Sierra Leone - Second Integrated Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4581 PROJECT PERFORMANCE AUDIT REPORT SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II (CREDIT 568/LOAN 1138-SL) June 24, 1983 Operations Evaluation Department 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. ABBREVIATIONS' APMU - Agricultural Project Management Unit CAC - Credit Advisory Committee CARE - Cooperative American Relief Everywhere CSS - Commercial Services Section CUSO - Canadian University Services Overseas DOPC - Daru Oil Palm Company EAP - Eastern Area Project EAPMU - Eastern Area Project Management Unit EEC SAC - European Economic Community Special Action Credit FFC - Farmers Finance Company GOSL - Government of Sierra Leone IADP II - Second Integrated-Agricultural Development Project IADP III - Third Integrated Agricultural Development Project IDA - International Development Association IFAD - International Fund for Agricultural Development MAF - Ministry of Agriculture and Forestry MANR - Ministry of Agriculture and Natural Resources MOW - Ministry of Works NAP - Northern Area Project NAPCO - National Produce Company NAPMU - Northern Area Project Unit NDB - National Development Bank ODA - British Overseas Development Administration OED - Operations Evaluation Department PAC - Project Advisory Committee PAO - Provincial Agricultural Officer PCC - Project Coordinating Committee PCR - Project Completion Report PEMSU - Planning Evaluation and Monitoring Services Unit PESU - Project Evaluation Services Unit PMU - Project Management Unit PPAM - Project Performance Audit Memorandum PPAR - Project Performance Audit Report RMWA - Resident Mission in West Africa SAR - Staff Appraisal Report SLPMB - Sierra Leone Produce Marketing Board USAID - United States Agency for International Development FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II (Credit 568/Loan 1138-SL) TABLE OF CONTENTS Page No. Preface .................................................................. . Basic Data Sheet ...................................................... iii Righlights .............................................................. v PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT SUMMARY ....1.................................... II. MAIN ISSUES ............................................... 5 A. Integration of the Project Management Units into the Ministry of Agriculture and Forestry ............................................. 5 B. Road Construction and Maintenance ................... 6 C. Agricultural Credit ..........................7......7 Annex I - Comments from the Borrower .......................... 8 PROJECT COMPLETION REPORT I. Background ................................................... 16 II. Identification, Preparation and Appraisal .................. 16 III. Implementation ............................................... 18 IV. Institutional Performance and Development ................. 26 V. Agricultural and Social Impact .............................. 39 VI. Economic Evaluation .......................................... 46 VII. Performance of the Bank and the Borrower .................. 47 VIII. Issues and Conclusions ....................................... 49 Tables Maps 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.  PROJECT PERFORMANCE AUDIT REPORT SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II (Credit 568/Loan 1138-SL) PREFACE This is a project performance audit report on the Second Integrated Agricultural Development Project (IADP II) in Sierra Leone, for which Credit 568-SL and Loan 1138-SL, each for US$5.0 million, were approved in April 1975. A Special Action Credit from the European Economic Community (SAC 53-SL) equivalent to US$2.0 million was also granted in 1979, but due to currency realignments, the US Dollar value of this Credit was only US$1.75 million at the end of the disbursement period. The IDA Credit and the Bank Loan were closed in September 1981, one year after the original closing dates. Dis- bursements under Credit 568-SL were completed in September 1978 and under Loan 1138-SL in April 1982. The project included two areas - the Eastern Area Project, which was completed in June 1980, and the Northern Area Project, which was completed in June 1981. The project in the Eastern area was the second phase of the development project, and this has now been followed by a third phase, the Eastern Integrated Agricultural Development Project III (Credit 1094-SL). Performance under the first project was reviewed in the Project Performance Audit Report (Number 2066) dated May 22, 1978. The project in the North was the first phase of development and this has been followed by the Northern Integrated Agricultural Development Project II (Credit 1128-SL). The audit report consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the Western Africa Regional office. The PPAM is based on a review of the Appraisal Report (644a-SL), dated April 8, 1975, the, President's Report (P-1603-SL), of April 9, 1975, and the Loan and Credit Agreements, dated July 2, 1975. The audit has also examined the EEC Special Action Credit Agreement dated May 30, 1980. Correspondence with the Borrower and internal Bank memoranda, as contained in relevant Bank files, have been consulted. The audit has also reviewed a report on an evaluation of the Northern Area Project 1/. A copy of the draft report was sent to the Government of Sierra Leone. The comments received have been taken into account in the final report. The comments are reproduced in full at Annex 1. 1/ Karimu, J. and Richards, P. "The Northern Area Integrated Agricultural Development Project. The Social and Economic Impact of Planning for Rural Change in Northern Sierra Leone". Department of Geography, School of Oriental and African Studies, University of London, Occasional Paper No. 3, 1980. - ii - The audit generally supports the conclusions in the PCR and agrees that the project has had modest success in meeting physical targets. however, institutional development under the project has been weak, while implementa- tion has been delayed. There have also been significant cost overruns, especially for road construction. These issues are discussed in the PPAMY. - Ili - PROJECT PERFORMANCE AUDIT REPORT SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II (LOAN 568-SL/CREDIT 1138-SL) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as % of Item Estimate Estimated Actual Appraisal Estimate Total Project Costs (US$ million) 13.7 15.2/a 111 Loan/Credit Amount (US$ m 1lion) 10.0 10.0 100 EEC Special Action Credit b 2.0 1.7 85 Date Board Approval 04/29/75 Date Effectiveness 09/30/75 01/29/76 Closing Date 08/--/80 09/--/81 Economic Rate of Return (%) 26 10 38 Financial Performance (%) 30 Institutional Performance (%) 50 Northern Region Date Physical Components Completed 12/--/79 06/--/81 - Proportion then Completed (%) 100 90 90 Economic Rate of Return (%) 14 10 71 Institutional Performance 100 60 60 Agronomic Performance 100 75 75 Number of Direct Beneficiaries (1979) 7,800 (1981) 11,200 140 Eastern Region Date Physical Components Completed 12/--/77 06/--/80 - Proportion then Completed (%) 100 90 90 Economic Rate of Return (%) 36LC 9 25 Institutional Performance 100 40 40 Agronomic Performance 100 70 70 Number of Direct Beneficiaries (1977) 6,000 (1980) 2,700 45 CUMULATIVE DISBURSEMENTS Ld FY76 FY77 FY78 FY79 FY80 FY81 FY82 Appraisal estimate (US$ million 2.1 6.0 7.9 9.2 10.0 12.0 Actual (US$ million) 0.2 1.9 4.3 6.7 9.25 11.57 11.7 Actual as % of estimate - 10 32 54 73 93 96 98 Date of Final Disbursement 04/14/82 MISSION DATA Date No. of Mandays Specializat ons Performa ce Types of Mission (mo./Yr.) Persons in Field Represented.e R Trenda Problems/h Identification 11/70 5 105 - - - - Preparation 01/73 2 21 - - - - Appraisal 05/74 6 168 a, b - - - Subtotal Supervision L/i 08/75 2 14/1 a, b 2 - H, F Supervision 2 01/76 2 28/1 a, b 2 2 M, F Supervision 3 03/76 3 14/k . - Supervision 4 05/76 1 7 b - -- Supervision 5 05/76 1 21 c - - F Supervision 6 09/76 1 14/1 c - - F Supervision 7 02/77 1 7 a 2 2 M, F Supervision 8 10/77 2 14/k a, c - - T Supervision 9 05/78 2 28/-k a, a 1 1 F Supervision 10 09/78 2 42 a, b 2 2 M Supervision 11 01/79 1 14 a 2 2 T, M Supervision 12 10/79 2 35 a, b 2 2 T, M Supervision 13 03/80 1 7 a 2 2 T, M Supervision 14 10/80 1 21/m a 2 2 T Supervision 15 01/81 1 7/- d - - Supervision 16 02/81 1 14/m a 2 2 T, M Completion 02/81 1 21/o b - - - Supervision 17 05/81 1 7@ d - - - Total 315 - iv - OTHER PROJECT DATA Borrower Government of Sierra Leone Executing Agency Ministry of Agriculture and Forestry Fiscal Year July to June Name of Currency (abbreviation) Leone (Le) Currency Exchange Rate: Appraisal Year Average US$ 1.00 - Le 0.9 Intervening Years Average US$ 1.00 - Lel.08 Completion Year Average US$ 1.00 - Le 1.101k Follow-on Project: (a) Name Eastern Integrated Agricultural Development Project III Credit Number 1094-SL Amount (US$ million) 12.0 Board Approval 01/31/81 (b) Name Northern Integrated Agricultural Development Project II Credit Number 1128-SL Amount (US$ million) 8.5 Board Approval 03/31/81 /a At the average rate of exchange of Le 1.066 per US $. 7T The EEC Special Action Credit of US$2.0 million was obtained in 1979. Due to devaluations of the currencies vie-a-vis the US$ the final amount of the credit was equivalent to only US$1.7 million. /c This ERR is for Phase I and II, for Phase II alone the SAR estimated that the ERR would be greater than 362. 7d' Includes the Credit/Loan and the EEC Special Action Credit. e a - Agriculturalist; b = Agricultural Economist; c - Financial Analyst; d = Roads Engineer; e - Tree-crop Specialist. /f 1 - problem-free or minor problems; 2 - moderate problems; and 3 - major problems. 7 1 - improving; 2 - stationary; 3 - deteriorating. h F - financial; M managerial; T = technical; P = political; and 0 - other. 711 Includes supervision of Cr. 323-SL. 7 Includes PCR of Cr. 323-SL. /k Includes review of proposal for a Phase III and Rubber projects. 71 Includes review of proposal for a Phase III. 7m' Includes supervision of Magbosi (IFAD Ln. 53-SL/TA Grant 10-SL). 7-n Includes general feeder roads review. 7-o Includes supervision of Cr. 1094-SL. 7- Average of 1980 and 1981 since the EAP was completed in June 1980, and the NAP in June 1981. - v - PROJECT PERFORMANCE AUDIT REPORT SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II (Credit 568/Loan 1138-SL) HIGHLIGHTS The Second Integrated Agricultural Development Project (IADP II) aimed to continue the agricultural development program started in the Eastern Province of Sierre Leone under the first project (Sierre Leone Integrated Agricultural Development Project, Credit 323-SL, OED Report No. 2066, dated May 1978). IADP II also included a new development program covering part of the Northern Province. The project was intended primarily to increase production of rice, cocoa and oil palm in the Eastern Province and rice and groundnuts in the Northern Province. IADP II has been followed by the Eastern Integrated Agricultural Development Project III (Credit 1094-SL) and the Northern Integrated Agricultural Development Project II (Credit 1128-SL). The project has been relatively successful in achieving physical production targets for cocoa and oil palm in the Eastern Province and rice in the Northern Province. However, production of rice in the Eastern Province and groundnuts in the Northern Province was disappointing. Project costs have also been higher than expected, largely due to greatly increased road con- struction costs. The PCR has re-estimated the economic rate of return at 10%, compared with 26% estimated at appraisal. However, the project has done little to strengthen or develop the institutions which will eventually have to assume responsibility for agricultural extension, farm credit and input supplies, and road construction and maintenance. Some of the lessons learned and points of interest, are as follows: - the project was implemented by specially created autonomous project units. Although this arrangement helped the project to achieve physical targets, it has not proved possible so far to reintegrate the project unit in the Eastern Province into the parent ministry, in the way intended (the project unit in the Northern Province was not scheduled for integration during the project period). - Only about one-third of the appraisal target for feeder road con- struction was achieved, but road construction costs per mile were about 5 times the appraisal estimate, largely because they were constructed to higher standards. The prospects for satisfactory maintenance of these roads in the future is uncertain. - vi - - Results so far from the project's agricultural credit program have been disappointing. Administrative costs have been high, while loan repayments have been poor. It was not possible to establish the Farmers Finance Company as a viable credit institution, as planned. - The company established to process oil palm fruit has incurred significant losses, partly because farmers have been reluctant to supply fruit to the factory at Government-controlled prices. - Cost overruns were financed with a Special Action Credit equivalent to US$1.7 million from the European Economic Community. - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II (Credit 568/Loan 1138-SL) I. PROJECT SUMMARY 1. This was the Bank Group's second agricultural lending operation in Sierra Leone. The first project, the Integrated Agricultural Development Project (Credit 323-SL) involved development of oil palm, cocoa and rice and oil palm processing in the Eastern Province of Sierra Leone. This project was completed in 1975 (OED Report No. 2066, dated May 1978). The second phase project (IADP II) involved continuation of the activities started under Phase I in the Eastern Province, and the start up of a similar project in the Northern Province. 2. The feasibility study for the project in the Northern Province (NAP) was prepared by the Government of Sierra Leone (GOSL) with assistance from outside consultants and the Bank's Resident Mission in West Africa (RMWA). Plans for extension of the project in the Eastern Province (EAP) were prepared by the GOSL in consultation with Bank staff. IADP II was appraised in May/ June 1974 and became effective in January 1976. 3. The project was aimed at increasing production of rice and ground- nuts in the NAP and rice, cocoa and oil palm in the EAP. In both areas the project involved support for agricultural extension, credit and farm input supply services. In the Northern Province the project included a component for construction and improvement of feeder roads. In addition, the project included support for a Project Evaluation and Services unit (PESU) in the Central Ministry of Agriculture and Natural Resources (MANR, which has now become the Ministry of Agriculture and Forestry (MAF)). 4. In both areas the project was to be implemented by specially created project management units (PMUs). In the new project in the Northern Province the PMU was expected to function throughout the full four year project period, while in the Eastern Province the project was expected to last only two years, when the PMU would be integrated with MANR. Two other key project supported institutions in the EAP, the Farmer Finance Company (FFC) and the Daru Oil Palm Company (DOPC) were also expected to have been established as viable institutions before the end of this two year period. 5. The total project cost was expected at appraisal to amount to US$13.7 million (Le 11.4 million). This was to be financed with an IDA Credit of US$5.0 million, an IBRD loan of $5.0 million, US$3.5 million (Le 2.9 million) from the Government, and US$0.2 million (Le 0.17 million) from farmers. 6. Actual project costs amounted to US$15.2 (Le 16.2 million), 11% higher than estimated at appraisal (42% higher when expressed in Leones due to the depreciation of the Leone in relation to the US Dollar). Costs were - 2 - higher primarily because the feeder roads built under the project were much more expensive than expected, while administrative and operating costs also increased. The increased project cost was financed with a European Economic Community Special Action Credit equivalent to US$1.7 million. 7. The project has had some success in achieving the original pro- duction targets. In the EAP by the end of the project period, production of both cocoa and oil palm was estimated to be similar to the appraisal fore- casts. However, production of swamp rice was only about 20% of the target, while no progress was reported with improvement of upland rice (see PCR Table 5.1). As noted in the Project Performance Audit Report for IADP I, farmers have not found swamp rice cultivation as attractive as expected. During IADP II it appears that farmers have found cultivation of cocoa and oil palm more attractive than rice. They have also been discouraged from cultivating swamp rice in some cases by physical problems such as soil shrinkage and flooding. Problems were also encountered because the supply of farm inputs on credit through the Farmer's Finance Company did not function effectively. Some farmers were also believed to have obtained credit for swamp rice production, but to have used this for other purposes. The failure of upland rice produc- tion in the EAP appears to have been primarily a result of the inadequate attention given to this by project management. Upland rice production was very successful in the NAP. 8. The project encountered significant delays in start up, especially the new project in the Northern Province. The Credit and the Loan were approved in April 1975 but they were not declared effective until January 1976. Government experienced difficulty meeting the conditions of effective- ness, which, inter alia, required that staff acceptable to the Bank be appointed to the positions of Project Manager and Accountant for NAP and Financial Controller for PESU. Eventually the Bank agreed that the Loan and the Credit should become effective when these positions were filled with acting staff. However, this did not prove satisfactory, and NAP took a long time to get underway due to the long delay in recruiting an expatriate project manager. But once these initial difficulties had been overcome, NAP then made considerable progress. 9. By the end of the project period production of swamp rice in the NAP was estimated to be about 17% higher than the appraisal targets, while pro- duction of upland rice was more than double the level expected. However, production of groundnuts was only about 20% of the appraisal target, mainly because sufficient improved seed was not available. 10. Progress with construction of feeder roads under the project has been much less than expected. About 108 miles of road were constructed compared with the appraisal target of 300 miles. However, costs per mile were about five times the appraisal estimate, primarily because roads were con- structed to a higher standard than planned originally. The feeder roads were constructed by CARE (Co-operative for American Relief Everywhere) which has also assumed responsibility for initial maintenance of these roads. -3- 11. The project achieved its target for constructing 200 wells for drinking water supplies. However, for these also, construction standards were higher than planned originally and per unit costs were almost four times the appraisal estimates. 12. The project was implemented primarily through semi-autonomous project management units (PMUs) within the Ministry of Agriculture and Natural Resources (MANR). These PMUs reported directly to the Permanent Secretary, MANR, but had considerable autonomy regarding staffing, salary levels and financial administration. Their staffs also included a significant number of expatriates, including the project manager in the NAP. This system proved to be quite effective in terms of achieving project production targets, and as noted in the Project Performance Audit Report (PPAR) on IADP I, (para. 38) this could be considered as a model for a project organization designed to achieve results quickly. However, this approach raises serious questions about how these autonomous units can eventually be integrated into their parent ministry. The appraisal report expected than in the Eastern Province the PMU would be integrated into the MANR by the end of two years. This has not been achieved to date and the project has made little progress developing institutions which can implement project activities over the longer term. These difficulties were clearly foreseen in the Project Performance Audit Report for IADP I. 13. The project has experienced serious difficulties with its farm credit and input supply programs. In the Eastern Province it was planned that a new institution, the Farmers Finance Company (FFC), would be established to take over the credit and input supply operations previously undertaken directly by the project through its Credit Revolving Fund. It was expected that the FFC would be established and fully operational by the end of the two year project period for EAP. This proved to be completely unrealistic. The PPAR for IADP I (Para. 31) in fact drew attention to the need for providing much longer gestation periods for newly established project operations such as FFC. In practice FFC was established almost two years behind schedule, and by the end of the project period it was in a most unsatisfactory position. Loan repayments were very low, administrative costs were excessive, some funds had been misappropriated, and FFC's financial difficulties were aggravated by the fact that government had not paid to FFC money due for fertilizer subsidies. In the NAP credit and input supplies were arranged directly by the project, although they experienced very similar problems to those encountered in the EAP. These credit activities are being continued in both areas under the follow-on projects (Eastern IADP III and Northern IADP II) and several measures are being taken to strengthen credit services, including the appoint- ment of an internationally recruited credit specialist. 