Senegal - Fourth Irrigation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 6484-SE STAFF APPRAISAL REPORT REPUBLIC OF SENEGAL IRRIGATION IV PROJECT October 21, 1987 Africa - Sahelian Department Agriculture Operations Division This document has a restricted distribution and may be used by recipients only in the performance of their officMl duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - CURRENCY EQUIVALENTS Currency Unit = CFA Franc (CFAF) US$1.0 = CFAF 314 CFAF 1 million = US$3,185 SYSTEMS OF WEIGHTS AND MEASURES Metric British/US Equivalents 1 meter (m) = 3.28 feet (ft.) 1 square meter (m2) = 10.76 square feet (sq.ft.) 1 cubic meter (ml) 35.30 cubic feet (cu.ft.' 1 kilometer (km) = 0.62 mile (mi.) 1 square kilometer (km2) - 0.39 square mile (sq.mi.) 1 hectare (ha) - 2.47 acres 1 metric ton (m. ton.) 2,205 pounds (lbs.) ABBREVIATIONS BADEA Banque Arabe pour le Developpement Economique en Afrique (Arabic Bank for Economic Development in Africa) BCEAO Banque Centrale des Etats d'Afrique de l'Ouest (Central Bank for West African Monetary Union) BNDS Banque Nationale de DQveloppement du Senegal (National Development Bank of Senegal) CCCE Caisse Centrale de Cooperation Economique (French Aid Loan Agency) CNAPTI Centre National d'Application et de Perfectionnement aux Techniques de l'Irrigation (SAED's training center) CNCAF Caisse Nationale de Credit Agricole - France (National Agricultural Development Bank of France) CNCAS Caisse Nationale de Credit Agricole du Senegal (National Agricultural Development Bank of Senegal) CPSP Caisse de P6rSquation et de Stabilisation des Prix (Price Stabilization Fund) CUMA Cooperative d' Utilisation du Materiel Agricole (Agricultural Equipment Cooperative) DCSR Direction de la Conservation des Sols et du Reboisement (Department of Soil Conservation and Reforestation) DPA Direction de l. Planification et des Amenagements (Department of Planning and Development Works of SAED) DPD Direction de la Producti'on et du Developpement (Department of Agricultural Development of SAED)  FOR OMCIL Use ONLY -iii- FAO/CP Food and Agriculture Organization/Cooperative Program GIE Groupements d'intergt economique (farmer groups) IFAD International Fund for Agricultural Development ISRA Institut Senegalais de Recherches Agricoles (Agricultural Research Institute of Senegal) KfW Kreditanstalt fUr Wiederaufbau (Federal Republic of Germany Aid Agency) KF Kuwait Fund for Economic Development MC Ministare de la Cooperation (French Aid Agencies) MDR Ministare de Ddveloppement Rural (Ministry .f Rural Development) MPN Ministere de la Protection de la Nature (Ministry of Environment Protection) NPA Nouvelle Politique Agricole (New Agricultural Policy) OMVS Organisation de Mise en Valeur de la Vallee du Senegal (Senegal River Valley Development Organization) PIV Perimetre Irrigu4 Villageois (Small Village Irrigation Perimeter) SAED Societd d'Amenagement et d'Exploitation des Terres du Delta du Fleuve S6negal et des Vallees du Fleuve Senegal et de la FalUmd (Organization for the Development of the Senegal River Delta and Senegal and Faleme River Valleys) SDR Societe de D4veloppement rural (Rural Development Agency) SNTI Soci6td Nationale de Tomate Industrielle (Tomato Production and Processing Industry) SOCAS Societe de Conserves Agricoles du S4ndgal (Tomato Production and Processing Industry) SOFISEDIT Soci4te Financiere Sen4galaise pour le Developpement de l'Industrie et du Tourisme (Financial Development Agency for Industry and Tourism) UNDP United Nations Development Program USAID United States Agency for International Development FISCAL YEAR July 1 - June 30 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,  -- so  - iv - STAFF APPRtAISAL REPORT SENEGAL IRRIGATION IV PROJECT TABLE OF CONTENTS Page DOCUMENTS CONTAINED IN PROJECT FILE ................... (vi) CREDIT AND PROJECT SUM4ARY ............................ (viii) I * THE ECONOMY ........................ 1 A. Economic Structure and Past Developments ....... 1 B. Recent Developments and Adjustment Efforts ..... 2 C. Producer and Export Incentives ................. 2 D. Public Investment Program. ................... 3 E. Parastatal Sector .......................... . . 3 F. Long-term Prospects. ............................ 