a. = not ailable.

Source: Regifercam and nission estinates.

CAMEROON RAILWAYS

Passenger Traffic

---------------------- Actual-------------------- ------------------------------------------------- Forecast-------------------------------------------------1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Number of Passengers (000)

Northern line 568.8 582.6 658.9 711.9 694 708 722 736 751 766 781 797

Central line

of which: Douala-Yaounde 912.2 1,062.9 1,108.2 1,046.2 921 927 900 840 800 800 800 800

Yaounde-Belabo 22.0 90.6 145.6 121.1 110 120 140 145 160 170 175 190

Belabo-Ngaoundere - - - - - 25 52 55 57 60 63 67

Sub-total 943.2 1,153.5 1,253,8 1.167.3 1.031 1.072 1,092 1,040 1,017 1,030 1,038 1,057

Total 1,503.0 1,736.1 1,912.7 1,879.2 1,725 1,780 1,814 1,776 1,768 1,796 1,819 1,854

Average Distance (km)

Northern line 62.9 65.4 66.5 73.0 72 73 73 73 73 73 73 73

Central line 129.5 131.4 145.4 144.6 140 148 155 168 178 180 184 190

Total 104.3 109.3 118.2 117.5 112 118 123 129 134 135 137 140

Passenger-kms (millions)

Northern line 35.8 38.1 43.8 52.0 50 51 52 53 54 56 57 58

Central line 121.0 151.6 182.3 168.8 144 159 170 175 180 185 191 201

of which: Yaounde-Balabo - 20 3/ 23 3/ 25 3/ 22 3/ 27 28 30 33 35 36 39

Belabo-Ngaoundere - - - - - - 30 40 47 51 56 62

Douala-Yaounde 121 132 159 143 123 2/ 132 112 105 100 100 100 100

Total 156.8 189.7 226.1 220.8 194.4(193.0) 211 223 229 235 241 248 259

Appraisal forecasts 1/ 156.8 182.7 194.7 204.3 213 223 263 291 306 - -

(M) 100 104 116 108 91 94 85 79 77 - -

1/ Loan 687-CM, Report No. PTR 50a, May 12, 1970

2/ Actual

3/ Estimate 'i

January 1974

CAMER09N

DouaaI Port: Oifratlooaî Itatiscs for Geseral Cargo i/

------------------------------- Atual---------------------------- --------------------------------------- o--r------------- _Forecats----------------------------__---_ -----

1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 19/8 1979 1980

Total traffir (000 ton.) 1,146 1,224 1,342 1,352 1,316 1,472 1,650 1,820 1,905 1,970 2,115 1,840 1,900

Nomrber ai ship 1,363 1,387 1,383 1,236 1,066 1,218 1,216 1,259 1,300 1,337 1,375 1,229 1,233

Tonnage handled by ship(tons) 841 882 970 1,094 1,235 1,335 1,470 1,557 1,620 1,686 1,752 1,594 1,539

Average aannal tannagehasdlsd by ship-day (ton) 355 338 328 381 405 445 490 519 540 562 584 498 513

Average tonnage handledby meter of quay (ton) 674 720 789 795 774 956 1,052 1,153 1,239 1,326 1,417 812 825

Length of quays (aster) 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 2,260 2,300

Duration af oalls (days) 2.37 2.61 2.96 2.87 3.05 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

Berth occupancy rata (2) ô5 90 101 87 77 80 83 86 88 88 92 70 72

Average lrngth of ship(meter) (163) (154) (153) (153) (147) 150 153 153 155 158 157 157 159

1/ Total traffic exoluding petroleon prodocts, cliokstr, basanas, bulk aine asd starting in 1976, anncrraslng percentage nf timber which will ùe eoacuated throngh th. log basnj.

Assunptions: From 1973 ta 1975: tannage handled by ship-day in-reasen by 10% a ye-r as a result of batter operations at the log depot (62. ia 1975); d-ration of -ail ,.noangad;

iength of quay is fird; berth occupancy rate is the reîidoal rariable.

Fram 1976 ta 1978: tannage hbndled by ship-day increased by 4% a year; dotation af rail rsmains at 3 dava: lenth nf q.oy is fiord; bertth .ocpancy is thse reid-al narlable.

To 1979 -es barths operational, berth occupancy rate fiaed et 707, and determines quay length reqoir er. Berth oo..panry ficranses itI, traIff subsequently.

FomuaI: berth ocrupanny rata = (doratian af cal) n (lsgth nf vensel) o (traffir)) divided hy ((365) s (lengtl of berth) a (tonnage pet ship)).

Ths same formsla nan bu nsed ta calculate the length nf berth required.

January 1974

CAMEROON

Comparison Between Regifercam and Douala Port Traffic(000 tons)

-- …----------------------- Actual -…-…------…--------- - --------------------------------------------------- -Forecas ts ---------------------------------------------------1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Total traffic

Douala Port 1,600 1,731 1,844 1,835 2,010 2,180 2,330 2,510 2,760 2,870 3,060 3,390

Regifercam 982 1,023 1,055 1,071 1,101 1,198 1,418 1,577 1,733 1,807 2,013 2,324

% 61 59 57 58 55 5; 61 63 63 63 66 69

General cargo 1/

Douala Port 1,099 1,208 1,238 1,227 1,405 1,540 1,760 1,880 1,930 2,010 2,240 2,520

Regifercam 756 794 804 830 878 1,063 1,252 1,373 1,448 1,516 1,694 1,935

% 69 66 65 68 66 69 71 73 75 75 76 77

Timber

Douala Port 323 364 350 351 435 457 635 737 840 890 1,000 1,180

Regifercam 272 267 248 228 282 345 480 580 691 734 847 1,003

'h 84 73 71 65 65 76 75 79 82 83 84 85

Petroleum products

Douala Port 236 262 309 306 320 352 365 385 400 425 460 520

Regifercam 101 102 107 107 111 127 132 142 148 156 174 200

% 43 39 35 35 35 36 36 37 37 37 38 39

1/ Total traffic excluding petroleum products, clinkers, bananas and bulk wine.

January 1974

TABIE 7

CAMEROON RAILWAYS

Estimated Schedule of' Disbursements

IBRD Fiscal Year Cumulative Disbursementand Quarter Ending at end of Quarter

(US$ millions)

1974/75

September 30, 1974 1.02December 31, 1974 4.49March 31, 1975 5.52June 30, 1975 9.35

1975/76

September 30, 1975 12.88December 31, 1975 13.66March 31, 1976 14.06June 30, 1976 14.91

1976/77

September 30, 1976 15.29December 31, 1976 16.00March 31, 1977 16.00June 30, 1977 16.00

Assumptions: 1. Effective Date: September 15, 1974

2. Bidding for Procurement:Japoma Bridge: December 1973/May 1974Track material, turn-outs, bogies, crane,freight-cars: 4pril/May 1974

3. DeliveryTrack material: December 1974/February 1975Freight-car bogies: December 1974Turn-outs: December 1974Communications equipment: December 1974Breakdown crane: April 1975Timber box-cars: April/September 1975Spare parts: July 1975

h. Construction/Installation,/ServicesJapoma Bridge: July 1974/December 1976Track renewal: January 1975/July 1976Consultants: October 1974/December 1977

Source: Regifercam and appraisal mission.

May 1974.

CAMEROON RAILWAYS

Box Car Requirements

1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

1. Number of box cars on stock 412 406 400 394 388 382 3762. Utilization of cars (/%) 90 90 90 91 91 92 92

3. Number of cars available 371 365 360 355 349 344 3384. Gross capacity of cars on stock

(000 tons) 1332 130 129 127 125 123 121

5. Gross loading capacity of carsavailable (000 tons) 11.9 11.7 11.6 11.5 11.4 11.3 11.1

6. Average capacity of cars (t/car) 32.2 32.2 32.2 32.2 32.2 32.2 32.2

7. Number of journeys 37 38 38.5 39.5 41 43 458. Gross transport capacity (000 tons) 440 445 447 454 467 486 5009. Load factor (0%) 2/ 74 74 74 75 75 75 7510. Net transport capacity (000 tons) 326 329 330 341 351 364 375

ll. Transport demand (000 tons) 296 319 342 364 381 423 482

12. Surplus capacity (deficit)(000 tons), 30 10 (12) (23) (30) (57) (107)

13. Additional number of cars requiredY 15 26 33 60 107

14. Additional cars available 25 25 25 50 50

15. Total number of cars on stock 425 419 413 437 431

16. Surplus number of cars (deficit) 10 (1) (8) 15 (32)

1/ Available capacity utilized at peak season.2/ Utilization as in line 2 and load factor as in line 9.3/ Assuming 25 cars delivered in 1975/76 and further 50 new cars iin 1978/79.

I <O

CH

CAkÉEROON MAILWAYS

Fll,t Car tequirements

1972/73 1973/7)4 197V/75 1975/76 1976/77 1977/78 1978/79 1979/80

1. Net tons ('000) 270 330 455 555 629 663 766 9032. Net ton-km (million) 94 115 170 222 253 272 322 3843. Average load (tons) 21D/ 21 21 21( V0) / 21(60) 21(60) 21(60) 21(60)4. Average distance (km) 348 350 373 400 402 410 420 4255. Number of journeys 34.6 36.5 h1.5 45.6 45.6 45.6 45.6 45. 6. Turnaround time lOo10 10 8.8 8.5 8.0 8o0 8.0 8.0

7. Number of flat c,ars3/ 490 481 >470 459 448 437 426 4158. Cars available /a 431 423 41h 404 394 386 375 3659. Capacity available ('000 tons) 313 324 361 387 377 370 359 350

10 Capacity surplus (1000 tons) 43 (6) (94>l 168) (252) (293) (407) (553)(deficit)

11. Requirements, additional4/ - 3 43 69 103 120 167 22612. Additional cars available/ - - - 100 100 100 200 200

13. Total-of cars on stock(7 + 12) 790 __ h70 _ 9/ 7 7/ _3

15. Surplus number of cars (deficit) - (3) (43) 31 (4) (22) 30 (30)

1/ Average load of existing cars is 21 tons.g Average load of new flat cars is 60 tons.3 Decreasing by 9 units per year (5 cars converted and 4 cars lost by accidents).

Car utilization 88v.i/' Assuming 100 new cars delivered in 1975/76 and a future 100 new cars in 1978/79.i One of new cars written off per year.

February 1974 h >

(D19(D

Table 9

CAMEROON RAILWAYS

Inco1e Account 1963/64-1972/73

(CFAF Million)

1963/64 1964/65 1965/66 1966/67 1967/68 1961/69 196,/71J 1970/71 1971/72 1972/73

Operating Revenue

Passengers 308 319 347 391 412 476 57 689 684 593

Luggage, mail and parcels 43 48 69 79 81 90 101 115 119 333

Freight 1277 1L47 1470 1495 1628 1617 1927 2168 2300 2399

Miscellaneous 93 136 132 149 264 1/ 242 1/ 129 1/ 84 1/ 156 1/ 242 1/

Total Operating Revenue 1721 1950 2018 2114 2385 2425 2732 3056 3259 3567

Operating Empenses

Staff costs 797 844 975 1014 1070 1189 1329 1366 1523 1650

Other 465 464 486 508 608 729 742 889 1052 1168

S/total cash outgoings 1262 1308 1461 1522 1678 1918 2071 2255 2575 2818

Depreciation (estivale) 232 247 250 254 269 298 542 607 663 744

Total Operating Expenses 1494 1555 1711 1776 1947 2216 2613 2862 3238 3562

Net Operating Revenue 227 395 307 338 438 209 119 194 21 5

Itterest charges - 20 27 28 22 29 62 112 227 260

=Net =rg_y_ ,,_ 275 280_ 310 416 _80 57 82

Transfer from Reserves 195

Subsidies from Governmecr 224

Available for appropriation 227 375 280 310 416 375 57 82 (206) (31)

Appropriations:

Transfer te reserves - - 12 22 6 - - - - -

Supplementary proviisio for depreciation 288 353 138 151 271 254 157 62 6 93

Exchange Iss (profit) on devaluatios - - - - - 101 (101) - _ 27

As,ortisation oi debt 10 22 130 137 143 98 54 54

Adjustments - - - - - - 3 8 (11)

Total Appropriations 298 375 280 310 420 453 110 119 14 109

Net surplus (loss) as shown inRegifercam's books (71) - - - (4) (78) (53) (37) (220) (140)

Working ratio 73% 67% 72% 72% 70% 79% 76% 74% 79% 79%

Operating ratio 87% 80% 85% 84% 82% 91% 96% 94% 99% 100%

Debt service:

Interest - 20 27 28 22 29 62 112 227 260

Repayment 10 22 130 137 143 98 54 54 35 153

Total 10 42 157 165 165 127 116 166 262 413

Interest coverage ratio - 19.7x 11.4x 12.lx 19.9x 7,2x 1.9x 1.7x O.lx -

Debt coverage ratio 45.9x 15.3v 3.5v 3.6x 4.3x 4.0v 5.7x 4.8x 2

.6

x 1.8x

Average net fived assets in use 5,254 5,425 6,142 6,564 6,575 6,842 10,682 15,324 16,631 18,144

Rate of return 4.3% 7.3% 5.0% 5.1 6.7% 3.1% 1.1% 1.3% 0.1% -

1/ including hire charges for motive power and rolling stock loaned tl Tramocameroon Extension construction

Source: Regifercam

January 1974

CAMEROON RAILWAYS

Summary Balance Sheetsas of June 30. 1964-1973

(in CFAF million)Revised

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1973 V

Fixed Assets

Gross fixed assets in service 9005 9999 11186 11698 12039 13123 20864 23411 24984 27852 27852

Less accumulated depreciation 3889 kg 4634 5123 5463 6014 6609 7260 7873 8675 8675Net fixed assets in service 5116 5732 É 6575 6576 7109 1425 16151 17111 19177 19177

Works ln progress 650 713 00 2 520 2826 242 1462 2087 1150 16682

Total net fixed assets 5766 6445 6852 687 7096 9935 I1797 17613 19197 20327 3gW9

Investments 51 51 5i 51 51 51 51 51 51 66 66

Current AssetsCash 343 319 56 34 5 (49) 216 77 106 162 162Receivables 176 222 217 229 282 360 344 654 713 715 715Stores 234 244 282 339 363 433 496 646 806 940 940

Suspense items (Net) 12 5 1 (2) 5 4 4 1 6 5 5Total current assets 7M 790 5 6-0-0 U 7f 1060 1378 1631 itie 1B22

Less current liabilities 192 313 339 433 459 554 619 805 1458 1793 1793Total net current assets 573 477 217 167 196 1914 -Z1 573 7 29 29

Total net assets 6390 6973 7120 7105 7343 10180 14989 18237 19422 20422 35954

Long-term Debt 743 977 1059 924 834 2301 4320 5476 6881 7302 11516

Equity Equivalent

Government contributions 2950 2950 2950 2950 2950 2950 2950 3145 3145 3145 5591Subventions from develop3ent

institutions 2712 2867 2909 2987 3171 4715 7503 9385 9385 10105 18977

Reserves and revenue account balances(15) 179 202 244 388 214 216 231 il (130) (130)Total equity equivalent 567 5996 6061 1I51 6509 7-79 10699 12761 125141 13120 2448

Total 697t xand Equity Eq2ivalent L7 1 Z 10180 V8Z IL2L 1922 20h22 9

Ratio of current assetsto current liabilities 4.0 2.5 1.6 1.4 1.4 1.4 1.7 1.7 1.1 1.0 1.0

Ratio cf lilu-id assetsto current liabilities 2.7 1.7 0.8 o.6 o.6 0.6 0.9 0.9 o.6 0.5 0.5

Debt/Equity ratio 12/88 14/86 15/85 13/87 11/89 23/77 29/71 30/70 35/65 36/64 32/68

/ Tro reflect completion of the Belabo-N'Oaoundere extension.

