Documen

The World

For OMCAL L

Repwt No. 9936

PROJECT COMPLETION REPORT

ZAMBIA

SMALLHOLDER DAIRY DEVELOPMENT PROJECT(CREDIT 1196-ZA)

OCTOBER 9, 1991

Agriculture Operations DivisionSouthern Africa DepartmentAfrica Regional Office

This document has a restricted distribution and may be used by recipients onI in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

IJ

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCYEOUIVALENIS

Currency Unit Zambian Kwacha (K)USS1.00 K 0.9- (1982)US$1.00 K Vf7 (1988)1 SDR K 1.12 (1982)1 SDR K 10.7 (1988)

WEIGHTS AND MEASURES

1 hectare (ha) 10,000 m2 = 2.47 acres1 kilogram (kg) = 2.204 pounds (lb)1 metric ton (ton) = 1,000 kg = 2,204 lb1 liter (1) 0.26 US gallon = 2.1 pints

GLOSSARY OF ABBREVITA IONS

AFC - Agricultural Finance CompanyARPT - Adaptive Research Planning TeamCFC - Cattle Finance CompanyDPB - Dairy Produce BoardGNP - Gross National ProductGRZ - Government of the Republic of ZambiaIDA - International Development AssociationIFAD - Intemational Fund for Agricultural DevelopmentLINTCO - Lint and Cotton Company Ltd.MAWD - Ministry of Agriculture and Wate- DevelopmentNRDC - Natural Resources Development CollegePAO - Provincial Agricultural OfficerPMU - Project Management UnitPVO - Provincial Veterinary OfficerSAR - Staff Appraisal ReportSDDP - Smallholder Dairy Development ProjectSPCMU - Southern Province Cooperative and Marketing UnionUNZA - The University of ZambiaZADL - Zambia Agricultural Development Ltd.ZIMCO - Zambia Investment and Mining Company

GQOVERNMENT FISCAL YEAR

January 1 - December 31

FOR OFFICIAL UUn ONLYTNE WOtLD BANK

W?0ingto, O C 20433U S A

OUt. of of.tedneCw".

October 9, 1991

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report - ZambiaSmaltholder Dairy Development Proiset (Credit 1196-ZA)

Attached, for your information, is a copy of a report entitled"Project Completion Report - Smallholder Dairy Development Project (credit1196-ZA), prepared by the Africa Regional Office with Part II of the reportcontributed by the Borrower. No audit of this project has been made by theOperations Evaluation Department at this time.

Attachment

This document has rauictd dittibution *nd may be used by recipients only in the ptfofuerceof their officw dutus. Its contents may not otherwise be discosed without Wod Bank suthuiattion.

FOR OFFICIAL USE ONLY

PROJECT COMPLETION REPORT

ZAMBIA

SMALLHOLPER DAIRY DEVELOPMENT PROJECT(CR, ', 196-:ZA)

TA,B3LE OF -CONTENT

Page No.

Preface .............................. ...... iEvaluation Summary ............ iii

PART I PROJECT REVIEW FROM BANK'S PERSPECTIVE

Project Identity ............ IBackground ............ 1Project Objectives and Description ........ .... 2Project DE5ign and Organization ....... ..... 3Project Implementation ............ 4Redesign of the Project ............ 5Project Results ............ 5National Impact ............ 7Project Sustainability ............ 8Bank Performance ............ 9Borrower Performance ............ 10Project Relationship ............ 11Consulting Services ............ iIProject Documentation and Data .................. 11

PART I1 PROJECT REVEW FROM BORROWER'S PERSPECTIVE

Introduction ............ 12Project Objectives ............ 12Project Design and Organization ...... 3...... Project Implementation ......................... 15Project Sustainability .......................... 15Bank's Performance ........................... 16Borrower's Performance ....... ................. 16Lessons Learned .............................17Statistical Information ..........................17Conclusion ................................17

PART ml STATISTICAL INFORMATION

Related Bank Loans and/or Credits .... ..... 18Project Timetable ......... 19Disbursements ............ 20

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS (CONT'D)

Project Implementation ........................ 21Project Costs .............................. 22Project Finadcing ........................... 23Project Results ............................. 24Status of Covenants .......................... 25Staff Missions ............................. 27

MAP !BRD 15776

PROJECT COMPLETION REPORT

ZAMBIA

SMALLHOLDER DAIRY DEVELOPMENT PROJECT(CR. 1196-ZA)

PREFACE

This is the Project Completion Report (PCR) for the Sinallholder DairyDevelopment Project in Zambia, for which Credit 1196-ZA in the amount of SDR 6.7million was approved on December 15, 1981. The project was redesigned and scaleddown subst:.utially in 1983. The credit amount was subsequently reduced to SDR 1.9million. Tne credit was suspended on May 1, 1987, when the Bank suspendeddisbursements to the Government of Zambia. The amount disbursed was SDR 1.32million.

The PCR was jointly prepared by the Agricultural Division of the TechnicalDepartment of the Africa Region (Parts I and III) and Part II was prepared by theBorrower.

The report is based, inter alia, on the Staff Appraisal Report, the DevelopmentCredit Agreement, the Guarantee Agreement and the Project Agreement, supervisionreports, correspondence between the Bank and the Borrower, and internal Bankmemoranda.

PROJECT COMPLETION REPQRT

ZAMBIA

SMALLHOLDER DAIRY DEVELOPMENT PROJECT(CR. 1196-ZA)

EVALUATION SUMMARY

Project Objectives

While the urban demand for milk in Zambia was steadily growing in the 1970s,domestic supply was sharply declining due to the closure of two thirds of the commercialdairy farms. The Dairy Produce Board (DPB) was partially meeting the milk shortfallby reconstituting imported milk powder. This effort was severely constrained by lackof foreign exchange. The objective of this project was to spearhead the methodology forincreasing the supply of milk from smallholders through strengthening of extensionservices, production and distribution of cross-bred dairy cattle, provision oi'-redit, milkcollection and sales services and improvement of producer incentives. The project wasdesigned as a limited pilot effort in three districts with a view to launching a moreambitious nation-wide project on the basis of the experience gained.

Project Implementation

The project suffered a traumatic start-up due to administrative and technicaldifficulties, which led to a major redesigning and scaling down of the project in scopeand coverage in 1983, a year after implementation started. The credit was reduced by72% from SDR 6.7 million to SDR 1.9 million. The number of participating farmerswas scaled down from 1,800 to 150. The major reason for this downswing was theunavailability of cross-bred heifers for distribution to farmers. Zimbabwe, the principalsource of supply, banned the export of breeding animals due to a reduction of its livestockpopulation during the 1981/82 drought. The second source of breeding heifers was theChisamba Ranch run by Zambia Agricultural Development Limited (ZADL), a governmentparastatal, which did not cooperate in implementing the cross-breeding program (see para.8).

Preparation on the part of government to start the project was not adequate.Counterpart funds were not made available on time as these were not provided in theforward estimates, and unfamiliarity with IDA procurement procedures considerablydelayed the importation of vehicles. The high degree of coordination expected of the fourgovernment agencies, namely Ministry of Agriculture and Water Development (MAWD),Dairy Produce Board (DPB), Cattle Finance Company (CFC) and Zambia Agricultural

- iv -

Development Limited (ZADL), responsible for the implementation of different componentsof the project did not materialize.

While the project could not get off the ground at the scale initially designed andenvisaged at appraisal, it was successfully implemented in the redesigned scaled downversion, far surpassirir the revised targets. Milk collection and sales even surpassed thetargets of the much larger original project, although much of it was tapping existing ratherthar incrementzl production. In 1987, over one million liters of milk were collected andsold. In the original project, this level of milk collection would have been achieved inthe fourth year from three times the number of farmers. However, only half of this milkwas incremental production.

