Senegal - Second Agricultural Credit Project

FILE COPY DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 128a-SE APPRAISAL OF THE SECOND AGRICULTURAL CREDIT PROJECT SENEGAL June 4, 1973 Regional Projecte Department k4estern Africa Regional Office This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  SENEGAL APPRAISAL OF SECOND AGRICULTURAL CREDIT PROJECT CURRENCY EOUIVALENTS Currency Unit = CFA Franc (CFAF) 1 US$ = CFAF 230.2 100 CFAF = US$0.43 WEIGI{TS AND MEASURES 1 ha = 2.47 acres 1 km = 0.62 mile l ton = 2,204 pounds 1 long ton = 1.016 metric tons = 2,240 pounds ABBREVIATIONS BNDS = Banque Nationale de Developpement du Senegal National Development Bank of Senegal CCCE = Caisse Centrale de Cooperation Economique French Financing Agency for Economic Cooperation FAC = Fonds d'Aide et de Cooperation French Development Aid Agency FED = Fonds Europeen de Developpement European Development Fund IRAT = Institut de Recherches Agronomiques Tropicales et des cultuires vivrieres Research Institute for Tropical Agriculture and food crops IRCT = Institut de Recherches pour le Coton et les Fibres Textiles Research Institute for Cotton and Textile Fibers IRHO = Institut de Recherches pour les Huiles et Oleagineux Research Institute for Vegetable Oils OCAS = Office de Commercialisation Agricole du Senegal Agricultural Marketing Agency of Senegal ONCAD Office National de Cooreration et D'Assistance pour le Developpement Office of Cooperatives and Development Assistance SATEC = Societe D'Aide Technique et de Cooperation Bureau for Technical Assistance and Cooperation SFS = Societe Fiduciaire Suisse Swiss Accounting Bureau SISCOMA = Societe Industrielle Senegalaise de Construction M.echanique et de Materiels Agricoles Senegalese Company for Mechanical Construction and Farm Implement Manufacturing SODEVA = Societe de Developpement et de Vulgarization Agricole Agricultural Development Agency FISCAL YEAR October 1 - September 30  SENEGAL SECOND AGRICULTURAL CREDIT PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ......................................... i I, INTRODUCTION ............................ * ,.* 1 II. BACKGROUND 1. .......... . A. General... 1 B. Agricultural Sector..... 2 III. THE FIRST AGRICULTURAL CREDIT PROJECT 3. .3 A. Background. 3 B. Physical Achievements Under the First Project 4 C. Organization and Maanagement Performance .....7 D. Evaluation of the First Project ... ........ 8 IV. THE PROJECT ....................... 10 A. Project Area ......................... .. . 10 B. Project Description . .10 C. Detailed Features ........................ il - Medium-Term Credit. il - Equipment, Buildings and Technical Assistance .. 12 - Studies . ....... .. .. .. ..13 V. COST ESTIMATES AND FINANCING .................... . 14 A. Cost Estimates .............. ..... . 14 B. Financing .. .15 C. Credit Arrangements .. .16 D. Procurement . ......... . .. ....... 16 E. Disbursement . . 17 F. Accounts and Audits. . 18 VI. ORGANIZATION AND MANAGEMENT .18 VII. CROP PRICES, YIELDS, PRODUCTION AND FARMER INCOMES, AND IMPACT OF PROJECT ON GOVERNMENT BUDGET 20 A. Crop Prices and Markets. 20 B. Yields ...21 C. Farmer Benefits . . .21 D. Production ...22 E. Impact of Project on Government Budget.. 23 VIII. BENEFITS AND JUSTIFICATION ........................... 23 IX. AGREEMENTS REACHED AND RECOMMENDATION ................. 24 This report is based on the findings of an appraisal mission in November/December 1972, composed of Messrs. A. Otten, C. Bourgin, P. Esmiol and R. Key (IDA).   Annexes 1. Agriculture in Senegal Appendix 1 Fertilizer Survey 2 Sine-Saloum Feasibility Study 3 Groundnut Seeds Storage Study Table 1 - Groundnuts and Cereals Production Table 2 - Impact of Farm Implements on Labor Requirements Table 3 - Yields of Crops under Supervised Conditions 2. National Development Bank of Senegal (BNDS) Table 1 - Loan Portfolio Table 2 - Income Statements, Profit and Loss Accounts Table 3 - Balance Sheets Table 4 - Cash flows resulting from First Agricultural Credit Project Table 5 - Combined Cash flow resulting from the First and Second Agricultural Credit Projects Table 6 - Sources and Applications of Funds Chart - Organization Chart of BNDS 3. National Office for Cooperatives and Development Assistance (ONCAD) Appendix 1 Terms of Reference for the Consultants for ONCAD Reorganization Table 1 - Balance Sheets Table 2 - Income Statements, Profit and Loss Accounts Charts - Distribution Objectives for Permanent Staff, Number and Functions - Organization Chart of ONCAD 4. Cost Estimates Table 1 - Detailed Cost Estimates Table 2 - Credit Purchases of Farm Implements and Draft