Tanzania - Smallholder Tea Development Project : Credit 0287 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 287 TA Project Agreement (Smallholder Tea Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND TANZANIA TEA AUTHORITY AND TANZANIA RURAL DEVELOPMENT BANK DATED MARCH 3, 1972 CONFORMED COPY CREDIT NUMBER 287 TA Project Agreement (Smallholder Tea Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND TANZANIA TEA AUTHORITY AND TANZANIA RURAL DEVELOPMENT BANK DATED MARCH 3, 1972 PROJECT AGREEMENT AGREEMENT, dated March 3, 1972, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and TANZANIA TEA AUTHORITY (hereinafter called TTA) and TANZANIA RURAL DEVELOPMENT BANK (hereinafter called TRDB). WHEREAS by a development credit agreement of even date herewith between the United Republic of Tanzania (hereinafter called the Borrower) and the Association (hereinafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to ten million eight hundred thousand dollars ($10,800,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that TTA and TRDB agree to undertake such obligations toward the Association as hereinafter set forth; and WHEREAS TTA and TRDB, in consideration of the Association's entering into the Develotment Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. TTA shall carry out, or cause to be carried out, Parts I, II, III and V of the Project and TRDB shall carry out Part VI of the Project with due diligence and efficiency and in conformity with sound administrative, financial, agricultural, engineering and economic practices. 4 Section 2.02. Except as the Association shall otherwise agree, TTA shall, in carrying out Parts I and III of the Project: (a) maintain in each of the Project Areas, an organizational unit, consisting of one Area Development Officer as the head of each such unit, and a sufficient number of Field Officers and Assistant Field Officers as shall be necessary for extension services to all Project Growers at the rate of one Field Officer, each assisted by at least five Assistant Field Officers, to not more than 500 Project Growers; (b) reques!. from the Ministry of Agriculture and Cooperatives of the Borrower secondment of qualified staff needed by it from time to time for such extension services; (c) make arrangements to provide adequate vehicles, staff houses, offices, workshops and stores for the said Area Development Officers, Field Officers and Assistant Field Officers; and (d) coordinate leaf collection schedules and acquire, maintain and operate appropriate leaf collection vehicles required for leaf collection services to the Project Growers. Section 2.03. (a) In carrying out Part II of the Project, TTA shall employ contractors acceptable to the Association for the construction and expansion of the tea factories included in the Project, upon terms and conditions satisfactory to the Association. (b) Except as the Association shall otherwise agree, TTA shall construct and operate, or cause to be constructed and operated, such additional tea factories as shall be necessary to provide for adequate processing capacity required for tea production resulting from the Project. Section 2.04. Except as the Association shall otherwise agree, TTA shall continue to operate existing tea nurseries and establish such new nurseries as shall be required to produce high-grade planting material in adequate amounts and at suitable sites for supply to all Project Growers. Section 2.05. Except as the Association shall otherwise agree, TTA shall, in order to assist TRDB in carrying out Part VI of the Project, make arrangements for: 5 (a) the deduction of TSh 0.20 per kilogram of tea leaf purchased by it from the purchase price payable to any Cooperative Society having outstanding any amount under any sub-loan received pursuant to Section 2.06 (a) (i) of this Agreement from TRDB; and (b) the transfer of the proceeds of such deduction as payment of principal and interest for any such sub-loan on account of any such Cooperative Society to TRDB. Section 2.06. (a) Except as the Borrower and the Association shall otherwise agree, TRDB shall make the following loans according to the Policies and Procedures of TRDB set forth in Schedule 1 to this Agreement: (i) TRDB shall make available as loans to the Cooperative Societies for on-lending to Project Growers the funds required for financing tea stumps for initial planting and fertilizer needed for carrying out and continuing the planting program established under the Project; and (ii) TRDB shall make available as loans to TTA the funds required for financing expenditures under Categories I (a), II (a) and (b) and III (a) of Schedule 1 to the Development Credit Agreement. (b) In granting the loans specified in paragraph (a) of this Section, TRDB shall obtain rights adequate to protect its interests and the interests of the Borrower and the Association. (c) TRDB shall exercise its rights under the respective agreements providing for the loans specified in paragraph (a) of this Section in such manner as to protect the interests of TRDB, the Borrower and the Association, and, except as the Borrower and the Association shall otherwise agree, TRDB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of said agreements. Section 2.07. Except as the Association shall otherwise agree, the