Benin - Zou Province Rural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3968-BEN STAFF APPRAISAL REPORT BENIN ZOU PROVINCE RURAL DEVELOPMENT PROJECT November 18, 1982 Regional Projects Department Western Africa Region 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$1.00 = CFAF 340 1/ CFAF 1,000 = US$ 2.94 CFAF 1,000,000 = US$ 2.941 FISCAL YEAR January 1 - December 31 WEIGHTS + MEASURES: Metric Metric British/US Equivalents 1 meter (m) 3.28 feet (ft) 1 kilometer (km) 2 0.62 mile (mi) 1 square kilometer (km ) 0.386 square mile (sq. mi.) 1 metric ton (m ton) 2,204 pounds (lb) '1 hectare (ha) 2.47 acres 1 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 Locale de Credit Agricole Mutuel CNCA Caisse Nationale de Credit Agricole COBEMAG Cooperative Beninoise de Materiel Agricole CRCAM Caisse Regionale de Credit Agricole Mutuel DEP Direction des Etudes et de la Planification du Ministere du Developpement et de l'Action Cooperative 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 MDRAC Ministere du Developpement Rural et de l'Action Cooperative MPSCAE Ministere du Plan, de la Statistique et de l'analyst Economique PMEU Project Monitoring 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 SONAPRA Societe Nationale pour la Promotion Agricole 1/ Floating Exchange Rate.  FOR OFFICIAL USE ONLY BENIN ZOU PROVINCE RURAL DEVELOPMIENT PROJECT Table of Contents Page No. I. BACKGROUND ................................................ 1 Introduction ......................................... 1 The National Economy ................................. 1 The Agricultural Sector .............................. 2 The Livestock Sector ................................. 3 Rural Development Policy ............................. 3 Sectoral Institutions ................................ 4 Agricultural Training ................................ 7 Bank Group Involvement in the Rural Sector ........... 7 TI. THE PROJECT AREA .9 Location and Climate ................................. 9 Soils ................................................ 9 Vegetation ........................................... 9 Hydrology ............................................ 9 Population ........................................... 9 Agriculture .......................................... 10 The Cooperative Movement ............................. 10 Agricultural Support Service ......................... 11 Infrastructure ....................................... 11 III. THE PROJECT ............................................... 11 Project Objectives and Description ................... 11 Detailed Features .................................... 13 Strengthening and Reorganizing the CARDER-Zou ........ 13 Training ..................................... ......... 13 Consolidation and Development of the Cooperative Movement .........,...................... 14 Supply of Inputs and Agricultural Eauipment .......... 14 Equipment for Crop Processing ........................ 15 Improvement of Livestock Health and Productivity ..... 15 Agricultural Research ................................ 16 Seed Production ...................................... 17 Expansion of Ox-drawn Cultivation .................... 18 Bottomland Development ..................... 19 Improvement of Water Supply .......................... 19 Monitoring and Evaluation ............................ 20 Strengthening of SONAPRA ............................. 21 Strengthening MDRAC's Planning Capacity .............. 21 Assistance to Cotton Ginneries ....................... 21 Studies ....... 22 Crop and Farm Development ............................ 23 Varieties ........... .... 23 Crop Development Stages, Yields ...................... 24 Phasing ..... 24 | 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.  Page No. IV. ORGANIZATION AND MALNAGEMENT.,. .......................!. ...... 25 Overall StructIure ........................2.5.. .... 25 Technical Assistance Staff ...................... 26 CARDER Field Extension Service . . 26 OrganiZation of Cotton Marketing .... .......... 28 Input Supply and Seasonal Credit ..........--.. 29 Medium-Term Credit ... ......- .... .............. 30 V. COST ESTIMATES AND FINANCAIL ARRANGEMENTTS.S.......--.... 31 Cost E stimates. ... ............... ........... 31 Proposed Finasncing ....... ............... -.- .. . 31 Pre-financing Requirements .................... 33 Procurement ................................... 33 Disbursements ..................*........... - ... 34 Financial Control, Audit and Reporting Requirements. 38 VI. PRODUCTION, MARKETS, PRICES AND FINANCIAL RESULTS..L.T.S 39 Production ............. - .. 39 Cotton Market rospects. ............rspe..... 39 Food Crop Market Prospects ....... . .......... 40 Financial and Economic Prices of Benin Cotton . 40 Economic Price of Food Crops and Tobacco ......... 41 Input and Product Price Policy .................. ... 41 Producer 's Financial Returns ................. ... 44 Government s Cash Flow...................... 45 VII. ECONOMIC BENEFIT, JUSTIFICATION AND RISKS ....... .. -.-. 45 Project Benefits and Their Distribution ........ 45 Economic Analysis, Analytical Assumptions and Economic Rate of Return (ERR) ..,............ -... 46 Sensitivity .... ..... >...... ....e.e . ...,0,,..... 47 Risks.. .......... ....... 48 VIII. ASSURANCES AND CONDITIONS........ ........ ......... D.... 49 Annex 1 Table 1 Project Components by Time .... ... ......... 52 Table 2A Estimated Schedule of Disbursement,........... .. 53 Table 2B Recurrent National Fertilizer/Insecticide Imports... 54 Table 3 Government Cash Flow ................................ 55 Table 4 Cotton Price Structure ........................... 56 Table 5 Development of Representative Farm Models...-..... 57 Project Organigram 58 Maps IBRD 16246 Benin: Zou Province - Infrastructure IBRD 16247 Benin: Zou Province Rural Development Project  BENIN ZOU PROVINCE RURAL DEVELOPMENT PROJECT I. BACKGROUND 1.01 Introduction The Government of Benin has requested IDA assistance in financing an integrated rural development project component in the Zou Province (US$26.0 million) and the country's recurrent fertilizer and pesticide import requirements (US$33.6 million), costing together an estimated US$59.6 million equivalent over 5 years. The project was identified in October 1978 by RMWA and prepared by the Bureau d'Etudes of SONAGRI (Societe Nationale pour la Production Agricole) under the Technical Assistance Project (Cr. 716-BEN), with the participation of RMWA. The project was appraised in November 1981 by a team consisting of Mr. 0. Honisch, Ms. R. Jaisaard, Messrs. A. Rychener and A. Chavancy (Consultant). Representatives of CCCE and FAC participated in parts of the appraisal. 1.02 The National Economy The People's Republic of Benin is situated in West Africa and is bordered by Nigeria to the east, Togo to the west, Upper Volta dnd Niger to the north and the Gulf of Guinea to the south. With 112,600 km total land area the country is divided administratively into six provinces -- Mono Atlantique, Oueme, Zou, Borgou and Atacora, of which Zou covers 18,700 km or 17% of the country. The country is predominantly agricultural and mainly dependent on rainfall. Two broad agroclimatic zones in Benin are the Equatorial zone to the south, with a bimodal rain distribution and the Sudano-Guinean zone in the north with a mono-modal rainfall pattern. The topography of Benin is flat with medium to low quality soil types. Mineral resources available include limestone, phosphate and off-shore oil. 1.03 Benin has a population estimated at 3.4 million (March 1979) with a growth rate of 2.7% per annum. Eighty-one percent of the people live in the rural areas and 95% of the adult labor force is engaged in agriculture. The country has three regions: the northern region composed of Borgou and Atacora provinces, which covers 73% of the area but has only 29% of the total population; the central region, covered by the Zou province, represents 17% both of the land area and of the country's population; and the southern region including Oueme, Atlantique and Mono provinces, which covers 10% of the land area and has 54% of the total population. Most of the southern region's popu ation is urban. The population density diaries from 12 persons per km in the northern region to 30 persons per km in the central region and 160 persons per km in the south. The population is composed of a number of ethnic groups of which the most important are the Ewe (55%), the Yoruba (13%), and the Bariba (12%). While each ethnic group has its own language, French is the official language.  - 2 - 1.04 Benin is one of the world's poorest countries, with per capita incomes estimated at US$320 (1980). After a period of stagnation in the early 1970s, GDP per capita grew at a rate peaking at 7% per year in 1975/76 and then levelling out at about 4.5% per annum over the period 1976-80. 1.05 The Government's three-year Development Plan (1978-80) had as its objectives to raise agricultural productivity, to improve the standard of living, to strengthen economic policies, to promote participation and to implement economic and social changes. The plan, while emphasizing agricultural development, allocated a greater portion of the budget for industrial investment such as the Cotonou port extension, the sugar project at Save, the cement plant at Onigbolo and the Seme offshore oil development project. These projects accounted for about 50% of plan investment while agricultural investment accounted for only 10% which was insufficient to generate adequate production to meet local consumption and export requirements. The integrated rural development project in Borgou province, which is co-financed by IFAD, IDA and Government, started operation in 1981. By being the first large-scale integrated rural development project to be undertaken towards the end of the planning period, it showed Government's efforts in balancing investments in agricultural and industrial development. Two additional province-wide rural development projects now under study, the Atacora Province Rural Development Project (to be financed by IFAD) and the proposed Zou Province Rural Development Project, continue the trend. 1.06 The Agricultural Sector Agriculture is the most important sector of the Beninese economy. It employs 70% of the active population and provides 45% of the GDP and 55% of foreign exchange earnings. The sector is predominently subsistence-oriented, producing yams, manioc, beans, maize, sorghum and small quantities of rice. The main cash crops are palm oil, cotton and groundnuts. Cotton is mainly for export while palm oil and groundnuts are principally for domestic consumption. Cultivation of these crops is usually done by traditional techniques with the exception of cotton and maize, where new varieties of seed, and fertilizer and insecticides are used. Farming patterns markedly vary by region. In the southern and most of the central regions, two rainy seasons permit double cropping. Land is used intensively, and the average farm size is 1.2 ha. In the northern region with only one rainy season the cropping pattern is less intensive and the average farm size is 2.8 ha. In the Zou province the average farm size is 2.3 ha. 1.07 Benin experienced a five-year period of stagnation in staple food production prior to 1976. After that year production increased as a result of better weather and more attractive prices to small farmers. Maize has been increasingly grown as a cash crop in response to growing domestic demand and border trade with western Nigeria. Production of maize reached 36,000 tons in 1978 due to a shift from manioc and the use of new hybrid seed. Production of groundnuts has increased steadily in the north and reached 64,000 tons in 1978, up from a low of 35,000 t in 1975.  Production of yams and sorghum has been stable at 530,000 and 60,000 tons per year respectively. Production of rice which, together with wheat, are major imports, has increased steadily since 1970. However at about 6,000 t per year, domestic production is not fully supplying the domestic market. For many farmers the development of a flourishing market for maize and other crops has led to intensification of agriculture and, to a certain extent, diversification away from traditional cash crops. 1.08 Export crop production has been variable. Cotton production, which was successfully introduced in Benin in 1963 under bilateral technical assistance, rose from about 5,000 tons in 1965 to almost 50,000 tons in 1972. Cotton production fell sharply to 16,000 tons in 1976/77 but has since recovered somewhat, rising to 18,000 tons in 1978/79 and 25,000 tons in 1979/80; however it had declined again to 16,000 t in 1980/81. The major factor accounting for this variation appears to be the movement in food crop prices relative to cotton prices, and the timely availability of fertilizer and insecticides. Government has begun to take note of both of these factors in its official pricing policy. Palm oil production, concentrated in the south, has remained traditional and despite the establishment of 30,000 hectares of modern plantations, production has been affected by limited rainfall. Nevertheless, under better weather conditions prevailing recently output of palm oil and kernels has increased. Since 1978-79, purchases of groundnuts on behalf of Government have declined substantially as prices offered by Government to farmers have been below open market prices. Government purchases have been processed by SONICOG, the parastatal oil-milling organization for internal consumption, and exports of groundnuts have been suspended. 