Lesotho - Thaba Bostiu Rural Development Project

RETURN TO REPORTS DESK WITHIN ONE WEEK DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Pubhe Use Report No PA-147a APPRAISAL OF THABA BOSIU RURAL DEVELOPMENT PROJECT LESOTHO January 24, 1973 Agriculture Division Projects Department East Africa Region This report was prepared for official use only by the Bank Group It may not be published, quoted or cited without Bank Group authorization The Bank Group does not accept responsibility for the accuracy or completeness of the report CURRENCY EqUIVALENTS US$1 = Rand (R) 0.79 R 1 = US$1.26 R 1,000,000 = US$1,260,000 WEIGHTS AND MEASURES Tons = Metric Tons (mt) Mixed Metric and British/US 1 bag = 200 lb = 90.74 kg 1 kilogram (kg) = 2.204 pounds (ib) 1,000 kg = 1 metric ton (mt)= 0.98 long ton 1 millimeter (mm) = 0.039 inch (in) 1 meter (m) n 1.09 yards 1 kilometer (km) = 0.62 mile (mi) 1 acre (ac) 0.405 hectare (ha) 1 hundredweight= 112 lb = 51.02 kg 1 kg/ac = 2.47 kg/ha = 2.204 pounds/acre (lb/ac) GLOSSARY AND ABBREVIATIONS ADS - Agricultural Development Service, Nairobi Association - A Farmers' Association or Cooperative CLL - Co-op Lesotho Ltd. GDP - Gross Domestic Product LDB - Lesotho National Development and Savings Bank M - Million UBIS - University of Botswana, Lesotho and Swaziland CROP/PROJECT YEAR October/September FISCAL YEAR April 1 - March 31 LESOTHO APPRAISAL OF THE THABA BOSIU RURAL DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ......................... i-iii I. INTRODUCTION .................................... 1 II. BACKGRODD ...................................... 1 A. General .................................. 1 B. Agriculture .............................. 2 C. Soil Conservation ........................ 3 D. Sociology and Land Tenure ................ 3 E. Banking and Agricultural Credit .......... 4 III. PROJECT AREA ..... o...... .. . ................#** s* *o 4 A. General ....... .. . o4 B. Production, Extension and Marketing . 5 IV. THE PROJECT..........e.o.................. 6 A. General Description 6....... . 6 B. Detailed Features ... ................. . 6 C. Cost Estimates ......................... 11 D. Financing, Procurement and Disbursement . 11 V. ORGANIZATION AND MANAGEMENT ..................... 13 VI. PRODUCTION, MARKETING AND FARMERS' BENEFITS .. 17 A. Production and Yields ................... 17 B. Markets and Prices ....................... 18 C. Farmers' Benefits .. ............ 18 VII. ECONOMIC BENEFITS AND JUSTIFICATION ............. 19 A. Economic Benefits and Costs............... 19 B. Rate of Return and Sensitivity......... 20 VIII. AGREEMENTS REACHED AND RECOMMENDATIONS - ....... 21 This report is based on the findings of a mission to Lesotho in March, 1972, comprising Messrs Nelson, Myllyluoma and Schul (IDA); Henderson (consultant agriculturist) and Vilakazi (consultant sociologist); and on the findings of a concurrent USAID soil conservation mission to Lesotho. -2- ANNEXES 1. Agriculture in Lesotho and the Project Area Tables 1-2 Monthly Annual Rainfall Totals for 50 years at Maseru and Roma Tables 3-5 Rainfall Fattern in mm Table 6 Livestock Population Chart Rainfall Chart Probability (%) of Annual and Wet Season Monthly Rainfall at Maseru 2. Sociological Background 3. Soil Conservation 4. Banking and Agricultural Credit Tables 1-2 Co-op Lesotho Limited Accounts for Years ended March 31, 1968-71 5. Agricultural Techniques and Programs in the Project 6. On-farm Costs (Regular Program) 7. Cost of Extension Services 8. Cost of Training 9. Agricultural Research 10. Cost of Research 11. Marketing Table 1 Total and Marketed Production Table 2 Lesotho Livestock Statistics Table 3 Estimated Storage Capacity at Full Development Table 4 Proposed Marketing Facilities Table 5 Imports and Exports (Lesotho/South Africa) Table 6 South African Statistics Table 7 Gross Prices per Grade Table 8 Estimated Marketing Costs and Farmers' Prices 12. Cost of Marketing Services 13. Cost of Credit Services 14. Road Development and Communications Table Road Construction and Maintenance 15. Cost of Roads 16. Cost of Soil Conservation - 3 - 17. Cost of Integrated Farming Program 18. Cost of Administration 19. Project Cost Summary 20. Financial Contributions and IDA Disbursement 21. Government Cash Flow 22. Financing and Disbursement Schedule Table I IDA Credit Financing Schedule Table 2 Estimated Schedule of Disbursements 23. Farm Budgets Table 1 Farm Budget for Wheat Table 2 Farm Budget for Maize and Sorghum Table 3 Farm Budget for Wheat in Year of Drought Table 4 Tractor Operating Budget Table 5 Budget for a Milk Cow Table 6 Budget for Integrated Farming on 5 Acres Arable plus 5 Acres Associated Permanent Grazing 24. Economic Rate of Return Table 1 Estimated Production Table 2 Details of Project Benefits Table 3 Rate of Return Calculations Table 4 Sensitivity of Economic Rate of Return CHART Organization Chart MAP vw vw LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project for provision of farm inputs - mainly seed, fertilizer and cultivation services - to about 12,000 peasant farmers on 60,000 acres of presently poorly cultivated land; the credit to acquire these inputs; marketing facilities; better roads; and vital soil conservation. It would improve production of maize, sorghum, wheat and beans. ii. Lesotho is a small, recently independent African country, largely mountainous, and entirely surrounded by the Republic of South Africa, with which its economic ties are naturally close. Many Basotho work in the mines, fields and factories of South Africa and their remittances contribute substantially to the Lesotho economy. iii. Government gives highest priority to agriculture, which provides a livelihood for 85% of the people and accounts for 70% of GDP. Lesotho farming is mainly for subsistence and only about one-third of farm produc- tion, mostly of animal origin, is sold. Traditional land use and cultural habits inhibit change. The immediate objective, therefore, is to control erosion and improve crop production and rural living within the existing social system, and thus move from subsistence to cash cropping for import substitution and export. A longer term objective is to transform land use custom so that integrated farming, combining rotational cropping with improved livestock production, can be introduced. Unless these fundamental changes in land use are made and integrated farming is adopted, erosion control and crop improvement would have little lasting value. iv. Production would be increased by timely provision of improved inputs on credit, and technical agricultural guidance on their use. Farmer demand for inputs is expected to be keen; but acceptance of essential condi- tions, especially proper cultivation and maintenance of soil conservation works, may not occur so readily. Effective institutions are at present lacking. A credit and marketing organization would need to be created for the project, and staff would need to be trained for almost all project activities. Initial production increase is therefore likely to be slow. v. Rainfall, averaging about 600-700 mm in the project area, is un- certain, varies greatly from year to year and nearly all occurs in October- March, with a January peak. Cultivation timing is therefore most important. For this reason, and because of migration of able-bodied males, ox and tractor power are used extensively and the project includes supply and more efficient use of these. vi. Farmers in the project area grow mainly subsistence crops, using family labor for weeding and harvesting. From an average 5-acre holding, in place of subsistence with annual cash of about US$20-25, project farmers - ii - would have more assured subsistence and about US$55-70 annual cash, with the later prospect of an annual net income exceeding US$150 from the same land, when they move into integrated farming. vii. The project would be administered by an autonomous Project Author- ity within Government. Involvement of farming community leaders would be ensured through a Liaison Committee, comprising elected representatives of farmers and chiefs. The project would be funded through the Government budget; USAID would finance soil conservation costs under a parallel grant; and crop purchases would be financed by commercial banks. viii. Project costs are estimated at US$9.8 M equivalent, of which about US$5.4 M (56%) would be the foreign exchange component. IDA would contribute 57% of project costs (equivalent to 39% foreign exchange costs and 19% local costs); USAID 29%; Government about 6%; commercial banks 5%; and farmers 3%. The proposed IDA credit to Government would be US$5.6 M. ix. Procurement of vehicles, farm tractors, equipment and fertilizer (US$0.9 M) would be in accordance with Bank/IDA guidelines. Imports for the project would be duty free. Roads (US$0.6 M) would be ia small sections, and buildings (US$0.6 M) few in number and widely scattered. They would be insufficient in value to attract international competitive bidding and would be subject to Government local tender. Seed and dairy cattle would be bought from nearby South Africa. USAID would procure the soil conservation equipment it financed. x. The project would produce an annual additional 4,600 tons of maize and 3,100 tons of sorghum, the basic Lesotho foodgrains, of which about 150,000 tons are consumed annually and about 25,000 tons imported. It would also produce 7,000 tons of wheat and 4,100 tons of beans, both for export. It would thus help Lesotho achieve self-sufficiency in food and increase export earnings. The value of incremental annual project production would build up over six years to about US$1.5 M. xi. Soil and climate severely limit the potential for Lesotho agri- culture and project crops are not of high value. Since this would be the first project of its kind in Lesotho, project overheads and training are a high proportion of total costs; but replication could follow success and future projects of a similar or more advanced nature would have higher returns, not only because overheads would be spread over a larger operation but also because results could be expected to improve as the project moves into and extends integrated farming. The estimated annual rate of return to the economy of Lesotho is 11%, based on the most probable assumptions. A 10% rise or fall in prices or yields would result in estimated rates of return of 14% and 8% respectively. The rate of return on integrated farming would be within the range 15-20%, and the ultimate goal is to extend it throughout Lesotho; but without the initial stimulus which the project would give, integrated farming is unlikely to be widely accepted. - iii - xii. Although adverse factors have been taken into account, the project would be subject to many uncertainties that cannot be easily quantified. Success depends, for example, on overcoming resistance to change in a traditional society, which would affect the willingness of farmers to accept new techniques, including enclosure and livestock limitation, and to maintain soil conservation works against insidious erosion. Farmers in the project area show willingness to accept change and enthusiasm for the project, while Government offers fervent support and has publicized the project extensively. The chances of success are therefore considered good. The project is extremely important to Lesotho, which has few alternatives for economic development. xiii. Appropriate assurances have been received at negotiations and the project is suitable for an IDA credit of US$5.6 M. The Government of Lesotho would be the borrower. w w LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT I. INTRODUCTION 1.01 Lesotho's Five-Year Development Plan 1970/71-74/75 gives highest priority to increased productivity of agriculture (on which the country is heavily dependent), including soil conservation and control of livestock to arrest long-recognized and persistent soil erosion. Objectives are to transform traditional subsistence farming to cash cropping, for import substitution and export, with emphasis on self-sufficiency in maize and sorghum 1/; and in the longer term, to integrate rotational cropping with improved livestock production, restore soil fertility, and achieve and main- tain a still higher level of production. 1.02 Traditional land use and social custom stand in the way of this longer-term objective. In the interim, Government seeks to improve crop production and rural living without major changes in the social system. 1.03 Following the success of the IDA-financed Lilongwe Development Project in Malawi, visited by Lesotho Government officials and farmers, and with help from the Bank's Permanent Mission in East Africa, Government pre- pared a comprehensive project for rural development of about 300,000 acres (ac) near Maseru, the capital (see Map). Selected partly because replication could follow success, the project would be the first Bank Group financed agri- cultural project in Lesotho. USAID is keen to help Lesotho with its soil con- servation problems and is willing to participate with grant finance for this purpose. 1.04 This appraisal report is based on the resulting November 1971 credit application and the findings of a mission to Lesotho in March 1972, comprising Messrs Nelson, Myllyluoma and Schul (IDA); Henderson (consultant agriculturist) and Vilakazi (consultant sociologist). The mission was advised on soil con- servation by Mr S. Fuchs of a concurrent USAID mission to Lesotho and by Mr R. Benham (Agricultural Development Service) from Lilongwe. II. BACKGROUND A. General 2.01 Lesotho, independent since 1966, is a small (30,300 km2), largely mountainous country, entirely surrounded by the Republic of South Africa. 2.02 Population is around 1.1 M, growing at 2-2.5% per year. About half the men of working age earn their living on short-term contracts in South 1/ Sorghum vulgare: a coarse grain, also known as millet. Africa, and their remittances (approximately US$13 M per year) are important to the Lesotho economy. GNP totals about US$80 M and per capita average annual income is about US$80. 2.03 Lesotho s natural resources are agricultural land (much of it badly eroded), natural pasture (largely overgrazed), water and people. The Malibamatsu project, which the Bank is studying, would export water to South Africa. Attractive scenery and a p:Leasant climate provide tourist potential. Manufacturing is still only .ibout 2% of GDP. 2.04 Lesotho has close economic ties with South Africa and, together with Botswana and Swaziland, belongs to the South African Customs Union, using South African currency and receiving part of South African customs revenue. Most goods move freely among the four countries. Though controls are permitted on agricultural products regulated by marketing boards, they have not so far been imposed in Lesotho, except for a livestock export quota. 2.05 Lesotho's average annual external trade deficit from 1966 to 1969 was US$28 M. The British Government was financing more than half Lesotho's budget at Independence and has since continued to help with bilateral, mainly grant, aid averaging about US$5.5 M annually. B. Agriculture 2.06 Agriculture provides the principal livelihood for about 85% of the people and accounts for about 70% of GDP. Though the Lesotho farmer is in- creasingly conscious of cash income, only about one-third of farm production (mostly animal products) is sold. Farming is generally primitive, and yields are low. During $167/69, annual agricultural exports averaged about US$4 M and were about 75% of total exports; agricultural imports, mainly maize meal and wheat flour, averaged about US$7 M, or 2C0 of total imports. 2.07 Lesotho, with a warm temperate climate, has three ecological zones; Lowlands at 5-6,000 ft, about 27% of the total, mostly in the west; Foothills 6-9,000 ft about '6%; and Mountains, rising to 11,000 ft on the eastern border, about 58%. Only about 15% of the total is suitable for cultivation. Average, annual rainfall varies locally between 560 and 900 mm; annual variation is great, and drought occurs about one year in five. Rain falls most often in heavy showers, nearly all in summer (October-May), with a January peak (Annex 1). 2.08 Maize grows on 45% and sorghum on 30% of the cultivated area. Of low monetary value, they are the principal food crops. Wheat (10%) is grown in the Mountains as a summer crop, and in the Foothills and Lowlands as a win- ter crop. Beans and peas (8%) are increasingly valuable exports. Rainfall permits only one crop per field to be grcwn each year. 2.09 Sharecropping is widespread, for a number of reasons discussed in Annex 2, paras 23-31. The most common is that a landholder lacks plowing - 3 - power; so he contracts with oxen or tractor owners to plow for a share of his crop or the use of some of his land. This latter practice usually results in poor preparation of the farmer's own land, but at little risk or cost to him. 2.10 Livestock production is extremely important; in 1967/69, wool and mohair were 44% and live cattle and sheep 36% of total exports. The country is almost free of animal disease. Livestock graze mountain pastures in sum- mer, and lowland pastures and crop residues in winter. Livestock population is estimated at 3.2 M, of which 1.6 M sheep, 0.9 M goats, 0.5 M cattle and 0.2 M horses and donkeys. This is much more than the grazing resources can comfortably carry under present systems. Government is anxious to improve this situation, but is severely hampered by traditional land tenure and social restraints (Section D and Annex 2). 2.11 Five-Year Plan investment in agriculture is estimated at US$8.2 M (23% of the total), more than half for irrigation. However, irrigation is possible on less than 3% of the arable land, while improvements to dryland farming are urgent and can be immediately implemented, with wide impact. C. Soil Conservation 2.12 Soil erosion has been a major problem of Lesotho agriculture for at least a century, and the rainfall pattern and traditional cropping have led to erosion on a spectacular scale. As steep Foothill and Mountain land is pressed into cropping through population growth, it is exposed to serious erosion risk. More than half a million acres have been protected since 1932/33 with terraces and grass buffer strips. While helpful, they need major improve- ment to be fully effective. The fundamental causes of erosion (faulty cropping practices and overgrazing) cannot be effectively removed unless traditional practices are changed. The technical answers are well known; the sociological answers are harder to find; but if erosion continues unchecked, little land will remain suitable for cultivation within three generations (Annex 3). D. Sociology and Land Tenure 2.13 The principal Basotho institutions are the nation, clan, village and family (Annex 2). The family is the most important, especially the extended family, which includes brothers and sisters and their wives and children, and the village, with its strong social sanctions, is a natural unit of cooperation. 2.14 All Basotho are entitled to lands for cultivation, though in prac- tice some are landless because no cultivable land is available. Sizes of holdings vary greatly; where population pressure is low, they may be as large as 15 ac per household; the average is believed to,be less than 5 ac. Enti- tlement is a right of use, not of ownership, and land may not be traded nor bequeathed. Use is exclusive to the individual only until his crops have been harvested; his holding then becomes public grazing until the next crop is planted; but the holder may not be deprived of land rights during his life- time, without good reason. The system admirably suited traditional society when land was plentiful. It is inadequate for the present population and quite unsuited to modern agriculture. 2.15 Apart from their economic value, livestock are exchanged in marriage transactions and used for sacrificial purposes, still important in Basotho life. Under present land use, no owner has incentive to reduce his own livestock, because he cannot control the numbers that others may graze on his land; nor is it normally possible for him to preserve cover on his soil by restricting grazing on it (Annex 2). E. Banking and Agricultural CreditI 2.16 Lesotho has no central bank. Two foreign commercial banks have branches, and the Post Office Savings Bank is popular for small savings. 2.17 Land cannot be pledged, so banks make few loans for agriculture. A few small specialized institutions lend to farmers, mostly short-term for in- puts such as seed and fertilizer; but their funds are limited and they lack experienced staff (Annex 4). The most important is the Co-op Lesotho Ltd (CLL) 1/, formed in 1963 after disastrous earlier experience with cooperative lending for agriculture. Its assets total about US$190,000., It began by making inputs available to individuals and cooperatives on credit. Follow- ing poor experience with individual repayments, it now lends almost exclu- sively to member cooperatives and farmers' asscciations and its recent repayment record is good. In 1970/71 it ventured into marketing, at Government request, with unfortunate results because crop purchase prices set by Government were too high and CLL was left with large unsold stocks. 2.18 Credit has high priority for Lesotho rural development and Govern- ment created the Lesotho National Development and Savings Bank (LDB) as the channel for development financing. The manager is expected in late 1972 but it will be some time before LDB is ready to engage in agricultural lending. III. PROJECT AREA A. General Location 3.01 The project area is about 300,000 ac, comprising most of the Little Caledon Watershed and the Berea Plateau (see Map). Most of it is less 1/ Formerly the Finance and Marketing Cooperative Union of Lesotho (FMCUL). - 5 - than a day's drive from Maseru. Altitude is between 5,000 and 6,500 ft, except on the mountainous eastern boundary (nearly 10,000 ft). Climate, Topography and Soils 3.02 Climate is typical for Lesotho Lowlands and Foothills (see para 2.07, Annex 1 and Chart 6799), rain averaging about 600-700 mm. Lowlands are in- terspersed with steep-sided plateaux and deep valleys; Foothills are gently undulating to steep. Annual area cultivated is estimated at 80-110,000 ac, depending on climate. Only about 75,000 ac are really suitable for permanent cropping; the rest is more suitable for grazing, with very occasional cropping (Annex 1, paras 25-28). Soils vary greatly and many are erodible, needing special protection. Little original natural vegetation and almost no trees remain. Poor annual grasses are dominant in grazing, though better grasses intrude on cropped land after harvest. 3.03 The Little Caledon and several small streams flow perennially; many others are seasonal. Groundwater is available at about 40 meters and there are 29 boreholes in the area. Drinking water is no problem. Communications and Services 3.04 The project area is linked to Maseru by a paved road, and a major secondary road runs through part of it. The rest is served by poor roads and tracks only usable by 4-wheel drive vehicles or animal traffic. There are five light aircraft strips in or near the project area. Roma and Mazenot have postal and telephone services. Roma, main campus of the University of Botswana, Lesotho and Swaziland (UBLS), has a hospital and there are nine field clinics in the area. The Farmers 3.05 Farmers in the project area grow mainly subsistence crops, using ox or tractor power, and employing family labor for weeding and harvesting. Many rely on their extended family groups for labor. B. Production, Extension and Marketing 3.06 Average yields, in a normal year, are low: estimated at 400 lb/ac for maize and sorghum; 500 lb/ac wheat; and 200 lb/ac beans (Annex 5, Table 1). A short season and erratic rainfall demand timely cultivation, and the use of ox or tractor-drawn plows is normal, with very little hand cultivation. Relatively few farmers own their own oxen, fewer still their own tractors. Oxen are weak at plowing time after poor winter grazing, and tractor owners take care of their own land first. Most cultivation thus tends to be late and poorly done. Though tractors are increasing (60 in the project area), effi- ciency is generally poor, due to lack of training, inadequate servicing, lack of capital and delayed payment (usually not until after harvest). - 6 - 3.07 Near Maseru, a few farmers keep dairy cows in fenced enclosures, to supply up to a total of 50 gallons of milk a day to the capital. This will form the basis for the UNDP milk processing and collection scheme, which would also market project milk production. Elsewhere in the project area there is serious overstocking and overgrazing (see paras 2.10 and 2.15). 3.08 The extension service has six officers at certificate level in the project area. Though well trained and enthusiastic, their efforts are circumscribed by lack of credit funds, transport, and an overall extension policy. They are also far too few (abouc 1:3,000 farmers, compared. with about 1:500-1,000 achieved in Kenya, for example). 3.09 Project area grain is marketed through 22 traders, handling an es- timated 65,000 bags annually. CLL has no facilities in the area but it pur- chased about 15,000 bags in 197', loaded directly onto trucks. There are two maize/sorghum mills, each with a total annual capacity of about 40,000 bags. 3.10 Population density is about 200/sq mi in the Lowlands, 100/so mi in the Foothills. Nearly all cultivation is nonmanual and around 150 man- days would suffice to work the average holding, readily available from the extended family. IV. THE PROJECT A. General Description 4.01 The project comprises: the timely provision to about 12,000 peasant farmers, of improved seed, fertilizer and cUlt4vation services; the credit to acquire them; technical agricultural guidance in their use; marketing for the resultant crop; road development; and soil conservation. Over six years, in- cluding about a year of planning and preDaration, it would improve maize, sorghum, wheat and bean production on about 60,000 ac of land which is poorly cultivated at present; and extend dairy farming through the supply of 400 good grade cows to selected farms. Integrated farming would be gradually introduced, aimed at higher levels of permanent agriculture, including im- proved production of livestock. The project would be administered by an autonomous Project Authority within Government. B. Detailed Features 4.02 Agricultural techniques for project production are explained in Annex 5. Details of on-farm costs are in Annex 6. -7- Seasonal Inputs 4.03 The fundamental feature of the project and basic origin of its material benefit, substantially improving crop yields from their present very depressed level, is the supply of seed, fertilizer, pes,ticides and, where required, cultivation services, as a "package" on seasonal credit, each package being designed in units of one acre for the particular crop and location. The incremental cost of 3upplying these inputs is included in project costs. Tractors and Machinery 4.04 One hundred 60 HP tractors, plows and cultivator/planters would be imported and made available on five-year credit, to experienced contractors and to progressive farmers or farmer associations with tractor experience and good agricultural performance. Tractor owners would complete a training course (or otherwise satisfy project staff of their competence) and undertake to: employ project-trained or tested drivers; follow project-approved standards; have regular maintenance carried out; give project farming priority; and work for cash (provided by project credit), not for share of crop or use of land. Dairy Stock 4.05 High quality Friesian and Brown Swiss dairy cows would be imported from South Africa (para 4.22) and made available on five-year credit, to farmers participating in the integrated farming program who had built simple sheds to receive them, and had successfully completed a dairying course. Extension Service 4.06 Except for a few individuals, project farmers would form farmers' associations of between 20 and 100 members to pool resources and obtain credit. The extension service would include the equivalent of one agricul- tural extension agent for about 250 farmers, or one to 6-8 farmers' associa- tions in Year 2, rising to 1:350 farmers, or 1:8-12 farmers' associations by Year 6 (Annex 7). This is not a high intensity, but techniques would be standardized and few, and channelling through associations would greatly help. The high literacy rate of Lesotho farmers and their wives should ensure greater effectiveness of the extension service than in some other countries. Farmers would be advised on proper selection and use of seed and fertilizer, cultivation techniques and timing for crops and proper control and production methods for all their livestock. The service would also coordinate with project marketing, credit and soil conservation to inform farmers of these activities. Training and Research 4.07 Additional staff, buildings and equipirent would be provided for the Matelas Farmer Training Center, which would serve the training and demonstration needs of project extension, credit and marketing services. u would also train farmers In crop and livestock production and simple budgeting; farmers' association secretaries and chairmen in simple administration and bookkeeping; and hold seminars for government officials, traditional chiefs, and others. The Government tractor school in Maseru would be provided with additional staff and equipment and the project tractor instructor would operate from there (Annex 8). DurIng negotiations assurances were obtained that the necessary facilities at the Maseru tractor school would be made available to the Project Authority 4.08 Project research would depend heavily on the existing Government Maseru Research Station, and the substatLon in the project area, wich would be strengthened by the addition of land, housing, simple laboratories and farm buildings. Staff would comprise a research officer, ar.d a field research officer, assisted by research staff from Government, from tne UNDP Leribe Project, about 40 mi north of the project area, and from UBLS (Annexes 9 and 10). They would work under a unified program, but with special attention to the project. Credit and Marketing Services 4.09 Government is proceeding cautiously with provision of credit ser- vices and no institution is yet ready to provide them to the project (para 2.18); nor has Government yet decided on its produce marketing policies. CLL buys produce from its members but has neither staff nor facilities to market project crops. It is important that prolect input supply, credit and marketing be coordinated under the firm control of the Projecc Manager. During the initial period, therefore, the Project Authority would: buy and distribute farm inputs; provide credit; and purchase output, as agent for CLL. 4.10 Farmers are reluctant to produce crop surpluses that they have to sell at poor prices to traders who are not very interested in produce dealing, and unwilling to expand their facilities (Annex 11). The project would therefore provide five principal markets and six subsidiary ones, which would also serve as the channel for distribution of inputs and repayment of credit, and be the focus for extension work. They would be equipped with simple buildings to accommodate expected project production and staff housing. Assurances were obtained at negotiations that Government would see that adequate land was provided free for these markets. 