Source: Regifercam. H

January 1974.

CAMEROON RAILWAYS

Dbel Positio oso loue 30, 1913

Terme I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~onntst-ding

Total Anoon t Annuel £0F151 A ...an îi tdr-e lepeid lune 30, 1973

Lender (mllontenrent RenPununt Poreus (CFAF Million) (CFAF Millilon) (CFAF Millico) (CFAF Million)

CCCE Ni 2 CFA? 100.0 3% 16 seni-ascoal eqo-l i-teljn-ts sterting 1-1-66 Moulue p-cr aod rulling ,,on 100 100 93 7

CCCE No 3 CFAF 500.0 4.25% 2Ooe.i -annoal eqoal anoiti-s snt-ilg 6-30-73 -alesed treiliro 500 500 25 475

CCCE No 4 (FAF 700.0 4.23% 20 sel-nna qeeI ..oni ies- onrtlsg 12-31-73 Rollnornae.d ureilîro 700 710 700

CCCE lu 5 CFA? 700.0 4.30% 10 o....el eq-1 sanitina oîartiog 12-31-77 Luuu us lo io ulos700 700 700

CCCE No 6 CFAF 500.0 4.35% 16 seni-e.....l eqoal as-iuis strln 12-31-76 L-oole,pneg rosr 500 274 274

Lord1 Bonis Nu I CEAI 130.0 5.25% 3 annuel equel .... lrti- startisg 6-30-72 Ir-u-h lion Edlik-IC-bi 150 150 100 50

Lor.1 Benks No 2 CFA? 200.0 5.25% 3 anue quel ennuei-Ie sterling je 1974/75 Rail 200 300 200

USAID BN I us79.2 0,75% 10 yeano grese; 60 selena qoal iislen

stantiog 0-17-74 TEuuuenu utension 2 300 2,300 2,300

lIC/tIB lu 1 O.C. 1.4 1/ 3% 6 y-ar gra-e; 30 -ei-......l eqoal lsolesterting 1-10-36 Bssseo..nkîbcps eqîipec- 386 386 386

KFWl DM 5.0 3% 7 yeers gras.s; 28 -ei-......l equellselssestantisg 6-30-77 Yeounde statise eud fneight n4s 22 422 422

IBID (Lues 687-CM) us$5,2 0% 5 years I.ran; 41 sun-con...el equal isalestarting 6-15-75 Tra-kensl bridge onrnis

rollisg elosi 1.300 1,064 1,064

COFACI CFAF 300.0 7.75% 10 sani-ess..al qoa1 9nonn seln -30-73 Loui oo hounur-, rIlce300 220 220

Totol Loes i-nîodsd io Regiftrnon'n belone hbast bu jon 30. 1872 67.îu 2

USAID Be 2 US$12.0 2.50% 10 ye.rs grena; 61 enni-......l equelenl ien-sterting 5-15-00 Truunco nEsolo-n 3,000 3,000

EECIEIB No 2 uC 5.0 îi 1% 10 yn-rs grena; 60 esmi-e.....l eqoul loele

storrlng Is 1908/81 TEunnecsIteusion 1,390 1.3980

Total edditio... esini .e.con 4,390

G-ad Total Lea....îS

NOTIS: Il Uolle' de ropue - US71 belons deudloorios onFAF 378.

2/ DBffînresne nitln-tn debt sbhs le Begifernan n balenîn bh-t or Jon. 30, 1773 Le CFAF 252 ulîliun due Lu (i7edonn te USA1D Bu I eod 1BRD 687-CM ..ns on prenesa.. ehueng nets of UB$l CFAF 250 -sd (il) e1iesetios nI

~itlrdranl epplîaiessi bcb.g po nd

bancs: Ingif-rnc

Jeooay 1074

TABLE 12

CAMEROON RAILWAYS

Financing of Transcameroon Extension Line

(CFAF Million)

Interest and Yaounde- Belabo- Total ex-repaynent Belabo N'Gaoundere tension line

Loans

FED 1%; 10 yrs grace; 30 annuities - 1,317 1,317USAID No. 1 0.75%; 10 yrs grace; 30 annuities 2,554 - 5,452USAID No. 2 2.5%; 10 yrs grace; 30 annuities - 2,898)

Total Loans 2,554 4,215 6,769

Grants

FED 5,127 5,794 10,921FAC 774 3,077 3,851Republic of Cameroon 197 2,446 2,640

Total Grants 6,095 11,317 17,412

Contributions Regifercam 210 210

TOTAL 8,859 15,532 24,391

CAMEROON RAIIlWAY

Forecast Income Account 1 972/73 - 1 979/80CFAF Million

Actual ----------------------------------------------- Forecast ----------------------------------------------1972/73 1973/7h 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Operating Revenue

Passengers - present rates 593 715 860 89c 910 940 970 1,010

Passengers - rate inrreases - - 43 1738 191 251 321 334

Mail, luggage and parcels 333 340 350 360 370 380 390 L4O

Freight - present rates 2,399 3,120 4,350 4,990 5,570 5,850 6,600 7,870

Freight - rate increases - - 326 1,178 2,167 3,089 3,960 5,352

Miscellaneous 242 140 120 125 130 135 140 145

Total Operating Revenue 3,567 h,315 6,o49 7,681 9,338 10,648 12,381 15,111

Operating Expenses

Staff costs 1,650 1,900 2,500 3,020 3,770 4,o60 4,860 6,050

Other costs 1,075 1,500 2,150 2,610 3,o50 3,500 14,130 5,110

Taxes 93 112 157 200 243 277 322 409

Total cash outgoing 2,818 3,512 4,807 5,830 7,063 7,837 9,292 11,569

Depreciation 74h 970 1,206 1,311 1,1409 1 ,450 1,537 1,652

Total Operating Expenses 3,562 4,482 6,013 7,141 8,472 9,287 10,829 13,221

Net Operating Revenue 5 (167) 36 540 866 1,361 1,552 1,890

Interest charges: on lorg-term debt 207 348 416 623 805 882 938 978

on bank overdraft 53 37 2h 30 23 6 _ O

Total interest charges 260 385 440 653 828 888 938 978

Subsidies from Gomernment 224 786

Net surplus (loss) ---- 1) 234 = ) = 3) 38 =73 614 912

Working ratio 79% 81% 79% 76% 76% 74% 75% 76%

Operating ratio 10c% 1014% 99% 93% 91% 87% 87% 87%

Times interest earned O (0.4) 0.1 0.8 1.0 1.5 1 .7 1.9

Debt service coverage 1.8 1.3 1.6 1.8 1.7 1.7 1.7 1.8

Average net fixed assets in service 18,144 26,911 35,719 37,892 39,091 38,770 40,102 42,082

Rate of return O (0.6%) 0.1% 1. 2.2% 3.5% 3.9% 4.5%

Sources: Regifercam and mission estimates

June 1974

1

Annex to Table 13Page I

CAMEROON

SECOND RAILIWAY PROJECT

Assumptions Used to Forecast Income Account

I. Operating Rsvenue

1. Passenger revenues are based on the traffic forecasts shown in

Table 4. Average revenue for passenger traffic is at present CFAF 3.86per pass-km, and will increase as explained below.

2. Freight revenues are based on the traffic forecasts given in Table 1.

The average revenue per ton-k:m based on tariffs as of March 30, is expected

to decrease from CFAF 8.5 in 1974 to CFAF 7.9 in 1980, as a result of longer

average hauls following opening of the Second Transcameroon Extension (Belabo-

N'Gaoundere) and the corresponding taper in the rate scale, combined with

an increased proportion of low-rated commodities.

3. The tariff increases proposed are shown below. They are likely to

be necessary to improveiegifercam's financial position, in the face of substantialcapital expenditure, expectation of moderate growth in productivity, and a

level of inflation which is likely to be at a rate significantly higher thanexperienced in recent years. Inflation is assumed to be 9% per annum (compared

with 5 to 6% p.a. in recent years).

Jan. 1975 Jan. 1976 Jan. 1977 Jan. 1978 Jan. 1980

Freight + 15% + 15% + 10% + 10% + 10%

Passengers + 10% + 10% + 10%

4. These increases are considered feasible without significantly affectingtraffic levels. The rationale is as follows:

(a) Freight Traffic. The cumulative effect of the above increases

will be to make. tariffs in January 1980 some 76% higher than in December 1974.This increase is somewhat greater than that expected for inflation over theperiod (68%) but three factors suggest that this will not seriously affectRegifercam'scompetitive position.

(i) Fuel price increases are likely to affect road transportmore seriously than rail;

(ii) the project should produce improvements in the quality ofrail service which are not quantified in the Plan ofAction; and

(iii) Regifercamhas a significant operational cost advantage overroad transport, even if vehicle size increases (Annex 10).Making due allowance for the possibility of truckers relatingrates to marginal costs in thé short run, Regifercam shouldstill have some cost advantage.

Annex to Table 13Page 2

5. Passengers

Regifercam's passenger traffic is expected to decline further onthe Douala-Yaounde line, under pressure from road transport. In order toavoid exacerbating the position, proposed tariff increases have been kept tothe minimum consistent with continued operation of the services without cross-subsidization.

6. Revenues from mail, luggage, and parcels increased significantlyfrom 1971/72 to 1972/73 due to restructuring and increase of tariffs. Experienceshows that for this sort of traffic, there exists no measurable elasticityof demand in relation to price increases. Accordingly, a continuous lightgrowth of this traffic during the forecast period has been assumed. On theother hand, it was also assumed that no further increase or restructuring ofthese tariffs will take place during the forecast period.

7. Miscellaneous revenues are decreasing as hiring of motive power androlling stock for construction of the Second Transcameroon Extension comesto an end.

II. Operating Expenses

Staff Costs

8. Detailed analysis shows that for the past ten years, there has beena very strorg correlation between number of staff and traffic volume. A computeranalysis resulted in the following regression equation:

x = 1,420 + 6.213 Y

which for practical reasons was used in the following form:

x = 1,420 + 6.2 Y.

In this equation, the dependent variable X is defined as number of staff employed,and the independent variable Y as millions of traffic units, counting one passenger-km for 1/3 of a ton-km. The correlation coefficient for the above equationis r = 0.991 which is very high even if we acknowledge the fact that a certainamount of auto-correlation is inevitable when comparing time series.

9. Several nonlinear regression equations which were tested did not leadto a significant improvement in the description of the empirical values. Onthe other hand, they had the disadvantage of piving unrealistic results whenused for long-range forecasting, whereas the linear equation which was actuallyused gives a realistic picture even in the case of an important growth oftraffic volume.

10. Labor productivity will increase from 101,000 traffie units per manand per year in 1972/73, to 131,000 in 1979/80 (3 passenger-lan being one trafficunit). The fastest productivity increase (reaching 7% p.a.) will occur in1974 and 1975. During these years, growth of total traffic volume will beparticularly high, and will be accompanied by better use of existing staffcapacities. After that time, from 1976 to 1980, growth of labor productivitywill be much slower since the spare capacity which now exists will be usedup by then, and since total traffic growth will slow down, particularly during1975-78.

Annex to Table 13Page 3

11. For the average costsper man employed, we assumed an increase of9% p.a. This figure contains a cost increase caused by re-grading of railway

staff, and aiso makes provision for a compensation for increased cost-of-living.

Other costs

12. This includes all working expenses except staff costs (excludingpensions which are included in other costs) and taxes which are shown separately.

A detailed analysis of the entire block of "other costs" showed that itsdevelopment in real terms depends upon the development of the following variables:

number of staff (34.2%); gross ton-km (24.1%); total mileage of locomotivesand rolling stock (36.2%). The figures shown in parentheses give the percentage

of dependence at the beginning of the forecast period, a final amount of 5.4%being constant over time.

13. The development of the abovementioned variables has been determinedon the basis of:

(i) the traffic forecasts given in Tables 1 and 4;

(ii) the development of the number of staff as determined inparagraph 8 of this Annex;

(iii) the projected increase in rolling stock productivity givenin Table 8;

(iv) an assumed increase of 20% in the average length of freighttrains until the end of the forecast period;

(v) an increase of 20% in the percentage of freight cars tobe transported without load. This increase is caused bythe greater imbalance of traffic as exports grow much faster

than imports throughout the forecast period.

14 The result is shown in the following table in the form of indices:

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Number of staff 100 110 128 141 153 160 175 200

Gross ton-km 100 118 147 169 184 196 216 254

Mileage of locomotivesand rolling stock 100 116 141 156 167 177 190 213

Constant 100 100 100 100 100 100 100 100

Total Other Costs 100 113 135 151 163 172 186 212

The result has been transformed into CFAF on the basis of the figure shownin Regifercam's books for 1972/73. To these figures has been added the costincrease caused by higher fuel prices: the impact of higher fuel prices hasbeen assessed by Regifercam to be CFAF 160 million in 1973/74 and CFAF 350 million

Annex to Table 13Page 4

in 1974/75, thereafter increasing in proportion to traffic grawth. Beginningwith the year 1973/74, the result has been increased by 9% p.a. to allow forcost price inflation.

