Ghana - Ashanti Region Cocoa Project

Document of The World Bank FOR OMCIAL USE ONLY Report No. 5092 PROJECT COMPLETION REPORT GHANA ASHANll REGION COCOA PROJECT (LOAN 118 1-GH) May 24, 1984 Western Africa Regional Office This document bus a restricted distribuoan md may be used by recipients only in the perfornce of their offica dute Ds cotents may not otherwise be disclosed without Wodd Dank authorizaion.  CURRENCY EQUIVALENTS Currency Unit (Abbreviation) = Cedis (%) Currency Exchange Rate - Appraisal Year Average - US $1 = 01.1538 - Intervening Year Average - US S1 = 02.2345 - Completion Year Average - US $1 = 02.75 - Exchange Rate since Ear.1984 - US S1 = 035.00 lEIGHTS AND MEASURES 1 metric ton = 0.98 long ton 1 long ton - 2,240 lb. = 1.016 metric ton 1 hectare (ha) = 2.47 acres I acre = 0.405 ha 1 Kilometre (kn) = 0.62 mile 1 mile = 1.609 km ABBREVIATIONS ARCP - Ashanti Region Cocoa Project BADE& - Arab Bank for Economic Development in Africa CPD - Cocoa Production Division ERCP - Eastern Region Cocoa Project GC M - Ghana Cocoa Marketing Board GOG - Government of Ghana ISSER - Tnstitute of Statistical Social and Economic Research MCA - Ministry of Cocoa Affairs PBA - Produce Buying Agency PU - Project Unit SSVD - Swollen Shoot Virus Disease FISCAL YEAR Prior to 1983 JulyI to June 30 Since 1983 - January 1 to December 31  FOR OMCIAL USE ONLY GHANA ASHANTI REGION COCCA PROJECT (Loan 1181-GH) PROJECT COMPLETION REPORT Table of Contents Page PREFACE ................ i BASIC DATA SHEET ......................... ii HIGHLIGHTS ................................... iii I. BACKGROUND ................. I II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL .........2 A Chronology ............................................ . 2 B. Project Design and Objectives ......................... 3 III. IMPLEMENTATION ............................................ 7 A. Effectiveness and Start-Up ............................ 7 B. Physical Progress ..................................... 7 C. Agricultural Achievements ....... ...................... 8 D. Project Costs and Financin ............................ 9 E. Disbursements.1 1 F. Procurement ....................... 11 G. Credit and Credit Recovery ............................12 IV. AGRICULTURAL IMPACT ..................................... 12 A. Yield and Output ........... . ...................... ... 12 B. Farm Income . .. .......................... 13 V. INSTITUTIONAL PERFORPANCE ................................. 15 A. Project Organization and Management ...........15 B. Training . .. .. ....................... 16 VI. ECONOMIC RE-EVALUATIOW..... .. ................... 16 A. Macroeconomic Constraints on Project ................... Implementation . .16 B. Real Producer Prices of Cocoa ......1 C. Food Crop/Cocoa Substitution ................ 20 | This document has a restricted distribution and may be used by recipients only in the performance or f their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  D. Labor Availability ..................... E. Project Economic Rate of Return ................ ........ 23 VII. PERFORMANCE OF THE BANK AND THE BORROWER .................. 24 A. Performance of the Bank ....... .................. 24 B. Performance of the Borrower ........................... 25 VIII. CONCLUSIONS ........................... o..................... 26 TABLES IN TEXT Table 1 Replanting Targets and Physical Implementation 2 Summary of Project Costs 3 Project Financing 4 Appraisal vs. Actual Disbursements 5 Estimated and Actual Yields and Production 0i Comparative Estimates of Farm Income 7 Yanimum Wages Paid to Project Workers 8 Returns to Cocoa and Other Crops LIST OF ANNEXES Annex I. Table 1. Production of Cocoa Beans in the World and Selected Leading Cocoa Producing Countries Table 2. Exports of Cocoa Beans and Processed Cocoa by Major Producing Countries Annex II. Table 1. Project Costs Table 2. Loan Disbursement Profile Annex III. Table 1. Nominal and Real Cocoa Producer Prices, 1963-1982 Table 2. Cocoa Price Indices and Distribution of Export Proceeds Table 3. Comparative Producer Prices Table 4. Distribution of Cocoa Proceeds between Marketing Board and Government Annex IV. Table 1. Comparison of Cocoa and Food Price Indices Attachment Borrower Comments MaD IBRD 11531 R Ghana Ashanti Region Cocoa Project.  