4.11 Marketing staff would be hired and trained by the Project Authority and their net cost is included until covered by market revenue. Marketing staff and facilities would be taken over by CLL at an appropriate time. Details are in Annexes 12 and 13. -9- Roads 4.12 About 90 km of all-weather gravelled main roads, and 100 km of dry-weather ungravelled subsidiary access roads would be constructed or improved (see Map and Annexes 14 and 15). A Roads Engineer would supervise and control road work. Assisted by the Public Works Department and consul- tants, he would design roads and plan construction, to be completed over two to three years. Labor is available, and would be used extensively for road work, though it would be insufficient and uneconomic for major earth- moving, which would be mechanized and carried out mainly by subcontractors, using their own equipment. During negotiations assurances were obtained that the Ministry of Works would satisfactorily maintain project roads. Soil Conservation 4.13 Soil conservation and farm road construction would be carried out by three USAID-recruited senior staff and the Roads Engineer, assisted by 24 man-months of USAID consultancy and the Ministry of Agriculture Soil Conservation Division (Annex 3 F). Soil conservation works would be preceded by aerial photography and preparation of a coordinated agricultural and soil conservation plan for each area. They would comprise approximately 1,680 km of diversion terraces; 600 drainage structures; repair to, or reconstruction of, 4,800 km of terraces; 400 km of 12-ft farm access roads, with associated protective fencing, grass and tree planting. Details are in Annexes 3 and 16. Before implementation of soil conservation works in any area, agreement would be obtained from farmers' associations, chiefs and Government that maintenance and protection of such works, as specified by project staff, would be provided. Suitable assurances to this effect were obtained at negotiations. It would be a condition of effectiveness that an agreement satisfactory to IDA had been signed by Government and USAID for the financing of soil conservation works in the project area. Integrated Farming 4.14 Integrated farming, described in Annex 5, Part B, would lead to higher sustained production and better soil conservation; but it needs changes in traditional land use that cannot be easily or quickly brought about. Farmers would need full rights over their cropping and contiguous grazing land to enable them to change their cropping systems and keep improved stock in correct numbers. Assurances were obtained during nego- tiations that plans for integrated farming, including grazing control and stock limitation, would be submitted to and agreed with IDA at the appropriate time. Parts of the project area have larger than average farms (15-20 ac) and relatively few livestock and about 5,000 ac would be selected to intro- duce integrated farming in Year 4 or 5, based on studies and research in Years 2 and 3. The program would comprise: mapping and measuring of farm holdings; more intensive use of inputs; improved livestock production, with fending and sheds; and a cropping plan to include fodder, grassland and crop rotations (Annex 17). - 10 - Proiect Adiristration 4.15 Project headquarters would be at Maseru, where an office building, store and most staff housing would be constructed on Government land. Details oi staff, buildings, vehicles and equipment are in Annex 18. Phasing 4.16 Farmer demand for project inputs is expected to be keen; but accep- tance of conditions, especiallv proper cultivatior. and maintenance of scIl con- servation, may not occur so readily. Without such conditions, the potentfal of improved seed and fertilizer would not be realized, or not long maintained, and farm income would fall short for credit repayment and generation of a worthwhile cash surplus. Effective institutions for project imlementation are lacking and the first year would be largely occupied with planning, prepara- tion and recruitment. Staff would need to be trained to provide technical guidance, tractor operator instruction and credit and marketing services. There is an acute shortage of such staff in Lesotho which can only be partly remedied by outside recruitment, and the project would only progress as fast as they could be recruited. Based on appraisal estimates of staff availability and training rate, the approximate phasing of farmers and areas of land coming into the project would be: ------------------- Year -------------- Farmers 1 2 3 4 5 6 otal Number 200 1,200 1,600 2,000 3,000 4,000 41200 Cumulative 200 1,400 3,000 5,000 8,000 12;O0 % 2 12 25 50 67 100 Acres Lowlands - 800 2,200 3,000 6,000 6,000 18,000 Foothills 250 750 2 000 3,000 6,000 61000 18 000 Total 250 1,550 4,200 6,000 12,000 12,000 36,000 Cumulative 250 1,800 6,000 12,000 24,000 36,000 Acres/farmer - 1.3 2.0 2.4 3.0 3.0 4.17 This rate of development is a minimum objective and would be speeded up to meet farmer demand, as staffing allowed. Since appraisal, Government has planned to increase certificate and diploma level training, which should ensure adequate staff at this level by Year 2. Project farmers in Year 6 would be about 70% of all farmers in the project area, a high but achievable proportion. Environment 4.18 The project would improve the environment through soil conservation that would restore vegetative cover to eroded land and help control soil loss and the silting of rivers and dams. Farm incomes are slender and cannot bear the loss of crop from serious pest infestation nor the cost of expensive pesticides; small amounts of inexpensive DDT would therefore be used to con- trol nests, under close control of project staff. Less persistent and danger- ous chemicals would be substituted, if found effective and economical. Dressing of seed -would exclude mercurial compounds. - 11 - C. Cost Estimates 4.19 Total six-year project cost is estimated at R 7.8 M (US$9.8 M), of which about US$5.4 M (56%) would be foreign exchange. Estimates are based on recent experience and appraisal findings, including those of USAID. Physical contingencies are applied to roads (20%), incremental fertilizer requirements (10%), and operating costs during development (10%). Quantities of other items are reasonably certain. Price contingencies of about 19% overall are made up from a compounded annual 5% on foreign and local costs and R 50,000 to compensate for the effects of 1972 parity changes of the Rand on the US$ component of soil conservation costs. Project costs are totalled in Annex 19 with details in Annexes 6-18. Summarized Project Cost Estimates Foreign --Rand (thousands)--- --US$ (thousands)---- Exchange 1973/78 Local Foreign Total Local Foreign Total % On-farm Costs 177 744 921 223 937 1,160 81 Technical Services 496 406 902 625 512 1,137 45 Credit Services 250 157 407 315 198 513 39 Marketing Services 608 256 864 766 323 1,089 30 Soil Conservation 763 1,191 1,954 961 1,500 2,461 61 Integrated Farming 72 79 151 91 99 190 52 Roads 190 306 496 239 386 625 62 Administration 303 423 726 382 533 915 58 Subtotal 2,859 3,562 6,421 3,602 4,488 8,090 55 Contingencies - Physical 34 81 115 43 102 145 70 - Price 551 663 1,214 693 842 1,535 55 TOTAL PROJECT COST 94338 5 770 56 D. Financing, Procurement and Disbursement Financing 4.20. IDA would provide US$5.6 M or 57% of project costs, comprising the equivalent of the foreign exchange costs not financed by USAID (US$3.8 M being 39% of total, 70% of foreign costs) and the balance of local costs (US$1.8 M being 18% of total, 43% of local costs) (Annex 20). USAID would provide 29% as a parallel grant to finance soil conservation (except aerial survey and vehicles); Government about 6%; commercial banks 5% for produce financing; and farmers 3% through downpayments. Summarized project financing (including contingencies) would be: - 12 - Farmers Banks Govt. USAID IDA Total ----------------US$ (thousands) --------------- On-farm Costs 280 - 111 120 - 1,070 1,470 Staff and Oerations - 530-- 280 1,220 3,000 5,030 Vehicles and Equipment - - 40 300 350 690 Buildings - - 70 170 650 890 Soil Conservation Works - - 50 1q110 530 1,690 /2 Totals 280 530 560-- 2,800 5,600 9,770 (Percent) (3) (5 (6) (29) (57) (100) /1 Incremental working capital for crop purchases. 12 .Including UNDF US$40,000. Financial Imolications for Government 4.21 Financial implications for Government are illustrated in Annex 21. By convention, the Lesotho Government receives revenue from the Customs Union based on the total value of all dutiable imported items in the Custcs Union related to total estimated Lesotho imports, whether duty is paid or not. Although Government imports are duty free, their value is included in the allocation to Lesotho. Revenue corresponds to about 20% of the value of imports at the Lesotho border. On-farm and marketing costs would be fully recovered from farmers; funds generated by the project to meet other costs would be: interest from project borrowers; duties and taxes generated by goods purchased by farmers with their higher project incomes; an average 4.5% income tax on salaries of project staff; and rents from pro-ect houses. Annex 21 shows that Government cash flow would be positive from Year 2 until about Year 21 when IDA annual debt service would be R 150,000 (US$189,000), and estimated annual net outflow R 100,000. By this time, project farmers should have moved on to integrated farming with appreciably higher incomes (though still less than an estimated US$180) and would consequently generate more tax revenue from their spending. Government .uuld also have revenue available from a development levy on income tax and the Maize Meal Fund to cover the balance, In view of the above, and having regafd to the modest farm incomes, no development charge to project beneficiaries is proposed initially (see para 6.11 Procurement 4.22 Procurement of vehicles, tractors, farm equipment and fertilizer (US$0.9 M) would be in accordance witlh Bank/IDA guidelines. The successful bidder for tractors would have, or undertake to provide, adequate servicing in Maseru or the project area. Tractor orders would be bulked each year and operators financed under the project would purchase tractors from the successful bidder. Project imports would be duty free. To facilitate initial project implementation and emergency purchase of replacements, the Project Manager would procure items of equipment up to an individual value o US$8,000 and a total value of US$60,000 by local competitive tender. Roads (US$0.67 M) would be in small sections and buildings (US$0.6 M) few in number and widely scattered. They would not be sufficient in value to attract international competitive bidding and would be subject to Govern- ment local tender procedures, which are satisfactory. Dairy cattle (US$60,000) would be bought, subject to project staff guidance and approval, from South Africa where they are suitable, acclimatized and plentiful. -13 - Most would be purchased by farmers directly; others by project staff, on th their behalf. Seed (US$144,000) would be purchased from South African cooperatives and seed firms, which offer good quality, keen prices and, most importantly, varieties acclimatised to local conditions. USAID would procure the soil conservation equipment it financed (US$0.3 M). Suitable assurances as to procurement were obtained during negotiations, including assurances that draft tender documents for all contracts exceeding US$50,000 would be submitted to IDA for approval before invitations were issued; that bid analyses and recommendations for award would be submitted to IDA for comment before award; and that project purchases would not be limited to brand names on Government's official purchase list. Disbursements 4.23 For imported goods, disbursements would be made against 100% of CIF value if internationally procured, or 90% of the total value if locally procured. For the services of expatriate staff, 100% of costs would be disbursed. Disbursements for other project costs would be against 90% of total expenditure on the basis of a certificate of expenditure, the documen- tation for which is not submitted for review, but is retained by the Borrower and available for inspection by IDA during project supervision. Any surplus credit amounts would be cancelled. A disbursement schedule is at Annex 22, Table 2. V. ORGANIZATION AND MANAGEMENT Project Control and Operation 5.01 The project would be implemented by an autonomous Project Authority to be created within the Government. This Authority would comprise the Senior Permanent Secretary, Chairman; the Permanent Secretaries for Agricul- ture, Finance and Works; and a senior representative each from the Planning Office and the Ministry of Interior. The members of the Authority would decide on policy, approve budgets and, with IDA's approval, recruit senior staff. Meetings, with the Project Manager as Secretary, would be held at least quarterly. 5.02 The Project would be administered by the Project Manager who would be fully responsible for project operations. Other senior staff would com- prise the Financial Controller and the Heads of the three divisions: Land Planning and Soil Conservation; Extension; and Marketing/Credit (Chart 6770). They would be supported by 6 professional, 15 technical and administrative, and 80 general service staff. The Bank's Agricultural Development Service in Nairobi is providing the Project Manager; USAID would provide the senior Soil Conservation staff. Assurances were obtained at negotiations that the above senior staff, satisfactory to IDA, would be appointed, and it would be a condition of effectiveness that the Project Manager had been appointed. 5.03 Involvement of-the farming community would be encouraged by com- mittees at all levels with a Project Liaison Committee in Maseru, under an elected chairman, comprising: four farmers' representatives, elected by area committees; four representatives of the Principal Chiefs; and one representative each from the Ministry of Agriculture and the Planning Office. Other members would be co-opted as required. This committee would be the forum for farmers' views and problems and would aim to meet monthly, with the Project Manager in attendance. 5.04 The Project Authority would be a developmental, not a service, organization with functions not normal to a Government department, operating at varying intensities (at first employing as many staff as the entire Minis try of Agricuture). It would need to respond quickly to changing com- mercial and farming conditions. It would employ specialist staff, including some with good practical background but not necessarily with academic qualifications needed for the civil service, and would need to offer terms and conditions different from, but attractive enough to match, more permanent civil service employment. An average project allowance of 12.5% above equivalent establishment pay is provided for. During negotiations terms and conditions of employment of project staff were eubstantially agreed with. TDA and assurances obtained that they would be implemented. 5.05 For all these reasons, simple legislation was necessary to give the Authority the required freedom of action and substitute Authrity control for Government regulation, e.g., for staff selection, contract hiring, salary scales and project allowances, procurement and tender boards and accounting procedures. It would also enable the Authority to buy and sell crops as an agent or on its own account, if necessary. At negotiations, suitable draft legislation was agreed with IDA and assurances given that such legislation would be implemented before disbursement. Staffing 5.06 Seplor staff would need to have extensive administrative experience, praferably with simiilar rural development projects in Africa; and training would be an Important part of their job. While every effort would be made to hire suitable Basotho, it is unlikely that many would have the right experience. Cost estimates are therefore based on international recruitment of key staff, with training of Basotho deputies to take over as soon as they are ready. 5.07 Project extension officers would have acquired field training and experience in the Ministry of Agriculture. Government is illing to allow some, dismissed during the 1970 political upheaval, to be employed in the project. Assurances were obtained at negotiations that Governme-t would second staff for the project, if requested by the Project Authority. 5.08 Basotho have a high rate of literacy at primary school level, and many acquire useful practical experience in South Africa. These, and secondary school leavers, are expected to be sufficient and suitablie for training as credit and marketing staff, crop demonstrators and others, if they are vigorously recruited and the proposed pay scales are adopted. Credit 5.b9 Credit would be provided through the Project Credit Account, a revolving fund increased each year by the Treasury to meet the season's needs. Credit funds from Government and from farmers' debt service would be paid into the account. It would be controlled by the Chief Credit and Marketing Officer, assisted by the Deputy Credit Officer, credit assistants trained at Matelas (para 4.07), and accounting staff. Government may wish to channel credit funds through LDB (Annex 4, para 19), once it has become functional. During negotiations assurances were obtained that IDA's agree- ment would be obtained before this channel is chosen. The conditions under which the ProJect Authority would then operate on behalf of LDB would need to be stipulated in a formal agreement. Assurances that such an agreement would be submitted to IDA for prior alproval were obtained during negotiations. - 15 - 5.10 LDB is empowered to seize all farm assets of delinquent borrowers and to take over and farm their lands until its debts have been serviced. However, LDB is not yet operating, and exercise of these powers might not be practicable, in view of traditional land tenure. Input credit would therefore generally be tied to farmers' associations, whose members would be collec- tively responsible for their project debts. To be eligible, a farmer would normally have to be a member of an association approved and registered with the project; only exceptionally would an individual be accepted as credit- worthy on his own. The association would assure that each farmer applicant: had asked for project credit; had rights to sufficient lands, which had been registered with the project; worked his lands regularly and well; and would himself be, or would see that a competent member of his extended family was, resident near the lands to be farmed. Furthermore, the asso- ciation would agree to accept responsibility for the applicant's project debts if he were in default. 5.11 Each accepted farmer would also be registered with the Project Authority and receive a credit record card. Initially, project staff would assess each farmer's capability; but associations would take this over as they became established and accepted as reliable. 5.12 Seasonal Credit: All seasonal input credit (para 4.03) would be in kind, with crop inputs delivered through market depots, where project staff would ensure that project, association and farmer records were consistent. Each farmer would pay in advance, 10% of input cost as his contribution, 10% as a bad debt reserve, and 10% as a crop failure reserve. The interest rate on outstanding amounts (80% of the input credit and bad debt) would be 1% per month. The crop failure reserve would be credited to a savings account at interest until it reached 100% of input value, to be drawn as the Project Authority approved. Credit schemes run by Church missions and CLL require deposits of up to 50%, so these advance payments should not prove too onerous. The bad debt reserve would be refunded to an association on full repayment of its members' credit for the season or to a paid-up individual farmer and no member of a defaulting association or a defaulting individual would receive project inputs or credit for the next season. 5.13 Farmers' credit would be collected as produce was sold. The project relies on the sanction of input/credit refusal and on the communal spirit of associations (see Annex 2, paras 12-14) to ensure repayment. Experience suggests that net proceeds, after debt service, could be higher than gross proceeds paid by traders, so the temptation to by-pass project depots and avoid debt repayment may not be great. Nevertheless, in view of the importance of successful credit management, and previous poor credit history in Lesotho, assurances were obtained at negotiations that the Authority would promptly exercise all available remedies to support project debt collection. 5.14 Medium Term Credit: Tractors and Dairy Cows. Deposits for tractor credit would be 25%, for dairy cows 50%. The annual interest rate charged on the outstanding amount would be 9%, which is lower than the 10.5% charged on the few loans made by commercial banks, but borrowers would be subject to stricter candstions a under close project contrAl. Repayment of the traector Saoa =0d be partially through the farmers' repayments for tractor opera- tiono Mc sould be direetly creditad to the traector owner's account; the rgmrinder is av7=d to be small, and would be paid by the owner through e -r t r operations. epayment of loans for dairy cows would be from eho ate of milk and yearlings. Although the Project Authority wou6 have en d M control over thase sales, the nuber of these loans and ir r in the integrated farming area would limit the risk of Wcfulä. Marketng. 5.15 Yarketing wculd be controlled by the Chief Credit and Marketing Officer, rsåstad by a Deputy Marketing Officer, marketing assistants/erop graders trined et Matelas, and accounSing staff, on behalf of CLL Under a formci agrremt, the Project Authority would work closely with CLL in deciK PrAC3 and sele channels. During negotiations, assurances were oAvrnmnt would permit CLL to operate on commercial lines and that Sn fåräng prices, it would have regard to market conditions and farmers' incentives. Sultable assurances were lso obtained that funds for crop purcheza uould bo provided by commercial banks, as they are nov provided for CLL, en aord=aft at prime rate (currently 9% per year), subject to Govern- ment guarantce. 5.16 Mousing would be of standard Gevernment design and markets would be prefabrieated. Building vould be supervised by the Ministry of Works and carrie ut by subcontractors. Assurances were obtained from Government at negotitionv, Mht adequate land for project buildings and houses would be made PreMPtAy available. Accounts and Audit 5.17 Tie Project Authority would kcep separate accounts in commercial form, shawing the results of its different activities, e.g. credit, market- ing, Ty would be prepared annually for audit by the Auditor-General within three oth of the financial year end. Quarterly summary, and draft and cudftgd annual, accounts would be submitted to the Project Author- ity Wd 1A Suitable assurances wern otained at negotiations. 5.18 A would be provided from the Treasury through a one-line Budget vote. USAID fundz would be provided by a direct grant. The Project Author- ity would forgeast quarterly funds required, net of inflow (e.g. from inter- est and loan repayments), and these would be provided in advance to a project bank accoun, the Project Manager being appointed a Chief Accounting Officer for this purpose. Assurances to this effeet were obtained during negotia- tions, - 17 - Monitoring 5.19 A Project Evaluation Officer (agricultural economist), assisted by a sociologist, would be responsible for monitoring project progress, including farmer performance, and collect data for the preparation of future projects. He would submit annual reports through the Project Manager to the Project Authority and IDA, within three months of the year end. Suitable assurances were obtained at negotiations. VI. PRODUCTION, MARKETING AND FARERS' BENEFITS A. Production and Yields 6.01 Production and yield information is scanty. This Section is based on a few past surveys, Ministry of Agriculture data and field observation. 6.02 The acreage of crops grown each year tends to fluctuate according to season, with areas left unplanted when the rains are late or poor. In the project area, about 100,000 ac are cropped most years, of which 25,000 ac are marginal, on steep slopes or land that ought to be used for grazing only. 6.03 Estimated annual yields without and with project inputs, and with the integrated farming program are: Crop Without With Integrated Yields Project Project Farming lb lb lb Maize 400 1,600 2,400 Sorghum 400 1,600 2,400 Wheat 500 1,400 2,000 Beans 200 900 1,200 Estimates "with project" are based on trials (Annex 9, page 3), observation of yields actually obtained by progressive farmers in the field, and experience in other countries (notably Malawi) where similar inputs have been applied - having regard to different soil and climate. They are believed to be achiev- able by the average project farmer. 6.04 Farmers who do not directly participate would nevertheless benefit from better roads, markets, prices, and better availability of cultivation power. This benefit is estimated to occur towards the end of the project period and to amount to about 200 lb/ac of mixed cereals. 6.05 Production of wool/mohair is assumed to remain unchanged. Project dairy farmers would each produce approximately 250 gallons/year of fresh milk and sell the equivalent of one yearling calf every three years and one cull cow every five. - 18 - B. Markets and Prices 6.06 All project sorghum, wheat and beans and half the maize would be exported, the other half being milled for local sale 1/, Two-thirds of the beans would be consumed in South Africa, the rest sold on the world market. South Africa is bound by the Customs Union (see para 2.04) to accept Lesotho surpluses, so long as free circulation of farm products across its border continues. Project maize, sorghum and wheat would each be less than 1% of South Africa&s production. Project beans represent less than 10% of South African bean/pea production and 70% of 1970/71 production of Small White Haricot beans, consumption of which is expected to continue increasing at about 2.5%/year. World market demand for the small excess is satisfactory (Annex 11). 6.07 Marketing of the kinds of crops to be grown by the project is con- trolled in South Africa by Marketing Boards. These fix prices for maize and wheat, and guarantee floor prices for sorghum and beans. Grain prices have increased over the past five years at average annual. rates varying from 1 to 3.5% (Annex 11, Table 6). Production is expected to follow consumption trends, and producer prices to remain at their present level at current Rand values. Bean prices have been steady over the last five years but are ex- pected to decline as Lesotho production meets South African demand with sur- pluses for export; however, they would still remain somewhat higher than world market prices (Annex 11, para 12). Farmers' prices per 200 lb bag, best grade, are forecast for maize at R 3.00 (US$42/ton), sorghum R 2.70 (US$37.5/ton), wheat R 5.20 (US$72.2/ton) and beans R 13.0 (US$180.5/ton) (Annex 11, Table 8) . Information on world markets for beans was obtained from South African brokers and is con-firmed by the Bank's Economics Depart- ment. C. Farmers' Beneafits 6.08 Farm budgets in Annex 23 are based on several farm models and appropriate packages of farm inputs. In place of subsistence, with annual cash of about R 18/20, a wheat farmer (probably in the Foothills) would have, in addition to his subsistence, about R 55 annual net cash income; a maize/ sorghum farmer (probably in the Lowlands) about R 45. Both would have the prospect of integrated farming with net income, from the same acreage, well above R 100. Beans are the most profitable crop; but net profit is not the only criterion on which farmers base their cropping decisions, and a basic food crop would probably always be grown until more advanced integrated farming is adopted. 6.09 The budget for a wheat farmer shows that, in a year of drought, he would need the crop failure reserve to service his debts, with about R 10 to spare. 1/ Although Lesotho is a net importer of maize (para 7.01), it sells maize grain for milling in South African mills. - 19 - 6.10 One milk cow would produce an annual net income of about R 50. 6.11 Farm incomes, even with the project, are modest; and farmers would be asked to make changes that are risky to them in relation to achievable benefits. No general development levy is therefore proposed initially, because it would discourage farmer participation in a novel, but important, venture. Government undertook to consider a development levy at a later stage, when the project is sufficiently well established, participation proved profitable and integrated farming substantially introduced. VII. ECONOMIC BENEFITS AND JUSTIFICATION A. Economic Benefits and Costs 7.01 The project would, from year 6, increase annual cash production of maize by 4,600, sorghum by 3,100, wheat by 7,000 and beans by 4,100 tons. This compares with annual consumption of 150,000 tons maize and sorghum, of which 25,000 tons mainly meal are imported. Total annual gross value would be R 1.2 M (US$1.5 M). 7.02 The project would reduce dependence on imports, increase exports, and help to feed a growing population. It would substantially improve the standard of living for about 12,000 farm families and lay the foundation for still further improvement. New crops, such as sunflower and seed potatoes, are likely to be grown by some farmers, but the profitability of such crops and the amount that would be grown cannot be forecast. 7.03 Grain and beans are valued at the gross price, average grades, delivered nearest South African market (Annex 11). All values are less bags and cleaning cost. 7.04 Investment costs are included at their financial value. Allocation of senior staff costs is expected to decline as the project becomes estab- lished and staff become involved in other projects, or are phased out (Annex 24). Other project services, except credit and marketing, are likewise ex- pected to be reduced in intensity as the project becomes established. 7.05 Family labor on project farms would work more effectively but would not increase in numbers. No farm labor cost is therefore attributed to the project. 7.06 The benefit of soil conservation is particularly difficult to evaluate. It is certain that, without it, yields would decline steadily, even from their present low levels; and yields forecast for the project would not long continue. Soil conservation is therefore vital to the project. The benefit depends on how quickly soil fertility would decline, and on the value of crops that would consequently be lost without it; and no reliable information is available on either factor. Observers with conservation and agricultural experience estimate that yields without the project, on land badly affected by soil erosion, would fall steadily at a rate of about 5% per year from 400 lb/ac to 200 lb/ac of mixed cereals. On this basis, the annual rate of return from soil conservation alone would be about 10%. - 20 - B. Rate of Return and Sensitivity 7.07 Soil and climate limit the potential for Lesotho agriculture, and project crons, except for beans, are not of high value. Since this would be the first project of its kind in Lesotho, project overheads and training are a high proportion of total cost; and the scale of operations would inevitably be small to begin with; but replication could follow success and future projects of a similar or more advanced nature would have higher returns , not only because overheads would be spread over a larger operation but also because results could be expected to improve as the project moves into and extends integrated farming. The estimated rate of return to the economy of Lesotho is sensitive to price, yield and timing; on various assumptions, over a 25-year project life, it would be: Basis Percent Most probable, including soil conservation (but see comments on soil conservation benefits in Annex 24) 11 No separate benefit from soil conservation 6 Prices increased 10% 13 Prices decreased 10% 8 Phasing advanced one year 15 Phasing as forecast, with integrated farming extended to cover 36,000 ac by Year 13 14 Yield variation would have about the same effect as price variation. 7.08 The project would immediately improve crop yields, but the ultimate goal is to extend integrated farming throughout Lesotho. This will require fundamental changes in Lesothan agriculture which cannot be quickly made. When they are made, the benefits would be substantial. The rate of return on integrated farming alone would be within the range 15-20%; but without the initial step which the project would take, integrated farming is unlikely to be widely accepted. Risks Involved in the Project 7.09 The rate of return is most sensitive to timing and every effort would be made to improve it, with good prospects of achieving such improve- ment if trained staff become available more quickly than forecast; but the staffing constraint and present lack of institutions cannot be ignored (see paras 4.16 and 4.17). - 21 - 7.10 Although adverse factors, such as weather, have been taken into account in calculating the rate of return, the project would be subject to many uncertainties that cannot easily be quantified. Success depends, for example, on overcoming resistance to change in a traditional society, which would affect the willingness of farmers to accept new techniques, including enclosure and livestock limitation, and to maintain soil conservation works against insidious erosion; on persuading tractor operators to use more efficient methods; on prompt collection of credit, in the light of past failures. But farmers in the project area show willingness to accept change and enthusiasm for the project, while Government offers fervent support and has publicized the project extensively. The chances of success are there- fore good. The project is extremely important to Lesotho, which has few alternatives for economic development. VIII. AGREEMENTS REACHED AND RECOMMENDATIONS 8.01 During negotiations, agreement was reached on the following principal points: (a) the Ministry of Works would maintain project roads (4.12), but soil conservation works would be protected and main- tained under satisfactory arrangements between project staff and farmers' associations and chiefs (4.13); (b) plans for integrated farming, grazing control and stock limitation would be agreed with IDA prior to implementa- tion (4.14); and Government would implement existing legislation in support of mixed farming (4.14); (c) senior staff, satisfactory to IDA, would be appointed (5.02) and their terms and conditions of employment would be agreed with IDA (5.04); (d) funds for credit to farmers would initially be channelled through a Project Credit Account, but if transferred to the Lesotho National Development and Savings Bank, it would be under terms and conditions acceptable to IDA (5.09); Govern- ment would fully support debt collection and promptly prosecute delinquents (5.13). 8.02 Conditions of effectiveness would be that: (a) an agreement satisfactory to IDA had been signed by Government and USAID for the-financing of soil conserva- tion works in project area (4.13); (b) the Project Manager had been appointed (5.02). December 31, 1972 E E ANNEX 1 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Agriculture in Lesotho and the Project Area A. Lesotho The Pattern of Agriculture 1. Three ecological zones, Mountains, Foothills and Lowlands, divide Lesotho and determine the pattern of agriculture. The Mountains are devoted mainly to summer grazing for most of Lesotho's livestock that, in winter, graze crop residues and permanent grassland on the Lowlands and Foothills. In recent years, an increasing area of the Mountains has been cultivated for wheat and other crops. The Foothills (average altitude 7,000 ft) are deeply dissected by steeply sided valleys of the drainage system and some of their cropping land is on steep slopes. The Lowlands (plains around 5,500 ft altitude in the west of the country) are flatter, less divided by valleys, and have more arable land. Because more people live in them, they suffer greater pressure on the land and more erosion. 2. Foothills and Lowlands are cultivated wherever possible, with patches left to rest only when crop yields become too low or erosion is too severe, to make cultivation worthwhile. What is not cultivated is unusable for agriculture, or only usable as permanent grazing. Crops in both zones are similar, with more wheat and peas in the Foothills and more beans, maize and sorghum in the Lowlands. 3. Maize and sorghum comprise 75% of the total cropped acreage, over half being maize. Beans and peas comprise about 10%, with wheat also 10%, being planted as a winter crop on land where moisture has been conserved in fallow during the wet summer months. The remaining 5% is fallow. Beans and peas, with their shorter growing period, are often planted when rains are late or cultivation has been delayed, giving the farmer a second chance and somewhat reducing the adverse effect of variable rainfall. Yields are low because of continuous cropping, poor seed, late and inefficient cultivation and lack of phosphates and nitrogen in the soils. Climate 4. Mean annual rainfall ranges from 560 mm in the south to 900 mm in the north; less in the Lowlands, more in the Foothills, and most in the Mountains. The May/September winter months are dry, and the summer growing season is October/March (Chart 6799). Distribution is very uneven, as are annual totals. Tables 1 and 2 give monthly and annual rainfalls for two stations in or near the project area. ANNEX 1 Page 2 5, Tables 3 to 5 show monthly rainfalls for years of relative drought, in which there would be severe reduction in crop yields - the criteio' 7eing two or more monthly totals of less than 50 rmm in a six- mot oi eriod. Such adverse conditions occur, on average, about one yena ve. Ho?ever, even in a very bad year, four months of rain above 50 m nerlny always occur, so that farmers can plant a catch crop of beans or sor3-um or shift to winter wheat to give them somwe return. Chart 6800 shows statistical probabilities of rainfall by month for thc wet season. There is an 80% probability of a monthly 50 mm or more for most of the wet months. Rail occurs every year in erratic patches throughout the country and affects most crops to some degree. 