15. The proposed Loan includes consulting services in order to improveRegifercam's administrative and operational practices in several fields.The recommendations of the consultants, if implemented, should lead to reducedoperating costs as compared to this forecast. As it is not possible at

present to make a reasenable assumptien about the extent of that cestreduction, if any, it has not been included in our forecast.

Taxes

16. In the past, taxes have averaged about 2.6% of Regifercam's operatingrevenue. It has been assumed that this percentage will remain constant through-

out the forecast period.

Depreciations

17. Depreciations have been calculated on the following basis:

(i) the values of the different items of assets as shown inRegifercam's books as of June 30, 1973;

(ii) the future developçent of fixed assets as given by Y

(a) the second section of the Transcameroon extension, and

(b) the investment plan for the forecast period (Table 13);

(iii) an assumed averaged service life of the different items ofassets as follows:

- earthworks and engineering: 100 years- structures in concrete: 66 years- structures in steel: 50 years- culverts: 66 years- ballast: 25 years- track: 33 years- buildings, stations, telecommunications: 50 years- tools and maintenance equipment: 15 years- office equipment: 10 years- motive power: 25 years- rolling stock: 33 years- spare parts: 25 years- road vehicles and similar: 5 years- miscellaneous: 20 years- management and head office Transcameroon extension: 50 years- consulting services: 5 years

III. Interest Charges

18. Interest charges on long-term debt are calculated on actual termsfor the existing debt as per Table 11, and on assumed terms for future debtas detailed in Table 15.

Annex to Table 13Page 5

19. Interest charges on bank overdraft are calculated on the averageannual amount of overdraft as shown in Table 14 and at the same rate of

interest as in the past (7-8%).

IV. Subsidies

20. Subsidization of Regifercam's current operation by Goverrnment

occurred for the first time in 1972/73 in the form of a waiver of taxes and

customs duties to the value of CFAF 224 million. This waiver will be

supplemented in 1973/74 by a cash payment of CFAF 200 million and the

reimbursement of all interest payments on long-term debt resulting in an

overall subsidy of CFAF 786 million. Corresponding to the Government'sofficial policy to replace further subsidies of Regifercam's operations by

tariff increases, we assumed that Regifercam will not receive any further

subsidies during the forecast period.

CAMEROON RAILWAY

Pro-forma Summary Balance Sheet 1973-1980(as of June 30)

CFAF Million

Corrected

1973 1974 1975 1976 1977 1978 1979 1980

Fixed Assets

Gross fixed assets in service 27,852 44,290 47,644 51,153 52,761 53,371 58,411 60,521

Less accumulated depreciation 8,675 9,645 10,851 12,162 13,571 15,021 16,558

Net fixed assets in service 19,177 34,645 36,793 38,991 39,190 38,350 41,853 42,311

Work in progress 16,682 1,100 1,100 1,300 2,000 2,800 1,100 1,100

Total Net Fixed Assets 35,859 35,745 37,893 40,291 41,1)0 41,150 42,953 43,411

Investments 66 66 66 66 66 66 66 66

Current Assets

Cash 162 190 250 302 377 611 538 681

Receivables 715 790 910 1,150 1,410 1,600 1,860 2,270

Stores 945 1,000 1,440 1,750 2,040 2,350 2,770 3.420

Total Current Assets 1,822 1,980 2,600 3,202 3,827 4,561 5,168 6,371

Total_Assets 37Ï=4=7 3=== 4===9 ===== 5O3==z7774,8 4==4

Current Liabilities

Creditors 876 1,050 1,390 1,690 1,980 2,270 2,670 3,310

Bank overdraft 917 189 525 380 193 0 0 0

Total Current Liabilities 1,793 1,239 1,815 2,070 2,173 2,270 2,670 3,310

Long-term Debt 11,516 11,880 14,358 17,216 18,599 18,723 20,119 20,228

Equity Equivalent

Government ccntribution 5,591 5,591 5,591 5,591 5,591 5,591 5,591 5,591

Subventions from developmentinstitutions 18,977 18,977 19,095 19,095 19,095 19,095 19,095 19,095

Reserves and revenue accountbalance (130) 104 (300) (413) (375) 98 712 1,624

Total Euity Equivalent 25,438 24,672 24,386 24,273 25,311 24,784 25,398 26,310

Total Liabilitite 37,747 37,791 40559 5,083 45,777 58,187 49,848

Ratio of current assets to currentliabilities 1.0 1.6 1.4 1.5 1.8 2.0 1.9 1.9

Ratio of liquid assets to currentliabilities 0.5 0.8 o.6 0.7 o.8 1.0 0.9 0.9

Debt equity ratio 32/68 33/67 37/63 bl/59 43/57 43/57 44/56 43/57

Sources: Regifercam and mission estimate

June 1975

CAIIERCON RUDflù2B

Forecat Ln-str Dtbt 1973/7[ 1979/80(tthbralale e.n-d RLeran

(Sn CFA! millon)

CCCE CC0E ccca CCOE 0 -F local IFW EEC/EIG SAID U U8AID EEIB CCCE Lal IBRD S/total ropoed L CCCE CCCE /Ttal dNo 2 No 3o No3 2 N. & _ Boko al No 1 No 1 No 2 N 2 NoK 6 a Nr2 Ln 687-ON Losao Lpa No 7 SCD Bfkks No 3 ASDEB. No 8 No 9 No 1S Las total

1973/74 A-out aototondig 7 475 700 700 27^ 50 41? 'M6 '7?<) 3(r'O 1390 271 200 1082 11206 11206

Withdraoaîo 80 226 306 185 l1u 295 6o0

Nepayoeat 7 50 70 60 SO 237 237

1974/75 ABount ootstaodiog 425 630 700 2140 1422 306 2300 3000 1390 500 200 1062 11275 185 110 295 11570

Wtthdra-l1s 218 218 2338 250 2588 2806

Repayonot 50 70 60 67 66 15 328 328

1975/76 Aoont oitatoding 375 560 700 18O 422 386 2233 3000 1390 500 134 1285 11165 2338 185 110 250 2883 14048

Withdraas 1391 800 1050 3241 3241

Repaynent 50 70 60 10 60 66 32 356 13 383

1976/77 A-ont outstnding 325 490 700 120 422 376 2165 3001 1390 S5o) 68 1253 10809 3729 185 83 800 1300 6097 16906

Withdra,a.. 271 100 1100 390 1861 1861

RNpay.nent 50 70 6O 15 21 70 63 68 33 450 28 28 478

1977/78 Aoont ootstatdig 275 420 700 60 1,07 355 2095 3000 1390 137 1220 10359 4000 185 55 100 1900 1300 390 7930 18289

900 900

Roaepy..nt 50 70 140 60 30 22 71 62 35 54o 78 27 9 131 236 776

1978/79 A-oont nitotaîding 225 350 560 377 333 2024 3»O 1390 375 1105 9819 3922 185 28 1000 1769 1300 390 8594 18.13

Withd,-Y&.2300 2300 2300

ROpaonot 5° 70 140 30 22 72 63 38 415 83 18 28 69 142 79 1419 90o4

1979/80 A-oont aotaotddig 175 280 420 317 311 1952 300( 1390 312 1147 9334 3839 167 931 1627 1221 390 2300 10475 19809

Withdraalo 1100 1100 1100

Nepaynent 50 70 140 30 23 73 54 62 f1i 5413 91 19 75 153 86 24 448 991

Jane 30, 1980 Aroopt mototsading 125 210 280 317 288 1879 2916 1390 250 1106 8791 374 11.8 856 1.74 1135 366 3400 11127 19918

So-roo ORgfrooo and rission .sti ot-

Jne 1974.

CAMEsROON RAILWAYS

State-ent of Soorces and Application of Fonds 1973/7l-1 979/80

ICEAF million)

Total 1913/lt1973/7l 1971/75 1975/76 1976/77 1977/78 1978/79 1979/80 - 1979/80 %

Sources o! Pbndo

Operating revenue 4,315 6,0h9 7,681 9,338 10,648 12,381 15,111

Cash outgoings on operating accou-t 3 512 4 807 5 830 7 063 7.837 9 292 1 1169

Cash ganeration from operations 03 1,2b 1,1 2,275 2,8112 53

Decrease in working capital 44 44 0,orrowing:C0FACE 80CCCE No. 6 226IbRD Loan 687-CII 218CCCE No 7 185ECD 110

Africas Develop,ent Bank 800 1,100Local Banks No. 3 100 900C0CE No 8/9/10 250 1,050 390 2,300 1,100

Proposed IBD Loan 2 338 1 391 271Total Borrosing 2,806 3,241 90 0 2300 1, 100 1209 43

Subventions, Fro- Gaos'rnaent 786 786 3FAC 118 118 0

Bank overdraft _ 236 236 1Total Funds Available 2723t EE05 5092 L7T7 3,711 5,389 E35! 29,60b 100

Application of Fus-ds

Increase in. rking capital 220 250 260 210 280 420 1,6t0 5

Capital investanit:(a) Ongoing projects

Lomotives and cosches 320Rerailing 30I8RD Project 687-CM 218N'Ga sndere depot 185Staff lodging 110

Sobtotal 645 218

(b) New projectsTrain¶ng school 130IBRD proposed projeot 2,766 2,539 228Douala statios 900 1,400 1,100

Motive poser asd rolling stock 390 2,750 1,490bctension earhafling yard

Yaonde 250 250

Subtotal 2,896 3,439 2,018 1,100 3,000 1,740

(c) Small diacellaneous investeents 211 240 270 290 310 340 370

Total Capital Investeent 856 3.354 3.709 2.308 1,410 3.340 2,110 17.087 58

Debt serviceInterest 385 44° 653 828 888 938 978 5,110

Repayaent 237 328 383 478 776 904 991 4 097622 1,06 6 1,396 9 lm 1,82 i= 9 207 31

Reduction of Bank overdraft 728 45 187 193 1,153 4

Total Fonds Applied 2,206 4,342 5,040 4,061 3,477 5,462 4,499 29,087 98

Cash surplus for th. year 28 60 52 75 234 (73) 143 519 2

Cash balance at Joun 30, 1973 162Cuaslative oash sorplus 150 250 302 377 611 538 681

Working capital - Increa- e or (decraa)Inoresse in stores 55 440 310 290 310 420 650 2,475

Increane in receivables 75 120 240 260 190 260 hiO 1 555

LessOncreane in creditors 17M 34° 30W 290 290 400 640 2.t34

Net increase (decrease) (44) 220 250 260 210 280 420 1,596

So.ro.: Regifercam and mss-ion eotirates

Jupe 1974

Table 16Page 2

CLMEROON RAILWAYS

Assumptions Used for Cash Flow Projections

A. Sources of Funds

1. Net cash generation of funds from operations stems from the fore-cast incorm accounts shown in Table 13.

2. Borrowing results from:

(a) secured loans; details on expected withdrawals are given inTable 15;

(b) expected loans on the following assumed terms and conditions:

(i) a CCCE No. 7 loan for construction of the N'Gaounderestation, for an amount of CFAF 185 million, repayablein 20 equal semi-annual annuities starting in 1978/79,at an annual interest rate of 4.25%. These terms arein line with those of previous CCCE loans;

(ii) a Banque de Developpement du Cameroun (BCD) loan for theconstruction of staff lodging, for an amount of CFAF 110million, repayable in four equal annual annuities startingin 1975/76, at an annual interest rate of 7%;

(iii) an African Development Bank (AFDB) loan presently beingconsidered for construction of the Douala station, for anamount of CFAF 1.9 billion, repayable in 12 years after agrace period of two years, at an annual interest rate of 8%;

(iv) a local banks' No. 3 loan as additional financing, forconstruction of the Douala station for an amount ofCFAF 1.0 billion, repayable in 12 years after a grace periodof two years, at an annual interest rate of 8%;

(v) a CCCE No. 8 loan for purchase of motive power for an amountof CFAF 1,300 million to be drawn in 1974/75 and 1975/76,repayable in 12 annuities after three years of grace at anannual interest rate of 5.5%;

(vi) an IBRD loan of US$16.0 million, repayable in 25 years,including three years of grace, at 7.25% annual interestrate;

(vii) a CCCE No. 9 loan for purchase of motive power for an amountof CFAF 390 million to be drawn in 1976/77, repayable onthe same terms and conditions as the CCCE No. 8 loan (see(v) above); and

(viii) a CCCE No. 10 loan for purchase of motive power and rollingstock for an amount of CFAF 3.4 billion, to be drawn in1978/79 and 1979/80, repayable on th? same terms and condi-tions as the CCCE No. 8 loan (see (y) above).

Table 16Page 3

3. A subsidy from Government for an amount of OFAF 786 million infiscal year 1973/74.

4. A FAC subvention of CFAF 118 million, presently secured, will covermost of the cost of the training school program.

5. A slight increase of the existing bank overdraft is assumed in 1974/75.

B. Application of Funds

6. Allowance is made for all ongoing projects, including constructionof the Japoma bridge, partly financed under IBRD Loan 687-CM.

7. New projects cover:

(a) the training school program;

(b) the proposed IBRD project;

(c) the Douala station;

(d) the purchase of motive power and rolling stock; and

(e) extension of the marshalling yard at Yaounde.

The cost estimates for new pro'ject include substantial provisions forinflation.

8. A separation of replacement of wrn-outequipment and investment toincrease capacity has been made for future investment in moaive power androlling stock. The figures in bracketsshown in the following table indicatethe number of locomotives or cars corresponding to the amounts shown inCFAF million. It has been assumed that Regifercam wlll purchase in the futurethe same sort of equipment as in the present project.

1976/77 1978/79 1979/80

Main line locomotives

Replacement (1) 295 (1) 335Capacity increase (2) 670 (2) 720

Shunting locomotives

Replacement (1) 95 (2) 170Capacity increase (3) 255

Timber cars

Replacement (40) 624Capacity increase (30) 468 (30) 505

Box cars

Replacement (24) 228Capacity increase (26) 265Total CFAF million 390 2,750 1,490

Table 16Page 4

9. Based on past experience, minor miscellaneous capital expenditureis estimated at approximately CFAF 200 million in 1973/74, increasing progressive-ly to CFA! 370 million in 1979/80, inflation being the main cau.. for thisincrease.

