Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2581 PROJECT PERFORMANCE AUDIT REPORT ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT (Loan 685-ZA) June 29, 1979 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ZAMBIA Weights and Measures 1 Acre (ac) = 0.405 hectare (ha) 1 hectare (ha) = 2.471 acres (ac) 1 metric ton = 1.000 Kilograms 1 Kilogram (kg) = 2.2 pounds (lbs) 1 bag = 200 lbs = 90.8 kg ABBREVIATIONS CDC = Commonwealth Development Corporation MRD = Ministry of Rural Development TBZ = Tobacco Board of Zambia PCR = Project Completion Report FOR OFFICIAL USE ONLY Project Performance Audit Report ZAMBIA COMMERCIAL CROPS FARM DEVELOPMENT PROJECT (Loan 685-ZA) TABLE OF CONTENTS Page No. Preface iii Basic Data Sheet iv Disbursement Table v Highlights vi PROJECT PERFORMANCE AUDIT MEMORANDUM I. Summary Background 1 The Project 1 Implementation 2 Project Impact 5 Total Project Cost, Procurement and Disbursements 6 II. Main Issues Project Preparation and Design 6 Project Staffing and Management 8 Marketing 8 Conclusions 9 Annex 1 10 Annex 2 11 PROJECT COMPLETION REPORT I. Project Background 13 II. Project Implementation 17 III. Organization and Management 25 IV.. Operating Results 28 V. Bank Performance 32 VI. Conclusions 33 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - 1.1 - ANNEXES Page No. 1. Summary of Project Accounts as Extracted by TBZ 35 2. Mukonchi Tobacco Training and Settlement Scheme - Balance Sheets 36 3. Tobacco Board of Zambia - Balance Sheets 36 4. Tobacco Board of Zambia - Income and Expenditure Accounts 38 5. Assisted Tenants Tobacco Production 39 6. Assisted Tenants Maize Production 40 7. Tenant Farmers Tobacco Production 40 8. Tenant Farmers Maize Production 42 9. Comparison of Actual Production with Appraisal Estimates 43 10. Estimated Cost of Production per acre for Assisted Tenants 44 11. Key to Tobacco Production Schemes 45 Map IBRD 13310 - 111 - Project Performance Audit Report ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT (Loan 685-ZA) PREFACE This is a performance audit of the Commercial Crops Farming Development Project in Zambia, for which Loan 685-ZA for US$5.5 million was approved in May 1970. The loan was fully disbursed on December 6, 1976, after the closing date had been postponed for one year. The audit report consists of an audit memorandum prepared by the Operations Evaluation Department and a Project Completion Report (PCR) dated February 9, 1978. The Project Completion Report was prepared by the Eastern Africa Regional Office on the basis of a country mission in November 1977. The audit memorandum is based on a review of the Appraisal Report (No. PA-28a) dated May 8, 1970, the President's report (P-813) of May 11, 1970, the Loan Agreement dated June 5, 1976 and the PCR; correspondence with the Borrower and internal Bank memoranda on project issues as contained in relevant Bank files have also been reviewed and Bank staff who have been associated with the project have been interviewed. An operations Evaluation Department mission visited Zambia in November 1978. Discussions were held with officials of the Ministry of Agriculture, the Tobacco Board of Zambia and with project farmers. The information obtained and observations made during that mission were used to evaluate the conclusions of the PCR and are also reflected in the audit memorandum. A copy of the draft report was sent to the Borrower on April 12, 1979 for comment. No comments have, however, been received. The audit agrees with the major findings and conclusion of the PCR. The memorandum focuses on the problem of project design as well as elaborating on some of the findings and conclusions of the PCR which merit further discussions. The Operations Evaluation Department wishes to acknowledge the valuable assistance provided by the Government, previous and present project staff, and farmers, which contributed to this report. b - iv - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT (Loan 685-ZA) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate 1/ Total Project Cost (US$ million) 11.1 N.A- Underrun or Overrun N. 1/ Loan/Credit Amount (US$ million) 5.5 Disbursed 5.5 Repaid to December 31, 1977 0.3 Outstanding 5.2 Date Physical Components Completed July 1975 N.All Proportion Completed by Above Date (%) - N.Al Proportion of Time Underrun or Overrun (%) - N.Al/ Economic Rate of Return (%) 19% Negative 2/ OTHER PROJECT DATA Original Actual or Item Plan Revisions Est. Actual First Mention in Files or Timetable - 2/23/68 Government's Application - - 11/26/68 Negotiations 1/6/70 4/13/70 4/13/70 Board Approval - - 5/28/70 Loan/Agreement Date - - 6/05/70 Effectiveness Date 8/31/70 10/15/70 10/15/70 Closing Date 13/31/75 12/31/76 12/31/76 Borrower Repuplic of Zambia Executing Agency Tobacco Board of Zambia Fiscal Year of Borrower Jan. 1 - Dec. 31 Follow-on Project Name Integrated Family Farming Loan Number 882-ZA Amount (US$ million) 11.5 Loan Agreement Date 2/27/73 MISSION DATA Sent Month No. of No. of Date of Item y Year Weeks Persons Manweeks Report Identification HQ 6/68 2 1 2 6/68 Preparation RMEA N.A. N.A. N.A. N.A. 9/68 Appraisal HQ 12/68 3 3 10 12/68 Reappraisal HQ 6/69 1 1/2 2 3 5/70 Total 15 Supervision 1 HQ 9/70 2 2 4 12/70 2 HQ 2/71 2 1 2 3/71 3 HQ 8/71 1.5 3 4.5 9/71 4 HQ 2/72 1 4 4 3/72 5 RMEA 9/72 1 3 3 9/72 6 RMEA 2/73 1 1 1 2/73 7 * RMEA 7/73 1 2 2 8/73 8 * RMEA 1/74 1 1 1 2/74 9 * RMEA 7/74 1 2 2 8/74 10 * RMEA 2/75 1.1 2 3 4/74 11 * RMEA 10/75 1.5 2 3 11/75 12 * RMEA 3/76 1.5 1 1.5 6/76 13 * RMEA 10/76 2.5 5 12.5 2/77 Total 43.5 Completion HQ 10/77 3 2 6 1/78 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Kwacha (K) Year: Appraisal Year Average Exchange Rate: US$1 = KO.714 Intervening Years Average US$1 = KO.713 Completion Year Average US$1 = KO.782 1/ Not available. 2/ Based on an estimated project cost that assumes size of project was reduced so as to remain within the original financing package, i.e. equal to appraisal estimates. * From July 1973 onwards, supervision missions covered both this Project and the Integrated Family Farming Project. - v - Project Performance Audit Report ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT (Ln 685-ZA) Disbursement Table (US$ Million Cumulative) Period Appraisal Percentage of Ending Estimate Actual Estimated 12/31/70 - 0 - 06/30/71 1,019 100 10 12/31/71 - 173 - 06/30/72 1,960 734 37 12/31/72 - 1,640 - 06/30/73 3,140 1,714 55 12/31/73 - 2,339 - 06/30/74 4,320 3,192 74 12/31/74 - 3,453 - 06/30/75 5,500 4,294 78 12/31/75 - 4,798 - 06/30/76 4,798 12/31/76 5,500 - vi - Project Performance Audit Report ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT (Loan 685-ZA) HIGHLIGHTS The loan for commercial crops farming development, was granted in June 1970. The major objective of the project was to assist selected Zambians to become commercial farmers and to further develop the Zambian tobacco industry. This was to be accomplished by providing training for Zambians who had the potential for commercial farming but lacked managerial experience and by establishing medium sized commercial tobacco farms to be operated by those trained under the project and by other Zambians with previous experience in tobacco farming. In addition, a small number of larger farms would be rented to farmers experienced in large-scale tobacco and maize production. The Commercial Crops Project contributed little to increasing tobacco production in Zambia. Any impact the project has had on the production of tobacco and maize (the other major crop) would be in terms of prevention of further decline in the production of these two crops (PPAR Annex 1). Project costs have been high relative to the number of tobacco farmers trained and to the numbers of tenant farmers that have been assisted. All project farmers have been subsidized, but despite these subsidies many had to leave the project because of poor financial results. At present the rate of return of the project is estimated to be negative; this is in contrast with the 19 percent rate of return estimated at appraisal. Other points of interest are: - project design was inappropriate for Zambian conditions (PPAM para. 32); - there were management problems at all levels of project implementation (PCR para. 2.14) which seriously compounded the problem of poor project conception and design (PPAM para. 32); and - the Bank failed to adjust for problems in project design during appraisal (PCR para. 5.02). Project Performance Audit Memorandum ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT (Loan 685-ZA) I. SUMMARY 1/ Background 1. The Commercial Crops Farm Development Project was designed to improve Zambia's tobacco industry and provide for the development of commercial farming by Zambians. 2. The Government requested the Bank to appraise this project in November 1968, after the project had been prepared by the Government with the assistance of ADS (Agricultural Development Service). An appraisal mission was sent to Zambia in December 1968. This mission concluded that a proposed small farmer component of the project was not adequately prepared; moreover there was a serious controversy over the proposed staffing by non-Zambians of the tenant farms that were to be developed under the project. A re-appraisal mission was then sent to Zambia in June 1969. Following this mission there was considerable discussion in the Bank over the participation in the project by non-Zambian farmers. After further discussion with the Government of Zambia, the project was negotiated in April 1970, approved by the Board in May 1970 and the loan agreement signed in June 1970. The Project 3. The project consisted of three main physical components plus a program of technical assistance. (a) Expansion of the capacity of the Mukonchi Training Scheme, which had been established and managed by the Commonwealth Development Corporation (CDC) since 1968. At appraisal the scheme had ten nucleus estates with the capacity for growing 600 acres of tobacco and 1,200 acres of maize. A successful similar scheme had been conducted by CDC in Malawi. Under the project the capacity of Mukonchi would be expanded from 25 to 50 graduates per year. Instead of the five year training scheme employed at Kasungu in Malawi, the Mukonchi program would be for four years which appeared adequate based on that experience. Graduates from the Mukonchi Training Scheme would go directly into an Assisted Tenant Farmer Scheme. (b) It was envisaged at appraisal that about 270 Assisted Tenant Farms would be developed. Each farm would contain 170 acres of arable 1/ Adapted from the PCR. - 2 - land and was expected to produce 20 acres of tobacco and 40 acres of maize each year. Of the 270 farmers, 180 were expected to be graduates of Mukonchi and the remaining 90 would be experienced farmers who would need further technical and financial assistance to farm on the scale envisaged. (c) Under the Tenant Farmer Scheme, about 30 large farms of 500 acres of arable land would be developed and operated by experienced farmers, many expected to be non-Zambians. These farms were expected to raise about 60 acres of tobacco and 120 acres of maize. They would be operated essentially as private commercial farms; some 15 were already partially developed, and the remaining half would be newly developed farms. (d) The project also was designed to assist small farmers growing about an acre of tobacco annually. Under the project, staff would be trained to assist and advise on the growing of tobacco on these small farms. 4. The Tobacco Board of Zambia (TBZ) was responsible for carrying out the project and part of the project funds were to be used to expand its facilities and staff, and to purchase additional equipment. The TBZ was established as a statutory board in 1968 to replace the Tobacco Industry Board. 5. The total cost of the project was estimated at US$11.1 million, of which US$5.4 million would be financed by a loan from the Bank, US$0.7 million by a loan from the Commonwealth Development Corporation, essentially to support the Mukonchi operations, US$3.8 million by the Government and the remaining US$1.1 million by commercial bank loans to farmers and farmers' own resources. 