Report No. 743-TA FILE COPYAppraisal ofMwanza Textile ProjectTanzaniaMay 5, 1975

Industrial Projects Department

Not for Public Use

Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for official use only by the Bank Group. It may notbe published, quoted or cited without Bank Group authorization. The Bank Group does

not accept responsibility for the accuracy or completeness of the report.

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CURRINCY EQUIVALENT WEIGHTS AND MEASURES

All weights and measures are in metric units

US$ 1 - Shillings (TS) 7.1 1 Metric Ton (t) = 1,000 kilograms (kg)Shilling (TS) 1 = US$ 0.14 1 Metric Ton (t) = 2,204.6 PoundsShilling (TS) 1 Kilometer (km) - 0.62 Miles

1,000 = US$140.00 1 Hectare (ha) = 2.47 AcresUS$ 1 - Kuwait Dinar 0.30 1 Bale = 187 kg

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

Government Government of TanzaniaMTL, Company Mwanza Textiles Limited, MwanzaKuwait Fund, KF Kuwait Fund for Arab Economic Development, KuwaitTexco National Textile Corporation, Dar-es-SalaamNatex National Textile Industries Corporation Ltd.Devplan Ministry of Economic Affairs and Development PlanmingSunguratex Tanganyika Dying and Weaving Mills Ltd., Dar-es-SalaamKiltex Kilimanjiaro Textile Corporation Ltd.TANESCO Tanzania Electric Supply CompanyNDC National Development CorporationTCA Tanzania Cotton AuthorityCIF Cost, Insurance and FreightFOB Free on Boardcc Cotton Countm. meter

FISCAL YEAR

Government July 1 - June 30Texco and MTL January 1 - December 31

TANZANIA

APPRAISAL OF

MWANZA TEXTILE PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ... ......... .... ...... * i-ii

I. IN4TRODUCTION ...............,.,,...... ...........

II. TEXTILE INDUSTRY AND THE COMPANY (MTL) .............. 2

A. Structure of the Textile Industry ... ,,.. 2B. Organization, Operations and Financial

Analysis of Texco .................... ..... 2C. MTL-and Its Operations .. ...... ............... . 5D. Financial Analysis of Existing MTL - Past

and Future . ...... I....... ... * 5

III. MARKET AND MARKETING ........ ....................... 7

A. Past and Present Textile Situation in Tanzania . 7B. Woven Textile Fabrics Forecast for Tanzania .... 9C. Marketing of Textiles in Tanzania .............. 12

IV. THE PROJECT ................. .. 14

A. Project Location and Scope . ................... 14B. Machinery and Buildings ..... ................... 15C. Raw Materials and Utilities ................. ... 15D. Ecological Considerations and Occupational

Health ................... , ... ,. 16,E. Implementation, Staffing and Training ....... ... 16

V. CAPITAL COSTS AND FINANCING PLAN .................... 18

A. Capital Costs ....... ........................... 18B. Financing Plan ....... .......................... 19C. Allocation of Bank Loan, Procurement

and Disbursements .............. ............ . 20

This report has been--prepared by Manfred Ferber and Aleksander Sandig ofthe Industrial Projects Department.

TABLE OF CONTENTS (Continued)

Page No.

VI. FINANCIAL ANALYSIS .................................... 22

A. Revenues and Operating Costs ..... ................ 22B. Financial Projections ............................ 22C. Incremental Financial Return and Major Risks ..... 24D. Auditing ......................................... 25

VII. ECONOMIC ANALYSIS .......... .......................... 25

A. Raw Materials and Textile Prices . ................ 25B. Economic Return .................................. 26

VIII. AGREEMENTS ...................... ...................... 27

ANNEXES

1 Glossary of Technical Terms

2-1 Texco Board Members2-2 Texco Subsidiary and Associate Companies2-3 Texco Financial Situation of Subsidiary and Associate Companies2-4 MTL Board Members2-5 MTL Organization Chart2-6 MTL Income Statements - Historical2-7 MTL Cash Flow Statements - Historical2-8 MTL Balance Sheets - Historical2-9 MTL Income Statements - Projections2-10 MTL Fund Flow Statements - Projections2-11 MTL Balance Sheets - Projections

3-1 Historical Woven Fabrics Production, Consumption, Imports andExports

3-2 Per Capita Fiber Consumption of Selected Countries3-3 Projected Woven Fabrics Production, Consumption, Imports

and Exports3-4 Projected Cotton Fabric Production, Consumption, Imports

and Exports3-5 Projected Requirements of Fabrics other than Pure Cotton Fabrics3-6 Trading Activities of Natex3-7 Maximum Retail Prices of Typical Textile Fabrics3-8 Price Structure of Typical Printed Fabrics3-9 Ex-Factory Selling Prices of Woven Fabrics3-10 Imports of Fabrict and Textiles by Country of Origin3-11 Export Prospects of Textile Industry of Tanzania

TABLE OF CONTENTS (Continued)

4-1 List of Machinery4-2 Implementation Schedule4-3 Terms of Reference for Technical Advisor for Texco and MTL

5-1 Capital Cost Estimates5-2 Working Capital Estimates5-3 Phasing of Expenditures

6-1 Revenues and Operating Costs Before and After Expansion6-2 Incremental Projected Income Statements6-3 Incremental Projected Fund Flow Statements6-4 Incremental Projected Balance Sheets Statements6-5 Projected Income Statements Including Expansion6-6 Projected Fund Flow Statements Including Expansion6-7 Projected Balance Sheets Statements Including Expansion6-8 Financial Rate of Return Calculations

7-1 Operating Costs and Revenues Assumptions for Financial andEconomic Analysis

7-2 Economic Rate of Return Calculations7-3 Sensitivity of Economic Rate of Return to Different Assumptions

MAP

Tanzania - Location of Textile Mills (IBRD Map 11282)

TANZANIA

APPRAISAL OF MWANZA TEXTILE PROJECT

SUMMARY AND CONCLUSIONS

i. This report appraises a project of Mwanza Textiles Limited (MTL) inMwanza, Tanzania to expand the Company's production from about 23 to 43 mil-lion meters of printed cotton fabrics per year to substitute for imports andmeet growing local demand. The project would benefit from existing manage-ment, skilled labor, and infrastructure and would use locally-grown cottonas principal raw material, most of which is presently exported; it wouldalso provide employment for about 1,200 persons. The Company is owned (40%)by the National Textile Corporation (Texco) which is responsible for allproduction, and marketing of textiles in Tanzania as well as the country'stextile imports and exports; a local agricultural cooperative (40%); and theFrench Sodefra group (20%) which assisted in the implementation of the Com-pany's original plant in the mid-1960's and its subsequent operations.

ii. Texco was created in early 1974 as a special parastatal organiza-tion. It is organized as a holding company and basically functions as aliaison body between the Government and individual textile companies. Texcoowns 100% of the shares in three of its eight associated and subsidiary com-panies, of which three still have some foreign minority shareholdings. Ex-cept for some small garment industries, all textile activities in Tanzaniaare within the Texco group and controlled by it.

iii. Total financing required for the project would amount to US$44.3million (Shillings 314 million), of which US$30.0 million is expected to berequired in foreign exchange to be met in equal parts by two loans of US$15million each from the Kuwait Fund for Arab Economic Development (KuwaitFund) and the Bank. Both loans would finance separate lists of goods andservices in accordance with the procurement guidelines of the two lendinginstitutions. The Bank loan would be made to the Government for 22 years,at an interest rate of 8.5% per annum and would be onlent to the Companyfor 13 years, including 4-1/2 years of grace, at 10% per year. The KuwaitFund loan would also be made to the Government for 22 years and at an in-terest rate 'of 4% per annum and be onlent on terms and conditions similarto the Bank loan. Local costs would be financed by the Company's internalcash generation and by the Government in the form of equity to Texco whichin turn would subscribe to new share capital in the Company, thereby in-creasing Texco's shareholding in MTL to 90%. The Government would alsocover any cost overrun.

iv. In addition to the proposed project and other small ongoing ex-pansions, the Government is considering another major textile project, tosubstitute for present imports of cotton/man-made fiber blend fabrics.Tanzania's cotton is ideally suited for the production of blend fabricsand the possibility of'exporting to other countries merits also consi-deration. To investigate the feasibility of this project includinga review of the export marketing possibilities of Tanzanian madetextiles, the Government intends to undertake a study of which theestimated foreign exchange cost has been included in the proposed Bankloan.

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v. The existing mill of MTL started operations in 1968. Its perfor-

mance has steadily been improving and it is now operating close to capacity;its present employment is about 2,400. Operations of the existing mill havebeen supported by expatriate management assistance from Textilconsult S.p.A.(Italy). Textilconsult's contract is now, however, being phased out so thatsince December 1974, Saigol Brothers Ltd (Pakistan), who also prepared thefeasibility study for the project, has been providing some technical manage-ment staff. Saigol is to act as the Engineering Company for the project withfull responsibility for project management, engineering, procurement, con-struction, erection, start-up, initial operations, personnel training andother such services as necessary to successfully implement and operate theproject.

vi. Saigol Brothers is one of the largest manufacturers and exportersof textiles in Pakistan, but has had no actual experience in building ormanaging textile plants outside of Pakistan. The Bank's review assistedby an independent textile consultant has indicated, however, that Saigolis fully qualified for the assignment, provided some limited assistance insuch areas as preparation of detailed equipment specifications and produc-tion planning systems will be added. This will be done through a TechnicalAdvisor, the Gherzi Textil Organisation of Switzerland, which will alsoassist the Company in the supervision and control of all project activities,from implementation through initial operations. While these arrangementsare satisfactory, the successful execution of the project will still largelydepend on the effective cooperation between the Company and Texco on the onehand and Saigol and Gherzi on the other.

vii. MTL was initially financed with a high loan portion and despitesatisfactory profits since 1972, the Company's debt service coverage andliquidity have remained low; furthermore, heavy loan repayments are stilldue through 1977. However, the project will be soundly financed so thatthe Company will have a satisfactory capital structure upon project com-pletion and should be able to service its debt comfortably. Furthermore,to maintain the Company's sound financial position, the Government willensure that MTL --on the basis of efficient operations--obtains sufficientrevenues to earn a reasonable return on its invested capital.

viii. The project would yield an attractive incremental financial returnof about 19% after taxes, and an economic return of 16% using internationalprices for tradable inputs and outputs. The project would provide substan-tial additional employment and training. While technical and commercialrisks are minor because of the standard plant design and a product thatwould largely replace present imports, a potential management and generaladministrative risk exists and can only be avoided if, as mentioned previ-ously, the local and expatriate expertise provided for in the project canbe effectively meshed.

ix. Based on the agreements reached with the Government, Texco and MTLas summarized at the end of this report, the project is suitable for a Bankloan of US$15 million.

I. INTRODUCTION

1.01 The Government of Tanzania has requested Bank financing of US$15.0million to cover part of the foreign exchange expenditures for a project thatis to cost about Shillings 314 million (US$44 million) and expand the annualproduction of Mwanza Textiles Ltd. (MTL) at Mwanza (Map IBRD 11282) by 20million meters (m.) of fabrics to 43 million m. per year 1/ based on locallyproduced cotton. The remaining portion of the foreign exchange required(US$15 million) would be provided by the Kuwait Fund for Arab Economic De-velopment. Local financing would be made available in the form of equity bythe National Textile Corporation (Texco) which is the parastatal organizationresponsible for the textile sector and which is fully owned by the Government.The Bank loan and Kuwait Fund financing would be extended to the Governmentand onlent to MTL. The project is scheduled to start production in 1978 insubstitution for textile imports and create additional direct employment forabout 1,200 people.

1.02 MTL is one of the best operated textile mills in Tanzania withsatisfactory operating performance and relatively high product quality.As part of Tanzania's program to expand textile production in the country,to reduce imports and to increase the local processing share of its cotton,the MTL project is of high priority. The project would increase Tanzania'stextile production capacity to about 120 million m. per year and wouldmainly produce printed woven cotton fabrics in high demand in Tanzania.The project's output is expected to satisfy domestic market needs for wovencotton fabrics until the early 1980's, when additional local production ca-pacity will be needed.

1.03 The project was identified in April/May 1974 out of three textileprojects for which feasibility studies had been submitted to the Bank andpre-appraised in August/September 1974. An appraisal mission, consisting ofMessrs M. Ferber (Chief) and A. Sandig of the Industrial Projects Departmentand Mr. B. Ahmad of the East Africa Region was carried out in November 1974.Subsequently, discussions with the Government and Texco took place in January1975.

1/ A glossary of technical terms commonly used in the textile industryis attached as Annex 1.

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II. TEXTILE INDUSTRY AND THE COMPANY (MTL)

A. Structure of the Textile Industry

2.01 In accordance with general Government policy, all textile companieshave over the past few years been gradually transferred into partial or fullstate ownership. Most of them were first incorporated into the National De-velopment Corporation (NDC) as either subsidiary or associate companies andsubsequently, in January 1974, all textile activities were entrusted to Texco.NDC is a wholly-owned Government corporation and is Tanzania's principal in-strument for economic expansion and productive investments. Texco was createdas a special parastatal organization in view of the importance given by theGovernment to the textile industry. Part of the shares of two major textilecompanies, previously majority-owned by private foreign groups, were purchasedby NDC and Texco against cash and long-term loans following agreements reach-ed with these groups in 1972 and 1974. Texco which now controls managementand operations of these companies does not intend to increase its sharehold-ings in them further.

B. Organization, Operations and Financial Analysis of Texco

1. Organization

2.02 Texco, which started its activities in January 1974, is responsi-ble for all production and marketing in Tanzania and the country's textileimports and exports. Its authorized share capital is Shillings 500 million(US$70 million) of which Shillings 70 million is paid in, fully owned bythe Government. Texco's Board of Directors is chaired by the Minister ofCommerce and Industry and consists of nine members including the ManagingDirector of Texco (Annex 2-1).

2.03 Texco is organized as a holding company with a staff of 30 and anoperating budget of about Shillings 4 million in 1974. At present, it func-tions as a liaison body between the Government and the mill managements andis mainly focusing on operations and pricing policy, expansion programs, aswell as the coordination of local and foreign financing. Texco holds sharesin eight companies, ranging from a 33% to 100% ownership. The holdings areshown in detail in Annex 2-2 and are summarized below:

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Texco Subsidiary and Associate Companies

Estimated1974 Produc-

Share Capital % of Shares tion (in millionCompany (in million shillings) Owned by Texco m. of fabrics /1

1. National Textile In-dustries Corp. Ltd.(Natex) 10 100 Marketing company

2. Friendship Textile MillLtd. 30 100 26

3. Kilimanjaro Textile Corp.(Kiltex) 26.4 57 21

4. Mwanza Textiles Ltd. 20 40 235. Tanganyika Dyeing and

Weaving Mills Ltd. 20 51 136. Blankets Manufacturers Ltd. 2 33 1,500 blankets7. East African Kenaf

Industries Ltd. 23 100 2,700 kenaf bags8. Tanzania Bag Corp. Ltd. 7.5 60 3,600 sisal bags

/1 Unless otherwise stated.

2.04 As the above table indicates, Texco's holdings comprise four textilemanufacturing companies (with'five plants), two agricultural bag making com-panies and one blanket manufacturer as well as the National Textile Indus-tries Corporation Ltd. (Natex) which is responsible for marketing textilesin Tanzania as well as their import and exports. Except for small garmentindustries, all the country's textile activities are therefore handled bythe Texco group.

2. Operations

2.05 The operational performance of the textile mills has improvedsteadily over recent years and further production increases from existingcapacity are expected (para. 3.04). Several mills have recently experiencedsome water (Dar-es-Salaam) and power (Mwanza) problems, but corrective stepshave been taken to overcome these (para. 4.06). Except for the Friendshipmill, all plants employ expatriates; in some instances they have full manage-ment responsibility and in others they are limited to filling some managementand supervisory positions in operations and accounting. The manpower situa-tion on the workers level is reasonably satisfactory, although all mills areheavily overstaffed. While gradual replacement of expatriates is envisaged,the scarcity of available local personnel can only be alleviated over time(para. 4.12). As mentioned previously, cotton, the major raw material ofTanzania's textile mills, is produced locally. Of an annual production ofabout 400,000 bales, about 15% is consumed locally by the textile mills andthe rest is exported and constitutes Tanzania's most valuable single crop

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and largest export earner. The Tanzanian Cotton Authority, in coordinationwith farmers' cooperatives, is responsible for production, ginning and mar-keting of cotton. In January 1974, IDA approved a credit of US$17.5 millionto help finance a cotton development project of the Tanzania Cotton Authorityin the Geita District of the Mwanza Region.

2.06 All textile mills base their production on requests from Natex anddeliver their products to Natex against cash payments. In view of the peren-nial textile shortage in Tanzania, this marketing system appears to have beenworking satisfactorily, although some reorientation will be needed as textiledemand and supply in the country become more balanced (para. 3.11).

3. Financial Analysis

2.07 Although Texco directs and influences all major decisions of itseight holdings, it does not prepare consolidated financial statements (two ofthe companies are only minority owned). Summarized financial statements onpast operations and projected debt service payments of each of the holdingsare shown in Annex 2-3. Their combined sales in 1973 amounted to Shillings358 million (US$50 million), not counting Shillings 218 million (US$31 mil-lion) of sales resulting from imported textiles and garments. During thesame year total net income before taxes was Shillings 55.5 million (comparedto 25.4 million in 1972) and net income after taxes was Shillings 28.1 mil-lion (17.4 million in 1972), corresponding to a 17% and 14% return on equityin 1973 and 1972 respectively. Earnings in 1974 have reportedly been main-tained at the 1973 level and are expected to rise in the future as produc-tivity increases and benefits from ongoing modernizations are realized (para.3.05). Considering Texco as a whole, the financial performance can be con-sidered as satisfactory except for the East-African Kenaf Industries, Ltd.which has lost half of its equity (Shillings 23 million) in less than twoyears of operations because of problems in kenaf plantations. However, theresponsibility for kenaf plantations is to be transferred to the Ministryof Agriculture.

2.08 Texco's long-term liabilities are about Shillings 30 million,most of them owed to the Government in the form of loans. They were in-curred to allow Texco the purchase of shares in Kiltex (1972) and Tangan-yika Dyeing and Weaving Mills, Ltd. (1974). Since ongoing small expansionsin the Texco group would be financed by the respective Texco project entityitself through internal cash generation and Texco's equity contribution tothe proposed project would be obtained from the Government, operationalexpenditures, principally for staff and debt service payments, thus consti-tute the only projected financing needs of Texco. It is realistic to assumethat these modest requirements can be financed by dividend contributionsfrom Texco's subsidiary and associate companies. Finally, Texco has con-tingent liabilities for guaranteeing its companies' short term bank borrow-ings from the National Bank of Commerce. These guarantees amount to aboutShillings 330 million of which Shillings 287 million are for Natex and areexpected to terminate by June 30, 1975. Natex experienced cash constraints

in early 1974 after it imported a substantial amount of Chinese garmentswhich have been slow moving; therefore, Texco had to provide guarantees fortemporary increased bank borrowings until the stocks of Natex will have beenreduced.

C. MTL and its Operations

2.09 MTL was established as a limited company in 1966. Its sharecapital of Shillings 20 million (US$2.8 million) is owned by Texco (40%),the Nyanza Co-operative Union, Ltd. (40%) and the Amenital Holding Regis-tered Trust (20%). The Nyanza Co-operative Union, Ltd. is the local agri-cultural cooperative union and the Amenital Holding Registered Trust belongsto the French group Sodefra which through Textilconsult S.p.A (Italy) alsohas assisted in the implementation and operation of MTL (para. 2.10). TheBoard members of MTL, listed in Annex 2-4, are all delegates of the share-holders. The organization chart of the Company is shown in Annex 2-5.

2.10 The MTL mill is located about 8 km from Mwanza (Lake Victoria), thesecond most important city of Tanzania and has a capacity of about 25 millionm. per year of cotton fabrics. It was constructed with the help of Textil-consult and started operations in 1968. The output of the mill has increasedsteadily from 12.3 million m. in 1970 to 22.6 million m. in 1974 and is ex-pected to at least maintain this level in future years. Early in 1974, afourth shift was introduced and total employment at MTL is now about 2,400of which 26 are expatriates. While MTL's General Manager, Mr. I.H. Mtingwa,is a Tanzanian national, most of the other key operational and accountingpositions are filled by expatriates, Under a management agreement with Tex-tilconsult which will expire in 1976, Textilconsult has provided technicalassistance, management and procurement services for dyes, chemicals and spareparts against an annual management fee based on a fixum plus profits. Inaccordance with the contract and in view of the envisaged phase out of Textil-consult, Texco, in December 1974, asked Saigol Brothers Ltd. (Pakistan) toprovide technical, management and training assistance for MTL and at presentfive management positions at MTL have been filled with experienced Saigolpeople (para. 4.09).

2.11 As for the other textile mills in Tanzania, the marketing of MTL'soutput is now being handled by Natex, which is MTL's only customer. At pres-ent, MTL is mostly producing khanga and kitenge dress prints (55%), sheeting(15%), with twills, linen and poplin accounting for the rest. MTL's productsare valued for their quality in Tanzania and in Kenya which has been importinglimited amounts of MTL's khanga prints.

D. Financial Analysis of Existing MTL - Past and Future

2.12 Detailed historical and forecasted income, cash flow and balancesheet statements are shown in Annexes 2-6 to 2-11 and summarized below:

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Summary Financial Statements

For MTL without Expansion(in million shillings)

Fiscal Years A c t u a 1 - Forecast -

Ending December 31 1970 1971 1972 19 197(r 1975 1976 1977(Preli--minary)

Production in millionlinear meters 12.3 16.5 18.5 20.0 22 .61/ 22.7 22.7 22.7

Sales 39.3 57.3 64.4 72.8 104.1 107.6 107.6 107.6Direct Costs 24.4 38.6 40.2 44.3 68.8 66.7 66.7 66.7Operating Costs 9.9 11.1 11.6 11.4 20.8 18.9 18.4 18.4Depreciation 5.4 7.0 7.0 7.1 7.3 8.1 8.1 8.1Interest on LT-Debt 3.0 3.3 3.2 2.9 2.2 1.8 1.1 0.3Net Income before

Taxes for FY (3.4) (2.7) 2.h 7.1 5.1 12.1 13.3 14.1ExtraordinaryChargesz/ (1.0) (4.0) (1.0) (4.4) - - - -

Taxes - - - 5.4 6.0 6.3

Net Income (4.4) (6.7) 1.4 2.7 5.1 6.7 7.3 7.8

Cash Flow 4.0 3.6 11.6 12.7 14.6 22.0 22.5 22.5Debt Service 10.1 8.0 10.4 14.0 12.5 12.1 11.0 8.5

Current Assets 28.4 38.9 31.8 47.0 41.3 44.3 52.3 52.3Current Liabilities 36.8 52.1 46.0 58.7 52.6 52.7 55.5 45.8

Debt ServiceCoverage 3/ 0.4 0.5 1.1 0.9 1.2 1.8 2.0 2.6

Current Ratio 0.8 0.7 0.7 o.8 0.8 0.8 0.9 1.1Debt/Equity Ratio 77/23 84/16 79/21 71/29 55/45 33/67 12/88 -

1/ Major price increases for finished products and a price reduction for cotton tookplace in early 1974. Production includes finishing of 1.5 million meters ofpurchased gray fabrics.