1.09 The Livestock Sector The livestock sector provided 9.4% of GDP in 1976. National herd size estimates (1978/79) are 780,000 head of cattle, 881,000 sheep, 847,000 goats and 600,000 pigs. Production of cattle is concentrated in Atacora and Borgou. Sheep and goats are mainly raised in Borgou, but they exist in all areas. Pigs are more prominent in Zou and the three provinces in the south than in the north. The increase in domestic urban demand for meat and dairy products has almost been met by the increasing livestock production; however, prices are high. Consumption, which exceeds production by a small amount, was covered by imports. 1.10 Rural Development Policy Benin's rural development strategy as given in the 1978-80 Three-Year Development Plan was directed at achieving food self- sufficiency, developing an internal market and increasing the income of the rural population, and generating exportable agricultural surpluses. These goals were to be achieved through improving productivity from the greater and better use of inputs, developing food grain storage capacity, strengthening the role of the public sector in production and marketing, increasing the availability of credit, developing agro-industries and expanding rural infrastructure. This continues to be a generally sound overall strategy for Benin at the current development stage. The policy  execution, however, was delayed in its earlier stages by restricted finances and a series of institutional changes resulting from the Government's frequent reorientation. The ongoing Borgou Province Rural Development Project is the first large integrated rural development project aiming to achieve some of the Development Plan's objectives, and this is a significant step in consolidating and making the policy operational. 1.11 Sectoral Institutions 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, the Ministry of State Farms, Livestock and Fisheries (MFEEP) which was formerly a directorte 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 until a recent reorganization (para 1.18) SONAGRI (input supply and cotton processing). 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, and SONACEB (para 1.18) was responsible for the export of all agricultural products except oil palm products. The private sector handles efficiently almost all food crop marketing 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 1980, the district structure was reorganized in Zou, increasing the number of districts from 8 to 15, each with a chief officer responsible for maintaining liaison with community representatives and coordinating the work of Government departments (including CARDERs). With modest changes in management structure the CARDER-Zou would be capable of project execution (para 4.02). 1.14 In addition to the State Societies and the CARDERs, sector operations are complemented by a number of important supporting institutions. Agricultural research, formerly under the direction of foreign research institutes--IRHO (oil palm and coconut), IRCT (cotton) and IRAT (food crops)--reports to the Ministry of Higher and Technical Education and is organized into a number of Research Units with responsi- bility for specific crops. To date, work to improve cotton and food crop varieties has been promising, requiring only financial support to complete development of useful recommendations.  - 5 - 1.15 The agricultural credit agency--CNCA (Caisse Nationale 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 and local agencies (CRCAM and CLCAM). CNCA has had responsible management to date and its performance--although restricted by low volumes of credit to offer--has been efficient. 1.16 Until the reorganization of institutions in the cotton sector, the Autonomous Stabilization Fund (FAS) was an agricultural price stabili- zation fund created to protect producers against fluctuations in export crop prices and to administer Government's input support program. Its price stabilization operations covered cotton, groundnuts, coffee, sheanuts and tobacco and its major input support expenditures were for distribution of fertilizers and insecticides. For price stabilization, FAS paid the exporting agency, e.g., SONACEB for cotton and groundnuts, an amount sufficient to equalize the unit price received in world markets with the prices paid to producers plus processing and marketing costs. For export crops, costs are tabulated in the crop's bareme, which is a statement of standardized costs of each step in the production and marketing chain which indicates the share of the total revenue earned by the crop accruing to that step. FAS was also responsible for paying Government's contribution to the cost of fertilizer and insecticide acquisition and distribution. SONAGRI imported and distributed the inputs to CARDERs, who subsequently redistributed them to farmers at officially determined prices--usually with seasonal credit. In principle, once acquisition and distribution costs were known and farmers' credit repayments were collected, FAS was expected to pay Government's subsidy which is the difference between the actual cost and the official price paid by farmers. 1.17 The relationship between FAS and SONACEB worked effectively to improve SONACEB's financial position. However, SONAGRI and the CARDERs were unable to fully account for all of the costs they incurred in marketing products (particularly cotton). Thus they did not demonstrate adequately their need for a greater share of revenues earned from export crops. Measures initiated under the Borgou Province Rural Development project have begun to help SONAGRI and CARDER-Borgou to improve in this area, and improvements in CARDER-Zou's cost accounting would enable it to participate with better data at the annual bareme negotiations (para 1.30). However, major difficulties have arisen between FAS, SONACEB, SONAGRI and the CARDERs concerning the financing of input supplies. SONAGRI and the CARDERs have had difficulties in determining actual costs of input delivery as a basis for reimbursement from FAS, again owing to weak accounting. Moreover, CARDERs have had a poor record of recovering seasonal credit for inputs which has left an additional financing gap that FAS has been unable to fill. This situation has left the CARDERs and SONAGRI with considerable debts. As part of the Borgou Province Rural Development Project, debts of SONAGRI and CARDER-Borgou were absorbed by the CAA (Caisse Autonome d'Amortissement). Those of CARDER-Zou, although small by comparison ($490,000) were also absorbed by CAA in September, 1982 as preparation for the proposed project.  - 6 - 1.18 Increased demands on FAS resources have left it unable to honor Government's commitments to pay subsidies in a timely fashion. This has meant that Government has had to resort to ad hoc means to finance insecticide and fertilizer purchases which have caused delays in ordering and delivery, and created uncertainty for suppliers. Part of the problem has been the complex inter-relationships between the institutions involved, but Government has recently decided to reorganize the function of FAS, SONACEB, and SONAGRI into a new organization, the SONAPRA (Societe Nationale pour la Promotion Agricole), with a single management structure, specifically for acquiring and financing fertilizer and for exporting cotton. SONAPRA would regroup the functions of the three superceded organizations into departments covering input procurement and distri- bution, finance and administration, marketing, and stabilization. Approval by the Borrower of SONAPRA's statutes satisfactory to IDA, and presentation of a satisfactory SONAPRA organigram and opening balance sheet, would be conditions of credit effectiveness (para 8.02,d and 8.02,e). The ginneries formerly owned and operated by SONAGRI would be transferred to the CARDERs, who would coordinate their operation with primary marketing of seed cotton, which would also remain with the CARDERs. Management of the cotton sector would thus be consolidated under the leadership of one ministry (MDRAC). Thus, the reorganization appears to be basically sound and a potential benefit to cotton sector operations. To monitor the management of the cotton sector, Government agreed at negotiations to formulate a cotton sector account and to define clearly its relations with inputs acquisition, distribution and stabilization. In addition, Government agreed at negotiations to hire consultants who would make recommendations for the improved management of the cotton sector and account, by June 30, 1984. Presentation to IDA of acceptable terms of reference for a study leading to these recommendations would be a condition of effectiveness (para 8.02,f). 1.19 The financing difficulties being encountered by Government in making subsidy payments have prompted it to reconsider its subsidy policy. When fertilizer and insecticides were distributed mainly to cotton growers in relatively small quantities, Government could finance about 90% of the subsidy from charges included in the cotton bareme, so that funding from the general budget was limited. However, with the revitalization of extension services such as those under the Borgou Province Rural Development Project, and the justified intensification of fertilizer use on food crops, which are increasingly becoming cash crops, quantities of modern inputs used in agriculture are projected to increase substantially. Along with this growth in use would be an equally large growth in the cost of subsidies and Government's difficulties in financing them. Recognizing this, agreement was reached between co-lenders and Government in connection with the Borgou Province Rural Development Project that Government would begin reducing rates of subsidy from levels of about 70% to about 40% by 1985. Government has begun to implement this policy (para 6.10). Yet even with this policy, the amount of subsidies for the years 1983-87 are projected to be about $26 million because of further growth in input use encouraged by new rural development projects Government is proposing to inaugurate because of their high economic and social value. Therefore Government has now decided to eliminate subsidies on fertilizer and pesticides over a period of the next six years (1983 to 1988) and has asked for the financial assistance of IDA, CCCE, and to a lesser degree IFAD, in implementing this new policy (paras 4.11, 6.10).  -- 7 - 1.20 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 function fairly well for non-food crops since few alternative markets are open for smallholders. Official prices are also announced for maize, sorghum and certain other food crops; however, unofficial food crop prices determined on the open market are generally higher than official prices, explaining Government's insignificant participation in food crop marketing (para 1.12). 1.21 Agricultural Training Four levels of professional agricultural training are available for primary school graduates: (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 and become Chef Sous-Secteurs (CSS). Their current annual output is 60; (ii) "Encadreur" and "Animatrice" are employed by CARDERs as village extension agents (Agent de Vulgarisation or AV) following one year of training (post primary school) in an "Ecole Pratique Agricole" at Ina or Porto Novo. Their current annual output is 150. The present annual output of each of these categories of professional agriculturalists would be inadequate relative to the national requirement if immediate needs to fill all extension service posts were to be met. This problem is exacerbated by inadequate facilities and insufficient operating funds to train the graduates properly. Possible national remedies are currently under discussion between Government, UNESCO (who have recently undertaken a study projecting manpower requirements) and international lenders with a view to improving the training capacity for professional agriculturalists. Under the proposed project training for provincial extension agents and farmers would be substantially strengthened and reorganized (para 3.06). 1.22 Bank Group Involvement in the Rural Sector IDA has financed four projects in the rural sector. The Hinvi Agricultural Project (Cr. 144-DA, US$4.6 million, 1969) involved planting  - 8 - 6,000 ha of oil palm, complementary maize, bean, and groundnut production, and oil mill construction. The Zou-Borgou Cotton Project (Cr. 307-BEN, US$6.1 million, 1972) was an attempt to stimulate basic production, but performed disappointingly. The Technical Assistance Project (Cr. 716- BEN, US$1.7 million, 1977) which followed up the Zou-Borgou Project was designed to strengthen SONAGRI and the CARDER institutionally and to prepare proposals for future agricultural investment projects. The Rural Roads Project (Cr. 717-BEN, US$5.5 million, 1977) built up feeder road planning and construction capabilities in the MTPCH (Ministry of Public Works, Construction and Housing), and improved some 300 km of rural roads. The Borgou Rural Development Project (Cr. 1127-BEN, US$20 million, 1981) involved the strengthening and support of institutions and of technical infrastructure, integrated with improved extension, cooperative training and social services. Lastly, a follow-up feeder road project (Cr. 1090- BEN, US$7.0 million, 1981) serves urgent feeder road requirements in all of the country's provinces. 