Tanzania - Livestock Development Project

RETURN TO - REPORTS DESFI4ILL LU!'!RESTRICTED REPORTS DESJR'"L COPY Report No. TO-656a WITHIN ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION BEEF RANCHING DEVELOPMENT PROJECT TANZANIA October 8, 1968 Projects Department  CURRENCY EQUIVALENTS US$ 1 = Tanzania Shillings 7. 14 T. Sh 1 = 100 cents = US$ 0. 14 l I T. ShZ2 = US$ 2. 80 J, 1 million = US$ 2. 8 million WEIGHTS AND MEASURES Imperial System INITIALS AND ACRONYMS ADS - Agricultural Development Service NACO - National Agricultural Company Ltd. NDC - National Development Corporation TPL - Tanganyika Packers, Ltd.  TANZANIA BEEF RANCHING DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY I. INTRODUCTION . ............................................ 1 II. BACKGROUND ..... ........................................ 1 A. General ........................................ 1 B. The Beef Cattle Sector ..... .................... 2 C. Animal Health .. . ............................... 2 D. Agricultural Services ........ . ......... . .... 3 E. Government Policies on Livestock Development ... III. THE PROJECT ......................... , ...... ....... ... 5 A. Project Description ............................ 5 B. Project Area .................... ........................... 6 C. Detailed Ranch Features ........................ 6 D. Land Tenure ...... .............................. 7 E. Cost Estimates ... . ............................ 8 F. Proposed Financing ...... ....................... 9 G. Lending Operations ...... ....................... 9 H. Procurement .......................... .......... . 10 I. Disbursements and Auditing .. .................. . 10 J. Financial Implications ..... .................... 11 IV. ORGANIZATION AND MANAGEMENT ...... ...................... 11 A. Project Organization ........................... 11 B. Capitalization of the National Agricultural Company ........................................ 0........ 12 C. Technical Services and Training ................ 12 V. MARKET PROSPECTS AND RANCH INCOMES ..................... 13 A. Marketing ........ ............ .... 13 B. Production and Income on Project Ranches ....... 14 C. Financial Incentives .. .......................... 14 VI. BENEFITS AND JUSTIFICATION ............................. 15 VII. CONCLUSIONS AND RECOMMENDATIONS ... ...15 This report is based on the findings of an IDA appraisal mission to Tanzania in November and December 1967, composed of Messrs. J. Gerring, F. Knobel, A. Schumacher and T. Husain. Messrs. Gerring and Schumacher are primarily responsible for this report.  ANNEXES 1. National Development Corporation Table 1 - NDC Balance Sheets, 1964-1967 Table 2 - NDC - Profit and Loss Accounts, 1965-1967 Table 3 - NDC - Income, Investments and Loans, 1967 Table 4 - NDC - Agricultural Department - Consolidated Balance Sheets, 1965-1967 Table 5 - NDC - Agricultural Department - Consolidated Profit and Loss Statements, 1965-1967 Table 6 - NACO - Proposed Capitalization Chart 1 - NDC - Organization Chart Chart 2 - NACO - Organization Chart 2. Herd Development, Ranch Investment Costs and Operating Expenses Table 1 - Kitengule - Breeding/Fattening Ranch Table 2 - Mkata - Fattening Ranch Table 3 - West Kilimanjaro - Breeding/Fattening Ranch Table 4 - Breeding/Fattening Ranch 3. Table 1 - ProJect Investments) Table 2 - Phasing of Proposed Financing and IDA Disbursements Table 3 - Projected Phasing of Ranch Investment Costs Table 4 - NDC - Projected Cash Flow Table 5 - NACO - Projected Cash Flow W. Technical Services Budget 5. Training Program - Phasing and Cost 6. Duties, Responsibilities and Authorities of the Chief Development Officer (Ranching) 7. Table 1 - Economic and Financial Rates of Return Table 2 - Annual Increased Turnoff of Beef and Breeding Stock at Full Development from Project Ranches MAP  TANZANIA bEEF RANCHING DEVELOPMENT PROJECT SUMMARY i. The Governlment of Tanzania has requested an IDA Credit to help finance the first part of its national livestock development program, compris- ing mainly the development of five state beef ranches. The principal objec- tives of the Project would be to increase the output of beef and to expand the production of improved breeding stock. ii. Finance would be provided for such investments as on-ranch roads, firebreaks, fencing, water supplies, stock handling and animal health con- trol facilities, ranch buildings and an initial procurement of feeder steers for fattening. Funds would also be allocated for technical services and a training program for ranch management. iii. One fattening ranch and four breeding/fattening ranches, all owned by the National