Zambia - Agricultural and rural sector survey (Vol. 1 of 3) : Main report and maps

CIRCiLA-'IIGs COPYI Report No. 841a-ZA RTSD Republic of Zambia To BE RETURNED TO REPORTS DESK Agricultural and Rural Sector Survey FILE t"PP (In Three Volumes) Volume 1: Main Report and Maps i ETURN T) October 20, 1975 REPODRTS DESK General Agriculture Division WI'TH IN Eastern Africa Regional Office O WEEK Not for Public Use Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1 = Kwacha 0.64 Kwacha 1 (K1) = US$1.56 Ngwee (n) 100 = Kwacha 1 WEIGHTS AND MEASURES 1 hectare (ha) = 2.471 acres 1 square kilometer (km2) = 100 ha = 247 acres = 0.386 square miles 1 kilometer (km) = 0.621 miles 1 kilogram (kg) = 2.2 lbs 1 metric ton (t) = 2,204.6 lbs 1 liter (1) = 2.116 US pints 1 bag maize = 90 kg 1 bag groundnuts = 80 kg ABBREVIATIONS AFC - Agricultural Finance Corporation CIMMYT - International Maize and Wheat Improvement Center (Centro Ihterracional de Mejoramiento de Maiz et Trigo) CSB - Cold Storage Board IDZ - Intensive Development Zone LANDSAT - Satellite undertaking program of land resource photography (formerly ERTS) MLNR - Ministry of Lands and Natural Resources MRD - Ministry of Rural Development NAMB - National Agricultural Marketing Board SNDP - Second National Development Plan (1972-76) RGA - Rural Growth Area RGC - Rural Growth Center RRP - Rural Reconstruction Program TAZARA - Tanzania-Zambia Railway UNIP - United National Independence Party ZiiS - Zambia National Service This report is based on the findings of two missions which visited Zambia in September/October and November/December 1974 composed of Messrs. J.H. ' Cleave, C.R. Blitzer, H.M. Kim, W.A. McCleary, Miss F.F., Johansen, Messrs. G.B. Nkojo, J.F.A. Russell, and M.A. Wolf (of the Bank) and Messrs. R. Ambroggi (UNDP), W.O. Jones, R.C.E. Kapteyn, J.C.D. Lawrance (MOD), and E.H. McCauley (Consultant).  ZAMBIA AGRICULTURAL AND RURAL SECTOR SURVEY TABLE OF CONTENTS Paragraph (s) SUMMARY PREFACE I. BACKGROUND 1.01 - 1.07 A. Structure of the Economy 1.01 - 1.02 B. Agriculture and Rural Development 1.03 - 1.07 II. GOVERNMENT'S OBJECTIVES 2.01 - 2.10 A. Development Aims 2.01 - 2.03 B. Progress in the Rural Sector 2.04 - 2.08 C. Problems and Opportunities 2.09 - 2.10 III. A NEW STRATEGY FOR THE RURAL SECTOR 3.01 - 3.12 A. The Approach 3.01 B. Rural Development 3.02 - 3.03 Rural Growth Areas 3.04,- 3.08 C. Production 3.09 - 3.12 IV. POLICY RECOMMENDATIONS 4.01'- 4.46 A. Organization for Rural Development 4.02 - 4.05 The Organization of Agricultural Services 4.06i- 4.08 Inter-Ministry Coordination 4.09 B. Pricing Policy' 4.101- 4.18 The Price System 4.10 Effects of Price Policy 4.11 - 4.14 Policy Proposals 4.15 - 4.18 C. Marketing 4.19,- 4.21 The Marketing System 4.19 Policy Proposals 4.20 - 4.21 D. Producers 4.22 - 4.26 Production and Prospects 4.22 - 4.23 Production Policy 4.24 - 4.26  Page ii Paragraph(s) E. Support Policies 4.27 - 4.46 Budgetary Procedures and Allocations 4.28 Status for the Rural Areas 4.29 - 4.31 Non-Agricultural Investments 4.32 - 4.34 Land Tenure 4.35 - 4.38 Transport Policy 4.39 - 4.42 Research and Training 4.43 - 4.46 V. DEVELOPMENT PROGRAMS AND PROJECTS 5.01 - 5.40 A. Investment in Rural Development 5.02 - 5.06 Rural Growth Areas 5.02 - 5.03 Agricultural Credit 5.04 Peri-Urban Development 5.05 Rural Industries 5.06 B. Crop Development 5.07 - 5.18 Maize 5.08 - 5.09 Wheat 5.10 - 5.12 Rice 5.13 Cotton 5.14 Tobacco 5.15 Groundnuts 5.16 Sugar 5.17 Other Crops 5.18 C. Market Development Proarams 5.19 - 5.23 Maize Storage 5.19 - 5.20 Crop Reporting 5.21 Training 5.22 Local Markets 5.23 D. Livestock Development 5.24 - 5.29 Demand and Supply 5.24 - 5.25 Problems and Proposals 5.26 - 5.28 Livestock Prices 5.29 E. Water Resources Development 5.30 - 5.36 Potential and Present Use 5.30 - 5.31 Development Proposals 5.32 - 5.33 Support Proposals 5.34 - 5.36 F. Fisheries Development 5.37 - 5.39 G. Summary of Investment Proposals 5.40 VI. THE FUTURE PERSPECTIVE 6.01 - 6.07  Page iii MAPS Land Tenure IBRD 11540 Ecological Zones and Traditional Agricultural Systems IBRD 11631 Population Distribution IBRD 11542 Transport Network IBRD 11509 International Routes IBRD 11510 Livestock, Tsetse and Fisheries IBRD 11541 Water Resources IBRD 11544 Water Use IBRD 11548 Irrigation Potential and Development Proposals IBRD 11545 Yearly Rainfall and Evaporation IBRD 11546 Rainfall Distribution IBRD 11547 ANNEXES 1. Comparative Data: Zambia and Other African Territories (1973) 2. Ecological Zones and Rural Growth Areas: Potential and Projects Appendix I: The Chitemene Systems Appendix II: A Note on the Rural Reconstruction Program 3. Migration and Rural Transformation 4. Recent Performance in the Agricultural Sector 5. Estimates of Demand and Supply for Food Products Appendix I: Derivation of Demand Projections Appendix II: Sources of Incremental Production 6. Organization