GHANA ASHANTI REGION COCOA PROJECT (Loan 1181-GH) PROJECT COMPLETION REPORT PREFACE This is a completion report on the Ashanti Region Cocoa Project, which was identified by the Government of Ghana (GOG) and formulated on the basis of the experiences gained in the Eastern Region Cocoa Project (ERCP). The Bank, with the help of the R?WA office and consultants, assisted GOG in further preparing the project and after a pre-appraisal in November 1974 and an updating mission in May 1975, approved loan 1181-GH for US$14.0 million in December 1975. An additional loan from the Arab Bank for Economic Development in Africa (BADEA), equivalent to US$5.0 million, was granted in September 1976. The Bank loan was initially anticipated to close by December 1978 but after three extensions finally closed in December 1982. With final disbursements on June 30, 1983, the loan was fully disbursed. This completion report was prepared by the Western Africa Regional Office and is based on a review of the Staff Appraisal Report (No. 827a-GH of November 18, 1975), President's Report (No. P-1687-GH of December 8, 1975), Loan Agreement (dated December 23, 1975), supervision reports, and the findings of a completion mission to Ghana in June 1983. The P- ect Performance Audit Report (OED Report No. 3526 dated June 24, 1981) on the preceding project - Ghana, Eastera Region Cocoa Project (Cr. 205-GH) - was also consulted. During the completion mission, discussions on various aspects were held with project staff and project farmers were also interviewed during field visits. A complet-ion report of reasonably good quality was also prepared by the Project Unit and is available in West Africa Information Center. We gratefully acknowledge the valuable assistance provided by the Government, particularly the project manager and his staff, whose assistance contributed greatly to this report. The PCR was completed on December 30, 1983, and submitted to OED. The project was not selected for audit by OED and the PCR was sent to the Borrower for comments on March 7, 1984. Comments received from the Ashanti Cocoa Project JUnit have been taken into account and are attached to the PCR.  - ii - GAlNA ASNANTI RECION COODA PROJECT (Ln. 1181-GB) PROJECT CMPLETION REPORT BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as 2 of Estimate Estimted Actual Appra il Estimate Proiect Costs (USS million) 21.9 65.7 300 Loa. A.nt (USS million)L' 14.0 14.0 100 Cofinancing (USS millioo/BACA) 5.0 5.0 100 Date Board Approvat 12/23775 its Signing 12/Z8/75 DMte Effectiveness 2/23176 Dite Physicsl CnmpoenS Conpi. ;V *18 __ Z/81 200 *r,prrcion Then completed 100 91 91 Clasing Date 12/31178 12/31/82 Economic Rate of Return 21 13 Institutional Perfornce 100 80 80 Agronomie Performce 100 70 70 No. of Direct HeneficiarLes 10.000 14.O0 140 Replanring Targets (OGO acres) 1976 1977 197d 1979 1980 1981 Total Calendar Year: fA A PA A P A P P A P A IRD Intical 4 10 16 30 BADEA Initial 1.6 4.2 6.7 12.5 Total: Initial 5.6 14.2 22.7 42.5 36.9 Revised 7.1 6 14 9.4 11.4 6.7 9.9 8.1 7.3 5.1 3.4 3.3 42.5_'38.6 P: Projected A: Actual CUMULATIVE DISBURSEIMETS FY76 FY77 FY78 FY79 FYm F81 FrY82 FY83 Appraisal estimate (SS million) 2.4 6.6 14.0 Actual (USS million) 0.1 1.7 5.1 6.0 7.3 9.1 12.5 14.0 Actual as 2 of estimate 4 Z6 36 43 52 65 89 100 Date of final disbursement 6/30/83 MSSION DATA Mission Sent Date No. of Mandays Spec. Perf. bv (no/vr) Persons in Field Repr. 3 Rating Trend 5' Problems Identification Cov't Pre-Appraisal HQIRWiIA 11/74 3 31 a.c.d Appraisal HQ 5/75 1 3 b Subtotal 34 Supervision 1 W 1176 2 24 b.c Supervision 2 W 5/76 1 10 b 2 2 M Supervision 3 HQ 1076 2 36 b.f 1 2 supervision 4 HQ 3/77 1 b Brief review mission Supervision 5 HQ 4177 2 a.f Brief review mission Supervision 6 HQ 11/77 1 16 a 1 2 Lack farmer partcip. Supervision 7 HO 7/78 2 8 a.c 1 2 Lack farmer particip. Supervision 8 HQ 12178 2 22 s.c 2 2 Lack farmer parctIcp. Supervision 9 HQ 1/60 3 20 d.f .f 2 2 Lack farmer parttcip. Supervision 10 HQ 5/10 2 10 f.g 2 2 Lack farmer particip. Supervision 11 HQ 1/81 1 10 f 2 3 Country Econ. Problem Supervision 12 HQ 9/81 2 7 f.d 2 2 Inadequate Prod. Prices Supervision 13 HQ 5/82 2 7 a.b 2 2 Country Econ. Problems Supervision 14 HQ 9tB2 1 7 a 2 2 Country Econ. Problems Completion H 5/B3 2 14 s.f Subtotal 191 7KAL 225 OTHER PROJECT DA_A Borrover: Republic of Ghans Execucl Agency: Ministrv of Cocoa Affairs 11 bhe project ws co-financed by BADE& (Arab Bank for Economic Developmenc in Africa). to the inout of US$ 5.0 million. 