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Report No. 13633

PROJECT COMPLETION REPORT

MALAWI

AGRICULTURAL EXTENSION AND PLANNING SUPPORT PROJECT(CREDIT 1626-MAI)

OCTOBER 25, 1994

Agriculture and Environment DivisionSouth Africa DepartmentAfrica Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed witbout World Bank authorization.

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CURRENCY EQUIVALENTS

1985US$ 1.0 = MK 1.721986US$ 1.0 = MK 1.861987US$ 1.0 = MK 2.211988US$ 1.0 = MK 2.561989US$ 1.0 = MK 2.761990US$ 1.0 = MK 2.731991US$ 1.0 = MK 2.801992US$ 1.0 = MK 3.601993US$ 1.0 = MK 4.39 (Av. Jan.-Sept. 1993)1994US$ 1.0 = MK 7.0 (Av. Apr.-June 1994)

WEIGHTS AND MEASURES

Metric System

GOVERNMENT FISCAL YEAR

April 1 - March 31

FOR OFFICIAL USE ONLY

ABBREVIATIONS

ACB Agricultural Communications BranchADD Agricultural Development DivisionADMARC Agricultural Development and Marketing CorporationAGREDAT Agricultural Economics, Statistics and Data Processing UnitARC Agricultural Research CouncilART Adaptive Research TeamsASP Agricultural Services ProjectBES Block Extension SystemCAETO Chief Agricultural Extension and Training OfficerCAO Chief Agricultural OfficerCARO Chief Agricultural Research OfficerCAS Controller of Agricultural ServicesCIMMYT Wheat and Maize Improvement CentreCPO Chief Planning OfficerCTL Commodity Team LeadersDAR Department of Agricultural ResearchDCA Development Credit AgreementDCAO Deputy Chief Agricultural OfficerDCARO Deputy Chief Agricultural Research OfficerDEVPOL Development PolicyDO Development OfficerDOA Department of AgricultureEP&D Department of Economic Planning and DevelopmentEPA Extension Planning AreaERR Economic Rate of ReturnFA Field AssistantsFAO/CP FAO/World Bank Cooperative ProgrammeFHA Farm Home AssistantsFSNU Food Security and Nutrition UnitGOM Government of MalawiICRISAT International Crop Research Institute for the Semi-Arid TropicsIFAD International Fund for Agricultural DevelopmentIITA International Institute for Tropical AgricultureINIBAP International Institute for Banana and Plantain ResearchISNAR International Service for National Agricultural ResearchLLDP Lilongwe Land Development ProgmrameMADD Mzuzu Agricultural DivisionMAEPS Malawi Agricultural Extension and Planning Support ProjectMARE Malavi Agricultural Research and Extension ProjectMOA Ministry of AgricultureMOF Ministry of FinanceNARP National Agricultural Research ProjectNRC National Research CoordinatorsNRDP National Rural Development ProgrammeOFD On Farm DemonstrationOSU Oregon State UniversityPCP Pilot Communication ProgrammePCR Project Completion ReportPD Planning Division (MOA)PO Project OfficerRDP Rural Development ProjectRMEA Regional Mission in Eastern AfricaSACA Smallholder Agricultural Credit AdministrationSAR Staff Appraisal ReportSDR Special Drawing RightsSFFRFM Smallholder Farmers' Fertilizer Revolving Fund of MalawiSMS Subject Matter SpecialistT&V Training and VisitTA Technical AssistanceTOR Terms of ReferenceTOT Training of TrainersTRFCA Tea Research Foundation of Central AfricaUNDP United Nations Development ProgrammeUSAID United States Agency for International Development

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

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluation October 25, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Malawi -Agricultural Extension and Planning Support Project (Cr. 1626-MAd)

Attached is the Project Completion Report on Malawi Agricultural Extension andPlanning Support Project (Cr. 1626-MAI) prepared by the Africa Regional Office. Part II wascontributed by the Borrower. While in general agreement with the conclusions of Parts I and II, theBorrower mentions some difference on points of detail and also correctly notes that the StaffAppraisal Report did not make specific recommendations concerning the poorer smallholders whoconstitute 55 percent of farmers and operate one third of arable land without access to significantcredit; failure to assist this majority was mentioned as a disappointing result in Part I.

The project aimed to improve the planning capacity of the Ministry of Agriculture(MOA), improve the planning, budgeting and management in its extension department, enhance staffquality through training, and improve extension services in a large administrative region (Mzuzu); thelatter also received equipment, infrastructural development and additional credit. The MOAinstitutional improvement was reasonably successful but has been plagued by senior staff retentionproblems. Improvements in the extension department proved difficult to implement; at the end ofthe project a planning and budgeting system was installed but its impact is as yet unknown, and theintended improved career structure for extension staff was abandoned. On-farm demonstrations weresuccessfully introduced to the existing modified T&V system of extension in Mzuzu, and even duringthe project period this innovation spread to the rest of the country. However, there was anunexplained reduction in the number of on-farm demonstrations in the last two project years. Massmedia programs were enhanced with USAID support, and there was an increased involvement ofwomen in extension and credit activities. The extension system, however, was affected by seriousoperational funding constraints; there is room for rationalization of staff numbers and services;research-extension linkage is deficient and site specificity in fertilizer recommendations needs to beimproved; and little attention is being given to those without access to credit (as has been traditionalin extension in rural development projects in Malawi).

Data to quantitatively assess impact even in Mzuzu were unavailable, but the extensionsystem did at least contribute to the substantially expanded use of hybrid flint maize and highernutrient fertilizers. The project is rated as having a satisfactory outcome, with a modest institutionaldevelopment impact. Sustainability is uncertain, especially considering the funding problems. Afollow-on project is attempting to address the identified problems and should at least temporarilyalleviate the operational support constraint. The quality of the Completion Report is satisfactory.

An audit is not immediately planned, but the project is likely to be audited togetherwith other research and extension interventions in Malawi in the future.

Attachment

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


MALAWI


TABLE OF CONTENTS

PREFACE ....................................................... i

EVALUATION SUMMARY ........................................... iii

PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE ................. 1

1. Project Identity . .............................................. 12. Background ................................................. 13. Project Objectives and Description .................................. 24. Project Design and Organization .................................... 25. Project Implementation .......................................... 36. Project Results . .............................................. 117. Project Sustainability ........................................... 148. Bank's Performance .159. Borrower's Performance ......................................... 1610. Lessons Learned . .............................................. 1611. Project Relationship . ............................................ 1812. Consultancy Services ........................................... 1813. Project Documentation .......................................... 18

PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE .... ........ 19

PART III: STATISTICAL INFORMATION ................................. 27

TABLES

1. Related Bank Loans and/or Credits .................. 272. Credit Time Table........................283. Credit Disbursements.......................294. Project Implementation ...................... 305. Project Costs and Financing.....................356. Project Results.........................377. Status of Covenants ....................... 388. Use of Bank Resources ...................... 40

ANNEX 1 - TABLES

1. Comparison of Target and Achievement Dates ........ ................... 432. Extension Service Demonstration Data ........... ..................... 443. Mzuzu ADD Credit Operations ..................................... 454. Inflators and Exchange Rates ...................................... 465. Incremental Maize Production (1983/84 - 1992/93) ........................ 476. Switch of Fertilizer Mix: Estimated Savings in Fertilizer Imports Expenditures in 1992/98 487. Investment Costs for Economic Analysis .......... ..................... 498. Smallholder Sector: Maize Area and Yields ........ .................... 509. Import Parity Prices ......................................... 5110. Budget per Hectare for Local and Hybrid Maize ....... ................... 5211. Mzuzu ADD Net Value of Maize (Local and Hybrid) Production in Economic Terms . .. 5312. Economic Rate of Return Estimated: Mzuzu ADD ........................ 54


MALAWI


PREFACE

This is the Project Completion Report (PCR) for the Malawi Agricultural Extension andPlanning Support Project (MAEPS) for which Credit 1626-MAI in the amount of SDR 11.7 million(USS 11.6 million) was signed on December 20, 1985. The credit became effective on 20 March1986. Originally expected to be implemented over a five-year period and closed on September 1,1991, the credit was actually closed, after two extensions totalling 22-months, on 30 June 1993.Actual disbursement totalled SDR 11.2 million (US$ 15.0 million) or approximately 96%, in SDRterms, of the originally approved credit amount. The last disbursement was made on October 1, 1993.

Parts I and HI of the PCR were prepared by the FAO/World Bank Cooperative Programme(FAO/CP) for the Agriculture and Environment Division of the Southern Africa Department (AF6AE)of the World Bank. Part II is being prepared by the Borrower.

Preparation of the PCR was started during a visit to Malawi by a teaml from FAO/CP inDecember 1993, and is based,.inter alia, on information gathered in Malawi from discussions withproject staff and officials of the Planning Division and the Department of Agricultural Extension andTraining within the Ministry of Agriculture and with officials from USAID which participated inproject co-financing. Meetings were held with officials of the Department of Economic Planning andDevelopment and the Smallholder Agricultural Credit Administration. The report also takes intoaccount information and data gathered from the Staff Appraisal Report (SAR), the DevelopmentCredit Agreement (DCA), Supervision Reports, USAID Agricultural Research and Extension Project(MARE) final evaluation report, correspondence between IDA and the Borrower and internal IDAmemoranda.

1 Messrs. R. Suppa, Economist and Mission Leader; G. Stem, Agricultural Extension Specialist (Consulant).


MALAWI


EVALUATION SUMMARY

Objectives

The project, signed in December 1985, formed part of the fifth phase of the National RuralDevelopment Programme (NRDP) which included the National Agricultural Research Project (NARP)(Credit 1549-MAI) and the USAID financed Malawi Agricultural Research and Extension Project(MARE), which provided parallel financing to the two IDA Credits. The project aimed at supportingMalawi's institutional development in the agricultural sector with the specific objectives to: (i)improve MOA's analytical and long-term planning capability; (ii) strengthen the National ExtensionService including the establishment of a mechanism for better defining extension strategies, prioritiesand programs and rationalizing existing structures; and (iii) develop the human resources needed foran efficient extension programme.

The following is a description of project components: (i) strengthening the Ministry ofAgriculture's (MOA's) Planning Division (PD); (ii) improving the national agricultural extensionsystem, including developing an extension planning and budgeting system; (iii) upgrading theDepartment of Agriculture's (DOA's) technical capacity by establishing a professional career streamand promotion system for extension staff, and in-service training program; (iv) producing anddistributing of teaching and training materials; (v) improving extension services in the MzuzuAgricultural Development Division (ADD); (vi) providing incremental credit for farmers in theMzuzu ADD; and (vii) improving research-extension linkages through the participation of extensionstaff in Adaptive Research Teams (ARTs), research-extension workshops and the development anddissemination of locally-specific technical recommendations.

Implementation Experience

The project was originally scheduled to be completed by September 1, 1991 after animplementation period of five years. Although investment planned at appraisal and subsequentmodifications were substantially completed on time, the project was extended to 1993 to bridge thegap between it and a follow-up Agricultural Services Project (ASP) which supports both nationalresearch and extension systems. Major implementation constraints included: (i) senior staff vacanciesand changes; (ii) inadequate project management and coordination, with the Steering Committeeestablished for that purpose meeting only infrequently; and (iii) weak procurement and financialservices, that seriously delayed equipment and operating funds for extension work.

The constraints were to some extent alleviated by implementation assistance provided by Bankstaff, particularly in the fields of extension, disbursements, finance and procurement. Changes toproject design agreed upon during implementation included: (i) a pilot operation to improve fieldprocedures and practices of the extension services, that started on a very small-scale in Mzuzu ADDand spread to all parts of Malawi, this, rather than planning and budget improvements, became the

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centerpiece of the project; (ii) Technical Assistance (TA) for the Food Security and Nutrition Unit,newly established in the Department of Economic Planning and Development; and (iii) provision ofoperating funds for new extension activities (i.e. expansion of the extension methodology used inMzuzu ADD to the rest of the country), by amending the Development Credit Agreement (DCA) andusing previously unallocated funds for the new disbursement category.

Results and Impact

Overall, project performance was generally satisfactory, and the outcomes were mixed.Observable results and impact suggest that the project made significant progress toward achievingmany of the original objectives (training, production and distribution of teaching and trainingmaterials, infrastructure development, improvement of the extension system in Mzuzu ADD,provision of incremental credit to farmers in Mzuzu ADD) and was disappointing in other aspects(planning and budgeting system, professional career stream, research-extension linkages).

Technical assistance and 12 masters degree fellowships have strengthened the PlanningDivision's analytical and planning capacity, but improvements were constrained by continuing seniorstaff vacancies and turnover. Of the various interventions to strengthen extension, an improvedplanning and budgeting system has been developed and adopted, but so late that the impact is not yetapparent. The two USAID funded components, the Women's and Communications Programs weresuccessful. The Women's Programme helped to formulate policy and procedures, including thechange of emphasis from home economics to equal attention being paid to agricultural productionactivities. The Communications TA, training and equipment gave the Agricultural CommunicationsBranch (ACB) of the MOA a much strengthened desk top publishing capacity, and the ACB nowconducts regular radio programs for a wide audience and produces advisory leaflets and other printedmaterial on demand. A pilot scheme designed during implementation, to improve extension methods,procedures and field training, spread to all parts of the country and has been adopted nationally.However, there was no funding for vehicles, equipment and operating funds needed for that purpose.As a result, a better system is in place, but some shortcomings identified during implementationremain to be addressed, including funding and transport problems, failure of extension to reach thepoorer smallholder sector and training weaknesses.

With regard to upgrading DOA's technical capacity, the Government was not able tointroduce an improved career stream, the fellowship and massive local training programme wasimplemented efficiently, but the latter proved so costly that it could not be completed for most fieldlevel staff. The Adaptive Research Teams, which received support from both this project and NARP,did not improve the research/extension linkage in Mzuzu ADD. The complementary credit componentexpanded lending seven fold in current terms, but almost 45% of total lending has not beenrecovered. This was not a local but a national trend. However, the fact that despite the Mzuzuinvestments, extension performance does not appear to be sustainable after very promising initialimprovement, must cause concern. The Food Security and Nutrition surveillance scheme introducedinto the project after appraisal, has become a vital tool for the Government to monitor national foodsupplies and nutrition status and design remedial actions if and when needed.

Additional contributions of the project include: (i) a major strengthening of Malawi'ssmallholder extension delivery system throughout the country; (ii) contribution of the extensionservice to the spread of hybrid maize from about 70,000 ha before the project (average 1984/85-1985/86) to about 330,000 ha in 1992/93. The hybrid expansion had increasing impact on productionboth in the 1991/92 drought, when the 16% of the area sown to it accounted for 40% of the harvest,and in the 1992/93 "boom" year, when 25% of the area under hybrids accounted for 50% of the

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record two million tons maize crop. However, the hybrid maize area dropped significantly in1993/94 (to about 175,000 has), primarily due to the collapse of the rural credit system; and (iii)contribution of the extension service to the conversion by farmers from using low nutrient contentfertilizers to those with high content. The conversion to high nutrient content fertilizers resulted inconsiderable foreign exchange savings.

Limited availability of empirical evaluation makes it difficult to provide conclusive evidenceof production impact at this time, although the accrual of project benefits may be forthcoming as theimprovements in the extension system are fully implemented.

Sustainability

The project, in line with its objectives, tried to raise the effectiveness of the extension service.However, with operating fund shortages that have handicapped the extension service during theproject period and with worsening cuts in MOA's revenue budget, the sustainability of the project'smain activities is in doubt without greater and sustained Government commitment and continueddonor support (during the 1990s) for operating costs, including vehicle and equipment replacement.Cost economies, in addition to improvements to be gained from better planning and budgeting, musttherefore be seriously and constantly considered and implemented, including detailed review andstreamlining of existing staffing and services to improve staff working conditions. Ways of doing sowithout affecting extension performance materially should be explored. It is important to note that theAgricultural Services Project (ASP) is supporting various actions to address these issues and developand implement workable solutions.

