Senegal - Eastern Senegal Livestock Development Project

FILE COPY IlDocument of The World Bank FOR OFFICIAL USE ONLY Report No. P-1771a-S REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF SENEGAL FOR A LIVESTOCK PROJECT May 24, 1976 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its content; may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit: CFA Franc (CFAF) EXCHANGE RATES Currency Unit Official Floating as of December 31, 1974 US$1 CFAF 230.21 CFAF 225.00 CFAF 1,000 US$4.20 US$4.44 CFAF 1,000,000 us$4,200 US$4,444 The CFA Franc is officially valued at the equivalent of FF 0.02. As the French franc is now floating relative to the US dollar, the US dollar/ CFAF exchange rate is subject to change. The exchange rate on December 31, 1974 of US$1 = CFAF 225 was retained for conversions made in this report. ABBREVIATIONS BADEA Banque Arabe pour le D6veloppement Economique en Afrique Arab Bank for Economic Development in.Africa BNDA = Banque Nationale de Developpement du Senegal CFDT = Compagnie Frangaise pour le Developpement des Fibres Textiles FAC Fonds d'Aide et de Cooperation FED = Fonds Europe'en de Developpement IDA International Development Association ONCAD = Office National de Cooperation et d'Assistance au Developpement ORSTOM = Office de la Recherche Scientifique et Technique d'Outre Mer PAI = Programme Alimentaire Mondial PY = Project Year RNWA = Regional Mission in Western Africa of the World Bank SAED = Societe d'Amenagement et d'Exploitation des Terres du Delta du Fleuve Senegal SATEC = Societe d'Aide Technique et de Coop6ration SERAS = Societ6 d'Exploitation des Ressources Animales du Senegal SODEFITEX = Soci6t6 pour le D6veloppement des Fibres Textiles SODEVA = Societe de Developpement et de Vulgarisation Agricole SONED = Societe Nationale des Etudes de D6veloppement STN = Societe des Terres Neuves USAID = United States Agenc"l fcr International. Development FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF SENEGAL FOR A LIVESTOCK PROJECT 1. I submit the following report and recommendation on a proposed dev- elopment credit to the Republic of Senegal for the equivvalent of US$4.2 mil- lion to help finance a lIvestock project. The credit would be on standard IDA terms. The Kuwait Fund for Arab Economic Development (KF) would provide a loan of Kuwaiti Dinars 1.2 million (US$4.1 million) to the Government of Senegal for a term of 25 years, including 5 years of grace, with interest at 2.5 percent per annum and an administrative charge of 0.5 percent per annum. The Arab Bank for Economic Development in Africa (BADEA) would also provide a loan of US$1.6 million to the Government for a term of 25 years, including 5 years of grace, with interest at 2.0 percent per annum. PART I: THE ECONOMY 2. A report entitled "The Economy of Senegal" (212-SE) was distributed to the Executive Directors on September 10, 1973. A special mission on public finance visited Senegal in October 1974; its findings are included in this report. Country data appear in Annex I. Past Development 3. During the 1960's, the Senegalese economy experienced virtual stagnation, as real output increased less rapidly than population, and per capita GNP declined. Two factors were responsible for this situation. First, with independence, Senegal lost its privileged position as the center of French West Africa and therefore had to adjust to reduced economic, administra- tive, and political dimensions. Secondly, the difficulties of adaptation to the new situation were compounded in the latter part of the decade when groundnut production fell by 50 percent due to unfavorable weather and falling export prices. In 1971, weather conditions improved temporarily, but 1972 and 1973 brought the Sahel'Es most severe drought in this century. Food emergency operations alleviated th,e drought's harmful effects, but both the fiscal and balance of payments situations sharply deteriorated. 4. Public savings net of amortization, which had substantially improved during the preceding years, were all but wiped out in 1972/73 and 1973/74. Revenues were affected by the decline in economic activity; and recurrent expenditures were further increased by a rise in salaries to compensate for the rapidly increasing cost of living, substantially higher debt service This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 2 - payments, and perhaps most importantly, heavy consumer subsidies which result- ed from maintaining low domestic prices in the face of skyrocketing food import prices. Thus, at mid-1974, in spite of a US$46 million higher transfer to the Stabilization Fund from groundnut sales than in the previous year, the public finance situation was more serious than it had been since 1960. 5. Faced with a difficult situation in public finance, the Government took a number of steps in November 1974 which were expected to put public finances on a sounder footing. Consumer prices for rice, sugar, and groundnut oil were raised by 40 to 90 percent to bring them more closely in line with world market prices and eliminate or drastically reduce subsidies. However, high world market prices for wheat required an increase in domestic flour prices which the Government was reluctant to pass on to the consumer and which led to a subsidy on flour. To compensate for the rapid increase in basic food prices, Government salaries were raised on average by 16 percent, with actual increases ranging from 60 percent for the lower to 3 percent for the higher salaries. Farmer prices for groundnuts were brought closer to world prices which were particularly high at that moment. The Government thought it could safely reduce its take from the groundnut crop since world phosphate prices had increased five-fold. In addition, compensating revenues from the latter source were assured through expanded government participation in the phosphate mining company and a 100 percent tax levy on excess profits accruing from the price rise. However, a good part of the additional public savings was absorbed by payments for the increased participation in the phosphate mine and the servicing of debt incurred to finance new investments and state acquisitions of two foreign-owned public utility companies. 