Senegal - Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5171 PROJECT PERFORMANCE AUDIT REPORT SENEGAL: SINE SALOUM AGRICULTURAL DEVELOPMENT PROJCT (CREDIT 549-SE/LOAN 1113-SE) June 29, 1984 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not outherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY ABBREVIATIONS BNDS - Banque Nationale de Développement de Sénégal CCCE - Caisse Centrale de Coopération Economique IRAT - Institut de Recherches Agronomiques Tropicales IRHO - Institut de Recherches pour les Huiles et Oléagineux ISRA - Institut Sénégalais de Recherche Agricole MDR - Ministère du Développement Rural ONCAD - Office National pour la Coopération et l'Assistance au Développement PA - Programme Agricole SAL - Structural Adjustment Loan SATEC - Société d'Aide Technique et de Coopération SIES - Société Industrielle d'Engrais du Sénégal SISCONA - Société Industrielle Sénégalaise de Construction et de Matériels Agricoles SODEVA - Société de Développement et de Vulgarisation Agricole SONAR - Société Nationale d'Approvisionnement Rural NUP - orld Food Programme COUNTRY EXCEANGE RATE ame of Currency: Communauté Financière Africaine Francs (CFAF) Year Exchange: Appraisal Year Average (19740 US$1 - 241 CFAF Intervening Years Average (1975-78) US$1 - 231 CFAF Re-Appraisal Year Average (1979) US$1 - 213 CFAF Intervening Years Average (1980-81) US$1 - 243 CFAF Completion Year Average (1982) US$1 - 334 CFAF WEIGETS AND MEASURES 1 kilogram (kg) - 2.20 pounds 1 metric ton (t) - 0.90 long ton 1 hectare (ha) M 2.47 acres 1 kilometer (km) M 0.62 miles This documenw hasa restricted distribution and may be used by recipients only in the perform.no of tr ofcial dutis. is contenu may not odhrwise be dinucd without World Bank authoizatiun PROJECT PERFORMANCE AUDIT REPORT SENEGAL: SINE SALOUM AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 549-SE/LOAN 1113-SE) TABLE OF CONTENTS Page No. Preface *.*..................................................... i Basic Data Sheet ................................................... ii Highlights o................................. ............o.....o.. iii PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT MAIN FEATURES ***.s. ............................ 1 II. AUDIT FINDINGS ........................................... 3 PROJECT COMPLETION REPORT I. Background ................................ 13 II. Formulation .............................................. 13 III. Implementation ........................................... 17 IV. Agricultural Impact *....... ................ 28 V. Financial and Economic Results ........................... 36 VI. Institutional Performance ................................ 41 VII. Special Issues ........................................... 45 Annex I Average Yield Results Annex 2 Bank Disbursements Nap IBRD No. 11251 PROJECT PERFORMANCE AUDIT REPORT SENEGAL: SINE SALOUM AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 549-SE/LOAN 1113-SE) PREFACE This is a performance audit of the Sine Saloum Agricultural Development Project (ADP) in Senegal, for which credit 549-SE and Loan 1113- SE, in the amounts of US$7 million each were approved in May 1975. The credit was fully disbursed and the loan was closed in December 1982, after cancellation of US$2.9 million. The audit report consists of an audit nemorandum prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) dated April 15, 1983. The PCR was prepared by the West Africa Projects Department based on a desk review of project files and the files of the Structural Adjustment Loan approved in December 1980 and which attempted to deal with many of the issues that arose during implementation of the proj- ect. The audit memorandum was based on reviews of the Staff Appraisal Report (No. 661a-SE) dated May 5, 1975, the President's Report (No. P-1590a-SE) of May 8, 1975, the Loan Agreement dated May 22, 1975, the Development Credit Agreement of May 22, 1975 and its amendment of August 14, 1980, and the PCR. Correspondence with the Borrower and internal Bank memoranda on project issues as continued in relevant Bank files were also reviewed. In addition, an DED mission visited Senegal in July, 1983. The mission held discussions with officials of the ministry of the implementing agency and with project participants. The PCR is factual and insightful. It provides a constructive critique of the project. The audit memorandum expands on some of the issues presented in the PCR. The draft report was sent to the Borrower on April 25, 1984, for comment; however, none have been received. The assistance provided by Government and project staff in the preparation of this report is gratefully acknowledged. flOECT hPEINA:W AUDT iE0Tr SEMÅCAL2 SiNE 0Aatt A0acUUA. DrELaUEffi rOECT (CEDIT 534-ME/1AX 1113-M) 8asIC DAT 5118E ET 0JCT DATA Apprata Actual ar Actual as Z ef Emtim.te Estimated Actual Apprloal. gattmte Total Project Cat (n aillvm) 30.9 22.9/4 70 CredLt Ammat (U" 1111.~) 7.0 7.d~ 100 Dae Zoard apprva 5/20/75 7/24/80 DatE Effeettvenes 10/01/75 10/31/73 Data Phyaical CampofeiCa Complaced 0~80 12181 Proporton toen complated (2) 100 60 60 Claosing aat* 0M/3o 51 06/30/83 Ecom~c Iate of ~atura (2> 25 /A Ytnacal N|rfore.ucm 1 2 InatICuteamal Performance 1 3 CUN1ATIVE DISBUR~ mEIS PY76 FW77 FM7 rm7 mo8 nei1 M12 Appral.al leattafte (u" ailitan) 1.3 4.0 6.8 9.7 12.6 14.0 14.0 Actual (S t111a.) 0.5 1.4 4.5 5.9 9.1 10.9 11.1 Actual as Z of sttaars 35 45 66 61 72 78 79 Data ef float d£~*ar"a March 1. 1083 PriocLpal repald to 02/28/84 US.'2 al Lien NISSION DATA Dage N.. of SpcialLoftons Parforefmnc T/p.s ef (No./yr.) Pwamenaagaak prested ,b matag/ Trnd/d Problaz/ Idntiftiatlom (MUA) 06/73 I 1.0 - - - Preparatam/ 10/73 Proa-pprala1 11/73 1 3.6 - - - (RNMA) 02/74 05/74 AppraiaL 07/74 4 13.0 - - - Sutetal TIrT supervision £ 11/75 1 1.2 1 2 N Supervtaio. II 04/76 2 2.8 I 1 T.F SupervIstom 11 (MU> 06/76 1 1.0 - - - SupervLaLon III 07/76 2 0.8 2 - supervistom IV M/76 1 1.4 1 2 N SupervIsom XV (KL) 11/76 2 2.0 -- Supervistan V 06/77 1 1.4 i 2 T.K Superviaom VI 01/78 2 2.8 3 2 T.K Sprviiem VII 10/78 1 1.0 3 3 K.T.0 Smporviiøon VILL 04/79 2 4.6 - - - SupervaLan IX Prap. for Re-Ppralma M/79 3 3.4 - - - Subtotal U.; Tagal 40.2 Reapprais1 11/79 5 13.4 - - - . Supervistoa/Follw-up Co aoapprasal 02/80 1 1.0 - - - - Subeatl iT Super¥£ta« i t/79 1 3.4 2 2 P. Suparvtion 2 05/81 I 2.0 - 3 3 - Supervistoa 3 02/82 1 2.2 - 3 3 r Total jf 7.b Total for project 62.2 O?IER phSECT NDATA horreurt Govrømat of Senegal Eme10ting Agncy: SoCIlkå de D&vloppemant et de Vulgartsagle Aricmle (SDEVA) Fial Tear July 1 - jue 30 Same of Currancy (abbrevtatLøa) Comamt6 inacIbre AfrIcalna Franca (CAf) Currency Enchange Rate Appratsal Tear Awerage LM$1.00 - 241 CPAF Iatrvemig Tuars Average m 1.00 - 231 CFAr he-Appralsal Tear Average S 1.00 - 213 CFAF Isterveftg TeGs Average U I.00 - 243 CMAi Camplttom Tear »arage om 1.00 - 334 CAF polloem~ Projact: no folla-on projece. /a Excludieg farm iput&. 75 r - FIancal Analygg; E - Uost. W I - problem fram: 2 - moderate problem.; 3 - major problem*. 73 1 - Lmproving 2 . mcatocary; 3 - detoriorating. e N - Kanagerlal; P fPolltical; T - Techanal; 0 - Other. Supervite of the reappraied projae u ~m Umkad to aupervisiot ef the SAL. Superitelom ta te is fleld for dida projaec Lo probsbly underrepreented sin~e 5Af. M uperviiBL mtsiommaot litemd bar* may have erved bach pur~pes. PROJECT PERFORMANCE AUDIT REPORT SENEGAL: SINE SALOUM AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 549-SE/LOAN 1113-SE) HIGHLIGHTS The Sine Saloum Agricultural Development Project was designed to continue Bank support to the development of agriculture in the Groundnut Basin of Senegal. The main objective was to increase output by increasing yields of groundnuts, cereals and livestock in the Sine Saloum Province. Increased yields were to be obtained by concentrated extension efforts to promote more intensive production techniques, and complementary supply of equipment and inputs on credit. By the fifth project year, 34,000 farm families or 50% of those in the project area were to be supervised by exten- sion staff, and about 150,000 ha or 20Z of the cultivated area was to be farmed using intensive techniques. Yields on fully intensified fields were expected to increase by about 50Z and total output by about 10%. The project started promptly and appeared to be going well for the first two seasons, 1975/76 and 1976/77. However, these results appeared to be caused by an unusually favorable rainfall pattern since the monitoring results from the 1977/78 season showed that the intensification measures were not having the expected positive impact on yields. Project management fully shared the Bank's and CCCE's concern and, following joint review of on-farm constraints (extension, input delivery and credit as possible explanations for the disappointing results) the 1978/79 work program was redesigned to put the emphasis on staff retraining and group extension. But the 1978/79 monitoring results revealed no improvement, and a complete redesign was initiated, leading to reappraisal in November 1979. The reappraised project was intended to cover three agricultural seasons with the focus on testing, in a more limited and climatically more favorable area, institutional changes in input supply, marketing and credit and promoting simplified technical recommendations. Apart from a promising beginning on one aspect of the institutional changes in the first few months, these tests were never started. The Bank seriously considered cancellation in mid-1981, opted to keep the project alive because of the considerable overlap with the agricultural policy provisions of the new Structural Adjust- ment Loan, but decided to cancel in May 1982 when it became evident that the tests would not even be started in the 1982/83 season. The standard questions of cost and time overruns do not apply, since the project was substantially redesigned, and the redesigned project was simply not executed. The project was closed two years later than had been envisaged at appraisal although six months earlier than envisaged at reappraisal. Project costs were about 80% of appraisal estimates through mid-1980, and reappraised project costs were about 70% of reappraisal estimates. - iv - The economic rate of return at appraisal was 25% over 10 years. At reappraisal, the economic rate of return of the original project was re- estimated on the basis of actual benefits, which were 30% of appraisal esti- mates, and actual costs which were 65% of appraisal estimates; this rate of return was found to be negative. The estimated economic rate of return for the reappraised project was 13-25% over 10 years, depending on the frequency and timing of droughts. At completion, a quantitative assessment is not possible due to lack of data, but it is considered highly unlikely that the reappraised project had a positive rate of return. The major lessons from this project concern the well known dangers of poor selection of technological packages and the difficulties created by making the realization of production objectives dependent upon the realiza- tion of institutional and policy objectives for which Government commitment was uncertain during the life of the project. The following points may be of particular interest: - the project was supposed to have been based on the experience of two previous agricultural credit projects, several years of research-station recommendations under "farm conditions", and three years' operations of a pilot project, yet still the project failed, in part due to lack of proper assessment of the operations that preceded it (PCR, paras. 1.01-2.01, PPAM, paras. 9-17); - the project, even though sizeable and highly visible, proved to be a poor vehicle for obtaining policy changes; despite agreements in principle obtained at negotiations (PCR, para. 2.08) and agreements in detail obtained at renegotiations (PCR, para. 3.13), scarcely any of the relevant covenants were complied with (paras. 3.37 and 3.39); - the monitoring work was well done, fully supported by project management, but failed to assess the acceptability of technological practices to farmers or their potential for increasing yields (PCR, paras. 3.29 and 4.05; PPAM, paras. 20 and 21); - the project was based on the assumption that land was scarce rela- tive to labor. This assumption was not based on an examination of factor availability in a disaggregated manner. Although the Sine Saloum Province is fairly densely populated, the population is less dense in the South where there still remains scope for increasing production though expansion of cultivated area; yet the South is also the better watered area with greater potential for increasing production through intensification. This factor was not recognized at appraisal and although the project area (or most of it) was not ready for intensification, the project recommended a technological package based on intensive use of marketed inputs per unit of land (PCR, para. 4.11); -v- - technical packages were not adapted to fit farmers' resources of land, labor and capital, as well as the importance of family struc- ture in determining land use and access to resources in this region (PCR, para. 4.17); and - project management did not have control over input supply, credit and marketing, neither did it have the authority to coordinate the supply of these services through other agencies. As a result, these services were inadequately provided (PCR, paras. 6.01, 6.07 and 6.11). PROJECT PERFORMANCE AUDIT MEMORANDUM SENEGAL: SINE SALOUM AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 549-SE/LOAN 1113-SE) I. PROJECT MAIN FEATURES Project Objectives 1. The Sine Saloum Agricultural Development Project (ADP) aimed to increase and diversify agricultural production in the Sine Saloum area and, thereby, raise the incomes of some 34,000 farm families. To that end, the project provided for (i) improving extension services under the project implementing agency-Socifti de Dfveloppement et de Vulgarisation Agricole (SODEVA)-through improved extension facilities, training and a comprehensive extension package consisting of destumping of cleared land, plowing, appli- cation of rock phosphate and compound fertilizer and the use of ow-drawn equipment, (ii) facilitating farmers' access to ox-drawn implements and seasonal inputs through improved input supply and credit services, (iii) reviewing grain marketing and procedures with the view of improving them, and (iv) developing a capability for the monitoring and evaluation of project results (PCR, paras. 2.09-2.11). Project Design 2. The project was identified by the Bank's Regional Mission in West Africa and prepared mostly by consultants on behalf of the project imple- menting agency, SODEVA. The project was a follow-up to IDA Credits 140-SE and 404-SE, both of which aimed at supporting Government's efforts to promote agricultural development in the context of the "Programme Agricole". Farming practices forming the basis of the project were to have been tested success- fully in the context of a pilot project financed by Caisse Centrale de Cooperation Economique (CCCE) and Government. As under the previous two projects, Bank support emphasized the introduction of animal drawn implements as a means to improve crop rotation and crop diversification. The project area was, however, limited to the climatically more favored southern part of the Groundnut Basin (PCR, paras. 2.01 and 2.02). 3. As was the case with the projects which preceded it, the project had the dual objective of supporting increased production through the provi- sion of inputs and technical advice and improving services to farmers by directly providing for, or suggesting that Government provide for strengthen- ing agencies responsible for extension, input supply, marketing and credit. SODEVA was given responsibility for extension, while responsibility for input supply, marketing and credit was left with the Office National de CoopEration et d'Assistance pour le D&veloppement (ONCAD), the Banque Nationale de Dfveloppement du S6nfgal (BNDS) and the groundnut cooperatives. Although formally responsible for project implementation, SODEVA was not given the formal authority and responsibility for coordinating its own activities with - 2 - those of other agencies involved, nor did the project include formal pro- cedures for resolving differences between SODEVA and the agencies upon which it was made dependent (PCR, paras. 2.03-2.11). Project Implementation 4. Responsibility for project implementation was given to SODEVA's regional director for Sine Saloum. Concerning other agencies involved in the project, the appraisal report concluded that SODEVA would work closely with cooperatives in the project area, with the Ministry of Rural Development's Agriculture and Veterinary Departments and their associated agricultural and veterinary research organizations on crop and animal husbandry investiga- tions, with Socift- de D-veloppement des Fibres Textiles (SODEFITEX) for cotton production, and with ONCAD and BNDS for input supply and credit. The appraisal assessment was that SODEVA had already established effective working relations with the departments and agencies and no formal agreements would be required. The decision not to require formal agreements between agencies involved was taken with the knowledge that in the past one or more of the critical inputs (seeds, fertilizer, implements, credit) had not been available on time and that SODEVA would have a major coordinating role: aggregating the needs of individual farmers and working with ONCAD to deal with bulk suppliers such as Socifti Industrielle S&ifgalaise de Construction Mcanique et de Materiel Agricole (SISCOMA) for animal drawn implements, and Soci-t- Industrielle d'Engrais du Sfingal (SIES) for fertilizers, and with cooperatives to ensure that farmers received their requirements. 