Lessons Learned

The major lessons to be derived from the implementation of the project are the following:

a comprehensive pre-project/pre-program analysis within country of farming systemsand technology needs of the main farmer types, the available stock of technology, andthe technology generation capacity are needed to ensure cost-effective and sustainableinterventions;

- an improved program budget system for recurrent cost funding should be developedand implemented within MOA, and this should be coordinated with an ongoing reviewof staff levels and job description;

- more thorough assessment of the borrower's financial and procurement capabilities isneeded during project preparation/appraisal, as well as operational requirements fortheir strengthening;

- it is important to establish effective project management and coordinationarrangements before project implementation;

- field supervision of financial, technical and management aspects of projects with IDAdonor assistance is extremely important;

- a detailed review of the various NRDP is needed to ascertain whether there aresustainable and effective alternatives to cost-intensive staff and operating requirementsof the extension system;

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greater attention needs to be devoted to ensuring that improvements in extensionmethods are complemented by ensuring strong research-extension-farmer linkages;

the importance of separating extension and credit activities to ensure extensionworkers devote their time to extension activities; and

- monitoring and evaluation of project activities are essential in order to communicatethe positive results of extension activities to Government and obtain Govermnentcommitment/support (particularly financial).

The design features of the follow-up project ASP, have taken into account all of the abovelessons. It is important that ASP implement effectively the various action plans prepared to addressthe key lessons from MAESP. Regarding improved and sustainable extension services, ASP is givingemphasis to:

improved mechanisms to ensure a constant flow of improved technologies to a broaderrange of smallholders through greater emphasis on low-cost technical messages andmore effective researcher-extension-farmer linkages;

improved MOA budgeting and planning procedures and capacities, includingdevelopment and application of improved 'yardsticks" for determining the level ofnon-salary operating funds for ensuring effective extension services; and

improved monitoring and evaluation of the effectiveness and impact of improvedextension services.

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MALAWI


PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE

1. Project Identity

Project Name Agricultural Extension and Planning Support Project

Credit No. 1626-MAI

RVP Unit AF6AE

Country Malawi

Sector Agriculture

2. Background

Introduction

2.1 The project was identified by IDA in early 1983, prepared by the Ministry of Agriculture(MOA) Planning Division assisted by Bank staff, and appraised by the Bank in September/October1984. The Credit Agreement was signed on December 20, 1985 and the project became effective onMarch 20, 1986. The project formed part of the fifth phase of the National Rural DevelopmentProgramme (NRDP) which also included the National Agricultural Research Project (NARP,Credit 1549-MAI) and the USAID-financed Malawi Agricultural Research and Extension Project(MARE), which provided parallel co-financing to the two IDA Credits.

The Agricultural Sector

2.2 Agriculture is the backbone of Malawi's economy. Up to 1990, it accounted for about 40% ofGDP, and 85% of exports and employment. Maize is by far the most important crop in terms ofcultivated area, number of growers, and food security. Other major food crops include groundnuts,pulses, cassava and rice. Exports are dominated by three crops: tobacco, tea and sugar. Production ispredominantly under rainfed conditions. Malawi's agriculture is characterized by smallholders andestates, differentiated by regulations concerning production, marketing, pricing and land tenure. Whileestate production focuses mainly on export crops, the smallholder sector accounts for about 80% offood production and only 10% of exports. It involves about 1.8 million families operating undercustomary tenure on about 1.75 million hectares, producing primarily for subsistence. Land and laborproductivity among the majority of smallholders is very low, and nearly half of the population livesbelow the level of absolute poverty. High population growth, low productivity of land and labor inagriculture, limited employment opportunities, low quality of human capital due to low nutritionallevels and limited access to education and health services, are the main causes of poverty. Ibis

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situation was, at project preparation time, further aggravated by the failure of research to find high-yielding maize varieties acceptable to smallholder farmers, inadequate supply and use of fertilizersand a narrow range of high-value cash crops available to smallholders.

The Agricultural Development Policy

2.3 As outlined in its "Development Policy (DEVPOL) 1987", the Government accorded priorityto promoting agricultural growth. The primary objectives for the agricultural sector were to ensurefood security at the household and national levels, improve rural incomes and increase exportearnings, while protecting the environment. In addition to increasing agricultural productivity, thestrategy envisaged policies and investment measures to expand off-farm employment opportunities.The donor community, including the Bank, supported this Government strategy.

3. Project Objectives and Description

3.1 Project objectives were described in the Development Credit Agreement (DCA) as follows: (i)improve MOA's analytical and long-term planning capability; (ii) strengthen the national extensionsystem, including the establishment of a mechanism for better defining extension strategies, prioritiesand programs and rationalizing existing structures; and (iii) develop the human resources needed toput in place a more efficient extension programme.

3.2 The following is a description of project components: (i) strengthening the Ministry ofAgriculture's (MOA's) Planning Division (PD) through training and consultant services; (ii)improving the national agricultural extension system, including developing an extension planning andbudgeting system; (iii) upgrading the Department of Agriculture's (DOA) technical capacity byestablishing a professional career stream and promotion system for extension staff, and an in-servicetraining programme; (iv) production and distribution of teaching and training materials; (v) improvingextension services in the Mzuzu Agricultural Development Division (ADD)' by constructing offices,staff houses and marketing sheds, and purchasing vehicles and motorcycles for extension managersand supervisors and equipment and materials needed by extension staff; (vi) providing incrementalcredit for farmers in the Mzuzu ADD; and (vii) improving research-extension linkages through theparticipation of extension staff in Adaptive Research Teams (ARTs), research-extension workshopsand through the development and dissemination of locally-specific technical recommendations. TheDCA allowed for component modifications mutually acceptable to the Government of Malawi (GOM)and IDA.

4. Project Design and Organization

4.1 Initial project preparation followed NRDP lines, to strengthen staff and infrastructure in areasnot covered by earlier projects. However, during preparation it was believed that, given Governmentbudgetary constraints, priority should be given to consolidating and improving maintenance ofexisting NRDP investments. Both GOM and the Bank considered that there was already a basicframework for satisfactory extension in Malawi, which needed considerable strengthening byimproving: cost effectiveness, extension planning and evaluation, the staff's technical capacity andlinkages with research. Consequently, project design focused on consolidation and institutionalimprovements of the agricultural planning and extension systems. However, planning aspects wentbeyond extension and were designed to have the Planning Division provide sector strategy and advice

I The Mzuzu ADD, as Lhe second largest ADD and representative of most of the country's agricultural area, wasselected to pilot the first phase of a national programme to improve extension service (SAR).

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for policy formulation and determine investment priorities. PD was also expected to improve projectpreparation, and monitoring and evaluation services. Orthodox NRDP investments (paras 3.2(iv) and(v)), accounting for 30% of project cost, were designed for Mzuzu Agricultural DevelopmentDivision only, which was to serve as a pilot area for improved extension planning and budgeting andresultant modifications (improvement) of the extension service; and for a "mass communicationsystem" that was not described in project documents. Technical assistance and training, totalling 55%of project cost, was envisaged to cover the entire extension service.

4.2 Overall responsibility for project implementation was vested in the MOA Principal Secretary(PS), assisted by the Project Steering Committee, comprising the two Controllers of AgriculturalServices (CAS), one for the NRDP and one for institutions; the Chief Agricultural Officer; the ChiefVeterinary Officer; the Chief Agricultural Research Officer, the Chief Projects Officer, the ChiefAccountant; and a Ministry of Finance (MOF) representative. Procurement services were to beprovided by the Consultant funded by NARP, and the same firm of architects, already appointedunder NARP, was to be entrusted with supervision of the civil works. The USAID contribution to theproject under the MARE project, which had been approved in July 1985, was managed by theConsortium for International Development, a consortium of four universities, with Oregon StateUniversity (OSU) serving as the lead institution.

Design Weaknesses

4.3 In retrospect, there were design shortcomings that led to implementation difficulties orchanges, notably: (i) a weak project management structure (para 5.31); (ii) inadequate provision forprocurement of goods (para 5.29); (iii) inadequate analysis of extension methods in use in the field(paras 5.10-5.15); (iv) inadequate analysis of and arrangements for ensuring adequate operating fundshortages (paras 5.13 and 7.1); and (v) inadequate attention to ensuring effective research-extension-farmer linkages.

5. Project Implementation

General

5.1 Implementation of IDA-financed components started slowly, despite two launch workshops,which were held a year apart, and labelled successful by participants. Action plans for implementingeach component were drawn up, but these seemed to have little impact on subsequent implementation(Annex 1, Table 1). The main reason for the slow start was a change of virtually every senior MOAmanager, including the PS, the two CASs, and heads of DAR, DOA and the Planning Division. Bycontrast, USAID-funded components, managed by OSU (para 4.2), made good progress.

5.2 Three key developments emerged from the Project. The first of these was initiation of a pilotoperation in Mzuzu ADD to improve field extension, which spread to the rest of Malawi and becamethe centerpiece of the project (para 5.10). The second was the establishment of a Food Security andNutrition Unit (FSNU) in the Department of Economic Planning and Development (EP&D) in theoffice of the President and Cabinet, and agreement by the Bank to finance TA to support it (para5.26). Finally, at GOM's request, the Bank agreed to some changes of TA to be financed by theProject (para 5.4).

5.3 Implementation was constrained by procurement (para 5.29) and financing problems (para5.30) and by lack of project direction/coordination/monitoring (para 5.31). Nevertheless, most of theproject components were completed as expected at appraisal. The closing date was extended twice, by

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a total of 22 months, mainly to ensure continuation and replication to other ADDs of the extensionpilot operation until the work could be funded by the follow-up project Agricultural Services Project(ASP).

Implementation of Individual Components

5.4 Strengthening the MOA Planning Division. PD has five sections, respectively responsiblefor: (i) price policy and marketing; (ii) project preparation; (iii) surveys, statistics and evaluation;(iv) planning and budgeting; and (v) data processing. The project was to finance about 84 months oflong-term TA for a Planning Adviser, Price Policy Economist and Systems Analyst, and 12 months ofshort-term TA. Other investments included six Masters fellowships and six vehicles plus officeequipment for the Division. Project activities were delayed because the Chief Planning Officer (CPO)post was vacant for the first year (para 5.1). Two further changes of this post and staff vacancies,some due to staff absences on training, impeded the Division's work, but ultimately the componentswere implemented more or less as planned with only a few exceptions. EEC provided the planner ona grant basis and MOA requested and IDA agreed to finance a monitoring and evaluation specialistinstead. At the end of the project, 90 person-months of long-term TA were delivered. Figures onshort-term TA were not available. The overseas graduate training programme was doubled, and therewere 12 Masters fellowships instead of the six projected in the SAR. Furthermore, some 156 person-weeks were provided to the Planning Division under the short-term (off-shore) training componentagainst the 100 foreseen at appraisal (Part III, Table 4).

5.5 The quality of the TA provided during project implementation has varied. Monitoring andEvaluation TA was poor and is reflected by the lack of extension or project impact studies. The firstnational survey of extension impact, conducted in early 1993, had not yet been collated and analyzedat the time of PCR field work. By contrast, the systems analyst is credited with designing the MOAcomputerization programme, conducting effective training, and designing the systems that remain inuse today. Of the two pricing policy advisers, the first was so difficult to manage that he had to bereplaced. The second performed his pricing policy evaluation duties competently, but it is difficult tojudge whether there was a lasting impact of his work on the Division.

5.6 The enlarged masters training programme (para 5.20), supplemented by short-term trainingfor 26 PD staff (156 person-weeks) disrupted the work of the Division during the project period, andthe performance of the Division remains constrained by staff vacancies, particularly at PrincipalEconomist level. The Division was to prepare a five-year Agricultural Strategy and a draft wasprovided to IDA for review over two years after the target date (Annex 1, Table 1).

Improving National Extension System

5.7 General. The SAR agreed with the 1982 NRDP review that a satisfactory institutionalframework to deliver extension services was in place, but that effectiveness of the extension servicewas increasingly hampered by inadequate numbers of properly trained technical and managementstaff; absence of structured career development opportunities or incentives for high achievement;paucity of technical packages for smallholder crops; inadequate extension planning and budgetingsystems; and unsatisfactory and scarce extension materials. The project was designed to address theseshortcomings as well as to address the need for special work to help the many women farmers.Specific investments for these purposes (Part III, Table 4) were to be mainly: (i) 276 months of TAfor two Training Specialists, a Women's Programme Adviser and a Communications Specialist, bothfinanced by USAID; and an Extension Planning Adviser, Financial Controller and Seeds Specialist,financed by IDA, plus 74 months of short-term TA; (ii) the US$ 3.5 million staff training

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programme, comprising 10 Masters fellowships, 34 diplomas, 120 weeks of short-term trainingabroad, plus some 13.000 weeks of in-country training; and (iii) 14 vehicles for DOA Headquartersand 4 for the Agricultural Communications Branch (ACB), office equipment for both and printing,binding and audio-visual equipment for ACB. In general, USAID-financed vehicles, equipment andoperating costs were to support its TA, in this case the ACB and the MOA Women's programme. Atproject completion, long-term TA amounted to 244 person-months (178 financed by USAID). Data onactual delivery of short-term TA were not available. The training component was successfullyimplemented and included 1 Ph.D., 23 MSc. and 20 diplomas. With regard to short-term training,actual delivery included 808 weeks and 850 weeks for off-shore and in-country courses respectively.Details on SAR targets and actual implementation are given in Part III, Table 4.

5.8 Extension Planning and Budgeting. The main purpose of the project was to strengthen theextension service by eliminating wasteful expenditures identified by improved planning and budgeting.The long-term TA for this purpose proved ineffective, as were proposals to strengthen impact bymoving TA from the Accounts Department to either PD or DOA. Although DOA did not acceptproposals resulting from TA, efforts to improve planning and budgeting continued. Short-term coursesin the later stages of the project in the use of a logical framework approach to designing a 'Five-YearExtension Strategy", led to its adoption by all DOA units and all ADDs. However, adoption is sorecent that the impact is not yet apparent.

5.9 Management Planning. The main output from the Extension Management Planning Adviserwas the Five-Year Extension Strategy, published in January 1990, and amended in June 1992. Thedocument became the policy guideline for all branches and programs of the extension service. Aninalhusbandry work was not included because the Department of Animal Health and Industries wasprimarily responsible for related advisory work. The Strategy details resources required, but does nottake into account the Government's budget constraints.

5.10 Improving Extension Methods, Procedures and Practices. Under NRDP, the country wasdivided into eight ADDs, each directed by a Programme Manager (PM); subdivided into 30 RuralDevelopment Projects (RDPs), each under a Project Officer (PO), further subdivided into 147Extension Planning Areas (EPAs), each supervised by a Development Officer (DO) and each of whichwas divided into sections. These represent the activity sphere of Field Assistants (FA) who are thefrontline extension workers interacting with farmers. In 1991 there were 1,898 sections staffed byabout 1,777 FAs2. In 1981, MOA introduced the Block Extension System (BES) to be standard forMalawi. This was a modified Training and Visit (T&V) system, entailing FA visits on a regularschedule to farmer contact points and bi-weekly FA training. For this purpose, FAs were to divideeach section into 8 Blocks, each one to be visited on the same day, once every two weeks. The mainextension tool was to be a demonstration plot, called the Block Garden, to be provided and tilled byfarmers of the area. Recommended practices were to be demonstrated there and discussed withfarmers by the FA on his visits, which it was hoped would attract most farmers. Farmers wereencouraged to form "Block Committees" to help guide and organize extension work within theirBlocks. FAs were supported by a range of Subject Matter Specialists, both at ADD and RDP level,and primary responsibility for their guidance and training lay with their immediate supervisors, theDOs.

