REPUBLIC OF UGANDA NORTH -WEST …...UGANDA NORTH WEST SMALLHOLDER AGRICULTURAL DEVELOPMENT PROJECT TABLE OF CONTENTS Page PROJECT INFORMATION SHEET, CURRENCY AND MEASURES, LIST OF

AFRICAN DEVELOPMENTFUND

UGA/PAAC/99/01LANGUAGE : ENGLISHORIGINAL : ENGLISH

REPUBLIC OF UGANDA

NORTH -WEST SMALLHOLDER AGRICULTURAL DEVELOPMENTPROJECT

APPRAISAL REPORT

NB: This document contains errata or corrigenda (see Annexes)

COUNTRY DEPARTMENT OCDEEAST REGION NOVEMBER 1999

AFRICAN DEVELOPMENT FUND01 B.P. 1387, ABIDJAN

Tel: 20-44-44; 20-40-56; 20-48-33Fax: (225) 20-49-09/4220/5160

PROJECT INFORMATIONDate: November, 1999

The information provided hereunder is intended to provide some guidance to prospectivesuppliers, contractors, consultants and all persons interested in the procurement of goods andworks for projects approved by the Boards of Directors of the Bank Group. More detailedinformation and guidance should be obtained from the Executing Agency of the Borrower.

1. COUNTRY : Uganda

2. PROJECT TITLE : North West Smallholder AgriculturalDevelopment Project.

3. LOCATION : The project area covers the entire North WestRegion comprising the four districts of Arua,Moyo, Adjumani and Nebbi.

4. THE BORROWER : The Republic of Uganda.

5. EXECUTING AGENCY : Ministry of Agriculture, Animal Industry andFisheries, P.O. Box 102, Entebbe, Uganda.Tel: 256-41-320722; Fax: 256-41-321335

6. DESCRIPTION : The project will comprise five components:(i) Production Enhancement Component, whichaims to improve land and labour productivity byincreasing crop yields per hectare, encouragingmore profitable crop combinations and expandingcultivated area per household; (ii) MarketingOpportunities Component which aims to expandmarket opportunities, reduce marketing losses andenhance the market value of commodities; (iii)Rural Infrastructure Component, which aims toimprove rural access roads linking farms tomarkets and market infrastructures; (iv) MicroCredit and (v) Support for Coordination andManagement.

7. TOTAL COST : UA 19.60 million

Foreign Cost : UA 9.82 millionLocal Cost : UA 9.78 million

PROJECT INFORMATION (Cont’d)

8. BANK GROUP LOAN/GRANT

ADF : UA 17.60 million

9. OTHER SOURCES

Government : UA 2.00 million

10. ESTIMATED STARTINGDATE AND DURATION : 1 July 2000, for 5 years.

11. PROCUREMENT OF GOODSAND WORKS : Project goods and works will be procured

according to Bank rules of procedures.International Competitive Bidding for thepurchase of vehicles and motorcycles;National Competitive Bidding for civilworks; and National Shopping for thepurchase of office equipment.

12. CONSULTANCY SERVICESREQUIRED AND STAGE OFSELECTION : Selection of Consultants/Technical

Assistance will be through LimitedCompetition on the basis of a shortlist.Long term consultants will includeManagement Advisor (12 person-months);Marketing Expert (24 person-months);Rural Infrastructure Expert (24 person-months); Extension Agronomist (24person-months); and CommunicationSupport Expert (24 person-months).Short-term technical assistance willinclude rural roads design/surveys (12person-months over two years), prioritymarket design (3 person-months), microcredit survey (6 person-months), marketinformation needs analysis ( 1 personmonth, Mid-term review and ProjectCompletion Report (3 person-monthseach); Audit (8 person-months over 5years); and Miscellaneous services (10person-months over 5 years) All the long-term consultants will be required in PY1.

