PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: 59102
Project Name
Region
Country
Sector
Lending Instrument
Project ID
Borrower(s)
Implementing Agency
Environmental Screening
Category
Date PID Prepared
Estimated Date of Appraisal
Completion
Estimated Date of Board
Approval
Decision
Other Decision {Optional}
I.
Irrigation Development and Support Project
AFRICA
ZAMBIA
Irrigation and drainage (80%); General agriculture, fishing
and forestry sector (20%)
Specific Investment Loan
P102459
GOVERNMENT OF ZAMBIA
Ministry of Agriculture and Cooperatives
PO Box 50197
Independence Avenue
Lusaka
Zambia
Tel: (260-1) 254-645 Fax: (260-1) 254-083
{x}A { }B { }C { }FI
December 6, 2010
December 17, 2010
March 22, 2011
{Insert the following} Project authorized to proceed to
negotiations upon agreement on any pending conditions
and/or assessments. {the text is automatically generated
after PID is filed}.
Teams can add more if they wish or delete this row if no
other decisions are added
Country Context
Zambia is abundantly endowed with minerals, land, and water. From 2000-2009 Zambia grew
on average 6 percent1 annually, drawing mostly on the mining, construction and service sectors.
Agriculture and agro-processing sectors contribute about 40 percent of GDP and roughly 12
percent of national export earnings2, but have contributed less than proportionately to aggregate
growth. The latent potential inherent in the abundant land and water has clearly not yet been
tapped. Primary agriculture employs about 67 percent of the labor force, and produces only about
20 percent of GDP. Agriculture remains small scale and labor intensive, and most producers
work two hectares or fewer. The relatively poor performance of agriculture explains why rapid
aggregate growth has brought little reduction of poverty.
1
GDP growth in 2009 was 6.4 percent; Average GDP at constant prices for 2006 to 2010 period is 6.0; and GDP growth is
projected to be 6.6 percent for 2010.
2 From key commodities: cane sugar, Burley tobacco, cotton lint, fresh flowers, fresh fruits and vegetables, and cotton yarn.
A key to the puzzle of Zambia’s agricultural underperformance can be seen in the country’s
demography and factor endowments. The approximately 12.5 million people are at present
working only about 12 million hectares of land, compared to medium to high potential cultivable
area of 16 million ha, and an even greater reservoir of arable land of moderate or lower quality.
The country is trapped in a model of predominantly smallholder agriculture, and attention of
policy makers has been focused on efforts to intensify production on small parcels to achieve
food security. Disproportionate priority has been accorded to maize and fertilizer subsidies to
produce maize on small plots. Concurrently the public interventions that would facilitate a
gradual shift of smallholders to larger scale production of commercially viable commodities have
been neglected. The policy dialogue on agriculture in Zambia is paradoxically similar to that in
neighboring countries without abundant land and water. Current policies and public spending
show little recognition that Zambia’s natural endowment should lead quickly beyond such
constraints.
Gradual increased use of more of the available land and water by a range of today’s smallholders
would transform the sector and spread the benefits of growth. Although the end point of such a
transformation can be envisaged without difficulty, the path to get there is technically and
politically challenging. Past efforts elsewhere to move too rapidly from small scale laborintensive agriculture to large scale commercial farming have foundered on poor design of public
programs, inadequate human capital, social tensions between those who benefit and those left
out, and inadequate consideration of environmental and financial sustainability. A realistic
strategy to bring more of Zambia’s land and water endowment into profitable agricultural use
requires a shift in technology that must be carefully calibrated and nurtured. Smallholders must
be included and integrated into the changing agricultural system. Larger producers who can
bring capital and expertise must be encouraged and linked in mutually beneficial economic
relationships with smallholders. Opportunities must be created for competent small producers to
acquire incremental holdings without too quickly becoming overly exposed financially.
The technologies suitable for this transition require financial outlays for equipment, structures,
and purchased inputs that can only be justified if water can be reliably managed. Therefore
irrigation is an integral part of the agenda to bring Zambia’s underutilized land into production.
