Malawi - Shire Valley Agricultural Consolidation Project

Document of The World Bank FOR OFFICIAL USE ONLY FILE COPY Report 'N. 1943-Hii.X STAFF APPRAISAL REPORT MALAIMI SHIRE VALLEY AGRICULTURAL CONSOLIDATION PROJECT May 25, 1978 Regional Projects Department Easter- Africa Projects, Southern Agriculture This document has a restricted distribution oul may be tised by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorizatitin.  CURRENCY EQUIVALENTS Currency Unit = Malawi Kwacha (MK) = 100 tambala (t) US$1.00 = MK 0.91 MXK 1.00 = US$1.10 WEIGHTS AND MEASURES 1 kg = 2.2 lb. I m ton = 1.1 short tons (= 2,000 lb.) 1 ha2 2.47 acrei 1 km = 0.3861 mi 1 km = 0.6 mile 1 bag maize = 90 kg (200 lb.) 1 bag fertilizer = 50 kg. (= 210 lb.) A.BBREVIATIONS ADHA2RC - Agricultural Development and Marketing Corporation CSC - Cold Storage Company EPA - Extension Planning Area FMD - Foot and Mouth Disease KRDP - Karonga Rural Development Project LLDP - Lilongwe Land Development Program MANR - Ministry of Agriculture and Natural Resources MOE - Ministry of Education MOH - Ministry of Health MOW - Ministry of Works and Supplies MYP - Malawi Young Pioneers NRDP - National Rural Development Program SVADP - Shire Valley Agricultural Development Program GOVERNMENT FISCAL YEAR April 1 to March 31  FOR OFFICIAL USE ONLY MALAWI SHIRE VALLEY AGRICULTURAL CONSOLIDATION PROJECT TABLE OF CONTENTS PaRe No. I. THE AGRICULTURAL SECTOR *................................ 1 A. Background **....................................... 1 B. Smallholder Production *.........ooooo........ ... .... 1 C. Livestock o... 000............................000................. 3 D. Government Agricultural Services ................... 3 II. THE PROJECT AREA .................. ..................... 4 A. The Project Area .... . ................................. 4 B. The Shire Valley Agricultural Development Program .. 6 III. THE PROJECT ... c.e..e...e..e....e............eec.... 11 A. General Description e.ec...eoooe.oo..ooo..ooee.*o.eo cc 11 Bo Detailed Features eee.....e ccc.* ceeeeccee.......e cc.. 13 C. Project Cost ... o.oo... ce... ce *......... .e..ee ....e. 22 D. Financing e.oe.c.e. oooe.e.......c..e.eeoeo.o..e.eo.o 23 Eo Procurement oeeeoeeooo *eoeeoe .ce . oe.e.o.... c.... 23 Fo Disbursement ......e *.........0000-0- ..... .........0 24 G. Accounts, Audit and Reports e.*oooooeoeo*o.....e..eo 25 H. Eavironmental Effects ...................0...........0 26 IV. ORGANIZATION AND MANAGEMENT ..oo ....... o .... e * c c e e c e c e c e e c e c 26 V. PRODUCTION, MARKETS AND PRICES, AND FINANCIAL BENEFITS ........... cece c e.cc..........c. e.e 28 A. Production .c....0......0c.0.ececcc....eeee... e.c.... 28 Bo Markets and Prices o...o.ece..ecee..e.c....ce00000e. 31 C. F Benefits C. Farmer Benefitsc.. c 33 D. Government Cash Flow cooo..oc cooo.... cececc. 34 VI. ECONOMIC BENEFITS AND JUSTIFICATION ....c..e.c.ccc.c 35 VII. ASSURANCES AND RECOMMENDATIONS ...e..eec..cee 38 This report is based on the findings of a Bank mission which visited Malawi in August 1977 comprising Messrs. J. Frankel, E. Goetz, D. Lister (IDA); G. Kerkhoven, J. Callahan, W. McDonnell (Consultants). Thu 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.  -2- ANNEXES 1. Supporting Charts and Tables Chart - C - 1 SVADP Organization Chart Chart - C - 2 SVADP Organization of the Extension Staff Chart - C - 3 Project Implementation Schedule Table - T-1 Credit Fund Cash Flow Table - T-2 Summary of Project Costs Table - T-3 Withdrawal of Proceeds of Credit Table - T-4 Breakdown of Project Costs into Categories Table - T-5 Incremental Project Production Table - T-6 Farm Budgets at Full Development of Project Table - T-7 Commodity Budgets per ha at'Full Development of Project Table - T-8 Fisherman's Budget, One Year's Catch Table - T-9 Government Cash Flow Table - T-10 Economic Cost and Benefit Streams Table - T-11 Project Equipment and Civil Works Schedule 2. Selected Documents and Data Available in the Project File MAPS IBRD 13345R - Shire Valley Communication 13346R - Shire Valley Agricultural Research and ADMARC, Marketing Location, and Shire Valley Extension Planning Areas 13347 - Shire Valley Health Facilities and Borehole Location 13348 - Shire Valley Meteorological Data  MALAWI SHIRE VALLEY AGRICULTURAL CONSOLIDATION PROJECT I. THE AGRICULTURAL SECTOR A. Background 2 2 1.01 Malawi has a total area of 118,500 km , of which 24,200 km is lake surface. The land area consists of three topographically different - ^ regions - the northern mountainous region, the central plateau, and the southern lowlands. Soils are relatively fertile, and the fairly reliable rainfall permits the cultivation of a variety of food and cash crops. Agri- culture is the most important sector of the Malawi economy, as it employs some 85% of the population and contributes about 46 percent of GDP (1975/76). The real annual growth of the agricultural sector ranged from 2 to 4 percent in the period 1972/73 - 1974/75, but increased sharply to 8 percent in 1975/ 76, due to a sharp rise in maize and rice production, resulting from lowered fertilizer prices and good weather. In 1976 agriculture accounted for 94 percent of export earnings; these were derived mainly from-tobacco (48 percent of agricultural exports), tea (20 percent), sugar (13 percent), groundnuts (8 percent), and other crops (11 percent). 1.02 The population of Malawi was estimated at 5.2 million in 1976, and the annual population growth rate is about 2.6 percent. The country's aver- age population density is one of the highest in Africa; this density does, however, vary considerably from region to region, with the majority of the population being concentrated in the more southern regions. About 82 per- cent of the total area is held under customary tenure, and about 8 percent is either freehold or leasehold estates or plantations; the average customary holding is about 1.5 hectares. The remainder is state land mainly devoted to forests and national parks. Over the past decade increased food requirements for the exDanding population have been met for the most part through an ex- pansion in cultivated area. This has meant that land more susceptible to erosion has been cultivated and that fallow periods have been reduced. Con- sequently, land conservation and maintenance of soil fertility through the introduction of improved techniques and inputs has become increasingly impor- tant. B. Smallholder Production 1.03 Smallholders account for over 85 percent of all agricultural pro- duction. Maize is by far the most important crop, occupying 80 percent of all cultivated land; other major food crops are pulses, groundnuts and cassava and to a lesser extent rice, sorghum and wheat. The main small- holder cash crops are groundnuts, rice, fire-cured tobacco, cotton, pulses and maize; the export value of these crops in 1976 totalled MK 49.4 million (US$54.3 million), or 35 percent of total export earnings from agriculture. Estates account for the remaining 15 percent of total agricultural produc- tion and over 60 percent of agricultural exports (mainly tea and tobacco);  -2- the total value of exports from this source was estimated at MK 80 million (US$88.0 million) in 1976. 