5. The project started on time. At the end of the first two agri- cultural seasons, progress was judged unsatisfactory as the expected impact on yields was not materializing. This failure was attributed by SODEVA to ineffective extension and input supply services. On that basis, SODEVA undertook actions to improve its extension activities, establish formal agreement with ONCAD for the supply of inputs, and expand monitoring and applied research activities. These actions proved ineffective, as no improvement in yields was achieved in the third agricultural season. 6. IDA supervision missions repeatedly questioned the suitability of the technological package being introduced in the project area. Neverthe- less, it was concluded that project failure was due mainly to ineffective implementation although the Bank recognized that technical packages were also ineffective. It was decided that a major reformulation of the project was necessary. The basis of this reformulation was for the most part institu- tional. The main features were a reduction in project area, a change in the extension methodology, the introduction of contract grower arrangements, reorganization of cooperatives and SODEVA, and redesign of the agricultural credit system. These ideas were the basis of project reappraisal in 1980 (PCR, paras. 3.03-3.16). The redefined project was to be implemented over a 2.5-year period. IDA's concern at the start of the project centered on the reorganization of cooperatives on the basis of village mutual guarantee groups (sections villageoises) as a tool for improving seed supply, credit and primary marketing services. However, Government was hesitant in giving SODEVA the means, including the legal basis, the institutional authority and -3- the policy support to achieve such reorganization. As a result the project was cancelled with approximately US$2.9 million undisbursed funds (PCR, paras. 3.20-3.26). Project Results 7. The first project objective of increasing crop yields and produc- tion was not achieved (PCR, paras. 4.01-4.09). The objective of diversifying agricultural production was, to a reasonable extent, achieved in the sense that maize cultivation and the integration of livestock and crop activities have become feasible undertakings for a sizable proportion of farmers. The PCR also concluded that the project impact on farmers' income was at best minimal (PCR, paras. 5.01-5.06). Although the project did not have explicitly-stated institutional objectives, it nevertheless sought, mainly through covenants, to strengthen agricultural services (extension, input supply, marketing, credit). These intermediate objectives were not achieved either (PCR, paras. 6.01-6.11). II. AUDIT FINDINGS 8. The PCR provides a thorough and accurate analysis of the events which led to the approval of the combined Credit 549-SE and Loan 1113-SE and seven years later to the cancellation of 20% of their amount. This audit concurs with the conclusions of the PCR, some of which are presented below from a different perspective or interpretation of the direction and extent of causality among the events that took place. Project Design 9. Although the project was the third Bank-supported operation and the fifth operation benefiting from outside financial support in the Groundnut Basin of independent Senegal, its design did not fully reflect the experience accumulated under the operations that preceded it. 10. The first Bank-supported project (Cr. 140-SE/Loan 584-SE), was a follow-up to a European Development Fund (EDF)-financed operation carried out over the four years 1965-68. The Bank-supported project sought within a four-year period (1970-73) to increase land cultivated by about 25%, ground- nut yield by about 25% and millet yield by about 5%. This was to be achieved through increased use of fertilizer, improved seeds and animal-drawn imple- ments. At the time this project was appraised, however, it was not possible to draw any conclusions on the impact or potential impact of the EDF- supported operation due (i) to the dominance of the reported influence of rainfall pattern on yields and (ii) to the fact that the EDF-supported program did not extend over a long enough period to account for the cyclical nature of drought. Thus, although the Government and the Bank expressed the need to build on previous experience and achievements, no time was taken to properly assess such experience and incorporate any lessons in the follow-up project. 11. The outcome of the project supported through Cr. 140-SE was a failure of the directly productive component due to exceptional weather con- ditions and inappropriate price ratios. In addition the institution-building component failed due to lack of Government support, poor performance by consultants and inadequate IDA supervision. The Project Performance Audit Report (PPAR)1/. concluded that "the project area remains a most difficult one in which to plan for major technical change under rainfed conditions". 12. The second Bank-supported project (Credit 404-SE) was designed to be a follow-up to the first project, with two exceptions. The project was to cover the whole country (instead of being limited to the Groundnut Basin), and credit to farmers was to be limited to the purchase of animal-urawn implements and draft animals (fertilizer was excluded). The second project was designed midway in the course of implementing the first project and at the time, Loan 584-SE (part of the first project) was cancelled on the grounds of poor project performance. Project files indicate that at the time the second project was designed, the country and the Bank faced the same uncertainties about project environment they faced when designing the first project. Yet, the geographical scope of the project was increased and no specific measures were introduced to address the constraints faced under the EDF project and the first Bank-supported projects. 13. The PPAR of the second project2/concluded that in terms of the number of farmers reached, the credit component was implemented as planned, but the project was unable to prevent the collapse of the input supply, marketing and credit services. Moreover, the PPAR concluded that the suc- cessful channeling of credit to farmers was not affected by the deterioration of the institutions involved. As in the case of the first project, rainfall and producer prices had a predominant role in determining project outcome. 14. In parallel to the two Bank-supported projects described above, IRAT3/ undertook a program (Unites Expirimentales) of testing research station results under farm conditions. This program served as a basis for two pilot projects, one supported by USAID and the other by CCCE, aimed at the dissemination, through concentrated extension efforts, of a modified set of IRAT's technical recommendations (mostly animal traction and fertilizer use). In assessing these pilot projects, the appraisal report for the Sine Saloum ADP stated that "Progress was slower than expected because many farmers were reluctant to or did not understand the need to clear fields of stumps and roots, a prerequisite for effective plowing.... The first meaningful results (based on a partial sample...) available are for the 1973/74 crop year.... Although limited, these results indicate that improved farming techniques recommended and SODEVA's extension methods are sound for 1/ Report No. 1319, October 20, 1976. 2/ Report No. 3514, June 25, 1981. 3/ The predecessor of the present Agricultural Research Institute of Senegal (ISRA). -5- application in a larger project.- No basis was provided in project documents to justify this judgment. 15. Thus between the time when the EDF-supported project was initiated in 1965 and the time the Sine Saloom Agricultural Development Project was designed in 1974, very little learning (in terms of how to tackle the development process in the Groundnut Basin) had actually taken place. - One reason appears to stem from the observation that although successive develop- ment interventions were meant to build upon each other's achievements, time pressure and the lack of an organized learning system have prevented that from taking place. The EDF-supported project, the two Bank-supported credit projects and the two pilot projects supported by CCCE and USAID were based on technological assumptions which made good technical sense under ideal condi- tions, but which were never put to a test under farmers' real work conditions, and their relevance to farmers was not seriously questioned despite their limited use. The design of all these projects was also based on the assumption that the institutional and policy frameworks were amenable to change during the life span of a given project, simply because of Govern- ment's desire to see projects reach their stated objectives. In all cases, however, the desired institutional and policy changes were not well defined; their implications beyond the project were not analyzed; and plans and means for achieving them were not specified and provided for. 16. The same technological, institutional and policy assumptions made under previous projects underlined the design of this project although at that time, there was sufficient information in project files to support the statement that (i) because of erratic rainfall and poor soils, the Groundanut Basin, particularly in the North, offered limited potential for quick and potentially sustainable increase in yield or in area planted; (ii) physical environment-related risk faced by farmers was compounded by the uncertainty associated with unpredictable changes in government policies and unreliable public services; (iii) existing credit, input supply and marketing channels were inefficient; (iv) in the prevailing socio-political context, Government was unlikely to undertake the necessary policy actions for motivating project participants and upgrading the institutions serving them; and (v) in the project environment, the technological package was unacceptable to the majority of farmers. Project files clearly indicate that Bank staff were cognizant of the substance of the statements. The fact that such substance was not fully reflected in the design of the Sine Saloum ADP could be attributed to a variety of reasons. 17. For example, although increased production was clearly stated as the objective of the project (and projects which preceded it) the magnitude of the institutional and policy constraints was such that removing the latter became the de-facto project objective. However, since the project did not include defined plans and means for removing such constraints, the pursuit of the stated project objectives was overshadowed by the unplanned pursuit of institutional and policy objectives. In other words, since the project ob- jective was not defined in relation to the realities of the environment in which it was ta be achieved, the Government and the Bank ended up struggling -6- in an ad hoc manner with the task of adapting the environment to meet produc- tion requirements.! In retrospect it would have been more practical to adapt the project to its environment at the design stage and, if necessary, improve the design during implementation as the environment changed (for example as a result of policy dialogue or better assessment of available resources and technology). Another alternative could have been to better define institutional and policy objectives (both with regard to substance and timing) at the design stage and identify a source for the necessary means to achieve them in parallel or in sequence with the production objective. Inadequate Use of Supervision Findings 18. Information in project files and discussions with country officials indicated that although Bank supervision input in the project was quanti- tatively adequate and often of commendable quality, it nevertheless proved of limited use in promoting the successful completion of the project. Two reasons may explain, at least in part, this outcome. First, although super- vision missions repeatedly questioned basic premises in project design, their recommendations were neither accepted nor challenged through further investi- gations.5/ This was particularly the case in relation to the technological package selected for introduction to farmers and, to a lesser extent, in relation to the feasibility of some institutional reforms sought under the project. Second, supervision missions were given the impossible task of promoting policy and institutional reforms which were not well defined and for which they were often not well equipped, given the complexity of the issues involved and their ramifications beyond the project context.6! 19. Information in project files indicates that both SODEVA and the Bank were reluctant to even entertain the idea, repeatedly advanced by super- vision missions, that the technological basis of the project could be wrong. 4/ Project staff consider that, whereas increased production was the pri- mary objective of the original preject, the objective of the reappraised project was the testing of institutional and policy reforms since, by 1979, they were considered as prerequisites to achievement of production objectives. The reappraised project provided a clearly defined plan for testing and assessing the institutional and policy reforms. 5/ Project staff consider that supervision missions began to challenge the basic premises of project design in early 1978 and that their recommendations were accepted, after internal review, as is evidenced by the re-orientation of the project for the 1978/79 season, the scaling down of the project in 1979, the decision to re-appraise, and the content of the re-appraised project. 6/ Project staff consider that, in the reappraised project, the institutional and policy reforms were indeed well-defined, and that the Structural Adjustment Loan program, which included several agricultural policy measures, provided a further vehicle for addressing the reforms that were first specified in the reappraised project. -7- Instead both SODEVA and the Bank maintained that farmers needed more inten- sive help to convince them to accept the technological package.7/ That meant strengthening SODEVA's extension service, and getting Government to reform ONCAD, cooperatives and the credit system. In addition to being ill- defined, these actions required political will, resources, and in particular time, beyond those available in the project context. Moreover, since these actions were viewed as absolute prerequisites for tackling the project's primary task of increasing production, no attempt was made to identify a less perfect route to some gradual increase in production with marginal institu- tional and policy reform in the short term, and a more perfect route to the long-term task of reforming institutions and policies as a basis for sus- tained and significant increase in production. As a result, neither the primary production objective nor the intermediate institutional and policy objectives were reached. Monitoring and Evaluation 20. Monitoring and evaluation in the context of the project aimed at: (i) assessing the acceptability of the technological practices recommended under the projects; (ii) measuring the impact of the project on yields and farmers' incomes; and (iii) providing feedback on farmers' opinions of ser- vices provided under the project. During the project period monitoring centered mostly on measuring the impact of the project on yields. With regard to that component, this audit concurs with the PCR's conclusion that "monitoring work was well done, fully supported by project management, well supervised, and decisive in detecting the need and the content of the redesign of the project-. However, with regard to assessing the accept- ability of the technololical practices and farmers' opinions, the monitoring function was deficient. o In retrospect, given that successive supervision missions questioned the suitability of technological practices, monitoring should have concentrated on the farmers' attitude toward the technology and the reasons underlying that attitude. Had this been done, the project may have been redesigned on the basis of simpler practices and more on the farmers' self reliance, instead of on the formula retained consisting of more extension and more government services which led to an institutional and policy impasse, with which the project was not designed to deal. 7/ Project staff consider that this was the case up to 1978, but not beyond; the reappraisal explicitly examined the technological basis of the original project, and rejected much of it. 8/ Project staff consider that project monitoring was not deficient in assessing the acceptability of the technological practices. The moni- toring results from the 1976/77 season cast some doubts on the technical packages and it was the monitoring results from the 1977/78 season that seriously called into question the effectiveness of the technical pack- ages. It was the analysis done by the project monitoring unit that first revealed the heterogeneity of farm types and the inapplicability of the heavily intensive packages to most of the farms. In addition, the implications of family structure on farm decision-making were first brought to light by the monitoring unit. -8- 21. Since projects are justified, at least partly, in terms of an internal rate of return made possible by increased production, it is logical for monitoring to concentrate on assessing the impact on production of project-recommended practices. This, however, assumes that the practices have been proven useful under farming conditions and that they are accessible to farmers. In the case of the Sine Saloum ADP, however, since the practices recommended turned out to be of questionable utility in the prevailing environment, monitoring should have given priority to assessing the reasons underlying farmers' observed reluctance to adopt them. Given the initial limited familiarity of many senior staff members in the project imple- menting unit with the premises underlying project design, a management- oriented monitoring system needed to begin by verifying the validity of such premises and even challenging them as a prelude to assessing the impact of the project. Views from the Field 22. Most people interviewed in the field expressed the view that al- though the project cannot be qualified as a success, it is too early to classify it as a definite failure. In their opinion, if credit and input supply services were to improve, SODEVA could turn the project into a success by shifting emphasis to the production of cereals, the integration of live- stock and crop activities, and community-supported services (seed supply, cereal marketing, local production and maintenance of equipment). 