6. The Bank loan would finance 100 percent of all imported machinery and equipment, 50 percent of all domestically produced machinery and building construction, and 75 percent of the cost of housing and salaries for employment of non-Zambians at TBZ and at Mukonchi. Implementation 7. General. The project got off to a slow start. Early in the project, all components of the project were behind schedule and they were having financial problems, especially Mukonchi and the Assisted Tenants. There were management problems at TBZ's headquarters in Lusaka as well. Many assisted tenant farmers had poor labor efficiency and high labor cost. Cost per trainee at Mukonchi was high. - 3 - 8. Beginning in 1972 project implementation and accomplishment improved; yields were good and the number of tenant and assisted tenant farms established was steadily increasing though somewhat behind schedule. Supervision reports were optimistic about these accomplishments and viewed the project as successful up through 1974. 9. Because of financial problems at Mukonchi, the high cost per trainee, which was averaging around K 20,000, and the desire to speed up the training of Zambians to take over operation of tobacco farms, the Government shortened the training program from four to two years and accepted only students who had at least two years of experience working on tobacco farms prior to entering the program. 10. In 1975 production began to slip. The assisted tenant program was far behind schedule. TBZ was plagued with accounting and management problems. Adequate machinery services were not being supplied to Assisted Tenants. Some of these troubles were attributed to low tobacco prices; others to a new government policy (Mwanakatwe condition of service) that prohibited parastatal institutions such as TBZ from paying higher salaries than those paid for comparable positions in Government. 11. There appeared to be a slight turnaround in 1976 when overall production targets were reached, but in August 1977, it was reported by a supervision mission that all aspects of the project were in moderate to serious trouble. This trouble was for the most part attributed to poor management by TBZ. 12. Because records of TBZ do not separate the accounts of the Commercial Crops Project from the Integrated Family Farm Project, other projects and general operating expenses, it is not possible to determine the total cost of the project. Since there was a devaluation of the Kwacha, it cannot be deduced that the total project cost was equal to the expected cost because the total credit was disbursed. 13. Disbursements were quite irregular throughout the implementation period (see page v) and always behind appraisal estimates. This was mainly due to procedures used by TBZ to request reimbursement of disbursements from the Bank. At one time reimbursements to TBZ were made by the Bank and later disallowed after further investigation of the expenditures. 14 Due to these problems the closing date was extended from December 31, 1975 to December 31, 1976. 15. Mukonchi Training Center (Scheme). In 1970, a creditable begin- ning was made in this component when eight nucleus estates and eight training farms were established as a first step of increasing the number of graduates by 25 annually. However, the center sufferred a loss of about K 8,000 on each estate (growing 60 acres of tobacco and 120 acres of maize). Crop yields were low in 1970, but these yields do not fully explain the losses. The following year the estates made a profit, but because of constraints on the budget, the Govern- ment decided in 1973 to reduce the training program (PPAM para. 9). This curtailed program was implemented in 1974. 16. At the end of 1974, CDC's contract came to an end, and management at Mukonchi was taken over by TBZ. The CDC general manager, however, was retained as an advisor. 17. By the end of 1974, too, it was found that the two year training period was too short as it did not provide sufficient training in the use of mechanical equipment. In 1975, to remedy this deficiency, the program was increased to three years. 18. There is no information available on the number of farmers trained at Mukonchi (now called MTS - West because another Center has been established in the Eastern Province). At appraisal it had been anticipated that 180 of the tenants established under the Assisted Tenant Scheme would be graduated from Mukonchi (PPAM para. 3b). Several supervision reports noted that the scheme continues to turn out about 25 graduates a year, the number that it had been turning out prior to commencement of the project. 19. Assisted Tenant Scheme. During the first three years of the project a total of 34 tenants were established under this component according to TBZ data. Yields on these farms exceeded the 1,000 kg/ha estimated at appraisal by 10 to 20 percent. But despite favorable prices plus subsidies, farmers lost money; most likely because of poor management. For example, labor cost per hectare on the Assisted Tenant Farms was unusually high. 20. From 1973 onward the number of assisted tenants increased rapidly, roughly doubling each year up to 1976. With this big surge in the number of assisted tenants established, yields began to decline and fell to only one-half their 1973 level in 1976. There is no evidence, however, to confirm that all of the decline has been due to the increased number of established farms. After the first year they were permitted to increase their maize production to 80 acres compared to the 40 acres estimated at appraisal. This was done in order to improve their incomes. 21. Although it was expected that 270 assisted tenants would be settled at appaisal, by 1978 only 205 were under the scheme. Others besides those trained at Mukonchi were settled on these farms, as expected at appraisal. Throughout the implementation period, some tenants left the scheme every year. 22. Tenant Scheme. Reportedly, the scheme turned out to be very profitable for many of these tenants; primarily due to subsidies and - 5 - investment reimbursements they received and therefore expensive from the project viewpoint. There were 70 tenant farms in Zambia in 1969 before the project started. In 1976 there were 72, not necessarily the same farms as those under the scheme at the beginning of the project. Thirty new tenant farms were to be established under the project, either through total farm development or rehabilitating farms that had been abandoned by expatriates. At one point in the project implementation period, prospec- tive tenants found that it was less costly to purchase an abandoned farm than to participate in TBZ's scheme. Production and yields on these tenant farms remained more or less static over the implementation period. Tenant farms are no longer receiving any support from TBZ although they are required to market all of their tobacco through TBZ facilities. 23. Technical Assistance to Small Farms. Project records do not show or imply that anything was done to implement this component. Most likely nothing was done. The Government wanted a large part of the project devoted to this component at preparation but the Bank objected and the Borrower ultimately agreed. However, between 1970 and 1972 bank supervision missions observed that the Borrower's "one-acre" tobacco scheme which it was carrying out independently was producing good results with high yields. The Bank then agreed to consider financing the Integrated Family Farming Project and approved a loan for this project in 1973. This is the likely reason that this component was never mentioned further in Bank files. Project Impact 24. At appraisal the project was expected to increase annual output of tobacco and maize by 4,600 and 42,500 tons, respectively. The target for tobacco was not reached. There is, in fact, reason to believe that the project had negligible or no impact on production of tobacco (see Annex 2). The target for maize production was probably not achieved either. Early in the implementation period Assisted Tenant Farmers were finding it more profitable to produce maize than tobacco. As already noted (PPAM para. 20), they were allowed to double the acreage of maize in 1971. However, total maize production data do not support the conclusion that they actually did (Annex 2). 25. In general, the objectives set out in the appraisal of this project were not achieved; it generated neither the production nor the income envisaged. In particular, the Assisted Tenant Farmer's financial position has been steadily deteriorating with mounting seasonal debts. The economic rate of return for the Tenant and Assisted Tenant Farmers' Schemes was recalculated assuming that the size of the project was reduced so as to remain within the original financing package, i.e. project cost was equal to appraisal estimates; operating costs and yields were based on the available information. The economic rate of return so calculated was negative compared with an appraisal estimate of 19%. - 6 - Total Project Cost, Procurement and Disbursements 26. All efforts by the Completion Mission to arrive at actual project cost proved fruitless. TBZ was requested two months prior to the mission's arrival in Zambia to prepare the necessary information and to carry out their own evaluation of project results, but TBZ took no action. Considerable difficuties were experienced by the Completion Mission in collecting information whether on project cost, disbursements, production, yields, etc. The information that was made available was inadequate to form any meaningful judgements. (See PPAR p. 11 for estimated and actual disbursements by category) II. MAIN ISSUES Project Preparation and Design 27. The lack of production achievement of the Commercial Crops Project resulted largely from the project's conception and design. 28. After independence in 1964 many expatriate tobacco farmers began leaving Zambia at a rapid rate because of an uncertain future. Consequently tobacco production declined rapidly (see PPAR Annex 1). Although these farmers numbered no more than a few hundred at any one time, they were producing relatively large quantities of tobacco. With their departure tobacco production fell from 24 million pounds in 1963/64 to 11 million pounds in 1968/69. The Government was concerned about this decline in production because tobacco was a very important export crop, although insignificant in comparison with copper. 29. Historical tobacco production methods in Rhodesia and Zambia had a significant influence on the design of the Commercial Crops Project. As a transition program to replace large expatriate farmers with Zambians, the project failed because of inadequate concepts and unrealistic expecta- tions. 30. The tenant farms from the beginning, as they were operated by expatriates, produced sizable crops of tobacco and early supervision missions reported the project was going quite well, tenant farms were being rehabilitated, future assisted tenants were being trained by CDC at Mukonchi and tobacco production was holding up well. The Tobacco Board of Zambia was functioning well mainly because it was under experienc- ed management.' Farm improvements were carried out and expansion of the facilities of TBZ - warehouse and offices - were completed quite rapidly (PPAM para. 8). 31. Soon it became apparent that the project was in trouble. One reason was that many of the expatriate tenants from Tanzania - 7 - and Rhodesia exploited the program. At the beginning of the project these tenants received payments to rehabilitate farms in excess of their actual expenditure. Thus during their first years incomes were very high and some preferred to take their gains and leave. At the end of project implementation there were about 75 tenant farmers under the project, only a few more than at the beginning. They were producing about 460 thousand pounds of tobacco per year compared with 1.8 million pounds expected at appraisal (cf. PCR paras. 2.17, 2.18). 32. Further, the expectation that Zambian farmers could be trained to operate the size of farms envisaged at appraisal within the four year training period proved to be unrealistic for two reasons: (a) the training program for the assisted tenants included only training for the technical aspects of production and no farm management training; (b) the farms were too large. The tobacco acreage that was expected to be cultivated with large crews of hired labor was especially unrealistic for Zambian farmers who lacked requisite practical experience and background. Tobacco production requires very high technical and managerial skill: to prevent disease; to achieve high yields and quality; and to efficiently organize labor for growing seedlings, transplanting, harvesting and curing. These skills are usually learned through long experience. For example, in the United States where farmers have had the benefit of generations of experience in tobacco production, very few of those who grow tobacco cultivate more than 10 acres. The average tobacco acreage is less than five acres. Although tenant farms were expected to produce about 40 acres of tobacco each, the highest acreage they achieved, on the average, was 27.5 acres in 1974/75. Thereafter, the average declined to 17.4 acres in 1977/78. Similarly, the assisted tenants were expected to produce 20 acres of tobacco on each farm. Their average tobacco acreage rose to almost 17 acres in 1972/73 when there were just 34 assisted tenants. By 1977/78 with 205 tenants, average acreage harvested per farm had declined to about 5 acres. Part of this underachievement was apparently due to unavailability of and inadequate management of labor required for the scale of operations envisaged. It was expected that the tenant farms would require a labor force of 38 and the assisted tenant farms a force of 15. It was unrealistic to expect the farm operators, especially, the inexperienced assisted tenants, to hire and supervise such large labor pools efficiently. 