Somalia - Trans-Juba Livestock Project

FILE COPY DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 261a-SO APPRAISAL OF THE TRANS-JUBA LIVESTOCK PROJECT SOMALIA January 10, 1974 Eastern Africa Project Department Agricultural Credit and Livestock Division 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 It may not be published, quoted or cited without Bank Group authorization.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.  CUKRENCY EQUIVALENTS Currency Unit = Somali Shilling (So. Sh.) So. Sh. 1.00 = US$0.16 US$1.00 = So. Sh. 6.23 So. Sh. 1,000 = Us$160 WEIGHTS AND MEASURES 1 hectare (ha) = 10,000 m = 2.47 acreE (ac) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (km2) 100 ha = 0.39 square mile (sq mi) 1 kilogram (kg) = 2.20 poundE (lb) 1 liter (1) = 0.26 gallon (gal) 1 cubic meter (m3) = 35.31 cubic feet (cu ft) ABBREVIATIONS LDA = Livestock Development Agency WDA = Water Development Agency MMFR = Ministry of LiveEtock, Forestry and Range SDB = Somali Development Bank SNB = Somali National Bank FISCAL YEAR January 1 - December 31  SOMALIA TRANS-JUBA LIVESTOCK PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................. . .......i - ii I. INTRODUCTION ...................................... 1 II. BACKGROUND ................................ 1 A. General . ........................... . .*..1 B. The Agricultural Sector .................. 2 C. Livestock Development Agency ............. 4 D. The Kismayu Meat Factory .......... ..... 5 E. Banking and Credit ....................... 5 III. THE PROJECT AREA ................................... 6 IV. THE PROJECT ....................................... . 7 A. General ....... ........................... 7 B. Detailed Features ..... ................... 8 C. Project Cost ...... ....................... 13 D. Financing ...... ...................... i... 14 E. Procurement ...... ........................ 14 F. Disbursements ...... ...................... 15 G. Accounts and Audit ..... ................. * 16 V. ORGANIZATION AND MANAGEMENT ..... ................... 16 VI. PRODUCTION, MARKETS AND LDA OPERATIONS ............. 17 VII. BENEFITS AND JUSTIFICATION .. ....................... 19 VIII.RECOMMENDATIONS .................................... 21   ANNEXES 1. The Agricultural Sector Table 1 Estimated Size and Distribution of Labor Force, 1963. Table 2 Exports, 1963-1971. Table 3 Exports of Live Animals and Livestock Production 1965-1971. 2. Markets and Prices Table 1 Cattle Weights and Assumed Weight Losses on Stock Routes. Table 2 LDA Cattle Purchases and Sales, 1969-1972. Table 3 Cattle Flow Projection. Table 4 Cattle Purchase and Sale Projection in the Project Area. Table 5 Cattle Flow Projection for Grazing Ranches and Feedlot. Table 6 Cattle Prices and Weights. 3. Livestock Development Agency Table 1 Income Statement, 1966-1972. Table 2 Projected Cash Flow without Project, 1973-1980. 4. The Kismayu Meat Factory Table 1 Incremental Investment Required to Process and the Additional Volume Resulting from the Project. Table 2 Assumptions for Computing Sales Revenues. Table 3 Assumptions for Computing Operating Costs. Table 4 Slaughtering and Production Projection. Table 5 Financial Projection 5. Banking and Credit Table 1 Loans to Private Sector by Branches of Economic Activity. 6. The Project Area 7. Cattle Markets, Stockroutes and Holding Grounds Table 1 Cattle Markets -- Investment Cost. Table 2 Stockroutes -- Investment Cost. Table 3 Afmadu Holding Ground -- Investment Cost. Table 4 Operating Costs. Table 5 Projected Stock Flows by Origin and Herdsmen Requirement. Plan Proposed Cattle Market.  Annexes (Continued) 8. One Grazing Ranch Table 1 Investment Cost. Table 2 Cattle Sales and Operating Costs. Table 3 Herd Projection. Table 4 Operating Costs -- Basic Assumption. 9. Irrigated Fodder Farm and Feedlot -- Irrigation Component Appendix 1 Consultants Draft Terms of Reference for Engineering Aspects. Table 1 Monthly Flows of Juba River at Gimama Station. Table 2 Water Requirements. Table 3 Investment Cost. Table 4 Operating Costs. Chart 1 Work Schedule. 10. Irrigated Fodder Farm and Feedlot -- Production Component Table 1 Investment Cost. Table 2 Tractor Operating Assumptions. Table 3 Tractor Use Assumptions and Projected Performance Analysis. Table 4 Total Annual Dry Matter Production. Table 5 Cattle Sales and Operating Costs. Table 6 Operating Costs -- Basic Assumptions. Table 7 Cattle Feeding and Growth Rates Assumptions. Table 8 Annual Throughput of Cattle and Incremental Liveweight and Carcasse Weight Gains. Chart 1 Land and Tractor Critical Use Chart. 11. Disease Control Table 1 Investment Cost. Table 2 Operating Costs. 12. Project Construction and Maintenance Unit Table 1 Investment Cost. Table 2 Operating Costs. Table 3 Construction Program. 13. Project Development and Training Unit Table 1 Investment and Operating Costs. Table 2 Training Cost of Local Counterparts. 14. Project Cost 15. Sources and Annual Phasing of Investments  Annexes (Continued) 16. Government's Incremental Revenues From Taxes and Duties 17. LDA's Estimated Cash Flow from Project 18. Allocation and Disbursement of Credit Table 1 Estimated Allocation of the Proceeds of the Credit. Table 2 Estimated Expenditure and Disbursement Percentage by Project Components. Table 3 Estimated Schedule of Quarterly Disbursement. 19. Organization and Management Appendix 1 Draft Terms of Reference, Duties, Responsibilities and Qualifications for IDA Project Staff; Project Director; Senior Grazing Ranch Manager; Irrigation Specialist; Irrigated Fodder Farm and Feedlot Manager; Master Mechanic; Project Finance Officer. Chart 1 Ministry of Livestock, Forestry and Range, Department of Animal Health and Production. Chart 2 Livestock Development Agency and Department of Animal Health and Production -- Existing Organization. Chart 3 Livestock Development Agency - Organization Chart (a) During Development (b) Full Development. Chart 4 Livestock Development Agency -- Marketing Department -- Organization Chart. 