23. There was a general agreement that the project was not well designed and that although some country officials agreed to project content, the country did not have much input in its design. The weaknesses in design mentioned included: (i) the fact that the development process was viewed in terms of simple additions of technological practices expected to contribute to increased production; (ii) limited appreciation of the constraints imposed by the socio-political realities in the country and an underestimation of the time and planning required to remove such constraints; (iii) absence of any input by beneficiaries in the design of the project; and (iv) unrealistic assessment of the exogenous factors affecting the project, particularly with regard to Government willingness to drastically change its policies. Bank staff in the Projects Department are of the opinion that while the country may not have had much impact on the initial design of the project, it was not the case for the redesign, in which SODEVA staff played a major role. Thus any misjudgement on the practicability of some of the provisions of - the redesign ought, in their opinion, to be levied at the Bank and SODEVA. 24. SODEVA's officials expressed the opinion that SODEVA was not given a fair chance to implement the project. It was made dependent upon organiza- tions (ONCAD, BNDS, cooperatives), over which it had no control; and it was made responsible for the project production objective which, in the course of project implementation, lost the urgency initially attached to it in favor of institutional and policy objectives, most of which were outside SODEVA's terms of reference. These officials suggested that the pursuit of insti- tutional and policy objectives should precede that of production objectives. In this case, the project could have been designed in such a way that an -9- initially modest production objective is progressively modified and expanded as progress is made on parallel institutional and policy objectives. This could have minimized SODEVA's dependence and given Government a chance to plan its institutional and policy interventions instead of having to react to crisis-type situations to keep the project going. 一7〞一 戶介＇〞“沙汾〞波 PROJECT COMPLETION REPORT SENEGAL SINE SALOUM AGRICULTURAL DEVELOPMENT PROJECT (Loan 1113/Credit 549 SE) April 5, 1983 Projects Department Western Africa Regional Office Agriculture III Division r 9 Å < s - 13 - I. BACKGROUND 1.01 The Sine Saloum Agricultural Development Project developed out of a continuing Bank interest in the Groundnat Basin of Senegal. The project was built on the results of the Government's Programme Agricole begun in the early 1960 a and supported by two agricultural credit projects from 1969-73 (Credit 140-SE/Ln 584-SE) and 1973-76 (Credit 404-SE). The First Agricultural Credit Project (Credit 140-SE/Ln 584-SE) supported the Programme Agricole's efforts to increase agricultural production and productivity in the Groundnut Basin through rrovision, on credit, of fertilizer, improved seeds end animal drawn equipment and the provision of extension services. It also aimed at improving the performance of key institutions in the agricultural sector including the BNDS, ONCAD and SODEVA, the regional development agency responsible for extension activities in the Groundnut Basin. 1.02 Due in part to successive drought years and Government price policies which made additional input use unattractive to farmers, input supply and crop production objectives under the first credit project were not satisfactorily met. The institutional reform component, especially for ONCAD, was also regarded as a failure due to insufficient Government support, poor consultant performance and inadequate supervision by IDA (PPAR No. 1319). Although the project did not satisfactorily fulfill these objectives and the loan portion was cancelled, the Government and the Bank agreed that a second agricultural credit project was needed to meet rising input demand resulting from improved weather conditions and favorable price policy and to consolidate the gains made in institutional performance. 1.03 The Second Agricultural Credit Project (Credit 404-SE) enlarged the first project's coverage to the entire country and included medium term credit to farmers for the purchase of agricultural equipment and draft animals, tech- nical assistance to SODEVA and ONCAD and studies of seed storage and crop response to fertilizer. Unlike the first credit project, the agricultural credit component of the second project was successful. However, the project failed in its efforts to reorganize and improve the management of ONCAD (PPAR Credit 404-SE). ONCAD's poor performance of the input delivery and credit functions posed enormous difficulties for the Sine Saloum project which started up in 1975/76, the final year of the credit component of the second agricultural credit project (para. 6.01). II. FORMULATION A. Origin and Preparation 2.01 The Sine Saloum Agricultural Development Project was the outgrowth of three efforts in the Region. The first, the Programme Agricole, has already - 14 - been discussed. The second was the IRAT 1/ unitfs expgrimentales which were testing research station recommendations under "farm conditions" in three villages of Southern Sine Saloum. This was in part the basis for the third effort which was a pilot project financed by Government and the CCCE (CFAF 815 million) for the three year period 1971-74 in Southern Sine Saloum. The pilot project disseminated, through concentrated extension efforts, a modified set of IRAT's technical recommendations for intensifying production of groundnuts and cereals. The Sine Saloum Project was identified in April 1973 as a follow-up to the CCCE pilot project. The initial preparation was done by the Bank's Regional Mission for West Africa. The feasibility study, financed by the Second Agricultural Credit, was carried out by the Studies Unit of SODEVA with the assistance of consultants and expatriate staff members from SATEC, a French consulting firm with 10% capital participation in SODEVA. The study was completed in June 1974. 2.02 There were two major issues raised by the feasibility study which were resolved prior to the Bank/CCCE Appraisal. The feasibility study pro- posed a six year project; the Bank maintained it as a five year project. The feasibility study proposed the expansion of the project area to cover the entire Sine Saloum Region including the northern Departments which receive less rainfall and which had not been touched by the pilot project or the IRAT unites exp&rimentales. In hindsight, this was a crucial decision which resulted in modified but still untested technical recommendations being extended to farmers of the northern zone (para. 4.13), and an increase in project personnel requirements which contributed to overloading the project management (para. 6.04). B. Appraisal 2.03 The project was appraised in July 1974 by a team of four Bank staff and a representative of the CCCE. Among the issues raised at this time were government policies which subsidized the consumer price of imported rice and the price of fertilizer and which limited the marketing channel for millet/sorghan. The problem of cooperative credit limits which restricted the amount of credit available to potential project participants, progressive farmers, to below their needs was also of concern. It was also pointed out that the working capital of SODEVA was insufficient to pre-finance project activities and that SODEVA's lack of an independent financial base might be a problem. 2.04 After the appraisal mission, initial decisions were taken to condi- tion the project upon agreement by Government to increase the working capital of SODEVA; to resolve with the BNDS the issue of raising cooperative credit limits; to change the cereal marketing regulations such that ONCAD became the 1/ IRAT is a French research organization that was responsible for agri- cultural research in Senegal until 1975, when Government established ISRA, the national research institute. - 15 - buyer of last resort and to submit a timetable for the withdrawal of the sub- sidy on the consumer price of imported rice. In November 1974, the Government eliminated the imported rice subsidy and increased producer and input prices. This was a significant step towards meeting the Bank requirements although the issue of subsidies on inputs and agricultural equipment remained unresolved. 2.05 During the course of discussions within the Bank about the project, prior to negotiations, several issues were raised which in view of subsequent events proved to be important. In the decision memorandum, it was agreed that the appraisal report should contain a justification of the high extension cost per farmer and the high proportion of project costs for personnel. The appraisal report was supposed to show that the personnel costs were develop- ment expenditures and that Government's revenues from the project would meet future extension costs after the project's development phase. At the yellow cover stage, Central Projects Staff argued that neither of these points had been adequately justified. The Loan Committee also questioned the high pro- portion of project costs, 83% net of tax, which were for personnel and operat- ing costs. It questioned why the full extension costs were being financed for the duration of the project rather than incremental costs which are normally financed by the Bank. In addition, the Loan Committee questioned the reasons for the high percentage of local costs, 87% of project costs including taxes. 2.06 The appraisal team justification was based on the "plateau theory". It was argued that since the techniques promoted by the extension services under the Programme Agricole had been adopted by an overwhelming majority of farmers, the extension services would have virtually no purpose unless they were devoted to instilling new techniques as intended under the project. The existing extension services would be totally devoted to teaching new tech- niques and, therefore, the entire cost should be considered incremental. In the appraisal report, it was argued that the pilot project had shown that at the existing stage of development in the region, intensive extension was needed in order to achieve technical change and that substantial benefits would result from intensification. Also, it was argued that concentrating on a limited number of farmers would have a demonstration effect, spreading improved techniques to other plots within those farms and to surrounding farms. It was stated that the extension costs would be capitalized over the life of the project and that there would be no need for extension efforts after PY5 in order to maintain the level of technological development and productivity achieved. These justifications were eventually accepted and the financing plan was approved as originally formulated. 2.07 Another matter of differing opinions within the Bank concerned the relative importance of sector issues, in particular the fertilizer subsidy and the consumer price of cereals. Some staff believed the cereals issue to be most important and that this had been resolved by the announced price changes in November 1974. Other staff believed that a harder line should be taken on fertilizer subsidies since the Government had not met its commitment to hold annual discussions as stipulated in the Second Agricultural Credit Agreement (Cr. 404-SE). These staff wanted a reduced level of subsidy which would be clearly defined as either a percentage of total cost (40%) or a specific price such as 18 to 20 CFAF per kilo as a condition of project effectiveness. - 16 - 2.08 Immediately prior to negotiations, there were indications that Goverment was very reluctant to accept a legal obligation to consult the Bank before making pricing decisions. When the Bank went into negotiations, it had already decided to drop the requirement that implementation of a program of reducing fertilizer subsidies be a condition of credit/loan effectiveness. In the credit and loan agreements, Government agreed to the progressive adoption of free market prices for agricultural equipment and fertilizer, setting of producer prices advantageous to farmers, and a policy of free market prices for iported cereals. No timetable was established and neither were any specific figures agreed upon. Either party could request price consultations and Government agreed to inform the Bank if it decided to introduce a subsidy on imported cereals. Government also agreed to a vague statement that it would not rule out the possibility of private trader involvement in cereal marketing and that it would exchange views with the Bank on the cereal marketing study to be financed by the project. The issue of BNDS credit limits to cooperatives was addressed in a s:mewhat vague agreement that if a cooperative under the project was denied credit, the causes would be reviewed and adequate financing provided. In fact, this did not address the original concern about individual farmers who did not have access to adequate credit especially since it was ONCAD and the cooperative Commission d'Octroi that made the key decisions on access to credit and credit limits and not the BNDS. Government provision of funds needed to increase SODEVA's working capital was maintained as a condition of effectiveness. Government agreed to discuss regular financial support for SODEVA before June 30, 1978. C. Objectives 2.09 The final project design approved in May 1975 aimed at increasing output and yields of groundnuts, cereals and livestock in the Sine Saloum Region through concentrated extension efforts to introduce more intensive production techniques and the complementary supply of equipment and inputs on credit. By the fifth project year, 34,000 farm families, 50% of those in the project area, would be supervised by project staff and about 20% of the cul- tivated area would be farmed using intensive techniques. In addition to the principal activities of extension and input/equipment supply on credit, the project provided for strengthening SODEVA by financing buildings, equipment, staff training facilities and courses; constructing an animal feed plant; establishing a tree nursery and promoting tree planting; monitoring and evaluating project results; and conducting a study of cereal marketing policies. 2.10 Quantified project objectives for crop production were established on the basis of the number of farmers supervised and the area intensified. This was based on a three-fold classification of intensification levels and a division of the project area into two zones, the North which received on average 600-800 mm of rain and the South which received on average greater than 600 sm. The project was based on the progressive intensification of farmiag techniques on a supervised farm during the course of the project. In project year 5 (CP5), 39,740 hectares would be fully intensified which repre- sented an increase of 530% relative to PYl. The semi-intensified area would - 17 - reach 108,975 hectares by PY5, representing an increase of 61% relative to PY1. For a farmer living in the southern zone who participated in the project for five years, groundnut yields would increase from 900 kg/ha in PYO to 1,400 kg/ha in PY5 on fully intensified fields. 1/ The farmer's maize yields would increase substantially from 1,800 kg/ha in PY1 to 2,700 kg/ha in PY5, and millet yields would increase from 850 kg/ha in PYO to 1,500 kg/ha in PY5. Annual incremental production by PY5 would be 27,000 tons of groundnuts, 15,000 tone of maize and 7,000 tone of millet. 2.11 Extension of livestock recommendations was directed at the farmers supervised under the crop component. Under the project, growth rates for stall fattened cattle would be about 500 grams/day, compared to an average of about 150 grams/day under traditional grazing methods. The calf mortality rate would be reduced, and the milk production and calving rate of breeding cows would be increased. The livestock component's annual incremental output by PY5 would be 1,500 tons of beef, 6,000 calves, and 1,600 tons of milk. The economic rate of return of the project was estimated at 25% over 10 years. The per capita income of project participants would increase by about 35% from an average of US$60-90 to US$115 per capita. III. IMPLEMENTATION A. Effectiveness and Start-Up 3.01 The Loan and Credit Agreements were signed May 22, 1975, and the project became effective on October 31, 1975, one month later than the appraisal-estimated effectiveness date. There were two conditions of effec- tiveness. The first was that the loan agreement between Government and the CCCE had become effective. The second was that Government and SODEVA had entered into an agreement to carry out the project and that Government had provided SODEVA with CFAF 200 million as working capital for the project. The delay in effectiveness was due to slow processing of the Government - SODEVA agreement. 