Togo - Country economic memorandum (Vol. 2 of 3) : Basic needs and human resources

Report No. 3416-TO Togo Country Economic Memorandum (In Three Volumes) Volume I: A. Basic Needs and Human Resources B. Sector Notes January 11, 1982 West Africa II Division A FOR OFFICIAL USE ONLY Document of the World Bank 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 CFA Franc (CFAF) US$1.00 CFAF 270 1/ CFAF 1 million US$3,704 1/ The CFA Franc (CFAF) is tied to the French Franc (FF) in the ratio of FF 1 to CFAF 50. The French Franc is currently floating. On the date of the Economic Mission the exchange rate was US$1 = CFAF 220.  FOR OFFICIAL USE ONLY TABLE OF CONTENTS VOLUME II Page No. INTRODUCTION .......... ................................. 1 A. BASIC NEEDS AND HUMAN RESOURCES ........................ 1 A. Incomes ...................1................... B. Nutrition ...... ................ 2 C. Health ....................... 2 D. Water supply ............................... . 4 E. Urban living conditions .... ............ 4 F. Education ...... ................ 7 B. SECTOR NOTES ............................................ 9 AGRICULTURE ............................................ 9 A. Cultivation pattern .............. 9 B. Food crops ............... .. .................. 10 C. Food crop marketing ........... .. ............. 11 D. Cash crops ............... .. .................. 11 E. Livestock ...... ............ .................. 13 F. Fishing .................. .................... 14 G. Forestry .................. ................... 14 H. Water management ............ .. ............... 14 I. Institutions for agricultural development .... 14 J. The 1981-85 plan and future development ...... 15 K. Production prospects .......... .. ............. 17 L. Conclusion ............... .. .................. 17 MINING ........... ...................................... 17 INDUSTRY ............................................... 19 SERVICES ............................................... 21 ENERGY ........... ...................................... 23 MAP ..................................................... 25 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.   VOLUME II INTRODUCTION 1. The following pages describe basic needs and human resources and the main sectors of the economy. Their main strengths and weaknesses are summar- ized, and broad recommendations are made for sectoral development. Part A summarizes living conditions in Togo. It discusses rural and urban incomes, nutrition, health and water supply. Support is given to Government attempts to improve living standards by better rural and urban water supply and more efficient operation of basic health services. Against the background of living conditions in Togo, Part B of this volume discusses the productive and supportive economic sectors which generate the nation's income. Section 1, on agriculture, summarizes production patterns in food crops, cash crops, live- stock, forestry and fishing. It discusses projects now under way, existing agricultural institutions and their weaknesses. The final paragraphs recom- mend that a thorough analysis of the sector be undertaken to identify the pos- sibility for further foodcrop development within the framework of strengthened institutions and a coherent agricultural development strategy. Section 2 deals with the mining sector (phosphate and clinker), including the future phosphoric acid project. Section 3 describes the industrial sector and its presently limited role. It discusses current Government efforts to strengthen the sector, including the Investment Code and the development banks. Section 4, on services, describes the important economic role in Togo of both trade and transport, which are largely operated by private enterprise. There has been over-investment by Government in tourism, however, and hotel losses could be a serious drain on public revenues. Section 5 discusses the energy sector in Togo, and assesses the prospects for electricity production and energy use. BASIC NEEDS AND HUMAN RESOURCES A. Incomes 2. There are wide income disparities between the cities (20 percent of the population) and the countryside (80 percrent of the population) as well as between those farmers who grow cash crops (20 percent of the farming popu- lation) and the majority who depend on subsistence agriculture. Rural per capita incomes average CFAF 36,000 to CFAF 40,000 per annum, but for most families cash forms less than half of income. Cash incomes for the 25,000 families in the cocoa and coffee growing areas are about CFAF 25,000 per capita, while cotton provides a cash supplement of about CFAF 5,000 per capita for the 50,000 families who grow it. 3. Major expenditures in the rural areas are for clothing, education and ceremonies. Per capita incomes in urban areas are several times those in rural areas, and urban families have access to a greater variety of con- sumer goods. For example, a recent survey of a low income area in Lome has shown that 17 percent of households have motorbikes, compared with an esti- mated 3 percent of families nationwide. Rent and transport absorb about 1/5 of the expenditure of the population in Lome.  -2- B. Nutrition 4. In general, Togo's population is adequately fed. Net food supplies are estimated to average 2,300 calories and 58 grams of crude protein per person per day. Recommended FAO standards for a country with Togo's popula- tion structure are 2,470 calories and 54 grams of protein. However, diet is of low quality; 80% of calories and 74 percent of protein are from cereals and tubers. Urban diets are in general better and more varied than rural diets, with a higher consumption of fruit, vegetables, meat, fish and cereals, and lower consumption of tubers. Togo has benefitted for the last 20 years from a program of the Catholic Relief Services, which provides for the dis- tribution of food supplements to mothers and young children in Plateaux and Maritime worth about CFAF 400 million per annum. About 90,000 rations with a food value of nearly 800 calories per child per day are distributed monthly; at the same time the child's weight is checked and some health education may be given. The impact of the program on young child mortality and morbidity has not been formally evaluated. Recorded infant mortality rates are low by African standards, about 90 per 1000 in Togo. Table 1: PER CAPITA DAILY FOOD SUPPLIES 1978 Foodstuff Calories Protein (crude protein gms) Tubers 777 11.6 Cereals 1,093 30.8 Beans and groundnuts 142 7.5 Oil 174 - Meat and fish 53 6.1 Fruit and vegetables 19 1.6 Sugar 54 - 2,312 57.6 Source: Direction de Statistiques Agricoles, Customs Statistics, SEDES food consumption survey 1964/65, FAO food composition tables. Note: Does not include beverages. C. Health 5. The main diseases are malaria, and sicknesses caused or aggravated by unhygienic living conditions, or insufficient, polluted water. Table 2 gives an indication of the prevalence of the major diseases. In a recent survey, 41.5 percent of 7,000 blood samples taken showed positive when tested for malaria. Malaria and diarrhea are not only major killers of children, they also cause suffering and debilitation among the adult popu- lation, and can seriously lower labor productivity.  - 3 - Table 2: MAIN RECORDED DISEASES, 1977 Disease No. of cases recorded ('000) Malaria 292 Gastro-intestinal infections 290 Respiratory infections 196 Malnutrition and anemia 32.8 Measles 20.4 Filiariosis 12.2 Venereal infections 10.9 Onchocerciasis 7.3 Schistosomiasis 6.2 Yaws 3.7 Source: Ministry of Health. 