Togo - Second Rural Development Project in Cotton Areas

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3920-TO STAFF APPRAISAL REPORT TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS October 21, 1982 Western Africa Region Agriculture 2 This document has a restricted distribution and may be used by recipients only in th their official duties. Its contents may not otherwise be disclosed without World Ban. --viatlon.  CURRENCY EQUIVALENTS Currency Unit = CFA Franc (CFAF) US$1.00 = CFAF 340 CFAF 1,000,000 = US$2,940 WEIGHTS AND MEASURES 1 kilometer 2 = 0.62 miles 1 square kilometer (km ) = 0.39 square miles 1 hectare = 2.47 acres 1 kilogram = 2.2 pounds 1 metric ton (t) = 2,205 pounds FISCAL YEAR Government and SOTOCO April 1 to March 31 ABBREVIATIONS AND ACRONYMS BOAD Banque Ouest Africaine de Developpement CCCE Caisse Centrale de Cooperation Economique CNCA Caisse Nationale du Credit Agricole DHE Direction de l'Hydraulique et de l'Energie DRDR Direction Regionale pour le Developpement Rural EDF European Development Fund FAC Fonds d'Aide et de Cooperation IFAD International Fund for Agricultural Development IRAT Institut de Recherches Agronomiques Tropicales et des Cultures Vivrieres IRCT Institut de Recherches du Coton et des Textiles Exotiques MRD Ministry of Rural Development OPAT Office des Produits Agricoles Togolais PROPTA Projet de Promotion de la Traction Animale SOTOCO Societe Togolais du Coton  FOR OFFICIAL USE ONLY TOCO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS STAFF APPRAISAL REPORT Table of Contents Page No. I. BACKGROUND 1 Introduction 1 The National Situation and the Economy 1 The Agricultural Sector 2 Extension Services 3 Development Agencies and Projects 3 IDA Assisted Agricultural Development Projects 3 The First Rural Development Project in Cotton Areas 3 Crop Marketing 5 Credit 6 Training 6 Applied Research and Seed Multiplication 6 Agricultural Development Policy Proposals and Priorities 7 II. THE PROJECT AREA 8 Project Area and Participating Farmers 8 Climate and Ecology 8 Agricultural Practices 9 Land Tenure 10 Road Communications 10 Water Availability 10 III. THE PROJECT 10 A. Objectives and Summary Description 10 B. Detailed Features 12 Agronomic Packages 12 Food Crop Storage 14 Field Services 14 Farmer Groups and Credit Operations 15 Animal Traction 16 Input Supply and Credit 17 Applied Agronomic Research 18 Seed Multiplication for SOTOCO 18 Support to National Seed Multiplication Program 19 Rural Water Supply 19 Feeder Road Development 20 Cotton Ginning, Transportation and Workshops 21 Mo Plain Development 22 Buildings 22 Monitoring and Evaluation 22 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.  IV. ORGANIZATION AND MANAGEMENT 23 Organization 23 Staffing, Technical Assistance and Fellowships 25 The National Extension System and SOTOCO's Future Role 26 Reporting Requirements 27 Preparation of Possible Third Project 27 V. COSTS AND FINANCING 29 Project Costs 29 Proposed Financing 29 Recurrent Costs 31 Financing PlaBO Procurement 32 Disbursement 33 Build-up of SOTOCO Capital 34 Financial Management, Reporting and Audit 34 VI. PRODUCTION, MARKETS, PRICES, FARMER RETURNS & FINANCIAL RESULTS 35 Adoption Rates and Production 35 Cotton Prices and Market Outlook 36 Food Crop Prices and Marketing 37 Farm and Crop Returns 38 Input Prices, Subsidies and Cotton Prices 39 The Cotton Bareme 39 Government Revenues and Cash Flow 40 VII. BENEFITS, ECONOMIC JUSTIFICATION AND RISKS 42 Benefits 42 Economic Analysis 42 Sensitivity 43 Risks 43 VIII. ASSURANCES AND RECOMMENDATION 44 TABLES IN THE MAIN TEXT Table 1 : Summary of Project Costs Table 2: Proposed Financing Plan Table 3 : Economic rate of Return ANNEXES Table 1 : Project Costs by Year Table 2 : Detailed Financing Plan Table 3 : Disbursement Schedule Table 4 : Government Cash Flow Table 5 : Farm Models Table 6 : Economic Value of Cotton Table 7 : Economic Costs and Benefits List of Reports and Working Papers in Project File Chart I : SOTOCO Organigram Chart II : SOTOCO's Regional Structure Map  TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS STAFF APPRAISAL REPORT I. BACKGROUND 1.01 Introduction. The Government of Togo has requested IDA assistance in the financing of a Second Rural Development Project in Cotton Areas. This project would follow on from the first project (Credit 741-TO) and would aim at further increasing cotton and food crop production within an integrated whole farm approach. The project was identified and prepared by RMWA in 1981 with assistance from consultants. Appraisal was undertaken in November/December 1981 by a mission consisting of Messrs. K. Oblitas, R. de Cock, M. Nightingale (IDA) and C. Sourang (Consultant). The CCCE and FAC also participated in the appraisal. 1.02 The National Situation and the Econo2my. Togo is located on the Gulf of Guinea and covers an area of 56,000 km- bordered by Ghana, Benin and Upper Volta. The country is divided into five administrative regions, from north to south; Savanna, Kara, Central, Plateau and Maritime (see map). Population is estimated at 2.5 million, growing at 2.5% per annum, of which 2 million (80%) are rural with particularly heavy concentrations in the south and in the Kara region. 1.03 Despite impressive economic growth rates (4 to 7% per annum) experienced between 1960 and 1975, mainly stimulated by the country's major export goods (coffee, cocoa and rock phosphate), the succeeding five years were marked by slow economic growth (2.5% per annum) and financial disequilibrium following stagnation or decline in output and lower prices for these products. Government investment in agriculture in the 1970s was low and thus the overall GDP in 1980, calculated at US$380 per capita, obscures a poverty level of only US$180 per capita for the rural community. 1.04 The Third Development Plan aimed to reverse the previous emphasis on infrasructural development, allocating over half of investments for rural development (22%) and industry and commerce (30%). However, actual investments concentrated on industry, commerce and tourism (more than 45%), with agriculture realising only 7% of the total. This produced little productive growth and simultaneously encouraged domestic consumption thereby seriously aggravating the balance of payments and government resources. Consequently, the servicing of the debt burden incurred by state enterprises in the latter part of the last decade will necessitate stringent economic controls throughout the Fourth Development Plan period (1981-85). Concomitantly, future Government investments will need to emphasise directly productive projects.  - 2 - 1.05 The Agricultural Sector. The agricultural sector accounts for 80% of employment, 30% of GDP and 30% of export revenues. Approximately 11% of the geographic area is cultivated, involving an estimated 265,000 families averaging 7.5 persons who typically grow food crops or food crops and cotton on about 2 hectares. Food crops comprise about 450,000 ha (estimated at maize 130,000 ha, sorghum/millet 150,000 ha, cassava 50,000 ha, yams 40,000 ha, beans 40,000 ha, groundnuts 30,000 ha, rice 10,000 ha) and industrial crops about 160,000 ha (57,000 ha oil palm, 80,000 ha coffee/cocoa and 23,000 ha cotton). About 12% of the population own cattle (200,000 head mainly in the northern and central regions), 10% keep pigs (150,000 head mainly in the south), 40% keep sheep and goats (900,000 head), and 70% have poultry (3 million head). Average annual meat consumption, estimated at 6.5 kg per capita, is almost wholly domestic production. 1.06 Despite dominant reliance on traditional techniques, and excepting drought years, Togo is largely self-sufficient in food crops. Food imports, mainly involving luxury cereals (wheat and rice) destined for urban centres, represent under 10% of food consumption. Basic nutrition levels are reasonable (estimate 1978/80: 1985 calories/capita) and consist of tubers (40%), cereals (52%) and legumes (8%). Nevertheless, a growing Togolese urban market and food deficit regions in neighbouring countries (especially Nigeria across the border from Benin), can absorb productivity increases, and are exerting upward pressure on domestic food prices and providing an increasingly attractive export potential for food crops. 1.07 Hitherto, Government policy for agriculture has concentrated on export crops, principally coffee, cocoa and, more recently, cotton. This has been largely achieved through crop specific development projects which have been relatively successful, although potential impact was sacrificed through a restrictive pricing policy. This emphasis was given at the expense of improving the productivity of food crops. As a result, improved varieties of food crop seeds are in short supply, less than 20,000 ha of food crops receive inorganic fertilizer and the use of pesticides on food crops is negligible. 1.08 Cotton production has been given a significant boost through the First Rural Development Project in Cotton Areas (para 1.12). Further development of cotton would help to diversify export crop production away from Togo's past heavy reliance for agricultural export revenues on coffee and cocoa which are subject to cyclical price changes. With the exception of most of the Maritime Region and the coffee/cocoa area to the S.W. of the Plateau Region, cotton can be grown throughout Togo. It offers a source of reliable cash income for farmers and is a lead crop in a cotton/food crops technical package which can simultaneously serve to stimulate food crop production. The relationship between cotton and food crops is not only technical. Farmers plant food crops as a first priority to meet subsistence needs; thus, by augmenting and stabilising food crop yields a direct stimulus is provided to increasing cotton production. Further, the whole package approach avoids duplication of extension efforts, and cotton sector surpluses can help support development efforts on food crops.  - 3 - 1.09 Extension Services. A national extension service is organized under the five semi-autonomous "Directions Regionales pour le Develop- pement Rural" (DRDRs) which come under the Ministry of Rural Development. The DRDRs currently employ about 600 extension agents (ratio 1:500 farmers) and are intended to increasingly play the role of regional development agencies but are constrained by lack of trained personnel, equipment and operating funds, and extension agents are poorly motivated and without the means to make an impact. As a result, parastatal agencies and industrial development projects have tended to develop their own exclusive support services, a tendency that has been exacerbated by Government's piecemeal approach to rural development which has resulted in a proliferation of small projects and duplication of efforts. 1.10 Development Agencies and Projects. In addition to the parastatal crop oriented agencies such as SRCC for cocoa and coffee, SOTOCO for cotton and associated food crops, TOGOFRUIT for fruit and SONAPH for oil palm, about 10 other rural development projects are in progress or getting underway in Togo. Of these, the principal projects relevant to the proposed Second Rural Development Project in Cotton Areas include the Federal Republic of Germany (GTZ) assisted project in the Central Region which is assisting DRDR extension services, promoting food crops and animal traction and has a seed production farm, and the proposed IFAD assisted Notse Rural Development Project in the southeast of the Plateau Region which would promote food crops and cotton and includes a seed production farm. 1.11 IDA Assisted Agricultural Development Projects. IDA has financed four rural development projects. The First Cocoa/Coffee Development Project (Credit 503, 1974) and the Second Cocoa/Coffee Development Project (Credit 945, 1979) are supporting the planting of coffee and cocoa and replanting of cocoa and progress of the coffee com- ponent is generally satisfactory but the cocoa component is experiencing difficulties. The Maritime Region Rural Development Project (Credit 638, 1976) will terminate at end 1982 and has been less successful. Reliance on food crops without a supporting cash crop, difficult soils and variable rainfall in the Maritime Region, the absence of a really effective technical package, over diversification of project components and a weak technical management have all contributed to incomplete realisation of project objectives at the farm level. Cotton production in the north-east of the region would be supported under the proposed Second Rural Development Project in Cotton Areas and the Maritime Project Credit has been extended by one year (1982) to continue support of applied research and seed multiplication for food crops and coconut. The Rural Development Project in Cotton Areas (Credit 741), described below, was initiated in 1977 and successfully completed in June 1982; it was the precursor to the follow-up project proposed here. 1.12 The First Rural Development Project in Cotton Areas. The main objectives of this project were to increase national cotton production and the production of food crops grown in rotation with cotton. This was to have been achieved through: (i) the strengthening of the implementing agency, SOTOCO; (ii) provision of farm inputs, improved seeds and pesticides and encouragement of improved cultural practices through an  - 4 - upgraded extension service; (iii) construction and maintenance of feeder roads and construction of a new headquarters, field offices and stores; (iv) promotion of animal traction; and (v) supporting services such as applied research, seed multiplication and monitoring and evaluation. Tube well developmrent was also regarded as a priority area and was financed separately with EDF assistance. The project (total estimated cost at appraisal including contingencies US$26.0 million) has been assisted with funding from IDA (US$14.0 million) and FAC (US$5.1 million equiva- valent) and the Credit was fully disbursed in June 1982. 1.13 The project has substantially achieved its main objectives. In the two years prior to the project, national seed cotton production averaged 6,700 t per annum whereas production from the 1981/82 season (PY4) reached 20,800 t or 87% of the appraisal target for PY4 of 23,900 t. The project's progress as regards food crop production has, however, been less successful although the precise impact is difficult to assess. Some 4,150 ha of food crops (maize, sorghum and groundnuts) were grown by project participants in 1981/82 at the full development stage which includes use of improved seed, fertilizer and improved cultural practices. This compares to an appraisal target for stage III food crops of 10,100 ha. Stage II production (improved cultural practices and in rotation with cotton) has considerably larger reported areas (64,000 ha) but the project's impact upon such farmers' yields and production is not precisely known (para 1.14). Some key indicators are tabulated below: Key Indicators of Progress Under First Rural Development Project in Cotton Areas (As at PY4, 1981/82 Season) Pre-Project Appraisal Achievement Achievement (1977) Target For PY4 as % of For PY4 Appr. Target Farming Families Reached 19,300 44,400 39,100 88 Total Cotton Area (Ha) 11,700 26,360 23,480 89 Total Cotton Production (t) 6,700 23,940 20,820 87 Maize Area Stage III(Ha) 0 2,870 2,150 75 Sorghum Area Stage I'I (Ha) 0 5,040 980 19 Groundnut Area Stage III (Ha) 0 2,200 1,020 46 1.14 These achievements reflect the generally satisfactory development of the various supporting project components and departments and of SOTOCO's management, although the following problems and shortfalls must be noted. The animal traction component was inadequately staffed and the unit head was also responsible for seed multiplication; as a result, little progress was achieved. Monitoring and evaluation was not given adequate attention and management feedback and data, particularly on food crops are scanty. The absence of an appropriately staffed department to manage cotton marketing and transportation operations has resulted in  - 5 - inefficiencies and high costs. Financial management was initially very weak to the extent that even general accounting and the timely sending of disbursement requests to Government and the cofinancers suffered. Under new management, accounting is now up to date and will shortly be fully computerized including analytical accounting and inventory management. Finally, while some progress has been made recently, inadequate attention has been paid by Government and SOTOCO management to the recruitment and training of Togolese senior and middle ranking staff. Additionally, SOTOCO has been hampered by its financial arrangements with Government and OPAT. Dependency on the Treasury for Government's 25% share of project funding and for subsidy payments on inputs have resulted in substantial past Government arrears to SOTOCO and late ordering of seasonal inputs. This has been exacerbated by an incomplete "bareme" between SOTOCO and OPAT for coverage of cotton sector related expenditures, and by SOTOCO's inadequate capital endowment which is insufficient to cover its working capital requirements. These problems would be redressed under the proposed second phase project. 1.15 Despite these shortfalls, the first project has had a significant impact on cotton production and some impact on associated food crops and provides a sound basis for a follow-up project. Project costs have been held to the original forecasts at appraisal (without adjustment for some incompletely realised components described above) and disbursements were completed on schedule. The rate of return for the first project is reesti- mated at approximately 22%. The snortfall on the appraisal estimate of 32% is due primarily to incomplete realization of production targets, in particular those of food crops, for which--in the absence of reliable data-- conservative estimates have been used. 1.16 Crop Marketing. Marketing of export crops is handled by the state marketing agency OPAT, which comes under the Ministry of State Enter- prises. In 1980, OPAT's gross sales amounted to CFAF 16.7 billion (US$79 million) and, due to heavy taxes particularly on cocoa and coffee, resulted in profits of CFAF 8.0 billion (US$40 million). OPAT surpluses, which were previously earmarked for special Government investments are now passed on to the Treasury's general budget and repesent about 8% of Government revenues. 1.17 In the cotton sector SOTOCO purchases seed cotton from farmers and is increasingly taking over cotton ginning and transport of lint and seed to the port (para 3.26), OPAT's role becoming restricted to port handling and exporting. A bareme between OPAT and SOTOCO is intended to provide reimbursement to SOTOCO of direct costs associated with cotton production, purchasing, processing and transportation but has to date not completely covered such costs with the result that SOTOCO has had to be supported out of the Treasury budget (para 6.12). 