2/ Projected figures for eech year add up to more than 42,500 acres, since these wee targets established annully to sake up for lower planting achieveents in previou pears. 3/ a-Agriculturist; b-Agrc-EconomLst; c-FinancLl Analyst; d-Cocoa Specialist; a-Credit Specalist; f-Economist; g-Konitoring and Evaluation 4/ 1-Problem-free or minor problem; 2-Moderate Problems; 3-Major Problems 5/ 1-1.proaing; 2-Stationary; --Deterioratin- 6/ F-Financial; :fHansgerll; rTechnical; 0-Political  - iii- GHANA ASHANTI REGION COCOA PROJECT (Loan 1181-GH) PROJECT COMPLETION REPORT HIGHLIGHTS In the early seventies cocoa accounted for 62% of Ghana's foreign exchange earnings, but despite its importance, the cocoa sector was declining. In retrospect, the major reasons for the decline were low real producer prices, shortages of inputs, deterioration of the transportation network and inefficiencies of the marketing system. In volume terms, Ghana's average annual production declined from about 450,000 long tons during 1960/61-1964/65 to about 400,000 long tons during 1965/66-1972/73 and was about 350,000 long tons in the 1973/74 crop year. Alarmed by the apparent trend of declining production GOG requested Bank assistance in replanting and rehabilitating cocoa plantings in the Eastern Region which materialized in a Bank financing of the Eastern Region Cocoa Project (CR 205-GH) for the five years 1970/71 to 1974/75. Recognizing the continuing importance of cocoa in the Ghanian economy the Bank responded favorably to a second request for financial assistance by GOG to resuscitate the cocoa industry. This time the proposed area of activity was the Ashanti Region - Ghana's most important cocoa area. However, there would be little justification for the Bank financing unless the project could be seen as a 'time-slice' operation of a long-term cocoa development program with repeat operations in later years. Due to the high inflation rate at the time of designing the project, which made estimating costs subject to much error and would have required an inordinately high provision for price contingencies, it was deemed justified to confine the project to three years only, i.e., until the first fruit-bearing, instead of full maturity, which would have needed a seven-year period. The project aimed at replanting 42,500 acres 1/ on the basis of the provision of credit to smallholder cocoa farmers for hliring labor and to cover the cost of production inputs provided in kind by the project; the farmer was supposed to put in 20 percent of the total labor by himself. The reality was that the project had to provide all labor, because of lack of farmer interest. Also, because of farmer disinterest, the project could not hand over the replanted areas to farmers for further maintenance and thus was 1/ Originally, the project replanting target was 30,000 acres, but some six months after effectiveness, BADEA funds were added on a joint basis and the project target revised to 42,500 acres.  iv - obliged to add four more years to bring each replanted area to maturity. Evidence now shows that farmers are even reluctant to harvest their cocoa plantings which are close to maturity. The principal reason for this lack of interest was low real producer prices for cocoa both in absolute terms and relative to prices of competing crops. Moreover, with the deteriorating national economy a huge out-migration of skilled and unskilled labor took place causing labor shortages for cocoa maintenance and harvesting which were normally carried out by sharecroppers. In addition, the farmowner and his family were busy producing food crops to satisfy household food requirements and the need for daily household items, such as kerosene, soap, matches, salt, etc. Due to low farmer participation and consequent slow achievement of planting targets, the project implementation period was extended from 3 to 7 years. At close in December, 1982, the project had achieved about 90% of the planting target (38,000 acres out of 42,500 projected at appraisal). Due to the substantial time over-run as well as the persistently high inflation (not