Benin - Rural Development Projects

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15218 PERFORMANCE AUDIT REPORT BENIN BORGOU RURAL DEVELOPMENT PROJECT (Cr.1127-BEN and 1127-1-BEN) ZOU PROVINCE RURAL DEVELOPMENT PROJECT (Cr. 1314-BEN) SECOND BORGOU RURAL DEVELOPMENT PROJECT (Cr. 1877-BEN) DECEMBER 29, 1995 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 otherwise be disclosed without World Bank authorization. Currency Equivalent Currency Unit = CPA Franc ((FAF) Avlerage Exchange Rates 1982 US$1.00 CFAF 329 1984 US$1.00 CFAF 439 1986 US$1.00 = CFAF 346 1988 US$1.00 = CFAF 298 1990 US$1.00 = CFAF 319 1992 USS1.00 = CFAF 265 1994 US$1.00 = CFAF 520 Weights and Measures Metric System Abbreviations and Acronyms BOAD West African Development Bank CARDER Regional Rural Development Agency CFAF Comniunaute Financiere Africaine Franc CFD Caisse Francaise de Developpeient (Formerly CCCE) CRCAM Regional Savings and Loan Cooperatives DGR Agricultural Engineering Department ERR Economic Rate of Return FAC Fonds d'Aide a la Cooperation FOB Freight on Board FSS Support and Stabilization Fund GDP Gross Domestic Product GV Informal Village Groups IDA International Development Association IFAD International Fund for Agricultural Development O&M Operation and Maintenance M&E Monitoring and Evaluation MDRAC Ministry of Rural Development and Cooperative Action PAR Performance Audit Report PCR Project Completion Report RCF Lint Cotton Research SONACEB Marketing and Export Agency SONAGRI Societe Nationale de l'Agriculture SONAPRA Societe Nationale pour la Production Agricole T&V Training and Visit Extension System UNDP United Nations Development Programme UPSP Union of Producers Groups Government Fiscal Year January I - December 31 FOR OFFICIAL USE ONLY The World Bank Washington, D.C. 20433 U.S.A. Office of the Director-General Operations Evaluation December 29, 1995 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Report on Benin Borgou Province Rural Development Project (Crs. 1127/1127-1-BEN) Zou Province Rural Dfvelopment Project (Cr. 1314-BEN) Second Borgou Province Rural Development Project (Cr. 1877-BEN) Attached is the Performance Audit Report (PAR) on the Benin Borgou Province Rural Development Project (Crs. 1127/1127-1-BEN for US$21.9 million equivalent), Zou Province Rural Development Project (Cr. 1314-BEN for US$20 million equivalent) and Second Borgou Province Rural Development Project (Cr. 1877-BEN for US$21 million equivalent) prepared by the Operations Evaluation Department. The objective of the three projects (approved in FY81, FY83, and FY88) was to improve the income of farm families by increasing the production of cotton and foodcrops through institution-building and technological improvements. Project components included the reorganization of agricultural institutions in the two provinces; the promotion of farmers' organizations; credit, inputs and extension services to farmers; applied agricultural research; expansion of animal traction; development of bottomlands; and construction of rural roads and social infrastructure. The first Borgou project also included the construction of ginning factories; the second Borgou project supported an environmental protection component, the promotion of women's groups, and a cotton subsector rehabilitation program including, inter alia, the creation of an independent cotton stabilization fund and the setting up of a new system for determining the producer price for cotton. The audit confirmed that the projects achieved or surpassed most of their physical targets within the estimated costs, in spite of some delays due to late counterpart fundings. Cotton production increased 15 fold in the Borgou province and 13 fold in Zou. Foodcrop production also went up significantly. These achievements resulted in part from the institutional reforms and subsequent reduction in cotton operating costs. At the time of audit, the satisfactory economic performance of the projects was reinforced by a higher production level and a better world cotton price than anticipated in the Project Completion Reports (PCRs). The recalculated economic rates of return (ERRs) are 23 percent for the two Borgou projects combined, as well as for the Zou project. The Second Borgou project also helped establish numerous women's groups for foodcrop production and marketing, and it created a stabilization fund and better pricing mechanisms for cotton. Although not planned at appraisal, the village groups created under the projects were able to take an increasing role in the sorting and marketing of cotton, and most sub-sector activities are gradually being privatized. The increasing professionalism of the village groups is an important step towards the participation of cotton producers in the decision-making process. OED rates the outcomes of the First Borgou and the Zou projects as satisfactory, and that of the Second Borgou project as highly satisfactory. Given the efficient performance of the agricultural This document has a restricted distribution and may be used by recipients only in the performance of their official duties. its contents may not otherwise be disclosed without World Bank authorization. 2 institutions and the increased participation of the village groups in sector decisions, the sustainability of the three projects is rated as likely. Institutional development is rated as substantial for the First Borgou and Zou projects, and as high for the Second Borgou project. The performance of both the Borrower and the Bank is rated as satisfactory. These ratings are comparable to the discussion of project results in the Project Completion Reports. The main lessons from these successful projects are (i) the importance of strong government commitment to reform , (ii) the effectiveness of a comprehensive approach to agricultural development, integrating agricultural research with extension, financial and marketing services to producers, and (iii) the need for research and extension programs to be designed in consultation with farmers. Attachment FOR OFFICIAL USE ONLY Contents Preface ...........................................................3 Basic Data Sheets ....................................................5 Evaluation Summary ........................................ .............. 1 1 1. Background ..................................................... 15 2. Projects ........................................................ 17 A. Borgou Province Rural Development Project (Cr. 1127 and 1127-1-BEN) ..........17 B. Zou Province Rural Development Project (Cr. 1314-BEN) ............... ......19 C. Second Borgou Rural Development Project (Cr. 1877-BEN) ............... .....20 3. Main Findings And Issues .................................... ......23 A. Agricultural Production ........................................ .....23 B. Environment ....................................................26 C. Economic Performance ....................................... ......27 D. Institution Building ...................... ...................28 E. Social Change...................................................31 F. Performance of the Government and IDA ...........................32 G. Overall Performance of the Project ................................ .....32 4. Sustainability and Future Prospects .............................. .....34 Annexes Annex A - Supporting Tables and Figures .......................... ..........37 Annex B - Comments from a Cofinancier (West Africa Development Bank) .. ...........43 Annex C - Response to Comments ........................................44 Map IBRD 27633 This report was prepared by Josette Murphy (Task Manager) and Christian Polti (Consultant) who audited the project in February 1995. Carla Sarmiento provided the Administrative Support. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed wiLhout World Bank authorization.  3 Preface This is the Performance Audit Report (PAR) for three Rural Development Projects in Benin, for which Credits 1 127-BEN, 1 127-1-BEN, 1314-BEN, and 1877-BEN totaling SDR 52.1 million were approved respectively in April 1981, April 1986, November 1982, and February 1988. Credit 1127-BEN was closed, 90 percent disbursed, in December 1988, three years behind schedule. The supplementary Credit 1127-1-BEN was fully disbursed and closed on schedule also in December 1988. Credits 1314-BEN and 1877-BEN were closed fully disbursed in 1992 and 1993, two and half years, and nine months behind schedule, respectively. The first project was cofinanced with the Caisse Fraitgaise de D6veloppement (CFD) and the International Fund for Agricultural Development (IFAD), the second with CFD and Fonds d'Aide A la Cooperation (FAC), and the third with CFD, IFAD and the We"t African Development Bank (BOAD). This PAR, prepared by the Operations Evaluation Department (OED), is based on Project Staff Appraisal Reports and President's Reports, the Credit documents, discussions with Bank staff, and the Project Completion Reports, prepared by the Africa Regional Office in cooperation with the Borrower, and issued in April 1 )92, June 1993, and September 1994. An OED mission visited Benin in February-March 1995 and discussed project implementation, outcome and issues with officials of the Ministry of Rural Development, the national cotton company (SONAPRA), regional rural development agencies (CARDERs), lint cotton research (RCF), local savings and loan cooperative (CRCAM), village groups, project farmers, and CFD officials in Paris. Their kind cooperation and valuable assistance in the preparation of this report are gratefully acknowledged. The PAR focuses particularly on the reasons for the success of both the production and institution-building components of the projects, new developments taking place since project completion, factors affecting project sustainability, and future prospects. The draft PAR was sent to the Borrower and cofinanciers for comments. The comments received from the West Africa Development Bank are reproduced as Annex B.  5 Basic Data Sheets BORGOU PROVINCE RURAL DEVELOPMENT PROJECT (CREDITS 1127 AND 1127-1- BEN) Key Project Data (SDR million) Appraisal Actual or Actual as % of Estimate Est. Actual Appr.Est. Project costs 31.5 41.2 130.6 IDA Credit 15.7 15.5 99.0 IFAD Credit 11.0 10.1 92.4 CFD 9.7 9.7 100.0 Government 4.8 3.9 82.0 ERR 21% 23% Number of beneficiaries (families) 39,000 40,483 103.8 Cumulative Estimated and Actual Disbursements (US$ million equivalent) FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 Credit 1127 Appraisal 2.3 6.8 12.3 17.4 20.0 Actual 1.1 3.1 5.8 8.2 10.6 13.1 14.6 16.6 17.7 Actual as % of 47.8 46.1 47.5 47.3 53.3 65.9 73.2 83.3 88.6 Final Disbursement October 23, 1989 Appraisal Actual 1.2 1.6 2.1 2.3 Actual as % of Final Disbursement July 19, 1989 Project Dates Appraisal Actual Appraisal Actual Credit 1127-0-BEN Credit 1127-1-BEN Identification 9/78 10/78 Preparation 1979 79/80 Appraisal Mission 5/80 5/80 Credit Negotiations 1/81 1/81 2/86 2/86 Board Approval 3/81 4/81 3/86 4/86 Credit Signing 4/81 4/81 4/86 5/86 Credit Effectiveness 8/81 3/82 6/86 2/87 Completion Date 6/85 12/88 6/88 12/88 Credit Closing Date 12/85 12/88 12/88 12/88 6 Staff Inputs (Staff Weeks) FY79- FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 Total FY82 Preparation 69.4 -- -- -- -- -- -- -- -- -- 69.4 Appraisal 67.6 -- -- -- -- -- -- -- -- -- 67.6 Neg./Board 13.1 -- -- -- -- -- -- -- -- -- 13.1 Loan Proc. 18.8 -- -- -- -- -- -- -- -- -- 18.8 Supervision 24.0 15.5 16.2 14.4 18.9 8.9 10.5 10.7 -- -- 119.1 Proj.Admin. 