Mali - Integrated Rural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3274 PROJECT PERFORMANCE AUDIT REPORT MALI: INTEGRATED RURAL DEVELOPMENT PROJECT (CREDIT 491-MLI) December 31, 1980 FILE COPY" 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. ABBREVIATIONS FAC Fonds d'Aide et de Cooperation IDA International Development Association IER Institut d'Economie Rurale IRDP Integrated Rural Development Programme OA Operation Arachide OACV Operation Arachides et Cultures Vivrieres ODIPAC Office de Developpement Integree de la Production d'Arachides et de Cereales OPAM Office des Produits Agricole du Mali OSRP Office de Soutien et de Regularisation des Prix SCAER Societe des Credits Agricole et d'Equipement Rural SEPAMA Societe d'Exploit*tion des Produits Arachidiers du Mali SEPOM Societe d'Exploitation des Produits Oleagineux du Mali SOMIEX Societe Malienne d'Import-Export FISCAL YEAR Government January 1 - December 31 OACV until 1974 January 1 - December 31 1975 January 1 - September 30 thereafter October 1 - September 30 FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT MALI: INTEGRATED RURAL DEVELOPMENT PROJECT (CREDIT 491-MLI) TABLE OF CONTENTS Page No. Preface .................................... .. ... . . ............. i Basic Data Sheet .............................. 6..................... ii Highlights ......................................... .. iii PROJECT PERFORMANCE AUDIT MEMORANDUM I. Project Summary .... ............ 1 II. Main Issues .............. ...... . .................. 4 A. General .......o.. ................o....... . o. ..... 4 B. Project Design . ............... .. ........... 4 C. Institutional Problems 8......... .............. 8 D. Additional Findings ............. .............. 12 PROJECT COMPLETION REPORT I. Background .. .4....... .. . ................. ....... 17 II. Preparation and Appraisal ................................ 18 III. Implementation ...................... * ..... ....... . ....... 22 IV. Production Impact ............ ........... 24 V. Impact of Other Project Components ....................... 29 VI. Project Cost and Financing .............. ... 32 VII. Institutional Development ......................... .... 34 VIII. Finanancial and Economic Results .. .............. 36 IX. Performance of the Association, OACV, and Goverment...... 40 X. Conclusions ............... ......... .. ................. 43 Annexes 1-7 Map 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.  PROJECT PERFORMANCE AUDIT REPORT MALI: INTEGRATED RURAL DEVELOPMENT PROJECT (CREDIT 491-MLI) PREFACE This is a performance audit of the Integrated Rural Development Project in Mali, for which Credit 491-MLI was approved in June 1974 in the sum of US$8.0 million and closed on time, on September 30, 1978. This audit consists of a memorandum prepared by the Operations Evaluation Department and a Project Completion Report (PCR) dated January 17, 1980. The PCR was prepared by the Western Africa Regional Office on the basis of a country visit in September 1979. The project agency, OACV, did not contribute to the PCR; however, reports of the Evaluation Unit, financed under the project, were extensively used. The audit memorandum is based on a review of the Appraisal Report (No. 340A-MLI) dated May 13, 1974, the President's Report (P-1398A-MLI) of May 24, 1974, the Credit Agreement dated July 1, 1974 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 associated with the project have been interviewed. An OED mission visited Mali in August 1980. The mission held discussions with officials of the Ministries of Rural Development, Finance and Planning, participating banks and the project agency. A field trip to visit some of the participating farmers was undertaken. The information obtained during that mission was used to evaluate the conclusions of the PCR and is also reflected in the audit memorandum. A copy of the draft report was sent to the Borrower on November 11, 1980; no comments, however, have been received. The audit finds the PCR comprehensive and accurate with respect to the project's achievements and shortcomings. The points discussed in the audit memorandum have been selected because of their relevance to this as well as other Bank projects. The valuable assistance provided during the preparation of this report by the Government of Mali, staff of the Project Unit and farmers is gratefully acknowledged.  - ii - PROJECT PERFORMANCE AUDIT REPORT BASIC DATA SHEET MALI: INTEGRATED RURAL DEVELOPMENT PROJECT (CREDIT 491-MLI) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 18.9 12.7 Underrun (%) - 32L? Credit Amount (US$ million) 8.0 Disbursed - 8.0 Date for Completion of Physical Components 03/78 03/78 Proportion Completed by Above Date (%) 100 100 Economic Rate of Return (%) 91 neg. Cumulative Estimated and Actual Disbursements (US$) FY74/75 FY/75/76 FY76/77 FY77/78 FY78/79 Estimated 2,300 4,900 6,700 7,700 8,000 Actual 200 2,500 4,200 8,000 - Actual/Estimated (%) 8.7 51.0 62.7 103.9 - OTHER PROJECT DATA Actual or Item Original Revisions Est. Actual First Mention in Files or Timetable - - 08/71 Government-s Application - - 08/71 Negotiations 04/15/74 - 04/15/74 Board Approval 06/06/74 - 06/06/74 Credit Agreement Date 07/01/74 - 07/01/74 Effectiveness Date 09/30/74 11/30/74 12/09/74 Closing Date 09/30/78 09/30/78 Borrower Government of Mali Executing Agency Operation Arachide et Cultures Vivrieres (OACV) Fiscal Year of Borrower January 1 - December 31 Follow-on Project none MISSION DATA Sent Month/ No. of No. of Man- Date of Item by Year Weeks Persons Weeks Report Identification RHWA 08/71 08/71 Preparation RMWA 01/72 1.8 3 2.4 02/03/72 06/72 1 1 1.0 07/07/72 03/73 1 2 2.0 04/02/73 Preappraisal HQ 04/73 1 1 1.0 05/17/73 Appraisal HQ 06/73 5 5 25.0 05/13/74 Follow-up RMWA- Appraisal HQ 03/74 2 4 8.0 05/23/74 Total 11.8 39.4 Supervision I HQ 07/74 1 1 1.0 07/30/74 Supervision II HQ 10/74 1 2 2.0 12/20/74 Supervision III HQ 05/75 0.5 2 1.0 05/21/75 Supervision IV HQ 11/75 1 1 1.0 02/02/75 Supervision V HQ 04/76 3 3 9.0 09/28/76 Supervision VI HQ 01/77 2 2 4.0 04/06/77 Supervision VII HQ 12/77 3 3 9.0 02/28/78 Supervision VIII HQ 11/78 1 1 1.0 11/29/78 Total 12.5 28.0 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Mali Franc (MF) Year: Appraisal Year Average Exchange Rate: US$1 = MF445.4 Intervening Years Average US$1 = MF462.5 Completion Year Average US$1 = MF473.7 /a For a summary discussion, see para. 10.  - iii - PROJECT PERFORMANCE AUDIT REPORT MALI: INTEGRATED RURAL DEVELOPMENT PROJECT (CREDIT 491-MLI) HIGHLIGHTS The Integrated Rural Development Project (Cr. 491-MLI) was designed to support the continuation of the development of groundnut production ini- tiated under a previous project financed through French aid and the extension of Government support to the development of cereal production. Project activities centered on extension, input supply, marketing, and social services to the communities involved. The project has not achieved its production objectives because of failures in project design, weaknesses in project management, unfavorable Government policies, and lack of consistency and continuity in Bank support. The project's impact on farmer incomes of those who had access to subsidized equipment and inputs was positive. The subsidies more than compensated these farmers for lower produce prices obtainable at official rather than private markets. However, only a limited number of farmers benefited from subsidized inputs, while all farmers were expected and at times obliged to sell their produce through official channels. The net benefit stream resulting from the project is essentially negative in the aggregate. Other points of special interest are: - suitability to farmers of technological packages doubtful (PPAM paras. 8 and 30; PCR paras. 4.07, 4.08 and 4.12); - organization and management of project inadequate (PPAM paras.17, 27 and 34); - need to review Bank experience with agricultural extension in Sahelian countries (PPAM para. 31); - project did not provide the appropriate technical assistance (PPAM paras. 47-49; PCR para. 3.06); - monitoring and evaluation lacked relevance for project management (PPAM paras. 50 and 51); - project failed to reach target population (PPAM paras. 57 and 58; PCR para. 9.10); and - project design did not fit macro-economic environment prevailing in the country (PPAM paras. 60 and 61).  PROJECT PERFORMANCE AUDIT MEMORANDUM MALI: INTEGRATED RURAL DEVELOPMENT PROJECT (CREDIT 491-MLI) I. PROJECT SUMMARYI/ 1. The Integrated Rural Development Project (IRDP), the second Bank Group operation in Mali-s rural sector, was appraised in June 1973 with the participation of the co-financier, Fonds d'Aide et de Cooperation (FAC). The project's main objectives were to continue groundnut development in Mali's western and central provinces, which had been successfully initiated in 1967 under a FAC-financed project; to extend the scope of project activities to cereals, and to expand the project area to the east. 2. In consequence, project activities focused on improvement of exten- sion services, input and equipment supply, and provision of marketing services in the old project area, and the development of similar services in the new project areas. Ancillary project components were a rural tracks improvement program; a functional literacy program; the improvement of medical facilities; a small livestock component comprising veterinary services and some cattle fattening; a small agricultural research program; the supply of equipment to blacksmiths; the establishment of an evaluation unit; and the execution of a study of cereals marketing and pricing policies. Total project cost was estimated at US$18.9 million, for which an IDA credit of US$8.0 million equivalent was approved in June 1974. The project provided technical assis- tance in the fields of agriculture and financial management through two French consultant firms. The project started in April 1973 and was completed in March 1978. (The first project year was financed entirely by FAC). The executing agency was Operation Arachides et Cultures Vivrieres (OACV), a branch of the Ministry of Rural Development. 3. Assurances were obtained from Government that IDA would be consulted annually on the producer price for the coming season and the price structure (bareme) for groundnuts, which specifies the charges to be reimbursed to each agency engaged in collection, transport, processing and export of groundnuts, respectively. Government also agreed to set up a stabilization fund for groundnuts and to consult with IDA on payments to be made into, or from, this fund. The Association would also be consulted on any policy changes regarding prices and subsidization of inputs and equipment. 4. With the exception of the buildings component, physical execution of the project encountered few problems. Execution of ancillary projects through special agencies was, on the whole, satisfactory, in particular for the track 1/ Adapted from the PCR. - 2 - improvement program, the livestock component, and the establishment of the evaluation unit. Not all objectives of the subprojects were reached, however. 5. Groundnut production increased considerably in project years 2-4 (after a stagnation in year 1 attributable to weather conditions) but relapsed to pre-project levels in the last project year, and remained low in the last year on record (1978/79). Groundnut marketings (through official channels) followed a similar course but fell to a level some 25% below pre-project marketing volumes. Cereals production appears to have increased but there is no reliable statistical indicator to gauge the increase, or the project-s contribution to this increase, as data on pre-project areas under cultivation are very uncertain. 6. Although the correlation between groundnut production (and market- ing) and economic indicators (producer price of groundnuts, prices of inputs, and relative groundnuts: cereals prices) is weak, there is no doubt that groundnuts have become less attractive compared to cereals. Market prices for both cereals and groundnuts in recent years were frequently more than twice as high as official producer prices, and adjustments made in the last project years were too little and too late and therefore remained ineffectual. Other factors contributing to the decline of groundnuts production are more directly attributable to OACV's performance (rather than to Government's pricing policies) and comprise late start of the buying campaign, bottlenecks in the supply of inputs and bags, poor seed quality, and a decline in the quality of extension staff which accompanied the expansion in area. 7. High market prices of cereals, partly fueled by demand from neigh- boring countries, induced a diversion of farmers' efforts towards these crops, This is reflected in strong demand for cereals fertilizer (and slackening demand for groundnut fertilizer); demand for improved seed, and, most con- vincingly, concentration of cultivation efforts on cereals fields. 8. Farmers proved more ready to apply selected productivity-raising inputs (mainly improved seed and fungicides, but also fertilizer) than to apply the whole package of recommended cultivation techniques. High-density sowing and early sowing, in particular, were largely rejected, farmers pre- ferring a risk-averting staggering of sowing dates and a larger number of low-density plots. However, developments were far from uniform in individual sub-areas. The new OACV areas in the east reverted to their traditional emphasis on cereals much faster than the core of the groundnut belt, where groundnuts partially held their own. 9. Distribution of equipment, improved seed, fungicides and fertilizer remained behind appraisal estimates for most of these items, but projections had been very optimistic, and the absolute increase is satisfactory for several items, in particular use of fungicides and improved seed. Sales of agricultural equipment were initially restricted more by supply bottlenecks than by lack of demand, and later on by steep increases in prices. - 3- 10. OACV s system of financial reporting was not geared to the concept of incremental expenditure which governs the definition of many project com- ponents. Therefore, no data are available about the precise counterpart financing by Mali, and therefore of total project cost. A tentative recon- struction shows project costs of US$12.7 million, which is 32% below the appraisal estimate. The shortfall is partly attributable to lower than anticipated expenditures for subsidies for agricultural inputs and partly due to a reallocation of expenditures, approved by IDA, from categories with a high Malian participation to categories with a low participation. 11. At the time of appraisal, OACV had a history of several years' successful performance, but its effectiveness was impaired by dependence on other agencies for supplies (inputs, bags) and short-term credit, which was provided by its clients, the groundnut crushers and exporters. 12. The performance of the Bank was uneven: supervision missions were generally pleased with the project's progress as long as outward danger signals were not yet apparent. The decline in the adoption rate of recom- mended techniques, the stagnation in fertilizer use, the unsound financial practices of OACV and the explosion of operating expenditure only came into focus when the turn of the tide in groundnut marketing initiated a rapid coll-apse of OACV. In the initial years, Government-s non-compliance with important covenants was tacitly tolerated. In the final stages, however, the Bank contributed actively, and with determination, to the shaping of reorgani- zation, which is now under way. An essential step in this process of per- suasion was the Bank's refusal to further process a proposed second OACV project (appraised in early 1978) until Government had accepted and imple- mented the proposed institutional and financial reforms. 13. Government's performance was weak. It maintained producer prices at a level not in line with the market situation and, until 1979, reacted belatedly and too timidly when this became apparent. It also resisted insti- tutional reform aiming at giving OACV greater freedom of action and bringing it under the discipline of commercial banks- scrutiny, and did not comply with the Credit Agreement s provision to channel some of the groundnut export surpluses of the early years into a stabilization fund. 14. The economic benefits of the project are difficult to assess because of the uncertainties surrounding the recorded increase of production, in par- ticular of cereals, and because it remains uncertain to what extent observed increases and decreases in production can be attributed to the project or must be attributed to extraneous factors, in the first place price policies. Incremental cereals production was estimated on the basis of recorded input supply and extension service achievements and their impact on production as estimated at appraisal. For groundnuts, the same method was used as an alternative to recorded groundnut production increases. In all cases, the net benefit flow resulting from the project is essentially negative in the aggregate. II. MAIN ISSUES A. General 15. The PCR describes the failure of one of the first integrated rural development projects in Sahelian Africa. It attributes responsibility for failure both to the approach used in project design for integrated rural development and to OACV-s management and internal organization. 16. The audit concurs with the general finding that project design should have taken greater account of the requirements of a rural development project, particularly in respect of institutional organization and its rela- tionship with the socio-economic and the ecological environment. The audit also considers, however, that most of the problems labelled "management" were essentially problems of design since many factors which influe ced management performance were not, in fact, subject to management control.1' Poor overall performance of this complex project must not, therefore, be cited as evidence of failure of the concept of integrated rural development, but rather a failure of project design, which, as OED analyses have shown, have been the single most prevalent factor in poor project performance in this type of project. B. Project Design 17. Use of Traditional Structures for Integrated Rural Development. This project is an example of the Bank-s use of institutional structures developed and perfected during implementation of traditional-style projects, in the design of a rural development project where the key to success rests instead on human and social factors. 18. Although rural development projects share the goals of economic and institutional development, they also aim at changing the way in which tradi- tional rural societies have functioned in the past, paying special attention to improving productivity, welfare and income levels of the rural poor. Such projects create extensive and diffuse boundaries for an organizational struc- ture, since a number of independent agencies at the regional, national and local levels, together with project beneficiaries, are likely to influence project outcome. A suitable project organization, therefore, is one which controls the basic functions necessary to achieve physical targets but also establishes a network of influence over the independent agencies involved. Integration should at first, concern all necessary functions related to a single or a few closely related objectives. Complementarity between the various objectives of rural development might not be found through a single institution but rather through coordinating bodies of different institutions at local, regional and national levels. 1/ This was a major finding of Staff Working Paper No. 375. - 5 - 19. This project, however, intended the integration to be sectoral rather than functional. It tried to integrate, under the same project insti- tution, various sectors of rural development: groundnut production, cereal production, livestock, health, functional literacy, and rural tracks. Most of these objectives were OACV's responsibility, while some remained the special- ized agencies': veterinary, health programs and functional litpracy; but no coordination mechanism was ensured to achieve complementarity 'Letween these various objectives. Coordination problems were exacerbated by the size of the area covered by the project: 135,000 km2, 1.2 million inhabitants and 120,000 farms. 