COUNTRY STOCKTAKING REPORTS:A PUBLIC EXPENDITURE REVIEW

COMPILATION

October 2010

As part of the CAADP preparation for country roundtables, stocktaking reports were prepared under the coordination of ReSAKSS/IFPRI, with these reports devoting a chapter to a review of public expenditure trends and issues. The present document is a compilation of extraction of these public expenditure sections from reports available as of December, 2009.

Table of Contents

INTRODUCTION...........................................................................................................................2ZAMBIA.........................................................................................................................................2LIBERIA.........................................................................................................................................2RWANDA.......................................................................................................................................2KENYA...........................................................................................................................................2UGANDA........................................................................................................................................2NIGERIA.........................................................................................................................................2GHANA...........................................................................................................................................2SWAZILAND.................................................................................................................................2

List of AcronymsABB Activity Based Budgeting ACDI Agricultural Cooperative Development International of the USA ACMP Agriculture Credit Management ProgrammeADB Agricultural Development BankAFC Agricultural Finance CooperationAFC Agriculture Finance CompanyAFD Agence Francaise de DevelopmentAFCO   African Fruits Company AfDB African Development Bank AFELL Association of Female Lawyers of Liberia AIDS Acquired Immune Deficiency SyndromeAPL Adaptable Program Loan ARC Agricultural Research Committee ASAL Arid and Semi Arid LandASIP Agriculture Investment ProgrammeASWG Agricultural Sector Working GroupAU African UnionAVRDC Asian Vegetable Research and Development Centre BADEA Arab Bank for Economic Development in AfricaBCADP Bong County Agricultural Development Project BIPP Bankable Investment Project Profiles

BMZ German Federal Ministry of Economic Cooperation and Development (Das Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung)

BNF Bureau of National Fisheries BOB Bureau of Budget BWI Booker Washington Institute CAADP Comprehensive African Agriculture Development ProgrammeCAAS-Lib Comprehensive Assessment of the Agricultural Sector of Liberia CARI Central Agricultural Research Institute CBO Community Based OrganizationCBPP Contagious Bovine Pluero PneumoniaCFC Cattle Finance CompanyCMS Credit Management ServicesCOCOBOD Ghana Cocoa BoardCOFOG Classification of Functions of GovernmentCOMESA Common Market for eastern and Southern AfricaCOZ Credit Organization of ZambiaCRS Catholic Relief Services CSL Country Services LimitedCSO Central Statistical Office

CUSA Credit Union and Savings AssociationDANIDA Danish International Development AgencyDBSA Development Bank of Southern AfricaDBZ Development Bank of ZambiaDDC District Development Committee DFID Department for International DevelopmentDPs Development PartnersGIDA Ghana irrigation Development AuthorityGPRS Ghana Poverty Reduction StrategyDRB-II Byumba Rural DevelopmentDSIP Development Strategy & Investment PlanEC European Commission ECHO European Commission Humanitarian Aid EDF European Development FundEU European UnionFAO Food and Agriculture Organization of the United Nations FBO Farmer-Based Organizations FBO Farmer-based organizationsFDA Forestry Development Authority FNDP Fifth National Development PlanFOREDEM Fund for the Strengthening and Development of Microfinance FSTP Food Security Thematic Programme GDP Gross Domestic ProductGEF Global Environmental FundGMO Genetically Modified OrganismsGoK Government of KenyaGOL Government of Liberia GOR Government of RwandaGoU Government of UgandaGRZ Government of the Republic of ZambiaGTZ   German Technical assistance to ZambiaHa. HectaresHIPC Highly-Indebted Poor CountriesHIV Human Immune VirusHPI Heifer Project InternationalICRAF International Centre for Research in Agro Forestry IDP Institute of Development PlanningIFAD International Fund for Agriculture DevelopmentIFC International Finance Corporation IFPRI International Food Policy Research Institute

IITA The International Institute of Tropical Agriculture IPPM Integrated Plant and Pest Management Approach IWMI International Water Management InstituteIWRMP Integrated Water Resources Management PolicyJICA Japan International Cooperation AgencyKg KilogrammesKDDP Komati Downstream Development ProjectKSPFS Kenya Special Program for Food Security LAC Liberian Agriculture CorporationLIAP Liberia Integrated Assistance ProgramLIBCO Liberia Company LISGIS Liberian Institute for Statistics and Geo-Information ServicesLUSIP Lower Usuthu Smallholder Irrigation ProjectM&E Monitoring and Evaluation MAAIF Ministry of Agriculture Animal IndustriesMACO Ministry of Agriculture and CooperativesMAFF Ministry of Agriculture and FisheriesMBT Micro Banker’s TrustMCC Milk Collection CentresMCDEP Micro Credit for the Empowerment of the Poor MCDSS Ministry of Community Development and Social ServicesMDG Millennium Development GoalMDGs Millennium Development GoalsMDRI Multi-lateral debt relief initiativeMINAGRI Ministry of Agriculture, Animal Resources and Forestry MOA Ministry of Agriculture MoCDM Ministry of Cooperative Development and MarketingMOF Ministry of Finance MOFA Ministry of Food and AgricultureMoFNP Ministry of Finance and National PlanningMoFPED Ministry of Finance Planning &Economic DevelopmentMoLFD Ministry of Livestock and Fisheries DevelopmentMRU Mano River UnionMTEF Medium Term Investment FrameworkMTRNAADS National Agricultural Advisory ServicesNAEP   National Agriculture Extension PolicyNAES National Agricultural Education StrategyNAP National Agricultural PolicyNAPE National Assessment of Progress of Education

NARO National Agricultural Research OrganizationNATSAVE National Savings and Credit Bank of ZambiaNBFIs Non-Banking Financial InstitutionsNEPAD New Partnership for Africa’s DevelopmentNGO Non-Governmental OrganizationNIS National Investment StrategyNMK Njaa Marufuku Kenya “Kick hunger out of Kenya”NMTIP National Medium Term Implementation Programme NORAD Norwegian Development AgencyNSCB National Savings and Credit BankNTF National Task ForceNTGL National Transitional Government of Liberia P4P Purchase for Progress PADEBL Dairy Cattle Development Support projectPAE Public Agricultural ExpenditurePAPSTA PSTA Support projectPaViDIA Participatory Village Development in Isolated AreasPCU Project Coordination UnitPDAG Gikongoro Agricultural Development ProjectPDM. Mutara Development ProjectPDMAR Rural Agricultural Markets Promotion ProjectPEMFA Public Expenditure Management and Financial AccountabilityPER Public Expenditure ReviewPGERB Buberuka Rural Lands ManagementPIP Public Sector Investment Programme PMA Plan for the Modernization of AgriculturalPRC People’s Republic of China PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy ProgrammeReSAKSS Regional Strategic Analysis And Knowledge Support SystemRIF   Rural Investment FacilityRPAL Rubber Planters Association of LiberiaRSA Republic of South AfricaRSSP Rural Sector Support ProjectRTF Rural Technology FacilityRWF Rwandan FrancSACCOs Savings and Credit CooperativesSADC Southern African Development CommunitySAR Send a Cow RwandaSida Swedish International Development AgencySRA Strategy for Revitalizing Agriculture

SRI Salala Rubber InvestmentsSSR Secretariat for Sector ReformSTABEX Système de Stabilisation des Recettes d'Exportation (System Stabilization of Export Earnings)SWG Sector Working GroupTNDP Transitional National Development Plan UGX Uganda ShillingsUIA Uganda Investment AuthorityUNCT United Nations Country TeamUNDAF United Nations Development Assistance FrameworkUNDP United Nations Development Programme UNICEF United Nations Children’s Fund UNMIL UN Mission in Liberia US$ United States DollarsUSAID United States Development AgencyWB World BankWFP World Food ProgrammeWHO World Health OrganizationZADB Zambia Agricultural Development BankZCF-FS Zambia Cooperatives Federation Financial ServicesZSIC Zambia State Insurance Corporation

INTRODUCTIONThe purpose of this stocktaking report compilation is to make generally available country-level information on the public expenditure analysis of the agriculture sector from the evidence-based action plan of the Comprehensive Africa Agriculture Development Program (CAADP) process. As part of the CAADP preparation for country roundtables, stocktaking reports were prepared under the coordination of ReSAKSS/IFPRI, with each report devoting a chapter to a review of public expenditure trends and issues. The present document is a compilation of the public expenditure sections extracted from all the reports available as of early 2010.

CAADP was developed as an African-led initiative to improve the African agriculture sector and significantly reduce poverty. The objective of the CAADP program is to enhance agriculture sector performance by having better policies, improved capacities, and investment programs for higher resource efficiency. Under the CAADP process, countries were required to complete four action points (i) engagement and partnership development (ii) evidenced based-planning (iii) building alliance for investment (public, private, and development partners) and (iv) program implementation, M& E and peer review system.

The information presented in this report is extracted from the evidenced-based planning component which consists of five aspects; technical analysis, ecosystems analysis, economic analysis, policy analysis and institutional analysis. The focus of this report is to present the information available on the public expenditure analysis of the agriculture sector as documented in the economic analysis of the evidenced-based planning component. This was undertaken as part of the preparatory work for the ongoing effort on agriculture expenditure review 1 by the Agriculture and Rural Development unit of the World Bank.

In 2003, African governments made a commitment at the African Union summit in Maputo to increase public spending in agriculture to at least 10 percent of total government budgetary resources. Although many African countries have increased their budgetary allocation to agriculture since then, most countries are yet to achieve this goal. As of April 2010 (Figure 1), eight countries—Burkina Faso, Ethiopia, Mali, Malawi, Ghana, Niger, Senegal, and Zimbabwe – have reached or surpassed the 10 percent level; nine of the reporting countries reached expenditure shares between 5 and 10 percent, whereas 28 countries remained at less than 5 percent of their total budgets to the sector (ReSAKSS, 20102). More than 70 percent of the labor force in Africa is engaged in the agriculture sector making growth in the sector essential for poverty reduction. It is not only important to increase spending in the sector, but also to improve efficiency of funds allocated to the sector. Due to the slower than expected growth in agricultural productivity since the mid-1980s and a number of food crises, much of the focus on the sector has been on providing emergency food aid and food imports (ReSAKSS, 2010) rather than long term agriculture development. For the region to achieve faster and sustainable growth in the agriculture sector and eventually reduce poverty level, focus should be on programs and policies that can increase productivity and efficiency in government expenditure.

1 For more information on agriculture public expenditure reviews and the importance of conducting such an exercise, see www.worldbank.or/agper

2 Comprehensive monitoring and evaluation report for the Comprehensive Africa Agriculture Development Programme (CAADP) by Babatunde Omilola, Mbaye Yade, Joseph Karugia, Pius Chilonda, and Melissa Lambert (a paper for Regional Strategic Analysis and Knowledge Support System (ReSAKSS), International Food Policy Research Institute, April 2010).

Figure 1. Agriculture expenditures and the CAADP 10% target, 2008 (unless otherwise noted)

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2468

10121416

Agriculture expenditures/Total expenditures CAADP 10% Target

Agric

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%)

* = 2009** = 2007*** = 2006**** = 2005

Sources: ReSAKSS Comprehensive Monitoring and Evaluation Report, April 2010

This report is in two parts - Part One presents information extracted from country stocktaking reports originally prepared in English and Part Two from reports originally in French. The reports in English cover Zambia, Rwanda, Liberia, Kenya, Uganda, Ghana, Nigeria, and Swaziland. The French reports include Benin, Burkina Faso, Cote D’Ivoire, Mali, Niger, Senegal, and Togo.

Table 1 provides some background information on the agriculture sector of the countries that have been included in this exercise. The second and third columns provide information on the agriculture value added per worker and as a percentage of GDP respectively for each country when the information is available. The fourth column provides annual percent growth (2007-2008) of agriculture value added. Columns five and six present the top five agriculture commodities (by value) and the active donors in each country respectively.

Table 2 presents a summary of the information available in the public expenditure analysis extracted from the stocktaking reports. At the early stage of the stocktaking exercise, countries presented information in different formats, making it difficult to make comparisons across countries. However, it is neither the purpose nor the intention of this report to do a comparative analysis but rather to present the information available from the stocktaking exercise. Column two shows the period of analysis covered in the report in general specifying coverage periods of actual and planned investments when available. Column four presents the program/ expenditure categories covered in the reports while Column five indicates whether the reports are consistent with the COFOG definition of what constitutes the agriculture sector. The last column indicates whether the reports presented both recurrent and investment expenditure.

Table 1: Agriculture Background InformationCountry Agriculture

value added per worker (constant 2000 US$)3

Agriculture value added (as % of GDP)

Agriculture value added (annual % growth 2007-2008)

Five largest food and agriculture commodities (by value), expressed in 2008 USD4

Active donors5

Benin $661 32.2 % 4.4% Yam, Cassava, Cotton Lint, Maize, Beans Not specifiedBurkina Faso $181 33.3 % 2.7% Cotton lint, Indigenous cattle meat,

Sorghum, Millet, Groundnut with shellFrance, Netherlands, Denmark, Austrian Development Cooperation, China, Belgium, Japan, Kuwait Fund, Libya, USAID, GTZ), WB, ADB, BOAD, EU, IDB, OPEC, IFAD, UNDP, West African Development Bank

Cote D’Ivoire $892 25.0% 0.5% Yams, Cocoa beans, Plantain, Game meat, Cassava

Not specified

Ghana $401 33.0% 5.1% Yams, Cassava, Plantains, Cocoa Beans, Chilies and Dry Pepper

AFD, JICA,

Kenya $345 27.0% -5.0% Cow milk, Indigenous cattle meat, Tea, Maize, Tomatoes

AfDB, IFAD, AFD, EC, KFW, WB, SIDA, JICA

Liberia 61.3% Rice paddy, Natural Rubber, Cassava, Bananas, Palm oil

WFP, DFID, USAID, WB, DANIDA, SIDA, AfDB, EC, JICA, Germany, Italy

Mali $523 36.5% 2.4% Rice paddy, Indigenous cattle meat, Millet, Groundnut with shell, Sorghum

Not specified

Niger 40.0% 6.0% Millet, Indigenous cattle meat, Dry cowpeas, Sorghum, Groundnut with shell

UNDP, UNICEF, FAO, WFP,WHO, UNFPA, UNSCO, World Bank, ADB, IDB, IFAD, , WADB, OPEC, U.S., France, Germany, Belgium, Denmark, Luxembourg, Netherlands, Italy, Saudi Arabia, Canada, China, Japan, Libya, Morocco, Switzerland, Norway

Nigeria 32.7% 7.4% Yams, Cassava, Groundnut, Millet, Citrus fruit

IFAD, DFID, WB, ADB, GEF, USAID

Rwanda $237 37.4 15.0 Plantains, Potatoes, dry beans, Sweet potatoes, Indigenous cattle meat

WB, AfDB, IFAD, US, Netherlands, Belgian, China

Senegal $235 15.7 19.6 Groundnut, Indigenous cattle meat, Millet, Rice Paddy, Cassava,

Not specified

Swaziland $1,154 7.0% 2.4% Sugar Cane, Indigenous cattle meat, Cow milk, oranges, Grapefruit

IFAD, USA, USAID, UN, Taiwan, EDF, Germany, RSA, DBSA and ADB

Togo $394 43.7 3.7 Yams, Cassava, Maize, Cocoa beans, Dry Not Specified

3 Source: World Bank, World Development Indicators. All agriculture values are as of 2008 except for Niger (2003); Benin and Togo (2005); Burkina Faso (2006); Mali and Nigeria (2007)4 Source: FAOSTAT5 Drawn from public expenditure reviews extracted from the stocktaking reports

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beansUganda $197 22.7 9.1 Plantains, Cassava, Sweet Potatoes,

Indigenous cattle meat, Cow milkNot Specified

Zambia $220 21.2 -0.1 Maize, Indigenous cattle meat, Tobacco (unmanufactured), Cotton lint, Cassava

AfDB, IFAD, USAID, SIDA, WB, GRZ, Finland, EU, JICA, Belgian, ADF, DfID

Table 2: Country Summaries: Information from the agriculture public expenditure analysis extractsCountry Years covered Actual and

Planned expenditure

Coverage of external funding

Program /Expenditure categories Is the report consistent with the definition of COFOG6 (Y/N)

Are both recurrent and investment expenditure presented?

Kenya 1975-2009 (Planned– 2006-2009; Actual– 1975-2006)

Both Yes Crops, livestock and fishery, lands, environment and natural resources, cooperative and marketing, regional development authorities

No7 Both

Liberia 2006-2008 Not specified

Yes Not Clear No8 No

Nigeria 1981-2008 (Actual–2005-2007)

Actual Yes Crops, Fisheries, livestock Yes Recurrent-limited information; Investment-Yes

Rwanda 1999-2010 (Planned– 2002-2010; Actual– 1999-2006)

Both Yes Crops, Fisheries, Livestock, Ag financing, extension

Yes Both

Uganda 2001-2007 (Planned– 2005-2007; Actual– 2001-2006)

Both Yes Crops, livestock, fish, forestry, water for production and agriculture land-related issues

Yes Both

Zambia 1992-2010 (Actual –1992-1999, 2001-2010; Planned –1992-1999)

Both Yes Agriculture, forestry, fishing, and livestock Yes Both

Ghana 1998-2007 Actual Yes Crops, agri-infrastructure, lands; irrigation No9 BothSwaziland 1989-2008 Actual Yes Crops, land management, irrigation, livestock

and nutritionNo10 Both

Burkina 1992-2015 (Actual –1992- Both Yes Crops, livestock, water management, No11 Both

6 Since most African countries have not yet established the Classification of Functions of Government (COFOG) in defining what constitutes agriculture, CAADP stakeholders agreed to use an abridged COFOG for the purpose of collecting data to track compliance with 2003 AU Maputo decision. Using the abridged COFOG criteria, CAADP stakeholders agreed that the core areas to track the 10% national budget allocation in agriculture and rural development should only include investments in crops, livestock, forestry, and fishing (Agriculture Unit, NEPAD, 2008)

7 Agricultural sector in Kenya includes Ministry of Agriculture, Ministry of Livestock and Fisheries Development, Ministry of Cooperative Development and Marketing; Ministry of Lands and Housing; Regional Development Authorities; and Environment and Natural Resources.

8 Agriculture sector programs and investment presented for Liberia include improving rural infrastructure9 Agricultural sector in Ghana includes Ministry of Food and Agriculture, Ghana Cocoa Board, Ministry of Fisheries, and the Council for Scientific and Industrial Research10 Agricultural sector in Swaziland includes the Ministry of Natural Resources and Energy who implement a number of irrigation projects

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Country Years covered Actual and Planned expenditure

Coverage of external funding

Program /Expenditure categories Is the report consistent with the definition of COFOG (Y/N)

Are both recurrent and investment expenditure presented?

Faso 2006; Planned – 2009-2015) environment, infrastructure; also agricultural research as a separate expense category

Senegal 2004-2010 (actual– 2004-2006); (planned–2008-2010)

Both Yes Crops, rural development, agric. infrastructure Yes Both

Niger 2001-2006 Actual Yes Agricultural development, Animal Resources, Planning and Community Development, Water management, Environment and anti-desertification, other departments and agencies

No12 No13

Mali 1997-2006 Actual Yes Crops, fish, forestry Yes BothBenin 1993-2006 Actual Yes Agriculture, Livestock and Fisheries Yes Both

Togo 1990-2004 Actual Yes Not provided14 Not clear15 Both

Cote D’ivoire

1999-2007 Actual Yes Fish, livestock, forestry Yes Both

11 Agricultural sector in Burkina Faso includes crops, water management, environment and livestock12 Agricultural sector in Niger includes Agricultural Development, Livestock, Land Management and Community Development, Water resource management, the

Environment and anti-Desertification Development.13 Expenditures are compared by sector and source of funds, not by class of expenditure14 The focus of the report was on the deterioration of the agriculture sector and the causes with limited information on the expenditure categories or what makes up the sector. 15 Agricultural sector in Niger includes Agricultural Development, Livestock, Land Management and Community Development, Water resource management, the

Environment and anti-Desertification Development.

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ZAMBIAAdapted from Zambia’s Review and Stocktaking Report on Ongoing Development Efforts and their Alignment with CAADP Targets and Principles. REVIEW OF AGRICULTURAL DEVELOPMENT POLICIES

Introduction

This Chapter of the report presents a review of the long-term economic development strategies and agricultural development frameworks, policies, strategies and interventions that were implemented in Zambia in the last five to ten years. These agricultural development policies and strategies are presented in chronological order as follows: (i) the Agricultural Sector Investment Programme (ASIP); (ii) Poverty Reduction Strategy (PRSP) and the Transitional National Development Plan (TNDP); (iv) the National Agricultural Policy (NAP); and (v) the Vision 2030 and the Fifth National Development Plan (FNDP). The specific performance outcomes of these development frameworks, policies, strategies and interventions in terms of specific changes in commodity production, productivity, areas cultivated and so on, were exhaustively analyzed and presented in Chapter Two. This chapter therefore just draws conclusions on the general successes, challenges and failures of the policies and strategies that were implemented under the Agricultural Sector Investment Programme (ASIP); the Poverty Reduction Strategy (PRSP) and the Transitional National Development Plan (TNDP). Lastly, due to the fact that Agriculture within the AU/NEPAD/COMESA framework includes the crop, fisheries, livestock and forestry sectors; and due to the inextricable linkage between agriculture and management of the natural resources or the environment, the Chapter ends with a brief review of the policies and key reforms in the natural resources sector in Zambia as well as outlining the natural resource programmes and strategies under the Fifth National Development Plan (FNDP).

Agricultural Sector Investment Programme (ASIP)

Between 1996 and 2001, the development of the agriculture sector was coordinated through the Agricultural Sector Investment Programme (ASIP). The overall objective of ASIP was to provide improved and sustainable agriculture services through promotion of free market development, reduction of government role in commercial activity, and enhancing efficient delivery of public services. ASIP was designed to achieve significantly greater project efficiency, ownership, capacity building and sustainability. ASIP focused on the key areas of (a) consolidating the liberalization of agricultural marketing (primarily the elimination of subsidies to marketing parastatals and, subsequently, their privatization); (b) strengthening the liberalization of trade and pricing policy, and (c) streamlining the land tenure system to make it receptive to the policy of liberalization. ASIP was a holistic approach to provide improved and sustainable services through efficient use of resources. In order to achieve this, ASIP was expected to provide an integrated and coordinated framework for the development of the agricultural sector. The major underlying assumption was that all Donors were expected to contribute to the “basket funding”, with the Ministry of Agriculture and Cooperatives (MACO) deciding on how and where to channel the funds (Government of the Republic of Zambia, 2001).

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ASIP Priority AreasThe interventions of ASIP were organized around the following sub-programmes: Extension, Irrigation, Research, Agriculture Training, Animal Production and Health, Agriculture Finance, Marketing and trade, Seeds, New Product Development, Farm Power and Mechanization, Policy and Planning, Standards, and the Rural Investment Fund. These sub-programmes set the broad outlines for MAFF activities during the implementation period and were the subject of review in the various theme groups. The implementation of ASIP started in January 1996 and was expected to end in December 1999. Due to teething problems such as restructuring of MAFF and delays in disbursement of funds, the implementation of ASIP started slowly and therefore, the programme was extended for two years, to the end of 2001, to permit completion of some activities. During this period, ASIP recorded some successes and some failures, presented in the next section.

Successes, Challenges and Failures under the ASIPIndependent evaluations of the overall assessment of the performance of the agricultural sector in the period 1996–2001 under ASIP found that the programme recorded a mixed picture of some successes and failures. Assessment of the trends over the years indicate that the agricultural sector somewhat accelerated its diversification mainly due to the increasing number of out grower schemes in the country. The value and variety of export commodities also increased, thanks to improving stakeholder consultations and partnerships. However, the ability of the sector to tap the resource endowment to improve the livelihoods of the poor was constrained by both micro and macro factors. Private sector activities were limited to a few areas, especially along the line of rail, thus exposing the long-standing duality of agriculture. High interest rates, escalating inflation, decreasing purchasing power, volatile exchange rates, liquidity constraints, and limited credit facilities combined to limit the impact of the liberalization policies (Government of the Republic of Zambia, 2002a; INESOR, 1999).

In addition to this, progress in the process of policy and institutional reform was far from complete. Lack of clarity in agricultural policy weakened private/public sector partnerships and created uncertainties in agricultural production and marketing. Specifically, performance of the agricultural input and output marketing, rural/microfinance, and agribusiness development policy framework (processing, agro-service provision such as mechanization, etc) was weak and needed to be improved. Weak capacity of public sector institutions to respond to the challenges of the agricultural sector and the ability to guide the sector’s transformation into a competitive and productive sector were major drawbacks, thus requiring the development of effective institutions that were transparent, accountable, and responsive to the needs of the agricultural sector and agribusiness clients. Moreover, the legal and regulatory environment was weak and needed to be improved to attract and encourage private sector participation, to ensure safety, and meet standards acceptable to local and international markets (Government of the Republic of Zambia, 2002; INESOR, 1999).

The sector over the years also suffered from a reduced level of investment and resource allocation inflows from the state budget and donor contributions especially during the period in which ASIP was being implemented (1996-2001). For instance, while the four- year budget for ASIP was $350 million, the actual total disbursement over the period was only 53 percent at $184 million. Meanwhile, the average government budgetary allocation to the sector was 4 percent of the total national budget. Unfavourable weather conditions (flooding and dry spells);

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increasing outbreaks of livestock diseases, and overall decline in access to agro-services also contributed to the slow progress of the sector. Furthermore, inconsistency between policy pronouncements and implementation; unfavourable weather conditions, poor infrastructure, gender inequality, outbreaks of livestock diseases and HIV and AIDS depressed the sector’s growth. Lack of incentives for utilization of idle and unsustainable agricultural practices also continued to inhibit the sector’s growth potential. While Zambia is said to enjoy comparative advantage in the production and export of various commodities, inherent constraints such as high energy and transport costs, driven by high internal taxes and charges, continued to hinder agricultural producers’ competitiveness (Government of the Republic of Zambia, 2002a).

Fifth National Development Plan (FNDP)

The Fifth National Development Plan (2006-2010) was formulated for almost two years between June 2005 and December 2006 and was adopted and launched by the Government in 16 th January 2007. The objective of the preparation of the FNDP was to provide a comprehensive framework for the operationalisation of the Vision 2030 in the medium-term. The FNDP presents the government’s development programmes in both the economic and social sectors. In the agricultural sector, the programmes that were formulated form the framework for investment planning and budgeting in the agricultural sector for the Government and increasingly for most development partners active in the sector.

The open and participatory nature of the FNDP formulation resulted in high stakeholder input in the design of all the sector programmes. In the agriculture sector, the formulation of programmes took into consideration other relevant national, regional and international development frameworks and policies. Among the major national policies are: liberalisation and privatisation, environmental protection and market and export oriented production as espoused in the National Agricultural Policy (NAP). At regional level, the sector programmes take into account the Government policy for regional integration, trade and economic cooperation within existing and planned Regional Economic Communities such as COMESA and the Southern African Development Community (SADC). The NEPAD initiative and in particular the CAADP was taken into consideration with regard to the objectives of achieving increased agricultural production and improved food security and related recommendations of appropriate management of the water and soil resources. The agricultural sector programme targets are also consistent with the MDGs with regard to reduction of the number of people suffering from hunger and malnutrition.

Agricultural Sector Context in the FNDPThe review and analysis conducted during the FNDP formulation revealed a number of challenges facing the agricultural sector in country, which needed to be addressed in the poverty reduction process. It was noted that despite the huge potential and past interventions, the sector was not making a significant contribution to poverty reduction and overall growth of the economy. The following are some of the challenges that need to be addressed in order to increase production and economic growth in the sector: (a) Low productivity; (b) High dependence on rain fed agriculture and related risks, and limited utilisation of irrigation; (c) High post-harvest losses; (d) Deficiencies in the early warning system; (e) Inadequate infrastructure and high energy and transport costs; (f) Limited access to affordable credit especially for small and medium scale farmers; (g) Poor functioning agricultural grain markets, which limit small farmers

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to access markets; (h) Restrictive trade policies which may result in price volatility and regional specialisation; (i) Limited domestic market; (j) Insecurity of land tenure system; (k) Limited mainstreaming of gender in agriculture; and (l) Environmental degradation due to unsustainable agricultural practices.

Against such a background, the Zambian government recognized that agriculture is a strategic sector in poverty reduction because the majority of the rural people derive their livelihood from agricultural related activities. The FNDP identified agricultural development as the engine for income expansion in the economy and in line with this; several strategies and programmes that were likely to have a positive impact on developing the agricultural sector and thus reduce poverty and hunger or food insecurity were formulated Government of the Republic of Zambia, 2006a).

Agricultural Development Strategies in the FNDPThe policy position of the National Agricultural Policy (NAP) shall be maintained during the FNDP period. In this respect, the overall objective of the agricultural sector, as set out in the NAP, is “to facilitate and support the development of a sustainable and competitive agricultural sector in order to ensure food security and income generation at household and national levels and maximize the sector’s contribution to gross domestic product (GDP).” The main thrusts of the National Agricultural Policy are liberalization, commercialization, promotion of public and private sector partnerships, and ensuring gender equity in the provision of effective services that will ensure sustainable agricultural growth. The agricultural sector policy recognizes the need to strengthen and expand the emerging opportunities and also deal with the challenges facing the agricultural sector. Increasingly, the role of the public sector will be confined to policy formulation; enforcement of legislation, regulation and inspection; maintenance of the strategic food reserves; provision of market information; financing the control of pests and diseases of national importance; provision of basic agricultural and rural infrastructure; provision of agricultural services i.e. research and extension in partnership with the private sector; provision of targeted support to outlying areas and underprivileged farmer groups; capacity building within public and private organizations; sector coordination; and monitoring and evaluation of overall sector performance.

During the FNDP period, agricultural development strategies will be consistent with the National Agricultural Policy (NAP). Food crops such as maize, cassava, sorghum, millet, sweet potatoes, beans and groundnuts will be targeted for increased production and productivity. Others to be targeted for production and research include indigenous horticultural crops i.e. fruits and vegetables. With regard to commercialization of the agricultural sector, it is expected that an increased number of small-scale farmers will be fully integrated in commercial production through out-grower arrangements or as individuals. Major cash and high value crops to be targeted include Cotton, Tobacco, groundnuts, paprika, cashew nuts, soybeans, castor, sesame, marigold, herbs and spices in agro-ecological regions I and II; coffee, tea, and sugar in region III. Large scale commercial farm production of cash and export crops like floriculture and horticultural products will also be promoted (Government of the Republic of Zambia, 2006a).

The Government will also endeavour to promote the formation of co-operatives and strengthen their operations so that they become the main conduit for socio-economic development, contributing to poverty eradication.

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Overall, crop production increases will come from expansion of area under cultivation; expansion of land under irrigation from the current estimated 100,000 hectares to 200,000 hectares by 2010; increased productivity through improved variety research releases and better research/extension linkages; increased use of better and sustainable farming practices including conservation farming and low input agriculture and increased use of animal draught power. Further, post harvest crop losses will be reduced from the current high of 30% to less than 10% by 2010 (Government of the Republic of Zambia, 2006a).

In the livestock sector, the main thrust will be to control livestock diseases of national economic importance, that is, those diseases of an epidemic nature and have trans- boundary (regional/international) significance. The other area of emphasis will involve re-stocking and increasing overall production, productivity and management of marketable livestock and livestock products especially in the traditional sector.

For fisheries, the focus will be to promote community based resource management of capture fisheries thereby improving catches. Concerted efforts will also be made to promote aquaculture development. Better processing facilities will be promoted and the distribution network improved.

FNDP Priorities and TargetsIn terms of priorities, the FNDP will pay particular attention to the top priority programmes that were identified in the agricultural sector. The top five are namely, Irrigation Development; Agricultural Infrastructure and Land Development; Livestock Development; Agricultural Services and Technology Development; and Fisheries Development. As was earlier noted, the various programmes and their respective strategies are in harmony with the four CAADP Pillars. With government commitment to fund the programmes, it expected that these programme interventions would result in the following:

- Attainment of food security for the majority of households with at least 90 percent of population being food secure by 2010.

- Agriculture’s contribution to total foreign exchange earnings will increase from the current 3-5% to 10-20% by 2010.

- Agriculture will grow at between 10% per annum from 2006 onwards.- Overall agricultural contribution to GDP will rise from the current 18-20% to 25% by

2010%. The share of crops, livestock and fisheries will thus increase.Increase incomes of those involved in the Agriculture sector (Government of the Republic of Zambia, 2006a)

The FNDP will strive to contribute to the achievement of these targets of the agricultural sector through the implementation the proposed Programmes. A table in Annex 1 presents the programmes, objectives and strategies under Zambia's FNDP. The extent to which these programmes are consistent with the New Partnership for Africa’s Development (NEPAD) Comprehensive Africa Agriculture Development Programme (CAADP) framework is also highlighted. CAADP as currently formulated focuses on investment in four Pillars that have been envisaged to make the earliest positive difference to Africa’s agricultural crisis. The four Pillars are namely are:

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Land and Water Management; Rural Infrastructure & Trade-related Capacities for Improved Market Access; Increasing Food Supply and Reducing Hunger; Agricultural Research, Technology Dissemination and Adoption

As will be noted in the following section, the programmes under the FNDP cover most of the areas or Pillars under the CAADP framework.

Agriculture Investment Programmes under the FNDP

Programme 1. Irrigation Development and Support

The objective of the programme is to promote a well regulated and profitable irrigation sub-sector that is attractive to both the public and private sector. Through this programme, the government will aim to develop socially desirable and economically viable irrigation schemes; construct communal bulk water supply systems; facilitate irrigation infrastructure development for improved agricultural productivity; establish an Irrigation Development Fund to enable farmers access funds for irrigation equipment; facilitate establishment of water rights that are supportive of sustainable agricultural development; and promote sustainable utilization of wetlands and ambos. The programme strategy takes into account the related targets defined in the FNDP to be achieved by the year 2010. The targets include, but are not limited to, the following: (i) 70,000ha brought under irrigation; (ii) 45 potentially viable small-scale irrigation schemes identified; (iii) 45 existing irrigation schemes assessed for rehabilitation (v) 25 potential sites for water harvesting identified and 25 water harvesting structures constructed; (vi) 45 wetlands/dambos identified for agricultural utilization; (vii) 68,000 farmers acquire irrigation equipment and have access to basic irrigation infrastructure

Programme 2. Agricultural Infrastructure and Land Development

The objective of this programme is to promote the improvement of agricultural land for sustainable production and productivity. In order to achieve this objective, interventions will focus on ensuring sustainable agricultural land use planning and management; development of new farm blocks and facilitating basic infrastructure development; and development of a land information system for the agricultural sector. It is envisaged that some of the targets to be achieved by 2010 include: (i) 3 assessments of high potential areas for agricultural development conducted; (ii) 50 assorted basic infrastructure to facilitate agricultural production constructed (iii) By 2008, establish a Land Information Centre (iv) By 2007 utilization of agricultural land assessed and land utilization and legislation reviewed (iv) By 2008, establish a system to ease access to land and title deeds for women and youth involved in agricultural production (vi) By 2010, 5,000 farmers supported with agro-inputs in the Farm Blocks on Out-grower Scheme basis; (vii) By 2010, 200,000 farmers facilitated in Conservation Agriculture and Agro forestry technologies (viii) By 2010, 4,000 trained community leader and farmers in integrated land use and water management for rainwater retention and utilization (ix) By 2010, a monitoring and evaluation for agriculture land utilization established; and (x) By 2010, 1440 land demarcation and surveys for agricultural production conducted

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Programme 3. Livestock Development Programme

The objective of this programme is to improve the productive efficiency of the livestock sector in a sustainable manner and support the marketing of both livestock and livestock products and contribute to food security and increased income. The main activities for the achievement of this target will include regulation and control of the quality of livestock, livestock products, and stock feeds; promotion of private sector participation in the provision of livestock and extension services, and in marketing of livestock and livestock products; creation and promotion of awareness in the conservation of animal genetic resources; facilitate implementation of disease and vector control programmes with private sector participation; establishment of the Emergency Disease Control Fund to control transboundary animal diseases, such as Foot and Mouth Disease, CBPP, etc.; rehabilitation of the Vaccine Unit; strengthening of the early warning system; establishment of 2 disease free zones by 2010; devise efficient and sustainable diagnostic techniques in investigations of diseases; enforcement of all legislation in the livestock sub-sector; promotion of the establishment of abattoirs in livestock production areas; encourage, support and promote poultry and small livestock enterprises as a way of empowering women and female headed households.

It is envisaged that some of the targets to be achieved by 2010 include: (i) livestock production increases by 10%; (ii) there is 10% increase in number of medium-scale livestock farmers and a 5% increase in number of medium-scale livestock farmers will be developed into commercial farmers; (iii) livestock products marketed increases by 15% and livestock exports increases by 10%; (iv) at least 10 epidemiological surveys are conducted on Trans-boundary Animal Diseases; (v) at least 400 certified livestock staff are trained and equipped in diagnosis and identification of diseases; (vi) at least 4 of the livestock legislation updated and enforced; (vii) at least 5 Livestock feed recommendations/packages identified; and grades and standards for livestock products enforced.

Programme 4: Agricultural Services and Technology Development

The agricultural research and extension systems will be strengthened with the objective of providing appropriate, efficient and effective technology development and transfer services in order to assist farmers increase agricultural production and productivity. This will be achieved through a number of measures, including development of appropriate crop varieties, agronomic packages and technologies for sustained farming systems and overall agricultural production and utilization; promotion of crop diversification; design and promotion of appropriate on-farm transportation, processing and storage structures, especially for small-scale farmers to minimize or prevent post-harvest losses; promotion of research/extension/farmer linkages in order to have more farmers’ input in research and technology transfer; promotion of cost sharing with beneficiaries of agricultural research and extension; regulation of the introduction and use of agro-biotechnology products, in particular Genetically Modified Organisms (GMOs); promotion of the involvement of the private sector and NGOs in the provision of extension services.

Among the targets to be achieved by 2010 include: (i) about 1000 tons of foundation seed produced for sale (ii) about 10,000 farmers access advisory services; (iii) about 1200 on- station and on-farm trials conducted; (iv) 10 alternative pest and disease control technologies develop; (v) 65 % of farmers adopting and practicing improved technologies (vi) twelve diagnostic

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surveys and twelve on-farm verification trials conducted; (vii) Four–thousand clients received soil and plant analyses; (viii) 10 agronomic trials conducted for 6 irrigated crops and water use and water use efficiencies established for 6 major irrigated crops (ix) five improved crop processing, storage and utilization technologies developed; (x) Three institutions and Fifteen persons capacity developed in biotechnology; (xi) Ten research trials conducted on the development of GMO varieties; (xii) one tissue culture laboratory and one agro-biotechnology laboratory constructed; (xiii) use of molecular techniques in disease and variety identification enhanced.

Programme 5. Fisheries Development

The objective of the fisheries development programme is to increase fish production and promote sustainable utilization of fisheries resources thereby contributing to the economy through the generation of employment, income and improved availability of fish. Major activities under the programme aim to: conserve and maintain bio-diversity of aquatic resources through improved monitoring; regulate and control the marketing and trading of fishing gears and fishing practices; promote aquaculture development, especially among women; strengthen gender balanced research-extension-farmer linkages; promote improved fish processing and storage. Some of the targets to be achieved by 2010 include (i) annual catch starts to increase by 5% above current levels; (ii) methods for producing fish seed for selected species developed; (iii) by 2008, amount of fresh well processed fish increased by 10%; (iv) by 2008, 50% of technicians and professional receive further training; (v) by 2009, information about the state of major fish socks accurately determined; and (vi) by 2007 output from aquaculture increases by 20% above current level.

Programme 6. Policy Coordination and Management

The objective of the policy coordination and management programme is to formulate and implement appropriate, gender sensitive strategies through multi-sectoral and coordinated interventions with a focus on increased food security and economic growth. The programme will achieve this objective through a number of activities which include the strengthening and monitoring of the liberalization of markets and facilitating private sector growth; review and realign of institutional and legislative arrangements; enforcement of the sector’s regulatory functions; strengthening of emergency preparedness through early warning information and data, timely and efficient crop forecasting, drought insurance mechanisms, and maintenance of strategic food reserves; development of a cross-sectoral strategic framework and monitoring matrix for food security within the context of the FNDP; facilitation of provision of incentives for local and foreign agricultural investment; strengthen information collection and dissemination; promotion of gender equity in resource allocation and access to agricultural services, focusing on women and young farmers; and strengthen/support platforms for policy dialogue and public/private stakeholder consultations. Among the targets to be achieved by 2010 include: (i) 4 stakeholder consultations conducted annually; (iii) coordination within MACO and between other ministries and other institutions strengthened; (iii) 5 strategic planning annual reviews conducted; (iv) 50 agricultural technical cooperation consultations held.

Programme 7 Agricultural Marketing, Trade and Agribusiness Development

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The objective of the Agricultural Marketing, Trade and Agribusiness Development programme is to promote the development of a competitive, efficient and transparent public and private sector driven marketing system for agricultural commodities and inputs. This programme will carry out several activities to achieve its objective. Some of these activities include facilitation of market information flow among stakeholders; imparting agro-business skills to market participants and farmers, especially women; promotion and enforcement of grades and standards of major agricultural commodities and inputs; facilitation of the development of rural infrastructure, such as roads rural storage infrastructure; creation of a market driven environment with no market distortions for improved input and output market centres; creation of an enabling environment for an improved agricultural input and output market, especially for small-scale farmers in rural areas; promotion of crops with both domestic and export markets; and encourage financial institutions to establish in rural areas. Some of the targets for achievement by 2010 include: (i) at least 20% of traders participate in the Agricultural market; (ii) Agricultural finance fund created for small and medium scale traders; (iii) at least one financial institution established in each province; (iv) 40% private sector rural based micro-credit facilities established; (v) 200 farmer groups and cooperatives having access to agricultural credit, savings and insurance; (vi) 5 private sector consultative meetings held on development of commodity exchange; (vii) 100% prioritized feeder and trunk roads are upgraded; (viii) grades and standards for other products established; and (ix) 600 farmers trained in agricultural entrepreneurial skills.

Programme 8. Cooperatives Development

The objective of the Cooperatives Development programme is to create an enabling environment for the development of autonomous, transparent, viable, and demand-driven cooperatives and other farmer organizations that will contribute to economic growth and poverty reduction. To achieve this objective, programme activities will aim at developing a legal and institutional framework to facilitate re-orientation and reformation of the cooperative organizations; developing the capacity of cooperative members to take advantage of the current socio-economic environment; promoting development of business-oriented cooperatives and farmer organizations in order to enhance their capacity to access financial resources; promoting partnerships between cooperatives and other sectors of the economy; encouraging and promoting participation of women in business-oriented cooperatives and farmer organizations; formulating policy on management and development of cooperatives; enhancing the capacity of cooperatives and MACO staff in management and development of cooperatives. Some of the targets to be achieved by 2010 include (i) 7,000 viable and demand-driven cooperatives established; (ii) efficient and accountable management of cooperative enterprises promoted; (iii) 7,000 cooperatives with sound business plans and strategies promoted; (iv) needs assessment for the women and youth in cooperatives conducted; and (v) 30% increased participation of women and youth in cooperatives.

Programme 9. Human Resource Development

The objective of the programme is to provide skilled human resource for the agricultural sector through capacity building, and addressing issues of HIV and AIDS, in order to increase the sector’s production and productivity. Major activities under the programme will aim to provide short and long-term training at technical and professional levels, including farmer training; facilitate development of public and private sector training institutions; promote agricultural

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education at both basic and high school levels, including young farmers’ clubs; promote income generating ventures in agricultural training institutions; establish new training institutions and rehabilitation of existing ones; create HIV and AIDS and gender awareness and sensitization among agricultural staff and farmers; provide relief and mitigatory measures to HIV and AIDS infected and affected staff and farmers including their families; and ensure gender equity in professional and technical training programmes in agriculture. Some of the targets to be achieved by 2010 include: (i) about 250 staff trained in professional and technical skills; (ii) 3 training needs assessments conducted; (iii) 2 curriculum reviews for primary and secondary school to incorporate agriculture education undertaken; (iv) 90 schools have agricultural production units in place; (v) stakeholder involvement in curriculum development in agricultural training facilitated; and (vi) HIV/AIDS sensitization conducted at all levels.

