Sierra Leone - Third Eastern Integrated Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY LE C'PY Report No. 2995-SL SIERRA LEONE EASTERN INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT November 26, 1980 Western Africa Projects Department Agriculture Division 4 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.  CURRENCY EQUIVALENTS US$1.00 = Le 1.05 Le 1.00 = US$0.95 WEIGHTS AND MEASURES Unless otherwise stated, all weights and measures in this report are metric 1 metric ton = 0.98 long ton = 37 bushels 1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.62 mile ABBREVIATIONS ACRE - Adaptive Crop Research and Extension BADEA - Banque Arabe pour le Developpement Economique en Afrique CARE - Cooperative American Relief Everywhere DOPC - Daru Oil Palm Company FAO - Food and Agriculture Organization of the United Nations FFC - Farmers Finance Company IADP - Integrated Agricultural Development Project IDA - International Development Association IFAD - International Fund for Agricultural Development IFCC - Institut Francais du Cafe, du Cacao et Autres Plantes Stimulantes IITA - International Institute for Tropical Agriculture IRHO - Institut de Recherche pour les Huiles et Oleagineux MAF - Ministry of Agriculture and Forestry MDEP - Ministry of Development and Economic Planning MOW - Ministry of Works NCDB - National Cooperative Development Bank NDB - National Development Bank NUC - Njala University College ODA - Overseas Development Association PEMSU - Planning, Evaluation, and Monitoring Services Unit PESU - Project Evaluation and Services Unit RMWA - Regional Mission in Western Africa (World Bank Office) RRRS - Rokupr Rice Research Station SLPMB - Sierra Leone Produce Marketing Board USAID - United States Agency for International Development UNDP - United Nations Development Program FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY SIERRA LEONE Eastern Integrated Agricultural Development Project III TABLE OF CONTENTS Page No. I. THE AGRICULTURAL SECTOR ............................. 1 A. Background .................................... . 1 B. Agricultural Sector ..... 2 C. Agricultural Institutions and Services ......... 3 II. THE PROJECT AREA ............. . ....................... . 6 A. Main Characteristics . . ...... . 6 B. DOPC and FFC .... ...... ..... . 8 C. The IDA Integrated Agricultural Development Projects .................................... 9 III. THE PROJECT ............................ 12 A. Background . .. .. ................................ 12 B. Summary Description ........ ............ . 12 C. Detailed Features . . .......... . 14 D. Cost Estimates .... 19 E. Financing Arrangements ..... ................... 19 F. Procurement ... 21 G. Disbursements ...... ..... ........ . 22 H. Accounts and Audits ..... . 23 IV. PROJECT IMPLEMENTATION .............................. 24 A. Organization and Management . . . 24 B. Agricultural Services.... . 26 C. Credit and Input Supply ....................... . 28 D. Project Monitoring and Evaluation ... 31 V. TECHNOLOGY AND PRODUCTION SPECIFICATIONS ........... 32 This report is based on the findings of an appraisal mission comprising Messrs. Burer, Drayton and Ms. Mackrandilal (IDA) and Messrs. Kellond, Olivin and Weatherell (Consultants), which visited Sierra Leone from January 25 to February 21, 1980. Mr. Hallgrimson (RMWA) supervised and advised on the project's road component, and Mrs. Kimaro (Consultant) assisted the mission during its stay in Sierra Leone. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenst may not otherwise be disclosed without World Bank authorization.  Table of Contents (con'd) Page No. VI. DEMAND, MARKETING, PRICES AND FINANCIAL ANALYSIS ..... 36 A. Demand ............................................ 36 B. Marketing ........................................ 37 C. Prices ........................................... 37 D. Financial Analysis ............................... 39 VII. BENEFITS AND JUSTIFICATION ....................... 41 VIII. RECOMMENDATIONS ...................................... 44 Tables in Text Table 1. Summary of Project Cost Table 2. Proposed Financing Plan Table 3. Estimated Yield Increases Table 4. Production Increases at Full Development Table 5. Farmgate Prices Table 6. Net Financial Return to Farmers ANNEXES Annex 1. Summary of Costs Annex 2. Schedule of Disbursement Annex 3a Projected Cash Flow - Farmers' Finance Company Annex 3b Projected Profit and Loss Statement - Farmers Finance Company Annex 4a Projected Cash Flow - Daru Oil Palm Company Annex 4b Projected Profit and Loss Statement - Daru Oil Palm Company Annex 5. Total and Incremental Crop Production Annex 6. Crop Budgets and Farm Models Annex 7. Government Cash Flow Annex 8. Economic Analysis Annex 9. Selected Documents and Data Available in Project Files MAPS AND CHARTS IBRD Map No. 14872. Project Area IBRD Chart No. 20551. Organization of Ministry of Agriculture and Forestry Chart 1. Implementation Schedule  SIERRA LEONE EASTERN INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT III I. THE AGRICULTURAL SECTOR A. Background 1.01 The Republic of Sierra Leone has an area of 71.740 km2 (28,000 sq miles), with a population in 1980 of about 3.2 million. The population growth rate is about 2.5%. Population density varies considerably, from 29 persons/km2 in the North to about 585 persons/km2 in the Western area. About 10% of the population live in Greater Freetown. Nearly 80% of the population live in rural areas and derive their livelihood from agriculture and related activities, 1-02 The 1978/79 GDP was estimated at Le 932 million (US$888 million at current market prices). Average per capita income was about Le 250 (US$238) and unevenly distributed across sectors and regions. Rural incomes are far below the national average, and within agriculture the highest incomes are in the East and the lowest in the North. GNP growth, satisfactory between 1969 and 1974, with an annual average of 4.0%, has experienced a sharp downturn since 1974. and the per capita real income has been declining. 1.03 The economy is characterized by two main and largely contrasting sectors. The modern mining sector, dominated by the diamond industry, has provided a major source of Government revenues and export earnings in the past. However, the share of mining in export earnings have fallen since 1974, owing to the cessation of iron ore mining and a decrease in the volume of production from diamond mining. While the sector continues to contribute about 10% of GDP and 60% of export earnings, it cannot be expected to provide large amounts of new employment. The agricultural sector remains largely underdeveloped and employs about three-quarters of the population. The contribution of agriculture, forestry and fisheries to both GDP and export earnings is about 35%. The export crops are dominated by coffee and cocoa, and the recent world price rises for these commodities have helped to boost export earnings. In comparison with crop production, the relative contribution of fisheries, livestock and forestry remains small. 1.04 The country has experienced an increasing trade deficit, mainly because exports have grown more slowly than imports, the trade deficit in- creased from Le 22 million (US$20.9 million) in 1977 to Le 65 million (US$60.9 million) in 1978. There was a slight improvement in 1979 when the deficit amounted to Le 53 million (US$50.5 million). Food imports comprise about 18% (1976/77) of the total import bill- Given the projected downward trend for coffee and cocoa export prices combined with declining mining activity and the rising import demand from an expanding population, the trade deficit can be expected to increase further. Assistance to the country in meeting its external debt adjustment problems is being provided by the Paris Club and the International Monetary Fund.  -2- B. The Agricultural Sector 1.05 The agricultural sector has a major role to play in improving the present economic situation of the country. The resource base is good. Most of the country has an annual average rainfall of at least 2,500 mm. The soils and climatic conditions are suitable for a variety of high potential agricultural production systems which can improve the income levels of the rural poor as well as expand production of export crops and of food crops for import substitution. The Northern half of the country has a long dry season and supports a system of shifting crop cultivation in which rice, groundnuts and sorghum are the principal crops; here the rural economy is basically a subsistence economy. The Southern and Eastern parts have rainfall and climate suitable for the cultivation of tree crops, especially cocoa, coffee and oil palm. 1.06 About 645,000 ha or 13% of the arable land is cultivated annually, which implies a fallow period of about seven years. The area of land under cultivation drops to about 6.5% in the North. Rice is the staple food, supplying in terms of calories, about 90% of the rural population's consump- tion of cereals. Each year it takes up over 70% of the cultivated area and is grown by over 80% of the farmers. Growth of rice production currently aver- ages 2% annually but attained 8% for about two years in the mid-seventies, because of increased swamp rice production and as a response to higher prices. Domestic production in 1978/79 was about 308,000 tons. Over the past 20 years imports of rice averaged about 30,000 tons annually, but in 1979 rice imports reached 68,000 tons. 1.07 Coffee, cocoa and palm kernels are the main export crops, and are also the primary sources of cash income for the rural population. There is some potential for coconut and rubber growing. Rubber development is limited to a few medium-sized government estates and some small private farms; two new private farms recently started production. The rural economies of the South and East are much more cash-oriented, with produce being sold for export or consumption in the nearby mining areas, as compared with the subsistence agriculture of the north. 1.08 Tree crop production is concentrated in the Eastern Province, with a small amount also in the Southern Province. Annual production of coffee ranges from 10,000 tons to 4,000 tons (1979/80), and on the basis of average yields of 0.28 tons per ha it is estimated that the present area is about 40,000 ha. Cocoa production averages about 6,000 tons from an area of about 50,000 ha. In 1979/80 exports included 9,500 tons of cocoa (worth US$29.6 million) and 10,000 tons of coffee (worth US$36.2 million). Most of the coffee and cocoa plantations are over 20 years old and are poorly main- tained. Use of fertilizer, pesticide and insecticide is minimal and yields are correspondingly low. No major rehabilitation or replanting programs have been initiated and consequently coffee exports have declined and cocoa exports have stagnated. The IDA-financed Second Integrated Agricultural Development Project (Credit 568/Loan 1138-SL), had a small cocoa development component for the Eastern Region (para 2.11). In addition, about 40,000 tons of palm oil is currently produced for domestic consumption and over 16,000 tons of palm kernels for export; almost all of the production is from wild palm groves, with most of the oil extracted in the traditional way by the rural family. To meet domestic demand, about US$3.0 million worth of animal and vegetable oils are imported annually.  -3- The National Development Strategy 1.09 The National Development Plan 1974/75-78/79 assigned high priority to agriculture and emphasized its development as essential for achieving long-term economic growth, balanced regional growth, and equitable income distribution. The plan called for an overall growth of the agricultural sector of 5.4 percent per year, self-sufficiency in rice, improved nutrition, and increased production of major export crops. These goals were to be achieved through improvements in agricultural services, and the implementation of a production-oriented price package. The main vehicle was to be the planning and development of integrated agricultural development programs and projects (IADPs) covering the country's main agricultural areas. Because of institutional and financial constraints, the plan proved far too ambitious. But there have been significant achievements in that, by mid-1980, it is anticipated that some 21,000 km2, or 29% of the country, will have been covered by IADPs: Eastern IADP and Northern IADP (financed by the Bank and IDA), Magbosi IADP (financed by IFAD and appraised and administered by the Bank), and Koinadugu IADP (financed by the EEC). Another three are scheduled to begin in 1981: Kambia/Port Loko, Moyamba, and Bo/Pujehun. Together with the proposed extension of the Eastern and Northern IADPs these projects will cover about 80% of the country (see map following Annex III). 1.10 The Government is now preparing a second plan. While a draft is not yet available, discussions with officials suggest that agricultural priorities will remain basically unchanged. Emphasis is expected to continue to be placed on IADPs and the strengthening of central services. Expansion of the cultivated area, irrigation, and soil conservation are recognized objectives, as is the raising of incomes of the rural poor. Some uncertainty, however, surrounds the Government policy towards mechanical cultivation, which is mainly concentrated in the Boli lands of the North, and the economic benefits of which so far seem questionable. The Ministry of Development and Economic Planning is receiving assistance from the UNDP in preparing the second plan as a whole. To supplement this effort, the IDA US$2.5 million Technical Assistance Project approved in December 1979 (CR 970-SL) provides assistance to ministries in priority development fields. Under this project, the Ministry of Agriculture and Forestry (MAF) is expected to employ two long-term advisers--a senior economic planner and a project planner--and to obtain financing for special consultant services and studies. C. Agricultural Institutions and Services 1.11 The Ministry of Agriculture and Forestry (MAF) comprises two divisions: The Agriculture Division, headed by a Chief Agriculturalist, and the Forestry Division, headed by a Chief Conservator of Forests. The Agriculture Division is the largest and is responsible for extension; produce inspection, pest and phytosanitary control; training and research coordina- tion; agricultural engineering and mechanical cultivation; and planning, monitoring and evaluation of projects. It would be the primary institution concerned with the proposed project. There are 5 agricultural regions, in each of which MAF's activities are headed by a Principal Agricultural Officer (PAO), supported by an Agricultural Officer (AO), Agricultural Instructors  - 4 - (AI's) and Agro-Technicians (AT's). At Headquarters in Freetown, the Chief Agriculturalist (CA) is assisted by a Deputy Chief Agriculturalist (DCA) and four Assistant Chief Agriculturalists (ACA's). 1.12 In general, MAF's extension activities are ineffective because of low salaries, poor mobility, shortage of funds and low morale. The externally financed Integrated Agricultural Development Projects (IADP's) carry out parallel extension work in the same administrative areas. Their project managers enjoy greater autonomy than PAO-s and deploy extension workers who are better paid, better trained and possess greater mobility to reach farmers who receive back-up services of input supplies and credit. This discrepancy in working conditions has led to a growing conflict between the 2 services. Further confusion results from the dual practice of seconding extension staff from MAF to the IADP, and of recruiting other personnel directly into the project. Seconded staff continue to enjoy retirement and other social bene- fits of their civil servant status, are answerable to MAF, and can be trans- ferred at short notice to other locations. Government has committed itself to correcting this situation, and, in its last National Development Plan, included some proposals for improving MAF's extension services with increased financial and logistical support. The Plan also included provision for improved input delivery, credit and marketing services, research and planning. In practice, however, because of limited financial support, only partial implementation of these proposals has occurred. The project would address the main issues of integrating project and non-project staff under a proposed restructured regional MAE. However the wider issues of reorganization and strengthening of MAF as a whole would be addressed in the proposed Fifth Agricultural Development Project currently being prepared for submission for IDA funding. Marketing 1.13 The major agricultural marketing institution is the Sierra Leone Produce Marketing Board (SLPMB), which is a part of the Ministry of Trade and Industries. The SLPMB, in operation since 1949, markets the country's main export crops and has also temporarily taken over the functions of the dissolved Rice Corporation which was recently dissolved by Government because of inefficiency. Producer prices for export crops are fixed by the SLPMB in consultation with the Government. Purchasing, grading, storage and transpor- tation to central collection points are the responsibilites of Licensed Buying Agents (LBA's) who are paid on the basis of the producer price,fixed overheads and profit margins. The government levies export duties on the basis of a fixed percentage of f.o.b. prices. These taxes are high, 35-40% on coffee and 35% on cocoa; they had been lowered in early 1979, but were subsequently raised in response to budgetary problems. An Agricultural Development Fund administered by the SLPMB has been established with a total value of Le 10 million by witholding 8.5% of the f.o.b. prices. A portion of this Fund is to be invested in large-scale cocoa and coffee plantation development through joint equity holdings with external plantation companies. In the early 1960's, the SLPMB embarked on a similar venture which proved a costly failure. Another portion of the fund is being used for a pilot cocoa and coffee rehabilitation program for smallholders, which involves financing for spraying equipment, pesticides, and consultants to provide training in improved techniques.  -5- Rural Credit 1.14 Two national credit institutions are concerned with development financing: the National Development Bank (NDB), which has provided credit mainly to marketing cooperatives; and the National Co-operative Development Bank (NCDB), which has increased its lending to agriculture, but concentrates on large farmers. The commercial banks prefer to concentrate their lending on the urban commercial sector, where risks are more controllable. The Bank of Sierra Leone introduced a credit guarantee scheme to encourage lending to farmers by the commercial banks, but with little effect so far. The only institution in the country that is providing credit for agricultural produc- tion to a significant number of small farmers is the Farmer's Finance Company (FFC), created under the IDA-financed EIADP II. Efforts are being made to provide credit along similar lines in the other integrated agricultural development projects. However, there is a larger need to examine the credit system in agriculture as a whole. A study on cooperative rural credit is currently being carried out by the Central Bank of Sierra Leone and an Ameri- can Cooperative Group (ACDI). A more detailed and wider focused study is about to be carried out under funding from the recently approved IDA Technical Assistance Project (CR 970-SL), proposals from which are likely to be incorpo- rated in the proposed Fifth Agricultural Development Project (para 1.12). Research 1.15 Research is carried out at the Rokupr Rice Research Station (RRRS) and the Njala University College (NUC). There has been insufficient coordina- tion between these units and MAF in terms of national objectives, though individual programs may have been well-conceived. RRRS is financially suppor- ted by UNDP and the West Africa Rice Development Association (WARDA), and there is collaborative research with the Fertilizer Development Center, Alabama, USA; the Justus Liebig University of Giessen, Federal Republic of Germany; and the International Institute of Tropical Agriculture (IITA) in Ibadan, Nigeria. A major innovation took place in early 1980, when the USAID- financed Adaptive Crop Research and Extension (ACRE) project became opera- tional at NUC. ACRE concentrates on food crop research using on-farm trials (para 4.13). No systematic tree crop research is being carried out. Agricultural Training 1.16 The procedure for selecting extension staff has been reorganized recently, and, starting with a pre-selection test in which 2000 candidates took part, 250 were allowed to take an aptitude test from which 100 were awarded training opportunity, under a MAF program. The lowest grade of extension staff (AT's) undergo a six months training course at 2 training centres at Mange and Makali, where broad introductory training in agriculture is provided, after which they carry out one year of field work. Upon success- ful completion of this training, each AT is guaranteed a position in the extension service. Training of AI-s consists of a 3 year course at Njala University College (NUC) and is open to selected AT's, with MAF adjusting the number of entrants on a year-i --ycar basis. NUC also offers a 4 year degree course in agriculture, graduat s from which may become senior officers in MAF, but are not guaraoyteed positions.. The annual output is between 10 to 15 degree graduates.  - 6 - Project Planning, Monitoring and Evaluation 1.17 A Project Evaluation and Services Unit (PESU) was established under EIADP-II to assist with project implementation of the two World Bank- financed integrated agricultural development projects in the Eastern and Northern Regions and other projects, such as, the Koinadugu and Magbosi IADPs, the Gambia/Mattru Oil Palm Project, the Daru Oil Palm Company (DOPC) and the Farmers Finance Company (FFC). PESU provided effective financial control, budgeting, accounting, auditing and related services, but did not accomplish its monitoring and evaluation functions as staff was diverted to the preparation of projects. 1.18 In 1979, to streamline and strengthen centralized planning and monitoring, Government merged PESU and MAF's Planning Unit into a single Planning, Evaluation, Monitoring and Service Unit (PEMSU). Under the Magbosi Project, provision was made for the first field monitoring and evaluation unit; PEMSU will supervise the unit's technical activities. II. THE PROJECT AREA A. The Main Characteristics Location and Physical Features 2.01 The project area of the proposed Eastern IADP-III, will cover the whole administrative region of the Eastern Province (15,350 km2), comprising three districts: Kenema, Kailahum and Kono (IBRD Map 14872); it includes the area covered by Phases I and II (10,600 km2). The topography is undulating, with inland plains at about 30 m above sea level in the South gradually increasing in altitude going northwards; these plains are dissected by narrow valleys and steep relief ranging to an altitude of 600-700 m. About 80% of the soils are ferallitic, shallow, acid (pH below 5.0), internally leached, of low fertility and with excessive amounts of iron stone, gravel or ironstone panning. Better soils are associated with recent river terraces. Soils in the inland valley swamps are peat/clay topsoils with higher nutrient levels. Mean annual rainfall is 2,500 mm over most of the area. About 80% of the precipitation falls in the wet season from May to November. Mean monthly temperatures vary between 25 and 280C, with mean daily temperatures highest in March/April when solar radiation is most intense. 2.02 Access is provided by a well-paved road from Freetown that enters the project area on its eastern border leading to Kenema. There is a daily air service and rather unreliable radio telephone links between Kenema and Freetown. Population and Agriculture 2.03 Population is estimated at 890,000 by 1980, with an average density of 60 persons/km2, varying from a low of four persons/km2 to a high of 149 persons/km2. Assuming that about 80% is rural, and an average household consists of seven persons, there are roughly 100,000 farming households  -7- or farm families. The main ethnic group is the Mende tribe, giving way to the Kono tribe toward the North and the Kissi tribe toward the West. 2.04 About 230,000 ha of land (13%) are cultivated. Upland rice, coffee, cocoa and swamp rice occupy about 90% of the cropped area: Upland rice 42%; coffee 17%; cocoa 21% and swamp rice 10%. Land Tenure and Farming 2.05 Land belongs to tribal communities or chiefdoms, with the Paramount Chief or subchiefs acting as trustees. The right to cultivate land usually is vested in certain family groups under the control of a family head and remains with that family unless land is abandoned for an identifiable period. Usufruct is retainable and inheritable for as long as it is claimed. With the approval of the Paramount Chief or family head, a farmer can temporarily pledge, lend, or lease his land to someone in or out the Lribal community. 2.06 In spite of efforts under Phases I and II to develop swamp farming, the traditional upland farming on the basis of shifting cultivation, remains most important to the farmer. Each year, an area is taken out of fallow (after some 7-10 years), cleared and planted with local varieties of rice; and generally, as a source of additional food, cassava, and other crops such as maize, sorghum, millet, pumpkin, melons, okra, etc. are added. Until the 'typical farmer has established a crop of rice, he is unlikely to engage in any other farming activity. The project would assist this type of farmer. Most of Sierra Leone's coffee and cocoa is produced in the project area; they are the main small holder's cash crops, and have been developed without the benefit of consistent technical guidance. The planted material is of doubtful genetic origin, and most farmers treat coffee and cocoa as "bush crops", providing them with only minimal attention. To increase yields from the dense stands of coffee, a maintenance regime of weeding, pruning and fertilizing is required. In addition, black pod disease and capsid damage depress cocoa yields in the project area. However, yields could be increased through a cocoa rehabilitation program. Roads and CARE 2.07 Including the main access road (para 2.02) there are some 160 km of paved roads. The trunk roads are mostly badly maintained laterite surfaces that are frequently impassable in the rain. Most feeder roads are in poor condition; by contrast, feeder roads under the responsibility of CARE (Cooperative American Relief Everywhere) are well maintained, all-weather laterite and have replaced the trunk routes in some areas, contrary to their original function. The capacity of the Ministry of Works (MOW) to build and maintain roads has been insufficient to meet needs and, so, CARE carries out these functions for the Government according to an agreed program under funds supplied by donors and Government. 2.08 CARE is an international private voluntary agency which has tradi- tionally received its major support from the U.S. Government and private con- tributors. At the start of the Phase II CARE was already building roads in  - 8 - Sierra Leone with USAID funds and agreed to construct the roads in the Eastern and Northern areas for the project. About 375 km have been constructed in the- East and 160 km in the North; this was in total some 225 km less than planned. CARE which has built the roads to a higher specification than originally planned, is now completing the northern roads to standards agreed with IDA with funds from the EEC Special Action Credit. B. DOPC and FFC Daru Oil Palm Company (DOPC) 2.09 DOPC was established in 1976 under Phase II and has operated inde- pendently since June 1977. It comprises a fully planted nucleus estate totalling 731 ha with an estimated potential production of about 12.3 tons ha of fresh fruit bunches (ffb) per year in the period covered by EIADP-II. However, actual average estate production has only been 70% of estimated production, and, in 1978 output fell to its lowest, 3,580 tons ffb, about 50% of the estimated potential crop. The production shortfall was caused partly by unfavorable weather conditions and partly by labor shortages at critical periods during harvesting. Housing is under construction and should help to overcome the labor constraint. The company-s financial performance is also seriously affected by the low outgrower response to the opportunity to sell ffb to the mill. Only around 20% of the outgrowers potential ffb production has been going to the mill, compared to the appraised figure of 60%, mainly because of the restrictive pricing policy of the Government (para 6.07) and the household consumption demand of the outgrowers. The plant is currently operating below full capacity. While there could be some improvement in the short-term in outgrower deliveries of ffb to the mill in response to the recent change in price (para 6.07), in the long term their deliveries are expected to decline. Experience with smallholders elsewhere has shown that their replanting efforts tend not to keep pace with the deterioration in their trees, and, with their growing household consumption demand. The mill cannot therefore rely on the outgrowers for a sustained supply level of ffb, and it is necessary to extend the present nucleus estate to provide reliable throughput to the mill. Farmers Finance Company (FFC) 2.10 For the Phase II of the Eastern IADP, the Government and the Bank agreed to establish a commercially viable rural credit institution, FFC. It became operational at the end of September 1976. The Company has taken over the commercial assets of the EIADP Phase I credit section along with its lending operations: a total value of about Le 1.0 million, composed mainly of net assets transferred (Le 833,000) and outstanding loans (Le 206,000). The FFC-s revolving credit fund has been established with the repayments of loans disbursed to farmers under Phase I. FFC established its own headquarters and inherited the EIADP commercial services staff, equipment, and buildings (market centers). Recovery rates have been low mainly because of weaknesses in the administrative structure, and partly because farmers seem to believe that government credits are, or should be, grants. It is difficult to determine the  -9- exact loan recovery rates since the current practice of the company is to record a repayment as being applicable to the year in which it is received even though it might be for a loan granted two or three years earlier. On the basis of the current method, recovery rates have fallen from about 80% in 1976 to 64% in 1979. At present the company is operating at a loss, given the high administrative costs, low recovery rates and interest rates of only 10% for seasonal and 8% for development loans. The management, input distribution, and loan collection system of the Company need to be reorganized and interest rates increased to be more reflective of the costs of operation. These issues would be addressed under the proposed project (paras 3.12, 4.16, 4.17). C. The IDA Integrated Agricultural Development Projects Phases I and II (Cr. 323-SL and Cr. 568/Ln. 1138-SL) Phase I 2.11 The first project (1973-75) was the first such project in Sierra Leone; it covered 10,600 km2 in 3 districts in the Eastern province and 2 chiefdoms in the Southern province. Total project costs were US$5.6 million of which IDA provided US$4.3 million. The project was a success, meeting targets six months ahead of schedule. It established a project management unit and provided smallholders with credit, and extension services. Over 3,500 of the 70,000 farm families in the area directly benefited. A modern palm oil mill and severalismall rice mills were built. A preparation report for a second development project, including the north was prepared, together with a consolidation phase for the follow-up project. The Project Performance Audit Report (No. 2066 da;ed May 22, 1978), while acknowledging the success of the project, and supporting the revised ERR of 20% (vs 15%-in the SAR), sug- gested the following shortcomings: a lack of understanding of the socio- economics of the area led to labor bottlenecks; the uncertain integration of swamp rice cultivation into the traditional farming system; low returns of swamp rice caused by decreasing yields; and the lack of significant improve- ment in existing institutions. Crop development averages were as follows: Table 1. EIADP-I Crop Development (1973-1975 incl.) Swamp Rice Cocoa Oil Palm Estate Oil Palm Outgrowers Appr. Actual Appr. Actual Appr. Actual Appr. Actual Hectares 2,400 2,855 300 308 204 213 732 774 Farmers 2,500 2,652 375 391 - - 183 542 Phase II 2.12 Next to the general objective of raising farmers' income, the second phase EIADP was mainly aimed at securing and strengthening the progress under Phase I through: (a) establishing farm service centers and expanding  - 10 - agricultural extension, credit, training and seed farms to (i) increase yields in the swamp rice area developed under EIADP-I, (ii) develop a further tranche of inland valley swamp rice, (iii) increase productivity on 14,400 ha of upland rice, and (iv) plant more oil palm and cocoa; and (b) establishing and staffing a project evaluation and services unit (PESU) in the Ministry of Agriculture; and short-term consultant services to prepa~-e new projects. 2.13 Seen as an extension of Phase I, the project was to cover two years (January 1976-December 1977). It was however financed jointly with the 4 year Northern Area Project for a total cost of US$13.7 million. The Bank Group's share of financing was an IDA credit of US$5.0 million, and an IBRD loan of US$5.0 million. Of the US$10.0 million financed by the Bank Group, US$2.3 million had been allocated to the Eastern Area Project Phase II. Because of delays in project implementation in both Areas, and cost overruns for production inputs in the North, and for roads in both the North and East, an additional EEC-Special Action Credit of US$2 million was granted. The completion dates of both Areas were extended to permit them to achieve their targets. Full momentum has been attained in the Northern Area and major production targets should be achieved by its completion date in June 1981. In the Eastern Area, as of December 1979, crop developments were all in excess of appraisal targets with the exeption of upland rice for which no development took place. Table 2. EIADP-II Crop Development (1976-1979 incl.) Swamp Rice Cocoa Oil Palm Outgrowers Appr. Actual Appr. Actual Appr. Actual Hectares 1,680 2,226 400 846 640 929 Farmers 6'000 6,905 By the end of 1979, CARE had constructed about 535 km of roads--70% of tar- get--to the country's Class IV road specifications. The houses and farm service centers were finally completed near the end of 1979. External funding for the Eastern component ceased in June 1980 and its operational expenses have since been met by the Government. 2.14 FFC and DOPC, were formed as independent companies, and took over from PMU the responsibility for providing farmer credit and distributing production inputs (FFC), as well as operating the oil palm estate and mill (DOPC). PESU became operational mid-1977, and in January 1979, Government merged PESU and its own Planning Unit into a Planning Evaluation, Monitoring and Services Unit - PEMSU (para 1.20), as a first step in reorganizing MAF (para 1.12). Project Problems and Lessons of Experience 2.15 A serious issue arose during Phase I over the proposal to set up the Agriculture Development Authority (ADA). It was intended that the ADA would own and operate the project-s oil palm nucleus estate and mill, take over the credit fund, operate rice mills after the project period, and assist  - 11 - Government in identifying, preparing and managing other agricultural projects. At the request of Government IDA agreed to abandon this proposal on the basis that ADA would remove considerable authority from the then Ministry of Agri- culture and Natural Resources (MANR), that it would stretch the countries limited qualified manpower, and ADA would not solve the problems of MANR's inefficiency which gave rise to its conception. FFC and DOPC were proposed and accepted for Phase II of the project to meet the need for proper credit arrangements and the management of oil palm production. 2.16 Overlapping extension services became a problem in Phase II. The PMU set up under Phase-I was to expand its responsibility to include all agricultural activities in the Eastern Province, with the Provincial Agricultural Officer (PAO), also being the Deputy Project Manager (DPM). For a while, these two posts were held simultaneously; but in 1978, because of conflicts and the view of MANR staff that this arrangement eroded the authority of the PAO, and affected their career stream, the PAO and DPM positions were separated. This created a problem, as there was one Service for project activities, responsible to the PM; and another for non-project activities, responsible to the PAO. This undoubtedly hampered the institu- tional building effort. Fortunately, MAF is now aware of the crucial need for aligning personnel assignments to working areas, and the preparation of EIADP-III has been based on this principle. 