Project Impact

The redesigned project's services reached 238 smallhoiders compared to the target of 150.The p_j+ r,- -pplied 433 cross bred cattle to 115 smallholders. Concentrate feed andveterinary drugs were supplied at cost. In addition to the daily collection of milk,veterinary and animal husbandry extension services were provided regularly. Participatingfarmers were able to increase their milk production and their incomes. The milkproduction achieved by project farmers averaged 1,920 liters per lactation of 240 daysfor the cross-bred cows compared to 459 liters over 163 days for the local cows. Calvingpercentage at 69% was much higher than projected. Calves of the cross-bred cows wereheavier and grew faster. However, mortality rates of calves and adults remained high,indicating the ieud for a more irtensive animal health care/extension program. The pilotproject demonstrated a successful integrated system of milk pr'duction by smallholdersrearing crossbred cows supported by extension and marketing services. A proposal wasmade in 1988 to incorporate the successful experience into a larger project of significantimpact that would involve 700 farmers raising 2,700 crossbred cows under intensivemanagement and crossing of 14,000 zebu cows under semi-intensive management. Theincremental milk production of the proposed development was estimated at 14,000 litersper day. The proposed follow-up did not materialize due to lack of donor finance. IDAhad suspended all of its operations in Zambia since July 1, 1987 because of Government'sdefault on its credit repayment.

Project Sustainability

The project overcame the financial difficulty caused by IDA suspension ofdisbursement in 1987, one year before the closing date of the project. At this juncture,the Zambian deputy manager took over as project manager. The project serves 238smallholders and its earnings from the sale of milk and inputs are sufficient to cover thesalary of all project staff while paying project beneficiaries (smallholders) adequateproducer prices for their milk supply. The veterinarians and field extension staff havedeveloped appropriate technology (crass-breeding of indigenous species) which has beensuccessfully extended to project beneficiaries. The project has also invested in buildingsfor offices and milk selling outlets. However, the continuity of the development started

v

by the pilot project could be impaired if the project activities are transferred to ZIMCO(Zambia investment and Mining Company), which has no experience in developmentalmatters. If the project activities were transferred to ZIMCO, veterinary and animalhusbandry extension seriices should continue to be provided by the Ministry (para. 22).A follow-up project that would replicate the success of the pilot would be feasible. Themarket and the technology exist. Commercial farmers and smallholders could supplycrossbred heifers. However, improvements would be required in the administration ofan effective extens'on service. Staff with the basic skills are available and, withappropriate in-service training and some technical assistance, they would be capable ofimplementing an expanded project.

Findings and Lessons Learned

The main lessons learned from this project are the following:

- Smallholder dairy development in Zambia is viable if cross-bred heifers and inputsare made available and dependable animal health and extension services areprovided.

- By selling milk in raw or sour form, the project showed that expensive milkpasteurizing and processing plants are not absolutely essential in the initial stagesof dairy development. Once the profitability of dairy production was recognizedin the farming community, farmers were willing to pay market prices for cross-bredanimals and finance the purchase from their own resources.

- The availability of improved breeding stock is crucial to a dairy developmentscheme. The breeding farms to supply these need to be developed three to fiveyears in advance of the time distribution to farmers is to start, especially whenimportation is too expensive.

- Sustained effort in extension and adaptive research would be needed in order todemonstrate the advantages of supplementary feeding and planted fodder. Althoughsmallholders readily purchased cross-bred cows and accepted animal health serviceadvice, extension efforts directed towards improved nutrition succeeded inconvincing only the most progressive farmers. The establishment of improvedfodder was unsuccessful due to the high cost of fencing materials and high laborrequirements.

- Proper orientation of project staff in Bank procurement and disbursement proceduresand more intensive Bank supervision during project start-up would have helpedavoid major procurement and disbursement problems, whose adverse effects werefelt throughout the project life.

- The Bank should consider the active involvement of local staff in resident missionsin supervising project start-ups (para 27).

- vi -

- The designation of a competent local counterpart to co-mange the project from theoutset could not only avoid initial bureaucratic lapses in procurement, funding, andassignment of qualified staff to the project, but also pave the way for maintainingbetter relationships with the management consultants (para 30).

PROJECT COMPLETIQN REPORT

ZAMBIA

SMALLHOLDER DAIRY DEVELQPMENT PROJECT(CREDIT 1196-ZA)

PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE

A. Proiject Identjuy

- Project Name Zambia Smallholder Dairy Development Project- Loan and/or Credit No. 1196-ZA- RVP Unit Africa- Cot ntry : Zambia- Sector Agriculture- Subsector Livestock

B. Background

Agricultural Sector Development Objectives

1. At the time of app'raisal, despite Zambia's considerable agricultural resource base,the performance of the sector had been far below its potential. In 1981, it contributedonly about 15 per cent to the GNP. There had been a declining trend in per capita outputof food and food imports had been increasing. The critical constraints to agriculturaldevelopment had been ineffective institutions, inadequate capacity to plan and managethe sector, and inappropriate policies. The development objectives of GRZ for the sectorwere to substantially increase agricultural output to meet domestic requirements for themajor staple crops, and to increase import substitution in commodities for which Zambiahas a comparative advantage (e.g., dairy and poultry products and vegetable oils andcakes). Developing smallholder farming, which had been the least dynamic source ofgrowth in the post-independence era, was to be given high priority. Not only would thisincrease the production of food, but also would directly increase the well-being of the ruralpopulation and increasE effective demand for industrial output. GRZ would strengthenits extension services, provide foreign exchange for importing essential inputs and providebetter incentives and improved marketing services in support of the sector's development.

2. In the dairy sub-sector, while the urban demand for milk was steadily growing,domestic supply for this market, which depended heavily on large scale commercialproduction, had declined significantly (from 15 million kg. p.a. in 1964 to, respectively,10.5 and 5.5 million kg p.a. in 1974 and 1980). This was mainly a consequ1..ce of thereduction in the number of commercial dairy farms from about 120 in 1964 to 40 in 1974because of uncertainties in land tenure policy and the future of these farms afterindependence. The prevailing low milk prices which were Government controlled alsocontributed to this reduction. The Dairy Produce Board (DPB), a parastatal monopoly,was partially meeting the shortfall in milk supply by reconstituting imported milk powder.

- 2 -

TIhis effort was being severely constrained because of lack of foreign exchange due toZambia's unfavorable trade baiance. The project, with em:phasis on smallholder dairyproduction was therefore, part of the GRZ's strategy to reduce import dependence andto improve rural income and well-being.

C. Project Objectives and Description

a. Project Objectives

3. The objective of this project was to spearhead the methodology for substantiallyincreasing the supply ot milk from smallholder production through strengthening extensionservices, production and distribution of cross-bred dairy cattle, provision of credit andmilk collection and selling services, and imnro'ed incentives to producers.

4. As substantial technical and social difficulties were foreseen at appraisal indeveloping commercial milk production from small-scale subsistence farms, the projectwas designed as a limited pilot effort in three districts (Mazabuka, Monze and Kabwe).It was anticipated that a more ambitious nationwide dairy production, processing andmarketing project would be launched at a later stage on the basis of the experience gained.The project would, over a six year period, assist about 1,800 farmers develop pasturesand water supplies, acquire improved dairy stock ard adopt improved husbandry practicesand produce surplus milk for sale. The project would support this development throughcoi -tlinated provision of technical services in animal husbandry and health care extension,input supplies, credit, milk marketing and training programs for both farmers and theextension cadre.

b. Project Components

5. Specifically, the project would finance the following components:

(a) Farmn Development. Technical services in farm development and training in dairyproduction would be provided to two categories of farmners. About 600progressive farmers (Type A) would be assisted to develop dairy production unitswith five cross-bred cows and a cross-bred bull. The natural pasture would befenced and farmers would grow forage. Credit would be available to finance farminvestment. Farmers would put up 20% equity and the labor required to intensifyproduction. Type A farms wouid be developed in clusters cf 8 to 10 v ithin 4 km.of milk collection centers to be established along all weather roads. About 1,200traditional farmers (Type B) would take advantage of the improved extension andveterinary service and the milk collection system to sell surplus milk. Creditwould be provided to this group to purchase cross-bred bulls. Annual incrementalmilk production would reach 1.4 million liters at the end of PY5 of the projectand 2.3 million liters at the end of PY10.

(b) Extension and Veterinay Services would be intensified and improved in the three

- 3 -

districts. Staff would receive specialized raining in dairy production, and additionalveterinary staff would be provided along with three expatriate volunteer veterinaryofficers. Project funds would be available for the procurement of vehicles,motorcycles, equipment, housing and veterinary inputs. Cattle wouid be vaccinatedannually and sprayed regularly against ticks. Calves would be dewormed three timesduring the year. Participating farmers would be trained in dairy husbandry at fannertraining centers.

