Chad - Second Livestock Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5370 4 PROJECT PERFORMANCE AUDIT REPORT CHAD SECOND LIVESTOCK PROJECT (CREDIT 783-CD) December 19, 1984 Operations Evaluation Department V document has a restricted distribution and my be used by recipients only in the performance of their ellcial duties. Its contents may not otherwise be disclosed without World Bank authoriation. ABBREVIATIONS APMU* - Agricultural Projectz Management Unit CCCE - Caisse Centrale de Coopfration Economique (France) EDF - European Development Fund FAC - Fonds d'Aide et de Coopfration (France) IDA - International Development Association USAID - United States Agency for International Development * Since July 1, 1983: WAPTC Western Africa Projects Technical Cooperation Unit FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT CHAD SECOND LIVESTOCK PROJECT (CREDIT 783-CD) TABLE OF CONTENTS Page No. Preface ..*.............................***1******************** * Basic Data Sheet .......... ........ ..................... ii Highlights .........**.........****.***************************** iii PROJECT PERFORMANCE AUDIT MEMRANDUM I. SUMMARY ........................................... 1 II. OBSERVATIONS ......... .. .......... . ........... 2 PROJECT COMPLETION REPORT I. Background .... . ..................... ....... 7 II. Project Formulation o ................................. 7 III. Project Implementation ................... ............. 9 IV. Impact ......................... .....************ 10 V. Bank Performance .................................. 10 VI. Conclusions ....................................... ...... 11 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 CHAD SECOND LIVESTOCK PROJECT (CREDIT 783-CD) PREFACE This is a performance audit of the Second Livestock Project in * Chad, for which Credit 783-CD was approved in March 1978 in the sum of US$11.5 million. The credit never became effective and, according to the Region, is to be cancelled once the US$67,000 advanced by the Agricultural Projects Management Unit (APMU) has been repaid. The audit report consists of an audit memorandum prepared by the Operations Evaluation Department and a Project Completion Report issued on April 23, 1984. The PC& was prepared by the Western Africa Regional Office on the basis of documents available at headquarters. The audit memorandum is based on a review of the Appraisal Report (No. 1773-CD) dated March 8, 1978, the President's Report (No. P-2187-CD) of March 15, 1978, the Credit Agree- ment dated April 14, 1978 and the PCR. Correspondence with the Borrower and internal Bank memoranda on project issues as contained in Bank files have also been consulted, and Bank staff associated with the project have been interviewed. The audit finds that the PCR covers adequately the project's salient features and the PPAM generally agrees with the conclusions. The issues of termination/cancellation discussed here have been selected because of their importance for this as well as other prematurely terminated Bank assisted projects. A copy of the draft report was sent to the Government for comments on "ptember 3, 1984 but none were received. * PROJECT PERFORMANCE AUDIT REPORT CHAD SECOND LIVESTOCK PROJECT (CREDIT 783-CD) BASIC DATA SHEET XEY PROJECT DATA Appraisal Actual or Actual as 2 of Estimate Estimated Actual Appraisal Estimate Project Costs (US$ million) 16.1 n.a. /a - Credit Amount (USS million) 11.5 0 7-a - Date Board Approval 03/78 03130/7 - Date Effectiveness 07/78 n.a. /a - Date Physical Components Completed 09/82 n.a. 7 - Proportion Then Completed (Z) 100 0 7a - Closing Date 03/31/S3 10/15/80 7-a - (cancellation date) Economic Rate of Return (%) Livestock Services 100 a.a. /a - Pastoral Associations 35 n.a. 7 - Institutional Performance - n-a. a - Agronomic Performance -u-a.- - Number of Direct Beneficiaries n.a. Ta- - CUUILATIVE DISBURSEMENTS FY79 FY80 Fy81 FY82 FT83 Appraisal Estimate (USS million) 2.0 5.2 8.2 10.8 11.5 Actual (USS million) Actual as Z of Estimate Date of final disbursement MISSION DATA No. of Mandays Specializations Performance Types of Date Persons in Field Represented/b Rating/c Trend/d Problems/e Identification 1 02/72 2 4.0 - - - Identification II 05/72 2 6.0 - - - Preparation If - - - - - - Appraisal 03/77 4 12.0 - - - Post Appraisal 06/77 2 4.0 - - - Subtotal - - 26.0 - - - Supervision I 10/78 1 0.5 E 2 - M Exploratory I 06/79 1 1.0 E - - Exploratory II 02/80 2 4.0 E, LS 2 2 P,m Subtotal - - 5.5 - - Total - - 31.5 - - - OTHER PROJECT DATA Borrover: Republic of Chad Executing Agency: Livestock Department, Ministry of Rural Development Fiscal Year: Project: October 1 - September 30 / Name of Currency (Abbreviation) Communaut FinanctEre Africaine Franc (CFAF) Appraisal Year Average USS1.00 - 245 Intervening Years Average USS1.00 - - Completion Year Average (Oct. 1980) US$1.00 - 211 Follo.r-on Project none /a Credit terminated. /b Specialization: E = Economist; LS - Livestock Specialist. 