1.23 Important lessons have been learned from the Zou-Borgou Rural Development Project and the Borgou Province Rural Development Project. Detail on the Zou-Borgou Rural Development Project is contained in the PCR and PPAR (#2034, August 20, 1980) and discussed in the SAR for the Borgou Province Rural Development Project (#3157-BEN, February 24, 1981). The PCR and PPAR for the Zou-Borgou Rural Development Project found that early in project execution, unexpectedly strong economic competition for cotton arose from maize. However project managers retained the project's emphasis on cotton production. In addition, institutions dealing with cotton in particular and agriculture in general were frequently changed and fractionalized, which reduced experience-building and efficiency. The official attitude hardened against technical assistance participation in project execution and against the promotion of cotton for export, which severely weakened critical performance in the areas of extension, cotton ginning and marketing, and made Government indifferent to the declining position of cotton vis-a-vis food crops. At the same time, relations between the Bank and Government became increasingly strained which limited the possibility for meaningful technical and policy dialogue at operational levels. It was concluded, therefore, that subsequent projects should be designed to focus on a range of crops and that a significant component of subsequent projects should involve institutional strengthening. Moreover, as pre-conditions for continued Bank involvement in developmental projects in Benin, Government would accept technical assistance participation to the extent that this was operationally justified and modify policies to be consistent with attaining project production objectives. Government's willingness to accept these conditions led to the successful preparation, appraisal and initiation of the Borgou Province Rural Development Project, which incorporated a multi- crop approach, operational technical assistance and material support for institution building. After about one-year's operations, the Borgou project is progressing well in that appraisal estimates for production are being met and institutional strengthening is occurring as expected. Government has also altered cotton and input prices following agreements made at negotiations which were designed to provide warranted incentives to farmers. Most importantly, however, constructive dialogue has begun. Unfortunately, with the commencement of the Borgou Province Rural Development Project it has become clear that difficulties continue to  - 9 - exist in financing and delivering sufficient quantities of imported fertilizer and insecticides to permit project objectives to be fully attained. This issue has been extensively discussed with Government and would be dealt with in the context of the proposed project (para 3.08). II. THE PROJECT AREA 2.01 Location and Climate The Zou Province lies in the southern part2 of Benin (70 to 80 30' north and 1030' to 2030' east) and covers 18,700 km of mostly flat land. The climate is transitional, in between the Sub-Equatorial coastal conditions and Sudano-Guinean conditions of north Benin. The rainfall varies between 1,100 and 1,200 mm, falls in 75 to 105 days and is distributed into two seasons, the first from mid-March to end July, the second from September to mid-November. The length of the intermittent dry season in August decreases towards the north, but the bimodal rainfall pattern still allows for two crop seasons per year. 2.02 Soils In the south, degraded red ferrallitic soils cover about 15% of the project area. They have a sandy to silty texture, less than average fertility, but can produce with adequate fertilizer good yields of maize, groundnuts and cotton. Ferruginous tropical soils are spread over about 60% of the province; their texture is silty to sandy, and fertility is average. They are well suited to the production of cereals, legumes, tubers, cotton and tobacco. The rest of the area is covered by lowlands with heavy textured hydromorphic soils offering a good potential for rice production, and by isolated pockets of fertile vertisols. 2.03 Vegetation In the south, the original forest has been replaced by a thin cover of palm trees interspersed with food crops, and in the north by savanna yith scattered trees and bushes. Classified forests occupy about 1,200 km . 2.04 Hydrology Two permanent rivers collect water from several temporary streams, the Oueme and its tributory, the Zou. The geomorphology complicates access to groundwater, usually found in depths of more than 40m. Wells are frequently without water towards the end of the dry season, and only well constructed boreholes provide a reliable source of healthy water. The proposed project would contribute to improved water supply in the province (para 3.19). 2.05 Population The population of 570,000 (census of 1979) represents 17% of the national total and has been growing at 2.7% per annum. The rural areas  - 10 - provide a livelihood for about 550,000 people or 76,000 farm families. About half of the population is less than 14 years old. In the north, a farm family includes on the average 8 people, 4 of whom are adults; in the south the average is 7 people of whom 3.5 are adults. About 40,000 families live in the northern part and 36,000 in the southern part of the provine e. The population density in the seven sou tern districts is 105 per km , in the eigh,y northern districts 18 per km , and the provincial average is 32 per km. 2.06 Agriculture Crop production is diversified and largely traditional. Maize is cultivated on more than 30% of the area, followed by groundnuts (20%), cassava (15%), cowpeas, yam, sorghum, cotton and rice. Cotton is the only crop grown at an improved level of technology. It was introduced in 1964, reached a peak of 22,000 ha and a production of 19,000 t in 1972-73 (40% of national total), and then declined mainly due to unattractive producer prices, weakness of the extension service and problems with input supply. In 1981, the total area under cotton cultivation was 6,500 ha. Livestock production is of a lesser importance but has a good potential for improve- ment which would be supported under the proposed project (para 3.10). About 400,000 small ruminants (sheep and goats) and 60,000 cattle are raised in the province. The animals generally suffer from a number of diseases, and from insufficient nutrition and lack of hygiene. 2.07 Average farm size in the south is 1.8 ha, in the north 2.7 ha, and the cultivated area over the two rainy seasons is estimated to be 2.7 ha and 3.4 ha, respectively. Cultivation is manual and animal traction is pratically non-existent. Awareness of the importance of fertilizer and pest control is steadily growing. 2.08 The Cooperative Movement The cooperative movement started in 1971 with the creation of village groups (GV), with the objective of coordinating the provision of inputs and marketing services for groups of cotton growers. Since 1977, Government encouraged a new type of farmer groups called "Groupement Revolutionnaire a Vocation Cooperative" (GRVC) based on individual ownership of land and equipment similar to GVs, but with a higher degree of planning and organizing cotton and food crop fields into larger blocks of land for ease of input supply, pest control, marketing and extension advice and supervision. In 1978, Government created as an experimental alternative to GRVCs, socialist type cooperatives (CATS) with communal ownership of equipment and land, and communal work and remuneration. At the end of 1981, the province had 186 GRVC with 3,050 members, and 13 CATS with less than 300 members. The GRVC operate well, the potential for their increase is considerable, and the proposed project would strengthen this type of cooperative groups (para 3.07). CATS are much less successful, do not enjoy farmers support and of the 13 groups established, the majority does not really function. Government does not intend to increase their number over the project period and they will not be supported under the project.  - 11 - 2.09 Agricultural Support Service The "Centre d'Action Regional pour le Developpement Rural" (CARDER) with headquarters in Bohicon is the province's main agricultural support service. It operates through seven divisions - training and cooperatives, extension, land development, marketing, livestock, research and development, and administration and finance, which are subdivided into 22 sections. CARDER's field service is organized into 15 district offices, each directed by an agricultural district officer - RDR (Responsable de Developpement Rural), 51 sub-sectors headed by a sub-sector chief - CPA (Charge de la Production Agricole), and 185 zones, each with an extension agent in charge. The professional hierarchy goes, in descending order, from agricultural graduate (Ing. Agr.) to technical officer (CSA), and to agricultural assistant (ATSA) and extension agent (AV). The CARDER organization is not very efficient; services need retraining and operating means and performance incentives are lacking. Under the project, the CARDER would be reorganized and strengthened, to be able to implement an intensified rural development program in the province (paras 3.04 and chapter IV). 2.10 Infrastructure The province is served by 1,930 km of roads, of which about 200 km are tarred. Road maintenance is inadequate and certain areas are inaccessible during the rainy season. Under the IDA financed Second Feeder Road Project (Credit 1090-BEN) it is planned to upgrade about 170 km of roads and to improve maintenance. CARDER-Zou headquarters buildings and storage facilities are generally sufficient and in good condition. The district offices are mostly rented; they are simple but adequate. Rural storage facilities cover only about 50% of actual needs and require improvement. Cotton ginning capacity is more than sufficient, with a modern, well-functioning ginnery at Glazoue (18,000 t), and older (currently non-operating) ginneries at Savalou (12,000 t), and Bohicon (6,000 t). III. THE PROJECT A. Project Objectives and Description 3.01 The project's main objectives would be to improve the level of rural incomes and to expand agricultural production of both export and food crops through strengthening and support of institutions, integrated with improved applied research, seed production, and extension, cooperative training and social services. The project would build on the experience gained in the Zou-Borgou Rural Development Project (para 1.23) by dealing with a range of crops which enter into a complete cropping rotation rather than focussing strictly on cotton. On the other hand, given its role as the most important source of foreign exchange earnings for Government, a significant source of cash income for farmers, and in the short run, a crop which can serve as collateral for seasonal credit, cotton would have a special place in the project. Therefore, steps would be taken which would  - 12 - continue actions initiated under the Borgou Province Rural Development Project to check and then reverse the decline in cotton production which occurred in the mid 1970's (para 1.23). These actions include the provision of necessary physical support in the form of production inputs and material for extension and working services (paras 3.04, 3.08, 3.14, 3.21); reorga- nizations of essential institutions (paras 4.02, 4.05 through 4.09); and the achievement of modified Government input and product price policies through dialogue and financing of structural adjustment in the area of input subsidization (paras 6.10, 6.11). In the early 1970's measures similar to those being proposed were responsible for the successful introduction and promotion of cotton production (para 2.06). 3.02 The project is expected to reach about 38,000 farm families (or half of Zou's total) by PY5 and generate an incremental production of some 5,700 t of cotton, 5,200 t of maize, 4,000 t of groundnuts, 3,300 t of cowpeas, 400 t of paddy and 200 t of tobacco. 