(c) C,Li. The Cattle Finance Company (CFC) would administer the creditcomponent to participating dairy farmers. Project funds would provide for theincremental investment in office buildings, office equipment and vehiclesnecessary to administer and supervise the credit.

(d) Heifer Farm Development and Production. As there was no adequate and reliablesupply of cross-bred cattle in Zambia, project funds would be provided to convertthe Government-owned Chisamba Ranch to producing cr.ss-bred cattle. Theproject would finance capital improvements in ranch infrastructure, vehicles,tractors, equipment and staff housing as well as the services of an experiencedexpatriate ranch manager. The ranch would rear 4,000 livestock units supplyingabout 550 cross-bred heifers p.a., which would only meet 55% of the project'sneed of 1,000 heifers in PY3. The remaining heifers would be supplied fromother parastatal and private commercial farms.

(e) Milk Collection Services. DPB would establish a milk collection system in theproject area. Funds would be provided to establish and operate 25-30 milkcollection depots and two milk cooling centers, and to acquire a fleet of milkcollection vehicles and equipment and supplies to operate the system.

(f) Project Manent Unit (P . A PMU would be established under theMinistry of Agriculture and Water Development (MAWD) for implementationand execution of the project. A project manager and financial controller wouldbe internationally recruited.

D. Projec Design and Organization

6. The project was well prepared and the conceptual foundation of the project wassound at the time of prepaation. Although the attempt to intensify smaUlholder dairyproduction using cross-bred animals might have been innovative in Zambia, the conceptwas familiar in Bank financed projects in Kenya, Ethiopia, and Tanzania as well is inother parts of the world. In retrospect, the scope and scale of implementation seem tohave been overambitious, given the limited availability of Zambian management andextension staff. Although there seems to have been a good understanding of the projectby the four participating institutions at the time of preparation (i.e., MAWD, DPB, CFCand ZADL), the high degree of coordination required in its implementation proved difficultto achieve and the project suffered immense administrative problems soon after

- 4 -

implementation started. There was little preparatory work done on the part of the GRZto start its implementation. The supply of -cross bred heifers for distribution toparticipating farners heavily depended on the importation of cross-bred heifers fromZimbabwe and the output of Chisamba Ranch to be developed under the project. Neitherof these supplies could materialize during the implementation of the project. Zimbabwehad imposed a ban on the export of breeding animals due to the reduction of the livestockpopulation during the drought of 1981/82. Chisamba Ranch could not get off the grounddue to lack of cooperation from ZADL (see para. 8). The lack of adequate supply of crossbred heifers and the administrative and financial problems the project encountered duringthe first year of implementation led to a major redesign of the project which reduced itsscope and size substantially (Section V). While the project could not develop at the scaleinitially designed and envisaged in the SAR, it was successfully implemented in theredesigned scaled down version.

E. Project Implementation

7. Implementation of the project started in November 1982. It experienced atraumatic start-up and soon tumed into a problem project involving technical,administrative, and financial factors. The administrative and financial problems stemmedmainly from GRZ's lengthy bureaucratic procedures involved in securing approval oftenders for procurement of vehicles and equipment for the project. These problems werecompounded by the poor performance of the first expatriate project manager supplied bythe management consultants, who had to be repatriated six months after his arrival (para.32). Unfamiliarity with Bank procurement and disbursement procedures added to theseproblems. Budgetary constraints and administrative lapses during preparation andsubmission of budget estimates by MAWD prevented GRZ from providing counterpartfunds directly to the institutions implementing different components of the project, whichcomplicated and finally impaired coordination of project activities.

8. The major .ause for redesigning the project was a technical problem related towhat was essentially the core of the project, i.e., the availability and supply of cross bredheifers and bulls to participating farmers. In the project design, ZADL was to retainownership of Chisamba Ranch but the PMU through the Ranch Manager was to manageand develop the ranch for production of cross-bred heifers and bulls for supply to theproject. Serious misunderstandings developed on the question of responsibility for runningthe ranch and little progress was made in developing the ranch at the end of the first year.The Projt;ct had to rely on the parastatal Batoka Dairy Crossbreeding Ranch andcommercial ranches for its supply of cross-breds. These could supply only 100 heifersand 50 bulls per year. The quality of cross brecs supplied to project farmers from Batokawas extremely poor and farmers expressed dissatisfaction and disappointment with theirmilk production. When in the end the EEC provided technical and financial assistanceto rehabilitate the Batoka Ranch, the plan to make Chisamba a cross breeding ranch wasaltogether dropped.

9. This led to a major redesigning and scaling down of the project in scope and

- 5 -

coverage resulting in substantial amendment and restatement of the Credit Agreement in1986. Tle Crdit amount was reduced by 72 % from SDR 6.7 million to SDR 1.9 million.The number of participating farmers was reduced from 1,800 to 150 in two districts(Mazabuka and Monze) instead of three.

F. Redesign of the Project

10. In view of the serious implementation problems that arose, particularly the supplyof heifers, the Bank requested GRZ, in November 1983, to prepare redesign proposalsfor the Bank's consideration. By that time, only $0.2m of the credit amount of $7.5mhad been disbursed (October 31, 1983). The Bank assisted GRZ in the redesigningexercise. The agreed upon redesigned project retained the original objectives but activitiesand targets were substantially scaled down, and the revised target group of up to 150 Atype farmers was confined to two districts, Mazabuka and Monze. On-farm investmentwas similar to the original project but generally simpler and excluded pasture establishmentas participating farmers had earlier shunned this due to the high costs and laborrequirements involved.

11. The PMU was brought directly under the Senior Dairy Officer. Field level animalhusbandry and veterinary staff were made to report directly to the PMU. Investment forChisamba cross breeding ranch was deleted. Milk was to be collected and marketedthrough the PMU, with anticipated DPB involvement as production increased to a levelwhere fresh milk collection became feasible. There was no specific provision for assemblydepots or milk collection centers. The participation of CFC was deleted. Credit was tobe provided by existing Government and commercial institutions. The cost of the pilotproject was reduced for the four year period (1985-88) from SDR 6.7 to 1.9 million,including provision for evaluation and possible preparation of follow-on project in 1987.IDA also agreed to raise financing of local expenditures from 70-80% to 90%.

G. Projict Results

12. Implementation of the project in its redesigned and scaled-down form was verysuccessful, far surpassing its targets. Its services reached 238 smallholders compared tothe targeted 150. Milk collection and sales even surpassed the targets of the much largeroriginal project. In 1987, the project collected and sold over one million liters of milk.In the original project, this ievel of milk collection would have been achieved in the fourthyear from tre times the number of farmers. However, the milk collected by the projectwas not all incremental production as foreseen in the original project. Although therecords are unclear, about half of the milk collected and sold came from existingproduction which found easy access to market. In fact, commercial farmers, who foundthe project's prompt payment more attractive than the DPBs delayed payment, suppliedas much as 20% of the total milk collected in 1987/88.

13. The project supplied 367 cross bred heifers and 66 bulls to 115 farmers.Participating farmers were able to improve their milk production. Most farmers obtained

6 -

milk yields of about 8 liters per cow per day. However, progressive farmers who gavetheir cross-bred cows supplementary concentrate feed milked as much as 15-20 liters percow per day. During a two year period from June 1986 to June 1988, the project supplied3,000 metric tons of concentrate feed to participating farmers. The average productionfor project farms was 1920 liters per lactation of 240 days for the cross-bred cows ascompared to 459 liters of 163 days for the local cows. Cross-bred calves reared byparticipating farmers grew faster than calves of local breeds and were on average 25 kgheavier at six months of age. Although the time was too short to establish definitiveproductivity parameters, calving percentage at 69% was slightly better than expected, calfmortality was about 20% as expected, but adult mortality of 14% was twice the rateexpected. This indicates that animal health care/extension needs to be intensified withthe introduction of cross-bred heifers under smallholder management conditions.

14. Farmers who supplemented their lactating cross-bred cow obtained a net incomeof about K 1252 ($155) per cow per year. Those who did not obtained about half asmuch. The financial rate of return to the majority of participating farmers who do notfeed supplements to their cows was 31%. More than 75% of participating farmersreported that because of their milk income they no longer sought credit to purchase seedand fertilizer. Producer prices have progressively risen from K 0.47 per liter in 1982to K 1.90 in 1987 and K. 2.90 in 1989.