5.11 The March 1987 Project Supervision Mission found that attendance at Block Gardens waslow, which a Mzuzu ADD review ascribed to "monotony of subjects and failure of BES to cater for

2 Source: Five Year Extension Strategy Plan - MOA - June, 1992.

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farmers' demands and aspirations". It was hard to tell what extension work other than visiting BlockGardens extension workers were doing. To address this situation, the mission recommended eitherreplacing Block Gardens or supplementing them with demonstrations on farmers' land, to cater totheir needs and interests. These findings led to subsequent regular visits of a Bank extensionspecialist. In October 1987, in line with appraisal objectives to experiment with improving extensionin Mzuzu ADD, the extension specialist initiated a small pilot operation to strengthen BES in two ofits EPAs. It included the establishment of demonstration plots on farmers' fields, allied to morestructured FA work programs and intensified bi-weekly training. Because of the hostile reception tothe March 1987 supervision findings by Mzuzu extension staff, the pilot operation was designed tominimize changes and reinforce existing practices rather than replace them. Although the new systemwas viewed with suspicion by managers and by DOA HQ staff, the field staff found it to be helpfuland in 1988, it was expanded to other Mzuzu EPAs and to small parts of two other ADDs. By 1992it had been adopted country-wide.

5.12 The rapid spread of the above methodology to the national scene had not been initiallyplanned or anticipated, but the new system was popular in the field because it addressed the difficultyof establishing Block Gardens. In 1991, 10 years after BES introduction, only 32% of blocks had aBlock Garden and it was difficult to tell what extension work FAs were doing in blocks withoutgardens. These gardens were especially difficult to establish in the densely populated South, whereland is scarce, and hard to obtain for communal purposes. There and elsewhere, FAs found thatfarmers were interested in "On Farm Demonstrations (OFDs)" on their own land, reflecting their owninterests. The Block Garden/OFD combination remained the most desirable option, with a range ofrecommendations shown on Block Gardens and specific ones, selected by specific farmers, on OFDs.However, OFDs enabled FAs to demonstrate improved practices, as foreseen in BES, even in areaswithout Block Gardens. By 1990/91, about 5,000 Block Gardens had already been reinforced byabout 22,000 OFDs (Annex 1, Table 2). The Pilot Operation seemed to benefit even the establishmentof Block Gardens which, by 1992/93 had increased to 8,000 and that of OFDs to 30,000. The latter isonly about 30% of the minimum target of establishing five OFDs per block, but quite a commendableeffort, considering that the project had not been designed to remodel extension procedures in thefield. OFDs allied to block gardens, could become a powerful extension tool if the national target ofoperating 75,000 OFDs is attained.

5.13 Successful BES needs mobility for close FA supervision. A Chronic shortage of vehicles wasexacerbated by a two-year delay in arrival of new motorcycles for the Mzuzu ADD. Special efforts toovercome breakdowns and lack of spares, which were the cause of most of the national MOA fleetbeing inoperative most of the time, brought only temporary relief. Recommendations for managingMOA transport (presently valued at MK 35 million), by an expert study, are to be dealt with by thesuccessor project (ASP). Operating fund shortages, equally crippling to extension work, weresomewhat alleviated by a DCA amendment that reallocated SDR 1 million of unallocated funds forextension operating costs (Part m, Table 5-B). However, it took two years from the DCA amendmentfor any funds to reach the field, and only SDR 678,000 of the allocation (which could have beenreplenished) was spent, despite dire fund shortage in the field, which seriously impeded extensionwork.

5.14 NRDP had established monitoring and evaluation (M&E) teams in each ADD. However,extension impact studies were conducted only in the early stages of the pilot operation, mainly byinterested ADD-based Evaluation Officers. With staff changes, vacancies and, allegedly, alsooperating fund shortages, the studies stopped and there seemed to be little that the MOA CentralM&E Unit could do to restart them. This defect received considerable attention during ASPpreparation activities. The early studies showed that only credit club members, usually commercial

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smallholders with larger holdings, attended block demonstrations, and that the same farmers wereconducting OFDs. The majority of the farmers who are subsistence smallholders farming on less thanI ha of land did not benefit from block demonstrations. It seems that despite the efforts ofsupervision and encouragement of Bank staff, there has been little change. As a result, in the 1993/94crop year when, due to particularly poor loan recovery, the number of credit clubs and farmersentitled to loans was drastically reduced, the number of farmers interested in extension work andconducting OFDs also fell. One reason for farmers' loss of interest in FAs was the FAs'responsibility for collecting loan repayments. Since 1987, supervision missions have triedunsuccessfully to separate credit servicing from extension functions, but this delinkage was finallyinitiated on a pilot basis only in July 1992. However, it is expected that the credit operation will betransferred from ADDs to a new rural financial institution to be established under the recentlyapproved Rural Financial Services project. Such delinkage would enable FAs to devote more time toproviding improved extension services. Up until now many FAs spent more time on supervisingcredit and loan repayment than on demonstrating agricultural technology, an estimated more than 80percent of their time was spent on credit-related activities.

5.15 By the time of project closure, the new extension methodology had been adopted as theNational Extension Policy and had spread to all parts of the country. However, the faults identifiedduring implementation, have not yet been eliminated, such as poor financing to meet incrementaloperating costs, lack of transport, inadequate supervision, weak training, and lack of success inexpanding the extension clientele or evolve messages of value to poor farmers, unable to affordpurchased inputs. Adequate funding has never been available for equipping and operating the wholeniational extension service, but it remains disappointing that even ADDs that benefited from supportby this and other projects were unable to overcome the above-listed problems. The recently approvedASP has been designed to address these problems.

5.16 Women's Programs and Communications. Both USAID funded consultants did good workthat left considerable impact. The TA for Women's programs helped to formulate policy andprocedures including the change of emphasis from home economics to equal attention to agricultureby Farm Home Assistants (FHA). Helped by some well focused short-term assistants, the TA helpedto accelerate implementation of Income Earning Activities Programs. These policies and programshave continued to the present. The associated fellowships programs have strengthened themanagement and execution of the Women's programs. The result of intensified MOA Women'sPrograms has been the provision of extension and credit to many women farmers previously deprivedof these facilities, as exemplified in Mzuzu ADD (para 6.5).

5.17 The Communications TA, training and equipment assistance gave ACB a much strengtheneddesk top publishing capacity. The sharply focused short-term training programs in various printingand publishing skills was very effective and could serve as an example for further training. ACB nowconducts regular radio programs that have a wide audience, and on demand, supplies well designedand produced advisory leaflets and other printed materials. The consultant was also responsible forintroducing a Pilot Mass Communication System for Mzuzu, which became known as the PilotCommunication Programme (PCP). In line with the SAR outline, this Programme focussed on 'visualpresentation", which taught ADD staff how to formulate technical advisory leaflets. In addition, videocameras were provided to most ADDs. The Communications Programme provided important supportto extension staff, it also helped the Pilot Extension Improvement Operation materially, but fell shortin identifying a more cost effective alternative to BES.

5.18 Professional Career Stream. At appraisal time a major study of the entire Malawi civilservice was expected to bring about comprehensive changes of terms of service, that could include

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improved career streams for MOA staff. This did not happen. Subsequently the Government insistedthat isolated career improvements for MOA staff alone, were not possible because of the budgetimplications, and eventually the Bank waived the relevant DCA requirements. GOM is addressingthese broader issues of career structure and incentives under a proposed institutional developmentproject and a recently completed Bank subsector study on civil service pay and employment.

5.19 Training, together with TA, were the major investments expected to have most impact onimproving PD and the Extension Service. The project established the Training Unit in MOA andconsultants (USAID funded) did excellent work together with Malawi staff, to organize the massiveMOA training programs arising from MARE, NARP and MAEPS. However, the Unit remainedwithout a Chief Training Officer after the consultants' departure and became less well staffed andtherefore with less capacity to serve MOA's training needs. There is now a recognition that the fullUnit performed a vital service and it is likely to be strengthened.

5.20 Details of MAEPS training are shown in Part III, Table 4. In MAEPS, academic trainingabroad was entirely financed by IDA and reportedly resulted in 12 Masters degrees for planning staff(rather than 6 as planned) and one Ph.D., 10 Master degrees and 20 diplomas for DOA and extensionstaff instead of targets of one, eight and 34 respectively. This was supplemented by about 800 person-weeks of short-term off-shore training for about 100 staff (40% USAID financed). However, the mainprogramme focus was on intensive in-country training (50% USAID financed), especially the Trainingof Trainers (TOT) programs. Training concentrated on senior and middle level management andsupervision staff, resulting in roughly SDR I million higher IDA disbursement for training thanscheduled at negotiations. Only a relatively small percentage of the 7,800 person-weeks trainingprojected for FA staff in the SAR could be conducted, because of the high cost of training.

5.21 Improving the Mzuzu ADD Extension Service. The main investment was the civil worksprogramme, which consisted of constructing two offices, 117 staff houses, 16 marketing sheds andfive diptanks, and was completed as planned. Several problems were encountered. One contractor wasslow and completion was delayed. More seriously, water supplies could not be provided at sevensites. The Ministry of Works Water Supplies Department failed to suggest alternative supply systemswhen trial boreholes failed. The 16 marketing sheds could not be used for inputs sales initially,because housing for store-keepers was overlooked. This did not come to light until the 1989 inputssupplies crisis (para 5.24), and was not corrected until 1993. However, the most serious complaintcame from the staff, about project funded houses, arising from IDA insistence that costs based onstandard Malawi designs, should be reduced by 20%. Complainants pointed out that rooms were toosmall, finish was unsatisfactory, kitchens and stoves were unusable or causing smoke to pollute thehouse; and that temperate designs with inadequate ventilation were built in the hot lakeshore areas.While a considerable amount of housing was provided, the users were unhappy.

5.22 Provision of vehicles. Altogether, 28 motor vehicles, 107 motorcycles and 100 bicycles werebought for Mzuzu ADD. Their arrival was seriously delayed by inept procurement by MOA. Inparticular, motorcycles ordered in early 1987 arrived later than expected and some of the replacementtransport, ordered in 1991, had still not arrived at project closure. Since motorcycles are vital forfield staff supervision, the delays undermined the effort to improve extension services.

5.23 Seed production at Mzuzu ADD was to be supported by a TA seeds specialist. Early duringthe Project, GOM felt and IDA agreed that there was no need for this TA. The modest bean andgroundnut seed production programme did not expand, mainly because the difference between wareand seed prices was too narrow. The unsuccessful seed production attempt at Mzuzu, confirmed that

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MOA supervised farmers cannot produce seed at significantly lower cost than seed companies, andthat effective seed bulking is best done by such companies.

5.24 Incremental Credit. Incremental credit for seasonal loans Mzuzu ADD was channelledthrough the smallholder (SACA). Disbursement and repayment performance are shown in Annex 1,Table 3. Lending started slowly, began to expand gradually in 1987/88 and jumped dramatically in1989/90, from MK 4.2 million to MK 10 million respectively. This came about because theAgriculture Development and Marketing Corporation (ADMARC) closed its retailing outlets, andwith the 16 inputs sheds constructed by the project inoperative (para 5.21), distributed inputs onlyfrom a few major markets. As a result, most farmers found that they could obtain all their fertilizerrequirements easier and much quicker through credit systems and changed from cash to credit inputspurchases. Until then, recovery was satisfactory but the ADD staff could not handle the sudden largeincrease in credit clubs and borrowers and this caused the first serious repayment default. Repaymentsimproved only marginally during the next two years and then deteriorated drastically due to the1991/92 drought. The recovery rate, slid even further in 1992/93 to as low as 11.4% due to acombination of overgenerous repayment moratoria after the drought, even for those who could havepaid; another doubling of lending, which, like in 1989 could not be properly administered; theemergent politics giving rise to suggestions that loans need not be repaid, and the relaxation oflending criteria requiring 100% repayment by a club, to qualify for new loans. This led to about 43%overdues in 1992/93, amounting to MK 23.5 million. Total lending during the project period was MI54.5 million, of which about MK 13 million was incremental (MK 5.8 million of this amount camefrom 1992/93 lending). Only MK 5.2 million were claimed from project funds, which translated intoSDR 1.4 million or only 50% of the SDR 2.8 million allocation to this category. Additional fundswere channelled to Mzuzu ADD from other resources including emergency funds released by theNational Agricultural Research Project (Credit 1549-MAI) and from the Smallholders AgriculturalCredit Project (Credit 1851-MAI and IFAD Loan 212-MW).

5.25 Initially, the credit component brought credit rationing to an end, but in the last project yearno project resources were used to expand lending. There was an eightfold increase, in nominal terms,of seasonal lending, mainly used for hybrid maize seed and fertilizer. Part of this increase paid forhigher inputs prices and much of it replaced cash purchases. To what degree the higher lendinghelped to expand production is difficult to gauge, but it helped enable farmers to continue usinginputs.

5.26 Food Security and Nutrition Unit. Following food security studies by the World Bank and a1986 seminar on the subject by Principal Secretaries, the Government decided to form a new FoodSecurity and Nutrition (FSNU) in the Economic Planning and Development Department (EP&D) andrequested Bank help to finance technical assistance to guide the new unit. FSNU was to design,evaluate and assist with implementation of food security and nutrition policies and programs; monitorfood security and nutrition conditions; coordinate food security and nutrition activities; and coordinateGovernment's relations with donors with regard to food security and nutrition. Bank funding was usedfor a contract with the Harvard Institute for International Development to provide senior advisors forseveral three-week visits per year, and to provide training for local staff. Emphasis was on buildinglocal capacity and this was successful up to the point where, due to promotion opportunities, somekey staff left the Unit. Consequently, after five years of Bank assistance, TA has continued, but ongrant terms from other donors.

5.27 One reason for requesting further TA was the key role being played by FSNU in thecountry's food security system. Early on, FSNU assessments helped to mobilize donor support toavert disaster during the 1987 food crisis. Subsequently, a continuous food security surveillance and

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assessment system has been installed, a strategy for managing strategic grain reserves established,options for meeting grain crises prepared and a food and nutrition data base established. The TA alsocollaborated with UNDP financed experts in similar nutrition oriented work. FSNU has become a keyGOM unit in the Food Security and Nutrition field, but apparently cannot yet dispense entirely withforeign expertise. The importance of the FSNU is confirmed by its useful role in the droughts of1991/92 and 1993/94.

5.28 Improving Extension Linkage was funded entirely from USAID, MARE funds. The designseemed ideal, with an Adaptive Research Team (ART) in each ADD, guided technically by theResearch Department, and accountable for its work programme to the ADD Manager. Each ART wascomposed of an economist and agronomist and would conduct on-farm trials to generate locationspecific production recommendations and identify constraints affecting small farm productivity. Theirlevel of performance, however, was below expectation. This was partly because of the excessivework load, but also because the economists who were needed for diagnostic work on farmers'economic constraints found more lucrative employment and left. Research-extension links were notimproved nor were location specific recommendations generated. Nevertheless, the most importantresearch findings, notably on flint maize hybrids, reached a large proportion of smallholders. It maywell be that extension workers obtained the most important research findings at the excellent annualResearch Station field days. With regard to local recommendations, quite a lot of field trials wereconducted, but were not evaluated by Research Headquarters. Evaluation should be worthwhile andmay result in useful production recommendations.