3.02 Project activities started up in July 1975. They were largely a con- tinuation and expansion of the CCCE project efforts. Construction of new offices and warehouses got off to a very slow start and resulted in disburse- ments for the earlier years being well below appraisal estimates (para 3.27). There were also problems getting senior level Senegalese as counterparts for expatriate staff. During the first two project years 176 and FY77 covering agricultural year 1976/77, 2/ the Bank considered that the project was I/ The yield figures reflect a 15% reduction to take into account drought. 2/ Project activities apparently started up in July 1975 although the loan did not become effective until October 31, 1975 and the appraisal report anticipated disbursements to begin in the first half of FY76 (July 1975 to December 1976). Benefits were not to be realised until the 1976/77 agricultural season. - 18 - progressing well as measured by indicators of the number of farmers super- vised, extension estimates of the area intensified and indications of the number of oxen trained and cattle fattened. Livestock, maize and tree nursery components were particularly successful. However, even before project start- up, it was evident that there were serious problems with ONCAD and these hampered input supply and cereal marketing. B. Revisions 3.03 There were no major changes in the project design from start-up to early 1978. It was not until SODEVA's monitoring and evaluation team produced its first statistical evaluation of the relationships between inputs and out- puts for agricultural years 1976/77 and 1977/78 that there were indications that the intensification measures being promoted by the project were not hav- ing the expected positive impact on yields. Based on these findings and dis- cussions with SODEVA, a joint Bank/CCCE supervision mission in February 1978 classified the project as a "problem" project. 3.04 SODEVA believed that the failure to raise yields resulted from ineffective extension services combined with ixternal factors outside its control, such as ONCAD's control of cereal marketing and agricultural input/- equipment supply. The Bank mission believed that on-farm constraints pre- vented adoption of the intensification recommendations and that the project should concentrate on themes in which farmers demonstrated an interest such as maize and livestock. The Bank/CCCE mission agreed to proposals to re-orient the project for the 1978/79 agricultural season based on SODEVA's perception of the project's problems. 3.05 SODEVA proposed to improve extension efforts through retraining of field staff and re-orientation to group extension including field demonstra- tions. It agreed to stop all recruitment of new personnel despite the fact that staffing levels were below appraisal estimates. The issue of inadequate transportation allowances, which had virtually immobilized field staff, was addressed in a Bank letter to Government. 1/ It was decided that legal agreements between SODEVA and ONCAD were needed to authorize marketing by SODEVA of cereals produced under contract, and sale of inputs by SODEVA for cash, and to govern relations between SODEVA and the cooperatives in order to permit more direct input supply by bulk suppliers. Expansion of the monito- ring and the applied research components was also planned. 3.06 The October 1978 supervision mission found that millet and maize pro- duction under contract to SODEVA had been quite successful although the area was less than planned. Livestock activities also continued to meet with success. Legal agreements concerning input supply, marketing and cooperatives 1/ This has been a continuing problem in Senegal and an issue which deeply concerned project management in Kaolack. Transportation allow- ances had remained at 1964 levels. - 19 - had been signed with ONCAD. Despite these changes the monitoring and evalua- tion results for the 1978/79 season failed to show an improvement in produc- tion or yields. A joint Bank/CCCE supervision mission in April 1979 concluded that the reorientation measures failed p:imarily due to ineffective implemen- tation. According to the supervision mission, SODEVA's efforts to improve extension were unsuccessful. Retrained extension workers visited an average of three farmer groups per month instead of the SODEVA established objective of six; the content of these meetings was apparently not very useful and demonstration fields, set up by SODEVA were not visited by farmers. SODEVA personnel were not invited to attend cooperative meetings that decided on the quantities of inputs and equipment to order and information on input and equipment needs as determined by SODEVA's annual census was not taken into account by the cooperatives or ONCAD. Although the area of contracted maize and millet was less than proposed, yields were reasonable. However, credit recovery for contract maize, was between 33 and 40 percent. The mission observed that agricultural conditions had declined in the project area. Fertilizer use had decreased and purchase of equipment had fallen below replacement levels. 3.07 SODEA and the Bank/CCCE mission agreed that a major reformulation of the project was required. Since this would require substantial amendments in the Loan and Credit Agreements, the mission proposed a full re-appraisal of the project to be undertaken in late 1979. In the interim, it was agreed that SODEVA would prepare detailed proposals of reorientation actions which would be based on the following ideas. Two of the project's six departments, Kaolack and Foundiougne, would be test areas for project reorientation. A new system of group extension, based in part on the Training and Visit System would be tested. Killet, maize and tobacco would be grown under contract. A trial of sub-dividing cooperatives into small groups of farmers who would be mutually responsible for credit reimbursement would be tested. In the four departments outside the test zones, project activities would continue as before. Efforts would be made to reduce the lowest level extension staff by 30% in the test zones and 12% elsewhere. Technical assistance would be strengthened. A high level working group of representatives from the Ministry of Rural Development (MDR), ISRA, SODEVA, SATEC and an outside consultant highly respected in Senegal would be responsible for proposing ways to reorganize SODEVA. In view of the serious situation regarding debt recovery and agricultural credit, a consultant would be chosen to design an appropriate agricultural credit system for the country. 3.08 These ideas served as the basic framework for the re-appraised project. In a letter to Government following the April 1979 supervision mission, it was stated that if matters such as availability of inputs and establishment of an acceptable level of debt recovery were not resolved even a re-appraised project would be unworkable and would therefore not be acceptable for continued Bank financing. C. Re-Appraisal 3.09 The project was re-appraised in November 1979 by a team of three Bank staff and representatives of the CCCE. There were two principal justifica- tions for the re-appraisal. First, a major reformulation of the project - 20 - was required which would result in substantial amendments of the project loan/credit agreements. Second, the Bank and the CCCE wanted to ensure that the estimated US$10 million of undisbursed project funds were used effec- tive3jy. The re-appraisal focused on the need for institutional reforms in the agricultural sector. In view of the limited remaining project funds and uncertainties about the outcome of the proposed changes, the scope of the project was reduced so that it could test new approaches. These included the reorganization of the extension system of SODEVA and adaptation of the tech- nical message; establishment of farmer mutual guarantee groups to handle seed storage, credit and primary marketing; and greater independence of coopera- tives to manage their own operations. 11 3.10 Prior to the re-appraisal, several issues were raised within the Bank. It was recognized that the political will to make fundamental insti- tutional reforms, even on a trial basis, might not exist. The re-appraisal mission took the firm position that if this was the case the project should not go forward. Another issue was how to ensure that the re-appraised proj- ect, which would not become effective before March 1980, would have an impact on the 1980/81 agricultural season. There was concern that the project had been coasting along without much impact since the 1978/79 season and that the re-appraisal should not create further delays. 3.11 The re-appraisal team returned from mission with a more optimistic view of the project and of the possibility for change in the rural sector. SODEVA, on its own initiative, had began to analyze the debt situation of cooperatives in the two test departments; this was a prerequisite to estab- lishment of the farmer groups (sections villageoises). The Government had established working groups on cred3t and .NCAD; recommendations were expected in early 1980. Meanwhile, the Ministry of Rural Development was considering the groundnut seed quality and storage issues raised by the re-appraisal mis- sion and a decision was expected in early 1980. On the whole, the mission concluded that Government had agreed in principle to the need to implement major changes in organization of the rural sector and that a continued Bank role in the project was justified in view of the agricultural importance of the Groundnat Basin and the fact that resolution of these issues was a prerequisite to further investment in rainfed agriculture in the area. 3.12 After the re-appraisal initial decisions were made on specific issues. The mission recommended discontinuation of external financing of 10% of SODEVA headquarters' operating costs; this was intended to reinforce the Bank/CCCE requirement that the project management based at the regional office in Kaolack be allowed greater autonomy. It was also decided that the coopera- tives and farmer groups should gradually become independent of ONCAD and that SODEVA should be allowed to sell directly to them supplies and equipment on consignment from ONCAD and financed by the BNDS. Initially, the mission recommended the suspension of financing of activities outside the two test zones prior to the closing date of the original project. However, the Bank 1/ The mission saw little role for the existing cooperatives in view of their poor performance and would have preferred to transfer all functions to the farmer groups (later called sections villageoises). - 21 - eventually accepted the strong position of Government, SODEVA and the CCCE that Government needed more time to arrange for financing of SODEV's activi- ties in the other four departments of Sine Saloum. The Bank accepted finan- cing of all project activities in the region until June 30, 1980, the completion date for the original project. This reduced the expected undis- bursed loan amount for the re-appraised project to approximately USS6.5 million. 3.13 Negotiations were held in Dakar in late Kay 1980. The Bank took a firm stand on most issues although certain compromises were made. Some issues were not addressed in the context of the renegotiation because it was felt that they*could be more effectively addressed by the SAL which was to be negotiated in September 1980. Government, however, accepted what the Bank considered one of the most important aspects of the project, the reorgani- zation of the cooperatives in the test zones on the basis of village mutual guarantee groups (sections villageoises). The re-appraised project centered on the transfer of responsibilities for seed storage, credit guarantee and primary marketing to these groups once the debt situation of their members had been cleared up. Government agreed in principle to allow the farmers' groups to produce, store and manage their own seed stock provided the technical con- ditions for maintaining seed quality were available and that their accounts were in order. However, Government was not willing to accept complete seed transfer until funds were found to re-finance the seed stock distributed by ONCAD in 1980; this entailed about 3 million CFAF for the two test zones. Government hoped that a donor might be willing to finance the national seed stock. In the memorandum of negotiations, the Bank and the CCCE stated that they hoped that when the technical conditions were met, management of indivi- dual seed stocks by the farmer groups would be tested in the project test zones. 3.14 In regard to agricultural credit, methods which gave SODEVA a greater role in assessing input needs, participating in fixing credit limits and ordering inputs were agreed upon; a timetable for implementing these measures was set. Government accepted the principle that equipment credit should require a cash down payment but it was unwilling to agree to a percentage figure, as suggested by the Bank, until the results of the study on the reorganization of agricultural credit were available. The Bank agreed to delete the proposed covenant from the amended agreements with the under- standing that Government was in agreement with the principle and that discus- sions would be held once the study was completed. The Bank negotiating team argued that this compromise did not have many practical implications since Government had temporarily suspended credit for heavy equipment anyway. 3.15 Government claimed it was unable to take a position on the issue of a larger and more direct role for BNDS in supervising credit and providing credit directly to the village groups since credit policies were under study. In the final amended agreements, it is stated that agricultural credit will be provided by the BNDS to village groups through the cooperative and that credit repayment and debts of these groups will be considered apart from the debt record of the cooperative as a whole. Groundnut marketing was not directly addressed in the amended legal agreements since Government said it was under study. However, it was stated that farmer groups which had repaid their debts would receive a marketing margin of 8% of the producer price of groundnuts; this would serve as a guarantee against debts and as an investment fund. - 22 - 3.16 Government agreed to finance the operations of SODEVA in the four departments outside the redefined project area and to provide 300 million CFAF in counterpart funds to the re-appraised project. Perhaps this was not very realistic in view of its already recognized difficulties in meeting its counterpart fund commitments during FY81. However the possibility of getting resources for this from the Bank Program Loan (SAL) under discussion at that time was considered likely. An increase in transportation allowances was made a condition for signature of the amended agreements. Government claimed that a decision on this was about to be made and in late June 1980 a 20% increase in allowances was announced. D. Objectives of the Re-Appraised Project 3.17 The primary objectives of the re-appraised project were to increase production through improved extension methods and modified agronomic recommen- dations to promote crop diversification and livestock development and to test the effectiveness of institutional reforms. Project activities included establishment of 800 village farmer groups (sections villageoises), decen- tralization and reorientation of the extension services, seasonal and medium- term agricultural credit for inputs and equipment, provision of materials for construction of 200 village seed stores, and provision of training and equip- ment for blacksmiths. 3.18 Quantified crop production objectives were based on estimates of the expected increase in area where recommended practices were adopted or partial- ly adopted and the incremental yield increase expected. Incremental produc- tion in PY3, the last year of the re-appraised project, was expected to reach 2,652 metric tons of groundnuts (oil), 1,624 metric tons of millet and 3,450 metric tons of maize. 1/ The yield for groundnuts cultivated using all the recommended practices was expected to increase from an average of 770 kg/ha in PYO to 1020 kg/ha in PY3. The yield of maize grown according to recommended practices was expected to increase from 1300 kg/ha in PYO to 1900 kg/ha in PY3. Quantified objectives were not established for the other components including livestock. 2/ 3.19 The economic rate of return of the re-appraised project over 10 years was estimated to range between 13 to 25 percent depending upon the frequency and timing of drought (see para. 5.10). It was estimated that 14% of the total cultivated area for millet and groundnuts in the test departments would be farmed using recommended practices by the end of the re-appraised project (PY 3); this compares with the weak level of 4% in PYO of the re-appraised 1/ Reduced by 30% to take into account drought. 