Benin - Borgou Province Rural Development Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. 3157-BEN STAFF APPRAISAL REPORT REPUBLIC OF BENIN BORGOU PROVINCE RURAL DEVELOPMENT PROJECT February 24, 1981 Regional Projects Department West Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = CFAF US$1.00 = CFAF 210 1/ CFAF 1,000 = US$4.8 CFAF 1,000,000 = US$4,762 FISCAL YEAR January 1 - December 31 WEIGHTS & MEASURES: Metrie Metrie British/US Equivalents 1 meter (m) 3.28 feet (ft) 1 kilometer (km) 0.62 mile (mi) 1 square kilometer (km2) 0.386 square mile (sq. mi.) 1 metric ton (m ton) 2,204 pounds (lb) 1 hectare (ha) 2.47 acres i cubic meter (m3) 1.308 cubic yards LIST OF ABBREVIATIONS BBD Banque Beninoise de Developpement BCB Banque Commerciale du Benin CARDER le Centre d'Action Regional pour le Developpement Rural CATS Cooperatives Agricoles de Type Socialiste CCCE Caisse Centrale de Cooperation Economique CLCAM Caisse Locole de Credet Agricole Mutuel CNCA Caisse Nationale de Credit Agricole COBEMAG Cooperative Beninoise de Materiel Agricole CRCAM Caisse Regionale de Credit Agricole Mutuel DRA Departement de la Recherche Agronomique FAC Fonds d'Aide et de Cooperation (France) FAS Fonds Autonome de Soutien et de Stabilisation des Prix des Produits Agricoles FED Fonds Europeen de Developpement GRVC Groupement Revolutionnaire a Vocation Cooperative GV Groupement Villageois IRAT Institut de Recherches Agronomiques Tropicales des Cultures Vivrieres I1DRAC Ministere du Developpement Rural et de l'Action Cooperative MPSCAE Ministere du Plan, de la Statistique et de la Coordination des Aides Exterieures PMEU Project M4anagement and Evaluation Unit SONACEB Societe Nationale pour la Commercialisation et l'Exportation du Benin SONACO Societe Nationale pour le Coton (formerly CNCB) SONAGRI Societe Nationale pour la Production Agricole SOPROCA Societe Provinciale de Commercialisation des Produits Agricoles I/ Floating Exchange Rate.  FOR OFFICIAL USE ONLY BENIN BORGOU PROVINCE RURAL DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. I. BACKGROUND ............................................ .. . 1 A. Introduction .............................................. 1 B. The National Economy ...................................... 1 C. The Agricultural Sector ...................................... 2 D. The Livestock Sector ................... ................... 2 E. Rural Development Policy . .. ......... ........... ....... ... 3 F. Sectoral Institution ...................................... 3 G. Agricultural Training ................ . . . .............. ....... . 5 -H. Bank Involvement in the Rural Sector * ..................... 6 II. PROJECT AREA .......................................... ... . .... ........ 6 A. Physical Resources .......................... ................. 6 B. Human Resources ........................................... 6 C. Agricultural Resources ... .................................. 7 D. Support Services for Agriculture & Rural Development ...... 7 E. The Cooperative Movement ..... ............................. 7 III. RESULTS OF ZOU-BORGOU AND TECHNICAL ASSISTANCE PROJECTS ........ 8 A. The Zou-Borgou Project .................................... 8 B. The Technical Assistance Project..... 9 IV. THE PROJECT.... .. .. .. ............ 10 A. Project Objetives and De scription. 10 B. Detailed Features 1. . . (a) Reorganizing and Strengthening CARDER-Borgou il (b) Consolidation and Development of the Cooperative Movement. . 12 (c) Supply of Inputs and Agricultural Equipment .13 (d) Agricultural Research..... . ........ 13 Seed Production. . .... 14 (e) Animal Traction Extension . . 15 (f) Civil Engineering Development . . . .16 Water Development . . 16 (g) Monitoring and Evaluation ..... .17 (h) Strengthening SONAGRI. . ........... 17 (i) Studies........... ... 18 C. Resulting Farm Development ...18 This document has a restricted distribution and may be used by recipients only in the performance of their officiai duties. Its contents may not otherwise be disclosed without Worid Bank authorization.  Table of Contents (continued) Page No. V. ORGANIZATION AND MANAGEMENT .................................... 21 A. Overall Structure ......................................... 21 B. Technical Advisory Staff .................................. 22 C. CARDER Field Extension Service ............................ 22 D. Project Coordination Unit ................................. 23 E. Organization of Cotton Marketing .......................... 24 F. Input Supply, Seasonal and Medium Term Credit ........... 0. 25 VI. COST ESTIMATES AND FINANCIAL ARRANGEMENTS ...... ................ 26 A. Cost Estimates ............................................ 26 B. Financing Plan ........ .................................... 27 C. Input Supply and Credit ...... .............................. 