20. At the same time, OACV had only incomplete control over key func- tions, particularly groundnut marketing, credit and input delivery necessary for achievement of project objectives. The only function controlled entirely by OACV was agricultural extension. It controlled only the organization of primary marketing but was dependent on the Societe Malienne dImport-Export (SOMIEX), Societe d'Exploitation des Produits Oleagineux du Mali (SEPOM) and Societe d'Exploitation des Produits Arachidiers du Mali (SEPAMA) for bags and marketing funds. In addition, OACV had only partial control over credit allocation and limited influence on credit recovery and input supply. As in most projects credit allocation and recovery were also influenced by local and national administrations. 21. As stated in PCR (para. 7.04), project performance, therefore, would depend only partially on OACV's internal mapagement and organizatin and mainly on the performance of other institutions- over which OACV had little influence or control. Furthermore, as the PCR clearly explains, the collapse of the project was provoked by the att tude of the most important partner: the farmers themselves. A tentative- explanation of their attitudes is that, given a comparatively low official producer price, their principal objective remained that of securing adequate food crop production (cereals) for their families.-3 Farmer interest in growing cereals was reinforced by the lack of a reliable marketing and storage system, for these basic staples, which made reliance on outside supply risky.4/ 1/ Particularly the Societe des Credits Agricole et D'Equipment Rural (SCAER), SOMIEX, SEPOM, SEPAMA and the Office des Produits Agricole du Mali (OPAM). 2/ The PCR is more specific and claims that low farmer prices are the main reason for marketing decline. 3/ See M. de la Croix, Rapport de mission au Mali 12-30 May 1979. 4/ Mali Sud project shows the best way to promote a cash crop is to secure food production at the same time. - 6 - 22. Extension Services. The principal component for achieving expanded agricultural production was intensification of extension work. Project design for this component drew heavily on experience under a previous project which, however, did not share the objectives of integrated rural development nor did its scope encompass the same geographical areas. The institutional structure, which had been tested on an experimental basis by OACV's predecessor, Oper- ation Arachide, was regarded as more than adequate by the appraisal mission. 23. The structure established by the French consultants was a hierar- chical one centered on "pilot farmers". At first sight this system seems to be very close to the Training and Visit System promoted by the Bank in other Sahelian countries. The failure of the extension system being a key project issue, it would have been useful to undertake a comprehensive post evaluation of its achievement. Extension structure was found too costly. A reduction of institutional overhead through a gradual transfer of tasks to cooperatives and mutual guarantee groups is considered under the new OPIPAC technical assis- tance project. 24. The concept of farmers' participation, however, was totally lacking in OACV's project despite the prevalence of very favorable conditions created by the Adult literacy component of former "Operation Arachide". This is confirmed by experiments undertaken by the current project's functional literacy campaign demonstrating that increased farmer participation at the village level was feasible. This can be explained by two main reasons. The first one was the general philosophy of extension methodology basically designed as a One Way, top to bottom approach, and the implicit distrust of farmers' capabilities. The second was the disappointing results of the cooperative system established under the former regime and the lack of a clear national policy on this matter.-' The fact remains, however, that this project is an example of project management-s and subsequent Bank supervision missions' limited ability to see ahead and plan project development. All decisions in extension policy were taken under pressure of external events which the project failed to control, influence or even appreciate. 25. When OACV-s financial situation was at ease in 1977, a Bank super- vision mission recommended a 30 to 50% increase in the number of field exten- sion workers. Eleven months later another supervision mission recommended a reduction of staff in groundnut marginal areas when the abrupt change in project's fortune became evident. 26. The appraisal report assumed that the quality of extension staff was more than adequate. At this stage it is difficult to know if the extension service was then really as good as stated. Quality of extension staff only became an issue in supervision reports in January 1977, when the extension system was intensively surveyed. But, the PCR is right when it states that "slowing down and even decline in the adoption of recommended techniques 1/ An experimental project aiming at rehabilitatin of cooperative structures started in 1976 but was, and still is, limited to the 7th region of Mali and concentrates mainly on herdsmen and fishermen cooperatives. - 7 - and the stagnation of fertilizer use might have alerted supervision missions somewhat earlier" (para. 9.04). Missions should also have been alerted by OACV-s Management Note of June 1975 which questioned the quality of extension staff. Given the importance which extension was to play in the achievement of project objectives, it would have been useful to undertake a comprehensive evaluation of its accomplishments during project implementation. 27. Technical Packages exhibited similar shortcomings to those described for extension services. Despite the importance attached to food crops, which followed mainly from the Bank -s thinking about rural development at that time (this view, however, was not shared by Government, nor apparently by the supervision missions), a defined technical package for cereal production was non-existent; "the appraisal report had excluded fertilizer application to cereals from the extension program and evidently misjudged its economic attractiveness." (PCR, para. 4.14). However, OACV should be credited for its efforts, although limited, to provide improved paddy seeds and maize. 28. Bank proposals for institutional changes favored groundnuts as a cash crop and paid little attention to food crops. Moreover food crop pro- duction, which was far above appraisal estimates, turned out to be more a subject of concern than satisfaction for the Bank. Reorganization of cereal marketing was found "beyond the scope of this project" by the September 1976 supervision mission, which recommended "that project objectives can only be reoriented to lessen OACV-s efforts on cereal promotion, and to emphasize groundnut development." (para. 6.05). The PCR also notes that incremental production of food crops was more a result of increasing farmer concern and favorable climatic conditions than a result of the project's impact. 29. For groundnuts, the technical package was considered well proven by farmer experience under the preceding Operation Arachide project; but, the PCR correctly points out the lack of flexibility in its application to other areas. With a few exceptions,I/ package components have been readily accepted by farmers although the technical adequacy and effectiveness of the package have been challenged. 30. This is not the first time that the Bank has been faced with this crucial technical issue. The PPAR op Senegal Terres Neuves Resettlement Project highlighted a similar problem2' and, in fact, Senegal Terres Neuves and OACV are examples of two opposite approaches: the "heavy" technical package promoted in Terres Neuves and recommended for Mali and the "light" technical packa e approach promoted by OACV and also used in the Senegal Sine Saloum project.- 1/ Principally the use of fungicide. 2/ PPAR: Senegal Terres Neuves Resettlement Project, Report No. 2589, June 29, 1979. 3/ Not yet completed. - 8 - 31. Given the importance and difficulties of agricultural extension work in Sahelian countries, it appears advisable to undertake an in-depth survey of the Bank-s experience in the region and, together with other financing agen- cies and research institutions, initiate a seminar on soil fertility problems in Sub-Saharan Africa. 32. Credit and Input Supply. Like other institutional arrangements, organization of credit and input supplies were not designed with the require- ments of a rural development project in mind. The feasibility study pointed out that "difficulties encountered in promoting development, and independent from extension efforts, are generally due to delays in supply of required inputs and limited financial resources of the farmers." The system was considered satisfactory at appraisal as long as contentious issues between OACV and Societe de Credite Agricole et d'Equipement Rural (SCAER), which was responsible for the supply of inputs and agricultural credit, were to be solved on the basis of a reciprocal service agreement. Nothing was designed to solve the input supply problems. This situation could not improve spon- taneously; in fact it worsened through project life and was one of the main reasons for the slow follow-up on recommended cultivation practices. This is, again, not a problem specific to this project. OED has found input supply to be a major bottleneck in several projects where functional responsibility is divided among several institutions without clear lines of coordination. This further confirms the merits of sectoral policy planning to tackle problems arising from rural development projects, with their inherently diverse yet interdependent characteristics. In the case of OACV, the Bank's response so far has been to provide basic studies, e.g. a cereal marketing survey, financed under the present credit.!V 33. Marketing. Project design correctly evaluated the importance of cereal marketing as the key issue for food crop development. A study on producer prices and marketing arrangements for millet and sorghum was financed under the project. In addition, the potential for higher priced crops (con- fectionary and edible groundnuts) was well perceived by the feasibility study, although project design did not pay sufficient attention to groundnut market- ing problems which existed at appraisal. However, the existence of local markets and the regional market (particularly illegal exports to neighboring CFA countries) were not taken into account. C. Institutional Problems 34. The PCR attributes failure of this project to poor design and weak management. On this latter point, it states that: (i) there has been a general decline of OACV performance over project life; (ii) the Malian project management was largely responsible for this situation; and (iii) the Govern- ment had an overall negative attitude towards institutional problems but 1/ The Bank learned from the deficiencies revealed between 1973 and 1976 and imposed a condition in the Mali Sud Project (Credit 669) authorizing CMDT to arrange its own input supply if the existing system would not improve within a year and the same clause was adopted for the second Mopti Rice Project (Credit 227) in 1977. - 9 - finally accepted the Bank's recommendations (paras. 7.01-7.06). The audit mission, however, found that many "management" problems are essentially the result of poor project design: (i) institutional problems already existed at appraisal time; (ii) OACV-s financial structure was not questioned by the Bank until the adverse trend in groundnut marketing became apparent; (iii) the project component intended to improve OACV-s managerial weakness was inade- quate; and (iv) Bank influence, while overall positive, has lacked consistency and continuity. 35. Existing Institutional Problems and Sank Reaction. No mention was made in the appraisal report of problems arisIng out of OACV's relations with other institutions. These were particularly acute in respect of groundnut marketing, where delays and shortages of bags and credit were widespread. Instead, the appraisal report refers to the establishment of efficient market- ing channels, lack of which was thought to be the reason for loss of interest by farmers in groundnuts as a cash crop. The feasibility study had already drawn attention to problems in credit supply.i/ 36. The Bank was slow, first, to recognize that there were groundnut marketing problems, and second, to realize that these were symptomatic of underlying institutional problems caused by poor project design. This, however, developed into a wider problem, where the Bank (and project manage- ment) failed to plan project development. 37. It was OACV, in its 1974-75 Annual Report, which highlighted delays in the marketing campaign, attributing them to bottlenecks in input supply./ The April 1976 Bank supervision report mentioned, for the first time, the shortage of bags and the resultant costly transfers and storage. This brought to the attention of the Bank, the need for structural reorganization of OACV including a redefinition of its relation Eo input supply organizations. The institutional problem became a key issue for the follow-on project. The Bank identified the complexity of the problem in a project brief prepared in June 1977, but, no decision was reached as to which approach would be best suited for OACV. Hence, the chance to institute measures which could have favorably affected project outcome was lost. 38. The project brief of June 1977 outlined the two solutions open to OACV. The first consisted of giving OACV full financial autonomy and responsibility for marketing and possibly exporcing groundnuts. This would require a change in its charter: from a non-profit association extending assistance to farmer-type organizations, 0ACV would be incorporated as a 1/ "The organization is frequently forced to utilize its operations funds to finance crop purchases. It is not recommended to continue this practice and it would be advisable to provide adequate funds through parastatals (SOMIEX, SEPOM) to finance marketing operations." 2/ While 85,000 bags were necessary, only 37,266 were available on January 1, 1975 although the marketing was scheduled to open on December 1, 1974 and OACV had to finance marketing out of its own funds. - 10 - commercial company. While the change would encourage efficiency, it would not necessarily best serve, in the long run, the interests of rural development. The second approach involved the creation of a Groundnut Fund which could be incorporated without modifying the existing institutional framework. Basically, OACV would receive credit and operating funds from this institu- tion, which would administer a cost-based price structure without taxesor subsidies. Whereas this latter approach would have the advantage of being easier to implement, while introducing some rationalization in the existing system, it could in fact reduce OACV's independence since its financial standing would be subject to the Fund's control. 39. The project brief also suggested separating OACV's various objec- tives: a directorate would be created and made responsible for marketing, credit and inputs supply. This could, after project completion, either become a central cooperative organization or a commercial state corporation. It also recommended that the non-commercial services offered by OACV could be restruc- tured under a permanent regional development organization. The project brief concluded that "because of the important foreign exchange losses, togethey with the deficit incurred by this problem-ridden industry and because of its interdependence with OACV through the bareme, it is recommended that the Bank review the situation and help Government to find a solution to this problem during the next appraisal." 40. On the basis of these findings, the Bank recommended in August 1977 that OACV-s status be changed to that of a commercial company. This position was steadfastly maintained despite increasing signs of the impending collapse of official groundnut marketing. The recommendation had to be abandoned later when it became evident that groundnut processing and export could no longer be considered a profitable activity. 41. Financial Structure: The Bareme Issue.l/ The system of bareme is generally used by developing countries whose budgetary earnings derive principally from exports of cash crops. The introduction of this system in Mali in 1970 was viewed as a progressive step because it secured operating funds for Operation Arachide. It provided OACV with a source of increasing earnings as long as the marketing achievements were above expectations. The system, however, encouraged OACV to overestimate the project-s provisional budgets and underestimate marketing prospects. The appraisal mission was aware of these problems and included credit covenants, which required annual consultation with IDA, on the price structure (bareme) for groundnuts, the producer price and contributions to the Stabilization Fund. But, supervision missions did not insist on Government and OACV compliance as long as marketing results were good (para. 10.02). 1/ See para. 3. For the PCR a basic flaw in OACV's structure is OACVs dependence on bareme revenue while at the same time being unable to intervene when producer prices are set. - 11 - 42. The audit mission endorses the PCR-s conclusion that with the col- lapse of official marketing and decline of groundnut prices on the world market, the bareme system is no longer suiable for financing OACV's recurrent costs and supporting Government revenue.- The audit mission also considers that this system could have been effective if the Bank had insisted on Govern- ment compliance with the bareme and Stabilization Fund covenants. The basic flaw of OACV-s financial structure was rather the lack of a Stabilization Fund and of close monitoring of OACV's operating expenditures than the bareme system per se. 43. Project Management. While in agreement with the overall PCR analy- sis on project management, the audit disagrees on some points and considers that the Bank-s attitude vis-a-vis the Project Manager lacked consistency and equity. Technical assistance performance should also have been evaluated. 44. The extreme centralization of decision making (PCR, para. 7.03) was not introduced by the Malian Project Manager but was rather an inheritance from the previous Operation Arachide project. Furthermore, the Bank was well aware of the problem since the beginning of the project. The first super- vision mission, October 1974, expressed its concern: "Project management appears over-centralized. In addition, there seems to be a propensity to deprive other agencies involved in project execution of some of their respon- sibility. This situation, if not corrected, will undoubtedly hinder the development of a project of this magnitude." 45. The situation was apparently corrected and confirmed by the super- vision mission of April 1976: "The organization of OACV was reviewed by the mission, and found to be satisfactory. The heavy concentration of power with the Project Manager of OACV, who is very dynamic, and has a strong personality, seems to be the best solution at this stage of OACV's develop- ment." The momentum given by OACV-s Project Manager to the execution of the project was, in fact, regarded as a positive factor in discussion regarding a follow-on project. These initial findings were not borne out by subsequent events. In fact, the Bank changed its position vis a vis the suitability of the Project Manager and so informed the Government. However, it was difficult for the Government to understand the sudden and drastic change in the Bank's judgment of the performance of the Project Manager, who, in the end, was induced to tender his resignation at the insistence of the Bank. 46. Shortcomings in financial management were acknowledged during the OACV Conseil d'Administration of 1978 by the Project Manager himself, who was accused of using operating funds to finance unscheduled investments (para. 7.05). The audit mission considers, however, that the interpretation of such "unscheduled investments" as being "indicative of an increasingly self-serving institution" (para. 8.05) is not entirely correct. The ample loans to staff (FM 107 million or $225,000) in fact cover bicycles and mopeds purchased by 1/ This is clearly illustrated in the findings of the appraisal mission working on the ODIPAC Technical Assistance Project. - 12 - OACV and sold on credit to extension staff and personnel as planned at apprai- sal. The problem lies not in the existence of such loans but in the manage- ment of the credit, where repayment terms were longer than the life of the equipment. 