RESTRICTED

Report No. TO-685a

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

AGRICULTURAL CREDIT PROJECT

SENEGAL

December 24, 1968

Agriculture Projects Department

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CURRENCY EQUIVALENTS

US$ 1.00 = CFA francs 246.85CFA franc 1 = US$ 0.oo4CFA francs 1 billion = US$ 4 million

WEIGHTS AND MEASTJRES

Metric System

ABBREVIATIONS

BCEAO: Banque Centrale des Etats de l'Afrique de l'Ouest, theCentral Bank of the West African Monetary Union.

BNDS: Banque Nationale de Developpement du Senegal, the

national development bank.CCCE: Caisse Centrale de Cooperation Economique, a French

Government financing agency.OCAS: Office de Commercialisation Agricole du Senegal, the

groundnut bulk marketing and expcrt institution.ONCAD: Office National de Cooperation et d'Assistance au

Developpement, the cooperatives' supply and marketing

institution.SATEC: Societe d'Aide Technique et de Cooperation, a French

Government technical assistance agency.SIES: Societe Industrielle d'Engrais du Senegal, the local

fertilizer factory.SIBCOMA: Societe Industrielle Senegalaise de Constructions

Mecaniques et de Materiels Agricoles, the local agricul-tural machinery factory.

SODEVA: Societe de Developpement et de Vulgarisation Agricole,the institution providing the extension service tofarmers and some technical assistance to cooperatives.

SENEGAL

AGRICULTURAL CREDIT PROJECT

Table of Contents

Page No.

S lW/d\IRY .............. o

I. IINTRODUCTION .............................. ............

II. BACKGROUND ..................... ............. 2

The Economny ................. * ...................... . 2Agriculture .. . . . . . . . o * . . . . . .*......O...... 2Production Improvement Program ..........................

III. THE PROJECT ........................................ ........ 5

A. General Description .*...........*..* ... .*.. 5

Project Area .................. *..*...... .. 5Institutional Aspects ....... . ...... .. .. ......... 6Cooperatives ......... ...... 009... 0, ...*.O...v 7Credit Procedures ............. ..... .... 7Provision of Farm Inputs ................... . . 8

B. Detailed Features .. *..to..... ..... 11The Credit Program ..... ........ ........ 11Management and Extension Services ................ 11Project Cost Estimates ...... ...................... 13Project Finance ............ ........ ..... ..... 14Procurement and Disbursement ..... ............ 15

IV. ORGANIZATIOJ A1ND KANAGEIMENT .............................. 16

Project Coordination ........... . .. . .... .... ... .. ........ . 16BNDS ......**.................. 16Extension Services . ..... .......... 17ONCAD ........... ...*....... 9. . .. 19OCAS ................................... o.................... 20

(Continued)

This report is based on the findings of two appraisal missionsto Senegal; in July/August 1967 (Messrs. A.H. Stoneham, J. Willems,R. Rossi and D. Dunn); in December 1967 (Messrs. A.H. Stoneham and

J. 1W1illems); and a follow-up mission in Hay 1968 (Messrs. W. Wapenhans,J. Dumoulin and A.H. Stoneham). This report was prepared by Mr. Stoneham.

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Table of Contents Cont'd. Page No.

V. PRODUCTION, 111AEL'TS AND FART\ERS' BENTEFITS .............. 20

Production ..... *......................***..... ....... 20Markets and Marketing . ........ ....... 20Farmer Incentives .......... ........ a. .... ....... 21

VI. BENEFITS AND JUSTIFICATION .............. ......... 6.... 22

VII. CONCLUSIONS AND RECOMuPETMATIONS ................ .... 23

A,\P1EXES

1. Agricultural Background2. Extension Services3. OITCAD Reorganization4. Credit and BNDS5. Miarketing and OChS6. Farm Inputs and Outputs7. Project Coordinating Committee8. Economic Rate of Return

TAFS

1. Senegal: Rainfall, Cultivation and Project Boundaries2. Project Area, showing Zones

SENEGAL

AGRICUITURAL CREDIT PROJECT

SUI4NMARY

i. In 1967 the Government of Senegal requested an IDA credit to help

finance the continuation of the groundnut/millet production improvement pro-

gram in the important "groundnut basin" of Senegal, started in 1964 with

financial help from the EEC (European Economic Community). As presented,

the project was not suitable for Bank/IDA support, but after further consul-

tation and in agreement with the Government, it was substantially revised.

The main emphasis would now be on the cooperative agricultural credit pro-

gram, and on improving the functioning and efficiency of the institution

responsible for procurement of farm inputs and for the primary marketing of

groundnuts from the cooperatives. Owing to shortage of IDA funds it is now

proposed that Bank Group participation be partly by Bank loan and partly by

IDA credit.

ii. The project would directly affect about one million of the rural

inhabitants, over one-quarter of the total population of Senegal. It would

cover the three-year period 1969/70 through 1971/72, and would provide credit

to the cooperatives through the national development bank for the purchase of

increasing numbers of simple animal-draw.i farm implements, for some of the

draft animals required, and for increasing amounts of fertilizer each year.

It would also provide funds to enable an international firm of managementconsultants to assist in the management of the cooperatives' supply and mar-

keting institution for a three-year period, so that at the end of that time

the institution would be able to operate efficiently with trained Senegalese

staff and with the minimum of assistance from specialist expatriate staff.

In addition, the project would provide funds to enable the extension service

to continue to perform some technical services (in particular the preparationof farmers' annual farm input requirements) on behalf of the cooperatives,

and provide funds for overseas fellowships for training staff of the coopera-

tives' institnltion.

iii. The main benefit would be the sustained increase in production of

groundnuts and millet by increasing areas under cultivation and improving

yields. This would lead to steady increases in farmers' incomes and in

Government revenue during a period of loss of privileged markets and declin-

ing price support from EEC for groundnuts.

iv. The estimated total cost would be US$ 24 million. The proposed

Bank loan of US$ 3.5 million and IDA credit of US$ 6.0 million (total US$ 9.5million) to the Government would cover almost three-quarters of the cost of

farm implements, the foreign exchange cost of the management and technical

services for the cooperatives, and the cos' of overseas fellowships for staff

training. About three-quarters of the loan/credit (US$ 6.92 million) would

be on-lent to the development bank for financing credit for farm implements.

Bank/IDA contribution to the total cost would be about 39%, farmers' about16%, and the balance (4j5%) would be provided by the Government, both directly

and through the development bank.

v. The project is suitable for a Bank loan of US$ 3.5 million and an

IDA credit of US"! 6.0 million (total US$ 9.5 million).

SENEGAL

AGRICULTURAL CREDIT PROJECT

I. IMTRODUCTION

1.01 In April 1967 the Government of Senegal applied to IDA for a cred-it to help finance the continuation of the groundnut/millet production

improvement program, started in 1964 with financial help from the EEC (Euro-

pean Economic Community). Total cost was estimated at CFAF 11 billion(US, 44 million) over the three-year period 1968/69 through 1970/71. IDA

finance was sought for up to US$ 13 million, while the balance would come

from FED (Fond Europeen de Developpement), CCCE (Caisse Centrale de Coopera-

tion Economique, a French Governmenit financing agency), BNDS (Banque Nation-

ale de Developpement du Senegal, the development bank of Senegal), farmers

in the project area, and the Government of Senegal.

1.02 The application for credit followed a Bank/IDA identification

mission to Senegal in March 1966, an IDA project preparation mission in

November 1966, consisting of Messrs. P.C. Goffin, K.H.S. Haasjes and

C. Brochu (FAO), and a short follow-up mission in March 1967 by Mr. A.H.

Stoneham. An appraisal mission, consisting of Messrs. A.H. Stoneham,

J. Willems, R. Rossi and D. Dunn, visited Senegal in July/August 1967. The

appraisal could not be completed, particularly on the institutional side,

because the Government, after making the credit application, had appointed

an interministerial committee to reconsider policy aspects of the project

and to reorganize the institutions concerned with the production and market-

ing of groundnuts, and it had not completed its work. Messrs. A.H. Stoneham

and J. Willems returned to Senegal in December 1967 to continue the apprais-

al, but completion was again held up pending further details of the institu-

tional reorganization from the Government. A follow-up appraisal mission,

consisting of Messrs. WH. Wapenhans, J. Dumoulin and A.H. Stoneham, returned

to Senegal in play 1968 to discuss substantial revisions and to complete the

appraisal, while the data obtained on the two previous missions were updated.

This report is based on the findings of the various missions, and on mater-

ial supplied by the Government and the various institutions concerned withthe project. Messrs. E. Wessels and J.M. Payen also contributed to the work

of the missions.

1.03 The project as originally presented was not suitable for Bank/IDA

support. Some of the organizational and managerial aspects were found to be

unsatisfactory, and no proposals were made to meet the mosti immediate prob-

lem, the weak management of ONCAD (Office National de Cooperation et

d'Assistance au Developpement), the Government institution now responsible

for assisting the cooperatives by providing farm inputs, marketing and tech-

nical services. The project also relied upon uneconomically high rates of

fertilizer application to achieve the desired increase in millet production.

1.04 In an effort to produce a program which could be considered suitablefor Bank/IDA support, the original project has been substantially revised,after consultation and in agreement with the Government of Senegal. The mainemphasis is nrow on the agricultural credit program, and on improvement in theoperation of OINCAD. W4hereas the original request was for an IDA credit tohelp finance the project, it is now proposed funds be provided by a blend ofBank loan and IDA credit.

II. BACKGROUND

The Economy

2.01 Senegal's agricultural sector employs over 85% of the 3.6 millionpopulation, and is the main source of economic activity. Agriculture ispredominantly subsistence farming (millet) with groundnuts as the one impor-tant commercial cash crop. Since achieving independence in 1960, Senegal hashad to face economic problems caused by the loss of her position as the focalpoint of the former French West Africa, and by the loss of privileged marketsand prices for groundnuts due to the entry of France into the Common Market.The industrial sector is advanced, though small in size. The rail and roadnetworks are fairly well developed. There are four ports, of which Dakar isthe most important. Agriculture, however, remains and is likely to continuefor a long time as the mainstay of the econorm. Industry and transport relyheavily on the handling, processing and marketing of groundnuts and groundnutproducts for their prosperity. Past Bank/IDA financing of rail and portfacilities has been oriented towards more efficient evacuation of the ground-nut crop.i/

Agriculture

2.02 The background to agriculture is given in more detail in Annex 1.Rainfall is the greatest single factor affecting agricultural development.Average annual precipitation varies from 400 mm in the north to 1,500 mm inthle south (Map 1), with sharply defined wet and dry seasons. A drought occursfairly regularly about once every four years, affecting the north more thanthe south, and the last was in 1966. About 11% of the total land area iscultivated, and probably a further 18% could be brought under economic culti-vation. In an average year groundnuts nowJ represent about one-half of totalagricultural production by weight, millet one-quarter and rice and cassavaone-eighth between them. Over four-fifths of the groundnut crop comes fromthe three contiguous regions of Thies, Diourbel and Sine Saloum (Map 2), whichare known collectively as the "groundnut basin". In this area the soils aregenerally sandy, while there are some rich fertile alluvial soils in thebasins of the four rivers (Senegal, Saloum, Gambia and Casamance).

1/ (a): IDA Credit 96-SE, September 1966, US$, 9 million for the railway:improvement of track and purchase of rolling stock;

(b): Bank Loan 493-SE, May 1967, US$ 4 million for the port of Dakar:improvement of harbor facilities and dredging.

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2.03 Groundnuts and millet are grown in rotation, being planted inJune and harvested in November. The total area cultivated for groundnutshas increased by about 605) over the past 15 years, and is now over 1.1million ha. Average yields have increased by about 12% over the same per-iod, and are now about 950 kg/ha, compared with an average of about850 kg/ha for the whole of Africa, and 1,800 kg/ha in the USA. Total aver-age annual production has increased by about 80% over the same 15-year per-iod, and is now just over one million tons. Senegal is the fourth largestgroundnut producer in the world (after India, Mainland China and Nigeria)

and accounts for one-fifth of total African production. Average annualproduction of millet now totals 500,000 tons on an area of about one millionha. Millet is grown mainly for consumption by the farmers themselves, but

increasing quantities are finding their way into local markets. The demandin the larger towns is relatively small owing to the availability of moresophisticated alternatives, particularly rice and wheat.

2.04 Long-term development plans are centered on diversification ofcrops, in particular rice, sugar, cotton, tobacco and edible groundnuts,but significant increases in their production depend upon further researchand experimentation, and on the development of irrigation. The Casamanceand Oriental provinces have the greatest development potential for rainfedcrops, and the Senegal River for irrigated crops.

2.05 The only large-scale extension service in the country is in thegroundnut basin, and was until recently provided by the Societe d'AideTechnique et de Cooperation (SATEC) (Annex 2), a French Government technicalassistance agency. It is now provided through a new Senegalese institution,Societe de Developpement et de Vulgarisation Agricole (SODEVA), which ismanaged by SATEC (para 4.08). The extension effort is intensive, and hasbeen mounted as part of the production improvement program (para 2.08).The service also provides important assistance to the cooperatives at farmlevel. Land titles in the accepted sense do not exist, but a recent landlaw (1964) has helped to improve land tenure. Although rural land belongsto the State, at village level it is allocated to cultivators through theelders, who can also reallocate it when mismanaged or not cultivated.

2.06 The cooperative movement has long been active in agriculture, andthere are some 1,500 societies throughout the country. Groundnut coopera-tives, which are the most important, play an effective role in the supply

of farm inputs, and in the marketing of the crop. ONCAD (Annex 3) isresponsible for assisting the cooperatives by providing farm inputs, market-

ing and technical services. Seeds are produced locally and a national seedstockpile for groundnuts is maintained by ONCAD. The National AgriculturalResearch Center is responsible for research on groundnuts and some other

crops, and maintains demonstration plots in most of the regions.

2.07 Most of the demand for farm machinery comes from the groundnutbasin, and is for light animal-drawn implements and carts, which are manu-factured locally. Imports of mineral fertilizer have increased rapidly overthe past few years, and are now over 60,000 tons annually. A new factory,SIES (Societe Industrielle d'Lngrais du Senegal), which is partly financed

by TFC,I/ started production in March 1966 and is expected in future yearsto supply the w.hole of the country's requirements of mixed fertilizers(para 3.12). Credit for agricultural inputs (implements, draft ani-

mals and fertilizer) is supplied through D1U1DS (Annex 4) to the cooperatives.There is a local trade in produce, livestock and vegetables, but commercialmarketing is mainly confined to a government institution, OCAS (Office de

Commercialisation Agricole du Senegal) (Annex 5), wqhich is responsible forthe bullk marketing and export of groundnuts and for imports of rice.

Production Improvement Program

2.08 The current Development Plan (1965-69) stresses that increasedagricultural production for import substitution as well as increased ground-

nut production is essential for a healthy development of the economy. This

is of vital importance in view of the loss of export revenues which Senegalis facing as a result of the 1964 Yaounde Convention between EEC and asso-

ciated countries. The Convention provides that groundnut exports fromSenegal urill no longer enjoy a privileged market in France after 1969. In

order to cushion the impact of the resulting loss in income, EEC has been

financing, through FED, a five-year (1965-69) production improvement program

(Annex 1, para 10). The main objectives of the program are to minimize the

losses in foreign exchange earnings arising from the elimination of theprivileged market, and also to minimize the reduction in income to farmersarising from the necessity to lower the groundnut buying price. The aim is

to bring about a 25/ overall increase in production of groundnuts over the

five-year period, by increasing both acreages and yields, particularly inthe groundnut basin. Simultaneously, production of subsistence ard other

crops is being expanded to accelerate import substitution, and efforts arebeing made to diversify the types of crops cultivated. The program directlyaffects about one million of the rural inhabitants, over one-quarter of thetctal population of Senegal.

2.09 Funds have been provided for the extension service, a fertilizersubsidy, processing and storage facilities, soil and seed improvement, andfacilities for training draft oxen. Total cost over the period 1965 through

1969 is expected to be a maximum of CFAF 4.9 billion (US$ 19.6 million), of

which 29% is for financing the extension service (originally to October 1967but since extended to June 30, 1968), and 34% for fertilizer subsidy to the

end of 1969. Farm implements have been supplied through credits to the

cooperatives by BNDS. Funds for such credits were not included in the FEDfinance for the program, and have been provided to date by BEDS with aid

from CCCE.

2.10 It is difficult to evaluate the impact of the program to date.Fluctuations in total annual production have always been substantial, duemainly to the influence of the weather on yields. Furthermore, the cyclical

drought wzhich generally occurs about every four years tends to make evalua-

tion over a short period misleading. Groundnut production in 1967/68

1/ Investment Agreement No. ll-SE, dated August 19, 1966. IFCinvestment US$ 3.46 million approximately.

(1.06 million tons, provisional) was about the same as in 1964/65 (1.02

million tons), with one of the intermediate years showing a record crop for

Senegal, and the other a low crop due to drought conditions (Annex 1,

Table 1). In spite of the irconclusive data, there is evidence that the

long-term impact of the program will be beneficial, particularly in famil-

iarizing farmers with the use of fertilizers and better cultural practices.

Average annual production for the four years 1969/70 through 1972/73 shouldreach 1.20 million tons, which would be a 25% increase over the annual

average for the four years 1962/63 through 1965/66, and in line with the

program's target.

III. THE PROJECT

A. General Description

Definition

3.01 The project would seek to provide sustained increases in farmers'

incomes and in government revenues during a period of declining export

prices due to loss of privileged markets and decreasing support prices for

groundnuts. Its main objective would be to ensure that the rate of produc-

tion of groundnuts and millet in the project area continues to increase,

both by bringing additional land under cultivation and by increasing yields.

Improved seeds and more efficient services to the cooperatives would play

their part in bringing this about, but increasing yields would be mainly

due to increasing rates of fertilizer application. The project would con-

tinue some of the more effective services provided by the current production

improvement program in the groundnut basin, and would improve some of the

organizational weaknesses revealed through the operation of the program to

date. It would cover the three-year period 1969/70 through 1971/72. It

would provide, through BNDS and the cooperatives, further credit for the

purchase by farmers of farm implements, draft animals and fertilizer. It

would improve the functioning and efficiency of the supply, marketing and

technical assistance services of ONCAD by meeting the cost of qualified

management services, which would be responsible for reorganizing and assist-

ing in the management of ONCAD for the three-year period. It would also

provide funds for overseas fellowships for ONCAD staff. Finally, by meeting

their cost, it would ensure that the services to cooperatives at present

being provided through the extension services would be continued until more

suitable alternative arrangements could be worked out.

Project Area

3.02 The project.would be confined to that area of the groundnut basin

in which an extension service is provided under the production improvement

program (see Map 2). This covers about 85% of the groundnut basin, and

excludes the very marginal areas. The project area comprises three specific

zones (North, Center and South), within each of which the conditions of

climate, pedology and demography are relatively homogeneous. There are,

hmoever, substantial variations between them. Yields increase progressively

from the North to the South Zone, due mainly to higher rainfall and better

soil fertility. Area cultivated would increase by one-quarter, from

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2.0 million ha to 2.5 million ha over the three-year period. This increasewiould be partly due to an increase in the area under fallow which would risefrom the present 12% to about 18% over the project period. Most of theincrease would be in the South Zone, where the total area under cultivationwould increase by about one-third, compared with about one-fifth in theother two zones. Except in parts of the densely cultivated area aroundDiourbel, groups of farms are separated from their neighbors by belts ofidle land covered with natural vegetation. In the past there has been somereluctance to use any part of these belts for cultivation, mainly owing todoubts about ownership and possible disputes with adjacent groups of farms.The demand to farm more land which arises from the increasing use of draftimplements has led to increasing cultivation of these belts, and the recentlaw to improve land tenure has eased problems of oiwmership and disputes.The increase in the area cultivated under the project would be met by addi-tional cultivation in these belts. land clearance would be done by thefarmers themselves.

3.03 Total rural population in the project area is at present almostone million, of which about half is in the Center Zone, one-third in theSouth, and the balance in the North. The overall increase in populationover the project period would be about 5%; 3% each ir. the North and CenterZones by natural growth, and 9% in the South Zone, of which 6% (2% per year)would be due to immigration from other areas of Senegal. Total number offarmers is 166,000, which would rise to about 176,000 at the end of theperiod. The average size of a farming family is six persons, of whom fourare active. The average size of a farm is at present 11 ha, which wouldrise to a little over 13 ha at the end of the period. Under farming condi-tions in Senegal, this is a satisfactory size.

Institutional Aspects

3.04 The three institutions directly concerned with the project areONCAD, BNDS, and SODEVA. ONCAD would continue to be responsible for dis-tributing farm inputs to the cooperatives, and fcr collecting their ground-nut crops for bulk sale to OCAS, as well as for managing the groundnut seedstockpile. BNDS would continue to finance through the cooperatives fertil-izer by short-term credits, and implements and some draft animals by medium-term credits. It would also be responsible for payment to the cooperativesfor the crops, after making deductions for farm input advances (in kind forthe seed stockpile, and in cash for the other inputs). SODEVA would con-tinue, for the time being, to spend about half its time on providing exten-sion services proper, and the other half on services to the farmers on behalfof the cooperatives (para 3.22). The future provision of these latter serv-ices would be the subject of a special study as part of the improvement inthe services provided by ONCAD.

3.05 In order to provide the necessary coordination, a Project Coordin-ating Committee would be set up, consisting of a senior official of theMinistry of Planning and Industry as Chairman, together with representativesof the ministries and institutions concerned with the project as members.Details are given in para 4.01.

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Cooperatives

3.o6 Of the farmers in the project area, 55% are presently members ofcooperatives. Although this level of membership may appear small, thecredit program is avai'lable to almost every farmer in the area, since underthe extended family system one membership covers the needs of other nearrelatives. There are 876 cooperatives in the project area with an averagemembership of 102 each. Each member contributes CFAF 1,000 to its sharecapital, which is held by BNDS and used as a guarantee fund against creditsadvanced. Credit is granted by BIDS to each cooperative as an institution,which is responsible for repayment. The two most important officeholdersare the president and peseur ('"weighmaster"). The latter is the financialagent responsible for weighing in the farmers' produce, and in due coursepaying them for it. Some abuse of the office of peseur has been observedin the past, and the present position is not wholly satisfactory. A solu-tion to the problems of the office would be sought as part of the improve-ments to be made in the services provided by ONCAD.