30 D. Procurement ......... ...................................... 30 E. Disbursements ........ ..................................... 31 F. Accounts, Audit and Reporting Requirements ............. ... 32 VII. PRODUCTION, MARKETS, PRICES AND FINANCIAL RESULTS ..33 A. Production ..33 B. Markets ........ ...................... ..................... 34 C. Prices ..35 D. Financial Results and Implications ..38 VIII. ECONOMIC BENEFITS, JUSTIFICATION AND RISKS ................ 39 A. Project Benefits and their Distribution . .39 B. Economic Analysis ..40 C. Risks . ...42 IX. ASSURANCES AND RECOMMENDATION .44 ANNEX 1 Table 1 Annual Project Costs Table 2 Disbursement Schedule Table 3 Government Cash Flow Table 4 Farm Cash Flow Table 5 Improved Cultivated Area and Production Table 6 Cotton Price Structure ANNEX 2 Model Structure of Cotton Bareme PROJECT ORGANIGRAM MAPS Benin Project Area  BENIN BORGOU RURAL DEVELOPMENT PROJECT I. BACKGROUND A. Introduction 1.01 The Government of Benin has requested IDA assistance in financing an integrated rural development project in the Borgou Province estimated to cost US$41 million equivalent over 4 years. The project was identified in October 1978 by RMWA and prepared by the Bureau d'Etudes, SONAGRI (Societe Nationale pour la Production Agricole) under the Technical Assistance Project 716-BEN, with the participation of RMWA. The project was appraised in May 1980 by a team consisting of Messrs. O. Honisch, L. Abbie, A. Berthier, R. Crown and M. Nightingale (IDA). Representatives of FAC and IFAD also participated in the appraisal. B. The National Economy 1.02 The People's Republic of Benin covers an area of 112,600 km2 and is bounded by Togo to the west, Nigeria to the east, Upper Volta and Niger to the north, and by the Gulf of Guinea to the south. Administratively, the country is divided into six provinces--Mono, Atlantique, Oueme, Zou, Atacora and Borgou, the proposed project area of 51,000 km2. Benin has two broad climatic zones: the southern equatorial, with bimodal rain, and the monomodal Sahelian zone in the north. Topographically flat with medium-low quality soils, the country is predominantly agricultural but has some mineral resour- ces including limestone, phosphates and offshore oil. 1.03 Of the total population, estimated at 3.3 million (1979 census) and growing at 2.6% per year, 87% are rural inhabitants and 95% of the adult labor force (1.4 million) is engaged in agriculture. Population density ranges from 170 persons per km2 in the south to 10 per km2 in the north. 1.04 With a per capita income of US$230 (1979), Benin is one of the world's poorest nations. After a period of stagnation, GDP growth rose to 7% annual in the mid-70s but has since levelled out to around 4.5% per year. 1.05 The Government's last three-year Development Plan, begun in 1977, had as its broad objectives increased industrialization, and food self-suffi- ciency by 1985. However, the budget designated only 11% for investment in small-holder rural development which was insufficient to meet food production objectives, while 70% was earmarked for major industrial and infrastructural projects, including the 40,000 ton agro-industrial Save Sugar Scheme, the Cotonou port extension and the Onigbolo cement project. The proposed project would be the first step in improving the balance between industrial and agricultural growth.  -2- C. The Agricultural Sector 1.06 Agriculture contributes 35% of GDP, and 55% of foreign exchange earnings. The sector is predominantly traditional, subsistence agriculture, producing yams, manioc, sorghum, maize and beans. The main cash crops are oil palms, cotton and groundnuts while maize is both a subsistence and a cash crop. Small quantities of rice are grown in bottomlands. Farming patterns vary markedly: in the densely populated southern provinces of Mono, Atlantique and Oueme, 18% of available land is cultivated, average farm size is 1.2 ha and rainfall conditions permit double cropping, whereas in the Atacora and Borgou with low population density, under 4% of available land is cultivated, the average farm size is around 2.8 ha, and production is limited to a single cropping season. The Zou Province in the centre is a transitional zone, displaying characteristics both of the south and the north. 1.07 A five year period of stagnation in production of staple food crops ended in 1976, principally as a result of better weather and more attractive prices to small farmers. Export crops production has been variable. Oil palm production, concentrated in the south, has remained traditional, and despite the introduction of 30,000 hectares of improved plantations production has been badly affected by prevailing limited rainfall. Cotton production, successfully introduced to Benin in 1963 under bilateral technical assistance, rose from about 5000t in 1965 to 50,000t in 1972. However, in spite of efforts made under an IDA financed rural development project (paras 3.01-3.04), cotton production fell sharply to 13,500 tons in 1976/77. Production has since recovered somewhat, rising to 18,000t in 1978/77 and 25,000t in 1979/80, encouraged by renewed Government support through extension and modest increase in producer prices (CFAF 45 to CFAF 55/kg seed cotton) and improved rainfall. 