10. Debt service results from actual terms for existing loans, andassumed terms for future loans, as per paragraph 2 above and Table 15.

il. Present and future bank overdrafts are being reduced in years witha cash surplus, taking into account the requirements in cash and workingcapital. In 1977/78 all of the bank overdraft will be paid back.

C. Cash

12. Based on past experience, and starting as of 1973/714, cumulativecash surplus at the end of each year is being kept at a minimum of 10% ofpayroll.

D. Working Capital

13. Stores are kept at an average level of two-thirds of working ex-penses excluding staff costs and taxes, thus allowing the reasonable averageof an eight-month delay for replenishment of spares.

14. Receivables are expected to be kept, as frmm 1974/75, at 15% ofgross operating revenue, a reasonable level which has until recently beenconsistently attained.

15. Creditors (excluding bank overdraft) are assuned to decrease to60% of working expenses (excluding staff costs) as from 1974/75,which representsan improvement in comparison to the present level of about 75%.

TABLE 17

CAMEROON RAIIGWAYS Page 1

Improved Road Edea-Yaounde

Forecast Income Account 1975/76-1979/80(CFAF million)

----------------------------------- Forecast ---------------------------- ______1975/76 1976/77 1977/78 1978/79 1979/80

Operating Revenue

Passengers - present rates 870 840 850 870 900Passengers - rate increases 135 176 20h 236 24Mail, luggage and parcelsFreight - present rates 4,590 4,780 4,920 5,470 6,630Freight - rate increases 1,005 1,683 2,327 2,900 3,.920Miscellaneous 125 130 135 140 145

Total Operating Revenue 7,085 7,979 8,816 10,006 12,239

Operating Expenses

Staff costs 2,880 3,180 3,540 4,180 5,240Other costs 2,380 2,690 2,990 3,440 4,0ooTaxes 184 207 229 260 318

Total Cash Outgoing 5,444 6,077 6,759 7,880 9,958

Depreciation 1,311 1,409 1,450 1,511 1,575

Total Operating Expenses 6,755 7,486 8,209 9,391 11,533

Net Operating Revenue 330 493 607 615 706

Total Interest Charges 653 828 904 979 1,028

Net Surplus (Loss} ~~~(323) (335)(27(34(2)

Working Ratio 77% 76% 77% 79% 81%

Operating Ratio 95% 94% 93% 94% 94%

Times interest earned 0.5 o.6 0.7 o.6 0.7

Debt Service Coverage 1.6 1.5 1.2 1.1 1.1

Average Net Fixed Assets inService 37,892 39,091 38,770 39,405 39,944

Rate of Return 0.9% 1.3% 1.6% 1.6% 1.8%

Source: Mission estimtes

June 1974

Table 17Page 2

CAMEROON RAILWAYS

Assumptions used to forecast Income Accounts in Caseof Improvement of Edea-Yaounde Road

I. Operating Revenue

1. Passenger and freight revenues are based on the traffic forecastsgiven in Annex 6 (B), and on the tariff increases shown below which are lowerthan those proposed i, the event the road will not be improved:

Jan. 75 Jan. 76 Jan. 77 Jan. 78 Jan. 80

Freight +15% +12% +10% +8% +8%Passenger +10% +10% - +5% -

2. The rationale is as follows:

Annex 6 (B) is based upon a situation in which relative costs ofroad and rail transport are aitered from the existing situation only by theability of a paved road to carry heavier, more economical vehicles. Thereforechanges in relative tariffs over time are not taken into account. It thusseems probable that if rail tariffs increased faster than road between1974/75 and 1979/80, there would be further erosion of the railwa>s competitiveposition. Thus the maximum rate of rail tariff increase for goods trafficover the period with an upgraded road would be equal to inflation, with theoptimum timing early in the period before rond improvements have had timeto take effect. For passengers, a rate slightly less than in the unimprovedroad situation is assumed.

3. Revenues from mail, luggage, parcels, and miscellaneous are assumednot to be influenced by an improvement of the road, and therefore remainunchanged.

II. Operating Expenses and Interest Charges

4. Staff and other costs and taxes are forecast on the same basis as

explained in Table 13. The reduction of these costs as compared to Table 13.is, therefore, due to the reduced traffic and revenue volumes.

5. If the Edea-Yaounde road is improved, further investment in motivepower and rolling stock from 1976/77 onwards will only be necessary to the

extent wern-out equipment has to be replaced (see Table 16, page 3). Thecorresponding reduction of depreciation and interest charges as compared to

Table 13 has been taken into account.

CAMEROON RAILWAYSFORECAST INCOME ACCOUNTS - 1974/75 - 1979/80

(Financial Sensitivity to Low Traffic Forecast)(CFAF Million)

1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

Operatlng Revenue

Passengers - present rates 860 890 910 940 970 1,010Passengers - rate increases 43 138 191 25> 321 334Mail, Luggage, Parcels 350 360 370 380 390 400Freight - present rates 4,170 4,590 4,910 4,940 5,250 5,890Freight - rate increases 313 1,083 1,910 2,608 3,150 4,005Miscellaneous 120 125 130 135 140 1145

Total Operating Revenue 5,856 7,186 8,421 9,257 10,221 11,784

Operating Expenses

Staff costs 2,440 2,850 3,270 3,600 4,110 4,870Other costs 2,090 2,440 2,790 3,080 3,480 4,130Taxes 152 187 219 241 266 306

Total Cash Outgoing 4,682 5,477 6,279 6,921 7,856 9,306

Depreciation 1,206 1,311 1,401 1,434 1,473 1,514

Total Operating Expenses 5,888 6,788 7,680 8,355 9,329 10,820

Net Operating Revenue (32) 398 741 902 892 964

Interest charges 440 653 817 867 856 806

Net Surplus (loss) __QhL2j_ ___L51( =-L76. ----.3- 3. 158

Working ratio 80% 76% 75% 75% 77% 79%Operating ratio 100% 94% 91% 90% 91% 92%Times interest earned (0.1) o.6 0.9 1.0 1.0 1.2Debt service coverage 1.5 1.6 1.7 1.4 1.3 1.4Average net fixed assets in use 35,719 37,892 38,911 38,380 38,337 38,197Rate of return 0% 1.1% 1 .9% 2.4% 2.3% 2.5%

Source: Mission estimates

June 1974

CAMEROON Annex 1

SECOND RAILWAY PROJECT

The Third Railway Development Plan.1970/71-1975/76

US$CFAF equivalent

million million 1/

(a) Equipment and existing lines works

(i) Motive power and rolling stock 5,570 20.0(ii) Japoma bridge reconstruction 322 1.2(iii) Track relaying 470 1.7(iv) Construction of the new Douala Station 940 3.4(v) Miscellaneous additions and renewals 2,617 9.4(vi) Training school extension 320 1.1

Sub-total 10,239 36.8

(b) Consulting services 15 0.1

(c) Line extensions and realigment

(i) Completion of the Transcameroon extension 13,952 50.2(ii) Construction of the first section of the

Yaounde-Yokadouma proposed line 17,000 61.2(iii) Construction of the Douala-Victoria

proposed line 2,300 8.3(iv) Douala-Yaounde realignnent 8,800 31.7

Sub-total 42,052 151.4

Grand Total 52,306 188.3

1/ Us$1 = CFAF 278

Source: Appraisal Report, First Railway Project (PTR-50a), May 12, 1970.

ANNEX 2

CA!EROON

SECOND RAILWAY PROJECT

Analysis of Cost Estinates for First Railway Project

(CFYA lion) (Us$ 'ooo)l/ < ofIo Foreim Total Local Foreiin Total Tota`

A. Items to be financed underproposed loan

1. Track renevai

a. Track (52.5 km) laying 29 - 29 10h - 104b. Rfai.ls - 192 192 - 691 691c. Sleepore 32 96 128 115 346 461d. Fasteninga - 29 29 - 104 104e. Welding 5 18 23 18 65 83r. Ballant 9 26 61

Sub-Total - f2 ET -7 1 ;267 17 5~37g. Contingencies(about 10%) 8 29 126 155

TOTAL 3i fi7O 299 1,393 1,692 7.9

2. IRolling stock

a. Freight wagors 37 526 563 133 1,894 2,027(95 L + 90 X)

b. 6 trailers - 66 66 - 238 238c. Spares - 12 12 -

Sub-Total 13.3d. Contingencies

(about 5S) 2 1° 2 108 11TOrA:L 39 3i7-3 1 1 =02,23 2,M23 11.4

3. Construction of Japoma Bridge

a. Construction of the bridgeand tracl approaches 66 191 257 238 688 926

b. Contingencies(about 25%) -L8 65 61 235

TOTAL 239 322 2 82 1,161 f.

4. Conaulting services 1 14 15 4 50 54 0.2

TOTAL = 1,27>I 51, ,5 7l2 E1,5 5,37 27.,

B. Other items

1. Brought forvard frot 2nd plan

a. Motive power and rolling stock 50 1 ,252 1,302 180 -4,507 .,687b. Open lino vorks 220 474 9 72 06° 98Sub-Total 270 1 ,t26 1,996 972 6,21 7,i7 34.S

2. Required ln project period

a. Locomotivoe and ro3ling stock - 950 950 - 3,420 3,420b. Contingenci.e (10%) 342 342Sub-Total 1,0@5 - 3,762 3,762 17.7

3. Ieconstruction os DouOi*S' 'taon 1C00 160 260 360 576 936 h.O

4. Trainit achool 320 _ 320 1,152 - 1,152 .-

5. Miscellaneous vor k n and oquint 617 925 1.296 2 221to tal, other it9 s 1k9 t,239 3,JTO 1 5797C

WRUD TOTAL PROZECT 1,153 4s,565 5,718 4,151 16,1.35 20,5FIe, :.

Source: Appraisal Report, First Railway Project(PTR-50a), May 12, 1970

l/ US$1.00 = CFAF278

-ANNEX 3Page 1

CANEROON

SECOND RAIIWAY PROJECT

Brief Description of Railway Property

Track (see Chart 2)

Prior to opening of the first section of the Transcameroon Extension,Regifercam operated 546 main line km of railway. This vas increased to 839 kmwhen the extension to Belabo was opened in April 1969, and to 1,174 km aftercompletion of the section Belabo-N'Gaoundere in February 1974. The last exten-sion work was financed by grants from FAC and FED, and by loans on concessionaryterms from USAID and EIB.

Al lines are meter-guage and single-track, except for short sectionsof 10 km which are double-track. There are terrain difficulties on the northernline from Loum to N'Kongsamba (120 m radius curves, and 2.10o maximum grade over54 km), and on the central line from Eseka to Yaounde (curves ranging from 150 mto 300 m radius, and 1.67Yo maximum grade). On the central line from Douala toYaounde (308 km), the total length of curves is 136 km, of 34 bridges 1,991 m,and of 4 tunnels 383 m. Regifercam has made great efforts to replace the ori-ginally very light rails (20 and 27 kg/m), in particular on the Douala-Yaounde

ine; at present only sections totalling 42 km between Otele and Yaounde.areleft for reneval, and this work will be done under the present project.

Most of the track is continuously welded, and maintenance work on mostsections is well done by efficiently planned use of mechanical equipment. Amongthe poorly maintained sections are the abovementioned 42 km which are now in anextremely critical state of disrepair. The cost o? maintenance is high, as itrequires excessive man-labor (1.3 man/km on the center main line as against thenormal average of about 0.7 man/km), lubrication of rails in curves, permutationof rails, replacement o? rails, etc. The excessive wvar of rails and the dif-ficult profile of the line give rise to frequent derailments which are expensiveboth in repair o? track material and rolling stock, and in claims paid to shippers,not to mention disturbance of normal traffic flow. Programs are now under wayto extend the length of sidings,and to strengthen and maintain bridges.

Signalling and Telecommunications

Regifercam ensures safety of operations without the aid of mechanicalor electrical signals. Instead, two simple systems are applied: an electrictoken block on the Douala-Edea section where traffic is heavy, and a telephoneblock system on the rest of the railway. Both these methods are adequate tomeet sa?ety requirements as long as train control regulations are strictly ob-servéd, and an efficient dispatcher system maintained. The present means ofcommunications (an old open-vire pole Une and antiquated equipment in stations)provide the voice circuits between stations (omnibus) and the dispatchers'circuits. The omnibus line stilil works fairly well over the short distancesbetween stations; however, the dispatching lUnes are now generally overloadedby the needs for communication of all the railway's services with no extra

ANNEX 3Page 2

circuits available, and the dispatcher sometimes breaks down completely.When this happens, stations are obliged to arrange train novements amongthemselves, and the result is often a confusing traffic operation situationalong the entire line. However, because spares for the existing equipmentare no longer on the market, and because Regifercam was planning to replacethe entire system in the near future, no substantial renewal program wascarried out in recent years.

Under the proposed Second Railway Project, financing for telecom-munications will be provided to help Regifercam: (i) carry out the necessaryrepair and maintenance work on existing facilities; (ii) establish a radiolink (voice and telex) between eight major stations and the headquarters atDouala; (iii) purchase and install telex equipment for these stations; (iv)equip shunting locomotives with a radio link to the dispatcher's post in theDouala area; and (v) maintain a back-up system to support dispatcher's linesin the event of their failure. The railway will use existing facilities ofthe public telecommunications agency to make installations in its railwaystations along the line Douala-N'Gaoundere, and will share the cost of equip-ment generating electricity. The radio link can be put into operation withinone year after contracts are placed. By mid-1975, the new facilities willhave a considerable effect on train movements and punctuality, and on utiliza-tion of rolling stock. Line capacity will be improved, as will communicationswith customers on commercial matters. In case the realignment project ofDouala-Yaounde materializes, the railway stations will be maintained and otherequipment transferred to the new stations to serve as an emergency system forthe proposed new telecommunications systqm on that line.

Road-rail level crossings in the suburbs and industrial areas ofDouala have been equipped with automatic gates. Existing level crossings inYaounde are proposed for elimination under the realignment project.

Motive Power and Rolling Stock

The locomotive fleet is fully dieselized, and is well maintained;the composition of the fleet is shown on page 4 of this Annex. The limitedavailability of some locomotive types in 1972/73 vas mainly due to severeaccidents. During 19721/72, four shunting engines of low power which were then20 years old, were scrapped; they vere replaced by four locomotives of highpower provided by CCCE financing. Six main-line diesel (4B 3600) locomotivesand one rail-car which were also included in the First Railway Project, verefinanced by CCCE and delivered at end-1972.