3.07 Proper books of account are not at present being maintained withinthe cooperatives, and until improvements in the organization of ONCAD areunderway the position is unlikely to get better. However, the presentsystem of receiving groundnuts and paying for them through the cooperativeshas been working for many years. The collective responsibility of thecooperative for the debts of its individual members is in keeping with theconcept of the traditional Senegalese extended family, even if individualmen,bers may at times receive unfair treatment. Although there are indica-tions that some members are becoming increasingly dissatisfied at the lackof financial information, particularly as to their personal indebtedness,the project should not be held up pending the introduction of satisfactoryaccounting methods and procedures. Assurances have been obtained fromGovernment that it will take appropriate steps to introduce, through ONCAD,uniform accounting procedures acceptable to Bank/IDA not later than the endof 1973. An earlier date would be impracticable in view of the many prob-lerns involved.

Credit Procedures

3.08 BNDS imposes a credit limit on each farmer of 25%o of his lastyear's sales of groundnuts through the cooperative to ONCAD. Requests forcredit are developed during the preceding summer by the extension workersin consultation with each individual farmer, and include financing forfertilizer, farm implements and some animals. The forms covering the de-mands of each farmer within each cooperative are made out in quintuplicate,and individual copies are forwarded to BNDS, ONCAD, SODEVA and the Govern-ment. By this means, all concerned have full information on the totalrequirements for the coming year. After consideration and approval of theproposed lending program at various regional levels and subsequent Govern-ment approval of the total at cabinet level, ONCAD places the necessaryorders for fertilizers and implements, and BNDS calculates its total creditrequirements. IJhen the goods arrive at local ONCAD storehouses, they aredistributed to farmers who arrange their own transportation to their farms.At harvest time members bring their groundnuts to the cooperative's ownstorage area and are given receipts for the quantities delivered. ONCAD

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duly takes delivery and advises BMDS of the quantities for marketing, afterdeducting the seed stockpile requirements. BNDS calculates the deductionsfor repayments due on credits advanced, after which payment is made throughMCAhD and the cooperatives to the farmers. A small part of the payment

(about 3%) is retained and paid later in the season, when the farmers' foodand cash reserves are at their miniraumn. By this means the requirements forthe seed stoclkmile and repayments of credit are made a first charge on theproceeds of the harvest, and the risk of bad debts to BIDS is thereby mini-

mized. These procedures would be continued under the project, except that

the regional representatives of BIHS would make payments direct to the coop-

eratives instead of through OIJCAD, and the necessary coordination would be

ensured through the Project Coordinating Committee (para 4.01).

Provision of Farm Inputs

3.09 Seeds and pesticides. Full details of farm inputs are given inAnnex 6. ONICAD maintains the groundnut seed stockpile which supplies over80% of the country's total annual requirement of seed, which at present is

almost 110,000 tons. Before they can sell the balance of their production,farmers receiving credit hand in at harvest time 125 kg of unshelled nutsfor every hectare they intend to farm in the following year. At sowing timethey are supplied with 100 kg of unshelled seed nuts for every 125 kg handed

in, the extra 25 kg being eventually sold to pay for the running of the stock-

pile. ONCAD's management of the seed stockpile has been unsatisfactory.Inappropriate storage, handling and distribution have led to adulteration,

spoilage and waste. The provision of satisfactory technical control and

commercial management of the stoclpile would be included as part of theimprovements to be made in the services provided by ONCAD. The use of pesti-

cides is almost exclusively confined to groundnuts, and about 80 tons perannum are used in the proJect area. Farmers pay cash for pesticides whencollecting their groundnut seeds for sowing.

3.10 Compared with the research effort on groundnut seeds, little isbeing done to improve the varieties of millet, but one promising variety hasbeen developed, although its impact at farm level has so far been negligible.Government is conscious of the importance of high quality millet seed and is

increasing its efforts to get these improvements down to farm level.

3.11 Fertilizer. For groundnuts three different fertilizer formulae are

in use (Annex 6, para 12), one in each of the zones. That in the North in-cludes a small quantity of molybdenum to compensate for trace element defi-

ciency. The composition of the fertilizer currently used includes a high

percentage of potash. Experimental trials in progress do not indicate thatthe application of this level of potash to groundnut crops has much, if any,

effect on groundnut yields in the project area. These trials are being vig-orously pursued, and if the results so warrant, the fertilizer formulae will

be suitably modified. If the potash component could be reduced or eliminated,fertilizer costs would be substantially reduced. Present cultural practicesdo not include inoculation of the soil with nitrogen-fixing bacteria. While

this has not been tested in Senegal, experience elsewhere indicates that in

the long run the requirements for nitrogen fertilizer might be reduced if

inoculation was introduced. Government intends to start inoculation tests

as early as practicable. One fertilizer formula for millet is used through-out the three zones (Annex 6, para 12).

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3.12 Credit for fertilizer would be supplied to farmers through theproject. At present about 85% of all fertilizer used in the country isapplied to groundnut crops, most of it in the project area. Total consump-tion in the project area for groundnuts and millet would be expected to risefrom 59,000 tons of mixed fertilizer in 1968/69 to 89,ooo in 1971/72, anincrease of about 50%. The bulk of this increase would be used for ground-nut production, since fertilizer consumption for millet, at present around15,000 tons per annum, would not be expected to rise more than 10% duringthe period. Supplies from 1969/70 onwards would come from the local factory,

SIES (para 2.07).1/ Cost of fertilizer delivered to the farmer isCFAF 23,000 per ton, and is not expected to rise now that fertilizer is pro-duced locally.

3-13 Fertilizer is presently subsidized to the farmer on a differen-tial scale (Annex 6, Table 1), the subsidy being about 30% for groundnutsand almost 50' for millet. These subsidies would be reduced progressivelyand would be eliminated for groundnuts around 1972/73 and for millet abouttwo years later. Although different fertilizer prices to farmers for ground-nut and millet production could lead to some misapplication cf fertilizer,in practice they appear to work reasonably well? anal no serious abuse hasbeen noted. 1Jhile subsidies at the same rate for bcth groundnut and milletproduction would have obvious advantages, any change at the present timewould be likely to confuse the farmers and disa-apt consumptlon. The mostimportant consideration for the next few years is to ensure that farmersapply the fertilizer at the appropriate rates. Accordingly, no change inthe present system of subsidies is envisaged.

3.14 At the rates proposed, estimated total cost of fertilizer to thefarmer under the project would be CFAF 4.21 billion. Estimated total costof' the subsidy would be CPAF 1.24 billion (US$ 5.0 million), of whichCFAFT 0.51 billion is available through 1969/70 from existing FED financing.The Government anticipates that FED would consider financing part of thesubsidy in 1970/71 and subsequent years, until it is eliminated. The farmbudget estimates demonstrate that on the diminishing subsidies proposed, farmincomes would continue to increase (Aniex 6, Table 7).

3.15 Implements. All implements and carts required would be suppliedthrough the project on credit to the farmers. At the present time about 75%

of the project farmers own seeders, 50C0 cultivators, and 20% harvesters. At

the end of the project period these percentages would be expected to increasesubstantially, with well over 90% of farmers owning seeders. Carts would be

supplied as replacement for existing units, but no increase in their numbersis colntemplated. Total project requirements would be about 213,000 imple-ments and 11,000 carts, with a total value of about CFAF 2.h billion (US$ 9.8

million). Of this, about CFAF 1.1 billion (45%) would be for replacement ofexisting implements and carts.

1/ For the 1968/69 season SIES supplied 11,000 tons in the project area.

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3.16 Kost of the implements at present in use arxd some of the carts have

been manufactured by a local factory, SISCOHiA (Societe Industrielle Senegal-

aise de Constructions Hiecaniques et de Niateriels Agricoles), which was set up

in 1963 to fabricate agricultural and other machinery. BNDS holds 45% of its

share capital, and the balance is held by private enterprise. SISCOMA is

well managed and its financial position is satisfactory. It is well able to

meet the project requirements for implements. It fixes its own selling

prices, and so far these have always been below the cif prices of equivalent

imported equipment. There is no formal understanding between it and the

Government as to its selling prices to meet project requirements. Since,

however, part of the loan/credit would be used to finance 75% of the total

cost of implements under the project, assurances have been given by theGovernment that OMCAD would procure implements for the project on the basisof local competitive bidding, extended to local agents of overseas manufac-turers as well as SISCO.HA. A survey made of such agents shows that a suffi-cient number would be interested to make local bidding meaningful, providedthat each consignment was not too small. Assurances have also been giventhat bids could be made on part or the whole of the requirements for imple-ments, that each consignment would be large enough to obtain favorable ship-

ping rates from port of loading, that if a contract was awarded to an import-

er the necessary import licenses and foreign exchange would be made avail-

able, and that OHCAD would retain the right to award the whole or part of

any invitation to bid to the best qualified bidder.

3.17 Draft animals. At present almost 70p of farmers in the projectarea own draft animals, and at the end of the project period the percentagewou?Ld be expected to rise to over 80. Horses, the most numerous and the

most expensive of the draft animals, would be held at their present level.

The biggest numerical increase would be in donkeys. However, part of the

resources of the extension services would be concentrated on increasing the

pairs of oxen in use. At present only 1% of the farmers own oxen. This

concentration would be mainly in the South Zone, where rainfall is higherand the prospects for the use of oxen are encouraging. About 10% more farm-

ers own seeders, the most extensively used implement, than own draft animals,and this imbalance is expected to remain at the end of the project period.

This is not considered a problem, since draft animals are frequently borrowed

by neighboring farmers to work their own implements, and without any deleter-

ious effect on overall production.

3.18 Animals financed under the project through credit would be confined

to all the oxen required. Farmers would make their own arrangements for buy-

ing horses and donkeys. No difficulty is anticipated in meeting the project

requirements for animals from within the country. Total requirements for

draft animals for the project would be about 48,000 donkeys, 28,500 horses,

and over 11,000 pairs of oxen, at a cost of about CFAF 1.48 billion (US$ 5.9million). Of this total about CFAF 1.00 billion (two-thirds) would be for

replacement of existing animals. Cost of oxen supplied on credit would be

about CFhF 0.51 billion. It is proposed that ONCAD would pay the sellers of

the oxen. The precise method of payment has yet to be worked out, but would

be included in the ONCAD reorganization proposals.

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B. Detailed Features

The Credit Progpram

3.19 Total cost of farm inputsi/ for the three project years would beabout CFAF 10.0 billion (US$ 40.0 million) and detailed estimates are atAnnex 6, Table 6. Credit requirements would be about two-thirds of thetotal, as follows:

CFAF billions 1969/70 1970/71 1971/72 Total (%)

Implements 0.77 0.77 0.82 2.36 ( 33)Draft animals 0.12 0.18 0.21 0.51 ( 7)

Total medium-term 0.89 0.95 1.03 2.87 ( o0)Fertilizer (short-term) 1.07 1.39 1.74 4.20 ( 60)

Total credit 1.96 2.34 2.77 7.07 (100)

The fertilizer credit is seasonal, and would, therefore, be completely repaidbefore advances were made for the next season. Thus, BNDS incremental cap-ital requirements to finance the fertilizer program would be about CFAF 0.86billion, being the difference between the 1968/69 advances of CFAF 0.88billion and the 1971/72 figure. The total sum required to finance the pro-ject credit program would thus be about CFAF 3.73 billion, of which CFAF 2.87billion (77%) medium-term and CFAF 0.86 billion (23%) short-term.

3.20 Credits to cooperatives for fertilizer would be advanced an anannual interest rate of 5%, and be repayable at the end of the season. Cred-its for farm implements and draft o::en would be advanced at a rate of 5.5%,repayable over a period of five years without any grace period. The creditprocedure outlined in para 3.08 would be followed. Individual farmers wouldreceive credit only in kind, and they would repay their loans through thecooperatives by deductions from crop proceeds. The cooperatives would berecouped for any additional costs and/or losses which they incurred by makingfurther deductions from the farmers' crop proceeds. Actual interest rates tofarmers could thus be expected to exceed 5.5%, though they are likely toremain somewhat below the commercial bank rate of 8%.

Management and Extension Services

3.21 In the past the main restraints on production have included theuntimely availability of farm inputs and the poor quality of the seeds sup-plied from the stockpile. This has been to a large extent due to the verypoor management of ONCAD and its predecessor institutions (para 4.10). Gov-ernment is fully aware of the need to reorganize ONCAD, and in October 1968invited suitably qualified consultants to review the current operations, and

1/ Pesticides, fertilizer, implements (cost and maintenance), anddraft animals (cost and upkeep).

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subsequently to supply such management and other services as would be neces-

sary to implement the recommendations made for operational improvement. A

copy of the letter of invitation and terms of reference is attached as

Annex 3. Evaluation of the replies received would be made by the Government,

and negotiation of the contrac-t with the successful consultant would be made

in cooperation with Bank/IDA, probably in January/February 1969. The prin-

cipal objective would be to reorganize ONCAD over three years, so that at

the end of that period it would be able to operate efficiently with trained

Senegalese staff with the minimum assistance from specialist expatriatestaff. The contract would be in two phases, the initial phase covering 60days, at the end of which the consultant would submit a comprehensive report

covering reorganization over a further period of three years. The subsequentplhase would cover the agreed management services for the three years. Thetotal cost cannot be evaluated precisely until the consultant has been selec-ted. TIeanwhile, it has been tentatively estimated at US' 2.75 million, made

up of US$ 2.50 million to co-ver the cost of supplying the management serv-

ices, plus US1. 0.25 million for counterpart training. The estimate for

management services includes 50 man-years of senior experts (20 in the first

and 15 in each subsequent year) and the essential overhead ex=penses. The

estimate for counterpart training covers the total cost of overseas fellow-

ships for key Senegalese management personnel. The cost of management serv-

ices and counterpart training would be included in the project.

3.22 About half the time of the SODEVA extension workers in the fieldis spent on providing services to the farmers on behalf of the cooperatives.

Services include preparation of annual individual farm input requirements,help with the weighing in of the harvest, with payments for crops, and with

the semi-annual meetings of the cooperatives. These latter services are

partly occasioned by the lack of proper cooperative accounts. Nominally theprovision of cooperative services is the responsibility of ONCAD, and thecontract of the management consultants would include a review of the serv-

ices required by the cooperatives, both those currently being performed by

the extension service and those not at present covered (cooperative accounts).

This would take the form of a report, one year after the second phase of the

contract commences, advising whether ONCAD, Government, or some other organ-

ization should provide these services, what should be their function and

scope, and to what extent ONCAD would be able to contribute to their imple-mentation. In the interim the contract between the Government and SODEVA

(para 4.08) would ensure that the extension service continues to give itscurrent services to farmers on behalf of the cooperatives. The cost of theservices provided by SODEVA to the cooperatives, estimated at US$ 2.52million, would be included in the project.

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Project Cost Estimates

3.23 The estimated total cost of the project is CFAF 6 billion (US$ 24million), as follows:

Total project cost Foreign exchangeCFAF US$ CFAF US$

Expressed in billion million %I' billion million %2/

I. Farm inputsImplements 2.36 9.44 40 o.64 2.56 27Animals 1.50 6.00 25 -- -- --

Fertilizer o.86 3.44 14 0.50 2.00 58

Total 4.72 i8.88 79 1.14 4.56 23

II. Technical servicesONCAD management 0.69 2.75 11 0.44 1.75 64SODEVA cooperative

services o.63 2.52 10 0.18 0.70 28

Total 1.32 5.27 21 0.62 2.45 46

III. Grand total 6.04 24.15 100 1.76 7.01 29

_/ Percent of total project cost.2/ Percent of item cost.

(a) Costs for implements and draft animals are based on pricesprevailing in Senegal at the end of May 1968.3/ Theforeign exchange component of the implements assumes theywould be procured from SISCOIKA;

(b) Cost of fertilizer covers the i-ncremental requirements ofBNDS to finance fertilizer distributed under the project(para 3.19);

(c) Cost of ONCAD management services is in accordance withpara 3.21;

(d) Cost of SODEVA cooperative services covers one-half of thecost of the extension service in the project area, exclusiveof counterpart training (paras 3.22 and 4.09).

In late June the Government decided to raise legal minimum salariesin the private sector by 25%. This is expected to have some impacton the costs of industrial production within Senegal, includingfarm implements and fertilizer supplied for this project. It istoo early yet to determine the precise effect of this on the project.

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Project Finance

3.24 Sources of funds to finance the project would be as follows:

CFhF US$Expressed in billion million %

Farmers' contribution 0.97 3.88 16BMDS resources 2.00 8.00 34Government funds 0.69 2.77 11Bank/IDA loan/credit 2.36 9.50 39

Total 6.04 24.15 100

(a) Farmers' contribution would cover the cost of the drafthorses and donkeys;

(b) BMDS resources of CFAF 2.00 billion would cover 25% of thecost of the implements, the full cost of the oxen, and theincremental fertilizer credit. The proposed financing ofBNDS is discussed in para 4.04;

(c) Funds for which Government would be directly responsiblefor providing, CFAF 0.69 billion, are for the balance ofthe cost of ONCAD management, and the SODEVA cooperativeservices not provided through the loan/credit.

CCC' has indicated that it is prepared to contribute about CFAF 0.45 billion(US,: 1.8 million) by way of long-term loan towards the total cost of theextension service in the project area, presently estimated at aboutCFAF 1.47 billion (Annex 2, para 12), so that with CFAF 0.18 billion fromthe loan/credit, Government would be responsible for providing the balanceof about CFAF 0.84 billion. Government would also be responsible for pro-viding finance for part of BNDS resources and for the fertilizer subsidy,towards which FED has agreed to contribute CFAF 0.51 billion in 1969/70 andindicated it may consider contributing in subsequent years, until the subsidyis phased out.

3.25 The Bank/IDA loan/credit of CFAF 2.38 billion (Us$ 9.5 million)would be made up as follows:

CFAF US$ExDressed in billion million %

Implements 1.73 6.92 73ONCAD management services 0.38 1.50 16ONCAD counterpart training 0.06 0.25 3SODEVA cooperative services 0.18 0.70 7Unallocated 0.03 0.13 1

Total 2.38 9.50 100

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(a) The allocation for implements would cover 75% of their costup to a maximum of US$ 6.92 million, aind would be on-lentby Government to BI\DS at 3.5% for 14 years, including agrace period of four years (para 4.03);

(b) The US. 1.50 million for O0NCAD management services wouldcover the actual foreign exchange component of the cost ofthese services, which has been tentatively estimated at 60%of their total cost (para 3.21);

(c) The sum of USp 0.25 million for counterpart training withinONCAD would cover the total cost of such training;

(d) The US$ 0.70 million for SODEVA cooperative services wouldcover the foreign exchange component of these services,estimated at 60% of half the total cost of expatriatepersonnel employed by SODEVA (Annex 2, para 12).

Procurement and Disbursement

3.26 Procurement of the implements required under the project would beon the basis of local competitive bidding, as set out in para 3.16. Disburse-ment of loan/credit funds for implements would be on the basis of 75% of sumsadvanced by BMDS to ONCAD for implements purchased, up to a total of US$ 6.92million. Due to planning requirements, ONCAD had to place orders for someof the implements and carts needed for the 1969/70 planting season before itwas clear that Bank/IDA financing could be forthcoming. Some of these wereplaced with SISCOMA, without competitive bidding. They amount to aboutUSr, 760,000, and during negotiations it was agreed that this sum would bemet out of the Bank/IDA loan/credit.

3.27 Disbursement of loan/credit funds for ONCAD management serviceswould be limited to the actual foreign exchange cost of these services. Dis-bursement would be in accordance with procedures to be established duringnegotiation of the managemenrt contract. Disbursement procedures for Bank/IDAfunds for ONChD counterpart training would also be agreed during negotiationof the contract.

3.28 Disbursement of loan/credit funds for SODEVA cooperative serviceswould be on the basis of 30% of the total cost of expatriate personnel second-ed to, or working directly for, SODEVA. The estimate of their total cost isCFAF 628 million (USq 2.5 million) (Annex 2, para 12).

3.29 In view of the protracted period between first appraisal and nego-tiation of the loan/credit, Government asked for some retroactive financingto be considered. During negotiations, it was agreed that retroactive financ-ing back to October 1, 1968 would be accepted. The total sum is not expectedto exceed US$ 1 million, and would consist of the US$ 760,000 for implementsordered from SISCOMIA (para 3.26), about US$ 150,000 for carts already orderedfor the 1968/69 planting season from SISCOIA under Government bidding pro-cedures, and about US$ 50,000 for SODEVA expatriate staff to the end of 1968.

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3.30 On the basis of the above, disbursement of project funds overthe project period would be approximately as follows:

US$ million 1969/70 1970/71 1971/72 Total

Farmers' contribution 1.40 1.28 1.20 3.88BNDS resources 2.40 2.75 2.85 8.00Governm.ent funds 1.04 0.92 0.81 2.77Bank/IDA funds 3.36 3.14 3.00 9.50

Total 8.20 8.09 7.86 24.15

The TDA credit would be disbursed before the Bank loan, and would be ex-hausted sometime late in 1970/71.

IV. ORGANIZATION AND 1ANAGEYENT

Project Coordination

4.01 The successful execution of the project depends to a very largeextent upon close cooperation between BNDS, ONCAD, SODEVA and the Govern-ment, and upon a high standard of management of the three institutions.Cooperaticn between ENDS, SODEVA and the Government is at present very good,but has no formal basis. During negotiations, Government agreed that aPi-oject Coordinating Committee would be set up by Presidential Decree withthe Secretary of the Groundnut Committee, the Directors General of BNDS,ONCAD, SODEVA, a representative each of the Ministries of Finance, ofPlanning and Industry, and of Rural Development as members, and with asenior official nominated by the Nfinister of Planning and Industry asChairman. The Committee would ensure the close coordination and coopera-tion of the member organizations and Government in the execution of theproject through procedures which would be laid down in the Decree. Theprecise method of procuring and financing farm implements would be set outin an addendum to the Decree. A summary of the main provisions of theDecree is at Annex 7.