Agricultural Company Ltd (NACO), would be included in the Project. The funds from the IDA Credit for the development of these ranches would be on-lent by Government to the National Development Corporation (NDC) at 4 percent per anmum for a term of 50 years including a grace period of 10 years. NDC would on-lend these funds to NACO at 7 percent per annum for a term of 12 years including a grace period of 5 years. iv. The Project is estimated to cost about US$2.0 million of which US$1.8 million would be for ranch development and the balance of US$0.2 million for technical services and training. The IDA Credit would cover about 65 percent of the total project cost. The other 35 percent would be provided by NDC and NACO. Thle foreign exchange component is about one-half of the Credit. v. A Chief Development Officer (Ranching) of NACO would be responsible for preparing the ranch development plans and supervising their execution. He would also advise on and assist the on-going practical training program for assistant ranch managers and field assistants. vi. The Project is technically sound and economically justified. Expected benefits to NACO, Project ranches and to the economy are adequate. The proposed administrative arrangements are satisfactory. The Project is suitable for an IDA Credit of US$1.3 million. The borrower would be the Government of Tanzania.  TANZANIA BEEF RANCHING DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Gove-rnment of Tanzania hats requested an IDA Credit to help finance the first stage of its livestock development program. The Project seeks to expand the beef ranching operations of the National Agricultural Company Ltd (NACO) a subsidiary company of the National Development Corpo- ration (NDC). The Project was prepared during 1966 and 1967 with the assis- tance of the Agricultural Development Service (ADS), an affiliate of the IBRD's Permanent Mission in Eastern Africa located in Nairobi. This appraisal report is based on the findings of a mission which visited Tanzania in November/December 1967 composed of Messrs. J. Gerring, F. Knobel, A. Schumacher and T. Husain. Messrs. Gerring and Schumacher are primarily responsible for preparing this report. II. BACKGROUND A. General 2.01 The mainland of Tanzania, with a land area of 341,150 square miles, has a variety of climatic and ecological conditions. Broadly, the country consists of four agricultural regions: the Eastern coastal belt (sisal and cashew nuts) extendinpa fArUu Dar es Salaam to the Mozambique border, the Kilimanjaro area (coffee), a fertile belt around Lake Victoria (cotton, tea and coffee), the Southern Highlands (tobacco, tea and pyrethrum), and the range areas of Sukuaialand and the central plateau (cattle). The agricultural sector provides a livelihood for 90 percent of Tanzania's 12 million popu- lation, most of whom live at subsistence levels. 2.02 Tanzania's economy depends mainly on agriculture, which contri- buted about 54 percent of the total GDP in 1966, with livestock accounting for about 8 percent. Exports of meat, cattle and livestock products account for about 3-4 percent of total exports. In the face of uncertain price pros- pects for the three principal exports, cotton, sisal and coffee, diversifi- cation of farm production towards beef is most important, Tanzania's large beef herd, ten million head, its extensive rangelands and favorable climate offer good prospects for increasing the production of beef. 2.03 NDC was set up in 1965 to take the initiative in developing certain sectors of the economy on commercial lines. It is largely self-financing, investing its annual surpluses in new or existing subsidiary companies. NDC is in a strong financial position with capital and reserves of Sh 174 million (US$24.4 million) and projected annual net earnings from i-ts investments of Sh 24 million (US$3.11 million). NDC has incorporated its existing livestock investments into a subsidiary company (NACO). This new company plans to further expand its beef, dairy and pig operations.  B. The Beef Cattle Sector 2.04 The domestic livestock population of Tanzania comprises about 10 million cattle, 3 million sheep and 4.5 million goats. These animals graze on about 155,500 square miles. Approximately two-thirds of this area receives less than 30 in of rain annually. Most of the cattle population is in the traditional sector. Though the cattle are individually owned, they are grazed on communal lands. In consequence, each owner is intent on increasing his herd but does little to ensure an adequate supply of pasture to feed it. Since the number rather than the quality of cattle is the symbol of wealth, the culling of unproductive stock is seldom practised. Historically, the maintenance of large numbers of cattle is regarded as sound insurance against losses. Under such conditions, serious overgrazing frequently results in a marked deterioration of the pastoral areas. 