2/ Livestock activities were to include: intensifying the fattening of cull draft animals, young steers, and sheep; rearing of calves; dis- tributing feed supplements to lactating cows; and improving fodder reserves. - 23 - project (PY5 of the original project). At the end of ten years, it was expected that 15,000 farmers, 75% of those in the two departments, would have adopted to varying degrees the recommended agricultural practices. E. Effectiveness and Start-Up of Re-Appraised Project 3.20 The amending agreements for the loan and credit were signed on August 14, 1980 and became effective immediately. However, the 30 month proj- ect did not get off to a good start. Institutional reforms became the focus of supervision missions since without these the production objectives were not likely to be achieved. The first supervision mission in October 1980 found that project management had improved markedly although SODETA was in a dis- astrous financial situation since Government counterpart funds had not been released. Project activities were concentrated on the verification of cooperative and farmer debts, a prerequisite to formation of the village groups (sections villageoises). Progress had been seriously delayed primarily due to administrative and political problems. Twelve cooperatives had been audited and 11 were in the process of being audited out of a total of 118 in the project area; sixty out of the proposed 800 sections villageoises had been created. Crop production activities were not particularly successful for the 1980/81 season since climatic conditions were unfavorable, credit for inputs was no longer available and credit for agricultural equipment was suspended in July 1980. Livestock production activities, blacksmith training, and tree distribution were relatively successful. 3.21 The October 1980 mission encountered strong resistance within the Ministry of Rural Development (MDR) to allowing the tests of the proposed reforms of seed storage, seed credit, primary groundnut marketing by, and allocation of a marketing margin to, the sections villageoises after debt repayment. In fact the MDR argued that the sections villageoises could not be given de facto recognition since they were not recognized by law. Thus despite agreements reached during negotiation of the reappraised project and SAL, MDR refused to accept the transfer of responsibilities from cooperatives to the farmer groups. This meant that the tests would not be carried out in the 1980/81 season and might not be carried out at all. Some Bank staff considered this sufficient grounds for suspending disbursements. The Bank responded by sending a letter to Government which explained the seriousness of this matter, particularly since Government had agreed in principle to these reforms in the structural adjustment loan (SAL) program. It was pointed out that the project and the SAL were very closely linked. 3.22 Government responded in late November 1980 stating that a new law of cooperatives, recognizing the sections villageoises (SV) had been adopted by the Council of Ministers and would be submitted for the approval of the National Assembly; the marketing margin on groundnuts for cooperatives (instead of SVs) had been established at approximately 6.8% of the producer price; and, in regard to seed stock and the reduction of seed credit by 30% contained in the SAL, Government said that the 1980/81 harvest was disastrous and that Government must therefore reconstitute the seed stock, and a CCCE - 24 - loan was being sought to finance the rebuilding of the seed stock. Although there was disappointment about the failure to change the seed policy, the Bank accepted these measures as an expression of good intent. F. Cancellation of the Re-Appraised Project 3.23 A supervision mission in June 1981 confirmed the finding of a February 1981 SAL supervision mission that the prospects for undertaking the tests of institutional reforms during the upcoming 1981/82 season were poor, due to unchanged Government policies. This was disappointing since the re- appraised project had made encouraging progress in improvement of project management, individual farmer seed storage, livestock fattening, tree nur- series, and blacksmith training. Most importantly, the accounts of 87 of the 118 cooperatives had been verified and 600 sections villageoises had been created. However, Government policies on seed credit, groundnut pricing, credit suspension, farmer debt write-off and failure to formally recognise the sections villageoises effectively precluded, for the 1981/82 season at least, the undertaking of the tests that were the essence of the re-negotiated project (see para. 7.02). 3.24 The supervision mission, therefore, recommended suspension of dis- bursements. Bank management decided that suspension would hinder the agricul- tural policy dialogue about which it felt there had been some encouraging indications from Government in official discussions in May 1981. Therefore, it was decided that a high-level mission would be sent to Senegal in early October 1981. The mission would discuss with Government whether the tests envisaged under the project would be pursued and, if so, what decisions and institutional arrangements were required to permit them to take place. 3.25 The October 1981 mission found an apparent willingness of Government to do the tests. Agreement was reached on a timetable of deadlines for decision-making on matters pertaining to the tests. Agreement was also reached on broader sectoral q7aestions being addressed in the SAL such as the volume of seeds stock to be managed by SONAR 1/ and an increase in fertilizer prices. Government was asked to make the decisions public by the end of 1981 in order to provide sufficient lead-time before the 1982/83 season. If the tests could not be pursued, the Bank considered that the only alternative was to stop the project. By December 1981 there was no indication that Government had taken the agreed measures. Government had also not met its financial commitments to SODEVA. Cancellation of the loan was recommended. 3.26 A supervision mission was sent to Senegal in February 1982 to evaluate the situation. It found that three of the four deadlines for crucial decisions had passed. It was clear that the tests could not be undertaken in a well-organized fashion for the 1982/83 season covering the last six months 1/ ONCAD, which among other things, was responsible for seed storage and distribution, was dissolved by Government in October 1980 and SONAR was created to take over its responsibilities of input distribution. - 25.- of tha project. The mission therefore recommended cancellation of the loan. Bank management agreed and the project was cancelled as of May 8, 1982, with approximately US$2.9 million of undisbursed funds. The CCCE also closed the project, but it did not cancel its undisbursed loan balance of about US$2 million. The cancellation had additional ramifications for SODEVA since it meant that its contract-plan prepared under the SAL could not be approved and hence SODEVA would not be eligible for financing from the counterpart funds of the SAL. G. Physical Progress 3.27 The original project provided financing for the construction of buildings at the regional headquarters, districts and sub-districts. An ani- mal feed mill was to be constructed in Kaolack. All construction was scheduled to be completed by the end of the second year (1976/77) of the project. The actual progress was very slow due to modifications in building design, slow bidding procedures, and the bankruptcy of the original contractor. Construc- tion financed by the original project was not completed until late 1981. The re-appraised project provided for construction of 400 cooperative warehouses. Forty were to be completed in PY1, 120 in PY2, and 40 in the last project year. It quickly became evident that this was not realistic and the number was greatly reduced. A total of about 30 warehouses were constructed. H. Reporting 3.28 Half-yearly and annual reports were normally submitted on schedule to IDA. The quality of these reports was generally mixed since there was too much emphasis in the reports on number of farmers under different levels of intensification rather than areas effectively intensified. One other short- coming of the SODEVA reports was that they used definitions for intensifica- tion that had been proposed during the preparation study of the project instead of the modified definitions maintained at appraisal. The result was that it was often difficult to compare project achievements with appraisal estimates. 3.29 The Monitoring and Evaluation Department of SODEVA did an excellent job of monitoring project impact. Their analyses of the project results formed the basis of the project re-design and were candid about management and technical shortcomings of the project. It was responsible for originating most of the project and institutional developnent ideas used in the re- appraised project. - 26 - I. Procurement 3.30 Under the original project, ICB procedures were to be used for civil works, vehicles and equipment purchases, amounting to about US$0.4 million. The ICB procedures were only used for the office construction at Kahone, and local competitive bidding procedures were used for all other purchases and construction, since purchases involved were normally less than US$50,000. Despite the ICB procedure for the Kahone construction, the contract was won by a local entrepreneur who was declared bankrupt before he finished the con- struction. A new contractor had to be employed to finish the works in 1981. The procurement process for all other purchases was satisfactory. Procurement issues, aside from the construction, were not very important since the bulk of project costs, estimated at appraisal at US$24.9 million, was for personnel and management and the rest, about US$3.7 million, was for farm inputs supplied normally, through ONCAD, by local industries. J. Project Costs 3.31 Total project costs were estimated at US$30.9 million at appraisal including taxes and duties of US$2.9 million and price contingencies of US$6.4 million. Actual costs have been difficult to establish, especially for incre- mental on-farm costs to be financed by Government and BNDS and for civil servant salaries. Estimating actual costs and comparing them with appraisal estimates has also been made more difficult because of the re-appraisal. Using actual disbursements made by the Bank group and SODEVA figures for civil servant salaries up to June 1980, an attempt has been made to estimate actual costs (excluding incremental on-farm costs). For the original project, financed up to June 30, 1980, the estimated actual and appraisal estimates compare as follows: Estimated Actual as Appraisal Actual % of Estimates Cost Appraisal ------------US$ '000------------ Civil Works, Vehicles and Equipment 1,630 1,617.3 99 Civil Servant Salaries 3,410 2,587.0 76 Other Personnel Costs 12,570 9,506.0 76 Operating Costs 3,320 3,536.2 106 Consultants' Services 160 260.7 163 Incremental Farm Inputs 2,730 N/A N/A Contingencies 7,130 - - Total 30,950 17,507.2 57 3.32 When the project was reappraised in November 1979, it was tailored to the available external financing that would remain from the original project as of June 30, 1980. The re-appraised project was estimated at US$7.9 million - 27 - including contingencies of US$1.3 million but excluding incremental on-farm costs. The actual project cost as of May 8, 1982, when the project was cancelled, has been estimated at US$5.5 million. These costs compare with the re-appraisal estimates as follows: Estimated Actual Re-appraisal Actual as % of Estimates Costs Re-appraisal --------------- US$ '000--------------- Civil Works, Vehicles and Equipment 700 456.5 65 Civil Servant Salaries 590 386.0 1/ 65 Other Personnel Costs 3,385 2,211.7 65 Operating Costs 1,120 2,312.7 206 Expatriates & Consultant Services 825 176.3 21 Contingencies 1,280 - Total 7,900 5,543.2 70 1/ Estimated using same percentage as for other personnel costs. 3.33 The estimated actual expenditure on operating costs seems unusually high for the two test zones of the re-appraised project. It may however include other SODEVA operating costs in the four other zones of Sine Saloum, though it has been difficult to verify this. K. Financing and Disbursements 3.34 The Bank was expected to finance 45% of original project costs with a loan of US$7 million and an IDA credit of an equal amount. A CCCE loan for approximately US$8.9 million would cover 29% of project costs. Government would finance civil servant salaries and input subsidies and the BNDS would finance short and medium term credit. The original financing plan called for 100% external financing on a 60:40 ratio (Bank/CCCE) of SODEVA's capital, personnel and operating costs associated with the project and IDA financing of 100% of the foreign exchange cost of consultants. 3.35 The Bank Group financed an estimated 52 percent of the original project costs to June 1980 (excluding incremental on-farm costs), and an estimated 38% of the re-appraised project costs before cancellation. The CCCE financed an estimated 33% of the original project and 25% of the re-appraised project costs. Government share in the financing has been estimated at 15% for the original project and 36% for the re-appraised project. The initial financing plans were adhered to during both periods except that estimated Government contribution was higher during the reappraised project because of higher operating costs (Government financed 75% of operating costs). - 28 - 3.36 Disbursements were slover than expected for both the original and re- appraised projects. As of the closing date for the original project, June 30, 1980, total disbursements were 65% of appraisal estimates. Under the re- appraised project and as of project closing by end-December 1982, a total of US$2.0 million, or 41% of the US$4.9 million available for the re-appraised project, was disbursed. When one combines the original and re-appraised project, US$11.1 million or 79% of the total allocated Bank resources were expended (see Annex 1 Table 3). L. Covenants 3.37 Aside from project covenants over which SODEVA had some control and which were generally complied with, most of the covenants involving action by Government or outside agencies were not complied with at one point or the other. Under the original project, covenants involving: (i) coordination between ONCAD, BNDS and SODEVA on credit and its recovery; (ii) limits on cooperative indebtedness; (iii) qualifications and experience of personnel seconded to SODEVA and their return to the public service by SODEVA if unsuit- able; (iv) provision of regular financial support by Government to SODEVA; (v) appointment of an ONCAD senior manager to oversee input delivery to the project participants; (vi) timely auditing of SODEVA accounts (vii) annual exchange of views on input and output prices with a view to reducing subsidies and fixing output prices advantageous to farmers; and (viii) ensuring adequate marketing of cereals, were generally not complied with. 3.38 The result of the non-compliance with these covenants was that the project ran into major difficulties, especially with input delivery, credit, counterpart funding for SODEVA and competence of SODEVA personnel. This in part led to the re-appraisal of the project. Each year interesting discus- sions were held between the Bank and Government representatives on prices, but the Bank's views were rarely taken into account in pricing decisions. 3.39 As of the end of the first year of implementation of the re-appraised project (August 1981) none of the renegotiated covenants had been or was being complied with. The attempts by several supervision missions to ensure com- pliance with the covenants were not successful and hence the project had to be cancelled (see paras 3.21, 3.24, 3.26). IV. AGRICULTURAL IMPACT A. Production and Yields 4.01 The original project design was based on the assumption that the technical recommendations promoted by the Programme Agricole (PA) had been adopted by nearly 80% of the farmers in the Sine Saloun Region and that the resulting production and yield increases had reached a ceiling. In hindsight, - 29 - it seems that the appraisal mission was overly optimistic about the pervasive- ness of the program's reach and the level of adoption of the technical changes promoted by the PA. Furthermore, the appraisal report does not present convincing empirical evidence that a production ceiling had been reached. 4.02 The technical annex to the appraisal report points out that it is difficult to assess the Programme Agricole's impact on yields and production in part due to the difficulty of sorting out fluctuations due to rainfall and price policies. It continues that the available evidence shows the groundnut yields increased in the period 1960-65, but have declined since that time. It then reports that studies show that yields may be declining irrespective of fluctuations in weather and input use, but the reasons for this have not been identified, and that millet and sorghum yields gradually increased over the period, which may be attributed to improved technology. Immediately following this discussion, the appraisal report draws the conclusion that the produc- tivity under the Programme Agricole technical package 1/ may have reached a ceiling for groundnuts and soon may reach a ceiling for cereals. The evidence presented though does not necessarily lead to such a conclusion. 4.03 The original project's main activity was to encourage progressive intensification of crop production through concentrated extension efforts. The appraisal mission proposed a technical package based on the CCCE financed pilot project which had used as a basis packages developed on IRAT's unites exp6rimentales. Although the package was modified to take account of condi- tions in the drier northern zone, in hindsight, it seems that the appraisal mission should have been more skeptical of the results of the pilot project experience and its replicability in other areas of Sine Saloum. The mission relied heavily on the reported yields for the 1973/74 season in the CCCE pilot project area of Nioro du Rip Department, one of the most well watered parts of southern Sine Saloum, to make estimates of base yields and yield increases expected during the project. In addition to the impact of favorable climatic conditions and location, the 1973/74 yields may have been inflated since groundnut and millet yields were based on extension worker records and not direct measurement. In examining the project's impact, therefore, one must keep in mind that the appraisal objectives were overly optimistic. 