4' Chart 5 Technical Assistance and Staff Training. 20. Projected Financial Results of LDA Including the Project Table 1 Projected Cash Flow of LDA Including Project -- 1974-1980. Table 2 Balance Sheet of LDA as of December 31, 1972 Actual and 1973-1976 Projected. 21. Financial Analysis Table 1 Marketing, Financial Rate of Return. Table 2 Two Grazing Ranches and Irrigated Fodder Farm and Feedlot, Financial Rate of Return. Table 3 Total Project -- Financial Rate of Return. 22. Government's Estimated Cash Flow from Project Excluding Taxes and Duties 23. Annual Government Revenues from Taxes and Duties at Full Project Development 24. Balance of Payments Impact Table 1 Foreign Exchange Costs and Revenues. 25. Total Project -- Rate of Return to Economy MAP (IBRD 10398R) -- Project Area (IBRD 10430R) -- Irrigation System.   SOMALIA TRANS-JUBA LIVESTOCK PROJECT SUMLMARY AND CONCLUSIONS i. Livestock production is the most important economic activity in Somalia, providing three-quarters of the value of the country's exports and a livelihood to nomads representing about 70% of its population. Traditional methods of production and marketing largely prevail, however, and Government has given priority to increasing productivity and expanding and diversifying exports of livestock and livestock products. ii. The proposed livestock Project would be the first Bank Group assistance to the agricultural sector in Somalia. Since 1965 IDA has extended six credits to Somalia, totalling about So.Sh. 220 million (US$35 million). Three of these were for development of the transportation network, including the construction of two trunk roads, Afgoi-Baidoa in the Central region and Hargeisa-Berbera in the North. Others included one for education and two for port development. Performance under these projects has been generally satisfactory in spite of some initial delays. iii. The Project would over five years include construction of five cattle markets and improvement of over 1,000 kIn of existing stockroutes. It would establish two grazing ranches of 80,000 ha each, as well as an irrigated fodder farm and feedlot. Provision would be made for a disease control program, tech- nical services , training and future project preparation. The Livestock Devel- opment Agency (LDA) would be responsible for the Project's execution, except for the disease control program and feasibility studies for future agricultural projects which would be the responsibility of Government. The LDA would engage in Livestock trading, improve and manage stockroutes and holding grounds for the better marketing of livestock; and carry out a large scale cattle fattening operation based on irrigated fodder production. iv. Total Project cost would be So.Sh. 71.8 million (US$11.5 million), of which So.Sh. 45.6 million (US$7.3 million) or 64% represents foreign exchange requirements. An IDA Credit of US$10 million would finance 87% of total Project cost. The Government contribution would be US$1.5 million, or about 13% of total Project cost. The Project would generate during the development period about US$0.6 million from taxes and duties leaving Government net of tax contribution at about US$0.9 million or 8% of total Project cost net of taxes and duties. IDA funds and Government's contribution would be onlent to LDA at 7 1/4% per annum for a term of 20 years with a 5-year grace period. Interest payment during the erace neriod will be deferred and capitalized to enable LDA to build up adequate cash balances during tL. i.iiLial years of the Project.  - ii - v. A Project Development and Training Unit (PDTU) would be established within LDA which would be responsTble for Project implementation and accounts, procurement, maintenance and supervision. PDTU would also train local count- erpart staff and organize in-service training. vi. Procurement for irrigation and drainage civil works, irrigation equipment, access and farm roads, tractors, trucks and vehicles amounting to about US$2.8 million would be by international competitive bidding in accordance with Bank/IDA guidelines. Contracts for boreholes, the feedlot, buildings and water development facilities on the Afmadu holding ground, as well as for the grazing ranches and the irrigated fodder farm and feedlot amounting to about US$0.8 million would be subject to local compet- itive bidding in accordance with Government procurement procedures, which are satisfactory. vii. The estimated financial rate of return to LDA would be 14%. The rate of return to the Somali economy would be about 25%. At full development in year six total annual marketed production through the Project would be about 52,000 head of cattle: 25,000 fattened, 19,000 canners and 8,000 for live export. At full development incremental carcass weight resulting from the Project would be about 3,900 tons annually and incremental exports of live cattle, chilled, frozen, and canned beef would amount to US$6.6 million annually, representing net foreign exchange earnings of about US$3.8 million. viii. About 20,000 nomadic cattle-raising families owning about one mil- lion cattle (1/3 of total Somali cattle) would benefit from the Project. Estimated annual cash income per family would increase on average by about 50%, from So.Sh. 600 (US$100) to So.Sh. 900 (US$150). The Project would provide permanent employment for 600-700 persons within LDA, and an additional 200 would be employed for five years in Project related construction. ix. Contingent on receiving the required assurances, the Project would be suitable for an-IDA Credit of US$10 million.  