BN_DS

4.02 BNDS (Annex 3) was formed in 1964 by the fusion of two existingcredit institutions, and is responsible for providing financial and tech-nical help for all projects concerned with the social and economic develop-ment of Senegal. In practice it has concentrated on agricultural andindustrial development, and the high level of other credit it inherited hasbeen steadily reduced. Its fixed capital is CFAF 1.36 billion, of whichGovernment owns 56%, CCCE 28%, and BCEA0!/ 7%. Its total assets are nowof the order of CFAF 12 billion. Since its inception it has followed aprudent financial policy. It has consistently been profitable, and hasbuilt up adequate reserves, which at September 30, 1967 were equivalent to

1/ Banque Centrale des Etats de l'Afrique de l'Ouest, the Central Bankof the West African Monetary Union.

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more than one and a half times its bad and douibtful debts. It is competent-

ly directed, and its staff, all of whom are Senegalese, are generally well

trained and efficient. Based on its past per-ormance, BNDS is considered

to be a suitable institution to administer the credits to cooperatives under

the project.

4.03 BITS makes credit and loans available for most purposes at 5% perannum short-term and 5.5% medium and long-term. Most of its long-term and

rnedium-term loan capital (mainly from BCEAO and CCCE) is borrowed at 3.5%,which gives it a margin of 1.5 to 2.0%. Its accounts demonstrate that on

this margin it has in the past been able to meet its administrative expen-

ses and accumulate adequate reserves. Accordingly, it is proposed that the

Bank/IDA loan/credit for implements would be on-lent by Governmrent to BNDS

at 3.5% (para 3.25), and that for the time being BNDS would continue to

make loans at its current interest rates. It would be a condition of

effectiveness of the loan/credit that an agreement covering the terms and

conditions of on-lending by Government to BNDS, and satisfactory to Bank/

IDA, had been signed.

4.04 The CFAF 1.73 billion (US$ 6.92 million) of the loan/credit on-

lent to BNDS would cover BI\IS financial requirements for medium-term agri-

cultural credit during the project period (Annex 4, para 26). BNDS would

be able to meet the balance of the total project short-term financial re-

quirements for fertilizer in the project area through its present discount-

ing facilities with BCEAO and the Treasury. However, it has other financial

conmitments, including provision of funds for the marketing of the groundnut

crop each year, and for long-term investment in industry. Accordingly,

during negottations assurances were obtained that Government would undertake

that BNDS was provided with adequate resources for all purposes on terms and

conditions satisfactory to Bank/IDA, and that its constitution would not be

altered without prior Bank/IDA approval. BNDS in its turn would undertake

to continue to charge interest on all its loans and credits such as to

enable it to cover all its operating expenses, to maintain adequate provi-

sions for bad and doubtful debts and to maintain adequate reserves.

4.05 Auditing is at present carried out by one appointee each of Gov-

ernment and CCCi. This arrangement is not acceptable to Bank/IDA, and pro-

vision for independent annual audits from 1968 onwards was confirmed during

negotiations. Arrangements are in hand for a French accounting firm,

Fiduciaire France-Afrique-Senegal, with offices in Dakar, to make the audit

for fiscal 1967 and 1968. No other suitably qualified firms operate in

Senegal.

Extension Services

4.06 Until July 1968, SATEC provided the extension service in the pro-

ject area under a 1964 agreement with the Government. Its operations are

described in more detail in Annex 2. It has been responsible for training

a cadre of competent extension workers, together with some of the necessary

supporting staff of senior officers. Total cost of the service for the

three-year period 1965 through 1967 was CFAF 1.2 billion (US$ 4.8 million).

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Extension workers in the field now number 700, witli a further 85 seniors, ofwhom 36 are expatriates. The numbers of expatriates have been declining, butsome difficulty has been experienced in finding suitable Senegalese to takeover the top positions. The extension workers are recruited from litexatesin the villages, and given training in simple techniques which they pass onto the farmers. Each worker is responsible for an average of about 230 farm-ers. They now enjoy the confidence of the farmers and have contributed tothe improvement in farming techniques achieved to date. The SATEC operationhas been well organized and managed. The simplicity of its technical programhas enabled inexperienced villagers to be readily trained into field workersand to carry out their clearly defined part of the operation. A very goodesprit de corps has already been built up.

4.07 Under its agreement with the Government, SATEC undertook to providean extension service in the project area with the objectives of increasinggroundnut production, diversifying production (particularly by promoting in-creased millet production), promoting more intensive cultivation by the intro-duction of draft animals and more modern farming methods, and forming anextension service outside of the existing public service capable of contin-uing the work after it leaves. Its impact on increased groundnut productionhas not been as great as was hoped, partly because the prospects of a sig-nificant increase in production are limited in about half the area by naturalconditions of soil and rainfall. Furthermore, the ready availability ofadditional land for cultivation and the limitations on the timely availabilit:rof farm inputs have reduced the potentialities of this relatively intensiveextension service (para 3.21). Additionally, about half the time of itsstaff has been spent on providing a service for the cooperatives (para 3.22),a role not usually associated with an extension service.

4.08 In order to transform the extension service into a wholly Senegal-ese institution, SODEVA was set up to take over the SATEC operations in July1968 (Annex 2, part C). All the Senegalese staff have been transferred toSODEVA on the same terms and conditions of employment. SATEC, under an agree-ment with SODEVA, will provide management services and expatriate personnelduring the first three years of SODEVA's existence. The SATEC mission chiefhas been appointed Director General of SODEVA up to June 30, 1969, when a

Senegalese will take over. The number of expatriates will be reduced from42 in 1968/69 to eight in 1970/71. Assurances were obtained during negotia-tions that the constitution of SODEVA would not be amended without priorBank/IDA approval.

4.09 Combined cost of the whole of the SATEC/SODEVA operation in theproject area is estimated to be of the order of CFAF 1.47 billion (uts 5.9million) over the project period, including counterpart training (CFAF 0.21billion, or US.$ 0.85 million). The cost of expatriates would average 43% ofthis total, but would diminish rapidly from 52% of the cost in the first yearto 27% in the third and would be expected to decline further in subsequentyears. The cost to the project of the SATEC/SODEVA services on behalf of thecooperatives (CFAF 0.63 billion, or US$ 2.52 million) covers half the cost ofstaff (Senegalese and expatriate) and overhead expenses. Of this, expatriatestaff accounts for CFAF 0.31 billion (US$ 1.24 million).

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ONCAD

4.10 ONCAD's main duties in the project area are to provide a serviceto cooperatives, including the provision of farm inputs, the primary mar-keting of their groundnuts, management of the seed stockpile, and technicalservices. ONCAD was formed in October 1966 to succeed regional farmers'organizations, but the responsibility for farm inputs and for primary mar-keting was not added until a year later. It was clear from the start thata drastic reorganization was necessary before ONCAD could operate efficient-ly. As a prerequisite to reorganization, Government appointed SATEC toreport on its organization and functioning. The main findings of the reportare:

(a) help to cooperatives is minimal;(b) management of the seed stockpile is unsatisfactory;(c) it is overstaffed and inefficiently organized;(d) accounts are unsatisfactory and in arrears; and(e) as a result, operating costs are abnormally high.

4.11 The reorganization proposals of SATEC are in three parts, con-cerned with overall policy, internal organization and operation, and staf-fing policy. As to overall policy, ONCAD should be prepared to divestitself of those operations which could be done more efficiently by privateenterprise, in particular by selling off its transport fleet, thereby re-ducing its staff from the present level of about 1,600 to below 1,000, and

eliminating the greatest single loss element in its operations. As toor,,anization and operation, management should be in two parts, one concernedwith the commercial aspects of providing farm inputs and marketing services,

and the other with providing technical services to cooperatives (instructionin cooperative methods, bookkeeping, etc.). The commercial services should

be reorganized with some 20 commercial centers in the groundnut basin con-

trolling the many village depots. A small transportation bureau in Dakar

should be set up to control the movement of transport and to use it effi-

ciently. Of great importance to the project, the seed stockpile should bereorganized to include technical supervision by a technical authority.Revision of the whole of the administrative, accounting and executive serv-

ices is also recommended. As to staffing policy, the more qualified of

the remaining staff should be retrained and the rest dismissed, which would

leave no more than 500 to 600 personnel on completion of the retrainingprogram. Government is in general agreement with the main findings of theSAThC review but has reservations on the advisability of transferring thetransport fleet to private enterprise.

4.12 The Bank and IDA are cooperating with the Government to find asuitable firm to help manage ONCAD, and participation in the projectwould be conditional on the Government appointing a firm acceptable to,and on terms and conditions approved by, Bank/IDA. It would be a conditionof effectiveness of the loan/credit that the chosen firm had been engaged.Invitations to study the problems and make proposals have been sent out toselected firms, and it is anticipated that the choice of consultants willbe made in January/February 1969 (para 3.21). The financing of ONCAD wouldbe one of the subjects to be considered and reported upon by the consul-

tants. Assurances have been obtained during negotiations that ONCAD's con-

stitution would not be altered or amended during the disbursement periodwithout prior Bank/IDA approval.

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OCA_

14.13 ONC0D. has the monopoly for buyring groundnuts from the cooperatives

and is responsible for their bul' sale to OCAS. OCAS (Annex 5), which was

formed on October 1, 1967, is responsible for the bulk marketing of ground-

nuts, as well as the importation of white rice for consumption. Its pred-

ecessor had the additional responsibility of providing farm inputs, now

transferred to ONCAD. However, it has relatively greater responsibilities

for marketing groundnuts, having now to sell in world markets instead of in

the protected French market. As newly constituted and with two advisors to

advise the Director General on financial and commercial affairs, it is cap-

able of marketing the crop satisfactorily.

V. PRODUCTION, NARn-TS AMB FARMERS' BENEFITS

Production

5.01 Total production of groundnuts in the project area is estimated to

rise from 0.82 million tons in 1968/69 to 1.21 million in 1971/72, an in-

crease of almost 50, over the project period, which would be accounted for

by approximately equal increases in area and in average yield. After allow-

ing for seed requirements, local consumption and losses in storage, about

0.99 million tons would be available for marketing in 1971/72 compared with

an estimated 0.67 million tons in 1968/S9, an increase of over 40%. Total

production of millet is estimated to rise from 0.40 million tons in 1968/69

to 00 49 million in 1971/72, an increase of almost one-quarter over the pro-

ject period. This would be accounted for by an increase in area of about

16% and an increase in average yield of 55.

iMarkets and Marketing

5.02 The prospects of the international groundnut market are discussed

in Annex 5 in more detail. The projections indicate a general increase in

the grotAh rate of output in both developing and developed countries, and a

very moderate growth in imports. The possible increase in consumption in

developing countries would, in the next few years, mainly come from domestic

and subsistence production and would thus have little impact on the world

market. In the short term prices are not likely to be affected substantially

and present forecasts indicate a cif (European ports) export price by 1970/71

of about CFAF 40,300 per ton, as compared wzith an average of CFAF 43,500 for

1967 and CFAF 40,500 for the first half of 1968. The 1967 average masks a

year of declining prices, from CFAF 46,ooo per ton at the beginning, to

CFAF 37,500 at the end.

5.03 Past policy for the producer price for groundnuts in Senegal has

been dependent on the preferential market price in France, the size of the

fertilizer subsi&-r and the requirements for Government revenue. Although

the preferential market price has been abolished, EEC is giving some price

support through 1969/70 (Alxnnex 5, para 10), but for 1970/71 onwards Senegal

will be entirely dependent upon world market prices for its earnings from

groundnuts. Government declares the price at which ONCAD will buy ground-

nuts from the cooperatives before the harvest each year, and reduced the

- 21 -

average producer price (which had been constant since 196L) by 15% toC'FAf 17.8 per kg for '967/68. This reduction was not sufficient to coverthe entire fall in export earnings, and consequently there was some reduc-tion in Goverinment income during that 7year. For the project years suchincome wgould, however, show a steady improvement, from an estimated CFAF 4.1billion in 1968/69 to CFAF 5.1 billion in 1971/72. In the project estimatesa reduction in the average producer price in the project area from CFAF 17.7per kg in 1968/69 to about OFAF 16.5 in 1971/72 has been anticipated, atwhich prices the incentive to the farmers would remain adequate. Govern-ment revenue would rise (as above), while the cif export price would de-cline from CFAF 41.9 per kg to 40.3.

5.04 A little over half the groundnuts marketed is processed locallyby the four oil millers. A recent agreement has been signed between themand the Government setting out the method for the annual bidding for ton-nages to be processed and the prices to be paid. The price is related tothe world market price over each ten-day period in which deliveries aremade. After a few initial difficulties it is now working satisfactorily.GCAS sells the balance of the crop on world markets, the bulk going toEurope. An office in Paris is maintained to ensure adequate liaison in theEuropean markhets.

5.05 Surplus millet is marketed locally by the farmers themselves.The amount available for markceting would rise from 0.15 million tons in1968/69 to 0.23 million in 1971/72. In the project estimates, consunptionper head of the rural population has been assessed at 250 kg per annum,and incomes calculated after making this deduction.

Farmer Incentives

5.06 The agricultural and financial estimates at farm level have beenmade on thle basis of the totals for each of the three zones. It is notpracticable to work on the basis of an average individual farm unit, sincein none of the zones does the number of implements or draft animals reachunity per farmer, and there are no reliable data available to show thedifference between farms using hand methods of cultivation and farms usingdraft animals and implements in the various zones.

5.07 Total cost of farm inputs and farm incomes has been estimated forthe three zones ard for the project as a whole (Annex 6, Tables 2 through 5)and average farmers' incomes have been summarized (Annex 6, Table 7).These include net income per farmer after deducting cost of farm inputs,and the figures bring out the great difference in incomes between the SouthZone and the other two, incomes in the former being about twice those inthe latter. In terms of suitabilityfr groundnut production, the North andCenter Zones are relatively marginal when compared with the South Zone andwith Senegal Oriental and the Casamance (Annex 1, para 9). 68% of the pro-ject farmers live in these marginal areas. However, annual net incomes ineach of the three zones would show a steady increase over the project per-iod in spite of the decline in groundnut buying prices, the overall averagebeing from CFAF 75,COO in 1968/69 to CFAF 92,000 in 1971/72. Annual incre-mental increases in gross income and in farm inputs are included in thetables, and show that at the fertilizer density rates and subsidies

- 22 -

proposed, the incentives to farmers to continue to use fertilizer would bequite adequate in the Center and South 7ones, and just adequate in the North.The tables do not show incentives for millet separately, but from calcula-tions made these w.ould be adequate. In accordance with these estimates,average overall increase in net incomes to farmers wolild be over 20% overthe project period. lTlis is expected to provide sufficient incentives to

farmers to participate actively in the project.

VI. BTLTE'ITS Al) JUSTIFICATIONT

6.01 As in most agricultural projects which rely for a large part oftheir success upon credit to and participation by small farmers, a quantita-tive assessment of the overall benefits cannot be made with accuracy, butthe main benefit would be the sustained increase in production of groundnutsand millet during the project period. This would produce increases in farm-ers' incomes and in Government revenue during a period of loss of privileged

markets and declining price support for groundnuts. Other important benefitswould be the continued increase in the number of draft farm implements in

use, the continued improvement in farming techniques, and an overdue improve-ment in the quality of service given to cooperatives by ONCAD, which shouldin due course lead to a strengthening of the cooperatives themselves. Theanticipated improvement in thle management of the groundnut seed stockpileshould ultimately contribute to higher yields through improved seeds.

k6.02 The increase in output of groundnuts from the project should offsetthe decrease in export earnings arising from the declining support of theexport price by EEC. The increase in the amount of millet marketed locallyshould strengthen its availabili-ty in the rural areas, where most of the

demand arises, and may avoid increases in imports of wheat and rice.

6.03 Thatever method is used to calculate the economic rate of returnon the project, the rate itself is bound to be high, since at the presentstage of development of farming techniques in the project area the simpleadditional inputs involved produce incremental outputs of relatively highvalue. The economic rate of return, based on the cost of the extension serv-ice, management services, other capital costs of the production improvementprogram, incremental cost of farm inputs for the three project years and the

incremental benefit of the increased production arising therefrom, would bevery high, since a net benefit would be shown for each year except the first.A more realistic method would be to consider the overall impact of the pro-duction improvement program from 1964 onwards and to include the full known

costs up to 1971/72, including those of this project. On this basis, taking

incremental groundnut production at fob prices, including the costs of trans-portation, marketing and the extension and management services, deductingthe millet consumed by the rural population as being the opportunity cost oflabor, and calculating over a life of 10 years, the economic rate of returnwould be about 25% (Annex 8). Assuming the incremental value of output forthe years 1969/70 through 1974/75 was reduced by 10%, the rate of returnwould be about 20%/. Assuming this reduction in value of output was coupledwith an increase in cost of inputs of 10%o over the same years, the rate ofreturn would be about 14h.

- 23 -

VII. COITCLUSIONS ANt RECOTENDATIONS

7.01 During negotiations the followlng agreements, assurances and

understandings were arrived at between the Bank, IDA and the Government:

(a) Uniform accounting procedures for the cooperatives acceptableto Bank/IDA would be introduced, through ONCAD, before the

end of 1973 (para 3.07);(b) ONCAD would procure farm implements through local competitive

bidding procedures, and Government would make available anynecessary import licenses and foreign exchange permits(para 3.16);

(c) A Project Coordinating Committee would be set up by Presiden-

tial Decree (para 4.01);(d) BNDS would be provided with adequate financial resources for

all purposes on terms and conditions satisfactory to Bank/IDA,and its constitution would not be altered without priorBank/IDA approval (para 4.04);

(e) BEDS would undertake to continue to charge interest on allits loans and credits such as to enable it to cover all its

operating expenses, to maintain adequate provisions for bad

and doubtful debts and to maintain adequate reserves(para 4.04);

(f) Annual audits of EIDS' accounts would be made by an inde-

pendent firm of auditors (para 4.05); and

(g) The constitutions of SODEVA and ONCAD would not be altered

without prior Bank/IDA; approval (paras 4.08 and 4.12).

7.02 It would be a condition of effectiveness of the loan/credit that:

(a) an agreement between the Government and BNDS covering the

on-lend ing of the loan/credit, on terms and conditions satis-factory to Bank/IDA, had been signed (para 4.03); and

(b) the firm of consultants to assist in the management of ONCAD

had been engaged, on terms and conditions satisfactory to

LIank/IDA (para 4.12).

7.03 The project is technically sound and economically justified. It

wou' d be suitable for a Bank loan o. US$ 3.5 million and an IDA credit of

USC 6.0 million.

December 24, 1968

AIMEX 1

AGRICULTURAL BACKGROU1

Main Crops

1. Agriculture is principally a two-crop culture. Groundnuts aregrown as a cash crop in rotation with millet as a subsistence cereal. Theonly other crops of any importance are rice and cassava, although smallquantities of maize, cowpeas, sweet potatoes and other vegetables are alsogrown. Table 1(C) gives details of production, area and yields of theprincipal crops (other than groundnuts) from 1963/64 to 1966/67.

Groundnuts

2. Details of the production of groundnuts, including areas undercultivation, production, quantity marketed and yields, are given in Table1(A). Annual averages over four-year periods have been used for 1947through 1963 ao minimize the effect of the cyclical drought, and are shownalso for the period 1963-1967. These figures show that the area under cul-tivation is now over one million ha, and has increased by over 60% since1947-1951. Annual production reached one million tons in 1965/66, and hasalmost doubled since 1947-195i. The lower figures for 1966/67 reflect theeffect of the drought during that year. Table 1(B) gives a breakdown ofgroundnut production by administrative regions for the year 1965/66 andshows that over four-fifths of the crop comes from the three contiguousregions of Sine Saloum, Thies and Diourbel, which are known collectively asthe "'groundnut basin". In these regions soil preparation for groundnutplaniting usually starts after the second rains in June; sowing and fertil-izing is done at the end of June; two or three weedings are made in Julyand August; and the crop is harvested in November. Harvesting is doneafter the last rain of the season, if possible, because of the susceptibil-ity of the crop to a fungus which produces toxins harmful to humans andanimals.

Millet

3. Estimates of recent annual production of mlillet are given inTable 1(C). Although accurate figures are not available, annual producticnis now over half a million metric tons, and average yields are now about500 kg/ha. This crop is grown mainly for consumption by the farmers them-selves, but increasing quantities are finding their way into the local mar-kets. The demand in the larger towns is relatively small owing to theavailability of more sophisticated alternatives, particularly rice andwjhe at.

Land Tenure

h. In 1964 a Law was enacted to improve land tenure. Land was di-vided into public and registered land (mainly in the towns) and nationalland (mainly in the rural areas). National land was further subdividedinto various zones for specific purposes, and the balance, by far the larg-est in area (called "zones des terroirs"), was classified for exploitationby the rural population through rural councils, but under the ultimate

A'1:JEX 1Page 2

control of the State. Land titles in thie accepted sense do not exist, buteach village has a committee of elders which allocates the land and has theright to reallocate any which is not being farmed or is being mismanaged.The traditional farm unit is the "carre" which is a group of farms worked bymembers of the same family, but its significance is diminishing and theindividual farm is now the more important unit. Except in the most thicklypopulated area in Diourbel (Map 1), most carres are separated from theirneighbors by belts of idle land covered with natural vegetation. In thepast there has been some reluctance to use any part of these belts for agri-cultural purposes, mainly owing to doubts about ownership and possible dis-putes with adjacent carres, but there is evidence that the 1964 Law hasimproved the position. The increasing use of farm implements and the demandto farm more land which arises therefrom necessitates the use of furtherareas from these belts for agricultural production.

Cooperatives

5. The cooperative movement has for some time past played a signifi-cant role in the development of agriculture. Cooperatives were first organ-ized by the colonial administration at the beginning of the century. Sinceindependence the Government has attempted to strengthen their influence amongthe rural poopulation, particularly by increasing their marketing responsibil-ities and by the expansion of rural credit through them. .VJhen first formeda cooperative is given a trial period of two years during which it is eligi-ble for short-term credit only; thereafter it can also obtain medium-termcredit, up to five years. Five functional types of cooperatives are inexistence, including fishing and livestock, but the only type of major im-portance is the groundnut cooperative which was primarily organized to handlethe marketing of the crop, but whlch now has an equally important role asthe channel for agricultural credit. There are at present some 1,500 socie-ties throughout the country.