4.04 During the first two years of the project, rough indicators of proj- ect progress such as the number of farmers supervised and the crop area by level of intensification seemed to show that the project was advancing satis- factorily. However, the monitoring of these indicators of project inputs was rather misleading since they were based on self reporting by extension agents 1/ The Programme Agricole technical package included: seeds treated with fungicide; light equipment (seeders and hoes) drawn by horses, donkeys or oxen; and use of light doses of fertilizer. - 30 - and loosely applied definitions of intensification. I / Information on the number of farmers supervised simply meant the total number of farms SODEA extension staff reported visiting during the year; the frequency and purpose of such visits was not indicated. Reporting of area intensified was partiou- larly problematic. Estimates of crop area (by level of intensity) supervised by SODEVA were produced by the extension service. Upon closer examination by Bank supervision missions, it became increasingly clear that the area under each crop which was declared intensified or semi-intensified did not actually reflect the areas applying the correct themes. The estimates of areas by extension agents were often rough and classification of an area as intensified did not necessarily mean that improved cultivation techniques were being used. For example, in 1979 SODEVA had classified 21,000 farmers (24,000 ha) as TBF, the highest level of intensification, but intensification themes were only applied to about 13% of their farm areas. 2/ Similarly, it was found in the 1977/78 monitoring and evaluation study that only 0.6% (as a percent of all measured) of the groundnut fields classified as TBFF were farmed according to the complete intensification recommendations. 3/ 4.05 The first reliable measurement of the project's impact on yields and production was not available until early 1978 when the monitoring and evalua- tion unit's 1977/78 agricultural season results were produced. These provided the first indication that the project was not meeting its objectives. Actual yields for 1977/78 were well below the appraisal estimates for the base year prior to project start-up and were aven more disappointing in reference to the expected results for the third project year (see table 4.1). Although full adoption of intensification themes resulted in acceptable yields, as indicated above, there was only a small percentage of the plots classified as TBFP on which the recommendations were fully applied. 1/ The appraisal report defined these as follows: (i) semi-intensive (SI) - land prepared by hoeing with oxen on which all basic recommenda- tions of the programme agricole are followed; (ii) intensive (I) - Ox- plowed land from which stumps have been removed that has received 400 kg/ha of rock-phosphate and for which cereals receive recommended fertilizers. However, SODEVA used a somewhat different terminology: (i) TBFF (Traction Bovine Fumure Forte): heavy fertilizer application on destumped land on which rock phosphate has been applied, use of trained oxen for plowing, and land preparation. (ii) TBFL (Traction Bovine Fumure L-gire): light fertilizer application and the use of trained oxen for land preparation. (iii) TL (Th-mes Legers): light fertilizer application. 2/ SODEVA, Journfes d'Etude, 1979. 3/ Up to late 1976, SODEVA classified farms rather than plots by level of intensification. This meant that if a farmer had a one hectare plot intensified, the entire farm was classified as intensified and input/out- put data were averaged for the entire farm. This masked the effects of using new techniques since rarely was an entire farm intensified. - 31 - Table 4.1: COMPARISON OF BASE YEAR YIELDS WITH 1977/78 SEASON YIELDS Appraisal Estimates Actual Yields (1977/78) Weighted Weighted Weighted average Yields in Tons/ha PYO average a/ average b/ of intensified fields c/ North South 1977/78 1977/78 Region North South MiUet 0.7 0.9 0.94 0.72 1.02 (1.4%) 0.98 1.04 Cotton - 0.8 1.03 - - - Groundnuts 0.7 0.9 1.06 0.63 0.79 (0.6%) 0.70 0.83 Maize - - 2.12 1.41 1.75 (3.6%) - 1.75 Sorghun 0.7 0.85 1.44 0.60 0.66 (1.81%) - 0.66 a/ All farmers under SODEVA supervision. F/ Statistically significant sample of all fields under SODEVA supervision. c/ These are a subset of the fields classified as TBFF on which all inten- sification themes have been applied including plowing, timely weeding, thinning. The figure in parentheses indicates their representiveness as a percentage of all fields measured. Source: SODEVA Monitoring and Evaluation Yield Study, 1977/78. Even more disturbing than the low level of yields was the survey finding that there was no statistically significant difference in yields of SODEVA super- vised farmers at three different intensification levels (see annex 1). There was no control group so it is impossible to say whether there was a signifi- cant difference between SODEVA supervised farmers and others not supervised. 4.06 No yield measurements were made in 1978/79. Monitoring and evalua- tion estimates of average yields for the entire project area showed that despite good rainfall, the yields of groundnuts were below appraisal estimates for the base year as well as the fourth project year. One of the main reasons for the poor yields this year was the poor quality of seed supplied by ONCAD. Millet yields were less disappointing, although they were still below appraisal expectations (see Table 4.2). In response to the disappointing yield results, the project was reoriented for the 1979/80 season and the project was re-appraised in late 1979 (see paras. 3.07-3.11). - 32 - Table 4.2: ESTIMATED YIELDS 1978/79 SEASON (MT/ha) Groundnuts Millet Appraisal et. Bst. Actual Appraisal Est. Est. Actual Northern Zone 1.1 .64 .97 .7 (0.7) a/ (.70) Southern Zone 1.1 .85 .97 .9 (0.9) a/ (.85) a/ Figure in parentheses is estimated yield for base year. 4.07 The re-appraised project was expected to bring about modest yield increases in the two pilot departments. In the short run it was not expected to have a large impact on yields since the period of 30 months was short and since improvement was more to be expected from modified institutional arrange- ments which require time to take hold. It became evident during the first supervision mission that the pilot project would have no impact on production and yields until the next agricultural season 1981/82, in other words, during the re-appraised project's second year. This meant that the project's impact on yields and production was limited to two agricultural seasons instead of the expected three. 4.08 However, from May 1981, when Bank staff first recommended cancella- tion of the project, until May 1982, when this actually took place, few project production related activities were undertaken (see para. 3.20). Its direct impact on production and yields, limited to the 19C./82 season, was probably very slight since most activities to improve yields, such as input supply and provision of equipment, did not take place. Village associations (sections villageoises) were created, but they were not accorded legal recog- nition nor allowed to test new methods for input supply, credit, and marketing which were their reason for existence. Although extension services were sub- stantially reorganized and improved, it is very difficult to measure how this may have affected farmer performance. Yield increases cou.; be expected from improvement in husbandry practices which did not require inputs or new equip- ment, but this has not be?% measured. 4.09 A positive impact on yields can also be expected from improvement in groundnut seed quality due to farmer control of the seed stock. 1/ For the 1981/82 season, it is estimated that 30% of the groundnut seed requirement in the project area was met from private utock; this is estimated to add an increment of 200 kg/ha to groundnut yields. However, this was probably a one 1/ Despite Government reluctance to officially recognize seed storage by farmer groups, SODEVA reported a significant number of individual farmers keeping their own seeds. - 33 - season effect since the net price system penalized farmers for retaining their own seed. The blacksmith component may have made a contribution to main- taining production through repair of existing equipment at a time when new equipment was unavailable. The livestock component had positive results, but on a small scale. Overall then, no quantitative results are available, but- even if the re-appraised project had had an impact on production it would probably have been limited and small. B. Technological Change 4.10 The project's main activity was to encourage progressive intensifi- cation of crop production (grounduts, maize, millet/sorghum) through concen- trated extension efforts. Farmers who were already fully implementing the recommendations of the Programme Agricole were expected to adopt new techni- ques in two stages: semi-intensification and, after three years at that level, intensification. The intensification package consisted of the follow- ing technical themes: destumping of cleared land, plowing every three to four years, application of rock phosphate, heavier application of compound . fertilizer, training of oxen and promotion of heavier ox-drawn equipment to rvplace light equipment that could be drawn by horses or donkeys. These measures were supposed to lead to increases in yields of millet/sorghun and groundnuts on already cultivated lands and to increase the acreage and yields. of maize. 4.11 Increasing yields was considered the primary measure of project success. One of the flaws in the project design was the failure to question whether maziiing returns to land was appropriate to the resource endowment and the labor/leisure choice of farmers in the Sine Saloum Region. This reflects in large part the research station orientation which focuses on maximizing yields with little concern for the implications for labor require- ments and economic profitability. The report of the working group for reorganization of SODEVA expressed this concern: "...The failure of the technical themes (thZnes lourds) proceeded from a confusion between intensification and increasing production... To liken everywhere the increase in agricultural productivity with an in- crease in yields is either a strategic error sanctioned by the deceiving results registered for marketed production or a long term objective of which conditions and steps need to be specified. Everywhere the peasant considers the increase in the productivity of his labor and not that of the land as the first step of development. The law applies with even greater force where the climatic conditions are most severe, thus reducing the suitable period for agricultural operations and by consequence increasing the value of labor." 1/ 1/ Comit' de Riorganisation de la SODEVA, 15 janvier 1980. Original version in French. -34- The report pointed out that the first step to improving production was to identify the zones where extensive agriculture was inevitable since it was economically profitable and to discern the zones where intensification was indispensable. For example, in Southern Sine Saloum, monitoring and evalua- tion data showed that 80% of the farmers supervised by SODEVA still had suffi- cient land for extending the cultivated area; in these areas it was more attractive to increase the cultivated area since it required less labor input per hectare and raised the returns to labor. 4.12 It is evident that the appraisal did not consider labor remuneration to be a factor that could influence the adoption of the technical package. According to the farm budget model in the appraisal report, over the five year project period the labor requirements of a 20 hectare farm would increase by 347 mandays or 30% while the income per man day would increase from 226 CFAF to 248 CFAF merely 10%. This does not seem very attractive from the farmers' point of view particularly since additional labor requirements must be consi- dered in the context of peaks in labor demand and the importance of timeliness of agricultural operations. The lack of agricultural equipment during project implementation also did not help any, and in the course of Bank supervision of the project, it was pointed out that one reason for the failure to adopt the intensification themes was that farmers were unable to apply them completely and correctly due to inability to meet higher labor demand during peak periods. 4.13 Although several technical issues were raised during project prepara- tion, the technical appropriateness of the intensification package was not questioned until monitoring and evaluation survey results in 1978 showed no statistically significant difference in yields between SODEVA supervised farmers of different intensification levels. The re-appraisal mission re- assessed the original project's technical recommendations and concluded that one of the main shortcomings in the technical recommendations stemmed from the fact that they were an extrapolation of the experience in the IRAT unit-s experimentales 1/ and CCCE pilot project located in well watered and favorably endowed areas of southern Sine Saloum to the rest of the region which had less favorable natural conditions. The expansion of the project area to cover the entire Sine Saloum region resulted in modified but untested technical recom- mendations being extended to farmers of the northern zone. Even if the tech- nical recommendations had been applied in southern Sine Saloum only, it is doubtful whether the results based on the pilot project, which were obtained under more controlled conditions, would have been replicable on a larger scale. 1/ The IRAT (ISRA) efforts on the unites experimentales were quite innovative in the late 1960's as the precursor to the now popular farming systems research approach. Experimental units were set up in villages away from the research station and the research station recormendations were tested on the best farmers' fields under strict supervision. Later the farmers were given greater managerial responsibility. IRAT believed that the results were widely diffusable. However, the recommendations had not been tested under "real" farm conditions and the expected yield benefits were, therefore, well above what could be expected under normal farm conditions. - - 35 - 4.14 The re-appraisal mission and SODETA reexamined the merits of the intensification recommendations; some of then did not seem to have the expected positive impact on yields and others met with strong farmer resis- tance. The core recommendations for the intensified farmer were: plowing using oxen, destumping and application of rock phosphate. However, monitoring and evaluation studies had shown that plowing did not significantly contribute to yields except in the case of maize. 1/ The need for stump removal, which was resisted by farmers in the pilot project, was questioned at the time of the original project appraisal. However, SODEVA had made it a prerequisite for project participation and a World Food Programme (WFP) project made it attractive by offering remuneration in the form of food. Despite the SODEVA condition and WP incentive, adoption of the intensification themes was disappointing. In the fourth year of the project, corresponding to agricultu- ral season 1978/79, the area destumped was only 22% of appraisal estimates. Only 23% of the area estimated at appraisal had been plowed; even farmers who owned plows did not use them. Also in May 1978, incremental rock phosphate consumption was estimated to be 45% of appraisal objectives. 4.15 Monitoring and evaluation results for 1977/78 indicated however that the recommended fertilizer use had a positive impact on yields within and between the intensified and semi-intensified level farmers. For example, the most intensified farmer (TBFF) using a heavy dose of fertilizer obtained about 210 kg/ha more groundnuts than the same level farmer (TBFF) using a light dose of fertilizer, and intensified groundnut fields yielded about 160 kg/ha more than semi-intensified groundnut fields due to the fertilizer effect. However, in May 1978, the heavy fertilizer dose was being applied to only 60% of the area foreseen at appraisal for the most intensified (TBFF) fields. It should be noted though that the SODEVA classification and reporting of areas inten- sified were not always coherent since it classified some areas as intensified when they actually were not. Thus the Monitoring and Evaluation Unit found for example that farmers only applied intensification themes partially and on a portion of the cultivated area. Fertilizers were often applied at sub- optimal levels and cultural practices such as weeding were often done late or not at all, thus masking the positive effects of intensification measures. 4.16 The importance of proper crop husbandry which was somewhat neglected in the original project was demonstrated by the mcnitoring and evaluation results of 1977/78. These showed that the fields closest to the compound (champs de case) which were cultivated using traditional or Programme Agricole recommendations but which received the greatest attention as far as timeliness of operations, had yields that compared very favorably with those of fully intensified plots. 