Rolling stock is relatively modern and in good repair. Most passengertraffic is carried by railcars and trailers which provide adequate service.Technical problems with bogies limited utilization and capacity of railcarsin 1972/73; however, these problems have since been resolved with the assistanceof the manufacturer. Nearly all freight cars in the present fleet are bogievehicles of an average capacity of 30 tons. New rolling stock will have capa-city of 35-80 tons.

ANNEX 3Page 3

Other Property

Stations

Most of the stations were rebuilt over the period 1930-1950, and are

generally well maintained. Because of construction of the Transcameroon

Extension, Yaounde station was rebuilt at the terminus of the new line, and is

connected to the terminus of the old line by a tunnel under the city. The

Douala station facilities are becoming increasingly insufficient to cope with

freight traffic growth, and the passenger traffic facilities have also become

obsolete. However, the track facilities in the midst of a densely populated

area do not allow for extension, and construction of a new station at a new

location, including switching yard and freight depot, both with improved access

to the port, had been included in the First Railway Project. Detailed studies

for this construction (for which close coordination is required between railway,

port and road authorities) are only now underway, and the work is expected to

be carried out concurrently with execution of the proposed second project. The

new Douala Station will replace the existing stations at Douala, New Bell, and

Bassa-Ateliers. It will consist of a passenger station, a freight station with

adjacent marshalling yard, goods depot, platforms, and loading and unloading

sidings; road accesses will be provided to the city of Douala, the industrial

area, and the airport. Total cost of construction (for which part financing

is expected from the African Development Bank) has been estimated at about

CFAF 3.4 billion.

Workshops and Sheds

Regifercam has a modern and well-equipped workshop in Bassa where all

motive power and rolling stock are repaired. Running maintenance is carried

out in Bassa in separate sheds, and along the Central Line also in Yaounde,

Belabo, and N'Gaoundere. The Bassa workshops also include limited plant capa-

city for construction of freight cars, a sleeper impregnation plant, a foundry,

and an electric rail-welding plant.

ANNEX 3CANEROON RAILWAYS Page 4

Composition of Motive Powerand Rolling Stock

(as of March 1, 1974)

A. Locomotives Number of Units

Main line

CEH-AGO 4B 3,600 6Alsthom-MaO CC 2,400 5Alsthom-MGO BB 1,200 13Alsthom-MGO BB 300/500 17Alsthom/Sulzer BB 200 4

Total 45

Shunting

CEM-MGO 32

B. Railcars

Billard-Soule MGO ZE 10 8CEM-MGO YE 4

Total 14

C. Passenger Cars 95

C. Baggage and Mail Vans 14

B. Freight Cars and Utilization

Type Flat Cars Flat Cars Flat Cars Box Cars Box Cars Others Tank Cars SpecialFlat Cars Special Special Special General Special Gondolas Regie Private Re _Private Private Cars

1. Loge 4862. Timber processed 203. Vehicles 16 1/ 54. Containers 285. General cargo 412 100 2/6. Aluminum and Alumina 24 3/ 19 4/7. Liveatock 6 2/ 88. Bananas 95-9. Other 2 5/ 6 5/

10. Petroleum 4 4511. Gas/Bitumen 512. Wine h13. Departmental traffic _ _ _ - - _ 131

Total 506 16 28 5 412 101 132 139 4 45 28

NOTES:

1/ Number increasing by 5 units per year by canverting log cars.2/ In 1974, 14 units converted to box cars for livestock.3/ West-bound traffic only.4! East-bound traffic only.§/ Refrigerated cars.

ANNEX hPage 1

CAMEP0ON

SECOND RAILWAY PROJECT

Summary of Operating Statistics, 1970/71 - 1972/73

1970/71 1971/72 1972/73

I. Traffic

Pass-km (million) 226.1 220.8 193.2

Ton-lm (million) 284.9 303.0 326.2

Traffic units (ton-km +pass-lcm) (million) 511.0 523.8 519.4

II. Operations

Train mileage (km)

Passenger trains-/ 1,534,641 1,524,967 1,515,575

Freight trains 1,326,117 1,334,864 1,310,032Service trains 11,639 10,280 6,975

Total 2,B72,397 2,870,l1l 2,832,582

Mainline locomotivemileage (km) 2,484,400 2,559,192 2,573,439

Railcar mileage (km) 769,000 802,700 855,378Freight car mileage (km) 18,907,000 18,801,079 19,944,732

Passenger coach mileage (km) 5,625,372 5,581,725 6,072,305Number of locomotives infleet (i) diesel loco-

motives (incl. shunters) 36 36 45(ii) railcars 11 il 1

Number of freight cars infleet 2/ 986 1,318 1,416

Nwnber cf passenger coachesin fleet 83 82 9h

Pass-krm per ka of line inoperation 269,485 263,158 231,227Average mileage per passenger 118 117 117

Ton-lcm per kn of line inoperation 339,115 361,193 388,550

Average mileage per freightcar n.a. n.a.Flat cars 34

Box cars 34

Gondolas 19

Average load of freight car n.a. n.a.Flat cars 21

Box cars 23.8Gondolas 22

I/ Including suburban traffic and mixed trains.2/ Including pi-.vate and departmental cars.

n.a. = not available.

ANNEX 4Page 2

1970/71 1971/72 1972/73

Number of cars loaded 45,245 43,237 42,467Ton-km per freight car trainkm 170.6 180.7 249Average daily mileage of motivepower

Type 4B 3,600 - - 274Type CG 2,400 131 177 126Type BB 1,200 264 254 222Railcars 191 200 195

Availability of motive power (%)Type 4B 3,600 81Type CC 2,400 54 68 51Type BB 1,200 86 87.5 62Railcars 71 58 61

Average train delay on centralline (minutes)

Passenger 62 81 99Freight 221 223 493

Average turnaround of freightcars (days) 1/

Box cars 6.5 6.8 9.8Gondolas 12.1 13.3 19.2Flat cars 9.1 10.8 10

III. Staff

Number of employees 3,525 3,596 3,699Instructors andtrainees 101 107 112

Total 3,626 3,703 3,811Traffic units per employee 142,100 142,400 134,400/2Technical Assistance 40 38 37

Nunber in fleet x 365 days1/ Average turnaround Number of cars loaded2/ 39 in March 1974.

ANNEI SPage 1

CMIEROON

SACOND RAIDWAY PROJECT

Operational Plan of Action

Regifercam has been concerned about the need for physical and financialrehabilitation of the railway system. Accordingly, Regifercam intends toimplement measures with the objective of f.ulfilling its'- appropriate ecornomic role,to complete its physical rehabilitation, and to achieve financial viability.

Operations

(a) Regifercam will take all necessary steps to improve its operatingefficiency and to achive the following targets:

Ojctives

IMM 1973/74 1974/75 1975/76 197677

Availability ofmotive pouer (%)

4B 3,600 81 1/ 83 83 85 88CC, 2,4OO 51 53 55 58 60B 1.,200 62 2/ 75 80 85 88Railcars 61 3/ 70 75 80 85

Utilization of freightcars (%)

Flat cars 88 88 88 88 88Box cars 88 90 90 90 91Gondolas 90 90 91 91 91

Average daily mileageof motive power (km)

hB 3,600 274 280 280 280 280 h/CC 2,400 126 130 135 140 150BB 1,200 222 250 270 290 300Railcars 195 240 260 280 300

Average load of freightcars (tons)

Flat cars 21 21 21 21(60) 5/ 21(60)Box cars 23.8 23.8 23.8 23.8 24.1Gondolas 22 23 24 24 25

Average daily mileageof freight cars (km)

Flat cars 34 ho 45 52 55Box cars 34 4o 42 45 48Gondolas 19 22 25 27 29

1/ One damaged locomotive under repair with manufacturer.2/ Two damaged locomotives under repair in workshop.§/ Four railcars with bogie problems being repaired.'l/ Locomotives only in service on Douala-Yaounde section (diffïoult alignment with

speed restrictions).5/ New 4-bogie timber cars.

ANNEXXPage 2

Ac ua_ ObJectives1972T,3 174J-/9775 '1975 9_76/.777

Productivity offreight cars(000 km per yr)

Flat cars 185 220 245 290 320Box cars 180 200 230 290 270Gondolas 85 96 107 118 130

Productivity ofstaff

Total staff(number) 1/ 3,811 4,229 4,929 5.,450 5,896

Staff (number~ 2 ,699 4,107 44,797 5,308 5,717Traffic units(million) 3/ 520 594 715 803 879Traffie units(000) perexmployee 134 145 149 151 154

(b) ROg±fteram viii àetab1iaah a system of. control to be agreed vith theBank that Vill pemit prompt evaluation Of progre88 in the physical rehabilitationof the railwaya, and in attainnert of the targete specified above.

1/ Operation budget only.2/ Excluding instructors and trainees.3/ Traffie unit 1 ton-lm + 1 passenger-km.

ANNEX 6Page 1

CAMEROON

SECOND RAILWAY PROJECT

Traffie Forecasts

There are alternative sets of forecasts for both freight andpassenger traffie. Alternative A assumes that there will be no significantimprovement to the road between Douala and Yaounde. Alternative B assumesthat a major improvement will occur through upgrading the section Edea-Yaoundeto a level capable of supporting heavy freight trucks.

A. Effect of No Improvement to Douala-Yaounde Road

Freight Traffîc

The principal factors determining the volume of freight trafficcarried by Regifercam are: (I) the potential demands upon the system in theabsence of constraints; and (II) the nature and incidence of constraints.

Freight traffic can be broadly classed under two headings:(i) timber, and (ii) general cargo traffic - other exports and imports,including petroleum.

I. (i) Timber

There are three sources of potential increase in the demand forCameroonian timber: world demand growth, diversion of demand from Ivory Coastto Cameroon production assuming that the former either becomes statie ordeclines, and diversion fromn other West African producers.

Economie Analysis and Projections Department has made projectionsof demand and price for world broad-leaved (hardwood) timber exports from1967-69 (average)to 1980 as follows:

Demand (Logs):+75%; Demand (Sain):+220CThe weighted total timber demand growth is about +90%.Price (African average of 7 species) +50%Price (Philippines) +24%

Although West African timber exports have tended in the past togrow at below the world average rate, this was partly due to substitutionof Far East for %st African timber in Europe. As petroleum prices rise,however, freight costs will tend to favor West African timber in this market.Additionally, there is probably more scope for reverse substitution of timberfor petrochemical products in Europe than in Japan, source of the main worlddemand growth over the past decade. Thus it is likely that West Africanexports will rise at the world rate to 1980. Total Cameroonian production,which stagnated at about 400,000 tons between 1968/69 and 1971/72, has been

ANNEX 6Page 2

constrained by difficulties at Douala port, and also more recently by thelimitation of railway capacity. It is therefore reasonable to assume thatif these constraints had not been present, Cameroon would have had a greatershare of total West African exports (about 5.5 million tons) than the presentestimated 7%. If growth had been at the regional average rate since 1968,Cameroon's share would have been about 9%.

The prospects for Ivory Coast timber have been analyzed. Althoughthere are virtually untouched reserves in the San Pedro area, these willprobably not be sufficient to compensate for declines elsewhere, and after1975 even San Pedro exports are likely to grow only slowly at about 1% p.a.to 1980. While there is scope for exploitation of secondary timbers, itseems improbable these will be competitive with the products of the vir-tually virgin forests of varied high quality species existing in Cameroon,Gabon, CAR and Congo. It is therefore unlikely that Ivory Coast will beable to contribute to the increased supply of timber required, and volumeexports may well decline 0 Assuming Ivory Coast (which currently exportsabout 50% of the regional total) has static exports, and Cameroon obtains9% of the regional growth to 1980 (about 2.8 million tons), total Cameroonexports would be 00+500 - 900 thousand tons.

The remaining 400,000 tons forecast is much more speculative.There are two factors, either or both of which may work in Cameroon t s favor:(a) Ivory Coast volumes may in fact decline after 1975; and (b) allowingfor lead time in implementation of projects for transport improvement inGabon/Congo, Caameroon may obtain a slight advantage in timber export ex-pansion up to 1980. 400,000 tons represents about 15% of current IvoryCoast production. It is recognized that this further diversion is moresensitive to transportation than raw material availability factors;accordingly, the sensitivity analysis assumes total Cameroonian exportsreaching only 900,000 tons in 1980.

The main areas with potential for increased exploitation areeastern and southern Cameroon. The eastern area is adjacent to Belabo, onthe Transcameroon railway extension, while timber from the south is justas readily evacuated by road as by rail.

Thus it seems realistic to assume that with increased carryingcapacity per unit (the flat-cars proposed for purchase under the presentproject have a capacity of 60 tons), the railway should obtain about 75%of the incremental traffic giving the following distribution:

ANNEX 61980 Timber Export Forecasts Page 3

(l000 tons)Total

Total Growth & Diversion Other Total Regi-Cameroon (Ivory Coast exports static)Diversion Douala (% fercam (%

1,300 900 4oo 1,180 90 1,000 77

Note:- While some Cameroonian timber may be evacuated via Pointe Noire, thisshould be fully compensated by some CAR timber passing through Cameroon.

(ii) Other Cargo

During the period 1962/63-1968/69, the most recent period beforethe advent of the Transcameroon extension, total Regifercam freight trafficgrew at over 6% p.a., about 1.2 times the rate of GDP. Although statisticsof total timber traffic are not separately available, data on the mainspecies indicate a growth rate of under 6%; thus general cargo grew by atleast 6% p.a. During the years 1968/69 to 1972/73, railway general cargotraffic increased by only 3% annually, a situation largely attributable torailway capacity limitations arising from rolling stock shortages andassociated operational problems.

GDF is expected to increase by about 47% over 1972/73-1979/80(about 5% p.a. from 1972/73 to 1975/76, and 6% p.a. thereafter). This maybe considered a minimum rate at which general cargo tonnage will increase.At the other extreme, if the effect of the rail capacity limitations isignored by assuming a traffic growth of 1.2 times the GDP rate on the 1968/69traffic base, the overall growth over the years 1972/73 to 1979/80 would be78%. In view of the traffic still to be gained from the Transcameroonextension, and the possibility that some of the traffie presumably lost toroad transport during 1968/69-1972/73 will be recovered, a midpoint fore-cast of 62% between 1972/73 and 1979/80 seems reasonable. In view of thegeneral tendency for high-value import traffie to be particularly vulnerableto road competition, a below average growth rate has been adopted for thistraffic; conversely, petroleum traffic is eminently suitable for railtransport, and a higher rate of 82e/o is used.

