Announcement of Eight Million Dollars IDA Credit for Tobacco Processing in Tanzania on September 17, 1976

.World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 !DA NEWS RELEASE NO. 77/8 September 17, 1976 $8 MILLION IDA CREDIT FOR TOBACCO PROCESSING IN TANZANIA The International Development Association (IDA), an affiliate of the World Bank, has today approved a credit to Tanzania of $8 million to help finance an expansion of Tanzania's tobacco processing facility at Morogoro to accomrrodate increasing leaf production. The Government's program to develop agriculture with balanced regional growth and more equitable income distribution also includes greater output, for increased foreign exchange earnirigs. Tobacco production although sti 11 relatively small has shown almost a fourford increase over the last 10 years -- mostly the output of some 40,000 smallholders who cure and grade their own leaf. The Tobacco Authority of Tanzania (the Authority) purchases the tobacco crop through local village cooperatives, arranges transport both to Morogoro for processing • by the Tanzania Tobacco Processing Co. Ltd. (the Company), and from factory to port . The Project wil 1 increase -- over a five-year period -- the operational capacity of the Company facility, from approximately 18 mill ion kg of cured leaves annually, to over 40 mi 11 ion kg. Expansion will be in two stages: initially the Project will improve and enlarge the existing threshing line and later a larger new processing linewi]l be installed. The project also provides for new storage facilities, the purchase of additional tools and equipment, road construction, water supply facilities, railroad sidings and other infrastructure at Morogoro and a new store and office at Dar es Salaam. Technical assistance, training and a study of further processing in- vestment requirements are also provided for. It is calculated that the project wi 11 double the total tobacco processing capacity of the Company and provide the necessary capacity for processing anticipated increases in output up to the mid-1980s. The increase in foreign exchange value of the tobacco crop could be about $57 million by 1985, compared with $27 million in 1976. The benefits also include increased farm incomes affecting some 100,000 smallholder faml lies, by project's completion. The total cost of the project is estimated at $11.3 mi 11 ion. The credit of $8 million v-1ill finance only the foreign exchange costs. $2 million will be re-lent to the Authority and $6 mi 11 ion to the Company at 10 percent interest, repayable over 7 and 8 years respectively. The Authority and the Company are together contributing $3.3 mi 11 ion to total project costs. The IDA credit of $8 mill ion is being made to the United Republic of Tanzania on the standard tDA terms of 50 years, including a ten-year grace period. It is interest • free except for a 3/4 of 1% charge for administrative expenses. NOTE: Money figures are expressed in U.S. dollar equivalents. FORM NO. 1121 (5-76) T E C H N I C A L DAT A PROJECT: COUNTRY: TOTAL COST: Tobacco Processing Republic of Tanzania "$ 11 . 3 mi J 1 i on • I DA FINANCING: $8 mi 11 ion, on standard IDA terms OTHER FINANCING: The Tobacco Authority of Tanzania (the Authority) and The Tanzania Tobacco Processing Company Ltd. (the Company), $3 . 3 mi 11 i on . IMPLEMENTING ORGANIZATION: Tobacco Authority of Tanzania, P.O. Box 227, Morogoro, Tanzania. Tanzania Tobacco Processing Co. Ltd., P.O. Box 616, Morogoro, Tanzania PROJECT DESCRIPTION: Over five years (1976-1980) the project wl 11 increase the operational capacity of the Company facility at Morogoro from a maximum of 18.5 million kg cured leaf per annum to some 41 mill ion kg, of which 36 mi 11 ion kg wi 11 be mechanically processed. The expansion will be in two stages, the first comprising additions and improvements to the existing processing line through purchase of equipment, machinery and quality control devices and secondly, installation. of a completely new processing line. This will accommodate incremental leaf production over the next five years. A survey to determine timing, scale and location of any further investment in processing plant w!.1 be provided for in the project. The project also includes technical assistance and training and wi 11 provide for improved storage facilities at Morogoro and a new office and export storage in Dar es Salaam. Construc- tion of roads, water supply facilities, offices, railroad sidings and other basic infra- structure at Morogoro are also provided for within the pr,oject. PROCUREMENT: Equipment and materials financed out of the proceeds of the IDA Credit will be procured on the basis of international competitive bidding in accordance w_ith World Bank guidelines except for equipment to improve the existing tobacco processing line at the Morogoro plant, which is being purchased through international shopping. This equipment is estimated to cost under $375,000. The civi 1 works contracts which are divided between Dar es Salaam and Morogoro are too small to attract international firms; _these have been advertised locally. To ensure that improvements to the existing threshing 1 ine at the t-brogoro plant is carried out in time for the next tobacco processing season and to ensure that the construct ion of new storage in Morogoro and Dar es Salaam is completed in time to handle the expected increase in the volume of tobacco, advance contracting for equipment of the value of $375,000 and civil works of the value of $1,625·,000 have been authorized. CONSULTANTS: May be required for the study on future investments in • tobacco processing. ECONOMIC RATE OF RETURN: 25% ESTIMATED COMPLETION DATE: 1980 - 0 -