Senegal - Pilot Agricultural Export Promotion Project

Report No. PID5986 Project Name Senegal-Pilot Agricultural Export (+) Promotion Project Region Africa Sector Agriculture Project ID SNPE51610 Borrower The Government of Senegal Implementing Agency Ministry of Agriculture Date This PID Prepared July 1997 Appraisal Date September/October 1997 Expected Approval by RVP December 1997 1. Country/Sector Background. In contrast with most African countries, the agricultural sector (including forestry, livestock and fisheries) accounts for only 209 of GDP. Agriculture is, however, the main occupation of 60- of the population. A large portion of foreign exchange earnings comes from the agricultural sector, with groundnut exports ranking third to fish and tourism. Although declining in relative importance, groundnuts still make up approximately 60- of farm cash income. Groundnuts and cotton occupy 50- of the cultivated land, the rest being devoted to food crops (millet, sorghum, rice, maize and cowpeas). In addition, pastoral production has always been important, accounting on average for 35t of the agricultural value added. 2. Agricultural production has stagnated or even regressed since the beginning of the decade. While, prospects for Senegal's main export and import substitution crops have improved since the parity change of the CFAF, there is concern that the sector has not responded as well to the favorable conditions created by the parity change as other francophone countries. Despite this generally disappointing performance, the agricultural sector has the greatest potential for employment and growth in the short to medium term, through export growth and forward and backward linkages. Given the fact that 809 of the poor live in rural areas, agricultural development is the most likely means to improve the living conditions of the poorest. In addition, prospects of agricultural development are not all that grim: pockets of dynamism have emerged in the private sector related to high-value crops or activities either for exports or urban markets, such as confectionery groundnuts, horticulture, cattle fattening, etc. Rural populations are also becoming more vocal and dynamic as producer organizations are strengthening and are ready to take an active role in providing a range of services for their members. It is therefore crucial to diagnose the sources of blockage and leverage points in order to support potential sources of sectoral growth. Because of the potential for non traditional crop production, the Government is considering with the support of the Bank and possibly other donors, to initiate an agricultural export promotion operation that could  directly assist individual producers/exporters and their private organizations in responding to the demand and product requirements of the regional and international markets, especially for non traditional agricultural products. Such an operation is also expected to contribute to private sector development, consolidation of growth, poverty alleviation and environmental conservation. 3. Objectives. The project's objectives would be to diversify and develop private agricultural exports, a core objective of the Government's export-led growth strategy. This would be achieved through: (a) specific actions aimed at export market development and diversification out of groundnuts and fisheries; (b) strengthening of existing private professional organizations and encouraging the creation of farmer associations and the establishment of an interprofessional group of producers' and exporters' associations; and (c) upgrading of export facilities at the airport. 4. Project Description. The project would have the following components: (a) Export Promotion and Diversification Activities by assisting Senegalese producers in: (i) market research, customer identification, meeting quality requirements, trial shipments and obtaining pre-export finance; (ii) product development and processing, and quality control via targeted adaptive research; and (iii) establishment of business partnerships between local exporters and foreign businesses and assistance in identifying regional and overseas niches. (b) Support to Producers/Exporters' Associations by: strengthening existing privately-controlled professional organizations: producer groups, export associations, cooperatives, interprofessional groups of professional associations, which could become a major vehicle for non traditional export market development and for lobbying activities etc.; (ii) encouraging the creation of farmer associations; and (iii) setting up a central referral/data information service and products packaging center as well as providing management and legal advice required for the formal establishment of nascent associations and for developing their work programs together with training in simplified cost accounting and management principles. (c) Upgrading of Export Facilities through rehabilitating the infrastructure at the Dakar and/or St-Louis airports for preserving perishable products in transit; and (d) Support to Project Management by qualified private professionals experienced in agricultural export, logistics and farmer organization. 5. Project Implementation. Project implementation will be under the general supervision and guidance of the Ministry of Agriculture. The project management will be assumed by private agricultural export professionals. Its staff of agricultural export professionals, will be recruited through local competition to - 2 -  provide technical and market development advice to individual producers/exporters and their associations. The project management team may be assisted by internationally recruited technical assistants (on short- or medium-term contracts) experienced in export development and finance, logistics and farmer organization and possibly connected to an extensive network of foreign buying agencies. Interprofessional group of agricultural producers and exporters' associations, formally established as non-government associations, would be represented in a Project Steering Committee (PSC) responsible for supervising the implementation of the proposed project and coordination and monitoring of overall project activities. It is expected that these beneficiaries would gradually assume the financing of the management unit. 6. Costs and Financing. Total project costs are tentatively estimated at US$11 million with proposed financing as follows: US$5.6 million from IDA; US$3.4 million from cofinanciers (possibly CIDA, EU); US$1 million from the Government, and US$1 million from agricultural producers/exporters. 