3.03 These objectives would be achieved through the following project components and actions: (a) strengthening and reorganizing the CARDER-Zou, the project executing agency, including provisions for technical assistance, consultancies and training; (b) consolidation and development of farmers' cooperative movement; (c) improved quality and supply of inputs to farmers through financing both incremental and recurrent cost of national fertilizer/insecticide requirements; (d) introduction of better primary cotton marketing and processing, and of an efficient credit system; (e) improvement of cattle and small ruminant husbandry through introduction of animal health care; (f) strengthening applied research on foodcrops and cotton and production of improved seed; (g) expansion of ox-drawn cultivation over about 1,500 ha through provision of credit for 300 pairs of oxen and an equal number of ox-cultivation equipment; (h) labor intensive rehabilitation of some 200 ha of bottomlands, reconstruction of 100 village wells and construction of 50 new wells; (i) setting up a project monitoring and evaluation system; (j) strengthening SONAPRA's cotton lint marketing efficiency through better organization of the marketing system;  - 13 - (k) reinforcing MDRAC's capacity to formulate strategic options for further agricultural development, and specification of investment proposals; (1) provision of technical and organizational assistance to cotton ginneries; and (m) studies for preparing a possible follow-up project, and for more efficient organization and management of CARDER's field services. B. Detailed Features 3.04 Strengthening and Reorganizing the CARDER-Zou Headquarters and Field Staff The organization of CARDER-Zou is bulky, inflexible, and inefficient. Improvement would be achieved through strengthening of senior management, simplifying headquarters structure, raising the technical level of staff, qualitative and quantitative reinforcement of training, tighter organization and supervision of field services, and provision of technical assistance and consultancies in expertise currently not available in Benin. 3.05 The CARDER, an organization with some 600 staff is directed by one overextended manager. Under the project, headquarters management would be strengthened by appointment of two Deputy Project Managers - one technical, the other financial- and by the introduction of a decentra- lized, operational management system. Functionally related services would be combined, thus reducing the number of divisions from 7 to 4, and the number of sections from 22 to 16 (para 4.02). Headquarters office facilities would be improved by means of additional office space, supplies and equipment. Means of transportation would also be provided for relevant personnel. In the field structure, superfluous subsector chiefs and extension agents would be redeployed as input supply and credit, and literacy instructors. Extension services would be reorganized along the principles of the training and visit ("T & V") system (para 3.06) which was introduced in Zou province in 1980 under the Technical Assistance Project (para 1.22). The project would enable CARDER field staff to be more effective by increasing transportation capability, input storage facilities and varius specific-purpose equipment. 3.06 Training CARDER's weak agricultural training capacity would be improved by building up the human and material resources of the training section. A competent national agricultural graduate with demonstrated pedagogical and organizational skills would assist a Training Specialist. Training support staff consisting of two technical officers (IASA or CSA level) would also be recruited. A modern training facility constructed under the IDA financed Rural Education and Training Project (Cr. 583-BEN), is available in Bohicon next to CARDER headquarters. The facility consists of a forty-bed dormitory and adequate teaching and social infrastructures. Other training section equipment to be provided under the project would include a minibus for about 20 persons for trainee transportation, a small mobile audiovisual unit, a library and other teaching materials, and  - 14 - agricultural demonstration tools and equipment. Initially, 2-3 week training courses would be provided for all types and levels of the Zou extension staff, with annual refresher courses thereafter. Subsistence costs for trainees and for visiting lecturers would be financed. The training section would also organize training programs for farmers and cooperative workers, and utilize successful examples of the on-farm demonstration program for farmers. The Training Specialist would work out annual training syllabi and timetables. The training program would be an integral part of the project's annual work plan and would be submitted to IDA for review (para 4.03). The project would also provide up to eight man-years of overseas training of senior CARDER personnel, as well as forty man-months of short-term consultancies. A list of proposed subject matters and durations of the scholarship and consultancies is available in the Project File. 3.07 Consolidation and Development of the Cooperative Movement As in the Borgou province, farmers in the Zou share a strong commitment for communal actions and mutual cooperation. Based on favorable past experience with GRVCs (para 2.08), the project would concentrate its efforts on this type of cooperatives. The objective would be to expand the block cultivation system, already proven successful in both the Borgou and Zou provinces. In the latter, an estimated 750 ha of cotton and foodcrops were cultivated in blocks in 1981. This approach is expected to increase the potential and efficiency of the extension services, and facilitate the operation of the "T&V" system. After appropriate training (para 3.06), extension agents would be responsible for intensifying contacts with existing GRVCs, and for upgrading the estimated 400 GVs to new GRVCs, to allow for greater farmer participation in the project. They would be supported by trained cooperative officers and input supply and credit officers, improved farmer training and demons- trations, better quality and organization of input supplies and improved cotton marketing. The GRVCs would become a principal vehicle for project impact, and their number is expected to increase from 186 in PYO to about 550 in PY5. Other producers would continue to receive assistance through the remaining and newly created GVs. The current 750 ha of crops cultivated in blocks would increase to about 5,000 ha under the project. This trend is expected to continue after the project's implementation period, as other smallholders receive training and are exposed to field demonstrations in their localities. 3.08 Supply of Inputs and Agricultural Equipment Timely and adequate availability of appropriate production inputs would receive high attention under the project and would be supported and partly financed through a revised seasonal credit program (para 4.10), coupled with improved cotton marketing (para 4.07). Fertilizers and pesticides would be provided on credit only to cotton producers offering satisfactory security but would also be sold for cash. As a result of these activities, by PY5 the anticipated use of fertilizer would amount to about 3,300 t, and that of pesticides to 290,000 1. Agricultural equipment and machinery would be provided through a medium- term credit system (para 4.11). Some 3,300 ultra-low-volume (ULV)  - 15 - sprayers for pest control, and 300 units of ox-drawn equipment are expected to be supplied under this system to project participants over the project disbursement period. Storage capacity at CARDER's district centres would be enlarged to provide appropriate protection to inputs at intermediate distribution points. Seven districts with insufficient storage space were identified and consequently, in each of them a 100 m store would be constructed under the project, according to a priority list to be worked out by CARDER-Zou. A detailed breakdown of input requirements by project years and crops is available in the Project File. Funds would be made available to finance both the incremental input requirements for the project, as well as a decreasing percentage of the annual recurrent cost of these inputs. In addition, finance would be made available to cover a decreasing percentage of the recurrent cost inputs in the rest of the country (excluding the requirements of the Atacora Province, which would be financed by IFAD under a separate rural development project for that province) over a period of about 5 years during which time Government would restructure its input pricing policy. 3.09 Equipment for Crop Processing A simple domestic industry of crop processing is widespread in the province. The industry has been developed and is operated by women with the aid of female extension agents ("animatrices"). It concerns mainly transformation of maize into flour, groundnuts into oil, cassava into gari and/or tapioka (the first are finely ground and roasted particles of cassava, the second is cassava starch), yams into "cosettes" (usually sliced, flat, dried pieces of yam), and finally paddy into rice. The industry has only limited output. To improve the situation, the project would provide for demonstration purposes on the pilot basis, three maize shellers, three groundnut oil presses, three small rice hullers, and one cassava and one yam processing unit. The equipment would be rotated among selected women's groups and the operation would be organized and super- vized by female extension agents (para 4.05). A women's group which wished to acquire a unit after the demonstration period would be helped to do so through regular medium-term credit supplied by the regional agency (CRCAM). This experimental program in use of intermediate technology for crop transformation would be monitored by the extension service and with the help of the PMEU (para 3.20). After two to three years of experience with the adoption rate by women's groups, the program would be reviewed to decide which equipment merit further dissemination through a more general medium-term credit program. 3.10 Improvement of Livestock Health and Productivity The Zou province has about 60,000 head of cattle and 400,000 small ruminants, giving an average of 0.8 and 5.3 per farm family, respectively. Diseases and parasites are widespread and productivity is low. The most important cattle diseases are rinderpest, trypanosomiasis, pasterellosis, and gastro-intestinal parasites. Small ruminants suffer mainly from pest and intestinal parasites. This situation persists in part because CARDER-Zou's livestock and animal health service is weak, with few trained personnel and virtually no operating means. Under the project this  - 1 6 - situation would be improved by providing for additional personnel, equipment and means of transport, and through provision of training and short-term consultancies. The livestock and animal health extension service would also train farmers in principles of animal hygiene and improved nutrition, particularly through better utilization of crop residues, prevention of bush fires, and provision of mineral licks. The low status of animal health would also be improved by the provision of means for acquiring vaccines and medicines which have not been readily available. It is estimated that by PY5 70% of the province's cattle population would be treated for rinderpest and intestinal parasites, 60% for trypanosomiasis, 40% for pasterellosis and 10% for anthrax, and protection would be provided to 20% of small ruminants against pest and intestinal parasites. In line with current practices in other livestock interventions in Benin, project personnel would charge CFAF 30 per vaccination, CFAF 250 per three trypanosomiasis treatments and CFAF 25 for internal parasite treatments, the latter recommended twice per year. These charges are expected to cover the cost of the vaccines, which would be financed by a revolving fund on an incremental basis. An additional responsibility of the livestock division would be a phased purchasing of about 300 pairs of oxen in the north of Benin for supply to farmers interested in the introduction of ox-drawn cultivation (para 3.16). 3.11 Agricultural Research All agricultural research is directed by the Department of Agronomic Research (DRA) in the Ministry of Higher Education and Scientific Research. The responsibility for foodcrop research in the southern part of Benin is with the Niaouli station, about 70 km south of Bohicon. In the Zou, the Niaouli station operates through three small substations. Two of these are in similar ecologic conditions and, therefore, one of them would not be supported by the project. Work on rice is carried out by a national "Programme de Recherche Rizicole", having a small administrative headquarters at Bohicon and experimenting in the Zou mainly at Sagbovi-Dome, some 40 km east of Bohicon, next to a large irrigated perimeter belonging to SONIAH (Societe Nationale d'Irrigation et d'Amenagement Hydroagricole). Cotton research, with headquarters in Cotonou, works in the Zou through three out-stations, two of them located in similar ecological zones in the north, and one in the south of the province. As in the case of food crop research, one of these northern outstations would not be developed. 3.12 Results of past research work have been translated into proven crop growing recommendations for maize, groundnuts, cowpeas, and cotton (paras 3.23 to 3.25) which are the main crops to be supported under the project. However, a critical lack of funds and, in some instances, of qualified personnel has considerably slowed down research progress in recent years and threatens to disrupt continuity even of some important long-term trials. For the same reason, work in some essential areas, such as tuber crop research (cassava and yam occupy 21% of Zou's cultivated area and provide 40% of the population's food) and farming systems research, has not yet started. Revival and consolidation of research is of prime importance for a sustained development of the agricultural sector in the province.  - 17 - 3.13 The proposed credit would partly finance strengthening of research planning capacity, qualified personnel, and related investment and operating costs. An internationally recruited food crop research specialist at the Niaouli research station would be responsible not only for trials on crops and farming systems research but also for medium and long-term programming and training of local personnel. Three national agricultural graduates and support staff would be recruited to cover the above-mentioned neglected research areas. The officer-in-charge of the research station would be liberated from administrative duties through recruitment of a technical officer (IASA or CSA level) who would take over these obligations. Required infrastructure, materials and equipment would also be financed. Existing infrastructure, equipment and materials of rice and cotton research would be renovated to provide a sound basis for carrying out project related applied research and primary seed production for these two crops. Research stations would be encouraged to maintain and strengthen contacts with international and national research units in West Africa, such as IITA Ibadan, WARDA Monrovia, and IRAT Bouake, for exchange of information and planting materials. The research program would concentrate on agronomic trials, variety screening, pest control, breeders' seed production and farming systems, and would be prepared in close coordination with CARDER-Zou technicians. It would become an integral part of the project's annual work program (para 4.03) and would be submitted for IDA review. 3.14 Seed Production The principle of seed multiplication employed in the project would be a simple, low-cost approach, consisting of producing modest quantities of "foundation seed" (Fl) and "registered seed" (F2), at the project's seed farm. This would contrast with the semi-industrial seed multiplication introduced under the Borgou RDP. After several years of operations, comparisons should be made as to the relative advantages of the two types of seed multiplication under Beninese conditions. The farm would initially concentrate on improved maize and groundnut seed, of which 15 t and 24 t, respectively would be produced annually at full development (PY3). Project participants would receive small amounts of "registered seed" (1 kg of maize annually, 10 kg of groundnuts each third year), which they would regrow on small plots under qualified project supervision, to produce their own "certified seed" (F3) for sowing on their commercial plots the following year. Essential to the success of the system would be good organization and field inspection of seed plots, which have been built into the design of this component (details in Project File). Cotton seed for the Zou farmers is being supplied from several South Borgou districts (growing the same variety as in the Zou) through the ginnery in Glazoue. The system is established and functions well. A small quantity of rice seed (about 1 t annually) would be required for seed regeneration of project participants, and this would be produced by the rice research station at Sagbovi-Dome. Requirement for tobacco seed would grow from 40 kg to 70 kg annually (by PY5), and this amount would be supplied by the adequately equipped station at Ouoghi, in the district of Save.  - 18 - 3. 15 The CARDER-Zou has about 1,000 ha of land at Za-Kpota, some 25 km east of Bohicon, which is well suited for establishing a seed farm. Sufficient land is available to provide for isolation requirements and for any future extension. A suitable site of about 100 ha would be selected and cleared in PYO under PPF financing. For the initial three years of operations, the farm would be managed by an internationally recruited Seed Specialist to be provided by the project. A national agricultural graduate as deputy seed farm manager, and support personnel, including a team of four seed inspectors, would be provided as well. A seed treatment unit, office, laboratory and s orage space, and a field workshop would be constructed on about 350 m . Machinery to be financed by the project would include two tractors and associated machinery and equipment, such as one corn picker, one groundnut lifter and one groundnut separator. The relatively small quantities of maize seed to be harvested at the end of the first rainy season do not require an artificial drying installation. Instead, initially four and later ten proven drying cribs would be constructed, predominantly out of local materials. Each crib can store up to 2.8 t of cobs, equivalent to some 2 t of grain. Groundnuts, grown in the second rainy season and harvested after the rains, would be dried using traditional methods. The seed treatment chain would include a reception pit, balances, shelling (maize), cleaning, grading, dressing (maize) and begging machinery plus necessary elevators and conveyors (details in Project File). Groundnut seed would be shelled and dressed by farmers shortly before planting. The seed farm would have a truck for seed delivery to districts and subsectors. The seed would be initially sold to farmers for cash at crop market value, and as from January 1, 1986 at the latest, Government would institute charges sufficient to cover variable costs of production (para 8.01, h). In the meantime, the proceeds from seed sales would be used to offset the farm's operating costs. 3.16 Since neither costs of mechanized operations nor of seed production are known in the project area, the seed farm would also serve as a machinery demonstration and testing unit. A trained agricultural assistant with one or two recorders from the Project Monitoring and Evaluation Unit (TMEU) (para 3.20) would be permanently assigned to the seed farm, to monitor and record output and costs of field machinery. Results of this exercise would be used, together with cost of other inter- ventions, to calculate the cost of seed to farmers as outlined in para 3.15. Responsible for training of this personnel and for supervision of quality of the data collection would be the Chief of the PMEU. 3.17 Expansion of Ox-drawn Cultivation The Zou is not a traditional cattle rearing province and dissemination of ox-drawn cultivation is difficult. Less than 100 pairs of oxen are currently estimated to be used in the province, predominently for transport. However, conditions are not unfavorable for ox-cultivation, particularly in the north of the province, and farmers have guarded interest. Under the project it is proposed to establish and equip eight ox-demonstration teams under the District Agricultural Officers' (RDR) personal responsibility, six in the north and two in the south. Each team would consist of one extension agent, two pairs of oxen and a full range of equipment (frame, plough, ridger, seeder, weeder, harrow and ox-cart).  - 19 - The teams would work on farmers' fields in major villages and show the advantages and capacity of ox-drawn cultivation. Since almost no farmers are able to provide their own oxen, the project's livestock division (para 3.10) would purchase oxen in the northern cattle-rearing provinces of Benin. Medium-term credit (para 4.11) for the purchase of oxen and the essential plough or ridger would also be provided. The project will also provide farmers with necessary training. Farmers also require assistance in destumping their fields, which is an essential condition for ox-drawn work, because this operation is largely beyond their capacity. Project management would establish initially five and later ten destumping teams, consisting of two workers equipped with a chain saw and monkey-winch. Destumping of about 2 ha per farmer, purchasing oxen and equipment, would be part of the package. Destumping services would be provided free of charge and farmers would participate by providing labor. It is anticipated that by PY3 about 50 pairs of oxen would be sold, with 100 in the following year (PY4), and 150 in PY5. 3.18 Bottomland Development Despite the considerable bottomland potential of the Zou Province estimated to be at least 14,000 ha, only about 800 ha are actually used for rice cultivation. Main reasons for the under-utilization are insufficient knowledge of the hydrologic and pedologic properties of the lowlands, and lack of extension efforts and technical aid to farmers to develop them. Under the project, this would be improved through streng- thening of CARDER-Zou's lowland development section (within the land use division) with technical personnel, specialised equipment and materials and means of transportation. The section would identify in PYl, and plan and organize over PY2 to PY5 a low cost, labor intensive development program for some 200 ha of lowlands. A typical site would have an area of between 5 to 15 ha. The principal improvements would consist of constructing about 40 cm high contour bunds, used according to needs for water conservation or drainage, and of establishing a central drainage canal. The development would be close to those villages with demonstrated interest in rice growing and where farmers have agreed to supply the necessary labor. Development cost is estimated at $550 per ha, and incremental production would reach about 260 t of paddy annually. Improved seed varieties and agronomic recommendations for rice growing would be provided. No provision for cost recovery of development costs is made in the planning stage but an effort to devise and implement an effective cost recovery mechanism would be undertaken as the lowland development program proceeds. 3.19 Improvement of Water Supply Perennial rivers are limited in the province and the main source of water for human use is approximately 300 wells and boreholes, giving an average of 1 for 2 villages. An estimated 30% of the wells supply limited or no water towards the end of the dry period. The aquifer is not easily accessible, since groundwater is found usually at a depth of 40 to 70 m. Availability of water is a critical constraint to human health and productivity. The well maintenance section of CARDER's land use division would be strengthened by a technical officer (CSA level) specialized in  - 20 - this work and by two well maintenance teams, each comprising a well-digger as team leader, an assistant, two pulley operators and two bricklayers. The teams would be supplied with necessary transport, equipment, and supplies. The initial task would be to complete an inventory of provincial wells and plan a maintenance and construction program with agreed priorities by September, 1983. The program would include training of village well-maintenance personnel. The investment to be financed under the proposed project would be rebuilding of 100 wells and construction of 50 boreholes. The latter would be subcontracted to the provincial "Service de l'Hydraulique" which owns the necessary equipment. Prior to rebuilding or construction of wells or boreholes, the villagers would agree to contribute in kind through the supply of free auxiliary labor. The rebuilding cost per well is estimated at $1,100 and the construction cost of a borehole at $9,300 of which imputed labor cost would be about 60% and 30%, respectively. These are generally in line with costs under similar conditions in other West African countries. There has been no dialogue on cost recovery to date but a discussion would commence on a standard policy on village well development in rural areas at negotiations that would continue during project execution. 3.20 Monitoring and Evaluation A Project Monitoring and Evaluation Unit (PMEU) would be established at Bohicon to monitor project execution and the impact of the project on farmers. Basic information on project inputs and outputs would be secured periodically from routine regular operational records within CARDER and SONAGRI, with impact information coming from regular surveys of participants. Data on changing economic and market conditions would also be monitored. Experience with other integrated rural development projects shows that such information is vital for modifying current operations and devising future plans. Moreover, such information would later serve as a basis for project evaluation, leading to recommendations for changes in approach and identification of components for a possible future project. Funds would be made available to finance three years of an internationally recruited specialist who also would lead the unit, train local staff, and supervise a newly recruited staff of 18 recorders and analysts. These incremental personnel would be paid under the project and would be supplemented by temporary staff for peak survey periods and support field survey operations whenever necessary. The PMEU would also be provided with appropriate vehicles and equipment. Detailed terms of reference for the specialist are available in the Project File. His first order of priority would be to agree with project management and MDRAC on key indicators and methodology required to monitor project execution. In doing this, he would take into account the experience of the PMEU in the Borgou RDP, with which he generally would stay in close contact for exchange of ideas and experience. A detailed PMEU's work program would be submitted to IDA for approval within six months after the arrival of the specialist in Bohicon but in any case, not later than September 30, 1983 (para 8.O1,d). In view of the anticipated existence of three PMEUs in three development projects in Benin (Borgou, Zou, and proposed IFAD-assisted Atacora), there is a need for a central coordinating function of these specialized units at the level of MDRAC. The Ministry's Bureau d'Etudes appears to be best suited for  - 21 - this role and a qualified and competent individual from this ministry, who would be in charge of this activity to be financed by Government, has been identified. 