Zambia - Commercial Crops Farming Development Project

L-otsA S ZA FILE COPY RESTRICTED Report Nlo. PA-28a 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 The report may not be published nor may it be quoted as representing their views.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 COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT ZAMBIA May 8, 1970 Agriculture Projects Department  CUGRENCY EQUIVALENTS US$1 = K 0.714 or 71.4 ngwee (n) Kwacha (K) 1 = Us$ 1.4O K 1,000,000 = US$ 1,400,000 K 1 100 n WEIGHTS AND MEASURES (British/American System) 1 short ton = 2,000 lbs = 908 kg 1 square mile 259 ha 1 acre (ac) = 0.405 ha 1 mile (mi) = 1,609 m = 1.6 km 1 bag = 200 lbs = 90.8 kg ABHLEVIATIOWS ADS - Agricultural Development Services AFC - Agricultural Finance Company CDC - Commonwealth Development Corporation GIiB - Grain Marketing Board MILD - Ministry of Rural Development TBZ - Tobacco Board of Zambia  ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT TABLE OF CONTENTS Page SUMMARY AND CONCLUSIONS .................................... i-ii I. INTRODUCTION . .................................. 1 II. BACKGROUND ..................1................. A. General . .................................... . 1 B. Agricultural Production ................. 2 C. Institutions and Agencies ............................ 3 D. Tobacco Industry o ................................. .. 4 III. PROJECT AREAS ..................................... 6 A. Location, Population and Land Tenure ............* ... 6 B. Climate, Soils and Vegetation ...... .................. 6 C. Transportation ...................................... 7 IV. THE PROJECT .............................................. 7 A. Description .......................................... 7 B. Detailed Features .................................., 8 C. Development Schedule ................................. 11 V. COST ESTIMATES AND FINANCING ............................ 11 A. Project Costs .......... .............................. 11 B. Proposed Financing ................................. 13 C. Provision of Medium Term and Seasonal Credits ......... 14 D. Procurement . .......................................... 14 E. Disbursement .......................................... 15 F. Accounts and Audit ....... ............................ 15 VI. ORGANIZATION AND PROJECT OPERATION ....................... 16 A. Tobacco Board of Zambia ...... ........................ 16 B. On-Farm Development ................ .................. 18 C. Selection of Participants ........... .. ............... 18 D. Leases .............................................. 19 E. Marketing and Processing ........... .. ................ 19 This report is based on the findings of a Bank Appraisal Mission to Zambia in December 1968 composed of Messrs. M. van Gent, J. Zarandin (Bank), and P. Hogg (Consultant), and a follow-up mission in June 1969 by Messrs. Rowe and Mehrad (Bank).  TABLE OF CONTENTS (Continued) Page VII. YIELDS AND PRODUCTION, MARKETS, FARMEIS' BENEFITS AND GO-VERNMENT REVENUES ...... ................... 20 A. Yields and Production ......... ....................... 20 B. Markets ............................................ . - C. Farmers' Benefits . ................................... D. Government Revenues ........... ....................... 23 VIII. BENEFITS AND JUSTIFICATION ............................... 23 IX. RECOMMENDATIONS .......................................... 25 ANNEXES 1. Zambian Production of Tobacco and Maize, and Tobacco Growing Methods 2. Existing Tenant Farmer Scheme, and Lease Arrangements for Tenants and Assisted-Tenants 3. Operating Costs - Mukonchi Training Farms 4. Operating Costs and Revenues - Mukonchi Training Unit C. Staff Training 6. Mukonchi Development Costs 7. Assisted-Tenant and Tenant Farmer Scheme Development Costs 8. Assisted-Tenant - Farm Investment and Budget 9. Tenant - Farm Investment and Budget 10. Tobacco Board of Zambia 11. Project Staffing 12. Tobacco Marketing Prospects 13. Applications and Sources of Government's Funds - Mukonchi Training Unit 14. Impact on Government Budgetary Position - Assisted-Tenant and Tenant Farmer Scheme 15. Economic Rate of Return Calculation - Assisted-Tenant and Tenant Farmer Scheme CHART MAP  ZANBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. This report sets forth the appraisal of a project designed to sup- port Zambia's tobacco industry and the development of commercial farming by Zambians. The main elements are (i) the Mukonchi Training Scheme which would train farmers in tobacco and maize production; (ii) the Assisted Ten- ant Farmer Scheme which would develop farms for leasing to farmers trained at Mukonchi; (iii) the Tenant Farmer Scheme which would develop new farms and refurbish existing farms for leasing to suitably experienced persons; and (iv) the provision of technical assistance services to small farmers. This would be the third agricultural project in Zambia financed by the Bank, previous loans being of US$5.3 million for forestry development in 1968 and of US$2.5 million for beef cattle ranching in 1969. Progress on the live- stock development project is satisfactory, and while the forestry project has run into problems it is anticipated that these will be resolved before the close of 1970. ii. Agriculture contributes only 7% of Zambia's GDP, but between some 50% and 60% of the active population are small scale cultivators or cattle owners. Almost all of the tobacco and most of the marketable surpluses of maize, livestock and fresh milk sold in Zambia are produced by non-Zambian farmers. The project would help to promote the growth of the tobacco and maize industries and to introduce Zambian farmers to cash crop production. iii. The project would be carried out by the Tobacco Board of Zambia (TBZ). TBZ would be reorganized and its staff strengthened for this purpose. In addition, managing agents would be appointed to operate and supervise the Mukonchi Training Unit. Until a sound government agricultural credit organi- zation can be established, TBZ would guarantee loans made by commercial banks to project participants for seasonal purposes and the purchase of equipment and the government would indemnify TBZ against any losses. As project to- bacco and maize would be sold through TBZ and the Grain Marketing Board such losses should be minimal. iv. The estimated cost of the project excluding interest and working capital is US$11.1 million. The proposed Bank loan of US$5.5 would finance the foreign exchange costs which constitute 50% of project costs. The equivalent of US$1.4 million would be met from part of a proposed loan from the Commonwealth Development Corporation (CDC) and the remaining funds would be provided by the government, commercial banks, tenants and assisted ten- ants. Where practical, project procurement would be by international competi- tive bidding, and goods and services obtained in this way are estimated to be valued at US$1.3 million. v. The rate of return to the economy from the Tenant and Assisted Tenant Farmer Schemes is estimated at 19% assuming full labour costs. If tobacco prices should fall by 10% the rate of return would be about 14%.  - ii - The benefits from the Mukonchi Training Scheme cannot be precisely quantified. The project would generate substantial foreign exchange earnings from tobacco of about US$2.9 million a year. and project maize production would be valued at about K 1.4 million annually. The project is economically justified and would be suitable for a Bank loan of US$5.5 million for a term of 25 years including a grace period of six years.  ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The project, subject of this report, would assist Zambians to enter commercial agriculture and help further develop the Zambian tobacco industry. It would do so by establishing medium-sized commercial tobacco farms for oc- cupation by Zambians, and by providing training facilities for potential farmers lacking managerial experience. Additionally, a small number of larg- er farms would be leased or rented to farmers possessing managerial experience of large-scale tobacco and maize production. In its request for financing the Government asked that the loan should cover the development of tobacco growing by subsistence farmers. Bank appraisal showed, however, that the plans for such development were insufficiently advanced and that it would be about two years before such a project could be considered by the Bank. 1.02 The project was prepared by the Government with assistance from Agricultural Development Services (ADS). This report is based on the findings of two Bank missions; one in December 1968, composed of Messrs. M. van Gent, J. Zarandin (Bank) and P. Hogg (Consultant) and which was as- sisted by R. Grimshaw of ADS, and a second in June 1969, composed of Messrs. R. Rowe and B. Mehrad (Bank). The second mission was necessitated by changes in the project proposed by the Government. 1.03 In the agricultural sector the Bank has made loans to Zambia of US$5.3 million (562-ZA) in 1968 for forestry development, and of US$2.5 million (627-ZA) in 1969 for livestock development. The livestock project is progressing satisfactorily. Problems have arisen with the forestry proj- ect; the planting program has been curtailed in view of new estimates of timber demand and of the wood quality of tree species being established under the project, and difficulties are being experienced in obtaining ade- quate numbers of professional personnel. The project is under close super- vision by the Bank, and given the expected cooperation of the Government it is anticipated that its deficiencies will be corrected during 1970. II. BACKGROUND A. General 2.01 Comprising about 290,600 sq miles, Zambia is land locked. Most of the country lies between 3,000 and 4,000 ft above sea level. Population was estimated at 4.1 million in 1969 and is believed to be increasing at 2.5% annually.  -2- 2.02 About 325,000 of the active population are engaged in non-agricul- tural occupations, and the bulk of the remainder are small scale cultivators and/or cattle owners. About 80% of the production of this latter group is self-consumed. In 1969 GNP amounted to about K 1,160 million (US$1,625 million) or about US$400 per capita. In 1968, agriculture, forestry, and fishing contributed about 7% of GDP, and mining (in particular of copper) about 42% of GDP. 2.03 The value of flue-cured Virginia tobacco production averaged K 4.2 million in the three years 1967-69, or about 7% of the total value of agri- cultural production, and exports of the crop amounted to K3.5 million. While these tobacco exports represented less than 1% of the value of total exports, they accounted for 50% of agricultural exports. In recent years, maize has become an export crop, but there are large fluctuations in production and consequently in exports. Of a 1966 crop 1/ of 420,000 short tons, 120,000 tons were exported to Congo (Kinshasa) and Mainland China; but the 1969 crop of 270,000 tons was sufficient only for local consumption and 110,000 tons were imported. Annex 1 contains details of Zambian tobacco and maize production, and of tobacco cultivation and curing methods. B. Agricultural Production 2.04 Some 1,000 commercial farmers, who farm north and southwest of Lusaka along the "line-of-rail" - the access from the South to the Copper- belt (see map) - form the bulk of the farm families who produce significant amounts of cash crops. The remaining 400,000 to 500,000 farm families are subsistence cultivators who cultivate by hand and practice a system of shifting cultivation to maintain soil fertility. These subsistence farmers produce small surpluses for sale, and the annual value of these surpluses is believed to be less than US$20 per family. 