offset by exchange rate adjustment) which Ghana experienced during the implementation period, the project costs were 0149 million ($65.7 million) compared to the appraisal estimate of 025 million ($21.9 million), a 490% increase in terms of cedis and a 200% increase in dollar terms. The Economic Rate of Return (ERR) re-estimated at completion is 13% compared to the appraisal estimate of 21%. This is based on the assumption, considered reasonable at this stage, that, as a result of the current sectoral rehabilitation efforts, particularly adjustment of producer prices, farmers will resume proper maintenance and harvesting of project planted farms. If this situation does not materialize and the project staff continue to maintain cocoa plantations, with a much lower efficiency, then the ERR would drop to about 5%. The ERR in both cases would have been much higher if the harmattan and bush fires in early 1983 had not destroyed about 30% of the project planted farms. As with the preceding Eastern Region Cocoa Project (ERCP), the principal lessons that emerge from the experience of this project are that it is almost impossible to ensure successful project implementation when major sector issues, which have a direct bearing on project success, remain unresolved and that small, geographically-confined projects are usually ineffective vehicles for addressing and resolving major sector issues. This lesson has been taken into account in the Export Rehabilitation Project (approved by the Board on January 3, 1984) which seeks to deal with the issues in the cocoa sector (principally adjustment of producer prices and reform of institutions responsible for marketing, input supply and extension) on a broad-based, sectoral level, link it with macro-economic measures and attempt to implement a comprehensive reform package. Other points of interest are: - farm labor availability remained a problem (paras 3.04, 6.16- 6.19); - no serious efforts have been made for credit recovery  (para 3.10); - responses to fertilizer applications by young cocoa are small, inconsistent and uneconomic (para 4.06); - training of middle level staff not beneficial to the project as most trainees left the project for better paying jobs (para 5.03); - the Bank underestimated the complexities of resolving major sect3ral issues, such as producer prices (paras 7.03 and 8.02); - an important consideration before the Bank in extending the project completion date was continued presence in the most important sector in Ghana and to endeavor to use the project as a leverage for resolving major sector issues (para 7.04); and - of the six assurances sought from the Government during negotiations in October 1975, none had been fulfilled by the deadline of December 31, 1976 (para 7.06).  GHANA ASHANTI REGION COCOA PROJECT (Loan 1181-GH) PROJECT COMPLETION REPORT I. BACKGROUND 1.01 Sector Background: The Ashanti Region Cocoa Project (ARCP) formed part of a first phase of a program to rehabilitate the cocoa industry of the Ashanti region, and an integral part of the 0overnment of Ghana's overall strategy to revamp the country's cocoa industry. At the time of project formulation, about a quarter of the country's total population or 2.5 million people were directly involved in cocoa farming, with the sector accounting for between 60-70 percent of foreign exchange earnings and over 30 percent of government revenues. The cocoa sector still accounts for over 60% of foreign exchange earnings of Ghana and provides employment to about 24% of the labor force. 1.02 However, despite its overriding importance, the sector has been experiencing a secular decline over the past decade or so. This could be interpreted in the wider historical context of production trends over the last 50 years. First, there was the broad period from around 1932/33 - 1959/60 when production levels stabilized around 200,000 - 300,000 tons. This period also witnessed a decline in real producer prices up to the mid-1940s, due to the low international prices resulting from World War II; however, prices doubled during the mid-1940s and stayed at a relatively high level until the 1960s. The second broad bistorical period - 1960/61-1975/76 - was marked by large increases in production which fluctuated at relatively high levels between 350,000 - 450,000 tons. This was a result of new plantings and good husbandry practices stemming from attractive price increases. 