Special Implementation Problems

5.29 Procurement became a problem even before the departure of the NARP funded consultant.His counterpart was not qualified for the work and this led to some contracts either not being awardedat all or not being delivered because of letter of credit or down payment problems. There were twochanges of MOA procurement staff; in each case with staff without procurement qualifications andexperience, and in each case claiming that the predecessor had left no hand-over notes ordocumentation on past and ongoing transactions. Typing and communication facilities provided wereinadequate. Tender documents took months to prepare and required many amendments, even aftershort-term TA provided model bid documents; and skilled guidance for evaluations was lacking. Theresult was long delays in vehicles and motorcycle deliveries (para 5.22). Towards the end of theproject there was some improvement with a more senior officer in place and provision of a computerand telephone, several training courses, and most importantly, the benefit from field visits by aknowledgeable Bank procurement specialist. As identified at a Project Implementation Review, thereare very few procurement specialists in Malawi, pointing to the need for major training programs.

5.30 Finance and accounting problems became apparent early when credit withdrawal difficultieswere encountered. Assistance from visiting Bank disbursement staff proved invaluable in overcomingthe problems, but recommendations for considerable strengthening of MOA financial and accountingservices were not followed. Then, the DCA amendment, establishing a new disbursement category for"Operating Funds", caused major problems. Since this category did not exist initially, there was noprovision for it in the GOM Development Estimates and its introduction seemed to baffle MOA andTreasury staff. The eventual solution, two years after the DCA amendment, required an input from aBank financial specialist. Even then, the MOA Accounts Department could not provide a satisfactorycash flow to the field (para 5.13). Almost concurrently, it became apparent that GOM DevelopmentEstimates were inaccurate. There was no mechanism for adjusting balances to exchange rate changesand the estimates did not reflect project off-shore spending (direct donor disbursements). The neteffect was that the GOM Estimates often showed low or no balances of project funds while the Donor

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showed considerable balances. As a result some project activities requiring local expenditures were'cut' from the estimates due to the apparent lack of resources. The delay in constructingstorekeepers' houses for Mzuzu marketing sheds (para 5.21) is a typical example. Workshops toimprove the GPM estimates were suggested by Treasury staff and were to be funded by the project,they were arranged, postponed and ultimately abandoned. The present status of DevelopmentEstimates accuracy is not known. Under the ASP special emphasis is being given to addressing theabove issues, especially through development of a yardstick as a basis for determining required non-salary operating funds, improved financial management procedures and associated in-service training.

5.31 Project Management. The Principal Secretary (PS) for Agriculture was given overallresponsibility for project management, assisted by a Steering Committee. The PS and his SeniorManager, who had helped design the project, were moved soon after project approval (para 5.1) andthe replacements were not familiar with the project and its management concepts. The new PS hadlittle feeling of 'Project Ownership" and was probably not informed that he was the Project Managerand, among other things, responsible for convening the Steering Committee. In any case, he was toobusy to undertake day-to-day project management tasks. As a result, the Steering Committee rarelymet, and there was no overall project management or coordination. Consequently, PD, DOA, MzuzuADD and later also FSNU handled their components almost as free-standing projects. There wasvirtually no project reporting and only occasional submission of work programs. Above all, there wasno central manager prepared to deal with financial, procurement and other problems.

5.32 With regard to extension management aspects, ADD managers reported directly to theController of Agricultural Services (CAS) of (NRDP) and were on the same seniority level as theChief Agricultural Officer (CAO), who therefore had relatively little impact on field activities. Thatmay be the reason why there was little push from MOA headquarters to introduce extension planningand budgeting reforms and why headquarters initially had little interest in the pilot operation toimprove extension. This changed in 1992 when a new PS made ADD Managers responsible to CAOwho was retitled Chief Agricultural Extension and Training Officer (CAETO), after which HeadOffice became an active participant in the field operations. While extension work benefitted from theline of control change, it left the direction of animal husbandry and health services undefined.

Project Costs and Disbursement

5.33 The final cost of the project is estimated at US$ 23.0 million, or 14% above SAR estimates(Part III, Table 5-A). Credit disbursement lagged considerably behind SAR estimates averaging 55%of the amount expected to be disbursed throughout the project life. The last disbursement was madeon October 1, 1993, when the total amount had reached SDR 11.2 million (US$ 15.0 million)representing 96% (if expressed in SDR) or 129% (if expressed in US$) of SAR estimates (Part m,Tables 3 and 5). This increased US$ amount reflected the appreciation in the value of the SDR vis-a-vis the US$ during the project period.

6. Project Results

6.1 Overall, project performance was generally satisfactory, and the outcomes were mixed.Observable results and impact suggest that the project made significant progress toward achievingmany of the original objectives (training, production and distribution of teaching and trainingmaterials, infrastructure development, improvement of the extension system in Mzuzu ADD, andprovision of incremental credit to farmers in Mzuzu ADD) and was disappointing in other aspects(planning and budgeting system, professional career stream, research-extension linkages).

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6.2 The agricultural sector underwent two major changes during the course of the project. Thefirst was the conversion from predominantly low nutrient content fertilizers to using mainly those withhigh nutrient content, resulting in about US$ 14 million savings per year on the import bill (Annex I,Table 6). The second and even more significant change was the rapid increase of the hybrid maizearea from 80,000 ha during 1983184-1985/86, to 330,000 ha in 1992/933. The impact of hybridmaize (para 6.11), was high in the favorable 1992/93 season when the 330,000 ha (25% of the maizearea) produced 50% of the record 2 million tons of maize crop. It was even more significant duringthe serious 1991/92 drought, when the 217,000 ha hybrids (only 16% of the maize area) produced283,000 tons, over 40% of the 660,000 tons maize crop. Extension staff taught farmers to convert tonew fertilizers, and similarly extension played an important role in the expansion of hybrid maize, buthow much and what role the project played has not been measured, and is discussed further below.

6.3 The national pattern is mirrored in Mzuzu. In the 1991/92 drought season, hybrids, sown on19% of the maize area, accounted for 50% of production, while in the "boom year" 1992/93, thehybrid maize area, which had expanded to 30% of the total, produced 60% of the record 180,000tons crop. An indication of the benefits of hybrids is given in the recently published DraftAgricultural Sector Memorandum, which records that according to field surveys, converting onehectare of unfertilized local maize to hybrid, results in a net benefit of about US$ 120 equivalent, orabout US$ 36 million for the entire hybrid maize area in Malawi, in 1992/93.

6.4 Two major MOA departments were to be strengthened by the project, the PlanningDepartment and Extension Service. The graduate training programme strengthened PD's operationalcapacity, while the TA impact was mixed with the most visible and lasting impact being MOA'scomputerization. Continuing problems in filling and retaining key senior posts, to some extent,continue to constrain PD's performance.

6.5 The emphasis of the extension improvement component changed during the project. It proveddifficult in the early project period to introduce a better planning and budgeting system. Such asystem was adopted late in the project period and has not yet made an impact (para 5.8).

6.6 Review of the extension system in the field showed critical problems at the FA/farmer level(para 5.11). This led to the Pilot Operation to address the problems in Mzuzu, which aroused somuch interest in MOA and extension staff in other ADDs, that it spread country-wide (para 5.11 and5.12), and became the project's centerpiece. Such a development had not been anticipated or fundedat project appraisal, and it is therefore laudable that such a system could be installed nationally, butnot surprising that imperfections remain to be addressed. For instance, in Mzuzu ADD, where thePilot Operation started, the new system was accepted enthusiastically and spread rapidly until1990/91. Since then, a drop in OFD numbers (Annex 1, Table 2), indicates problems that have notyet been diagnosed. Consolidating the new system and dealing with the problems that were identifiedduring the course of intensive field work (para 5.15), formed the core of ASP preparation. However,a measure of the difficulties encountered by MAEPS, indicates that several project cycles may beneeded to solve all the problems.

6.7 The extension service has been censured for dealing mainly with credit club members of the"commercial smallholder sector". This sector, which comprises 45% of Malawi's farmers, and

3 Information received after field work for this report was completed shows that the hybrid maize area has droppedsteeply during the current season, due to the breakdown of the smallholder credit system. As the credit constraints areresolved and the smallholders are able to gain access to cash crops and world market prices for their crops, the use of maizehybrids will expand significantly during the 1990s.

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operates two-thirds of the arable land, has been largely responsible for the hybrid maize expansion.Extension has been working with up to 30% of Malawi's farmers, or almost 75% of the commercialsmallholder sector, and has played a part in their agricultural improvements. However what part, andhow much of that was achieved through credit-related visits to farmers and how much by theimproved demonstration system (para 5.12), has not been measured. ASP preparation efforts will belooking into this issues.

6.8 It is disappointing that the new system has so far failed to help the majority group of farmers,who farm less than one hectare of land. They constitute 55% of smallholders and operate about one-third of the arable land. Improved farming would have enormous impact on the welfare of this group,but less on national production. This subject has assumed more urgency this season, when manyformer borrower clients are ignoring extension workers, but it would be counterproductive to discountthe needs of the commercial smallholder sector in future.

6.9 The Women's Programme has made important contributions towards bringing women farmersinto the credit and extension network. National figures were not obtained, but Mzuzu ADD is a goodexample replicated in most other ADDs; where the number of women's extension groups bringingextension to women not previously in contact with extension workers increased from 175 to 530 withmembership increasing from 2,200 to 13,400, and the number of women who received seasonal creditrose from 3,500 to 14,500 an increase of 11,000 borrowers compared to the increase of about 8,500male borrowers.

6.10 As indicated (para 5.17) improving ACB's publishing capabilities and capacity was animportant project success and benefit. By contrast, the success and benefit of the Pilot CommunicationProgram (PCP) is. less apparent. It may be that support for this programme ceased too early, before ithad firmly taken root, and follow-up should be considered.

6.11 Although establishing the Food Security and Nutrition Unit (paras 5.26 and 5.27) was notplanned at appraisal, the unit has developed into an indispensable food security and nutritionmonitoring agency. In 1987, its work helped to avert a serious food shortage. Since then, a foodsecurity strategy, including guidance of strategic grain reserves operations, has been developed andfood security and nutrition monitoring systems have been established. It is expected that further TAwill be needed to maintain effectiveness.

Economic Re-evaluation

6.12 At appraisal an economic rate of return (ERR) was calculated for the directly productivecomponents of the project, with incremental production in the Mzuzu extension area of maize,groundnuts, tobacco, cotton, wheat and rice being the major quantifiable economic benefits. The ERRwas estimated at 22%. In trying to reassess the economic viability of the project it is important toconsider some relevant aspects. While average yields of all crops grown by smallholders havefluctuated or remained fairly constant over the 1980s and early 1990s, those of maize increased fromabout 1 ton/ha in 1986/87 to about 1.5 ton/ha in 1992/93. However, this increase is not part of asustained trend in view of the fact that total cereal production in Malawi in 1993/94 is estimated .tsome 900,000 tons, only 40% of the record harvest of last year. The decline reflects lower plantdrarea (13% less) and poor yields, as well as the collapse of the rural credit system. The fact remainsthat whether in a good or bad year and whether fertilized or unfertilized, hybrid maize varietiesalways out-yield local varieties. This has been demonstrated through a series of experimentsconducted by the Maize Agronomy Team, FAO, MOA and the Maize Commodity Team, andindicated that hybrid maize grown without fertilizer performed significantly better than unfertilized

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local maize in 3 out of 4 years. It was also demonstrated that local maize which received 40 kg/ha Nand 10 kg/ha P205 did not yield significantly more than unfertilized hybrid maize. The above clearlyindicates that hybrid maize is more efficient than local maize in utilizing and partitioning nutrients tothe grain, and therefore production of hybrid maize should be encouraged. To the extent farmershave resources to purchase fertilizers, the hybrid/fertilizer package (with appropriate site-specificrecommendations and application practices, will provide attractive financial and economic returns.

6.13 At the national level, the increase in average maize yields in 1992/93 (an exceptional year),mentioned above, is the result of an increase in the proportion of hybrid maize planted from 3% oftotal maize area in 1986/87 to nearly 25% in 1992/93 (Part 111, Annex 1, Table 8), as well asincreased use of inorganic fertilizer throughout the 1980s and early 1990s, and the one-off extraavailability of nitrogen in the soil as a result of the drought the previous year. The first two factorsare the results of: (i) technological changes; (ii) increased supplies of fertilizers and credit to thesmallholder subsector; (iii) Government extension efforts, and (iv) changes in smallholder producepricing (i.e. increase in maize prices) and marketing policies (i.e. liberalization of markets).

6.14 It is also important to recognize that the average yields of hybrid maize have been relativelystagnant e.g., averaging about 2.5 tons/ha, well below attainable yields of about 4 tons/ha undersmallholder conditions. This yield gap is partly due to deficient fertilizer recommendations and farmercrop husbandry practices. However, the increased use of hybrid maize and fertilizer is encouraging,and if smallholders are able to obtain access to world market prices for other crops and to seed,fertilizer and credit supplies, the increased use of hybrid maize should lead to enhanced householdfood security and a diversification of production in this sub-sector. This is supported by the fact thatsince the liberalization of agricultural produce marketing in 1987, there has been an increase in theproduction of a variety of high value crops,, including tobacco, pulses, cashewnuts, sunflower seedsand chilies (ASM-1994). Bearing in mind the above considerations, the economic re-evaluation of theproject, relative to Mzuzu ADD only, has been carried out on the basis of an indicative breakevenanalysis. The analysis, the details of which are presented in Part III, Annex 1, Tables 7 to 12, showsthat in order to generate an ERR of 13%, which would define the project as economically viable, thehybrid maize area, presently (average 1990/91-1992/93) representing about 20% of the total maizeplanted area in Mzuzu, should increase to about 40% in 15 years from now. This assumption isconsidered conservative in view of the fact that in 1984/85-1985/86, the without-project situation,hybrid maize already accounted for about 14% of the total maize area in Mzuzu. A similar approachtaking into consideration not only Mzuzu ADD, but the country as a whole, would have produced amuch higher ERR and well above the opportunity cost of capital. Economic viability would beimproved if the extension system is able to provide better site-specific fertilizer recommendations.Under the above possible scenario, it makes economic sense for GOM to invest in sustaining theextension system. Further improvements in the cost-effectiveness and ensuring dissemination ofrelevant extension messages to a broader scope of smallholders would further enhance sustainableeconomic benefits. Some considerations in trying to estimate other possible benefits to be attributedto the project are given in paras 6.1 and 6.2.

7. Project Sustainability

7.1 The project, in line with its objectives, tried to raise the effectiveness of the extension service.However, with operating fund shortages that have handicapped the extension service during theproject and with the revenue budget cuts worse, sustainability of the project's activities is in doubtwithout greater and sustained Government commitment and donor support (during the 1990s) foroperating costs, including vehicle and equipment replacement. Cost economies, in addition toimprovements to be gained from better planning and budgeting, must therefore be seriously and

14

constantly considered and implemented, including detailed review of existing staffing and services,benefits from them and whether they are all needed. For instance, the ADD structure seems excessiveand should be reviewed to ascertain the value and contribution that all the staff and sections there aremaking, and whether the vehicle fleet noticeable at some ADD offices is all needed. In addition, thevalue of the large SMS complement, particularly at ADD and RDP levels is questionable. Most ofthe time SMSs are office-bound through lack of travel funds. With most farmers practicing a simplerotation, the well qualified RDP and EPA managers should have the technical capability to deal withtechnical problems and train the staff (particularly since many SMS are no more specialized orqualified than the managers), so that all but a very few SMS may be redundant. Equally, some EPAshave as much specialist FA level staff, usually serving few beneficiaries, as the section staff. Areduction or virtual elimination of these, by attrition, early retirement or transfer to FA vacancies,may generate considerable economies without affecting extension quality. Another issue, mainlyconcerning revenue expenditures, is the high allowances paid to trainees. This factor led tocurtailment of project training for FAs and is reportedly straining training resources of ASP. Thesecosts rule out sizeable training programs on revenue budgets, and need to be reviewed.