AGRICULTURAL INVESTMENT

Public Sector Financing

In order for the Agricultural Sector to successfully play its role to achieve the objectives assigned to it in the Vision 2030, the NAP and in the FNDP, substantial financial investments are necessary. Taking into account that the nature and magnitude of private sector financing in the agricultural sector is not well captured, documented and understood, the public sector is currently the major certain source of agricultural financing. As outlined in the FNDP, total public financing in the agricultural sector necessary to achieve the FNDP objectives is projected to rise from 633.6 billion Kwacha in 2006 to 811.3 billion Kwacha in 2007, 1,051.1 in 2008, decline slightly to 1,034.2 in 2009 and rise to 1,351.2 billion Kwacha in 2010.

The Public Investment Programme (PIP) 2006-2010The Fifth National Development Plan (FNDP), which outlines the Public Sector Investment Programme (PIP) was finalised in December 2006 and launched in January 2007. Following up on the PRSP and the TNDP, it made projections of the necessary public investments in all sectors in order to achieve the FNDP objectives. The PIP took into account the availability of resources and the absorptive capacity for efficient utilization of the resources in the different sectors and identified the funding gaps after analysing already made commitments mainly from the co-operating partners.

The national long term planning instrument entitled Vision 2030, prepared in consultation with line ministries, provinces and districts, the donor community and civil society, sets Zambia's long-term vision. The Vision reflects the collective understanding, aspirations and determination of the Zambian people to be a 'prosperous middle-income country'. The vision sets the horizon for developing the medium term plans and provides the 'gravitational pull' to achieve long term objectives. It outlines in broad terms, plausible courses of action to be taken towards the achievement of the country's long term objectives and targets. It broadly reflects what Zambians aspire to be by 2030 and the options they feel will practically and realistically get them there. The vision is to be operationalised through five-year medium term planning instruments, which will contain specific policies, programmes and projects, predominantly targeted towards wealth creation and poverty reduction. The first of these medium term plans is the Fifth National Development Plan (FNDP), which covers the period 2006 to 2010. The planning process of the

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FNDP adopted a highly consultative approach involving all stakeholders and integrated views from the provincial and district level organs. The FNDP's goals are multi-pronged:

Firstly, the government recognises that wealth creation through sustained economic growth constitutes the most important element in poverty reduction and, consequently, a very high premium is placed on growth-stimulating interventions;

Secondly, the Government recognises that redistributive policies do matter for reducing poverty and that growth and equity are not necessarily in conflict. The Government maintains that there is no intrinsic trade-off between long term aggregate efficiency and overall equity, hence its resolve to approach poverty reduction through the 'broad based growth' approach. It is in this context that the Government, together with civil society, has placed priority attention on those sectors that both maximise growth stimulation as well as those, such as agriculture, education and health, that best address the plight of the poor;

Thirdly, the Government maintains that the need for linkages between growth and poverty reduction can be developed in a sustainable way, but only through an approach that allows everyone to share the benefits of growth. Although under the right circumstances, sustained growth does often result in poverty reduction, rising inequality adversely affects this and it is in this regard that the role of social protection is considered an important FNDP component. Not withstanding this, empowering the poor to earn a decent living income is perceived to be a much more effective approach in addressing their plight, than the often unsustainable subsidy programmes which tend to destroy the very financial and human resource bases that are expected to facilitate positive growth through productive investment; and

Fourthly, long period of neglect in infrastructure maintenance due, in part, to the curtailment of development budgets in the interest of fiscal balance, have resulted in the country's characteristic deterioration of transport networks. It is in this regard that, as one of its priorities in the FNDP, the major transport arteries that connect the countryside to the market are focussed upon to ensure basic minimum connectivity for transporting poor people's income yielding commodities over long distances.

Under the banner of Broad-Based Wealth and Job Creation through Citizenry Participation and Technological Advancement as its theme, the Plan aims to target in the next five years both wealth creation and poverty reduction.

According to the FNDP, the Gross Domestic Investments, from both the government and donor sector, have to be gradually raised from 1.6% of GDP in 2006 to at least 2.3% of GDP by 2010. The government plans to increase its allocation from 0.9% to 1.6% by 2010. As a percent of GRZ budget, allocation to the agricultural sector is planned to be increased to about 9.0% by 2010 from 5.0% in 2006 and 8.0% in 2007. This will bring Zambia closer to the SADC and Maputo Declaration to raise agricultural budgets to not less than 10 percent of total budget. Total public financing in the agricultural sector necessary to achieve the FNDP objectives is projected to rise from 633.6 billion Kwacha in 2006 to 1,351.2 billion Kwacha in 2010. It is expected that during this period and thereafter the private sector will be the driving engine of growth and will greatly contribute to the private investments in agriculture. Table 1 illustrates the planned public investments from 2006 to 2010. The proportion of agricultural investments in the total public investments is expected to reach the peak of 13.1% in 2010 and average 11.5% over the period 2006-2010.

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Table 1: Planned Core Investments to attain FNDP Objectives (Billion Kwacha)Sector Year

2006 2007 2008 2009 2010 TotalAgriculture 569.82 791.07 952.85 905.88 1216.39 4436.00

Total Investments 5814.53 7364.28 7857.03 8374.85 9286.84 38645.43

% Agriculture 9.8% 10.7% 12.1% 10.8% 13.1% 11.5%

Source: Fifth National Development Plan, 2006

Development of the Public Investments in the Agricultural SectorThe resources allocated to the Agricultural sector in the past five years were far lower than those necessary to achieve the PRSP, TNDP and FNDP objectives and have not met the Maputo declaration of allocating at least 10% of the total Government budget to the agricultural sector. The percentage of funds allocated to the agricultural sector over the 2001-2006 period has been, 4.5%, 8.5%, 8.2%, 5.3%, 5.6% and 6.3% respectively. Also proportion of the Government resources allocated to agriculture in the development budget has constantly decreased since 2002. In spite of the nominal increase of the allocated budget from about 194 billion kwacha in 2001 to 650 billion Kwacha in 2006, the percentage of actual resources allocation to the agricultural sector has fallen from 8.5% in 2002 to 6.3% in 2006.

A close look at the pattern of resource allocation within the agriculture sector shows that, over the 2001-2006 period, allocation to recurrent departmental charges, which enable the Ministry of Agriculture and Co-operatives carry out its mandate, were only 9.8% of agricultural budget in 2001 and 2002, 9.5% in 2005 and declined to 6.0% in 2006. Capital expenditure over the same period was 19.6% and 8.8% of agricultural budget in 2001 and 2002 respectively and was practically to 0% over the period 2003 through to 2006. This shows a consistent decline/lack of capital investment in the sector. However, it should be pointed out that in years where the figures show little or no capital expenditure there was actually some capital expenditure under recurrent departmental charges. Capital expenditure that occurred under recurrent departmental charges included expenditure on computer, equipment, vehicles and vehicle maintenance. It is infrastructure related capital expenditure which did not occur in these lean or no allocation years. Spending heads were given powers to spend according to their priorities. Allocation to Agriculture infrastructure and social relief services was 17.0% of agricultural budget in 2001, declined to a low of 4.2% in 2003, increased to 13.4% in 2005 and declined to only 4.9% in 2006. However, allocation to poverty reduction programmes was relatively larger and continued to increase from (33.5%) in 2001 to (69.5%) in 2003 after which the allocation declined to 41.5% in 2006. It should be noted that within the allocation to Poverty Reduction Programmes a large proportion went to the Fertiliser Support Programme and the Food Reserve Agency. Table 2 shows resource allocation to and within the agricultural sector over the 2001-2006 period.

Table 2: Fund Allocation to the Agricultural Sector and within the Sector (Billions of Kwacha)

Ministry of Agriculture and Co-operatives 2001 2002 2003 2004 2005 2006

Personnel Emoluments 15 29 26 71 75 84

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Ministry of Agriculture and Co-operatives 2001 2002 2003 2004 2005 2006

(7.3%) (14.1%) (5.2%) (20.7%) (16.2%) (12.9%)Recurrent Departmental Charges 19 20 25 18 44 39(includes capital expenditure such as computers, equipment etc)

(9.8%) (9.8%) (5.0%) (5.2%) (9.5%) (6.0%)

Grants and other payments 2 2 10 9 4 3 (0.5%)(1.0%) (0.98%) (2.0%) (2.6%) (0.9%)

Poverty Reduction Programmes/HIPCa 65 78 347 142 221 270(33.5%) (38.0%) (69.5%) (41.4%) (47.6%) (41.5%)

Capital Expenditure (civil works, vehicle purchase and maintenance, boats, irrigation equipment, laboratory equipment etc.)

38(19.6%)

18(8.8%)

1(0.2%)

0(0.0%)

0(0.0%)

1 (0.2%)

Agriculture Show 0 0 0 0 1 2 (0.3%)(0.0%) (0.0%) (0.0%) (0.0%) (0.2%)

Donor Funded Programmes 22 37 61 62 49 211(11.3%) (18.0%) (12.2%) (18.1%) (10.6%) (32.5%)

Agriculture Infrastructure and Social 33 21 21 34 62 32Relief services (17.0%) (10.2%) (4.2%) (9.9%) (13.4%) (4.9%)Allocation to Provinces and Districts 0 0 8 7 7 7 (1.1%)

(0.0%) (0.0%) (1.6%) (2.0%) (1.5%)Total allocation to Sector 194 205 499 343 464 650

(100%) (100%) (100%) (100%) (100%) (100%)% of Agric. Spending in National 4.5 8.5 8.2 5.3 5.6 6.3BudgetNational Budget 4212 5172 6338 6999 8360 10237The Fertiliser Support Programme and Food Reserve Agency are included under these programmesNote: In years when allocation to capital expenditure was very little or nothing some capital expenditure was undertaken under recurrent departmental charges. Source: Govereh, J. et al., 2006

A number of reasons contribute to the Government resources allocations to the agricultural sector that are much lower than those planned to achieve the PRSP, TNDP and FNDP objectives. General lack of adequate resources compounded by the need to contain/cut back on public spending in order to meet fiscal targets has been the major cause for budgetary constraints in all sectors including agriculture. Lack of properly prepared sector policies/strategies and corresponding budgets for the PRSP and TNDP implementation and Sector Public Expenditure Reviews, based upon which correct MTEF budgeting is possible, has until recently been a constraint for adequate resources allocation in many sectors, including Agriculture. However, the introduction of Activity Based Budgeting (ABB) and the Medium Term Expenditure Framework (MTEF) in 2003 and the implementation of Public Expenditure Management and Financial Accountability (PEMFA) in 2005 have significantly increased the match between resource requirement and allocation at budget stage and follow up of public expenditure.

A closer look at funding over the 2001-2006 period indicates that funding for Economic Affairs increased from 11.9% of national budget in 2001 to 24.8% in 2005 and declined to 10.3% in 2006. Of the allocation to Economic Affairs the share to agriculture increased from 11.4% in 2001 to 58.2% in 2006. The share of total national budget going to agriculture increased from 1.4% in 2001 to 7.8% in 2005 and fell to 5.99% in 2006. The allocation to health increased from 6.6% in 2001 to 10.6% in 2006 whereas that for Education increased from 14% in 2001 to 21.7% in 2002 and declined to 13.6% in 2006. The importance of health and education in terms of

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stimulating growth and contributing to poverty reduction is reflected in their respective total budgets. While the budget for agriculture fell from around 7.8% in 2005 to 5.9% in 2006, that of health and education rose from 6.2% to 10.6% and 9.9% to 13.6% in the same period, respectively. The education and health sectors remain high priority areas in the poverty reduction strategy and achievement of the MDGs.

However, it should be noted that of the funds allocated to Economic Affairs the share allocated to agriculture has been steadily increasing over the 2001-2006 period, ranging between 11.4% in 2001 and 58.2% in 2006. Despite the increase in allocation to the agriculture sector, the allocation of funds within the sector still remains a source of concern. The share of the total agricultural sector budget going to poverty reduction programmes increased from 33.6% in 2001 to 47.6% in 2005 and declined only slightly to 41.5% in 2006. Agriculture infrastructure and social relief services also receive a considerable share of the agricultural sector budget. However capital expenditure was practically zero over the 2003-2006 period.

Table 3 shows expenditure by Function of Government and highlights the share going to economic affairs and agriculture’s share if the allocation to economic affairs and of total expenditure by function.

Table 3: Expenditure by Function of Government, 2001-2006 (Billions of Kwacha)Sector Year

2001 % 2002 % 2003 % 2004 % 2005 % 2006 %Total Outlays 2669.6 3268.6 4691.8 5842.0 9386.0 10212.8

General Public Service 1169.6 43.8 1307.8 40.0 2048.6 43.7 2739.7 46.9 3580.1 38.1 4868.2 47.7

Defence 375.5 14.1 453.2 13.9 594.4 12.7 658.3 11.3 706.8 7.5 1082.0 10.6

Public Order and safety 144.6 5.4 182.5 5.6 246.9 5.3 306.6 5.2 515.2 5.5 463.2 4.5

Economic Affairs 318.9 11.9 231.4 7.1 310.5 6.6 532.9 9.1 2327.4 24.8 1050.9 10.3

Agriculture, forestry, fishing & hunting (value and proportion of Economic affairs)

36.3 11.4 53.0 22.9 89.6 28.9 231.6 43.5 732.3 31.5 611.5 58.2

Agriculture, forestry, fishing & hunting (value and proportion of Total Expenditure)

36.3 1.4 53.0 1.6 89.6 1.9 231.6 3.96 732.3 7.8 611.5 5.99

Environmental Protection 1.3 0.05 0.6 0.02 1.1 0.02 0.8 0.01 2.3 0.02 30.4 0.3Housing and CommunityAmenities

80.6 3.0 83.4 2.6 38.1 0.8 99.9 1.7 421.4 4.5 152.0 1.5

Health 175.8 6.6 251.2 7.7 506.4 10.8 649.4 11.1 586.5 6.2 1084.1 10.6Recreation, culture and religion 22.8 0.8 23.2 0.7 28.8 0.6 31.2 0.5 277.4 3.0 72.5 0.7

Education 374.2 14.0 710.5 21.7 911.6 19.4 802.9 13.7 930.5 9.9 1384.9 13.6Social Protection 6.3 0.2 24.6 0.8 5.3 0.1 20.4 0.3 38.4 0.4 24.6 0.2

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Sector Year

2001 % 2002 % 2003 % 2004 % 2005 % 2006 %Total Outlays 2669.6 3268.6 4691.8 5842.0 9386.0 10212.8

Grand Total 2676.4 3268.7 4755.0 5988.1 9758.5 10236.6

Source: Compiled from figures for various years, from Ministry of Finance and National Development lanning (MoFNP)

Requested, Approved Vs Released FundsA look at actual disbursement/releases in relation to requested and approved amounts reveals that the agricultural sector almost always receives less than the approved amount. In some years the funds released to the spending agencies can only cover personnel emoluments and some fixed expenses, leaving very little or nothing for recurrent departmental charges. This has tended to cripple the implementation of planned developmental activities such as research, extension, market information collection and dissemination, training etc. Table 4 below shows released amounts in relation to approved and requested amounts.

Table 4: Variation in Amounts Requested by MACO, Amounts Approved and Released by MoFNP, 1992-1999 (at 2006 Prices)Year Requested Approved % Approved Released % Released1992 257,516 76,751 30 67,178 881993 193,700 134,060 69 95,301 711994 483,317 441,358 91 168,398 381995 207,416 132,388 64 143,183 1081996 230,633 172,058 83 129,088 671997 349,518 296,530 85 164,793 561998 246,803 175,183 71 128,155 731999 224,859 143,752 64 119,991 83Source: Agriculture Statistical Bulletin, MAWD, cited in Govereh. J. et al, 2006

The figures in Table 4 show that over 1992 to 1999 the amounts approved were consistently less than the amounts requested. Even more of concern, is the fact that the figures reveal that the amounts released were less than the approved amounts. Figures for 1994 show that the amount released was only 38% of what was approved. Only in 1995 was the released amount slightly more than the approved amount. Releases of less than the approved amounts have serious repercussions for the implementation of planned activities. This under and often delayed funding has negatively affected capital development and service provision i.e., research and extension and the co-ordination of activities within the sector and across sectors.

Public Vs Private InvestmentAlthough government policy has states that the development of the agriculture sector shall be driven by the private sector, little investment goes into actually trying to develop the capacity of the private sector nor improving the operating environment such as improving roads, communication, energy, strengthening the extension system, etc. In recent years an effort has been made to directly invest in the private sector through the out grower fund facility. However, support to the out grower scheme was only 41 billion Kwacha (6%) of total agriculture

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development budget of 677 billion Kwacha in the 2002- 2004 Public Investment Programme. This shows a marked divergence between priority setting in terms of public policy vis a vis budgetary allocations. Despite the policy of private sector led growth in the sector, much of the government’s spending is on private goods (such as fertiliser subsidies) as opposed to public goods and services.

Development ProjectsPublic agricultural financing is carried out through different projects and programmes, planned in the Public Investment Programme (PIP) and budgeted according to the MTEF. In the 2002-2004 PIP the Government had 42 agricultural projects in different areas in the sector including irrigation, infrastructure and land development, technology development and dissemination, commercialisation of the agricultural sector, livestock and fisheries development, seed multiplication and distribution. Total resource commitment to the 42 registered projects in the PIP was close to 678 billion Kwacha. Table 5 shows the various projects as planned and budgeted under the 2002-2004 Public Investment Programme for the agriculture sector.

Table 5: Public Investment Programme: Agriculture Sector (Kwacha, Millions)PROJECT NAME 2002 2003 2004 TOTALNewAgriculture Commercialisation Programme (ACP) 188,952 0 0 188,952

Agriculture Development Support Programme

0 11,600 0 11,600Agricultural Entrepreneurship 0 310 420 730Agriculture Sector Support 0 0 2,800 2,800Agro-based Industry Development 0 0 2,000 2,000Conservation Farming 0 0 3,500 3,500Dairy Production 0 1,500 1,500 3,000Development of Co-operatives 0 0 2,000 2,000Economic Diversification 0 46,500 0 46,500Fertiliser Support 0 50,000 0 50,000Finance and Development 0 0 35,000 35,000Fish farming 0 500 600 1,100Fish farming -Southern 0 300 400 700Land and Infrastructure Development 0 15,000 3,000 18,000Livestock Development 22,701 3,000 500 26,201Luapula Food Security, Nutrition Action and Communication 0 10,269 11,269 21,538

Mpika Farm Training Centre Rehabilitation 0 500 200 700Participatory Extension 0 0 3,000 3,000Rehabilitation and Construction of Staff Houses, Training Centre and Offices

0 0 1,450 1,450

Rehabilitation of Agriculture Colleges 5,100 2,340 28.030 35,470Rehabilitation of Farm Institutes and Farm Training Centres 0 500 5,000 5,500

Rural Investment 6,000 1,982 6,000 13,982Seed Multiplication 0 1,060 2,000 3,060Smallholder Enterprise and Marketing Programme 24,441 230 300 24,971

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PROJECT NAME 2002 2003 2004 TOTALSupport to Policy and Planning 0 0 1,500 1,500Sub Total New 247,195 145,591 110,469 503,255

On-goingAdministration of Title Deeds 0 1,000 1,250 2,250Agriculture Research and Technology Development

0 500 5,000 5,500Animal Draught Power 1,000 2,000 2.850 5,850ASIP/ZAM (Eastern Province) 0 2,700 15,737 18,437Economic Expansion in Outlying Areas 0 0 9,000 9,000Fisheries Development 2,000 1,000 2,000 5,000Irrigation Development 5,132 6,000 6,000 17,132Irrigation Development (Southern Province) 0 2,000 500 2,500

Marketing , Trade and Agribusiness 0 0 18,500 18,500

Out Grower Schemes 15,000 8,000 18,000 41,000Seed Multiplication and Distribution 2,500 0 0 2,500Small Holder Irrigation Schemes 0 0 2,000 2,000Small Scale Irrigation Project 0 10,300 2,300 12,600Soils and Crops Research 2,000 500 4,000 6,500Southern Province Household Food Security Programme

0 23 0 23Targeted Food Security 0 10,000 15,000 25,000Sub Total ongoing 27,632 44,023 102,137 173,792

Sector Grand Total 274,826 189,614 212,606 677,046

Source: Public Investment Programme 2002-2004, MoFNP, August 2003

Table 5 shows that, of the total 677,046 million Kwacha for the 3 years, only 12,000 million Kwacha (1.8%) was earmarked for Research and Technology Development. 34,232 million Kwacha (5.0%) was earmarked for Irrigation Development, 3,500 million Kwacha (0.5%) was earmarked for Conservation Farming, 3,000 million Kwacha for participatory extension (0.4%), 2,000 million Kwacha (0.3%) for Agro Based Industry Development and 7.4% was earmarked for the Fertiliser Support Programme. It is remarkable to note that despite the low productivity in the sector very little was allocated to productivity enhancing activities such as Research and Technology Development, irrigation, conservation farming and participatory. It is also note-worthy that despite the priority given to agro processing, less than one percent was allocated to promotion of agro based activities. This pattern of resource allocation seems to indicate that there is a divergence between policy and preferred strategies on the one hand and budgetary allocation on the other.

The figures in Table 6 below show that over the period 2001-2006 resource commitment to the agricultural sector through various projects and programmes was 573.5 billion Kwacha. Table 7 outlines the major funding agencies, number of projects funded, total funding committed and proportion of total funding for the period 2001- 2006. Over the period, the bulk of the investment was from multi-lateral sources (72.9%), followed by bi-lateral (22.4%) and least from GRZ (4.7%).

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The African Development Bank total financing through five projects: ASIP/ZAMPIP Eastern Province, Small Scale Irrigation Project, Smallholder Agricultural Production and Marketing Support, Kwando-Zambezi Tsetse and Trypanosomiasis Eradication Project and Economic Diversification represented 51.6% of total agricultural commitments. IFAD contributed 13.4%, USAID 9.6%, Sida 6.3% and the World Bank 5.0% and GRZ 4.7% (see Table 6 below).

Table 6: Multi- and Bi-lateral Donor Funded Programmes (Billion Kwacha, 2006=100), 2001-2006

AGRICULTURE DEVELOPMENT PROGRAMMES

FUND 2001 2002

2003

200420052006

TOTALMulti-lateral ProgrammesSouthern Province Household Food Security Programme IFAD 0 8 0 0 0 0 8

Smallholder Enterprise and Marketing Programme

IFAD 0 7 0 20 16 19 62 US$18.4 millionASIP/ZAMPIP Eastern Province ADB 36 29 4 17 16 35 137 135 billion ZKSmall Scale Irrigation Project ADB 10 9 15 16 12 13 75 UA8.04 millionSustainable Land Management GEF,IDA-

World Bank0 0 0 1 5 1 7 US$1.35 million

Small and medium Enterprise Trade and Investment Project ADF 0 0 0 0 0 4 4 US$7.25 million

Smallholder Agricultural Production and Marketing Support ADB 0 0 0 0 0 26 26 US$34.4 million

Agriculture Development Support Programme World bank 0 0 0 3 2 17 22 US$40 millionAgriculture Diversification and Food Security Project EU 0 0 0 0 0 12 12 EUROS15

millionSmallholder Livestock Improvement Programme IFAD 0 0 0 0 0 7 7 EUROS9.9

millionKwando-Zambezi Tsetse and Tryps Eradication Project

ADB 0 0 0 0 0 12 12 US$13.09 million

Economic Diversification ADB 0 0 46 0 0 0 46Support to Decentralised Rural Development in Southern Province

GTZ EUROS11 million

Sub Total Multi-lateral 46 53 65 57 51 146 418

Bi-lateralParticipatory Approach to Village Development in Isolated Areas JICA 0 0 0 1 1 2 4 US$0.678

millionLuapula Agricultural & Rural Development Project Finland 0 0 0 8 0 16 24 EUROS9.9

millionCrop Monitoring DFID 0 0 0 0 0 1 1 US$0.668

millionLuapula Food Security, Nutrition Action and Communication Belgian 0 0 0 0 1 5 6 US$2.8 million

Agriculture Support Programme Sida 0 0 0 0 0 35 35 US$15 millionDevelopment through empowerment of Rural Communities

JICA 0 0 0 0 0 2 2 US$0.039 million

Agriculture Policy and Monitoring Project Sida 0 0 0 0 0 1 1MSU Food Security III USAID 0 0 7.6 7.6 7.6 7.6 30.4 *US$11.88milli

onProduction, Finance Technology (PROFIT-CLUSA)

USAID 0 0 0 0 0 14.7 14.7 *US$17.5 million

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AGRICULTURE DEVELOPMENT PROGRAMMES

FUND 2001 2002

2003

200420052006

TOTALMarket Access, Trade and Enabling Policies MATEP-DAI

USAID 0 0 0 0 0 8.8 8.8 *US$10.5 million

Agribusiness Technical assistance Centre/Agribusiness Consultative Forum

USAID 0 0 0 0 0.8 0.8 1.6 **US$0.8 million

Sub Total Bi-lateral 0 0 7.6 16.6 9.6 93.9 128.5

Government of ZambiaZambia Co-operative Federation (ZCF) GRZ 0 5 0 0 0 0 5Smallholder Irrigation and Water Use Programme

GRZ 0 1 0 0 0 1 2Animal Husbandry Credit Revolving Fund GRZ 0 7 0 0 0 0 7Small scale farmer commercialisation GRZ 0 0 0 13 0 0 13Sub Total GRZ 0 13 0 13 0 1 27

TOTAL 46 66 72.6 86.6 60.6 240.9 573.5

* Denotes total up to 2010 and ** denotes total up to 2007 Source: GRZ various years in J. Govereh, et al., 2006

Table 7: Major Sources of Agricultural Financing, 2001-2006Funding Agency Number of

ProjectsTotal Commitment (Real Billion Kwacha 2006=100)

Percentage

African Development Bank (AfDB) 5 296 51.6%IFAD 3 77 13.4%USAID 4 55 9.6%Sida 2 36 6.3%World Bank 2 29 5.0%GRZ 4 27 4.7%Finland 1 24 4.2%EU 1 12 2.1%JICA 5 6 1.0%Belgian 1 6 1.0%ADF 1 4 0.7%DFID 1 1 0.2%TOTAL 30 573.5 100%Source: GRZ, various years, in Govereh. J, et.al , 2006.

Table 8 gives an inventory of projects and programmes in the agriculture sector as compiled by the Ministry of Agriculture and co-operatives, in 2004. Although there are quite a number of projects sponsored through the private sector as well as under the donor “silent partner arrangement, the table does not capture these projects nor does it highlight the silent partner in projects financed through the donor “silent partner arrangement”. Table 8 also gives a historical review of projects and programmes undertaken in the sector, the funding agency, the lifetime, the total budget and the objectives and components.

Table 8: Inventory of Ongoing and Pipeline Projects in Agriculture as at 2004Project/Programme Funding

Agency Lifeline Total Budget Major objectives/ components

Ongoing Projects/Programmes

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Project/Programme Funding Agency Lifeline Total Budget Major objectives/ components

SHEMP IFAD 2000-2007 US$18.4 millionTo facilitate formation and strengthening of farmer enterprise groups and develop capacity of local institutions to form such groupsTo promote diversification in production and marketing of smallholder output

Agriculture Support Programme Sida 2003-2005 SEK132 millionSmall Scale Irrigation Project ADB 2002-2007 ZMK29.025

billionTo increase food production and household income of the target group

ADB Support to Eastern Province ADB 2000-2003 ZMK135 billion To provide improved and sustainable agriculture and financial services in order to increase food production and household income

Participatory Village Development in Isolated Areas (PaViDIA)

JICA 2002-2009 US$678,000 To bring out the villagers' potential to develop their village by self help effort and strengthen villagers' capacity to sustain own development through fostering mutual reliance and prospering village economy in order to alleviate poverty

GTZ Agriculture Sector Support Programme

GTZ 1998-2003 €3.5 million

Smallholder Access to Processing, Extension and Seeds Project

NORAD, Sida 2000-2004 US$2.3 million

CLUSA-implementing programme on behalf of SHEMP

IFAD 2001-2004 US$12.7 million

AFRICARE-implementing programme on behalf of SHEMP

IFAD 2003-2005 US$866,378

Support to Farmers' Association Project NORAD 2000-2004 US$3 million

Agriculture Consultative Forum USAIDRoyal Netherlands Embassy,Royal Norwegian Embassy, Irish Aid

2004-2007 US$1.24 millionThe ACF is a public/private sector stakeholder driven consultative forum established to: facilitate continuous consultation among key

stakeholders in the agricultural sector. provide informed advice in the formulation,

updating, designing and operationalization of agricultural policies and programs.

provide a channel for information gathering, analysis, networking and sharing among stakeholders.

Projects/Programmes in Pipeline

Support to Decentralised Rural Development in Southern Province

GTZ 2004-2009€11.0 million

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Project/Programme Funding Agency Lifeline Total Budget Major objectives/ components

Agriculture Development Support Programme

The World Bank

2005-2011 US$37.4 millionTo increase the growth of agriculture productivity and incomes as the driving force for reducing rural poverty and improving food security in an environmentally sustainable manner

Smallholder Agricultural Production and Market Support Project

ADB 2005-2010 US$50 million

Source: National Mid Term Investment Plan, 2004

Information contained in the preceding tables indicates that agriculture development efforts, programmes/interventions and related investment in the recent past have targeted all the four CAADP Pillars as well as the crosscutting issues; however, actual resource allocation (especially in terms of actual releases) to these focal areas, except Pillar three, has been grossly inadequate.

Private Sector Investment

Although the amount of private sector investment in the sector is not yet well captured and documented, it is still important to point out that private sector investment in agriculture has increased tremendously since the policy of liberalization was adopted for the sector. Though the investment cannot at this moment be quantified it is evident that the private sector has invested significantly in the sector. In fact figures on proportion of loans and advances from the commercial lending institutions show that most of the loans and advances during 2005 and 2006 went to the agriculture sector. This is a strong indication that actors in the private sector were accessing funds and investing in the sector.

The private sector has invested in areas such as input supply (seed, stock feed, fertilizer, chemicals, drugs and farm equipment), production of seed, stock feed, chemicals, agriculture marketing as in trading in agriculture products, transport, agro processing, as well as in the provision of financial services. Private sector institutions such as cotton, tobacco, sugarcane producing companies have invested in out grower schemes which have greatly contributed to increased productivity, production, employment and incomes among the smallholder farmers thus contributing to the objective of increasing incomes and reducing poverty. In addition increased private sector investment in horticulture and floriculture has increased the sector’s GDP and its contribution to national GDP and more so to employment creation and the nation’s foreign exchange earnings. Agriculture is the leading contributor to manufacturing GDP, and almost all agriculture based manufacturing is private sector based. Since the collapse of Credit and Savings Union of Zambia (CUSA) and Zambia Cooperative Federation which were the major institutions through which government provided credit to the agriculture sector most of the credit now available to the farming community is provided by the private sector. The warehouse receipts system accords the farmers a chance to borrow even before they have actually sold their crop making it possible for then to predict their income and plan for the next season with more certainty. It has greatly eased the farmers problem of capital by increasing their access to loans as the produce can be used as collateral even while it is still in the warehouse (i.e. before it has been sold). These activities and related investments signify the important and increasing role the private sector is playing and can play within the sector.

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Despite, the uncertainty caused by shifts in government policy on liberalized trade the private sector has continued to invest in the sector indicating that the private sector has the will to work in the sector and could invest even more if the operating environment was certain and predictable. Though the private has responded well and made a strong and promising start in terms of investing in the sector and providing the much needed goods and services, much more, especially in terms of clarity and consistency in terms of policy pronouncement and more so implementation, can still be done to make the investment climate within the sector more attractive and attract even more investment.

Current Investment Programmes in Agriculture

Table 9 shows the FNDP 2006-2010 with a total of 9 big programmes and a total cost of 4,881.4 billion kwacha. The projects cover the following areas; irrigation development and support, agriculture infrastructure and land development, animal health, livestock research and development, livestock production and extension, agriculture research and technology development, agriculture extension, agriculture seed support, farm power and mechanisation, aquaculture development, capture fisheries management and development, fish processing and marketing, fisheries training, policy formulation and coordination, agriculture marketing, trade and agribusiness, cooperatives development, human resource management and development, fertiliser support programme, strategic food reserves and salaries for extension officers. Donor Funded programmes are also reflected in the FNDP

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Table 9: Total Cost of the FNDP Agricultural ProgrammesCore FNDP Programs Order of

Priority2006 2007 2008 2009 2010 Grand Total

Cost in K' Billions Cost in K' billions Cost in K' billions Cost in K' Billions Cost in K' billions Cost in K' billionsGRZ DonorsTotal GRZ DonorsTotal GRZ DonorsTotal GRZ DonorsTotal GRZ Donors Total Total GRZ Donors

Irrigation Development and Support 1 2 2 22 53.5 75.5 34.9 65 99.9 86.9 50 136.9 80.9 70 150.9 465.1 226.6 238.5Agriculture Infrastructure & Land Development

2 7.4 7.4 20 37 57 20.8 66.7 87.5 80.8 60 140.8 80.8 70 150.8 443.6 209.9 233.7

Livestock Development 3 3.2 3.2 47.5 21 68.5 89.8 32.9 122.7163.450 213.4 189.5125 314.5 722.2 493.4 228.8Agricultural Services & Technology Development

4 5 13 18 40 38.6 78.6 77.9 23.8 101.781.4 55.1 136.5 121.773.9 195.6 530.3 326 204.3

Fisheries Development 5 1 0.4 1.4 26.8 0.9 27.7 24.4 2.8 27.2 31.5 20 51.5 94.8 24 118.8 226.6 178.5 48.1Policy Formulation and Coordination 6 2.4 10.4 12.4 11.1 9.7 20.8 20 13.97 34.0 20 14.55 34.6 20 15.1 35.1 137.3 73.5 63.7Agriculture Marketing, Trade and Agribusiness Development

7 - 10.1 10.1 11.8 16.9 28.7 22.1 24.33 46.4 36.9 19.2 56.1 47.4 25 72.4 213.6 118.1 95.5

Cooperatives Development 8 0.3 0.3 5.8 0 5.8 6.5 0 6.5 6.5 0 6.5 6.5 15 21.5 40.7 25.7 15.0Human Management and Resource Development

9 1 1 15.5 0 15.5 14.5 0 14.5 14.5 0 14.5 14.5 20 34.5 80 60 20.0

Fertilizer Support Programme 10 197.6 197.6150 0 150 150 0 150 - 0 - 0 497.6 497.6 -Strategic Food Reserves 11 50 50 50 0 50 30 0 30 - 0 - 0 130 130 -Salaries – Extension Officers 12 66.5 66.5 75.8 0 75.8 83.2 0 83.2 89.5 0 89.5 96.6 0 96.6 411.6 411.6 -Other (on-going projects 13 199.5 199.5- 137.2 137.2- 149.3 149.3- 25.7 25.7 - 25.7 25.7 537.4 - 537.4Sub Total 336.4233.4 569.8476.

4314.7 791.1574.

0378.8 952.8611.4294.5 905.9 752.7463.7 1,216.44,436.

02,750.91,685.1

Non-Core FNDP Program s Order of Priority

2006 2007 2008 2009 2010 Grand Total

Cost in K' Billions Cost in K' Billions Cost in K' Billions Cost in K' Billions Cost in K' Billions Cost in K' BillionsGRZ DonorsTotal GRZ DonorsTotal GRZ DonorsTotal GRZ DonorsTotal GRZ Donors Total GRZ DonorsTotal

Personal Emoluments 1 17.8 17.8 20.2 20.2 25.0 25.0 30.7 30.7 37.0 37.0 130.7 130.7 -Grants and other Payments 2 3.5 3.5 - - 3.5 3.5 3.6 3.6 3.7 3.7 14.2 14.2 -Support to MACO 3 40.5 40.5 - - 66.3 66.3 90.0 90.0 90.0 90.0 286.8 286.8 -Agricultural Shows 4 2.0 2.0 - - 3.5 3.5 4.0 4.0 4.2 4.2 13.7 13.7 -Sub Total 63.7 - 63.7 20.2 20.2 98.3 - 98.3 128.3 128.3 134.9 134.9 445.4 445.4 -GRAND TOTAL 400.2233.4 633.6496.

6314.7 811.3672.

3378.8 1,051739.7294.5 1,034.

2887.5463.7 1,351.24,881.

43,196.31,685.1

Current Donor Commitment 234.6 - 235.9 - 233.4 - 104.8 25.7 - 69.3 25.7 878.0 - 878.0Financing Gap 1.2 (78..8) (145.4) (189.7) (394.40) (807.1)

Source: FNDP, 2006

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Table 10 below gives the current programme/project portfolio, the objectives and components of each of the programme/project and the related development budget under MACO.

Table 10: Agricultural Development Projects/Programmes under MACO and related Budget for 2007

FNDP Programmes Total Cost

GRZ Donor

Project period

Major objectives/Components

Irrigation Development and Support

75.5 22.0 53.5 2006 - 2010

To promote a well regulated and profitable irrigation sub-sector that is attractive to both the public and private sectors

Agriculture Infrastructure and Land Development

57.0 20.0 37.0 2006 – 2010

To promote the improvement of agricultural infrastructure and land for sustainable production and productivity

Livestock Development Programme

68.5 47.5 21.0 2006 - 2010

To improve the productive efficiency of the livestock sub-sector in a sustainable manner and support the marketing of both livestock and livestock products and contribute to food security and increased income

Agriculture Services and Technology Development

78.6 40.0 38.6 2006 - 2010

To provide appropriate, efficient and effective technology development and transfer services in order to assist farmers increase agricultural production and productivity

Fisheries Development 27.7 26.8 0.9 2006- 2010 To increase fish production and promote sustainable utilization of fisheries resources thereby contributing to the economy through the generation of employment, income and improved availability of fish

Policy Co-ordination and Management

20.8 11.1 9.7 2006 - 2010

To formulate and implement appropriate gender, sensitive strategies through multisectoral and co-ordinated interventions with a focus on increased food security and economic growth

Agriculture Marketing, Trade and Agribusiness Development

28.7 11.8 16.9 2006 - 2010

To promote the Development of a competitive, efficient and transparent public and private sector driven marketing system for agricultural commodities and inputs

Co-operatives Development 5.8 5.8 0.0 2006 - 2010

To create an enabling environment for the development of co-operatives and other farmer organisations that will contribute to economic growth and poverty reduction

Human Resource Development

15.5 15.5 0.0 2006- 2010 To provide skilled Human Resource for the agricultural sector through capacity building, and addressing issues of HIV/AIDS and Gender in order to increase the sector's production and productivity

Fertiliser Support Programme

150.0 150.0 0.0 2006 - 2008

To improve availability of and smallholder access to improved seed and fertiliser, especially those in less accessible rural areas

Strategic Food Reserves 50.0 50.0 0.0 2006-2008 To ensure effective and efficient acquisition and maintenance of adequate strategic reserves at all times

Salaries - Extension Officers 75.8 75.8 0.0 2006-2010 To ensure the availability of an appropriate, effective, efficient and motivated cadre of extension officer in order to improve extension service delivery in the sector

Total Agriculture Development Budget

791.1 476.4 314.7Agriculture Recurrent Budget

20.2 20.2 0.0Total Agricultural sector Budget

811.3 496.6 314.7

Total National Budget 9936.4

Agriculture Budget as a % of National Budget

8.2%

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Donor Funded Projects/ProgrammesSHEMP 18.9 18.9 2000-2008 1. Strengthening the private sector agribusiness environment

2. Promoting a network of market intermediaries serving smallholder enterprises; and 3.Engaging in market brokerage to generate business based on smallholder production

ASIP/AfDB 39.5 39.5 1999-2008 Support to Eastern Province to:1. Enhance the productive capacity of smallholders through improved

research and extension services, provide credit to 2. Increase production of crops like maize, beans, sorghum and other

crops annually3. Improve cattle health and marketing services and thereby

achieve increased production of meat and full development4. Improve the living standards of the subsistence farming households

by providing income generating micro-projects, whilst maintaining a sustainable environmental condition and promoting sound principles of entrepreneurship and private initiatives

PAViDIA 2.0 2.0 2002-2009 To establish a practical model for sustainable participatory village development in isolated areas

Sustainable Land Management in the Zambian Miombo Woodland Ecosystem (Global Environmental Fund-GEF)

1.3 1.3 2003-2006 1. Reduction of carbon emissions from unsustainable slash-and-burn agricultural practices in the Miombo woodlands

2. Conservation of globally significant bio-diversity3. 3. Improvement of the food security of the local population

ADSP 49.9 49.9 2006-2011 Support farmer and Agri- business enterprises focusing on:1. Supply chain credit facility2. Market improvement and innovation Facility3. Feeder roads improvement facility4. Institutional Development and Programme Management

SIP 21.3 21.3 2002-2008 To increase food production and household income of the small scale farmers, who were mainly displaced by the construction of the Kariba Dam in the implementation districts

PLARD 15.7 15.7 2006-2010 To contribute to the development of an efficient, competitive and sustainable agricultural and rural sector which ensures increased income and food security for small scale rural households in Luapula Province

Crop Monitoring Project - - 2005-2008 Improved planning, targeting and co-ordination of interventions addressing the food security of the vulnerable through an effective, operational crop monitoring system

LFSNAC - - 2003-2007 To improve the livelihoods and nutrition status by food security and nutrition interventions such as palm oil production and consumption to 2007

Support to Small & Medium Enterprise

5.0 5.0

Trade & Invest Programme

Smallholder Agricultural Production and Marketing Support Project

33.8 33.8 2006-2011 To reduce poverty in rural areas and increase access to food and raise agriculture contribution to GDP, and to improve the capacity of smallholder farmers in production and marketing

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Agricultural Diversification and Food Security Project

18.8 18.8 2006-2013 Overall: To contribute to poverty reduction and increased food security among rural households, whereby food security is considered in three dimensions (food availability, food access and nutrition)Purpose: Rural householders' (126,000) increased performance in food security and agricultural diversification strategies in western and North Western Provinces

GTZ -Decentralization and Rural Development in Southern Province

- - 2004-2006 District administrations and line ministries orient their services in synergy with the private sector towards poverty reduction. Best practices will be used for development and implementation of national strategies for the decentralisation policy

Smallholder Livestock Improvement Programme

7.8 7.8 2005-2012 not yet signed and not yet effective

1. Reduction of the incidence of CBPP and ECF to levels that allow smallholders' cattle herds to be re-established and to grow

2. Adequate restocking of poor smallholder farmers who have lost their cattle to disease, in a way that will provide them with sustainable access to draught animal power

Agriculture Support Programme (ASP)

36.8 36.8 2003-2008 To contribute to food security, income generation and poverty reduction

Mid Zambezi Water Irrigation and Water Management Project

- - At Appraisal stage

Kwando Zambezi and Typanosomiasis Eradication Project

12.4 12.4

Project for Development through empowerment of Rural Communities

- - 2005-2008 1. Increase capacity of the target villages to identify and solve their communal problems, hence promote self-reliance

2. Introduce on farm and off farm techniques for increasing crop yields and their additional values, hence income in selected target districts

3. Local partners (PACO, DACO, ZIP, Extension Officers) acquired and enable to facilitate community development through participatory approach and appropriate technology

Source: FNDP, MoFNP 2006 Current Major Public Investment Projects in the Agricultural Sector

During the PRSP period, the Government of Zambia and its cooperating partners put a number of investment projects and programmes in key sectors in the social and economic sectors. It is during this period that the programming of public investments through the PIP started. A number of projects in the agricultural sector were initiated and some old projects continued. During the PRSP period the most important projects focused on improving the agricultural finance and investment climate, improving marketing, trade and agricultural business climate, land and infrastructure development, technology development and dissemination and food security through a targeted support system. In the Transitional National Development Plan the focus assumed in the PRSP was continued. The progress of the sector was to be monitored periodically to assess whether the sector is contributing to economic growth and poverty reduction. A number of indicators such as real GDP growth in agriculture, food security, total employment in agriculture, earnings from agriculture exports and agriculture in general were to be used to measure this progress (Government of the Republic of Zambia, (2002b)).

