Rhodesia and Nyasaland - Agricultural Development Project

R E S T R I C T E D Report No.P-219 FILE COPY rThis report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE FEDERATION OF RHODESIA AND NYASALAND March 23, 1960  REPORT AND RECCiT'EUDATTONS OF THE PRESID1ET TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE FEDERATION OF RHODESTA AND NYASALAND 1. I submit the following report and recommendations on a proposed loan of $5.6 million for the development of African agriculture in South- ern Rhodesia. PART I - HISTORICAL 2. On the occasion of my trip to Africa in 1958, I was asked by some African leaders in the Federation of Rhodesia and Nyasaland about the possibility of the Bank's being of assistance in financing develop- ment projects having a direct impact on African life. Their approach was later supported by the United Kingdom Government and by the Government of the Federation of Rhodesia and Nyasaland. Among the projects suggested for the Bank's assistance was the completion of the Southern Rhodesia Government's seven-year plan for development of African agriculture. On the basis of preliminary information received late in 1958, the Bank in- dicated its willingness to consider this project. 3. A formal request and supporting data were received early in 1959. A mission from the Bank went to the Federation of Rhodesia and Nyasaland in September 1959 to examine the economy and the proposed project. Nego- tiations for the proposed loan were carried out in Washington in February- March 1960. h. The Bank has already made the following loans in the constituent territories of the Federation: Amount as of March 15, 1960 (expressed Year Borrower Purpose in $ million) 1952 Colony of Southern Rhodesia Power 28.0 1953 Territory of Northern Rhodesia Railways lb.O 1956 Federal Power Board Power 80.0 1958 Federation of Rhodesia and Nyasaland Railways 19.0 Total 11.0 Of which has been repaid 7.5 Total outstanding 133.5 Amount sold 23.4 Of which has been repaid 7.2 16.2 Net amount held by the Bank 117.3 The total outstanding includes $18.2 million not yet disbursed. 5. The Bank has made the following loans with the guarantee of t+he United Kingdom:  -2- Amount as of March 15, 1960 (expres- Year Borrower Purpose sed in $ million)_ 1952-58 Federation of Rhodesia and Nyasaland Power and or its constituent territories railways fll1.0 1955 East Africa High Commission Railways and Harbours 2h.0 1958 Nigeria Railways 28.0 Total 193.0 Of which has been repaid 9.9 Total now outstanding 1 / Amount sold 32.5 Of which has been repaid 9.6 22.9 Net amount held by the Bank 160.2 1/ Includes $26.8 million not disbursed as of March 15, 1960. A proposed loan of $1.25 million to the Colony of British Guiana for agricultural credit is also about to be presented to the Executive Directors. PART II - DESCRIPTION OF THE PROPOSED LOAN 6. The main characteristics of the proposed loan would be as follows: Borrower: Federation of Rhodesia and Nyasaland. G;uarantor: United Kingdom. Amount: The equivalent in various currencies of $5.6 million. Amortization: In 15 semi-annual installments, com- mencing on December 1, 1962 and ter- minating on December 1, 1969. Interest rate: 6 1/4%, including 1% commission. Commitment Charge: 3/4 of 1%. Purpose: Land surveys and allocation of indi- vidual land plots to African farmers, development of water supplies, farm- to-market roads, soil conservation, and expansion of various agricultural services.  -3-. PART III - LEGaAL INSTRUMENTS AND AUTHORITY 7. Drafts of the following loan dneuments are attached: (a) Loan Agreement between the Federation of Rhodesia and Nyasa- land and the Bank (No.1); (b) Guarantee Agreement between the United Kingdom and the Bank (No.2); (c) Project Agreement between the Colony of Southern Rhodesia and the Bank (No.3). The draft Loan and Guarantee Agreements conform generally to the pattern of the previous Loan and Guarantee Agreements with the Federation and the United Kingdom concluded in 1958 for the Rhodesia Railways Project. 8. The Loan Agreement would require the Federation to re-lend the proceeds of the Bank loan to Southern Rhodesia under a Subsidiary Loan Agreement, the terms of which would have to be satisfactory to the Bank and could be changed only with the consent of the Bank (Section 5.01 (a)). In the event of a shortfall of funds available to meet Project expenditures, the Federation would be obligated to make arrangements satisfactory to the Bank to cover the shortfall ('ection 5.07). Should Southern Rhodesia pre- pay the subsidiary loan the Federation would thereupon have to prepay an equivalent portion of the Bank loan (Section 5.08). 9. Article VI of the Loan Agreement would make a default by South- ern Rhodesia under the Project Agreement an additional event entitling the Bank to premature the Loan. The due execution and delivery of a Bank- approved Subsidiary Loan Agreement and the due authorization or ratifica- tion of the Project Agreement, together with appropriate legal opinions in respect thereof, would be additional conditions to the effectiveness of the Loan Agreement (Sections 7.01 and 7.02). It is contemplated that appropriate legislation for these purposes would be introduced at the ne