7.2 Without really stringent economies, the extension system remains vulnerable to the vagaries ofdonor assistance. Whether the service needs to be so large and costly as at present needs to be re-examined. In the meantime, the improved extension system emerging from the project, to beadequately equipped and funded by ASP, is well poised to make important contributions to Malawi'seconomy, with challenging tasks such as spreading the new flint hybrid maize technology widely,especially to the small farm sector; and teaching farmers the recent promising findings of involvingsite-specific fertilization recommendations and associated husbandry practices to enhance the economicefficiency of fertilizer use. Also, with the delinking of credit and extension, greater effort shouldfocus on low-cost technical messages for a broader range of food and cash crops. Such assistancecontinues to be justified to steer effective extension to a sustainable stage, which should continue to betreated as an important objective.

8. Bank's Performance

8.1 The Bank's main strength was the close supervision of the project. Details of staff inputs bythe Bank during appraisal, negotiations and supervision, and data on supervision missions areprovided in Part III, Table 8. Staff time on supervision totalled 421 weeks. The project wassupervised 15 times, mostly as one of a group of inter-related agricultural projects supported by IDA,and benefiting from the interaction between several of these. The Bank provided considerableimplementation assistance through the visiting extension specialist, and this was reinforced from 1989,by a resident extension specialist. This appointment enhanced even further the key role of the Bank'sField Office in trouble shooting and assisting all project implementation aspects. The valuableassistance to the project of Bank disbursement, computer, procurement and financial specialists mustbe especially stressed. In addition, the Bank played a particularly active role in supporting the hybridmaize program.

8.2 Even though the Bank showed flexibility in amending the DCA to alleviate operating fundconstraints, and agreed to extend the project by a total of 22 months to continue to support theextension improvement programme, the change in supervision emphasis in 1987 from planning andbudgeting aspects to replication of the extension system to other ADDs resulted in the poorimplementation of planning and budgeting aspects. In addition, there was lack of specificity on thepart of the appraisal team. For example, programming and budgeting was to eliminate waste in theextension service, but there was no guideline on what waste the appraisal mission had identified.

15

Similarly, the project was to implement a "Mass Communication' component, but there is no hint asto what project designers had in mind.

9. Borrower's Performance

9.1 The Borrower showed committment to the ideals, objectives and substantive goals of theinstitutional development of an extension system, and GOM's committment to a better performingextension system is reflected by the willingness to extend the Mzuzu ADD pilot extension schemenationwide. Performance was enthusiastic in the field, but there were shortcomings in projectdirection and services, summarized as follows: (i) lack of project management and coordination,exacerbated by several changes of MOA senior management staff, in addition the Project SteeringCommittee met rarely and only after repeated supervision mission reminders (para 5.31); (ii) weakprocurement and financial services (paras 5.29 and 5.30); and (iii) only "lukewarm" support of fieldactivities from headquarters except for the last two years of the project (para 5.32).

9.2 Compliance with DCA covenants is shown in Part III, Table 7. In general, covenants werefulfilled, albeit late in the case of time-bound obligations. Two covenants, requiring credit studies anda modified lending structure, became unnecessary with implementation of the SmallholderAgricultural Credit Project. There were two covenants that GOM was unable to fulfil theestablishment of a career stream and the provision of incremental operating expenses. Of these, theBank waived the requirement to establish a career stream for extension staff (para 5.18). TheGovernment failed to meet 100% of incremental operating costs, and its stated intention to do so wasovertaken by the deteriorating national economy, requiring major budget cuts in all ministries. Theextension improvement pilot scheme needed higher operating expenses than foreseen at appraisal,which led to project financing of some incremental operating costs.

9.3 Project accounting and auditing was complex, because there were separate accounts forMzuzu, PD and DOA. They were completed but invariably late. Reporting and submission of budgetsand work plans varied from late to no submission at all and reflected weak project management.

10. Lessons Learned

10.1 The major lessons to be derived from the implementation of the project are the following:

- a comprehensive pre-project/pre-program analysis within country of farming systemsand technology needs of the main farmer types, the available stock of technology, andthe technology generation capacity are needed to ensure cost-effective and sustainableinterventions;

an improved program budget system for recurrent cost funding should be developedand implemented within MOA, and this should be coordinated with an ongoing reviewof staff levels and job description;

more thorough assessment of the borrower's financial and procurement capabilities isneeded during project preparation/appraisal, as well as operational requirements fortheir strengthening;

it is important to establish effective project management and coordinationarrangements before project implementation;

16

field supervision of financial, technical and management aspects of projects with IDAdonor assistance is extremely important;

a detailed review of the various NRDP is needed to ascertain whether there aresustainable and effective alternatives to cost-intensive staff and operating requirementsof the extension system;

greater attention needs to be devoted to ensuring that improvements in extensionmethods are complemented by ensuring strong research-extension-farmer linkages;

the importance of separating extension and credit activities to ensure extensionworkers devote their time to extension activities; and

- monitoring and evaluation of project activities are essential in order to communicatethe positive results of extension activities to Government and obtain Governmentcommitment/support (particularly financial).

10.2 Other lessons include:

the following problems, identified during the course of field work (para 5.15) requirespecial attention: field work financing, transport provision and maintenance,improving field staff supervision and technical skills, and expanding extension staffclientele to the "small farm' group;

the lack of discernible impact from high training expenditures is troubling andwarrants a review of the benefits from the type of training financed by the project andthe high cost of local training; and

MOA has become the owner and custodian of very considerable assets, by way ofbuildings and vehicles, and care needs to be taken to ensure they are properlymaintained.

10.3 The design features of the follow-up project ASP, have taken into account all of the abovelessons. It is important that ASP implement effectively the various action plans prepared to addressthe key lessons from MAESP. Regarding improved and sustainable extension services, ASP is givingemphasis to:

improved mechanisms to ensure a constant flow of improved technologies to a broaderrange of smallholders through greater emphasis on low-cost technical messages andmore effective researcher-extension-farmer linkages;

improved MOA budgeting and planning procedures and capacities, includingdevelopment and application of improved "yardsticks' for determining the level ofnon-salary operating funds for ensuring effective extension services; and

improved monitoring and evaluation of the effectiveness and impact of improvedextension services.

17

11. Project Relationship

11.1 There was good Borrower/Bank collaboration, due largely to the constant dialogue betweenMOA and the Bank's Field Office. This was reinforced by the appointment of the MalawianAgricultural Specialist, who devoted much of his time to the project, in particular to fosteringprogress of extension improvements at the field level. In addition, as pointed out elsewhere,supervision missions provided considerable implementation assistance, which was effective, andappreciated by the Government.

12. Consultancy Services

12.1 The quality of the consultancy services provided by the project varied. The two USAIDfunded consultants who collaborated with the MAEPS project - on communications and women'sprograms - did excellent work. Two of the IDA financed six multi-year consultancies failed.Interestingly, short teaching courses succeeded in introducing log frame planning and budgetingsystems, after the two year TA had failed to do so. On the whole, the TA for this project was neededand well-conceived, but success depended on the quality of the consultants and the adequacy of thesupervision by MOA staff.

13. Project Documentation

13.1 The SAR, in general, provided a useful framework for project implementation. However,certain specific aspects were missing that would have made implementation, supervision and PCRpreparation easier, for example, the omission of detailed cost tables, which are the only record ofproposed investment details. On the Borrower's side, lack or irregularity of reporting would havemade supervision very difficult, but for the close contact maintained by the Bank's resident staff withMOA. Lack of recent impact evaluation makes it impossible for the Borrower and the Bank to judgethe merit of ongoing extension work, and this aspect of the project deserves urgent attention.

18


MALAWI


PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE4

1. COMMENTS ON PART I AND II.

Project Design

1.1 The project is consistent with Government efforts to improve analytical capability within theMinistry of Agriculture to provide for a conducive policy environment to facilitate delivery ofagricultural services. It therefore focussed on provision of Technical Assistance and training of staffin both the Planning Division and the Department of Extension.

1.2 Project Management and Organization: The Management of the project rested in the PrincipalSecretary of the Ministry of Agriculture and coordination to be done through the Project SteeringCommittee. This Management Structure proved ineffective in coordinating activities of the projectwhich were in three separate units, namely, the Planning Division under the Chief Planning Officer,the Department of Agriculture and Mzuzu ADD. However, it is not true that ADD Managers were atthe same seniority level with the Chief Agricultural Officer. The CAO was a grade higher than theADD Managers. The lack of direction in the Department of Agriculture (DOA) was largely due tostaff turnover. The CAO's office saw five different officers, during the life of the project. Thismade follow-up on issues difficult.

Implementation of Individual Components

1.3 The implementation of most project components was largely satisfactory however the projectfaced several major constraints which slowed or prevented the implementation of some components ofthe project. Although most of these were resolved during the course of implementation of theproject, some still persist. There is need therefore to take cognisance of these and address them infuture projects.

Strengthening of the Planning Division

1.4 To strengthen the analytical capabilities of the Planning Division, the project focussed onprovision of three Technical Assistants totaling 84 man months, post-graduate Master's training,vehicles and equipment. The original estimates of the training programme for short-term offshorecourses was revised upward from 99 foreseen at appraisal to 585 person weeks on 19.2.1988 with theBank's concurrence, although only 156 person weeks were achieved. The doubling of the Master'sprogramme to 12 M.Scs was made possible because some took one year instead of the two yearsplanned. In addition there was a transfer of resources from the short-term offshore training to the

4 Prepared by the Ministry of Agriculture and Livestock Development

19

Master's programme to meet the expressed need of the Division and the revision that was made toinclude one Masters for an Economist in the Food and Nutrition Unit of the Department of EconomicPlanning and Development.

1.5 The performance of the Technical Assistance Inputs is mixed. As observed in Part I of thePCR, while others did develop lasting systems, others either left little or no imprint. This calls forneed for careful selection and supervision of TAs to ensure that they perform up to expectation. Thefact that most of the TAs served up to the end of their contracts without being checked leaves onewondering as to whether they were supervised or not.

Improving the National Extension System

1.6 The assessment of the extension component in Part I and III has been reviewed and theborrower has the following comments to make:

(a) Part III Table 4 has been revised in line with the revision that was done on 19.2.1988. Theactual delivery for in- country extension courses was 8,479 person weeks out of the planned13,109 person weeks.

(b) Section 5.20. The low coverage of field level technical staff was due to the reallocation offunds to the Training of Trainers (TOT) programme which was felt to be a prerequisite forthe field one. In addition, the programme used hotels for this training. This proved verycostly and was later changed to utilize Residential Training Centers (RTCs).

(c) Section 5.23: The failure of the Seed Production Programme was due to poor pricingstructure which did not give -any incentive to seed producers. This however does notautomatically mean that smallholder farmers cannot multiply seed at competitive prices tocommercial seed producers.

(d) Section 5.25: It is not true that the injection of incremental credit into Mzuzu ADD stoppedcredit rationing. An examination of the smailholder fertilizer sales on both cash and creditshows that cash sales have been on the increase throughout the projected life except in1989/90 and 1992/93. (Part II Table 2 and Fig. 1).

(e) Section 5.28: While the design of the linkage between Research and Extension seemed ideal,experience shows that there was no full establishment of the ARTs. This was due to therequirement for training of the staff and the unforeseen staff turnover of scientists for betteroportunities. In addition the ARTs did not receive adequate support from CommodityResearch Teams. There is need for future programme to address this.

(f) Section 5.31: It should be noted that while the Principal Secretary is held responsible for theoverall responsibility of the Project, much of the weakness in project implementation was dueto its poor design. The project did not have a definite Project Management Unit despite itsdispersed nature.

(g) Section 5.32: The CAO is a grade higher than Programme managers.

(h) Section 6.5: The PCP activities did not expand outside the pilot areas due to staff turnoverand lack of funds. Although all ADDs did benefit from equipment purchased under theproject.

20

(i) Section 6.6: It is not entirely true that extension messages went to credit farmers only.There have been messages on low cost technologies such as use of organic manure, soilconservation and nutrition. It should also be noted that the SAR does not make definiterecommendations for reaching the poorest smallholders. There is therefore need for futureprogrammes to be more explicit as to how these can be reached.

(j) Section 6.8: National figures for women credit groups increased from 34,273 to 104,598while Women IGA groups increased six-fold from 157 to 1,032.

(k) Section 7 - Project Sustainability: Whilst it is recognized that the present extension system isresource intensive and expensive, there does not seem to be any viable alternatives. Thesuggestion to retrench some staff at the ADD level in favour of lower level staff may notreduce costs as there will be need to strengthen this level and may compromise quality. Thehigh costs of training programmes are not due to high allowances paid to trainees. Trainersare given normal government rates which are the subsistence allowances paid to officers.Cost cutting measures have been adopted including holding of courses at Residential TrainingCentres (RTCs).

2. ADEQUACY AND ACCURACY OF FACTUAL INFORMATION IN PART I

2.1 The country data used in the definition of the project profile for the PCR was in a large partprovided by the participating institutions including the Planning Division, the Agricultural TrainingUnit, Departmnent of Extension & Training and the Chief Accountant. This has been reviewed and afew amendments made. The following are the major corrections that were made:

(i) Table 4 page 3 of Part HI: The Appraisal Estimates were revised as indicated in Table 1 below.Consequently the PCR estimates ought to be assessed in light of the revised targets.

3. EVALUATION OF BANK'S PERFORMANCE AND LESSONS LEARNED

3.1 Bank personnel played a significant role in both the appraisal and execution of the project.The Supervision Missions during the implementation phase were judged to be professionally qualifiedand did assist in guiding the project, including effecting the amendments made to the DCA and theExtension System. However, it is surprising to note that they were unable to resolve the managementproblems which were recognized early at the beginning of the project. For example, the lack of adefinite project manager, despite early recognition of the need for one; nothing was suggested by themission to correct the situation by either suggesting the positioning of a project manager orfacilitator or setting up a Project Management Unit (PMU).

3.2 The Bank's insistence on forcing the borrower to accept its recommendations without carefulconsideration of the implications and justification did contribute adversely to the implementation ofthe project. The instance on having the borrower to accept modification of standard housing designsin the interest of cost cutting without considering the effects and availability of funds from thetotality of the project is one example which resulted in building of inappropriate house designs whichwill require further financial resources to correct.

3.3 The introduction of the Training and Visit (T&V) Extension System and the associated OFDsto the rest of the ADDs was done without due appraisal of the availability of resources to implement

21

the system although this was later recognized and reallocation of SDR 1.0 million was made to theoperation costs category. Even this proved very insignificant to effectively assist eight ADDs whichhad serious shortages of operating funds.

3.4 These shortcomings have been recognized and attention has been given to provision ofoperating funds, transport and a project facilitator in the ASP.

3.5 The performance of other co-financiers was satisfactory as can be seen from the success madein the Women IGA Component and the External Training Programme.

4. EVALUATION OF THE BORROWER'S PERFORMANCE AND LESSONS LEARNED

4.1 Overall performance of the borrower was satisfactory given the environment within which theproject was implemented. Most of the actions indicated in the project action plan were implemented.These included the establishment of the Project Steering Committee, the recruitment of the TechnicalAssistance.

4.2 There were however, a number of implementation weaknesses as evidenced by theineffectiveness of the Project Steering Committee and failure of Government to comply with the oneimportant covenant to provide adequate financial resources to cover incremental recurrent operatingcosts. This had an important bearing on the ability of field staff to implement the extension system.However, with hindsight it would be appreciated as indicated by the Bank evaluation report that thiscommitment was frustrated by the deteriorating situation of the national fiscal budget.