goods and services to be financed out of the proceeds of the Credit made available to TTA and TRDB, shall be procured in accordance with the provisions of Section 2.03 of the Development Credit Agreement and any agreements supplemental thereto. Section 2.08. (a) TTA and TRDB undertake to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit made available to each of them by the Borrower against 6 hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods. (b) Except as the Association may otherwise agree, all goods and services financed out of the proceeds of the Credit shall be used exclusively for the Project until its completion. Section 2.09. (a) TTA and TRDB shall furnish to the Association promptly upon their preparation, the plans, reports, specifications, contract documents and construction schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) TTA and TRDB: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit made available to each of them by the Borrower, and to disclose the use thereof in the Project; (ii) shall enable the Association's representatives to inspect the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so made available to each of them and the goods and services financed out of such proceeds. Section 2.10. TRDB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, TRDB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. ARTICLE III Management and Operations of TTA and TRDB Section 3.01. (a) Except as the Association shall otherwise agree, TTA and TRDB shall at all times take all steps necessary on their part to acquire, maintain and renew all rights, powers and privileges which are necessary or useful in their operations. (b) TTA and TRDB shall at all times conduct their operations under competent and experienced management, in accordance with sound administrative, financial, engineering and agricultural practices and with the assistance of adequate qualified and experienced staff. 7 (c) TTA shall: (i) employ a Chief Marketing Officer and a Planning Economist, whose experience and qualifications for such positions shall be satisfactory to the Association; (ii) employ not later than July 1, 1972, an Accountant whose experience and qualifications for this position shall be satisfactory to the Association; and (iii) until completion of the Project, consult with the Association prior to making any changes in any of the positions of its Chief Executive, Financial Controller, Accountant, Planning Economist, Chief Marketing Officer and Chief Factory Officer. (d) TTA shall, until completion of the Project: (i) employ a Factory Manager for each of its tea factories in Mponde, Lupembe and Katumba, whose experience and qualifications for such positions shall be satisfactory to the Association; (ii) except as the Association shall otherwise agree, employ visiting consultants acceptable to the Association for a period of not less than two years and upon other terms and conditions acceptable to the Association and TTA; and (iii) make arrangements satisfactory to the Association for the sound management of the other tea factories under its control. (e) TTA and TRDB shall at all times operate, maintain, renew and repair their facilities, plant, equipment and machinery in accordance with sound engineering and management practices. Section 3.02. TTA shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with sound practice. Section 3.03. TRDB shall not amend its "Investment Policy", as set forth in the Resolution of its Board, passed on December 15, 1971, without prior consultation with the Association. ARTICLE IV Financial Covenants Section 4.01. TTA and TRDB shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices their operations and financial condition. Section 4.02. TTA and TRDB shall: (i) have their accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the 8 Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of TTA and TRDB and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association, TTA and TRDB shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association, TTA and TRDB shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of TTA and TRDB and other matters relating to the purpose of the Credit. Section 5.02. The Association, TTA and TRDB shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of their respective obligations under this Agreement or the performance by the Borrower or TRDB of their respective obligations under the Subsidiary Loan Agreement. Section 5.03. TTA and TRDB shall enable the Association's representatives to inspect all plants, sites, works, properties and equipment of TTA and TRDB and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association, of TTA and of TRDB thereunder shall terminate on the earlier of the following two dates: 9 (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the later of (A) the date on which the entire principal amount of the Subsidiary Loan shall have been repaid by TRDB to the Borrower in accordance with the Subsidiary Loan Agreement, and (B) a date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify TTA and TRDB of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. 