7 1 - Problem-free; 2 - moderate problems; and 3 - major problems. /d I = improving; 2 * stationary; and 3 - deteriorating. 7e = Managerial; P - political. 7; Government's FY = January 1 - December 31. - 111 - PROJECT PERFORMANCE AUDIT REPORT CHAD SECOND LIVESTOCK PROJECT (CREDIT 783-CD) HIGHLIGHTS 4 The main objectives of the project were to obtain greater partic- ipation of the pastoralists in the management and improvement of communal rangelands and stock watering points; to improve the performance of the Livestock Department through better animal health and pastoral productivity services; expanding the scope for livestock production in the South through tsetse eradication. Due to the civil disturbances the Credit was never declared effec- tive. Points of interest are: - although the Legal Department has clear guidelines on termination, cancellations of Loans/Credits, other Bank Departments seem insecure of the implications of Loan/Credit termination (PPAN, paras. 7-12); - some project components are likely to be financed by other donors (PCR, para. 18). PROJECT PERFORMANCE AUDIT 1EMORANDUM CHAD SECOND LIVESTOCK PROJECT (CREDIT 783-CD) I. SUMMMARYI 1. The Second Livestock Project was to be the twelfth IDA operation, and the seventh agricultural project in Chad. It was to support the impor- tant livestock subsector by following up - though in a more comprehensive way - on the development of watering facilities, started as the single physical objective during the First Livestock Project. 2. The project was to incorporate the Government's growing realization that a higher degree of pastoralist participation was essential in success- fully tackling overgrazing, and that producer payments for services rendered were essential in maintaining the wells and keeping the Veterinary Service operating efficiently. The establishment of 75 pastoral associations, which would provide the institutional framework for well maintenance, distribution of veterinary drugs, the introduction of range management techniques and the provision of credit, would have been the key features of the project. Other activities under the project included tsetse eradication in the South, to be cofinanced with the European Development Fund, the strengthening of the Livestock and Rural Water Supply Services of the Ministry of Rural Develop- ment and the equipment of the slaughterhouse at Farcha near Ndjamena. 3. Project identification and preparation, financed under the First Livestock Project, took over four years, because of the Sahelian drought, the security situation, and the lack of familiarity of Chadian officials with Bank procedures. 4. An important issue during the appraisal of the Second Project concerned the high level of recurrent costs to be carried by Government after project completion. Government's assurances at negotiations that adequate cost recovery mechanisms would be established, were judged by the Bank to adequately deal with this problem. The security issue was also frequently raised but it was felt that the divisibility of the activities would always allow some parts to be carried out, and that security should therefore not be an overriding consideration. £ 5. However, security problems did have a major effect on project implementation. The very fluid situation between 1978 and 1980 initially caused the Bank to delay recruitment for technical assistance, later allowed two experts to be recruited and posted, but then again forced termination of their employment before the other conditions of effectiveness could be fulfilled, and decided that the deadline for effectiveness was not to be further postponed beyond October 15, 1980. A Bank advance of approximately 1/ Adapted from the PCR. -2- US$67,000 for technical assistance could not be reimbursed by Government, and is still outstanding. 