1.18 Food crop marketing is handled primarily by a thriving private network of traders. Although some concern has been expressed by Government that trader operations are monopolistic and involve speculation and excess profits, analysis of these channels suggests that the system is fairly  - 6 - competitive and efficient and that price mark-ups are not excessive (para 6.05). Partly in response to this concern and also in response to the considerable price fluctuations for food crops, both during and between seasons, Government established TOGOGRAIN in the early 1970s to maintain a security grain reserve, stabilize the market by buying at low price periods (after harvest) and selling at high price periods, and provide an alternative sales outlet to farmers. Inadequate funding by Government, managerial problems, heavy losses during storage and high operating costs have characterized its operations to date and it has had minimal market impact. Given the security provided by the variety of food crops grown in Togo, a better strategy might be to monitor expected crop harvests and import grains during deficit years while encouraging on-farm storage and further development of private sector marketing and trade. A special study on the above has recently been undertaken by the Bank. 1.19 Credit. Most farmers have no access to credit. The main Government institution, "Caisse Nationale du Credit Agricole" (CNCA), hitherto lent only to parastatal organizations and farmer groups. CNCA is currently being reorganised under a new management so as to provide a more effective service. With the exception of seasonal credit for cotton production (over 98% recovery), provided through SOTOCO, experience of credit operations with small farmers has been discouraging particularly when used for food crops. 1.20 Training. Agricultural training at the graduate and diploma levels is generally adequate although college output is constrained by lack of operating funds. Base level training of extension staff and pilot farmers, particularly under the DRDRs, is less satisfactory although the development projects, and particularly SOTOCO, are having some impact. 1.21 Applied Research and Seed Multiplication. Agricultural research is currently handled under four different Ministries involving about a dozen agencies. Additionally, practically every agricultural project has its own applied research program. Five international research institutions are also represented in Togo: IRCT for cotton, IRAT for food crops, IRCC for cocoa and coffee, IRHO for oil crops and ORSTOM for soil analysis and mapping. Generally, there is a need for much greater coordination of agricultural research efforts focusing on avoidance of duplication, appropriate priorities, feedback from farmers and extension services and greater inflow of information from international research agencies. The Government, conscious of these needs, has requested IDA's support under the Second Technical Assistance Credit (para 1.24). Specific applied research related to the SOTOCO program is currently done by IRCT and IRAT under contract arrangements with SOTOCO that would be continued, with appropriate improvements, under the second phase project (para 3.19). 1.22 Most agricultural development projects have a seed multipli- cation component based on foundation seeds provided by their applied research programs. Lack of coordination amongst these results in duplication of efforts and often poor seed quality. A national program to coordinate production and control seed quality is much needed and would be supported by the project (para 3.21).  1.23 Agricultural Development Policy Proposals and Priorities. Recog- nising the inadequacy of agricultural investments in recent years and the inherent dangers to national food supply and foreign exchange earnings, Government has determined to promote balanced agricultural development as the priority for the Fourth Plan (1981-85). Agriculture and rural development have been allocated CFAF 117 billion (US$344 million), or 45% of total investments. The current program is, however, vague and over-ambitious relative to prospective financial and manpower resources and lacks a coherent investment strategy. Key areas requiring further attention are outlined below: (i) careful planning and coordination of Togo's rural development strategy is required focusing primarily on smallholder farming and on further development and diversification of export earning crops and of food crops; (ii) review and revision of producer prices for export crops and input prices, the former being in most cases heavily taxed (especially coffee and cocoa) and the latter heavily subsidized (para 6.07); (iii) restructuring of the institutions, agencies and projects involved to streamline functions and reduce duplication of efforts. The existence of two Ministries, the Ministry of Rural Development and the Ministry of Rural Works with many over- lapping functions, and the current situation as regards extension (para 1.09) and applied research and seed multipli- cation (para 1.21) provide examples of current inefficiencies; (iv) improved services to the agricultural sector (for instance, extension, research, seed multiplication, credit, animal traction, input supply, feeder roads, and village water supply); and (v) progression towards more effective decentralization of development responsibilities to the regions. 1.24 The proposed project would contribute to these areas particularly as concerns items (iv) and (v). In parallel, a second Technical Assistance Credit (Cr. 1270) has recently been approved and a Structural Adjustment Credit is under consideration and, as concerns the agricultural sector would place emphasis on items (i) to (iii). A price unit is being established within OPAT to review agricultural output and input prices, to propose changes and to provide a mechanism for continued monitoring and updating of price recommendations. This would be supported under the Technical Assistance Project which would also help finance the creation of an agricultural planning unit within the Ministry of Rural Develop- ment and a unit for coordination of applied research. Attention is also being paid by Government and IDA towards institutional restructuring in the context of the proposed Structural Adjustment Credit. Together with the proposed Project and the ongoing Second Cocoa/Coffee Development Project, a comprehensive program to tackle key development potentials and constraints would therefore be supported by the Bank which would complement ongoing development initiatives and projects financed by the Togolese Government and other development agencies.  - 8 - II. THE PROJECT AREA 2.01 Project Area and Participating Farmers. Given the wide distri- bution of cotton growing in Togo, the project would entail, as under the first project, a geographic coverage comprising most of Togo's land area and the following administrative regions: Savanna, Kara, Central and Plateau (exclusive of the Cocoa/Coffee area in the south-west of the region). Additionally, it would include the cotton growing area in the north-east of the Maritime Region and the Mo plain in the west of the Central r5gion (see map). In total, this amounts to a land area of some 46,000 km and comprises a rural population of about 1.4 million or 215,000 families. Some 42,000 families in this area are estimated to produce cotton with SOTOCO's assistance during the 1982/83 season. 2.02 The project area includes locations where other rural development projects operate. For each of these projects, specific arrangements were worked out under the first Project for the areas concerned, whereby SOTOCO's role was reduced to take account of these interventions. This generally takes the form of a SOTOCO intervention limited to the supply of cotton inputs and cotton marketing and technical advice and training in cotton production techniques. Similar arrangements would operate in the future, with improvements to take account of past lessons. 2.03 Climate and Ecology. The project area, with an altitude of 200 - 500 m, adequate rain and an annual mean temperature of 33 C, is ecologi- cally well suited for cotton and food crop production. It can be subdivided into the following main ecological zones: (i) North Savanna has an irregular and short rainy season (five months, May - September) with about 1,000 mm/year. Population density is about 50/km and families are generally large (about 8 persons). The predominant soils are ferruginous tropical of medium fertility. Farms average 4.4 ha and grow mainly sorghum- /millet, cotton, groundnuts and, in the low lying areas, swampland rice. (ii) Oti-Kara is a mountainous zone with adequate rainfall (1,300 mm in 6 months, May - October) but low agricultural potential due to over-population and resultant depletion of soil fertil'ty. Population density averages 53/km but reaches almost 300/km in some areas while about one fourth of the region is unpopulated due to onchocerciasis. Typical family size is five persons and farms average only 2.4 ha. Principal crops include sorghum/- millet, groundnuts, cotton and rice. (iii) North Central is 2the least populated zone with a density of only about 19/km . Rainfall of 1,400 mm/year over 7 months (April - October) and generally good soils make this region well suited for the main crops of the area: maize, yams, cassava, cotton, groundnuts and cowpeas. Families average about 5 persons and farm some 3.5 ha.  - 9 - (iv) South Central is a zone where rainfall averages 1,450 mm/year over 8 months (March - October) an2d soils are generally good. Population density is about 40/km and families average 4.5 persons. Farms are small (2.5 ha) and grow a wide range of crops including cassava, maize, cotton, groundnuts, rice (upland), sorghum and cowpeas. (v) Plateau. With an average rainfall of 1,200 - 1,600 mm/year (bi- modal over 8 months, March to October with a dry period in Augus2), generally good soils and a population density of about 30/km , this zone has the best agricultural potential. Cocoa and coffee dominate the wetter, mountainous areas to the west, while the eastern part is most suited for integrated cotton and food crop development. Families are generally large (6 persons) and have 2 ha of cleared land, cultivating up to 3.5 ha over the two growing seasons. Principal crops are maize, cassava, yams, cotton, groundnuts and cowpeas. 2.04 Agricultural Practices. Apart from some animal traction (para 2.06), land clearing and cultivation is done by hand. Land is generally cultivated for 3 to 4 years and then left under fallow for 6 to 8 years in the Savanna and Plateau regions and 3 to 4 years elsewhere. Deficient cultural practices including late planting, poor and late weeding and absence of inputs (improved seeds, fertilizer and pesticides), result in low yields for food crops. Cotton, receiving technical assistance and inputs on credit, has better yields as illustrated in the table below: Ecological Region Crop Yields (kg/ha) Cotton Maize Sorghum Groundn. Rice Cowpea Yams Cassava North-Savanna 700 - 650 450 700 - 5,000 - Oti-Kara 800 - 650 550 700 - 5,000 6,000 North Central 900 700 650 650 750 340 - 6,000 South Central 1,100 800 650 650 750 340 - 6,000 Plateau 900 700 - 650 - 340 5,000 6,000 2.05 In the north, sorghum and yams -- the main food staples -- are planted on almost 70% of the cropped area. In the centre and south, these are replaced by maize and cassava and cover over 50% of the cultivated area. Losses during storage (15% for grains) and family consumption result in very little of food crop production reaching the market. Farmers' yearly cash income is therefore limited and has been estimated (details in Project File) at between US$70 and US$130 depending on the region and the crops grown (the highest being for cotton growers). 2.06 Cattle are reared for meat, milk and to a lesser extent draft purposes. They are concentrated mainly in the northern and central regions and are kept as small herds grazed in the bush and on crop residues and stockaded near the homestead at night. Some 2,100 pairs of draft oxen exist of which 1,900 are in the Savanna and Kara regions where a strong tradition exists. Elsewhere, animal traction is rare but has been  - 10 - stimulated by Government's recent commitment to develop animal traction, the economic attractiveness of animal traction, and by promotional and training efforts in agricultural projects. The principal existing insti- tutions are: (i) PRODEBO, the EDF supported national agency for promoting animal traction which is to be reinforced and renamed PROPTA; (ii) the Direction de la Sante Animale" (DSA) which is responsible for animal health and which has a field service lacking in equipment and operating funds for medicaments; and (iii) UPROMA, a recently established UNDP funded workshop for manufacture of animal traction equipment. The First Rural Develop- ment Project in Cotton Areas intended to established 350 pairs of work oxen but progress was initially slow due to inadequate staffing of SOTOCO's ox traction unit and to date only 90 pairs have been introduced. 2.07 Land Tenure. The land tenure system in the Savanna and Kara regions is based on extended family ownership and inheritance within the family. In the Central and Plateau regions, land is owned by the local community, with individual farmers receiving usufruct rights from village chiefs. Leasing of land to migrant farmers is possible in all regions. Generally, land tenure is not a problem. 2.08 Road Communications. The area is served by Togo's main north- south tarmac road from which radiate a number of other public and major rural roads which, together, provide a good basic road network. Upgrading of this network is being supported by the Fourth Highways Project (Credit 1149) and the Feeder Roads Project (Credit 810) and through projects financed by the EDF, ADB and Kuwait Fund. Access to rural villages from this road network is, however, poor and a critical constraint for collection of cotton, distribution of inputs, marketing of food crops and farmer access by field staff. Continuation and expansion of SOTOCO's feeder road reconstruction and maintenance activities is therefore essential to provide the access required to achieve the project's objectives. 2.09 Water Availability. Access to potable water is a significant constraint to rural development in most areas of Togo. Perennial streams are scarse and sub-surface water is generally deep, substantially deter- mining demographic distribution within a generally fertile rainfed farming ecosystem. Furthermore, many villages must fetch water from sources several miles away, entailing substantial family labour and, quite commonly, actual movement of the village population to a perennial water source during the dry season. In response to this problem, a national program to develop tubewells is underway and would be supported by the project (para 3.22). III. THE PROJECT A. Objectives and Summary Description 3.01 Objectives. The project would be a follow-up to the First Rural Development Project in Cotton Areas (Credit 741, FY78). As such it would  - 11 - continue the expansion of cotton production but would place more emphasis than under the first project on food crops grown by participating farmers. Greater usage)of animal traction would also be promoted. SOTOCO would continue to be the project executing agency and its efficiency would be upgraded through staff training and provision of technical assistance with particular emphasis on redressing past weaknesses (para 1.14) and upgrading of field services. Associated infrastructure required to support these objectives (feeder roads, village water supply, some buildings) would also be provided. In addition to its production objectives, the project would aim to build up SOTOCO's managerial and field services capacity so as to provide the future option for a possible restructuring of SOTOCO into a specialized cotton agency and a separate regionally managed, extension service (para 4.10). The project would also provide support to Government's national seed multiplication program. 3.02 Summary Description. The above general objectives would be achieved through a five-year project comprising the following activities: (i) upgrading of key departments within SOTOCO including provision of technical assistance and vigorous recruitment and training (on the job and short-term training fellowships) of Togolese personnel. Such institutional strengthening would include upgrading of the financial department and the industrial (cotton marketing, processing and transport) department; (ii) strengthening of SOTOCO's extension service including further emphasis on polyvalent training, whole farm planning, refinement of the recently established training and visit system, establishment of small farmer groups for extension and coopera- tive activities, improved input supply and primary cotton marketing activities, and decentralization of responsibilities; (iii) multiplication and distribution of improved food crop seeds; (iv) applied research on cotton, food crops and farming systems; (v) encouragement of animal traction through training, animal health and credit for purchase of oxen and equipment; (vi) promotion of bio-degradable pesticides to reduce losses of traditionally stored food crops; (vii) provision through credit or cash of farm inputs and equipment relative to the above, including streamlining of distribution and accounting procedures; (viii) reconstruction of some 950 km of feeder roads and periodic main- tenance of some 2,100 km of existing feeder roads so as to provide basic access for extension, input supply and marketing activities; (ix) establishment of 400 village tubewells to support agricultural development in agronomically suitable areas where agricultural productivity is constrained by the difficulties encountered and substantial time involved in obtaining water for household use;  - 12 - (x) additional storage capacity and minor infrastructure to increase annual ginning capacity of existing factories and provision of trucks for transport of inputs and cotton products; (xi) establishment of a project monitoring and evaluation unit; (xii) additional buildings (field stores, regional offices, workshops, houses for staff, expansion of the headquarters office); (xiii) consultancy services for the preparation of a possible third phase project; and (xiv) support to the Ministry of Rural Development's national seed multiplication program including the creation of a small seed farm to maintain and produce breeders seed for food crops, a seed quality control unit attached to the seed farm to monitor the quality of seed produced at all multiplication stages in Togo and creation of a coordinating committee and secretariat to coordinate countrywide production. B. Detailed Features 3.03 Agronomic Packages. Agronomic packages would be largely based on techniques promoted under the first project and would cover: improved crop husbandry with particular attention to timely sowing, plant density, weeding and rotational practices; usage of fertilizers and improved varieties; spraying of cotton and selective usage of pesticides on other crops; and post harvest protection. 3.04 For cotton, the recommended variety remains BOU. Its latest selections have shown a yield potential of 3,200 kg/ha of seed cotton, a ginning out-turn of over 41% and satisfactory fibre characteristics. A well tested fertilizer compound NPKSB (15-25-15-5-1.8) would be applied at the rate 200 kg/ha in all areas with an additional 50 kg/ha of urea in the Central and Plateau regions. Better pest control would involve six sprayings (ULV) of a synthetic insecticide (pyrethrinoid - 3 litres/ha) at 12 day intervals commencing 50 days after planting. Better and timelier observance of the technical package (especially planting) would be stressed. 