10 For TTA: Tanzania Tea Authority P. 0. Box 2663 Dar es Salaam United Republic of Tanzania Cable address: Tantea Dar es Salaam For TRDB: Tanzania Rural Development Bank P. 0. Box 268 Dar es Salaam United Republic of Tanzania Cable address: MTAJI Dar es Salaam Section 7.02. TTA and TRDB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of TTA and TRDB, respectively, take any action or exe3ute any documents required or permitted to be taken or executed by TTA and TRDB pursuant to any of the provisions of this Agreement. Section 7.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed 11 in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Mohamed Shoaib Vice President TANZANIA TEA AUTHORITY By /s / Gosbert M. Rutabanzibwa Authorized Representative TANZANIA RURAL DEVELOPMENT BANK By /s/ Gosbert M. Rutabanzibwa Authorized Representative 12 SCHEDULE I Policies and Procedures for Loans to TTA and Cooperatives In making the loans referred to in Section 2.06 (a) of this Agreement, TRDB shall follow the policies and procedures outlined below, as such policies and procedures may be amended from time to time by TRDB with the approval of the Borrower and the Association. I. Eligibility 1. TRDB shall make loans to: (a) TTA for the purchase of factory equipment and buildings, equipment and vehicles 'for headquarters and leaf collection services and for financing nursery development; and (b) Cooperative Societies having any Project Growers as members in any of the four Project Areas for tea planting material and fertilizer for Project Growers. II. On-Lending by Cooperative Societies 2. TRDB shall ensure, by provisions in its loan agreements with the Cooperative Societies or otherwise, that the Cooperative Societies on-lend the proceeds of the loans to Project Growers on terms and conditions and following procedures acceptable to TRDB and TTA. 3. Each loan agreement shall include provisions for the following: (a) that the Cooperative Society shall allow representatives of the Borrower, TRDB, TTA and the Association to visit the Cooperative Society, including all land cultivated by its members; (b) that the Cooperative Societies shall maintain separate and identifiable accounts pertaining to the Project and the individual Project Growers being their members, and will furnish TRDB, TTA and the Association such information regarding those accounts and the overall accounts of the Cooperative Society as either TRDB, TTA or the Association shall reasonably request; and 13 (c) that the Cooperative Society shall accept such other terms and conditions adequate to protect the interests of TRDB, including conditions resulting from recommendations in the reports referred to in paragraphs 10 (c) and 10 (d) below. III. Term of TRDB Loans 4. Loans to TTA shall have a term not exceeding twenty-eight years with a grace period not exceeding eight years. 5. Loans to Cooperative Societies for on-lending to Project Growers are estimated to be repaid within fifteen years; to that end, TRDB shall ensure that: (a) TTA shall deduct TSh 0.20 per kilogram of tea leaf purchased by it from the purchase price payable to any Cooperative Society having outstanding any amount under any sub-loan received from TRDB; (b) TTA shall remit said TSh 0.20 per kilogram directly to TRDB, as payment of principal and interest for any sub-loan on account of the respective Cooperative Society, and inform the respective Cooperative Society as to the payment credited to it; and (c) when any Cooperative Society shall have fully paid principal and interest of its loans, TRDB shall notify TTA to stop making deductions and sending remittances to TRDB for loan payment purposes with respect to any such Cooperative Society. IV. Interest 6. The loans shall bear interest at a rate of 8-1/2% per annum on the outstanding balance, or such other rate as the Borrower, TRDB and the Association shall have otherwise agreed. V. Disbursement 7. TRDB shall disburse its loans to TTA in cash. 8. TRDB shall disburse its loans to Cooperative Societies in kind, including planting material financed by direct payments by TRDB to TTA and delivery of such planting material to Project Growers by TTA. 14 VI. Supervision 9. TRDB shall ensure that amounts drawn on loans are applied exclusively to the purposes for which they were lent and its staff shall regularly visit Cooperative Society and TTA facilities to ensure that the Cooperative Societies and TTA are complying with the terms of their respective loan agreements. In supervising its loans to Cooperative Societies, TRDB shall cooperate closely with TTA. VII. Appraisal of Loan Applications by TRDB 10. In appraising a loan application from any eligible Cooperative Society, TRDB shall ensure inter alia that: (a) a suitable Maximum of Liability Certificate shall have been issued by the Registrar of Cooperatives; (b) a general meeting of the Cooperative Society shall have approved the loan application; (c) a confidential report on the loan application shall have been received from the Chief Cooperative Officer of TTA; and (d) the accounts and financial operations of the Cooperative Society shall have been examined by the Financial Analyst of TRDB and a report shall have been made thereon. 11. In appraising a loan application from TTA, TRDB shall ensure inter alia that: (a) the Board of TTA shall have approved the loan application; and (b) in all cases, the loan application shall be accompanied by cost estimates based on detailed designs.