7. Sustainability. The project would enhance the capacity of the agricultural export sector to respond to the country's export promotion and diversification objectives. By strengthening farmer organizations and helping establish an interprofessional group of such organizations, the project would contribute to build a local capacity that would further ensure that actions initiated under the project are carried out and pursued upon project completion. In view of the importance of the private sector's effective involvement, financial contribution and effective participation in project activities, project benefits will be also maintained after project completion, with all direct cost of services to be recovered at the end. 8. Lessons from Experience. The Bank experience in supporting export promotion in Africa and other regions shows that while traditional exports need to be part of an outward-oriented strategy, the future is in non traditional exports. Foreign market development, the identification of customer and product requirements beforehand, and the presence of a catalytic mechanism that facilitates the establishment of partnerships between local agricultural producers and foreign investors -- have proven to be central factors for successful entry into the international markets. Even a modest increase in a country's share of world markets has often been an important ingredient for growth. The project design will take into account the above lessons of experience. 9. Rationale for IDA Involvement. The 1994 devaluation of the CFA Franc has provided an important incentive for agricultural export development and diversification that exporters/producers are taking advantage of. A number of high value-added agricultural export products from Senegal also continue to be competitive on overseas and regional markets. By providing an effective vehicle to support private investment and private sector involvement in improving the performance of non traditional exports, and by streamlining the role of agricultural professional organizations in - 3 -  the agricultural export sector, the project fits well in the Bank's country strategy. It will also complement local initiatives being undertaken through a series of workshops, action plans and trade facilitation studies, to enhance private sector involvement in agricultural and agro-industrial activities with significant export potential. The work being done by the existing Groupe de Reflexion Strategique (GSR) and local consultants could serve as a basis for project preparation and appraisal. 10. Environmental Aspects. An environmental analysis will be conducted for the project with a view to ensuring that it will have no significant negative environmental impacts, that the industries in the sector are not polluting, and that the expected increases in cultivated areas will take place on cleared land, with no impact on forests. It is expected that the project will create incentives for the stabilization of agriculture by promoting environmentally sound cash crops and by increasing household income in rural areas through the marketing of high value agricultural products. It is also expected that the project would be classified under environmental category B. 11. Project Objective Categories. The project will contribute to the following Project Objective Categories (POCs): capacity building and private sector development and indirectly, poverty reduction. 12. Benefits. The project will directly benefit private agricultural producers/exporters and their professional organizations, and reach indirectly smaller growers of exportable crops. It will foster improved links between production and markets and result in increased exports of high-value agricultural products and contribute to reducing the country's excessive reliance on a couple of traditional products. The project is also expected to help create jobs for producers/exporters and to bring them new technology and training opportunities. It will therefore lead to important institutional and capacity building benefits. 13. Risks. The major foreseeable risks are likely to be the difficulty in securing the right implementation expertise in the full range of activities to be covered under the project, and possible attempts by government agencies to interfere with the project activities. The first risk will be reduced through supplementing in-country capacity with ad hoc short-term outside expertise with international export market connections. As for the second risk, upfront agreement will be made with the Government on entrusting project implementation to an autonomous project management team, staffed with qualified and experienced professionals entirely selected from the private sector. In addition, the strengthening of agricultural professional organizations would further encourage their involvement in lobbying activities for their trade and empower them to better represent their interests while participating in project activities. Another risk could be the difficulty in harmonizing various donor approaches to supporting agricultural export activities, which may further delay the expected project results. Donors are increasingly acknowledging the potential for diversifying and developing -4 -  Senegal's agricultural export base and the need for coordinating their activities in the field and, in this respect, setting up the proposed project with parallel cofinancing arrangements is expected to further provide a catalylic mechanism and an appropriate forum. Contact Point The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the InfoShop week ending February 6, 1998. - 5 -  Annex Environmental assessment: An environmental analysis was conducted for the project with a view to ensuring that it will have no significant negative impact, that the expected increases in cultivated areas will take place on cleared land, with no impact on flora and fauna, and that mitigation measures will be taken to minimize the impact of pesticides on soil, water resources and affected population. It is expected that the project will create incentives for the stabilization of agriculture by promoting environmentally sound cash crops and by increasing beneficiaries' income in rural and urban areas through the marketing of high value agricultural products. Given the scope of project activities, the project is classified under environmental category B according to the Operational Directive (OD) 4.01, Annex E. - 6-