3.05 The food crops covered would be maize, sorghum, groundnuts, paddy and cowpeas. Initially, the maize variety would be the hybrid NHI which has a yield potential of over 3 t/ha. With a growing period of 110 days, it is well suited to precede cotton in the bimodal rainfall areas (Plateau). For the other areas the composite, La Posta, would initially be utilized. Intensive maize variety screening is already ongoing and varieties are likely to become available to replace the hybrid NHI, for which seed has to be replaced every year, and the La Posta which has grains that are harder to mill than the local varieties. A well tested fertilizer compound NPK (15-15-15) at a rate of 100 kg/ha and 50 kg/ha of urea would  - 13 - be applied in all regions except Plateau where the compound doses would be 150 kg/ha. Through testing at IRAT field stations over the past years, two varieties of sorghum have been identified (219 with a cycle of 110 days and 517 with 150 days) that are suitable for the project area, with yield potentials of 2 t/ha. Fertilization with 100 kg/ha of the compound NPK (15-15-15) and 50 kg/ha of urea is recommended. Groundnut research has identified two varieties suited for the project area (149-A for the Plateau and RMP-12 for all other regions) with yield potentials of over 2 t/ha. Together with better and timelier cultural practices, 100 kg/ha of the compound NPK (15-15-15) would be applied. It is only recently that research work was initiated on rainfed paddy (grown by farmers in unimproved swamplands). Two varieties, the D-52-37 for the Savanna and IR- 841 for the other regions with yield pontentials of 3 t/ha have been found suitable. Fertilizer applications would involve 150 kg/ha of NPK (15-15- 15) and 50 kg/ha of urea. Vita 5 is the cowpeas variety showing the best adaptation and highest yield potential (1,100 kg/ha). No fertilizer application is recommended. All of the above mentioned varieties are currently being produced by SOTOCO and successfully used by farmers. 3.06 Adoption of these techniques is expected to occur in two phases, the first one involving better and timelier cultural practices and the second, acceptance of improved varieties and use of fertilizers. As these packages are gradually adopted by farmers, average yields are expected to increase as tabulated below. Average yield estimates are based on results obtained by research and yields achieved by progressive farmers prorated for the crop husbandry performance of an average farmer. Yield Estimates (kg/ha) -/ Crop Present Stage I Stage II Achieved by: Progressive Research Farmers Cotton 900 - 1,060 2,000 3,200 Maize 700 900 1,130 2,100 3,000 Sorghum 650 850 1,200 1,600 2,000 Groundnuts 650 800 1,000 1,500 2,100 Paddy (rainfed) 750 1,000 1,400 2,000 3,000 Cowpeas 350 500 800 900 1,100 1/ Stage I involves local varieties with improved crop husbandry. Stage II involves improved varieties, improved crop husbandry, use of fertilizer and (selectively) pesticides.  - 14 - 3.07 Food Crop Storage. Food crops are stored by farmers in traditional thatch covered, raised bins made of wood and woven cereal and grass stems in the south and compacted earth in the north. Current losses due to insect attacks during storage are about 15% and can be reduced to an estimated 5% by application of a biodegradable insecticide (actillic). Actillic would be sold by SOTOCO to farmers for mixing with the grains to be stored and subsequent regular spraying from the outside. This low cost measure (about CFAF 2,600, US$8 on average for a typical farm) would realize food crop savings equivalent to about CFAF 13,500 (US$40) per farm. In parallel to these measures, IRAT is conducting research on simple improved on-farm (or farmer group) storage structures. A pilot demonstration program for such stores is being conducted by the GTZ assisted Central Region Project and a pilot component would be included under the proposed Notse Rural Development Project. If technically and economically success- ful, improved food crop stores could subsequently be promoted on a wider scale in Togo. 3.08 Field Services. The project would consolidate and improve upon the extension system that has been successfully initiated under the first project. Principal innovations would be: emphasis on the "whole farm" approach with greater attention to food crops; further refinement of the recently established "training and visit" system and greater emphasis on upgrading field staff skills; decentralization of field level responsibi- lities; introduction of an audio-visual unit; improved field organisation of input distribution, credit and cotton marketing; and, encouragement of farmer groups. 3.09 The extension service would be organized as shown in Chart II. At the regional level there would be a regional director, an assistant director, a trainer and assistant trainer, an animal traction supervisor and a supervisor for farmer groups and credit operations plus support staff (clerks, secretaries, drivers). Each of the four regional directorates (plus the sub-regional directorate for the Bassar/Mo area) would head about four to five sectors (20 in all) consisting of a sector chief and an "intendant" which would in turn head about four sub-sectors (90 in all by PY5), consisting of a sub-sector chief and about 8 extension agents (725 in all by PY5). The new elements in this structure are the addition of a regional supervisor for farmer groups and credit (para 3.12) and an intendant for each sector. The intendant's role would be as a deputy to the sector chief responsible for administering the ordering, stocking, bookkeeping and distribution of farm inputs, the maintenance of data for the sector and the organization of cotton marketing, thereby releasing more of the sector and sub-sector chiefs' time to extension activities. 3.10 The field staff training program would continue the pre-season preparatory courses which would be complemented by visual aids. The two- weekly training and visit meetings would be expanded to include production technology for "packages" involving the principal crops in each ecological zone. Extension agents in each sector would meet with sector and sub- sector chiefs and trainers for training/demonstrations and to review the progress of the past period and set the program for the next two weeks. An audio-visual unit would also be established with a chief officer respon- sible for preparing or procuring and reproducing literature, films and  - 15 - tapes as aids for extension agents, plus an assistant who would travel the regions operating a mobile cinema van and distributing literature. Two organisational innovations would be to improve the links with the animal traction service and, where suitable, to initiate training for farmer groups (para 3.12). 3.11 Overall supervision of the extension service would be provided through the headquarters based director (an internationally recruited specialist for the first four years) and deputy director of extension who would work closely with the director and deputy director of the training service and the section for promotion of farmer groups and cooperatives. Resulting from improved organisation and increased support services, the ratio of extension agents to participating farmers would decline from 1:75 at project initiation to 1:90 in year three (1:300 if non participating farmers are included). Furthermore, despite an increase of 23,400 (56%) in the number of participants between years 1 and 5, the number of SOTOCO professional field officers would expand by only 145 (intendants: 20, training and cooperatives: 5, sub-sector chiefs: 15 and extension agents: 105), or 20%. In view of the investments under the first project, minimal new investments are envisaged for SOTOCO field services. Provision would be made for enlarging the regional/sub-regional offices, vehicles, audio- visual equipment and radio telephones for remote areas. Additional village input stores (approximately 425) would also be included sufficieni to augment those constructed during the first project to provide one 25 m store per extension agent. Built with farmer assistance, these stores would provide centres for distributing inputs and organising marketing and other activities. 3.12 Farmer Groups and Credit Operations. In support of Government's efforts to coordinate and promote farmer group development through the National Centre for Promotion of Cooperatives and associated regional offices, a new post would be created at SOTOCO Headquarters of farmer group and credit development officer. Together with a deputy and four regional farmer group development and credit officers, he would, in liaison with regional centres for promotion of cooperatives, be responsible for encouraging, on a pilot scale, the creation of small farmer groups (up to 30 families). This team would instruct group organisers and project extension staff in the objectives and administration of such farmer groups and supervise the development of groups at the village level. Lessons from the past would be taken into account. In the Maritime region, development of cooperatives has been largely unsuccessful for three main reasons: (i) cooperatives were generally far too large with a resultant lack of rapport between cooperative members; (ii) the absence of an effective technical package in the Maritime region and frequent reliance entirely on food crops created technical and repayment difficulties; and (iii) inadequate attention was paid to their organizational structure and support by extension staff. Initially the team's work would include such activities as the promotion of food crop storage and group marketing, the ordering of inputs and oxen cultivation. For the first four project years, this unit would be managed by a training and farmer group development specialist recruited internationally. The objective would be to stimulate sociologically and financially viable farm  - 16 - level structures for promotion of technical and organizational innovation beyond the scope of an individual farmer which could be supported by credit provisions from the CNCA. Specific economic benefits from this service are not provided as they are difficult to estimate and the benefits from getting successful farmer groups underway should be viewed in a longer term perspective. 3.13 Animal Traction. The limited population, restricted family size and concomitant scarcity of casual labour presents a major constraint to expanding the cultivated area in most project areas. Promotion of oxen cultivation offers scope both for reducing this constraint and of raising yields through better timing and quality of cultivation. The indigenous cattle, traditonally reared in the north, adapt well to traction. However, progress in promoting animal traction has been slow and the project's animal traction service, working with the existing institutions in Togo, would help rectify this. PRODEBO, Government's agency for training, prophylactic treatment and the procurement and supply of oxen and implements is currently being reorganized and strengthened and is to be renamed PROPTA (Projet de Promotion de la Traction Animale). PROPTA would procure oxen and implements in line with annual work plans and would, similarly, provide annual prophylactic treatment of the cattle involved and advice on necessary supplementary feeding. Animal traction implements and trailers would be purchased from the UNDP assisted UPROMA workshop at Lama Kara and credit for such equipment and purchase of animals would be provided through CNCA (para 3.18). An assurance was obtained from Government during negotiations (para 8.01(c)) that SOTOCO would enter into agreements with PROPTA, CNCA and UPROMA to this effect. 3.14 SOTOCO's animal traction service would be upgraded through training or replacement of existing staff, and would consist of a service chief, a deputy, an accountant, and four regional supervisors plus field staff and laborers for training and destumping. A consultant animal traction specialist would also be hired to make periodic visits (about 22 months in total) during the first four years of the project to assist the unit. Two new oxen training centers would be established at Atakpame and Dapaong involving simple sheds and handling facilities, making a total of six, at each of which a spray race would be constructed for acaricide treatment. A nucleus of cattle would be maintained at each centre as a basis for a four-week training course for the project's extension agents. This would be undertaken by 36 specialised trainers who would subsequently spend four weeks in the villages with the extension agents supervising the training of groups of participants. Because of the treed nature of much of the virgin land, it is preferable to remove tree stumps mechanically to prepare the ground for oxen cultivation. Therefore, the purchase of 23 sets of manually operated winches would be financed, each manned by two operators who would work with the farmers. Farmers would be charged the full cost of equipment and animals purchased but would receive training and assistance as necessary with destumping free, although they would contribute their labor to the destumping teams. 3.15 While the main impact would be through training of oxen belonging to existing cattle owning farmers, particularly in the north, with an overall target of 1,125 pairs, emphasis would also be placed on  - 17 - introducing animal traction to non cattle owning families and in areas where cattle ownership and animal traction is less common. Therefore, 1,000 pairs of oxen are targeted for purchase on CNCA credit through PROPTA. The destumping brigades are, additionally, expected to clear 3,500 ha in the course of the project. In total a minimum of 10,000 ha per year are expected to be cultivated using work oxen by the end of the five-year period. Several factors provide reason to expect an impact at this level rather than the modest achievement under the first project's pilot exercise (90 pairs as against a target of 350): (i) the unit would for the first time be appropriately staffed and would include consultancy support; (ii) some improvements to staffing are already underway; (iii) Government has recently placed a high policy priority on development of animal traction which is also now reflected by SOTOCO's management; and (iv) the creation of UPROMA and PROPTA will facilitate the project units efforts. 3.16 Input Supply and Credit. Crop inputs (improved seeds, fertilizers and pesticides) would be distributed as at present through the directorate of production services and the regional extension system in coordination with the industrial department (transportation) and financial department (maintenance of accounts and financing), supported at the field level by the intendants and additional field stores to be introduced under the project (paras 3.09 and 3.11). A departure from current practices would be that SOTOCO would purchase fertilizer and pesticides directly without passing through Government's input procurement agency, the "Service des Engrais et Moyens de Production". An assurance that this arrangement would be in effect for the 1983/84 growing season was obtained during negotiations (para 8.01a). While the Government service is managed adequately, it is constrained by delayed funding from the Treasury and its comittments to other projects, and involves an unnecessary intermediate step for orders that are already sufficiently large to benefit from bulk ordering under international competitive bidding. 3.17 Seasonal inputs would be provided by SOTOCO on a cash or credit basis for cotton growing farmers and on a cash basis for non-cotton growing farmers. This restriction is currently necessary in view of the previous poor experience in Togo for credit recovery not secured by cotton. For cotton growing farmers, credit would be recovered as at present during SOTOCO's cotton marketing operations, a system which has achieved a recovery rate of over 98%. Extension staff would safeguard against a cotton farmer's ability to repay credit on food crops by using as a general but judgementally applied guide the criterion that total credit on all his inputs should not exceed 50% of expected gross revenues from the farmer's planned cotton area. 3.18 All credit not secured by cotton would be provided by the Caisse Nationale du Credit Agricole (CNCA) in collaboration with the project extension service. In view of the expected limited scale of these operations, additional facilities are not envisaged for CNCA under the project. Credit applications supported by the extension agent responsible and approved by the sector chief and cooperative section chief, would ultimately be decided on by the regional CNCA managers. Seasonal loans, extending for 12 months, and medium term loans, extending for 36 months, would be subject to the currently applied annual interest of 10 percent.  - 18 - Where loans are made to farmer groups the members would, however, be individually responsible for repayment. The current interest rate is low in view of expected international and domestic inflation rates of between 6 to 10%, administrative costs and risk coverage. This distortion is however, far outweighed by Government's current price subsidies on fertilizers, the subject of an assurance concerning phasing out of such subsidies (paras 6.10; 8.01(j)). The project's medium term credit provided through CNCA would not be financed by IDA and is small in relation to total credit provisions provided by CNCA. 3.19 Applied Agronomic Research. The applied agricultural research program, successfully initiated under the first project, would be continued with appropriate modifications under the second project. As previously, the program would be subcontracted by SOTOCO to IRCT (cotton) and IRAT (food crops) in order to realize economies whilst benefiting from the senior staff and back-up support available from these two estabished research agencies. Improvements would reflect the farm approach to development rather than the crop approach followed so far. To this effect, an agro-economic research component, managed by IRCT in close cooperation with IRAT would be added to the research program to provide feed back information on the farmers reaction to and adoption of improved and intensified cultural practices. Data would be gathered at the farm level by 5 surveyors located in the five main ecological zones and analyzed by a supervisor assisted by consultants. IRAT's food crop research program would be continued on crops such as maize, sorghum, millet, groundnuts, upland rice and cowpeas and would involve variety screening, fertili- zation, herbicide use, crop rotation and traditional storage improvement conducted at six trial sites representative of the project area. Existing working relations with international and regional research institutions such as IITA, CIMMYT, IDEESA and WARDA would also be reinforced. Applied cotton research on IRCT's six local research stations would continue to cover the genetic, agronomic. and pathologic aspects of improving production. Full details are in the project file. As previously, IRCT and IRAT would prepare annual reports on research findings which would be submitted to SOTOCO together with detailed proposals and a budget for the forthcoming year. Assessment of research findings and approval of future proposals and budgets would be made during the course of project supervision missions. 3.20 Seed Multiplication for SOTOCO. For cotton seed, breeders and foundation seed would continue to be produced by IRCT under a contract with SOTOCO. Further mnultiplication of first and second generation seed would be done on SOTOCO's 8 seed multiplication farms. The last multiplication stage would be done, as presently, on farmers fields in the Savanna Region and recovered during ginning of the Savanna crop. For food crops, breeders and foundation seed would continue during the first two years of the project to be produced for SOTOCO under a contract with IRAT. From PY3 onwards, foundation seed would be provided by the national farm for maintenance and production of foundation seed to be established under the project (para 3.21). This would then be multiplied by SOTOCO's seed multiplication farms. Should the proposed Notse seed farm and the existing Central Region seed farm be sufficiently geared up to produce all of the country's first generation seed by the last years of the project, SOTOCO  - 19 - would also subcontract the first generation production cycle to these two centers, restricting itself to the second and (where appropriate-eg maize, groundnuts) third generation multiplication stages (details of above in Project File). 