2/ Mostly currency exchange rate fluctuations.3/ Including repayments due in 1971/1972 that were rescheduled to 1973-1978.

2.13 As mentioned previously MTL's operating performance has steadilyimproved. Capacity utilization in 1974 including finishing of 1.5 million m.of purchased gray fabrics was about 90% and some marginal increase in outputis expected in 1975. The production of 22.7 million m. forecast from 1975onwards is about 7% above the 1974 level in terms of spinning and weavingoutput. MTL's profit situation was unsatisfactory until 1972 mainly due topoor operating performance and heavy financial charges. With an initial high

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debt financing and a short repayment period, MTL's debt service in some yearshas amounted to more than half of its equity. As a result, repayments duein 1971/72 on its foreign loans from French banks had to be rescheduled to1973-1978.

2.14 The profit situation of MTL in 1974 was satisfactory and furtherimprovements are expected in future years because of the anticipated minorrise in output (para. 2.13) and the favorable effect of the 1974 pricechanges. Although heavy loan repayments are due through 1976, MTL's debtservice situation is therefore forecasted to become less critical from 1975onwards. Conversely, the debt/equity ratio is projected to improve rapidlyfrom 79/21 at the end of 1973 to zero in 1977 with the current ratio strength-ening moderately from 0.9 in 1973 to 1.1 in 1977. Although, based on the ex-pected earnings, MTL appears to be in a position to attain a sound financialstructure through internal resources within the forthcoming three years,MTL's present financial situation does not provide a satisfactory basis forincurring additional debt. Therefore, the Government and Texco have agreedto provide, as part of the Bank's involvement in the project, adequate newequity funds (para. 5.06).

III. MARKET AND MARKETING

A. Past and Present Textiles Situation in Tanzania

3.01 Production, consumption, imports and exports of woven textiles areshown in detail in Annex 3-1 and are summarized in the following table:

Historical Production, Consumption, Importsand Exports of Woven Fabrics in Tanzania

(in million meters)

LocalProduction Imports Exports Apparent Consumption

Year Cotton Cotton Other /1 Total Cotton Cotton Other /1 Total

1966 8.0 50.5 19.5 70.0 - 58.5 19.5 78.01967 10.0 30.0 12.0 42.0 - 40.0 12.0 52.01968 33.5 31.5 12.2 43.7 0.4 64.6 12.2 76.81969 53.3 31.6 7.3 38.9 0.5 84.4 7.3 91.71970 60.2 9.7 13.8 23.5 4.4 65.5 13.8 79.31971 66.2 4.9 9.2 14.1 4.7 66.4 9.2 75.31972 70.2 1.0 13.9 14.9 2.0 69.2 13.9 83.11973 74.0 12.9 21.3 34.2 1.8 85.1 21.3 106.41974 76.3 12.5 28.2 40.7 3.0 85.8 28.4 114.0

/1 Mainly wool, polyester and blends (as explained in Annex 1).

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In the past eight years the consumption of woven fabrics has been increasingat an annual rate of 4.1%, or 1.4% per capita annually. However, the pat-tern of this growth has been erratic reflecting year to year variations inthe level of import licenses granted due to foreign exchange constraints.Major local textile production commenced only in the mid-1960's and between1966 and 1974 the share of domestic fabrics in total consumption increasedfrom 10% to 67%. Nevertheless in 1974, Tanzania imported Shillings 312 (US$43)million worth of textiles, in the form of 12.5 million m. of cotton fabricsand 28.2 million m. of blended fabrics.

3.02 Textile consumption in Tanzania, even by the standards prevailingin other less developed countries in Africa, has remained low. In 1973, percapita consumption of woven fabrics was 7.6 meters (1.3) kg and includingimported textile articles (apparel anid home furnishing) about 1.7 kg percapita as compared with 1.9 kg average for all,of Africa (excluding SouthAfrica), 12.7 kg for Western Europe and 20.5 kg for North America (Annex 3-2).The popular African printed fabrics (khanga and kitenge) have frequently beenrestricted to a few sales outlets in the cities and at times they have notbeen available even at prices higher than those fixed by the Government.Potential demand in 1974 is estimated to be up to about 19 million m. higherthan the apparent 1974 consumption of 114 million m. of textile fabrics inthe above table.

3.03 Tanzania has essentially a tropical climate and cotton textileproducts meet most, though not all, of the consumer requirements. Woolsuiting fabrics still have to be imported and so have easy care polyester-cotton suiting and shirting materials. Due to foreign exchange constraintsthe Government in the past has restricted imports of blended man-made fab-rics. These restrictions are expected to be tightened and thus to resultin a relative increase in the consumption of locally made cotton goods.

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B. Woven Textile Fabrics Forecast for Tanzania

3.04 Supply/consumption projections for woven textile fabrics are shownin detail in Annexes 3-3, 3-4 and 3-5 and are summarized below:

Projected Woven Fabrics Production,Consumption, Imports and Exports in Tanzania

(in million meters)

Local Production - Consumption - DeficitCotton Other Total Cotton Other Total Cotton Other Total

1974 76 - 76 86 -28 114 10 28 381975 84 - 84 102 25 127 18 25 431976 92 1 93 106 27 133 14 26 401977 101 1 102 111 28 139 10 27 371978 111 1 112 116 28 144 5 27 321979 116 1 117 120 30 150 4 29 331980 121 1 122 126 31 157 5 30 351981 121 1 122 131 33 164 10 32 421982 121 1 122 137 34 171 16 33 49

/1 Including Mwanza expansion at 50, 75 and 90% capacity in 1978, 1979, and1980 respectively.

/2 1974 are actual figures. Thereafter an upward adjustment for total latentdemand of 10 million was made on which basis an annual growth rate of 4.3%has been applied. The projected consumption figures are averages of mini-mum and maximum expected consumption figures shown in Annexes 3-3 to 3-5.

/3 Part of the deficit of other fabrics consists of fabrics which are notlikely to be made in Tanzania for economic and technical reasons (Annexes3-3 to 3-5).

3.05 The production forecast for textile woven fabrics is based on thecapacity of the existing mills at reasonably attainable capacity utilizationplus minor expansions already in progress, and the proposed project. In1973, operating 825 shifts per annum, the industry produced 71.7 million m.(74 million m. including imported gray fabric) at a capacity utilizationestimated at 82%. As from January 1974 all mills have been put on 1050shifts per annum and by 1975, the production of the existing facilitiesshould increase to 84 million m. New looms to be installed in the Kiltex,Friendship and Sunguratex plants account for another 18 million m. bringingtotal production up to 102 million m. by 1977, i.e. before the MTL projectstarts operations. With the MTL expansion assumed to operate at 50, 75 and90% of capacity utilization in 1978, 1979, 1980 and thereafter respectively,the local production of woven fabrics is expected to reach 122 million m.per year by 1980.

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3.06 Given the erratic textile consumption pattern in the past and thelatent demand, historical consumption does not provide sufficient guidance forestimating future fabric consumption. Therefore, minimum and maximum demandprojections were prepared. These are shown in detail in Annexes 3-3, 3-4 and3-5 and the above table only gives demand averages. As the starting point forprojecting minimum demand, the actual 1974 textile consumption was used whilefor projecting the maximum demand, the 19 million m. of unsatisfied demand(para. 3.02) was added to the actual 1974 consumption. Using this minimumand maximum consumption base, demand projections for the period 1975-1982assume a 4.3% annual growth rate of which 2.8% is expected to derive frompopulation growth and the remaining 1.5% from increases in the per capitaconsumption. The income elasticity of demand for textiles implied in theseprojections is 1.0 which is higher than the 0.7 average for all developingcountries combined 1/ but lower, and considered by the Bank more realistic,than the 1.5 used by the local planners. 2/

3.07 There are no specific Government projections of textile demand inTanzania. In 1973, there was a reported Government policy to limit consumptionto 8 meters per capita and to export any remaining surplus. Were such policyapplied the consumption of woven textiles in Tanzania in 1982 would be 144million m. and thus considerably below the 171 million m. projected by theBank in para. 3.04 above. However, some unofficial forecasts prepared byconsultants within the Ministry of Economic Affairs and Development Plan-ning (Devplan) 2/ estimated the 1982 demand as high as 190 million m.,thereby assuming that the average income per capita between 1974 and 1982will grow at 2.8% per year.and per capita textile consumption by 4.2% peryear over the same period. Finally, Natex more recently 31 projected 1982domestic demand for cotton woven fabrics alone as high as 183 million m.

3.08 The average consumption figures forecasted by the Bank thereforeare between the various projections and take into account (1) a latentdemand of about 10 million m. at present and (2) a growth rate in futureconsumption that is based on the assumption of reasonable economic growthin Tanzania and the objective of the Government to improve the availabilityof textiles. Actual future consumption will largely depend on the overalleconomic development and the priority given to domestic consumption growthwhich is greatly influenced by the Government which controls wages, pricesas well as exports and imports of the textile and other consumer industries.

1/ IBRD Fiber Seminar, October 1973.

21 Development of the Textile Industry in Tanzania, Devplan, August 1973.Actual income elasticity of demand for textiles in Tanzania in theperiod 1966-1974 was 0.7.

3/ Brief on Demand Estimates for Cotton Woven Fabrics, Jan. 1975.

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3.09 A comparison of likely supply and demand projections indicates thatTanzania will practically achieve self-sufficiency in cotton textiles by 1978.Whether there will actually be a small deficit or a small exportable surplusin cotton fabrics will entirely depend on (1) the Government policy on texti-les and consumption in general, (2) the country's overall economic develop-ment and (3) the consumer's willingness to follow the Government policy ofsubstituting blended fabrics through cotton fabrics. After 1980 thereappears to be justification for additional cotton fabric production capac-ity.

3.10 Considering the blended fabric situation it appears that in thelonger run the import level of 28 million meters in 1974 may still furtherincrease despite the Government's policy of substituting it with cottonfabrics. Even after substracting about 15 million m. fabrics which foreconomic and technical reasons cannot yet be manufactured in Tanzania,there is expected to remain an annual import requirement of 10-15 millionm. of polyester-cotton blended suiting and shirting fabrics; it is expectedthat this type of material could be economically made in Tanzania by blend-ing local medium-long staple cotton with imported polyester staple. Therefore,the Government is considering as the next major textile project in Tanzaniaa blended fabric production facility. Such a project would not only reduceforeign exchange requirements for imports but might even create export pos-sibilities to other countries, since Tanzania's cotton is ideally suitedfor this type of fabric.

3.11 In order to further investigate the feasibility and eventuallyto advance the preparation of such a project, Texco will undertake a feasi-bility study for a blended fabric project in Tanzania. The study will becarried out by experienced textile consultants and will in particularinvestigate the requirements for successful project implementation, oper-ation and marketing. The estimated foreign exchange costs for the study(US$200,000) have been included in the proposed project and in the sug-gested Bank loan. As part of the study, the marketing investigation asbasis for any future textile project in Tanzania will also cover exportmarketing possibilities for blended as well as cotton fabrics made inTanzania to other countries. The Government has agreed to carry outsuch a study, and as part of the continuing dialogue on the developmentof the textile sector, exchange views with the Bank on the conclusionsof the study and apply these conclusions to any major expansion of thetextile industry. The consultants are to be appointed by no later thanDecember 1, 1975 and their appointment and terms of references to beacceptable to the Bank.

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C. Marketing of Textiles in Tanzania

1. Distribution

3.12 As mentioned previously, all yarns, fabrics, garments and other

textile articles whether domestically produced or imported are currentlybeing marketed and distributed by Natex the fully owned subsidiary of

Texco. Between 1971 and 1973, Natex's sales increased from Shillings 176

to 573 million; mostly reflecting the growth in the number of manufacturingunits it represented but also increases in the prices of domestic and im-

ported goods. In 1973 sales of domestic goods (Shillings 360 million)

accounted for 64% of Natex's turnover. Details of Natex's trading activi-ties are shown in Annex 3-6.

3.13 Natex operates 34 distribution centers 4 of which are located inDar-es-Salaam and 30 in the other 19 regions of the country. Natex operates

its own trucks to deliver the goods from the factories, ports, or warehousesto the distribution centers. Internal freight costs are pooled, so thatprices to the retailers are the same throughout the country. There were

20,000 accounts in 1973 but 1,350 accounts (or 7%) in the Dar-es-Salaam area

absorbed 54% of the sales. Terms of sale to retailers are either cash or

banker's draft. Because of the shortage of textiles a sale to an individualretailer can be made only once a week and there is a strict allocation of

the total volume as well as of the proportion between domestic and importedgoods. The marketing and distribution of textiles in Tanzania, while not

overly efficient, is inexpensive. The opportunity for individual profits is

drastically reduced, and the cost of advertising, merchandising and market

research practically non-existent. Most of the retail sales are transacted

in open air bazaars. The price to the consumer is therefore usually no more

than 100-130% higher than the price of the goods landed or ex-factory, ascompared with a 200-300% mark-up in more developed countries.

2. Prices

3.14 Ex-factory prices of domestic fabrics are determined by the Price

Commission of the Ministry of Commerce and Industry and are generally based

on the ex-factory costs of the plant with the highest operating costs, in-

cluding depreciation and interest charges plus a profit which on average is

intended to amount to about 10% of the sales price. In practice, the actualprofit may vary from year to year and from item to item. Prices are deter-

mined periodically (usually once a year) and as costs change continuously,

the mills have occasionally operated at a loss, at least on specific items.

Although the system provides some incentives for the individual plant to

lower costs and improve productivity, adequate incentives are limited

because prices are not based on standard costs but on actual costs and in

some instances the same fabric is only made by one or two mills. The cur-rent textile prices were established in April 1974 on the basis of 1973

costs; however, in view of rapidly increasing costs, MTL for example cannot

cover production costs on about 40% of its items and needs to subsidize them

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with the profits on the sales of khanga. More frequent product by productprice reviews would be desirable to provide for a reasonable and up to dateprice structure (para. 6.06).

3.15 The price of cotton, the major raw material, is determined by theTanzania Cotton Authority (TCA). Until recently cotton prices for domesticmills were the same as for exports. In 1973 and early 1974, when interna-tional cotton prices were unusually high and local fabric prices could notbe increased accordingly most of the textile plants in Tanzania were tem-porarily losing money. Therefore, in April 1974 the internal cotton pricewas fixed at about Shillings 3.30 (US$0.45) per pound below the export pricerith this difference absorbed by TCA. Although the internal prices at thattime represented only about 50% of the export prices it approximately cor-responds to the present world-market prices.

3.16 The ex-factory fabric prices are subject !o a Shillings 0.3/m2Excise Duty and 25% Sales Tax (20% for khanga). lhe structure of Natexvsselling prices is such as to allow Natex to make a i,% gross profit on alldomestic and imported goods. The wholesale prices charged to wnolesalers,manufacturers and parastatal organizations include a 5 to 6% gross profitand so-called sub-wholesale prices charged to retailers one of 10 to 11%gross profit. The Price Commission determines also the maximum retailprices so as to limit the gross profit of the retailer to 10% of theprice paid to Natex. The maximum retail price for each type of fabricat the retail level is the same irrespective of which mill produces itbest or the geographical location of the point of sale. Retail pricesfor typical fabrics as well as a comparison of ex-factory selling pricesof similar woven fabrics in Tanzania and USA are shown in detail inAnnexes 3-7, 3-8 and 3-9; in general, ex-mill prices of fabrics inTanzania, converted at the official exchange rate, are higher than inthe USA, on average about 30%. However, if a shadow foreign exchange rateis used, this margin would be reduced accordingly.

3. Tariffs

3.17 Imported goods are subject to custom duties ranging from 30 to 45%of the CIF price, and a sales tax of up to 50% on the duty paid costs. In1973 the duty on the Shillings 162 million CIF value of textile articlesimported by Natex amounted to Shillings 73 million or 45%. The sales taxpaid (Shillings 78 million) averages 33% of the duty paid costs. Sinceas mentioned previously Natex resells the goods at 10% gross profit to theretailers who in turn are entitled to a maximum 10% gross profit, an average

item landed at CIF cost of Shillings 10.00 would be sold to a consumer atShillings 23.33. Most of the textile fabrics and articles are at presentimported from the People's Republic of China which in 1973 supplied 52% oftotal imports and from Japan. A breakdown of imports is shown in Annex 3-10.As all importation is carried out on the basis of strict licensing by theGovernment, the high import duties are primarily designed to discourage theuse of foreign goods and thus conserve scarce foreign exchange rather thanto protect the local textile and apparel industry from outside competition.

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4. Export Situation

3.18 In the last five years Tanzanian exports of cotton fabrics have beenlimited by lack of local production. Exports varied between 2 and 4 millionm. per year and went mainly to neighboring Uganda and Kenya. Exports of yarnhave been negligible. However, Tanzania is considering further textile proj-ects to satisfy domestic market needs as well as export markets and the fea-sibility study mentioned in para. 3.11 will include an in-depth review of the

marketing possibilities, principally to other East African countries which arelogical export countries for Tanzania. General observations on export pros-pects of the textile industry of Tanzania are discussed in Annex 3-11.

IV. THE PROJECT

A. Project Location and Scope

4.01 The project consists of the expansion of an integrated textileplant from about 23 to 43 million meters per year of finished fabrics, i.e.an additional annual production of 20 million meters. It would be builtadjacent to the existing MTL plant with the land needed for the expansionalready owned by the Company. The plant is located eight km from Mwanza,a town with a population of 50,000, situated on Lake Victoria and some1,100 km (by air) northwest of Dar-es-Salaam. Mwanza is the second mostimportant city in Tanzania and thus offers availability of skilled andsemi-skilled labor; it is connected by rail and road to all parts of thecountry and to Uganda and Kenya through Lake Victoria. The climate inMwanza at an altitude of some 1,100 m. is mild and the mill does not re-quire air conditioning which in contrast is essential in the coastal areasbecause of the deleterious effect of the high humidity and temperature onthe human element as well as on the efficiency of spinning and weaving oper-ations.

4.02 An alternative location in Musoma (about 200 km north of Mwanzaon Lake Victoria) was considered but found less attractive because of thehigh additional costs for infrastructure, and the lack of skilled labor,civil amenities, housing as well as adequate road and rail connections. Theexpansion of the existing mills in Dar-es-Salaam was also eliminated as analternative because of the Government's policy to decentralize the industryand on account of the acute shortage of water in the area.

4.03 The project would add to the existing facilities 27,648 spindlesand 578 looms as well as related bleaching, mercerising, dyeing and printingequipment. Assuming 1,050 eight hour shifts per annum and 83% overall plantefficiency, annual spinning capacity will be raised from 3,360 to 6,540 tons,screen printing capacity from 7.4 to 18.5 million meters, and roller printingcapacity from 11.6 to 25.0 million meters per year. The overall design ofthe project which was carried out by Saigol Brothers Ltd. takes into accountthat the existing mill is not entirely balanced with certain departmentshaving excess capacity; this will result in some savings for the project.The expanded mill will provide employment for 3,600 workers and thereforecreate about 1,200 new jobs.

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B. Machinery and Buildings

4.04 The mill will be equipped with new but conventional machinery.

The type and amount of equipment has been specified in Saigol's feasibility

study on the basis of detailed production calculations assuming efficiencies

and utilization factors which are considered attainable and which have been

checked by the Bank and where felt necessary, revised. All spinning, weaving,

converting as well as 90% of the service machinery will have to be imported.

A detailed list of the machinery required for the different plant sections

is shown in Annex 4-1.

4.05 About 23,000 m2 of covered floor space will be constructed includ-

ing 19,700 m2 of service buildings for warehousing, a boiler plant and power

house. The area of the floor space is in line with norms accepted in the

textile industry, i.e. 0.33 m2 per spindle and 20 m2 per loom. The main

factory buildings are to be of structural steel with asbestos cement corru-

gated sheet roofing, cement brick walls, reinforced cement brick floors and

false fiberglass ceilings. There will be humidity control in the spinning

and weaving areas but no air conditioning. The spinning section will have

an overhead air exhaust system and the carding room, an additional floor

waste filter exhaust to improve working conditions and increase yarn qual-

ity. The proposed machinery layout as related to the planned floor space

has been checked and found satisfactory.

C. Raw Materials and Utilities

4.05 The basic raw material required by MTL is cotton of which at full

production, the mill will utflize annually 7,050 tons or 38,000 bales. AR

cotton type from the Mwanza growing area will be used. There is an ample

supply of cotton in Tanzania. In 1973, the local textile industry processed

only about 15% of the crop and, in 1980 is expected to use about 22% (or

110,000 bales) of a crop estimated at 500,000 bales. The AR cotton grade

is clean, white and of a superior quality suitable for spinning medium and

medium-fine counts up to 50 cc.

4.06 The project's additional water requirements of 2.0 million liters

per day will be made available from the municipal water supply system. MTL

presently receives all its power from TANESCO which is the government entity

responsible for all power supply and distribution in Tanzania. At present,

four transformers of 1.25 MVA each are installed at the factory and for the

project 2 transformers will be added at the factory, one of 1.25 MVA for the

spinning and one of 1.5 MVA for the weaving department. Recently MTL has

frequently been experiencing power failures because of break-downs of

TANESCO's generators. To improve power supply and satisfy increasing demand,

TANESCO has obtained Government approval for an expansion program for addi-

tional power generation in the Mwanza area. The first phase is already

under construction and is expected to be ready by 1976 and adequate to meet

MTL's increased needs together with those of other consumers in the area.

In addition the Government has agreed to cause TANESCO to supply sufficient

power to ensure the efficient operation of MTL's integrated textile plant.

At present the Company operates two boilers each with a capacity of 6,000 kg

of steam/hour. For the expanded plant two more similar boilers will be

required to allow a 25% safety margin for repair and maintenance.

