Togo - Cotton Sector Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7170-TO STAFF APPRAISAL REPORT REPUBLIC OF TOGO COTTON SECTOR DEVELOPMENT PROJECT May 31, 1988 Agriculture Operations Occidental and Central Africa Department This document has a restricted distribution and may be used by recpients only in the performance of their official duties. Its contents may not otherwise be disclosed witbout World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit CFA Franc JCFAF) US$1.00 CFAF 277 a WEIGHTS AND MEASUREMENTS Metric System ABBREVIATIONS AND ACRONYMS CCCE - Caisse Centrale de Cooperation Economique CFDT - Compagnie Francaise de Developpement des Textiles CNCA - Caisse Nationale de Credit Agricole DRA - Direction de la Recherche Agronomique DRDR - Direction Regionale du Developpement Rural FAC - Fonds d'Aide et de Cooperation GAV - Grcupement Agricole Villageois IRCT - Institut de Recherches du Coton et des Textiles MDR - Ministbre du Developpement Rural M&E - Monitoring and Evaluation OPAT - Office des Produits Agricoles du Togo RAV - Recherche Accompagnement Vivriers SAL - Structural Adjustment Lending SOE - Statement of Expenditures SOTOCO - Societe Togolaise du Coton SRCC - Societe Nationale pour la Renovation et le D3veloppement de la Cacaoyere et de la Cafeibre Togolaises T&V - Training and Visit Agricultural Extension System GOVERNMENT'S FISCAL YEAR January 1 - December 31 SOTOCO'S FISCAL YEAR October 1 - September 30 a/ The exchange rate of CFA Franc (CFAF) is fixed at 50:1 with the French Franc, which is a floating currency.  VOROX . ..IA . t..L REPUBLIC OF TOGO COTTON SECTOR DEVELOPMENT PROJECT TABLE OF CONTENTS Pa&e DOCUMENTS CONTAINED IN PROJECT FILE ............................. iii CREDIT AND PROJECT SUMMARY .. . . ...... v KEY FEATURES OF THE AGRICULTURAL SECTOR ......................... ix I. INTRODUCTION ................................... 1 II. THE AGRICULTURAL SECTOR . ............. ................1.... A. Main Features ............................... .... 1 B. Government's Agricultural Strategy and IDA's Involvement in the Sector ......................... 2 C. Principal Constraints Facing Agriculture ..... ......... 3 D. The Food crops and Cotton Sectors ...........5... ....... S lIII TEHE PROJECT ... 9 11. POET................................................ 9 A. General ............................................ 9 Rationale, Project Concept and Objectives. 9 Project Description ... ... ,.... 10 B. Detailed Project Features ..... .10 1. Agricultural Production and Productivity Program .. 10 2. Efficiency Improvements in Cotton Sector Operations 15 3. Producer Pricing Policy ........ . 17 C. Project Costs and Financing .. . .18 Cost Lstimates . .. 18 Financing Plan and Arrangements . . . 20 Procurement ....21 Disbursement ..... 23 Reporting, Accounts and Audits . . .24 D. Project Management and Implementation .... ...... 24 This report is based on the findings of a Bank Appraisal Mission which took place from 9 to 27 November, 1987, consisting of Messrs. Raine (mission leader), and Fayd'herbe, Spurling and Shaw (IDA). Messrs. D'Andlau (CCCE) and F4lix (FAC) also participated in this joint mission. Figures were checked by Mr. Bakayoko, and secretarial work was done by Mrs. C. Asare. This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be d1iscbosed without Wofld Bankc authotization.  - ii - TABLE OF CONTENTS (continued) Page IV. FINANCIAL AND ECONOMIC ANALYSIS .. ........................... 26 A. Production, Markets and Prices ...... .................. 26 B. Environmental Impact .......... ........................ 28 C. Financial Implications to Farmers, SOTOCO and Government 28 SOTOCO's Financial Performance ........ .............. 30 Producer Floor Price Support Fund .................... 33 Government .......................................... 33 D. Economic Analysis ..................................... 33 Overall Benefits .................................... 33 Economic Rate of Rcturn ......... .................... 34 Sensitivity Analysis ............ .................... 34 Risks ........................................... 34 V. ASSURANCES, CONDITIONS AND RECOMMENDATION ..... ............. 35 MATRIX OF MONITORABLE ACTIONS ........... ........................ 