2.17 The two rice components - swamp and upland - offer an interesting contrast. For upland rice, performance against target was a disaster - zero achievement against a target of 14,400 ha. This failure is attributable partly to project management's emphasis on swamp development to the neglect of upland farming which is the main food crop activity in the region. The emphasis was prompted in the first place by a controversy over suitable upland rice varieties for the Eastern area, and the ensuing shortage of improved seed. Further, because of the known higher yield responses to improved practices in the swamps, and because of the strong traditional attachment of the farmer to upland farming, MANR, at that time, actively promoted swamp rice development at the expense of the upland. The issue of upland seed availabil- ity remained unresolved, and, faced with a relatively short project implemen- tation period (2 years), project management concluded that it could not promote parallel development of the upland with the swamp component. The result was that swamp rice development area targets were surpassed. However, yield achievements did not meet appraisal expectations--1800-2000 kg/ha compared with 2200-2500 kg/ha. This performance was due mainly to emphasis on area targets to the detriment of technical standards of water control, the difficulties in getting adequate and timely deliveries of inputs, and the departure of the land development technical expert in 1978. Government recognizes the discrepancies in the rice development program for the Eastern Area, and is committed to correcting them. It wishes to promote improved upland rice production, and has resolved the seed varieties problem mentioned above by establishing a National Seeds Committee (para 4.22), which will decide on the release of recommended improved varieties. The proposed project would therefore include an upland rice improvement component. Further, the Seed Multiplication Unit (SMU) in addition to swamp rice seed has expanded its  - 12 - production to include the recommended upland rice varieties (para 4.20). The Land Planning Unit has been reorganized and strengthened with qualified staff, and now has the capacity to operate effectively. The proposed project would also address the issue of improving input supplies (para 4.16) and extension follow-up (para 4.08). 2.18 The FFC suffered from a number of problems, which were discussed in para 2.10. PEMSU's financial controlling function is operating well and is extending its services over some seven projects. Its planning section is awaiting the appointment of a senior sector planner and a project planner. PEMSU's monitoring section was fully occupied with the preparation of the proposed EIADP-III and is now carrying out a baseline survey in the Magbosi area. III. THE PROJECT A. Background Project Identification, Preparation and Appraisal 3.01 The proposed project is the third integrated agricultural development project in the Eastern Province and is a follow-up of EIADP-II. The need for a third phase was identified by World Bank-s Regional Mission, West Africa (RMWA) in 1977. The project was prepared by a team from the Ministry of Agriculture and Forestry assisted by consultants and RNWA, and presented to World Bank for financing in November 1979. An appraisal mission visited the country from January 25 to February 21, 1980. B. Summary Description 3.02 The project would enable Government to continue the agricultural development of the Eastern Region over the next five years. The primary project objective would be to increase food and export crop production and farm incomes of smallholders by extending the present project area from 10,500 km2 to 15,400 km2 to cover the whole of Eastern Province and promote upland crop development among farmers not reached under the earlier phases. Another objective would be to improve production levels of swamp rice achieved under the first two phases. Increasing food production, mainly rice, and the major cash crops, cocoa and coffee would be achieved by encouraging improved farming techniques through strengthening and training the extension service in the use of more effective extension methods, and improving the input and credit services provided by FFC. Of the 100,000 farm families presently in the area about 50,000 would benefit from the extension service advice, the wells and the road construction programs; of these about 12,580 families would be direct beneficiaries of the crop development and credit programs. To improve the long-term viability of DOPC and increase palm oil production, the nucleus estate would be expanded. The present dual administration in the region would be unified into a single agricultural service which would be responsible for all agricultural develop- ment. Rural infrastructure would be improved further through the construc- tion of more feeder roads and wells. The project would specifically provide for:  - 13 - (a) a smallholder crop development program involving; i) improving yields on 2,000 ha of swamp development under EIADP I and II; ii) increasing yields on 10,000 ha of upland annual crops - principally rice and cassava; iii) rehabilitating 800 ha of coffee and planting 2,000 ha of new coffee; iv) rehabilitating 1,000 ha of cocoa and planting 800 ha of new cocoa; (b) constructing 300 village wells and 300 km of feeder and penetration roads; (c) strengthening the regional agricultural services by: i) maintaining and strengthening the existing Project Unit and putting all agricultural services in the region under its control; ii) expanding training and improving direction of the extension services; iii) establishing an engineering unit to oversee the engineering aspects of land planning for swamp development, road and well development and the workshops; iv) establishing a monitoring and evaluation unit: (d) expanding the Daru Oil Palm Company nucleus estate by 300 ha, reorganizing its management and financial systems; (e) strengthening the Farmer Finance Company services by: i) recruiting a credit specialist and improving staff quarters and office accommodation; ii) construction of four service centers and drying floors for coffee and cocoa: (f) financing of the services provided by MAF's Planning. Evaluation. Monitoring Services (PEMSU) for projects and providing a projects coordinator in MAF; (g) financing special studies. 3-03 The Ministry of Agriculture would have responsibility for project implementation. Under agreed specifications and contracts, the road construc- tion would be done by CARE which would be responsible to the Ministry of Works.  - 14 - C. Detailed Features Crop Development 3.04 Inland Swamp Rice. Based on the interest shown by farmers and experience gained during Phases I and II, the project would improve the water control and crop husbandry on 2,000 ha of swamps partially developed under the first projects. About 2,000 farmers would be involved, farming 1.0 ha of rice each. Two types of swamps are recognized for which two technological packages would be introduced (para 5.02). On 500 ha of swamps, with fertile soils and good drainage and irrigation potential, the new package would increase yields and the potential of a second crop. On about 1,500 ha with sandy soils, difficult drainage and and limited water, the new package would only improve its yield potential through improved husbandry (para. 5.02). 3.05 Upland Annual Crops. Most farmers in the Eastern Area continue to produce rice on the uplands in the traditional manner, that is shifting cultivation with a new area cleared each year for this crop. Although the social, cultural and environmental dynamics of this crop are not fully understood, improved productivity and better land utilization are likely to be of considerable benefit to farm families in the project area. Research into the farming systems as a whole would continue, under Rokupr, but in the meanwhile improved seed and cultivation techniques (para. 5.04) would be introduced under the project on 10,000 hectares of upland rice and cassava. 3.06 Coffee. The project would take over the present SLPMB pilot rehabilitation program and would rehabilitate some 800 ha of coffee under a system of phased pruning. To increase the income of farmers, the project would also place emphasis on the development of some 2000 ha of new coffee planting. The project would supply credit for fertilizer, tools, seedlings and labor. Extension activities would concentrate on ensuring adherence to the improved technology and proper harvesting. 3.07 Cocoa. Yields of existing cocoa stands would be increased through a cocoa rehabilitation and planting program covering 1,800 ha. This program would build upon SLPMB's pilot rehabilitation program (400 ha/year), which concentrates heavily on training staff and farmers in correct spraying tech- niques for controlling blackpod disease and capsid damage. Farmers would be provided with credit to purchase CP3 knapsack sprayers and chemicals. No fertilizer would be supplied for rehabilitated cocoa because of the poor genetic base of the planted material. Although farmer demand for new cocoa plantings is high, only limited areas possess suitable soils for new plantings with the higher yielding hybrid planting material. The project would there- fore carefully select some 800 ha of suitable cocoa lands for development, and would provide credit for seedlings, fertilizers, tools and labor. Village Wells 3.08 To support agricultural development through improving the general well-being of the rural population, a village well component has been included to improve the domestic water supply in a number of villages. Swamps, streams, water holes and hand-dug open wells which are the water  - 15 - sources for most of the smaller villages in the project area, tend to dry up in the dry season, and sooner or later become heavily polluted. A well unit now being trained under a UNICEF program would be properly equipped under the proposed project to execute the well digging program. A simple health educa- tion program would be carried out by project staff to teach the villagers how to use wells properly and maintain sanitary conditions. Since there is no previous experience in the project area with well digging, the project would follow a simplified well design as currently used in the Northern IAD project. About 300 wells would be installed in villages of less than 1,000 persons, at a ratio of one well per 150 persons, and not more than two wells per village. The project would consult village leaders on site selection, and would enlist villagers to supply labor under supervision of project staff. Penetration Roads 3.09 A total of about 300 kms of penetration roads and chiefdom tracks would be constructed under the project. It is proposed that of the total about 170 kms would be to Class 4a (feeder road) specifications and 95 kms would be chiefdom tracks. The remaining 35 kms consists of routes which could be either chiefdom tracks or Class 4a depending on the availability of funds since their importance in terms of accessibility and projected usage places them between the two categories. With the construction of these roads and tracks the all-weather road density of the area would be increased from about 0.08 to 0.10 km/km2. The road component would be undertaken by MOW under a negotiated contract with CARE, the executing agency, satisfactory to IDA. Bank missions have met with CARE and discussed the relevant engineer- ing and financing procedures (see Working Paper No. 6). The project would provide financing for the equipment and operating costs of a road construction unit. The equipment purchased would be the property of the Government and would be placed at the disposal of CARE for the execution of the program. Upon completion of the program the equipment would be made available for maintenance of the roads. In addition to the construction of the roads, CARE, with financing from the Government, would maintain each road for two years after completion, after which MOW would assume responsibility for its mainte- nance. Where MOW does not have the capacity to carry out this maintenance, it would engage local contractors. Project Management and MOW/CARE would agree upon an annual construction program in advance of the start of any work. The working details of the program would be subject to prior approval by a consultant engineer who would be retained by the project. On the basis of this annual construction program, CARE would prepare operating cost rates on a per unit basis for the Class 4a roads and chiefdom tracks. MOW would submit annually these unit rates and supporting details to IDA for approval. However, because the all-weather capability of the roads Manowa junction to Sefadu and Daru to Joru is a prerequisite for the start of the road works under the project, MOW would commence the upgrading of these roads not later than March, 1981. MOW would submit to IDA by January 1 of each year a satis- factory annual maintenance program for all trunk roads and feeder roads in the project area. Assurances on the above actions were obtained at negotiations and in addition it was agreed that satisfactory contractual agreement with CARE and commencement of work on the Manowa-Sefadu and Daru-Joru roads would be conditions of disbursement against the road component.  - 16 - Agricultural Services 3.10 A main objective of the proposed project is to create well-trained and motivated unified regional support services. To achieve this (i) the EIADP-II project area would be extended to cover entirely the Eastern Province; (ii) the management functions of Project Manager (PM) and Principal Agricultural Officer (PAO) would be combined in one; and (iii) all activities normally carried out by the MAF Agricultural Division and the ones for which EIADP-II is responsible would be amalgamated into a single support service. Under the project, extension services would be provided for the whole of the Eastern Province; the system would be reorganized along the lines of the Training and Visit (T & V) system, and personnel - anticipated to be larger in number than at present - would be properly selected and trained (paras 4.08-.10). All personnel would be provided with adequate means of transport: cars for upper level and supervisory personnel, motorcycles for middle level staff and village extension workers. Also, in order to ensure that all key staff are aware of the objectives of and their responsibilities under the project, consultants would carry out management training sessions for key supervisory staff at the start of the project, with periodic follow-up train- ing (para 4.10), and additional training overseas would be provided. The present rather limited engineering services would be strengthened with suffi- cient and qualified personnel, appropriate transport and two workshops--one in Kono and a main workshop in Kenema--to carry out the swamp development and well programs and to supervise road construction. A Monitoring and Evaluation Cell (MEC) would be established in Kenema Headquarters to collect data on project progress and weaknesses, to be analyzed at PEMSU in Freetown. Houses would be built for project management (chief accountant and internal auditor) for the extension services (AO's house in Kono and one in Daru district), and for the project's engineer. The training center would be rehabilitated. An additional workshop for maintenance of all project vehicles and equipment would be constructed in the Kono district. DOPC 3.11 To improve the supply of ffb for the DOPC's mill, and achieve greater reliability of operations, the present nucleus estate will be extended by 300 ha of new plantings (para 2.09). These will be sited on suitable land at a distance of no more than 15 km from the estate. No mass displacement of villages would be necessary, as adequate sparsely populated land is expected to be available in the vicinity of the estate for this purpose. Because extension of the nucleus estate is essential for DOPC's financial viability, the acquisition of 300 ha land suitable for palm oil growing in the neighbor- hood of DOPC's nucleus estate, and the payment of appropriate compensation, satisfactory to IDA, to smallholders whose land is acquired, would be a condition of disbursement against expenditures on this project component. Farmers' Finance Company 3.12 Under the project an internationally recruited credit specialist would be employed for three years under terms of reference satisfactory to IDA. Details of terms of reference are in Working Paper 3. He would be  - 17 - responsible for the reorganization and restructuring of the credit admini- stration and input supply systems of the FFC and of the proposed second phase of the Northern Integrated Agricultural Project. Also, adequate means of transport for input distribution and mobility of field staff would be provided. Four new farm service centers would be constructed in the Northern part of the project area, and 4 of the existing service centers would be equipped with drying floors so that FFC can act as a buying agent for SLPBE. Under the project FFC credit officers would regularly attend village meetings with farmers and, in collaboration with project extension workers, determine farmers' demand for credit; FFC management would then be responsible for obtaining the production inputs on time (para 4.16). At negotiations an assurance was obtained that FFC would be appointed a Licenced Buying Agent for Coffee and Cocoa before March 31, 1981. PEMSU and Projects Coordinator 3.13 Since PEMSU is essential for the operation and institution building of all development projects in the country, financing for PEMSU's continued services including financial control, planning, monitoring and evaluation would be provided under the project. The costs of all local personnel as well as of the internationally recruited Financial Controller and Evaluation Economist would be covered for the entire implementation period of the proj- ect. The positions of Senior Sector Planner, and Project Planner would be covered for two years after 1982 when the existing funding under the IDA Technical Assistance Project (Cr 970-SL). The position of Projects Coor- dinator would be funded for five years (1981-85). Consultant Services 3.14 The project would finance a total of 26 man-months of short-term consultant services at an estimated cost of US$11,000 per man-month indi- vidually or through consulting firms for the following (i) carry out a management training program for key staff through a series of seminars in which project objectives would be analyzed, and methods of attaining them determined, and management progress reviewed (6 man-months); (ii) design and execute a baseline socio-economic survey of the project area to facili- tate the implementation of an appropriate monitoring and evaluation system by the project's MEC (9 man-months); (iii) prepare, by December 31, 1981, a research program for improving smallholder production of cocoa, coffee and oil palm in the project area to be implemented by project staff, and periodically review its progress (10 man-months); (iv) review and approve a detailed work plan for penetration road construction (300 km) prior to commencement of construction work (1 man-month). Although most of the consultants are likely to be recruited internationally, efforts would be made to encourage participa- tion by local institutions and qualified Sierra Leonians where possible. Assurances were obtained at negotiations that consultants would be engaged with qualifications, experience, terms and conditions satisfactory to IDA, and Government would promptly submit their reports to IDA for review.  