UGANDANORTH WEST SMALLHOLDER AGRICULTURAL DEVELOPMENT PROJECT

TABLE OF CONTENTS

PagePROJECT INFORMATION SHEET,CURRENCY AND MEASURES, LIST OF TABLES, LISTOF ANNEXES, LIST OF ABBREVIATIONS, EXECUTIVE SUMMARY,PROJECT MATRIX i-v

1. ORIGIN AND HISTORY OF THE PROJECT............................................................... 1

1.1 Project Genesis and Background.......................................................................... 1

2. THE AGRICULTURAL SECTOR.................................................................................. 1

2.1 Structure and Performance ................................................................................... 12.2 Land Tenure and Use............................................................................................. 22.3 Micro Credit System.............................................................................................. 22.4 Community Participation ..................................................................................... 32.5 Gender Issues ...................................................................................................... 42.6 Environmental Issues............................................................................................. 42.7 Development Experience in the Sector ................................................................ 52.8 Recent Development Policies Affecting Agriculture........................................... 5

3. THE CROP SUB-SECTOR ............................................................................................. 6

3.1 Farming Systems .................................................................................................. 63.2 Constraints and Opportunities for Crop Development ........................................ 63.3 Institutional Framework ........................................................................................ 7

4. THE PROJECT.................................................................................................................. 8

4.1 Project Concept and Rationale ............................................................................... 84.2 Project Area and Project Beneficiaries.................................................................. 94.3 Strategic Context: Poverty Alleviation ............................................................... 104.4 Project Objective ................................................................................................. 114.5 Project Description .............................................................................................. 114.6 Market and Prices ................................................................................................ 184.7 Environmental Impact and Mitigation ............................................................... 184.8 Project Costs ........................................................................................................ 194.9 Sources of Financing and Expenditure Schedule................................................ 20

TABLE OF CONTENTS (Cont'd)

5. PROJECT IMPLEMENTATION ................................................................................... 21

5.1 Executing Agency ............................................................................................... 215.2 Institutional Arrangements .................................................................................. 215.3 Supervision, Implementation and Expenditure Schedules.................................. 225.4 Procurement Arrangements................................................................................. 235.5 Disbursement Arrangements ............................................................................... 255.6 Monitoring and Evaluation.................................................................................. 255.7 Financial Reporting and Auditing ...................................................................... 265.8 Aid Co-ordination............................................................................................... 26

6. PROJECT SUSTAINABILITY ANDRISKS…………………………………………….26

6.1 Recurrent Costs.................................................................................................... 266.2 Project Sustainability........................................................................................... 276.3 Critical Risks and Mitigation Measures.............................................................. 28

7. PROJECT BENEFITS...................................................................................................... 28

7.1 Financial Analysis ............................................................................................... 287.2 Economic Analysis.............................................................................................. 287.3 Social Impact Analysis ........................................................................................ 297.4 Sensitivity Analysis ............................................................................................. 30

8. CONCLUSIONS AND RECOMMENDATIONS......................................................... 30

8.1 Conclusions ......................................................................................................... 308.2 Recommendations .............................................................................................. 30

--------------------This Appraisal Report was prepared by a Mission comprising Messrs. Chiji Ojukwu(Principal Agricultural Economist/Analyst and Mission Leader), Frank Kufakwandi(Principal Forestry Officer), Driss Lekorchi (Principal Civil Engineer) and Ms. PhoebeMtambo (Senior Agronomist) which visited Uganda in September/October 1999.Messrs. Hailu Mekonnen (Senior Poverty Reduction Expert) and Gerald Kambou(Senior Country Economist) contributed to the report. Enquiries should be addressed toMr. L.I. Umeh, the Division Manager, OCDE.2 and the authors.

LIST OF TABLES

No. Page4.1 Summary of Project Cost Estimates by Component 194.2 Summary of Project Cost Estimate by Category of Expenditure 204.3 Sources of Finance 205.1 Expenditure Schedule by Component 235.2 Expenditure Schedule by Sources of Finance 235.3 Procurement Arrangements 24

LIST OF ANNEXES1

No.No. of Pages

1. Map Showing the Project Area 12. Project Organisational Chart 13. Provisional List of Goods and Services 14. Summary of Financial and Economic Analysis 35. Project Implementation Schedule 16. Environmental Category II Justification 17. Bank Group Operations in Uganda 1

CURRENCY AND MEASURES

Currency unit : Ugandan Shillings (USH.)UA 1 : USH. 1991UA 1 : USD 1.37195

Effective rate in October, 1999

GOVERNMENT FISCAL YEAR

July 1 - June 30

WEIGHTS AND MEASURES

1 Kilogram = 2.2 Pounds (lb)1 Quintal = 100 kg1 Metric tonne = 1000 kg1 Hectare (ha) = 2.471 Acres1 Square Kilometer = 100 ha1 Square Mile = 259 ha1 Square Mile = 640 Acres

ABBREVIATIONS

1 Annexes in Project Implementation Document (Separate Volume) include: I. Detail Cost Tables; II. RuralInfrastructure Development; III Crop Production and IV. Cost-Benefit Analysis Tables.