15. The project's extension efforts concentrated on animal health care and improvednutrition. Although farmers willingly and enthusiastically purchased cross-bred dairy cattleand accepted aiimal health service advice, extension efforts directed towards improvednutrition of the lactating cow and her calf through supplemental feeding succeeded inconvincing only the most progressive farmers. Establishment of improved fodder wasunsuccessful due to the high cost of fencing materials and high labor requirements. Theproject showed that it would take much sustained effort in extension and adaptive researchto demonstrate the advantages of supplementary feeding and planted fodder.

16. An innovation not foreseen in the design but introduced during projectimplementation was selling milk directly to consumers through outlets known as milk barsin the small towns of Mazabuka, Monze and Kabwe. What prompted this innovation wasthe project's frustration in selling direct to DPB creameries as originally planned. Thecreameries not only paid late but also rejected large amounts of project milk because ofits sourness. In seeking a means of disposing of this rejected milk, the project discoveredthat sour milk was so popular in Zambia that it could sell all the milk it had directly toconsumers. The health officials gave permission to the project to sell raw fresh and sourmilk directly to consumers provided that these products were free of tuberculosis andbrucellosis and that clients were advised to boil the fresh milk before drinking it. Allanimals in the herds of milk suppliers were subsequently tested for reactors to thesediseases and the few found positive were slaughtered.

17. The sour milk sold by the project is so popular that the supply at the milk barsis exhausted by mid-day. The milk is sold at the project's milk bars in two liter plastic

- 7-

bags. The price of the plastic container is discounted for those who bring their owncontainers. The project owes a good measure oT its success to this marketing techniquewhich produced immediate cash upon sales. The project was able to pay farmers promptlyonce a month after deducting short term loans for supplementary feed, veterinary drugsand cattle. The lesson to be learned from this experience is that a sophisticated processingplant requiring a large investment is not a prerequisite for developing smallholder dairyproduction. Throughout much of Sub-Saharan Africa, raw milk is sold by farmers to theirvillage clients, who either boil it or sour it before drinking. Investment ;n processingplants could be added at a latter stage, when transporting and marketing large quantitiesmakes it economically feasible.

18. Another interesting lesson from the project's experience was farmers' ability tobe readily convinced to self-finance the purchase of improved breeding stock. After twoyears of project implementation, farmers in the project area saw the benefit of theimproved dairy cows and were willing to buy cross-bred heifers and bulls from commercialfarmers at one and a half to twice the price of those provided by the project. In general,the peiformance of these was far superior to those supplied by the project. Realizing thatfarmers were selling their local animals to finance these purchases and that this was adesirable action that would help in reducing the number of animals on participating farms,the project stopped financing the acquisition of cross-bred cattle on credit in 1986, afterhaving disbursed only K 412,082 ($51,500). Subsequently, short-tern credit at 1% permonth was given against deductions from milk sales.

H. National ImDa

19. While the project, supplying less than 2 % of marketed milk production, was toosmall to have an appreciable macro-economic impact on the livestock sector and thenational economy, it demonstrated that indeed great potential exists in smallhclder dairyproduction in Zambia. Milk production needs to be substantially increased in view ofthe large deficit (134,000 tons) projected in the 1990s and the serious foreign exchangeproblem the country faces in importing milk powder, the price of which increasedmarkedly in recent years. Producer prices have progressively increased in recent years,thus providing good incentives for increasing investment and production. The project hastrained a small number of Zambians in dairy extension, dairy technology and themanagement of input supply and distribution and milk collection and sales, which canbe used as a nucleus for further expansion of smallholder dairy development in thecountry. The pilot project demonstrated a successful integrated system of milk productionby smallholders rearing crossbred cows supported by extension and marketing services.A proposal was made in 1988 to incorporate the successful experience into a larger projectof significant impact that would involve 700 farmers raising 2,700 crossbred cows underintensive management and crossing of 14,000 zebu cows under semi-intensivemanagement. The incremental milk production of the proposed development was estimatedat 14,000 liters per day. However, the proposed folow-up project did not materializebecause of lack of donor finance. IDA had suspended all its in Zambia since July 1, 1987because of Government's default on its credit repayment.

8-

I. P_oject Sustainability

20. The project is ongoing and is sustaining its activities, despite the financial difficultyit faced when the Bank suspended all disbursements to GRZ on July 1, 1987, one yearbefore the closing date of the project, because of the Borrower's default on making loanrepayments to the Bank. At that time, one third of the project loan was undisbursed.The Zambian deputy manager took over as Project Manager in July 1988, when thecontract of the expatriate manager terminated at the closing date of the project. He hasbeen able to sustain and expand the activities of the project with little financial assistancefrom GRZ. The project has succeeded in paying the salaries of all its staff, includingthe Zamnbian project manager, entirely from its milk trading operations and has managedto have a small surplus for ins stment in purchasing buildirgs for officzs and milk sellingoutlets. Its trading margin in 1988 was K 1.14 ($0.14) per liter. It paid an average ofK 1.93 ($0.24) per liter to producers and charged consumers K 3.07 ($0.38)per liter.In 1989, price to the producer was raised to K 2.90 ($0.29) per liter, while consumerswere charged K 5.00 ($0.50). The producer price provides the farmers with sufficientincentive to produce while the margin of K 2.10 ($0.21) was necessary for coveringproject operating costs in the absence of any subvention from GRZ.

21. In addition to institutional capacity to handle project activities which has beenadequately demonstrated, the staff has the technological expertise to solve the technicalissues facing the project. The project has developed cross-breeding techniques withindigenous species which are high yielding. This technique has been effectively extendedto project beneficiaries through extension and research. Furthermore, the project's foreignexchange requirements to purchase imported goods are so minimal that it would not imposea major danger to project sustainability.

22. However, the pilot project is facing a major obstacle to its sustainability. Theproject is currently being managed under the umbrella of the DPB. The GRZ has decidedto place DPB under the management of Zambia Investment and Mining Company(ZIMCO). This raises the issue of where the organizational responsibility for the projectshould lie. ZIMCO is a parastatal conglomerate guided primarily by the profit-makingmotive, while the activities of the project are developmental and cannot be judged onthe basis of an attractive business concem, at least at this initial stage. It could bedifficult to get this point across to ZIMCO and obtain its support, since its managementis not accustomed to this type of activity. It is conceivable that ZIMCO may take overthe project together with DPB. Should this happen, veterinary and animal husbandryextension services should continue to be provided by the Ministry. The other alternativearrangement is retaining the project under the wings of MAWD as an autonomous projectsupervised by a high level Steering Committee composed of the Chief Dairy Officer, theChief Veterinarian, the Director of Planning, representatives from DPB, AFC andproducers' associations until the project is eventually steered towards developing itselfinto a National Dairy Producers Cooperative along the lines of the Anand model in India.Where the project is eventually housed could well determine its continued viability and

9

sustinability.

23. In view of the large deficit of milk projected for the 1990s in excess of 130,000tons of powdered milk and the demonstrated ability of Zambian smallholders to quadrupletheir milk production, a follow-up project involving a large number of farmers andcovering the hinterlands of the principal urban centers would be feasible. The marketand the technology exist. Commercial farners and smallholders could supply crossbredheifers. However, improvements would be required in the administration of an effectiveanimal health and husbandry extension services. Staff with the basic skills are availableand, with appropriate in-service training and some technical assistance, they would becapable of implementing an expanded project.

J. Bank Performance

24. While the Bank's performance with respect to the preparation and appraisal ofthe project can be rated as excellent, it did not closely supervise project implementationduring the first year, when serious administrative and financial problems bogged downimplementation. Once these and the heifer supply problem were discovered, the projectofficer moved swiftly in causing a major redesign of the project to a manageable scale.From then on, the project was regularly supervised twice a year.

25. The Bank kept close consultation and liaison with FAO/CP from the identificationof the project in 1979 to its full preparation in late 1980. The preparation report wasthoroughly reviewed by several Bank staff, who raised important issues with respect toproject organization and management, the weaknesses of state operated enterprises inZambia and the project's heavy dependence on their performance and the inability of theGRZ to provide the incremental staff and funds to implement the project. The projectwas promptly appraised in February 1981. Issues of major concern were discussed andassurances obtained from GRZ on resolving the problems. There were no major delaysin preparing the SAR, getting decisions on the Credit amount, completing negotiationsand obtaining Board approval in December 1981.