2.05 Most conspicuous amongst the commercial farmers are the non- Zambian farmers, largely British citizens, who produce about 95% of the tobacco and 60% of the maize, livestock and fresh milk sold in Zambia. Since Zambian independence in 1964, the future of the non-Zambian farm- er has become uncertain, and this uncertainty has been reflected in a number of ways. Several non-tZaubian rarmers have lef t the country; many of those remaining have l't. 8ec their farm reinvestment to a minimum and have switched to non-labor intensive activities such as livestock. This has caused a decline in maize and flue-cured tobacco production. 2.06 The strengthening of Zambian agriculture depends very largely on the lessening of economic dependence on non-Zambian farmers by the growth of cash crop production by Zambians. The Government's policy of promoting cash crop production by Zambians has been too slow to make up the deficit 1/ References are to the crop marketed through the Grain Marketing Board.  - 3 - in commercial farm production which is being caused by the decline of the expatriate farming community. The project described in this report re- presents the Government's most significant effort so far to introduce Zambians into commercial farming. 2.07 While maize (the basic foodstuff of Zambia) and tobacco dominate both cash and subsistence farming sectors, other important food crops grown in the subsistence sector are cassava and millet. Cash crops to which par- ticular attention is now being paid by the Government are cotton and ground- nuts, and substantial increases in cotton production are being achieved by subsistence farmers. Presently, a combination of maize and tobacco growing gives good financial results, but a wide range of crops and livestock can be produced in Zambia - many of which could be import substitutes such as soybeans, cotton and beef. Growing conditions would permit a satisfactorily diversified agriculture, but this can be brought about only by considerable government efforts. 2.08 The following table gives an indication of the relative economic importance of various crops and livestock products. The values refer to marketed production and not to total production. Certain of the figures, especially for beef cattle and groundnuts, are tentative. Average Estimated Value of Selected Agricultural Production 1967-1969 Gross Sales Value Relative Value Commodity (K million) (Maize - 100) Maize 9.9 100 Tobacco: flue- cured 4.2 42 burley .1 1 Cotton .6 6 Groundnuts 1.2 12 Sugar 1.0 10 Cattle 3.9 39 Milk 1.3 13 Poultry and eggs 6.2 62 C. Institutions and Agencies 2.09 Governmental responsibility for agriculture rests with the Minis- try of Rural Development (MRD). This Ministry has a wide portfolio, encom- passing such departments as Cooperatives and Social Development, as well as the departments of Agriculture, Forestry and Livestock. While relatively well staffed both at headquarters and with specialists at the major field stations, its extension service is weak. In general the Ministry has yet to have a significant impact on development in Zambia. The Tobacco Board of Zambia (TBZ) which would implement the proposed project is responsible to the Minister of Rural Development.  - 4 - D. The Tobacco Industry 2.10 In Zambia tobacco production started shortly before World War I, but it was not until the early 1950's that significant quantities of ac- ceptable quality were produced. In 1955 the British Government undertook to buy 4.5 million lb of flue-cured Virginia tobacco to stimulate produc- tion. After this the industry expanded and in the 1960's annual produc- tion was in the order of 14 million lb with a peak production in 1964 when 24 million lb were produced. In recent years the tendency has been for the acreage planted to decline. The decline resulted, in particular, from the enactment in 1967 of a Government decree greatly increasing farm labor wage rates and fringe benefits such as housing or a rent allowance in lieu. This, combined with an attractive maize price, and general labor unrest in the country led to a fall in tobacco production in 1967. In 1968 im- provement in the labor situation, more settled conditions, and a lower maize price, resulted in an increase in tobacco production. A further in- crease to 15 to 16 million lb was anticipated for 1969, but very high rain- fall - experienced about once in every decade - caused the loss of much tobacco and a crop of only about 11.1 million lb was obtained. The 1969/70 crop is not expected to be substantially larger. 2.11 Until 1966, most of Zambia's flue-cured tobacco was sold in Salisbury, Rhodesia. An up-to-date auction floor, owned by the Tobacco Board of Zambia (TBZ) and with a sale capacity of 450,000 lb per day, was opened in Lusaka in 1966. All Zambia's production is now sold over this floor. In 1967, TBZ commissioned a modern tobacco processing and packing plant in Lusaka, with a capacity of 40 million lb annually, to redry and process leaf. In 1968 the new plant processed and packed 8 million lb of tobacco. 2.12 About 60% (8.5 million lb) of Zambia's average annual flue-cured tobacco production is exported to Britain. Zambian cigarette manufacturers purchase a further 3.5 million lb. The remainder of the crop is exported to Europe. 2.13 Zambia's tobacco industry faces the prospect of falling produc- tion at a time when Zambia could profitably sell more tobacco on world markets. Zambian tobacco is 4 n demand as a replacement for the Rhodesian leaf which it closely resembles. The fall in production has several dele- terious effects. First the number of buyers attracted to the Lusaka auc- tion floor has been falling with the consequences of less competition and less favorable prices. Due to the circumstances which restrict shipment of Zambian tobacco through Rhodesia, buyers have to pay about KO.03/lb more to ship through alternate routes. While the Zaubian crop is attractive to buyers from a quality point of view the development of a distinct "buyers market" would result in the passing of this transport differential, and more, to producers. Second, larger government subsidies to TBZ are needed to operate the auction floor and packing plant, and the prospects are re- ceding of ever meeting, from self-generated funds, the service charges on  the capital employed in these facilities. If the crop fell to 6 million lb or less, TBZ estimates that it would probably benefit Zambia to sell its crop through brokers and abandon the auction floor and packing plant. 2.14 In 1966 the Government announced its intention to develop Zambian tobacco production to 100 million lb annually (this compares with a pre- sanctions annual Rhodesia, Malawi and Zambia production of about 200 million lb); this target appears to have been replaced by the less specific objec- tive of increasing production to a minimum sufficiently large to maintain active overseas interest in the Zambian crop and allow reasonably efficient operations of the TBZ marketing and processing facilities. Such a minimum level would be about 25 million lb. The prospects for sustaining tobacco production by non-Zambian commercial farmers are uncertain, and the Govern- ment is actively pursuing other methods of sustaining and increasing tobacco production. and these are aimed at establishing Zambian growers as the main- stay of the industry. Two development schemes were launched in 1966: - The Mukonchi training scheme, and - The tenant farmer scheme. The Mukonchi training scheme, an extension to which is part of the proposed Bank project, trains Zambians to a stage where they can manage a medium- size (about 170 acres in arable area) commercial farm, and then settles them as assisted tenants and supervises them on such a farm. The first trainees will be settled in 1971/72 1/ on farms established for them in 1970/71. Under the tenant farmer scheme, a limited extension to which would be financed under the proposed Bank project, Government rents farms of about 500 acres of arable land to experienced, mainly non-Zambian, tobacco growers for a period of five years. Tenant farmers grow a minimum of 60 acres of tobacco and 120 acres of maize a year; and the major objective of the scheme is to sustain national tobacco production until Zambian growers begin to play a significant part in production. In the 1966/67 crop year 11 participating tenants grew tobacco and TBZ estimates that they produced about 4% of the Zambian flue-cured crop in that season; in 1967/1968, 39 tenants grew 15% of the crop; in 1968/69, 62 tenants grew about 23%; and in the present season 72 tenant farmers are growing a crop. Details of the existing tenant farmer scheme are given in Annex 2. The supply of non-Zambian tenant farmers is diminishing, and in the limited extension to this scheme that would be financed under the project Zambians with appropriate experience, many of whom have gained this in Tanzania, would be settled on project financed tenant farms. 2.15 The Ministry of Rural Development (MRD) is responsible generally for the field development of the tobacco industry and TBZ was created in 1968, with wide powers as a controlling body for the tobacco industry. In October 1969, TBZ's activities were extended from tobacco processing and 1/ Throughout this report the tobacco year, starting August 1 and ending July 31 in the subsequent year, is used to describe time periods.  - 6 - marketing to include direct promotion of production, and it took over re- sponsibility for the Mukonchi and tenant farmer schemes. Since that time TBZ has also sponsored the production of tobacco by subsistence farmers, the "one-Acre Schemes"* III. PROJECT AREAS A. Location, Population and Land Tenure 3.01 Areas selected for project activity are sparsely populated and lie adjacent to, or within, the existing tobacco growing areas of the Central and Southern Provinces. Most of the land is State Lan4 nministered and con- trolled by the Commissioner of Lands, and the balance is Trust Land. Trust Land is administered by the Commissioner of Lands for the use or common bene- fits of the people, but "rights of occupancy" can be allocated "for the common good". During negotiations the government gave assurances that legal titles would be issued to all project participants in accordance with the terms and conditions described in paras. 6.15 and 6.16. A condition of ef- fectiveness of the proposed loan would be the conclusion of a lease or a "right of occupancy" between the Government and TBZ for lands required for the Mukonchi Training Unit. B. Climate, Soils and Vegetation 3.02 Climatic conditions in the project areas are reasonably uniform. Evenly distributed rainfall falling in the November-March growing season, ranges from a mean of 28 inches in the Southern Choma area to 40 inches in the Northern Mukonchi area. guring thg tobacco growing season mean maxiWum temperature varies between 77 F and 86 F and the mean minimum between 59 F and 68 F; frosts do not occur in the tobacco growing season. All project areas are subject to hail, and hail insurance is taken out by all tobacco growers. 3.03 Sand-veldt soils, consisting of loamy sands or sands overlying sandy clay loam or sandy clay, are common to the project areas. These soils are well drained and suited to flue-cured tobacco production. Topography is gently undulating and there are very few rock outcrops. Water supplies in all project areas are adequate, and obtainable from rivers, dams, boreholes or wells. Generally, growing conditions are very similar to those experienced in the major tobacco growing areas of Rhode- sia. 3.04 The project would be carried out on land which is covered with light forest. Clearing costs average K26 (US$36) per acre. This wood- land is known as "Miombo", and provides fuel which is ideal for tobacco curing.  - 7 - C. Transportation 3.05 All project areas are linked to Lusaka by either rail or road, and lie within 250 miles of the city. Zambia Railways operate the rail services, and two Government owned road transport organizations provide road haulage. Outlets to the sea are by the Great North Road to Dar-es- Salaam in Tanzania, and by the Great East Road to Beira in Mozambique. The distance by road to each port is approximately 1,000 miles. Lusaka has a modern airport suitable for freight aircraft. IV. THE PROJECT A. Description 4.01 The project forms part of a Government program to sponsor com- mercial crop production by Zambians. The crops would be tobacco and maize, presently a profitable combination; the increased production would further develop Zambia's tobacco industry and increase maize supplies which are needed for domestic consumption. The project consists of: - Mukonchi Training Scheme: Expanding the Mukonchi Training Unit to an extent where it would have the capacity for a yearly output of 50 farmers trained in maize and tobacco production; - Assisted Tenant Farmer Scheme: Developing and equiping about 270 farms of about 170 acres of arable land each for leasing to farmers trained at Mukonchi, and to other individuals with suit- able managerial experience and providing manage- ment and tractor hire services to support such farmers; - Tenant Farmer Scheme: Developing and equiping about 15 new farms of about 500 acres of arable land each, and purchasing and refurbishing about 15 partially developed 500-acre farms, for leasing and renting to individuals with experience of managing this size of farm; and - Technical Assistance: Providing the services of a specialist in small farmer tobacco growing to assist TBZ in planning and implementing schemes under which small farmers would grow a limited area of tobacco - "one acre" schemes. Implementation of the project would be the responsibility of TBZ.  -8- B. Detailed Features 4.02 Mukonchl Training Scheme - Mukonchi is located in the Central Province, about 40 miles east of Kabwe. The training unit is modelled on a highly successful training scheme now operating at Kasungu in Malawi where the Commonwealth Development Corporation (CDC) acts as managing agents for the Government of Malawi. Mukonchi, which is also managed by CDC, consists of ten nucleus estates with the capacity for growing a total of 600 acres of tobacco and 1,200 acres of maize. The nucleus estates operate as commercial farms and provide,in addition to training facilities, revenues which are used for operating expenditures. Trai'!es spend the first two years on the unit's nucleus estates, the first as laborers and the second as headmen. In the third through fifth years, trainees are placed in groups of five on training farms administpred by the Unit. Train- ees manage these farms under close supervision. Any proiits, up to a maxi- mum of K850 annually, accrue to the trainees, after the payment of full ex- penses including rentals for land, buildings and equipment, and a supervision fee. Such profits are placed in individual savings accounts to provide trainees with initial working capital when they become independent farmers. Annexes 3 and 4 provide estimates of the operating accounts of nucleus estates and training farms under the project. Under its ongoing program Mukonchi is being developed to a stage where it will graduate 25 trainees each year. 4.03 Under the project, the training capacity of Mukonchi would be doubled from 25 to 50 graduates per annum. The length of the training period would be reduced to four years. Four years have been shown to be satisfactory at Kasungu and trainees at Mukonchi have shown themselves to be no less capable. The expansion of the scheme would require an in- crease in the Unit's training farms and related facilities to enable the cultivation of 1,350 areas of maize and tobacco annually. 4.04 In mid-1969 the first group of trainees completed their initial two-year course; members of this group are growing their first training farm crop in the current 1969/1970 season. In 1971 the first 17 trainees under the project will leave the scheme and grow their first crop in the 1971/72 tobacco year followed by a further 20 trainees in 1972; in 1973, 45 trainees will graduate and in subsequent years the yearly output would be about 50. To date only about 13 trainees have dropped out of the scheme, mostly for health reasons. 4.05 The period over which this type of training, whether for tobacco, maize or other crops, would be required cannot be forecast. But in view of the expected demand for developed land as more Zambians enter commercial farming, assets at Mukonchi would not be wasted even if its training func- tion is discontinued. Farm planning has taken this future possible use into account, and Mukonchi is laid out to allow its eventual settlement.  - 9 - 4.06 In order to allow for future diversification the Mukonchi Unit would test on a commercial scale different crop combinations, both ex- cluding and including tobacco. The objective of these trials would be to establish alternative economic rotations, and to teach trainees to handle these different rotations and crops. During negotiations, as- surances to this effect were obtained from the Government, together with assurances that its Ministry of Rural Development would provide all rea- sonable assistance in this work. 4.07 Assisted Tenant Farmer Scheme - About 270 farms would be de- veloped under this scheme. Each would be of about 170 acres of arable land and would support the annual production of 20 acres of tobacco and 40 acres of maize. Farms would be grouped in threes, and while operated individual- ly, buildings and facilities of all three farms would be grouped around a common borehole, or other water supply point. Each assisted tenant would take up a farm equipped with a house, the buildings needed to cure, grade and bale the production of 20 acres of tobacco, a water supply system, and two laborers' houses. In addition, each farm would have 40 acres of land cleared before occupation, and another 80 acres would be cleared subsequent- ly. The government would lease these farms to the assisted tenants for 99 years. 4.08 Of the estimated 270 farms that would be developed under the pro- ject about 180 would be occupied by Mukonchi graduates. Of these 180 farms, about 70 would be developed adjacent to the training unit on land allotted by Government to the Mukonchi Unit. The training unit would provide a management service for the occupants of these holdings. Participants would be advised by Grower's Advisers, appointed for this purpose. In addition a tractor and farm machinery hire service would be provided by Mukonchi. While tenants would be encouraged to purchase and operate their own machin- ery, it would be uneconomic for them to do so in their early years of pro- duction. It is anticipated, however, that some project participants would purchase tractors and equipment and develop their own contracting business, and that eventually the training unit's service would be discontinued. The remaining 110 Mukonchi trainees would be settled in other areas. Government is now conducting surveys of potential settlement areas. In view of Zambia's extensive land resources no serious problems are foreseen in locating areas suitable for settling 70-100 assisted tenants in a group to whom similar services as foreseen for Mukonchi settlers would be provided. During nego- tiations assurances were obtained from Government that areas so selected would have adequate water and fuelwood resources. 4.09 The balance of 90 assisted tenant farms developed under the pro- ject would be leased to experienced farm workers, and to men who had success- fully participated in MRD's apprenticeship scheme, details of which are given in Annex 5. Almost every expatriate-owned commercial farm in Zambia has at least one capitao (foreman or junior manager) with the experience to sucessfully manage a farm growing 20 acres of tobacco and 40 acres of maize annually. Candidates would be carefully selected, as described in para 6.13, and in the initial years TBZ would provide one manager to assist each group of 12 farmers. The farms, which would be organized in the same  - 10 - way as at Mukonchi, would be developed in clusters of 12 and each cluster would be supported by a farm machinery hire service that would be operated by the TBZ manager. Fees for supervision and equipment hire would be the same as those levied on assisted tenants trained at Mukonchi. In 1968/69 two assisted tenants (ex-foremen) grew their first crop, and achieved to- bacco yields nearly double the Zambian average for the season, and a good performance appears likely for the five such assisted-tenants growing a crop in 1969/70. 4.10 Tenant Farmer Scheme - Under the tenant farmer sc!mne about 30 farms of 500 acres of arable land each would be leased or rented to farmers with the experience needed to grow 60 acres of tobacco and 120 acres of maize annually. Of the 30 farms to be developed it is anticipaL,_.d that about 15 would be new farms and the remaining 15 partially developed. The latter are farms which are expected to come onto the market during the project devel- opment period and would be purchased by the governmeni.; although such farm purchase would not be financed by the proposed Bank loan. It is anticipated that of the 30 farms developed under the project 20 would be taken up by Zambian citizens and ten by non-Zambians. Tenant farmers ould purchase and operate their own farm machinery. 4.11 Technical Assistance - Elsewhere in Africa schemes for growing tobacco by small farmers have been successful. Usually the acreage grown by small farmers is one acre or less. These schemes have been successful because of the high cash returns per unit area achievable from tobacco, and the close supervision given to participants. The Government is now considering such schemes for Zambia, but the 1969/70 season is the first in which the so-called "one-acre farmers" are growing a crop, and the number of these is small - less than 20. This type of development in Zambia has the problem of scattered and small settlements. This dispersal, and the small size of settlements make supervision of "one-acre" tobacco development extremely expensive; consequently an effective "one-acre" scheme probably will require a measure of resettlement. The services of a specialist in "one-acre" development to assist in planning and implement- ing suitable schemes and to organize the training of staff would be financed under the project. TBZ has employed a specialist whose experience and qualifications are satisfactory to the Bank. 4.12 Fuel Requirements - Project tobacco barns would be fitted with furnaces equipped with doors to enable the most economic use of fuelwood. During negotiations assurances were obtained from the Government that all Mukonchi trainees would be settled in areas where cutting of the "Miombo" woodland on a 30 year rotation would ensure a perpetual supply of fuelwood; and that other participants would be leased farms with at least a ten-year supply of fuelwood. Alternative fuels for curing would be oil and coal, both used in other countries, and plantations of eucalyptus trees made for this purpose. Preliminary investigations show that one acre of eucalyptus on a 5-year harvesting rotation would provide sufficient fuel to cure be- tween two and three acres of tobacco at each felling. Government and TBZ are investigating the use of alternative fuels, but in economic and finan- cial analyses it is assumed that project fuel requirements would come from natural woodland.  - 11 - C. Development Schedule 4.13 The project would be carried out over the five years 1970/71 through 1974/75. The number of assisted tenants and tenants settled annual- ly would be approximately as shown in the following table: Year ending July 31 - 1971 1972 1973 1974 1975 Total Assisted tenants: ex Mukonchi 17 20 45 50 50 182 ex Farm Managers and ex Apprentices 12 17 20 20 20 89 Sub-Total 29 37 65 70 70 271 Tenants: on new farms 3 3 2 3 4 15 on partially developed farms 2 2 3 4 4 15 Sub-Total 5 5 5 7 8 30 TOTAL 34 42 70 77 78 301 4.14 At Mukonchi the training farms acreage and related facilities would be increased to allow the cultivation annualy by 1975 of 1,350 acres of tobacco and 1,350 acres of maize. Present capacity is 158 acres of tobacco and 46 acres of maize. 4.15 During negotiations assurances were obtained from Government and TBZ that prior to the beginning of each tobacco year, the program for farm development for that year would be agreed with the Bank. This insures that the program of the development of new farms under the project would be in line with both the supply of qualified tenants and assisted tenants, the availability of suitable developed farms for purchase by the Government, and the need to continue Mukonchi as a training unit. V. COST ESTIMATES AND FINANCING A. Project Costs 5.01 Project cost estimates during the development period (1970/71- 1974/75) and their foreign exchange components are shown in the following table and are elaborated in Annexes 6 through 9. Project costs do not include interest payable during the development period and contain no provi- sion for working capital. They include, however, managing agents fees, salaries, wages and other administrative costs for the Mukonchi Training Unit and that part of TBZ salaries and administrative costs which can be  - 12 - SUTTARY TABLE OF PROJECT COSTS a, K(thousands) US$(thousands) Fore ,".u. Local Foreign Total Local Foreign Total Exch u;Coe 1. Overhead Costs Incurred by TBZ in Project Development Housing, workshops, con- struction and equipment 59 33 92 83 46 129 36 Vehicle purchase 1 3 4 1 4 5 80 Salaries and other ad- ministration costs 404 270 674 566 378 944. 40 Sub-total 1 464 306 770 650 Lh28 1,078 4o 2. Mukonchi Training Unit Costs Salaries and other ad- ministration costs 118 395 513 165 553 718 77 Farm machinery, equip- ment and vehicles 77 307 384 108 430 538 80 Houses, roads, buildings and land clearing 574 398 972 804 557 1,361 41 Sub-total 2 769 1,100 1,869 1,077 1,540 2,617 59 3. Tenant Farmer Scheme Costs Purchase of farms 150 - 150 210 - 210 - Houses, roads, buildings and land clearing 313 179 492 438 251 689 36 Improvement of purchased farms 45 30 75 63 42 105 40 Farm machinery and equipment 71 284 355 99 398 497 80 Sub-total 3 579 493 1,072 810 691 1,501 46 4. Assisted-Tenant Farmer Scheme Costs Houses, roads, buildings and land clearing 1,731 981 2,712 2,423 1,373 3,797 36 Farm machinery and equipment 184 737 921 258 1,032 1,289 80 Sub-total 4 1,915 1,718 3,633 2,681 2,405 5,086 47 5. Contingency Allowance 321 295 616 449 413 862 48 6. Project Cost 4,048 3,912 7,960 5,667 5,477 11,144 49  - 13 - attributed to the Tenant and Assisted Tenant Scheme. Full project devel- opment would not be complete until 1979, but development costs 1975/76 through 1978/79 would not be large and would be confined largely to land clearing costs. 5.02 Cost estimates are based on the experience of tobacco and maize farmers in Zambia and Rhodesia, and have been corrected for recent price developments in Zambia. They include a contingency of 10% on all building, equipment, land development and machinery costs. Administrative costs in- clude an in-built contingency to allow for possible salary and wage increases. B. Proposed Financing 5.03 It is proposed that the Bank should make a loan of US $5.5 million (K 3.9 million) to finance the estimated foreign exchange com- ponent equivalent to 49% of project costs. The Bank loan would be for a term of 25 years, including a grace period of six years. The term of the loan is justified by the expected life of the project. CDC has offered to make a loan of K 1.0 million to assist the Government in financing local expenditures for the Mukonchi component of the project. The CDC loan would have a term of 20 years, including a grace period of five years, and interest would be 7%. The CDC loan would cover expenditures made in 1969/70 at Mukon- chi, and only about K 510,000 would be disbursed against costs in the 1970/ 71-1974/75 period. Project costs would be financed approximately as follows: K US$ Z (million) of project cost Proposed Bank Loan 3.9 5.4 50 Government: 41 From Budget 2.8 3.8 From CDC Loan .5 .7 Commercial banks, tenants and and assisted tenants (exclud- ing working capital) .8 1.1 10 Total Project Costs 8.0 11.1 100 5.04 The borrower of the proposed Bank loan would be the Government of Zambia. The proceeds of the loan together with funds to cover that part of project costs met directly by the Government would be made avail- able to TBZ as a direct budget subvention and would not be repaid by TBZ. As explained in para. 6.01 all assets created under the project would re- main the property of Government. During negotiations assurances were ob- tained from Government that adequate funds for carrying out the project  - 14 - would be made available to TBZ in the form of a lump sum allocation an- nually, on the basis of estimates prepared following the joint annual re- view by Government, TBZ, and the Bank of the development program. Commer- cial banks would provide the medium term loans required by participants for the purchase of farm equipment which forms a substantial part of the costs of the Tenant Farmer Scheme. C. Provision of Medium Term and Seasonal Credits 5.05 Medium term credits to tenant farmers for the purchase of farm tractors, machinery and equipment, and to assisted tenants or the purchase of a limited amount of personally owned equipment such as hand tools and spray guns; as well as the seasonal credits (up to K 170/acre for tobacco, and K 40/acre for maize) required by all project par!r'-pants would be pro- vided by commercial banks. Such credits would be guaranteed by TBZ, which would be indemnified by the Government in the event of losses. The commer- cial banks (Commercial Bank of Zambia, Standard, and Barclays) have adequate funds for these purposes, and have stated that they are prepared to under- take the business. The ruling interest rate on seasonal loans is 7-1/2%, and on medium term loans 8-1/2%. 5.06 Assurances were obtained during negotiations that an appropriate agreement would be concluded between the Government, commercial banks, and TBZ for the provision of short and medium term credits to project partici- pants; and that in the event of these arrangements failing to operate satis- factorily the Government would make alternative arrangements satisfactory to the Bank. Such alternative arrangements, if needed, would be made prob- ably through the state-owned Agricultural Finance Company (AFC). Procedures for the collection of credit repayments would be those in force at present; these are stop orders in favor of the Banks with TBZ and the Grain Market- ing Board (GMB) through which all project participants would be required to market their produce. Effectiveness of the proposed loan is conditional on the conclusion of an agreement between Government and the commercial banks satisfactory to the Bank. D. Procurement 5.07 TBZ would let for international competitive tender all contracts for goods estimated to cost more than US$30,000 and all contracts for services exceeding US$140,000. In view of the nature of the contracts that would be let by TBZ, largely farm buildings and land development, and the presence of agents for many farm machinery manufacturers in Lusaka, it is anticipated that the value of goods and services obtained directly by TBZ from foreign suppliers would not exceed US$1.3 million. For contracts smaller than the above TBZ would use the Government's standard tender pro- cedures - these are satisfactory to the Bank.  - 15 - 5.08 International bidding would not apply to farm equipment and machinery purchased directly by participating farmers who would have a free choice. International manufacturers of vehicles, tractors and farm equipment are adequately represented in Zambia, and competition is keen. Tractors and farm equipment are imported from most West European countries, the USA and Japan. E. Disbursement 5.09 The Bank loan would be disbursed against: - the CIF costs of farm machinery, vehicles, other equip- ment and building materials imported directly for the project - about US$1.2 million; - 50% of the costs of farm machinery, other equipment and building materials procured locally; building and road construction, and land and water development - about US$3.2 million; - 75% of the costs of principal non-Zambian headquarters staff of TBZ, and payments to the Mukonchi managing agent - about US$500,000. An unallocated amount of about US$600,000 to cover contingencies would be provided in the loan. Disbursements of the loan would be made against im- port documents and appropriate records of expenditures certified by the TBZ Production Department Manager and the Chief Accountant. Estimated dis- bursements of the loan over the five-year development period are: Project Year 1 2 3 4 5 ......... thousands. US$ 1,019 941 1,180 1,180 1,180 Kwacha. 728 671 843 843 843 F. Accounts and Audit 5.10 TBZ would keep separate accounts for the project. During nego- tiations assurances were obtained from the Government that project accounts would be audited annually by an independent auditor acceptable to the Bank, and that such audited annual accounts would be submitted to the Bank not later than four months after the closing of the TBZ's financial year.  - 16 - VT. ORGANIZATION AND PROJECT OPERATION A. The Tobacco Board of Zambia (TBZ) 6.01 TBZ would carry out the project for the government, and all assets created under the project such as farms and the Mukonchi Training Unit would remain the property of the Government. TBZ, as agent of the Government would have full operational and supervisory powers, including the selection of participants for the Mukonchi Training Scheme, the Assisted Tenant Farmer Scheme and the Tenant Farmer Scheme, and would have the right to expel unsatisfactory participants. TBZ would also have full resr )nsibility for "One-Acre" scheme development. 6.02 TBZ is a statutory board formed in April 1968, when it succeeded the former Tobacco Industry Board (TIB). At Independence TIB inherited the Zambian operation of the Federation of Rhodesia and Nvasaland Tobacco Market- ing Board. More details, including financial information, of TBZ are given in Annex 10. The operations of TBZ are directed by the Executive Chairman of its Board, who is appointed by the President of the Republic, and who is assisted by a General Manager. The TBZ Board of nine members is appointed by the Minister of Rural Development. The Board now consists of the Execu- tive Chairman (an ex-permanent secretary of MRD), the Permanent Secretaries of MRD and the Ministry of Trade, three members representing the growers of Virginia, Oriental and Burley tobacco respectively, and three members rep- resenting business and financial interests. The Tobacco Act did not envisage TBZ entry into tobacco production and training schemes, and its provisions concerning the composition of the TBZ Board are now outdated. A condition of effectiveness of the proposed loan is publication of legislation, satis- factory to the Bank, amending the Act to allow TBZ to carry out its expanded functions, and to modify the makeup of its Board. 