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D. Ecological Considerations and Occupational Health

4.07 The air quality in Mwanza is relatively good because there are fewindustrial units in the town and the MTL mill's distance from its center. Theonly fuel burnt at MTL is and will continue to be diesel oil for steam genera-tion. The discharge is therefore limited to the boiler flue and it is plannedthat the new boilers will have an automatic regulating device to ensure maxi-mum combustion. The spinning and weaving sheds will be equipped with airfilters to control fibers and dust from being exhausted into the atmosphereand the appropriate humidity in them will be maintained by a central airtreatment system comprising air filters, washers and dampers. The cards willbe equipped with floor waste exhaust filters. In the converting departmentthe dyeing, printing and finishing equipment generating heat and/or steam willhave special hoods with forced exhaust systems to lower the temperature in theworking area. The effluent from the converting operations will be dischargedto the two existing open air settling ponds located 3 km from the mill. Thedrainage system, which is a combination of sinking, settling and evaporationand extends about 40 km from the ponds to Lake Victoria is considered fullysatisfactory and will be modified to handle the additional effluent to ensurean acceptable level of biological oxygen demand. There are no agriculturalland or human settlements in the immediate vicinity of the ponds or along thelength of the drainage system which is passing through what is essentiallywaste land.

E. Implementation, Staffing and Training

4.08 Efficient implementation of the project is closely related to theavailability of expatriates. Three out of four companies manufacturing wovenfabrics in Tanzania have had management assistance from European companies,--Sunguratex from Tootal (UK), Kiltex from Texunion (France) and MTL fromTextilconsult (Italy). Within the provision of the contracts, Texco hiredSaigol in December 1974 to replace expatriate management positions in Kiltexand MTL (para. 2.10). Saigol replaced five key technical people at MTLthrough experienced personnel from its own mills. The remaining 21 expatriatesat MTL have been contracted by MTL directly; although they have been hired inpart with the assistance of Textilconsult, their staying is not linked withthe management contract with Textilconsult which will expire in 1976. Althoughit is the Government's policy to reduce the number of expatriates, Texco hasat present no technical and management personnel to fill their positionsshould they become vacant.

4.09 The Saigol group who undertook the feasibility study for the project,is one of the largest textile producers and exporters in Pakistan. Addi-tionally, Saigol has broad experience in the construction and chemical industryalthough part of these activities have now been taken over by the Governmentof Pakistan. Texco, on behalf of MTL, and Saigol have already entered intoa tentative contractual arrangement according to which Saigol is to act as theEngineering Company for the project with full responsibility for projectmanagement, engineering, procurement, construction, erection, start-up andinitial operations, personnel training and other such services as necessary

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to successfully implement and operate the project. Saigol has never executedor operated a project outside of Pakistan; however, our investigation of theSaigol organization with the help of an independent textile consultant companyhas shown that Saigol should be capable of undertaking the above functionsprovided that it obtains support in some of these responsibilities.

4.10 More specifically Saigol will require assistance in detailed equip-ment specifications and procurement and in the area of establishing millcontrol, labor cost and production planning systems. Such assistance will beprovided by the Technical Advisor (para. 4.11). Saigol will be fully res-ponsible for completion of the project according to an agreed timetable(Annex 4-2) and for arranging all necessary operational training of theoperators and management (para. 4.12). Qualified preparatory, spinning,weaving, dyeing and printing personnel will be made available from a cadreof the existing MTL plant as well as the personnel trained by Saigol. Texco,MTL and Saigol are at present discussing a detailed draft of a contract forproject implementation. Such a draft was reviewed by the Bank during nego-tiations and principally found acceptable, and MTL will enter by not laterthan August 1, 1975 into a final agreement with Saigol Brothers for projectimplementation, satisfactory to the Bank. Among others the agreement cannotbe terminated prematurely without the consent of the Bank. Additionally, MTLwill not later than six months before the expected date of commissioningmake arrangements, acceptable to the Bank, for technical management tooperate the project for a period of three years after completion of theproject.

4.11 Since Texco and MTL do not have sufficient experience in projectmanagement and implementation control they will employ a Technical Advisor.The main responsibility of such Advisor will be to assist Texco and MTLin supervising the work of the Engineering Company. The Technical Advisorwill also provide management and technical assistance to Texco and MTL incoordination with the Engineering Company to start up the project and inte-grate it with MTL's existing operations. The detailed terms of referencefor the Technical Advisor are described in Annex 4-3. Texco and MTL havehad preliminary discussions with Gherzi Textil Organisation (Switzerland),an experienced textile engineering and consulting company. During negotia-tions the Bank has reviewed the draft contract with Gherzi and found itprincipally acceptable. Texco and MTL will enter into a final technicalassistance agreement with Gherzi, satisfactory to the Bank by not later thanAugust 1, 1975 and such agreement cannot be terminated prematurely withoutthe consent of the Bank.

4.12 Saigol and Texco have developped a proposal for a detailed job-related training program which is acceptable to the Bank. Training of workersfor the project will be undertaken in the existing facilities of MTL. Inaddition and according to the expected availability and needs of supervisoryand management personnel at least 20 Tanzanian nationals with appropriateeducation and several years experience in the textile industry will be selectedfor the special training program. The suitable candidates will be sent to

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the Pakistan College of Textile Technology in Lyalpur for a speciallydesigned crash course in textile technology, to be followed by training inSaigol's mills in Pakistan or plants elsewhere to the extent any equipmentinvolved in the project is not in use by Saigol. The foreign exchangeexpenditures of such a training program (US8100,000) have been included in theproject costs and are part of the suggested Bank loan. Texco and MTL willenter into final agreements for adequate training with Saigol and Gherzi,satisfactory to the Bank by not later than August 1, 1975 as part of thegeneral contracts with Saigol and Gherzi.

V. CAPITAL COSTS AND FINANCING PLAN

A. Capital Costs

5.01 Total project costs are estimated at Shillings 289.2 million(US$40.8 million) and total financing required including interest duringconstruction at Shillings 314.4 million (US$44.3 million). Capital costsare shown in detail in Annex 5-1 and are summarized below:

Summary of Capital Cost Estimates

In million shillings In million USS in %Local Foreign Total Local Foreign Total

Engineering andConsultancy Services 2.0 7.1 9.1 0.3 1.0 1.3 5.2

Plant & Machinery 0.7 109.9 110.6 0.1 15.5 15.6 61.4Freight & Insurance 10.8 11.4 22.2 1.5 1.6 3.1 12.2Erection 4.9 3.5 8.4 0.7 0.5 1.2 4.7Civil Works 17.8 12.1 29.9 2.5 1.7 4.2 16.5

Base Cost Estimate (BCE) 36.2 144.0 180.2 5.1 20.3 25.4 100.0

Contingencies: Physical(5% of BCE) 1.8 7.1 8.9 0.3 1.0 1.3Price (34% of BCE plusphysical contingency) 26.6 38.3 64.9 3.7 5.4 9.1

Installed Cost 64.6 189.4 254.0 9.1 26.7 35.8Working Capital 32.4 - 32.4 4.6 - 4.6Study & Training 0.7 2.1 2.8 0.1 0.3 0.4

Project Cost 97.7 191.5 289.2 13.8 27.0 40.8

Interest DuringConstruction 3.9 21.3 25.2 0.5 3.0 3.5

Total Financing Required 101.6 212.8 314.4 14.3 30.0 44.3

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5.02 Capital costs are based on estimates prepared by Saigol fromindicative quotations provided by various suppliers and Tanzanian constructionfirms in November 1974 for orders to be placed early in 1975. To provide forinflation from early 1975 until the expected date of expenditures a priceescalation of 12% in 1975, 10% in 1976 and 8% in 1977 for foreign and 30% perannum for local expenditures has been provided for in the project cost estimate.The unusually high rate for local price escalation is based on past and expec-ted near term trends of local costs, particularly in the construction industry.The cost estimate also includes a 5% physical contingency. Since the equip-ment to be used is fairly standard, the project scope well known, and civilworks clearly defined and relatively modest because of already existinginfrastructure, the risk of cost increases is limited and the capital costestimates are considered realistic. Additional infrastructure required forsuccessful operations of the project and not included in the capital cost willbe mainly for improvement and increase in power supply (para. 4.06); this isbeing financed by the Tanzania Investment Bank and bilaterial sources.

5.03 Permanent incremental working capital requirements for the projectare estimated at Shillings 32.4 million (US$4.6 million). They provide for6 months requirements for raw materials, 18 months for stores, 1-1/2 monthsfor finished goods and 20 days for receivables. Since the Company is paidupon delivery of the goods, the estimates for inventories and receivablesare considered realistic. Details of the working capital requirements beforeand after expansion are shown in Annex 5-2.

B. Financing Plan

5.04 The financing plan of the project would be as follows:

Financing Plan(in million US$)

Local Foreign Total Local Foreign Total

Debt

IBRD - 106.4 106.4 - 15.0 15.0Kuwait Fund - 106.4 106.4 - 15.0 15.0

Equity (Texco) 101.6 - 101.6 14.3 - 14.3

101.6 212.8 314.4 14.3 30.0 44.3

5.05 The proposed Bank loan of US$15 million equivalent would cover halfof the estimated foreign exchange financing required for the project, theother half would be provided by the Kuwait Fund. The proposed Bank loanwould be made to the Government for 22 years, including 5 years of grace, atan interest rate of 8.5% per annum. The Government would relend the proceedsof the loan to MTL for 13 years, including 4-1/2 years of grace, and wouldcharge an effective interest rate of 10% per annum. MTL would bear the

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foreign exchange risk on the loan. The proposed Kuwait Fund loan of US$15million equivalent (Kuwait Dinar 4.5 million) would be made to the Governmentfor 22 years, including 5 years of grace at an interest rate of 4%. Theonlending terms to MTL would be similar to those of the Bank loan. Whileconfirmation of the terms and conditions of Kuwait Fund financing has beenreceived, the finalization of the financing arrangements between the KuwaitFund, the Government and MTL would be a condition of effectiveness for theBank loan.

5.06 The local funds of Shillings 101.6 million (US$14.3 million)required for the project would be provided through an increase in equity byShillings 100 million (US$14.1 million) and through internal cash generationof Shillings 1.6 million (US$0.2 million). The equity would be provided bythe Government through Texco which being the only shareholder to participatein the equity increase, will increase its shareholdings in MTL from 40% to90%. MTL's internal cash generation during project implementation is expectedto be about Shillings 67 million. However, due to low working capital andthe Company's high debt service payments until 1977 most of the total internalcash generation (Shillings 65.4 million) would be needed for loan repaymentsand for establishing a reasonable working capital level. The Government andTexco have agreed to make equity funds available to MTL as required by theproject and in any case in such a way that MTL's debt to equity ratio does notexceed 60:40. The Government has also agreed to provide any overrun financing(local and foreign) that might be required to complete the project in a formsatisfactory to the Bank. Specifically this would mean that at the date ofproject completion 1/ MTL's debt/equity ratio will not exceed 60:40 and itscurrent ratio will be at least 1.5:1.

C. Allocation of Bank Loan, Procurement and Disbursements

5.07 Bank and Kuwait Fund financing would be on a parallel basis withseparate specific goods and services to be covered by each of the two lenders.The Bank and Kuwait Fund loans would be used for meeting the foreign exchangeexpenditures of the project. However, foreign exchange expenditures for US$1.5million of the Kuwait Fund loan representing foreign interest during construc-tion would be disbursed against local expenditures for civil works because ofthe Kuwait Fund's policy not to finance interest during construction.

1/ Defined at the date at which the project will have produced 2.9 millionm. of finished textiles over two months (about 80% capacity).

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Allocation of Loans(in million US$)

Bank Kuwait Fund.

Engineering and Consultancy Services 1.0Study and Training 0.3 -Equipment and MaterialsSpinning -- 8.1Other 9.0 -

Erection - 0.5Civil Works - 3.2Interest during Construction 1.5 -Contingency and Escalation 3.2 3.2

15.0 15.0

5.08 The Bank loan would be used for financing all foreign exchangeexpenditures for consultancy services, study and training, equipment forweaving, finishing and service facilities and for interest during construc-tion on the Bank loan. Procurement of goods and services financed by theBank will be according to Bank procurement guidelines. Equipment and mate-rial will be procured through international competitive bidding, except for(1) small items costing less than US$50,000 equivalent which may be purchasedtthrough international shopping on the basis of suitability, availability andprice considerations following approval by the Bank of the list of itemsinvolved, and (2) proprietary equipment necessary for efficient plant opera-tion and items in limited supply which are critical to the timely completionof the project and which are estimated to cost not more than US$2 millionand which may be procured following bidding from restricted lists of qualifiedsuppliers, with prior approval of the Bank. A forecast of the estimateddisbursement schedule is given in Annex 5-3. Any funds remaining in the loanaccount upon completion of the project would be cancelled. All disbursementswould be fully documented. In order to proceed with the project as soon aspossible, it is expected that up to US$150,000 retroactive financing willbecome necessary; principally for the downpayments on the contracts with theEngineering Company and the Technical Advisor, both critical for timelyimplementation of the project.

5.09 Equipment financed by the Kuwait Fund loan would be procured inter-nationally according to its own procurement guidelines. Subject to pre-qualification, local contractors after local bidding would carry out civilworks, in part financed by the Kuwait Fund.

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VI. FINANCIAL ANALYSIS

A. Revenues and Operating Costs

6.01 The financial analysis of the project has been done on an incrementalbasis for which the assumptions are listed in detail in Annex 6-1 and aresummarized below. It has been assumed that the project will start operationsin January 1978, that capacity utilization will increase from 50% in the firstyear (1978) to 75% in 1979 and 90% thereafter and that it will have an opera-ting life of 15 years. At 90% capacity, the project will add 20 million m.per year of fabrics production and at the same time, allow to shift productionto more sophisticated fabrics, thereby, for example, eliminating production ofsheeting and linen; most of the project's output will be in the form of khangaand kitenge. Thus, the project is projected to add annual sales of Shillings125.5 million (US$17.7 million) i.e. slightly exceed the sales of Shillings106.7 million of the existing mill, and to generate operating profits beforedepreciation and financial charges (at 90% capacity) of Shillings 74.6 million(US$10.1 million) per year as compared to Shillings 22.5 million (US$3.2million) for the existing mill.

6.02 Revenues and operating costs before and after expansion have beenexpressed in constant 1975 ptices. Since prices of textiles, as a basicconsumer good, are set by the Government in consultation with Texco (para.3.12), it has been assumed that any cost increases after 1975 be compensatedfor by increases in product prices.

B. Financial Projections

6.03 The financial projections are based on sales revenues and operatingcosts assumptions explained in para 6.01 and 6.02. Detailed projections ofincome statements, cash flow and balance sheets on an incremental basis forthe project as well as for MTL after expansion are given in Annexes 6-2 to6-7 and are summarized below:

- 23 -

Summary Financial StatementsMTL Before and After ExpansionI/

(in million shillings)

Construction of Project Operations Including Proj.1974 1975 1976 1977 1978 1979 1950 1981

Production inmillion meters 22.6 C 22.7 22.7 22.7 33.8 39.4 42.7 -42.7

Income Statements

Sales 104.1 107.6 107.6 107.6 178.3 213.7 234.9 234.9Direct Costs 68.7 66.7 66.7 66.7 92.5 102.6 106.7 106.7Operating Costs 20.8 18.9 18.4 18.4 30.1 30.1 30.1 30.1Depreciation 7.3 8.1 8.1 8.1 26.9 26.9 26.9 26.9Tnterest 2.2 1.8 1.1 0.3 21.3 21.3 20.2 20.2Taxes - 5.4 6.o 6.3 3.4 14.8 22.9 22.9Net Income

(After Taxes3 5.1 6.7 7.3 7.4 4.1 18.0 28.1 28.1Cash Flow 3, 14.6 22.0 22.5 22.5 55.7 81.0 98.1 98.1Debt Service 12.5 12.1 11.0 8.5 25.4 25.2 38.6 39.3Dividends 4/ - - - - - 3.3 13.4 19.8

Balance Sheet

Current Assets 41.3 44.3, 52.3 74.0 94.7 94.7 94.7 94.7CurrentLiabilities 52.6 30.3 35.3 39.6 33.9 48.4 499.1 50.0

Net Fixed Assets 52.1 52.4 191.9 299.7 290.9 266.0 241.1 216.2Surplus Cash J/ - - - - 1.9 37.6 58.7 72.8Net LT-Debt 22.4 14.6 118.6 199.0 209.3 190.9 171.8 151.8Equity 18.4 51.8 90.3 135.1 144.3 159.0 173.6 181.9

Debt ServiceCoverage3/ 1.2 1.8 2.0 2.6 2.2 3.2 2.5 2.5

Current Ratio o.8 1.5 1.5 1.9 2.8 2.0 1.9 1.9Debt to Equity

Ratio 55/45 22/78 57/63 60/40 59/41 54/66 50/50 45/55Net Income before

Taxes as % ofSal_es 4.8 11.2 12.4 13.1 4.2 .15.3 21.7 21.7

1/ For projected statements of MTL without expansion (see Annexes 2-9 to 2-11).

2/ Preliminary; including 1.5 million meters of purchased gray fabrics.

3/ Before taxes on income.

V/ Dividends restricted until 1979; thereafter maximum dividend according toTanzanian laws.

5/ Cash not needed for operations and available for reinvrestmernt.

- 24 -

6.04 Under the assumptions, MTL's profitability would improve substan-tially on account of the project. Net income after taxes is expected toincrease from Shillings 7.8 million in 1977 to 18.0 million in 1979 and 28.1million in the years thereafter; only in 1978 when no more than half of theproject's capacity has been assumed to be utilized, net income declines toShillings 4.1 million. The more than proportional increase in sales valueand earnings-is due to switching to more sophisticated products as well asto economies of scale from the expansion. Net income before taxes as apercentage of sales which was only 5% in 1974 is expected to increase tomore than 10% in 1975, mainly as a result of higher textile prices and lowercotton prices which only in part affected 1974 earnings. After completionof the project, net income after taxes as a percentage of sales would be atabout twice the level of the existing operations.

6.05 As a result of the good earning potential of the project, thefinancial ratios of MTL show quite satisfactory levels despite substantialadditional debt financing. The debt service coverage remains above two timesafter the heavy repayments on the existing operations in 1975 and 1976. Thecurrent ratio would improve from 0.8 in 1974 to a satisfactory level of 1.5in 1975 as a result of internal cash generation and the increase in sharecapital. The debt to equity ratio would be about 60:40 from 1976 until 1979when as a result of beginning debt repayments on the project, it would startto gradually improve. Texco and MTL have agreed to maintain a debt to equityratio of at least 60 to 40 and a current ratio of 1.5 (paras. 5.03 and 5.06).

6.06 Since MTL's profitability and sound financial situation willlargely depend on the Government's policy of pricing inputs and outputs, theGovernment has agreed to take all measures necessary or appropriate to ensurethat after completion of the project, MTL--operating efficiently--obtainsrevenues sufficient to cover all of its costs, to service all of its debt andto earn a reasonable return on its invested capital. MTL has agreed not todeclare or pay any dividends until the project has been completed and thereafteronly if by so doing the current ratio would not fall below 1.5.

C. Incremental Financial Return and Major Risks

6.07 The incremental financial return of the project amounts to 24.2%before and 19.4% after taxes. Its detailed calculation and its sensitivityare shown in Annex 6-8. It is relatively high partly because the project isan expansion using existing infrastructure and partly because existing machin-ery can be used more effectively in combination with the project. As usual,the return is most sensitive to changes in revenues. The return after taxeswould decrease to 17.3% if a 10% reduction of textile prices is assumed. Ifinvestment costs went up 15% combined with a one year delay in project com-pletion the return would drop to 13.9%. If the ultimate capacity utilizationof the project were to be only 80%, the return would decrease to 17.7%.

- 25 -

6.08 The project faces technical, managerial and commercial risks.However, the technical and managerial risks should be limited in view of: (i)employment of an engineering company for project implementation, (ii) employ-ment of experienced technical advisors, (iii) MTL's experience with similarexisting operations, (iv) outside assistance for operations and job-orientedtraining program, and (v) allowance for a relatively long implementationperiod and a well defined capital cost estimate. These risks would only be-

come major if for whatever reasons the cooperation between the Company andTexco on the one hand and Saigol and the Technical Advisor on the other shouldnot be as effective as now expected. Therefore, Texco and MTL agreed thatthe arrangements with Saigol and the Technical Advisor cannot be terminatedprematurely without the prior consent of the Bank (paras. 4.10 and 4.11). Inview of the limited supply of textiles and since MTL is not responsible formarketing its output, the major commercial risk of the project would be in theGovernment's price setting for inputs and outputs. This risk should belimited considering MTL's relatively good production performance and in viewof the agreements obtained from the Government in this regard (paras. 5.03,5.06 and 6.06).

D. Auditing

6.09 Coopers and Lybrand is MTL's auditor and its auditing reports areprepared on time and are acceptable. MTL will continue to be audited by an

independent auditing firm acceptable to the Bank.

VII. ECONOMIC ANALYSIS

7.01 For the economic analysis, costs and benefits have been evaluatedat estimated long-term world prices prevailing in 1978 (expressed in 1975Shillings), when the project is expected to start operations. As theconversion rate a shadow exchange rate of Shillings to US$ of 10 to 1 hasbeen used. Tradable items, which are the more significant costs and benefitsof the project, are valued at border prices, and non-tradable local items attheir nominal values except for unskilled labor, the only non-tradable itemwith some significance. Based on detailed studies of the textile sectorwithin the Tanzanian Ministry of Economic Affairs and Development Planning,it is estimated that the shadow price for unskilled labor is 50 to 75% of thenominal value; therefore a shadow price of 75% has been assumed for calculatingthe base return of the project. This is considered conservative in view ofthe relatively high minimum wages in Tanzania.

A. Raw Material and Textile Prices

7.02 Prices for cotton, which is the basis for the textile productionof this project, have to be seen in close relation to prices for man-madefibers. In line with other increased commodity prices, cotton prices reachedunprecedented high levels in 1973/74. In the past, cotton has experienced

- 26 -

increasing competition from man-made fibers which prior to 1973 kept cottonprices practically unchanged for many years; in real terms, cotton priceshad even declined. Improved technology and enlarged capacities for man-madefibers, particularly polyester staple, resulted in substantial reductions ofproduction costs and combined with excess production over many years ledto constant pressure on cotton and fiber prices. Consequently, and in addi-tion to increasing consumers' preference for man-made fibers, cotton demandstagnated. This situation changed in 1972/73 when demand for cotton increasedpartly because of a leveling in the supply of man-made fibers since inpreceeding years, product prices for them were low, and the industry hadbeen unable to attract sufficient investment for new capacity. Additionaluncertainties were introduced through the changed oil situation. The com-bination of these factors resulted in early 1974 in a dramatic increase incotton prices which reached a level three times higher than the traditionalUS$0.25 to 0.35 per pound before 1973. Subsequently, cotton prices haveagain decreased to about US$0.40 per pound and lower. Although cotton pricesmay decrease further in the near future, it is not expected that, on a long-term basis, they will return to levels prevailing before 1973. For purposesof calculating the economic rate of return, Mwanza cotton has been pricedat its export value with an estimated international price of US$0.52 perpound FOB. This is in line with the price forecast of the Bank's EconomicAnalysis and Projections Department. For other major raw materials whichare practically all imported, CIF import prices have been used.