6. Togo has a reasonably well-developed network of health facilities with a total of 21 hospitals and nearly 300 dispensaries or clinics. However, 60 percent of the 4,500 medical personnel are in Lome, and of staff stationed outside the capital, over one third are in the regional administrative head- quarters. Thus, the rural population has poor access to basic health care. Dispensaries sometimes have no qualified staff, little equipment and run short of drugs. The health service has a fairly successful immunization program, and an effective leprosy control program, with drugs provided by UNICEF, German support and 11,600 cases undergoing treatment. Table 3: PUBLIC SECTOR MEDICAL STAFF TO POPULATION (1977-78) Staff in Staff in Population/Staff Population/Staff Total Staff Maritime other regions in Maritime other regions Doctors and dentists 147 110 37 12,000 42,000 Paramedical staff 4,630 2,821 1,809 380 860 Source: Ministry of Health. 7. Government investment in the health and social sectors has been rela- tively limited; even during the Third Five-Year-Plan, (1976-80), these sectors were allocated only 3.8 percent of investment, a total of CFAF 10.7 billion (US$18 per inhabitant). Health currently absorbs under 10 percent of Govern- ment recurrent expenditure (about US$5 per capita for personnel, drugs and equipment). Social sector investment run the risk of being severely limited by the Government's current financial difficulties. However, it is important that sufficient operating funds be provided to ensure that the existing health network functions more effectively, through regular staffing, and provision of drugs and equipment.  -4- D. Water Supply 8. A sufficient supply of clean water can substantially reduce the incidence of most diseases. Where women must walk several kilometers for water they can fetch enough only for drinking and cooking. Water for washing must take second place, food is contaminated, and skin diseases fester. Lack of drinking water has been a constraint to settlement in some areas with good agricultural potential. A recent survey of 515 villages indicated that in only 28 percent was there a cement lined well, 30 percent had traditional wells (whose water is very vulnerable to contamination), and 4 percent had a nearby river or other permanent water source. The other villages (38 percent) had no nearby water source. 9. The need for village water supply in Togo has been estimated at 2,500 wells; this would supply sufficient water to most of the 1,700 rural settlements with over 200 inhabitants. The Government has embarked on a village water supply program: 360 wells have so far been drilled with FED and UNDP assistance at an average cost of CFAF 5 million per completed well. Maintenance costs are estimated at CFAF 100,000 per year, and well qualified maintenance teams are being built up. USAID, FAC, FED and BOAD are financing 350 more wells. Finance is being sought by the Entente Fund for a further 1,000 drillings. The village water supply program is one of the Government's most successful, with good cooperation between the different aid agencies. The total capital costs of the program are estimated at CFAF 13 billion, or US$27 per rural inhabitant, while the annual maintenance costs are only $0.5 per rural inhabitant. 10. The record with urban water supply has also been successful. Eighteen of the 21 district capitals now have clean water supplies, mostly through public standpipes. The situation is serious, however, in Lome, where there is on average only one standpipe for every 2,300 people. Inhabitants over much of the city rely on shallow wells of heavily polluted water for washing, and buy drinking water when they can. A feasibility study for extending the water supply system is underway with IDA and UNDP assistance, and engineering works could start in 1983. E. Urban living conditions 11. About 500,000 people in Togo live in a total of 37 settlements with more than 5,000 people. Two-thirds of town-dwellers, however, are concentrated in Lome (320,000 inhabitants) which is growing at 5 percent per year. The other towns are very largely agricultural service centers, and none has more than 50,000 people. Table 4 summarizes some of the characteristics of the major towns in Togo. 12. Lome, partly because. of its small size, escapes some of the urban problems of other African cities. Room occupancy rates at 2.3 per- sons per room are comparatively low, and living densities do not exceed about 300 persons per hectare, and only 55 percent of households rent accommodations. However, as described earlier, Lome has a very inadequate  -5- water supply. Storm drainage in the flatter parts of the city is poor, and there are frequent floods in the rainy season. Sanitation, too, is inadequate; only 5 percent of households have modern sewerage systems. About 40 percent of compounds have pit latrines but because of the high water table these easily contaminate the shallow wells on which much of the population depend for water. Thirty percent of compounds used to rely on bucket latrines but the collection system was poorly operated and was abolished in early 1980; about half of all households now have no means of sanitation. 13. Land speculation has forced newcomers to settle far from the city centers. The official price of land is CFAF 2,000 per square meter but there are private exchanges at 10 times this price. As the city grows, the need for an urban land policy is becoming more urgent. Until recently, the Government has intervened little in shelter and urban development, and institutions were little developed. However, the preparation of a sites and services and urban upgrading project for Lome and Lama Kara is underway with a proposed US$15 million loan from USAID, and it includes technical assistance, training and institutional development components. A master plan concentrating on trans- portation and sanitation has been prepared. Lome's population is expected to increase by 200,000 over the next 10 years, and an effective system of loans for serviced plots and corehousing could substantially improve housing condi- tions. There is also a growing need for low cost urban transport. The outly- ing townships are poorly served at present and their inhabitants frequently have to make time-consuming and exhausting journeys to work on foot. There may be scope for IDA assistance to enlarge the scope of what is being devel- oped under the current urban project in Lome and possibly in other towns.  Table 4. Housing conditions in major towns, 1980 Population Lome Aneho Kpalime Atakpame Sokode Lama Kara Population (000's) 312.0 11.6 29.9 25.5 45.5 25.2 Born in the town (%) 47.5 68.1 55.8 44.7 75.6 41.7 Economically active (%) 37.0 29.5 33.0 31.0 27.0 28.0 Household characteristics Households per compound 3.0 2.3 1.8 2.0 1.8 NA Household size 4.6 4.4 4.9 5.2 7.2 5.8 Households renting (%) 55.0 31.0 47.0 57.0 20.0 65.0 Monthly rent/room (CFAF) 1,670 925 585 1,045 700 980 Rooms per household 2.3 2.5 2.8 2.7 4.2 3.1 Persons per room 2.0 1.9 1.8 1.9 1.7 1.9 Household facilities Cement block construction (%) 88.0 86.0 40.0 46.0 8.0 30.0 Electricity in household (%) 38.0 31.0 17.0 23.0 14.0 22.0 Latrine in compound (%) 47.0 52.0 46.0 58.0 23.0 36.0 Running water in compound-(%) 9.5 9.5 5.5 NA 11.4 8.2 1/ Inhabitants per public fountatn 2,260 242 1,150 NA 827 170 1/ Source: Surveys by Technosynesis, Rome, for Direction de l'Urbanisme et de l'Habitat except where data provided by Regie d'Eau.  -7- F. EDUCATION 14. Expansion of primary education has been rapid and net enrollment rates are now about 71 percent, one of the highest in Africa. There are, however, wide regional differences: enrollment rates approach 100 percent in Lome, but are only 33 percent in Savannah and only 38 percent of girls in Togo attend primary school. Table 5: SCHOOL ENROLLMENTS, 1980 No. of % of age 1/ % of age 2/ students group group (unadj.) group (adj.) % girls Primary 484,000 6-11 111 71 38 Lower secondary 106,000 12-15 48 23 25 Upper secondary 14,000 16-18 11 - 15 Technical education and Vocational training 6,800 12-18 2 - 26 Higher education 3,500 19-22 1.9 - 16 Source: Ministry of Education. 1/ Enrollment, including students older or younger than normal age of school attendance, as fraction of age-group. 