6. The project was well designed and appraised, and its main elements are still considered essential for successful pastoral development in Chad. This is demonstrated by the present interest of other donors to finance a project activity which is almost entirely based on the appraisal of the Second Livestock Project. II. OBSERVATIONS 7. Due to security conditions in Chad, establishment of a Specia: Account, stipulated in the Credit Agreement as a condition of effectiveness never materialized. The Bank, in the hope of an early solution to the civi strife, tried to keep the credit alive by postponing the Date of Effective ness several times, but following discussions and in agreement with th Chadian Delegation to the 1980 Annual Meeting, decided against an extensio of the effectiveness date beyond October 15, 1980 (see PCR para. 12). 8. The Bank is supported in its decision to terminate the Credi Agreement by the terms of the General Conditions Applicable to Developmen Credit Agreements, dated March 15, 1974 which stipulate in Section 12.04: "Termination of Development Credit Agreement for Failure to Become Effective. If the Development Credit Agreement shall not have come into force and effect by the date specified therein for the purposes of this Section, the Development Credit Agreement and all obligations of the parties thereunner shall terminate, unless the Associa- tion, after consideration of the reasons for the delay, shall establish a later date for the purposes of this Section. The Association shall promptly notify the Borrower of such later date." 9. There are, however, differences between Bank Departments on t meaning of "Termination". According to the Legal Department's interpret- tion, termination of a loan/credit does not require cancellation becau "something that did not exist, i.e. never became effective, cannot cancelled." On the other hand the Regional Office is still considering cancel the credit, once the APMU advance of US$67,000 has been repai Controllers Department has the credit listed as cancelled. To avoid a outside criticism for using different terminology departmental acceptance the Legal Department's term "termination" would be warranted. 10. The audit is satisfied that country security problems likely jeopardize project implementation are receiving adequate attention by t Bank. Although there is no Operational Manual statement setting out precl criteria by which the situation is to be assessed, the Bank's Articles -3- Agreement, according to the Legal Department's interpretation,2/ provide the required legal provisions. Firstly, Article I requires the Bank to be guided in all its decisions by the "Bank's purposes", which is defined - among other additional definitions as: "To assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes...." It should be relatively easy for the Bank to determine if the Borrower still has the ability to undertake the envisaged investment. Secondly, Article III, Section 4 (v) requires the Bank to: "...pay due regard to the prospects that the borrower, and, if the borrower is not a member, that the guarantor, will be in a position to meet its obligations under the loan/credit; and the Bank shall act prudently in the interests both of the particular member in whose territory the project is located and of the members as a whole." The control of the borrowers meeting their obligations is part of the supervision function. If project supervision cannot be undertaken due to ongoing hostilities either in the country or in the project area, the Bank no longer could act "prudently in the interests ... of the members as a whole." Thirdly, Article III, Section 5 on the "Use of Loans guaranteed, participated in or made by the Bank" states in paragraph (b) that: "The Bank shall make arrangements to ensure that the proceeds of any loan are used only for the purposes for which the loan was granted, with due attention to considerations of economy and efficiency and without regard to political or other non-economic influences or considerations." As correctly pointed out by the Legal Department, the extent to which (i) the Borrower can effectively carry out the project, (ii) the expected benefits from the project will be realized, and (iii) whether Bank staff can regularly visit project areas in safety for purposes of supervision, are key factors taken into account by the Bank when reaching a judgment whether to proceed with a project in an area subject to hostilities or not. 11. The audit recognizes the need to be flexible in determining termi- nation, cancellation, and/or suspension of loans/credits. Attention is drawn to the Bank's decision not to cancel a credit in Ethiopia although supervi- sion was not possible for most of the time.3/ To protect the Bank from 2/ The audit reviewed an internal memorandum which is still subject of discussion within the Legal Department. 