1.08 In addition to being a subsistence crop, maize has been increasingly grown as a cash crop since the 1976 drought in response to growing domestic demand and border trade especially to Western Nigeria. To a lesser extent, this has also applied to sorghum production which is mainly confined to the north. Production of rice, which together with wheat are major food imports, and groundnut have increased steadily since 1970. Therefore, for many farmers the development of a flourishing market for maize and other food crops has led to diversification away from traditional cash crops. D. The Livestock Sector 1.09 Growth of livestock production in Benin has been good in recent years, the present national populations being estimated to be 770,000 head of cattle, 860,000 sheep, 925,000 goats and 450,000 pigs. Cattle production is concentrated in the Borgou, Atacora and northern Zou Provinces, sheep and goats exist in all areas and pigs predominate in the south. Increasing livestock populations and growth in the domestic supply of livestock products, has satisfied most of the growing urban demand, with shortfalls in dairy production being covered by imports.  -3- E. Rural Development Policy 1.10 Government's policy for rural development is to achieve food self- sufficiency, to create an internal market by increasing agricultural incomes and to generate exportable agricultural surpluses. This is to be achieved through improving productivity from greater use of inputs, developing food- grain storage capacity, expanding the role of the public sector in production and marketing, increasing availability of credit, developing agro-industries and expanding rural infrastructure. At Benin's current stage of development this is a sound overall strategy. However, policy execution has been delayed by a shortage of identified projects, restricted finances and a series of institutional changes resulting from Government's frequent reorientations. F. Sectoral Institutions 1.11 The Ministry of Rural Development and Cooperative Action (MDRAC) is responsible for directing and controlling agricultural policy through three Directorates, responsible for (i) Agriculture, (ii) Civil Works and (iii) Quality Control. In 1980, a separate ministry was created for livestock, which was formerly a directorate of MDRAC. 1.12 At the national level, programs are executed by a number of semi- autonomous State Societies (Societes d'Etat), five of which are under the general supervision of MDRAC: SONAFOR (forestry), SONIAH (irrigation and water development), SONAFEL (fruits and vegetables), SONAPECHE (fisheries) and SONAGRI (production inputs and cotton ginning). Other state organizations are responsible for the processing and marketing of export crops: SOBEPALH is a palm oil processing agency while SONICOG markets palm products and both processes and markets groundnuts. SONACEB is responsible for the export of all agricultural products except oil palm products. The private sector handles almost all foodcrop marketing, which currently is efficient and Government has had negligible influence in this area. 1.13 Primary agricultural production is promoted and organized through provincial development centers--CARDERs (Centre d'Action Regional pour le Developpement Rural)--which represent MDRAC and are responsible for provision of inputs, extension, cooperative and primary marketing services, maintenance of rural roads, water and other infrastructure development. However, since their creation in 1976, the CARDERs have lacked adequate financing and staff. In 1979, the district structure was reorganized in Borgou, increasing the number of districts from 9 to 14, each with a chief officer responsible for maintaining liaison with community representatives and coordinating the work of government departments (including CARDER's). With modest changes in management structure CARDER Borgou would be capable of project execution (para 2.06). 1.14 In addition to the State Societies and the CARDERs, sector opera- tions are complemented by a number of important supporting institutions. Agricultural research, formerly under the direction of the French Research  - 4 - Institutes, IRHO (oil palm and coconut), IRCT (cotton) and IRAT (foodcrops), is now run by the Ministry of Higher and Technical Education and is organized into a number of Research Units with responsibility for specific crops. To date, work to improve cotton and foodcrop varieties has been promising, requiring only financial support to complete development of useful recommen- dations. 