SOMALIA TRANS-JUBA LIVESTOCK PROJECT I. INTRODUCTION 1.01 Livestock represents the most important economic activity in Somalia and provides a livelihood for three-quarters of its population. The industry, however, remains traditionally organized and is dependent on no- madic pastoralists who are very poor and have a low level of productivity. The Government's objectives, to which this project would make an important contribution, are to improve the income of the nomads by modernizing cattle production and, at the same time, utilize this valuable resource more effi- ciently to increase exports and foreign exchange earnings, which are crucial to the further development of the country. To achieve these goals, emphasis is being placed on improved marketing facilities and on the introduction of cattle fattening operations, which would enable a diversification of production into chilled and frozen beef for export. The Trans-Juba region, wlhere the proposed project is located, contains one-third of the country's total cattle population, and is located near one of the country's major ports. The Juba river assures the water supply necessary for the Project. 1.02 This would be the first Bank group assistance to the agricultural sector; however, since 1965 IDA has extended six credits totalling about So.Sh.220 million (USS35 million) to Somalia. Three of these credits were for development of transportation, including the construction of two trunk roads - Afgoi-Baidoa in the Central region and Hargeisa-Berbera in the North. Others included one for education and two for port development. Performance under these projects has been generally satisfactory, although initially they presented problems causing some delays. 1.03 This Project was prepared by Government with assistance from the IBRD permanent mission to East Africa (PMEA). This report is based on the findings of an IDA appraisal mission to Somalia in January/February 1973 composed of Messrs. S. Silbiger, G. Ablasser, T. Baddar and C. Wolffelt (IDA), and V. Ashworth and J. Moller (consultants). II. BACKGROUND A. General 2.01 Somalia is located in the eastern corner of Africa and has a total area of about 637,000 km2. Rainfall is low and uncertain, ranging from 200-600 mm, and the country is generally arid to semi-arid. The population is estimated at about three million, and is growing at a rate of 2.4% per annum.  - 2- 2.02 GNP in 1971 was about US$200 million, with a per capita income of about US$70. There are no national accounts available; however, it is estimated that between 1960 and 1970, the per capita income remained static. Total export earnings have not shown any significant increase over the last nine years, and in 1971 totalled about So.Sh. 246 million (US$39 million). Generally non- livestock exports declines have been offset by rising livestock exports. About two-thirds of the 1971 total exports were derived from livestock and related products, and one-quarter from bananas and fruit. Total value of imports rose from So.Sh. 364 million (US$58 million) in 1969 to So.Sh. 457 million (US$73 million) in 1971. B. The Agricultural Sector (Annex 1) 2.03 In the absence of known significant mineral resources, the country is dependent on the agriculture sector for its economic development. However, with the exception of bananas and sugarcane, commercially produced, production is mainly subsistence. About 70% of the population are pastoralists, some of whom engage in subsistence cultivation; an additional 15% are engaged in sedentary agriculture, forestry and fishing. 2.04 Although most of Somalia is arid or semi-arid, there are considerable areas of potentially productive land suitable for agriculture and livestock production. Of some eight million ha of potentially arable land (13% of total area), only about 600,000 ha are now cropped. Of this approximately 100,000 ha is under irrigation from the Juba and Shebeli rivers. In addition to the arable land, some 35 million ha (or about 55% of the total land area) is used for seasonal grazing. All land belongs to the State, and is largely used traditionally by nomadic herdsmen who move according to the seasons and the availability of grass and water in Somalia and adjacent countries. All natur- al and Government-constructed stock watering facilities are for common usage and are mostly free of charge. Livestock Population 2.05 The country's main resource is its extensive livestock population; this totals about 2-1/2 - 3 million cattle (mostly located in the South), the same number of camels, and about 12 million sheep and goats. Cattle are well adapted to the generally harsh environment and without further genetic improvement, fertility and growth rates will respond to improved disease control and nutrition. The most pressing needs are for measures designed to increase production and offtake and improved facilities for marketing and disease control. Livestock Markets and Prices (Annex 2) 2.06 Although the traditional marketing system provides cattle markets in most towns and villages, the marketing facilities in the Trans-Juba area  - 3 - are inadequate. In the more remote areas traders use trucks or camels to visit the nomads. The Bardera-Kismayu road is not serviceable for 6-8 months of the year, and there are not enough staging points and watering facilities along existing stockroutes. Consequently, mortality and weight loss on the stockroutes are high - about 1-1/2% and 13% respectively on an average nine- day route. Very little is known about the proportion of cattle marketed through middlemen, transactions among middlemen, or the price structure prior to purchase by the Livestock Development Agency (LDA). LDA is a Government agency engaged primarily in the purchasing of livestock for live export and sale to the Kismayu meat factory (paras. 