0.1 -- 0.2 0.4 0.3 1.0 -- -- -- -- 1.9 PCR -- -- -- -- -- -- -- -- 5.9 4.0 9.9 Total 193.0 15.5 16.4 14.8 19.2 9.9 10.5 10.7 5.9 4.0 299.8 193 Mission Data Month/ No. of Days in Perform. Type of Year Persons Field Status Problems Through Appraisal Preidentification 7/78 1 4 - - Identification 10/78 2(A,E) 14 - - Prep. Reviews 1979 Several Several - - Appraisal 5/80 5 n.a. - - Supervision I 6/81 1(A) 19 I - Supervision II 9/81 2(A,A) 11 1 - Supervision III 2/82 2(A,F) 9 2 - Supervision IV 12/82 3(A,E,N) 10 2 F Supervision V 6/83 2(A,M) 12 2 F,M Supervision VI 12/83 3(A,L,E) 20 2 F,T Supervision VII 6/84 7(A,L,E,A,F,M,T) 20 2 F,T 2(A,F) T,O Supervision VIII 11/84 1(A) 18 2 Supervision IX 6/85 2(E,F) 17 2 F,O Supervision X 12/85 3(E,F,A) 13 2 T,F Supervision XI 3/86 1(F) 22 2 T,M Supervision XII 10/86 2(A,F) 10 2 M Supervision XIII 4/87 2(A,F) 12 2 F,M Supervision XIV 10/87 4(A,A,F,F) 15 2 F,M Supervision XV 4/88 2(A,F) 9 2 F,M Supervision XVI 11/88 5 2 F,M Notes: Preparation was carried out by SONAGRI's Bureau d'Etudes under the Technical Assistance Credit (716-BEN) and several short-term visits were made by staff from the Abidjan office during 1979 to supervise and review progress. From mid-1983, Supervision Missions of this project usually also supervised Zou and Atacora Projects at the same time. Key to Expertise: A = Agriculturalist, F = Financial Analyst, E Economist, N = Engineer. T = Training Specialist, M = Monitoring and Evaluation Specialist, L Livestock Specialist. Key to Performance Status: I = Problem free or minor problems, 2 = Moderate problems. Key to Type of Problems: F = Financial, M = Managerial, T = Technical, 0 = Other Other Project Data Borrower Government of Benin Executing Agencies Borgou Province Regional Rural Development Agency (CARDER), Marketing and Export Agency (SONACEB), Soci6t6 Nationale de l'Agriculture (SONAGRI) and Soci6t6 Nationale pour la Production Agricole (SONAPRA) Follow-on Project Second Borgou Rural Development Project 7 ZoU PROVINCE RURAL DEVELOPMENT PROJECT (CR. 1314-BEN) Key Project Data (US$ million equivalent) Appraisal Actual or Actual as % Estimate Est. Actual of Appr. Est. Project Costs 62.7 64.5a 103 IDA Credit 20.0 22.2 111 CFD Loan 6.5 8.2 126 FAC Loan 3.7 4.8 130 Government 9.9 3.8 38 Farmers 22.6 28.5 126 ERR 22% 23% Number of beneficiaries 38,000 36,800 97 a. Difference due to exchange rate fluctuation Cumulative Estimated aqd Actual Disbursements (in SDR millions) FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 Appraisal 1.3 3.6 6.3 9.8 13.9 17.3 18.7 Actual 0 2.9 6.4 9.2 11.9 13.3 14.2 15.3 16.1 17.5 18.5 Actual as % of 0 82.1 102.3 94.3 86.3 77.0 76.0 81.8 86.5 94.1 99.4 Estimate (%) Final Disbursement: February 1, 1993 Project Dates Appraisal Actual Identification 10/78 Preparation 1980/1982 Appraisal Mission 11/81 Board Approval 11/82 Credit Signing 2/83 Credit Effectiveness 9/83 Completion Date 6/89 9/92 Credit Closing Date 12/89 1/93 Staff Inputs (Staff weeks) FY80- FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 Total FY82 Preparation 17.5 -- -- -- -- -- -- -- -- -- -- -- 17.5 Appraisal 47.9 6.4 -- -- -- -- -- -- -- -- -- -- 54.3 Neg./Board -- 6.0 -- -- -- -- -- -- -- -- -- -- 6.0 Loan Proc. 3.6 6.3 -- -- -- -- -- -- -- -- -- -- 9.9 Supervision -- 5.6 17.1 8.9 13.1 7.9 6.5 6.9 10.0 11.5 13.0 1.2 101.7 Proj.Admin. -- 0.9 0.1 0.6 0.1 0.1 -- -- -- -- -- -- 1.8 PCR -- -- -- -- -- -- -- -- -- -- 4.5 -- 4.5 Total 69.0 25.2 17.2 9.5 13.2 8 6.5 6.9 10.0 11.5 17.5 1.2 195.7 8 Mission Data Missions Date No. of Staff/Week Specialty a Ratin Type of persons in Field Status Problem Preparation 05/81 3 5 Ag. Ec. FA 09/81 1 1 Ag. Appraisal 11/81 4 4 Ag Ec AE FA Post. Appr 04/82 2 2 Ag Ec Supervision I 12/82 3 2 Ag Ec RL 2 Supervision II 05/84 7 10 Ag AE ME Li 2 Technical Ag Tr FA Manag. Supervision III 11/84 2 2.5 Ag FA 2 Supervision IV 04/85 2 3 Ag Ec 2 financial Supervision V 06/85 1 1.5 Ag 2 technical Supervision VI 12/85 2 4 Ec AF 2 technical managem. Supervision VII 03/86 3 7 Ec AE Ag I Supervision VIll 10/86 1 1.5 FA I Supervision IX 12/86 1 2 Ag I Supervision X 04/87 1 0.5 FA (see note)d Supervision XI 02/88 2 2 Ag FA 2 technical financial Supervision XII 07/88 2 2 Ag FA 2 managem financial Supervision XIII 03/89 2 2 Ag FA 2 financial Supervision XIV 12/89 2 1.5 Ag FA 2 financial Supervision XV 10/90 2 4 Ag Ec 2 financial Supervision XVI 07/91 2 5 Ag Ec 2 financial Supervision XVII 05/92c 2 5 Ag Ec 2 financial a. Specialty: Ag: Agronomist, Ec: Economist, AE: Agricultural economist, FA: Financial Analyst, ME. Monitoring & Evaluation Specialist, LI: Livestock Specialist, RE: Rural Engineer. TR: Training sp. b. Ratings: I Problem free or minor problems. 2 Moderate problems c. Final supervision mission combined with PCR mission d. Brief mission to review financial situation only Other Project Data Borrower: Government of Benin Executing Agencies: Zou CARDER and SONAPRA Follow-on Project: Agricultural Services Restructuring Project 9 SECOND BORGOu RURAL DEVELOPMENT PROJECT (Cr. 1877-BEN) Key Project Data (US$ million equivalent) Appraisal Actual or Actual as % of Estimate Est. Actual Appr. Estimate Project Cost 67.3 48.7 72 IDA Credit 21.0 21.3 100 CFD Loan 21.0 15.5 74 IFAD Loan 10.5 5.8 55 BOARD Loan 7.0 2.1 30 ERR (%) 25.5 29.0 Number of beneficiaries 50,000 38,000 76 Cumulative Estimated and Actual Disbursements (in US$ million equivalent) FY88 FY89 FY90 FY91 FY92 FY93 FY94 Appraisal 1.3 8.1 14.3 18.3 21.0 Actual - 8.9 13.1 16.9 19.4 20.5 21.0 Actual as % of Estimate (%) Final Disbursement: February 1, 1994 Project Dates Appraisal Actual Identification 9/84 9/84 Preparation 8-10/85 8-10/85 Pre-appraisal 3/86 Appraisal Mission 1/86 5/86 Credit Negotiations 3/87 11/87 Board Approval 6/87 2/88 Credit Signing 4/88 Credit Effectiveness 12/8 Completion Date 6/92 3/93 Credit Closing Date 12/92 9/93 10 Staff Inputs (Staff weeks) FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 Total Preparation 41.6 53.3 -- -- -- -- -- -- -- -- 94.9 Appraisal 14.3 30.3 5.7 -- -- -- -- -- -- -- 50.3 Negotiations -- -- 18.6 -- -- -- -- -- -- -- 18.6 Loan Proc. 0.2 1.4 6.9 -- -- -- -- -- -- -- 8.5 Supervision -- -- -- 6.9 9.7 8.9 10.6 16.1 3.9 -- 56.1 PCR -- -- -- -- -- -- -- -- -- 4.0 4.0 Total 41.6 69.2 37.2 6.9 9.7 8.9 10.6 16.1 3.9 4.0 232.4 Mission Data Mission Month/ No. of Days in Performance Type of Year Personsa Field Problemsb Pre-identification 3/85 1 10 Preparation 1 9/85 2(E,F) 4 Preparation II 10/85 1(E) 4 Appraisal 5/86 4(E,A,L,R,F) 21 Post Appraisal 10/87 2(E,E) Supervision I 3/88 2(E,E)$ 5 N.A. F,M Supervision II 9/88 2(E,AE)$ 19 2 F,M Supervision Ill 12/88 2(E) 7 2 F,M Supervision IV 3/89 2(E,AE)* 2 TA,F Supervision V 11/89 3(E,F,AE)* 3 2 P,F Supervision VI 5/90 4(E,F,A,AE)* 8 1 F Supervision VII 11/90 4(E,F,A,AE)* 17 1 F Supervision VIII 6/91 3(E,O,AE)* 6 2 F Supervision IX 10/91 3(E,O,AE)* 10 2 F Supervision X 1/92 3(E,F,AE)* 3 2 F,L, Supervision XI 4/93 2(E,A) 9 1 F,M a. E: Economist; F: Financial Analyst; A: Agronomist; L: Livestock Specialist: R: Road Engineer, E: Agro-Economist; 0: Operations Officer; F: Forester. b. Problems: F: financial; M: management, TA: technical assistance; P: procurementC L: legal $ Mission done with BOAD (Banque Ouest Africaine de D6veloppement). * Mission done jointly with the CFD (Caisse Frangaise de Dveloppement) Other Project Data Borrower: Government of Benin Executing Agencies: CARDER, SONAPRA Follow-on Project : None 11 Evaluation Summary Introduction 1. The economic performance of Benin is to a large extent determined by the agriculture sector, which accounts for 40 percent of gross domestic product (GDP), 80 percent of export earnings, and about 75 percent of employment. Food production is relatively diversified and meets the country's food requirements. Cotton, now the most important export commodity of the country, was introduced in 1963. 2. The three projects, Borgou Province Rural Development (Cr. 1127-0/1127-1-BEN), Borgou Province Rural Development II (Cr. 1877-BEN), and Zou Province Rural Development (Cr. 1314-BEN), were implemented between 1981 and 1993. This period in Benin was marked by government control of most economic activities, poorly coordinated investments and an economic growth rate lower than the population increase. By 1991, a new Government introduced a liberal and democratic framework, substantially reduced the size of the public sector, and promoted private enterprise. Objectives 3. The three integrated rural development projects were part of a series of eight in the agricultural sector. The projects were implemented over five to six years at costs of about US$41.0 (Borgou 1), 62.7 (Zou) and 48.7 (Borgou II) million equivalent. 4. The main objective was to improve rural incomes by increasing the production of foodcrops and cotton through institution-building and technological improvements. Project components included the reorganization of agricultural institutions in the two provinces; the promotion of farmers' organizations; credit, inputs and extension services to farmers; applied agricultural research; expansion of animal traction, development of bottomlands; and construction of rural roads and social infrastructure. The first Borgou project also included the construction of ginning factories; the second Borgou project supported an environmental protection component, the promotion of women's groups, and a cotton subsector rehabilitation program including, inter alia, the creation of an independent cotton stabilization fund and the setting up of a new system for determining the producer price for cotton. Implementation 5. Institutional and managerial problems, and late counterpart funding caused implementation delays of about three years in the Zou and first Borgou projects, and nine months in the second Borgou project. However, the three projects achieved or surpassed their physical targets, except for the development of bottomlands in the three projects, and minor components in Zou and second Borgou. Costs in US dollar terms were at or below the estimates. The agricultural extension system was successful, and farmers were generally responsive to its recommendations. 6. A major institutional restructuring was undertaken. The number of agencies involved in the cotton subsector was reduced, and the roles of the cotton company and the regional rural 12 development agencies were redistributed. Groups of farmers took over the responsibility for the primary marketing of cotton at the village level, and for inputs distribution among their members. Project Results 7. At the time of audit, two to seven years after completion of the projects, the production components had clearly surpassed their objectives. Over 13 years, cotton production increased by 15 times in the Borgou province and 13 times in Zou, much more than was planned at appraisal. This resulted from an expansion of cropped area and from yields which have been much higher than anticipated. Foodcrop production also went up significantly, but to a lesser extent. Other notable achievements were the creation and rapid development of numerous village groups, including women's groups, for foodcrop production, processing and marketing. Young, unemployed school graduates received loans to start their own farms. 8. This high rate of production increase, unusual for projects of this nature, can be explained by the great difference between the very low technological level of cotton production before project implementation and the high yields achieved as a result of the project. At the time of audit, the satisfactory economic performance of the projects was reinforced by a higher production level and a better world cotton price than anticipated in the Project Completion Reports (PCRs). The recalculated economic rates of return (ERRs) are 23 percent for the two Borgou projects combined, as well as for the Zou project. 