1.03 Diring the third broad period - 1976/77 to the present time - production declined from around the 400,000 ton-level achieved in the early 1970s to the current level of about 180,000 tons. As recognized in the Appraisal Report, this progressive decline in production was caused by the interplay of at least six sets of factors: (1) low real producer prices; (2) the inadequate and erratic input distribution system; (3) the spread of Swollen Shoot Virus Disease (SSVD); (4) the unfavorable age profile of cocoa trees due to an excessive component of over-aged trees; (5) the deteriorating transportation system, and resultant difficulties in evacuating cocoa from producing areas to ports; and (6) the lack of a consistent overall development plan for the cocoa sector. In addition, the institutional network for provision of inputs, extension and credit and the evacuation of the produce lacked efficiency and effectiveness caused, among other factors, by dissension between the Kinistry of Cocoa Affairs and the Ghana Cocoa Marketing Board. 1.04 On account of the above-mentioned factors, Ghana, which was for several decades the world's largest producer and exporter of cocoa and cocoa products, is now the world's third largest producer and exporter, behind Ivory  -2- Coast and Brazil (Annex I, Table 1). Further, the experience during the past two decades reveals not only a rapidly declining export performance, but also the worst export record among the major producing countries (Annex I, Table 2). 1.05 Sector Strategy and Bank Groop Lending: It is against this background that the Government of Ghana initiated a set of policies during the early 1970s aimed at resuscitating the cocoa sector through: (a) intensification of an ongoing replanting program; (b) promotion of research and extension servicAs; (c) provision of financial relief to farmers in debt through the provision of credit; and (d) assisting farmers in obtaining labor and other inputs at subsidized rates. 1.06 As a part of the overall resuscitation efforts, an IDA credit of US$8.5 million was provided in 1970 for the rehabilitation and replanting of cocoa farm lands in the Suhum area of the Eastern region of Ghana (Eastern Region Cocoa Project - (ERCP): Credit 205-GIt' (signed on June 26, 1970). The ARCP (Loan 1181-GH dated December 23, 1975) was therefore the second Bank- financed project aimed at reversing the decline in the cocoa sector through a rejuvenation program of cocoa plantings. It was the sixth Bank Group lending operation for agriculture in Ghana. Besides the ERCP others included: Credit 163-GH for a Fisheries Pro,ect signed in 19694, Credit 354-GH for a Sugar Rehabilitati4n Project' signed in January 1973, Credit 500-GH for a Livestog5 Project4- signed in July 1974 and Credit 531-GH for an Oil Palm Project.. signed in March 1975. II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL A. Chronology 2.01 The ERCP vas premised on the need to rehabilitate cocoa farm lands which were extensively devastated by swollen shoot virua disease and to rehabilitate those farms which were in a state of neglect due to a lack of farmer interest and the unavailability of production inputs. A similar strategy was used in the design of the ARCP since similar problems existed in the Ashanti region. 2.02 As a first step, in 1970, the Government of Ghana commissioned the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana to conduct a survey of the Ashanti region as a means of providing data on the extent of the devastation, as well as other information which could be used for effective project planning. The Bank was also 1/ Project Performance Audit Report (PPAR) No. 3526 dated June 24, 1981. 21 PPAR No. 2794, dated December 28, 1979. 1 PPAR No. 3525, dated June 24, 1981. 4/ PPAR No. 3972, dated June 16, 1982. 5/ Desk audit underway.  -3- approached to assist in project preparation. As a result, a pre-appraisal mission visited Ghana in October/November 1974, and an appraisal mission in May 1975. B. Project Design and Objectives 2.03 Project Design: The basic project design was similar to that of the ERCP; however, the ARCP took into consideration lessons learned from the former project and some improvements were incorporated. In perspective, the main components of the ERCP were as follows: (i) rehabilitating 51,000 acres of existing low-yielding cocoa and replanting 36,000 acres on which cocoa had died out; (ii) training farmers in modern cocoa production techniques; (iii) improving marketing cooperatives through. the provision of technical assistance; (iv) establishing a project administration within the Ministry of Agriculture to plan and manage the project; and (v) resurfacing some 100 miles of feeder roads in the project area. However, implementation of this project was adversely affected by factors such as poor farmer participation, a large number of absentee landlords, problems of procurement of sprayers and insecticides, the absence of a mechanism for project evaluation, and the lack of expertise in the inspection unit which was provided for in the project. As a result, the design of the ARCP made adequate provisions for improvements in the mode of procurement of insecticides and sprayers, the organization and staffing of an inspectorate section within the Project Unit CPU), and the provision for project evaluation. Most importantly, the ratio between catchment area and project area was substantially increased. The ERCP project has suffered from a shortage of resident farmers available and willing to participate in the replanting program. This was largely due to the limited catchment area (a total of 57,000 acres to be replanted or rehabilitated out of a total area of 146,000 acres). Preliminary reports on the Ashanti region by ISSER and the Soil Research Institute indicated that similar problems might be encountered in the new project area. To combat this, the catchment area had been increased very considerably in the Ashanti project (30,000 acres 1/ to be replanted out of a total area of 1.3 million acres). 2.04 Project Objectives. As indicated earlier, the project was to be a first phase of a program geared towards revitalizing the cocoa industry in the Ashanti region. It was to be carried out over a three-year period - 1975/76 - 1977/78. The design included both physical and institutional components, as !ollows: (a) provision of credit to smallholder cocoa farmers for hiring labor and provision of farm inputs in kind for replanting of 30,000 acres and their maintenance during the project period; (b) training of farmers and project staff in modern cocoa production techniques and practices; I/ The figure of 30,000 acres was increased to 42,500 acres some seven months after the project became effective, when additional financing was obtained from BADEA (para 3.02).  -4- (c) provision of equipment for the maintenance of feeder roads and the planning of fature feeder road imprOvement; (d) designing a survey of the cocoa sector with a viev to formalating an overall development plan for the cocoa sector, with provisions for the evaluation of project progress; and (e) establishment of a project administration within the Ninistry of Cocoa Affairs (MCA) to plan and manage the project. 2.05 Project Area: The project area would be the three main cocoa growing zoaes in Eastern Ashanti - Manmpong, Konongo, and Bekwai, covering a total area of 1.3 million acres. The conditions of the cocoa plantings at the time of appraisal were as follows: Condition Acreage Percentage Good 799,559.0 60.4 Fair 402,653.0 30.5 Poor 94,602.0 7.1 Dying 27,081.0 2.0 Total 1,323,895.0 100.0 Source: MCA - Interim Report on Intensive Cocoa Survey. February 1978. One has to note that some 122,000 acres were poor or dying cocoa. A soil survey of the region, carried oat by the Ghanaian Soil Research Institute, indicated that around 940,000 acres of the soil is good or very good for cocoa. 2.06 Project Phasing. The project was to be phased as follows: Bank Loan Disbursement period Additional time required to bring all plantings to maturity year 1 year 2 year 3 year 4 year 5 year 6 year 7 (a) acres to be replanted 4,000 10,000 16,000 (b) acres to be maintained 4,000 14,000 30,000 30,000 26,000 16,000 It was therefore envisaged that replanting would be spread over three years, with Bank loan disbursemeat covering this period. Further, since cocoa takes about four years to come into bearing, it was reasoned that another four years would be needed to maintain the entire 30,000 acres to maturity, - a total of seven years as shown in the above schedule. 