Table 1 Summary of Project Cost Local Foreign Total Local Foreign Total (Le million) (US$ million) s ojf Base Project Cost Cost 1. Project Management 0.9 0.9 1.8 0.8 0.9 1.7 8.9 6.8 2. Extension & Training 1.6 1.4 3.0 1.5 1.3 2.8 14.7 11.2 3. Engineering Services a. Admin. & Workshop 0.8 1.1 1.9 0.8 1.0 1.8 9.5 7.2 b. Wells 0.3 0.2 0.5 0.3 0.2 0.5. 2.6 2.0 c. Roads 0.9 2.6 3.5 0.8 2.5 3.3 17.4 13.2 4. Production Inputs 0.9 1.7 2.6 0.9 1.6 2.5 13.2 10.0 5. Daru Oil Palm Co. 0.4 0.7 1.1 0.4 0.6 1.0 5.3 4.0 6. Farmers Finance Co. 0.3 1.3 1.6 0.3 1.2 1.5 7.9 6.0 7. PEMSU and Projects Coordinator 1.0 2.1 3.1 1.0 2.0 3.0 15.8 12.0 8. Monitoring & Evaluation Cell 0.4 0.2 0.6 0.4 0.2 0.6 3.1 2.4 9. Consultancy Services - 0.3 0.3 - 0.3 0.3 1.6 1.2 Total Base Cost 7.5 12.5 20.0 7.2 11.8 19.0 100.0 76.0 Physical Contingencies 0.1 0.5 0.6 0.1 0.5 0.6 2.4 Price Contingencies 2.0 3.6 5.6 1.9 3.5 5.4 21.6 Total Project Cost 9.6 16.6 26.2 9.2 15.8 25.0 1LOO.O Percentage 36.6 63.4 100.0 36.6 63.4 100.0  - 19 - D. Cost Estimates 3.15 Project costs, net of identifiable taxes and duties,(from which the project is exempt) are estimated at Le 26.2 million (US$25.0 million) of which Le 16.6 million (US$15.8 million) or 63% would be foreign exchange require- ments. The baseline cost estimate has been derived using mid-1980 prices. Cost estimates for civil works (swamp development, roads, wells and buildings) have been based on updated prices experienced in the Northern (for the wells) and Eastern IAD projects, while incremental farm inputs have been costed at farmgate level. Local staff salaries and emoluments have been calculated following civil service salary scales, increased by 25% as agreed to by Government, to make them consistent with the salary and wage levels of other IAD projects. Expatriate staff costs are estimated to be US$75,000-85,000 per man-year, in accordance with prevailing market conditions for individual contracts; salaries of expatriate staff would be exempted from income taxes. Physical contingencies of 5% have been added for civil works, equipment, non-labor farm inputs and operation and maintenance, and amount to 3% of total base cost. Anticipated price increases, amounting to 28% of total base costs plus physical contingencies, have been calculated on the basis of the following projected rates of inflation: 5% per annum for all local personnel costs (in line with present government policy); for local civil works and operation and maintenance costs, 13% in 1980-82, 12% in 1983, 11% in 1984 and 10% in 1985 and following years; for the foreign exchange component of all non-personnel costs, 10.5% in 1980, 9.0% in 1981, 8% in 1982, 7% in 1983, 6.7% in 1984 and 6.5% in 1985, for personnel 8% per annum. A detailed cost table is in Annex 1 and Working Paper 1 and a summary in Table 1. E. Financing Arrangements 3.16 External financing for the proposed project would be provided by IDA, the United Nations Developpement Programme (UNDP), and Banque Arabe pour le Developpement Economique en Afrique (BADEA) on a parallel financing basis. The proposed financing plan is shown in Table 2 below, further details are provided in Working Paper No. 2. The proposed IDA credit of US$12.0 million would be on standard terms and would finance 48% of the total project costs. The credit would cover US$9.9 million or about 65% of the total foreign exchange costs of the project, it would finance the foreign exchange costs of the credit specialist for the FFC, the senior extension trainer, the project engineer, consultancy services, buildings, production inputs, road construction and operational and maintenance costs (excluding salaries) of the project. In addition, the credit would cover US$2.1 million of the domestic costs of the buildings, production inputs, road construction and operations and maintenance. The UNDP grant of US$1.9 million would finance 19 man years of expatriate technical assistance for PEMSU. The BADEA contribution of US$8.5 million would cover 80% of local personnel costs and 90% of the costs of project vehicles and equipment (excluding the roads component). The funding for the DOPC and FFC would be transmitted onwards by the GOSL to the companies in the form of equity holdings. The BADEA loan would be for 20 years at an interest rate of 5%. The Government's contribu- tion of US$2.6 million or 10% of total project costs would cover mostly local personnel and operational costs.  Table 2. Financing Plan US$ million ------- IDA -------- ------BADEA-------- -UNDP-- GOSL ---------TOTAL---------- Foreign Local Total Foreign Local Total Foreign Local Foreign Local Total Personnel Admin. & Ext. 1/ 0.4 - 0.4 2.6 2.6 0.6 0.4 3.2 3.6 PEMSU 1.0 1.0 1.5 1.5 1.0 2.5 DOPC 0.2 0.2 0.2 FFC 0.2 0.2 0.1 0.2 0.1 0.3 Vehicles & Equipment + 20% spares 2.8 - 2.8 0.1 0.3 2.9 0.3 3.2 Buildings 0.5 0.2 0.7 0.1 0.5 0.3 0.8 Production Inputs 1.6 0.6 2.2 0.3 1.6 0.9 2.5 Consultancy Services 0.3 - 0.3 0.3 0.3 Road Construction 2.5 0.8 3.3 2.5 0.8 3.3 Operations & Maintenance 2/ 1,9 - 1.9 0.4 1.9 0.4 2.3 Total Base Cost 7.4 1.6 .9.0 2.8 3.6 6.4 1.6 2.0 11.8 7.2 19.0 Unallocated 2.5 0.5 3.0 1.2 0.9 2.1 0.3 0.6 4.0 2.0 6.0 Total 9.9 2.1 12.0 4.0 4.5 8.5 1.9 2.6 15.8 9.2 25.0 Percentage. 48 34 8 10 100.0 1/ Administration and Extension includes Project Management, Extension and Training Monitoring and Evaluation Cell and Engineering Services 2/ Fuels, spares, office supplies, buildings maintenance etc.  - 21 - 3.17 In view of the financial constraints facing the Government of Sierra Leone, it would be necessary to provide prefinancing for certain categories of project expenditures to maintain a satisfactory rate of project implementation. The mission has recommended that BADEA should consider establishing a revolving account of at least one quarter of their annual contribution to be replenished in advance of each quarter. IDA would establish a similar facility for the operational costs of the road construction component which would be carried out by an executing agency of the Government - CARE - (paras 2.08 and 3.09), a non-profit organization which does not have the working capital to undertake the program. Immediately after credit effectiveness and compliance with the relevant conditions of disbursement (paras 3.09, 3.19), an IDA disbursement of US$300,000 equivalent would be made into a revolving account which IDA would replenish upon receipt of satisfactory evidence that such expenditures are eligible (see para 3.19). The management of the accounts and the maintenance of certified expenditure claims would be the responsibility of the Financial Controller of PEMSU who is being financed under the current IDA project and who would continue under the proposed project. No problems are expected in the management of the accounts since PEMSU has already demonstrated its ability to design and supervise efficient accounting systems in the on-going IADPs. Conditions of effectiveness would be that all conditions precedent to the effectiveness of the proposed BADEA loan had been fulfilled and that financial agreements had been concluded with the DOFC and FFC. In addition, Government would continue to finance the cost needed to maintain existing services presently estimated at US$130,000 per year. Assurances to this effect were obtained at negotiations and that they would increase the funds as necessary to maintain these services to a comparable level. F. Procurement 3.18 All goods and services financed under the IDA credit would be procured in accordance with IDA Guidelines. Contracts, valued at US$50,000 or more for vehicles and equipment for the road construction unit with an aggregate value of about about US$1.7 million, including contingencies, and for fertilizers with an aggregate value of about US$0.7 million would be procured through international competitive bidding (ICB); purchases would be grouped into packages of at least US$50,000 whenever possible. Domestically manufactured goods would be allowed a preference of 15% or the level of applicable import duty, whichever is lower. Contracts involving expenditures estimated at less than US$50,000 but more than US$10,000 for fuel and trans- portation of farm inputs, with an aggregate value of US$1.9 million would be procured through local competitive bidding. Contracts for buildings, valued at US$1.0 million including contingencies, would not be attractive to foreign contractors due to their small sizes and dispersed locations and would therefore be awarded on the basis of local competitive bidding in accordance with procedures satisfactory to IDA. Contracts of less than US$10,000 for small items such as pesticides, insecticides, tools, seedlings, spares and other operational expenses, with an aggregate value of US$2.8 million would be procured through limited international tendering, or local competitive shopping in which at least three potential suppliers would be asked to submit quotations. The services of internationally recruited staff and consultants, valued at US$1.2 million would be procured in accordance with IDA guidelines. The road construction program with operational costs of about US$2.7 million  - 22 - would be carried out under a pre-negotiated contract between the Borrower and its executing agency CARE (para 3.09) since the component consists of small scattered works and would not attract foreign bids and there are no local contractors available. Goods and services financed by BADEA with an aggregate of US$8.5 million would be procured in accordance with their procedures. The UNDP contribution of US$1.9 million would be for technical staff. The GOSL contribution of US$2.6 million would be mainly for the local costs of staff salaries, production inputs, and operational expenses. G. Disbursements 3.19 The proceeds of the US$12.0 million IDA credit would be disbursed over five years as follows: Amount Category Terms US$ Million I. Production (a) 100% of the foreign exchange costs 2.5 Inputs (est. $1.8m) 90% if purchased locally (b) 90% of the local distributional Costs (est $0.7m) II. Civil Works (a) 100% of Operational Costs of the road construction program 2.3 (b) Buildings 100% of foreign exchange costs 0.8 85% of local costs III. Staff 100% of the costs of Internationally Recruited 1.0 staff and consultants IV. Operation and 100% of foreign exchange costs Maintenance 90% of local costs of (excluding (a) Administration, Extension and PEMSU 1.7 salaries) (b) DOPC 0.1 (c) FFC 0.4 V. Vehicles and 100% of costs of road construction unit 1.6 Equipment VI. Revolving Initial deposit into revolving account 0.3 Account for Roads program VII. PPF Refinancing of advance for project pre- 0.1 paration facility for purchasing production inputs VIII. Unallocated 1.2  - 23 - 3.20 A schedule for estimated disbursements is in Annex 2. Disbursements against Vehicles and Equipment, Civil Works, project operational costs, pro- duction inputs, and Salaries and Allowances of internationally recruited staff would be fully documented. Disbursements for the operational costs of the road program would be made in accordance with the arrangements described in para 3.17. IDA would make the initial payment of US$300,000 into the re- volving account, then subsequent disbursements would be made against ex- penditure claims verified by PEMSU. These expenditure claims would be based on the system of unit cost rates agreed upon by CARE and IDA (para 3.09) and must be in respect of road construction work carried out in the project area. All supporting documents would be retained by the Borrower and made available for inspection by IDA during the course of project supervision. If any disbursement out of the revolving fund should fail to satisfy these criteria, IDA would refuse reimbursement and Government would be under the obligation to deposit the corresponding amount into the revolving account. In order that implementation of the tree crop program may proceed according to schedule IDA approved an advance of US$100,000 under the project preparation facility to cover initial expenditures before credit effectiveness on seedlings and planting materials for nursery preparation. This amount would be refinanced under the proposed project. Assurances to above conditions were obtained during negotiations. It is expected that disbursements would be completed by September 30, 1986. H. Accounts and Audits 3.21 Management of the Project, of FFC and of DOPC would prepare budgets and estimates of quarterly cash requirements in collaboration with the accounting section of PEMSU based on appraisal estimates, but amended where necessary to reflect changes in costs and project development policies. The budgets would then be submitted to MAF, and the Boards of FFC and DOPC respectively for approval. On the basis of the approved budget Government would (i) make appropriate allocations in the MAF budget and release the necessary funds available to MAF quarterly in advance, and (ii) make timely allocations of the necessary foreign exchange for importation of recurrent farm inputs and other goods required under the proposed and previous projects. Assurances to this effect were obtained during negotiations. PEMSU, which had set up the project, FFC and DOPC accounts, has satisfactorily supervised these accounts under Phase II, and would continue to do so under the proposed project. PEMSU would also be responsible for the supervision and training of the internal auditor and accountants employed under the project. 3.22 Government would cause MAF, FFC and DOPC to: (i) establish and maintain separate project related accounts, in accordance with sound and recognized accounting practices, to reflect its financial and operational position as have been established under the two previous projects; (ii) have the accounts audited annually by independent auditors acceptable to IDA; (iii) submit certified copies of the audited accounts and the auditor's report to IDA within four months of the end of each project year; (iv) ensure that the reports of the auditors are of such scope and detail as IDA may reasonably request; and (v) furnish such other information concerning its accounts as IDA may reasonably require. Assurances to this effect were obtained during negotiations.  - 24 - IV. PROJECT IMPLEMENTATION A. Organization & Management 4.01 The Ministry of Agriculture and Forestry (MAF) would have overall responsibility for the project. All activities normally carried out by the MAF's Agricultural Division in the Eastern Region would be the responsi- bility of the Project Manager (PM), who would be graded at the PAO or Assis- tant Chief Agriculturalist (ACA) grade. All project and other agricultural staff would be responsible to the PM, who in turn, would be accountable to the Permanent Secretary (PS), through the Chief Agriculturist (CA). A Project Advisory Committee (PAC), already in place advising the ongoing project, will continue its functions for the proposed project. The PAC comprising the PS (Chairman), CA, Chief Conservator of Forests, representatives of PEMSU and the Projects Coordinator (para 4.04) would advise on management problems, finan- cial statements, annual budgets, programs of work, quarterly and annual reports, audited accounts and any other matters that may require the attention of the Ministry. 4.02 The Project Manager would chair a Regional Project Advisory Committee, which would meet quarterly, and a Project Development Committee, which would meet at least once a month. The Advisory Committee would have the function of discussing the objectives and purposes of the project, with membership representing the Administration, the farmers community, FFC and DOPC. The Development Committee would consist of the Project Manager (Chairman), the Manager of FFC and the Manager of DOPC, and would be responsi- ble for coordinating the activities of the extension services with credit and input and oil palm development. Farmers- Committees, which were allowed to lapse under the Second Project, would be encouraged and integrated with the T&V extension system (para 4.09) and the FFC farm input and credit network. 4.03 Under the Eastern Regional Office, there would-be three operational units: Administration and Finance, Extension and Training, and Engineering. The Engineering Unit would include land planning, wells, road supervisor and the workshops. 4.04 Because of the increasing number of externally funded agricultural development projects in the country, and the greater administrative burden these projects place on the MAF, Government has appointed a Projects Coordina- tor funded under the current project and based in Freetown to assist the Permanent Secretary in coordinating the activities of these projects. The Projects Coordinator would continue under funding from the proposed project and would liaise with Project Managers, and would be involved in the forma- tion of project policies and projects development programs, the coordination of projects training, liaising with other Government agencies on common projects matters, and generally advise and inform MAF on the operations of the projects.  - 25 - 4.05 The two companies, DOPC and FFC would continue to be controlled by their Boards of Directors. The memorandum and articles of association of FFC state that the PAO, and therefore the PM in the proposed project, would occupy a Director's post. Under the Project, PEMSU, the Ministry's planning, moni- toring and financial control capability, would be strengthened. Staffing 4.06 The Project Manager, holding the PAO or ACA grade, would have extensive experience in agricultural development work; formal academic qualifications would be desirable but a successful managerial history would be more important. He would be conversant with project planning and have experience in dealing with high government officials and committees, and with extension work, preferably the Training and Visit method. An assurance was obtained that his qualifications and experience would be satisfactory to IDA. The Deputy Project Manager would head the Extension and Training Unit, and, assisted by an internationlly recruited Senior Training Officer, and a Senior Extension Officer, would concentrate on implementing the Training and Visit system of extension. Three graduate Agricultural Officers (AO's), and 4 Subject Matter Specialists (SMS's) and a Training Officer (TO) complete the professional staff of the Unit. One SMS each would be assigned responsibility for cereals (rice, maize, millet); root crops (cassava), legumes and vegeta- bles; coffee; and cocoa. AO's would be selected from the present corps of MAF AO's and assigned to the Province's 3 districts. Nineteen Agricultural Instructors (AI's) would be required under the project, and would be selected from existing MAF staff on the basis of experience, performance and training (2 years at Njala University College NUC). The project would select 96 Agricultural Technicians (AT's) as the frontline extension worker who would be based in villages in the project area. These AT's would have received formal agricultural training. New appointments would be made after candidates have passed the recently introduced pre-selection and aptitude tests conducted by the West African Examination Council followed by the 6 months agricultural training course. All field operational staff, including credit staff in FFC would be expected to have a general knowledge in agriculture preferably from within the formal training system. 4.07 Within the present structure of MAF, and, related to the implementa- tion of the development projects, several key posts exist for which inter- national recruitment has been necessary, the Projects Coordinator in MAF's central administration; and the Senior Sector Planner, Project Planner, Financial Controller, and Project Economist of PEMSU (para 3.17). In addition to these, the posts of Senior Training Officer (para 4.06), and Farm Credit Specialist (para 3.12) and Project Engineer (para 4.12) would be filled by international recruitment. Assurances were obtained from Government during negotiations that all of the above posts would be held by qualified competent staff acceptable to IDA, and that recruitment of the Senior Training Officer and Farm Credit Specialist would be condition of Credit effectiveness. A project implementation schedule is in Chart 1.  - 26 - B. Agricultural Services Extension and Training Service 4.08 The Extension and Training Service would be headed by a Chief of Service, who is also the Deputy Project Manager, his initial concentra- tion would be training on-the-job the extension staff selected for the project. He would be assisted by an internationally recruited Senior Training Officer, who would also coordinate all training activities within the project (para 4.10). Under the proposed project, the T & V extension method would be fully developed. In April 1979, the local Training Officer of EIADP-II visited Upper Volta to study the T & V system which was then being implemented by a team of specialists. He would assist in carrying out the training program. There would be three basic levels of extension worker: Agricultural Officer (AO), Agricultural Instructor (AI), and Agricultural Technician (AT). The AT is the village extension worker, who would live in the area of a farm service center, and who would reach his farmers through contact villages, which are centrally located villages within less than one hour walking dis- tance from neighboring villages and where farmer committees, or village associations will meet. ATs would have a fixed, regular 14-day cycle of extension visits and training sessions. There would be one AI on six ATs and about one AO on six AIs; the AOs would supervise the activities of the AIs and ATs. Extension workers would liaise with the credit and input supply officers of FFC to ensure timely delivery of farm inputs. The extension workers would be backed up by Subject Matter Specialists (SMS), who would report to the Chief of Service. Under the project, there would be 72 ATs, 12 AIs, 2 AOs, and 4 SMSs. It is anticipated that each AT can visit eight contact villages per fortnight, representing four to six villages each with an average of 20 farm families. Under the project, each AT would be provided with a motorcycle which he would pay for in equal installments over a period of two years. The SMS would maintain a close working relationship with Rokupr and ACRE project which would conduct all adaptive research in the project area. 4.09 The Deputy Project Manager would have a key role in planning the annual field work program and budget for the extension service, eva- luating extension staff performance, and exchanging information with other agricultural technical organizations. This officer would be a University graduate with at least five years supervisory experience. Training 4.10 The internationally recruited Senior Training Officer (STO) would be responsible for coordinating all training activities under the project, and would ensure that all staff are adequately trained to carry out their duties. The STO would assess the value of the training program through field visits and a feed back from senior project staff. He would be assisted by and would himself train the local Training Officer who would be required to take over training responsibilities at the end of the STO's employment contract. Initially, at each level, staff would receive orientation and refresher courses in order that they would fully understand the objectives of the project, and its relationship to MAF, and each staff member's responsi- bilities. The senior management team (including FFC and DOPC) would first participate in a management training seminar. This seminar would provide an opportunity for staff members to become fully acquainted with the project objectives, the likely difficulties in implementing it, previous experiences  - 27 - gained under the earlier phases, and to formulate a more systematic approach to managing project affairs, which would include target setting and review. The seminar would be carried out within three months of project implementa- tion, and would be run by a team of consultants with specific project manage- ment experience. After six months, the consultants would carry out an interim follow-up assessment of the functioning of the management team, and after a further six months, would hold a second seminar to thoroughly review with the same staff the first year's operations. At this time a clear indication should have emerged of how the project is to be managed in order to accomplish its objectives. Staff training needs would be identified during this period, and it is expected that some key senior staff would require further management training overseas for which provision would be made (15 man months). Middle level staff would also be given orientation training of a similar nature but organized and run by the Senior Training Officer after consulting the manage- ment training consultants. The consultants would also organize and run a seminar for MAF officials in Freetown on integrated agricultural projects, their objectives, management and role in Sierra Leone's agricultural develop- ment. After the above initial training, the main thrust of the project's training program would be aimed at the effective implementation of the Train- ing and Visit system of extension. Subject Matter Specialists (SMS's) assisted by Agricultural Officers (AO's) would carry out training of the Agricultural Instructors (AI's) and the Agricultural Technicians (AT's). Two training teams consisting each of 2 SM's and 1 AO would each train a total of 6 AI's and 36 AT's per fortnight. The teams would spend six days each fortnight in training, and would spend the remaining five working days in field visits, assessing the effects of training and in providing necessary field support to the AI's and AT's. The training of farmers would generally fit within the Training and Visit extension system, however, from time to time the STO and extension staff would hold one day training sessions for farmers which would be held in their districts, and for which a mobile audio-visual unit would be set up under the project. 4.11 FFC staff and credit officers would have on-the-job training by the credit specialist who will advise FFC during the first three years under the project. The consultant responsible for carrying out surveys under the project should also train the project's monitoring and evaluation field staff. Project funds would be made available to cover the cost of visiting specialists from the International Institute of Tropical Agriculture (IITA) in Ibadan, Nigeria; from the Institut Francais du Cafe, du Cacao et Autres Plantes Stimulantes (IFCC) in Abidjan, Ivory Coast; from the Institut de Recherche pour les Huiles et Oleagineux (IRHO) in Montpellier, France; or from ACRE and RRRS sponsored activities. Engineering Services 4.12 The Engineering Services Unit would be headed by the Project Engineer who would be responsible for supervising, on behalf of project management, the road construction program to be carried out by CARE (para. 3.09). He would also be responsible to project management for the overall operations of the land planning and well construction units and the workshops. His qualifications and experience would be satisfactory to IDA. If an expa- triate is recruited for the position, his contract would be for three years and he would have the responsibility of training a local counterpart to replace him for the remainder of the project implementation period.  - 28 - Research 4.13 The Adaptive Crop Research and Extension Project (ACRE), which is being financed by USAID, is expected to begin operations in the cropping season of 1980. The primary focus in the first five years of its anticipated 15-year life would be on food crops, with emphasis on agronomy, soils, harvest- ing, storage and marketing, agricultural economics and evaluation. A section for each would be created. The Eastern Area Project would provide facilities for and participate in the field trials program and in application of research findings, the program being carried out in consultation with the extension service. 4.14 Under the ACRE program, rice, cassava, sweet potatoes, groundnuts, onions, pigeon peas, cowpeas, sesame and other crops will be included. The ACRE project is expected to address those functions which could lead to improved production from the established farming systems, including: the use of improved varieties which perform well under farmer-s conditions; timing of farming operations so that labor is available for each essential activity; improving productivity of land and labor through the introduction of small equipment; and improving the harvesting, processing and storage of crops. 4.15 Tree crop research is not provided for in the first phase of the ACRE project. In view of the lack of research into coffee and cocoa, and the importance of these crops as foreign exchange earners, the project would contract with a suitable research organization to prepare by December 31, 1981, a detailed research program for the immediate problems of these two crops. Cocoa research is needed in Capsid and Black Pod disease control, fertilizer requirements, planting material (seed vs clones), and shade management. In coffee, research is required in pruning systems, fertilizer requirements and planting materials. The project's tree crop agronomist will be responsible for carrying out the field research under the guidance of consultants from the research organization. Ten man-months would be provided in the project for the consultants to set up the research program and super- vise through visits to the project area. Rokupr Rice Research Station has a continuing commitment to rice and related research for all of Sierra Leone, and carries out locational research in the Eastern Area. The Director of the ACRE project would liaise with RRRS and the project for research in the project area. C. Credit and Input Supply FFC and Credit Arrangements 4.16 The FFC would provide credit in the form of agricultural inputs (fertilizers, pesticides, tools and equipment, seeds and seedlings) and payment for hired labor for upland and swamp rice development, cocoa and coffee rehabilitation and new plantings. The existing credit administra- tion and input distribution systems of the Eastern and Northern projects would be reorganized by the Credit Specialist to be recruited under the  - 29 - project (para. 3.12). He would be responsible for developing a new proce- dures manual for the approval, disbursement and collection of loans. He would evaluate the procedures for cost control and the profitability of each activity including the proposed FFC activity as a Licensed Buying Agent for cocoa, coffee and palm kernels on behalf of the SLFMB (para. 3.12). He would also be responsible for establishing appropriate procurement and distribution procedures to ensure timely supply of inputs. 4.17 Both seasonal and medium-term credit would be provided to farmers. Medium term credit would comprise: (i) hand tools, a communally owned pedal thresher, and the first year's seed provision for swamp rice development; (ii) sprayers for cocoa rehabilitation; (iii) seedlings, fertilizer, chemi- cals, hand tools and a crop loss credit l/ for coffee rehabilitation; and (iv) input requirements including hired labor for cocoa and coffee plantings. All loans would be at 15% per annum with the repayment period varying between three to five years for rice development and tree crop rehabilitation and eight to ten years with four years grace for new plantings of the tree crops. Seasonal credit at 20% per annum would comprise; (i) seed, cassava setts and tools for upland development; (ii) seed fertilizer and hired labor for swamp rice development; (iii) seedlings, insecticides and fungicides for cocoa rehabilitation, (iv) seedlings, fertilizer and pesticides for coffee rehabili- tation, (v) fertilizer, pesticides, tools and hired labor from Year 4 onwards for cocoa planting; and (v) fertilizer and pesticide from Year 6 onwards for coffee planting. No downpayment would be required for seasonal credit. In medium term development credit, farmers would make a downpayment of 10% as a part of the credit arrangement. Under Phase II of this project, Government agreed to a phased removal of the subsidy on fertilizers and, with the last reduction in June 1979, the subsidy now stands at 30%. At negotiations, Government agreed in principle to the removal of all subsidies on fertilizers and have submitted a time table for removal before the end of the 1985 cropping season through annual reductions, starting in the 1982 season of about 25% of the existing subsidy. Interest rates on seasonal and medium-term credit currently are set at 10% and 8% respectively in the project area. In view of present and prospective inflation rates and the costs of administering the credit, the interest rates should be increased. Assurances were obtained from Government at negotiations that seasonal and medium-term interest rates for the project would be increased to 20% and 15% respectively, as was agreed to by the Government for the IFAD Magbosi Integrated Agricultural Development Project and that these rates would be reviewed annually by Government with IDA. 4.18 To ensure adequate funding for the credit operations of the FFC under the proposed and earlier phases of the project, the government has agreed to increase the equity of the FFC by Le 500.000 over a period of two years, of which Le 400,000 would come directly from the Central Government and Le 100,000 from the SLPMB. The contributions would be in installments, the first installment of Le 100,000 would be paid within ninety days after credit 1/ The pruning technique for rehabilitation of coffee results in a temporary drop in production, which is easily made up in later harvests.  - 30 - effectiveness followed by two installments of Le 200,000 each within one year and two years, respectively, after credit effectiveness. Assurances were obtained at negotiations that these contributions would be under terms satis- factory to IDA. FFC-s main sources of revenue come from interest on loans, mark-up on farm inputs and commission as a Licensed Buying Agent (LBA) for coffee and cocoa (Annex 3). Combining credit and marketing is a general practice in the country, farmers are accustomed to obtaining credit from traders to whom they sell their produce, a practice which facilitates loan collection. Furthermore since the two activities are so closely linked there would be a more efficient use of FFC-s staff and transport. Assurances were obtained that FFC be appointed as LBA for coffee and cocoa. FFC's cash flow indicates that some years would be profitable, others would not, but that a positive cumulative surplus would accrue, ranging from Le 29,000 in Year 2 to Le 3.2 million by Year 12 (W.P. 3). To ensure FFC's continued viability, agreement was reached that the cumulative surplus be converted into equity, until such time as the debt/equity ratio is at least 1 to 1. 