Tanzania - Cashewnut Development Project

CIRCULATING COPY Report No. 397a-TA TO BE RETURNED TO REPORTS DESK Appraisal of Cashewnut N Development Project FJgPOW oDU Tanzania I tN May 2,1974 FILE COPY Agricultural Credit and Livestock Division Eastern Africa Region 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 It may not be published, quoted or cited without Bank Group authorization.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 Currency Unit = Tanzania Shilling (Tsh) Tshl.0 = US$0.145 US$1.0 = Tsh6.86 In January, 1974 the Tsh was revalued to US$1.0 = Tsh7.14 WEIGHTS AND MEASURES Metric System 1 hectare (ha) = 10,000 m2 = 2.46 acres 1 kilometer (kim) = 0.62 miles 1 square kilometer (km2) = 0.39 sq. miles = 100 ha 1 kilogram (kg) 5 2.20 pounds 1,000 kg 1 metric ton 0.98 long ton ABBREVIATICNS CNSL C Cashewnut Shell Liquid CATA = Cashewnut Authority of Tanzania RMEA 5 IBRD Regional Mission in East Africa CEC = Community Education Centers TAC = Tanzania Audit Corporation TANU = Tanganyika African National Union Government FiEcal Year July 1 - June 30  TANZANIA CASHEWNUT DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................ .................. i-ii I. INTRODUCTION .. 1 II. BACKGROUND ............................................... 2 A. General ....................... 2 B. The Agricultural Sector ..... ............... 3 C. Cashewnuts .......................................... 4 III. THE PROJECT ....................................... . 7 A. General Description ........ ......................... 7 B. Detailed Features ................................... 8 C. Project Costs ................... .................... 10 D. Financing ........................................... 12 E. Procurement ......................................... 12 F. Disbursements ....... ................................ 13 C . Accounts and Audit ...... ............................ 13 H. Project Monitoring ..................... 14 tV. ORGANIZATION AND MANAGEMENT .............................. 14 V. PRODUCTION, MARKETING AND PRODUCER BENEFITS .... .......... 16 VI. ECONOMIC BENEFITS AND JUSTIFICATION ...................... 18 VII. RECOMMENDATIONS .......................................... 20 This report is based on the findings of an appraisal mission to Tanzania in October 1973 composed of Messrs. D. Lomax and U. Mbanefo (IBRD) and D. Rest (Consultant).  TABLE OF CONTENTS (Continued) A?NEXES 1. Ujamaa and TANU Table 1 Formation of Ujamaa Villages: Comparison of 1971 & 1972 data 2. Cashewnut Production 3. Cashewnut Processing - Appendix A - Fitancial and Economic Analysis of Hanc. and Machine Processing 4. Factory Construction and D)evelopment Table 1 Factory Capital Costs Table 2 Typical Factory Profit and Loss Accounts Table 3 Raw M4aterial - Requirements Table 4 Estimates of Factory Labor Requirements Table 5 Supplies Requirements Table 6 Transportation of Kernels Appendix A Cashewnut Processing Facilities: Outline of a Request for Tender 5. Extension and Grading 6. Cashew Research 7. Project Costs Table 1 Summary of Development Cost Table 2 CATA Headquarters Fixed Assets Table 3 CATA Headquarters Operating Costs Table 4 Extension and Grading Services - Fixed Assets Table 5 Extension and Grading Services - Operating Costs Table 6 Mtwara Agricultural Research Center - Pixed Assets fable 7 Mtwara Agricultural Researth Cente-r - Operatihg Costs Taible S Factory Development Table 9 Factory Land Development Costs Table 10 Factory Building Requirements Table 11 Factory Equipment Requirements Table 12 Costs of Factory Water Infrastructure Table 13 Cost: Rural Water Supply Table 14 Cost: Community Education Centers Table 15 Technical Services  TABLE OF CONTENTS (Contined) 8. Disbursements Table 1 Disbursement Categories of Bank Loan Table 2 Estimated Schedule of Disbursements 9. The Cashewnut Authority of Tanzania 10. Staffing Schedules 11. Markets and Prices Table 1 Cashew Kernel Sales Prices 12. Table 1 CATA Project Related Profit and Loss Accounts Table 2 CATA Project Related Cash Flow Table 3 CATA Profit and Loss Accounts 13. Government Project Related Cash Flow 14. Economic Analysis Table 1 Economic Costs Table 2 Economic Benefits Table 3 Financial Costs Table 4 Financial Benefits MAP Cashewnut Development Project CHARTS CATA Organization Chart IBRD 8246 Factory Construction Schedule IBRD 8551 Rate of increasing Factory Capacity IBRD 8552   TANZANIA CASHEWNUT DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. Tanzania's development strategy has given emphasis to agricultural and rural development, As part of its rural development program and in line with Government's recent decentralization of its administrative functions, a balanced regional development effort has recently been undertaken. Within this context greater attention has been given to the construction of agri- cultural feeder roads, rural water supplies and health and educational fa- cilities. Government also intends to concentrate its resources in directly productive investments, particularly in agriculture. As Tanzania is the world's second largest producer of cashewnuts and nearly all of this comes from smallholders of whom 350,000 in the Project area produce 75% of Tanzania's production, the expansion of cashewnut processing is the most promising method of developing the area and has been given a high priority under Gov- ernment's Second Five-Year Plan (1969-74). ii, The proposed Project is aimed at integrating the cashewnut industry and providing a base for increasing farmers' incomes by establishing processing factories and providing essential infrastructure. As part of the Project five processing factories would be established each of which would include a farm access road maintenance unit, a cooperative shop and a dispensary. The Proj- ect would also provide storage facilities for Cashewnut Shell Liquid (CNSL) and offices, houses and equipment for the Cashewnut Authority of Tanzania (CATA) headquarters at Mtwara. The Project would support cashewnut research and the establishment of a cashew extension and grading service, and in addi- tion, would include provisions for expanding rural water and education facili- ties. Finally, it would provide for technical services, training and future Project preparation. The Project would be implemented by Government and CATA. iii. Total Project cost is estimated at US$30.3 million. The proposed IUS$21 million Bank loan would cover the foreign exchange costs and 36% of local costs. Factory plant, machinery, equipment and technical services valued at US$9.5 million (excluding contingencies) would form the basis of a turnkey contract, other machinery, equipment and motor vehicles (US$.8 million) would be procured separately from this. Both would be procured under international competitive bidding in accordance with Bank/IDA guide- lines. A turnkey contract is considered essential due to the small number of processing machinery manufacturers and due to the technical nature of their products each factory would have to be equipped with one type of equipment to ensure efficiency of production. As the Project area is remote and there is adequate local building capacity, all buildings and  costruction contracts (US$2.4 million) would be subject to local competi- tive bidding or construction by force account. The bulk of the IBRD loan and the Governments' own contribution would be respectively onlent to CATA and take the form of an equity investment. The loan would be at 8-1/2Z for 20 years including a 5-vear grace period and would amount to about Tsh 80 million (US$11.7 million excluding contingencies). iv, The Project would support Government's rural development objectives by expanding the production and processing of cashewnuts, by expanding rural water supplies and by providing seven new community education centers. The maintenance of the farm access road network would ease the difficulties of transporting not only raw cashewnuts, but also food and other items not directly connected with the cashew industry. The dispensary at each factory would help to meet the health requirements of the rural population. As a direct result of the Project, family cash incomes would be increased by about 24% in thf poorer regions of the country. At full development, the Project would create additional permanent employment for about 5,000 indivi- duals who would be employed by CATA in the factories and in the extension, grading and research services. Annual cash income of these employees would be about US$420 against a current wage estimated at not more than US$200. By expanding cashew research, the Project would provide a base from which it will be possible to increase farmers' benefits. v. As a result of the Project, total output of raw cashewnuts in Tanzania would increase from 124,000 tons to about 143,000 tons; that is by 19,000 tons per year at full Project development in year 7 (1983). The five factories to be constructed under the Project woulld process 9,000 tons of cashew kernels and 2,500 tons of cashewnut shell liquid (CNSL). vi. The economic rate of return on the Project is estimated at 39% over 20 years. Foreign exchange costs and earnings were shadow priced at Tsh 10 per US$1 to reflect the scarcity value of foreign exchange in Tanzania (th-e official exchange rate is now Tsh 7.14 per US$1). vii, 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 cotten. In addi- tion, an education credit provided US$3.3 million for agricultural training in 1971. Performance under the projects has been mixed. viii. Subject to the required assurances, the Project would be suitable for a Bank loan of US$21 million for a period of 20 years to the Government of Tanzania.  TANZANIA CASHEWNUT DEVELOPMENT PROJECT I. INTRODUCTION 1.01 Tanzania's development strategy has given emphasis to agricultural and rural development. As part of its rural development program and in line with Government's recent decentralization of its administrative functions, a balanced regional development effort has recently been initiated. Within this context greater attention has been given to the construction of agri- cultural feeder roads, rural water supplies and health and educational facili- ties. Government also intends to concentrate its resources in directly pro- ductive investments, particularly in agriculture. As Tanzania is the world's second largest producer of cashewnuts and nearly all of this comes from small- holders of whom 350,000 in the Project area produce 75% of Tanzania's produc- tion, the expansion of cashewnut processing is the most promising method of developing the area and has been given a high priority under Government's Second Five-Year Plan (1969-74). The objectives, to which this Project would make an important contribution, are to increase cashewnut processing capacity as well as raw cashewnut production by peasant farmers in order to provide a base from which rural incomes can be increased. 1.02 The proposed Project would comprise a 5-year program to increase the production and processing of cashewnuts. It would provide 5 new processing factories, support services to ujamaa-villages, 1/ storage facilities and extension, research and other teclmical services. It would ultimately reach about 350,000 of Tanzania's cashew farm families (about 2 million people). 1.03 Government's original request included two items which were excluded during appraisal. The first was for peeling units to assist hand processing operations and the second was for two factories at Tunduru and Kilwa. On appraisal it was found that the use of peeling machines would not improve the economic viability of hand processing in Tanzania (Annex 3 Appendix A). Because of its location in relation to CATA's headquarters, Tunduru would create difficult management control problems. Kilwa also has locational problems and the production and quality of nuts in that area are too low for efficient processing. The Goveinment has agreed to these changes. 1.04 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. In addi- tion, an education credit provided US$3.3 million for agricultural training 1/ Ujamaa are economic and social communities where the members of the com- munity agree to live and work together for the benefit of the community as a whole.  -2- in 1971. Performance under the projects has been mixed. The Agricultural Credit project was moderately successful after some initial institutional problems. The first Livestock Project has been satisfactorily complet- ed, while the second has only jus: started. The development of the tobacco Project has been disappointing and slower than expected. There has been a shortfall in recruitment of farmers expected to grow tobacco due to prema- ture introduction of collective cultivation under the ujamaa system. The Smallholder Tea Project has serious management problems and area planted is only about one half of that originally expected. The Geita Cotton Project has recently been approved by the Executive Directors. 1.05 The Bank's Economic Mission of 1972 drew attention to the need for investment in the cashewnut industry and subsequently the Project was prepared by Government with assistance from the IBRD Regional Mission in East Africa (RMEA). This report is based on the findings of an appraisal mission to Tanzania in October, 1973 composed of D. Lomax, U. Mbanefo (IBRD) and D. Rest (Consultant). II. BACKGROUND A. General 2.01 Tanzania with a total area of about 880,000 km is sparsely popu- lated; the average density is under 15 per km2. The population of 13.9 mil- lion is increasing at 2.7 percent a year. Overall per capita-GNP for 1973 is estimated at US$110 per annum while in the Southern region per capita income is estimated at about US$38 per annum. Over 90 percent of the people are dependent on agriculture and 40 percent of GNP is derived from this sector. The growth rate of the economy has been about 5.6% per annum from 1965 through 1971. Actual growth has been behind the Second Five-Year Plan (1969-1974) targets, mainly due to failure of the main agricultural crops to reach plan projections. 2.02 Tanzania aims at reducing inequalities in income distribution through emphasis on smallholder agriculture and rural development, and State control of important industries, services and large-scale agricultural enterprises. To facilitate rural development and to improve the efficiency of Government administration, greater responsibility for development was recently given to the 20 regions (divided into about 70 relatively autonomous districts) speci- fically for the identification of education, feeder road, rural water supply and agricultural projects within the regions,  - 3 - B. The Agricultural Sector The Organization of Production 2.03 Most production is concentrated on smallholdings which are culti- vated by hand and produce family subsistence as well as cash crops. The family provides most of the labor, and hiring workers is discouraged as alien to the socialist spirit of the country. Limited use is made of oxen, mainly in the less densely populated parts of the cotton growing area. The area cultivated by a family is generally about 5-6 ha (some of this interplanted) but varies from under 2 ha in the more favored agricultural areas to 50 ha in less favored areas. Plots tend to be irregular but fragmentation is only serious in such densely populated areas as Kilimanjaro. 