33. In addition, the assisted tenant scheme was very costly to the Government, both in terms of financial and administrative assistance and extension service. Also from a management viewpoint the project was too dispersed for efficient use of personnel. Farms were dispersed over more than 25 thousand square miles, making it difficult under the project to provide timely production advice and to maintain equipment that was provided to the assisted tenants. There were frequent breakdowns in equipment and spare parts were difficult to obtain. And if parts were available, considerable time was required to get them to their destination. Further, because of distances involved it was not possible to have a fully - 8 - equipped repair depot in relative proximity of the farms. For this reason the average life of tractors in TBZ pools is about four years. It is surprising that the Bank agreed to support tractor and machinery pools as a project component to be operated by TBZ in light of the poor results with such pools that have been observed in Africa. Because of the difficult logistics involved the Bank should have insisted that competent management be put in charge of the pools and then followed up on their operations through supervision missions. One CDC report early in the project period cited the case at Chibwe where a pool had a full complement of equipment but no workshop or mechanic. Project Staffing and Management 34. Another major factor contributing to the poor performance of the project was that the management of TBZ was designed to be and was at the time of appraisal dependent upon expatriates. Many expatriates served in the project up until 1974 when the Government implemented its Mwanakatwe policy (PPAM para. 10). As a result of this action, TBZ lost many of its management personnel, technical specialists, engineers, agriculturists, etc. At the present time, 30 percent of the top management and other professional positions in TBZ are not filled. 35. In essence, the two Bank loans to support tobacco and maize production in Zambia have served to support the overall operation of TBZ, whose program is much more extensive than covered by these projects. For this reason it is very difficult to monitor and account for use of Bank funds, both because of the many facets of TBZ's operation and because adequate records have not been kept. The staff recruitment problem is one of the factors contributing to the poor state of record keeping and accounting. 36. In addition to directing the Assisted Tenant, Tenant and the Integrated Small Family Farming Schemes, TBZ also promotes burley tobacco production on Family Farms which results in added problems of record keeping and complaints by Bank supervision missions that funds are not being used in accordance with the Loan Agreement. Marketing 37. The tobacco auction center at TBZ headquarters in Lusaka, is the only one available in Zambia. This remoteness certainly acts as a deterrent to tobacco production because farmers, especially from the smaller assisted tenant farms, cannot watch their tobacco being sold to be sure that they are getting a fair price. Moreover, the cost of transport to Lusaka is high for the more remote farms. The auction center was built in 1965. Before that most of the tobacco grown (mostly by large - 9 - farms) in Zambia was sold through auction in Salisbury, Rhodesia. The center in Lusaka was designed for efficient operation at a throughput of over 50 million pounds of tobacco. One reason for this size was to attract and make it convenient for more buyers to come to Zambia and, thus, it was hoped, to increase tobacco prices. Obviously, with total tobacco production reaching only about 15 million pounds in Zambia, the center is operating very inefficiently. 38. Partly because of lack of concentration the Integrated Family Farming Project is having difficulties, too. It is dispersed over an even greater area than that for Commercial Crops. Not only is marketing very difficult for the small tobacco farmers, but providing them with needed advice (extension) is extremely difficult. III. CONCLUSIONS 39. In summary, the project has not achieved its goals to date because (i) the designs of the Mukonchi and Assisted Tenant schemes were not well conceived considering the limited experience of Zambian farmers and the fluid political situation in Zambia at the time of project preparation and appraisal, (ii) the expectation that the project would be managed by expatriates was unrealistic and could not be fulfilled, and the Government's policy made implementation more difficult than it would have been. The Government also failed to use advice and assistance offered by the Bank. 40. The project represents the replication of the Kasunga Scheme in Malawi that initially was successful when care was taken to select participating farmers on objective criteria.. The 20-acre schemes are now considered as failures despite all the potential advantages. The Zambia project represented the perpetuation of a farming structure that existed in the pre-independence era, and soon became a historical anachronism, unable to function properly in a radically changed political and managerial situation. - 10 - ANNEX 1 Project Performance Audit Report Zambian Commercial Crops Farmings Development Project (Ln 685-ZA) Total Production of Tobacco and Maize in Zambia Year Tobacco Maize (OOOT) Total Flue Cured (Ton) 1960 6,230 5,650 515 1961 7,320 6,730 515 1962 8,170 7,320 480 1963 8,590 7,020 395 1964 12,960 10,960 490 1965 9,290 6,600 580 1966 7,630 6,560 705 1967 5,390 4,980 780 1968 6,670 6,270 590 1969 5,340 5,020 655 1970 5,040 4,790 550 1971 6,280 5,900 400 1972 5,910 5,530 617 1973 6,690 5,220 383 1974 6,620 6,200 563 1975 6,960 6,460 575 1976 6,000 NA 675 1977 7,000 NA 550 Source: World Bank, DED. - 11 - ANNEX 2 Project Performance Audit Report Zambia Commercial Crops Farming Development Project (Ln 685-ZA) Estimated and Actual Allocation of Loan Proceeds by Category Category Estimated Actual (thousands US$) I. Farm machinery, vehicles, other equipment and building materials 1,200 1,332 imported for the Project II. Farm machinery, vehicles, other equipment and building materials procured locally; building and road construction; land and water development 3,200 3,182 III. Emoluments of principal non- Zambian headquarters staff on the Board and payment to Mukonchi managing agent 500 986 IV. Unallocated 600 Total: 5,500 5,500 - 12 - ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT (Loan 685-ZA) PROJECT COMPLETION REPORT February 9, 1978 - 13 - ZAMBIA Commercial Crops Farming Development Project (Loan 685-ZA) Project Completion Report I. PROJECT BACKGROUND 1.01 In 1966, the Government of Zambia announced its intention to deve- lop Zambian tobacco production from 15 million lbs to 100 million lbs annually; this target was later replaced by a less specific objective of increasing production to a minimum large enough to maintain active overseas interest in the Zambian crop, and allow reasonably efficient operations of the newly opened marketing and processing facilities of the Tobacco Board of Zambia (TBZ). Several factors motivated Government to embark on a tobacco expansion program: (a) It was established Government policy to diversify the-economy, to reduce its dependence on one commodity, copper. (b) Tobacco was a crop well-suited to production by small enterprises, and thus its production would favor participation of large numbers of Zambians in the money economy. (c) Zambia has large areas of light soil suitable for tobacco production; its climate is most favourable for this crop, and the country has considerable experience in tobacco growing. (d) The U.N. sanctions against Rhodesia gave Zambia an opportunity to strengthen its position in the market. A. Project Preparation 1.02 Early in 1968, the Ministry of Agriculture requested the Bank to assist their Virginia tobacco program; this program had essentially two parts - a training scheme for Zambian farmers and a scheme for tenant farmers. Government in conjunction with the Commonwealth Development Corporation (CDC) had already set up a tobacco Training Scheme at Mukonchi, where Zambians were trained over five years in the growing of tobacco; the first trainees were expected to be available by 1970. Government therefore proposed that a project be prepared to finance the settlement of these farmers (Assisted Tenants) on 100 acre farms permitting the planting of 20 acres of tobacco each,taking into consideration crop rotation. Government was also interested in including under the project the existing Tenant Farming Scheme at Mkushi, which was designed to produce Virginia tobacco on 80 acre unit (500-acre farms). The major objective of this latter scheme was to sustain naticnal tobacco production by non- Zambian experienced tobacco growers until Zambian growers begin to play a - 14 - significant part in production. Tenancies on this scheme therefore, were for 5 years and the tenants were mainly foreigners; after the first 5 years,it was proposed that Zambians would take over as tenants. 1.03 A Bank mission visited Zambia in June 1968, to review Government's proposals. The general impression gained was that there was considerable scope for increasing Virginia tobacco production in Zambia. The quality of leaf was high and there was good demand for this leaf as a blending tobacco. Zambia also offered an ideal climate and excellent soils for the production of flue-cured tobacco. There were no limitations to the amount of soil available and no real limitations to the availability of labor. The main limiting factors were seen as: (a) finance for development of the crop; and (b) the lack of trained producers. 1.04 A project preparation report was prepared by Government with assistance from RMEA (then known as PMEA). The objective of the project was an increase in annual production of flue-cured tobacco by 17 million lbs in five years and by 25 million lbs from the 10th year onward. To achieve this target, the capacity of the Mukonchi Training Scheme was to be doubled; 193 smallholder farms (Assisted Tenants) were to be established around the Mukonchi nucleus estate; 8 schemes for peasant growers (one-acre schemes) were to be established in various provinces, and the successful Tenant Schemes were to continue to. operate on an enlarged scale for the five-year project period. Projections showed that by the end of year 5, 150 trainees would be working on 30 training farms at Mukonchi; 43 smallholder farms would be established (increasing to 193 such farms in year 10); 5, 820 farms would be participating in the one-acre schemes; and 150 tenant farmers would be operating commercial tobacco farms. Together, these farmers would be producing tobacco on 16,000 acres (the area would increase to about 24,500 acres at maturity in year 10). Total project cost over a five-year period was estimated at K13 million (US$18 million). 