4.3 Frequent staff turnover of senior staff both in the Department of Agriculture (DoA) andPlanning Division mitigated against follow-up and continuity of crucial project activities forexample, the supervision and control of Technical Assistant staff. The Project saw five differentChief Agricultural Officers (CAOs) heading the Department of Extension while the Planning Divisionsaw three changes of the Chief Planning Officer. In the absence of elaborate handover notes,follow-up of issues was seriously compromised. Compliance with project progress reportingrequirements and preparation of annual workplans was partial. This was largely due to inadequatestaffing of the Central Monitoring and Evaluation Unit which was to coordinate the activity. Thisweakness has been addressed in the preparation of the follow-up project (ASP).

5. MAJOR LESSONS LEARNED

5.1 The major lessons that were learnt from the experiences with theProject are:

(a) The need to ensure an effective management unit. It should be noted that the office of thePrinciple Secretary cannot be made a coordinating unit for a particular project. As has beenpointed out in Part I, this has been taken into account by the provision of the post of a ProjectFacilitator in case of the ASP and the post of Programme Manager for the GOMIUNDP FifthCountry Programme.

(b) The need for a thorough mid-term project review would avoid focusing on a few selectedcomponents to the exclusion of other equally important components of the project.Experience with the project clearly shows that the Bank supervision missions remained partialin the treatment of the management problems. A thorough Mid-term review would give amore balanced review of the project implementation.

22

(c) The need for the borrower to keep staff transfers to the minimum. Although some staffmovements may be inescapable it would be advisable for Government to keep staffmovements to a minimum particularly for those working in key areas of projects.

(d) The insistence on forcing new introductions as evidenced by the forced modification of staffhouses in Mzuzu and the wholesale expansion of the T&V Extension system with itsassociated OFD underscores the need for donors and implementers to appreciate the existingor client specifications and availability of local resources. Future projects should ensure thatany modifications to standard designs in buildings and systems are carefully evaluated beforeadoption.

(e) The need to restore credit discipline. The relaxation of the 100% repayment condition foreligibility for credit, coupled with wholesale moratorium extended to all farmers during the1991/92 drought season led to the credit crisis which affected the whole country includingMzuzu ADD. Given the important role credit plays in the uptake of improved inputs andproduction, it is important that such moratorium be selective. A study on the Credit Crisiswas carried out on a national scale to determine the causes of the credit crisis and maderecommendations to ensure the restoration of the smallholder farmer credit system. It isimportant that these recommendations be adopted if agricultural productivity is not to becompromised.

23

Table 1

(a) EXTENSION APPRAISAL REVISED ACTUALPESTMAIE ESTMAIM (PCR ESTIMATE)

Ph.D 2 1

MSc 16 24 23

Diploma 34 34 20

TOTAL

-PhD 2 1

- Diploma 34 34 20

(b) SHORT TERM(OFF SHQRE1

- Planning Division 99 585 156

- Extension 122 103 808

TOTAL 221 688 964

(c) SHORT-TERMIN-COLNThY __

- Training of Trainers 1,328 1,328 p. weeks 2,380 p.weeks

- Technical and others 13,109 13,109 6,009

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Table 2: Smallholder fertilizer cash and credit sales,Mzuzu ADD. 1984/85 - 1993/94 seasons

(tons of fertilizer)

Season Cash Credit Total

1984/85 6615 5781 12396

1985/86 5530 6474 12008

1986/87 6639 4290 10929

1987/88 6914 5047 11961

1988/89 7298 5398 12696

1989/90 4570 10745 15315

1990/91 6195 8126 14321

1991/92 8859 5654 14513

1992/93 7624 10461 18085

1993/94. 9411 . 3622 13033

25

Figure 1: Cash and Credit Sales Mzuzu ADD(Tons of Fertilizer)

15

10

0 L l .1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

-C CASH CREDIT W TOTALS

26

PART III: STATISTICAL INFORMATION

Table 1. Related Bank Loans and/or Credits

Loan/Credit Title Purpose Calendar Year of Status CommentsApproval

(1) National Rural The project was designed to November 1978 Closed The project included co-Development assist GOM to implement the June 30, 1986. financing from CIDA, EDF,Programme first five-year phase of the PCR dated UK and Fed. Rep. ofNRDP Phase I programme. Completion of June 1987. Germany.(Credit 857-MAI) Lilongwe Land Development

Programme (LLDP).

(2) National Rural Very similar components to October 1981 Closing date Third IDA project to supportDevelopment NRDP IV. Main objectives to September 1986 rural development inProgramme increase agricultural production, extended to Karonga AgriculturalNRDP Phase III5 income and welfare of the September 1988. Division (ADD) in North(Credit 1183-MAI) smallholder sector. It also PCR dated Malawi.

included forestry. May 1990.

(3) National Rural The project included components April 1983 Closed Fourth IDA project toDevelopment to strengthen and support April 30, 1991. support rural development inProgramme extension services, training and PCR dated Lilongwe ADD. ExtensionNRDP Phase IV adaptive research and made April 1991. services satisfactory and an(Credit 1343-MAI) provision for improved credit effective mechanism for the

and marketing facilities. issue and recovery ofseasonal credit wasestablished.

(4) National Provide improvements in the February 1985 Closed In terms of its generalAgricultural infrastructure and planning and October 31, 1993. objectives, the project hasResearch Project management procedures of DAR PCR dated been successful, particularly(Credit 1549-MAI) and research-extension linkages. February 1994. on its breeding programme

to produce flint type grain ofhigh yield maize. Linkedwith USAID financedlMARE.

(5) Smallholder To transform Malawi's 1988 Under IFAD co-financier.Agricultural Credit smallholder credit system into a implementation.Project better managed, more efficient, Closing date(Credit 1851-MAI) and financially viable national June 30, 1995.

credit delivery system.

(6) Agricultural Designed to help formulate and 1993 Under Total project cost: US$ 79.2Services Project implement Institutional and implementation. million. Co-financing(Credit 2514-MAI) Management reforms in Launched in provided by IFAD and

Research, Extension and Input December 1993. African Development Bank.Supply Systems.

NRDP II was a Wood Energy Project.

27

Table 2. Credit Timetable

Item Date Planned Revised Date Actual Date

- Identification6 January 1983 - January 1983

- Preparation' June 1983 - June 1983

- Appraisal' September/October 1984 - September/October 1984

- Credit Negotiations9 July 25-30, 1985 - July 25-30, 1985

- Board Approval September 19, 1985 - September 19, 1985

- Credit Agreement December 20, 1985 - December 20, 1985

- Credit Effectiveness February 1, 1986 March 20, 1986 March 20, 1986

- Credit Closing September 1, 1991 February 28, 1993 June 30, 1993

6 Carried out by IDA.

7 MOA/APD was responsible for preparing the project proposal. Bank staff assisted the GOM in the preparation workand periodically reviewed progress.

s The project proposals were submitted to IDA and USAID in June 1984 for co-financing. The proposals were reviewedand discussed with GOMIMOA by an IDA mission which visited Malawi in June/July 1984.

9 Held in Lilongwe, Malawi at Ministry of Finance.

28

Table 3. Credit Disbursements

Cumulative Estimated and Actual Disbursements (IDA)

IDA Fiscal Year F1985/86 1986/87 19M/88 | 1988/89 |-1989/90 | 1990/91 1991/92 1992/93 1993/94

...................................... million).....................................

A. In US$

Appraisal Estimates 0.7 3.3 7.2 9.3 10.8 11.6 11.6 11.6 11.6

Actual 0.5 0.7 1.8 4.0 6.9 9.2 11.8 13.5 15.0

Actual as % of Estimates 71 21 25 43 64 79 102 116 129

..................................... .(SDR' million) .

w B. In SDR

Appraisal Estimates'0 0.7 3.3 7.3 9.4 10.9 11.7 11.7 11.7 11.7

Actual 0.5 0.6 1.4 3.1 5.3 7.0 8.9 10.1 11.2

Actual as % of Estimates 71 18 19 33 49 60 76 86 96

Date of Final Disbursement: November 16, 1993: MK 67,650 (SDR 10,958).

The undisbursed balance of SDR 509,750 was cancelled as follows: SDR 500,000 as of March 19, 1993 and the remainder as of November 16, 1993.

10 Mission's Estimates: Figures in SDR were not given in SAR.

Table 4. Project Implementaton(Page 1)

Indicators Appraisal Estimates Actual (or PCR Estimates)

A. Civil Works

For Mzuzu ADD:

. Houses 118 136

. Offices 2 2"

Marketing Sheds 16 17

Dip Tanks 5 5

B. Vehicles

Planning Division 3 4

Department of Agriculture 14 14

Mzuzu ADD 21 28

Communications/Adaptive Res."2 _11 _

Total 49 57

C. Other Transport

Mzuzu ADD:

| Motorcycles 99 107'3

| Bicycles 25 100

Other ADDs:

l Motorcycles - 224"'

. Bicycles 200

Total:

. Motorcycles 99 331

l Bicycles 25 300Also several large

consignments of motorcycle spares

D. Equipment

Office Equipment For PD Believe more than projectedDOA was suppliedMzuzu

Extension Equipment Mzuzu Supplied

Audio Visual Equipmentv For ACB Supplied

Computers 2 20With Software

l There was additional construction for renovating and expanding residential training centers.

12 USAID financed.

3 Of these, 26 had been paid and reportedly skipped but had not yet arrived in Mzuzu.

14 Paid and reportedly skipped but not yet arrived in Malawi.

30

Table 4. Project Implementation(Page 2)


E. Technical Assistance (Long-termn)

(i) Planning Division

Planning Management Advisor 36 months Financed by EEC

Senior Systems Analyst 24 months 30 months

Pricing Policy Specialist 24 months 30 months

M&E Specialist 30 months

Sub-total 84 months 90 months

(ii) Department of Agriculture

Extension Planning Advisor 30 months 36 months

Financial Advisor 30 months 30 months

Seeds Specialist 36 months

Training Advisor"5 60 months 60 months'6

Training Specialist" 60 months 48 months"

Mass-Media Specialist" 30 months 34 months

Women's Programs Advisor" 30 months 36 months

Sub-total 276 months 244 months'"

Total 360 months 334 months

F. Technical Assistance (Short-term)

Planning Division 12 n.a.

Training (Extension) 35 n.a.

Ag. Communications (Extension) X Believed mostly used

Total 83'5 n.a.

G. Training

I. Long-term

(i) Planning Division

MSc 6 12

I5 USAID financed.16 Mission Estimate.

17 Of which 178 months financed by USAID.18 Of which 74 for extension.

31



(ii) Extension

PhD

MSc 1019 23

Diploma 34

Total:

. PhD - 1

. MSc 16 3520

. Diploma 34 20

H. Short-term (Off-shore)

(i) Planning Division 100 person-weeks 156 person-weeks

(ii) Extension 120 person-weeks2 ' 808 person-weeks2 2

Total 220 person-weeks 964 person-weeks4'

M. Short-term (In-country)

Training of Trainers 1,328 person-weeks 2,380 person-weeks

Technical and Other Courses 11,800 person-weeks' 6,099 person-weeks24.Period during which trainingtook place was 143 weeks

19 SAR figures of which 6 to be financed by USAID, however training unit data shows a revised plan for 24 MScs with16 for USAID finance.

20 Includes 13 financed by USAID.

21 SAR projection of which 72 weeks were to be financed by USAID training unit records show revised plan of 210weeks half for USAID finance.

22 334 person-weeks financed by USAID.

23 Of which 9,900 to be funded by USAID. Total includes 7,800 person-weeks training for FAs and FHAs.

24 Mission estimate.

32


Activity Expected Implementation' Actual Implementation

H. Key Implementation Indicators

I. Ministry of Agriculture (MOA)

(i) Establishment of the MOA By March 1, 1986 Committee established, but metProgramme Steering Committee infrequency and irregularly.

(ii) Establishment of Project Special By credit effectiveness Implemented.Account

II. Plannino Division (PD)

(i) Recruitment of Planning and By April 30, 1986 Financed by EEG.Management Advisor

(ii) Employment of Systems Analyst By March 31, 1986 On September 8, 1987.

(iii) Review of PD's proposed By September 30, 1986 Done, but date not recorded.functions and reorganization-completed

(iv) Staff Recruitment Programnme By September 30, 1986 Done, but recruitment is EP&Ddeveloped and submitted to IDA responsibility, and due to staff shortagefor comment there remained vacancies, somewhat

(v) Recruitment of additional senior By March 31, 1987 reduced in later project years.

staff-completed

(vi) Formulation of Five-Year Plan- By July 1. 1987 1st draft October 1988 neverCompleted and sent to IDA for satisfactorily completed.comment

(vii) Review of Planning and By February 28, 1988 Not applicable.Management Advisor's contractfor purpose of possibleextension

(viii) Annual Work Plans and By September 30 of each year Submitted spasmodically, sometimesBudgets Due incomplete, usually late.

HII. National Extension System(DOA)

Reorganization

(i) DOA - Internal reorganization By March 1, 1986 Not clear from SAR what was merit. Ifcompleted appointments to DOA HQ, a Deputy

CAO was appointed, but no economist,due to staff shortages.

(ii) Recruitment of Extension By March 1, 1986 On August 28, 1987.Management and PlanningAdvisor

25 Expected Project Effectiveness February 1986. Actual Project Effectiveness March 1986.

33


Activity Expected Implementation Actual Implementation

Management and Systems Improvement

(i) Recruitment of Financial By July 1, 1986 In February 1987.Advisor/Controller

(ii) Establishment of DCAO post By March 1, 1986 Done, but date not recorded.and appointment

(iii) Design and Implementation of Long-term TA for this purpose was ineffectiveExtension Planning and but short-term training brought results and logBudgeting Systems frame system adopted in 1992/93 by most- Mzuzu ADD By April 30, 1987 ADDs and DOA units.- Other ADDs Thereafter

(iv) Implementation of Mass By October 31, 1986 Pilot communication project to design andCommunication Pilot Scheme produce advisory leaflets introduced March

1989.

(v) Annual Workshops May/June of each year Implementation not recorded, but believed thatthey took place.

(vi) Annual Extension Work Plans By September 30 of each year Unsatisfactory most of the time, but improvedfor DOA and Mzuzu ADD in 1992/93.

(vii) Five-Year National Extension By July 1, 1987 Ist version published January 1990. RevisedStrategy Plan Completed and incorporating Bank's suggestions, July 1992.sent to IDA for comments

Strengthen DOA's Technical Capacity

(i) Recruitment of USAID financed By September 30, 1985 October 1986.Training Advisor

(ii) Training Advisor's responsi- By September 30, 1985 October 1986.bility to be broadened toinclude all professional andtechnical training within MOA

(iii) Establishment and staffing of By credit effectiveness Implemented.the Training Unit

(iv) Recruitment of Agricultural By July 1, 1986 On October 10, 1986.Communications Specialist(financed by USAID)

(v) Proposed establishment of March 31, 1987 MOA attempted to implement this requirement,Career Stream and Promotion but it was turned down by the Government onSystem for DOA the grounds that a new career stream cannot be

introduced for one department or ministry inisolation from the rest of the public service.

Rural Credit Study

(i) Formulation of TOR By September 30, 1985 Studies were carried out as part of project

(ii) Study completed and sent to By March 31, 1986 preparation of the Smallholders AgriculturalIDA for comment Credit Project, which took over the obligations

for credit system improvements from MAEPS.(iii) Implementation of agreed By January, 1987

recommendations

34

Table 5. Project Costs and Financing

A. Project Costs

| SAR Estimates2 6 Revised" Actual2 8 Actual as a %

I I I ~~~~~~~~~~~~~of SAR Estimates

................. (US$000) .