6. Lesotho temoeratures vary greatly, with a high maximum simmer 3, C and a minimum -110C. Sub-zero temperatures occur frequently between April a d Sep-ember, especially in the Mountains, and have actually been recorded in every month of the year. Relative humidity at kaseru ranges from 36% to 71%, lowest in winter, highest in the wettest spring and summer months. Crooping Patterns 7. The cropping potential varies between Lowland and Fcothill areas. Pooth.Il soils are more fertile and offer a wide choice of Irops. However, slopes are steeper, communications more difficult, temperatures slightly lower, and growth periods slightly shorter, thus discounting any appreciable difference in yields until higher levels of farming are achieved. Maize, sorghu=, beans, wheat and vegetables, in that order, are the important crops both in acreage and for food. 8. Maize is grown as a first crop, beir-g the most important food cereal, either green or as grain for maize flour. Sorghum is second, as malt for brewing but also as grain for flour. Sorghum is important also be- cauge of ite slightly shorter growth period and its greater resistance to drought. s possib l the best and safest crop from an agricultural view point. Benns are grown in the traditional manner as a mixed crop amongst the two cereal crops and in small gardens; and also, more recently, in greaser acreages as a cash crop in pure stands. Dwarf varieties, grown throughout Africa, are used, with a preponderance of White Haricot and Michigan pea bean for export. 10. Wheat has been grown for many years in small quantities as a winter crop. Vegetables, although not shown in crop statistics, are grown in enclosed gardens, maize, green beans, potatoes, sweet potatoes and cabbages being the most popular. Some fodder is cut for winter in the form of maize and bean stover (the stalks after harvesting) and volunteer blue grass. The bulk of crop residues, regardless of ownership, are communally grazed to the ground at a signal from the chief, when all live- stock from the local traditional villages are turned loose. ANNEX 1 Page 3 Cultivation 12. Unlike most African peasant communities, little or no hand cultivation, apart from some weeding, is carried out. The farmer relies on the use of work-oxen - either those of his extended family, or those of an outside owner, usually under some sharecropping system (see Annex 2, paras 35-38) - or on tractors, owned by private contractors or the small Government tractor hire agency. About 25% of tractor work is for cash. 13. Tractors are scarce, as are oxen; the latter are weak after winters on short commons. Cultivations thus tend to be late and scamped, parti- cularly on the smaller holdings. This is probably the greatest limiting factor after lack of fertilizer for good crop yields. Rainfall is erratic and marginal and crops must make full. use of available moisture in the growing season. Therefore, early planting of seed, good cultivations to ensure rain penetration, and weed-free fields to reduce water competition, are important; but they are seldom achieved and great variability in crop yields can be seen over the arable areas. 14. The agricultural population lacks able-bodied males, some 40% being absent outside Lesotho; but this is balanced to a great extent by reliance on ox and tractor power, so that the average unit of five acres can be run with some 150-200 man-days of work per year, a figure within the reach of a normal family even with able-bodied males away. Fallow and Moisture Conservation 15. Previously, cropping was discontinued on worked-out soil which was left fallow to rest and revert to natural grazing for regeneration. With the rise in population, less and less land is rested, and progressively steeper areas are being brought under cultivation. However, some short-term summer fallowing is practiced when winter crops, such as wheat and peas, are grown and land is cultivated periodically, but not planted, during the wet summer to conserve moisture for the winter crop. The same field cannot normally support two crops in one year due to low rainfall. Livestock 16. Environmentally, Lesotho is more suited to livestock production than crops. The people are stock farmers by tradition and choice, though they value numbers rather than production. 17. Some million livestock units have been carried on the grazing areas and crop residues since the 1940's, with little change in the composi- tion or in total numbers of effective grazing units (Table 6). This tends to support the argument that Lesotho has been overstocked for a long time, with numbers controlled only by drought and starvation. 18. Livestock are kept in the traditional manner firstly as capital and for ceremonial and social commitments and only secondly for production. However, milk is drunk and is in demand. Small stock are occasionally ANNEX 1 Page 4 slaughtered for food and sold for cash and they provide wool and mohair, the most important agricultural export, and livestock products. 19. Tn the suimer an appreciable migration of livestock, particularly cattle, takes place to the mountain grazing, with a return at harvest to Low- land and Foothill villages to graze crop residues and surrounding permanent pasture. This sytem, with no restriction on numbers, overgrazes the permanent pastures, denudes the soil cover and causes a large part of the erosion to which Lesotho is so prone. 20. A two-way livestock trade exists with South Africa, young store animals being imported for fattening (bought by mine worker's savings or bartered, two to one, for larger animals). Conversely, both young and old finished animals are exported for fattening or slaughter. 21. The demand for milk is relatively high in Lesotho, with an annual importation of some R 500,000 of dairy products. A few individual cow keepers supply milk to private buyers in and around Maseru. UNICEF has embarked on a joint program with Government to set up a pasteurizing and packing plant to supply and process some 250 gallons daily of locally produced milk. 22. Cattle are a hardy type, being a mixture of European and Afrikander breeds of the type kept by neighboring South African farmers. The original humped Zebu cattle have disappeared. 23. Sheep are also a mixture of hairy indigenous types with a strain of merino from across the border. The latter give around 4.5 lb of medium to poor quality fine wool, depending on the proportion of indigenous blood in the animals. 24. Goats are of the Angora type almost exclusively, and are shorn annually giving about 2.5 lb of mohair per animal (compared with a South African average of 4-5 lb). The Ministry of Agriculture runs ram and billy goat improvement schemes and encourages the formation of wool associations for shearing, grading and marketing of both wool and mohair. These products are very important to the small farmer. The limiting factor is communal grazing, which leads to nutritional shortages in bad years and in the winter. Rational stocking combined with winter feeding, and the use of good rams, could reduce the presently high lambing losses and probably double production. B. Project Area Land Use 25. The total area of the Little Caledon Watershed and Berea Plateau, which comprise the project area, is some 300,000 ac. Of this, it is estimated that 25% is unusable, 25% suitable for permanent grazing only, and the remaining 50% a mixture of arable, grazing and eroded, steep or rocky land. Of the latter 50%, about half (75,000 ac) is suitable for permanent arable cropping. A further very approximate 25,000 ac of steep slopes and thin ANNEX 1 Page 5 poor soils are cultivated, though more suited to permanent grazing. These proportions vary, depending on the amount and timeliness of the rains, and the arable land is divided roughly equally between Foothills and Lowlands. The following is a tabulation (acres): Category Arable Grazing Unusable Total % Unusable Land - - 75,000 75,000 25 Grazing Only - 75,000 - 75,000 25 Mixture of Arable, Grazing and Eroded or Rocky Areas 75,000 50,000 25,000 150',000 50 Total 75,000 125,000 1OO,00 300,000 100 Soils 26. The project area, with typical Lowlands/Foothills climate (paras 4 - 6), contains a wide range of soils comprising most of the types found in Lesotho. There are large acreages of Eutrophic Brown soils which are amongst the best in the country. A broad reconnaissance soil survey was carried out in 1966-67. 1/ While inadequate for detailed cropping recommendations, it contains the best available information on soils and land capability. Acreages of major soil types surveyed within the area are: Acres Percent Lithosols on lava/calcimorphic soils 37,000 14.4 Lithosols on rocks rich in ferromagnesium materials/eutrophic brown soils 24,700 9.6 Lithosols on sedimentary rocks/sedimentary rock debris 107,600 41.8 Eutrophic brown soils/vertisols 45,100 17.5 Lithosols on sedimentary rocks/ferralitic soils 3,000 1.2 Ferralitic soils/lithosols 3,600 1.4 Claypan soils (Maseru set) 22,500 8.7 Vertisols of topographic depressions 4,000 1.5 Fersiallitic soils 10,000 3.9 TOTAL 257,500 100.0 1/ D.M. Carroll and C.L. Bascomb: "Notes on the Soils of Lesotho". ANNEX 1 Page 6 Vegetation 27. The project area is heavily cultivated and grazed with considerable degradation of the natural vegetation and an almost complete lack of trees. The area was originally covered with natural sweet veldt grazing dominated by Red Oat Grass (Themeda triandra) with Cymbopogon, Setaria and Fragrostis spp. showing at lower altitudes. With extended overgrazing, poorer annual grasses of sporobulus, eragrostis and aristida spp. are dominant and cannot support the quality or quantity of stock, nor provide the soil cover necessary to minimize soil erosion. A Blue Grass (paspalugm laevitolium) invades crop lands at harvest time on the better soils, providing cut fodder and grazing of a good nutritional value. As it readily seeds itself and is aggressive as well as heavy yielding, it would provide a good start to any program of fodder provision or grazing for better stock keeping. 4 2droog 28. Both the Little Caledon and its main tributary, run through the project area. Together with the many small streams feeding them, they provide adequate drinking water over the district. Subsurface water is available for boreholes at around 120 ft with 20% failure rate. Although silt loads are high and the rivers show great stream flow variability, there may be opportu- nities for irrigation of approximately 3,000 ac at the lower end of the project area; but information is lacking and it is not included in the project. A number of small earth dams have been built in the area for stock watering and minor garden irrigation. The sandy, high sodium, valley soils are unstable and unsuitable for dam construction. The Community Development Department has a program bringing piped water to villages from rivers, borehole or dams, generally powered by windmills. 52 out of 90 villages in the project area are already completed with a further 10 per annum scheduled for the next three years. This represents one of the highest water development rates found in Africar rural areas. The costs runs around R 2,000 with the village inhabitants producing 25% in cash and 25% as labor for the water scheme with Government and aid agencies such as OXFAM producing the balance. Attached: Tables 1 - 6 Charts 6799(R) and 6800(R). June 30, 1972 ANNEX I Tables 1-2 LESOTHO THAA BOSIU RURAL DEVELOPMENT PROJECT Rainfall Totals for 50 Years at Maseru (Millimeters) ------------------------Wet Season------------------------ --------*---Dry Season--**----------- ------------Totals---- ---------2 Water Year- Oct Nov. Dec. jan. J mr. A m june july Ag Set. Wet W.Yea- C. Year 1920/21 - - - 74 139 136 59 35 - - - 20 - 56 - - 1921/22 38 148 187 94 53 14 - 20 45 6 13 2 535 87 623 840 1922/23 84 113 64 135 131 62 40 22 37 18 11 - 633 90 723 512 1925124 25 67 27 76 63 210 16 10 3 - 1 56 488 72 559 580 1924/25 83 80 79 82 147 217 98 64 - - 4 38 789 108 897 681 1925/26 63 37 32 96 38 116 19 12 9 - - 21 405 44 449 788 1926/27 78 52 69 82 96 179 11 2 - 19 31 7 569 61 630 515 1927/28 74 39 121 181 87 60 35 - 2 - 10 15 600 29 629 665 1928/29 59 99 80 114 32 123 14 47 46 31 15 99 522 239 761 632 1929/30 21 77 120 37 85 156 84 19 4 1 24 2 562 51 612 741 1930/31 52 48 59 124 110 73 161 2 - 48 - - 630 51 681 554 1931/32 81 130 68 61 95 102 4 29 2 1 - 40 542 73 616 801 1932/33 29 63 107 26 17 63 26 9 8 12 - 8 334 39 373 537 1933/34 5 221 194 330 50 123 130 78 - 21 24 17 1,056 143 1,199 594 1934/35 71 147 122 62 94 156 80 31 16 - 23 8 735 80 815 1,119 1935/36 44 90 152 37 121 75 31 56 - 1 - 1 544 59 613 761 1936/37 86 161 98 150 119 77 18 17 1 10 1 24 710 55 765 671 1937/38 22 104 60 84 176 31 97 14 25 8 14 9 577 72 649 607 1938/39 93 69 81 162 157 39 8 30 - 23 38 10 612 103 716 706 1939/40 127 127 47 33 103 84 70 41 8 7 - 63 595 120 715 774 1940/41 22 117 62 173 163 64 97 - - 18 3 19 702 42 744 616 1941/42 82 1 20 173 75 98 50 6 - - 53 19 502 80 582 645 1942/43 129 149 145 121 34 48 143 53 - 86 89 6 772 236 1,009 982 1942/44 116 213 162 130 102 65 5 25 55 - 25 797 107 904 1,077 1944/45 57 48 10 77 94 114 5 22 - 2 - - 408 25 433 529 1945/46 16 43 52 148 27 92 59 52 5 2 - 13 440 74 525 428 1946/47 67 31 63 49 119 72 80 9 2 7 - 62 484 81 565 564 1947/48 94 65 115 135 33 216 83 137 1.2 - - 743 40 783 678 194E/49 28 29 19 93 70 67 20 25 10 7 -2 19 329 64 394 585 1949/50 60 75 96 77 96 210 161 80 15 36 89 14 777 236 1,013 549 195C/51 36 28 106 132 90 62 51 8 5 2 5 16 508 39 547 953 1951/52 113 31 40 178 71 63 17 13 6 47 22 29 516 120 636 561 1952/53 36 88 74 50 145 63 103 16 4 - 14 8 560 44 604 650 1953/54 83 109 .146 51 97 165 23 25 3 - - - 676 29 706 744 1954/55 8 82 40 246 172 84 75 30 14 13 1 - 709 61 770 498 195',/56 67 59 172 57 183 136 15 42 2 1 - 9 692 55 747 937 1956/57 56 32 189 156 90 81 48 5 29 13 38 153 654 240 894 726 1957/58 124 115 78 89 111 55 77 72 - - - 29 652 102 755 934 1958/59 17 153 92 79 51 69 95 52 - 44 - 4 559 102 661 700 1959/60 65 86 141 84 65 129 50 11 10 15 29 15 624 83 706 691 1960/61 93 130 92 54 53 121 101 45 56 8 14 4 648 128 776 729 1961/62 2 125 107 67 249 85 49 4 - - - 8 679 12 691 695 196:/63 22 164 50 193 71 93 106 34 15 25 - 1 703 77 780 694 1960/64 27 173 56 47 62 148 75 6 44 - 3 11 532 66 658 800 1964/65 123 59 92 76 20 34 83 2 25 27 17 31 491 104 595 676 1965/66 25 52 21 192 71 41 36 4 19 - 2 1 442 27 469 419 1966/67 32 71 122 193 95 88 121 57 6 2 3 4 727 74 801 596 1967/68 83 36 67 120 7 107 81 65 1 11 16 7 504 102 606 761 1960/69 55 16 95 25 76 178 70 64 1 - 17 15 528 99 627 586 1969/70 102 36 46 82 21 22 20 9 18 18 22 43 333 111 444 644 MEAI 61 88 89 108 91 99 60 28 11 12 13 20 596 86 682 687 STD, DEVY 34 51 46 60 49 51 42 22 15 16 20 27 137 53 160 149 MAXIMUM 129 221 194 130 249 217 161 80 56 86 89 153 1,056 240 1,199 1,119 MINIMUM 2 1 10 25 7 14 - - - - - - 329 12 373 419 ROMA (In Proiect Area)A/ Table 2 MEAN 81 99 109 118 114 114 70 37 14 15 17 26 711 111 823 824 STD., DEV.Y 48 59 48 70 53 74 46 28 17 17 25 33 146 61 167 169 MAXIMUM 188 251 242 296 227 425 194 128 78 60 112 152 1,063 282 1,287 1,202 MINIMUM 1 5 34 32 35 22 9 - - - - - 428 16 536 482 ND Decimals Omitted 1 October - September. 2/ Calendar Year. / Standard Deviation / urther information for other stations available from Hydrological Survey Department. May 5, 1972 E E ANNEX I Tables 3-5 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Rainfall Pattern in mm Years of Drought Extracted out of Total Records Table 3 I. MASERU (11 Years of Drought in 50 Years) Total Total Years Oct. Nov. Dec. Jan. Feb. March April Wet Mo. Year 1923/24 25 67 27 76 63 210 .. 1 488 559 1925/26 63 .32 32 96 38 116 19 405 449 1932/33 29 63 107 27 17 63 26 334 373 1941/2 82 1 20 173 75 98 50 502 582 1944/h5 57 48 10 77 94 114 5 408 433 194546 16 43 52 143 27 92 59 440 515 1946/7 67 31 63 49 119 72 80 484 565 1948/49 28 29 19 93 70 67 20 329 394 1965/66 25 52 21 192 71 41 36 442 469 1967/68 83 36 67 120 7 107 81 504 606 1969/70 102 36 46 82 21 22 20 333 444 Average 61 88. 89 10d 91 99 60 596 662 Over 50 Yrs. _ II. ROMA (7 Years of Drought in 35 Years) Table 4 19hk/k5 46 73 40 85 57 155 15 474 536 1946/47 76 39 118 49 104 27 14 430 540 1948/49 26 51 34 144 111 102 23 495 579 1964/65 146 45 115 43 38 31 81 543 644 1965/66 47 105 34 292 126 4 28 679 724 1967/68 72 70 85 40 35 102 39 498 614 1969/70 129 29 77 104 48 25 13 438 547 Average 31 99 109 113 114 114 T 711 623 Over 35 Yrs. . III. TEYATETANENG (16 Years of Drought in 75 Years) Table 5 1902/03 72 27 63 51 107 8 41 456 489 1905/06 16 55 77 123 93 105 28 501 584 1913/14 83 53 - 97 86 41 64 445 536 1919/20 27 119 20 131 112 170 25 607 673 1923/24 36 79 22 79 78 172 11 480 562 1925/26 78 57 53 92 66 133 6 488 554 1931/32 49 151 23 80 94 117 4 521 564 1932/33 15 61 70 23 34 48 27 281 318 1941/42 94 6 28 100 72 114 62 478 572 194/5 89 58 13 57 81 146 8 455 485 1945/46 17 48 50 148 17 158 37 478 528 1948/49 35 15 11 129 88 66 19 366 425 1965/66 39 107 20 172 75 58 31 506 536 1967/68 40 50 80 45 43 314 81 455 567 1968/69 24 12 65 70 108 ..116 55 453 585 1969/70 98 23 51 79 39 24 28 345 467 Average 66 83 96 123 95 100 56 623 714 Over 75 Yrs. NOTE% Decimal Points Omitted May 31, 1972 ANNEX 1 Table 6 LESOTHO THABA BOSIU RURAL DEVELOEMENT PROJECT Livestock Population (Thousands) Livestock /2 Yea; Cattle Sheep Goats Others L Units 1939 448 1,598 566 119 1,000 1945 437 1,545 542 121 975 1955 408 1,339 655 156 963 1960 331 1,037 579 138 792 1964 308 1,408 716 128 861 1970 494 1,540 897 92 1,073 Project Area Livestock Populations 1970 Lowlands 8.7 (7.4)/3 19.1 (5.7) 9.8 (3.7) 6.1 29.9 Foothills 13.0 (8.8) 14.3 (5.1) 6.1 (2.6) 3.9 31.3 Total 37.9 44.2 22.2 10.0 61.2 /1 Horses, mules, donkeys /2 One head of mature cattle or five sheep or goats equals one livestock unit /3 Male stock in brackets May 31, 1972 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Millimeters Rainfall 100 - (Irrigation Research Station, Maseru) 90 - 80 - 70 - 60- 60 - 10 years' average maximum 50 - 40 - 30 - 20 - 10 years' average minimum 4Ee DRY SEASON - 10 - OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. A ,l9r, 1C17? .-- U U LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Probability (%) of annual and wet season monthly rainfall at Maseru (Millimeters-average over 35 years) ANNUAL TOTAL IN MM 200 251 316 398 501 531 794 1000 1259 1585 1995 MONTHLY TOTAL IN MM 20 25 32 40 50 63 79 100 126 159 200 99 968~ 95 4 90 100 90 -'ó&_____ _______ 60 w 40 00 20 10 5 0 A-w?"l7 I E ANNEX 2 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Sociological Background A. Social and Religious Structures 1. The Kingdom of Lesotho, which became independent in 1966, after nearly a century of British rule, lies more or less in the heart of the Republic of South Africa. It is the country of the Basotho people who were welded together by their warrior king and nation founder, Moshoeshoe. About two-thirds of the country is mountainous, rising up to 3,500 m, and known as the Highlands or "Maluti"; the remaining one-third is a narrow strip on the west, known as Lowlands or "Lesotho." Most of the people are in the Lowlands. 2. The Basotho (singular, Mosotho) are a Bantu-speaking people, and their main groupings and institutions are as follows: Kingship, Nation, Chieftainship, Clan, Village, and Family. The most important political institution is the Kingship and under it, Chieftainships. These institutions are traditional and ascriptive in character, i.e., except for the village, which is a territorial grouping, most of them are kinship groups into which people are born. There are also non-kinship groups to which the Basotho belong, such as the Church and voluntary associations of a cooperative nature; these are very important for development in general. The Nation 3. The nation is essentially a political grouping and is composed of all who acknowledge the authority of the King and the political authority of the present Government of Lesotho. The King is the secular and religious representative of the nation, which vests him with mystical credentials of authority. He is the head of the judicial and political system and the trustee for the land and other natural resources of the country. 4. In the traditional view, Basotho domicile in Lesotho automatically means political adherence and loyalty to the King. Basotho men and women temporarily outside Lesotho, working in the mines and on the farms in the Republic of South Africa, are also clearly understood to be the King's subjects and they pay their taxes to Lesotho. 5. The Basotho are patrilineal, i.e., they trace descent through the male line. Inheritance is also traced patrilineally. Children, therefore, acquire nationality through their fathers. Other people may acquire nation- ality by admission into the country and by the formal granting to them of a residential site and their payment of local taxes. ANNEX 2 Page 2 Chieftainship 6. The country is divided under the King into districts, sub-districts, and villages. Each district is administered by a chief and its sub-districts are administered by a sub-chief. The sub-districts are also divided into villages presided over by headmen. The chiefs, sub-chiefs and headmen, while not part of the civil service, are officers of His Majesty's Govern- ment and their positions, duties, powers and prerogatives were established by the Chieftainship Act No. 22 of 1968. As their general functions, they are expected to "aid and maintain the King and His Government of Lesotho; and subject to their authority and direction, to serve the people in the areas of their authority, to promote their welfare and lawful interests...." One of the most important functions of the chief is to allocate land for building, pasture and cultivation to all people who live under his Jurisdic- tion. The Clan 7. The Basotho are divided into clans. These are social groupings distinguishable by name and also, sometimes, by emblems and other cultural forms. Clans have different status. Ordinarily, pride of place is given to the politically dominant Koena, the clan of the King, but there are local claims of seniority made, for example, by the Tlokoa who do not admit the ascendancy of the Koena in their own area. In practice, the question of seniority seldom arises, and when it does, it is generally settled by amicable agreement. 8. Clanship is an attenuated fictitious form of kinship and clansmen believe they are descended from a common ancestor. It is difficult to estimate the significance of clan affiliation among the Basotho since it is unobtrusive and enters subtly into many types of relationships. The Village 9. The village is an important territorial social group and comprises all families which settle together under a village headman, chief or sub- chief. Villages vary in size, ranging from two or three families, primarily or wholly of kinsmen, to those having 400-500 unrelated families. The average size is about 30 to 50 families. Small villages are situated mainly in the Highlands and intrusive river valleys, where arable lands are scattered and suitable sites for large settlements are rare. Large villages are in the Lowlands and open plateaux. Most reflect their environment - the simple lines of houses, their patterns and curves taking their shape and color from the rocky landscape. 10. Villages are normally permanent and some have been in their present location for many years. They are moved only as a result of some disaster, such as frequent lightning strikes or some epidemic. The village itself is divided into households, mostly extended families, although nuclear families are also found. Many villages have a school, a church and ANNEX 2 Page 3 a court, which is open. Practically every village has one or more cattle kraals where calves, small stock, and such are kept overnight, and occasion- ally there may be a covered stable for horses. Except for milking cows and oxen during the plowing season, all cattle are kept on mountain grazing during the summer. 11. The village, like the clan and family, is important in Lesotho life because it is one of those institutions which shields a man and helps him to ease the adversities of life. It is a cushion against the in- calculable variability in the social world of human relations and against the periodic shocks of disasters such as follow failure of the rains and consequent drought and famine. It is also a natural unit of cooperation on a territorial and non-kinship basis and has advantages in terms of the project, for on it could be based a unit for the organization of Farmers' Associations through which credit could be given. Social sanctions within the village would be strong enough to make a defaulting farmer mend his ways, for the villagers would want to avoid the stigma attaching to a defaulting village. Social motivation could also develop inter-village competition, in which villages would vie for first place as the most progressive in adopt- ing proposed methods of improving agriculture. The Family 12. The family is perhaps the most important, because it is the most intimate form of social grouping. There are two types of family structure which must be recognized: the nuclear family consisting of father, mother and children, and the extended family - in Africa a much more important and pervasive form - most often consisting of a man and his widowed mother, unmarried brothers and sisters, his married brothers and married sons with their wives and children, his wife or wives and all their children. 13. What is important in this extended family structure is not neces- sarily the numbers involved as much as the network of social relations, reciprocal obligations and responsibilities, which becomes important for social, political, economic and religious activities. The significance also lies in the fact that the extended family is a corporate group, owning property such as lands, cattle and goats together and also cooperating in production and consumption. The extended family is the unit of production and, as such, all its members (who may be members of nuclear families) pool their capital resources (money, cattle, goats, sheep, donkeys, land and agricultural implements) and their labor, and benefit from a common leader who assumes the position of manager. 14. It is this elementary form of cooperation and mutuality which clearly is the basis of the growing tendency towards communal agriculture in Lesotho and which has become the pattern for village communities. Wise developmental policy would be able to build on this traditional organizational strength by providing the managerial support it requires and giving it proper direction by adapting the traditional institutional structure to modern imperatives of technology and a market economy. ANNEX 2 Page 4 15. Marriage in Lesotho, as in many parts of Africa, requires "bohali" or bride-wealth, which is given by the bridegroom's people to the family of the bride. According to Basotho law and custom, a marriage is not valid and the children not legitimate without it. Bohali is a consideration for two sacrifices which the bride's family makes: the loss to her group, (a) of an Lmportant economic producer, and (b) of her ability to strengthen the group by adding her children. Both these benefit the husband's family after mrriage. It is calculated on the average of 20 head of cattle, 10 head of sheep or goats, one horse and one ox. For royal personages and rich families, "bohalil" is 30 head of cattle and the rest as above. The Church 16. The Christian churches have a firm hold in Lesotho and have become important institutions for change and development. Education and health were pioneered by missionaries and the Roman Catholic Church is Darticularly strong in the Roma Valley within the project area. Besides setting up churches and mission stations nationwide, they have also estab- lished schools. The University at Roma was started by the Roman Catholic Church, and it claims as its members the King and most of the members of the Cabinet. Second in strength, as measured by numbers and total invest- ment in the country, is the Lesotho Evangelical Church, followed by the Anglican Church. 17. Not only are the churches involved in education and health but they are also very active in cooperative work and in agriculture. The Machekoaneng and Phuthiatsana Development Scheme, for example, is run by a Roman% Catholic nun, Rev. Sister Yvonne Maes of Mazenod Teacher's Training College. The churches, therefore, have a part to play in the project, not only as dispensers of information, but as providers of examples of agricul- tural change. B. Land Tenure and Related Problems Rights of Tenure 18. Consideration of land tenure is crucial for Lesotho agricultural development of any kind. All land belongs to the nation, with the King as Trustee. He controls its exploitation and distribution and delegates his authority to his subordinates in the Chieftanship hierarchy. Every member of the nation is entitled to a share of land for building, pasture and cultivation. This right of the Basotho to land is embodied in The Laws of Lesotholi, Law No. 8, which states: "All chiefs and headmen must by law, provide people living under them with lands to cultivate." The right is usufructual, not of ownership--land is neither bought nor sold, nor may it be bequeathed. Rights the Basotho enjoy are: ANN~EX 2 Page .5 (a) Public Rights. These are rights to such commodities as thatching grass, reeds, wood, water, building materials on the public domain, and to pasture; (b) Extraneous Rights. Traditionally, Basotho law and custom, which were concerned exclusively with subsistence food production, made no allowance for traders, schools, missions and industry. It became necessary, however, with the coming of British colonial rule, to make provision for this kind of land iu.se and land right. The understanding, when these extraneous rights are granted, is that when the activity for which the land was specifically given ceases, the land will revert to the King and be available for redistribution. (c) Private Rights. Theoretically, arable land holdings are limited to three good lands per household, one for wheat, one for maize and one for sorghum. They are tacitly assumed to be equal in size although in actual fact, they vary considerably. The arithmetical average holding is between 5 and 6 acres per household. It is in the area of arable land tenure that individual rights come out clearly. The rights of an individual farmer to the lands allocated to him for farming are recognized only during particular seasons when he has crops on it. He is allowed exclusive rights to his crops and to the land, only until the crops have been harvested. After harvesting, his exclusive rights cease, for the crop stover (residues) and grass cover become grazing fodder, open to all livestock of the people resident in his village or in his ward. What was private agricultural land now becomes common pasture. The farmer is allowed to cut off the maize or corn stalks if he wishes to feed his cattle in his cattle kraal, but if he leaves the stalks standing in the field after harvest, he cannot keep other farmers' cattle from grazing on what has then become common pasture. 19. While some doubts have been cast on security of tenure under this system, most authorities on Lesotho land tenure concur with the view that while "rights of tenure are less than fLull ownership . . .they give satis- factory and secure title; and are admirably designed to meet the needs of the community. The holder has the right of occupation and use of land for his lifetime. And he may not 'be deprived of his place or fields without good reason"' (Ashton, p. 147). Two valid reasons are recognized among the Basotho for loss of lands: namely, the possession of surplus lands (not crop surpluses) and change in political allegiance. Another reason, which seems somewhat exaggqrated, is "failure through continual absence or insufficient reason for successive years properly to cultivate or cause to be cultivated the land or lands allocated." In practice, a man 's extended family is nearly always available to cultivate his fields and it seems doubtful whether there are many cases of failure to cultivate. ANNEX 2 Page 6 20. A custom of very recent origin is the allocation of garden plots, i.e., odd pieces of land close to villages, dongas or river banks on which to grow vegetables. These garden plots usually measure from a few square yards to about an acre and quite frequently lend themselves to irrigation. The#r are in the area of private rights and are very special and perhaps significant in that land rights in them persist throughout the year, in contrast to arable acreage allotments, which seasonally revert to public grazing. Plots can be enclosed and farmers, free from traditional pressures and inhibitions, can grow whatever they like on them and even experiment with non-traditional approaches. Thus, a precedent has been established for year-round uninterrupted land rights and for enclosure, which are normally discouraged. Problems of Existing Land Tenure 21. While existing land tenure would be acceptable for limited crop improvement programs, it is an impediment to more fundamental development because it adversely affects land use and, in particular, the grazing of cattle, rotation of crops and soil conservation. If improved agriculture and soil conservation are to be practiced, it is clear that radical changes in land use are called for, but it is equally clear that these changes cannot be forced because they involve very deep-seated cultural norms and prejudices. The problems are particularly intractable because they involve livestock (cattle, goats and sheep). 22. The emphasis on "use value," which we find so strongly entrenched in land tenure, is also present in the people's attitude toward cattle. Livestock are raised for subsistence and to serve as reserves of wealth for use in times of great need. To own large numbers of cattle, regardless of quality, is very important in a subsistence economy, especially in a country like Lesotho that suffers from chronic droughts during which cattle die in large numbers. Possible Solution - Integrated Farming 23. While to change this situation is admittedly difficult, it is not impossible. Within the project area, land would be available where holdings are large and livestock relatively few. It would be possible, therefore, to carry out a program (described in Annex 5, Part B) with a small group of farmers on land which the chief (and this would have to be the most impor- tant chief in the Roma district) would make available for controlled grazing and crop rotation. The chief and Government would be asked to permit fencing of grazing land for rotational grazing, but the group would also have to be willing to keep its own stock from common pastures; otherwise the scheme would be unfair to other farmers. 