Tanzania - Kigoma Rural Development Project

Report No. 453a-TA Appraisal of Kigoma Rural Development Project FILE COPY Tanzania July 15, 1974 Agriculture and Rural Development Department Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS US$1.00 Tanzania Shilling 7.1 4 (Tsh) Tshl.00 US$0.14 WEIGHTS AND MEASURES Metric System 1 hectare (ha) 10 000 m2 . 2.46 acres 1 kilometer (km) 0.62 miles 1 square kilometer (kn2) 0 0.39 sq. miles = 100 ha 1 kilogram (kg) 2.20 pounds 1 liter (1) 0.26 gallons 1,000 kg = 1 metric ton = 0.98 long ton ABBREVIATIONS KILIMO Ministry of Agriculture MAJI Ministry of Water and Power MAJI/K Regional Water Engineers - Kigoma NBC National Bank of Commerce MMC National Milling Corporation TANU Tanganyika African National Union TCA Tanzania Cotton Authority TRDB Tanzania Rural Development Bank Union Kigoma Regional Cooperative Union Government Fiscal Year July 1 - June 30  TANZANIA KIGOMA RURAL DEVELOPMENT PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ................... ..... i-iii I. INTRODUCTION ................................. 1 II. BACKGROUND ........ ............................. 2 A. The Economy of Tanzania . .. 2 B. The Agricultural Sector ................. .. 2 C. Agricultural Marketing and Pricing ........ 3 D. Agricultural Credit ..... .................. 4 III. THE PROJECT AREA ............................... 5 A. Economy of Kigoma Region .................. 5 B. Regional Government and Administration 6 C. Rural Infrastructure ..... ................. 8 D. Agriculture and Fisheries ....... .......... 10 IV. THE PROJECT ....... ............................. 11 A. Brief Description ........ ................. 11 B. Detailed Features ..... .................... 12 C. Project Costs ...... ....................... 16 D. Financing ................................. 18 E. Procurement ...... ......................... 18 F. Disbursement . . . 19 G. Accounts and Audit . . ................ 20 H. Ecological and External Effects ........ . 20 V. ORGANIZATION AND MANAGEMENT ...... .............. 20 Regional Government .......... ............. 20 Village Planning . .21 Agriculture ............................... 21 Regional Cooperative Union ............... . 22 Tanzania Rural Development Bank ............ 23  'fable of Contents (Continued) Pate No. VI. PRODUCTION, MARKETS, FARMER BENEFITS AND FINANCIAL RESULTS ...... ........................ 24 Production, Yields and Marketed Surplus 24 Markets and Prices . .25 Farmer Benefits ............ ............... 25 Financial Results ........... .............. 25 Government Revenues and Outlays .. .......... 26 VII. ECONOMIC ANALYSIS ...... ........................ 27 VIII. RECOMMENDATIONS. :8 ANNEXES 1. Cooperatives Chart 1 Organization Chart of Rural Development Division Table 1 Affiliated Primary Societies and Produce Handled Table 2 Union Produce Purchases - 1971-72 2. Tanzania Rural Development Bank 3. Agriculture in Kigoma Region Table 1 Mean Monthly Rainfall Records Table 2 Estimated Labor Needs (Mandays) and Audibility per 3.5 Acre Farm Table 3 Herd Projection for Boran Nucleus Herd 4. Government and Administration in Kigoma Region 5. Education 6. Rural Water Supply 7. Public Health 8. Fisheries Appendix A Resources and Enviroument of Lake Tanganyika Appendix B Rough Comparative Data on Lake Tanganyika Fishing Techniques 9. Recommended Qualifications and Responsibilities of Staff Financed under the Project 10. Regional Planning, Project Preparation and Evaluation  Table of Contents (Continued) 11. Cost Estimates Table 1 Cost Estimates by Year Table 2 Water Supply and Health Facilities Table 3 Education Table 4 Feeder Roads and Tsetse Clearing Table 5 Estimated Credit Needs for Villages Productive Infrastructure Table 6 Loans and Equity Contribution to Kigoma Cooperative Union Table 7 Rural Training Centers Table 8 Trial and Training Center and Livestock Pilot Project Table 9 Technical Assistance Table 10 Project Preparation and Evaluation 12. Estimated Schedule of IDA Disbursements 13. Procedures for Selection of Villages Appendix A Proforma Village Site Feasibility Report (VSFR) 14. Trading and Lending Procedures Chart 1 Trading and Lending Cycles Table 1 Kigoma Cooperative Union - Annual Cash Flow Table 2 Purchase and Sale of Agricultural Inputs Table 3 Purchase and Sale of Marketable Surplus Table 4 Unit Costs of Wholesaling Agricultural Inputs Table 5 Unit Costs of Wholesaling Marketable Surplus Table 6 Kigoma Cooperative Union - Operating Costs Table 7 Kigoma Cooperative Union - Transport Cash Flow Table 7(a)Kigoma Cooperative Union - Buildup of Motor Vehicles Table 7(b)Kigoma Cooperative Union- Lorry Account Table 8 Capital Investment and Repayment Table 9 Kigoma Cooperative Union - On-lending Activities Table 10 Annual Cash Flow of Primary Society 15. Crop Budgets Table 1 Maize Acre Budgets Table 2 Bean Acre Budgets Table 3 Cotton Acre Budgets Table 4 Groundnuts Acre Budgets Table 5 350-Family Village Production Model at Full Development Table 6 350-Family Village Acreage and Production Buildup Table 7 350-Family Village Marketable Surplus Buildup Table 8 Buildup of Regional Marketable Surplus Table 9 Credit and Input Needs by Volume and Cost Table 10 Volume and Costs.of Inputs for Demonstrations 16. Economic Analysis  Table of Contents (Continued) Cr:ARTS 8466 - Overall Government Organization MAPS 10941 - Project Area 10942 - Population Density and Major Ecological Zones  SUMMARY AND CONCLUSIONS i. Tanzania places high priority on agriculture and rural development, in keeping with the needs of the 90% of its population who live in rural areas and mainly work in traditional agriculture. Government policies aim at gradually narrowing the sizable gap in rural and urban incomes. Particu- lar emphasis is being placed on the poorer regions. To facilitate rural de- velopment, Government in 1972 decentralized into 18 regional administrations the principal responsibility for planning and implementing development projects within each region. Directly productive and social investments and the need for developing collective and self-help activity through ujamaa villages are being stressed. ii. The project would aim, over a five-year period, to improve the production, incomes and living standards of some 250,000 people, about one- half of the rural population of Kigoma region, one of the poorest in Tanzania. A principal objective would be to double the annual per capita incomes of villagers under the project, from US$20 to US$40 (compared to rural per capita income of US$85 for Tanzania as a whole), through simple improvements in agri- cultural practices and the provision of inputs to about 135 newly-established and existing ujamaa villages. The project would also aim to provide a market- ing and credit system, extension-related agricultural research and social services. Mlaize, beans, cotton and groundnuts would be farmed in the villages on the basis of "block" farms in which each family would be responsible for a particular plot. iii. The project would consist of: (a) land-clearing of tsetse bush, simple feeder roads and improved social services (including water supplies, health services and schools) for villages; (b) loans to creditworthy village primary cooperative societies for crop inputs and productive infrastructure such as godowns, maize mills and simple fish-catching and processing equip- ment; (c) loans to the regional cooperative union (Union) for godowns and vehicles; (d) expanding the region's rural training centers, establishing a livestock pilot project and an agricultural trials and training center and providing vehicles, aerial photography and simple radio-telephone communica- tions within the region; (e) technical assistance by way of resident staff and provision for short-term consulting services; (f) Government proposes to prepare comprehensive rural development projects in other regions and provi- sion has been made for a project preparation team to prepare rural development projects in three other regions and to assist in the early phases of the evaluation of the Kigoma project. iv. The project would constitute a major part of the regional govern- ment's development activities and would be implemented through departments of the regional administration. The Regional Development Director (RDD) would be responsible for overall project planning and implementation. The regional ."vornment's annual plan for village development under the project would be submitted to IDA for discussion and agreement. The regional government's  - ii - technicians would examine the viability of villages to be included under the project according to agreed-upon criteria. Government would also discuss with IDA its annual program for all village development in the region. The Tanzanian Rural Development Bank (TRDB), lending channel for a nmber of earlier IDA projects, would be the channel for lending to the Union and village primary societies. The Union would transport, warehouse and deliver production inputs and marketable surplus under the project. v. The proposed IDA credit of US$10.0 million would cover 75% of the project's total cost. Under parallel financing the United Nations Capital Development Fund (UNCDF) would provide a grant of US$1.5 million, to go towards the costs of the water supply and health components. The IDA credit and UNCDF grant would together cover the foreign exchange cost and two-thirds of the local cost, or 86% of total costs. Government would channel funds to TRDB at 4% annually under a subsidiary loan agreement satisfactoy to IDA. Interest rates would be in accordance with general government policy for agricultural credit; existing rates are 8-1/2 percent for short-term (seasonal) credit and 7-1/2 for medium- and long-term credit. These rates are currently under review. vi. Imported fertilizers, pesticides, sprayers, radio-telephone equip- ment, and aerial photography (US$1.4 million) would be purchased through international competitive bidding in accordance with Bank/IDA, guidelines. In evaluation of bids, local manufacturers would be allowed a preference margin of 15% or the existing rate of import duty whichever is lower. Orders of less than US$30,000 would be procured in accordance with Government pro- cedures, which are satisfactory. Vehicles would be required in small lots over the disbursement period and would therefore be purchased under local competitive bidding from local agents of well-represented foreign suppliers who are equipped with essential service facilities. Classrooms, houses, village water supply supplies, godowns, dispensaries, other building, tsetse clearing, and access roads, are of small scale, varied design and are geograph- ically scattered; they would be constructed by force account and local competi- tive bidding. vii. After 8 years, incremental marketable surplus at producer prices from villages under the project is projected at about T Sh 30 million (US$4.2 mil- lion). Gross annual direct foreign exchange earnings would be about US$4.8 million. viii. Allowing for use of self-help village labor for most land clearance and village housing and for certain other village structures, notably school buildings, the full capital cost of village settlement (including allowance for regional infrastructure expenditures) would be approximately US$75,000 generated as a result of increased agricultural production, would approximately double village and family income from agriculture over an 8-year period of village development. The economic rate of return to the project is estimated at 22%.  - iii - ix. The project has greater than usual risks stemming from the economi- cally unproven nature of ujamaa villages and the need to create a completely new marketing and distribution network to service project villages. Tech- nical assistance would be provided under the project to strengthen village planning, agriculture, and the marketing and credit system, which should reduce the risk. This, and the project's potential for improving markedly the incomes of large numbers of rural poor in a disadvantaged region of the country at relatively low cost, make the risks worth taking. x. Six IDA credits totalling US$62.1 million have been previously approved for agricultural projects in Tanzania (one each in agricultural credit, tea, tobacco and cotton and two for livestock). A recently approved loan provided US$21 million for a cashewnut project. In addition, an educa- tion credit in 1971 provided US$3.3 million for agricultural training. Per- formance under these projects has been mixed. xi. The project would be suitable for an IDA credit of US$10 million to the Tanzanian Government.   I. INTRODUCTION 1.01 Tanzania places high priority on agriculture and rural development in its development strategy, in keeping with the needs of over 90% of its population who live in rural areas and are mainly engaged in traditional peasant agriculture. Incomes of the rural majority have traditionally been much lower than those of the small urban sector and Government's long-term aim is to narrow this gap. Particular emphasis is being placed on the poorer regions and on the development of collective and self-help activity through ujamaa (in Swahili, literally "familyhood") villages (para. 2.05). In order to facilitate rural development, Government in 1972 decentralized principal responsibility for planning and implementing development projects to 18 regional administrations. 1.02 Since mid-1972 the newly-regionalized administration in Kigoma region has been organizing the development of the rural areas by encouraging the formation of ujamaa villages. The proposed project would provide direct- ly-productive and improved social infrastructure in selected new and existing villages. The project would also aim to strengthen the marketing and collec- tion system in the region through improved organization and management. The project would directly affect about 250,000 people, roughly one-half of the rural population of the region. 1.03 Six IDA credits totalling US$62.1 million have been approved thus far for agricultural projects in Tanzania. These include one for agricultural credit, two for livestock and one each for tobacco, tea and cotton. A recently approved loan provided US$21 million for a cashewnut project. In addition, an education credit in 1971 provided US$3.3 million for agricultural training. Performance under the projects has been mixed. Management and staffing has been a continuing problem. In reference to cotton loans extended under the now completed credit project, a need was found for improved supervision of cooperative society loan records and input distribution. The first livestock project has progressed satisfactorily and is nearing completion, and the second credit has only recently become effective. The development of the tobacco project has been disappointing and slower than expected and has encountered difficulties due to inadequate services (mainly water) in the new settlemwnt areas and the premature introduction of collective cultivation under the ujamaa system. There are recent signs that implementation of this project is now proceeding more satisfactorily. The smallholder tea project is also encountering problems with farmer recruitment, and the planting program is about two years behind schedule. Weak management and other difficulties have slowed progress, and it is expected that the project will be rephased. The cashewnut loan was only recently signed and is not yet effective. 1.04 The loan application was prepared by the Government assisted by the IBRD Resident Mission East Africa (RMEA). This report is based on the .indiags of an appraisal mission to Tanzania in October/November 1973 con- sisting of Messrs. D. Martinusen, S. MacLeod, D. Pickering and D. Turnham (IDA) and G. Gerhardsen, R. Hennion and C. Pineo (consultants) and an updating  -2- rission in Mlarch 1974 consisting of Messrs. D. Martinusen, S. MacLeod and D. Turnham. Under parallel financing the United Nations Capital Development Fund (UNCDF) would provide a grant of US$1.5 miUion to go towards the costs of the water supply and health components of the project. II. BACKGROUND A. The Economy of Tanzania 2.01 Tanzania has an average population density of under 15 per km2, but most cf its 14.0 million people are concentrated in a few areas. The popula- tion is increasing at about 2.7% a year. Overall growth of production remains modest, particularly in agriculture whose growth in recent years has not kept pace vith population growth. Per capita GNP is estimated at US$110 (World Bank Atlas 1973). 2.02 Tanzania's socialist development philosophy aims at reducing inequalities in income distribution through emphasis on smallholder agricul- ture and rural development, and through State ownership of important indus- tries, services and large-scale agricultural entterprises. Growth has been behind the Second Five-Year Plan (1969-1974) targets. Due to recent favor- able export prices for coffee, cotton, sisal, diamonds and meat, Tanzania's balance of payments has improved but the full effects of the recent dramatic increase in oil prices have yet to be felt. B. The Agricultural Sector General Background 2.03 Agriculture accounts for roughly 40% of Tanzania's GDP with half of tie sector subsistence production. About 80% of total exports come from agriculture, mainly coffee, cotton, sisal and cashews. Most of the population (94Z) live in rural areas, usually in small isolated communities, and 90Z of the economically active population are engaged in agriculture. 2.04 Most production is from smallholdings, using family labor. Large- scale agriculture in estates produce sisal, coffee, tea and wheat; state farms mainly produce wheat, rice, sisal and livestock. Estate production lhas diminished in importance part