1.05 A comparison of costs and returns for the various types of farms and the project as a whole showed that Government would be justified to allocate the estimated investment to the project. Farmers would earn an. attractive income and the project would have an internal economic rate of return of 24%. Moreover, it was estimated that the project would in year 5, add a value of K4 million (US$5.6 million) to the country's exports increasing to K7 million (US$9.8 million) per annum from year 10 onwards. B. Project Appraisal 1.06 A Bank appraisal mission visited Zambia during December 1968; it reported that the project proposal was incomplete on matters of organization, management and finance but satisfactory agreements had been reached on all other aspects during appraisal. Because of expected staffing difficulties, the mission decided to reduce the proposed settlement of one-acre tobacco farms by 30% and the tenant farming scheme byl7%. Project costs after revision were estimated at about K13 m3ilion (US$18 million). - 15 - 1.07 One source of difficulty remained, however. It became clear during appraisal that 80% of the required number of tenants and management personnel would have to come from Rhodesia. Thus the viability of a significant part of the project depended on the free entry into Zambia of tenant farmers and management personnel from Rhodesia. The mission wished to have assurances that this free entry would be guaranteed by the Government. It was pointed out by Government representatives that while it would be impossible for the Zambian Government to advertise in Rhodesia for these tenants, they would , however, be willing to give an assurance that all tenant farmers and management personnel regardless of their country of origin would be granted free entry into Zambia. In view of the complicated political issues and the United Nations resolutions such an assurance could not be included in any loan document. Subsequently, the Government of Zambia hardened its attitude towards the entry of Rhodesian tobacco farmers into Zambia. Once it was clear that the Rhodesia farmers would not be available, the viability of the tenant farmer scheme,became very questionable. The Bank took the position that a Government proposal to maintain the number of tenant farmers by admitting applicants lacking in experience would obviously result in lower quality tobacco with correspondingly lower prices. As a result, it became doubtful whether the Tenant Farmer Scheme could be included in the proposed Bank project. Moreover, such a Government policy decision on the entry of Rhodesian tobacco farmers would also affect the staffing of other schemes under the proposed project (23 experienced staff were required in all). 1.08 In view of the changed circumstances, it was decided in June 1969, to reappraise the project. The reappraisal mission modified the proposed project as follows: (a) The training period at Mukonchi Training Unit was reduced from 5 to 4 years; this accelerated*the output of trained smallholders (who would each grow 20 acres of tobacco and 40 acres of maize annually), to allow for the training of 143 smallholders in the loan disbursement period. (b) In addition to 143 Mukonchi trainees, provision was made for the settlement as Assisted Tenants during the loan disbursement period, of 69 Zambians with experience as foremen on commercial farms. (c) The number of tenant farmers to be established under the project further reduced from 125 to 50 of which only25 would be new farms. It was estimated that about 50 qualified tenants, whether Zambians or resident foreigners could be found within Zambia in the five year period. (d) The original Government proposal provided that participants would pay annual rent equivalent to 6h% of the cost of developing their farms. This was adjusted to a plan whereby all Zambian Tenants and Assisted Tenants would purchase their farms over a 15 years at an interest rate of 7 % and that non-Zambian farmers -16 - should pay an annual rent equivalent to an interest rate of 8% a year on the value of the fixed assets of their farms. The new plan allowed for the amortization of the Government's capital investment and ensured that all management costs would be covered; this eliminated the annual deficit which would have occured if all the farms had been rented rather than purchased. (e) The mission concluded that the originally proposed One Acre Scheme could not be considered viable at that stage in view of the large number of problems assosiated with this type of development with which the Government had no experience. C. Project Negotiations 1.09 At negotiations, several minor changes were introduced; it was agreed that: (a) All Zambian farmers should purchase their farms over a period of 20 years at 7% interest; and expatriates should rent their farms at the equivalent of 6 % a year of the value of farm assets. These terms were agreed as'Government believed that the Bank's proposed lease purchase and rental arrangements would be too onerous to attract participants to the project. (b) The proposed loan would finance the estimated foreign exchange costs of the project starting from 1970/71 tobacco year. This required updating of the appraisal report and some adjustments to the number of farms to be developed without any substantial change in total project cdst. 1.10 The Project as presented to the Board thus comprised: (a) The Mukonchi Training Scheme. This scheme provided for the expansion of the Mukonchi Training Unit so that it would have the capacity for a yearly output of 50 farmers trained in maize and tobacco production. (b) The Assisted Tenant Farmer Scheme. This scheme supported the development and equipment of about 270 farms of about 170 acres of arable land each for leasing to farmers trained at Mukonchi and to other individuals with suitable managerial experience; it also provided management and tractor hire services for these farmers. (c) Tenant Farmer Scheme. This scheme provided for the development and equipment of 15 new farms of about 500 acres of arable land each, and the purchase and refurbishing of 15 partially developed 500-acre farms for lease or rental to individuals with experience in managing this size of farm. - 17 - (d) Technical Assistance. Provision was made for recruit- ment of a specialist in small farmer tobacco growing to assist the Tobacco Board of Zambia (TBZ) in planning and implementing schemes under which small farmers would grow a limited area of tobacco - "one-acre" schemes. II. PROJECT IMPLEMENTATION A. Mukonchi Training Scheme 2.01 The Mukonchi training unit was modelled on a highly successful training scheme operating at Kasungu in Malawi where CDC acts as managing agent for the Government of Malawi. Mukonchi, which was also managed by CDC, was to. consist eventually of ten nucleus estates with the capacity of growing a total of 600 acres of tobacco and 1,200 acres of maize. The nucleus estates operated as commercial farms and provided in addition to training facilities, revenues which were to be used to meet operating expenditures. Trainees were to spend the first two years on the nucleus estates, the first as laborers and the second as headmen. In the third through fifth years,trainees were to be placed in groups of five on training Earms administered by the unit. Trainees were to manage these farms under close supervision. -Any profits, up to a maximum of K 850 annually, were to accrue to the trainees, after the payment of full expenses including rentals for land, buildings and equipment and a supervision fee. Such profits were to be placed in individual savings accounts to provide trainees with initial working capital when they become independent farmers. 2.02 Under the Project, the training capacity of Mukonchi was to be doubled from 25 to 50 graduates per annum. The length of the training period was reduced to four years as this was shown to be satisfactory elsewhere. The expansion of the scheme necessitated an increase in the Unit's training and related facilities to enable the cultivation of 1,350 acres of maize and 1,350 acres of tobacco annually. It was anticipated that the first 17 trainees under the Project would leave the scheme and grow their first crop in 1971/72, followed by 20 in 1972/73, 45 in 1973/74 and 50 annually thereafter. 2,03 A very creditable effort was made in 1970 to develop this institution. Eight nucleus estates and eight training farms were established. Because of the emphasis which had been given to development, the crop yields and training aspects suffered to some extent. The financial results for that year showed a loss of approximately KS,000 on each estate with 60 acres of tobacco and 120 acres of maize; this was attributable to high input costs and low crop yields 1/ (tobacco 700 lb/acre). 1/Due to poor crop results for most tobacco growers in 1969/70, the Government introduced a subsidy for flue cured tobacco which applied retroactively to the 1969/70 season. This subsidy effectively guaranteed an average price of 38 Ngwee/ lb. At the same time, the official maize price was raised from K3.40/bag to K4.0/ bag. - 18 - During the following year, the average estate made a profit of about K2,000 including the tobacco subsidy. The training farms also made a profit in 1970/71 with an average profit per trainee of about K1,000. 2.04 In 1972, Zambia was going through a phase of financial stringency due to falling prices of copper. Government initiated an investigation into the viability of the tobacco industry as a whole; in particular, it was interested in evaluating the Assisted Tenant Scheme and the Mukonchi Training Unit. The outcome was a new program to maintain the outturn of trainees at the pre-project level of 24 per year. Trainees were to be reduced from 140 to 60 in the first year and the number of nucleus estates reduced from eight to four. Also, during their second year of training, trainees would work in pairs and not singly as before. The third and fourth year training were to be organized on an individual basis, the trainee growing 15 acres of tobacco and 30 acres of maize in the third year and 20 acres of tobacco and 40 acres of maize in his final year. 2.05 In 1973, a committee was set up to advise on the scheme's training program and possible further reduction in operating costs. The following major alternations were introduced: (a) To turn over the development unit and the induction farm to direct production of tobacco on a unit basis of 180 acres of tobacco and 360 acres of maize. This brought Mukonchi's area under production to a total of 1,200 acres of tobacco and 2,400 acres of maize; (b) to recruit trainees with two years field experience in tobacco growing from within the increasing number of small tobacco farmers and TBZ field employees instead of from outside the industry; (c) to shorten the training period from 4 years to 2 years; and (d) stop the practice of crediting the trainee tenants with the profits of the crops produced by them and replace it with an incentive bonus. Thus, the third and fourth years of the training program remained as before. The first and second years training, which consisted essentially of field labor in all aspects of tobacco growing could be substituted for by two years previous experience in tobacco growing. 2.06 Following the reduction of the training program from four to two years, it was found that assisted tenants generally lacked experience in management and machinery maintenance. It was therefore decided to - 19 - I -- - --- ------ ourth year, a successful e would initially grow 20 acres of tobacco and 80 acres of maize. He would subsequently progress to 40 acres of tobacco and 80 acres of maize. If successful, an assisted tenant might qualify for allotment of a tenant farm. 2.07 . At the end of 1974, CDC's technical assistance agreement came to an end and the Government decided not to renew it. It was agreed with the CDC General Manager that he would remain in an advisory capacity until the end of June 1975. 2.08 In 1976, the Zambian tobacco sector was going through a difficult period due to high input costs and low export prices. Moreover, serious cuts in 1975/76 budget for TBZ by Treasury made it extremely difficult to continue the development program. TBZ bad to reconsider its involvement in direct production and decided to cease operating the direct production units following the 1976/77 season. It was also decided that with the graduation of the trainees already in the pipeline, the Mukonchi training unit would close down. 2.09 The above detailed account of the training program is meant. to show the continuous changes 1/ this program went through in a relative- ly short period of time which could not have allowed for a proper evaluation. The program has generally been inappropriate for preparing assisted tenants to manage commercial sized farms. The training concentrated on the timing and techniques of production, rather than the development of management skills. No practical experience in managing labor was included in the program, nor were the conceptual priorities of productivity (e.g. "maximizing" production from limited costly resources), instilled in any sense into the trainees. It would therefore be unreasonable to expect an assisted tenant farmer to make competent managerial judgements. B. Assisted Tenant Farmer Scheme 2.10 It was estimated at appraisal that about 270 farms would be developed under this scheme. Each would comprise 170 acres of arable land and would support an annual production of 20 acres of tobacco and 40 acres of maize. Each assisted tenant would take up a farm equipped with a house, the building needed to cure, grade and bale the production of 20 acres of tobacco, a water supply system and two laborers' houses. In addition, each farm would have 40 acres of land cleared before occupation and another 80 cleared subsequently. The Government would lease these farms to the Assisted Tenants for 99 years. 