6. The balance of payments also came under pressure in 1973 and 1974, in the former year because of a widening of the trade gap and in the latter year because capital outflows from the private sector partly offset a substan- tial improvement in the current account. Net foreign reserves at the end of 1974 stood at minus US$44 million. Tn January 1975 Senegal drew its full US$19.2 million allocation under the IMF oil facility. 7. Balance of payments problems persisted through 1975 largely because of cyclical factors. The good 1974 crop was harvested at a time when world groundnut prices were still high; this created an atmosphere of optimism both in the private and public sectors. At the end of 1974, the state marketing organization purchased the crop from the farmers at generous prices thereby injecting massive purchasing power into the economy. In summer 1975 private and public expenditures were booming, but the bulk of the groundnut crop remained unsold, world market prices were 30 percent lower than a few months earlier, and foreign exchange reserves fell rapidly under the pressure of excess demand. The Government responded by introducing selective credit restrictions which so far have been effective in reducing total credit out- standing and stabilizing domestic inflation. Foreign exchange reserves stood at minus US$66 million by the end of November 1975; this was financed by a  - 3 - drawing in September of US$11.7 million under the second IMF oil facility, by the monetary union to which Senegal belongs, and by the mostly foreign-owned commercial banks. 8. The first half of 1976 will see a continuation of the problems experienced in 1975; the Government's reluctance to cut incomes of groundnut farmers has encouraged it to maintain producer prices in the face of slack- ening world demand-for groundnut products. Unfortunately, phosphate rock prices are weakening as wqell; this will effectively eliminate the cushion which has enabled Senega:L to absorb the recent rises in oil and other import costs while implementing a policy of income distribution in favor of the rural areas. Hopefully, this income redistribution policy will not fall victim to the current difficulties Senegal is experiencing. There are strong indications that several OPEC countries are willing to provide increased capital aid; moreover, there remain substantial sources of additional balance of payments assistance the Government can tap such as the IMF, Stabex and the monetary union to which Senegal belongs. Finally, the Government has already demonstrated its willingness to use credit restrictions and to eliminate costly consumer subsidie3 to maintain control over the short-term situation. Prospects 9. As demonstrated during the last five years, weather conditions and groundnut world market prices remain critical Eor Senegal's growth pros- pects. The Government is striving, with our support, to reduce its vulner- ability to variances in these factors. Its long range program calls for development of areas less affected by rainfall fluctuations (Casamance and Eastern Senegal) where cash crops other than groundnuts can be grown. Irriga- tion is being developed in the arid northern part of the country; this will reduce dependence on cereal imports. With substantial gains also in industry, tourism and fisheries, weather conditions and groundnuts by 1980 will be less decisive factors than today. However, groundnut cultivation is the mainstay of the economy and provides the livelihood for the majority of the rural poor. The Government is, therefore, supporting the introduction of animal traction, fertilizers and crop rotation techniques to raise the prm- ductivity of the groundnut farmer. 1,0. The Fourth Development Plan (1973/74 - 1976/77) continues to give highest priority to rural development (36 percent of the total projected investment during the Plan period), housing/public utilities (18 percent) and transport infrastructure (16 percent). Industry and tourism, quite justifi- ably, will have their share increased from 5 to 10 percent during the Plan period. Assuming average rainfall conditions, Senegal's growth in real terms in the remainder of the 1970s will be of the order of 4.5 percent or about 2 percent per capita, which is still a considerable improvement over the past decade. A new plan is under preparation and will be reviewed in the course of a basic economic mission scheduled for the Fall of 1976.  - 4 - 11. The structure of Senegal's balance of payments will gradually improve, but in the next few years the benefits of these favorable trends will be reduced by falling terms of trade. Tourism, some new export industries and an important expansion of phosphate rock mining will provide additional foreign resources, and the implementation of existing irrigation plans will progressively diminish the large food imports for urban centers. These prospects combined with a favorable long-term outlook for groundnut production should result in a healthier trade balance in the early eighties. The favor- able long-term prospects remain contingent on the execution of the investment program which will have to be largely financed from abroad at a rate of about US$125 million annually on concessionary terms. Traditional sources of aid will probably not suffice, and it will take time before new aid flows are developed. Therefore, for the coming two or three years supplemental foreign funds, over and above foreseeable project aid, will be needed. 12. The financial pressures of the past three years have already led the Government to borrow on the Eurodollar market for a total amount of US$85 million, partly to roll over previous debts. Part of the expected balance of payments deficits over the next two or three years could be financed through access to the expanded IMF facilities or the Stabex fund; but additional foreign exchange resources at a rate of about $25 million a year will pro- bably be needed. Assuming that additional borrowing to cover the gap is done on Eurodollar terms, debt service would increase from six percent of exports of goods and non-factor services in 1975 to roughly ten percent by the end of the 1970s. PART II: BANK GROUP OPERATIONS IN SENEGAL 13. The Bank Group has had 25 operations in Senegal to date. Total outstanding lending amounts to US$137.8 million, including fourteen IDA credits, six Bank loans, two blends of Bank and IDA funds, two IFC operations, and one blend of Bank and IFC funds. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1976 and notes on the execution of ongoing projects. 