2.10 and 2.13). It is estimated that of the 58,000 cattle purchased by LDA in 1972, 20-40% were bought directly from nomads and 60-80% from traders. In addition, about 90% of those cattle not purchased by LDA (i.e. sales to Kenya estimated at about 30,000 annually and sales of about 5,000 to local slaughter houses) are traded through middle- men. Prices received by nomads from middlemen fall probably within the range of So.Sh. 0.63 to 0.67/kg liveweight. LDA pays So.Sh. 0.81/kg for canner cattle (of which the seller receives So.Sh. 0.75/kg after deduction of taxes A and fees), and sells to the Kismayu meat factory at the agreed price of So.Sh. 0.98/kg. Cattle for live export are purchased by LDA at So.Sh. 0.92/kg and sold at about So.Sh. 1.53/kg. These margins have been sufficient to cover costs and give LDA a profit but the prices to the nomads are not believed to be attractive enough to stimulate greatly increased sales by them in the future. To induce nomads to sell more cattle in order to meet increasing demands, LDA increased prices to So.Sh. 0.87/kg for canners and So.Sh. 1.00/kg for live export in late summer, 1973 increasing the prices received by nomads to about So.Sh. 0.77/kg or by about 18%. Exports 2.07 Livestock exports have increased rapidly, rising from So.Sh. 109.2 million (US$17.5 million) in 1967 to So.Sh. 162.4 million (US$26 million) in 1971; their share of total exports increased over the same period from 55% to 66%. About 56,000 live cattle were exported in 1971 at a value of So.Sh. 18.5 million (US$3 million) and about 81,000 in 1972 at a value of So.Sh. 28 mil- lion (US$4.5 million); most of these were shipped from Berbera due to the port's proximity to Saudi Arabia and other Gulf states where the cattle are marketed. In spite of the established trade, shipping is poorly organized and losses are high. In order to alleviate these problems, Government is estab- lishing the Somali Shipping Agency, which will be responsible for improving ocean transport of both livestock and bananas, and tentatively at a later date a Livestock Trading Agency which will eventually assume responsibility for all live animal exports. With the opening in 1969 of the Kismayu meat factory, the supply of processed meats available for export has more than tripled, reaching a value of So.Sh. 21.4 million (US$3.4 million) in 1971 1/. The USSR is the factory's major customer, but in 1972 small quantities were ex- ported to African and Mediterranean countries (para. 2.13). Exports of chilled and frozen beef to these markets are expected to become one of the factory's main activities, but this will be dependent on an improvement in the quality of cattle. 1/ Figures for 1972 are not available.  -4- Animal Health 2.08 Disease control is a continuing, though lessening constraint on improved productivity in the livestock sub-sector. Until recently Rinderpest was the principal disease affecting the cattle population. An eradication and mass vaccination program is now being carried on throughout the country with assistance from the Federal Republic of Germany. About 800,000 head or 80% of the cattle in the Trans-Juba area have been treated thus far. Foot and Mouth Disease (FMD) is endemic, but in spite of sporadic outbreaks is not a serious threat to indigenous cattle. Trypanosomiasis is a major problem in the Juba valley area, causing considerable stock losses. Government has decided to concentrate disease control measures within a limited area, pro- gressively expanding its program until the entire country is covered. The program will initially focus on the Lower Juba region, part of which is with- in the Project area, and the long-term plan calls for the eventual establish- ment of a disease free zone (}Map, IBRD 10398). In 1972 Government introduced a program to supply veterinary drugs free of charge - primarily to increase producer acceptance of animal health control measures - but it is too early to assess results. Water Supply 2.09 The Water Development Agency (WDA) was set up in 1970 within the Ministry of Mineral and Water Resources to design and implement the siting, drilling and equippping of boreholes on a contract basis; it presently has some 25 drill rigs and other auxilliary equipment, and its staff includes four qualified hydrologists. A lack of Government funds has restricted operations over the past two years to about 40 drillings per year, and little effort has been expended in the maintenance of existing boreholes. C. Livestock Development Agency (Annex 3) 2.10 The Livestock Development Agency (LDA) was established in 1966 as an autonomous Government agency to coordinate and promote livestock development and marketing and export of livestock and livestock products. To finarce LDA's activities, Government has appropriated So.Sh. 4.0 million (US$640,000) between 1966 and 1972. LDA initially concentrated on providing holding grounds and marketing facilities along the Shebeli and Juba rivers but in 1967 also became responsible for all port veterinary work as well as the issue of health certificates and collection of livestock inspection fees. In 1969 LDA started livestock trading, mainly to supply the Kismayu meat factory, and its trading operations have since expanded rapidly.  2.11 LDA is headed by a General Manager, and has headquarters in Mogadishu and six regional offices throughout the country. Its major constraint at pre- sent is the lack of qualified and experienced staff, particularly in financial management; any accurate financial evaluation of its individual activities is therefore difficult. Based on LDA's available data, its net income from live- stock trading amounted to about So.Sh. 1.0 million in each of 1971 and 1972 compared with So.Sh. 0.5 million in 1970 and a net loss of So.Sh. 0.5 million in 1969. 