3.21 Support to National Seed Multiplication Program. In support of Government's objectives to streamline and coordinate the production of food crop seeds within a monitored and controlled national program (para 1.22), the project would support three measures, administered directly under the Ministry of Rural Development's General Directorate of Agriculture, to achieve this program: (i) establishment of a small seed farm in the Central Region's Sotouboua area to maintain varieties and produce foundation seed; (ii) a seed quality control unit attached to the seed farm to monitor the quality of seed produced throughout the country at all multiplication stages; and (iii) operating funds for a small committee plus permanent secretariat to coordinate the national seed multiplication program. The committee would include representatives from the regions and the agricultural development projects and research institutes involved in seed testing, production and usage and would serve to ascertain needs, plan future production and provide feed back on farmers requirements. A permanent secretary with experience and appropriate seniority would be appointed in the General Directorate of Agriculture for administration of the program. For key policy decisions the committee would be chaired by the General Director of Agriculture or the Minister. The research agencies (eg. IRAT) would continue to produce breeders seed. The existing seed farm in the Central Region, assisted by the Federal Republic of Germany's GTZ, and the proposed seed farm at Notse to be financed with assistance from IFAD (para 1.10), are eventually envisaged to be entrusted with production of all foundation seed for food crops. This would be sold to the various projects (including SOTOCO) and regional authorities in Togo for multiplication to commercial seed for their respective project areas. These arrangements would allow for maximum flexibility at the regional and project levels during the last stages of production, but would introduce the necessary quality control and coordination of national needs while reducing production costs at the critical breeders and foundation seed stages where efforts are currently duplicated at considerable expense in all projects with a seed production component. The three elements described above would thus furnish the missing pieces required to achieve a national seed production program within a coherent, planned and controlled strategy. 3.22 Rural Water Supply. Some 400 tubewells equipped with manual labor operated pumps and a stock of spare parts would be financed in villages without ready access to dry season water. This component would help alle- viate the water shortage problem in many villages covered by the project where shortage of household water is a constraining factor on further agricul- tural development and settlement in fertile areas otherwise well suited to rural development (para 2.09). This component is designed to harmonise with the national strategy for development of such tubewells and would make use of the proven existing institutions. SOTOCO would enter into a contract with the Ministry of Public Works' "Direction de l'Hydraulique et de l'Energie" (DHE) for supervision of the component and DHE would be assisted by consultants. The drilling contract would be awarded under international competitive bidding, the pumps would be the proven Vergnet-type to conform  - 20 - with the existing stock of spare parts and to simplify training of local mechanics. They would be financed by the FAC (see financing plan at Table 2). The EDF has tentatively agreed to support this component through the continued financing of training for village mechanics (simple pump or well- head repairs), maintenance of a stock of spare parts and continued support from maintenance brigades for major maintenance. A formal letter of com- mitment from the EDF has been requested. Contributions from beneficiary villages would take the form of provision of labor (construction of fencing, drainage and the well-head platform and free board to construction crews during construction, appointment of a village mechanic for training and subsequent repair work and purchase of spare parts. The above technical, administrative and financial arrangements follow those used successfully under the previously executed tubewell development programs in Togo. 3.23 Tubewells to be financed would be located in the following priority areas: eastern Savanna (about 150), the Bassar and Mo areas of the Central region (about 200) and the area North and West of Notse in the Plateau region (about 50). The selection of villages would be based on their proximity to dry season water, dejography (1 well/600 persons, i.e. about 10 litres/person/day from a 6 m per day well), suitability for further agricultural development and avoidance of duplication with the national tubewell development program. SOTOCO would prepare the initial list of proposed villages together with justifications which, after review and agreement with DHE, would be submitted to IDA for comment and approval. An assurance to this effect was obtained during negotiations (para 8.01b). SOTOCO's annual report would contain a section on the past and proposed future program with an updated list as appropriate, and progress and future orientations would be reviewed during project supervision. Technical details and full selection criteria, administrative arrangements and reporting requirements are in the project file. 3.24 Feeder Road Development. In view of the importance of feeder roads to provide access for field staff, supply of inputs and crop marketing (para 2.08), the second Project would continue to develop and periodically maintain key feeder roads. Some 950 km of feeder roads would be reconstructed and 2,100 km would receive periodic maintenance. Road standards would be simple, single vehicle width gravel, based on SOTOCO experience. Costs amount to CFAF 1.3 million/km (US$3,800) for upgrading and average CFAF 75,000 (US$220) per km for maintenance (base 1982 terms including equipment amortization). These are low due to the prevalance of lateritic soils, generally flat terrain, high utilization of plant (12 hours of continuous operation per day with two drivers has been achieved by SOTOCO's road unit under the first project), general effi- ciency of the SOTOCO unit and the basic but adequate standards chosen. 3.25 As previously, all periodic maintenance would be done by SOTOCO's feeder roads unit but SOTOCO would only do half of the recons- truction work, the remaining 475 km being subcontracted by SOTOCO to the Feeder Roads Unit in the Ministry of Rural Works based on SOTOCO standards and prices. This would provide continued support to the Ministry of Work's feeder roads unit subsequent to completion in 1983 of the IDA supported feeder roads project (Credit 810). This project concentrates primarily on  - 21 - major rural road linkages and no duplication with the Second Rural Develop- ment Project road program is involved. If the performance of the Rural Works feeder road unit continues to improve, the merging after PY5 of the SOTOCO unit within the Ministry of Rural Works could be considered. An assurance was obtained during negotiations that the contract and any subsequent amendments with the Ministry of Rural Works Unit would be subject to prior approval by IDA (para 8.01(c)). SOTOCO's annual report would contain a special section on the feeder roads program including past progress, costs and future proposals. Full details are in the Project File. 3.26 Cotton Ginning, Transportation and Workshops. An industrial department of SOTOCO headed by an internationally recruited specialist, would be created under the project to handle these interrelated activities which, to date, have been haphazardly managed with resultant inefficiencies, underutilization of plant, and high operating costs. Existing ginning capacity in Togo consists of SOTOCO's new 22,000 t/annum ginnery at Lama Kara, two privately operated delapidated ginneries at Atakpame with a combined capacity of 10,000 t/annum and a new 22,000 t/annum ginnery managed by SOTOCO at Notse. Construction of a 4,000 t store for seed cotton at the new Notse ginnery would be financed to prolong the ginning season. National seed cotton production is estimated to reach 47,700 t by PY5. Thus, these improvements would provide sufficient capacity for the project period although a third new ginnery in the Central region and the phasing out of the two old privately owned ginneries is likely to be necessary eventually. 3.27 Transportation of seed cotton, cotton fibre, cotton seed and farm inputs is particularly poorly administered at present. SOTOCO has a fleet of 67 trucks, 52 of which have trailers and were purchased in 1980 under the First Project. Prior to this, SOTOCO supplemented its own fleet using contracted private sector truckers, although this entailed a number of difficulties, particularly for journeys off the main roads which were seldom attractive to such truckers. Through increased efficiency, mean round trips can be progressively reduced to half the present averages. For example, the current 2.5 day average for collection of seed cotton is made up predominately of standing time during loading and unloading plus slow servicing. This will require better organised and monitored logistical control, advance liaison with field services and ginneries during cotton collection, streamlined truck servicing and fueling, minimization of empty trips (e.g return legs with inputs during delivery of fibre to the port), further driver training, two drivers per vehicle and driver bonuses for overtime. With such improvements, fully attainable under the intensive management envisaged to be established through the project, truck fleet requirements would only need to be expanded by eight trucks plus replacement, during PYs 3 to 4, of the 52 existing trucks. Considerable savings would be made on operating costs. While, for the purposes of project costing, a self-contained SOTOCO transport fleet has been assumed, subcontracting to private sector truckers would be used to the extent possible. Upon taking up his post, the industrial director would undertake a review of SOTOCO's transport and processing procedures and needs to serve as a starting point for his future work program. Terms of reference are in the project file and are intended to follow-on from the detailed consultant  - 22 - studies that have recently been done and which point to areas that merit further refinement., The study would include a further examination of the transport sub-contracting option. Cofinancer approval of future truck purchases, provisionally included in project cost estimates, would be contingent upon the study's findings in this respect. 3.28 A new maintenance garage is under construction next to the ginnery at Lama Kara. Another repair-servicing garage would be constructed and equipped at Atakpame to replace the existing and inadequate rented hangar plus two small subsidiary garages at Dapaong and Notse. These garages would handle servicing and repairs of the project's trucks, light vehicles and agricultural and road brigade equipment. For major overhauls of heavy plant, commercially operated facilties at Lome would be used. Full details on ginning, transportation and workshops are in the project file. 3.29 Mo Plain Development. This 75,000 ha plain in the north central zone on the border with Ghana is isolated from the rest of Togo by a range of hills to the east and the Mo river to the north but has good agricul- tural potential and a rapidly growing population (currently about 5,000). The proposed Credit would therefore assist in financing low cost (US$70,000) access by means of a raised concrete track with culverts passable for eight months per year by vehicles, plus a simple pedestrian suspension bridge. Development measures in the plain would be similar to those in the rest of the project area; establishment of an extension service, essential feeder roads and tubewells,and technical recommen- dations as for the north central zone. 3.30 Buildings. In addition to the constructions specified in paras 3.11, 3.14, 3.21, and 3.26, project investments would include construction of 10 houses for the project management staff and a slight expansion of the SOTOCO headquarters office at Atakpame. In view of the dispersed nature and small size of these constructions, larger structures would be built under local contracts and smaller structures (for example extension agent input stores, sheds for seed multiplication and oxen training centers), would be done by local builders and village labour using materials supplied by SOTOCO. Its engineering division has the capacity for design, preparation of bidding documents and supervision and would be responsible for the project construction program with assistance from regional staff for site supervision. 3.31 Monitoring and Evaluation. Under the first project it was envisaged that monitoring and evaluation would be done by the Ministry of Rural Development's "Direction des Enquetes et Statistiques Agricole" (DEESA) which is responsible for collating agricultural statistics and has a countrywide field service of enumerators. Reliance was placed on the strengthening of DEESA that was to have taken place under the Maritime Region Rural Development Project (Credit 638), which included financing for extra vehicles, equipment and an expatriate specialist, and provisions under Credit 741 were therefore restricted to a technical officer based at Atakpame, a vehicle, equipment and short term consultancy services. Faced with other ongoing survey committments and beset by lack of operating funds and trained enumerators, DEESA's limited capacity did not in the event allow for monitoring and evaluation work relevant to SOTOCO. Furthermore,  - 23 - DEESA's evaluation specialist was not recruited until the end of the first project's third year and as his first priority had to get monitoring and evaluation work underway in the Maritime Region. Field data relevant to SOTOCO was therefore limited to information collected by extension staff and records of input usage and cotton production with notable gaps as concerns food crop production, cultural practices and yields, farming systems and socio-economic data. Such information will be particularly critical in the project's second phase and the usefulness of project monitoring and evaluation is now fully recognized by SOTOCO's management and Government. A start was made in 1981 with the employment of a consultancy firm to analyse SOTOCO's past extension staff records of participating farmers' crop areas, input usage, cotton yields and (mainly for cotton) cultural practices. For the project a specific monitoring and evaluation unit for SOTOCO has been requested. 3.32 In response to these needs, the establishment of a monitoring and evaluation unit within SOTOCO would be supported under the project. It would be staffed with an internationally recruited specialist (his appointment is a condition of project effectiveness, para 4.06), an assistant unit chief, one supervisor per region (four), five controllers, twenty enumerators (one per sector), a statistician, seven data processing personnel and support staff (drivers and secretary) and funds would be provided for purchase and operation of vehicles and field and office equipment. The unit would report directly to the General Director of SOTOCO. To the extent possible within DEESA's own work program, DEESA field staff would be recruited into the SOTOCO unit so as to avoid functional redundancy. The SOTOCO unit would also liaise with DEESA which would itself receive some continued consultant support under the IFAD financed Notse Rural Development Project. SOTOCO's monitoring and evaluation unit would measure and evaluate the project's physical progress and effectiveness, adoption, yield increments, and reactions by farmers to project recommendations, and constraints, inefficiencies and potentials requiring further attention. Particular emphasis would be placed on the collation and analysis of data on food crops. It would also collect base line data required for planning future actions, undertake special studies as appropriate, and--in liaison with the Project's financial department-- analyse the financial and economic efficiency of SOTOCO's internal operations. The unit would thus serve as a management tool for providing feedback on project impact, reorientation of activities as appropriate and planning future actions. Evaluation data would be summarized in the project's quarterly and annual progress reports which would be submitted to Government and the cofinancers and in special reports following each survey or study, these to be submitted within three months of completion of survey field work. An assurance to this effect was obtained during negotiations (para 8.01(b)). Initial guidelines for the monitoring and evaluation unit are contained in the project file and would be revised, as appropriate, during the course of project supervision. IV. ORGANIZATION AND MANAGEMENT 4.01 Organization. As under the first project, SOTOCO would be the implementing agency, either directly or through arrangements between  - 24 - 6SOTOCO and other specialised agencies (para 4.03). An exception to this would be the project component supporting the national seed multiplication program (para 3.21) and the preparation of a possible third project (para 4.13) which would be managed separately under the Ministry of Rural Development's (MRD) General Directorate of Agriculture. SOTOCO is a state eriterprise created in 1974 as a national cotton development agency with responsibility for extension work, technical support and primary marketing of cotton. Its responsibilities were amended under the first project to include food crops cultivated in cotton areas and it is now increasingly handling cotton processing (para 3.26). SOTOCO is an independently managed entity under an Administrative Council including representatives of the key ministries involved (Rural Development, State Enterprises, Commerce, Finance, Plan, Interior) plus the General Directors of the CNCA and OPAT and a representative from each of the regional DRDRs. This provides an appropriate forum, although in practice most decision making is undertaken with the Ministry of Rural Development for technical matters and the Ministry of State Enterprises for financial and administrative matters in consultation with the Ministry of Plan on general policy questions. Given the extensive delegation of all day-to-day decision making to the. General Director of SOTOCO, the system works well and would not be changed. 