14. In the Eastern Province an oil palm processing mill was built under IADP I in order to process oil palm fruit from a nucleus estate and out- growers. During IADP II it was expected that a company would be established to operate this mill and this company would be fully operational by the end of the two year project period in the Eastern Province. This company, the Daru Oil Palm Company (DOPC) was established as planned, but it has encountered serious operational problems. Oil palm yields have been somewhat less than expected, while labor has been very scarce. The factory has suffered from mechanical problems and it requires a new boiler. But the most important factor has been the effect of government controlled prices for oil palm fruit and palm oil on factory operations. Although GOSL has increased prices several times during the project period, after much encouragement from the Bank, prices have in general been lower than those prevailing in private markets. DOPC has thus not been able to compete effectively with other buyers, its purchases have been much lower than expected, and throughput at the factory has often been lower than 25% of capacity. This situation has been aggravated further because DOPC was expected to act as an agent for FFC and collect loan repayments from oil palm outgrowers. Primarily because of the problems associated with low fixed prices and a low factory throughput, DOPC has incurred substantial losses. However, some of these have been written off through GOSL converting loan capital into equity, and the audit understands that GOSL has now given DOPC the authority to fix its own prices for palm oil within certain limits. This should greatly increase the pros- pects for the long term viability of the company. Further support for the company will be provided under Eastern IADP III, including extension of the nucleus estate, provision of a new boiler and construction of labor housing. 15. In addition to the project activities carried out in the Eastern and Northern Provinces the project included support for the headquarters of the Ministry of Agriculture and Natural Resources (MANR) through the establishment of a Project Evaluation and Services Unit (PESU). This unit, which reported directly to the Permanent Secretary, MANR, was expected to provide support to the two PMUs in the Eastern and Northern Provinces through improving planning and budgeting, maintaining accounts, formulating credit and input supply systems, and evaluating ongoing projects. In 1979 PESU was merged with the ministry's planning unit and was renamed the Planning Evaluation and Moni- toring Services Unit (PEMSU). The financial section of PEMSU provided considerable support to the project unit and to FFC and DOPC. The planning section also performed useful work in preparing a number of agricultural projects. However, the monitoring and evaluation function of PEMSU was largely unfulfilled because staff were diverted to other tasks, especially project planning. 16. The PCR has re-estimated the economic rate of return (ERR) to be about 10% for the whole project (10% in NAP and 9% in EAP). This compares with the ERR of 26% estimated for the combined project at appraisal. The revised ERR is lower than the appraisal estimate primarily because incremental crop production, especially for rice and groundnuts, is now expected to be considerably below the appraisal targets, while project costs were higher. This revised estimate of the ERR is based on the assumption that activities which have been started under the project can be sustained over the long term by GOSL. In view of the limited impact which the project has had in developing institutions which can assume responsibility for carrying out project functions in the long term, there must be some doubt about whether this assumption is realistic. Certainly, it will require external support over a relatively long period to create viable new institutions. This problem is made all the more difficult by the extremely serious financial situation faced by GOSL. In Eastern Province GOSL was not able to sustain project -5- activities properly towards the end of the project period, in the interval between the time when donor financing came to an end under IADP II and new financial support became available under Eastern IADP III.1/ II. MAIN ISSUES A. Integration of the Project Management Units into the Ministry of Agriculture and Forestry 17. The project used semi-autonomous project management units (PMUs) to implement agricultural extension and other services in the two project areas. It seems clear that this has been an effective measure for achieving consider- able developmental impact in the short-term. It has always been the intention that these PMU's should be integrated into the Ministry of Agriculture and Forestry (MAF) at an early stage - in the case of EAP this was expected to take place not later than two years after the start of IADP II. So long as these PMUs exist, there are in effect two branches of the MAF operating side by side in the project area. The reasons for the success of the PMUs in obtaining quick results are readily apparent. They were able to operate with a considerable degree of autonomy and were not constrained by normal govern- ment administrative or financial procedures. They were able to pay better salaries than government and thus could attract local staff more easily, while they also employed significant numbers of expatriates. However, some of these same factors will also make it more difficult to reintegrate these units into their parent ministry. Staff who are paid higher salaries may be less en- thusiastic about accepting a lower salary in the ministry, even if this does involve more permanent employment. It may prove very difficult for Government to offer permanent employment to project staff, for this requires that extra posts be established in the civil service, and the recurrent budget be in- creased accordingly. It is also realistic to expect that once project units have been reintegrated with the ministry they will become subject to the normal government financial rules and procedures. Thus, the operational flexibility which existed when the PMUs were autonomous will be lost. For these reasons, the audit feels it will prove difficult to reintegrate the PMUs into MAF. This is apparent already, for no reintegration has taken place yet, despite the fact that this subject has been given, and continues to receive considerable attention. For example, consultants financed under the Sierra Leone Technical Assistance Project (Credit 970-SL) made proposals in 1981 for reorganization of MAF, including re-integration of the PMUs into the ministry. The same subject is being given serious consideration under an agricultural sector study currently being prepared in the Bank, while concrete measures to bring about reorganization of MAF will probably be proposed under the Agri- cultural sector Loan, due for appraisal shortly. The audit is raising the 1/ This is a much more widespread problem. Another example of a case where government had difficulty maintaining project activities when donor support was no longer available, is the Rural Development Project (Credit 644-GM) in The Gambia (audit under preparation). - 6 - issue again here, not because it sees any easy solution to this problem, but because it feels that it is necessary to continue to emphasize the need for reintegration so that MAF has a much better rospect of sustaining the development activities started under the project. B. Road Construction and Maintenance 18. At appraisal it was proposed that crop extraction roads would be constructed in the NAP by the project itself under force account, although it was not clear who was expected to assume responsibility for maintenance of these roads. In the event, it was decided that the project should employ CARE (Co-operative for American Relief Everywhere) to construct the roads. CARE was the only locally established agency with the capacity to do this work. Although, CARE executed this work well, the roads were constructed to a much higher standard than expected originally and there has been considerable debate between the Bank and CARE about whether lower standard roads would have been more appropriate. CARE constructed 108 miles of roads at an average cost of about $29,000 per mile, compared with a target of about $5,600 per mile (including contingencies) expected at appraisal. CARE felt that the higher standard of construction was necessary because subsequent maintenance of these roads was likely to be deficient.2Y Following construction, it became clear that no other agency, apart from CARE, was able to maintain these roads, and CARE was asked to take on the responsibility for maintenance for the first two years following construction. These roads were constructed to the Ministry of Works (MOW) Class IV standard and, as such, the MOW would normally be respon- sible for their maintenance. However, the MOW has very limited capacity for road maintenance. The MOW is being strengthened under a new IDA supported road maintenance project (Highways II), but it is understood that MOW will probably give highest priority to maintenance of main roads. Thus, the prospects for adequate maintenance of the roads constructed under the project do not look promising. 1/ Problems with autonomous project units have been mentioned in several OED reports. See, for example: (a) OED Report No. 2242 - "Rural Development Projects: A Retrospective View of bank Experience in Sub-Saharan Africa." (b) OED Report No. 3520 - PPAR on Rwanda - Mutara Agricultural Develop- ment Project. (c) OED Report No. 3958 - PPAR on Indonesia - North Sumatra Smallholder Development Project. (d) Nepal Settlement Project and Ivory Coast Cotton Areas Rural Develop- ment Projects (audit reports under preparation). 2/ Higher construction standards and cost overrun for rural roads have been observed by OED in a number of PPARs. This suggests that the road components in agricultural projects should be more carefully prepared, and agreement should be reached with Governments on road standards prior to negotiations. See, for example, the Ivory Coast, Cotton Areas Rural Development Project (audit report under preparation). - 7 - 19. The audit is not well qualified to comment on which is the most appropriate standard of construction for project roads. Nevertheless, it would seem realistic to expect that at least some of the roads should have been cheap access tracks, (as proposed at appraisal) which would be maintained by the local people. Some roads of this type are being developed under the follow-on project. C. Agricultural Credit 20. In both the EAP and the NAP very serious problems have been encoun- tered in administering agricultural credit. However, the discussion here is confined to the EAP because this illustrates the difficulty experienced in trying to establish a viable institution which can assume responsibility for credit. Although the Development Credit Agreement contained a Covenant (Section 3.06) that the Farmers Finance Company (FFC) would be established by December 31, 1975, this was not in fact accomplished until September 1977. Ever since inception FFC has suffered from acute financial and operational problems, as clearly documented in the PCR (paras. 4.16 - 4.19). FFC has had inadequate financial control and internal audit, it has been short of well trained and experienced staff, its operating costs have been clearly exces- sive, and the loan repayment position very unsatisfactory. In every year since FFC was established, gross operating expenditure has been in excess of the total value of new loans advanced during the year (PCR, Annex 3, Table 1). During the last three years total operating costs have been equivalent to between 20% and 30% of the total value of outstanding loans. This compares with interest rates changed by FFC of 8% for medium term loans and 10% for seasonal loans, at the end of the project period. Furthermore, interest was not charged (or capitalized) during the disbursement period for medium term loans for tree crops. Thus, FFC's interest income was significantly lower than would have been expected with the nominal interest rates quoted. 21. The position with loan repayments was clearly unsatisfactory. Repayments received by FFC for seasonal and development loans declined from more than 50% in 1977 and 1978 to only 16% for seasonal loans and 21% for development loans in 1980 (PCR, Table 4.02). Furthermore, these repayment percentages were calculated in a way which overstated the true repayment position. FFC has restricted the issue of new seasonal loans to farmers who have repaid earlier loans. As the repayment position has worsened, the volume of new lending has declined and there has been a corresponding decline in the quantity of farm inputs provided to farmers. Seasonal loans issued in the EAP have declined from more than Le 200,000 in 1977 to only Le 55,000 in 1980. 22. It is clear that Government will need to give strong support to FFC in its efforts to recover overdue loans, if FFC is to become a viable credit institution. Further assistance is being provided to FFC under Eastern IADP III. This will attempt to improve the position of FFC through emphasizing group rather than individual credit, through a general strengthening of FFC, and with the provision of an expatriate credit specialist. However, the experience so far does not give grounds for much optimism, and the audit feels it may prove necessary in future to emphasize cash sales of farm inputs rather than credit. Annex I - 8 - Page 1 RCA MAY 11 10190 248423 WORLDBANK 3220 DARNED SL 1420 MRS WORLD BANK MAY 11 1983 WASHINGTON D C FOR x KAPUR OPERATIONS EVALUATION RE PERFORMANCE AUDIT REPORT. IN GENERAL I AGREE WITH CONTENTS FOR VIEWS AND FINDINGS LARGELY EXPRESS MY OWN AS WELL. DETAILED REPLY WILL FOLLOW SOONEST. REGARDS GORD.IJN..++.. 'SENT PDG* 248423 WORLDBANK 3220 DARNED SL MAY 4 1 low) Annex I Page 2 When replying please quote NORTHERN AREA PROJECT MANAGEMENT UNIT R:No................ NAP/A.18 MINISTRY OF AGRICULTURE AND NATURAL RESOURCES Cable:-Mingric MAKENI-SIERRA LEONE Telphoe: 052-.9 PRIVATE MAILBAG .. .1.7th.. .M. . .. ... Mr. Shiv S. Kapur, Acting Director General, Operations Evaluation, The World Bank, 1818 H. Street N.1., Washington D.Ce 20433 U.S.A. Dear Sir, Res Project Performance Audit Rep6rt on Sierra Leone Integrated Agricultural Development Project (Credit 568/Loan 11!8 -SL.) Further to my telex sent in May, 1983, please find below my comments on th, above mentioned performance Audit Report refer- ring to the respective pages and paragraphs. On page three paragraph eight (8)s The period of long delay and appointments of staff in acting positions at the start of the Project has had a serious negative effect in the orga.isa- tional pattern which was found to be without proper emphasis on delegation and follow up control by excaption. The consequences were felt in the current Phase of the Project when systems and procedures had to be introduced for staff not used to such systems forcing them to surrender with difficulty the habit of acting without questioning. On page four (4) paragraph ten (10) and page twelve (12) paragraph seventeen (17): It can be questioned whether CAE as Contractors for road building are also decision takers. The non profit structure of CARE seems to have been over emphasised and treated ao a licence to incur costs to be paid for by the Project. It i' a serious matter that the situation in the current Phace of the Project is allowed to continue by the present Project Agreement. On page five (5) paragraph twelve (12): It has been found that the concept of a Project Managenent Unit was carried too far with a result that no responsibility could be fixed on any one staff for important decisions were taken across tle table but basis and conditions applicable not pursued resulting in serious difficulties being trcrsferred to the current Phse arising from suck- decisions. On page six (6) paragraph thirteen (13): It is felt thlat too much emphasis has been fixed o, --:c :i., target- with the result that inputs, includin6 cass wnrp distributed without proper re- cords enabling f£:audulent practices including the creation of "cest" S In the present Phase the operation h?s been corrected of by institution suitable systemc ard procedures and imposition of a solid acccunts-base. - 10 - Annex I Page 3 Mr. Shiv S. Kapur, The World 2ark. 1;th. May, 1983. On pages thirteen (13) and fourteen (14) paragraphs nineteen (19) and twenty (20): In the absence of suitable records and statietics estimates of the Credit recovery rate from 500/o in 1977 to 16% in 1978 seem to be difficult to comprehend. An average of 12% from the beginning of the Project has been found to be a realistic figure. Project Completion Report anc3 conclusion It appears that the Project Completion Report attached to the draft Project Performance Audit Report is a copy of the final Completion Report and it seems improper for me to make comments on it if this.is indeed the case. However I consider it in place to mention that in general the Completinn Report reflects a reasonable accurate picture of the situation at the beginning of 1981. Weaknesses mentioned and others found to exist have been corrected since then. It is gratifying to observe that Project Staff in general have accepted the newly installed order and do comply with instructions and directives. Section Heads now bear a direct responsibility for their actions but continue to play a collective role in Managerial decision making, preparing and con- trol of budjects etc., in preparation of transferring full res- ponsibility to Sierra Leonean Management at the end of 1984. Yours faithfully, J.C. Gordijn, Project Man JCG/,md Amsas I -11- Page 4 rECElVED CA JUN 01 1153 183JUM - I PM 12: 48 248423 WURLDBA14K CABLE SECTION YWB6862 SNY667 ACCO23 URWN CO SLFN 170 FREETOWN 170/163 1 1340 'NTBAFRAD WORLD BANK WASH1iGTOW DC 20433 USA ATTN: SHIV S. KAPUR - AG DIRECTOR GENERAL OPERATIONS EVALUATION. RE YR LETTER 6 APRIL 83, PROJECT PERFORMANCE AUDIT REPORT S/LEONE IADP CREDIT 568/LOAN 1138 SL. THKS FOR ASKING VIEWS AND COMMENTS. DRAFT REPORT SATISFACTORY IN CONTENT ON FINANCIAL AND ACCOUNTING SECTIONS AND Annex I Page 5 COL DC 20433 6 83 IADP 563/ 1138 C61 PAGE 2 HAVE NO COMM'IENTS TO 'iAKE. HOvIEVE PLS NOTE FOLLOW1 AG:- A) PAGE 7 LIr- 13 - SHOULD krAD CAi PrICLS UF PALI-1 uIL b) PAGL 8 LIyt 4 - SHJULD krAD PLAN ING LVALUATlUil ANJ viuiiITjr%u' SERVICES UNIT C) PAGE 13 LAST TWO LINES. IN PHASE 1 FFC CHARGED INTEREST SEASONAL LOAN 10 PCT COL A) 7 13 B) ; 4 C) 13 1 1 PCT - 13 - Annex I Page 6 PAGc 3 AND MEDIUM LONG TERM LOAN PCT. UNDER PHASE II SEASONAL LOAN 23 PCT AND MEDIUM / LONG TERM LOAN 15 PCT n) PAGE 2? A PARA 4. AT THE INITIAL STAGES THERE WAS CONSIDERABLE RESISTANCE FOR THE F,CRMER M1ANAGER EAP TO AN INTERNAL AUDITOR, AND DISAGREEME14T OW HIS FUACTIOWS A;4D RESPONSIBILITIES CL 8 I 20 15 D) 22 4 UKJ PAGE 4 E'T THIS WAS SUBSEQUENTLY RESOLVED. iiUTTUL I iGAm FIWAWCIAL CONTROLLER - PrASU 3418 PEMSU SL COL 3419 CKD - 14 -r E4bYl lNk 587166AUnl 1JUN83 15:43/15:44 E5T VI1A: 89650 TO: 62153470 WORLDBANK UD WU INFOMASTER 1-016286A152 06/01/83 I(.