for Rural Development Appendix I: The Decentralized Situation Appendix II: Distribution of Higher Grade Staff Appendix III: Distribution of Planning, Financial and Personnel Staff Appendix IV: Manpower: Serenje District, 1972 Appendix V: The Integration of Central Ministries Appendix VI: Decentralization of Building Staff and Stores 7. Agricultural Services Appendix I: Organization of the Ministry of Rural Development 8. Agricultural Markets and Prices Appendix I: Estimates of Production, Consumption and Sales Appendix II: Pre-Independence Trade Appendix III: Zambian Market Places in 1974 Appendix IV: Border Prices and the Pricing of Major Agricultural Commodities 9. Incentives to Commercial Farmers 10. Rural Small-Scale Industries in Zambia 11. Land Tenure and Rural Development 12. Transportation in Agricultural Development Appendix I: Tables Appendix II: Roads Department Organization 13. Performance and Prospects in Crop Agriculture 14. Water Resources: Potential, Use and Development (The Annex contains 22 Appendices covering documentation, water resource data, organization of administration, irrigation development costs, and project outlines. See Table of Contents to Annex.)  Page iv 15. Livestock Development Appendix I: Offtake in Traditional Cattle Keeping Appendix II: Livestock Development Schemes in Progress Appendix III: Outline for Training Programs 16. Fisheries in Zambia 17. Summary of Investment Proposals 18. Development and Income Distribution in a Dual Economy: A Dynamic Simulation Model for Zambia 19. Statistical Annex  ZAMBIA AGRICULTURAL AND RURAL SECTOR SURVEY SUMMARY i. This report proposes a strategy, policies, and potential invest- ments which would accelerate rural development and increase agricultural production in Zambia over the next two decades. It notes that, relative to Government's objectives, recent progress in the sector has been disappoint- ing and that at present there is no coherent strategy for rectifying!this situation. In particular the gap between rural and urban incomes has widened rather than narrowed, and in spite of some increases in production, the goal of self sufficiency in foods and agricultural raw materials is further away than a decade ago. Moreover, immediate prospects in the mining sector leave little room for optimism that it can continue to be relied upon to serve as a milche cow for the rural sector. Projections show that, even by 1980, copper production will be only 17% above the 1965 output, and pricesiin the next 5 years are predicted to stay low. Meanwhile, migration to the urban areas continues and stimulates the market demand for foodstuffs, calculated to rise at nearly 6% a year. ii. The report highlights two major problems. On the one hand, there is the urgent need to close the widening gap (now over 40% by value) between market demand for agricultural produce and domestic supply: on the other, there is the need to direct more attention and resources to the rural areas in order both to redress the income imbalance between them and urban areas, and also to enable disadvantaged areas outside the line-of-rail to play an increasing role in production for domestic consumption and eventually provide agricultural exports to diversify out of copper. iii. The strategy proposed for reaching these objectives is two-pronged, with action on each part to be initiated simultaneously. Immediate increases in output should be obtained from the areas with greatest comparative advant- age, particularly the line-of-rail, making maximum use of all types Iof producers-- smallholders, emergent farmers, company and private commercial farmers and state enterprises--principally by policy improvements. The transformation of tradi- tional sector production and development of the rural areas requires' a longer term program and should be achieved by concentrating social and production investment and recurrent expenditures in high potential areas across the nation. The rural provinces and areas outside the immediate line-of-rail might be covered by some 70-80 of these areas which we have called Rural Growth Areas. They are discussed further below. Zambia needs to tackle both elements of the strategy if the anticipated increase in effective demand for agricultural produce is to be met. The time required to achieve significant production increases is very different in the traditional sector from the existing commercial sector, but Zambia has the resources to carry out a twin strategy, there should be little trade-off between its two elements, and the balance of payments situation of the country makes immediate action on both fronts imperative.  - ii - iv. The rural population in Zambia is sparse and widely scattered. Rural real incomes are perhaps one-quarter of the urban level and rural social amenities are markedly poorer than in the cities. Consequently there is a continuing migration to the Copperbelt and other urban centers in the line-of-rail that has already made Zambia the most urbanized country in Africa. A major problem is how to improve the production potential-- and therefore the incomes--of the rural areas, and how to provide social services to this dispersed population and thus counter the move to the conurbations. The Rural Growth Area approach to rural transformation would meet this problem. At the same time, it builds on a continuing tendency of the rural population to move towards lines of communication and urban centers within the rural areas. It is consistent with policy statements encouraging family farms, would be complemented by the Rural Reconstruction Program (RRP), meets the need to concentrate the provision of services, and enables sub- stantial development to take place in all Provinces simultaneously, facilita- ting local participation and choice in the planning process, and simplifying coordination of development inputs. It thus avoids the problems found in the Intensive Development Zone (IDZ) program which became overdesigned, centralized in administration, and concentrated in one area: and at the same time avoids the cost, logistic and planning problems inherent in attempts to reach all of a dispersed population which is at varying stages of development. v. A Rural Growth Area (RGA) would be selected on the basis of suita- ble soils and climate for agricultural development, existing communications and other infrastructure, and relative concentration of population. It might initially embrace some 10-20,000 people including those in the Rural Growth Center (RGC), a central place within the RGA which would develop as the urban market and service center for it, and which would be the site for rural small industry development. Around the RGC the growth of secondary centers would be fostered. These would be villages in which farm level pro- duction services, and local social facilities would be concentrated. One such center should normally be the rural reconstruction center in which young people are trained under the Zambia National Service, and from which successful trainees should settle in the RGAs or RGCs, according to the skills they have acquired. There should be a near-exclusive concentration of Government rural development expenditures in RGAs, both directly and through the Provincial administrations, and RGAs should also be the exclusive sites of rural projects and subprojects be they of a national, regional or local nature, funded from national, bilateral or international sources. vi. For the RGA program to be effective it is essential that there is greater and effective decentralization of decision making and execution of Government's policies to the provinces where coordination of Government and quasi-government services and private operations can be most readily achieved. Because of manpower constraints decentralization should generally not go below Provincial level, at least for the next decade, and the task of national policy formulation and the setting of development guidelines should remain  - iii - firmly with the Central Government. The first powers to be delegated should be control over allocation of a significant proportion of development expendi- ture; provincial planning; and control over those personnel allocated to the provinces. Only when these three areas are clearly a provincial responsi- bility can the operations of specialist departments be made effective. vii. Price policy has discouraged agricultural production, led to misallocation of resources, and favored the urban community over the rural poor, thus running counter to Government's welfare goals and encouraging the migration to the urban line-of-rail. Changes in price policies are crucial to development in the sector, both for the short-run production goals and for the longer-run objectives of rural transformation and development of production in the traditional sector. Although there are strong pressures against it one can see no alternative to the principle that world market levels be the guide to setting prices. Present indications are that most producer prices should be gradually raised. Similarly the policy of uniform national prices should be abandoned so that local prices more fully reflect regional comparative advantage. Floor prices, announced regularly ahead of planting time, should be retained to provide farmers with a firm guarantee. At the same time, controls and subsidies on consumer prices should be gradually re- moved, particularly those on non-staple items. To some extent improvements in producer pricing rest upon improving the transport tariff structure, both for internal services and on Zambia's external routes. viii. Parallel with changes in price policy improvements are needed in the agricultural marketing system. The present system in which monopoly