2/ Enrollment, excluding students older or younger than normal age of school attendance, as fraction of age-group. Enrollment in secondary schools has also increased rapidly. From 1974/75 to 1979/80, the number of students in lower secondary schools increased from 40,000 to 106,000. Entry standards have recently been lowered and it is now expected that 75 percent of primary school graduates will continue their education. 15. Regrettably, the rapid expansion in enrollment has been achieved at the expense of the quality of instruction. Class sizes average 54 in primary and 42 in secondary schools. The qualifications of teachers are often defi- cient; among primary school teachers 50 percent have only a primary school education. There is only one teacher training school with a total of 120 places, mostly for lower secondary school teachers, and it satisfies only 10 percent of Togo's annual requirements. 16. Vocational education is still limited. Only 7 percent (8,600) of the children in secondary education receive technical training. The majority are in commercial, or secretarial schools from which annual graduation is about 1,000, which might soon lead to saturation. Annual graduation is only 500 from industrial schools, 200 from paramedical schools and 30 from social worker training. The most serious inadequacy is in training for  agriculture. Although agriculture employs 80 percent of the population, and its labor force is increasing by 15,000 to 20,000 per year, there is only one agricultural school in Togo with an annual output of 90 technicians. Further- more, the quality of the training received is of insufficient quality to meet the requirements of the employees. 17. Togo's university has about 3,400 students, about 20 percent of which were enrolled in science and engineering courses. A further 1,000 students are educated abroad. 18. Functional literacy programs are limited. The Ministry of Social Affairs provides functional literacy classes to adults in 4 local languages. Classes for women were started in 1978. The classes include self-help schemes such as cultivation of vegetable gardens and development of sewing skills. It is too early yet to evaluate the success of the program. The Centre National de Promotion des Petites et Moyennes Entreprises (CNPPME) gives technical and financial assistance to small industries, but its impact has so far been limited. The Centre National de Perfectionnement Professionnel (CNPP) gives on-the-job training to the employees of the public and private enterprises. 19. Despite the rapid expansion of the education system, the share of education in the Central Government's recurrent budget remains modest, amount- ing to about 17 percent in 1980. This is due to the low cost of education 1/ with high teacher/pupil ratios, low teachers' salaries, but also to parents' contributions to educational expenses which finance virtually the whole cost of construction and learning materials of rural primary schools. Local communities, too, frequently finance the construction of primary schools. Education reform 20. In 1975, the Government began the implementation of an education reform with the objective of improving the quality and relevance of educa- tion. Measures adopted include: the introduction of the two main languages Ewe and Kabye as the medium of instruction in primary schools; a revision of the curricula at the primary and secondary levels to provide a more prac- tical orientation, with emphasis on the natural sciences and agricultural subjects; expansion of teacher training and upgrading programs; provision of skill training and basic education for adults and dropouts; and better management of the education system. 21. The Government has taken some specific actions to implement the reform: 1/ Costs per student year are low compared with those in other West African countries, averaging US$35 for primary and US$140 for general secondary education. They are, however, US$520 and US$1,550 for technical and vocational training.  - 9 - 1) an employment study carried out by the Ministry of Planning and ORSTOM; 2) the construction of two teacher training schools up-country with 360 places and expected annual output of 240 teachers, i.e. about 3 percent of the present number of teachers; 3) the expansion of the National Institute of Agricultural Training to train middle and high level agricultural staff. Expected annual output of this school would be 36 senior staff, 100 middle and lower staff, which would cover two thirds of estimated agri- cultural staff needs in the late 1980s; and 4) the construction of 2 technical schools financed by the ADB. 22. On the whole, however, the Fourth Plan allocates only a modest CFAF 15 billion to education (or 7 percent of total planned expenditures). Break- down of the planned expenditures is not satisfactory either, with less than 1 percent of the planned education investments for primary schools with nearly 500,000 students, compared with 20 percent for the university with 4,000 students. 23. Recurrent expenditures should also be increased. Financial projec- tions indicate that despite the expected constraints on public finance, the Government could increase Jts annual expenditure on education and training from CFAF 9 billion in 1980 to CFAF 20 billion in constant prices by 1985, i.e. from CFAF 4,200 to about CFAF 8,600 per capita. Although still relatively modest, this amount, efficiently spent on priority actions, could have a decisive impact on the growth of the country. B. SECTOR NOTES AGRICULTURE A. Cultivation pattern 24. About 11% of the area of Togo is under cultivation, the proportion varying from 20% in the densely populated Maritime region to under 4% in the Centrale region. The area planted with the main food crops is about 450,000 ha. Cotton is grown on 30,000 ha, coffee and cocoa cover about 80,000 ha in western Plateaux, and oil palm, mostly wild, grows on 50,000 ha in Plateaux and Maritime. Average farm size is 2 ha, varying from 1.3 ha in Kara to 4 ha in Savannah, and there are about 250,000 farm families. Average family size is 7.5 and the bulk of farm work is carried out by family labor. The majority of farmers grow only food crops, relying on sales of surplus crops for cash income. Cotton is increasingly a source of revenue, but is still  - 10 - grown for cash by only about 50,000 families. However in western Plateaux about 25,000 farmers have coffee and cocoa holdings of 2 to 5 ha; they grow only a little food, but have relatively high cash incomes. B. Food crops 25. The main foodcrops are maize and cassava in the south, yams and sorghum in the center, and sorghum, millet and groundnuts in the north. Togo approaches self-sufficiency in production of the basic staples, except in drought years. However, there are wide annual variations, and production particularly of maize is vulnerable to irregular rainfall. Imports, mainly of wheat and rice for the urban areas, are still less than 10% of food production, and account for about 12 percent of merchandise imports. Wheat is used mainly for bread, for which no local food crop is equally suitable, whereas imported rice competes with nascent production of local rice. Table 6: PRODUCTION AND IMPORTS OF THE BASIC STAPLES 1972-74 AND 1978-80 Average net daily per Average Annual Production capita food supplies (000 tons) (calories) 1972-74 1978-80 1972-74 1978-80 Tubers 834 899 891 796 Cereals 234 289 915 1,033 Legumes 30 36 156 156 1,962 1,985 Estimated Average Annual Imports Wheat cereal 10 45 41 186 Rice 5 13 22 57 Source: Direction de la Statistique Agricole, Port de Lome, - FAO. See annex table for production trends. 26. Crops are grown on the bush fallow system, and cultivation techni- ques are simple. Few farmers have access to extension services. Fertilizer was applied to only 15,000 ha of foodcrops in 1978, use of improved seed is very limited and use of tractors or animal traction is negligible. Yields are low, averaging 0.7 to 1 tonne per hectare for cereals and 7 to 10 tonnes per hectare for tubers. Rotation and intercropping patterns vary regionally; cowpeas and cassava are usually grown as secondary crops, yams and maize as sole or principal crops. Small vegetable gardens are kept around the compounds, and many have a few fruit trees, grown partly to provide shade.  - 11 - 27. Progress on improving yields and farmer incomes through food crops has so far been disappointing. Countrywide, the extension system is poorly organized. There are over 600 extension agents, one for every 500 farmers, but most have received little formal training, have little supervision, no organized system of visits, and often no improved "know-how" to present to farmers. There is no effective link between the foodcrop research organiza- tion IRAT, extension services and improving farming systems, and there is no nationally organized program of improved seed multiplication. By 1980, out of an estimated 450,000 ha planted with the major food crops, under 20,000 ha were cultivated using "improved techniques", and these were all in agricultural projects initiated and supported by various aid agencies (they included 13,000 ha under the IDA- FAC supported cotton and foodcrops program, 3,100 ha under the IDA-FAC supported Rural Development Project in the Maritime Region 1/ and about 1,400 ha under the FED supported Lama-Kara resettlement project). C. Foodcrop marketing 28. Food is produced mainly for subsistence. Probably no more than 20% of production is marketed, and in poor years the marketable surplus is sharply reduced; thus in the drought period of 1976/77 maize prices in Mari- time rose from CFAF 30 per kilo (considered to be the "normal" price) to CFAF 180 per kilo. Even in normal years seasonal fluctuations are considerable. Farmers lack storage facilities and need cash at harvest time, while marketing is tighly organized by female traders who sometimes buy the crop while it is still in the field. Government has intervened little in foodcrop marketing. TOGOGRAIN, established to build up grain reserves and stabilize the market, has a storage capacity of 17,000 tons but at present only 600 tons of grain in storage. Most of its storage capacity is in silos which are not suitable for Togolese conditions. In light of the deepwater port of Lome and relatively good communications in Togo, the most appropriate price stabilization policy may be encouragement of better storage methods at village level and advance imports of grain in drought years. D. Cash crops 29. Coffee, cocoa and cotton are the main cash crops. By the mid-1970s most trees were over 30 years old, yields were low and production declining. In 1974, the Government agency SRCC embarked on a replanting program. So far 5,500 ha of coffee and 2,100 ha of cocoa have been replanted, and the export value of the two crops totalled CFAF 14.4 billion in 1979/80 compared with CFAF 6.4 billion in 1975 (current prices). 30. An extensive cotton expansion program covering all of the country except Maritime was started in 1977 by the Government agency, SOTOCO. The project has been a success, and so far 40,000 farmers are participating in the program. Cotton production has risen to 23,000 tons for 1979/80 compared 1/ The Maritime project has experienced particular difficulties in developing an appropriate technical package for this area of depleted soils; the farmers credit association has been ineffective, supervision of extension has been poor and project progress has not been adequately monitored.  - 12 - with 6,000 tons p.a. in the early 1970s, and it should reach 37,000 tons by 1985. The program has also encouraged better techniques for cultivation of foodcrops in rotation with cotton. 31. Palm products are a relatively minor source of Government revenue, since oil is mostly marketed privately. However, production may be well over 30,000 tons annually. An oil palm replanting program by SONAPH has been supported by FED since the late 1960s. Progress has been inhibited by drought and in some areas by land disputes, but there are now about 5,770 ha planted with SONAPH aid, 2,500 ha in small farmer holdings and 3,270 ha in plantations. About 5,000 ha more are planned. 32. Cash crops are marketed by OPAT. Attempts to establish farmers' marketing cooperatives have not yet proved successful. Table 7: EXPORTS OF MAJOR CASH CROPS (CFAF BILLION) 1975 1980 Cocoa 5.2 8.1 Coffee 2.2 6.3 Ginned cotton 1.0 1.2 Palm products 0.4 0.5 Other crops 0.3 0.6 Total gross sales 9.1 16.7 Gross OPAT profits 3.2 8.0 Government revenues from OPAT 2.0 5.5 Source: OPAT, Direction du Tresor - See Annex Table 3.3 for export trends. 33. Cash crop production in the past may have been constrained in part by the pricing policy of the Government, which was not always consistent and tended to maximize short term Government revenues rather than encourage pro- duction and maximize foreign exchange receipts, as shown by the study on agri- cultural pricing in Togo undertaken by Bank staff. In the late 1970s, the producer price for coffee and cocoa was less than one-third the export price and considerably lower than producer prices in most other West African coun- tries. Between the 1977/78 and 1979/80 growing seasons, however, producer prices were increased by around 40 percent. Since the increases coincided with sharp falls in export prices for coffee and cocoa, Government revenue from these cash crops declined more sharply. Preliminary analysis suggests that the coffee price should be raised further to stimulate maintenance of recently planted trees. Nevertheless, revenues from exports of coffee and cocoa are still an important source of budgetary revenue, and an appropriate balance must be sought between production objectives and fiscal consequences. In 1980 government revenues from cash crops, predominantly coffee and cocoa, amounted to CFAF 5.4 billion, about 10 percent of total revenue. The coffee/  - 13 - replanting programs should begin to make a significant contribution to Govern- ment revenues by the late 1980s, as the trees come into production. In order to examine criteria to be used in determining producer prices and to assess the likely consequences of various policy options, the Government decided in early 1981 to create a price monitoring unit in OPAT. 34. The price pattern for cotton is particularly distorted. As is the case for other cash crops, fertilizers are offered to farmers at CFAF 15 per kilo, which is only about 20 percent of the current c.i.f. price, and cotton pesticides have to date been provided to farmers free of charge. For an average cotton growing farmer, the overall input subsidy in 1980 amounted to about CFAF 37,400 per hectare (CFAF 13,000 on fertilizer and CFAF 24,400 on pesticides). To the extent that fertilizers were used on food crops, these have also been subsidized. Part of the subsidies to cotton production is offset by implicit taxation at the marketing stage. OPAT has a monopoly on marketing of cotton and benefitted from a profit margin of about CFAF 29 per kilo in 1979/80, because the export price was higher than the producer price, which was fixed at CFAF 60 per kilo. The net effect of a relatively low producer price and heavy input subsidies was a net subsidy per ton of cotton fiber produced of CFAF 27,000, or only CFAF 208 million for cotton production as a whole. The subsidies have helped stimulate a rapid increase in cotton production and export earnings, but this has been achieved at some budgetary cost. Furthermore, although food crop production has also expanded in recent years, output might have increased more rapidly had cotton not been subsi- dized. However, to reduce the burden on the budget of fertilizer subsidies, the Government decided to raise the price charged farmers to CFAF 35-40 for the 1981/82 growing season. The Government is thus moving in the right direction by reducing subsidies, but there is still scope to introduce a pricing policy which would secure a judicious balance between cotton and food crop production. 