-IPMWGjWC WSH ZCZC 06061 06-01 0301P EST TLX 89650 WORLD UD BT 1-126843G152 06/01/83 ICS IPMIIHA IISS IISS F M WUI 01 1248 PMS WORLD BANK WASHINGTON DC UWC0638 FRW741 ACC033 UWNX CO SLFN 087 FREETOWN 87/85 1 1600 INTBAFRAD WORLD BANK WASHINGTON DC20433 ATTN: SHIV S. RAPUR - AG DIRECTOR GENERAL OPERATIONS EVALUATION. RE YR LETTER 6 APRIL 83, PROJECT PERFORMANCE AUDIT REPORT S/LEONE IADP CREDIT 568/LOAN 1138 SL. THIS IS A CONNECTION TO CABLE NO: 016 SENT TODAY PARA (C) PAGE 13 LAST TWO LINES. IN PHASE I COL DC20433 6 83 568/LOAN 1138 016 (C) 13 PHASE I (ONE) PAGE 2 AND II FFC CHARGED INTEREST SEASONAL LOAN 10 PCT AND MEDIUM / LONG TERM LOAN 8 PCT. UNDER PHASE III SEASONAL LOAN 20 PCT AND MEDIUM /LONG TERM LOAN 15 PCT. REGARDS A MUTTULINGAM 3418 PEMSU Sl COL II FFC 10 8 15 20 III NNN 1345 EST NNNN 1542 EST MMMM JON - 15 - SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) Project Completion Report October 29, 1982 Western Africa Region - 16 - I. BACKGROUND 1.01 Economic Background: The economy of Sierra Leone is characterized by two main, and largely constrasting sectors: a modern mining sector dominated by the diamond industry, and an underdeveloped agricultural sector engaged to a large extent in subsistence production. In the early seventies, in the face of declining production and employment in the mining sector, it became in- creasingly important to expand production of export and food crops as well as to increase employment opportunities in the agricultural sector. Furthermore, within the agricultural sector there are wide regional disparities. The Southern and Eastern parts of the country have climatic conditions suitable for tree crop production, which has led to the development of a rural cash economy. In the Northern Province, conditions are less favorable as the dry season becomes longer. The cropping system has been mainly shifting cultiva- tion for subsistence. 1.02 Against such a background, the Government of Sierra Leone recognized the increasing importance of developing the agricultural sector as the major source of long-term growth and employment. Following the success of the first IADP, the Government supported the approach as an appropriate strategy for in- creasing production. This approach could also be used for dealing with the problems of regional disparities. 1.03 Project Design: It was as an extension of this strategy that the IADP II was designed. The main objective was to increase smallholder produc- tion of rice, groundnuts, cocoa and oil palm through expansion of the services under Phase I in the Eastern Province; introduction of similar services in the Northern Province as well as improved central institutional services. The project covered two separate areas referred to as (i) the Eastern Area Project (EAP) 4,300 square miles, which was identical to the Phase I project and (ii) the Northern Area Project (NAP) - 1,300 square miles in the Bombali and Tonobolili districts in the Northern Province. In keeping with the objectives of reducing regional disparities, there was a greater concentration of re- sources in the NAP (63% of total projects costs) spread over 4 years with a target of 8000 beneficiary farm families. Financing for the EAP (29% of pro- ject costs) was for two years for a target of 6000 families. The allocated costs of the central services were 8% of the total project costs. II. IDENTIFICATION, PREPARATION AND APPRAISAL A. Chronology 2.01 The project was first identified by an HQ/RMWA mission in the fall of 1970. The broad outlines for a feasibility study of the Northern Area Project (NAP) had been included in the Phase I project in the Eastern Area (Cr. 323-SL). The project was cleared in substance with the Minister of Agriculture and National Resources by the RMWA identification/preparation mission of January 1973. The feasibility study for the NAP was prepared by - 17 - the Government of Sierra Leone (GOSL) with the assistance of United Kingdom technical advice, consultants and RMWA. Plans for the extension of the EAP were prepared by the GOSL on the basis of the Phase I project and discussions with various Bank supervision missions. The project was appraised in May-June 1974. B. Project Content and Targets 2.02 The project components that were included in the Staff Appraisal Report (SAR) are described below. The specific crop development and construction targets are shown in Tables 3.1, 3.2 and Annex 1, Table 1. (a) The Northern Area Project (NAP) provided for: - the establishment of extension, credit, input supply and other farmer support services; - financing of the credit for hired labor and improved inputs for the crop development program; - construction of supporting infrastructure including roads and wells; and - investigations and research into livestock development and fuelwood production for tobacco farmers. (b) The Eastern Area Project (EAP) included: - expansion of the extension and other farmer support services which had been established under the first project; - establishment of the Farmers Finance Company to take over credit and input supply functions; - financing for the incremental credit for the new crop develop- ment program; and - construction of 12 additional market centers. (c) Central Support Services covered: - the establishment and staffing of a Project Evaluation and Services Unit (PESU) in the Central Ministry of Agriculture and Forestry (MANR); and - financing for consultants to prepare new projects. 2.03 The project was designed to have a development period of four years; two years (1975/76-1978/79) for the NAP and the central support unit PESU; and two years (1975/76 to 1976/77) for the EAP. Total investments were expected to be Le 7.2 million (US $8.6m) for the NAP, Le 3.3 million (US $4.0m) for the EAP, and Le 0.9 million (US $1.1m) for PEMSU, and assistance to FFC and the oil palm company. - 18 - C. Institutional Arrangements 2.04 It was planned that each project area would be managed by a Project Management Unit (PMU), based on the organization established under the Phase I project, but with redefined terms of reference agreed with the Bank. These PMUs would be directly responsible to the Permanent Secretary, MANR. In addi- tion, project management were to be assisted by two committees - the Project Advisory Committee (PAC) and the Project Coordinating Committee (PCC) (see paras 4.01-4.02). The Project Evaluations and Services Unit (PESU) was to be established with direct reporting responsibilities to the Permanent Secre- tary. The unit was expected to oversee and assist the Project Management Units in the implementation and evaluation of the project, as well as assist in other agricultural development schemes being implemented by MANR. 2.05 Other institutional arrangements of importance were: (i) establishment of a Farmer Finance Company (FCC) by Dec. 31, 1975 to take over the commercial services of the EAP; and (ii) establishment of the Daru Oil Palm Company (DOPC) to assume control of the oil palm estate and palm oil mill established under the Phase I project. 2.06 Assurances were obtained from the Government that it would prepare and implement pricing formulae for groundnuts and oil palm products that were satisfactory to the Bank. The Government also agreed to a reduction or re- moval of all subsidies on agricultural inputs. III. IMPLEMENTATION A. Effectiveness and Start-up 3.01 The project was approved by the Board on April 29, 1975 and was signed on July 2, 1975. The conditions of effectiveness were: (a) establishment of bank accounts for PESU and NAP with initial deposits of Le 20,000 and 100,000 respectively; (b) establishment of a NAP management unit (NAPMU); and reorgani- zation of the EAP management unit (EAPMU) under terms of refer- ence satisfactory of the Bank; and (c) appointment of the Project Manager and Accountant of NAPMU and the Financial Controller of PESU with qualifications and terms satisfactory to the Bank. 3.02 Effectiveness was delayed by the difficulties in recruiting staff for the three positions and failure of the Government to make the initial deposit - 19 - in the NAPMU account. Meanwhile, the covenants regarding the establishment of the FFC and DOPC, the gazetting of producer prices for groundnuts, and arrangements for road construction in EAP became due. However, in response to the concerted effort of the Government in trying to meet these covenants, mak- ing the deposit and filling the positions with acting staff (while the Bank was assisting with international recruitment), the project was declared effec- tive on January 29, 1976. 3.03 There were no major start-up problems in the EAP since the project management unit (PMU) had been established under the Phase I project and was adequately staffed. However, there were considerable delays in the NAP since the acting staff proved incapable of implementing the project. The Government was slow in approving the appointment of a suitable, qualified Project Manager and then in agreeing to the terms and conditions of his employment. The project did not become fully operational until late 1977. PESU was estab- lished with an acting financial controller and accounting staff; a qualified financial controller was subsequently appointed in May 1977. B. Changes in Project Design 3.04 Since the EAP portion of the project was an extension of the earlier phase, it was expected that the targets would be achieved in a two year period. However, due to delays in the implementation of components and an in- crease in the financing available for local costs under the Loan/Credit as a result of the depreciation of the Leone vis-a-vis the US dollar, about US$1.0 million (of the total allocation of US $2.3 million) remained under the Credit/Loan at the end of 1977. It was therefore decided that the implemen- tation period should be extended by another two years to the end of 1979, and project activities should be extended into the Kailahun District. 3.05 In 1979, it became apparent that there would be considerable short- falls in project targets for road constructions due to cost overruns (see para 3.09); and for crop development in the NAP due to the initial delays in implementation (para 3.03). An application was made and approved for an EEC Special Action Credit (SAC 53-SL) of various currencies that were then equiva- lent to about US $2.0 million. The equivalent of US $1.0 million was allo- cated for road construction, since according to the original project plan there were 15 miles in the EAP, and over 200 miles in the NAP still to be com- pleted. The other portion of the credit was allocated mainly to the NAP to meet the costs of the following items: (i) fertilizer and seed for the upland rice program; (ii) construction of 10 additional market centres; (iii) con- struction of 400 village wells; (iv) small equipment and drugs for the pilot livestock component; and (v) vehicles and equipment. A small amount was also allocated for the purchase of vehicles for the EAP and PEMSU. - 20 - C. Physical Progress Northern Area Project 3.06 Crop Development: The achievements of the NAP are summarized in Table 3.1 below. Due to the delays discussed in para 3.03, the project did not gain full momentum until 1978. At the end of 1980, the project reported cumulative development of about 2,990 ha (120% of appraisal targets) of swamp rice. However, on the basis of costs per hectare, the disbursements of devel- opment loans were insufficient to fully develop these areas. The implications for project impact are discussed further in Chapter V and VI. For the pur- poses of this chapter the data in the reports of the Project and supervision missions are taken to be actual achievements in terms of area. Table 3.1: CROP DEVELOPMENT (in hectares) Achievement as a % of Appraisal Appraisal 1976 1977 1978 1979 1980 1981 Total Targets Targets Northern Area Swamp Rice 1/ 142 660 1331 577 281 388 / 2991 2500 120 Upland Rice - 127 1796 1424 3408 2508 9263 9270 100 Groundnuts i/ - 27 1277 47 334 27 1712 4375 39 Maize 3/ - - 92 55 - 147 - - 1/ New Development 2/ Consolidation and improvement of swamps developed during the earlier years. 3/ New areas registered annually for seasonal inputs. Sources: Project's Reports and Supervision Report January 31, 1981. 3.07 In the earlier years, project management exerted its initiative in obtaining improved upland rice seed by establishing a seed farm at Binkolo and using outgrowers to multiply seeds; this function was subsequently taken over by the Seed Multiplication Project financed under German Technical Aid. Un- like the EAP (para 3.14) they were able to distribute seed and fertilizers to a considerable hectarage of upland (9,263 ha), nearly 100% of appraisal targets. Groundnut development has been plagued by seed shortages. The project attempted to use outgrowers but lacked the necessary technical support to organize and carry out the program. The project was able to purchase a limited quantity of seed from the National Produce Company (NAPCO), which had been operating an outgrower scheme as an interim measure until it could be taken over by the project. These problems were further compounded by adverse - 21 - weather conditions. In 1980, there was a drastic fall in production; short- ages and high prices iresulted in practically no retention of seeds by far- mers. Project Management felt its purchases were contributing to the price spiral and therefore halted its operations for that season. A s..all maize program, which had not been included at appraisal, was introduced under the project to test farmers' interest in growing maize for human consumption and livestock feed. While the demand was not very high or widespread, farmers were interested in receiving improved maize seed. 3.08 Civil Works. Due to the low levels of infrastructure in the Northern Province, a considerable portion of the project was devoted to the provisions of roads, wells, market centers, etc. The appraisal targets and project achievements are presented in Annex I Table 1. On the whole, achievements were satisfactory for the buildings and wells programs. 3.09 Roads. About US $1.8 million had been allocated for the construction of 20 miles and improvement of 280 miles of crop extraction roads in the Northern area. It had been intended that the work would be carried out under force account by a unit to be established under the project for this pur- pose. Subsequent to Loan/Credit effectiveness, modified arrangements were worked out among the Government, USAID, and the Bank Group. By this arrang- ment, the roads would be built by CARE, a non-profit organization, which had already established its capabilities in road-building in the Eastern Province under USAID financing. At appraisal, it had been estimated that the costs would average about US $6,000 per mile. However, the roads that have been built by CARE have been of a far higher standard. CARE justifies this standard on the grounds that the Ministry of Works (MOW) has a limited main- tenance capability; and given that the poor conditions of the trunk roads, there is considerable diversion of traffic to the feeder roads. As a result of these higher standards only 95.8 miles were constructed in the NAP by mid- 1980, at a cost of about US $27,000 per mile. A further allocation of US $1.0 million was made in the EEC Special Action Credit to continue work on these roads and those in the EAP (see para 3.05). By end 1981 another 18.3 miles were completed; but due to cost overruns in other components and currency re- evaluations (see para 3.20 and 3.22), only 12.3 miles could be financed from the EEC credit, while the remaining 6 were financed retroactively under the NIADP Phase II. Therefore, total achievements under the first phase were 108.1 miles, only 36% of appraisal targets. While the targets and achieve- ments are not strictly comparable due to the differences in standards, coverage of the project area and, hence project farmers served by the network are considerably lower than originally planned. 3.10 Livestock. The livestock component was reduced to one project-run ranch (Mara; support to one private rancher (instead of three, as originally planned); and extension support for pig and poultry production. The Project Management at its own initiative (and against the advice of the Bank, see para 3.23), purchased and installed a small feedmill. Its operations have been hampered by inadequate input supplies (and more recently sporadic electri- city), resulting in losses to the project. The project also attempted to obtain National Development Bank's (NDB) financing for the pig-farmers. However, due to administrative delays in NDB, slow disbursements, as well as inadequate feed supplies, the scheme has not been particularly successful. - 22 - 3.11 Forestry. The project also included a small component to carry out a research program with the Forestry Division of the MANR to examine the poten- tial of various fuel-wood species for use by farmers for drying tobacco. Re- search trials were carried out with various subspecies of Eucalyptus under different spacing conditions; similar trials were also carried out for Gmelina and other less used species. Eastern Area Project 3.12 Crop Development. The crop development achievements of the EAP are summarized in Table 3.2 below. The data is taken from the tables provided by the FFC in June 1982 and reflects the most recent attempt at reconciling the data on loan disbursement with those on reported areas developed. However, as discussed further in Chapter 5, there are still discrepancies in the data. With the exception of upland rice, achievements compare favorably with ap- praisal estimates since the implementation period was extended by another two years without any adjustments in targets. At the end of the original im- plementation period (end of 1977), targets for cocoa development had been achieved, but oil palm and swamp rice lagged behind. During the extended implementation period, the project was able to maintain sufficient momentum in these activities so that by mid-1980 (the closing date for the EAP) total cocoa hectarage was more than twice the appraisal targets while oil palm was about 116% and swamp rice somewhat below 85%; virtually no progress had been made in upland rice. While these overall achievements are impressive, there is some concern about the quality and viability of the developments both here and in the NAP. The project has not collected any information on the yields achieved, quality of maintenance of farms, continuation of the use of inputs, and improved techniques etc. Furthermore, the distribution of inputs and loans under the FFC would appear to indicate that the recommended levels of input use have not been maintained (see Chapter V). - 23 - Table 3.2: CROP DEVELOPMENT (in hectares) Achievement as a % of Appraisal Appraisal 1976 1977 1978 1979 1980 Total Targets Targets Eastern Area Cocoa 230 189 232 185 141 977 415 235 Oil Palm 269 250 142 111 - 722 665 116 (outgrowers) Swamp rice 926 885 131 115 62 2,119 1750 1 85 750 2/8 Upland Rice - - - - 235 235 14895 2 1/ New Development 2/ Improvement Source: Report from FFC June 1982. 3.13 For cocoa development there is no information on the varietal nature or yield potential of the seedlings under the project. Also, the project has not maintained systematic records of the level of maintenance and techniques followed by farmers. Oil palm seedlings were grown from imported material (Dura x Psifera) from the Ivory Coast; the seedlings distributed were of good quality though yield potential have been affected by variations in rainfall, and lower-than-recommended fertilizer applications during development. While maintenance of the outgrower holdings had been poor in earlier years, there have been considerable improvements subsequently, in response to higher prices. 3.14 It was only in 1980 that 235 hectares of upland rice were provided with improved seed, less than 2% of the original target of about 15,000 ha. The major constraint was the lack of seed because of the controversy between the PMU and Rokupr Rice Research Station on the suitability of LAC 23 versus ROK 3 seed varieties for the uplands. The PMU made little effort to obtain seed from other sources or to use outgrowers for multiplication. This could perhaps be explained by the greater emphasis on tree crop production by far- mers in the area and, hence, less interest in improvement of upland rice which is grown mainly for subsistence. 