2.12 Government reviewed the financial situation of public agencies in the context of development fund requirements and availability and found these largely unsatisfactory. Accordingly it passed a law (effective January 1, 1973) which provides for various improvements including some fiscal simplifi- cation and strengthening of financial management and accountability of public agencies. The principle measures include: making the magistrate of accounts responsible for audit of the agencies (no audit requirement existed previously) and replacing income tax by a turnover tax at a rate to be determined annually by the Ministry of Finance. Further, cash generated annually which is surplus to the enterprise's requirements, after specified permitted appropriationsis paid to Government. The law appears to be satisfactory and although it is too early to judge its effect it should lead to increased efficiency in operations and the use of funds in Government agencies. D. The Kismayu Meat Factory (Annex 4) 2.13 The Kismayu meat factory came into operation in 1969; its total cost of about So.Sh. 43 million was financed-mainly by the USSR under an agreement providing for management by Russian experts until 1976. It has a slaughter capacity of 50 head/hour, and a canning capacity of about 250 head/day and produces mainly stewed steak for the USSR. The factory is required to export 16 million cans (equivalent to about 5,300 tons of dressed carcass meat or 50,000 head of cattle) of stewed steak per year to the USSR at a price which is negotiable annually. In 1972 the factory also sold 600,000 cans of cooked corned beef to African and Mediterranean markets. Total 1972 sales were about So.Sh. 32.4 million (US$5.2 million). The plant is well designed and allows a good production flow, although in some respects it does not reflect modern sanitary practices and standards. Government plans to expand the factory's capacity to increase production of chilled, frozen and canned beef. It does not wish to mingle other external financing with the USSR investment para. 6.07). E. Banking and Credit (Annex 5) 2.14 Somalia's banking system consists of a Central Bank - the Somali National Bank (SNB) - two commercial banks and the Somali Development Bank.  -6- The two commercial banks, the Somali Commercial Bank and Somali Savings and Credit Bank, were created in 1970 following the nationalization of the four foreign-owned commercial banks operating in the country. Each of these has a capital of So.Sh. 2.5 million (US$400,000), equally subscribed by the SNB and Government. The commercial banks extend short-term loans to the small private trading sector at an interest rate of 9% which accounts for 71% of their total credit outstanding, while agricultural credit amounts only to 5%. However, certain Government agencies receive preferential rates to encourage development in particular sectors e.g. 7-1/2% to the National Banana Agency, 6% to LDA, and 5% to the Agriculture Development Corporation (ADC). ADC is a Government Agency and although it does not provide credit it supplies farmers with agricultural inputs, extension and marketing service on a small scale. 2.15 The Somali Development Bank (SDB) provides nedium and long-term loans to both the public and private sectors. It does not normally lend for agriculture. Up to the end of 1972 its sources of funds have been its paid up equity capital of So.Sh. 20.6 million (US$3.3 million) and an eight year loan from Iraq at 2-1/2% for the equivalent of US$1.3 million. SDB lending was about So.Sh. 7 million in 1971, compared with So.Sh. 1.3 million in 1970. This increase was attributed to an improved business climate in the private sector after a period of uncertainty. As its activities are increasing, SDB's operational efficiency needs strengthening. III. THE PROJECT AREA (Annex 6) 3.01 The Project Area covers some 65,000 km ; it is bounded in the east by the Juba river, in the north and west by Kenya and in the southeast by the Indian Ocean. For the most part the area is arid to semi-arid rangeland subject to recurrent droughts; it has low shrubs and infrequent trees, and water supply is widely dispersed, seasonal and often brackish. Nevertheless, the area contains an estimated 0.9 to 1.0 million cattle, one-third of the country's total cattle population, the main outlet for which is the Kismayu meat factory. 3.02 The majority of the population in the area is made up of traditional pastoralists who are almost wholly dependent on livestock. In the past these nomads had raised cattle mainly to satisfy consumption, prestige, or other family needs. Attitudes are now changing, however; availability of better educational and medical facilities has in many cases caused the nomads to establish semi-permanent homes, and the herdsmen more often now vief their cattle simply as a source of income. The banana plantations are the only large employers within the area, and it is estimated they employ about 8,000 persons. The small farmers along the Juba provide the main source of this labor, and they keep small herds of livestock to supplement their incomes.  - 7 - 3.03 All the administrative centers are linked by roads of varying qual- ity; these are generally poor, however, and the majority are impassable to vehicles for up to five months or more every year. With the exception of the bridge across the Juba at Gelib, the only other crossing points are the ferries at Lugh Ferrandi and Barbera. Kismayu harbor was reconstructed with a loan from USAID in 1969 and is now capable of handling vessels of up to 10,000 gross tons. 3.04 The proposed Project envisages the irrigation of the fodder farm from the Juba river. It enters Somalia from Ethiopia but no agreement exists between the two countries for the use of the water of this common river. It is unlikely, however, that the Ethiopian river basin would be developed in the foreseeable future since its topography and soils are unsuitable for agricultural development, and there is as yet limited demand for power. The irrigation component of the proposed project would require only about 4% (22.5 million m3) of the average flow over 14 years (1951-1964) near the site of the proposed farm area. The question of water rights between the two countries was discussed with the Somali Government who indicated that they objected to making formal notification to the Ethiopian Government as the border is disputed and it considers the Juba river basin in Ethiopia an integral part of Somalia. 