In the FNDP the focus has largely been maintained with more elaboration of specific interventions. Major areas of focus under the FNDP include; Irrigation Development and

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Support, Agriculture Infrastructure and Land Development, Livestock Development Programme, Agricultural Services and Technology Development, Fisheries Development, Policy Co-ordination and Management, Agricultural Marketing, Trade and Agribusiness, Co-operatives Development and Human Resource Development. Of the donor funded programmes the ADB funded projects focus on irrigation development; rural savings and credit; capacity building; infrastructure development; and livestock development. The IFAD funded projects focus on support to smallholder enterprise group development, market linkage development and policy/legislative and institutional support. The Sida funded projects focus on entrepreneurship and business development, land, crop and livestock development, seed, infrastructure fund, capacity building among relevant support structures, management, information and learning systems and smallholder access to planting materials and Extension support. The World Bank funded projects focus on agriculture extension; research and infrastructure development; institutional arrangements and capacity building; and market development. The USAID projects focus on agribusiness development, trade and investment enhancement, development of early warning system and development of stakeholder consultation in the agriculture sector. The NORAD funded projects focus on development of stakeholder consultation in the agriculture sector, farmer mobilisation, extension, technical assistance, training, financing support, farm level infrastructure support, community infrastructure, input credit and working capital support. The GTZ funded projects focus on decentralised rural development. The Netherlands funded projects focus on development of stakeholder consultation in the agriculture sector and livestock development. JICA funded projects focus on Participatory Village Development in Isolated Areas and Irish funded projects focus on Development of stakeholder consultation in the agriculture sector.

However, the performance of the projects and the level of achievement of the project objectives have varied due to a number of factors. Uncertain policy environment, a general lack of supportive legislation and regulatory framework and lack of enforcement where it exists, unstable macroeconomic factors e.g. exchange rate, interest rate and inflation, which have albeit improved in recent years, poor infrastructure, lack of financial services, poor technology development and dissemination, poor information generation and dissemination, poor input and produce service delivery, inadequate and delayed funding on the Government's part etc.

With the development of the FNDP, the MTEF, the PEMFA process and establishment of the necessary institutional arrangements to ensure efficient and transparent public financial management, it is expected that the current projects will perform better. The major donor funded projects in the agricultural sector in the past five years and their alignment with the CAADP Principles and Pillars are presented in Table 11 below. As noted earlier, Annexes I to III present the FNDP and the donor funded programmes as well as highlighting the extent to which these programmes are consistent with the CAADP Pillars.

Table 11: Current Co-operating Partner Agriculture Investment & Alignment with CAADP

Co-operating Partner Areas of Interest/Projects Relevance to CAADP Pillars

1 2 3 4World Bank Agriculture Extension, Research and Infrastructure

Developmentx x x x

Institutional Arrangements and Capacity Building x

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Co-operating Partner Areas of Interest/Projects Relevance to CAADP Pillars

Market Development xSida-Sweden Entrepreneurship and Business Development x x

Land, Crop and Livestock husbandry x x x x Seed x x Infrastructure Fund x x Capacity Building among Relevant Support Structures x x x Management Information and Learning Systems x x x Smallholder access to Planting Materials and Extension

Supportx x x x

IFAD Support to Smallholder Group Development x x Market Linkage Development x x Policy/Legislative and Institutional support x x x x

ADB Irrigation Development x x Rural Savings and Credit x x x x Capacity Building x Infrastructure Development x Smallholder Agricultural Production and Market Development

x x

Livestock DevelopmentUSAID Agribusiness Development x x

Trade and Investment Enhancement x x Development of Early Warning x x Development of Stakeholder Consultation in Agriculture

sectorx x x x

NORAD-Norway Development of Stakeholder Consultation in Agriculturesector

x x x x

Farmer Mobilisation Fund x Extension Fund Attachment x x Technical Assistance x x x x Training Programme x x x Pre-ship Financing Support x x Farm Level Infrastructure Support x x Community Infrastructure-Storage Sheds x x Input Credit x x x x Working Capital Support x x x x

GTZ-Germany Support to Decentralised Rural Development xNetherlands Development of Stakeholder Consultation in Agriculture

Sectorx x x x

Livestock DevelopmentJICA-Japan Participatory Village Development in Isolated Areas x x x x

Irish Aid-Ireland Development of Stakeholder Consultation in AgricultureSector

x x x x

FINNIDA-Finland xSource: Support to NEPAD-CAADP Implementation, National Medium Term Investment Programme, MACO, November 2004.

A study commissioned in March 2005, by JICA presents a detailed inventory of all projects, programmes and interventions in the agricultural sector as at 2006

Current Investment Programmes in Natural ResourcesTable 12 shows the 15 core programmes in natural resources in the FNDP 2006-2010 with a total cost of 377.6 billion Kwacha. The programmes cover the following areas; Support to Zambia Forestry Commission; Sustainable Indigenous Forest Resource Management; Sustainable Management of Wildlife Resources; Sustainable Wood Fuel Management; Industrial and Plantation Forestry Programme; Private and Public Capacity Building; Strengthening

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Community Based Forest Management; Agro-Forestry and Affrorestation Programme; Strengthen Forestry Education and Training Programme; Support to Forest Business Enterprises; Strengthening Forestry Research & Information Management System; Management of Protected Areas; Management of Wetlands; Sustainable Management of Heritage Resources; and Institutional Strengthening and Capacity Building. Donor Funded programmes are also reflected in the FNDP. A close look at the pattern of resource allocation within the natural resources sector shows that, over the FNDP period, the budgetary allocation to all development programmes in the forestry sub-sector gets the largest share compared to others like wetlands management or management of heritage resources. This shows or reflects the concerns about the need to redress the poor management of the country’s forest resources.

Forests and forest industries contribute at least 3.7 percent to GDP; the largest contribution comes from the wood fuel sub-sector. Charcoal production (mostly commercial) and firewood collection (mostly subsistence) account for 2.2 and 0.8 per cent, respectively. The most significant contribution from the forest sub-sector is that of providing energy for the agricultural and domestic needs of 90 percent of the Zambian population. Moreover, the potential forest contribution to the national economy could be much higher than at present as the overall productivity of the forest resource is sub-optimal. Productivity (measured per unit of financial or labour input) is low at all stages of the marketing chain, from production, to processing and marketing. Transaction costs are high due to poor infrastructure, roads, and communications. In the light of the above, the Zambian forest resource is dwindling; annual deforestation is estimated at 900,000 ha., indicating the urgent need to reduce the speed of deforestation, and to mitigate its impact on the people and the environment. Charcoal burning significantly contributes to rapid deforestation. Half of Zambia’s population lives in urban areas and the rate of urbanization is increasing. Between 66 and 98 percent of urban households use charcoal for domestic energy needs. The highest prevalence of consumption (98 percent) is among the urban low-cost households who constitute 85 percent of the total number of urban households (Government of the Republic of Zambia, 2006). Increased funding to the forestry sub-sector as reflected by the FNDP is seen as a means to addressing the problems of deforestation and low productivity of the forestry sector. The investments or programme interventions will aim at controlling deforestation including improved availability of forest goods to the rural poor, increased sub-sector productivity, and more cost-efficient use of the nation’s natural resources. Significant economic and environmental gains may be achieved through increasing the efficiency of the forest industries, including small-scale enterprises

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Table 12: Total Cost of the FNDP Natural Resources ProgrammesCore FNDP Programs Order of

Priority2006 2007 2008 2009 2010 Grand Total

Cost in K' Billions Cost in K' billions Cost in K' billions Cost in K' Billions Cost in K' billions Cost in K' billionsGRZ Donors Total GRZ Donors Total GRZ Donor

sTotal GRZ Donors Total GRZ Donors Total Total GRZ Donors

Support to Zambia Forestry Commission

1 0.66 0.66 0.70 - 0.79 0.79 - 0.79 0.86 0.20 1.06 0.91 15.00 15.91 19.2 4.0 15.2

Sustainable Indigenous Forest Resource Management

2 0.92 0.6 1.52 1.10 5.0 6.10 1.75 4.20 5.95 1.20 4.80 6.00 1.27 4.80 6.07 25.6 6.2 19.4

Sustainable Management of Wildlife Resources

3 - 2.1 2.10 - 4.8 4.80 - 3.99 3.99 - 8.40 8.40 - 6.50 6.50 25.8 - 25.8

Sustainable Wood Fuel Management

4 0.19 2.4 2.59 0.23 3.8 4.07 0.36 4.56 4.92 0.25 4.00 4.25 0.26 8.40 8.66 24.5 1.3 23.2

Industrial and Plantation Forestry Programme

5 0.79 - 0.79 0.95 1.2 2.15 1.51 5.40 6.91 1.04 6.30 7.34 1.09 12.80 13.89 31.1 5.4 25.7

Private and Public Capacity Building

6 0.21 - 0.21 0.25 - 0.25 0.40 3.20 3.60 0.28 - 0.28 0.29 - 0.29 4.6 1.4 3.3

Strengthening Community Based Forest Management

7 0.75 - 0.75 0.90 3.80 4.70 1.43 8.80 10.23 0.99 5.60 6.59 2.04 1.20 3.24 25.5 6.1 19.4

Agro-Forestry and Affrorestation Programme

8 2.00 0.60 2.60 2.40 3.48 5.88 5.88 3.81 5.94 2.62 8.50 11.12 2.76 0.80 3.56 32.9 13.6 19.3

Strengthen Forestry Education and Training Programme

9 0.90 - 0.90 1.08 - 1.08 1.72 - 1.72 1.18 4.70 5.88 1.25 6.00 7.25 16.8 6.1 10.7

Support to Forest Business Enterprises

10 3.00 - 3.00 3.60 - 3.60 5.70 6.10 11.08 1.80 5.00 6.80 4.14 4.00 8.14 33.3 18.2 15.1

Strengthening Forestry Research & Information Management System

11 0.26 1.77 2.03 0.32 3.18 3.50 0.50 8.40 8.90 0.35 6.60 6.95 0.36 1.00 1.36 22.7 1.8 20.9

Management of Protected Areas 12 - 4.40 4.40 - 12.0 12.0 - 10.80 10.80 - 10.90 10.90 - 3.80 3.80 41.9 - 41.9Management of Wetlands 13 - - - - 8.00 8.00 - 7.60 7.60 - 4.00 4.00 - 3.00 3.00 22.6 - 22.6

Sustainable Management of Heritage Resources

14 - 6.50 6.50 - 1.61 1.61 - 9.00 9.00 - 2.09 2.09 - 7.86 7.86 27.1 - 27.1

Institutional Strengthening and Capacity Building

15 - - - - 4.5 4.50 - 6.50 6.50 - 7.00 7.00 - 5.89 5.89 23.9 - 23.9

Sub Total 9.69 18.37 28.06 11.63 51.41 63.04 17.96 84.49 102.45 10.57 78.09 88.66 14.38 81.05 95.43 377.6 64.2 313.4

Non-Core FNDP Program s Order of Priority

2006 2007 2008 2009 2010 Grand Total

Cost in K' Billions Cost in K' Billions Cost in K' Billions Cost in K' Billions Cost in K' Billions Cost in K' BillionsGRZ Donors Total GRZ Donors Total GRZ Donors Total GRZ Donors Total GRZ Donors Total GRZ Donors Total

Personal Emoluments 1 2.51 - 2.51 3.01 - 3.01 3.20 - 3.20 3.29 - 3.29 3.46 - 3.46 15.5 15.5 -Contributions to International Organizations

2 0.07 - 0.07 0.07 - 0.07 0.07 - 0.07 0.07 - 0.07 0.9 - 0.9 1.2 1.2 -

General Administration (for NRM)

3 0.67 - 0.67 0.80 - 0.80 0.84 - 0.84 0.87 - 0.87 0.92 - 0.92 4.1 4.1 -

Human Resource Management and Development

4 1.37 - 1.37 1.64 - 1.64 1.72 - 1.72 1.79 - 1.79 1.88 - 1.88 8.4 8.4 -

Planning, Policy, Monitoring and Evaluation

5 0.37 - 0.37 1.20 - 1.20 0.46 - 0.46 0.48 - 0.48 0.51 - 0.51 3.0 3.0 -

4.98 - 4.98 6.72 - 6.72 6.30 - 6.30 6.50 - 6.50 7.67 - 7.67 32.2 32.2 -14.67 18.37 33.04 18.35 51.41 69.76 24.25 84.49 108.74 17.07 78.09 95.16 22.05 81.05 103.10 409.80 96.4 313.4

Source: FNDP, 2006

42

Agricultural Financing Institutions

Brief BackgroundThe Government of Zambia (GRZ) shortly after independence in 1964 established a number of specialized institutions to provide agricultural credit namely the Credit Organization of Zambia (COZ), Agricultural Finance Company (AFC), Zambia Agricultural Development Bank (ZADB) and the Lima Bank. Alongside AFC was also Cattle Finance Company (CFC) which “fizzled out” together with state ranches dotted in various parts of the country which were the main source of animals (cattle) under the CFC credit scheme. There were also diaries, which phased out under the privatization programme. Lima Bank was liquidated in February 1997. When one institution failed to be viable and sustained another institution was started without taking action to restructure and/or rehabilitate the sick institution.

The other financial institutions which are presently operational with an agricultural credit component are National Savings and Credit Bank of Zambia (NSCB), Development Bank of Zambia (DBZ) and some commercial banks with a network of rural branches.

The Rural Investment Fund (RIF) was created as a financial component of Agricultural Sector Investment Programme (ASIP), RIF happened to be the only one of the fifteen components of ASIP that was implemented. It was operational from 1997 to about 2002 but since most of that time its operations stalled due to lack of funding.

The other financial institution in the agricultural sector which currently could best be described as moribund are the Credit Unions and Savings Association (CUSA), the Zambia Cooperatives Federation Financial Services (ZCF-FS) and Cooperative Bank of Zambia.

The last attempt by the Government at institutional credit was the introduction in 1994 of the Agricultural Credit Management Programme (ACMP) to supply fertilizer on credit. The programme did not succeed due to low recovery rates. ACMP was in effect replaced in 2002 by the Fertilizer Support Programme (FSP) which was intended to last for three years but due to demand is still in existence.

It has to be pointed out, however, that since Lima Bank was liquidated there has been a distinct vacuum created in the agricultural finance sub-sector because there no specialized institution specifically mandated to provide agricultural credit particularly to the small scale farmers. The only institution which could be relied upon in the past decade or so to play this role in a significant way is the Development Bank of Zambia (DBZ) and later on National Savings and Credit Bank (NATSAVE) as well as private commercial banks. However, DBZ was created to cater for large scale farmers and all other sectors and given it’s mainly ‘funding constraints’ could not significantly play this role. Similarly NSCB with its ‘legal framework’ still largely resolved could also not provide agricultural credit in a significant manner. Lending by commercial banks is generally available to established clients –the commercial farmers and agricultural businesses (Government of Republic of Zambia, 1997).

43

Public Financing Institutions

Development Bank of ZambiaThe Development Bank of Zambia was established by an Act of Parliament in 1972 and started operations in 1974. Its mandate included the provision of agricultural credit to corporations and large scale farmers. Since it is mandated to provide financial assistance to all the sectors of the economy its role and participation in the agricultural finance sub-sector is fairly limited.

National Savings and Credit Bank of Zambia (NATSAVE)National Savings and Credit bank (NATSAVE) is a government owned non-bank financial institution that was established in 1972 by an Act of Parliament. The Act gives the Bank the power to administer funds on behalf of any person or agency, accept deposits, operate savings schemes, the giving of loans an to carry out any form of banking business. The Bank is also required to play an active role in stimulating banking business. The Bank is also required to play an active role in stimulating economic activity among the marginalized sectors of the economy through the provision of innovative credit and savings service. NATSAVE has defined its mission as “to promote increased access to sustainable financial services in rural and urban areas through mobilization of savings and offering of prudent credit to foster economic growth.” Though the bank has a history of poor performance it has recently registered phenomenal growth in deposits. According to accounts of the bank, the deposit base was K34.31 billion in 2003, K57 billion in 2005. This growth needs to be matched by complementary developments in bank management systems as well as the bank’s ability to comply with the regulatory and supervisory framework. In this regard the bank has adopted for implementation an Institutional Development Plan (IDP) which has comprehensively articulated the enhancement of management capacity of NATSAVE to be able to contain the challenges that come with this level of business growth.

Private Financing Institutions

Private Commercial BanksAlthough there are 13 operating commercial banks in the country only three have significant rural branch networks, namely; Zambia National Commercial Bank Limited, Barclays Bank of Zambia Limited and Finance Bank Zambia Limited.

Commercial banks’ operations in agricultural credit are three types: lending own funds, lending credit guarantee funds at shared risk and administration of donor funds for an administrative fee without risk. Some examples of lending with shared risks or without risks are World Bank/ADB agricultural marketing and processing funds channeled through commercial banks. World Bank funded Coffee II project through ZNCB and DBZ, Barclays Bank’s participation in EU Rose growers scheme, EU’s channeling of funds through Standard Chartered Bank for maize marketing and the Agricultural Credit Management Programme (ACMP) scheme funds through SGS and Cavmont Merchant Bank. Although many of these schemes intended to target small scale farmers, economies of scale meant that funds are channeled through commercial farmers and agri-businesses. There is no detailed analysis made by the Bank of Zambia or others of the amount lent to agribusiness, commercial farmers, emergent farmers etc. But it is estimated that only a very small percentage of commercial banks’ lending goes to small scale and emergent farmers.

44

Micro-Finance InstitutionsA number of micro-finance institutions emerged in the last decade, which represent a new generation of financial intermediation in Zambia. These new initiatives are by NGOs as well as some private companies, capitalized with a mix of donor funds and private capital. Though their outreach was limited, most of them were built on the principles of cost recovery. Unfortunately the principal organizations operating in the rural areas namely the Credit Management Services (CMS) and Country Services Limited (CSL) went under and these two failures were recently joined by the Women Finance Trust (WFT). The only micro-finance institutions participating in the rural finance sub-sector are Micro Bankers Trust (MBT) and NATSAVE operating under the umbrella of National Savings and Credit Bank discussed above.

Micro-Bankers Trust (MBT)MBT was established as an autonomous body to implement the Micro Credit for the Empowerment of the Poor (MCDEP) programme which is a joint venture of the Government of Zambia and the European Union (EDF), though the Ministry of Community Development and Social Services (MCDSS) as Settler of the Trust. MBT's mission has been defined as “to contribute to the creation of wealth at community level through access to appropriate financial and other services for enterprise development and self employment by vulnerable groups.

Recent Trends in Lending to Agriculture by Financial InstitutionsFigure I shows the recent trends in the shares of loans and advances that are lent to the various sectors in the country. Perhaps these figures on loans and advances would give a proxy indication of private sector investment in the agriculture sector. The figure shows that over the June 2005-December 2006 period the agriculture sector’s share of total loans and advances ranged between 25 and close to 30%. The proportion going to other sectors over the same period was less than 15%. From the figures one may argue that there is a considerable portion of borrowed funds being invested in the agriculture sector. However, an appreciation of which sub- sectors of agriculture the investments are going into would shed more light on investments in various aspects of agriculture in relation to the sector’s performance. The reality is that most of the loans are obtained by a few commercial farmers and other large agribusiness enterprises like Nakambala Sugar Estates. For instance, Nakambala Sugar Estates recently launched a major expansion plan for its sugar production. More than 800 billion Kwacha of private sector funds will be invested in the Nakambala Sugar Estates expansion project.

45

Figure I: Share of Total Loans & Advances by Sector, June 2005-December 2006

Source: Bank of Zambia data

The recent trends indicating increasing investments in the agricultural sector are as a result of the financial reforms that have been undertaken in the country. Zambia has been instituting financial sector reform measures with a view to restructuring its financial institutions, introducing measures of deregulation in their operations, freeing interest rates, checking excessive growth in money supply, and strengthening the supervisory role of central banks. Zambia has also created domestic capital markets or strengthened their institutional, legal and operational framework in order to generate greater public confidence in their financial intermediation work. These confidence building measures are all geared towards more effective and efficient mobilization of domestic savings and channeling them into priority investments. In this regard, the restructuring of financial institutions may be considered to enable the provision of long-/medium-term credits for important sectors like agriculture. There are several examples of the developing capital or financial markets in Zambia financing agriculture among which include funding of the agribusiness firm Freshpikt by Zambia State Insurance Corporation (ZSIC); financing of Zambeef through the Lusaka Stock Exchange. All these developments are positive in terms of the growth of the private sector in the country.

46

Share of Total Loans & Advances by Sector, June 2005-December 2006

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Sector

Jun-05 Dec-05 Jun-06 Dec-06

Share of Total Loans & Advances by Sector, June 2005-December 2006

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Sector

Jun-05 Dec-05 Jun-06 Dec-06

Financial Sector Development

The Zambian government recognizes that the financial sector is characterized by high cost of borrowing, thin capital markets and absence of financial services in most of the rural and peri-urban areas. Consequently, the financial system has not played a meaningful role in national development. Moreover, the weaknesses of local insurance markets means that private agents are often unable to effectively mitigate risks, for example, in the agricultural sector which results in low levels of investment being undertaken. The medium-term objective is to reverse this situation and expand financial intermediation and access to financial services both in urban and rural areas so as to contribute to the achievement of rapid pro-poor growth. This vision will be achieved through the implementation of the Financial Sector Development Plan (FSDP) (Government of the Republic of Zambia, 2006a).

The FSDP is a detailed master plan for the development of the financial sector and its main focus is on developing the capital markets, enhancing the role of micro-financing in the economy, development of rural financing, and the strengthening of banking and non-banking financial institutions. It also seeks to enhance the role of pensions and insurance in the financial sector. Annual work programmes and milestones will be developed on which implementation progress shall be measured. The cost of implementing the FSDP is estimated at US $1.5 million. Some of the key regulatory reforms to be achieved under the FSDP are the amending of the Pensions Scheme Regulation Act. This will result in the harmonization of legislation affecting pensions, including investment guidelines. The amendment will also compel the Pension Funds and other Institutional Investors to channel a portion of their funds to the capital market. This would enhance the demand for instruments on the market and enhance liquidity too. Other important milestones shall be the facilitation by GRZ of the creation, by the private sector, of a Credit Reference Bureau (CRB), which will, among other things, aim to strengthen the credit culture in the country. Similarly, the Bank of Zambia and other financial sector regulators will be strengthened so that they are able to play their roles more independently and effectively (Government of the Republic of Zambia, 2006a).

Through the FSDP, the reform of the publicly owned non-bank institutions, namely, the Zambia National Building Society (ZNBS), Development Bank of Zambia (DBZ), and the National Savings and Credit Bank (NSCB) will be completed. The reforms which started in 2005 are intended to turn these institutions into viable entities, broadening the range of financial services that they provide, enhancing their role in the provision of medium to long-term credit, and providing financial services to rural and peri-urban areas. The initial focus is the harmonization of the Banking and Financial Services Act (BFSA) with the DBZ Act, the Building Societies Act and the NSCB Act, which are in conflict with the BFSA Act. This process was completed during 2006. The three institutions were also incorporated as limited liability companies under the Companies Act in 2006. The repeal of the DBZ Act will also open up the market for development financing to other players. The harmonization of legislation, in particular, the inclusion of the state-owned non-banking financial institutions (NBFIs) under the Companies Act is also expected to strengthen the regulatory and supervisory powers of the Bank of Zambia over these institutions (Government of the Republic of Zambia, 2006a).

47

With respect to rural and micro financing, there has been a gap in the provision of financial services in the rural areas. This followed the collapse of most of the subsidized and publicly funded rural finance institutions in the mid-1990s. This situation has been further aggravated by the closure of many commercial bank branches in peri-urban and rural areas due to the stagnation in the rural economy and the poor infrastructure. This lack of financial services in the rural areas has remained one of the constraints to rural development. In the light of the focus on rural-led development in the FNDP, developing a well functioning micro and rural financing system is one of the priorities of the FSDP. The first step shall be the preparation of a comprehensive rural financing policy and strategy, which has been absent. The policy and strategy will provide a framework for the provision of rural financing. Efforts towards the preparation of the rural financing policy and strategy commenced in 2005 (Government of the Republic of Zambia, 2006a).

Apart from developing and implementing a rural financing policy and strategy, the National Savings and Credit Bank (NSCB) will be jointly capitalized with the International Fund for Agricultural Development (IFAD) and its rural branch network expanded further. This will be after the Bank has been reformed into a viable institution within the context of the FSDP.

48

Annex I: FNDP Agriculture Programmes and their Alignment to CAADP Pillars

Programme(Number indicates order of Priority)

Objective Strategies Relevance to CAADP Pillars1 Land and Water Management

2 Rural Infrastructure & Trade-related Capacities for Improved Market Access

3 Increasing Food Supply and Reducing Hunger

4 Agricultural Research,Technology Dissemination and Adoption

(1) Irrigation Development and Support

To promote a well regulated and profitable irrigation sub-sector that is attractive to both the public and private sector

a) Develop socially desirable and economically viable irrigation schemes;b) Construct communal bulk water supply systems;c) Facilitate irrigation infrastructure development for improved agricultural

productivity;d) Establish an Irrigation Development Fund to enable farmers access funds for

irrigation equipment;e) Facilitate establishment of water rights that are supportive of sustainable

agricultural development;f) Promote sustainable utilization of wetlands and dambos.

XXX

X

X

X

XXX

XXX

X

X

X

X

X(2) Agricultural Infrastructure and Land Development

To promote the improvement of agricultural land for Sustainable production and productivity

a) Ensure sustainable agricultural land use planning and management;b) Develop new farm blocks and facilitating basic infrastructure development;c) Develop a land information system for the agricultural sector.

XXX

XXX

(3) Livestock Development Programme

To improve the productive efficiency of the livestock sector in a sustainable manner and support the marketing of both livestock and livestock products and contribute to food security and increased income

a) Regulate and control the quality of livestock, livestock products, and stock feeds;

b) Promote private sector participation in the provision of livestock and extension services, and in marketing of livestock and livestock products;

c) Create and promote awareness in the conservation of animal genetic resources;

d) Facilitate implementation of disease and vector control programmes with private sector participation;

e) Establish the Emergency Disease Control Fund to control transboundary animal diseases, such as Foot and Mouth Disease, CBPP, etc.;

f) Rehabilitate the Vaccine Unit;g) Strengthen the early warning system;h) Establish 2 disease free zones by 2010;i) Devise efficient and sustainable diagnostic techniques in investigations of

diseases;j) Enforce all legislation in the livestock sub-sector;k) Promote the establishment of abattoirs in livestock production areas;l) Encourage, supporting and promoting poultry and small livestock enterprises

X

X

X

X

X

XXXXXXXX

X

X

X

X

X

49

(4) Agricultural Services and Technology Development

To provide appropriate, efficient and effective Technology development and transfer services in order to assist farmers increase agricultural production and productivity

a) Develop appropriate agronomic packages and technologies for sustained farming systems and overall agricultural production and utilization;

b) Promote crop diversification;c) Design and promote appropriate on-farm transportation, processing and

storage structures, especially for small-scale farmers to minimize or prevent post-harvest losses;

d) Promote research/extension/farmer linkages in order to have more farmers’ input in research and technology transfer;

e) Promote cost sharing with beneficiaries of agricultural research and extension;f) Regulate the introduction and use of agro-biotechnology products, in

particular Genetically Modified Organisms (GMOs);g) Promote and encourage the involvement of the private sector and NGOs in

the provision of extension services.

X

XX

X

X

X

X

X

X

X

X

XX

(5) Fisheries Development

To increase fish production and promote sustainable utilization of fisheries resources thereby contributing to the economy through the generation of employment, income and improved availability of fish

a) Conserve and maintain bio-diversity of aquatic resources through improved monitoring;

b) Regulate and control the marketing and trading of fishing gears and fishing practices;

c) Promote aquaculture development, especially among women;d) Strengthen gender balanced research-extension-farmer linkages;e) e) Promote improved fish processing and storage.

X

X

X

X

X

X

(6) Policy Coordinationand Management

To formulate and implement appropriate, gender sensitive strategies through multi-sectoral and coordinated interventions with a focus on increased food security and economic growth

a) Strengthen and monitor the liberalization of markets and facilitating private sector growth;

b) Review and realign institutional and legislative arrangements;c) Enforce the sector’s regulatory functions;d) Strengthen emergency preparedness through early warning information and

data; timely and efficient crop forecasting; drought insurance mechanism; and maintenance of strategic food reserves;

e) Develop a cross-sectoral strategic framework and monitoring matrix for food security within the context of the FNDP;

f) Facilitate provision of incentives for local and foreign agricultural investment;g) Strengthen information collection and dissemination;h) Promote gender equity in resource allocation and access to agricultural

services, focusing on women and young farmers.i) i)Strengthen/support platforms for policy dialogue and public/private

stakeholder consultations

XX

X

XX

X

X

XXX

X

XX

X

X

XX

XXX

X

XX

X

XX

X

(7) Agricultural Marketing, Trade and Agribusiness Development

To promote the development of a competitive, efficient and transparent public and private sector driven marketing system for agricultural commodities and inputs

a) Facilitate market information flow among stakeholders;b) Impart agro-business skills to market participants and farmers, especially

women;c) Promote and enforce grades and standards of major agricultural commodities

and inputs;d) Facilitate the development of rural infrastructure, such as roads rural storage

infrastructure;e) Create a market driven environment with no market distortions for improved

input and output market centres;f) Create an enabling environment for an improved agricultural input and output

market, especially for small-scale farmers in rural areas;g) Promote crops with both domestic and export markets;h) Encourage financial institutions to establish in rural areas.

XX

X

X

X

X

XX

X

X

X

X

X

XX

50

(8) Cooperatives Development

To create an enablingenvironment for the development of autonomous,transparent, viable, and demand- driven cooperatives and other farmer organizationsthat will contribute to economic growth and poverty reduction

a) Develop a legal and institutional framework to facilitate re-orientation and reformation of the cooperative organizations;

b) Develop the capacity of cooperative members to take advantage of the current socio- economic environment;

c) Promote development of business-oriented cooperatives and farmer organizations in order to enhance their capacity to access financial resources;

d) Promote partnerships between cooperatives and other sectors of the economy;e) Encourage and promote participation of women in business-oriented

cooperatives and farmer organizations.f) Formulate policy on management and development of cooperatives;g) Enhance the capacity of cooperatives and MACO staff in management and

development of cooperatives.

X

X

X

X

X

XX

X

X

X

X

X

XX

(9) HumanResourceDevelopment

To provide skilled humanresource for the agricultural sector through capacitybuilding, and addressing issues of HIV and AIDS, in order to increase the sector’s production and productivity

a) Provide short and long-term training at technical and professional levels, including farmer training;

b) Facilitate development of public and private sector training institutions;c) Promote agricultural education at both basic and high school levels, including

young farmers’ clubs;d) Promote income generating ventures in agricultural training institutions;e) Establish new training institutions and rehabilitation of existing ones;f) Create HIV and AIDS and gender awareness and sensitization among

agricultural staff and farmers;g) Provide relief and mitigatory measures to HIV and AIDS infected and

affected staff and farmers including their families;h) Ensure gender equity in professional and technical training programmes in

agriculture.

X

X

X

X

X X

X

X X

X

51

Annex II: FNDP Natural Resource Programmes and their Alignment to CAADP PillarsProgramme

(Number indicates order of Priority)

Objective Strategies Relevance to CAADP Pillars

1 Land & Water Management

2 Rural Infrastructure & Trade-related Capacities for Improved Market Access

3 IncreasingFood Supplyand Reducing Hunger

4.AgriculturalResearch, Technology Dissemination and Adoption

(1) Management of Protected Areas

To maintain a representation of ecosystems for the benefit of current and future generations

a)Maintenance of representative protected areas network system;b) Expansion of protected area system to include wetlands types which are not currently under protection

XX

(2) Legislation andPolicyReview

To develop a conducive policy and legislative framework for enhanced contribution of the Sector to the national economy

a)Formulate and implement appropriate policies and plans;b)Integrate private sector driven policies and programmes in NRM;

c) Integrate international environmental conventions in national laws and local programmes

XXX

(3)Environmental Institutional Strengthening and Capacity Building

To strengthen management systems for sustainable utilization of natural resources

a)Improved coordination and administration;b)Institutional development and capacity building

XX

XTo mainstream Gender andHIV/AIDS in Sector activities

Promotion of Gender and HIV/AIDS equity and awareness

(4) Sustainable Management of Wildlife Resources

To effectively conserve and manage wildlife and habitats

a)Improving habitat productivity, protection, and monitoring;b)Rehabilitation of protected areas infrastructure;c) Integrated regional law enforcement;d)Co-management of wildlife resources;e) Commercialisation of wildlife industries

X

XX

X

X(5) Institutional Reform

To effectively manage the process of institutional change and reform of the forestry sub-sector

a)Institutional reform;b)Strengthening of institutions and human resources;c) Enhanced institutional inter-sectoral and regional collaboration

XXX

XX

(6) Sustainable Indigenous Forest Resources Management

To manage and conserve indigenous forests in a sustainable way

a) Integrate forestry into relevant cross-sectoral development activities;b) Implement sustainable forest management and conservation;c) Strengthen forest resource protection and monitoring

XXX

X X X

(7) Sustainable Wood Fuel Management

To promote efficient use of wood energy and alternate sources

a) Sustainable and participatory wood fuel management;b)Establish fuel wood plantations;c) Improve efficiency and technology of charcoal production and use

XXX

XXX

(8) Industrial and Plantation Forestry

To enhance the economic and social contributions of industrial and plantation forestry

a) Strengthen commercial forestry;b)Promote forest sub-sector financing;c) Improve access to information, market opportunities, trade channels, and technology

XXX

XXX

XXX

52

(9) Private and Public Sector Capacity Building

To develop an efficient private sector driven wood processing and marketing system

a. Promote out-grower scheme in rubber growing and cottage industry;b. Capacity building of forestry entrepreneurship;c. Distribute market information

XXX

XXX

XXX

(10) Strengthening Community Based Forestry Management

To build local forest Governance through decentralisation and community based forest management

a) Promote joint management of forest resources;b)Establish community structures and develop skills;c) Formulate joint forest management plans and put in place appropriate legal frameworks

X X X

X X X

X X X

(11) Agro-Forestry and Afforestation Programme

To strengthen the capacity of extension and research officers to actively promote agro-forestry and afforestation activities

a) Establish on-station and on-farm trials;b) Promote village nurseries and establishment of woodlots;c) Formulate integrated land use plans

XXX

XXX

XXX

XXX

(12) Strengthening Forestry Education and Training

To support Zambia Forestry College and in-service staff training

a) Rehabilitate college infrastructure and review curricula;b) Improve staff skills through staff development programmes;c) Develop and implement staff training programmes

XXX

XXX

(13) Supporting Forest Business Enterprises

To improve investment in the forestry sub-sector and provide support to rural and urban livelihoods throughSustainable forest-based enterprises

a) Increase funding to Forest Development Credit Facility;b) Promote micro and small-scale credits to rural based enterprises;c) Strengthen the informal sector;d) Promote Bee Keeping and Api-culture

XXXX

XXXX

XXXX

(14) Strengthening Forestry Research and InformationManagement System

To generate and maintain up- to-date forest data and information

a) Implement research programmes, inventories, and assessments;b) Conduct forest accounting and valuation;c) Rehabilitate research infrastructure;d) Establish forest database

XXXX

XXXX

(15) Management of Wetlands

To promote conservation and sustainable utilization of wetland resources

a) Promotion of community participation;b) Promote commercialisation and value addition for wetland resources;c) Develop integrated land use planning;d) Improve regional and international collaboration;e) Improve coordination of wetlands management;f) Improve public awareness on wetland values and functions

XXXXXX

XXXXXX

XXXXXX

XXX

(16) Sustainable Management of Heritage Resources

To conserve and manage national heritage

a) Encourage community participation in the conservation and management of the national heritage;

b) Promote the commercialisation on national heritage;c) Promote sustainable tourism development;d) Promote public awareness and education in heritage conservation;e) Strengthen research and management planning;f) Improve regional and international collaboration;g) Improve infrastructure;h) Strengthen analysis, treatment and curation of heritage materials;i) i) Strengthen national heritage resource protection and monitoring

XX X X X X X X X

X X XXX X X X X X

X X X X X X X X X X

X X X X X X

53

Annex III: Donor Funded Agriculture Programmes and their Alignment to CAADP PillarsProgramme Objective Strategies Relevance to CAADP Pillars

1 Land and Water Management

2 Rural Infrastructure & Trade-related Capacities for Improved Market Access

3 Increasing Food Supply and Reducing Hunger

4 Agricultural Research, Technology Dissemination and Adoption

Crosscutting Issues

SHEMP 1. Strengthening the private sector agribusiness environment

2. Promoting a network of market intermediaries serving small holder enterprises

3. Engaging in market brokerage to generate business based on small holder production

1. Support to small holder enterprise development

2. Agribusiness development3. Access road improvement4. Support to small holder marketing

X

ASIP/ADB Support to Eastern Province to:1. Enhance the productive capacity of

smallholders through improved research and extension services, provide credit to increase production of crops like maize, beans, sorghum and other crops annually

2. Improve cattle Health and marketing services and thereby increased production of meat and meat products

3. Improve the living standards of the subsistence farming households by providing income generating micro- projects, whilst maintaining a sustainable environmental condition and promoting sound principles of entrepreneurship and private initiatives

Financing:1. Agriculture Development2. Livestock Development3. Infrastructure Development4. Rural Finance5. . Technical assistance

X X X X

PaViDIA To establish a practical model for sustainable participatory village development in isolated areas

1. Identification of sustainable agricultural practices for small scale farmers

2. Selection and demonstration of sustainable agricultural practices

3. Production of field manuals on sustainable agricultural practices for training programmes

4. Monitoring on pilot projects for giving feedback on training programmes

5. Establishment of training programme for extension officers

6. Facilitation of phase 1 micro projects for village development by extension officers

X X X

GEF Reduction in carbon emissions from unsustainable slash and burn agricultural practices in the Miombo woodlandsConservation of globally significant bio- diversityImprovement of the food security of the local population

1. Promotion of sustainable land management2. Scaling up of sustainable land management

approach to other areas in Zambia3. Support studies4. Capacity building5. Project management, monitoring and

information dissemination

X X X

ADSP Farmer and agribusiness enterprise development 1. Supply chain credit facility X X X

2. Market improvement and innovation facility 3. Feeder roads improvement facility4. Institutional development and programme

managementSIP

To increase food production and household income of the small scale farmers, who were mainly displaced by the construction of the Kariba dam, in the implementation districts

1. Setting up irrigation schemes2. Provision of financial services and market

linkages3. Build productive capacity of Department of

Agriculture in MACO and RIF in project areas

X X X

PLARD To contribute to the development of an efficient, competitive and sustainableAgriculture and rural sector, whichensures increased income and food security for small scale rural households in Luapula province

1. Fisheries and fish farming 2. Agriculture and non farm economic

activities Marketing and communication (including minor infrastructure)

3. Institutional support

X X X

Crop Monitoring Project

Improved planning, targeting and coordination of interventions addressing the food security of the vulnerable through an effective, operational crop monitoring system

1. Carry out crop and livestock surveys2. Inform policy and planning

X X

LFSNAC To improve the livelihoods and nutrition status by food security and nutrition interventions such as palm oil production and consumption

1. Nutrition communication and education2. Food security3. 3. Institutional capacity building for

planning

X X

Support to Small & Medium Enterprise Trade & Investment Programme

Smallholder Agriculture Production & Marketing Support Programme

To reduce poverty in rural areas and increase access to food and raise agricultural contribution to GDP, and to improve the capacity of small holder farmers in production and marketing

1. Support to smallholder farmers2. Strengthen capacity of MACO3. Training staff and farmers and

entrepreneurs4. Improvement of access feeder roads5. Rural seed promotion

X X X X

Agriculture Diversification and Food SecurityProject

To contribute to poverty reduction and increased food security among rural households, whereby food security is considered in its three dimensions (food availability, food access and nutrition)

1. Assist GRZ to operationalise the food security components of the National Agricultural Policy and implement food security action plans in Western and North Western provinces)

2. Support MACO extension services at provincial and district level to achieve improved performance in activity based planning, budgeting and accounting and participatory extension services to farmers

3. Provide a grant facility for non state actors to support rural food security interventions (through a call for proposals)

X X

GTZ-Decentralisation and Rural Development in Southern Province

District administrations and lineministries orient their services in synergy with the private sector towards poverty reduction

Provision of services in:1. Social extension (PEA, Gender, HIV/AIDS

Nutrition)2. Conservation agriculture

X X X

3. Seed multiplication4. Business management5. market orientation6. Formation of business forum7. advice to council to implement conducive

district frame conditions for private sector development

Smallholder Livestock Improvement Programme

Reduction in the incidence of CBPP and ECF to levels that allow small holders’ cattle herds to be re-established and to grow

Adequate restocking of poor small holder farmers who have lost their cattle to disease, in a way that will provide them with sustainable access to draught animal power

1. Animal disease control: (I) disease control development (ii) East Coast Fever

2. Management (iii) CBPP Eradication3. DAP Oriented Restocking: (I) Support to

livestock transfer management (ii) Livestock transfers

4. Project Management

X X

Agriculture Support Programme (ASP)

To contribute to food security, income generation and poverty reduction

5. Promotion of agricultural production, productivity and marketing

6. Promotion of land management (including conservation tillage, soil erosion and drainage)

7. Agribusiness promotion which covers training in business management skills

8. (including income generating activities, farming as a business, market research and entrepreneurship)

9. Linkages to organizations including produce buyers, micro-finance institutions and out grower schemes

X X X X X

Regional Irrigation and Water Management ProjectKwando Zambezi and trypanosomiasis Eradication ProjectProject for Development throughempowerment of rural communities

Human security and social welfare of the target villagers is maintained as a model for other village development in the ZI areas

1. Increase capacity of the target villages to identify and solve their communal problems, hence promote self and mutual reliance

2. Introduce on farm and off farm techniques for increasing crop yields and their additional values, hence income in target villages

3. Local partners able to facilitate community development through participatory approach and appropriate technologies

X X X X

LIBERIAAdapted from Liberia and the Comprehensive Africa Agriculture Development programme: A Stocktaking Report

INVESTMENT

The formulation and implementation of national and agricultural development policies and strategies since 2006 elicited the design of corresponding investment strategies and programs for the sector. For example, government authorized the development of a National Medium Term Investment Program (NMTIP) in early 2006 in a bid to achieve the policy objectives of the NEPAD – CAADP as well as those of the 150-Day Plan and the interim Poverty Reduction Strategy. A similar effort was made during the development of the full-fledged Poverty Reduction Strategy; the type of investment required to achieve the government’s growth and development aspirations was identified early on in the formulation process and appropriate estimates of the required financing was obtained.

Investment in the sector is being undertaken by government, bilateral and multilateral donors, and the private sector. In the past, many donors supported the development of the agricultural sector through institutional capacity building or some aspect of integrated agricultural development. At the advent of the civil crisis and through the transitional period, donors focused on emergency programmes. But with the ushering in of a new and democratically elected government, a more constructive relationship emerged as donors began to design assistance strategies consistent with government investment priorities. This chapter therefore discusses public financing of agriculture as well as selected investment in the sector by donors and private capital inflow; the need to prioritize investment is also presented.

CURRENT INVESTMENT STRATEGIES AND PRIORITIES

National Medium Term Investment Programme, 2006 - 200816

The National Medium Term Investment Programme (NMTIP) commenced in September 2005 with an awareness workshop on the concept of NEPAD–CAADP and on modus operandi was conducted. Following the workshop, MOA undertook an internal exercise aimed at prioritizing areas for agricultural development which became a major input in the work of a team of consultants who were entrusted to prepare a draft NMTIP for discussion in a national stakeholder workshop that was conducted on 18 May 2006. The national stakeholders’ workshop discussed and endorsed a set of priority investment areas, and they all fell within one or more of the NEPAD–CAADP Pillars. These priority areas reflected the national goals of reducing poverty and hunger, stimulating food production and enhancing the rural economy, and are randomly presented below:

Rebuilding institutional capacities and agricultural support services; Improving rural infrastructure and market access; Support to inland swamp development; Improving micro–finance services in rural areas; Implementation of a national programme for food security;

16 NEPAD doc_________

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Livestock development; Support for sustainable artisanal fisheries; Support for tree crops development and agroforestry; Developing off–farm skills and rural employment opportunities; Monitoring, surveillance and enforcement of fisheries regulations.

Bankable projects were then selected following the identification of priority areas. The main project selection criterion was the potential of each of the projects in contributing to the main goals of poverty reduction, food security, and sustainable utilization of the natural resources and protection of the environment. The identification of the above investment priorities was undertaken by the government and validated at a national stakeholders’ workshop of the NMTIP. In the identification of bankable projects for preparation with FAO assistance, the following additional criteria were used: (i) consistency with government policy orientation; (ii) technical feasibility and sustainability; (iii) financial and economic feasibility; (iv) absorptive capacity; and (v) synergy with ongoing programmes. On the basis of the priority areas and selection criteria indicated above, three projects were selected for development into bankable investment project profiles (BIPPs) with FAO assistance. These are summarized below.