A. IDA Financing

1. Civil Works 1.8 1.9 2.2 122

2. Vehicles, Equipment and Furniture 1.0 1.2 2.3 230

3. Consultants' Services 2.8 2.9 4.9 175

4. Training 2.9 3.3 2.7 93

5. Credit 3.1 3.6 1.9 61

6. Incremental Operating Costs - 1.3 1.0 ...

7. Unallocated - 1.0 ...

u' Total IDA Financing 11.6 15.2 15.0 129

B. USAID Financing2e 6.2 6.2 5.6 90

C. Government Contribution 2.4 2.4 2.4 100

Total Project Cost 20.2 23.8 23.0 114

26 As given in SAR; IDA Financing as per DCA amounted to SDR 11.7 million equivalent as indicated in part B below.

27 Mission estimates. For IDA financing. figures are derived from the amended DCA expressed in SDR and converted into USS using the exchange rate of I SDR = 1.3(Average 1989).

25 IDA financing derived from actual disbursement equivalent to SDR 11.2 million (US$ 15.0 million) as indicated in part B below.

29 Mission estimates. USAID contribution amounted to USS 14.8 million for both NARP and MAEPS. Separate contributions for each project were not available and itis assumed that USS 9.2 million and USS 5.6 million were disbursed for NARP and MAEPS respectively in line with SAR estimates.

Table 5. Project Costs and Financing

B. IDA Financing

Planned Revised Actual Actual as a %

Categories Value T % Value % Value f %Pn

(SDR'000) (SDR'000) (SDR'000)

1. Civil Works 1.5 12.8 1.5 12.8 1.7 15.2

2. Vehicles, Equipment and Furniture 0.9 7.7 0.9 7.7 1.7 15.2

3. Consultants' Services 2.2 18.8 2.2 18.8 2.1 18.8

4. Training 2.5 21.4 2.5 21.4 3.6 32.1

5. Provision for Incremental Credit 2.8 23.9 2.8 23.9 1.4 12.5

o 6. Operating Costs - - 1.0 8.6 0.7 6.3

7. Fund - - - ... ...

8. Unallocated 1.8 15.4 0.8 6.8 - -

Total IDA Financing 11.7 100.0 11.7 100.0 11.23° 100.0 96

30 The undisbursed balance was cancelled as follows: SDR 500,000 as of March 19, 1993 and SDR 510 as of November 16. 1993.

Table 6. Project Results

A. Direct Benefits

Indicators SAR Estimates I PCR Estimates

i. Increased Productivity a) Extension Plarnning and Results: The impact of the project is difficult toand Production from: Budgeting. gauge. The impact of (a), (b) and (c) were as

b) Upgrading Management and follows:Technical Capacity. (a) Extension planning and budgeting improvements

c) Improving Research/ have been introduced, but so late that there has notExtension Linkage. been any impact yet. The benefits may become

d) Improve Cost Effectiveness. apparent in the future.(b) The projected major technical assistance andtraining programs were implemented, but impact onproduction has not been readily apparent and has notbeen measured.(c) The Adaptive Research component, financedpartly by this project and partly by NARP (US AIDfinancing in both projects) did not improve researchextension linkage, but the most important technologyimprovements reached farmers, which indicates thatapprehensions of lack of communications betweenresearch and extension may have been exaggerated.(d) As indicated under (a) above improved planningand budgeting has been adopted too recently to makeany impact; while efforts to improve impactevaluation services were disappointing.

ii. Number of Beneficiaries 36,000 farmers in Mzuzu ADD - Extension: 30,000 (6,000 Block Gardens(pilot area). for an average of 5 farmers/group).

- Credit: 38,000 (through credit clubs).

iii. Incremental Production At PCR's Datesi Projections'l(Mzuzu ADD)- Local Maize 2,000 7,500 (4,000)- Hybrid Maize 5,800 25,400 99,100- Composite Maize 2,900 n.a. n.a.- Groundnuts 920 n.a. n.a.- Tobacco 526 n.a. n.a.

Average 1990/91-1992/93.h/ Full development at Year 2007/2008.

B. Economic Impact

(i) Economic Rate of Return 22% 13%GI(Mzuzu Component)

Based on a breakeven analysis. Detailed analysis is given in Part III, Annex 1, Tables 7 to 12. Basically, thefollowing assumptions have been taken into consideration: (i) incremental benefits would only derive from maize,(ii) average 1984/85-1985/86 considered as the without project situation, (iii) average 1990/91-1992/93considered as present situation (PCR's date), (iv) full development would be reached in Year 2007/2008 when itis assumed that hybrid maize area would represent 40% of total maize area in Mzuzu, (v) within the context ofMalawi, maize is treated as non-tradable and its financial farmgate price of t/49/kg has been considered adequateto reflect the economic price of maize.

C. Financial Impact

(i) Financial Rates of Return n.a. n.a.

37

Table 7. Status of Covenants(Page 1)

Covenants Subject Status

Section 3.03 Carrying out a study of rural credit and Compliance with this covenant becameintroducing a new lending structure. unnecessary following implementation of the

Smallholder Agricultural Credit Project(Credit 1851-MAI).

Section 3.04 Employment of a planning and management Compliance with this covenant is consideredadviser in MOA's planning division. satisfactory as MOA has employed such an

adviser with EEC funding.

Section 4.01(a) Borrower to maintain accurate records and Compliance is believed to be satisfactory.accounts.

Section 4.01(b) Audit of Accounts. Audits have been completed but werefrequently delayed.

Section 4.01(c) Special procedures to be used for Same as 4.01(b)Statements of Expenditure.

SCHEDULE 5para 1 Establishment of Project Steering This Committee was established as required,

Committee. but has met irregularly and infrequently.

Part A, para 3(a) Planning Division to submit recruitment This covenant has never been complied withprogramme to IDA. and it is really not feasible for MOA to do

so, as recruitment of economists is controlledby EP&D. Since 1992, the number ofvacancies in the Planning Division has beenreduced significantly.

Part A, para 3(b) MOA to provide IDA with five-year The plan was submitted to IDA, but twoagricultural strategy plan by July 1987. years later than scheduled.

Part A, para 3(c) Planning Division to submit annual work Compliance with this covenant has neverplans and budgets to IDA. been satisfactory. 1990/91 work plans for

the Planning Division were submitted to IDAalthough they did not cover the whole of thenext financial year, but 1991/92 plans wereoverdue in July 1992, the last time that thiscovenant was checked.

Part A, para 4 Planning Division to employ a systems These conditions have been complied with,analyst and pricing policy advisor and create although several staff positions in thesix new posts for economists. Planning Division remained vacant.

Part B, para 5 Part B of project to be managed by Deputy The Deputy Chief Agricultural Officer wasChief Agricultural Officer assisted by an appointed but an economist was noteconomist from the Planning Division. seconded from the Planning Division, due toExtension advisor to be employed by March staff shortage. The two advisers were1986 and financial specialist by July 1986. recruited, albeit later than planned.

38

Table 7. Status of Covenants(Page 2)

Covenants Subject Status

Part B, para 6 New extension planning and budgeting An improved planning and budgeting systemsystem to be introduced not later than was outlined in the 1990 5-year extensionApril 1987 in Mzuzu ADD and strategy and MOA has trained ADD staff insubsequently in other ADDs. the log frame work planning and budgeting

system, which was in use in most units atProject Closure.

Part B, para 7 MOA to provide IDA not later than This covenant has never been satisfactorilySeptember 30 each year annual extension complied with, although some plans for thework plans and budgets for Mzuzu ADD extension programme have been submittedand the Department of Agriculture. for Mzuzu ADD. As the extension

programme is now countrywide, IDA hadrequested submission of National ExtensionWork Programme by January 31, 1992,which was submitted, and similar submissionfor the 1992/93 season was expected butcompliance is not known.

Part B, para 8 MOA to furnish IDA with a five-year A five-year strategy plan was submitted toextension strategy plan by July 1987. IDA in January 1990. This was not

considered fully satisfactory and IDAproposed a number of improvements. Thesewere taken into account in the revisedstrategy plan, published in June 1992.

Part C, para 9 MOA to introduce a career stream for There were very few staff losses, unlikesubject matter specialists in the Department DAR whose staff have better jobof Agriculture. opportunities outside MOA than extension

staff. Consequently, this covenant was not asimportant for MOA as a similar requirementin NARP. In any case, no progress wasrecorded in establishing the proposed careerstream, although Bank missions discussed thisissue with MOA, MOF and the Departmentof Personnel Management and Training. AtGOM's request, IDA agreed to waive thiscovenant.

Part C, para 10 MOA to establish a Training Division and This has been fulfilled.implement a training developmentprogramme.

Part E, para 12 Introduce in Mzuzu ADD: (a) a mass This covenant has been complied with exceptcommunication scheme; (b) improved for part (d), which was supposed to beoutreach of the extension system, especially addressed by the Adaptive Research Team,to women; (c) a seed multiplication which had only partial success in adaptingprogramme; and (d) area specific technical national recommendations to the variouspackages. localities in the ADD. Part (c) never received

much attention from ADD management orsupervision missions, and never developed asenvisaged at appraisal.

39

Table 8. Use of Bank Resources

A. Bank Staff Inputs

Planned Actual

.......... .Staff-weeks .

Preparation n.a. 62.7

Appraisal n.a. 101.3

Negotiations n.a. 10.5

Supervision n.a. 246.23

PCR n.a. 0.3

Total n.a. 421.1

31 Including full-time Malawian agricultural services specialist in the Resident Mission.

40


B. Mission Data

Stage of Project Cycle Month/Year Number of Specialization Days in Field33 Performance Rating Types of Problems35

I Persons Represented32 Status�Pre-appraisal June/July 84 - - n,a.

Appraisal September/October 84 - - n.a.

Supervision 1 March 86 1 A 5 1

Supervision 2 May86 1 A 4 1

Supervision 3 October 86 2 A, E 5 2 PM, 0

Supervision 4 February/March 87 2 A, E 20 (10) 2 PM, 0

Supervision 5 October/November 87 436 A, A, E, EX 26 (9) 2 PM

Supervision 6 May/June 88 435/ A, A, E, AR 24 (6) 2 PP

Supervision 7 October/November 88 435/ A, A, E, EX 31(6) 2 PM, PP

Supervision 8 February/March 89 3 A, E, EX 31(10) 2 PM, PP

Supervision 9 November/December 89 335/ A, A, AS 25 (9) 2 PM, PP

Supervision 10 June/July 90 2 E, AS 26 (9) 3 PM, AF, PP. LC, DO

Supervision 11 December 90/January 91 2 E, AS 30 (11) 2 PM, AF

Supervision 12 April/May 91 5 A, E, AS, F, P 22 (6) 3 PM, AF, PP. LC, DO

Supervision 13 October/November 91 6��' A, A, E, AS, EX, 26 (6) 3 LCP

Supervision 14 June/July 92 435/ A, A, AS, EX 28 (6) 2

Supervision i5�� May/June 93 2 AS, AS 18 (9) n.a2� n.a"

Note: The project enjoyed additional visits by the Extension Specialist, and by Bank Disbursement, Procurement and Computer Specialists.

32 Specializations are: A = Agriculturist; AR = Architect; AS = Agricultural Specialist (resident staff): E = Economist; EX = Extension Specialist; F = Financial

Analyst; P = Procurement Specialist.

� From the fourth Supervision mission, the World Bank combined the supervision of other IDA assisted projects; e.g., NARP. NRDP Ill, NRDP IV, AgriculturalMarketing and Estate Project, Dowa West Rural Development Project, Kasungu Agricultural Development Project and SniallIioIdt�r Agricultural Credit Project. Figuresin brackets are attributed to MAEPS.

� Performance rating status: 1 = Problem free or minor problems; 2 = Moderate problems; 3 = Major problems.

� AF = Availability of Funds; DO = Development Objectives; LC = Compliance with Covenants; 0 = Other; PM = Project Management; PP = Procurement Progress.

� Including consultants.

No Form 590 was prepared.


B. Mission Data

Stage of Project Cycle Month/Year Number of Specialization Days in Field33 Performance Rating Types of Problems3 5

l | Persons Represented 2 T Status3' l

Pre-appraisal June/July 84 - - n.a.

Appraisal September/October 84 - - n.a.

Supervision I March 86 1 A 5 1

Supervision 2 May 86 1 A 4 1

Supervision 3 October 86 2 A, E 5 2 PM, 0

Supervision 4 February/March 87 2 A, E 20 (10) 2 PM, 0

Supervision 5 October/November 87 436 A, A, E, EX 26 (9) 2 PM

Supervision 6 May/June 88 435/ A, A, E, AR 24 (6) 2 PP

Supervision 7 October/November 88 435/ A, A, E, EX 31 (6) 2 PM, PP

Supervision 8 February/March 89 3 A, E, EX 31(10) 2 PM, PP

Supervision 9 November/December 89 335' A, A, AS 25 (9) 2 PM, PP

Supervision 10 June/July 90 2 E, AS 26 (9) 3 PM, AF, PP, LC, DO

Supervision 11 December 90/January 91 2 E, AS 30 (11) 2 PM, AF

Supervision 12 April/May 91 5 A, E, AS, F, P 22 (6) 3 PM, AF, PP, LC, DO

Supervision 13 October/November 91 635' A, A, E, AS, EX, 26 (6) 3 LCP

Supervision 14 June/July 92 4351 A, A, AS, EX 28 (6) 2

Supervision 1537 May/June 93 2 AS, AS 18 (9) n.a 36 n.a.3

Note: The project enjoyed additional visits by the Extension Specialist, and by Bank Disbursement, Procurement and Computer Specialists.

32 Specializations are: A = Agriculturist; AR = Architect; AS = Agricultural Specialist (resident staff); E = Economist; EX = Extension Specialist; F = FinancialAnalyst; P = Procurement Specialist.

33 From the fourth Supervision mission, the World Bank combined the supervision of other IDA assisted projects, e.g., NARP. NRDP 111, NRDP IV, Agricultural

Marketing and Estate Project, Dowa West Rural l)evelopment Project, Kasungu Agricultural Development Project and Smalillolder Agricultural Credit Project. Figures

in brackets are attributed to MAEPS.

34 Performance rating status: I = Problem free or minor problems; 2 = Moderate problems: 3 = Major problems.

35 AF = Availability of Funds; DO = Development Objectives; LC = Compliance with Covenants; 0 = Other; PM = Project Management; PP = Procurement Progress.