47. Role of Technical Assistance. The PCR does not refer to the tech- nical assistance component, which was intended to strengthen administrative and financial services. Since the follow-on project would be essentially a technical assistance project, it is useful to assess, more precisely, the role of technical assistance in the first project. 48. Weaknesses in OACV-s accounting and credit control had been identi- fied by the appraisal mission. The only relevant project component was a provision for accounting assistance during the first year. Analysis of the reports of the firm which provided such assistance shows no evidence that they shared the concern of the first supervision mission regarding OACV's financial management." Assistance was given primarily for accounting and credit organization. OACV does not seem to have received specific assistance in budgetary procedures as the 1975 supervision suggested. 49. The Bank-s response to OACVs management shortcomings was to provide accounting and auditing consultants.-1 While this was certainly necessary to project success, it was insufficient. D. Additional Findings 50. Evaluation Unit. A successful project component was the Evaluation Unit, appropriately established in IER.- The audit supports the PCR's general comments that its work had little impact on project development (para. 5.12) but its pioneering studies were most useful. The audit considers that a monitoring unit, closely integrated with the management structure, where it is most likely to be effective, would also have made a useful contribution to project development. 1/ "Financial management and procedures remain unsatisfactory. The major shortcoming, however, is OACV-s budgetary procedures. The budget is prepared primarily as a justification for funds to be obtained from the bareme or from external financial sources. It does not reflect realistic OACV capital and operating requirements and there is no budgetary con- trol." Supervision mission May 1975. 2/ As the consultant provided to the Minister of Rural Development by the Caisse Centrale de Cooperation Economique pointed out: "the accounting system was entirely unsuitable to OACV-s management problems making management control impossible." 3/ A department of the Ministry of Rural Development. - 13 - 51. The Bank closely supervised this component, providing two specia- lized missions in 1976 and 1977. There should have been, however, exchanges of experience among monitoring and evaluation units of several Bank-supported projects and, more specifically, between OACV and the Mopti Rice Project.l/ 52. The Evaluation Unit focused mainly on OACV's impact a' the farmer's level (PCR para. 5.10). Farming surveys carried out by the Unit provided valuable information on agricultural production and will certainly be useful for preparation of a new project. However, they provide little information on some of the basic problems now faced by 0ACV at the farm level, namely: (i) farmers- attitudes vis-a-vis groundnut marketing and role of the black market; (ii) end use of groundnuts produced by women on individual fields, which com- prise 40 to 50% of total acreage in some areas; (iii) development of agricul- tural credit and reasons for the increase in bad debts, and (iv) extent of farmers' indebtedness to private merchants as a result of the drought and its impact on marketing behavior.-- These questions can only be answered by an in-depth socio-economic study. It could be included in the ODIPAC Technical Assistance project but the study would have to be extended to include the entire area previously covered by OACV. The methodology developed for eval- uating the functional literacy campaign could be used, since it includes self-evaluation at the village level. Results obtained by this method can be used to validate the opinion poll approach which has been used to date. 53. The consultant in charge of the evaluation was careful to involve intensively population in the project area as well as Malian staff in the evaluation effort. As a result: (i) the evaluation cost less than appraisal estimates; (ii) the techniques used are now firmly implanted in the evaluation program; (iii) the information required for improving the program was gathered by those responsible for the program-s operation, and (iv) the Malian staff trained in the process of evaluation were subsequently able to use the same methodology for functional literacy activities in the Segou area.3/ The methodology designed and implemented for this component was found to be interesting and valuable both by the Malian Government and Bank staff, in spite of delays which occurred in submission of the final report. 54. Monitoring of OACV activities was suggested by one of the specia- lized supervision missions but could not be implemented by the already over- loaded Evaluation Unit. It must be said, however, that Bank experience at that time was very limited and that this Unit was one of the first established under a Bank-supported project in Sahelian Africa. 1/ See PPAR, Mali Mopti Rice Project, when issued; it iscurrently under preparation. 2/ A farmer representative to the 1978 Conseil d'Administration suggested that one of the reasons for increased farmer usage of black markets was their indebtedness to private merchants after the drought. 3/ Functional literacy centers had been established in every sector covered by OACV except Segou. - 14 - 55. Project's Impact at Farmer Level. It is difficult to assess accu- rately the project's impact on farmer income. The PCR maintains that official prices offered by OACV have been lower than those prevailing on the open market, thus farmers have incurred some loss of income (para. 8.01). The PCR also suggests that, in the final years of the project, coercive methods were used for the collection of groundnuts (para. 9.10). 0ACV's former Project Manager strongly denies that coercive measures were employed by OACV staff. He acknowledges, however, that coercive methods were employed by the adminis- tration and local police for credit recovery!/ and for cereal marketing. 56. More important is the equity issue (PCR para. 9.10). Only some farmers had access to subsidized equipment and inputs, thereby obtaining an advantage over others. Furthermore, only larger families were able to fulfil the requirements for obtaining agricultural credit: two term payments and the clearing of 1.5 ha but no credit allowed for the purchase of oxen. The sharp increase in price of both equipment and oxen further reduced the number of eligible farmers. 57. Surveys made by the Evaluation Unit discovered that nearly half the labor force and a large part of the area under groundnut cultivation (30 to 50% in some areas) received no direct attention from extension staff. As in most other rural development projects in Sahelian Africa, women play an important role in agricultural production and yet, with some remarkable exceptions, are generally not considered by extension staff. 58. It is interesting to know, however, that farmer reaction has been positive overall, at least in the Kita area visited by the audit mission.3/ Farmers do regard OACV as an input supplier and there is a strong demand for groundnut seeds!! and "complexe cotton" fertilizer. The disappointment expressed by farmers of the Kenieba area after the announcement of OACV-s withdrawal is an indication of the dependence farmers built on OACV. The result should have been progressive reliance on the self-help approach to development. 59. Macro-economic Consideration. This project is a typical example of the need to take into account the macro-economic environment in countries where agriculture is the most important sector. OACV's performance was considerably affected by the generally unfavorable economic environment created by Government policy. Producer price policy and allocation of ground- nut earnings were the most important constituents of this environment and their negative influence on OACV's performance is analyzed well in the PCR. 1/ A 10% bonus was offered by OACV to officials who recovered debts. 2/ See PPAR on Senegal Casamance Rice Project, op. cit. 3/ This impression is confirmed by the Evaluation Unit's findings and by a field mission undertaken by M. Delacroix in 1979. 4/ During this comparison (1980/81) farmers accepted to pay cash at 125 FM/kg for groundnut seeds provided by OACV. - 15 - 60. The deterioration in terms of trade was at first passed on to farmers, but, with the declining trend of world market prices, the groundnut sector has in recent years proved unable to support OACVs high costs and Government-s substantial levies as well. The conclusions of the PCR on the alternatives open to the Malian Government are not explicit; the PCR merely refers to the Agricultural Sector Memoranduml/ for Mali. The findings of this Memorandum warrant being mentioned: "The inadequacy of OACV, which is real enough, should not obscure, however, the fact that groundnuts as an export crop are being caught in a squeeze between a stagnating world market and rising domestic prices (of groundnuts as well as other foodstuffs), which would possibly have produced the same eclipse of exports over a somewhat longer term. Food prices have been rising faster than f.o.b. prices of export crops in much of tropical Africa over the last decade. Domestic inflation, fueled by this increase, leads to rapidly rising costs of intermediary services (transport, insurance, handling), thereby reducing the export parity prices in relation to f.o.b. prices. Groundnuts are the exemplary product to study the effect of these "scissors" as they are both an export crop and a domestic food crop." This memorandum further demonstrates that, for OACV-s financial situation to reach even a precarious break-even position, all taxes and transfers borne by OACV would have to be eliminated, and OACV's expenditure per ton of groundnuts would have to be sharply reduced. 61. Two other main project components also suffered from a failure to consider macro-economic issues. The livestock stall fattening component was beset with marketing problems, despite a good start due to strong farmer interest. Also, the findings of the cereals marketing study were not accept- able for project implementation. 62. The lessons seem to have been learned. Appropriate changes have been incorporated in the ODIPAC Technical Assistance project, now under discussion. It is to be hoped that this project will also provide an opportu- nity to experiment on new approaches, taking into consideration the macro- economic environment. Another lesson from this project is that supervision missions do not necessarily assess, on a continuous basis, such key issues as the macro-economic environment and institutional problems relevant to an integrated rural development project. Different approaches to monitoring these key issues should be explored. 1/ Report (No. 2567-MLI) of June 22, 1979.  - 16 - MALI INTEGRATED RURAL DEVELOPMENT PROJECT (Cr. 491-MLI) PROJECT COMPLETION REPORT January 17, 1980  - 7 - I. BACKGROUND 1.01 The Integrated Rural Development Project (Cr. 491-MLI) was the second Bank Gro-n operation in Mali's agricultural sector; the first was a rice development project in the flood plains around Mopti (Cr. 277-MLI, 1972). An IDA credit of US$8.0 million equivalent was approved for the Integrated Rural Development Project (IRDP); the agreement was signed on July 1st, 1974. 1.02 The main objective of the IRDP was to continue the development of groundnut production in Mali's western and central provinces, which had been successfully initiated in 1967 with financing from French Aid (FAC); to expand the project area towards the east; and to extend the scope of project activities to cereals, in the first place millet and sorghum, the country's staple food. 1.03 Groundnut production in Mali had been fairly stable until the early 1960's; production was not less than 110,000 tons, of which some 75,000 tons were marketed. 1/ The disruption of established marketing channels, following the departure of French trading firms, and unattractive producer prices (unchanged from 1959 through 1966 in spite of substantial inflation) caused a sharp decline in groundnut production and marketing. In 1965/66, total production was estimated at 75,000 tons, and production marketed through official channels was a mere 28,000 tons. 1.04 A first attempt to redress the situation failed in 1966/67 due to lack of direction and inadequacies of Government's general agricultural services. Thereupon a special project agency, Operation Arachides (OA), was created in 1967; its staff was exclusively concerned with the promotion of groundnut production in the area of Mali best suited for this crop (the Kita region, with rainfall between 700 mm and 1,200 mm); the project focussed on production, quality control and distribution of improved seed, extension advice and reliable marketing services. In spite of mediocre and even adverse weather conditions, OA succeeded in halting and reversing the declining trend of groundnut production; in the early 1970's, groundnut production was back to more than 100,000 tons. For additional information on OA see Annex 1. 1.05 In the early 'seventies, Government, under the impression of the drought years, shifted agricultural priorities from cash crops to food crops. This change of orientation is also reflected in the National Development Plan 1974-78 (prolonged to 1979). The further expansion of groundnut production was therefore to be supplemented by a parallel promotion of cereals produc- tion. This new concern with broadening the scope of OA's activities developed at a time when the World Bank started to focus on a new type of rural develop- ment projects, which inter alia also implied greater attention to food crops. It was against this background that the IRDP was prepared and appraised. 1/ Unless otherwise specified, all quantity figures refer to groundnuts in the shell. - 18 - II. PREPARATION AND APPRAISAL A. Chronology 2.01 The project was identified in August 1971 by the Bank's Regional Mission in Western Africa (RMWA). A second mission from RMWA visited Mali in February 1972. This mission submitted a first outline according to which the project would not only expand agricultural production through intensification of extension work but would also include social infrastructure (education, health) and feeder roads. At the mission's recommendation Government secured FAC assistance for the preparation of the feasibility study. Institut d'Economie Rurale (IER), a section of the Ministry of Rural Development, provided background information and statistical data. 2.02 The feasibility study was started in May 1972 and submitted to IDA in February 1973. The proposed project contained two parts: - the main project was agricultural development (groundnuts and cereals) through improved extension services in areas where OA was already involved, and similar development in new areas (Segou and Kenieba); - the ancillary projects included feeder roads, functional literacy, research, health and livestock components. The feasibility study estimated the project's cost at MF14.8 billion (US$32.8 million) over a five-year period. 2.03 The feasibility study was reviewed by a preappraisal mission from HQ in March 1973; it recommended changes in the project's content, in particular deletion of rice development (lack of preparation); replacement of a proposed major feeder road improvement program by a small feeder road unit within OA since many feeder roads were to be financed under the Third Highway Project (Cr. 599-MLI); elimination of the proposed riverblindness program since this was to be tackled separately by a consortium of foreign donors in the context of a regional project covering several countries. In addition, HQ requested that before appraisal more information be made available concerning the finances and operations of a number of Government agencies (SCAER, SEPOM, SOMIEX, OPAM, OSRP); detailed operating results of OA by extension zone; OA's financial results for 1971 and 1972; and an analysis of on-going functional literacy programs. 2.04 The project was appraised in June 1973 with the participation of FAC. - 19 - B. Project Content 2.05 Project activities were: (a) intensifying OA activities, in areas then served by the program, to cover not only groundnuts but all principal farming activities, especially the production of basic cereals and livestock; (b) expanding QA services into new areas, namely Segou and Kenieba; (c) supplying farm inputs and equipment on cash or credit to participating farmers. To support the above, the project also included: (d) a rural tracks improvement program for spot repairs on approximately 1,500 km of tracks; (e) a functional literacy program; (f) a program of agricultural research to supplement the current national program; (g) improvement of medical facilities; (h) improvement of veterinary services; (i) the supply of equipment on credit to selected blacksmiths; and (j) establishment of a project evaluation unit. The project also financed a study of cereal producer prices and marketing arrangements. 2.06 The project extended over 5 years from April 1973 to March 1978. The first project year (PYl) was financed entirely by FAC; IDA financing covered only PY2-5. This arrangement had been requested by FAC and had been agreed to by the Association when an understanding had been reached with FAC on the activities to be financed in PY1. C. Targets 2.07 The project's targets with respect to its main activity, the expan- sion and intensification of groundnut and cereals production, are summarized in Annex 2, Tables 1-3. The steep increase in area and production in PY2 (both with and without the project) reflects the expansion of activities to the vast Segou province; the projected drop in average yields in PY2 - 20 - indicates that in Segou province farmers are less familiar with groundnut cultivation and that climatic conditions are less favorable, both factors resulting in lower anticipated yields than further west. The difference is less for millet (Table 3b). 2.08 It was projected that even without the project, areas under ground- nuts and cereals would continue to expand for a certain period; the growth rate for areas under cereals was assumed to be close to the population growth rate, and the area under groundnuts about twice that much (until PY4), presum- ably to take into account a possible spin-off from OA activities in the pre-project period. 2.09 A noteworthy feature of the proposed technical package is that for cereals no fertilizer application was recommended in the Appraisal Report. Low cereals prices and lack of demonstrated response of the local millet and sorghum varieties were given as the reasons. 2.10 With the projected adoption rates shown in Table 2, total production of groundnuts was to reach 171,000 tons in year 7, and cereals production 195,000 tons; incremental production was estimated at 65,000 tons of ground- nuts and 36,000 tons of cereals. It should be noted that at least for cereals the statistical basis was quite insufficient to permit such projections. In Mali, areas under cereals, total cereals production, and by implication also yields, are not known with any degree of accuracy; the margin of uncer- tainty is not less than 20%. Characteristically, the reported area under cereals cultivation started to rise briskly as soon as OACV instructed exten- sion agents to also report on progress of cereals cultivation. D. Institutional Arrangements 2.11 The project agency OA changed its name to Operation Arachides et Cultures Vivrieres (OACV) to reflect the new emphasis on promotion of cereals production. Unlike most other Operations de Developpement in Mali, OACV remained, and still is, a unit of the Ministry of Rural Development. The Association did not seek to change the status of OACV at the time of appraisal but focussed on the Board of Directors of OACV to ensure that all relevant Government agencies were represented. 