Zambia - Livestock Development Project

RETURNq TO REPORTS DE R EST RI CT ED WITHIN L U 1 Report No. PA-10* ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION LIVESTOCK DEVELOPMENT PROJECT ZAMBIA May Z7, 1969 Agriculture Projects Department  CURRENCY EQUIVALENTS US$ 1 = Zambia Kwacha 0. 714 Zambia Kwacha 1 = US$ 1. 40 Zambia Kwacha 1 = Ngwee 100 Zambia Kwacha 1, 000, 000 US$ 1, 400, 000 WEIGHTS AND MEASURES - IMPERIAL SYSTEM 1 Acre = 0.405 Hectares 1 Imperial Gallon = 4. 7 Liters 1 Square Mile 2. 590 Square Kilometers 1 Mile = 1. 609 Kilometers 1 Pound = 0. 453 Kilograms 1 Long Ton = 1. 016 Metric Tons 1 Short Ton 0. 907 Metric Tons ABBREVIATIONS ADC - Agricultural Development Corporation CSB _ Cold Storage Board DCO _ Dominion Colonial and Overseas DPB - Dairy Produce Board ZCDL _ Zambia Cattle Development Limited  ZAMBIA LIVESTOCK DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY I. INTRODUCTION .......................................... 1 II. BACKGROUND ................., 1 A. General ......... ................................ 1 B. The Beef and Dairy Cattle Industry .... .......... 2 C. Animal Health ................................... 4 D. Agricultural ServiCLes ........................... 5 E. Government Policy for Livestock Development ..... 6 III. THE PROJECT ..................., 8 A. Project Description .............................. 8 B. Project Areas and Land Tenure .... ................. 8 C. Detailed Features of Beef Ranch and Dairy Farm Developments ................................. 9 D. Cost Estimates .................................. 11 E. Financing ....................................... 12 F. Procurement ..................................... 14 G. Disbursements and Auditing ...................... 14 H. Corporate Structure and Management .... .......... 15 I. Technical Services and Training .... ............. 17 IV. MARKETS AND PRICES ................................... 18 V. ECONOMIC BENEFITS AND JUSTIFICATION .... .............. 19 VI. CONCLUSIONS AND RECOMMENDATIONS ...................... 20 This appraisal report was prepared by Messrs. J. Edwards and A. Schumacher (IBRD) and C. Chisholm (Livestock Consultant).  -2- A M?IEXES 1. IThe Cattle Industry 2. Marketing of Beef and Milk 3. The Grazier Scheme 4. Government Policies for Livestock Development 5. Project Technical Aspects: Maize Feeding, Pasture Tmprovements and Artificial Tnsemination 6. Beef and Dairy Herd Projections Table 1 - Breeding/leaning Ranches (Consolidated) Table 2 - Bull Stud Ranch Table 3 - Breeding/Fattening Ranches (Consolidated) Table 4 - Breeding/Weaning Ranches (Model) Table 5 - Dairy Farm (Model) Table 6 - Gravetts Dairy Farm 7. Beef Ranch and Dairy Farm Acreages 8. Operating Costs Table 1 - Beef Ranches Table 2 - Dairy Farms 9. Project Tnvestments Table 1 - Investmen-t Categories Table 2 - Artificial Insemination - Cost Estimates Table 3 - Pasture Development Program Table 4 - Phasing 10. Corporate Organization of the Agricultural Development Corporation and its Subsidiary, the Zambia Cattle Development Limited Chart 1 - Project Organizational Chart 11. Zambia Cattle Development Limited - Financial Projections Table 1 - Cash Flowy Table 2 - Pro-Yorma Balance Sheets, 1969-1975 12. Economic and Financial Return Calculations 13. Production Benefits MAPS 1. The Project Areas  ZAMBIA LIVESTOCK DEVELOPMENT PROJECT SUMMARY i. The Government of Zambia has requested a loan to help finance production of beef and milk by the development of twelve beef ranches and five dairy farms. Nine of the beef ranches would concentrate upon ma&cimizing numbers and quality of weaners for sale to Zambian tarmers. Two ranches would only produce fat steers and the remaining one vould specialize in bull-breeding. The dairy farms, besides their milk output, vould feed out their steer calves for beef production. ii. Finance would be provided for on-ranch roads, firebreaks, fencing, buildings, machinery and water supplies as well as for breeding stock in the early stages. Semen for both beef and dairy herds would be imported. Funds would be included for technical services. iii. The Project is estimated to cost about US$5.8 million of which US$5.2 million would be for ranch and farm development, US$0.2 million for technical services and US$0.4 million for working capital, the latter fi- nanced entirely from local sources. The proposed IBRD loan of US$2.5 million would provide about 43% of the total Project cost and would cover in full the foreign exchange component. The remaining 57% of the Project coat would be met by Government, the Zambia branch of Barclays DCO, and the Zambia Cattle Development Ltd. (ZCDL). iv. The proceeds of the IBRD loan would be lent by Government to the ZCDL. This Company, wholly owned by Government, would operate the ranches and farms and would administer the Project. V. The Project is sound and would yield satisfactory returns to ZCDL (12%) and the national economy (16%). Subject to obtaining certain assur- ances during negotiations, the Project is suitable for a loan of US$2.5 mil- lion repayable over 15 years including five years of grace. The Borrower would be she Government of Zambia. The Project is intended to be the first major stage of Zambia's national program of livestock development.   