boards play a major role is costly and inefficient and has stifled rural enterprise. We recommend a policy of divesting parastatal buyers of their monopoly powers and gradually withdrawing their services from farm level whilst cooperative or private initiative in marketing is encouraged. This too requires changes in price policy to allow farmers, cooperatives or traders a margin for performing the essential marketing function. The boards should continue as buyers at main depots and retain a role as countervailing powers and as buyers of last resort at floor prices. ix. Improved policies in the agricultural sector have to be viewed with other facets of Government operations. Among the actions needed are a criti- cal examination of the relationship between capital and recurrent expendi- tures, and of the allocation of funds to maintain agricultural staff in the field, and positive measures which will attract staff to rural areas. Agri- cultural research needs to emphasize farming systems, the needs of small- holders, and traditional livestock. The links between research and extension work need improvement. The system of land tenure has changed little over the decade, probably because it currently presents few problems. However, there are already signs that difficulties will arise as development takes place and, before the pressure makes them urgent, changes should be made in the land law to facilitate registration of all lands and the issue of leasehold titles to individuals or groups. A start should be made in RGAs with a systematic program of land registration.  - iv - x. In the report we have identified an investment program for the next decade which, given the support of policy improvements, will further Govern- ment's goals for the sector within the framework of the two-pronged strategy. The program of nearly K 400 million (US$620 million), of which over half would be directed to RGAs, compares with rather under K 170 million (US$270 million) suggested (but not achieved) for the total Rural Sector Program for the 5 years of SNDP (1972-76). Among potential investments within RGAs are the development of smallholder rice, initially rainfed in Luapula and North- ern Provinces, and later irrigated in Western, Southern and Northern Prov- inces; cotton, integrated with maize, groundnuts or burley tobacco in Southern, Central and Eastern Provinces; burley tobacco on limited sites in most provinces and Virginia tobacco as an expansion of existing projects. Confectionary groundnuts should be concentrated in Eastern Province, but suitable sites for oil groundnuts and other oil-seeds can be found in RGAs in most provinces. The development of maize production for the market, the keystone around which improved smallholder management will evolve, mainly rests upon improvements in pricing, timely input deliver- ies, and better marketing. Radical new programs are not needed. Proposals for increased beef and dairy production by smallholders envisage continuation of present programs and in addition concentrate on disease control, research programs geared to the traditional farmer, and training of Zambian staff. However, improved price policy is the key to progress in either the smallholder or commercial sector. Wheat, which is unlikely to develop as a smallholder crop, should be encouraged as an irrigated winter crop on commercial farms, although a proposal for mechanized rainfed production in Southern Province would also be worth investigating. Feasibility studies for the doubling of sugar production by 1995 possibly under irrigation by an estate and small- holder outgrowers close to TAZARA should be started in 1976. xi. Irrigation development from surface and ground water for large- scale undertakings and smallholders is technically feasible and appears to have economic potential for a range of crops including sugar, wheat, rice, fruits, and vegetables, while about 10,000 rural water supply sources in RGAs will need to be constructed or restored over the next decade. Con- flicting demands for the use of Zambia's considerable water potential are appearing and it is important that all future development is coordinated within river basins. xii. The quantification of these policy changes and programs, if fully implemented, is subject to the usual hazards. However, the land resources exist to broadly meet the sector targets, and the capital investments needed appear to be achievable. In the mission's view, Zambia can close it. import gap in agricultural produce and meet its rising demand in all except wheat and beef (and for these too if demand is curbed by increased consumer prices) and could produce major surpluses of maize, groundnuts, tobacco and possibly cotton. Much hinges on Government's ability to release the potential of the rural sector, in a way it has not done so far, and its willingness to tackle the organizational