2.12 Other institutional arrangements of importance were: - an agreement between the Societe de Credit Agricole et d'Equipement Rural (SCAER) and OACV provided that SCAER would supply inputs and agricultural credit, and that OACV would collect credit repayments on behalf of SCAER; - the Office de Soutien et de Regularisation des Prix (ORSP) would set up a price stabilisation fund for groundnuts and intervene with subsidies should world market prices not be sufficient to cover OACV expenses; to enable ORSP to exercise - 21 - this function, surpluses from groundnut exports would be channelled to ORSP to build up a stabilization fund. 2.13 Assurances were obtained from Government that IDA would be consulted annually on the producer price for the coming season, the payments to be made into or from the ORSP account, and the individual items of the price schedule (bareme) for groundnut marketing, which specifies the charges per ton which will be reimbursed to each agency for collection, processing and export of groundnuts. The Association would also be consulted on any policy change regarding prices and subsidization of inputs. - 22 - III. IMPLEMENTATION A. Effectiveness and Start-Up 3.01 The project was approved by the Board on June 6, 1974, was signed July 1st and became effective December 9, 1974. The interval between signing and effectiveness was normal since there was only one specific condition of effectiveness: conclusion of the agreement between OACV and SCAER (para. 2.12). There were no specific start-up problems since OACV was already an operating agency, fully staffed, and the project had in fact started one year before the IDA Credit was approved (para. 2.06). B. Physical Progress 3.02 Physical execution of the project comprised construction of build- ings; procurement of vehicles and equipment; recruitment of technical assis- tance and incremental local staff; implementation of the agricultural credit program and of the ancillary programs (para. 3.07-3.09). 3.03 The IDA-financed construction of stores, offices and staff-houses encountered many problems. Most contracts were awarded to local builders after local competitive bidding which was carried out in a manner satisfactory to the Association. Although contracts were broken into small lots, local builders experienced technical and financial difficulties and completed buildings frequently with considerable delay. The OACV headquarters building at Bamako was never built because bids by far exceeded appraisal estimates; this had no detrimental effect on operations as existing headquarters are somewhat cramped but tolerable. 3.04 In addition to IDA-financed constructions, OACV built further stores, offices and houses which were mostly financed, in an unorthodox way, out of operating funds (Chapter VIII). Total construction in the project period as compared to IDA-financed construction was as follows: IDA-financed Total Storage space 2,430 m2 3,562 m2 Staff housing 3,610 m2 4,165 m2 Office rooms 66 84 Buildings not included in the Project were not subject to the control of Government's Rural Works Department with respect to technical specifications or procurement procedures. Many of the additional buildings were of low priority. 3.05 Procurement of vehicles and equipment did not raise particular problems. - 23 - 3.06 It had been agreed, by side-letter, between the Association and Government that a consulting firm would continue to provide technical assist- ance to OACV in the field of agriculture. Technical assistance for admini- strative and financial services of OACV was provided by another firm of consultants. The initial contract was prolonged as OACV proved unable to continue without further assistance in this field. The appraisal report did not contain specifications of the professional profiles, terms of reference or stipulation of responsibilities of technical assistants but only an informal understanding that technical assistants would be hired under terms of reference and conditions acceptable to IDA. In the event, OACV proved unwilling to give in-line responsibilities to technical assistants (with the exception of the head of the evaluation unit) and consequently advice on matters of key impor- tance was not systematically implemented, and this greatly reduced the effec- tiveness of the technical assistance component. 3.07 The feeder road improvement program started in 1975 and was carried out successfully. This was due, to a great extent, to the personality of the Malian engineer in charge and to his excellent working relationship with the Department of Public Works which allowed him to call on their expertise and equipment whenever required, although he himself reported to the General Manager of OACV. 3.08 Likewise, the veterinary and health programs and the functional literacy component, all executed through specialized agencies, were imple- mented without major problems, although objectives were not always fully achieved (Chapter V). 3.09 The study of cereals prices and marketing systems in Mali was executed by consultants and submitted in 1976. Terms of reference had been cleared with HQ; in the following the study was monitored and oriented by IER (see also para 5.13). - 24 - IV. PRODUCTION IMPACT 4.01 Summary: Groundnut production rose considerably in project years 2-4 but relapsed to pre-project levels in the last project year and the following year (Annex 3, Table 1). Marketed production followed a similar course but fell to a level some 25% below pre-project levels. Cereals produc- tion appears to have increased but there is no reliable statistical indicator to gauge the increase, or the project's contribution to this increase. 4.02 The project's impact will be discussed in more detail in the follow- ing paragraphs for groundnuts and cereals separately - although the unequal fortunes of the two crops were interrelated. The statistical basis for the following discussion is at Annex 3. A. Groundnuts 4.03 To appreciate the economic factors which affected the rise and subsequent fall of groundnut production, it is necessary to also be aware of climatic influences. In brief, rainfall was - on the whole poor in 1973/74 (PYl) - excellent in 1974/75 (PY2) - good in 1975/76 (PY3) - mediocre in 1976/77 (PY4) - poor in 1977/78 (PY5), and - good in 1978/79, the most recent campaign. 4.04 In 1973/74, stagnating groundnut production primarily reflected climatic conditions; in the following, production rose in good years as well as in mediocre years; on the other hand, it remained low even in as good a year as 1978/79. The steep fall in 1977/78 (PY5) reflects both poor growing conditions and the economic factors discussed below. 4.05 The development of production does not follow a simple pattern. The correlation with official producer prices for groundnuts is poor, and so is the correlation with input prices or the ratio of cereals to groundnut prices. Groundnut production and marketing volumes continued to rise in spite of a relative increase in cereals prices and steep increases in equipment prices, and subsequently production fell in spite of stable input prices and rising producer prices. On the whole, producer prices, input prices and general consumer prices increased at roughly the same rate over the project period (Table 3). Although statistics of areas under groundnuts and of total groundnut production are surrounded by uncertainties, the margin of error is much smaller than the reported decline in area and total production. There can be no doubt that groundnuts have become an increasingly less attractive crop and that farmers have shifted efforts to cereals: - 25 - - official producer prices of cereals are a poor indicator, as market prices of cereals rose steeply in recent years; after the excellent 1974/75 harvest, cereals prices remained low through 1975/76 and thereafter started to rise again; this rise was accentuated by the poor 1977/78 harvest and the absequent need to restock granaries in 1978/79; - prices of groundnuts on the parallel market (for domestic consumption and clandestine exports) also rose steeply as from 1977; this accounts for the particularly steep drop in marketing; since prices for both cereals and groundnuts were frequently more than twice the official producer price, the timid adjustments made in 1976 and 1977 were ineffectual. 4.06 Other factors, inherent in OACV's declining performance, contrib- uted to the decrease in groundnut production, in particular - late start of the buying campaign; - frequent bottlenecks and delays in the supply of inputs and the provision of bags; - poor quality of improved seeds; and - a decline in the quality of extension staff which accompanied the expansion in area. 4.07 The application of recommended cultivation practices remained well behind appraisal targets (Table 4). The most readily accepted themes were use of fungicides for seed dressing and the use of improved seed and fertilizer. Farmers resisted the recommended high-density sowing, which is not compatible with the traditional practice of ridging, as well as the early sowing, preferring a risk-averting staggering of sowing dates and a larger number of low-density plots. Fertilizer use on groundnuts peaked in PY3. 4.08 Developments were far from uniform in the individual sub-areas; this is reflected in production figures of Table 1. After the poor results of 1977/78, the newly integrated areas in zone 4 and 5, which have significantly lower rainfall and are traditionally more cereals-oriented, reverted to their original pattern of cultivation; losses in zones 1-3, the traditional ground- nut belt, were much smaller. This result suggests that the expansion of the OACV area and the schematic application of OACV extension methods to ecologi- cally and economically different areas was a mistake which needs to be cor- rected. B. Cereals 4.09 There has been a definite shift of efforts away from groundnuts to cereals, in particular in zones 4 and 5 but also in the traditional ground- nut areas. Since most farms operate under full employment in peak seasons, - 26 - the desire to improve their food security (or to take advantage of prevailing high cereal prices) has forced a certain reduction in groundnut cultivation. Statistics of areas under cereals are suspect. As shown in Table 5, reported cultivated areas increase by 8-10% annually over the project period, which would only be possible if there had been widespread underemployment before the project or spectacular technical progress, and neither was the case. Thus, there is no firm basis to determine the true increase in cereals production. An attempt has been made in Table 6 to quantify 0ACV-induced increases in cereals production on the basis of observed input supply and extension acti- vities; the same methodology has been applied to measure project-induced increases in groundnut production, as opposed to reported increases and decreases in production (Table 2), which reflect influences extraneous to the project agency's activities as well. 4.10 Evidence of increased interest in cereals cultivation comes mainly from surveys conducted by OACV's Evaluation Unit (para. 5.04), which show: - frequent requests of farmers for improved cereals seed, - frequent requests of farmers for cereals fertilizer (not recommended by the project), - use of groundnut fertilizer on cereals fields, and - more efforts spent on cultivating cereals than on ground- nuts. The following data from a 1977/78 sample survey are telling; observation of certain cultivation practices in % of surveyed farms: Zone 1 Zone 2 Zone 3 Zone 4 Zone 5 Sowing before July 15 Cereals 93 94 83 53 75 Groundnuts 50 57 58 13 44 Two or more weedings Cereals 38 93 64 29 41 Groundnuts 36 73 17 10 25 4.11 Although most indicators point in that direction, it is not yet certain that the increased interest in cereals is a structural and permanent phenomenon and not motivated primarily by the need to replenish stocks and satisfy increased local demands for cereals after the poor 1977/78 harvest. The drought of the early 'seventies was also followed by a period of market saturation and low cereals prices. Staple foodstuffs, after all, have a low elasticity of demand, and continuous good harvests may bring about a collapse - 27 - of the now very attractive market prices for cereals and a certain reorienta- tion towards groundnuts. The 1979/80 season, with a significantly increased groundnut price (MF80/kg), and following on a good crop year, will provide important clues to answer this question. If groundnut production and marketing responds to these favorable conditions, there is still hope for redressing the situation, at least in the core areas of the groundnut belt. C. Distribution of Farm Equipment and Inputs 4.12 Farmers proved more ready to apply selected productivity-increasing inputs, in the first place seed and fungicides, than to apply the whole package of recommended cultivation techniques (para. 4.07). Timely sowing of groundnuts, for instance, was achieved on 22% of the groundnut area in PY5, against an appraisal estimate of 60%. There has been a continuous decline in the percentage throughout the project period, reflecting farmers' primary concern with sowing cereals at optimal dates (para 4.10). Similarly, high- density sowing of groundnuts was recorded on 14% of the area in PY5, against 50% estimated at appraisal. Distribution of improved seed and fungicides remained partially behind appraisal estimates (Table 7) but the latter were very optimistic, and the absolute increase is satisfactory for several items, in particular use of fungicides and of improved groundnut seed. The increase might have been higher if deficiencies in the supply system and the uneven quality of extension work had not acted as a break (para. 4.15). 4.13 With respect to the use of fungicides on groundnuts and cereals, the official figures must be interpreted with caution. Given the increased interest of farmers in cereals, the share of fungicides applied to cereals may be larger than indicated, and the share of groundnuts smaller. The same applies to fertilizer use, even if the groundnut fertilizer is not the most appropriate for cereals cultivation. 4.14 Throughout the first four project years, fertilizer use was mainly restricted by limited supplies. The price of groundnut fertilizer was kept fairly stable, and the higher price of cereals fertilizer was no impediment to generating vivid demand. The increase of fertilizer use on groundnuts was limited partly because of supply constraints (SCAER delivery delays) and, in the later years, by decreasing economic interest in groundnut cultivation and increasing demand for cereals fertilizer, which remained unsatisfied. The Appraisal Report had expressly excluded fertilizer application to cereals from the extension program and evidently misjudged its economic attractiveness. 4.15 The increase in equipment use was mainly limited by supply bottle- necks and by failure of extension staff in some sectors to actively inform farmers of the benefits from equipment use (see table 7 for a comparison of projected and actual distribution). Results in individual sectors reflect the ability and dynamism of sector heads as much as differences in farmers' receptiveness. Farmers generally complained about the steep price increases but, on the whole, demand continued to exceed available supplies, in particular for carts. In the case of toolbars, the price increases appear to have induced a certain diversion towards ploughs; this has detrimental effects on the weeding capacity of farmers as toolbars are multi-purpose and also serve for weeding. - 28 - D. Other Developments in Agriculture 4.16 During the project period, first attempts were made to develop quality-groundnuts for exports, namely confectionary groundnuts and edible groundnuts. - The variety 47-10, which is grown in the northeastern part of the OACV area, i.e. in the zones attached to OACV during the project period, began to be treated as a confectionary groundnut; this required no special cultivation method but only careful screening and preparation at marketing. Three hundred tons were prepared in 1976/77, and a screening device was installed. Confectionary groundnuts fetch a premium of 33%, which fully justifies the additional labor input. It is expected that in the long run, at least 20,000 tons could be marketed as confectionary groundnuts. - For the cultivation of edible groundnuts ("arachides de bouche") the variety GH 119-20 was imported from Senegal in 1976 and is cultivated in the southwestern part of the OACV area around Kenieba, another recent addition to the project area. In contrast to confectionary groundnuts, production of edible groundnuts requires mastery of all improved techniques and needs careful monitoring both during the growing season and at marketing. About 80 tons were harvested in the first two years. It is expected that in the long run 10,000 tons could be marketed. These initiatives should be followed up. Given the mediocre outlook for world market prices of groundnuts and groundnut oil, it is important for Mali, in its land-locked position, to export groundnuts in the form yielding the highest specific value. 4.17 As in the cotton-growing areas of CMDT, farmers in the OACV area showed lively interest in expanding maize cultivation; this applies in particular to the areas of higher rainfall (more than 900 - 1,000 mm). Unlike CMDT, OACV did not follow-up. Given the higher yield potential of maize, OACV will be well advised to respond to these demands as higher productivity in cereals production may help to contain the area shift from groundnuts to cereals. - 29 - V. Impact of Other Project Components 5.01 In support of its action to develop animal-drawn cultivation, OACV executed a program to train and equip blacksmiths throughout the project area. Blacksmiths would provide maintenance and repair services and in some cases make spares and even agricultural equipment. OACV distinguished three stages of training: Stage 1 - blacksmiths are initiated to the use of elementary equipment; Stage 2 - blacksmiths use all techniques for forging and tempering and are initiated to woodworking for the building of carts: Stage 3 - black- smiths use welding equipment and are able to repair small motors. In 1977 a total of 171 blacksmiths had been trained: 68 had completed the first stage, 83 the second and 20 the third. At a later stage, the most advanced blacksmiths are to be equipped with a small mill for the grinding of cereals. 5.02 The achievements of the blacksmith program fell far short of appraisal estimates (Annex 4, Table 1). This is in sharp contrast to the success the blacksmith program experiences in the neighboring Mali-Sud project. The difference in performance is attributed mainly to insufficient attention given to this component by OACV management. 5.03 The track improvement subproject started with a delay of one year but then made remarkable progress under a dynamic and able head of the track improvement unit who cooperated closely with the Public Works Department. In the end, 1,987 km of tracks had been improved against 1,500 km projected at appraisal (Table 2). 5.04 The livestock subproject financed under the project consisted of (i) health protection of livestock; (ii) stall fattening; and (iii) main- tenance of draft oxen. This program was implemented by a zootechnical engineer with two lower-grade livestock specialists, 3 assistants, two nurses and 10 vaccinators (1 for each sector). Results are summarized in Table 3. 