ZAMBIA LIVESTOCK DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Government of Zambia has requested a loan to help finance the development and expansion of beef and milk production. In 1964 the Ministry of Rural Development and the Cold Storage Board (CSB) began the development of a number of ranches and dairy farms, and in 1966 approached the Indus- trial Development Corporation to acquire and run, them. Government then decided to create the Agricultural Development Corporation (ADC), owned entirely by Government, to exploit new projects in agriculture. ADC in turn formed a wholly owned subsidiary company, Zambia Cattle Development Limited (ZCDL) to take over and develop a number of beef and dairy operations previous- ly run by Government. These included the Ministry and CSB ranches offered earlier to the Industrial Development Corporation. During this period, the Agricultural Developient Service (ADS), an affiliate of the IBRD's Permanent Mission in Eastern Africa (PMEA), was requested to study the feasibility of operating these ranches and farms as commercial operations. Its report was presented early in 1968. PMEA organized a follow-up preparation mission in June 1968. The Project was appraised in October/November 1968 by a mission consisting of Messrs. J. Edwards and A. Schumacher (IBRD) and Messrs. C. Chisholm and G. Kahl (Consultants). As explained in paras. 3.07 and 3.08 of the report, the Project as submitted was reformulated and somewhat expanded in the course of appraisal vith the agreement of the Zambian authorities. This reformulation and expansion of ZCDL's development program will enable the company's operations to be closely integrated into the national program of livestock development (Annex 4). II. BACKGROUND A. General 2.01 Only about 4 million Zambians inhabit a country which is almost the combined size of France and Germany. Although consumption levels of beef and milk are low, there is a shortage of both. Imports of one-third of present needs of these products are required at an annual cost of US$8 million equivalent. The population grows at 3% per annum - it has doubled s:Lnce 1940 - and the demand for beef and milk is increasing in the industrial and urban centers of the country, especially in the "copper-belt" where wages are high. 2.02 Zambia is a landlocked country. It is 600 miles from the sea at Beira, Mozambique and 1,000 from Dar es Salaom, Tanzania. Altitude ranges from 3,000 to 4,000 feet. The topography over large areas is slightly un- dulating. There are three distinct seasons: a dry cool period begins in April and is followed by a dry hot spell from July until early November w-lth a wet season up to March.  -2- 2.03 There are wide differences between the productivity and income of farmers. These are low among the Zambian farmers living in widely scattered tribal areas of the country, and higher - close to western levels - for the much smaller numbers of non-Africans farming along the 'line of rail' 1/. Although agriculture contributes less than 10% of GDP, 80% of the population derives its livelihood from the land. By contrast, almost 50% of GDP is derived from mining, mainly copper. As a result of the dominance of the copper industry, an extended decline in the copper price would have serious consequences for the economy and affect its ability to pay for imports. Agricultural exports in 1967 accounted for about 3% of all exports whereas agricultural imports were about 4% of all imports. Annual earned income varies greatly according to occupation, being highest for mining (US$1,240 equivalent) and lovest for agriculture (US$246 equivalent). The latter, although it compares favorably with other East African countries, could be brought closer to non-farm earnings within Zambia with the increasing devel- opment of the agricultural sector. B. The Beef and Dairy Cattle Industry 2/ The Beef Sub-Sector 2.04 There are approximately 1.2 million cattle in Zambia beef-producing herds. The great majority - 1.1 million - are owned by traditional African farmers and their productivity is low. Slaughter cattle offtake from this sector is about 3-4% annually compared vith 17-18% from the commercial herds of European farmers in vhich the balance of the country's beef cattle are found. The contribution from each source is therefore: Number Cattle Commercially Source Numbers Slaughtered Traditional 1,085,000 43,4ao Commercial 130,000 22,750 The indigenous breeds - Tonga, Barotse and Angoni - are well adapted to their environment and cross productively with exotic breeds. Of the latter,. the Africander, pure and crossed, accounts for 90% of the "blood" of beef herds in the commercial sector. In the last 10 years, this sector has used in- creasingly bul:Ls and semen of the Hereford, Boran, Brahman, South Devon and Charolais breeds. 1/ The 'line of rail' describes the land running along both sides of the railway from the 'copper-belt' in the North to Livingstone in the South. 2/ Annex 1, The Cattle Industry, gives further detail.  -3- 2.05 Communal grazing is characteristic of the traditional sector of the industry. Steers reach slaughter age at 5 to 7 years. Fenced grazing is typical of the comme*cial sector and cattle are often fed on maize for up to 120 days to reach sll'kughter age at 2