1.04 Government is presently determined to achieve self sufficiency in food staples while at the same time allowing a significant expansion in agri- cultural exports. However, given the limitation on high quality land avail- able for new cultivation, and the increasingly high cost of reclamation on marginal lands or lands exhausted by continuous cultivation, the main emphasis of current agricultural policy is on a sustained rise in produc- tivity. Government's overall strategy is to attempt to provide a growth climate for both smallholders and estate production. In the past, improve- ments in smallholder productivity have been sought through two quite dif- ferent approaches. The more general approach has concentrated on a gradual improvement of extension, land husbandry and farmer training services through- out the country; these efforts have been supported by a few small, low-cost rural development projects (usually funded by the UK or by UNDP) and by spe- cial activities and programs (e.g. ox-training, dairy improvement, and tea development). The second approach has been based on the introduction of considerably more expensive and management intensive integrated development programs in four specific areas; these are: the Lilongwe Land Development Projects (LLDP - I, II, and III, IDA Credits 113, 224 and 550), Shire Valley (SVADP I and II, IDA Credits 114 and 363, and Consolidation Phase subject of this report), Karonga (KRDP I and II, IDA Credit 282, and Third Window Loan 1286), and the Lake Shore Rural Development Project, formerly funded by the Republic of Germany (1968-74) and now assisted by the European Development Fund (EDF). All of the above programs are characterized by the provision of infrastructure (roads, markets, water and health facilities, etc.), institu- tion of land improvement and conservation measures, irrigation development, improved extension and other services, and provision of credit facilities. These four comprehensive programs - which are concentrated in the more densely populated areas - will eventually affect one million persons, or 25 percent of Malawi's rural population. While the programs are making a significant con- tribution to increased agricultural production, a change of emphasis will be needed if the remaining 75 percent of the rural population is to be included in the development effort within a reasonable period. 1.05 In line with the above objective, Government has adopted a National Rural Development Program (NRDP) which will extend and consolidate various development programs over the entire country, but necessarily under a less intensive basis. The NRDP is specifically designed to increase the level of smallholder production through the provision of agricultural inputs and farm services; particular attention will be paid to increasing the efficiency and scope f extension, input supply, marketing and credit services. Under the NRDP, cultivation of new land will be discouraged, and emphasis will be placed on ir-nroved productivity on already cultivated areas; attention will also be given to soil conservation, fisheries development, and afforestation. The Ministry of Agriculture will have overall responsibility for implementation of the program, whereas the earlier projects were established under indepen- dent authorities. The Ministry will establish eight Management Units cover- ing the whole country, each of which will be responsible for one Agricultural  - 3 - Development Division (ADD). On average, each ADD will be divided into five Development Areas (DA), each covering about 25,000 farm families. The pres- ent plan calls for a 15-18 year development period for each DA, which would be divided in four phases - a preparatory phase, an extensive phase, an intensive phase and a consolidation phase. The four major development pro- grams (Lilongwe, Karonga, Lake Shore and Shire) are being adjusted where necessary during their present phases to fall into line with the overall concepts of NRDP. The area of the SVADP is the same as the NRDP/Ngabu management unit; therefore, the Project is consistent with national planning for NRDP development. C. Livestock 1.06 Malawi's total cattle population was estimated at over 700,000 in 1976; the herd is growing at a rate of about 5 percent per annum, and offtake rates are not generally higher than 10 percent. Most of these cattle are located in the central and northern regions, although there is a fairly heavy concentration of stock in the Shire Valley (8 or 9 percent of the total). The cattle are raised for the most part by traditional methods, and are valued mainly as a source of wealth; livestock are only to a limited extent integra- ted into the existing development programs. The Government is making improved breeds and artificial insemination services available in the livestock sub- sector. Other Government activities include the establishment of a fattening ranch, and the introduction of stall feeder schemes (to introduce cattle raising to farmers who were previously not familiar with animal husbandry). With the expansion of these schemes, Malawi has achieved self-sufficiency in better grade beef, however, domestic production of lower grade beef is still insufficient. Pigs are mainly raised by estates; slaughterings of pigs in- creased by an average of 30 percent per annum between 1973 and 1976, when Malawi became self-sufficient in pork. D. Government Agricultural Services 1.07 The Ministry of Agriculture and Natural Resources is primarily responsible for the provision of services to the agricultural sector. It operates through four departments: Extension and Training (which provides farmer services throughout the country), Animal Health, Research (with particular specialization in agricultural economics, cattle breeding and pasture improvement), and Technical Services (which supervises land use planning, settlement schemes and irrigation programs). The Ministry is also responsible for the four major agricultural development projects (para 1.04), through which almost all organized smallholder credit in Malawi is provided. 1.08 The Ministry of Agriculture also exercises general supervision over the activities of the Agricultural Development and Marketing Corporation  - 4 - (ADMARC) - the most important institution involved in the marketing of small- holder produce. ADMARC buys, stores, processes and markets (both locally and abroad) all marketable cotton and tobacco grown in Malawi and is also empowered to purchase all produce grown on customary land. ADMARC views itself as a residual buyer of smallholder produce, purchasing only that out- put which farmers choose to market through it. A large amount of marketed smallholder produce is either sold or bartered among the farmers and at local markets; ADMARC's maize purchases, for example, represent only a small portion of the marketed total. In addition, ADMARC implements Government's price pol- icy and supplies inputs to smallholders. Commodity prices are established by ADMARC (with the approval of the Minister of Agriculture) and its official price list includes most cash and subsistence crops. In recent years ADMARC has accumulated substantial profits from trading crops such as tobacco, cot- ton, and groundnuts. ADMARC's profits from crop trading reached a record level of MK 22.7 million in 1976/77. With its profits from crop trading, ADMARC has been able to expand its investments and loans; these reached MK 50.7 million in 1976/77, as compared to MK 39.1 million in 1975/76. Most of ADMARC's investments and loans in recent years have been to estate agri- culture and non-agricultural commercial and industrial enterprises. ADMARC also devotes part of its turn-over to a price-equalization reserve to stabil- ize domestic commodity prices, and maintains a small food reserve stock. It maintains 52 main storage depots, and over 700 temporary produce buying sta- tions; in addition it operates tobacco and groundnut grading centers and seed production farms. ADMARC also supplies fertilizer, seed, and agricul- tural equipment to smallholders. The Cold Storage Company, is involved in the marketing of smallholder produce. It is a residual buyer of cattle at official auctions, and currently handles about 20 percent of all cattle marketed. II. PROJECT AREA A. Shire Valley 2.01 The Project area comprises the administrative districts of Chikwawa and Nsanje making up most of the Lower Shire Valley covering some 6,720 km in the southern part of Malawi (see maps). The valley floor is an elongated alluvial plain about 144 km long and 16-32 km across, whose height above sea level changes gradually from 150 meters at the foot of the Valley escarpment to 60 meters along the Shire River. Some 295,000 ha (or 44%) of the total land area consists of national parks, game reserves, forest reserves and controlled areas. Some 63,000 ha or (9%) is covered by marsh, and 10,500 ha (1.5%) is used by the Sugar Corporation of Malawi (SUCOMA). This leaves about 300,000 ha (45%) available for settlement and/or cropping. The 310,000 people living in the valley represent 6% of Malayii's population. The overall popu- lation density is about 36 persons per km ; however, as the maj2rity of people live on the valley floor, the density there is about 150 per km . The approx- imately 70,000 smallholder families in the Project area cultivate an average of about 1.5 ha each. Available data indicates family size to be between 4 and  5 members. Land is held under customary tenure and inheritance is patri- lineal. Average annual income for all Valley smallholders is calculated at $75.00 per family or $15.00 per capita assuming 5 in a family. The figure includes the value of home consumed food crops. No allowance has been in- cluded for livestock sales since only 12-13% of farmers own all the Valley cattle. If, however, an allowance for reported cattle sales were added to gross Valley income it would increase average per capita income to $18.00. This would be equal to about 14% of the national per capita average of $132.00. 