BIPP 1: Inland Swamp Rehabilitation and Development. The objective of the project is to increase food production by expanding cultivation within the inland swamps, thereby contributing to poverty reduction and food security. The project would: a) rehabilitate abandoned inland swamps and develop new ones for the production of rice and vegetables; b) promote small–scale community irrigation, especially for women market–gardeners to produce high value crops; and c) strengthen institutional capacity in water resources management to support farmers. To this end the project would organize farmers to obtain technical assistance, training, extension service and credit for the purchase of farm equipment and inputs. MOA staff would also be strengthened through the provision of training, technical assistance equipment and incremental operating funds.

The project would operate in the main areas where inland swamp is prevalent and where there is a tradition and experience in swamp cultivation, i.e., Lofa, Grand Gedeh and River Gee counties. A total of 4,000 ha of swamp area would be rehabilitated; while about 2,300 ha would be newly developed. Some 1,400 farmers, mostly women, would also be assisted to practice small–scale irrigation by constructing shallow wells and small reservoirs, to produce crops during the dry season.

Total project costs, over a period of five years, were estimated at about US$8.3m. The overall responsibility for the project would be vested with MOA. However, the actual execution of the project would be carried out under an implementation unit to be established under MOA.

BIPP 2: Sustainable Fisheries and Aquaculture Development. The proposed five year project has four components: a) support to artisanal marine fisheries development; b) support to aquaculture development; c) strengthening national capacities for sustainable fisheries development; and d) project management. The first two components would be supported by credit arrangements with a view to providing communities to undertake sustainable fishing operations; while the

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institutional strengthening component would create capacity for executing the project and prepare the ground for the implementation of much larger development programmes in the future.

The proposed project, to be implemented over a five year period, would be located in the fishing communities of the six coastal counties (Maryland, Grand Kru, Sinoe, Rivercess, Grand Bassa and Grand Cape Mount) for artisanal marine and riverine fisheries; and in the inland valley swamps in Lofa, Grand Gedeh and River Gee for aquaculture development. A total of about 3,650 artisanal fishers and 1,600 aquaculture–based fish farmers would benefit from the project. Total project cost would be of the order of US$7.7m.

While MOA would have overall responsibility for project implementation, it would be managed by a project implementation unit to be established by MOA. The unit would have a team of senior professionals that would work full time for the project. Within MOA, the Bureau of National Fisheries would play a major role in the planning, supervision, monitoring and evaluation of the project.

BIPP 3: Market–Oriented Agroforestry and Tree Crops Production Systems. The main objectives of the project are to improve the income of rural households and enhance environmentally sustainability of farming systems. To this end the project proposed to: rehabilitate and replant tree crops’ plantations, mainly coffee, cocoa and oil palm; rehabilitate rural infrastructure to support the production and marketing of tree crops; promote agroforestry practices as part of enhancing the productive and environmental sustainability of farming systems; revitalize the marketing system for tree crop and agroforestry products; and strengthen the capacity of MOA extension personnel and grassroots community organizations.

The project would consist of four components i.e., rehabilitation of cocoa, coffee and oil palm farms; planting of trees and promotion of agroforestry practices; support for the marketing of tree crop products; and project management. The project proposed to organize farmers in order to ensure a smooth project implementation; to provide them with training, extension and credit; and to facilitate their produce processing and marketing. MOA would be strengthened through staff training, provision of additional funds and equipment and other facilities.

The project would be implemented under the overall supervision of the MOA and the Forestry Development Authority (FDA). However, considering the fact that the MOA and FDA lack adequate trained manpower and capacity to successfully implement the project in a timely manner, it was proposed that implementation be supported by experienced international institutions such as IITA or ICRAF. Overall project costs were estimated at about US$10.1m.

PRS Investment Priorities for Food and Agriculture17

Notwithstanding the challenges that have limited agriculture’s contribution to growth and poverty alleviation over the years, the PRS recognizes the tremendous potential of the sector to facilitate expansion of employment and incomes particularly given international market demand and Liberia’s comparative advantages in agriculture and fisheries. Against this background, the

17 PRS, 2008

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central goal for the agricultural sector during the PRS period is to revitalize the sector in order to contribute to inclusive, and sustainable economic development and growth, and to provide food security and nutrition, employment and income, and measurable poverty reduction.

Specifically, the Government seeks to expand agricultural production by about 3.6 percent per annum during the first two years of the PRS period. This will be based on a strong supply response in the food crop sector, with traditional crops such as rice and cassava recovering strongly. Production of non-traditional export crops such as vegetables is also expected to expand rapidly. With support measures being put in place, the tree crop sector will also start recovering by 2009, with cocoa, coffee and oil palm taking the lead. Rubber production, a critical component of agricultural growth, is expected to plateau or decline for some years before starting to recover toward the end of the PRS period.

The fisheries and livestock sectors will show some marginal increase during the first year of the PRS. The fisheries sector is likely to accelerate faster than the livestock sector because the recovery measures being undertaken are shorter-term and more easily achievable. Total agricultural production is expected to expand by 6 percent by the end of 2010 and in 2011. To realize the expected growth and achieve the central goal, the Government is focusing on three strategic objectives and their related investment priorities (See Annex 1).

First, it will aim to develop more competitive, efficient, and sustainable food and agricultural value chains and linkages to markets. Redefining the role of the state and creating space for private sector-led agriculture (with smallholders at the core) will be at the forefront of the Government’s approach to agricultural development. Government interventions will focus on creating a stable environment for private investment, with limited involvement in production and marketing functions. It will aim to clarify property rights and strengthen the security of land tenure, and will clarify incentives to promote foreign and domestic investment in the sector and strengthen efforts to ensure adequate agricultural financing. Where there is a need for the Government to directly support essential inputs (mainly improved seeds and fertilizer) to increase production, it will carefully target the most needy (women and smallholders) in order not to retard the development of input markets.

The Government will focus on farmer-based and other community organizations in its efforts to build production and marketing capacity amongst smallholders. It will place a high priority on linking smallholders to markets (local, regional and international), the increased participation of MSMEs in the supply chains and value chains, and establishing new institutional arrangements to ensure smallholders benefit from tree crop production. Access to markets will be a major factor in determining which feeder roads are to be rehabilitated first, and the Government will support critical local marketing infrastructure to reduce post-harvest losses. Finally, to ensure that growth is more inclusive than in the past, the Government expects all agricultural concessions to include out-grower schemes appropriate to the subsector, including—in the case of rubber—the creation of formal ties between out-growers and processors.

Second, it will strive to improve food security and nutrition, especially for vulnerable groups, including pregnant and lactating women and children under five. High levels of food insecurity and child malnutrition impede socio-economic development and poverty reduction; by one

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estimate, poor nutrition could lead to productivity losses of US$431 million over nine years. To address these issues, the Government will work to improve access to markets by rebuilding roads, facilitate access to inputs, and increase market competitiveness and efficiency. The Government will also ensure the wellbeing of vulnerable households which are unable to take advantage of emerging opportunities by developing a targeted social safety net program.

Interventions will also be undertaken with respect to the fisheries and livestock industries to increase available food and to strengthen institutional frameworks. Recovery measures for fisheries will include improving the monitoring, control and surveillance of Liberian waters, finalizing the establishment of a competent authority to facilitate trade to the European Union and the United States, and preparing for a Fisheries Partnership Agreement with the European Union. The Government will also implement programs to rehabilitate fish ponds. For livestock, a restocking program will be undertaken focusing on small ruminants.

Notwithstanding these interventions, disaster mitigation, risk reduction and early warning of food security issues will be critical. The Government will therefore monitor trends in food security and malnutrition to inform decision making and a timely response to emerging problems.

Third, it will strengthen human and institutional capacity. The Government will aim to establish functional, efficient and effective institutions to provide needed services, to create a strong enabling environment, and to reduce vulnerability. It will re-establish its role as custodian of Liberia’s natural resources, with special attention to transparency and sustainability in land use, and will promote farmer-based organizations (FBOs) as representatives of farming communities and will ensure their role in local-level planning. FBOs will play a key role in defining the kinds of services to be provided and will be the main mechanism for building the capacity of farmers. The Government will focus agricultural research and extension services on the needs and priorities identified by the FBOs. It will abolish all statutory monopolies and focus public institutions on their regulatory functions only. It will develop a sector monitoring framework involving all stakeholders to track progress and measure results.

The Government will also undertake measures to expand the role of women in the agricultural value chain and increase women’s participation in non-traditional segments of the economy and the labor market. It will incorporate gender issues in rural strategies and programs to ensure that they support the role of women, create opportunities for women in non-traditional rural activities, including women with disabilities, and enhance women’s access to productive assets and services in the agricultural value chain. It will aim to facilitate married and single women’s participation in farmer field schools and other rural community organizations. It will also explore options to create and strengthen the institutional capacity of female producer associations.

In seeking to achieve the PRS objectives, the Government plans to use its existing strengths, i.e., expand existing production systems before introducing new ones. It will focus most immediately on food security. To support production, it will also aim to ensure that sufficient critical inputs are available (preferably through the market, although other modalities may be required) and to make basic improvements in the marketing chain. It will begin to rebuild essential capacity in public institutions as a precursor to wider institutional reform. Over the medium and long term, it

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will aim to rebuild a comprehensive agricultural extension system and in particular to expand national research capacity in the context of regional initiatives.

Key Development Programs and Projects

Public Financing of Agriculture18 Public financing of agriculture falls significantly short of Government’s stated commitment to developing the sector and the Maputo Declaration. Currently the Ministry of Finance (MOF) has responsibility for revenues, treasury functions and since 2006, implementation of the cash management system. The Bureau of Budget (BOB), formerly independent of the MOF and having responsibility for budget preparation, is now a department of the Ministry of Finance. The mechanism for monitoring and coordinating donor projects and programmes is in a very early stage of implementation. Administrative weaknesses allow the Legislature to increase appropriations in excess of those proposed by the Executive, and despite a law to the effect, budget implementation is oftentimes inefficient with transfers undermining fiscal planning.

Past expenditures in the agricultural sector have been only a fraction of the total budget. Between 2003 and 2005, the share of the national budget allocated to MOA hardly reached one percent. The low budgetary share is also confirmed by a review of allocations since then. In 2005/06, during which the total national budget was US$80m, MOA was allocated US$0.74m, slightly less than 1 percent of the total. In the 2006/2007, 2007/2008 and 2008/2009 fiscal years, MOA was allocated US$3.1m, US$3.8m and US$7.0m (Table 1). Budget shares of 2.0 percent, 1.8 percent and 2.3 percent, respectively, lower than any major ministry or agency except Lands, Mines and Energy and National Defense.

18 CAAS-Lib, 2007; MOF, 2009 email on AID

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Table 1: Budgetary allocations, 2006/07 to 2008/09, $M and percent of budget19

Min/Agency 06/07 07/08 08/09Amt % Amt % Amt %

Agriculture 3.1m; 2.0

3.8 1.8 7.0 2.3

Health 7.6 5.0

12.4 6.0 15.1 5.0

Education 11.1 8.0

21.5 10 23.4 7.0

Public Works 5.6 4.0

10.2 5.0 17.1 5.9

Lands & Mines 2.2 1.6

3.3 1.6 3.5 1.1

Finance 4.9 3.5

7.8 3.8 9.1 3.0

Justice 8.1 6.0

12.4 6.0 15.3 5.0

Defense 1.9 1.3

3.7 1.8 6.2 2.0

National Budget 135.0 199.4 298.1

These investments fall far short of the NEPAD commitment to allocate 10% of expenditure to agriculture. Furthermore, the amounts are insufficient to cover the Ministry’s annual recurrent expenditures, let alone undertake meaningful development work including building rural infrastructure and providing support to farmers who are the majority of the population. At the present time, MOA is using any excess over recurrent expenditures, mainly personnel and related services, to purchase and distribute inputs such as rice seeds, fertilizers and agricultural chemicals, multiply and distribute high yielding planting materials, construct technology centers intended to store and process farm produce, and build the capacity of its research and extension services.

It is thus clear that over the coming years and in the absence of a dramatic turnaround in how government narrows the wedge between ‘promises and cash’ donors will be increasingly relied upon to finance the funding gap if the PRS food and agriculture objectives are to be accomplished. The best available estimate of international partner contributions to the sector over the 2008 – 2011 period is USD $210 million (Table 2).

Table 2: International Partner Contribution to the Food and Agriculture Pillar ($M) 2008/201120

World Food Programme $97.7United Kingdom 2.8 United States 53.7 - 76.0 World Bank 8.0DANIDA 8.4SIDA 0.9 EC 15.1Total 21021

19 Source: Ministry of Agriculture Budget Office20 Source: Ministry of Finance21 These are mere estimates; data is still being collected

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Selected Bilateral Development Programs and ProjectsMost bilateral donors who financed emergency programmes in the past through specialized UN agencies or non-governmental organizations (NGOs) are now supporting agricultural development in response to the policies and strategies enunciated by the Sirleaf government. The United States Agency for International Development (USAID) of the US Government is the single largest bilateral donor in Liberia. USAID has a great deal of experience in supporting Liberian agriculture and is currently providing assistance in capacity building, improved rural infrastructure, and tree crop development among others.

Other important bilateral donors are Japan, Denmark, Sweden, Germany, Italy, People’s Republic of China (PRC) and the European Commission. The PRC has supplied farm tools and equipment to farmers, provided technical assistance to improve the knowledge and skills of farming communities, and is now on the verge of commencing a US$5.7 million agricultural technology demonstration project that will operate out of CARI’s facilities in Suakoko, Bong County. The following is a presentation of selected investments by bilateral donors. United States Government Projects

Liberia Integrated Assistance Program (LIAP) The Liberia Integrated Assistance Program (LIAP) is a three year food security project designed to provide assistance to food-insecure rural households. Catholic Relief Services (CRS Liberia), Africare and Samaritan’s Purse (SP) are implementing partners with funding from United States Agency for International Development through its Food for Peace (FFP) program. Activities of the project cover 24 districts of six counties in the Northwest, Central and Southeast regions of Liberia. CRS operates in Bong, Lofa, Maryland, and Grand Kru counties; SP in Lofa and Gbarpolu Counties; and Africare in Nimba County.

The project districts experienced a high level of destruction and/or neglect as a result of the prolonged Liberian armed conflict, and are currently coping with the combined effects of abject poverty, extremely limited access to basic infrastructure and social services, and limited agricultural inputs.

LIAP was therefore designed to achieve the following strategic objectives between 2007, when the project commenced, and 2010 when it is expected to end: To protect and enhance livelihood capacities of targeted households by improving access to

agricultural inputs and strengthening agricultural production techniques; To work with targeted communities in improving their resilience by, among other things,

rehabilitating or constructing community infrastructure; and To develop human capacities through improved health and nutrition by providing training in

the Positive Deviant Hearth Nutrition Program and imparting other life skills.

A number of activities are being undertaken in support of the program areas. For livelihood capacity-building, LIAP is assisting households in improving agricultural productivity. It is planned that this will be achieved by adopting improved farm production techniques and by exposing households to improved agro-enterprise development methods.

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Project work on the resilience of targeted communities is focused on rehabilitating infrastructure and assisting them in the preparation and implementation of plans in respond to shocks affecting food security. For enhancing human capacities, the project is targeting caretakers of children to improve their child health care and nutrition practices.

Recent achievements during October – December 2008 included: (i) distribution of seed protection rations and small ruminants, and provision of agricultural extension such as yield checks; (ii) rehabilitation of roads, bridges, fish ponds, cocoa/coffee farms, oil palm plantation, community warehouses and wells; (iii) construction of wells, latrines and drying floors; (iv) food-for-work activities; (v) training on improved health and hygiene practices for caregivers; and (vi) participation of malnourished children in PD Hearth sessions.

Rice and Agriculture Productivity, Marketing and Value Chain Project (Increasing Productivity and Profitability of Food Crops in Liberia) This US $25 million - $50 million, US government project is currently under development. It will seek to address the constrained growth of private enterprise, recent surge in imported food prices, and weak agricultural support institutions. The goal of the proposed project will be to increase the productivity and profitability of rice, pulses, cassava and high value horticultural crops.

The value chain development approach that will be taken will: (i) facilitate the procurement, multiplication and distribution of improved planting materials using resources available in West Africa; (ii) support the development and commercialization of technologies and practices that reduce post harvest losses and add value; (iii) assist agribusiness access technical and financial support required to take advantage of market opportunities; (iv) improve marketing infrastructure; and (v) strengthen technical and managerial capacity of agricultural support institutions.

The expected outcomes and outputs of the project are: Quality planting materials of improved varieties made available to producers through private

sector mechanisms; Trade, tax, and agricultural policies revised to enhance agribusiness growth; Post harvest losses significantly reduced; and Overall local production and profitability of target communities increased.

Possible project components comprise: (i) improved planting material acquisition and distribution; (ii) capacity building; (iii) establishment of public private partnerships; (iv) infrastructure development; and (v) policy analysis, negotiation and implementation. Other Projects The US Government is funding a host of other interventions in the agriculture sector. A few of these are the Sustainable Tree Crop Program that is being implemented by the IITA in Nimba, Bong and Lofa counties, various projects being executed under the auspices of the Local Communities Infrastructure Program (LCIP), technical assistance to the Ministry of Agriculture provided by ARD, and ACDI-VOCA’s value chain development work in Lofa County.

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Federal Republic of Germany Projects

Reintegration and Recovery Programme et al The German Federal Ministry of Economic Cooperation and Development (BMZ), the German Development Bank (KfW), and European Commission Humanitarian Aid (ECHO) are financing four projects focused food security, infrastructure and basic services (e.g. education, health). These are implemented by a German NOG, Welthungerhlife, formerly German Agro Action. The titles, funding levels and start and end dates of the projects are shown in Table 3:

Table 3: Welthungerlife Projects Financed by German AgenciesTITLE FUNDING START/END

DATEReintegration and Recovery Programme 13.4 M. Euro 08/05 – 04/10Improving and Consolidating Nutrition,Income, water supply and sanitation in NW Liberia

1 M. Euro 03/08 – 06/09

Rehabilitation of roads and conflictManagement

1.962 M. Euro 11/08 – 06/10

Rehabilitation of roads and WATSAN 1.435 M. Euro 08/07 – 07/09

The total cost of the interventions is 17.8 million Euro of which the two with significant agricultural investment implications account for 14.4 million Euro. Of these is the Reintegration and Recovery Programme which has a very substantial agricultural component and has coverage in Southeastern Liberia, a poverty-stricken, food-insecure region in the country.

Other Projects Germany is also providing over USD $1.5 million through Landmine Action, a British NGO, for the Sinoe Agricultural Training Program. The nearly six-month program strives to reintegrate ex-combatants into society by providing significant agricultural training coupled with counseling.

Government of Italy Projects

Food Security through Commercialization of Agriculture (FSCA) Project This project is funded by contribution from the Government of Italy to the Trust Fund for Food Security and Food Safety administered by FAO. The initial funding was US$ 1.5million; this has since being increased by US $ 750,000.00. Project duration is for three years beginning January 2008. It is part of a West Africa program that includes Guinea Bissau, Mali, Senegal, Sierra Leone and Liberia and is being implemented within a common strategy. The main objective of the three year agricultural development program is to support the development of African agriculture into a modern, competitive and commercially vibrant sector, while building on the achievements and lessons learned from the National Programmes for Food Security of the FAO.

The five national projects are being supported by the “Inter-country Coordination for West Africa Food Security Projects” which is coordinating the national projects in the five countries to ensure their coherence within a common strategic framework and that lessons are shared across projects. It seeks to address regional issues such as access to regional and international markets, food quality and safety, cross-border trade, and harmonization of policies and institutions to support competitiveness and modernization.

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The objective of the Liberia component is that agricultural productivity, marketed output and incomes of project beneficiary farmer-based organizations (FBO) are increased on a sustainable basis, resulting in improved livelihoods and food security of FBO members.

The project includes three components: (i) Support to FBOs, aimed at establishing/strengthening sustainable FBOs which function as effective commercial mechanisms to increase production and value addition, and improve marketing; (ii) Support to Value Addition and Marketing, which will build the capacities of the FBOs supported under component I and strengthen service provision to support value addition and value chain processes, as well as value coordination and linkages; and (iii) Project Coordination, Monitoring and Evaluation, and Subregional Cooperation.

The original design called for the project to be implemented in Nimba, Maryland and Grand Kru counties. Rice-vegetable value addition systems are the primary focus in Nimba and Maryland and added value to fresh and processed fish, especially women fish processors, is the primary focus in Grand Kru. The project is targeting smallholder farmers and processors in existing FBOs and supporting the development of new FBOs engaged in production, processing and.or marketing of agricultural produce. Special attention is being paid to ensuring that the most vulnerable and food insecure members in the communities are benefitting from enhanced market opportunities resulting from the project. The project is also assisting the development of county level associations and county governments. With additional funding, the project has now extended its coverage to several fishing communities in Montserrado County, capacity building of the MOA’s Bureau of National Fisheries, and a few other related activities.

Support Vulnerable Groups in Rice Production and Productivity This food crisis project is financed by the Italian Trust Fund administered by the International Fund for Agricultural Development (IFAD) and has been implemented in Liberia since May/June 2009 by the FAO. It seeks to promote a rapid supply response by targeting food insecure smallholders in Bong, Nimba, Lofa and Grand Gedeh counties. This will be achieved through the distribution of critical production inputs and pest management inputs. In addition, the project will strengthen the domestic seed chain by supporting farmer based seed banks established as part of the MOA Seed Chain Programme, 2008 – 2011. In so doing, the project will the GOL in prompt recovery of the agriculture sector and to mitigate the negative affects of soaring food prices on Liberian smallholders. It also complements the governments’ efforts to gain self- sufficiency in rice production by 2015.

The specific outputs of the project are clear and well-defined elements of both the PRS and the FAPS, and will assist and complement Government’s objectives of: (i) promoting increases in domestic production of rice; and (ii) fostering the reconstruction of the agricultural sector by providing essential basic inputs, particularly seeds, fertilizers, agro-chemicals and tools, so as to improve food security.

The project budget is USD 2.5 million and project duration is 18 months (start date of May/June 2009 – October/November 2010). By the end of the project, it is anticipated that:

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12 000 farming households receive quality rice seeds and fertilizers; Pre- and post-harvest losses are reduced by 50 to 60% from the baseline; An additional 600 to 650 MT paddy rice is procured from the targeted farmers, processed

and marketed annually by the P4P programme (WFP) or the MOA, thus ensuring market access for at least 2,000 smallholders per annum;

Farmer-based seed banks are supported and seed security is enhanced through production of 670 MT improved seeds for the 2010- 2012 planting seasons (providing sufficient inputs for 13,500 to 15,000 farming households).

FAO/Monrovia will ensure overall implementation of the project in close collaboration with the MOA. In consultation with the MOA, a project coordination unit (PCU) will be established within the FSNS Secretariat. The PCU will recruit national consultants to provide managerial oversight, logistics and monitoring and evaluation support to the project. FAO/Monrovia will report to both the MOA and IFAD on the use of funds including written evidence of disbursements and audits. FAO/Monrovia will also submit quarterly progress reports to both the MOA and IFAD.

Government of Japan Projects

Rebuilding Communities in Post-Conflict Liberia – Empowerment for Change Initially covering only nine of the fifteen counties (Lofa, Bong, Nimba, Gbarpolu, Maryland, River Gee, Grand Gedeh, Bomi and Cape Mount counties) during phase I, the project was subsequently expanded to the other six counties in phase II. The key reason for adopting this nation-wide strategy was to effectively respond to the rebuilding of communities in rural Liberia and integrate government’s priority goal to enhance food security. It is a Human Security Fund Project conceived and implemented jointly by UNDP, FAO and WFP and funded by the Government of Japan through the United Nations Trust Funds for Human Security. Key sectors covered by the project are employment, social infrastructure, agriculture and reconciliation.

The project seeks to contribute to the consolidation and sustenance of peace by curbing potentials for friction and avoiding risks of possible relapse by creating opportunities for gainful employment and enhancing community empowerment to participate in the decision making process at the local level. The objectives are to: (i) enable communities to participate in identifying and determining their needs, articulate and negotiate with partners, and to effectively participate in the monitoring and realization of such needs; (ii) replenish farming skills and technical blacksmith support services lost during the Liberian conflict; (iii) support the revitalization of local economies by creating on-farm and off-farm opportunities for gainful employment; and (iv) enhance access to basic social services including education, health and water and sanitation.

The total budget for the projected two-year duration was US$ 3,857,867.66. Phase I, which covered October 2006 – September 2007, accounted for $1,981,443.73 and Phase II, October 2007 – December 2009, for $1,876,423.93.

The UNDP is overseeing the creation of temporary employment by supporting labor intensive works through the rehabilitation or restoration of basic social service infrastructures such as access roads and the construction of connecting log bridges. It is also undertaking the

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construction or rehabilitation of structures for the improved delivery of public utilities and social services including education, health and water and sanitation, and building capacity building through the establishment, training and equipping of district development committees.

FAO is supervising the food security components intended to contribute to the restoration of food security for vulnerable households in farming communities – mainly returnees and host communities during the transit from post-conflict - through the provision of basic agricultural inputs. It is also providing support to the development of community based organizations in order to rebuild their production management capacity, and increase yields through extension services and on site farm training and demonstrations on improved crop production practices, integrated pest management, fertilizer and pesticides application methods.

WFP provides food packages to complement the cash payments made to participants involved in labor intensive works supported by UNDP and FAO.

According to reports, the lives of over 300,000 beneficiaries were improved in terms of better livelihoods and community security during Phase I in 8 counties. Under Phase II, a total of 123,386 beneficiaries directly benefited from various project activities ranging from access road rehabilitation to basic social services (health, education, latrines and safe drinking water) and food security facilities (storage, processing equipment and farm tools).

Counterpart institutions are the Ministry of Agriculture, local governments, NGOs, and district development committees (DDCs). UN agencies executed the project but a Project Approval Committee was formed and coordinated by the Agriculture Coordination Committee chaired by the Ministry of Agriculture.

Other Interventions Through the Japan International Cooperation Agency (JICA), the Government of Japan plans to support Liberian agricultural development efforts in other ways. JICA has stated its readiness to provide partial funding for the Mano River Union Food Security Project under development by the World Bank and others, resume support of food crop production in Lofa County, and is reviewing the National Rice Development Strategy for possible funding as part of its Africa Rice Development initiative.

European Commission

Strengthening the Government and UN Joint Response to the Food Crisis in Liberia The project will consist of 5 priority areas: (1) Expand production amongst existing small-holder farmers through supply of agricultural inputs, capacity-building and marketing; (2) Expansion of agriculture land and crop diversification, facilitate restocking and build capacity of MoA staff; (3) Support increased marketable surplus with post-harvest interventions; (4) Management of the food crisis through support to MoA coordination and M&E; and (5) Scaling up nutrition and safety net programmes. Agriculture related activities will be led by MoA with the support of FAO and WFP, while the nutrition component under the auspices of the FSNS will be led by MoHSW with support of UNICEF. The other implementing partner is UNDP.

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FAO, UNDP and WFP in collaboration with MoA will jointly support farmers in increasing the availability of locally produced food and provision of new sources of incomes. FAO will provide support in terms of quality seeds, fertilizers and agro-chemicals and will provide training on agro-processing. UNDP will facilitate construction of warehouses, drying floors and markets centers while WFP provides food/cash for work/assets. WFP, with technical support of FAO and in close collaboration with MoA, will also use its purchasing power (P4P) to link these farmers to markets and a joint FAO/WFP training module will educate them in marketing skills including packaging, storage, quality control and negotiating skills.

UNICEF will work with the Ministry of Health and Social Welfare and other partners to establish community therapeutic care sites in rural Liberia for treatment of children with severe acute malnutrition and will support the delivery of a set of essential nutrition actions at 130 facilities and water and sanitation programmes aimed at preventing malnutrition with a focus on underserved and neglected regions where agriculture is the predominant livelihood strategy. In collaboration with the MOHSW, UNICEF will also develop and implement a cash transfer programme targeting vulnerable groups; this aims at reducing the impact of the higher food prices on family income and purchasing power and reduce the need for child labor and other harmful household coping strategies.

Expected Results - The project will result in a number of outcomes in each respective priority area and in line with the outcomes and outputs described in the Government/UN Joint Programme as follows: (i) agricultural production at local and national level increased through a competitive and revitalized agricultural sector and improved access to food through enhanced opportunities for sustained employment, better markets and strengthened safety nets; (ii) access to means of production, productive assets, and small-scale mechanization broadened; (iii) post-harvest processing, storage services, market linkages, infrastructures and efficiencies improved; (iv) capacity of MoA staff to coordinate, implement and monitor activities and trends strengthened, households/community food security and nutrition monitoring system established and operationalized, and national production and imports monitored; and (v) rates of acute malnutrition in children under 5 maintained below critical levels and morbidity and mortality due to malnutrition reduced.

Monitoring and Evaluation - The M&E structure for this project is aligned to the system developed for the Government/UN Joint Programme for Food Security and Nutrition and is based on the national institutional framework established to support the implementation of the national Food Security and Nutrition Strategy. All stakeholders will participate in bi-annual planning and review meetings to monitor outputs and progress made towards expected results. A detailed M&E plan will be developed at the beginning of the project which ensures that gender-sensitive data will be collected and reported. In addition, participating ministries and agencies will undertake regular joint field visits throughout the project cycle to do spot-checking of project activities.

Other Interventions

The European Commission (EC) is supporting a number of projects linked directly and indirectly to the food price crisis. In addition to the EUR10 million contribution to the FAO, UNDP,

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UNICEF and WFP through the Joint Programme for the Strengthening the Government and UN Joint Response to the Food Crisis in Liberia project discussed supra, the EC is expected to allocate: (i) EUR10 million under the Food Security Thematic Programme (FSTP), under Component 4 (LRRD); (ii) EUR4.7 million under the Food Security Thematic Programme (FSTP) Response to Soaring Food Prices; (iii) EUR4.1 million under the 10th EDF Env. B; and (iv) EUR2.7 million through separate grants to non-state actors, NGOs and member state agencies. This will mean a total final contribution (including support to the FAO, UNDP, UNICEF and WFP submission) of EUR32.5 million (equivalent to USD44 million) in direct and indirect support of GoL efforts to respond to the food price crisis.

Selected Multilateral Development Programs and ProjectsMany multilateral donors who displayed little or no interest in articulating a clear assistance strategy have responded favorably as the country progresses toward debt relief. The World Bank is typical of these; while its assistance in the past has been of an emergency nature, it is now reviewing development aid in the context of its country assistance strategy in areas such as fisheries and productivity enhancement. The African Development Bank (AfDB) and the International Fund for Agricultural Development (IFAD) have even taken the lead, approving a six-year multimillion dollar development project for 8 of Liberia’s 15 counties.

UN agencies are also playing a key role. The FAO has assisted government with the formulation of sector development policies and strategies and is the implementing partner for several projects; WFP is executing an innovative Purchase-for-Progress (P4P) program that is making markets accessible to farmers; and the UNDP, UNICEF and others are providing valuable assistance. In connection with the UN Development Assistance Framework (UNDAF) and the government’s Food Security and Nutrition Strategy, the Government of Liberia and the United Nations have formulated and are implementing the Joint Programme for Food Security and Nutrition. These efforts, along with those of other multilateral donors, are profiled in the next few pages.

Government of Liberia - United Nations Joint Programme on Food Security and NutritionIn response to the global food crisis and medium-term priorities in the ‘Lift Liberia’ Poverty Reduction Strategy (PRS), the Government of Liberia and the United Nations developed and signed on June 13, 2008 a Joint Programme on Food Security and Nutrition for the 2008 – 2011 period. This is the first comprehensive joint programme in the world that brings together Government and the United Nations system, including the World Bank, in response to the global food price crisis and related development objectives. .

The Joint Programme on Food Security and Nutrition involves UN agencies working together to support the Government of Liberia, led by the Ministry of Agriculture with substantial input from other relevant ministries including the Ministries of Health and Social Welfare, Planning and Economic Affairs, Gender and Development, Education and Public Works. The Programme adopts a two-pronged approach, offering emergency preparedness and response in an effort to tame the short-term crisis in food prices, and medium-term support to the Government’s PRS priorities. The key collaborating UN partners are FAO, UNDP, UNICEF, WFP, WHO, UNMIL (the UN Mission in Liberia), and the World Bank.

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Whether short or long-term, interventions are designed to work across three main target areas in a coordinated approach. The first is support for access to markets and factors of production – this includes increasing the supply of quality planting materials to 60kg per farmer. Access to basic services and safety nets includes efforts to improve nutrition through, for example, the provision of hot meals for 600,000 pre- and primary school children. Finally, nutrition priority interventions include measures such as the training of health and community workers in the promotion of infant and young child feeding and improved nutrition practices.

Bolstering these three programme elements, and providing the Government with the tools to tackle these problems in a more sustainable manner, the Joint Programme also provides support for the development of related policy, legislation and guidelines, and national leadership and coordination. The indicative overall cost of the Joint Programme is $140.236m, of which $49.466m constitutes emergency support, and $90.77m is for medium-term responses. The cost of school feeding alone is estimated at $99.993m, over the duration.

The outcome of the Joint Programme is to increase the number of rural and urban Liberians significantly who have: (i) sufficient food available through a competitive and revitalized agricultural sector; (ii) improved access to food through enhanced opportunities for higher incomes and sustained employment, better markets and strengthened safety nets; and (iii) improved nutritional status through better food utilization, particularly for the vulnerable groups of pregnant and lactating women, children under five as well as children, especially adolescent girls, out of school. All food security and nutrition interventions undertaken by the United Nations Country Team (UNCT) are implemented through the Joint Programme and overseen by a single Joint Programme coordination structure.

Programme Innovations - In response to widespread donor recognition for harmonized approaches, this Joint Programme differs from past efforts in that it offers a coordinated approach to boost the Government’s food security, nutrition and poverty reduction efforts. It offers the potential to bring about a real and measurable improvement in the lives of the most vulnerable. The Joint Programme also builds on the existing expertise among agencies, while enabling a coordinated delivery of services, and resources.

The Joint Programme is based on considerable analytical work, including comprehensive nutrition surveys undertaken in both rural and urban areas. This information, the first of its kind for years in Liberia, has sharpened the Programme, enabling more targeted support for food security and nutrition efforts. The Joint Programme also has a particular focus on women, who constitute the majority of small-holder producers and the agricultural labor force in general. It aims to enhance women’s access to resources and ensure that interventions take account of their needs.

Donor Support - A coherent UN response to the problem of food insecurity and malnutrition will be of enormous benefit to the Liberian people. Internally, it will also go a long way to avoid duplication and maximize the impact of Government/UN interventions in supporting national objectives.

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The advantage for contributing donors is that funding can be allocated quickly, and efficiently, with additional costs kept as low as possible. A joint steering committee comprising government representatives from key ministries and each of the participating UN agencies is providing strategic direction, and establishing and reviewing priorities. The joint programme also establishes a fast funding mechanism under which external funding flows directly to the Programme, via a ‘pass-through’ mechanism run by UNDP. This provides flexibility for aims and outputs to be adapted locally and re-shaped as needs emerge, with unallocated funds being directed accordingly.

African Develoment Bank (AfDB) and International Fund for Agricultural Development (IFAD)

Agriculture Sector Rehabilitation ProjectThe Agriculture Sector Rehabilitation Project covers 30 districts located in four Western and four South-eastern counties of Liberia. The project is expected to restore the capacity of Liberia’s agricultural sector and therewith enhance the sector’s contribution to GDP, and increase food security and farmers’ incomes. The project will be implemented over a period of six years (January, 2010 – December, 2015) under three components: agriculture infrastructure rehabilitation; agricultural production and productivity improvement; and project management.

The total cost of the project is estimated at UA 18.3 million (USD 26.853 million) of which the African Development Bank will contribute UA 12.5 million or 68 percent; the share of the co-financier, International Fund for Agricultural Development (IFAD) will be UA 3.4 million or 19 percent; the Government of Liberia will contribute UA 1.7 million or 9 percent in kind; and beneficiaries will contribute UA 0.7 million or 4 percent, also in kind.

Taking into account the strategic focus of both institutions, the AfDB will essentially finance infrastructure rehabilitation and development works while IFAD financing will cover production activities and capacity building for relevant sector institutions. The project will directly benefit an estimated 9,610 households in the 8 counties. The household income is expected to increase by 300 percent on successful completion of the project. Beneficiaries will also participate in infrastructure rehabilitation and maintenance. A detailed description of the project follows.

The overall goal of the project is to contribute to food security and poverty reduction. Its specific objective is to increase the income of smallholder farmers and rural entrepreneurs including women on a sustainable basis. Specific components of the project are discussed below.

Agriculture Infrastructure Rehabilitation - The estimated cost for this component is UA 9.1 million of which AfDB will fund UA 7.8 million and IFAD UA 1.3 million. The activities will include: (i) rehabilitation of water management infrastructure covering an estimated 1,620 ha for swamp rice cultivation in Grand Kru, Grand Gedeh, River Gee and Maryland counties; (ii) detailed technical studies in preparation for future investments in irrigated rice farming (7,000 ha); (iii) rehabilitation of 100 km of feeder roads; and (iv) development of community infrastructure such as storage and agro-processing facilities including 2400 square metres of multifunctional post-harvest/marketing facilities, 40 mechanised wells and sanitation facilities.

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Agriculture Production and Productivity Improvement - The estimated cost of this component is UA 4.9 million; AfDB will cover UA 3.4 million and IFAD UA 1.5 million. This component will focus on: (i) agricultural productivity enhancement including increase in crop productivity through an Integrated Plant and Pest Management Approach (IPPM), provision of farm inputs, facilitating women’s access to land, and employment of youth; (ii) capacity building of agricultural institutions, which will cover the re-equipping and re-tooling of the Ministry of Agriculture at national and local levels as well as the rehabilitation and equipping of a seed laboratory for the Central Agricultural Research Institute, in addition to facilitating farmers’ organizational capacity through regular training; secondly, the project will provide for short and long-term technical assistance including bolstering the proposed MOA Project Coordination Unit (PCU) which is being set up with initial funding from USAID and the World Bank, and training agriculture sector staff within the country and region; (iii) establishing and training community-based agents who will facilitate transactions between farmers and agricultural inputs suppliers and/or produce buyers; (iv) community capacity building activities to ensure sustainability of project interventions. Project Management - This component will be for a total of UA 1.9 million of which AfDB will contribute UA 1.3 million and IFAD UA 0.6 million. This component will cover project implementation support to the MOA. Grant resources will be used for payment of operational expenses and to provide national staff with in-service training including skills transfer from international experts.

Project Target Area - The project area comprises eight counties (30 districts) including rice production counties of the south-east (Grand Gedeh, River Gee, Grand Kru and Maryland counties) and major cassava production areas in the north-west (Grand Cape Mount, Bomi, Montserrado and Grand Bassa counties). The direct project beneficiaries are estimated at 9,610 households.

Key Performance Indicators - The indicators for monitoring progress towards the main outcomes of the project during implementation include: increase in household incomes from USD 350 to 1,730; creation of jobs equivalent to 498,800 person days; 10 percent increase in rice production; 15 percent reduction in post-harvest losses; functionality of community-based groups; and percentage of women among project beneficiaries. Primary responsibility for tracking of the project’s progress is with the MOA’s M&E unit, together with the Ministry of Planning and Economic Affairs and the Liberian Institute for Statistics and Geo-Information Services (LISGIS). Implementation Arrangements - The Ministry of Agriculture (MOA) will be the overall executing agency of the Program and will supervise the Project Coordination Unit (PCU) through the Monitoring Unit in its Planning, Monitoring and Evaluation Division. The PMU would be an autonomous, independent unit with its own premises based in Monrovia. In the case of space shortage additional space will be rented and paid by Program resources. The Central Bank of Liberia will be responsible for the regulatory and supervision aspects of the rural financial services component. Implementation of the Program’s civil and rehabilitation works will be overseen and supervised by the Ministry of Public Works in cooperation with the PMU.

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Overall management of the Program will be the responsibility of the PCU. The PCU will have selected National Staff recruited by the Ministry of Agriculture with the support of an International Consultant contracted by AfDB to assist in selection of the national staff and preliminary arrangements for setting up the PCU. The PCU would also be supported by sufficient international Technical Assistance recruited directly by AfDB and/or IFAD to cover each of the Program components and will be financed by the Program resources throughout its duration.

The Food Security and Nutrition Technical Committee, chaired by the Minister of Agriculture, and comprising other ministries and stakeholders will serve as the steering committee.At the local level, the project will be implemented through the decentralized establishment of the MOA – county agricultural coordinators, district agricultural officers and clan technicians.

African Development Bank (AfDB)

Support to Water Sector Reform The Support to Water Sector Reform is a national project funded by the African Water Facility of the African Development Bank to disseminate and implement the Integrated Water Resources Management Policy (IWRMP), reform institutions and build appropriate capacity, and develop short and medium term investment programs.

The ultimate outcome of the project will comprise: (i) accelerated and sustainable development of the water sector; (ii) effective utilization of human, financial and other resources, and (iii) usher an effective system for the planning, management, allocation, utilization, regulation, protection and conservation of water resources in Liberia.

The cost of the Sector Reform Project is EUR 1, 784,000 or about USD 2,426,240.00. It is expected to commence in 2009. The Ministry of Lands, Mines and Energy will execute the day to day management of the project through a Secretariat for Sector Reform (SSR). A National Task Force (NTF) will serve as the Project Steering Committee.

World Bank

Agriculture and Infrastructure Development Project Although the entire Agriculture and Infrastructure Development Project was funded with US $37.0 million, agriculture-related activities comprising policy reform and capacity building, value chain development, productive infrastructure and seed multiplication accounted for only US$5.0 million. This amount was increased by US$3.0 million to US$8.0 million to help expedite a supply response of agricultural production.

Agriculture-related activities were designed to maximize synergies with the other infrastructure investments, particularly rural roads. Project implementer is the International Institute for Tropical Agriculture (IITA) based in Ibadan, Nigeria and specific aspects of the project components are described below.

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Under the policy reform component, technical assistance is being provided to the Ministry of Agriculture to strengthen capacity in policy formulation and planning, as well as monitoring, evaluation and statistical reporting. Ensuring rice seed availability for next planting seasons seeks to establish basic seed multiplication facilities to supply high quality rice seed for rice farmers and the strengthening agriculture value and marketing chains component focuses on improving the production, basic processing and marketing of agricultural crops, including smallholder tree crops and food crops; it also seeks to increase production of marketable surplus and supporting mechanisms. The marketing infrastructure development activity provides hardware (e.g. market places, postharvest handling infrastructure, local distribution hubs, storage places, and local markets).

Expected outcomes of the agriculture-related investments are: (i) improved policy formulation and monitoring capacity; (ii) collaboration between MOA and resident farmers, via farmer-based organizations (FBO) to increase the production and sales of quality rice seed; and (iii) strengthened market oriented FBOs and improved rehabilitated marketing infrastructure.

As stated earlier, the World Bank established a Liberia Emergency Food Crisis Response Program in response to rising world food prices; this consisted of (i) US$3.0 million of additional financing to the Agriculture and Infrastructure Development Project; (ii) US$3.0 million of additional financing to the Liberia Community Empowerment II Project for a cash-for-work employment program; and (iii) a grant of US$4.0 million for a new Food Support Project for Vulnerable Women and Children Food Support for Vulnerable Women and Children ($4m) comprising school feeding, take home rations for girls, and support for vulnerable women, mainly pregnant and lactating women

The additional funding increased the AIDP’s total budget to US$8.0 million. It allowed increasing of production primarily through increasing yields and reduced post-harvest losses and provides for an expansion of food crops activities and for additional quick-impact interventions on postharvest infrastructure. It is expected to benefit 150,000 small farmers over three years, and establish local seed multiplication facilities to produce around 1,000 metric tons of certified seed.

West Africa Regional Fisheries Project Liberia The objective of this proposed project is to sustainably increase the overall wealth generated by the exploitation of the marine fisheries resources of Liberia, and the proportion of that wealth captured by the country, by: (i) reducing illegal fishing, (ii) strengthening the country’s capacity to sustainably govern and manage its fisheries, and (iii) increasing the value and profitability generated by fish resources and the proportion of that value captured by the country. Estimated investment cost is USD 12.0 million.

In the short term, the proposed project would complement ongoing programs and support the fisheries sector in order to eliminate illegal fishing activities in the territorial waters, stop the immediate leakage of value and damage to the resources, and create conditions for access rights and fishing capacity control. In addition, the project will establish co-management activities with fishing communities and provide training for stakeholders. The legal framework will be completed and the comprehensive development of management plans will be drafted to improve governance of the sector.