3.15 During the course of the project, several nurseries were established for raising cocoa and oil palm seedlings. These were fairly well-maintained and were able to meet the demand for seedlings. A clonal seed garden for cocoa was established at Pendembu, with some advice from international consul- tants at the recommendation of the Bank. However there seems to have been some problems in the original layout with respect to water and shade requirements, which subsequently were partly corrected. - 24 - 3.16 It had been intended that the project would provide spraying services for pest control financed from a fund into which farmers paid premiums. How- ever, no proper accounting seems to have been maintained for this fund and, consequently, the amount available is not clear. Furthermore, farmers paid the premium charge for which they did not receive effective services. There was an apparent lack of interest in this aspect on the part of management. No effective use was made of the MAF spraying unit seconded to the project, and no information has been compiled on the incidence and nature of pest problems, the extent of damage, the effectiveness of remedial actions, etc. 3.17 Civil Works No financing for road construction in the EAP had been included under the project, since the Government had separately obtained assistance from USAID to meet the costs of construction or improvement of about 250 miles of crop extraction roads in the area. At the time of apprais- al, this was considered adequate to meet the needs of the project area. Due to cost overruns only 235 miles were completed by 1979 and additional financ- ing was obtained from the EEC Special Action Credit (SAC) to complete the re- maining 15 miles (see para 3.05). However, due to overexpenditures in other components (para 3.20) only about one mile was constructed with financing under the SAC, and the remaining was financed retroactively under EIADP III. 3.18 Under the project, four houses were to be constructed or recondi- tioned, and one store and 12 market centers were to be built as well. There were considerable delays initially due to difficulties in attracting local contractors, shortages of counterpart local financing, and delays in procurement of materials. However, by the completion date June 30, 1980, targets were met. (See Annex I Table 1). D. Project Costs and Financing 3.19 Total project costs were estimated at appraisal at Le 11.4 million (US $13.7 million),with IBRD/IDA financing Le 8.3 million (US $10.0 million); GOSL, Le 2.9 million (US $3.5 million); and farmers, Le 0.2 million (US $0.2 million) -- the farmers' contribution was to cover part of the costs of fer- tilizers and inputs, including hired labor. Table 3.3 shows total actual project costs of Le 16.2 million (US$15.2 million) that were financed by external sources and GOSL. Farmers' cash contributions to project costs have been mainly for hired labor (for which there are no precise data), and have been included as part of the total costs of labor in the economic analysis in Chapter VI. 3.20 The total cost overrun is 42% in terms of Leones, but only 11% in US dollars, reflecting the depreciation of the Leone. The major contributors to the real increase (in terms of dollars) were roads construction, and adminis- trative and operating expenses. The increase in the costs of roads is due to construction at higher standards than planned (see para 3.09). The increase in administrative and operating expenses is explained by the initial delays, and the consequent extension in the implementation period for both the NAP and the EAP (para 3.05); the higher than anticipated operational costs of the FFC, - 25 - the merging of PESU and the planning unit of MAF (para 4.23); and the agree- ment by the Bank to meet part of the planning section's operational costs from the Loan/Credit. 3.21 The project costs in Table 3.3 were financed by the Bank, US $10 (Le 10.7) million; an EEC Special Action Credit US $1.7 (Le 1.8) million; and GOSL contributions of Leones 4.045 million in cash, and Le 0.149 in fertili- zers. The excess in financing over expenditures was held by the projects in stocks, net cash reserves and prepayments of about Le 0.5 million at their respective completion dates. In addition, the GOSL contributed Le 1.6 million to the projects for bridging financing before effectiveness of the follow-up projects. E. Disbursements 3.22 Initially, disbursements were considerably lower than appraisal esti- mates because of the delays in starting up in the NAP, and slow implementation of civil works in the EAP. However, from 1979 onwards disbursements proceeded at slightly higher rates than expected at appraisal, since implementation was more concentrated in this latter part of the project period. Disbursement of the EEC Special Action Credit were much slower than expected, due to delays by CARE in submitting expenditure claims. As a result, the US$ value of the credit was reduced by 0.3 million due to the strengthening of the US$ versus the European currencies in 1981. Details of disbursements are presented in Annex 2 Table 1. F. Procurement 3.23 Delays in procurement were major obstacles to implementation in both the EAP and NAP. The main problem was convening the Central Tender Board for ICB evaluation and award. Eventually, the projects resorted to using competi- tive shopping (or limited international bidding) through Procurement Agents. This system proved to be more efficient, though more costly. It also led to a reduction in expenditure control, which resulted in procurement of items that had not been included in the Loan/Credit Agreement or cleared with Bank staff prior to purchase -- for example, a feed mill in the NAP and vehicles in the EAP. These items were eventually financed from reallocations in the Credit, following discussions between the Bank and the Government, and on undertaking by the latter to provide the equivalent in local financing (in the case of the EAP). G. Covenants 3.24 The covenants were mainly aimed at assuring adequate institutional, staffing, financial, and pricing arrangements. With respect to the institu- tional arrangements, there were initial delays in setting up the Farmer Finance Company and the Daru Oil Palm Company (See para 3.02). There were problems in meeting staffing covenants due to manpower shortages and delays by the Government (see para 3.03); however, the covenants were eventually ful- filled. In the first two years, there were serious delays in the flow of funds to the Projects, but, subsequently, funding arrangements have been generally satisfactory. The Government has not refunded the fertilizer sub- sidy to the revolving funds of the projects, but has issued fertilizers as payments in kind to the funds. This policy has not yet emerged as a con- straint on meeting recurrent demand for fertilizers and other inputs. 3.25 The pricing and subsidy covenants posed to be the greatest prob- lems. In an effort to reduce consumer prices for palm oil (which are, and have been higher than import parity prices), the Government had set prices of fresh fruit bunches (ffbs) at Le 25 per ton and the millgate price of palm oil at Le 400, considerably below the prevailing market prices. In view of the demand and supply situation, and the fact that the DOPC (para 2.05) and the Gambia Mattru Oil Palm Company (the only other publicly-owned oil palm company) accounted for less than 5% of market, it was not possible to enforce these prices on the markets. After repeated requests from the Bank, in late 1977, prices were increased to Le 40 and 500 per ton for ffb and palm oil respectively; and again in May 1980, to Le 55 and 660 at the recommendation of the appraisal mission for the follow-up project. However, these price adjust- ments have always lagged considerably behind market prices, thereby undermin- ing the viability of the DOPC (paras 4.20 -4.22). The subsidies on fertilizer was decreased in 1977 and 1979, but were not fully removed. In 1980, subsi- dies were at about 30%. A research policy was never prepared and the covenant was subsequently considered by all parties not be a matter of high priority. IV. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT A. Coordinating Committees 4.01 The Project Advisory Committee (PAC) which had been established for the EAP under the Phase I project to coordinate interactions with Government agencies was expanded to include coverage of the NAP. This committee had proved very useful to management in the Phase I project who had used it to effectively neutralize undue or non-productive interference from individual ministries by canvassing for support from other members of the PAC. However in Phase II, this function of the PAC appears to have diminished and eventual- ly the committee became disfunctional. This was due to several reasons: (a) the membership of the committee was too wide, (b) changes in the top man- agement of MANR led to more cooperative dealings with the project units, and (c) creation of the central unit (PESU) which was important in securing budgetary allocations for the projects, and thereby reducing the need for high level discussions with the Ministries of Finance and Development. The PAC was eventually replaced in 1979 by a smaller Project Executive Committee (PEC), Table 3.3 SIERRA LEONE Summary of Project Costs ------ -------------------Le - 000------------------- ---- - ------------ --US $ 000-- X of Costs NA Central Services Tota Total Appraisal Ac 2 ppraisal ActL/ AppraisalI Actual AppraisaLl Actual Appraisal! Actual-/ Appraisal Actual Estimate Estimates Estimates Estimates Estimates Estimates Infrastructure Road improvement 1414.0 2600.0 - 25.0 - - 1414.0 2625.0 1699.2 2462.4 12 16 ell construction 81.0 Service centers 88.0 1228.0 200.0 154.0 - - Training centers 116.0 1239.0 * 1510.0 1486.8 1416.5 11 9 Offices and staff 599.0 155.0 128.0 - - Farm Input Costs Fertilizers 287.7 282.1 - - Planting materials, pesticides, 585.0 1306.0 1010.1 909.6 - - 2164.9 2215.6 2597.9 2078.5 20 14 tools and hired labour Farmer Support Services Costs Local staff 1705.0 2214.0 874.1 1356.0 125.0 179.8 3869.1 4073.7 642.9 3821.5 33 )25 Technical Assistance 593.0 184.0 108.7 388.0 215.2 1 T I j Vehicles and Equipment 590.0 686.0 154.0 420.0 50.0 161.5 794.0 1267.5 952.8 1189.0 7 8 Administrative and Operating Expenses 1110.1 2119.0 440.0 1280.6 69.0 323.7 1619.1 3723.3 1942.9 3492.8 14 23 Other Costs Technical Assistance to DOPC 92.0 107.0 92.0 107.0 110.1 100.4 1 I Technical Assistance - feasibility studies 114.2 34.1 114.2 34.1 136.0 32.0 1 Assistance to FFC and consultancy 114.2 643.1 114.2 643.1 136.0 603.3 1 4 TOTAL 7168.8 10153.0 3413.5 5025.0 838.2 1021.3 11420.5 16199.3 13704.6 15196.0 to 100 Percentage of Total Costs 63 63 30 31 7 6 100 100 1/ adjusted for contingencies 2/ up to June 1981 3/ up to June 1980 5/ Rate of exchange Le 1.066 per US $. determined from the total disbursements of Le 12.526 million in the audited accounts equivalent to IDA credit of US $5.0 million, IBRD Loan US $5.0 million and EEC credit of US $1.175 million. - 28 - composed of the Permanent Secretary - MAF 1/ (chairman); the Chief Agriculturalist, his two deputies; the Managers of EAP, NAP; the two companies established under the Project (FFC and DOPC), and the Financial Controller PESU. The committee met about once a year and often without full attend- ance. On occasion it was a useful forum for discussing budgetary allocations, policy matters and the coordination of activities - especially in the EAP where problems arose among the managers of the EAP, FFC and DOPC. 4.02 A Project Coordinating Committee (PCC) was supposed to be established for each project area to advise management on local affairs and assist in dealings with the chiefdom authorities. It was intended that the committees would meet monthly and would comprise the following: Chairman - Provincial Secretary, members - Provincial Agricultural Officers, Divisional Officers for Works, Health and Education, three farmer representatives, and a senior Perma- nent Chief, with the Project Manager as Secretary. (In addition, the Manager of the Rokel Tobacco Leaf Company was to be on the Committee for NAP.) At the chiefdom and village levels, PMUs were supposed to operate through committees of traditional leaders and elected farmer representatives. There is no evidence that a PCC was ever convened in either Project area. In the NAP, project management reported several meetings with members of Parliament and Paramount Chiefs, but attendance was poor. In an effort to generate greater farmer involvement, Farmer Associations were formed in both Project Areas, but they were not effectively utilized in areas such as group credit and distribu- tion of inputs. B. Project Management 4.03 The project management units (PMUs) were established as planned at appraisal (para 2.04). Each was designed to comprise a project manager, a deputy manager and five section heads. This particular organizational ap- proach of separate PMUs directly responsible to the Permanent Secretary was proposed on the basis that (a) the projects were expected to perform functions that were normally carried out by a number of ministries and agencies; and (b) the-e was a need for close coordination of these activities within each project area. A major underlying reason was the limited implementing capabi- lity of MANR, which had been identified prior to and during Phase I; and given the limited time-frame for project implementation, there seemed to be no alternative but a separate project management structure. 4.04 During the course of implementation, this management unit approach proved to be advantageous in several key aspects. First, it provided a frame- work for developing a consistent strategy for implementing the project. The Project Manager was able to ensure coordination among the various divisions and to resolve operational conflicts, when they arose. The PMU ensured that the project resources (including staff) were focused on carrying out the project in a coordinated manner to achieve the objectives. Second, the approach permitted a certain degree of autonomy and flexibility in 1/ The Ministry of Natural Resources (MANR) was reorganized in 1978 into two Ministries - Ministry of Agriculture and Forestry (MAF), and the Minis- try of Natural Resources (MNR), responsible for livestock and fisheries. - 29 - operations. By being outside the normal ministerial structure and having relatively independent project managers, the projects had some protection against attempts at diversion of resources by competing interests. The pro- ject units also enjoyed a high degree of financial autonomy, which was important for project implementation within an acceptable Time-frame. Once annual budgets were allocated and advances made, project management had total control over the use of resources. The project units had separate bank accounts and overdraft facilities which were immediately accessible. They were not restricted by the Civil Services procedures for expenditures and dis- bursements. The PMUs also had considerable flexibility in switching resources from one task to another as the situation demanded. This flexibility is almost impossible in the ministerial structure and difficult to implement when there are several organizations involved as opposed to one management unit. Finally, the approach provided direction and targets for staff, as well as made them accountable for achieving those targets. In comparison to MAF staff, they were given better remuneration and facilities, and were subjected to greater disciplinary measures. These factors contributed to higher levels of staff motivation and better performances than has been observed in MANR/MAF. 4.05 However, weaknesses in the approach itself have also emerged. Man- agement seems, in several instances, to have displayed a preoccupation with the achievement of targets at the expense of quality of development. This at- titude was reflected down the line, since staff were also given targets and were accountable for non-fulfillment. As a result, the quality of swamp de- velopment seems to have suffered (para 5.03) and proper assessment of indivi- dual farmer constraints (with respect to labor, debt servicing, etc.) were not fully carried out before commencing development. Furthermore, the discrepan- cies in the data on the areas developed (paras 3.06 and 3.12) seem to indicate that the emphasis was on getting the maximum number of farmers registered by the extension divisions, rather than on provision of a full development pack- age of extension advice and improved inputs (and credit, if necessary). 4.06 A high degree of financial autonomy can also be self-defeating. As discussed in para 3.23, there were instances of procurement without prior Bank approval or budgetary allocations. In the EAP, serious financial mismanage- ment occurred in the interim period between completion of Phase II and com- mencement of Phase III. While this situation arose because of poor staffing arrangements (including unqualified accounting staff), and was subsequently corrected by changes in management and improved financial controlling proce- dures, the possibility of reoccurrence is a potential problem. 4.07 But the major weakness of the approach relates to -the continuity of the institutional development that it initiated. The project structures that were created exist parallel to those of MAF and there is a duplication of staffing structures. So there is on the one hand a situation of a highly de- veloped and motivated structure but with a limited life, since the project units were designed for specific objectives within a short time frame and cannot be maintained at the levels of expenditures attained during develop- ment; on the other hand, the MAF structure has remained inadequately staffed and equipped, but with the permanent responsibility for maintaining services to the agricultural sector. The attempts that have been made so far at inte- grating the two structures have not been successful. It had been planned in - 30 - Phase I and restated at appraisal of Phase II that the EAPMU would be inte- grated into the ministerial structure; however, even at the end of Phase II, no positive action had been taken. In fact, matters had somewhat worsened since the position of Deputy Project Manager was separated from that of Provincial Agricultural Officer (of MAF) and the two structures were even further apart with a certain amount of antagonism between them. 4.08 Similar provisions had not been made for the NAP since the management unit was in the initial stage of development, and the position of Project Manager was occupied by an expatriate and not by seconded MANR staff, as in the EAP. Nevertheless, it was expected that the manager would have eventually been replaced by the Deputy, who should have been a PAO, thereby facilitating integration into the MAF structure. 4.09 In conclusion, it can be said that the management approach was justi- fied on the basis of the particular circumstances and the advantages it pro- vided. Within the local context, performance was satisfactory despite serious shortcomings (see Chapter V). The failure to integrate the services in the EAP may be considered as one of the major organizational problems of the project, since the costs of integration were incurred without obtaining the benefits. These costs were the breakdown in coordination and increased operating costs, resulting from the creation of the FFC (see para 4.16) to handle services of credit and input supply, while the benefits should have been the reduction in operational costs of extension etc. This would have been achieved if the remaining EAP units had been merged into those of MAF in the Eastern Province. C. Extension and Training 4.10 In the original project design, it was intended that the project would carry out-one week training courses for farmers. The EAP I had also been operating a special course for Chiefdom Agricultural Demonstrators, who were paid employees of the chiefdoms and returned after training to their res- pective communities to assist the members. It was intended that this type of training would be continued in the EAP and introduced in the NAP. It was also planned to train project staff, who would then carry out demonstrations for farmers. However, during the course of implementation there was a decline in farmer interest in this type of training provided by the project. This was due to a number of factors: (a) poor design and execution of courses -- EAP reports indicated that the courses were unimaginative and the contents lacked relevance; (b) inadequate availability of training aids and also poor use of those available; (c) farmers unwillingness to be away from their farms; and (d) poor accommodation facilities at the training center. - 31 - The first two factors in the earlier years of the project were due mainly to the shortage of qualified staff. Conditions at the farmer training center in EAP were subsequently improved. The staffing situation was later improved in both project areas with the appointment of qualified extension officers, how- ever, the training sections have remained weak. In 1977, the EAP shifted em- phasis to more in-service training of project staff, with the objective of training a large number of farmers on their own farms and to carry out "field- day" demonstrations. During the course of implementation in the NAP as well, the need for more on-farm training emerged, and emphasis was shifted to more village demonstrations and mobile training teams backed up by repeat visits. Towards the end of the project, this approach was structured into a modified Training and Visit System. 