24. The farmers would also have to agree to stock limitation to con- form with the professionally assessed carrying capacity of the given area. This would present very few problems if the program were in the nature of a Cooperative or Farm Association. There would need to be a program manager, hired by or on behalf of the farmers, and he would run the program as a ANNEX 2 Page 7 commercial concern. This group of progressive farmers might then become the model for the rest of the project area, and indeed for the country as a whole. The most revolutionary aspects would be enclosed pasture and stock limitations, which would be breaks from traditional cattle-keeping attitudes. If the cattle were owned by an Association whose members were unrelated, the ritual significance of the cattle would be completely removed. 25. Two objectives would be immediately achieved: (a) those farmers would be identified, among the Basotho and in the project area, who would be prepared, not only to accept intellectually the need and possibility of change, but would be willing to take the necessary risks - a nucleus of these farmers already exists and they are often spoken of as progressive farmers; they would be the social catalysts and exemplars in their society; (b) an associational or cooperative form would be encouraged and indeed recommend itself to Government because this is the way Government believes agricultural develop- ment should best be organized; it would also build on a deep-seated cultural tradition of communalism but modernized by removing traditionalism associated with kin-based groupings, with their domination by family heads and inhibition against any kind of business-oriented under- taking; the manager would be an integral part of this modernization and would need to provide the motivation and entrepreneurial spirit which the Association would need to make it a commercial success. Sharecropping 26. Despite the general Law and custom which recognize every indivi- dual's entitlement to three lots of arable land, deliberately fragmented to spread out evenly the advantages and disadvantages of soil, rainfall and natural hazards, many Basotho do not own any lands at all. This is because land is limited. One of the ways in which landless people enjoy temporary rights to use lands is by sharecropping with a landholder who is willing to do so for one or some of the following reasons: (a) he has no oxen, tractor, or implements for farming; (b) he does not have the necessary inputs such as seed, fertiiizer and labor for cultivation; (c) his lands are too far from his home and he is willing to allow a man whose home is near them to be a sharecropper with him; or (d) he is away in the mines and wants someone to farm his lands and supply all the inputs. ANNEX 2 Page 8 The sharecropper (who could be another farmer or, more likely, a contractor) would have the necessary ox and tractor power, implements, seed and labor. There are variations in the sharecropping relationship. The contractor, for example, may provide all the inputs, be wholly responsibile for pro- duction, take all the risks, and at harvest time take two of every three bags of the produce. The extent of the practice can be gathered from the fact that, of the 155,287 landholdings surveyed in 1960, 27,879 (18%) reported sharecropping. 27. While an easy way out for the indigent farmer, sharecropping has several drawbacks. Those engaged in it do not take the interest they should in land conservation. This is particularly true of the contractor. The landholder, on the other hand, makes no effort to acquire the necessary implements and inputs for effective farming. The system tends, therefore, to encourage exploitative agricultural practices, in which farmers take out of the soil but do not return anything by way of crop residues or manure. 28. It is generally believed in Lesotho that sharecropping is exploitative in the economic sense in that it encourages the rise of a class of agricultural capitalists and therefore economic domination of the many by the few. Although sharecropping might benefit the poor farmer, it cannot be the basis for progressive farming because it is difficult for agricultural extension officers to instruct landholders who do not operate their farms. C. Migrant Labor 29. Lesotho's economy and social structure have been deeply affected by employment of Basotho beyond its borders. Thousands leave the country yearly to take industrial, commercial, mining and farming employment in South Africa, and they contribute as much, if not more, to the development and material prosperity of Lesotho as all the other economic pursuits of the Basotho together. Migration also creates social problems which are as serious as they are neglected, such as the desertion of wives by men who take new wives in South Africa and fail to support their Sotho wives, or the venereal infection which the men bring back. Women go to the neighboring Orange Free State to work on farms during the harvest, while others go to work as domestic servants. Others again, leave to join their husbands in South African towns. The men mostly work in the gold mines, though with the enormous increase in industrial development in South Africa, many have found lucrative industrial jobs too. While the mines do not pay as well as industry, they offer food and accommodation and engage workers on contract for a definite period, after which men can return home. 30. About nine labor recruiting companies operate in Lesotho and they hire about 40% of the able-bodied men. The number recruited each month during 1971 was: ANNEX 2 Page 9 Month Number Percent (of Year Total) January 12,371 14.0 February 9,693 10.9 March 7,553 8.5 April 6,322 7.1 May 5,492 6.2 June 5,873 6.6 July 5,430 6.1 August 7,279 8.2 September 7,377 8.3 October 6,634 7.5 November 7,747 8.8 December 6,873 7.8 The plowing season is September/November (early December for some crops) and it is clear that peak migration occurs soon thereafter. The least migration occurs during winter, when granaries are full. This is also the period of much social activity when marriages and other festivities take place. The plowing season is preceded by increased migration because, by then, granaries have been depleted, partly as a result of winter feasting, but also because money is needed to buy seed and fertilizer for the plowing season. 31. Migrant laborers' wages generate demand for non-agricultural products and also strengthen domestic savings potential for investment financing (Lesotho First Five-Year Development Plan, 1970/71-1974/75, p. 12). However, migrant labor poses serious problems for agricultural development, for the quality of farming, if carried out only by women with other responsibilities and by children, uould be likely to suffer and lead to progressively poorer yields. 32. Government officials appreciate the importance of migration since there is no alternative employment in Lesotho. They are, in fact, concerned that migration may be officially pegged by South Africa and they would prefer a liberalization of South African policy in this regard. 33. It is doubtful if the project would have much effect on migration. Mechanized farming in the project area, as elsewhere in Lesotho, needs relatively little labor. However, more thought clearly needs to be given to training of women in farming and management, for despite the legal fiction that they do not have authority, they are frequently the "de facto" operators and managers of their husbands' lands and they make all kinds of decisions every day, playing important roles in agriculture and in the administration of farmers' associations. 34. Working with and through women might well be one easy way of attacking the conservative agricultural practices and social structures of Sotho society, for women have a vested interest in changing the time-honored laws and customs, which have been the main instruments of their social disability. ANNEX 2 Page 10 D. Social Factors That Impede Development Poor Cultivation and Grazing Methods 35. Certain factors in Lesotho agriculture tend to encourage con- servatism and retard progress. The first and most important, perhaps, is the ignorance of the Lesotho farmer about some of the elementary require- ments of good farming. To begin with, livestock, which are an important part of agricultural activity, are owned individually but the resources necessary for livestock production - land and grazing - are held communally. This raises one of the crucial issues, for on it hinges the whole matter of soil erosion, land conservation, rotation of crops and all problems related to land use. 36. Ignorance also perpetuates exploitative use of land resources in cropping and grazing and leads to a naive belief, especially among peasants and chiefs, that there is plenty of land "out there" (and this is often in the far away mountains) and a persistent belief, even among civil servants, that the cattle population has decreased or is decreasing. 37. It may be true that droughts periodically kill many beasts but there are several factors which could be, but are not being, controlled. First, there has been an increase in human population and, though very few farmers are large livestock holders, the increased number of farmers with two or three cattle and a few sheep could well balance the decreased number of livestock held by more enlightened owners of larger herds. Besides, money sent back from the South African mines is almost always invested in cattle, especially cows, which have natural increase. Further, there is no evidence to suggest that cattle are not coming in from across the border, despite the firm belief by the civil servants that they have stopped their coming. Farmers and chiefs affirm that they can always bring in cattle from outside. Social and Religious Attitudes Toward Livestock 38. Livestock - cattle, sheep, goats and horses - have an intricate web of emotions and attitudes woven round them, arising from their close association with social institutions like marriage and religion. Any attempt to change these sentiments and attitudes is bound to meet with very strong resistance, because all proposed changes have multi-dimensional implications for the people and their life-styles and non-economic factors are very important. To ask men to reduce their stock, or to send their cattle to the abattoir, is not seen by them as advice which will lead to better farming or to higher economic benefit but as an attack: (a) on their ability to obtain wives either for themselves or some members of their families (para 15); (b) on their religion,because cattle, sheep and goats are important in propitiating ancestors and for other ritually important social functions; and ANNEX 2 Page 11 (c) on their social power and prestige, for cattle, sheep and goats, especially in large numbers, give a man social standing and are a source of satisfaction, because they are marks of achievement and visible wealth. 39. Small stock are also very important as everyday currency and are often used in sale or exchange for such things as school fees and school books for children, clothes for the wife and children, and government taxes. They can, therefore, be regarded as a man's current account in the bank and as an important cushion against all sorts of disasters. Theological Approach to Agriculture 40. Another very important principle for the Basotho, as in African thought in general, that has far-reaching implications for their life- styles and for all their social, political and economic activities has to do with the way they perceive the world, i.e., as controlled by two opposing forces: the good and the evil. Man's main preoccupation, they believe, is to maintain and strengthen the good forces which bring good health, good crops, and rains in the right season, and to fight and suppress evil forces, which bring about sickness and disease, droughts, poor harvests and starvation. The forces of good and evil, they also believe, can be manipulated by man by the use of magic. Good magic and ritual, which are controlled by the medicine men and religious leaders like the King, priests and diviners (miscalled witch doctors), bring about abundant life and crops, while bad magic or witchcraft and sorcery, which are controlled by evil men and women called witches and sorcerers, destroy life and cause droughts and starvation. The concepts of witchcraft and sorcery represent the principle of evil in man's life, and they are often invoked in times of crisis and disaster. 41. From the foregoing it will be seen that, for the majority of Basotho, agricultural successes and failures, especially extreme ones, are explained in theological terms, and responsibility for success or failure is projected onto the supernatural and not onto man himself. This, in essence, is the "magical mentality", which rejects scientific explanations for natural and social phenomena. Thus, if my crops fail and my neighbor's, with whom I share the same soil and climatic conditions, flourish, I do not explain it in terms of good or bad farming but in terms of religious ideas. This explains also why there is so much magic and ritual connected with agricultural and even political, activity. Fields and seeds receive ritual treatments or seeds are taken to church so that they may be blessed by the priest. There is also the rain-making ritual; the "doctoring" of fields to produce bumper crops; or the magical treatment of fields and crops as protection against birds, insect pests or hailstorms. 42. The churches, in their secular and educational activities, are doing much to dispel these beliefs, but schools do not offer enough purpose- ful and significant scientific education. Nor are there, in the curriculum of the agricultural colleges, courses in the sociology of the area, ANNEX 2 Page 12 particularly the sociology of production. Such courses would deal with social institutions that need to be developed; social attitudes necessary for development; and a frank discussion of the magical aspects of production. Local students could set up demonstration plots, bring all the productive medicines and invite all the necessary functionaries for agricultural ritual. Side by side with these could be plots where scientific agriculture, which did not depend on magic and religion, would be demonstrated. Such demonstrations would impress, not only the young farmer, but also the older farmer who would come for special educational visits and refresher courses. 43. The above theological factors tend to be played down by governments but they are, nevertheless, to be contended with. They frequently snarl development because little or no attention is paid to them. They are problems which cannot be handled by legislation, but only by a long process of persuasive education. January 2, 1973 ANNEX 3 Page 1 LESOTHO THABU BOSIU RURAL DEVELOPMENT PROJECT Soil Conservation A. General 1. Soil conservation has been defined as the achievement of orderly movement of soil, at levels consistent with continued use of the land for productive purposes. Fundamentally, this is accomplished by pursuing a form of agriculture suited to the area. Basic principles involve: (a) performing the minimum cultivation or working of the soil consistent with efficient production of crops; (b) using rotation systems to assure that humus and plant nutrients are retained; and (c) exercising control of livestock. 2. Soil conservation may also be assisted by physical actions, such as cultivation in strips and across, not down slopes, so that surface water is held by grass or clods and allowed to slow down and penetrate; and movement of soil to form terraces or diversion ditches so that, again, surface or runoff water is collected and diverted slowly across slopes to allow penetration, with the excess water being safely conducted down grassed and protected waterways so that its amount and speed does not cut into and carry off the soil in ever widening and deepening gullies. 3. Soil conservation is high on the list of Lesotho's national priorities. Conservation of soil, water and related resources is essential if the Basotho are to continue to enjoy the natural resource base for sustained productive use. This will mean imediate construction or repair of physical works and, as speedily as they can be accepted, changes in the use of land and in grazing and farming practices. B. Causes of Erosion in Lesotho Climatic Conditions 4. More than 70% of Lesotho's annual rainfall occurs in the six months October-March. Rainfall occurs mostly in sharp, torrential downpours, which fail to penetrate the soil quickly or deeply and cause runoff that carries away soil. Adverse climatic conditions, including drought and ANNEX 3 Page 2 occasional hail, make farming risky and farmers reluctant to innovate and invest. This reluctance is reinforced by long-established traditions of land use. Soils 5. Very little information is available about soil types except in general surveys. The broad reconnaissance soil survey carried out by D.M. Carroll and C.L. Bascombe in 1966 and 1967, "Notes on the Soils of Lesotho," contains the best available information. 6. Soils in the project are varied and some, especially in the low- lands, are highly erosive. Included are: cave sandstone sediments, Molteno beds, and most difficult of all, the shales of the Beaufort series. Many soils in Lesotho have high sodium content and are unstable when wet. They act more as a slurry than a solid soil, causing physical works on them to have a high failure rate. 7. Overgrazing, improper cultivation, livestock trampling and drought have resulted in much of the topsoil eroding away. The remaining soil is low in organic matter, a dearth of which contributes to erodibility and low crop production. Thus, when soil has a reduced capacity to hold water for plant use, the full effects of added fertilizers are lost. 8. All the major crops grown in Lesotho are annual. Apart from wheat, they provide inadequate spring and early summer cover for soil pro- tection. Removal of all residues by traditional communal grazing causes excessive erosion rates. This cycle of overgrazing and soil depleting crops grown year after year has resulted in a serious erosion problem. C. Previous Soil Conservation Programs 9. After the unprecedented drought of 1932-33, followed by massive erosion from the subsequent rains, a physical soil conservation program began in earnest in 1936 with a grant of T160,200 (US$400,000) from the British Colonial Development Fund. This program resulted in substantial reduction of field soil loss; it also caused most farming in Lesotho to be carried out on the contour, which helped reduce erosion. However, it did not attempt to alter traditional grazing management and/or cropping systems and was not as effective physically as more modern works can be. It was therefore only partially successful, and erosion, though checked, was not cured and continued at an unacceptable rate. 10. As of January 1, 1967, the following works had been installed in Lesotho: ANNEX 3 Page 3 Terraces 27,891 miles Dams 787 Buffer Strips 188,218 acres Diversions 4,067 miles Gullies Demarcated 5,658 Meadow Strips (Grass Runways) 1,409 miles Reclamation Beaconing 14,040 miles Acres Protected 547,423 acres It is also reported that large numbers of trees (4.5 million) had been planted in 1968, though little protection was apparently afforded them since few survive. 11. Part of the lack of effectiveness of the program was due to lack of involvement of rural people and improper management of structures and livestock - terraces not adequately maintained, grass strips narrowed, cropping practiced over terraces, and livestock overgrazed on gullies and terraces. More importantly, no effort was made to relate erosion control to conservation farming practices and its potential for long-term income benefits. The solution to soil conservation problems is inexorably linked with land and livestock management and with integrated cropping systems designed to protect land as well as produce income. While these concepts are difficult to deal with in Lesotho, the project would create a favorable environment for their understanding and acceptance by Government, chieftancy and rural people. D. Project Implementation 12. Implementation of project conservation will involve a heavy com- ponent of new construction of terraces, drop structures, grassed waterways, etc. as well as repair and maintenance of existing facilities. The project would work with farmer groups to emphasize that maintenance of these structures, and their protection from damage due to livestock grazing or improper cultivation are essential to their effectiveness. 13. As areas are selected for treatment, the conservation staff would first analyze soil, design the diversion terrace system, waterways and drop structures and then initiate construction. Grass seeding and tree plantings would be carried out as needed. 14. An overall agricultural development and soil conservation plan would be produced for each main market area as developed, with two being built in Year 2 and one each in Years 3 and 4. The plan would show the position of roads, soil conservation works, market places and tree planting areas. It would also detail and explain the associated farming developments such as supply and amount of seeds and fertilizer and dates required, the cultivation program and tractors required and the numbers and location of participating farmers. ANNEX 3 Page 4 15. The plan would be formulated by staff of all project departments to cover all aspects of project development, including soil conservation, and would be under the control of the project manager. Soil conservation aspects would be particularly important in the Integrated Farming Program (see Annexes 5, 17, and 23) by which, hopefully, many of the present farming practices would be changed to improve, not only the farmer's situation, but also permanent land use and erosion status of the area. 16. Within the project area, a variety of practices and treatments would be employed. These include, but may not be limited to: (a) Rural Roads. 250 miles of 12-foot-wide rural access roads, in general allied to construction of diversion terraces; (b) Diversion Terraces. 1,040 miles of grass-covered diversion terraces, designed to lead off excess water above gully heads or to provide protection for existing terraces on sloping fields by diverting runoff to waterways; (c) ep Structures. 600 rock structures to allow excess run- off from diversion terraces to be delivered to a waterway or to a stabilized gully where it can be handled in a controlled fashion; (d) Terraces. 3,000 miles of existing, or new, terraces and grass stripped cover to be repaired, regraded or constructed as required; (e) Multi-Purpose Dams. 20 earth dams on natural waterways to provide for floodwater retardation, garden irrigation, stock water supply, village water, and fish farming; (f) Grassed Waterways. 150 miles of natural or constructed waterways or outlets to be shaped with appropriate grass or other structure; these would be mostly eroded gullies, some down to bedrock, with steep bare sides, a costly and time-consuming but key part of the reclamation process; (g) Integrated Farming. An integrated farming area of about 5,000 acres, with particular care in soil analysis and land use planning; advice would also be given to farmers on treatment of terraces, waterways, grazing areas and improved farming practices. A close liaison would be maintained with the research section, training and extension staff, to achieve an integrated project drive to ensure this program's success (see Annex 9); (h) FencIng. 15 miles of fencing to protect especially hazardous, highly critical installations, e.g., to protect a stabilized waterway and drop structure leading runoff into a stabilized gully where grazing and trampling by cattle could easily result in serious and costly damage to the system until vegetative cover is assured; ANNEX 3 Page 5 (i) Tree Planting. 1.5 M trees to be planted to assist in erosion control and, when mature, to be used as firewood and as construction material: seedling or rooted cuttings to be grown by contract, costing about RO.02 each at the nurseries, and to be planted and watered by local people or farmers' associations, or possibly by the Food for Work Program. Aerial Photographyj 17. A new set of aerial maps would be produced at a scale of 1:20,000 which can be enlarged to provide 1:5,000 planning maps. These maps would be needed to assist in preparation of overall area plans for major roads, farm access roads, physical layouts for soil conservation works, soil survey and classification, land use programs and land tenure registration. Relationship to Project 18. Soil conservation techniques, both mechanical and structural, as well as those related to farming practices and management, are an integral part of the project. Conservation staff would be involved in extension, research and particularly in the integrated farming program, where the principal goal is to reduce soil losses to acceptable levels, suitable for long-term resource protection (about 5 tons/ac/year) while simultaneously increasing the total agricultural productivity of the land. Training 19. The training responsibilities of the conservation component would rest with the Project Manager advised by the Soil Conservation Division and would be part of the overall project program: (a) General. The conservation component of the project would provide: "on the job" training to counterpart officers; USAID external training grants (48 months during life of project); and a substantial training impact on the regular Lesotho Soil Conservation service staff (the project's conservation component would be larger than the Ministry's regular programs). (b) Field Extension Staff. Conservation officers would be required to prepare materials for and participate in training courses for extension staff, tractor drivers, tractor owners, and credit/ marketing staff. (c) Farmer Training. Conservation officers would be required to prepare materials for and participate in training for farmers, such training aids/materials to be designed to encourage farmers to utilize conservation practices appropriate to their situation. ANNEX 3 Page 6 (d) Mechanical Training. Conservation officers would be required to organize and operate conservation training for tractor and grader operators and for maintenance staff. E. Soil Conservation Benefits 20. Soil conservation is essential to sustained agricultural production in Lesotho. Between 1950 and 1960, according to the 1960 agricultural census, the total number of bags of maize, sorghum, wheat, beans, peas and sunflower produced annually declined from 3,573,000 to 2,737,000. These declines, confirmed by long-term observation, are largely attributable to rapid depletion of the land base by erosion. Figures for the 1970's vary widely and are not quoted for this reason. Many observers have stated that the Lesotho problem of field soil loss, through both sheet and gully erosion, is more serious than any other in Africa, or possibly in the world. 21. The estimated cost of the proposed soil conservation and rural roads program, based on figures in Annex 14, is R 16.4/ac. Assuming a 25-year life for the structural measures, terraces, dams, etc., the annual cost equals R 1.8/ac (US$2.27), including interest at 10% and excluding maintenance (which farmers would largely provide). 22. The project is expected to touch upon 100,000 ac of arable land (see Annex 1). Nearly all land in the project area now has field soil losses greatly in excess of 5 tons/ac, the acceptive level for long-term, continued agricultural production. On much of the project arable land field soil loss per acre may now be in excess of 100 tons, a very high and hazardous level. 23. One approach to cost/benefit analysio is to estimate the conser- vation benefits possible to the project by assessing the loss in productivity which is taking place due to gully and sheet erosion and re.lating this to conservation costs. Loss of Soil 24. Gully erosion results in total loss of farm land. It would be impossible, even under very sophisticated treatments, to expect to grow cereal grains on or in gullies. Eventually, and with careful controls, some grass could be produced and harvested or grazed, and trees could be grown on side walls. 25. Based on first-hand observation by trained soil conservationists, and their examinations of aerial photographs taken over the past five years, gully erosion has substantially increased in the project area. Their analysis suggests that this might amount to an annual loss as high as 0.5% of the area per year and that a total of 7% of the overall area in the project is already lost to gullies. Probably about 0.25% of the total project land area (250 ac) would be annually lost to new gullies or extensions or widening of existing ones if no controls were employed. ANNEX 3 Page 7 26. Sheet erosion is much less obvious than gully erosion, but accounts for a much greater percentage of the field soil loss (and conse- quent loss of production and income). It occurs on sloping land through soil removal by run-off from rains. There may be little or no apparent change in appearance of the land, but soil and nutrient losses continue over time, and such erosion eventually results in exposure of the base materials, either rock or unproductive subsoils, as well as a steady decline in crop yields in the interim. 27. While no valid data exist in Lesotho, a study of the 1960 agri- cultural census indicated that, as erosion increased to "severe", 1/ yields decreased, over 10 years as follow: Maize 24% Sorghum 28% Wheat 12% This strdy indicates that yields progressively decline as topsoil washes away and farming is carried on with decreasingly nutritive subsoil. It is also important to note that the study was not continued over time. If it had been, it could be expected, based on research in other countries, that losses would have continued with increasing severity. 28. Professional observers, with conservation and agricultural experience, are of the opinion that if no controls were employed, not less than 40% of the project area, or 40,000 ac, would be seriously and con- tinuously affected by erosion--induced productivity loss. The remaining 60% would also suffer loss, but of a lesser degree. Based on the impact of only the conservation component on production, the following illustrates the possible effect on this 40,000 ac with productivity declining by 5% per year from 2 bags/ac to 1 bag/ac: 1. Present Situation (annual) Land affected .................. 40,000 ac Initial production level (mixed cereals) ..................... 2 bags/ac (No fertilizer, credit, etc.) Value at R 6.00 per bag average R 480,000 2. Situation in 14 Years With No Controls (annual) Land affected ................. 40,000 ac Production level (estimated) .. 1 bag/ac (No fertilizer, credit, etc.) Value at R 6.00 per bag average R 240,000 1/ While no specific criteria are provided to define "severe erosion", it is understood to be on fields subject to general soil depletion due to sheet erosion. AMR6EX 3 Page 8 On this basis the total value lost would be R 6/ac (R 240,000 on 40,000 ac) against estimated soil conservation expenditure, to save this value, of R 1.8/ac or a cost/benefit ratio, due to conservation/rural roads only, of about 0.3. 29. A direct comparison between results from land with and without physical soil conservation can be made but it needs large areas of land, much of it allowed to erode, as a control; so it has rarely been done and would, in any case, be subject to wide margins of error. 30. To separate the benefits of project soil conservation from the benefits of the project as a whole would be extremely difficult and of doubtful validity, because interactions take place between the various factors affecting crop production efficiency. The project wculd improve production through use of fertilizers, better seed, more effective culti- vations, better farming practices, terracing, training and extension services. Some of these factors are totally unrelated to soil conservation measures, others are directly affected by them and some are in between. 31. Direct comparisons with and without soil conservation, and with other variables mostly equal, have been made, especiall-y in the USA, but results are specific to the soil conserved and farming practice applied. They indicate probable trends, but not magnitudes, that might `e expected. 32. It is known that inputs of fertilizer, seed and better cultivation would raise yields immediately in Lesotho. It is also known that without soil conservation and related farming practices, yields w.l decline to some point slightly above the postulated minimum of ' bag/ae of mixed cereals. At what rate, and along which shape of productivity curve the decline would take place, can only be a matter of speculazion. Some areas, especially in the Lowlands, will decline rapidly without soil conservation measures; others will decline less slowly, though inevitably, until they reach the poorer condition; and the rate of decline will vary over time. 33. The table below illustrates the effect of, but cannot be used to quantify, soil erosion on the 36,000 ac selected for crop development, on the assumption that it would cause production to fall from 8 to 4 bags/ac over 20 years: Land affected ................ 36,000 ac Production per acre with inputs ........ 8 bags Value at R 6/ba ...................... R 48/ac Annual cost of inputs per acre ........ R 14 Net annual profit ..................... R 34/ac Production per acre in twenty years ... 4 bags Value at R 6/bag ...................... R 24/ac Annual cost of inputs per acre ........ R 14 Net annual profit ..................... R 10/ac Annual value saved by soil conservation R 24/ac Total ............. R 864,000 per year ANNEX 3 Page 9 F. Personnel To Implement Project Soil Conservation 34. A Senior Soil Conservation Officer and Land Planner, a Soil Con- servation Engineer and a Field Plant Operator would be employed full time within the Project Soil Conservation Division and would be provided by USAID, which would also provide 24 man-months of specialist consultancy services to assist with forestry, grassland management, soils and conservation economics. Part-time services, on request, would be provided by Ministry of Agriculture personnel from the Conservation Division, in which UNDP aid would provide a Forester and a Junior Level Land Use Planner while USAID would provide.a Senior Conservation Officer and a Soils Specialist, the former to head the Ministry of Agriculture Conservation Division and provide essential linkages with the project and other ongoing activities. 35. The technical/administrative skills indicated in the following paragraphs would be required from staff to implement the conservation phases of the project. Soil Conservation Officer 36. The Soil Conservation Officer should be an experienced soil conservationist strong in planning and administration. A rainfed farming background would be helpful. 