1/ All changes were approved by the Bank either at appraisal or during supervision. - 20 - 2.11 It was anticipated that out of the 270 farms, 180 would be occupied by Mukonchi graduates and the balance would be leased to experienced farm workers (particularly foremen of expatriate-owned commercial farms) and to men who had successfully participated in the Ministry of Rural Development (MRD) apprenticeship scheme I/ operated by the Government designed to train young men, (who were literate but not necessarily of high academic standards), in the practical production of Virginia flue-cured tobacco. Candidates were to be carefully selected and in the initial years TBZ was to provide one manager to assist each group of 12 farmers. All farmers were to be developed in clusters of 12, and each cluster was to be supported by a farm machinery hire service that would be operated by the TBZ manager. Fees for supervision and equipment hire were to be levied on all Assisted Tenants. 2.12 Prior to the 1969/70 season, TBZ was able to settle five Assisted Tenant farmers growing about 12 acres of tobacco and maize each These farmers were not Mukonchi trainees,but were growers who had. graduated through a series of TBZ schemes for small producers. In 1970/71, the number of settled Assisted Tenants rose to 24, each growing 20 acres of tobacco, and 40 acres of maize. However, as the 1971 target of completing the settlement of 29 assisted tenants was not achieved, it became necessary to revise the development schedule presented in the appraisal report. -One main reason for the delay at that point was the difficulty experienced by TBZ in completing legal formalities connected with the purchase and development of land. By 1972, the settlement of 66 Assisted Tenants was completed and a further 42 tenants were settled in 1973, bringing the total to 108 compared to appraisal estimates of 131. By 1976, the number of settled farmers reached 184. In view of the increasing concern about the viability of the Assisted Tenant Scheme, TBZ decided to halt develop- ment of further farms and to settle the remaining trainees on existing farms, which would bring total settled to 200, compared with appraisal estimates of 270. 2.13 During the first three years of Project implementation, the average tobacco yield for Assisted Tenant farmers exceeded appraisal estimates of 1,000 lb/acre (particularly in 1972/73 when weather conditions were more favourable).In spite of the relatively high yields, most of the Assisted Tenants were unable to make a profit due to poor handling of crops, which resulted in a low quality tobacco selling at much lower prices. 1/ Apprentices are settled on Virginio tobacco farms for two years. In the first year apprentices learn the practical work. In the second year they complete their all-round knowledge of practical work and learn the rudiments of farm management and labor control. - 21 - However, the increase in cost of production and the very small margin of profit (if any) that could be achieved by an Assisted Tenant cultivating an acre of tobacco as compared to an acre of maize led to the realization early in project implementation that the area under maize should be doubled if Assisted Tenants were to make a surplus. It was therefore decided in 1971 that each Assisted Tenant would maintain the size of his tobacco plot at 20 acres while increasing his maize production to 80 acres. With the -hike in the price of maize, it was expected that by increasing the area of maize to 80 acres, and retaining the tobacco area at 20 acres, the loss could be turned into a profit of about Kl,000 per farm (or about half the net income anticipated in the project appraisal report). 2.14 However, following the 1972/73 season, yields per acre for both tobacco and maize declined steadily; the reported average yield for 1976/77 was 778 lb/acre for tobacco and 17 bags/acre for maize. This poor performance of the Assisted Tenants could be attributed to poor management at all levels: (a) Management at the farm level was particularly non-existent. Training of the Assisted Tenants was production oriented, rather than management oriented; while this deficiency was recognized in later years, management training remained inadequate due to staffing problems. Moreover, the standard of admission for Assisted Tenants was not sufficiently high and was consistently lowered in an effort to recruit sufficient number of trainees. The Assisted Tenant therefore was not of the calibre of an entrepreneur cabable of planning, managing and organizing a commercial size farm. Even the recruits from the ranks of foremen who had previous experience on commercial sized farms were unable to manage effectively once left on their own. (b) Managementat the scheme level also deteriorated over the years. At the'beginning there were sufficient ex- patriate scheme managers to carry out extensive supervision of the small numbers of settled Assisted Tenants. With the increase in number of farms, supervision was diluted. The quality of scheme managementalso deteriorated with the exodus of the expatriates which began in 1972 following the closing of the borders with Rhodesia. Many expatriates, especially those with children attending - 22 - schools in Rhodesia, found it difficult to remain in Zambia, particularly with the rising cost of living resulting from border closure. Most scheme managers were replaced by Zambians whose education and training in tobacco was scarcely more than the farmers they were suppored to supervise. The capable Zambian managers left as they found it more profitable ito farm on their own. (c) Management at the project level was also poor. TBZ's inadequate management and lack of supervisory staff were major factors in the disappointing results achieved by the scheme overall. The Project, since its inception, has been understaffed as most of TBZ's qualified expatriate and Zambian staff resigned. The exodus that was started in 1972 was compounded by the implementation of the revised employment conditions based on the recommendations of the Government's Ywankatwe Salary Commission in 1975. Thereby the salaries and fringe benefits of senior level positions in parastatals were substahtially cut back and in the-case of expatriates, education benefits and dependents air-passages were withdrawn. Subsequently, in November 1976, Government relaxed some of the conditions with regard to qualified professional and technical expatriates employed by parastatals, but the decision came too late to reverse the trend. C. Tenant Farmers Scheme 2.15 Under the tenant farmer scheme about 30 farms of 500 acres of arable land each were to be leased or rented to farmers with the experience needed to grow 60 acres of tobacco and 120 acres of maize annually. Of the 30 farms to be developed, it was anticipated that about 15 would be new farms and the remaining 15 were already partially developed. It was expected that of the 30 farms to be developed under the Project, 20 would be taken up by Zambian citizens and 10 by non-Zambians. Tenant farmers were to purchase and operate their o6n farm machinery. 2.16 In 1969/70, prior to project implementation, there were 71 tenant farmers producing nearly 3.5 lb million of tobacco from 4, 330 acres with an average yield of about 800 lb/acre. Most of them lost money on their tobacco operations during that year but the Government introduced subsidy helped tq cover a large part of these losses. During the following year, 10 tenants left the scheme for one reason or another and 5 joined bringing the total to 66. The initial absence of demand for new farms coupled with a subsequent increase in the cost of development caused the Government and the Bank to change the project - 23 - to eliminate the new farm component and to expand the refurbishing to 30 farms. 2.17 During the 1976/77 season, 75 tenants participated in the scheme; the majority were expatriates, only 26 were of Zambian origin. Nine more farms acquired by the Government remained idle due to lack of suitable applicants. Although 30 of these farms were supposed to be refurbished under the Project, these were never identified separately and it is difficult to see how this could have neen accomplished when the project started with 71 farms and ended with 84. It is claimed however,that there had been a large turnover of tenants during the period requiring additional expenditure when one tenant left the scheme and another took his place. Nearly all farms acquired by the Government for the tenant farmer scheme were equipped with the necessary farm houses, curing barns, grading and bulking sheds and boreholes. Expenses were incurred mainly on repairs of barns and houses, electrical and water reticulation systems, land clearing and houses for laborers. 2.18 In many cases, the refurbishing of a derelict abandoned farm- resulted in a final cost (including land) well above open market valuation for a similar farm property available as a going concern. As the leasing agreement is based on the full cost, the scheme was only attractive to individuals without ready cash and unable to obtain credit. D. Project Costs and Financing 2.19 Project costs were estimated at appraisal at K7.96 million (US$11.14 million) over a five year development period. Foreign exchange costs were estimated at K3.9 million (US$5.5 million)or 49% of total costs. Project costs did not include interest payable during the development period and contained no provision for working capital. They included, however, managing agents fees, salaries, wages and other administrative costs for the Mukonchi training unit and that part of TBZ salaries and administrative costs which could be attributed to the Tenant and Assisted Tenant Schemes. 2.20 All efforts by the completion mission to arrive at actual Project cost proved fruitless. The state of the accounts was such that management of TBZ had to ask for help from the auditors to extract whatever information that may be available on record. This related to capital expenditure by TBZ at headquarters, and on the Tenants and Assisted Tenant Schemes (Annex 1). No information was available for the Mukonchi Training Scheme or the Assisted Tenant Farms in the Mukonchi Scheme other than the audited financial statements up to the end of 1975, (Annex 2). Project accounts could not be separated from non-Project accounts which made it impossible to arrive at actual total Project cost. 2.21 The Project was financed by a Bank loan of US$5.5 million (K3.9 million) to cover the estimated foreign exchange component for a term of 25 years including a grace period of 6 years. CDC made a loan of KL.0 million to assist the Government in financing the expenditures for the - 24 - Mukonchi component of the Project. The CDC loan covered expenditures made in 1969/70 at Mukonchi and only about K510,000 was to be disbursed against costs incurred during the Project period. The CDC Soan was at 7% per annum for a term of 20 years including 5 years grace period. It was anticipated that commercial banks, Tenants and Assisted Tenants would finance K800,000 (US$1.1 million) of project costs mainly for the purchase of farm equipment and machinery. The balance, which was estimated at apprai- sal to be K2.8 million (US$3.8 million) was to be covered by Government. 