35. Sugar production is neglible at present, but recorded sugar imports have risen from 4,000 tons in 1973 to 20,000 tons in 1979. A sugar plantation of 1,200 ha is being established with Chinese aid near Anie, and production of refined sugar should be 6,000 tons per year in the mid-1980s. Over 60 Chinese are employed on the project, the costs of which are unknown but which is progressing well technically. It is essential, however, if the benefits of the program are to be lasting, that qualified Togolese be provided for training in project management with the Chinese. E. Livestock 36. Livestock plays a relatively small part in the Togolese agricultural economy, though it is more important in the north than in the south. Seventy percent of farm families keep poultry, 40% keep goats or sheep and 12% cattle. There are about 3 million poultry, 900,000 goats or sheep, 200,000 cattle and 150,000 pigs in Togo. Local production probably meets about 85% of consump- tion, which is at present 6 to 7 kg per head per year. Increased production of large livestock is constrained by the Tse-tse fly for non-resistant cattle, while the main constraints for small livestock, which probably have greater potential in Togo, are poor hygiene and nutrition. The Government Animal Production and Animal Health Services have a staff of over 300; some need retraining, their effectiveness is greatly limited by lack of drugs, equip- ment, transport and supervision, and they are underutilized at present.  - 14 - F. Fishing 37. National sea-fish production is constrained by Togo's limited coast- line. Annual per capita consumption varies from 14 kg in Maritime to only 1 kg in Centrale, far from the sea and with few lakes and rivers. The Government fisheries service has a staff of over 80, but they have a limited impact at present on increasing fish production. G. Forestry 38. Togo is not a major producer of hardwoods. Most hardwoods used for furniture and construction are imported. The main use for wood is for charcoal and direct burning as a cooking fuel, collected from naturally growing bush and forest. Firewood resources in Maritime and Lama Kara are being depleted, but elsewhere natural regeneration probably balances consumption. ODEF was formed in 1974 to protect, develop and commercialize forest production in Togo. It has a staff of 150 and has had a limited impact on the sector to date. H. Water management 39. Some irrigation schemes have been started with foreign assistance. They include a system for 800 ha of irrigated rice prepared by the Chinese at Tsevie and 800 ha of irrigated rice undertaken by the North Koreans in the Mono Valley. Engineering works are complete but in both schemes severe difficulties are being met in using the irrigation techniques necessary to produce high- yielding paddy. The Fourth Plan includes proposals for two large irrigation schemes, which should be very carefully studied before they are embarked upon, bearing in mind the limited Togolese experience with water management systems. I. Institutions for agricultural development 40. The Government structure for agricultural development is confused. In 1975 the Ministry for Rural Development, then responsible for Rural Develop- ment policy, was split into two. The Ministere de Developpement Rural was to be concerned with production and programs support for it, and the Ministere d'Amenagement Rural with rural infrastructure. The distinction between the two has in practice been very unclear; for example, the Direction de Produc- tion Animale is with the first, but the Direction de Sante Animale is with the second. At the regional level, agriculture was supervised by SORADs 1/ from the late 1960s. These were divided in 1977 into ARACs, 2/ concerned with extension, and ORPVs 3/ comprising the different production entities with government control. In practice this distinction too has been very unclear, and they have recently been re-merged into DRDRs, 4/ whose functions are the same as the old SORADs. 1/ SORAD - Societe Regionale d'Amenagement et de Developpement. 2/ ARAC - Animation Rurale et Action Cooperative. 3/ ORPV - Organisation Regionale pour le Developpement des Vivrieres. 4/ DRDR - Direction Regionale pour le Developpement Rural.  - 15 - 41. There are over 3,000 staff employed by the two Ministries, an increase of 1,000 since 1976, but they are in general poorly supervised and do not have clear work programs. They also have very little means with which to work. Examination of the recurrent cost budget for the 1975-80 period indicates that personnel formed 85 to 90% of total recurrent costs for the Ministries of Rural Development and Rural Equipment. Furthermore, non- personnel expenditures fluctuated considerably from year to year, indicating an inconsistency in the provision of inputs. It is important, if develop- ment programs are to have lasting impact, that their operating costs be incorporated into the recurrent expenditure budget. 42. In addition to departments depending directly on the Ministries of Rural Development, there are parastatals concerned with agriculture, but whose programs are frequently not coordinated with those of the rural development ministries. These include TOGOGRAIN, SOTEXMA and TOGOFRUIT. The organizations which manage the IDA and FAC supported projects, SRCC, SOTOCO and PRODERMA, and the cash crop marketing organization OPAT are better integrated. Rural development projects directed at the small farmer have not always been the responsibility of the rural development ministries; the Nord-Togo and Lama- Kara projects are supervised directly by the Ministere de Plan. The lack of an effective line of authority for all rural development schemes hinders the implemetation of a consistent program. 43. CNCA is the agricultural credit institution, but most farmers have no access to credit and most of its loans have been to parastatals. Where small farmer loan schemes have been established, the repayment record has been poor, under 50% for the coffee/cocoa project, and under 30% for the PRODERMA project. On the other hand, credit recovery for SOTOCO, concerned with production of an annual crop with a guaranteed system for marketing and inputs, has been good. The whole issue of small farmer credit needs care- ful reexamination. J. The 1981-85 plan and future developments 44. Agriculture and rural development have been allocated the highest priority in the Fourth Plan. Agriculture is to receive CFAF 117 billion (45 percent of total planned investments). The emphasis on agriculture is sound; however, a coherent investment strategy needs to be prepared if there is to be an effective agriculture development program. The current agricul- tural investment program is too ambitious and includes projects which have not been carefully analyzed. Proposed projects, which the mission considers the Government should not embark upon without further study, include: the proposed "peasant production" foodcrop (CFAF 21.3 billion); large-scale farms with agro-industrial complexes (CFAF 10 billion); cattle ranches (CFAF 5.5 billion) expansion of TOGOGRAIN's capacity (CFAF 4.1 billion), and irri- gation works (CFAF 6 billion) (see Table 11.18).  - 16 - 45. The suggested prerequisites of a coherent agricultural development program are as follows: (i) An assessment of ecological constraints to agricultural development, particularly with regard to soils, water management and rainfall, and the measures necessary to conserve soil resources; (ii) Improved knowledge about current production and cropping patterns, this is expected to be provided by the agricultural census to be carried out with FAO assistance in 1982; (iii) An evaluation of agricultural projects currently under way and the lessons that may be learned from them; (iv) An examination of the existing institutions for rural development, their roles, coordination, personnel and equipment; (v) A thorough assessment of medium-term management and financial constraints; and (vi) An assessment of the appropriate balance of investments between the various subsectors (export crops, foodcrops, fishing, livestock and forestry). This must be made within the context of international price movements (for export crops), growth in internal demand, and the comparative advantages of the subsectors. Price prospects for the main cash crops are not very bright, except for cotton. There is room to increase foodcrop production in line with population growth and increasing urbanization, but too large an increase in foodcrop production might raise problems of finding outlets outside Togo. 46. Identification and preparation of an agricultural development program would follow a thorough sectoral analysis as described above. However, the program would probably focus on small-farmer foodcrop development and would include the following components: (i) building up an extension program through an effective supervi- sion, training and visit system; (ii) a coordinated system of applied research to build up technical "know-how "; (iii) seed multiplication and fertilizer provision with distribution programs; (iv) crop protection, credit and marketing programs as appropriate; (v) associated infrastructure; and (vi) monitoring and evaluation to assist management in program improvement. Appropriate land preparation and soil and water management systems also need very careful study.  - 17 - 47. The Bank is planning to carry out agricultural sector work in 1981 to assist the Government in the recommended analysis of the sector, and to identify and prepare a nationwide small-farmer cotton and foodcrop develop- ment program. IDA will also identify those areas where the Government could best call upon technical assistance to formulate its development strategy and prepare a realistic program. K. Production prospects 48. Even if a foodcrop program is successfully prepared, with execution starting by 1983/84, the impact on food production will not begin to be substantial before the late 1980s. Assuming favorable growing conditions, output of tubers would increase roughly in line with rural population growth to 1 million tons in 1985. Output of grains, particularly rice and maize, could increase a little more rapidly, by 3 to 3 1/2 percent per annum, to 350,000 tons in 1985. Projections for increases in production of the cash crops which are currently receiving Government and foreign support, can be made with more confidence. Cotton production should increase from 23,000 tons in 1980 to 37,000 tons in 1985; cocoa from 14,000 tons in 1980 to 16,800 tons in 1985; and coffee from 10,000 tons in 1980 to 12,100 tons in 1985, again under favorable growing conditions. L. Conclusion 49. Togo has considerable agricultural potential, but the sector has been relatively neglected for the last decade. If Government directs its investments in those areas where agricultural productivity and incomes can best be increased, the sector can make a growing contribution to the economy by the late 1980s. MINING 50. Phosphate mining is expected to remain the leading activity in Togo for a long time. Price prospects are favorable. According to the Bank's latest estimates, in constant prices, phosphate rock is expected to increase from US$46 in 1980 to US$53 in 1985. Phosphates are expected to generate steadily increasing export receipts (about 27 percent of total exports in 1985) and public revenues (30 percent of public revenues). This target could be reached without any new investments. However, OTP should consider building a sixth line in the mid-1980s to reach a volume of production of 4 million tons if the prices at the time justify it.  - 18- Table 8: PHOSPHATE REVENUES (IN CURRENT PRICES) 1980-1985 1980 1981 1982 1983 1984 1985 Volume (000 tons) 2,750 2,900 3,000 3,200 3,200 3,400 FOB price (CFAF/Ton) 10,500 10,500 11,300 13,000 15,200 16,400 OTP revenue (CFAF/Ton) 3,500 4,500 5,000 5,500 5,500 6,000 Treasury (CFAF/Ton) 7,000 6,000 6,300 7,500 9,700 10,400 Export FOB (CFAF million) 28,900 30,400 33,900 41,600 48,600 55,700 OTP payment to Treasury CFAF million 19,250 17,400 18,900 24,000 31,000 35,400 - in % of government revenues 31.0 26.4 25.5 27.5 30.2 30.2 - in % of Exports 35.8 28.3 27.0 27.6 27.6 27.4 Source: Data provided by OTP, and mission estimates. 51. In recent years, there has been a major change in the trading pattern of phosphate rock. Exports of phosphate intermediates have tended to increase faster than rock exports, because of savings in transport and processing from transformation on the site. Togo is investigating the possibility of producing phosphoric acid and fertilizers, but since there is a premium on the export market for the high quality Togolese rock, searches are being made to find lower grade deposits, which would form a more suitable basis for a domestic phosphoric acid plant. The Bank Group is assisting the Government in the prep- aration of a phosphoric acid project which would produce about 300,000 tons of phosphoric acid per annum. Of an enclave nature, this project which is esti- mated to cost about US$500 million, CFAF 60 billion (in 1980 prices), will involve major technical, financial, managerial and commercial studies. Plant construction, under the best assumptions, would not start before the mid-1980s. 52. CIMAO will undoubtedly help diversify Togo's exports over the next five years, and replace imports of clinker. However, CIMAO's contribution to the growth of the economy is expected to remain limited. CIMAO employs 600 staff of which only 200 are Togolese. Financial projections indicate that it is only in the second half of the eighties that CIMAO will generate surpluses. Foreign exchange earnings from exports of clinker are estimated at CFAF 13 billion in 1985 (i.e. 6 percent of total exports). The construction of a second line which would increase the capacity from 1.2 million to 1.9 million tons is expected to be undertaken around the mid-1980s, once CIMAO has over- come its start-up difficulties. The cost of the second line can be tentatively estimated at US$100-150 millions, CFAF 20-30 billion (in 1980 prices). 53. The Fourth Plan includes several small mining projects amounting to CFAF 2.3 billion, the most interesting of which is the altapulgite project. Altapulgite is a clay used in offshore oil drilling. The project cost is estimated at CFAF 2 billion, and its return is expected to be high. The pro- duction, which would amount to about CFAF 1 billion annually, would mostly be exported. The project is promoted by a Swiss company, and IFC might consider participating in its financing. The project could start in the mid-1980s.  - 19 - 54. While mineral production makes a major contribution to export receipts and Government revenue, it has also introduced a considerable ele- ment of instability in the economy and posed the problem of how to rationally dispose of large, sudden windfall profits. The large decline in exports of phosphate rock in 1976 would have resulted in an awkward revenue shortfall for the Government, were it not for the simultaneous, but fortuitous, sharp increase in revenue from cocoa and coffee exports due to higher world market prices. The unforeseen more than tripling of Government revenue from phos- phates in 1975 prompted the Government to embark on its ambitious 1976-80 Development Plan and to relax significantly the hitherto rather strict budge- tary discipline. Believing erroneously that the slump in phosphate revenue would be temporary, the Government persisted with its overly expansionary financial policies through major recourse to foreign borrowing, until grow- ing payment arrears forced a policy reversal in 1978. In a sense, then, it was the spectacular, but short-lived boom in phosphates in 1974/75, which unleashed the chain of events which led to much wasteful public invest- ment since 1975 and the serious financial