problem. In real terms overall market production in excess of 4 times the current value is projected for  1995, a growth rate of 7% a year. This growth would not be even throughout the sector, however. Initial rapid growth would be on the present commercial and emergent farmers lands, but over the two decades the proportion of market production supplied by them would fall from nearly 60% to one-quarter, and the most rapid growth rate and major expansion would come from half 'a million Zambian smallholder families in RGAs. These, in the process, should become by far the dominant agricultural producers in the country and would increase their cash incomes to some seven times present levels. Although it seems inevitable that average rural incomes will remain markedly below those of urban dwellers, the increased participation of rural families in market produc- tion and increased output of those engaged in cash crop production will be the key to reducing the gap. Developing the initiative and encouraging the self reliance of this group should be the major concern of Government, the key to the long-run strategy for the sector and the dominant consideration in agri- cultural policy formulation.   PREFACE i. This report presents the findings of a mission which made two visits to Zambia in the last quarter of 1974 1/ to examine the rural sector and to make proposals for a strategy, policies, and projects which would further rural development and agricultural production. It is intended to provide a perspective for Bank lending, bilateral aid, and government invest- ment in the Sector, to be a direct input into the basic economic mission visiting Zambia in 1975, and also to assist Zambia in the preparation of the Third National Development Plan (1977-1981). ii. The report consists of two parts: a General Report in Volume I, and a series of Annexes in Volumes II and III. The General Report has been kept brief: it contains little descriptive material or detail, but outlines the broad strategy, policy and project proposals. These are derived from the detailed reports in the Annexes which also contain explanatory materials and statistical data. A set of 11 maps illustrating the report is included at the end of Volume I. iii. The Sector Mission was inevitably selective in its coverage. For example, because of manpower constraints, the forestry and fisheries sub- sectors were not examined, whilst important complementary areas such as rural industries, health services and education, although discussed by the mission, could not be studied in depth. However, a model of the Zambian economy described in an Annex and in part developed during the mission, provides some understanding of the interrelationship of the rural sector with other parts of the economy and the effects of the cross-sectoral influence of policy actions. The inclusion of an abbreviated version of a report of a 1974 mission on small industries, and a note on fisheries prepared in Zambia at mission request, provide perspectives on these topics, both important to the growth-area strategy which is proposed (see paras 3.04-3.08). Bank studies on copper pricing and population migration have also been drawn upon in the report. Some other matters such as the organization of. rural credit received only cursory attention because they were considered low priority 1/ On the first visit the mission concentrated on the definition of problem areas and on data collection: the second included technical expertise in key sub-sectors. The mission members and their major responsibilities were: First visit: J.H. Cleave (Chief of Mission), C.R. Blitzer (Macro- model), H.J. Kim (Statistics), G.B. Nkojo (Policy issues), J.F.A. Russell RMEA, Agricultural Services), M.A. Wolf (Price policy); Second visit: J.H. Cleave (Chief of Mission), H. J. Kim (Demand projections), W.A. McCleary (Micro-economics), Miss F.F. Johansen (Transport policy), J.F.A. Russell (RMEA, Crop Agriculture) (Bank); and R. Ambroggi (UNDP, Water Resources), W.O.-Jones (Marketing and price policy), R.C.E. Kapteyn (Organization), J.C.D. Lawrance (MOD, Land Tenure), and E.H. McCauley (Livestock) (Consul- tants). H. Olf (FAO, Agricultural Advisor to His Excellency P!esident Kaunda) was observer to the mission throughout, and Messrs. M. Mufwaya and T. Kasapu (Ministry of Rural Development) as their work load permitted.  - ii - in the Zambian context. The selection of priorities and materials, and policy proposals and project suggestions obviously reflect judgments by the mission. These have been developed as objectively as possible, within the framework of Government's development aims. However, they do not, and should not, take account of all the political pressures which, in a democratic society, must strongly influence Government's actions. To that extent the report makes sug- gestions of direction, not firm prescriptions. It is recognized that some of the mission's proposals will involve hard decisions although throughout the report a conscious effort has been made to suggest the possible. We believe that the report presents a strategy and policies which logically derive from Government's aims and the country's problems in the Rural Sector. In this respect the proposals are a coherent whole, a package. But it is not a package which has to be accepted in its entirety or rejected as a whole. Providing it is understood how they are interlinked, different elements can readily be given the emphasis in scope and time that Government feels appropriate. iv. The political philosophy of Zambia, the philosophy of Humanism, seeks to create an egalitarian society in which there is equal opportunity for self- development for all. We believe that the mission's proposals further the long-term implementation of these ideals, and much which is proposed reinforces Government policies and existing trends within the country. In some cases, indeed, events have overtaken the report during its drafting. Most important was the address of H.E. President Kaunda to the UNIP National Council on June 30, 1975, in which policy measures were announced on land tenure, water re- source development and subsidies to parastatals which had been anticipated by the mission. Similarly, the price increases announced on July 26 were in the direction of mission recommendations. Less in line with mission views was the report of the Salaries Commission which, together with the white paper containing Government's comments, was published in September. Rather than attempt to change the text of the report to reflect these events they have, where appropriate, been discussed in footnotes. It has, however, been felt desirable to insert comment both in the Main Report (para 3.05) and in Annex 2 (at para 23 and Appendix II) on the role of the Rural Reconstruction Program under the Zambia National Service which has developed since early 1975. Details were omitted from the "Green Cover" draft because the mission had not at that time been able to assemble sufficient information. v. The "Green Cover" draft of the report was issued on August 11, 1975. A mission 1/ visited Zambia in September to discuss the draft with Government officials, and was honored by a meeting with H.E. President Kaunda together with members of the Central Committee of the Party and of the Cabinet. Fol- lowing these cordial and constructive discussions a number of factual errors have been corrected and several points which were inadequately explained in the draft have been clarified, either by text changes or footnotes. The general 1/ Comprising C.H. Walton (Chief, General Agriculture Division), J.H. Cleave, and J.F.A. Russell, accompanied by H. Reichelt (Resident Representative, Lusaka).  argument of the report remains unchanged, however. For the gracious interest and encouragement of His Excellency and his advisors, and for much h,elp especially from officials of the Ministry of Rural Development and Ministry of Planning and Finance, and for many personal kindnesses, the mission is grateful. Any mission, but particularly a large one such as a secto6r mission, inevitably makes heavy demands on the time of Government personnel and other concerned persons within the country. It is a pleasure to record that these demands were so generously met. The mission also records appreciation to the Government of Zambia and FAO for making available the services of Hans Olf as observer to both missions, and to Dr. Olf himself for his help and advice; and to the UNDP, through its Resident Representative in Lusaka, Winston Prattley, for providing the services and costs of Robert Ambroggi as Water Resources specialist on the mission.   I. BACKGROUND A. Structure of the Economy 1.01 In many ways Zambia is unique in tropical Africa. 1/ It has one of the highest per capita incomes of the region; a large value in foreign trade, in spite of its land locked position; and is the most highly urbanized country with 35% of the 4.7 million population in 10 towns over 50,000, al- though it has a low average population density. Migration to the towns is such that virtually all the net population growth takes place in the urban areas, particularly those along the central line-of-rail linking the Copperbelt with Livingstone. This belt is the locus for over 85% of the economic activity of the country. Indeed, a key characteristic of Zambia is its dual economy, dominated by copper mining. Mining accounts for 43% of GNP, a large but varying share of Government revenue, and 98% of exports. Agriculture accounts for under 8% of GNP. The economy has also been characterized by a relatively slow growth in real GDP -- between 3.5 and 4% on average. Negligible exports, but nearly 10% of total imports, are of food and agricultural raw materials. Average incomes in mining at K 1,500 (US$2,300) are 15 times those in traditional agriculture, and urban incomes are probably 4 times the rural average. 