6. A study is at present under way to consider the possibilities ofrehabilitating and regrouping the cooperative movement so that it can play amore active part in the agricultural development program. The major obstacleto any regrouping is that individual cooperatives would then tend to losetheir village and family character, which is at present their main strength,particularly over security for credit.

Fesearch

7. Agricultural research is carried out by several institutions, ofwhich the most important is the Institut cis Recherches Agronomiques Tropi-cales et des Cultures Vivrieres (IPAT), which deals mainly with genetics andcultural improvement of crops (soil and water management, fertilizers, cropprotection, etc.). It does not in general concern itself with crops coveredby the four other more specialized French research institutes, which dealwith oil producing crops, animal protection and veterinary medicine, cotton,sisal and tropical fruits. IRAT is a French institute, whose work in Senegalis carried out through the National Agricultural Research Center at Bambey,where groundnut research is concentrated. The Center has six regional re-search stations, where work on specific problems is done and where demonstra-tion fields have been developed.

ANIEX 1Page 3

Development

8. The first four-year Development Plan (1961-65) aimed at a growth

rate of 8' per year, 6% in agricultural production and 13% in industry and

mining. In practice the rate was just over 2%, although agriculture in-

creased by just over 4%. Under the Plan agriculture was to receive 13% of

the total expenditure. One of its major aims was to enlarge the Govern-

ment's role in the economy, by changing the structure of the rural market-

ing system for traditional agriculture through displacement of privateenterprise. This has largely been achieved, but with very little net gain

in output, and the difficulties which arose in the early stages have not

yet all been overcome. These include problems of management of the organi-

zations set up to put the Plan into effect.

9. Under the Second Plan (1965-69) 24% of the total expenditure has

been allocated to agriculture. The main effort is towards diversifying

production so as to lessen as far as possible the present dependence on

groundnuts for most of Senegal's foreign exchange earnings. Diversifica-

tion plans already under way cover both subsistence and cash crops, includ-

ing rice, sugar, cotton, tobacco, and edible groundnuts. However, signifi-

cant increases in production of these crops depend upon further research,

experimentation and the development of irrigation, so that there are no

short-term prospects of a useful impact on the econoiy from them. Crop

diversification must, therefore, be considered as a longer-term measure.

In the short-term, an expansion of agricultural production must largely

depend upon increased production of groundnuts and subsistence crops, par-

ticularly millet. The Casamance and certain parts of Senegal Oriental

wouid appear to offer the best prospects for further expansion in the near

future, and the basin of the Senegal River (which is contiguous with

Miauritania and Mali) in the longer term. The Casamance and Oriental togeth-

er produce at present about 15% of total groundnut crops, with yields equal

to those in Sine Saloum and Thies, but with greater potential for develop-

ment.

Production Inprovement Program

10. Since 1965 EEC has been financing a five-year production improve-

ment program through a grant from FED. The program's basic objectives are

to minimize losses in foreign exchange earnings arising from the elimina-

tion of the privileged market in France for groundnuts, and to minimize

losses in income of the farmers due to the lowered buying price for ground-

nuts necessitated by the loss of that privileged market. It was proposed

to achieve this by increasing production of groundnuts by 25% by 1970/71,

by increasing the output of millet and by diversifying production. The

main effort has been concentrated in the groundnut basin, with the emphasis

on providing an efficient and intensive extension service and on providing

fertilizer on credit at subsidized prices, both to encourage its use and

to familiarize the farmers with its potentialities in increasing yields.

In practice the extension service has also continued to encourage the use

of implements drawn by draft animals to replace the traditional hand meth-

ods of farming. These have been provided on credit, although funds for

this purpose were not included in the program. The program also covered

hNIC, X 1Page 4

improvements to the processing facilities at village and district levels,and the Drovision of further storage facilities. Funds were also allocatedfor seed improvement, soil conservation, to the rural expansion centers (inthe first two years of the program), and to centers for training draft oxen.The program has been reasonably successful in that there has been an increasein the use of fertilizer and implements as well as some improvement in farm-ing techniques, but it is unlikely that production in 1970/71 will reach thetarget of a 255% increase over 1965/66, which would amount to 1.46 milliontons. It might, howzever, reach 1.20 million tons, which would be a 25% in-crease over the annual average production for the four years 1962/63 through1965/66.

11. Funds allocated for the program total CFAF 4.9 billion (US$ 19.6million) as follows:

CF1111 rr:.L1,ion 1965 1966 1967 1963 1969 Total

Extens%von serv1:ie 376 392 446 235 - 1.)49Fertilizer subsidy 217 300 350 307 509 1,683Processing facilities -- -- 7 945 -- 952Stcrage facilities -- -- 67 69 _ 136Seed improvemenaC 50 47 85 52 42 276Sri ccistrvatIcn 14 4 5 70 129RhUral expEasioi1 centers -- -- 200 -- -- 200Training c.enters -- 12 36 10 20 78

Tcte, 603 751 1,205 1,663 601 4?-9O3

Finance for the extension service was due to finish at the end of October1967, but was extende-. to Ju1ne 30, 1968 by using savi:?gs from other parts oftha -gmam. O1 'lle ;botal su-m provided, 29% is for the extmension serviceai, 3751 for fertiH?'z-r subsi6y.

ANNE: 1Table 1

(A) GROUNDNUT PRODUCTION

Area Production Yield Marie tedYear ('000 ha) (2000 tons) (ke/ha) ('000 tona) (%) (1)

1947 - 1951 (Av) 672 561 835 414s 741951 - 1955 (Av) 687 552 804 458 831955 - 1959 (Av) 815 759 931 675 891959 - 1963 (Av) 981 908 926 787 871963/64 1,084) 952) 878) 782 821964/65 1,055)1,088(Av) 1,019)l,022(Av) 966)940 (Av) 839 821965/66 1,114) 1,168) 1,048 984 841966/67 1,100) 950) 864 760 801967/68 (2) 1,150 1,060 953 870 82

(1): Percent of total production narketed(2): Estimated and provisiosl.Source: IBRD and Ministry of Rural Development

(B) GROUNDNUT PRODUCTION BY AI2NISTRATIVE REGIONS1965/66

Area Production Yield Marie tadRegion ('000 ha) ('000 tons) (kg/ha) ('000 tons) (%) (2)

Sine Saloum (1) 499 555 1,112 467 47Thies (1) 146 150 1,027 128 13Diourbel (1) 285 277 972 242 25

Subtotal 930 982 1,056 837 85

River 27 16 589 4 -

Oriental 35 36 1,051 34 4Casamance 118 132 1,116 108 11Cap-Vert 4 2 500 1 -

Total 1,114 1,168 1,048 984 100

(1): Areas in which the extension service covers 00,000 ha approximately(2): Percent of total nnrketedSources: BCUO and Ministry a Rural Development

(C) MLIN AGRICULTURAL CROPS(other than groundnuta)

1963/64 1964/65 1965/66 1966/67

(i) Production ('000 tons)Millst 478 532 554 423Rice (piLddy) 106 110 122 125Cowpeas 14 17 14 16Cassava 152 156 150 241Maize 27 37 40 40Market gardening 31 32 32 32

Total 808 884 912 877

(ii) Cultivated area ('000 ha)Millet 959 1,010 1,069 -

Rice (paddy) 75 86 82 -

Cowpeas 51 56 53 -

Cassava 34 33 38 -

Maize 33 47 54 -

Marie t gardening 3 3 3 -

Total 1,155 1,235 1,299 -

(iii ) Yielda (kg/ha)millet 490 530 520 -

Rice (paddy) 1,410 1,280 1,490 -

Covweas 270 300 260 -

Cassava 4,4701 4,730 3,950 -

Maize 820 790 740 -

Source: IBRD and Ministry of Rural Development

ANNEX 2

EXTENSION SERVICES

A. Background

1. The provision of extension services is nominally the responsibil-ity of the Ministry of Rural Development, but the only effective servicesare those provided until recently by SATEC in the groundnut basin, and by

CFDT in Senegal Oriental on a very small scale for cotton producers. The

"Centers of Rural Expansion" operated by Government, which nominally pro-

vide extension services in agriculture, medicine, veterinary and other rural

social work are relatively ineffective. In 1963, when investigating the

introduction of the production improvement program, Government considered

that nothing effective could be done without the provision of an extension

service capable of meeting the needs of the rural population in the ground-

nut basin. This required the building up of an effective organization in

the shortest possible time, and SATEC was entrusted with this work. As

from July 1968, a new Senegalese organization, Societe de Developpement et

de Vulgarisation Agricole (SODEVA), has taken over responsibility from

SATEC for this service in the groundnut basin (para 10 below).

B. SATEC

Constitution and Organization

2. The Societe d'Aide Technique et de Cooperation (SATEC) was formed

in France in 1956 as a state organization responsible to the French Minis-

tries of Finance and of Overseas Departments and Territories. Its objec-

tives are to give assistance (both in France and overseas) for the develop-

ment of production, in particular for the small-scale farmers and fishermen

and for small-scale industries. Assistance is generally in the form of

technical aid, particularly by supporting specialist organizations such as

cooperative societies formed for the production and marketing of agricul-

tural produce. It is also empowered to make social and economic studies.

SATEC was set up with a capital of 12 million French francs (US$ 2.4 mil-

lion). Its head office is in Paris. It is required to conform to the

French laws for private enterprises. It is administered by an Administra-

tive Council of 22 members, representing the various ministries and organi-

zations concerned with home and overseas development. Most of the dutiesof the Council have been delegated to two executive committees of nine

members each, one responsible for activities within France and the other

for activities overseas.

3. In the field of agriculture SATEC has three projects in France,

has projects in five territories outside Africa, and is also working in

Senegal and five other African countries. Projects include rural land re-

form, improvement of smallholder groundnuts, bananas, sugar beet and rice,

and a number of agricultural studies. In the industrial field it is working

in five overseas countries. Its total permanent staff is about 4OO, of

which about three-fifths are overseas. Local staff overseas number over

A10EX 2Page 2

1,600, of which about one-sixth are expatriates under contract. Total ex-penditure by SATEC in 1967 was of the order of 46 million French francs(US' 9.3 million), of which a little over half came from public funds inFrance, one-quarter from FED, alnost 5,% from national budgets in the coun-tries in which it operates, and the balance from other sources.

Senegal Agreement

4. The terms and conditions under which SATEC has been operating inSenegal were covered by an agreem,ent between it and the Government datedSeptember 1964, under which SATEC agreed to provide an extension servicewith the following objectives:

(a) to increase the production of groundnuts in the areas inwhich it operates by 25% over a three-year period;

(b) to help diversify production, particularly by promotingincreased production of millet;

(c) to promote more intensive cultivation by the introductionof more modern methods and by integration of livestockwith agriculture where possible; and

(d) to form, outside of the existing public service, anextension service capable of continuing the work afterit leaves.

5. The three main regions in which SATEC has been operating are Thies,Diourbel and Kaolak. The precise demarcation of this area is shown in Map 2as the project area. In order to provide the extension service SATEC agreedthat, in collaboration with the existing government services, it would re-cruit the necessary cadre of Senegalese extension officers, support the workof the Centers of Rural Expansion, and give technical assistance to thecooperatives, particularly by determining their production needs and prepar-ing their annual agricultural program. In accordance with the agreementSATEC opened a head office in Dakar working under the direction of theMinistry of Rural Development in liaison with the Ministry of Planning andIndustry, and a regional office in each of the three regions, workingunder the authority of the regional governor. Government provided furnishedquarters for six officers in Dakar, and for two in each of the regions, andprovided offices for the regional engineers.

6. Under the agreement SATEC was responsible for all the financialoperations of its organization, including payment of staff and the trans-portation of expatriates. Government nominally paid all expenses of SATEC,by agreeing an annual program and its financing prior to the beginning ofeach year. SATEC received 45, of the total when the program was agreed, 25%on July 1, 25% on October 1, and the balance (5%) on December 1. Since thefunds for SATW-C were provided from FED and French Government sources, themethod of payment was regulated by an agreement between them and the SenegalGovernment. SATEC was required to submit an annual report to the latter.

7. Its work has been supervised at national level by a Working Commit-tee consisting of the Minister of Rural Development as Chairman, and ninemembers representing Government departments and organizations, together withthe SATEC representative in Dakar. The current agreement was valid to

A11\HEX 2Page 3

October 31, 1967, and was later extended to June 30, 1968. SATEC is also

responsible for technical assistance for an irrigated rice project of about

6,000 ha in the delta of the Senegal River, under a separate agreement with

the Government.

Staff

8. SATEC was started in a small way in April 1964, and during the

1965/66 season its service was extended to cover the whole of the non-

marginal area of the groundnut basin. As at the end of 1967 total technical

staff was as follows:

Expatriate Senegalese Total

Head Office 7 1 8Regional Engineers 3 -- 3Assistant Regional Engineers 3 2 5Regional Extension Techni-

cians 8 h 12

Technical Assistants 15 42 57Extension Workers -- 700 700

Total 36 749 785

At the start of the program the expatriate staff numbered over 50 and most

of the reduction since has been at Technical Assistant level. A small office

staff is maintained at the Head Office and the three regional offices.

Annual cost of the wihole of the SATEC operation in 1967/68 was about CFAF 60o

million.

C. SODEVA

Constitution

9. SODEVA was set up in 1968. Its main object is to provide, within

the framework of the national development plan, technical assistance toincrease agricultural productivity, in particular by popularizing techniques

for the development of agriculture, with special emphasis on the improvement

of production technioues, land improvement, and the combination of agricul-

ture with livestock. It can enter into agreements with Government to provide

extension services in specific areas, similar to those entered into in the

past between SATEC and the Government. Its fixed capital is CFAF 10 million,with the Govermnent as principal shareholder, and SATEC holding some shares.

It is governed by a Board of between three and twelve members.

10. SODEVA has entered into an agreement with Government to provideextension and cooperative services in the project area on very similar terms

to those between SATEC and the Government, and outlined in paras 4 to 7above.

ANEX 2Page 4

lianagement

11. On the formation of SODEVA, all the Senegalese staff of SATEC weretransferred to SODEVA, on the same terms and conditions of employment. Atthe same time SODEVA entered into an agreement with SATEC under which thelatter will provide management services and expatriate personnel to SODEVAduring the first three years of its existence. The agreement provides forthe appointment of the SATEC mission chief to act as Director General ofSODEVA for the first year ending June 30, 1969, after which a SenegaleseDirector General would be appointed. The number of expatriates would bereduced from h2 in the first year to eight in the last year, as follows:

Year 1968 1969 1970 1971Semester 2 1 2 1 2 1

Senior Cadres 19 19 14 13 8 8Regional Extension

Technicians 11 11 8 8 - -Technical Assistants 12 12 8 8 - -

Total 42 42 30 29 8 8

Cost

12. The combined cost of the project extension service through SATEC/SODEVA is estimated to be as follows for the three years (July 1 to June 30):

CFA,F million 1968/69 1969/70 1970/71 Total

Expatriates 280 233 115 628Senegalese l4j. 152 160 456Buildings and staff

services 61 59 55 175Counterpart training LI9 7i. 90 213

Total 534 213 420 1,472

Of the above cost, half i2 ^d culated t; be due to services rendered by theextension service on behaif cl tie (cooperatives (para 13), after deductingthe cost of counterpart tra±cing.

D. Project Extension Service

13. The foundations of the extension service in the project area arethe extension workers workin,g at village level. They are recruited fromwithin the villages from among those who can read ane write, and are chosenfor their moral qualities and their capacity to communicate with others.There are 700 of them in direct contact with the mass of rural farmers, giv-ing an average of about 230 farmers per worker. Their distribution amongthe zones is as follows:

AITNEX 2Page 5

North Center South Total

Extension workers 107 323 270 700Average number of farmers

per extension worker 270 254 193 233

Their main purpose is to be the principal activator of agricultural improve-ments, by disseminating information, giving demonstrations, and explainingtechniques and objectives. In practice, about half their time is spent ingiving technical services on behalf of the cooperatives, which are nominallythe responsibility of ONCAD. These services include the preparation ofannual farm input requirements for each farmer, help with the weighing in atharvest time and with payments to farmers for crops at the end of each sea-son, and much assistance at the bi-annual meetings of each cooperative soc7-ty. These services are occasioned partly by the lack of proper cooperativeaccounts (para 3.07 of the report). Through their close contact with thefarmers the extension workers get to know them individually very well, andare encouraged to record as many details as possible about each farm, forwhich they are supplied with special record books. In general, they enjoythe confidence of the farmers, and are always available for consultation andadvice.

14. Each worker is given training at regional level on simple anddefinite techniques by his immediate superior, the Technical Assistant(para 15). This consists mainly of simple operating instructions which theworkers pass on to the individual farmers. Extension manuals have been pre-pared in simple language and picture form and are easily understood. Thetraining program and the manuals are designed to improve the techniques ofland preparation, sowing, weeding and harvesting, and to introduce fertilizerand animal-drawn implements. The workers are periodically sent back forfurther training, and although no systematic attempt is made to give them atechnical background, they do progressively acquire the ability to understandtechnical innovations of greater complexity and to pass the information onto the farmers. By recording as many details as possible of each farm theextension workers are gradually building up a census of the farmers' needs.This work is beginning to be of value in estimating future requirements.

15. The extension workers are supervised by the Technical Assistants,of wzhich there are at present over 40 in the field, an average of about oneper 17 extension workers. They are responsible for the work of all theworkers under them. They participate in the recruitment and training ofextension workers, are responsible for arranging periodic meetings for them.and for getting information to and from them. In the first instance most on1the Technical Assistants were expatriates but they have now been largely d-s-placed by Senegalese, many of whom are graduates from agricultural colleges,Supervising the work of the Technical Officers are the Regional Engineers,who are responsible for the work of the whole of their region and for liaisonwith the regional representatives of ONCAD, BMDS and the Government. TheSODEVA head office in Dakar is responsible for the direction and managementof the whole program, and for liaison with the head offices of ONCAD andBMDS, and with the Government.

ANNEX 3

ONCAD REORGANIZATION

REPUBLIC OF SENEGALMITITSTE OF PLAlNING AND INDUSTRY

SUBJECT: Invitation for the study of the problems of management andoperation of a public institution and for proposals for the implementa-tion of improvements thereto.

1. The Government of Senegal is seeking management advice and manage-ment services from suitably qualified consultants, firms or groups of firmsspecializing in problems of institutional organization and management, toreview the current operations of a public institution, the Office Nationalde Cooperation et d'Assistance pour le Developpement (ONCAD), and subse-quently, as agreed with the Government, to supply the services necessaryto implement the recommendations made for their inprovement.

2. OTCAD is the government agency responsible for the supply of farminputs to the coopieratives, for the primary collection and marketing oftheir output of groundnuts, for the managemenit of the stockpile of ground-nut seeds, and for the provision of certain teclnical services to thecooperatives. It is described in more detail in Addendum 2. ONCAD wasformed in October 1966, and since then has taken over, at various times,its current responsibilities from other governmient agencies. Arising fromthis, its main problems include the assimilation and retrainirg of thestaff it took over, the evolution of an accounting system appropriate toits responsibilities, the efficient use of its omn transportation fleet andof ether transportation on hire, an improvement in the technical and com-mercial- management of the groundnut seed stockpile, and the introduction ofan effective system for maintaining the accounts of the cooperatives.

3. The purpose of this letter is to invite you to send representa-tives to Dakar to make a preliminary review of the organization and workingof ONCAD and to present to the Minister of Planning and Industry (Buildingdu Gouvernement, Dakar, Senegal), under confidential cover, within sixtydays of receipt of this letter, your proposals for bringing in a suitablyqulalified management team for improving the management of ONCAD, in accord-ance with the attached Terms of Reference (Addendum 1). The Government'smain objective in seeking yoxr assistance is to ensure that at the end ofa three-year period ONCAD would be able to operate efficiently wlith trainedSeregalese staff and with the minimum of assistance from expatriate staff.Every assistance will be given to your representatives to enable them tomake the preliminary rev-iew, including full access to the officials andfiles of ONCSD and to the reports and studies already made on its operation.Those Goverrzrent officials with moiowledge of ONCAD will also be availablefor discussion.

ANNEX 3Page 2

4. It is stressed that in the first instance your proposals shouldnot include any financial estimates of their cost. Your proposals will beevaluated together with those from other suitably qualified consultants,after which the selected consultants will be invited to negotiate a suitablecontract and submit financial estimates, as set out in the Terms of Refer-ence.

5. The Governme7 is seeking finance from the International Develop-ment Association (IDA)_,an affiliate of the IBRD, to cover part of the costof a project designed to increase production of groundnuts and millet inthe groundnut basin of Senegal. Improvement of the efficiency of ONCAD ispart of this project and IDA finance is also sought for part of the costof the necessary management study and the provision of management services,including implementation of the recommendations contained in the study.Negotiation of the contract for such study and subsequent action would,should IDA finance be forthcoming, be made by the Government in cooperationwith IDA.

1/ This invitation was distributed before it was known the projectwould be financed partly by Bank loan.

Addendum 1

TULFIS OF REFERENCE

Prncipal objective

1. The principal objective is to introduce a suitably qualified man-agement team to assist to the fullest possible extent and at the highestlevels in the management of ONCAD for a period of three years, so that atthe end of that period OiECAD would be able to operate efficiently withtrained Senegalese staff with the minimum of assistance from specialistexpatriate staff.

Preliminary review and proposals

2. In acccrdance with the letter of invitation, a preliminary reviewof the organization and working of ONCAD wou'ld be made, and the MIinister ofPlanning and Industry 1w7ould be presented, within 60 days of the date of theinvitation, with proposals fcr meeting the principal objective above.These proposals would cover in broad outline the consultants' practicalexperience in similar problems, the staff which would be assigned to ONCADincluding curriculum vitae on the principal members, an organizationaldiagram, and the way in which the main organizational and management prob-lems would be approached. They would include details of what counterpartstaff would be required for training, and what facilities and other helpwould be required fron the Government. They would be presented in the firstinstance without any consideration of their cost.