26. The task of project supervision was given to the Regional Mission in EasternAfrica in February 1982, at which time Bank staff from RMEA visited Zambia anddiscussed a list of actions GRZ should take for the loan to be effective and for startingup the project. The following month, a Bank staff briefed the accounting personnel ofDPB, CFC and ZADL on the Bank's procurement and disbursement procedures. Thefirst supervision mission by the Bank project officer took place at the end of March, 1982.He advised that advance preparation be made for procurement of project vehicles andequipment before the expatriate project manager's arrival. He also expressed doubt thatsuitable cross-bred cattle would be available in the numbers required to stock ChisambaRanch and supply farmers during the first phase of the project. Unfortunately, the nextsupervision mission did not take place until one year later, during which time majoradministrative and financial problems had developed.

- 10 -

27. The lesson to be learned by the Bank from this project is that very closesupervision is necessary during project start-up in order to avoid major slips whose adverseeffect might be felt throughout the life of the project. The Bank might consLder the activeinvolvement of local staff in Resident Missions ir, supervising project start-ups.Furthermore, adequate steps should be taken to thoroughly familiarize project andministerial finance officers with Bank procurement and disbursement procedures in orderto avoid inordinate delays in the first procurement of goods and services, which canparalyse project start-up.

K. Borrower Performance

28. The Borrower's performance during project identification, preparation, appraisaland negotiations was satisactory. Its performance rapidly deteriorated with the start-upof the project. There seems to have been inadequate preparation by the GRZ for the start-up of the project despite the check list agreed upon with the Bank. There were long delaysand difficulties in procurement of vehicles, and equipment, provision of housing for staff,which adversely affected the proposed development of Chisamba Ranch and theeffectiveness of the PMU and extension and veterinary staff. The project could not attractqualified staff due to inadequate housing in the project areas. The expatriate ProjectManager and Financial Controller could not successfully work through the lengthyGovernment procurement and tendering procedures. Failure of the GRZ to designate aZambian deputy project manager in time significantly contributed to these problems.Budgetary constraints and administrative lapses during preparation and submission ofbudget estimates by MAWD prevented GRZ from providing counterpart funds directlyto ZADL (ranch development), CFC (farmer credit) and DPB (milk collection system)as required under the project subsidiary loan agreements. Consequently, MAWDreallocated part of the allocations for PMU for 1983 to ZADL and CFC in an attemptto implement project activities. This decreased the funds available for PMU's operations.There was considerable confusion in MAWD and the three agencies involved over thequestion of budgetary request and allocations, and with the inability of MAWD to providestrong co-ordination and leadership as earlier envisaged, the implementation of majorproject activities through a number of independent agencies was seriously impaired.

29. GRZ was able to deploy only four of the eight animal husbandry and veterinarystaff required by the project. Several of these were of low caliber. A Zambian deputyproject manager was designated only in 1986, more than three years after the projectstarted. One Norwegian and two Danish volunteers provided much needed technicalsupport to the project's extension activities. The PMU was first placed under thesupervision of the Director of Planning, MAWD, and later in 1986 under the DPI?. TheDPB did not take keen and active interest in guiding and supervising project activities.

30. The important lesson for the Borrower arising from this project is that thedesignation of a competent Zambian to co-manage the project from the outset could haveprevented the initial bureaucratic lapses in procurement and financing, arranged for theassignment of qualified staff to the project, and perhaps maintained better relationships

- 11 -

with the management consultants.

L. Proiect Relationship

31. There was a cordial relationship between Bank and borrower staff throughout thelife of the Project. The redesigning exercise went smoothly with full participation of bothparties. The relationship remained solid despite the fact that the suspension ofdisbursement of loan funds by the Bank in mid-1987 undoubtedly created uneasy feelingsamong Zarnbian officials and project staff who rightly felt that the success they wereachieving would come to a standstill.

M. nsulting Se

32. Senior management for the implementation of the project was contracted out toa consulting firm, which supplied a project manager, financial controller and a ranchmanager for the development of Chisamba Ranch. During the initial phase of the project,the performance of the consultant management team was below expectations. GRZrequested the firm to repatriate the project manager six months after his arrival. Someimprovement was brought about by the successor, who stayed until his contract endedin June 1986. The third project manager provided by the firm was both competent anddynamic. The success of the redesigned project is attributable largely to his efforts andthe dedicated and capable Zambian deputy manager assigned to work with him.

N. Proiect Documentation and Data

33. The legal agreement did not present any problems during implementation. TheBank and the Borrower agreed to amend it twice to facilitate project implementation. TheSAR was abandoned one year after project implementation started as the prevailingsituation could not allow its implementation. Tre SAR envisaged that a full-timemonitoring and evaluation officer would be assigned to the project. This did notmaterialize under the much reduced project. Consequently, no time series data on thetechnical and financial performance of farmers under the project is available. However,in 1987 the project conducted a one-off sample survey of participating farmers whichprovided good data on basic farm characteristics and costs and returns of farm enterprises.

- 12 -

PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE I/

Introduc oQ

34. At the time of inception of SDDP in 1982, government policy towards agriculturaldevelopment was going through a period of significant changes, placing strong emphasison livestock development with particular interest in the dairy industrv. At that time, 60%of marketed milk.came from 40 commercial farmers while 100,000 traditional cattleowners produced around 30 million liters annually, mainly for home or village levelcons 1mption. Milk intake by the Dairy Produce Board declined continuously from 18million liters in 1964 to 8.9 million liters in 1979 and rising to 11.2 million liters in 1982.This trend was attributed to unattractive producer prices and land tenure uncertainties onthe part of commercial formners.

35. The involvement of small scale farmers in milk production through Rural MilkProduction Schemes and Dairy Tenant Settlement Schemes produced some successalthough progress was constrained by relatively low producer prices, limited creditfacilities, insufficient supply of suitable cross-bred dairy heifers and bulls, high mortalityrates, high incidence of disease, inadequate extension services, prohibitive customary cattlerearing and ownership patterns, and delays in issuing of title deeds at dairy settlementschemes. Progress of the schemes has been rather slow and performance of individualfarmers variable. Government investment outlay in smalUholder dairy programs was veryhigh relative to the amount of development achieved to the extent that farmers have tendedto be over-dependent upon services provided by the Government. It has also beenrecognized that the planned farming systems have essentially been too sophisticated andnot always commensurate with the farmers' degree of technological advancement.

36. In line with the priorities of the Third National Development Plan, the ProjectManagement Unit of Smallholder Dairy Development Project was given the task ofincreasing milk production and income potential of about 1, 800 smallholder dairy farmers,especially in the Mazabuka and Monze districts of the Southern Province with subsequentexpansion to Kabwe district in Central Province. This was to be achieved through theintroduction of improved herd management and production techniques and of milkcollection and marketing services; and development of a dairy cattle breeding ranch toproduce heifers for distribution to smallholders to improve milk and beef productionpotential.

PrQject Obigaives

37. The project underwent several changes in design as the weaknesses in the originaldesign were identified by both the World Bank and the Zambian Government. However,

I/ Transcript of letter received from the Ministry of Agriculture.

- 13 -

the project objectives remained intact but with a smaller target group. The lack ofadequate flnds, resulting from the termination-of funding by the World Bank and thealmost negligible flow of funds from the Govemment, prompted the project managementto involve themselves more with the commercial activities (e.g., milk sales and inputsupp!y) at the expense of developmental programs like extension and farm developmentcredit.

38. From preparation to date, the objectives of the project have remained those ofintensifying extension activities, providing credit to smallholder farmers, supplyingcrossbred dairy heifers, dairy input supply and collection and sale of milk in the projectarea.

39. Training for Zambian counterpart staff was the major omission made in the originalset of objectives and this did not auger well with sustainability of the project after the endof the foreign technical assistance. When the project eventually decided to train staff,this created an extra financial constraint on it. No provision was made for credit toparticipating farmers after the 1986 amendment to the Development Credit Agreement.This measure had the negative effect of reducing the ability of farmers to increase theirdairy herds and thus increase their milk production.