2.02 The valley floor has marked wet and dry seasons of about six months each, and the annual rainfall averages 750 mm (see meteorological map). Tem- peratures are highest in October/November prior to the onset of the rains, and lowest during the period June/July. The soils on the escarpments are generally poor and unsuitable for crops, but those in the valley, predomi- nantly cracking clays and alluvials, can support sustained cropping under both rainfed and irrigated conditions. There is ample surface water, and a good supply of groundwater throughout most of the Valley. 2.03 The major dryland crops of the Lower Shire Valley are cotton, maize, bulrush millet, sorghum and groundnuts. Pigeon peas and cassava are locally important in hill areas. Rice is grown along the Shire floodplain, some of it under irrigation, and irrigated sugarcane is a major estate crop. The valley is one of the best natural grazing areas in Malawi as the extensive marshes and riverine flats provide excellent dry season fodder. The total cattle population is about 60,000 head and there is also a large goat population. Fish, mostly from the marshes, is an important valley product, both for local consumption and for export to surrounding areas; the yearly fish harvest has grown from 90 m tons in 1956 to the present range of 7-8,000 m tons. 2.04 Travel in the valley has been radically transformed and improved with the recent completion of the bitumen road from Chikwawa to Bangula. However, the access roads from the Shire highlands to the valley have always been relatively poor, and are often impassable during the rains. Contracts have been let by the Ministry of Works (MOW) for construction of the Blantyre- Chikwawa road over the escarpment; with completion of this route, the Valley will be easily accessible from the northern urban centers. The river is navigable as far as Chikwawa, and barges from Nchalo (SUCOMA) carry sugar to the railhead at Chiromo. Postal and telecommunications services link Lilong- we, the capita, and Blantyre with all the main centers in the valley. There are five light aircraft landing strips at Nchalo, Ngabu, Bangula, Nsanje and Chikwawa. 2.05 The educational facilities of the area consist of 102 primary schools, two secondary schools, two corresponding college centers, and a number of Kwacha schools concentrating on adult literacy. Government ser- vices include police, traditional courts, forestry and veterinary adminis- tration, and district council administrative headquarters at Chikwawa, Ngabu and Bangula.  -6- B. The Shire Valle! Agricultural Development Program Phase I 2.06 The Shire Valley has always been considered one of Malawi's most disadvantaged regions in terms of climate, incidence of disease and low agri- cultural productivity. Consequently, Government has since the late 1960's given high priority to the implementation of a comprehensive development program in this area. The first phase of this program - The Shire Valley Agricultural Development Project (SVADP I) - was initiated in 1968. The Project was aimed primarily at increasing crop production on about 50,000 ha; it included provision for credit to farmers, improved agricultural ex- tension services, settlement of farmers, construction of essential infra- structure such as boreholes and markets, and construction and improvement of crop extraction roads. The project was supported by an IDA Credit (114-MAI) totalling US$3.7 million, which covered 80% of the overall project cost of US$4.6 million. 2.07 The project was terminated on schedule on March 31, 1973. The completion report and the performance audit 1/ considered the project to be well conceived, effectively implemented and generally successful. This success was based not only on the achievement of physical targets (see below), but also on the overall impact of the project on the attitudes of those living in the Shire Valley. The project was noteworthy in that it was very success- ful in involving people at all levels in the rural development effort in an area whose inhabitants had been considered resistant to change. It had an immediate and salutary effect on the populace as a result of the improvement in health standards, the streamlining of administrative services, the training of local staff, and the increased expenditures on basic infrastructure. Once the tangible effects of the central Government's commitment became evident, it also facilitated the political reintegration of the area into the mainstream of Malawi's economic activity. It is generally agreed that these unquantifi- able benefits were vital in providing the initial stimulus to the participa- tion and cooperation of the people in subsequent phases. The PPAR pointed out that, although the Project would attain about a 15% economic rate of return, there was little chance that Government could recover more than a minor part of its investment since benefits generated by the Project would remain with the large number of participating smallholders. 2.08 Prolect Implementation. The physical implementation of the project was generally excellent, as appraisal targets were in most cases either met or exc bded. Achievements with regard to construction of basic infrastructure are detailed below: 1/ Project Performance Audit Report (Credit 114-MAI), October 22, 1975. Report No. 895.  -7- Appraisal Estimates Actual Roads (km) 288 290 Productive Boreholes (no) 156 183 Markets (no) 7 8 Settlement (families) 4,000 340 1/ 1/ This component was finally deleted from the Project because of political considerations. The project also increased extension coverage from one sprayer demonstrator per 1,650 farmers to one per 160 farmers. Credit was provided to allow farmers to purchase cotton sprayers and pesticides. 2.09 Extension work and other crop related services were focussed on cotton - mainly because of the lack of a suitable innovative package for other crops at that time. An attempt was made to introduce high yielding maize, but was unsuccessful because the varieties used were not suited for Valley conditions. The purpose of the agricultural extension for cotton was essentially two-fold: (i) to induce the farmers to buy a sprayer and insec- ticides on credit; and (ii) to induce the farmers to adopt general agronomic improvements. The success of the cotton extension effort can be seen in the table below, which shows the percentage of all farmers owning sprayers (the appraisal target was to have 4,000 sprayer-owning farmers by 1972/73). Sprayer-Owning Farmers 67/68 68/69 69/70 70/71 71/72 72/73 Number 200 853 1,819 2,994 5,364 4,800 1/ % of all farmers 1.2% 5.2% 10.7% 14.4% 25.2% 21.8% 1/ Data incomplete for the year. The success of the extension effort may also be measured by the incremental cotton production achieved over the project period. The appraisal projected that farmers adopting the spraying recommendation would increase cotton yields from 300 kg/ha to 800 kg/ha, and eventually to 900 kg/ha. In practice, aver- age yields of those who sprayed ranged between 800 and 1,000 kg/ha, depending on weather conditions. Incremental cotton production followed appraisal pro- Jections closely up to year four; in year five, however, production fell to only one-third the expected level due to unfavorable weather conditions.  -8- Incremental Cotton Production (m tons) 68/69 69/70 70/71 71/72 72/73 Original Project Estimates 750 1,782 2,872 4,126 5,744 Actual 867 1,821 3,004 3,725 2,021 As noted in para 2.07, the PPAR for the Phase I project re-estimated the economic rate of return for Phase I at about 15%; that figure has not been further recalculated, but would now be lower because of the subsequent droughts, the subsequent lowering of intensity of spraying (as now recom- mended, and reflecting changing relative prices between cotton and insecti- cides) and the decrease in overall cotton acreages in the Shire Valley (partially the result of reduced financial incentives). Phase II 2.10 While recognizing the achievements of the first phase, development had been concentrated in the immediate neighborhood of Ngabu (the central valley). It was decided that the second phase project should be a more broadly based rural development program which would provide agricultural and other services and infrastructure in an area adjacent to and including that of Phase I. The project was appraised in June 1972, and an IDA credit of US$10.5 million (which financed 78% of total project costs of US$13.5 million) was approved on March 1973, Credit No. NAI-363. The Phase I PPAR was critical of the size and complexity of Phase II and disagreed with the 22% ERR projected for the second phase, these observations, however, came almost three years after the appraisal. The Project included provision for: Ci) medium term and seasonal credit; (ii) extension services and a farmer training program; (iii) development of livestock and fisheries, and wildlife protection; (iv) construction of roads, health facilities, crop markets, and rural water supplies; and (v) project administration and agricultural re- search. The agricultural component was expected to affect some 16,300 farm- ers, additional to those reached in Phase I, as well as some 1,000 fisher- men. The principal aim of the Project was increased crop production on some 52,400 ha, including some 20,000 ha of cotton, 21,000 ha of maize, 7,600 ha of sorghum, 2,800 ha of rice and 1,600 ha of groundnuts. The specific yields and production targets projected at full development in 1976/77 were: Yields (kg/ha) Cotton Maize Sorghum Rice Groundnuts Unimproved farms 335 675 675 335 450 .Improved farms 1,000 2,020 900 2,250 900 Total Production (m/tons) Improved farmers 16,700 30,000 850 49,500 135  - 9 - These projections were based on the expectation that an average of just over 3,000 farmers would annually adopt improved cultural practices. It was also assumed that fish production would increase annually by about 1,260 m tons, and that the annual offtake of beef cattle for sale would increase from 10% to 15%. 2.11 Prolect Implementation. The success of the project can be measured by two quite different criteria. On the one hand, excellent progress was achieved in completing the project's physical infrastructure; on the other hand, total crop production failed by a wide margin to meet appraisal esti- mates. Achievements with regard to construction of basic infrastructure are detailed below: Appraisal Estimate Actual % Road Construction (km) 304 200 66% Borehole Construction 140 132 94% Dips 11 5 1/ 100% .Fish Kilns 50 62 124% Health Posts and Centers 16 15 94% Markets 17 9 2/ 100% Ox-Training Centers 7 7 100% Oxen Trained (pair) 250 592 236% 1/ Original target of 11 dips was reduced to 5. 2/ ADMARC decided to limit construction to 9 based on volume in targeted areas. In spite of these achievements, the viability of the project was threatened by the widespread failure of almost all crops to meet appraisal targets. Total cotton production declined from 15,200 m tons in 1973/74 to 7,600 m tons in 1975/76. Maize dropped from 27,000 m tons to 8,600 m tons. One of the major causes of these drastic declines was the prolonged drought which devastated the area, although low cotton farmgate prices also discouraged production. Many farmers increased their planting of drought resistant sorghum and millet, while sharply reducing cotton planting, in an effort to protect their family food supply. There were, however, additional production related constraints which had not been recognized in formulating appraisal projections. For example, increases in both cultivated area and yields were overestimated, as was the size of the average smallholder cotton area. Moreover, project staff made slow progress in identifying improved maize, sorghum and millet varieties adapted to valley conditions. Consequently, as there was no cereal grain package available to producers, there was little improvement in yields. 1/ Finally project management was almost completely occupied with executing the construction program, and did not take the time required to organize, imple- ment and supervise an effective extension/ training/research unit to support crop production. The table below gives a comparison of appraisal estimates and actual production over the first four project years. 1/ However, varieties that showed promise were identified, tested, and multiplication has begun, to form the basis for Phase III packages. I  - 10 - ('000 m tons) Base Year 72/73 73/74 74/75 75/76 76/77 Prol. Act. Proj. Act. Proj. Act. Proj. Act. Proj. Act. Cotton 17.0 14.5 20.5 15.2 22.0 9.6 27.8 7.6 31.5 9.5 Maize 12.2 12.2 21.5 27.0 28.5 12.0 43.0 8.9 44.0 28.4 Sorghum 3.5 3.5 3.6 3.5 3.6 2.7 3.7 4.5 3.7 10.2 Rice 2.2 2.2 2.25 1.8 0.7 2.5 2.5 0.6 2.5 0.7 Groundnuts 0.42 0.42 0.54 0.53 0.90 0.72 1.3 0.62 1.5 0.88 An analysis of these statistics clearly shows the disastrous effect of the drought years 1974/75 and 1975/76. Moreover, although crop yields for all crops returned to normal in 1976/77, cotton production fell by about 25% be- cause of a late season infestation of field mice. 2.12 The project's fisheries and livestock development programs met with somewhat greater success. The fisheries program, which included the con- struction of kilns and boats and the training of fishermen, was progressing satisfactorily towards achieving appraisal targets. The ox-training and ox-purchase programs were well accepted by farmers, although-there was more interest in using the oxen for transport than for land preparation. On the other hand, meat production in the project area declined due to two outbreaks of Foot and Mouth Disease (FMD). This resulted in the prohibition of all livestock movement both within and out of the Valley, and the temporary closing of cattle markets. 2.13 The incremental credit required for the second phase was provided through funds contributed by Government, in-kind contribution from ADMARC, and the cumulative building of credit repayments. Farmers and fishermen received credit in-kind with no down payment. Seasonal loans (10 months) were made at an interest rate of 12% per annum, while medium term loans (3 years) were at a rate of 3.2% per annum. Farmers also benefitted from an ADMARC subsidy on farm inputs, mainly spraying equipment and pesticides. The accounting procedures for monitoring this credit were extremely poor; there was no distinction made between current accounts and outstanding amounts from previous years. A comprehensive analysis of repayment performance was therefore not possible; available data indicate, however, that repayments dropped sharply from the rate achieved under the first phase 1/. Much of 1/ No. of Amount Loaned Recovery Rate Year Borrowers ('000 MK) Rate Z (Sept. 1977) 1968/69 702 39 92 1969/70 1,255 83 92 1970/71 1,730 132 96 1971/72 5,438 2i8 87 1972/73 6,760 174 63 1973/74 10,396 294 80 1974/75 15,320 335 64 1975/76 24,031 446 44  - 11 - the problem can be attributed to crop failures in the drought years, and recent information since appraisal from the field indicates a definite in- crease in repayments following the improved harvest of the 1976/77 crop season. 2.14 Economic Analysis. The economic analysis of Phase II of the Project, considered as separate from Phase I and the Consolidation Phase now under appraisal, is quite difficult because of interface problems. How- ever, such an analysis will be attempted in detail during the preparation of the forthcoming Project Completion Report for the Phase II project. The normal technical difficulties in this kind of situation are exacerbated in this case by the fact that the exceptionally bad droughts of 1974/75 and 1975/76 have had a massive effect on yields, causing shifts of plantings to subsistence crops. If it is assumed that the results of Phase II are limited to those already apparent, Phase II would show a zero rate of return even if future operating costs are assumed to be cut back solely to those required to maintain the present Phase II (rather than the much heavier levels originally presumed to be needed if Phase II had had the incremental production effect originally estimated). It can, however, be argued that much of what has been done in Phase II has provided the basis for the Con- solidation Phase, under appraisal, the economic rate of return for which is some 20% (see Chapter VI); thus it is important to note that when Phase II and the Consolidated Phase are combined, an 8-10% economic rate of return results. 