37 ANNEXES 1. Supply and Demand of Locally Produced Food crops 2. Key Indicators First and Second Rural Development Projects in Cotton Areas 3. Agronomic Packages 4. Technical Assistance 5. Price Setting for Export Crops 6. Project Cost by Component and Type of Expenditure 7. Detailed Financing Plan 8. Estimated Schedule of Disbursements 9. SOTOCO's Organigram 10. Incremental Cottor. Production 11. Incremental Food Crop Production 12. SOTOCO's Profit and Loss Forecast 13. SOTOCO's Source and Application of Funds Forecast 14. SOTOCO's Balance Sheet Forecast 15. Government Cash Flow 16. Economic Rate of Return 17. Economic Farmgate Prices - Cotton, Sorghum, Maize MAPS: IBRD No. 21023R - Project Infrastructure and Cotton Growing Areas. IBRD No. 21024R - Agricultural Extension Area Responsibilities.  - iii - REPUBLIC OF TOGO COTTON SECTOR DEVELOPMENT PROJECI DOCUMENTS CONTAINED IN THE PROJECT VILE A. DOCUMENTS AND REPORTS 1. Etude de la Filibre Coton au Togot Rapport Principal et Rapport de Synthase; CFDT, Jullet 1987. 2. Evaluation Ex-Post du Deuxieme Projet d De elo _ t Rural de la SOTOCO (PDR II). Rapport Princlpal *t Annees SOTOCO, Juin 1987. 3. Evaluation Ex-Ante du Projet de Ddveloppemnt Rural Intdrimaire de la SOTOCO (PDR Inter). Rapport Principal et Annexes. SOTOCO, Juin 1987. 4. Etude Diagnostic du Cycle de la ComercialLsation. Arthur Anderson, Mai 1987. 5. Politique des Prix aux Producteurs des Cultures d'Exportation (Document de Travail). tiniLatre du Plan et de l'Industrie, Novembre 1986. 6. Resultats Analytiques Fibres Compares (not publihed) CFDT, November 1985. 7. Survey of Cost of Production of Raw Cotton. 43rd Plenary Meeting of the International CottGn Advisory Cooimttoe, Arusha, Tanzania, October 1984. B. STAFF WORKING PAPERS 1. Agricultural Program 2. Extension and Research 3. Farmrrs Groups and Functional Literacy Program 4. Seed Production 5. SOTOCO's Training Program 6. Monitoring and Evaluation 7. OPfT's Reorganization Terms of Reference 8. Cotton Sector Cost Analysis 9. Detailed Cost Tables  - v - REPUBLIC OF TOGO COTTON SECTOR DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of Togo Beneficiarys Soci4t6 Togolaise du Coton (SOTOCO) Amount: SDR 10.9 million (US$15.1 million equivalent) Terms: Standard IDA terms, with 40 years maturity Cofinanciers: Caisse Centrale de Cooperation Economique (CCCE) (US$11.5 million equivalent) and Fonds d'Aide et de Cooperation (FAC) (US$3.3 million equivalent). Proiect Descrintion: The project, the third in the cotton sector, would seek to increase the efficiency and productivity of Togo's successful cotton and food crop production, begun in 1977 with IDA, CCCE and FAC cofinancing. This would be achieved through: (a) increasing farmers productivity as a means to increase cotton and food crop production; (b) improving the cost-effectiveness of SOTOCO's cotton processing and marketing operations; and (c) modifying the sector's financial arrangements to be more responsive to world price fluctuations and to provide the sector's participants (farmers, SOTOCO and Government) with greater incentives. Costs of production of cotton fibre are forecast to decrease by over 25Z by the end of the project. The participants' revenues would increase as a result, as would Togo's international competitiveness in cotton production. SOTOCO would operate on a financially independent and commercial basis.  - vi - latimeted Protect Cost Z of Base Local Foreign Total Cost -- (US$ million) ---- Rztension 6.15 3.46 9.61 29.5 Ieeearch 0.34 0.50 0.83 2.6 acmerfm Groups 1.52 0.15 1.68 5.2 Ageicultural Inputs 0.77 3.11 3.88 11.9 Seed Production-Foodcropu 0.63 0.64 1.27 3.9 teeder Road Maintenance 2.68 2.20 4.88 15.0 Training 0.96 1.30 2.26 7.0 MNa=torfg a Ivaluation 0.98 0.62 1.60 4.9 Managemenit Support 0.93 3.57 2.50 7.7 Cotton Marketing 1.54 2.48 4.01 12.3 bass Costs Al 16.50 16.03 32.53 100.0 Physical Couting4mcies 0.45 0.67 1.12 3.5 Price Contingencies 2.03 1.83 3.86 11.9 Total Costs 18.98 18.53 37.51 115.4 I XIncludes times Local Foreign Total ------ (US$ million) ------ GOVeO n ONt 5.04 2.06 7.10 IDA 6.08 9.00 15.08 CCCI 6.90 6.01 11.54 VAC 5.53 1.42 3.31 Farmers Groups 1.89 0.04 0.48 Total 18.98 18.53 S7.51 h&tAate4disburebiment-from IDA Credit IDA Fiscal Years 89 90 91 92 93 94 95