Protect Design and Orgonization

40. The original project aimed at assisting 1,800 cattle-owning families in the threedistricts, with 600 "more progressive f rners' developing small crossbreed dairy unitsand increasing sales from their local c .rde with subsequent stock upgrading.

41. The appraisal mission's recomi &endatior s for the Smallholder Dairy DevelopmentProject did not differ substantially from those contained in the Project Preparation Report.The project was designed to provide finra ce for the establishment of a project managementunit to assist farmers with extension and credit support in their dairy activities and tocoordinate the supply of dairy crossbred heifers. The project was also meant to undertakethe collection and marketing of milk (fresh and sour) from the smallholder farmers foronward selling to the Dairy Produce Board.

42. Implementation commenced in late 1982 but within two years of implementation,serious problems were encountered which led to major redesign. Key factors that led tothe early failure of the original SDDP concept and the subsequent redesign included thelack of preparedness on the part of the project management, the Zambian Government,local institutions, and procurement delays. The project design was unnecessarily ambitiousin terms of the number of participating farmers and slow rate of build-up, particularlyfor a pilot project, due to lack of base knowledge and local information.

43. An IDA mission of June 1983, in conjunction with senior representatives of theMinistry of Agriculture and Water Development, recommended that the project beredesigned and implemented as a four-year pilot project, reduced in size and scope, and

14 -

that the Chisamba Ranch be abandonea as a source of cross-bred heifers in favor of BatokaDairy Crossbreeding Ranch which was at an advanced stage with EEC assistance. It wasrecommended that the PMU would be responsible to the Chief Animal Husbandry Officeron technical matters and to the Director of Planning for general administrative andimplementation matters. The project manager would be internationally recruited to assumethe leadership role. Provision would be made for the recruitment and training of five dairyextension assistants and three veterinary assistants (VAs) who would render logisticalsupport. Furthermore, it was suggested that MAWD would, if necessary, engage theservices of consultants during the pilot phase to prepare proposals for the second phaseof the SDDP. In line with this, a Monitoring and Evaluation Officer would be appointedto the PMU staff. Although the Amended Agreement was signed in 1986, the redesignedproject became informally effective in 1984.

44. According to the Amended and Restated Development Credit Agreement of 1986,the scale and cost of off-farrn development was considerably reduced fnr the four-yearperiod, 1985 to 1988, to SDR 1.9 million, including provision for evaluation and possiblepreparation of a follow-up project in 1987.

45. The redesigned project had a greater simplicity and flexibility of operation whichenabled progress to be effected mort rapidly without the restrictions imposed by multipleagencies and formal operating procedures. Authority became vested in the projectmanagement, thus facilitating on-spot decision-making and more efficient and effectivecoordination in the day-to-day management of the SDDP.

46. The project, according to the original project design, was to be administered bythe Dairy Produce Board with the Ministry of Agriculture as the implementing agency.From the original project structure only the Project Management Unit (PMU-SDDP) couldbe said to have survived the affiliation wrangle that befell the project just after World Bankfunding was terminated.

47. The project currently operates with a total Af 255 farmers in Mazabuka, Monze,Pemba and Kabwe, with Mazabuka being its Heae Office. Each of these district officesis manned by a district manager who reports to Uhe Project Manager in Mazabuka.

48. Overall responsibility for policy planning and project coordination and for theprovision of fimds remained with the permanent Secretary, Ministry of Agriculture andWater Development, through the Director of Planning, even after February 1986 whenthe project w. X placed under the umbrella of DPB.

49. A Steering Committee comprising representatives from the Ministries ofAgriculture and Finance and the Dairy Produce Board was instituted in 1987, but thiscould not function due to various reasons including sheer apathy, high staff turnover inthe member ministries and conflicts regarding the institutional affiliation of the project.

- 15 -

Eroiect Iml2leMentation

50. General implementation performance was good, despite the need for changes inthe initial design and, the subsequent withdrawal of IDA funding. The ProjectManagement Unit performed very well in the execution of the various project activitiesunder difficult circumstances. The revised management structure proved effective,although staff turnover was high due to inadequate incentives like housing, training anda reasonable wage rate. Transport was another constraint to proper project implementation.

Project Results

51. The project was very popular with the participating farmers and other beneficiariesin the project area. This was mostly due to the relative profitability of dairy farming overother major crops.

52. The project accepted sour milk from farmers and this, coupled with promptpayment for sales, resulted in more farmers taking up dairy farming - an atmosphere thatthe Dairy Produce Board failed to create.

53. In the later stages of project implementation, the issue of women's involvementwas taken up and great progress was made in partnership with relevant govemmentministries.

54. Since most of the milk produced by the participant farmers is consumed withinthe project area, there should be no doubt that the project has contributed immensely toraising of the nutritional status of the rura' people in the particular areas. It was also notedthat the project has been a major source of income for farmers, owing to the high profitmargins and the fact that at the moment there is no other way in which smallholderfarmers can market dairy produce (let alone sour milk) by themselves.

55. The project has been unable to integrate well into the related organizations sinceinception. This has, been due to the inithil implementation problems and the subsequentredesigning of the project. It was also due to lack of support from the local institutionsthat were required to render support.

pon X t suggimbiity

56. The project could be said to have proved its potential to sustain its operationswithout externz funding. The project managed to meet its operations (even though thisvas at the expense of the developmental activities) for three years without considerableexternal support while its operational costs were being paid for by its milk and farm inputsales. A fresh injection of funding for capital expenditure will be required if the projectis to be fully established and be capable of meeting its future operational and capital costs.

- 16 -

Bank's Performance

57. Close professional liaison between the World Bank, ANZDEC and the ProjectManagement Unit was missing during the implementation of the project. The World Bankdid not supervise the implementation closely enough, especially in the initial and latterstages. The World Bank should be aware by now that procurement liaison ha., been onemajor problem in project implementation. During initial stages, close supervision isnecessary, especially for procurement procedures to be carried out effectively. /\NZDECconsultants supervised the project regularly twice a year and, together with a World Banksupervision mission of early 1988, assisted in the preparation of proposals and dairydevelopment plans for implementation under Phase II.

Borrower's Performance

58. The Zambian Government did not fully comply with its obligations under theCredit Agreement. Disbursement of counterpart funds was consistently delayed andeventually became suspended altogether. From early 1986 until last year, no furtherdisbursements were made to SDDP for operational and capital expenditures. The project'srecurrent obligations have since been financed from its own operational accounts.

59. The Project Management Unit maintained close liaison with the Planning Divisionof MAWD through the responsible project desk officer, and with the Department ofAgriculture through the Senior Dairy Officer.

60. Failure by the Government to provide adequate and suitably qualified counterpartpersonnel has been one of the major limiting factors to proper project implementation.Appointment of counterpart staff, particularly the project co-manager, was unnecessarilydelayed until 1986. Instead of the eight veterinary assistants and agricultural assistantsproposed in the Staff Appraisal Report, the project has had no more than four in positionat any time throughout the project life. Only three of these were reliable and genuinelyproductive. In spite of the close cooperation of provincial heads of departments,particularly the Provincial Veterinary Officer, the non-availability of appropriately trainedpersonnel continued to restrict efficient project operations. It has been recognized thatthe Department of Agriculture has general animal husbandry officers whereas the projectneeds specialized dairy extension staff. In this effect, the PMU realized that the only wayto achieve effective extension support service was through employment and training ofits own project personnel.

61. Recently, there has been a positive change of attitude from the governmentregarding financial support to the Smallholder Dairy Development Project. A total ofK6,818,000 was allocated to the project for use in replacement of the transport fleet andconstruction of staff and office accommodation.

- 17 -

Lessonls L-ae

62. Agricultural projects that are aimed at covering large areas or target groups shouldnot forego the advantages inherent in starting such a massive project on a pilot basis. Apartfrom allowing for the necessary target group learning process, such an approach alsoassists the project management to adjust to the practica aspects of implementation withouthaving to commit large sums of funds.

63. The Zambian Govemment needs to change its attitude and start honoring projectagreements especially regarding the provision of counterpart personnel and GRZ funds.This weakness caused far-reaching implementation problems and had a negative effecton the sustainabiLity of the project.