Irrigation forms the core of this proposed project, but the intent is not primarily to expand
irrigated area. Rather the intent is to apply a model that brings smallholders and large
commercial farmers together in a shared irrigation scheme with complementary roads and power,
contracted management of the irrigation, and professional guidance to the smallholders. The
model requires public investment for public goods, such as water storage and access roads, but
also for private and quasi-private goods and services, such as irrigation and managerial advice
for smallholders. The amounts of public investment are significant, and hence the oversight and
discipline to achieve results must be commensurate. The inclusion of smallholders in the design
necessitates public provision of a large share of the initial cost of their participation, since the
resources cannot be generated in full from within the existing smallholder production systems
through savings or borrowing.
Risks of such an undertaking in Zambia are high because costs are high. The risks must be
acknowledged and addressed. Now is the right time, however, for the country to take the risks.
Copper prices are high and resources are available. Memories of low copper prices are fresh,
and commitment to diversification of the economy is strong. Agriculture’s role in poverty
reduction is recognized, and the constraints of existing smallholder production are clear. Global
prices of agricultural commodities are favorable, and land-abundant African countries are
increasingly recognized as the world’s reserves of agricultural production. New models to
develop Africa’s agricultural resources jointly with private investors and including existing
smallholders are needed, and the proposed project in Zambia is designed as one such approach.
II.
Sectoral and Institutional Context
Rain-fed maize still dominates Zambia’s agriculture, while a well-developed agribusiness
industry draws roughly 0.3 million or one quarter of smallholders into vertically integrated value
chains mainly in sugarcane, cotton, tobacco3, and other high value horticultural crops.
Availability of land and potentially low production costs make smallholders under out-grower
schemes attractive partners for agribusinesses needing access to raw materials for processing and
exports. Opportunities for effective Government and donor support can be organized around
three complementary sets of actions: (a) strengthening market mechanisms and value chains;
(b) addressing critical policy issues in the agricultural sector; and (c) investing in
infrastructure. The work on value chains includes improved access to market and price
information, better market linkages and organization, contract enforcement, and partnerships
between the public and private sectors in extension.
Key policy issues are the poorly targeted fertilizer subsidy, price policy for wheat and maize, and
periodic export bans on key food staples. A long history of input price controls and subsidy
programs has been biased towards maize. The Fertilizer Support Program 4 launched by the
Government in 2003-2003 provides fertilizer and maize seed to smallholder farmers with the aim
of improving national food security. Such programs provide an incentive to farmers to favor
maize over other crops such as cotton, other cereals, roots and tubers, and act against
diversification. The Government agreed to pilot a fertilizer voucher program in 2009 that is
expected to increase private sector involvement in fertilizer distribution and a gradual reduction
of public fertilizer expenditure; implementation has been delayed, however. Ad-hoc export bans
have constrained market growth and competiveness. Most recently the Government has, in
contrast, held excess stocks of maize acquired at a support price higher than the export parity
price in the region. Wheat is protected to enhance domestic production, and the benefits of this
policy accrue primarily to large commercial producers. High budget allocations to subsidy
programs and price support divert resources from public investments in agricultural research,
extension, and rural infrastructure and undermine achievement of the Government’s vision for
agricultural investment and growth5. Improvement is also needed in the business environment to
reduce the high cost of doing business, which is constrained by a complex licensing regime6. The
policy issues noted above are addressed through dialogue of a group of partners, and supported
under policy-based operations. They will not be addressed directly through this proposed
3
Tobacco waiver was granted by Bank Management because many smallholders cultivate and depend on tobacco as a key source
of income in project target areas. On the basis of recent production trend data and tobacco industry trends, it is expected that
only a small share of the project budget will be directly attributable to this crop and through provision of access to irrigation
water, smallholders will have a wider menu of crop choices. Project will monitor the investment share of the project and
eligibility criteria will be adapted if tobacco related investment starts to depart significantly from recent trends. It is not
envisaged that smallholder tobacco production will reach earlier peak levels of cultivation under irrigation in project command
areas.