2.04 Important smallholder cash crops are cotton, cashewnuts, tea, tobacco, coffee, maize and rice. Large estates produce sisal, coffee, tea and coco- nuts, and state farms mainly wheat, rice and livestock. Estate production has diminished in importance, and the state farm program remains small. Tanzania's national herd of 13 million cattle grazes extensively over the 40 percent of the country which is free from tsetse fly. There is little integration of livestock into crop farming. Coffee is the major export crop; coffee ex- ports valued at Tsh 383 million represented 19% of total exports in 1972; in the same period cotton accounted for 17% of the total, and sisal and cashew 8% each. The remainder consists, inter alia of exports of tea, meat, pyrethrum, and beans. Ujamaa Villages (Annex 1) 2,05 A major instrument of Government's rural development strategy is the reorganization of production on communal lines in ujamaa villages, usually comprised of 60-70 families, Ujamaa is a movement based on a maximum of self- help and self reliance: the ultimate aim is to transform Ujamaa villages into multi-purpose cooperative production societies, Some of these are formed by physical resettlement, others without change of location, Although the objec- tive is primarily social and political, Government recognizes that Ujamaa villages must be economically viable. In December, 1972 a total of 5,556 ujamaa villages involving nearly 2 million people were in some stage of de- velopment, and 315 of these were registered cooperatives. There has been some opposition by farmers to ujamaa, particularly in areas with established cash crops. Success in implementing this program has varied considerably between areas and regions, and over-enthusiasm by local officials has on occasion led to undue pressure on farmers to form ujamaas, with subsequent adverse effects on production. Agricultural Services 2.06 Extension. The agricultural extension service is organized region- ally with a coordinating office in Dar es Salaam. About 2,500 field staff  -4- are engaged on crop work, and a further 2,000 on animal husbandry and animal health programs; the average officer is responsible for 900-1,000 farmers. The extension services have thus far been rather ineffective in introducing improved techniques to farmers. Major factors have been the lack of adequate staff, inadequate training in the more valuable techniques, and poor manage- ment; the latter is reflected in a lack of logistic support, frequent transfers, and problems with the administration of pay and allowance. There is no spe- cific cashew extension section. 2.07 Research. Agricultural research is organized in twelve major centers, each handling several crops or livestock. Priorities are set by a conference under the chairmanship of the Director of Crop Development or Livestock Development in the Ministry of Agriculture. Cashew research is carried out at the Mtwara Research and Training Institute, Thus far the program has concentrated mainly on seed selection, vegetative propagation and spacing trials, The cashew research section at Mtwara is severely under staffed and there is a serious shortage of research equipment. C. Cashewnuts (Annex 2) 2.08 The cashewnut is the product of the cashew tree which grows on poor sandy soil to a height of around 6 meters. The tree has about a 30-year bear- ing life, yielding a significant quantity of nuts (attached to an apple-like fruit) from about year 5 on. The cashewnut itself has an outer hard shell as well as a brittle inner shell which protects the kernel. A resin between the two shells is the source of cashewnut shell liquid (CNSL) used commercially for paints and varnishes. The cashew trees are best spread 10 meters apart (about 100 trees per ha) and require a small amount of weeding in the form of annual bush clearing. The crop is harvested by collecting the ripe nuts from the ground under the tree, and it is essential that this area be kept clean if significant losses are to be prevented. 2.09 Tanzania ranks second only to Mozambique in total production of cashewnuts. In 1971/72 it produced about 115,000 to 120,000 tons of nuts, as compared with 170,000 tons for Mozambique and 55,000 tons for India. Tan- zania's production in that year thus represented about 28% of total world production of 407,000 tons. About 75% of Tanzania's production is concentrated in the Project area, being the Lindi and Mtwara regions and the Tunduru dis- trict of Ruvuma region (map) where cashewnuts are the major cash crop of the two million inhabitants. 2.10 Cashewnuts are produced almost entirely by smallholders who own between 200 and 400 trees crowded onto an area of about 1 ha. Plantings are generally scattered rather than set out in rows, and in many cases are not given adequate spacing. The smallholder generally pays little attention to his trees due to the mistaken belief that as a bush crop they need no care.  -5- This belief is reinforced by the latk of any cashew extension service. Crop yields average about 325 kg per ha F.s compared with yields of over 1,000 kg per ha which could be achieved by following simple husbandry practices; essentially, weeding and thinning. About 60% of this total production is Tanzanian standard grade and 40% is second grade. Standard grade is defined as that sample of raw nuts having less than 13% defective nuts; a sample 13% to 23% defective is classified as second gracle, and any sample over 23% is discarded. Defective nuts include black nuts, aborted nuts and nuts where germination has started. 2.11 Project area farmers are organized into cashew cooperatives and market their raw nuts through cooperative btying centers where they are weighed, graded and purchased. Each cooperative operates 3 or 4 buying centers. Cooperatives then transport the nuts to a central marketing store now operated by the Cashewnut Authority of Tanzania (formerly operated by the National Agricultural Produce Board) where a regrading is done prior to processing or eventual export as raw nuts. Processing (Annex 3) 2.12 The objective of processing raw cashewnuts is to extract the high- est percentage of whole kernels. The processing of cashewnuts has developed from the original 100% manual processing prevailing in India to the highly mechanized systems now used in some parts of Tanzania and Mozambique. At present, there are only three companies in the world who manufacture cashewnut processing equipment (one British, one Italian and one Japanese). Both the manual and mechanical systems involve the following steps: sizing, humidi- fication, heat treatment, decortication (removal of both shells) drying of kernel, peeling the kernel, grading and packing. The cashewnut shell which has a high calorific content can be used as fuel in the heat treatment step of processing. The essential difference between the methods arises at the decortication stage. With manual processing the nut is cracked open by being placed upon an anvil and struck with a stick or wooden hammer; the kernel is then separated from the shell by hand. In mechanical shelling the shell is opened either by knives or by projection at high velocity against an anvil; the kernel is then separated by pneumatic devices. Mechanical pro- cessing allows for the separation of a higher percentage of CNSL, production yield being about 6% by weight. In most countries under both processes the production yield of kernels whether whole or broken is about 23% by weight; however, Tanzania has not been able to develop a sufficiently high standard for hand processing and there is a significantly higher percentage of broken kernels. Hand processing operates at a financial loss in Tanzania due to low labor productivity and low quality of production. Financial and eco- nomic comparisons of hand to mechanical processing in Tanzania are set out in Annex 3, Appendix A. 2.13 Out of a total production of about 124,000 tons (1972/73) of raw nuts Tanzania now has the capacity to process about 27,000 tons, 20,000 by machine an4 7,000 by hand.  -6- Cashew Marketing 2.14 Cashewnut shell liquid is exported mainly to Japan, the United King- dom and the USA for use in the automobile and paint industries. CNSL is of minor importance in cashewnut processing as its sales value represents only about 2.5% of total sales value. India is the main market for exportable raw cashewnuts not processed in producing countries. Historically, the Indian processors have bought for their own account, but in 1970 the Indian Govern- ment formed a single buying agency--the Cashew Corporation of India. Imports of raw cashewnuts by India have declined from 178,000 tons in 1968 to 131,000 tons in 1971, as the producing countries, particularly Mozambique, have moved to develop their own processing capability. Tanzania now exports about 80% of its raw nut production to India; the remaining 20% is processed domestically and then exported. 2.15 The cashew kernel is sold mainly as a dessert nut. Other important dessert nuts include the almond, walnut, brazil, hazel and pecan. Dessert nuts are packed either as mixed nuts or as single varieties and because of its bland taste and low price related to other nuts, the cashew (together with groundnuts) generally constitutes the largest percentage of a mixed pack. For primary marketing purposes cashew kernels are classified by number of whole nuts per lb and the 320 whole nut classification price is the price which is quoted by dealers in London and New York. Broken kernels are sold mainly to the confectionery industry. Kernel sales are mainly through agents. 2.16 The main importing countries for cashew kernels are USA and USSR, and these two countries accounted for about 80% of total world kernel imports during the years 1969/71. Although world kernel imports have remained steady at around 82,000 tons for this period, FAO projects world demand for cashew kernels to grow at 10% per annum over the next 7 years while current supply projections indicate a growth of about 5% per annum over the same period. Cashewnut Authority of Tanzania (Annex 4) 2.17 The Cashewnut Authority of Tanzania (CATA) was established in 1973 under the Cashewnut Industry Act as a statutory body designated to coordinate all aspects of production, processing and marketing of cashewnuts. The Act gave CATA virtual monopoly powers over the cashewnut industry, subject only to the over-riding authority of the Minister of Agriculture. It provided for a Chairman appointed by the President, a Board of Directors comprised of from ten to fifteen members appointed by the Minister of Agriculture, and a General Manager appointed by the President to serve as chief executive of the Authority. Final financial details with regard to the initial capital structure of CATA are not expected to be completed until mid 197h; in the interim it will continue to function under provisional arrangements. When fully operational CATA will purchase raw nuts from the cooperative unions for its processing facilities and arrange for the export of kernels and the export to India of all unprocessed nuts. CATA will also be responsible for  -7- maintenance of an extension and grading service and for cashew research. CATA has already taken over the activities of the National Agricultural Products Board;(NAP3) related to the purchase and sale of raw cashewnuts. The National Development Corporation (NDC) still owns the National Cashew Corporation (NCC), and CATA will eventually take over those assets of NCC necessary for its opera- tions. CATA will also take over from the National Development Corporation its 85% equity in the Tanita Co. (the other 15% being held privately) and its 50% equity in Mtwara Cashew Company, the other 50% is held by the Japanese Cashew Corporation. Tanita at present mechanically processes about 12,000 tons of raw nuts per year at its plant in Dar es Salaam, however plans are being im- plemented to increase this capacity to 25,000 tons by 1980. Mtwara Cashew Company recently opened new facilities with a design capacity of 8,000 tons per year and has approved plans to increase this to 20,000 tons. NCC operates hand processing units with a total annual capacity of about 7,000 tons. III. THE PROJECT A. General Description 3.01 The Project would over 5 years (1974/75-1979/80) increase cashewnut production and processing in Tanzania through the strengthening of extension services, the establishment of processing factories, and the improvement of infrastructure. The Project would include: (a) establishment of 5 Cashewnut processing factories and port storage facilities for Cashewnut Shell Liquid (CNSL); (b) establishment of a cashew extension and grading service; (c) improvement of cashew research facilities; (d) construction of office and staff accommodation for CATA headquarters; (e) construction of improved water supplies and education facilities in selected villages within the cashewnut producing areas; and (f) technical services, and future project preparation. The Project would be implemented by the Government and by the Cashewnut Authority of Tanzania (CATA) under the general direction of the Ministry of Agriculture.  -8- B. Detailed Features Factory Development (Annex 4) 3.02 The Project would provide 5 new factories (Map) with a processing capacity of 40,000 tons of raw nuts per annum to produce about 9,000 tons of kernels and 2,500 tons of Cashew Shell Liquid (CNSL). Factories At Masasi, Newala and Lindi would each have a 10,000 ton raw nut capacity per annum and factories at Nachingwea and Mtama would each have a raw nut capacity of 5,000 tons per annum. Suitable factory sites, already owned by Government, have been identified at each of the locations based, inter alia, upon their proximity to labor, production, and infrastructure sources. The main invest- ment items for factories would include buildings (including a dispensary and cooperative shop), processing equipment (comprising decorticators, roasters, peelers, humidifiers, etc.) and factory water development. Provision would also be made for a farm access road maintenance unit to be attached to each factory which would maintain about 500 km of such roads in the surrounding area. The Project would also provide for the construction of CNSL storage facilities at Mtwara which would include a storage tank, pumps and piping and would have a capacity of 700 tons equivalent an annual throughput of 2,800 tons, Assurances were obtained at negotiations that Ministry of Com- munications and Works would continue to maintain primary and secondary roads in the Project area. Assurances were obtained that the location, design and specifications of the processing and storage facilities would be acceptable to the Bank. To ensure orderly development of the industry, assurances were obtained at negotiations that no other cashewnut processing plant would be built or expanded during the constructiop period of Project factories without prior consultation with the Bank. Extension and Grading Service (Annex 5) 3.03 An extension and grading service would be set up within CATA under the direction of a Chief Agricultural Officer. The service would be de- signed to advise cashew farmers on improved agricultural methods through farm visits, demonstrations and the use of radioprograms and mobile film units. It would concentrate on instructing farmers in good husbandry practices, and would also serve to familiarize farmers with some of the practical recommen- dations arising out of the projected research program (para 3.04). The ex- tension staff would be organized with one extension officer for each of the existing 395 buying centers which would service about 900 farmers each. The grading service would complement the extension service, as it would not only test the quality of the nuts but would also identify those farmers most in need of extension advice. The grading service would be set up with one grading officer for each of the existing 131 cooperative societies; each officer would then service about three or four buying centers.  -9- Cashew Research (Annex 6) 3.04 A research program would be carried out by the Mtwara Research and Training Institute which would be designed to improve the efficiency of farming and land use. The program would include research on individual tree care, fertilizer application, controlled utilization of insecticides and inter-cropping of cashew with food crops. Provision would be made for 12 man-years of senior research personnel to include inter alia an entomologist, agronomist, and an economist as well as for the necessary vehicles and equip- ment and supporting staff. CATA Headquarters 3.05 In view of Mtwara's position as the most prominent commercial and administrative center in the Project area, and in view of the latter's remoteness from Dar es Salaam, Government has proposed to move CATA Head- quarters to Mtwara, Assurances were obtained at negotiations that sufficient qualified senior staff would be transferred to Mtwara in time to supervise all factory construction works. Under the Project provision would be made for additional offices, houses, vehicles and equipment for about 33 Project staff stationed at CATA Headquarters. Rural Water Su plies 3.06 In order to supplement the supply of domestic water in rural areas, the Project would include provision for appropriate dam and well construction and distribution at seven locations within the Project area. Assurances were obtained at negotiations that the design of the rural water systems would be acceptable to the Bank and that funds for recurrent expenditure would be made available by Government. Community Education Centers (CEC) 3.07 Government has embarked on a countrywide program to provide com- munity education centers each of four classrooms; as part of this Project, seven CEC's would be constructed under the Project. Assurances were obtain- ed at negotiations that the design of the centers would be acceptable to the Bank, and that teachers and funds for recurrent expenditures would be made available by Government. Technical Services 3.08 Technical services to be provided under the Project would include: (a) CATA Processing Services. A senior manufacturer's representative for four years and five assistant manufacturer's representatives (each for a period of three years) would be provided as part of a turnkey contract (para 3.13). Consultant services to assist in the preparation and evaluation of bid documents for factory equipment and services would also be provided;  - 10 - (b) CATA Other'Services. Provision would be made for a Marketing Manager, Financial Manager for four years each and 12 man-years service of research personnel to include inter alia an entomologist, agronomist and an economist; (c) Training Program. Two two-year overseas fellowships would be provided for assistants to the research personnel at the Mtwara Research Center; provision would also be made for study tours and seminars. The Project also includes provision for one four-month overseas management training course for each of the five factory managers; and (d) Future ProJect Preparation. Consultant services would be provided to assist Government or CATA in the preparation of future cashew projects, as it :Ls expected that the Project could be replicated. Operating Expenses and Working Capital 3.09 It will take at least 5 years of concentrated attention by CATA's administrative, extension and research staff to establish the income earning capacity of the Project. The operating costs of these services have therefore been considered as investment costs for the five-year Project period. Factory working capital is considered to be three months operating costs; the Project costs provide for factories incremental working capital built up over the Project period. C. Project Costs (Annex 7) 3.10 Total Project costs are estimated at Tsh 208.1 million (US$30.3 million), of which Tsh 108.3 million '(US$15.8 million) or 52% would be foreign exchange. Project costs are summarized below:  - 11 - -----Tsh million--- ----US$ million---- Foreign Component as Exchange % of Local Foreign Total Local Foreign Total % Total Costs Factory Development 31.2 50.2 81.4 4.5 7.3 11.8 62 63.0 Extension & Grading fixed assets 1.8 2.6 4.4 .3 .4 .7 59 3.4 Mtwara Research Center fixed assets .2 .4 .6 - .1 .1 68 0.5 CATA Headquarters fixed assets 2.0 1.8 3.8 .3 .2 .5 49 2.9 Rural Water Supplies 3.5 3.5 7.0 .5 .5 1.0 50 5.4 Community Education Centers 4.5 2.3 6.8 .7 .3 1.0 34 5.3 Technical Services 1.6 3.9 5.5 .2 .6 .8 70 4.2 Operating Costs CATA Headquarters .8 .8 1.6 .1 .2 .3 50 1.5 Extension and Grading 14.5 1.1 15.6 2.1 .1 2.2 7 1.2 Research 1.9 .7 2.6 .3 .1 .4 25 1.8 Subtotal 17.2 2.6 19.8 2.5 .4 2.9 15.3 Total Project Costs without contingencies 62.0 67.3 129.3 9.0 9.8 18.8 52 100.0 Contingencies: Physical 6.2 6.8 13.0 .9 1.0 1.9 52 Price 31.6 34.2 65.8 4.6 5.0 9.6 52 37.8 41.0 78.8 5.5 6.0 11.5 52 Total Project Costs including contingencies 99.8 108.3 208.1 14.5 15.8 30.3 52 Cost estimates include import duties Tsh 800,000 (US$120,000). A physical contingency allowance of 10% and a price contingency allowance of 15% per annum have also been included on all costs.  - 12 - D. Financing 3.11 The Project costs would be financed as follows: Tsh million US$ million X Government of Tanzania 32.2 4.6 15 CATA 31.9 4.7 16 IBRD 144.0 21.0 69 Total 208.1 30.3 100 The proposed IBRD loan of US$21 million would be at 7.25% per annum for a period of 20 years with a grace period of 5 years to Government and would cover the foreign exchange costs and 36% of local costs. Project funds for capital expenditure on factory development, the extension and grading ser- vice, the Mtwara Research Center and CATA Headquarters, would be channelled to CATA. These funds represent about 70% of total Project Funds. Funds for rural water development and Community Education Centers would be channelled directly by the Government to the Regional Director's Office (after approval by the Ministry of Water Development and Power) and the Ministry of Educa- tion, respectively. The Government would onlend funds to CATA at 8.5% (the general onlending rate for agro-industry in Tanzania) for 20 years. The loan would have a five-year grace period to allow CATA to achieve sufficient cash generation. Assurances were obtained at negotiations that Government's own contribution to CATA would take the form of a grant. The signing of a subsidiary loan agreement approved by the Bank between the Goveroment and CATA would be a condition of loan effectiveness. E. Procurement 3.12 Factory plant, machinery and equipment, four years service of the senior manufacturer's representative and three years service of each of five assistant manufacturer's representatives would form the basi-s of a turnkey contract (US$9,5 million excluding contingencies) whose terms would be accept- able to the Bank. Annex 4, Appendix A sets out a pro-forma guideline of a request for tender, This turnkey contract would be subject to international competitive bidding in accordance with Bank guidelines. However, as there are only a few manufacturers of cashewnut processing machinery, competition is likely to be limited (para 2,12). A turnkey contract is considered essen- tial due to the small number of processing machinery manufacturers and due to the technical nature of their products each factory would have to be equipped with one type of equipment to ensure efficiency of production. Because of the detailed technical knowledge required in preparing and evaluating bids for this type of contract, Government would employ a consultant acceptable to  - 13 - the Bank upon terms and conditions satisfactory to the Bank to assist in the preparation and evaluation of the bids. All items costing less than US$30,000 would be procured under standard Government or parastatal procedures which are satisfactory; orders would be bulked. to the maximum extent possible. As the Project area is remote and as there is adequate local building capacity, all buildings and construction contracts (US$2.4 million) would be by contracts sublect to local competitive bidding or construction by force account (contracts are likely to be small). Assurances were obtained at negotiations that the above procurement procedures would be followed. F. Disbursements (Annex 8) 3.13 Disbursement of funds from the loan would be on the following basis (costs exclude contingencies): (a) 100% of foreign expenditures and 95% of local expendi- tures for the turnkey contract (US$9.5 million); (b) 100% of foreign expenditures and 95% of local expendi- tures for other technical services (uS$0.5 million); (c) 90% of total expenditures for the construction of buildings and schools (US$2.1 million); (d) 100% of foreign expenditures and 75% of local expenditures for equipment and vehicles (US$.7 million); and (e) 25% of the salary and wages costs of the extension and grading service of CATA (US$0.4 million). Disbursement against (a), (b), (c), and (d) would be fully documented. Dis- bursements against (e) would be made against certificates of expenditure endorsed by the General Manager of CATA the documentation for which would not be submitted for review but would be retained by the borrower and made available for review by the Bank during the course of supervision. As this Project has a high degree of replicability funds remaining on the loan account upon completion of the Project would be used in agreement with the Bank for further development of the cashewnut industry. Annex 8 Table 1 shows dis- bursement categories and Table 2 shows the estimated disbursement schedule. G. Accounts and Audit 3,14 CATA would maintain records and accounts adequate to explain all of its transactions. It would also maintain for each factory cost and other information necessary for proper management control. The accounting for  _ 14 - Project expenditures on rural water development and Community Education Cen- ters would be dealt with in the normal accounting system of the Government Ministries concerned. Assurances were obtained at negotiations that these accounting procedures would be followed. 3.15 rJnder the Cashewnut Industry Act 1973 the Tanzania Audit Corpora- tion (TAC), which audits the accounts of most of the parastatal organizations and cooperative societies in Tanzania, was appointed the auditor of CATA. In principle TAC has sufficient independence to discharge these duties but due to a shortage of personnel within TAC, there have in the past been delays in presenting audited accounts for which TAC has been responsible. Government and TAC are now making considerable efforts to overcome this problem. The accounts of Government Ministries are audited by the Auditor General. Assur- ances were obtained at negotiations that CATA's accounts would continue to be audited by independent auditors acceptable to the Bank; that a certified copy of CATA's accounts and of a detailed auditors' report thereon would be submitted to IBRD within six months following the end of CATA's financial year. The Government was reminded at negotiations that TAC's continued acceptability would be dependent upon its achievement of high auditing standards and timely production of audit reports. H. Project Monitoring 3.16 The Prime Minister's Office as part of its regular activities is well placed to monitor a Project of this nature. Assurances were obtained at negotiations that the Government would appoint suitable officials or an organization to monitor all Project activities; that an annual report would be prepared, the details of which were discussed at negotiations; and that a copy of this report. would be submitted to IBRD within six months follow- ing the end of CATA's financial year. IV, ORGANIZATION AND MANAGEMENT Cashewnut Authority of Tanzania (Annex 9) 4.01 CATA is the independent statutory body set up in 1973 which con- trols all aspects of the cashewnut industry in Tanzania (para 2.17). Its policies are formulated by the Board of Directors, and carried out by the General Manager operating through five departments: factory coordination and control; marketing; finance; extension, grading and research; and admi- nistration (Chart). The General Manager would be advised on technical mat- ters by the senior manufacturer's representative to be provided as part of the turnkey contract (para 3.12), and would serve as head of the factory coordination and control department; other department heads would be re- cruited as part of the Project; while every effort would be made to fill these posts locally, it is expected that with the possible exception of the head of the extension, grading and research department, candidates for  - 15 - these posts would be recruited internationally. Assurances were obtained at negotiations that the appointment of the senior manufacturer's repre- sentative would be made subject to IBRD approval, and that the Bank would be consulted prior to the future appointment of heads of departments and suitably qualified senior research personnel during the 5-year Project period. 4,02 . All five project factories would be owned and operated by CATA as self-accounting branches. They would be managed by Tanzanians who would be advised on technical matters for the first three years of each factory's operations by the as4istants to the senior manu- facturer's representative supplied under the turnkey contract (para 3.12). Development and production plans of the factories would be supervised and coordinated at CATA headquarters by the General Manager (para 4.01). Pro- visions made for farm access road maintenance units management and workshops are adequate, Assurances were obtained at negotiations that appointments of factory managers and assistant manufacturer's representatives during the project period would be made after consultation with IBRD. 4.03 Extension Staff. The extension, grading and research department of CATA would be headed by a Tanzanian Chief Agricultural Officer. He would be supported by three Regional Cashew Officers, seven District Cashew Officers, 131 Cashew Officers (one grader per cooperative society, (each cooperative covers 3 or 4 buying centers)) and 395 Assistant Cashew Officers (one exten- sion officer per buying center). Regional and District Cashew Officers would be university graduates. Cashew Officers would hold Certificates of Agriculture; Assistant Cashew Officers would hold Certificates of Agriculture or have completed a two-year course at a Farmer Training Center and no recruit- ment problems are expected as there is an adequate number of potential appli- cants, Contact would be maintained with the political party, Tanganyika African National Union (TANU), at its Regional, District, Ward and cell- organization levels which have up to now carried out virtually all the cashew extension services (Annex 5). Personnel would live in their operational areas close to cooperative societies or at ujamaa villages. 