problems currently facing Togo. 55. Unlike many other countries with large mineral sectors of an enclave type, there is scant evidence in Togo that the substantially above average wages paid in the mineral sector have been a significant factor in domestic inflation. Nor does the competitiveness of other sectors seem to have been impaired by the presence of the islands of relative prosperity, which OTP and CIMAO constitute. This is mainly because in employment terms OTP and CIMAO are rather small. Employing 2,200 and 600 respectively in 1980, together their personnel corresponds to only about 7 percent of the civil servants of the Central Government and less than 3 promille of total employment. The wage differentials are marked, however; whereas the average annual labor remuneration of the Central Government was CFAF 0.5 million in 1980, for OTP it was CFAF 1.1 million and for CIMAO CFAF 2.3 million (in part because of the presence of more expatriates, reflecting the recent start-up of the company). INDUSTRY 1/ 56. Manufacturing activities are of limited importance in the Togolese economy, contributing only 7 percent of GDP, and growing at a slow pace (2 percent per annum) between 1975 and 1980. The sector consists of about 90 private enterprises employing 8,000 people, of which half are industrial enter- prises and half are handicraft workshops. The manufacturing sector consists of import substitution activities--food, beverage, shoes and cement. The limited size of the domestic market, and the lack of managerial and technical skills constitute the main obstacles to the expansion of the sector. In addition, competition from Ghana and Nigeria is keen, and several enterprises, producing for instance vegetable oil and bicycles, have lost sales recently 1/ This section does not deal with the state and mixed enterprises estab- lished during the Plan period (see Volume I, para. 50 ff).  - 20 - due to uncompetitive prices. The potential for export is also limited, because Togo has only few comparative advantages. Local entrepreneurs have not become very active in industry, preferring to invest in commerce or real estate, where yields are perceived to be higher and safer. Private foreign investments have also been limited. 57. Local industries are very little protected through quotas or tariffs, in line with the Government's liberal economic policy. But Togo has an Investment Code which offers generous advantages in the form of exemptions from duties on imports and profit taxes (15 years for import duties and 9 years for profits taxes). A cost-benefit analysis of the Investment Code is called for with a specific linkage of means to objectives. 58. The Government has recently established the National Center for the Promotion of Small and Medium-Scale Enterprises (CNPPME), aimed at inducing Togolese entrepreneurs gradually to move into industrial activities. CNPPME is expected to help potential investors with feasibility studies and operates two industrial estates in Lome and Lama Kara. The lack of funds, technical and managerial personnel and investment opportunities have limited the inter- ventions of the CNPPME. 59. To promote local private investments in Togo, two development banks have been created: the SNI (Societe Nationale d'Investissements) is expected to specialize in large projects and the BTD (Banque Togolaise de Developpement) in smaller projects. The volume of development projects financed by these two banks has remained relatively limited, in particular for the SNI reflecting both a shortage of viable projects, and insufficient project preparation capacity of these two institutions, but not a shortage of funds per se. As a result, BTD has concentrated on mortgage lending while the SNI has been underutilized. Moreover, during the last five years, these two institutions have been called upon to contribute to the financing of the Plan, or to mount rescue operations for ailing state enterprises. The Government is willing to enhance the role of both SNI and BTD. SNI has recently recruited 30 young economists, and both institutions have requested Bank assistance to improve their operations. Table 9: CREDIT GRANTED BY BTD, CUMULATIVELY 1967-79 (in millions of CFAF) Sector Amount Percent of total Real estate 10,879 48.8 Industry and handicrafts 4,516 20.2 Social and consumer loans 1,700 7.6 Local governments 1,405 6.3 Agriculture 1,209 5.4 Other 2,597 11.6 TOTAL 22,306 100.0 Source: BTD Annual Report 1978/79  - 21 - 60. The outlook for manufacturing points toward a slightly more rapid growth than in the recent past. Mission estimates project now an increase in growth to about 4 percent per annum (in constant terms), assuming improved performance of some enterprises. CIMTOGO, the cement grinding plant is an example of a plant with potential, which was able to export part of its pro- duction to landlocked Upper Volta. Well equipped and managed, CIMTOGO in- creased its production to 300,000 tons in the late seventies. Investments to expand capacity to 900,000 tons are under way. There is also room to improve the construction industry which employs about 4,000 workers. Pre- sently about 3/4 of the public works are carried out by foreign contractors. The remainder is being executed by domestic contractors, who are in fact sub- contractors of the foreign firms. The development of the domestic construc- tion industry has been impeded by the lack of adequate equipment and working capital, because local small-scale contractors have only limited access to financing. But, in addition to funds, they also need assistance to streng- then their technical and financial management. BTD and SNI could help in this respect. SERVICES 1/ 61. There are about 360 formal sector commercial enterprises in Togo employing about 6,000 people and competition is lively. Commercial activities are estimated to contribute a large share of Government revenues. SONACOM (Societe Nationale de Commerce) has the monopoly of import of some basic goods such as rice, sugar, flour, and salt. Large foreign importing companies are also represented in Togo. Domestic trade is spread out among a large number of petty traders, many of whom are women. The internal distribution network functions well and major markets are normally supplied with a broad range of products. Markets are rarely restricted by price controls, although a system of price controls exists on paper. For a few important consumer goods, such as sugar, bread and local beer, and petroleum products, retail prices are fixed. The prices, however, are sufficiently high to avoid a need for subsidies. 62. Transport activities generate about 7 percent of GDP and employ about 4,400 people. They have grown fast over the last 10 years as the infrastruc- ture network was being expanded. The expansion of the port of Lome and the pavement of the south-north link enhanced the transit trade with Upper Volta and Niger. In view of the short distances, road transport is the predominant mode in Togo. 63. There are six major freight transporters in Togo, mostly engaged in transit traffic (about 100,000 tons per annum), and about 160 small transpor- ters carrying domestic traffic (36,000 tons per annum). Since entry into the profession is free, competition is stiff which has led to rate cutting and overloading. Anxious to develop transit trade through the port of Lome and to ensure that Togo gets a fair share of the traffic, the Government established 1/ Excluding the Central Government.  - 22 - a state-owned trucking enterprise (Togoroute) in 1976, which has experienced the difficulties mentioned in para 53 of the main report. Prospects are for a 4 percent annual growth of the transport sector based on the assumption that transit trade will continue to increase. 