9. The success of these projects resulted in part from institutional reforms (a flexible producer price system, removal of subsidies on inputs, improvement of ginning yields, and increased efficiency of project agencies), which led to a sharp reduction in the operating costs of the cotton subsector. The gross profit of the subsector has been positive since 1989. It is expected to reach a record high in 1994/95, following the devaluation of the Communaut6 Financi6re Africaine Franc (CFAF) and an increase of the world cotton price. The new, independent stabilization fund is operating satisfactorily. 10. The increasing role and professionalism of the village groups is an important step towards the participation of cotton producers in the decision-making process. Although not planned at appraisal, privatization of the cotton subsector activities is gradually taking place. The private sector is now supplying agricultural inputs and making investments in new ginning factories. The government has also decided to allow private investors, particularly cotton producers, to own shares in the cotton company. 11. The outcomes of the Borgou Rural Development and Zou Province Rural Development Projects are rated as satisfactory, and institutional development is rated as substantial. The outcome of the Second Borgou Project is rated as highly satisfactory and its institutional development as high, because of its remarkable achievement in restructuring the entire cotton subsector, and its success in addressing the issues of environment and women in development. 12. The performance of International Development Association (IDA) and its excellent cooperation with the Government and cofinanciers contributed to the projects' success. Bank staff drew from Bank experience with similar projects in other countries, the frequency of 13 supervision and staff continuity was adequate, and IDA responded flexibly to unexpected problems such as the need for extra ginning capacity. Sustainability 13. With the country's improved economic conditions, windfall profits of the cotton subsector, and effective project institutions, the sustainability of project benefits is likely for all three projects. The main project risks are associated with the farmers' reaction to future producer prices and any inflation due to the recent devaluation of the CFAF. In addition, the Regional Rural Development Agency (CARDERS) are now more dependant upon government funding, already an issue during project implementation. Findings and Issues 14. The success of cotton production in Benin reflects a sound approach to development, integrating agricultural research with extension, and financial and marketing services to producers. This strategy, used in a number of countries in West Africa, has made cotton production particularly attractive to farmers because of its high yield and guaranteed market. In contrast, farmers have not intensified foodcrop production as much because of frequent difficulties with marketing. The Benin experience demonstrates once again that research and extension services need to design their programs in consultation with the farmers. 15. Project achievements were possible mainly because of strong government commitment to reforms, especially during the past few years, and the Government's pragmatic and prudent approach towards privatization. It is important that the on-going privatization process keep the integrated approach intact as it was the key element contributing to the sharp increase in production. 16. The projects' success in organizing farmers and increasing their professionalism was facilitated by the Government's willingness to disengage from production activities and to rely on traditional village organization and self-help. 17. The projects also show that much more time than initially estimated may be needed to achieve complex development goals. In this case, three projects over a 13-year period were necessary to achieve the original objectives of significantly increasing rural incomes and establishing an efficient institutional framework.  15 1. Background 1.1 The three projects under review were implemented over a 13-year period (1981-93), a period of profound political and economic changes in Benin. In the early 1980s, the Marxist regime in power put a heavy emphasis on the development of industry and physical infrastructure, which absorbed about 80 percent of budgetary allocations. A large number of state enterprises were created to underpin the official policy of national control and self-reliance. The decade of the 1980s was a period of prolonged economic difficulties and lower living standards. Growth in gross domestic product (GDP) barely exceeded 1.8 percent a year in constant prices, while the population increased by 3.2 percent a year: from 3.4 million in 1979, to 4.3 million in 1987, and 5.4 million in 1992. 1.2 Following the democratization process of 1991, the new Government embarked on a policy to liberalize the economy. Priority was given to restoring the budgetary balance, restructuring public enterprises and the banking system, and implementin, an emergency social program. Measures were taken to allow market forces to determine prices, the cost of money, and the choice of objectives and production methods. The positive results of the new policy, combined with the 1994 devaluation of the Communaute Financir6 Africaine Franc (CFAF) and improved balance of payments, became apparent by the end of the year when the GDP increased by 5 percent. 1.3 Agriculture is the most important sector of the Beninese economy, accounting for 40 percent of GDP and 80 percent of exports. Unlike its Sahelian neighbors, Benin enjoys good natural resources and climatic conditions. Rainfall is generally adequate, ranging 1,500 mm in the South to 700 mm in the North. Smallholdings under customary land tenure are predominant. The sector is mostly subsistence-oriented, producing yams, cassava, maize, sorghum, groundnut and beans. In the early 1980s, government policy was to achieve self-sufficiency in food production and generate exportable surplus. However, policy execution was hindered by a shortage of properly identified projects, restricted finances, and a series of institutional changes among the large number of state organizations responsible for the execution of government programs. 1.4 Cotton, now the main cash crop and export commodity of Benin, was successfully introduced in 1963 under bilateral technical assistance. Seed cotton production rose from about 5,000 tons in 1965 to 50,000 tons in 1972, but declined to 16,000 tons in 1981. The major factors accounting for this variation were the movement in foodcrop prices relative to cotton price, as well as shortages of agricultural inputs for cotton production. 1.5 The first International Development Association (IDA)-supported project for the agricultural sector, the Zou-Borgou Cotton Project (Cr. 307-BEN), was approved in 1972. It provided funds for expanding and improving cotton production, processing and marketing. However, the project did not achieve its objectives because of institutional changes introduced by the Government, inappropriate price and marketing policies, and price movements which led farmers to abandon cotton production in favor of maize for export to Nigeria. The project was terminated prematurely by mutual consent. At project closing in 1975, cotton production was below pre-project level and the project economic rate of return (ERR) was negative. Lessons learned from the project were the need to emphasize organizational and institutional aspects, and 16 to avoid commitment to a single cash crop (Project Completion Report (PCR) Report No. 2034). An interim Technical Assistance Project (Cr. 716-BEN) was, therefore, approved in May 1977 to prepare rural development projects. Each project would cover one province, and would promote both cash crops and food crops. This approach was the basis of the three projects under review. 17 2. The Projects 2.1 The three projects were the third, fourth and fifth of a series of eight projects in the agricultural sector in Benin. Their main objective was to improve rural incomes by increasing the production of cotton and foodcrops. The development strategy combined the provision of services to farmers with the strengthening of institutions. The projects were complex in terms of number of components (up to 13), executing agencies (3 to 6), and external financing institutions (up to 4). 2.2 When the first Borgou Project was approved in April 1981, the main institutions involved in the sector were the Ministry of Rural Development and Cooperative Action (MDRAC) and its regional rural development branches (CARDERs). The Ministry held national responsibility for directing and controlling agricultural policy. The CARDERs were responsible at the province level for the provision of inputs, agricultural extension, primary marketing services, the maintenance of rural roads, and the construction of rural infrastructure. In the cotton subsector, the Soci6te Nationale de I'Agriculture (SONAGRI) was responsible for input supply and cotton processing; and the Marketing and Export Agency (SONACEB) for export of lint cotton. A stabilization fund (FAS) had been created to protect producers against fluctuations of export prices. It covered cotton, coffee, groundnut and tobacco. Most of these institutions were restructured and reorganized during the projects' 13-year implementation period. The following sections summarize the projects' objectives, implementation and outcomes, as described by project documents and the three PCRs. Project outcome, performance and main issues at the time of audit, two to five years after completion, are described in Chapter 3. A. Borgou Province Rural Development Project (Cr. 1127 and 1127-1-BEN) Objectives and Design 2.3 The project, approved in 1981 and completed in 1988, was expected to benefit about 39,000 farm families, about 57 percent of the population of Borgou Province. Production oriented components included the provision of inputs, credit, and extension service to farmers; applied research on both cotton and foodcrops; the expansion of animal traction; the rehabilitation of bottomlands; the construction of wells; and technical assistance. Institution- building components consisted of the reorganization and strengthening of Borgou CARDER and SONAGRI; consolidation of the farmers' cooperative movement; and creation of a monitoring and evaluation system. Total project costs were estimated at SDR 31.5 million equivalent,' to be disbursed over four years and financed by IDA (50 percent), International Fund for Agricultural Development (IFAD) (35 percent), and the Government (15 percent). When insufficient cotton ginning capacity became apparent during project implementation in 1985, the construction of two ginneries and storage facilities and the procurement of trucks, for a total costs of SDR 11.5 million, were supported by the IDA Supplementary Credit 1127-1-BEN (16 percent) and a Caisse Francaise de Developpement (CFD) loan (84 percent). 1. All US dollars are equivalent. 18 Implementation 2.4 Project execution suffered a three-year delay and 60 percent cost overrun in CFAF (5 percent cost underrun in SDR because of the appreciation of the SDR to the CFAF). Delays were mostly due to institutional and managerial problems and late counterpart funding. Farmers were responsive to the proposed technical recommendations, and greatly increased their cotton production. The diffusion of animal traction was successful, with over 27,000 pairs of oxen at project closing, versus 10,000 planned at appraisal. Cotton research successfully introduced higher yielding varieties, while food crop research was adversely affected by inadequate link with agricultural extension. The bottomland development program did not succeed, mainly because of lack of farmer interest (discussed in paras. 