2.15 Planning for the Consolidation Phase has taken particular cognizance of the production weaknesses that developed during Phase II. Consequently, under the Consolidation Phase, there would be a reorganization and intensifi- cation of the extension and training component; the research and seed multi- plication units would provide extension with complete production packages, which would include drought resistant cereal seed varieties, and moisture conserving cultivation practices. There would also be sharp reductions in infrastructure development which would permit full attention by Project staff to agricultural production. An increase in cotton prices of 17% was announced prior to the 1977/78 planting season, vhich has encouraged increased plantings. Consolidation Phase crop projections of yields and areas have been adjusted to include an allowance for the risk of recurring dry seasons. III. THE PROJECT A. General Description 3.01 The Project would constitute a third, consolidation phase of the Shire Valley Agricultural Development Program; as such, it would be a direct continuation of the second phase, drawing on the experience gained over the past five years. The Project's major objectives are: (i) to increase the number of farmers applying improved crop practices by about 15,000 so that at least 55% of the Valley's smallholders (40,000) will have adopted at least some of the practices by full development in 1982/83; (ii) to provide tech- nical assistance to these farmers to increase land under improved practices  - 12 - (12% of cropped area) 1/ to about 50,000 ha (47% of cropped area) by 1982/83; and (iii) to provide increased social and infrastructural services directly or indirectly affecting just about all 70,000 families in the Project area. 3.02 Over a four year period (1978/79 - 1981/82), the project would: (i) continue to support development of rainfed agricultural production through reorganization and strengthening of the extension service, provision of improved seed varieties, and through provision of credit; (ii) improve the quantity and quality of meat and fish production; (iii) continue support of the land husbandry program with an added forestry unit; and (iv) extend water, health, and road services. The Project would specifically provide for: (a) establishing headquarters for 5 additional Extension Planning Areas (EPA's) with the required staff housing, training and administrative facilities, (see map for location of EPAs); (b) establishment of a 150 hectare irrigated seed selection and multiplication farm directed by an expanded research team; (c) continuation of seasonal and medium term credit for farm and fisheries inputs; (d) construction of additional livestock markets and dips, expansion of FMD and tsetse control, and increasing the ox-training program; (e) expansion of the Natural Resources Division to include a Forestry Development Unit, and continue improvement of wildlife facilities; (f) groundwater survey and development including construction of 40 additional boreholes and 40 shallow wells, providing consultants' service to review experiences gained under existing irrigation schemes and to undertake an irrigation feasibility study of the Valley; (g) continuation and improvement of Project area health facilities; (h) completion of the access road network, and maintenance of Project roads, buildings and equipment; and (i) continuation and expansion of the Project Evaluation unit, and finance for two years, the position of Chief Planning Officer in the MANR. 1/ of which 9300 has are in cotton representing 44% of the total cotton area.  - 13 - The project would be administered by the Shire Valley Agricultural Development Program (SVADP) management team, (see chart C-1) under the general direction of the Ministry of Agriculture and National Resources. The health component would be administered by the Ministry of Health. 3.03 As is usual for agricultural projects, expenditures on staffing and vehicle operating costs and the like are considered as "capital costs" when they are required for further development; they are considered as "recurrent costs" when they are required to maintain levels of production already attain- ed. In the case of this Consolidation Project, it might normally have been expected that the levels of expenditure originally anticipated as needed to maintain Phase II levels of production would be considered as "recurrent costs" of the Shire Valley project entity during the Consolidation Phase and that "capital costs" for the Consolidation Phase would include only expendi- tures above and beyond those levels. However, as already noted in the des- cription of Phase II project results (paras 2.11 to 2.14), present production results of Phase II are substantially below expectations. Therefore, the cost of services required to maintain the level of production reached by farmers and fisherman at the end of Phase II have been recalculated (para 3.32) and are considered as "recurrent costs" to be borne entirely by Government during the Consolidation Phase; and all expenditures by the Project entity above and beyond this level are considered as Consolidation Phase project costs. A consistent approach has been taken in assessing the economic costs of the Consolidation Project. B. Detailed Features Agricultural Services 3.04 Extension. Production increases in the Project area would be primarily dependent upon the effectiveness of the Project extension and farmer training programs organized under the first and second phases. Present staff, although adequate in numbers, have been generally ineffective - mainly because the early recruits had only limited skills and were preoccupied mostly with the construction of basic infrastructure. Under the Project, therefore, the extension system would be reorganized to provide farmers with more regular and up-to-date advice on farming methods and practices. The new system would be based on a carefully scheduled "Training and Visit" program. The program would be instituted and supervised by trained village agricultural extension workers (TA's). Each of these extension workers could cover some 600 farm families, divided into smaller groups of about 100 families (the number would vary according to population density and accessibility). Each group of families would be visited by a TA on a fixed day of the week, once every two weeks. The TA would work primarily with 10 contact farmers selected from each group; other farmers in the group would be encouraged to join the TA in his field visits and discussion sessions. The message communicated would be a simple one, and would concentrate on specific crops and specific farming operations of interest to the farmers at that point in time. The specific message or lesson would be developed by the TA and Project technical officers  - 14 - at bi-weekly training sessions. The TA would thus spend one day out of every two weeks participating in demonstrations, field trials and administrative activities, so as to prepare for the following two weeks of field work with the designated farmer groups. 