Contract

3. The preliminary proposals would then be evaluated by the Govern-ment in consultation with IDA, and the selected consultants would be in-vited to submit tentative financial estimates. After broad agreement onthe costs of the proposals, a contract would be negotiated covering twophases:

(i) Initial phase: This would cover a period of 60 days at theend of which the selected consultants' firm proposals forthe reorganization and management of ONCAD for a furtherperiod of three years would be submitted in the form of acomprehensive report. Proposals would include the preciserole of the consultants in their implementation, details onSenegalese counterpart personnel, and detailed financialestimates of OINCAD operation and of the cost of the addi-tional service of the consultants;

(ii) Subsequent phase: The scope of the proposals in the com-prehensive report would be considered by the Governmentand IDA, and any necessary changes in the contract would bere-negotiated as appropriate with the consultants who wouldthen provide the agreed management services for the three-year reorganization period.

Addendum 1Page 2

Main considerations

4. The consultants would be free to malke proposals on every aspect ofthe organization and management of OIICAD and to carry them out, but theGovernment would expect the proposals to include the following, which areconsidered to be of major impcrtance:

(i) Staff and training:

(a) any reduction in staff considered necessary, includinga phased redundancy program;

(b) the training of counterpart staff at higher levels ofmanagement, including the necessary basic qualifica-tions of such staff, the period of training (Govern-ment would undertake to make available the necessarysuitably qualified counterpart staff) and how muchshould be done locally and abroad (through fellow-ships and specialized courses);

(c) the training of staff at all other levels of manage-ment;

(d) the introduction of a staff manual containing theterms and conditions of appointment of staff at alllevels.

(ii) Finance and accounting:

(a) the opening balance sheet of OMCAD as at October 1,1967 is expected to be available shortly. Consultantswould be required to comment on the suitability ofthe financial structure revealed therein, and if con-sidered necessary, to make recommendations as to itsimprovement;

(b) the study and introduction of an accounting system,under the ultimate control of the Public InstitutionsAccounting Center, which provides for adequate day-to-day flexibility of operation, financial analyses, costaccounting data, and internal operating data, andwhich reflects the commercial nature of much of ONCAD'sresponsibilities;

(c) the possibility of using computer time for part of theaccounts, and a recommendation as to which of theavailable computers in Dakar would be most suitable;

(d) before the end of the second year of the main contract,a critical examination of ONCAD's sources of incomeand proposals for any amendment, to ensure that ONCIAis able in the future to operate without loss and tobuild up adequate reserves;

(e) the introduction of an accounting manual for staffguidance, to cover every aspect of the accountingprocedures.

Addendum 1Page 3

(iii) Transportation:

(a) a study of the past operations of this sector, and

previous proposals for its future operations, and

recommendations as to its retention, reduction, or,

if found absolutely essential, its transfer to otheroperators, together with arrangements considered

necessary to provide an efficient and economicaltransport service to meet ONC.4D's responsibilitiesfor providing farm inputs and marketing services;

(b) consideration of the possibilities of shelling grotnd-nuts at coopera-tive level to reduce transportationcosts.

(iv) Seed stockpile:

(a) its technical and commercial management, includingdetails of the numbers and qualifications of seniorstaff required;

(b) selection, handling, grading, storage and testing ofthe seeds, including the introduction of a staffmanual covering these points;

(c) a review of the present inducements to selectedfarmers to produce the seeds, and proposals for thefuture.

(v) Cooperative services:

(a) a review of the present services to cooperatives,including the preparation of estimates of farm input

requirements (at present being performed by SCDEVAJ)and those requirements of the cooperatives not atpresent being met (in particular the maintenance of

accounts of the cooperatives and their individualmembers), so as to produce, one year after the second

phase of the contract comnences, a full report whichwould advise whether ONCAD, Government, or some otherorganization should be responsible for the provisionof these services, what should be their function and

scope, and to what extent OMCAD would be able tocontribute to their implementation.

1/ SODEVA: The organization providing agricultural extension services

in the groundnut basin.

Addendum 1Page 4

(vi) Organization and management:

(a) apart from the considerations above, any other changesin the organization and management considered neces-sary for the efficient operation of ONCAD;

(b) changes in the Decree setting up ONCAD, and any otherchanges in the law which would be necessary for theimplementation of any of the proposals above;

(c) the introduction of a manual covering standard oper-ating procedures not specified above.

Feporting requirements

5. The following reports would be submitted by the consultants during

the second phase of the contract:

(i) quarterly reports giving routine information, constraints,bottlenecks and problems on staffing, farm inputs, marketing,transportation, seed stockpile, and cooperatives, all in aform to be agreed later, together with quarterly accountswithin one month of the end of each quarter;

(ii) annual reports, on the lines of the above, but includingaudited annual accounts-

(iii) a final report at the end of the contract period showingprogress made over the contract period, and including pro-jections for the next five years of staff requirements,financial data, transport and other relevant data.

Addendum 2

OFFICE NATIONAL DE COOPERATION ET D'ASSISTANCE FOUR IEDEVELOPPEMENT (ONCAD)

Background

1. Office National de Cooperation et d'Assistance pour le Developpe-ment (ONCAD) was formed in October 1966 to succeed regional farmers' organ-izations, the Centres Regionaux d'Assistance au Developpement (CRAD), andwas given the responsibility of providing services to cooperatives. Follow-ing a redistribution of functions among government agencies concerned withthe production and marketing of groundnuts in September 1967, ONCAD wasgiven the additional responsibilities of procurement and supply of farminputs for the cooperatives (fertilizer, implements, draft animals andseeds) and of the primary marketing of their groundnut c7'ops (over 800,000tons in 1968), previously carried out by other organizations. Its objec-tives are now: to provide a technical service for cooperatives; to marketgroundnuts collected by the cooperatives; to assist and coordinate allactivities related to cooperatives carried out by the Government, SODEVA,BNDSI/ and OCAS/; to manage and supervise the production and distributionof groundnut seed; to ensure the supply, distribution and transportationof farm inputs to the cooperatives, and the delivery of the groundnutscollected by the cooperatives to OCAS. Staff at present -cotal about 1,500,of which 650 are in the transportation department.

Administr ation

2. ONCAD is governed by an Administrative Council which includes arepresentative of the President, the seven regional Governors, the NationalAssembly, the Ministries of Rural Development, of Finance, and of Planning,OCAS, BNDS, BCEAO_/' and four members representing cooperatives, making 19members in all.

Management

3. As indicated in the letter of invitation, the Government is eagerto improve the management of ONCAD. The main problems which have arisenare given in para 2 of the letter. The Government commissioned an enquiryinto the working of ONCAD and the report will be made available to theinvited consultants. The report contains a number of proposals for re-organization, particularly concerning overall policy, internal organiza-tion and operation, and staffing policy. Wthile the Government is ingeneral agreement with the main proposals, it has reservations on thepracticability of selling off the transport fleet to private enterprise,and provision has been made in para 4 (iii) (a) of the Terms of Referencefor the advice of the selected consultants on this point.

1/ BIDS: The Banque Nationale de Developpement du Senegal.2/ OCAS: The marketing organization responsible for export and local

processing of groundnuts.3/ BCEAO: The Central Bank of the West African Monetary Union.

Addendum 2Page 2

Finance

4. A provisional balance sheet as at September 30, 1967 is available,but this reflects the financial position immediately before ONCAD took overits responsibilities for the supply of farm inputs and for the transporta-tion fleet on Octcber 1, 1967. An opening balance sheet on that day, show-ing the further assets taken over, and the new capital structure, is underpreparation and will be available shortly.

5. The provisional accounts for the year ending September 30, 1967show a loss on the year's working of CFAF 190 million for a total expendi-ture of CFAF 965 million, of which cost of personnel accounted for 50%;amortization and provisions 12%; office expenses and transportation 18%.The balance sheet shows capital (in the form of grants) and provisions ofCFAF 2.87 billion, current assets CFAF 1.78 billion and current liabilitiesCFAF 1.50 billion.

6. A document giving a provisional budget and other details for thefiscal year ending September 30, 1968 is available for perusal. The budgetis considerably larger than the previous year, because of the additionalresponsibilities for farm inputs and primary marketing. A small profit onthe year's working of CFAF 19 million is estimated, on a total expenditureof CFAF 29.0 billion, of which CFAF 24.9 billion is for the marketing ofgroundnuts. Total cost of providing a technical service to the coopera-tives is estimated to be CFAF 231 million, which, less income, would givea deficit on this service of 190 million. ONCAD's main income for theyear comes from a charge of CFAF 271 per ton of groundnuts handled, saleof the surplus from the seed stockpile, a tax on local oil millers yieldingCFAF 210 million, and some regional taxes.

7. At the present time ONCAD does not have full accounting autonomy,being controlled by the Public Institutions Accounting Center. It isauthorized to deal direct with the banks for financing the agriculturalprogram and groundnut marketing, but all receipts go direct to the Center,and for all current expenditures funds are obtained through the Center.It is the Government's intention that, while maintaining control by theCenter, ONCAD should have as soon as practicable a revised, complete andefficient accounting system which is adapted to the commercial principlesunder which ONCAD is required to operate.

A1NEX h

CREDIT AND BNDS

A. Background

1. Senegal is a member of the West African Monetary Union, wqhich be-

came effective in its present form in 1962. It shares with the six other

members a common currency, the CFA1E franc, and a common Central Bank, the

Banque Gentrale des Etats de l'Afrique de l'Ouest (BCEAO). Under an agree-

ment between France and the Union, the former guarantees unlimited conversion

of CFA francs into French francs. From Serlegal's point of view, pressures

vhich would normally be brought to bear on its foreign exchange reserves if

it had its own currency are cushioned through the 7Union. In times of short-

age of foreign exchange these pressures usually manifest themselves in due

course as restrictions on domestic credit throughout the Union. A complemen-

tary aspect of the monetary system is the very close commercial and financial

ties linking the Senegalese economy with that of France. In the past imports

have corme essentially from France regardless of competitiveness, while ex-

ports have had a guaranteed market in France at preferential prices.

2. At independence in 1960 Senegal became an associate mnemer of the

EEC. Under the terms of the Yaounde Convention signed with EEC in 1964,

Senegal will lose, by the end of 1969, the preferential treatment in France

for its groundnuts and groundnut oil. The producticn improvem.ent program

(Annex 1, para 10) has the principal objective of minimizing the losses in

foreign exchange earnings of Senegal, and the loss of income to the farmers

as a result of the Convention. It is being financed from 1965 through 1969

byr FED. This finance does not include the direct provision of medium-term

credit to finance imple.ments and draft animals for emall farms, which has

been made available for the program by BIDS from resources mainly provided

by CCCE.

3. Commercial banking services are provided by four banks, formerly

branches of French banks which have adapted their organization and ownersh4r

to the conditions of independence. A large proportion of their business is

short-term financing of the marketing of the groundnut crop in a consortium

with BENS. They are also involved in financing the local processing of the

crop, and in other importing and exporting operations.

B. BIDS: Operations To Date.?/

Objectives

4. The Banque Nationale de Developpement du Senegal (ED3S) was formed

by the fusion of two existing credit institutions under Law No. 64-33 of

May 26, 1964, and commenced operations on July 1, 1964. The two former

institutions were concerned with the provision of social credit and develop-

ment credit in the public sector. One of the main objectives of BDMS weas to

1/ Franc of the Communaute Financiere Africaine.2/ As at the end of fiscal 1967 (September 30). All the data on BIDS

in this annex refer, to the position up to that date.

ANNEX 4Page 2

simplify and improve the cumbersome procedures then existing for obtainingcredit for both social and development purposes. It took over all thestaff, together with the assets and liabilities of both institutions, neitherof which was operating efficiently or profitably. BIUS is responsible forproviding financial and technical help for all projects concerned with thesocial and economic development of Senegal, including aid to industry, com-merce, agriculture, livestock, fisheries, the cooperative movement andartisans. On its own behalf it can provide finance through loans, discount-ing procedures, guaranteen, and equity participation, and can provide acommercial banking service by receiving deposits. On behalf of Governmentor public institutions it can study any question or project of general in-terest provided it is adequately reimbursed, and can also manage any publicfunds entrusted to it.

Constitution

5. Fixed capital is CFAF 1,360 million, in 136,000 shares ofCFAF 10,000 each, all of wfhich have been fully paid up (para 14). Durationof BUDS is 99 years from July 1, 1964. It is administered by an Administra-tive Council of not more than 12 and not less than seven members, represent-ing shareholders in approximate proportion to their shareholdings. I,1eetingsof the Council are governed by normal rules, except that the President andVice President are elected on a three-fourths majority and their appointmentis subject to approval by the President of Senegal. The Council meets atleast once a month and has the usual powers to carry out its objectives,including the nomination of the Director General and the fixing of hissalary, and can delegate all or any of its work to committees formed forspecific purposes. It is required to approve all rules and regulations forthe conduct of BNDS affairs. The Shareholders' Assembly General nominatestwo "commissioners of accounts" (auditors) to audit the accounts, and isrequired to meet once a year to approve the annual report and accounts.Under its powers it can alter the duration of BUDS, and can also alter itscharacteristics, notably by extending or restricting its social objectives.

6. B.'iIDS financial year is from October 1 to September 30, and theaccounts are required to be kept in accordance with good commercial prac-tice. The Council is responsible for making the annual inventory of stocksand equipment. There are legal requirements for the disposal of annualprofits, calculated after due allowance for amortization and bad debts. 5%of such profits has to be placed to a legal reserve all the while the legalreserve is less than 10% of the fixed capital, or whenever the reserve fallsbelow this amount. The balance of profits may be placed in a special orgeneral reserve account, or may be paid out to shareholders, subject to amaximum of 4.5% of the nominal value of' any preference shares which may becreated (but wihich shall be non-cumulative), and 3% of the nominal value ofordinary shares. Any balance remaining after any payments to shareholdershas to be placed in an extraordinary reserve account.

Administration and MIanagement

7. The Administrative Council is at present composed of 10 members,six representing the Government, two the CCCE, one the BCEAO and one theother three shareholders. The President is M. Rene N'Diaye, Chief of the

ANNEX hPage 3

Treasury, and the Vice President is ex officio the Director of the CCCE in

Senegal.

8. The two auditors at present nominated by the Shareholders'Assembly General are M. Alioune Diagre, Director of Exterior Finance at theMinistry of Finance, and M. Meda, an Inspector at CCCE, who is a profes-sional accountant, and who is also the Director of the training center forbanking staff (para 11).

9. An organization diagram is attached. The Director General isdirectly responsible to the Administrative Council. Under him there arethree separate Directors responsible for credit, finance and administration,together with the Inspector General. The Credit Director is responsiblefor four sections: agricultural; social; industrial and investment; andcommercial credit. The Financial Director is responsible for three sections:the central accounting section, which includes an IBM mechanized accountingsystem with some 20 workers; the banking section, which provides a commer-cial banking service to the public; and the control section, which isresponsible for the six regional cffices. The credit and financial divi-sions cover most of the work of EiDS, but the7e is also an AdministrativeDirector, responsible for personnel and legal matters (including recoveryof debts) as well as general administration0 The Inspector General isresponsible for the internal audit, and occasionally makes special studieson behalf of the Director General. There are six regional offices, one inthe capitals of each of the regions of Senegal: Thies, Diourbel, Ziguin-chor, Tambacounda, Kaolak and St. Louis. They are closely associated withthe problerms of investment and development in the regions they serve, andalso provide a local commercial banking service, as well as being respon-sible for payments to cooperatives for the groundnut crop.

Staff

10. Prior to the formation of BEDS and during its early months itreceived technical assistance from CCCE, but its staff is now entirelycomposed of Senegalese. The senior staff, from the Director General down-wards, are qualified, well trained and generally competent. Salaries arecomparable with those in commercial banks and BCEAO. There are five cadresfor permanent staff and one for temporary and contract staff. Staff as atSeptember 30, 1967 was as follows:

Cadre Designation Head Office Regional Offices Total

I Senior professional 16 - 16

II Junior professional 17 10 27III Skilled office workers 33 8 41IV Unskilled office workers 55 26 81V Manual workers 23 18 41VI Temporary and contract 55 22 77

Total 199 84 283

AINMEX 4Page 4

Included in the above are some 25 persons under training. Total staff at

283 represent an increase of 64 over the figure for the previous year, mostof it being in Cadre VI.

11. There is a training center for banking staff in Dakar (the Centred'Enseignments Techniques des Banques) which caters to the needs of BiDS,

BCEAO and the commercial banks, mostly in Cadre III. The Director isII. iMeda of CCCE, who is also one of BNDS's auditors. There are at present

about 150 persons under training, of which 15 are temporary employees of

KMDS.

Accounting Controls

12. Accounting and financial controls are both internal and external.Internal controls include the work of the Inspector General and the threeinternal auditors who make inspections throughout the head office depart-ments and regional offices, and are responsible for adherence to all account-ing and financial procedures. External controls cover three separate aspectS

Tle Government has appointed a Commissioner (under the laws covering theconduct of all public institutions) who attends meetings of the Council ofAdministration, and BJDS is generally under the supervision of the MIinisterof Finance. Under the banking laws BCEAO and the Commission of Supervisionof Banks receive monthly financial and liquidity statements, as well asannual reports and accounts. CCCE is a shareholder, and has the right toappoint one of the two auditors. These controls, both internal and external,are considered adequate to ensure full accountability in accordance with thefinancial procedures which have been laid down under the existing regulationsSubject to satisfactory completion of the current independent audit of theaccounts for the years ending September 30, 1967 and 1968 by the externalauditors (para 4.05 of the report), the present financial practices and pro-cedures would be acceptable to Bank/DA.

13. The present IBIr mechanized accounting system, which is well organ-ized, is becoming overloaded and BTDS has arranged to hire a small IBMI com-puter for installation in October 1968. IJhen installed, surplus capacity

will be hired out to other organizations. Two young Senegalese graduates

are being trained by IBM as programmers, and the existing 20 operators willbe retrained, 12 for computer work and the balance for other duties withinBIDS.

Balance Sheets

1Lh. Comparative and forecast balance sheets of BNDS as at September 3C,

1965 through 1971 are shown in Table 1. The long and medium-term loans port-folio is discussed more fully in para 19. Investments in equities of indus-

trial and banking enterprises now number over 20, and include SIES andSISCONA, both of which are concerned with this project, as well as CFAF 224

million in two local commercial banks. The relatively high figure for

accounts receivable in 1967 was of a temporary nature and has since beenreduced. Share capital is fully paid up and held as follows:

Al,TET TLY

Page 5

Million CFPF %

Government 760 56CCCI 375 28BCEAO 100 7Three other shareholders

(one bank and twoGovernment funds) 125 9

Total 1,360 100

15. The deposit on Government's behalf is consistently greater thanthe loans and advances made against it. lo fee is charged for this serviceto Government, but BNIDS has the use of the excess funds. 76% of long-termdebts (1967) was owing to CCcr,, and was borrowed mainly to finance indus-trial de-velopment. Repayment is over a 10 to 15-year period and the inter-est rate averages 3.5%. The balance of the long-term debt was advanced bythe Government over 10 to 15 years at 3.5,%O. About half the medium-termdebt (1967) was owing to CCCE, the balance to BCEAO, and has been advancedmainly to cover agricultural implements and draft animals under the produc-tioni improvement program. Interest rate is 3.5%, and period of loan three

to five years. Most of the short-term debt (1967) was owing to BCEAO,obtained under rediscounting procedures, with interest also at 3.5%,.

Income and Ependiture

1o. Income and expenditure statements from the time of inception up

to September 30, 1967 are given in Table 2. Interest, fees and commissionshave remained the same over the last two years, although as a percentage of

average capital employed they have decreased. Interest charges paid outhave also remained the same, although as a percentage of average capitalemployed they have declined. Administration costs, as a percentage of aver-age capital employed, have shown a steady decline but this is entirely dueto interest charges. Without this item the percentage is the same for bothyears (2.68), and can be considered satisfactory. The amo1nts appropriatedto pro-visions and reserves are also high. These include the relativelysmall amounts required for the legal and statutory reserves (para 6), the

balance being mainly provisions against bad debts and depreciation of equityinvestments (para 23).

Loan Regulations

17. The loan regulations include rules for five categories of loans,as follows:

(a) Agricultural and rural: Loans under this category can bemade for agricultural, livestock and fishing purposes.They are in general given for equipment, basic needs duringthe planting to harvest season, marketing of crops, ruralconsumption and small fishing equipment. Loans are inprinciple given only to cooperatives or friendly societies(mutuelles), but in special circLrmstances loans to isolated

ANNEX 4Page 6

communities may also be considered. These latter areusually covered by personal securities and collectiveguarantees from within each community. Loans for ruralconsumption are made to cooperatives only, for a maximumperiod of 45 days to cover the consumption requirementsof their members from a very limited list of goods.Loans for fishing equipment are also made to fishingcooperatives only, mainly for outboard motors, lines andnets for use with dug-out canoes.

(b) Social: Loans under this category can be made to borrow-ers who do not make their living from agriculture, live-stock or fishing, and are mainly urban in character.They are given to salaried workers, artisans, clerks,and professional workers, and repayments are made throughdeductions from their salaries. They are made for hous-ing over a 10-year period, for construction material,water and electrical installations, furniture, part-timeeducation and bicycles over a 12-month period, and wereformerly also given for automobiles.

(c) Artisans and professional workers: Loans under thiscategory can be made to artisans to buy tools, and toprofessional workers to purchase professional equipment.Each case is considered on its individual merits.

(d) Industrial and public: Credit for industrial purposecan be given to industrial enterprises for buildings,machinery and installations on medium or long-term.Repayment depends upon the return from the enterprise butis limited to 15 years for buildings, 10 for machineryand installations, and three for vehicles. Adequatesecurity is required, the sponsor being expected to con-tribute at least 20% of the total capital cost, and loansare limited to a further 65%. Short-term loans for stocksand working capital can be made where they are complemen-tary to longer-term loans. Loans for public purposes maybe made to finance projects of social or economic importance,excluding the cost of administrative equipment. Each pro-ject is considered on its individual merits.