14. Execution of these projects, apart from the Railway Project, is moving forward without exceptional delays. The procurement for the railway has been slow due to time consuming contract approval procedures, but most components have now been received or ordered. Two agricultural credits (140-SE and 404-SE) provided for technical assistance designed to facilitate the reorganization of the Office National de Cooperation et d'Assistance au Developpement (ONCAD); these programs did not achieve meaningful results. Although Government took in early 1975 steps to strengthen ONCAD's management and financial operations, ONCAD's overall performance has not improved. (see Annex II). 15. In view of Senegal's need for substantially higher capital inflows, the scale of Bank Group lending is expected to increase significantly in the  future. The Bank Group share of foreign aid disbursements (including grants) is expected to increase from about 6 percent in 1970/71 to 24 percent over the 1974-80 period. By then the Bank Group is likely to be the largest aid donor. This will increase the Bank Group's share of the outstanding and dis- bursed debt from 12 percent at the end of 1973 to about 25 percent by 1980. IBRD/IDA share in public debt service will probably go up from 2.2 percent in 1973 to about 13 percent by 1980. 16. The objectives of Bank Group project lending in Senegal fall under four main headings. Priority will continue to be rural development, including development of irrigation in the Senegal River Valley Region (e.g., the Debi- Lampsar Engineering Credit), intensification of groundnut production and di- versification into new crops and new regions (e.g., the Sine Saloum and Terres Neuves projects, the proposed Sedhiou II project in Casamance and the project described in this report). As in the past, our agricultural lending is ex- pected to exceed one-thlird of the total. Secondly, we shall assist diversi- fication of the economy by lending for the growing sectors of tourism and industry (e.g., the proposed tourism infrastructure project on the Petite Cote and a proposed second loan to SOFISEDIT, a development finance company esta- blished with assistance from the Bank Group in 1974). Thirdly, we shall continue investment for modernizing and expanding the country's infrastructure (e.g., a Third Highway Project and a Feeder Roads Project approved by the Board in March 1976, and a proposed fishing wharf at Dakar Port). Finally we shall continue lending to reorient and expand the country's education system, as in the Second Education Project. PART ]III: THE AGRICULTURAL SECTOR 17. Despite relatively poor soils and erratic rainfall, the agricul- tural sector is centraL to Senegal's economy. It has traditionally accounted for about 35% of GDP, up to 70% of Senegal's exports and 70% of all employ- ment. There are several important sectoral characteristics: small farms (less than 10 ha) account for 95% of all production; groundnuts account for almost 70% of agricultural exports; 60% of the rural population is con- centrated within about 100 miles of Dakar in the Groundnut Basin; and large areas in the northern and eastern parts of the country are suitable only for livestock production under extensive grazing. 18. Government's efforts to develop agriculture have been directed to increasing groundnut and millet production, especially in the heavily populated Groundnut Basin; diversifying production by promoting rice and cotton in the south and east, and developing the irrigation potential of the Senegal river; and encouraging the migration of farmers from the heavily populated areas of the Groundnut Basin to Eastern Senegal. To date the major component of Government's rural development efforts has been "Programme Agricole". Starting in the early 1960s, the program has aimed at increasing the production of millet and groundnuts by making animal drawn implements, fertilizers and improved seeds available to farmers on credit, providing  - 6 - extension services to promote the correct use of these inputs, and developing cooperatives to facilitate the distribution of inputs and crop marketing. 19. To coordinate the support it provides through Programme Agricole and other special programs, the Government is increasingly relying on semi- autonomous development agencies. The long range objective is to have at least one of these agencies established in each administrative region of the country with each reporting directly to the Ministry of Rural Development and Hydraulics and working in close cooperation with Banque Nationale de Developpement du Senegal (BNDS) and ONCAD, the national cooperative support, input supply, and groundnut marketing organization. Some of these agencies are already the beneficiaries of Bank Group financing; one of them, Societe pour le Developpment des Fibres Textiles (SODEFITEX), has expanded its range of activities well beyond its original focus on cotton production, and is ready to take responsibility for the livestock project proposed in this report. 20. The Livestock Subsector. Livestock numbers were increasing rapidly prior to the 1972/73 drought, when losses amounting to about 15% of the country's herd occurred. At the end of 1973 the cattle population was about 2.2 million and livestock's share of GDP was a relatively modest 7.5% (US$140 million). The total value of animal products in the year was about US$53 million; meat and offal accounted for about two-thirds of that and milk, eggs, hides and skins for the rest. 21. Until the drought, domestic meat production met about 80% of domestic demand with the balance coming from Mauritania on the hoof. How- ever, Mauritania meat imports are now more expensive; and as a result of generally rising retail meat prices, per capita meat consumption has dropped to about 10 kg per year from close to 15 kg before the drought. Per capita fish consumption is still the highest in West Africa, at about 50 kg/year, and milk imports amount to about US$9 million per year. 22. About 2-3% of Senegal's population derive their livelihood entire- ly from livestock, and another 8% depend on livestock as their main income source. The Peul, a nomadic or semi-nomadic ethnic group, raise an esti- mated 70% of the cattle; the remaining 30% are raised by other ethnic groups as a complement to farming activities. Lately some changes have become noticeable in the value system of the traditional pastoralists. Though status and prestige are still predominant reasons for accumulating large stock numbers, there is a rising awareness of the irrationality of maintaining old, unproductive animals and even a willingness to sell younger animals; a transition from subsistence to production-oriented attitudes is therefore underway and could be substantially accelerated, provided the pastoralists are made aware of incentives and marketing opportunities through programs of education and extension services. 