2.05 The off-take of cattle from the traditional sector is estimated at 11 to 13 percent per annum. This estimate, however, is based on hide counts which include both fallen animals and those killed for subsistence needs. Recorded sales through the local markets totalled 285,000 in 1966 or less than 3 percent of the national herd. Potentially, there is considerable scope for increasing the present off-take to a more desirable 18 percent and even more for raising the average weight of slaughter stock, which currently is only about 250 lbs per head on a cold dressed weight basis. The establishment of fattening ranches for the purpose of increasing the weight of immature stock represents the best possibility for increasing beef production quickly in Tanzania. 2.o6 Consumption of beef is expected to increase about 4 percent per annum during the next five years. Currently, per capita consumption of beef may be approaching 20 lb. This is higher than the estimated seven pounds per capita consumption in Nigeria, but similar to estimated per capita consumption in Kenya and Uganda. Urban and institutional (hospitals, schools, military, etc.) demand is rising at 7-8 percent per annum, much of it for improved grades of beef. C. Animal Health 2.07 In recent years the Government has successfully controlled rinder- pest and contagious bovine pleuropneumonia. The last case of rinderpest occurred in 1965 in Masailand (north Tanzania). Each year approximately one million cattle are vaccinated against this disease to form a barrier zone of resistant animals should the disease be reintroduced across the country's northern boundary. However, it is over 20 years since rinderpest occurred in the southern half of Tanzania. 2.08 Contagious bovine pleuropneumonia last occurred some four years ago in a small area of north Masailand where some 330,000 cattle are vac- cinated annually. Blood testing to detect infected animals and strict control of stock movements are additional precautions taken against further outbreaks.  2.09 Foot-and-Mouth Disease is endemic in the main areas of the tra- ditional livestock sector. Government vaccinates all cattle before trans- ferring them to new stock areas such as the West Lake Region. Any affected herds are placed under strict quarantine. Government has stated that it will continue to apply effective measures of control. 2.10 Tsetse fly, the vector responsible for trypanosomiasis of cattle, infests more than 60 percent of the area of Tanzania. Since this disease virtually excludes the raising of cattle, it is the major factor influencing the distribution of cattle in Tanzania. Economic production, however, is possible where effective control measures are applied. Such measures are being directed against the fly as well as against the organism it transmits in a number of areas of Tanzania. The methods used include clearance of bush which harbors the fly; application of residual insecticides to the foliage of the bush; and use of a variety of drugs to prevent or cure the disease. In most cases a combination of two or more of these methods is used. 2.11 Tick-borne diseases, particularly East Coast Fever, are responsible for serious losses in the traditional livestock sector where dipping is not practised. Routine dipping of all cattle effectively prevents these losses. Dips are being established in a number of districts to enable compulsory dipping schemes to be implemented. Routine dipping is practiced on all NACO ranches. D. Agricultural Services 2.12 The Ministry of Agriculture and Cooperatives is responsible for all disease control measures and for much of the existing effort to develop the livestock industry. Of its eleven divisions, the activities of five pertain to livestock: Veterinary, Agriculture, Training, Planning and Marketing. 2.13 The Veterinary Division is mainly responsible for disease control, livestock research centers, tsetse control and eradication, stock routes, quarantine stations, meat inspection and breeding stations. The Agriculture Division, inter alia, is responsible for soil surveys, livestock marketing, pasture research and livestock statistics. The professional staff of the Veterinary and Agricultural Divisions comprises 26 expatriates and 18 Tan- zanians and 59 expatriates and 46 Tanzanians respectively. 