Zambia - Fisheries Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5012-ZA STAFF APPRAISAL REPORT ZAMBIA FISHERIES DEVELOPMENT PROJECT October 31, 1984 Eastern Africa Projects Department Southern Agriculture Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1 = ZK 1.60 ZK 1 = US$0.63 (The Zambian Kwacha is officially valued in terms of a basket of currencies, for which the US dollar is the intervention currency. Since July 1983, the Government has followed a flexible exchange rate policy, making periodic adjustments in the official value of the Kwacha. The rates expressed above are as of August 1984.) WEIGHTS AND MEASURES 1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.624 miles 1 sq kilometer (km2) = 0.386 sq miles 1 kilogram (kg) = 2.2046 1 metric ton (ton) = 1,000 kg = 2,204.6 pounds 1 liter = 1.057 US quarts ABBREVIATIONS AFC = Agricultural Finance Company CFC = Cattle Finance Company DBZ = Development Bank of Zambia DOF = Department of Fisheries FAO = Food and Agricultural Organization FDA = Fisheries Development Authority GRZ = Government of the Republic of Zambia MAWD = Ministry of Agriculture and Water Development MOF = Ministry of Finance NAMB = National AGricultural Marketing Board SIDA = Swedish International Development Agency TNDP = Third National Development Plan UNIP = United National Independence Party ZADB = Zambia Agricultural Development Bank ZESCO = Zambia Electricity Supply Corporation ZIMCO = Zambia Industrial and Mining Corporation FISCAL YEAR GRZ Fiscal Year - January 1-December 31 ZADB Fiscal Year -- January 1-December 31  FOR OMCIAL USE ONLY ZAMBIA FISHERIES DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. Credit and Project Summary i I. SUMMARY AND CONCLUSIONS ... ............................ 1 II. THE AGRO-FISHERIES SECTOR A. General ...................................00. 3 B. The Agricultural Sector ....................... 4 C. The Fisheries Sub-Sector ..................... 5 Fish Resources and Production .............. 5 The Fishing Industry .... .. ... .......... ....-.. 7 Fish Collection, Marketing and Consumption . 8 D. Fisheries Services ........... ................. 9 The Department of Fisheries ................ 9 Fisheries Development Authority . ........... 10 Boat Building 000000-0.......................... 11 Outboard Engines . 12 Fishing Nets .....** **.. ................... 12 E. Agricultural Credit .....o.......o....... 12 F. Government Development Plans .................. 14 III. THE PROJECT A. Objectives and Main Features ... 15 Bo Detailed Features ................. ........... 16 Institutionalised Credit Services .......... 16 Foreign Exchange Assistance for Net Manufacturing .......... ............ 19 Improved Management of Fish Resources ...... 20 Coordination and Monitoring and Evaluation . 21 C. Project Costs ........ ...... ... .... ....... ... 21 D. Financing ..... ....... ...... . ... ............ 22 E. Procurement ... ......... .. .................... 24 F. Disbursements ...... ............ . .............. 25 G. Accounts and Audit .........................o... 27 H. Environmental Impact .......................... 27 IV. PROJECT IMPLEMENTATION A. Institutionalised Credit Services ............ ; 27 Organisation and Management ............. ... 28 Credit Policies and Procedures ...... o....... 29 Financial Structure of ZADB ................ 32 B. Assistance to Nkwazi Manufacturing Company .... 34 C. Improved Management of Fish Resources ...o...... 34 D. Monitoring and Evaluation .............*...... 35 This document hu a resticted distrnbution and may be used by recipients only in the performance of their offcia duties. Its contents may not otherwise be disclosed without World DBank authorization.  - ii - Page No. V. PRODUCTION, MARKETING AND PRICES As Production ***************************,****.** 36 B. Marketing ............. 37 Co Prices .......................... 37 VI. BENEFITS, BENEFICIARIES AND JUSTIFICATION A. General ......... 38 B. Economic Rate of Return ........................ 39 C. Sensitivity and Risk Analysis ................. 39 D. Beneficiaries ................................. 41 E. Justification ************* ** ***************.** 42 VII. ASSURANCES AND RECOMNENDATIONS ..oo ...................... 43 This report is based on the findings of an appraisal mission comprising Mr. Asaf Malik, Mr. Ridley Nelson, Mr. Fujio Kada, Mr. Eduardo Loayza (IDA), Mr. Henry Gunawardena (FAO-CP), and Mr. A. Flanagan (consultant). The mission visited Zambia in April/May 1983 and January/February, 1984.  - iii - ANNEXES, TABLES, CHARTS, MAPS Annex 1 Terms of Reference for Technical Assistance to Phase Out AFC & CFC Annex 2 Selected List of Materials & Working Papers Available-Project File Financial Tables: Table Al Estimated Schedule of Disbursements A2 ZADB Summarized Projected Balance Sheets A3 ZADB Summarized Projected Income and Expenditure Accounts A4 ZADB Projected Sources and Uses of Funds A5 ZADB Projected Portfolio Income Analysis A6 ZADB Projected Fisheries Portfolio Income Analysis A7 Nkvazi Manufacturing Company Limited - Profit & Loss Account A8 Nkvazi Manufacturing Company Limited - Balance Sheet MODELS: Table Bl Model 1 - Plank Boat, Engine, Nets B2 2 - GRP Boat, Engine, Nets B3 3 - Engine plus Nets B4 4 - Gill Nets B5 5 - Transport Boat for Pontoon Rigs B6 6 - Collection and Marketing Facilities B7 7 - Economic Analysis B8 8 - Annual Production and Disposal Pattern Before and After Project Cost Tables: Table Cl Credit Artisanal Fishermen C2 Credit Commercial Fishermen C3 Collection and Marketing Facilities C4 General Line of Credit C5 Institutional Credit Services - Management and Technical Assistance C6 Net Manufacture Facilities C7 Facilities C8 Fisheries Institutional Development - Management and Technical Assistance C9 Fisheries Institutional Development - Training CIO Coordination, Monitoring and Evaluation Cli Summary Account by Year - Base Costs C12 Summary Account by Year - Totals Including Contingencies C13 Summary Account by Project Component C14 Project Component by Year - Base Costs C15 Project Component by Year - Totals Including Contingencies C16 Project Cost Summary C17 Summary Accounts Cost Summary  - iv - Table DI Funds Allocated for Fisheries Loans D2 Annual Fish Yields D3 Projected Demand Based on Population and Per Caput Consumption Increase D4 Fish Production by Major Species D5 Fishing Boats Operating in Zambia Table El ZADB Planned Establishment of Field Offices E2 ZADB Staffing Plan Chart 1 Project Organisation Chart 2 ZADB Organisation Chart 3 Department of Fisheries Chart 4 Implementation Schedule Hap 1 Map of Zambia  REPUBLIC OF ZAMBIA FISHERIES DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Zambia. Beneficiary: Zambia Agricultural Development Bank (ZADB) and Nkwazi Manufacturing Company. Amount: SDR 7.1 million (US$7.1 million equivalent). Terms: Standard. Use of Credit: (i) US$2.8 million to ZADB for sub loans (for fish production, collection and marketing) as equity capital. Sub-loans would have maturities of up to five years, with interest not lower than the maximum rate allowed on agricultural credit (currently 15 percent per annum), plus two percent commitment fee and two percent loan processing fees; (ii) US$0.3 million to ZADB (for technical assistance) as a grant; (iii) US$1.0 million to be purchased with local currency by Nkwazi Manufacturing Company to finance imports of raw materials and machinery spares for fishing net manufacture; (iv) US$2.6 million to be retained by Government for technical assistance and training-(US$1.2 million), and facilities (US$1.0 million) for the Department of Fisheries, and (b) project coordination, monitoring and evaluation (US$0.4 million); and (v) US$0.4 million to cover physical and price contingencies. Project Description: The project would support the Government's strategy for agricultural development by increasing fish supplies; and strengthening two key institutions in the sector. Specifically, it would provide: credit to artisanal and commercial fishermen for fish production; credit for fish marketing facilities; foreign exchange assistance for the manufacture of fishing nets; and technical assistance.  - li - Project The implementation of the project would Increase fish Desription: production by about 10 percent and raise incomes of about (continued) 3,500 fishing families from an average of K1,400 to about K2,800 per family. Technical assistance would strengthen ZADB and the Department of Fisheries (DOF). Major projpct risks are: that ZADB may not develop as planned due to under-capitalization; and that DOF may not be allocated adequate operating funds. To minimize these risks, Government would be required to make specific contributions to ZADB's capital over a four-year period (1984-87) and adequate budgetary allocations for DOF's operations.  - lli - Estimated Cost Local Foreixn Total ~- -US$Milllon- -- Credit services 1.14 2.72 3.86 Net Manufacturing Facilities 0.11 0.90 1.01 Management of Fish Resources 0.60 2.23 2.83 Coordination, Monitoring and Evaluaton 0.05 0.44 0.49 Total Baseline Cost 1.90 6.29 8.19 Physical Contingencies 0.05 0.07 0.12 price Contingencies 0.73 1.60 2.33 Total 2.68 7.96 10.64 (Of which taxes and duties) (1.10) (1.10) Financing Plan: Local Foreign Total --US$ Million IDA - 7.1 7.1 Government 1.5 0.9 2.4 Sub-Borrowers' Contribution 1.1 - 1.1 2.6 8.0 10.6 Estimated Disbursements of IDA Credit: IDA FY 85 86 87 88 89 90 -- -US$ Million Annual 0.4 0.8 2.3 2.2 1.0 0.4 Cumulative 0.4 1.2 3.5 5.7 6.7 7.1 Rate of Return: 26 percent. !Lev No. IBRD 18135  ZAMBIA FISHERIES DEVELOPMENT PROJECT I. SUMMARY AND CONCLUSIONS 1.01 Zambia's recent development strategy has given a high priority to agriculture and