6.03 TBZ obtains its revenues from operating the auction floor and packing plant, and from moneys appropriated by Parliament. Since the auc- tion floor and packing plant operate at a loss due to low throughput, the Government subsidies are of crucial importance; in 1969 the subsidy appro- priated amounted to K 793,600, of which about K 593,000 was for the packing plant alone. 6.04 TBZ was reorganized in 1969, although without legal recognition, to enable it to carry out tobacco production programs including the project, and the proposed organization is shown in the Chart. The reorganization included: - the taking over by TBZ in August 1969 of the assets of the Mukonchi Company which, previouslv was a wholly owned subsidiary of the Industrial Development Corpora- tion (INDECO) - a State corporation:  - 17 - - the formation on October 1, 1969 of a production department in TBZ. Until that time TBZ was concerned solely with Tobacco processing and marketing. The Mukonchi Training Unit is now a sub-department of TBZ with its Manager reporting to the manager of the TBZ Production Department. TBZ intends to employ managing agents, probably the present managers of Mukonchi, CDC, to manage and supervise the training unit as well as the 70 assisted-tenants trained at Mukonchi who would be settled on land adjacent to the Unit. The managing agents would supply the Manager, Deputy Manager and Accountant of the Mukonchi Training Unit; the remainder of the Unit staff would be TBZ employees. A condition of effectiveness of the proposed loan would be that a managing agency contract for the Unit, satisfactory to the Bank, had been completed. 6.05 The Production Department of TBZ would have principal responsi- bility for carrying out the project. Assisted by a qualified accountant, a Planning Officer, and a Manager, Tenant Farmers, the Production Manager would supervise the work of three Divisions. One would be concerned with "One-Acre" scheme development and training, and would be headed by the "One-Acre" specialist who would be finanaced by the proposed Bank loan. Another would be the Mukonchi Division, and the third would be concerned with the Tenant and Assisted Tenant Farmer Schemes. The latter division would be organized on a provincial basis, with separate managers for activi- ties in the Central and Southern Provinces. The Central Province Manager would become responsible for Mukonchi trainees once they had been settled, but the servicing of these assisted tenants would be by Mukonchi Unit staff. The Production Division would be responsible also for supervising TBZ's present tenant farmers. 6.06 Staff. There is an acute shortage of trained Zambians, conse- quently, most senior positions in the project administration would be filled by non-Zambians. Most are now in post, including the "One-Acre" scheme Specialist, and the remainder are being recruited by TBZ. During negotia- tions, assurances were obtained from the Government that, during the dis- bursement period of the loan, persons initially and any subsequently ap- pointed to the TBZ positions of General Manager, Chief Accountant and Production Manager, would be mutually acceptable to the Government, TBZ and the Bank, and that appointments to the post of "One-Acre" scheme special- ist would be filled only following consultation with the Bank. 6.07 Of special importance to the success of the project would be the Scheme Managers, one of whom would be required for each 12 assisted-tenants who had not been trained at Mukonchi, and the Growers Advisors who would perform similar functions for assisted-tenants trained at Mukonchi although each of these would supervise an appreciably larger number of farmers. Suit- able candidates for these positions would be found among the graduates from the Natural Resources Training College (NRTC) (described in Annex 5) at Lusaka. In obtaining such staff, TBZ would be in keen competition with other Government agencies - in particular - with MRD which runs NRTC. Con- sequently, assurances were obtained from the Government during negotiations that suitably trained Zambian staff would be made available to TBZ, as set out in Annex 11.  - 18 - 6.08 With the staffing and organizational arrangements described above, TBZ would be well qualified to carry out the project. In particu- lar, it would be able to enforce very close financial control of all aspects of project operation. This would be both because it would be well organized and staffed for financial operations, and because TBZ auction floor and packing plant work is seasonal, and in the off season, August through January, TBZ would be able to deploy most of its packing plant and auction floor staff capacity to assist with its production programs. Most of such staff are well experienced both in tobacco production and other commer- cial aspects of the tobacco industry. B. On-Farm Development 6.09 TBZ would have responsibility for providing the buildings, roads, water supplies, and land clearing and development required on assisted tenant farms. To do so, TBZ would emplov contractors who would be super- vised by TBZ building inspectors - see Chart. Tenant farmers would super- vise all development required on their holdings, with the exception of boreholes. Farm development would be carried out in accordance with plans and specifications provided by TBZ, who would provide materials and money. Tenants would be visited regularly by TBZ building inspectors who would issue authorizations for materials and cash advances in line with progress. These arrangements are being used under the on-going tenant farmer scheme and work well. C. Selection of Participants 6.10 Mukonchi Trainees. Applicants are first screened by Provincial Agricultural Officers of MRD. The sole educational qualification is literacy although school grade standards are taken into account. A small committee including a senior Mukonchi staff member makes a further selec- tion. The final selection is at Mukonchi during a rigorous ten-day selec- tion course when applicants' aptitudes are thoroughly tested. Trainees are required to be at least 23 years of age, and, in practice, most are married. 6.11 Assisted Tenants. Direct entrants would have the same literacy and age qualifications as Mukonchi trainees; and would have worked a mini- mum of six years on a commercial tobacco farm, the last two of which would have been in the capacity of foreman or higher. Selection would be by a TBZ committee, which would require references from each applicant's previous employers. This committee would also interview the candidates' previous employers personally. Successful participants in MRD's appren- ticeship scheme would be eligible for selection bv a committee comprised of TBZ and MRD nominees. Details of the apprenticeship scheme are given in Annex 5. b.12 Tenants. Tenants would be selected bv a TBZ committee. Partici- pants would have a minimum of two years' managerial experience of tobacco  - 19 - growing, own a small truck or K 1,000 in lieu, plus K 200 in cash to meet legal and other fees, and be in possession of an up-to-date and satisfac- tory Banker's Reference. D. Leases 6.13 Assisted Tenants. Initially assisted tenants would be granted a conditional lease to their holdings. This conditional lease would be converted into a full 99 year lease on full repayment of the costs incur- red by TBZ and the Government in developing the farms together with in- terest at 7%. Assisted tenants would pay for their lease by means of 20 annuities, approximately K 1,500 annuallY. Such payments would be collected through stop orders in favor of TBZ against the proceeds of assisted- tenant's annual tobacco and maize sales. A suitable form of lease was a- greed between the Bank, Government and TBZ during negotiations. This sets out the rights and obligations of assisted tenants, contains provisions al- lowing TBZ satisfactory control of the cropping patterns and rotations used by assisted tenants, and provisions for compensation in the event of a grower being evicted (for unsatisfactory performance) or voluntarily giving up his holding. 6.14 Tenants. The lease purchase arrangements described above would be used for Zambian tenants, who would be required to purchase their farms. Non-purchasing tenants, who would be non-Zambians, would pay annual rentals equivalent to 6-1/4% of the cost of improvements plus an appropriate land rent. These rentals would not be sufficient to recover investment costs, but a concessionary term is justified because such farmers would operate the farms at their own risk and at the end of the rental period the Government would remain in possession of a fully developed farm with well maintained assets. The arrangements for these rentals resemble closely those now used in the on-going tenant farmer scheme, see Annex 2. An ex- ception is, however, that the arrangements and form of agreement agreed between the Government, Bank and TBZ during negotiations guarantee satis- factory tenants an option at the end of the first three years to extend the period of their rental for an additional period of 5 years (giving a total of 10 years). 6.15 Head leases and, where appropriate right of occupancy would be issued to TBZ for project farms, and tenants and assisted tenants would enter into sub-leases and sub-rights of occupancy. More information on leases is given in Annex 2. E. Marketing and Processing 6.16 All project-produced tobacco would be sold by auction on the TBZ floor at Lusaka. The floor is sufficient for the sale of 2,500 bales or 450,000 lb of tobacco at one time. Payment to the farmer would be net of auction charges and any transport or other charges, as well as stop- pages made for fees, rents and annuities.  - 20 - 6.17 Revenue for operating the floor is derived from a charge of K 0.20 per bale for handling, and a commission of 2% on each farmer's gross sale proceeds. A levy of K 0.003 per lb is also payable by the grower; this is passed on to one of the three tobacco growers organiza- tions, in this case, the Virginia Tobacco Growers Association of Zambia (VTGAZ). All proJect participants would automatically be eligible for membership of VTGAZ. The TBZ owned processing and packing plant is located in Lusaka alongside the auction floor. 6.18 All project-produced maize which farmers wished to sell would be purchased by the Zambia Grain Marketing Board (GMB), a Government mar- keting board. GMB owns and operates bulk and bagged storage facilities. The Board, in turn, sells grain to local millers and distri'3utors and ex- ports surpluses. VII. YIELDS AND PRODUCTION, MARKETS, FARMERS' BENEFITS AND GOVERNMENT REVENUES A. Yields and Production 7.01 Tobacco. During the five years, 1964 through 1968, the national annual average yield of virginia tobacco was about 924 lb/acre, see Annex 1. In project projections, an average yield of 1,000 lb/acre is assumed for all project-produced tobacco. While about 8% above the five-year national average, 1,000 lb/acre is a realistic estimate for project parti- cipants. The reasons are as follows: i) the acreage figure used in cal- culating the national average is that used by farmers in applying for seasonal credits - most farmers deliberately inflate their acreage figure to obtain maximum credit; ii) in the Southern Province, tobacco farmers grow a late tobacco crop in addition to the main crop - while this crop can be very profitable yields are low and deflate the national average; iii) yields well in excess of 1,200 lb/acre are consistently obtained by efficient growers, and the tendency is for yields to rise - in the 1950's the national yield average was below 700 lb/acre; and iv) intense training and experience as well as careful selection of participants would ensure that only skilled farmers capable of handling commercial units would par- ticipate in the project. 