4.02 SOTOCO is managed by a Togolese General Director under whom are several headquarters departments and a regionalized field service. Staff inexperience in these departments has necessitated over cen- ralized management by the General Director and his senior staff and resulted in low efficiency in some areas (para 1.14). To correct this, SOTOCO headquarters would be reorganized into four main departments-- agricultural production, finance and administration, marketing, and industrial--and an engineering division. The reorganization would involve consolidation and clearer definition of responsibilities for the existing agricultural production, and finance and administration departments and the engineering division, (paras 3.11 and 5.12) and the creation of a new marketing department to be responsible for cotton marketing and an industrial department to be responsible for factory processing, transport management and the workshops and garage (paras 3.26 to 3.28), and of a monitoring and evaluation unit (para 3.31). Chart I illustrates the new division of responsibilities. These organizational units would provide the necessary headquarters support to the regionalized field services which, with some minor changes described in paras 3.08 to 3.11, would maintain their existing structure (Chart II). Coordination of unit work programs would be achieved through regular meetings chaired by the General Director. To further reduce the administrative workload of the General Director, the vacant post of Deputy General Director would be filled by a suitable Togolese. Assurances were obtained from Government during negotiations that the General Director and the Deputy General Director would have at all times qualifications and experience acceptable to IDA. The nomination of a new General Director would be a condition of Credit effectiveness (para. 8.02(i). 4.03 To make best use of existing organizations in Togo and to minimize the range of expertise and activities required within SOTOCO, a number of other organizations would be involved in the project: the DHE for implementation of the tubewell program (para 3.22); the Feeder Roads Unit of the Ministry of Rural Works for part of feeder road construction  - 25 - (para 3.25); PROPTA for supporting animal traction (para 3.13); IRCT and IRAT for applied research (para 3.19); and CNCA for provision of medium term credit (paras 3.12 and 3.18). In the longer term, the first stage of food crop seed multiplication would also be done under the nationally organized program (para 3.21). In addition, SOTOCO would continue with the present arrangements with OPAT for cotton exporting but with a revised cotton marketing bareme (para 6.12). Contractual arrangements governing these linkages are described in the relevant paragraphs and would be subject to prior agreement by IDA. An assurance to this effect was obtained during negotiations (para 8.01(c)). 4.04 Staffing, Technical Assistance and Fellowships. In view of SOTOCO's past weaknesses in certain critical areas (para 1.14), and with a view towards building up a trained and experienced Togolese staff within a technically and administratively strong organization, particular emphasis would be placed upon recruitment and training of national staff and upgrading of efficiency in all departments. This would be tackled through recruitment of some additional staff, the provision of salary premiums where necessary, a training fellowship program, provision of technical assistance staff and attention to on-the-job training. 4.05 Internationally recruited staff are anticipated for the following positions: the Directors of the Agricultural Production Depart- ment, the Finance and Administration Department and the Industrial Department; the heads of the engineering division and the monitoring and evaluation unit; the chief of the extension services; the chief of the farmer groups and credit service, a cost accountant, a seed production agronomist for SOTOCO, an agronomist for the national seed production component and two workshop managers for the Atakpame and Lama Kara garages. This total of 12 positions would aggregate to 42 man-years plus consultancy visits amounting to 22 months for the animal traction component. Expatriate staff terms of reference are contained in the project file and place emphasis on training of local staff. Financing provisions would also be provided for 24 man-months of consultancy services for the preparation of a possible third phase project (para 4.13) and for other needs that may materialize during project execution. 4.06 The resident expatriate staff would be recruited if possible through a single contract with a consultancy firm or group in order to benefit from the back-up services provided under such an arrangement. Subcontracting or informal linkages by the employed firm with other consulting firms or with individuals is, however, most likely given the range of expertise required which is seldom available in any one firm. An assurance was obtained during negotiations (para 8.01(d))that the selection and appointment, including terms of reference of all technical assistance staff and of short term consultants would be in accordance with the Bank's guidelines for usage of consultants (August 1981) and that IDA approval of the qualifications and experience of all such selected staff would be obtained prior to their appointment. The signing of a satisfactory contract or contracts involving at least the following six positions--the directors of the agricultural production, finance and administration and industrial departments and the heads of the extension service, engineering division and monitoring and evaluation unit--would be a condition of Credit effectiveness (para 8.02).  - 26 - 4.07 The project's fellowship program would be designed to upgrade the skills of Togolese staff. CFAF 100 million (US$294,000) have been provided for medium (about one year) to short term (typically one to three months) visits or courses generally outside of Togo and would cover all associated costs (e.g. travel expenses, accommodation, training fees, books and subsistence). Fellowships would respond to staff needs in all aspects of the project (for details see project file). Project management would be encouraged to use this facility energetically to upgrade Togolese staff skills and to assist in preparing for a reduced expatriate involvement. The consulting firm and the individual expatriate staff would be responsible for assisting in identifying needs and opportunities and the program would be administered by the Director of Agricultural Production under the overall direction of the General Director in consultation with unit heads. Periodic visits would be made by a consultant training specialist to help identify staff needs and subse- quently make contacts and assist in arrangements with appropriate agencies. To ensure close monitoring of this program while permitting maximum flexibility for detailed arrangements to SOTOCO's management, the program would be discussed and future orientations determined during each supervision mission and project progress reports would contain a special section on training achieved during the reporting period plus recommenda- tions for the future. 4.08 All internationally recruited positions would initially be in line management roles. However, a deputy (in some cases two), with clearly defined responsibilities, would work closely with each expatriate staff. The deputy staff would be expected to gradually take over responsibility during the latter part of the project. Prior to his eventual departure each expatriate staff member would be expected to assume an advisory role to facilitate this process. In initial selection of expatriate staff and in subsequent performance evaluation, capacity for training of counterpart and junior staff would be considered as important as the technical skills provided by the expatriate. Technical assistance arrangements would be reviewed annually in order to identify needs as they occur and to permit maximum flexibility in the transfer of responsabilities to Togolese staff. 4.09 The project's institution strengthening and staff build-up objective cannot be achieved without support from Government and project management in selecting and retaining competent staff and, where necessary, replacing unsatisfactory staff. Additionally, for some local staff positions, experience has shown that higher salaries or salary premiums are necessary to attract qualified staff. These matters would therefore be followed closely during project supervision. For the key posts of General Director and Assistant General Director of SOTOCO, an assurance was obtained during negotiations (para 8.01(e)) that these positions would be filled at all times by persons with qualifications, experience and capabilities satisfactory to IDA. 4.10 The National Extension System and SOTOCO's Future Role. In the longer term, Government envisages that SOTOCO's role would be reduced to that of a specialized cotton development agency responsible for marketing, processing, input supply and provision of technical advice to the cotton sector, leaving extension and other supporting rural development activities to a nationally administered extension service under the DRDRs  - 27 - (para 1.09). Nevertheless, for at least the five-year project implemen- tation period, Government recognizes that the DRDRs and their extension services are not sufficiently developed to handle these activities and SOTOCO would, therefore, continue to act as a general rural development agency in Togo's cotton areas. The strengthening under the project of SOTOCO's industrial and financial departments and general management would, however, create the capacity for the possible eventual creation of a separate company, possibly supported by foreign capital, for undertaking the reduced functions described above. Similarly, the upgrading and regionalization of SOTOCO's field services could permit their release as a well trained, polyvalent extension service to the DRDRs, and the subcon- tracting of supporting services to specialized agencies that would take place under the project (para 4.03), would serve to limit the future rural development functions of the DRDRs to provision of extension services, thereby reducing the range of services that they would n1eed to provide. A consultant's study to assist the Government to analyse the above conside- rations would be financed under the Second Technical Assistance Project. 4.11 Arrangements already underway in certain areas (para 2.02) will serve as test cases for this possible option. Currently they offer mixed indications. For instance, in part of the Savanna region, one project administered through the DRDR, from which SOTOCO has withdrawn its extension and rural development support services, has resulted in cotton yields at less than half the previous levels and even food crop production, though currently not easily monitored, appears to have suffered. On the other hand, for the GTZ assisted project in the Central region, a clear delineation of area responsibilities between DRDR and SOTOCO extension staff has been made and SOTOCO back-up services for cotton production techniques and marketing has been more successfully applied. The problems encountered in the Savanna region project and elsewhere will have to be redressed if Government's future objectives are to be attained. Further- more, the presence in many areas of both SOTOCO and DRDR extension agents is inefficient and would be tackled through clearer definition of intervention zones during the course of the project, a matter that is already being addressed on a case by case basis and would be encouraged during supervision. 4.12 Reporting requirements. In addition to the financial reports described in para 5.12, SOTOCO's management would prepare an annual report to be submitted to IDA not later than three months after the end of the cotton growing year (i.e. by June 30th) summarizing the project's achievements, comparing them to appraisal targets and commenting on key problems and future priorities and needs. Additionally, brief quarterly reports, consisting largely of summary data sheets, would be submitted to IDA within two month of the close of each quarter. Assurances to the above effect were obtained during negotiations (para 8.01(f)). Individual work unit heads would contribute to these reports which would subsequently be prepared by the Director of Agricultural Production in liaison with the General Director. 4.13 Preparation of Possible Third Project. Preparation of a possible third project would be done by the Government with substantial assistance from SOTOCO, using consultants selectively in specific areas and for final analysis and report compilation. This is anticipated to be done in PY3. IDA's agreement for hire of additional consultants would be contingent upon agreement of the follow-up project's content and orientation, and  - 28 - subsequent consultant selection and TORs would be governed by the conditions of para 4.06. V. COSTS AND FINANCING 5.01 Project Costs: Project costs are estimated at CFAF 16,567 million (US$48.7 million) with a foreign exchange component at CFAF 11,356 million (US$33.4 million) or 69% of project costs. Project costs include an estimated CFAF 768 million (US$2.3 million) of taxes, primarily on local salaries and construction materials, as Government intends to continue to allow tax exemptions on directly imported equipment, inputs and material, and fuel for SOTOCO will also continue to be untaxed. This was confirmed during negotiations. 5.02 Base costs (CFAF 12,326 million, US$36.3 million) are expressed in mid-1982 prices and reflect recent costs incurred by SOTOCO supple- mented by cost data from other agencies represented in Togo. Physical contingencies of 8% have been applied to capital costs (constructions and equipment) and 10% to operating costs except wages, salaries and technical assistance. Price contingencies have been applied as follows: Expected Price Increases: Annual Rates % 1983 1984 1985 1986 1987 Local Costs 10 10 10 10 10 Fertilizer and Pesticides 11 10.5 10 9 9 Other Foreign Costs 8 7.5 7 6 6 Price increases for fertilizers and pesticides are based on projections for these commodities. Price increases for all other foreign costs are based on estimates of international inflation. The price escalation factors on local costs are based on estimated annual inflation for Togo taking into account the composition of local costs. Cost estimates were made in CFAF and converted to US$ at an exchange rate of CFAF 340: US$1.00, based on the expected medium term average conversion rate. Total contingencies amount to CFAF 4,240 million (US$12.5 million) or 34% of base costs (26% of total costs). Detailed costs (Project File) are summarised in Table 1 and a yearly breakdown is given in the Annex, Table 1. 5.03 Project cost estimates exclude operating costs for ginning and transportation of cotton and inputs which will be covered under the OPAT- SOTOCO bareme (para 6.12). They also exclude non incremental staffing and operating costs for SOTOCO's headquarters, the field services and seed multiplication and non-incremental costs for seasonal inputs. 5.04 Proposed Financing - Project Costs. In view of Togo's difficult current and medium term financial constraints it is proposed that external financing should amount to 95% of net-of-tax project costs or CFAF 15,000 million, (US$44.1 million). This would be equivalent to all of the project s foreign exchange costs plus CFAF 3,647 million (US$10.7 million)  Table 1: PROJECT COST ESTIMATES % of CFAF Million ----- -----US$ Million ------ Base Local Foreign Total Local Foreign Total Cost Headquarters Services 380 1,298 1,678 1.1 3.8 4.9 13.6 Extension Services 701 1,208 1,909 2.1 3.6 5.7 15.6 Seed Production 170 220 390 0.5 0.6 1.1 3.2 Applied Research 258 236 494 0.7 0.7 1.4 4.0 Animal Traction 359 397 756 1.0 1.2 2.2 6.2 Fertilizer and Pesticides 125 1,218 1,343 0.4 3.6 4.0 10.9 Feeder Roads 609 1,773 2,382 1.8 5.2 7.0 19.4 Village Water Supply 600 850 1,450 1.8 2.5 4.3 11.8 Ginning/Storage Investments 65 65 130 0.2 0.2 0.4 1.1 Transportation Investments 176 891 1,067 0.5 2.6 3.1 8.7 Monitoring and Evaluation 193 257 450 0.6 0.8 1.4 3.7 Support to National Seed Multiplication 111 166 277 0.3 0.5 0.8 2.3 Program I, TOTAL BASE COST 3,747 8,579 12,326 11.0 25.2 36.3 100.0 Contingencies Physical 181 623 804 0.5 1.8 2.3 6.5 Price Escalation 1,282 2,154 3,436 3.7 6.3 10.1 27.9 Total Contingencies 1,463 2,777 4,240 4.2 8.1 12.4 34.4 II. TOTAL PROJECT COST 5,210 11,356 16,566 15.3 33.4 48.7 134.4 (including Taxes) Taxes 768 - 768 2.3 - 2.3 - III. TOTAL PROJECT COST 4,442 11,356 15,798 13.0 33.4 46.4 (Net of Taxes)  - 30 - or 82% of the net-of-tax local costs of the project (CFAF 4,442 million, US$13 million). Government's contribution to project costs would therefore amount to CFAF 1,574 million (US$4.6 million) or CFAF 806 million (US$2.3 million) net of tax. 5.05 Recurrent Costs. In addition to its CFAF 1,574 million (US$4.6 million) contribution to the costs of the project, the Government Treasury would contribute CFAF 3,493 million (US$10.3 million) towards the recurrent costs of SOTOCO's field services, headquarters and seed production (CFAF 2,155 million or US$6.3 million net of tax). A substantial part of this (CFAF 1,928 million, US$5.7 million or CFAF 1,698 million, US$ 5.0 million, net of tax) represents salaries for SOTOCO's non incremental local staff, in particular for the field services. The payment of salaries is made through the Treasury's "General Budget" and, unlike funds provided through its "Investment Budget", payments have generally been made promptly. The above costs exclude costs incurred by SOTOCO to be reimbursed through farmer payments for fertilizer or by OPAT under the bareme (e.g cotton processing, marketing and transportation costs). Short term credit for these revolving and reimbursable costs is made to SOTOCO through Central Bank loans provided via the intermediary of the CNCA which acts in this instance as a commercial bank. Interest payments against such short term funding is charged under the bareme. 5.06 The above estimates are based on the following assumptions: (i) the OPAT-SOTOCO bareme is adjusted to include (a) the full operating costs of cotton ginning and marketing operations, and (b) Government subsidies on seasonal inputs (para 6.12); and (ii) subsidies on fertilizers are progressively removed during the five-year project period and pesticides continue to be covered in full under the bareme (para 6.10). Background and assurances relative to the above are contained in the paragraphs cited and detailed project and recurrent cost estimates are in the Project File. An assurance was obtained during negotiations (para 8.01(g)) that all funding required from the Treasury would be provided in full and in a timely manner. 5.07 Financing Plan: The proposed repartition of project cost financing between IDA and other cofinancers is based on the amounts indicated by such cofinancers and their preferences as concerns project components and expenditure categories to be financed. These preferences have been accommodated within the overall objective of achieving an administratively simple financing plan and are detailed in the Annex Table 2 with a summary at Table 2. The CCCE and FAC would contribute CFAF 5,500 million (US$16.2 million) and CFAF 1,500 million (US$4.4 million) respectively. Together with an IDA credits of US$23.5 million (CFAF 8,000 million) the proposed external financing amounts to US$44.1 million equivalent (CFAF 15,000 million). 5.08 The contribution of FAC would be a grant and CCCE a 15 year loan (including a grace period of 5 years) at 4.5% interest per year. The IDA Credit would be on standard terms. These funds would be channeled through the Central Bank, the Government agency for handling all official foreign financing, and passed on by Government as grants (surpluses, para 6.13, would be made by OPAT rather than SOTOCO and subsequently passed on to the Government Treasury) on the following basis:  TABLE 2 : PROPOSED FINANCING PLANLA TOTAL PROJECT COST - - - - - - - - - - - - - - EXTERNAL FINANCING - - - - - - - - - - - Inclusive of Taxes Net of Taxes IDA CCCE FAC Total Government Farmers CFAF Millions ----------------------------------------- US$ 1000 -------------- o-f inancers Treasury Bareme 1. Buildings, Plant and Equipment for SOTOCO H.Q., National Seed Production, Ginning and Storage and Transportation and Credit for Animal Traction and Follow-up Project Study. 2,556 7,518 7,294 (1) 101 (Q3) 6,q7Q Q t4) 7,080 ( 6) 438 - 2. Expatriate Personnel. 