Senegal - Small Rural Operations Project

Document of The World Bank FILE LUPY FOR OFFICIAL USE ONLY Report No. 2700a-SE SENEGAL SMALL RURAL OPERATIONS PROJECT STAFF APPRAISAL REPORT February 19, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their officia] duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit: CFA franc (CFAF) US$ 1.00 CFAF 210 CFAF 1,000 US$ 4.76 WEIGHTS AND MEASURES 1 kilogram (kg): 2.2 pounds 1 metric ton: 0.98 long tons 1 hectare (ha): 2.47 acres 1 kilometer (km): 0.62 miles ABBREVIATIONS BNDS Banque Nationale de Developpement du Senegal (National Development Bank) DFC Development Finance Company FAC Fonds d'Aide et de Cooperation (Fund for Assistance and Cooperation - French) FED Fonds Europeen de Developpement (European Development Fund) ONCAD Office National pour la Cooperation et d'Assistance au Developpement (National Cooperative Organization) PPA (F) Bank Project Preparation Advance (Facility) RDC Rural Development Center SAED Societe d'Amenagement et d'Exploitation des Terres du Delta du Fleuve Senegal SERAS Societe pour l'Exploitation des Ressources Animales du Senegal (National Livestock Products Company) SODEFITEX Societe pour le Developpement des Fibres Textiles (Cotton Development Agency) SODESP Societe pour le Developpement de l'Elevage en la zone sylvo- pastorale (Sylvo-pastoral Livestock Authority) SODEVA Societe de Developpement et de Vulgarisation Agricole (Groundnut Basin Extension Agency) SOMIVAC Societe de Mise en Valeur Agricole de la Casamance (Casamance Development Authority) SONED Societe Nationale d'Etudes pour le Developpement (National Consulting Company) STN Societe des Terres Neuves (Land Settlement Agency)  FOR OFFILCIAL USE ONLY SENEGAL SMALL RURAL OPERATIONS PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. BACKGROUND ............................................ 1 A. Project Background ...... ................ 1 B. The Rural Sector ...... ................ 1 C. Sector Strategy and Issues ............................. 5 II. THE PROJECT. 7 A. Objectives and Summary Description .7 B. Detail and Features 9. . ...... 9 C. Cost Estimates ....... .................................. 13 D. Proposed Financing ... .................................. 14 E. Prbcuremesnt and Disbursement .................... .. 16 F. Accounts and Audit .................................. 17 III. ORGANIZATION AND MANAGEMENT ....... 18 A. Project ]3xecution ....... ........................... .... 18 B. Capital Replacement Accounts ..... ...................... 20 C. The Smal:L Rural Project Cycle for Unidentified Operati.ons . ........................................... 22 IV. TECI1NOLOGICAI. AND PRODUCTION SPECIFICATIONS ................ 23 V. FINANCIAL RESULTS .......................................... 25 A. Demand, Marketing and Prices ........... .. .............. 25 B. Financial Implications for Beneficiaries ........ ........ 26 C. Financial Implications for Government .... .............. 30 VI. BENEFITS AND ECONOMIC ANALYSIS .......................... 31 A. Project Benefits ................... .................... 31 B. Economic Analysis . ..................................... 32 VII. AGREEMENTS REACHED AND RECOMMENDATION ..... ................. 33 This report is based on the findings of an IDA mission which visited Senegal in June/July 1979 comprising Messrs. David Steeds (Bank) and Bernaard Adikpeto, E.R. de St. Vincent, ]Dominique Gentil and A. Robert Whyte (Consultants). This docurnent 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 (Continued) Page No. ANNEXE S 1. Terms of Reference 35 2. Supporting Tables and Charts 37-44 3. Selected Documents and Data in the Project File 45 LIST OF TABLES IN THE MAIN TEXT 2.1 Summary Project Costs 14 4.1 Key Technical Coefficients 25 4.2 Production Volume, Value and Unit Prices 27 5.1 Financial Features, Rent and Cost Recovery Indices 29 LIST OF SUPPORTING TABLES AND CHARTS (ANNEX 2) Table 1 Project Costs by Subproject and by Year 37 2 Project Financing by Expenditure 38 3 Project Financing by Year 39 4 IDA Disbursement Categories and Schedule 40 5 Beneficiaries Incomes 41 6 Government Cash Flow 42 7 Prices of Overseas-Traded Outputs 43 8 Economic Costs, Benefits and Rates of Return 44 CHART 21019: Organization Chart MAP 14615R: Location of Appraised Operations  SENEGAL SMALL RURAL PROJECTS STAFF APPRAISAL REPORT I. BACKGROUND A. Project Background 1.01 In September 1976, Government informed IDA of its interest in a follow-up project to the Drought Relief Fund (Credit 446-SE). This project, through a successfu;L and innovative financial procedure, had financed rural water supplies, firebreak construction and fire-fighting equipment, and a one-year livestock vaccination campaign. Government and the Bmnk agreed that a follow-up project should emphasize more directly-productive activities rather than infrastructure, and thus more direct participation by the project beneficiaries. Detailed preparation studies were started in MaLrch 1978, financed by an advance of US$142,000 from the Project Preparation Facility and undertaken by a national para-public consulting firm SONED, with assist- ance from staff of the Ministry of Rural Development and the BaLnk's Regional Mission for West Africa. The preparation phase was unusually long because of difficulties in deciding on an appropriate institutional framework and on effective means of providing guarantees for credit to be extended to bene- ficiaries. Preparation was finally completed in early June 1979, and an appraisal mission visited Senegal in June-July. The project now proposed focusses on channelling funds and technical services to small groups of rural people who undertake to provide labor, and some funds, for the development of directly-productive activities of which five types have been appraised. The project: would also include village water supplies, an allocation for further directly-productive activities to be identified and prepared during implementation, and management services. B. The Rural Sector 1.02 Human Geography. Senegal has a population of about 5.2 million of whom nearly 4 million live in rural areas. The country covers 200,000 km2, of which about 70% is suitable for rainfed crop production. Irrigation potential is substantial, in excess of 200,000 ha along the Senegal Valley alone. About 60% of the rural population is concentrated within about 150 km of Dakar in the central Groundnut Basin; in this area, which covers 25% of the country, local population densities often exceed 100/km2 and there is little scope for further expansion of extensive farming. 