5.05 Although the impact of the livestock subproject cannot be easily quantified, there has been a good response from farmers, especially in the sectors of Koulikoro and Banamba where livestock activities started in February 1975. The number of cattle in the OACV area was estimated at 2.3 million in 1977/78, of which 6% were vaccinated against rinderpest, 4% against pleuropneumonia (CBPP) and 3% against pasteurellosis. Draught-oxen in the area were estimated at 40,000. Of the latter, about 20% were treated in 1977 for internal parasites, 4% against external parasites, and 85% for trypanosomiasis. Improved husbandry practices included cultivation of fodder crops, ensilage and, in Koulikoro, Banamba and Segou, stall fattening. Stall fattening was carried out with 444 head of cattle in 1977, involving some 205 farmers. This technique has been readily adopted by farmers; constraints on further development are the availability of credit for purchasing animals and the organization of marketing of fattened animals. - 30 - 5.06 The health subDroject consisted of distribution of malaria- preventive medicine, construction of several dispensaries and the training of mid-wives and first aid volunteers, and provision of vehicles. The program concentrated on the 1st Region (Kayes), which is particularly deficient in communications, The program started late (1977) and was managed by local committees in each of the four administrative units of the Region. It maintained close contact with the local branch of the adult literacy program. At the time of the last supervision mission, two dis- pensaries were still to be built. Due to the remoteness of the Kayes area, this subproject has received little attention from supervision missions. 5.07 Functional literacy in the OACV area started in 1969 under the auspices of UNESCO and FAC. The Bank Group financed an evaluation of functional literacy under this project and a number of functional literacy activities (staff, housing, operating costs) under an education project. In 1977 there are 634 centers of" functional literacy in every sector covered by OACV except Segou. The participants represented 2.5% of the rural population and 7% of the population reached by the program. The evaluation showed that most participants quickly lost the knowledge gained during courses if they did not take repeater courses and if they did not apply their new skills in practice. The main benefit of the program was thus to create within the villages nuclei of farmers able to assume increased respon- sibilities in the organization of village communities. Results are summarized in Table 4. 5.08 The agricultural research component consisted of varietal research on groundnuts, as well as research on diseases and soil surveys. Technical assistance was provided by IRHO (for groundnuts) and IRAT (for cereals). Research activities were coordinated by IER. 5.09 Research coordination by IER proved to be lacking in flexibility. In particular, OACV did not benefit from the services of the IRHO researcher whose (part-time) services were badly needed for seed quality control, but who was not released by IER. OACV's seed quality declined considerably over the project period and reduced farmers' willingness to pay the high price for seed of sometimes dubious effectiveness. IER has failed to provide a final account of the research activities for which it was responsible under the project. 5.10 The project financed the establishment of an evaluation unit which would eventually coordinate the evaluation of all agricultural projects carried out by the "Operations de Development Rural". In a first step, it would concentrate on the impact of the OACV project and determine whether any of the project objectives or the organization of OACV could be improved. 5.11 The studies carried out by the evaluation unit included: (a) a broad-based descriptive survey of the entire OACV area, through the sampling of some 1,100 farms, or 1% of the total, to outline the main characteristics of the area (1976); (b) an indepth farming system survey with daily obser- vation of a total of 32 representative farms in the four eco-systems com- prising the OACV area, over a one-year cultivation period (1976-77); (c) a statistical survey of the agricultural potential of the Segou area with - 31 - measurement of areas, yields and production; and (d) an opinion poll (1978) in the same area about farmers' problems and their perception of OACV's activities. 5.12 The Unit had practically no impact on the development of the project because (i) it was created too late (July 17, 1975) and spent most of its time on the necessary basic studies, and (ii) management of OACV ignored relevant findings when they became available. The valuable studies of the evaluation unit, which were carried out competently, are now largely completed, and will serve as a basis for a redefinition of OACV objectives and a change in its organization. They were also used for the preparation of this report. 5.13 The study on cereals marketing had been executed by consultants (para. 3.10). The Institut d'Economie Rurale (IER), which monitored the study, influenced its orientation and policy conclusions. The report, in the end, reflected IER's well-known views on the subject and advocated a tightening of OPAM's trading monopoly, an impractical solution since experience shows that in the prevailing conditions such a monopoly cannot be enforced and serious attempts at enforcement aggravate rather than relieve supply problems. An intermediary review of the study's progress by a supervision mission could have led to a more balanced treatment and more constructive policy recommenda- tions. However, in view of Government's unresponsive attitude to the recommen- dations of several other studies on the subject, executed subsequently, 1/ it is doubtful whether a more successful execution of this project component would have had an impact on Government's cereals marketing policy. 1/ In particular: A study on grain marketing systems in Mali, by University of Michigan, acting as consultants for the Comite Inter-Etat de Lutte Contre la Secheresse dans les Pays du Sahel (CILSS), in 1978; and a study on grain marketing policies in Mali by FAO and several other donor institutions, also submitted in 1978. Both studies advocated a liberali- zation of marketing policies. - 32 - VI. Project Cost and Financing A. Cost and Financing 6.01 The following summary is based on a reconstruction of the Malian contribution to project costs. Details of the assumptions are discussed in Annex 5. With a minor adjustment in the definition of total project cost (explained in the Annex), costs ex ante and ex post are summarized below: Appraisal Actual FM US$ FM US$ Million 1000 % Million 1000 % IDA 4,000 8,000 43.2 3,790 1/ 8,000 63.2 FAC 1,259 2,518 13.6 1,259 2,722 2/ 21.5 Govt. 2,148 4,296 23.2 290 627 2/ 5.0 Farmers 1,857 3,714 20.0 605 1,308 2/ 10.3 Total 9,264 18,528 100.0 5,944 12,657 100.0 It appears that total expenditure remained some 36% below the appraisal mark in terms of FM, and by 32% if expressed in US$. (The difference is due to the change in the US$ value between appraisal and completion of the project.) 6.02 This reduction is due to a drastic shortfall in the Malian partici- pation. The low contribution by farmers reflects the disappointing pace of increase in the use of equipment and inputs (see section IV c above). The same factor accounts for part of the shortfall in Government's contribu- tion, namely the subsidies on equipment and inputs: these were reduced per unit of equipment and input, and the total quantity distributed remained behind expectations. The remaining shortfall in Government's participation is due to the reallocation from expenditure categories with relatively high Malian participation to categories with a low Malian participation (operating cost); to the increase in the share of IDA financing of seed from 18% to 90%; and to the allocation of the entire unallocated to these categories with very low Malian participation. These reallocations were approved by the Association (Annex 5, Table 1). 1/ Exchange rate used: US$1=MF473.7 (average over project period weighted with amounts of IDA credit disbursed). 2/ Exchange rate used: US$1=MF462.5 (simple average over project period). The FAC contribution had been fixed in FM terms. - 33 - 6.03 The small amount of incremental input subsidies was not paid by Government but de facto by the Association (in the case of improved seed) and by farmers (in the case of fertilizer and equipment); this is more fully examined in Annex 5. In fact, it appears that OACV farmers - in addition to substantial amounts of export taxes - paid about US$4 million for the financing of input and equipment subsidies through a special levy in the price schedule (bareme), whereas they received only subsidies worth US$1 million over the project period. If this were taken into account, Government's contribution would have been squarely negative in the aggregate. 6.04 The financing of 90% of incremental groundnut seed by the Associa- tion should have resulted in the build-up of a working capital of roughly US$1 million at the end of the project period provided that farmers repaid the annual credit on schedule and Government paid the subsidy element. Even allowing for arrears and Government's non-payment of subsidies (para. 6.03), there ought to have remained a sizable residual of this fund. In reality, however, all liquid funds were used by OACV to cover urgent financial needs. In future projects, it is advisable to clearly identify the financing of incremental inputs as the financing of an asset (working capital for input purchases) and require the proceeds to be maintained in a separate account, which would be verified by the statutory annual audits. B. Disbursement 6.05 Disbursements lagged considerably behind appraisal estimates until 1976 and then quickly caught up with projected amounts; in the end, the credit was fully disbursed several months ahead of the estimated date (Table 2). Initial delays were attributable to delays in procurement (buildings, vehicles and equipment) as well as slow processing of disbursement requests at OACV; this reflected the low efficiency of OACV's central administrative and finan- cial services. Also, OACV was in a comfortable financial position until 1976 and was in no hurry to obtain reimbursements from the Association. This changed drastically in the last two project years when the Association was asked to approve a substantial increase in the allocation of finance for operating expenditure out of the unallocated category (para. 6.02). - 34 - VII. Institutional Development 7.01 At the time of appraisal, OACV was well managed and looked back on several years of successful performance. It was expected that OACV would be able to carry out the project without major institutional reform. The appraisal mission only insisted on an agreement with the agricultural credit and input supply organization SCAER and on the establishment of a groundnut price stabilisation fund by ORSP. The first condition was fulfilled, the second not, and there are no records of a reminder having been addressed to Government. Beyond this, a strengthening of the weak administrative and financial services was undertaken through a firm of consultants. 7.02 These consultants (i) introduced inventory controls; (ii) initiated a decentralization of the credit recording operations; (iii) assisted in the establishment of annual accounts; and (iv) trained local staff. While the procedural changes have been helpful, the quality of administrative and financial services is still low, according to the findings of a FAC- financed chartered accountant who visited the OACV in March 1979 1/. 7.03 The Malian General Manager, who took over from his expatriate predecessor in 1975, instituted a system of extreme centralization in decision- making, paralyzing the five regional heads of service. This reluctance to delegate was particularly unfortunate in an organization which extended over 1,000 km from East to West and in an area with notoriously poor communications, in particular west of Bamako. Prolonged trips abroad undertaken by the GM in 1977 and 1978 exacerbated management problems. The GM-s lack of financial and management skills--he was trained as an agriculturalist and extension spe- cialist--contributed to financial unorthodoxies which led OACV into difficul- ties which seriously reduced its effectiveness (para. 8.02-8.06). 7.04 Financial problems of OACV were not only due to management mistakes; they also brought into focus the inadequate status of OACV as a branch of the Ministry of Rural Development without any degree of autonomy, and its extreme dependence on other agencies, in the first place the export monopoly of SOMIEX, and the groundnut crushers SEPOM and SEPAMA, who provided the credit for groundnut purchases as OACV had no direct access to bank credit, lacking the "autonomie juridique et financiere". If OACV had access to credit from a commercial bank, it would automatically be subject to scrutiny and forced to observe certain standards of financial management. 7.05 The basic flaw in OACV's structure is, however, that it depends for its recurrent cost financing on a margin per ton of groundnuts marketed which is annually negotiated with Government on the basis of a projected marketed volume; however, OACV has only a limited say in the determination of producer prices which ultimately determine the actual volume of groundnuts coming forth, and in the determination of other items of the bareme, such as the margin for collection, which frequently does not reflect real cost; as a consequence, OACV is exposed to serious shortfalls in earnings over which it has no control but for which it is not compensated. 1/ M. Fleury, Rapport de Mission, OACV, March 20, 1979, p. 1. - 35 - 7.06 As from 1977, the shortcomings of 0ACV's structure have been pointed out, with increasing frequency and insistence, by Bank missions; Government, at first unwilling to move, is now preparing a reorganization of OACV. This reorganization is expected to comprise the change to a statute with financial, legal and managerial autonomy, a review of the financial foundations, and the splitting of the unwieldy and heterogenous organization into two or more separate Operations de Developpement. Although the IDA- financed project could not prevent or halt the institutional decline of OACV, the Association has made important contributions to the identification of structural weaknesses and to creating an awareness in Government of the changes to be implemented. - 36 - VIII. Financial and Economic Results A. Financial Results a) Farmers 8.01 It is difficult to assess the project's financial impact on farmers. For cereals, incremental production can only be estimated, and no information is available about incremental marketing through private market channels. In the case of groundnuts, the incremental volume of marketed production in 1974/75 - 1976/77 must be seen against the rising discrepancy between the official price and the private market price. Farmers selling to OACV (because they had incurred debts for equipment, inputs and seed) increased their cash income compared to pre-project times, but suffered an income loss compared to sales on the parallel market. The abrupt fall in marketing in 1977/78 (to which poor weather contributed) and 1978/79 (under normal weather conditions) shows that in farmers' perception they do no longer gain from the OACV program at prevailing input and output prices. Gains from access to subsidized inputs and equipments (the latter for a small number of farmers annually) are more than offset by revenue foregone by sales through official rather than private market channels, and by the subsidy recovery collected through the bareme (para. 6.03), which was four times the amount of subsidies received by farmers. Here, farmers with access to subsidized equipment and inputs bene- fitted at the expense of the majority of OACV farmers. b) The Project Agency OACV 8.02 The financial situation of OACV was sound in 1972/73 but underwent a steep decline in the course of the project. The decline is due to a number of causes, which will be discussed in turn. 8.03 With the inception of the IDA/FAC-financed project, OACV operating expenditure exploded: from MF 490 million in 1972/73 to more than five times that figure four years later (Annex 6, Table 1). Inflation, and expansion in OACV's area, can account for not more than half the increase. In 1976/77, when total operating expenditure was approaching FM 3 billion (US$7 million), OACV, prompted by the Association and FAC, made successful efforts to curtail expenditure; by that time, however, the gap between official and private market prices had caused marketing volumes to drop; as a consequence, the increase in OACV cost per ton of groundnuts marketed (Table 1) continued: while in the last pre-project year OACV costs per ton marketed had been 44% of the producer price, these costs were 143% of the (much higher) producer price in the last project year (1977/78). 8.04 In spite of OACV's steep increase in recurrent expenditure, its cash-flow situation did not deteriorate drastically until the end of the project period since funds continued to come in from the foreign sources of finance. OACV could have maintained a manageable financial position had the manager not resorted to financing of unscheduled investments (para. 8.05) from his operating funds, consisting in the first place of advances from groundnut crushers SEPOM and SEPAMA and exporters SOMIEX. This resulted in the build-up of short-term debt of FM 2.38 billion (US$5 million) until September 1978. Until 1979, this figure is expected to reach FM 3 billion. - 37 - As a consequence of this policy, OACV's working capital had become negative in 1976/77; net assets were a mere FM 720 million (US$1.5 million) at the end of the 1977/78 campaign and are expected to become negative in the course of 1979. This means that all remaining assets, fixed and otherwise, will be more than balanced by short-term debt. A summary balance sheet as of September 30, 1978, is at Ta 'e 2. 8.05 Investments financed with these short-term funds include trucks, but also residential buildings for staff (FM 610 million or US$1.5 million) and ample loans to staff (FM 107 million or US$225,000), items indicative of an increasingly self-serving institution. 8.06 The consultants repeatedly pointed out to OACV management that financial procedures were in conflict with principles of sound financial management. In addition, financial control of the most basic kind seems to be deficient. The balance sheet, for instance, contains a "provision for debtors to cashier" of US$200,000, which is a euphemism for unexplained shortages in the field offices' cash-boxes. Auditors Price Waterhouse reviewed the 1975, 1976, and 1977 accounts prepared with the assistance of the consulting firm but did not express an auditor's opinion on them because they were not present at stock-taking. Before any reorganization and financial consolidation of OACV, Government should arrange for a professional audit of OACV accounts by a firm of international standing, and the Association should not consider any further credit to OACV until this has been done. c) Government 8.07 Government decided in 1970 to take OACV out of the national budget - which until that time had provided salaries of extension staff - and to make it entirely dependent on revenue from marketing (and external subsidies). At the same time, Government drew substantial revenues from the groundnut sector through - the ORSP levy - the CSP tax (3% of fob value) - the export tax, and the surplus accruing to the state monopoly exporter SOMIEX (difference between projected and actual export proceeds, if the latter exceeded the former). In recent years, the three tax components have, with the exception of 1976/77, amounted to FM 20,000/ton (US$43/ton) on average, and total tax revenue from groundnuts has been close to US$10 million over the project period (not counting any surpluses of realized over scheduled export prices). In addi- tion, SCAER netted some US$3 million from the excess of subsidy recovery though the groundnut bareme over subsidies actually paid to OACV farmers (although this amount was never transferred to SCAER by OACV) see Annex 5. 