4.17 The original project design did not adequately take into account the on-farm constraints to adoption. Farmers were considered as a relatively homogeneous group. The "package" approach to technical change did not take 1/ IRAT claimed that plowing significantly increased yields by encouraging a deeper root system and promoting better utilization of rainwater. However, even its own research results showed significantly increased yields from plowing for maize only. - .36 - into account the diversity of resource availability between farmers which affects the package's attractiveness. In addition, the importance of the family structure in determining land use and access to resources was not taken into account. It was highly unlikely that the entire cultivated area of a farm would be intensifieu given the different resource and labor availability of different household members. The monitoring and evaluation results show clearly the wide variance in yields between plots located in different areas of the farm (usually associated with different household members). 4.18 In view of the limited impact of the original project's intensifica- tion package and the uncertain input and equipment supply situation, the re- appraised project had simplified technical recommendations to be promoted through the new extension methods. The re-appraisal project concentrated on themes like: improving seed quality by selecting special seed production fields and treatment of groundnut seed with fungicides and insecticide for storage and prior to seeding; early seed bed preparation; increased capacity for mechanized weeding and seeding through promotion of light equipment; light and well timed fertilizer applications; and better maintenance and handling of equipment. Livestock production, particularly livestock fattening, was to be increased through better collection and use of crop residues for feed. Con- siderable attention was paid to farmer constraints to adoption which is one reason simple technical recommendations, which required very limited addi- tional labor and inputs, were chosen. 4.19 The level of adoption and impact of improved husbandry practices due to the re-appraised project is not known. The institutional reforms of the input supply and the credit systems were not successful, so recommendations which depended upon the availability of fertilizer and light equipment failed. Improvement of seed quality through retention and storage by the farmers themselves, which could have had a significant impact, was discouraged by Government through the net-price system and the reluctance to recognize the sections villageoises. For these reasons, the re-appraised project had practically no chance of successfully promoting technical change. V. FINANCIAL AND ECONOMIC RESULTS A. Farm Income 5.01 Overall, the project was expected to increase the family farm income of the 34,000 participants by 33% from an average of US$825 to US$ 1,094 over a period of five years. 1/ The individual farm models showed that hypothetic- ally the largest farm, 20 hectares, in the southern zone would benefit most with a rise of 41% in per capita income and 127% in net cash income from a 1/ According to the appraisal report (para 5.08), family income varied considerably by location. The family income in the south in the base year was estimated to be US$1,160 whereas in the north it was only US$340. Per capita income was less divergent. - 37 - higher base value than the 13 hectares and 7 hectares farms. This assumed that drought reduced yields by 60% every four years or 15% per year. 5.02 For the re-appraised project, the two farm models presented the evolution of the cropping pattern, costs and income over ten years. For the three years of the re-appraised project, per capita income was expected to increase by 25% for the average farm in Foundiougne and 15% for the average farm in Kaolack. This assumed that drought reduced yields by 30% every three years. 5.03 In its economic reports on the 1977/78 season, the monitoring and evaluation unit attempted to analyze the effects of intensification on farm incomes. Holding farm size constant at medium (range of 10 to 12 persons), the results indicated that it was profitable to intensify crop and livestock production. The net farm income per person for the intensified farm (TBFF) was 1.7 times greater than for the unintensified farm (TL) (see table 5.1). Unfortunately, the returns per man day were not provided, but the results showed that the return per economically active person was significantly higher on fully intensified farms. Table 5.1: COMPARISON OF FINANCIAL RESULTS OF INTENSIFICATION ON MEDIUM SIZE FARMS (1977/78) ('000 CFAF) Intensification Level TL TB TBFF Net Farm Income 107 141 223 Net Farm Income/Family Member 10.4 12.7 18.1 Net Farm Income/Economically Active Person 17.5 21.6 30.5 Comparing these results with appraisal base year estimates for the 20 and 13 hectare farm models (with comparable number of persons), the actual 1977/78 results are lower. The most intensified farm (TBFF) has a reported net per capita income of 18,100 CFAF in the projects' third year whereas the 13 hectare farm model in the south was expected to have a net average per capita income of 19,000 CFAF in PYO, increasing to CFAF 24,500 in PY3. i' The impact of intensification on different farm sizes according to the M&E results are given below. 1/ The expected income per capita increase by PY3 was to be achieved with none of the area intensified as yet. -38 - Table 5.2: IMPACT OF INTENSIFICATION ON INCOME BY FARM SIZE a/ Small Medium Large Income per Family member TBFF 24,000 15.000 15,000 TBFL 15,000 13,000 10,000 TL 13,000 10,000 8,000 TBFF/TL 1.9 1.5 1.9 Income per Economically Active Member (FCFA) TBFF 46,000 30,000 30,000 TBFL 27,000 27,000 20,000 TL 24,000 20,000 17,000 TBFF/TL 1.9 1.4 1.8 Cash Income per Economically Active Member (FCFA) TBFF 17,000 12,000 10,000 TBFL 6,000 11,000 6,000 TL 9,000 6,000 6,000 TBFF/TL 1.9 2.0 1.3 a/ Farm size in terms of family size: small farms 1-7 members; medium farms 8-15 members; large farmers more than 16 members. Statistically signifi- cant figures underlined. 5.04 While the economic surveys of 1977/78 showed that intensification was profitable for some farmers, the project was not very successful in promoting intensification. A key explanatory factor was probably farmer risk. In addi- tion to the various on-farm resource constraints to adoption (equipment, labor, seeds, etc.), financial risk was probably also of importance. Although the economic studies showed that total production costs represented a smaller fraction of output oL the intensified farm (TBFF) compared to the non- intensified (TL) farm, the absolute cost may have been too high and too risky to bear. 5.05 The re-appraisal tried to incorporate some concept of farmer per- ception of risk into the project design especially by concentrating on light equipment instead of heavy equipment that could lead the farmer into debt. Of particular concern was the ISRA developed intensification model which was based on equipping the farm with costly, heavy implements over a short period of time. ISRA had developed a 10 year model of intensification which it believed demonstrated that yields and revenues would be sufficient to sustain the costs of the technical package. The importance of this consideration is borne out by a review of animal traction projects in francophone West Africa which found that farmers typically experience cash flow problems in the first - 39 - two to four years of animal traction projects when they are learning how to handle oxen and when acreage and yield effects are likely to be low. 1/ Thus farmers in the re-appraised project were to use the equipment narme:lly sup- plied under the PA and to increase productivity through better crop husban- dry. However, due to the breakdown of both credit and rural organization, these themes proposed at re-appraisal could not be tested. 5.06 Aside from the 1977/78 monitoring and evaluation studies, there is a lack of information on the project's impact on farm income. The data for 1977/78 show that the benefits of intensification were less than expected by the appraisal mission. It should be noted that 1977/78 was a drought year and therefore the meager results may not necessarily reflect project impact had the drought not occurred. However, there is no information about the impact of the project in non-drought years and neither is there information on the effect of the re-appraised project on farm incomes, but, for the reasons discussed elsewhere, there was probably little or none. (See para 4.09). B. Economic Re-Evaluation 5.07 The economic rate of return (ERR) of the original project was esti- mated at appraisal as 24.7 percent over 10 years. Direct quantifiable project benefits were based on estimates of incremental crop and livestock production. It was assumed that drought would reduce production on the average by 15% per year and that output would be maintained at the PY5 level for the five years following project completion. Project costs included all SODEVA's extension and operating costs in the project area during the five year project period, but none of these costs for the remaining five years. Only the incremental cost of seasonal farm inputs, maintenance of farm implements and livestock production were included after PY5. This was based on the assumption that there would be no incremental extension costs after PYS since project benefits could be maintained with little or no extension. The appraisal mission argued that the project involved the introduction of a series of techniques which by their nature either required a single application (such as stump removal) or simple repetition (such as the use of oxen for plowing) to maintain benefits indefinitely. Incremental labor requirements were valued at zero with the justification that additional time spent on project activities would not otherwise be used for productive activities. 5.08 Due to these assumptions, the economic rate of return may have been overestimated. More than 80% of project costs were for SODEVA personnel and operating costs, primarily for extension services. The assumption that these costs would end in PY5 meant that project costs were much lower than under the alternative assumption that extension costs were maintained through PY10. Although the appraisal assumption was consistent with the "plateau" theory (para. 2.06), questions can be raised about the likelihood of sustaining the 1/ M. Sargent, et.al., An Assessment of Animal Traction in Francophone West Africa, Michigan State University, African Rural Economy Working Paper No. 34 (1981). - 40 - level of technological development and productivity achieved in PY5 with a substantial reduction of personnel within one year. The political feasibility of a rapid reduction in staff is also questionable. Another factor which may have resulted in underestimation of project costs was the valuation of labor at zero. Even if the project area was a labor surplus region, it is very unlikely that the opportunity cost of labor was zero in view of the seasonal labor constraints characteristic of agricultural production, the possibility for non-agricultural income generating activities during the slack agricul- tural periods, and the prevailing social norms regarding labor allocation within and between households and extended family units. 5.09 At the time of re-appraisal, the economic rate of return of the ori- ginal project was re-estimated. Actual benefits (incremental crop production) for three agricultural seasons and actual costs for the four completed project years were compared with appraisal estimates. Actual benefits averaged 30% of appraisal estimates and actual costs averaged about 65% of appraisal esti- mates. I/ Using appraisal benefits and costs streams and assuming that the benefits and costs would follow the same pattern as the four year period, it was estimated that the original project's economic rate of return would be negative. 5.10 At the time of re-appraisal the economic rate of return for the 30 month project in the two test zones was estimated over a 10 year period to range between 13 to 25 percent depending upon the frequency and timing of drought. In view of the drought experience with the original project, cau- tious assumptions about the incidence of drought - .-, made. In two of the five base cases it was assumed that drought w--.- reduce incremental crop production to zero in three out or the ten yt.zs. Project benefits were based on incremental crop production for the three seasons covered by the project and the seven years following its completion. It was assumed that benefits would start-up in the first year of the re-appraised project since changes in extension services were already underway. At the time of re-appraisal, it was considered impossible to set numerical livestock objectives since the animal feed mill to be built by the original project was not operational. Therefore, incremental livestock production was not included in the economic analysis. 5.11 In the working papers for the re-appraised project, it was stated that the project could not be expected to have a visible short run impact on production since its key objectives were to test institutional changes in the cooperative, credit, input supply and extension systems. If successful, these would serve as a model for reorganization of the rural sector in Senegal and thus the project impact, though difficult to quantify, would be very substan- tial. Project costs included all SODEVA operating costs for the two test zones as well as the investment cost for the cooperative warehouses through year ten. 5.12 The re-appraised project was substantially different in scope and activities from the original project. Conceptually, it should be considered a separate project. Therefore, it is not meaningful to try to estimate an 1/ 1980 prices. - 41 - economic rate of return for the combined original and re-appraised project. For the re-appraised project there is inadequate information for quantifi- cation of-its economic rate of return and as explained in the reasons leading to cancellation (paras. 3.23-3.26) the focus of project management and the Bank was more on institutional issues rather than production-related activi- ties. A qualitative assessment can however be made on its possible returns. 5.13 Early on in the implementation of the re-appraised project it became evident that, contrary to expectations, project benefits from activities in PY1 (1980/81) would not be realized until the following agricultural season 1981/82. This probably had a significant negative effect on the economic returns in view of the finding of the re-appraisal mission that for all five base cases (see para. 5.10) the ERR was extremely sensitive to a one year lag in benefits. Since the project was cancelled in May 1982 prior to the 1982/83 season, the project had at most a direct impact on one agricultural season only. Even for the 1981/82 season, one can expect low economic returns since most of the activities to improve yields in the pilot zones, with the excep- tion of improvement of seed quality and extension services, did not take place. One cannot therefore expect a positive longer term impact of the project over ten years since the foundation for this was not established. The livestock and blacksmith components, which were not included in the calcula- tion of benefits, did have a positive impact, but there is insufficient data to quantify this. 5.14 Project coets were below re-appraisal estimates due to the failure to supply inputs and eq;.ipment and to construct the planned number of warehouses. Indications from Bank disbursements is that actual re-appraisal project costs were about 50% of estimated cost. It is very probable that the re-appraised project's benefits were more than proportionately lower than its costs and therefore it seems highly unlikely that the re-appraised project also had a positive economic rate of return. VI. INSTITUTIONAL PERFORMANCE 6.01 The original project was based on a very intensive extension effort by SODEVA. However, the success of such an effort depends upon the timely delivery of the inputs and equipment being recommended and the availability of acceptable marketing outlets offering reasonable prices. Key institutions vital to project success were however not under the authority of project management, and it was expected that efforts being made under the second Agricultural Credit Project (CR 404-SE) would improve the performance of the key institution, ONCAD, which was responsible for marketing, credit and input delivery. ONCAD's performance did not improve and key covenants that were supposed to involve SODEVA more directly in input delivery, credit allocation and marketing were not complied with (see para. 3.37). By the time of the re- appraisal, there was a nearly complete breakdown in the institutions operating in the agricultural sector. This was recognized by Government and the Bank, and institutional development (especially rural organization) was expected to be the focus of the re-appraised project. In addition, alternative institu- tional arrangements for input supply, credit and marketing were also addressed - 42 - in the SAL. Despite assurances given at negotiations, Government did not take the policy decisions necessary to enable the tests of alternative institu- tional arrangements to be made. The tests were not carried out and the reforms espoused in the Government's SAL program had not been implemented as of December 1982. A. SODEVA 6.02 The regional development agency for the Groundnut Basin, SODEVA, was the principal project executing agency. Its overall performance under the original and re-appraised project was reasonable despite serious internal and external problems. Project management was responsive to the findings of its monitoring and evaluation unit and opened discussions within SODEVA and with the Bank about ways to reorient the project when it became clear it was in difficulties. Although there was not always agreement about the causes of project weaknesses, there was a willingness to face up to the problems. SODEVA agreed to the reorientation of the project in 1978 and, when this proved unsuccessful, it participated fully in the design of the re-appraised project. This included establishment of a working group to study its reorga- nization. While some of the issues contributing to the project's lack of success were attributable to SODEVA, the most difficult ones were outside its control (see para. 3.23). 