1.03 Significance for the Economy. Despite poor soils and erratic rainfall, and although its contribution to GDP is much lower than in most countries of West Africa, the rural sector remains a key sector in the Senegalese economy. In the last five years, the sector accounted for about 35% of GDP; of this contribution crops accounted for 60%, livestock 18%,  - 2 - fishing 15%, and forestry 7%; much of the rest of GDP is in the form of processing and trade of commodities from the rural sector. The sector also produces about half of export income (of which groundnuts 90%) and employs about 70% of the labor force. In contrast to GDP per head of $?340 in 1978, primary sector income per head of the rural population was only $150. The relative poverty level in rural areas was about US$120. Almost all rural sector output is produced by small-scale units, though there is some diversity in farm size, productivity and income. 1.04 Policy-making and Technical Institutions. The Ministry of Rural Development has overall responsibility for development of the sector but several other ministries, notably Human Affairs, Public Works and Water, and the new Ministry of Forestry and Inland Fisheries, each have some responsibili- ties for rural development. While the Ministries are responsible for policy, responsibility for execution has over the last decade been increasingly entrusted to regional development agencies rather than to Government Departments; in practice, the distinction between policy and execution is not clear cut, with the agencies much involved in investment planning and the Departments having retained many field staff, primarily in the Rural Development Centers (RDC - para. 1.06). 1.05 Regional Development Agencies. These agencies include SAED for irrigation in the Senegal Valley, SODEFITEX for extension work and cotton marketing in the south-east, SODESP for extension work and cattle marketing in the semi-arid north-center, SODEVA for extension work in the Groundnut Basin, SOMIVAC for planning and project execution in Casamance, and STN for land settlement, primarily in the south-east. These agencies are primarily concerned with provision of services for crop production, but they are increasingly providing services to other subsectors, notably cattle production. These agencies' staffs are well paid and equipped relative to Government Departments, but the agencies' financial soundness is unduly dependent on executing foreign- financed projects; only SODEFITEX earns significant revenues. The agencies have different degrees of financial and managerial autonomy. This is due in part to their status as wholly Government-owned enterprises (SAED, SODESP, SOMIVAC, STN) or mixed enterprises with minority private ownership (SODEFITEX, SODEVA) but also to top management's style and willingness to take initiatives. The agencies are not mere executing bodies and they all undertake investment planning; SAED, SODEVA and SOMIVAC have set up well-staffed Planning Units, each of which benefits from considerable foreign technical assistance. During preparation of the proposed project, each agency was invited to and did in fact make detailed proposals for small rural projects. Some proposals were rejected, or deferred for further work, during preparation and appraisal as the selection criteria became more clearly defined. The project, as now proposed, would include two operations for which technical services would be provided by regional development agencies, namely SAED for small rice peri- meters and SOMIVAC for small banana perimeters. 1.06 Government Departments and Rural Development Centers. Alongside the broadening of the executive responsibilities of the regional development agencies, some Government Departments have retained considerable though no  - 3 - longer exclusive responsibility for execution. These Departments include Fisheries, Forestry, Livestock and Water Supply. The Departments that no longer have important responsibilities for field execution, notably Agricul- ture, also retain a nationwide network of field staff. At the local district level, staff from these Departments as well as from the Ministry of Human Affairs are physically and organizationally grouped into Rural Development Centers (RDCs). Physically, the RDCs comprise shared office, warehouse and transport f'acilities, and staff housing, and have been installed in the 90 districts nationwide. Organizationally, each RDC has a fulltime Chief, a generalist rather than a technician, in most cases a graduate of the National School of Applied Economics. The technical staff of the RDC report both to the Chief and to their superiors in their technical departments; the Chief reports to the national Executive Secretary of the RDCs who is 'housed in the Ministry of Rural Development and reports directly to the Minis ter. Although based on the attractive idea of the coordinated provision of a jpackage of technical knowledge at the district level, the RDCs have been gienerally ineffective and, in contrast to the regional development agenci,es, increasingly starved of operating funds. Now, the RDCs comprise about 500 juanior technical staff whose abiliti