1,693 4,980 4,980 (50) 2,481 (23) 1,149 (27) 1,350 (100) 4,980 - - 3. Local Personnel and Operating Costs for SOTOCO H.Q., National Seed Production, SOTOCO Seed Production, Applied Research, Field Services, Monitoring and Evaluation and Feeder Roads; Buildings, Plant and Equipment for Feeder Roads; Local Personnel for Village Water Supply. 6,272 18,447 17,321 (59110,875 (27) 4,946 - (86115,821 (14) 2,626 - 4. Fellowships and Studies; Incremental Fertilizer, Pesticides, Sprayers and Batteries. 2,178 6,406 6,406 (52) 3,303 (481 3,103 - (100) 6,406 - 5. Buildings, Plant and Equipment for SOTOCO Seed Production, Applied Research and Oxen Cultivation; Local Personnel for Oxen Cultivation; Operating Costs for Oxen Cultivation and Village Water Supply. 951 2,797 2,665 - - (72) 2,015 (72) 2,015 (28) 782 - 6. Buildings, Plant and Equipment for SOTOCO Field Services. 1,290 3,794 3,578 (96) 3,575 - (96) 3,575 (4) 219 - 7. Equipment for Monitoring and Evaluation 57 168 168 (100) 168 - (100) 168 - - 8. Buildings, Plant and Equipment for Village Water Supply. 1,569 4,615 4,054 (68) 3,004 (23) 1,047 (91) 4,051 (9) 564 - TOTAL PROJECT COST US$'000 16,566 48,725 46,466 (48)23,507 (33)16,177 ( 9) 4,412 (90)44,096 (10) 4,629 - Non Incremental Expenditures 23,164 68,015 65,974 - 10,265 57,750 TOTAL PROGRAM COST US$'000 - 116,740 112,440 (20)23,507 (14)16,177 ( 4) 4,412 (38)44,096 (13)14,894 (49)57,750 CFAF million 39,700 - 38,230 8,003 5,500 1,500 15,003 5,064 19,635 1/ Percentages in parentheses  - 32 - (i) US$1.1 million equivalent (CFAF 370 million) to a special account with the CNCA to finance credit for purchase of implements and animals for the project's animal traction component. Reimbursements from farmers plus the 10% interest charged would be used to build up a revolving fund for animal traction development within the CNCA. This component would be financed by the CCCE. (ii) US$1.0 million (CEAF 358 million) to the Ministry of Rural Development for the national seed production program and the preparation of a possible third project; and (iii) the balance, US$42.0 million (CFAF 14,270 million), to SOTOCO for financing all other project components. For project components subcontracted by SOTOCO to other agencies (para 4.03), SOTOCO would pass these funds on in accordance with the agreed contracts. 5.09 Procurement - Works. The construction of storage facilities, office and laboratory buildings, houses and workshops totalling US$2.7 million would be through local competitive bidding for the larger structures and through contracts with local builders with SOTOCO supplying materials for simpler structures. International competitive bidding would not be justified in view of the dispersed nature and individually small size of each of the constructions (para 3.30). Tubewell construction (US$4.6 million; IDA US$3.0 million) would be through international competitive bidding. Works procured under the IDA Credit (stores and field offices for the field services totalling to US$1.5 million of which the IDA Credit at 96% represents US$1.4 million) would be through procedures satisfactory to IDA. Goods. Vehicles, motorcycles and bicycles and farm, field and office equipment for field services and monitoring and evaluation (US$2.4 million) and pesticides and sprayers (US$ 2.4 million) would be financed by IDA. Tenders would be grouped as far as possible in appropriate bidding packages and procured through international competitive bidding (about 75% of the above total or US$3.6 million) according to World Bank Guidelines. Contracts below US$100,000 but more than US$50,000 would be procured through local competitive bidding procedures acceptable to IDA, while those of less than US$50,000 would be on the basis of quotations from at least three reputable suppliers. The remaining plant and equipment (US$10.6 million) would be financed by other cofinancers and procured according to their guidelines. Credit for the animal traction component (US$1.1 million) would be financed by CCCE. Services. Contracts for 46 man-years of technical assistance valued, in line with experience in Togo, at US$10,100 per man-month on average and with a total value of -T3$5.0 million (IDA contribution US$2.5 million) would be procured in accordance with IDA and Government procedures for international recruitment. Fellowships and the study (US$0.9 million, all IDA) would be financed according to agreed overall objectives updated during project supervision missions. Other Expenditures. About US$18.5 million of project expendi- tures representing operating costs and local salaries (IDA financing  - 33 - US$9.7 million) would be committed in accordance with established Government procedures satisfactory to IDA. Contract Review. All works and goods or packages estimated to cost over US$100,000 and to be financed by IDA would be subject to IDA's prior review of procurement documentation resulting in a coverage of about 75% of such contracts, the balance being subject to random post review by IDA after contract award. 5.10 Disbursement: A projected disbursement profile is given in Annex Table 3 and involves a six year period. This is based on analysis of past disbursement profiles for IDA financed rural development projects in West Africa (94% disbursed by end PY6), the operational momentum of the ongoing SOTOCO development program and the satisfactory disbursement achieved under the first project (para 1.15). IDA funding would cover: Amount of Loan % of Expressed in 000's Expenditures Category Dollar Equivalent Financed 1. Buildings, Houses and Equipment for SOTOCO HQ. 125 12 2. Buildings and Equipment for SOTOCO Field Services and Monitoring and Evaluation 3,300 100% of foreign and 95% of local currency. 3. Buildings, Plant and Equipment for Feeder Roads 900 70 4. Buildings, Plant and Equipment for Village Water Supply 2,750 75% of foreign and 68% of local currency. 5. Local Personnel and Operating Costs for all components except Ox Cultivation 8,375 42 6. Expatriate Personnel 2,400 50 7. Studies and Fellowships 850 100 8. Pesticides and Sprayers 2,400 21 9. Unallocated 2,400 Total 23,500 Disbursements under categories 1, 3 and 5 would be pari-passu with the CCCE and the Government in the ratios of IDA 12%, CCCE 73%, Government 15% for category 1, 70%, 29% and 1% respectively for category 3 and 42%, 18% and 40% respectively for category 5. Category 4 would be pari-passu with the  - 34 - FAC in the ratios of IDA 68%, FAC 23% and Government 9%. IDA and CCCE would finance 50-50% all the cost of expatriate personnel (category 6). For categories 2, 7 and 8, IDA would be the only external contributor. Disbursements against civil works, vehicles, equipment, technical assistance, fellowships and studies (US$9.4 million) would be supported by full documentation. Disbursements against operating costs and local personnel would be against certificates of expenditure, with full supporting documentation, showing costs incurred by category, retained for inspection by IDA during project supervision. SOTOCO's recently improved financial department already has the capacity to prepare disbursement requests by component and expenditure category, a capacity that would be further strengthened under the project, including a more systematic maintenance of records. Disbursement requests gainst the National Seed Production Program would also be prepared by SOTOCO as a service to facilitate administration of this component. 5.11 Build-up of SOTOCO Capital: Due to the lags in receiving funds from external donors and Government, SOTOCO has in the past experienced cash flow problems due to insufficient liquidity. To redress this situation an assurance was obtained during negotiations (para 8.01(h) that farmer repayments against the quantities of fertilizers financed by external sources under the project would be retained by SOTOCO and added to its reserves. Taking into account the phasing out of fertilizer subsidies that would occur under the project (para 6.10), this arrangement would result in a total addition to SOTOCO's reserves over the five years of CFAF 790 million (US$2.3 million). In addition to increasing SOTOCO's liquidity this would enable SOTOCO to build up capacity for eventual reinvestment in plant out of its own resources. SOTOCO's reserves would be increased by about CFAF 230 million (US$0.7 million) with subsequent yearly increments of about CFAF 160 million (US$0.5 million). 5.12 Financial Management, Reporting and Audit: The project would continue to support the upgrading of SOTOCO's financial management that has been taking place during the past two years. The objective would be to create a strong financial management capable not only of expeditious handling and recording of SOTOCO's financial transactions, but also of serving as a management tool for monitoring and recording SOTOCO's operations in all departments. The Director of Finance and Administration would be internationally recruited and supported during the first three years by an internationally recruited analytical accountant with computer experience. Financing would also be provided for a slight capacity expansion of SOTOCO's small office computer plus the hire of appropriately qualified Togolese staff who would be trained, including fellowships as necessary, for eventual takeover. In the light of previous experience, salary premiums to attract and retain suitable homologue staff are likely to be necessary (para 4.09). The accounting system that is being established will include general accounting, analytical accounting and inventory management plus record keeping of procurement and disbursement operations and will allow detailed records and financial analysis of all of SOTOCO's operations by project activity, type of expenditure and geographic area. The office computer would also be used selectively for such functions as transport management and monitoring and evaluation.  -35 - 5.13 Since appointment of a new financial director in 1980, financial reporting by SOTOCO has been satisfactory and annual reports and audits are up to date. Procedures under the second project would be largely similar to those established during the last two years. A financial report, following guidelines contained in the project file, would be prepared annually by SOTOCO and submitted to IDA together with an audit report within four months of the close of the financial year (April 1 to March 31). The audit report would be prepared by independent auditors' satisfactory to IDA and would include verification that: (i) goods and services financed by IDA had been procured from Bank member or other elligible countries; (ii) goods had been received or work performed; (iii) payments had been made; and (iv) goods and services, in particular those financed under certificates of expenditure, are elligible for financing. The audit report would also provide separate assessments of (i) the adequacy of the past year's OPAT-SOTOCO bareme in covering SOTOCO expenditures to be financed under the bareme (para 6.12); and, (ii) the accounts for the projects' national seed production component. Key financial data would also be summarized in SOTOCO's quarterly progress reports (para 4.12). Assurances to the above effects were obtained during negotiations (para 8.01(i)). VI. PRODUCTION, MARKETS, PRICES, FARMER RETURNS AND FINANCIAL RESULTS 6.01 Adoption Rates and Production. Projections of participating farmers and production increases have been based on analysis by ecological zone of expected adoption rates and yield increases taking into account agronomic considerations, analysis of farmer incentives, demographic characteristics, performance under the first project and the stimulus that would be provided through the measures proposed under the second project. Full details are provided in the project file, summary data on yields is at para 3.06 and summary information on expected participants and production is tabulated below: Farmers Assisted by the Project PYO PYl PY2 PY3 PY4 PY5 Farms ('000) 42.1 49.8 56.0 59.9 63.8 65.5 % of all Farms 20 23 26 28 30 31 Expected Production (in t.) Without Incremental Crop Project PY5 t 7 Seed Cotton 22,000 40,400 18,400 84 Maize 29,465 43,985 14,520 49 Sorghum 35,348 49,263 13,915 39 Groundnuts 12,609 17,438 4,829 38 Paddy 6,038 9,940 3,902 65 Cowpeas 1,018 2,050 1,032 101  - 36 - An estimated 42,100 farmers are producing cotton with SOTOCO's assistance in 1982 (PYO). By PY5 the number of farmers participating in the project is projected to grow to 65,500, one third of the farming families in the project area. This represents an increase of 23,400 farmers or 56% as against the first project's achievement of 22,800 new project partici- pating cotton growing farmers representing an increment of 118%. The relative slowdown in the percentage of new participants reflects the approach of the expected cotton production plateau in Togo of about 50,000 to 55,000 tons per annum. Cotton yields of farmers already participating would increase slightly but the main increase in cotton production would result from the increased area under cotton which, combined with the yield increases from already participating farmers would increase cotton production from 22,000 t/annum in PYO to 40,400 t/annum by PY5, an increase of 18,400 t or 84%. Through increased yields of participating farmers's food crops due to the cultural practices described in paras 3.03 to 3.06, aggregate food crop production (excluding tubers) of the 65,500 families is projected to increase from 84,000 t in PYO to 122,000 t by PY5, an increase of 38,000 t or 45% due, primarily, to increased yields as a result of use of improved husbandry, rotations, and the use of fertilizer and improved seed. The food crop yield increase assumptions (para 3.06) are based on experience in Togo and neighbouring countries. These should be attainable under the proposed project given that SOTOCO's seed production has expanded considerably during 1981 and 1982 and would be further expanded under the proposed projet and that appropriate varieties are already being used successfully by SOTOCO farmers. 6.02 Cotton Prices and Market Outlook. World market prices for cotton fibre were fairly stable during the 1960s and early 1970s at about US$2.52/kg (constant 1982 prices for Mexican SMI-16 CIF N. Europe), fluctuated by about 18% around this level between 1974 and 1977 and fell to around US$2.07/kg between 1978 and 1981. The medium and longer term outlook for cotton fibre is good based on expected demand growth in developing country markets and expected upward price trends for the petro- chemical based synthetic textiles. Demand is expected to grow at about 3.2% per annum through 1990 with world cotton production growing at about 1.6% per annum. The real price of cotton fibre is projected to grow by about 2.5% per annum during the 1980s to US$2.20/kg (1982 terms) in 1990, most of the growth occurring during the 1983-85 period. 6.03 Togolese cotton is of medium but variable quality and is generally exported in quantities which are small compared to the needs of major textile concerns. Therefore, OPAT has marketed its cotton through Compagnie Cotonniere, a marketing agent which sells cotton from several African countries under a pooled arrangement. Compagnie Cotonniere groups volumes of cotton with similar milling/spinning qualities and assures customers volumes consistent with manufacturing needs. It is normally able to sell a participating country's cotton at prices within the range established in world markets for similar grades. For this service, Compagnie Cotonniere receives a 0.5% commission. Concern has been expressed recently, however that prices received by OPAT for Togolese cotton may be selling systematically at prices below those which might otherwise be obtainable if marketing management was improved. In order to estimate the magnitude of the possible shortfall in revenue and to identify  - 37 - factors influencing the selling price of Togolese cotton, the OPAT Price Unit (para 1.24) would, with financial support from the Technical Assistance Project (para 1.24), hire a cotton marketing specialist to analyze recent developments in Togolese prices and make recommendations by December 31, 1983 for changes in the marketing system which might improve prices. Following an initial analysis, the OPAT price unit would update a review of market prospects for Togolese cotton on an annual basis. This information would also be transmitted to SOTOCO as supplementary manage- ment information. An assurance was obtained during negotiations that the initial report and annual reviews would be forwarded to IDA for information and comment (para 8.01(b)). In the economic analysis of this report, the indicative economic price for Togolese cotton is taken to be the IBRD cotton price indicator (para 6.02) discounted by 20%. This discounting factor reflects recently observed statistical differences between Togolese realized selling prices and reported price quotations for Mexican SMl-1/16 cotton. 6.04 Food Crop Prices and Marketing. The market outlook for food crops appears good. World market prices for maize and groundnuts are expected to increase in real terms by 2% per annum with rice and sorghum increasing by 3% per annum. For Togo, which produces almost entirely for local consumption plus some informal exports to neighboring countries, a more useful indication is provided through assessment of the local and regional market. In Togo the combined effect of population growth (2.5%), rising per capita incomes (3%) and urban growth (6%) offers an expanding local demand and the rapidly expanding market in neighboring countries, notably Nigeria, could easily absorb surpluses. 6.05 Existing private food crop marketing in Togo is efficient and flexible, with mark-ups in line with marketing costs, and should be able to continue its current role as regards the marketing of project generated off-farm surpluses. Farmers sell their surplus produce on roadsides or in small village markets, or directly from their fields or granaries generally choosing to sell the minimum possible at harvest time, storing the rest for family consumption and sale of surplus as prices rise nearer the next harvest. A competitive network of traders purchase and transport these surpluses to deficit areas in Togo or neighboring countries. The project's investment in improved rural roads and sale to farmers of bio- degradable pesticides would support this mechanism without interferring in its operations. 6.06 Food crop prices used in the economic analysis and farm models are based on average trends of farm level prices over a number of years which have tended to follow average domestic inflation with yearly variations depending on the size of the harvest. As Togolese production is expected to keep in line with national consumption, these prices are assumed constant (in 1982 terms) in the economic analysis. The market prices used are slightly below the calculated Togolese farmgate equivalent price of Nigerian border prices adjusted for estimated transport and marketing costs. These prices are generally in line with projections of world market prices. Surplus maize, sorghum and groundnuts are exported by  - 38 - Togo. For maize the farmgate price used (CFAF 55/kg equivalent to US$162/t) compares with a 1985 projection for FOB maize of US$206/t (1982 terms). Togo's red grain sorghum valued at a farmgate price of CFAF 60/kg or US$176/t compares with a FOB commodity projection for 1985 of US$218/t for red grain sorghum. Unshelled groundnuts at CFAF 65/kg or US$294/t farmgate price for shelled groundnuts compares with an estimated FOB price for shelled groundnuts of US$420/t. The farmgate price of paddy, CFAF 80/kg equivalent to US$360/t of rice, compares with a projected CIF price of imported 35% broken rice of US$470/t. No commodity comparison is available for cowpeas. 