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In the short to medium term, the proposed project would build the necessary capacity of the Bureau of National Fisheries and fisheries communities to implement the governance and management structures necessary to control the use of the marine fish resources (such as determining the feasibility of and implementing access rights and fishing capacity controls, establishing a quality assurance system to ensure value addition and the export of fish produce abroad), in order to prepare for a transition towards an economic approach or wealth-based fisheries management system.

In the long term, the proposed project would support the implementation of a system of fisheries management based on access rights, which would have value and could be capitalized; and would encourage investments to increase the domestic value added to the fish captured in the territorial waters at the processing, wholesaling and retail stages, as well as create mechanisms to capture and utilize a greater share of the value generated by the resources to finance social and public benefits, thereby creating an increased, sustainable and shared contribution to economic growth. It would also provide shore based infrastructures (e.g. fish landing pier with cargo handling equipment, ice plant and on-shore storage and service facilities) to enhance fish handling, legal transshipment and trade, thereby yielding economic dividends.

Project Description - The project will be implemented over five years from May 2009 to May 2014. Substantive project activities will be grouped under three key components: (i) good governance and sustainable management of fisheries, (2) reduction of illegal fishing, and (3) increasing the contribution of the marine fish resources to the local economy. Coordination and financial monitoring and evaluation will be folded into a separate, fourth component.

The sub-components under component 1, Good Governance and Sustainable Management of Fisheries are as follows: mapping out of the present legal and institutional structure of the fishery sector; promoting sub-regional, regional and international cooperation in fisheries management; establishing beach management units to co-manage fisheries resources; demarcation and mapping of fishing ground; training of BNF officials and stakeholders in fisheries enforcement; establishment of a scientific data base to enhance management capacity; and development of strategic and effective monitoring and enforcement regime to combat illegal fishing.

The proposed sub-components under Reduction of Illegal Fishing, component 2, are: establishment of local monitoring and surveillance task force to include beach management units; development of the economic performance of the sector; setting up of a net-based Vessel Monitoring System; and provision of equipment for the task force, training in operations and maintenance of equipment, and logistical support and office supplies.

Component 3, Increased Contribution of Marine Fish Resources to Local Economy, will focus on establishing a competent authority with the full capacity to assure fish product quality; establishing a fishing pier equipped with cargo handling facilities and ice plant and storage and handling facilities at the sea and air port; and training of laboratory technicians in fish quality management.

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Mano River Union Regional Food Security Project The development objective of this proposed five year project would be to improve the availability of rice and other important food commodities by increasing productivity of relevant production systems and efficiency of marketing and distribution arrangements pursued through closer regional cooperation of MRU member states. It is being developed by the World Bank, JICA and MRU countries.

Substantive activities of the project are grouped under three major components which are (i) improving on-farm productivity of relevant rice and other food crops production systems; (ii) improving efficiency of rice and other food crop marketing and distribution; and (iii) project implementation and coordination.

Outgrower Schemes or Smallholder Tree Crop Programme Considerable discussion has been going on between Government and multilateral institutions particularly the World Bank and the International Finance Corporation (IFC) to develop outgrower schemes. These involve the provision by a core industrial estate (usually with both plantations and processing facilities) of a package of services (planting material, inputs, technical advice) to surrounding smallholders under a contract farming arrangement. Inputs and services are delivered at cost, either against cash payments or on credt, the beneficiary agreeing to repay through the delivery of its products to the service supplier. Contract farming arrangements are however open to significant risks, in particular because of side-selling to third parties who can offer a higher price because they have not extended any services in advance.

This is a pipeline project for which significant details are yet to be worked out including project development (scoping, formulation and appraisal), financing and implementation.

World Food Programme (WFP)

Purchase for Progress (P4P) The Purchase for Progress (P4P) initiative of the United Nations World Food Programme (WFP) aims to support low-income farmers by enhancing their linkage to markets and through agricultural development. This is accomplished by WFP guaranteeing a firm market for surplus produce and, with partners, building smallholder farmer capacity in production, in group processing and marketing and in standard procurement practices.

The goal is to provide small-scale farmers with tools that enable them to get a fair share of the market price for their surplus produce. In so doing, smallholder farmer’s income would be raised, they get an incentive to increase production and ideally, the modalities developed would also be replicated by other stakeholders in the agricultural sector.

The Declaration of Principles between the Government of Liberia, represented by the Ministry of Agriculture, the World Food Program and the FAO regarding implementation of the P4P in Liberia was signed March 10, 2009 for two years. Among other things, WFP is procuring rice locally from 2 farmer cooperatives (in Lofa and Nimba) for use in the school feeding program. WFP also invested in storage, processing and marketing improvements, and together with the other two partners, continuing selection of farmer cooperatives for inclusion into the programme in future years.

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For the smooth planning, coordination, monitoring and reporting on the P4P, a Central Steering Committee comprising the parties (MOA, FAO and WFP) was established and is chaired by the MOA.

Food and Agriculture Organization Since 2005, the Food and Agriculture Organization (FAO) has provided significant support to Liberia in several key areas which are: (1) policy formulation support; (ii) development and implementation of programs for enhanced food security including introduction of improved planting materials such as the NERICA rice varieties; (iii) urban and peri-urban vegetable production; (iv) forest conservation and related institution capacity building; (v) reintegration of ex-combatants; (vi) support to livestock development including establishment of the first veterinary laboratory and reactivation of domestic poultry industry; and (vii) support to fishing communities.

These activities have been funded with US$28.2 million since 2006 by the following sources: (i) technical cooperation programmes ($2,119,902); (ii) use of trust funds such as that of the Swedish International Development Agency ($16,734,354); (iii) FAO government cooperative programmes ($9,319,217); and (iv) telefood activities ($16,808). for a grand total since 2006 of approximately $28,190,281.

Sample projects with budgets of $450,000 or more and start dates of 2006 and later are shown in Table 4.

Table 4: FAO Projects in Liberia, 2006 - PresentNational Programme for food security (operation eliminate hunger)

$490,000

Regional support to alleviate impact of soaring food prices $500,000Sustainable rural livelihoods and access to resources $2,530,835International instruments $2,530,835Emergency assistance for soaring food prices $1,000,620Support for urban and peri-urban inhabitants $490,000Rapid assessment of avian and human influenza $2,416,031Extension of SIDA Cooperation $6,738,646Joint Programme Support $777,387Soaring Food Products Prices Assessment $673,856Coordinated Response to Food Price Crisis $6,007,164Food Security through Commercialization $1,500,001Others $904,226

RECENT PRIVATE INVESTMENT IN AGRICULTURE22

Until 2008, significant private investment in agriculture was in tree crops. This changed with the increase in international food prices. Although cash crops investment is dominant, investors are now looking favorably into the food subsector of Liberia not only for domestic markets, but also for regional and international markets. The review that follows provides a brief history of major

22 MOA; CAAS-Lib, 2007

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investors in the country’s agricultural sector as well as an update of their current investment spending, where this is available.

The Firestone Plantation Company (located in Harbel, Margibi County) was granted a 99-year concession for one million acres (approximately 416,670 ha) in 1926. Originally the company was subject to a land tax of 6 cents per acre, and Liberian corporate income tax (a maximum of 45% of net profits). The Firestone is at present owned by Bridgestone. The National Transitional Government of Liberia (NTGL) renewed the concession agreement in 2005. A formal review and renegotiation of the NTGL agreement commenced in 2007, culminating in ratification in 2008. The latter increased the tax obligations of the company and contains clear provisions for social expenditure and compliance with Liberia’s environmental laws and regulations. Firestone has already commenced the implementation of a business plan that called for US$185 million to be injected into its Liberian operations through 2015; some of this has been spent on a new rubber wood processing facility. The Cavalla Rubber Plantation in Maryland County was initially part of the Firestone concession, but was passed on to the Doe government in 1981, and the concession was awarded in 1983 to a Belgian company, SIPEF, under which the government maintained a 50% stake in shares of the company. When MODEL rebels occupied the plantation during the civil war, SIPEF withdrew. A number of unsuccessful attempts were made to manage the plantation. In 2006 an interim management team was installed under the supervision of MOA and following an extensive review, management was turned over to Salala Rubber Investments (SRI), to whom SIPEF had assigned its rights under the land lease agreement. SRI subsequently sold 60 percent interest in the plantation to a French company, SIPH. Government has now sold its 50 percent stake to the new management and commenced negotiations to convert the land lease into a concession agreement. The company’s business plan calls for the injection of US$25 million over the next four to five years.

The Cocopa Plantation (Nimba County). The original lease agreement was signed in 1949 for 40 years with the Liberia Company (LIBCO), and renewed for a further 40 years in 1967 from the date of its expiry under the condition that LIBCO had cultivated a certain percentage of the lease area by 1987. In 1996, LIBCO sublet the management of the plantation to a Liberian company owned by the then Minister of Agriculture Roland Massaquoi. In January 2007 the government suspended the agreement citing poor management. Three months later, GOL turned management over to a LIBCO-appointed team, mainly from LAC. GOL may have to proceed with competitive bidding if LIBCO fails to renegotiate the current agreement under which it operates by the end of 2009. Some investment is being made to improve social services, replant and expand the plantation.

The Sinoe Rubber Corporation. The original concession agreement was concluded in 1953 with the African Fruits Company (AFC) for a period of 80 years, initially for the planting of bananas and plantains. In 1973, AFC sold out to Ernest Dennis, but another company claims that Ernest Dennis sold the rights and obligations to its subsidiary, Mesurado Plantation Industries. In 1983 Mesurado leased the plantation to the Government-owned Sinoe Rubber Corporation for 20 years. Ownership of the plantation remains in doubt despite efforts to obtain a credible review of this matter. The plantation is now being managed by the locals and their authorities with plans

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for a takeover by central government authorities. No new investment has been made aside from attempts to maintain minimum operations.

B.F. Goodrich, now popularly known as the Guthrie Rubber Plantation, is located in Bomi County. It was established in 1954 and production commenced in 1963. Goodrich was granted tax exemption up to 1973, and then paid corporate tax at a rate of 25% of net profits for the next 10 years, after which the company paid the then normal corporate tax rate. In 1981 the plantation was taken over by the Government following the military coup, and the Guthrie Rubber Company of Malaysia negotiated a management contract with the Government. Guthrie withdrew when LURD rebel forces occupied the plantation. Although the transitional government entered into a 45-year management agreement with Agro Resources Corporation Liberia Ltd in 2005, this arrangement was never sanctioned by the present government which instead appointed an interim management led by the Rubber Planters Association of Liberia (RPAL). The Guthrie Rubber Company of Malaysia, now part of a larger entity known as Sime Darby, has renegotiated the concession agreement which has been ratified by the national legislature, and plans to make an investment of over US$800 million mainly in oil palm cultivation and processing.

The Salala Rubber Corporation in Bong County (40,000 ha) was established in 1959 by the Liberian Agriculture Corporation (LAC). The70-year lease for 125,000 ha in Grand Bassa County was signed in 1959, originally by a construction company to whom the Government was indebted, and then sold to Uniroyal. The second largest plantation, a processing plant for producing latex for export, was installed in 1968. The plantation was ransacked in 1989. In 1998 a Luxemburg company, Socfinco, bought the leasehold rights to LAC and Weala. In 2007 or thereabouts, Salala was merged with Weala and the IFC took an equity stake in the new company. New investment is unknown.

Other substantial investments in the agriculture sector by private entities are as follows:ADA/LIAP – This Lybian-backed venture plans to spend US$30 million during the first phase of massive rice production in Foya, Lofa County and Gbedin, Nimba County. It has obtained a concession agreement from government and initiated activities in Lofa.

NOVEL – Also an international rice marketing firm with substantial interests in Liberia, this company received a concession agreement to cultivate 5,000 acres of rice in the Garwula Tombe area of Cape Mount County. Very little activity has commenced.

EQUITORIAL BIOFUELS/LIBINC – Equitorial Biofuels has obtained a concession agreement from Government for the rehabilitation and expansion of the Butaw Oil Palm Plantation in Sinoe County. LIBINC also renegotiated its agreement with Government for its oil palm plantation in Palm Bay, Grand Bassa County. Initial investment amounts were US$9.0 million for Butaw and US$5.2 million for Palm Bay. Following the ratification of these two agreements by the Legislature, LIBINC investors sold their interest to EBF which now controls both Butaw and Palm Bay.

Government is currently engaged in renegotiating the concession agreement with the Liberia Agricultural Corporation (LAC), a producer and exporter of natural rubber located in Grand

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Bassa County and is far along in the competitive bidding process for management of the Decoris Oil Palm plantation in Maryland County. Significant new investment flows are apt to occur at the conclusion of these processes.

CHALLENGES AND OPPORTUNITIES FOR PUBLIC INVESTMENT IN AGRICULTURE

Financing Agricultural Development

The macroeconomic environment will have a decisive influence on government goals for the agriculture sector and achievement of CAADP targets. Support for smallholders, incentives for strong involvement of the private sector, removal of structural constraints in the sector (infrastructure, energy, markets) and the attraction of external investors in the value chains of the sector hinge on accommodating fiscal, monetary and trade policies.

Creating a supportive environment for pro-poor growth and private sector-led agricultural development therefore means getting Liberia’s macroeconomic environment ‘right’. This would be in sharp contrast to the un-timely and insufficient flow of national resources that plagues the sector, the often discriminatory treatment of agriculture by revenue and tax laws that minimize investment incentives and encourage the explicit and implicit taxation of agriculture, and the impotence of monetary policy (i.e. incomplete control of the dual-currency exchange regime) to declining agricultural terms of trade. It also means reversing the application of export licensing and similar policies to protect the monopolies of state-owned enterprises and discourage competition and private investments, and implementing a policy of financial inclusion to curtail negligible lending to the sector by established financial institutions (e.g. low percentage of loans; high interest rates; short lending horizon, etc).

But the most important indicator of this new agenda of changing minds and changing attitudes would be to get the right volume and right patterns of public expenditure for agriculture. Past evidence shows that strategic public spending in agriculture can be highly effective in increasing agricultural productivity and reducing poverty. However, as indicated earlier in this report, public expenditure on agriculture in Liberia has been miniscule and has not promoted growth, jeopardizing Liberia’s commitment to the Maputo Declaration which requires the allocation of 10 percent of the annual national budget to agriculture.

An indicative simulation undertaken during the CAAS-Lib study suggests that meeting the Maputo commitment in a timely manner is possible but would imply substantial scaling up of resource for agriculture (Table 18). With projected revenue growth now threatened by the global financial crisis and increasing domestic imperatives, translating this commitment into public cash for agriculture in the foreseeable future will be challenging and if made available, constrained by the MOA’s current lack of absorptive capacity.

Prioritizing Investment

Fostering sustainable growth in agricultural commodity value chains will require substantial public and private investment in order to improve their productivity and competitiveness in

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national, regional and international markets. Investment could conceivably come from a combination of domestic savings and external resource inflows.

Domestic savings can be generated both in the public sector, through lower consumption and fiscal discipline, and from private individuals and organizations, through higher incomes and increased savings. External investment can come from foreign direct investment, return of capital flight and foreign aid. While numerous factors have been identified as important determinants of national and foreign investment, private investors’ perception of risk and the ability to earn and keep their returns in a given country or zone appear prominently at the top of every list.

At the farm level, a major question relates to the influence of land tenure on investment in and adoption of new technologies, as well as intensification of production practices for tree crops. The government will need to consider how the value chain will deal with investments required by smallholders, given that many have few assets or experience. In the present situation, farmers have little income from farm and non-farm activities to use for productive investment.

From a food security perspective, investment in tree crops, which does not generate a return for several years (3–5 years for cocoa and 15 years for rubber), may need to be combined with investment in activities with shorter-term pay-offs. For many investments (e.g. in swamp rice), more detailed feasibility studies will be required that consider the relative returns and technical merits of alternatives. Other smaller-scale investments, e.g. fish smoking technology or tools for aquaculture pond development, outside of a value chain, may need to be proposed by producer organizations or included in county/district development plans in order to be systematically considered and funded.

Government needs to carefully prioritize its investment programme within the framework of the PRS. The following criteria should form basic components of the screening procedures for all proposals, whether they are to be donor funded or included in the Ministry’s own budget. Screening and prioritization of this kind is a core part of public financial management reform. The major project selection criterion should be the government’s overall priorities for rural development and poverty alleviation. Together with donor interests, this should be used in selecting the proposed investment project. The following additional criteria that may be used include technical feasibility and sustainability, financial and economic feasibility, absorptive capacity, ease of implementation, and existing projects and plans.

Short- and medium-term investment priorities identified by CAAS-Lib fall into five categories, namely activities to improve food security and increase food production, rehabilitation of the tree crop sector inclusion smallholder inclusion, making agricultural markets work better, institution building and infrastructural development. The latter must ensure that appropriate mechanisms for tracking investment and assistance are in place.

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Annex1: PRS Priority Action Matrix - Food and Agriculture

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RWANDA – RT main report Final

FINANCE, INFRASTRUCTURE, AND INSTITUTIONS IN RWANDA’S AGRICULTURE

The National Investment Strategy (NIS)

The NIS was developed and adopted in October 2002. It makes projections of the necessary public investments in all sectors in order to achieve the PRSP objectives. According to the NIS, Gross Domestic Investments, from both the public and private sectors, have to increase from 18 percent GDP in 2001 to 20–22 percent GDP in 2010 in order to achieve a GDP annual growth rate of at least 7 percent, which is necessary to attain the PRSP objectives. Corresponding public investments in the agricultural sector are to increase from 8.3 billion FRw in 2002 to a peak of 14.7 billion FRw in 2006, then gradually decrease to 10.4 billion FRw in 2010. It is expected that from 2007 onward, the private sector will be the driving engine of growth and will greatly contribute to private investments in agriculture.

Agricultural Sector Funding Through the Government Budget and Public Sector

Public agricultural financing is carried out through different projects and programmes, planned in the Public Investment Programme (PIP) and budgeted according to the Medium Term Expenditure Framework (MTEF). The resources allocated to the agricultural sector in the past five years have been far lower than what is required to achieve the PRSP and Vision 2020 objectives and do not meet the Maputo goal of allocating at least 10 percent of the total government budget to the agricultural sector. The percentage of funds allocated to the agricultural sector fell from 8.63 percent in 2002 to 3.28 percent in 2006 mostly due to a general lack of adequate resources as well as a lack of properly prepared sector strategies under the PRSP. Significantly increased funding for priority areas such as energy and fuel and transport and communication has also contributed to lower allocations to the agricultural sector.

The government has substantially increased the number of agricultural projects in the last five years in different areas, including soil and water management/marshland development, the rice sector, export crop promotion, dairy cattle development, and fisheries. World Bank financing of the Rural Sector Support Project (RSSP) and the Rural Agricultural Markets Promotion Project (PDMAR) represented 27.13 percent of total agricultural commitments. The three multilateral agencies—the World Bank, African Development Bank (ADB) and the International Fund for Agricultural Development (IFAD)— together contributed 60.96 percent of all committed resources, as loans for 8 projects. The United States, the Netherlands, Belgium, and China accounted for 23.37 percent of all committed resources in the agricultural sector, as grants for 20 projects. The remaining 15.67 percent of financing came from the FAO and different NGOs for several small projects and programmes.

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Agricultural Sector Funding Through Private-Sector Financing Institutions

The Banque Nationale du Rwanda (BNR) oversees all banking and credit and savings institutions in the country. Two non-commercial banks, the Banque Rwandaise de Developpement (BRD) and the Union de Banques Populaires (UBPR), play a significant role in agricultural financing. BRD promotes development investments and is increasingly paying particular attention to the agricultural sector. In 2004, the government strengthened the role of BRD to promote investments, inter alia, in the areas of agriculture and tourism. BRD is playing an increasingly important role in financing the agricultural sector. Total BRD loans to the agricultural sector rose by about 250 percent from 2001 to 2004. However, while BRD lending approvals to the agricultural sector continue have risen, disbursements have not followed the same trend. Disbursements rose from 244 million FRw in 2001 to 1.2 billion FRw in 2004, but fell drastically by more than 66 percent in 2005, to only 403 million FRw, indicating the relatively low level of absorptive capacity of investments in the agricultural sector, resulting from long delays by project promoters in fulfilling the conditions for disbursements.

In 2004, BRD’s Microfinance Unit was restructured and renamed the Fund for the Strengthening and Development of Microfinance (FOREDEM), in conformity with its role as a promoter and not implementer of microfinance. Since 2004, FOREDEM has managed to mobilise resources and provide funding for different projects in the agricultural sector. As of June 2006, loan approvals totalled 1.62 billion FRw for 20 projects, including 13 in coffee and 5 for refinancing microfinance institutions (MFIs). According to its strategy, the financing of farmer cooperatives and the refinancing of MFIs will enable BRD to reach 8,034 members of cooperatives and 14,871 MFI clients.

The Banques Populaires are credit and savings cooperatives that provide medium, small, and microcredit loans to their members. There are currently 149 branches, distributed in 102 of the country’s 106 former districts. The total loan amount approved in the agricultural sector rose from 272.37 .million FRw in 2001 to 3.5 billion FRw in 2004, representing 7.2 percent and 13.4 percent, respectively, of total approved loans. The majority of members of the Peoples Banks are small depositors with savings of less than 10,000 FRw. In 2004, these constituted 72.3 percent of all depositors. About 12.5 percent of all loans granted by the Banques Populaires in 2004 were between FRw 10,000 and 20,000 FRw. More than 80 percent of all loans were granted to members for less than 500,000 FRw.

Besides the BRD and UBP, many microfinance institutions are involved in the agricultural sector, although determining the exact amount of credit channelled through them and other rural financing organisations has been difficult, since they have not had to report to any central institution. However, recent BNR regulations will make the surveillance of MFI operations easier through the regular provision of reports.

In recent years, a small number of commercial banks have shown increasing interest in agricultural- sector activities related to the production, processing, marketing, and trading of agricultural inputs. However, the level of financing going to the sector remains insignificant when compared to other sectors. Loans to the commerce and construction sectors, for example, accounted for more than 60 percent of all bank loans over the entire period.

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RWANDAAdapted from Rwanda’s Review and Stocking Taking Report on Ongoing Development Efforts and their Alignment with the CAADP Targets and Principles

AGRICULTURAL INVESTMENTS Public Sector Financing

In order for the Agricultural Sector to successfully play its role to achieve the objectives assigned to it in the Vision 2020 and in the PRSP, substantial financial investments are necessary. Taking into account that the role of private sector financing in the agricultural sector remains non-significant, the public sector is the major source of agricultural financing. According to the PRSP, the total public financing in the agricultural sector necessary to achieve the PRS objectives was projected to rise from 13.20 Billion RWF in 2002 to 17.86 Billion FRW in 2003 and 20.34 Billion FRW in 200423.

The National Investment Strategy (NIS)

The National Investment Strategy (NIS) was developed and adopted by the Government in October 2002. It makes projections of the necessary public investments in all sectors in order to achieve the PRSP objectives. The NIS takes into account the availability of resources and the absorptive capacity for efficient utilization of the resources in the different sectors and identifies the funding gaps24. The development of NIS was based on the hypothesis of two phases in the national development strategy: Phase I: “Primary growth phase” between 2002 and 2006 and Phase II: “Consolidation phase from 2006 onwards”. The NIS further assumes that intensive public investments must be made in the first phase while the private sector will become the driving engine of growth in the consolidation phase and significantly contribute to the GDI through increased private investments. A number of measures and programmes25 for promotion of the private sector were undertaken by the Government in order to facilitate it to play this role.

According to NIS, the Gross Domestic Investments, from both the public and private sector, have to be gradually raised from 18% GDP in 2001 to 20 – 22% GDP in 2010 in order to achieve a GDP annual growth rate of at least 7%, necessary to attain the PRSP objectives. The total required public investments have to increase from 51.5 Billion RWF in 2002 to 127.5 Billion RWF in 2010. The corresponding public investments in the agricultural sector are to increase from 8.3 Billion RWF in 2002 to reach the peak of 14.7 Billion RWF in 2006 and gradually decrease to 10.4 Billion RWF in 2010. It is expected that in the period from 2007 onwards the private sector will be the driving engine of growth and will greatly contribute to the private investments in agriculture. Table 1 illustrates the planned public investments from 2002 to 2010.

23 PRSP Document , June 2002, pp. 129 24 This is the reason for the difference in corresponding figures in the PRSP and the NIS 25 The private sector promotion programmes include the Competitiveness and Enterprise Development project through the

WB loan and projects supported mainly by the Netherlands and USAID

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The proportion of agricultural investments in the total public investments is expected to reach the peak of 17% in 2004 and gradually fall to 8.2% in 2010.

Table 1: Planned Public Investments to attain PRSP Objectives according to the National Investment Strategy (in Billion RWF)

Sector 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total

Agriculture 8.3 10.3 12.5 13.6 14.7 14.5 13.3 11.8 10.4 109.4Total Investments

51.5 62.7 73.7 86.4 99.5 109.3 117.4 123.1 127.5 851.1% Agriculture

16.1%

16.4%

17.0%

15.7%

14.8%

13.3%

11.3%

9.6% 8.2% 12.9%

Source: National Investment Strategy, May 2002

Development of the public investments in the agricultural sectorThe resources allocated to the Agricultural sector in the past five years are far lower than those necessary to achieve the PRS objectives and do not meet the Maputo declaration of allocating at least 10% of the total Government budget to the agricultural sector (ref. Table 2). The percentage of funds allocated to the agricultural sector to the total Government budget has continuously fallen from 8.63% in 2002 to 3.28% in 2006. Also proportion of the Government resources allocated to agriculture in the development budget has constantly decreased since 2002. In spite of the nominal increase of the allocated budget from about 56 Billion RWF in 2002 to 111 Billion RWF in 2006, the percentage of resources allocation to the agricultural sector has fallen from 12.32% in 2002 to 7.23% in 2006.

Table 2: Funds allocation to the agricultural sector in the Development and total national budget (in Billion RWF)

Year Development Budget for Agriculture

Total Development Budget

Total Agriculture Budget

Total National Budget

% Agriculture Dev. Budget of Total Dev. Budget

% Total Agriculture of total National Budget

1999 14.62 77.15 174.09 18.95%2000 6.75 66.20 128.05 10.19%2001 10.73 56.84 11.51 184.88 18.87% 6.22%2002 6.95 56.40 13.05 151.24 12.32% 8.63%2003 7.42 65.11 9.79 252.03 11.40% 3.88%2004 9.91 86.77 13.29 328.91 11.40% 4.04%2005 7.95 109.94 12.67 368.28 7.23% 3.44%2006 8.66 111.30 13.27 404.74 7.78% 3.28% Source: Annual Finance Laws 1999 - 2006

A number of reasons contribute to the Government resources allocations to the agricultural sector that are much lower than those planned to achieve the PRS objectives. General lack of adequate resources is the major cause for budgetary constraints in all sectors. Lack of properly

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prepared sector strategies26 for the PRS implementation and Sector Public Expenditure Reviews , based upon which correct MTEF budgeting is possible, has also been a constraint for adequate resources allocation in many sectors, including Agriculture. However, recent significantly increased funding for priority areas such as energy and fuel as well as Transport and communication has also contributed to lower allocations to the agricultural sector. The importance of infrastructure development and the energy sector is reflected in their respective total budgets as shown in Table 3. While the budget for agriculture fell from around 4% in 2004 to 3.28% in 2006, that of fuel and energy rose from 1.30% to 5.87% in the same period. The budget for the sectors fuel and energy; transport and communication; and water and sanitation combined more than doubled from 7.65% in 2004 to 15.56% in 2006. The education and health sectors remain high priority areas in the poverty reduction strategy and achievement of the MDGs, with respectively 17.11% and 8.44% of the total budget for 2006. Table 3: Total Budget Allocation by Sector

Sector 2002 2003 2004 % 2005 % 2006 %Total National Budget 151.24 252.03 328.91 374,32 404.74Agriculture 13.05 9.79 13.29 4.04% 12.67 3.38% 13.27 3.28%Fuel & Energy 4.28 1.30% 17.51 4.68% 23.77 5.87%Transport & Communication

15.51 4.72% 20.01 5.35% 26.24 6.48%

Water & Sanitation 5.37 1.63% 9.01 2.40% 12.98 3.21%Health 16.54 5.03% 29.10 7.77 34.17 8.44%Education 48.91 14.87% 53.98 14.42% 69.25 17.11%Social Protection 33.84 10.29% 26.80 7.16% 20.26 5.00%Source: Compiled from the Annual Finance Laws

Development ProjectsPublic agricultural financing is carried out through different projects and programmes, planned in the Public Investment Programme (PIP) and budgeted according to the MTEF.

The Government has increased substantially the number of agricultural projects in the last five years in different areas in the sector, including soil and water management/marshland development, rice sector, export crop promotion, diary cattle development and fisheries. Table 4 shows that in 2003, a total of 72 projects in the agricultural sector were registered, with total resources commitments of around 195 Million USD.

The World Bank total financing through two projects: Rural Sector Support Project (RSSP) and the Rural Agricultural Markets Promotion Project (PDMAR) represented 27.13 % of total agricultural commitments. The three multilateral agencies, the World Bank, ADB and IFAD together contributed with nine projects 60.96% of all committed resources, as loans. The four countries USA, the Netherlands, Belgium and China together with 20 projects accounted for 23.37% of all committed resources in the agricultural sector, as grants. The remaining 15.67%

26 So far adequate sector strategies exist only for the sectors of Education, Health and Water and Energy, all finalised during the preparation of the PRSC from the World Bank

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of the financing originated from the FAO and different NGOs to finance several small projects and programmes.

Table 4: Major sources of external agricultural financing in 2003

Funding Agency No. of projects Total Commitment (Million USD) Percentage World Bank 2 53.00 27.13%African Development Bank ADB

5 36.50 18.68%

IFAD27 2 29.59 15.15%USA 7 19.98 10.23%The Netherlands 5 10.95 5.60%Belgium 7 10.73 5.49%China 1 4.00 2.05%Others 43 30.61 15.67%TOTAL 72 195.37 100%Source: Compiled from: MINECOFIN/CEPEX: Registry of External Aid to Rwanda Vol. I: Distribution of Interventions by Sector, April 2004

Current Investment ProjectsTable 5 shows the PIP 2005 – 2007 with a total of 10 big projects and a total cost of 88.78 Billion RWF (equivalent 152 Million RWF). The projects cover the sectors of dairy cattle promotion and fisheries, cash and export crops promotion, Rural Sector Support project, seed sector and the agricultural extension system. The PIP also includes the EU funded STABEX programme as well as the Agricultural Guarantee Fund and the Bugesera irrigation project, both financed with the Government’s own funds.

Table 5: PIP 2005 – 2007 - MINAGRIProject Total Amount

RWFFunding Agency Period

1. PADEBL – Dairy Cattle Promotion Project 7.94 Bn ADB 2001 - 20072. PAIGELAC – Fisheries promotion project 13.71 Bn ADB 2005 - 20093. PDCRE – Cash and export crops promotion project

17.91 Bn IFAD/BADEA 2003 - 2009

4. RSSP-I – Rural sector Support Project – Phase 1

28.52 Bn WB 2001 - 2007

5. Support to Rwanda Seed Sector 4.58 Bn Belgian Gvt 2004 - 20086. Support to the National Extension System 1.39 Bn Belgian Gvt 2005 - 20077. STABEX 14.00 Bn EU 2002 - 20078. Agricultural Guarantee Fund 600 Mio GOR 2004 - 20059. Bugesera Irrigation Project 50 Mio GOR 2005 - 200510. Training of MINAGRI staff 80 Mio FAO 2004 - 2005TOTAL 88.78 Bn

Source: MINAGRI, 2006

27 The two projects are PGERB and PDCRE. The funds for agricultural activities in the project UCRIDP are not included in the report under Agriculture. The project PGERB closed in 2004.

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The current project portfolio under MINAGRI in 2006 is presented in Table 6 and the development budget for 2006 is shown in Table 7. In addition to the projects in the PIP 2005 – 2007, two new projects are included: The IFAD funded PSTA Support project (PAPSTA) and the Bugesera Rural Development Project, funded by Luxemburg. A detailed description of the individual projects and the achieved outputs and outcomes is presented in the following section.

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Table 6: Agricultural Development Projects under MINAGRI in 2006Project Funding

AgencyTotal Project Cost

Total Project Cost in RWF

Project period

Major objectives/Components

1. PADEBL ADB U.A. 15.68 Mio

7.94 Bn 2001 - 2006

To satisfy local demand for milk through intensification of diary cattle production, improved veterinary services and promotion of milk products.

2. PAIGELAC ADB U.A. 16.80 Mio

13.71 Bn 2005 – 2011

Improved fisheries industry through better development and management of fish resources and capacity development of stakeholders in the industry.

3. RSSP-I WB USD 55.18 Mio

28.52 Bn 2001 - 2005

Improved agricultural productivity through better land use, marshlands development, agricultural exports promotion and improved agricultural sector financing

4. ASSR/ASNR BTC EUR. 6.6 Mio

4.58 Bn 2005 - 2009

Production of quality seeds, adopted to local agro-bio-climatic conditions and accessible to producers

5. Support to National Extension System BTC

EUR. 4.5 Mio

2006- 2009

Establishment of agricultural information and communication centre ; support decentralized extension delivery systems.

6. PAPSTA IFAD USD 20.1 Mio

11.68 Bn 2006 - 2011

Support to Institutional development and capacity building for institutions responsible for agricultural activities and introduction of innovative integrated agro-livestock development pilot actions applying a holistic watershed management approach.

7. PDCRE IFAD USD 25.1 Mio

17.91 Bn 2003 - 2011

Maximise productivity and marketing of traditional and new cash and export crops through promotion of production, transformation and marketing.

8. Cold Room Construction project

NL EUR. 523,000

363.49 Mio 2002 - 2005

Rehabilitation and new installation of a cold room at Kanombe International Airport.

9. Institutional support to ISAR

NL EUR. 1.7 Mio

1.18 Bn 2003 - 2007

Rehabilitation of two regional research stations and support to research in commodity chains of potatoes, horticulture, wheat and milk

10. Support to Statistics Dpt. Of MINAGRI

NL EUR. 1.0 Mio

695.00 Mio 2004 - 2006

Support to annual surveys for improvement of agricultural database

11. Bugesera Rural development Project

LUX-DEV NA NA

12. STABEX EU EUR 22.0 Mio

14.00 Bn 2003 - 2007

Promotion of export crops Coffee, Support to the privatisation process and Diversification of export crops

Source: MINAGRI, 2006

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Table 7: Development Budget 2006Project/Programme Total Amount Funding Agency

1. PAPSTA 263,000,000 IFAD2. RSSP 1,381,000,000 WB3. Support to Agric. Statistics 351,703,996 NL4. Bugesera Rural Dev. Project 1,433,792,800 Luxemburg5. Marshlands Dev. and Watershed protection

669,000,000 ADB Grant

6. STABEX 1,486,000,000 EU7. Cold Room Project 250,436,000 NL8. PDCRE 630,672,000 IFAD10. Support to National Extension System

263,910,000 BTC

11. Support to the Seed Sector 638,400,000 BTC12. PADEBL 421,000,000 ADB13. PAIGELAC 867,902,000 ADBTotal 8,657,526,796Total Recurrent budget 4,607,836,247Total MINAGRI Budget 13,385,362,043Total National Budget 404,738,200,000

Current major public investment projects in the agricultural sector.After the transition phase from emergency to development in 1997/98, the Government of Rwanda negotiated with the development partners a number of investment projects and programmes in key sectors in the social and economic sectors. It is in this period that the programming of public investments through the PIP started. A number of projects in the agricultural sector were initiated and old project loan agreements re-negotiated and amended. The first set of most important projects included the IFAD funded projects: Byumba Rural Development (DRB-II), Gikongoro Agricultural Development Project (PDAG) and Buberuka Rural Lands Management Project (PGERB) and the ADB funded project, the Mutara Development Project (PDM). These four projects played an important role in reviving public investment activities in the agricultural sector and provided significant support to the rural populations in the respective project zones. The three IFAD funded projects had an integrated rural development character, mainly involved in soil protection measures such as construction of terraces, marshlands development, promotion of fertilizer use, animal restocking and rehabilitation and construction of important rural infrastructures such as storage facilities, feeder roads and markets. The Umutara Development Project mainly supported sustainable agricultural production activities, promotion of forestry and agro-forestry as well as efficient livestock systems and construction of valley dams to improve water availability in the dry season, which was, at that time a grave problem in the region, which had about 90% of the entire national cattle population.

However, the performance of the projects and the level of achievement of the project objectives remained low due to a number of factors. Lack of capacity in the project management, insufficient knowledge and respect of the Donors’ procedures and the heavy bureaucracy of the financing institutions caused extremely long delays and subsequent low levels of disbursements and consequent unsatisfactory degrees of implementation of project activities. In addition, the methods used for project appraisals, which were Donor driven with little involvement of the

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Government and of the beneficiaries often resulted in formulation of projects, which were not addressing the priority needs of the beneficiaries and which were not participatory in planning, and monitoring and evaluation of implementation of project activities.

With the introduction of the PIP, the MTEF, the PRSP process and establishment of institutional arrangements28 for ensuring efficient and transparent public financial management (PFM), a new set of investment projects have been agreed between the Government and the different multilateral International Financing Institutions since 1999/2000. A number of projects in the agricultural sector were negotiated and loon agreements signed with different IFIs, particularly with the World Bank, the ADB, and IFAD. The most important projects in the agricultural sector in the past five years are briefly presented in the following section.

The Rural Sector Support Project (RSSP)The Rural Sector Support Project is an IDA Adaptable Program Loan (APL) of US$ 153 million, initiated in 2001 with the main purpose of helping the GOR to revitalize the rural economy and thereby increase rural incomes, reduce poverty and reinforce national stability. The project (RSSP) was designed with a view to operationalise the mandates of the Ministry of Agriculture, Animal Resources and Forestry (MINAGRI), as defined by the Government of Rwanda hence, in conformity with the Agricultural policy, the PRSP and feeds into the National Long-Term Development Strategy (Vision 2020).

The project was designed as an APL with a flexible lending mechanism, to have a total duration of 14 years, and to be executed in a staggered manner within three phases:

Phase I: 2001-2005: The first phase puts emphasis on building institutional and technical capacities that are needed to support the generation and adoption of efficient cropping and post-harvest technologies and hence launch the intensification process (US$ 48 million). Phase II: 2006-2011: The project would deepen and broaden its support in order to accelerate the pace of intensification and commercialisation of agricultural production (US$ 55 million).Phase III: 2012-2017: The final phase would seek to utilize the stimulus resulting from faster growth in agricultural production to promote the diversification of economic activities in the rural areas and expand the productive employment of available resources (US$ 50 million)..Project components

The main objective of the first project phase (RSSP-I) is to equip the primary target groups and institutions (farmer groups, private sector operators, private R&D institutions, local administration and community groups, lead research and extension institutions) with the basic institutional and technical capacities that should lay the groundwork for subsequent productivity-raising interventions. The original design of the project planned, six operational components:

1. Rehabilitation of farmed Marshland and Hillside Areas (US$ 13.97 Mio.);2. Integrated Management of Critical Ecosystems (GEF-funded activity to be prepared and

implemented by MINITERE)3. Promotion of Commercial and Export Agriculture (US$ 10.53 Mio.)4. Support to Agricultural Services Delivery Systems ( US$ 9.59 Mio.);

28 These include the Auditor General’s Office, the National Tender Board and CEPEX

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5. Small-scale Infrastructure Development (US$ 9.81 Mio.) and 6. Promotion of Off-farm Productive Activities in Rural Areas (US$0.34 Mio.); and

Project Strategies:

The strategy for implementation of the project activities and achievement of the project objectives was a two-fold approach: (a) Decentralization approach adopted countrywide for rural development; and (b) Application of adaptive research and participatory extension system. Three facilities were established in the project as implementation vehicles to channel the project’s financial resources to the implementing local agencies and other beneficiaries:

(i) Local Infrastructure Facility (LIF) (US$ 9.17 Mio.). The LIF would be the mechanism to transfer financial resources to local administrations and other local beneficiaries in form of grants. The resources are for use in construction and rehabilitation of the rural infrastructure necessary to facilitate project activities related to production, storage and processing of agricultural products. The projects were to be prepared by local administration and local communities and be submitted to the project for approval and financing.(ii) Rural Investment Facility (RIF) (US$ 8.07 Mio.). The RIF would provide financial incentives through investment cost subsidy (of 40%) to qualified private sector operators, including farmer groups and individuals, willing to invest in activities with substantial economic or environmental externalities. The facility is managed by the National Bank of Rwanda (BNR) under a Subsidiary Financing Agreement (SFA) signed between the GOR and BNR. The illegible sub-projects from individuals are channelled through collaborating local commercial and development banks.(iii) Rural Technology Facility (RTF) (US $8.25 Mio.). The Facility would be offered in form of grants, and it is the main vehicle to establish and support participatory agricultural research and extension services delivery systems.

Current Status:

The implementation of RSSP faced a number of problems and setbacks almost throughout the first years of phase I, which resulted into the failure to fully address the development objective for phase I. According to the MTR, conducted from January 31st to February. 12th 2006, the development objective for phase I had not yet been achieved, and recommended an extension to 30th June 2007. The MTR Mission report describes in detail some of the achievements, constraints and validity of the development objectives. It also gives the recommendations the key actions to be carried out so as to upgrade the project implementation rating (IP). In view of the above constraints, most of the project activities for phase I were not implemented or could not reach the targets. The poor performance is also reflected in the extremely low disbursement level, amounting to US$ 11.54 Million from the credit amount of US$ 48 Million, equivalent to a disbursement rate of only 24% at the end of 2004. Hence, the recommended extension of phase I to June 2007 is expected to enable the project phase I to achieve the development objectives and allow the starting of phase II of the project. The subsequent phases will be adjusted to accommodate this and other changes, following the APL principle of the RSSP Furthermore, the MTR recommended the simplification of the project design to reduce the number of components to only four: 1) Rehabilitation of farmed Marshland and Hillside Areas; 2) Promotion of Commercial and Export Agriculture, which would integrate component 5

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(Small-scale Infrastructure Development) and component 6 (Promotion of Off-farm Productive Activities in Rural Areas); 3) Support to Agricultural Services Delivery Systems; and 4) Project Management, Monitoring & Evaluation. Meanwhile, after the change in the project design and in the project management, the project is back on track, with a total disbursement rate of over 50% at the end of 2005.

Dairy Cattle Development Support Project The Diary Cattle Development Support project (PADEBL) is a five-year project, which was signed between the GOR and the ADB in 2001, with a total cost of 15.68 Units of Account (U.A.), equivalent to 7.732 Billion RWF. It is jointly financed by the ADF loan covering 86% of the total project cost and the GOR covering the remaining 14%. The justification for the project was the fact that the high demand for livestock products that was significantly higher than the domestic production had forced the country to invest its meagre financial resources in the massive importation of the most important livestock products, milk and meat. Furthermore, despite some limitations that constrain livestock production, the agro-climatic environment is quite conducive to improved productivity to satisfy domestic needs and provide incomes for livestock producers. Therefore, in order to eliminate the livestock production constraints, the GOR obtained a loan from the ADF to assist in the development of dairy cattle production throughout the country.

Objectives and project components and StrategiesThe objective of the project is to contribute to food self-sufficiency and poverty reduction with the specific objectives of satisfying domestic demand for milk and beef and to increase the incomes of livestock producers. The project has five operational components:

1. Outreach & Extension activities (UA 3.30 million);2. Intensification of cattle breeding/ production (UA 2.85 million);3. Veterinary activities (UA 1.28 million);4. Promotion of livestock products (UA 2.94 million);5. Institution building (UA 0.59 million)

The project strategy is consistent with the Government policy, to devise deliberate change from traditional extensive cattle production system to semi-intensive and intensive (zero grazing) production systems, managed as small market agricultural enterprises, as well as the reconstruction and modernization of production and marketing facilities. The direct impact will be increased incomes of up to RWF 300,000 per household per annum at full development, accruing from the sale of surplus livestock products from the livestock keepers who are the primary beneficiaries of the project. The expected increase in milk production is over 200,000 litres/annum, while, increase in meat production has been approximated to 8,000 tons/annum. The increase in livestock products, with emphasis to milk, will be a direct result of increased and improved genetic quality of cross-breed cattle from 34,400 heads to 168,500 heads. The indirect benefits to the cattle keepers and the non- cattle keepers alike, is the improved welfare in terms of improved nutrition of the Rwandan population.