rural development, in the wake of declining copper production, increased costs and softening of international copper prices. Within this context greater attention is being paid to self-sufficiency in major foodstuffs and some non-food commodities, and to diversification to widen the export base of the economy, currently still dominated by copper. The Government has also emphasized the achievement of more equitable distribution of income and employment. Attention is now being given to increasing support for the fisheries subsector as a means of supplying badly needed protein in the diets of both the rural and urban population. In addition to raising nutritional levels, the expansion of fish supplies also has significant economic, social and employment benefits. The proposed Project would support this strategy by expanding the capacity of the artisanal and commercial sectors and helping to improve the marketing system in support of the production activities. The Project, in addition to increasing the present fish supplies and consumption levels, would provide the basis for the future expansion of the fisheries sub-sector. The Project would also provide support to Zambia Agricultural Development Bank (ZADB) during its establishment phase to eventually become the principal lending institution to the agricultural sector. 1.02 The Project would represent the first stage of a long term program of development of the fisheries sub-sector. It would, over a five year period, support the establishment and development of artisanal and small-scale commercial fisheries at selected lakes and assist in the improvement of the marketing system. The Project is designed to strengthen the Department of Fisheries (DOF) through the provision of facilities and technical assistance to improve its capability to better manage the country's fish resources. The Project would specifically provide for the extension of credit to artisanal fishermen and small-scale commercial entities to purchase wooden plankboats, glass reinforced plastic (GRP) boats, transport boats, engines and nets to carry out fishing activities in Lakes Tanganyika, Mweru Wa-Ntipa, Mweru Luapula and Kariba. Credit would also be provided to individuals or private sector companies to establish integrated fish collection, marketing and distribution systems on Lakes Mweru Wa-Ntipa and Mweru Luapula, and an ice plant in Kafue. The centres would be designed to regulate the supply of fresh/frozen fish to the Copperbelt through the facilities propcsed to be financed under the Project and private truckers and thereby reduce the substantial losses, which at present result from lack of adequate marketing infrastructure, and improve the quality of fish being supplied. Likewise, the proposed ice plant in Kafue would enable the traders to better preserve fish supplies to the Lusaka market. Under the project, technical assistance would be provided to ZADB to administer the credit effectively. The Project would also provide foreign exchange assistance to Nkwazi Manufacturing Company, the only fishing net manufacturing company in the country, to meet about 20Z of its requ'rements of raw materials and machinery spares for maintaining the  supply of flshing nets required for stRll fishermen during the Project period. The Project would provide for upgrading of DOF's existing transport, research and training facllities gnd some operating funds. It would also provide technical assistance to DOF in the form of internationally recruited staff to assiet In research, extension and training. Finally, funds would be provided for the recruitment of international staff for project coordination and monitoring and evaluation. 1.03 The Ministry of Agriculture and lister Development (MAWD) would have overall responsibility for all Ptoject activities. To assist the Ministry in this task, a Project coordinator would be appointed through international recruitment. The ZADB would be responsible for the credit component. The Bank of Zambia Would adoinnster the foreign exchange assistance to the net manufacturing company. The DOF would have the responsibility for implementing the component designed to provide facilities and technical assistance to improve assessment and management of fish resources. 1.04 An IDA credit of Us$7-1 million is proposed which would cover 90 of the foreign exchange comPonent. This would represent about 75Z of project costs excluding taxes and duties and about 672 of total Project costs of K17.0 a (US$10.6 m). The Covernment's contribution would be K2.1 m (US$1.3 m) or about 14% of project costs eccluding taxes. Taxes and duties would total abodt K1.7 s (US$1.i v) or about 11Z of net project costs. The borrowers under the credit compovent and net manufacturing company would provide K1.8 E ZUS$1l l ) equal to 11% of net project costs. The funds for the credit compovent wo