7.02 Maize. Maize yields are forecast at 25 bags (5,000 lb)/acre. Yields in this range are regularly obtained by commercial farmers, and as in the case of tobacco the yield trend is upwards. 7.03 Farms established under the project would be in full production after approximately 6 years - by 1975/76. In that, and in subsequent years, total production would be about 4,600 tons of flue-cured tobacco and 42,500 tons of maize. Of these quantities, 1,000 tons of tobacco and 7,400 tons of maize would be produced by the Mukonchi Training Unit. On the basis of  - 21 - the price forecasts given below, the annual value of project production at full development would be about K 4.3 million (US $5.9 million equivalent). B. Markets 7.04 Tobacco. In recent years about 8.5 million lb, 60% of Zambia's annual production of virginia tobacco have been exported to Britain, large- ly to the two major U.K. manufacturers. Local cigarette manufacturers in Zambia purchase about 3 million lb each year; the remainder of the crop is exported to Europe. The Tobacco Advisory Committee of the United King- dom, which represents British manufacturers, indicated at a meeting held with TBZ in July 1968, that British manufacturers wished to maintain pur- chases of Zambian leaf in 1969, 1970 and 1971 at the same proportion - 60% - provided that quality was maintained and that the total crop would not exceed 15, 20 and 25 million lb respectively in the three years. While this assurance is only very short term it indicates the general acceptabili- ty of Zambian tobaccos. 7.05 Prior to 1965, the Zambian crop was purchased by Rhodesia based buyers, and was treated as part and parcel of the Federation of Rhodesia and Nyasaland's overall production of some 260 million lb. Following Rhodesia's unilateral declaration of independence, most traditional buyers of Rhodesian tobacco had to look elsewhere for substitute supplies. In addition to the relatively small quantities available from Zambia and Malawi, these were found particularly in the relatively low cost producing areas of Pakistan, India, Thailand, South Korea and Eastern Africa. In general, however, supplies from these sources were, and continue to be, of lower quality than either Zambian or Rhodesian tobaccos, and Zambian tobac- co has not had any problem in competing with them. 7.06 Under prevailing circumstances Zambia should be able to profitably increase tobacco exports by supplying a part of the market lost to Rhodesia; it should also be able to maintain this share of the market even in the event of Rhodesia again becoming a major exporter provided it can offer sizable quantities at comparable quality and competitive prices. Reasons for this would be: - the similarity in quality between Zambian and Rhodesian tobacco; - the moderate quantities of tobacco involved, between 20 and 25 million lb if Zambia's production plans are achieved, the great bulk of which would be produced on closely supervised schemes which would insure quality and facilitate the introduction of measures to increase production efficiency.  - 22 - 7.07 Over the past four years the auction floor price for Zambian flue-cured tobacco has been about K 0.32/lb. This average is not expected to change significantly in the future since, as discussed in Annex 12, despite an expected decline in the world consumption expansion rate from 2.3% annually during the 1955-66 period to about 2% in the 1970's, no major disequilibrium in the world supply and demand of tobacco is antici- pated. Consequently, in project projections a gross price of K 0.32/lb of flue-cured tobacco to producers has been used. Tobacco marketing prospects are discussed further in Annex 12. 7.08 Maize. Maize would be marketed within Zambia, but also could be exported, in particular to Congo (Kinshasa). Large deficits occur in the Congo copper belt which is easily served from Zambia. Zamila has been asked officially to meet as much of this demand as possible during the next ten years. Because of the good rail link between the two countries, Zambia has a competitive advantage in the Congo market over potential maize export- ers in East Africa and elsewhere. However, apart from the exceptionally good maize year of 1966, when a surplus was available for export to the Congo and mainland China, Zambia usually has had difficulty in supplying national requirements. Taking into account the growing domestic demand for maize, no difficulty is anticipated in disposing of project maize pro- duction. 7.09 Currently, Government guarantees the purchase of maize from farmers by the Grain Marketing Board at an average price of K 3.50/bag delivered to recognized local collection points. This is equivalent to US$49/ton. There is no reason to assume that prices in Zambia will decline substantially in the future. Consequently, a producer price of K 3.40/bag for maize has been used for the calculation of project benefits. C. Farmers' Benefits 7.10 Farm budgets for a typical tenant and assisted tenant are de- tailed in Annexes 8 and 9. The estimated annual income of an assisted tenant of about K 1,600 during purchase of his lease, and K 2,600 subse- quently, compares favorablv with the average income of an African engaged in the mining industry (the most renumerative employment sector) which in 1968, was K 1,250; and about three times the average income of Africans em- ployed in agriculture - in 1968 this was K 356. The anticipated annual income of tenant farmers purchasing their holdings - about K 4,500 in the purchasing period and K 7,700 thereafter, and an average income of K 5,600 for renting farmers - compares with an average 1968 income for non-Zambians engaged in agriculture of K 3,693 and with the 1968 average income of non- Zambians in mining of K 7,604. The financial rates of return on assistant- tenant and tenant farms, without attributing a value for the farmer's man- agement, would be about 26%.  - 23 - D. Government Revenues 7.11 The Mukonchi Training Unit would require annual subventions from the national budget since while it would produce substantial revenues from Maize and Tobacco, these would be inadequate to pay for the high over- heads inherent in such a large and complex training operation. Following completion of development in 1976 which would require total Government sub- ventions of about K 1.1 million, the annual operating deficit would be about K 140,000 annually thereafter. In addition to this, service charges on the proposed Bank loan (that part applied to Mukonchi) and CDC loan would amount to about K 200,000 each year. The total of K 340,000 an- nually may appear high in relation to the output of 50 trained farmers each year; yet under present Zambian conditions, and in advance of sustained experience of the efficiency of other training methods - such as the ap- prenticeship scheme - this cost is considered reasonable. Also it is pos- sible that as experience is gained the training period could be reduced below the four years envisaged, with consequent savings in the cost per farmer trained. At this time, it is not possible to determine for how long Mukonchi would be required for training purposes; but at some time it would be split up and leased as individual farms, and following this, Government would recover all development expenditures with interest through lease purchase pavments. A cash flow for the Mukonchi Unit is at Annex 13. 7.12 Budget subventions of about K 1.8 million in addition to Bank loan funds would be needed between 1971 and 1976 to complete the development of farms established under the Tenant and Assisted Tenant Farmer Schemes. Thereafter, collections of rents, fees, lease purchase payments, and very small income tax payments from project participants would meet all expend- itures subsequently incurred by TBZ and the Government, including servicing the proposed Bank loan. Additionally, these collections would allow a sur- plus to accrue to Government which by 1993 would have offset all Government and TBZ expenditures on the project. 7.13 The long period required to recoup Government costs could be shortened by increasing the interest rate for lease purchase to above 7% and by increasing the cost to assisted-tenants of management services to above K 4/acre cropped. These rates were agreed between the Bank and the Government during negotiations and are substantially higher than the Gov- ernment's original proposals. Increases in these rates are not excluded and they would be reviewed from time to time. At the outset of the scheme, however, Government wishes to employ terms which reasonably guarantee ade- quate cash incentives to participating farmers. The impact of the Tenant and Assisted Tenant Schemes on the Government's budgetary position is shown at Annex 14. VIII. BENEFITS AND JUSTIFICATION 8.01 Using the yields, prices and costs forecast in this report, cost- ing all paid labor at cash cost, and assuming an average project farm life of 20 years, the economic rate of return from investment in the Tenant and  - 24 - Assisted Tenant Schemes is about 19%. Details are given in Annex 15. There are risks that the yields, prices and costs foreseen would not be achieved; and also that project farms would not remain in tobacco production for 20 years. The risk of lower yields is not high; those used are achieved by many farmers at the present time. Project farmers should be more effi- cient than average, because both of their training and close supervision; additionally, the trend of Zambian maize and tobacco yields is upwards. Maize prices may vary to some extent, but tobacco prices used are more susceptible to change. The uncertainty regarding the latter stems from both internal and international considerations. Internally, the possibi- lity of the traditional commercial tobacco farmers leaving Zambia and thus the collapse of the auction system could result in lower prices. On the international scene the reentry of Rhodesia to the world r .rket could have similar results. A 10% fall in tobacco prices would reduce the estimated rate of return to 14% and a 20% fall would reduce it to 9%. On the cost side, it is unlikely that farm development costs wo"ld rise beyond those forecast, or that operating costs, would appreciate more rapidly than an almost inevitably improvement in yields. A 20% increase in labor costs, which was not offset by productivity gains or higher prices, would reduce the rate of return to 13%. 8.02 The concern, particularly in the developed countries, of the possible hazards to health of tobacco smoking will tend to restrict the growth in world tobacco consumption, see Annex 12. This development should not affect the project adversely since Zambia would be a competitive pro- ducer and a preference supplier (the preference is about US $0.16/lb) to the large British market. If, however, tobacco farming became uneconomic in Zambia, project farms would be able to switch to other crops, and to livestock, and the major loss incurred would be the investment made in any tobacco barns which could not be made use of in the new enterprise. The rate of return of the project is rather insensitive to the estimated life of its assets. For instance, if for any reason, project farms were aban- doned after a life of 10 years and not used for productive activity, the rate of return would decline to only 16%. 