64. Although the expansion of Togo-s transport infrastructure has now reached a stage where most of the country's present needs are met, several major issues remain to be solved. Because of a focus on individual projects, absence of transport planning and coordination among different modes is a serious problem. To cope with this problem the Government created, in mid- 1980, a General Directorate of Transport (GDT), which became operational in early 1981. The main tasks of GDT will be to define a transport development strategy, prepare projects, collect basic data such as costs by transport mode, and to examine special issues such as road freight transport and rail/road coordination. 65. The three Government-owned railroad lines in the South and the Center, which are operated by the Chemins de Fer du Togo (CFT), lost much of their traffic when parallel paved roads were built around 1970. Since then freight by rail has been limited largely to bulky commodities like cement, fuel, and phosphate rock on OTP's own spur line. Passenger traffic between Lome and major cities is maintained by charging low rates. CFT has incurred operating losses regularly, has no financial autonomy and no funds to finance a replacement of badly worn out rolling stock. In the framework of project preparation with the Bank Group, the Government decided in the spring of 1981, to prepare an action program for CFT aiming at improved operations with existing rail infrastructure. 66. The substantial expansion of the road network inevitably led to growing need for maintenance, but the deteriorating financial situation of the Government in 1978 prompted a cutback in road maintenance expenditure, which has since been inadequate. However, in order to forestall the need for major repairs or road rebuilding in a few years time due to neglect of maintenance, the Government has decided to allocate a minimum of CFAF 750 million annually to road maintenance. 67. Tourism has expanded by 30 percent per annum between 1975 and 1980, as measured by hotel receipts and is expected to increase further by 20 percent per annum, as Togo has constructed several new hotels of high standard, which has led to much excess capacity. The number of rooms in Lome amounts to 1,160, mainly luxury hotels. At the present room occupancy rate of 40 percent, hotels are estimated to lose about CFAF 4 billion per annum, and are unlikely to break even before the mid-1980s. The outlook would be better if an agreement could be reached to liberalize restrictions on charter flights, or, which is much less likely, if large international institutions would settle in Lome. This would allow for a higher rate of occupancy in the Hotel du 2 Fevrier which, as stated earlier, is the main loss-maker. Value added by tourism, although still rather limited in terms of GDP, has created about 2,200 jobs in the hotel industry, and currently generates CFAF 3 billion in gross foreign exchange earnings per annum (i.e. 3 percent of total imports of goods and N.F.S.).  - 23 - ENERGY 68. Togo is not well endowed with energy resources. No exploitable oil or coal deposits have been found so far. An oil exploration program is however foreseen during the 1981-85 Plan, but the likelihood of finding commercially exploitable deposits in off-shore areas, like in Benin, is limited by a short coastline (only 55 km). The small area and relative flatness of Togo explain the scarcity of large hydroelectrical sites. Most energy has therefore to be imported. The major domestic source of energy is firewood, which raises the threat of gradual deforestation. 69. Consumption of both petroleum products and electricity increased rapidly from 1975 to about 250,000 tons of refined petroleum products and 200 GWH of electricity in 1980, because of growth in passenger and freight trans- port following the expansion and improvement of the road network, the boom in construction, and the realization of energy-intensive industrial projects, such as the CIMAO clinker plant and the steel mill. Consumption of petroleum products is almost exclusively met through imports, because STH exports nearly all of its low sulphur output, which commands a quality premium on the world market. 70. Over 90 percent of the electricity consumed in Togo is imported from Akosombo (Ghana), and is distributed by the Communaute Electrique du Benin (CEB), which is owned jointly by Togo and Benin. In 1969, CEB entered into a contract with Ghana, by which Ghana would supply for 15 years 50 MW of hydro power from Akosombo to CEB (equivalent to 300 GWH), starting in 1973. The electricity generated by the huge Akosombo dam is supplied at competitive prices. Due to depressed economic conditions in Ghana, supplies of electri- city have in recent years exceeded the amounts specified in the delivery contracts. Nevertheless, part of peak demand in Lome is met from costly local thermal generating plants, which rely on imported fuel. As stated in para 16 of the main report, the Government has built three thermal plants, which have increased Togo's own generating capacity to 116 MW, but following the sharp increase in fuel prices in 1979 the thermal plants cannot produce at a price competitive with that of Akosombo, and are consequently greatly underutilized. The thermal plants were built in part to supply the nearby steel mill with electricity. The steel mill, however, is producing at only a fraction of its capacity and prefers to rely on cheaper electricity from Ghana. 71. Retail prices of petroleum products, which are fixed by the Govern- ment, were raised by over 30 percent in July 1980 to account for sharply higher import prices. The liter price for premium gasoline was increased to CFAF 145 (about US$2.35 per gallon) and that of regular gasoline to CFAF 142. Various domestic taxes account for 45 percent of the retail prices, while the profit margin allowed retailers is less than 4 percent. Whereas fuel oil is taxed in a similar fashion, the taxation of kerosene, a mass-consumption item for lighting, is much less, about 27 percent of the retail price in gross terms, but reduced to 4 percent in net terms through the granting of a subsidy. In July 1981 retail prices of petroleum products were again increased; the price for premium was raised to CFAF 175, and the price for regular to CFAF 169.  - 24 - Electricity tariffs have hardly been changed since 1968, because of the con- tinuing availability of cheap electricity from Ghana, and need to be adjusted to achieve a more realistic and sustainable price relationship between elec- tricity and petroleum products. 72. In view of the sharp rise in the cost of electricity provided through thermal plants using imported fuel, and the prospect that deliveries from Ghana will be substantially more costly in the near future, and cut back to less than current amounts after the expiration of the present contracts, Togo has decided to reduce its reliance on imported energy. Together with Benin, Togo has decided to develop the hydro-electrical potential of the Mono river, which over its last 100 km forms the border between the two countries, by building a dam and power station at Nangbeto upstream on Togolese territory. The objective of the Nangbeto hydro-electric project is to produce 144 GWH annually, equivalent to nearly half of the electricity consumed in Togo and Benin during 1980. The total cost of the Nangbeto project is estimated to be US$120 million. Under favorable circumstances, production of electricity could begin in 1986. 73. The Bank Group's lending program includes the Nangbeto project as a project for FY85 with an IDA allocation of US$30 million. To assist in the financing of engineering and feasibility studies, the Bank Group has included in its lending program for FY82 an IDA allocation of US$3.8 million for a Nangbeto engineering credit. In connection with this credit, a PPF of US$800,000 was approved in November 1980 (US$400,000 each to Togo and Benin).  IBRD 13601R ' U.PP V O L t aauRITANIA ' ' -11- j 9 r 1) g rd~~~~~~~~~~~~~~~~~ALI NIGER /ODOPOOn U'E I / ~~~~D APA ON / ,s GU E- ' i,,) N IGERIA S A V A SES ~ '/cocE AN ANGO KANTE le \ I ~~~~~~~~~~Konle