4.19 To improve the viability of DOPC, in addition to increasing its nucleus estate to 300 ha (para 3.11) it is intended to: (a) improve its management by moving its headquarters to the plantation, and (b) increasing prices for smallholders delivery of fresh fruit bunches (para 6.07 and W.P. 4). Based on an increased millgate price of Le 610 per ton of palm oil (para 6.07) and Le 235 per ton of kernel the projected cash flow for DOPC (Annex 4) shows annual surpluses from Year 1 onwards. Annual surplus starts from Le 174,500 in Year 1 to Le 783,700 by Year 10. The projected profit and loss statement for DOPC is shown in Annex 4. Again, based on the increased prices, DOPC would realize annual profits from year 1 onwards. Profits range from Le 558,000 in Year 1 to Le 750,000 by Year 10. DOPC has accumulated losses of approximately Le 683,000 and a loan from the Government of Le 1.9 million. To ensure DOPC-s liquidity and profitability, assurances were obtained that out of the Le 1.9 million loan from the Government, Le 1.0 million be converted into equity, and the accumulated interest on the loan be waived. The amount of Le 900,000 shall be paid over a period of not less than 10 years at an interest rate of not more than 11% on the outstanding balance. However, payments shall not start until after the Le 683,000 accumulated loss shall have been wiped out, estimated to be by the end of Year 2 (Annex 4b). Rice Seed Supplies 4.20 Government has recently established a National Seed Committee which will be responsible for regulating the release and withdrawal of varieties, and will influence activities related to commercial seed produc- tion in Sierra Leone. The existing Seed Multiplication Unit (SMU) would continue to produce all seed requirements for the project. The SMU operates two irrigated seed farms of 8 ha each in the project area, and plans to increase output through double cropping. In addition, it has contracted with swamp rice farmers to produce certified seed under the Unit's supervi- sion; some 100 ha are currently producing seed. The Unit's management has given assurances that both swamp and upland seed requirements under the proposed Phase III could and would be met. These requirements would peak at  - 31 - 37.5 tons for swamp rice in PY 4, based on replacement of seed every fourth year. The project's upland rice seed demand is expected to reach 105 tons in PY 3, and theoretically could increase to 245 tons and 350 tons in PY 4 and 5 respectively, if the replacement policy is adhered to. However, although the project would advocate replacement, it is doubtful that all upland rice farmers would purchase replacement seed in the fourth year. D. Project Monitoring and Evaluation 4.21 PEMSU is responsible for the implementation and monitoring of all the agricultural development projects in the country (para 1.17). The internationally recruited positions that would be funded under the project (para. 3.13) have the following responsibilities: (a) The Senior Sector Planner, the Project Planner, and the Agro- statistician would work in close conjunction with the National Central Planning Unit (in the Ministry of Development and Economic Planning) in the preparation of a national development plan and in the formulation of agricultural policies. They would also be responsible for all sectoral data and analysis, as well as the identification, preparation and assessment of development projects. (b) The Evaluation and Project Economists would assist in the planning and preparation of projects and also be responsible for the monitor- ing and evaluation of all on-going projects. (c) The Financial Controller would be responsible for establishing and supervising the accounting systems in all the projects, and for training of accounting and auditing staff. More detailed descriptions of the terms of reference and functions of this mit are in Working Paper No. 2. It is anticipated that PEMSU would be fully operational when the proposed project is effective. To properly carry out its functions PEMSU's evaluation section--headed by the Project Econo- mist--would have a Monitoring and Evaluation Cell (MEC) based in Kenema. MEC would be equipped with one Field Control Officer, six Field Control Assistants, one Evaluations Officer, three Senior Enumerators, nine Permanent Enumerators, supporting staff and appropriate means of transport. The MEC unit would be directly administered by the PM, who would also review the work and findings of MEC with PEMSU; the work program would be established in collaboration with PEMSU and the Project Development Committee. Local consultants would be engaged to carry out a baseline socio-economic study of the project area, as was done for the IFAD Magbosi IADP, and would make a detailed design of the monitoring and evaluation activities to be carried out by PEMSU and MEC during the first and following years. Except as Government and IDA would otherwise agree, services of consultants would be engaged by the Government not later than three months after credit effective- ness, under terms of reference and conditions of employment satisfactory to IDA. Assurances would be sought to this effect during negotiations.  - 32 - Reporting Requirements 4.22 In addition to the financial reporting requirements outlined in para 3.21 and 3.22 , project management would be responsible for the prepara- tion and submission of semi-annual and annual reports. As in the earlier projects, these reports would reflect implementation and physical progress based on the inputs of PEMSU and management staff. Reports would be submitted to IDA for review not later than one month after the end of each half-year. At negotiations assurance were obtained from Government to this effect, and in addition, Government would prepare and furnish to IDA, promptly after project completion, a project completion report in accordance with a format and content acceptable to the Association. V. TECHNOLOGY AND PRODUCTION SPECIFICATIONS 5.01 No major attempt will be made by the Project to radically alter existing cropping systems, and shifting cultivation is expected to continue during the life of the project. Some promising results have been achieved at Rokpur on crop combinations for permanent upland cropping and further trials would be carried out under the proposed Adaptive Crop Research Extension (ACRE) project. Estimated yield increases are shown in Table 3, and details of crop production are in Annex 5. Table 3: Estimated Yield Increases (tons/ha) Project Year 0 1 2 3 4 5 6 7 Upland Rice 1/ 0.7 0.9 1.0 1.0 1.0 1.0 1.0 1.0 Swamp Rice Pkg 1 2/ 2.0 2.5 3.0 3.3 3/ 3.5 3.5 3.5 3.5 Swamp Rice Pkg 2 2/ 2.0 2.2 2.5 2.5 2.5 2.5 2.5 2.5 Cocoa Rehab. 0.28 0.38 0.45 0.50 0.50 0.50 0.50 0.50 Cocoa Plantings 4/ - 0.00 0.00 0.00 0.25 0.56 0.70 0.70 Coffee Rehab. 0.28 0.26 0.26 0.35 0.45 0.48 0.48 0.48 Coffee Plantings 5/ - 0.00 0.00 0.00 0.06 0.24 0.75 0.75 1/ Average yields of 1,590 kg/ha (LAC 23) obtained by project farmers in the Bong Project in Liberia. 2/ Trials in Sierra Leone under Package 1 conditions gave main season crop yields of more than 4,000 kg/ha, and under Package 2 conditions, up to 3,500 kg/ha (Rice Research Station, Rokupr). 3/ 10% dry season cropping in PY3 and 15% from PY4 on. 4/ Indications from SLPMB experience. 5/ Njala University trials gave average yields of over 2,000 kg/ha with 5 clones over a 5 year period.  - 33 - 5.02 Swamp Farming. Farmers who only grow swamp rice would improve their rice production under one of the two recommended packages for this component. The average swamp rice holding under the project is approximately 1 ha, although in some cases larger areas have been developed where avail- able family labor permits. Package I for swamps with good soils and good drainage and irrigation possibilities would concentrate improvement of already constructed dikes, bunds and peripheral irrigation canals, and further clearing and leveling. Agronomic practices would include the use of better varieties, proper nursery establishments, appropriate fertilizer application (NPK 15:15:15 and Urea), spaced transplanted seedlings, weeding, and water control to deter pests. Ten percent of the area under this package is expected to be double cropped within the third year of development, increasing to 15%. Package II swamps would be carefully selected to ensure that they can be managed with limited engineering. Beause of their lower potential, these swamps would receive lower fertilizer inputs, NPK: 115 kg/ha instead of 245 kg/ha in Package 1 and Urea 50 kg/ha instead of 55 kg/ha. The recommended rice varieties are C.P. 4, ROK6 and RH12; for the second crop in the dry season Rok 11 and ROK 12 are recommended. 5.03 Under the project all land development and swamp drainage would be done by the farmers themselves but the Land Planning Unit would select swamps, design and peg out the work to be done. For these technological packages to succeed, well trained extension staff would provide follow-up supervision to ensure that recommended techniques are used. Such supervision would be needed for at least two cropping seasons, and would be combined with adequate and timely supply of inputs--seed and fertilizer. Since farmers traditionally depend on their upland for growing food crops, consisting of rice and a range of vegetables and root crops, the production of these crops would have to be assured. Thus swamp rice farmers would be encouraged to develop the border areas of the swamps. Cassava, cocoyams, pineapples, chilles, and other vegetables could be grown on areas of less than 5% slope, and tree crops, especially fruit trees (plantains, bananas and citrus), on steeper slopes. This system would reduce the farmer's time and labor, as it confines his food crop activity to a fixed, permanent area and possibly farmers who have suitable swamps could be persuaded to carry out multiple cropping on a portion of the swamps, and by doing so stimulate expansion of tree crops and increasing the fallow period. 5.04 Upland Farming. Upland rice farmers would either improve their rice cropping techniques or would participate in the coffee or cocoa compo- nents consisting of either rehabilitation or new planting of one of these crops. Under the project the farmer would be advised to use the main recom- mended upland rice varieties - ROK 3 and LAC 23 - at a seeding rate of 70 kg/ha, seeding rate, on appropriate planting times, and to plant approximately 0.1 ha of cassava in rows (instead of in a scattered manner). He would be encouraged to weed his upland rice crops, and, in the second year, to increase his cassava stand by establishing additional rows to a purestand level. This practice would ensure greater productivity from his cleared plot before it reverts to fallow, and would conform to his normal cropping pattern. No fertilizer is recommended at this time as the farmer depends on bush fallow for soil improvement, and the benefits of fertilizer applications in the  - 34 - conditions of the project area have not been demonstrated. More than 10,500 farmers would be assisted in this respect by the project. In consultation with the research agencies, the project would promote longer and better utilization of the cleared areas following upland rice, initially, by advocat- ing the infilling of harvested rice area with cassava, followed by a fallow with bush pigeon peas or other recommended plants. This practice is likely to be accepted slowly by farmers, but could initiate a desirable type of change in land use. 5.05 Cocoa Planting and Rehabilitation would be undertaken by a total of 2,200 farmers only where suitable soils exist. Improvement would consist of: (a) shade regulation; (b) proper spacing--mainly infilling, as reducing the number of established mature cocoa trees is not recommended; (c) prun- ing--mainly chupon (sucker) removal and removal of unproductive canopy in young Upper Amazon; (d) proper weeding where necessary--closed canopy cocoa usually requires no weeding; (e) black pod control through a regime of spraying copper fungicide (Kocide 101), and the regular collection and burying of diseased pods; and capsid control with insecticide (Gammalin 20). Staff being trained by SLPMB-s expatriate cocoa specialist would spearhead rehabilitation activities, which started in 1979. Under this rehabilitation program, farmers undertake spraying with their own equipment and have demonstrated enthusiasm for black pod control. The purchase of fungicides, insecticides and CP3 Knapsack sprayers would be done either singly or collectively in small groups. A minimum holding of 2 ha of rehabilitated cocoa is required per allocation of a sprayer. Initially, seed for the cocoa planting program would be obtained from clonal seed gardens in the Ivory Coast, and grown in project nurseries; in the meantime, a clonal seed garden established at Pendembu under Phase II of the project is to be further developed and improved. While soils in the project area are struc- turally suitable for cocoa growing, they appear nutritionally marginal for the more demanding, early maturing Upper Amazon hybrids. Because no research has been carried out, exact fertilizer requirements are not known; therefore the project would recommend a gradual increase in the fertilizer rate up to Year 4 after planting (from 50 to 300 kg/ha). Research would be carried out through a small program, under the supervision of SMSs and AOs in farmer fields and in Pendembu, to determine more precisely the fertilizer require- ments of cocoa in the project area. Establishment would be carried out under shade, preferably under bush regrowth with thinning out as required. It is not recommended that completely cleared land be used for planting cocoa because of the difficulties in getting farmers to maintain temporary shade and to establish proper levels of permanent shade. The cocoa planting program is based on an average of 1.0 ha per farmer. 5.06 Coffee. To increase yields from the dense stands, a coffee rehabilitation program based on a five-year pruning cycle, with one-fifth of the holding pruned each year, would be carried out under the project. Carefully selected farmers would be trained in pruning techniques, given guidance on shade regulation (shade trees removal is needed, with pruning to prevent etiolation of new stems), plant density (mainly thinning), weeding and fertilizer application (200 kg/ha). An average of 1.5 ha of coffee  - 35 - planting would be developed per farmer, also over a five-year cycle. In this way farmers would develop approximately 0.3 ha each year without hired labor, and without straining his other crop commitments. The project would also introduce the "Agobiada" system of bending and pegging seedlings to promote controlled vigorous multi-stem development, and pruning on a five- year cycle for rejuvenation. At full development, farmers would have an even production of coffee, with 1/5 the holdings in a pruned stage, and 4/5 in full production. Some 1,250 farmers would participate in the rehabilita- tion of existing coffee trees and would concentrate mainly on applying the five-year pruning cycle. 5.07 Labor. It is estimated that in addition to incremental family labor hired labor would also be required for all project activities except coffee planting. Upland food crops is estimated to require some 12% (30 man-days) of hired labor. Farmers are likely to utilize a higher proportion of hired labor (38%) in swamp rice production. Hired labor requirements for cocoa planting are expected to drop from 18% of total labor to nil by the fifth year. However, farmers would themselves carry out regular spraying against black pod disease, and, where necessary, against capsids. Labor availability was identified as a problem in the previous project and was due in most part to a changing socio-economic system. There is an increasing demand by the younger members of the community for payment for work which traditionally was done free or, at most, the cost of a meal. This factor has been taken into consideration under the project, farmers would be given credit to pay for hired labor so they are not likely to encounter labor availability problems. The crop development packages as shown in the farm models in Annex 6 have been designed to minimize the overlapping of cropping activities so that both family and hired labor would be available for smooth functioning of farm operations. However, farmers would initially require guidance and assistance from the extension services in the organizing and efficient use of labor in their farming operations, for which a trained and improved extension service is essential. 5.08 Of the 100,000 farmers in the project area, some 55,000 to 60,000 farmers would be reached by the extension service. Of these, only about 20% or 12,580 are expected to request a credit and are considered direct benefi- ciaries. Anticipated participation would be as follows: Table 4: Adoption Rate No. of Farmers involved in Each Activity Type of Activity PY 1 2 3 4 5 Total Upland 350 700 1100 2200 2790 7140 1/ Swamp Rice 200 300 500 550 450 2000 Cocoa Rehab. 150 280 500 500 - 1430 Cocoa Planting 200 200 200 200 - 800 Coffee Rehab. 310 320 310 310 - 1250 Coffee Planting 340 500 660 500 - 2000 1/ The pruning technique for rehabilitation of coffee results in a temporary drop in production, which is easily made up in later harvests.  - 36 - Environmental Considerations 5.09 The agricultural components of the project and the technology proposed are likely to improve utilization of the resources of the project area, and no damage to the environment is likely to result from this project's activities. Although there is a low incidence of schistosomiasis in the project area, a recent survey of villages associated with swamp development under the project concluded that the snail population in rice swamps was small, and there is no evidence that the swamp rice activity under the project increases the incidence of this disease in the area. 1/ VI. DEMAND, MARKETING, PRICES AND FINANCIAL ANALYSIS A. Demand 6.01 At full development in 1990 the project would contribute incremen- tal output of: 780 tons of cocoa; 2,650 tons of coffee; 4,500 tons of husked rice (equivalent to 3100 tons of milled rice) and 16,900 tons of cassava; 710 tons of palm oil and 140 tons of palm kernels. The incremental production of food crops would be easily absorbed into the domestic market. The country is a net importer of food, including rice which is the major staple. Average per capita consumption of rice is between 100-125 kg per annum and Government projections indicate that a deficit of about 30,000 tons of rice will persist in the 1980s despite the rice components in the ongoing and planned agricultural development projects. The project area is the major rice deficit region in the country; the incremental production of rice and cassava which is a substitute for rice in the local diet would be consumed within the project area. 6.02 Palm oil is another major component of the national diet, per capita annual consumption is estimated at 13 kg and demand for domestic consumption is projected at 48,000 tons in 1985, this excludes additional demand for soap production. Annual production from the traditional processing of wild palm is estimated at 31,000 tons while production from the existing nucleus estates at Gambia-Mattru and Daru is estimated at 14,000 tons. So there would be a deficit of at least 3,000 tons; at present the deficit is filled by imported substitutes. Current imports of animal and vegetable oils are about Le 4.3 million (1978). The palm kernels which are a byproduct of the oil palm processing are purchased by the SLPMB and either exported or processed into palm kernel oil and then exported. The incremental production would be small and would face a ready demand in the export market. Furthermore the SLPMB palm kernel oil mill is presently operating below capacity due to inadequate supplies of palm kernels. 