8.08 With world market prices of groundnuts sluggish, or even declining in real terms, the groundnut sector has in recent years proved unable to support OACV's high costs, Government's substantial levies, and an attractive producer price as well. The lesson of recent years is not only that OACV expenditure must be brought back into line but also that the groundnut exports in a landlocked country can no longer be taxed as heavily as in the past. - 38 - B. Economic Results 8.09 Assumptions underlying the economic analysis are explained in Annex 7. The economic analysis faces two major difficulties, one factual, the other methodological: - by how much did groundnuts and cereals production increase (or decrease) over the project period? - how much of the increase (or decrease) can be attributed to project-related activities, and how much must be attributed to project-external influences (market signals in particular)? 8.10 A possible way of dealing with both problems simultaneously has been discussed in Annex 3 and applied in Table 6 of that Annex. This method has also been the basis for the economic analysis which uses: - firstly, incremental production of cereals and groundnuts as deduced from recorded extension and input supply activities; and - secondly, the described method for cereals only, and recorded production figures for groundnuts. The first-mentioned method is thought to reflect more closely the project's real impact while the second one only illustrates, as far as groundnuts are concerned, the powerful impact of an unfavorable economic setting. The important drawback of the first method is, of course, that its results are purely conjectural with respect to the postulated effect on production of the various input supply and extension activities taken into account. However, the chosen method is the best one under the given circumstances. 8.11 Whichever method of computation is applied, the result is in each case an essentially negative net benefit stream without meaningful internal rates of return. - In the first case (Table 2), this may be interpreted as showing that the impact of the OACV staff in terms of increased pro- ductivity of farmers has not been commensurate with the expen- diture involved; this may reflect low efficiency of the organi- zation, or excessive costs, or both. As discussed in preceding chapters, it does reflect both. - The second case (Table 3) shows that the results of extension work - however modest in this case - can be thwarted and anni- hilated if they are not accompanied by a macro-economic framework which makes it worthwhile for farmers to pursue the project's objectives. - 39 - 8.12 The second case, however, also has a more hopeful aspect: as long as the market signals were reasonably favorable (PY1-4), the project's success was remarkable in terms of incremental production of groundnuts; with a more competitive groundnut producer price, it may be possible to bring production back to the level prevailing in PY3 and PY4, or close to it. If groundnut production had remained stationary at the PY3 level, the IRR would have been very high indeed 1/. However, the producer price required to induce produc- tion at that scale may well be above the export-parity price and therefore require subsidies.2/ 1/ Due to the absence of heavy initial outlays, the ERR of rural development projects is very volatile. This is particularly true in the case of follow-up projects or, as in this case, where a project builds on a pre-existing institution. The benefit-cost ratio is probably a more appropriate measure in this case. 2/ This problem is further discussed in the Agricultural Sector Memorandum for Mali (Report No. 2567-MLI) of June 22, 1979. - 40 - IX. Performance of the Association, OACV and Government A. The Association 9.01 Various features of the project's design contributed to its un- satisfactory result; before these are discussed it should be recalled, however, that the main reasons for the result are wrong pricing policies and managerial weaknesses. 9.02 The project provided for a Malian participation of more than 40% of net of tax costs, to be shared about equally between OACV and farmers. Such a high proportion was unrealistic in Mali, one of the poorest countries which had - and still has - serious budgetary problems. 9.03 While the overall contribution of Mali was excessive, the required counterpart financing was not distributed judiciously: Malian contributions for vehicles, equipment, buildings etc. were in the 20-40% range; on the other hand, the financing plan provided for minimal Malian participation in incre- mental operating cost (8%) and local staff (9%); this amounted to an invita- tion to expand operating expenditure liberally; the allocation of the bulk of the "Unallocated" category to operating expenditure (up 46% from appraisal estimates) shows that this invitation was gladly accepted. 9.04 Supervision missions were generally pleased with the project's progress as long as outwardly the danger signals were not yet apparent; the slowing down and even decline in the adoption of recommended techniques and the stagnation of fertilizer use might have alerted supervision missions somewhat earlier. Supervision concentrated on agricultural matters (credit, input supply, seed problem) and institutional matters (bareme, relations with SCAER, SOMIEX, SEPOM) and were somewhat deficient in economic analysis. Similarly, the unsound financial practices of OACV, in the first place financing investment out of operating funds, and lack of restraint in con- trolling operating expenditures, came into focus only when the turn in the tide of marketing initiated a rapid collapse of OACV's finances. 9.05 Government's non-compliance with important covenants (consultations on producer price and groundnut bareme, establishment of a groundnut stabi- lization fund) was tacitly tolerated as long as there seemed to be no reason to disagree with the decisions taken. The Association has been pressing more consistently, in fact nearly annually, for adequate producer prices but as it was not consulted beforehand, this had only a limited impact on the prices decided upon. 9.06 In the final stages, the Association, through its supervision missions, its Resident Representative, and policy discussions held at various levels, has contributed actively and constructively to the reorganization of OACV which is now under way. An essential step in this process of persuasion was the Association's refusal to further process a - 41 - proposed second OACV project which, according to the 1977 plans submitted by IER, was to be an inflated follow-up of the first project. The Association appraised a much reduced version of this proposal in early 1978 but stopped further processing in mid-1978, when it appeared that Government was not yet ready to accept basic institutional and financial reforms. In the meantime, Government and the Association have come much closer to a consensus on what needs to be done (para 10.3). B. OACV 9.07 The performance of OACV declined over the project period. Aided by favorable economic conditions in 1974/75 - 1976/77, it succeeded in considerably expanding groundnut production and marketing. Frictions originated, with regard to field operations, from reliance on third agencies for essential services (bags, input, credit), and these did not always arrive in time, or in required quantities. 9.08 The expansion in area to Segou and Kenieba was accompanied, however, by a decline in the quality of field staff, and a loosening of financial and personnel control, features exacerbated by the General Manager-s attempt to keep all the strings in his hand. Expatriate staff both in field assignments and in administration and finance were denied decsion-making power, robbing them of much of their potential usefulness. This refusal to grant in-line responsibility to expatriates is a national policy, however, and not attrib- utable to OACV. 1/ 9.09 The quality of OACV-s financial reporting as well as of its annual activity reports also declined through the years, the 1974/75 Annual Report (for PY1) being the last reasonably exhaustive and informative such report. Independent auditors as well as consultants urged OACV to undertake reforms in financial control but few of the recommendations were implemented until 1978. 9.10 In 1977/78 and 1978/79, when marketing declined sharply and OACV's future was clearly at stake, field staff, at the order of management, began to use quasi-requisitionary methods in marketing groundnuts in a desperate effort to meet targets that were unrealistic at the authorized producer prices. As a consequence, OACV has lost farmers' goodwill in those areas where coercive or intimidating methods were used. This may prove a mortgage on future efforts to redress the situation. C. Government 9.11 Government was not financially involved in the project since it had decided that OACV, a branch of the Ministry of Rural Development, should be able to subsist on the statutory revenue from the bareme and funds made available by the Association and FAC. Government must be held responsible, however, for maintaining OACV's inappropriate organizational structure, its 1/ The one major exception to this policy is CMDT (Mali-Sud), where ex- patriates occupy in-line positions. This is explained by the fact that CHDT is a "societe mixte" with French participation. - 42- lack of access to seasonal credit etc., in the face of the increasing difficul- ties arising therefrom. The only relevant provisions built i-to the Credit Agreement (regarding a stabilization fund and annual consultations on producer prices and baremes) tenrc unheeded (para 9.14). 9.12 As in the case of cereals, where OPAM has a largely ineffectual marketing monopoly, Government has maintained the producer price of ground- nuts at a low level, ignoring the lessons of the 'sixties and not following up on the encouraging new start made in June 1974. When adjustments were finally made, they were too little and too late, the free market price remaining so far above the official prices as to make the increases ineffective. Only in 1979, when the marketing volume had plummeted to 32,000 tons, did Government go to, and even slightly above, export parity by a bold increase from EM 60 to FM 80/kg. At the time of writing this report it is impossible to indicate, however, what the impact on the 1979/80 marketing volume will be. 9.13 Finally, Government did not exercise its supervisory responsi- bilities over the General Manager. The fact that OACV, unlike most other Operations de Developpement, remained a branch of the Ministry of Rural Development, imposed special supervisory responsibility on the Minister. The General Manager, however, operated in a largely unfettered manner and authorized important investments that were not budgeted and not properly funded; the steep rise in operating expenditure (from MF 800 million in 1974/75 to MF 2,900 million in 1977/78) went unchecked until financial con- straints enforced severe cut-backs. Lack of supervision by Government was most serious in the expansionist period between 1975 and 1977. D. Compliance with Covenants 9.14 As stated earlier, the financial covenants (para 2.13) were not complied with. In the end, the factors that caused OACV's defeat were those the covenants were designed to avoid, i.e. inadequate producer prices, in- adequate sources of revenue, and no protection against spells of low world market prices through a stabilization fund. The Associations, at hindsight, was right to feel strongly about these matters at appraisal, but then failed to show the necessary determination in obtaining Government's compliance. 9.15 Governments non-compliance with its obligation to consult the Association on changes in producer prices and baremes positions was brought up by a supervision mission in 1975 but there are no records of a follow-up. The failure to set up the groundnut stabilization fund in ORSP was pointed out in a letter to Government in early 1977. Also in 1977, OACV was reminded, with some emphasis, of its obligations to have its account audited. Until that time, no audit had been performed. In the end, the Association received only a limited review of the 1975 to 1977 accounts (see para. 8.06 above). - 43 - X. Conclusions 10.01 The Integrated Rural Development Project was prepared and appraised at a time when the Bank had launched very few projects of this kind. Thus, knowledge of agricultural and socio-economic conditions in the area was limited. This is reflected in the optimistic appraisal estimates with respect to adoption rates and increases in cultivated area and production, in the lack of differentiation between ecologically diverse areas, and some misjudgment of the relative attractiveness of groundnuts and cereals, respectively. In the meantime, many lessons have been learned from this and similar projects. 1/ 10.02 The appraisal focussed on a number of important issues that were translated into covenants designed to ensure adequate producer prices, adequate income for OACV, protection against price fluctuations, and strengthening of 0ACV management. The project got off to a good start in terms of incremental production and OACV revenue, but incremental production was to a large extent due to favorable economic conditions unrelated to the project; this tended to obscure the view on emerging weaknesses in OACV's performance and structure. Government and OACV did not comply with important covenants (consultation on producer prices and the baremes, creation of a stabilization fund), and the Association did not insist as long as the going was good. When the tide turned, adjustments were made too late and too timidly. The lesson would seem to be that: - covenants should only be sought if they are deemed crucial for the project's success and are thought to be enforceable, but - once they are sought and obtained, compliance should be insisted on to maintain the Association's seriousness of intent. 10.03 The turn in OACV's fortunes occurred so late in the project period as to make corrective action by supervision missions and the Association impossible. However, since 1977 the Association has, in continuous discussion with Malian authorities, contributed to identifying the main causes of the collapse of groundnut marketing and gained Government's acceptance of these views. Besides managerial shortcomings and inadequate producer prices, re- peatedly high-lighted in the preceding pages, important findings were: - the need for a differentiated approach to each of the sub-areas constituting the OACV area, adjusting direction and intensity of intervention to prospective returns; - the need for a review of recommended cultivation practices to take into account the constraints revealed by farmers' reactions; 1/ See in particular: Rural Development Projects: A Retrospective View of Bank Experience in Sub-Saharan Africa, October 13, 1978, Report No. 2242. - 44 - - the need for a genuine effort to meet farmers' demands with respect to improving cereals cultivation; - the need for a new status of OACV with a higher degree of financial and managerial autonomy, giving it access to bank credit (which, of course, requires first a consolidation of its debts) and making it less dependent on other state agencies; and - the need for a revenue structure making OACV less dependent on marketing volumes and reflecting its increasing involvement in the promotion of crops which are not marketed through official channels, or are not marketed at all. 10.04 These issues are in the center of on-going discussions with Govern- ment which may lead to a Technical Assistance Project aimed at working out in detail and implementing these institutional, technical and financial changes, laying the basis for a new project on the foundation of lessons drawn for experiences with Cr. 491-MLI. 10.05 Several of the ancillary project components were executed quite succesfully, in the first place the rural roads improvement program, the livestock subproject, and the setting up of the Evaluation Unit. - 45 - ANNEX 1 MAL I INTEGRATED RURAL DEVELOPMENT PROJECT Project Completion Report Operation Arachides 1. Operation Arachide (OA) was created in June 1967 with FAC financing. Technical assistance was provided by a French consultanting firm. OA originally focussed on the Kita/Sebekoro area and gradually spread out to the western areas of Kayes/Bafoulabe (1969/70 and 1970/71) and the northern area of Mourdiah (1971/72). In 1971/72, OA covered closed to 100,000 ha in an area of about 80,000 km2 in western and central Mali with a total population of 0.6 million, or roughly 60,000 farm families. 2. The impact of OA is reflected in the figures of Table 1. The increase in production can be atributed to a considerable extent to increases in yields. The impact of the technical package propagated by OA is shown in the following figures. The percentage of farmers in the OA area using im- proved methods increased as follows: 1967/68 1968/69 1969/70 1970/71 1971/72 Seed dressing 14 20 15 18 24 Fertilizer 4 10 8 19 25 3. During the tri-annual national recovery program (1969/70-1971/72) which was launched after the change of Government in November 1968, agricul- tural exports increased from MF 4.9 billion to MF 9.6 billion; groundnuts contributed significantly to this recovery with groundnut exports rising from MF 0.8 billion to MF 3.0 billion. MALI INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Groundnut Production and Marketi. 196661 191 2 Area 1000 ha OA area Yield (kg/ha) OA area Production (1.000t) OA area karketed (0OOt) OA area YerI/Mali OA area in % Mali OA area Mali Mali OA area in % Mall OA area in -- 19 - - 802 - - 103 - 39 - - 140 46.2 33 551 385 0.70 77 17.8 23 30 10.5 191,/)9 129 51.0 40 481 470 0.98 62 24.0 39 28 14.5 52 19(9/.0 118 75.0 64 750 753 1.00 89 56-5 63 57 58.1 67 1970/71 162 102.6 64 661 668 1.01 107 68.5 64 74 46.0 62 145 92.4 64 771 812 1.05 112 75.0 67 60 44.0 73 I r/ cops are marketed in January - April of the year following the year of production. cr ! MALT INTEGRATED RIRAL DEVELOPMENT PROJECT Pro lect Completionk_eport_ Diffusion of Recounnended Techniques n Pro ject Area (Es,timated at appraisal) 9 979 4 1914p, i9'( l 9( '77 1977 { 97" '79 1979/80 rePr ,cct py Py, py PY4 _ )(PY) Ia ha ha¯ ha 'lelv -,wn l9,900 0 7. 00 100 4 7, 400 !0 94,00 10,900 '0 112.100 ,0 114/00 (>0 .r. .... '>,100 0 F00 "N 41. 400 90 '4."00 3 7.00 4> 90,A00 !0 9,400 ''0 9:,00 50 i t i '', ' I 9 4900 4? - .200 40 70, 00 4' t,.?00 .0 99',00 l-, 102,00 0,000 1! 0.0 ") 7',900 "' 94,000 l0 120,00 70 127,100 70 10, 00 70 19,700 70 Appialugi ii:l e , 0 49,100 47 ,00 40 79.!00 4' 94,l00 5! 99,00 >'. 10 ,.0 ' 10!,000 55 "x ..owi r I i <i.. 'j4m) .' 4,90 4 ', 40 1,00 20. 9-0 1 ? 0, 400 17 -,000 19 46,00 4 bl Us,,>ing, to-is. 9-0 1 ' ,1.0 9l ',100 '9 57,0:0 9 109,(00 i5 190,1)0 .0 1¯9, 00 O 19 ,000 .0 i< .i a I i - I I1 0 ' O '/,100 . 40,000 l'1 4',,.00 1H :",',,00 ?1 '9,9>00 21 > 00 2 >(7,400 '> --p I..i 0 9 .0 9 : ,''11 M11, 9go o0, 0 - ,o00 i i 7,00 14 41,71,0 1 MALI INTEGRATED RURAL DEVELOPMENT PROJECT Pro ject Completion Report ircremental Production Induced by the Pro ject (Estinated at appralsal) 1 972 1973 /74 19(475 1975 76 1976/77 1977/7R 1978/79 1979/80 Pre-Project PYI PY, PY3 PY4 PYS (PY6) (PY') al rGroIunounutsý Are (ha) 1 tliet¯ ro ject 99,100 10',700 135,200 1 700 1,400 159,000 159,000 159,000 With Proieet - 104,600 138 100 156,00 172,400 121,600 186,950 191,050 Wi t hout 'ro jec t 7- 71 97 697 670 6,7 667 66!7 W i i I'i je' t1 720 Pl 277 P9 295 295 Produl i on ( ros) Witilorlit 'ret 7. 0 7,430 94,170 100, 920 104,770 106,(0 106,070 106,070 Witi Irolject 2,900 107,(90 127,750 151,250 162,500 167,25 170,955 ncremental Productin 7,470 13,520 26,W30 46,480 56,430 61;215 64, R5 bl CerueasI Area hi-) Wil ,ri rolt 111,000 11 ,750 23, 920 242, 320 247, 950 253, 450 253, 450 253,450 Witl Proeel 116. 750 234.300 244,900 255,200 26650 266 , 470 269,900 Avereage Y i el d ()?g/ha) W i tit ' r jecr ) h ? 