6.07 Farm and Crop Returns. Net returns per farm are summarised in the Annex Table 5. Three farm models are presented representing typical farms in the north, center and south of the project area. For each model, returns for a non-cotton growing farmer, a cotton growing farmer under the first project and a cotton growing farmer at the final development stage under the proposed second project are compared. At the final development stage of the second project, net surpluses After family consumption are more than double those under the first project with a particularly strong impact in the north, largely due to the influence of improved food crops. The figures in parentheses show the projected influence of a removal of subsidies on fertilizers (para 6.08). 6.08 Annex Table 5 also compares returns per hectare and per manday for different crops. For this purpose, the project area is divided into two ecological areas, the north (Savanna and Oti-Kara) where sorghum is grown and the south (Central and Plateau) where maize replaces sorghum. Returns from yams, cassava and bottomland paddy are high but expansion is limited by land availability for paddy and marketing problems for the high weight; low value cassava and perishable yams. The key comparisons are therefore cotton, sorghum and groundnuts in the north and cotton, maize and groundnuts in the south. The table clearly illustrates the advantage to the farmer--particularly on a return/ha basis--of adopting the project package for his sorghum, maize or groundnuts. Improved cotton production is also more profitable on a per hectare basis than production of unimproved sorghum, maize and groundnuts. Of particular interest is the comparison between improved production of cotton, sorghum/maize and groundnuts. At the current farmgate price for seed cotton of CFAF 65/kg, cotton has a similar return per hectare as improved maize and groundnuts in the south although a lower return per man day. In the north the return per hectare from cotton is slightly greater than that of improved groundnuts but 25% lower than that of improved sorghum, and on a per manday basis is lower than both of these crops. A largely similar picture emerges when fertilizer subsidies are removed. 6.09 The influence of an increase in the farmgate price for seed cotton is also iLlustrated in Annex Table 5. At a price of CFAF 75/kg cotton emerges as an attractive crop in comparison with maize and groundnuts although it is still marginal when compared with sorghum in the north. Cotton production, however, offers a guaranteed price and market outlet, and farm labor input at cotton harvesting time, a relatively slack period in the farming calendar, has a low opportunity cost. Nevertheless,  - 39 - some increase in real terms of seed cotton prices appears appropriate (para 6.11). The second conclusion emerging from this analysis and its heavy current financial costs to Government (para 6.07 and Table 5) concerns the financial feasibility from the farmers' point of view of removing fertilizer subsidies. Given the high budgetary costs involved (para 6.10) an assurance to this effect is provided in the paragraph below. 6.10 Input Prices, Subsidies and Cotton Prices. Fertilizer and pesticide prices are fixed annually by Government decree. Fertilizers are currenty sold to farmers at prices that represent 45 to 50% of cost prices with Government subsidising the balance. Farmers pay the total cost of batteries for ULV sprayers, pesticides used on food crops (very limited usage to date) and for improved food crop seeds. Pesticides for cotton are provided free but costs are subsequently recovered in full through the bareme and therefore represent no net loss for Government in that producer prices are correspondingly lower. The budgetary implications of maintaining current fertilizer subsidy levels are high; a 50% subsidy level in the 1983 season (PYI) would amount, for SOTOCO's farmers alone, to CFAF 330 million (US$0.9 million) in constant 1982 terms and would rise to CFAF 670 million (US$2.0 million) by PY5. An assurance was therefore obtained from Government during negotiations (para 8.01(j)) that full cost coverage prices would continue to be applied to batteries, food crop pesticides and improved food crop seed and that fertilizer subsidy levels would be progressively phased out to zero by not later than 1987 (PY5). 6.11 The analysis of para 6.09 and para 6.13 also suggest that a further financial stimulus should be provided for production of cotton viz-a-viz food crops and that this is financially supportable out of OPAT surplus from the cotton sector. The agricultural prices analysis unit within OPAT (para 1.24) would be undertaking a comprehensive review of rural sector prices, farmer incentives and responses and budgetary costs and revenues annually in time for Government consideration prior to commencement of each season. An assurance was obtained during negotia- tions (para 8.01(b)) that the price unit's findings and recommendations would be discussed annually with IDA with a view to achieving appropriate production stimuli and rural incomes for farmers while taking account of the financial implications for Government. It was further agreed during negotiations that the Government would (i) announce at the latest in February of each year, the price of cotton and farm inputs for the next growing season (8.01(k)); (ii) eliminate the subsidies on cotton fertilizers over five years as scheduled in para 6.13; and (iii) increase the price of cotton from CFAF 65/kg to at least CFAF 75/kg for the 1983/84 cotton growing season (8.01(1). The announcement of input prices (with the fertilizer subsidy reduced from 50% to 40%) and the cotton price for the 1983/84 season would be a condition of credit effectiveness. Cotton prices would thereafter be adjusted upwards to precisely compensate for cotton production cost increases as a result of the progressive removal of fertilizer subsidies and would also be adjusted to compensate for changes in world price of cotton, general inflation and the price trend for competing food crops. 6.12 The Cotton Bareme. The cotton bareme between OPAT and SOTOCO is intended to reimburse SOTOCO for costs incurred in supporting cotton production. SOTOCO purchases seed cotton from farmers and is reimbursed by  - 40 - OPAT--plus reimbursement of associated cotton processing, marketing and production related costs--upon delivery to OPAT's warehouses at Lome port. The bareme currently covers: (i) the purchase cost of seed cotton; (ii) operating costs for: ginning, storage and baling (when done by SOTOCO ginneries), transport of seed cotton to the ginneries, transport of fibre and cotton seed to the port, transport of farm inputs and handling and field marketing costs; (iii) insurance costs; (iv) financial charges incurred by SOTOCO for short-term borrowing to finance expenditures incurred prior to end of season reimbursement of marketing operations and input purchases; (v) the full cost of cotton pesticides purchased by SOTOCO; and (vi) SOTOCO overheads associated with the above. In the past, these costs were not always fully covered under the bareme resulting in additional funding requirements for SOTOCO from the Treasury and difficulties for SOTOCO due to delayed payments, a matter that would be corrected in the future through the analytical accounting system now being established by SOTOCO (para 5.12). An assurance was obtained during negotiations (para 8.01(m)) that the above items would be fully costed and recovered under the bareme and that the following additional elements would be added to the bareme in the future: (i) the debt service payments that must be made by SOTOCO against the loans provided by the CCCE for construction of the Lama Kara and new Notse ginneries; (ii) staff and operating costs for maintenance of SOTOCO's truck transport fleet; (iii) subsidies on fertilizer for cotton. The subsidy element in fertilizer would be included in the bareme as a mechanism to ensure timely and complete provision of funding by Government for fertilizer imports for the project, a critical past problem that has resulted in late ordering and delivery. As fertilizer subsidies are phased out, this entry, would disappear. An assurance would be obtained during negotiations that the draft bareme would be forwarded annually to IDA not later than September 30 of each year, three months before commencement of each cotton marketing season for comment and approval. As previously, SOTOCO would prepare the first draft of the bareme which would be discussed and provisionally agreed with OPAT before forwarding to IDA. 6.13 Government Revenues and Cash Flow. The effect on OPAT surpluses of the above measures--increasing the producer price (para 6.11); adjusting the bareme to include full charging of all costs described in para 6.12 including subsidies, until they are phased out, on fertilizers; and progressive phasing out of subsidies on fertilizers (para 6.10)--is shown below along with the farmgate price and subsidy assumptions used:  - 41 - Estimated Progression of Net OPAT Surpluses (Constant 1982 Prices) 1983 1984 1985 1986 1987 Farmgate Value of Seed Cotton (CFAF/kg) 1/ 177 197 218 220 223 Proposed Producer Price (CFAF/kg)- 77 78 80 82 84 Proposed Subsidy on Fertilizers (%) 40 30 20 10 0 Net OPAT Surplus per i/n seed cotton (CFAF '000) - 35 57 76 79 83 This would produce annual net OPAT surpluses (1982 constant terms) on SOTOCO production of CFAF 1.0 billion (US$2.9 million) in 1983 and of CFAF 3.3 billion (US$9.7 million) by 1987. The increase in OPAT's margin is essentially due to the projected increase in world market prices for cotton fibre. These margins are sensitive to variations in world prices falling, for instance, from CFAF 35,000/t to CFAF 16,000/t in 1983 if a 10% fall in the projected world price of cotton lint were to occur. Nevertheless, the table illustrates that under expected price trends, substantial surpluses would be made from the sector providing room for further increases in the producer price of cotton. The recommended producer prices should, therefore, be regarded as representing "minimum" price increases which would be reviewed during project execution to ensure adequate producer incentives. The inclusion under the bareme of subsidies on food crop fertilizers used by SOTOCO has only a minor impact, CFAF 2,500/t in 1983 and thereafter decreasing to zero by 1987. Varying the producer price for seed cotton would alter the OPAT margin by CFAF 1,000/t for each one franc/kg change in the producer price. 6.14 A Government cash flow is at the Annex Table 4. This shows Government's estimated net financial position as a result of SOTOCO's development program over the next 10 years (i.e. inclusive of project and ongoing recurrent expenditures) and includes the proposed external financing for project expenditures over PYs 1 to 5. OPAT surpluses are treated as Government revenues. Annual net returns are positive throughout and amount to CFAF 4.1 billion (US$12.1 million) by PY5 and amount to CFAF 15 billion (US$44.2 million) through the first five years of the project. 1/ The recommended price of CFAF 75/kg is adjusted upwards during the fertilizer phase-out period to compensate farmers for increased costs of fertilizers. Prices in current terms would need to be higher to account for inflation. OPAT surpluses would also be higher after allowance for inflation. 2/ Before export duties.  - 42 - VII. BENEFITS, ECONOMIC JUSTIFICATION AND RISKS 7.01 Benefits: The project's directly quantifiable benefits would be through its impact on crop production. By PY5 incremental production of cotton would reach 18,400 t representing an 84% increase over current production levels of participating farmers, and food crop production would increase by 38,000 t, the bulk of it representing surpluses over on farm consumption for sale in Togolese markets or adjacent countries. The FOB value of incremental cotton lint and seed would amount in constant 1982 terms to CFAF 3.9 billion (US$11.5 million) by PY5 which is equivalent to 5% of Togo's total exports or 29% of the FOB value of cocoa and coffee exports in 1980. FOB export revenues from cotton lint and seed in 1980 amounted to CFAF 1.2 billion (US$3.5 million). The farmgate value of projected PY5 incremental food crop production would amount to CFAF 4.2 billion (US$7 million). 7.02 The project would benefit some 65,500 farming families (425,000 persons) or 31% of the rural population in the project area, 23,400 of these families would be new participants. These families would be distributed over about 3/4 of Togo's land area providing pilot examples to other farmers of the benefits of improved cultural practices. The cash incomes of project participants would more than double providing a significant stimulus to rural growth. 7.03 In addition to these quantifiable benefits the project would help strengthen the development institutions involved, in particular, the extension network and the management of the main implementing agency, SOTOCO. This, supplemented by the study on the extension system under the TA II (para 4.10), could allow future reorganization of Togo's extension system and the creation of a financially autonomous cotton development agency. Project measures related to applied research, seed multiplication, village water supply and feeder road development would have long range benefits beyond the immediate production impact of the project's field development activities. 7.04 Economic Analysis: The project's economic rate of return has been calculated in constant 1982 terms over a twenty year period on the incremental costs and benefits resulting from the project. Without the project measures, production levels are assumed to remain at PYO (1982) levels and project benefits have therefore been taken to represent the value of incremental production of cotton, maize, sorghum, groundnuts, paddy and cowpeas over PYO levels. These are projected in the Annex Table 7 which also gives the price assumptions used (paras 6.02, 6.03 and 6.06). From PY6, production levels are assumed to remain constant. The economic farmgate price of seed cotton is calculated at the Annex Table 6 and includes reductions for ginning and transportation costs. Project costs (part A of Annex Table 7) exclude taxes but include physical contingencies (para 5.02). The full project costs of all project components have been taken including the project's support to the national seed multiplication program (2% of project costs). Farm input levels have been adjusted to represent annual input usage over PYO usage rather than the annual  - 43 - increments over preceeding years used in the calculation of incremental inputs for project costs. A line to cover transport costs for inputs (excluded from project costs at Table 1 as financed under the bareme) has also been added. Incremental farm labor has been valued at CFAF 300/man day, representative of the estimated average opportunity cost of farm labor in Togo. Staff salaries and paid labor have been costed at actual costs (net-of-tax). An exchange rate of CFAF 340: US$1 has been used throughout. 7.05 Under the above assumptions (details and computations in project file) the project's economic rate of return is estimated at 21.3%. A summary of the principle economic tests is given in Table 3: TABLE 3: Summary of Economic Analysis Switching Value @ 12% % Increase % Decrease ERR Costs Benefits Project 21.3 12.1 10.8 Project, 20% decreased participation 15.8 5.0 5.2 Project, benefits lagged I year 11.2 1.5 1.3 Variation in Cotton Prices 10% decrease 15.8 4.9 4.7 Variation in Shadow wage rate 33% increase 12.7 0.8 0.8 7.06 Sensitivity: The project's economic viability is sensitive to variations in costs and benefits, due mainly to the large values of annual farm inputs and farm labor after the disbursement period. A simultaneous 10% rise in costs and 10% fall in benefits give an ERR of 4.9. Never- theless, the overall rate of return provides an acceptable buffer against unforseen circumstances, as switching values (at a 12% opportunity cost of capital) are 12.1% for costs and 10.8% for benefits. A reduction in cotton prices of 10% would yield an ERR of 15.8%. Shortfalls in participation rates have been tested for by varying production, farm input levels and farm labor in the same proportions but leaving fixed investments constant. A 20% shortfall in participation would result in a 15.8% rate of return. Finally, if the shadow prices for farm labor were to increase to CFAF 400/day compared with CFAF 300/day in the base case, the ERR would be 12.7%. 7.07 Risks: There are no major technological risks under the proposed project. The proposed farm development measures have been well tested in Togo and other ecologically similar W. African countries and projected yield increments are averages allowing for variations due to adverse years. Additionally, SOTOCO has proven itself to be a capable  - 44 - development agency and current weaknesses have been specifically catered for in project design. SOTOCO's future performance will depend critically upon the calibre of project management and senior Togolese staff and appropriate staff strengthening and assurances concerning these matters are contained at paras 4.04 to 4.09. 7.08 The calibre of technical assistance staff is also crucial to the success of the project. Appointment of key technical assistance staff is a condition of Credit effectiveness and the qualifications and experience of all technical assistance staff would be carefully assessed by IDA prior to acceptance of appointment (para 4.06). Their subsequent performance would also be carefully monitored during project supervision. 7.09 Attainment of cotton production objectives would require maintenance of an attractive farmgate price for seed cotton. Recommen- dations and an assurance relative to this are contained at para 6.11. Projected real price increases for cotton fibre and the lack of appreciable price oscillations in the international cotton market should allow for progressive increases in seed cotton prices without negative consequences on Government surplus from the cotton sector (para 6.13). 