4 The FSP has since 2009 been renamed the Fertilizer Input Support Program (FISP).
5 Zambia Impact Assessment of the Fertilizer Support Program Analysis of Effectiveness and Efficiency, June 9, 2010 World
Bank Report No. 54864-ZM.
6
Ease of doing business in Zambia is ranked at 76 while dealing with licenses is ranked at 158.
specific investment loan, although expected changes in policy will be accommodated in the
design.
The 2010 bumper maize harvest placed a spotlight on policy changes that will be required as
Zambia shifts to a net export stance in more commodities. Changes in the fertilizer subsidy
program, price policies for key staples, and trade policy, as well as shifts in the composition of
public spending in the sector will be needed to underpin growth and improve performance.
Infrastructure needs are vast in transport, energy, telecommunications and irrigation, requiring
both prioritization and partnership with the private sector.
Several of the needed changes are already in process. Others are expected to occur during the
course of implementation of the project, with corresponding provision for adjustment in the
behavior of producers as the changes occur. The reintroduction of the Agriculture Marketing
Bill, designed to enhance smallholder farmers’ access to markets and to include warehouse
receipting, is among the favorable developments already under way. Continued strong macroeconomic performance and ability to attract strong private sector participation will remain
important. Innovations arising from the project’s proposed model linking smallholder farmers
with access to irrigated land to both the public and private sectors are expected to contribute to
scaling up of similar activities in the sector.
III.
Project Development Objectives
The project development objective is to “increase yields per hectare and value of divers products
marketed by smallholders benefitting from investments in irrigation in selected sites served by
the project.”
IV.
Project Description
Component 1: Irrigated Agricultural Support Services
(US$22.29 million total, including an IDA contribution of US$18.30 million)
The objective of this component is to provide knowledge and skills, and to strengthen capacity
of beneficiaries to prepare and operate medium-to-large size smallholder irrigation schemes on a
sustainable commercial basis through the use of partnership agreements between the
Government, communities and the private sector. The project will support:
(a) Irrigation planning and preparation, including pre-feasibility studies on 25,000 ha and
feasibility studies on 20,000 ha, thereby building a large pipeline of potential investment.
Studies will be based on detailed consultations with the communities on land tenure and
land (re)allocation among the three Tiers. The subcomponent also provides for
preparation of detailed environmental and social assessments and resettlement action
plans by a separate consulting company.
(b) Provision of scheme operation and marketing services facilitated by a transaction
advisor to help Government structure about seven viable transactions7 attractive to the
communities and potential private investors. These transactions will refer to the existing
public-private partnership framework, and include irrigation scheme development and
O&M, as well as agricultural and marketing services.
(c) Community mobilization and capacity building services by targeting communities to
ensure a fully informed decision-making process has been undertaken to assess trade-offs
7
Includes the three proposed pilot sites.
between expected benefits and risks. The training program will enable the establishment
of water user associations and producers’ organizations, and increase the knowledge
capacity of smallholder farmers to negotiate with their commercial partners in the value
chains.
Component 2: Public Infrastructure
(US$95.49 million total, including an IDA contribution of US$66.95 million)
2.
The objective of this component is to provide the bulk water supply and associated
infrastructure required to establish medium-to-large size smallholder irrigation schemes under
agreed partnership agreements. The infrastructure will be fully financed by IDA credit and
owned by the Government8. The project will support:
(a) Irrigation infrastructure to supply water to at least 10,000ha in seven sites, including:
water storage9 and diversion, pumping and main supply, and distribution up to farm
gate. Infrastructure will include in-field canals and structures for Tier 1 plots, while onfarm irrigation equipment for Tiers 2 and 3 will be funded under Component 3.
(b) Supporting infrastructure, including access roads to project sites and service roads
within schemes; electrification; storage facilities, and drinking water points to link
farmers to markets and provide essential access to such services.
(c) Implementation of site specific Environmental Management and Resettlement
Action Plans. IDA credit will be used for implementation activities while
compensation related to resettlement will be funded by the Government.