6.03 Coffee and cocoa are export crops which are major sources of foreign exchange and government tax revenues. The country would not face any problems in marketing the incremental production. Sierra Leone is a member of the International Coffee Organization and has a quota of 16,000 tons which is con- siderably in excess of its current production of 10,000 tons. The incremental cocoa production (about 8% of current production) would be too small to cause any concern in the international cocoa market. 1/ "Farmer Health Survey" - IADP, CUSO, CARE/Njala University College.  - 37 - B. Marketing 6.04 The food crops would be marketed through the existing network of private traders, which is adequate for handling the increased volume of production. About 80% of the rice produced in the project area is tradi- tionally processed by hand-pounding, yielding rice with 41% brokens and a recovery rate of 68%. The remaining 20% is processed in small scale milling facilities with recovery rates ranging between 50 and 67 percent. On-farm storage is adequate and the current percentage of crop loss appears to be small. Rice that is surplus to short-term on-farm consumption is sold to itinerant traders for sale in Kenema and the nearby mining towns. Cassava is marketed through contract harvesters/traders. The crop is sold standing in the field to the trader who provides labor for harvesting and transporta- tion to the market. 6.05 The coffee, cocoa and palm kernels would be marketed through the SPLMB marketing system. The system operates efficiently but there is some concern about producers receiving the official prices. In situtations of farmer indebtedness and pledging of crops before harvest to the trader, producer prices are often far below the official price. The entrance of the FFC (paras 3.12 and 4.18) into the system would serve as a regulatory factor since farmers would be able to compare prices paid by the FFC and the costs of its credit with those of the commercial traders. This role of the FFC depends on its operations reaching a level where it can compete effectively with the traders and create uniformity in prices and credit terms. C. Prices 6.06 With the exception of cassava, prices of the products are currently set by the Government. The financial and economic prices used in the farm budgets and calculations of the economic rate of return respectively are shown in Table 5 below. They are based on the existing prices and IBRD forecasts. For the tradable commodities, the economic border prices were determined by the shadow exchange rate of US$1.00=Lel.20. Further details on margins, distribution costs and the underlying assumptions are set out in Working Paper 5. The current producer prices are 50% of the f.o.b. price Freetown for coffee, 65% for cocoa (this includes a trading loss of Le 108 per ton by the SLPMB) and 47% for palm kernels.  - 38 - Table 5. FARMGATE PRICES (constant 1980 Leones) 1980 1985 1990 Economic Financial Economic Financial Economic Financial Output: Rice (Paddy) 325.7 277.5 471.6 419.0 485.3 431.1 Cassava 123.0 100.0 123.0 100.0 123.0 100.0 Palm oil 790.0 500.0 795.2 710.7 769.3 687.6 Palm kernel 407.3 201.6 402.1 296.8 384.7 277.5 Cocoa 3,637.2 2,125.5 2,928.5 1,619.6 1,923.3 1,055.9 Coffee 4,218.6 2,007.0 3,000.2 1,656.5 3,276.5 1,810.9 Inputs: Urea 325.5 291.2 415.5 369.0 436.0 387.0 N-P-K (15-15-15) 378.0 336.0 483.0 428.0 505.0 448.0 6.07 At the time of appraisal the pricing policy on palm oil appears to have been inconsistent with the objective of reducing consumer prices. There were no controls on consumer prices but the Government had set the millgate price of palm oil at the two nucleus estates--DOPC and Gambia-Mattru at Le 500 per ton while the combined production of the two mills is apparently too small (10% of total production) to have any influence on prices on the consumer market which range from Le 925-Le 1000 per ton. The result had been very high margins to the select traders who market the oil produced by these two mills as shown below, in the analysis of prices at different levels in the marketing system: Le/ton Millgate Price DOPC 500 Traders margin 270 Wholesale Price Kenema 770 Wholesaler-s margin 30 Retailer Price Kenema 800 Retailer's margin 125-200 Consumer Price 925-1000 Mainly as a result of this very restrictive pricing policy the DOPC has been experiencing financial difficulties. The selling price did not cover the costs of production or permit the Company to pay more than Le 40 per ton of fresh fruit bunches (ffb) to the smallholder outgrowers while the market price is Le 56 per ton so that the Company has been unable to obtain ade- quate supplies. An agricultural pricing study will be funded under the  - 39 - recently approved IDA Technical Assistance Project. However, as an interim action to rescue the operations of the DOPC the mission recommended that the ffb price be raised to Le 56/ton and the millgate price to Le 650/ton. This recommended millgate price was based on the analysis of margins and price levels discussed above and the derivation of a millgate price of Le 705 per ton based on a hypothetical import price of Le 642 derived from the IBRD spot price and local distribution costs of Le 218 from port to consumer market net of distribution costs of Le 153 from the Millgate to the consumer market (further details in Working Paper No. 5). While recognizing the limitations of such a partial approach, the available data indicate that these prices would ensure the financial viability of the DOPC (Annex 4) without causing any major adverse effects on the allocations of resources to other crops. It was recommended that the DOPC should investigate the possibility of selling directly to the wholesaler and/or retailer in Kenema. The Government subsequently, in May, 1980 raised the prices to Le 660 per ton of palm oil and Le 55 per ton of ffb which are adequate. Assurances were obtained that these prices along with other agricultural prices would be reviewed annually by the Government and IDA within the framework of market monitoring that would be established under the proposed pricing study. D. Financial Analysis Financial Implications for Farmers 6.08 The financial returns to farmers who would participate in the various crop development programs are summarized in Table 6 below (details in Annex 6). The wide variations in returns reflect the differences in the intensity of resource use in the tree crops as compared with rice as well as the wide variations in yields obtained in the three types of rice cultivation. All farmers would achieve an increase in net profit even if family labor is costed at the market wage rate of Le 1.50 per manday which is about equal to the opportunity cost of family labor. Since most of the improved techniques are highly labor intensive, the average returns to labor may not increase very much or may even fall, as in the case of cocoa rehabilitation; however the net profit to all farmers would increase even after costing family labor, and the average returns to family labor would still be higher than its opportunity cost. 6.09 The total income effect on project farmers would depend on crop combinations and farm sizes. Mainly because of labour constraints at peak seasons a project farmer would not be able to improve all his crops simulta- neously. The distribution of project farmers according to the feasible improvement packages and the total income impact are shown in Annex 6 Table 3. The incremental real income at full development in 1990 would range from about Le 200 (US $190) for a Package 2 swamp rice farmer with 2.1 ha to Le 1,948 (US$1,855) for a farmer with 2.9 ha of which 1.5 ha are new plantings of coffee, though it must be noted that the rice farmers would achieve full increase in yields in about two years while the new coffee farmer with a  Table 6. Net Financial Return to Farmers per hectare in 1990 Constant 1980 Leones Increase in Increased Without Project With Project Average Returns Costs of Net Return Net Return Net Return Net Return per per family Increase in per ha per manday per ha per manday ha manday labor 2/ Net Profit 3/ Swamp rice Pkg 1 666.3 5.5 1171.8 7.1 505.5 1.6 66.0 439.5 Swamp rice Pkg 2 663.3 6.5 850.4 7.4 187.1 0.9 19.5 167.6 Upland rice/cassava 300.7 1.2 453.6 1.7 152.9 0.5 46.5 106.4 Cocoa Rehabilitation 287.5 12.0 372.8 8.5 85.3 - 3.5 30.0 55.3 0 Cocoa New Planting 4/ 5/ - - 479.9 6.6 479.9 6.6 109.5 370.4 Coffee Rehabilitation 477.0 13.6 737.4 17.6 260.4 4.0 10.5 249.9 Coffee New Planting 4/ - - 1255.7 18.7 1255.7 18.7 100.5 1155.2 1. (a) These returns are based on the financial farm budgets in Annex 6 table and the farmgate price of inputs and outputs - Working Paper No. 5 (b) They are net of all financial costs including hired labor. (c) The net returns per manday indicate the returns to family labor. 2. At Le 1.50 per manday. 3. After costing family labor. 4. In the planting of cocoa and coffee there would be some displacement of other farm activities and some loss of incomes allowances for this have been in the overall farm budgets involving these two activities - Annex 6 and Working Paper No.5 5. Values for 1991 (after 6 year loan repayment period)  - 41 - phased planting program would reach maximum income levels in ten years. The preponderance of farmers in Model 3 (improvement of upland rice and cassava) despite the relatively lower incomes reflects the importance attached by the risk averse subsistence farmers to their main food crops rather than technical or other constraints. On the basis of the present assumptions on prices and yields, it would appear that coffee production is much more profitable than cocoa, but some farmers seem to prefer growing cocoa either because they are more familiar with its husbandry or they may have different price expecta- tions. Others prefer a diversified production base and so grow both coffee and cocoa. Financial Implications for Government 6.10 The project would generate additional revenues to the Government directly through the taxes on the export crops - coffee, cocoa and palm kernels - as well as indirectly through taxation on the secondary economic activities that would be induced by the project in the construction, process- ing, trading and other servicing sectors. At full development in 1990 incre- mental revenues from export taxation would amount to Le 6.3 m (US$6.0 m) in current terms,a precise measure of the revenues that would be generated indirectly is not possible at this time. The government cash flow is presented in Annex 7; the negative flows in the implementation period are relatively small, since about 90% of development costs are externally financed (IDA US$12.0 million, BADEA US$8.5 million, UNDP US$2.0 million). The debt servic- ing and recurrent costs in the post-implementation period would be offset by the considerable increases in revenue from taxation of the increased exports of coffee and cocoa that would be generated by the project. The recurrent operational costs for servicing the investments made under the two previous projects and which are not attributable to the proposed project, amount to about Le 130,000 and will be borne entirely by the Government. At the end of the investment period of the proposed Phase III project, an additional Le 620,000 (Annex 7 for details) would be required for the annual operational costs of the agricultural services for about 5 years. By 1990, these re- current costs should decline to about Le 500,000, as it is expected that farmers would then be well versed in the techniques of improved husbandry introduced under the project, and so fewer extension workers would be needed. Furthermore, bottlenecks in the proposed system would have been identified, and monitoring and evaluation activities would be reduced. The estimated annual road maintenance costs would amount to Le 300,000 by the end of the construction period and increase to about Le 400,000 by 1990 (Annex 7). VII. BENEFITS AND JUSTIFICATION Benefits and Justification 7.01 Overall Benefits: It is estimated that there would be about 12,600 farm families (12% of total rural families in the Eastern province) who would earn significantly higher incomes (para 6.09) under the various crop improve- ment and credit programs. As indicated by the distributional pattern of farm  - 42 - types in Annex 6, Table 3, all of these farmers earn per capita incomes below US$200 per annum, while about 20% of them are below the relative poverty income threshold of US$80 for Sierra Leone. As discussed in paras 6.08 and 6.09 above the wide variations in incremental incomes are due mainly to crop combinations since farm sizes are fairly equal in the area, however, the largest increases in incomes would accrue to the farmers currently earning the lowest incomes (Models 6 and 7). The improvement of the road network and the provision of village wells would reach beyond these direct beneficiaries to a considerably larger proportion of the rural population. There would also be spin-off effects from the strengthening of the institutional services and the expansion of credit. It is estimated that at least 50% (50,000) of the rural families in the Province would benefit in some way under the proposed project. As Sierra Leone is a net importer of food (para 6.01) the incremental foodcrop production would represent potential annual net foreign exchange savings of at least US$6.0 m at border prices (Le 7.2 million in domestic currency, shadow priced at Le 1.20 = US$1). While incremental foreign exchange earnings (net of imported inputs) per annum from the export crops would be about US$8.0 m by 1990 (in real 1980 terms). 7.02 The training programs and institution building to be introduced under the project would improve local capability and facilitate planning and implementation of future development programs. By 1990, annual on farm employment would increase by 745,000 man-days (12% paid labor and 88% family labor). Additional employment would also be created by the increase in the level of economic activity that would be induced by the project in other sectors such as trading, rice processing, construction, transportation, etc. Economic Rate of Return 7.03 The Economic Rate of return is estimated to be 34% (Annex 8, Table 1). The important assumptions underlying the analysis are: a) Benefits: Only the benefits from incremental crop production that would be directly generated by this project are included. For the rice components which are currently in Phase II, all future incremental production are attributed to Phase III since in its absence production would stagnate at current levels. Yields, acreages and production are as in Chapter 5. The economic farmgate prices and the bases of their derivation are in Working Paper No. 5; b) Costs: Only investment, and operating and maintenance costs that are directly related to the generation of the identified benefits are included. The costs of the special studies, are excluded since they generate benefits which cannot be easily identified and which extend beyond the direct beneficiaries. Eighty percent of the costs of PEMSU are excluded since they are attributable to the four other agricultural projects in the country. For operations after the five year development period it is assumed that a smaller agricultural and extension staff would be required to maintain the momentum achieved. The phased decline in recurrent cost are shown in Annex 8, Table 1; c) Shadow pricing: All foreign exchange costs and benefits are shadow- priced at an exchange rate of Le 1.20 = US$1 which is based on the existing restrictions on trade. Fifty percent of the costs of inter- nationally recruited personnel are considered foreign exchange costs to  - 43 - reflect the proportion of their incomes kept abroad and the import content of their expenditures, the remaining 50% are considered domestic costs and are not shadow priced. Given the labor situation in the area, hired and family labor is priced at the average market wage of Le 1.50 per man-day; d) Project life: The economic life of the project is assumed to be 25 years including a 5-year implementation period. Risks and Sensitivity 7.04 The proposed project would be the third phase in the area and would build upon the organizational structures and techniques developed in the previous phases so that normal risks associated with projects of this kind would be minimized. However, three factors could impose severe con- straints on the project: (i) a delay in appointing the Senior Training Officer and the Senior Credit Specialist - two key positions since extension and credit are the two crucial elements in achieving the project targets, (ii) a delay in achieving an effective extension service. (iii) shortage of funds by the FFC to purchase recurrent input requirements at the appropriate time, Therefore the positions of Senior Training Officer and Senior Credit Special- ist have been identified for international recruitment and their appointments have been made conditions of credit effectiveness (para 4.07) in order that effective extension and input supply programs could be implemented without delay. Furthermore, the provision of adequate funding for recurrent inputs would be a project covenant (para 3.20). Technical risks are minimal for the new components because the proposed techniques are simple and do not require major changes in the cropping patterns, the agronomic recommendations are based on experimental results and experiences in the area. 7.05 Sensitivity analysis was undertaken to evaluate the impact of various adverse factors on the economic rate of return (ERR) and determine which variables would be most crucial to the success of the project. As a measure, switching values?l/ using an opportunity cost of capital (OCC) of 15%, were computed. The numerical results indicated that in its present design the project is resilient to the possible risks and would remain viable under adverse conditions in any of its components. Total benefits would have to decrease by about 50% (through a shortfall on yields, prices, area or any combination thereof) before the project becomes economically unviable The project is also insensitive to increases in costs. there would have to be an increase of 106% in total costs before the project would be economically unviable. A more detailed sensitivity analysis is presented in Annex 8 Table 2. 