3.8-3.9). Outcome 2.5 The project was successful in helping farmers greatly increase their production, from 26 percent (sorghum) to 163 percent (cotton). At the time of project closing, more than 40,000 farmers had benefited from the project activities. In spite of depressed world price of cotton for most of the project implementation period, the audit found a recalculated ERR of 23 percent for Borgou I and II combined (para. 3.16) and also for Zou (para. 3.17). 2.6 On the institution-building side, the functions of FAS, SONACEB and SONAGRI were reorganized into a new agency, the Soci6te Nationale pour la Production Agricole (SONAPRA), which was responsible for input procurement and distribution, and marketing of cotton. In spite of the Bank's objections, the responsibility for ginning was transferred from SONAGRI to the CARDERs (and would be transferred again to SONAPRA under the Second Borgou Project). Such institutional reorganizations contributed to management problems and delays in project execution. Financial management of CARDER, a weakness identified at appraisal, was not significantly improved during project execution. Contrary to the Government's plans, there was no insistence on collective cropping; individual farmers received assistance in the same manner as cooperatives. A new development was the expansion of informal village groups (GVs) to handle the primary marketing (collection, grading and sorting) of cotton. Costs saved by SONAPRA were paid to these village groups in the form of a bonus (ristourne), subsequently used to invest in village infrastructure. 2.7 At the time of PCR review, the project was rated satisfactory (see para. 3.34 for the audit rating for the three projects under review). The PCR emphasized that the project success was due to the incentive of a high producer price for cotton, and to the provision of a sound input supply and a reliable marketing structure. In addition, adequate IDA supervision and the good relationship between IDA, CFD and project management permitted a fairly prompt response to issues as they arose, such as the need for extra ginning capacity. 19 B. Zou Province Rural Development Project (Cr. 1314-BEN) Objectives and Design 2.8 Like the Borgou project, the Zou Rural Development Project aimed at improving rural incomes by increasing the production of cotton and food crops. The project, approved in 1982 and completed in 1992, was to reach 38,000 farm families, or about half of the Zou provincial population. Production-oriented components included the provision of agricultural inputs, and extension services to farmers under a newly established Training and Visit (T&V) extension system, the introduction of animal traction, the strengthening of applied research for cotton and food crops, animal health care, the development of bottomlands, the rehabilitation and construction of wells, and technical assistance. Institution building components included the strengthening and reorganization of the Zou CARDER, the consolidation and development of village groups, the creation of a monitoring and evaluation system, improvements in the efficiency of SONAPRA, and the provision of technical assistance to cotton ginneries in the Zou province. The project was to be implemented over six years at a total cost of US$62.7 million financed by IDA (32 percent), CFD (10 percent), FAC (6 percent) and the Government (52 percent). Implementation 2.9 Project implementation was satisfactory but slower than expected, mainly due to late counterpart funding and the collapse of the national banking system. To alleviate the permanent liquidity problem, both IDA and CFD agreed to increase the funding level of operating costs. The physical targets of the project were substantially achieved. The livestock and animal traction components were the exception, as they were adversely affected by inadequate credit arrangements, and an inappropriate selection of animals resulting in high mortality. The development of bottomland and wells also fell short of expectations, due to shortages of personnel and equipment. The production of seeds for food crops was a notable failure of the project because of poor selection of the site for the seed farm. The credit closing date, initially planned for December 1989, was extended three times until September 1992. Actual project costs were US$64.5 million, a 3 percent overrun mainly due to exchange rate fluctuations. Outcome 2.10 The PCR concluded that, in spite of the macroeconomic difficulties faced by the country, the project was a success in relation to both its production and its institution-building objectives. At project closing, cotton production exceeded appraisal expectations by about 75 percent. Food crop production and yields also exceeded targets from 20 percent to 40 percent, except for groundnut. The project reached 97 percent of the number of families initially planned. 2.11 Despite its insufficient ginning capacity, SONAPRA, fully responsible for the industrial and commercial aspects of the cotton subsector, was considered an efficient organization. The elimination of input subsidies and the liberalization of markets were achieved during implementation. Village groups were developed and they were able to manage input and primary cotton marketing. The agricultural extension service was successfully reorganized 20 following the Training and Visit system. The satisfactory performance of the extension service appeared to play an essential role in the achievement of project objectives. The PCR re- estimated the project ERR at 22 percent, the same rate as the appraisal estimate. As with the first Borgou project, a higher production of cotton compensated for low international prices. Surveys carried out by the CARDER monitoring and evaluation (M&E) unit from 1986 to 1989 showed that the farmers' incomes were significantly higher at project closing than before the project, particularly for cotton producers. 2.12 The PCR mentioned that the project successfully introduced an improved market-based economic environment in Zou province. Efficient project institutions and a sound technical package were the main factors for project success, as well as the excellent relationship and cooperation between IDA, the cofinanciers and the Borrower. At PCR review, the project outcomes were rated satisfactory. C. Second Borgou Rural Development Project (Cr. 1877-BEN) Objectives and Design 2.13 The project, prepared and appraised at a time of historically low international cotton prices, was approved in February 1988. Like its predecessors, it had dual objectives: to improve agricultural productivity and to strengthen institutions. However, the project was designed as a hybrid operation, including both a sectoral adjustment component with quick disbursing tranches and related investments. 2.14 Production components included the provision of credit for the purchase of agricultural inputs and animal traction, and extension services following the T&V system to about 50,000 farm families; the rehabilitation of bottomlands and construction of wells; applied research for cotton and foodcrops; the rehabilitation of feeder roads in the Borgou province; and environmental protection through forestry programs and prevention of forest fires. The institution-building objectives sought to restructure and improve the financial management of CARDER and SONAPRA, establish an independent cotton stabilization fund, and design a new system for determining the farmgate price of cotton. The project was also the first to emphasize the role of women. It promoted the production, processing, and marketing of agricultural products by women's groups. Total project costs were estimated at US$67.3 million, cofinanced by IDA (31 percent), CFD (31 percent), IFAD (16 percent), West African Development Bank (BOAD) (10 percent), and the Borrower (12 percent). The project was expected to be implemented over five years. Implementation 2.15 Like its predecessors, the project achieved most of its production and institutional objectives. Inputs were distributed on time and credit recovery was about 99 percent. About 167 women's associations were created. Activities for environmental protection included the creation of 14 village tree nurseries and reforestation of about 2,000 ha. More village wells were built than had been planned, because of a high demand from villagers. Implementation was delayed, however, and achievements fell short of expectations for feeder roads and bottomlands (28 21 percent of target) financed by BOAD, and for research supported by IFAD, due to administrative difficulties and misunderstanding between the Borgou CARDER and the financing institutions. The Project was fully disbursed and closed in September 1993, nine months behind schedule. Project costs (US$48.7 million) were about 28 percent lower than estimated at appraisal, because the road and bottomland components were not completed. 2.16 The production of cotton and foodcrops again exceeded appraisal expectations. The PCR notes that the increase in cotton production was partly due to higher yields, while for foodcrops it was mostly the result of an expansion of planted area. The project institution- building component (analyzed in detail in Chapter 3 and summarized below) was a notable success. The cotton stabilization fund (FSS) was established as planned. SONAPRA and the Borgou CARDER were successfully strengthened. The operation of the ginning factories was transferred from the CARDERs to SONAPRA. A flexible farmgate price for cotton was adopted, linked to the world market. The factorygate cost of seed cotton decreased significantly due to improved management, while the cash flow of the cotton subsector became positive. Progress in terms of number and functions of village groups was also achieved. The project ERR was estimated by the PCR at 29 percent, higher than at appraisal (25.5 percent). This was due to higher volume of production, better cotton quality, higher prices for agricultural commodity, and the lower production and processing costs of SONAPRA. 2.17 The PCR concluded that even complex projects can be successfully implemented, provided that the project is properly designed, Government commitment is strong, and the role and responsibilities of the implementing agencies involved are clearly defined. 2.18 The on-going Agricultural Services Restructuring Project (Cr. 2285-BEN), was approved in 1991 and financed by the Government, IDA, IFAD, United Nations Development Programme (UNDP), as well as with French, German and European assistance. It was designed to consolidate the results of the three projects, and accelerate the disengagement of the Government from production and marketing activities in favor of private operators, particularly farmers' organizations. Downsizing of MDRAC personnel (with financial compensation and reassignment of remaining staff ) is planned both at the central (ministry) and provincial (CARDER) levels. Investment components include office space, equipment and vehicles for the ministry and CARDERs; training of personnel; research activities; equipment for seed production and a livestock laboratory; and credit lines and training to facilitate the reinsertion of redundant personnel in private sector activities. At the time of audit of the Borgou and Zou projects, the disengagement of the Government in favor of private operators was progressing satisfactorily, and the downsizing of CARDER personnel was underway. Covenants 2.19 In the three projects, covenants on institutional aspects, price policy, accounting practices and staffing were generally complied with, although not according to original timetables in some cases. The main weakness of Government performance was the failure to meet its counterpart funding commitment, particularly from 1985 onwards. This difficulty, however, was the result of macroeconomic problems, not of problems within the projects. 