2.22 The proceeds of the Bank loan together with funds to cover that part of Project costs met directly by the Government were to be made available to TBZ as a direct budget subvention and not to be repaid by TBZ as all assets created under the Project were to remain the property of the Government. The financial statements of TBZ (Annexes 3 and 4) show that all amounts under the Project were advanced to TBZ as a loan on which interest was charged at 6k% until 1975 when the Government decided to consider K10.6 million of the funds provided to TBZ as equity capital. E. Procurement and Disbursement 2.23 At the outset of project implementation, Government policy regarding import licenses and international competitive bidding, as well as the closing of the Rhodesia border, hindered the smooth operation of procurement efforts and disbursements lagged seriously behind appraisal estimates. From 1974 onwards, however, procurement and disbursement procedures were fully understood and no difficulties were encountered. The closing date was extended by one year to enable disbursements to be completed by December 31, 1976. (See PPAM Annex 1) F. Integrated Family Family Farming Project (Loan 882-ZA) 2.24 At the preparation stage of the Commercial Crops Farming Development Project, included the establishment of eight schemes for peasant growers (one-acre schemes) in various provinces. Because of expected staffing difficulties it was decided at appraisal to reduce the proposed settlement of one-acre farms by 30%. When the Project was later reappraised, this component was totally excluded as it was not considered viable at that stage in view of the large number of problems associated with this type of development with which the Government had no experience. 2.25 A separate project aimed at developing the one-acre farm scheme was approved by the Board in October 1973. This project was designed to further develop the Zambian tobacco and maize industries and assist subsistence farmers to enter commercial agriculture. Under the Project about 900 existing and 5,400new producers would grow some 12,500 acres of Virginia flue-cured tobacco and 16,000 acres of hybrid maize cver the first five-year period of a nine-year program which would ultimately assist 8,800 farmers. Project implementation and management including the provision of housing, vehicles, equipment and a tractor hire service is entrusted to the Production Department of TBZ. The Project comprises the construction of crop extraction roads, soil conservation measures, tree and tobacco nurseries, domestic water supplies, baling centers, a limited number of schools and dispensaries - 25 - and an enlargement of Government's extension and supporting services to farmers. It also makes provision for seasonal credit for farming inputs and medium-term loans for construction of grading sheds and curing barns. Total project cost was estimated at US$15.2 million of which the Bank is providing US$11.5 million (or 75% of total cost) under a 20 year loan including a grace period of 5 years. 2.26 After a very slow start with annual farmer recruitment ranging between 25% and 30% of appraisal target levels, there was some improvement in 1976/77 with the total number of farmers reaching 52% of appraisal target. As in the case of the Commercial Crops Farming Development Project, management represents a serious problem. The number and quality of management staff have not been up to appraisal estimates and the problem became critical at the end of 1976 with the resignation of the project manager and two expatriate staff threatened resignation because of unsatisfactory salary conditions. Government rejected TBZ's request to recruit as replacement a qualified expatriate project manager or to hire an ADS man as they refuse to consider financing such positions from loan funds which they believe could be financed under free bilateral assistance. 2.27 The supervision mission in October 1976, estimated that the economic rate of return had declined to 6% compared to 20% at appraisal. The September 1977 Supervision mission believes that this may now be lower in view of higher costs and lower prices than expected. To improve the economic viability of the project it is necessary to improve management at all levels.' This remains a key problem. A further project review is scheduled for February 1978, at which time corrective measures will have to be taken. III. ORGANIZATION AND MANAGEMENT 3.01 TBZ is the Government agency responsible for implementing the Project. The operations of TBZ are directed by the Chairman of its board,who is appointed by the President of the Republic, and who is assisted by a General Manager. The TBZ Board now consists of seven members, the Minister of State for Lands and Agriculture as Chairman, the six remaining members consist of the Permanent Secretary of the Ministry of Lands and Agriculture, three members representing the growers of Virginia, Oriental and Burley tobacco respectively, one farmer and one District Governor. 3.02 TBZ had complete authority over the selection of participants for the Mukonchi Training Scheme, as well as the selection of participants in the Assisted Tenant Farmers Scheme and the Tenant Farmer Scheme. TBZ also guarantees loans made by commercial banks to protect farmers for seasonal and equipment credit purposes. In October 1969, TBZ formed a Production Department to assume principal responsibilities for carrying out the Project. - 26 - 3.03 In the early stages of project implementation, the Mukonchi Training Unit and TBZ staff were considered to be of reasonable quality although there was room for substantial improvement at TBZ headquarters particularly in planning and direction. The Chairman of TBZ at that time was apparently not interested in tobacco production and development and the General Manager was unable to provide sufficient direction or leadership to his staff. The problem was aggravated in 1972. Many expatriate staff decided to leave at the expiry of their contracts due to high costs of living in Zambia and general dissatis- faction with conditions; it later proved to be difficult to attract or recruit replacements. 3.04 Throughout the Project implementation period, TBZ's weaknesses centered on persistent management and staffing problems especially at head- quarters. There were also serious weaknesses at the scheme level, much of which were attributed to the loss of expatriate staff and the lack of qualified Zambians to replace them. Zambianization was difficult, since for financial reasons the few well qualified Zambians opted for tenant farms rather than TBZ employment. The situation went from bad to worse, particularly with the completion of the Mwanakatwe Salary Commission early in 1976 which resulted in a considerable reduction in salaries and benefits particularly to expatriates. 3.05 Since the formation of TBZ in 1967, it has been determined to replace the drop in production from the commercial sector which reached an unprecented level of 24 lbs million in 1964, and has subsequently dwindled steadily until in 1976, it reached 4 million lbs. TBZ hoped to replace that steady drop in production with expanded production from the Tenant Farmers Scheme utilizing vacated tobacco farms and expatriate expert farmers as Tenants with financial support from the State. At a later stage this was to be augumented by developing new farms and settling Zambian Assisted Tenant farmers after four years of training, subsequently, by Direct Production Schemes managed and operated by TBZ and the Family Farming Project. The State was relatively affluent in the early years of TBZ's existence and so there was no shortage of funds or highly qualified expert managerial staff. Imported materials were also readily available. With the decline in the price of copper and the steady increase in costs, the allocation of public funds each year was not adequate to meet the increasing requirements of the schemes. TBZ's budget for 1976 was reduced by about 50% from K8.7 million to 4.6 million. It was therefore decided that both the Tenant and Assisted Tenant Schemes would be consolidated as of the end of 1975/76 season, the Mukonchi training function for Assisted Tenants would cease after completion of training of present trainees and that all activities in the Direct Production Scheme would cease. Instead, TBZ has opted for a policy whereby all available resources will be directed towards providing an extension service for tobacco growers. This policy is yet to be implemented however. The Family Farming Project Review Report dated April 4, 1977 recommended against this new policy, at least for the next few years until the farmers' performance has signifi- cantly improved to warrant a reduction in the level of management assistance provided by TBZ. - 27 - 3.06 The shortage of experienced manpower and qualified personnel took its toll of the Accounts Department. The low calibre of staff engaged led to accounting entries becoming months in arrears with subsequent reconcilations becoming more and mcre difficult. This resulted in the breakdown of the accounting system which continued through 1975 and the early part of 1976. Throughout their reports, the auditors have repeatedly referred to shortage of accounting staff and the lack of qualified personnel as being the principal cause of the problem. The situation has been such that the books of account and records are totally unrealiable. The audit report on the financial statements of TBZ for 1974 was heavily qualified and stated that: "1. We were unable to adequately verify production department fixed assets having a net book value of K6.2 million forming part of the total assets of about K13 million because: (a) Proper records have not been maintained (b) No physical verfication of fixad assets has been carried out by the Board. 2. K1.14 million of the stocks appearing in the balance sheets of K1.39 million together with the exceptional stock write-off of K610,000 could not be adequately verified because in our opinion adequate stock records have not been maintained and the evaluation of the physical count at December 31, 1974 could not be relied upon". 3.07 A letter from the auditors to the management of TBZ dated October 29, 1975 stated: " The last reply to a letter on internal control was written by the previous General Manager on December 1, 1971 and related to the audit of the year ended December 31, 1970. Despite having written letters on internal control covering all the audits since that date we are disappointed to note that these have met with little response. You will of course be aware that many of the weaknesses previously reported continue to be unsatisfactory. The following are the major areas: fixed assets, stores, creditors and accruals, debtors, accounts preparation timetables". 3.08 The 1975 audit report has not yet been finalized, but it is understood that the auditors will decline to express an opinion on the accounts for that year. - 28 3.09 The situation was further aggravated by the resignation of the previous Financial Controller in June 1976 without prior provi- sion for a replacement. Although the position was filled temporarily, the new Financial Controller had to concentrate on the day to day accounting matters rather than direct his attention to his proper duties. A new accounting system has been proposed by the auditors which recognizes the inpossibility of having accountina staff of a high calibre at scheme level. This had not been implemented. 3.10 It can only be concluded that the financial and statistical records kepy by TBZ for the headquarters and all the projects under its supervision were incomplete and inadequate and could have been of little use as a base for management decisions. In this stage of chaos, where all records were totally unrealiable no monitoring and evaluation of Project activities could have been possible. IV. OPERATING RESULTS A. Agricultural Production 4.01 It was estimated at appraisal that at full development total area cropped would be 7,200 acres of tobacco and 14,400 acres of maize. This was based on 270 Assisted Tenant farmers participating each growing 20 acres of tobacco and 40-acres of maize and 30 Tenant farmers growing 60 acres of tobacco and 120 acres of maize. Total production was estimated at 7.2 lbs million of tobacco and 360,000 bags (200 lbs each)of maize on the basis of an average yield of 1,000 lb/acre of tobacco and 25 bags/acre of maize. It was later decided that due to increased cost of production an assisted tenant should double his cropped area of maize from 40 acres to 80 acres. 4.02 Production figures for 1976/77 season compared with appraisal estimates are given below: 1/ Actual Production Appraisal Estimates Tobacco Maize Tobacco Maize Tenants:Area cropped(acres) 1,810 9,200 1,800 3,600 Production 1,324,000 lbs 212,000 1,800,000 90,000 bgs. Yield/acre 732 " 23 1,000 lbs 25 Assisted Tenants:Area cropped (acres) 3,680 12,830 5,400 10,840 Production 2,865,000 " 217,000 5,400,000 271,000 Yield/acre 778 " 17 1,000 25 Details of tobacco and maize production for the year 1971 to 1977 and a comparison with appraisal estimates are given in Annexes 6 to 10. 