3.05 Within Somalia the use of irrigation water for fodder production has also to be weighed against other possible competing demands. However, the Juba at present has a potential for irrigation of about 40,000 ha of which only about 6,000 ha is now utilized, mainly for banana plantations; moreover this potential will increase to about 75,000 ha when a barrage at Fanole financed by the USSR is completed. The Project's modest water demand for a 1,200 ha farm would therefore not conflict with other possible uses in the foreseeable future. However, to protect Project water requirements for the future, Government should enact legislation regulating the use of Juba waters which would stipulate that water rights for irrigation be allocated on the basis of prior use. During negotiations assurances were obtained that such legisla- tion would be enacted within one year of credit signing. IV. THE PROJECT A. General 4.01 The Project would over five years provide an improved and extend- ed marketing system for the purchase of livestock from nomadic pastoralists; the Project would also establish a cattle fattening operation which in conjunc- tion with the marketing system would increase and diversify production from the existing Kismayu meat factory. The Project would include:  -8- (a) construction of five permanent cattle markets, one new holding ground, and development of water supplies and staging points on over 1,000 km of existing stockroutes; (b) two grazing ranches of about 80,000 ha each; (c) one irrigated fodder farm for feed production on about 1,200 ha, and a feedlot with a capacity of 5,200 head; (d) a disease control program; (e) technical services, training, feasibility studies and future project preparation. Apart from the disease control program, and feasibility studies which would be directed by the Veterinary Department of the Ministry of Livestock, Forestry and Range (MLFR), and Government respectively, the Project would be executed by LDA under the general direction of MLFR. LDA would discharge its Project responsibilities through a Project Development and Training Unit (PDTU). 4.02 The total area required for the major Project components would be about 1,900 km2. The Government proposes to assign these areas to LDA for an unlimited period without charge and the Government does not consider this to be a significant social problem. Assurances were obtained during negotia- tions from Government that as a condition of credit effectiveness about 1,900 km2 land in the Project area would be made available to LDA for its exclusive use at no charge for an unlimited period. B. Detailed Features 4.03 The Project's marketing and production components are largely inter- dependent. About one-half of the livestock purchases from nomadic pasto- ralists - 26,000 - would at full development be sold either live or to the Kismayu meat factory for canning. The other half, representing the better quality animals, would first be prepared for fattening on the two grazing ranches proposed under the Project and would subsequently be finished off at the feedlot using high quality fodder produced under irrigation. The feedlot production would be sold to the Kismayu meat factory for processing as chilled or frozen beef to be sold in the more lucrative export markets. Markets, Stockroutes and Holding Grounds (Annex 7) 4.04 The Project would establish organized marketing facilities for live- stock in the Project area in order to increase offtake and reduce losses. These would facilitate the orderly purchase and movement of cattle. The mar- keting component would specifically include:  (a) construction of three large new permanent cattle markets at Tabda, Maskati and Gelib, and two small markets at Lugh Ferrandi and Busar; (b) development of water supplies and staging points on over 1,000 km of existing stockroutes; (c) construction of one 20,000 ha new holding ground near Afmadu; (d) bush clearing of over 12,000 ha and development of two water points on the existing LDA cattle holding ground near Kismayu; (e) vehicles and equipment for the LDA marketing teams in the Project area. The markets would be located so as to allow purchases from areas with the greatest concentration of cattle. The stockroutes would connect the perman- ent markets with the holding grounds at Afmadu and Kismayu, and staging posts and water points would be established approximately every 30 km. The new holding ground icear Afmadu would be primarily used for regulating the Kismayu meat factory's intake of slaughter cattle and would also be used for select- ing and sorting of immatures for the grazing ranches and the irrigated fodder farm and feedlot. The expansion of the holding ground at Kismayu would pro- vide additional facilities for quarantine and veterinary procedures, and would enable cattle to be retained until ready for export or slaughter at the Kismayu meat factory. Grazing Ranches (Annex 8) 4.05 Two ranches would be established on natural grasslands in areas virtually free of bush. One ranch would be located in the vicinity of the irrigated fodder farm and feedlot (para. 4.08) and the other near the Afmadu holding ground. Each ranch would have a perimeter fence, be sub-divided by firebreaks and roads into about 30 fields, and watering points would be con- structed where necessary. One ranch would be established in each of the first two Project years, and at full development in year three, each would provide about 10,000 cattle for the feedlot. 4.06 The ranches would be established in order to provide additional market outlets for young immature cattle. Thev constitute an essential intermediate step which would help prepare range cattle for subsequent in- tensive fattening in the feedlot, as an adequate number of cattle suitable for intensive fattening would not be available from within the nomadic herds. Cattle would enter the ranch at about 210 kg liveweight and would reach some 300 kg before being transferred to the irrigated fodder farm and feedlot. All animals would be vaccinated and regularly treated for parasites. After one year on the grazing ranches, the immature cattle would show substantial growth and weight gain, as well as significant quality improvement; they would then be ready for subsequent "finishing" in the feedlot.  - 10 Irrigated Fodder Farm and Feedlot (Annexes 9 and 10) 4.07. The irrigated fodder farm and feedlot would provide a continuous regular supply of high quality meat essential to the diversification of beef exports. The farm would be used for feed production (but would be so de- signed that if necessary, the irrigation system could be applied to the production of other crops) and it would provide almost the total feed require- ments of cattle in the feedlot. There are no alternative feed sources avail- able and improved rainfed grassland has yet to be established in Somalia as a feasible basis for quality beef production. 4.08 Government has selected and put forward in the credit application a possible site for the irrigated fodder farm and feedlot. The design and cost details shown in Annex 9 are based on construction at that site. The proposed location seems to be favorable as basic requirements such as: topo- graphy, soil quality, distance from the river and the paved highroad are se- cured. However a survey of alternative locations could prove thaft better (and probably cheaper) solutions could be found. The proposed farm would be located some 80 km north of Kismayu adjacent to the Kismayu-Gelib highway and the Juba River. Water would be pumped without storage from the Juba to a surface border irrigation system on the 1,200 ha farm using either ditches or dykes depending upon the topography after levelling. The water lift would be about 10 m. After the water was conducted to the farm through a 2 km supply canal, it would be distributed to the fields through primary, secondary and tertiary canals. ,Sprinkler irrigation was not found to be feasible, partly due to the high winds which are a feature of the area. 4.09 Consultants would be required to determine the location of the irrigated farm, to advise LDA on the engineering aspect of the irrigation component and to prepare bidding documents. This work would comprise topographical surveys, detailed design and supervision of construction. The topographical survey would include a soil survey 1/ and water sampling 2/. Assurances were obtained during negotiations that LDA would, not later than four months from credit effectiveness, employ a firm of engineering consultants acceptable to IDA upon terms and conditions satisfactory to IDA. 4.10 Construction would require about two years. On completion of the irrigation system, the 1,200 ha farm would gradually be brought into culti- vation; based on a crop rotation of 600 ha of corn (double cropped) and 600 1/ A general soil survey of the reconnaissance type is available for the Project area. However, a more detailed soil survey with density of about one pit every 25 ha is required, as its result might influence the techni- cal design of the system, specifically the land levelling. According to available soil classification, the Project area is almost homogenous and is classified as arable land good for irrigation. 2/ In the period 1963-1965 thirteen water samples were taken and analyzed for the main chemical characteristics; these have been found satisfactory. However, systematic sampling during one dry and one rainy season is required to provide more detailed analysis, as this could influence the sequence of irrigation. One year's observation would be sufficient, as the incidence of irregularity of dry and rainy seasons thus far has been low.  - 11 - ha of Alfalfa and Rhodes grass pasture at any one time, full development would be reached in year six. The irrigated fodder production proposed calls for an intensive mechanized system since it is unlikely that sufficient labor of the required quality could be obtained to replace a significant amount of the mechanization. The Funds necessary for the proposed mechanized system are therefore provided under the Project. However, the consultants terms of reference would include a requirement to investigate the possibility of re- placing some of the mechanization with labor. 4.11 The feedlot would have a simple open air design consisting of covered troughs, pens, corrals, and dips. About 25,000 cattle would be fattened annually in full production from year six. Approximately 80% of these (20,000) would come from the two grazing ranches and the balance of about 5,000 would be selected from local markets. It is estimated that about 2,000 cattle would enter and leave the feedlot every month in lots of about 500 per week. All cattle entering the feedlot (average weight 300 kg) would be tested for Contagious Bovine Pleuropneumonia and vaccinated against FMD. They would be fattened over 75 days and the incremental liveweight gain annually would be about 1,700 tons - equivalent to about 1,400 kg per irrigated ha. When finished, the 370 kg animal would have a dressing out percentage of at least 50%. The result of the fattening operation would be animal gains of 23% liveweight, 31% carcass weight, and about 90% in sale value. 