Zambia - Smallholder Dairy Development Project : Credit 1196 - Credit Agreement - Conformed

CREDIT NUMBER 1196 ZA Development Credit Agreement (Smallholder Dairy Development Project) between THE REPUBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1982 CREDIT NUMBER 1196 ZA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated (ktC-L , 1982, between THE REPUBLIC OF ZAMBIA (hereinafter called the Borrower) and THE INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Project will be carried out partly by the Zambia Agricultural Development, Limited, the Dairy Produce Board and the Cattle Financing Company, Limited, with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Zambia Agricultural Development, Limited, the Dairy Produce Board and the Cattle Financing Company, Limited, part of the proceeds of the Credit as hereinafter provided; and (C) the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth herein and in the Project Agreement of even date herewith between the Association and the Zambia Agricultural Development, Limited, the Dairy Produce Board and the Cattle Financing Company, Limited; NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated June 30, 1980 (herein- after called the General Conditions) with the same force and effect as if they were fully set forth herein. Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the Agreement between the Association and the Zambia Agricultural Development, Limited, the -2- Dairy Produce Board and the Cattle Financing Company, Limited, of even date herewith, as the same may be amended from tim: to time, and such term includes all Schedules to the Project Agreement and all Agreements supplemental to the Project Agreement; (b) "ZADL Subsidiary Loan Agreement" means the Agreement to be entered into between the Borrower and the Zambia Agricultural Development, Limited, pursuant to Section 3.03 (a) of this Agree- ment, as the same may be amended from time to time, and such term includes all Schedules to the ZADL Subsidiary Loan Agreement; (c) "DPB Subsidiary Loan Agreement" means the Agreement to be entered into between the Borrower and the Dairy Produce Board pursuant to Section 3.03 (b) of this Agreement, as the same may be amended from time to time, and such term includes all Schedules to the DPB Subsidiary Loan Agreement; (d) "CFC Subsidiary Loan Agreement" means the Agreement to be entered into between the Borrower and the Cattle Financing Company, Limited, pursuant to Section 3.03 (c) of this Agreement as the same may be amended from time to time and such term includes all Schedules to the CFC Subsidiary Loan Agreement; (e) "MAWD" means the Borrower's Ministry of Agriculture and Water Development; (f) "PMU" means the Project Management Unit to be estab- lished pursuant to Section 3.04 of this Agreement; (g) "DOA" means the Borrower's Department of Agriculture; (h) "DVSTC" means the Borrower's Department of Veterinary Services and Tsetse Control; (i) "ZADL" means the Zambia Agricultural Development, Limited, a company established on December 14, 1978 under the Companies Act (CAP 686) of the Laws of the Republic of Zambia and any successors thereto; (j) "DPB" means the Dairy Produce Board, established under the Dairy Produce Board (Establishment) Act (CAP 350) of the Laws the Republic of of Zambia and any successors thereof; (k) "CFC" means the Cattle Financing Company, Limited, established on April 29, 1969 under the Companies Act (CAP 686) of the Laws of the Republic of Zambia; -3- (1) "Project Advance Account" means the Account to be established pursuant to Section 3.05 of this Agreement; (m) "Project Area" means the Districts of Monze and Mazabuka in the Southern Province and the District of Kabwe in the Central Province of the Borrower; (n) "Phase I of the Project" means Parts A, B, C and D of the Project to be carried out in the Districts of Monze and Mazabuka; and (o) "Phase II of the Project" means Parts A, B and D of the Project to be carried out in Kabwe District. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to herein, an amount in various currencies equivalent to six million seven hundred thousand Special Drawing Rights (SDR 6,700,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made or, if the Association shall so agree, to be made in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions set forth or referred to in Schedule 3 of this Agreement. Section 2.04. The Closing Date shall be June 30, 1988 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent -4- (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each February 15 and August 15 commencing February 15, 1992, and ending August 15, 2031, each installment including the installment payable on August 15, 2001, to be one-half of one per cent (1/2 of 1%) of such principal amount and each installment there- after to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01 (a) The Borrower shall carry out Part A of the Project through PMU with due diligence and efficiency and in conformity with appropriate agricultural, administrative, finan- cial and engineering practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without any limitation or restriction upon any of its other obligations under this Agreement, the Borrower shall cause ZADL, DPB and CFC to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth, shall take or cause to be taken all action including the provision of funds, facilities, licenses, services and other resources necessary or appropriate to enable ZADL, DPB and CFC to perform such obligations and shall