23. Senegalese cattle are well adapted to the environment, but because of poor nutrition (particularly during the dry season when weight losses of 10-20% are common), total herd offtake is not more than 10% annually and  - 7 - average carcass weights are very low (in the range of 125-140 kg). The aver- age semi-nomadic herd in the north of Eastern Senegal is 67 cattle; annual milk and meat production amounts to roughly US$1,400, of which about 1/4 is consumed by the family group and the balance either sold or retained as savings. Including the value of agricultural and other activities (estimated at US$30 per capita), a herdsman family group of about 25 people in Eastern Senegal would therefore have an effective per capita income roughly equal to the average of all Senegalese small-scale farmers (US$85). 24. About 90% of annual cattle marketing is handled by a complex tradi- tional system which involves a large number of established private traders, intermediaries and butchers. There are about 20 principal and 50 secondary cattle markets in which animals are sold on appearance only, with sales usually for cash. This traditional system performs quite efficiently. 25. Government intervenes in the livestock subsector principally through its tax system and by providing animal health and extension services to herds- men and supervision of slaughtering and meat processing. So far, the Govern- ment has not seriously attempted to take over marketing and control prices in the livestock subsector as it has in other parts of the agriculture sector. In 1963, the Government did enter the livestock production and export market- ing business by setting up a state corporation, Societe d'Exploitation des Ressources Animales du Senegal (SERAS), to operate a 5,000 head fattening ranch and the Dakar slaughterhouse and to handle the export of hides and skins; this venture has not been very successful and handles only a small proportion of the market. 26. About 1% of total public revenues are raised through direct head tax on animals in the domestic herds; this tax is unpopular and only 30% of the revenues due are collected each year. Some revenues are also collected through taxes on the marketing and slaughtering of cattle and on the annual turnover of tradesmen and butchers. 27. All of Government's animal health, extension and inspection pro- grams are managed centrally by the Department of Animal Health and Pro- duction of the Ministry of Rural Development. The operating staff of this Department, both veterinarians and livestock technicians, are well trained under existing Senegalese programs. The Department gives top priority to animal health programs and has managed through mass vaccination campaigns in the late 1960s to bring rinderpest and pleuropneumonia under control; chronic budgetary constraints have, however, limited the extent of veteri- nary services coverage tD about 45% of the country's cattle population, and the risk of a destructive epidemic remains therefore high. For the same reason, livestock extension services are practically ineffective. 28. Pastoral Resources and Livestock Development Strategy. Senegal's 11 million ha of pasture, coupled with about 3 million ha of arable fallow and the agricultural by-products from an area of 2.5 - 3 million ha of cultivated land, constitute a major national resource which, under the present system of livestock production, is grossly underutilized. The  - 8 - major factors leading to this underutilization are the lack of range manage- ment, with resulting destruction of pasture through bushfires and overgraz- ing, and the unfamiliarity of traditional herdsmen with the use of crop re- sidues for animal feed. Any strategy to increase livestock production must address these two factors. 29. Range management entails bringing the livestock production of a given area into line with the area's water and pasture resources (its "carry- ing capacity") while simultaneously working to prevent degradation of those resources through fire or other natural calamity. Carrying capacity varies with climatic conditions. Thus, the some 7 million ha of Senegalese pasture- land located in the Sahel zone, an ecologically delicate area characterized by low annual rainfall and a very long dry season, could support, even under good range management conditions, far smaller herds than the 4 million ha of pasture further south in the Sudano/Guinean zones where rainfall is higher and some mixed farming/livestock raising is possible. As a result of the severe droughts of the early 1970s, Senegal's livestock herds are now smaller than the optimum carrying capacities of the respective zones; the best strategy for increased livestock production would be to encourage rapid herd reconstitution in the Sudano/Guinean zones while going much slower in the Sahel zone. 30. Range management cannot take place, however, under the present practice of communal pasture utilization in Eastern Senegal. Each herd owner tends to maximize his personal benefits by grazing as many animals as he can on the common pasture; he has no incentive either to control the size of his herd or to invest in land improvement. What is needed is education for the pastoral community to realize the futility of the present system; at the same time incentives must be provided to induce the individual herds- man to voluntarily control the size of his herd. The existing social struc- ture and system of land tenure plus sheer administrative burden augur against a new program centered on individual herdsmen and their families. What does appear desirable is a scheme whereby groups of related families would be alloted exclusive grazing and water rights in a specific area in return for acceptance of prescribed husbandry practices, including limitations on the size of their herds; control over the use of their alloted pastureland would be the principal incentive for these groups to participate, but they would in addition benefit from the provision of watering facilities, livestock extension services, training and credit. The success of such schemes in Eastern Africa, under similar socio-economic conditions, offers encourage- ment to try in Eastern Senegal. The proposed project is just such an attempt; 90 percent of the project area falls in the Sudano/Guinean zones where the potential is greatest for livestock development, and its various components are consistent with the Government's overall program for dev- elopment of the livestock subsector.  - 9 - PART IV - THE PROJECT 31. The Government of Senegal has requested IDA assistance in financing a livestock project in the Eastern Senegal Region. The project was identified by the Bank's Resident Mission in Western Africa (RMWA) and prepared by the French consulting firm SATEC assisted by the Government and RMWA under a UNDP financed project.. The project was appraised in May 1975 and joint negotia- tions were held in March 1976, with a Senegalese delegation led by Mr. Tidiane NDiaye, Director of Financing of the Plan a.i., and representatives of the Kuwait Fund and BADEA. The appraisal report (No. 988a-SE) is being circulated separately to the Executive Directors. Annex III provides a credit and project summary and the attached map (IBRD 11823) shows the project area. Project Description 32. Eastern Senegal's potential for crop production is not high, basic- ally because of poor soils, and livestock development constitutes a rational approach to making the best use of the region's human and natural resources. This would be IDA's fiirst livestock operation in Senegal and the country's first comprehensive efEort to increase livestock production by traditional pastoralists through the combination of animal health and husbandry improve- ments. The project would assist some 30,000 livestock owners in Eastern Senegal to increase their income and living standards through the develop- ment and operation of a controlled grazing scheme and the provision of effective animal healtlh, extension and credit services. The project would be carried out over the five-year period, mid-1976 mid-1981, and would in- clude: (a) Developing and operating a grazing scheme on about 1.4 mil- lion ha of understocked grazing land in the northern part of Eastern Senegal, involving principally: (i) organizing some 6,500 predominantly pastoralist families into about 65 grazing units to whom exclusive rights to land and watering facilities would be granted; (ii) constructing about one hundred wells 45 to 75 m deep, and about 2,400 km of firebreaks; (iii) granting up to 300 credits to herders for the pur- chase of breeding animals, 500 credits for supple- mentary feed (cottonseed) and 30 credits for ox-drawn carts and small farm equipment; (iv) designing, developing and evaluating a functional literacy program for livestock producers. (b) Improving animal health services throughout Eastern Senegal;  - 10 - (c) Providing fellowships and opportunities for visits to livestock development projects abroad for Senegalese graduates, project staff and pastoral leaders and pro- viding agricultural extension workers with training in livestock husbandry; and (d) Monitoring and evaluating the project, and formulating future livestock investment proposals. Project Execution 33. The grazing units would be established in Years 2 through 5 of the project after consultation with pastoralists and local leaders. Under the grazing scheme, each group of pastoralists would be given exclusive grazing rights to a specific grazing unit; such rights would be granted and safe- guarded by Government and enjoyed by the pastoralists for as long as they followed range, water and livestock management practices prescribed by Gov- ernment. The project would provide for the construction of firebreaks to demarcate and protect each grazing unit and for two shallow wells per unit. A typical grazing unit of 22,000 ha would accomodate a group of 100 families of eight members on average, and at full development about 2,000 cattle and 1,000 sheep and goats. Government would issue a decree establishing the administrative conditions for implementation of the grazing scheme and entrusting the administration of the project area to SODEFITEX, the regional rural development agency for Eastern Senegal, which would have the power to grant and withdraw grazing rights (Section 3.02(a) of the draft Credit Agree- ment). SODEFITEX is a corporation (Societe Anonyme d'Economie Mixte) which is majority - controlled by the Government. The Government agreed not to take any action by which it would lose effective control over SODEFITEX (Section 4.09 of the draft Credit Agreement). As a condition of effective- ness, the Government would conclude an agreement with SODEFITEX entrusting the latter with the execution of the project (Section 3.01(b) of the draft Credit Agreement). 34. During the project period, a credit program would be developed from PY 2 through PY 5, to assist: (i) 200 to 300 families - about 60 per year-, or 5% of the families in the grazing scheme area, in the acquisition of breeding animals by providing long-term credits to cover 80% of the purchase price of about four heifers/young cows per family (totaling about 950 heifers/ cows and 50 bulls), for a 12-year term, including a four-year grace period, at 7.5% interest per year; (ii) about 30 pastoralist families in the acquisi- tion of ox-drawn carts and small farm tools by providing medium-term credits to cover 80% of the purchase price of such equipment, for a five-year term at 7.5% interest per year; and (iii) about 500 pastoralist families in the acquisition of supplementary feed (cottonseed) by providing short-term credits to cover the entire costs of such inputs to feed about 5,000 cattle annually, for a 12-month term at 7.5% interest rate.  - 11 - 35. The existing staff of the Regional Animal Health Service (RAHS) is sufficient and competent, but lacks facilities and funds. Consequently, the project would provide RAHS with 9 veterinary field offices, 40 vac- cination yards, transport, veterinary and laboratory equipment and the incremental operating funds needed to carry out a five-year regionwide vaccination campaign. The first two years of this campaign would be free of charge to the beneficiaries; afterwards Government would entrust RAHS with the collection of charges with respect to vaccinations and drugs provided to participating pastoralists. During negotiations, Government gave assurances that it would discuss with IDA no later than 18 months after the date of the Credit Agreement the arrangements for the collection of these charges (Section 4.03(a) of the draft Credit Agreement). 