3/ See PPAR on Lower Adiabo - Credit 516-ET, OED Report No. 3971 dated June 25, 1982. -4- appearing arbitrary in allowing extension of effectiveness dates, guidance for termination/cancellation of loans/credits in the form of a statement in the Operational Manual may be appropriate. 12. The audit also found that pursuant to the Recruitment Assistance Agreement with Chad the Bank took adequate precautions to secure reimburse- ment of the advances made to two experts hired by the Agricultural Projects Management Unit (APMU). It had been envisaged that the Bank would be reimbursed out of the Credit Account (para. 6 of the Letter of Agreement of May 10, 1978). The same Letter of Agreement stipulates also that in case the proceeds of the Credit should not be available for such payment mechanism, the Government shall pay promptly at the Bank's request out of its own resources. -5- CHAD SECOND LIVESTOCK PROJECT Credit 783-CD PROJECT COMLETION REPORT Projects Department Western Africa Regional Office Agriculture D Division. ｀州，〞 ―細 常要 丸 化 文 丰 7 1. Background 1- Livestock-raising Is a major economic activity in Chad, providinS a third of the rural population with its maia source of living, and accounting for 25-30,fo of Its export ea--nings- The Bank has been actively involved in thi.s subsector sluce 1972, when t-he first livestock develop--eat project became effective- This first project sought to: (1) improve stock watering facilities in order to ex-and grazing; and (U) assist the Ministry of 3urral Develop=ent in carrying out a w=ber of studies in the livestock subsector. The project completion report (Harch 12, 1981) concluded that the project succeeded In achieving its obJecti-ze to 1=p--ove watering faellities, albeit with considerable delay. and with much less i=pact than originally planned- The Second Livestock Project was to be more co=prehensive. 2- The Second Livestock Project was to be the twelfth IDA activity and the seventh agriculture project in Chad. It was -requested by the Gover=eut of Chad before the Sahelian drought, bur. incorporated the drought experierices In its preparation and appraisal. n. Project For-.=latioa 3. The identification of the Second Livestock Project took place im 1972 by EWA staff before any activity under Livestock I had been carried out. Me identification report prineizally 2-o-posed to st=engthea the veterinary services, and to construct =ore wells- The report also indicated that 3tudi-es on the hydrolo&T of the reglon. and '20S31ble ways of inc--easing the tax revenues froa the subsector -a finance the Veterinary Service were still required mrior to The 1972-1974 drought, the lack of fa-iliarity of Chadian officials wizh Ba- procedures, and the internal security s--;*-ua;----;on de-la7ed -.he co=-jletion oi. .1. f these studies till the end of 1976. However, th.-is delay pe-_.utted Bank staff to beco=e nore fa=11-4ar -with the aubsector in Chad, and enabled a more co=prehensive approach at appraisal. 4. The Second Livestock Project was to incorporate Govern--ent's graving realization th.at a higher degree of pastoralists' participation was essential for addressing zhe issue of overgrazing, and that their f:Lnancial coatr:Lbution was al3o crucial in =aintsi-4_-9 watering Doints and -aai=al health services. Also, it was to reflect G07e-_=ent's real--;=at-;on that the sco-pe for increased production in the Sahelian zone was very United and that so=e of -he livestock develom=ent efforts WoUld have ' a take place in the Southern region- This latter region was better endowed with water and feed resources, but would require the prior eradication of the tsetse fly. 5. Aix appraisal Mission visited Chad in February/March 1977.. During this mission the scone of -he project was broadened. and a considerable amount of further preparation work was undertaken. Overall, however, the Bank considered that, subject to a brief follf)-d-up visit to Chad to disCU33 possible participatloa of USAID. C-_CR, UNDP, FAC and EDF in the project. the mission could proceed directly wit"a the processing of the appraisal report. Durine this fo1low-up =ission, only EDP expressed interest in the project. -8- 6. Mhe key objective of the Second Livestock project was to establish 75 pastoral associations and delineate their gra=ing rights through the Livestock Department of the Ministry of Rural Development. Once recogni-ed, these associations would be proviled with a package of services, including minerals and concentrates, anti-helmintic drugs, and vaccination agai=st the major epidemic diseases in cattle and respiratory diseases in goats and sheep. The vaccination for respiratory diseases in small ru-inants was conditional on satisfactory field tests. The appraisal report ezvisaged that, apart from the vaccines against the =ain cattle diseases, all ani=al health inpt3 would be paid for by the pastoralists after an initial free demonstration period of two years. 