4,04 Research. Under the Project, research into cashew production would be carried out by a unit within the Mtwara Research Institute. The research program would be drawn up, implemented and supervised by CATA's Chief Agri- cultural Officer. Provision has been made as part of the Project's technical assistance component to cover the cost of 12 man-years' service of research personnel to include inter alia an entomologist, agronomist and an economist. It is expected that these would have to be recruited internationally. Three Tanzanian graduates would be trained to replace the expatriates after the fourth year. The unit would be supported by adequate field assistants, laboratory staff and clerks. Assurances were obtained at negotiations that a research program would be drawn up and submitted for review by the Bank within one year of loan effectiveness. 4.05 Rural Water. The siting, construction and operation of rural water facilities would be the responsibilities of the Ministry of Water Development and Power and the Regional Authorities.  - 16 - 4.06 Community Education Centers. The location and design of the centers would be the responsibility of the Ministry of Education which would also super- vise the evaluation of construction bids and procure the necessary educational equipment. For the sake of expedience, construction of the CEC's would be supervised by CATA on behalf of the Ministry of Education where such an arrangement is mutually agreed between CATA and the Ministry. In the absence of such agreement, construction of CEC's would be supervised by the Ministry of Education. 4.07 Staff and Training. With the exception of staff operating rural water supplies and community education centers, who would be supplied and controlled by their respective Government Ministries, all Project staff would be employed by CATA. Factory staff training would constitute an important element in the turnkey contract, provision being specifically made for about a 4-month management course for each of the five factory managers (Annex 7, Table 8). Initially, extension staff would be seconded to CATA from the Ministry of Agriculture. Those recraited directly by CATA would have at least two-year training certificates. All extension staff would undergo short training courses emphasizing cashewnut and food crop cultivation, and they would also periodically attend special i;efresher courses. All training would be carried out at the Ministry of Agriculture Training Institutes and Farmer Training Centers in the Project area. Provision has been made for research staff to be trained both in Tanzania and abroad. An overall staff- ing plan is presented in Annex 10. V. PRODUCTION, MARKETING AND PRODUCER BENEFITS 5.01 Project production would arise as a result of: increased raw nut production from extension and grading; increased quality of raw nuts from extension and grading; increased production of fully processed nuts from fac- tories; and increased production of CNSL from factories. Increased production from these by year 7 would be: (i) 19,000 tons of raw nuts; (ii) a small value increase of Tsh 4 million represented by a shift in quality of raw nut from a standard grade/second grade ratio of 60:40 to a ratio of 75:25; (iii) 9,000 tons of processed nuts (representing 40,000 tons of raw nuts); and (iv) 2,500 tons of CNSL. Current raw nut production in Tanzania is about 124,000 tons and there is capacity to produce 6,200 tons of kernels and about 1,200 tons of CNSL.  - 17 - Prices and Markets (Annex 11) 5.02 Farmer prices of raw nuts are state controlled. In keeping with current practice, Government and CATA would at the beginning of each buying season publish the fixed prices at which CATA would buy raw nuts from coopera- tive unions and the prices at which the unions would buy from the farmers. For the 1972/73 season, farmer prices were Tsh 950 per ton for standard grade nuts and Tsh 750 per ton for second grade nuts. These prices are consistent with world prices, In 1973/74, the National Agricultural Products Board (CATA's predecessor) paid the unions prices averaging about Tsh 1,200 per ton for standard grade and about Tsh 950 per ton for second grade nuts. Raw nuts are exported to India at a negotiated price which in 1972/73 averaged about Tsh 1,295 per ton of 60:40 standard/second grade ratio. Exports of raw nuts are subject to a tax of 7,5X payable by the buyer. It would be desirable for CATA to introduce a grading/price structure which will give more of a differential between standard and second grade. However, it is anticipated that this would take some time to introduce. The increase in value added as a result of Project processing is expected to be passed on to the farmers in the form of higher prices. Assurances were obtained at negotiations that within two years the borrower would establish and thereafter maintain a pric- ing structure for cashewnuts based on the grading of such nuts and closely relating world prices to farmgate prices less appropriate marketing and processing costs. Processing costs would include depreciation and a reason- able return on capital. 5.03 The local processing industry now has capacity to absorb about 27,000 tons, or 20% of Tanzania's total current production. The remainder is exported to India for processing and subsequent re-export as kernels. Tanzania's cashew kernels are exported mainly to Europe and the USA; CNSL is exported mainly to Japan for use in the manufacture of automobile brake linings and certain paints and lacquers. Demands for both cashew kernels and CNSL are strong and are expected to remain so, with demand for kernels growing at about 10% per annum. With proper marketing, good marketing in- telligence and continued use of well-established brokers in New York, London and Tokyo, no difficulty is envisaged in marketing the Project's output of kernels and CNSL. 5.04 Kernel prices are usually quoted per pound of 320 wholes --this being the standard to which prices of all other sizes (e.g., 420 wholes, 240 wholes, splits, brokens, etc.) are directly related. In the last three months of 1973, kernel sales prices ranged between US$1.03 and US$1.20 per lb c & f New York for 320 wholes. These prices are slightly higher than those projected for the long term; however prices are expected to stabilize and remain firm at about US$0.90 lb c & f New York for 320 wholes and this is the constant price which has been employed throughout in the calculations of Project benefits. CNSL prices are now around US$240 per ton c.i.f. Tokyo. This price is expected to remain fairly stable in the long run.  - 18 - Farmer Benefits 5.05 There would be two sources of benefits accruing to farmers as a result of the Project. First, there would be an increase of about 20% in the total output of raw nuts and secondly the standard grade/second grade nut ratio would shift from 60:40 to about 75:25. These two factors would combine to increase the family cash income oi. about 350,000 families in the Project area from the current level of about US$41 per annum to an average of US$51 per annum by 1983. Benefits to CATA 5.06 Financial arrangements for the setting up of CATA had not been finalized at the time of Project appraisal (para 2.17). Assurances were obtained at negotiations that by June 30, 1976 Government would take avail- able to CATA sufficient funds in the form of grants so that the.consolidated current assets of CATA and its subsidiaries shall be at least equal to the consolidated current liabilities of CATA and its subsidiaries. The Project within CATA is expected to sustain trading losses during the first three years (Annex 12, Table 1). Thereafter, net profits are expected to rise rapidly from.Tsh 5.7 million (US$.8 million) in year 4 to Tab 3.0 million (US$1.9 million) in year 5, and reach a peak of Tsh 14.6 million (US$2.1 million) in year 7. There would be no subsidy to CATA. A projected cash flow statement (Annex 12, Table 2) shows that the Project, within CATA, would generate a net annual cash surplus of Tsh 2.5 million (US$.4 million) in year 3 rising to Tsh 11,3 million (US$1.6 million) in year 5 and averag- ing annual surplus of about Tsh 2,0 million (US$.3 million) thereafter. Government Benefits 5.07 A Government cash flow for the Project is in Annex 13. It shows that Government annual cash inflows including taxes on CATA profits, dividends and loan repayments from CATA would exceed Government's expenditure on the Project and Bank loan service by Tsh 3.3 million (US$.5.million) in year 6. This surplus would build up to an average of Tah 6.0 million (US5.9 million) per year from year 7 to year 20. From 1980 onwards, the Project is expected to result in annual average net foreign exchange earnings of about Tsh 50 million (US$7.3 million). VI. ECONOMIC BENEFITS AND JUSTIFICATION 6.01 The Project would support Government's rural development objectives and the high priority given to cashew processing under the Second Five Year plan by expanding the production and processing of cashewnuts, by expanding rural water supplies and by providing seven new community education centers.  - 19 - The maintenance of the road network would ease the difficulties of transport- ing not only raw cashewnuts, but also food and other items not directly con- nected with the cashew industry. The dispersary at each factory would help to meet the projected health requirements of the rural population. As a direct result of the Project, family cash incomes would be increased by about 24% in areas among the poorer regions of the country. Total family subsist- ence and cash income in the area is estimated at US$217 including US$41 cash income and would increase to US$227 including US$51 cash income. At full development, the Project would create additional permanent employment for about 5,000 individuals who would be employed by CATA in the factories and in the extension, grading and research services. By expanding cashew research the Project would provide a base from which it will be possible to increase farmer's benefits. Economic Rate of Return (Annex 14) 6.02 The benefits of the Project arise from sales of raw nuts, cashew kernels and CNSL. The economic rate of return on the entire Project is es- timated at 39% over 20 years; that on the extension and grading element ex- ceeds 100% while that on the processing element is estimated at 29%. In these calculations foreign exchange costs and earnings were shadow priced at Tsh 10 per US$1 to reflect the scarcity value of foreign exchange in Tanzania (the official exchange rate is now Tsh 7.14 per US$1). Without shadow pricing of foreign exchange, the rate of return on the whole Project would be 27%. Processing labor has not been shadow priced. There is under- employment in the area but nevertheless it seems that labor would not be prepared to work in the processing plants at wages below the prevailing ones. If labor were shadow priced at 50% of the prevailing wage rate, however, the rate of return would increase by 4% to 43%. The farm labor has not been costed as there is little additional work required. Sensitivity Analysis 6.03 There are a number of factors which could adversely affect the out- come of the Project. The two most important considerations are the problems involved in administering this complex and extensive Project in relatively remote locations, and those associated with finding suitable managerial talent for the factories which would be located in those areas. However, in view of the Government's regionalisation policy, the detailed Project preparation and and the elimination of two of the more remote factory sites, and taking into account the technical services to be provided as part of the turnkey contract no substantial difficulties in Project administration are foreseen. A 10% increase in costs would reduce the IER on the whole Project by 3% to 36%. With a 10% reduction in benefits the IER would fall by 5% to 34%. The Project's rate of return is therefore not particularly sensitive to either an increase in costs or a reduction of benefits.  - 20 - VII. RECOMMENDATIONS 7.01 During negotiations assurances were obtained from Government that: (a) The location, design and specifications of processing factories would be acceptable to the Bank (para. 3.02); (b) No other cashewnut processing plant would be built or expanded during construction period of Project factories without prior consultation with the Bank (para. 3.02); (c) That sufficient qualified senior staff would be transferred to Mtwara in time to supervise all factory construction wo.rks (para 3.05); (d) Factory plant, machinery and equipment, four years service of the senior manufacturer's representative and three years service of each of five assistants to this representative would form the basis of a turnkey contract whose terms would be acceptable to the Bank; the contract would be awarded after international competitive bidding in accordance with Bank guidelines, and Government would employ a consultant acceptable to the Bank upon terms and conditions satis- factory to the Bank to assist in the preparation and evaluation of bids (para. 3.12); (e) Within two years of signing the Government would establish in consultation with the Bank and thereafter maintain a pricing structure for cashewnuts based on the grading of such nuts and closely relating world prices to farmgate prices less appropriate marketing and processing costs (para 5.02); and (f) That by June 30, 1976 Government would make available to CATA sufficient funds ini the form of grants so that the consolidated current assets of CATA and its subsidiaries shall be at least equal to the consolidated current liabili- ties of CATA and its subsidiaries. 7.02 Condition of loan effectiveness would be that: (a) A subsidiary loan agreement approved by the Bank had been signed between Government and CATA (para. 3.11). 