36. SODEFITEX is in the process of establishing a Project Unit at Tambacounda, in Eastern Senegal, to coordinate and supervise the entire project implementation. Key project staff would include a Project Director, his Deputy and an Accountant. The unit would have two specialist sections: (a) a Pastoral Service, headed by a Range Management Specialist, to handle the grazing scheme, and (b) a Hydraulic Service. The animal health component of the project would be carried out by the Department of Animal Health of the Ministry of Rural Development and Hydraulics through RAHS; the project's water development, rural. engineering and functional literacy components would be undertaken in close collaboration with, respectively, the Urban and Rural Hydraulics and Rural Equipment Departments of the Ministry of Rural Development and the State Secretariat for Human Resources of the Ministry of Education. 37. Given the shortage of qualified and experienced Senegalese, ex- patriates would be recruited for the following posts: Deputy Director, Range Management Specialist, and Hydrogeologist. The first two would be replaced after about five years and the third after about three years by Senegalese whose training would be funded under the project. The project would also provide for 25 man-months of consultant services for studies related to pro- ject implementation and preparation of a second-phase project for a total cost of $152,000. Project Cost and FinancLng 38. The total cost of the project, net of-taxes (US$2.5 million) but including contingencies, is US$10.5 million. The proposed IDA credit of US$4.2 million would be complemented by parallel financing from the Kuwait Fund equivalent to US$4.1 million and from BADEA of US$1.6 million. Livestock owners who would be beneficiaries of the project would contribute about US$100,000 to project with the balance of project costs, including all taxes and duties, to be financed by Government. The financing plan is, thus, as follows:  - 12 - (US$ million) Percentage IDA 4.2 40 Kuwait Fund 4.1 39 BADEA 1.6 15 Government 0.5 5 Farmers 0.1 1 Total 10.5 100 39. Government and colenders' contributions would be passed on as a grant to SODEFITEX because SODEFITEX would receive negligible revenues from the project and, except for the grazing scheme, the project would involve services normally supplied to pastoralists by Government. However, the Government has agreed to explore means of recovering costs from beneficiaries and to exchange views with IDA on this subject (Section 4.05 of the draft Credit Agreement). 40. At Government's request it has been agreed that an advance of $300,000 under the Project Preparation Facility would be made to permit implementation of the project to begin prior to Credit effectiveness. Indeed, Government, colenders and IDA agreed that it was essential to strengthen SODIFITEX by providing it with the expatriate staff (para. 37) as soon as possible. In addition, it is necessary that the first vaccina- tion campaign, because of its seasonal nature, be completed before vacci- nation campaign, because of its seasonal nature, be completed before trans- humance of cattle starts in September 1976. A delay in the implementation of this component would result in a loss of one year in the animal health program of the project. Funds under the Preparation Facility will be used to establish the project unit (including the recruitment of staff and the provision of facilities) and to launch the first vaccination campaign. Accordingly, retroactive financing of up to $300,000 is provided. Procurement and Disbursement 41. Well development (US$4.1 million) would be financed by the Kuwait Fund with procurement in line with Kuwait Fund procedures. Firebreaks dev- elopment (US$1.6 million)would be financed by BADEA with procurement in line with BADEA procedures. All other procurement would be according to IDA guidelines. Contracts in excess of US$50,000 for buildings (US$0.7 million), and vehicles and equipment (US$0.6 million) would be awarded on the basis of international competitive bidding; contracts for less than US$50,000 would be awarded on the basis of competitive bidding advertised locally. Goods manufactured locally would be allowed a preference of 15 percent or the level of applicable import duty, whichever is lower, when comparing domestic and  - 13 - foreign bids. Contracts of over US$10,000 (US$0.5 million) for the construc- tion of vaccination yards and extension outposts and the purchase of motor- cycles for extension officers would be awarded on the basis of competitive bidding advertised locally. The balance of equipment purchases of furniture for the staff houses and office furnishings and small equipment would be in small lots of less tharn US$10,000 each (aggregating US$0.2 million), and would be made locally following quotations obtained from suppliers. The services of internationally recruited staff and consultants, costing about US$1.0 million, would be obtained in accordance with procedures acceptable to IDA. The remainder of the project cost would be for local salaries and allowances (US$1.3 million) and for general operating expenditures (US$1.6 million). 42. The proceeds of the IDA credit would be disbursed to cover the following: (a) 70% of total expenditures for civil works (excluding construction of wells and firebreaks) - US$0.50 million; (b) 100% of the foreign exchange costs of vehicles and equip- ment or, if procured locally, 65% of total expenditures - US$0.35 mill"on; (c) 100% of foreign exchange costs for expatriate personnel, consultant services and training of project staff abroad - US$0.57 mill:ion; (d) 75% of total costs of credits for breeding stock - US$0.22 million; (e) 75% of total project incremental operating costs - US$1.44 million. US$1.12 million would be unallocated. Marketing 43. All output o:: the project would be consumed domestically, and as the incremental product-ion of the project at full development would be less than 5 percent of domestic output, the market outlook for the products involved is very good. Meat is increasingly scarce due to the recent droughts, and the strength of domestic demand is shown by an increase in cattle prices of about 180 percent during the past five years. Incremental milk production generated by the project would improve the nutrition of about 30,000 rural families, and any surpLus would find a ready market in Eastern Senegal. Hides and skins can be sold to either the state agency SERAS for eventual export or local private tanneries.  - 14 - Benefits and Justification 44. The principal direct benefits from the project would be incremental annual livestock production worth US$3.0 million in 1975 terms. Each of the 6,500 pastoral families benefiting from the grazing scheme is expected to nearly double its average annual cash income from livestock production to US$670, while some 24,000 other rural families benefiting only from the improved animal health services, would increase theirs from US$250 to US$310. In addition, about 1,000 seasonal and 80 permanent jobs would be created. 45. The overall economic rate of return of the project is estimated at 23 percent and analysis shows it to be relatively unsensitive to all but major variations in costs and benefits. Risks 46. Although interviews of potential participants in the grazing scheme have revealed considerable interest, it is extremely difficult to assess at this time the rate of response of pastoralists to the changes required as a condition of participation and whether the participating groups and the Government will be able to prevent encroachment by non-participants. Conse- quently, the grazing scheme is risky and, in a sense, experimental. However, the degree of risk involved appears acceptable given the generally success- ful results of similar grazing schemes in East Africa. Such schemes also appear to offer the only practical means to achieve significantly better use of the livestock, pasture and human resources of the area and, at the same time, to prevent environmental degradation through overgrazing. More- over, an appropriate legal framework is provided to protect the grazing units from encroachment; and, most importantly, the potential benefits to pastoral- ists from participation are very attractive. 47. In order to minimize the risk, the implementation of the grazing scheme would be phased, with each successive phase undertaken only follow- ing the completion and satisfactory management of previous phases (Section 3.01(d) of the draft Credit Agreement). This would enable this project com- ponent to be modified or even terminated in the light of experience. If it should become necessary to limit the scope of the grazing scheme, continua- tion of other project components would still be justifiedd. In particular, the animal health component, covering the entire Eastern Senegal Region, will have high returns; furthermore, the stocking rates in this region are very low, and the danger of overstocking and overgrazing is serious but not immediate. PART V - LEGAL INSTRUMENTS AND AUTHORITY 48. The draft Development Credit Agreement between the Republic of Senegal and the Association, the Recommendation of the Committee provided in Article V, Section I(d) of the Articles of Agreement of the Association  - 15 - and the text of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. 49. Features of the draft Credit Agreement of special interest in- clude: (i) those referred to in paragraphs 33, 35, 39 and 47 of this report, (ii) cross remedies in case of suspension or default under the Kuwait Fund and BADEA loan agreements (Sections 5.01 and 5.02 of the draft Credit Agree- ment), (iii) additional conditions of effectiveness, namely that conditions of effectiveness under the Kuwait Fund and BADEA loan agreements have been met, that a decree granting authority to SODEFITEX to organize the grazing scheme has been enacted, that an agreement has been concluded between the Government and SODEFITEX entrusting the latter with the carrying out of the project and that the Project Director and Deputy Director have been employed (Section 6.01 of the draft Credit Agreement) and (iv) a condition of disbursement against the credit program, namely that the Association has approved the plan of implementation for said program (paragraph 4(b) of Schedule 1 to the draft Credit Agreement). 50. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 51. I recommend that the Executive Directors approve the proposed dev- elopment credit. Robert S. McNamara President by J. Burke Knapp Attachments Washington, D.C. May 24 , 1976  ANNFX I Page 1 of L pages TASLE!3A CSENCAL * SOCIAL-INDICATORS DATA SHEET LAND ARt (THOU WN2i ........................................... - - N- ...~~~ ,SE..8NCCAL REFERENCE COUNTRIES (1970) TOTAL 19,.2 NOST RECENT AGRIC. .4 1960 1970 ESTIMATE GHANA IVORY COAST TUNISIA,-. GNP PER CAPITA tUSS) 240.0. 250.0* 250.0* 250,0 320.0 S20.0 ....__.._.._......... POPULATION AND VITAL STATISTICS POPULATION (NID-YR, MILLION) 3,0* 4-4* 4.75 8.6 5J2 5.1 POPULATION DENSITY PER SQUARE KM. 07.0 22.0 24.0 36.0 16.0 31.0 PER SO. KM. AGRICULTURAL LAND .. .. .. VITAL STATISTICS CRUDE BIRTH RATE PER THOUSAND 43.2 32.3 ,, 47.0 46.0 38.0 CRUDt DEATH RATE PER THOUSAND 25.6 18,3 * 18.0 23.0 14.0 INFANT MORTALITY RATE (/THOU) 93.0 156.0 156.0 ,, 125.0 LIFE EXPECTANCY AT BIRTH (YRS) 37.0 /a 41.0 44.0 46.0 41.0 52.0 GROSS REPRODUCTION RATE .. 3.0 3.0 3.2 3.1 3.4 POPULATION GROWTH RATE tS) TOTAL 2.1 2.7 2.7 2.6 3-J 2.1 URBAN 3.5 4.0 ,, S.0 7.5 /a 3.1 /a URBAN POPULATION CS OF TOTAL) 23.0 29.0 *. 29.0 28.0 40.0/b AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 42.6 41.2 .. 4069 42.4 46.3 b IS TO 64 YEARS 53.6 54.9 49.5 54.9 50.2/b 65 YEARS AND OVER 3.8 3.9 3.6 2.7 3.5 7_ AGE DEPENDENCY RATIO 0.9 0.8 ,, 1.0 0.8 1.0 b ECONOMIC DEPENDENCY RATIO 1.2/b 1.2 L 2. 1.4 0.9 b I,S FAMILY PLANNING ACCEPTORS (CUMULATIVE. THOU) ,, 10.9 , 112.2 USERS (t OF MARRIED WOMEN) ,, ,, ,. 2.0 *. 12.0 ENPLOYNENT TOTAL LABOR FORCE (THOUSAND) 1300.0 1600.0 ,, 3300.0 2600.0 1300.0/b LABOR FORCE IN AGRICULTURE t(I .. 73.0 . 54.0 78 .0 57.0/b JNEMPLOYCD (I OF LABOR FORCE) .. 7.0 .. 5.0/a 9.0 12.0 0 INCONE DISTRIBUTION I OF PRIVATE INCOME REC D BY- HIGHEST ss OF HOUSEHOLDS 36.8 2 4 .. 8/c 23.5/d HIGHEST 20S OF HOUSEHOLDS 62.5 5. 5. 55 p 55. 