626 6?4 624 623 623 623 W i thi ro e 667 6ss 662 625 703 717 720 Il rodlc t i O (-t onS) Witlhuit Project 74,3 10 75, 920 146,510 151, 320 154,700 152, 000 158,000 152, 000 With I'rojeel 77,4"1 1S3,AO 163,535 174,720 15.255 191,135 194,35 Inr. wlt ;l Product ion 1,90 7,020 12,2 1 20,020 27,255 33, 135 36,355 ANNEX 3 Page 1 MALI INTEGRATED RURAL DEVELOPMENT PROJECT Project Completion Report Incremental Production 1. Determination of incremental production is made difficult, in the case of OACV, by two factors: - the weakness of data regarding cultivated area and yields; and - the fact that the project area expanded by close to 40% during the project period. For cereals, data on both pre-project areas and yields, and therefore also for incremental areas and yields, are very weak. The extraordinary increase registered by OACV reflects, most probably, an increasing concern with, and attention to, the cereals aspect of OACV. 2. Development of total groundnut production and marketing is summa- rized in Table 2. The main changes in project area during the project period were: - inclusion of Segou province (zone 5) in 1975/76 with an estimated area of 50,800 ha and 34,000 tons of groundnuts; - inclusion of Kenieba sector to Kayes/Bafoulabe (zone 1), with an estimated area of 6,000 ha and production of 4,500 t. These estimates are approximate. A small part of zone 5 was integrated in 1974/75 already but this had to be neglected because of lack of details. Figures of Table 2 were adjusted by adding the above-mentioned production and area figures to the years preceding integration into OACV (Table 1). Fortunately, marketing data for production outside OACV are available for 1972/73 and 1973/74; thus, marketed production could also be adjusted to a constant area. 3. The resulting incremental production is still a very rough order of magnitude because: - it depends on the quality of OACV's and the Evaluation Unit's area and yield data; wherever they differ, the (lower) Evaluation Unit's figures have been used from 1975/76 onwards 1/; 1/ No Evaluation Unit data available for earlier years. - 50 - ANNEX 3 Page 2 - it is assumed that without the project total production would remain unchanged, which is questionable at least for the medium-term effect of improved seed, fertilizer, and extension advice; and - the base year data (1972/73) is an estimate derived from marketing data and intrapolation between 1971/72 and 1973/74. For these reasons incremental production as given in Table 2 must be regarded as an upper limit. 4. An alternative estimate was derived on the basis of documented extension and input supply activities of OACV. Each of these actions (dis- tribution of improved seed, of fungicides, of fertilizer, and of equipment; propagation of high-density sowing) was linked to incremental production estimates as shown in Table 1 of Annex 2. The same approach was used for cereals (with the after-effect of groundnut fertilizer as an additional item). The result is shown in Table 6. For groundnuts, incremental production is much lower than in Table 2, but also more stable. For cereals, it is the only estimate available as reported increases in area (Table 5) are quite improbable. MALI INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Development af Groundnut Cultivation in OAgV Area _196'/68 1978/ 9 67/68 68/69 69/70 70/t 71/72 72/73 73/74 74/75 75/76 76/77 77/78 78/79 - Project Period - Area 1 Kayes/Bafoulab6 20.2 (27) 34.8 34.4 33.0 27.3 2 Kita 31.0 (40) 418 40.1 45.9 42.2 3 Kolokani 17.2 (18) 19.0 18.2 16.6 18.0 4 Koulikoro 10.8 (15) 18.4 17.6 16.6 5.6 5 Segou - ('7) 56.4 54.1 40.0 27.1 Total 46.2 51.0 75.0 102.6 92.4 (86) 86.2 107.3 170.5 164.4 152.1 120.1 Production I Kayes/Bafoulab4 15.2 (22) 31.0 34.7 27.4 24.0 2 Kita 35.1 (42) 46.0 47.2 40.p 40.7 3 Kolokani 11.1 (16) 19.0 21.0 12.3 13.4 4 Koulikoro 5.2 (12) 16.7 17.8 5.4 3.4 I 5 Segou - (5) 37.8 39.7 16.9 19.5 Total 17.8 24.0 56.5 68.5 75.0 (69) 66.6 96.0 150.6 160.4 10P.4 100.9 Marketing 1 Kayes/Bafoulabi - - 3.3 6.2 9.1 7.2 9.2 12.2 15.7 16.4 9.3 9.0 2 Kita 3.8 8.3 16.3 21.3 22.2 27.9 25.3 27.6 32.3 33.5 23.8 18.0 3 Kolokani 3.7 3.6 9.0 9.6 8.2 4.6 4.4 9.3 12.2 11.5 4.3 3.2 4 Koulikoro 3.0 2.6 5.8 8.9 4.5 1.8 1.2 5.5 7.9 7.4 0.6 0.2 5 Segou - 5.4 10.3 8.0 2.3 3.9 Total 10.5 14.4 34.4 46.1 44.0 41.4 40.2 60.1 78.5 77.0 40.3 34.2 1 Kayes/BafoulabI 750 (800) 778 1,009 830 84! 2 Kita 950 (1,050) 1,100 1,177 876 u60 3 Kolokani 647 (900) 1,000 1,155 756 60 4 Koulikoro 478 (800) 908 1,009 325 600 5 Segou - (700) 648 575 421 720 Average 385 470 753 688 812 (800) 784 900 880 976 673 84O ) = estimate MALI INTEGRATED RURAL DEVELOPMENT PROJECT Project Completion Report Estimated Incremental Production of Proundnuts, 1972/73 - 1978/79 72/73 73/74 74/75 75/76 76/77 77/78 78/79 --------------- Project Period -------------- OACV Area under groundnuts, unadjusted (1,000 ha) 1/ 86.2 86.2 107.3 170.5 164.4 152.1 120.1 Adjustment Segou/Reni6ba 56.8 56.8 56.8 - - - Groundnut Area Adjusted 144.0 144.0 164.1 170.5 164.4 152.1 120.1 OACV groundnut production unadjusted (1,000 t) 1/ 69.0 66.6 96.0 150.6 160.4 102.4 100.9 Adjustment Segou/Kenigba 38.5 38.5 38.5 - - - - Groundnut production adjusted 107.5 105.1 134.5 150.6 160.4 102.4 100.9 Ln Marketed groundnuts OACV (1,000 t) 41.4 40.2 60.1 78.5 77.0 40.3 34.2 Adjustment 1972/73 and 1973/74 2/ 8.5 3.9 - - - - - Marketed groundnuts, adjusted 49.9 44.1 60.1 78.5 77.0 40.3 34.2 Marketed production in % 46 42 45 52 48 39 34 Incremental Area (1,000 ha) 0 21.1 26.5 20.4 8.1 -23.9 Incremental Production (1,000 t) -2.4 27.0 43.1 52.9 -5.1 -6.6 Incromental Marketed Production (1,000 t) -1.2 18.7 37.1 35.6 -1.1 -7.2 1/ Table 1. 2/ OACV, Compte Rendu de la Campagne 1973/74, P. 84. M t>, IA LI INTEGRATL) RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Selected Economic Indicators for Pro ect Period 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 Producer Prices (FM/kg) CroundloL 30 30 40 40 45 50 Millet/Sorghum/Maize 20 20 32 32 32 36 Price ratio groundnuts cereals 1.50 1.50 1.25 1.25 1.41 1.39 Index of Producer Prices Crounidnuts 100 100 133 133 150 167 Cureatu 100 1.00 160 160 160 180 LO ComiposIite Index of Input and E<ulpment Prices 1/ 100 100 135 167 178 180 (Equ i pment) (100) (100) (100). (144) (231) (231) (Seed) (100) (100) (159) (188) (188) (188) (Pertilizer) (100) (100) (100) (112) (111) (121) Consumer Prices (Food) 2/ Controlled (Cooperatives) 100 110 132 161 178 196 Uncontrolled (Markets) 100 128 1.33 140 150 188 Average . 100 119 133 150 164 192 1/ Prices to OACV farmers, weighed with PY3 sales values. The Index Includes toolbars, seeders, carts, stiperphosphate, and improved seed. 2/ Official statistics. For 1972/73 agricultural year, the 1972 prices were used as these influeice 1972/73 decisions of farmers, and correapondingly for subsequent years. - 54 -. ANNEX 3 MALI Table 4 INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Development of Improved Production Methods, 1972/73 - 1977/78 PYO PYl PY2 PY3 PY4 PY5 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 Total Areas (1000 ha) Improved Seed Groundnuts 15.1 19.3 21.8 60.7 69.0 40.9 Cereals - - - 5.5 3.5 2.4 Fungicides Groundnuts 20.7 33.5 36.1 51.6 38.8 52.2 Cereals 17.4 15.0 37.3 44.7 35.1 53.1 Fertilizer Groundnuts 30.4 40.3 36.3 52.9 39.2 50.4 Cereals - - - 2.2 0.8 3.1 Ox-drawn Cultivation 1/ 8.0 15.4 20.0 27.2 32.9 39.7 High Density Sowing 2/ 24.9 18.8 23.6 27.3 29.6 21.3 Incremental Areas (1000 ha) 3/ Improved Seed Groundnuts 4.2 6.7 45.6 53.9 25.8 Cereals - - 5.5 3.5 2.4 Fungicides Groundnuts 12.8 13.4 30.9 18.1 31.5 Cereals - 19.9 27.3 17.7 35.4 Fertilizer Groundnuts 9.9 5.9 22.5 8.8 20.0 Cereals - - 2.2 0.8 3.1 Ox-drawn Cultivation 7.4 12.0 19.2 24.9 31.7 High Density Sowing - 2.4 4.7 - 1/ Until and including 1972/73, OACV distributed 1,328 toolbars. Assumed area covered per toolbar = 6 ha, comprising both cereals and groundnuts. For allocation between groundnuts and cereals see Table 6 , footnote 2. 2/ Groundnuts only. 3/ Assuming that without the project all areas would remain at PYO level. - 55 - ANNEX 3 Table 5 MALI INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Appraisal Estimate and Reported Increase in Cultivated Area in OACV (1,000 ha) Appraisal Estimate Reported by OACV Estimated by Evaluation Unit PYO PY5 PYO PY5 PYO PY5 a) OACV area under groundnuts 99.6 96.0 86.4 2/ Correction for areas added to OACV subsequently 1/ 26.0 50.8 45.7 2/ Total Groundnut Area 125.6 181.6 144,8 152.1 132.1 143.8 b) OACV area under cereals 114.0 114.0 96.9 2/ Correction for areas added to OACV subsequently 1/ 114.3 145.0 123.3 2/ Total Cereals Area 228.3 263.7 259.0 426.6 220.2 331.3 Total Cultivated Area 353.9 445.3 393.8 578.7 352.3 475.1 Average Annual Increase (%) 4.7 8.0 6.2 - of which groundnuts (7.7) (1.0) (1.7) - of which cereals (3.0) (10.5) (8.5) Rate of Rural Population Increase (%) 3/ 2.2 2.2 2.2 1/ The area reported for 1975/76, the year of entry into OACV, was used without correction for PYO. If a correction had been made for increases over these 3 years, the base year figures would have been lower and the apparent increase in cultivated area even higher than shown. 2/ EU estimates are 10% lower than OACV estimates for groundnuts, and 15% for cereals. These results, based on surveys in PY4 and PY5, were applied to base year estimates as well. 3/ Estimate. - 56 - ANNEX 3 MA.LI Table 6 INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Estimated Incremental Production of Groundnuts and Cereals 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 a/ 1979/80 etc. PY1 PY2 PY3 PY4 PYS A. Groundnuts Increm. Area (1000 ha) 1/ Improved seed 4.2 6.7 45.6 53.9 25.8 27.5 27.5 Fungicides 12.8 13.4 30.9 18.1 31.5 21.5 21.5 Fertilizer 9.9 5.9 22.5 8.8 20.0 8.2 8.2 High density - - 2.4 4.7 - - - Deep ploughing 2/ 2.6 4.2 6.7 7.5 7.9 8.4 13/ 8.9 13/ Increm. Production (1000 t) Improved seed 3/ 0.4 0.7 4.6 5.4 2.6 2.8 2.8 Fungicides 4/ 0.6 0.7 1.5 1.9 1.6 1.2 1.2 Fertilizer T/ 2.5 1.5 5.6 2.2 5.0 2.1 2.1 High density 6/ - - 0.5 0.9 - - - Deep ploughing 7/ 0.5 0.7 1.2 1.3 1.4 1.5 14/ 1.6 14/ Total Increm. Production 4.0 3.6 13.4 11.7 10.6 7.6 7.7 14/ B. Cereals Increm. Area (1000 ha) 1/ Improved seed - - 5.5 3.5 2.4 1.5 1.5 Fungicides - 19.9 27.3 17.7 35.4 28.2 28.2 Fertilizer direct - - 2.2 0.8 3.1 4.8 4.8 Fertilizer after-effect 8/ - 9.9 5.9 22.5 8.8 20.0 8.2 Deep ploughing 2/ 4.8 7.8 12.5 17.4 23.8 5.4 15/ 27.0 15/ Increm. Production (1000 t) Improved seed 9/ - - 0.6 0.4 0.2 0.2 0.2 Fungicides 10/ - 1.8 2.5 1.6 3.2 2.5 2.5 Fertilizer direct 11/ - - 0.5 0.2 0.8 1.2 1.2 Fertilizer after-effect 12/ - 1.5 0.9 3.4 1.3 3.0 1.2 Deep ploughing 7/ 0.8 1.3 2.2 3.0 4.2 4.5 16/ 4.8 16/ Total Increm. Production 0.8 4.6 6.7 8.6 9.7 11.4 9.9 16/ a/ Based on data for 1978/79. 1/ See Table 4. 2/ Share of groundnuts assumed to be roughly proportional to share of area under groundnuts in total cultivated area, i.e. 35% in PY1-3, 30% in PY4, and 25% in PY5 and thereafter. 3/ Increm. area times 100 kg/ha. 4/ Increm. area times 50 kg/ha. 5/ " " " 250 kg/ha. 6/ " " " 200 kg/ha. 7/ " 175 kg/ha. 81 " " under groundnuts in preceding year was used as the indicator. 9/ " " times 100 kg/ha. 10/ " " " 90 kg/ha. 1/ " " " 250 kg/ha. 150 kg/ha. 13/ The area increases by 500 ha a year to reflect the continuing increase in the number of toolbars. The increase levels off after 5 years to reflect beginning replacement needs. 11/ Production continues to increase by 100 tons a year for a period of 5 years. See footnote 13. 15/ The area increases by 1,600 ha a year to reflect the continuing increase in the number of toolbars. The increase levels off after 5 years to reflect beginning replacement needs. 16/ Production continues to increase by 300 tons a year for a oeriod of 5 years. See footnote 15. NB. Yield increases used are those suggested by the Appraisal Report and shown in Annex 2 , Table 1 of this PCR. MALI INTEGRATED PURAL LEVELOP?ENT PROJECT PROJECT OMFLETION REPORT Equipment and Input Use: Apprai8al Estimatee and Actual Development, 1972/73 - 1977/78 pyl PY2 PY3 PY4 PY5 PY5 Actual in Appr. Act. Appr. Act. Appr. Act. Appr. Act. Appr. Act. % of Appr. A. uri?tities of Inputs it) Giroundnjuta kertilizer (t) 3,195 2,176 3,590 2,097 4,585 3,450 6,165 2,550 6,490 3,021 47 F'uI,gicide (kg) 4,830 5,02? 6,070 5,408 7,560 7,736 9,480 5,814 10,980 7,834 71 Improved seed (t) 2,695 1,928 3,610 6,078 if 4,455 6,074 4,950 7,638 5,705 6,326 111 ) Cereals Fertilizer (t) -- - 330 - 119 - 470 n.a. Pungic1de (kg) 905 750 1,675 1,867 2,175 2,234 2,740 1,606 3,270 2,657 81 improvel sce.l (t) - - - 97 - 25 - 22 n.a. B. Cuantities of' Eqjuipment Toolhars 1,SX) 1,098 2,050 905 2,550 1,208 3,100 940 3,750 1,142 30 2eeders i,000 1,126 1,670 887 2,100 1,169 2,570 928 3,o8o 1,149 37 crts 650 120 1,025 180 1,280 980 1,550 1,136 1,875 1,564 83 Loundnut Lifter 400 - 600 - 745 - 930 - 1,125 - 0 hon - - - - - - - - 70 n.a. /' InrIClns ,'0o t of seed donated by EDF. -4a- - 58 -, h- 1 MALI 7NTEGPATID RULÅL DE77LOP AN' PROJECT PROJECT CM2LETION RPPORT Results of Elacksmith Projec C zc-et (Nuzber of Blacksmiths EquiDed) OACV Staze 1 Stage 2 Stage 3 Total 5 9 2 16 II 16 12 6 34 III Il 10 4 25 .L 20 25 2 47 v 17 9 6 32 otal 69 65 154 ÄDOpra:sal Target 348 261 38 647 -59 - MALI ANNEX 4 Table 2 INTEGPATED PUPAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Achievements of the Feeder Road Unit (km) 1 1973/74 II 1974/75 111 1375/76 IV 1976/771 V 1977/7ts Total Sectors 0 1/ M 2/ 0 i 0 M 0 =M M 0 Im Kayes 78 25 75 78 100 Kenieba 20 50 50 30 100 50 Bafoulab 100 70 50 65 55 75 165 Rita 50 200 50 75 65 50 65 325 Kolokani 36 67 47 53 36 167 Koulikoro 65 65 Banamba 35 35 70 Segou 50 92 142 Monimpt 80 80 Sano 30 30 San 53 53 Tominian 100 50 36 186 Total - 184 4521170 530 1115 165 85 286 554 1433 1,987 km Appraisal Estimate' 1,500 km 1/ Road opening. 2/ Road maintenance Source: OACV - November 1978 MALI INTEGRATED RURAL EEVELOPMENT PROJECT PROJECT COMPLETION REPORT Summary of Livestock Project Activities Sector Kayes Kenieba Bafoulabe Kita Kolokani Banamba Koulikoro Segou San Tominian Vaccinations - Rinderpeat 72,308 6,175 4,920 - 18,450 3,725 1,346 10,908 22,895 2,630 - Peripneumonia 71,100 9,858 11,437 39,418 18,450 3,725 1,167 10,908 22,895 7,502 - Pasteurella 53,792 - 2,612 5,624 1,577 - 582 - - - - l3ackquarter 9,934 2,064 861 3,154 223 - 170 - - - - Anthrax - - - - 172 - - - - - Anti-parasite treatments ON - Internal 586 189 1,065 840 1,071 1,070 2,811 2,865 474 1,983 C - External 35 - 5 24 6 95 120 26 714 815 Clinical treatmwnts - General 30 - 1 42 102 740 95 1,062 262 118 - Ca5tration5 85 52 45 129 349 219 19 144 251 580 Feeding - Number of cattle 264 13 87 889 1,354 1,566 789 1,493 198 643 - Hectares of fodder crop 105 6.5 46.5 160 110 170 201 201 14 38 - Number of ailage pits 16 5 6 77 60 62 48 117 5 62 'Imallholder fattening (77/78) - Number of fattened cattle - - - - - 104 123 217 - - - Number of particip. farmers - - - - - 43 51 111 - - wl - 61 - ANNEX 5 MAL I INTEGRATED RURAL DEVELOPMENT PROJECT Project Completion Report Project Cost and Financing 1. It is difficult to reconstitute actual project cost because no details are available about the actual amount of counterpart funds provided by Mali. The system of reporting of OACV as well as the annual financial statements and balance-sheets submitted to auditors were not geared to the concept of incremental expenditure used to define key project components (farm inputs, local staff, operating expenditure). This annex deals mainly with the reconstruction of the Malian contributions to project cost. (The disbursements of IDA are summarized in Tables 1 and 2. The FAC contribution of FM 1,259 million was also fully disbursed by the end of the project period. It should be noted that the FAC contribution was fixed in terms of FM.) 2. The contribution of Government and of project farmers will be discussed under four headings: - construction and equipment, - incremental local staff and operating cost, - incremental groundnut seed, and - incremental farm inputs and equipment. The latter two will require more detailed examination. 3. According to data supplied by OACV, the Malian contribution toward the cost of buildings (excl. taxes) was FM 169.1 million, which is equivalent to US$357,000 at the (weighted) average exchange rate. Starting from the Association's disbursement of US$1.203 million, which is equivalent to 70% of net of tax costs, the Malian 20% ought to have been US$343,000. The small difference can be explained by deviations of the actual exchange rate from the average rate used here. 4. The Association disbursed 100% of the foreign exchange cost of vehicles purchased under the project. No information about local costs is available. An estimated 15% of border costs was imputed for the Malian contribution (i.e. about 10% for dealer's services and 5% for transport from the border to final destination). This amounts to US$140,000 or FM 66.3 million. 5. In the case of incremental local staff and operating cost, the amount contributed by Mali must be deduced from the IDA disbursements: - 62 - ANNEX 5 Page 2 (a) for local staff, 9% of US$453,000= US$58,000 1/ 0.70 (b) for operating cost, 8% of US$2,394,000=US$266,000 1! 0.72 At the weighted average exchange rate, these amounts correspond to FM 27.5 million and FM 126.0 million, respectively. 6. Total and incremental quantities of equipment and farm inputs (incl. improved seed) are at Table 3. We shall first examine the financing of incremental quantities of improved groundnut seed (Table 4), in which IDA participated only as from PY 2. (Project activities in PY 1 had been financed by FAC). Accordingly, incremental quantities are defined as those exceeding quantities in PY 1. It appears from Table 4 that IDA financed more than total incremental cost of improved seed because (a) the cost figure of FM 84/kg advanced by OACV proved to be higher than actual cost as established by OACV accounting services in 1979; only in 1977/78 (when there were no incremental quantities of seed and thus no disbursements) did the actual cost exceed the figure of FM 84/kg; (b) in PY 4, OACV expected to distribute 8,530 tons and claimed reimbursements for the corresponding incremental quantity. Accord- ing to subsequent supervision missions, only 7,638 tons were actually distributed. As a consequence, total IDA disbursements exceeded actual cost by 90 million (US$200,000), and Government's contribution is negative. A corrollary finding is that IDA did de facto finance the subsidy element in incremental seed distributed amounting to FM 40 million (US$100,000). 7. However, the real financing needs for incremental seed were not those shown in Table 4, which was constructed according to the Bank's standard methodology. What is left out, in our calculation of incremental input financing needs, is the incremental financing required for cost increases affecting the non-incremental amounts. In the present case, these needs amount to FM 90 million 2/ - which by coincidence is exactly equal to excess disbursements identified in the preceding paragraph. In this project, the impact of the omission was minor because the initial level of seed distri- bution was low but wherever a project builds on a substantial level of 1/ See Table 1 of this Annex and Table 1 of Annex 13 of the Appraisal Report. 2/ This amount consists of FM 53 million for the financing of the 1928 tons distributed in PY 1 (FM 78,200 - 50,9000 x 1,928 t, plus the incre- mental financing needs of incremental amounts distributed in PY 2 and PY 3, respectively. -63 - ANNEX 5 Page 3 pre-existing input distribution, appropriate arrangements should be made for these financing needs in order to avoid financial bottlenecks in times of high inflation rates 1/. 8. Since farmers are supposed to repay improved seed at the end of the season and Government is responsible for the subsidy element, OACV ought to have had, at the end of the project, a working capital equal to IDA's disbursements for seed plus the 10% contribution of 0ACV itself, i.e. some FM 550 million. The amount which ought to be still available at the end of the project can be smaller than this amount for the following reasons: - because Government did not pay the subsidies (FM 40 million); - because OACV did not make its own contribution (FM 50 million), and - because of arrears in farmers' repayment of seed credit. The total for the latter item is not available but is unlikely to amount to the residual FM 450 million. There is no working capital for seed pur- chases left, however, as OACV in the financial crisis of recent years has used up all available liquid assets. It would be preferable, in future projects, to term the financing of incremental inputs "financing of a working capital for incremental inputs" to make it clear that what the Association ultimately finances is not a recurring cost (inputs) but a capital asset since incremen- tal inputs are ultimately paid for by farmers (abstracting from defaults and arrears). Also, the continued existence of this asset, as it builds up over the project years, should explicitly be made the object of the annual audit examination. 