1.02 Policy making is centralized on Lusaka, but the Government machin- ery operates through eight Provinces--three along the line-of-rail and five so-called 'rural provinces'. Government's role in the economy is all- embracing. All mining and major industrial undertakings are state con- trolled and Government, typically through parastatal corporations, is more or less directly engaged in insurance and banking; wholesale and retail marketing; road, rail and air transport; tourism; agricultural production; and fisheries. It also directly operates a range of social and production services--education, health, water supplies, extension services, and credit. B. Agriculture and Rural Development 1.03 Implicitly the role of the agricultural sector in Zambia is to provide cheap and ample food and some raw materials for the urbanized mining, manufacturing and commercial sectors. It also remains the largest absorber of labor in the country, and is the major prospect for diversifying Zambia's export base. 1.04 The dualism seen in the economy as a whole is found in agricul- ture with large State and company farms and an economically importanlt group of about 800 commercial farmers 2/ on one extreme, and about 600,000 1/ Basic parameters of the Zambian Economy and other countries of tropical Africa are given in Annex 1. 2/ The number of large commercial farmers has halved since independence, but the net decline appears to have stopped.  - 2 - small-holders, on the other. Between is a group of Zambian 'emergent farmers'. State farms are engaged in beef, maize and dairying and the large companies produce mainly maize and beef. The commercial farmers are located on State Land (see Map IBRD 11540) the leasehold 1/ area of which occupies 3% of Zambia. Their farms are large with generally fair land, close to the line-of-rail, and therefore with good access to market. They use modern, rather capital intensive methods to produce cereals, dairy produce, beef, poultry and eggs, for the urban market or tobacco for export. Although the proportion is declining about 65% of commercial farmers are expatriate. The emergent farmers are a growing but still small band of innovators who use improved seed, and ox equipment or tractors. They are variously located on State land or relatively favored areas of Reserve and Trust land especially close to the line-of-rail and are growing the same crops as the commercial farmers, plus cotton. It is estimated that over 55% by value of marketed domestic production (35% of market demand) is derived from commercial and emergent farmers, including nearly 60% of the legal market in maize, 35% of beef and over half the country's milk, pork and tobacco. Gross annual sales from commercial farms average about K 25,000-35,000 (about US$40,000): emergent farmers' gross incomes are probably typically in the range K 1,000-3,000 but vary widely. 1.05 Of the smallholders, about half grow little but their own sub- sistence while others produce perhaps three or four times their family needs using hand tools and traditional technology. Those in the reserve areas of the line-of-rail provinces (about 30% of the total) and Eastern Province (20%) tend to be more market oriented than those, scattered and often remote, in the other provinces. Major crops are maize, cotton, groundnuts and free-grazed beef. Average family sales by smallholders are estimated at only K 50-60 (US$85) a year. However, the importance of smallholders is better gauged by their share of total production, estimated at 85% of all cereals (and 80% of all maize) and 90% of domestic cattle slaughtered. 1.06 2 The average density of the 3 million rural population is about 4 per km --or nearly 140 ha of land per rural family. Much of Zambia's land is of poor quality and inaccessible, but there are many pockets with good potential and generally land is not constraining. Cattle grazing is limited by trypanosomiasis and other stock diseases; and the wide-spread chitemene systems of traditional agriculture, 2/ are forms of shifting cultivation which do not readily lend themselves to intensification. Although more developed systems are to be found, land productivity is gene- rally low. The typical settlement pattern is a dispersed one, but, paralleling 1/ Freehold was abolished on 1 July 1975 and all former freehold land is being converted to 100 year leases held by the State. 2/ The chitemene systems are described in Annex 2, Appendix 1.  - 3 - the major migration from the rural provinces to the line-of-rail, there has been a marked tendency within the rural provinces for the population to move towards major lines of communication and townships. 1.07 Marked differences in ecology and agricultural potentia