1/ The figures for tenant farmers were adjusted to show production of 30 farmers covered by the Project out of a total of 75. This was done on an average basis since the 30 project related farms could not be identified separately(para 4.17). - 29 - B. The Tenant Farmer Scheme 4.03 This was an ongoing project with 71 tenants in 1969/70 (para 26). At the beginning of Project implementation in 1970/71, 66 tenant farmers participated in that scheme. Of 84 farms available, only 75 were cropped in 1976/77. TBZ was unable to identify which 30 farms were refurbished under the Project when only 13 farms were added since 1970. 4.04 Yields were around 1,000 lbs/acre during the first three years (1970/71 to 1972/73), but declined steadily after that. Reasons given were weather conditions had not been favorable and farmers were stretching their management ability by overcropping with maize. Some of the better tobacco growers left Zambia to take up tobacco growing in Malawi where prospects were said to be better. Others who were discouraged about living conditions gave up farming and left the country and were replaced by less experienced growers who planted as much maize as their equipment and arable land would allow. 4.05 Tobacco requires a high standard of management and supervision. Tobacco yields of 1,800 lbs/acre for early planted tobacco have been achieved by experienced conetcial growers with good management ability. The tenant farmer is obliged to plant 60 acres of tobacco each year. Since bank credit is allotted on the basis of area grown, and since areas planted are not verified, it is likely that a smaller area than that reported is actually planted resulting in a lower recorded yield. Moreover, as Tenant farmers were not required to disclose their yields or costs of production, these figures are based on reported sales which could be misleading. C. The Assisted Tenant Farmers Scheme 4.06 In the case of Assisted Tenant Farmers, available statistical information indicate that average yields varied from 1,160 lbs/acre to 640 lbs/acre during the project implementation period with a tendency towards lower yields Ouring the last three years. 4.07 The reasons for the low recorded yields could be varied. Quantities of tobacco lost in the field during handling and during curing are probably considerable but are difficult to measure as these vary from farm to farm. TBZ extension staff consider the losses on many farms at around 50% of the potentially salable leaf. There are indica- tions that some of the tobacco may have been sold privately while some of the fertilizers destined for the tobacco crop has been sold or applied to an excessive acreage of maize. There is also evidence that several Assisted Tenants are selling a portion of their maize privately rather than through NAMBOARD, which is the official channel. These "on-the-side" sales distort the true yields. - 30 - 4.08 The efficiency of the tractor hire units operated by TBZ left much to be desired. Due to prolonged breakdowns and lack of sufficient numbers of operating tractors, critical cultivation practices were delayed. Poor tractor maintenance resulting in shorter tractor life and the unavailability of spare parts led to many tractors being laid up on blocks for long periods. Moreover, parts were removed from such tractors as replacement parts for other tractors. The consequence of these measures was that some of the "cannibalized" tractors never became operational again. Poor scheme management,' and the inability of scheme managers to plan and allocate machinery hire on time also contributed to poor yields. 4.09 The inefficiency of Assisted Tenants and the resulting low recorded yields may also relate to their ineffective use of labor and their misplaced emphasis on production rather than productivity. Most Assisted Tenants believe that cropping larger areas of tobacco and maize will realize greater production and by implication, profits. A successful commercial farmer - often an expatriate - produces 1,550 to 2,000 lbs of tobacco per acre with each labor unit accounting for more than 2,200 lbs. This means that one labor unit covers about 1 acres of a substantial crop. The Assisted Tenant, on the other hand, typically chooses to employ one labor unit per acre, irres- pective of his anticipated yield. Labor costs/unit of tobacco produced, therefore, are about three times as much on an assisted tenant farm as on a good commercial farm. 4.10 Assisted Tenants are provided with credit in kind for farm inputs and in cash for laborers wages and their own living allowances, which is recorded by TBZ through stop orders at delivery of maize and tobacco. With their relatively poor yields and therefore low cash returns, most Assisted Tenants have not been realizing a cash payment at the end of the season. Under these circumstances, it is hardly surprising that most Assisted Tenants do not know thair gross income or the extent of their debts to the banks or to TBZ. Nor are they particularly concerned about such debts. During the past fout to siz years Assisted Tenants received their monthly living allowances regularly. Therefore, some, if not the majority appear to think that they are employed by TBZ. For many years they have been told what to do and have not developed a sense of initiative. Debts are becoming of such proportions that farmers have no ineentive to work hard as any "profit" is paid to TBZ for charges and old debts. 4.11 It should be reiterated that as records were not properly kept and available information is inaccurate, production figures,areas cultivated and yields are unrealiable. - 31 - D. Farmers Benefits 4.12 It was estimated at appraisal that the annual income of an Assisted Tenant would be about K1,600 during purchase of his lease and K2,600 subsequently. The anticipated annual income of a Tenant farmer purchasing his holdings was K4,500 in the purchasing period and K7,700 thereafter and an average of K5,600 for renting farmers. The financial rates of return on assisted tenant and tenant farms without attributing a value to the farmers' management was calculated at about 26%. 4.13 The average cest of production per acre during the 1976/77 season for an Assisted Tenant Farmer amounted to K497 for tobacco and K132.50 for maize (Annex 11). At the prevailing average price achieved by this category of farmers of 46 Ngwee/lb for tobacco (including a price support of 7 Ngwee/lb) and K6.0 per bag of maize, the Assisted Tenant Farmer would break even if he produced 1,800 lbs/acre of tobacco and 22 bags/acre of maize. The average cropped area for an Assisted Tenant Farmer for 1976/77 was 19 acres of tobacco and 67 acres of maize producing an average of 778 lbs/acre of tobacco and 17 bags of maize. Therefore, the operating loss sustained by the average farmer amounted to K139/acre of tobacco and K30.5/acre of maize or a total of about K4,700. The results of 1976/77 season show that of 193 participating farmers only 6 or 3% were able to pay back their debts. 4.14 The results for Tenant Farmers are more difficult to gauge since they are not obliged to disclose their costs of production. It is estimated that their average cost of production for an acre of tobacco was about K475 and K135 for an acre of maize. The available information shows that 75 farmers participated in the Tenant Farmer Scheme (30 of whom are presumed to be under this Project), in 1976/77, cropping an average of 60 acres of tobacco. and 300 acres of maize and producing on average 732 lbs/acre of tobacco and 23 bags/acre of maize. The average price obtained by a Tenant Farmer was 54 Ngwee/lb of tobacco and K6.0/bags of maize. Therefore, the average Tenant Farmer is estimated to have sustained a loss on tobacco of K4,800 and made a profit on maize of K900 resulting in a net loss of K3,900 on his total holdings. 4.15 As mentioned before, it is quite coneeivable that the above calculated losses do not reflect the true position and that such losses were to a certain degree, lower than those estimates. The main reasons are that seasonal credit was advanced on the basis of acreage planted which was not verified at any time.. This would tend to reduce yields per acre and inflate costs. Moreover, while the amount of tobacco produced can be verified as TBZ is the main channel for tobacco sales, this is not the case with maize part of--which is used for home consumption and can also be sold privately without going - 32- through NAMBOARD. Finally, the records kept by the scheme managers for the individual farmers and the records kept by TBZ have proven unrealiable. In point of fact the costs of production in each case were produced by the present Project Manager for both schemes based on his memory. 4.16 The economic rate of return for the Assisted Tenant Scheme and the Tenant Scheme was recalculated based on the available information on operating costs and yields and on an estimated project cost for both schemes, that assumed that the size of the Project was reduced so as to remain within the original financing package, i.e. equal to appraisal estimates. Even under the most favorable assumptions, the rate of return so calculated over a project life of 25 years was negative compared with an appraisal estimate of 19%. V. BANK PERFORMANCE A. Appraisal 5.01 The Project concept depended heavily on the availability of extensive management and supervision at all stages. Since this was not available locally, it was obvious that expatriates with considerable experience in tobacco growing would have to be brought in. During project appraisal, it was found that the majority of the required tenants would come from Rhodesia. At first, the Government took a relaxed position with regard to the entry of Rhodesians into Zambia but later its attitude hardened. This rendered the Tenant Farmer Scheme, which was the principal scheme in the project, doubtful and also affected the availability of management presonnel for the remaining schemes. 5.02 At that juncture, the Bank should have considered rejecting the Project in view of its heavy reliance on expatriate experienced tobacco growers and qualified management personnel being available in sufficient numbers. Rhodesia was the obvious main source and the complex political situation that was developing at the time should have given sufficient warning. Instead of a basic conceptual change, the Project was modified at reappraisal by shifting the emphasis from the Tenant Scheme to the Assisted Tenant Scheme whereby marginally literate Zambians would be trained over a period of four years to become entrepreneurs capable of handling commercial size farms with all the required knowledge and experience of managing such farms. It is not surprising therefore, that most of them were unable to comprehend sufficiently what was required of them, resulting -in a sadly poor performance. - 33 - 3. Supervision 5.03 The Project was supervised regularly at half yearly inter- vals beginning with the supervision mission of September 1970. Thirteen missions in all visited Zambia, at first from Headquarters and from 1973 onwards supervision was carried out by RMEA in Nairobi. Since inception , the main theme that ran through supervision reports was the overall weakness of TBZ's management, the lack of control, the shortage of well qualified staff and the inability of TBZ to attract or recruit expatriate staff. Moreover, the poor stage of TBZ's and Project accounts was also of major concern. In spite of repeated efforts to correct the situation most super- vision missions were left with promises from Governe nt and the management of TBZ that corrective measures would be taken. It is not clear, however, why with the Management of TBZ being in such total disarray over a long period of time, no action was taken by the Bank to withhold disbursement of funds until such time that management is properly strengthened and accounts are put in order. 5.04 The last supervision mission in October 1976, reached agreement with TBZ on the urgent need for a Farm Management Adviser, a Chief Accountant and a Management Accountant and also on the need for implementing the new accounting system which was already prepared, none of which was appointed or implemented a year later 1/.There has been a general lack of interest on the part of TBZ management which has made supervision missions tasks the more difficult. VI. CONCLUSION 6.01 The objectives set out in the appraisal of this Project were not achieved; it generated neither the production nor the income envisaged. In particular, the Assisted Tenant Farmer's financial position has been steadily deteriorating with mounting seasonal debts. The problems associated with tobacco production (particularly at scheme level) were grossly underestimated. It was generally not appreciated that the different services required at scheme level must be properly coordinated. Agriculture is particularly sensitive to administrative inefficiency. Relatively minor delays and over- sights in coordination can result in crop failure. Financial and technical records kept were incomplete and inadequate and were of little use as a base for management decisions. Moreover, Government measures have negatively conditions causing many expatriates and Zambians to leave and have seriously curtailed the availability of capital for development. 