7.03 The proposed Project constitutes a suitable basis for a Bank loan of US$21.0 million. April 29, 1974  ANNEX 1 Page 1 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Ujamaa and TANU The Ujamaa Village Program 1. Tanzania's socialist development policy is aimed at the simul- taneous achievement of rapid economic growth and an egalitarian society. Perhaps one of the most important aspects of this policy is the increasing emphasis on agriculture and rural development, and in recent years the rural development strategy was focused on the establishment of cooperatives or ujamaa villages throughout the country. The immediate objectives are social and political to foster a sense of self-reliance through self-help, to achieve equality of income, and to raise rural incomes in order to close the rural/urban gap and reduce the flow of people to the major towns. Government recognizes, however, that to be successful in these spheres, the strategy must be economically viable, and cooperative production - only possible with the new social attitude - is set as the final goal. The formation of ujamaa villages, which is one of the most conspicuous features of the execution of the policy, is important in those rural areas of Tanzania, where the greatest progress towards ujamaa has been made so far. However, cooperative production can take place without any resettlement and, parti-, cularly in the most closely populated area, will probably be developed on that basis. 2. The Prime Minister's Office is charged with the development of ujamaa villages. A Rural Development Division coordinates with TANU (the political party organization) and other executive Ministries, and is responsible for continuous evaluation of ujamaa operations. The standardi- zation of reporting and assessment of economic performance is still poor but these problems are receiving close attention. Technical support is given by other Ministries, especially the Ministry of Agriculture. 3. It is difficult to gauge progress with ujamaa in quantitative terms, because this is marked by the acceptance of a cooperative attitude to working and living as well as by the economic success in production. The latter is only now being evaluated by the Tanzanians. A count of ujamaa villages and the population involved in them is some guide to pro- gress, but village formation is reported in three stages and the first, unspecific, stage which dominates the statistics tends to be overestimated in spite of efforts to improve reporting. Estimates of population in villages may also be high due to double counting. Subject to these reser- vations, Table 1 shows progress with village formation. In April 1971,  ANNEX 1 Page 2 17 villages had been registered with the Registrar of Cooperatives and vere accepted as being Stage III; by October 1971 this total had rdlen to bout 40, and in December 1972, 315 villages had been registered. 4. The stages in ujamaa development, based on sources of fla=ce open to villages, are: (a) A formative stage during which resettled villages acquire financial aid for activities such as clearing bush, access road construction and purchase of initial equipment. In practice, they often also need food, which cannot always be raised locally. At this stage the Regional Developzsnt Funds are the major source of assistance. Villages,that are members of primary marketing cooperatives also receive the same servicing facilities as individual members. (b) A growing stage in which the village members learn to live and work together, putting increasingly more of their work effort into commercial crops and activities. The village had a workable constitution, and when it has become -economically viable Tegisters as an Agricultural Association. Credit may then be obtained from the Tanzania Rural Develop- ment Bank (TRDB). (c) The final, mature stage is when the ujamaa village registers with the Registrar of Cooperatives. It may become a full multipurpose cooperative society, and would have adequate security to attract commercial credit. The assessment of when this stage is reached is carried-out by the local Cooperative Officer, Agricultural Officer, and TANU secretary. 5. In the early years of ujamaa development, officials exerted pressure on farmers to form villages. The basic principle of ujamaa formation was thus transgressed, i.e., that it take place on the un-coerced initiative of members. This policy of coercion has been abandoned for some years, but there have been signs of undue persuasion again being used, almost certainly without the approval of central policy makers. There is evidence that the three-stage approach is being short-circuited in some areas and that ujamaas are registered without first going through a learning period. This has clearly happened in the Coast, Dodona and the Iriaga Regions and to a lesser extent in Mara, Mwanza and Shinyana, where the number of registered villages in December 1972 greatly exceeded those in Stage II, 18 months earlier. 6. Progress with ujamaa village formation varies considerably by -region. The differences reflect both the variety of motives for the forma- tion of villages, and the social and geographical conditions of the areas.  ANX 1 Page 3 The greatest development has been close to the boundary with Moaambique where the dominant motivation has been security. Elsewhere the largest number of villages are in areas which have limited involvement in the cash economy, are sparsely populated, and have a harsh environment. These include Dodoma and Kigoma where there has been a concentration of planning effort and technical assistance. It is in these areas where the concept of physical movement into concentrated villages (probably located on a new water supply), and the introduction of new crops (necessitating rather intensive technical guidance, modern inputs and credit) is a particularly appropriate approach. Because of the real need for services, and the flexibility which available land presents, these areas will probably accept ujamaa most readily. 7. Progress in numbers has been noticeably slower in two types of areas. These are: (i) the densely populated highland areas where individu- ally owned land is under coffee, tea or bananas (such as in Kilimanjaro, Bukoba and Rungwe districts) and where ujamaa will be based on cooperative work on existing crops and is unlikely to involve any resettlement; and (ii) generally less densely populated areas with established cash crops such as cotton, tobacco, and cashew. These are drier regions than the highlands, with more extensive cultivation and marked seasonal peak labour requirements (traditionally met by hiring). Technical and social problems seem parti- cularly likely in the cotton area around Lake Victoria, where an individualis- tic attitude, typical of first-generation settlers exists. An unhurried approach to ujamaa seems especially appropriate in these areas. 8. The economic justification for communal farming rests on the greater production arising from economies of scale and division of labor, and the more economical (and therefore increased per capita) provision of Government services such as extension advice, water supplies, schools and disnensaries. The case for economies of scale is based on (i) sharing bulk orders of inputs and group marketing; (ii) making more efficient use of labor and hand or powered Implements, enabling a greater area to be cultivated; (iii) allowing specialization of function, such as herding and tool repair in the village; and (iv) enabling wider access to and acceptance of yield- increasing technical advice. The channelling of agricultural credit can be facilitated by cohesive ujamaa units, as can the economic distribution of packages of inputs supported by extension services. Potentially, ujamaa villages would extend the coverage of cooperative marketing organizations, but until they reach a sufficient size to provide marketing services economically, ujamaa villages would be members of existing cooperative societies. A further argument for ujamaa villages is that a group of farmers will accept an innovation to which individuals are indifferent. However, there is a lack of empirical evidence on where economies of scale are achievable in commercial production; the optimum scale of different operations is not known, but it is clear that radical changes are needed in farm management as production becomes increasingly communal and is carried out on a larger scale. A well-trained extension service familiar with or trained in decision making on large farms then becomes a necessity.  ANNEX 1 Page 4 9. These management changes will be particularly required for crops like cashew, tobacco and cotton. The application of ujauaa principles to organized cashew production would support major changes in husbandry techniques. These would include introduction of the use of insecticides, herbicide fertilizer, pruning and possible changes in pricing and grading. 10. Difficulties within villages - which are likely to be a continuing concern - are the lack of leadership and management skills among village members, and problems of measuring the share of communal production which is the due of the individual. The former can be helped by planning, training, and assistance from extension services. The most important factor is to ensure that ujamaa villages develop from the desire of the people and at a pace at which they can absorb the new ideas and techniques essential for viable communal production. TANU 11. The mobilizing force in ujamaa development has been the political party, TANM. Organized down to cells of ten families, TANU reaches the grassroots of the rural areas, and in its pyramid structure rising through village development committees and ward organizations provides a hierarchy for channelling both policy decisions and local opinions. At the village level it provides a forum within which a group of farmers can debate possible cooperation through which technical and planning advice (e.g., on site selection, crops, planting areas) can be channelled, and through which farmers' problems and wishes can be passed to the party and Government. 12. The unpaid leader of the 10-family cell, known as the 'Balozi', is a TAIJR member elected by party members of the cell. It is his job to keep records of the cell membership, collect dues from party members, and pass on political and policy information to the cell. He is also to keep the party leadership and - through TANU - the Government informed on local problems. The Balozi tries to settle local disputes which otherwise would go to the courts. The position is primarily political, but with party and development matters so closely linked, the Balozi obviously fills an economic role as well. Although the 10-cell system has not been working uniformly well, partly because the duties of the Balozi have become over- burdensome, it does provide the most effective two-way channel for information available. March 15, 1974  TANZANIA " SHEWNUJT DEVELOPMENT PROJECT Formation of Ujamaa Villages: Comparison of 1971 and 1972 Data Advanced IFillages People Per Village Total Villages April 1971 December Population in Villages Regional Percentage Increase April* December Stage 1972 April December Increase April December April December (Decrease) feflgo n 1971 1972 II Registered 1971 1972 % 1971 1972 1971 1972 % Arusha 44 92 5 1 6 9,000 20.000 122 1.3 2.8 200 220 1( Coast 58 185 26 1 46 55,000 112,000 103 6.0 12.2 940 600 ( 36) Dodoma 150 299 17 1 65 47,000 400,000 750 5.9 50.2 310 1,340 332 Iringa 350 630 - 1 80 84,000 208,000 148 10.8 26.7 240 330 37 Kigoma 108 129 15 - 1 32,000 114,000 256 6.3 22.4 300 890 197 KilimanUaro 11 24 2 - 1 2,000 5,000 150 0.3 0.7 190 210 10 Mara 250 376 20 4 30 95,000 127,000 33 15.5 20.7 380 340 ( 11) Mbeya 194 713 - 3 6 50,000 99,000 98 4.6 9.1 260 140 4 46) .Morogoro 22 116 2 1 1 5,000 24,000 380 0.7 3.h 210 210 0 MStwara 672 1,088 21 - 2 282,000 441,000 56 44.1 68.9 420 410 ( 2) Lindi 188 626 26 - 2 79,000 175,000 121 18.3 40.5 420 280 ( 33) Mwanza 41 211 3 - 14 8,ooo 32,000 300 0.7 2.8 190 150 (21) Ruvuma 120 205 15 - 3 12,000 29,000 142 2.7 6.5 106 140 40 Shinyanga 132 123 1 - 9 13,000 15,000 15 1.3 1.5 100 120 20 Singida 57 263 15 - 5 13,000 59,000 354 2.7 12.2 230 230 0 Tabora 82 148 43 4 14 20,000 25,000 25 3.2 4.0 240 170 ( 29) Tanga 146 245 32 1 13 23,000 78,000 239 2.7 9.1 160 320 100 West Lake 43 83 - - 17 11,000 17,000 514 1.5 2.3 250 200 (20) Totals 2,668 5,556 241 17 315 840,000 1,981,C00 136 6.3 14.8 315 360 144 * Given as June 1971 in Economic Survey, 1971-72 & M (D H February 20, 1974   ANNEX 2 Page 1 TAIZANIA CASHEWNUT DEVELOPMENT PROJECT Cashewnut Production 1. The cashew tree is a tropical tree generally found in coastal areas between the tropics of Cancer and Capricorn. The tree grows well on poor, sandy soils and thrives where other more sophisticated commercial trees would not. It will grow in areas with a rainfall anywhere from 90 mm to over 400 mm, but requires a long dry spell in order for the cashewnut to ripen. The tree has a strong root structure, with a tap root which is as long as the tree is high, and side root structures as wide as the canopy of the tree. The tree is thus ideal for erosion arresting purposes; in fact the tree was originally transported to Africa and India from its native Brazil by the early Portuguese navigators specifically for this purpose. It now flourishes along the West Africa coast from Senegal to Nigeria and in Angola. It also is found in varying quantities in Mozanbique, Madagascar, Tanzania and Kenya. The west coast of India South of Goa is now a major cashew growing area, and small quantities have been grown in Sri Lanka, Central America and the West Indies. 2. The tree, which has a bearing life of about 30 years, produces an annual nut crop attached to an apple-like fruit. This "cashew apple" is highly astringent, and is plucked for sucking as a thirst quencher. In some areas, typically in Brazil, the apple has traditionally been used to produce a potent alcoholic drink. The cashewnut itself has outer shell (Epicarp) which is greenish to pinkish brown depending on its degree of dryness. With- in this outer shell there is a honeycomb structure (Mesocarp), in the cells of which is secreted a natural resin known commercially as the cashewnut shell liquid (CNSL). This liquid has vesicant properties and will blister the human skin unless precautions are taken. Within the Mesocarp there is a hard and brittle inner shell (Endocarp) which protects the cashew kernel from the resin. The kernel is also protected by a thin membrane covering known as the testa, or peel, which is pinkish in coloi. This inner kernel is the most Important product of the cashew tree and the cashew processing industry has evolved in an effort to extract the kernel without damaging it in any way. 3. Most of the cashew trees cultivated today are the progeny of the wild trees which spread naturally along various coastal areas. Except for a few organized plantations which may account for two percent of annual production, the bulk of the crop comes from wild growths on small peasant  ANNEX 2 Page 2 holdings. for the most part the crop is gat4ered from the ground after the cashew apple with the attached nut has fallin. While it is good practice to allow the fruit to fall of its own accorci, the crop should be collected daily in order to reduce any deterioration of the nut. The fruit is thea removed and the nut dried in the sun; this process reduces the soisture content and may help to further mature the nut. 4. The extraction of the kernel was traditionally a long and laborous process. First the natural resin was burned off by heating the nuts in an open fire. The charred nuts then had a brittle outer shell which would be cracked by striking it with a small wood batten, causing the nut to split open along the natural line of cleavage. The resultant kernels were often scorched, but in any case served as an acceptable foodstuff. This crude method of extraction served as the basis for the establishment of the cashew processing industry which developed in India and later in other cashew growing areas (Annex 3). 