6.03 One of the implementation problems recognized early on in Bank super- vision was the centralization of decision-making in the Dakar headquarters of SODEVA that hampered the project management in Kaolack which was closer to the day-to-day problems of the project. This was partially resolved early on in the project. However, during re-appraisal, it was decided to reinforce Kaolack's position as the decision center by discontinuing support of the overhead costs of the Dakar office. 6.04 Responding to the 1978 monitoring and evaluation findings, project management identified poor extension services as the primary cause of poor project performance. In accord with the appraisal report, the project had rapidly expanded staff, particularly at the lowest level of village extension worker. By the time of re-appraisal, SODEVA employed 1,200 persons in the project area. This resulted in serious management problems especially since the anticipated increase in middle and senior level supervisory personnel did not take place as planned and middle level field staff also were reluctant to visit farmers because of inadequate transportation allowances. Furthermore, the qualifications of the new extension workers tended to be poor and training provisions were inadequate. The result of these factors was inadequate supervision, poor morale and poor discipline. 6.05 Project management began to address this problem in 1978 and for the 1979/80 season it tried to reorient the extension system in line with the training and visit system. The re-appraised project entailed a significant reduction in staff in the pilot zones and a slight decrease in the other - 43 - departments. Politically this was a difficult issue, but SODEVA managed to streamline its operations and to decentralize the locus of extension activi- ties to the rural community level. 6.06 Another problem which hampered SODEVA's performance was its lack of an independent financial base. Since its creation in 1968, it had been almost entirely financed by external sources. The CCCE pilot project had fully sup- ported SODEVA's operating costs and, at the time of re-appraisal, the Sine Saloum project financed 50% of SODEVA's headquarters budget. Recognizing this problem, a covenant in the original credit/loan agreements called for discus- sions of arrangements under which the Government would provide regular budget- ary support to SODEVA. The problem of SODEVA's dependence on external sources of finance became acute when the project co-financiers decided to reduce the scope of the project to the two test zones. Government was expected to finance activities in the other four departments dropped from the pro- ject. I/ However, Government was experiencing serious difficulties in meeting its counterpart fund commitments. As a result, SODEVA was in serious finan- cial difficulties throughout the re-appraised project period. This was aggra- vated by poor internal financial management in the period prior to re-appraisal. 6.07 The most difficult problems contributing to the lack of intended project impact were outside SODEVA's control. There was an attempt to enlarge SODEVA's role to assume functions which were being performed inadequately by other institutions. These included its experiments with contract maize and millet and special covenants with ONCAD which allowed SODEVA a greater role as an intermediary in input and equipment supply. The re-appraised project envi- sioned a much greater role for SODEVA as a development agency dealing directly with the newly created village associations on matters of seeds storage, marketing, input supply, credit and self management. 6.08 Although SODEVA had substantially improved its performance over the course of the project and had proved itself capable of carrying out the re- appraised project, the Bank was forced to cancel the project. The Bank was also unable to approve SODEVA's contract plan proposal for SAL financing since Government had not taken the measures necessary for its success. B. ONCAD 6.09 ONCAD was responsible for supporting activities crucial to successful project implementation. Since 1967/68, ONCAD, was responsible for procurement and delivery of farm inputs, including groundnut seed; marketing of groundnuts and cereals; and provision and recovery of seasonal and medium term credit on behalf of the BKDS, and it was responsible for overseeing the cooperatives. Even at the time of appraisal, it was obvious that ONCAD was performing its functions unsatisfactorily despite Bank supported efforts to strengthen it (see para. 1.01 and 1.02). The pilot project had experienced problems of late input delivery and inadequate equipment supplies. The appraisal mission 1/ There was an expectation that this could be financed out of the SAL. - 44 - attempted to work out an arrangement which would give SODEVA greater authority over input supply and marketing. However, this was unsuccessful and the credit agreement simply required ONCAD to appoint a senior manager to coordinate deliveries to the project area. 6.10 By December 1974, before the final version of the appraisal report was released, Government had recognized the disastrous financial situation of ONCAD and had appointed a special study commission. The fact that the project was not reconsidered at this time illustrates the momentum of the Bank's internal processes which may prevent reconsideration of a project's viability under deteriorating conditions. It seems to have been accepted on faith that either ONCAD's performance would improve or a solution would be found to improve input delivery during the course of the project despite the history of failures. 6.11 In the course of project implementation, the Bank and SODEVA manage- ment tried to devise ways of getting around the input supply and marketing problems. Agreements were signed between ONCAD and SODEVA which allowed SODEVA to take on responsibility, on behalf of ONCAD, for primary marketing of maize and millet and coordination of input and equipment ordering and deli- very. These partial measures did not have much impact. By the time of re- appraisal, in October 1979, the Prime Minister had established a commission and 15 working groups to study the reform of ONCAD and suggest alternative systems. Government announced in August 1980 that ONCAD was to be dissolved effective October 31, 1980, and that a new agency, SONAR, would temporarily assume its responsibilites for input delivery. The Government program for the SAL, worked out in pre-negotiations in September 1980, recognized SONAR as a transitional agency. Once the Sine Saloum project tests were successfully completed, responsibility for input supply and marketing would be transferred from SONAR to the sections villageoises, the cooperatives and the regional rural development agencies. C. Bank Performance 6.12 The original project design proved, in hindsight, to be inadequate both in terms of the underlying concept and the treatment of institutional issues. Project supervision was responsive to implementation problems. However, sometimes the timing of supervision missions was not sufficiently in advance of the agricultural season to allow for immediate adjustments for that season. This resulted in the project coasting along with limited impact. The length of time between the initial recommendation to cancel the re-appraised project and the definitive decision was considerable. During this period there were some encouraging signs that Government was ready to make signifi- cant sectoral policy changes. However, in hindsight, it is evident that the Bank was too willing to accept Government assurances which were not followed by concrete actions. As a result, the project continued despite the inability to undertake its primary activities. - 45 - VII. SPECIAL ISSUES A. Collapse of the Credit System 7.01 The cooperatives were the only organizations through which farmers could obtain subsidized inputs and equipment on credit and through which groundnuts were marketed. Groundnut seed was distributed on credit through the cooperatives by ONCAD which was repaid in kind; inputs and equipment were provided to the cooperative by ONCAD financed by seasonal and medium term credit provided by the BNDS. By 1979, deterioration of the credit system's financial status and consequent ability to provide inputs and equipment was accelerated by farmer refusal to repay credit for fertilizer and equipment, and for groundnut seed, the quality of which had been deteriorating progree- sively. The Government responded in the 1979/80 season to the desperate financial situation of ONCAD and severe indebtedness of the cooperatives by declaring cooperatives which had repaid less than 65% of their debts inelig- ible to borrow. In the 1980/81 season, therefore, only seed credit and a small amount of fertilizer credit were available. With the dissoldtion of ONCAD and the burden of its unpaid debts forcing the temporary shutdown of the equipment (SISCOMA) factory and the reluctance of the fertilizer factory (SIES) to continue production without being paid, no equipment credit and only reduced fertilizer credit was provided to farmers in 1981/82. 7.02 The proposal for establishment of small, mutual guarantee groups of farmers (sections villageoises) as a test in the re-appraised project was an attempt to base credit and marketing activities in a small unit with mutual interests (see para. 3.13). However, this effort was undermined by Government decisions in April 1981 to cancel all seasonal debts, call a moratorium on equipment debts, cancel most credit for the 1981/82 season and deduct a per- centage per kilogram of the groundnut price paid to all farmers for seed and fertilizer debt repayment. This meant that farmers or farmers groups that had already repaid their credits were penalized. In addition, no bonus was paid to the sections villageoises as envisaged under the re-appraised project, and seed cost continued to be deducted from the producer price. These lapses eliminated any possiblity of testing how well the mutual interest of the village associations would improve agricultural credit. Meanwhile though, the failures in input supply and credit in the Sine Saloum project did bring to the fore the need to improve agricultural credit in Senegal. Government set up a working group to study this question and the group has proposed the establishment of a new financial institution that will take direct respon- sibility for its credit instead of working through a rural agency such as ONCAD or SONAR. B. The Project as a Lever for Policy Changes 7.03 The project raises the important issue of the usefulness of a project as a lever for fundamental policy changes advocated by the Bank. The covenants of the original project's legal agreements committed Government in - 46 - principle to changes in pricing and marketing policies which the Bank had been discussing with Government for many years. The amended legal agreements for the re-appraisal project committed government to test institutional changes which in the case of groundnut seed storage had concerned the Bank since the early 1970s. Despite these agreements, Government's subsequent actions or lack of them (see para. 3.39) showed that there were still substantial differences in perspective and/or that political obstacles to implementing the changes were greater than anticipated. Unfortunately, as this project shows, there are few sanctions, other than suspension of disbursements or can- cellation of the loan/credit, to enforce the covenants. 7.04 The experience of the Sine Saloum project supports the finding of a recent review of Bank projects that "individual projects in general are inefficient instruments for inducing policy change" although they may be effective in reinforcing policy agreements or providing the basis for policy dialogue. 1/ Although the Bank hoped that the re-appraised project backed up by tho SAL program would be an effective vehicle for bringing about important sectoral policy changes, even the combination of project and program lending proved weak in this regard. 1/ Eighth Annual Review of Project Performance Audit Results, December 1982, para. 3.06. 47 Annex I Page 1 Average Yield Results for Different Intensification Levels 1977-78 After the 1976/77 season, SODEVA's monitoring and evaluation unit classified plots as follows: (i) Intensified plots are defined as farms using ox-traction (TB), destumped and applying phosphate (at least 400kg/ha); (ii) semi-intensified plots are defined as farms using ox-traction and applying some fertilizer; and (iii) traditional plots are defined as farms either using ox-traction (TB) with no fertilizer applied or using light themes (TL) without ox- traction TB but using some fertilizer. Within the first two categories, one could distinguish between farms applying a heavy dose of fertilizer (TBFF) and those applying a light dose (TBFL). The classification allowed for intensified TBFF and intensified TBFL and semi-intensified TBFF and semi-intensified TBFL. Thus the difference between intensified and semi-intensified plots is the destumping and phosphating. For the 1977/78 yield survey sample plots were taken from four zones- -North, East, Center and South. Recorded yields differed for each zone, with the South sharing, in general, the highest yields for all crops and plot types. The study considered all plots with yields of less than 150 kg/ha damaged. The results in tables 1-3 show these average yield for non-damaged plots as well as all plots. Table 1: AVERAGE YIELDS INTENSIFIED PLOTS 1977-78 TBFF 1/ TBFL 2/ PY3 Expected Yields Non-damaged All Plots Non-Damaged All Plots On Intensified Plots Plots Surveyed Plots Surveyed Weighted Average Crops (ha/kg) (kg/ha) (kg/ha) (kg/ha) (kg/ha) Groundnuts 792 748 708 595 1,400 Nillet 1,022 1,022 892 892 1,100 Naize 1,743 1,606 1,549 1,354 2,500 Sorghum 665 525 638 436 1,600 1/ TBFF-ox traction and heavy fertilizer application. 2/ TBFL-ox traction and light fertilizer application. -48- Annex 1 Page 2 Table 2: AVERAGE YIELDS SENI-INTENSIFIED PLOTS 1977/78 TBFF TBFL PY3 Expected Yields on Non-damaged All Plots Non-damaged All Plots Semi-Intensified Plots Plots Surveyed Plots Surveyed Weighted Average Crops (Lg/ha) (4es/ha) (kgs/ha) (kgs/ha) (kgs/ha) Groundnuts 631 537 597(617) 493(573) 1,170 Millet 804 804 712 702 1,056 Maize 1,483 1,381 1,257 926 - Sorghum 634 465 608 339 Table 3: AVERAGE YIELDS TRADITIOKAL PLOTS 1977/78 (kg/ha) Heavy Fertilizer Application TL 1/ Champs de Case-2/ Ron-Damaged All Plots Non-Damaged All Plots Non-Damaged All Plots Plots Plots Plots Groundnuts 617 573 572 4/ (495) 3/ 436 4/ (368) 3/ -- - Millet 786 744 660 636 864 852 Maize 1,149 4/ 890 4/ 1,241 4/ 808 4/ 1,243 982 Sorghum 460 277 598 374 611 478 1/ TL-Light fertilizer application only. T/ Fields surrounding the compound. 3/ Yields from Toll Gor fields which are next to the Champs de Case and normally sown during the second rain. 4/ Yields from Toll Diatti which are the fields farthest away from the compound and normally sown last. *-49 - Annex 2 Table 1: BANK DISBURSEMENTS UNDER ORIGINAL PROJECT AGREEMENT (To June 30, 1980, US$) Disbursement Appraisal Actual % Actual/ Categories Estimate IDA Credit IBRD Loan Total Estimated 1. Civil works, 1,000,000 817,206 153,210 970,416 97 vehicles, equipment 2. Personnel 7,500,000 4,218,697 1,484,937 5,703,634 76 3. Other 2,000,000 1,729,558 392,055 2,121,613 106 operating costs 4. Consultants 200,000 234,538 26,200 260,738 130 5. Contingencies 3,300,000 - - - - TOTAL 14,000,000 7,000,000 2,056,402 9,056,401 65 Table 2: BANK SEMI-ANNUAL DISBURSEMENTS FOR RE-APPRAISED PROJECT (Thousands of US Dollars) Period Ending Amount Disbursed Balance of Loan December 1980 714 4,230 June 1981 413 3,817 December 1981 387 3,430 June 1982 369 3,061 December 1982 171 2,890 Table 3: BANK DISBURSEMENTS UNDER AMENDED PROJECT AGREEMENT (uss '000) Amended % Actual/ Disbursement Category Estimate Actual Estimated 1. Construction, vehicle, 1,900 1,244.3 65 equipuent 2. Personnel 8,300 7,030.6 85 3. Other operating costs 2,500 2,468.5 99 4. Consultants 700 366.5 52 5. Contingencies 600 - - TOTAL 14,000 11,109.9 79 SENEGAL Sine-Salocum Agricultural Development Project -RJC -A--- Reglonol, boundarles SENEGAL PROJECTAREA Departmental boundarles PkaAr&O o - ........ District (Arrondissement) boundarles -A- - --- , 60 8, - . Regional capital -A l KUME1ERS Deportmental capitals OA 8 5. 200 o District (Arrondissement) copitals o ,1 . . Rallrocds NEINE Maln roods SSA9 GUINEA .j--- Rivars -~ -Intermittent streams -~70..-Roinf oll In milimeters Ta ok REGION DE DIOURBEL ---internallonol boundaries [ REGION DE DIOURBEL DIOURBEL OC96b~ b Niakhar- -i 0 Diakhb 0 Gossas to DokourunoOa or - o Z0NE 2......... Gandlaye - )r Fuma Kahoneen M .oe Ho or ,5 \E2niugne ne-, k I. \7N Dolo .n..Koun.be Niodlor älIN Ganda-- Toubakour Paos-Koto- Wack-N' Gund'" Rier L Saback-