3.05 In order to ensure the successful implementation of this program, the Project would improve the present ratio of 1 trained extension worker (TA) per 1,000 farmers. At the present time there are some 75 Technical Assistants (TA's) and 160 Development Assistants (DA's) working with farmers at the village level. DAs, who are primary school leavers with little agri- culture training or experience, have been used when technically qualified and trained TAs were not available. During the Project, the number of TA's would be increased by 57 (to 132) and the DA's would be phased out. Some of the new TA's would be promoted DA's, following completion of the certificate course at Colby Agricultural Training College; others would be newly recruited. Since the DA positions are non-permanent, non-pensionable positions, while the TA positions are permanent and pensionable, it was agreed during negotiations that sufficient new TA positions would be established to meet project needs, as follows: 97 positions by May 1, 1979; 112 by May 1980 and 132 by May 1981. At project completion, the 132 TA's would be deployed as follows: 12 in training centers and 120 doing field extension work, providing a ratio of I trained extension worker to about 600 farm families. The proposed extension methodology is based on regular and frequent farm visits by extension staff. It is essential, therefore, that field staff and their supervisors live near their work and that they are sufficiently mobile to enable them to function effectively. Despite extensive access road improvements there are many areas of the Valley where four wheel drive vehicles are required during the rainy season which is also the growing season and the most active time for field contacts. The Project would provide staff houses, 1/ offices, 9 4-WD vehi- cles, 30 motorcycles, 3 extension aid vans with equipment, and a 7-ton truck; provision would also be made for Project vehicle operating costs and staff salaries, which are considered developmental costs (para 3.03). 3.06 Training. The basic extension techniques to be applied under the Project would require a systematic training program for village extension workers (TA's). The TA's would therefore receive intensive instruction from Project specialist staff in those specific agricultural practices and recommendations related directly to the field preparation planned for a given two-week period. Residential and non-residential training sites and facili- ties were established under the second phase project; new facilities would be provided under the proposed Project for the five new EPA headquarters. Also, two additional staff would be recruited to continue the training for farm women in agriculture and home sciences. This will bring to twelve the number of instructors whose program includes poultry, milk and vegetable production besides participation in planning by farm women. Specifically the Project 1/ 60 one-room staff houses (PL type) constructed for DAs will be converted to acceptable EL-2 standard houses by adding required rooms. The con- version has been estimated at MK 2,000 for each unit. New construction of EL-2 costs MK 5,000.  - 15 - would include provision for: 5 area headquarters training centers; 50 low-cost village unit training centers, one 4-WD vehicle, a personnel carrier, 11 motorcycles, vehicle operating costs and staff salaries. 3.07 Research. The Project Research Unit would be charged with providing the extension service with simple but relevant technological information suitably adapted to the locality and major crop combinations of the five ecological zones identified in the Valley. The Research Unit has four rainfed experiment stations (Ngabu, Tomali, Maperera and Nsanje) which carry out replicated field trials on all major crops grown in the Valley; these stations are operated in close collaboration with the National Research Program and the MANR's research stations at Kasinthula and Makanga. Also, there are 32 one acre (0.4 ha) fenced crop/weather plots distributed within the Project area which are designed to provide information on yields of major crops in the different ecological regions of the Valley. All agricultural research in the Lower Shire Valley would continue to be directed by the Project Senior Agricultural Research Officer, based at Ngabu. The experiment stations and the crop/weather trial plots would be used by the extension TA's for their work sessions with the contact farmers in the "Training and Visit System," and in turn the Senior Technical Officers would use these facilities for training sessions with the TA's. In addition demonstration plots would be established on contact farmers' fields as part of the system. The sucdess of the exten- sion "Training and Visit" system will depend upon effectively coordinating extension, training and research. The Project would include provision for: an office block, a general laboratory and storage building, staff houses, 3 4-WD vehicles, 6 motorcycles, a farm tractor with assorted field equipment, equipment for the research laboratory, vehicle and laboratory operating expenses, and staff salaries. 3.08 Seed Multiplication. The Project would provide for the establish- ment of an irrigated seed selection and multiplication farm at the existing MANR Makanga Research Station. The Ministry has agreed to assign 150 hectares of the station's land to the Project for this purpose. Since the provision of adequate improved seed for Project farmers is essential, the formal transfer of the land to Project administration and control, would be a condition of Credit effectiveness. The existing irrigation system would be improved and expanded to handle the additional crop area. Selection and multiplication of maize, sorghum, millet, groundnuts, guar beans, and edible beans would be con- centrated at the new Makanga seed farm, while cotton and rice seed selection and multiplication would be handled on the more suitable soils of the MANR's Kasinthula Station. At full development, the seed multiplication operation at Makanga would be financially self-sufficient. In addition to developing the irrigation system, the Project would include provision for: an office building, a storage and seed cleaning building, a garage and service bay, staff houses, 3 farm tractors with a full complement of field equipment, one 4-WD vehicle, one 5-ton truck, seed cleaning and drying equipment, and one motorcyle. The Project would also provide for vehicle and seed farm oper- ating costs, and staff salaries for the first two Project years. The farm would require one additional Professional Officer (PO), 2 supervisors and 8 TA's.  - 16 - 3.09 Credit Administration (Table T-1). The credit program initiated under the first two phases of the SVADP would be continued over the Project period. The credit fund balance at the end of the second phase will be approximately MK 1.30 million; this would be sufficient to cover the total credit needs of the proposed Project. Seasonal and medium-term credit would be extended to some 30,000-35,000 smallholder farmers and fishermen. At full development, MK 172,000 in seasonal credit would be extended annually for purchase of fertilizers, along with some MK 342,000 in seasonal credit for pesticides. This credit would be extended at an interest rate of 15% with a 15% downpayment. Medium term credit would be extended at an interest rate of 10% per annum; recovery would be in three equal annual installments. These are existing rates established by MANR. Group credit introduced in the second phase project would be expanded under the Project to lower administrative costs and improve repayment rates; a lower credit charge of 10% for all such loans would be imposed to provide an incentive to form participating groups. The credit cash flow includes a 20% provision for bad debts for seasonal credit and a 5% provision for medium-term credit. The Project would include provi- sion for staff salaries (including 9 additional staff), houses, a 4-WD vehi- cle, 13 motorcyles, office equipment and vehicle operating costs. 3.10 Animal Husbandry - Livestock Extension. The Project would provide additional livestock extension staff (one professional officer, a supervisory officer and 2 livestock TA's) to the existing staff of 13 technicians to: (i) support the increased marketing, disease control, and ox-training fa- cilities; and (ii) work intensively with livestock owners in an effort to stabilize the valley's cattle herd. The latter objective would require reducing the number of females kept in the herd, and lowering the age of animals to be sold for slaughter from 4-5 years to 2-3 years. Much of the incentive for this will come from the demand for young feeder cattle from within and outside the valley. The Project would provide one staff house, a 4-WD vehicle, 10 motorcyles, operating costs and staff salaries. 