(e) Retail commerce: Loans in this category are reservedexclusively for small retailers who must be Senegalesenationals, mainly for purchase of stock and equipment.BITS gives advice on management and development wheneverpossible. Loans are short-term for stock, medium-term forequipment. Preference is given where the borrower issponsored by a cooperative or friendly society prepared toprovide a guarantee. Each case is considered on its merits.

AJNiHX 4Page 7

18. Short-term loans are defined as being for a period of up to twoyears. In practice, most of them are seasonal. PlMedium-term loans are forover two years up to five years, and long-term for more than five years toa normal maximum of 10, except for some industrial loans. Interest ratesare 5%0 per annum for sliort-term and 5.541 for medium and long. In practice,loans for agricultural purposes represent a large part of BKDS investmentsand are increasing annually. Short-term loans (the largest part) are rela-tively seasonal and mainly cover the cost of fertilizer and the marketingof the crop (Annex 2). A large part of medium-term loans are advances foragricultural implements and draft animals. Loans for artisans and profes-sional workers are largely short-term, but because of the bad debts situa-tion are now only made very cautiously. Loans to public bodies are mainlylong-terml, and most were made by BNDS's predecessor. They are for water andelectricity installations in Dakar and other principal tovms. 1;ost -nvest-ment of this nature is now done through the separate fund which BIDS adminis-ters on behalf of Government. Loans for retail conmmerce are usually givenfor a period of one or two years, the amount advanced for equipment beingrenewable if the borrowers' operations have been satisfactory during therzevious year.

Loan Portfolio

19. i.n analysis of the loan portfolio is given in Table 3. This showsbad and doubtful debts as a separate item, and almost all of them are mediumor long-term. The figures showqn include interest outstanding at the date ofbeing declared bad or doubtful. Long-term loans for agriculture are negligi-ble, while medium-term loans have increased steadily, and consist mainly ofloans fCor implements and draft animals. Under this heading is included thebalance of an original debt of CFAF 262 million owed by a predecessor organi-zation to ONCAD, which BI.S took over on formation. This debt has beengradually liquidated and is expected to be fully paid off during the currentyrear. Short-term agricultural debt at the date of the balance sheet includesthe advances for fertilizer. Bad and doubtful debts represent only 1 ofthe total agricultural portfolio, but since they are mainly medium-term,they represent almost 4% of the total agricultural medium-term loans. Theyhave increased slightly in the last year, but in view of the large sums dis-bursed each year for agricultural purposes, the position is considered to besatisfactory.

20. The bad debts position in respect of fisheries loans deterioratedconsiderably during fiscal 1967. Host of these loans were made to coopera-tives for outboard motors, lines and nets. Plain cause of the difficultieshas been exploitation by the intermediaries. Loans for fishing purposeswere stopped early last year, pending regrouping of the cooperatives. Gov-ernment is actively pursuing alternative arrangements for marketing thecatches, and BIDS considers that if these are successful, there are goodprospects of recovering some of the outstanding loans.

21. Loans for social purposes have been reducing steadily, and recoveryof doubtful debts has kept pace w-ith this reduction. Included in the baddebts is the sum of CFNF 12 million for advances for automobiles, taken overby BiMS on formation, which is not recoverable. No loans for automobiles

ANNEX 4Page 8

are now made. Loans for industry and commerce show a steady increase inlong-term, wjhile medium-term have declined over the past year. This trendis likely to continue in the future.

22. In considering annual totals by types of loan (Table 3 (6)), it isstressed that over 95% of short-term loans are for agriculture, and thatthis figure varies throughout the year, reaching its peak at the height ofthe marketing season, in February. The figures in the table represent theposition as at September 30 in each year, although short-term loans foragriculture are higher in February, the peak of the groundnut marketing sea-son (para 28). The amounts of medium and long-term loans have increasedprogressively during the last two years, their percentages remaining the

same. The table showing annual totals by purpose of loans (Table 3 (7))also shows the high proportion of BNDS resources devoted to agriculture, and

underlines the decline in importance of social loans. Loans for industry,commerce and public institutions have increased in totals but remain propor-tionately the same.

23. The CFAF 387 million in the category of bad and doubtful debts asat September 30, 1967 represents 4% of the total loan portfolio at thatdate. Since it is mostly medium and long-term loans that are in default, itis more directly comparable with the total of these two categories, of whichit is 81', compared with 10'; as at September 30, 1965. The most serious ofthose outstanding in 1967 are the fisheries loans, some of which may be re-coverable (para 20). Against provisions for all purposes of CFAF 751 mil-lion as at September 30, 1967, a sum of CFAF 664 million has been set asideagainst risks of bad and doubtful debts, which is more than twice the amountshoi,m in this category at that date. The loan portfolio, the bad debtsposition, and the provisions made to cover it are considered to be verysatisfactory.

Conclusion

24. Considering the situation it inherited in 1964, BNDS has done verywell in achieving its present position in under four years. Its policiesare prudent, its management is competent, and it enjoys a good reputation inlocal banking circles.

C. Project Credit

Credit Requirements

25. Total credit requirements for the three project years (Annex 6,Table 6) would be CFAF 7.08 billion, made up of CFAF 2.87 billion medium-term (implements and animals) and CFAF 4.21 billion short-term for fertil-izer. Since the fertilizer credit would be completely repaid before advanccs

were made for the following season, BNDS incremental capital requirements tofinance the fertilizer credit would be CFAF 0.86 billion. Thus the totalcapital required to finance the credit for the project would be of the orderof CFAF 3.7 billion (US$ 14.8 million) over the three-year period.

mr 4Page 9

D. BICDS: Financial IProjections

Capital Requirements

26. Total increase in long-term investment by BINS in both agricultureand industry over the project period is estimated to be of the order ofCOAF 5 billion, of which about CFP2 0.75 billion would be met by a reductionin BIDS's portfolio in other categories (mainly social), leaving aboutCFAF 14.25 billion to be found from other sources. Of this, at least CFAF3.50 biaion wculdbe required as long-term funds, approximately half each foragriculture and industry. The loan/credit of CFAF 1.73 billion would thusmieet BI\DS requirements for agriculture during the project period, leavingit to find a similar amount from other sources for industrial financing.

27. The short-term capital position as at September 30 each year(Table 1) does not bring out the peak short-term capital requirements, whicharise at the end of February each year, when advances to finance the market-ing of the groundnut crop are at a maximumn. A study of the varying require-ments throughout the year shows that BiDS access to rediscounting facilitiesat UCrLO would enable it to meet the incremental requirements for the pro-ject fertilizer credit from its own resources. Furthermore, the study alsoshows that no difficulty is anticipated in financing the marketing of thefuture groundnut crop. Rediscounting facilities at BCAA0 are for up to65$ of BIDS advances for marlketing the crop, and the right to drawr from theTreasury u-p to CFYAF 2.0 billion for the same purpose. Also at the end ofFebruary deposits are at their maximun m. However, BIDS's present drawingrights at the Treasury have not been formalized into a long-term agreement,

consequently approval of the loan/credit would be subject to an undertakingby the Government that it wrould ensure that BMTS was provided with adeouateresources at all times to meet its connitments.

K BANQUE NATIONALE DE DEVELOPPEMENT DU SENEGALORGANIZATION CHART

BOARD

7 TO 12 MEMBERS

DIRECTOR GENERAL

|INSPECTOR GENERAL

DIRECTOR DIRECTOR DIRECTOR[ CRE DIT l l FINAN ICIAL l GENERAL ADMINISTRATION

LEGAL SERVICES

STATISTICS

DEBT RECOVERY

SOCIAL CREDIT ~~~~~~~~CENTRAL FINANCIA PERSONNELAGRICULTURAL CONTROL FINANCIAL PUBLIC RELATIONS, ETC.

CREDIT FOR ARTISANS, CREDIT ACCOUNTING AND BANINGSERVICANDHOUSING, ETC. !8M

INDUSTRIAL CREDIT COMMERCIAL FINANCIAL CONTROLAND INVESTMENT CREDIT OF

.__._.I. _ _..._ _ _ _____

REINLOFFICES

REGIONALOFFICES

March, 1968 (2RIIBRD-3763

8ANQ<UE NATIONALE DE DEVELO0PEIET DU SENEGAL

COMPARATIVE AND FORECAST BALANCE SHEETS(in CFAF millions)

As at September 30 1965 1966 1967 1968 1969 1970 1971

....... Actual ........ ............. Projected .ASSETS

Loan portfolio, long and medium-termAgriculture 1,059 1,256 1,691 2,600 3,350 3,920 4,310Fishing 77 58 101 100 160 270 410Social 1,85L 1,622 1,150 1,000 750 500 250Industry and commerce 546 657 1,036 1,700 2,250 2,850 3,500Public institutions 456 683 686 700 650 600 550

Total portfolio 3,992 1,276 4,667 6,100 7,160 8,140 9,020

Loans, short-term (A) 2,377 4,531 1,731 4,800 5,000 5,200 5,400Fquity investments and guarantors (B) 432 493 581 650 750 850 900Land, buildings and equipment (C) 73 232 236 260 230 200 190Cash in hand and at banks 311 493 614 650 650 65o 650Accounts receivable and miscellaneous (net) 126 154 1,313 300 300 300 300Loans and advances on Government behalf 921 797 631 570 500 430 360

8,235 10,976 12,779 13,330 11,590 15,770 16,810

LIABILI TIES

Capital and reservesShare capital 1,360 1,360 1,360 1,36n 1,360 1,360 1,360Grants, subsidies and reserves 323 361 410 450 500 550 600Provisions (D) 492 553 751 800 800 8on 800Accumulated profit 38 41 71 100 130 165 205

Total 2,213 2,318 2,586 2,710 2,790 2,875 2,965Denosits, cooDeratives (E) 180 366 263 25r 250 250 250Deposits, public (F) 1,353 1,730 1,653 1,9o0 1,90o 2,000 2,100Deoosit on Government behalf 1,001 931 785 720 60)o 500 1o0Long-term debt 1,556 2,137 2,012 2,100 3,600n 1,9r 1,350Medium-term debt 25 215 951 1,250 1,500 1,795 1,905Short-term debt 755 2,862 3,239 1,00" 3,150m 3,760 3,810Accounts payable 318 361 1,260 5no 500 500 Soo

8,235 10,976 12,779 13,330 11,590 15,77n 16,310

A: In 1967, over 95 percent for agriculture3: In 1967, 95 percent of total is investment in commercial (mainly industrial) and hanking enterorisesC: Head office building purchased in 1966D: In 1967, CFAF 661 million against bad and doubtful debtsE: Includes share canital of cooDerative societiesF: Represents normal commercial banking deoosits by individuals and companies

ANNEX 4TABLE 2

BANQUE NATIONALE DE DEVELOPPEIMENT DU SENEGALINCOM4E ANTD EXPENDITURE ACCOUNTS

(in CFAF millions)

15 months 12 months 12 monthsto to to (A)

Sept 30 1965 Sept 30 1966 Sept 30 1967

Average capital employed 7,500 (100) 9,600 (100) 11,900 (100)

Income

Tnterest, fees, commissions 696 (9.28) 809 (8.t42) 806 (6.77)Other income 15 (0.20) 18 (0.19) 20 (0.17)

Total 711 (9.L8) 827 (8.61) 826 (6.94)

Expenditure

Interest charges 16L, (2.19) 230 (2.b0) 233 (1.95)Salaries and allowiances 173 (2.31) 151 (1.57) 188 (1.58)Office exoenses 67 (0.89) 51 (0.53) 32 (0.27)Depreciation 30 (0.40) 3I (0.35) 58 (0.49)Transoortation 15 (0.20) 13 (0.1L1) 18 (0.15)Other e-.xpenses 8 (0.11) 9 (0.09) 13 (0.11)

457 (6.09) 488 (5.08) 551 (h.63)e2-t pro°it. before tax 25L (3.39) 339 (3.53) 275 (2.31)

711 (9J48) 827 (8.61) 826 (6.9k)

Appropriation

Provisioas and reserves 185 (2.h7) 283 (2.95) 20L (1.71)Taxation 31 (0.h4) 53 (0.55) h1 (0.3!i)fialance 38 (0.51) 3 (0.03) 30 (0.25)

254 (3.39) 339 (3.53) 275 (2.31)

(A): Provis,ional

ANNEX 4TABLE 3

BANQUE NATIONALE DE DEVELOPPEMENT DU SENEGALANALYSIS OF LOAN PORTFOLIO

(in CFAF millions)

As at September 30 1965 1966 196

(1) AGRICULTURE

Long-term 6 (-) 7 (-) 8 (-.)Medilum-tern 992 (31) 1,201 (21) 1,622 (26)Short-term 2,165 (67) 4,390 (78) 4,580 (73)Bad and doubtful 61 ( 2) b7 ( 1) 63 ( 1)

Total 3,22b (100) 5,6-5 (100) 6,273 (100)

(2) FISHERIES

Medium-term 71 (92) 54 (83) 30 (28)Short-term 6 ( 8) 7 (11) 6 ( 6)Bad and doubtful - ( -) 4 ( 6) 70 (66)

Total 77 (100) 65 (100) 106 (100)

(3) SOCIAL

Long-term 605 (30) 51,8 (35) 486 (38)Medium-term 972 (b9) 684 (bit) -82 (37)Short-term 143 ( 7) 117 ( 7) 136 (11)Bad and doubtful 280 (14) 223 (14) 183 (1b)

Total 2,000 (100) 1,572 (100) 1,287 (100)

(L) INDUETRY AND COMMERCE

Long-term 185 (30) 318 (38) 570 (5b)Medium-term 291 (48) b7b (56) 396 (38)Short-term 62 (10) 24 ( 3) 12 ( 1)Bad and doubtful 70 (12) 27 ( 3) 71 ( 7)

Total 608 (100) 843 (100) 1,049 (100)

(5) PUBLIC INSTITl'lTIONS

Long-term 456 (100) 635 (93) 650 (95)Medium-term - ( - ) b8 ( 7) 36 ( 5)

Total 456 (100) 683 (100) 686 (1CC))

(6) ALL CATEGORIES (by type of loan)

Long-term 1,252 (20) 1,508 (17) 1,714 (18)1Medium-term 2,326 (37) 2,J61 (28) 2,566 (27)Short-term 2,376 (37) 4,538 (52) h,73b (51)Bad and doubtful 4ll ( 6) 301 ( 3) 387 ( 4)

Total 6,365 (100) 8,808 (100) 9,bOl (100)

(7) ALL CATEGORIFS (by purpose of loan)

Agriculture 3,22b (51) -,,615 (6it) 6,273 (67)Fisheries 77 ( 1) 65 ( 1) 106 ( 1)Social 2,000 (31) 1,572 (18) 1,287 (14)Industry and commerce 608 (10) 803 (10) 1,049 (11)Public institutions 456 ( 7) 683 ( 7) 686 ( 7)

Total 6,365 (100) 8,808 (100) 9J401 (1(X)

AISEX 5

MARKETIiZG AND OCAS

A. Marketing

Background

1. This Annex deals with the marketing of groundnuts after completionof the domestic collection from farmers by ONCAD and the transference ofthem to OCAS, for selling either to local oil millers for processing or onworld markcets. Prior to redistribution of functions in September 1967 amonggovernment agencies concerned with the project, the wshole of the marketingof the groundnut crop was the responsibility of OCA (Office de Commercial-isation Agricole), which was also responsible for the distribution of farminputs (fertilizers and implemerts). At the redistribution, the latterresponsibility and the primary r,urketing of the groundnut crop were trans-ferred to ONCAD, and OCA was renamed OCAS (Office de CommercialisationAgricole du Senegal). At the same time the opportunity was taken to bringits statutes up to date.

Oil Ilillers

2. Part of the groundnut crop is processed by the existing four oilmillers within the country. Tonnage of unshelled nuts processed locally

has increased steadily from 205,000 in 1950/51 to over 500,000 in 1967/68,the latter representing over 55% of the total groundnut crop marketed thatyear. Late in 1967, Government concluded an agreement with the oil millerswhich ensures that the latter pay the equivalent of world market prices fortheir purchases. In September each year each miller notifies OCAS of thetotal tonnage he proposes to process during the year, divided into equalmonthly amounrts over the season, and has the right to increase or decreasethese amounts by 15% prior to the beginning of each month. The monthlyamounts are divided into three 10-day tranches, and the price paid for eachtranche is agreed betwseen OCAS and the millers through a local quotationcommittee on which both sides are represented, and which agrees the "worldprice" for the period, after considering quotations from the various worldmarkets. After a few initial disagreements the quotation committee hassettled dowm. The duration of the agreement was originally for the seasonto September 30, 1968, but has since been renewed. The millers can purchasetonnages outside the above by direct negotiation with OCAS, but prices areusually higher. A shortage of storage facilities by the millers (about 2.5months' supply at current processing rates) places at times a burden onOCAS' owm facilities, but unused funds from the FED production program maybe used to alleviate this problem. The millers make their own arrangementsfor selling their oil and oil cake.

B. OCAS

Constitution

3. OCAS was formed with effect from October 1, 1967 under Law No.67-47. It is responsible for the bulk marketing of groundnuts, and for themonopoly importation of white rice for consumption, including transportationas necessary. It can also import other consumption goods in the national

AI'INEX 5Page 2

interest, but none are immediately contemplated. It is responsible for

marketing, on behalf of ONICAD, the surplus from the seed stockpile. It can

import groundnuts for the local oil milling industry in case of necessity.It comes under the joint responsibility of the Ministries of Finance and of

Commerce and Industry. It has an Administrative Council of nine members,which includes representativeqof BES, ONCAD and BCEAO as well as the Gov-ernment. It is charged with conducting OCAS' affairs in a commercial manner

Its financial year ends September 30. Accounts are audited by two personsappointed by the Council.

Organization and Management

4. Two Advisors give advice to the Director General, one on corner-cial and the other on financial affairs. There are four directorates, oneeach for commercial, financial, administrative and technical affairs.Three Inspectors General act as internal auditors. There is a EuropeanOffice in Paris responsible for maintaining relations with ELC, the FrenchGovernment, oilseed importers and agents, and for passing marketing ardother relevant information back to the head office in Dakar. The CommercialDirector is responsible for the marketing of groundnuts. There are fourregional offices, one each in Thies, Diourbel, Kaolak and Ziguinchor. Thereare 54 reception points throughout the country, of which 30 are in the pro-ject area.

Finance

5. The provisional budget for fiscal 1968 shows an estimated profitof CFAF 35 million on a total expenditure of CFAF 7.05 billion, of wqhich245% is for exporting costs and 1h1% taxation for Government revenue (para 10).Management costs are estimated at CFAF 516 million (including interestcharges and amortization), or 7% of the total. An income of CFAF 2.78 bil-lion is expected from profit on the sale of groundnuts and imported rice,the balance coming from various Government grants.

Conclusion

6. OCAS has relatively less responsibilities than its predecessor,OCA, since it is only concerned with bulk export of groundnuts and importsof rice, whereas OCA was also responsible for distribution of farm inputsand primary marketing of groundnuts. At the same time OCAS has a greaterresponsibility in connection with exporting groundnuts, since this will now

have to be done in competitive world markets instead of in the protectedFrench market. The management of OCAS and the Government appreciate theproblem. The two newly appointed Advisors, who are experts in their fields,should be adequate to ensure OCAS meets its new responsibilities.

ANIEX 5Page 3

C. World Groundnut Prices

Supply and Demand

7. Discussions on the prospects for world groundnut prices have beenheld with oil and oilseecb experts. The Bank economic i/ission, which visitedSenegal in November 1967, also surveyed this problem.l The wzorld marketfor oils and fats in general shows an increase in the growth rate of outputin both developing and developed countries (if current expansion plans arerealized) and a very moderate rate of growth in imports by major buyers in

the developed countries. The possible increase in consumption in developingcountries would, for the next few years, largely come from domestic andsubsistence production and would thus have little impact on world markets.Furthermore, there are uncertainties regarding production and supplies fromEastern Europe, the USSR and China. For the medium-term, up to 1970 aslight price decline can be expected, which might continue further in the

seventies as output rises.

8. The position of groundnut oils in this market is not very strongat present. Groundnut oil is mainly a higher priced quality product, but

recent technical developments in other oils are reducing this advantage, and

substitution by other oilseeds (such as sunflower from Eastern Europe and

the UJSSR, and soya bean from the USA) is occurring, and can be expected to

increase. Also, consumers' behavior regarding quality preferences is afactor of uncertainty, particularly if the price differential should remainhigh or become even higher. Present medium-term prospects for groundnutsand oil (as evaluated by the Commodity Division of the Economics Department)for Nigerian groundnuts as quoted in London to European ports (cif) are:

CFAF per ton

Groundnuts (shelled) 40,000 to 43,500

Groundnut oil 63,710 to 67,000

9. As to short-term prospects, prices in 1967 dropped from CFAF 43,800

per ton (cif) in May to CFAF 37,500 in mid-November, although Senegal has

sold a sizeable part of its 1967/68 crop by forward contracts at CFAF 41,000

per ton. January 1968 quotations for Nigerian groundnuts were still low,equivalent to CFAF 35,800 per ton cif, reflecting the expected record world

crop in 1968, estimated to be over lWia above the previous year's large out-put, and almost one-fourth above the 1960-6 4 average. Senegalese groundnuts

are usually quoted at a slight premium because of higher oil content and

lower acidity. Based on the foregoing a cif export price of CFAF 39,000 per

ton has been assumed for 1967/68 and 1968/69, increasing to CFAF 40,300 in

1969/70 through 1971/72.

1/ Current Economic Position and Prospects of Senegal: ConfidentialReport No. AF-73, February 1968, Annex 1.