3.21 Strengthening of SONAPRA Under the Borgou RDP, financing was provided to support an internationally recruited financial controller and a chief accountant, to consolidate the financial management of SONAGRI. Both specialists have been in post since September, 1981. Funds were also provided to acquire 18 man-months of short-term consultant services for operation and maintenance of ginneries, for workshop organization and management, and for logistics of transport fleet operations. Since the need for provision of these specialized short-term consultancies is likely to be of a longer term nature, the proposed project would continue to finance their activities after the credit closing date of the Borgou project. In addition, an international cotton lint marketing consultancy would be provided (para 4.09). With the absorption of SONAGRI into SONAPRA, these arrangements would continue. A cotton sector account would be established within SONAPRA to consolidate for the first time all information related to Benin's cotton production including inputs acquisition and price stabilization function. By June 30, 1984, a study would be completed recommending the steps to be taken in assuring optimal management of the sector. The elaboration of terms of reference for this study, acceptable to IDA, would be a condition of credit effectiveness (para 8.02,f). 3.22 Strengthening MDRAC's Planning Capacity With the beginning of the proposed Zou Province Rural Development Project about 75% of Beninese agriculture would be covered by integrated rural development project activity. The Zou Province, Borgou Province and Atacora Province projects would provide significant support to field operations in these provinces. Bilateral assistance now supports similar activity in Atlantic Province. However, the scope of activity under these projects is limited to the provincial level, and the cotton circuit (also principally a concern of Zou and Borgou provinces). In order to capitalize on these projects, MDRAC now needs to strengthen its capacity to undertake more strategic sectoral planning which would lead to the definition of new development options and setting of priorities among the options. At the time of preparation of the Zou and Borgou Province RDPs, the Bureau des Etudes of SONAGRI had partially performed this task at the level required, with the support of the IDA financed Technical Assistance Project. Now the Direction des Etudes et Planification (DEP) within MDRAC has been designated by Government to perform the function of conducting strategic planning on a national basis, and initiating in a systematic way the preparation of investment programs to be executed under subsequent five-year plans. Funds would be made available under the proposed project to reinforce DEP in its expanded role; specifically to provide the services of two technical assistance staff for a total of five years (terms of reference in Project File); about 20 man-months of short- term consultancy services; oversee training for senior Beninese technical staff; and aggregate office equipment and means of transportation.  - 22 - 3.23 Assistance to Cotton Ginneries The experience of past ginning seasons in Benin has revealed considerable weaknesses in technical and operational support to cotton ginning operations at central level, as well as in the actual management and technical performance of the country's three operating ginneries. Two of these are located in the area of the Borgou Province RDP, and one in the area of the Zou Province RDP. In addition, with the recent absorption of SONAGRI into SONAPRA (para 1.18), Benin's limited central operational and planning expertise in cotton ginneries has been lost through retirements and resignations. For these reasons, provision of support to this highly specialized activity under the Zou Province RDP is needed. Therefore, a consultancy mission, to be financed under the Borgou RDP, would visit Benin in the first half of 1983 to study the situation and propose the creation of a central ginnery support unit to be financed under the proposed project. The initial function of the unit would be to carry out a technical analysis and evaluation of the ginneries with the objective of making their operations more reliable and efficient. It is anticipated that an interna- tionally recruited ginnery specialist would be placed to Benin for the period of about four years. His qualification and experience would be acceptable to IDA (para 8.0l,b). His detailed terms of reference would be worked out by the above consultancy mission and would include planning of operational and post-season technical maintenance and revision, planning and judicial advance procurement of necessary spare parts, ginnery organization and management including technical quality control, and special emphasis would be given to on-the-job training of national managers and technicians. 3.24 Studies A study of organization and management of CARDER-Zou field services and their methods of intervention with the farming community would be financed as part of the project and initiated in PYI. Its main objective would be to continue on a more systematic basis the work started by the appraisal mission in the area of simplifying and upgrading CARDER's organizational structure of extension and advisory services (paras 4.05 to 4.06). While not critical for present project execution, there are some questions about the management of the CARDERs' field services for which answers are not obvious and which warrant further enquiry. Terms of reference of the main managerial, technical and support positions would be reviewed and proposals would be made for increasing the efficiency and work output of the heavily staffed field services and testing new approaches, possibly combined with some staff reductions. Recommendations would be discussed with Government, and if found viable, they would be introduced under the project on a pilot basis in a test zone comprising one or two agricultural districts. If results of the changes proposed in the CARDER- Zou were successful, Government would be encouraged to introduce the experience on a wider scale into the remaining five CARDERs. The study would require about eight man-months of consultants' work. Detailed terms of reference are in the Project File. By PY3, an additional study would be initiated to prepare a possible follow-up project. The proposed project's interventions are expected to involve about half of Zou's farm families,  - 23 - leaving scope for a future increase in the number of participants. This, coupled with new developments in crop production techniques expected to become available under the strengthened research component financed by this proposed project, would provide a basis for a follow-up project. The total cost of the study would be about US$0.4 million and it would include some 29 man-months of consultancies. 3.25 Crop and Farm Development Technical crop growing recommendations and packages to project farmers would be based on research results obtained in the national food crop and cotton research program, and proven in farm demonstrations and pilot commercial production. The recommended cropping system would be based on a cotton-food crop rotation, in which compound fertilizer is applied to cotton and the succeeding food crop benefits from the residual fertilizer effect with a demonstrated yield increase of up to 30%. Fertilizer application directly to food crops would also be done in higher crop development stages. 3.26 Varieties The maize variety actually recommended is the simple hybrid NH-2 (ex Niaouli), having the advantage of a slower genetic erosion than most other hybrids. Two open-pollinated varieties are also being tested: the TZPB (ex IITA Ibadan) and La Posta, widely grown in neighbouring Togo. All three varieties have a yield potential of about 4.5 t/ha and have yielded well over 2 t/ha on progressive farm fields. Intensive variety screening and breeding work has been underway in Niaouli for several years, and improved varieties are expected to be released shortly. Concerning groundnuts, apart from the local variety Moto, three improved varieties are available: KH149A, TE3 and TS3201 (all ex Upper Volta). Their yield potential is in the region of 2.5 t/ha; they are rosette resistent but show some susceptibility to rust which would have to be followed closely. Their introduction has started and before better varieties from the ongoing screening at Niaouli become available, they would be multiplied at the project's seed farm and disseminated to farmers. The local cowpea variety Kpod iguegue is well appreciated by the population and has shown good response to phosphorus fertilizer and to pest control. Initially, an improved package based on this variety would be recommended by the project's extension service. In the meantime, work has well advanced in Benin with screening alternative varieties, and particularly Vita 4 and Vita 5 (ex IITA Ibadan) are promising. Concerning rice, IR-442 (ex IRRI) has been disseminated for several years and it appears well adapted to Zou's conditions. Another variety, the ADNY-ll (ex Sierra Leone), is giving very good results in research. The yield potential under local conditions is around 4 t/ha. The tobacco variety performing well in Benin is called Paraguay and its cultivation would be continued. The currently grown cotton variety is the HAR-444.2, but within one or two years it will be replaced by L-299-10.75, which has a slightly higher productivity and longer fibre.  - 24 - 3.27 Crop Development Stages, Yields Cropping practices of participating farmers would be expected to move from stage 0 (without project, all traditional) through an inter- mediate stage I (traditional food crop varieties, following fertilized cotton in rotation, modest pest control in cowpeas, 50 kg/ha urea for rice) to the full development stage II (improved varieties, seed dressing, 100 kg/ha of urea top dressing for maize, 50 kg/ha and 20 kg/ha of P 20 basal dressing for groundnuts and cowpeas respectively, improved pest conlrol in cowpeas, 100 kg/ha of urea for rice). For cotton, stage 0 includes 100 kg/ha of fertilizer compound NPKSB (15-25-15-5-1.8) and modest pest control, stage I is 150 kg/ha compound fertilizer and intermediate pest control, and stage II is 150 kg/ha compound fertilizer plus 50 kg/ha urea topdressed, and full pest control (details in Project File). Resulting yield estimates are shown below: Yield Estimates (Kg/ha) Project's Weighted Stage II Stage Average Yield as % of Crop 0 I II in PY5 Potential Potential Cotton 600 800 1,000 860 2,700 37 Maize 600 1,000 1,600 740 4,500 36 Groundnuts 600 800 1,100 820 2,500 44 Cowpeas 350 500 700 580 N.A. - Rice 700 1,000 1,300 880 4,000 33 Tobacco 400 600 800 510 N.A. - 3.28 Phasing The phasing of farmers into the project and their adoption of improved production techniques is expected to be facilitated by substantial improvement of support services foreseen, by the farmers' generally progressive attitude, and by the fact that about one quarter of farmers are already growing some crops using improved seed and inputs. As a result of expanding participation in the project, it is anticipated that by PY5 almost all cotton growers would be using improved techniques corres- ponding to stage I or II, and about half of farmers would cultivate one or more of their food crops at a comparable level. Expected growth in the number of participants is shown below. The PYO figure (in brackets) shows farmers already growing cotton and/or maize under some improved techno- logy. No. and % of Total of Project Participants (PYO) 1 2 3 4 5 (18,000) 21,000 24,000 28,000 33,000 38,000 (24%) 27% 30% 35% 41% 48%  - 25 - IV. ORGANIZATION AND MANAGEMENT 4.01 Overall Structure The proposed project would be administered by the CARDER-Zou, whose Director would become Project Manager (PM). He would report directly to the Minister of Rural Development and Cooperative Action (MDRAC) in Porto Novo. For input supply and cotton lint marketing the Project would have close cooperation with SONAPRA. The PM and two newly created Deputy Project Managers - one for technical development, the other for finance and administration - would be qualified and administratively experienced officers. Assurances to this effect would be obtained from Government (para 8.01 , b). 