1/ At the time of the Completion mission. - 34 - 6.02 The Project concept relied heavily on intensive expatriate management and on the expectation that marginally literate Zambians could be transferred after a few years training on tobacco growing into entrepreneurs capable of planning, managing and organizing commercial size farms. In retrospect and .wth the benefit of hindsight, the Project should have been changed at reappraisal when it became clear that experienced tobacco growers and qualified management personnel would not be available in sufficient numbers. At that stage, it should have been altered to fit the then prevailing developments in the Zambian political scene. 6.03 There are no prospects for immediate and drastic improvements in the performance of Assisted Tenants as experienced management is lacking. TBZ has already taken the decision to consolidate the Tenant and the Assisted Tenant schemes at the present level and to cease direct production. The management of TBZ has indicated that they intend to improve scheme management by training NRDC graduates or agricultural graduates of the University -College of Zambia to replace present scheme managers whose performance is not up to standard. The last supervision mission had recommended that more emphasis should be placed on productivity rather than production. In order to achieve this, the acreage of cropped tobacco and maize for each Assisted Tenant should be reduced in the hope that yields per acre would improve. It remains to be seen whether this action would help achieve better results. 6.04 If there is one lesson to be learnt from this Project, it is never to allow a project to slide downhill with ever increasing speed without attempting to apply the brakes. The Bank's apparent flexibility towards project implementation was interpreted by TBZ as a license for complacency and inepttude. Where project management or for that matter the Government fail to make the necessary corrective measures, the Bank should take the necessary steps (such as withholding disbursements of funds) until such time that the project is brought back on its intended course. - 35 - ZAMBIA ANNEX 1 COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project Completion ReDort Summary of Project Accounts as Extracted by TBZ 1/ (K'000) Assisted Tenants Tenants TBZ Scheme Scheme Headauarters Total Barns 434 69 66 569 Bulking sheds 19 7 11 37 Building: Temporary 26 15 3 44 Staff 93 13 176 282 Office 5 - 19 24 Workshop 14 1 3 18 Grading sheds 124 8 16 148 Stores 2 9 7 18 Schools and Clinics 13 - - 13 Miscellaneous 4 8 46 58 Permanent Labor Houses 34 38 26 98 Conservation works 18 24 134 176 Electrical reticulation 64 15 38 117 Farms 3 - 332 335 Fencing 2 z 4 Furniture, Fittings: Housing 36 9 -55 100 Offices 4 2 30 36 Land clearing 580 520 194 1,294 Motor vehicles 176 53 314 543 Plant and Equipment 547 52 77 676 Roads and bridges 159 180 8 347 Small tools and equipment 15 - 23 38 Tractors and trailers 455 7 82 544 Water reticulation 336 15 93 ____ Total 3,13 1,045 11755 5,963 1/ It is not certain that the amounts under Tenants Scheme and TBZ Head- quarters are Project related. No Project accounts were.available for the Mukonchi Assisted Tenants Scheme. - 36 - ANNEX 2 ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project Completion Report Mukonchi Tobacco Training and Settlement Scheme - Balance Sheets (K'000) As at 12/31 1975 1974 1973 1972 1971 1970 Fixed Assets 3,174 2,675 2,331 2,361 1,821 961 Assisted Tenant Farms 1,158 688 599 199 - - Medium Term Loans to Assisted Tenants 67 85 73 - - - Current Assets: Growing Crops 360 323 317 109 217 -122 Advances 619 300 179 221 120 - Stores 155 111 118 148 148 75 Debtors 27 20 18 22 18 82 Cash 12 55 44 123 42 87 Total current assets 1,173 809 676 623 545 366 Current Liabilities: Accounts payable 413 67 103 94 141 336 Net Current Assets 760 742 573 529 404 30 Capital employed 5,159 4,190 3,576 2,956 2,225 990 Loans 133 200 - TBZ 5,159 4,190 3,576 3,386 2,263 300 Reserves (430) (238) 691 Total 5,159 4 190 3,576 2,956 2,225 991 - 37 - ZMBIA ANNEX 3 COMMERCIAL CROPS FARMING DEVELOPMENT PTOJECT Project Completion Report Tobacco Board of Zambia - Balance Sheets As at 12/31 1975 1974 1973 1972 1971 1970 Fixed Assets 14,457 12,612 11,100 10,560 9,338 4,327 Cost of Assisted Tenant Farms 1,158 688 598 199 - - Current Assets: Stocks 735 709 436 109 219 4 Consumable Stores 1,632 1,394 1,207 727 639 70 Debts 2,486 1,586 1,125 904 431 99 Funds on deposit - 500 500 1,014 1,489 1,273 Cash 238 475 1,625 675 666 86 Total current assets 5,091 4,664 4,893 3,429 3,444 1,532 Current Liabilities: Accounts payable 3,386 2,965 1,361 826 725 333 Bank overdraft 305 - - - - - Net Current Assets 1,400 1,699 3,532 2,603 2,719 1,199 Capital employedi 17,015 14,999 15,230 13,362 12,052 5,526 Capital 1/ 10,600 - - - - - Loans 21 10,838 18,637 17,618 13,954 10,290 5,013 Reserves (4,423) (3,638) (2,388) (592) 1,767 513 Total 17,015 14,999 15,230 13,362 12,057 5,526 Contingent Liability 1,300 1,236 1,520 1,475 - - 1/ Government decided to consider K10.6 million of its loans as equity capital 2/ Loans: Government @ 6k% 14,920 13,137 10,514 7,925 CDC @ 6 3/4% 1,000 1,000 1,000 1,000 IBRD @ 7% 2,322 2,227 1,214 245 AFC 1,445 995 1,102 933 Zambia Building Society 295 260 124 127 - 38 - ZAMBIA ANNEX 4 COMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project Completion Report Tobacco Board of Zambia - Income and Expenditure Accounts (K'F000) Year Ended 12/31 1975 1974 1973 1972 1971 1970 Auction Floor Income 255 321 182 149 156 111 Expenditure 315 304 244 224 238 - 196 (60) 17 (62) (75) (82) (8-5 Packing Plant Income 734 693 241 174 125 97 Expenditure 793 812 753 716 728 708 (59) (119) (512) (542) (603) (611) Mukonchi Training Scheme Income .566 646 303 438 276 - Expenditure 1,063 1,118 678 869 514 - (497) (472) (375) (431) (238) - Tobacco Production Department Income 2,854 2,698 430 416 134 - Expenditure 4327 3,807 2,679 2,088 1,533 - (1,420) (1,109) (2,249) (1,672) (1,399) - Administration Expenses 712 463 415 315 469 275 Losses under guarantees 294 113 42 114 - - Total. (3,042) (2,259) (3,655) (3,149) (2,791) (971) Government Subsidy 598 379 800 800 1,200 1,025 Surplus/(Deficit) (2,444) (1,880) (2,855) (2,349) (1,591) 54 - 39 - ANNEX 5 ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project ComDletion Report Assisted Tenants Tobacco Production Number Output Quantities Average Total Year of growers Acreage per acre sold Price K'000 lb lb'000 K/lb 1970/71 24 490 1,027 503 0.30 152 1371/72 33 840 1,052 883 0.35 308 1972/73 66 1,421 1,152 1,638 0.36 591 1973/74 103 2,356 802 1,888 0.43 813 1974/75 142 3,523 644 2,267 0.36 824 1975/76 184 4,509 660 2,976 0.41 1,210 1976/77 193 3,680 778 2,863 0.46 1,317 ZAMBIA ANNEX .6 COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project Completion Renort Assisted Tenants Maize Production Number Output Quantities Average Total Year of growers Acreage per acre sold Price K'000 bags bags'000 K/bag 1970/71 24 710 26 18 4.0 .73 1971/72 33 1,340 23 31 4.0 125 1972/73 66 5,225 23 123 4.0 491 1973/74 103 8,843 24 214 4.0 856 1974/75 142 11,155 20 228 4.0 940 1975/76 184 13,031 20 259 6.0 1,552 1976/77 193 12,839 17 217 6.0 1,302 - 41 - ZAMBIA ANNEX 7 COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project Completion Report Tenant Farmers Tobacco Production Number Output Quantities Average Year of growers Acreage per acre sold Price Total * lb lb'000 K/lb K'000 1970/71 66 4,124 934 3,851 0.30- 1,144 1971/72 69 3,934 1,004 3,949 0.32 1,264 1972/73 68 3,952 968 3,825 0.39 1,492 1973/74 73 4,679 852 3,989 0.43 1,715 1974/75 77 4,946 701 3,469 0.39 1,353 1975/76 71 4,603 835 3,845 0.41 1,576 1976/77 75 4,536 732 3,319 0.54 1,792 * 30 Tenant farms were assumed to be under the Project as estimated at appraisal. - 42 - ANNEX 8 ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project Completion Report :enant Farmers Maize Production Number Output Quantities Average Total Year of Growers Average per acre sold Price K'000 bags bags'000 . 1970/71 66 19,000 25 475 4.0 1,900 1971/72 69 21,000 24 504 5.0 2,016 1972/73 68 21,000 23 483 4.0 1,932 1973/74 73 23,000 25 575 4.0 2,300 1974/75 77 24,000 25 600 4.3 2.580 1975/76 71 13,000 24 552 6.0 3,312 1976/77 75 23,000 23 529 6.0 3,174 * 30 Tenant farms were assumed to be under the project as estimated at appraisal. - 43 - ANNEX 9 ZAMBIA COMMERCIAL CROPS FARMING DEVELOPME1NT PROJECT Project Completion Report Comparison of Actual Production with Appraisal Estimates Tobacco Maize Actual Prod. Appraisal Est. Actual Prod. ADpraisal Est. Year AcreaRe lbs'000 Acreage lbs'000 Acreage bgs'000 Acreage bRs'000 1970/71 490 503 - - 710 18 - - 1971/72 840 883 880 880 1,340 31 880 22 1972/73 1,421 1,152 1,920 1,920 5,225 123 2,800 70 1973/74 3,317 2,707 3,520 3,520 13,568 332 5,440 136 1974/75 5,450 3,618 5,340 .5,340 20,505 462 8,860 222 1975/76 6,454 4,600 7,220 7,220 22,749 492 12,560 314 1976/77 5,494 4,191 7,220 7,220 22,039 429 14,440 361 As Tenants under the Project could not be identified separately, tenants ' production was included at the average applicable to all tenants and at a revised rate of settlement that assumed that 15 tenants were project related in 1973/74, and 30 in 1974/75. It was estimated at appraisal that five tenants would be settled under the Project in each of the first three years, seven in the fourth year and 8 in the fifth year. - 44 - ZAMBIA ANNEX 10 COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT Project Completion Report Estimated Cost of Production Der acre for Assisted Tenants 1976/77 (K) Tobacco Maize Wages 180.00 10.00 Fertilizers 43.00 39.00 Seed 0.50 3.00 Hessian,twine and paper 14.50 Fumigants and fumigation covers 11.00 Pesticides and chemicals 2.00 5.00 Wires 3.00 Insurance 28.00 2.00' Repairs - barns 20.00 - buildings 12.00 Machinery hire 1/ 79.00 £18.00 Stores 20.00 Raincoats 6.00 Selling expenses 20.00 3.00 Depreciation of movable assets 6.00 Rent 6.50 6.50 Water charge 1.00 1.00 Management fee 7.50 7.50 Interest on seasonal loan 2/ 27.00 7.50. Sundries 10.00 Total 497.00 132.50 1/ Cost of machinery hire per acre was calculated by TBZ at K142.35 for tobacco and K48.06 for maize. However, management decided that charges to Assisted Tenants should beat the rate of K79 per acre of tobacco and K48 per acre of maize. 2/ Interest calculated at 9% on amount advanced for seasonal loans for nine months at the rate of K400 per acre of tobacco and K110 per acre of maize. - 45 - ANNEX 11 ZAMBIA COMERCIAL CROPS FARMING DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Key to Tobacco Production Schemes (See Mav) 1. Serenje Family Farming Scheme 2. Mkushi West Family Farming Scheme 3. Mungule Family Farming Scheme 4.* Mkushi Tenant Farming Scheme 5.* Mpima Assisted Tenant Scheme 6.* winuna Assisted Tenant Scheme 7.* Mwomboshi Tenant Farming Scheme 8.* Chibwe Assisted Tenant Scheme 9.* Mukonchi Training and Settlement Scheme 10. Mpongwe Family Farming Scheme 11. Gamela Family Farming Scheme 12. Siachitema Family Farming Scheme 13, Choma Tenant Scheme 14. Kalomo Tenant Farming Scheme 15, Mukwela Assisted Tenant Scheme 16# Tara Assisted Tenant Scheme 17, Popota Training College and Assisted Tenant Scheme 18. Kanchcmba Burley Family Farming Scheme 19. Mapanza Burley Family Farming Scheme 20. Lumezi Family Farming Scheme 21. Luwerezi Family Farming Scheme 22. Sindemisale Family Farming Scheme 23. Vubwe Family Farming Scheme 24. Zemba Family Farming Scheme 25. Sinda Family Farming Scheme 26. Petauke Family Farming Scheme 27. Kapara Burley Family Farming Scheme 28. Chipangali Family Farming Scheme 29. Kaoma Family Farming Scheme 30 Kaoma Assisted Tenant Scheme 31t Kabompo Assisted Tenant Scheme 32. Mukonge Family Farming Scheme 33. Nyawa Family Farming Scheme * Project schemes 江
Группа Всемирного банка · Project Performance Assessment Report
Zambia - Commercial Crops Farming Development Project
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