7.03 Since production generated by the project would replace imports offabrics, the estimated import prices based on the above cotton price have beenused for determining the economic benefits of the project. Because of dif-ference in design, fabric structure, product quality and market fluctuations,it is difficult to establish long-term international prices for the varietyof textiles to be produced by the project. The prices used were developedthrough a comparison of production costs in typical textile manufacturingcountries and compared with actual import prices in Tanzania. In order toarrive at production costs, added values for spinning, weaving and finishingin typical fabric exporting countries plus freight and insurance to Tanzaniahave been added to the estimated long term cotton price. The prices arrivedat through this added value concept have been found well in line with theactual import prices in Tanzania at a time when cotton prices were about atthe same level as assumed in the economic return calculations. The differentfabric prices and costs used for the financial and economic analysis areshown in detail in Annex 7-1.

B. Economic Return

7.04 Based on the assumptions given above, the project yields a satis-factory rate of return of 16% (base case). Annexes 7-2 and 7-3 give adetailed description of the calculation of the return and its sensitivitieswhich fundamentally follow those for the financial return. Under the mostadverse circumstance of a one-year delay in project completion with a 15%increase in investment costs, the project's return would be about 12%. If

- 27 -

unskilled labor is shadow-priced at 50% of its nominal value, the project'sreturn would increase to 17%. If unskilled labor would be assumed at thenominal value the return would be 15%. Using the official exchange rate,the base return would decrease to 14.0%. Substantial indirect benefits fromthe project will be derived from the additional employment and training ofabout 1,200 workers.

VII. AGREEMENTS

8.01 Assurances and agreements were obtained from the Government, Texcoand MTL as follows:

A. From the Government that it will:

(a) carry out a feasibility study (para. 3.11) including areview of export marketing possibilities to other countries(para. 3.18), exchange views with the Bank on the conclusionsof the study and apply these conclusions to any majorexpansion of the textile industry;

(b) cause TANESCO to supply sufficient power to ensure theefficient operation of MTL's integrated textile plant (para.4.06);

(c) relend the proceeds of the loan to the Company on termsand conditions satisfactory to the Bank (para. 5.05);

(d) provide Shillings 100 million in the form of equity throughTexco as required by the project (para. 5.06);

(e) provide any overrun financing (local and foreign) for theproject on terms satisfactory to the Bank (para. 5.06);

(f) take all measures necessary or appropriate to ensure thatafter completion of the project, MTL--operating efficiently--would earn a reasonable return on its invested capital(para. 6.06);

B. From Texco that it will:

(a) employ consultants, acceptable to the Bank, to assist Texcoin carrying out the feasibility and marketing study (para. 3.11);

(b) assist the Company to appoint a Technical Advisor andenter into a technical assistance agreement, satisfactoryto the Bank by August 1, 1975 (para. 4.11);

- 28 -

(c) enter into an agreement, satisfactory to the Bank, on asuitable job oriented training program with Saigol BrothersLtd. and the Technical Advisor for the provision of suchtraining program by August 1, 1975 (para. 4.12);

(d) provide Shillings 100 million in the form of paid-inequity to the Company (para. 5.06);

(e) maintain a current ratio of at least 1.5 for theCompany (para. 6.05);

(f) maintain a debt to equity ratio of at least 60 to40 (para. 6.05);

C. From the Company that it will:

(a) enter into an agreement, satisfactory to the Bankwith Saigol Brothers Ltd. by August 1, 1975 forproject implementation (para. 4.10);

(b) enter into an agreement, acceptable to the Bank, fortechnical management to operate the project for a periodof three years after completion of the project (para. 4.10);

Cc) appoint a Technical Advisor and enter into a technicalassistance agreement, satisfactory to the Bank, byAugust 1, 1975 (para. 4.11);

(d) enter into an agreement, satisfactory to the Bank,with Saigol Brothers Ltd. and the Technical Advisorfor the provision of a job oriented training program,by August 1, 1975 (para. 4.12);

(e) increase its authorized share capital to Shillings120 million as a condition of the effectiveness ofthe Bank loan;

(f) maintain a current ratio of at least 1.5 (para. 6.05);

(g) maintain a debt to equity ratio of at least 60 to40 (para. 6.05);

(h) not declare or pay any dividends until the project hasbeen completed and thereafter only if by so doing thecurrent ratio will not fall below 1.5 (para. 6.06).

8.02 Agreement has tentatively been reached on the terms and conditionsof Kuwait Fund financing. Finalization of these arrangements between the

- 29 -

Kuwait Fund, the Government and MTL will be a condition of effectiveness ofthe Bank loan.

8.03 Based on the above agreements and assurances, the project is suitablefor a Bank loan of US$15 million equivalent to the Government for 22 years,including a 5-year grace period, and for relending to the Company for 13 years,including 4-1/2 years grace.

Industrial Projects DepartmentMay 5, 1975

ANNEX 1Page 1

TANZANIA

MWANZA TEXTILE PROJECT

GLOSSARY OF TECHNICAL TERMS

AR cotton medium-long staple cotton (1-1/32-1-3/32") suitable forgrade: spinning yarn up to 50 cc.

beater: A device for the opening and/or cleaning of fibers,found on the opener or on picker machines. Its teeth,blades, or bars beat against layers of fibers whichare fed to it at a slow rate.

blow room The machinery for opening/blending and cleaning ofequipment: cotton and forming a uniform fiber sheet called a lap.

carding: An operation which opens and cleans fibers, separatesthe individual fibers and delivers them in sliver form.

converting: General term-for variety of processes by which grey(also gray, or greige) woven fabrics are convertedinto finished goods. Bleaching, mercerising, dyeing,printing as well as application of resins andchemicals in finishing are some of the convertingprocesses.

cotton: Unicellular fibers attached to the seeds of variousspecies of Gossypium, a member of the mallow family(Nalvaceae). Soft, usually white, between 3/8 and2 in. long. Chemically almost pure cellulose. Mainproducers: U.S., India, Brazil, Egypt, Russia andChina.

denim: Washable, inexpensive, strong, stout twilled cloth,made of single yarns, either dyed in the piece orwoven with colored warp and white filling; used foroveralls, skirts, etc. Now also made in fancyplaids, dobbies, stripes and sometimes printed.

draft: In spinning, reducing the size of a fiber aggregatesuch as a lap, sliver, roving, top, by advancing itthrough pairs of rollers moving with progressivelyhigher surface speed.

drawing: The process by which draft is obtained in the spinningof fibers into yarns.

dyeing: The process of coloring materials. Piece dyeing:dyeing "in the piece" after weaving.

ANNEX 1Page 2

easy-care: A term used to describe garments-also fabrics from whichthey are made that will satisfactorily retain theiroriginal neat appearance after repeated wear and laundering,with occasional or no ironing. Note: "Retain theiroriginal neat appearance" means that after launderingthe garment will 1) retain desirable pressed-in creasesor pleats, if any, and 2) be essentially free fromundesirable wrinkles both during wear and after launder-ing. It is also assumed the fabric will meet normalconsumer's demands for such properties as durability,color fastness, and shrinkage.

fabric; A collective term applied to cloth no matter howconstructed or manufactured and regardless of thekind of fiber from which made. In structure it isplanar produced by interlacing yarns, fibers orfilaments. Textile fabrics include the followingvarieties: bonded, braided, felted, knitted, andwoven.

fiber: The fundamental unit used in the fabrication oftextile yarns and fabrics.

fiber, A class name for various genera of fibers (includingman-made: filaments) produced from fiber forming substances

which may be (1) polymers synthesized by man fromsimple chemical compounds, (2) modified or transformednatural polymers

fiber, A class name for various genera of fibers, includingnatural: filaments of (1) animal, (2) mineral, or (3) vegetable

origin. Examples: (1) silk and wool (2)asbestos, (3) cotton, flax, jute, ramie.

filling: (1) Yarn running from selvage to selvage at rightangles to the warp in a woven fabric. (2) Yarnto be used as filling in weaving.

finished Cloth after passing through finishing processes,goods: ready for market.

grade: Cotton: the quality for raw cotton determined byits color, dirt content, etc.

Gray goods Woven or knitted fabrics which have received no(also grey bleaching, dyeing, or finishing treatment.greige goods):

ANNEX 1Page 3

greige: Term for fabrics in unbleached, undyed state beforefinishing. More commonly in U.S. "gray goods".

humidity, The weight of water vapor present in a unit volumeabsolute: of air. For example, grains per cubic foot, or

grams per cubic meter. Note: The amount of watervapor is also reported in terms of weight per unitweight of dry air, for example, grains per pound ofdry air. This value differs from values calculatedon a volume basis and should not be referred to asabsolute humidity. It is designated as humidityratio, specific humidity, or moisture content.

kenaf: A light yellow to gray colored soft fiber, similar tojute. The fibers are 5-6 ft. long and are taken fromthe inner bark of the kenaf plant, Hibiscus cannabinus,grown mainly in India and Africa. Used principally forcordage and agricultural bags.

khanga: 100% cotton fabric popular for apparel uses in EastAfrica. The print design includes 4 distinct borders.

kier: A large, metal vat, usually a pressure type, inwhich fabrics may be boiled out, bleached, etc.

kitange: 100% cotton fabric popular for apparel uses in EastAfrica. The print design includes 2 distinct borders.

lap: In spinning, a continuous, usually compressed, sheetof fibrous material which is rolled into a cylindricalpackage, produced by opening or picking machinery.

licker-in: The first roller of a card, which receives the stock,fleece, or lap from the feed rolls and delivers thefiber to the bumbler or main card cylinder.

loom: A weaving machine for producing a fabric by interlacingwarp and filling yarns.

mercerising: Treatment of cotton fabric with cold caustic soda undertension to improve luster, strength and affinity todyestuffs.

padding: The application of solutions to textiles by passingthem through the solutions and subsequently throughsqueeze rolls.

pick: A throw of the shuttle. One filling thread is termeda pick on the loom or in the fabric.

ANNEX 1Page 4

picker: In spinning, the machine used to clean and further open

fibers which have been through the opening department.Produces laps.

pirn: A wood, paper, or plastic support, slightly tapered,with or without a conical base, on which yarn is spun

or wound for use as filling (U.S.A. quill). Also,

the yarn comprising such a package.

printing: Process of producing designs of one or more colors

on yarns, warp, or fabric. There are several methods,

such as roller, block, screen, etc., and several

color techniques, such as direct, discharge, and

resists.

quill: A tapered, wooden core on which filling yarn is wound

preparatory to weaving. The package of yarn itself.

ring A spinning method using a ring and traveller in place

spinning: of a flyer, cap, or mule spindle.

roving: A loose assemblage of fibers drawn or rubbed into asingle strand with very little twist. An intermediate

stage between sliver and yarn.

scouring: (1) Removing the sizing and tint used on the warp yarn

in weaving. (2) General cleaning of the fabric priorto dyeing. I

shuttle: Device used to carry filling or weft yarns back and

forth within the warp shed to form cloth.

sisal: A hard fiber obtained from the swordlike leaves of the

sisal plant, Agava sisalana, used for cordage and

agricultural bags.

sizing: (1) Operation consisting of applying onto yarns

compounds such as starch, gelatin, oil, wax, or any

other suitable ingredient to aid the process offabrication or to control fabric characteristics,e.g., crepe fabrics. (2) The compounds used in

this process. (3) Warp sizing is generally referred

to as slashing.

sliver: In textile spinning, a continuous strand of loosely

assembled fibers that is approximately uniform in

cross-sectional area and without twist. Produced bycards, drawing and gill frames, combers, etc.

ANNEX 1Page 5

soft waste: Yarn waste that has received little twist. Alsoroving, card, and top waste.

spinning: (1) General: The process of making yarns or cordagefrom fibers, tow, or liquid materials. (2) Yarn fromfiber: The formation of a yarn by a combination ofdrawing or drafting and twisting operations appliedto prepared fiber masses such as rovings.

spinning A machine by means of which the roving is drawn outframe: to the required fineness, the twist is inserted, and

the finished yarn is wound onto bobbins or otherpackages. There are four types: cap, ring, flyer,and mule.

twill: A weave characterized by diagonal lines or ribs producedby staggered floats. Warp face twill has prevalentlywarp floats on the face, filling face twill has fillingfloats. One of the basic weaves; permits heavier,denser cloth than plain weave.

twist: The turns about their axes of fibers, yarns, or cords.Expressed in turns per unit of length or, lesscommonly, by the helix angle in reference to thediameter of the yarn.

warper: A machine for preparing the yarns intended for the warpof a woven or warp knit fabric.

warping: The preparation of the warp for looms or knittingmachines by arranging the yarns on a bean. Principalmethods: beam warping, chain warping, and sectionalwarping.

weaving: The process of manufacturing a fabric by interlacing aseries of filling (crosswise) yarns with a series ofwarp (lengthwise) yarns at right angles.

width: The distance between the two selvages of woven cloth.

winding: Transfer of a yarn or thread from one type of packageto another, for example, from cakes to cones.

yarn: A generic term for continuous strands of textile fibersor filaments in a form suitable for knitting, weaving,or otherwise intertwining to form a textile product.It may comprise: (a) A number of fibers twistedtogether, (b) A number of filaments laid together

ANNEX 1Page 6

without twist (a zero-twist yarn), (c) A number offilaments laid together with more or less twist, or(d) A single filament with or without twist, a mono-filament.

yarn, carded: Yarns made from fibers that have been carded but notcombed in the manufacturing process. Note: Mostspun yarns are of this type.

Yarn number- A measure of linear density. For cotton, the cottoning system: count (c.c.) is defined as the number of basic hanks

(840 yd. lengths) per pound. Hence, the finer theyarn the higher the count.

Industrial Projects DepartmentFebruary 14, 1975

4NMEX iCh;art '-

TANZANIAMWANZA TEXTILE PROJECT

PROCESS FLOW SHEET - SPINNING

COTTON IN BALES

BLOW ROOM EQUIPMENTOpening, Blending and Picking

CRDING

DRAWING ....... _. ......

COMBING

DRAWING .......... .........

ROVING

RING SPINNING

I WINDING Cotton yarn on cones

World Bank-9621

Industrial Projects DepartmentFebruary 11;, 1975

ANNEX 1Chart 2

TANZANIAMWANZA TEXTILE PROJECT

PROCESS FLOW SHEET - WEAVING

COTTON YARN ON CONES

[ WARPING

PIRN WINDING SIZING AND SLASHING

WEFT WARP

WEAVING - Loom State(Gray) Fabric

World Bank-9623

Industrial Projects DepartmentFebruary 14, 1975

ANNAE1Chart 3

TANZANIAMWANZA TEXTILE PROJECT

PROCESS FLOW - CONVERTING

LOOM STATE

(Gray Fabric)

SINGEING AND DESIZING

SCOURING

BLEACHING

| MERCERISING L

T ~~DRYING

STEAMAGNl

FINISHINGl

FRAMING

INSPECTION

World Bank-9622

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 2-1

TANZANIA

MWANZA TEXTILE PROJECT

NATIONAL TEXTILE CORPORATION (TEXCO)

BOARD MEMBERS

Hon. A. II. Jamal M.P. Chairman, Minister of Commerce andIndustry

IIr. G. F. Mbowe Chairman and Managing Director,Tanzania Investment Bank

Hon. J. C. Rwegasira M.P. Regional Commissioner,Dar-es-Salaam

Mr. G. A. Cheyo Commissioner of Internal Trade

Hon. D. N. Milembe (Mrs.) M.P. .

Mr. D. Bitegeko Commissioner of National Industries

lion. S. S. Ng'wannang'wahu M.P.

Ifr. B. Salala General Manager, Tanzania CottonAuthority

Mtr. N. A. Rweyemamu Managing Director, Texco.

Industrial Projects DepartmentFebruary 14, 1975

TANZANIA

MWANZA TECTILS PROJECT

NATICNAL TEXTILE CORPORATION !(TXO()SUBSIDIARY AND ASSOCIATs GOMPANIES

Share Capital % of Sharms Date ofComamy Activity -in Mi3lion Shillings Owned by Texco Incorporation

1. ANational Textile Industries Marketing ofCozporation Ltd. (NATEX) Textiles 10 100 1970

2. Friendship Textile Mill Ltd. Manufacturingof Textiles 30 100 1966

3. Kilismajaro Textile Corpora- Mmufacturing 1tion Ltd. of Textiles 26.4 57 1972/

4. Mwanza Textiles Ltd Manufacturingof Textiles 20 40 1966

5. TangaVUka Dying and Weaving ManufacturingMills Ltd of Textiles 20 51 197hz'

6. Blankets Manufacturers Ltd. Manufacturingof Blankets 2 33 1961

7. East African Kenaf Industries Manufacturing ofLtd. Kenaf Bag 23 100 1970

8. Tanzania Bag Corporation Ltd. Manufacturingof Sisal Bas 7.5 60 1967

1/ After reorganization and merger7/ Date of share purchases by Texco

Indastrial Projects DepartmentFebruary lh, 1975

TANZANIA

MWANZA TEXTILE PROJECT

NATIONAL TEXTILE CORPORATION (TEXCO)

MAIN FINANCIAL INDICATORS OF SUBSIDIARY AND ASSOCIATE COMPANIES-in million shillings-

Fiscal Years Ending Friendship Natex Kiltex bIwanza Tanganyika Blankets E.A. Kenaf Tanzania Bag Total -December 31 1972 1973 1972 1973 1972 1973 1972 1973 5/1972 5/1973 1972 1973 1972 1973 1972 1973 1972 1973

(Prel.) (2 months)Income Statements

Net Sales 75.6 94.8 271.1 576.3 72.2 65.8 64.4 72.8 36.8 41.3 19.2 18.5 0.7 5.9 7.9 10.2 276.82/ 309.3/-'Operating Costs 58.2 69.1 252.8 529.7 62.6 59.7 52.8 60.1 29.4 27.7 15.6 15.6 2.8 8.3 5.8 7.8Financial Charges 3.4 2.5 1.6 3.1 3.6 3.5 3.2 2.9 3.1 2.8 0.7 0.7 0.4 3.0 0.5 1.2 16.5 19.7Depreciation 7.6 7.9 1.2 4.2 3.7 3.7 7.0 7.1 3.5 4.3 0.8 0.8 1.3 2.6 0.9 1.8 26.0 32.4Net Income Before Taxes 6.4 15.3 15.5 39.3 2.3 (1.1) 1.4 2.7 0.8 6.5 2.1 1.4 (3.8) (8.0) 0.7 (0.6) 25.4 55.5Taxes 2.2 7.9 5.6 15.7 - - - - 3.3 0.2 0.5 - - - - 8.0 27.4Net Income 4.2 7.4 9.9 23.9 2.3 (1.1) 1.4 2.7 0.8 3.2 1.9 0.9 (3.8) (8.0) 0.7 (0.6) 17.4 28.1

Balance Sheets

Current Assets 39.2 66.8 61.0 185.3 26.8 36.2 31.8 47.0 14.8 17.1 7.0 8.3 5.3 6.0 4.1 4.4 190.0 371.1Current Liabilities 5.2 19.4 51.3 163.2 25.8 39.7 46.0 58.7 24.9 23.8 5.7 7.2 7.2 7.5 6.5 7.3 172.6 326.8Net Fixed Assets 32.9 26.6 6.7 17.9 49.9 51.8 64.9 57.4 38.3 42.4 8.9 8.6 54.8 52.7 17.4 15.6 273.8 273.0Long Term Debt 32.6 32.1 - - 32.4 30.8 40.1 32.4 10.4 7.6 5.7 5.2 36.8 40.0 9.9 7.5 167.9 155.6Equity 34.3 41.9 16.4 40.0 18.5 17.5 10.6 13.3 17.8 28.1 4.5 4.5 16.1 11.2 5.1 5.2 123.3 161.7

Current Ratio 7.5 3.4 1.2 1.1 1.0 0.9 0.7 0.8 0.6 0.7 1.2 1.1 0.7 0.8 0.6 0.6 1.1 1.1Debt/Equity Ratio 48:52 43:57 - - 63:37 63:37 79:21 71:29 36:64 21:79 55:45 53:47 69:31 78:22 66:34 59:41 57:43 49:51

1/ Although Texco ownsonly part of the share capital of some companies, totals have been shown in order to give accumulateddata about the Texco controlled companies as a whole; see also Annex

/ Total sales of production facilties excluding Natex. Only by 1973, Natex has taken over all sales of the above companies;in addition it is handling imported textiles.

InLtats4al Projects Departmnt

Febrmar 14, 1975

TANZANIAMWANZA TEXTILE PROJECT

NATIONAL TEXTILE CORPORATION (TEXCO)FUTURE DEBT SERVICE PAYMENTS OF TEXCO

AND ITS SUBSIDIARY AND ASSOCIATED COMPANIES

-in million shillings-

Texco- Friendshi Natex3/ jt.e 4/ Mwanza I TanganyU%6/ Blankets-7 E.A. KenafQ/ Tanzania Bag 2 / Total

1975 2.7 2.3 1.9 2.6 12.1 2.5 1.0 4.4 0.5 30.01976 2.7 2.3 1.8 2.4 11.0 5.6 0.9 4.2 1.2 32.11977 2.7 2.3 1.7 2.3 8.5 9.5 0.9 3.9 1.1 32.91978 3.2 2.7 1.6 2.2 4.2 11.0 0.9 3.7 1.1 30.61979 3.7 4.3 1.5 2.0 0.1 10.. 0.8 3.5 1.0 27.01980 3.6 4.1 1.4 1.9 0.1 9.3 0.8 3.3 1.0 25.51981 3.6 4.0 0.5 1.7 4.5 0.7 2.0 0.9 17.91982 3.2 3.8 0.9 0.9 8.81983 23.5 3.7 0.8 0.9 28.91984 1.6 5.5 0.7 0.8 8.61985 1.6 5.2 0.7 7.51986 1.5 4.9 6.41987 1.4 4.6 6.01988 1.4 4.3 5671989 1.3 1.31990 0.9 0.91991 0.3 0.3

1/ Main portion for loan from Tanzanian Government for purchase of shares of Sunguratex, small other loans (foreign) for Kiltex share financing.2/ Loan by NDC (onlending of Chinese Government credit).3/ Loan by Tanzania Housing Bank.4/ 9% debenture stock issued to shareholders in 1972 when company was reconstituted.51 See Chapter II of report.6/ Mainly loans by Tanzania Investment Bank and East African Development Bank.7/ Loan by NDC.8/ Loans (guaranteed by Texco) by Italian equipment supplier and East African Development Bank.9/ Loan by East African Development Bank (guaranteed by Texco).