4.11 There was a steady increase in the coverage of the extension services over the life of the project, but the ratios of farmers to extension workers were still too low at the end to be fully cost-efficient. The ratios: for the EAP (Phases I and II) 1020 per senior extension worker (SEW) and 140 per junior extension worker (JEW); for the NAP 1100 per SEW and 250 per JEW. While these ratios can be justified on the basis of the dispersion of farmers in the project areas, and the need for intensive support given the level of farmer development, it does raise implications for the recurrent costs of the project. It is not clear why the Chiefdom Demonstrator training program was abolished. It might have been appropriate to merge the two systems so that beneficiary farmers could carry some of the costs of the program. 4.12 While the ultimate measure of the efficiency of the extension system is the impact on yields and production, and this is difficult to estimate, as discussed in Chapter 5, it can be concluded that the extension systems have considerably improved over the life of the project and have made an impact on farmers in their respective project areas. At the end of the project, in both areas, the systems seemed to be well organized and staff appeared to be moti- vated. However, there was still room for improvement in the training sections of both projects and in the information feedback system (linking farmers, re- search personnel, and extension staff) to improve the extension messages. There was also need for improvement in quality, organization, and use of ex- tension aids, manuals etc. D. Commercial Services 4.13 The Commercial Services Section (CSS) in each project was responsible for the supply of credit and farm inputs. It was intended that in the begin- ning the project would employ staff to carry out these functions, but the ultimate aim was the development of farmer organizations to handle input supply. As an encouragement to the formation of farmer groups and to reduce costs, discounts were to be offered for group purchases and a premium charge for small purchases. The credit system was to be linked closely with chiefdom administrators according to the system that had worked during Phase I. A Credit Advisory Committee (CAC) was to be established in each Development area to appraise the status and credit-worthiness of applicants. The interest rates of the Phase I, 10% for seasonal and 8% for development loans, were to be maintained. - 32 - Northern Area Project 4.14 Performance The CSS was duly established in the NAP and has been fairly efficient in the distribution of inputs, though it has been plagued by shortages of trained staff and occasional transportation problems. Nearly all of the inputs were issued on credit, cash sales have been negligible. Total disbursements and recoveries are presented in Table 4.01 below. Table 4.01: CREDIT OPERATIONS Northern Area 1976 1977 1978 1979 1980 1981 Disbursements ('000 Leones) Seasonal 5.5 39.2 218.9 253.8 357.0 591.0 Development 11.5 41.0 108.4 38.2 16.0 216.0 Recoveries 1/ (%) Seasonal n.a n.a 78% 50% 40% n.a. Development n.a n.a n.a. 34% 25% n.a. 1/ These should be interpreted with caution since repayments are recorded as being applicable to the period in which received and as a percentage of the demand for that year and not against the accumulated arrears. 4.15 The credit recovery record has been deteriorating, and the opera- tional costs of the unit have been high; the margin on input distribution has been negative; the cost of credit administration in mid-1980 was about 22% of the loan portfolio, as compared with interest rates of 10 and 8%. At the end of the project, no strong institutional development appears to have been achieved. The situation was: a unit that was poorly staffed and financially unviable. There were no effective control measures and, therefore, misappro- priation of funds and supplies occurred. Very little progress has been made to establish farmer groups to reduce the costs of input distribution and to improve credit recovery through group responsibility. Furthermore, the dis- tribution of physical quantities of inputs has not kept pace with the cumu- lative areas under development, implying less than potential project impact. Eastern Area Project 4.16 In order to facilitate the merging of the administrative structures of the EAP with those of MAF, it was planned that an autonomous public company would be established to take over the commercial services (para 2.04). The Farmers' Finance Company (FFC) was established at the end of September 1977, nearly two years behind schedule (para 2.05), the authorized share capital was Le 1.5 million, divided into Le 1.4 million class A shares and Le 0.1 million - 33 - class B shares - which were meant to be purchased by farmers. However, to date their purchases have been Le 10,700. The disbursement and repayment record are summarized in Table 4.02 below. (Further details are in Annex 4, Table 1). Table 4.02: FFC CREDIT OPERATIONS 19761/ 1977 1978 1979 1980 Disbursements ('0600Leones) Seasonal 53.6 33.9 3.3 2.2 1.5 Development 283.2 209.3 148.4 119.3 54.9 Recoveries (%) Seasonal 20 53 54 34 16% Development 20 53 54 34 21% 1/ Issued by the EAP. 4.17 These recovery figures are calculated on the same basis as in the NAP and, therefore, overstate the true recovery picture. Several explanations have been put forward for these poor recoveries, some relating to the credit program itself, (see para 4.19) and others relating to the inefficiencies of the FFC, which are similar to those of the CCS in the NAP. The recruitment of trained staff has been one of the most serious problems. For a greater part of the period, the company lacked adequate financial control and internal au- diting procedures. These problems were further compounded by poor coordina- tion with the extension services of the EAP. 4.18 It would appear that it was perhaps premature to establish the FFC as a separate company. The analysis and assumptions on which its projected via- bility were based have proved to be weak. The extension service has not been able to create and maintain the expected usage of input and hired labor, and credit recoveries have been poor. Furthermore, the separation of the manage- ments of the extension and credit services appear to have created rivalry and antagonism between the two. But this might have been a reflection of the par- ticular individuals concerned, since presently under the Third Phase, rela- tions have improved with new management. More importantly, however, was the increase in operational costs: when the two services were under the same man- agement, with closer coordination, there were considerable economies of opera- tion. In particular, it was easier to combine staff visits for extension with credit approval, input distribution, and loan collections, permitting more effective use of vehicles, operating costs, overheads etc. It is worth noting that the operation costs of the FFC in 1980 were Le 295,000; in that same year, only Le 56,000 worth of credit was disbursed. This dramatic decline in the amount of credit and inputs supplied by the FFC also has serious implica- tions for the overall impact of the project and brings into question, both the - 34 - level of institutional development that has taken place and its relevance for promoting development in the area through provision of credit and inputs. Overall assessment of the Credit and Input Supply Program 4.19 At the end of the project, viable credit and input supply mechanisms had not yet been developed in either project area. While a fair amount of disbursements had been made, recoveries were poor. Furthermore, other funda- mental problems in the credit project have been identified: 1/ (a) the extension package and the associated credit program were both based on insufficient analysis of the farmers preferences and constraints; (b) as a result of above, the credit program may have driven farmers further into debt with the local moneylenders, because the credit package for the targeted development may have been inadequate 2/ or debt-servicing too taxing; (c) insufficient use was made of existing local groups and institu- tions to distribute inputs, and facilitate loan approval, and collect repayments; (d) poor control mechanisms, and the appropriation of repayments by credit staff, thereby, adversely affecting farmers' confidence in the system; and (e) inadequacy of the system to handle repayments in kind, which has been the traditional method and is the expressed preference of farmers. In 1973, under the first phase, project repayments were made in kind and re- covery was 100%. However, collection in kind was suspended in 1977, since it posed severe problems for the project, e.g. arguments with farmers on weights, measures and quality, and administrative problems in collection and delivery to a storage point, and protection from theft. E. Daru Oil Palm Company 4.20 The Daru Oil Palm Company (DOPC) had initial problems in recruiting 1/ Karimu, J. and P. Richards - "The Northern Area Integrated Agricultural Development Project. The social and economic impact of planning for rural change in northern Sierra Leone." Department of Geography, School of Oriental and African Studies, University of London, Occassional Paper No. 3, 1980, and working papers on the credit opera- tions prepared during the Preparation and Appraisal of NIADP II. 2/ These inadequacies were partly due to inconsistencies in the SAR, misunderstanding on the part of management of the SAR allocations, and non-use of contingency allowances for increases in labor costs. - 35 - qualified staff and in getting the mill to operate. It had originally been planned that the General Manager would be internationally recruited, and funds were provided for this purpose. However, the Government subsequently suggested, and the Bank agreed to the appointment of a locally recruited Manager (the former manager of the EAP Phase I), and funds were also used for the employ- ment of an engineer (from the suppliers) to assist in the maintenance and operation of the mill as well as the training of local personnel. 4.21 The production of the estate established under Phase I has been lower than expected. Yields have been affected by weather variations and insuffi- cient fertilizer applications during development. Also, harvesting has been a problem due to labor shortages since the main production periods coincide with the peak seasons of labor demand for on-farm operations, and as no provisions had been made for a resident labor force. For its milling operations, the company could not augment its own production with purchases of ffb from out- growers, since under the Government's pricing policies (para 3.24) it could not compete with private purchasers. Furthermore, the company had been acting on behalf of the FFC to collect loan repayments from outgrowers, which rein- forced their reluctance to sell to the DOPC. As a result, the mill was often operating at below 25% of capacity, and given the low prices at which it could sell palm oil, the company incurred heavy losses over most of the project period. 4.22 The company has had to face these various adverse factors as well as mechanical problems with the mill. However, management seems to be coming to grips with the problems, and the overall record is one of progress, albeit rather slowly. Recently, the Government has been displaying greater interest in ensuring the financial viability of the company and has provided technical evaluation and advice at its own initiative. The performance of the company is expected to continue to improve. The follow-up project (Cr. 1094-SL) in- cludes extension of the nucleus estate, expansion of the capacity of the mill, and provision of estate housing for labor. The subsequent amendment to the Credit Agreement (August 1982) provides for the purchase of a boiler to cor- rect the mechanical problems of the mill. With these improvements and appro- priate pricing policies, the company should become a financially viable enterprise, while contributing to domestic food requirements and stabilized prices. F. PEMSU 4.23 In view of the weaknesses of the ministerial structure, it was neces- sary to establish a central unit (PESU) within MAF to assist in the implemen- tation, monitoring and evaluation of the project and other similar projects that were planned. The original PESU unit was merged with MAF's Planning Unit in 1979 to form PEMSU. The Financial Section of PEMSU provided valuable sup- port to the project units, as well as to the FFC and DOPC in establishing their accounting and internal auditing systems. The section also assisted in training staff for these purposes and in monitoring the financial systems once they were established. The section also represented the interest of the pro- jects at the center in Freetown. Since 1977, the projects have not exper- ienced the earlier difficulties in obtaining their allocations, despite the overall budgetary problems. The Planning Section, despite staff shortages, - 36 - was able to prepare and assist in the preparation of a number of projects within the sector. However, no provision had been made for technical support for this section and it remained technically weak. Very little monitoring and evaluation of project implementation, impact, and benefits was carried out because the project economist (financed by ODA) was diverted to planning exer- cises. The Commercial Services Section, which had been intended to provide advice on credit operations and input distribution systems, as well as assist in procurement etc. was abolished upon the premature departure of the commer- cial services officer. 4.24 An overall assessment of the unit indicates that its capabilities have developed over the life of the project. Its operations have extended to providing assistance in financial controlling in seven projects and three com- panies and in planning a number of new projects, though no information has been collected for impact evaluation of any for the projects. Furthermore, the unit continues to be dependent on technical assistance and operates outside the mainstream of the MAF structure. G. Other Institutional Aspects 4.25 Staffing and Training. The difficulties of recruiting trained staff and a high rate of turnover were major problems in both project areas and PEMSU. The SAR had recognized that there would be a shortage of staff but the gravity of the situation, especially at the middle level, was underestimated and very little provision was made for the training of local staff. In re- cognition of the shortage of senior staff, the SAR made provisions for international recruitment for seven positions - Project Manager, Construction Engineer and Livestock Officer (NAPMU); Land Development Officer (EAPMU); General Manager (DOPC); and Financial Controller and Commercial Services Officer (PESU). The positions, with two exceptions, were eventually filled by expatriate staff recruited with assistance from APMU. The exceptions were: Livestock Officer, NAPMU, and General Manager, DOPC, which were filled by qualified local staff whose performance have been satisfactory. In the DOPC, the position of the Mill Engineer was substituted instead for international recruitment and Bank-financing. The internationally recruited staff have been well-qualified and have generally been satisfactory, judged under difficult circumstances. Only one of the six internationally recruited staff (the Commercial Services Office of PEMSU) had his contract terminated for unsatis- factory conduct and performance. However, there has been very little training of local staff to replace the expatriates, and in the follow-up projects these positions have continued to be held by expatriates. There was no systematic program of identifying competent local counterparts to be trained for succes- sion, except in the cases of Mill Engineer in the DOPC, and of Land Planning Officer in the EAP. However, the training of the Mill Engineer seems to have been inadequate since there have been a number of problems with maintenance of the Mill; and the local Land Planning Officer left the EAP soon after his training was completed. The Financial Controller of PEMSU has trained a number of accounting and auditing staff for the project units but, unfor- tunately, a number of these have also departed for better salaries in the private sector. - 37 - 4.26 In the SAR, mention was made of in-service staff training for junior- level staff and included in the terms of reference of some of the senior staff. However, no precise program was set out or financing provided. Les- sons that have emerged include: (a) more provision should be made for train- ing, so that larger numbers than actual requirements could be trained to allow for heavy staff turnover; and (b) there should be more systematic programs to assess staff potential and develop their capabilities to replace expatriate staff in senior positions. 4.27 Accounting and Auditing: The SAR stipulated that separate accounts would be kept for each entity "under acceptable commercial accounting proce- dures, which would also provide cost-accounting and project evaluation data". However, during the course of supervision, no specifications were given on the details of data required and the project units displayed no initiative in setting up procedures for monitoring the costs of operations, such as roads, wells, nurseries, and livestock operations; or the considerable increases in staff and operating costs over the life of the project. The accounts have been audited annually by independent auditors acceptable to the Bank; however, during supervision of the follow-up projects, it has now emerged that while the minimum requirements have been met, there is room for considerable improvements in the scope of the audits. 4.28 It took some time for internal auditors to be trained and assigned to the project units, FFC and DOPC. In the EAP, there was considerable resis- tance from the former Manager to an Internal Auditor, and disagreement on his functions and reporting responsibilities; the other managers appear to have appreciated the need for internal auditors and have used them effectively. 4.29 Reporting: The projects were expected to prepare annual budgets and program of work in advance. The work programs were rarely prepared suffi- ciently in advance to permit coordination of activities; in particular, be- tween the extension and commercial services. There is considerable inconsis- tency in the reports from year-to-year, as well as within some of the reports and between those of the FFC and the EAP. These inconsistencies arise mainly with respect to the area that was supposed to be developed and the correspond- ing distribution of inputs (on credit or on sale). The data provided by the reports were limited, and coverage and break-down tended to decrease over time instead of expanding. There were no attempts to collect data systematically of project impact on farmers; therefore, the labor constraints of the crop improvement and development packages, and the limitations of the credit allocations were not identified early enough to permit adjustments. As a result, the long term viability of the crop developments have been affected, as discussed in Chapter 5. 4.30 From the observations and results, it can be concluded that at the end of the project, all staff were not yet fully convinced of the need and benefits of monitoring the cost effectiveness of their operations and evaluat- ing their performances. They have only implemented the minimum requirements with respect to auditing, which the Bank insisted upon. It was also noted that a positive attitude towards accounting for funds could have been devel- oped, particularly at certain senior levels in the project units. The incon- sistencies in the project reports suggest that they were not adequately used - 38 - as management tools to plan or coordinate the activities of the various sec- tions, and cross-check the achievements they reported. It can be said that within the local context the project has achieved a great deal by creating an awareness of these important aspects of institutional development. But the level of internal monitoring and evaluation necessary to maintain efficient and dynamic services (without Bank involvement) in the project units, and much less so in the rest of MAF, had not yet been attained. 4.31 Institutional Arrangements for Roads: The decision that CARE would implement the roads program (para 3.09) seemed an appropriate course of action since (a) the Project's Engineering Unit was heavily involved in buildings and wells construction, supervision of swamp development etc; and (b) CARE had the necessary equipment and expertise, and was also committed to community parti- cipation in road construction. However, during the course of implementation, CARE switched from labor-intensive to capital-intensive methods of construc- tion, thereby increasing the costs and reducing community participation in road improvement and maintenance. CARE's explanation was: inadequate labor supply due to conflicts with the timing of on-farm tasks. Formerly, under local government regulations, villagers were required to allocate a certain amount of time to community works such as road construction. Since CARE's involvement in road construction, the local government has not been enforcing this regulation, and villagers as well as local authorities have come to expect outside responsibility for road maintenance and construction. 