4.02 The CARDER-Zou would be reorganized to reduce unnecessary lines of communication so as to maximize attention to farmers' needs. Four divisions at Bohicon Headquarters, complemented with the seed farm at Za- Kpota reporting to the Technical Deputy Manager, (Organigram No. 23620) would replace the existing seven as follows: (i) Finance and Administration: involving six sections responsible for budgeting and accounting, all aspects of physical input supply and credit administration, personnel management and administrative services, organization and supervision of the project's transport fleet, vehicle and machinery maintenance and repair services; and cotton ginning operations; (ii) Land Use Services: with three sections involved in the develop- ment of bottomlands, rural water supply, the management and supervision of water and forest resources; (iii) Extension Services: responsible through six sections for crop extension services including demonstrations of new production techniques, training of all level of extension staff, organiza- tion and promotion of cooperatives, organization and guidance of rural youth groups, home economics and alphabetization and crop processing, and demonstration and popularization of ox-drawn cultivation; (iv) Animal Husbandry: organized in two sections, one responsible for extension advice to farmers and animal production, the other for provision of a comprehensive animal health service and for supply of suitable animals for ox-drawn cultivation to farmers. 4.03 To provide sufficient incentives to attract and retain qualified staff, Government has agreed to increase the salaries of CARDER-Zou personnel from their budget to those of corresponding levels in state enterprises by December 31, 1983 at the latest (para 8.01 , g). This realignment follows the approach agreed upon under the Borgou Province RDP. In addition, the project would introduce and provide finance in  - 26 - support of a bonus system rewarding good performance for extension personnel. On a pilot basis, such system was tried out with good results in 1978 and 1979, and has also been introduced in 1981 in the Borgou project. With close attention to the experience in Borgou, project management would work out details of the system by June 30, 1983 and send them to IDA for comments (para 8.01,f). CARDER management would introduce a system of annual work plans and associated budgets for each district as the basis for project implementation. Introduction of this system and submission of the first such acceptable work plan for 1983, would be a condition of effectiveness (para 8.02,a). Assurances were obtained at negotiations that subsequent annual work plans and budgets would be sent to IDA for comments by December 31 of each preceding year (para 8.01,c). Project reporting requirements would consist of annual reports, to be submitted to IDA by February 28 of each year, and of quarterly reports (para 8.01,e). 4.04 Technical Assistance Staff Finance would be provided for 45 man-years of specialist technical personnel whose skills are currently unavailable in Benin, in thirteen positions from three to five years. Detailed terms of reference of this staff are in the Project File. Some of these posts would be line positions, and the appointment of Beninese counterparts of appropriate calibre would be required to ensure effective succession on termination of each technical assistance contract. The terms of reference of each technical assistance staff member requires that appropriate attention be paid to on-the-job training to permit a smooth transition of responsi- bility to local staff, and the project training specialist would monitor progress in this area. Assurances would be obtained from Government during negotiations that the experience and qualification of incumbents of these positions would be at all times acceptable to IDA (para 8.01, b). This would include: (i) for CARDER-Zou: the Technical Deputy Project Manager; the Financial Controller; the Chief Accountant; the Seed Production Specialist; the Input Supply, Credit and Marketing Specialist; the Training Specialist; and the Workshop Manager; (ii) for PMEU in MDRAC: an Agroeconomist specialized in project monitoring and evaluation; for DEP (Direction des Etudes et de Planification) in MDRAC, two Agroeconomists specialized in strategic sector planning and project analysis; and for the central ginnery support unit a Ginnery Specialist; (iii) for research: the tropical Foodcrop Research Specialist; and (vi) for SONAPRA: a Senior Accountant. Short term consultancies for CARDER, SONAPRA and agricultural research totalling about seven man years, would also be provided.  - 27 - 4.05 CARDER Field Extension Service Project financing would assure the means for reorganizing CARDER field staff by raising the calibre and improving working conditions and productivity of field workers, implementing a "T and V' system already initiated under the TA Project, coordinating cooperative development and instituting for regular retraining. Existing staffing at all levels is being reviewed by the Director of CARDER-Zou and unsuitable staff would be replaced. Some services would be strengthened through lateral transfers of superfluous staff. Nine unnecessary subsector chiefs would be transferred to strengthen the cooperative and input supply service, sixteen superfluous female extension workers would reinforce the regular crop extension and the literacy service. A supply officer (intendant) would be appointed in each district with two assistants for supervising input supply, credit and marketing services. Some of these appointments have already been made. Below RDRs, subsector chiefs would be reorganized to create 33 ATSA or CSA posts (para 2.09), and would be renamed to "Charge de la Production Agricole" (CPA). Each would be responsible for 2-3 communes (15 villages). Female extension officers, working with groups of women in each village, would be responsible for promoting improved health, hygiene and nutrition practices at family level and helping to organize and provide advice on simple and intermediate crop processing methods (para 3.09). At village level, existing extension agents (AV) would be reorga- nized into commune teams and those unsuitable for retraining would be reassigned. About 200 agents, each looking after two to three villages, would be responsible for organizing agricultural production of GRVCs and individual farmers. By PY5, each AV would be expected to provide advice to about 190 farmers. A similar reorganization has been undertaken under the Borgou Province RDP, and its first year's experience is positive. 4.06 The efficiency of the extension service would be improved through: (i) better planning, coordination, work organization and review, and minimizing involvement with organizing input supplies and cotton marketing; (ii) coordination of farmer production into a single GRVC system centered on rotational block cultivation and a "whole farm" development concept involving an annual package of two to three specific crops; (iii) greater mobility by provision of pick-up vehicles for each RDR and supply officer, motorcycles for all other district officers and each CPA, and mobylettes for AV and home economics officers. Motorcycles and mobylettes would be supplied to staff on a loan and allowance basis; (iv) provision of continuing in-service training for all extension officers, commencing with short retraining courses for all CPAs (former subsector chiefs); (v) improved back-up services, farmer training and information, time- liness of input supplies, and of marketing; and (vi) introduction of a bonus system for extension personnel (para 4.03).  - 28 - Responsibility for this upgrading would primarily rest with the Technical Deputy Project Manager (para 4.04). 4.07 Organization of Cotton Marketing Primary Marketing: The CARDER was previously and would continue to be responsible for primary cotton marketing. It determines a calendar of marketing dates and designates marketing points, provides agents to be part of buying teams and to manage cash. In the Zou the number of small- volume markets has grown from about 200 in 1977/78 to over 800 in 1979/80 to encourage cotton production. The CARDER contacted SONAPRA (formerly SONAGRI) for the provision of trucks for transporting seed cotton, but since 1978/79 it has increasingly used private truckers to provide transport that SONAPRA has not been able to provide for lack of sufficient operational vehicles. Also, collection of cotton by SONAPRA trucks has not always been well coordinated with the calendar for buying teams, and deliveries to the ginnery have not been well coordinated with the ginnery's ability to accept and store seed cotton. As a result, collection has been slow and the marketing season too long to assure high quality seed cotton. 4.08 Under the project the system would be modified to assure that CARDER would be able to efficiently execute its responsibility. Under the reorganization of organizations in the cotton sector, the management of the ginneries would be transferred to the CARDERs, which would remove one area where lack of coordination between organizations reduced efficiency. Taking into account the advice of its field staff concerning the best dates of harvesting, CARDER-Zou would prepare a calendar of market dates and points. The market points would be determined so as to assure efficiency in the use of trucks and fairness to producers, but only market points at which at least 10 tons of seed cotton representing one full truckload without trailer could be collected would be retained. Routings would be drawn up in PY1 with the assistance of a short term consultant on dispatching and this program would be revised each year thereafter following the model established. Two market controllers and their assistants, operating from the Glazoue ginnery, would be responsible for daily scheduling of trucks and buying teams following the plan previously worked out. They would also be responsible for securing the services of private truckers to supplement in-house trucking capacity as needed. District cotton buying teams would be organized, composed of selected CARDER extension agents and coordinated by district CARDER supply officers. They would be given basic training by CARDER-Zou's financial controller in cash control and by the ginnery manager and quality controllers in grading. About 10 individuals employed for the 3 month buying period would be responsible for about 30 markets each, with large markets possibly requiring more buyers. By PY5 each buyer would purchase about 20 tons per day. Purchasing teams would also have a weigher and several laborers to load the trucks, recruited by the chairmen of GRVCs and paid by CARDER-Zou as a direct operating cost. Making farmers aware of the time and place of the market and organizing them to be ready just before the market day would be the responsibility of the District Cooperative Agent. The CARDER supply officer, responsible for credit recovery, would also be present at each market. Seed cotton would be evacuated directly to the ginnery at the close of each purchase day. To the degree that a second round of purchasing was needed, similar procedures would apply.  - 29 - 4.09 Secondary Marketing: Since 1977/78, marketing of cotton lint and cotton seed was conducted efficiently from a technical point of view, with SONAGRI selling and delivering lint and seed to SONACEB, which was responsible for assembly, storage, grading and exportation. Improvements have been made in domestic grading, with SONACEB employing a full-time, internationally recruited grading specialist who is training Beninese staff. Under the new reorganization of the cotton marketing agencies, these functions would be incorporated into SONAPRA. However, there are indications that Beninese lint has often been sold on international markets for a lower price than would be expected for lint of similar quality parameters. It is evident that Benin has not sufficient expertise to assure sales of lint for a fair price. Therefore, an international cotton lint marketing consultancy of about 12 man-months would be financed under the project to help establish this expertise in Benin. 4.10 Input Supply and Seasonal Credit SONAPRA would, as SONAGRI did in the past, procure and receive delivery of fertilizer and insecticides for all CARDERs in Benin. Orders from the CARDERs should be received by September, permitting the bidding for national requirements to be completed and the contract awarded by November. This would permit deliveries to be made to Cotonou by January, and ultimate distribution to the CARDERs and their district stores by end March. Delivery of inputs to Zou province would be coordinated by CARDER's input supply section (ISS) and done by both Government and privately contracted truckers. The ISS would assure delivery of the rest of inputs to district stores using CARDER and hired trucks. Once inputs were delivered, SONAPRA would receive on behalf of each CARDER the value to be charged to farmers in their respective provinces. CARDER-Zou, for purposes of prefinancing farmers' contribution, would seek interim financing from CNCA which would be reimbursed at the end of the season from farmer credit repayments. CARDER-Zou would obtain this short-term credit at an interest rate of 9% from CNCA. In turn, it would charge farmers a rate of 11% per annum over the time they utilize the credit. Over the 5- year project period this spread of 2% on the non-subsidized cost of fertilizer and insecticide would contribute some CFAF 60 million (US$0.2 million) towards CARDER's credit administration costs. Government agreed under the Borgou Province Rural Development Project to establish a rate of interest at 11% and to review and adjust interest rates country-wide when information on administrative costs became available from the CARDERs whose cost accounting capabilities were being improved, such as that of CARDER-Zou. At present, with only one year's experience under the Borgou Province Rural Development Project, a proper accounting of the costs of credit administration and non-recoveries is not yet available. However, Government agreed at negotiations to review and adjust rates under the proposed project (para 8,01,a). Initially, following present practice, seasonal credit would be granted only to farmers who grow cotton since this crop, which is officially marketed, provides collateral for loans. Credit repayments would continue to be made when cotton is marketed. As experience is gained elsewhere in Benin with providing seasonal credit to food crop farmers who are members of GRVC's (as in the IFAD financed Atacora Rural Development Project), this policy would be re- evaluated with the possibility that it could be liberalized. In the meantime, inputs would be available for sale on a cash basis throughout the project zone.  - 30 - 4.11 Recent procurement of inputs has been late, however, owing to Government's difficulties in making funds available to prefinance purchases and assuring the availability of funds needed to cover input subsidies. Part of the reason is institutional (para 1.18) and Government is in the process of reorganizing and amalgamating responsible agencies. On the other hand, as input use has increased, encouraged by successful extension services, the amount of Government subsidy has also increased and would continue to do so unless remedied stages are taken. Government has recognized the seriousness of the situation and has progressed to gradually eliminate subsidies within six years. The proposed IDA and CCCE credits would contribute financial resources to assist Government to make adjustments in present input price policies (para 6.11). 4.12 Medium-Term Credit To finance a pair of oxen and implements for ox-drawn cultiva- tion, CNCA would extend medium-term credit to farmers through its "Caisse Regionale de Credit Agricole Mutuel" (CRCAM). While CNCA's headquarters is located in Cotonou, lending and savings in rural areas have over the past years been built-up through a network of regional CRCAMs and local GLCAMs ("Caisse Locale de Credit Agricole Mutuel"). CRCAMs and CLCAMs are staffed by CNCA personnel and their initial lending capital consists of subscriptions by farmers (FCFA 1,000 per participating farmer). In the past CRCAMs' and CLCAMs' lending has been very limited and was tightly controlled by CNCA, and mainly consisted in administering small savings accounts of GRVCs and individual farmers. This lead to a considerable under-utilization of existing staff in these small regional and local saving banks. There is, therefore, no need to strengthen CRCAM or CLCAMs with additional staff and it is estimated that 300 medium-term credits -- 50 in PY3, 100 in PY4 and 150 in PY5 -- could be handled by existing staff. 4.13 Medium-term credit to farmers would be at an interest rate of 11% over three years, repayable in three equal annual installments. Farmers' applications would be reviewed by CARDER's technical staff for credit worthiness and technical feasibility, and with the appropriate recom- mendations would be passed on to CRCAM, Bohicon, for further action. Credit recovery would occur annually through a CRCAM field agent at a cotton marketing points. Should a farmer be in default, the CRCAM agent would liaise with CARDER technical staff to determine the cause of non-payment and the two would propose remedial action to CRCAM/CNCA. The financial controller, to be recruited under the project for CARDER-Zou, would about twice a year, review CRCAM's credit accounts to ensure proper accounting and follow-up of individual credit accounts. Thus far, the credit recovery under CRCAM has been satisfactory.  - 31 - V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS A. Cost Estimates 5.01 Total project cost including taxes is estimated at CFAF 21.3 billion (US$62.7 million). Out of this the cost of the Zou Province Rural Development Component amounts to CFAF 9.9 billion (US$29.0 million) with a foreign exchange component of 65% or CFAF 6.5 billion (US$19.0 million). Customs duties and identifiable taxes are estimated at CFAF 0.9 billion (US$2.7 million) and represent 9% of total cost (excl. inputs). Thus, the Rural Development Component's cost net of taxes amounts to CFAF 9.0 billion (US$26.3 million) of which foreign exchange represents 72%. The CIF cost of the recurrent national fertilizer/insecticide imports (para 5.03 ii) over the 5-year project period is estimated at CFAF 11.4 billion (US$33.6 million). 5.02 Cost estimates are based on end-1981 prices and include physical contingencies of 5% on civil works, vehicles and equipment, 10% on all other costs except wages, salaries and technical assistance, and price contingencies applied on baseline costs plus physical contingencies compounded as follows: Annual Rates % 1982 1983 1984 1985 1986 1987 i. Fertilizer, insecticides, chemicals 10.8 11.0 10.5 10.2 9.0 9.0 ii. Other costs: Local 12.0 12.0 12.0 12.0 12.0 12.0 Foreign 8.0 8.0 7.5 7.0 6.0 6.0 The higher price escalation factor on local costs is based on the estimated annual inflation for Benin. Detailed cost estimates are presented in Annex 1, Table 1, and are summarized in Table 1. B. Proposed Financing 5.03 The proposed financing plan would be as follows: (i) The Zou Province Rural Development Component's cost net of taxes would be financed by Government (US$3.0 million, or 12% of total cost), IDA (US$14.8 million or 56% of total cost), CCCE (US$4.8 million or 18% of total cost), and FAC (US$3.7 million or 14% of total cost).  - 32 - (ii) Costs of the recurrent national fertilizer/insecticides imports would be financed by Government (US$4.1 million or 13%), IDA (US$5.2 million or 15%), CCCE (US$1.8 million or 5%) and farmers (US$22.6 million or 67%). While farmers would pay for a gradually increasing part of input costs, Government and external co-financiers would cover the recurrent inputs for the entire country. Government's present budgetary situation does not permit it to provide timely financing for the recurrent national fertilizer/insecticide requirements, thus threatening the implementation of agricultural development country-wide. Given this situation parallel to a gradual elimination of Government's subsidy rates on fertilizer and insecticides, combined with a corresponding increase in the farmgate price of cotton, IDA and CCCE would assist Government in financing part of these recurrent expenditures country-wide. These price adjustments would be announced annually not later than March 31, and this would be a condition of disbursements against recurrent input expenditures (para 8.01,a). 5.04 An IDA credit of US$20.0 million is proposed to finance 56% of the Zou Rural Development Component cost net of taxes including incre- mental input requirements for the Zou (US$14.8 million), and 15% of the recurrent national fertilizer/insecticide imports (US$5.2 million) or 47% of Government subsidies for these inputs. A condition of effectiveness of the IDA credit would be fulfillment of all conditions precedent to the effectiveness of the CCCE and FAC credits (para 8.02,b). 5.05 The terms and conditions of the CCCE (US$6.5 million) and FAC (US$3.7 million) credits are yet to be negotiated. The CCCE contributions would respectively cover about 18% of project cost net of taxes and 5% of recurrent input imports cost. The FAC contribution would cover 14% of project cost net of taxes. Total external financing of about CFAF 10.3 billion (US$30.2 million) would represent: (i) about 88% of project cost net of taxes (80% of cost including taxes), covering foreign exchange (US$19.0 million) plus 62% (US$4.5 million) of local cost excluding taxes (or 44% with taxes); and (ii) about 20% (US$7.0 million) of the recurrent national fertilizer/insecticide imports (or 63% of the subsidy element). 5.06 Combined external funds amounting to US$30.2 million equivalent and Government funds amounting to US$10.0 million, would be deployed as follows: (i) Project: (a) CFAF 7,035 million (US$20.6 million) would be passed on grant terms to CARDER-Zou to cover management of extension services, input distribution, operation of its specialized units, applied research, seed production, technical assistance and studies; (b) CFAF 280 million (US$0.8 million) would be passed on grant terms to SONAPRA to cover strengthening of its truck fleet for cotton evacuation, workshop rehabilitation, technical assistance and studies;  - 33 - (c) CFAF 1,450 million (US$4.3 million) would be paid in annual tranches into a "special input account" to be created at the Caisse Autonome d'Amortissement (CAA) and to be drawn from by SONAPRA to finance imports of incremental seasonal inputs; (d) CFAF 95 million (US$0.3 million) would be onlent to CNCA, for medium-term credit to farmers. The onlending terms would be over 8 years with a grace period of 2 years at 6% interest. CNCA would lend to farmers initially at 11% and these terms would afford CNCA a 5% spread to cover administrative costs associated with lending activities; and (e) CFAF 1,022 million (US$3.0 million) would be passed on to the Ministry of Rural Development and Cooperative Action to cover strengthening of its DEP (para 3.22) as well as the set-up of a technical support unit for all ginneries (para 3.23). (ii) Recurrent National Fertilizer/Insecticide Imports: CFAF 3,750 million (US$11.1 million) would be paid in the above "special input account" at the CAA (para 5.07,i,c), to be drawn from by SONAPRA to finance imports of recurrent national seasonal inputs. C. Pre-financing Requirements 5.07 Government would prefinance the Zou Rural Development Components and recurrent expenditures out of a revolving fund to be set up at CAA for this purpose. The amounts required would be determined according to quarterly budgets prepared by CARDER-Zou for the Zou component and by SONAPRA for the annual seasonal input budget; such amounts would be included in the national investment budget. The fund would amount to CFAF 520 million (US$1.5 million), equivalent to about 3 months of project expenditures, and would be jointly financed by advances from IDA by CFAF 290 million (US$0.85 million), from CCCE by CFAF 160 million (US$0.47 million) and from Government by CFAF 70 million (US$0.21 million). The amounts represent pro-rata shares of co-financiers total contributions to the project. Pre-financing for the recurrent national fertilizer/- insecticide requirements would be provided by Government. Establishment of the revolving fund account and Government's deposit of its share would be a condition of credit effectiveness (para 8.02,c). For purposes of verification of statements of expenditures against which IDA would replenish its share of the revolving fund, Government would maintain a separate sub-account with CAA for the US$0.85 million advanced by IDA. D. Procurement 5.08 Works: The construction of storage facilities, office buildings, staff houses and land clearing, totalling US$0.8 million would be procured by local competitive bidding procedures satisfactory to CCCE and FAC.  - 34 - 5.09 Goods: Vehicles, motorcycles, farm and workshop equipment, and office and house furniture, totalling about US$4.6 million, of which the IDA credit would finance US$2.9 million, would be grouped as far as possible in appropriate bidding packages and procured through ICB according to World Bank Guidelines. Remaining vehicles and equipment, costing about US$1.6 million, would be financed by CCCE and FAC and procured according to their guidelines. Seasonal inputs, chiefly fertilizer and insecticides worth about US$37.9 million of which IDA would finance US$8.4 million, would be procured by SONAPRA through ICB. About US$0.3 million (IDA US$0.3 million) worth of oxen and ploughs financed by CNCA medium-term credit would be purchased from local, specialized suppliers. 5.10 Services: Contracts for 336 man-months of technical assistance valued at US$9,150 per average man-month including salaries, allowances, housing insurance, and international travel, and 50 man-months of short- term consultants' services valued at US$11,530 per man-month with a total value of US$3.7 million (IDA US$3.7 million) would be procured in accordance with IDA and Government procedures for international recruitment. Remaining technical assistance and consultancy services valued at US$2.4 million would be financed by FAC and CCCE and procured according to their guidelines. 5.11 About US$11.7 million (IDA US$4.7 million) of project expendi- tures, representing operating cost and local staff salaries, would be committed in accordance with established Government procedures, satisfactory to IDA, CCCE and FAC. 5.12 Contract Review: All works and goods contracts or packages estimated to cost over US$100,000 equivalent would be subject to IDA's prior review of procurement documentation resulting in a coverage of about 90% for the total estimated value of works contracts and about 75% of goods contracts. The balance of contracts would be subject to random post review by IDA after contract award. E. Disbursements 5.13 IDA funds (US$20.0 million), except for refunding of the PPF advance, would be jointly disbursed with CCCE funds (US$5.5 million). Estimated project disbursements are given in Annex 1, Table 2 and follow the pattern established for typical West African rural development projects. IDA funds would be disbursed over a 5