Togo - Second Cocoa - Coffee Development Project

Document of The World Bank FOR OFFICIAL USE ONLY FILE COPY Report No.2408-TO STAFF APPRAISAL REPORT REPUBLIC OF TOGO SECOND COCOA COFFEE DEVELOPMENT PROJECT June 4, 1979 Regional Projects Department West Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of Iheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT Currency Unit = CFA Franc (CFAF) US$1 = CFAF 220 CFAF 1 = US$0.0045 CFAF 1,000,000 = US$4545 ABBREVIATIONS SRCC - Societe Nationale pour la Renovation et le Developpement de la Cacaoyere et de la Cafeiere Togolaises National Cocoa and Coffee Development Agency OPAT - Office des Produits Agricoles du Togo Agricultural Commodities Marketing Agency CNCA - Caisse Nationale de Credit Agricole National Agricultural Credit Agency PCU - Project Credit Unit BTD - Banque Togolaise de Developpement Togolese Development Bank FAC - Fonds d'Aide et de Cooperation (France) French Development Aid Agency EFCC - Institut Francais du Cafe, du Cacao et Autres Plantes Stimulantes (France) French Institute for Coffee, Cocoa and Other Stimulant Plants IRAT - Institut de Recherches Agronomiques Tropicales et des Cultures Vivrieres Research Institute for Tropical Agronomy and Food Crops SSVD - Swollen Shoot Virus Disease OLB - Organization of Licensed Buyers FISCAL YEAR Government : January 1 to December 31 SRCC : July 1 to June 30  FOR OFFICIAL USE ONLY TOGO SECOND COCOA COFFEE DEVELOPMENT PROJECT Staff Appraisal Report 8 TABLE OF CONTENTS Page No. I. Sectoral Context ..................................... 1 II. The Project Area ..................................... 7 III. Results of First Project ............................. 9 IV. The Project .......................................... 12 V. Organization and Management .......................... 24 VI. Production, Markets, Prices and Fiscal Impact ........ 30 VII. Economic Benefits, Justification and Risks .... ....... 35 VIII. Assurances and Conditions ............................ 41 LIST OF TABLES Table 1 Farm Size Distribution Table 2 Coffeee and Cocoa Planting Projections According to SRCC Sectors Table 3 Coffee and Cocoa Production Projections Table 4 Improved Foodcrop Production Projections Table 5 Farm Budget of Coffee Farmer Table 6 Farm Budget of Cocoa Farmer Table 7 Annual Cost Estimates Table 8 Financial Equilibrium of Project Credit Unit Table 9 Cash-Flow of Project Credit Unit Table 10 Cash-Flow and Income Projections for 1 ha of Replanted Cocoa Table 11 Cash-Flow and Income Projections for 1 ha of Replanted Coffee Table 12 Production and Exports of Coffee 1960-95 This report is based on the findings of an appraisal mission which visited Togo in October 1978, comprising Messrs. 0. Honisch, A. Berthier, J. Franz, Ch. Redfern (IDA) and J. Chartier (Consultant). The mission was assisted by Mr. D. Brown of the Commonwealth Development Corporation. 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 Worid Bank authorization.  TABLE OF CONTENTS (Continued) LIST OF TABLES (Continued) Table 13 Cocoa Production 1975-78 and Projection to 1994 Table 14 Past and Projected Producer Prices for Coffee and Cocoa Table 15 IDA Disbursement Estimates Table 16 Government Cash Flow Table A Summary of Cost Estimates Table B Proposed Financing LIST OF ANNEXES IN PROJECT FILE I. Technical Aspects of Coffee Growing Il. Technical Aspects of Cocoa Cultivation III. Foodcrop Component IV. Tree Crop Research (In French) V. The Project Credit Unit VI. Detailed Farm Budgets VII. Coffee-Cocoa Marketing and Prices VIII. Plantain Marketing Facilities IX. SRCC Road Program X. Training (In French) XI. Detailed Cost Tables XII. Financial Analysis XIII. Economic Analysis Note: Tables A and B are included in text of Chapter 4.  I. SECTORAL CONTEXT Background 1.01 Togo is located on the Gulf of Guinea and bounded by Ghana, Benin and Upper Volta. It covers 56,000 km2; population is about 2.4 million (1977) and is growing at 2.7% per year. In the 1960s the average growth rate of GDP was about 7% per year in real terms, among the highest in Africa. Growth during the 1970s has been about 5% per annum in real terms, led by exports of phosphate rock. World market prices for Togo's agricultural exports, mainly cocoa and coffee, have been high during the late 1970s and phosphates, the major export commodity, has enjoyed relatively good prices after a period of wide fluctuations in 1974 and 1975. Sharp increases in public investment and current expenditure during the past three years have led to public finance problems which are now being addressed by a policy of fiscal austerity. Per capita income was estimated at $300 in 1977, although rural incomes are only about one-third of this level. Togo's future growth will depend upon market conditions for its primary commodities, ex- pected to be favorable for phosphates but mixed in agriculture, and upon the successful operation of several large industrial projects recently implanted. Growth of GDP is estimated at about 4% per annum over the next decade. Agricultural Sector 1.02 Agriculture employs about 75% of the active population and accounted for about 30% of GDP at factor cost in 1978, a decline from about 45% in 1973. Although there has been substantial growth in the mining sector (phosphates), this decline does not reflect any major structural change in the economy, but rather a stagnation of the agricultural sector. Food crops account for about 75% of agricultural production, the major staples being maize, sorghum, yam and cassava, and industrial and export crops, principally cocoa, coffee, cotton and palm oil, for the remainder. Agricultural production is estimated to have increased in real terms by about 3.5% per year during the period 1966-70, but since then the marketed production of cocoa, coffee and palm-oil decreased by about 50%, whereas cotton recovered from a decline in the late 1960s. Food crop production is estimated to have essentially kept up with the growth of rural population, except for the two low rainfall years of 1976 and 1977. As a result of production variations and price fluctuations the share of agriculture in export earnings has varied between 25 and 50% in the 1970s, with cocoa and coffee making up on average 85% of agricultural exports. Cocoa and Coffee Subsector 1.03 Cocoa cultivation is concentrated in the Plateau region, in parti- cular in the Litime and Kloto plains (Map 10536 and para 2.02). It is a small farmers' crop, generally grown on holdings of between 2 to 5 ha. The total area under cocoa is estimated at 42,000 ha, of which some 40% are older than 30 years and require rehabilitation (Project File, Annex II). Very little cocoa was planted in the 1960s because of low prices and the absence of a development effort geared to provide farmers with technical assistance,  credit and improved planting material. In 1969, however, Government took steps to provide support for the cocoa subsector. A capsid pest and swollen shoot virus disease (SSVD) control was successfully initiated, and in 1971 a cocoa rehabilitation program with FAC (Fonds d'Aide et de Cooperation) financial and technical assistance was started. The first Cocoa-Coffee Development Project (Credit 503-TO) was a follow-up to this program. Land tenure problems, shortage of improved planting material, drought, and lack of incentives for replanting caused a delay in achieving cocoa planting targets and measures, such as introduction of a landowner-tenant contract, irrigation