3.11 Marketing. The Project would finance an additional cattle market near Nsanje, complete with weighscale, handling yard, and other required facilities. The Khaombe Holding Ground established in the second phase would be enlarged, and would be provided with a water supply. 3.12 Disease Control. The tsetse investigation team established during Phase II will complete the study in the first two years of the proposed Project, however, an early evaluation of field results has indicated a 25% incidence of trypanosomiasis in cattle and the Project will provide for a trypanosomiasis vaccination program. The Project would finance an office/laboratory, a 4-WD vehicle, a motorcycle, laboratory and field camp- ing equipment, and operating costs of the study. Outbreaks of Foot and Mouth Disease have become more frequent, and although they have not seriously affected the Valley's herd growth rate the disease periodically prevents ex- ports of cattle from the Valley and poses a threat to other cattle herds in the country. Under the Project an FMD vaccination program would be initiated by the Veterinary Department. It has been agreed that technical guidance  - 17 - would be the responsibility of the Animal Virus Research Institute of Pirbright, UK. The Project would finance purchase of a refrigerated vehicle, 2 motorcycles, a camp caravan and field equipment, FMD vaccine, and vehicle operating costs. 3.13 Ox-Training. The Project would support the continuation of the established ox-training program and would provide for additional training centers one each at the five new EPA headquarters. The animal husbandry technical assistants, in cooperation with the crop extension staff, would intensify their efforts to increase the use of oxen for land preparation. Natural Resources 3.14 Land Husbandry. The Land Husbandry Unit of the Project's Natural Resources Division would continue to monitor the ecological effects of the development program and would help develop programs related to long term preservation of the Valley's natural resources. The section would compile and develop data on: (a) the classification and current use of land resources; (b) present agricultural and other Government services and organization of human resources; (c) problems and constraints affecting development of the Valley's potential; and (d) physical planning of the area. The Land Husbandry Unit would work closely with the Extension Unit to provide additional information on early cultivation, plant densities and rotations as they affect retention of soil moisture. It would also act as a technical advisory unit to support possible future development of irrigation potential. The research section of the Natural Resources division organized under Phase II has been incorporated into the Project's Research Unit to ensure better overall coordination of all Project related research and reduce possible duplication of operations. The Project would include provision for the staff and other operating costs of the Unit. It would also provide for 7 additional staff (5 TA's and two supervisory staff), one house, a 4-wheel drive vehicle and a motorcycle. 3.15 Fisheries. The Project would continue and expand the fisheries development program initiated under the second phase project. This program would include construction of infrastructure, extension of credit for pur- chase of canoes, training of fishermen, and pollution monitoring. Four new centralized boat landings would be constructed, along with some 60 smoking kilns (these were successfully introduced in the second phase to replace the traditional, but inefficient, smoking pit). Seven additional staff would be recruited to assist with the training of 1,000-1,200 additional fishermen in  - 18 - the use of improved fishing gear and modern kilns. Credit would also be extended to fishermen to enable them to purchase some 500 plank type canoes to be built by an existing factory in this area. Finally the Project would continue an ongoing program whereby regular water, soil and fish samples are sent to the Tropical Products Institute (TPI) laboratory in London for analysis to check on the level of pesticide residues; corrective measures would be introduced where necessary. In order to implement these activities, the Project would include provision for staff salaries, vehicles, a motor- boat, a VHF radio and operating costs. 3.16 Forestry. A Forestry Unit would be established in the Natural Resources Division to oversee implementation of the Project's reforestation program. The program would: (a) institute a planting program for the reforestation of those areas, particularly the East Bank and West Bank escarpments, which have been denuded of natural tree cover by the high demand for land, building poles and fuelwood; (b) investigate the adaptibility of tree species to the Lower Shire environment and encourage the planting of village woodlots and shelter belts; (c) increase control of gazetted forests and advise the local authorities on the most economic principles of tree usage and management; (d) teach silvicultural techniques and their management so as to ensure optimum tree exploitation and sound conservation measures; and (e) attempt to reduce or rectify erosion problems that have arisen due to uncontrolled and indiscriminate tree exploitation. 3.17 A primary goal of the program would be the involvement of the local population in the planting and care of forestry plantations. With this par- ticipation, the people would be made to understand the importance of pre- venting livestock from destroying young seedlings and the need for control of indiscriminate burning. However, because there would be competition for labor at a time when farmers are busy with maize planting and weeding, the tree-p anting would have to be started with a regular forestry team supple- mented by local volunteer labor. Farmer and villager activity would be increased each year as the planting areas are expanded. The Project's for- estry staff would be responsible for organizing, training and supervising all field activity; the staff would include a senior forester and several assistants, including a forest officer with experience in semi-arid zones. Provision would also be made for vehicles (including 2 farm tractors), staff housing and operating costs.  - 19 - 3.18 Wildlife. Wildlife conservation activities under the second phase were concerned with the extension and demarcation of the Mwabvi and Lengwe game reserves and the posting of Game Scouts to monitor activities within these areas. The project also assisted with the development of a road net- work to facilitate tourism, the construction of fences and game ditches, and the institution of crop protection and anti-poaching measures. The Project would complete these activities. It would include provision for boundary demarcation and construction of fences, and ditches. Existing overnight tourist accomodations in Lengwe, which are in great demand, would be in- creased from two 4-bed chalets to five chalets with 17 beds; electricity, and running water would be installed and a mobile radio and a telephone sys- tem provided to improve communications necessary for tourist arrangements and park administration. Finally the Project would provide staff housing and vehicles. The wildlife activities would be executed by the Senior Game Warden, assisted by a Senior Game Ranger and 19 Game Scouts. Hydrology and Water Supply 3.19 Hydrology. An experienced hydrogeologist would be recruited to investigate hydrogeologic conditions, to conduct hydrology studies, to oversee the construction of boreholes, to assist in the reconstruction of failed boreholes, to determine the location and availability of ground water for public supply and irrigation, and to assist in designing a master plan for water development. The information accumulated would provide the basis for deep drilling exploration of possible groundwater sources capable of suppor- ting irrigation units. The Project would finance purchase of a complete trailer-mounted rotary drilling machine and provide for training for an operating crew; the Project would also finance a gamma ray and electric logger to