4 II. BANK GROUP OPERATIONS IN SENEGAL ................... 4 III. THE IRRIGATION SUB-SECTOR * ....................... . 7 A. Physical Resources . .......................... . 7 B. Prospects for Irrigation Development ........... 7 C. Bank Strategy ................................... ....... a D. Government Policy ............................. . 8 E. Institutions involved in the Subsector ......... 9 F, Land Use ............. oo*o**...o4 ............ 18 IV. THE PROJECT ........... . 19 A. Project Background ............................ . 19 B. Rationale for Bank Involvement ................. 19 C. Objectives and General Description ............. 19 D. Detailed Features ...................................... . 20 E. Ecological Impact ...................................... . 26 P. International Water Rights .................... 26 G. Project Implementation ........................ 26 This report is based on the findings of an appraisal mission to Senegal in June 1986. Mission members included Messrs. Jan Pruntel (Engineer/leader), Jean Boutan (Sr.Economist/Financial Analyst), Alain Seznec (Agriculturist), and Stephen Berkman (Technical Educator) all from IDA, and Ms. Nicole Glineur (Consultant). This report was edited by Ms. Michile Moriarty and processed by Mesdames J4hanne Romain and Guillemette Rohan.  TABLE OF CONTENTS (continued) Page V. PROJECTS COSTS AND FINANCING ........................ 27 A. Costs Estimates ............................... . 27 B. Proposed Financing Plan ........................ 27 C. On-lending and Administration of Fun ds ......... 28 D. Procurement and Use of Consultants ............. 29 E. Disbursements ......... .................... . 29 VI. MARKETS, PRICES, FINANCIAL AND ECONOMIC ANALYSIS .... 30 A. Markets ........................... . 30 B. Prices ....................... ................ .. 30 C. Farm Income Analysis ........... ........... 31 D. Cost recovery ................................. . 32 E. Economic Jus tification ......................... 32 F. Benefits and Risks ............................. 34 VII. AGREEMENTS REACHED AND RECOMMENDATIONS ........ ..... 35 ANNEXES III-1. Organization and Disengagement of SAED from its Production-Related Activities III-2. Financial Analysis of SAED IV-1. Modernization of Irrigation Infrastructure IV-2. Training IV-3. Agricultural Credit IV-4. Organizational Charts of SAED IV-5. Reinforcement of SAED and ISRA IV-6. Agricultural Production IV-7. Health IV-8. Implementation Schedule and Construction Schedule V-1. Project Cost Summary V-2. Detailed Financing Plan by Components V-3. Amounts and Methods of Procurement V-4. Allocation and Disbursement of IDA Credit VI-1. Project's Incremental Agricultural Production VI-2. Economic Justification and Farm Budgets. MAPS: IBRD 19099R Senegal Irrigation IV Project - Boundoum, Thiagar, and Dagana Main Infrastructure IBRD 20027 Senegal Irrigation IV Project - Boundoum, Thiagar, and Dagana Schemes Agriculture Operations Division Sahelian Department October 1987  - vi . STAFF APPRAISAL REPORT SENEGAL IRRIGATION IV PROJECT DOCUMENTS CONTAINED IN THE PROJECT FILE A. Selected Reports and Studies Related to the Project Ref. No. Document Date 1. Rapport du programme de cooperation FAO/Banque Mondiale. Composante Irrigation - Elements de preparation May 1985 2. Projet de rehabilitation des perimetres d'irrigation de Boundoum et de Dagana. Avant-projet detaille. Rehabilitation du Perimbtre de Thiagar December 1985 3. Rapport de revision des comptes de la SAED pour l'exercice clos le 30 juin 1985 July 1986 4. Deuxieme lettre de mission de la SAED et Annexes December 1984 5. Rapport SINORG sur le desengagement de la SAED (Proposition pour l'etude de l'4volu- tion des fonctions de la SAED) April 1985 6. Etude des rizeries de la SAED au Senegal (CFDT) October 1985 7. Mission de preparation d'un projet d'experi- mentation des machines agricoles sur le fleuve S4n6gal (CEEMAT) September 1985 8. Rapport sur la r6gie de la SAED (Aviron Viollet) February 1986 9. Creation de PME dans le departement de Podor (Dhonte) March 1986 10. Etude du credit agricole dans le delta du Senegal - Etude du milieu humain - Evolution November 1986 des conditions de mise en place de la compo- sante credit (2 tomes) - Rapport de synthbse Note complementaire  - vii - B. Selected