1/ The switching value is the value of the variable tested at which the net present value (NPV) of the net benefit stream of the project, discounted at the OCC, is zero, in other words, the value beyond which the ERR would be below the OCC. The switching value may be interpreted as a measure of how far the variable can differ from its most likely value before the project becomes economically unviable.  - 44 - VIII. AGREEMENTS REACHED AND RECOMMENDATIONS 8.01 The following assurances were obtained from the Borrower during negotiations and included as project covenants: (a) that MOW would make arrangements satisfactory to IDA for (i) CARE to carry out the road construction and maintenance programme (para 3.09); (ii) taking over and maintaining roads completed by CARE (para 3.09). In addition, MOW would submit (i) a program satisfac- tory to IDA by January 31, 1981 for upgrading the main roads from Manowa junction to Sefadu and Daru to Joru to an all weather capa- bility (para 3.09); (ii) put the programme into effect by March 31, 1981 and (iii) by January 31 of each year, submit the annual work programme for adequate maintenance of trunk and feeder roads in the project area (para 3.09); (b) appointment of FFC as a Licensed Buying Agent for coffee and cocoa before March 31, 1981 (para 3.12); (c) consultant services would be engaged to carry out the research and training programs, and review the road program, under terms of reference and conditions of employment satisfactory to IDA (para 3.14); (d) consultants' services would be engaged to carry out a baseline survey, under terms of reference and conditions of employment satisfactory to IDA not later than three months after credit effectiveness (paras 3.14 and 4.21); (e) Government would replenish any funds disbursed for expenditures not eligible for financing from the revolving account for roads construction (para 3.20); (f) on the basis of the approved budget, Government would (i) make appropriate allocations in the MAF budget and release the necessary funds available to MAF quarterly in advance and (ii) make timely allocations of the necessary foreign exchange for the importation of recurrent farm inputs and other goods (paras 3.17 and 3.21); (g) Government would cause MAF, FFC and DOPC to make satisfactory accounting, auditing and reporting arrangements (para 3.22), and would ensure that project progress reports and a project completion report are submitted as specified by IDA (para 4.22); (h) the positions of: Project Manager, Project Engineer, Projects Coordinator, Senior Training Officer, Farm Credit Specialist, Senior Sector Planner, Project Planner, Financial Controller, and Project Economist would be held by qualified competent staff acceptable to IDA and under terms and conditions of employment satisfactory to IDA (paras 4.06 and 4.07); (i) Government agreed to the removal of all subsidies on fertilizers by the end of the 1985 cropping season and have submitted a timetable  - 45 - for annual reductions, starting in the 1982 season, of about 25% of the existing subsidy (para 4.17); (j) Government would set the seasonal and medium-term interest rates charged under the project at 20 and 15% per annum respectively, and chese interest rates would be reviewed annually with IDA (para 4.17); (k) Government agreed to increase the equity of the FFC by Le 500,000 through capital contributions of Le 400,000 from the Central Government and Le 100,000 from the SLPMB (para 4.18); (1) conversion of (i) the cumulative surplus of the Farmers Finance Company into equity, (ii) Le 1.0 million of Government's Le 1.9 million loan to DOPC into equity, with interest on this loan waived (paras 4.18, 4.19); and (m) prices on fresh fruit bunches and palm oil for the Daru Oil Palm Company would be reviewed with IDA, annually, and maintained within the framework of market monitoring (para 6.07). 8.02 The following would be conditions of disbursement against expendi- tures concerning: (a) the penetration roads component - the borrower would (i) establish a special revolving account for the road construction program (para 3.17), (ii) commence the upgrading to all weather capability of the Manowa junction to Sefadu and Daru to Joru roads (para 3.09), and (iii) enter into a contractual agreement, satisfactory to IDA, with CARE (para 3.09); and (b) the Daru Oil Palm Company - the borrower would acquire 300 ha land suitable for oil palm growing in the neighborhood of the DOPC nucleus estate, and pay appropriate compensation for such land, satisfactory to IDA (para 3.11). 8.03 The following would be conditions of Credit effectiveness: (a) all conditions precedent to the effectiveness of the proposed BADEA loan of US$8.5 million had been fulfilled (para 3.17); (b) the execution of financial agreements between (i) the Government and the DOPC, and (ii) the Government and the FFC, for the onward transmission of funds in the form of equity holdings by the Government (para 3.17). (c) recruitment of the Senior Training Officer and Senior Credit Specialist (para 4.07). 8.04 With the above assurances and conditions, the project is suitable for an IDA Credit of US$12.0 million.  SIERRA LEONE EASTERN INTEGRATED AGRICULTURAL DEVELOIREMNT PROJECT III ANNEX 1 Summary of Costs (Le '000) Project Year 1 2 3 4 5 Total Foreign Exchange Amount % 1. Project Management 627.2 398.5 425.8 389.4 470.9 2,311.8 1,266.0 55.0 2. Extension and Training 758.0 669.3 810.5 721.6 811.4 3,770.8 1,914.8 51.0 3. Engineering Services A. General Administration 274.1 293.9 154.2 51.8 37.2 811.2 433.7 53.0 B. Land Planning 151.7 188.1 185.6 251.3 208.2 984.9 435.4 44.0 C. Wells 113.0 109.4 104.2 171.3 134.0 631.9 323.5 51 0 D. Workshop 221.9 205.2 83.6 126.3 93.5 730.5 414.1 5b .0 E. Roads 1,389.9 534.2 728.9 1,035.2 862.0 4,550.2 3,566.1 70.0 4. Monitoring and Evaluation 142.5 106.9 138.3 156.7 155.0 699.3 264.8 38.o 5. Farmers Finanoe Company 712.6 312.4 384.o 463.9 296.0 2,168.9 1,699.2 78.0 6. Daru Oil Palm Company 478.4 432.4 179.4 200.2 198.7 1,489.1 961.9 65.o 7. PEMSU 613.5 591.6 821.6 962.1 864.3 3,853.1 2,571.2 67-o 8. Production Inputs A. Seedlings 158.1 283.5 451.4 661.6 634.7 2,189.4 1,228.6 56.o B. Fertilizers 21.9 74.6 144.8 251.1 319.3 811.6 716.9 88.o C. Insecticides 12.6 34.7 64.5 104.8 89.2 305.9 270.6 88.o D. Tools 19.5 31.8 53.9 58.3 33.6 197.1 174.7 88.0 E. Labor/Crop Loss 36.5 58.9 85.o 108.7 88.8 379.9 - - 9. Special Studies 119.8 83.6 60.4 51.0 - 314.7 314.7 100.0 Total 5,851.2 4,409.0 4,876.1 5,765.3 5,296.8 26,198.4 16,556.2 63.2  - 47 - ANNEX 2 SIERRA LEONE EASTERN INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT III Estimated Schedule of Disbursement (US$ million) IDA Fiscal Year Cumulative Quarter Disbursement Disbursement FY 81 4th Quarter O.1 0.1 FY 82 1st Quarter 0.3 0.4 2nd Quarter 1.0 1.4 3rd Quarter 1.4 2.8 4th Quarter 0.3 3.1 FY 83 1st Quarter 0.5 3.6 2nd Quarter 0.5 4.1 3rd Quarter 0.5 4.6 4th Quarter 0.5 5.1 FY 84 1st Quarter 0.5 5.6 2nd Quarter 0.5 6.1 3rd Quarter 0.7 6.8 4th Quarter 0.7 7.5 FY 85 1st Quarter 0.5 8.0 2nd Quarter 0.5 8.5 3rd Quarter 0.5 9.0 4th Quarter 0.5 9.5 FY 86 1st Quarter 0.5 10.0 2nd Quarter 0.5 10.5 FY 86 3rd Quarter O.5 11.0 4th Quarter 0.5 11.5 FY 87 1st Quarter O.5 12.0  - 48 - SIERA LEorE Eastern Integrated Agwleultuwsl Development Project III 4 3s Projected Cash Flow - Farmers' Finance Company ('000) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 tear 13 Inflow I/ Government Contribution - 815.5 877.9 1,326.4 1,771.0 1,084.6 Share Capital 2/ 300.0 200.0 - - - Loan Repayments: Seasonal 3/ 94.6 190.6 359.8 685.5 899.5 763.5 935.8 1,029.7 94668 1. o67.4 1,132.0 995.8 1,o64.6 Development - - 10.9 42.2 97.2 _263.4 469.o 698.9 965.6 ___85 620.8 366.6 914 42.9 Subtotal 4 94.6 201.5 402.0 782.7 1,162.9 1,232.5 1,634.7 1,995.3 1,745.3 1,688.2 1,498.6 1,087.2 1,107.5 Less: 10% Bad Debts 4 9.5 20.2 40.2 78.3 116.3 123.2 163.5 199.5 174.5 168.8. 149.9 108.7 110.8 85.1 181.3 361.8 704.4 1,046.6 1,109.3 1,471.2 1,795.8 1,570.8 1,519.4 1,348.7 978.5 996.7 Commissions-/ 12.6 28.1 51.2 84.6 113.1 170.3 242.4 314.5 362.8 371.8 371.8 371.8 37i.8 Total Inflow 1,213.2 1,287.3 1,739.4 2,560.0 2,244.3 1,279.6 1,713.6 2,110.3 1,933.6 1,891.2 1,720.5 1,350.3 1,368.5 Outflow Farm Inputs: Seasonal 55.2 137.5 262.3 495.1 687.0 751.4 841.0 891.4 773.8 841.0 891.4 773.8 841.0 Development 158.7 295.8 466.4 606.2 544.0 32.6 8.2 6.o 3.0 Subtotal 213.9 433.3 728.7 1,101.3 1,231.0 784.o 849.2 897.4 776.8 841.0 891.4 773.8 841.0 Vehicles and Equipment 264.8 292.0 139.9 375.5 153.8 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 a- Buildings 270.0 40.5 88.5 - - - - - - - - - - Salaries 8/ 272.2 316.3 332.0 274.0 287.6 273.2 258.8 244.5 244.5 244.5 244.5 244.5 244.5 Operating and Maintenance -/ 136.2 231.9 263.7 284.8 304.5 289.5 260.3 221.3 221.3 221.3 221.3 221.3 221.3 Total Outflows 1,157.1 1,314.0 1,552.8 2,035.6 1,976.9 1,421.5 1,443.3 1,438.2 1,317.6 1,381.8 1,432.2 1,314.6 1,381.8 Surplus (Deficit) 56.1 (26.7) 186.6 524.4 267.4 (141.9) 270.3 672.0 616.0 509.4 288.3 35.7 (13.3) Cumulative Surplus (Deficit) 56.1 29.4 216.0 740.4 1,007.8 865.9 1,136.2 1,808.3 2,424.3 2,933.7 3,222.0 3,257.7 3,244.4 1/ Staff costs, vehicles and equipment, operating and maintenance costs and farm inputs. 2/ Agreed increase in Share Capital 3/ See Tables on Repayments - Development and Seasonal Loans. Working Paper No. 3. / 10% of amount due estimated to be uncollectable. / See Table on FFC Commission as Licensed Buying Agent. Working Paper No. 3. 6 See Table on Summary of Farm Input Costs to Project. Working Paper No. 3. Average of vehicle replacement. 0/ Salaries and operating and maintenance costs reduced by 5% yearly from year 6 to 8.  S3IRRA LEONE Easterni Integrated Agricu3tural Development Project III ANNEX 3b Projected Profit and Loss Statement - Farmers' Finance Company ('00o) Year Year 2 Year 2 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 1 Year 12 Year 13 Income Loans 1/ Seasonal - 70.' 162.9 307.5 585.9 768.8 652.6 799.8 880.1 109.2 912.3 967.5 851.1 909.9 Development - 170.5 316.' 492.8 610.8 545 , 198.8 1C1.8 88.6 44. - Subtotal 2/ 240.8 479.2 800.3 1,196.7 1,314.1 851.4 901.6 968.7 853.5 912.3 967.5 851.1 909.9 Less cost of Farm Inputs - 213.9 433.3 728.7 ],]01_' 1,231.0 784.o 849.2 897.4 776.8 841.0 891.4 773.8 841.0 Gross Profit on Loans -/ 26.9 45.9 71.6 95.4 83.1 67.4 5?.4 71.7 76.7 71.' 76.1 77.3 68.9 Interest on Loans Seasonal 4/ 2].0 27.7 5S.7 99.6 130.7 11C.9 136.0 149.6 137.6 155.1 164.5 144.7 154.7 Developmet t 25.6 76.8 160.5 270.1 3''4. 364.9 361.7 318.9 221.7 135.3 62.4 16.8 5.6 Subtotal 37.6 104.5 212.8 370.7 465.C 475.8 527.7 468.5 359.3 290.4 226.9 161.5 160.3 CommissiLn6/ 12.6 28.1 51.2 84.6 113.1 170.3 242.4 314.5 362.8 371.8 371.8 371.8 371.8 Total Income 77.1 178.5 335.f6 55C.7 661.2 713.5 822.5 854.3 798.8 733.5 674.8 610.6 601.0 Expenses Salaries 25'C.0 279.9 279.9 219.9 219.9 208.9 197.9 186.9 186.9 186.9 186.9 186.9 186.9 Onerating and Maintenance 7/ 134.9 176.5 1F6.6 188.1 188.1 178.7 l69.' 159.9 159.9 159.9 159.9 159.9 159.9 Bad Debts 8/ 9.5 210.2 4(1. 78.' 116.' 12a.2 167.5 199.5 174.5 168.8 149.9 108.7 110.8 Denreciation- - - - - - 110.0 110.( 110.0 110.0 110.0 110.0 110.0 110.0 Total Expenses 397.4 476.6 506.7 486.3 524.3 620.8 640.7 656.' 6!1.' 625.6 606.7 565.5 567.6 Net Profit (Loss) (320.3) (298.1) (171.1) 64.4 136.9 92.7 181.8 19F.0 167.5 107.9 68.1 45.1 33.4 Cumulative Profit (Loss) (320.3) (618.4) (789.5) (725.1) (588.2) (495.5) (313.7) (115.7) 51.8 159.7 227,8 272.9 306.3 1/ See Tables on Seasonal Loans and Repayments and Development Loans respectively. Working Paper No. 3. 7/ See Table on Summary of Farm Input Cost to Project. Working Paper No. 3. 3/ Renresents mark-up on inputs. i/ See Table on Seasonal Loans and Repayments. Working Paper No. 3. 5/ See Table on Pepayments on Development Loans. Working Paper No. 3. / See Table or, IFC Commission ae Licensed Buying Agent. Working Paper No. 3. 7/ Salaries an, onerating and maintenance shown at base cost to match cost of inputs shorn also at base cost; expensen reduceP by 5rS yearly from year 6 to 8. 7/ 1C1 of Loans. 9/ 2PO< of vehicles and equipment of Le 450,000 ano 5, buildinpg coat of Le 4(0,200 berirninp yeRr 6.  SIERRA LEONE EASTERN INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT III Daru Oil Palm Company CASH FLOW '000 Le FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY10 OUTFLOWS Personnel 277.3 279.6 296.1 324.9 318.8 301.9 301.4 302.2 305.9 302.3 Vehichles & Equipment 305.9 360.o 54.4 100.2 33.2 42.0 65.5 89.4 107.5 107.5 Buildings 129.0 91.0 1.0 1.0 1.0 5.0 5.0 5.0 5.0 5.0 Operations & Maintenance 326.4 350.7 401.5 437.1 403.7 372.5 371.5 369.4 368.7 365.9 FFB from outgrowers at Le 60/ton 168.0 234.0 294.0 300.0 300.0 300.0 300.0 270.0 240.0 180.0 TOTAL 1206.6 1315.3 1047.0 1163.2 1056.7 1021.4 1043.4 1036.0 1027.1 960.7 INFLOWS Palm Oil at Le 650/ton 1300.0 1462.5 1612.0 1638.0 1644.5 1644.5 1644.5 1625.0 1657.5 1644.5 Kernels at Le 235/ton 81.1 89.3 98.7 101.0 101.1 101.1 101.1 99." 103.4 99.9 TOTAL 1381.1 1551.8 1710.7 1739.0 1745.6 1745.6 1745.6 1724.9 1760.9 1744.4 NET 174.5 236.5 663.7 575.8 688.,o 724.2 702.2 688.9 733.8 783.7 Note Present interest payments on Government loan amount to Le 155 thousand per annum, it has been requested that the loan be converted to equity  SIERRA LEONE EASTERN INTEGRATED AGRICULTURAL DEVELOBdENT PRWECT III Daru Oil Palm Company Projected Profit/Loss Statement (Le '000) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year U Year 12 Income - PaJlm Oil 1/ 1,300.0 1,462.5 1,612.0 1,638.o 1,644.5 1,644.5 1,644.5 1,625.0 1,657.5 1,644.5 1,651.0 1,677.o Kernels 2 81.1 89.3 98.7 101.0 101.1 101.1 101.1 99.9 103.4 99.9 110.5 122.2 Total Income 1, 81.1 1,551.8 1,710.7 1,739.0 1,745.6 1,745.6 1,745.6 1,724.9 1,760.9 1,744.4 1,761.5 1,799.2 Expenses Salaries and Wages 328.8 277.3 279.6 296.1 324.9 318.8 301.9 301.4 302.2 305-9 302.3 291.7 Field Establishment Cost - - 38.4 68.4 35.4 9.2 8.2 4.4 - - 29.5 53.9 Maintenance and Harvesting 53.6 54.7 55.3 55.9 56.3 56.3 56.3 55.0 57.7 55.0 48.o 42.2 ' Operating Cost 194.5 215.7 227.5 232.5 231.7 226.7 226.7 229.7 230.7 230.6 241.2 238.7 Building Maintenance 13.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 Overheads 55.3 55.3 55.3 55.3 55.3 55.3 55.3 55.3 55.3 55.3 55.3 55.3 Soil Survey 10.0 - - - - - - - - - - - FFB Purchases 3/ 168.0 234.0 294.0 300.0 300.0 300.0 300.0 270.0 240.0 180.0 210.0 270.0 Depreciation.i/ - 78.1 136.1 82.5 97.9 75.6 100.0 100.0 100.0 100.0 100.0 100.0 Total Expenses 823.2 940.1 1,111.2 1,115.7 1,126.5 1,o66.9 1,073.4 1,040.8 1,010.9 951.8 1,011.3 1,076.8 Net Profit (Loss) 557.9 611.7 599.5 623.3 619.1 678.7 672.2 684.1 750.0 792.6 750.2 722.4 At Le 650 per ton. At Le 235 per ton. 3/ Purchases of FFB from smallholders at Le 60 per ton. Depreciation for building at 5% per annu starting at year 3; vehicles and equipment are depreciated at 20% per annum leveling off at an average of Le 100,000 per annum from year 7.  SIERRA LEONE ANNEX S EASTERN INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT III TOTAL AND INCREMENTAL. PRODUICTION SUMMARY (metric tons) 1 2 3 4 5 6 7 8 912 SWAMP' RICE P1(6 1 WITH 250.0 550.0 880.0 1355.0 1605.0 1695.0 1740.0 1750.0 1750.0 WITHOUJT 200.0 400.0 600.0 900.0 1000.0 1000.0 1000,0 1000.0 l1.oo.oo INCREMENTAL PRODUCTION 50.0 150.0 2830.0 455.0 605.0 695.0 740.0 750.0 750.0 SWAMP RICE PK(6 2 WI'TH 220.0 690.0 1630.0 2630.0 3630+0 3750.0 3750.0 3750.0 3750.0 WITHOUT 200.0 600.0 1,400.0 2200.0 3000.0 3000.0 3000.0 3000.0 3000.0 INCREMENTAL PRODUCTION 20.0 90.0 230.0 430.0 630.0 750.0 750.0 7,50.0 7,50.0 UJPLAND RICE W'I.TH 450.0 1400.0 280 . 0 5700.0 9600.0 10000 .0 1.0000,0 :10000).0 :10000 .0 WIT-HOUJT 350 .0 1050 .0 2100.0 4200 .0 7000.0 7000.0 7000.0 7000.0 7000.0 INCREME-NTAL. PRODUCTION 1.00.0 350.0 750.0 :1500.0 2600 .0 3000.0 3000 .0 :3000.0 3000 .0 TOTAL RICE 170.0 590.0 :1260.0 23835.0 3835.0 4445.0 4490.0 4500.0 4500 .0 CO0FFFEEl REHFIA WI'TH 130.0 260.0 4 35J.0 660. 0 770.0 880.0 9 4,5 .0 960.0 960,0 WIT'HOUT' 140.0 280.0 420.0 560.0 560.0 560.0 560.0 560.0 560.0 INCREMENTAL PRODUCTION 100 -20.0 :1.50 :100,0 210.0 320.0 385.0 400.0 400.0 COFFE:E PL A NTIANG WITH1 0.0 0.0 0.0 30.0 165.0 61.5.0 1222.5 1867.5 2250,0 INCREMENTAL ~~PRODUCTION 0.0 0,0 0,0 30.0 165.0 615.0 1.222.. 875 221.50 . 0 TOTAL. COFFEE 10. 2 0 15.0 130.0 375.0 9:35 .0 1 6 07.5 2.267.5 2650 .0 COCOA PP.1::-lAB WITH- :39.0 1.23.0 2..76.5 444,0 4 82 .5 500.0 50 5 500.( 5(00 W i': TH C)LJT 20,B0 84. 0 182,0 200.0 280. 0 2180 .0 280 .0 280.0 280 0 I NCREME'NTAL. FRO,'DLUCTION II C) :39.0 9 4 , 5 164. 0 2.02.5 220.0 220 .0 2:0. .0 ")t'2 0 COCO PLANTING W11 0.rI .0 0,0 0.0 50.0 1.62.0 302. 0 442.0 5:32110 56. INCREMENTAL P~I-RO.DUC,TI0ON 0.0 0. 0 0.0 50+0 162. C 302.+0 442.*0 532 .0 560 C.0k TOTAL. COCOA 11 .0 39 .0 94 5 521.14.0 '36 4 .5 522.0 66 .)2 . l '752 0 700 01 CASSAVo ):fNIER-CR0F: WITf I.-I 400, C 1~300, o 2700,0 -5 4 0 0 .0 9200.0 10000 1000 0100. 10000 .0 W I THOUT1 I 7 250.0 j 75(1, 0 1500,. 0 3000.0. 5000.0 5,J0 00 . 0 5000.0 5000.0( 5 0.0 '. ~ I: N C RE ..M INT("L FPRODUCT ION I15 0 ,0 55i0 .0 :1 20f0 . 0 2400 .0 4::?0 0O 5000 .0 50 C) . 0 5'000, (1 "500 WlIT H :11390. 0 :3-57(1 .0 71.40 +0 1 428(1 .0 213800 .0 2.1380 0 .0( 2 -h0''C 2 3,8 0 0 x2:3 R 0 WI :i H-ioUT 595.*0 J.7 85. 0 :357(1. C) 71.40. 0 11.900.0 :11.900.0 1.1 90 0.0 It.1901 .0 1:1.9 (vJ INCFlR:EME..NTAIL. P'RODUCTION 1595.- .0 ty7s 5 0 :3570.0C 71.4(0 *0 1.1900k~ 0 1.1.900. (1- 1.190C)* C 119CC). C) :1.1 9 C TOTAL C:AS_SAYA :'74 !. j,0 2335 * ( 477 0 1) 9'5 4 0.0C :1.L 100.0 16+900.0 :1.6,9CC) . 0 16 9 00 * C' 169 0 0  SIERRA LEONE EASTERN INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT III Financial Crop Budget for 1 Hectare (Constant 1980 Leones) Swamp Rice Package 1 Swamp Rice Package 2 Upland Rice/Cassava Unit Present - 1990 ------ Present ------1990------ Present ------1990