2.07 The rationale for confining the proposed loan to the first 3 years'  -5- disbursements lies in the fact that inflation in Ghana was running close to 20 percent per .nnum; this would make estimating costs over a seven year period subject to much error, would require the inclusion in project costs of an inordinately high provision for price contingencies,and would result, in the case of a se-en year disbursement period, in the tying up of a very large proportion of the Bank loan for a long period of time (t;e commitment charges paid by Ghana would be correspondingly heavy). Moreover, the Government assured the Bank that the additional cost required 1o maintain all project plantings till full maturity (that is in project years 4 to 7), estimated at about USS28 million at the time of appraisal, would be fully met between the farmers and the Government. However, when after three years only some 50% of the target area was replanted and 60% of the funds still undisbursed, the Bank decided to continue financing on the grounds that economic conditions could improve, so as to make maintenance of cocoa by farmers a real possibility (para 3_05). 2.08 Credit. On the basis of an average estimated acreage of 3.0 acres per farmer participant, the project was expected to involve about 14,000 farmers, with credit requirements as follows: Years 1 2 3 Total Cedis per acre 216 78 3 361 These amounts were to cover 80 percent of labor COS .3 and 100 percent of the cost of materials. To be eligible for credit, the farmer participant was expected to satisfy the following conditions: (a) reside on, or within 5 miles of the land to be replanted, and be prepared to work actively and regularly on the land; (b) be a member of a primary cocoa cooperative marketing society, or Produce Buying Divisicn Farmers' society; and (c) establish a firm proprietary right to the land to be replanted. The residency and active participation conditions were meant to eliminate absentee farmers, as well as ensure that farmer participants contributed a full 20 percent of total labor time to the replanting program. 2.09 Farmer participants would receive credit for the first three years of each planting (shown in the schedule above), and -he terms of the loan would be 18 years with both principal and interest payments beginning in the 7th year. Interest, at not less than 8 percent, would be capitalized over the grace period of 6 years. Credit would be channeled by the PU to members of cooperatives or the Produce Buying Agency (PBA) societies, as the case may be, with the latter organizations responsible for debt collection, and retaining 2 percent or a quarter of the 8 percent rate for credit administration. 2.10 Organization and Management. The project was to be implemented by a semi-autonomous project unit within the MCA. Overall project management and control were to be exercised by a Project Manager, a Deputy Project Manager, a Pinancial Controller, an Administrative Officer, Project Accountant, Credit'  -6- Officer, Internal Auditor, Cooperative Officer, Rngineering Superintendent and supporting staff. The project unit would be adequately staffed to give technical assistance to farmers, to administer the credit fund, process credit applications, make loans, supervise debt collections, maintain project account and far records, liaise with cooperatives and PBA and undertake a feeder road study -1 The staffing ratio for technical staff was set at one field assistant for 33 farmers, and one farm inspection assistant for 50 farmers; an intensity wbich was thought to be required in case participating farmers were spread thinly over the project area. Most staff would be recruited from MCA which had a considerable staff surplus. 