1/ The nastoral associations would also provide the =echanism for extension on range =anagement and animal husbandry techniques, institutiona- lice producers' participation for well maintenance, and provide the framework for credit for herd reconstitution for drought-stricken pastoralists and for steer-fattening operations. The proposed expansion of livestock develop=ent activities in the South would be supported by ED. including cofinancing for a Tsetse survey, and eventually an eradication campaign and the preparation of a corresponding land use plan in that region. Yinally, the project would assist in the institution building of the Livestock Depart=ent, the Rural -dater Supply Department and the Ndjamena slaughterhouse, through training and provision of vehicles and equipment. The project activities would cover the entire country. 7. Total project cost for the four-year disburse=ent period was estimated at USS16.1 million of which USS11.5 =illion was to be financed by IDA, USS3.4 million by EDF and USS1.2 illion by the producers. Of the IDA Credit, USS4.2 million would be used to strengthen the Live3ock Service, US$2.9 million to -ur=hase inputs for the pastoral associations (drugs, concentrates, and water points) and USS1.0 million for on-lending to the associations for herd reconstitution purposes. USS130,000 would be directed .towards further e-ui;ing the slaughterhouse of Farcha, USS1.3 =illion for organization and manage=ent, including sixteen =a-year of technical. assistance and high level training. The remainder would be used for a revolving fund or was unallocated. 8. At the time of appraisal, two issues were raised: a) Recurrent cost financing: The high level of recurrent cost and its financing after proJecl completion, when a negative governmental cash flow of US-1 million per year was projected, constituted the key issue. As both the effectiveness of cost recovery measures and the amount of the national budget contribution would depend u-on the internal security situation, the =agnitude of this problem remained uncertain. The proposals of the staff apPraisal report, envisaging c higher tax revenue because of i=roved collection methods and increased producers contribution.after project completion, as well as Government's assurance that the necessary legislative and administrative =easures would be. issued to enable adequate on recovery, were accepted as adequate solutions to this issuer and i During the October 1975 supervision and in view of Government's deteriorating financial situation, it was decided that the producers would pay for drugs from proJect start. -9- b) Security situation. Chad's problematic security situation was also frequently raised within the Bank, although more as a constraint to efficient supervision by Bank staff, than as a factor which would seriously affect or even preclude project implementation. The divisibility of the components, allowing that some activities in a particular area could be discontinued, without affecting the whole project, and specific provisions in the Credit agreement which would allow the Bank to suspend its financing, if Bank staff could not adequately supervise all project activities, were thought to be sufficient safeguards. 9. During the negotiation, the discussions covered the size of the technical assistance component, the methods of cost recovery for the well construction costs and the repayment conditions of herd reconstitution credits for breeding a=i=als. No major differences of opinion occurred, and the resulting changes in the project were only -arginal. The project was approved by the Board u=der "Special Procedures", and no questions or comments were made. III. Project Imole=entation 10. The recruitment of Technical Assistance and the opening of a Special Account constituted the only specific conditions of effectiveness- It was therefore senerally expected that the -:A Credit would be effective within three months of the Anril 1978 credit signature. However, the security situation deteriorated, and the Bank advised Goverr=ent to go slow on the recruitment of experts. After the first supervision mission in October 1975, the situation seemed to have improved, and before the end of 1978 both the Chief Operations Officer and the Accountant were recruited through APG. Unfortunately, the situation deteriorated again, forcing the implementing agency to rescind the contracts of the two experts in June 1979. 