Announcement of Three Million Four Hundred Thousand Dollar Credit to Uganda for Smallholder Tea Production on September 13, 1967

• INTERNATIONAL ·DEVELOPMENT ASSOCIATION 1818 H STREET, N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 67/12 Subject: $3.4 million credit to Ugancla September 13, 1967 for smallholder tea production The International Development Association (IDA), an affiliate of the World Bank, has approved a credit equivalent to $3.4 million to Uganda to assist in financing a program f.or the development of tea production by African smallholders. The program will improve the standard of living of a large number of African sub- sistence farmers and contribute appreciably to Uganda's foreign exchange earnings. Tea growing is already well established in Uganda and its teas have gained recogn:Ltion in world markets. At present there are about 26,000 acres planted to tea which produce about 25 million pounds. Nearly 907. of the present tea acreage ~ is in large estates. The Government is now giving emphasis to expanding tea grow- ing in smallholder areas. In many regions tea is the only practicable cash crop which will enable subsistence farmers to achieve a better standard of living. The project which the IDA credit will assist provides for the planting of some 9,700 acres of tea over the five-year period, 1966-70, together with technical ser- vices for the farms involved and for about 4,000 acres of smallholder tea planted prior to 1966, and additional processing facilities. About 5,500 smallholder African farmers are expected to participate in the scheme. Most of the land hold- ings to be included in the program are located in the southwest where elevations are from 4,000 to 5,500 feet and annual rainfall is from 40 to 70 inches per year with good dfatribution. The area is connected by rail with the Indian Ocean port of Mombasa in Kenya. When the new tea bushes mature it is estimated that they will • contribute annually about 10 million pounds of tea, valued at about $4 million, to Uganda's total tea output. Net foreign exchange earnings are expected to average the equivalent of $1.8 million a year to about 1986 and $3.4 million thereafter.  - 2 - The principal responsibility for the execution of the project will rest with the Uganda Tea Growers Corporation (UTGC), a statutory body established in 1966 for the purpose of developing smallholder tea cultivation. UTGC secures pianting • material and fertilizer for innnature tea and makes it available to smallholders under credit arrangements. It supervises smallholders' tea cultivation and or- ganizes and supervises tea growers' cooperatives, with staff seconded from the Ministry of Agriculture, Forestry and Cooperatives. It arranges for the process- ing of the smallholders' leaf and organizes and finances its collection, inspec- tion and transportation to factories. The Government will construct and maintain the roads needed for this collection and delivery; some of these roads are being financed by an earlier IDA cre2it. The IDA credit will be used only for the field development part of the project which will cost the equivalent of $6.4 million. The IDA credit will cover $3.4 mil- • lion of this amount and a loan from the Commonwealth Development Corporation (CDC) will provide b301,000 ($843,000)o The balance will be provided by the Government, UTGC revenues and the smallholders themselves. An amount of $2.6 million from the IDA credit and all of the CDC loan will help to finance expenditures for UTGC's head office, a training center, the capital equipment for leaf collection, nurseries, planting material and fertilizers during the development period. The remaining $800,000 of the IDA credit will cover part of the expenditure by the Government on staff seconded to UTGC. The processing sector of the project is expected to cost the equivalent of not more than $5 million but the number, location and size of factories are yet to be determined in the light of recent technological advances which make possible more economical units than hitherto envisaged. The Government will be responsible for providing the processing facilities and may be assisted in their financing by the CDC. This is the third IDA credit made to Uganda this year. A credit of $10 mil- lion was granted for an education project and one of $5 million for roads. A con- sultant provided by the Food and Agriculture Organization of the United Nations (FAO) assisted in the appraisal of the smallholder tea project under the Bank/FAO Cooperative Program. The IDA credit will be for a term of 50 years. Repayment of the principal will begin on August 1, 1977 after a 10-year period of grace. Thereafter, 1% of the principal will be repayable annually for 10 years and 3% will be repayable annually for the remaining 30 years. The credit will be free of interest but a service charge of 3/4 of 1% per annum on the amount withdrawn and outstanding • will be made to meet IDA's administrative costs. The Uganda Government will re- lend $2.6 million out of the proceeds of the IDA credit to the Uganda Tea Growers Corporation for a term of 20 years, including a six-year grace period, with interest at 5% per annume