4.32 Under the arrangements with GOSL, CARE constructs and maintains feeder roads for two years after which they are handed over to the Ministry of Works (MOW) for maintenance. However, at present MOW does not have the equip- ment or funding to carry out the required maintenance; over the years, exter- nal financing for feeder roads and a considerable amount of Government funds, as well, have gone to CARE, to the detriment of MOW. 4.33 Another problem is that CARE has not constructed any access tracks and does not seem prepared to do so in the follow-up projects, thereby limit- ing the coverage of the extension and input supply services. Furthermore, the road network was supposed to be in support of the project activities but the actual constructed network has been found to have no statistically significant relationship to project activities. 1/ The project management and CARE are supposed to determine the alignments in consultation with each other, and it is not clear whose will shall prevail in the decisions. In conclusion, it can be said that in the interest of speedy implementation, the development of local capability was sacrificed but the net outcome has been costly. The costs have been higher, coverage more limited than anticipated, village and local government participation reduced, and now there is no institution capable of taking over maintenance of the roads. With the benefit of hind- sight, it can be postulated that the original plan of implementation by the project unit would have been more appropriate, or an alternative could have been a MOW unit assigned to the Northern Province either supervised directly by, or working in close consultation with the project. If the latter plan had been adopted, the project would have directly reimbursed that unit for work done to avoid the problems of allocation of funds going through central MOW. 1/ See Karimu and Richards op. cit. Pages 22-32. - 39 - V. AGRICULTURAL AND SOCIAL IMPACT 5.01 Since no data have been collected on a systematic basis in either project area, it is difficult to evaluate the full impact of the project. An effort is made below to estimate the agricultural impact in terms of technological change and output, but this is also difficult due to the large discrepancies and contradictions in the data provided by the project units. The discussion on the social impact is based on the observations of project staff, and two studies carried out in the project areas. A. Technological Change 5.02 The upland food crop development package consisted of improved seed varieties for upland rice and groundnuts. Since there was no information on response to fertilizer under shifting cultivation techniques, a cautious ap- proach to the use of fertilizer was followed. Farmers have been responsive to the advice of extension agents on planting, spacing, and intercropping techni- ques. There has also been considerable seed exchange among the farmers. 5.03 Swamp development was the main thrust of the technological innovation objective of the project. Internationally recruited engineers were employed in both project areas to introduce better drainage and water-control systems for inland valley swamps. The package also included improved seed and ferti- lizers for cultivation. While the design of the water-control system is basi- cally sound, the implementation has only been partially successful. A major problem has been a too short development period. The practice had been to build the drainage canals and permanent bunds simultaneously in the first year. However, experience has shown that the introduction of drainage caused shrinkage of the peat soils, which could change the water course and distort the alignment of the canals and bunds, which would then have to be rebuilt. In some of the virgin swamps the drainage process may take 3-5 years, while in the previously cultivated swamps the problem has not been as serious and the systems have worked more efficiently. In the NAP there have also been problems with flooding and the consequent destruction of the works. In the cases (between 25-40%) where the systems have been working efficiently, some farmers have been able to achieve cropping intensities of between 130-150%. There has also been considerable spillover effects of swamp development, with non-project farmers attempting to build water-control works on their own. The success of their efforts have depended on the particular characteristics of their respective swamps, since without the benefit of technical surveying the main drain is sometimes poorly aligned with the water course. But on the whole their efforts have contributed to increased production. 5.04 The adoption of improved cultural practices in swamp-rice cultivation has also been widespread, with farmers recognizing the potential value of improved seed and fertilizer as well as the recommendations on spacing, transplanting, etc. However, the use of fertilizer has been declining and a number of farmers have abandoned their swamps and returned to the uplands. - 40 - 5.05 There is no consensus on the reasons for this observed abandonment. One major explanatory factor is the problem of distortion of the bunds, dis- cussed in para 5.03, since no provision had been made in the package for fi- nancial assistance in consolidating swamps after shrinkage, though in the NAP consolidation assistance was introduced in 1981. The incidence of abandonment also appears to be higher in the Eastern than in the Northern, which could be explained by the shrinkage factor and/or more preferred alternatives. In the EAP most of the swamps developed were virgin, hence greater shrinkage occured than in the NAP, where traditional swamp cultivation has been more wide- spread. Also, in the EAP there are more competing opportunities for non-farm employment (in the diamond-mining etc.) and tree crop cultivation. Other explanatory factors that have emerged include conflicting labor demands with tree-crop activities, land-tenure issues, and the association of schistosi- miasis with swamp cultivation. A health survey was carried out to examine the latter factor (see para 5.19). 5.06 Tree-Crop Development was confined to cocoa and oil palm in the EAP. For cocoa, the seedlings were propagated from locally available vari- eties. Since the planting material was purchased from farmers, there are no records of variety and yield potential etc. of the seedlings distributed. A clonal-seed garden was established (see para 3.15) in an effort to select and propagate high-yielding varieties. However, the quality of the seedlings pro- duced is still questionnable, since the project staff lacked the expertise to select the genetically superior varieties for propagation. Some technical consultancy was provided under the project to assist in establishment of the Seed Garden, however, it did not appear that assistance was provided for selecting planting material. The project also advised on-site selection for cocoa plantings but the quality of this advice deteriorated following the departure of the land planning officers and there have been a number of cases of cocoa plantings on unsuitable soils, mainly to establish land tenure claims. The technical package also included advice on spacing, weeding, and shade control. 5.07 Oil palm seedlings were grown from IRHO materials (Dura X Psifera) from the Ivory Coast. The extension staff had detailed leaflets on the selec- tion of sites, planting, and maintenance of the trees. On the whole, farmer response to the recommendations has been good, though fluctuating with relative pricing levels. The level of fertilizer usage may have been below the recommended levels, but this does not appear to have had a severe effect on growth or yields. 5.08 With the exception of those cases where tree-crops were planted to establish land-tenure rights, the adoption by farmers of the technical pack- ages has been good, though there have been considerable variations. In the EAP the most obvious impact is observed on oil palm farms, which, on the whole, are better maintained than the cocoa farms established under the pro- ject. Fertilizer usage has been much greater in the NAP than in EAP, which is partly explained by the problems of the FFC; but it is believed that soil characteristics may also be a factor which needs to be investigated. Throughout both project areas, farmers have become aware of the advantages of improved seed and there is considerable seed exchange among them, without going through the project. While they are also aware of the potential value - 41 - of fertilizer, usage has not been maintained at expected levels and it has been noted that a number discontinue using fertilizers after the first year or two, including some that have repaid their loans and are eligible to receive fertilizers from the project. At the end of the project, the conclusion was that a number of possible explanatory factors need to be explored further, including that: (a) response was not up to expectations; (b) the risk element is too high for subsistence farmers; (c) the fertilizers wc;e rot avallabl: en t2he; (d) this is a reflection of the general pattern of disinvestment out of agriculture (see para 8.08); and (e) the increased weeding that is required following fertilizer application for uplands and for those swamps without adequate water-control could be too costly in relation to returns. B. Incremental Output 5.09 There have been considerable variations in adherence to the original technical packages promoted under the project. Analysis of the total dis- bursements of loans and distribution of inputs by the projects as well as of samples of individual loan cards indicate that farmers did not apply the full fertilizer recommendations. There were variations in the level of applica- tion, in any one year as well as over time, that is, in the case of oil palm, there were farmers who applied fertilizer in alternate years or every three years, with some discontinuing fertilizer applications after the second or third year. There have also been variations in the levels of maintenance of the tree-crops and swamp works. As a result, the incremental output per farm under the project varies considerably. Project staff's estimates of the im- provements in yields that have been achieved are summarized in Annex 5 Table 1. For rice and groundnuts, three possible packages are considered: (i) Package A-improved seed and fertilizer at more or less recommended levels; (ii) Package B - improved seed and improved cultivation practices and/or fertilizer below recommended dosages; and (iii) Package C - local seed and improved cultivation practices such as better weeding, intercropping, and spacing. 5.10 For swamp rice, the increases in yields above pre-project levels could vary from 80% to 140%, for upland rice from 60% to 100%, and for ground- nuts from 15% to 100%. For the tree crops established under the project, yields would vary between 50% below and 10% above the yield of 700 kgs/hectare for cocoa expected at full development (starting in 1984); and for oil palm while the yield potential is not expected to be considerably lower than 8.4 tons/hectare at full development, actual production is likely to be lower due to labor constraints on maintenance and harvesting. - 42 - 5.11 Variations in input usage appear to be the major factor explaining the differences in developed areas reported in Tables 3.1 and 3.2 as compared to the disbursement of loans and distribution of inputs under each crop. For swamp and tree-crop development, another explanatory factor is the substitution of family (or exchange) labor for hired labor. For tree-crop development, the seedlings distributed for cocoa more or less match the area registered for credit, for oil palm the implied area of the total seedlings distributed is greater than the registered area. Given these variations in credit disbursements, input usage, yield expections etc., the incremental production for rice and groundnuts under the project is assumed to vary between 75 and 50% of the total implied by the areas and yields reported by the project units during the implementation period and to fall to between 60 and 30% afterwards. The falling-off of production would be greatest for upland rice and groundnuts since the major factor in increased yields was improved seeds, which need to be changed every three years to be fully effective. However, the NAP has stopped distributing groundnut seeds and the distribution of upland rice seed is decreasing rapidly. The specific assumptions for each crop in each project area are given in Annex 5 Table 2. For tree-crop development, total production is assumed to be about 75% of the total potential of the area developed, to allow for cases of poor soil selection for cocoa (para 5.07) and of poor maintenance for both. Under these assumptions incremental production would be as follows: Table 5.1: CROP PRODUCTION (tons) NAP EAP Appraisal Appraisal Actual 1/ Estimates Actual 2/ Estimates Swamp Rice (Unhusked) 3770 3220 1270 1/ 6600 2/ Upland Rice (Unhusked) 4630 2060 - 2410 Groundnuts (unshelled) 310 1560 - - Cocoa - - 510 3/ 318 Oil Palm (ffb) - - 4860 3/ 5600 1/ 1982 2/ Second Phase of EAP alone 3/ 1988 - 43 - C. Impact on Farm Incomes 5.12 In order to distribute the benefits of the project to as wide a range of farmers as possible, it had been intended that loans would be for about 3 acres (1.2 ha) for swamp rice, 2 acres (0.8 ha) for cocoa, and 10 acres (4.0 ha) for oil palm. However, a number of farmers applied for loans under the names of various members of their extended families, so that there has been some concentration of project benefits especially in the case of tree-crop development. Here there are cases of holdings of one family being as much as 7 times the permitted area. 5.13 Therefore, the actual number of farmers reached by the project are less than those reported, but at present it is not possible to arrive at a exact estimate of the number of families benefiting from the project. A realistic estimate would be about 75% of the reported numbers shown in Table 5.2 below, which would be some 13,840 farmers. Table 5.2: NEW FARMERS REGISTERED ANNUALLY 75% of NAP 1976 1978 1978 1979 1980 1981 Total Total Swamp 139 767 1462 634 329 - 3331) Upland Rice - 105 985 2923 3408 1664 9085) 11170 Groundnuts - 44 1529 146 567 47 2333) Maize - - - 142 - - 142) EAP Swamp Rice 799 802 132 107 44 - 1884) Cocoa 315 302 355 286 207 - 1465) 2670 Oil Palm 71 65 41 29 - - 206) 5.14 The approach under the project was the improvement of a single crop of individual farmers. It does not appear that much consideration was given to the full implications of improving that particular crop within the overall farming system at the individual farm level, with respect to labor demand on different members of the household, the effect on other crops, the net cash flow etc. and at the village or district level, with respect to the total labor demand at peak seasons. As a result, little is known of these effects except the observed constraints of labor, both at the farm level and at the village/district levels. This shortage of labor was less of a constraint in the NAP than in the EAP, where it affected not only swamp development but also establishment, maintenance, and harvesting of tree crops of farmers, and the harvesting of oil palm at the DOPC. 5.15 Therefore, it is difficult to estimate the net effect on farmers' incomes of the various packages. On the basis of the little data that are available, - 44 - cash flows for the tree-crops and budgets for the annual crops have been con- structed (Annex 5 Tables 3 to 6); the net returns per family and per manday of family labor are summarized in Table 5.3 below. These net returns are likely to be overstated since the opportunity costs of family labor in terms of the reduction of other production is omitted; as well as the costs of exchange labor, which may be considered as accumulated family labor since it is paid for by family labor in advance, or afterwards in a lump sum, or spread over a period. Table 5.3: INCREASE IN RETURNS 1/ 1981 Prices Increase in Yields Increase Returns per per hectare at in family Manday of full development income 2/ family labor tons/ha Leones Le/manday With Without Project Project Swamp Rice 1.4 430 3.0 1.8 (1 hectare) Upland Rice 0.6 220 2.5 1.6 (1 hectare) Groundnuts 0.4 160 2.0 1.5 (1 Hectare) Cocoa i/ 0.7 505 6.7 2.0 5/ (1 hectare) Oil Palm (ffb) 4/ 8.4 375 5.8 2.0 (4 hectares) 1/ For assumptions on costs, input usage etc. See Annex 5, Tables 3 to 6. 2/ Excluding costs of family labor for cultivation etc. and opportunity costs of foregone productions. 3/ Net of cash costs of development capitalized over 5 years but excluding costs of family labor for development which is about 300 mandays/ha in the first 2 years. 4/ New development, net of repayments of development loans but excluding costs of family labor in development period. 5/ Using traditional methods and planting material. - 45 - 5.16 Even after adjustments for opportunity costs, it is likely that the project has had considerable impact on farmers' incomes. While there are con- siderable variations in the returns to the various crops, there are a number of equalizing factors such as the high development costs and greater risks associated with the higher returns, a long development period for tree crops, and the more strenuous nature of work for swamp development and cultivation. D. Social and Environmental Impact of Other Components 5.17 Roads: The total coverage of the feeder road network in the NAP has been less than appraisal expectations, the costs have been high (para 3.09), and the routing has not been entirely satisfactory in relation to proic't ac- tivities (para 4.33). Furthermore, as pointed out by Karimu and Richards in their study 1/, the network is poorly planned, there are too many inter- connections and even instances of closely parallel routes. However, in spite of these shortcomings, the network has increased access to about another 30% of the project area, assuming a sphere of influence of about 2 kms on either side of each road 2/. In addition to this direct, project-related benefits of improved extension, credit, and input supply services, a USAID study 3/ has identified a number of other indirect impacts - positive and negative. The positive impacts include improved transportation and marketing services at lower costs, and higher sales of farm output. Improved accessibility has also increased expenditures on basic consumer goods; more importantly the study also identified increased government and private health services with improved accessibility. The relationship of increased accessibility with new construc- tion, more schools and students is not so clear. Some of the negative impacts which are beginning to emerge include increased out-migration and decreased fallow periods along these routes. In the cases where the fallow periods have been reduced because of substitution of tree crops and permanent cultivation in place of shifting cultivation, the net effects are clearly beneficial. However, in cases where shifting cultivation is continued, there are higher possibilities of environmental damage - such as increased erosion, less fertility, etc. 5.18 Health Impact: The project has also been involved in the construc- tion of wells to improve the quality of drinking water for villagers and to provide an alternative source of water supply following cultivation of swamps. The program has been successful and villagers have participated in providing the manual labor for construction. In 1980, the Wells Unit with assistance from the Masanga Leprosy Asylum, carried out an analysis of village wells constructed by the project. In the analysis, the Ph and ammonia content of the water was measured as well as the bacteria and protozoa levels. Of the 1/ Karimu and Richards op. cit page 26 and Fig. 5. 2/ Ibid page 22. 3/ Effectiveness and Impact of the CARE/Sierra Leone. Rural Penetration Roads project - USAID, Report no. 7. - 46 - 30 IADP wells that were tested, 28 were found to be yielding water suitable for drinking while one was unused and the water was stagnant, and another had been deliberately contaminated by rival sections of the village. In com- parison, five native sources were tested, of which three were found to be yielding water suitable for drinking and two were found to contain high levels of protozoa. 