22 Monitoring and Evaluation 2.20 The CARDERS were successful in establishing an efficient M&E system in each province. In the first Borgou project, the M&E unit was originally designed to be independent from CARDER administration. It was to report directly to MDRAC, resulting in conflicting relations with the CARDER manager. Later, the M&E units in both provinces were fully integrated into the CARDERS, and became useful management tools. In addition, they prepared interesting studies which reviewed the impact of project activities on farmers' incomes. The audit mission found that the staff of the M&E units are well known and appreciated by project farmers, and that they have a good understanding of farmers' problems. In the two CARDERS, expatriate staff were progressively and fully replaced by qualified and competent national staff. 23 3. Main Findings and Issues at the Time of Audit 3.1 At the time of audit, two to seven years after the completion of the projects, it is clear that the three operations have successfully achieved both their production and their institution- building objectives. This was done despite delays in counterpart funding, other implementation delays, and the adverse macroeconomic conditions prevalent during most of the project years. A. Agricultural Production Cotton Production 3.2 In Benin, about 85 percent of cotton and a significant proportion of cereals, groundnut and cowpeas are produced in the Zou and Borgou provinces. Tables I and 2 in Annex A show the production indicators of the main crops in the two provinces since the start of project activities (Borgou, 1982 and Zou, 1983) through to the 1994/95 cropping season. Over 13 years, the production of seed cotton production increased by more than 15 times in Borgou and 13 times in Zou. This was significantly more (about six times) than planned at appraisal (see Figures 3.1 and 3.2). Such progress is partly due to a six to seven fold increase in cultivated area, but also to a remarkable achievement in higher yields (70 percent in Zou and 200 percent in Borgou). In the two provinces, yields have exceeded appraisal estimates by 50 percent and 30 percent, respectively. In 1995, cotton was the main cash crop in the Zou and Borgou provinces. It is cultivated by most farmers and contributes more than 50 percent of the farmers' incomes. For the whole country, the production of seed cotton has increased from about 15,000 tons in 1981/82 to 162,000 tons in 1992/93, 277,00 tons in 1993/94, and an estimated 300,000 tons in 1994/95 (Table 3 in Annex A). Another remarkable achievement was the increase in cotton ginning yields from 38 percent to more than 42 percent, and better quality of lint. This increase in quality was due to the introduction of new varieties and improved technologies. 3.3 The projects' success in cotton production was due to the implementation of a development strategy similar to that used by private agroindustries in developed countries. The strategy integrates the provision of technical, financial and marketing services to producers. It includes an excellent link between research and development, the timely delivery of inputs under a credit-in-kind system, payments to farmers for their production, and a guaranteed market for the total production of seed cotton. This contract-farming system, applied in most cotton producing countries in Francophone Africa,2 has made cotton production particularly attractive to farmers because of its guaranteed market. The farmers have confidence in technical services and they accept innovations, such as new varieties and new cropping techniques, without reservation. In this regard, the cotton technology was remarkably well and quickly assimilated by the contact groups established under the T&V extension system in both provinces because of its immediate and positive impact on yields 2. See OED Reports on Rural Development Projects in Burkina Faso (No. 2793, 4547, 5175, and 9699), Cote d'Ivoire (No.4568), Togo (No.5137), Cameroon (No. 8420), and Mali (No.3274, 7324, 9270 and 9688). 24 Figure 3.1: Cotton Objectives and Achievements Zou Province 70 60 - 850 - 40 0 220 10 - - - -A -- -- ----------------- 82 83 84 85 86 87 88 89 90 91 92 93 94 95 Year - - - SAR Projection ---Actual Figure 3.2: Cotton Objectives and Achievements - Borgou Province 180 160 C) 140- 120 - E 100 20 -8 S 60- 20 CL 20 ---------------- ----A 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 Year - - - - SAR Projection - Actual 3.4 The enthusiasm of farmers for the cultivation of cotton resulted in a considerable, unexpected increase in production. This led to occasional shortages in ginning capacity, and the need to sell part of the record harvests at low price in the form of seed cotton to other countries. In retrospect, the relation between the ginning capacity and the world price for cotton has been an issue throughout this series of projects. In the early 1980s, the rapid increase in production outstripped ginning capacity, but then the fall in price prevented project institutions from 25 financing the increased capacity with their own resources. This resulted in the use of external financing for the construction of new factories and storage facilities. The considerable production increase of the past two years again led to new shortages in ginning capacity, an estimated 50,000 tons in 1995. 3.5 An issue was the difficulty for CARDERS to adequately monitor the area planted in cotton and to correctly forecast the production of the forthcoming harvest. In the late 1980s, when world cotton prices were low and the subsector incurred losses, the Government attempted to reduce the cultivated area and to restrict cotton production through a quota system for the number of cotton producers and the quantity of seeds and inputs distributed. This control, however, proved inefficient and counterproductive, as farmers often reacted by importing poor quality inputs from neighboring countries, or by increasing area planted under cotton to compensate for the shortages of inputs. Such "hidden" cotton planting resulted in lower yields, and made it more difficult for the CARDERs to monitor and supervise cotton production. An attempt to limit the area planted under cotton and to reduce production through a lower producer price was made from 1990 to 1993 (table 3 in Annex), again without much success. This experience confirms th- finding of an 1987 Operations Evaluation Department (OED) study which found that farmers determine their cropping pattern more according to market security than to price. The Government's ability to control production, and to balance a guaranteed market and the producer price of seed cotton will determine project sustainability in the coming years. This issue will be discussed in Chapter 4. Foodcrop Production 3.6 Progress in foodcrops has also been significant under the three projects, but to a lesser extent. Over 13 years, the foodcrop production in Borgou increased by 400 to 700 percent according to the type of crops, mostly by expansion of cropped area. The introduction of new varieties resulted in yields that were higher from (20 percent to 60 percent) in 1994/95 than at project inception, but lower than those forecast at appraisal. By contrast, in the Zou province, the area planted to foodcrops remained stable or declined slightly over the past 12 years. The increase in production was due mainly to yields, which exceeded the pre-project situation and the appraisal forecasts. 3.7 The main problem affecting food crop production was difficulties in marketing, particularly in Borgou province where market uncertainty resulted in low cropping intensity. In addition, the gradual overvaluation of the CFAF against the Nigerian currency discouraged exports of foodcrop products to this country, a usual practice in the early 1980s. Increasing staple food needs of the Borgou population were met through the expansion of the cultivated area by opening up new lands, rather than through the use of costly inputs for foodcrops. While the cotton technology was quickly accepted by the contact groups established under the T&V extension system, the technical messages for food crops were generally poorly received by the same contact groups, due to market uncertainties. In Zou province, where population density is higher, new land is no longer available, and the foodcrop prices are 20-30 percent higher than in 3. Cotton Development Programs in Burkina Faso, C4te d'Ivoire and Togo. OED Report 6878, June 1987. 26 Borgou due to proximity of the main cities, the production increase was mostly the result of cropping intensification rather than expansion of cultivated area. Such differences between the two provinces were illustrated by the adoption rate of animal traction, much higher in Borgou than in Zou, and the interest in bottomland development where the reverse was the case (see next section). Project experience has shown that farmers give great importance to marketing opportunities in reaching production decisions. This finding demonstrates the need to design applied research and extension programs in full cooperation with project farmers and according to their needs. Bottomland Development 3.8 The same marketing and land availability factors also affected the development of bottomlands financed by BOAD and IFAD. In both provinces, bottomlands were predominantly developed for paddy production during the rainy season. Occasionally, vegetables are cultivated as a second crop. A typical bottomland covers 15-20 ha, and is cultivated by 75 to 100 families of the same village. In most cases, the initial investments consisted of mechanical land clearing, leveling and land prepatation for the first cropping season. Farmers provided their labor, not cash. As rice is not part of the traditional diet in Benin, paddy production is mostly market- oriented. Traditionally, women play an important role in bottomland cultivation. 3.9 Project achievement of the bottomland component was only 20 percent and 28 percent of target, respectively, in the first and second Borgou projects but reached 68 percent in Zou. Implementation was affected by a series of misunderstandings between CARDERs and the external financiers in both provinces. However, the most important factor of success for bottomland development in Zou was a high population density and subsequent pressure on land. In Borgou, where low population density and traditional shifting cultivation prevailed, farmers showed only a moderate interest in bottomland development. The other important factors determining response were access to market and the price of agricultural products, better in Zou than in Borgou. Of note is the increase in farmers' demand for bottomland in both provinces following the devaluation of the CFAF, and the resulting increased opportunity for rice exporting to Nigeria. B. Environment 3.10 Insufficient crop diversification and the farmers' increasing dependence on cotton for incomes has been a pervasive problem in Benin and other countries with similar climatic conditions. The spread of cotton in the crop rotation has been blamed for adverse effects on soil fertility. Fallow periods have diminished in the whole country, more so in the densely populated Maritime province. 3.11 Although cotton is the main source of incomes for project farmers, it occupies only about 30 percent and 11 percent of the cultivated area in Borgou and Zou, respectively. This demonstrates that farmers still give preference to foodcrops and self-sufficiency in the two provinces. The yields have increased over time for all crops, an indication that soil degradation is still limited. Experience has also shown that cotton producers use more modern inputs on foodcrops, an indication of the demonstration effect of cotton on other crops. These producers 27 also achieve better yields than do non-producers, as the fertilizer used for cotton production benefits the subsequent foodcrops. The West African Development Bank, cofinancier for the Second Borgou Project, correctly points out that increased use of fertilizer calls for regular monitoring of soil fertility and good soil management (see Annex B). 