11. During their brief period of employment, the two experts concentrated on the preparation of administrative procedures prior to project implementa- tion. The statute of pastoral associations, of which a first draft was already discussed during negotiations, went through several levels of internal discussions and drafts and was send to all provincial delegates. Bank supervision focussed on the status of the specific and general conditions of effectiveness, and on organization and management issues. 12. The political and security situation remained unstable during the rest of 1979 and in 1930, but in the ho=e of an eventual improvement, the Bank decided to postpone the deadline for Govler=ent to meet the conditions of effectiveness, initially till April 15, 1980, and subsequently till October 15, 1980 to allow further discussion with the Chadian delegation visiting the Bank for Annual Meeting in September 19B0. In October 1930, in the absence of any improvement the Bank decided not to extend the deadline for effectiveness any more, and the Credit Agreement terminated on October 15, 1980. 13. As the Credit never became effective, an amount of USS67,756.07, - 10 - advanced by AP!T for the cost of the two experts for the period of December 1978 till June 1979, could not be reimbursed and is still outstanding. This issue will have to be discussed with Government and the a=ount wll have to be recovered from one of the other IDA Credits to Chad, as soon as disbursements under these projects can be reinstated. IV. I=pact 14. The termination of the Credit Agree=ent before effectiveness precluded the project to have any impact. However, the Livestock Service component was expected to reach so=e IC0,000 families, and to have an economic rate of return of over 133%. While this target =ay appear overa=bitious. its justification was a=nly de=oastrated by the recent Rinderpest outbreak where lack of adequate vaccination services allowed, this disease to spread very rapidly through the country and subsequently caused that Chad beca=e a focus of infection for the neighboring countries. The credit component would have benefited some 650 failies hard hit by drought, and the tsetse studies were intended to lead to actual eradication programs with a significant impact on livestock production. 15. The main elements of the Second Livestock project are still valid. Indeed, it appears that the Zuro-ean Develoz=ent Fund intends to provide about US36 million for a livestock develoment program based for a substantial part on the studies and appraisal of this project- Such develop=ent might still justify the invest=ent3 =ade in project preparation and appraisal. V. Bank Perforance 16. Except for underestimating the impact on the project of the security situation, which was extre=ely difficult to predict, Bank's Derformance was satisfactory. The project was well designed and appraised, and its broad concepts are still valid. The Bank tried as much as possible to respond to the proble=s created by the constantly changing political circu-stances, and this explains the decision to extend the effectiveness date twice until it became absolutely clear that no improvement was forthcoming in the immediate future. 17. Whilst the broad project concepts are still valid, the following, mainly organizational, modifications would have to be incorporated to bring the project up to the present "state-of-the-arts" in pastoral development: i) Territorial delineation of mastoral associations, and rationalization of gra=in- right3, although essential for a sustained land use in the Sahel, can better be introduced at a latter stage in the evolution of the pastoral associations, and not immediately at establishment, as proposed by the SAR; (ii) Pastoral participation in the maintenance of the wells is easier if -U- such facilities are not seen as Govern2ent property, as planned in the SAR. but are perceived to be owned by the pastoral association; and (iii) Primary "grss3root" animal health care (individual treatment, drug distribution, castration, etc.) can be better handled directly by the pastoral associations, rather than by the Livestock Service. VI. Conclusions 18. In sunmary, the Second Livestock project proposed a number of interesting concept3 in pastoral development. Because of civil unrest, the Credit could not be declared effective, and had to be cancelled. The project concept might now be supported by other donors. Only slight modifications would be required to bring it up-to-date with current experience.