(D F

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 2-4

TANZANIA

MVANZA TkITILE PROJECTMWANZA TEXTILES LDT1D BOARD MEMBERS

Mr. N.A. RUsyesmau Chairman, Texco

Mr. Thorsteinsson Director., Texco

Mr. J.J. Malongo Director, Nyanza Co-operativeUnion Ltd.

Mr. L. Nungwana Nyansa Co-operative UnionLtd.

Mr. M. Ndimi Nyanza Co-operative UnionLtd.

Mr. K. Ng'wigala Nyanza Co-operative UnionLtd

Mr. G. Vaturi Director, Amenital HoldingRegistered Trust

Mr. F. Pieciotto Amenital Holding RegisteredTrust

Industrial 'Projects DepartmentFebruary 14, 1975

TANZANIAMWANZA TEXTILE PROJECTMWANZA TEXTILES LIMITED

ORGANIZATION CHART

GENERAL MANAGER I

WORKERS COUNCIL

MANAGEFt ~~~~~~~~~~CHIEF ACCOUNTANT PERtSONNEL MANAGER

SPINNIG M. 1 TR

r~~~~~~~~~~~~~~~~~~~~~~~~~~~~

. Spin ChEnneer Elesrtin- Ch. Designer Cost Act e i UMg,.~~~~~~~~~~~~~~~~~~M,

Industrial Pro-ecUs Depertreenl

February 1)4, 1975 World Sank-9173

ANNEX 2-6

TANZANIA

MWANZA TEXTILE PROJECT

INCOME STATEMEN'TS - HISTORICAL -- in million shillings -

Eiscal Year Ending December 31 19692/ 1970 197 1972 1973 1974(19 -months) (Prelimi-

nary)Production

Tn million linear meters 7.7 12.3 16.5 18.2 20.0 22.62/

Sales 1/ 14.5 39.3 57.3 64.4 72.8 104.1Changes in Stock 6.5 2.4 ( 5.4) ( 1-3) 0.4 1.9

Direct Costs

Cotton 7.8 7.4 11.7 15.6 16.5 33.7Cotton Yarn - - - 1.2 3.0 6.6Salaries and Wages 5.3 7.1 9.3 10.5 12.0 15.3Dyes and Chemicals 1.7 8.4 9.3 7.6 9.7 13.0Other Materials 1.2 3.9 2.9 4.0 3-5 2.0

16.0 26.8 33.2 38.9 44.7 70.6Giross Profit 5.0 14.9 18.7 24.2 28.5 35.4

Operating Expenses

Power and Utilities 1.9 1.9 2.7 2.0 2.4 3.0Spare Parts 0.8 1.7 1.8 2.5 2.5 4.1Salaries o.6 1.0 1.6 1.9 1.8 2.4Managing Fee - 0.4 0.5 o.6 1.0 0.8Other Expenses o.6 2.6 2.0 2.4 1.9 7.2Interest on Short-Term

Borrowings 1.0 2.3 2.5 2.2 1.8 3.3

4.9 9.9 11.1 11.6 11.4 20.8

Operating Profit 0.1 5.0 7.6 12.6 17.1 14.6

Depreciation 4.6 5.4 7.0 7.0 7.1 7.3Interest on Long-Term Debtk 2.6 3.0 3.3 3.2 2.9 2.2

Net Income for Fscal Year ( 7.1) ( 3.h) ( 2.7) 2.L 7.1 5.1

4djustments for Prior Years andOther Expenditures - 0.1 ( 1.5) 0.1 ( 1.7) _

Transfers to/from Foreign Ex-change Fluctuation Reserve 7.4 ( 1.1) ( 2.5) ( 1.1) ( 2.7) -

Net Income 0.3 ( 4.) ( 6.7) 1.L 2.7 5.1

Net Inoem an % of Sales 2% -11% -12% 2% 4% 5%

1/ Excluding Excise Duty and Sales Tax.2/ Commercial operations started in June 1963; operations in 1963 are included in- 1969 statements.3/ Including 1.5 million meters processing of purchased grey fabrics.

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 2-7

TANZANIA

MAUTZA 'TEX'TILE PROJECTCASH FLOW ST iTK.ENTS - HISTORICAL -

- in million shillings -

Yiscol Yenr Ending Deceiber 3- 1969 197G 1971 1972 1973 1974(Preli-

SOURC3; minary)

Net Income before Taxes andInterest 2.9 ( 1.) ( 3.) 4.6 5.6 7.3

Depreciation 4.6 5.4 7.0 7.0 7.1 7.3

7.5cl 4 .o 3.6 11.6 12.7 14.6

Current Lipbilities 27.7 .4 12.8 (10.0) 13.2 ( 5.8)-Long-Term DebtForeign 1/ 55.1 1.1 3.LI 1.1 2.9Local - 13.C - - -

55.1 14.2 3.4 1.1 2.9 -

90.3 22.5 19.8 2.7 28.8 8.8

.'-,PL C~TI0US^

Repayments, of Long-Terr Deb i -Foreign Loans 3.5 7.0 3.6 4.1 9.0 8.2Local Loans - 0.1 1.1 3.1 2.1. 2.1

3.5 7.1 14.7 7.2 11.1 10.3

Interest on Long-Term Deb-tForeign l,oans 2.6 2.8 2.5 2.3 2.3 1.8Local Loans - 0.2 o.8 0.9 o.6 0.4

2.6 3.0 3.3 3.2 2.9 2.2v,ixeul tSsetq 83.5 4.6 1. 3 0.o6) (0o.4) 2.0Receivable- L.2 5.3 5.8 (10.8) 4.9 7.8Inventories 16.L4 2.5 1.7 ]. 15.6 (14.5)

110.2 22.5 16.8 0.4 34.1 7.8

Cash Surplus/Deficit of F'Y (1§.9) 0.0 3.0 2.3 5.3 1.0accurulated Cash 0.0 0.0 3.0 5.3 0.0 1.0

Debt Service Coverage / 102 0.4 0.5_/ 1.1 0.9 Z/ 1.2

1/ Fror. 1970 - 1973 mainly currency exchange rate fluctuations.

2/ Rep.rrnents for 1971/1972 were resohecduled to 1973 - 197'` in view of lowprofits in 1970 and 1971 and also in view of the Compa.ry's high debt/equity ratio.

Industrial Projects DepartnentFebruary 14, 1975

ANNEX 2-8

TANZANIA

MWANZA TEXTILE PROJECT

BALANCE SHEETS - HISTORICAL -- in million shillings -

Fiscal Year Ending December 31 1969 1970 1971 1972 1973 1974( Preli-

AS3ETS minary)

Current Assets

Cash and Bank Deposits 0.0 0.0 3.0 5.3 0.0 1.0

Receivables and Advances 4.2 9.5 15.3 4.5 9.4 17.2Inventories 16.4 18.9 20.6 22.0 37.6 23.1

20.7 28.4 38.9 31.8 47.0 41.3

Fixed Assets

Gross Value 80.2 84.9 88.1 88.3 88.5 90.5Accum. Depreciation 4.6 10.0 17.0 24.0 31.1 38.4Development Expenditures 3.3 3.3 1.4 0.6 - -

78.9 78.2 72.5 64.9 57.4 52.1

TOTAL ASSETS 99.6 1o6.6 111.4 96.7 104.4 93.4

LIABILITIES AJND CAPIT.iL

Current Liabilities

Short-Term Borroaings 22.4 22.2 22.1 20.4 14.5 20.6Creditors 5.3 9.9 22M8 14.5 33.6 21.7Current Portion of Long-Tern

Debt 7.1 4.7 7.2 11.1 10.6 10.3

34.8 36.8 52.1 46.o 58.7 52.6

Long-Term Liabilities

Foreign Loans 51.6 45.7 45.5 42.5 36.4 28.2Local Loans - 12.9 11.8 8.7 6.6 4.5

51.6 58.6 57.3 51.2 43.0 32.7Current Portion of Long-Term

Debt 7,1 4.7 7.2 11.1 10.6 10.3

Net Long-Term Debt 44.5 53.9. 50.1 40.1 32.4 22.4

E-qui ty

Share Capital 20.0 20.0 20.0 20.0 20.0 20.0Accumulated Losses ( 7.1) ( 10.4) ( 14.6) (12.1) ( 6.7) ( 1.6)Currency Fluctuation Reserve 7.4 6.3 3.8 2.7 -

20.3 15.9 9.2 10.6 13.3 18.4

TOTAL LIABILITIES AND CAPITAL 99.6 106.6 111.4 96.7 104.4 93.4

Current Ratio o.6 0.8 0.7 0,7 0.8 0.8

Dbbt/Equity Ratio 69:31 77:23 84:16 79:21 71:29 55:45

Industrial Projeots DepartmentFebruary 14, 1975

T AflZ 4N TA

MWANZ4 TEXTILE PROJECTPROJECTIONS wIrHOUT EXPANSION

-in million Shillingts-

1 2 3 4 5 6 7 8 9 10 11 121975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

INCOME STATEMENTS

PRODUCTION

IN MILLIONLINEAR METERS 22.7 22.7 22.7 22.7 22.7 22.7 22.7 22.7 22.7 22.7 22.7 22.7

SALES 107.6 107.6 107.6 107.6 107.6 107.6 107.6 107.6 107.6 107.6 107.6 107.6

DIRECT COSTS

COTTON 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5COTTON YARN 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7SALARIES & WAGES 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4DYES & CHEMICALS 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5OTHER MATERIALS 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6TOTAL 66.7 66.7 66.7 66.7 66.7 66.7 66.7 7 66.7 66.7

GROSS PROFIT 40.9 40.9 40.9 40.9 40.9 40.9 40.9 40.9 40.9 40.9 40. 9 40.9

OPERATING EXPENSES

UTILITIES 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0SPARE PARTS 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5SALARIES 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9MANAGING FEE 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0OTHER EXPENSES 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0INTEREST ST DEBT 2.5 2.0 2.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 0 1.0TOTAL 18.9 18.4 .4 1 17 17.4 17.4 17.4 17. 17.4 7T 17.4 1.

OPERATING PROFIT 22.0 22.5 22.5 23.5 23.5 23.5 23.5 23.5 23.5 23.5 23.5 23.5

DEPRECIATION 8.1 8.1 8.1 8.1 8.1 8.1 8.1 0.0 0.0 0.0 0.0 0.0INTEREST LT DEBT 1.8 1.1 0.3 0.1 0.0 0.0 0.0 0 0.0 0.0 0.0 °°-

INCOME BEFORE TAX 12.1 13. 3 14.1 15. 3 15 4 15 .4 15 23 .5 23 5 23. 5 235 23.5

TAXES (45%) 4 6.o 3 6 6 6 lo. 10.6 10.6 10.6 10.6NET INCOME 6.7 7.3 7.8 5.4 8.5 3.5 8.5 12.9 12.9 12.9 12.9 12.9

DIVIDEND 0.0 0.0 0.0 0.0 6.6 6.8 6.8 6.8 9.2 10.3 10.3 10.3RETAINED INCOME 6.7 7.3 7.3 3.4 1.9 1.7 1.7 6.1 3.8 2.6 2.6 2.6ENDING BALANCERETAINED EARNINGS 5.1 12.4 20.1 283.5 30.4 32.1 33.8 40.0 43.8 46.3 48.9 51.5

Industrial Proiects DepartmentFebruary 14, 1975

T4Z 10'IA

MWO.JZb TEXTILE PROJECTPROJEC.,IOOS WTOIYEL;T EXPANSION

-in ml)Slrns 2h. ns

0 ;4 1 1; 5 6 7 8 9 In 11 121975 107r 1 1973 117 137 1q50 1331 193.2 19T3 1084 1985 1986

FUND FLO\I

SOURCES OF FUNDS

INCOMIE BEFOREINTEREST AND TAXES 13.9 14.4 14.h 15.4 15.4 15.4 15.4 23.5 2.5 23.5 23.5 23.5DEPRECIATIONJ 3.1 3.1 8.1 3.1 83. 3.1 3.1 oIo n.o 0.0 0.0 0.0-OPER.CASII FLOII 22.0 22.5 22.5 23.5 23.5 23.5 23-5 21.5 23.5 23.5 23.5 23.5SI1ARE CAPITAL 0.0 0.0 0.0 n,n0 0.0 0. 0.0 0.0 0. 0.0 ol00 0o.IBRD LOAli 0.0 0.0 0.0 0.0 0.0 0.0 o.0 0.0 0.0 0.o 0.0 0.0KUIIAIT FUND) 0.0 0.0 0.0 010 0.o0 0.0 0.o 0.0 . 0.0 0.0 0.0OT11ER FOREIGON LOAN 0.0 0.0 .0 0. 0 0.0 0.0 9.0 0., 0 o 0.0 0.0 0.0LOCAL LOAN 0.0 0.0 0.0 .0 0. 0 0 0.3 0.0 o.0 0.0 0.0 0.0 0.0TOTAL SOURCES 22.0 22.5 22.5 23.5 23.5 23.5 23.5 23.5 23.5 23.5 23.5 2 3. 5

AP0

LICATIOFI

FIXED ASSETS 2.0 2.0 2.' 2.0 2.0 2.0 0.90 00 0.o 3.0 0.0 0.0WORKING CAPIITAL 2.5 3.5 5.5 7.1 0.0 o 0.0 0o.o0 0. 0 0.0 0.0 0.0 0.0INTEREST LT DEBT 1.8 1.1 0.3 0.1 0.0 0.3 0.0 0. 0.0 0.0 0.0 0.0LOAN REPAYMENTSIBRD LOAFl 0.0 0. 0.0 0.0 0 .1 0.03 0.l 0 0 0 0.0 0.0 0.0KUWAIT FUIID 0.0 0.0 0. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.o 0.0OTH1ER FOREIGN LOAII 3. 2 3.1 n 3. 3.0 o .0 D . C 0 0 n o n.0 0.0 0.0LOCAL LOAN 2.1 1.0 0.2 0.2 0.1 0. 0.o0 0.0 0.0 0.0 0.0 0.0TOTAL REPAYMENTS 10.3 0.9 * .2 I. 0O.1 0. 0.I 0.0 0.0 0.0 0.0 0.0

TOTAL DEUTSERVICE 12.1 11.0 3.0 4.2 O.1 0.1 o.0 0.0o 0. 0.0 0.0 0.0TAXES 5.4 6.0 6. 3 6.) 6.3 6.) 6.0 1 i.6 lo.6 lo.6 10.6 10.5DIVIDENJDS 0.0 0.0 3.0 o0.0 6*.5 . 6. G, 6.8 3.2 In.3 lo.3 10.3TOTAL APPLICATION 22.0 22.5 152 3 20.2 15.o VT 13.7 17.4 19.7 20.9 20.3 20.3== == = == = = == == == = = _= == == = _= = = = == == == = == == == = == == == = == == == = == == = = == =r== = == == == = =

YRLY CASII i/ALAF!EE 0..0 00 .1 3.3 7.) 7.7 0.2 6.0 3.8 2.6 2.6 2.6ACCUMULATEDCASII SURPLIJS 0n.0 0.0 0 .0 3.) 1 1. 1^) 20.7 34.) 3°.7 41.2 43. 46.4

R A T I O S

INCOME BEFORF TAXAS 0. OF SALES 11.2 12.4 13.1 14.2 14.3 111. 14.3 71.3 21.8 21.3 21.3 21.3DEBT iERVICE COV. 1.3 2.9 2.6 53, 0.0 0. 0.0 0o. n n0 .0 0.0 0.0rCURREIIT RATIO o.0 0.9 1 1.5 15 1.5 1.5 1.5 1.5 1.5 1.5 1.5DEOT/EOUITY RATIO 0.33 O.1 0. 0. 0.00 0.00 0.5lO 0.00 0no n. 9.00 0.00 OO 3 0.0

1REAK-EVEN P()INTS

PROFIT BREAi -EVEI.CAPACITY 0.70 0.L7 5.0( 0.(3 0.67 0.G2 O. 2 0n.3 0. 43 O.43 0.113 0.43PRICE LEVEL 0.39 9.30 9.37 .0 o .-35 o .ns 00,. 7 D 0 .78 3.7R o.7 01.78

CAS I BREAI-EV/ENCAPACITY 0.7r 1.72 Crj 0C.5, 0.43 0,i3 0.4 o0.43 0.4? 0.43 0.43 0.43PRICE LELVL 09I n9 n.°7 1).!)2 0 . 7 ' 0.78 0 .7 0 .7P, 0.- r).73 n o 0.73 ' 0.78 Industrial Projects DepartmentFebruary 14, 1975

TAINIZ ANl

MWANZA TEXTI'E PROJECT

PROJECTIONS WITHOUT EXPANSION

-in million Shillings-

1 2 3 4 5 6 7 S 9 10 11 121975 1376 107- 197P, 197) 1930 1321 132 1933 1Q84 1085 1986

BALANCE SHEETS

CURRENT ASSETS

CASH 1.0 1.0 1.0 1.9 1.0 1.0 1.0 1.3 1.D 1.0 1.0 1.0RECEIVABLES 13.3 3.3 8.3 °.3 3.3 3 3. 3.2 2.3 3.3 3.3 3.3 3-3INVENTORY 30.0 43.3 43.s 43.9 4,3?,9 I!3.J 3. 4'. 4?.C 43.° 1139 43.nTOTAL 'I * 3 52.3 52.3 2 52. 523 r2 . 3 52. 3 2.3 r2.3

ACC.CASH SURPLUS 0.0 0.9 9.0 , 13 . 20.7 31 3.7 21.2 43.3 4r.4

FIXED ASSETS

GROSS FIXED ASSETS 92.r 91.5 . 5 90.5 10n.5 102.5 102.5 132_ l2.5 102.5 192.5 102.5ACC DEPRECIATION 46.5 54. 3 2 .7 79. 73 9 37-9 '5.1 92.1 5. 1 35.1 r.1 9r, 1NET FIXE[ ASSETS 4f 3399 33 13 27.7 21 . 15.5 7. 7.3 74 7 7.4 4 74

TOTAL ASSETS 90.3 2.2 39.1 33.3 35.1 3 .7 9 .11 371.5 P.O4 100.9 103.5 106.1

CURR. LIABILITIES

CREDITORS 25.0 25.0 20.0 29.9 2 2.9 20.0 20.9 20.9 20.0 20.0 20.0 20.0ST 3ORROIIINGS 17.3 22.3 21.7 1. 141.G 114.f 14.6 14.f 14.6 211r 1_4 14.2CURRENT LT DEBT 9.9 3.2 4.1 0.1 0.1 0.9 0.0 9..n n.o 2. 0.0 '¾.TOTAL 52.7 55.5 145 T. 34.7 3 4.7 . T F 34.5 31. f , 3 f4

LONG TERt1 DEBT

IBrD 0.0 0.0 9.9 0.0 0.0 0.. 0 9.2 2.2 3. 0.0 0.2KUWIAIT FUND 0.0 o.n o.o 0.0 0.0. . 0.9 . 9.0 oo .n0 2.0 0.1 0.3OTHIER FOREIlrr LOAN 20.0 11.9 3.9 9.0 0.° 0. 0. n.o .n n0.9o .o 0.LOCAL LOAN 2.4 0.6 o0.4 9.2 0.1 9.0 n .o n0.2 0.9 9.9 9.o o.oTOTAL 22.4 12.5 4.3 O.2 0.1 0.0 Q.0 0.0 O.3 0.n 3.0 o.o

LESS CURRENT 9.9 3.2 4.1 3.1 0.1 0. .0 . 0 0.0 0.9 0. 0.9 2.NET LT DEBT 12.5 0.2 0.1 0.0 0.1 0o.0 0.3 9.9 0.0 0. 0.0

E0IJITY

SHARE CAPITAL 20.0 20.0 20.9 90.0 20.0 2.0 r r) 20 3.9 n. or 29.9 20.0 20.0 nRETAINED EARNINGS 5.1 12.4 20.1 23.5 r 1 4 32.1 237 )9*9 13.0 * 483 5TOTAL 25.1 32.1 1

l 49.0 50-4 52.1 53. -- .2 ',3.: (63 8-92 71.5 :

TOTAL LIABILITIES n0.2 92.2 2f.3 33.' 25.1 ,97 '0.1 ! 1.4 100.9 193.5 10f.1 5

«ngustria1 PriNets DepartmentWr U4rll, 1 7~

TANZANIA

MWANZA TEXTILE PROJECT

WOVEN FABRICS PRODUCTION, CONSUMPTIONJ

IMPORTS AND EXPORTS, 1970-74

(in million linear meters)

C o t t o n F a b r i c s Blended Fabrics T o t a I

Avai- Avai- Avai- Apparent

lable for lable for lable for Population Consumption

Production Imports Exports Home Market Imports Home Market Production Imports Exports Home Markets (million) per capita 1!

1966 8.0 50.5 - 58.5 19.5 19.5 8.0 70.0 - 78.0 11.3 6.9

1967 10.0 30.0 - 40.0 12.0 12.0 10.0 42.0 - 52.0 11.6 4.5

1968 33.5 31.5 0.4 64.6 12.2 12.2 33.5 43.7 0.4 76.2 12.0 6.4

1969 53.3 31.6 0.5 84.4 7.3 7.3 53.3 38.9 0.5 91.7 12.4 7.4

1970 60.2 9.7 4.4 65.5 13.8 13.8 60.2 23.5 4.4 79.3 12.6 6.3

1971 66.2 4.9 4.7 66.4 9.2 9.2 66.2 14.1 4.7 75.6 13.2 5.8

1972 70.2 1.0 2.0 69.2 13.9 13.9 70.2 14.9 2.0 83.1 13.6 5.5

1973 74*.0i/ 12.9 1.8 85.1 21.3 21.3 74.0 34.2 1.8 106.4 14.0 7.6

1974 7 6 . 32/ 12.5 3.0 85.8 28.2 28.2 76.3 40.7 3.0 114.0 14.4 7.9

1/ Linear meters - Average Weight 158 gns/m

2/ Contains 2.3 million meters of imported gray in 1973 and 4.5 million meters in 1974.