3.12 Nevertheless, crop diversification is highly desirable because of its contribution to environmental protection. Experience in other countries has shown, however, that diversification is difficult to achieve without specific support for research. Also a deliberate policy, such as tax exemption or other incentives, is needed to promote the establishment of agroindustries and encourage traders to work in more remote areas such as the Borgou province. Following the CFAF devaluation, studies on alternative cash crops are currently being carried out by the Caisse Frangaise de D6veloppement (CFD). It is worth noting also that the devaluation may result in a renewed opportunity for Benin to export maize and other crops to Nigeria. In the 1970s and early 1980s, this generated strong competition with cotton, and was the main reason for the failure of the Zou-Borgou Project. 3.13 The persistence of the slash and burn cropping system, particularly in the Borgou province, is a matter of concern. In this regard, an interesting feature of the Second Borgou project was the environmental protection component designed by CARDER. It resulted in the creation of village tree nurseries and the planting of fruit and forest trees (mostly cashew nut and teak). A vigorous campaign for an early and controlled bush fire system is also expected to reduce environmental problems in the province. New low cost technical recommendations, such as intercropping leguminous crop into maize, are well accepted by farmers because of their positive effect on soil fertility. It is still too early to know the adoption rate and impact of these environmental protection activities. However, from the mission's discussions with villagers, it is clear that concern for environmental protection is increasing among farmers and village leaders. C. Economic Performance First and Second Borgou Province Rural Development Projects (Crs. 1127/1127-1/1877- BEN) 3.14 The two projects in Borgou provide an example of the conceptual difficulty in recalculating a project ERR when two projects are disbursed in one continuous stream. The problem arises from the treatment of the investment of the other project and the allocation of the benefits to each project. The PCR for Borgou I (written in 1992, four years after implementation of Borgou II started and only one year before its completion) calculated the ERR for Borgou I without taking the investment made under Borgou Il into account but using actual production figures up to 1990. It claimed all benefits over 20 years as accruing to Borgou I, thus overestimating the returns to the first project. On the other hand, the PCR for Borgou II treated the investments of Borgou I as sunk costs. This method, while providing a plausible measure for the returns to Borgou II, greatly overestimated the return to the Bank's investment in the Borgou province. Hence, the PCRs' estimates of 35 percent and 29 percent for Borgou I and Borgou II respectively overestimated the ERR for the Bank's investment. 28 3.15 To avoid double counting of benefits and to fully account for the two projects' investments, the audit calculated one ERR for Borgou I and II combined. Using the data from the Borgou II PCR plus the Borgou I investments, the audit recalculated a combined ERR of 15 percent. This rate is high for projects of this nature, but it is consistent with the low productivity of cotton before the first project and the high yields and production achieved for all crops under the projects. Over the 13 years, cotton production increased fifteenfold in Borgou and food crop production also increased significantly. This is a remarkable achievement in a region often adversely affected by economic problems and poor performance. In addition, and in spite of delays in the implementation of Borgou I, the projects were completed without significant cost overruns. 3.16 Cotton production continued to increase after the completion of Borgou II, more than expected in either of the PCRs. As a result, at the time of audit (93-94 crop season), the recalculated ERR for the two projects combined increased to 23 percent (see Tables Al and A4), a rate comparable to the 21 percent (Borgou I) and 26 percent (Borgou II), estimated in the SARs. Since the time of audit, the CFA has devalued and the cotton price has risen further, which would improve the ERR if production remains stable. Sensitivity analysis shows that a 10 percent rise in the benefit stream increases the ERR by 0.5 percent. Zou Province Rural Development Project (Cr. 1314-BEN) 3.17 The audit largely confirmed the good economic performance of this project. The audit ERR recalculation for the Zou province took into account the larger cropped area, higher production and newer price estimates for 1994. It also prorated all costs to account for the larger cropped area. These effects balanced each other out and the recalculated ERR is 23 percent, an excellent result comparable to the 22 percent estimates in the PCR and at appraisal. D. Institution Building 3.18 The projects' remarkable agricultural and economic performance would have been impossible without the institution building components. The main achievements were the institutional restructuring of the cotton subsector and the establishment of an independent stabilization fund; the setting up of a flexible cotton producer price and the subsequent reduction of operating costs of the cotton subsector; and the strengthening of farmers' organizations. Institutional Restructuring 3.19 When the first Borgou Project was approved, a number of semi-autonomous State agencies (CARDERs, SONAGRI, SONACEB) were responsible for cotton production, ginning, marketing and export. Price stabilization was ensured by FAS, a fund covering all export crops. This complex distribution of responsibilities resulted in inefficiencies and high operation costs. The creation of SONAPRA to take over the functions of SONAGRI, SONACEB, and FAS was a first step towards an institutional simplification. Later, the distribution of roles between CARDERS and SONAPRA changed several times, causing some debate between the Government and the Bank, and resulting in implementation delays. The final arrangement was to make SONAPRA responsible for all cotton processing and marketing activities, and the 29 CARDERS responsible for agricultural development and rural infrastructure. This arrangement proved its efficiency in Benin, as it did in most cotton producing countries in Western Africa. 3.20 The CARDERS were the lead agencies for project implementation in their respective provinces. They also had overall responsibility for coordinating other rural development activities, such as applied research and feeder road construction and maintenance, which were executed by other agencies. For a time, the CARDERS took responsibility for the management of cotton ginneries. This was contrary to the project objectives to reduce the functions of CARDERS, and proved unsustainable. When SONAPRA took over the ginneries, the CARDERS returned to their role in rural development and their structure was streamlined. They played a major role in developing and supporting farmers' organizations (para. 3.29). They successfully established extension services modeled after the T&V system. As stated above (para. 3.7), the results were excellent for cotton production and less satisfactory for food crops. Finally, the CARDERS were successful in establishing an efficient M&E system in each province (para 2.20). Privatization of the Cotton Subsector 3.21 The privatization of the cotton subsector activities was not specifically addressed during preparation and appraisal of the projects. However, during implementation of the Second Borgou Project, the Government agreed to partly disengage SONAPRA from input supply activities. As a first experimental step, a number of private operators were allowed to trade an increasing fraction of the inputs imported by SONAPRA under competitive bidding. By 1995, about 80 percent of agricultural inputs were sold by the private sector. So far, however, the change has mostly consisted of a break in SONAPRA's former monopoly rather than full competition, as inputs have been sold at the same price by all operators. Following the CFAF devaluation, all traders simultaneously increased input prices by 100 percent, significantly more than in other countries of the CFAF zone. The Government position is that a full privatization of inputs, including their importation and open pricing competition, will be introduced if the current experiment proves successful, and when a quality control system of inputs has been put in place. 3.22 The CARDERs are also gradually disengaging from the transportation and distribution of inputs to producers in favor of the GV unions, when the latter have reached a technical and financial level enabling them to manage their business. The GV unions receive a fee for their service, which they invest in a wide range of infrastructure and activities. Seed production and veterinary services are also being transferred to the private sector. The Government's monopoly on lint cotton export and marketing has been abolished, and these functions have been redistributed between about a dozen of private operators. The Government addressed the need for more ginning capacity by allowing the private sector to participate with SONAPRA in the construction and the operation of three new ginneries with a total capacity of 75,000 tons. 3.23 In 1993, the Government decided to open up a third of SONAPRA's capital to the private sector, and more particularly to cotton producers. To this effect, the value of SONAPRA's capital has been estimated by independent consultants. The modalities, procedures and alternative solutions for farmers' participation are currently under review. The main options under review include: (i) a capital increase or sale by the state of a portion of its shares; (ii) access limited to cotton growers only, or open to all farmers; (iii) eligibility of individual 30 producers, or only GVs and unions of GVs; and (iv) the ways and means of selling shares to potential shareholders. A survey of cotton growers has shown that they are interested in owning part of SONAPRA's capital. Such interest was also expressed by the farmers during visits by the audit mission. The main reasons given by interviewees are their willingness to better understand the cotton pricing system, to be associated in the producer price decision-making process, and to share the risks and profits of the whole cotton subsector. 