5d LOWEST 20S OF HOUSEHOLDS 3.2 c ,, ,, 3.9/c 4 2X LOWEST 400 OF HOUSEHOLDS 9.0 ,. ,, 10.6 E 11,47c DISTRIBUTION OF LAND OWNERSHIP S OWNEO BY TOP 10S OF OWNERS ,, .. ,, ., .. S3.0/e S JWNED BY SMALLEST 10S OWNERO , , .. ,, , 57I HEALTH AND NUTRITION 0OPULATOON PER PHYSICIAN 20000.0/d 14940.0 14520.0 12950.0/b 1214000 5950,0 DOPULATION PER NURSING PERSON .. 2410.0 2030.0 1D70.07b 2480.0/d 730.0/f POPULATION PER HOSPITAL BED 760.0/e 730.0 /b 750.0 /a 760.0 680.0W 4i0o.07o PER CA0ITA SUPPLY OF - CALORIES (t OF REQUIREMENTS) 97.0 97.0 100.0 96.0 108.0 86.0 PROTEIN (GRAMS PER DAY) 64.0 64.0 65.0 46.0 60.0 54.0 -OF WHICH ANIMALIAND PULSI . 28.0 /c . 10.0/c 180/e 14.0hL DEATH RATE C/THOU) AGES 1.4 .. *. .- *. .. 1.5 /b. EDJCATION DJUSTED ENROLLMENT RATIO PRIMARY SCHOOL - 38.0 /d 43.o 58.0 76O 10 70 SECONDARY SCHOOL 15.0 7,e . 9.0 1l.0 20,0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 13.0 13.0 13.0 15.0 13.0 13.0 VOCATIONAL ENROLLMENT (t OF SECONDARY) ,, 7.0 . 23.0 7.0 34.0 ADULT LITERACY RATE (I) ,, 10.0 10.0 .. 20.0 HOUSING PERSONS PER ROOH (AVERAGE) 1.5/f .. .. .. .. 2.7 /b DCCUPIED DWELLINGS WITHOUT PIPED WATER (5) 12,0 ,, .. .. ., 60.0 /b ACCESS TO ELECTRICITY (t OF ALL DWELLINGS) 96.0 ,, ,, ,, ,, 20.0 /b RURAL DWELLINGS CONNECTED TO ELECTRICITY (Il ,. .. .. . . CONSUMPTION RADIO RECEIVERS (PER THOU POP) 47.0 69.0 67.0 78.0 17.0 77.0 PASSENGER CARS (PER THOU POP) 8.0 9.0 9.0 4.0 11.0 13.0 ELECTRICITY (KWH/YR PER CAP) 47,0 73.0 92.0 338.0 120.0 155.0 REWSPRINT (KG/YR PER CAP) 0.1 0.t 0.1 0.4 0.2 0.1 ......................... .................................................. ................................... SEE NOTES AND DEFINITIDNS ON REVERSE  ANNE! I Page 2 of 1. pages NOTE Unless oth-rsie noted, data for 1960 refer to soy year between 1959 end 1961, for 1970 betwee 1968 end 1970, sod for Most Raeost Re.tist between 1971 sod 1973. To a recent de-egraphio etody on Seoegal, B-kexbsperts food onde-enuceration of children in 1975 -nonting to 0.7 mi11ion. Accordingly, population figures for Seosg1 have been revised for the period 1960 to 1975. asToneisi has been selected ae an objeotive ouontey beomue. of -ne siml-aity of its sconoesy stb tbe Senegalee econoe,, inoluding favorable prospeote for the d-vlopnent of ftisrtee. scd touris.. SENEGAL 1960 L 1957; /b Ratio of population under 15 and 65 end ..vsr to total labor force, /n Popolati.; /d 1963; /e 1962, governot hospital estabifhbanots; If Total, urhan and rura. 1970 Ratio of population and-r 15 end 65 end over to total labor force; /b io-o-et hospital establiehmeoto, Lc 1964-66 dO nadjusted; L.- .eer sodary level. MOST RECENT ESTIMATE, GaSverna..ot hospital establiehents. GHANA 1970 I Registered oneaployed; lb Registered, cot all practicing in the country; /. 1966-68 IVORY COAST 1970 Li1965-70; /b Ratio of population undsr 15 end 65 and over to total labor force; /. Incm recipient; /d iorno only; La 1964-66. TUNISIA 1970 1956-66; /b 1966; /o Ratio of population under 15 end 65 sod over to total labor force; /d 1ncom. reipient; Covering 6.3rainlion bec.teres of private land, excluding 0.8 sillima hactaree in public oanership, and 2.1 oillior hectrars of collective lend; If Peceo-e1 In gover-et service on...ly; ZA Go- -net hospital establieihen;e only, A 1961.66; /A, Registered only. R6, Ray 3, 1976 DEPUNT000NG iF SOCIAL INDICATOSS lend Area (then I.') bypulatien per nursngc Person - Popualotion divided by n-her ef p,rocticg T.7tol - o _ta suface urea cocTiprisg lord oven and u,land enters. mis and fmoale groduate owse,trooned or 'etfd"cre,end ar-t. - Mont reseat etibaate of agricultural rsa usad teesporarily or per- snoiliory personnel with trotinig orvpetor5 aenetly for crops, pastres, merbet & hitch., gardenso c to lie fallow. Population per h.epial bed - Popolotio divided by nw-her of honpitol bedo available in public and pivote gaamo-l anod spe....lioed hospital and GNiP Per capita CUSS) - SGNP par cpilta estimates at oarhet prices, calco- rehabilitationa cnters.; encld..nuowslog hones and notablirhshote for l.td by sasc -vrion method as World Sari Atlas (1972-71. basis). costoda1 and prevention. care. ;psr caita s-pl of caorie (5 of reout-osrts - Tompoted fron energy pepoattc ad vtolstatistic eqiaeto e od sopplis _vo blai in country per capita per day; Pot,latoc Ced-rAa, ia - As of holy first; if not availabls, overge available eupplite copriese dooti productioc, impot.lssia copots, of ten sod-yew- estiatee. end changes in stom; net supplie nw-nods onini fesod, se.de, qoatittiec uwad in food prooeo..ing and losses in distribuotion; raqirenete osre Populatio deneity -.per 500w-s e - id-yea popolation per square bile- setinntad by PAO hosed en physioiegirnI.. ned. fw- norma activty mee 10 etrs)o oa area,nod beat conoid-ring envir-uneta1 teprtr, -d vghts, 080 and Poooaiic dsornv cersoonekh of arce, lead - Cq-pted as above f-c e dia tributtis of populiro-n, nod allowing 10% for aete nt house hold Pe "aiasPpyo prtei (go- Ze a) - Protein contest of psr Vital etatistics capita e upl ffo per7. d,F ;ay;ne upl of fo edfnda perthusnd- Annual live births p-r thousand of mid- above; reqoi,ranete for all countriss established by tOSS Ecenemic ysear population; usull fiv-y-a aver.gee ending in 1960, 1970 and Resea rch Services proide for a mini-u ileoeof 6i grels of total 1975 for deosiping co-ntries, protein per day, anod 20 grams of nisnl and pulse protein, of otich 10 Crude death rote par thousand - Annual deaths par thS,osand of old-year grace should be animal protein; tbees standarde are loor than those of Population; usually fiveyear averogee ending in i960, 1912 and 1975 75 grams of total protein and 23 go-ac of animoal protein as an overage for developing coontries. for tho osrld, propose d by 9AO in tie Third World Feed Sw-cey. In- r.iyruts /thou) - dAneal doaths of infants undro on.eapoer cpt rtt upy rmoio n os -protein s-pply sf food Lffage per th-ssr aos ;i.drvdfoaub eadple ogo-prdy. Life sPant_cy ti birh A(-) - Aerge nw-br of ys..re of life rsmin- rah ts in noi dAnnual denthn por tih-nad to ags group i-b logat irt; anly fveyear ov-rg-s end-ng in 1960, 19170 and years, to chile-u intis g0 gro-tp; euggeoted us on ndicator of l-1 1975 for developing countries. nntritie.n ry%,5gedp-trccrait - Averags ow-bar of live daightere a -enmn call %anhrocr_lropo-odunrivs parted if ebe soprisnoso present ogs- Education spenIfto fertility vra usoa.lly five-yea averagss ending to i960, idutd anroilceotratio ps-lerypschol - Ptrni11int of o1 ages so 1970 and 1975 for develoIn cow-trie, prcentg ofpnryehlagppaltn;ild cidengd P2poletion g