Ghana - Sugar Rehabilitation Project : Credit 0354 - Project Agreement - 1 - Conformed

CONFORMED COPY CREDIT NUMBER 354 GH Project Agreement (Sugar Rehabilitation Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL DEVELOPMENT BANK DATED JANUARY 29, 1973 CONFORMED COPY CREDIT NUMBER 354 GH Project Agreement (Sugar Rehabilitation Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL DEVELOPMENT BANK DATED JANUARY 29, 1973 PROJECT AGREEMENT AGREEMENT, dated January 29, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and AGRICULTURAL DEVELOPMENT BANK (hereinafter called ADB). WHEREAS by a development credit agreement of even date herewith between Republic of Ghana (hereinaftei called the Borrower) and the Association (hereinafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to fifteen million six hundred thousand dollars ($15,600,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ADB agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS, by a subsidiary loan agreement to be entered into by the Borrower and ADB, the Borrower proposes to make available to ADB an amount in various currencies equivalent to $1,400,000, of which the equivalent of $972,000 will be made available out of the proceeds of the Credit and the equivalent of $428,000 will be made available by the Borrower out of its own resources; and WHEREAS ADB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement, the ADB Subsidiary Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. 4 ARTICLE II Execution of the Project Section 2.01. (a) ADB shall carry out Part B of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with sound agricultural, administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) ADB shall apply the proceeds of the ADB Subsidiary Loan exclusively to the making of loans in accordance with Section 2.02 hereof to carry out the said Part B of the Project. Section 2.02. ADB shall, for the purpose of carrying out Part B of the Project, relend the amounts lent to it by the Borrower under the ADB Subsidiary Loan Agreement upon the terms and conditions set out in Schedule I hereto (as the same may from time to time be revised with the approval of the Association) and upon such other terms and conditions as the Association shall approve. Section 2.03. (a) ADB shall furnish to the Association promptly upon their preparation, the plans, reports, contract documents and work schedules for Part B of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) ADB: (i) shall maintain records adequate to record the progress of Part B of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in Part B of the Project; (ii) shall enable the Association's representatives to inspect Part B of the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning Part B of the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. Section 2.04. ADB shall duly perform all its obligations under the Specified Agreements to which it is a party. Except as the Association shall otherwise agree, ADB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any of such Specified Agreements or any of the provisions thereof. 1 5 ARTICLE III Management and Operations of ADB Section 3.01. ADB shall at all times carry on its operations, manage its affairs, maintain its financial position and plan the future expansion of its business, including agricultural development, all in accordance with sound business, agricultural, technical, administrative and financial principles and practices under the supervision of experienced and competent management and with the assistance of adequate, qualified and experienced staff. Section 3.02. (a) ADB shall enter into an agreement with a firm of consultants acceptable to the Association upon the terms of reference set out in Schedule 2 hereto (as from time to time amended or extended by agreement between ADB, the Association and the firm of consultants) and upon such other terms and conditions as the Association shall approve. Such firm of consultants shall, in particular, provide a Credit Management Specialist and a Credit Finance Specialist, who shall be appropriately qualified and shall have not less than five years experience in credit operations. (b) ADB shall take all such action as shall be required to enable the firm of consultants, and the specialists to be provided thereby, to carry out their duties hereunder and shall implement the recommendations of such specialists to the extent and in the manner agreed between ADB and the Association. Section 3.03. ADB shall enter into an agreement with GHASEL on terms and conditions satisfactory to the Association for the purchase by GHASEL of the sugarcane output of farms at Asutsuare and Komenda financed by ADB and for the provision by GHASEL to ADB or to such farms of technical appraisal, administrative, extension and other technical services. Section 3.04. (a) Not later than November 30, 1973, ADB, in conjunction with GHASEL and in consultation with the Association, shall formulate and submit to the Association a detailed program for the development of sugarcane production by farms financed or to be financed by ADB under Part B of the Project with a view to ensuring that the total quantity of sugarcane available to GHASEL from such farms, together with the sugarcane available to it from its estates at Asutsuare and Komenda, will be sufficient to meet the capacity from time to time of its sugarcane factories at Asutsuare and Komenda. 6 (b) Upon formulation of such program, ADB, in conjunction with GHASEL and in consultation with the Association, shall take such steps as shall be required on its part for the implementation thereof in the manner and on the basis of the time schedule therein provided. ARTICLE IV Financial Covenants Section 4.01. ADB shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. Section 4.02. ADB shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of ADB and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Any loans made by ADB to farmers for sugarcane production for supply to the sugarcane factories of GHASEL at Asutsuare and Komenda, additional to the relending referred to in Section 2.02 hereof, shall be made upon the terms and conditions referred to in the said Section. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and ADB shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and ADB shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of ADB and other matters relating to the purpose of the Credit. Section 5.02. The Association and ADB shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the 7 accomplishment of the purposes of the Credit, or the performance by either of them of its obligations under this Agreement or the performance by the Borrower and ADB of their respective obligations under the ADB Subsidiary Loan Agreement or the performance by ADB of its obligations under any of the other Specified Agreements to which it is a party. Section 5.03. ADB shall enable the Association's representatives to inspect all buildings and properties of ADB and all farms, buildings, properties and equipment relating to sugarcane production of any borrower from ADB referred to in Section 2.02 hereof and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association and of ADB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date 15 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify ADB of this event. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, 8 telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are:. For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For ADB: The Secretary Agricultural Development Bank P.O. Box 4191 Accra Ghana Cable address: AGRICBANK Accra Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of ADB may be taken or executed by the Managing Director of ADB or such other person or persons as ADB shall designate in writing. Section 7.03. ADB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ADB, take any action or execute any documents required or permitted to be taken or executed by ADB pursuant to any of the provisions of this Agreement. Section 7.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 9 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / Roger Chaufournier Regional Vice President fWestern Afi)ica AGRICULTURAL DEVELOPMENT BANK By /s / H. R. Amonoo Authori:ed Reprcsentatire 10 SCHEDULE 1 ADB Loans 1. Each loan shall carry interest at the rate of not less than 9% per annum on the principal amount thereof, from time to time outstanding. Repayment of the principal amount of the loan, together with accrued interest, shall be made in four successive annual installments respectively of 40%, 30%, 20% and 10% of the principal amount thereof, the first such repayment to be made immediately following the harvesting of the plant crop. 2. No loan shall be made by ADB unless the technical performance of the borrower in respect of any previous stigarcane cultivation and the servicing by the borrower of any previous borrowings from ADB shall be satisfactory. 3. Loans for new planting of new farms shall be made in respect of a maximum of 25 acres. 4. Loans for new planting of existing farms shall be made in respect of a maximum in any year of 20% of the area under sugarcane cultivation at the time of the loan application or 20 acres, whichever shall be the less. 5. Loans for replanting of existing farms shall be made in respect of a maximum in any year of 100 acres. 6. Each loan shall be made in respect of up to five years of sugarcane cultivation on the following basis: (a) in respect of the first year of sugarcane cultivation, ADB shall finance 80% of the cost of clearance, 100% of the cost of planting material and fertilizers and, in the case of a loan for new planting of a new farm, a living allowance of not more than Nq 300, payable in two equal installments, the first after land clearance and the second after completion of the weeding; (b) in respect of the second through the fifth year of sugarcane cultivation, ADB shall finance 100% of the cost of fertilizers and other inputs and 80% of the manpower required for harvesting assuming a productivity of 0.5 ton of cane cut and loaded per man-day. 11 SCHEDULE 2 Terms of Reference 1. The firm of consultants shall review the policies, procedures and system of financial control of ADB, shall make recommendations for the improvement thereof and shall assist ADB in the implementation of such recommendations. 2. (a) In particular, the Credit Management Specialist to be provided by the firm of consultants shall: (i) Review the present credit procedures and the terms of credits and make recommendations to ADB as to: (A) the appropriateness of procedures for making credits; methods of application for loans, including the size of individual credits; the proportion of costs to be financed by credit; and procedures for investigating the viability of credit applicants, including appraisal techniques and security arrangements; (B) the adequacy of interest rates, taking into account ADB's borrowing and administration costs and the building up of reserves including bad debts reserves; (C) the appropriateness of repayment terms for the various kinds of credit; and (D) improved procedures for credit recovery and measures for dealing with overdue credits, supervision of loans and establishment of working conditions with the Ministry of Agriculture and other bodies involved in agricultural credit. (ii) Review ADB's organization and staffing at both headquarters and field offices, and make recommendations for improvements. (b) The Credit Management Specialist shall complete the above review and present his recommendations within six months of taking up his assignment. For the following period of 12 months, he will then assist in implementing agreed changes and in training staff and, at the expiry of such period, shall submit a final report. 12 3. (a) In particular the Credit Financial Specialist to be provided by the firm of consultants shall: (i) Review the present system of credit accounting and control and to make recommendations to ADB as to: (A) improved procedures for recording credits, differentiating between seasonal, medium, and long-term credits; (B) periodic reporting to management on the status of credits, including aging of overdue payments of interest and principal; (C) improvements necessary to ADB's internal audit and internal control procedures; and (D) preparation of periodic cash flow forecast. (ii) Review ADB's accounting organization and staffing, at both headquarters and field offices, and make recommendations for improvements. (b) The Financial Specialist shall complete the above review and present his recommendations within three months of taking up his assignment. For the following period of 12 months, he will then assist in implementing agreed changes and in training staff and, at the expiry of such period, shall submit a final report. 4. During the course of their assignments, both specialists shall review the status of existing credits and make recommendations on action necessary to recover or, if necessary, write off overdue credits.