9. Table 5 shows incremental distribution of equipment, fungicides and fertilizer to OACV farmers. These means of production are distributed through SCAER at subsidized prices. The subsidy element is to be recovered through a levy on marketed groundnuts. The total amount of incremental equipment and inputs distributed is small; fertilizer accounts for two thirds of it. Total subsidies amount to FM 353 - 220 = FM 133 million (US$300,000) over the project period. At the same time, the amount recovered through the SCAER levy of the groundnut price schedule was FM 291 million, or more than twice the subsidy received 2/. Thus, Government's contribution was negative here as well. 1/ Elaborate arrangements for the financing (by Govt.) of cost increases for non-incremental inputs have been made in the recent Dosso Agricul- tural Development Project in Niger, for instance.(Report No. 2493-NIR) 2/ In PY 2, the incremental marketing volume (net of seed requirements) was 15,200 tons; in PY 3, 17,400 tons. The levy was FM 8,930/ton and F1 8,936/ton, respectively. - 64 - ANNEX 5 Page 4 10. This result prompts a similar calculation for total (rather than incremental) quantities of groundnuts marketed. This is presented in Table 6. It appears that over the project period subsidies amounted to FM 488 million (just over US$1 million) while four times as much, FM 1.9 billion (US$4 mil- lion) were recovered from farmers under the title of subsidy financing. Thus, apart from the various export taxes levied on groundnuts, OACV farmers made additional substantial contributions to Government finances. (It is immate- rial, in this context, that OACV did not pass on these receipts to SCAER but used it for recurrent expenditure; SCAER is now the largest creditor of OACV.) 11. For a summary of project financing, the following assumptions are made: - Government's contribution to the project is limited to the items discussed in para. 3-5, which amount to a total of US$821,000 or FM 380 million, minus the IDA excess payment for seeds mentioned in para. 6 above. The net contribution is therefore FM 290 millionl/. - Farmers' contribution is equal to the value of incremental inputs and equipment at prices paid by farmers, i.e. FM 220 million for SCAER-delivered items, FM 381 million for incremental groundnut seeds 2/, and FM 4 million for small quantities of improved cereals seeds, or a total of FM 605 million or US$1.308 million. (Arrears in credit repayment are left out of account since no records are available to the Association; any arrears would decrease the amount of farmers' participation and increase Government's share cor- respondingly.) This yields the following summary table which compares actual financing of project activities with the original financing plan: 1/ Deduction of the US$3 million collected for subsidy recuperation in excess of subsidies given to OACV farmers would turn Government's contribution into a negative value. Although such a treatment would also be admissible it was not used here; rather, the excess levies are regarded as a supplementary tax levied on OACV farmers, comparable to the various export taxes which ultimately are also borne by farmers. 2/ For farmers' contribution, of course, incremental amounts include PY 1. Prices paid by farmers for improved seed were FM 34.5/kg in PY 1, FM 55/kg in PY2 and FM 65/kg thereafter. - 65 - ANNEX 5 Page 5 Appraisal Actual FM US$ FM US$ Million 1000 % Million 1000 % IDA 4,000 8,000 43.2 3,790 2/ 8,000 63.2 FAC 1,259 2,518 13.6 1,259 2,722 3/ 21.5 Govt. 2,148 4,296 23.2 290 627 3/ 5.0 Farmers 1,857 4/ 3,714 20.0 605 1,308 3/ 10.3 Total 9,264 18,528 100.0 5,944 12,657 100.0 1/ Exchange rate FM 500/$. 2/ Exchange rate weighted with IDA disbursements in each year: FM 473.7/$. 3/ Average exchange rate over project period FM 462.5/$. 4/ The initial project cost contained an item for bodies of ox-carts to be built by local artisans and entirely paid by farmers. Since no infor- mation is available on this item, the original project cost of FM 9,471 million was reduced by this item (FM 207 million including contingencies) and is now, for the sake of comparison, FM 9,264 million. MALI INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Planned, Revised and Actual Disbursements Cr. 491-MI.1 Allocation in Reallocation Reallocation Actual Disbursement Cate ety Vescript ion Credit Agreement % per 1/25/78 % per 4/28/78 per 6/50/78 I Vehicles and graders required 795,000 9.9 1,100,000 15.8 951,107 11.6 931,107 11.6 tor the purposes of the project Incremental cost of groundnut 208,000 2.6 700,000 8.8 1,214,827 15.2 1,078,794 15.5 improved seeds Construction of buildings and 1.352,600 16.9 650,000 8.1 1,084,752 15.6 1,20),579 15.0 project lacilities 4 Expatriate staff, salaries 1,721,000 21.5 1,721,000 21.5 1,686,464 21.1 1,707,539 21.5 and consultants' services Consultants' services under 90,000 1.1 200,000 2.5 254,991 2.9 250,996 2.9 part D(b) of the project, and accounting services Incremental local staff 807,000 10,1 807,000 10.1 45, 955 5.7 455,941 5.7 sala,ries0" Iu(remental operating costs 1,657,000 20.5 1,637,000 20.5 2,595,946 50.0 2,594,444 50.0 1 Coust ruct ion of B1amaloo H1Q 1/ 700,000 8.8 - Illoillonted 1,589,000 17.4 484,600 6.1 - To tal 8, 000,000 100 8,000,000 100 8,000,000 100 8,000,000 100 This category was created to allow, by exception, disbursement of 100% of net of tax costs (against 80% in the case of category 5). Construction of 'he,dqOarters never materialized however. HNtn Nit. AlI I amun .. to io ,iied t o nearest C (D>4 "' L ÅNAN.X 5 - 67- Table 2 MAkLI inte2rated Rural Development Proiect Proiect Comuletion Reoort Disburse=ent Schedule (Cu=ulati4ve) Fiscal Year and Seester Appraisal Actual 1974/75 -st 1,000 200 ,nd 2,300 200 1975/76 ist 3,700 590 2nd 4,900 2,500 1976/76 Ist 5,900 3,400 2nd 6,700 4,200 1977/78 1st 7,200 6,200 2nd 7,700 8,000 1978/79 ist 8,000 2ud - - 68 - MALI ANNEX 5 INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Development of Equipment Use and Input Distribution in OACV area, 1972/73 - 1977/78 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 PYO PYl PY2 PY3 PY4 PY5 Total Quantities A. Equipment (No.) Toolbar 694 1,098 905 1,208 940 1,14Z Seeder 523 1,126 887 1,169 928 1,149 Cart 599 120 180 980 1,136 1,564 Hoe - - - - - 70 B. Fertilizer (t) Superphosphate, simple 1,978 2,176 2,097 3,440 2,550 3,021 Urea 110 39 157 Phosph. of Ammonia 220 78 313 C. Fungicide (1000 bags) Groundnuts 20.7 33.5 36.1 51.6 38.8 52.2 Cereals 17.4 15.0 37.3 44.7 35.1 53.1 D. Improved Seed (t) Groundnuts 1,580 1,928 6,078 1/ 6,073 7,638 6,325 Cereals - - 26 97 25 22 Incremental Quantities A. Equipment (No.) Toolbar 404 - 110 - - Seeder 603 - 43 - - Cart - - 381 156 428 Hoe - - - - 70 B. Fertilizer (t) Superphosphate, simple 198 - 1,264 - - Urea - - 110 - 47 Phosphate of Ammonia - - 220 - 93 C. Fungicide (1000 bags) Groundnuts 12.8 2.6 15.5 - 0.6 Cereals - 19.9 7.4 - 8.4 D. Improved Seed (t) Groundnuts 348 250 2/ 3,895 1,565 Cereals - 26 71 - - 1/ Including 3,900 c of seed donated by EDF. 2/ Excluding the 3,900 t donated by ZDF. - 69 - ANNEX 5 Table 4 MALI INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Distribution and Financing of Incremental Groundnut Seed PY 1 PY 2 PY 3 PY 4 PY 5 Total Total Quantity of Seed Distributed (t) a) Actual 1,928 2,178 6,073 7,638 6,325 b) Claimed by OACV 1,928 2,178 6,073 8,530 6,325 Incremental Quantity of Seed Distributed as from PY 2 1/ a) Actual 250 3,895 1,565 - 5,710 b) Claimed by OACV 250 3,895 2,457 - 6,602 Cost per Ton as Claimed by OACV (FM 1,000) 84.0 84.0 84.0 84.0 IDA Disbursement per Ton (90% of Cost), FM 1,000) 75.6 75.6 75.6 75.6 Total IDA Disbursement (FM Mill) 18.9 294.5 185.7 - 499.1 2/ Actual Cost per Ton acc. to OACV accounts (FM 1,000) 3/ 67.4 69.3 78.2 87.0 Total Actual Cost of Increm. Seed (FM million) a) Actual Quantities 16.9 270.0 122.4 - 409.3 b) Quantity Claimed by OACV 16.9 270.0 192.1 - 479.0 Disbursements Due for Increm. Improved Seed a) Actual Quantities and Cost 15.2 242.3 110.1 - 367.6 b) Quantity Claimed by OACV 15.2 242.3 172.9 - 430.4 Net Government Contribution a) - 89.8 4/ b) - 20.1 4/ 1/ IDA participated in the finarcing of increm. seed only as from PY 2. / This amount is identical witn the amount in US$ disbursed for seed (Table 1) at an exchange rate of FM 462.5 per US$, which is the average exchange rate over the project pari,:c. 3/ Detailed breakdown of cost (including treatment, redistribution, and amortization of equipment) is at West Africa Files. 4/ Total actual cost minus IDA disbursement. - 70 - ANNEXn Table 5 ITSRA'EJ RURAL JVELCPN' P ECT PRUGECT C'MPIXTION REPMI Val. of Lorereotal Equ0pmeot and Inputa: C.st to SCAER and Aroera, 973/74 - 1977/78 1973/74 1974/75 1975/76 1976/77 1977/78 PRUJECT TRIOD 1PRIM Te PRICZ To PR IE TM PRICE 1C PRICE TO PR!I=- FIR SI _håk ____ä_____ FARER FRl5 $çAg FAMtS gg FARM(la §g4j FA2R SCAE5 FAIR2RS &fl A. Equteoent a) Tooloaro Numler 404 110 514 unit Coat (FN 1,000) 30.0 48.o 43.2 60.0 Total Valu. (FK Mill.) 12.1 19.4 4.8 6.6 16.9 26.3 b) 3..der Numbr 603 43 646 Uit Cott (FM 1,00) 18.5 28.0 26.6 41.0 Total Valut (fM mill.) 11.1 16.9 1.1 1.8 12.2 18.7 e) Cart. Number 381 156 428 965 Unot Coot (FM 1,000) 47.2 54.c 64.7 74.0 64.7 (80.0) Total Valat (FM mill.) 18.0 20.6 10.1 11.5 27.7 34.2 55.8 65. d) H oa Number 70 70 Unit Cott (IN 1,000) 66.2 (70.0) Total Valu. (Pk moll.) 4.6 4.9 . 4.6 4.9 Total Vala. Equp..nt -2 - - Q3 2- 1.1 U g 89 U i.9 fl. Fertiltoer o) Soprrchahate hae Quantjty (t) 198 1,264 1,462 Unot coat (N 1,000) 53.8 (55.0) 60.5 94.7 Total Valu. (F4 Mill.) 10.7 10.9 76.5 119.7 87.2 130.6 b) Oroa quantity (t) 110 47 157 Unit coat (FIN 1,000) 93.5 24-6.5 92.0 139.4 Total valu (FN mill.) 10.3 27.1 4.3 6.6 14.6 33.7 ) Sul2phte of A-. Quantity (t) 220 93 213 Unit cot (FN 1,000) 60.5 250.5 95.0 137.7 Total Value (IN mill.) 13.3 55.1 8.8 12.8 22.1 67.9 Total Valuo Fortilizer 10.7 10.9 1001 P0. 13.1 94 12 - 2 2. C. Fungoidea a) Grouadnuts Qantity (1,000 bags) 12.8 2.6 15.5 ..6 31.5 Unit Cost (Fl) (150) (100) (150) (100) (150) (100) (150) (100) Total vala, (4 mill.) 1.9 1.3 0.4 0.3 2.3 1.6 0.1 0.1 4.7 quantity (1,000 laga) 19.9 7.4 8.4 35.7 Unit cott (FM) (50) (33) (50) (33) Tota Valu. (Fl .ill.) 1.0 0.7 0.4 0.2 0.4 0.3 1.8 1.2 Total Valu. Fungicides 1j L:i 4 1.0 7 1.8 2-4 6t4 Ttal Valu of Increm. Equipant and Input. / 7Ž2 2 L2.1 ;¾ 2 212 MJ2 M--- z/ xclugng e. ( a ate. - 71 - ANNEX 5 MALI Table 6 INTEATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Subsidies on Equiment and Inputs Distributed to OACV Farmers. 197304- 197778, and Recuperation of Subsidies '973/74 1974/75 1975/76 1976/77 1977/78 Project Period Toolbars Number 1,098 905 1,208 940 1,14? Unit Subsidy (FM 1,000) 18.0 23.0 16.8 22.6 24.7 Subsidy (FM mill.) 19.8 20.8 20.3 21.2 28.2 110.3 Zeeders Number 1,126 887 1,169 928 1,149 Unit Subsidy (FM 1,000) 9.5 13.5 14.4 - 6.o Subsidy (FM mill.) 10.7 12.0 16.8 - 16.9 c6.4 Carts Number 120 180 980 1,136 1,564 Unit Subsidy (FM 1,000) (6.1) 6.1 6.8 9.3 15.3 Subsidy (FM mill.) 0.7 1.1 6.7 10.6 23.9 43.0 Hoes Number 70 Unit Subsidy (FM 1,000) (13.8) Subsidy (FM mill.) 1.0 1.0 Superohosphate Tonnage 2,176 2,097 3,440 2,50 3,021 Unit Subsidy (FM 1,000) 1.2 6.2 34.2 11.4 14.0 Subsidy (FM mill.) 2.6 13.0 117.6 29.1 42.3 204.6 Urea Tonnage 110 39 157 Unit Subsidy (FM 1,000) 153.0 20.0 47.4 Subsidy (FM mill.) 16.8 0.8 7.4 25.0 Sulphate of Amm. Tonnage 220 78 313 Unit Subsidy 190.0 72.0 42.7 Subsidy (FM mill.) 41.8 5.6 13.3 60.7 Groundnut Fungicide Number of bags (1,000) 33.5 36.1 51.6 38.8 52.2 Unit Subsidy (FM) -50 -50 -50 -50 -50 Subsidy (FM mill.) -1.7 -1.8 -2.6 -1.9 -2.6 -10.6 Cereals Fungicide Number of bags (1,000) 15.0 37.3 44.7 35.1 5-.1 Unit Subsidy (FM) (-17) (-17) (-17) (-17) (-17) Subsidy (FM mill.) -0.3 -0.5 -0.7 -0.5 -0.8 -2. Total Subsidies (FM mill.) 44.6 216.7 64.9 129.6 Groundnuts Marketed (net of seed req.), 1,0co t 38.3 55.0 72.4 70.4 34.0 Levy for SCAER (FM/ton) 2,000 8.930 8,936 5.000 10,0Cc Total Receints for SCAE SubsiJies iTM mill.) 76.6 401.2 647.0 02 .LL 1,906.3 Net Contribution by OAC1 Farmers to -3CAZR (FM mill.) 1446.6 40.7 287.1 ll.L MALI INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Development of OACV Operating Fxpenditure, 1972/73 1978/79 (FM Million) 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Pre-Project Post-Project Malian Staff 226 258 276 545 692 715 Op. Cost other than Transport 200 462 566 1,295 1,389 1,065 Transport 23 40 366 340 648 313 Management + Overheads 36 34 56 150 148 112 Various Taxes 1/ 5 4 1 3 18 69 Total 2/ 490 798 1,265 2,333 2,895 2,274 (2,000) Marketed Groundnut Production (1000t) 41.4 40.2 60.1 78.5 77.0 40.3 34.2 Seed Requirements (1000t) (4,0) (4.5) 5.8 9.2 8.5 8.4 6.2 Net Marketed Production (1000t) 37.4 35.7 54.3 69.3 68.5 31.9 28.0 Operating Expenditure per Net Ton Marketed (FM1000/t) 13.1 22.4 23.3 33.7 42.3 71.3 71.4 Producer Price (FM1000/t) 30.0 30.0 40.0 40.0 45.0 50.0 60.0 OACV Cost in % Producer Price 44 75 58 84 94 143 119 1/ Excluding export taxes and ORSP levies. 2/ Without depreciation. - 73 - ANNEX 7 MALI INTEGRATED RURAL DEVELOPMENT PROJECT Project Completion Report Economic Analysis A. Benefits 1. For groundnuts, two series of incremental production figures were developed in Annex 3 (Tables 2 and 6). The first series can be interpreted as incremental production induced mainly by market signals, which were favor- able in the mid-'seventies but unfavorable after 1976. The second series (Table 6) can be interpreted as the imputed productivity effects of OACV activities in the project period; incremental production is lower but more stable in this case. Both series will be used alternatively for building a benefit stream but the second is thought to reflect more accurately the project's impact. For cereals, only the second method (explained in Annex 3, Table 6) will be used as no figures of comparable (relative) reliability are available for total and incremental production. 2. Economic prices are derived on the basis of World Bank commodity price recordings and forecasts, and on transport and other cost items acc. to the Malian baremes. B. Costs 3. The production-related part of incremental OACV expenditure has been derived in Table 1, with explanations provided in the footnotes. Incremental farm inputs and equipment have been calculated in Table 2 of Annex 5; an adjustment has been made for EDF-donated seed which has an economic but no financial cost. 4. No opportunity costs of incremental labor were calculated. Most of the imputed production increase is attributable to productivity-raising new inputs (seed, fungicides, fertilizer) requiring minimal amounts of incremental labor input. Most of the incremental labor requirements occur at harvest time, and part of the harvesting operations are handled by women and children with a low opportunity cost. 5. The economic life-time of the project has been set at 15 years, in accordance with appraisal assumptions. C. Results 6. The resulting net benefit streams (Table 2 and 3) are somewhat perverse, with positive figures initially and negative figures later on. The IRR ie not able to deal adequately with these conditions; the resulting economic rates of return are meaningless. The structure of the net benefit flows clearly points to negative returns both in Table 2 and Table 3. MALI INTEGRATED RURAL DEVELOPRENT PROJECT PROJECT COMPLETION REPORT Incremental OACV Operating Cost during and after Project Period (FM Million) PY 0 PY 1 PY 2 PY 3 PY 4 PY 5 (6) Total OACV budget (ex post) 490 798 1,265 2,333 2,895 2,274 2,000 1/ Incremental cost 308 775 1,843 2,405 1,784 1,510 Minus various taxes 2/ (4) (1) (3) (18) (69) (56) Increm. cost adjusted 304 776 1,840 2,387 1,715 1,454 x 0.85 3/ 258 660 1,564 2,029 1,458 1,236 Increu. production- related tech. asat. 4/ - - - - - (230) Increm. production-related OACV expenditure 258 660 1564 2,029 1 08 1,001 1/ Planned for 1978/79. 2/ See Table 1 of Annex 6. 3/ The factor 0.85 reflects the share of directly production-related activitea in total projec- cost and excludW3 all ancillary subprojects (section 11 of summary cost table in AR) with the partial exception of the costs of the track improvement program, of which 50% have been imputed to the project. 4/ Cost of technical assistance in PY 5 (acc. to AR estimate) plus proportionate price contingencies. Only staff coste have been taken into account since operating costs will also accrue for Malian staff replacing rechnical assistants. NALI INTEGRATED RURAL DEVELOPMENT PROJECT PROJECT COMPLETION REPORT Estimate of Economic Rate of Return of the Project Method 1: Imputed Effects of Extension and Input Supply Services 1/ FYI PY2 PY3 PY4 I PY5 PY6 PY7 PY8 PY9 PY10 PY11-15 lIenef1 i Incr. Gronnnuts (100t) 1/ 4.0 3.6 13.4 11.7 w10,6 7.6 7.7 7.8 7.9 8.o 8.0 Econ. Price (FM/kg) 150 78 81 131 120 83 85 87 84 81 80 Incr. Value (FM mill.) 600 281 1,085 1,533 1,272 631 655 679 664 648 640 Incr. Cereals (ooot) 1/ 0.8 4.6 6.7 8.6 9.7 11.4 9.9 10.2 10.5 io.8 10.8 Econ. Price (FM/kg) 85 85 67 61 69 71 80 82 83 84 85 Incr. Value (FM mill.) 68 391 449 525 669 809 792 836 872 907 918 Totl lie fIts 668 672 1,534 2,058 1,941 1,440 1,447 1,515 1,536 1,555 1,558 Costs Jcr. fost of OACV 2/ 258 660 1,.564 2,029 1, 4b8 1,006 1,006 1,006 1,006 1,006 857 Incr. Inputs and Equipment / 65 335 / 699 750 857 857 / 857 857 857 857 857 Total Costs 6/ 325 995 2,263 2,7(9 2,315 1,863 1,863 t,863 1,863 1,863 1,863 lenefits - Costs 6/ 345 -525 -729 -721 -374 -423 -416 -348 -327 -308 -305 Econ. Pol? Ni. The rate of return (156%) is not meaningful. Sensitivity analysis shows, for instance, that the RoR would increase further if the benefits in later project years are decreased. The cash-flow clearly shows an overall negative economic return. See Table 6 of Annex 3. 2/ See Table I above. Derived froa Tables ) and 5 in Annex 5. Includitg tie economic cost of the EDF-donated 3,900 t of seed. 5/ The increm. cost for 1978/79 was calculated from 1978/79 data and is equal to the figure for PY5 by mere coincidence. / Wi thout taking into account the opportunity cost of increm. labor requirements. MALI INTEGRATED RURAL LEVELOPMENT PROJECT PROJECT COMPLETION REPORT Estimate of Economic Rate of Return of the Project Method II: Imputed Effects of Input Supply and Extension Services for Cereals; Reported Incremental Production for Groundnuts PYl PY2 PY3 PY4 PY5 PY6 PY7 PY8 PY9 PY10 Pyl-15 Jkenefitki Increm. Groundnuts (1000t) 1 - 27.0 45.1 52.9 - - - - Econ. Price (FM/kg) - 78 81 131 - - - - - incr. Vlue (FM74 mill.) - 2,106 3,491 6,930 - - - - - - Increm. Value of Cereals (FM mill.) 2/ 68 391 449 525 669 809 792 856 872 907 918 Total 13erefits 68 2,497 3,940 7,455 669 809 792 836 872 907 918 Total Coatp 5/ 4/ 325 995 2,263 2,779 2,315 1,863 1,863 1,863 1,863 1,865 1,863 benefits - Costs 4/ -255 1,502 1,677 4,676 -1,646 -1,054 -1,(T1 -1,0f -991 -956 -945 Econ. Rol - NB. The rate of return (7%) is not meaningful. Sensitivity analysis shows, for instance, that if costs in years 6 - 15 were increased the RoR would become higher. The meaningless result reflects the fact that benefit streams are not so much project-induced as the result of price policies and other factors extraneous to the project. See Table2 of Annex 5. 2/ See 'Table 2 above. / See Table? above. 1/ WithouL taking into account the opportunity cost of increm. labor requirements. M A U R i T A N l A J \ .oNara dj5 * BA LMAURE-IAH- <0< r 14' M,AIIIN I ~ 'i4..J 5DiENI"'I BATIMAKA " 'XE \ ANAMBA 7A-\REPUBLIC OF MALI KASSAN OUND A S~ G U -INTEGRATED RURAL K[TA SEBEKORD -- SAN *J DEVELOPMENT PROJECT •. <OTOR N kOL ~PROJECT AREA .KENIEBAKOKOFAT BAMAKO \ FARABA -® SECTOR ADMINISTRATVE CENTER(9) y ..Nssoo SUB-SECTOR ADMINISTRATIVE CENTER(24) 12' SUB-SECTOR ADMINISTRATNE CENTER O) ALSO SECTOR ADM)NISTRATVE CENTER {0 o OTHER TOWNS -SECTOR BOUNDARIES 12'- N'- -Y INTERNATIONAL BOUNDARIES PANISH -- \L BYA RNERS HARAt ALGERIA n Yanfol Sikassoo EXTENSIONS MAURITANIA REPUBL IC 1967 F N1968 EGAL -- MA IL NG 1969 -- ~91970 Kcoo 1971 Nl~E .- 7'Kcoo 1 v O R Y C 0 A s T KILOMETERS -.' * 4° 2