Current Status

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An evaluation study conducted in March 2004 in preparation of the MTR found out that the project PADEBL, through its varying activities has qualitatively contributed to the current level of milk production in Rwanda by modernization of the milk marketing systems in the rural areas through the construction of MCCs., but it attributes the significant increase of milk production to the private sector and the NGOs. The evaluation reports that for the past few years the private sector has imported more than 600 high-breed Frisian cattle from Germany and South Africa and unspecified number of cattle from Uganda. Also the projects “Heifer Project International (HPI)” and Send a Cow Rwanda (SAR) have brought in more than 1,300 cows targeting especially smallhoder farmers.

With regard to the planned targets, the performance has been different for the various components. The component “Genetic improvement and Restocking” did not perform well as only 37,954 inseminations or 19% of the planned (200,000) inseminations were done giving a total of 4, 863 heifers or 9.7% of the expected output of 50,000 in five years. Under the Agriculture-stockbreeding integration component, a total of 217 bulls were distributed to farmers and about 800 heifers were also bought under the credit and guarantee schemes and a good number of improved sheds were constructed. Under the animal feed improvement component, ISAR produced good results on the testing for adaptability and production of forage seeds and planting material suitable for Rwanda’s ecological zones. Good performance was also achieved in the promotion of veterinary services delivery. Under the component “Promotion of livestock products” all the 15 planned Milk Collection Centres (MCC) and 8 out of 10 livestock markets have been complete and fully equipped with the necessary facilities. Most of these MCCs are operated by Farmer associations formed with the assistance of the project.

In spite of distinct achievements in some project components, the overall assessment of the project concluded that progress towards meeting the development objective of the project has been slow and limited, primarily because implementation of most of the components experienced a very slow take-off and due to obvious management constraints with below average performance, resulting from, inter alia, the slow procurement, tendering and funding approval procedures. The evaluation report recommended enhancing implementation capacity, reduce project complexity, empower beneficiary community organizations to be actively involved in every aspect of the project and accelerate investments in community-level activities that would have direct pro-poor impact in rural areas.

Smallholder Cash and Export Crop Development Project The Smallholder Cash and Export Crop development Project (PDCRE) was negotiated with IFAD and the loan agreement signed in February 2002. The project was conceived within the framework of the Government’s Poverty Reduction Strategy Paper, PRSP (2001) and of the National Strategy for Agriculture, which recognize that sustainable development of agricultural sub-sectors, access to export markets, support for farmers’ groups and professional associations; and credit and other financial mechanisms for rural-based activities are critical to sustaining the economic recovery of Rwanda. The project aims at addressing constraints facing Rwanda, with regard to unfavourable international markets for coffee and tea, the traditional export crops of Rwanda, with a significant negative impact on smallholder producers, particularly coffee growers, and on foreign exchange earning capacity of the country. An important contribution to redressing the coffee situation, which can play key role in sustaining the country’s foreign exchange earnings, is to significantly improve the quality of coffee products, to exploit new

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market niches for quality products, and to search for new marketing channels through the Fair Trade organization network with a view to obtaining better prices and a larger share of the trading margins. Tea prices are also on the low side, but Rwanda tea is slowly recapturing for international reputation for high quality production, enjoyed before the 1994 war, and thus benefiting of better than average prices. The involvement of Fair Trade organization in marketing Rwanda tea would further strengthen the capacity of the country to withstand unfavourable price trends for average teas in the international markets.

The Government of Rwanda is convinced, that if supported by adequate policies, the country has considerable potential to produce and market high quality coffee and tea, and also to develop other cash and export crops, the production of which has already started under a number of private enterprise initiatives. The project PDCRE has the purpose to improve production levels and the competitiveness of Rwanda’s cash and export crops. The total project cost is estimated at USD 25.54 million. The project is jointly financed by IFAD (USD 16.3 million), the BADEA (USD 5.66 million), the Government (USD 1.88 million), the local banks (USD 0.637 million) and the beneficiaries (USD 0.63 million).

Project Objectives and componentsThe main objective of the Smallholder Cash and Export Crop Development Project is to maximize and diversify the income of poor smallholder cash crop farmers through the development of financially sustainable production and commercial processing practices and targeted marketing strategies. It aims at achieving four major outcomes: (i) to secure production and processing of top quality products for international markets; (ii) to engage Fair Trade and ethically-minded private trading organizations to secure access to remunerative markets; (iii) to empower poor smallholder producers to control processing and marketing operations; and (iv) to ensure sustainable credit for growers and processing/marketing enterprises. The project PDCRE has four major components: (i) Coffee diversification; (ii) Tea development with two sub-components: (a) Integrated smallholder tea development in the Nshili district and (b) Smallholder tea plantations in the Mushubi district; (iii) Guaranteed credit to smallholders tea and coffee producers and (iv) Development of new cash and export crops.

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KENYAAdapted from Comprehensive Africa Agriculture Development Programme (CAADP): A Technical Review Report

TRENDS IN AGRICULTURAL INVESTMENTS Trends in Budget Allocation to the Agricultural SectorSince the mid 1980s, percentage of the resource allocation to the agricultural sector by the government has been on a general decline. During the 1985/86 financial years, the sector was allocated 12.5% of the total government budget. This dropped to 4% in 2000/01 financial years (Figure I). The decline impacted negatively on the agricultural growth, as service delivery to farmers was almost grounded (MOA, 2006a).

Figure I: Budget Allocation to Agriculture

0

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Source: MOA 2006a; MOF, 2007; various Development and Recurrent Budget Estimates

The downward trend has since been reversed with more resources being allocated to the agricultural sector which is recognition by the government that revitalization of agriculture was essential to economic growth and poverty reduction. This is also in response to the Maputo Declaration to increase the budget allocation to agriculture to at least 10% of total government budgets. The total allocation to agriculture in 2005/06 was 5.7% of government budget. In 2007/08, the budget allocation to the sector had risen and is set to increase to 6.8% and is posed to rise further to 7.3% of the total expenditure by 2008/2009 given the need to implement the SRA and other aspirations in the Kenya vision 2030. The proportion of development to the recurrent expenditure has also been increasing from 30% in 2001 to 40% of the total allocation to the Ministry in the 2007/2008 year.

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Budget allocation to the agricultural sector, in nominal terms, increased from Kshs. 11.05 billion in 1999/2000 to Kshs. 29.58 billion in 2007/08. Over the same period, there was marked increase in development budget. Allocation for development purposes increased from 21% (Kshs. 2.69 billion) of total government budget to the agricultural sector in 2001/02 to 45.6% (Kshs. 13.5 billion) in 2007/08. Consequently, the share of funding for recurrent expenditure has dropped from 79% of budget allocation to the sector in 2001/02 to 54.4% in 2007/08 (Table 1).

Table 1: Budget Allocation to Agricultural Sector29, 1999 – 2007  1999/00 2000/0

12001/02 2002/0

32003/04 2004/0

52005/06 2006/0

72007/08

Recurrent (Kshs. mil)

8,204

8,613

10,146

10,764

11,261

11,343

14,291

15,180

16,085

Development (Kshs. mil)

2,842

2,982

2,690

4,378

5,100

6,457

5,722

9,108

13,503

Total (Kshs. mil)

11,046

11,595

12,836

15,142

16,360

17,800

20,013

24,288

29,588

Recurrent as % of total

74 74 79 71 69 64 71 63 54

Dev as % of total

26 26 21 29 31 36 29 38 46

Total 100 100 100 100 100 100 100 100 100Source: PER, 2003, 2004, 2006; MOF, 2007; Various Budget Estimate Books 1999/2000 – 2007/08

Available data show that most of the budget allocations have been directed towards funding of core poverty programmes. In the Ministry of Agriculture, the core poverty programmes (e.g. food security, research and extension services, and disease and pest control), have been allocated between 77.27% in 2002/03 and 81.14% of total recurrent budget in 2005/06 (Table 2).

A different trend is evident in the Ministry of Cooperative Development and Marketing where the spending on core poverty programmes under the recurrent budget ranges between 42% and 45% of the total recurrent budget (Table 3). During the 2007/08 financial years, the budget that went into financing core poverty programmes was Kshs. 343.4 million or 42.1% of total recurrent budget, up from Kshs. 339.1 million in 2006/07.

Table 2: Share of Core MOA Activities in Recurrent Expenditures (%)Actual Expenditure Budget Estimates (Approved)

2002/03 2003/04 2004/05 2002/03 2003/04 2004/052005/06Printed

Research and Extension Services 76.61 75.06 75.74 74.01 74.59 74.39 69.88Food Security and disease and pest control services 2.91 5.25 5.43 3.26 5.68 5.50 11.27Total 79.52 80.32 81.17 77.27 80.27 79.89 81.14Source: MOA, 2006c.

Table 3: Allocations of MOCDM to Core Poverty Programmes HEAD PROGRAMME/ACTIVITY 2006/ 2007/08 2008/09

29 Agricultural sector includes Ministry of Agriculture, Ministry of Livestock and Fisheries Development, Ministry of Cooperative Development and Marketing; Ministry of Lands and Housing; Regional Development Authorities; and Environment and Natural Resources.

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07Cooperative Marketing Services

Marketing and Research; Collecting Marketing Data; Analysis of the data and dissemination; Promotion of Cooperatives to viable Commercial enterprises to provide value adding, farm inputs & credit services to producers

15,281,55313,091,609 13,091,609

Cooperative Governance and Ethics

Administration of Ethics Commission for Cooperative Governance; Improvement in the corporate governance of cooperatives

10,893,33912,753,524 12,763,335

Provincial Cooperatives Management Services

Coordination of training programme/activities & implementing of Cooperative Projects; Overseeing the implementation of Co-operative Societies Act, Represent CCD in Provincial/Regional bodies; Monitoring Co-operative Activities

75,387,82280,239,410 81,239,410

District Cooperatives Management Services

Training of Co-operators, Implementing Cooperative Development Projects; Provide guidance in Implementation of Co-operative Societies Act; Monitoring Cooperative activities; Monitoring; Cooperative livestock activities

237,610,280

247,384,542 249,684,542

Total 339,172,994

353,469,085 356,778,896

Total R22 754,767,000

837,754,400 846,644,396

Source: MOCDM, 2007, Recurrent Budget Estimates 2007/08

In the year 2007, the government adopted programme budgeting. Through this system, various ministries budgeted for programmes rather than activities. In this case, the Ministry of Agriculture had four programmes (Table 4), whereby the bulk of the budget still went into financing the core poverty programmes such as facilitating increased agricultural productivity through research and extension services.

Table 4: MoA Programme Expenditure (Kshs.) EstimatesMoA Programme Projected Outcome

2006/07Estimates2007/08

Projected Estimates2008/09 2009/10

1. General Administration and Support Services 1,319,400,975 1,551,174,826 1,259,273,569 1,056,476,505

2. Review and Development of Policy And Legal & Regulatory Framework 26,841,948 37,764,876 39,091,641 42,854,000

3. Promote Product Enhanced Programme 187,847,187 221,592,900 234,176,317 242,703,749

4. Facilitate Increased Productivity And Agriculture Outputs 8,647,538,961 11,223,772,317 10,861,546,885 11,431,260,016

Grand Total 10,181,629,071 13,034,304,919 12,394,088,412 12,773,294,270Source: MOA, 2007

Funding from development partners remained relatively since. In the MOA, for example, the appropriations in aid (A in A) increased from Kshs. 691.0 million recorded in 2001/02 to Kshs. 1.194 billion in 2003/04 before dropping to Kshs. 776 million in 2006/07 (Figure II). In 2007/08, it was estimated at Kshs. 1.069 billion.

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Figure II: Appropriation in Aid (A-in-A) under Development Budget

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Source: MoA 2003, 2004, 2005, 2006c, 2007.

Programmes and Projects being Implemented

Under the agriculture sector ministries, some of the key ongoing programmes and projects are:

Kenya Agricultural Productivity Project (KAPP)The Kenya Agricultural Productivity Project (KAPP) aims at contributing to sustainable increase of agricultural productivity and improvement of the citizens’ livelihood through improved performance of the agricultural technology supply and demand system. The program design hinges on the premise that separate and poorly linked systems of research and extension generate low returns and therefore the design envisages an integrated approach in order to synchronize research, extension and farmer empowerment initiatives.

The project objective is to improve the overall agricultural research system by supporting generation, dissemination, and adoption of agricultural technology. This objective will be achieved through a twelve-year program to be implemented in 3 phases.

The first phase (2004-2007) will support continuation of ongoing reforms in agricultural research, initiation of a participatory process of change in extension services, farmer/client empowerment and pilot testing of extension methods and delivery systems. Implementation of the phase will be guided by four project components namely:

i. Facilitation of Policy and Institutional Reforms by supporting establishment of the institutional framework required for increased agricultural productivity.

ii. Support to Extension System Reform by building on achievements made under the National Agricultural Extension Policy framework (NAEP) to establish a new system of national agricultural extension.

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iii. Support to Research System Reform to encompass a plurality of actors and become more efficient and accountable.

iv. Support to Farmer/Client Empowerment through development of institutional and financial mechanisms that will give farmers control over extension and research services and increase their access to productivity enhancing products.

The World Bank has funded the first phase of the project at the cost of Ksh 3.1 billion. The implementation of phase 1 commenced in October 2004. Subsequent phases of the program will focus on consolidating reforms in research, implementing reforms in extension, and building the basis for sustainable financing of the entire system.

Kenya Special Programme on Food SecurityImplementation of the Kenya Special Programme on Food Security (KSPFS) was started in 2003 with total project cost of Kshs. 77.6 million to be met by both the GOK and FAO. The pilot districts were Busia, Vihiga, Nyando, Homa Bay, Bondo, Nandi South, Nandi North, West Pokot, Marsabit, Makueni, Nyandarua, Kiambu, Tharaka, Kilifi, and Garissa (Figure III).

The objective of the project was to identify and provide necessary support to any community or group based projects that can lead to immediate impact on food security and poverty reduction. Hence the project that ended in 2006 to give way for Njaa Marufuku Programme had the following key achievements:

Release of small grants to community groups. Capacity building of stakeholders at national level, provincial and district levels. Operationalization of Ahero Irrigation Scheme, which had collapsed. This brought back

life to 5,000 households in the Scheme. Development of Njaa Marufuku Kenya programme to be the long-term programme for

addressing national food security as well as the fulfilment of MDG-1. Development and circulation of Food Security brochures.

Initiatives targeting the poor and vulnerable people are geared towards increased productivity, generation of rural incomes, health and nutrition improvement and conservation of the natural resource base. The project aim at empowering the poor and vulnerable through capacity building and provision of sustainable resource support that enables them to fully participate in economic activities.

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Figure III: Map of Kenya

D istric t b ound aryProvin c ia l bou ndary

K E N YA

A d m in is tra tiv e u n its

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Njaa Marufuku Kenya (NMK)The term Njaa Marufuku Kenya literally means, “Kick hunger out of Kenya”. This was initiated in 2005 by the Agriculture sector ministries, with support from FAO and the MDG Centre, as a strategic approach that calls for action and a “Green Revolution” towards hunger and poverty reduction in Kenya to fulfil MDG-1. The programme that was developed from the KSPFS supports community-driven agricultural development. The overall goal of the programme is to contribute to reduction of poverty, hunger and food insecurity among poor communities in Kenya. The strategic objectives of the programme include:

Increase food security initiatives through support to resource poor communities. Support health and nutrition interventions that target the poor and vulnerable. Strengthen and support private sector participation in food security and livelihood initiatives. Establish and strengthen linkages and collaboration with stakeholders in food security and livelihood initiatives.

The total cost of Njaa Marufuku Kenya programme is estimated at Kshs. 800 million and is to cover all districts in Kenya. However, its implementation commenced with initial allocation of Kshs 40 million in 2005 that was used for implementation of the Fast Tracked components in 57 districts.

Target beneficiaries are rural and urban resource poor, who should be actively involved in agricultural production, organized in groups and registered by relevant authorities. Some of the constraints facing the programme include inadequate funding to support the large number of groups requesting seed money to help them set off. In addition, there is a conceptual conflict with other projects in the sector that advocate against financial support to farmer groups. ASAL Based Livestock and Rural Livelihoods Support ProjectThe project area consists of 22 districts covering the Arid and Semi-arid lands (ASALs) that are predominantly pastoralist and agro-pastoralist. Selection of these districts has been based on the level of poverty and potential for success and impact. The districts covered include the pastoral districts of Garissa, Isiolo, Mandera, Marsabit, Moyale, Samburu, Tana River, Turkana, Wajir and West Pokot, where livestock production is the predominant activity, and the agro-pastoral districts of Baringo, Ijara, Kajiado, Laikipia, Mbeere, Machakos, Makueni, Kitui, Malindi, Mwingi, Narok and Taita Taveta, where a mixed crop-livestock production system is practiced.

The overall objective of the project is to contribute to poverty reduction at the national and household levels, consistent with the government’s policies of mainstreaming ASAL areas in the economic framework of the country. The specific objective of the project

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is to improve sustainable rural livelihoods and food security through improved livestock productivity, marketing and support for drought management and food security initiatives in the dry marginal areas.

In order to realize its objective, the project focuses on the following components: Sustainable livestock improvement: Animal health delivery improvement Livestock marketing improvement Drought management and food security initiatives

Central Kenya Dry Areas Programme (CKDAP)CKDAP is a seven-year project, which started in the year 2001. The project is funded by IFAD at a cost of Kshs. 195.3 million. The goal of the project is to reduce the mortality and morbidity in the project area and improve the well being of the target households. The main objective of the agriculture and livestock sector is to improve household food security and nutrition through increased sustainable agricultural production.The project covers the dry parts of 5 districts in Central Province, namely: Nyeri, Nyandarua, Kirinyaga, Maragua and Thika.

The project has 4 components implemented under different Ministries namely:i. Agriculture and Livestock - Ministry of Agriculture and Ministry of Livestock and Fisheries Development.

ii. Community Empowerment - Ministry of Gender and Social Servicesiii. Primary Health Care - Ministry of Healthiv. Domestic Water Supply - Ministry of Water and Irrigation

Smallholder Dairy Commercialisation ProgrammeThe overall goal of the programme is to increase the income of poor rural households who depend substantially on production and trade of dairy products for their livelihood. The project has five components namely:

i. Organizational and Enterprise skills developmentii. Technical support to smallholder dairy producers

iii. Development of the milk marketing chainiv. Support to policy dialogue and institutionsv. Programme management and coordination

South Nyanza Community Development Project

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The objective of the project is poverty reduction and improved livelihoods of the communities in the project area. The project, which covers Rachuonyo, Migori, Kuria, Homa Bay and Suba districts, has 4 components implemented under various Ministries namely:

i. Agriculture and Livestock – Ministry of Agriculture and Ministry of Livestock and Fisheries Development.ii. Community empowerment – Ministry of Gender and Social Services

iii. Primary Health Care – Ministry of Healthiv. Domestic Water Supply; Ministry of Water and Irrigation

The main activities under the livestock component include: Improvement of productivity of local zebu through cross-breeding and general animal husbandry management Improved management of local birds Upgrading of indigenous cattle breeds Training on home made feed rations Training of private animal health service providers at community level Introduction of dual purpose goats Promotion of poultry production Facilitate the organization of livestock, CIGs for easy access to livestock markets Training of farmers on livestock management (feeding and disease control)

Agricultural Sector Programme Support (ASPS)The programme, whose implementation stated in July 2005 is funded by DANIDA/GoK at a cost of Kshs. 2.24 billion and will be completed in 2010. The programme has a number of components that include: agriculture and water development; support to national agricultural policy framework; support to Micro and Small Enterprises (MSE) and rural infrastructure to support agricultural production i.e. rural access roads, cattle markets, etc. The programme is taking over from the Agricultural Sector Project (ASP) that started in 1999 and was completed in June 2005 with total project cost of Kshs. 1.01 billion from DANIDA/GoK.

Promotion of Private Sector Development in Agriculture (PSDA)/GTZThe programme started in October 2003 and is expected to run up to 2015. The total cost of the project is estimated at Kshs. 300 million to be provided by GTZ/GoK. The programme’s geographical coverage is 9 districts in high and medium potential areas with high population density and high levels of poverty. The project aims at addressing the marketing problems, through value chain approaches. The project largely supports activities related to:

Identification of constraints that cause the under-utilization of the agro-industrial potential and limited access to markets; Participatory elaboration of intervention strategies aimed at facing these constraints and seizing opportunities;

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Capacity development of farmers, agro-industrial entrepreneurs and service providers in supporting value chain development, as well as the sensitisation on and improvement of political, legal, administrative and infrastructure framework conditions that are conducive for value chain development.

Eastern Province Horticulture and Traditional Food Crops Project (EPHTFCP)The project covers eight districts of Eastern Province namely: Embu, Machakos, Makueni, Mbeere, Meru Central, Meru North, Meru South, and Tharaka. The IFAD/GoK at a total cost of Ksh. 961 million funds the project. Its implementation started in 2001 and is to be completed in 2007. The specific objectives of the project are:

Promotion of rational use of natural resources especially water for irrigation. Strengthening and re-orientation of support services. Development and dissemination of appropriate and sustainable technical packages. Supporting beneficiary participation in planning and development.

The Ministry of Agriculture is the lead implementing agency of the project. However, collaborating institutions include Kenya Agricultural Research Institute (KARI), Kenya Industrial Research and Development Institute (KIRDI), Horticultural Crops Development Authority (HCDA), Cooperative Bank of Kenya (Coop Bank) and other relevant stakeholders.

National Agriculture and Livestock Extension Project National Agriculture Extension Programme Phase I funded by SIDA at a cost of Kshs. 1.1 billion started in 2000 ended in June 2005. The major objective of the project is to strengthen agricultural sector extension service through provision of necessary facilities and promotion of demand driven extension services. Phase II of the programme covering 55 districts has an estimated total cost of Kshs. 2.15 billion to be met by SIDA. Implementation of this new phase started in July 2005 and will end in 2010.

The Roads 2000 StrategyThe Roads 2000 strategy was incorporated into the Poverty Reduction Strategy Paper (PRSP) 2001- 2004 with the aim of employment creation. The key objective of the Roads 2000 strategy is cost effective maintenance of the classified road network of the country to an economic level of serviceability using local resources and labor-based methods wherever these are cost effective. The main features of the concept include:

Focus on routine maintenance and spot improvement works; Use of local resources as much as possible; Use of employment-intensive methods of work where applicable; Partnership with private sector.

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The Ministry of Roads and Public Works and the Kenya Roads Board are implementing this programme with support from development partners such as the Governments of Denmark, France, Germany, Sweden, the European Union, and the Africa Development Bank. The coverage of these partners has been as follows:

DANIDA provided support in four districts in Coast Province (Kwale, Kilifi, Malindi, and Taita Taveta). The project that was implemented from 1999 to 2003 had a total expenditure of 27.5 million Danish Kronars provided by DANIDA.

SIDA provided support to the Roads 2000 Programme in Nyeri and Kirinyaga districts from July 1997. About 60 million Swedish Kronars were used.

EC provided Kshs 700 million for implementation of the programme in eight districts in Eastern Province from March 1998 to December 2004. The districts supported included Meru North, Meru South, Meru Central, Tharaka, Embu, Mbeere, Machakos, Makueni. Most of the projects were completed by the end of December 2004.

Implementation of the Roads 2000 Programme is expected to continue into the future. Between 2004 and 2007, a number of development partners had provided new commitments to financing of the programme in at least 37 districts in Kenya. These partners include KFW, ADB, AFD, SIDA and EC (Phase 2). They have pledged a total of Kshs 6.241 billion in the next 5 years. GOK will contribute Ksh. 1.468 billion as counterpart funds in the same period.

Lake Victoria Environmental Management ProjectLake Victoria Environmental Management Project is a regional development programme that covers the whole of Lake Victoria and its Catchment areas. The governments of Kenya, Tanzania and Uganda are jointly implementing the project. The cost of Phase I of the project whose implementation started in 1997 and ended in 2005 was Kshs. 66 million, with funding coming from IDA/WB/GoK.

The overall project vision is: “A stable Lake Victoria Ecosystem Capable of Meeting Demand for Food, Income, Safe Water, Employment, Disease-Free Environment and a Conserved Biodiversity”. The project objectives are to: (i) maximize the sustainable benefits to riparian communities of the lake basin from using resources within the Catchment to generate food, employment, income, supply safe water and sustain a disease free environment; (ii) conserve biodiversity and genetic resources for the benefits of both the riparian and global communities; and (iii) harmonize national and regional management programmes in order to achieve to the maximum extent possible the reversal of environmental degradation.

Kibwezi Irrigation ProjectThe Project was designed as a pilot Project to gather technical data for the planned greater Kibwezi Irrigation Project estimated at 15,000 ha at full development. It had hoped to grow grapes, cotton, citrus and mango to provide subsistence for the small holders.

Masinga Irrigation Project

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The main objective of the project is to grow horticultural crops on contract for exporters and in the process explore the possibilities to export the produce directly. Crops to be grown are: French beans, chilies, okra, brinjals, straw berries and passion fruits.

Kiambere Irrigation Project Some of the objectives of the project are to grow horticultural crops mainly okra, chilies, brinjals, karella and baby corn for export; and tomatoes, onions and green maize for local markets. The project will involve production of horticultural crops for export.

Tana Delta Irrigation Project (TDIP)A major objective of the project was to open up the delta area to farming on 28,000 hectares acquired by the Tana and Athi Rivers Development Authority (TARDA) in the Eastern Delta area of the Tana River. The subsequent phases of the planning and development will investigate other commercial crops such as cotton, sugar, palm oil, bananas or settlement programme under smallholder models of commercial farming.

Farmers Field Schools (FFS)This is aimed at empowering farmers to become self-reliant; increasing food production, hence, food, self-sufficiency and poverty reduction.

Ewaso Ng'iro North River Natural resources Conservation Project This is a project funded by African Development Bank (AfDB), which aims at enhancing resource conservation with specific focus on improving the availability of water. The areas of invention will cover participatory catchment conservation and water resource development and management.

ASAL Based Livestock Development ProgrammeThis is also a finance project funded by African Development Bank (AfDB). The programme has a number of implementing agencies who have different roles in the implementation. Key activities include support to the establishment of a Livestock Early Warning System (LEWS) and drought mitigation.

Other projects include:

Agricultural research – under the Kenya Agricultural research Institute (KARI). Animal Production Research Project. Catchment and Natural Forest Conservation. Forestry Development Services

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Implementation of Fisheries Management Plan (IFMP) Improvement of Agricultural Technology Development Stations Kenya Dairy Development Programme Land Development and Machinery Services Marine Fisheries Research National Crops and Horticultural Research Project. Pan-African Control of Epizootics (PACE) Pan-African Tsetse and Trypanosomiasis Eradication Campaign Programme (PATTEC) Private Sector Development for Agriculture. Range and Arid Lands Research Project. Rehabilitation and Redesigning of Agricultural Training Centers. Rehabilitation of Agricultural Training Institutes. Soil and Water Management Research Veterinary Research Project.

Resource MobilizationResource mobilization is a social theory, which focuses on the ability of the members of a group to acquire resources and mobilize people in order to advance their goals [Kendall 2006]. Resource mobilization is defined as a comprehensive process involving strategic planning for program funding, close communication and effective negotiation with donors.

Resource mobilization can only succeed when there is a core group of strategists who work ensure that the required resources are acquired, both from within and outside the organization. Success of acquiring the resources from outside will depend on the extent to which one proves that once acquired, the resources will be used in accountable and effective manner that expected outputs and outcomes would be achieved. Thus resource mobilization must be supported by the institution’s record of sound management of resources, image and credibility in development.In Kenya, resource mobilization commences with identification of projects that need funding. In most cases, funding agencies are approached after a project has been identified and a project proposal written. After a donor or financial agency has expressed interest in a project, thorough review of the project is jointly done to the extent acceptable to both the government and the financing agency.

Government funded projects, however, take a slightly different line, with implementing agencies presenting their project proposals through the Medium Term Expenditure Framework (MTEF), where resource allocation is carried out at the Sector Working Group (SWG) Level. However, the acceptance at the sector level is not a guarantee of project funding as further scrutiny and final decision-

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making is made at the Treasury. Thus projects that receive high priority at the ministry level may not be financed if it does not maintain that priority rating at the national (Treasury) level.Prier to 2003, resource mobilization by the Kenya government was hindered by belief that there was inadequate commitment of the government to fight graft and mismanagement of public resources. This resulted in some development partners freezing financial support and declining to finance any new projects in Kenya. However, this improved in 2003, leading to increase in Official Development Aid (ODA).

Currently, the resource mobilization of the government remains weak, with most government departments having no bankable project proposals to “sell” to potential financiers. This is due to inadequate priority given to project development and resource mobilization. This is exacerbated by lack of aggressiveness in sourcing for funding, especially under the grants. Moreover, there are no officers designated to mobilize the resources.

Allocation of Investment Resources

In Kenya, all new public investments are subjected to the MTEF process that act as a coordinating system for public investments. Under the MTEF, major decisions are made at the Sector Working Group (SWG) level. The agricultural sector ministries are under the Agriculture and Rural Development SWG. Each year, resource envelopes are allocated to each sector, based on GoK revenues, donor resources and internal appropriations in aid (A-in-A).

Though this system is an improvement to the previous budgeting system, which was not, linked to specific policies and plans, it still has a number of weaknesses that should be addressed if effective and efficient resource allocation is to be realized.

The issue of priority setting at the sector level should be strictly implemented. Any proposed project should be subjected to priority ranking with any other projects proposed by the sector ministries so that only projects that will generate the highest output are funded. Currently, resources are allocated to individual ministries without a clear priority setting of the planned activities – a form of incremental budgeting, thus rendering the SWGs largely ineffective.

Role of Private Sector in Agricultural Sector Financing

The agricultural sector in Kenya in largely private sector led, with the government providing mainly support/advisory services. In this context, financing of the sector is largely by the private sector through own savings. However, for farmers who need credit facilities, various sources are available. These include borrowings commercial banks and financial institutions such as SACCOs, Merry-Go-Round, etc.

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In the past, farmers had serious difficulty accessing credit facilities for agricultural development, as only a few banks were willing to venture into the credit to agricultural sector. Most banks did not accept the only available collateral ‘the title deed’. This limited some farmers to subsistence production, and accessing credit from friends, relatives and some few informal micro-financial institutions. Moreover, the few banks or financial institution that ventures into the sector set high interest rates to cover the perceived high risk.

Since 2002 general elections, this has changed with financial institutions getting into cutthroat competition, even for previously neglected rural communities and farmers. This is attributed mainly to reduce internal borrowing by the government that made banks and financial institutions to readily avail credit to farmers. One of the key institutions that have significantly increased funding to the agricultural sector is the Agricultural Finance Corporation (AFC). The Corporation has increased credit to farmers from Kshs. 220,000 in 2001/02 to Kshs. 1.79 billion in 2006/07. Other banks such as Equity and Cooperative Banks also provide significant levels of credit to farmers.

Institutional Reforms in Financial Management

In the 1990s, Kenya considerably lost donor confidence due to poor resource management, coupled with lack of accountability and transparency. This called for review of various financial management systems. One of this was introduction of the Medium Term Expenditure Framework and the Public Expenditure Review, both of which are carried out annually. In addition, steps were taken to ensure sealing of loop holes that may lead to loss of funds through procurement. Some of the key issues that had to be addressed to ensure effective resource use are:- (i) corruption in procurement; (ii) an ineffective commitment control system; (iii) the procurement of goods that is not based on needs assessment; (iv) uneconomic use of government fleet of vehicles; (v) lack of procurement plans; and (vi) poor maintenance of procurement records (MOF, 2005).

Studies have revealed a number of anomalies in Kenya’s procurement system including:- Inappropriate application of the requisite procurement method; Inappropriate authorizations applied in the procurement process; Abuse and mismanagement of contract variations; Lack of effective checks and balances in respect of procurement at the district level; Incomplete evidence of the full receipt of goods and services paid for; excessive delays in the procurement process; Embezzlement under the pretext of low value procurement; Poor filing of procurement and related expenditure documentation; and Inappropriate use of arbitrary compliance criteria to eliminate bidders in order to justify the choice of a particular bidder.

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In order to address these bottlenecks, Procurement Bill was formulated and enacted leading to reduced incidence and magnitude of procurement malpractices. In addition, Kenya Anti-Corruption Commission (KACC) was set up to investigate and deal with any corruption cases.

Planned Programmes/InvestmentsAs the year 2015 nears, the government has put efforts towards ensuring that the MDGs are achieved. This culminated in a study to carry out the MDG Needs Assessment. The agricultural sector ministries carried out the Needs Assessment for the MDG1 on poverty and hunger. This forms the basis for planned investments and programmes up to the year 2015. The CAADP needs assessment will use this as a starting point. Table 5 shows the planned strategies, programmes, expected outputs and annual costs.

Table 5: Planned Activities in Agricultural Sector

Strategy Programme/Intervention Expected output / target Estimated annual cost (US$)

1. AGRICULTURAL PRODUCTIVITY

2,900,000 smallholders increase production three times though restoration of soil fertility 260.91

a. Soil Health 2.9 million smallholders restore sol fertility through application of mineral fertilizers, manure and soil conservation measures. 70Each farmer applies 60 kg of fertilizer on 0.3 ha every year 68Each farmer applies 300 kg of manure on 0.3 ha per year 2

b. Water/land Man. & Irrigation

Develop 437,000 ha for small-scale managed irrigation for smallholder settlement, construct livestock watering points 175Develop 437,000 ha under irrigation by 2015 1362.9 million ha covered by soil conservation measures 29Construct small dams, water pans and boreholes 10

c. Improved Seed varieties

2,900,000 farmers use improved maize and bean seeds in maize/beans inter-cropping production systems 11.6Farmers use 2 kg of maize seed (recycled 8

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Strategy Programme/Intervention Expected output / target Estimated annual cost (US$)

every 3 years)Farmers use 1.1 kg of bean seed (recycled every 3 years) 3.6

d. Support to needy community groups

15 groups per district be granted financial support country wide

2.28

All districts are reached annually 2.28

e. Support private sector food security initiatives

1 CBO/NGO per district be granted financial support countrywide 2.03All districts are reached annually 2.03

Strategy Programme/Intervention Expected output / target Estimated annual cost (US$)

2. RESEARCH AND EXTENSION SERVICES

60a. Extension Research to specifically address the problems

of 2.9 million smallholders 43 10,000 new community extension officers hired 8Public extension delivery strengthened 10 farmer groups strengthened 10Farmer field schools operational zed 10 Agricultural information provided 5

b. Agricultural Research Research to specifically address the problems of 2.9 million smallholders 17Germplasm and crop and animal husbandry 8Technology verification and socio-economics 6Research-Extension-Farmer linkages 3

3. RURAL INCOME GENERATION

Generate rural incomes through storage, livestock production, credit, food for work and market development

304.10

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Strategy Programme/Intervention Expected output / target Estimated annual cost (US$)

a. Livestock Production The livestock industry improved through improved breeds, AI, disease free zones and slaughter facilities 1371% of 1.2 million farmers replace old dairy cows/year 31.2 million dairy farmers use AI 6Create disease free zones in pastoral areas 125Support for private sector slaughter facilities 3

b. Support Fisheries Development potential

Fisheries industry improved through support of enhanced beaches and coolants, aquaculture and quality control 13

c. Support Animal and Plant Health

Execution of disease and pest control programmmes 8

d. Credit and Rural Financial Services

Develop credit policy and practices for smallholders, venture capital, and rural financial services fund 95Credit practices disseminated to grassroots institutions 5Seasonal credit at $ 100 per household on average, rolled over 30Credit calculated at $ 100 per household, rolled over 30Lent to investors in processing of farmers produce 10Advanced to Financial Institutions for on-lending 20

e. Food/Cash for Agricultural Infrastructure

Develop agricultural infrastructure using labour intensive methods to benefit unemployed and landless 3660,000 jobs for unemployed 1860,000 jobs for the Landless 18

f. Farmer Associations 5,000 community centres established for farmer training 11.5

g. Improved Storage Facilities

5,000 community stores built0.6

h. Develop Markets for smallholders

Create market opportunities for small farmers3

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Strategy Programme/Intervention Expected output / target Estimated annual cost (US$)

4. NUTRITION INTERVENTIONS

Improve nutrition of malnourished population 113.10

a. School Meals Provide school lunches to pre-primary, primary and secondary school going population from poor families 13.550% of 1.2 million children provided with meals 610% of 7.2 million children provided with food 75% of 862,000 students provided with meals 0.5

b. Capacity Building Build capacity for food security and nutrition for government officials at headquarters, districts, and CBOs 41Provide capacity building at headquarters 5Provide capacity building at districts and to farmers 36

c. Nutrition Education Reaching out to households at the grassroot levels through public fora/ barazas - 300,000 households reached every year 1.9

d. Training of community health and nutrition workers

Initial Training of nutrition workers for the pre-primary children(under fives) and subsequent refresher courses - Training 29,000 community health nutrition workers (CHNW) 17.4

e. Establishment of nutrition and health monitoring centres

Monitoring and Management of malnourished under- fives in collaboration with pre-primary centres using fortified foodstuff - 425 tonnes of fortified foodstuff provided on daily basis 39.3

f. Model of Kitchen gardens

Establishment of model kitchen gardens at pre-primary and primary levels - 48,491 gardens established 1.2

g. Support for youth in 4K-clubs

Promoting existing clubs and establishment of the clubs where non-existent - 8,000 primary schools are targeted

113.10

5.COMPLEMENTARY FEEDING

Provide complementary feeding to malnourished and people at risk

235.00

612,000 malnourished infants 22

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Strategy Programme/Intervention Expected output / target Estimated annual cost (US$)

1.1 million stunted children 4010% of 1 million mothers 2.610% of vulnerable groups 2610% of 180,000 elderly people 9Provide food for emergency situations 135

GRAND TOTAL 973.91

In order to implement these investments plans; the Ministry of Agriculture proposed the following projects for funding during the 2006/07 financial year. However, very few came on board due to lack of funds.

Table 6: New projects proposed for 2006/07Project Name Status When likely to

start Areas to be covered Project Cost

DonorProject Cost GoK

1. Organic Agriculture Support Project- FAO

Project Document ready and already sent to Donor

Not likely to start 2006/ 07

Kshs 31 Million

2. Promoting Farmer Initiative through FFS (UNDP thru` FAO)

Concept paper is being drafted.Phase 11 2005-2006

On-going;Likely to start 2006/07

Kilifi, Taita Taveta, Nakuru, Bomet, Narok, Kitui, Mwingi

USD 200,000(Kshs 15m)

3. Integrated Rural Development Project in the Baringo Area

Marigat and Makutano Divisions

US$17.8 million (Kshs 1.275 billion)

4. Small scale Horticulture Development Project- Rift Valley; ADB

Formulation Stage Unlikely to start 2006/07

Kajiado, Nakuru, Koibatek, Baringo, Keiyo, Marakwet and Machakos

US$ 25 m

(Kshs 2.8 billion)

US$ 2.7 m

5.Training in Farm Management and Marketing in Kenya-TCP FAO

Formulated, by MoA, and submitted to Donor for consideration

Likely to start 2006/07

Countrywide, with pilot districts as Nakuru and Bungoma

US$394,890(Kshs 30 million)

No cash contribution

6. Development of Community Agriculture in ASAL Areas-JICA

Project agreement has been signed

Has started in 2005/06

Keiyo and Marakwet Districts

Kshs 97m

7. Small Holder Horticulture

Approved by JICA April 2006 Nyandarua, Trans Nzoia, Bungoma,

Kshs 400m No cash contributio

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Project Name Status When likely to start

Areas to be covered Project Cost Donor

Project Cost GoK

Empowerment Project-JICA

Kisii n. Staff and offices

8.Small holder Horticulture Marketing Project-IFAD

Inception stage Not certain Not finalized

9. Grant Assistance for Under-privileged farmers-JICA

Approved by Japanese Cabinet on 16/12/2005

By July 2006 Nationwide; wheat and maize growing areas

460 Yen (Kshs 280m)

Kshs 30 m

10. Western Kenya Integrated Ecosystem Man. Project - WB

Officially launched on 18-10-2005

Started in 2005/06

Nyando, Yala and Nzoia River catchments

US$ 4.1 m

11. Construction of Kilimo House Annex

Has been proposed for funding

2006/07 Kilimo House Nairobi Kshs. 500 million

Source: MoA, MPER 2006.

POLICY AND INVESTMENT OPTIONS TO ACHIEVE CAADP AND MDG TARGETS

Over the last ten years, efforts have been made towards achievement of MDGs, with many policies being formulated to facilitate economic recovery. It is during the last five years when some of these efforts started bearing fruits, with the overall economy improving from a growth rate of 0.5% in 2002 to 6.1% in 2006. Growth of the agricultural sector improved from -3.1% in 2002 to 6.1% in 2006.

The major policy guide to the agricultural sector has been the Strategy for Revitalizing Agriculture (SRA). The Ministry of Agriculture, Ministry of Livestock and Fisheries Development and the Ministry of Cooperative Development and Marketing are implementing this. The other key sub-sectors not adequately incorporated into the SRA are environment, water and irrigation. This has made it difficult to promote irrigation development and provide water for livestock. Moreover, it has been noted that cooperative development issues have not been adequately covered in the SRA. In addition, new developments have been experienced in the agricultural sector since 2004 that require review of the policy.

It is in this light that it would be critical to review the SRA with the aim of coming up with strategies that will facilitate rapid sustainable growth of the sector. This policy direction should bring on board the ministries responsible for water, irrigation, environment, and food security besides those dealing with cooperatives, livestock, fisheries and agriculture.

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In the policy, emphasis should also be laid on monitoring and evaluation to ensure that only projects that have actual significant impact on livelihood of the target group are implemented. This follows revelations that some completed projects had no impact on livelihoods of target groups (MOA 2007b). Implementation of the new policy should be coordinated under a re-engineered Agricultural Sector Coordination Unit.

Although projects/programmes and investment areas are dynamic and may change with any policy reviews, the following investment areas, that were identified by the agricultural sector ministries during the MDG1 needs assessment study which are still relevant.

Increasing Agricultural Productivity

This strategy targets mainly the vulnerable groups that may not improve on agricultural productivity on their own and may need some level of initial support. Key interventions that may be implemented under this strategy include:

Invest in soil health. This will involve supporting the smallholder farmers to access, at least initially, both organic manure and fertilizer;

Provide support to needy community groups. This support, targeting specific farmer groups, will go towards addressing any key problems preventing them from improving on agricultural productivity.

Improve access to affordable farm inputs such as quality seeds, fertilizer and pesticides; Support private sector food security innovations; Support small-scale water management and irrigation. This will include investment in water harvesting, water management,

livestock water and small scale irrigation.

Rural Income Generation

The major objective of the agricultural development is to increase rural incomes and provide employment at all levels. Following are some of the key areas identified for rural income generation:

Provision of storage services. This will require construction of suitable storage facilities that will facilitate trade in agricultural products and inputs;

Development of smallholder markets; Livestock production. This will include investment in various livestock enterprises such as dairy, poultry, beef, piggery, shoats

production, among others. Various services such as AI, veterinary, extension, research, construction of abattoirs etc are crucial for this sub-sector;

Fisheries development. This sub-sector is important for income generation and employment creation;

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Credit and rural financial services. Increased access to credit and rural financial services such as savings facilitate investment in the agricultural sector and hence income generation;

Food/cash for work for the landless and unemployed; Strengthening farmer associations and community resource centres.

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Improving Delivery of Research and Extension Services

This will include strengthening research and extension services to ensure improved adoption rates of new technologies thus increasing agricultural productivity. The support includes both to public and private sector providers.

Nutrition Interventions

Food security involves access to sufficient, safe, and nutritious food that meets the dietary needs and food preferences of the individuals. Interventions have therefore been proposed to facilitate achievement of nutrition part of food security. These include:

Production and distribution of nutritional manuals, booklets and brochures; Training of Community Health and Nutrition workers and volunteers; Capacity building of key actors at various levels, more at the community levels; Establishment of model kitchen gardens in primary and pre-primary schools; establishment of Community nutrition monitoring centres; Community supported School Meals Programmes.

Promoting Mother and Infant NutritionInfants and Lactating mothers have been identified as vulnerable to food insecurity. Among the support earmarked for this group are:

Complementary feeding to children under five years among the poor households; Nutrition intervention to pregnant women and lactating mothers; Supplementary feeding to vulnerable groups. These are mainly the sick (HIV/AIDS) and orphans; Support to the elderly, who have no other source of support, in terms of supplementary nutrition; Emergency feeding assistance – arising from disasters such as floods, drought, and fires.