37. Under the direction of the Project Manager, he would be responsi- ble for the overall soil conservation component of the project. He would coordinate the activities within this discipline. Public relations, including working with high-level Government officials, are an important aspect of the position. He would be expected to provide guidance in the development of policy, procedures, technical material, training aids, broad goals, scheduling, etc. He would have overall responsibility for soil surveys, equipment management, conservation planning, installation of con- servation practices and road engineering. Agricultural Engineer 38. The Agricultural Engineer must have broad experience in conserva- tion engineering, including survey, design, and calculation of watershed runoff. With the help of a soil scientist, he would assess soils to be used in construction. He must be able to initiate, supervise and direct all the work on terraces, diversions, roads, waterways, dams, etc. He would be expected to develop technical material pertaining to structural measures, as well as participate in training demonstrations, etc. He must be able to work with high-level Government officials, technicians, and farmers. He would assist the Soil Conservation Officer in getting the structural measures shown on conservation plan maps. It may be possible to develop 300-500 acres of land for irrigation; knowledge of land leveling, irrigation water manage- ment, and related practices would therefore be useful. A background in- volving rainfed farming would be helpful. The position would involve staff supervision. ANNEX 3 Page 10 Mechanical Superintendent 39. The Mechanical Superintendent would be responsible for the operation and maintenance of all vehicles and equipment used in soil conservation and construction of field access roads. He would give training in operation and maintenance of all types of equipment used in the soil conservation program. His job would be to keep equipment running so that work could be completed on schedule in an orderly manner. Experience in all phases of operation and maintenance of farm machinery and earth-moving equipment, with carryalls, would be important for this job. He would be in charge of project equipment facilities. Other Skills 40. (a) Consultancies Additional provision would be made for short-term consultancies (4 months maximum per year) to provide additional technical skills as needed. These are expected to be in disciplines such as forestry, grass- land management, conservation economics and others as appropriate. (b) Other Staff (i) Three technical officers would be required for the project as follows: Number Senior Technical Officer for Conservation I Technical Officer, Layout Technical Officer, Plant 1 (ii) Other requirements would include: Maximum Number Position Required Technical Assistants 8 Draftsman 6 Artisan 1 Heavy Equipment Operators 5 Light Equipment Operators 6 Mechanics 3 Drivers 4 Secretary/Chief Clerk 1 Labor/Watchman 10 Clerk/Storeman 4 Total 43 August 4, 1972 ANNEX 4 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Banking and Agricultural Credit Money and Banking 1. Lesotho has no central bank and uses the South African Rand as its domestic currency. Two commercial banks, the Standard Bank Ltd, and Barclays Bank International Ltd, both foreign-owned, have branches in Maseru and agencies throughout the country. The Standard is banker to Government. Land tenure prevents real estate being put up as security. Since little other suitable security is available, commercial banks lend relatively little to Basotho borrowers for any purpose, though deposits in Lesotho are, on average, about four times the banks' advances. They have made a few three-year loans for the purchase of tractors, with a lien on the machinery and an undertaking to pay the proceeds of tractor hire directly to them. Repayment experience on these loans is not very good, however, and the banks are not very keen on them, though they continue to make tractor loans to borrowers with whom they have good personal relationships. 2. The Government-owned Post Office Savings Bank, established in April 1966, is a popular depository for small savings, totalling about R 1 M. Rates of Interest 3. Commercial banks lend to Government at 8%; to Government agencies at 9%; short-term on overdraft against produce stocks, with Government guarantee, at 8.5%; and to other borrowers on good security (e.g. estab- lished civil servants) at 9-10.5%. The rate paid on savings by the commercial banks and the Post Office Savings Bank is 4-4.5%; on term deposits the rate varies between 5.5% for 31 days to 7% for six months. These interest rates generally follow the South African pattern. The customary rate for such short-term agricultural credit as is available, i.e. through Cooperatives and Farmers Associations, is 1% per month. Agricultural Credit Institutions 4. Although very little credit is available for agriculture, a number of small institutions lend to farmers, all supported by various donors and charities. They comprise: ANNEX 4 Page 2 (a) Agricultural Development Fund (ADF); (b) Co-op Lesotho Ltd (CLL); (c) Lesotho Credit Union Scheme for Agriculture (LECUSA); (d) Leribe Scheme (part of the UNDP Leribe Project). Agricultural Development Fund 5. ADF was founded in 1962, with grants from OXFMA and the British Government. It makes short-term and some medium-term (3-5 year) credit available to groups of farmers and to some individuals, using the Government Extension Service as a channel. For seed and fertilizer, purchased through traders, up to 90% of the cost is advanced. Its loans at September 30, 1971 totalled about R 70,000 (US$93,000). 1/ Interest charged to Associations is 9% per year and by Associations to members, 1% per month. Since ADF has extremely few staff of its own (one manager, one extension agent and three clerks) it is unable to collect repayments promptly at harvest time and its repayment record is poor. It now has a rule that no new loans are made to an Association unless at least 75% of repayments due have been paid. Co-op Lesotho Ltd. (CLL) 6. Cooperative banking made a promising debut in 1957, ran into insurmountable difficulties by 1960/61, and ended in disaster in 1963 - generally attributed to political interference and inadequate management. The Finance and Marketing Cooperative Union of Basutoland was formed in 1963 to take over the remaining assets of previous cooperative lending institutions; it changed its name to the Finance and Marketing Cooperative of Union Lesotho after Independence in 1966, and to Co-op Lesotho Ltd in July 1972. CLL's members, except for the Lesotho Government, are themselves cooperatives or saving societies and its lending is supplementary to its member societies' funds. By its statutes, CLL iay not lend for more than five years nor at interest rates exceeding 15% per year nor pay more than 10% on deposits. It currently pays 4% on members' deposits and will lend to them a maximum of twice the amount deposited, thus ensuring that member societies first raise their own funds. CLL charges 1% per month on its loans. 7. Summarized CLL Balance Sheets and Profit and Loss Accounts for 1965/66-1970/71 are in the attached Table. CLL assets at March 30, 1971 totalled about R 153,000 (US$193,000). 3. CLL made an unfortunate beginning and had to curtail its credit operations drastically; but more recently, especially since it discontinued loans to individuals and limited the amount of loans to any one cooperative (maximum R 3,000), it has met with more success. 1/ At the exchange rate of R 1 = US$1.33. ANNEX 4 Page 3 9 -Like ADF, CLL is short of staff; but it has a sound institutional backgrund, With strengthening of staff and freedom to operate commercially without Government interference, CLL could become an effective credit and marketing agency. However, in view of CLL's lack of expertise and faci- liti~s which it would take a long time to put right, and its countrywide area mof- oper&tion, it would be preferable for the project to make its own arrange- crnts for supply of inputs on credit. Leothcredit Union Scheme for Agriculture 10, LEUUSA is an association of consumer and producer credit unions, set up with USAID assistance. It also receives funds from voluntary agencies such as OXTA-M and CARE. Started as a University Extension Service, mainly for tractor purchase and hiring credit, its funds are very limited and its ataff inexperienced. Its principal deficiency, however, is lack of trained staff and inadequate pay for credit union officers. Four of the twelve member tnions have run into serious problems, mainly due to farmers' lack of savings, inflexible loan policies and loan delinquency. Other Agricultural Credit 11. Although there are probably upwards of 100 trading stores in Lesotho (26 in the project area), they are believed to make little credit vvailable, and then only very selectively. Some consumer goods are supplied on credit, pending the marketing of a wool or mohair clip; but the supply of farm inputs by traders on credit, except in a small way in conjunction with other institutions, is rare. Credit and the Agricultural Sector 12. Most Lesotho farms are small (3-5 ac) and fragmented, but large enough to need plowing by oxen or tractor. Production is mostly by family labor and for subsistence; cash incomes from crops are low, supplemented in many cases by sales of wool and mohair. Farming is seasonal and subject to the usual fa7ming risks of weather and market, though in Lesotho drought is an abnormal hazard; and facilities for marketing surplus crops are minimal so that, in a good year, surpluses are largely wasted through inadequate storage. Most farmers are totally unable to purchase improved seed, fertilizer and pesticide; and not many can pay cash for plowing services, which are therefore frequently arranged on a crop sharing basis and are often late in starting. 13. Communal spirit is strong in Lesotho, however (Annex 2, para 11), and several score of farmers associations have been formed to pool resources and obtain credit, backed by the joint liability of their members. These associations may be registered as Friendly Societies with relatively little formality and supervision, or as Cooperative Societies proper (Cooperative and Friendly Societies Act 1960); and they vary from relatively loose associations of a dozen or more farmers, with a common kinship, to larger and more sophisticated groups, geographically linked. Group supply of inputs and credit is their principal motivation, encouraged by ADF and CLL in view of poor experience with credit to individuals. AINNEX 4 Page 4 14. Since land cannot be pledged as security, repayment of credit must be secured in other ways, e.g. short-term credit closely tied to marketable crop. TIis presupposes an improved marketing system so that surpluses can be sold through an approved channel and debt recovered at the time of sale. Medium-term credit must be secured by a lien on assets purchased with it, and pre-emption of income derived from their use. Need for Agricultural Credit 15. Supply of improved and adequate inputs, including plowing services, would have a significant effect on production and cash income. Very few Lesotho farmers can have use of these inputs unless they are supplied on credit; and, incidentally, farmers can only benefit from them fully if they are shown -which to use and how to use them. Short-term credit has high priority for rural development anywhere. 16. There is also a concurrent need for more faru machinery, such as tractors, plows, cultivators and trailers, which likewise can only be used properly with adequate training and demonstration; and for improved livestock for draft and for production. These items cannot generate enough income in one or two seasons to pay for themselves and they have a relatively long life; medium-term (5-year) credit is therefore needed for their purchase. 17. Longer-term credit for farm buildings and other more pernanent improvements is not at present feasible, in the absence of suitable security or repayment methods. Proposals for Credit Supply is. Government is aware of the shortcomings of the present credit system, in particular, the need for more funds, more rtaff, and competent management. It is also aware that agricultural credit generally is more risky than coTmnercial or industrial credit and needs soecial attention, including proper appraisal, technical agricultural and financial supervision, and the provision of adequate input supply and crop marketing channels. With its limited financial and management resources, Lesotho has created one credit nstitution, the Lesotho National Development and Savings Bank (LDB) (Order No. 8 of March 5, 1971) into which will be consolidated all official develoment lending and credit activities. it is intended to be the principal depository of Lesothan savings, recipient of development funds and channel for credit of all kinds throughout Lesotho. ihile it has statu- tory existence, and a manager with experience of German banking and coopera- tives and Swiss trading in Africa, it has, as yet, no policy and no staff, and Government intends to proceed cautiously with its establishment. 20. It is likely that ADF will be dissolved and its credit function transferred to the Development Bank; the .redit functions of CLL might also be absorbed into the Development Bank or a special relationship be established with it, ANNEX 4 Page 5 21. It is important that agricultural credit be coordinated with input supply and marketing outlets. If project farmers are to be properly provided for, at least until LDB is safely working, the project would need to set up its own coordinated system. August 4, 1972 E ANNEX 4 Table Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Co-Qp Leso,p 184. Accounts for Years ended March 31, 1968 - 1971 (Rand) BALANCE SHEETS AT MARCH 31 1968 1969 1970 1971 ASSETS Fixed Assets: Buildings 78,640 78,640 76,035 74,515 Equipment and Fixtures 2,500-2/ 2,250-/ 2,230 2,019 Vehicles 4,500/ 9000 / 18,206 17,023 85,640 89,890 96,471 93,557 Less Depreciation for Year (-) (-) (6,300) (5,946) Net Fixed Assets 85,640 89,890 90,171 87,611 Current Assets: Stocks 26,292 27,776 41,072 90,399 Debtors 14,438 29,911 36,337 70,438 Cash and Bank - 3,083 6119 78,008 40,730 60,770 83,528 238,845 Current Liabilities (28,080) (50,037) (44.447) (173.771) 12,650 10,733 39,081 65.074 TOTAL ASSETS: T98 0023 1_9,2 12 5T LIABILITIES Accumulated Funds Loans and Grants b/f 253,691 47,745 53,580 84,750 Addition during year - - 25,000 8,921 Net Loans & Grants 253,691 47,745 78,580 93,671 Net Profit (Loss) for Year (205,946) 5,835 6.170 13,115 Net Accumulated Funds 47,745 53,580 84,750 106,786 Loans & Savings Accounts 50,545 47,043 44,502 45,899 TOTAL LIABILITIES: 98,290 100,623 129,251 152,685 1/ Unaudited 2/ At valuation August 9, 1972 ANNEX 4 Table Page 2 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Co-Op Lesotho Ltd. Accounts for Years ended March 31, 1968 - 1971 (Rand) PROFIT AND LOSS ACCOUNTS FOR YEAR ENDED MARCH 31 1968 1969 1970 1971 INCOME Sales 134,719 242,838 342,611 408,962 Interest Received 8,235 110 - 1,073 Rent (Net) 6,159 5,654 5,921 5,486 Sundries - 1,743 35 221 TOTAL INCOME: 149,113 250,345 348,567 415,742 EXPENSES Purchases 128,102 214,067 309,734 397,182 Opening Stock 18,618 26,292 27,776 41,072 Less: Closing Stock (26,292) (27,776) (41,072) (90,299) Railage - 4 531 - 10,268 120,428 217,114 296,438 359,223 Transportation 6,3981/ 6,815 15,337.1/ 6, Salaries & Wages 9,443 10,642 15,703 19,998 Interest & Bank Charges 3,698 2,601 1,775 1,751 Depreciation 4,883 2,332 6,300 5,946 Other 3,878 5,006 6,462 9,7402 28,300 27,396 45,577 44,405 a Doubtful Debtors 3,000 - - - Written Off 135,007 382 - Deficiency b/f 68,324 - - - Net Profit (Loss) (205,946) 5,835 6,170 13,115 TOTAL EXPENSES: 149,113 250,345 348,567 415,741 1] Includes Railage 2/ Includes Maize Levy R2,110 August 9, 1972 ANNEX 5 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Agricultural Techniques and Programs in the Project A. Basic Crop Input Program General 1. The present system of agriculture in Lesotho is based on the right of every married, tax-paying male to the use of sufficient land for the growing of subsistence crops for his family, and his right to pasture stock, however numerous, on communal grazing. 2. With a few exceptions, no permanent rights to land exist either for permanent agriculture or controlled individual grazing. Under the present land tenure system, therefore, the farmer can only avail himself of improved crop husbandry practices which give him immediate increase in annual crop yields and is precluded from any permanent improvement designed to raise soil fertility and long-term yields. Farming Inputs 3. The project provides, as a package, inputs of improved seed, fertil- izer and cultivation; credit to purchase them; and technical guidance on how to apply them; together with soil conservation, roads and marketing facilities. Each package would be designed by the extension service, in one-acre units, to suit the particular crop and the soil in the area in which it would be used. This would enable the farmer to improve his output and profits within the present system and would be readily acceptable to him. Improved Seed 4. The project would provide and organize the timely arrival of better seed to enable the farmer to plant at the correct time. Trials carried out by the Department of Agriculture, together with the experience gained from neighboring South Africa, indicate the most suitable varieties of seed for different zones. Lesotho is fortunate in that good, certified supplies of all the main varieties of seed are available from nearby Farmers' Cooperatives in South Africa. 5. Maize seed would mainly be hybrids such as PPK64 and SA4. Sorghum would be white hybrid NK 320, among others, along with the nonhybrid Tenent White; all are particularly suitable for malting. Wheat varieties used are mainly winter grown, starting with Scheepers planted in April and May, with quicker growing varieties being used as the season progresses. Spring or ANNEX 5 Page 2 summer wheats would not be planted in the project, despite the higher price obtained for these hard-grained varieties, because they grow better in the Mountains, where they are less liable to rain failure and aphid damage. 6. Bean seed varieties used are mainly of the white haricot type, but the project would encourage the use of the Michigan pea bean which commands a higher price. Fertilizer 7. Fertilizer is already being used by progressive farmers, limited by cash or credit availability. The recommended rate of fertilizer applica- tion is based on results from the FAQ Lesotho Fertilizer Program, run by Government's Agricultural Research Station, on test plots within the project area. By the second year, it will have further data to improve on its recommendations. Preliminary indications at the UNDPIFA0 Leribe Project, just outside the project area, show still further increases in yields with heavier fertilizer application. When confirmed, the project would be able to adapt its program accordingly. 8. The project provides for credit to 12,000 farmers on 36,000 ac for the purchase of improved seed and fertilizer (100 kg/ac) for maize, wheat, beans and sorghum. The fertilizer would be in proportion 2:3:0 NPK mixture, providing 6% nitrogen and 18% phosphate (P205) for maize, wheat and sorghum, with a cheaper mixture for beans providing 2.5% nitrogen and 16% phosphate (P205). Improved Cultivation 9. The third project input is cultivation services in the form of work oxen, and tractors for timely aad proper cultivation. Credit would be provided to owners to purchase these items and to farmers to hire them for one plowing and one cultivation/planting per year. Alternative methods of minimum cultivation, dropping the use of the plow, and substituting three tined ripping cultivations before planting would be encouraged. These techniques keep the maximum possible cover cf crop residues on the ground, encourage water absorption and reduce runoff and soil erosion. Tractor Loan Program 10. About one-third of Lesotho farmers own draft cattle used for culti- vation. There are about 300 serviceable tractors in Lesotho, of which about 60 are in the project area. Of the 75-100,000 ac cultivated land in the project area, three-quarters could be properly cultivated by existing oxen and tractors, given some training in improved methods which the project would provide. The remaining quarter would require some 100 tractors and machinery plus 200 oxen to be used, especially within the 36,000 ac to receive project inputs (see para 8). ANNEX 5 Page 3 11. Tractor hire operators, some of whom are also farmers, own most of the machines - two to three each on average. One-quarter to one-half of the work is on a straight hire basis and the rest on some form of share- cropping. General rates are R 3.50 per hour, equivalent to R 4 for plowing and R 3.50 for cultivating and planting one acre. 12. A Ministry operated tractor school trains drivers; but they have little incentive to learn because tractor owners have yet to recognize their skills and pay them more. Cultivations tend to be skimpy and shallow and unskilled drivers damage terrace banks and grass strips. Tractor owners also lack skill and do not properly understand bookkeeping; nor do they make adequate provision for tractor replacement. 13. The project would provide sufficient credit for 100 tractors plus complementary machinery, consisting of a plow and cultivator planter. The Ministry tractor training school would be expanded to cover training required for the project. 14. Existing experienced operators would have priority for loans, followed by trained, able and experienced tractor drivers and, finally, progressive farmers and farmers' groups; the latter only after one or two years' demonstration of their viability and knowledge of bookkeeping and tractor hiring. 15. Tractor loans would be made on the following conditions: (a) 25% deposit; (b) both driver and owner to have successfully attended an appropriate driving or operating course; (c) operator to give priority to project farms and work only for cash; (d) project approved standards of work to be followed; and (e) proper maintenance to be carried out regularly, as approved by project management. 16. Thus, the farmer would be helped with his present farming system and crops by removing the three limiting factors of: cultivation power and timeliness; proper seed to provide the genetic capability to use the better conditions; and fertilizers to correct the chronic deficiencies of phosphate and nitrogen. 17. Some progressive farmers already carry out these practices and are achieving yields in excess of those shown in the attached Table, and in farmers' budgets in Annex 23, Tables 1 to 6. Apart from these inputs to progressive farmers, the general project benefits of roads, markets, soil conservation, and agricultural advice and training would benefit all farmers in the area. The savings from avoidance of crop losses due to bad storage and marketing alone would be substantial. ANNEX 5 Page 4 Livestock 18. The project provides credit for the purchase of 400 Friesian or Brown Swiss milk cows and 200 animals suitable for work oxen. Work Oxen 19. The work oxen would be purchased on the basis that the farmer would sell sufficient of his unproductive stock to provide one-quarter of the pur- chase price of a pair of adult working animals, at R 100 each. In some cases younger, two-year animals would be purchased at a lesser price and time would be taken to train them. The capability of a team to work some 15 ac per season allows an owner to contract to his neighbors. Sometimes, two pairs of oxen are used, particularly for the heavier soils. Provision is also made for some winter feed to ensure good condition and work capability of the oxen at the beginning of the cultivation season. Milk Cows 20. Apart from a very few individual farmers with fenced holdings on the Berea Plateau, and some cows in backyards in Maseru, no improved dairy cattle exist in the project area. Provision would be made for 5-year credit for 50% of the purchase price of 400 Friesian or Brown Swiss daizy cattle, and for their housing during the winter months. 21. A dairy cow owner's budget in Annex 23, Table 5 shows provision for the purchase of concentrate feeding stuffs to supplement crop residues and cut fodder and grazing provided by the owner. The integrated farming program (Part B), when implemented, would be given priority for dairy cattle loans, because an integral part of the farming system is the feeding and grazing of high producing stock in controlled numbers. 22. Milk would be sold locally or to the UNICEF funded pasteurizing plant being established at the Ministry Dairy Stud Farm at Maseru. The farm would provide improved bulls and later an artificial insemination service to dairy farmers. The plant would provide a lorry collection service, from two centers to be established within the project area, and package and pas- teurize up to 250 gallons daily for sale in Maseru. Farmers are presently being paid R 0.03 per pint farm-gate. R 0.005 each for transport and packing in plastic containers and R 0.01 for pasteurizing, would keep the price within the wholesale R 0.05-.06 per pint for similar imported milk presently sold in Maseru. 23. Existing dairy farmers are achieving at least the average milk yields used in the budget in Annex 23, Table 5, i.e. a 425-gallon lactation every 18 months. With a 20% death rate among the calves and one replacement heifer every five years, one store yearling every three years can be raised. ANNEX 5 Page 5 B. Integrated Farming General 24. The basic project program helps solve the immediate problem of increasing crop yields, as described in Part A of this Annex, so that project farmers would produce cash crops as well as subsistence and earn a cash income from their land. However, the fundamental problems arising from traditional land use and communal unrestricted grazing would not be tackled thereby, and the project farmer would be unable to reach the next stage of stable improved farming, based on rising soil fertility and integrated productive stock keeping, without further action. 25. The present system of continuous cropping has led to soil erosion, descending soil fertility, reduction of humus, poor water retention and low yields. Better cultivation techniques, rotation of crops and grassland, together with controlled grazing of stock, would reverse the depletion process. Soil structure would be reformed under grass leys or fodder crops; soil cover would be maintained by grass or controlled grazing of crop residues; and thus the water holding capacity of the soil would be improved. 26. The tradition-bound peasant farmer needs education, persuasion and physical demonstration before he is willing to adopt and adapt to radically different concepts and practices, whereby he moves to a basically cash economy with integrated stock and crop farming and more permanent land rights. Careful trial must be made to find the system most suited to the situation. The project therefore provides for a research program (Annex 9) to investigate and demonstrate different practical systems of land tenure and agriculture to reach this stage. At the same time, the project establishes an integrated farming program to make use of research findings. The program provides for credit inputs and staff to establish an area of integrated crop and stock farming on some 5,000 ac, over the final three years of the project. The program would be implemented either by individuals or groups of farmers, with full rights over their cropping land and contiguous grazing and enabling them by fencing, to keep improved stock in correct numbers and to change their cropping system to allow the growing of better crops, fodder and grass in an integrated farming system. Field Program 27. The Chief Extension Officer, with wide field experience, assisted by his Deputy and a social scientist seconded from UBLS (Roma) would prepare for, establish and carry out this integrated program, obtaining the consent and cooperation of farmers, chiefs and Government to transform a coherent area within the project to this type of permanent agriculture. USAID is considering funding UBLS (Roma) to provide the necessary assistance in this field. 28. In addition to project inputs at a higher level of intensity, improved stock would be included to replace or supplement original animals, ANNEX 5 Page 6 and fencing and cow sheds would be provided. Project and Ministry staff would also carry out any necessary mapping, land registration and holding reorganization necessary. 29. The integrated farming program would serve as a guide for continued development of the project area and other areas with similar ecology, and would itself obtain information and guidance from integrated farming investi- gations carried out by the Project Research Section (Annex 9). 30. The program, once the location was agreed and the cooperation of farmers and others was assured, would proceed as follows: (a) farmers' holdings to be mapped, measured and agreed; (b) an integrated soil conservation, land use, cropping and farming plan to be produced by project staff, and its adoption agreed by the farmers; (c) road, fencing and waterway protection works to be carried out by the project; (d) fencing and simple building construction for livestock to be completed; (e) the cropping program, including fodder and grassland, to be started; and credit supplied for crop inputs and tractor power for cultivations; (f) the original livestock to be marshalled and inspected and a plan agreed on its disposal, whether through sale, permanent despatch to mountain grazing, or incorporation in the farming unit; (g) purchase and installation of replacement livestock; (h) farmers to be trained meanwhile in cropping, stock management, bookkeeping and general farming business. 31. Project staff would assist at all levels during the difficult transition period of the first two years. They and Government would keep an open mind as to the eventual form this type of agriculture might take, whether as individual holdings with cooperative marketing and supply of inputs and tractor power; or as extended family holdings, groups of contiguous farmers, or larger - scale completely communal holdings. 32. Likewise, the eventual form of land tenure for the progressive farmer could develop in many ways from individual state tenancy to communal or village rights, with saleable interests held by individuals or families. But it is important that grazing control and stock limitation be enforced in the area selected, according to a plan formulated by Government and agreed with IDA. ANNEX 5 Page 7 C. Crop Production and Yields within the Project Area 33. The Table below summarizes estimated crop yields without the project and as forecast with project inputs of seed, fertilizer and improved cultivations. The third column shows the yields estimated for the integrated farming program, using more fertilizer and crop rotations. Table 1: Crop Yield Project Integrated Without Project With Inputs Program Bags/ac lb/ac Bags/ac lb/ac Bags/ac lb/ac Maize 2.0 400 8.0 1,600 12.0 2,400 Sorghum 2.0 400 8.0 1,600 12.0 2,400 Wheat 2.5 500 7.0 1,400 10.0 2,000 Beans 1.0 200 4.5 900 6.0 1,200 (4 when graded) (5.5 when graded) 34. Farmers within the project, but who do not directly receive project inputs, would benefit from extension advice, better roads, soil conservation and proper marketing provided under the project. Better seed would be available to them, after the first harvest, from participating farmers; soil conservation would affect moisture penetration; and pressure on available cultivation power would be relieved with extra tractors and oxen from the project, so that more timely cultivation would be possible throughout the project area. Finally, losses of stored grain are presently very large (up to 50%), and proper marketing under the project would serve to increase effective yield by reducing these losses. The increase would be gradual and, estimated at one bag/ac of cereal, is expected to be derived during the last two years of the project. 35. The Tables below summarize possible acreages of different crops, based on the farmers' budgets in Annex 23. Estimates for the project area show that maize and sorghum now comprise 75% of cropped acreage, with maize probably 45% and sorghum 30%; wheat and beans comprise about 10% each and the remaining 5% is under fallow or other crops. ANNEX 5 Page 8 Table 2: Number of Farmers Accepting Inputs and Acreage Involved Number of 2 Ac Maize or Farmers 2 Ac Wheat Sorghum 1 Ac Beans Total 6,000 12,000 - 6,000 18,000 6,000 - 9,000 + 3,000 6,000 18,000 maize + sorghum _ 12,000 12,000 12,000 12,000 36,000 Table 3: Cumulative Program for Phasing of Inputs (Crop and Project Year April 1 to March 31) ------------------- Acres------------------------- Project No. of Total Year Farms Maize Sorghum Wheat Beans Area 1 200 120 80 - 50 250 2 1,400 360 240 600 600 1,800 3 3,000 1,200 800 2,000 2,000 6,000 4 5,000 2,400 1,600 4,000 4,000 12,000 5 8,000 4,800 3,200 8,000 8,000 24,000 6 12,000 7,200 4,800 12,000 12,000 36,000 36. The project would increase wheat and beans, the two most profitable cash crops, at the expense of maize and sorghum. It is assumed that the area presently under minor crops or fallow would be absorbed. Alternatively, if the land was poor and under fallow, it would not be within the improved area. 37. Other crops might be developed by project staff, or by the farmers themselves, and would have at least as good prnfit margin (See Annex 9, para 6). For example, a good demand exists for sunflower which was recently introduced and is already growing in the area in small amounts; and potatoes grow well, though their marketing is difficult. ANNEX 5 Page 9 Table 4: Project Crop Percentage and Acreage --------------Crops With Project---------------- Crops Totals Without Progressive Farmers Farmers Within Project Using Inputs Not Using Inputs Project Crops Amount % Amount % Amount % Amount % Acres Acres Acres Acres Maize 45,000 45 14,400 24 18,000 45 ) ) 39,600 40 Improved ) Maize - - 7,200 12 - - ) Sorghum 30,000 30 9,600 16 12,000 30 ) ) 26,400 26 Improved ) Sorghum - - 4,800 8 - - ) Wheat 10,000 10 - - 4,000 10 ) ) 16,000 16 Improved ) Wheat - - 12,000 20 - - ) Beans 10,000 10 - - 4,000 10 ) ) 16,000 16 Improved ) Beans - - 12,000 20 - - ) Other Crops or Fallow 5,000 5 - - 2,000 5 2,000 2 100,000 100 60,000 100 40,000 100 100,000 100 June 30, 1972 솝 LESOM ZMM BDSJU LU& DEVELORM PROJECT On-Form Costs fRemdar ProsLam (Rand) unit Cost!/ Foreign Crop Inputs (ESLIOO Ac Year 1 2 3 5 6 Total Exchanse 2 jize (Acres) (120) (360) (1,200) (2,400) (4,800) (7,200) Seed 150 ISO 540 1,800 3,6DO 7,200 10,800 24,120 21,708 Fertilizer 479 575 1,724 5,748 11,496 22,992 34,488 77,023 69,321 Seed Dressing 66 79 238 792 1,584 3,168 4,752 10,613 9,552 sub-total 34 7 502 !Z 76 68. 