5.19 Some of the villages have expressed fears that swamp cultivation in- creases the possibility of contacting various diseases. A survey was carried out in the EAP by CARE and CUSO to assess the prevalence of Schistosomiasis and Onchocerciasis in the area. Samples were taken from 74 villages in the project area, and of the total sample population of about 25,000, some 8,000 were selected for testing. The survey was unable to identify a definite re- lationship between IADP swamp development and the incidence of schistoso- miasis; the researchers recommended further analysis but no follow-up has taken place. VI. ECONOMIC EVALUATION 6.01 The overall economic impact of the project has been widespread: it has contributed to institutional development (Chapter 4), to technological change and increased agricultural production (Chapter 5), and to improvements in social infrastructure (roads and wells). At least 14, 000 farmers have been introduced to the use of improved inputs and cultivation techniques. 6.02 However, a number of these benefits are difficult to quantify, therefore only the direct benefits of increased farm production are included in this attempt to evaluate the economic impact of the project. The data used in the analysis are presented in Annex 6 Tables 1 and 2, and the major underlying assumptions are as follows: (a) Production. The assumptions on actual increased production are discussed in para 5.11, and the production streams are presented in Annex 5 Table 2. (b) Prices. All benefits and costs are expressed in constant 1981 Leones. For foreign prices from 1981 onwards, a shadow exchange rate reflecting a 30% over-valuation of the 1981 Leone is used. This exchange rate is based on observations on the parallel market and staff (Bank and IMF) estimations. (c) Costs. (i) the costs of the Central Unit, PESU, have been omitted since the benefits are related to institution building of the country as whole (in the SAR, 50% had been charged to the EAP and 30% to the NAP); (ii) for the EAP, all the operational costs of the FFC in the development period have been included (they had been omitted in the SAR), but no operational costs for the FFC have been included after year 5, since the FFC is not necessary to maintain the levels of production assumed in the benefit stream. (iii) Family labor has been costed at market wages (in - 47 - 1981 Leones) to reflect the actual labor shortage phenomenon; in the SAR, shadow wage rates of 60% and 35% of the official wages had been used for the EAP and NAP respectively, but it has evolved that surplus labor is only an off-season phenomenon. Furthermore, in some cases, hired labor has been used for activities which were expected to be done by family labor in the SAR. (iv) Post-development costs are equal to the allocation made under the follow-up projects, adjusted to 1981 prices. On the basis of these assumptions, the Economic Rate of Return (ERR) for the NAP would be 10%, for the EAP 9%, and for the two combined almost 10%. In the SAR, the estimated ERRs were 14% for the NAP and in excess of 36% for the EAP (since EAP Phase I had been combined with the second phase EAP under this project). Though as discussed above, the assumptions on which these ERRs were based were different. The assumptions of the present analysis are a better reflection of the true direct benefits and costs of the project. If 50% of the road costs are excluded (on the assumption that they are about equal to the indirect benefits), the ERR on the project increases to 13%. While these reestimated ERRs are below appraisal expectations, the project may still be considered as having been economically beneficial to the country as a whole, in terms of increased production, institution building, and improved income distribution. The project achieved its income distribution objective by generating the larger proportion of the total benefit stream in the NAP as compared with the EAP (Annex 6 Table 1) though the returns to family labor are higher for the tree crops in the EAP (Table 5.3). If the secondary benefits and spread effects could be quantified, the ERR would be well in excess of 10%. VII.. PERFORMANCE OF THE BANK AND THE BORROWER A. Performance of the Bank 7.01 From start-up in late 1975 to completion in 1981, the Bank sent fif- teen missions from headquarters and three from RMWA to supervise the implemen- tation of the project. Supervision has generally been adequate. At the same time, several critical observations can be made about implementation perfor- mance, where in hindsight, supervision missions could have played a more active role in pointing out shortcomings of the project units. Thus, some of the crucial problems of project implementation could have been identified earlier, and corrective measures could have been suggested more timely. For example, the large discrepancies between the areas reported as being developed on the one hand, and loan disbursement and input distribution on the other hand, were not discovered until the appraisal of the follow-up project in the NAP in June 1980 and were only discussed in the June 1981 Supervision report when the project was completed. Also, if closer attention could have been paid to the activities of the extension and commercial services sections, and the problems of coordination among the divisions and the quality of the technical packages could have been addressed earlier. - 48 - 7.02 The Project Completion Report (PCR) of the Phase I project contained several recommendations that were ignored by the project units and that could have been pursued more by supervision missions. For example, the PCR had identified the problems associated with swamp development and maintenance, but the project failed to monitor even a sample of swamps to examine the problems of labor requirements, shrinkage, returns etc. The PCR also discussed the need to understand the socio-economic aspects of the farming systems, in order to introduce balanced changes. However, the project units did not collect information from farmers on their labor constraints, risk preferences etc. in order that appropriate technical and credit packages could be designed. The emphasis continued on single crops without adequate consideration of the impact on the farming system, household allocation of labor etc. 7.03 The high operational costs of the credit systems were also identified in the PCR, but there does not appear to have been much emphasis by the pro- ject units on the development of farmer associations to reduce these costs and improve loan collections, as had been planned at appraisal. The Bank seems to have displayed a preoccupation with removing fertilizer subsidies without paying enough attention to the costs of distributing fertilizers and credit. These costs became a greater burden on the Government's resources than the subsidy on fertilizers, which had a certain rationale in reducing the risks of the technical packages to the subsistence farmers. 7.04 It is not clear why the Bank went along with the Government on its national research policy and waived the covenant on this matter. One of the major problems in the sector is the lack of coordination among the various research organizations, as well as between them and the extension services. One might speculate that the controversy over upland rice seed in the EAP (para 3.14) might have been resolved earlier and some progress might have been made towards establishing permanent annual cultivation on the uplands with an appropriate technical package, if this covenant had been followed up. The need for coordinating the formulation and implementation of a national research policy is discussed further in Chapter VIII. 7.05 One general lesson that emerges is that consideration should be given to scheduling supervision missions differently. It might be more appropriate to schedule one major annual review at the end of each cropping year to assess performance and to incorporate the results into the next year's plan, a draft of which should be submitted to the mission before arrival in the country. These annual reviews could be supplemented by six-monthly interims reviews of progress. This approach would not necessarily involve more staff time since the interim progress reviews could be brief and only short supervision reports would be required. B. Performance of the Borrower 7.06 There were a number of initial delays on the part of the Government (paras 3.02 and 3.03) but these were probably normal given the bureaucratic system. On the whole, the government has been supportive of the project and - 49 - losely involved in its implementation. The delays in the payment of counter- part funds during the first two years of the project were partly a reflection of the budgetary problems, and even though these problems have increased the Government has provided considerably more funding than had been originally planned (para 3.21). 7.07 With respect to the issues on prices and subsidies that arose during the implementation of the project, the Government has been less cooperative than one would have liked. However, for these issues to be satisfactorily dealt with, they should be analyzed in a sectoral/national framework to take account of all the implications involved, but the Government has lacked the technical expertise to carry out such an exercise. This issue is discussed further in Chapter VIII. 7.08 The major shortcoming has been with respect to the failure to inte- grate the agricultural services in the EAP. The costs and institutional im- plications of this problem are discussed in para 4.07. The major obstacle to integration is that the organizational structure of the central Ministry is at present not strong enough institutionally to carry out the functions of the project units in an efficient manner, and the Government has been slow in tak- ing the necessary steps to modernize and strengthen the structure and improve its performance. VIII. ISSUES AND CONCLUSIONS A. Issues 8.01 The major issues that were encountered during implementation of the project are either inherent to, or derived from, its particular design and approach, including its institutional/organizational (paras 4.01-4.09) credit (paras 4.13-4.19) and crop approach (5.14-5.15). The main external issues relate to oil palm pricing (para 3.25), delays on the part of the government (paras 3.02 and 3.03), and the absence of a coordinated research policy (para 7.04). 8.02 Some of these issues are being addressed in the follow-up projects - Eastern Phase III (Cr. 1094-SL) and Northern Phase II (Cr. 1128-SL). The Eastern Phase III includes a repeat of the integration covenant. Since there has not been adequate analysis of the obstacles to integration and the devel- opment of an appropriate strategy in consultation with all parties involved, it is not surprising that progress has not been satisfactory. It is now in- tended that the organizational issues will be dealt with more extensively as part of a sector review and under the proposed Agricultural Development Project which is being prepared. 8.03 With respect to the credit issue, an internationally recruited Credit Adviser has been appointed. He is currently reorganizing the operational methods and examining the feasibility of developing farmer groups for credit and extension services. However the problems discussed in para 4.19 are still a long way from being resolved. - 50 - 8.04 The approach to crop development was the major inadequacy of the project design. The basis of the technical packages was weak and as discussed in para 5.14 the single crop approach could not deal with all of the problems facing the subsistence farmer. It is quite likely that for a number of farmers, the approach merely resulted in movements along the production fron- tier rather than outwards, given the labor constraints and the nature of the packages that were being promoted. This issue is still not being adequately dealt with in the new projects, the emphasis continues to be on single crops; though it has been agreed between the Bank and project staff that case'studies of farming systems would be started. The results of these studies should be used to change the broad packages, where necessary, and also to design specific pilot packages to test alternatives and improvements. 8.05 The approach to swamp development continues to be another area of concern. Given the problems of water control and labor requirements for maintenance, a feasible approach might be the development of entire swamps using light mechanical ditch diggers to build the main structures (that is, the main drainage canals and peripherals) larger than at present, and rein- forced where necessary. Farmers would be responsible for the construction of the field divisions. The costs of construction could be recovered through annual land taxes on the owners/occupiers. At present, the proposals under the follow-up projects are limited to consolidating the swamps developed in the earlier phases in the EAP and some reinforcing with stones and cement in selected cases in the NAP to reduce the flooding problems; these measures alone would not be sufficient for making the program viable over the long- term. 8.06 Covenants on oil palm pricing and subsidies and fertilizers have been included under the EAP III. A study on prices and marketing is currently be- ing carried out as a basis for discussions between the Government and the Bank, within the framework of a sectoral and national approach to the issues on prices, taxes, subsidies, and marketing etc. 8.07 A coherent research policy for the agricultural sector has not yet been achieved. There are various organizations involved in food crop research - Rokupr Rice Research Station, Njala University College, the USAID funded Adaptive Crop Research and Extension Project. Tree crop research was formerly supervised by the Sierra Leone Produce Marketing Board but has now been handed over to the EAP. It is of vital importance that there should be a coordinat- ing body to: (1) direct the research into the most appropriate channels; (2) formulate national policy on the basis of the findings; (3) ensure dissemination of the findings to the extension services; and (4) establish feedback systems linking researchers, extension agents and farmers. - 51 - 8.08 A potential issue that needs to be examined further is the contention by Karimu and Richards that the project has contributed to an increase in the outflow of resources from the agricultural sector 1/. They argue that under the project's criteria of credit-worthiness the farmers who are selected are relatively better-off farmers, already engaged in disinvestment out of agri- culture or who use the proceeds of their increased returns from the credit and technical packages to do so. There is enough evidence to prove that there is some truth in this argument, but it is not clear whether this outflow is higher than what the agricultural sector can afford to lose, and what can be absorbed efficiently in the rest of economy. The rising unemployment in Freetown and the overloaded civil services indicate that the outflow is prob- ably beyond its equilibrium level. This issue is of a sectoral nature and relates to prices, income etc; it can only be dealt with partially, within the framework of the projects, through measures such as the swamp-development package recommended in para 8.05. Such an approach would direct more project expenditures into longer-term capital investments to generate a stream of benefits over time, rather than the once-and-for-all benefits of credit for inputs for a single year. The system of annual taxes (and forfeiture of tenure rights for continued default or non-use) would force continuous culti- vation of the land. 8.09 An issue that has been raised by various social analysts 2/ is that of participation of women farmers in the project. It is claimed that because of the smaller farm sizes and greater subsistence orientation of women farm- ers, they are excluded from the project. There is some truth in this criti- cism, since credit and input distribution operations are inefficient even at the existing loan sizes and repayments have to be made in cash. However, this problem should be resolved within the framework of the group approach, which is being more closely pursued under the new projects. 8.10 Measures have been included in the follow-up projects to deal with the other problems encountered during implementation. To improve the level of technical expertise, the positions of Extension Trainer (EAP), Agronomist (NAP), and Livestock Trainer (NAP) have been filled through international re- cruitment. The new projects also include monitoring and evaluation compo- nents, more specific attention to training requirements and funding, and con- sultancy for the technically weak areas (such as tree-crops in the EAP and land conservation in the NAP). B. Conclusion 8.11 The project has had significant impact within Sierra Leone. It has contributed significantly to institutional and organizational development in the agricultural services. The IADP approach that was utilized under the pro- ject has been adopted by other external donors and by 1982 there were seven of these IADPs covering about 80% of the country. On balance, the organizational aspects of the approach have proved to be particularly useful. The clear ob- jectives and strategies have transformed local perceptions of agricultural 1/ Karimu and Richards op. cit. Chapter 7. 2/ Karimu and Richards op. cit. Chapter 7. - 52 - bureaucracies, project staff are now motivated towards the achievements of targets, and farmers have come to recognize the difference. However, this aspect of organization needs to be developed further, staff should be con- cerned not only with the achievement of targets but also with the outcome in terms of impact on farmers production and incomes, group development etc. The reasonable efficiency of the PMUs, as compared with the rest of MAF, demonstrated the importance of flexibility and autonomy at the regional levels for successful implementation of programs in the agricultural sector, where activities are regionally dispersed. However, the IADP approach has been designed for specific developmental purposes within constrained time horizons, and therefore involved high staff and operational costs, which cannot be continued after the development period in each project area. The approach also contributed to some amount of fragmentation of the institutional system and could hinder the implementation of coordinated policy, especially when there are a number of these projects financed by several external agencies. Furthermore, the development of the IADPs has been partially at the expense of the original KAF Services, and the major organizational weakness under the project has been the failure to integrate these services and the IADPs. With the proliferation of these IADPs (7 in 1982) the point has now been reached where the budgetary burdens and the organizational capabilities of the top management of MAF are stretched to the limit. It is now imperative that these services should be merged. In doing so, care must be taken to ensure that the positive aspects of the IADPs are maintained and there is no reversal to the pre-project situation of a static bureaucracy with little impact on the agri- cultural sector. 8.12 It is more difficult to arrive at firm conclusions on the credit and input supply services. Given the time constraints of the project, there was no alternative to the project providing these services since it is unlikely that the private sector response would have been as quick as required. There were also concerns about the markups and interest rates of private traders, which appeared to be exorbitant. However, the problems that have been encountered and the costs of the services imply that within the local context, credit and input supply are not amenable to the type of public ownership and organization that was promoted under the project. Various alternatives need to be examined further, such as separation of the two functions, credit to be merged with rural banking, and input supply to be handed over to the private sector - traders or farmers associations. 