ANNEX 5Page 4

D. Groundnut Prices Within Senegal

Background

10. Past policy on fixing the producer price to the farmers for ground-nuts has depended upon a number of factors, including the special marketprice for groundnuts in France, the amount of EEC subsidy for fertilizers,and the amount required by the Senegal Treasury for revenve,,rftik,p s. Basedon the prices guaranteed by France, Senegal was able, until 1966/67, toexport the bulk of its groundnuts (processed and unprocessed) at prices con-siderably above world market prices and thus was able to pay relatively highproducer prices. As a result of EEC regulatio.ns France had to reduce grad-ually its guaranteed price, with EEC covering part of the reductions. Theguaranteed price was abolished in 1967, after which Senegal had to sell atworld prices. However, up to 1969 EEC agreed to reimburse Senegal for 80%oof the price difference should the world market price fall below CFAF 46,000per ton. This support was subject to a limit covering all overseas terri-tories associated with EEC. When world prices fell sharply to CFAF 39,000per ton in late 1967, the EEC limit was insufficient to cover 80% of theprice difference, and the amount received for support in 1967/68 and 1968/69is expected to be equivalent to CFAF 2,900 per ton. This prospect forcedthe Government to reduLce the average producer price by 15% to CFAF 17.77 perkg for the year 1967/68. The export and producer prices for groundnuts from1964/65 and estimates to 1972/73 are as follows:

CFAF '000 per tonshelled 64/65 65/66 66/67 67/68 68/69 69/70 70/71 71/72

French guaranteedprice 49.5 48.5 48.5 - - - - -

World market price - - - 39.0 39.0 40.3 40.3 40.3EEC price support 3.0 1.0 0.5 2.9 2.9 1.1'/ - -Cif export price 52.5 49,5 49.0 41.9 41.9 41.3 40.3 40.3Government revenue 8.6 6.7 6.2 4.5 4.8 4.5 4.5 5.1Flarketing and

processing 14.1 13.0 13.0 12.0 11.7 11.7 11.6 11.5Producer price 29.8 29.8 29.8 25.4 25.4 24.8 24.2 23.7Producer price

(unshelled) 20.9 20.9 20.9 17.8 17.8 17.4 17.0 16.6Government revenue

(CFAF billion) 7.2 6.8 4.5 4.1 4.5 4.8 4.7 5.1

1/ Estimated.

Government Revenue

11. The reduction in producer price in 1967/68 was not sufficient toabsorb the entire fall in export prices, and there was some reduction inGovernment revenue for that year. However, with the anticipated EEC pricesupport, revenue can be expected to rise in subsequent years. Governmentrevenue from the total Senegalese crop marketed each year is estimated torise from CFAF 4.5 billion in 1968/69 to CFAF 5.1 billion in 1971/72, asagainst CFAF 7.2 billior in 1964/65.

ANINEX 5Page 5

Producer Prices

12. The producer prices shown in Annex 2, Table 1(4) for the year1968/69 are based on an average producer price of CFAF 17.77 per kg for thewhole of Senegal. Producer prices have been grouped into five regions, atdifferential rates, depending on the cost of transport to Dakar. Theseregions do not correspond with the project zones, but zone averages havebeen calculated.

ANNEX 6

FARM INPUTS AID OUTPUTS

Groundnut Basin

1. The groundnut basin extends over a large part of the regions ofThies, Diourbel and Sine Saloum. It is characterized by a predominancy ofbrown and reddish-brown sandy soils, supporting as native vegetation short-

lived plants (mainly graminaes and legumes) and scattered trees of which

baobab is characteristic. This vegetation has been beneficial, preventing

heavy insolation and wind erosion. The bulk of the soil is low in organic

matter, phosphorus and potash, and high in iron. The area receives between

500 and 1,000 mm of rainfall per annum, distributed in some 4o to 60 days of

rain from June to October. Along the northern border uncertain and lowrainifall, together with relatively short duration of daylight during thegrowing period, make the return from groundnut productio:i very marginal. In

the northwest corner a lack of trace elements, mainly molybdenum, reducesyields, while along the strip parallel to the coastline and adjacent to therivers Sine and Saloua, the presence of hydromorphic soils with poor drain-

age and high salinLity also makes production very marginal.

Project ALrea

2. The project area would be confined exclusively to those areas in

the groundnut basin in which an extension service is provided, and wouldvirtually exclude the very marginal areas. It has been divided into three

specific zones, within each of which the conditions of climate, pedology and

demography are relatively homogeneous, although there are sufficiently large

variations between them to make it essential to consider each one separately.

These zones are shown on Map 2 and have been called North, Center and South

in accordance with their relative location. The Center Zone includes the

area around Diourbel which is the most densely cultivated in Senegal. Many

of the differences in these zones are brought out below. The most important

is the increase in yields from North to South due to higher rainfall and

better soil fertility the further one goes south and east.

3. Total land under cultivation in the project area would increasefrom 1.98 million ha in 1968/69 to 2.46 million ha in 1971/72, an increase

of 2450 over the three-year period. Most of this increase would occur in theSouth 'Zone, as is shown in the following table:

ANNEX 6Page 2

PercentMillion ha 1968/69 1971/72 increase

North: groundnuts 0.14 0.16 14millet 0.14 0.15 7

Center: groundnuts 0.37 0.40 8millet 0.36 0.42 17

South: groundnuts 0.34 0.43 26millet 0.23 0.28 22

Total: groundrnuts o.85 0.99 16millet 0.73 0.85 16other crops 0.16 0.18 13fallow 0.24 0.44 83

Grand total 1.98 2.46 24

Area under other crops has been estimated at 10% of the combined area undergroundnuts and millet. Fallow areas would increase from 12% of total cul-tivated land to 18% in 1971/72 (para 7).

4. The effect of the increase in total area under cultivation on thetotal available area for cultivation in the three zones would be as follows(figures in brackets being percentages of total available area):

Total CultivatedFlillion ha available 1°68/69 1971/72

North o.60 0.35 (58) 0.40 (67)Center 1.70 0.91 (54) 1.11 (65)South 1.60 0.72 (45) 0.95 (59)

Total 3.90 1.98 (51) 2.46 (63)

AN12TEX 6Page 3

Rural Population

5. The variations between the rural population in the three zonesare shown in the following table:

Unit North Center South Total

Rural population

1968/69 '000 166 524 307 9971971/72 c000 172 539 335 1,046Increase over period % 3 3 9 5

Farmers

1968/69 '000 29 83 54 1661971/72 ooo 30 66 60 176Increase over period % 4 4 12 6

Cultivated land per farmer(average)

1968/69 ha 11 10 12 111971/72 ha 13 12 15 13

In the North and Center Zones there would be a natural increase in thepopulation of 1% per annum. In the South Zone the increase would be 3%0annually, made up of a 15J natural increase and a 2% increase due to immigra-tion.

Yield and Price Assumptions

6. Assumptions as to yields and prices over a five-year period byzones are given in Table 1. Assumed groundnut yields vary considerablybetween the three zones (Table 1(1)). Increase in yields at the end of1971/72 over the base year 1968/69 is estimated to average 30% for the wholeof the project area. To achieve these yields average fertilizer densityover the same period would increase by about 40%. In the South Zone theincrease would be 17% only. This is due to the better natural soil condi-tions in the Zone, to the higher rainfall, to the heavier quantities of fer-tilizer used for millet during the crop rotation cycle, and also to the in-crease in the use of draft oxen (para 29), which would increase the avail-ability of natural manure. Millet yields also vary considerably betweenthe three zones (Table 1(5)), and would increase from an average of 475 kg/hain 1968W69 to 575 kg/ha in 1971/72, with a modest increase in average fertil-izer density from 16 kg/ha to 19 kg/ha.

7. Of importance to the achievement of the assumed yields for bothgroundnuts and millet is the advisability of increasing the proportion ofground under fallow each year. The theoretical proportion for optimum pro-ductivity is of the order of 25%, but at the present time only about 12% isunder fallow. The table in para 3 above shows an increase to 18% in theyear 1971/72, which should be achieved without difficulty.

ANETX 6Page 4

Seeds

8. The areas planted to groundnuts are calculated on the basis of100 kg of unshelled seeds per hectare. Of each 100 kg of unshelled seeds,about 70 kg of grains is produced, but of this only about 50 kg is suitablefor planting. Stocks are of very mixed quality, there being no effectivesupervision of the quality of seeds handed in or of their handling andtreatment during storage, since OIICAD has not the necessary technicalspecialists for this work. Once the relatively low cultural value of thesestocks can be improved, yields will rise accordingly. The reorganizationproposals for ONCAD (Annex 3) include provisions for technical control ofthe stockpile. It is also intended that the Centers of Rural Expansion

would be relieved of their present responsibility of selecting fields tobe used to produce seed stocks, which is being done in a very unsatisfac-tory manner.

9. Of the four selected varieties of groundnut seeds developed atthe experimental stations only one (variety No. 28-206 of 125 days vegeta-tive period) enjoys the general acceptance of farmers in the south of theproject area. This variety when pure gives yields of about 30% higher thantraditional varieties. The other three have shorter vegetative periods(90 to 120 days), and were developed to meet specific problems of soils,photo-periodism and drought which prevail in the north and northwest of thearea. As yet they do not enjoy general acceptance by the bulk of farmersin these districts, who still prefer to use the traditional varietieswhich, although less productive, have a natural resista-ice to drought con-ditions.

Pesticides

10. After being threshed and selected, groundnut seeds are treatedwith pesticides before sowing. Each 50 kg of seeds receives 100 grams ofa mixture of Thirame (fungicide) and Dieldrine (insecticide) in equal pro-portions by weight. This is the only treatment used in the country. Themixture is distributed to farmers by ON-CAD at the same time as the seeds,and the farmers pay in cash CFAF 50 for each 100 grams of the mixture. Thetotal volume of pesticides used in the project area is at present 80 tonsannually, which would rise to 94 tons in 1971/72. The use of pesticidesis almost exclusively confined to groundnuts, although small quantitiesare beginning to be used for cotton crops.

11. Groundnuts sown late are susceptible to attack by a virus called"Poseta". Those sown too early and harvested when immature, or those ex-posed to late rains, are liable to be attacked by a fungus disease of thefruits (aspergillus flavius) wJhich produces toxins dangerous to human andanimal health. The only recommended method of control is to sow and harvestcrops at the proper times.

AiaX 6Page 5

Fertilizer

12. For groundnuts three differeint formulae for fert-lizer have beenrecomm.ended by the research station and are in use, cne for each of the

zones, as follmos:

North: 12-10-10, equivalent, at a rate of 100 kg/ha, to12 kg N2, 10 kg P205 and 10 kg K20 per ha; plus2 kg of molybdenum compound ('lNutramine") per ha.

Center: 10-0-30, equivalent, at a rate of 100 kg/ha, to6 kg N2 and 30 kg K20 per ha.

South: 6-20-10, equivalent, at a rate of 100 kg/ha, to6 kg N2, 20 kg P205 and 10 kg K20 per ha.

For millet only one formula is recommended and used throughout the project

area: 14-7-7, equivalent, at a rate of 100 kg/ha, to 14 kg N2, 7 kg P205

and 7 kg '20 per ha.

13. On a not very well defined area in the South Zone having soils with

a loW level of phosphorus, a corrective dressing of about 50 kg of P205 per

ha is beginning to be applied, once every three to four years, in conjunc-

tion with deep plowing. At the present moment the practical results are not

well determined, although some research work shows that when phosphorusdeficiency is corrected there is a better response to nitrogenous fertilizer,with significant rises in the yields of groundnuts and millet,Although benefits are likely to be of a long-term nature, this dressingprogram is being continued until the results can be more accurately deter-

mined. Elsewhere in the South Zone it is possible in some demons-trationfields to identify benefits resulting from the application of green manures

in new scherres of crop rotation. These show tangi1ble improvements in yield

and quality of the harvests. Among selected groups of farmers the use of

locally made organic manures ard composts is beginning to grow, although asyet the benefits are not well quantified. This work is also being continueduntil the results become more apparent.

14. About 85' of all fertilizer in Senegal is applied to groundnutcrops, almost all of this being in the groundnut basin. The rest is used

mainly for millet, although consumption for the cotton crop is expected toincrease in the future. In the project area total consumption for ground-nuts and millet was about 59,000 tons in 1968/69. Estimated consumptionduring the project years would be:

Thousand tons 69/70 70/71 71/72 Total

Groundnuts 53.7 63.6 72.3 189.6Millet 14.9 15.7 16.5 47.1

Total 68.6 79.3 88.8 236.7

A OEIEX 6Page 6

15. As part of the production improvement prcgram (Annex 1, para 10),the Government operates a subsidy scheme for fertilizer used for groundnutsand millet. Details are given in Table 1. Government's general policy inregard to the subsidy is to reduce it gradually in such a way as to ensurethat tihe farmers appreciate the benefits of fertilizer and are not therebydiscouraged from using it. Goverrnment is prepared to subsidize fertilizerfor millet as much as is necessary to ensure adequate harvests to meet thecountry's food requirements. The subsidies are expected to disappear inthe mid-1970's.

16. Cost of fertilizer to the Government and to the farmers for theproject years would be as follows:

CFAF million 1969/70 1970/71 1971/72 Total

Groundnuts. Government 377 318 218 913Farmers 859 1,143 1,445 3,447

Iillet: Government 134 110 82 326Farmers 209 252 298 759

Total: Government 511 428 300 1,239Farmers 1,068 1,395 1,743 4,206

Grand total: 1,579 1,823 2,043 5,445

The total sums allocated for fertilizer subsidy under the production im-provement program financed by FED and the resulting shortfall would be asfollows:

CFAF million 1969/70 1970/71 1971/72 Total

Total project subsidy 511 428 300 1,239Program allocation 509 - - 509Shortfall 2 428 300 730

Government would meet any shortfall in the first year from its own fundsbut hopes to obtain at least part of the shortfall in the other two yearsthrough international aid.

17. A local deposit of phosphate rock (mineral calcium phosphate)with an average of 38% P205 is being worked at Taiba, 70 miles from Dakar,and a deposit of phosphal with an average of 34% P20< at Thies, producingcalcined and crushed aluminum phosphate. These supply all the local demandfor raw materials for phosphate fertilizer. In the past the balance ofrequirements for all types of fertilizer has been imported from EEC coun-tries. Although the Government buys almost the whole of the country'srequirements there has been no competitive bidding for supplies. The bulkof the nitrogenous fertilizer has been in the form of ammonium sulphate,one of the most expensive forms available.

AlflNEX 6Page 7

18. ITith the help of IFC a new company, Societe Industrielle d'Engrais

du cenegal (SIES) has been under construction since 1966 and started produc-

tion in IThrchl 1968. Output to June 30, 1968 was 25,000 tons,i/ and is ex-

pected to reach 90,000 tons per annum within two years. It has a planned

capacity of 125,000 tons per annum. The factory is expected to meet the

whole of Senegal's fertilizer requirements from the 1969/70 production year

ornards. The plant has been designed to produce the various grades and

formulae required for domestic consumption and to be sufficiently flexible

to meet export orders. It will use local phosphate rock and import the

balance of its raw materials. Capital cost is of the order of CFAF 3,100

million (US$ 12.4 million). IFC is investing CFAF 200 million in equity

(18%) and CFAF 665 million in loan, a total of CFAF 865 million (US$ 3.46

million). BNDS holds CFAF 140 million (10/%o) of the equity. Technical

assistance and management are provided by the Potasses d'Alsace Group. The

Government has granted SIES various concessions and investment incentives,

and has guaranteed to purchase a minimum of 60,000 tons annually at an

agreed price of CFAF 18 per kilo ex factory, which should enable SIES toearn 6" on its share capital. W-Jith economical use of transport this price

would enable distribution to the farmers, through ONCAD and the cooperatives,

at an overall delivered price of CFAF 23 per kg. The foreign exchangeelement of local production by SIES is estimated at 74% ex factory, which is

equivalent to 58% of the cost to farmers. It is not yet certain that the

cost of fertilizers to farmers can be stabilized at CFAF 23 per kg because

of the rising price of raw materials (notably sulfur), but in due course

SIES' costs of production are expected to decrease, which it is hoped would

offzet any increase in costs due to raw materials.

Imolements

19. The movement towards the use of imnlenents drawn by draft animals

has been under way for some years, and by the end of the last season (1967/

68) 75ro` of prolect farmers owned seeders and 49% cul.ivators, although only

1°, owned harvesters. At the end of the three project years more than 90%would oatm seeders, 80% cultivators and 40% harvesters. The ultimate objec-tive is for almost every farmer to own a seeder and cultivator, and about

8/o% to own harvesters. Total number required for the whole of the period

would be about 213,000 implements and 11,000 carts, with a total value of

about CFAF 2.4 billion (US$ 9.8 million). Of this, CFAF 1.1 billion (45%0)would be for replacement of existing implements and carts. Over the last

few years there has oeen considerable rationalization and standardization

in the design and manlufacture of the implements now in use, and some of the

requirements for replacement implements would be due to obsolescence and to

the non-availability of spare parts for some of the models formerly imported.

Assuming the carts as well as the implements were all made locally at the

SISCOMA factory (para 24), the foreign exchange component (at 27%) would be

about CFAF 640 million (USa 2.6 million).

1/ of mixed fertilizer

A1liD( 6Page 8

20. Only one basic design of seeder is used, having interchangeableplates for groundnuts and millet. This implement plows at the same timeas it seeds. Total number required during the period would be about 78,000,valued at CFAF 1.02 billion. All seeders would be supplied on credit.Cost to the farmer delivered through the cooperative would be CFATF 13,COOeach, advanced by a loan from BNDS repayable over five years at 5.5% perannum. SISCOMA has kept careful records of maintenance for all imolements,and calculates the average to be CFAF 40C per annum per seeder, which sumwould be found by the farmer from his own resources.

21. Two types of cultivators are in general use, although experiencein operating has brought out a preference for one of them. Total numberrequired during the period would be about 52,000, valued at COAF 0.67billion. A13 cultivators would be supplied on credit on the same terms asfor seeders. Cost to the farmer delivered through the cooperative wouldaverage CFAF 8,200 each. Maintenance is estimated to average CFAF 200 perannum per cultivator, which sum would be found by the farmer from his ownresources.

22. During the l965/66 planting season fork harvesters were intro-duced into the project area for the first time, and have enabled farmers toincrease their harvesting efficiency (in terms of crop recovered) fromaround 80% by hand to nearly 100%. Total number required during the pro-ject period would be about 53,000, valued at CFAF 0.39 billion. All har-vesters would be supplied on credit on the same terms as for seeders, thecost to the farmer being CFAF 7,300 each. Annual cost of maintenance isestimated to average CFAF 200 cer harvester which sum would be found bythe farmer from his ow-n resources.

23. A variety of designs of farm carts is in use, depending on thedraft animals used. There are at present some 36,oco carts throughout theproject area. It is not intended to increase their total number, but afurther 11,000 approximately would be purchased during the project period,based on an annual replacement ci about 10%, and would be available to thefarmers on the same credit terms as for implements, their cost averagingCFAF 27,000 each. Total cost would be CFAF 0.29 billion. SISCOMA suppliesabolat half the carts at present being sold. The balance is made by smallfirms which import wheels, tires and axles, and build a variety of bodiesto suit individual requirements. Maintenance has been calculated atCFAF 675 per cart per annum, which sum would be found by the farmer fromhis own resources.

SISCOMA

24. All the implements and about half the carts supplied during thelast three years have been manufactured at the SISCOMA (Societe IndustrielleSenegalaise de Constructions Mecaniques et de Materiels Agricoles) factorynear Dakar. SISCOMA was set up by Government in 1963 to fabricate agricul-tural and other machinery. It has a capital of CFAF 110 million, of whichBIDS holds 45%, the balance being held by seven French firms. One ofthese, Etts. Mouzon, with 10% of the capital, supplies the technical know-how. The companry is run entirely on cormercial lines, its only concession

ANINEX, oPage 9

from the Government being a waiver of income tax for the first eight years.It pays import duties on its raw materials. About 170 persons are employed,of which seven are expatriates. To date rm-ianufacture has been confined toagricultural implements, including carts. At first it manufactured numeroustypes of each implement, but more recently it has standardized mainly onthe types required for the project, thereby reducing costs of manufactureby about 5%. Apart from supplying the requirements in the groundnut basin,SISCOMA has made a few local private sales, and exports to neighboringterritories (Mali and Niger) reached 5% of total production last year. Itmaintains an improving spare parts service throughout the project area, andoperates a small training center at the factory, where farmers are giveninstruction in handling, operating and maintaining their implements. It alsopublishes diagrams of implements, including part numbers and names, whichare freely distributed among farmers, and has recently started a mobileservice unit to provide maintenance in the field. Farmers pay cash forspare parts.

25. Financially SISCO1iA is in a satisfactory position. Average capi-tal employed at present is around CFAF 450 million. Reserves as at July 31,1967 were CFAF 7h million. At the same date current assets were 30% morethan current liabilities. Met profit for the year was CFAF 31 million asagaLnst CFAT 42 million the year before, and stocks were up from CFAF 47 to77 million, due to anticipated increased output during the present financialyear and irregularity of shipments of raw materials. Turnover has increasedsteadily, from CFAF 404 million in 1965/66 to CFAF 675 million in 1967/68,and is expected to be of the order of CFAF 750 to 800 million in 1968/69.The company imports its steel requirements, nuts, bolts, castings and somespecialist parts from overseas, but does the maximum possible machining andfabrication on the premises. Consequently, the foreign exchange componentof the total cost of its output is relatively low, at 30%. This figure isreasonably constant, and is not expected to vary significpntly over the nexttlhree years, and has been used in tlhe project estimates.-' The price ofimplements ex factory averages 10% below the price at which they are sold tofarmners, so that the foreign exchange component is 27% of the cost to farmers.

Draft Animals

26. To date 27% of the project farmers own donkeys, 41% horses, and 1%pairs of oxen, making a total of 699% owning draft animals. At the end ofthe period the percentages would be about 35, h0, and 7 respectively, makinga total of over 80. Total cost of draft animals to the farmers over theproject period would be about CFAF 1.48 billion, of which CFAF 0.51 billion(34L%) would be by credit.

27. There are at present about 35,000 donkeys in the project area,one-fifth of which would be replaced each year. Total number (includingreplacements) required during the project period would be 48,000, an annualrequirement of 16,000, of which some 5,000 to 6,000 could be expected by

1/ On the assumption that project requirements would be purchased fromSISCOKA, although procurement would be by local competitive bidding(para 3.16 of the report).