log all new wells and all old cased wells. This process would provide the Project hydrogeologist with data to locate new wells, to correlate data from well to well to determine the lateral and vertical extent of aquifers and conferring beds, and to help determine the ultimate yield of the aquifers for irrigation or other purposes. In order to provide information about the sediment yield of the streams in the lower valley, the Project would establish an 8-station sediment sampling network at existing stream gauging stations, and provide for a neutron probe for soil moisture study. In the Elephant Marsh, staff gauges for marsh water levels have been installed, and new rain gauges will be installed at Kasinthula, Capananga and Nsanje. The Project would finance all operating costs of the water development program, and would in addition provide for 4 staff houses, and several vehicles. Finally, Project funds have been provided to finance a feasibility study for the development of a surface water irrigation project (US$255,000.00). Since this study will raise irrigation policy issues that will require resolution on a national basis it is a credit condition for funding the Shire Study, for the Government to undertake an initial study which will review existing ir- rigation schemes, organization, financing and policies. It would examine the justification for irrigation development generally and would suggest revisions where necessary to existing policy so that irrigation expansion takes places in an economic and rational manner. The cost of the National Study has been estimated at US$225,000.00. The terms of reference and consultants to be used for the Shire study would be agreed with IDA.  - 20 - 3.20 Water Supply. The Project would finance construction, under the supervision of the staff hydrogeologist, of 40 additional boreholes and 40 shallow-wells, both with hand operated pumps for village potable water. The Government Hydrological Department would provide suitable well screens from either local manufacturers or import sources to properly develop the wells' capacity. A program of pumping tests would be started on new bore- holes to determine aquifer properties, and during drilling the specific conductance of water encountered would be determined to build knowledge of water quality so as to help solve the problems of salinity. A specific conductance meter would be provided under the Project. To obtain greater village participation in the operation of village water supplies, the agri- cultural extension field staff, in cooperation with Public Health Workers, would train village teams in routine maintenance. Wells and surrounding ground have generally been badly neglected and contamination and siltation has resulted. Unless villagers assume the responsibility for maintaining well fencing and the concrete surrounds, it would be useless to drill addi- tional boreholes. It will be a condition of disbursement for financing additional boreholes that a program satisfactory to IDA for achieving these objectives has been drawn up, and Government has agreed to implement it. Health 3.21 The Project would continue and expand the comprehensive health program now underway in the Shire Valley. Two new maternity/dispensary sub- centers and four health posts would be constructed. The bilharzia control program would also be expanded by construction of field latrines and village bathing/laundry facilities. The Project would also include provision for three motor vehicles, and 3 motorcycles. The program would be staffed and managed by the Ministry of Health under supervision of the Senior Public Health Offi- cer based in Ngabu working with SVADP management. Technical Services 3.22 Roads. The Project would upgrade and expand the system of secondary and district roads which service the main agricultural areas in the Valley, and would maintain those roads already completed under the first and second phase projects. The new construction would comprise: (i) improvement of 86 km of secondary roads; (ii) improvement of 32 km of district crop extrac- tion and feeder roads; and (iii) construction of 21 km of district roads to fish landings. It was agreed at negotiations that maintenance of main and secondary roads in the Valley would be the responsibility of the Ministry of Works and Supplies (MOW). District roads would be maintained by the Project road maintenance unit during the construction phase. It was also agreed that at project completion MOW (or district councils, if they are suitably equipped) will be responsible for maintaining the district roads. In order to facilitate this program, the Project would include provision for the pur- chase of a grader, 3 dump trucks, a tractor, a 4-WD vehicle, two motorcycles, equipment, and three staff houses; it would also provide for vehicle and equipment operating costs and for salaries.  - 21 - 3.23 Building and Mechanical Maintenance. The Project maintenance units provide maintenance service for the repair and upkeep of all Project housing, vehicles and equipment. The unit has a well equipped auto and machine maintenance depot and has been able to provide effective repair service for Pro4ect equipment. The Project would provide incremental housing (where necessary), two 4-WD vehicles, 5 motorcycles, 1 tractor, 1 dump truck and an assortment of machinery and equipment as well as operating costs for these units. Proiect Administration 3.24 Project Manager's Office. A total of eleven additional staff would be recruited for the Project Manager's Office. These would include 1 Techni- cal Officer, 2 Senior Technical Assistants (Senior Clerks), and 8 Clerical Officers (typists and clerks). These staff would be required to handle the increased volume of work arising out of the expansion of the program to cover additional smallholders. Housing (where required), offices, equipment and vehicles would also be provided. 3.25 Evaluation Unit. The existing Evaluation Unit has developed a nucleus of experienced field enumerators and supervisory staff, and a tech- nique of annual farm surveys similar to those used by Karonga and Lilongwe Projects. The Project would provide for development of a common computer package program for analysis of the annual farm survey data, and a number of small surveys to be conducted in the field on specialized topics as re- quested by management. Crop marketing, credit recovery, and unit data bank statistics would also be collated and circulated as routine information. Close liaison would be maintained with other evaluation units of the National Statistics Office and the Headquarters Planning Unit to provide uniformity in field surveys and reporting techniques. Because of the recent wide fluctua- tions in valley crop production, Project evaluation staff plan to provide management with continuing statistical feedback related to all crop produc- tion. A survey design has been prepared which will directly address the agricultural, sociological, and economic factors affecting adoption rates of recommended packages. Results of the monitoring will assist extension, research and training units in shaping their responses to field developments. Additional staff required to assist in the implementation of these activities would be 1 Professional Officer and 16 Technical Assistants (enumerators and analysts). The Project would also include provision for purchase of computer time, housing, and vehicles. 3.26 Finance Division. Additional staff would also be recruited for the Finance Division. These would include 2 Accountants and 1 Procurement and Stores Officer. Three clerks would be upgraded to Senior Clerical Officer. These staff would be provided with office equipment and supplies. 3.27 MANR Planning Unit. The Project will finance for two years the services of an internationally recruited expert to fill the position of Chief of MANR's Planning Unit, and the training of a Malawian national to replace him within that period.  - 22 - C. Prolect Cost (Table T-2) 3.28 The total cost of the proposed Project is estimated at MK 11.4 million (US$12.6 million), of which about US$5.8 million or 46% represents foreign exchange requirements. Total Project cost is detailed below: Foreign Exchange Local Foreign Total Local Foreign Total Z ------