Staff Workint PaDers 1. Working papers: engineering July 1986 2. AID's disengagement actions July 1986 3. CNAPTI: preparation of training August 1980, component March 1981 and February 1983  - v1ii - STAff APP""I$AL REPORT LRRIGATION IV PROJECT CPIST AND PROJECT SUMM4ARY Borrowers Republic of Senegal Beneficiaries: Socidt6 d'haSnagemnt et d'Exploitation des Terres du Delta du fleuve SEnEgal et des VallUes du Fleuve S6n6gal et do la FaldmE (SAED) and Caisse Nationals de Crddit Agricole du SEn6gal (CNCAS) Credit Amount: SDR 26.2 million (US$ 33.6 million equivalent) Termst Standard IDA terms, with a maturity of 40 years. Flow of Credit US$33.6 million equivalent would be passed by Government of Senegal on to SAID (US$23.6 million) as a grant and to CNCAS (US$10.0 million) as a subsidiary loan. Co-lenders: XfW, BADIA, CCC and French Ministry of Cooperation. Proiect Descriptions The proposed project would modernize irrigated areas and increase cropping intensity, taking advantage of the construction of the Diama and Manantali dams that make water available all year around in the Senegal River Valley. It would further SAED's disengagement from its production-related activities, a process begun under the IDA-financed Irrigation Technical Assistance Project. The Project would include tha following components: (a) modernization of three perimeters (7,000 ha); (b) training of SAID's perbannel and farmers; (c) development of a credit network for farmers; (d) financing, on a decreasing basis, of part of ShED's operating expenses (incurred in connection with its production-related activities); (e) provision of maintenance equipment and spare parts for ShED; (f) studies on diversifying irrigation development in the Senegal valley; (g) strengthening of SAED's Planning and Development, Accounting, and Training Departments; (h) research, reforestation and health.  - ix - Proiect Benefits: The Project would result in the improved operation and maintenance of some 7,000 ha of irrigation schemes in th6 Senegal river Delta, thereby making possible sustained and increased production primarily of rice, but also of tomato, maize, and sorghum. The project's institutional reform program would have major non-quantifiable benefits. SAED's disengagement from its production-related activities and the strengthening of its service and planning activitiei would attract new farmers, agro-businesses and support services into the area, and result in more effective training of farmers in agricultural methods, water use, mechanical repairs and management. The creation of an agricultural credit network in the area would allow farmers and their associations to buy inputs from private distributors, have their land prepared by private contractors and their equipment repaired by private mechanics. As SAED disengages, and goods and services begin to be traded on a commercial basis, the business climate for the development of the valley would be greatly improved. Project Risks Major risks would be: (a) a slower-than-expected transition to double-cropping; (b) inadequate maintenance; tc) failure of the credit network,, since the history of credit in Senegal shows that delinquency could hamper its operations, thus retarding SAED's disengagement; (d) failure of Government to maintain a price policy adequate to sustain agricultural production; and Ce) slowness of the private sector to take over production-related activities relinquished by SAED. Protection against those risks has been provided for in the proposed project: (a) the reinforcement of SAED's training and extension services would provide farmers with adequate technical skills for double-cropping; tb) it would be the responsibility of SAED's Water Management Department to set up maintenance programs and to see to it that they are executed; (c) SAED's training expertise, technical advice and experience with farmers would provide strong support to CNCAS's credit network; (d) IDA will maintain a constant policy dialogue with the Government through the preparation and supervision of structural adjustment programs and "lettres de mission"; (e) a diversification and marketing study would be undertaken, expressly to promote private investment in the valley.  -x- Estimated Prolect COsts a/ Local Foreign Total ---