36 Including consultants.

37 No Form 590 was prepared.

Part m: Annex 1: Table 1. Comparison of Target and Achievement Dates

Activity Target Date Achievement Date

(a) Effectiveness February 1986 March 1986

(b) Recruiting Bank-Funded TA March-July 1986 September-October 1987

(c) Start Bank-Funded Fellowships Training Calendar 86 Calendar 88

(d) Complete 5-year Agricultural Strategy July 1987 1st Draft October 1988

(e) Complete 5-year Extension Strategy July 1987 January 1990

(f) Design and Implement New Extension April 1987 1992/93Planning and Budgeting System

(g) Design and Implement Mass October 1986 March 1989Communication System in Mzuzu ADD

43

Part III: Annex 1: Table 2. Extension Service Demonstration Data

No. of No. of FA/Sections No. of Blocks | Actualarget9 No. of Block Actual/TargetW No. of OFD3 1 ' ActuallTargetaJ

ADD Sections FA3 Target Atual % Gardens . Target Actual

1. 199/91:

Karunga 142 141 99 1,136 839 74 466 41 5,680 1,852 33

Mzuzu 247 231 94 1,976 1,823 92 488 25 9,880 5,422 55

Kasngu 239 245 103 1,912 1,680 88 578 30 9,560 3,310 35

Lilongwe 355 342 96 2,840 2,725 96 2,064 73 14,200 1,390 10

Salima 135 134 99 1,080 869 80 487 45 5,400 1,275 24

Liwonde 305 228 75 2,440 1,589 65 286 12 12,200 4,604 38

Blantyre 296 266 90 2,368 1,491 63 520 22 11,840 3,147 27

Ngabu 179 190 106 1,432 743 52 - - 7,160 1,432 20

Total 1,898 1,777 94 15,184 11,559 76 4,889 32 75,920 22,435 30

11. 1M/93:

Karunga 130 120 92 1,136 891 86 660 63 5,680 2,311 44

MDIzu 243 238 98 1,976 1,889 97 713 37 9,880 3,026 31

Kasungu 246 234 95 1,912 1,341 68 1,261 64 9,560 4,067 41

Lilongwe 368 347 94 2,840 2,648 90 2,375 81 14,200 7,336 50

Salima 136 133 98 1,080 1,009 93 568 52 5,400 1,224 23

Liwonde 329 303 92 2,440 1,763 67 868 33 12,200 5,675 43

Blantyre 294 287 98 2,368 1,628 69 491 21 11,840 3,757 32

Ngabu 195 171 88 1,432 1,293 83 909 58 7,160 2,651 34

Total 1,941 1,833 94 15,184 12,462 80 7,845 51 75,920 30,047 39

Sources: 1990/91 - Five-Year Extension Strategy Plan, MOA, June 1992.

1992/93 - From ADD progranme managers, through Chief Agrkultural and Training Officer.

38 FA = Field Assistant; OFD = On Farm Demonstration.

39 The target for each section is to have 8 Blocks; and for each Block to have I Block Garden and 5 Demonstrations.

40 The target for Block Gardens is the same as for Blocks.

Part III: Annex 1: Table 3. Mzuzu ADD Credit Operations

Lending and Repayment Levels

Season Amount Lent" Amount Recovered I Balance Recovery (%)

........ ...... (MK) ..............

1984/85 1,982,605 1,959,954 22,651 98.9

1985/86 2,903,898 2,571,460 333,438 88.5

1986/87 1,936,886 1,842,325 94,561 94.5

1987/88 3,223,837 3,064,548 159,289 95.0

1988/89 4,174,181 3,741,795 432,386 89.7

1989/90 9,981,135 8,007,775 1,973,360 80.2

1990/91 8,731,884 7,058,116 1,673,768 80.8

1991/92 7,851,971 2,957,659 4,894,312 37.6

1992/93 15,739,059 1,793,589 13,945,470 11.4

T 24 54,542,851 31,037,267 23,505,584 43.1

Number of Clubs and Borrowers

tA Season No. of Clubs No. of Club Repaid No. of Clubs with No. of Women's No. of Borrowers No. of Women % Women100% Overdues Clubs Borrowers Borrowers

1984/85 580 481 99 n.a.43 23,035 3,500 15

1985/86 656 342 214 n.a. 18,042 3,500 19

1986/87 481 256 130 n.a. 14,006 3,400 24

1987/88 797 482 297 n.a. 21,162 7,500 35

1988/89 870 590 228 n.a. 22,899 6,200 29

1989/90 1,355 672 683 n.a. 38,261 1,200 3

1990/91 1,066 460 606 175 26,360 5,600 21

1991/92 910 31 879 215 n.a. 7,200

1992/93 2,002 85 1,917 450 27,100 14,500 54

Sources: Mzuzu ADD, Credit and Marketing Ofricer and Farm Home Assistance Officer.

41 Includes 12% interest charges.

42 Excludes 1984/85 which was the last year before the project started.

43 n.a. = Information not available.

Part III: Annex 1: Table 4. Inflators and Exchange Rates

Consuner Price Excange Rate GOM Fiscal Exchange RatesCalendar Year ldeex Inftors Year"4 Infbtors

am = 10) MKSDR MKIUS$ MK/SDR MK/USS

1985 100.0 3.93 1.84 1.72 - - - -

1986 114.0 3.45 2.39 1.86 1985/86 3.57 2.25 1.83

1987 142.8 2.75 2.91 2.21 1986/87 2.93 2.78 2.12

1988 191.1 2.06 3.41 2.56 1987/88 2.23 3.29 2.47

1989 215.0 1.83 3.52 2.76 1988/89 1.89 3.49 2.71

1990 240.3 1.64 3.77 2.73 1989/90 1.67 3.21 2.74

1991 270.7 1.45 3.81 2.80 1990/91 1.50 3.80 2.78

&; 1992 332.1 1.18 6.04 3.60 1991/92 1.25 5.48 3.40

1993 393.2" 1.00 6.19" 4.39 1992/93 1.05 6.15 4.19

44 Source: IFM: International Financial Statistics, January 1984.

45 GOM Fiscal Year: April I - March 31.

46 First quarter 1993.

47 Average January/September 1993.

Part III: Annex 1: Table 5. Incremental Maize Production (1983/84 - 1992/93)

Area Production Yield Increases

1983/84-1985/86 1992/93 1983184-1985/86 1992/93 1983/841985/86| 1992/93 Area Production

......... .(Ha'000) .... (Tons'000) ... (Kg/ha) .. (Ha'000) (Tons'000)

Country as a Whole

Maize - Local 1,073 5 997.2 1,083.2 1,032.2 1,009 1,035 (76.3) (51.0)

- Composite 22.5 3.9 39.6 6.3 1,760 1,615 (18.6) (33.3)

- Hybrid 77.5 236.0 226.7 695.5 2,925 2,900 158.9 468.8

- Hybrid - 100.0 - 300.0 - 3,0004 100.0 300.0

(MH17-MH18)

Total 1,173.5 1,337.5 1,349.5 2,034.0 1,150 1,521 164.0 684.5

vA. Increase + 14% + 51% + 32%

Mzuzu ADD

Maize - Local 74.9 83.3 61.5 70.0 821 1,138 8.4

- Composite 7.5 ... 19.1 ... 2,527 n.a. (7.5) 8.5

- Hybrid 12.5 38.4 42.6 113.2 3,409 2,951 25.9 (19.1)

- Hybrid - n.a. - n.a. - n.a. - 70.6

(MH17-MH18)

Total 94.9 121.7 123.2 183.2 1,297 1,505 26.8 60.0

Increase + 28% + 49% + 16%

48 Mission's estimate: no wide spread surveys were carried out by MOA on the overall performance of MH17 and MH maybe hybrid varieties. The average yield of 3

ton/ha relative to the overall hybrid maize production in 1992/93 has been applied.

Part I1: Annex 1: Table 6. Switch of Fertilizer Mix: Estimated Savings in Fertilizer Imports Expenditures in 1992/93

Fertilier (Mate) Quantities" Nutrient Content Pries 1992/93 of Values of Fertiliers

1987/88 | 1992/93 197/8 | 1992/93 1987/8 |

............................ (To.............. Tns) .. .. .. .. .. .. .. .. .. .. .. .. .. . (M I ... .. .. ... (MK niUion) ... .. .. .. .

S/A (21%) 8,500 - 1,785 1.000 8.5

CAN (26%) 30,000 25,000 7,800 6,500 1.390 41.7 34.8

20:20:0 (40%) 20,000 - 8,000 - 1.300 26.0

23:21:0:4S (44%) 5,000 18,751 2,200 8,250 1.400 7.0 26.3

UREA (46%) 9,000 55,000 4,140 25,300 1.216 10.9 66.9

DAP (64%) 5,000 37,500 3,200 24,000 1.323 6.6 49.6

Total 77,500 136,251 27,125 64,050 100.7 177.6

oo1. Average Price of Fertilizer in 1987/88: MK 1.3/kg (MK 100,700,000: 77,500,000) N.B. in 1992/93 terms.00

Average Price of Fertilizer in 1992/93: MK 1.3/kg (MK 177,600,000:136,251,000) N.B. in 1992/93 terms.

Average Price of Nutrient in 1987/88: MK 3.712/kg (MK 100,700,000: 27,125,000) N.B. in 1992/93 terms.

Average Price of Nutrient in 1992/93: MK 2.773/kg (MK 177,600,000: 64,050,000) N.B. in 1992/93 terms.

Total Savings in Fen. Imports Expend. in 1992/93 as compared to 1987/88: [(64,050,000 x 3.712) - (64,050,000 x 2.773)] = MK 60.2 million (US$ 14.4 million)

49 Source: MOA (SFFRFM Fertilizer Imports).

50 Source: MOA (SFFRFM Fertilizer Selling Prices: Ist April to 26th September 1993).

Part III: Annex 1: Table 7. Investment Costs for Economic Analysis

1986/87 1987/88 1988189 1989190 1990/91 1991/92 1992/93

A. Investment Cost. ' ................................. ................................

In current terms:

- Civil works 1,276 1,407 1,966 139 458 434 2,269

- Vehicles and equipment 117 209 1,182 663 293 591 263

-T.A. 3 - - - 11 72 699

- Training 59 674 1,065 1,509 3,352 2,243 1,602

- Incremental credit - - 2,706 33 2,511 - 467

- Operating costs 191 410 660 763 1,292 2,423 2,032

Total Investment Costs: 1,646 2,700 7,579 3,107 7,917 5,763 7,332

of which Planning Division 63 121 407 508 808 935 1,024

Total Investment Costs Excluding Credit and Planning 1,583 2,579 4,466 2,566 4,598 4,828 5,841

P ~~~DivisionInflators' 2.93 2.23 1.89 1.67 1.50 1.25 1.05

B. Tod Invesinent Costs in Cotantun199293 Prices for 4,638 5,751 8,441 4,285 6,897 6,035 6,133

Ecok AnayJsi

51 Source: MOA Planning Division.

52 See Part m, Annex 1, Table 4.

53 For the economic analysis, the credit and the Planning Division components have not been taken into account.

Part III: Annex 1: Table 8. Smallholder Sector: Maize Area and Yields

{1982/83 1 1983/84 1984/85 1 1985/86 1 1986/87 i 1987/88 1 1988/89 1 1989/90 1990/91 1 1991/92 1992/93

Area ............................................ ('000 ha) ...................................

Total Maize 1,196 1,174 1,145 1,198 1,182 1,215 1,271 1,344 1,352 1,368 1,327

of which:

-Local n.a 1,068 1,048 1,105 1,132 1,138 1,160 1,184 1,194 1,138 997

- Composite n.a 26 22 20 14 19 25 25 19 13 4

- Hybrid n.a 89 75 69 37 59 86 135 179 217 326

% of local maize over total n.a 91 92 93 96 94 91 88 86 83 75

% of hybrid maize over total n.a 8 7 6 3 5 7 10 13 16 25

3-Year Average Smaliholder Yields .............................................. (os/a...........................................(toos/ba) .

- Maize . . . . . . 1.17 1.15 1.09 1.09 1.13 1.12 1.11 0.87 1.05

Local maize . . . . . . . . . 1.01 0.98 1.00 1.03 0.99 0.91 0.67 0.74

-Hybrid maize . . ... . . . 2.94 2.92 2.77 2.74 2.69 2.77 2.26 2.42

Part III: Annex 1: Table 9. Import Parity Prices

LUI E | TSP | Potassium Chloride1. . ($/ton) -...

World Market-Constant 1990 prices5' 109 115 110 100

MUV (1992/93) 1.06 1.06 1.06 1.06

World Market-Constant 1992/93 prices 116 122 117 106

Freight Insurance and Port Charges 45 45 .. 451 .4SCIF Beira 161 167 162 151

Transport Costs to Lilongwe' 56 _36 ....36CIF Lilongwe 197 203 198 187

................... ( ....... .c..

CIF Lilongwe 0.86 0.89 0.87 0.82

SFFRFM Costs 5 - 0.15 0.15 0.15

Prices at Main Delivery Sites 0.86 1.04 1.02 0.97

Transport Farm Delivery Sites5' (0.10) 0.10 0.10 0.10

Losses (5%) (0.05) 0.05 0.05 0.05

Farmgate Economic Prices 0.71 1.19 1.17 1.12

Farmgate Financial Prices 0.49 1.21'

54 World Bank commodity price forecasts (1994).

55 400 km at Tambala 40/ton/km.

56 Including rebagging, storage, ADMARC fees, transport and overheads (Source: SFFRFM).

57 Average 150 kn at Tambala 70/ton/km.

58 Part III, Annex 1, Table 6.

51

Part III: Annex 1: Table 10. Budget per Hectare for Local and Hybrid Maize

Local Maize Hybrid Maize

Gross Value of Production:

Yield (kg/ha) 900 2,700

Price (t/kg)'9 49 49

Gross Value of Production (MK/ha) 441 1,323

Production Costs:

Seed (local) 12 -

Seed (selected: 25 kg) - l2560

Fertilizer - 23:21:0+45 (50 kg)6' 70 -

Fertilizer - DAP (80 kg)6" 106

Fertilizer - CAN (40 kg)6" 56 l

Fertilizer - UREA (170 kg)' - 206

Chemicals (600 g) - 7

Transport 120 340

Credit Charges6' 2 dl

Total Production Costs 297 902

Net Value of Production (MK/ha) 144 421

59 As indicated in Table 9, the import parity price for maize has been estimated at Tambala 71/kg. In the context ofMalawi where maize is to be considered as now tradeable, the farmgate price of Tambala 49/kg would better reflectthe economic price of maize.

60 At MK 5/kg (without subsidies).

61 At MX 1.4/kg.

62 At MK 1.32/kg.

63 At MK 1.39/kg.

64 At MK 1.21/kg.

65 Estimated at 15% of production costs.

52

Part III: Annex 1: Table 11. MZUZU ADDNet Value of Maize (Local and Hybrid) Production in Economic Terms

Average" ~~~Average"7 Projections

1984/85-1985/86 1990/91-1991/92-1992/93 1997/98" 12002/03" 72007/08

............................... ('000 ha) .. )

Local maize 79.4 87.8 80.5 78.0 75.0

Hybrid maize 13J 2.72 X5 -42.0 50

Total: 92.7 110.5 115.0 120.0 125.0

....................... Net Value of Production7' .................. .(MK million)

Local maize 11.4 12.6 11.6 11.2 10.8

Hybrid .. i6 9.6 _1 5L 1211

Total: 17.0 22.2 26.1 28.8 31.9

Incremental - 5.2 9.1 11.8 14.9

66 Considered as without project situation.

67 Hybrid maize represented 20% of total maize area.

68 Assuming hybrid maize would represent 30% of the total maize area.



71 Based on budgets per ha as presented in Table 10.

53

Part III: Annex 1: Table 12. Economic Rate of Return Estimated: MZUZU ADD

Project Year Investment Costs" Incremental Net Benefits" Balance to be Discounted

1 (1986/87) 4.6 (4.6)

2 5.8 - (5.8)

3 8.4 (8.4)

4 4.3 - (4.3)

5 6.3 - (6.3)

6 6.9 - (6.9)

7 6.0 5.2 (0.8)

8 0.4 5.9 5.5

9 0.4 6.7 6.3

10 0.4 7.4 7.0

11 0.4 8.3 7.9

12 0.4 9.1 8.7

13 0.4 9.6 9.2

14 0.4 10.0 9.6

15 0.4 10.5 10.1

16 0.4 11.1 10.7

17 0.4 11.8 11.4

18 0.4 12.4 12.0

19 0.4 13.0 12.6

20 0.4 13.6 13.2

21 0.4 14.3 13.9

22 (2007/2008) 0.4 14.9 14.5

Economic Rate of Return: 13.1%

72 See details in Table 7.

73 See details in Table 11.

54

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