5. Annual production of exportable nuts has been growing at a rate of only 4% over the last few years. As a result of the growing popularity of the cashew kernel for use as a dessert nut (along with almonds, walnuts, brazil nuts, and pecans), some efforts are now being made to directly stimulate production in the major cashew growing areas. Estimates of past annual 'production of cashewnuts in these areas are given below: 1968/69 196970 1970/71 1971/72 ___ 0-0 tons Mozambique 160 140 178 170 Tanzania 11S 116 113 120 India 70 60 65 55 Kenya 10 15 23 20 Brazil 15 15 15 40 Others - 2 2 2 Total 370 348 396 407  ANNEX 3 Page 1 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Cashewnut Processing Harvesting and Drying 1. Cashewnuts are harvested by collecting the ripe nuts from the ground once they have fallen naturally from the tree. They should be collected daily before they become soaked by ground moisture or rain. As harvested, the raw nuts contain loose debris, detached pieces of apple, and a high moisture content, and include a varying proportion of bad vuts. Unless these defects are immediately reduced to a minimum, the rau nuts deteriorate in storage with an attendant loss in kernel content value and subsequently higher processing costs. 2. The most serious defect is high moisture content. The harvested nuts contain about 15 percent moisture, but this percentage can be much higher if the nuts have absorbed a significant amount of moisture while lying on the ground prior to gathering. A high moisture content encourages microbiological decay, germination of the kernel and spontaneous heating in storage, all of which result in a lower out turn and a lower value kernel. 3. As the first step in processing, the raw nuts are dried immediately following harvesting by spreading the nuts in the sun. The rule of thumb is that nuts exposed to bright sun and protected from rain and night time dew will be adequately dry in three days. Except where following an accepted routine the harvester has no objective way of determining whether or not the nuts are sufficiently dry. Subjective means such as rattling a handful of nuts and listening to the noise What they make, or pressing a finger against the end where the nut was detached from the apple, must therefore be used. It is desirable that the nuts be dried to less than 10 percent moisture (ideally about 8 percent) as quickly as sun drying permits. A harvester generally gathers only a few kilos of nuts and spreads them on the ground. Proper drying requires that the spread nuts be picked up at sundown and placed under cover so that moisture condensation during the night can be avoided. The nuts must then be spread again the following morning to continue drying. 4. During the period that the nuts are spread for drying, bad nuts and debris can be picked out and discarded. It is estimated that up to 15Z of original harvesting is discarded at this stage. The purpose of this step is to increase the value of the nuts marketed by avoiding contamination of sound nuts and the cost of subsequent handling of nuts which will not yield valuable kernels.  ANNEX 3 Page 2 Central Grading and Storage of Nuts 5. The second step in processing is carried out at the point of collection of the raw nuts. If the nuts move from the field through buying centers, then the next processing step will occur there. If the DUts nwe from field to the processor, then the second step should be carried out at the processing facility. This step is in fact a replica of the first step and is carried out to assure a higher standard of quality. The raw nuts received at this point should be carefully sampled and analyzed for moisture, debris and bad nuts. If the batch represented by the sample falls outside the limits established for these variables, then the raw nuts should be dried and/or cleaned and/or improved by discarding bad nuts. At this point the nuts are placed into storage for later processing; some provisions need to be made to ensure adequare circulation, although they will vary according to the moisture content of the anuts. 6. There are no technical problems involved with regard to drying or cleaning the nuts. However, there is some question as to how effective the separation of useless nuts from sound nuts can be given the present level of technical knowledge about means of appraising raw nuts. The only really reliable methods are cutting tests and the use of a moisture meter. Processing 7. The processing of cashew nuts has developed from the original emspletely manual processing used in India to highly mechanized systems now in use in Tanzania and Mozambique. Under the so-called Indian system all operations are carried out manually, with an absolute minimum of mechanical aids. This hand processing system is utilized in Tanzania in the National Cashew Company operations in Dar es Salaam, the grading and packing station in Mtwara, and at nine other locations in rural areas. The manual operation typically requires 100 man days per ton of nuts processed. In the rural operations the peeled nuts are moved to a central grading and packing station in Mtwara or Dar es Salaam. 8. A system has been developed in Brazil that uses a hand-fed, foot- operated cutting tool in an attempt to increase the productivity of labor. In fact this system is more labor intensive (120 man days per ton nuts) than that employed in the hand processing plants in Tanzania. For that reason no consideration is being given to its introduction in Tanzania. Another system being developed by a Portuguese company for use in Mozambique is dependent upon a chemical process to help in the peeling operation whereby the testa is removed from the kernel. The pure food problems inherent in this system as well as the possible degradation of the organoleptic properties of the kernel as the result of the use of chemicals have yet to be defined.  ANNEX 3 Page 3 Processing Systems 9. Processing systems vary, but all essentially include the following steps: sizing, humidification, heat treatment, shelling, drying of kernel, peeling the kernel, grading and packing. 10. Sizing. The classification of nuts by size prior to processing is required in all types of machine processing so that there can be a proper matching of nut size and shelling tool adjustment. Pre-sizing is also necessary for accurate control of rehumidification and heat treatment. Without size calibration there is a likelihood of scorching some small nuts while under-roasting large ones. Establishing the size distribution in advance allows more efficient planning of the entire operation. 11. Humidification prior to Shelling. Humidification is usually only carried out in the process that includes hot CNSL roasting of nuts. Humidi- fication is carried out by piling the raw nuts according to size on a concrete slab or in concrete bins or silos. Water is added by spraying the pile of nuts on the slab with a hose, or admitting water into the bottom of the concrete bin or silo through permamently installed spray headers. The moisture content of the nut after humidification should be approximately 20 percent. The purpose of humidification is to provide moisture which in the hot oil bath will become steam and rupture the cellular material in the shell releasing CNSL. The moisture in the kernel will make it more plastic and less friable so that in subsequent shelling operations less degradation by breakage will occur. 12. Heat Treatment. The method of heating varies between machine processing and hand processing. In hand processing the heating of the nuts is done over an open flame in a rotating hollow cylinder in a position slightly inclined from the horizontal. The time that the nuts remain in the cylinder is related to the initial moisture content of the nuts at the time they are fed into the roaster. The nuts in the roaster actually catch fire and as the nuts leave the rotating drym the fire is extinguished by a spray of water applied to the flaming nuts. The control over the heating process is dependent on operator skill and experience rather than any form of technical measurement. 13. A technically more advanced method of shell embrittlement used in both hand and machine processing is the heating of nuts in a hot bath of CNSL. In this bath the nut rupture releases additional CNSL into the bath. Thus the value of CNSL recovery is added to the value of the edible kernel. 14. In East Africa hot oil roastitg is carried out in hot oil baths containing conveyors which move the nuts at a controlled rate through the bath. In India on the other hand the nuts are placed in a basket and the basket is dipped manually into the hot oil bath. Careful control of both time and temperature is important to avoid scorching of kernels. 15. Shelling. Following the heating operation the nuts are cooled prior to shelling. Shelling is carried out either manually or mechanically.  ANNEX 3 Page 4 In hand processing the nut is cracked open by being placed upon an anvil and hit with a stick or wooden hammer. In mechanical shelling the shell is cut open by reciprocating or stationary converging knives or by throwing the nut at high velocity against an anviL. When shelling is carried out manually the kernel is separated from the shell by hand. In machine shelling the separation is done by pneumatic devices and/or vibrating screens. 16. Drying. Following the shelling operation the kernels are heated and dried in hot air and/or steam to condition the skin or tests and facilitate its removal from the kernel. 17. Peeling. Peeling of the kernel is carried out either manually or with mechanical aids. In all types of processes some part of the peeling operation is carried out manually. The mechanical aids used vary with the system. Following drying, further temperature adjustments may be made to the kernel and some method of abrading one kernel against another or against an abrader is frequently used to remove the peel. 18. Sorting and Grading. Following the peeling operation the kernels are sorted into as many as 20 or more grades; whole kernels are divided by size and color and broken kernels by color and piece size. While the bulk of the grading takes place after peeling, some grading actually occurs during the entire process from immediately after shelling until packing. Grading is done by hand and by mechanical devices, and electronic color sorters are sometimes used. 19. Packing. After grading, the kernels are usually conditioned so that they have a moisture content of about 5 percent - but never more than 5.5 percent prior to packing. They are packaged in a 4-gallon tin container under an atmosphere of carbon dioxide gas. The 25-pound tins are assembled in a corrugated board container with two tins to a container - the standard commercial package. 20. Three mechanical processing systems have been developed, each of which is financially viable. The first system is unique in the shelling technique employed and to a lesser degree in the method of pre-conditioning the kernel prior to peeling. The decorticator consists of two opposed horizontally fixed blades between which the nuts are rapidly conveyed. In addition, a rotating blade assist in splitting the under side of the shell. This device has been demonstrated in pilot plant studies using Tanzania cashew nuts, and is currently being utilized in the recently opened factory at Mtwara (Mtwara Cashew Company). 21. The second sytem makes use of unique decorticator and peeling techniques. Here decortication is accomplished by inpacting nuts at a high velocity against a fixed anvil, thereby splitting the shell and releasing the kernel. The peeling operation in unique in that the kernel with the peel is exposed to low (-10C) temperatures after the more conventional drying ot heat treatment of the kernel. The system is now in limited use in Mbzambique and a major installation is currently being set at Nacala in Mozambique.  ANNEX 3 Page 5 22. The third system differs from the others in the uniqueness of the decorticator and the kernel pre-conditioning techniques employed. Decortica- tion is accomplished by cutting the shell with reciprocating opposed, shaped, knife blades which split the shell and release the kernel. The precondition- ing of the kernel is carried out in a batch heater (compared to the continuous process used in other systems) in which the time and temperature profile to which the kernel is exposed is carefully controlled. The remaining operations in all three systems are essentially the same, one system differing from the other only in the degree of engineering ingenuity employed in the design and construction of the machinery. Current Status of Processing in Tanzania 23. Tanzania now has the capacity to process only about 27,000 tons out of its total production of 124,000 tons of raw cashewnuts. About 12,000 ; tons per year are processed at the Tanita factory in Dar es Salaam, although plans are now being implemented to increase this capacity to 25,000 tons per year. About 8,000 tons per year are processed at the recently renovated factory operated by the Mtwara Cashew Company at Mtwara, and it is planned to eventually expand this facility to 20,000 tons per year. After about 6 years of financial losses, the Tanita factory now operates at a profit. 24. Hand processing operations within Tanzania have a total annual capacity of about 7,000 tons. Most of these facilities are operated by the National Cashew Company and located in the ujamaa villages. Kernel grading and packing plants for these operations are located at Mtwara and Dar es Salaam. Hand processing operates at a loss to Tanzania due to low labor productivity and the low quality of production. A financial and economic analysis for both factory and hand processing is given in Appendix A.   ANNEX 3 Appendix A Page 1 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Financial and Economic Analysis of Hand and Machine Processing 1. About 100 man-days are required to process one ton of raw nuts in Tanzania. One ton of raw nuts will yield about 230 kg of kernels. With an f.o.b. price of US$0.85 per lb, and adjusting for typical hand processing outturn, the net factory price is US$0.60 per lb (Tsh 9 per kg) (Annex 12, Table 1). Tsh Cost - 1 ton of raw nuts 1,200 Shrinkage - 4% 48 Labor - 100 man-days at Tsh 240 per month 1,120 Packing and Administration 200 Total Cost 2,568 Sales 230 kg at Tsh 9 per kg 2,070 Loss per ton (498) 2. The labor input is comprised of 55%o peelers and 45% shellers. The use of a peeling machine would reduce the number of peelers required by about 60%. Thus labor cost per ton would be reduced by .60 x .55 x 1,120 = 370. This would leave a loss per ton of Tsh 118 before charging for any cost of peeling machine (about Tsh 133 per ton). The relative costs of machine and hand processing are compared in the Tables below:  IANNEX 3 Appendix A Page 2 CompariFon of Hand and Machine Processing Tsh per Ton of raw nuts Hand Foreign Machine Foreign Processing Exchange Processing Exchange Financial % % CostF Raw Nuts 1,248 1001/ 1,248 5001/ Labor 1,120 365 All other operating costE including packing, Administration, etc. 200 15 397 15 Total costs 2,568 2,0102/ Sales c2,070 - 2,490?