1.15 The Agricultural Credit Agency - CNCA (Caisse National de Credit Agricole), directed by a national committee composed of MDRAC, the Ministries of Finance and Commerce and State Society representatives extends credit to state enterprises, the CARDERS, and to individuals. At provincial and community levels the CNCA is associated with regional agencies (CRCAM and CLCAM). CNCA has had responsible management to date and its performance -- although restricted by low volume -- has been efficient. 1.16 The Autonomous Stabilization Fund (FAS) is an agricultural price stabilization fund created to protect producers against fluctuations in export crop prices and to administer Government's input support program. Its price stabilization operations cover cotton, groundnuts, coffee, shea nuts and tobacco and its major input support expenditures are for distribution of fertilizers and insecticides. For price stabilization, FAS pays the exporting agency, e.g. SONACEB for cotton, an amount sufficient to equalize the unit price received in world markets with the prices paid to producers plus proces- sing and marketing costs. The total costs are tabulated in the crop's bareme, which is a statement of standardized costs of each step in the production and marketing chain. FAS retains any difference when the world price exceeds the bareme target price. For cotton, this relationship between FAS and SONACEB has worked effectively to stabilize and improve SONACEB-s financial position. However by using the bareme -- which bears little resemblance to the real costs of marketing and processing because cost accounting is poor -- FAS does not help stabilize the incomes of SONAGRI or the CARDERs. Thus, the financial stability of SONAGRI and the CARDERs poses a major problem for project execution and would be dealt with at negotiations (para 8.11). 1.17 FAS also pays Government's cont'ribution to the cost of fertilizer and insecticide acquisition and distribution. In the case of cotton, SONAGRI imports and distributes the inputs to CARDERs, who subsequently distribute them to farmers -- usually with seasonal credit. In principle, once acquisi- tion and distribution costs are known and farmers payments are collected, FAS is expected to pay the difference on behalf of Government. The system has not worked well however, since SONAGRI and the CARDERs have not been able -- owing to poor accounting -- to establish the real cost of distributing inputs as a basis for reimbursment from FAS. Also, CARDERs have had a poor record of recovering payments from farmers which leaves an additional financing gap that FAS is unwilling to fill. As a result SONAGRI and the CARDERs have become heavily indebted to their creditors. Measures would be taken by Government to deal with SONAGRI's and CARDER's debts as a condition of negotiation (para 6.11), and the project would include actions to strengthen the financial management and accounting sections of SONAGRI and CARDER (paras 4.05, 4.23).  - 5 - 1.18 The National Pricing Commission (Commission Nationale des Prix) sets farmgate prices for major crops as part of the baremes negotiated at the beginning of each agricultural campaign. On behalf of Government, State Societies have sole franchise for the main export crops and these can func- tion fairly well since few alternative markets are open for smallholders. Official prices are also announced for maize, sorghum and certain other foodcrops; however unofficial foodcrop prices determined on the open market are generally higher than official prices. Government has made several attempts to participate in foodcrop marketing and has installed considerable storage capacity and equipment for this purpose. However, with the relatively efficient private channel available, further investment in official food- crop marketing would not be a high priority. G. Agricultural Training 1.19 After primary school, four levels of professional agricultural training are available: (a) The Faculty of Agriculture (created in 1972) of the National University offers a 6 year course to secondary school leavers and produces 5-10 "Ingenieurs des Services Agricoles" (ISA) (General Agriculture Graduates) annually; (b) The School of Agriculture, Medji and the Agricultural polytechnic (level 2) at Sekou (Atlantic) train "Conducteurs des Services Agricoles" (CSA) who follow a four year, post junior secondary school course. The annual output at this level is 30. (c) Agricultural polytechnics (level 1) at Ina (Borgou) and Porto Novo (Oueme) train two types of extension agents: (i) "Agents Techniques des Services Agricoles" (ATSA) follow a four year, post primary school course at Ina or Porto Novo. Their current annual output is 60. (ii) "Encadreur"