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 3-2

TANZANIA

MWANZA TEXTILE PROJECT

FIBRE CONSUMPTION OF SEIECTED COUNTRIES(In kg per capita)

1964 1968 1970 1M 1980

Tanzania N.A. 1.4 1.4 1.7 2.0Tunisia N.A. 3.1 4.3Morocco N.A. 3.7 3.7Ivory Coast N.A. 4.1 4.1Senegal N.A. 3.8 3.8Nigeria N.A. 1.8 1.8Africa 1 i.6 N.A. 1.9Western Europe 11.3 N.A. 12.7North America 17.6 N.A. 20.5Developing Countries N.A. N.A. 2.8Asia 2/ N.A. N.A. 2.3

1/ UNDP INT/71/032 May 1973

2/ Excluding South Africa

y/ Excluding Japan

Industrial Projects DepartmentFebruary 1h, 1975

TANZANIAMWANZA TEXTILE PROJECT

PROJECTED WOVEN FABRICS PRODUCTION, CONSUMPTION, IMPORTS AND EXPORTS

(In million linear meters)

Local Total Net Essential Imports (Exports) Population Consumption (inYear Consumption Production Imports .f I Balance 2/ (million) m.per Capita)

in.i 2 Nax. Min. Xax. Min. Max. Min. Max.

1973 1/ 106 128 74 32 54 17 15 37 14.0 7.6 9.11974 1/ 114 133 76 38 57 16 22 41 14.4 7.9 9.21975 116 139 85 ! 31 54 17 13 37 14.8 7.9 9.41976 121 145 93 28 52 18 10 32 15.2 8.0 9.51977 127 151 102 $ 25 49 19 6 30 15.6 8.1 9.71978 132 157 112°/ 20 45 19 1 26 16.0 8.2 9.81979 137 164 117 20 47 21 (1) 26 16.5 8.3 9.91980 144 171 122 °/ 22 49 21 1 28 17.0 8.4 10.01981 150 179 122 28 57 22 6 35 17.4 8.6 10.21982 156 186 122 34 64 22 12 42 18.0 8.7 10.3

1/ Actual, Projections based on the apparent consumption in 1974 and on annual growth rate of 4.3 thereafter. 4.3% thereafter./ Projections based on the estimated demand (including 19 million latent demand) in 1974 and on annual growth rate of /

LI Cotton fabrics capacity of 84 million meters plus 1 million meters blended fabrics capacity startingfrom 1975

i/ Capacity of present mills at attainable productivity plus minor expansions already approved -and in progress./ Mwanza expansion at 50, 75 and full capacity in 1978, 1979 and 1980 respectively.

7/ Allowing for export of about 2 million meters in both 1973 and 1974 (i.e. apparent consumption plus anotional 22 million meters in 1973 and 19 million meters in 1974 being TEXMG's estimates for unsatisfiedor latent demand in those years)

8/ Fabrics which cannot be made in Tanzania.9/E = A - (B + D)

Industrial Projects DepartmentFebruary 114, 1975

ANMEX 3-1

TANZANIAMWANZA TEXTILE PROJECT

PROJECTED COTON FABRIC PRODUCTION. CONSUMPTION,IMPORTS AND EXPORTS

(In million linear meters)

Local Total Net Imports 6Essential Import (Export)Demand Production (Ecports) 6/ Imports 1/ Balance

A B C D E

Year Min. . Max. M. Mn. Max. 1!!Ln. Max.

1973 2/ 85 103 74 11 29 3 8 261974h1/ 87 107 76 11 31 2 9 291975 92 112 84 8 28 3 5 251976 96 116 92 4 24 3 1 211977 101 121 101 0 20 3 (3) 171978 105 127 111i / (6) 16 3 (9) 131979 109 132 116 (7) 16 4 (11) 121980 1'4 138 121 (7) 17 4 (01) 131981 119 144 121 (2) 23 4 (6) 191982 124 150 121 3 29 4 (1) 25

j Actualz/ Projections based on the apparent consumption in 1974 and on annual growth

rate of 4.3% thereafter.3/ Projections based on the estimated demand in 1974 (i.e. apparent consumption

plus a notional 18 million meters in 1973 and 20 million meters in 1974 being,TEXCO's estimate for unsatisfied or latent demand in those years)

4/ Capacity of present mills at attainable productivity plus minor expansionsalready approved and in progress.

5/ Mwanza expansion at 50, 75 and maximum capacity in 1978, 1979 and 1980respectively.

6/ Allowing for export of 2 million meters in both 1973 and 1974.7/ Fabrics which cannot be made in Tanzania.

§/E = A - (B + D)

Industrial Projects DepartmentFebruiary 14, 1975

ANNEX 3-5

TANZANIAMWANZA TEXTILE PROJECT

PROJECTED REQUIRE1ENTS OF FABRICS 1/OTHER THAN PURE COTTON FABRICS

(In million linear meters)

Local Total Net Essential Import (Export)WYear Demand Production Imports Imports Balance

A B C D

Min. Max. Min. Max. Min. Max.

1973 2/ 21 25 - 21 25 14 7 111974 V 27 26 - 27 26 14 13 121975 2 4 i 2 7 1 23 26 14 9 121976 25 29 1 24 28 15 9 131977 26 30 1 25 29 16 9 131978 27 30 1 26 29 16 10 131979 28 32 1 27 31 17 10 141980 30 33 1 29 32 17 12 151981 31 35 1 30 34 18 12 161982 32 36 1 31 35 18 13 17

1/ Including all synthetic fabrics, blended fabrics and woolen fabrics./ Actual

]/ Projections based on the apparent consumption in 1974 and on annualgrowth rate of 4.3% thereafter.h/ Projections based on the estimated demand in 1974 and on annual growthrate of 4.3% thereafter.

i Fabrics which cannot be produced locally for technical or economicreasons.

~/E = A _(B + D)

Industrial Projects DepartmentFebruary l4, 1975

ANNEC 3-6

TANZANIA9WeZk TEXTILE PROJECT

TRADING ACTIVITIES OF NATEX

In TS Million

Purchases of Sales ofYear Total Sales Export Sales Imported Goods Imported Goods

1971 176 37 72 711972 271 22 86 105197 i 573 10 31h 218197iil/ 650 10 500 N.A.

1/ National Textile Industries Corporation, Limited

2/ As from 1973 sales of agricultural bags and Hessian cloth

are included.

32/ Estimated

Industrial Projeots Department

February i4, 1975

ANNEX 3-7

TANZANIA

MWANZA TEXTILE PROJECT

MAXUM RETAIL PRICES OF TYPICAL TEXTTILE FABRICSPRODUCED BY I4WANZA TEXTILES, LTD.

Price Price vFabric Unit TS -US

White sheetings Metei 5.00 0.70Combed twi Meter2 9-55 1.34Khanga - Pair v 39.10 1.63White poplin Mfeter 6.35 0.89Dyed deni4 Meter 5.85 0.82Kitenig Meter 8.30 1.16Java Meter 11.20 1.57

v Screen printedv 3.35 N/ Roller printed

M Per linear meteri Discharge screen print

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 3-8

TANZANIA

MWANZA TEXTILE PROJECT

DOMESTIC PRICE STRUCTURE OF TYPICAL PRINTED FABRICS(Tsh per meter)

EX-FACTORY EX-FACTCRY EXCISE SALES COST NATEX SELLING PRICE RETAIL

FABRIC!/ COST PRICE DUTY TAX TO NATEX WHOLESALE SUB-WHOLESALE PRICE

KITANGE 5.45 5.20 0.35 1.45 7.00 7.15 7.55 8.30

KHANGA 4.44 5.84 0.35 1.31 7.50 10.10 10.60 11.67

V Mwanza Textiles Limited

Industrial Projects DepartmentFebruary 14, 1975

Ah'NEX -3-9

TANZANIA

IANZA TEXTILE PROJECTELJFACTCIY SEULLIG PRICES OF WOVEN FA=ICS

(In U$ per meter)

Typical zill 1 2/Fabric in U.S.A. 1wanza Textile iLtd.-

bhite shootings 0.35 o.46

Ccabed twill 0.80 0.83

Xhangal/ 0.47 0.81

'Wite poplin 0.37 0.68

Dayed denim 0.41 0.50

Kitenge 0.58 0.75

1/ January 1975 prices1/ October 19714 prices, excluding Sales Tax and Excise Duty

/ The average price for 35% roller prints, 35% areen printsand 30% discharge (screen) prints.

Industrial Projects DepartmentFebruary 114, 1975

ANNEX 3-10

TANZANIAMNANZA TEXTILE PROJECT

IDlORTS OF FABRICS AND TEXTILES BY COUNTRY OF ORIGIN

(As a percentage of total)

1970 1971 1972 1973 197h2;!PeoplesRepublic ofChina 25.0 4t3.0 28.5 51.6 40.0Japan 32.0 21.0 18.8 N.A.Kenya 2.6 2.6 25.1 N.A.Hongkong 6.5 11.0 10.5 N.A.India 7.7 3.0 N.A. N.A.Others 26.2 2.3 17.1 48-4 60.0

Total 100.0 100.0 100.0 100.0 100.0

-_--

a/ Estimated

Irndustrial Projects DepartmentFebruary 14, 1975

ANNEX 3-11Page 1

TANZANIA

MWANZA TEXTILE PROJECT

EXPORT PROSPECTS OF TEXTILE INDUSTRY OF TANZANIA

1. In assessing future export opportunities for cotton fabrics,special consideration has to be given to Uganda and Kenya which are membersof the East African Community (EAC). Tanzanian goods are not subject toimport duties which for the cotton fabrics originating from outside theEAC amount to 45% (page 5). Uganda traditionally has been an exporter ofcotton fabrics (mostly to Kenya) and in the years 1970-72, its exports ofcotton fabrics exceeded imports by 20 million meters. Recently, however, dueto economic problems the textile industry has been reported to operate at afraction of its capacity. Kenya is currently importing textile fabrics at arate of 40 million meters per annum, including 8 million meters of cottonprints. At this moment, there are in Kenya two textile projects under con-sideration with a total capacity to produce 22 million meters per annum by1977 and 47 million meters by 1980. It is estimated that in terms of cottonprints, Kenya will be self-sufficient by 1977 and by then, only a small pro-portion of other imported fabrics will be of the type which can be produced inTanzania (page 6).

2. Erection of new and/or expansion of the existing manufacturingplants have also been reported in Zaire, Zambia, Sudan, Malawi and Ethiopiaand it appears that most African countries have plans to become self-sufficientby the end of the decade as far as cotton textile fabrics are concerned. Also,in some African countries (Zambia, Somali), a portion of the textile require-ments are being supplied on concessionary terms by the Peoples Republic ofChina eliminating almost completely the requirements for regular commercialimports. Consequently, future exports of Tanzanian cotton fabrics to theAfrican countries are most likely to be limited to occasional sales anc itappears that opportunities to build a sizeable and permanent market in thesecountries do not any longer exist.

3. In the period 1967-1971 the world imports of cotton textiles fromdeveloping countries increased from US$217 up to US$284 million, i.e. 31%,while the total world imports of cotton fabrics grew from US$827 up toUS$1,192 million, i.e. by 44%. 1/ Consequently, while the number of develop-ing countries exporting cotton fabrics has increased, their share of the worldmarket has declined. There are two reasons to explain this trend. Firstly,the quality of fabrics supplied by the developing countries is relatively

1/ Source: UNCTAD Secretariat, International Trade in Cotton Textiles andthe Developing Countries: Problems and Prospects, August 1973.

ANNEX 3-11Page 2

low so the imports are mainly limited to gray goods. In 1972 the EuropeanEconomic Community (EEC) imported $170 million worth of cotton fabrics fromthe developing countries out of which only $11 million or 6.5% were finishedfabrics. In total, EEC imported during 1972 $559 million worth of cottonfabrics so the finished fabrics from all developing countries accounted forless than 2% of the imports. Secondly, the developing countries exportmostly cotton fabrics, the importance of which in world trade has beensteadily declining. In the period 1967-1971 world imports of man-madefabrics increased from US$682 to 1,263 million, i.e., by 85% or twice therate of growth of cotton fabrics. In 1960, cotton accounted for 68% of alltextile fibers used. By 1970 this figure had decreased to 55% and it isestimated that by 1980 the cotton share will be as low as 38%. On the otherhand, the share of polyester increased from 1% in 1960 to 11% in 1970 and isexpected to reach 24% in 1980.

4. With the exception of a few thousand samples of Khanga and Kitengeprints distributed through the Tanzanian embassies in USA and Europe, noserious attempt has ever been made to explore the export opportunities forTanzanian textiles outside Uganda and Kenya. The current productivity(page 7) of the Tanzanian textile industry is low and also the cost ofmachinery, spare parts, dyestuffs and chemicals is approximately 25% abovethe level prevailing in Europe and USA. Consequently, the costs and sell-ing prices of Tanzanian textiles usually would not be competitive (pages 8,9 and 10) in the world markets. Tanzanian fabrics entering EEC would besubject of a 13.5% duty as compared with no duty for EEC member and asso-ciate member countries (Tunisia, Greece, Morocco, Spain and Portugal).Also, the freight from Dar-es-Salaam to European ports would be more costlythan from the Mediterranean countries. In Asian countries, the wage ratesare usually lower (page 11) and labor productivity higher than in Tanzania,and Tanzanian cotton fabrics are not competitive in export markets withtextiles from such exporting countries as Taiwan, Hongkong, South Korea andPakistan, which dominate the world export markets. Actually, cotton fabricsfrom Taiwan, Pakistan and Hongkong can be landed in Dar-es-Salaam 35-45% belowthe prices of the similar local goods (page 8). It appears, therefore, thatthe prospects to develop export markets for Tanzanian cotton fabrics in Europeare not too good and extreme caution has to be exercised in planning any ex-port oriented investments in the immediate future.

5. At the same time, as part of its economic development program,Tanzania wants to decrease the share of raw cotton exports in favor of anincreased export of cotton yarn and fabrics (page 12). The Governmenthopes eventually to increase the share of cotton to be processed in Tanzaniaup to 60%. The cost of such a program is estimated to cost US$400 millionwith US$300 million foreign component. Such a program would create anexportable surplus of 200 million meters. However, there is no evidencethat export markets can be easily developed to absorb even a small portionof this output. It appears that before sizeable exports can be developedthe productivity of the industry has to be improved and the costs have tobe drastically reduced. Also, a considerable amount of market and merchandis-ing research and development has to be done regarding quality, styling, pricingand distribution before any definite plans for export oriented facilities areformulated.

ANNEX 3-11Page 3

6. It appears that Tanzania probably has a greater comparative advan-tage in the production of cotton-polyester blended fabrics (based on localcotton and imported polyester fibre) than in pure cotton fabrics. The mainreason for this is that Tanzanian AR grade cotton is of a type that is tech-nically ideally suited for the manufacturing of fine blended combed fabrics.This type of cotton is available in limited quantities only in some partsof the world (Egypt, Sudan, Peru, Southwest USA).

7. The potential foreign exchange savings associated with a polyester-cotton blended fabric project appears also attractive. On average the landedcost in Dar-es-Salaam (excluding duties and taxes) of standard 65/35 polyester-cotton fabric in 1974 was US$1.00 per meter. In other words, a 10 millionmeter project would substitute US$10 million worth of imports per annum. Theannual foreign exchange costs of operating such a factory would be about US$6million (page 13). The foreign exchange savings associated with the projectwould be therefore of the order of $ 4 million per annum. Furthermore, itis quite possible that - because of the type of cotton grown in the country- Tanzania could manufacture fine blended combed fabrics at an internationallycompetitive cost level and develop permanent export business in this rapidlygrowing market.