_ Profit/(LoFs) (498) 480 Economic: Using a foreign exchange shadow price of TshlO per US$1.00 and a 50% shadow price for labor: Hand Stand Processing Machine Processing with Peeling Machines Processing -aw nuts 1,617 1,817 1,817 Labor 56o 375 182 Peeling Machine coEtEV 194 - All other operating costs including packing, Administration etc. 214 - 214 513 Total 2,591 2,600 2,512 Sales 3,014 3,014 3,625 Surplus 423 414 1,113 T- Being the opportunity cost as theFe raw nuts could be exported. 2/ Costs and sales including CNSL at factory full development. 3/ For 150 tonE kernel throughput machine costs approximately TFh400,000 which after shadow pricing foreign exchange = Tsh482,000 and writing off over 5 years = Tshl16,500 per annum for 150 ton kernels or 600 tons raw nuts. Cost per ton of raw nu-ts iF therefore Tshl9lt.  ANNEX 4 Page 1 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Factory Construction and Development 1. Under the Project five factories would be constructed which would be capab]e of processing a total of 40,000 tons of raw nuts per annum into approximately 9,000 tons of cashew kernels and 2,500 tons of cashew nut shell liquid (CUSL). The factories would be located within the cashew nut producing areas of the country. Those factories located at Masasi, Newala and Lindi would each be constructed to a capacity of 10,000 tons per annum while those at Mtama and Nachingwea would each have a capacity of 5,000 tons per annum. These factory sites were selected on the basis of the volume of raw nut production within their immediate area, local labor availability, and the accessibility of the sites from the port at Mtwara. 2. Factory construction would be carried out under the turnkey contract to be awarded after international competitive bidding. The contract would include provision for factory plant, machinery and equipment, three years service of an assistant manufacturer's representative for each factory, and four years service of a senior manufacturer's representative. The estimated capital costs of a typical 10,000 and 5,000 tons/year factory are given in Table 1. The contractor would construct the CNSL facility to be located at the Mtwara port. The specifications and conditions of the turnkey contract are detailed in Appendix A. 3. The phasing of factory development would be spread over a period of 36 months in order that experience gained in the process would be transmitted from one factory to another, and to allow for the manufacture and installation of equipment in an orderly manner (Chart 8551). The rate at which the factories may be expected to come up to full production is indicated in Chart 8552. Some initial production is expected from the Masasi factory (the first factory scheduled for construction) about one year after the initiation of the Project, or six months after construction is actually underway. Thereafter as capacity is expanded and experience gained, the rate of production would increase rapidly until full production is achieved in just over four years. 4. The five factories to be constructed under the Project would be owned and operated by CATA as self-accounting branches. The accounts would be maintained at CATA headquarters and local records would be kept by the factorv accountant. Typical factory profit and loss accounts for both a 10,000 ton/venr and a 5,000 ton/year factory are given in Table 2, with supporting data in Tables 3-6.   ANNEX 4 Table 1 TANZANIA CASIhUWUT DEVELOPMENT PROJECT Faca_Capital CosEtS Tsh I OOO 5,o00 ton / ear 10,000 tons/year Land!/ 52 52 Building2/ 1,472 2,607 Equipment31 6,020 11,620 Motor Vehicles4/ 214 214 Furniture5/ 255 255 WIatery/ 260 260 lsrking Capital- 2,32r5 65o 10,598 19,658 I/ Annex 7 Table 9 21 Annex 7 Table 10 3/ Annex 7 Table 11 5/ Annex 7 Table 6 5/ Annex 7 Table 8 6/ Annex 7 Table 12 7/ Annex 7 Table 8 Apri. 5, 19Th  ANNX 14 Table 2 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Typical Factory Profit and Loss Accounts (Tsh'OOO) Three Two 10,000 Ton/yr. 5,000 Ton/Yr. FactorieE FactorieE Total Raw Material- 37,500 12,500 50,000 Labor V 9,762 3,688 13,450 SuppliesE 3,624 1,208 4,832 TranEport.V 420 140 560 Road Maintenance-5 1,500 1,000 2,500 Depreciation- 3,?77 1,259 5,036 Dispensary Operation 60 20 80 Factory and Equipment Maintenance7/ 2,812 938 3,750 Insurance 127 43 170 Total 59,582 20,796 80,378 Costs per Factory 19,861 10,398 Sales per Factory 24,904 12,452 Profit per Factory 5,043 2,054 1/ Annex 4 Table 3 2/ Annex 4 Table 4 3/ Annex 4 Table 5 L/ Annex 4 Table 6 5/ At Tshl,OOO per Io and 500 km per factory. Total includeE about T'hl.2 million for labor. 6/ Buildings 5%, Furniture and equipment 71, Motor vehicles 25% 7/ Maintenance at 5% of capital cost. March 11, 1974  ANNEX 4 Table 3 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Raw Material - Requirement- 5,000 10,000 Tons/Yr. Tons/Yr. Nuts Processed (Ton*) 5,000 10,000 Shrinkage (4%) 208 416 Nuts Purchased (Tons) 5,208 10,416 Unit CoEt (Tsh/ton) 1,200 1,200 Total Purchases (Tsh) 6,250,000 12,500,000 March 6, 1974  ANNEX 4 Table 4 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Estimates of Factory Labor Requirements 5,000 Annual 10,000 Annual Rate Tons/Yr. Cost Tons/Yr. Cost (Tsh/month) (No.) (Tsh) (No.) (Tsh) Factory Manager 2,000 1 24,000 1 24,000 1st Shift Supervisor 1,350 1 16,200 1 16,200 2nd Shift Supervisor 1,356 1 16,200 1 16,200 1st Shift Mechanic 1,350 1 16,200 1 16,200 2nd Shift Mechanic 1,350 1 16,200 1 16,200 R;oasting Foreman 300 2 7,200 2 7,200 Shelling Foreman 300 2 7,200 2 7,200 Peeling Foreman 300 2 7,200 2 7,200 Peeling Leaders 280 10 33,600 10 33,600 Grading Foreman 300 2 7,200 2 7,200 Quality Control Foreman 300 2 7,200 2 7,200 Quality Control 280 2 6,720 2 6,720 Peelers-Graders 240 490 1,411,000 900 2,592,000 Other Laborers 240 50 144,000 100 288,000 Office and Clerical 300 10 36,000 15 54,000 1,756,320 3,099,120 Adjustment for provident Fund x 1.05 1,844,136 3,254,076 March 6, 1974  ANINEX a Table 5 TANZANIA CASHEWNUT DEVELOPMIT PROJECT SupplieE Requirements (tshf' 00) 5,000 10,000 TonE/Yr. Tons/Yr. Fuel and Lubrication for GeneratorE 80 160 Sawdust 5 10 Lubrication 3 6 Packing 506 1,012 Fuel and Lubrication for Vehicles 7 1l Miscellaneous (Office, water, etc.) _3 6 Total 604 1,208 March 6, 1974  ANNEX 4 Table b TANZANIA CASHEWNUT DEVELOPMENT PROJECT Trangortation of Kernels 5,000 10,000 Tons/Yr. Tons/Yr. Cases 50,600 112,000 Cases/Ton 4O 4o Tons 1,265 2,530 Av. kh to Mtwara 120 120 Av. Ton- kn 151,800 303,600 Rate/Ton- Rri (Tsh) .46 .h6 Cost (Tsh 0OO'F) 70 L4O April 5, 1974  ANNEX 4 Appendix A Page 1 TANZANIA CASHEWNUT DEVELOPMENT PROCESSING Cashewnut Processing Facilities - Outline of a Request for Tender 1. The Project would include provision for construction and operation of five cashewnut processing factories to be located at Masasi, Newala, Lindi, Nachingwea and Mtama. The Cashewnut Authority of Tanzania (CATA) would be responsible for factory construction. This would be implemented under a turnkey contract awarded as a result of international competitive bidding according to Bank guidelines. General 2. The Cashewnut Authority of Tanzania (CATA) intends to construct and operate five cashewnut processing facilities. This request for tender for a cashewnut processing system is presented as a guide only and offerers shall submit their best concepts, designs and cost estimates within the parameters given in the outline. 3. The contractor shall supply the process and facilities designs, working drawings, site preparation, buildings, equipment, machinery, controls, engineering services, labor supervision, tools and other requirements (except those listed under para. which are to be supplied by the owner) to deliver in operating condition (a turnkey project) a cashewnut processing system. Processing Facilities 4. The cashewnut processing system would have an annual processing capacity of 40,000 tons of raw nuts into about 9,000 tons of kernels and 2,500 tons of CNSL. The system is to consist of 5 factories and one CNSL storage and shipping facility to be located at sites provided by the Government near the indicated towns. Processing facilities will be designed for 16 hours per day operation, 300 days per year. Cashewnuts to be processed at these factories shall be about 75% Tanzanian standard grade and 25% second grade. (a) Masasi - A facility to process 10,000 tons of raw cashewnuts per year, to be constructed in two related increments each with 5,000 tons annual capacity. First increment to be in operation 6 months after award of contract. Second increment to be in oDeration 18 months after contract award.  ANNEX 4 Appendix A Page 2 (b) Newala - A facility to process 10,000 tons of raw cashewnuts per year, to be constructed in two related increments each with 5,000 tons annual capacity. First increment to be in operation 12 months after award of contract. Second increment to be in operation 24 months after contract award. (c) Lindi - A facility to process 10,000 tons of raw cashewnuts per year, to be constructed in two related increments each with 5,000 tons annual capacity. First increment to be in operation 18 months after award of contract. Second increment to be in operation 30 months after contract award. (d) Nachingwea - A facility to process 5,000 tons of raw cashewnuts per year to be in operation 18 months after contract award. (e) Mtama - A facility to process 5,000 tons of raw cashewnuts per year to be in operation 24 months after contract award. (f) Port of Mtwara - A facility to receive and store 700 tons of CNSL, complete with provisions to deliver the CNSL directly into ocean cargo vessels at a minimum rate of tons Per hour. Utilities 5. The contractor shall provide the primary source of power for each of the five factories but not the CNSL facility at Mtwara. ilrimarj source i to consist of two duplicate units, each unit with a capacity equal to the connected load of the processing equipment, lighting and other directly related equipment plus a 20% safety factor. 6. The contractor shall include a survey and consultations with approp- riate agencies to prepare cost estimates for providing water from primary source to each of the five factories. 7. The contractor shall provide provisions for sanitary drinking water and a waste disposal system. Auxiliary Buildings 8. Each factory site shall have three air conditioned residential buildings two each with a total area of square meters consisting of 3 bedrooms, bath, kitchen, sitting room; one to have an area of square meters consisting of 2 bedrooms, bath, kitchen and sitting room. 9. Each factory shall have a building of square meters to be used by employees for dressing, showering and toilets.  ANNEX 4 Appendix A Page 3 10. Each factory shall have an air conditioned medical dispensary of square meters consisting of two consultation rooms and one first aid treatment room. 11. Each factory shall have appropriate office space of at least 50 square meters that will be air conditioned. 12. Each factory site shall have a maintenance shop of .,square meters to make minor repairs and routine maintenance. One larger central machine shop equipped to do major repairs shall be supplied at the Mtwara CATA headquarters. 13. Each factory site shall be completely fenced with 2 meter high "cyclone" type fence of appropriate gauge wire with two double gates for vehicular traffic and two gates for personnel traffic. Government Supplied Components 14. The Government will supply to the contractor without charge the following: (a) Uncleared land of 6.5 acres at eacn site; (b) Water at point on the periphery of each site; (c) Raw nuts for operation; (d) Factory operating labor; (e) Factory operating and maintenance supplies; and (f) A contractor-Government liaison staff of 5 fulltime managing personnel. Special Personnel Requirements 15. The contractor shall provide: (a) A competent senior representative to reside in Mtwara for a period of 4 years commencing with the date of initial operation of the first increment of the Masasi factory. (b) Five competent assistants to the senior representative, one for each factory, to reside at the factory site in one of the square meter houses to be built by the contractor. Residence shall be for three years from the date of initial operation of each facility. (c) The cost of a short training program for each of the five Tanzanian factory managers.  ANNEX 4 Appendix A Page 4 Process Requirements 16. As an option the contractor shall offer equipment to dry raw cashewnuts as received, from a moisture content of about 14% to less than 8-1/2%. 17. The contractor shall provide a storage facility at each site to adequately store a 1 year supply of raw nuts in bags or bulk. Facility design will provide for a means to dissipate heat generates during storage. 18. The raw cashewnuts are to be cleaned and size graded prior to entering processing. The degree of size grading to be determined according to process requirements and shall be well defined in the proposal. 19. The graded and cleaned nuts are to be humidified by a controllable means to yield raw nuts with the appropriate moisture content dictated by the process which follows. Decortication 20. Roasters - Each 5,000 ton per year processing line shall be provided with at least two shell fired hot oil bath roasters with an hourly capacity of 12% of the daily rated capacity. The roasters shall have indicating controllers to control the temperature of the oil bath and the resident time of the nuts in the bath. Each oil bath roaster is to be equipped with equipment to collect and pump recovered CNSL to a central receiving tank. 21. Residual CNSL Removal - The contractor shall provide for the removal of CNSL that adheres to the roasted nut. If the process dictates, the nuts shall also be cooled prior to furthering processing and, if necessary, the roasted nust may be regraded for size at this point. 22. Decorticators - The roasted, cooled nuts with adhering CNSL removed shall be decorticated by multiple decorticators. Upon leaving the decorti- cators the shell pieces shall be immediately separated from the kernel to avoid contaminating the kernel with CNSL. If necessary, uncracked nuts may be recycled through the decorticator. Kernel Preparation 23. Peeled, clean kernels from the decorticators are to be submitted to thermal treatment as required by subsequent testa removal operation. The testa is to be completely removed by mechanical and/or hand means, minimum labor consistent with yields of high quality product is sought. 24. Elaborate electronic product grading equipment is not required. Adequate mechanical devices and tools necessary to isolate the many commercial grades of cashew nut kernels shall be supplied.  ANNEX 4 Appendix A Page 5 25. Equipment shall be provided to condition the kernels to 4.6% to 4.8% moisture before packing. Packing 26. Cashew nut kernels are to be packed in conventional tins of 25 pounds net weight in an environment of carbon dioxide. Two tins are to be placed in a fiber board carton for shipping. 