2.14 Education and training facilities have been expanded recently: Tanzanians are obtaining degrees in agriculture at Kampala, Uganda, and in veterinary science at Kabete, Kenya (University of East Africa). The Vete- rinary Training Institute at Entebbe, Uganda, conducts a two-year course for the training of veterinary assistants with outstanding students permitted to stay for a third year for a diploma in animal husbandry. In addition, some 800 Tanzanians are studying for certificates and diplomas in agriculture and veterinary science at seven training institutes in Tanzania. Of these stu- dents, about 50 field officers and assistant field officers are being gra- duated each year in animal husbandry with diplomas from Morogoro Agricultural College and with certificates from the Ministry of Agriculture's Institute at  - 4 - Ukiriguru. However, it is evident that the agricultural sector will continue to require the services of expatriate professional and technical staff for some years to come. Despite efforts to staff the Government services with Tanzanians, there are more vacancies than can be filled by qualified Tanza- nians, especially in the fields of education, research, planning and the management of development projects. E. Government Policies on Livestock Development 2.15 Government is beginning to recognize the important role of live- stock development in the diversification of its agricultural production. Of the planned development expenditure of Sh 371 million (US$ 52 million) in 1967/68, the Ministry of Agriculture and Cooperatives was allocated nearly Sh 50 million (US$ 7 million) or 12 percent of which the livestock sector accounted for about Sh 7 million (US$ 1 million). The bulk of this invest- ment is for clearing further areas from tsetse fly infestation, controlling tick-borne diseases, improving stock routes and quarantine stations and con- structing additional livestock improvement and breeding centers. Government's plans to extend its existing 1,400 miles of stock routes by another 1,600 miles are contingent upon the provision of sufficient finance. 2.16 To promote livestock and crop development in the country's dry lands, Government passed a Range Development and Management Act in 1964. The Act empowers the Minister of Agriculture to set aside particular areas of the country as range development areas and to appoint a commission to administer them. In addition, the Act sets out general provisions for controlling stock numbers, grazing and cultivation rights and for facilitating range develop- ment by providing rights of occupancy to ranging associations formed by people who hold customary rights in the areas concerned. The Government is also pro- posing to set up a National Livestock Commission which, as a statutory body, would advise it on all matters affecting the livestock industry, particularly with respect to the organization and regulation of meat production and market- ing. These two pieces of legislation would provide the framework for the development of livestock production and marketing in large areas of the country. Following up this legislation, the Government has requested the assistance from UNDP of US$1.4 million for a major study which would investi- gate the potentials and means of increasing beef production from the tradi- tional sector. 2.17 Beef prices are free from central Government control for domesti- cally consumed beef. Tanganyika Packers Ltd (TPL), owned 51 percent by NDC, is a major buyer for the export market. For cattle meeting TPL's minimum weight criteria of 250 lb cold dressed weight (cdw), it pays a price of Sh 1.10 (US$0.15) per lb cdw. Cattle are purchased for domestic consumption at prices ranging from Sh o.60 (Us$0.08) to Sh 1.40 (US$0.20) per lb cdw - slaughter weight and quality being the principal determinants of the differ- ential. There are no quotas on the export of meat. Government levies a tax of three percent on the export of processed meat. Municipal governments charge market and other fees ranging in total from Sh 2 to Sh 10 (US$0.28 to US$1.40) per head marketed. Imports of virtually all agricultural inputs are free from duty.  -5- III. THE PROJECT A. ProJect Description 3.01 The Project would be part of the first stage of a long-term beef cattle production program. In this first phase finance vould be provided for the development of five large-scale ranches owned by NACO. This vould need to be followed by a broader based second phase project with two closely related objectives. The first objective would be to increase the sales of cattle suitable for fattening from the large traditional sector by the wider use of improved disease control measures and by the provision of better mar- keting facilities; the second, to raise the slaughter weight of these cattle by the introduction of improved bulls and the establishment of strategically located fattening ranches. During negotiations assurances were obtained that Government would undertake a survey of the livestock sector which would lead to a second phase integrated project. 