2.11 Negotiations. Loan negotiations were held in Washington from October 20 to 31, 1975. Based on the experiences gained in the ERCP, the Bank's involvement for the second time in the Ghanaian cocoa sector was dependent on a new commitment by Government to redress the previous decade's neglect. Among steps Government was seen to be taking were a reorganization into one ministry of the various agencies responsible for cocoa. The Bank identified further areas which required attention, and which became assurances for the Loan. These were: (C) A study of the cocoa producer price policy and submission to IERD by December 31, 1976 of a proposed statement of such policy which took into account the country's needs, incentives to producers and the findings of relevant studies on the subject (para 1. Side Letter of December 23, 1976). (ii) Completion of a study of the financial arrangements for, and availability and distribution of cocoa sector inputs, to be submitted to IBRD by December 31, 1976 (para 2. Side Letter of December 23, 1976). (iii) Design of a comprehensive survey of the cocoa sector by December 31, 1976 in consultation with IBRD (para 1. Schedule 6. Loan Agreement). (iv) Appointment of an officer within the Ministry of Cocoa Affairs to promote and oversee replanting and rehabilitation of cocoa. Experience and qualifications to be acceptable to IBRD (para 2. Schedule 6. Loan Agreement). (v) Establishment of a seed garden unit by June 30, 1976, headed by an officer, with experience and qualification acceptable to IBRD (para 3. Schedule 6. Loan Agreement). (vi) Employment of consultants by March 31, 1976 to assist in an annual review of efficiency and adequacy of seed garden production (para 3. Schedule 6, and Section 3.02(a), Loan Agreement). 1/ The Ghana Highway Authority (GHA) was responsible for maintenance of feeder roads and the feeder road study. PU merely provided inputs for GHA to do so (see Borrower Comments attached).  -7- III. IMPLEMENTATION A. Effectiveness and Start-Up 3.01 The project was approved by the Board on December 23 and signed on December 28, 1975. There was one condition of effectiveness: Agreement was to be reached between the Bank and the Government of Ghana on the form of the loan agreement between participant farmers and the Project Unit. There was a timely resolution in this iss-ie so that it did not affect project effectiveness in any material way. On February 23, 1976, the project was de:lared effective. B. Physical Progress 3.02 Project Execution. At the start of the project Government showed clearly an intention to embark on a program of rehabilitating the cocoa industry as efficiently as possible. Even before project effectiveness key staff were in post at headquarters, in three zonal offices and nine district offices; a work program was prepared and some vehicles purchased through fiannving from Government budget and from the Ghana Cocoa larketing Board gCGNB ). Also, the cocoa sector was given high priority in the allocation of input licenses and a study was started on the cocoa pricing policy. Dynamic leadership of project management succeeded in achieving 6,000 acres which was about 85% of the ambitious first year replanting target of 7,100 acres (including BADEA program). On September 20, 1976, BADEA's loan for USS5.0 million became effective adding an additional 12,500 acres to the Bank's replanting target of 30,000 acres. In this first year the major problems experienced by the project were: (i) inappropriate attitude of extension personnel seconded from the Cocoa Production Division of the MCA, who - in order to meet their planting targets - explained to farmers that Government had established the project to do the replanting and subsequent maintenance for them; (_i) inadequate provision of seedlings; and (iii) low farmer participation. The first two problems were partially resolved by reassignment of most of the seconded staff back to the Cocoa Production Division (CPD) of MCA and by increasing the number of nurseries over a larger area to simplify the logistics of the transport of seedlings. However, the underlying problem - inadequate production of seedpods from which the seedlings were to be raised - was not tackled until late 1977 when, under strong pressure from the Bank, action was taken towards creation of a semi-autonomous Seed Garden Unit and the appointment of a qualified head of the unit. 3.03 Cocoa Nurseries. After having encountered transportation problems resulting from long transportation distances over often rough roads, the set up of a few large central nurseries had been changed towards the establishment of a large number of smaller nurseries closer to the planting areas. However,  at many of the smaller nurseries, water had to be transporj qd during the dry season. Moreover, too small polythene seedling containers