3 =60 50,040 111,756 100,581 Sorgh (Acres) (80) (240) (WO) (1,600) (3,200) (4,800) Seed 100 80 240 Boo 1,600 3,200 4,800 IG,720 9,650 Fertilizer 479 383 1,150 3,832 7,664 15,328 22,992 51,349 46,214 Spraying and Dressing 160 128 384 1,280 2,56D 5,120 7,680 17,152 15,437 Sub-total ;91 7774 7,912 1,824 T 648 35,472 79,221 71,301 Wheat (Acres) - (600) (2,000) (4,000) (8,000) (12,000) Seed 400 - 2,400 8,000 16,000 32,000 48,000 106,400 95,760 Fertilizer 479 - 2,874 9,580 19,160 38,320 57,480 127,414 114,673 Spraying 100 - 600 2,000 4,000 8,000 12,000 26,600 23,940 Sub-total 874 T;780 9,160 76,320 117,480 76.,414 234,373 liar-vesting and Threshing 350 2,100 7,000 14,000 28,000 42,000 93,100 83,790 Sub-total 7,974 T6,580 3,160 T06,320 75 353,514 318,163 Beans (Acres) (50) (600) (2,000) (4,000) (8,000) (12,000) Seed 420 210 2,520 8,400 16,800 33,600 50,400 111,930 100,740 Fertilizer 400 200 2,400 8,000 16,000 32,000 48,000 106,600 95,940 Spraying 100 50 600 2,000 4,000 8,000 12,000 26,650 23,985 Sub-total 460 5,520 l.,-O 36,800 73,600 110,400 245,180 220,665 TOTAL ANNUAL CROP INPUTS 1,885 17,770 59,232 118,464 236,928 335,392 789,671 710,710 Annual incremental Cost 1,885. 15 885 41,462 59 23,2 118,46 118,46 355&3 2 319 850 J_ Annual Cultivation Tractor Operating New 21 415 1,040 6,230 24.900 49,800 97,150 124,500 293,620 205,530 ExistingAL 514 1,540 - - 7,700 23,130 32,370 22,660 Cattle Feed 100 380 1,500 1,500 3,380 TOTAL ANNUAL CULTIVATION 1,040 7,770 24,900 50,180 96,360 149,130 329,370 2MI90 Annual Incremental Cost 1,D40 6,730 17,130 25.280 46,170 52,780 149,130 89,870 Purchases for Cultivation Tr_.ctor -SetL51' 3.000 3,000(l) 12,000(4) 45,000(15) 60,000(20) 90,000(30) 90,000(30) 30CODO 270,000 Oxen 200 __AQ U025)_12,00k(73) 20,000 - TOTAL -URCHASES 3,000 12,000 45,000 65,000 105,000 90,000 320,000 270,000 TOTAL CULTIVATION COST 4,040 19,770 69,900 115,180 201,350 239,130 649,370 498,190 - T7439,041 2,208,9DO TOTAL ON-FARM COST =923 T-,540 72-975-ai 73376" Z38 278 94,522 TOTAL FUNDS6/ 0= 2 269=4 679,720 I/ Unit cost includes transportation, handling and losses. D Years' addition to revolving fund. Traders purchased under the project. Tractors, other than those purchased under the project. 5/ Comprise one tractor: R 2,400; one plow; R 300; one planter R 300. 6/ Total funds required, including revolving fund. ,.n. 27, 1972 o, E E LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Cost of Extension Services (Rand) Unit Foreign Staff Cost Year 1 2 3 4 5 6 Total Exchange Senior Extension Officer 12,000 12,000(1) 12,000(1) 12,000(l) 12,000(1) 12,000(1) 12,000(1) 72,000 64,800 Deputy Extension Officer 3,080 1,540(k) 3,200(1) 3,320(1) 3,440(1) 3,560(1) 3,680(1) 18,740 - Area Supervisors 1,920 3,840(1) 3,980(2) 5,920(3) 8,050(4) 8,430(4) 8,620(4) 38,840 Area Supervisor Trainees 910 - 910(1) 1,820(2) 1,820(2) 1,820(2) 1,820(2) 8,190 Extension Agents 910 1,820(2) 2,830(3) 5,710(6) 9,650(10) 19,230(20) 23,100(30) 62,340 - Demonstrators - Trainees 580 1,740(3) 2,320(4) 4,060(7) 8,700(15) 9,280(16) 4,060(7) 30,160 - Clerk/Typist 520 260 (h) 550(1) 590 (1) 640(1) 680 (1) 730 (1) 3,450 - Drivers 520 520 (1) 550 (1) 590 (1) 640 (1) 680 (1) 730 (1) 3,710 - Subitotal. 21,720. _26,340, 34,010 44,940 55,680 54,740 237,430 64,800 StaffO:n-Costs 40%i 8,690 10,540 13,600 17,980 22,270 21,900 94,980 25,920 Sub-total 30,410 36,880 47,610 62,920 77,950 76,640 332,410 90,720 VehicleS an V_iM*_-Rt 4-Wheel Drivel 3,200 5,340 (d) 1,070 (a) 1,070 (a) - 3,200 (1) - 10,680 10,150 Cars 1,400 1,400 (1) - - 1,400 (1) 1,400 (1) 1,400(1) 5,600 5,320 Bicycles 30 150(5) 60 (2) 300 (10) 390(13) 420 (14) 300 (10) 1,620 1,540 Office and Demonstration 1,000 900 900 400 400 400 4,000 3,800 Sub-total 7,890 2,030 2,270 2,190 5,420 2,100 21,900 20,810 Bulia Houses- Type A 16,000 16,000(1) - - - - - 16,000 9,600 - Type B 10,600 10,600 (1) - - - - - 10,600 6,360 - Type C 4,400 8,800 (2) 4,400 (1) 4,400 (1) - - - 17,600 10,560 Sub-total 35,400 4,400 4,400 - - - 44,200 26,520 4-Whel Drive 1,600 2,670 (d) 3,200 (2) 3,740 (e) 3,740 (e) 2,670(d) 2,140 (c) 18,160 12,710 Cars 1,200 1,200 (1) 1,200 (1) 1,200 (1) 1,200 (1) 2,000 (d) 2,400 (2) 9,200 6,440 Equipmnt - 1,000 1,000 1,000 1,000 1,000 .5,000 3,500 Houses (2,5%) - 880 990 1,100 1,100 1,100 5,170 2,580 Sub-total 3,870 6,280 6,930 7,040 6,770 6,640 37,530 125,230 TOOAL EITENSION 77,570 49,590 61,210 72,150 90,140 85,380 436,040 163,280 / Shared with Credit and Marketing Services. (a) one-third (d) one and two-thirds a i(c) one and one-third (e) two and one-third LESOM10 THABAB U~RAL DEVELOPMENT PRqOJECT Cost of Training Unit Foreign Staff xat Year 1 2 3 4 5 6 Totel Exia1e Senior Agricultural Machinsery Office.V 700 700 (1) 700 (1) 700 (1) 700 (1) 700 - 3,500 - Dzputy Traini.g Officer 3,080 3,080(1) 3,200(1) 3,320(1) 3,440(1) 3,560 16,600 &astant. Traning Officer 1,850 3,700(2) 3,840(2) 3,980(2) 4,120 (2) 4,280 19,920 Cleik/Drivere 520 1,040(2) 1,100(2) 1,180(2) 1,280(2) 1,360 5,960 Sub-total 8,520 8,840 9,180 9,540 9,900 - 45,980 Staff On-Costs 40% 3,410 3,540 3,670 3,820 3,960 18,400 Sub-total 11,930 12,380 12,850 13,360 13,860 64,380 - Ninibus 3,000 3,000(1) - - - 3,000 2,700 Car 1,400 1,400(1) -- - 1,400 1,260 Motorcycles 450 900(2) - 450(1) 450(l) - 1,800 1,620 fiactor and Irpiemnts 4,000 4,000(1) 4,000(1) - - - - 8,000 7,200 Dmonstration LqUIynTnt 3,000 2,500 1,000 1,000 1,000 8,500 7,650 Sub-total 12,300 6,500 1,450 1,450 1,000 - 22,700 20,430 Buildins Houses - Type 2/ 10,600 21,200(2) - - - - - 21,200 12,720 - Type C 4,400 8,800(2) - - - - - 8,800 5,280 - Type D 6,300 6,300(1) - - - - - 6,300 3,780 Classroom 10,000 10,000(1) - - - - - 10,000 6,000 Varm Buildings 4,000 4,000(1) - - - - - 4,000 2,400 Sub-total 50,300 50,300 30,180 Mintenance and Oqeration Training Visitay 4,000 6,000 4,000 6,000 - - 20,000 14,000 Vehicles 4,000 4,000 4,000 4,000 4,000 4,000 - 20,000 14,000 Training Center 5,000 2,000 5,000 5,000 5,000 5,000 - 22,000 15,400 Buildings (2.5%) - 1,260 1,260 1,260 1,260 - 5,040 3,530 Sub-total 10,000 16,260 14,260 16,260 10,260 - 67,040 46,930 TOM h P'RJECT TRAININGA/ 84,530 35,140 28,560 31,070 25,120 204,420 97,540 / Additional cost of Machinery Officer, already in Lesotho, who would continue to use his own vehicle. / For guests and visiting lecturers. 3 Training visits to similar ?rojects, e.8. Yenya, Malavi. 4/ Excluding Soil Conservation (see Annex 14, Page 1). July 6, 1972 a a ANNEX 9. Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Agricultural Research Present Research 1. Agricultural research has been carried out by the Ministry of Agriculture for more than 20 years at the Maseru Research Station and more recently at six substations, one of which is in the project area. The UNDP Leribe project started last year is also investigating dry land crops and cultivation about 40 mi north of the project area. Research has been directed mainly at the four principal dry land crops, to investigate suitable varieties, fertilizer rates, pests and diseases and cultivation techniques. An expanded program on fertilizer application, in conjunction with FAO, has been in operation since 1970, incorporating field plots throughout all the farming areas in Lesotho, and has yielded one year's results (para 11). In recent years, a program of irrigation research on crops and water application rates has been started. 2. The Animal Husbandry section has maintained stud herds of dairy- fed beef cattle, merino sheep and angora goats, mainly for the supply of improved males but also to collect information on yields and perfornance. 3. The Research Station has started a small range and grass management section which has initiated a scheme for highland grazing control. There has been no work on integration of livestock with crops or on grassland establishment and management under stock, however. Project Research 4. The project research staff would, as agreed with Government, make use of the present research substation in the project area and work in close association with the Ministry of Agriculture's Research Station at Maseru and the Faculty of Agriculture, University of Swaziland, from where, funded by UNDP-USAID, one of the two research officers might be seconded to work on the project. 5. The Project Research Officer would be provided from Ministry staff and would have sub-tropical crop development and research, as well as some animal husbandry, experience. The second (Field) Research Officer, provided under the project, would have experience in fodder crops and their use by cattle, sheep and goats, and in grassland development. ANNEX 9 Page 2 Investigational Program Dryland Crops 6. The investigational program would be in two parts. Firstly, in conjunction with the crop work being done at the UNDP Leribe Project and Maseru Research Station, rainfed crops would be developed through improvement in their varieties, fertilization, cultivation, control of pests and diseases and introduction of rotations, mainly of maize, wheat, beans and sorghum, but also including crops such as sunflower, peas, potatoes, pyrethrum, vegetables and linseed. With these crops, investigations would be conducted and rotations devised to incorporate fallow fodder crops and cultivation techniques that would arrest the decline in, or build up and maintain, soil fertility and yields, and reduce soil erosion. Integrated Farming 7. Secondly, in support of integrated farming (Annex 5, Part B), the program would investigate systems and rotations to integrate the above crops with better animal husbandry, so as to support stock on fodder crops, grassland, and crop residues, together with permanent grazing, and so over- come the problems of communal grazing and allow the keeping of improved stock and an increase in livestock products. 8. Investigations would also be carried out on systems of permanent cropping designed to maintain soil structure and fertility through fallows, green manuring and restorative crops without the use of grass leys or livestock. For example, a ten-acre area could be farmed on the lines of the rotations and budget laid out in Annex 23. This involves the development of five acres of arable land under the four crops plus planted grass leys and fodder, fertilized at double the rates proposed for the basic project inputs, together with five acres of associatad permanent grazing to form a basic unit, fenced to contain the associated livestock, e.g., a milk cow and its calf and ten merino sheep or goats. 9. Other variations would also be investigated to collect facts and to serve as a teaching and demonstration unit to progressive farmers, who might be considering better, permanent farming, stock keeping and land usage systems. Research Substation Development 10. The substation at present consists of a small amount of land allocated by the chief, some buildings and one research assistant's house. Field trials on rainfed crops under the direction of Maseru are carried out each year. The project would make use of the facilities, would be allocated further necessary land, and would provide additional housing, simple labora- tories, and farm buildings (Annex 10). ANNEX 9 Page 3 Fertilizer Trial Results 11. The FAO/Ministry of Agriculture fertilizer trial program has results available for only one complete year. These vary greatly according to site and rainfall differences. By no means conclusive as to correct quantities, they quite definitely indicate that increases in yield, comparable with those predicted for the project, are likely. 12. Records for all research program fertilizer trials have been kept for some years and also support the yields used in the project. Fertilizer Trials in Experimental Program Maize Sorghum Wheat Beans Bags/acre 8- 17 12- 17 6- 9.5 5- 6 Pounds/acre 1,600-3,400 2,400-3,400 1,200-1,900 1,000-1,200 August 4, 1972 Qh Q LESOTHO THABA R081U RURAL DEVELORMENT PROJECT Cost of Research (Rand) Unit Foreign Staff Cost Year 11/ 2 3 4 5 6 Total EM2hange Research Officer 12,000 12,000 (1) 12,000 12,000 12,000 12,000 12,000 (1) 72,000 64,800 Agriculturist - Trial Officer 3,080 1,540 (k) 3,200(1) 3,320(1) 3,440(1) 3,560(1) 3,680(1) 18,740 - Field Assistants 1,850 1,850 (1) 3,840 (2) 3,980 (2) 4,120 (2) 4,280 (2) 4,420 (2) 22,490 - Clerk 520 260 (h) 550 (1) 590 (1) 640 (1) 680 (1) 730 (1) 3,450 - Laborer 240 1,200(5) 2,400(10) 2,400(10) 2,400(10) 2,400(10) 2,400(10) 13,200 - Sub-total 16,850 21,990 22,290 22,600 22,920 23,230 129,880 64,800 Staff On-Costs 40% 6,740 8,800 8,920 9,040 9,170 9,290 51,960 25,920 Sub-total 23,590 30,790 31,210 31,640 32,090 32,520 181,840 90,720 Vaeles and Eauipnt 1 Pickup 1,800 1,800 (1) - - 1,800 - - 3,600 3,240 1 Car 1,400 1,400 (1) - - 1,400 - - 2,800 2,520 Tractor 4,000 4,000(1) - - - - - 4,000 3,600 Equipmant 2,000 2,000 - - - - 4,000 3,200 Sub-total 9,200 2,000 - 3,200 - - 14,400 12,560 Houses - Type A 16,000 16,000 - - - - 16,000 9,600 - Type B 10,600 10,600 . - - - - 10,600 6,360 - Type C 4,400 4,400 - - - - - 4,400 2,640 Laboratory 3,000 3,000 - . - - - 3,000 1,800 Sub-total 34,000 - . - - - 34,000 20,400 Maintenance and 0opration Vehicles 3,000 1,500(h) 3,000(1) 3,000(1) 3,000(1) 3,000(1) 3,000(1) 16,500 11,550 Equipment 2,000 1,000 2,000 2,000 2,000 2,000 2,000 11,000 7,700 Housing - 850 850 850 850 850 4,250 2,125 Sub-total 2,500 5,850 5,850 5,850 5,850 5,850 31,750 21,375 TOTAL RZSFARCHI 69,290 38,640 37,060 40,690 37,940 38,370 261,990 145,055 1/ Staff recruited during year charged proportionately. May 25, 1972 E E ANNEX 11 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Marketing A. Marketing Institutions 1. Agriculture in Lesotho being mainly for subsistence, existing marketing facilities are rudimentary and almost entirely in the hands of a few private traders. Surplus crops can be sold through established marketing institutions in South Africa (Cooperatives and Marketing Boards) and this has, until recently, avoided the need for more sophisticated institutions in Lesotho. However, in order to develop its agricultural production, Lesotho rightfully plans to increase its marketing facilities and rationalize marketing channels. Traders 2. Private traders have largely contributed to the initial development of the country and will likely remain the only center of exchange for farmers in remote areas. Because of poor infrastructure and the absence of a clear-cut government policy on marketing, these traders have developed a quasi-monopoly, leaving the farmer in a very weak bargaining position. Although forbidden by law, most transactions are by barter, with the trader judging quality. It is not surprising that farmers intensely dislike the system. Moreover, farmers receive little real market incentive to achieve increased production, specialization and improved quality. If marketing is to be improved in the project area, alternative channels will have to be sought. 3. Some grains, such as wheat, are exported; some are sold elsewhere in Lesotho; and others are sold locally later in the season. Farmers tend to oversell at harvest time and repurchase grain at higher prices when foodstuffs are scarce, e.g. during plowing. There are no statistics on traders' grain throughput, but a store is estimated to handle 3,000 to 5,000 bags per year. Twenty-two traders in the area handle annually an estimated production of 65,000 bags. They should not be excluded from the marketing system, since they provide a valuable service in local exchange which could not be profitably replaced by a more sophisticated organization. Government, directly or through its project, could license some traders to handle grain on its behalf and under its close control in areas where production would be inadequate to justify establishing a separate market. 4. The traders' main activity and source of profit is retail sale of consumer goods. They handle grain and usually operate a simple mill, to attract farmers to their store; but they are not very interested in grain ANEX 11 Page 2 marketing which they find unprofitable and risky. And, since grain marketing requires substantial capital, traders are reluctant to expand their facilities to handle increased production. Co-op Lesotho Ltd. (CLL) 5. CLL is a cooperative union and its purpose is financing supply of inputs and marketing. Its main activities have been supply of credit to its members and supply of inputs (Annex 4, para 6). Lack of staff and facilities has impaired the efficiency of these operations and inputs have often been delivered late. In 1971, Government asked CLL to market maize and sorghum at prices fixed by Government. In a record harvest year, CLL was unable to buy all grain offered by its members; even so, CLL bought a total of 27,000 bags of maize and sorghum. The prices, however, were fixed too high (higher than equivalent prices across the border in South Africa) and CLL is unable to resell this produce without incurring a substantial loss; and 25,000 bags are still in stock with a new harvest now ready for market. CLL, suitably strengthened, would be adequate to market project output; but it lacks the expertise and facilities to carry out such a task. It would therefore be preferable for the project to build and operate markets in the project area as agent of CLL, but for the time being firmly under the Project Manager's control. Project facilities and staff would be taken over by CLL at an appropriate time. 6. This arrangement would be jeopardized if Government requested CLL to act as agent only for a proposed Grain Control Board, at fixed prices and margins (para 7). In that event, CLL would lose its flexibility and competitiveness with the private traders, and the project would need to receive from Government the authority to operate an independent marketing organization under separate regulations. Grain Control Board 7. Government's unsuccessful attempt to f"x maize and sorghum prices pointed to the need for a carefully considered long-term Government policy on marketing. This led to a proposal to establish a marketing board, on South African lines. Since Lesotho has only limited expertise and facilities available, it is unlikely that it could effectively engage in a sophisticated marketing exercise. Government's difficult financial situation also limits the funds it could provide for a marketing organization, which would thus probably have to rely entirely on a levy to cover its costs at the farmers' expense. Sophisticated marketing, moreover, would not appear to be warranted, because Lesotho's agricultural exports are absorbed by the South African market where the marketing boards make policy decisions and set prices, limiting the margin of independent decision in Lesotho. Until more data, staff and finance are available, it would seem appropriate to concentrate on minimum control measures. These would include: (a) issue of grade specifications and enforcement of their application; ANNEX 11 Page 3 (b) collection of data from traders and other marketing channels; and (c) licensing of dealers in grain to ensure that they meet criteria laid down by the controlling body and provide the data required, e.g. quantities purchased and sold, by grade and price. 8. Fixing floor prices would be useful in stabilizing farmers' income in years of overproduction. However, until adequate storage and finance to buy all quantities offered at the published price are available, floor prices would not be very meaningful. Milling and Processing 9. Only limited quantities of maize and sorghum are currently being processed within Lesotho. Hammer mills owned by traders grind a farmer's production for his own consumption. Two industrial mills, with an annual capacity of about 40,000 bags each, operate within less than 13 km of the project area. The Lesotho National Development Cooperation, in conjunction with a South African milling company, plans to set up a mill at Ficksburg Bridge, to start operations in October/November, 1973, with an annual capacity of about 350,000 bags. Although the mill is appropriately situated near important maize-producing areas in Lesotho and South Africa, it would be about 100 km from the project area. Transportation costs would make it cheaper to carry maize from the project to the smaller mills now in Lesotho, or to mills across the border in South Africa; and then to purchase maize meal from the same factories. Although it is recognized that additional milling facilities would assist Lesotho development, maize producers and consumers in the project area may not benefit from the new mill. Lesotho Farmers' Produce Marketing Cooperation (LFPMC) 10. LFPMC is a statutory corporation created in May, 1971 within the Ministry of Agriculture to handle livestock marketing. Nine auction centers have been constructed throughout the country and are managed by a South African auctioneering company. This company takes 6% commission from buyers, mainly South African. LFPMC imposes a levy of R 1.5 per cattle, 1.0 per pig and 0.5 per sheep marketed. If sellers, farmers or traders consider the price offered inadequate, they can withdraw their animals, which LFPMC will then arrange to ship instead to the Durban abattoir. Durban prices, however, have generally been lower than on the auction floors, and direct sales to Durban have decreased in recent months. Since LFPMC was created exports of cattle have come under its exclusive control and official figures show a sharp decline in such exports (Table 2), partly because statistics have become more accurate. At the same time, imports of cattle have been pro- hibited. The Lesotho Government envisages an abattoir near Maseru, which would rely on a partial throughput of cattle from South Africa to reach full ANNEX 11 Page 4 capacity. Although this abattoir would offset the lack of nearby slaughtering facilities in South Africa, it seems unlikely to be economically viable unless Lesotho sales of cattle increase considerably. B. Project Marketing, Storage and Transportation 11. In the project area, licensed traders would be allowed to continue to market graif, as at present. The project would provide marketing facilities for project farmers, to absorb their additional output. It would operate as agent for CLL, at prices agreed in consultation with CLL and Govern- ment. The funds would be provided by commercial banks, as they now provide funds to CLL, i.e. at rates applicable to Government-sponsored enterprises and with suitable Government assurances as to repayment. Annual operating costs at full development would be deducted in arriving at market prices. Storage would be required for the additional project production to be purchased, and also for project inputs, mainly seed and fertilizer. Four main markets and stores and up to six secondary buying points would be located in the field and one main store at the Maseru railhead. Estimated capacity is based on the assumption that only 30% of grain would remain in store at any one time, with 50% of beans and 50% of inputs. The beans would advantageously remain longer in store, to await the higher seasonal price in South Africa. A total of six trucks of seven-ton capacity would be needed to transport crops and inputs. Details are in Tables 3 and 4. C. Markets and Prices 12. South Africa usually has excess maiz%, sorghum and wheat; and bean production within the South African Customs Union would exceed estimated consumption at full project development. The Customs Union requires free circulation of goods throughout the Union which includes Lesotho, and the South African authorities will accept exports from Lesotho on the same terms as for South African farmers - but without subsidies. This will be maintained as long as Lesotho continues to allow free circulation of farm products from South Africa across its border. In South Africa, marketing of crops is controlled by Marketing Boards. Prices fixed by these Boards are usually higher than world market prices and it is expected that, except for some beans which might be exported through South African brokers, project output would be sold on the South African market. Maize 13. There are no reliable statistics on Lesotho maize production, but the Ministry of Agriculture estimates annual production at about 95,000 tons. Lesotho iS officially a net importer of about 30,000 tons (300,000 bags) of maize per year (Table 5). In addition to these officially recorded imports, about 11,000 tons are believed to be smuggled in each year and ANNEX I1 Page 5 about another 11,000 tons come in under the Food Aid Program. 70% of these imports are in the form of maize meal. Although Lesotho is known to export maize grain for milling, no figures are available. At full development, the project would increase annual maize production by about 3,800 tons (42,000 bags). This production could be exported for milling or be milled in Lesotho (para 9). 14. The South African Maize Board's operations vary according to region. Most Lesotho imports come from a region in which South African producers are compelled to sell to the Board or its agents who, in turn, are required by law to buy and store all graded maize offered at the fixed Board price. Producer prices, fixed each year in March or April, take into account changes in production cost, expected crop size, consumption, exports and the position of the Board's stabilization fund. The Board's selling price is determined by its operating costs, aided by a Government subsidy, which has steadily increased over the last five years to reach R 0.47 per bag in 1971/72. This amount was approximately equivalent to the Maize Board's operating costs so that, in effect, the Board resells maize at the producer price. The Board also controls the millers and fixes the price of maize meal. 15. South Africa is a regular exporter of maize, though the quantity varies enormously, depending on the harvest. The average percentage of production exported over the last five years was about 28%. Export prices for white maize averaged R 4.21 per bag (US$61.7/ton ex-warehouse) in 1970/71. Further details are in Tables 6 and 7. The South African Govern- ment requires the Lesotho authorities to collect the equivalent of the South African subsidy on each bag imported. This levy is then donated to a Maize Meal Fund which the Lesotho Government can use for agricultural development purposes. It presently totals about R 300,000. 16. Farmers' price calculations (Table 8) are based on the South African Maize Board price. Although some incremental maize production would be milled locally, the price would be similar to the South African price. Lesotho millers purchase lower qualities, thus offsetting the higher trans- portation costs and taxes. The South African Maize Board's price for the best grade of maize was R 3.70 in 1971/72. Allowing for R 0.41/bag for transport and marketing, and deducting bagging costs, the farmer price would average R 3.00/bag (Table 8) compared with current farm-gate prices paid by traders, believed to be about R 2.50/bag. In 1970/71, Government fixed the maize price at R 4.00/bag, best grade. Sorghum 17. There are no reliable statistics on Lesotho sorghum production, marketing and export. The Ministry of Agriculture estimates that annual production fluctuates around 42,000 tons and the exports would be around 3,600 tons in a good year. Although sorghum has a lower value than other crops, it is favored by Lesotho farmers because it will grow when the rains are poor and other crops likely to fail. At full development, the project would increase annual sorghum production by about 2,600 tons or 28,000 bags. ANNEX 11 Page 6 18. In South Africa, sorghum is handled by the Maize Board under a floor price system. Traders are free to buy and sell sorghum without restriction. In certain areas, the Board purchases sorghum through registered agents at an announced fixed price, and then resells it to millers at the producer price increased by R 0.5 per bag to cover handling cost. All manufacturers of sorghum products have to register with the Board. In main producing areas, they must also inform the Board of their monthly transactions. Manufacturers of sorghum malt pay a special levy to a fund used to cover losses on exports. In 1970/71, sorghum consumption in South Africa reached 300,000 tons. The floor price is determined by similar criteria as for maize, and in 1971/72 was R 3.45/bag, best grades. The Board's selling price was R 3.95/bag. Further details are in Tables 6 and 7. 19. It is expected that the R 3.45/bag, delivered South Africa, would be paid for sorghum of the best Lesotho quality. After deduction of costs, and marketing commission of R 0.10, the farmer price would be R 2.70/bag (Table 8) compared with about R 2.40/bag believed to be currently paid by traders. For the 1970/71 buying season, the Lesotho Government fixed the price of sorghum at R 4.00/bag, best grade. Wheat 20. Wheat production is estimated by the Ministry of Agriculture to average about 19,500 tons/year. Annual exports averaged 6,000 tons over the last six years but with wide fluctuations (Table 5). Lesotho wheat is, on average, a good quality soft (Class B) wheat. At full development, the project is expected to increase average annual wheat exports by about 6,000 tons or 67,000 bags (compared with South African annual consumption of 1.2 M tons). 21. In South Africa, wheat is controlled by the Wheat Industry Control Board (WICB) under a system similar to that used by the Maize Board. Wheat prices are controlled from producer to consumer; all agents handling wheat and/or wheat products have to register with the Board. Total annual wheat production in South Africa is now about 1.1 million tons and imports from overseas average about 240,000 tons, excluding imports from Lesotho. Producer prices are fixed as for maize, but with a particular emphasis on quality. All grains have to be delivered in new bags. In view of increasing wheat production in South Africa, only prices for grade A and B wheats are expected to be maintained. There are no exports from South Africa, but about 240,000 tons were in stock at the end of 1969/70. The Wheat Industry Control Board is represented in Lesotho by Frasers, a long-established South African retail and wholesale trading company. Frasers' thus has a monopoly of official wheat exports to South Africa. With additional storage and transportation facilities, the project would take care of its own wheat exports if Fraser's services or prices proved inadequate. 1/ 1/ Though no proper data are available, there are some indications that prices paid by Frasers do not correspond to the regulations imposed by the Wheat Industry Control Board. ANNEX 11 Page 7 22. Since wheat exported from Lesotho is already of good quality, 1/ no improvement has been assumed. The price of 95% of Lesotho wheat in 1971/72 was R 6.43/bag delivered Fraser's. After deduction of costs, including R 0.10/bag for cleaning and a marketing commission of R 0.06, the farmer price would be R 5.20/bag (Table 8). Traders are thought to pay about R 4.50/bag. Beans 23. No statistics on Lesotho bean and pea production are available, but the Ministry of Agriculture estimates annual production at around 5,400 tons. The variety is mainly Small White Haricot, used for canning. Bear exports from Lesotho to South Africa have increased from 635 tons in 1968 to about 1,360 tons in 1971 (Table 5). There is a strong South African demand for Lesotho beans because of their high quality. Low labor costs in Lesotho allow careful cleaning and hand sorting, which produces a better result than the mechanical cleaning which is necessary in South Africa. At full development, project production would be about 3,600 tons or 40,000 bags. 24. Detailed statistics on the South African market for beans are in Tables 6 and 7. Purchases of peas and beans averaged 47,400 tons/year over the last five years, while local consumption was about 48,100 tons/year. The difference was provided through imports and carry-over stocks from a record production of about 70,000 tons in 1967/68. Production of Small White Haricots in South Africa in 1970/71 was 5,270 tons, while consumption was 6,630 tons. The difference between consumption and production was met by imports, mainly from Lesotho. About one-third of project incremental production, corresponding to 68% of Small White Haricot production in South Africa, could be absorbed by South African consumers. The remainder would need to be exported on the world market (para 12). 25. Marketing of dry beans in South Africa is controlled by the Dry Bean Board. The Board operates a floor-price system and carries out marketing research. Funds are provided through levies collected from the trade. An ordinary levy covers the Board's operating cost and amounts to R 0.11/bag; a special reserve fund levy covers losses on exports and is R 0.17/bag. Records show that only middle and lower grade beans were purchased by the Board at the floor price. Higher grades, which correspond to the Lesotho production, have always fetched higher prices than those fixed by the Board. 26. The world market for dry beans is about 350,000 tons. Producers are mainly the United States and Canada. Consumers, mainly the United Kingdom and Japan, each take about 70,000 tons/year. The Common Market countries consume 40/100,000 tons/year. Prices cif UK ports have declined from the 1970 average of US$395 to US$295 per mt in 1971 and are projected to decline further to US$238 per mt in 1975 in terms of constant dollars. 1/ According to the WICB statistics, for the last five years, 95% of Lesotho wheat exports were of the B2 category. ANNEX 11 Page 8 27. A sample of Lesothan and South African lots was sent to the United Kingdom in 1971. The price cif UK port was R 225 (US$285) per metric ton. Freight costs were R 14 and commission, R 15 per metric ton. Thus, the fob Durban price was R 196 per metric ton. Transportation costs and profits within South Africa amounted to R 16, resulting in a price of R 180 per metric ton or R 16 per bag cleaned beans at the Lesotho border. Assuming a decline in the cif UK price to R 189 (US$238) per metric ton for exported beans, the Lesotho border price would become R 13.1/bag. The increased Lesotho production for sale in South Africa would depress prices on that market to R 16 per bag resulting in a Lesotho border price of R 15.2/bag. Assuming that 1/3 of the production is exported on the world market and 2/3 on the South African market, the average price at the Lesotho border would be R 14.5/bag. The equivalent producer price would then be US$13.00/bag (Table 8). Attached: Tables 1-8 August 4, 1972 ANNEX I I Table 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT /1 Total and Marketed Production- 1. In 1969/70 (thousand tons) /2 Lesotho Project Area- Produced Marketed % Produced Marketed % Maize 95 19 20 8.2 2.5 30 Sorghum 42 10 25 5.4 1.6 30 Wheat 58 18 30 2.3 1.4 60 Beans 5 2 40 0.9 0.4 40 Total 200 49 24 16.8 5.9 35 2. At full project development (1979/80) (a) Additional production from project (all marketed) /3 /3 Normal Average (90%)-- Normal Average (90%)L-- ------('000 bags)----- ------(000 tons)----- Maize 48.00 42.24 4.35 3.83 Sorghum 32.00 28.16 2.90 2.56 Wheat 75.00 66.50 6.80 6.04 Beans 44.40 39.60 4.03 3.59 Total 198.40 176.60 18.08 16.02 (b) Total produced and marketed in project areas ('000 tons) on average Produced Marketed Preproject Project Total Preproject Project Total % Rounded Maize 8.2 3.8 12.0 2.5 3.8 6.3 50 Sorghum 5.4 2.6 8.0 1.6 2.6 4.2 50 Wheat 7.3 6.0 8.3 1.4 6.0 7.4 20 Beans 0.9 3.6 4.5 0.4 3.6 4.0 90 Total 16.8 16.0 32.8 5.9 16.0 21.9 70 /1 Estimates are based on statistics that are not very reliable, but give a reasonable indication. 