Component 3: Private and Cooperative Investment
(US$72.20 million total, including an IDA contribution of US$20.40 million)
3.
The objective of this component is to facilitate private and cooperative investment in
productive equipment and assets in and around irrigation schemes, and to stimulate the
establishment of small scale enterprises. Equipment will be owned by the private operators and
farmers10. The project will finance:
(a) Improving access to long and short-term financing and investment capital, for
smallholder farmers, by providing them with business development services through
technical assistance, networking and linkage facilitation; provision of ICT services
related to agricultural services; and strengthening the rural banking services available
and or located in targeted sites of participating financial institutions.
(b) Investment Support Fund (ISF) to include conditional partial grants for on-farm
irrigation equipment for Tiers 2 and 3, including sprinkler system (Tier 2) and center
pivots (Tier 3) or other appropriate irrigation technologies as recommended by the
technical studies; other on-farm equipment and assets; specialized production inputs;
post-harvest and value-adding equipment and assets; essential inputs for production and
marketing grant for non-traditional activities; and seed capital for small enterprise
development. The fund includes a special window for women, youth and other
vulnerable groups. The ISF grants will finance part of actual costs of goods/ works and
services as applicable.
8
Budget of this component is based on the assumption that the bulk water infrastructure will be financed at 100 percent by the
project using public funds for all sites (no upfront private sector contribution
9
The project will finance small and medium-size earth dams to store water during dry season for irrigation purposes
10
Budget is based on reasonable cost sharing assumptions (with private contribution varying from 25 to 75 percent).
Component 4: Management and Coordination.
(US$11.05 million total, including an IDA contribution of US$9.35 million)
4.
The objective of this component is to ensure efficient and timely delivery of project
resources in accordance with the project’s objectives and to strengthen the irrigation sector
policy and institutional framework. The component will provide funding for: (a) Project
management; (b) Support the policy and institutional framework; (c) Safeguards issues
management and oversight; and (d) Monitoring and evaluation.
V.
VI.
Financing
Source:
Borrower/Recipient
IBRD
IDA
Others: Co-financing (Beneficiaries)
Total
($m.)
23.45
115.00
62.57
201.02
Implementation
Implementation arrangements feature a number of players whose roles are clearly spelled out and
further detailed in the Project Implementation Manual. These arrangements take into
consideration capacity limitations in Government and build on similar successful irrigation
projects in Zambia.
The project will be implemented under the overall responsibility of MACO, which will enter into
partnership agreements with qualified firms to handle the design, construction and O&M of the
irrigation schemes and support farming activities. For each site, a feasibility study and an
ESIA/RAP will be established by two different consulting companies hired by MACO. A
private operator (Concessionaire) will then be contracted to construct and operate the bulk water
supply and associated infrastructure. Bulk water assets will be owned by a public utility
company (UtilityCo) established to act as an interface between MACO and the Concessionaire.
A farming company (FarmCo) will be responsible for the operation of Tier 3 farms and the
provision of farming services to farmers on Tiers 1 and 2. It is expected that the Concessionaire
and FarmCo would generally be the same entity for economies of scale. The PPP Unit of
Ministry of Finance and National Planning will assess these transactions against the recently
enacted PPP Act.
In addition, a Transaction Adviser will provide support to local stakeholders and MACO in the
establishment of partnership agreements for each site and help GRZ identify new sites for
irrigation development. A Community Mobilization and Capacity Building Service Provider
(CMCBP) will be hired for each site to mobilize and train the beneficiaries and help them
participate in the design of and make informed decisions with regard to the proposed partnership
agreement. These service providers will be hired for the entire duration of the project and their
remuneration will be based on clear performance indicators.