Animals Table 3 - Technical Assistance Costs Table 4 - Equipment List Table 5 - Estimated Quarterly Disbursement Schedule 5. Price and Marketing Structure Table 1 - Financial and Economic Prices for Groundnuts at Farmgate Table 2 - Price and Marketing Structure for Millet Table 3 - Price and Marketing Structure for Rice Table 4 - Price and Marketing Structure for Cotton 6. Farm Budgets Table 1 - Farm of 6 ha in Central Groundnut Basin Table 2 - Farm of 20 ha in Southern Groundnut Basin 7. Production Estimates 8. Government Cash Flow 9. Economic Rate of Return Maps   SENEGAL SECOND AGRICULTURAL CREDIT PROJECT SUMMARY AND CONCLUSIONS i. Senegal has suffered a difficult time over the last six years as a consequence of three severe droughts which have reduced agrieultural produc- tion in general, but that of groundnuts, the country's main cash crop and export earner, in particular. Although other sectors of the economy have made significant advances, especially manufacturing and tourism, the economy is still mainly dependent on groundnuts. Even at low 1970 production levels, the crop accounted for 14% of GDP and over 40% of total exports in that year. As a result of the drought years, per capita income has declined from US$277 in 1960 to US$250 in 1971. ii. Since 1964 Government has operated a Groundnut and Millet Produc- tivity Program, known as the "Programme Agricole" (PA). PA has been the spearhead of Government's effort to increase the productivity of, and the areas under these crops: groundnuts for cash and export, and millet for sub- sistence and domestic food supplies. Under PA, fertilizer, improved seeds, and animal-drawn farm implements have been available to farmers on credit, and a strong extension service has been developed to promote improved cul- tivation methods. The Bank Group firet assisted PA in 1968 when it made a combined credit and loan totalling US$9.5 million for the purpose of finan- cing farm implements, and the strengthening of PA institutions, in particular the National Development Bank of Senegal (BNDS), the Agricultural Development Agency (SODEVA) and the Office of Cooperatives and Development Assistance (ONCAD), during the 1968-72 period. The performance of these institutions has improved substantially, but the droughts of 1968, 1970 and 1972 resulted in general declines in agricultural production; which in the case of ground- nuts was accelerated by a sharp fall in farmgate prices brought about by Government's over-reaction to a temporary fall in export prices for groundnuts. As a result, the demand for farm implements was significantly lover in the project period than in previous years, and much below appraisal estimates. Consequently the loan portion of the Bank Group's assistance, amounting to US$3.5 million, was cancelled in early 1971 on the grounds that it could not be used within a reasonable period. Disbursement of remaining IDA Credit funds for farm implements is expected to be completed by the middle of 1973, about a year behind appraisal estimates. iii. While crop production in the project period was below appraisal estimates, the Bank Group's financing of farm implements has been justified since, despite adverse weather conditions, the equipment so financed has permitted its operators to achieve production levels higher than they vould have obtained without the use of the equipment. While a decline in demand for implements occurred during the project period when groundnut prices were low, good groundnut prices in 1971 and 1972 resulted both in an increased demand for farm inputs including equipment, and an expansion of the area under groundnuts. As Government has committed itself to maintaining farmgate prices for groundnuts at remunerative levels in the future and because the  - i - forecasted declines in international prices for groundnuts do not appear to inhibit it from doing so, demand for farm implements is expected to remain at least at current levels and continued IDA assistance to PA thus justified. iv. The proposed project would continue to assist PA by financing 75% of subloans made by BNDS for the purchase of animal-drawn inplements - mainly seeders, hoes, ploughs, groundnut lifters and multipurpose toolbars - over the three year period 1973 through 1975. The project would also provide the equipment and technical assistance required to consolidate the progress achieved in improving the performance of SODEVA and ONCAD with funds pruvided under Credit 140-SE. The project would also include studies aimed at developing a more rational fertilizer policy, improved seed storage and distribution programs, as well as a reg