1969/70 was chosen for the production estimate as it was considered a normal year for most crops, wheat excepted. /2 Production estimates for Lesotho are from the Five-Year Plan and, for the project area, according to mission appraisal. Estimates on maximum mar- keted production for Lesotho are based on the 1971 FAO report on marketing of grains and pulses in Lesotho by Dr. Creuplandt (TA-3025); revised upwards for wheat and beans in the light of 1970 and 1971 export figures. /3 Allows for 50% crop failure one year in five. June 30, 1972 ANNEX 11 Table 2 LESOTHO TRABA BOSIU RURAL DEVELOPMENT PROJECT Lesotho Livestock Statistics /11 1. Imports and exports- Years Cattle Sheep and Goats Imports Exports Net Exports Imports Exports Net Exports 1961/62 19,956 8,828 (11,128) 6,602 1,444 (5,158) 1962/63 22,704 12,164 (10,540) 8,224 4,071 (4,153) 1963/64 17,843 11,883 (5,960) 5,724 4,654 (1,070) 1964/65 13,859 11,906 (1,953) 5,469 10,693 5,224 1965/66 8,724 12,976 4,252 5,654 9,063 3,409 1966/67 9,937 13,353 3,416 7,714 5,428 (2,286) 1967/68 5,239 18,353 13,114 8,956 16,539 7,583 1968/69 4,355 15,299 10,944 8,321 25,852 17,531 1969/70 4,730 11,408 6,678 12,862 16,143 3,281 1970/71 - 3,032 3,032 - 1,738 1_738 Average 10,735 11,920 1,185 7,725 10,432 2,707 /2 2. Lesotho Farmers' Produce Marketing Corporation (LFPMC) activities- During the first eight months of the corporation's operations (May 1971 - January 1972), 3,032 cattle, 1,738 sheep and goats, and 41 pigs were sold. Average recorded prices per head were: Rand Oxen (1947) 71 Cows (229) 41 Bulls (258) 59 At the Durban abattoir (650 km from Maseru), 598 cattle were sold at an average price of R 77/head. Deducting transportation: R 3.65; food and transit: R 0.13; slaughter: R 0.53; abattoir fees: R 0.65; commission: R 2.53; South African levy: R 0.77, a total of R 8.23, leaves a net farmer price per head of R 68.77. /1 Up to 1969/70: statistics provided by the Veterinary Services; 1970/71 provided by LFPMC first eight months of operation. /2 Ministry of Agriculture. Economics and Marketing Annual Report of 1971. June 30, 1972 ANNEX 11 Table 3 LESOTHO TRABA BOSIU RURAL DEVELOPMENT PROJECT Estimated Storage Capacity at Full Development I. Inputs Per Main /2 Ferti- Storage Capacity Store Equivalent- lizer Seeds Input Req. Total Sept. March Acres kg/ac k&/ac tons -------- Cubic meters --------- Maize 7,200 100 7.5 774 2,407 300 Sorghum 4,800 100 5.0 504 1,567 200 - Wheat 12,000 100 20.0 1,440 4,480 - 560 Beans 12,000 100 15.0 .1,380 4,293 540 540 Total 36,000 4,098 12,747 1,040 1,100 II. Project Farmers' Marketed Production /3 /1 Per Main /2 In Store- Storage Capacity- Store Equivalent- Total April-July Sept-Dec April-July Sept-Dec April-July Sept-Dec ------------ tons----------- ---------------cubic meters-------------- Maize 4,350 1,450 - 4,510 - 565 - Sorghum 2,900 970 - 3,020 - 380 - Wheat 6,800 - 2,270 - 7,050 - 880 Beans 4,020 1,010 1,010 3,130 3,130 390 390 Total 18,070 3,430 3,280 10,660 10,180 1,335 1,270 Since at maximum capacity it is expected that half the inputs would be stored while the crop is being bought, capacity in terms of cu m would not exceed 2,000. However, because inputs have to be stored separately from crops and because of identity problems with the crop itself, the main stores would need to be 15 m x 45 m x 3.5 m = 2362 cu m and the secondary stores 9 m x 36 m x 3.5 m = 1,134 cu m. The extra capacity would be required for the production from the integrated farming programs. /1 With 20% circulation allowance, 3.11 cu m are required per ton. /2_ With 5 main stores, and 6 stores with half the capacity of the main stores, the total storage is the equivalent of 8 main stores. This total storage capacity has been divided by 8 to determine the capacity of one main store. /3 One-third of the grains and half the beans. June 30, 1972 ANNEX 11 Table 4 LESOTHO TRABA BOSIU RURAL DEVELOPMENT PROJECT Proposed Marketing Facilities Head Office Major Markets Secondary Markets Number 1 4 6 Location Maseru Ntsi, Mokema Area, Roma, Thuate, Machache Faku and to be and to be determined determined Market Capacity 2,362 Cu m 2,362 cu m 1,134 cu m + office space Houses 1 A type 1 C type 1 B type 1 Duplex (type D) Vehicles 2 seven-ton I seven-ton truck trucks 1/3 4-wheel drive 1 car vehicles /1 Staff 1 Marketing and 1 Marketing 4 Watchmen/Laborers Credit Officer Supervisor (of which 2 for (overall 6 months only) management) 1 Deputy Marketing Officer 1 Assistant Accountant 1 Clerk 1 Clerk/Storekeeper 3 Drivers 1 Driver 4 Watchmen/ Laborers 4 Watchmen/Laborers /1 The vehicles would be shared with Credit and Extension and be replaced by a car after 5 years. June 30, 1972 ANNEX 11 Table 5 LESOTHO TRABA BOSIU RURAL DEVELOPMENT PROJECT Imports and Exports (Lesotho/South Africa) 1. Maize Imports Years Bags '000 Tons 1961/62 163,307 14.8 1962/63 240,337 21.8 1963/64 225,901 20.5 1964/65 302,949 27.5 1965/66 450,040 40.2 1966/67 319,085 28.9 1967/68 154,796 14.0 1968/69 362,090 32.8 1969/70 320,085 23.0 1970/71 391,872 35.6 2. Sorghum Exports Exports are estimated to reach 40,000 bags or 3,600 tons in a good production year. No other statistics are available. 3. Wheat Exports Quantity Average Price Years 200 lb Bags '000 tons per Bag in R 1964/65 122,535 11.1 5.63 1965/66 30,235 2.7 5.54 1966/67 5,672 0.5 5.82 1967/68 22,086 2.0 6.00 1969/70 150,120 13.6 6.17 1970/71 23,353 2.1 6.01 4. Bean Exports Years 200 lb Bags '000 tons 1968/69 7,000 0.6 1969/70 11,000 1.0 1970/71 15,000 1.4 June 30, 1972 E E ANNEX 11 Table 6 Page 1 LESOTRO TRABA BOSIU RURAL DEVELOPMENT PROJECT South African Statistics 1. Maize Producer/ Production Imports Exports- Consumption Export Price Price - (thousand metric tons)--------- R/mt R/bag R/bag 1966/67 5,056 153 482 4,237 n.a. n.a. 3.58 1967/68 9,762 - 3,111 4,233 36.26 3.29 3.35 1968/69 5,316 - 2,956 4,691 35.38 3.21 3.35 1969/70 5,340 503 947 4,884 42.22 3.83 3.60 1970/71 6,133 73 1,302 5,149 46.36 4.21 3.55 Average 62321 146 1,760 4,639 40.32 3.66 3.49 2. Sorghum 1966/67 336 91 42 301 37.04 3.36 3.20 1967/68 844 182 372 310 36.03 3.27 3.30 1968/69 207 - 109 287 34.48 3.13 4.00 1969/70 232 182 - 228 - - 3.40 1970/71 445 - 103 304 36.42 3.30 3.45 Average 413 91 125 286 35.89 3.26 3.40 /1 Including exports to Lesotho, Swaziland and Botswana. /2 Best grades maize, sorghum and wheat in bags; 1971/72 maize price R 3.70/bag. June 30, 1972 ANNEX 11 Table 6 Page 2 /2 /1 Producer-- Production Imports Exports- Consumption Export Price Price ----------(thousand metric tons)--------- R/mt R/bag R/bag 3. Wheat /3 1966/67 568 808 - 1,107 - - 5.75- 1967/68 1,100 211 - 1,151 - - 6.05 1968/69 1,345 13 - 1,068 - - 6.05 1969/70 1,396 140 - 1,242 - - 6.35 Average 1,135 237 1,121 6.09 4. Beans & Peas /4 /5 /7 1966/67 37.9- 7.54- 0.23 43.7 n.a. n.a. 14.00-- 1967/68 68.1 0.85 0.91 49.2 n.a. n.a. 12.00 196&/69 50.3 0.80 4.21 56.6 n.a. n.a. 14.05 1969/70 42.1 2.14 3.28 42.7 n.a. n.a. 13.20 1970/71 38.5 2.90 1.65 48.1 197 17.A96- 13.96 Average 47.4 2.84 2.06 48.1 13.29 /1 Including exports to Lesotho, Swaziland and Botswana. /2 Best grades maize, sorghum and wheat in bags; 1971/72 maize price R 3.70/bag. /3 For Grade B1, after deduction of the trader's commission. /4 Marketed; Dry Bean Board estimate. /5 Exclusive of imports from Lesotho, Swaziland and Botswana. /6 Fob Durban price; one lot exported to U.K. /7 Average producer price for Small White Haricot over the main marketing months. June 30, 1972 ANNEX 11 Table 7 Page 1 LESOTHO TRABA BOSIU RURAL DEVELOPMENT PROJECT /1 Gross Prices per grade- (Rand) 1. Maize White Grades Producer price in 1970/71 per ton per bag WD1 39.13 3.55 WD2 38.58 3.50 WD3 37.48 3.40 WF1 37.75 3.42 WF2 36.93--- 3.35 2. Sorghum Producer price in 1971/72 Grades (floor price) per ton per bag KR1 38.03 3.45 KR2 36.93 3.35 KM1 36.93 3.35 KM2 35.83 3.25 KW1 38.03 3.45 KF1 35.83 3.25 KF2 34.72 3.15 KF3 33.62 3.05 /1 Delivered in bags. /2 This price was increased in 1971/72 to R 3.70/bag. The Lesotho importer also pays the Board's operating costs of R 0.47/bag. ANNEX 11 Table 7 Page 2 3. Wheat Producer Price in 1971/72 after Deduction of Trader's Commission of R 1.65/ton Grades Class A Class B Class C Class A Class B Class C ----------Per ton---------- ----------Per bag---------- Super 77.04 - - 6.99 - - 1 75.94 74.29 72.64 6.89 6.74 6.59 2 73.18 70.83 69.88 6.64 6.43 6.34 3 - 66.37 64.72 - 6.03 5.87 4 - - 58.11 - - 5.27 4. Beans: Small White Haricot Producer Prices High Quality Cleaned Beans 1968/69 Average Prices Purchased by Broker-monthly Averages Floor price 1971 Highest Lowest May Sept DB1S - April 13.56 DBI - DB2 12,000 May 13.76 1970 20.00 14.75 15.00 16.75 DB3 11,000 June 14.37 1971 18.00 13.50 16.00 15.50 DB4 10,000 July 15.14 Average 13.96 June 30, 1972 ANNEX 11 Table 8 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Estimated Marketing Costs and Parmers' Prices (Rand) 1. Marketing Costs - Operating Staff/I 39,600 Vehicles/2 13,000 Replacements/2 6,000 Building maintenance (2.5%) 3,300 Building depreciation (over 25 years) 5,300 Equipment (scales, tarpaulins, office equipment) 1,600 Equipment depreciation (10% of 10,000) 1,000 69 ,800 Contingency 5% on costs, other than staff 1,500 Cost per bag for 176,000 bags R 0.41-/3 2. Farmers' Prices (per 200 lb bag) Wheat Maize Sorghum (B grade) Beans Delivered in bag for best grade 3.70 3.45 6.43 14.50 2% loss on net 0.07 0.07 0.12 0.29 3.63 3.38 6.31 14.21 Transport and marketing 0.41 0.41 0.41 0.41 Bagging 0.10 0.10 0.42 0.10 Cleaning/4 - - 0.10 - Interest-- 0.07 0.07 0.12 0.58 Subtotal 0.58 0.58 1.05 1.09 Net price 3.05 2.80 5.26 13.12 /5 Reserve margin- 0.05 0.10 0.06 0.12 Farmgate price 3.00 2.70 5.20 13.00 /1 Excludes expatriate Marketing/Credit Officer, but includes 25% of the Deputy Marketing Officer and the Accountant Assistant who would be assigned to Marketing Headquarters. /2 Vehicles operating and replacement costs assume that cars at market site would be used half the time by Credit and Extension. /3 Costs have been allocated to project production, excluding the integrated farming program. A At the current annual commercial rate of 9%; four months for cereals and six months for beans. /5 Upward rounding. June 30, 1972 E E TH4IIA EOSto Ruma0PMf P"ROJECT Cost of Mark ises (L Ranod) 51' Unit if Foreign Staff Cost Year 2 3 4 5 6 otalEh e Senior Credit/Marketing Officery 12,000 6,000 () 6,000 (4) 6,000 (4) 6,000 (4) 6,000 (4) 6,000 (4) 36,000 32,400 Deputy Marketing Officer 3,080 1,540 (4) 3,200 (1) 3,320 (1) 3,440 (1) 3,560 (1) 3,840 (1) 18,900 - Accountant Assistant, 860 860 (1) 900 (1) 950 (1) 1,000 (1) 1,050 (1) 1,090 (1) 5,850 Marketing Supervisor/Grader 1,850 1,850 (1) 5,690 (3) 7,770 (4) 8,040 (4) 8,330 (4) 8,620 (4) 40,300 Clerk/Storekeeper 690 690 (1) 2,910 (4) 3,770 (5) 4,070 (5) 4,330 (5) 4,600 (5) 20,370 Driver 690 690 (1) 2,910 (4) 3,770 (5) 5,450 (7) 5,810 (7) 6,160 (7) 24,720 Watchman/Laborers 240 960 (4) 3,360 (14) 5,280 (22) 7,200 (30) 7,680 (32) 7.680 (32) 32,160 - Sub-total 12,590 24,970 30,860 35,200 36,760 37,990 178,370 32,400 Staff On-Costs 40% 5,040 9,990 12,340 14,080 14,700 15,200 71,350 12,960 Sub-total 17,630 34,960 43,200 49,280 51,460 53,190 249,720 45,360 Vehicles end ofmt 7-ton Lorry 5,300 5,300 (1) 5,300 (1) 10,600(2) 10,600(2) 5,300 (1) 5,300 (1) 42,400 38,160 4-Wheel Drive.3j 3,200 2,130 (b) 1,070 (a) 1,070 (a) - - - 4,270 3,840 Cars 1,400 1,400 (1) - 1,400(1) - 1,400 (1) - 4,200 3,780 EquiPeant 2,000 4,000 (2) 2,000 (1) 2,000 (1) 2,000 (1) - - 10,000 9,000 Sub-total 12,830 8,370 15,070 12,600 6,700 5,300 60,870 54,780 buildinAS - Construction I MaEkets 10,100 20,200 (2) 10,100 (1) 10,100(1) 10,100 (1) - - 50,500 30,300 Secondary Markets 5,100 - 5,100 (1) 10,200 (2) 10,200(2) 5,100 (1) - 30,600 18,360 Office and Shed 2,000 4,000 (2) 2,000 (1) 2,000 (1) - - 8,000 4,800 Sub-total 24,200 17,200 22,300 20,300 5,100 - 89,100 53,460 A Type House 16,000 8,000 (%) - - - - - 8,000 4,800 B Type House 10,600 10,600(1) - - - - - 10,600 6,360 C Type House 4,400 8,800 (2) 4,400(l) 4,400 (1) - - - 17,600 10,560 Duplex 6,300 12,600(2) 6,300(1) 6,300(1) - - - 25,200 15,120 Sub-total 40,000 10,700 10,700 - - - 61,400 36,840 Maiatenance and operation VehiceSM Trucks 2,100 2,100(1) 4,200(2) 8,400(4) 12,600(6) 12,600() 12,600(6) 52,500 36,750 4-Wheel Drive 1,600 1,070 (b) 1,600 (1) 2,140 (c) 2,140 (c) 1,070 (b) 570 (a) 8,590 6,010 Cars 1,200 1,200(1) 1,200(1) 1,200(1) 1,200(1) 2,000(d) 2,400(2) 9,200 6,440 Equipaent 400 800(2) 1,200(3) 1,600(4) 1,600(4) 1,600(4) 1,600 (4) 8,400 5,880 Sub-total 5,170 8,200 13,340 17,540 17,270 17,170 78,690 55,080 - 1,800 2,500 3,320 3,830 3,960 15,410 10,790 Sub-total 5,170 10,000 15,Wan 20,860 21,100 21,130 94,100 65,870 Worki -ait,14 19,500 45,500 65,000 130,000 130,000 390,000 - TOTM MAR £1MNG 99,830 100730 152,610 168,040 214.360 209,620 945,190 256.310 Proceeds of B.1e.X - (550) (3,310) (11,030) (22,060) (44,120) (81,070) - TOTAL FUNDS REQUIRED 99,830 100,180 149,300 157,010 192,300 165,500 864,120 256,310 1] Staff recruited during year charged proportionately. (a) one-third (c) one and one-third Shared with Credit Services. (b) two-thirds (J) one and two -t,irds, 3 Shared with Extension and Credit Services. 4 Corresponds to incremental wheat purchases, which exceed earlier maize, sorghum and bean purchases, sold before wheat purchases. 5) Income from sales proceeds at IDO.41/bag. May 26, 1972 E LESOTHO THABA BOSIU RURAL DEV9LEMNT ROJEC Cost of Credit Services (Rand) Unit Foreign Staff Cost Year 1i' 2 3 4 5 6 Total EEEange Senior Credit/Marketing OfficerY 12,000 6,000(4) 6,000(4) 6,000 (4) 6,000 (4) 6,000 (4) 6,000(j) 36,000 32,400 Deputy Credit Officer 3,080 1,540(4) 3,200(1) 3,320(1) 3,440 (1) 3,560(1) 3,840 (1) 18,900 - Credit Accountant 1,850 925(1) 1,920(1) 1,990(1) 2,060(1) 2,140(1) 2,210(1) 11,245 - Credit Supervisora 1,850 1,850(1) 5,690(2) 7,770(3) 8,040(4) 8,330(4) 8,620(4) 40,300 - Credit Assistants 910 910(1) 1,920(2) 2,930(3) 4,900(5) 9,680(10) 14,730 (15) 35,070 - Accounting Assistants 860 860(1) 2,660(3) 3,750(4) 4,710(5) 4,930(5) 5,170(5) 22,080 - Clerks 520 520(1) 1,620(3) 2,250(4) 2,940(5) 3,150(5) 3,370(5) 13,850 - Sub.total 12,605 23,010 28,010 32,090 37,790 43,940 177,445 32,400 Staff On-Costs 40% 5,040 9,200 11,200 12,840 15,120 17,580 70,980 12,960 Sub-total 17,645 32,210 39,210 44,930 52,910 61,520 248,425 45,360 Vehiclee and EMAuimnt 4-Wheel Drive3/ 3,200 2,130(b) 1,070 (a) 1,070(4) - - - 4,270 3,840 Cars 1,400 2,800(2) - 1,400(1) 1,400(1) 1,400(1) 1,400(1) 8,400 7,560 motorcycles 450 900(2) 900(2) 2,700(6) 2,250(5) 3,600(8) 4,500(10) 14,850 13,370 Equipment L.S. 4,000 1,000 1,000 1,000 1,000 1,000 9,000 8,100 Sub-total 9,830 2,970 6,170 4,650 6,000 6,900 36,520 32,870 BuilASELS Bouses - Type A 16,000 8,000() - - - - 8,000 4,800 - Type B 10,600 10,600(l) - - - - - 10,600 6,360 - Type C 4,400 13,200(3) 4,400(1) 4,400(1) - - - 22,000 13,200 - Type D 6,300 12,600(2) 6,300(l) 6,300(1) - - - 25,200 15,120 Sub-total 44,400 10,700 10,700 - - - 65,800 39,480 Maintenance and 2peration 4-Wheel Drive 1,600 1,070(b) 1,600(1) 2,140(c) 2,140(c) 1,070(b) 530(k) 8,550 5,990 Cars 1,200 2,400(2) 2,400(2) 2,400(2) 2,400(2) 3,200(f) 3,600(3) 16,400 11,480 Motorcycles 300 900(3) 1,200(4) 3,000(10) 4,800(16) 6,900(23) 8,700(29) 25,500 17,850 Equipment - 500 500 500 500 500 2,500 1,750 Computerization - - 500 700 1,000 1,000 3,200 2,240 Sub-total 4,370 5,700 8,540 10,540 12,670 14,330 56,150 39,310 TOTAL CREDIT 7624 g580 620 612 150 82,750 40,9 157,020 I/ Staff recruited during year charged proportionately. (a) one-third 2/ Shared with Marketing Services. (b) two-thirds Shared with Extension and Marketing Services. (c) one and one-third (f) two and two-thirds May 25, 1972 E I ANNEX 14 Page 1 LESOTHO THABA BOSIU DEVELOPMENT PROJECT Road Development and Communications Present Communications 1. Public roads in the project area are shown on the Map. Maseru, the capital of Lesotho, is linked to the project area by a paved road, and from this, one major secondary road runs through part of the area. Various access roads connect with these two roads, but they are in bad condition because of poor drainage. 2. Maseru has a railhead linked with the South African Railway system. 3. There are three flights weekly from Maseru to Johannesburg. in addition Lesotho Airways operates daily commercial passenger, freight and postal services, linking Maseru with over twenty other centers within Lesotho. There are five airstrips'either in the project area, or close to it. 4. Postal and telephone facilities are good in Maseru, where project headquarters would be located, and fair at Roma and Mazenod, both of which are within the project area. Proposed Program 5. The purpose of the project road program is to provide partly all- weather and partly dry-weather access by truck from the different production areas to the main centers of the project area and thence to markets, princi- pally in Maseru and South Africa. To meet this purpose, the following road construction improvements are essential: (a) about 57 miles of main access roads (all-weather); and (b) about 62 miles of subsidiary access roads (dry-weather). In addition, about 250 miles of field access roads would be constructed to carry crop inputs to the fields and the harvested crops and crop residues from them. These would be of low standard and suitable only for tractors and light motorized and animal-drawn vehicles. The field access roads would be designed and constructed together with, and as part of, the soil conservation works. The rough location of main and subsidiary access roads is shown on the Map. In the attached table are the different road sections and their lengths. The alignment of new roads would, where suitable, follow existing tracks and also use old fords. About 8 major and 15 minor fords would be constructed on main and subsidiary access roads. ANNEX 14 Page 2 6. The proposed roads are an integral part of the project. There ate few plans for other new activities in the project area but since the area is heavily populated and the project would stimulate trade, some addi- tional traffic, other than project traffic, would be generated (see para 10). Road Usage and Design 7. The project area is geographically divided into two main ecological zones, Lowlands and Foothills. The terrain is either flat or rolling, and generally fairly easy for road construction. No serious problems are expected with soils in the project area; the bearing capacity of the subsoil is gener- ally good and outcrops of dolomite are plentiful throughout the project area. The soil is, however, sensitive to erosion in many parts of the area. Soil conservation and drainage would be of particular importance in the road pro- gram. i 8. The mean annual rainfall of the area ranges from approximately 600 mm to 700 mm per annum; about 70% of the rainfall occurs in the spring and summer months, October-April. The distribution of rains, however, is very uneven, and droughts occur frequently. This means that the subsi- diary access roads can be built generally as dry-weather roads, because only short closing periods are necessary. All markets would be located along main access roads. 9. Trucks of 5-7 tons would be used to move farm crops and crop inputs. About 40,000 tons of crops would be transported from the area annually. In addition, about 5,000 tons of crop inputs would be transported to the area. These crop transport movements would occur during April-June and September- December. Inputs would be transported in September-October and January- February. The heaviest transport of about 25,000 tons, a total of 40-60 truckloads per day, would occur in April-June. The number of heavy vehicles during that period on the subsidiary access roads would be 5-15 per day, and on the main access roads 20-40 per day. 10. On completion of the roads (1975), non-project traffic on subsi- diary access roads is very roughly estimated at 10-20 vehicles per day (mainly light traffic), and on the main access roads, at 20-40 vehicles per day (also mainly light traffic but with some buses). The annual increase is estimated at about 3-6% during the first five years, depending thereafter on the rate of economic development in the area. It is probable, however, that another project in adjoining areas would follow the success of this one, and increase use of project roads. 11. The total annual average daily traffic by 1975 can be estimated to vary from 10 to 30 vehicles on the subsidiary access roads and from 30 to 60 vehicles on the main access roads; the number of heavy vehicles would vary on different roads from 20% to 40% of the total. 12. The standard of the access roads has been determined taking into account: the needs of the project, possible cost savings in construction and maintenance, and later possible improvement in the standard. Final ANNEX 14 Page 3 design work would be based on these considerations, and particular attention would be given to possible cost savings. 13. The formation (distance between the bottoms of side ditches) of the main and subsidiary access roads would be 22 ft. The standard of main access roads would, where possible without additional costs, conform to the standard of Ministry of Works "Secondary and Feeder Roads" for rolling country. The main access roads would have 10-ft-wide and 4-in-thick gravelling. The subsidiary access roads would not be gravelled. 14. Drainage structures would consist of concrete pipe culverts and paved fords. Design Work 15. Detailed engineering on the main and subsidiary access roads would consist of a limited number of soil surveys, design of horizontal and some vertical alignment, and design of bridges and drainage works. Also major changes in the location of the roads (compared to the rough location indicated in this report) would be possible, provided they were motivated by construction and maintenance costs as well as traffic efficiency and had been approved by the Project Manager. Part of the design work would be concurrent with actual construction in order to achieve the best possible economic result. Design work could best be carried out by the project's own organization with some assistance from the Ministry of Works and, possibly, from consultants. Field access roads would be designed jointly with the soil conservation works and by the soil conservation unit with help of the project construction unit if necessary. Construction 16. To achieve the best use of resources (equipment, material, personnel), a separate construction unit would be set up within the Land Planning and Soil Conservation Division (see Chart 6770). It would be headed by an experienced site manager (Roads Engineer). This unit would cooperate with the Ministry of Works in the design and construction of stores and houses, as well as being responsible for project road construction and main- tenance during the project period. The construction unit would also work in close cooperation with the soil conservation unit in order to make optimum use of the same equipment and experts. 17. The construction unit would use Ministry of Works staff or, possibly, consultants for design work to keep the number of its own personnel to a minimum. Labor is available for road construction and about 150/200 people would be employed on the program, representing about 30% of road costs. The construction unit would mainly employ subcontractors and use hired equipment for major earthmoving. Depending on the actual situation during construction, it may also be possible and desirable to use soil conservation equipment. ANNEX 14 Page 4 18. A detailed plan for the execution of construction works would be prepared by the construction unit before work began. The plan would include at least: (i) construction techniques; (ii) use of subcontractors, hired equipment and project equipment; (iii) use of materials; (iv) use of labor; (v) time schedule in appropriate form; (vi) organization plan; (vii) costs; and (viii) a system to follow up and report continuously on the actual progress of the works in terms of time and costs as compared to the proposed plan. 19. Construction works are expected to take about two and a half years to complete. Construction of main and subsidiary access roads would precede agricultural works. The final time schedule would be based on the overall time schedule for the whole project. 20. The Public Works Department would be expected to assist in soil and material testing. Cost Estimates 21. Costs for each road are shown in the Table. Cost estimates are based on the experience and statistics on unit prices of the Public Works Department. Additional costs of the construction unit have been taken into account as well as the possible use of consultants. The cost of paved fords is also included in the following figures: Total cost of road construction: R 0.41 M (US$0.52 M) Unit cost of main access roads: R 2,600/km (US$3,280/km) Unit cost of subsidiary access roads: R 1,750/km (US$2,200/km) Road Maintenance 22. During the project period (6 years), che maintenance of all project roads would be carried out by the construction unit which, upon completion of the works, would be transferred to other works leaving a small separate maintenance unit or joint unit with soil conservation; or would be reduced as required for maintenance only. Total maintenance cost during the project period is estimated at R 35,000 (US$47,000). Attached: Table August 4, 1972 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Road Construction and Maintenance Agricultural No. Road Standard Lenh-th Cost Estimate --------- Area From - To km Total Total R/km '000 Rand '000 US$ W. Lowland 1 Botsabelo - Thaba Bosiu Main access 14.0 2,600 36.4 2 Qeme - Phohleli " 11.8 2,600 30.7 3 Masianokeng - Boqate Subsidiary access 5.8 1,750 10.2 4 Qeme - Sekoala " 10.1 1,750 17.7 5 Mazenod - Mokema 10.9 1,750 19.1 6 4ofuka - Makoba " 4.7 1,750 8.2 7 Lekholela - Taole " 8.5 1,750 14.9 8 Phohleli - Lesoli " 3.1 1,750 5.4 E. Lowland 9 St. Michaels - Rants'etse Main access 8.5 2,600 22.1 " 10 Roma - Project boundary "i 7.4 2,600 19.2 i 11 Rants'etse - Phohleli Subsidiary access 3.1 1,750 5.4 S. Foothills 12 Nqheku - Mokonyana " 15.4 1,750 27.0 I 13 Molengoane - Tsoili " 2.7 1,750 4.7 f 14 Ntsi - South " 3.9 1,750 6.8 I 15 Ratau - main road 2.4 1,750 4.2 i 16 Kubutu - Ntlo - Kholo 4.5 1,750 7.9 N. Foothills 17 Lancers Gap - Fako Main access 32.2 2,600 83.7 " 18 Thaba Bosiu - Fako U 16.9 2,600 43.9 19 Khamolane - Masopha Subsidiary access 3.2 1,750 5.6 " 20 Fako - Mokonyana " 9.3 1,750 16.3 2) Sefikeng - Pulane i 11.7 1,750 20.5 Sub-total, Road Construction 190.1 609.90 516.5 Road Maintenance, including additional central administration and staff costs 86.49 Total 496.39 625.5 August 2, 1972 B B TRAA H0SIU R~L DEVEL~MT PROJECT gost of Rad (Rand) Unit Foreign itaff Cost Year 1 2 3 4 5 6 ivtal mäå~ Sentor Road Engineer 12,000 6,00(½) 12,000(1) 12,000 (1) - - 30,000 27.000 Tee«nical Officer 1,850 1,850(1) 3,840 (2) 3,990(2) 4,130(2) 4,280(2) 4,420(2) 22,510 - Sub-total 7,850 15,840 15,990 4,130 4,280 4,420 52,510 27,000 Staff On-Costa 40% 3,140 6,340 6,400 1,650 1,710 1,710 20,950 10,800 emnmultants Services 5,000 10,000 5,000 - - - 20,000 18,000 Sub-total 15,990 32,180 27,390 5,780 5,990 6,130 93,460 55,800 Vebiclesand Euianent 4-heel Drive 3,200 6,400 (2) - - - 3,&00 (1) - 9,600 8,640 Pckup 1,800 1,800 (1) - - 1,800 (1) - 3,600 3,240 Office and Laboratory 3,000 (1) 400 300 (1) 100 (1) 100 (1) 100 (1) 4,000 3,600 NIbile Trailer 3,000 3,000 (1) - - - - 3,000 2,700 Sub-total 14,200 400 300 1,900 3,300 100 20,200 18,180 1uses - Type A 16.000 16,000 (1) - - - - - 16,000 9,600 - Type C 4,400 8,800 (2) - - - - - 8,800 5,280 S-total 24,800 - - - - - 24,800 14,880 ~tane and Operation Vdieles 4,200 1,500 4,200 4,200 2,600 2,600 2,600 17,700 12,390 Nouses (2.5) - 620 620 220 220 220 1,900 1,330 Sub-total 1,500 4,820 4,820 2,820 2,820 2,820 19,600 13,720 conetruetia Nain Accges Roads 1,930/km 19,300 (10) 67,550 (35) 88,780 (46) - - - 175,630 105,380 Subaidiary Accss Road 1,300/ka 13,000 (10) 45,500 (35) 70,200 (54) - - - 128,700 77,220 Sub-total 32,300 113,050 158,980 - - - 304,330 182,600 8bl_unco SO/km 1,000 4,5 9,500 9,500 9,500 34,000 20,400 sub-tetal 32,300 114,050 163,480 9,500 9,500 9,500 338,330 203,000 TTLRDS18,550 49,93058 8,7ay 151,450 195,990 20,000 110 May 26, 1972 E I LBSO'JHO 'UHAB 10SIS RAL DZLWOPIT PROJECT Goat of Soil Conservation Unit Foreign Cost Year 1 2 6 Staft Senior Planin & Soil Conservation Officer 20,000 20,000(1) 21,100(1) 21,850 22,600 23,350 24,100 133,000 133,000 Conservation nq;Loer. 18,000 9,000 () 18,500(1) 19,100 19,700 20,300 5,400 92,000 92,000 Nechanical Superintendent 15,000 7,500(4) 15,350 (1) 15,700 16,050 16,400' 4,000 75,000 75,000 Sub-total 36,500 54,950 56,650 58,350 60,050 33,500 300,000 300,000 Local Senior Tedtcal Officer (Conaarvation) 2,590 2,590 (1) 2,680(1) 2,770(1) 2,670(1) 2,960 (1) 3,080(1) 16,750 Techni.cal Officer (Layout) A4 1,850 925() 1,920 ) 1,990(1) 2,070(1) 2,140(1) 2,210(1) 11,255 Plant BA 1,850 925() 1,920 ) 1,990(1) 2,070(1) 2,140(1) 2,210(1) 11,255 Teclnical Asaistants & Artisan C2 860 4,730(W) 9,000(10). 9,80(11) 9,960(11) 10,440(12) 10,920(12) 54,530 Plant Operators for heavy 860 2,580(3Y 4,500(5) 4,740(5) 4,980(5) 5,220(6) 5,460(6) 27,480 equipuent C2 Plant operators for light 690 2,070(3) 4,380(6) 4,680(6) 5,100(6) 5,400(6) 5,700(6) 27,330 equipment 03 Mechanics 03 690 1,380(2) 2,190(3) 2,340(3) 2,550(3) 2,700(3) 2,850(3) 14,010 Drivers 03 520 2,080(h) 2,200(4) 2,350(4) 2,560() 2,740(4) 2,920(4) 14,850 Sooretary & Clerk & Storemn c3 520 1,560(3) -2,750(5) 2,940(5) 3,180(5) 3,420(5) 3,660(5) 17,510 Laborers 240 2,400(10) 2,h00(10O 2,400(10) 2,400(10) 2,400(10) 2,400(10) 14,400 T-kt 21,240 33,940 35,680 37,540 39,560 41,410 209,370 - TOTAL 57,740 88,890 92,330 95,890, 99,610 74,910 509,370 300,000 Staff On-Costs (40%) 23,100 35,560 36,930 38,360 39,840 29,960 203,750 87,720 TOTAL STAFF 80,840 124,450 129,260 134,250 139,450 104,870 713,120 387,720 1 1 11,000 43,000 41,000 43,000 25,000 - 163,000 163,000 TOTAL STAF, CONSULTANCY & TRAINING 91,840 167,450 170,260 177,250 164,450 104,870 876,120 550,720 July 3, 1972 LSOM(O THABA HSim WRAL MVEOPMNirT POJET Gost of Soil Conservation (and) unit Foreign Cost ear 1 2 5 6 MTAL Exhang Track tractor 125 HP 35,h00 70,800(2) 70,800 63,720 Motor grader 27,000 54,000(2) 54,000 8,600 Scraper & Cable 9 cu yd. 16,00o 16:000(1) 16,000 14,400 Tractors 58 HP 3,850 23,l006) 23,100 20,790 Diesel Bowaer trailer 1,700 1,700(1) 1,700 1,530 'dater Bowser trailer 1,200 2,400(2) 2,400 2,160 Tipper/Duzaper 1,600 1,600(1) 1,600 1,8W0 Ploughs (& marking) 300 900(3) 900 810 Concrete mixers 800 2,100(3) 2400 2,160 Minor equipment 16,000 16,000(1) 16,000 14,4co Compressor 1,500 1500(1) 1,500 1,350 Caravans (trailer house) 2,450 2,450(1) 2,00 2,200 3-yard scraper with tractors 1,500 15)000(10) Sub-total 207,850 207,850 187,060 7ehicles 4-wneel drive 3,200 12,800(4) 12,800 11,520 Cars 1,400 2,800(2) 1,400 1,400 5,600 5,020 Truck 5-ton ,000 a 000 2) L,000 12,000 10,800 Pick sp 1,820 800 1 1,000 12,00 110,82 Sub-total 25,4o0 3,200 5,00 34, 000 30, 60 Equi pme rt Survey 3,000 3,000 3,000 2,700 Soil survey 1,000 1,000 1,000 900 amping 1,000 1,000 900 Sub-total 5,O00 5,oco 4,50 Aerial Photogrgphy 10,000 13,000 5,30 Forestry Contract (trees 1000)V 20 6,000(300) 6,000(300) 6,000(300) 6,000(300) 6,000(300) 30,000 15,000 Coatruction Workshop building & office 6,000 6,000 6,000 3,600 Houses - Type A 16,000 48,000(3) - 48,000 28,803 Type B 10,600 10,600(1) 10,600 6,360 Type C L,400 8,800(2) 8,800 5,280 Type D 6,300 18,900(3) 12,600(2) 31.500 18,90 Sub-total 92,300 12,600 104,900 62,940 TOTAL EQUIRMNT & COKSTRUCTION 77"M T11 I/ Labor through Food for Work. June 5, 1972 St LESOTSO HABA BOSIU RURAL DEVOPMENT PFOJECT Cost of Soil Conservation (cout.) Unit Foreign Costs Tear 1 2 TOTAL Exchange Waterways earthmoving/.dle 400 18,000(45) 20,000(50) 10,000(25) 8,000(20) 4,000(10) 60,000 30,000 Intakes & stone walling/mile 400 18,000(45) 20,000(50) 10,000(25) 8,000(20) 4,000(10) 60,000 30,000 Diversion ditch, earthmoving/aile 160 41,600(260) 41,600(260) 41,600(260) 41,600(260) - 166,400 83,200 Improving e2isting works 23 - 00O) 17 25o(750) 17 250(750) 17 250(750) 1 0(250) 69 000 34 500 sub-total - ----- DaMS Earthoving 1,800 7,200(4) 7,200(4) 7,200(4) 7,200(4) 7,200(4) 36,000 18,000 Inlets & Fencing 300 - 100(4) 0 ) 10(4) 10(4) 1 0(N) 000 000 Sub-total 8,400 8,400 8,400 8,h00 :8,400 42,000 21,000 Roads Earthmoving/miles 200 10,000(50) 10,000(50) 10,000(50) 10,000(50) 10,000(50) 50,000 25,000 Structures culverts 30,000 - 30,000(l) 30,000(1) 30,000(1) 30,000(1) 30,000(1) 150,000 75,000 Sub-total 40,000 40,000 40,000 40,000 40,000 200,000 100,000 TOTAL STRUCTURES 13 7,500 147-,250 127T2530 123,250 62-,15059,00 26,0 Maintenanice &OpatnCos 1. Worksheop 2,000 2,000 2,000 2,000 2,000 2,000 2,000 12,000 6,000 2. Vehicles 11,800 11,800 11,800 11,800 11,800 11,800 11,800 70,800 35,4oo 3. Buildings 2.5% 20 - 2,310. 2,620 2,620 2,620 2,620 12,790 6,400 4. Roads/mile - - 1,000 2000 3,000 4,000 10,000 5,000 TOTAL MAIMNANCE/OPERATING 13,800 16,110 17,420 18,420 19,420 20,420 105,590 52,800 TOTAL SOIL CONSFRVATION 446,190 339,660 340,930 332,120 318 U20 193,440 1,970,860 1,2O0730 July 3, 1972 色－ LESOM TRAM WSM Rua" DEVIWPNW pajocr Cost Of tnts%fid F&SVIAR pro Otand) unit Foreign Overboade Cost Year 2 3 4 5 6 Total Exchange iaff Sociologist/Ag- E00ft-, 12.000j, 91000 M 6,000(%) 6,000(k) 6,000(h) 6 000 ( ) 6 000 M 39,000 35,100 Technical Officer 2,590 2,590(l) 2,680(t) 2,770(l) 2,870(l) 2:%0 (1) 3:080 (1) 16,950 - Driver 520 550 590 640 680 730 3,710 - 12,110 9,230 9,360 9,520 9,60 9,810 59,660 35,100 Staff on-costs 40%. 4,940 3,690 3,740 3,800 3,860 3,920 23,850 14,040 Sub-total 16.950 12,920 13,100 13,310 13,W 13,730 83,510 49,140 Vehicle$ Car 1,400 2,800 (2) - 1,400(l) 1,400(l) - 5,600 5,040 Housing Type A 16,000' 12,000 12,000 7,200 Type B LO,600 10,600(l) 10,600 6,360 Sub-total 22.600 22,600 13,560 Maintenance and Operation Car 1,200 2,400(2) 2,400(2) 2,4oo(2) 2,400(2) 2,400(2) 2,400(2) 14,400(2) 10,080 House (2.5%) - 560 160 560 160 560 2,800 1,400 Sub-total 2,400 2,960 2,960 2,960 2,960 ,960 17,200 11,480 Total Overheads 44,750 17,67 TKM IT767 128,910 7T,-fro crop Inputs adi, 1 1 P*rt1l$%*r (per 100 ac) X.jj 479 - %0 2,160 4,310 7,430 6,690 sorghum 479 720 1,441) 2i87O 5,030 4,530 Wheat 629 1,570 3,140 6,290 11,000 9,900 B"aff 400 2,000 2,000 4,000 7,000 6,300 Tot .1 Crop Inputs 4.250 8,740 17.47 30.46 M42 Tot I Incremental Annual crop inp.tV 4,250 4,490 8,730 17,470 15,720 Livestock Inputs Feed - Annual 22 110 550 1,760 3,630 8,360 9,240 23,650 - - Incremental 110 440 1.110 1,870 4,730 880 9,240 - Fencing - - - 1,500 3,GOO 4,500 9,000 8,100 Cows and Co'shads (Not)l/ 150 750 3.000 7.300 12,000 30,000 6.760 60,010 40,200 Total Livestock Inputs 860 3,550 9,260 17,130 41,360 20,300 92,660 48,300 Net wotking Capital 3,540 6,130 12,200 21,870 - TOTAL COST 45.610 I.430 X.TKO =290 2.690 T6-.860 Y7-3.900 154,940 On-Farm Costag 860 3.440 8,710 19,620 42,220 20,670 95.720 64,020 Other Costs ".750 15,880 17,460 21,210 22,590 28,890 150 780 79,220 TOTAL FMS-5/ 45,610 19,320 26,170 40,830 49,760 246.50 143,240 11 Part-time University or UIMP. .75 D Years' addition to revolving fund. 3/ Purchase of cows and cost of sheds, less value of animals sold prior to cow purchase. 