27. As an option, quote to furnish equipment to manufacture shipping tins from sheet tin plate at each factory site, Conveyors 28. Contractor shall provide all conveyors including mobile equipment to move the material from one operation to another. This includes handling of spent shells and testa. Gen,eral 29. Contractor shall provide with each factory a 12 month supply of operating and maintenance spare parts. 30. Contractor shall make all inter- and intra pipe, wiring, and mechanical connections. Materials of Construction 31. All materials to be of quality consistent with good engineering practices. Material in contact with kernels is to be of good grade quality. Test Equipment 32. Contractor shall supply devices to allow for rapid and accurate determination of moisture in nut and kernel. Drawings 33. Contractor shall submit preliminary drawings for review by CATA. Prior to making detailed drawings, all general arrangement and other pre- liminary drawings must be submitted for approval to CATA. 34. Upon completion of Project, three full sets of "as constructed" drawings will be provided to CATA for each factory. Operational and Maintenance Manuals 35. Detailed flow diagrams and carefully worded and illustratad operating manuals for each factory are to be supplied (three copies).  ANWEX 4 Appendix A Page 6 36. Repair and maintenance manuals for each piece of equipment shall be furnished. 37. Contractor shall prepare preventative maintenance schedules, and procedures including a list of spare parts. Contractor Proposal 38. Proposal submitted by potential contractors shall include: (a) ComDlete process description including flow diagram and plant layout including a list of equipment to be furnished both of your manufacture and that manufactured by others. (b) The production capability of the system offered complete with the following table: Grade Approximate yield in percent Under 320 wholes 320 wholes 450 wholes Local wholes Dessert wholes Butts Splits LWP swP Other pieces (c) A full description of the building required to house the factory. (d) Estimate of electrical power, water, fuel and other utilities required. (e) Maintenance requirements of the system. (f) Break-down of management and administrative staff as well as factory labor, by category, including skill requirements. (g) Warrantees and guarantees that your company is prepared to offer. A performance bond will be required at the time the contract is signed. (h) A graphic timetable showing the phases for preparation of detailed drawings, construction, start-up of operations, training, etc. required to bring each factory to full capacity.  ANNEX 4 Appendix A Page 7 (i) Cost estimates for each factory accompanied with payment schedules. (j) A'statement as to experience of your company in processing of cashewnuts. (k) An outline of a training program for training local managers.   ANNEX 5 Page 1 TANZANIA CASH ENNUT DEVELOPMENT PROJECT Extension and Grading 1. Cashewnut production in Tanzania has a high potential for absolute growth. Production over the past five years has been as follows: 1968/69 1969/70 1970/71 1971/72 1972/73 114.3 116.6 112.8 119.7 124.0 The increase in production since 1968/69 has been attributed to extension work carried out by TANU (Annex 1). The extension work concentrated upon farmi clearing, and although it reached only about 20% of the country's cashew farmers, nevertheless over 4 years total production increased by about 10,000 tons (9%). Thus the increase in production of farmers affected by the TAIU extension work was estimated at about 44% over the four-year period. For Project purposes it has been estimated that a 20% increase in production would be achieved over five years in the Project area (equivalent to a 15% increase in total Tanzanian production). Production increases would be expected to continue after this period as a result of both increased area and improved yields. Improved yields will come about from a more concentrated extension service which, together with continued TANU campaigns, would concentrate on thinning, clearing, pruning and weeding. The coverage and quality of extension staff would be important. With the increase in extension work it is estimated that Tanzania's annual cashew production would increase by at least 15% from 124,000 tons to about 143,000 tons by 1983. Extension 2. It is proposed that extension staff be based in the buying centers, with one extension officer per buying center. Each officer would service about 900 farmers and there would be 395 officers to cover the area. Phasing of staff recruitment would be as follows: Project Year 1 2 3 4 5 Incremental 95 1,00 100 100 - Total 95 195 295 395 395 Total production increases are expected to be as follows: Extension Year 1 2 3 4 5 Annual increase - 5% 5% 5% Total increase - 5% 10% 15% 15%  ANNEX 5 Page 2 Each cashew officer would be trained for about 2 months in cashew as well as food crop production. Grading 3. Grading of raw nuts consists of a visual inspection for obviously bad nvts, separation of debris, moisture testing and a cutting test. The cutting test is done on a sampling basis to establish the percentage of aborted nuts. Grading staff would be based in the cooperative societies, with one grading officer per society. Each of the 131 officers would service, on average, about 3 buying centers. Phasing of staff recruitment would be as follows: Project Year 1 2 3 4 5 Incremental 32 33 33 33 - Total 32 65 98 131 131 Current quality production in Tanzania is 60% standard grade and 40% second grade. It is expected that over 5 years this ratio of quality would improve from a 60:40 to a 75:25 ratio. Each officer would receive about 2 months training, and his work would be concentrated on post harvest care. Yields 4. The average yield of raw cashewnuts in the Project area is estimated to be 325 kilos per ha- there is, however, considerable variation between farmers. Under reasonable husbandry, yields of over 1,000 kilos per ha have been achieved on farms where clearing had taken place following TANU campaigns. _ric_s_ Grades and Farm Incomes 5. Current prices to growers and outturns for raw cashewnuts are: Grade 1 60% Tsh 95/kg Undergrade 40% Tsh 75/kg Average Tsh 87/kg Farmer cash income per ha 325 kg x .87 Tsh 283 (US$41) Thf farmer also grows maize for subsistence.  ANNEX 5 Page 3 Prices are set by Government and it is expected that prices to growers in Tanzania will be at least maintained. With the improvement in quality and yields resulting from the extension and grading service, the farmer's cash income is expected to be as follows: Grade 1 75% Tsh 95/kg Undergrade 25% Tsh 75/kg Average Tsh 90/kg Farmer cash income per ha 390 kg x .90 Tsh 351 (US$51)   ANNEX 6 Page 1 TANZANIA CASHEWNUT DEVELOPMENT PROJECT Cashew Research 1. Cashew research was originally carried out at the Nachingwea Research Station (MAP). In 1968 all cashew research was transferred to the Mtwara Research and Training Institute, a multi-disciplined research station rtn by the Ministry of Agriculture. However, due to a lack of equipment and sufficient staff, no intensive cashew research has taken place since 1968. The Institute now has 50 ha under cashew with about a further 200 ha available for planting, and is carrying out a limited research program. Additional support for this program would be provided under the Project. A. Research Results Propagation of Improved Planting Material 2. Floral Biology. Systematic observations were made on flowering and fruit setting in cashew. It was found that production of hermaphradite flowers and the efficiency of pollination and fruit setting were generally sufficient to secure optimum yields. 3. Seed Selection by Density. Records made from a population of seed selection by specific gravity showed that those seeds with the highest specific gravity germinated more quickly and had greater viability. 4. Vegetative Propagation. Cashew is a cross pollinated crop and seeds from individual trees are hetrazygons. It was concluded that vegetative propagation would be the best method to disseminate the characteristics of high yielding trees. The air layering method was the only method which proved successful. Hlowever, the distribution of air layers to farmers spread over a wide area would be extremely difficult and financially prohibitive. 5. Cashew Breeding. Considerable time was spent in developing a breed- ing program for both the short and long term. However, sufficient time has not yet elapsed for the production of any definite results. 6. Cashew Multi-stage Mass Selection Trial. The object was to find out if the yield of unselected varieties could be improved by carrying out mass selection in a large population of young trees. Varieties of Tanzania, Malaysia, Sri Lanka and India were randomized in planting. Yield data were collected in the 3rd and 4th year from trees selected with greatest girth and height as compared with unselected trees from four varieties. No significant difference was found in these years, but the experiment is continuing.  ANNEX 6 Page 2 Cashew Agronomy 7. Establishment of Cashew. In order to find the best method of establishing cashew, an experiment was laid out to compare the effect of intercropping, mulch, farm yard manure and natural grass cover on the growth and yield of cashew; one control plot and three plots with varying treatments were put down. Stem diameter and height measurements were taken on the seedlings, and those plots which has intercropping showed significantly higher growth rates than the control plot. Yields of cashew and an intercrop of soya were the most encouraging in the early years. 8. Spacing Trials. Yields of cashew from time of bearing were measured on eight different spacings for three years. Results showed that the closer spacing in the early years gave higher yields per hectare. However, on reaching maturity, the greater the spacing up to limit of 12 m x 12 m gave the optimum yield; the experiment is continuing. 9. Cashew Thinning. Plots planted in 1958 at a spacing of 6 m x 6 m were thinned in four different ways in 1965, and yield data collected for two further years. It was shown that thinning 50% by selection increased yields significantly. There are further experiments underway to find the most economic way of spacing by (i) growing a fixed population from the beginning; and (ii) having a higher plant population in the beginning and the population thinned out at a later date. The experiment is continuing. 10. .ertilizer Trials. Conflicting evidence has been collected with regarc to the response of cashew to artificial fertilizers. The Research Station at Nachingwea conducted a trial using various treatments, and after measuring girths for two years found no significant effect on the growth rate. Further trials were carried out and it was shown that adding small quantities of nitrogenous and phosphate fertilizers to the planting hole gave some measurable response. Field trials on existing estate planted trees yielded a measurable response to fertilizers. The trial was repeated the following year with the same results. Pest and Disease Control 11. Helopeltis (schoutedeni and anacardi) are two serious pests which threaten cashew. Research into the method of attack and the life cycle of the insects has been carried out, and seasonal variations in numbers to be found on the trees ascertained. Control by means of BHC has been found effective, but at that time (1960) it was considered to be uneconomic under smallholder conditions. 12. Other insect pests have been identified: a sucking insect, Pseudotheraptus wayi; a bark borer, Mecycoyrus loripis; and a defoliating caterpillar, Nudraureba bellina. The most important pest is Theraptus, which causes a black spot on the kernel. Some work has been done on entomological control by using an ant (Occophylla longinnoda); some degree of success was achieved, but more has to be done to establish the ant colonies.  ANNEX 6 Page 3 13. Little research on cashew disease has been carried out, but it is known that cashew trees do die a "sudden death". However, the real cause is still to be established. B. Project Rtesearch Program Objective 14. The five-year research development program would expand existing facilities at Mtwara and would include provision for: (a) Establishment of 200 ha of nurseries and research plantation; (b) Fertilizer trial programs; (c) Ouantification of insect damage and formulation of an insect control program; (d) Variety trials; (e) Intercropping; (f) Breeding trials; (g) Post-harvest control; (h) Spacing program; (i) Vegetative propagation; (j) Pruning trials. The Project would also include provision for short term training courses and for overseas study courses. Field research trials would be carried out at selected points throughout the cashew growing area to further test promising results. Staffing 15. Project research would be carried out by a special unit within the Mtwara Research Institute. The research program would be drawn up, implemented and supervised by CATA's Chief Agricultural Officer. Provision would be made as part of the Project's technical assistance component to cover the cost of 12 man-years' service to include inter alia an entomologist, an agronomist and an economist. It is expected that these would be recruited internationally. Three Tanzanian graduates would be trained to replace the expatriates after the fourth year. The program would be supported by an adequate number of field assistants, laboratory staff and clerks.   TANZANIA CASIHEWI'UT DEVELOPMENT PROJECT Summary of Development Costs (Tsh'OOO) Foreign Foreign Annex 8 Exchange Exchange Project Year Table 1 2 3 4 5 Total % Amount CATA Headquarters-Fixed Assets 2 1,927 1,102 84 430 294 3,837 49 1,870 Extension and Grading-Fixed Assets 4 1,175 994 994 1,112 168 4,443 59 2,606 Mtwara Research Center-Fixed Assets 6 243 146 42 44 134 609 68 412 Factory Development 8 12,166 33,594 21,260 10,000 4,328 81,348 62 50,229 Rural Water Supply 13 1,000 5,000 1,000 - - 7,000 50 3,500 Community Education Centers 14 1,956 1,956 1,956 978 - 6,846 34 2,331 Operating Costs CATA Headquarters 3 231 317 319 319 457 1,643 50 821 Extension and Grading Service 5 1,105 2,211 3,312 4,488 4,488 15,604 7 1,172 Research Center 7 334 595 447 601 523 2,490 25 6o4 Sub-total 1,670 3,107 4,o69 5,4o8 5s,468 19,737 2,597 Technical Services 11 1,015 1,265 1,530 1,480 200 5,49o 70 3,843 Total Project Costs without Contingencies 21,152 47,170 30,944 19,452 10,592 129,310 52 67,388 Contingencies -Phyisical 212,115 4,719 3,095 1, 915 2, 52 61874 Price S 3,490 16,734 17,782 16,026 11,73 65I3 52 346,4 5,605 21,453 =7,T 17,971 l,T; 52 Total Project Costs including Contingencies 26,757 68,623 51,821 37,423 23 434 208,058 52 108,486 | 10 lO3 on all costs. 2/ 15% compounded on all costs. April 3, 1974  TANZANIA CAEHEWNUT DEVELOPMENT PROJECT Cashewnut Authority of Tanzania (CATA) Headquarters-Fixed Assets (Tih 000) Foreign Foreign Project Year Exchange Exchange 1 2 3 4 5 Total 96 Amount Buildings Unit Cost___ Offices 700 s2 at 339 m2 231.0 - - 231.0 Senior staff houses X 110.0 3