Non-Timber Traffic('000 tons)

Estimate Actual Forecast1962/63 1968/69 1972/73 1979/80

500 710 819 1,380

II. There are two constraints upon the development of railway traffic:

(i) the speed with which rail services can be improved; and

(ii) port capacity.

Both these factors determine how quickly Regifercam's traffic will attainthe projected traffie trend line between 1972/73 and 1979/80, as well assubsequent departures from it.

ANNEX 6Page 4

Traffic volumes during 1973/74 and 1974/75 will be verysensitive to the speed with which the components of the proposed Loancan become effective. This is partly a question of availability, partlyof organization. The asumption employed is that adjustment will notbe jimmediate in 1973/74, but that by 1974/75 traffic will be close tothe latest consultant forecasts (see Graph on page 7 of this Annex).In 1975/76 however, the effective limitation of the port of Douala willbe reached. This has two components, the facilities for general cargoand those for timber. As a certain amount of timber traffic passes overgeneral cargo quays, the two are not entirely separate. However, whilea systematic analysis has been made of the capacity limitations likelyto be imposed upon general cargo operations (Table 5), those on timbertraffic are more empirically based. In both cases, the effect, makingfull allowance for improved productivity, is to severely restrict thepotential rate of growth in the years 1975 to 1978.

For general cargo, the main problem is to determine whencongestion becomes excessive. For a port of Doualats size, this is at under900* of theoretical capacity, but it is clear that a moderate excess demandsituation can be sustained for a short period of time, about one ortwo years. Thus the assumption is that capacity utilization could riseto a maximum of 92% in 1978. By the end of that year, it is assumedthat the proposed Douala port expansion will be completed and the capacityconstraint removed, thus enabling the forecast general cargo traffic forthe port, and therefore for the railway, to be attained in 1979/80.

As an undetermined amount of petroleum traffic also passes overgeneral cargo quays, the same constraint pattern has been adopted. Thisis a conservative assumption.

Log traffic is constrained until the flat cars provided underthe proposed Loan are added to the existing capacity of Regifercam, whichis estimated as 450,000 tons. Shortly after this bottleneek is overcome,the port capacity constraint is expected to appear. The existing port'slog capacity is estimated at 650,000 tons per annum; with investment inhandling equipment proposed by the Government, this should rise to800,000 tons. Even allowing for some further capacity resulting fromearly concentration on timber facilities under the proposed port project,port timber handling capacity will restrict Regifercam's timber trafficto under 750,000 tons until the first half of 1978/79.

The Graph on page 7 of this Annex shows total forecast railtraffia volumes, as well as separate forecasts for timber, compared withthe latest consultantsi forecasts.

Passenger Traffic

There are three components of the forecast passenger traffic:(i) traffic on lines existing before work began on the Transcameroonextension, (ii) traffic on the Yaounde-Belabo part of the extension,already built, and (iii) traffic on the Belabo-N'Gaoundere section whichwas fully opened in February 1974.

ANNEX 6Page 5

Increasing competition from road transport on the Douala-Yaounderoute is refleeted in a decline in traffie estimated at about 22 millionpass-km over the period 1971/72-1972/73. This was partly caused byunreliable railway operations, and consequently the improvements whichwould result from the proposed project are expected to slow the rate ofdecline and stabilize traffic (though not the share of traffic) in1976/77 at about 100 million pass-km. Some further growth of trafficbetween Yaounde and Belabo of about 796 p.a. is expected, but the mainpotential lies in the Belabo-N'Gaoundere extension. Total traffic fore-casts and their components are shown in Tables 3 and 4.

B. Effect of Improvements to Edea-Yaounde Road

The consultants have estimated the effect on freight andpassenger traffic of three sets of conditions:

(i) no railwayimprovements and constructionof a heavy-duty trunk road;

(ii) complete remodeling of the railway, andmaintenance of the present road; and

(iii) complete remodeling of the railway, andconstruction of a heavy-duty trunk road.

Since the proposed railway project is intermediate between situations(i) and (iii) above, and since the greatest effect of road improve-ment woauld be if a heavy-duty trunk road were constructed, the inter-mediate effect was adopted. It was assumed, in the absence of anyinformation on the timing of road investment, that 50% of the effectwould be felt in 1975/76, 75% in 1976/77, and the complete effectin 1977/78. The reductions in freight tonnages on the Douala-Yaoundérailway are estimated as 25,23 and 22%/ reapsctiv.ly for 1977/78 through1979/80.

Freight Traffic

The road effect was assumed to be similar for all types of traf-fie, with differences in the reduction between commodity groups in ton-kmbeing a function of the differences forecast in the average haul,and thus in the weighted effect of improvement in the 200 km Edea-Yaounde road. The net effect for 1979/80 was a below average effecton timber, an average effect on petroleum, and above average ongeneral cargo. As general cargo is shorter haul and of higher value,it is inherently more susceptible to road competition. It is there-fore possible that the above bias, though directionally correct, maynot be an adequate indicator of the effect on general cargo, andtherefore on railway revenues, if substantial road improvements weremade; but a more precise estimate cannot be made for lack of evidenceon commodity distribution between road and rail. The comparativetraffie volumes for the years affected, with and without the road,are shown below.

ANNEI 6Page 6

Freigpht Traffic(in millions of ton-km)

1975/76 1976/77 1977/78 1978/79 1979/80

Without Road

Timber (loge) 213 253 272 322 385Petroleum 70 73 77 86 101General 291 318 334 367 445

Total 574 644 683 775 931

With Road

Timber (logs) 194 221 227 271 332Petroleum 62 61 60 68 82General 260 266 278 297 360

Total 516 548 565 636 774

Passenger Traffic

Because passenger traffic on the Douala-Yaounde route isMch more locialod than freight, the effect of road improvement ijless. On the basis of the distribution ahown in Table 4, themaximum redaction in pass-km is about 10%. Coeparative trafficvolumes for 1975/76-1979/80 are shown belows

Passenger Traffic(inmillions of pass-km)

1975/76 1976/77 1977/78 1978/79 1979/80

Without Road 229 235 242 248 260

With Road 223 217 218 223 234

Annex 6

CAMEROON Page 7

SECOND RAILWAY PROJECT

Freight Traffic Forecasts

2400o- -- - ' ,

(1)rConàmltantrbforecasts (total'traffic)(2) Bank forecasts (total traffic)

2300 --f3 -Bank -orecasts with improve4 roed - -A --

(4) Consultant timber forecasts,2 (5) Bank timber forecasts

2200. 1----------r- -- ' t2100 -- -

2000L200o;------ ---- -- (1) X 7

190v--

1800k .(2) , -1100

1700 --. 1000

16o0; 900

150C 9 //N800

1400 _,,, 700

1300 ,60/0 t

1200 5 '

1100 400X_

1000 300

w'

900 2 200

E-4 o71/72 72/3 73/4 74/15 -75/6 76/7 7Và- -78/9

ANNEX 7Page 1

CAMEROON

SECOND RA.IIWAY PROJECT

Construction of the New Japoma Bridge

The Japoma Bridge is a single-track steel girder bridge across theDibamba River, near Douala; it has two steel spans of 70 m each, and threeof 60 m, making a total length of 320 m. The bridge is of vital importancein the railway systemn, as it carries all traffic to and from the capitalcity of Yaoundé as well as northern Cameroon. The girders are in a poorstate of repair and require complete overhaul and strengthening. Moreover,

the stability of the whole bridge is imperiled by damage to its piers andthe sinking and tilting of one of them. Reconstruction of the bridge is

therefore considered as being of high priority, and had been provided forunder the First Railway Project. However, when the possibility of recon-structing it at the same site was investigated thoroughly, this was found

to prove both difficult and quite uneconomical; it was therefore decided to

build a new bridge 250 m upstream from the present site, and preliminaryengineering studies were carried out by the Office du Chemin de Fer Trans-camerounais (OCFT), a government agency. OCFT was requested to conduet an

extensive campaign of soundings along the proposed new bridge site and itsvicinity; these tests revealed layers of mud 40 to 50 m deep which would causeconstruction difficulties. The plan was therefore abandoned, and a suitablesite found about 150 m downstream from the existing bridge.

The cost of the project was estimated at CFAF 257 million (US$926,000equivalent), of which CFAF 191 million (about 75%) in foreign exchange. Toallow for possible unforeseen difficulties in construction., this estimate wasincreased by an unusually high physical contingency allowance of 20v, making

an estimated total cost of about CFAF 322 million (US$1.2 million).

Tender documents were prepared by Regifercamn, approved by the Bank,

and issued in March 1972. Bidders were requested to make proposals for:

(i) construction of a new bridge with steel deck; (ii) partial reconstructionof the existing bridge over 130 m between the right bank abutment and pier

No. 2; and (iii) any alternative they considered to be appropriate. Offers

were received in the second half of 1972 for a steel bridge (CFAF 724 million),

a prestressed concrete type bridge (CFAF 550 million), and partial reconstrulction

of the existing bridge. These estimates were all considered too high, and wererejected by Regifercam. However, an alternative offer by one bidder to reconstructpier No. 1 of the existing bridge, at a cost of CFAF 329 million, receivedattention. A soil mechanics expert was asked to advise on the technîcal validity

of this proposal; his opinion was that the type of construction proposed wasvery delicate, and could cause the present pier to deconsolidate during theprocess of driving new piles. At the same time, he suggested another possiblesolution for reinforcement of pier No. 1. Regifercam then requested theLaboratoire des Ponts et Chaussées (France) to study both proposals in lieisonwith experts on difficult foundations. The report from the Laboratoire hasrecently been issued, and it suggests as a possible method for sustaining pierNo. 1 the technique of "Racine" piling which has been used successfully in

Page 2

similar cases. The cost involved was tentatively estimated at about CFAF 250million. Both Regifercam and the Bank studied this proposal carefully, andconcluded that it still harbored too many uncertainties, and that reconstruc-tion of a new bridge at a new site vas preferable.

The estimated cost of this new construction (using continuous girdersof pre-stressed concrete) is based on an offer from the proposed contractorin the amount of CFAF 860 million, to which bas been added a 1096 physicalcontingency and 28.30o price contingency, making a total o! CFAF 1,103 million«US$4 .85 million); of this CFAF 911 million (about 75%) is estimated as foreigncosts. As compared with the original estimate, this higher cost results fromall the abovementioned major changes in the bridge design and location, thelonger approaches o! the railvay link to the bridge, and increases since 1969in the costs of labor and materials.

ANNEX 8Page 1

CAMEROON

SECOND RAILWAY PROJECT

Tentative Terms of Reference for Consulting Services

ObJective

1. The objective of the consulting services is to assist Regifercamin its policy of operating on sound business principles so that it mayplay its proper role in the transport sector. Towards this objective, the

consulting services will concentrate on improving the efficiency of op-erations and the financial situation of Regifercam by providing assis-tance in the preparation of programs, the implementation of action, andthe training of personnel. The specific areas for consultants' assis-tance are given below.

Operations

2. The study of Regifercam's operations vill provide:

(a) a review of all aspects of present train operations,including freight and passenger timetables, utilizationof motive power and rolling stock (with particularattention to any variations in equipment productivitybetween different commodities and periods of time),shunting operations in stations, maintenance schedulingand execution, adequacy of signalling and teleco-muni-cations systems, control posts, safety probleus, andstaff training;

(b) an analysis of traffic flow characteristics sufficientto enable identification of existing and potential con-straints;

(c) recommendations and a program of implementation forcorrecting deficiencies and improving operations; and

(d) recommendations for train achedules and personnel train-ing to meet future requirements.

Costinz

3. The costing study shall includes

(a) an analysis of the existing system of cost accountingto establish an improved systex based on direct costing,so that the contributions of traffic per line and com-modity to overhead costs can be easily identified, andan efficient system of budgeting and control imple-mented;

ANNEX 8Page 2

(b) recommendations for implementation of the new costingsystem, including estimates of time and manpower re-quired for the individual steps of implementation;

(c) recommendations for the appropriate structure and le-vel of tariffs, fees, etc. for each of Regifercam'sservices (including the manner and timing of intro-ducing appropriate tariff changes), which would allowRegifercam to meet its financial targets; and

(d) a preliminary analysis of co0ts per line and commodityto provide recommendations for an appropriate structureand level of the major tariffs for passengers and freightuntil results of the new costing system are available.

Commercial

4. TThe present commercial organization will be reviewed to pro-vide:

(a) an identification of the commodities and geographicalareas in which Regifercam's competitive position isstrongest, currently and in the future, with particularattention paid to developments in competing modes oftransport;

(b) an assesoment of the commodities and areas in which de-mand for Regifercam's services are likely to be sensi-tive to tariff changes;

(c) recommendations for the marketing services required toestablish and maintain contact between Regifercam andits customers, to advise customers of the implioationsof the new costing system, and to ensure adjustment inservices to changing patterns of demande;

(d) a forecast of the future patterns and volumes of traf-fic in sufficient detail to enable adequate short andlong-term financial planning to be undertaken; and

(e) recommendations for a program implementing improvementsin the commercial fields;

Management

5. The present administration and its procedures shall be reviewedto:

(a) establish a simple job analysis program, and numbersof staff required by function and by department;

ANNEX 8Page 3

(b) establish an improved systea for short and medium-termcorporate planning and control, including marketing,pricing, operations, personnel, investment and finances; and

(c) provide recommendations for management training.

ImDplementation

6. The consultants shall assist Regifercam in implementing the re-commendations resulting from the foregoing, and in the training of per-sonnel. The consulting services are expected to require about 120 man-months of experts'time over a period of about 30 months. Regifercam will1provide the consultants with all necessary data. It will also assign onecounterpart to each member of the consultants' teau, either on a full-timebasis or from time to time as required.

ANNEX 9Page 1

CAMEROON

SECOND RAILWAY PROJECT

Details of Economic Evaluation

A. Track Reneval

Benefits

The benefits associated with renewal are the avoidance of costs due

to the following:

(a) increased operating time as a result of broken rails;

(b) derailments and associated probkems: danger to life;damage to rolling stock; reduction in line capacity dueto temporary line closure; increased turn-around time

for rolling stock; and loss of passenger traffic to lesseconomical road transport; and

(c) additional maintenance on broken rails.