not take or permit to be taken any action which would prevent or interfere with such performance. Section 3.02. The Borrower shall carry out or cause the Project to be carried out in two phases as defined in Section 1.01 (n) and (o) to this Agreement provided, however, that, not later than three years from the Date of Effectiveness of this -5- Agreement, and prior to the implementation of Phase II of the Project, the Borrower and the Association shall: (a) jointly undertake a review to assess the progress achieved in carrying out Phase I of the Project, which shall, inter alia, examine: (i) the number of smallholders who have qualified and obtained credit for dairy development under the Project; (ii) the pattern of milk production developing among Project smallholders; and (iii) an overall analysis of the condition of the milk industry including production, pricing, processing, marketing and consumer demand. (b) On the basis of the above-mentioned review, determine whether to proceed with t%e implementation of Phase II of the Project. Section 3.03. Without any limitation or restriction upon any of its other obligations under this Agreement, the Borrower shall: (a) enter into a Subsidiary Loan Agreement with ZADL acceptable to the Association which shall provide, that, inter alia, the Borrower shall onlend to ZADL from the proceeds of the Credit, up to one million eight hundred fifty thousand dollars ($1,850,000) equivalent, repayable in fifteen (15) years, incil4- ing a three-year grace period, at an interest rate of not lejs than eleven percent (11%) per annum to assist ZADL in carry- ing out Part C of the Project; (b) enter into a Subsidiary Loan Agreement with DPB accept- able to the Association which shall provide, inter alia, that the Borrower shall onlend to DPB from the proceeds of the Credit, up to one million two hundred fifty thousand dollars -($1,250,000) equivalent, repayable in twenty (20) years, including an eight- year grace period, at an interest rate of not less than eleven percent (11%) per annum to be capitalized during the grace period to assist DPB in carrying out Part D of the Project; (c) enter into a Subsidiary Loan Agreement with CFC accept- able to the Association which shall provide, inter alia, that the -6- Borrower shall onlend to CFC from the proceeds of the Credit, up to two million seven hundred thousand dollars ($2,700,000) equi- valent, repayable in twenty (20) years, including a five-year grace period, at an interest rate of not less than five percent (5%) per annum to assist CFC in carrying out Part B of the Project; and (d) the Borrower shall exercise its rights under the Subsidiary Loan Agreements referred to in paragraphs (a) through (c) of this Section in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit and, except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate t waive any of the Subsidiary Loan Agreements or any provision thereof. Section 3.04. In order to assist the Borrower in carrying out the Project, the Borrower shall establish PMU in MAWD under terms and conditions acceptable to the Association which shall include, inter alia, the employment of a Project Manager and a Financial Controller whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Association. Section 3.05. Without limitation upon its obligations under Section 3.01 (a) of this Agreement, the Borrower shall: (i) establish and maintain in the Bank of Zambia, under arrangements satisfactory to the Association, a Project Advance Account to be used by PMU for the purpose of meeting recurrent expenditures under Part A of the Project; and (ii) deposit in such Project Advance Account at the beginning of each quarter, the funds required by PMU for recurrent expenditures under said Part of the Project. Section.3.06. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. -7- (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project until the Project is completed. Section 3.07. (a) The Borrower shall, with respect to the Project, furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract docu- ments and construction and procurement schedules for the Project and any material modifications thereof or additions thereto in such detail as the Association shall reasonably request. (b) The Borrower shall: (i) maintain records and procedures adequate to record and monitor the progress of Part A of the Project including its cost and the benefits to be derived from it, to identify the goods and services financed out of the the Credit and to disclose their use in the Project; (ii) enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association shall reason- ably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. (c) Upon the award by the Borrower of any contract for goods to be financed out of the proceeds of the Credit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish to the Association a report of such scope and in such detail as the -8- Association shal1 reasonably request on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respective obligations under this Agreement and the accomplishment of the purposes of the Credit. Section 3.08. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire, as and when needed, all such land and rights in respect of land as shall be required for carrying out the Project and shall furnish to the Association, promptly after such ac,quisition, evidence satis- factory to the Association that such la,id and rights in respect of land are available for purposes related to the Project. Section 3.09. The Borrower shall employ a Ranch Manager to manage the Chisamba Ranch whose qualifications, experience and terms and conditions of employment shall be acceptable to the Association. Section 3.10. The Borrower shall assign not less than twelve Agricultural Assistants and not less than six Veterinary Assistants to the Project Area within a year from the date of this Agreement. Section 3.11. The Borrower shall coordinate and integrate the activities of DOA and DVSTC (including training of their staffs) in the execution of the Project. ARTICLE IV Other Covenants Section 4.01. The Borrower shall: (a) maintain separate Accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices, its operations, resources and expenditures in respect of the Project,; (b) have the Project Accounts, including the certificates of expenditure referred to in Section 4.02 of this Agreement, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able to the Association; -9- (c) furnish to the Association as soon as avEilable but, in any case, not later than six months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in Section 4.02 of this Agreement as to whether the proceeds of the Credit withdrawn from the Credit Accounts on the basis of certificates of expenditure have been used for the purpose for which they were provided; and (d) furnish to the Association such other information concerning said Accounts and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. To the extent that any withdrawal of the proceeds of the Credit are made on the basis of certificates of expenditure, the Borrower shall cause PMU, ZADL, DPB and CFC to retain, until one year after the Closing Date, the underlying documentation on which such certificates were based (bills, receipts, invoices or other such documents) and shall make such documentation available to the Association for its inspection. Section 4.03. In order to maintain adequate production incentives to farmers and a profitable margin to DPB on the resale price of milk, the Borrower shall annually review and adjust as deemed necessary, milk prices, taking into account the cost of production, processing and distribution and shall, from time to time, exchange views with the Association on its milk pricing policy. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) ZADL, DPB or CFC shall have failed to perform any of their respective obligations under the Project Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that ZADL, DPB or CFC will be able to perform any of their respective obligations under the Project Agreement; - 10 - (c) any legal provision governing or applicable to the establishment, organization or operations of ZADL, DPB or CFC shall have been amended, suspended or abrogated so as to affect materially and adversely the ability of ZADL, DPB or CFC to carry out any of their obligations under the Project Agreement; (d) ZADL, DPB or CFC shall be unable to pay their debts as they mature or any action or proceeding shall have been taken by ZADL, DPB or CFC or by others whereby any of the property of ZADL, DPB or CFC shall or may, )e distributed among their creditors; and (e) the Borrower or any other authority having jurisdic- tion shall have taken any action for the dissolution or disestablishment of ZADL, DPB or CFC or for the suspension of operations of ZADL, DPB or CFC. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty (60) days after notice thereof shall have been given by the Association to the Borrower; and/or (b) any event specified in paragraphs (b) through (e) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the Effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the ZADL Subsidiary Loan Agreement has been executed on behalf of the Borrower and ZADL; (b) the DPB Subsidiary Loan Agreement has been executed on behalf of the Borrower and DPB; - 11 - (c) the CFC Subsidiary Loan Agreement has been executed on behalf of the Borrower and CFC; (d) the Project Advance Account referred to in Section 3.05 of this Agreement has been established and the initial amount has been deposited; and (e) the Borrower shall have employed the Project Manager referred to in Section 3.04 of this Agreement. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by ZADL, DPB and CFC, and is legally binding upon ZADL, DPB and CFC in accordance with its terms; (b) that the ZADL Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and ZADL and is legally binding upon the Borrower and ZADL in accordance with its terms; (c) that the DPB Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and DPB and is legally binding upon the Borrower and DPB in accordance with its terms; and (d) that the CFC Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and CFC and is legally binding upon the Borrower and CFC in accordance with its terms. Section 6.03. The date 3L is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Articles III and IV of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty (20) years after the date of this Agreement, whichever shall be the earlier. - 12 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as the Representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box 50062 Lusaka The Republic of Zambia Cable address: Telex: MINFIN 42221 Lusaka For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their Representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the District of - 13 - Columbia, United States of America, as of the day and year first above written. THE REPUBLIC OF ZAMBIA By 0A Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Eastern Africa I