8.13 The project has also made an impact on the farming communities in the two project areas. It introduced new techniques of swamp development, improved inputs (fertilizers, improved seeds and seedlings), new methods of crop cultivation, and tree-crop maintenance to nearly 14,000 farmers, with secondary impact on considerably more. Through these services, the project contributed to increased production and incomes for at least 20% of the pro- ject population. The network of feeder roads and the wells have been benefi- cial to an even larger proportion of the population: the road network has improved the villagers access to markets, health services etc., and the wells have improved the availability of water supplies for consumption. Thus, the project has had considerable impact beyond the major agricultural production increases that it has generated. - 53 - SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) Table I Civil Works Physical Units Leones 1976 1977 1978 1979 1980 1981 Total A 1/ Actual A Actual A Actual A Actual A Actual A Actual A Actual E E E E E E E NORTHERN AREA RoadeConstructed miles 60 - 90 - 70 10.D 80 38.64/ - 47.0- - 23/ 300 108.1 Cost/mile - - - - - - 7000 (28000) - 30000 - - 7000 29000 Bridget Constructed Units 4 - 11 - 2 - 3 4 - 4 - - 16 8 Cost/Unit 7000 - 7000 - 7000 - 7000 15500 - 15500 - - 7000 15500 .Wells Constructed Units 50 - 50 - 50 4 50 95 - 77 - 24 200 200 Cost/Unit 246 - 246 - 246 - 240 910 - 910 - 1000 246 920 Buildings (a) Staff Housing Construction Units 9 - 4 - - - - - 9 4 Cost/Unit 22000 - 21200 22000 21200 (b) Engineering Workshop etc. Construction Units .5 .5 .9 .1 - - 1 1 Cost/Unit 8000 8000 15000 1000 - - 16000 16000 (c) Project Office Constructed Units I - - 1 1 1 Cost/Unit 100,000 - - 232,000 - - - - 100,000 232.000 (d) Project Store - Constructed Unitd 1 1 1 1 Cost/Unit 10,000 10,000 10,000 10,000 (e) Extension Field Office Constructed Units 5 4 5 4 Cost/Unit 8000 2000 8000 2000 (f) Training Centre Constructed Units 1 - 1 - - - - - 1 1 Cost/Unit 236,600 20.000 100,081 - - - - - - - 236,000 100,000 (g) Crops and Land Services & Stores Constructed Units 2 -2 - Cost/Unit 8000 - 8000 - (h) Services Centres Constructed Units 5 - 5 - - 5 5 Cost/Unit 13,000 - 10,000 - - 13,000 10,000 (i) Feed Mill Unit - Cost/Unit EASTERN AREA Buildings (a) Staff Housing 1 1 3 2 (b) Offices 2 1 1 1 1 3 2 (c) Warehouse 2 - I - - 1 1 1 (d) Market Centres o - 6 - 2 12 10 1/ A - Appraisal Estimates 2/ includes culverts 3/ Source - CARE quarterly reports, 18.3 miles were constructed but the remaining 6 miles were financed under the follo-up project. 4/ Handed to FFC in 1979. Eourc, Supervision reports and :roject reports. - 5- Annex 2 Table 1 SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II (Credit 568/Loan 1138-SL) Schedule of Disbursement Cumulative Disbursements US$ million equivalent IBRD Actual Total Appraisal Actual as % Appraisal l/ Actual Total FY & QTR. Disbursements Estimates of Appraisal Estimate Disbursement IDA IDA IBRD IDA IBRD IDA & IBRD EEC Special Action Credit FY76 let 2nd .3 3rd 1.1 4th .2 2.1 10% FY77 1st .8 3.3 24% 2nd 1.2 4.5 27% 3rd 1.6 5.0 .5 29% 4th 1.9 1.0 32% FY78 1st 2.4 1.5 37% 2nd 3.0 2.0 43% 3rd 3.6 2.5 48% 4th 4.3 2.9 54% FY79 1st 4.6 3.2 56% 2nd 5.0 .39 3.5 62% 3rd 5.0 1.14 3.9 69% 4th 5.0 1.70 4.2 73% FY80 lst 5.0 2.26 4.5 76% 2nd 5.0 2.69 4.8 78% 3rd 5.0 3.12 5.0 81% 4th 5.0 4.25 93% FY81 let 5.0 4.608 96% 2nd 5.0 4.61 96% 1.0 3rd 5.0 4.66 97% 2.0 2/ 1.41 4th 5.0 4.83 98% 1.74 FY82 1st 5.0 4.91 99% 1.74 2nd 5.0 4.97 99% 1.74 3rd 5.0 5.00 100% 1.7521 Closing date 4/14/82 8/31/80 3/31/81 4/14/82 1I No disbursement schedule was prepared for the credit but it was expected that it would be disbursed by March 81 2/ Due to the devaluation vis A vis the US $ of the currencies in which the credit was denominated, the total amount of the credit was finally equivalent to only US $1.75. SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) FARMERS' FINANCE COMPANY ANALYSIS OF FINANCIAL OPERATIONS FOR YEAR ENDING 30TH SEPTEMBER I INCOME 1977-1/ 1978 1979 1980 1981 Interest Receivable 71,864 61,046 59,444 78,364 127,942 Profit on Inputs and Miscellaneous Income 68,181 71,127 67,794 31,817 41,334 GROSS INCOME 140,045 132,173 127,238 110,181 169,276 II EXPENDITURE Salaries and Wages 140,303 100,554 130,813 146,417 173,434 Vehicle Operating Expenses (including hired transport) 62,618 43,734 90,889 111,904 66,841 General Office Expenses 28,909 23,859 27,542 36,388 22,251 TOTAL CASH EXPENDITURE 231,830 168,147 249,244 294,709 262,526 Cash and Stock losses 8,797 14,452 4,966 23,906 28,491 Bad and Doubtful Debts Provision - 7,639 10,884 105,008 103,140 Depreciation 22,346 15,097 18,508 32,594 24,156 TOTAL PROVISIONS 31,143 37,188 34,358 161,508 155,787 GROSS EXPENDITURE 262,973 205,335 283,602 456,217 418,313 III EXCESS OF EXPENDITURE OVER INCOME 122,928 73,162 156,364 346,036 249,037 an IV EXPENDITURE MET BY GOVERNMENT AND PROJECT 158,755 127,711 117,000 141,150 96,20&- V NET PROFIT/(LOSS) 35,827 54,549 (39,364) (204,886) (152,829) VI LOANS ADVANCED DURING THE YEAR 243,171 151,707 121,508 56,422 148,798 VII RECOVERIES FROM FARMERS DURING THE YEAR 86,619 117,230 74,848 93,345 41,930 VIII LOANS OUTSTANDING AT THE END OF THE YEAR 1,123,622 1,224,715 1,389,149 1,535,009 1,754,061 1/ For a period of 17 months since inception. 2/ Includes Le 50,000 from the Government as a development grant. SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) FARMERS' FINANCE COMPANY CREDIT OPERATIONS UNDER EIADP PHASES I AND II (1973-80) PARTICULARS PROJECT YEARS (PHASE I) COMPANY YEARS (PHASE II) EIADP PHASES I 6 II 1973 1974 1975 Total 1976 1977 1978 1979 1980 Total Grand Total NUMBER OF FARMERS Swamp Rice 175 1055 1422 2652 799 802 132 107 44 1884 4536 Cocoa 80 159 152 391 315 302 355 286 207 1465 1856 Oil Palm 284 98 160 542 71 65 41 29 - 206 748 Total 539 1312 1734 3585 1185 1169 528 422 251 3555 7140 AREA DEVELOPED (AC) Swamp Rice 451 2574 3827 6852 2288 2187 324 284 153 5236 12088 Cocoa 155 314 271 740 568 467 573 456 349 2413 3153 Oil Palm 721 383 754 1858 665 617 350 275 - 1907 3765 Total 1327 3271 4852 9450 3521 3271 1247 1015 502 9556 19006 1 LOAN DISBURSEMENTS Leones Rice Seasonal 6057 31432 90037 127526 53566 33855 3345 2187 1485 40872 168398 Swamp development 19516 105987 145720 271223 123596 73434 22208 8100 8353 235691 506914 Oil Palm development 91036 54937 74694 220667 92472 74523 47120 43927 - 258042 478709 Cocoa development 18975 34278 31217 84470 67183 61359 79034 67294 46584 321454 405924 Total 135584 226634 341668 703886 336817 243171 151707 121508 56422 856059 1,559945 LOAN RECOVERIES Leones Rice Seasonal 6057 31432 42833 80322 16791 8018 8111 4100 10919 47939 128261 Swamp development - 4916 22368 27284 20647 77921 101650 55552 65687 321457 348741 Cocoa development - - - - - - 1380 6500 10937 18817 18817 Oil Palm development - - - - - 680 6089 8696 5802 21267 21267 Total 6057 36348 65201 107606 37438 86619 117230 74848 93345 409480 517086 2 of Recoveries to Demand 100 100 NA NA NA NA NA NA 27 NA NA H M SIERRA LEONE NTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II Estimated Yields tons/hectare Without Project With Project Yrl Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 YrIO Eastern Area 1/ Cocoa - - - - .220 .330 .500 .700 .700 .700 Oil Palm (ffb) - - - - 3.6 4.8 6.0 7.2 8.4 8.4 Swamp Rice Package A 1.0 1.8 2.0 2.2 2.4 2.4 2.4 2.4 2.4 2.4 2.4 B 1.0 1.4 1.8 2.0 2.2 2.2 2.2 2.2 2.2 2.2 2.2 C 1.0 1.4 1.6 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Upland Rice B 0.6 1.0 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 C 0.6 1.0 1.0 Northern Area Upland Rice A- 1.2 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 Upland Rice B 0.6 1.0 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Upland Rice C 0.6 0.8 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 3/an 2/c 2 .8 2 . . .8 2.8 2.8 2.8 2.8 Swamp Rice A 1.0- 1.8 2.2 2.4 2.8 2.8 2.8 2.8 2.8 2.8 2.8 B 1.0 1.4 1.8 2.0 2.2 2.2 2.2 2.2 2.2 2.2 2.2 C 1.0 1.2 1.4 1.6 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Groundnuts 0. 0.9 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 B 0.6 0.8 0.9 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 C 0.6 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 Maize 1.3 1.0 1.8 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Notes 1/ New development under the project il For areas that were alread cultivated2some of the areas are incremental and therefore all production would be incremental S/ Package A -Improved seed +~ fertilizer B = improved seed + improved cultivation practices and/or fertilizer application below recommended dosages C - local seed + improved cultivation techniques (better weeding and intercropping, no fertilizer). SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT 11 ANNUAL ESTIMATED CROP PRODUCTION 1/ tons 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 - 2000 Northern Area Project 2/ Swamp Ric- 110 660 2330 3210 3540 3700 3770 3770 3770 3770 3770 3770 3/ Upland Ric - 50 720 1660 3240 4130 4630 4630 4630 4630 4630 4630 Groundnut& 4 - 200 400 460 310 310 310 310 310 310 310 Eastern Area Project 5/ Swamp Rice- 560 1230 1640 1850 1900 1270 1270 1270 1270 1270 1270 1270 Cocoa4 40 90 170 280 380 450 490 510 7, Oil-Palm (ffb) - - - - 730 1640 2490 3390 4080 454D 4760 4860 00 1/ All above dates are mission estimates based on annual areas reported in Tables 3.1 1n 3.2 and Yields in Annex 5 Table I which together indiite the potential production under the project. 2/ Assuming that 30% of area developed every year was virgin and 70% had been previously cultivated and that actual production was about 70% of potential in first 5 years and will be 60% of potential in the future. 3/ Assuming that actual production was 60% of potential in first 5 years and 50% thereafter. 41Assuming that actual production was 50% of potential in first 5 years and 30% thereafter. Assuming that 50% of area developed every year was virgin and 50% had been previously cultivated and that actual production was about 75% of potential in first 5 years and 50% thereafter. 6/ Assuming that actual production will be 75% of potential. 7/ Assuming that actual production will be 75% of potential. f X SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMFNT PROJECT PHASE II (Credit 568/Loan 1138-SL) (current prices) Crop budget - Oil Palm Development I hectare Leones Unit 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 Yield ffb tons/ha - - - - 3.6 4.8 6.0 7.2 8.4 8.4 Price Le/ton - - - - 55.0 55.0 55.0 55.0 55.0 55.0 Inflows: Gross vale of production Le/ha 198.0 264.0 330.0 396.0 462.0 462.0 Development loan Le/ha 241 35 25 20 - - - - - - TOTAL INFLOWS Le/ha 241 35 25 20 198.0 264.0 330.0 396.0 462.0 462.0 Outflows: Cost of Development (Le/ha) Seedlings Le/ha 150 - - - Wire Collars Le/ha 45 - - - Pueraria Seeds Le/ha 6 - - - Fertilizers Le/ha 14 9 - - Drugs etc. Le/ha 13 13 7 3 Hired Labour Le/ha 13 13 8 7 Costs of Production Fertilizers Le/ha Hired Labour Le/ha Tools etc. Le/ha 10 10 10 10 10 10.0 15.0 15.0 20.0 20 Pesticides & Spraying Le/ha Interest on Seasonal Loan Le/ha Repayment of Development Loan for 9 years - - - - 67.4 67.4 67.4 67.4 67.4 67.4 TOTAL OUTFLOWS 251 45 25 25 77.4 77.4 82.4 82.4 87.4 87.4 NET INFLOW (outflow) (10) (10) - - 120.6 186.6 247.6 313.6 374.6 374.6 Family labour/hired labour Mandays/ha 48 22 20 20 50 55 58 60 65 65 Net return per Manday of Family Labour Le/Manday 2.4 3.4 4.3 5.2 5.7 5.7 SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) (current prices) Leones Crop Budget - Cocoa Development I hectare Unit 1977 1978 1979 1980 1981 1982 1983 1984 Yield tons/ha 0 0 0.0 0.0 .220 .330 .500 .700 Price Le/ton 1430 1250 1070 887 Inflows: Gross Value of Production Le/ha - - - - 314 412 535 620 Development Loan Le/ha 346 9 8 8 - - - - TOTAL INFLOWS 346 9 8 8 314 412 535 620 Outflows: Costs of Development Le/ha Seedlings Le/ha 320 - - - - - - 3 Pest Insurance Premium Le/ha 4 4 4- - - Hired Labour Le/ha 22 5 4 4 - - - - Costs of Production Hired Labour Le/ha. Tools & Bags Le/ha 10 10 15 15 20.0 20.0 25.0 3.0 Pesticides and Spraying Le/ha Interest on Seasonal Loan Le/ha Repayment of Development Loan for 8 years Le/ha - - - - 86.8 86.8 86.8 86.8 Repayment of Seasonal Loan TOTAL OUTFLOWS 356 19 23 23 106.8 106.8 111.8 116.8 NET INFLOW (outflow) (10) (10) (15) (15) 207.2 305.2 423.2 503.2 Family Labour/hired labour (including Mandays/ha 110 55 40 45 55 65 70 75 harvesting & processing) Net return per manday of family labour Le/manday - - - - 3.76 4.7 6.0 6.7 SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) Swamp Rice Returns at Full Development 1 hectare 1981 Returns (Leones) Package Package Package Package-/ Unit W/o C B A A Yield tons/ha 1.0 1.8 2.2 2.4 2.8 Price Le/ton 400.0 400.0 400.0 400.0 400.0 Inflows: Gross Value of Production Le/ha 400.0 720.0 880.0 960.0 1120.0 Seasonal Loan Le/ha - 56.0 91.0 91.0 91.0 TOTAL INFLOWS Le/ha 400.0 776.0 971.0 1051.0 1211.0 Outflows: Costs of Development Le/ha - 35.0 35.0 45.0 45.0 Costs of Production Le/ha Seed Le/ha 22.0 36.0 36.0 36.0 36.0 Fertilizers- Le/ha - 20.0 55.0 55.0 55.0 Pesticides Le/ha Tools & Bags Le/ha 20.0 20.0 25.0 30.0 40.0 Interest on Seasonal Loan Le/ha - 5.6 9.1 9.1 9.1 Repayment on Seasonal Loan Le/ha - 56.0 91.0 91.0 91.0 TOTAL OUTFLOWS Le/ha 42.0 172.6 251.1 266.1 276.1 NET INFLOW Le/ha 358.0 603.4 719.9 784.9 934.9 Family Labour Mandays/ha Development Mandays/ha Production Mandays/ha 200.0 240.0 250.0 260.0 270.0 Net return per manday of family labour Le/Manday 1.79 2.51 2.87 3.0 3.4 1/ For assumptions on packages See Annex 5 Table 1. 2/ Development costs of between Le 50-70 per acre (a Le 125-173 per hectare) for hired labour and tools capitalized over 5 years at 8%. 3/ Recommended 5 bags/hectare, actual applications vary. 4/ Family labour for development is about 250 and 50 mandays/hectare in the first and second years respectively. SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) Upland Rice Improvement Returns at Full Development 1981 (Leones) 1 hectare Package Package Package Unit W/O C B A Yield tons/ha 0.6 1.0 1.2 1.6 Price Le/ton 400.0 400.0 400.0 400.0 Inflows: Gross value of Production Le/ha 240.0 400.0 480.0 640.0 Seasonal Loan Le/ha - 36.0 36.0 61.0 TOTAL INFLOWS Le/ha 240.0 436.0 516.0 701.0 Outflows: Costs o/Production Le/ha Seed- 2/ Le/ha 22.0 36.0 36.0 36.0 Fertilizers- Le/ha - - - 25.0 Pesticides Le/ha - - - - Tools & Bags Le/ha 10.0 15.0 15.0 20.0 Hired Labour- Le/ha - - - - Interest on Seasonal Loan Le/ha - 3.6 3.6 6.1 Repayment on Seasonal Loan Le/ha - 36.0 36.0 61.0 Repayment on Development Loan Le/ha TOTAL OUTFLOWS Le/ha 32.0 90.6 90.6 148.1 NET INFLOW Le/ha 208.0 345.0 425.4 552.9 Family Labour Production Mandays/ha 126.0 140.0 168.0 198.0 Net return per manday of Le/manday 1.65 2.46 2.53 2.78 family labour 1/ 1 bushel per acre at Le 900 per bushel for traditional and Le 15/bushel for improved seed. 2/ 1 bag per acre. 3/ May be used for brushing and cleaning but would not be incremental. rlb- SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT PHASE II (Credit 568/Loan 1138-SL) 1 hectare Groundnut Improvements Returns at Full Development (1981 Leones) Package Package Package Unit W/O C B A Yield (Unshelled) tons/ha 0.6 0.7 1.0 1.2 Price (Unshelled) Le/ton 440.0 440.0 440.0 440.0 Inflows: Gross value of Production Le/ha 264.0 308.0 440.0 528.0 Seasonal Loan Le/ha - - 10.0 25.0 TOTAL INFLOWS Le/ha 264.0 308.0 450.0 553.0 Outflows: Costs oi/Production Le/ha Seed- Le/ha 60.0 60.0 60.0 60.0 Fertilizers Le/ha - - 10.0 25.0 Pesticides Le/ha Tools & Bags Le/ha 10.0 15.0 18.0 20.0 Hired Labour Le/ha Interest on Seasonal Loan Le/ha - - 1.0 2.5 Repayment on Seasonal Loan Le/ha - - 10.0 25.0 Repayment on Development Loan Le/ha TOTAL OUTFLOWS Le/ha 70.0 75.0 99.0 132.5 NET INFLOW Le/ha 194.0 233.0 351.0 420.5 Family labour Production Mandays/ha 130.0 145.0 170.0 180.0 Net return per manday of Le/Mandays 1.50 1.60 2.06 2.33 family labour 1/ Due to high market prices local seeds were at the same price as improved seeds and the project is not distributing improved seeds at present. SIERRA LEONE INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT II Economic Costs and Benefits 1/ 000'Leones (1981 constant prices) 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987-90 1991-95 1996-2000 NAP 2/ Costs: Project Costs - 905.6 2105.7 1961.5 1589.8 1732.0 897.0 525 525 525 525 525 525 525 525 Roads 0.0 78.2 1712.0 789.1 687.6 400.0 150 150 150 150 150 150 150 150 On Farm Inputs - Development 23.9 101.2 249.0 260.3 252.2 216.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 Inputs - Seasonal 10.0 60.7 365.2 457.6 649.4 591.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 Labour 93.4 431.3 333.2 1006.3 1195.4 1325.0 1297 1297 1297 1297 1297 1297 1297 1297 TOTAL INCREMENTAL COSTS 1032.9 2777.1 5620.9 4103.1 4517.6 3428.0 2572.2 2572.2 2572.2 2572.2 2572.2 2572.2 2572.2 2572.2 Benefits: Swamp Rice 46.4 276.1 1118.9 1253.6 1626.1 2087.6 2125.5 2125.5 1767.5 1767.5 1767.5 1767.5 1733.6 1733.6 Upland Rice - 19.1 347.0 648.2 1488.2 2329.3 2612.2 2612.2 2172.2 2172.2 2172.2 2172.2 2130.4 2130.4 Groundnuts - 2.1 97.8 160-0 145.6 130.1 131.1 131.0 117.0 117.0 117.0 117.0 123.2 178.8 TOTAL INCREMENTAL BENEFITS 46.4 297.3 1563.7 2061.8 3259.9 4547.0 4868.8 4868.8 4056.7 4056.7 4056.7 4056.7 3987.2 4042.8 EAP Costs: Project Costs 1102.9 1279.0 997.5 863.9 1033.2 170.0 170.0 170.0 170.0 170.0 170.0 170.0 170.0 170.0 FFC - Project Financed21 197.6 292.0 212.0 160.0 173.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 FFC - Self Financed 4 0.0 134.5 68.1 180.8 188.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 On Farm Inputs - Development 563.6 385.1 246.3 163.4 67.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Inputs - Seasonal 106.7 62.4 5.5 3.0 1.9 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Labour 564.8 818.1 570.7 348.5 371.1 465.5 474.5 475.0 475.0 475.0 475.0 475.0 475.0 475.0 TOTAL INCREMENTAL COSTS 2535.6 2971.1 2100.1 1719.6 1835.8 645.5 654.5 655 655 655 655 655 655 655 Benefits: Swamp Rice 235.9 514.7 789.1 722.1 872.9 717.1 717.1 717.1 596.3 596.3 596.3 596.3 584.8 584.8 Cocoa 0.0 0.0 0.0 0.0 0.0 244.6 475.4 775.9 700.9 831.4 916.7 956.1 947.9 1133.6 Oil palm (ffb) 0.0 0.0 0.0 0.0 50.8 115.0 174.5 237.1 285.8 317.5 333.4 340.4 340.4 340.4 TOTAL INCREMENTAL BENEFITS 235.9 514.7 789.1 722.1 923.7 1076.7 1367.0 1730.1 1583.0 1745.2 1846.4 1892.8 1873.1 2058.8 1/ Based on prices in Annex 6 Table 2. 2/ Recurrent costs from 1982 onwards are based on allocations in SAR of NIADP II - Cr. 1128-SL. 3/ Financed from the proceeds of the credit/loan and government contributions. 4/ Financed from interest income and loan repayments collected by the FFC. -01 SIERRA LEONE Table 2 INTECRATED ACRICULTURAL DEVELOPMENT PROJECT II Prices 1/ 1981 Leonas/aetric ton 1976 1977 1978 1979 1980 1981 1985 1990 1995 Financial Paddy 2/ 368.0 340.0 337.0 380.0 341.0 400.0 400.0 400.0 400.0 cocoa 2/ n.a n.a n.a n.a n.a o430.0 887.0 880.5 880.5 Palm-oil - ffb V n.a n.a 40 40 55.0 55.0 55.0 55.0 55.0 kroundnuce 4/ 395.0 380.0 350.0 350.0 440.0 440.0 357.0 377.0 377.0 Inputs Tools - Uplands/ha 15.0 15.0 15.0 15.0 15.0 35.0 15.0 15.0 15.0 Swamp/ha 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 Fertilizers - Urea 5/ 355.0 331.0 300.0 3oo'.0 270 .0 220.0 220.0 384.02/ 400.0 Seed rice/bushel 15.0 15.0 15.0 15.0 15.0 1me 15.0 15.0 15.0 Seed groundnuts/lb .20 .20 .20 .20 .20 .20 .20 .20 .20 Economic Output Paddy 425.0 420.0 480.0 390.0 460 564.0 469.0 469.0 460.0 m Cocoa 2775.0 1864.0 1848.0 2210.0 Palm oil fth 3/ 55.0 55.0 70.0 70.0 70.0 70.0 70.0 Croundnuts 4/ 433.0 520.0 490.0 402.0 320.0 426.0 380.0 400.0 581.0 Inputs Fertilizers - Urea 5/ 370.0 375.0 360.0 380.0 445.0 450.0 444.0 550.0 570.0 Labour family/hired ZAP 1.69 1.84 2.07 1.71 1.85 2.50 2.50 2.50 2.50 Labour family/hired NAP 1.69 1.84 2.07 1.71 1.85 2.00 2.00 2.00 2.00 Consumer Price Index (CPI) 1.99 1.84 1.66 1.37 1.23 1.00 - - - 1/ Actuals, and IBRD June 1982 projections adjusted to local farmgate prices, 1976-1980 prices converted on the basis of the CPI. 2/ For underlying assumptions see Working Paper 1 on file. 3/ See SAR EIADP III and Supervision Report August 1982. 4/ See SAR NIADP II adjusted to 1981 prices 5/ It is assumed that subsidies on financial prices would be discontinued after 1985 (SAR EIADP III) Price of Urea as a base, NPK - + 15%, TSP - 5% Muriate of Potash. -40% SSP - 25%.  -0-0 . 2 .e0 MAUR ITANIA S NIGER Sr VOLTA GUINEA AU ATLANTIC OCEAN f N R T H E N P ROV N C E W-,IdUllÅ n,d ,t offilw.- < . ~ BA«.TI- KAMARAKA - PENDEMG U 1N E A -se GOWAHUN NORTHERN AK AREA PROJECT SEBORARA Rok,/ E A S T E R N FREETOWNiN P R OI N C E YAWEI t ODO- BAMBAR AAe PEJEWA S OUT ER NG UP L aAMBRA -so BNONGOW'DA EASTERNs- P R O 1 N EAREA PROJECT SMALL BO JAWI > ~G- i- -M- Project Boundories - DAMA ,/ s / MLM ,.----Chiefdom Boundarnes lp, _-1GAUIRA < --> Provincial Boundories -WUINDE AM InernOt:Iol Boundories K RAMNOMO 0 Provinciol Headquorters 5/) 1/ KOYA' NOMO - ) TUNKIA -0{Ì 10 20 30 40 50 60 SBAR N KILOMETERS SIERRA LEONE SORO. INTEGRATED AGRICULTURAL AND & \ '' RURAL DEVELOPMENT PROJECT f ¯0 LOCATION OF PROJECT AREAS 3-0 12- F.-  价：  OKA8ALA NORTHERN ROVERNC GBANTI- MARANKA 1 ER 3 0 PORT PROJECT / 0SUADU Makumre3 --t - EASTEßN , ,lp' FREE fni n or l. n d , d e - 0 P OVINC E wkonM /r .kSOUTHERN 0 vdr oKENEMA PROV/NC! EASTERN SANDA TE NARAN P REH MATEBO- Kt.ok0A\ \ BENDE T z GBENDEm uG WAHUN BATAK»i Gban a --UNA bal\ SIERRA LEONE INTEGRATED AGRICULTURAL AND 7AFROKO RURAL DEVELOPMENT PROJECT 11 s MoIBNORTHERN AREA PROJECT 9*00- 0 PROJECT HEADQUARTERS 0 DEVEtOPMENT CENTER EN ROADS TO BE IMPROVED b. a.. MOTORABLE ROADS BOULANDS BOUNDARY Cý A K A Q Gi N l PAKI -----PROJECT BOUNDARY AS-A-BO G ------CHtEFDOM BOUNDARY SIERRA ,GBURALEONE so tom- -- b0 IAF R I C A F LM rATOITAKA 0 o s 2 25 30 01 5E fi