4/ Purchases of Fencing, Cms and Cowsbods'plud incremental annual crop inputs. I/ Total funds required, including revolving fund. June 19, 1972 TAM 30M ~L m~vmo0 aRWEr Cost of Addnistration CL_.d) unit Foreign taff Cost Year 1 2 3 5 6 Tata Frmject mwcs"1,0 1,0 1) 2,0 21,2100 ) 2,021,000,0 ) 4,980 (1) 109,980 98,9W0 D~Pty Prøjfct Manae 3,320 3,320(1) 3,440(1) 3,560<1) - 10,320 inc Cn C:11er 19,000 19,00 (1) 19,000(l) 19,000(1) 19,000(1) 19,000 (1) 19,000 1) 114,000 102,600 Projwt 4ewuatmst 3,320 1,760 M 3,440<1) 3.560(1) 3,6900(1) 3,840(1) 3,%0(1) 20,250 - A ai Of flcer 2,59 1,250 2,680(1) 2,770(1) 2,870(1) 2,960(1) 3,080 (1) 15,610 - 2,500 2,500 (1) 2,590(1) 2,680 (1) 2,770(1) 2,870 (1) 2,960 () 16,370 1,850 - 1,850(1) 1,920(1) 1,900(1) 2,060 (1) 2,140(1) 9,960 - s 1,180 300Mt 1,230 (1) 2,460 (2) 2,570(2) 2,670(2) 2,830(2) 12,060 - 860 - 1,720(2) 1,800 (2) 1,900(2) 2,000 (2) 7,420 TQ4ep~t/Typ~t 860 1,720(2) 3,520(4) 3,700(4) 3,900(4) 4,00(4) 4,280(4) 21,200 - Cl~ - 520 1,040(2) 2,140(4) 2,280(4) 2,380(4) 2,540 (4) 2,820(4) 13,200 - DrLvr wh2~860 860(1) 2,620(3) 2,750(2) 2,900(3) 3,040(3) 3,180(3) 15,350 - can/.brr 240 480(2) 960(4) 1,200(5) 1,200(5) 1,200 (5) 1,20 (5) 6,240 - 8la49,910 61,030 68,360 69,510 70,720 52,430 371,960 201,580 Staff On-a~ta 40% 19,970 24,410 27,340 27,800 28,290 20,970 148,780 80,630 8gtotal 69,80 85,440 95,700 97,310 99,010 73,400 520,740 262,210 2,050 2,050(1) - - 2,050 - - 4,100 3,690 C«rs 1,400 1,400(1) - - 1,400(1) - - 2,800 2,520 zibo ,3,000 3,000 (1) - - - 3,000 2,700 4- lDri 3,200 3,200 (1) - - - - - 3,200 2.800 sZ*-tota 6,650 3,000 - 3,450 - - 13,100 11,790 offten Equip 12,000 8,000 5,000 5,000 5,000 5,000 40,000 36,000 Sbtotal 18,650 11,000 5,000 8,450 5,000 5,000 53,100 47,790 - Type Å 16,800 33,600 (2) - - - - 33,600 20,160 - Type B 10,600 10,600 (1) - 10,600 (1) - - - 21,200 12,720 - Type e 4,400 4,400 (1) 4,40 (1) - - - 8,800 5,280 50,000 50.000 - 50,000 30,00 O -total 98,600 4,/100 10,600 - - 113,600 68,160 Veicles 3,000 4,800 4,800 4,800 4,800 3,800 26,000 18,200 Eati (2.5) -- 2,430 2,540 2,780 2,780 2,380 12,910 6,460 3,00b 7,230 7,340 7,580 7,580 6,180 38,910 24,660 T FJE= Al STRMTR 190,130 108,070 1182640 113,340 111,590 84,580 726,350 422 820 / Staff recruited during first year charged proportIoately. Way 25, 1972 LESOTHO TRB. BOSIU IURAL DETEPENr PJECT Foreign Annex ear 1 2 I 5 6 Total F On-farm costs 6 6 35 104 149 270 261 825 680 76 Technical Services 7, 8 Extensin 7 78 50 61 72 90 85 h36 163 Trating 8 84 35 29 31 25 - 204 98 Besearch 10 69 39 31 38 262 Sub-total 231 124 127 lh 153 123 902 406 45 credt 13 76 51 65 60 72 83 407 157 39 Mrketing 12 100 100 1h9 157 192 166 864 256 30 Soil Conservatlon 14 51h 319 322 312 294 193 1,954 1,191 61 Integrated Farming 17 On-tarm costa 1 3 9 20 42 21 96 64 67 other 45 16 17 21 23 29 151 79 52 Sub-total 46 19 26 41 65 50 247 1h3 58 Roada 16 89 151 196 20 22 18 496 306 61 Administration 18 190 108 119 113 112 84 726 1>23 58 Sub-total 1,252 907 1,108 996 1,180 978 6,21 3,562 55 PUyical Contingencies 3 7 69 11 13 12 115 B1 70 Price Contingencies 58 8 2 3 1,16 61 53 ~&;.onsarvab.ion Ad justnmn 2 61 gub-Total TOTAL PRoJECT COSTS 1 364 221 1 15 46 1f Ineludes romding. 2/ rmpensation for devaUation of Rand. LESOTHO mmABA DOSIV RuaAL. Dmwva mT arNLMcT Finanial Contributions and DA Disbarsement ------------------------- Thoeand Read -------------------------------------- US$ '000 Year 1 2 3 4 5 6 Sub-total CpEaIggaIes Total '129twaeRt Totals Z Farmerwl Contribution 1 8 23 35 71 49 187 39 226 290 3 Cao cial ank - 19 42 58 114 98 331 89 420 530 5 USAID (Soil Conservation) 479 319 322 308 288 194 1,910 310 2,220 2,800 29 Sub-total 480 346 387 401 473 341 2,428 5i 2,866 1,610 3,61W 37 IDA Credit: A. jere CIa Go"*a aMdS-ervim"I~ji O-fEam InputxU 531 108 639 Vehicles & Equi;met= 269 41 310 Rspatriate Staff 733 150 883 Sub-total A 1,533 299 1,832 90% Arl,649 -?,078 21 B. Other Goods and Services- Local On-f*r Tate 203 96 299 Local Staff 1,042 190 1,232 Baildings 506 53 559 Maintenance & Operationa. 371 115 486 Roads 338 138 476 Sub-total B 2,460 592 3,052 90% B-2,747 3,461 36 IDA-Credit Sub-total 4,396 _rM 57 RMoaded to 5,600 600 57 TOTAL 6,421 7,70 Governant Contribution 560 6 100 1f tEcluding Soil Conservation, with the exception of vehicles and aerial survey. 2/ Againt doctments. / Includes aerial survey R10,000. August 9, 1972 a a LESOTHO TRAM BDSIU RURAL DEVEIOPENT PROJECT Government Cash Flow (Thousand Rand) Year 1 2 3 4 5 6 7 8 9 10 11-20 21-50 1. Project Cash Flow A. ,Inflow Id 730 563 824 639 840 800 - - - - - - USAIDl 498 346 364 362 351 248 - - - - - - Farmers' deposits-1/v 1 7 23 40 76 78 75 75 75 75 75 75 Farmers' repayments on seasonal loansl// - 3 26 87 172 332 425 423 423 423 423 423 Sub-total 1,229 919 1,237 1,128 1,439 1,458 500 499 8 8 98 498 498 B. Outflow On-fare cost 7 48 165 292 558 710 581 581 581 581 581 581 other project costsy 1,285 910 1,123 876 904 762 253 218 164 160 160 160 Sub-total 1,292 958 1,288 1,168 1,462 1,472 834 799 745 741 741 741 met balance (63) (39) (51) (40) (23) (14) (334) (301) (247) (243) (243) (243) 2. Gover Icm 2 mport duties & In4ee taxe8/ - 124 32 53 74 115 96 89 88 87 86 86 Farmers' repayments on mediue- ters loanm - 1 3 10 27 61 163 164 150 126 108 108 Harketing comisain5 - - - - - - 76 76 76 76 76 76 House rents 15 18 20 22 22 22 22 22 22 22 22 22 Sub-total 15 143 55 85 123 198 357 351 336 311 292 292 Net balance before IDA payments (48) 104 4 45 100 184 23 50 89 68 49 49 payments to IDA - Service charge - 3 8 16 21 27 33 33 33 33 31 18 - Repayments - - - . - - - - - - 44 133 Net annal balance (48) 101 (4) 29 79 157 (10) 17 56 35 (26) (102) Cumflative balance (48) 53 49 78 157 314 304 321 377 412 152 Positive too Year 21 I/ Contingencies inclnded up to Year 6. 2/ Exclusive of oxen and cow feed. 3 Exclusive of working capital for crop purchases financed by commercial banks. 41 20% on laported goods and 4.5% on salaries of additional project staff. I/ Until Year 6, these revenues are ueed to reduce commercial bank overdrafts. July 5, 1972 E E LESOTHO TARA BOSIU RURAL DEVELOPIMT PROJECT IDA Credit Financng Schedule 1 2 3 4 5 6 Total ------------------------- Thousand Rand ------------------------------- 1. Total Costs on-farm Costs 5 32 89 133 239 236 734 Vehicles & Equipment 113 33 32 39 33 19 269 Staff 204 278 310 319 347 317 1,775 Buildings 37.5 '47 59 - 20 5 506 Yaintenance & Operations 40 59 67 73 71 61 371 Roads 32 112 164 10 10 10 338 Sub-total 721 720 3,993 Contingencies Physica1 3 7 69 10 11 12 112 Price/1 2/ 39 58 125 126 202 229 779 TOTAL 811 626 915 710 933 889 43884 2. IDA Financing 90% D63 8214 639 840 800 1396 3. IDA Financ (US$'OO).9 (930) (72) (100) (810) (107) (12020) (51600) 4. Cumulative (US$'000) (930) (1,650) (2,700) (3,510) (4,580) (5,600) 1/ Including physical contingencies I/ Includes rounding. August 3, 1972 ANNEX 22 Table 2 IESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Estimated Schedule of Disbursements IDA Fiscal Year and Quarter End Cu=ulative Disburseent at End of QuarterY 1973/74 (US$ thousands) September - December 200 March 300 June 500 1974/75 September 600 December 700 March 800 June 900 1975/76 September 1,200 December 1,500 March 1,800 June 2,100 1976/77 September 2,4U00 December 2,6oo March 2,800 June 39,00 1977/78 September 3,300 December 3,600 March 3,900 June 4.200 1978/89 September 4,500 December 4,700 March 5,000 June 5,200 1979/80 September 5,300 December 5,600 1/ Allowing for slippage August 3, 1972 ANNEX 23 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Farm Budgets General 1. The attached farm budgets (Tables 1-6) illustrate returns obtainable by participating farmers using project inputs and family labor on a 5-ac farm, estimated to be the average size in the project area. They show estimated results from the following model farms or activities: (a) Wheat farmer with 2 ac wheat, 1 ac beans, 2 ac subsistence food crops; (b) Maize/sorghum farmer with 2 ac maize/sorghum, 1 ac beans, 2 ac subsistence food crops; (c) Effect of partial crop failure (drought) for wheat farmer as in (a); (d) Tractor operator using one tractor; (e) Dairy farmer with one cow; (f) Integrated mixed farming with 2 ac wheat, I ac maize/ sorghum, 1 ac beans, 1 ac grass/fodder crop, 1 cow, 10 sheep. 2. Different farming patterns and budgets can be constructed by taking the unit costs per acre for each crop in the desired proportions. 3. For wheat farming, two acres is about the amount a family would be able and prepared to handle as a winter crop, together with two acres of summer subsistence crops coupled with one acre of cash crop beans. 4. Beans, with a net profit per acre of R 30, are the most valuable crop when compared with wheat at R 13, and maize and sorghum at R 8 each. This is confirmed by the steady increase in bean growing and exports over recent years, now about 8-10% of the cropped area. The attached budgets reflect a further expected increase under the project, with every progres- sive farmer growing one acre (20%). 5. But net profit is by no means the sole criterion. The peasant farmer will change his crops in response to price or yield variation; but always food crops take priority. Since an increase in cash crop acreage would be at the expense of food crop acreage, he will be reluctant ANNEX 23 Page 2 to increase cash crops further, unless a higher yield from the reduced food crop area will give him about the same total food supply. As he moves into the cash economy, however, and as food production in his neighborhood becomes generally more secure, through improved farming, he would become more willing to grow cash crops and rely on purchases of grain to meet part of his family food needs. 6. Different soils, labor requirements and seasonal peaks also dictate the crops he will grow. The farmer normally has the use of two or three scattered fields on different soils. This, plus the different crops grown, gives him some insurance against failure through drought, hail and pests. Rainfall is such that two crops cannot be grown on the same field in any crop year. 7. The farmer therefore would continue to grow maize and sorghum, wheat and beans in varying proportions, with the following factors, apart from soil and climate, limiting the proportion of any one crop: (a) Wheat: Available ox.or tractor power for cultivations; labor or combine harvesters for harvesting; and credit for good seed and fertilizer; (b) Maize: Amount of land with sufficient fertility, to out-yield sorghum; (c) Sorghum: Profitability only, since this is the most hardy and drought resistant crop for adverse conditions and poor soil; (d) Beans: Fear of insect damage, labor at harvest and grading, and credit for good seed and fertilizer. 8. The rationale for each model precedes each budget. Attached: Tables 1-6. June 30, 1972 ANNEX 23 Table 1 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Farm Budget for Wheat The average 5-ac farm is estimated to grow 2 ac of subsistence crops, sorghum and/or maize in the summer, without project inputs and, as cash crops, 2 ac of winter wheat and 1 ac of beans. Thefollowing budget is calculated on yields obtained under normal climatic conditions occuring 4 years out of 5. A reserve fund is provided to cover estimated costs of partial crop failure 1 year out of 5. 1. Wheat - 2 Acres Rand Rand Rand (a) Income: Yield of 7 bags/ac 5.20/bag 72.80 (b) Inputs: Seeds: 20 kg/ac 0.20/kg 8.00 Fertilizer 100 kg/ac 0.048/kg 9.60 Plowing 4.0/ac 8.00 Planting and Cultivation 3.50/ac 7.00 Spraying 2.00 34.60 Threshing with Combine 0.50/bag 7.00 41.60 (c) Net Income - Wheat 31.20 2. Beans - 1 Acre (a) Income: Yield of 4.5 bags/ac of which 4 saleable 13.00/bag 52.00 (b) Inputs: Seeds: 15/kg/ac 0.28/ac 4.20 Fertilizer: Siefos 100 kg 0.04/kg 4.00 Plowing 4.00/ac 4.00 Planting and Cultivation 3.50/ac 3.50 Tooth Harrowing 1.50/ac 1.50 Spraying (1 year in 6) 1.00 18.20 (c) Net Income - Beans 33.80 ANNEX 23 Table 1 Page 2 3. Overall Net Income Rand Wheat 31.20 Beans 33.80 Wool: 20 sheep at 4.5 lb/animal and R 0.2/lb; or 24 goats at 2.5 lb/animal and R 0.3/lb 18.00 83.00 Less: Purchase of Subsistence Cereals (4 bags) 17.60 Total 65.40 Less: Loan Interest and Drought Reserve (assuming Bad Debt Reserve recovered) 11.36 Overall Net Income 54.04 4. Subsistence Bags No Cost Inputs; Family Labor Only 1 Acre of Maize 3 1 Acre of Sorghum 2 Inter-row Beans 2 Cereal Equivalent from Vegetable Garden 3 10 Purchase to Make Up Family Ration of 14 bags: 4 Bags Maize Meal at 4.40 (17.60) 5. Cash Flow Rand Rand August: Preseason Deposits 10% for Input Purchase (41.60+18.20 = 59.80) 5.98 10% for Bad Debt Reserve /1 5.98 Nov-Mar: Balance of Input Cost (59.80 - 5.98) 53.82 Credit for Input Cost 53.82 Jan-Mar: Sale of Wool/Mohair 18.00 Feb-Apr: Food Purchase 17.60 Mar-Aug: Sale of Cash Crops (72.80+52.00) 124.80 Jly-Aug; Repayment of Credit 53.82 Payment of Credit Interest5.38 Net Cash Balance 54.04 196.62 196.62 /1 On successful repayment of his Association's loans, the 10% bad debt reserve would be transferred to an interest earning Drought Reserve until it totals the value of one year's inputs. June 30, 1972 ANNEX 23 Table 2 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Farm Budget for Maize and Sorghum The average 5-ac farm in the Foothills or Lowlands is assumed to grow 2 ac of subsistence, together with 2 ac of maize and/or sorghum in the summer, and 1 ac of beans in winter, as cash crops. The following budget is calculated on yields obtained under normal climatic conditions, occuring on average 4 years out of 5. A reserve fund is provided to cover estimated costs of partial crop failure 1 year out of 5. 1. Maize - 2 Acres Rand Rand Rand (a) Income: Yield of 8 bags/ac 3.00/bag 48.00 (b) Inputs: Seeds: 7.5 kg/ac 0.20/bag 3.00 Fertilizer 100 kg/ac 0.048/kg 9.60 Plowing 4.00/ac 8.00 Planting and Cultivation 3.50/ac 7.00 Stalk Borer - Dressing (0.3 lb of insecticide/ac) 0.60/ac 1.20 28.80 (c) Net Income - Maize 19.20 2. Sorghum - 2 Acres (Alternative to Maize) (a) Income: Yield of 8 bags/ac, 7 bags 2.70/bag and 1 bag for malting at 9.00/bag 53.00 (b) Inputs: Seeds: 5 kg/ac 1.00/bag 2.00 Fertilizer 100 kg/ac 0.048/kg 9.60 Plowing 4.00/ac 8.00 Planting and Cultivation 3.50/ac 7.00 Stalk Borer Dressing 0.60/ac 1.20 Spraying 2.00 29.80 (c) Net Income - Sorghum 23.20 ANNEX 23 Table 2 Page 2 3. Beans - 1 Acre Rand Net Income as for Wheat Farmers (see Table 1, Part 2 (c)) 33.80 4. Overall Net Income Maize or Sorghum /1 19.20 Beans 33.80 Wool or Mohair: As for Wheat Farmers 18.00 71.00 Less: Purchased Subsistence Cereals (See Table 1, para 3) 17.60 Total 53.40 Less: Loan Interest Repayment and Drought Reserve (assuming Bad Debt Reserve recovered) 8.90 Overall Net Income 44.50 5. Cash Flow Rand August: Preseason Deposits 10% for Input Purchases (28.80 + 18.20 = 47.00) 4.70 10% for Bad Debt Reserve /2 4.70 Nov-Jan: Balance of Input Cost 42.30 Credit for Input Cost 42.30 Jan-Mar: Sale of Wool/Mohair 18.00 Feb-Apr: Food Purchases 17.60 Mar-Jly: Sale of Cash Crops (48.00 + 52.00) 100.00 Jly-Aug: Repayment of Credit 42.30 Payment of Credit Interest 4.20 Net Cash Balance 44.50 160.30 160.30 /1 Alternative sorghum would increase cash by R 4.00. /2 See Footnote I in Table 1. June 30, 1972 ANNEX 23 Table 3 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Farm Budget for Wheat in Year of Drought (One Year in Five) 1. Wheat - 2 Acres Rand Rand Rand (a) Income: Yield of 3.5 bags/ac 5.20/bag 36.40 (b) Inputs: Seed, Fertilizers, Plowing, Planting and Spraying 34.60 Threshing with Combine 0.50/bag 3.50 38.10 (c) Net Income - Wheat (1.70) 2. Beans - 1 Acre (a) Income: Yield of 2 bags/ac 13.00/bag 26.00 (b) Inputs: Seeds, Fertilizers, Plowing, Planting, Tooth, Harrowing and Spraying 18.20 18.20 (c) Net Income - Beans 7.80 3. Subsistence Total production estimated at 5 bags of cereal or equivalent, requiring purchase of 9 bags of grain at R 4.00 to make up 14 bags required 36.00 .ANNEX 23 Table 3 Page 2 4. Overall Net Income Rand Wheat (1.70) Beans 7.80 Wool and Mohair 18.00 Drought Reserve Refund (5.98 at 5% per annum compound over 4 years + 5.98) 33.08 57.18 Less: Subsistence 36.00 Total 21.18 Less: Loan Repayment Interest and Drought Reserve (assuming Bad Debt Reserve recovered) 11.01 Overall Net Income 10.17 5. Cash Flow Rand August: Preseason Deposits 10% for Expected Cost of Input Purchase 5.98 10% for Bad Debt Reserve 5.98 Nov-Mar: Balance of Input Cost (38.10 + 18.20 - 5.98) 50.32 Credit for Input Cost 50.32 Jan-Mar: Sale of Wool/Mohair 18.00 Feb-Apr: Food Purchase 36.00 Mar-Apr: Sale of Cash Crops 62.40 Jly-Aug: Receipt of Drought Reserve Fund 33.08 Jly-Aug: Repayment of Credit 50.32 Payment of Credit Interest 5.03 Net Cash Balance 10.17 163.80 163.80 June 30, 1972 ANNEX 23 Table 4 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Tractor Operating Budget Equipment Cost Rand Rand 1 Tractor 2,400 3 Furrow Plow 300 Wheat or Maize Planter 300 3,000 Financed by: Owner's Contribution (25%) 750 Project Loan 2,250 3,000 Operating Results Revenue: 750 Paid Hours at 3.50/hr-- 2,625 (out of 1,000 total running hours per annum) Expenses Costs per Tractor Running Hour (Average 1,000 hours per year) Rand Fuel & Oils 0.25 Drivers' Pay 0.26 Spares and Repairs 0.45 Insurance 0.30 1.26 Total Cost per Annum 1,260 Net Revenue 1,365 Annual Loan Repayment with Interest over 5 Years at 9% (equated annuity) 580 /2 Net Cash-- 785 /1 In first year only 650 paid hours would probably be achieved. /2 With the tractor replaced in 5 years and worth R 500, and machinery in 10 years worth R 60, annual replacement costs would be R 385. June 30, 1972 ．爭 ANNEX 23 Table 5 LESOTHO THABA BOSIU RURAL DEVELOP14ENT PROJECT Budget for a Milk Cow Rand Rand (a) Income Sale of 250 gal milk at R 0.03/pint 60.00 Sale of one-third weaned calf (R -10) and one-fifth culled cow (R. 20) 30.00 90.00 (b) Inputs 4 lb concentrate feedstuffs per gal for 200 gal at 0.027/lb 21.60 68.40 Less: Annual Loan Repayment with Interest over 5 years; R 75 at 9% (50% of R. 125 for cow and R 25 for building) 19.30 (c) Net Income 49.10 June 30, 1972 會曲 ANNEX 23 Table 6 Page 1 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Budget for Integrated Farming on 5 AcresArable plus 5 Acres Associated Permanent Grazing Future developments in land usage, and integration of associated stock, would involve individuals or groups of farmers in following new cropping patterns. Two examples are listed below: the rotations would be flexible, but proper moisture conserving techniques, with a bare fallow, would be necessary, preceding winter wheat. Fodder, after a summer crop, could readily comprise 4 volunteer crop of Bluegrass (Panicum spp), self sown, aggressive and productive, at no establishment cost. It would probably also serve as a ley grass, while experience was gained with other planted species. Crop Rotations (Fields of one acre each) ------------- Wheat Farm ------------- Field No. Summer Winter 1 Fallow Winter Wheat 2 Fallow Winter Wheat 3 Maize/Sorghum Fodder 4 Beans Grass 5 Grass Grass or: Field No. ------------- Maize Farm ------------- Maize Fodder 2 Maize Fodder 3 Beans Grass 4 Grass Grass 5 Grass Fallow ANNEX 23 Table 6 Page 2 Wheat 2 acres Rand Rand (a) Income: 10 bags/ac at R 5.20/bag 104.00 (b) Inputs: As for regular wheat farmer 34.60 plus Double Fertilizer 9.60 plus Higher Harvest Costs 10.00 54.20 (c) Net Income - Wheat 49.80 Maize 1 acre Rand Rand (a) Yield: 12 bags/ac (b) Inputs: As for regular maize farmer 14.40 plus Double Fertilizer 4.80 19.20 or: Sorghum 1 acre (a) Yield: 12 bags/ac (some might be sold for malting and pro- ceeds used to purchase food) (b) Inputs: As for regular sorghum farmer 14.90 plus Double Fertilizer 4.80 19.70 Beans 1 acre (a) Income: 6 bags/ac of which 5.5 saleable at R 13.00/bag 71.50 (b) Inputs: As for regular bean crop 18.20 plus Double Fertilizer 4.00 22.20 (c) Net Income - Beans 49.30 ANNEX 23 Table 6 Page 3 Overall Net Income Rand 2 Acres Wheat 49.80 1 Acre Beans 49.30 Income from one milking cow and follower 49.10 Income from 10 improved sheep at 6 lb wool each at R 0.3/lb plus sale of 5 lambs at R 5.0 each 43.00 191.20 Less: Cost of one acre of maize inputs, to produce 12 bags of maize used for subsistence, together with 2 bags equivalent garden produce 19.20 Less: Loan Interest, Repayment Installments, and Drought Reserve 37.50 Overall Net Income 134.50 Cash Flow Rand Rand August: Preseason Deposits 10% for Input Purchase (54.20+19.20+22.20 = 95.60) 9.60 10% for Bad Debt Reserve 9.60 Nov-Mar: Balance of Input Cost 86.00 Credit for Input Cost 86.00 Jan-Mar: Sale of Wool/Mohair /1 43.00 Apr-Jly: Sale of Milk and Follower 49.10 Mar-Jly: Sale of Cash Crops 175.50 Jly-Aug: Repayment of Credit 86.00 Repayment of Crop Credit Interest 8.60 Repayment of Stock Credit Interest and Loan 19.30 Net Cash Balance 134.50 TOTAL 353.60 353.60 /1 Income from 10 improved sheep at 6 lb wool each at R 0.3/lb plus sale of 5 lambs at R 5.0 each = 43.00. June 30, 1972 響， ANNEX 24 Page 1 LESOTHO THABA BOSIU RMAL DEVELOP11MIT PROJECT Economic Rate of Peturn 1. Tables 1 and 2 show incremental project benefits from crop production and dairy farming. Table 3 details annual costs and benefits 'used in calculating the estimated rate of return to the economy of Lesotho. Table 4 shows a sensitivity analysis and the rates of return obtained from the project and its components. 2. The econonic life of the project is assutned to be 25 years, the estimated life of project structures, buildings and permanent on-farm im- provements. 3. Investment costs are as shown in the project cost tables, exclusive of taxes or duties and with the adjustments noted in the following paragraphs. 4. Expatriate staff of the crop improvement program would be replaced by counterparts before or at the end of Project Year 6. Before their replace- ment, expatriates would allocate some of their time to extra-project activi- ties such as extension of the proposed project, and support to national institutions. The proportionate time allocated to these activities is shown in the following table: Years of Project Investment Period 1-2 3 4 5 6 ------- 7Percent ---------- 'Project Manager - - 20. 50 - Financial Controller - - - 10 20 Senior Extension Officer - - - 50 50 Senior Credit and Marketin', Officer - 5 10 20 25 Senior Conservation Officer - - 50 80 Expatriate staff salaries and staff on-costs have been adjusted proportionately in project economic costs. The social scientist for the Integrated Farming Prolgram would spend 25Z of his time on an educational program at Roma Uni- versity in Year 1. his involvement in the project would decrease progress- ively and stop in Project Year 10. 5. Administrative, Extension, Credit and Marketing Services required at the end of the project investment period could be progressively reduced without affecting project achievement. From Year 7, administrative and extension services costs have been reduced annually over three years by 25% AiNEX 24 Page 2 of their full capacity and maintained at that level thereafter. Credit facilities have been reduced and maintained at 75% of their full capacity. Marketing staff at headquarters would be transferred to CLL, thereafter dedicating about 25% of their time to the project. 6. Soil conservation staff :o be provided by USAID are included in project costs at salaries USAID would pay. However, some of the USAID staff assigned to the project would narticipatc in a national program which exceeds project requirements. The costs of consultancies, the "echanical Superintendent and half the technical assistants are excluded, to compensate for this, and salary costs, for rate of return purposes, are reduced to levels comparable with other project expatriate salary costs. Farmers would maintain the soil conservation structures with family labor and no maintenance costs have therefore been included. 7. Costs of the research program for better fertilizer use, which would have national impact, are not included as economic costs of the project. 8. Only physical contingencies have been included in economic costs; it is assumed that price increases, due to inflation, would apply with about equal effect to costs and benefits, and cancel out. Benefits 9. (a) Yields and output of project produced coimodities have been taken from Table 1. Production has been reduced by 10% to allow for partial crop failure about one year in five. Proceeds of.crop sales would be received, on average, about half a year after costs have been incurred. It would, therefore, be incorrect (and overstate the economic rate of return - by about 2%) to show costs and benefits occurring simultaneously in the same year. It would also be incorrect, and understate the return, to show costs in one year and benefits one whole year later. To compensate for this, half the crop proceeds are included in the year in which the costs are incurred and half one year later. (b) Benefits of soil conservation are of uncertain magnitude and have been calculated on the following different assumptions: (i) soil conservation cost included in project cost but no additional benefit attributed to soil conservation alone; (ii) benefit of soil conservation included as avoidance of crop loss that would occur without it from 2 bags/ac to 1 bag/ac at the rate of 5% per year value R3/bag, period of loss, 15 years (see Annex 3, Section E); ANNEX 24 Page 3 (iii) same as (ii) but average crop valued at R6/bag (the average for the project) - the most probable assumption. (iv) same as (iii) with loss at rate of 7% per year. (v) same as (iii) with loss at rate of 3% per year. (c) The effect of these various assumptions and the sensitivity of the economic rate of return are shown in Table 4. 10. Prices. Returns have been calculated using gross prices for average grades on the 1971/72 South African market, for maize, sorghum and wheat (slightly less than the price for best grades in Annex 11, Table 8); and a forecast for beans, 10% lower than at present, to reflect expected market conditions. From these prices the cost of bags and cleaning, as shown in Annex 11, Table 8, have been deducted. These prices are expected to increase annually as they have done in the past, to reflect increases in production costs. Since investments have been.costed in terms of current Rand, estimated prices have also been maintained in constant Rand values. 11. Residual values for staff houses no longer required for the project are based on a 25-year life. 12. Extra-Project Traffic. Statistics (August 1971) show that the number of vehicles now on project roads varies from about 5 to 40 per day, 15 to 40% being heavy vehicles (3 tons and over). The saving in transport costs is estimated at R 0.055 per heavy vehicle mile and R 0.08 per light vehicle mile. Annual mileages would be approximately 115,000 for heavy vehicles and 283,000 for light vehicles. This would mean a saving of about R 28,000 as from the fourth year of the project, estimated to increase at 5% annually thereafter. Attached: Tables 1-4 July 5, 1972 춈， · & ANNEX 24 Table I THABA BOSIU RURAL DEVELOPMENT PROJECT Estimated Production (Baga of 200 lb.) Year 4 5 6 Mafze1J onwards Production with project Acres 120 360 1,200 2,400 4,800 7,200 Yield (bagslac) 8 8 8 a 8 8 Production (bagl) 960 2,880 9,600 19,200 38,400 57,600 907V 864 LM 8,640 17,280 34,560 51,84 Production without project!/ Acres 120 810 700 5,400 10,800 16,200 Yield 2 2 2 2 2 Production 240 1,620 5.400 10,800 21,600 32,400 Incremental Production 624 972 3,240 6,480 12 960 19,440 Additional Production-/ - - - - 11,400 22,8003/ TOTAL 14AIZE - - -:-- W24 S72 T 24.0 T480 T4 360 42,240 Production with project Acres 80 240 Boo 1,600 3,200 4,BOO Yield 8 8 8 8 8 8 Production 640 1,920 6,400 12,800 25,600 38,400 907,1/ 576 1,728 5,760 11,520 23,040 34,560 Production without project!/ Acres 80 540 1,800 3,600 7,200 10,800 Yield 2 2 2 2 2 2 Production 160 1,080 3,600 7,200 14,400 21,bOO Incremental Production 416 648 2,160 4,320 8,640 12,960 Additional Production! I - - - - 7,600 15,2003/ TOTAL SORGHUM Z-16 ?48 Y 160 4,320 T6,240 28,160 Wheat Production with project Acres 600 2,000 4,000 8,000 12,000 Yield 7 7 7 7 7 Production 90%2/ 4,200 14,000 28,000 56 000 84,000 3,780 12,600 25,200 50,400 75,600 Production without projecti/ Acres 180 600 1,200 2,400 3,600 Yield 2.5 2.5 2.5 2.5 Production 450 1,500 3,000 6,OOQ 9,000 TOTAL WHEAT 3,330 11,100 22,200 44,400 66,600 Beans Production with project Acres 50 600 2,000 4,000 8,000 12,000 Yield 4 4 4 4 4 4 Production 200 2,400 8,000 16,000 32,000 48,000 907V 180 2,160 7,200 14,400 28,800 43,200 Production without projectV Acres 50 ISO 600 1,200 2,400 3,600 Yield I I 1 1 1 1 Production 50 180 600 1,200 2,400 3,600 TOTAL BEANS IW T7W 6, 6OF IT= F6 -.WO- 39,600 TOTAL ACREAGE DEVELOPED 50 1,800 6,000 T 2-, 0 00 000 36,000 1/ The current proportion of maize and sorghum to total crop land is estimated at 45% and 30% or a ratio of maize to sorghum of 3:2. The ratio would be maintained under the project, but the total acreage devoted to these crops would be reduced from 27,000 to 12,000. Production estimate reduced by 10% to allow for oartial croo failure about one vear in five. After pr9je ' ct Year 1, production without the project has been estimated on the basis of the existing acreage proportions of 45% maize, 307. sorghum, 10% wheat, 10% beans and 5% fallow. From he 75,000'*ac. of land suitable for cultivation in the project area, 36,e3o,) would be improved with project inputs. Soil conservation. extension and better marketing would cause increased yields on the remaining 39,000 ac. by the equivalent of 0.5 bag/ac of maize/sorghum in Year 5 and by 1.0 bag from Year 6 orwards. June 29, 1972 LESOTHO TABA BOSIU RURAL DEELOPMENT PROJECT Details of Project Benefits Year 1 2 3 4 5 6 - - onwards Cro Improvement Maize (Bags) (624) (972) (3,240) (6,480) (24,360) (42,240) Sorghum (Bags) (416) (648) (2,160) (4,320) (16,240) (28,160) Wheat (Bags) (3,330) (11,100) (22,200) (44,400) (66,600) Beans (Bags) (130) (1,980) (6,600) (13,200) (26,400) (39,600) TOTAL VALUE Rand 5,208 77 169,188 338,376 739,832 1,141,288 Integrated Program Maize bags (720) (1,620) (3,240) R at 3.4/bag 2,450 5,508 11,016 Sorghum bags (540) (1,080) (2,160) R at 3.2/bag 1,730 3,456 6,912 Wheat bags (680) (1,370) (2,700) R at 5.6/bag 3,780 7,560 15,120 Bean bags (225) (450) (900) R at 13.5/bag 3.040 6,075 12,150 11,000 22,599 45,198 Dairy Farming Cows additional (5) (20) (50) (80) (200) (45) Cows cumulative (5) (25) (75) (155) (355) (400) Milk at R 0.24/gal 300 1,500 4,500 9,300 21,300 24,000 Sale of yearlings and cull cows at R 30/cow/year Rand 150 750 2,400 4,150 11,400 12,600 TOTAL BENEFITS FROM DAIRY ------- PROGRAM 450 2,250 6,900 14,250 32,700 36,600 June 28, 1972 41 LESOTHO TRARA BDSIU RURAL DEVEIOPMENT PROJECT Rate of Return Calculations (Thousand Rand) Year 1 2 3 4 5 6 7 8 9 10 11-24 25 Costs Project costs 1,252 907 1,108 996 1,180 978 647 647 647 647 647 647 Adgtments On-fam costs and Integrated Farming - 2 22 79 157 340 349 346 343 340 340 337 Technical Services (69) (39) (37) (41) (47) (47) (77) (94) (111) (111) (111) (111) Credit - - - - - - (14) (14) (14) (32) (32) (32) Marketing - (20) (46) (67) (134) (135) (47) (47) (47) (47) (47) (47) Soil Conservation (87) (47) (49) (54) (56) (31) - - - - - - Administration - - - (15) (24) - (54) (68) (83) (83) (83) (83) Contingencies & Working Capital 3 13 86 51 85 94 93 89 89 89 89 47 Econmic costs 1,099 816 1,084 949 1,161 1,199 897 859 806 803 803 758 Benefits I Crop improvem- - 5 51 169 338 740 1,141 1,141 - - - - Adjusted over 2 years2/ 3 28 110 254 539 941 1,141 1,141 1,141 1,141 1,141 1,141 Roads - - - 28 29 31 32 34 36 38 40 40 Soil Conservatiou3j - 27 53 77 101 124 145 166 186 204 223 312 Integrated Farming Crops - - - - 11 23 45 - - - - - Adjusted over 2 years - - - 6 17 34 45 45 45 45 45 45 Dairy faralag - 1 2 7 14 33 37 37 37 37 37 37 Sub-total 1 2 13 31 67 82 82 82 82 82 Residual value of houses - - 14 - 52 122 21 18 13 - - TOTAL NOGWITS 1,215 1,522 1,444 1463 1,478 1,486 1,575 NET IRuBFITS ) (760) (919) (63) (4) 16 625 585 657 675 683 817 I Crop benefits as froa Tables 1 and 2. 2 According to para 9(a) of this Annem. See Annez 3, Section 9: (a) Sheet erosion: annual loss of 5% from 2 bag/ac to 1 bag/ac (15 years) over 40,000 ac at the average price of R6.0/bag. (b) Gully erosion: loss of 250 ac per year with an average yield of 2 bags/ac R6.0/bag = R3,000. July 5, 1972 ANNEX 24 Table 4 LESOTHO THABA BOSIU RURAL DEVELOPMENT PROJECT Sensitivity of Economic Rate of Return Most Probable Percent 1. Crop Improvement, including Soil Conservation Costs/Benefits with Integrated Farming on 3,000 ac in Years 4-6. 11 2. Prices increased 10%. 13 3. Prices decreased 10%. 8 4. Costs increased 10%. 9 Components 5. Crop Improvement excluding Soil Conservation Costs/Benefits. 10 6. Soil Conservation alone. 10 7. Integrated Farming alone, excluding overheads 17 Alternatives 8. Crop Improvement, including Soil Conservation costs but no additional Soil Conservation Benefits. 6 9. As in 1 with crop price R3/bag instead of R6/bag for Soil Conservation Benefits. 9 10. As in 1 with Soil Conservation Benefit at rate of 7% per year. 12 11. As in 1 with Soil Conservation Benefit at rate of 3% per year. 9 12. Project extended to Year 13 with Integrated Farming on all 36,000 ac. 14 13. Project advanced one year. 15 July 6, 1972 THABA BOSIU RURAL DEVELOPMENT PROJECT ORGANIZATION CHART LESOTHO GOVERNMENT MINISTRYOF MINISTRNCSTRYRF FJNANCEJRK AGRICULTURE PROJECT COMMITTEE PAOJECT CONSULTATIVE COMMITTEE CAR5R,D PFSA'AN-T SECRETSCRTIO SEJO PRMANENT SECRETARY CHA RMAN REPS ØF FARMERS (4 P1- 1T11ETAR -N CLE CHIEFS (4} PERMNEN SECRTARY WORK M ISTRY .F AGR1C-LTi1R REP. OF PLANNING CFFICE PLANNING OFFICE E.. OF M-N-S- .F IN R NDP LERB IE PROJECT MANAGER MONITCRING &EVALUATION F. 'NANCE & LAND PLAN NO&AMNSRTO EXTENSION MREfG AMINISTRATION SOIL CONSERVATION OFC CREDIT FARMARNG UNAT DFPUTY .PTPEI D EP INANCA DEUYCNEVTO EERHDPTEXTENSION TRDEPUTY MARKETING DPTCEI CONUTROL L HOFCR FES RH OFFICER TRAINING OFFICER 11 OFFICER 1 CONTRLLER EF lEROFFICCE REEACH AREA SUPR- SR RANN STAFF (4)STF l SUPERVISonS (4) SUERVISORS (4) SENIOR CONSERVATiON RASMECHANICAILAST RE ACCUNTNTENGNE ENGINEER EN ERSPERVISDRS (2) BOD-bEEPING EXTENSfØN MREIGSAFCEIAET STAFF AGET (30CE(15 ENT (f1. IF 1AET World Bn --677014F) . 唷 IBRD-3962 snUTH, AFRICA 717