(a) Broken Rails

During 1971/72, the number of broken rails totalled 89, double the

level of the previous year. Most of the breaks occur on sections with 26 kg

rail laid in 1927. The number of these accidents is expected to increase

rapidly as the track deteriorates further; on Otele-Yaounde an estimated 150accidents will occur in 1975, with increases of about 10% annually to 1981,

if present conditions are maintained.

Tbh del1y involWed as a resuit of on. *ccident in estiiated at 3hours for the first train, and 1-1/2 hours for the second train. However, given

the forecast traffic increases, the time of the average delay vill rise at arate averaging 1096 p.a., making due allowance for the effect of improved

telecommunications. The costs associated with these delays include:

(j) additional working time for the crew whose salary isvalued at 180,000 CFAF/3 man_months;

(ii) crew repair unit whose cost is valued at 4,250 CFAF/occurrençe;and

(iii) utilization of a gang-car valued at 3,000 CFAF/occurrence.

(costs in CFAF million)

(i (ii) (iii)Crew's Repair

Time salary unit Gang-car NumberNumber bro- lost 180,000 4,250 3,000 wagons Tbtal

Year ken rails (hours) CFAF/ronth CFAF/occur. CFAF/occur. per train (i) - (iii)

1976 165 5.0 0.825 0.700 0.495 24 2.0

1977 182 5.5 1.000 0.775 0.545 26 2.4

1978 200 6.o 1.200 0.850 0.600 27 2.7

1979 220 6.6 1.450 0.935 o.660 29 3.0

1980 242 7.2 1.74o 1.030 0.725 29 3.5

1981 266 8.0 2.130 1.130 o.800 29 4.0

Ik

ANNEX 9Page 3

(b) Derailments

In 1971/72, there were 105 derailments on Douala-Yaounde, halfof them caused at least partly by the condition of the track. It is es-timated that on Otele-Yaounde, at least 26 derailments will occur in 1976,and that this number will increase by an average of 10%6 each year there-after.

The unit cost of a derailment is difficult to assess; however,probability estimates show that the cost is about 4.50/o of the value ofthe material involved (item (i)). Other costs involved in derailmentsinclude:

(ii) increase in turnaround time for locomotives and rollingstock;

(iii) the passengers lost to road transport when trains arecancelled; assuming that 85%o of passengers on centralline travel through Otele Yaounde, 33 % are lost to roadwhich costs h.38 CFAF/km extra; and

(iv) the temporary line closure which might result on Otele-Yaounde section, thereby reducing the capacity of theline.

Assurning that 1 locomotive and 4 wagons are involved in 50% of the ac-cidents, the cost incurred from derailment is as follows:

(Costs in CFA' miillion)

WS)(i ii (iv) (v) (ari)IICost due to

Number increasdai Annual Costlocomo- Cost Nunber turn-arozid Number number 657 Sa-rings in Total

Number tives of wagons Cost Number time of lcnomo- wagons Cost of passen- CFAF/ avoidance (i)

derail- in- loco- in- of trains tives-16,560 per wagons-350 gers passen- of capacity thru

Year ments volved motives volved wagons(freight) CFAF/occir. train CFAF/occur. ('000) gers reduction (viL

1976 25 12 54 48 7.6 12 5.2 24 2.6 942 14.9 4 88.3

1977 28 14 63 58 9.1 13 6.3 26 3.4 968 17.1 13 111.9

'yid 29 15 67.5 60 9.5 14 7.5 27 4.2 997 19.4 18 136.1

1979 33 16 72 66 10.4 15 9.3 29 5.7 1,037 22.1 68 187.5

1980 36 18 81 74 11.7 16 11.0 29 6.7 1,078 25.6 - 136.0

1981 43 21 94.5 86 13.5 19 13.6 29 8.3 1,122 29.3 - 159.2

1/ The assumptions are that:(i) obstruction occurs per 3/4 day, (ii) one section train and 2 servicetrains are suppressed for 2 days,and (iii) two passenger trid:s are suppressed.

:JCl

ANNE 9

Page 5

(c) Maintenance

A special maintenance team has been set-up to lubricate the railson a weekly basis. The additional number of workers is estimated at 0.5man/km.

Increase in Maintenance

Total SavingsNumber of Workers/km Saving (CFAF/million)

Year Actual Normal

1976 1.2 .7 *5 8.31977 1.3 .7 .6 9.81978 1.3 .7 .6 9.81979 1.4 .7 .7 11.31980 1.4 .7 .7 11.31981 1.5 .7 .8 12.8

Assumptions: Lengtht 42 km

Workers' Salarys 30,000 CFAF/month

1 Supervisors 60,000 CFAF/month

(d) Cost/Benefit Analysis

The rate of return on the track renewal item amounts to over 120/o.

(CFAF million)Benefit Benefit Benefit Total

Cost a) (b) (c) Benefits

1976 76 W 2.0 88.3 8.3 981977 0 2.4 111.9 9.8 1241978 O 2.7 136.1 9.8 1491979 0 3.0 187.5 11.3 2021980 02/ 3.5 136.0 11.3 1511981 -32e- 4.0 159.2 12.8 176

(e) Sensitivity Analysis

Assuming a lower rate of growth of timber and general cargo traffic

(Annex 6), the rate of return is reduced to a still satisfactory 9-1/2%o.

1/ At 1973 prices.2/ Residual value of rails.

ANNEX 9Page 6

B. Breakdown Crane

The track realignment expected by end-1979 will reduce, but noteliminate, the frequency of derailments. Consequently, there are benefits tobe obtained from provision of an additional breakdown crane. These comprise:(a) reduction in delay to trains through a reduction in the average crane-travelling time to the scene of an accident, (b) an increase in equipmentproductivity through reduced idle-time resulting from derailment, (c) increasedline capacity resulting from an increase in the number of daily train movements.No maintenance costs are shown in the cost stream as these will probably be smallenough to be fully offset by unquantified crane benefits, such as its potentialuse for lifting heavy loads onto cars, etc. Benefits (a) and (b) will apply fromthe time of introduction of the crane, i.e. from 1976 onward. However, benefit(c) applies only to 1978 and 1979, years when the demand for line capacity willexceed that available without the new breakdown crane, and before effective linecapacity is increased through realignment.

(a) The number of derailments in 1971/72 totalled 195, more than half ofthem occurring on the main line between Douala and Yaounde. It has been esti-mated that improvements to the Otele-Yaounde line will reduce the number ofderailments in 1976 by 26. With increased traffic, the number of derailmentson the main line (for reasons other than poor track between Otele and Yaounde)is expected to reach 150. It is also assumed that:

(i) 50% of the derailments-would involve heavy locomotives(CC 2,400 or 4B 3,600) or large wagons, and would there-fore require the use of heavy-duty cranes;

(ii) a Poisson distribution of derailments is used; and

(iii) one of the two large cranes will be based in Doualaand the other in Yaounde.

Causes of DerailmentsTraffic

ConditionTKm % of Track Other Total

Douala-Yaounde 400 71 20 90 110Yaounde-Belabo 100 18 2 23 25Belabo-Ngaoundere 60 il 1 14 15

The average distance to be travelled by the heavy-duty crane wouldtherefore be 184 kcm; if another crane is purchased and located in Douala, theaverage distance would be reduced to 130 km. A crane travelling at an averagespeed of 25 km/h would take 7-½ hours to reach the scene of the accident.Moreover, it can be estimated that it takes on the average at least 10 hours(in some cases, it can take several days) to clear the site. Traffic interrup-tion might therefore last for about 18 hours.

ANNEX 9Page 7

Using a Poisson distribution, the probability of having two major

derailments on the same day between Douala and Yaounde is 2%.

If a new crane is purchased, the time lost per derailment will be

reduced by about two hours. Trains circulating over a 24-hour period will beaffected by this reduction.

Savings

Year Number daily trains Savings(in each direction) (millions CFAF)

1976 15 1.51977 16 1.61978 17 1.71979 19 1.91980 20 2.0

1981-95 22 2.2

Assumptions

N'umber of derailments on Douala-Yaounde: 55Time lost: 2 hours x 55 = 110 hours = 4.58 days;

Number of derailments on Yaounde-Ngaoundere: 20Time lost: ½ (reduced traffic) x 2 hours x 20 .84 days;

Number of derailments occurring simultaneously: 2%Time lost: 2< x 75 = 1.50 days

Total time lost: 4.58 + .84 + 1.50 = 6.92 days

Salary: Driver (80,000 CFAF/month); 2 crewmen (50,000 CFAF/month);

Total Salary per day: 180,000/25 = 7,200 CFAF/day

(b) In Equipment Tied Up

Number Wagons /Year Total Savin&s per train Total Savings

(Unit: 22,222 (Unit: 467CFAF/loco-day) CFAF/Car-day)

1976 4.61 24 2.331977 4.92 26 2.691978 5.23 27 2.971979 5.84 29 3.561980 6.15 29 3.75

1981-93 6.77 29 4.12

1/ Freight only.

ANNEX 9Page à

(c) In line capacity

number of trains saved for every occurrence

From avoidance ofmore than one derailment

Saving (i) Saving (ii)1978 1979 Number derailments (Poisson distribution)

Total Percentage (Percentage>

Jan. 1 1 5.6 10.2 1.8Feb. 1 1 5.6 10.2 1.8Mar. - 1 14.8 8.8 1Apr. - 1 4.8 8.8 1May - 1 4.8 8.8 1June - 1 4.8 8.8 1July - 1 4.6 8.4 1Aug. - - 3.4 6.3 0.5Sept. - - 2.3 4.2 0.2Oct. - - 3.4 6.3 0.5Nov. 1 1 5.3 9.6 1.5Dec. 1 1 5.3 9.6 1.5

number of trains saved

(i) 1978 26 trains x 672 tons/train x 300 km = 5.242 million TKm1979 46 trains x 672 tons/train x 300 km - 9.275 million TKm

(ii) Poisson distribution

1978 5 YJ trains x 672 tons/train x 300 km = 1.010 million TKm1979 9 2 trains x 672 tons/train x 300 km = 1.815 million TKm

unit savings

cost of transport by truck: 14.27 CFAF/TKmcost of transport by rail: 9.01 CFAF/TKm

75.26 CFAF/TKm

Total Savings

1978: 32.89 million CFAF1979: 58.33 million CFAF

1/ o.36 x 14É/0.55 x 16

hNNEX 9Page 9

Cost/Benefit Analysis

(CFAF millions)Benefit Benefit Benefit Total

Cost ()(b) (c) Benefits

1975 1 -

1976 - 1.5 6.9 _ 8.41977 - 1.6 7.6 - 9.21978 _ 1.7 8.2 32.9 42.8-1979 - 1.8 9.4 58.3 69.5

1980 - 2.0 9.9 - 11.9

1981-93 - 2.2 10.9 _ 13.1

The rate of return on the investment in a new crane will be about 24h%o.

C. Log Cars (Flat-Cars)

If railway capacity becomes inadequate for timber transport,two alternative solutions exist:

(1) troasportation by road; or(2) no production at all.

The cgst of road transport has been estimated by consultantsOCCR/Sofrerail?J in their recent study of realignment of the Douala-Yaounde line. They consider that on a poor road the cost would be asfollows:

Type of Percentage Weighted cost with Weighted cost with

truck Unit Cost of traffic loan factor of 60%6 load factor of 80%9(CFAF/TKm) (CFAF/TKm) (CFAF/TKm)

800 kg 87.86 5°b 7.32 _4 T 29.02 25 6 12.09 10.882/8 T 21.02 70 $ 24.752 18.39

73.94 29.27

However, this means an average transport cost of about 12,000 CFAF/ton

which would make any forest exploitation unprofitable, except for high

values species.

If the roads were improved, costs would be substantially lower,and the consultants have produced the folloving estimates.

Type of Percentage Weighted cost with

truick Unit Cost of traffic load factor of 80%(CFAF/TKm) (CFAF/TKm)

12 T 12.57 200 3.1424 T 8.00 20e, 1.98

28 T 7.41 60°h 5.5510.67

1/ At 1973 prices.2/ OCCJ/Sofrerail: Etude de l'Aménagement de' la Ligne Centrale Douala-

Yaounde (March 1973), pp. 129 and 142./ Assume % in traffic is 3096%

ÂNNEI 9Page 10

Allowing for the costs per freight ton-km of road improvement, this increasesto approximately 14.7 CFAI/ton-km. This would represent an average coet ofabout 5,850 CFAF/ton which would make timber production competitive.

Theoretically speaking, two different sets of figures shouldbe used in the cost/benefit analysis:

(1) the value added lost during the construction period ofa road axis for heavy traffic; and

(2) the differences in transport coste following such con-struction.

It is extremely difficult to assesa the precise amount of value-added which should be used both for timber and for other cargo, since therehas been no recent study which can provide a basis for this assessment. ASeptember 1972 study by the Bank's Permanent Mission in Western Africa ar-rived at a value-added percentage of about 30%9 on low value species (e. g.ayous), making a total of about 3,000-4,000 CFAF/ton.

In this analysis, however, only the comparative costs by railand by truck on a high-standard road were considered, thoereby reaching arate of return which can be considered au a minimum. The coste includenot only the investment cost of flat cars, but also the cost of the lo-comotives needed to pull the trains.

unit cost of freight cars 10,000,000 CFAFunit cost of locomotives 190,000,000 CFAF

A locomotive travels 100,000 km a year. Unit cost of a shunt-ing locomotive is 60,000,000 CFAF.

A freight car will do 2 x 45 x 400 - 36,000 km; consideringtrains of 25 flat cars, one locomotive is needed for 100.000 x 25 - 69 wagons -34 wagons, as double traction is used. 36,000 2

If loge are transported by truck, transhipment charges are avoided;these have been estimated at 700 CFAF/ton for a total of x 700 = 1,1400CFAF/ton. The benefit per ton-km is equal to 14.7 - 9.0 5.7 CFAF/ton-km.This gives a net annual benefit per fully utilized car of about 2.5 million CFAF.Because the total number of flat-cars are not immediately required in 1976,the full benefit does not appear until 1978.

Nurber of Total NetInvestment Co0t Cars Required Benefit(CFAF million) (CFAF million)

1976 1,920 71 1751977 0 95 2361978 O 100 250

1979-94 0 100 2501995 - 370 100 250

Regifercam's Annual Report and data.