Statistical Information

64. The statistical information provided in Part III of the Bank's completion reportis in conformity with the GRZ's own estimates.

CQonclusion

65. At the close of the Project, one of the major tasks of the Zambian evaluation teamwas to determine the best options for the Smallholder Dairy Development Project. Fouroptions were proposed: turning SDDP into a cooperative venture; transferring SDDP tothe Department of Agriculture; transferring SDDP to the Dairy Produce Board; or turningthe project into a public limited liability company with management and ownership patternbased on the LINTCO model.

66. Having assessed the present technical, financial and economic viability of theSmallholder Dairy Development Project and its future potential under each of the fouroptions, the GRZ evaluation team arrived at the conclusion that the SDDP be convertedinto a public limited liability company on the lines of the LINTCO model.

67. Flexibility on the above recommendation option can only be towards the formationof a cooperative organization. However, the conditional requirements for the success ofa cooperative are so diverse and difficult to meet that extreme cautiorn would be demandedbefore undertaking such an option. Therefore, it was recommended that even though acooperative oranization would be socially attractive, it would be economicallyunacceptable to experiment on this approach at the current stage of the project.

- 18 -

III. STATISTICAL IN-FORMATIQN

'bole 1. Rtlated I*u Loa welfor Credits

Year of

Loan/Crldit Title Approval Purpos

:;ffee T*cMrncat Asuistarsc '973 Rehabilitating Of 50 ha of coffee otantation, establishing of

C 08630 400 ha of coffee. constructing coffee Processing facilitiesand strengthenung coffee research and extension.

Eastern Province '981 'creasing croo output of 206000 farm_r through ir,roved

AgricuLtural 0evotopnt agricultural *etesion, research, irput suolios, processing

L ZOO10 and credit facilities.

Southern Province 1961 icreasing crop an Livestock praetion tflroLi iRiroved

Agrtcuiturai DOvlo""nt eAttnoiwn, veterinary & tsetse cortrol, input suLty creditC 11930 and imrKeting services.

Industrial forestry ill 1986 Increasing proOtli of tle from eotic trwe tyC 1i373 strenthtwing ieg_ it & technicat opewatiorn, igreding log

trnport A haIrlng facilitie, reflilftating sailti:geqip o n. foproving wokshop facilities and staff training.

AgriCulturol Rehabilitation 1985 fInwui,g l rts of mehinwy. spore part, seed & fertikiter,C 15450 structural djutment to foprve inrkoting ad irpau distribution.

Fisheries 19 Incrnasing fish pr iction & fpfwing services for fisherenC 15290 including credit & technial asistance.

Agricultural esearch and 196? Providing saist for research *wd extesUion srvices throughExtensicn 0iymical fIpata, tadunicl *sistun e W training.

C 1740

'offee it 16 Strngt~enig coffee reserc ud extenion.c 1713

................. ................................................ 0. 0.......

ZAMBIA

SNAILIGODER DAIRY DEVGl0PENtf PROJtCT (CR. 1196UZA)

lable 2. Project limetable

Item Dte Plnn Oate Revised Actual Date Issues Raised- . - - . - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - . ..... ......... . .. .--..........------------------- --.-.-.--..---..-...----.-.--.---- -----.-

Identification 09/7J 01/79 OA/79

Preparation 10/19 09160 Weak onstitutionit linkages, credit arrongements nd milk prices.

Appraisel mission 01/1- 02181 Availability of counterpart funding for recurrent costs and effectiveness ofgovernwnt services. Finncial viability of Dairy Board, raising of retailprice of milk, rate of technology adoption nd raising ot retending rate ofinterest.

Loan/Credit egotiatiioe 09/81 - 09/10 Raising of relending rate to II% pa.

Board Approval llJ11 - 12/81 Procurement procecdres.

loan/Credit Sigature 3/52

Loan/Credit Effectiveness 04U/2 06/82 11/82

LoavnCredit Closing 06/0 - 06/81 Oisbursement was suspended with eftect from May 1987 because of the defaultof the Government of Zleia on its loan repayments to IDA.

Loan/Credit Co pletion na.

- 20 -

ZAMBIA

SMALLHOLDER DAIRY DEVELOPMENT PROJECT (CR. 1196-ZA)

Table 3. Cumulative Estimated and Actual Disbursements

(US$'000)

........................ ............................................................... ...X... ...................... ........

Actual as Date of FinalYear SAR Estimate Revised Actual % of Revised Disbursement

........ ..................... ........................... ......................................................... ......... ...........

1983 750 750 475 631984 1900 1117 668 601985 3500 1304 767 591986 4700 1483 1256 851987 6100 1850 1401 761988 7500 2584 1486 581989 1757 68 01/10/89

........ ..................... ................. ......................................... .......... ................... ...........

- 21 -

7ZAMBIA

SMALLHOLDER DAIRY DEVELQPMENT PROJECT (CR. I 196 ZA)

Table 4: PRQJECT IMPLEMENTATION

KEY INDICAT-ORS

Appraisal Redesign Achievement AchievementObjective Objective as % of

Year 6 Year 6 Year 6Activity (No.) (No.) Appraisal Revised

PMU Formation 1 1 1 100 100Subsidiary loan

agreements 3 3 3 100 100Farmers 1800 150 238 8 159

Annual Heifer SupplyChisamba Ranch 550 0 0 0 niaBatoka Ranch 300 (not stated) 100 W 33 / n/a

Commercial Farms 150 (not stated)

Annual feed supply 0 0 1,500 tons

Milk Collec. Centers Z5 30 60 240 200Milk Cooling Centers 2 3 3 150 100

Annual Incremental ProductionMilk in tons 1736 (not stated) 500 tons 29 100+ bMeat in tons 412 (not stated) 105 25 100+ bi

W In 198, Batoka ranch produced 474 in-calf beifers but delivered only 100 to the project.

t/ No specifie tw 1 e1 e stated durng project redesign ecept for the number of farmes Judgedby that, the Unt of milk and meat produced would have been over 100% as the number offarmers readhd wa 159%.

ZAMBIa

SMALLHOLDER DAIRY DEVELOPENIT PROJECT (CR. 1196-ZA)

Table 5. Project Costs

(in USS 000)

Apraisel Estiste Revised Estite Actual

foreign Foreign ForeignLocal Exchwie Local Exchange tocal Exchangeits Costa Costa total Costs Costs lotal Coats Costs Total

On Fars OVtwIoprnt S47 163 710 - - - 733 260 993Anhil HusbSidry Extinsion 493 8? 580 475 125 600 136 79 215Veterinary Services 176 69 245 200 60 260 120 83 203 haCredit 2342 622 2964 200 - 200 193 92 285Heifer farm Oevt op nt 639 1159 1;P 350 - 350 412 33 445 IMilk Collection Service 533 651 1184 SOO - SOO 643 131 774Project Management 604 709 1313 S45 545 1090 800 72 872Project Preerat ion - - SO 105 155 - - -Experieentation - - 90 255 345 - - -Contingencies 2149 725 2Q74 100 35 135 - - -

Total Project CoSt 7483 4185 11668 2510 1125 3635 3037 r50 3787

I ~ ~ ~ ~ ~ ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - -

- 23 -

SMALLNOLDL R DAItY DEYELW PROJECT (CU. 1196-ZA)

Table 6. PWJT FIAIIING(CIOOO)

Plannd Final(Loan/Credit as X of

Category Agreemnt) Revised Final Revised Canents

IDACivi l Works 1000 205 127 62Vehicte, Equipmnt, 690 120 241 201Operating Costs 590 410 454 111Technical Assistane 1200 910 935 103Breeding Stock I/ 590 0 0 Co,Ponent deleted

during redeign.

Credit to Formers / 2470 0 0 Conponent deletedduring redesign.

Unallocated 960 940 0 0. ................ . . ... .... . ...................... .............................

Subtotal 7500 258S 1757 68

GOVERNMElT OF ZA4SIACiviI Works 458 140 244 174Vehicies, Equipfnt 669 30 253 843Operating Costs 851 556 883 159Technical Assistace 875 0 0 0Breeding Stock 412 211 445 211Credit to Farmers 113 113 205 181UnatLocated 790

SubtotaL 4168 1050 2030 193........................... ......................................................... .................................................