ANNEX 6Page 10

natural reproduction from among the farmers' existing animals, while thebalance would be obtained from within the country. The total number ofdonkeys in the country is estimated to be about 100,000, so that about one-third is in the project area. A large semi-wild herd in the Dahra area inthe north of Diourbel Province is being increasingly exploited, the donkeysbeing captured and broken in before being sold. A price of CFAF 5,000 perhead has been used in the project estimates, which is a little above currentmarket prices. Total cost over the project period would be CFAF 240 mil-lion, of which CFAF 105 million (4Ii%) would be for replacement of existingdonkeys. All donkeys would be bought by the farmers from their own re-sources. No allowance has been made in the project estimates for anjy costof medicines and veterinary services for donkeys.

28. There are at present 66,600 horses being used by farmers in theproject area, with a gradual lessening in density from north to south.Horses cost six times as much as donkeys, whereas the amount of farm workthey are capable of doing per farm is about the same. They are much prizedfor their prestige value. It is not expected their numbers would increaseduring the project period, but that existing animals would be replaced ata rate of one-seventh of the total each year. Requirements during the pro-ject period would thus be 9,500 per annum, most of which could be expectedby natural reproduction, leaving a swell balance which could be expec'ed tocome from outside the project area. The total number of horses in thecountry is over 1303000, of which about half is in the project area. It isanticipated that most of the shortfall in the project area would come fromthe Fleuve Province, as has been the pattern for aome years. The averageprice of a horse is about CFAF 30,000 in the project area which gives re-placement cost over the project period of abou-t CFAF 855 million. Allhorses would be bought by the farmers from their own reasources. Annualcost of upkeep of a horse for medicines and veterinary treatment has beenestimated at CJAFJ 1,000, wlhich would continue to be paid by the farmer fromhis own resources.

29. There are at present 1,700 pairs of oxen in the -project area. Interms of total number of farmers, those owning pairs of oxen would rise fromthe present 1% to 7% at the end of the project period. There are well over2 million head of cattle in Senegal, and there would be no difficulty inobtaining the required numbers for the project. The-bottleneck is likelyto be the rate at which they can be trainfd, but the extension service hasestablished training centers, and would make a special effort to train them,The total number required during the project period (including replacePentat 250 pairs annually) would be 11,300 pairs. A price of CFAF 34,000 perpair has been used in the project estimates. In nrder to encourage theirgreater use, a loan covering the full cost of all oxen used on the pro jectwould be advanced to the farmers through the cooperative by BNDS, on thesame terms as for implements. Total cost over the project period would beCFAF 384 million. Annual cost of upkeep of a pair of oxen for medicinesand veterinary treatment has been estimated at CFAF 1,000, which would con-tinue to be paid by the farmer from his own resources.

AhINEX 6Page 11

Cost of Farm InDuts

30. Total cost of farm inputs for the three project years is givenin Table 6. The grand total for the period would be CFAF 10.0 billion(US$ 40.0 million). Of this total the farmers' cash contribution would be17%. Total credit advanced to the farmers would be CFAF 7.1 billion(US$ 28.4 million), or 71%, of which over one-half would be short-term forfertilizer; the balance medium-term for implements and draft animals.Total foreign exchange component would be CFAF 3.9 billion (Us$ 15.6 mil-lion), or 39ZJ of the total cost, of which almost four-fifths would be forfertilizer.

Groundnut Production

31. Estimated total production of groundnuts for the three projectyears compared with the base year would be as follows:

Unit 68/69 69/70 70/71 71/72 Increase (A)

North '000 tons 99 113 128 144 45 (45)Center " " 326 363 402 442 116 (36)South , t 398 4L68 552 624 226 (57)

Total " 823 944 1,082 1,210 387 (47)Seed reserve, etc. " " 149 169 194 218 69 (46)

Marketed U 674 775 888 992 318 (47)Income to farmers Frs billion 11.9 13.4 15.0 16.4 4.5 (35)

W: Increase between 68/69 and 71/72; figures in brackets beingpercentages of the 68/69 production.

Millet Production

32. Estimated total production of millet for the three project yearscompared with the base year would be as follows:

Unit 68/69 69/70 70/71 71/72 Increase (A)

IJorth '000 tons 54 57 59 66 12 (22)Center 'l 181 191 200 219 38 (21)South " " 164 175 186 203 39 (24)

Total " " 399 423 445 488 89 (22)

Consumed if 249 254 258 262 13 ( 5)1larketed it 150 169 187 226 76 (51)

Income to farmers Frs billion 2.7 2.9 3.0 3.4 0.7 (26)(A): Increase between 66/69 and 71/72; figures in brackets being

percentages of the 68/69 production.

AIN'IIEX 6Page 12

The amount consumed locally has been calculated on the basis of 250 kg perannum per head of the rural poDulation. There is no evidence to suggestthat with millet becoming more freely available the consumption per headwould rise in the project area. On the contrary, increases in farmers'incomes may stimulate the present small demand among them for the moresophisticated cereals, particularly rice and wheat. Total production of

millet would rise by one-third in the project area over the three-year per-iod. The quantities coming on to the local market would increase by 50%over the same period, which would mean a reduction in the local market price

(Table 1(8)). These quantities should, however, be readily absorbed in

rural areas outside the project, which could be expected to continue to

produce less than they consume. Gross income to farmers from millet produc-

tion would increase by one-fourth over the period.

Farmers' Incomes

33. Farmers' incomes are set out in Table 7, which brings out thedisparity between incomes in the South Zone and the other two zones

(para 5.07 of the report). Cost of farm inputs as a percentage of farmers'

gross income would be about the same in the three zones, and would increase

steadily due mainly to the increase in the cost of fertilizer, caused by

the reducing subsidy and by heavier application. Farmers' incentives,measured by incremental farm expenditure expressed as a percentage of in-

cremental income, would show considerable variations between the regions.As might be expected, in the relatively marginal Wqorth Zone, the incentiveswould be just adequate, whereas in the South Zone they would be very

attractive.

34. The overall picture does not bring out the question of adequateincentives for planting millet. The only variable farm input directly

attributable to millet is the fertilizer used on the crop. On this basis,

the ratio bettieen the annual incremental income from millet accruing to the

farrner and his incremental expenditure on fertilizer for the crop would beadequate on the acreages, yields, fertilizer density, and farmers' fertil-

izer prices set out in these estimates.

ANNEX 6Table 1

YIELD AND PRICE ASSUMPTIONS

(Groundnuts, millet and fertilizer)

Unit 67/68 68/69 69/70 70/71 71/72 72/73

(1) Groundnut yields Kg/ha

North 700 700 775 850 925 975Center 875 875 950 1,025 1,100 1,175South 1,175 1,175 1,250 1,350 1450 1,500Overall average 950 950 1,050 1,125 1,225 1,275

(2) Groundnut fertilizer density Kg/ha

North 28 28 35 42 49 55Center 35 35 43 51 58 64South 82 82 86 91 96 100Overall average 52 52 60 67 73 78

(3) Groundnut fertilizer price CFAF/kg

Cost to farmer 14 16 16 18 20 22Government subsidy 9 7 7 5 3 1Total cost 23 23 23 23 23 23

(b) Groundnut selling price (farmers) CFAF/kg

North 17.9 17.9 17.5 17.1 16.7 16.1Center 17.9 17.9 17.5 17.1 16.7 16.14South 17.5 17.5 17.1 16.7 16.3 16.0Overall average 17.7 17.7 17.3 16.9 16.5 16.2

(5) 1Millet yields Kg/ha

North 350 b0 400 400 1425 1425Center 150 500 500 500 525 525South 600 700 700 700 725 725Overall average 475 550 550 550 575 575

(6) Millet fertilizer density Kg/ha

North 11 13 13 13 13 13Center 10 114 14 1 1b4 11South 26 31 31 31 31 31Overall average 16 19 19 19 19 19

(7;, Rillet fertilizer price CFPF/kg

Cost to farmer 10 12 12 14 16 18Government subsidy 13 11 11 9 7 5Total cost 23 23 23 23 23 23

(e) i'illet, selling price (farmers) CFAPAg

All zones 20 18 17 16 15 114

r A ./-1<] 3U?F K3TiKArI5s; ''0RTc ,

To-. CL Zone Inc-ome and 3x eniliture

TTinC?A mfrillions,

.- : 1967/68 19( £7TS 1962Z?O 197iq. 972 1972/73

I NCOME

Groi-I:ndnuts 1,396 1,.§- 1,62. 1,796 1,971 2,116iillet 83 22< 247 26L 335 3i3Gross inr.ome (A) ,79 1, 1,87 2,060 2,306 2,59

FARI4 EXPENDITURE

Pesticides 7 7 7 7 8 8Fertilizer cost 68 8L 108 150 189 236Fertilizer interest 3 L 6 8 9Implements repay loan capital 6L 80 93 106 116 125Implements loan interest 16 18 20 20 21 22Implements maintenance 15 17 19 20 22 24Draft animals cash purchase 61 63 65 66 69 72Draft animals repay loan capital - 1 2 3 5 7Draft animals loan interest - - 1 1 1 2DrIaft animals upkeep 1 lb 14 13 13 13Total expenditure (B) 248 287 333 392 452 518

NET INCOME 1,231 1,388 1,5h2 1,668 1,854 1,941l

ITNCRErENTAL 5-year total

Gross income (C) 980 - 196 200 1B5 2L6 153Farm expenditure (D) 710 - 157 158 126 186 87(D) as % (C) 72 - 77 69 76 57

(B) as % (A) 17 17 18 19 20 21AVEMPGE NET ING0CE PER FAR!'EEA ('000 frs) L L8 52 56 61 6b

FAIRM BUDGET ESTIMATES: CENTER ZONE

T,otal Zone Income and Exaenditure(in CFAF millions)

Year 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73

I1NCOIIE

Groundnuts 4,654 L ,779 5,215 5,6h3 6,045 6,511

Millet 497 901 988 1,054 1,265 1,298

Gross income (A) 5,151 5,680 6,203 6,697 7,310 7,809

FARM EXPENDITURE

Pesticides 18 19 19 20 20 21

Fertilizer cost 211 269 337 449 572 702

Fertilizer interest 8 11 13 18 23 28

Implements repay loan capital 177 224 265 305 337 361

Implements loan interest 42 50 55 58 61 66

Implements maintenance 42 48 53 59 65 70

Draft animals cash purchase 169 174 178 173 187 185

Draft animals repay loan capital 1 4 10 20 36 59

Draft animals loan interest 1 1 2 4 5 6

Draft animals upkeep 36 37 37 38 38 39Total expenditure (B) 705 837 969 1,11th 1,344 1,537

NET INCOME 4,446 4h,843 5,234 5,553 5,966 6,272

INCRE4ENTAL 5-year total

Gross income (C) 2,658 - 529 523 494 613 499

Farm expenditure (D) 832 - 132 132 175 200 193

(D) as % (C) 31 25 25 35 33 39

(B) as - (A) 14 15 16 17 18 20

AVERAGE NET INCOME PER FARMER ('000 frs) 54 58 62 65 69 73

.- tr', " !' . _5' 711RAT7S: S UT , '1T'.

e...!? Incomie anc r.oend .re(in IFAF 1mil o n S

ar 1967/68 196'/69 190'9/70 1 ?70/71 1971/72 1972/73

'Irouidnuts 5,128 5,705 6,566 7,565 8,3Lc3. 8,86b;ille; lll;5 ~~~~~~~~~~~~1,575 _1L629 1,663 l,9l 1,799

Gross income (A) 6 273 7,280 8,1?5 0,228 10,lO 10,66

FA,Rl EXPEITDITUR7E

Pesticides 15 17 19 21 22 22

Fe-tilizer cost h08 532 623 801 98,2 1,174

Fertilizer interest 16 21 25 32 39 )47Implements repay loan Capital .li 180 213 2)4 268 287Implements loan interest 35 40 )46 b8 52

Implements maintenance 34 39 L3 47 52 56Draft animals cash purchase 157 130 104 77 50 21Draft animals repay loan capital 1 3 14 32 57 89Draft animals loan interest 1 b 8 13 19 26Draft animals upkeep 18 20 23 25 28 30Total expenditure (B) 829 986 1,116 1,338 1,565 1,804

-L1ST 1SUOME 5,U4)4 6,29)4 7,079 7,890 8,575 8,859

INICRE1MNTAL 5-year total

Gross income (C) 4,390 - 1,007 915 1,033 912 523Farm expenditure (D) 975 - 157 130 222 227 239(D) as % (C) 22 - 16 1)4 21 25 46

(3) as :" (A) 13 1) i, 15 17AVfRAGE NET INCOMI-T P-ER FAWC' 13. ('00 frs) 104 117 127 137 1)!1 1)'

_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 12_3 1

FARM BUDGET ESTIMATES: PROJECT ARFA

Total Income and Expenditure(in CFAF millions)

Year 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73

INCOME

Groundnuts 11,178 11,934 13,409 15,004 16,362 17,h91Millet 1,725 2,701 2,864 _ 2,981 3,394 3,440Gross income (A) 12,903 14,635 16,273 17,985 19,756 20,931

FARM EXPENDITURE

Pesticides -40 43 45 48 50 51Fertilizer cost 688 886 1,068 1,395 1,743 2,112Fertilizer interest 28 35 43 56 70 85Implements repay loan capital 385 484 571 655 721 773Implements loan interest 93 108 119 124 130 140Implements maintenance 91 104 115 126 139 150Draft animals cash purchase 387 367 347 316 306 278Draft animals repay loan capital 2 8 26 55 98 155Draft animals loan interest 2 5 11 18 25 34Draft animals upkeep 68 71 74 76 79 82Total expenditure (B) 1,784 2,111 2,g19 2,869 3,361 3,860

NET INCOME 11,119 12,524 13,854 15,116 16,215 17,062

INCREMENTAL 5-year total

Gross income (C) 8,028 - 1,732 1,638 1,712 1,591 1,355Farm expenditure (D) 2,076 _ 327 308 450 492 499(D) as % (C) 26 - 19 19 26 31 37

(B) as % (A) 14 15 15 16 17 19 C xA'JERAGE NET INCOIME PER FARPEUR ('300 frs) 68 75 80 88 92 96 4i ,

ANIr;x 6Table 6

TOTAL COST OF FARM INPUTo(in CFAF millions)

Year 69/70 70/71 71/72 Total (Percent)

Pesticides 45 48 49 142 1)Fertilizer 1,579 1,823 2,041 5,443 ( 54)Implements cost 768 771 824 2,363 ( 24)Implements maintenance 115 126 139 380 ( 4)Draft animals cost 465 494 520 1,479 ( 15)Draft animals upkeep 74 76 79 229 _ 2)

Total cost 3,046 3,338 3,652 10,036 (100)

of which:Farmers' cash

Pesticides 45 48 49 142Implements maintenance 115 126 139 380Draft animals purchase 347 316 306 969Draft animals upkeep 74 76 79 229

-l'otal farmers' cash 581 566 573 1,720 ( 17)

Credit

Implements (medium-term) 768 771 824 2,363Draft animals (medium-term) 118 178 214 510

Total medium-term 886 949 1,038 2,873 ( 29)Fertilizer (short-term) 1,068 1,395 1,743 4,206 ( 42)

Total credit 1,954 2,344 2,781 7,079 ( 71)

Subsidy (fertilizer) 511 428 298 1,237 ( 12)

Total cost 3,046 3,338 3,652 10,036 (100)

Foreign exchange component

Pesticides 41 43 44 128 ( 1)Fertilizer 916 1,057 1,184 3,157 ( 32)Implements 207 208 223 638 ( 6)

Total 1,164 1,308 1,451 3,923 C 39)

ANNEX 6Table 7

FARMERS' INCOTES

(derived from Tables 2 through 5)

Year 67/68 68/69 69/70 70/71 71/72 72/73 Average-/

(1) Average net income per farmer (CFAF thousands)

North 43 48 52 56 61 6b 56Center 5 58 62 65 69 73 65South 104 117 127 137 1b1 144 131

Overall average 68 75 80 88 92 96 86

(2) Cost of farm inputs as % farmers' gross income

North 17 17 18 19 20 21 19Center lh 15 16 17 18 20 17South 13 lb 1l 15 15 17 15

Overall average 11 15 15 16 17 19 16

(3) Incentives: Incremental farm expenditure as % incremental income

North - 80 77 68 76 57 72Center - 25 25 35 33 39 31South - 16 14 21 25 4 22

Overail average - 19 19 26 31 37 26

1/ Five-year average 1968/69 through 1972/73

AMNNEX 7

PROJECT COCRDIMATIN COMMITTEE

The following summarizes the main provisions of the draft Presidential Decree to set up the above Committee to ensure the satisfactoryexecution of the project (para 4.O1 of the report):

Decree

(1) The Committee will be composed of the following members:

The Secretary of the Groundnut CommitteeRepresentatives of the following:

Minister of Planning and IndustryMAinister of FinanceMinister of Rural DevelopmentDirector General of BNDSDirector General of ONCADDirector General of SODEVA

(2) The Committee will meet when convened by the Chairman, atleast once per month, and will keep minutes of eachmeeting.

(3) The Chairman will be a senior official nominated by theMinister of I'lanning and Industry.

(4) The Committee will be responsible for the proper executionof the project, and for the detailed operations as describedin the addendum, including the annual program for farmequipment, the extension program and all necessary docu-mentation relating to the progress of the project.

(5) The Committee will also be responsible for collecting andcollating all the information required by Bank/IDA andfor forwarding it to Washington.

(6) The Committee will be responsible for the qualificationsof technical assistance personnel and their replacements,the rate of increase of production, improvements in themarketing of groundnuts, the progress of the reorganizationof ONCAD and the functioning of SODEVA.

(7) The Ministers of Planning and Industry and of Rural Devel-oprment, and the Secretary General of the Presidency, inaccordance with their specific legal responsibilities,will ensure that the duties set out in the addendum arecarried out by the various organizations concerned.

ANM; 7Fage 2

Addendum

The Committee will be responsible for the control and coordina-

tion of the annual buying programs by ONCAD on behalf of the cooperatives

for implements, fertilizer, insecticides and other farm inputs financed by

credits agreed for the cooperatives by BMDS, in accordance with the

following:

(1) For each planting season SODEVA will discuss with theindividual cooperators their needs for farm inputs, andin agreement with the cooperatives, submit to ONICAD, BNDS

and the Committee the consolidated credit demands of thecooperatives.

(2) BENDS will determine the credit it will grant to each

cooperative, and ONCAD will prepare the consolidatedorders for farm inputs.

(3) The Committee will examine the credit demands from thecooperatives, BMDS' proposals for granting credits, andONCAD's proposals for ordering farm inputs, and will thenestablish the program to be followed for the plantingseason and submit it for approval of the President of theRepublic. ONCAD and BMDS will subsequently agree with

each cooperative its buying and financing program.

(4) In accordance with the approved program, ONCIAD will orderthe farm inputs, pay for them and deliver them to the

cooperatives.

(5) BNDS will give each cooperative a credit for the amountof approved farm inputs under the program, and pay ONCADaccordingly. Cooperatives will repay the credits from

the proceeds of the sale of their groundnut crops in

accordance with the agreed credit repayment schedules.

(6) The whole of the marketable groundnut crop of the coopera-

tives will be sold to ONCAD, which will ensure that BNDSreceives repayment for credits, and the balance of the

proceeds will be paid in cash to the cooperatives.

PHDUCT ION IMPRVEKENT PROGRAM

Econmaic Rate of Return

*NIT 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75

OUTPUT

Estimated production without program

Groundnuts marketed '000 ts65 5 62 65 796 _ 36 878 922

value (1) CFAF miilion 15,820 Ž5,385 15,97k 13,493 13,396 l,709 1b,781 lk,0oE 13,627 13,170 12,724

Millet marketed value 50 100 200 350 500 600 700 800 900 1.000 1,000

Total value 15.870 15.,485 16.174 13.843 13,896 l.679 15,481 14.810 1,.527 14.170 13,724

Estimated production with program(2) (2) (2)

Groundnuts marketed '000 tcns 565 69?(7 562 631 674 775 888 992 1.o80 1.13, 1,191value (1) CFAF million 15,820 18,10k 14,387 12,999 13,1 3 15,113 17,316 17,459 17,604 17,010 16,436

Millet marketed value 50 69 35 1.540 2.790 3,060 3,26k 3.915 4.ooo 4.ooo 4,000

Total value n 15.870 18.173 144.22 1L,539 15.933 18,173 20,580 21,374 21,604 21,010 20,h36

Incremental value from program

Actual frcm above n 2,688 (1,752) 696 2,037 3,149s 5,099 6,564 7,077 6,840 6,712

AdJusted for weather variations n 150 500 1.000

INPUT

Fertilizer increasnt 161 621 1,039 1,193 1,4i8 1,662 1,880 2,083 2,239 2,439

Implementa exclwiing replacaent 367 392 b12 424 b30 h32 k37 450 150 150

Animals " 105 115 127 135 ILL 153 161 170 125 50

Pesticides & maintenance incre mt n 20 40 69 88 1014 120 138 152 168 175

Extension services 376 392 446 569 522 41b o00 350 300 300

Management services ONCAD 230 213 213 50 50

Other program costs:Processing facilities " 7 945Storage improvement 67 69

Seed improvement 50 47 85 52 L2 50 50 50

Soil conaervation 1n 45 70Rural expansion centers 200Training centers n 12 36 10 20 20 10 10

Total cost output 1 1.07Q 1.619 2,50? 3.760 2,963 3.064 3,126 3,265 2,982 3,1114

NET COST " 929 1,119 1.502 1.723

NET BENEFIT 531 2.o35 3,438 3,812 3,858 3,598

(1) fob value less transportation and marketing costs (2) Actual

RATE OF RETURN - 25 percent approx.

- ~~~~~~~~~~~~~~~~~~~~~~SENEGALO 2 5 5 0 75 100. t -^SE GARAINFALL

AND CULTIVATIONPERCENTAGE OF CULTIVATED LAND

1 + ;T ,oU X Hi :; X C *~~~~~~~~~~~~~~~~~~~~~~3 ESS THAN En

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OUGASENEGAL

PROJECT AREAPOU L

OAHRA North area

r~J~Z~Central area~~ ~South area

Paved roads

Earth roads

H----*-4±--Railway

CAYAR~~~~~~~~~~~~~~~~~~~~~~.-- International boundary

Provincial boundaries

Airport

Phosphate mines

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JULY 1968 IBRD-2242R