KENYA CAADP GROWTH & INVESTMENT OPTIONS

Agricultural Spending Required to Reach the CAADP and MDG1 Targets

Achieving the CAADP agricultural growth target will be a challenge for Kenya. In addition to an improved policy environment, public investment will be instrumental in improving public services and attracting private investment and inputs. This raises a number of key questions for the government such as: What kinds of public investments will be needed to achieve Kenya’s stated growth and poverty reduction objectives? How should public investment resources be allocated among different types of public goods and

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services (e.g. agricultural research and technology development, extension, irrigation, roads, and education, health, etc.) and across geographical areas (i.e., high-potential versus lagging regions) to improve the outcomes and impacts? And finally, how will the investments be financed? In this section, we consider the public agricultural expenditure (PAE) required to achieve the growth targets described in the previous sections.

Our CGE modeling indicates that Kenya’s agricultural sector could grow at six percent per year over the next decade if certain crop- and other sub-sector-level growth targets within agriculture can be achieved. To promote poverty reduction in Kenya in general, the government of Kenya has been implementing the Economic Recovery Strategy for Wealth and Employment Creation (GOK xxxx) within its Vision 2030 (GOK xxxx), which aims at making the country attain a Newly Industrialized Status (NIS) in the next 25 years. This hinges on using agriculture as the engine of growth of economic recovery through appropriate land use, conservation methodologies and integrated regional development for increased production and marketing, as stated in the government’s Strategy for Revitalizing Agriculture (SRA) (GOK 2004). The SRA is implemented by several government institutions including the Ministries of Agriculture (MOA), Livestock and Fisheries Development (MOLFD), Environment and Natural Resources (MENR), Lands (MOL), Regional Development Authorities (MRDA), and Cooperative Development and Marketing (MOCDM). Between the 2006/07 and 2008/09 periods, for example, the government was expected to spend about KSh 83.4 billion to achieve its objectives and targets (Figure VIII). While these interventions and investments will provide a better foundation for achieving higher agricultural growth, the question remains as to whether the planned investments are sufficient to meet the desired growth and poverty-reduction targets. Detailed knowledge of the rates of return to such different types of public investment is needed to answer this question. In the following, results from previous studies on Kenya and elsewhere are used to assess the aggregate PAE that will be required to reach the CAADP growth target. First, we examine recent trends in PAE to establish a Baseline scenario for the required spending.

Figure IV. Expected government resources for the entire agriculture sector, 2006/07-2008/09

Total resource requirements for 2006/07-2008/09 is KSh 83.4 billion

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2006

/07

2007

/08

2008

/09

2006

/07

2007

/08

2008

/09

2006

/07

2007

/08

2008

/09

2006

/07

2007

/08

2008

/09

2006

/07

2007

/08

2008

/09

2006

/07

2007

/08

2008

/09

Agriculture Livestock and Fisheries

Environment and Natural Resources

Lands Regional De-velopment Au-

thorities

Cooperatives and Marketing

03,000,000,0006,000,000,0009,000,000,000

12,000,000,00015,000,000,000

Development Recurrent

Agriculture 44%

Livestock and Fisheries20%

Environment and Nat-ural Resources

19%

Lands 8%

Regional Development Authorities

6%Cooperatives and Marketing

3%

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Research and Technology De-velopment

12%

Technical Services Provision (ex-tension, etc)

65%

Infrastructure and market access

6%

Administration and planning

17%

Source: Authors’ estimates based on the Medium Term Expenditure Framework (GOK 2006).

Composition of and Trends in Public Agricultural Expenditure

Government financial statistics obtained from the International Monetary Fund (IMF, 2007) show that the share of total government resources allocated to the agricultural sector has been declining steadily; the share reached a low point of about four percent in 2003 and then started to rise again (see Table 7). The data show that non-agricultural and total spending grew at about 4.3 and 4.6 percent per year in real terms, respectively, while PAE grew by about 9.1 percent per year.

The bulk, almost two-thirds, of the total resources for agriculture is spent on recurrent activities, which is dominated by salaries for employees, including the extension officers. Less than 30 percent is spent on development activities, including agricultural research and market information, animal health services, crop protection, seed inspection, mechanization services, and farm planning services (World Bank 2005). Looking at the amount by the six ministries involved in the sector (Figure V), 38 percent of the resources were spent on crops, 22 percent on livestock and fisheries development, and 20 percent on forestry and other natural resources. Market development, lands, and regional development attracted 6 to 8 percent each.

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Table 7. Government spending on agriculture and non-agriculture sectors in Kenya, 1975-2006  1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006Expenditure (Billion 2006 KSh)

Total 115.3 182.7 211.2 294.7 331.9 265.4 282.1 331.9 347.2 351.8 365.7 386.0Agriculture 8.7 15.4 21.9 17.8 18.3 18.1 18.6 17.8 14.2 17.9 24.2 22.8Non-agriculture 106.5 167.4 189.3 276.9 313.5 247.3 263.5 314.1 333.0 333.9 341.5 363.2

aExpenditure shares (%)

Agriculture expenditure in total expenditure 7.6 8.4 10.4 6.0 5.5 6.8 6.6 5.4 4.1 5.1 6.6 5.9Agriculture expenditure in agricultural GDP 5.4 7.6 9.3 6.5 6.0 4.9 5.0 5.1 4.0 5.0 6.6 5.8Non-agriculture expenditure in non-agricultural GDP 28.6 32.0 32.4 34.4 36.5 26.7 27.1 31.3 32.2 30.3 28.9 29.1Total expenditure in total GDP 21.6 25.3 25.8 27.3 28.5 20.5 21.0 24.5 24.9 24.0 23.6 23.5

Sources: Government Finance Statistics (IMF, 2007) and Public Expenditure Review (World Bank 2004).

Figure V. Spending on agriculture sector in Kenya by ministry, 2002/03 to 2004/05

MOA38%

MOLFD22%

MENR20%

MOCDM6%

MOL8%

MRDA6%

Notes: MOA=Ministry of Agriculture; MOLFD=Ministry of Livestock and Fisheries Development; MENR=Ministry of Environment and Natural Resources; MOL=Ministry of Lands (MOL); MRDA=Ministry of Regional Development Authorities (MRDA); MOCDM=Ministry of Cooperative Development and Marketing.Source: Public expenditure review (World Bank 2005).

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As Figure VI shows, the agriculture budget spent on agricultural research and technology development is quite high (around 20 percent), and the amount spent has risen sharply. Expenditures on agricultural research and technology development by non-governmental organizations is also very high and seem to match those spent by the government (Figure 10), which is about 41 percent. Similar to agricultural research and technology development, agricultural extension and advisory services in Kenya are provided by both government and non-governmental entities, including private companies, non-governmental organizations (NGOs), community-based organizations (CBOs), and faith-based organizations (FBOs) (Muyanga and Jayne 2006).

Figure VI. Spending on agricultural R&D in Kenya

19751977

19791981

19831985

19871989

19911993

19951997

19990

1

2

3

4

0

5

10

15

20

25

30

35Governmentnon GovernmentPercent of government in total agriculture

Billi

on K

Sh

Perc

ent

Sources: ASTI (IFPRI 2007) and Government Finance Statistics (IMF, 2007).

Estimated spending required for agricultural growth

To determine the aggregate PAE required achieving the CAADP growth target, we need to know the annual growth rate in agricultural expenditure (Ėagexp) required to achieve a particular growth rate in agriculture (θag), which can be expressed as:30

Eag exp=θag−(εnag exp∗Enagexp∗snag)

[ε agexp+(εnag exp∗φnag ,ag) ]∗sag …1

where εagexp and εnagexp are the ‘agricultural growth-agricultural expenditure elasticity’ and ‘agricultural growth-non-agricultural expenditure elasticity,’ respectively; Ėnagexp is the annual growth rate in non-agricultural expenditure; nag,ag is the multiplier effect or linkage (i.e. trade-offs and complementarities) between agricultural and non-agricultural expenditures; and sag and snag are the shares of agriculture and non-agriculture in GDP, respectively. These parameters (i.e.

30 See Appendix C and Fan et al. (2008) for details.

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εagexp, εnagexp, and nag,ag) can be estimated econometrically using historical data on different types of public investment, private investment, and agricultural production (see e.g.: Fan et al. 2000, 2004 and 2008). The main concept underlying such econometric estimation is that public and private capital complement one another such that an increase in the public capital stock increases the productivity of all (private) factors used in agricultural production. By raising the productivity of all factors of production, public investment also attracts (or crowds in) private capital investment for agricultural development, non-farm rural development (e.g., food processing and marketing, transportation and trade, restaurant services, electronic repairs shops, etc.), urban industrial development, and service development. The development of the non-farm rural sector can have multiplier effects if it in turn expands the market opportunities for farmers and creates off-farm employment opportunities. The latter is particularly important for absorbing the excess labor and other factors of production that arise as a result of increased agricultural productivity. In addition to their agricultural productivity impacts, public investments in rural areas directly create non-farm rural employment opportunities, thereby improving rural wages and incomes, and reducing rural poverty.

We use the results from prior studies on Kenya and elsewhere to obtain estimates of these elasticities. The agricultural growth-expenditure elasticity comprises two parts, namely the growth-capital and capital-expenditure elasticities. For the agricultural growth-capital elasticity, we use the results of Gerdin (2002) on the long term sources of agricultural growth in Kenya and several other studies on the effect of public goods and services on use of agricultural labor, capital and inputs and agricultural productivity in Kenya. The results from these studies were used to estimate low- and high-end values of the range of sources of growth and elasticities (Table 8). Regarding the capital-expenditure elasticities, we relied on several studies in other countries, which show that the elasticities typically lie in the range of zero to one (see Appendix D for detailed examples). We used 0.5 and 0.75 as the low- and high-end values, respectively, for all public agricultural expenditures.

Table 8. Sources of growth and effect of public expenditure on agricultural productivity in Kenya

Intermediate inputs

Labor inputs Capital inputs Productivity Sources

low high low high low high low highSources of growth1

0.32 0.82 0.06 0.16 1.13 2.74 0.32 0.42 Gerdin (2002)

Effect of public capital:Research2 -- -- -- -- 0.49 0.89 0.12 0.60 Anandajayasekeram et

al. 1997; Maredia et al. 1998; FAO 2000; Beye 2002

Extension3 0.22 0.75 -- -- 0.49 0.89 0.05 0.14 Bindish and Evenson 1997; Evenson and Mwabu 1998; Gautam and Anderson 1999

Infrastructure3 0.51 0.76 -- -- 0.51 0.76 0.05 0.17 Kamara 2004; Evenson and Mwabu 1998

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Administration and planning4

-- -- -- -- -- -- -0.13 0.05 M’Amanja and Morrissey 2005; Fan and Rao 2003

Notes: 1 Values are average annual growth rates (%); 2 Values are rates of return (%); 3 Values are elasticities; 4 This refers to recurrent or unproductive spending and values are elasticities.

We combined the above information to obtain estimated agricultural-growth-expenditure elasticity for government expenditures in the agriculture sector in Kenya to be 0.14 to 0.46, corresponding to the low- and high-end values of all the information used31. This means that every one percent increase in PAE generates 0.14–0.46 percent growth in agricultural GDP. This compares favorably with elasticities for the sector in other countries, including the elasticity with respect to agricultural development expenditure in Rwanda (0.17) (Diao et al., 2007), agricultural development expenditure in Africa (0.36) (Fan and Rao, 2003), agricultural development expenditure in Ghana (0.15) (Benin et al., 2008), agricultural research in India (0.25) (Fan et al., 2000), and agricultural research and extension in the US (0.11–0.19) (Huffman and Evenson, 2006).

Regarding the effect of expenditure on the non-agricultural sector on agricultural growth (i.e. ‘agricultural growth-non-agricultural expenditure elasticity or εnagexp), we used information from the study by Fan et al. (2004) on Uganda where they estimated the agricultural growth-capital elasticities with respect to feeder roads (0.05), education (0.12) and health (0.16). We estimated the elasticity to be 0.17–0.2532, corresponding to the low- and high-end values of the assumed capital-expenditure elasticity.

Regarding the multiplier effect or linkage (i.e. trade-offs and complementarities) between agricultural and non-agricultural expenditure (i.e. nag,ag), we were unable to obtain any reliable estimates. For simplicity, we assume that it is zero, noting that both positive and negative values are possible, where a positive sign indicates complementarity and a negative sign indicates trade-offs. Non-agricultural expenditure is treated as exogenous, and historical data from 1982 are used to calculate the annual growth rate (i.e. Ėnagexp), which is about 11.8 percent per year. Similarly, historical data on GDP are used to calculate the shares of agriculture and non-agriculture in GDP, which are 0.35 and 0.65, respectively.

It is also important to recognize that the elasticities may shift over time, depending on whether the returns to public investments are increasing or declining over time. Rosegrant and Evenson (1995), for example, found that while the return to public investments in extension and research in India’s agriculture sector was declining over time, the return to public investments in irrigation was increasing, due primarily to increased private investment in irrigation. They also found that the returns to education were greater in the post-Green Revolution period than before or during this period. These authors used data over a 30-year period. In this report, however, we

31 The agricultural growth-agricultural expenditure elasticity is given by the weighted sum of the agricultural growth-capital elasticities with respect to research, extension, infrastructure, and administration and planning multiplied by the assumed capital-expenditure elasticity; where the weights are the shares of government expenditure on research, extension, infrastructure and administration and planning in total agricultural sector expenditure (see Figure IX).

32 This is given by the weighted sum of the agricultural growth-capital elasticities with respect to feeder roads, education and health multiplied by the assumed capital-expenditure elasticity; where the weights are the shares of government expenditure on transport and communication, education and health in total non-agricultural sector expenditure.

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are examining a shorter period of time (ten years from 2005 to 2015), and therefore assume that the above parameters remain unchanged over the simulation period.

Scenarios

To estimate the aggregate PAE requirements over the 2007-2015 periods, we simulate three scenarios. The first is the Baseline scenario, where we assume that PAE and non-agricultural spending continue to grow according to recent trends at 9.1 and 4.3 percent per year, respectively. The simulation results show that the share of agricultural spending in total expenditure will rise from 5.6 percent in 2007 to 6.3 percent in 2010 and 7.8 percent in 2015 (see Table 9 and Figure VII), since PAE grows more rapidly than total spending. The other two scenarios relate to achieving the CAADP and MDG1 objective and targets.

Under the CAADP scenario, agricultural growth accelerates from 3.7 to six percent per year during 2007-2015, while non-agricultural GDP growth increases marginally from 5.5 to 5.8 percent per year, and total GDP growth increases from 5.1 to 5.9 percent per year. To estimate the aggregate PAE required to support the acceleration in agricultural growth, we perform two simulations: (i) we assume that agricultural growth will be supported solely by an increase in PAE, without taking into account the effect of non-agricultural expenditure on agricultural growth, which continues to grow at the Baseline rate of 4.3 percent per year; (ii) we relax the latter assumption and take the effect of non-agricultural expenditure on agricultural growth into account, and assume that non-agricultural expenditure grows in proportionate to the growth in this sector’s GDP.

Under the first CAADP scenario, the accelerated growth in agricultural GDP requires an associated growth in PAE from the Baseline value of 9.1 to 14.1 percent per year under the high elasticity scenario and 25 percent under the low elasticity scenario (see Table 9 and Figure VI). The total government budget is estimated to grow at 5.1 percent per year under the high elasticity scenario and at 6.9 percent under the low elasticity scenario (see Table 43 and Figure VIII). Again, with agricultural spending growing more rapidly than total spending, the share of agricultural spending will rise from the Baseline value of 5.6 percent to 6.6-8.7 percent in 2010 and 9.6-19.9 percent in 2015 (the lower bound numbers correspond to the high elasticity and vice versa, here and below) (see Table 9 and Figure IX). These increases translate into additional (i.e. over the base scenario) spending on the agricultural sector of KSh 67-279 billion over 2007-2015, or KSh 8-35 billion per year.

In the second CAADP scenario, we take the effect of non-agricultural expenditure on agricultural growth into account. In this case, PAE is expected to grow at 12.9 percent per year under the high elasticity scenario and 21.2 percent under the low elasticity scenario (see Table 45 and Figure IX). The proportion of the accelerated growth (i.e. from the Baseline value of 3.7 to six percent per year during 2007-2015) to be driven by growth in PAE was determined using the shares of the growth-expenditure elasticities for the two sectors as weights. Under these conditions, the total government budget is projected to grow at 5.2 percent per year under the high elasticity scenario and at 6.4 percent under the low elasticity scenario (see Table 45 and Figure X). Again, with agricultural spending growing more rapidly than total spending, the share of agricultural spending in total expenditure will be 6.9-8.4 percent in 2010 and 9.8-16.1 percent

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in 2015 (see Table 45 and Figure XI). These increases translate into additional spending on the sector in a total amount of KSh 50-194 billion over 2007-2015, or KSh 6-24 billion per year.

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Table 9. Estimated Resource Allocation

Growth due to agriculture expenditure only Accounting for effect of non-agricultural expenditure and faster non-agricultural expenditure growth

Base CAADP MDG CAADP MDGLow elasticity

High elasticity

low elasticity

high elasticity

low elasticity

high elasticity

low elasticity

high elasticity

Real growth rates Total government expenditure 4.6 6.9 5.1 7.3 5.2 6.4 5.2 8.1 7.1 Agriculture 9.1 25.0 14.1 26.8 14.7 21.2 12.9 21.3 12.9 Non-agriculture 4.3 4.3 4.3 4.3 4.3 4.6 4.6 6.7 6.7Government expenditure shares (%)

Agriculture expenditure in total expenditure2007 5.62010 6.3 9.2 7.2 9.6 7.3 8.4 6.9 8.0 6.52015 7.8 20.1 10.8 22.0 11.2 16.1 9.8 14.1 8.5

Agriculture expenditure in agricultural GDP2007 5.32010 6.2 8.7 6.6 9.0 6.7 7.9 6.4 7.9 6.42015 8.0 19.9 9.6 21.9 9.8 15.5 8.8 15.3 8.6

Non-agriculture expenditure in non-agricultural GDP2007 31.32010 30.2 29.9 29.9 28.2 28.2 30.2 30.2 30.2 30.22015 28.5 27.8 27.8 23.8 23.8 28.5 28.5 28.5 28.5

Total expenditure in total GDP2007 24.62010 24.2 24.5 23.9 23.4 22.9 24.4 24.0 24.7 24.32015 23.7 25.8 23.1 23.3 20.5 25.1 23.4 25.4 23.9

Source: Authors’ estimates.

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Figure VII. Value of agricultural expenditure required under alternate growth scenarios

More efficient expenditure scenario (high growth-expenditure elasticity)

2007 2008 2009 2010 2011 2012 2013 2014 20150

30

60

90

120

150 MDG (effect of AgExp only)

MDG (plus effect of nonAgExp)

CAADP (effect of AgExp only)

CAADP (plus effect of nonAgExp)

GOK MTEF

Base

Expe

nditu

re (b

illio

n K

Sh)

Less efficient expenditure scenario (low growth-expenditure elasticity)

2007 2008 2009 2010 2011 2012 2013 2014 20150

30

60

90

120

150 MDG (effect of AgExp only)

MDG (plus effect of nonAgExp)

CAADP (effect of AgExp only)

CAADP (plus effect of nonAgExp)

GOK MTEF

Base

Expe

nditu

re (b

illio

n K

Sh)

Source: Own calculations using results from the Kenyan CGE-microsimulation model, plus results of prior public expenditure analysis.

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Figure VIII. Value of total expenditure required under alternative growth scenarios More efficient expenditure scenario (high-growth expenditure elasticity)

2007 2008 2009 2010 2011 2012 2013 2014 2015350

450

550

650

750 MDG (effect of AgExp only)

MDG (plus effect of nonAgExp)

CAADP (effect of AgExp only)

CAADP (plus effect of nonAgExp)

Base

Expe

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re (b

illio

n K

Sh)

Less efficient expenditure scenario (low growth-expenditure elasticity)

2007 2008 2009 2010 2011 2012 2013 2014 2015350

450

550

650

750 MDG (effect of AgExp only)

MDG (plus effect of nonAgExp)

CAADP (effect of AgExp only)

CAADP (plus effect of nonAgExp)

Base

Expe

nditu

re (b

illio

n K

Sh)

Source: Own calculations using results from the Kenyan CGE-microsimulation model, plus results of prior public expenditure analysis.

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Figure IX. Share of agricultural spending in total expenditure under alternative growth scenariosMore efficient expenditure scenario (high growth-expenditure elasticity)

2007 2008 2009 2010 2011 2012 2013 2014 20155

10

15

20

25 MDG (effect of AgExp only)

MDG (plus effect of nonAgExp)

CAADP (effect of AgExp only)

CAADP (plus effect of nonAgExp)

Base

Perc

ent

Less efficient expenditure scenario (low growth-expenditure elasticity)

2007 2008 2009 2010 2011 2012 2013 2014 20155

10

15

20

25 MDG (effect of AgExp only)

MDG (plus effect of nonAgExp)

CAADP (effect of AgExp only)

CAADP (plus effect of nonAgExp)

Base

Perc

ent

Source: Own calculations using results from the Kenyan CGE-microsimulation model, plus results of prior public expenditure analysis.

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The CGE model analysis indicated that reaching the CAADP target of six percent agricultural growth will significantly improve poverty outcomes. However, even under this accelerated growth scenario, Kenya will not be able to achieve the first MDG of halving poverty by 2015. Without complementary accelerated growth in the non-agricultural sectors, binding demand/market constraints arise for agricultural outputs, preventing rapid agricultural growth from translating into higher household incomes.

Under the MDG scenario, agricultural growth accelerates from 3.7 to 6.3 percent per year during 2007-2015, while non-agricultural GDP growth increases substantially from 5.5 to 8 percent per year, and total GDP growth increases from 5.1 to 7.5 percent per year. As in the CAADP scenario, we perform two simulations: (i) we assume that agricultural growth will be supported solely by an increase in PAE, without taking into account the effect of non-agricultural expenditure on agricultural growth, which continues to grow at the Baseline rate of 4.3 percent per year; (ii) we relax the assumption and take the effect of non-agricultural expenditure on agricultural growth into account, and assume that non-agricultural expenditure grows in proportionate to the growth in this sector’s GDP.

Under the first MDG scenario, the accelerated growth in agricultural GDP requires an associated growth in PAE from the Baseline value of 9.1 to 14.7 percent per year under the high elasticity scenario and 26.8 percent under the low elasticity scenario (see Table 43 and Figure XI). The total government budget is estimated to grow at 5.2 percent per year under the high elasticity scenario and at 7.3 percent under the low elasticity scenario (see Table 43 and Figure XII). The share of agricultural spending will rise from the Baseline value of 5.6 percent to 7.3-9.6 percent in 2010 and 11.2-22 percent in 2015 (the lower bound numbers correspond to the high elasticity and vice versa, here and below) (see Table 43 and Figure XIII). These increases translate into additional spending on the agricultural sector of KSh 76-325 billion over 2007-2015, or KSh 10-42 billion per year.

In the second MDG scenario, where the effect of non-agricultural expenditure on agricultural growth is taken into account, PAE is expected to grow at 12.9 percent per year under the high elasticity scenario and 21.2 percent under the low elasticity scenario (see Table 43 and Figure XI). The total government budget is projected to grow at 7.1 percent per year under the high elasticity scenario and at 8.1 percent under the low elasticity scenario (see Table 43 and Figure XII). The share of agricultural spending in total expenditure will be 6.5-8.0 percent in 2010 and 8.5-14.1 percent in 2015 (see Table 43 and Figure XIII). These increases translate into additional spending on the sector in a total amount of KSh 50-194 billion over 2007-2015, or KSh 6-24 billion per year, which is similar to the requirements under the comparative CAADP scenario.

These results confirm the importance of Kenya meeting the Maputo declaration by spending at least ten percent of the government’s total budgetary resources on the agricultural sector. Figure 11 shows that continuing with the allocation of resources to the agricultural sector proposed under the MTEF will be insufficient to meet this goal. In 2005, the government of Kenya undertook a needs assessment and costing study in order to align its policies and programs with the MDGs, and estimated that it will need about US$ 565 million (or KSh 42 billion) per year for the sector in order to achieve MDG1. Our estimates of KSh 40-68 billion and KSh 37-53 billion under the first and second MDG scenarios, respectively, are comparable (the lower bound numbers correspond to the high elasticity and vice versa).

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Identifying investment priorities

It is important to be able to estimate the total public resources needed to reach particular agricultural growth targets, but prioritizing investments is equally important. Due to a lack of long-term historical data on PAE for specific investment programs in Kenya, and related data on program outputs and outcomes, we are unable to analyze specific investment priorities based on their potential returns on agricultural growth. The priorities associated with the CGE analysis were based on the sub-sector and commodity growth-poverty relationships, but we do not have sufficient data to examine prioritization of decisions on where to invest (research, extension, irrigation, farm input support, marketing information, storage and processing infrastructure, etc.) to achieve the sub-sector and commodity specific growth rates and how much to invest in each of these areas. Using the estimated expenditure-growth elasticities and again information from other studies, we make two contributions: how much of the additional estimated resources to allocate to research, extension, infrastructure, and administration and planning; and an indicative guide to key investments that could help promote agricultural growth and rural poverty reduction.

We estimate that the bulk (60-70 percent) of the additional resources should be allocated to infrastructure (or improving market access and information services, etc.), followed by agricultural research, and then extension and other technical services (Table 10). The relatively large allocation for improving market access and information services is consistent with several studies. The report by Fan, Zhang and Rao (2004) on infrastructure in Uganda, for example, shows that investment in rural road infrastructure (particularly feeder roads) has a high return and can have large effects on growth and poverty reduction. The marginal returns to public spending on feeder roads on agriculture output and poverty reduction is three to four times larger than the returns to public spending on murram and tarmac roads. In fact, investment in infrastructure, especially road development, is often ranked among the top two public spending sources of overall growth and poverty reduction (see Fan, Hazell and Thorat, 2000; Fan and Zhang, 2004; Mogues et al., 2007).

Table 10. Estimated resource allocation

CAADP MDGLow elasticity

High elasticity

Low elasticity

High elasticity

Additional expenditure (billion KSh)Total (2007-15) 193.7 49.9 194.7 50.1Annual average 24.2 6.2 24.3 6.3

Distribution of additional expenditure (%)Research 27.3 31.2 27.3 31.2Technical services 5.7 6.9 5.7 6.9Infrastructure 68.4 61.7 68.4 61.7Administration and planning -1.4 0.2 -1.4 0.2

Source: Authors’ estimates

IFPRI studies in other countries, including Ethiopia, Ghana and Zambia, emphasize the importance of rural roads for increasing smallholder access to agricultural inputs and product markets. Roads enable farmers to participate in higher value-added market chains, thereby contributing significantly to poverty reduction (Thurlow and Wobst, 2004; Diao and Nin-Pratt,

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2005). With its current road density standing at about 110 kilometers per 1000 square kilometers, Kenya is ranked 25th in Sub-Saharan Africa (IRF, 2007). Figure X shows how the Government of Kenya has substantially reduced its spending on transport and communications.

FigureX. Government spending on transport and communications in Kenya

19751977

19791981

19831985

19871989

19911993

19951997

19992001

20032005

0

3

6

9

12

15

0

2

4

6

8

10

12

14

shareexpenditure

prec

ent o

f tot

al e

xpen

ditu

re

billi

ons K

Sh

Source: Government Finance Statistics (IMF, 2007)

It is generally agreed that in order to increase agricultural production, reduce costs of production and protect the environment for sustainable agricultural production, farmers need improved technologies. These technologies should be profitable under local farming and market conditions, while helping the farmers increase yields, manage water, and use natural resources in a more sustainable manner. Therefore, a key investment area to support technology generation and dissemination is agricultural research and development (R&D) and extension. The studies reviewed in here confirm that investment in agricultural research and technology development offers the great potential for enhancing agricultural productivity (see Table 10). Similarly, Thirtle et al. (2003) showed that for every one percent increase in yields brought about by investments in agricultural R&D, two million Africans can be lifted out of poverty. As agricultural R&D spending in Kenya seem to be relatively high (see Figure VII), more emphasis should be placed on improving existing technologies and practices that better fit local farming and market conditions, since there exist large variations in the cost of production and productivity of farmers within the same agro-ecological zones (Figure XI).

This needs to be closely linked with improving the public extension system, whose effectiveness has been a controversial issue, in the sense that the large positive returns estimated by Evenson and others (Bindish and Evenson 1997; Evenson and Mwabu 1998) was found to be grossly estimated, and with possible negative returns (Gautam and Anderson 1999). Figure XI shows several dimensions of the production system vis-à-vis use of technologies and access to extension services one hand and local farming conditions on the other. The top panel of Figure XI clearly shows that there are very little productivity improvements without use of improved technologies (hybrid seeds and fertilizers), whose adoption can be enhanced by extension, although use of those technologies need to be fit local farming and market conditions. As argued

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by Muyanga and Jayne (2006), the wide variations in costs of production and yields within the same agro-ecology (bottom panel) suggest that variations in management practices and husbandry skills are probably very large. This is an area that the extension system can target. Bringing down the production costs of farmers in the high production cost tercile to average level would result in a substantial cost saving with large income-improving and poverty-reduction implications.

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Figure XI. Maize productivity under alternative technology and farm production conditions

1997 2000 2004 1997 2000 2004 1997 2000 2004 1997 2000 2004Fertilier and hybrid

seedHybrid seed only Fertilizer only No fertilizer or

hybrid seed

0.00.51.01.52.02.53.0

0

3

6

9

Yield (mt/ha) Distance to extension (km)

mt/

ha

km

Coastal L

owlands

Marginal R

ain Sh

adow

Western

Lowlan

ds

Easter

n Lowlan

ds

Western

Tran

sitional

Western

Highlan

ds

Centra

l High

lands

High Poten

tial Maiz

e0.00.51.01.52.02.53.0

0

3

6

9

12

Yield (mt/ha) Distance to extension (km)

mt/

ha

km

Low

cost

Med

ium

cost

High

cost

Low

cost

Med

ium

cost

High

cost

Low

cost

Med

ium

cost

High

cost

Low

cost

Med

ium

cost

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cost

CH, SC, LF CH, SC, HF HPM, SC, HF HPM, M/LS, HF

0

2

4

6

0

150

300

450

Yield (mt/ha) - left axis Fert (kg/ha) - right axis

mt/

ha

kg/h

a

Notes: Low, medium and high cost refers to range of production cost per unit of output; CH is central highlands; HPM is high potential maize zone; SC and M/LS are small and medium/large scale, respectively; and LF and HF are low and high fertilizer use intensity respectively.

Source: Based on Muyanga and Jayne (2006).

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UGANDAAdapted from the COMESA CAADP Uganda Stock-taking Report

INVESTMENTS IN THE SECTOR

Private Sector Investment Over the first three quarters of FY 2006/7, Uganda Investment Authority (UIA) licensed a total of 330 projects comprising planned investment of US$ 1.75 billion and estimated employment of 42,950 jobs. In FY 2005/06, UIA registered a total of 348 projects with planned investments worth US$ 761 million and planned employment of 33,910 jobs.

Hence, the 2006/07 data represent an increase of over 100% in terms of investment value and over 26 % in terms of planned job creation. Out of the 330 projects registered within the first three quarters of FY 2006/07, 57% are foreign, 15% are joint ventures and 28% local. The leading destination sectors for the registered projects include telecommunications, industry, energy and hospitality.

Table 1: Planned Investments by Sector

FY 2005/6 Planned FY 2006/7 PlannedSector Investments

(USD)Jobs Investments

(USD)Jobs

Agriculture, Hunting, Forestry and Fishing 71,126,000 7,436 58,134,465 5,886Community, Social and Personal Services 33,044,000 2,030 43,103,000 638Construction 49,563,500 3,050 174,920,000 5,701Electricity, Gas and Water 17,243,000 152 209,779,000 5,834Financing, real estate & Business Services 109,306,648 5,014 170,723,000 4,100Manufacturing 245,298,500 12,433 224,194,500 12,276Mining and Quarrying 8,145,000 438 4,470,000 217Transport, Communication and Storage 32,942,000 1,011 567,754,000 3,977Wholesale, Retail Trade, Catering & Accommodation Services

194,094,000 2,346 293,513,000 4,321

Source: Background to the Budget 2007/08 MoFPED

Public Sector Investments

Public Expenditure Review (PER) outcome A comprehensive assessment of public financing in the COFOG-defined agricultural sector (crops, livestock, fish, forestry, water for production and agriculture land-related issues) was conduced in 2007. It is expected that a second exercise will focus on an assessment of the formulation, execution and evaluation of the agricultural budget and finally an examination of the efficiency and outcomes in the delivery of agriculture services.

Looking at aggregate long term expenditure allocations, trends registered a steady decline in agriculture’s share (crops, livestock and fisheries) of the GoU financed budget from 9.6 percent in 1980/81. In fact the PER report notes that since 1991/92, agriculture has not received more than 3% of the GoU-financed budget in any year and in some years the share has been below 2%. Combining the GOU-financed budget with donor-financing raises the agriculture sector’s total public expenditure substantially, but it has yet to exceed 5 percent in any year. The report

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also notes that the low level of public investment in the agriculture sector depicts a regional character.

Recent aggregate expenditure apportioning indicates that public expenditure allocations at both the CG & LG levels by GoU and donors raised the share of the total budget allocated to the sector to almost 8% in 2001/02 but there has been a continuous decline since to 5.7% in 2005/06. The budget has decreased, in real terms, from approximately UGX 280 bn at the start of the decade to UGX 210bn in 2005/06.

Direct donor funding is on the decline, from approximately UGX 125 bn at the start of the decade to only UGX 76 bn in the current financial year. General budget and earmarked sector support (including “basket” funding) is also channelled by those development partners still involved in the sector. Decentralisation in sector financing is deepening with its share of the sector budget registering an increase from 7 per cent of the total agriculture sector resources at the start of the period, to 19 per cent by 2005/06.

Table 2: Agriculture’sa share of GoU-funded budgetb allocations 1980/81 to 2009/10Year % Year % Year %1980/81 9.6 1990/91 3.4 2000/01 1.61981/82 5.5 1991/92 2.6 2001/02 2.61982/83 5.1 1992/93 2.1 2002/03 2.31983/84 4.0 1993/94c 2.4 2003/04 2.11984/85 3.9 1994/95 2.9 2004/05 2.01985/86 3.8 1995/96 2.0 2005/06 3.01986/97 5.4 1996/97 1.6 2006/07 3.01987/88 3.2 1997/98 1.1 2007/08 (proj) 3.11988/89 3.1 1998/99 1.6 2008/09 (proj) 3.51989/90 2.2 1999/2000 2.6 2009/10 (proj) 5.1Source: Quoted from the Draft Final report Agricultural Expenditure Review who quoted Nygaard, D. et al. 1997 using data from Uganda Statistical Abstracts and World Bank Agriculture Report, MAAIF 2006 and Development Strategy & Investment Plan; and analysis of MTEF data. Note: a. Essentially MAAIF and excluding forestry

b.. Excluding direct donor funding of projectsc. From 1993/94 the NARO budget is included as part of the agriculture budget

A look at disaggregated expenditure allocations indicates that the recurrent budget allocation particularly the non wage component has fluctuated considerably since 2001 from UGX 6 bn to UGX 11 bn in constant 2005/06 prices. Attribution of the fluctuations appears to be mainly due to the accumulation and payment of domestic arrears and other ‘one-off’ issues. The ratio of wage: non-wage is considered to be a good measure of the ability of an organisation to deliver public services effectively. The report notes that ratio for MAAIF is ‘deceptively’ low as the Headquarters programme, which absorbs the largest share of the recurrent budget, has a very low wage share. The area of major concern is the development budget which averaged over UGX 100 bn in 2000/01 to 2002/03 in constant 2005/06 prices but declined to between UGX 63 and 76 bn in 2003/04 to 2005/06. This reduction is associated with a decrease in direct donor financing and no corresponding increase in domestic resource allocation. It is important to note however that there was an increase in domestic funding for NAADS Local Government operations appearing under a separate vote line. This increase led to a doubling of the share of district grants from 15% to 32% in 2005/06

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The PER also reviewed planned and actual allocations as a measure of budget implementation effectiveness which indicated that there was wide variation, suggesting a significant ‘disconnect’ between policy intentions as well as the planning and budgeting process. The MoFPED budgeting process is supposed to be informed by an 'evidence based' approach that is expected to facilitate the justification of appropriate resource allocation, however the impression created from the report findings suggests that there is limited regard paid to this data when actual allocation or disbursement occurs.

The PER reported that budgeted COFOG funds altered little over the five years registering no increase. MAAIF budget trends showed similar manifestation while on the other hand it was observed that ‘Releases’ of COFOG funds did increase slightly, with the exception of 2004/05 when MAAIF releases dipped dramatically. Data captured indicates that total donor resources have declined from approximately UGX 125 bn at the start of the decade, while only UGX 76 bn has been committed in the financial year 2007/08. The PER report observation was that the decrease was compensated for by general budget and other ear marked support by development partners that are still involved in the sector.

In aggregate terms, funding of COFOG-related agencies and ministries as a share of the proportion of government’s total budget declined from 7.9% in 2001/02 to 5.7% in 2005/06. Releases as a share of the national totals fell from 6.9% to 5.4% over the same period while annual ‘releases’ as a proportion of annual ‘budgets’ fluctuated between 57 per cent (2004/05) and 79 per cent (2003/04) over the five-year analysis period, although showing no distinctive trend.

Note however, that the proportion of the budget released by the GoU was, on the average, significantly higher by nearly 10% each fiscal year than the proportion released by the donor agencies. In neither case, however, do releases account for more than two-thirds of the total budgeted amounts.

The PER also looked at ‘off budget’ expenditure and noted that this spending accounts for a significant share of overall funding of the COFOG defined sectors. In one quoted incident, the volume of resources provided to the sector from only two ‘off budget’ partners resulted in an additional 10 to 20% resources over and above the total provided through GoU budget. CSO activities were also estimated to contribute resources to the level of 10% of the total COFOG related expenditure in 2006/07.

Another issue was the apparent disconnect between allocation of resources to priority areas identified in MAAIF’s Development Strategy Investment PLAN (DSIP) and annual approved budget allocations, which is a telling indication of MoFPED’s disregard or supposed lack of conviction of MAAIF’s prioritisation process. The PER notes that the development of the annual Budget Framework paper (BFP) process appears to managed by the MAAIF Planning Department apparently under very tight time constraints, with limited involvement and input from the Agricultural Sector Working Group (ASWG). The PER team was of the view that these challenges were self imposed and suggested that early and timely preparation would address this issue. Of significance was the finding that MoFPED reconsider the guidelines for Sector BFP development as in their view the content and presentation did not appear to be very relevant to informing evidence based claims for prospective resource allocation.

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Table3: Summary of COFOG-relevant expenditure 2001/02 to 2005/06, in nominal UGX bn 2001/02 2002/03 2003/04 2004/05 2005/06Budget Releases Budget Releases Budget Releases Budget Releases Budget Releases

Central GovernmentMAAIF *recurrent 7.45 5.82 7.85 6.58 6.64 7.22 11.46 10.71 14.49 13.55development 125.86 63.19 125.61 79.10 90.67 56.54 85.06 39.28 106.07 60.71Other COFOG ministriesLands, Forestry & Water-for-Production.recurrent 1.51 1.12 1.84 1.10 1.38 1.12 0.19 0.16 0.24 0.21development 58.75 43.95 50.69 30.96 56.44 51.64 50.02 14.94 34.23 19.63Semi-autonomous agenciesDDA 0.50 0.50 0.16 0.16 0.24 0.24 0.22 0.22 0.22 0.22CDO 1.26 1.26 0.95 0.95 1.77 1.77 1.98 1.98 1.03 1.03UCDA 2.12 1.85 1.89 1.76 2.78 2.25 2.61 2.69 2.76 3.12NFA 0.00 0.00 0.00 0.00 1.03 1.03 10.76 10.76 13.25 13.25Local GovernmentAgricultural Extensionwage 2.47 2.16 3.06 2.83 3.06 3.19 3.06 3.89 3.08 3.85non-wage 3.00 2.90 2.92 2.73 2.92 2.81 2.92 2.92 2.92 2.78NAADS (Districts)33 2.57 2.42 5.66 9.32 14.27 13.75 16.02 15.13 27.46 24.87NSCG 6.07 4.44 5.76 4.09 5.96 4.20 6.38 4.01 6.18 4.22LGDP - 1.62 - 1.06 - 1.69 - 1.42 - 0.67

TOTAL (nominal) 211.56 131.23 206.39 140.64 187.16 147.45 190.68 108.11 211.93 148.11Total (constant terms) 286.28 177.58 255.43 174.06 217.38 171.25 205.47 116.50 211.93 148.11

Total GoU 2,686 1,895 2,768 2,720 3,107 3,128 3,380 3,369 3,716 2,760

COFOG/Total GoU 7.88 6.93 7.46 5.17 6.02 4.71 5.64 3.21 5.70 5.37Source: PER 2007 report obtained from MFPED Aid Liaison Department database; information collected by Study Team from MoLG, PMA Secretariat and NFA; DDA, NFA and UCDA annual reports; MFPED, various MTEF projections.

From a historic perspective, the agricultural sector has relied extensively on donor funding but this scenario is now seriously constrained by MTEF ceilings and GoU’s singular determination to reduce aid dependency. The PER notes that donor disbursements over the medium term are so low that actual development expenditure is always below targeted MTEF ceilings noted to be a characteristic feature of large donor funded projects that are considered to be no longer the most appropriate funding modality for the sector.

The PER team recommended that MAAIF designs a portfolio of projects for implementation in the revised DSIP, which GoU could fund using local and donor resources. It also proposes revitalization of the ASWG and an enhanced role especially in developing a value for money portfolio that would assist MAAIF to achieve enhanced execution of mandate.

Development Strategy and Investment Plan (DSIP)

The Development Strategy and Investment Plan (DSIP) presents the medium-term plan of Ministry of Agriculture Animal Industry and Fisheries (MAAIF) for the development of its policy objectives in line with the national development objectives. The Ministry through the DSIP presents a statement on how the national goals and priorities contained in the PEAP are translated into public sector activities in the agricultural sector. The DSIP also seeks to clarify

33 The PER report notes that from 2003/04 an amount appears in this vote under Donor Development that cannot be accessed by the NAADS programme and yet in at least one year, it is reported as having been fully spent.

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the objectives and outputs for the sector, to highlight the priority areas in which will be carried out in the years (2005/ to 2007/8.

The PMA identifies seven broad “priority areas” for public sector support. The DSIP further elaborates priority areas in which public sector action is required in the medium term to support the modernization of agriculture, and which fall in the mandate of the Ministry and its semi-autonomous agencies. These areas include: (i) institutional reform and strengthening; (ii) policy formulation and planning; (iii) provision of regulatory and agricultural advisory services; (iv) agricultural statistics data collection, analysis and dissemination; (v) provision of market information for agricultural inputs and outputs; (vi) epidemic diseases and pest control; development of technologies for soil fertility management, water conservation and environmental protection, construction of infrastructure including landing sites; (vii) capacity building for irrigation and water harvesting; (viii) capacity building for the production of breeder seeds, planting materials and improved animal breeding stock; and (ix) capacity building for marketing and agro-processing infrastructure.

The DSIP is in it final year of implementation and is currently under review and MAAIF has registered considerable success in the execution of its programme of work. These achievements have been realized in spite of the Medium Term Expenditure Framework (MTEF) rigid ceiling for the sector, as well as the uneven and untimely release of funds relative to the planned activities and seasonal requirements.

Besides the numerous on going activities carried out by the various technical units of MAAIF, the Ministry has continued to play its key role at the centre of the Plan for the Modernization of Agriculture (PMA), and implemented a number of development Programmes, which are contributing to the growth of the sector. MAAIF has also been steadfast in facilitating the implementation of new programmes and has started the process of reformulating ongoing projects such that they are fully aligned to he PMA principals and objectives.