3.24 In theory, the privatization of the subsector is not contrary to the integrated approach (para. 3.3), which has been the key element of project success. However, opinions differ on this subject, and a school of thought within the Bank is that the integrated development approach should be dismantled in favor of a complete desegregation of activities. This audit concludes that such dismantlement would be dangerous in Benin because it could rapidly result in the declining performance of the subsector as experienced in some other countries. In market- oriented economies, many private agroindustries successfully operate on a similar integrated system, ensuring the provision of inputs, technical support and marketing services to producers. Price Stabilization Fund 3.25 Another achievement was the establishment in 1987 of an independent price stabilization fund (FSS), and its interministerial management committee. Over seven years, FSS has been able to accumulate about US$1.0 million according to a mechanism allocating the profits of the subsector between producers (30 percent), Government (15 percent), SONAPRA (15 percent), and the stabilization fund (40 percent). The success of an independent and efficient stabilization fund in Benin contrasts with the failure of a number of stabilization funds in other countries. The main reasons for this success were (i) the coverage of a single crop rather than all export crops; (ii) the Government 's commitment to use FSS only as a price stabilization mechanism, and not as a multipurpose agency or financing institution; (iii) a clear definition of the role and responsibility of the FSS, together with a set of mechanisms to determine stabilization and support rules and, (iv) an appropriate selection of key staff. Producer Price and Reduction of Costs 3.26 It had been recognized at the outset of the first Borgou Project that the existing bareme system, used to finance the annual costs of the cotton subsector, did not reflect its actual costs, and was a source of price distortion at all levels of the subsector. In particular, the price of agricultural inputs and the producer price of cotton were pre-determined at the beginning of the growing season, and not linked to the real import and export prices. Therefore, an agreement was obtained during loan negotiations on guidelines and a timetable to amend the bareme system. The first step was to remove subsidies on agricultural inputs and to privatize their distribution (para. 3.23). It was not, however, until the Second Borgou project that a flexible price system was fully adopted. It consisted of a floor price, determined by actual world price and market trends, later supplemented by a bonus (ristourne), if and when the actual export price of lint 4. Under this system, the intermediaries in the production transport and processing system were paid in the basis of a pre-determined schedule. 31 cotton permitted it. The result was a reduction of the guaranteed producer price from CFAF 105 in 1989, to CFAF 95 during the four following years, with no negative impact on total seed cotton production. No negative impact on production resulted from this reduction of farmgate prices (Table A3 in Annex A), because increasing yields and a guaranteed market were able to keep intact farmers' motivation to grow cotton. 3.27 Following these changes, together with internal restructuring and improved management, SONAPRA was able to reduce its operating costs by 22 percent. In 1993, the cotton lint cost was the lowest in West Africa, and about 30 percent lower than in C6te d'Ivoire. The gross profit of the cotton subsector went from negative in the early to mid-1980s to highly positive during the course of the Second Borgou project, despite low international cotton prices. Boosted by the devaluation of the CFAF and the increase in world cotton price, the gross profit is expected to reach a record high in 1994/95. E. Social Change 3.28 Farmers' Organizations. The projects turned out to be good vehicles for organizing farmers, increasing their professionalism, and developing their sense of responsibility. Although not planned at appraisal of the first Borgou Project, the creation and rapid development of village groups (GVs) has been an important project achievement. The groups are responsible for collecting, sorting and grading seed cotton. The costs savings for the CARDERS and SONAPRA for these operations are paid to the GVs in the form of a compensation, which is subsequently used for investment in village infrastructure. The GV formula, largely used in other West African countries for primary marketing of cotton, has been extended to the distribution of inputs among the GV members, credit committees, and marketing of foodcrops. At the time of audit, almost all cotton producers in the two provinces were members of GVs. In addition, unions of GVs were formed at the district (commune) and county (sub-pr6fecture) levels to coordinate the GVs' activities, and to create a framework for dialogue with SONAPRA and the CARDERS. This increased professionalism of the cotton growers was a major achievement of the projects, and an important step towards farmers' participation in the decision-making process within the cotton subsector. 3.29 Women's Groups. While the first Borgou project did not pay attention to the role of women in productive activities, the Zou and Second Borgou projects included a program designed to improve the living standards of women through specific activities supported by technical assistance, and the provision of credit for women's groups. Despite a slow start, the program turned out to be quite successful. At the time of audit, the number of women's associations had reached 169 in Borgou and 86 in Zou. Their main group activities were foodcrop and vegetable production, followed by the processing and marketing of agricultural products, mostly palm and groundnut oil. All leaders of the associations visited by the mission expressed their satisfaction with the program and their willingness to expand their activities. 3.30 Youth Program. The training and settlement of young, unemployed school graduates, whereby youngsters are given loans to start their own farms, have also been successfully carried out by the Borgou CARDER. In addition to helping alleviate unemployment in the province, the program has generated a new dynamism in some villages, as the young graduates have often 32 taken a leadership role in farmers' associations. Adult literacy programs for both men and women have also become quite popular in a number of villages. F. Performance of the Government and IDA 3.31 Project achievements have been made possible mainly because of the strong government commitment to reforms, particularly during the past few years. In fact, the Government went well beyond the institutional changes proposed by the projects, as illustrated by its on-going large privatization program. An interesting feature of the government program is its pragmatic and prudent approach, based on the principles of pilot experiences, and a smooth transition towards new institutional arrangements. 3.32 Another element of success was the good performance of IDA and its excellent cooperation with the Government and cofinanciers. The appraisal of the first project was preceded by careful studies and intense preparation. The lessons learned from completed projects were used for designing the follow-on operations. In addition, lessons from OED reports were taken into account. A number of measures adopted by the Government and IDA, such as the flexible pricing system linked to the world market price for cotton, the creation of an autonomous stabilization fund, and the farmers' participation in the capital of the cotton company, originated from the recommendations of the OED study described in para. 3.5. The frequency of supervision missions and staff continuity was adequate. Most supervision missions were conducted jointly with CFD, and Aide-Memoires were prepared and agreed upon by the two institutions. Although IDA was not able to influence some organizational changes, the main strength of its performance has been its flexibility. It enabled IDA to respond quickly to unexpected problems, such as the need for extra ginning capacity 3.33 Finally, an important lesson from the projects is that much more time than initially estimated was needed to achieve the multiple objectives of complex operations involving several institutions and about 100,000 producers, a feature common to many operations in the agricultural sector. In Benin, it took three projects and 13 years to reach the objectives of increasing rural incomes and exportations, and reforming regional and sectoral institutions. The project design evolved over time, in response to a changing situation. Gaining in experience, and induced by the strong government commitment, IDA moved from traditional investment projects (Borgou 1 and Zou) towards a hybrid-type operation (Borgou 2). This combined investments and sectoral adjustment with quick disbursing tranches and related conditionalities, a lending formula which proved effective and well accepted by the Government. G. Overall Performance of the Projects 3.34 The three projects have achieved or surpassed their original objectives, both in terms of economic performance and institution-building. Delays in implementation and institution restructuring were the only problems of the first Borgou and Zou projects. The audit rates the outcomes of the two projects as satisfactory, and institutional development as substantial. The Second Borgou project was the most successful in reorganizing the cotton subsector, strengthening farmers' organizations, and addressing the issues of women in development and 33 environmental concerns. The audit therefore rates the outcome as highly satisfactory, and institutional development as high. 34 4. Sustainability And Future Prospects 4.1 With improved macroeconomic conditions and satisfactory performance of the institutions, the sustainability of project benefits appears likely in the three projects. The main project risks are associated with the farmers' reaction to future producer prices and any inflation due to the recent devaluation of the CFAF. 4.2 At the time of audit, the effects of the devaluation, combined with the higher world cotton price, resulted in a three-fold increase of the lint cotton freight on board (FOB) price. This led to windfall profits for the subsector as a whole. The producer price of seed cotton was increased by 40 percent in 1994. At the same time, however, the price of inputs increased by 100 percent. The farmers reacted as they did in the years of low producer prices. They did not reduce the areas planted to cotton, but curtailed their use of fertilizers and chemicals during the following cropping season, or imported poor quality inputs from Nigeria. This resulted in declining yields, particularly in Borgou province. The producers are not a,vare of the pricing mechanism for cotton and feel that they do not receive a fair price for their seed cotton. Therefore a potential ri,k is a continuing reduction in the use of inputs in the years to come, resulting in lower yields and lower quality of cotton if the current farmers' perception persists. 4.3 A substantial increase in producer price would lead to the opposite risk. This could result in more enthusiasm for cotton, a large and uncontrolled expansion of cultivated area and a booming production that could again exceed the national ginning capacity. Besides, with inevitable price variations, a sharp fall in world cotton price would result in considerable losses if production is uncontrolled. A recent study in Benin has shown that with the current national production of lint cotton (110,000 tons), a fall in world price of US$0.05/lb. would exhaust the whole resources of the stabilization fund in one year. Therefore, there is a need to amend the existing quota system, to improve the monitoring of crops, and to reduce or eliminate hidden production. One possibility would be to contract with each producer the area planted to cotton, and determine a maximum amount of seed cotton to be absorbed by SONAPRA. This production control system would be facilitated by a widespread information campaign and closer cooperation with the GVs and their unions for a voluntary limitation of the cultivated area. In this respect, the participation of producers in SONAPRA's capital is likely to have a positive effect on the subsector policy and decision-making process. 