7.10 The success of the project would also depend upon full and timely provision of funding from the Treasury (assurance at para 5.06). This risk would be lessened by inclusion, until subsidies are phased out, of cotton fertilizer subsidies under the bareme (assurance at para 6.12) thereby ensuring timely provision of funds required for seasonal inputs and reducing the contribution required from the Treasury. VIII. AGREEMENTS REACHED AND RECOMMENDATION 8.01 At negotiations, agreement was reached with Government on the following points: (a) direct procurement by SOTOCO of farm inputs as from the start of the 1983/84 growing season (para 3.16); (b) preparation and forwarding to IDA for review and comment of annual and/or periodic reports governing village water supply (para 3.23), monitoring and evaluation (para 3.32), comparative analysis of cotton export revenues (para 6.03) and review of the factors to be considered in seed-cotton price setting (para 6.11); (c) prior approval by IDA of contracts relative to services provided by IRAT and IRCT for applied research, DHE for village water supply, the Ministry of Rural Works' feeder roads unit, PROPTA for animal traction and CNCA for medium term credit (para 4.03); (d) terms of reference and selection procedures of all technical assistance and consultancy staff would be satisfactory to IDA, and IDA approval of their qualifications and experience would be  - 45 - obtained prior to appointment (para 4.06); technical assistance arrangements will be reviewed annually in order to identify needs as they occur and to permit maximum flexibility in the transfer of responsabilities to Togolese staff (para 4.08); (e) the posts of SOTOCO General Director and Assistant General Director and Marketing Director would be filled at all times by persons with qualifications, experience and capabilities satisfactory to IDA (para 4.09); (f) annual and quarterly reports, following formats satisfactory to IDA would be forwarded to IDA within respectively 3 months and two months of close of the reporting period (para 4.12); (g) Government contributions to the costs of the project and of recurrent costs relative to SOTOCO's ongoing development program would be made in full and in a timely manner (para 5.06); (h) farmer reimbursements against the quantities of farm inputs funded by the cofinancers would be retained by SOTOCO and added to its reserves (para 5.11); (i) an audited financial report following a format satisfactory to IDA and with special sections as described in para 5.13 would be for-warded to IDA within four months of the close of the financial year; (j) farmers would pay the full costs of batteries, pesticides used on food crops and improved food crop seeds, and fertilizer subsidies would be phased out progressively to zero by not later than 1987 (para 6.10); (k) prices for seed cotton and farm inputs will be announced not later than February each year for the next cotton season; (1) the price to be paid farmers for seed cotton would be adjusted annually to take account of movements in the international price of cotton, the reduction of fertilizer subsidies, general inflation and the price trend of competing food crops (para 6.11); and (m) the OPAT-SOTOCO cotton bareme would be modified to include the full costs of items currently contained in the bareme and additionally: (i) debt service payments against the Lama Kara and Notse ginneries; (ii) staff and operating costs for maintenance of SOTOCO's truck transport fleet; (iii) subsidies on fertilizer for cotton; and the draft bareme would be forwarded annually to IDA for comment and approval (para 6.12). 8.02 Credit effectiveness would be conditionned by: (i) nomination of a General Director with qualifications and experience acceptable to IDA (para 4.02);  - 46 - (ii) signature of a satisfactory contract or contracts for the six technical assistance staff positions described in para 4.06; and (iii) announcement of input prices (with the fertilizer subsidy reduced from 50 to 40 percent) and the seed cotton price (at a minimum of CFAF 75/kg) for the 1983/84 growing season. 8.03 Under these conditions, the proposed project would be suitable for an IDA Credit of US$23.5 million.  - - Annex Table 1 TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS Project Component bi Time (CFAF '000) Base Costs Total PYl PY2 "y3 PY4 PY5 CFAF (US$ '000) A. SOTOCO HEADQUARTERS 533P644.2 341,201.6 311,543.1 309,643.3 181,746.8 1,677,778.9 4,934,6 P. SEED PRODUCTION NATIONAL SEED PRODUCTION PROGRAM 105,258.5 71,971.5 33,378.9 32,720.6 33,378.9 276,708.5 813.8 SEED PRODUCTION COMPONENT 108,301.2 70,970.7 87,354.3 68,702.9 55,364.1 390,693.2 1,149.1 Sub-Total SEED PRODUCTION 213,559.7 142,942.3 120,733.3 101,423.5 88i743.0 667P401.7 1,962.9 C. APPLIED RESEARCH 133,785.5 86,382.2 85,605.5 104P034.6 84,806.7 494,614.6 1,454.7 0. SOTOCO FIELD SERVICES /a 452,869.3 346,092.7 365,097.9 476,339.7 268,480.6 1908,880.0 5,614.4 E. PROJECT MONITORING AND EVALUATION 112,348.6 80,661.2 81391.2 88,084.2 87,275.1 449,760.2 1,322.8 F. OXEN CULTIVATION 120,937.2 1475897.9 169,563.6 181,880.0 136f184.5 756,463.1 2,224.9 G. COTTON GINNING AND STORAGE 6,661.1 - 122,872.5 - - 129,533.6 381.0 H. TRANSPORTATION 180,792.7 75,305.2 247,127.2 311,184.9 252,123.1 1,066Y533.1 3,136.9 I. VILLAGE WATER SUPPLY 136,786,5 557,442.1 701,515,5 27,166.1 27Y166.1 1,450,076,3 4,264.9 J. FEEDER ROADS 684,453.3 371,707.4 445,940.3 470,796.3 409,188l2 2,382,085.5 7,006.1 K. INPUTS SUPPLY 509,319.3 251,231.1 228,312.2 207,148.7 147,294.6 1,343,305.9 3,,50.9 Total BASELINE COSTS 3,085,157.3 2,400,863.5 2,879,702.2 2,277,701.2 1,683,008.7 12,326,432.9 36,254,2 Phssical Contingencies 209,098,5 149,147.1 187,690.4 147,463.1 110,411,2 803,810.3 2,364.1 Price Contingencies 293,381.3 471,765.6 868,023.2 918,559.7 884,643.3 3,4360373.1 10,107.0 Total PROJECT COSTS 3,587,637,0 3,021,776,2 3,935,415.9 3,343,724,0 2,678,063,1 16,566,616.2 48,725.3 Tax>es 114,893.3 186,504,6 240,470.3 109,287.7 116,705.0 767,860.8 2P258.4 Foreign Exchanse 2,733,104.1 2,000,762.5 2,579,167.5 2,354Y551.1 1,688,8302. 11,356f415+3 33f401.2 la TRAININC,EXTENSION AND COOPERATIVES DEVELOP.  -48 - Annex Table 2 TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS Proposed Financing by Pro1ect Component and Expenditure Category/l Component and Expenditure Category Total IDA CCCE FAC Lenders Trermury (CPAY Millions) (US$ Millions) ---------------------- (CPAY Millions) ----------------- SOTOCO HQ Buildings, Plant & Equipment 399 1.17 (13) 45 (87) 295 - 340 59 Expatriate Personnel 667 1.96 (50) 334 (23) 153 (27) 180 667 Local Personnel 247 0.73 (J8) 138 (32) 65 - 203 44 Fellowship 226 0.67 (104) 226 - - 226 - Other Operating Costs 555 1.63 (i) 309 (32) 146 - 455 100 Total 2,094 5.67 1,052 659 180 1,891 203 Follow-Up Project Study 63 0.18 (100) 63 - - 63 - National Seed Production Buildings, Plant & Equipment 65 0.19 (100) 63 - 63 2 Expatriate Personnel 73 0.22 (50) 36 (23) 17 (27) 20 73 Local Personnel 116 0.34 (68) 65 (32) 30 - 95 21 Other Operating Costs 100 0.29 (68) 56 (32) 26 - 82 18 Total 354 1.04 157 136 20 313 41 SOTOCO Seed Production Buildings, Plant & Equipment 142 0.42 - - (100) 128 128 14 Expatriate Personnel 47 0.14 (50) 23 (23) 11 (27) 13 47 Local Personnel 188 0.55 (68) 105 (32) 49 - 154 34 Other Operating Costs 142 0.42 (68) 79 (32) 37 - 116 26 Total 519 1.53 207 97 141 445 74 Applied Research Buildings, Plant & Equipment 112 0.33 - - (100) 100 100 12 Expatriate Personnel 58 0.17 (50) 29 (23) 13 (27) 16 58 - Local Personnel 306 0.90 (68) 171 (32) 80 - 251 55 Other Operating Costs 184 0.54 (68) 103 (32) 48 - 151 33 Total 660 1.94 303 141 116 560 100 Field Services Buildings, Plant & Equipment 1,290 3.80 (100)1236 - - 1,236 54 Expatriate Personnel 307 0.90 (50) 153 (23) 71 (27) 83 307 - Local Personnel 480 1.41 (68) 268 (32) 126 - 394 86 Other Operating Costs 487 1.43 (68) 271 (32) 128 - 399 88 Total 2,564 7.54 1,928 325 83 2,336 228 Monitoring and Evaluation Buildings, Plant & Equipment 57 0.17 (100) 57 - - 57 - Expatriate Personnel 196 0.58 (50) 98 (23) 45 (27) 53 196 Local Personnel 232 0.68 (68) 129 (32) 61 - 190 42 Other Operating Costs 104 0.30 (68) 58 (32) 27 - 85 19 Total 589 1.73 342 133 53 528 61 Oxen Cultivation Buildings, Plant & Equipment 129 0.38 _ - (100) 117 117 12 Expatriate Personnel 61 0.18 (50) 30 (23) 14 (27) 17 61 - Local Personnel 266 0.78 - (100) 151 151 115 Credit for Animals and Implements 434 1.28 - (100) 369 - 369 65 Other Operating Costs 148 0.43 - - (100) 126 126 22 Total 1,038 3.05 30 383 411 824 214 Ginning and Storage Buildings, Plant and Equipment 178 0.52 _ (100) 178 - 178 11 Transportation Buildings, Plant & Equipment 1,480 4.35 - (100)1468 - 1,468 12 Water Supply Buildings, Plant & Equipment 1,569 4.61 (75)1069 - (25) 356 1,425 144 Expatriate Personnel 121 0.35 (50) 60 (23) 28 (27) 33 121 - Local Personnel 66 0.19 (68) 37 (32) 17 - 54 12 Other Operating Costs 154 0.45 - - (100) 63 63 91 Total 1,910 5.62 1,166 45 452 1,663 247 Feeder Roads Buildings, Plant & Equipment 525 1.54 (70) 366 (30 157 - 523 2 Expatriate Personnel 163 0.48 (50) 82 (23) 37 (27) 44 163 - Local Personnel 292 0.86 (70) 174 (30) 74 - 248 44 Other Operating Costs 2,248 6.61 (68)1299 (32) 612 - 1.911 337 Total 3,228 9.49 1921 880 44 2,845 383 Farm Inputs Sprayers 108 0.32 (100) 108 - _ 108 - Fertilizer 1,055 3.10 - (100)1,055 - 1,055 Peatticida 726 2.14 (100) 726 - _ ;26 - Total 1,889 5.56 834 1,055 - 1,889 - Total 16.566 48.72 8,003 5,500 1,500 15.003 1,574 1/ Percentages in parentheses  - 49 - Annex Table 3 TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS Estimated Scheduled of Disbursements (US$ '000) Fiscal Year and Quarter Disbursements % Quarterly Cumulative Total FY83 4 700 700 3 FY84 1 900 1,600 7 2 950 2,550 11 3 1,000 3,550 15 4 1,000 4,550 20 FY85 1 1,000 5,550 24 2 1,000 6,550 28 3 1,100 7,650 33 4 1,200 8,850 38 FY86 1 1,200 10,050 43 2 1,150 11,200 47 3 1,150 12,350 52 4 1,150 13,500 57 FY87 1 1,150 14,650 62 2 1,150 15,800 67 3 1,150 16,950 72 4 1,150 18,100 77 FY88 1 1,150 19,250 82 2 1,000 20,250 86 3 950 21,200 90 4 900 22,100 94 FY89 1 900 23,000 98 2 500 23,500 100  *Annex Table 4 T O G O SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS GOVERNMENT CASH FLOW (CFAF millions, Current Terms) FYi FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY10 1. Source of Fundst External financing /2 3,297 2,693 3,509 3,072 2,432 - - - - - Cotton market surplus - 2,792 3,993 5,438 5,952 6,571 6,966 7,382 7,827 8,295 8,796 Farmers' contribution on farm inputs 623 958 1,391 1,915 2,516 2,669 2,826 2,996 3,176 3,367 Sub-total 6,712 7,644 10,338 10,939 11,519 9,635 10,208 10,823 11,471 12,163 2. Application of Funds Program costs /3, /4 5,062 5,376 6,986 7,287 7,407 6,466 6,814 7,201 7,587 8,013 3. Cash Flow Before Debt Servicing /5 Net annual 1,650 2,268 3,352 3,652 4,112 3,169 3,394 3,622 3.884 4.150 Cumulative 1,650 3,918 7,270 10,922 15,034 18,203 21,597 25,219 29,103 33,253 1/ Excluding net margin on credit to farmers 2/ Including export duties and before subsidies on farm inputs (see note 4) 3/ Net of taxes 4/ Including costs of farm inputs 5/ Debt servicing excluded pending clarification of cofinancers' financing terms  - 51 - Annex Table 5 T O G O SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS Farm Models PART A: COMPARATIVE FARM RETURNS Net Value Of Net Surplus After Production: Family Consumption: Per Farm Per M. Day Per Farm Per M. Day North Togo: (CFAF '000) (CFAF) (CFAF '000) (CFAF) W/out Project-Non cotton grower 184 (184) 380 (380) 34 (34) 70 (70) W/out Project-Cotton grower 193 (162) 390 (330) 35 (12) 70 (24) With Project 278 (256) 470 (430) 119 (97) 200 (160) Central Togo: W/out Project-Non cotton grower 111 (111) 460 (460) 37 (37) 150 (150) W/out Project-Cotton grower 123 (110) 450 (400) 48 (35) 180 (130) With Project 175 (124) 560 (400) 99 (87) 320 (280) Southern (Bimodal) Areas W/out Project-Non cotton grower 118 (118) 400 (400) 23 (23) 80 (80) W/out Project-Cotton grower 136 (111) 410 (330) 43 (18) 130 (50) With Project 327 (302) 800 (740) 100 (75) 240 (180) 1/ Figures in parentheses are returns when fertilizers are not subsidized. Cotton price assumed at CFAF 65/kg seed cotton throughout. PART B: COMPARATIVE RETURNS BY CROP Savanna/Oti-Kara Central/Plateau With Without With Without Fertilizer Fertilizer Fertilizer Fertilizer Subsidies Subsidies Subsidies Subsidies Per Ha Per Per Ha Per Per Ha Per Per Ha Per In M.D. In M.D. In M.D. In M.D. CFAF '000 In CFAF CFAF '000 In CFAF CFAF '000 In CFAF CFAF '000 In CFAF Cotton Improved 2/ 49 390 40 320 60 430 49 350 Sorghum Improved 65 530 58 480 Maize Improved 57 600 48 510 Groundnuts Improved 47 590 43 530 60 670 56 620 Paddy Improved 97 1020 88 920 97 1020 88 920 Sorghum Traditional - - - - - - - - 38 470 - - - - - - - - - Maize Traditional - - - - - - - - - 37 520 - - - - - - - - Groundnuts Traditional - - - - - - - 26 430 - - - - - - - - - - - - - - - - - - 35 510 - - - - - - - - Yams Traditional - - - - - - - - - - - - - - - - - - - - 132 530 - - - - - - - - - - - - - - - - - - - - Cassava Traditional - - - - - - - - - - - - - - - - - - - - 180 (950) - - - - - - - - - - - - - - - - - - - - Cotton at Alternative Prices: 70 CFAF/kg - 44 350 - 54 390 75 " - 49 390 - 60 430 80 " - 53 420 - 65 470 85 " - 58 460 - 71 510 2/ At CFAF 65/kg seed cotton  T 0 G 0 Annex I Table 6 SECOhD RURAL DEVELOPFENT PROJECT IN COTTON AREAS Econoic Value of Cotton (Constant 1982 terms) FYI PY2 FY3 PY4 PY5 Ref. prLce (Mex,SM 1-1/16)CIF N,Europe US$/MT I/ 1,970 2,087 2,143 2,177 2,196 Ref. price (Mex.SM 1-1/16)CIF N.Europe CFAP/MT 2/ 669,800 709,580 728,620 740,180 746,640 Quality adjuotmont 3/ 133,960 141,916 145,724 148,036 149,328 Value Togolese Lint CIF N.Europe CFAF/MT 535,840 567,664 582,896 592,144 597,312 Adjoatment from CIF N.Europe to FOB Lone 4/ 46,418 46,922 47,279 47,313 47,350 Value Togolese Cotton FOP Lone - tint (CFAFP/MT) 5/ 489,422 520,742 535,617 544,831 549,962 - seeds (CFAF/MT) 6/ 28,592 26,154 28,476 28,642 28,821 Port Charges 7/ - lint (CFAbF/T) 2,410 2,430 2,430 2,430 2,430 - seeds (CFAF/MT) 1,090 1,090 1,090 1,090 1,090 Transport & Hand linR Oio.ery-Lone 8/ - lint (CFAF/MT) 8,527 8,263 8,349 8,256 8,118 - seeds (CFAF/MT) 7,958 7,807 7,881 7,809 7,694 Insurance (CFAF/MT) 9/ - lint 3,120 3,120 3,120 3,120 3,120 - seedo 103 103 103 103 103 Value em-factory (CPAP/MTI - lint 475,345 506,929 521,718 531,025 536,294 - seeds 19,441 17,154 19,402 19,640 19,934 Ginning coats (CFAF/MT) 10/ - lint 15,129 13,044 11,286 9,750 9,463 - seeds Pre-factory valo. - list 460,216 493,885 510,432 521,275 526,831 - seeds Yield - lint 40 40 40 40 40 - seeds 55 55 55 55 55 Equivalent value seedcotton - lint (CFA/400 kg) 184,086 197,554 204,173 208,510 210,732 - oeeda (CFA/550 kg) 10,693 8,435 10,671 10,802 10,964 - seedcotton (CFA/IT) 194,779 206,989 214,844 219,312 221,696 Primary marketing costs per ton seedcottos - transport farr-ginnery 11/ 10,745 9,030 8,645 8,353 7,542 - labour 12/ 226 226 226 226 226 - storage materials 13/ 1,449 1,449 1,449 1,449 1,449 Slb-total marketing 12,420 10,705 10,320 10,028 9,217 Econonic Farigate price per ton seedcotton (excluding depreciation on transport and ginning) 182,359 196,284 204,524 209,284 212,479 NOTES 1/ World Bank projections June 1982: adjusted for 1982 constant. 2/ Exchange rats 340 CFAF/US$ 3/ -207, for grade and staple 4/ 5/ See Project File"Estimted Value of Togolese Cotton Lint" 6/ Sea Project File "estisated Value of Togolese Cottonseed" 7/ Includes OPAT's estimted overheads for cotton-related transit coats; data fron appraisal report of lt phase of this project (1977), adjusted to 1982 constant prices (factor: 1.558) 8/ Detailed calculation in working file: "Cotton Transpartation" 9/ Dats fro SOTOnC0 10/ Ginning cost is entirely charged on cotton lint and unit ginning coat is equal to total operating coats of ginning divided by total production of lint 11/ Detailed calculation in working fill 12/ Local salaries for primary marketing of seadeotton (after 80TOCO data) 13/ Small terial for storage of seedrotton (after SOTCO data)  Annex Table 7 TO OG SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS Economic Costs and Benefits (CFAF millions, Constant 1982 Terms) PYl PY2 PY3 PY4 PY5 PY6 PY7 PY8 PY9 PYIO-20 A. COSTS Base Costas 1/ SOTOCO Headquarters 488.7 296.2 311.5 309.6 181.7 202.5 202.5 202.5 202.5 202.5 Seed Production (SOTOCO) 108.3 71.0 87.4 68.7 55.4 83.7 83.7 83.7 83.7 83.7 Applied Research 133.8 86.4 85.6 104.0 84.8 92.2 92.2 92.2 92.2 92.2 Field Services 452.9 346.1 365.1 476.4 268.4 251.2 251.2 251.2 251.2 251.2 Monitoring and Evaluation 112.4 80.7 81.4 88.1 87.3 68.9 68.9 68.9 61.5 61.5 Oxen Cultivation 120.9 147.9 169.6 181.8 136.2 93.3 93.3 93.3 93.3 93,3 Village Water Supply 136.8 557.4 701.5 27.2 27.2 47.7 47.7 47.7 47.7 47.7 Feeder Roads 684.5 371.7 445.9 470.8 409.2 208.8 208.8 208.8 208.8 208.8 Farm Inputs 509.3 760.5 988.8 1195.9 1343.2 1343.2 1343.2 1343.2 1343.2 1343.2 Transport of Inputs 13.4 24.6 33.8 41.3 44.6 44.6 44.6 44.6 44.6 44.6 Ginning Capital Costs 10.9 14.8 128.2 0.0 , 0.0 0.0 0.0 0.0 0.0 0.0 Transportation Capital Costs 180.8 73.3 247.1 311.2 252.1 142.9 0.0 275.6 296.0 186.2 2/ National Seed Mult. Program 105.3 71.9 33.4 33.7 33.4 44.5 44.5 44.5 44.5 44.5 Total Base Costs: 3058.0 2902.5 3679.3 3308.7 2923.5 2623.5 2480.6 2706.2 2769.2 2659.4 Plus Physical Contingencies 206.0 197.8 264.1 246.2 230.0 199.8 188.3 206.5 211.5 206.9 Less Taxes 107.7 108.7 241.6 109.3 116.7 95.9 90.4 99.0 101.5 99.2 Sub-Total 3156.3 2991.6 3701.8 3445.6 3036.8 2727.4 2578.5 2813.7 2879.2 2767.1 Incremental Farm Labor 3/ 1194.6 1358.4 1473.6 1576.8 1611.9 1611.9 1611.9 1611.9 1611.9 1611.9 TOTAL ECONOMIC COSTS 4350.9 4350.0 5175.4 5022.4 4648.7 4339.3 4190.4 4425.6 4491.1 4379.0 B. ECONOMIC BENEFITS Cotton: Incr. Production ('000 t) 5.60 10.21 13.50 16.96 18.37 18.37 18.37 18.37 18.37 18.37 Econ. Farmgate price 182.36 196.28 204.52 209.28 212.48 212.48 212.48 212.48 212.48 212.48 Benefits 1020.8 2004.0 2761.0 3549.4 3903.3 3903.3 3903.3 3903.3 3903.3 3903.3 Maize: Incr. Production ('000 t) 0.87 3.52 7.19 11.25 14.52 14.52 14.52 14.52 14.52 14.52 : Benefits (55 CFAF/kg) . 47.9 193.6 395.5 618.8 798.6 798.6 798.6 798.6 798.6 798.6 Sorghum: Incr. Production ('000 t) 2.53 5.42 9.08 11.85 13.92 13.92 13.92 13.92 13.92 13.92 : Benefits (60 CFAF/kg) 151.8 325.2 544.8 711.0 835.2 835.2 835.2 835.2 835.2 835.2 Groundnuts: Incr. Production ('000 t) 0.15 1.28 2.31 3.86 4.83 4.83 4.83 4.83 4.83 4.83 : Benefits (65 CFAF/kg) 9.8 83.2 150.2 250.9 314.0 314.0 314.0 314.0 314.0 314.0 Paddy: Incr. Production ('000 t) 0.28 0.99 2.10 3.07 3.90 3.90 3.90 3.90 3.90 3.90 Benefits (80 CFAF/kg) 22.4 79.2 168.0 245.6 312.0 312.0 312.0 312.0 312.0 312.0 Cowpeas: Incr. Production ('000 t) 0.07 0.32 0.64 0.93 1.03 1.03 1.03 1.03 1.03 1.03 Benefits (CFAF 95/kg) 6.7 30.4 60.8 88.4 97.9 97.9 97.9 97.9 97.9 97.9 TOTAL ECONOMIC BENEFITS 1259.4 2715.6 4080.3 5464.1 6761.0 6261.0 6261.0 6261.0 6261.0 6261.0 NET ECONOMIC BENEFITS (LOSSES) (3091.6) (1634.4) (1095.1) 441.7 1612.3 1921.7 2070.6 1835.4 1769.9 1882.0 1/ From project cost tables and projections from PY6. Operating costs of cotton ginning and transportation in calculations of economic farm-gate price of cotton (Table 6). Farm inputs represent annual usage over without-project usage. 2/ Average of years 10-20. 3/ At CFAF 300/M.D.  - 54 - TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS Contents of Project File 1. Detailed Project and Program Cost Tables 2. Crop Yields, Areas, Production and Input Requirements 3. Farm Models and Budgets 4. Applied Research 5. Support to National Seed Multiplication Program 6. Feeder Roads 7. Rural Water Supply 8. Animal Traction 9. Transport 10. Ginning 11. Construction 12. Monitoring and Evaluation 13. Terms of Reference for Technical Assistance Staff 14. Credit Arrangements 15. Financial Analysis 16. Financial Reporting Requirements 17. Economic Analysis  TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS SOTOCO Organigram Administrative Council l | General t Monitoring and | Director l l Evaluation Unit Agricultural Production Finance and Administration Industrial Marketing Department Department . Department Department Services: Services: Services: Services: Engineering Division Training and -General Accounting - Factories Management -Cotton Marketing -Roads Extension: -Analytical Accounting, - Transport Management -Tubewells -Extension Management Information - Workshop and Garage -Buildings -Training and Internal Audit - Farmer Groups -Inventory Management -Credit -Procurement and Payments -Animal Traction -Personnel Management Research and Seed Production: -Research -Seed Production SOTOCO Field Services Savanna Kara Central Plateau rt Region Region Region Region World Bank-23764  - 56 - Chart I TOGO SECOND RURAL DEVELOPMENT PROJECT IN COTTON AREAS SOTOCO'S Regional Structure Regional Director Assistant Director Supervisor Trainer Supervisor Supervisor Animal and Assistant Farmer Groups Monitoring and Traction Trainer and Credit Evaluation rSecto'r Sector Sector h Chief | Chief | Chief _ I ntendant__ (Inputs, Inventory Sub-Sector Chiefs _ _ ._ Management, Cotton Su-etrCif Marketing) |_ Extension Agents - Field Enumerators World Bank-23765  IBRD 16296 rI >>-_ U P P E R V O L T A MALR -AN A "PAARCH 19B? L ( rKoeg . os7 S- - -GA