TOTAL 11668 3635 3787 104

Source: IDA Disb-senant and Goverment of Zaia. SmtLhotder Oairy Devalopeimt Project records.

- 24 -

ZAMBIA

SMALLHOLDER DAIRY DEE MENT EROIJECredit 1196-ZA

Table 7. PROJECT RESULTS

A. Di[ect Benefits and Economic Im2a

1. The SAR indicated that the major quantifiable benefits of the would be theincremental production of milk and beef from smallholdet farms and the supply of breedingheifers and bulls above the immediate iieeds of the project. According to the SAR, the majorunquantifiable benefit of the project would result from its pilot role in developing a low-costsmallholder dairy production. which could then be expanded on a national scale to increasemilk production in Zambia. An internal economic rate of return of 17% was calculated notso much as a justification of the project as an indicator of its potential for this type of dairydevelopment. ln view of this and the greatly diminished benefits obtained under the reducedproject. an internal economic rate of return was not calculated. Judged from the proportionof reduction in finance, the milk and meat production results of the redesigned projectcompare satisfactorily with the SAR estimates. Despite the fact that the project was reduced,in terms of financing, to 28% of the SAR estimates, it managed to produce nearly 30% of theSAR's estimated annual production of milk and about 25% of that of meat (See Table 4).The incremental production of crossbred heifers and bulls, however, was nil as the, redesignedproject scrapped the Chisamba Ranch component of the project.

B. Financial ImacUt

2. Participating farmers obtained an incremental income of S80-S 15 per cross-bred dairy cow p.a., depending on whether they used concentrate feed during the dry season.The internal financial rate of return to the average participating farmer was calculated to be31 %. The internal financial raue of retr to the projet's input supply, milk collection andselling activities, using 1986-88 dat and excluding the cost of technical assistance, was 29%.It dropped to 17% when this cost was included. The project was implemented at a time whenthe Government of Zambia was having financial difficulties due to the sharp decline in theprice of its dominant expon. copper. As it appears that the project has not generated anysignificant revenue for the Government, it can be concluded that its financial impact on theGovernment was nvoe.

C. S

3. Acording to the SAR and the redesign documents, the project was wO haveincluded an evaluation officer, who would have (a) studied the impact of the project onbeneficiaries, and (b) analyzed the dairy industry, including reduction, pricing, processing,marketing and consumer demand. This did not mAterialize as an evaluation officer was neverappointed. However, the project management conducted a one-off sample survey ofparticipating farmers which provided good data on basic farm characteristics and costs andreturns of farm enterprises.

- 25 -

ZAHM I

SMALROLER DAMXY DEVELOPMENT PRQJECT (CREDIT 1196-ZAi

Table 8 CODPLIANCE WITH COVENANM OF THE DEVELOPMENTCREDIT AGRE-EN

Section Short DescriDtion Com2liance

3.01 (a) ....... carry out Part A of the Project Parialthrough PMU ....... and sball provide.promptly as needed, the funds, facilities.seMces and other resources requiredfor the purpose

3.02 (b) cause ZADL. DPB and CFC to perform in Partialaccordance with provisions of ProjectAgreement ..... (with (and) shall take orcause to be taicen all action including theprovision of funds. facilities. licences,services and other resources ..- toenable ZADL DPB and CFC to perform suchobligations and shall not taie or permitany action which would prevent orinterfere with such performance

3.03 (a), (b) & (c): .-- enter into Subsidiary Loac Agreements: Fullwith ZADL, DPB and CFC (in tm descnlbedin par. (a), (b) and (c) to car outPar C, D and B of the Projec

3.04 . . esablih a PMU in MAWD under terms Fulland nditioin aceptabis to theAhociani -

3.05 (i) : e tblhandmantaini the Bankof PartialZambia unde n sadsfactory tothe Auoca,a a Project Advance Accountto be rad by PMU for the purpbm ofuueua rcuet under PartAof th Projec and

(3.05 (ii) : depwt in sucb Prje Advance Account at Partialthe beging of eah quae, the fbnfrequired by PMU for recrret eapeniturunder fth said Part of the Projec

3.10 -. a not les tha un PattalAgricltural Asisitnts and not less tC:an

- 26 -

six Vetenay Asistants to the ProjectArea within a year fom the date of this

3.11 ....... coordinate and integrate the . Partialactivities of the DCA and DVSTC (includingtraining of their staff) in the executionof the Project

4.01 (a) ....... maintain separate Accounts ..... Complied with

(b) ....... have Project Accounts, including Complied %ithcertificates of expenditure (Section delay4.02), for each fiscal year audited, .by independent auditon.

(c) furnish to MA ....... a certified copy of Complied withthe report of such audit ...... . including delay

(d) furnish to IDA such other information .-... : Partialas IDA shail from time to time request

4.02 For withdrawals made in cerficates of Complied withexpenditure - sal cause PMU. ZADL,DPB and CFC to retain - suchdocumentation -

4.03 _ sba annually view and ajust : Partiaiaecay, milk pnco - and sa fromtime to tms chang views with IDA onits milk pricin policy.

- 27 -

ZAMBIA

S4ALLHOLDEt DAIRY DEVELOPMENT PROJECT (CR. 1196/ZA)

T1ba 10. Staff missions

.. ,............ ,............. ............ ......................... . . . . . .j. .. . . .. .. . .. . ..

Stage of Nui r of Days in SpecieUiztian Perfo_rwe rype ofProject Cycle Nonth/Year Person Fleld 1/ Reresentod 2/ Ratirg Status Probtem 3/

...........................................................................................................

Through Appraisal 09/79 3 23 L,l n/a08/80 3 L,E,F n/a

Approisal througn 02/81 3 17 L,E,F n/a

Board ApprovelSwpervision 02/82 2 5 L,E n s.N

03/82 1 5 L n.a m,F

03/83 1 7 L 2 M,F,T

11/83 3 3 L,E,F 3 0

06/84 1 3 L 1 N, T

03/85 2 6 L,F 1 0

09/85 1 6 F 2 0

06286 1 4 L 2 F

12/86 f L 1 N

05/8? 2 5 L,F 1

11 /8 2 9 L.F 1

1/ Per pesonl

2/ E * Ecarmist, F * Finfacial Arulyst, L * Livestock SpwislistF F ffnmwlal 1 N * N _wug tt, T a Temicmal, 0 * iaOrganzaol

3/ n/s a not Wlicfbl*, n.s. rot awl ae

ZAMBIASMALLHOLDER DAIRY DEVELOPMENT PROJECT \ Munenga O

MILK COLLECTION ROUTES MZB

MAZABUKA AND MONZE DISTRICTSChalimbana

- Milk collection routes yoRood to be upgraded

F Proposed milk cooling on processing center

C Proposed milk depots

- Paved roads

Other roads MO

Rivers

o Agricultural camps

A Veterinary stations MAZABUKAQ Dip tanks ziwezi

-~-.-District boundary D I S T R I C T

KILOMETERS 0 5 10 15 A

MILES 0 5 10\ e

/ / ~~~~~Muniilel ] 3

~ \ Maunga

Sianjalika

/ M O N ~Z E D I S T R I C T \\

MONZ< QCMuiika \ % hiwuno

S f 1 V ~~~~~Kaum b\Siakasenle 0Ch uA

m aOkube Ne et O Nkonkola

A , / \. ^,Sikabenga o-.

/ / ~~~~~~~~~~ChikunkaoSIWIILI SEtTLEMENT/ 4 /

gO t~~~~~~hisekesi V hiobola

QSiwiili C-bi nTNAI

1 / Chikuni Ufwenuka -ZAMBIA TANZANIAD.s .rct bZtda,ie R

ChisuwoO 2 , N_5< ,

\ ~~~~~~~~~~~~ANGOLA (S<X\xGwembe. S

¶ i MAZAIREA,e MOZAMBIQUETh,s -sap has baae" pmap sad by the Wd* . v,k, fcOi55,y X -co~~.of doe tade' of t.mo . wh~hd ,saftfaohd rh. d nd b* MOA27 ? -'

bo-dws ow n : rn map do rot A - Mn &the rASTTof td WadS e',d adrsaffihits wypdern m, tMe ll staros of Wny te,to1.y o, a,y t,rdor5ernent O, N -*ccsp,te'~ of s,eh bwnas,sd.r

ZIMBABWE 0 0'