At MACO level, a National Project Steering Committee (NPSC) will be chaired by the
Permanent Secretary (Agriculture) of MACO and the National Coordinator (NC-IDSP) under
the Director of Agriculture will serve as its Secretary. Site Committees will be established at
planning and preparation stage to interact with the consultants responsible for the feasibility
studies and the Transaction Adviser, and provide feedback to MACO on progress made and on
proposed partnership arrangements. Technical and administrative support staff will be assigned
by MACO or hired externally to assist the National Coordinator. A Technical Committee will be
nominated from within the MACO’s Technical Services Branch and from other relevant
agencies11 to contribute to project supervision as needed. Finally, fiduciary support (financial
management and procurement) will be provided by MACO’s Financial Management Unit and
Procurement and Supplies Unit.
The National Coordination Office (NCO) of ADSP, established in 2006 within MACO’s
Policy and Planning Department will provide support functions to NC-IDSP for safeguards
monitoring and oversight and M&E. These services are provided by two externally recruited
staff in ADSP-NCO.
Site specific activities will be done in close collaboration with the provincial agricultural offices
and district agricultural offices. MACO’s decentralized extension officers will be fully
integrated in implementing site specific work plans. Membership of the Site committees will be
drawn from the existing Area Development Committee and include representatives from key
stakeholders and potential investors. Each district agricultural office will serve as the Site
committee secretariat with support from the Transaction Adviser.
The Investment Support Fund (ISF) under Component 3 will be administered by a Fund
Administrator, a consulting company or non-governmental organization (NGO) with
demonstrated experience in smallholder grant management. The Fund administrator will
coordinate and manage the ISF and provide demand-driven, co-financing subproject grants to
eligible project beneficiaries. The Concessionaire/FarmCo will be responsible for the delivery of
on-farm irrigation equipment to Tier 2 smallholder farmers.
Supplementary construction of access roads, power access and drinking water points will be
undertaken by the contractor for the irrigation scheme. This arrangement will capture economies
of scale in civil works. Transfer of ownership and maintenance of these roads after construction
will take place through a Memorandum of Understanding with the Roads Development
Agency12. Similar arrangements will be made with ZESCO for power lines and with District
Authorities for water drinking points.
Details of the functions and responsibilities of the various entities are outlined. A Project
Implementation Manual (PIM) has been prepared comprising the following modules: (i) M&E,
(ii) Administrative, Financial management and Procurement, (iii) Participatory design and
transaction, (iv) Environmental and Social Management Framework and Resettlement Policy
Framework (ESMF and RPF). The PIM will be finalized prior to project effectiveness. Terms
of reference for the main service providers will be attached to the PIM. A draft outline of the
partnership arrangements has been prepared for the proposed pilot sites during project
preparation, and further consultation with the private sector is expected to take place before
effectiveness to define attractive risk sharing arrangements for these sites.
VII.
Safeguard Policies (including public consultation)
11
Ministry of Energy and Water Development, Road Development Agency, ZESCO, PPP Unit of the Ministry of Finance and
National Planning.
12
This arrangement will ensure that all rural access roads in project sites are included in the national grid and long
term maintenance is funded by the National Road Fund Agency (NRFA).
The project is rated as environmental category “A”. The project may have high environmental
and social impacts, triggering the following safeguard policies:
Safeguard Policies Triggered by the Project
Yes
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OP/BP 4.10)
Forests (OP/BP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OP/BP 7.60)*
Projects on International Waterways (OP/BP 7.50)
VIII.
No
x
x
x
x
x
x
x
x
x
x
Contact point at World Bank and Borrower
World Bank
Contact:
Title:
Tel:
Email:
Indira Janaki Ekanayake
Senior Agriculturist
5338+3262 / 260-211-252-811
iekanayake@worldbank.org
Borrower/Client/Recipient
Contact:
Dr. Situmbeko Musokotwane
Title:
Minister of Finance & National Planning
Tel:
+260-211-250481
Email:
situmbekomusokotwane@mofnp.gov.zm
Implementing Agencies
Contact:
A.K. Banda
Title:
Permanent Secretary for Agriculture, MACO
Tel:
+260-211-252552
Email:
akbanda@maff.gov.zm
IX.
For more information contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
*
By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas
Fax: (202) 522-1500
Web: http://www.worldbank.org/infoshop