4.12 The irrigation system would not have an appreciable effect on the ecology of the area. As Shistosomiasis (Bilharzia) and Malaria are prevalent, however, any water development would tend to increase their incidence unless precautions were taken (Annex 9). Assurances were obtained from Government during negotiations that: (a) the irrigation component would be designed so as to control the incidence of disease; and (b) the recommendations of the consultants would be considered by IDA and the Government prior to implementation. Disease Control (Annex 11) 4.13 To complement the ongoing program designed to eradicate Rinderpest and Contagious Bovine Pleuropneumonia (para. 2.08), the Project would in- clude measures to control the incidence of Trypanasomiasis and other diseases. Government eventually plans to establish a disease free zone; however, as it would be unrealistic to attempt to cover all cattle producing areas simultaneously, Government is concentrating on the lower Juba area. The Project would support this effort by providing one regional veterinary center at Kismayu, four district veterinary centers at Afmadu, Gelib, Gimama and Brava, and five small veterinary centers at Bulo Haji, Goba, Anjail, Beles Gogani and Tabda. The regional center would be headed by a qualified veterinarian, and provision would be made for supporting staff, equipment, vehicles and buildings. The disease free zone would give Somali exports of chilled and frozen meat access to certain European markets presently ex- cluded on sanitary grounds. Meanwhile, Somalia will continue to sell its production to other overseas markets (para. 6.07) (Map, IBRD 10398).  - 12 - Technical Services (Annexes 12 and 13) 4.14 Technical services to be provided under the Project would include: (a) Project Staff and Equipment: The Project Development and Training Unit (PDTU) would be established in LDA to develop and implement the Project (para. 5.02). It would comprise a total of 12 professional staff, six of which would be expatriates to be internationally recruited. The Project would require design and construction of markets, water supplies, staging points on existing stockroutes, a new holding ground near Afmadu, the expansion of the holding ground near Kismayu and construction of buildings needed for disease control. This would consequently involve a number of different construction works in various scattered locations where local contractors are not available. In the opinion of Government the Ministry of Public Works is organized to execute works for ongoing highways and port projects,,but the type of construction work required under the water supply portion of the Project could be executed by the Water Development Agency (WDA). WDA's facilities would not be adequate to do the other construction work required however and it does not have experience in this type of work. Accordingly, a Construction and Maintenance Unit equipped with bull- dozers, trucks and other machinery and equipment would be established within the PDTU. (b) Training: The Project would provide for overseas postgraduate and diploma training and short term study tours. Four graduates would receive training overseas and about ten other students would be given diploma train- ing in countries with similar ecological conditions. The four graduates to be trained overseas would be the Somali counterparts of expatriate staff of LDA who would require training in order to eventually take over responsibility for Project execution. It is assumed that about half of the diploma students would become directly involved in Project implementation, while half would strengthen the staff of other Government agencies within the livestock sub- sector. The Project would thus benefit directly from a large portion of the training; the remainder of the training would yield more general benefits to the livestock industry. Candidates would be selected by LDA in conjunction with MLFR. In addition sums would be available for LDA staff to travel on short term study tours to observe ranch development in other African coun- tries. During negotiations assurances were obtained from Government that the training program would be established after agreement with IDA. (c) Feasibility Studies: Provision would be made for studies for future agricultural projects preparation. Government feels that probably initial areas of investigation should be development of the Mbgadishu Dairy and improvement of livestock marketing in the North, as it wishes to give these priority. During negotiations assurances were obtained from Govern- ment that it would consult with IDA and obtain its concurrence before the studies are carried out.  - 13 - Operating Expenses 4.15 The Project would include the first three years of operating expenses for all Project components, as during this period revenues earned would be in- sufficient to cover them. These would total about So.Sh. 16 million (US$2.6 million) and are included under the various Project components in the Project cost (para. 4.16). C. Project Costs 4.16 Total Project cost is estimated at So.Sh. 71.8 million (US$11.5 mil- lion) of which So.Sh. 45.6 million (US$7.3 million) or 64% represents foreign exchange requirements. The estimated costs are summarized below: Foreign Exchange So.Sh. '000 US$ '000 Per Local Foreign Total Local Foreign Total centage LDA Operations: Markets, Stockroutes and Holding Grounds 3,001 3,805 6,806 482 610 1,092 56 Grazing Ranches 3,746 4,186 7,932 601 672 1,273 53 IIrrigated Fodder Farm and Feedlot 9,237 16,293 25,530 1,482 2,616 4,098 64 Construction and Maintenance Unit 1,888 3,124 5,012 302 502 804 62 Development and Training Unit 1,195 1,624 2,819 191 261 452 58 Consultant Fees 540 4,858 5,398 86 780 866 90 Total LDA Operations 19,607 33,890 53,497 3,144 5,441 8,585 63 Government Operations - Disease Control 818 745 1,563 132 120 252 48 Non-project related Training 245 570 815 40 90 130 70 Feasibility Studies 400 1,600 2,000 64 256 320 80 Total Government Operations 1,463 2,915 4,378 236 466 702 66 Total LDA and Govern- ment Operations 21,070 36,805 57,875 3,380 5,907 9,287 64 Contingencies Physical 2,107 3,680 5,787 338 591 929 64 Price 2,950 5,153 8,103 474 827 1,301 64 Total Project Cost26,127 45,638 71,765 4,192 7,325 11,517 64 ) - _  - 14 - A more detailed breakdown of Project cost is available in Annexes 14 and 15. Costs have been estimated at prices prevailing in January 1973. Allowances have been made for a physical contingency of 10% and a price contingency of 14% (equivalent to 5.6% p.a. on the amount invested). The above cost esti- mates include duties and taxes totaling about So.Sh. 3.5 million (US$0.6 million). D. Financing 4.17 The financing of Project costs would be as follows: