Ghana - Livestock Development Project

Report No. 277-GH FILE COllPY Appraisal of Livestock Development Project Ghana May 28, 1974 Western Africa Regional Office Not for Public Use Document of the International Bank for Reconstruction and Development Iniernational Development Association This report was prepared for offifial tise only by the Bank Group. It mav not be published, quoted or cited without Bank Group authorization. The Bank Group d:)es not accept responsibility tror thie act ur-acy or completeness of the report  CURRLiCY EQUIVALS US$1 - C 1.1538 C 1 " US$0.8667 WEIGHTS AND) ELASURES 1 acre - 3.405 hectares I mile - 1.609 kilometers 1 ton - 2,240 lb - 1.016 metric tons ABBREVIATION The Company - Ghana Livestock Company, Limited FISCAL YEAR July 1 - June 30  GHANA LIVESTOCK DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................................ i-iv I. INTRODUCTION ........................................... 1 II. BACKGROUND ............................................. 1 A. General ........................................... 1 B. The Livestock Sector .............................. 2 General ...................................... 2 The Cattle Industry ................. 2 Government Services, Training and Research ... 3 Animal Health ................................. 4 Other Development Prolects ................... 4 Government Policy ............................ 5 III. TIE PROJECT ............................................ 5 A. Description ....................... 5 B. Detailed Features ................................. 6 The Project Areas ............................ 6 The Ranches .................................. 7 Privately Owned Herds ................. 9 Training ...... ............ ................... 10 Project Preparation ........... .. ............. 10 C. Organization and Management ......... .. ............ 10 The Company .................................. 10 Board and Senior Management .................. 11 Ranch Staffing ............................... 11 Dealings with Private Farmers ..... .. ......... 12 Start-Up Arrangements ......... .. ............. 12 Reviews of Company Policies and Results ...... 12 D. Accounts and Audit .............. .. ................ 13 IV. COST ESTIMATES AND FINANCIAL ARRANGEMENTS .............. 13 A. Project Costs .......... ........................... 13 B. Financing . ......................................... 15 C. Disbursement ........... ........................... 16 D. Procurement ........... ............................ 17 E. Credit to Farmers ........ ......................... 17 This report is based on the findings of an appraisal mission, composed of Messrs. F. M. Crowe, H. Ochs and J. Leblanc, which visited Ghana in February and March, 1973.  TABLE OF CONTENTS (Cont'd) Page No. V. PRODUCrION, MARKETS, PRICES AND FINANCIAL BENEFITS ..... 18 A. Production ....... ................................. 18 B. Mark;ets ....................................................... 18 C. Prices ............................................ 19 D. Financial Benefits ...... ................... 21 VI. ECONOMIC BENEFITS AND JUSTIFICATION ................. ... 22 VII. ASSURANCES OBTAINED AND RECOMMENDATIONS ............. ... 23 ANNEXES 1. The Cattle Industry 2. The Economic Price of Beef 3. Ghana Livestock Company Ltd - Cattle Prices 4. Ghana Livestock Company Ltd. Table 1: Herd Projections - Pong Tamale Table 2: Herd Projections - Tadzevu Table 3: Herd Projections - Branm Table 4: Investment Costs and Phasing - Pong Tamale Table 5: Investment Costs and Phasing - Tadzewu Table 6: Investment Costs and Phasing - Branam Table 7: Revenue and Expenditure from Livestock Sales and Purchases - Pong Tamale Table 8: - Tadzewu Table 9: - Branam Table 10: Ranch Operating Costs - Pong Tamale Table 11: - Tadzewu Table 12: - Branam Table 13: Adjustment of Base Prices to January 1974 Levels Table 14: Ranch Operating Statements Table 15: Head Office Investments and Expenses Table 16: Profit and Loss Statements Table 17: Summary Balance Sheets 5 Table 18: Cash Flow Statement Appendix 1: Notes on the Calculation of the Projections 5. Private Farmers Table 1: 10 Private Farmers - Herd Projections Table 2: 10 Farmers - Revenue and Expenditure from Livestock Sales and Purchases Table 3: Private Cattle Herd (250 Head) - Investments, Operating Costs and Revenues Table 4: 50 Private Farmers - Cash Flow  TABLE OF CONTENTS (Cont'd) 6. Project Cost and Financing 7. Estimated Schedule of Disbursements of IDA Credit 8. Government Cash Flow 9. Financial and Economic Rates of Return Table 1: Financial Rates of Return Calculations Table 2: Economic Rates of Return Calculations Appendix 1: Notes on the Financial and Economic Rates of Return MAP   GRANA LIVESTOCK DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS Backgrouni i. flThis report appraises a livestock development project in Ghana for which an IDA credit of US$2 million is proposed. The objective would be to create the beginnings of a modern cattle industry. A newly formed company would take over two existing ranches and a maize farm which it would expand and develop into three commercial/breeding fattening ranches. The company would help local farmers to increase the productivity of their own herds with improved breeding stock, credit and technical advice. By demonstrating the profitability of good management practices, it would stimulate the interest of cattle owners, private investors and the commercial banks. It would pro- vide experience of integrated livestock and crop production and develop means of reaching small cattle owners. ii. Between 1961 and 1971 annual beef consumption in Ghana fell from 24,500 tons to less than 17,000 tons; annual consumption per capita fell even more sharply, from 7.9 lbs to 4.3 lbs with the growth in population from 6.9 to 8.8 million. Demand is strong, however, and is evidenced by shortages of meat for sale and rapidly rising prices in spite of Government controls. Forecasts of annual consumption by 1980 range from 25,000 tons to 39,000 tons. Imports, which have declined sharply in recent years, still account for about half of total beef consumption. Recently, however, severe droughts threaten Ghana's sources of supply in neighboring countries and, in the longer term, West Africa as a whole has little prospect of achieving self sufficiency in meat. In any event, Ghana's foreign exchange position precludes any major expansion of imports. There is, therefore, a market for any foreseeable increase in local production. iii. There have been serious obstacles to the development of a commer- cial livestock industry. The quality of the national herd is not high and farmers lack both the technical knowledge and the access to credit which would enable them to improve it. There is little experience of livestock development projects. The overvaluation of the Cedi and retail price controls (even though ineffective) do not encourage local production. iv. On the other hand, large areas of the country, presently unused, are suitable for cattle raising. The national herd (mainly West African Short- horn) is estimated at about 700,000 head. The veterinary service covers all the important cattle areas and has brought the principal epidemic diseases under control; and some experimental data are available on improv- ing local cattle through selection and crossbreeding. The Government owned State Farms Corporation and the Ministry of Agriculture's Animal Husbandry  - ii - Division have built up improved herds on a small but significant scale. The Bank of Ghana and the Agricultural Development Bank both plan to under- take livestock projects; and the commercial banks, cattle dealers and livestock owners are interested in the possibilities of commercial production. Government is anxious to provide a sound basis for the growth of the indus- try and appears to be ready to take account, in its price control policies, of the need for incentives to production. v. The proposed project was identified by the Ministry of Agriculture and the feasibility study, financed by France, was carried out by SEDES/IMVT. There was close cooperation with PM{A at all stages. The project was appraised by an IDA Mission in February/March 1973. Project Description vi. The project would produce improved breeding stock and slaughter cattle, and would comprise: (a) thwe rehabilitation and expansion of two existing ranches and one maize farm, taken over from Government, as breeding/fattening ranches. The main developments would include: land clearing, fencing, watering facilities, improved pastures and the purchase of breeding cattle; (b) the improvement of some 50 privately owned herds, initially of about 100 head each, in the areas surrounding the ranches. The owners would be provided with technical advice and finance for improved breeding stock, and, where necessary, for spray races, fencing materials, land clearing and pasture improvement; (c) the training of Ghanaian managers; and (d) the identification of further ranch sites and the preparation of a second stage project. vii. A newly formed enterprise, the Ghana Livestock Company Ltd., would carry out the project. The Ghana Commercial Bank, Barclays Bank of Ghana and Standard Bank, Ghana, which have ample liquid funds, would subscribe for shares and debentures and provide overdraft facilities and the Agricul- tural Development Bank would subscribe for shares and debentures. Government would be issued shares and debentures in exchange for the assets taken over from the State Farms Corporation and the Ministry of Agriculture. Although the banks would together hold a majority of the shares, Government would have the controlling interest through its ownership of the Ghana Commercial Bank and the Agricultural Development Bank. viii. The senior management of the company would comprise: Managing Direc- tor; Chief Accountant and three Ranch Managers who would also be responsible for dealings with surrounding farmers. These posts would be internationally recruited and it is likely that expatriates would be required for two of them.  - iii - ix. The project is not expected to encounter serious technical diffi- culties. The standards assumed in the projections are judged to be capable of being achieved by trained Ghanaian management and farmers, and take full account of the current lack of experience of commercial cattle pro- duction in the country. Cost Estimates and Financial Arrangements x. The total project cost is estimated at US$4.5 million, with a foreign exchange component of US$2.0 million, including contingencies of US$1.1 mill- ion. The financing would be provided as follows: IDA US$2.0 million; Govern- ment US$0.6 million (representing the estimated value of the assets taken over by the Company); Banks US$0.9 million; Company's retained income US$0.9 mil- lion, and; private cattle owners' contributions US$0.1 million. xi. The IDA credit of US$2.0 million would be on standard terms to the Government and would finance 53% of all project costs during the first four years of the six-year development period, the equivalent of the total foreign exchange costs, or 44% of total project costs, including the assets taken over. Government would onlend about 01.8 million (US$1.52 million) to the Company at 8% for a term of 16 years, including six years of grace and would utilize the proceeds of the credit to finance directly the cost of preparation of a second livestock project (US$70,000) and to defray the cost of training Ghanaians overseas (US$20,000). The sum of US$390,000 would be held as a contingency reserve. The banks would provide finance by way of equity con- tributions of C600,000 (US$520,000), the purchase of 0 200,000 (US$173,000) of 8% debentures and overdraft facilities at 9% rate of interest. Loans to private farmers would be made through the Company, which would finance 80% of investment costs, the farmers contributing the other 20%. xii. Disbursements of the IDA credit to Government would be made as follows in the case of Company expenditures: (a) 60% of the cost of investment in infrastructure, equipment and breeding stock (US$993,000); (b) 60% of the loan to private farmers (lJS$262,000) and (c) 100% of the costs of expatriate salaries, excluding income tax (US$267,000). Disbursements of the credit would be made to Government for 100% of the costs of project preparation and overseas training (US$91,000). xiii. International competitive bidding, in accordance with IDA guidelines, would be used for all procurement contracts over US$50,000 for the following goods and services: fencing materials, motor vehicles and other mechanical and electrical equipment (about US$500,000) and contractors' services for works such as land clearing, buildings, firebreaks and water supplies (about US$700,000). Locally advertised competitive bidding procedures would be used  - iv - for contracts of less than US$50,000 (aggregating about'US$350,000), except for small replacements and items whose low cost would not justify such procedures. Domestically manufactured goods would be allowed a 15% preference in evaluating bids; there are no applicable regional preferences. xiv. International competitive bidding would not be practicable for the procurement of cattle (US$1.0 million), as the breeds suitable for Ghanaian conditions can only be obtained locally through the traditional trading system or through negotiated Government-to-Government contracts, from other West African countries. xv. The services of expatriate personnel amd consultants, and overseas training would be arranged according to procedures acceptable to IDA. Economic Benefits xvi. The new company would build up herds totalling some 14,000 head on about 75,000 ac, of which about 4,700 ac would be cultivated with maize and high yielding fodder crops. At full development, the annual output of the company's three ranches and of the surrounding privately owned herds (whose productivity is expected to treble) would be about 950 breeding heifers, 600 male yearlings for breeding or fattening, 1,000 tons of carcass meat, and 2,000 tons of maize. xvii. The project would improve supplies of meat and maize for Ghanaian consumers and, at full development, lead to foreign exchange savings of about US$0.9 million annually. It would raise the quality of cattle and the standards of management in the areas surrounding the ranches. Valuable experience would be gained of pasture improvement, crossbreeding, feeding and the integration of livestock production with farming. The training of management and the participation of the commercial banks would provide a sound base for the growth of commercial cattle production in Ghana. The pro- ject would, therefore, have important unquantifiable benefits, deriving from its pilot or demonstration nature. xviii. The financial rates of return for the new company and for the parti- cipating livestock owners are estimated at 14% and 17% respectively. xix. The economic rate of return of the project is estimated at 12%. This estimate takes into consideration all costs, overseas training, and physi-_ cal contingencies. Costs have been adjusted so as to: (a) exclude duties, subsidies and fiscal taxes other than income tax; and (b) take account of the estimated shadow exchange rate of the Cedi by adding an adjustment equal to 50% of foreign exchange costs. No adjustments have been made to cattle prices, which are based on those ruling in the free market and are consistent with the estimated economic price derived from international and regional prices and the shadow rate of exchange. xx. The project is suitable for an IDA Credit of US$2.0 million.  GHANA LIVESTOCK DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Government of Ghana has requested an IDA Credit to help finance a livestock development project which would create the beginnings of a modern cattle industry. Three ranches, managed by a limited liability company, would be involved, together with about 50 farmers in areas sur- rounding the ranches. 1.02 The project was identified by the Ministry of Agriculture and the feasibility study, financed by France, was carried out by SEDES/IMVT. There was close cooperation with PMWA at all stages. An appraisal mission, comprising Messrs. F. M. Crowe, H. Ochs and J. Leblanc, visited Ghana from February 19 to March 18, 1973. This report is based on their findings. 1.03 There have been three IDA Credits for agriculture in Ghana - Fisheries Project (163-GH) in 1969, Eastern Region Cocoa (205-GH) in 1970, and Sugar Rehabilitation Project (354-GH) in 1973 - and three more projects, involving rice, cotton and oil palm, were recently appraised. The Fisheries Project was recently cut short, for various reasons including poor manage- ment, and Government has agreed to cancel the remaining proceeds of the Credit, except for those funds required to complete procurement in process and the ports studies. IDA is, however, working with Government to plan a comprehen- sive study of the fishing industry, which is a major source of protein for Ghana and which appears capable of expansion and improvements in efficiency. The progress of the Cocoa Project is satisfactory. The Sugar Rehabilitation Project became effective on May 31, 1973 and early indications of progress are very satisfactory. II. BACKGROUND A. General 2.01 Ghana has an area of about 92,000 sq mi. and a population of some 9 million, increasing at about 2.5% a year. Two-thirds of the people live in the humid Southern half of the country; and of the total population, about one-third live in towns with 9,000 or more inhabitants. GNP increased by about 2.5% annually - about 2% in real terms - from 1960 to 1970, rising to US$2.5 billion. Although per capita GNP declined in real terms over the past decade, to US$285, it remains one of the highest in West Africa.  -2- 2.02 Agriculture, forestry and fisheries employ 60% of the population and contribute about 40% of GNP; cocoa accounts for over 70% of export earnings, timber for about 11%, and gold and diamonds for most of the balance. Livestock is still relatively unimportant, accounting for only about 5% of the value of agricultural production. 2.03 Foreign trade plays a major role in the economy, representing some 17% of GNP. Though there is some current easing of an acute foreign exchange constraint, Ghana has had serious foreign exchange deficits; these deficits were worsened by the overvaluation of the Cedi and a growing burden of external debt service. In these circumstances, strong demand for imported consumer goods created inflationary pressures which have been exacerbated by Government budgetary deficits and the frequently imprudent financing of a wide range of production and commercial activities under public control. Government's measures to deal with these problems include import controls, encouraging local production of food and raw materials, and making Government enterprises financially self-reliant. So far, only the import controls have made a significant impact. B. The Livestock Sector General 2.04 Poultry is the most developed among the livestock industries due to Government promotion of commercial production, mainly on the Accra plain, alongside the traditional backyard poultry farming. The total output was last estimated in 1970 at 6,500 tons of meat. Pig production is scattered throughout the country, generally under backyard conditions. There are 115,000 pigs in total, with an annual offtake rate of about 70%, yielding some 2,000 tons of pork per year. The development of these two industries is restrained by their competition with human nutritional needs and by the high prices of concentrate feed. Furthermore, some sections of the popula- tion do not eat pork. Consumption of sheep and goat meat is met through local supply of some 2,500 tons and imports of some 1,500 tons. The cattle industry is described below and in further detail in Annex 1. The Cattle Industry 2.05 Ghana's cattle herd is estimated at roughly 700,000 head. The majority (about 85%) are of the trypanosomiasis-tolerant West African Short- horn type; pure N'Damas and Zebus represent only about 5% of the total and the remaining 10% are Sanghas, a crossbreed between taurin cattle and Zebus such as the White Fulani or the Sokoto Gudali. The few commercial herds and the breeding stations of the Ministry of Agriculture, however, have much higher proportions of N'Damas, Zebus and Sanghas. More than 80% of Ghana's cattle are in the Northern and Upper regions (Map), another 16% are in the Accra plain and the remainder are scattered throughout the forest area.  2.06 Only about 7% of the national herd is managed commercially, mostly around Accra. Traditional cattle owners seldom sell any but culled cows and frequently leave their cattle to be tended by hired Fulani herdsmen. This dependence upon the Fulani has delayed the development of animal husbandry which, as a result, is almost entirely divorced from crop farming. The stan- dards of cattle management are generally poor and, at best, moderate: there are virtually no fenced or improved pastures and supplementary feeding is rarely provided. Nutrition, especially during the 4-6 month dry season, is deficient in both quantity and quality. As a consequence, productivity is low: typically, in traditional herds the calf weaning rate is 40%, adult cattle mortality is 5%, and it takes about five years for a steer to mature. Under these circumstances, the national herd has an annual offtake of 7%, or about 50,000 head equivalent to 5,000 tons of carcass meat. In 1971, this output met only half of Ghana's progressively declining beef consumption (para 5.03), and the balance had to be imported at a foreign exchange cost of about US$7.8 million equivalent. The annual herd offtake could be greatly increased through the adaptation to local conditions of modern herd and pasture manage- ment practices that have been successful elsewhere in the world under similar ecological conditions. Such improved practices could increase weaning rates to 65-75%, decrease adult cattle mortality to 2-3%, and the age of steers at slaughter to 3-1/2-4 years. 2.07 At present, the principal obstacles to improvements are the lack of knowledge and experience in modern production techniques under local con- ditions. The proposed project has been designed to help gain this knowledge and experience as well as to make a direct contribution to increased output. Government Services, Training and Research 2.08 The Ministry of Agriculture has two Divisions concerned with livestock. The Animal Health Division provides free veterinary services to livestock owners and operates three quarantine stations for imported cattle; it operates a training center for veterinary assistants at Pong Tamale. The Division is adequately staffed, provides good cover through- out the country, and is well managed. As a result, the principal epidemic diseases are under control. The Animal Husbandry Division is responsible for livestock extension work. It also operates 10 livestock stations where it breeds improved bulls for sale to farmers at subsidized prices. The Division lacks adequate funds and consequently has not been able to do very much toward improving the cattle industry. 2.09 Training in animal husbandry is provided by the University of Ghana at Legon, and the University of Science and Technology in Kumasi; each turns out between 5 and 10 graduates a year. Professional veterina- rians are still trained abroad. The Pong Tamale training center turns out 10-30 veterinary assistants each year. While the local training is satis- factory from an academic point of view, there is little or no opportunity in Ghana for obtaining practical experience and training in commercial cattle production.  - 4 - 2.10 Research in animal production, including crossbreeding and nutrition, is carried out by the universities and by the Animal Research Institute of Ghana. Some work is also done by the Animal Husbandry Division itself. Unfortunately, though much of the research is of a high standard and would be useful for the proposed project, the means for conveying new knowledge to cattlemen have not been effective, and conse- quently it has had little impact. Animal Health 2.11 The most important restraint on beef production in Ghana is the tsetse-fly, which, in varying degrees, infects most of the country. However, acute trypanosomiasis is rare because most of the cattle are trypano-tolerant and graze only in areas with little or no tsetse-challenge. Provided grazing areas are suitably located and curative treatments used, trypanosomiasis is not considered an insurmountable obstacle to developing a cattle industry, even with non-trypano-tolerant cattle. But the disease could become a serious danger for an expanding cattle industry until tsetse flies are eradicated or more effective prophylactic drugs or a vaccine are found. Meanwhile, breeding enterprises in tsetse-areas will have to rely on trypano-tolerant cattle, al- though cattle fattening during a limited period, with the help of prophylactic treatments would be technically feasible there. 2.12 Internal parasites, brucellosis, and contagious bovine pleuropneu- monia are the main diseases in the country. The Animal Health Division started a vaccination campaign against the last two diseases in 1972 and hopes to bring them under control in the near future. Tick-born diseases, foot and mouth disease, anthrax, rabies, and tuberculosis are present but are not serious obstacles to development. There is little or no rinderpest in the country. Skin diseases, especially streptothricosis, are present throughout the country. Zebu-type cattle are very susceptible to these diseases, but the West African Shorthorn and N'dama cattle have high resistance. There is no proven control for streptothricosis, although regular prophylactiq treatments such as dipping and spraying and treatment with anti- biotics are used effectively as palliatives; research is, however, progressing in the development of a vaccine. Other Development Projects 2.13 The Bank of Ghana has employed Gunn Rural Management (Australia) to prepare aa feasibility study for, and to assist with the management of a ranch on the AAccra plains. The project, which is designed to demonstrate the feasi- bility of modern cattle production in that area, will develop a total herd of 3,150 head on 13,500 ac, producing 730 head of slaughter cattle annually. The ranch will operate commercially, but it is recognized that high management and consultancy costs will give it a low financial rate of return; the project should, however, have useful demonstration and training effects in the only area of Ghana where commercial cattle production has so far developed.  2.14 The Agricultural Development Bank has interesting plans, in prelim- inary draft, for the integrated development of a rural village. Although the main emphasis would be on cash and food crops, the project also includes a cooperative ranch. 2.15 The Agricultural Development Bank lends for cattle production by private borrowers, but on a very small scale. At the end of November 1972, six loans totalling C 225,000 had been approved, of which t 96,000 had been utilized; of C 35,000 due for repayment, C 24,000 was in arrears. Government Policy 2.16 While there is no clear-cut Government development policy for the cattle industry, the industry is affected by Government's general economic and agricultural policies, aspects of which are frequently incon- sistent with one another. The confusion of objectives reflects differing political pressures caused by inflation, the shortage of foreign exchange, and desires to improve rural conditions and for self-reliance. 2.17 The need to curb price increases has led Government to maintain an exchange rate which overvalues the Cedi, and to impose price control on beef (para 5.06). Both of these policies discourage local producers, and price controls have worsened the shortage of beef. Again, the desire to help farmers has led to a cheap money policy for agriculture: the official policy is that the lending rate to agriculture should be 6% per annum. As commercia:l lending rates (at appraisal) were in the range of 9-14%, and upwards of 7% is paid on time deposits, this policy has had the result that the commercial banks, which have ample funds, are lending little or nothing to farmers or livestock owners. At the same time, however, large sums of money are being channelled through the Agricultural Development Bank to State corporations with, at best, doubtful prospects, and for projects which have been inadequately prepared and appraised. 2.18 There is no doubt that the development of an efficient cattle industry is in Ghana's interest and within her capacity. Government is an- xious to obtain better information than hitherto about the conditions in which cattle production can develop and about how the needs of the industry are to be weighed against competing claims. It is hoped that this project, and the information oobtained from it, will help policy-making for the industry, en- courage local investment and train some of the managers who will be needed for further development. III. THE PROJECT A. Description 3.01 The project has been designed to provide a basis for the develop- ment of a commercial cattle industry in Ghana. A company (para 3.19) would be formed to manage three commercial ranches and to assist the development  -6- of smaller private herds in the areas surrounding these ranches. The project would produce improved breeding stock and slaughter cattle, and would comprise: (a) the development of three breeding/fattening ranches by rehabili- tating and expanding two existing ranches and a maize farm, which would be taken over from Government. The main developments would include: land clearing, fencing, watering facilities, improved pastures and the purchase of breeding cattle; (b) the improvement of some 50 privately owned herds, initially of about 100 head each, in the areas surrounding the ranches. The owners would be provided with technical advice and finance for improved breeding stock, and where necessary for spray races, fencing materials, land clearing and pasture improve- ment; (c) the training of Ghanaian managers; and (d) the identification of further ranch sites and the preparation of a second stage project. B. Detailed Features The Project Areas 3.02 The project locations - Tadzewu, Pong Tamale and Branam - are respectively in the southeast, north and west of Ghana (Map). Tadzewu is in an area of tree and shrub savannah, Pong Tamale in tree savannah, and Branam in mixed secondary and open forest and tree savannah. The ranches are easily accessible throughout the year. Tadzewu and Pong Tamale lie in important cattle areas. Relevant information about the three areas is tabulated below: Tadzewu Pong Tamale Branam Rainfall-in/yr 40 43 54 Rainy season Mar-Nov May-Sept Apr-Nov Dry season Dec-Feb Oct-Apr Dec-Mar Temperature - av.min C^ 24 22 21 - av.max C0 28 33 30 Stocking rate on existing natural pastures (ac/Animal Unit) 8 10 8-9 Population density-people/sq mi 100-300 50-100 25-30 Cattle density high high low Ranch areas (ac) at full development 15,000 31,400 30,000 - of which seasonally inundated 5,000 16,500 - - of which cleared 6,000 200 3,000 - of which fenced 2,000 2,000 3,000  - 7 - 3.03 The ranch sites are flat to slightly undulating. During the rainy season all three are well watered by rivers and ponds, but by the middle of the dry season only the larger rivers flow, and the number of permanent water sources is very limited. Dug-outs and dams would be constructed by the project to provide supplementary watering facilities. 3.04 Although the feasibility study indicates no tsetse-fly challenge, tsetse-fly distribution maps show that two of the ranches -- Tadzewu and Branam -- lie in areas where tsetse flies may be present. Tadzewu is in a region with forest (Fusca group) and riverine (Glossina palpalis) flies. It is likely, however, that even less trypano-tolerant Zebu-type cattle can continue to be bred at Tadzewu ranch and distributed to, and kept successfully by, surrounding farmers of the Accra plain, except in limited areas where specialized habitats exist for Fusca group tsetse (G. medicorum). Branam is in a region with riverine (G. palpalis and G. Tachinoides), savannah, (G. morsitans and G. longipalpis), and forest (Fusca group) flies. The challenge from the tseti;e in the Branam area is much higher than around Tadzewu. Therefore the Branam ranch would be stocked with trypano-tolerant N'dama and West African Shorthorn breeds. The same breeds would be sold to surrounding farmers. Cattle thus sold would require veterinary supervision for three months after sale, until they have developed antigens against the common trypanosome species of the new environment. The Ranches 3.05 The three proposed ranches are at present being used as follows: (a) the Pong Tamale ranch is a breeding station of the Animal Husbandry Division of the Ministry of Agriculture; (b) the Tadzewu ranch is operated on a commercial basis by the State Farms Corporation; and (c) The Branam ranch is a maize farm belonging to the State Farms Corporation. The Pong Tamale and Tadzewu ranches have benefited from investments in land clearing, watering facilities, buildings, and other constructions. Together they have about 2,600 head of cattle: about 200 Zebu-types (White Fulani and Sokoto Gudali), 1,000 Sangas (crossbreeds between Zebus and West African Shorthorns), 600 pure N'damas, and 800 West African Shorthorns. Although Tadzewu ranch made a small profit last year, it and the breeding station at Pong Tamale are presently operated on too small a scale to be commercially viable. The Branam ranch has no cattle at present, but it has good buildings and about 3,000 ac of cleared land, of which 1,700 ac were cultivated with maize in 1972. As a single crop operation, Branam has not been profitable; present yields of about 1,500 lb/ac are low and could be improved to profit- able levels through good crop management including rotation with pastures.  -8- 3.06 In order to carry out the developments described below, the ranches would have to be expanded: the Pong Tamale ranch from 13,000 ac to 31,000 ac, the Tadzevu ranch from 1,500 ac to 15,000 ac, and the Branam ranch, the present size of which is not clearly defined, to 30,000 ac. At Pong Tamale, the Ministry of Agriculture would retain existing buildings, some 3,000 ac. of land and 20% of the herd. At Tadzewu some of the land required is occupied by private farmers. These number less than 20 and could be resettled on adjoining land that is equally suitable for agricultural production. It would be a condition of effectiveness that the Ministry of Agriculture and the State Farms Corporation on the one hand, and the Company on the other, had entered into an agreement satisfactory to IDA for the transfer of the property and the assets of the three ranches. The agreement would come into force on the date of effectiveness of the credit. Assurances were obtained that the land required for the full development of the ranches would be made available to the Company, with satisfactory title and security, and that proper arrangements would be made for the transfer of the private farmers presently on the land required for the expansion of the Tadzewu ranch. 3.07 As commercial cattle production in Ghana is in its early stages, many of the developments on the project ranches would also serve as trials, under field conditions, of methods of land clearing, pasture improvements, cross-breeding and feeding that had been proved in similar conditions else- where. At Branam, where parts of the ranch are suitable for maize cultiva- tion, 1,700 ac of maize would be grown annually in a 3-5 year rotation with fodder crops (mainly Stylosanthes) to maintain soil fertility. This inte grated method of production would be an innovation in Ghana and, if success- ful, could serve as a model for wider application, both for large- and small- scale operations. Finally, to ensure that full advantage is taken of the animal husbandry research work already carried out in Ghana, the Company would consult regularly and cooperate with the institutions concerned with such research. 3.08 The developments on the three proposed ranches would be carried out over a period of six years and would consist of fencing, land clearing, watering, cattle handling and transport facilities, dips, firebreaks and tracks, ranch buildings (including new offices and staff houses as well as rehabilitation of those already in existence), and equipment for pasture improvement and (at the Branam ranch) for maize production. Additional breeding stock for the Pong Tamale and Tadzewu ranches and a foundation herd for Branam would be procured. 3.09 Since trypano-tolerant breeding stock of N'dama and West African Shorthorn cattle are in short supply, the purchase of good quality heifers of these breeds at reasonable prices could be difficult. However, the problem is unlikely to prove insurmountable; an arrangement for the supply of a considerable number of N'damas over several years has been made recently with Zaire under another IDA project and there is evidence that other West African countries, such as Gambia, would supply N'dama cattle under satis- factory conditions. About 2,600 of the 3,600 heifers needed for the project would be of this type. The rest would be Zebus (White Fulani or Sokoto Gudali) and their crossbreeds with N'damas and West African Shorthorn.  - 9 - These would be satisfactory at the Pong Tamale and Tadzewu ranches and, because of their larger size, are preferred by the local cattle owners. Purchase of Zebus should be easier than purchase of N'damas and West African Shorthorns. 3.10 Stocking rates and nutrition in general would be improved through rotational grazing, selective bush clearing, burning of pastures to control regrowth of bush and shrub and to provide fresh pasture for the dry season, and by developing 1,500 ac at Branam, and 2,000 ac at each of the other two ranches, of Stylosanthes gracilis pasture. Mineral supplements would be made available throughout the year, and appropriate prophylactic treat- ment, such as deworming and dipping, would be administered. 3.11 Natural pastures would be divided into 500 to 100 ac paddocks and im- proved pasture into 80 to 100 ac paddocks, by a total of 142 miles of fencing, using live posts wherever possible. Pastures would be protected by 135 miles of fire-breaks. Twenty-five miles of access tracks would be built. 3.12 At the Pong Tamale ranch, 1,500 ac of bush would be cleared mecha- nically for pasture improvement. Bush at the Tadzewu ranch is lighter and can be cleared by hand. At Branam ranch the bush is denser than at the other two ranches, and provision is made for selective clearing, using mechanical, chemical or manual methods as required. 3.13 Each paddock would have at least one permanent natural or artificial water source. Artificial sources would consist of already existing dams and, at the Pong Tamale and Branam ranches, of 24 new dug-outs with a capacity of about I million gallons each. Artificial sources are expected to collect enough water for the dry period during the rainy season. For hygienic reasons they would be fenced and provided with troughs, where practicable. 3.14 Although water supplies at the Branam and Pong Tamale ranches can be assured with the proposed relatively modest investments, further planning is needed at the Tadzewu ranch. There are three dams within the ranch area from which people and livestock obtain water, but these cannot meet the requirements of the ranch. Sufficient water is known to be available economically from other sources, but it is not yet certain whether the cheapest means would be supplementary dams, dug-outs, or pumping. Accordingly, provision is made for a three-month feasibility study during the first year of the project, as well as provision for subsequent execution of the recommendations of the study. Privately Owned Herds 3.15 About 50 privately owned herds, within about 25 miles of each of the ranches, would be improved under the project. The size of these herds would probably range from 10 to 400 head. The pattern of ownership would vary from individual farmers or cattle traders to village or family groups. Land tenure and grazing rights would also vary. For the purpose of herd projections, it has been assumed that an average herd would have about 100 cattle and one principal owner disposing of at least 40 ac of land and sufficient grazing rights and crop residues for building up his  - 10 - herd to about 250 head and for finishing about 25 steers per year. The owners would be provided with technical advice and finance for improved breeding stock and feeder steers, watering facilities and, where necessary, dips, spray races, fencing materials, land clearing and pasture improvement. Also, they would be assisted in increasing the size and raising the quality of their herds, and in integrating cattle production with other activities. Because of the difficulties in supervising, under this project, a larger number of private farmers owning small herds, the number of participants would be limited to about 50. A principal objective, however, would be to develop extension and management techniques for a broader based second project (para 3.18). Training 3.16 The training of Ghanaian ranch management would be fundamental, not only to the success of the project, but also to the further development of the cattle industry. It would primarily be carried out on the three ranches, and would be accompanied by the delegation to trainees of substan- tial management responsibilities. This in-service training would be sup- plemented, with funds provided by the project, by sending promising Ghanaian staff to gain further experience on other Bank Group financed projects. 3.17 Ghanaian ranch managers could, after training, follow a variety of paths: remain with the project and assist in its further expansion, strengthen the Animal Husbandry and Animal Health Divisions, establish their own ranches, or find employment in other agricultural business enter- prises. The possibilities for entry at the management level into private agriculture ventures are particularly good, due to their increasing number and the continuing shortage of skilled Ghanaian managers. The combination of training and career opportunities in all these areas should be attrac- tive to University graduates. Project Preparation 3.18 -A provision for consultants' services has been made for the pre- paration of the second project in the third project year (PY 3). By that time it should be possible to assess the value of the methods and policies employed, and if they prove successful it should not be difficult to identify further livestock development projects. In addition, a second project would place more emphasis on reaching smaller farmers, for example, through schemes to develop village or communally owned herds and to encourage cattle fattening by smallholders. C. Organization and Management The Company 3.19 The project would be carried out by the Ghana Livestock Company Limited (the Company), a private limited liability company under the Ghana  -. 11 - Companies Code, 1963 (Act 179). The registration of this Company, with a lemorandum and Articles of Association acceptable to IDA, has been completed. 3.20 The shareholders, initially at least, would comprise: (a) Government, to whom shares and debentures would be issued in exchange for the assets taken over; (b) Agricultural Development Bank; and (c) the three commercial banks: Ghana Commercial Bank; Barclays Bank of Ghana, Ltd.; and Standard Bank, Ghana Ltd., which would, in addition, provide overdraft facilities. Although the banks would hold a majority (60%) of the shares, Government would have a controlling interest through its own shareholding and its ownership of the Agricultural Development Bank and the Ghana Commercial Bank. Board and Senior Management 3.21 A Board of Directors, elected by the shareholders and on which each of them would be represented, would be responsible for laying down and implementing the Company's policies. The senior management of the Company would comprise: (a) Managing Director, who would also be a member of the Board; (b) Chief Accountant; and (c) three Ranch Managers. Holders of senior management posts would be recruited internationally, and would have qualifications and experience, and be appointed on terms and condi- tions, acceptable to IDA. Assurances on these matters were obtained. The appointment of the Manager Director would be a condition of effectiveness. 3.22 While every effort would be made to find suitable Ghanaian can- didates, the small degree of commercial ranching experience in the country makes it likely that some expatriates would be required. For the purpose of preparing the financial projections and to ensure that adequate provi- sion is made in the proposed credit, two of the senior management posts are assumed to be paid at expatriate salary levels. Expatriates would be appointed under five-year contracts and would be expected to have substan- tially handed over their responsibilities to Ghanaian successors by the end of the fourth year, leaving themselves time to plan and advise on the Company's future policies and operations in their final year of tenure. Ranch Staffing 3.23 The senior staff at each ranch would comprise a Manager, Assistant Manager and Veterinary Assistant. The Managing Director would be based on one of the ranches, which would also be the head office of the Company. 3.24 Although routine veterinary care would be the responsibility of the Veterinary Assistant, the Animal Health Division of the Ministry of  - 12 - Agriculture would also provide veterinary cover. Assurances of the adequacy of this cover were obtained. 3.25 Other staff at the ranches would comprise clerks, mechanics and other artisans, storekeepers, drivers, head herdsmen, herdsmen, laborers and guards. At head office there would be a senior bookkeeper, a secretary, telephonist/typist and messengers. Dealings with Private Farmers 3.26 The Ranch Managers would be in charge of dealings with private herd owners and the Managing Director would visit each of the project areas regular- ly in order to meet intending participants in the project and to supervise the progress of those to whom credit had been extended. Day-to-day advice and assistance to the private herd owners would be given by Assistant Managers and Veterinary Assistants, under the close guidance and supervision of the rartch managers. There would also be close cooperation with the Animal Health Division of the Ministry of Agriculture, which would provide adequate veteri- nary cover to these associated farmers. Assurances of this service were obtained. Start-Up Arrangements 3.27 Although registered and established as a legal entity, the Company would remain a shell until the appointment of the Board and Managing Director (para 3.21), together with the effectiveness of the IDA Credit, enabled it to start operations. The following 3-6 months would be used for the recruitment of senior staff, the preparation of detailed ranch plans (including the hydrological survey at Tadzewu - para 3.14), initial procurement, arrange- ment of land titles and other legal and administrative matters. The assets would be transferred at the end of this period, and provisions to this effect would be included in the agreement to be concluded between the Ministry of Agriculture, State Farms Corporation, and the Company (para 3.06). Reviews of Company Policies and Results 3.28 The Company's operations would be on a straightforward commercial basis, with a view to making profits. To ensure that its policies took full account and advantage of changing conditions, herd projections and financial forecasts would be prepared and updated annually. The forecasts would be reviewed by the Board, in conjunction with the latest available accounts, and taking note of the rate of return on capital employed. Assurances were obtained that the Company would update its financial projections, together with its future development program, and review these with IDA not later than two months before the start of each financial year.  - 13 - D. Accounts and Audit 3.29 The Ghana Companies Code 1963, under which the Company wo4ld be formed, has detailed requirements for accounts and audit. These call for inter alia: (a) the keeping of records adequate to reflect, in accordance with consistently maintained sound accounting practices, its operations and financial condition; and (b) the appointment of independent, qualified auditors. 3.30 Assurances were obtained that: (a) the auditors would be a firm acceptable to IDA; (b) copies of the Company's audited accounts and of the auditor's report thereon would be submitted to IDA within four months of the end of each financial year; and (c) the report of the auditors would be of such scope and in such detail as IDA may reasonably have requested. IV. COST ESTIMATES AND FINANCIAL ARRANGEMENTS A. Project Costs 4.01 Costs over the project's six year development period are estimated at US$4.5 million, including US$0.5 million for assets taken over, with a foreign exchange component of US$2.0 million, as detailed in Annex 6 and summarized in the table below.  - 14- ------------s 000 -------- - ---- us$ OO Local Foreign Total Loc-l Foreign isLta F. E Ghana Livestock Coepany.Ltd. - Buildings 399 40 439 346 34 380 9 Fencing and stock handling fucilities 117 35 152 101 31 132 23 Firebreaks and tracks 50 - 50 44 449 Watering facilities 174 17 191 131 15 166 9 Improved pastures 98 97 195 85 84 169 50 Selective land clearing 75 20 95 65 17 82 21 Vehicles and equipment 114 267 381 99 231 330 70 VaterEng facilities study - 22 22 - 19 19 too Subtotal 1,027 498 1,525 891 431 1,322 33 Herd-taken over 456 - 456 395 - 395- -purchased 356 357 713 309 309 618 50 Etpacriute s-I-lris 2/ - 385 385 - 334 334 100 Other expenses 2/ 60 15 75 52 13 65 20 Subtotal 2/ 872 757 1.629 756 656 j1412 46 Total Coepany 1.899 1.255 3.154 1 647 1 087 _2734 40 Private Farmers Fencing and stock handling facilities 62 22 84 54 19 73 26 .W.tering facilities 108 12 120 94 10 104 10 trEq.ips5nt 6 5 11 5 5 10 50 Cattle - breading 122 286 408 106 247 353 _Z0 - incremental fattening 36 - 36 31 - 31 - Trtal Priv-te Farmers 33 325 659 290 281 571 49 Pretaration of Future Project - 84 84 - 73 73 100 Overseas Training _ 21 21 _ 18 18 100 Subtotal - 105 105 91 91 100 Projlct Cost Before Contingencies 2,233 1,685 1,918 1,937 1,459 3,396 43 Contingencies Physical 80 58 138 70 50 120 42 Prie 600 566 1L166 519 491 1 0t4 Tutal Proiject Cost 2 913 2.309 'i2_2 2 2_526 _2C0 4_526 4 NOTES I/ Project costs include tho following esiating a.setu taken over by thb company Buildings 132 114 Fencing and handling facilities 11 10 Watering facilitiss I 1 Cattle 456 395 Total 600 520 2/ The subtotal is equal to the balance sheet v-lue of the herd at the end of PY 6. The sm of expatriate salories and other expenses represen. the costs not recovered by sales but added to the value of the herd. The total of expatriate salarias is shown because IDA financing of the build-op in herd value is disbursed in this way; other epenses are the residual figure. May 2b, 1u74  - 15 - 4.02 Cost estimates are based on price levels ruling at the beginning of 1974. A 10% physical contingency has been included for Company ranch investments. Price contingencies have been calculated on the basis of the following annual rates of increase in prices: (a) for buildings and civil works, 18% in the first year, 15% in the second year and 12% thereafter; (b) for vehicles, equipment and material ranch inputs, 14% in the first year, 11% in the second year and 7.5% thereafter; and (c) for all other costs, 7%. rares and duties account for about 6% of total costs before contingencies and excluding assets taken over. B. Financing 4.03 The financing of project costs would be in the following amounts and proportions (details at Annex 6): Company's Retained Private Govt. Banks Income Farmers IDA Total -US$VOOO--