Page 4

TANZNIA

MWANZA TEXTILE PROJECT

MU1L - DOORT WTIS FOR T.T1LE FABRICS2I

- ~~~A B

,ii1liiigs DE S. *1. %- A Valowa

-W nd Bleached 2.50 45

Ds. 1 d Td - 3.80 45

Priats30

Oth . ° ° 30

i/ The datiy is ad Valorem but not less than the specific diztyin Colnm A.

Industrial Projects DepartmentFebmary 114, 1975

ANNEXI 3-11Page 5

TANZANIIA

NWJNZA TEXTILE PROJECT

KENYA - DE14AND PROJECTION FOR TEXTILE FABRICS

CONSUMPTION PRODUCTION IMPORTS

FABRIC PRINTED OTHER PRINTED OTHER -PRIII1E OTHER

197h 20 50 12 21 8 29

1977 27 55 20 35 7 20

1980 35 65 35 45 - 20

1/ Industrial Development Bank of Kenya

Industrial Projects DepartmtFebruary 14., 1975

kNNEX 3=11Page 6

TAMZANIAIAA TEXTILE PROJECT

COKARISON OF WA/VHJ PP1lCTIVITI AND LABOR COST/111? IN SPINNING AND WEAVING

19691J 1974 1/

TANZANIA U.S.A. TANZANIA U.S.A. MWAZA

Average Wage/Hourin tJS 0 includingfringe benfits 33.3 310.0 l1.4 424z.0 56.o

Kgs. of 20 cc.produced per n hour 2.7 17.9 2.3 20.1 2.6

Labor cost per kg.in us 0 12.3 17.3 17.9 21.0 21.5

WEAV.IG

Thousand meters ofWeft inserted per Dm- 21hour 19.0 156.0 13.9 175.0 23.0 -

Labor cost per thousadmeters of Weft insertedin US 0 1.8 2.0 2.9 2.4 2.0

1f Average./,f Based an 1836 picks per meter and average width of fabric 1.11 a.

Induhstrial Projects DsparttFebruary 14, 1975

ANNEX 3-11Page 7

TANZANIA

PAM= USA IT TETIL1 LTD.

Gray Sbghting .17 .22Dyed Linen .28 Denim .22 .31Dianga *35 .50Kitange .38 .61

Twill .33 *53sipertwill .54 .97Poplin/Dreas Prints .27 i

Aveae .32 .50

~ Difference betwee the ex-factory coat and the value of theraw material (cotton)

2/ Actual C0ot8 in 1974

Industri,il Projects DepartmentFebruary 14, 1975

ANNEX 3-llP age 8

TANZANIA

MWANZA TEXTILE PROJECT

WHOLESALE SELLING PRICE - KITANGE

Mwanza Textile Mill 1.00USA 0.64Taiwan 0.62Pakistan O.55Hongkong 0.63

1/ Weight 100 gns/square meter. Price of 1 linear meter C&FDar-es-Salaam in US$.

Industrial Projects DepartmentFebruary lh, 1975

ANNEX 3-11Page 9

TANZANIA

MWANZA TEXTILE PROJECT

PRICES OF CARDED YARN

TANZANIA WESTERN EUROPE U.S.A.

Ul Margi 1/ 46-5 36.5 40.0

Selling Pricev 117.0 103.5 105.0

CIF European Port-Duty Paid 137. ;

1/ Difference between the ex-factory cost of producing 1 lb.of yarn 20 cotton count, and the value of the raw material(cotton content in US cents.

2/ September 1974 in the country of origin .

2/ Freight 11 US cents, MFN duty 7%.

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 3-11Page 10

TANZANIAMUNZA TEXTILE PROJECT

AVERAGE WAGES IN TEXTIL8 I ST2/

Taania 0.41

Taiwan 0.23

South Korea 0.11

Colombia o.25

Pakistan 0.224

U4.24

1 In US$ per hour including fringe benfits

Industrial Projects DepartmntFebruary 14, 1975

ANNEX 3-11Page 11

TANZMNIAMiANZA TEITILZ PROJECT

COTTON CROP

In thoUaznubof baIhel'

Year Total Used by Domestic Industrz Exported

1958 169 1681959 203 1951960 189 1871961 168 1711962 211 2001963 263 2591964 293 2951965 369 3631966 436 13 4231967 N.A. N.A. N.A.1968 283 30 2531969 386 44 3421970 l20 53 3491971 363 58 2261972 423 60 3671973 h30 62 368197X3/ 400 63 337

]/ 181 kg. per bale

.g/ Estimated

Industrial Projects DepartaentFebruary 14, 1975

ANNEX 3-11Page 12

TANZANIA

SWANZA TEXTILE PROJECT

ANNUAL FOREIGII EXCHANGE COSTS OF 10 MILLION METERS

POLYESTER-COTTON BLEND PLANT

US$ Million

Polyester Fibre Imports 1/5Unrealized Cotton Export Reserves 0.6Imported Dyes, Chemicals and

Spare Parts 0.7Expatriates Salaries & Benefits 0.2Interest and Depreciation 3.0

6.0

v/ $1.50/kg F.O.B. Dar-es-Salaam

v $1.10/kg FOB Dar-es-Salaam - AR Grade

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 4-1Page 1

TANZANIAMIANZA TEXTILE PROJECT

LIST OF MACHINERY - SPINNING

No. of Unit TotalUnits Price Price

In US$ '000

1. Blow Room 1 Line with 393.4 393.43 Schutchers

2. High Production Cards 18 37.8 681.13. Combing (including pre-comber

draw frames) 1 354.8 354.84. Drawframes 4 sets 75.6 302.45. High Speed Roving Frames

(96 Spindles each) 8 40.9 327.26. Ring Frames (432 Spindles each) 64 55.2 3534.47. Automatic Winding Frames

(100 Spindles each) 10 55.o 550.08. Multiple Winding Frame 1 34.8 3h.89. Ring Twisting Frames

(h00 Spindles each) 7 4h.7 313.010. Auxiliary Machines 30.011. Testing Equipment 72.012. Accessories 5% 329.713. Spare Parts, Tools and Gauges 5% 329.7

Total FOB Price US$ 7252.5

T. Shs. Million 51.9

Industrial Projects DepartmentFebruary 14, 1975

PMNE 4-1Page 2

TANZANIAMWANZA TEXTILE PROJECT

LIST OF MACHINERY - WEAVING

No. of Unit TotalType cf Machine Units Price Price

In US$ '000

1. High Speed Warper 2 56.2 112.4

2. High Speed Sizer 2 86.5 173.0

3. Warp Tying 2 20.5 41.0

4. Reaching-in-Frame 1 17.0 17.0

5. Pirn Winders 18 12.5 225.4

6. Cop Change Looms 578 4.9 2817.6

7. Pirn Stripping Machine 2 6.0 12.1

8. Inspection Frame 3 2.0 6.o

9. Accessories

a) For Start-up 382.0

b) For one year consumption L314.0

10. Trolleys 18.2

11. Spare Parts 84.8

TOTAL FOB PRICE US$ 4,324.1

T.Shs. Million 30.9

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 4-1Page 3

TANZANIAMWANZA TEXTILE PROJECT

LIST OF MACHINERY - CONVERTING

No. of Unit TotalType of Machine Units Price Price

In UJS$ '000

1. Shearing 1 98.1 98.12. Open Width Blending 1 346.7 346.73. Chainless mercerising 1 391.2 391.2h. Soaper with Drying Range 1 244.6 244.65. Flat Screen Printing including Dryers 3 220.0 660.06. Open Width Washingtwith Dryer 1 226.8 226.87. Hot Air Stenter with 6 Drying Area 1 285.4 285.h8. Felt Calendar 1 18.0 18.09. Folding 3 3.0 9.010. Equalizer Stenter 1 48.8 48.811. Roller Printing 1 213.1 213.112. Jiggers 4 4O.O 160.013. Spare Parts 5% 136.0

TOTAL FOB PRICE US$ 2855.7

T.Shs .Million 20.4

Industrial Projects DepartmentFebruary 14, 1975

ANNE h-lPage 4

TANZANIAMWANZA TEXTILE PROJECT

LIST OF SERVICE EQUIPMENT

EQUIPMENT: IMPORTED LOCALIn US$ '000 in TS '000

Workshop 32.2 57.6Boiler Plant 93.8 139.7Electrical System 14L.9 152.0Air Conditioning 547.5 320.0

(no cooling) 17.3 19.2Water SupplyCompressed Air 13.6 10.2Spare Parts h2.5 -

TOTAL 892.0 698.7

Industrial Projects DepartmentFebruary 14, 1975

TANZANIAMWANZA TEXTILE PROJECT

IMPLEMENTATION SCHEDULE

ITEMS I MONTHS0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34

DETAILED ENGINEERINGAND DESIGN

CONSTRUCTION WORK

PROCUREMENT _

EQUIPMENT DELIVERY (FOB) _ _ = =

PRESHIPMENT-INSPECTION

PERIOD OF SHIPMENT ON SEAS

UN LOADING AND INTERNAL _ _TRANSPORTATION

MACHINERY ERECTION _ _

TRIAL PRODUCTION

COMMERCIAL PRODUCTION

O Date = Signing of Contracts with Engineering Company and TechnicalAdvisor, expected by July 1, 1975.

World Ban k-9624Industrial Projects DepartmentFebruary 14, 1975

ANNEX 4-3Page 1

TANZANIA

MWANZA TEXTILE PROJECT

TERMS OF REFERENCE FOR TECHNICAL ADVISOR FOR TEXCO AND MTL

A. The Project

1. The National Textile Corporation (Texco), on behalf of the Govern-ment of Tanzania, proposes to expand textile production at Mwanza TextilesLtd. (MTL), Mwanza (Lake Victoria) by 20 million meters per year. Texco isa parastatal organization for all major textile activities in Tanzania. Itis a major shareholder of MTL and is the sponsor for the project togetherwith MTL. The project consists of an integrated textile plant which wouldincrease production at Mwanza from 23 million meters to 43 million metersper year. Total project costs are estimated at about US$43 million ofwhich about US$30 million would be in foreign exchange. It is expectedthat these foreign exchange requirements will be financed by IBRD and theKuwait Fund.

2. Project implementation should start about mid-1975 and commercialproduction of the project is expected to commence in 1978. The feasibilitystudy for the project has been prepared by Saigol Brothers Ltd., Lahore(Pakistan), the largest textile producer in Pakistan. Saigol Brotherswould also be retained as Engineering Company to implement the project(details in para. B). The existing mill at Mwanza started operations in1968 and has achieved a production of 22.6 million meters in 1974. Totalemployment is now about 2,400. Operations are supported by managementassistance from Textilconsult SpA (Italy) which also assisted in the con-struction of the mill. The management agreement with Textilconsult willterminate in 1975 and adequate replacement of expatriates has been arrangedwith Saigol Brothers.

3. The project would add about 28,000 spindles, about 600 looms aswell as bleaching, mercerizing, dyeing and printing equipment to the exist-ing facilities. The spinning capacity will be increased from 3,360 tonsto 6,540 tons. With addition of three new automatic screen printing machinesthe capacity for screen printing will be increased to 18.5 million meters.The capacity for roller printing will be increased to 25.0 million meters.The expanded mill will provide employment for an additional 1,,200 workers.It is proposed to construct about 23,000 sq. m. of covered floor spaceincluding 19,700 sq. m. of service buildings for warehousing, boiler plantand power house.

ANNEX 4-3Page 2

B. Engineering Company

4. Texco on behalf of MTL entered into a tentative contractual arrange-ment with Saigol Brothers, Ltd., of Pakistan to act as Engineering Companyfor the project. Saigol will be responsible for undertaking in consulta-tion with Texco, MTL and the technical advisor, project management, engineer-ing, procurement, construction supervision, project control, start-up super-vision, personnel training, and other such services as necessary to success-fully implement and operate the project. The contract as entered into betweenMTL, and Saigol Brothers will be subject to the approval by the Lenders.Saigol Brothers shall be responsible for the completion of the project accord-ing to an agreed timetable and for arranging intensive short duration opera-tional training to be given to the operators and management at Mwanza as wellas in the Saigol Brothers textile mills in Pakistan.

C. Technical Advisor

5. The Technical Advisor (TA) will provide technicalassistance to Texco and MTL for the Mwanza project during implementationand early operations to the point where local personnel is largely trainedand qualified to assume major responsibilities for the plant.

6. Qualified spinning, weaving, dyeing finishing and printing overseerswill be made available at the start-up of the mill, from a cadre of theexisting plant as well as the personnel provided by Saigol Brothers, thetextile engineering company reaponsible fcr implementation of the projectand eventually from machinery suppliers.

7. TA shall supply as required during project implementation andearly operationss

a. Experienced Textile Engineer as Resident Advisor;

b. Textile Industrial Engineer.

8. TA shall assist TEXCO in supervising the work of the EngineeringComDany in:

(i) developing the plant and machinery design

(ii) procurement of equipment

(iii) construction activities

(iv) erection of the project

(v) training of management personnel and start-up.

ANNEX 4-3Page 3

9. Specifically, TA shall provide the following services:

(a) Evaluation of the performance of Engineering Company

(i) Evaluate the Feasibility Study.

(ii) Evaluate the technical specifications of theproject both for civil engineering, technicalinstallations and machinery.

(iii) Evaluate Tender Documents prepared by theProject Engineers.

(iv) Review with TEXCO and give technical and commercialrecommendations in respect of Engineering Company'sanalysis of bids and recommend awards of purchasecontracts to be made by MWATEX and submit copies toLenders if required by TEXCO.

(b) Engineering Advice

(i) On behalf of TEXCO review and monitor operationsof Engineering Company and their subcontractors inrespect of dosign, procureiaent, expediting inspection,logistics and construction to ensure that thefacilities are being constructed in workmanlikemanner and in confornity with timetables, budgets andspecifications.

(ii) Assist TEXCO to supervise the work of the EngineeringCompany to ensure a ful set of records is compiledand maintained for plant and equipment as built.

(iii) Provide TEXCO with any and all other technicalassistance it may require from time to time.

(iv) Assist TEXCO during final phases of construction insupervision of Engineering Company and sub-contractor'swork and testing and preparing the facilities forinitial operation.

(c) Textile Advice

With TEXCO, evaluate and modify, if necessary, methods, systems,procedures, drawings, and manuals developed by the EngineeringCompany as:

(i) a production plan which specifies processing standards,quality standards, maintenance standards, all designedto maintain optimum quality product operations;

ANNEX 4-3Page

(ii) work assignments and job specifications for allproduction, managerial, supervisory and servicespersonnel;

(iii) systems for the control of raw materials, processingand the quality of finished goods;

(iv) a laboratory testing system, waste and qualitystandards; this includes raw material, in processand finished goods quality control;

(v) machine maintenance schedules, effective reportingsystems, minimum and maximum spare parts inventorylevels required for proper machine maintenance;

(vi) appropriate manning schedule for the entiremanufacturing process;

(vii) time units required for the production of finishedfabrics in each stage of manufacturing and a planningsystem to utilize all production machinery at optimumlevels;

(viii) a training program for Tanzanian personnel to beconducted both in Tanzania and Pakistan.

(d) Commissionina

TA shall monitor plant test runs undertaken by theEngineering Company to run any such additional tests inconformity with contractual obligations of the severalsuppliers and contractors as it deems necessary, analyse alltest runs and furnish TEXCO with a written report thereonwhich shall form the basis of TEXCO's acceptance of theexpanded plant.

(e) Training

TA shall ensure that TEXCO members of the Team receiveadequate technical training and exposure in Tanzania toenable them subsequently to provide technical advisoryservices to the TEXCO group of companies.

Industrial Projects DepartmentMay 5, 1975

TANZANIAMWANZA TEXTILE PROJECT

CAPITAL COST ESTIMATES (AT 1975) PRICES)

In million shillings In million US$ in %Local Foreign Total Local Foreign Total

Engineering and ConsultancyServices 2.0 7.1 9.1 0.3 1.0 1.3 5.2

Plant and MachinerySpinning - 51.9 51.9 - 7.3 7.3 28.8Weaving - 30.9 30.9 - 4.4 4.4 17.3Processing - 20.4 20.4 - 2.9 2.9 11.4Service 0.7 6.7 7.4 0.1 0.9 1.0 3.9

Freight and Insurance 10.8 11.4 22.2 1.5 1.6 3.1 12.2Erection 4.9 3.5 8.4 0.7 0.5 1.2 4.7Civil Works 17.8 12.1 29.9 2.5 1.7 4.2 16.5

Base Cost Estimate 36.2 144.0 180.2 5.1 20.3 25.4 100.0Contingencyl! 1.8 7.1 8.9 0.3 1.0 1.3Escalation 2/ 26.6 38.3 64.9 3.7 5.4 9.1

Installed Cost 64.6 189.4 254.0 9.1 26.7 35.8Working Capital 32.4 - 32.4 4.6 - 4.6Study and Training 0.7 2.1 2.8 0.1 0.3 0.4

Expected Project Cost 97.7 191.5 289.2 13.8 27.0 40.8Interest During Construction 3.9 21.3 25.2 0.5 3.0 3.5

Total Financing Required 101.6 212.8 314.4 14.3 30.0 44.3

1/ 5% of Base Cost Estinate.

2/ 12% p.a. in 1975, 1070 p.a. in 1976 and 8% in 1977 until exnected date of expenditures on foreignand 30% p.a. on local expenditures.

Industrial Projects DepartmentFebruary 14, 1975

TANZAN IA ANNEX 5-2

MWANZA TEXTILE PROJECT

WORKING CU.PITAL ESTInATES

- in million shillings -

Before AfterExparsion Expansion Expansion

Cotton (6 months) 15.1 10.9 26.0

Dyes, Chemicals & SizingPacking (6 months) 8.9 6.7 15.6

Stores and Screens (18 months) 7.0 6.1 13.1

Salaries and Wages (1 month) 1.7 o.8 2.5

Semi-Finished & FinishedGoods (1½ months) 12.0 9.7 21.7

Receivables (20 days) 6.6 7.2 13.8

Cash 1.0 1.0 2.0

52.3 42.4 9L.7

Less: Creditors (Based orPresent Experience) 20.0 10.0 30.0

32.3 32.4 614.7

Industrial Projects DepartmentFebruary 14, 1975

ANNEx 5-3

TANZANIAMWANZA TEXTILE PROJECTPHASING OF EXPENDITURES

- in million US$ -

Local Foreign Loans-Equity- -IRD- - KF- Total

1975

III 0.2 0.1 - 0.3IV 0.4 0.1 0.1 o.6

1976

I 1.0 0.8 0.8 2.6II 1.2 1.9 1.9 5.0

III 1.2 2.2 2.2 5.6IV 1.3 3.0 3.0 7.3

1977

I 1.5 2.3 2.3 6.1II 1.5 1.5 1.5 4.5

III 1.7 1.2 1.2 4¢.1IV 4.0 0.9 1.0 5.9

1978

I 0.2 0.8 0.8 1.8II 0.1 0.2 0.2 0.5

14[.3 15.0 15.0 144.3

Industrial Projects DepartmentFebruary 14, 1975

TANZANIA

MWANZA TEXTILE PROJECT

REVENUES A D OPERMJ IN( COSTS AT FULLCAPACI.Y BEFORE AND AFETER EXPA.iSIOIQI

Before After Before After Before AfterExpansion Expansion Expansion Expansion Expansion Expansion Expansion Expansion Expansion

------------------ Units ------------ …--__ -------------- Shillings -------------- ---------- Average Unit Price ------------

mill. m. (in million) (in shillings)2/Sales

Twill 0.8 1.3 2.1 4.7 7.6 12.3 5.85 5.85 5.85Super Twill 0.7 2.8 3.5 4.6 18.6 23.2 6.64 6.64 6.64Bleached Cambric - 3.1 3.1 - 14.4 14.4 4.63 4.63 4.63Khanga 8.7 9.3 18.0 50.3 53.8 104.1 5.78 5.78 -5.78Kitenge 2.6 8.1 10.7 13.4 41.7 55.1 5.15 5.15 5.15Poplin/Shirting/Dress Pr. 2.4 2.9 5.3 10.9 13.1 24.0 4.53 4.53 4.53Grey/White Sheeting 6.3 (6.3) - 18.5 (18.5) - 2.93 2.93 2.93Dyed Linen/Denim 1.2 (1.2) 5.2 ( 5.2) - 4.33 4.33 4.33

22.7 20.0 42.7 107.6 125.5 233.1 4.74 aver. 6.28 aver. 5.46 aver,Yarn - 107,000 kg 107,000 kg - 1.8 1.8 17.25 fob 17.25 fob

107.6 127.3 234.9

Direct Costs

Cotton 3,600,000 kg 2,950,000 kg 6,550,000 kg 26.5 2t.8 48.3 7.37 del. 7.37 del. 7.37 del.Yarn 336,000 kg (336,000)kg - 6.7 ( 6.7) - 19.94 del. - -

Salaries and Wages 2,411 1,189 3,600 17.4 9.8 27.2Dyes and Chemicals 13.5 13.6 27.1Other Materials 2.6 1.5 4.1

66.7 40.0 106.7Operating Costs

Power, Fuel, Water 5.0 5.0 10,0Salaries 193 40 233 2.9 0.7 3.6Spare Parts 4.5 4.5 9.0Managing Fee 1.0 - 1.0Other Expenses 3.0 2.0 5.0Interest on Short-Term Borrowings 2.0 0.5 1.5

18.4 t2.7 30.1

Operating Profit-/ 22.5 74.6 98.1

,L/ Based on constant L91S costs and prices and 907. of attainable capacity.

2/ Ex-mill prices net of males tax and excise duty.

3/ Before Depreciation and Interest on Long-Term Loans.

Industrial Projects DepartmentFebruary 14, 1975

TANJZANIA

MWANZA TEXTILE PROJECTPEROJECTIONS INCWDTNG EXPANSIONF

-in mi2lion S3)il2ings-

1 2 3 4 5 6 ? 8 l in 11 121975 197f 1277 19 73 197J? 1987 1381 192 1933 1984 1935 1936