4.4 According to the current distribution mechanism (para. 3.26), a significant part of the profits accrues to farmers' associations (GVs and GV unions), which in many cases have been created recently, and lack experience in accounting and financial matters. Increasing profits from the subsector in 1994 and 1995 (Table 4 in Annex) means that larger amounts of money are now benefiting those organizations, increasing the risk of misuse of funds and poor financial management. Some associations have grown substantially over time to several hundred members, and have diversified into new activities. This results in potential management problems. Occasionally, their members resent the decisions made by GVs leaders, and may disagree with the use and allocation of funds. Therefore, the CARDERs need to conduct an intensive training for associations, and to encourage more transparent management practices. 4.5 Uncertainty over the role and functions of the CARDERs is an issue that may affect project sustainability. The privatization of input distribution and other services has resulted in a 35 sharp reduction of the CARDERs' activities and downsizing of their personnel. The CARDERs, however continue to play an essential role in the maintenance of roads, the construction of village infrastructure, the provision of extension services, and support to GVs and women's groups. In the past three years, the CARDERs have been financially supported by the on-going Agricultural Services Restructuring Project, but at the same time they have been deprived of their former revenue earning activities. After this project closes, the CARDERs will depend for their financial needs on the fee paid by SONAPRA for their remaining role in the cotton subsector, and on budget allocations by the Government. Given th.- Government's failure to honor its budgetary commitments during project execution, there is a risk that the CARDERs' activities will be hampered by financial difficulties, resulting in poor staff efficiency, low motivation and disruption of services. The CARDERS' role and effectiveness in rural development, agricultural extension and support to farmer associations remains essential for project sustainability. The demand for bottomland development has significantly increased for the past two years. Demand for village wells has remained unsatisfied despite farmers' willingness to participate both in cash and work to support these investments. Moreover, part of the CARDERs' former activities, such as seed production and veterinary services, has not yet been fully taken over by the private sector, and needs to be organized and supervised during the interim period. In other words, it is the Government's role to support their action when the on- going Agricultural Services Restructuring Project is completed.  37 Annex A Supporting Tables and Figures Table Al: Crops-Objectives and Achievements-Borgou Province Crop SAR PYO PCR I ACTUAL % Difference est. (1982) (1992) 1993/9! 1994/95 from PYO to 1994/95 Cotton Area (ha) 23,100 12,500 77,200 125,611 102,902 +723 Production (t) 26,570 9,375 103,100 173,144 153,541 +1535 Yields (kg/ha) 1,150 750 1,370 1,378 1,487 +98 Maize Area (ha) 21,470 19,525 22,700 79,785 87,780 +350 Production (t) 32,520 13,670 90,600 92,232 102,075 +650 Yields (kg/ha) 1,515 700 1,170 1,250 1,160 +66 Sorghum Area (ha) 35,940 33,210 79,900 79,632 83,687 +150 Production (t) 41,170 19,930 61,600 65,019 68,623 +250 Yields (kg/ha) 1,145 660 770 811 820 +24 Groundnut Area (ha) 8,960 8,120 16,000 16,877 20,197 +150 Production (t) 9,670 4,875 14,600 16.542 19,295 +300 Yields (kg/ha) 1,079 610 920 980 955 +56 Cowpeas Area (ha) 8,530 7,685 16.500 15,445 17,467 +127 Production (t) 5,640 2,500 9,200 9,263 11,447 +360 Yields 661 325 560 600 655 +105 Rice Area (ha) 2,000 n.a. n.a. 2,081 2,641 n.a. Production (t) 3,700 n.a. n.a. 3,137 3,650 n.a. Yields (kg/ha) 1,850 n.a. n.a. 1,382 1,382 n.a. Source: 1993/94-1994/95 Annual Report - Borgou - CARDER Annex A 38 Figure Al: Evolution of Area planted for Major Crops - Borgou Province 130 120 110 100 80 --g -- S70 60 ~- 50 40 ' 30 20 ------------ 10 81 82 83 84 85 86 87 88 89 90 91 92 93/94 94/95 96 Year ---- Cotton - - a - Maize - -* - Sorghum Source: 1993/94-1994/95 Annual Report - Borgou - CARDER 39 Annex A Table A2: Crops-Objectives and Achievements-Zou Province Crop SAR PYO PCR ACTUAL % Difference est. (1983) (1992) 1993/94 1994/95 from PYO Cotton Area (ha) 12,500 6,500 37,300 31,433 49,739 +665 production (t) 10,800 5,120 32,700 41,550 66,376 +1196 Yields (kg/ha) 864 788 877 1,321 1,330 +68 Maize Area(ha) 77,000 77,000 75,570 71,615 69,114 -11 Production (t) 51,400 46,200 64,690 59,608 59,840 +30 Yields (kg/ha) 667 600 856 785 870 +45 Groundnut Area (ha) 46,000 46,000 52,500 47,899 43,190 -6 Production (t) 32,400 28,300 33,700 33,635 35,000 +24 Yields (kg/ha) 704 616 642 700 810 +31 Cowpeas Area (ha) 29,000 29,000 36,640 32,486 34,445 +18 Production (t) 13,500 10,100 18,810 21,362 23,250 +130 Yields 465 350 513 658 665 +90 Rice Area (ha) 1,200 850 590 808 n.a. -5 Production (t) 1,100 620 1,330 2,150 n.a. +95 Yields (kg/ha) 883 729 2,254 2,661 n.a. +265 Source: 1993/94-1994/95 Annual Report of Zou-CARDER Annex A 40 Figure A2: Evolution of Area planted for Major Crops - Zou Province 80 70 60 50- - - ----- e. 40 30 20 10 0 #--+-t--------F------------- - - - - - - 00 0 0 00 00 w0 00 w0 01 ONl ONCYON Year 6 Cotton - U - Maize -A- - - Groundnut Source: 1993/94-1994/95 Annual Report of Zou-CARDER 41 Annex A Table A3: Cotton Subsector in Benin-Basic Data Cropping Seed cotton Producer Lint Lint Season Production Price Production Price (Tons) (CFAF/kg) (Tons) (CFAF/ton) 1981-82 14,784 n.a. 5,914 n.a. 1982-83 30,381 n.a. 12,152 n.a. 1983-84 45,279 100 18,112 n.a. 1984-85 88,003 100 36,619 451,067 1985-86 89,315 110 36,619 318,250 1986-87 132,729 110 47,805 343,799 1987-88 70.204 100 27,238 383,899 1988-89 108,753 105 44,041 390,290 1989-90 104,741 95 42,719 471,581 1990-91 146,404 95+5a 59,210 409,926 1991-92 177,617 95+5 74,799 367,683 1992-93 161,595 95+5d 67,870 312,500 1993-94 277,000 100+10a 103,740 850,000 1994-95 b (300,000) (140+ ?) (126.000) (900,000) a. base price + bonus paid according to world price b. (estimate) Source: SONAPRA data Annex A 42 Table A4: Economic Analysis - Borgou I and II (Constant 1990 CFAF million) Project Costs Total On- Total Benefits Net farm Costs Incre. Benefits Production 1982 1271.52 409.44 1741.66 542.02 -1199.64 1983 2987.36 1549.55 4928.77 4077.23 -851.54 1984 2263.87 3590.82 6792.81 8947.30 2154.49 1985 1961.75 5284.58 8674.93 12808.11 4133.18 1986 1958.63 7278.61 11197.30 7139.53 -4057.77 1987 1969.20 8276.05 12638.45 9664.76 -2973.69 1988 1931.41 6454.56 10411.95 11437.80 1025.85 1989 3443.10 17163.55 20606.65 11095.46 -9511.20 1990 5762.92 16629.00 22391.92 19182.81 -3209.11 1991 2085.23 17930.00 20015.23 18402.25 -1612.98 1992 1665.26 18467.29 20132.55 20191.37 58.82 1993 791.03 18623.15 19414.18 17933.08 -1481.10 1994 1424.68 18884.50 20309.17 24365.38 4056.20 1995 616.88 18356.96 18973.84 24307.42 5333.58 1996 124.02 18336.88 18460.89 30106.45 11645.56 1997 124.02 18318.21 18442.23 30377.82 11935.59 1998 124.02 18318.21 18442.23 30377.82 11935.59 1999 124.02 18318.21 18442.23 30377.82 11935.59 2000 124.02 18318.21 18442.23 30377.82 11935.59 2001 124.02 18318.21 18442.23 30377.82 11935.59 2002 124.02 18318.21 18442.23 30377.82 11935.59 2003 124.02 18318.21 18442.23 30377.82 11935.59 2004 124.02 18318.21 18442.23 30377.82 11935.59 2005 124.02 18318.21 18442.23 30377.82 11935.59 2006 124.02 18318.21 18442.23 30377.82 11935.59 2007 124.02 18318.21 18442.23 30377.82 11935.59 2008 124.02 18318.21 18442.23 30377.82 11935.59 2009 124.02 18318.21 18442.23 30377.82 11935.59 Economic Rate of Return: 23% Note: Unlike the PCRs, a joint ERR was calculated for Borgou I and II. The ERR is lower than those calculated in the PCRs because it accounts for investment in the two projects. 43 Annex B Comments from a Cofinancier West African Development Bank Lome, November 28, 1995 Mr. Roger Slade, OED. Subject: World Bank/BOAD Cooperation in Operations Evaluation Dear Sir, Thank you for your letter of Oct. 31 and the draft audit report on development projects in the Provinces of Borgou and Zou in Benin. We are gratified at this demonstration of the Bank's interest in fruitful cooperation between our two institutions. In addition, we greatly appreciate the quality of the report, particularly the sections dealing with the overall and economic performance of the projects, institution-building, sustainability and future prospects. We would, however, like to make the following points: I) although one of the principal objectives of the projects was to improve rural incomes, there is no calculation of income per farmer and/or per group of farmers, although the audit report notes specifically that the CARDER "introduced an effective monitoring and evaluation system in each province"; 2) as well as the figures for crops cultivated (area, production, yields) it would be useful to follow the trends in these indicators via the curves for cotton (cash crop) on the one hand and those for food crops on the other (corn, sorghum, peanuts, cowpeas, rice, etc..); 3) as regards the environment, we believe that the increasingly intensive use of "more modern inputs" (e.g. chemical fertilizers, pesticides, etc.) risks damaging soil fertility in the long run. There is also a need for an effective system of soil monitoring for frequently sown areas, along with recommendations regarding the use of organic fertilizer for certain kinds of crops. We hope that the above comments will help to enhance the quality of the final version of the report. yours etc. /s/ Issoufou Kanda Director, Operations Evaluation and Internal Audit Unit 44 Annex C Response to Comments 1. OED appreciates the interest taken in the audit by the West African Development Bank (BOAD), cofinancier for the second Borgou project. We note with satisfaction that BOAD finds the report of good quality, BOAD's suggestions pertain to increasing the level of detail in the report, they are not objections or corrections to the report's content. 2. As noted by BOAD. the audit focuses on the global performance of the projects and their economic and institutional results. The audit does point out the positive consequences for farmers of increased production (see for examples paras. 2.5. 2.7, 2.10. 2.11, 3.2, 3.6). It also highlights the positive results achieved by village organizations and women's groups (section E of chapter 2). A detailed analysis of farm-level income for various categories of farmers would have been beyond the scope of this audit. 3. Annex A giNes data on area and production of major crops for the two provinces. As suggested by BOAD, graphs showing trends over time in areas for cotton and major food crops have been added (see figures Al and A2). 4. BOAD correctly states that the monitoring of soil fertility is an important part of soil conservation. This point has been added in para. 3.11. Paras. 3.10 to 3.13 already emphasized that good environmental protection measures are necessary, and para. 3.13 praises the environmental protection component implemented in the Second Borgou project. MAP SECTION  IBRD 27633 M L N l G E R 3 b1d e t u- NIGER RE O G NIGER AT BURKINA\ eG AGo\; FASO 1-- N0 20 0 KILOMETERS Banikora \ NATIONAL PARK DE .A PENDJAR --Kandi ý 9Ségbon K NIGERIA Matéri \ Tnguiéta Kobli Toukountouno .k NATITINGOU Kouandé sn Son.p- ' S.nnB"Noukoumnbé, 'abråKalalé M.ng.o i Péhonko BORGOU, KopOrgo Ndcli Nk'- N Djougou ýbrèr ~OAKOU --9, Tchaourou BENIN BORGOU AND ZOU PROVINCES TOGO TOGO .BORGOU PROVINCE ZOU PROVINCE PAVED ROADS RAVEL ROADS RAILROADS INTERNATIONAL AIRPORT † AIRFIELDS o DISTRICT CAPITALS . ® PROVINCE CAPITALS ® NATIONAL CAPITALS .abang - T N.%° °L-m - PROVINCE BOUNDARIES APIhk.. e . -- INTERNATIONAL BOUNDARIES 5 s Zè Ad houn LOKOSSA,, T o , AbomIi' ORTO NOVO agos .OuidhCOTONOU Srmå-IKpodji GHANA. M Popo ATLANTIQUE 4M 19 DECEMBER 1995   IMAGING Report No: 15218 Type: PPAR