3.02 For the investment program as proposed, provision would be made for financing on-ranch roads and firebreaks, fencing, water supply, stockhandling and animal health control facilities, farm machinery, ranch buildings, pur- chase of breeding stock and an initial procurement of feeder steers for fat- tening. Finance for the cost of technical services and training would be included. 3.03 In the Credit request submitted by Government, the investment pro- gram included the development of a very large (254,000 acre) ranch complex located at Mkata as a breeding/fattening operation. However, this ranch at Mkata is subject to extensive flooding in the wet season, which makes as much as two-thirds of the area ungrazeable for up to four months of the year. In addition parts of it are infested with tsetse fly. While the flood areas offer an additional grazing margin for exceptionally dry years, in view of the uncertainties involved, only about 80,000 acres of Mkata are included for initial development in the present Project. The Project also comprises ranches at Kitengule, West Kilimanjaro and two further units to be selected of approximately 80,000 acres each. Altogether, some 12 areas are at present under consideration as possible new sites for ranch development. Further portions of Mkata may be considered for fattening providing a study is made with a view to determine the extent to which existing problems could be over- come, as well as the economic feasibility of such development compared with other possible sites. A field review of the feasibility of the two sites selected for inclusion in the Project would be made prior to the IDA agree- ment to the site and for disbursement of IDA funds for their development. Assurances were obtained during negotiations that detailed ranch development plans for these latter two units would be submitted to IDA within the first eighteen months from the effective date of the proposed Credit. A field re- view of their feasibility would be made by IDA in the course of project supervision.  - 6 - B. Project Area 3.04 The three existing project ranches are widely separated (See Map). Kitengule Ranch is in the West Lake region in the northwest part of Tanzania. West Kilimanjaro Ranch is located in the northeast region in the valley be- tween Mt. Kilimanjaro and Mt. Meru. Mkata Ranch is located on the railroad line about 200 miles due west of Dar es Salaam. For the sites of the two additional breeding/fattening ranches included in the project and yet to be located, feasibility studies are being carried out at Pangani near Tanga, Missenye in the West Lake region and Kitulo near Mbeya in the southern region (See Map). C. Detailed Ranch Features 3.05 The Kitengule Ranch, together with its extension, covers a total area of approximately 100,000 acres. Currently carrying about 9,000 animal units comprising both local Zebu and improved Boran stock, this number would be increased to around 16,000 at full development as a mixed breeding/fat- tening operation. The ranch lies at an altitude of 4,000 feet and is gently undulating to flat in contour. Annual rainfall, which normally exceeds 30 in, is reasonably well distributed. This ranch has had areas of tsetse fly in- festation on both its eastern and western boundaries. Control measures taken since 1966 by the Tsetse Control Division of the Ministry of Agriculture have considerably reduced the level of infestation. Sufficient Government funds are available to complete this work by mid 1969. Provision has been made in the operating costs to maintain the barriers clear of bush and for drugs to treat the few cases of trypanosomiasis which may occur before the fly has been eliminated. 3.06 The West Kilinanjaro Ranch of 82,000 acres is already stocked with a Boran-type beef breeding herd and a flock of Black-faced Persian sheep which together total a cattle equivalent of around 7,000 animal units. The ranch is mostly flat with small areas broken in contour varying in altitude from around 6-7,000 feet. Rainfall is generally low at about 12 in per year. It is outside the tsetse area. 3.07 The 80,000 acres of the Mkata Ranch included under the Project are part of an extensive flat river basin. Situated at an altitude of about 1,500 feet, the mean annual maximum temperature is 80-85