INCOME STATEMENTS

PRODUCT I ON

IN IIILLIONLINEAR J1ETERS 22.7 22.7 22.7 33.- 39-.: 42.7 'I2.7 42.7 42.7 42.7 42.7 42.7

SALES 107.6 107.' 127.2; 173.3 213.7 23'I.9 23'.2 23'-. 234.9 234.9 234.9 234.9

DIRECT COSTS

COTTON 26.5 26.5 26.5 33.6 .7 43.3 18.3 '1.3 48.3 4q.3 4'. 3 48.3COtTON YARN 6.7 6.7 .7 9.7 . 7 V. n 2.o 0.2 0.9 2. i i .0 0.0SALARIES S IIAGES 17-. 17.1h 17.4 29.2 29.2 27. 27.2 _27.? 27.2 27.2 27.2 27.2DYES C CIIHMICALS 13.5 13.5 13.5 21.1 2'1.9 27.1 27.1 27.1 27.1 27.1 27.1 27.1OT4EP. t1ATERIALS 2.6 2.' 2.6 3.' 3.' 4I. 4.1 4.1 4.1 4.1 It.1 4.1TOTAL f 6 66.7 92.5 102.6 1n.7 12.7 11 .7 107.7 1¢6.7 lo.7 106.7

GROSS PROFIT 410. 9 42.9 42,9 35.3 111.1 123.2 120.2 l2 122.2 123.2 123.2 128.2

OPERATING EXPENSES

UTILITIES 5.2 5.0 5.0 10.- 12.0 10.0 12.0 10.0 19.0 10.0 10.2 10.0SrARE PARTS 4.5 'i 5 4.5 9.2 9.0 9.0 9.0 9.0 ._0 9.0 9.0 9.0SALARIES 2.9 2.9 2.9 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.2iMANA(IlNG FEE 1.0 1.2 1.0 1.0 1.0 1.0 2.2 1.0 1.2 1.0 1.i 1.0OTI0HR EXPENSES 3.0 3.0 3.0 5. i 5.0 5.0 5.2 5.0 5.0 5.0 5.0 5.0INlTEREST ST DEBT 2.5 2.0 2.0 1.5 1.5 1.5 1.5 1.5 1.5 1.5TOTAL J89F 1T.4 1.4 30.1 30.1 30.1 30.1 32.1 37.1 30.1 30.1 30.1

OPERATING PROFIT 22.0 22.5 22.5 55.7 31.0 93.1 98.1 98.1 98.1 98.1 98.1 98.1

DEPRECIATION 8.1 3.1 8.1 26. ' 26.i 26.9 26.9 13.8 18.8 18.8 18.8 18.8INTEREST LT DEBT 1.8 1.1 _2 21.3 20.2 27.2 19. 5 -I. 14.6 12.3INCOME BEFORE TAX 12.1 13.3 3 1 7.5 32.5 51.ri 51.0 . 62. 7 64.7 67.0 694

TAXES (45') 1 6.o 6. 4 14.8 22.3 22. 27.4 23.2 29,1 ,0,1 31.NET ItICO1IE 5.7 7.3 7,4 4.1 18.0 2 3;1 33.4 j425 35.T 36.9 38.2

DIVIDEND 0.2 01'i 020 0.0 3. 13.4 19.2 22.4 25.6 27.6 28.5 29.5RETAINJED INCOiE 6.7 7.3 7.8 4.1 14.7 11J.7 3. 11.2 8.9 3.0 3.1, 3.7EllDIJG 3ALANJCERETAINED EARNINGS 5.1 12.11 20.1 24.3 32.( 53.6 61.9 72.9 81.3 8i.8 98.2 106.9

======= ======= =======~~~~~~~~~~~~~~~~~~~~ === = =rz== == == = == == == = == == == = _= = === = === ---- -----

Industrial Projects DepartmentFebruary 14, 1975

TANZANIAMWANZA TEXTILE PROJECT ANNEX 6-3

PROJECTIONS INCLIUDING EXPANSION --in million Shillings-

1 2 3 4 5 6 7 8 9 10 11 121975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

FUND FLOW

SOtURCES OF FUNDS

IiJCOME 3EFOREINTEREST AND TAXES 13.9 14. 4 14.4 28.8 54.1 71.2 71.2 79.3 79.3 79.3 79.3 7913DEPRECIATION 8.1 8.1 3.1 26. 9 26.9 06.9 18.8 18.8 18.8 18.8 18.8DPER.CASH FLOW 22.0 22.5 22.5 55.7 81.0 77 98.1 98 .1 98 1 95.1 98.1

SHiARE CAPITAL 26.7 31.2 37.1 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 9.013RD LOAtJ 1. 4 56.1 41.? 7.1 0.0 9.0 0.3 0.0 9.0 .0 0 .0 0.0KU/AIT FUND 9.7 56.1 42.6 7.1 0.9 .0 0.0 0.0 0.0 0.0 0.0 0.0 OT IER FOREIGN LOAN 9.O 0.0 0.0 0.0 0.9 9.0 0.0 0.0 0.9 0.9 9.0 0.0LOCAL LOAN 00 .0 0.0 o0n 0.0 0.n .0 0.0 0.0 0.0 0. o 0.0TOTAL SOURCES 50.3 165. 1 144 74.9 81.0 981 98 1 9.1 0.1 91 98.1 9 1

APPLICATION

FIXED ASSETS 3.4 147.6 115.9 18.1 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0/ORKINO CAPITAL 24.9 1.3 13.3 26i.2 .n0 o.0 0.0 0.0 0.0 n.o 0 0.0 O.

INTEREST LT DE3OT 1.8 1.1 0.3 21.3 21.3 20.2 20.2 18.5 16.6 14.6 12.3 9.9LOAN PEPAY'1ENTSI JR[I LOAN 0.0 0.9 0.0 0.0 3.8 8.2 9.0 9.9 10.9 12.0 13.3 14.7i.UWIAIT FUND 0.0 0.9 0.0 n.0 3.e 8.2 9.0 9.9 10.9 12.0 13.3 14.7OTHIER FOREIGN LOAN 3.2 8.1 8.0 3.9 0.0 0.0 0.0 0.0 0.0 9.0 0.0 0.0LOCAL LOAN 2.1 1.3 0.2 0.2 0.1 0.1 0.0 0.0 0.0 0.0 0.0 9.0TOTAL REPAYMENTS 10.3 9.9 - T. - 4. 7.7 16.5 18.0 19.8 22.8 7 24. 26.6 29.4

TOTAL DEBTSERVICE 12 .1 11.0 3.5 25.4 29.0 36.7 38.2 38.3 38.14 38.6 36.9 39.3TA.ES 3.4 6.o 6.3 3.4 114.8 22.9 22.9 27.4 23.2 29.1 30.1 31.2DIVIDENDS 0.9 0.0 0.0 0.0 3 3 1 19.8 22.4 25.6 27.6 28.5 29.5TOTAL APPLICATION 5so3 165. 9 144 O 73 1 1 752 a 90.1 9I. 97.3 99.5 102.0

YRLY CAS I BALANCE 0.0 0.0 0.1 1.8 31.9 23.1 15.2 8.o 3.9 0.8 -1.4 -3.9

ACCUMULATE UCASH SURPLUS 0.0 0.0 0.0 1.9 33. 5 s6.9 72.0 80.0 83.9 84.7 33.3 79.4

R A T I O SRATIOS------

INCOlE IjEFORE TAXAS 8 OF SALES 11.2 12.4 13.1 4.2 15.3 21.7 21.7 25.9 26.7 27.5 28.5 29.5DEBT SERVICE COV. 1.3 2.0 2.6 2.2 2.8 2.7 2.6 2.6 2.6 2.5 2.5 2.5CURRENT RATIO 1.5 1.5 1.' 2.5 2.0 2.0 1.9 1.8 1.3 1.7 1.6 1.5DE:T/EtUITY RATIO 0.22 0.57 0.60 0.59 0.54 0.59 9.45 o.40 0.34 0.27 9.18 0.07

BREAK-EVEN POINTS

PROFIT BREAK-EVENCAPACITY 9.70 0167 0.66 0.91 0.70 0.60 0.60 0.53 0.51 0.50 o.48 o.46PRICE LEVEL 9.89 o.88 0.87 0.76 o.85 0.78 0.78 0.74 0.73 9.72 0.71 0.70

CASII .REAK-EVENCAPACITY 0.76 0.72 0.66 9.65 0.53 0.52 0.53 0.53 0.53 9.54 0.54 0.54PRICE LEVEL 0.91 0.89 0.87 0.83 0.76 0.74 0.74 0.75 0.75 0.75 0.75 0.75

1/ The repayments under the Subsidiary Loan Agreement of the Kuwait Fund loan have been changed slightly and should be as follows:1979: -- ; 1980-1986: 10.1 each; the Summary Financial Statements on page 23 of the report consider this small change with

minor changes in the ratios in some cases.

Industrial Projects DepartmentFebruary 14, 1975

TANiZANIA

MWANZA TEXTILE PROJECTINCREiENTAL PROJECT INSI-in million Shillingg-

1 2 3 4 5 6 7 8 9 In 11 121975 1976 1977 173i 1979 1980 1971 1992 1983 1284 1985 1986

BALANCE SHEETS

CJR.:LEIT AS, 5T

CASHl 0.0 0.0 1.n I.0 1.9 1.0 1 l.0 1. 0 1.0 1.0 1.0 1. RECEIVABLES 0.0 010 4.n 8.9 3.9 3.0 8.0 8,o 8.0 8.0 3.o 3.oINVEJNTORY 0.0 0.0 16.7 343 33.4 _ 33.4 _ 3 44 33.4 4TOTAL 0 0.0 21.7 42.4 42.4 2. 42 2.4 4 2.4 42.4

ACC.CASHI SURPLUS 0.0 0.0 0.0 -1.5 22.6 37.3 43.3 45.1 49.3 43.5 39.5 33.0

FIXED ASSETS

GROSS FIXED ASSETS 6.4 152.0 265.0 292.0 282.0 292.0 204.0) 2?6.0 ?8,3.0 290.9 292.0 294.0ACC DEPRECIATION 0.0 0.0 0.0 18.8 37.6 _.4 75.2 9_4.o 112.8 13 .6 l50-4 169.2NET FIXED ASSETS C; 152.0 2639 225.6 208.8 192.0 175.2 1 Y . 14114.9

TOTAL ASSETS 6.4 152.0 287.6 30II.1 309).4 305.9 294.5 279.5 262.9 244.3 223.5 20012

CURR. LIABILITIES

CREDITORS -5.0 -5.0 10. 100 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0ST BORROWINGS -17. 4 -15.2 -16.2 -14i.6 -14.6 -I4 . f -14.6f -14.6 -14.6 -14.6 -14.6 -14.sCURRENT LT DEBT 0.0 0.9 0.0 7.6 16.4 18.0 19.8 21.8 214.0 26.6 29.4 32.4TOTAL -22.4 -2 n.2 3.n 11. 0 13.4 15.2 17.2 .22.0 24.9 27.9

LONG TERHl DEBT

IBRD 1. 4 57.5 9n.4 10 .5 102.7 94.5 85.5 75.6 64.7 52.7 39.4 24.7KUtIAIT FUND 0.7 56.3 99.4 10f6.5 102.7 94.5 35.5 75.6 64.7 52.7 39.4 24.7OTHER FOREIGNJ LOAJ 0.0 0.0 0.0 0. 0.0 0.0 0,0) 0.0 0.n 0. 0.0 0 .0LOCAL LOAN 0.0 0.0 0.0 0.0 0. 0 .0 n.0 0.o .0 Q0.0 0.0 0.0TOTAL 2.1 114.3 19.7 213.0 2075. 189.0 171.0 151.2 129. 4 105. 79. 4

LESS CURRENT 0. 0 0. 0.0 7.6 le.4 1 .o 19.8 21.9 24.o 26.6 29 4 32.4NET LT DEBT 2.1 114.3 1-3. 05-T 13.0 171.0 151.2 129.4 1.:4 7 49 4 17.0

EOlU ITY

SHARE CAPITAL 26.7 57.9 97.0 0lo.0 100.0 1on.0 100.0 100.0 100.0 100.0 loo.0 100.0RETAINED EARNINGS 0.0 0.0 0.0 -4.3 8.6 21.5 27 .1 32.9 38.1 43.5 49.3 55.4TOTAL 26.7 57.9 95.0 95.7 13T . 121.T 12.7 122.0 13911 135 149.3 155.4

TOTAL LIABILITIES ,.4 152.0 297. 304.1 90nI. 3 n.9 2Q4.5 279.5 262.9 244.3 223.5 200.2

1/ See footnote 1 in Annex 6-f.

Industri-al Pro,-ectS Dc,art1ncntFebruary L5, 197'5

TANZAN IAMWANZA TEXTILE PROJECTINCREMENTAL PROJECTOINS-in million Shillings-

1 2 3 0 C, 7 9 n 10 11 1210)75 1975 10)7? 1970 107q loo 1) '19f1 191;92 1033 DOJ31 l)s7 1 1o 87

INCOME STATEHENTS

PRODUCTI Otl__________

IN tILLIOIJLINEAR METERS 0.0 0.0 0.9 11.1 16.7 20.0 20.0 29.0 20.0 20.0 20.0 20.0

SALES 0.0 0.0 0.0 70.7 106.1 127.3 127,3 127.3 127.3 127.3 127.3 127,3

DIRECT COSTS____________

COTTOrN 0.0 0.0 010 12.1 1'.2 21.2 21.8 21,8 21.3 21.8 21.8 21.8COTTON YARN 0.0 0.0 0.0 -6.7 -6.7 -6.7 -6.7 -6.7 -6.7 -6,.7 -6.7 -6.7SALARIES & WAGES 0.0 010 0.0 l1.9 11.3 9.83 .8 9.?9 9.8 9.8 9.8 9.8DYES & CHEMICALS 0.0 0.0 0.0 7.6 11.3 13.6 13.6 13.6 13.6 13.6 13.6 13.6OTllER MATERIALS 010 0. 0.0 1.0 1.3 l r ll5; lllTOTAL 0.0 0.0 0.0

GROSS PROFIT 0.0 0.0 0.9 44.9 70.2 37.3 37.3 87.3 87.3 37.3 87.3 37.3

OPERATING EXPENSES__________________

UTILITIES 0.0 0.0 0.0 5.0 5.o 5.0 5. 0 .0 5.0 5.0 5.0 5.0SPARE PARTS 0.0 0.0 0.0 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5SALARIES 0.0 0.0 0.0 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 9.7MANAGING FEE 0.o0 0n.o n 0.0 . o. 0 0n.0 0.o0 0. n.0 0 0.0 n.0OTHER EXPENSES 0.0 0.0 0.0 2.0 2.0 2.o 2.0 2 2. 2.0 2.0 2.0 2.0INTEREST ST DEBT 0.0 010 0.0 0. n 5 o 5 0.05 n0.5 O.5 0-5 0-5 oTOTAL 0. 0 0.0 0 12 7 12 7 12.7 12.7 12.7 12.7 12.7 12.7 12. 7

OPERATING PROFIT 0.0 010 0.0 32.2 57.,5 74.f 74.6 74.6 74.6 74.r 74.6 74.r

DEPRECIATIOt, 0.0 0.0 0.0 19.3 19.9 19.3 1Pi.8 19.9 19.8 18.8 18.3 18.3INTEREST LT DEBT 0.0 0.0 0.0 21.2 20 2.2 20i.2 19,.5 1i6.6 1.6 12.3 I.INCOME ilEFORE TAX .000 7 17.1 TT 35.' 37.3 30.2 41.2 03.5 45.9

TAXES (5)0.0 0.0. 0.0 - 3-3 7.8 16.0 1f.0 16.8 17.6 18.5 1916 2*27 7NIET INCOME .0 n.0o 0.0 - 3 9.6 10.. 7. 20.5 21.6 22.7 23.9 25 2

DIVIDEND 0.0 0.0 0. ) 0.0 -3.3 0. 13.0 15.7 16.0 17.2 18.1 19.1RETAINED INCOM1E 0.0 0.0 0.0 -01.3 12.9 13.0 6.6 4.9 5.1 5.4 5.8 6.1ENDINf7 LALANJCERETAINED EARNIlNGS 0.0 n.0 0.n -4.3 9 21.9 23.1 31.9 39.1 43.5 49.3 55.4

Industrial Projects DepartmentFebruary 14, 1975

TANZANIAMWANZA TEXTILE PROJECT ANNEX 6-67ICREMENTAL PROJECTIONSA"-in million Shillings-

1 2 3 )I 5 6 7 3 9 10 11 121975 1976 1977 1972 1979 19230 1931 1982 1933 1934 1935 1986

FUNJD FLO.I

SOURCES OF FUNDS

INCOME BEFOREINTEREST AND TAXES 0.0 0.0 0.0 13.11 39.7 55.3 55.9 55.8 55.8 55.8 55.8 55.8DEPRECIATION 0.0 0.0 0.0 18. 8 18.5 13. .8 1.8 123.8 18.8 18.8 18.8 182.8OPER.CASII FLOM 0.0 0.0 o.0 32.2 57.5 712.6 - 74. 74.7 74.6 74.6 74.6 7

SHARE CAPITAL 26.7 31.2 37.1 5.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0I3RD LOAN 1.4 56.1 41.9 7.1 0.0 0.0 0.0 0.0 0.0 n.0 010 0.nKU2IAIT FUNI) 0.7 56.1 42.6 7.1 0.0 0.0 .o 0.0o 0. 0.0 0.0 0o.oOTHER FOREIGN LOAN 0.0 0.0 .o 0.0 0.0 0.0 0n.n 0.0 9.0 0.0 0.0 9.0LOCAL LOAN 0.0 0.0 0.0 0.0 0.0 0.0 0 0.0 0.0 0 .0 0.0 0.0TOTAL SOURCES 29.3 143. T 121.r 51.4' 57.5 7 771 74.6 774. -7.6 74.C

APrL I CAT ION

FIXED ASSETS 6.4 14 5.6 113.9 16.1 0.0 0.o 2.0 2.0 2.0 2.0 2.0 2.0WORKING CAPITAL 22.4 -2.2 7.7 1.1 9.0 0. o 0.0 0.0 0.o 0.0 0.0 0.0IrlTEREST LT DE tT 0.0 0.0 0.0 21.2 21.3 20.2 20.2 13.5 16.6 14.6 12.3 0.9LOAN REPAYMENTSliRD LOAN 0.0 0.0 o.n 0.0 3.l 8.2 .0 1.9 1019 12.0 13.3 14.7KU IAIT FUND 0.0 0.0 0.0 0.72 3.0 3.2 9.0 0.9 10.9 12.0 13.3 14.7OTiHER FOREICN LOAN 0.0 0.0 0.0 0.0 0.0 n.9 0.0 0.0 0.0 0.0 0.0 0.0LOCAL LOAN 0.0 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0TOTAL REPAYMEtNTS 0.0 0.0 0.0 0.0 7. ' TG 13.0 19. 2-1.3 -2 4T.0 _26. -2 9

TOTAL DEBTSERVICE 0.0 0.0 0.0 21.2 23.9 36.6 39.2 38.3 32.4 32.6 33.? 33.3TAXES 0.0 0.0 0.0 -3.5 7.` G6.o 16.0 10.8 17.6 13.5 1i.6 20.7DIVIDENDS 0.0 0.0 n.o 0.o0 6 6. 13.0 15.7 16.4 _17.2 13.1 1°.1TOTAL APPLICATION T283 143.4 121.6 s2.3 33.5 59.2 69.2 72.7 74.5 76.4 7

YRLY CASH1 BALANCE 0. 0 0. 0.0 -1.5 24.o 15. 4 5.4 1.9 0.1 -1.2 -4.o -6.5

ACCUMULATEDCASH SURPLUS 0.0 0.o 0.0 -1.5 22.6 37.0 43.3 45.1 45.3 43.5 39.5 '3.9

R A T I 0 SRATIOS------

INCOME BEFORE TAXAS 23 OF SALES 0.0 0.0 0.0 -11.0 16.4 283.0 283.0 20.3 3n.8 32.4 34.2 36.1DEBT SERVICE COv. 0.0 0.0 0.O 1.5 2.0 2.0 2.n 1.9 1.9 1.9 1.9 1.9CURRENT RATIO 0.0 0.0 -3.5 14.1 3." 3.2 2.3 2.5 2.2 1.9 1.7 1.5DEBT/EOUITY RATIO 0.07 0.66 o.CG80.68 0.2 0.59 °Sa 0.49 0.213 n.35 0.25 0.10

BREAK-EVEN PDlrNTS

PROFIT BREAK-EVENCAPACITY 0.00 0.00 0.00 7.17 0.75 0.59 0.59 0.57 0.55 0.53 0.s5 ,.47PRICE LEVEL 0.00 0.00 0.00 1.11 o.894 0.72 0.72 0.71 0.69 0.68 o.66 0.64

CASH BREAK-EVENCAPACITY 0.00 n.00 o.no 0 .76 5.s9 0.55, 0.593 0.5 0.59 0.59 0.59 0.60PRICE LEVEL 0.00 0.00 ).0n 9.94 0.73 0I70 0.71 0.71 0.72 0.72 0.72 0.72

I/ S,ee footnote 1 in Annex 6-3.

Industrial Projects DepartmentFebruary 16, 1975

TANZAIIIA

MWANZA TFXTILE PROJECTPROJCCTIONS fliCL.UDING EXPANSION/

-in million Shillings-

1 . 3 '4 5 6 7 ? 9 (10 11 121975 1972 197- 1079 !,)I 1221 1932 1933 1)814 1935 1985

BALANCE SHEETS

CURRENT ASSETS

CASH 1.0 1.0 2.0 2.0 2.0 2.9 2.3 2.2 2.0 2.0 2.2 2.0RECEIVABLES 13.3 8.3 12.3 16.3 16.3 1.3 1.3 16.3 16.3 16.3 16.3 16.3INVENTORY 43-0~ 0.7 r ) .1 76.4 7 ____47 ___ 76.4 7C. 76.44 76.4TOTAL ".3 52.3 0 5 9 7 ' 4.7 294

ACC.CAS11 SURPLUS 0.0 0.0 0.0 1.9 33.P 56.2 72.0 30.0 83.9 84.7 83.3 79.4

FIXED ASSETS

GROSS FIXED ASSETS 93.9 246.5 362.4 389.5 332.5 3981. 5 3 36.5 333. 390.5 392.5 394.5 396.5ACC DEPRECIATIONJ 4G 54 5 6.7 89.G 116.5 143.4 _170. 189.1 207.9 226.7 245.5 264.3NET FIXED ASSETS 52.4 191.9 222. 290.9 26F. 271. 1 216.2 199.4 1l2. 6 175. 142.f 132.2

TOTAL ASSETS 96.7 24'4.2 373.7 387.14 394.5 322.6 322.9 3714.1 361.2 345.2 327.2 306.3

CURR. LIABILITIES

CREDITORS 20.0 20.0 30.0 30.0 3010 32 0 30.0 3 r . 0 3r .2 3010 32.0 30.0ST tIORROWIINGS 0.4 7.1 5.5 0.0 0.0 0.0 0.9 0.0 0.0 0.0 9.0 0.0CURRENIT LT DEBT 3.5 8.2 4 .1 7.7 _1.5 18.0 19.8 21.8 2'I.0 26.6 29.4 4TOTAL 30.3 35.3 39G 37.7 4G.5 437. '49.8 51.8 54.0 5fi.t 5 34

LONG TER11 I)EbT

ItRD 1.4 57.5 99.14 1n5 192.7 94.5 85.5 75.G 64.7 52.7 39.4 24.7KUIAIT FUND 0.7 56.3 99.4 10(.5 102.7 914.5 85.5 75.' 64.7 52.7 39.'4 24.7OTHER FOREIGNI LOAN 20.0 11.9 3.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0LOCAL LOAN 2.14 0.r, 0.4 0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0TOTAL 53T. 124.2 203.1 213.2 205.5 189.0 151.2 15.2 T22.4 105.4 7. 9.4

LESS CURRFNT 8.2 4.1 7.7 Jr, 12.0 19.3 21.3 24J.0 26.6 29.4 32.4NET LT DEBT 14.G 118.7 199.0 205.5-189 171.0 151.2 129.7 102.4 7 . 49.4 17.0

EOUITY

SHARE CAPITAL 4o7 77.9 115.0 120.0 120 .0 12 0 .0 120.0 120.0 122.0 120.0 120.0 120.0RETAINED EARNINGS 5.1 12.14 20.1 1.639.0 6 61.9 7 81.8 89.8 98.2 >TOTAL 51.8 90.3 135.1 1 _43 159.0 173. 181. 192.9 207.8 203.8 218.2 226.9

TOTAL LIABILITIES 96.7 244.2 373.7 337.4 394.5 392.6 382.9 374.1 361.2 345.2 327.0 309.3 '

/ See footnote 1 in Annex 6-3.

Industrial Projects DepartmentFebruary 1L, 1975

TANZANIA

MWANZA TEXTILE PROJECT

FINANCIAL RATE OF RETURN CALCULATIONS

- in million shillings -

1985-

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1992 1993

Sales - - - 71 106 126 126 126 126 126 126 126

Direct Costs - - - 26 36 40 40 40 40 40 40 40

Operating Costs - - - 13 13 13 13 13 13 13 13 13

Investment Costs 6 97 109 13 - - - - - - - (51)

Taxes on Income - - - (4) 8 16 16 17 18 19 23 25

Net Benefits (6) (97) (109) 23 49 57 57 56 55 54 50 99

Financial Rate ofReturn (Before Taxes): 24.2%

Financial Rate ofReturn (After Taxes): 19.4%

Industrial Projects DepartmentFebruary 14, 1975

C-.01

ANNEX 6-8Page 2

TANZANIA

MWANZA TEXTILE PROJECT

FIIANCIAL RATE OF RETUJRN AND SlNSITIVITIE

Rate of Returmin %_

1. Base Return (Before Taxes) 214.2

Invwtmet Cost Up 15%, 1 Year Delay 18.8

Reteues Down 25% 13. 4

2. Base Return (Ater Taxes) 19.h

Investment Costs Up 15%, 1 Year Delay 13.9

Investment Costs Up 10% 17.5

Revenues Down 10% 17.3

Revenues Down 25% 14h.5

Final Capacit Utilization at 80% 17.7

Industrial Projects DepartmentFebruary 14., 1975

ANNEX 7-1

TANZANIA

MWANZA TEXTILE PROJECTDIFFERENCES BETWEEN OPERATING COST AND REV-

ENUES ASSUMPTIONS FOR FINANCIAL ANDECONOMIC ANALYSIS 1/

TotalAverage Unit Price -in million shillings-Financial Economic Financial Economic

-in shillings-Benefits per lin. m.

Twill 5.85 4.47 7.6 5.8Super Twill 6.64 5.82 18.6 16.3Bleached Cambric 4.63 4.27 14.4 13.2Khanga 5.78 3.83 53.8 35.6Kitenge 5.15 4.12 41.7 33.4Poplin/Shirting/Dress Pr. 4.53 3.41 13.1 9.9Grey/White Sheeting 2.93 2.84 (18.5) (17.9)Dyed' Linen/Denim 4.33 3.26 ( 5.2) ( 3.9)

125.5 92.4Yarn 17.3 15.2 1.8 1.6

127.3 94.0

Costs

Cottonl/ 7.4 sh/kg 8.1 sh/kg 21.8 23.9Spare Parts and Material=-/ 6.o 4.6Other 24.9 21.9

52.7 50.4

1/ Benefits and costs have been based at 1978 prices expressed in 1975 Shillings.Economic price assumptions for tradable items are based on international pricesand non-tradables, except unskilled labor, at their nominal values. Values in thistable are based on the official exchange rate whereas the economic rate of returncalculations are based on a shadow exchange rate of Shilling to US$ of 10 to 1.Unskilled labor has been shadow priced at 75% of its nominal value. Economicbenefits are based on an expected long-term cotton price of US$-.52/pound CIFequivalent with added values for spinning, weaving and finishing in typicalfabric exporting countries plus freight and insurance to Dar-es-Salaam. CIFvalues have been assumed because the project's output represents importsubstitution.

2/ Includes 30% import duty.

3/ The cotton produced in Tanzania and used for the project is of higher qualitythan actually would be required for producing this type of textiles. TheFOB Mwanza value of Tanzanian cotton has been estimated at US$-.52 cents/poundequivalent corresponding to a CIF value of US$-.57/pound in the major textileexporting countries. However, when determining the benefits of the project, lowergrade cotbon, typically used in other countries, has been taken into account witha CIF value of US$-.52/pound (see above).

Industri e Projects DepartmentFebruary 14, 1975

TANZANIA

MWANZA TEXTILE PROJECTECONOMIC RATE OF RETURN CALCULATIONS

-in million shillings-

1985-1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1992 1993

Benefits - - - 65 98 132 132 132 132 132 132 132

Operating Costs - - - 42 58 67 67 67 67 67 67 67

Investment Costs 9 123 137 16 - - - - - - - (62)

(9) (123) (137) 7 40 65 65 65 65 65 65 127

Economic Rate ofReturn (Base Case: 16.1%

Industrial Projects DepartmentFebruary 14, 1975

ANNEX 7-2Page 2

TANZANIA

MWANZA TEXTILE PROJECT

ECONOM-IIC RATE OF RETURN AIAD SEITIVITIES

Rate of Returnin %

Base Return 16.1

Revenues Under Different Assumptions

Up 10% 19.3Up 15% 20.8Down 10% 14.0

Investment Costs Under Different Assumptions

Up 10% 14.6Up 15%, 1 year delay 11.9Down 10% 17.2

Cotton Cost Under Different Assqumptions

Up 10%¢ 15.2Up 20% 14.2Down 10% 16.7

Unskilled Labour Shadow Priced

At 100% 15.0At 50% 17.1

Final Capacity Utilization at 80% 14.9

Official Foreign Exchange Rate 14.0

Industrial Projects DepartmentFebruary 14, 1975

TANZANIAMWANZA TEXTILE PROJECT

SENSITIVITY OF ECONOMIC RATE OF RETURN TO DIFFERENT ASSUMPTIONSRATES OF RETURN %)

10

oc

SALES PRICES TEXTILES -10% -5% +5% +10% +15%

I .,ICOTTON COSTS +20% -20%

__ ~~~~~~~~~~~~~~~~~I I . I IINVESTMENT COSTS +20% +10% -10% -20%

UNSKILLED LABOUR 100% 75% 50%SHADOW PRICED AT

Industrial Projects Department

VVorld Bank-911 2(2R)

IBRD 11282

.... .X .. ...

+

2.0.-.

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