ANNEX 9Page 11

Locoiotives are assumed to have a life of 20 years, and freight cars a

life of 30 years (therefore residual value).

The rate of return on these cars is about 1390, which is acceptablein view of the conservative assumption being made that there will be noreturn load on the cars. Some construction material traffic may well be

carried.

À sensitivity analysis was carried out to take account of timbertraffic growing at only the long-term (1953-68) average rate. This re-duoed the rate of return to 10*6 which is still acceptable.

D. Box Cars

The same type of analysis is applicable as for log cars. Theoptimum truck size for general cargo traffic is probably lower than forlog cars, at about 12 tons. However, the load factor should be greater,at 80/% , giving a unit cost of 15.7 CFAF/ton-km. Also, the transhipmentcosts are lower, as most trains come directly into the port area. Anaverage of 1-1/2 movements instead of 2 has been employed giving a costper Journey of 1,050 CFAF. The cost of necessary motive power is alsoincluded.

There are other factors which make the annual benefit per boxear less than for log cars, i.e. lower capacity and seasonal variance inusage. The net effect is that the annual benefit per car is about 1.9million CFAF.

The motive power required is equivalent to about half a loco-motivels annual output. Ail the boxcars are not required in 1976, butthey will be tully utilized in the following year.

Investment Cost Number of Cars Total Net Benefit(CFAF million) Required (CFAF million)

1976 270 15 351977 25 471978-94 - 25 47

1995 -50 25 47

The rate of return on these cars is 1996 which in satisfactory. A sensi-tivity analysis assuming the traffic growth rate to be 20%» lover stillgives an acceptable rate of return of 140h.

ANNEX 9Page 12

E. Freight-Car Bogies

Therefore, the economic Justification for purchase of the 100bogies in the project depends upon whether this is the least cost solutionto the problem of.providing freight-carrying capacity. The cost of recon-ditioning is about $9,400 per car (bogies $7,050 and labor $2,350). Sincenew cars would cost about $14,000 for box cars and $40,000 for flat cars,rehabilitation of existing cars is therefore the least cost solution.

F. Radio-link and Single Turnouts

These items are considered necessary to ensure the operationalimprovemonts forecast. The radio-link will supplement the existing commu-nications system; the turnouts will improve operational flextbility. Asthey account in total for only 40h of project costs, no separate rate ofreturn calculations w,ere possible.

G. Total ProJect

Tihe rate of return on the total project, excluding the Japoma Bridgeand the bogies, and including the cost of consulting services, in juat under 13%.

ANNEX 10Page 1

CAMEROON

SECOND RAILWAY PROJECT

Economic Justification for Continued Operation of Regifercam

The economie justification for maintaining the Cameroon railwaysystem in operation, if necessary through subsidies or similar means, is

that for over 600/o of forecast freight traffic, the railway is clearly the

least-cost transport form. For the remaining traffic, the railway'seconomic advantage is very sensitive to the standard of improvement ofthe Edea-Yaounde road, the size of vehicle which could consequently operate

on it, and Government policy with respect to charges for road use. The

following c Jculations are based on the consultants' analysis of road andrail costs.îY

Situation 1 - No road improvement

The maximum vehicle capacity would remain 4 tons in the wet season

and 10 tons in the dry season, these being the maximum loads sustainablewithout very rapid deterioration of the road. The weighted average cost per

ton-km of such road transport is estimated in the range of 26-35 CFAF, depend-ing on the load co-efficient (from 80 to 600co respectively). Short-run

marginal rail costs are estimated as 9 CFAF/ton-km; making allowance for

attribution of project and modal transfer costs to the incremental traffic

increases this cost to about 12 CFAF, thus leaving the railway the least-cost

transport mode by a substantial margin.

Situation 2 - Roadimproved to heavy-duty standard

If this occurred, much larger vehicles could be carried. Dependingupon the "mix" of vehicle sizes and the load co-efficient, vehicle costscould be as low as Il COAF/ton-km, ranging up to about 17 CFAF/ton-km.However, attribution of the cost of constructing and maintaining the road to

the incremental traffic adds about 5 CFAF/ton-km to the cost of road transport.Thus, if these road costs are included in the overall cost of the alternative

solution of constructing a heavy-duty road, rail transport is still the least-

cost solution, though by a smaller margin than in Situation 1 above. The factthat the capacity of the road would be substantially in excess of the demands

placed upon it by the incremental traffic is irrelevant.

Rail Road(with project investment) (Upgraded to heavy duty)

Costs per ton-km (C?ÂF) forincremental traffic 9 + 3 - 12 min. il + 5 = 16

max. 17 + 5 = 22

1 OCCRVSofrerail: Etude de l'Ameiagement de la Ligne Centrale Douala-Yaoundé(March 1973), pp. 129 and 142.

ANNEI 10Page 2

The more general characteristics of the main commodity groups transportedare described below:

Timber

The existing road Douala-Yaoundé is inadequate to carry vehiclesheavier than 8 tons on average. Although transfer to rail involves costswhich do not apply to direct road vehicle services, the substantially greaterunit costs per ton-km by road (long-run marginal costs) make these servicestheoretically uncompetitive beyond a distance of about 50 km. However, ifthe Edea-Yaoundé road is improved to heavy-duty standard, the possible trucksize increases substantially. For this reason, competition from road ser-vices is very sensitive to three factors: size of vehicle, utilizationfactor, and extent of road vehicle contribution to road costs.

At one extreme, with a 28-ton vehicle fully utilized and making nocontribution to road costs, road traffic can undercut rail at all distances(within the limits of suitable road conditions). At the other extreme, withonly 600o utilization and making full contribution to road capital costs at10//o and also to maintenance costs, the competitive limit is about 150 km.The most reasonable assumption is that 800/o utilization is achieved, and thatroad charges reflMect only 500/o of total costs (the maintenance element). Onthat basis, the break-even with 28-ton road vehicles occurs at 550 km. How-ever, as the paved road system north of Yaoundé extends only for 170 km toNonga Eboko, it follows that heavy road vehicles can compete only over 470 kmof the railway route from Douala.

Only a small proportion of 1972/73 timber traffic originated beyond470 km. However, between one-third and one-half of the 1979/80 forecastvolume is expected to pass through Belabo (600 km). This would not be subjectto serious competition, and consequently would continue to require rail serviceto Douala. The remainder would be subject to competition, but as the mainrailway timber loading point at Eseka is some distance from the,road, compe-tition would be constrained. Also, it is considered that only 70/o of roadvehicles for timber traffic would be of 28-ton capacity, thus 3096 would beonly marginally competitive. In view of this, the road is considered competi-tive for only half this traffic (or one-third of total forecast timber traffic),and the railwey is therefore not necessarily the least cost mode.

Cotton Traffic from North Cameroon and Transit Traffic from Chad

Road competition for this traffic between N'Gaoundere and Doualsis limited by four factors: (i) the gravel road north of Nanga Eboko isnot suitable for vehicles heavier than 8 tons; (ii) the traffic volume isin any case insufficient to justify large vehicles; (iii) it is doubtfulif the expense is worthwhile of consolidating traffic at Yaounde where,if the road vere improved, larger vehicles vould be available for the re-maining journey to Douala; and (iv) the road between N'Gaoundere andYaounde is approxiuately 1-1/2 times the distance by rail (880 km against600 km). Thus rall transport is clearly the least-co8t mode for this traf-fic.

ANNEX 10Page 3

Petroleua

The existing traffic flows between Douala and Yaounde, fromwhere it îs distributed by road. It is thus uni-directional traffic, andeven if 28-ton road vehicles were employed, they would be unable toachieve more than 5o°/o utilization. The savings that would accrue tovehicles in avoiding double-tracking to areas between Yaounde and Doualaare insignificant; only 20% of petroleu discharged at Yaounde is thusaffected. As 40-ton tank-wagons are employed on the railway, and theproductivity (in ton-km per annum) of petroleum wagons is more than threetimes the average for general cargo, the marginal costs of operation arealmost certainly lower than average. This traffic is therefore unlikelyto be subject to significant road competition, even if the road is im-proved.

Alumina

Alucam raw material (alunmina) traffie is carried on the company'swagons which have a high productivity of about 700,000 ton-km per annum.As these wagons operate in block trains between Douala and the factory atEdea,and as the wagon capital cost is sunk, there is no likelihood of sub-stitution of road for rail transport, either wlth or without road improve-ment.

Other Traffic

Traffic from the above commodity groups accounts for three-quarters of forecast total traffic (in ton-km) in 1979/80 (about 609b in1972/73). The remaining traffic comprises miscellaneous imports, and ex-ports of cocoa and small volume production. These commodity groups arecarried over average distances of about 300 km, largely to and from theYaounde area; they are therefore sensitive to road competition if theroad is improved. However, the volumes involved are unlikely to be suf-ficiently high to justify the use of very large trucks - probably 12-tonmaximum. Thus road competition on the basis of identified costs wouldbe limited to 120 to 160 km (see line j of Graph attached). However,identified costs probably do not fully reflect costs of delay, which isusually greater for rail than for road transport. Thus a longer break-even distance for these high-value commodities is likely, and this leadsto the break-even probably being about 240 km (based upon European ex-perience). Applied to Cameroon, this would indicate that for about 80%6of Douala-Yaounde "other traffic", the railway would not provide a signi-ficant saving in transport costs.

The table below shows the composition of railway traffic bycomodity, for which the railway is clearly the least cost transport mode.

ANNEX 10Page 4

PercentaRe of Railway Freight Traffic by Columodity

Edea-Yaounde Chad androad conditions Timber Petroleum Cotton Alucam Other TOTAL

1972/73 Existing 83 100 100 100 82 88

1979/80 Existing 89 100 100 100 80 90

1979/80 Improved 65 100 100 100 20 64

Trafffic tr Commodity as_Percenta&e of Total

1972/73 29 13 14 3 41 100

1979/80 46 il 16 2 25 100

ANWEX 10Page c

Rail/Road Long-Run Variable Cost Comparisons-/

i (1) Rail with 2 transfer ope4ations (timber traffic) l

j, (2) , "'~ " . .1 ,n _.(general var.o) -

- (3) jRoad unimproved 8-ton tr4ck

k - Q.) Road nmproved 12-ton tru.k, _,

(5) Road improved 28 -ton truck (+12 ton trucklbeyond 470 km)

10000 `.

9000 -- --- - . . , ` (t5)/goo

7000 / .' 4, ~~~~~(3)

6000

2000

1000

100 200 300 400 5o0 600 700 800 900

Distance (Ian)

1/ Based upon OCCR Report (Sept. 1973) and Regifercam data

CAMEROON RAILWAYS ORGANIZATION

| BOAROD

GENERAL MANAE

DIRECTOR D EPUTY DEPUTYGENERAL MANAGER GENEJRAL AAE

ADMINISTRATION AND FINANCE STU|IES, PLANNING, TRACK AND BUILDINGSCrONUTOROL 0F BUD1GET

<41 1 , ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~OI , SFESTO|CK T |POWR COMMUNICATIONS T UD

WodId Bank - 8796

CAMEROON RAILWAYSTRACK CHARACTERISTICS

KILOMETERS RAILS KG SLEEPERS N KOF SLOEPERSIKm. WELOING BALLAST NGAOUNDERE K- 935WE LDIN 3

DOUALA-BELABO

0 Io 104 30 SIooI 30 Kg 1750 ConO,nuo, 5000

104 go .49250 36 Concrete Rs 1357 " 700

g4920O gO 17370 35 Conrege SIL 1357 700

173500 1Sd 36 Stee 3BKg 100 700

tS5 go 2 3 30 SmO 20 KgS 16500 400 NGAOUNDAL K.. 798

218 go 248200 76 CooegSL 1357 700

243200 go 202 26 S-eel 26 Kg. 100 700

202 o. 266500 36 S-gî 26 Kg. 15000 700

266500 to 276 36 Conoge-e RS 1357 700

276 go 2S3 26 StO 26Kg 1500 Not 040drd 5 400

280 g 300 20 Ogeo 26 Kg. 1500 ogoog 70

306 go 491 30 Steel 30 Kg. 1500 9000

497 îo 703 30 Wood 1500 42 A. -ogO î02

900 MBITOM Ko. 706

700 o 19 35 30 Steel 30 Kg. 1500 Co9t,ggous 000

OTELE-MBALMAYOt

o go 357°0 26 Sel 26 Kg. -1500 No, ggOIO 40u

DOUALA-NKONGSAMBA

0 go 1 3 30 SO 3 Kg t1500 W.Id 500

o o L 30 ceel30 Kg. 100 Wel40 500

11 g I23200 20 Sgeeî 27.8 Kg. 1500 Nog oe0d.d 300

134300 g 3670

27.S S-e 27. Kg. 15 300 BELABO Km. 601

13d700 oo 160 20 S-el 27.8 Kg. 1500 300

MBANGA-KUMBA

o go 97 27. OgelI 3708 Kg. 0000 4Dm8. ,J 700A

NANGA.060KO Km. 477

NKONGSAMBA Km. 160

M8BANIJOCK Km. 406

.LEGEND

NLOHE Km. 115 20 Kg. Germg 1800 T/km.

30 Kg. Standard 1500 T/km. St-el

KUMBA Km. 2R Renewal of 143 Km OBALA Km 344,500 30 Kg. Standard 1750 T/ko.

g 0-d 1978/O 27,8 Kg. Germ- 150û T/km.

M6ANGA Ko. 0 26 Kg, Frc 1500 T/km.

65 _ ~ \ X nYAOUNDE K.. 308I | - \AOIJNI36 Km.i,7J7! 3087EtKsfflr!dNf:>r ~36 Kg. R. En EoblocSle,e 1357 T/ko,

Reo-WooI of 42 Km unde 36 Kg Rails oo36 Kg0 Slegpers 1560 T/ko.

\ | MAKAK < Bank's 2od railway proiect= 36 Kg. Rol, on 26 Kg. Slegpers 1500 T/km.

/ Km. ~~~~~~~~~~~~~~~~218.5û002/0 tL EDEA Km. 84 . .: MBALMAYO Km 37 36 Kg. Stagdard on mood Sleepe 1500 T/km.

BONABERI K 1L

m. .1 f 52.5 K. -d., of f804 Km fiESE K Ad

Renemal of 52.5 Ko, under from fdc Wo,;1 Oa., 7806 (2R)

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