8.03 The Mukonchi Training Unit would be an integral part of the pro- ject; but due to the high administrative and managerial costs inherent in its operation its direct economic benefits - the crops it produces - would not greatly outweigh costs. At some future time Mukonchi would be split up and settled, and would accommodate 75 assisted tenant holdings. Since the timing of this is not known, and since it is not possible to assess the economic benefits of the Unit's training function, the calculation of the economic return from investment at Mukonchi is not possible. Nonethe- less, the value of a nucleus of Zambians experienced in commercial farm management would be invaluable. 8.04 In tobacco alone the project would generate foreign exchange earnings of about US$2.9 million per annum.  - 25 - IX RECOMMENDATIONS 9.01 During loan negotiations, agreement was reached on the following principal points: (i) prior to the beginning of each tobacco year the program for farm development for that year would be agreed be- tween TBZ, the Government and the Bank (para 4.15); (ii) the Mukonchi Unit would test on a commercial field scale different crop combinations, both excluding and including tobacco, and the Ministry of Rural Development would pro- vide all research assistance in this work (para 4.06); and (iii) until the end of the disbursement period, the TBZ posts of General Manager, Chief Accountant and Production Manager, would be occupied by persons acceptable to the Bank (para 6.06). 9.02 Among others, conditions of effectiveness of the proposed loan would be that: (i) Government had published necessary amending legislation to the Tobacco Act, 1967 (para 6.02); (ii) Government had concluded with commercial banks, or alternatively AFC, and TBZ arrangements satisfactorv to the Bank for the provision of short and medium term credits to project participants (para 5.06); and (iii) Government had engaged Managing Agents for the Mukonchi Training Unit satisfactory to the Bank (para 6.04). 9.03 The proposed project constitutes a suitable basis for a Bank loan of US$5.5 million for a term of 25 years including a 6 year grace period.   ANITEX 1 Page 1 ZAMBIA Gi2MCIAL CROPS F.-UIU,!G DEVEPORMINT PROJECT Zambian Production of Tobacco and 1Maize and Tobacco Growring Methods Tobacco Types and Curing Methods 1. Four major methods of curing tobacco are used in Zambia: (a) flue-curing, mainly used for Virginia tobacco; (b) fire-curing for dark tobacco; (c) air-curing, usually for Burley tobacco; and (d) sun-curing for Oriental tobacco. Air and sun-curing are the most simple methods, and in air-curing green tobacco leaves are hung in the shade until they are dried out and have turned to a yellowy brown. In sun-curing they are hung in the sunlight. In fire-curing the green leaves are hung in a barn in which a small smokey fire is lighted; tobacco cured in this way is a warm dark brown in color. Flue-curing is the process most commonly used, and in this the tobacco barn is heated by flue pipes served by a furnace outside the barn. By careful control of the temperature tobacco of a uniform bright yellow color can be produced by this process. Virginia tobacco is used mainly for cigarettes; fire-curing for pipe tobacco; and Burloy and O0:iental for both pipe tobacco and cigarettes. Project Farming Methods 2. Each project farm would follow a cropping pattern determined by TBZ and adherence to this would be a condition of the tenants' lease. The current cropping pattern, is based on the following rotation: Year 1 - tobacco; Year 2 and 3 - maize; Year 4, 5 and 6 - grass fallow (natural regeneration). Under this rotation tenants would grow 60 acres of tobacco and 120 acres of maize annually, and assisted tenants 20 acres of tobacco and 40 acres of maize. 3. Tobacco production methods would be those practised and proven in Zambia and Rhodesia. Seedbeds would be sown at the end of August, after fumigation against soil pests. Seedlings would be transplanted into the field about 10 weeks later to give a plant population of 7,000 per acre. A basal dressing of compound fertilizer would be standard and be followed by top dressings with nitrogen as necessary. Tobacco varieties would be Hicks, K51, and White Gold, all three of which have given satisfactory results in Zambia. 4. First reapings would take place in early January, and subsequentl1 at roughly five-day intervals for another 8 to 10 weeks. Curing would be carried out in barns heated by passing hot air through closed circuit flue pipes and would be completed in an average of seven to eight days for each loading allowing a barn turn-round time of eight to nine days. After curing, the leaf would be bulked and graded. Subsequently, graded leaf would be packed in bales of 170-220 lb weight.  AITEX 1 -age 2 Zambian tobacco is relatively free from disease. The main field disease is Alternaria Leaf Spot, but control measures are wiell established. Barn rot occurs but only where barns are too densely packed with leaf. Insect pests are responsible for some damage but are easily controlled. 6. Maize would be planted in November with the first rains, and would be harvested in July. Improved high-yielding varieties, both synthetic and hybrid, would be used. These are already commonly used in Zambia and seed production facilities are adequate. Labor Requirements 7. Tobacco is labor intensive, and under Zambian conditions require- about one permanent laborer for each two acres plus casual labor at peak periods. Taking into account the labor needed for maize production, 15 r.an- days per acre, the number of permanent laborers that would be employed under the project is estimated to rise to about 4,000 in Year 5. The official wage of KO.6 per day for labor in the agricultural sector is satisfactory and labor shortages are not anticipated. ApriL 28, 1970  Z A M B I A COMMERCIAL CROPS FARMING DEVELOPMEN PROJECT Flue-Cured Tobacco and I4laize Production TOBACCO MAIZE I/ Crop Area Production Price Value Production21 Producer Price Value Season Acres .000 lb n/lb 'OOOK t000 US$ '000 Bags - K/Bag '000K '000 US$ 1953/54 14,610 7,990 27 2,157 3,080 1,321 4.10 5,416 7,737 1954/55 13,550 7,610 28 2,131 3,040 1,039 4.00 4,156 5,937 1955/56 14,870 10,100 26 2,626 3,750 1,646 4.15 6,831 9,758 1956/57 12,100 9,260 32 2,963 1,230 2,085 4.00 8,340 11,914 1957/58 12,860 6,770 29 1,963 2,800 580 4.15 2,407 3,438 1958/59 13,870 12,630 28 3,536 5,051 1,537 3.70 5,687 8,124 1959/60 14,830 12,470 28 3,492 4,990 1,683 3.60 6,059 6,856 1960/61 16,950 14,840 28 4,155 5,940 2,253 3.15 7,097 10,139 1961/62 16,870 16,150 29 4,684 6,690 2,327 2.95 6,865 9,807 1962/63 20,390 15,490 34 5,267 7,520 1,658 3.85 6,383 9,119 1963/64 25,110 24,170 23 5,559 7,940 2,136 3.75 8,010 11,443 1964/65 16,250 14,550 27 3,928 5,612 2,139 3.75 8,021 11,459 1965/66 16,970 14,570 31 4,517 6,453 2,804 3.33 9,337 13,338 1966/67 11,340 10,720 44 4,717 6,739 4,163 3.10 12,905 18,436 1967/68 14,640 13,850 31 4,294 6,130 4,131 2.90 11,980 17,114 1968/69 14,200 11,070 35 3,904 5,465 2,749 3.003-/ 8,247 11,545 1/ Deliveries to Grain Marketing Board only. 2/Net weight 200 lb. 3/ Effective price; this was raised to K 3.20 too late in the year to influence planting or sales decisions. CD May 1, 197C  AlbEX 2 rage 1 ZAMBIA CONIiERCIAL CROPS FAR1ING DEVELOPMENT PROJECT Existing Tenant Farmer Scheme, and Lease Arrangements for Tenants and Assisted-Tenants A. Existing Tenant Farmer Scheme 1. The following table shaos the numbers and performance of tenants 1966/67-1969/70: Year ending July 31: 1967 1968 1969 1970 Number of tenants 11 39 62 72 Tobacco per tenant (acres) 35 58 60 60 Average yield per acre (lbs) 1,128 923 695 900 (estimate) Total production ('000 lbs) 434 2,100 2,600 N/A Percentage of national production 4 15 23 N/A 2. A total of 78 tenants have been recruited and six have dropped out of the scheme. Of 75 tenants recruited by mid-1969, eight were Zambian, 25 Greek, two Dutch, and one Italian, nationals; and the remainder British or South African. About 70% of non-Zarbian tenant farmers have been recruited within Zambia. B. Lease Arrangements - Tenants 3. All tenant farms have been, and would be developed on State Land. The Government is lessor, and for project tenants would execute,in the name of the President of the Republic, a lease agreement with TBZ, which in its turn would issue a sub-lease to Zambian tenants, and enter into a rental agreement with non-Zambians. All tenants, whether leasing or renting farms would pay a land rent (equivalent to 1Jd- of K 0.75/acre) to the lessor. 4. Each tenant farm has approximately 500 acres of arable land and, under the project, sufficient reserves of woodland, either on or conveniently located to the farm, to provide woodfuel on a sustained yield basis, for ten years. Tenants are required to use a tobacco (one year), maize (two years) and grass ley (three years) rotation in which the ratio of maize to tobacco is 2:1, up to a maximum maize area of 120 acres. Tenants are not prevented from diversifying their activities, provided they obtain TBZts prior written consent. Farm Development 5. Each tenant is required to clear land, construct buildings and make other improvements in accordance with a schedule annexed to his sub-lease. This work is supervised by TBZ inspectors, and must be carried out in accordance with plans and specifications prepared by TBZ. TBZ provides funds and materials in line with progress. Works to be carried out by the tenant are as follows:  ANNEX 2 Page 2 Homestead Bulking shed Tobacco barns Workshops Borehole water supply (the borehole is drilled by the Government prior to occupation) complete with reservoir (50,000 gallons) and pump Piping for water reticulation Access road Major conservation works such as storm drains are under- taken by the Government, but other essential soil conservation measures such as contour ridges are the responsibility of the tenant Land clearing - 120 acres are cleared in advance of occupation by the tenant Farm Eauipment 6. Farm equipment is procured directly by the tenant using either his own resources or, alternatively, cormmercial bank facilities under Government guarantee. The major requirements are listed below: 2 Tractors 1 Plough 1 Disc harrow 2 3-ton Trailers 1 W.later trailer and frame Ridger, toolbar and fertilizer attachments Miscellaneous equipment (borehole pump and engine and small tools, etc.) All other equipment, including a suitable farm vehicle and domestic items are provided by the tenant at his own expense. Security of Tenure: Tenants Renting Farms 7. The rental agreement is for five years and comes into force on August 1 of the appropriate year. The tenant has an option to renew his lease for a further five years in the third year of initial occupancy. The agreement can be terminated on July 31 in any year, by either the tenant or TBZ giving six months' notice. In the case of the latter giving notice, however, this must be based upon the tenant's infringement of the agreement's good husbandry clauses. When a tenant vacates his farm no compensation is paid, but the tenant is afforded reasonable time to harvest any standing crops. Security of Tenure: Tenants Leasing Farms 8. Tenant lessees retain tenure of their holdings provided that rents and lease purchase annuities are paid regularly, and that they comply writh a number of conditions in the lease relating to: good husbandry, maintenance and insurance of buildings, maintenance of roads and drains, occupation by the tenant and his family, and a number of general matters. Leases are not transferable, without the consent of TBZ, but contain provision for the-ir inheritance. The leases adequately protect both -the tenant and Goiermieuit.  ANNEX 2 Page 3 C. i ase Arrangements - Assisted-'2enants 9. Assisted-tenants would be established on both State and Trust Land. When on State Land they would hold similar leases as for Zambian tenant farmers. When situated on Trust Land they would hold sub-rights-of-occupancy from TBZ; the right-of-occupancy being issued by Government to TBZ. The rights and obligations of assisted-tenants whether holding sub-leases or sub- rights-of-occupancy would be as for Zambian tenant farmers. 10. Additionally, assisted-tenants would sign a contract with TBZ agreeing to pay a charge, provisionally set at K 4.0/acre cropped for the management advisory service that wiould be provided by TBZ. 11. Unlike the case of tenant farms, building construction and land development on assisted-tenant farms would be carried out by contractors employed for this purpose by TBZ. Ray 5, 1970  ZAMBIA ANNEX 3 COIIMERCIAL CROPS FARMING DEVELOPMENT PROJECT MUKONCHI TRAINING UNIT Training Farm Production and Trainees' Costs and Revenues Year ending July 31, 1971 1972 1973 1974 and onwards Cropping (acres) Tobacco 495 840 1,275 1,350 Maize 495 840 1,275 1,350 Production Tobacco - lbs. 495,ooo 840,ooo 1,275,000 1,350,000 Nfaize - bags 12,375 21,000 31,875 33,750 Value (K) Tobacco t 32 ngwee/lb. 158,400 268,800 408,000 432,000 Miaize @ K 3.40/bag 42,100 71,400 108,400 114 750 Total: 200,500 340,200 516,400 546,750 . . . . . . . .K . . . . . . . . . . Crop Costs (charged to trainees) Direct - Tobacco @ K 190/ac l/ 94,000 159,600 242,200 256,500 Maize @ K 34/acre _ 16 800 28,600 43,300 45,900 Sub-total: 11o0,80 188,200 285, 302,400 Indirect - and accruing to Mukonchi Unit Rents../ 13,900 23,500 35,700 37,800 Service charges3/ 8,900 15,100 22,900 24,300 Water chargesiV 1,000 1,700 2,500 2,700 Tractor and equipment hired 31 400 53,300 80 800 85,600 Sub-total: 93,600 141,90C 150,400 Total Crop Costs: 166,000 281,800 427,400 452,800 Surplus accruing to trainees: 34,500 58,400 89,000 93,950 1/ Estimated cost to Mukonchi;labor costs are higher than those for assisted-tenants since trainee would not have benefit of family labor. 2/ K 28/acre for tobacco. 3/ Tobacco K 12/acre, maize K 6/acre. 4/ x 1.0/acre. May 1, 1970  ANNEX 4 ZAMBIA COMMERCIAL CROPS FARMING DEVELOPMENT PROJECT MUKONCHI TRAINING UNIT Nucleus Estate Production - Crop Costs and Revenues Year ending July 31, 1971 1972 1973 1974 and onwards Cropping (acres) Tobacco 600 600 600 600 Maize 780 1,080 1,200 1,200 Production Tobacco (lbs.) 600,000 600,000 600,000 600,000 Maize (bags) 19,500 27,000 30,000 30,000 Value (K) Tobacco @ 32 ngwee/lb. 192,000 192,000 192,000 192,000 Maize @ K 3.40/bag 66,300 91,800 102,000 102.000 Total: 258,300 283,800 294,0d0 294,000 Crop Costsl/ Tobacco @ K 190/acre 114,000 114,000 114,000 114,000 Maize @ K 34/acre _26,500 36,700 40,800 40,800 Total: 140,500 150,700 154,800 154,800 Surplus 117,800 133,100 139,200 139,200 1/ Include labor, seed, fertilizers, pesticides, insurance, tools, packing and bagging and sundries. Exclude costs of farm machinery and overheads, see Annex 13. May 1, 1970  Page1 ZAIMIA CORCIAL CROPS FARMING DEVELOPMENT PROJECT Staff Training 1. The overall responsibility for training in agriculture, in- service, institutional, or extra-territorial - is vested in the Ministry of Rural Development. The Department of Agriculture, part of the Ministry, has within its Extension Branch a Training Section with specialist respcns - bilities for in-service training and training at the National Resources Development College (NRDC) and the Zambia College of Agriculture (ZCA). The University of Zambia is outside the responsibilities of the Kinistry and students in its newly formed Faculty of Rural Science will not graduato until 1972. 2. The NRDC at Lusaka provides a two-year diploma course for students with five or more C-levels, including science subjects, and the cx.t- put was 30 students in 1967, 31 in 1968, and 25 in 1969. NRDC graduates ill be needed to fill the posts of Growers Advisors and assisted tenant Scheme Managers under the project, and the anticipated output of 45 graduates annually should be adequate for this and other demands. 3. The Tobacco Section of the Department of Agriculture runs an annual course on tobacco, mainly on Virginia flue-cured, at Mochipapa Research Station. This is a course of five sessions spread over the tobacco year from September to May and is designed primarily for qualified Technical Officers (NRDC graduates), who are responsible directly or indirectly for tobacco growing in their areas. The course covers all practical, technical and managerial aspects of tobacco production, from seedbeds to auction floor, with a strong emphasis on methods of reducing costs of production. The course has been long established and trains about 12 officers a year from the Extension and Research Branches of the Depart- ment. New recruits from the MRDC who are destined to become Growers Advisors and Scheme Managers would be resident at Miochipapa for the full year, and in addition to attending the course, would each manage a smaLl acreage of flue-cured tobacco themselves. This residential course was started for the first time in July 1968 and is designed to give new Technical Officers a greater insight into management problems. After leaving Hochipapa,Growers Advisors would work a further year at IMIukonchi under the direct supervision of an experienced Advisor so as to gain field and extension experience before taking over responsibilities of their owirn. Assisted tenant Scheme Managers wzould similarly work for one year under an experienced Manager. 4. The Virginia Tobacco Apprenticeship Scheme is designed to train young men, who are literate but not necessarily of a high academic stader cr, in the practical production of Virginia flue-cured tobacco. Apprentices are recruited from all provinces in the country and are settled on success- ful Virginia tobacco farms for two years. In the first year apprentices learn the practical work. In the second year they complete their all-rour.6 knowledge of practical work and learn the rudiments of farm management and labor control. Tuition on farmmLaraCa.rL3 -n- theoretical aspects of gryowin is provided by the farmer free of charge under the guidance of t,ne Dep,irt- mrat of Agriculture Tobacco Officers. The apprentica S'eceiveb a h.. aazy  ANDEX 5 Page 2 from Government during the period of his apprenticeship. The Scheme wNas started in 1967 with 32 apprentices, 50 apprentices were recruited in 1968 and 50 in 1969. About 50 apprentices will be recruited every year hence- forth. The graduates of this training scheme are eligible for participaticn in the project as assisted tenants. April 28, 1970  ANNEX 6 ZAMBIA CONMERCIAL CROPS DEVELOPMENT PROJECT DEVELOPMENT COSTS - MUKONCHI TRAINING UNIT (K) Total F.E. Total Year ending July 31: 1971 1972 1973 1974 1975 1976 1971-75 1971-75 1971-76 FIXED ASSETS Tobacco Barns 97,200 64,800 86,400 21,600 - - 270,000 81,000 270,000 Bulking and Grading Sheds 31,700 21,200 28,200 7,000 - - 88,100 26,400 88,100 Central Stores 5,000 - - - - - 5,000 1,500 5,000 Community Hall 5,000 - - - - - 5,000 1,500 5,000 Water Development 196,000 - - - - - 196,000 98,000 196,000 Labor Housing 9,700 6,500 3,700 2,200 - - 22,100 6,600 22,100 Trainees Housing 12,000 27,000 7,000 - - - 46,ooo 13,800 46,ooo Growars Advisors Housing 7,000 - - - - - 7,000 2,600 7,000 Roads 2,100 3,400 1,300 1,700 - - 8,500 5,100 8,500 Farm Equipment 20,800 20,800 27,700 7,000 - - 76,300 61,000 76,300 Farm Implements 7,800 7,800 10,400 2,700 - - 28,700 23,000 28,700 General Equipment and Tools 1,000 1,000 1,000 1,000 - - 4,000 3,200 4,000 Tractors 36,000 36,000 48,000 12,000 - - 132,000 105,600 132,000 Tractor Trailers 15,000 15,000 19,000 5,000 - - 54,000 43,200 54,000 Trucks and Truck Trailers - 8,900 - 8,900 - - 17,800 14,300 17,800 Motorcycles 300 - - - - 300 200 300 Replacement of Vehicles and Farm Machinery - 53,000 - 18,300 41,800 64,300 113,100 57,000 177,400 Sub-total: 446,600 265,400 232,700 87,400 41,800 64,300 1,073,900 544,000 1,138,200 LAND DEVELOPMENT CLEARING AND FIELD ROADS 88,100 90,700 88,100 57,000 33,700 10,400 357,600 161,930 368,000 CONTINGENCY ON FIXED ASSETS AND LAND DEVELOPMENT (10%) 53,500 35,600 32,100 14,400 7,600 7,400 143,200 70,600 150,600 ADMINISTRATIVE COSTS Managing Agents Fee 50,000 52,000 52,000 54,000 54,000 56,0oo 262,000 209,600 318,000 Salaries, Wages and Allowances 7,600 12,800 12,200 14,400 14,100 16,200 61,100 24,400 77,300 Office and Other Expenses 30,800 32,600 34,800 36,0oo 37,300 39,600 171,500 85,800 211,100 Stores Overheads 3,200 3,300 3,500 4,300 4,500 4,600 18,8 75,200 23.400 Sub-total: 91,600 100,700 102,500 108,700 109,900 116,400 513,400 395,000 629,800 TOTAL DEVELOPMENT COST: 679,800 492,400 455,400 267,500 193,000 198,500 2,088,100 1,171,500 2,286,600 May 1, 1970  MXEX 7 ZAMBIA COMMERCIAL CROPS FAREMING DEVELOPMENT PROJECT TENANT AND ASSISTED TENANT SCHEMES, DEVELOPMEENT COSTS Total Eachasge Total Year ending July 31, 1971 1972 1973 A27 1975 1976 1977 1978 1979 1971-1975 1971-1975 1971-1975 A. ASSISTED TENANT SCHEME - DIRECT COSTS FA71, DE10PPMEIT (TBZ) Hoasiag 29,000 37,000 65,0o0 70,000 70,000 _ _ - - 271,000 81,3009 .7_,00 Barns nod oashs 147,900 188,700 331,500 357,000 357,000 - - - 1,382,100 415,Z30 1,382,100 Las.r .noses 17,400 22,200 39,000 42,000 42,000 - - - - 162,6C1 48,800 162,600 Hoods and sort consermati-o 4,300 5,500 9,700 10,500 10,500 - - - 40,500 2,,300 al>,501 Water sapplies 29,000 37,000 65,000 70,000 70,000 - - - 271,000 135,501 71,u0C Land clearing 30,200 53,600 101,900 140,900 177,300 i25,800 106,610 72,800 36,400 503,900 o51,901 3LS,50C lao-total: 057,800 34n,000 612,100 69900 0 726,500 129 S00 106,600 72,800 36,400 1,631,100 956,800 2.972,70') FJaACsEL0 OF P0S'STC (FARMEB3) siiour nuoses 8,700 11,100 19,500 21,000 21,000 - - - - 81,300 2.,400 8 ,31: c4aipmesnn 5,800 7,400 13,000 14,000 16,000 2,600 4,500 4,900 4,900 56,200 45,000 73,12( Suo-tctal: 14,500 18,500 32,500 35,000 37,000 2,600 4,500 4,900 4,900 137,590 69,400 2S1,a),. FAR3M MACH_NaiaY (TBZ) Tractors 6o,000 72,000 132,000 144,000 144,000 - - - - 552,000 aal,801 551,112 Far-s -ashlry 34,00 40,800 74,800 8i,6oo 81,600 -- - - 312,800 250,200 312,80, rosts; replacement - - - _ _ 60,0oo 72,000 132,000 144,000 - - S-tnto,l: 91,000 112,800 206,800 225,600 225,600 6o,0 0 72,000 132,000 144,000 864,800 691,802 1,272,800 211LL 9`X21ING CONTINGENCY 366 300 475,300 851 400 951,000 999,400 199,400 193,100 209,700 195,300 3,633,400 1,718,003 o,399,900c 19NTI7NG0N0Y (1Ot) 36,600 47,500 85,100 95,100 98,900 i8,8c0 18,300 21,000 18,500 363,200 171,3iC 439,800 '.'11 02300? 01070: 402,900 522,900 936,500 1,046,100 1,088,300 207,200 201,,00 230,700 203,900 3,996,600 1,889,800 4,839,70( 12r FLM3a SCH0; 3 - DIRECT COSTS 1M r4 r7TFh 9P._NT (TBZ) -,:asi-.? 19,000 o9,000 12,000 18,000 24,000 - - - - 90,000 31,501 2,. :s sal srecd 44,700 44,700 29,800 1,700 59,600 - - - - 223,500 67,100 223,521 L or ac ses 4,500 4,500 3,000 4,500 6,000 o - - - 22,500 7,131 22,511 -s - and oil o iasercoolos 600 600 4oo 60c 800 - - - - 3,000 1,805 3,0D0; - ae -ppl es 7,200 7,200 4,800 7,200 9.600 - - - - 36,000 O8,oo 73,L 6,J 9,400 14,000 15,600 21,800 29,600 18,700 14,000 10,900 6,400 90,400 4 5,203 l1l,a2.9 ao_Lctal: 94,400 89,000 65,6oo 96,8oo 129,600 18,700 14,00 10,900 6,4OO 465,400 170,703 515,4li s,O ?3tC HASa (TBZ) 20,000 20,000 30,000 40,000 40,000 - - - - 150,000 - 15.3, 0:: rc: .-. .e.lza 10,000 10,000 19,000 20,000 20,000 - _ - - 75,000 30,000 7,, L30,00 30,000 49,000 6 60,000 6 - - - 225,000 30,D Ou o