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NIGERIAAdapted from Agricultural Development Efforts in Nigeria and Alignment with CAADP: A Review and Stock Taking Report

INVESTMENT PROFILE OF NIGERIA AGRICULTURE

Nature of Agricultural Investments

Agricultural investments include spending by public and private economic agents to augment capital goods upon which increased productivity and incomes can be guaranteed into the future. Public investments in agricultural sector encompasses capital spending for critical infrastructure and facilities such as irrigation, crop/animal processing, marketing systems, land development, agriculture oriented ICTs, research and extension, farmer service centres capacity building (institutional building and human resource development). In Nigeria, public spending for agricultural development is a concurrent responsibility of the three tiers of government – federal, state and local. On the other hand, private investments in agriculture come from domestic private investors and foreign direct investment. Domestic private investors include farmers, processors, marketing agents, service providers, banks, insurance agencies and credit societies. Foreign direct investment comes in the form of portfolio investments and full or part ownership of companies involved in agricultural sector activities. In another vein, investments in agriculture can come in the form of bilateral and multilateral development grants or transfers, and also in the form of agriculture-targeting credit lines to the country. For illustration purposes, the profile of project investments in agricultural development and food security is given in Table 1, as follows.

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Table 1: Profile of project investments in agricultural development and food securityName of project Period covered Investment/Funding Object and strategy FOOD SECURITY, PRODUCTIVITY IMPROVEMENT AND COMMUNITY DEVELOPMENT The National Special Programme for Food Security Pilot phase: 2002-2005;

Expansion phase: 2006-2010

Pilot phase-US$42.5million; expansion phase – US$250million

To raise agricultural productivity and production to eliminate rural poverty and attain food security. The main programme components are food security, aquaculture and inland fisheries, animal disease and trans-boundary pest control, soil fertility improvement and marketing of agricultural commodity and food-stock management.

National Fadama Development Project II 2004-2009 US$125.37million loan funding from WB, ADB and GEF

To increase the income of fadama users through empowering them and reducing conflict among them. The project aims at building the capacity of fadama users and providing rural infrastructure, asset acquisition support and project management services.

Community-based Agricultural and Rural Development Programme

2004-2009 Total cost – 68.5 million; IFAD loan – US$29.9million

Involves rural communities and the poor in project design and implementation of field activities. The programme is designed to stimulate rapid expansion of investments in sustainable growth in agricultural output and productivity, combined with non-agricultural activities, natural resource management, rural infrastructure and social services.

Community-based Natural Resources Management Programme

2003-2010 Total cost – US$82.2million; IFAD loan – US$15.0million

It aims at improving the living conditions of poor rural communities in the nine Niger Delta States of Nigeria. It adopts the community driven development and participatory approaches in identifying and prioritising the communities’ needs and plans to address those needs. It focuses on institutional capacity building, increasing productivity of agriculture and artisanal fisheries, diversifying sustainable livelihoods, improving access to markets and social infrastructure and environmental management.

Root and Tuber Expansion Project 2002-2010 US$23.05million It aims at raising smallholders’ production of cassava, yam, potatoes and cocoyam as well as their by-products to enhance national food security and improve rural household incomes. It is a follow-up on the IFAD-assisted Cassava Multiplication Project

RURAL INFRASTRUCTURE AND SUPPORT SERVICES Rural Access and Mobility Project 2005-2010 US $225 million It involves the rehabilitation and construction of rural roads,

development of inland waterways. Large scale Irrigation Infrastructure Development 1997-ongoing N66.613 billion It involves the construction of several multipurpose dams in various

parts of the country to supply water to urban and rural populations, generate power and provide water for irrigation and fisheries development.

DFID Promoting Pro-Poor Financial Services 2005-2009 £7.5million It aims at enhancing poor people’s access to financial services by facilitating the development of a viable financial services market.

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IFAD Nigerian Rural and Micro Finance Institutions Building Programme

2006-2011 US$15million There are four dimensions of the intervention: supporting and strengthening the rural financial intermediaries to enable them provide rural financial services to clients in a sustainable manner; supporting regulatory institutions to provide effective supervision for the growth of viable rural financial institutions; supporting umbrella organisations of rural financial institutions to strengthen them in the capacity building, advisory and advocacy roles; facilitating the creation of linkages between rural clients, financial institutions, input suppliers, food processors, business development service providers and exporters

USAID Promoting Improved Sustainable Microfinance Services

2004-2007 US$5.1million The objective is to facilitate the provision of financial services to the under-served micro, small and medium entrepreneurs. It works in partnership with banks to demonstrate profitable and effective engagement with the MSME sector; provides technical assistance and capacity building.

Rural Slaughter House project 2004-2008 N706.9million It is aimed at promoting food hygiene by adopting the FAO Size II slaughter house design and providing one facility per state and then one slaughter slab in each local government area

Agricultural Market Support Services 2005-2008 N15billion It aims to improve the quality and competitiveness of agricultural commodities by providing market support facilities. It includes establishment of modern produce grading centres, systems of quality control and price integrity.

On-farm Rural Storage project 2005-2008 N475.28million It is aimed at reducing post-harvest losses through improved on-farm or rural storage facilities.

LIVESTOCK AND FISHERIES Cattle Breeding and Multiplication project 2005-2010 N50.95million The project is aimed at raising the genetic standing of local breeds

through selection and cross breeding with exotic stock. It involves strengthening the cattle breeding and multiplication centres in order to maximize the benefit of cross breeding and also to conserve the gene pool and to raise elite breeds for animals for sale to local farmers.

Small Ruminant Breeding and Multiplication project 2005-2010 N58.95million It is aimed at improving the local breeds of small ruminants, especially goats and sheep, through selection and multiplication.

Animal Vaccine Production and Veterinary Drug Manufacture

2005-2010 N1.4billion The objective is to upgrade the facilities in the National Veterinary Research Institute in order to raise the level of vaccine production and veterinary drug manufacture. It is based on public-private partnership.

Aquaculture and Integrated Fish Farming project 2004-2009 N105million It is aimed at boosting local fish production through improved fish farming and fish culture practices and the rehabilitation of community-based fish farms. It focuses on fish farms in flood plains, fadamas, lakes, rivers, and other inland water bodies.

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Fisheries Terminals Development project 2004-2006 N610million It is aimed at providing shore-based facilities for sea-going fishing vessels including trawlers, medium-sized fishing vessels, and boats for artisanal/small scale fishing. The facilities include ice flakes, fuel, lubricating oil, potable water, vessel repair facilities, fish handling, processing and storage amenities

INPUT SUPPLY Fish Seed Industry Programme 2004-2010 N36.5million It is aimed at increasing the production and distribution of genetically

improved and fast-growing fish brood stock and fingerlings. Foundation Seed Multiplication Programme 2004-2007 US$4.5million Through the National Seed Service, the government produces and

supplies foundation seeds using out-growers. It involves the rapid multiplication and distribution of newly released high yielding and standardised quality seeds of cereals and legumes which were developed by National and International Agricultural Research Institutes.

National Seed Quality Project 2002-2007 US$1.24million It is aimed at strengthening seed quality assessment in order to secure the quality of seed supply to farmers and to facilitate seed exports to neighbouring countries. It involves provision of vital facilities for seed testing, seed health screening, genetically modified seed detection and improvement of technical capacity of staff through training.

Community Seed Development Project 2004-2007 US$2.5million This is an integrated programme whereby the federal government through the National Seed Service provides improved seeds, the state governments provide the complementary extension service and seed producers and sellers operate through community-based organisations.

MARKETING SUPPORT Market Information System 2005-2007 N824.64million It is aimed at promoting agricultural produce marketing through the

establishment of functional market information system covering prices, demand, supply, market facilitation, transportation and so on.

Multi-Commodity Development and Marketing Companies

2005-2007 N1.5billion It involves the establishment of three multi-commodity and marketing commodities for arable crops, tree crops, livestock and fisheries. It is designed to minimize the bottlenecks associated with agricultural marketing by establishing production, processing and storage centres.

Export Promotion Village Project 2003-2010 N300million The project is aimed at expanding exports, stimulating rural development by ensuring a stable and fair market price, upgrading entrepreneurship and productivity. It is designed to develop viable commercially-oriented village institutions capable of mobilising the productive capacities of small producers of small producers and building new supply source of exportable products.

Source: Derived from Government of the Federal Republic of Nigeria. 2006. NEPAD – Comprehensive Africa Agriculture Development Programme: Medium-Term Investment Programme (NMTIP). Support to NEPAD-CAADP Implementation TCP/NIR/2906 (I) NEPAD Ref 06/44 E. February 2006.

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Agricultural Budget and Spending by Federal Government

Financing Strategies of the Federal Government Currently, the federal government uses a number of special windows to channel public funds for the promotion of agricultural growth and development. These windows are given as follows34:

Budget allocation for capital and recurrent spending in agriculture. In 2008, the federal government allocation to agriculture and water resources increased from 3% to 7%. It is intended that budget allocation will reach and even exceed 10% in subsequent years.

Natural Resources Fund. This is a fund that has been designated by the federal government to the funding of national food security programme. It is realised from 1.68% of the Federation Account. Currently, the Fund has a standing balance of N80 billion and is estimated to contribute N50 billion per annum.

Agriculture Development Fund. This is a special intervention fund to finance short to medium term obligations in areas such as guaranteed minimum pricing and other subsidies. It will also be utilised for the funding of microfinance institutions to provide affordable credit to small scale farmers.

Federal Government Bond Issue (N200 billion). The federal government would issue a N200 billion bond to provide long term credit to private sector agents entering into partnership with the government. Focus of credit will be large scale farming and the functional areas will be land acquisition, input supply and storage infrastructure.

National Agricultural Cooperative and Rural Development Bank (NACRDB). The objective of NACRDB is to augment agricultural lending through concessionary subsidised interest rates to agricultural production and processing agents (individuals, groups and societies).

Overview of Public Expenditure in NEEDS (OPEN). Nigeria’s reform agenda, known as National Economic Empowerment and Development Strategy (NEEDS) provided the platform in 2005 for introducing Nigeria’s version of a Virtual Poverty Fund known as OPEN. The facility was a direct fall-out of the debt relief negotiations by which Nigeria committed to devoting the savings from debt relief to exclusive public spending for meeting the MDGs 2015 targets. With the debt relief signed between the Federal Government and Paris club in September 2005, the stage was set for the commencement of the OPEN initiative. Under the plan, the annual debt relief gains (DRGs) of about $1 billion will be exclusively allocated to MDGs programmes and projects in the country.

These projects include agricultural interventions aimed at reducing extreme income poverty and hunger. Some sector lines were identified as the primary channels through which to actualise the DRGs spending. They include: health, education, water resources, power and steel, works, agriculture, environment, women’s affairs, housing and urban development. Examples of DRG-funded projects for meeting the MDGs 2015 targets include: integrated rural roads construction and the rehabilitation of rural feeder roads, investments in run-off water harvesting technology, and the development of grazing reserves, including watering points and disease control initiatives35. Out of a total debt relief funds of about N99.9 billion in budget 2006, agriculture was allocated N9.4 billion,

34 Federal Ministry of Agriculture and Water Resources, 2008. National Food Security Programme. August 200835 Office of the Senior Special Assistant to the President on Millennium Development Goals. The Story of Overview of

Public Expenditure in NEEDS (OPEN). Published in 2008.

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that is, about 9.4%. Also, agriculture got N15 billion (that is, 13.7%) out of the total debt relief budget of about N109.5 billion in 2007.

Quantitative Allocations by the Federal Government The trends in federal government allocation of budgetary resources to agriculture and water resources are given as follows (Table 2):

Table 2: Trend in Budget Estimates for Agriculture and Water Resources Year Grand Total Agriculture and

Water Resources Budget Total Agriculture and Water Resources Capital Expenditure

Total Agriculture and Water Resources Recurrent Expenditure

Total Federal Government Budget Estimates

1981 2,268,400,000 2,234,500,000 33,900,000 11,413,700,000 1982 3,574,300,000 3,540,200,000 34,100,000 11,923,200,000 1983 2,936,100,000 2,906,800,000 29,300,000 9,636,500,000 1984 900,200,000 867,400,000 32,800,000 9,927,600,000 1985 1,489,700,000 1,457,000,000 32,700,000 13,041,100,000 1986 2,019,400,000 1,986,500,000 32,900,000 16,223,700,000 1987 846,300,000 817,100,000 29,200,000 22,018,700,000 1988 1,644,400,000 1,590,100,000 54,300,000 27,749,500,000 1989 1,592,400,000 1,511,300,000 81,100,000 41,028,300,000 1990 2,696,100,000 2,488,000,000 208,100,000 60,268,200,000 1991 1,234,200,000 1,113,100,000 121,100,000 66,584,400,000 1992 1,675,900,000 1,514,400,000 161,500,000 92,797,400,000 1993 4,494,600,000 3,479,300,000 1,015,300,000 191,228,900,000 1994 8,032,700,000 7,113,700,000 919,000,000 160,893,200,000 1995 14,031,000,000 11,795,000,000 2,236,000,000 248,768,100,000 1996 7,315,200,000 5,634,000,000 1,681,200,000 337,217,600,000 1997 21,149,900,000 19,467,700,000 1,682,200,000 428,215,200,000 1998 23,231,200,000 20,267,400,000 2,963,800,000 487,113,400,000 1999 45,183,700,000 13,836,500,000 31,347,200,000 947,690,000,000 2000 24,126,300,000 19,291,600,000 4,834,700,000 701,100,000,000 2001 64,943,900,000 57,879,000,000 7,064,900,000 919,214,805,186 2002 44,803,800,000 32,364,400,000 12,439,400,000 1,018,000,000,000 2003 16,045,200,000 8,510,900,000 7,534,300,000 1,179,000,000,000 2004 59,773,400,000 48,047,800,000 11,725,600,000 1,303,000,000,000 2005 90,797,800,000 79,939,000,000 10,858,800,000 1,799,938,243,138 2006 107,463,900,000 89,544,900,000 17,919,000,000 1,842,587,700,000 2007 133,196,811,320 112,642,874,419 20,553,936,900 2,386,200,000,000 2008 113,673,666,845 89,952,014,445 23,721,652,400 2,453,638,933,020

Sources: CBN Statistical Bulletin (various issues) and FGN Budget Speeches.

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Budget and Spending by State Governments

Together, state governments recorded a total spending of about N121.29 billion36 on agriculture and water resources in 2007, out of which N63.27 billion went to capital spending. In addition, total capital spending of all local governments on economic sectors was about N54 billion37 in 2007. The bulk of this spending went to agriculture and water resources subsector investments. The trend of state government budgetary allocation to agriculture and water resources is illustrated using a sample of states as follows (Table 3):

Table 3: State level expenditure with respect to agriculture, rural development and water resources in six sample states, 2005-2007 Expenditure type/ratio STATE Year 2005

KANO JIGAWA YOBE CROSS RIVER OSUN ANAMBRA Actual capital expenditure on agriculture + rural development + water resources as % of total capital expenditure

31.46 1.98 12.55 0.23 5.33 0.45

Actual recurrent expenditure on agriculture + rural development + water resources as % of total recurrent expenditure in 2005

12.80 - - 0.10 - -

Year 2006 STATE KANO JIGAWA YOBE CROSS RIVER OSUN ANAMBRA

Actual capital expenditure on agriculture + rural development +water resources as % of total capital expenditure in 2006

34.0 - 16.25 0.08 13.79 0.13

Actual recurrent expenditure on agriculture and rural development + water resources expenditure in as % of total recurrent expenditure in 2006

6.15 3.39 - - - -

Expenditure type/ratio STATE Year 2007

KANO JIGAWA YOBE CROSS RIVER OSUN ANAMBRA Actual capital expenditure on agriculture + rural development + water resources as % of total capital expenditure in 2007

28.13 2.6 15.09 0.30 0.19 0.19

Actual recurrent expenditure on agriculture + rural development + water resources as % of total recurrent expenditure in 2007

8.41 1.62 - - - -

It is obvious from the data outlined above that states have varying outlook on expenditures on agriculture, water resources and rural development. The sample of states draws from the geopolitical zones of the country. Kano and Yobe States devote relatively higher percentage of budgeted expenditures to agriculture, water resources and rural development. In each of the States, these three expenditure heads together constitute more than the 10% target set by CAADP. The expenditures are heavy on irrigation development, land development, provision of agricultural extension and advisory services, development of critical agricultural-rural

36 CBN Annual Report for 200737 CBN Annual Report for 2007

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infrastructure, funding of farmer subsidies and development of water resources potentials. Banking Sector Credit to Agricultural Sector

Agricultural credit is seen by commercial banks as a risky business, because of the high transaction cost of dealing the numerous small lenders scattered in remote sometimes inaccessible areas of the country. Consequently, only 4.4% of the banking sector credit went to agriculture in 2007. This meagre flow of credit to agriculture reflects the poor attractiveness of agriculture to organised private sector in Nigeria. Another indication of the poor resource flows to the agricultural sector is that only a paltry sum of N555.2million (in Year 2006) was guaranteed under the Agricultural Credit Guarantee Scheme Fund, operated by the Central Bank of Nigeria. The licensing of microfinance banks is aimed at improving access of the poor, small borrowers to formal sector loans for production and operational expansion of businesses and enterprises. Microfinance banks therefore have the potentials to enhance the flow of capital into agriculture, if the mechanisms to channel those flows are put in place.

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GHANAAdapted from A Review of Agriculture Sector Performance, Policies and Strategies Towards Development of Long Term Framework for the Implementation of ECOWAS Agricultural Policy (ECOWAP) and the Comprehensive Africa Agricultural Development Programme (CAADP) in Ghana

Public Sector Funding One of the principles in the Maputo Declaration that Ghana is committed to achieving is the allocation of at least 10% of government expenditure to the agriculture sector. This section of the report assesses the extent to which the expenditure allocation target has been achieved. The difficulty of this assessment is that several other interventions that support agriculture occur outside the government departments directly responsible for the sector of the Ministry of Food and Agriculture is the lead agency. Expenditure on MOFA, COCOBOD, and Ministry of Fisheries alone is an under-estimation of fund allocation to the sector. This assessment of public sector financing of agriculture therefore attempts to identify expenditures on other sectors, such as feeder roads, that have an impact on agriculture.

Costing GPRS II Priority Programmes

Expenditure on agriculture is assessed against the implementation cost of the GPRS II. This cost over the four year period (2006-2009) is US$8.063bil, with 35% allocation to Private Sector Competitiveness, 55% to Human Resource Development and 9.7% to Good Governance (Table 1). The cost of agriculture related focal areas (modernised agriculture, fishing and aquaculture development and restoration of degraded environment) in 2006 was US$191.8 mil, representing 25.5% of expenditure on private sector competitiveness pillar, and 9.3% of total cost of implementing GPRS II (Table 2). The programme has been implemented for the first year, and a progress report is available on actual fund allocation and alignment by government and her development partners to GPRS costing. Expenditure on poverty reduction is also presented.

Table 1: GPRS II Estimated Cost (Mill US$) by Thematic Area, 2006 - 2009Thematic Area 2006 2007 2008 2009 Total

Value % Value % Value % Value % Value %Private Sector Competitiveness

751.884 36.39 764.811 36.71 704.387 34.54 633.949 33.83 2855.031 35.41

Human Resource Development

1110.69 53.75 1115.939 53.57 1158.783 56.82 1042.906 55.65 4428.318 54.92

Good governance and Civic responsibility

203.842 9.86 202.485 9.72 176.284 8.64 197.165 10.52 779.776 9.67

Total 2066.42 100.00 2083.24 100.00 2039.45 100.00 1874.02 100.00 8063.13 100.00Source: Republic of Ghana. GPRS II Volume II Costing Framework

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Table 2: Costing of Focal Areas under Private Sector Competitiveness in 2006Focal Area Cost in GPRS II

Value (Mill US$)

%

Private Sector Development 50.564 6.73Modernized Agriculture 141.04 18.76Modernized Fishing Methods and aquaculture development 6.127 0.81Restoration of degraded environment and natural resource management 44.589 5.93Sub-Total (Agric, fisheries & environment) 191.76 25.50Promoting trade and Industrial Development 136.205 18.12Transport Infrastructure (road, rail, water & air) 218.879 29.11Energy supply to support Industry and Households 106.067 14.11Science & Technology to support Productivity & Development 15.205 2.02Developing Information and Communication Technology 2.539 0.34Developing the Tourism sector for revenue and employment generation 25.133 3.34Support to music Industry for growth and Job Creation 1.536 0.20Employment generation and improvement and Expansion of safety nets 3.709 0.49Life Cycle Related Vulnerability and exclusion 0.269 0.04Environment related factors in vulnerability and exclusion 0.018 0.00Total for Private Sector Competitiveness 751.88 100Source: Republic of Ghana. GPRS II Volume II Costing Framework

In 2006, total approved budget for private sector competitiveness was US$888.9 Mil (Table 3), which was above the estimated cost (US$751.88 Mil) of programmes under the pillar. However, only 64.7% of the budget (equivalent to 77% of initial cost) was released by Government and Development Partners (DPs). The distribution of released funds by government and DPs, as compared to the GPRS II costing shows a misalignment of funding against GPRS II priority spending (Figure 1). Government releases were misaligned in favour of human resource development while DPs expenditures were in favour of private sector competitiveness. Expenditure allocation by focal area within thematic pillar is not available but the 2006 allocations imply that at best, funding of agriculture programmes could not exceed the above ceilings for private sector competitiveness.

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Table 3: Alignment of 2006 Spending Priorities of GoG and DPs with Approved BudgetThematic Area

 Source and type of funds

Private sector Competitiveness

Human Resource Development

Good Governance

Multilateral Debt Relief Initiative

HIPC Contingency

TOTAL

GoG Approved budget

300.3 126.4 215.3  -  - 642

Releases 56.9 84.9 110.1  -  - 251.8% 18.9 67.1 51.1  -  - 39.2

DPs Projected inflows

442.8 258.3 32.5  -  - 733.5

Releases 357 329.3 56.9  -  - 743.2% 80.6 127.5 175.4  - -  101.3

Statutory Funds

Approved Budget

145.8 401.1 222.2 0.2 49.5 818.9

Releases 161.5 255.4 146.5 0.2 0 563.6% 110.7 63.7 65.9 0 0 68.8

Total Approved Budget

888.9 785.8 470 0.2 49.5 2194.4

Releases 575.3 669.6 313.6 0.2 0 1558.7% 64.7 85.2 66.7 100.7 0 71

Source: Republic of Ghana (2007). Implementation of GPRS II. 2006 Annual progress report

Figure 1: Alignment of 2006 Spending with GPRS Costing Framework

GPRS Cost GOG DPs0

10

20

30

40

50

60

36.3926.77

48.0453.75

41.73 44.31

9.86000000000001

31.47

7.66

Figure : Alignment of 2006 Spending with GPRS II Costing Framework

Private sector Competitiveness Human Resource DevptGood Governance

Source: Republic of Ghana (2007). Implementation of GPRS II. 2006 Annual Progress Report

157

Government Spending on Poverty Reduction38

Besides the infusion of resources to broad sectors, government has targeted additional resources to specific areas in the social and economic sectors, to benefit the poor. This measure responds directly to MDG 1 and recognises the need to target the poor for better impact of programmes on poverty reduction. Funds for poverty targeting have come from government discretionary spending, HIPC funds and Multilateral Debt Relief funds.

Share of government expenditure devoted to poverty reduction has increased steadily since 2003 from 27% to almost 35% in 2006 (Figure 2). In 2006, 47% of a total of C1322.64bn released from HIPC funds was allocated to private sector competitiveness. In addition, about 12% of the allocation of C944.8bn from the Multi-lateral debt relief initiative (MDRI) funds for poverty reduction was allocated to the agriculture sector.

Information on government discretionary spending on poverty reduction is more detailed and Table 38 presents data on poverty focused agriculture and feeder roads, the two types of spending that impact agriculture directly. Other areas of poverty reduction are basic education, primary health care, rural water, rural electrification, social welfare, governance, drainage, human rights, public safety, HIV/AIDS etc. The share of poverty focused agriculture spending in total poverty spending declined from 2.56% in 2003 to 2.13% in 2005 before rising to 3.9% in 2006 (Table 4). Although the share of spending on feeder roads in total poverty spending, at an average of 6.9%, has been higher than the agriculture focused spending, the pattern of variation over the period has been the same. It is clear that poverty spending is still very much focused on social services and there is probably a need to improve the balance of expenditure towards the productive sectors.

Figure 2: Share of Total Poverty Reduction Expenditure in Total Government Discretionary Expenditure

2003 2004 2005 200605

10152025303540

27.18 28.13

34.47 34.86

Figure : Share of Total Poverty Reduction Expenditure in Total Government Expenditure (%)

Source: Based on Table 4

38 Source of information is the 2006 Annual progress report on the implementation of GPRS II

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Table 4: Government Spending on Poverty ReductionType of expenditure 2003 2004 2005 2006

Budget Actual % Var

Budget Actual % Var

Budget Actual % Var

Budget Actual % Var

Total poverty reduction expenditure (C bil)

4059.28 4278.74 5.41 5456.21 6122.61 12.21 8014.93 8256.01 3.01 11985.21

12374.03

3.24

Total Govt. Expenditure (C bil) 15712 15744.1 0.20 19507.8 21765.1 11.57 25052040

23948.62

-99.90

34677.1 35493.2 2.35

Total poverty reduction exp as % of total Gov. Expenditure

25.83 27.18   27.97 28.13   31.99 34.47   34.56 34.86  

Poverty focused agric exp (C Bil) 141.89 109.51 -22.82

132.68 145.05 9.32 205.33 175.91 -14.33

351.72 484.4 37.72

Agric sector Exp (C Bil) 157.40 114.27 -27.40

146.91 150.34 2.33 217.32 205.07 -5.64 382.5 517.77 35.36

Poverty focused agriculture expenditure as % of Sector exp.

90.15 95.83   90.31 96.48   94.48 85.69   91.95 93.56  

Poverty focused agriculture expenditure as % of poverty spending

3.5 2.56   2.4 2.4   2.56 2.13   2.93 3.91  

Feeder roads expenditure (C Bil) 227.98 306.38 34.39 296.55 337.98 13.97 395.56 410.24 3.71 875.07 766.95 -12.36Roads & transport expenditure. (C Bil) 887.38 809.28 -8.80 1039.69 1045.34 0.54 1424.73 1505.56 5.67 2214.58 2322.35 4.87Feeder roads exp as % of Sector expenditure.

25.69 37.86   28.52 32.33   27.76 27.25   39.5 33.02  

Feeder roads exp as % of poverty spending

5.6 7.2   5.4 5.5   4.91 4.97   7.3 6.20  

Source: Source: Republic of Ghana (2007). Implementation of GPRS II. 2006 Annual Progress Report

159

Public Investment in Agriculture SectorAn alternative way of assessing government expenditure allocation to agriculture is to determine aggregate expenditure to relevant MDAs, including MOFA, COCOBOD, Ministry of Fisheries, and the Council for Scientific and Industrial Research. These expenditures directly support the agriculture sector. Government expenditure on agriculture since the withdrawal of subsidies on inputs has been on the delivery of services such as extension, policy formulation and monitoring, and implementation of projects. Government expenditure on agriculture dropped from 12.2% in 1980 to 4.1% in 199039 when subsidies on agricultural inputs were completely phased out. Since the late 1990s, the share of government expenditure going through MOFA has been less than 2%; inclusion of expenditure on the cocoa sub-sector however raises this share considerably. Between 2001 and 2006, the share of MOFA and COCOBOD expenditure in total government expenditure increased steadily from 2.4% to 9.7% (Table 5).

Table 5: Share of MoFA and COCOBOD Expenditure in Total Government Expenditure (Billion Cedis)

Expenditure type 1998 1999 2000 2001 2002 2003 2004 2005 2006Total Central Government Expenditure

5005 2717.6 3295.404

13073.8 15447 10442.1 10513.2

12693.8 17912

Expenditure on Agriculture (MOFA)

35.12 43.59 62.23 62.46 127.02 136.68 142.71 209.75 256.9

Expenditure on Cocoa 115.036 126.569 705.078 301.78 275.654 485.132 802.143

912.985 1472.16

Total Expenditure on MOFA & COCOBOD

150.156 170.159 767.308 364.24 402.674 621.812 944.853

1122.735 1729.06

Share of Expenditure (MOFA & COCOA) in total Govt Expenditure (%)

3.0 6.3 23.3 2.8 2.6 6.0 9.0 8.8 9.7

Share of MOFA Expenditure in Total Govt Expenditure

0.7 1.6 1.89 0.48 0.82 1.3 1.36 1.65 1.43

Share of Cocoa Expenditure in Total Expenditure on Agriculture

76.6 74.4 91.9 82.9 68.5 78.0 84.9 81.3 85.1

Source: Data based on SRID, Agriculture Facts & Figures; COCOBOD Data

Expenditure on Cocoa sub-sector has increased since 2001 because of efforts to revamp the sub-sector with programmes such as mass spraying and credit for application of high technology in cocoa production. It appears from these expenditure flows that Ghana is close to achieving the minimum of 10% allocation of government expenditure to agriculture.

Expenditure on cocoa is generally not included in government budget on the ground that it is drawn from deductions for services tax on the producer price. However it is not likely that these deductions are sufficient to cover investments, e.g., in road infrastructure in the cocoa growing areas. Lessons can also be learned from the responsiveness of the cocoa sub-sector and other export agriculture, to the increased government support, and the resultant reduction in poverty among export farmers, for the food crop, livestock, and fisheries sub-sectors where poverty is still endemic. For this reason, there is need to improve the balance of expenditure between cocoa and other sub-sectors.

Current Public Investment Projects in Agriculture

39 Oxford Policy Management Briefing notes, 2007 - 2160

The distribution of MOFA’s expenditure has historically been biased towards recurrent expenditure. However the share of development expenditure is growing, increasing from 30%-35% in the period 1998-2000, to 46% in 2005-2006 (Table 6). The areas affected by the low investment expenditure are irrigation infrastructure, land development, rural roads, post-harvest infrastructure, the latter in partnership with the private sector.

Table 6: Share of Development Expenditure in MoFA Budget  1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

MOFA Expenditure 35.12 43.59 62.23 62.46 127.02 136.68 142.71 209.75 256.9 338.3Development Expenditure on Agriculture

11.15 15.37 22.3 18.45 61.42 21.36 38.2 96.78 119.6 144.2

Recurrent Expenditure on Agriculture

23.97 28.22 35.52 44.01 65.6 115.33 104.51 112.97 137.3 194.1

Share of Development Expenditure in total

31.7 35.3 35.8 29.5 48.4 15.6 26.8 46.1 46.6 42.6

Source: Data based on SRID, Agriculture Facts & Figures; COCOBOD Data

IrrigationAvailable information suggests that 18,000 ha out of a potential irrigable area of about 1,900,000 ha is under irrigation (GIDA, JICA and IDC, 2002). The Ghana irrigation Development Authority (GIDA) has about 22 formal irrigation schemes under its control. The 22 schemes together have a potential area of about 12636ha of which only 8,580ha (68% of the potential area) has been developed for irrigation farming (Table 7 from Leizumi, 2006). However, due to inadequate and deteriorating conditions of irrigation and drainage facilities at various schemes, irrigated area had reduced to 4,651ha (54% of developed area) as at March, 2006 (Leizumi, 2006).

A survey conducted by the International Water Management Institute (IWMI) in June, 2006, shows that about 38.5% of these schemes have been closed down and are not operating under irrigation due to break down of pumping machines, high cost of electricity, old and choked irrigation canals and pipes, among other reasons. Others are in operation but production is carried out only in the rainy season, which makes them partially non-operational. The schemes that are fully functioning currently are Vea, Libga, Tono, Golinga, Botanga, Tanoso, Anum Valley, Ashaiman and Okyereko, representing a total area of 3893 ha.

Land development (e.g. pasture development)Inland Valley Rice Development Project includes land management as one of the project components. With improved seed and good land management, farmers have tripled rice yields from 1.5ton/ha before the project interventions to 4.5tons/ha.

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Table 7: Formal Irrigation Schemes and their Corresponding Potential and Developed AreaScheme Region Potential Area (ha) Developed Area (ha)Ashaiman, Greater Accra 400 190Dawhenya, Greater Accra 148 130Kpong Greater Accra 3780 3000Weija Greater Accra 1200 220Mankesim Central 256 17Okyereko Central 110 40Kikam Western 27 27Tono Upper East 2500 2500Vea Upper East 500 500Tanoso Brong Ahafo 130 64Subinja Brong Ahafo 121 60Akumadan Ashanti 300 65Annum valley Ashanti 129 109Sata Ashanti 56 34Afife Volta 880 880Aveyime Volta 150 63Kpando Torkor Volta 356 40Botanga Northern 450 450Golinga Northern 40 20Libga Northern 20 20Amate Eastern 203 101Dedeso Eastern 880 50Total 12636 8580Proportion of potential area developed 68%Source: Boateng, Samuel Kwaku. MPhil Thesis. University of Ghana

The Lowland Rice Development Project in the Northern region, funded by Agence Francaise de Development (AFD), also supported land and water management on lowlands for rice production between 1999 and 2003. The aim of the LRDP was to develop a profitable and sustainable intensive rice production system focusing on small scale farmers. The LRDP developed 1040 ha of lowland area through provision of water harvesting structures in form of contour bunds. Yields increased from 1 Mt/ha to 2.5 Mt/ha. The project is going to be extended and aims at developing lowland rice production in the Northern, Upper East, Upper West and Volta regions. About 6,500 hectares of lowland areas will be developed with water control infrastructure and technical support to farmers Ghana.

Agricultural Sector Funding Through Private-Sector Financing Institutions The agriculture sector is dominated by private sector activity therefore it expected that much of the investment in the sector is by private sector initiative. Operators in the agriculture sector, in addition to equity funds, source funds from formal and informal financial institutions to finance their activities. Funds from informal sources, such as money lenders, traders, rotating credit associations, tend to be small with limited scope, and are of short-term. However, informal sources are more easily accessible than formal financial institutions.

Allocation of credit to agriculture from the formal financial institutions, represented by money deposit banks, has been on the decline since 1998, having declined from levels close to 20% that prevailed prior to the financial sector reforms of the late 1980s. Since 2000, allocation to agriculture has been below 10%, falling to just above 6% in 2006 (Figure 3). The Agricultural Development Bank, is the lead bank for agricultural financing. The share of ADB’s agricultural loans in its loans and advances portfolio as at 2000 was 65% reaching

162

70% in 2005. The areas of financing are agricultural production, export financing, agro-processing and marketing and cocoa financing with more focus on production and marketing and very little into agro-processing. However, the ADB provided about 28% of the total demand for credit in the agricultural sector up to the year 2006, suggesting an excess demand for credit in the sector, a situation that does not favour investment and growth of the sector.

Figure 3: % Allocation of Credit by Deposit Money banks to Agricultural Operators

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006'0

2

4

6

8

10

12

14

Figure : Allocation of Credit by Deposit Money Banks to the Agricultural Sector (%)

Source: ISSER (2006); Bank of Ghana (2007)

Foreign direct investment is another source of financing the agricultural sector; but this has been very low. Data from the Ghana Investment Promotion Centre40 show that not only have number of agricultural projects registered been the least among all investment sectors, but this number has consistently declined since 2001 from 15 to 6 projects in 2006. Total value of investment projects registered between September 1994 and December 2006 was US$4.65bil, but the agriculture sector projects shared 17% of this amount with projects in areas such building and construction and export trade.

This low level of investments attracted into the agriculture sector is in spite of various incentives in the tax regimes41 such as zero rate tariffs for agro-inputs, plant and machinery, 8% concessionary tax on income from non-traditional agricultural exports, tax holidays ranging from 5 years for arable crop enterprises and small ruminants to 10 years for tree crops and cattle. A 100% foreign ownership of agricultural investment projects is allowed and so are free transferability of profits and dividends.

It is suggested that the land tenure systems and poor physical infrastructure (e.g. roads) are some of the bottlenecks to attracting investments into the sector. There are plans to set up land banks to improve access to land and tenure security for investors. Infrastructure improvements including roads (trunk and feeder roads), port facilities, water and energy are some of the priorities of public investment expenditure that will attract agricultural investment. However, as noted above, the level of these investments, particularly from domestic sources, is still very low.

40 Ghana Investment Promotion Centre (2007). The GIPC Quarterly report. Vol. 2 Issue 4. January 2007.41 Tax incentives are published at the IRS website: http://www.irs.gov.gh/taxes/tax_incentives.htm

163

SWAZILANDAdapted from Acceleration of the Implementation of the Comprehensive Africa Agriculture Development Program (CAADP) in Swaziland: Final Stock Taking Report

REVIEW OF FUNDING MECHANISMS

Total Budget Allocation to the Agricultural SectorThe responsibility for escaping from hunger and poverty rests, to a large extent, with individual Governments themselves. The Maputo African Union declaration of 2003, signed by member states, including Swaziland, commits member states to allocate at least 10 % of the national budget to the agricultural sector. The intention of this declaration was to show Africa’s own commitment to funding agriculture against a background of re-emerging international recognition that the funding of agriculture is vital for sustainable development. The Maputo declaration came at a point where African countries had noted that developed countries, despite the fact that they can survive without agriculture, continue to finance their agricultural sector significantly, yet Africa, with more than 70% of its inhabitants dependant on agriculture, is reluctant to support the sector.

Financing for agriculture is therefore, based on the assumption that if member states show their full commitment to the sector, international cooperating partners will come forward and complement their efforts. Moreover, it is an established fact that transformation of developing economies, such as Swaziland, has to be led by a vibrant agricultural sector.

Evidence provided in Figure 1, shows that in the case of Swaziland, the percentage allocation to the agricultural sector has not exceeded even the 6 % mark since 1994/95. In 00/01, 06/07 and 07/08, the allocation to the sector was disappointingly low as it was below 4% of the national budget. This is a direct contrast of the commitment shown by Government in the early 90’s, where the agricultural sector received more than 10% in 91/92 and 92/93, respectively.

164

Figure 1: Percentage Allocation of Total Budget to the Agricultural Sector

0.0

2.0

4.0

6.0

8.0

10.0

12.0

89/'9

090

/'9191

/'9292

/'9393

/'9494

/'9595

/'9696

/'97

97/'9

898

/'9999

/'0000

/'0101

/'02

02'03

03/'0

404

/'0505

/'0606

/'0707

/'0808

/'09

Source: Ministry of Finance

A drastic improvement was, however, noticed in the 2008/09 budget as the allocation increased from 3.8% recorded in 2007/08 to 8.9%. The increase is attributed to the commitment expressed by Government during the country’s first ever national agricultural summit held in July 2007. Worth noting is that over 95% of the total capital budget under the Ministry of Agriculture in the 2008/09 financial year is funded by the local government, with the Republic of China on Taiwan providing the remaining budget for controlling the spread of alien invasive plants.

In terms of the capital budget, Figure 2 shows a more similar picture, where the percentage allocation is also below 10 percent between 93/94 and 07/08. Funds provided under the capital budget are primarily used to implement Government investment projects, in line with national priorities as reflected in sectoral development plans, which normally precede the annual budgetary process. In the agricultural sector, such funds are used for land and irrigation development, agricultural research and extension, animal production and health as well as food and nutrition projects. A major improvement is shown in the 2008/09 financial year, where about 46% of the capital budget under the Ministry of Agriculture has been allocated for land and smallholder irrigation development. Projects under the agricultural sector include those implemented by the Ministry of Natural Resources and Energy, mainly focusing on downstream development of major irrigation projects. These include KDDP and LUSIP, which upon full completion will bring about meaningful change to the lives of rural farmers who have suffered heavily from the impact of the recurring drought currently affecting the entire southern African region.

165

Figure 2: Percentage Allocation of Total Capital Budget to the Agricultural Sector

0

5

10

15

20

25

Years

% o

f tot

al c

apita

l bud

get

Source: Ministry of Finance

Implementation of the LUSIP, which has progressed well, has attracted huge support from international financiers, hence the increase of the sector’s capital budget to about 23% of Government’s total capital budget in 2008/09.

Donor Support in the Agricultural SectorDonor agencies normally finance capital projects as opposed to recurrent activities. The support from these agencies is received either in the form of grants or loans. In the years under review, donors have played a significant role in financing capital projects under the agricultural sector. Evidence provided in Table 1 and Figure 3 shows that donor support has on average, accounted for more than 50% of the total capital budget in the agricultural sector.

Figure 3: Donor Contribution to Capital Budget under the Agricultural Sector

0102030405060708090

Years

% c

ontr

icut

ion

of d

onor

s

Source: Ministry of Finance

It was only in 2001/02, that the support from donors was less than 30% of the total capital budget allocated to the agricultural sector. The full details of the total budget allocation are provided in the Table 1. Swaziland has received support in the agricultural sector from

166

various donors including IFAD, USA, USAID, UN, Taiwan, EDF, Germany, RSA, DBSA and ADB. The Republic of China on Taiwan has of late emerged the leading development partner in the sector, especially between 1998/99 and 2007/08. The support received from Taiwan has been spread throughout a number of sub-sectors, including irrigation development, resettlement, control of alien invasive species and livestock development. In the late 80s and early 90s, the agricultural sector in Swaziland was mainly supported by IFAD and EDF. IFAD provided support on the improvement of irrigated agriculture, credit facilities and improving marketing systems for agricultural products. EDF, on the other hand, provided support mainly on the earth dam construction programme and irrigation development.

Figure 4: Development Partner's Support to the Agricultural Sector9.7%

6.0%

1.1%1.3%

24.9%

19.7%

0.4%5.3%

0.1%

11.6%

19.7%

IFAD

USA

USAIDUN

TAIWAN

EDFGERMANY

RSA

DBSAADB

VARIOUS FINANCIERS

Source: Ministry of Finance

Substantial support has been received of late from various financiers, who are assisting Government with the implementation of major irrigation projects, including LUSIP and KDDP. The financiers include IFAD, African Development Bank, Arab Bank for Economic Development in Africa (BADEA), Development Bank of South Africa, European Investment Bank, European Union and Taiwan/ICDF.

Table 1: Total Budget Allocation to Agricultural Sector (1989/90 - 2008/09)

Years Recurrentto sector [E'000]

Gov'ttotalrecurrent[E'000]

GOScapital tosector[E'000]

Donorcapitalto sector[E'000]

Total capitalto sector[E'000]

All sectorstotalcapital[E'000]

Totalbudget tosector[E'000]

TotalGov'tbudget[E'000]

% allocationto agricsector

89/'90 26,625 350,014 4,359 13,586 17,945 100,223 44,570 450,237 9.9090/'91 28,597 418,375 6,948 17,323 24,271 245,833 52,868 664,208 7.9691/'92 34,001 514,305 19,780 33,324 53,104 331,983 87,105 846,288 10.2992/'93 40,173 659,822 32,233 44,158 76,391 416,244 116,564 1,076,066 10.8393/'94 59,214 889,720 15,025 16,339 31,364 412,350 90,578 1,302,070 6.9694/'95 60,584 1,007,110 13,098 13,468 26,566 550,470 87,150 1,557,580 5.6095/'96 55,704 1,138,802 16,826 9,197 26,023 414,755 81,727 1,553,557 5.2696/'97 59,588 1,261,314 7,423 14,264 21,687 540,824 81,275 1,802,138 4.5197/'98 70,134 1,497,342 4,782 22,559 27,341 526,535 97,475 2,023,877 4.8298/'99 76,878 1,726,414 11,370 26,123 37,493 572,529 114,371 2,298,943 4.9799/'00 81,497 1,961,033 22,093 22,188 44,281 944,405 125,778 2,905,438 4.3300/'01 83,483 2,226,339 20,776 11,652 32,428 960,233 115,911 3,186,572 3.6401/'02 100,548 2,459,041 38,874 15,385 54,259 1,158,510 154,807 3,617,551 4.2802'03 106,523 2,903,226 45,171 27,690 72,861 1,126,742 179,384 4,029,968 4.45

167

Years Recurrentto sector [E'000]

Gov'ttotalrecurrent[E'000]

GOScapital tosector[E'000]

Donorcapitalto sector[E'000]

Total capitalto sector[E'000]

All sectorstotalcapital[E'000]

Totalbudget tosector[E'000]

TotalGov'tbudget[E'000]

% allocationto agricsector

03/'04 103,607 2,271,470 32,238 38,211 70,449 1,232,502 174,056 3,503,972 4.9704/'05 122,669 2,931,543 39,880 70,339 110,219 1,415,222 232,888 4,346,765 5.3605/'06 146,638 3,453,095 44,608 43,175 87,783 1,490,376 234,421 4,943,471 4.7406/'07 142,832 5,687,453 61,032 61,187 122,219 1,450,000 265,051 7,137,453 3.7107/'08 198,021 7,169,076 75,970 72,339 148,309 1,953,635 346,330 9,122,711 3.8008/'09 333,743 7,341,287 515,674 2,233,060 849,417 9,574,347 8.87

Source: Ministry of Finance

168