ADF African Development FundAEP Agricultural Extension ProjectAMTA Agricultural Management Training for AfricaBAT British American TobaccoCAP Community Action ProgrammeCAO Chief Administrative OfficerCBO Community Based OrganisationCCU Central Coordinating UnitDEC District Extension CoordinatorDFI District Farm InstituteDFID Department for International Development (UK)DTAC District Technical Advisory CommitteeGoU Government of Ugandaha HectareIE Intermediate EntitiesLC Local CouncilMAAIF Ministry of Agriculture, Animal Industry and FisheriesMFI Micro Finance InstitutionMLWE Ministry of Land, Water and EnvironmentMT Metric TonneMTR Mid Term ReviewMOC Market Opportunities ComponentMUV Manufacturers Unit ValueMWHC Ministry of Works, Housing and CommunicationNAEP National Agricultural Extension PlanNARO National Agricultural Research OrganisationNCB National Competitive BiddingNEAP National Environmental Action PlanNEMA National Environmental Management AuthorityNGO Non-Governmental OrganisationPAC Project Advisory CommitteePAP Poverty alleviation ProjectPEC Production Enhancement ComponentPCU Project Coordinating UnitPMA Plan for Modernisation of AgriculturePCR Project Completion ReportPSC Project Steering CommitteePY Project YearSH Shilling (Uganda)SOE Statement of ExpenditureUA Unit of AccountUNDP United Nations Development ProgrammeUSAID United States Agency for International DevelopmentUSP Uganda Seed Project

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EXECUTIVE SUMMARY

1. PROJECT BACKGROUND

This Appraisal Report follows the successful completion of an earlier Preparation Report whichwas submitted to the Bank Group for funding in 1999 by the Government of Uganda for asmallholder agricultural development in the Northwest Region. The Region is ranked among thepoorest in Uganda with social indicators of poverty higher than national averages. TheGovernment of Uganda has developed poverty reduction plans to address the problem asenunciated in the Plan for Modernisation of Agriculture (PMA), Poverty Eradication ActionPlan (PEAP) and the Uganda Vision 2025. The proposed project is part of these measures and isseen as a priority, having been included in the country’s Public Investment Programme (PIP).

2. PURPOSE OF THE LOAN

The ADF loan will be used to finance the entire foreign exchange cost of the project amountingto UA 9.82 million. The Fund will also finance some local costs amounting to UA 7.78 millionor 40% of total project cost.

3. OBJECTIVES

The project’s objective is to improve agricultural productivity and marketing in the Region,consistent with the government policies of sustainable economic growth with regional equityand poverty reduction. The project will contribute towards poverty reduction by enhancing foodsecurity and increased household incomes of smallholders throughout the North West Region.

4. DESCRIPTION

In order to attain these objectives, the project will focus attention on:

(i) Production Enhancement: through 6 sub-components:

Improving Farmer Management Skills: to educate farmers about improved practices and toenhance their skills so as to raise both food security and household income;

Revitalisation of District Farm Institutes (DFIs): to upgrade the physical facilities and staffcapacity at Arua and Moyo DFIs and establish DFIs at Nebbi and Adjumani;

Seed Multiplication and Distribution: to promote increased supply and utilisation ofimproved seeds and seedlings;

Farm Mechanisation: to promote the use of animal traction as a replacement for the hand hoeas the major tool of production and thereby raise productivity;

Communication Support: to disseminate timely information on improved agriculturalpractices and technologies, and marketing issues.

Agro-forestry and Conservation: to encourage and support farmers to plant trees forconservation to reduce pressure on natural forests and enhance soil fertility.

(ii) Market Opportunities: through 4 sub-components:

Market Information and Analysis: to generate information on markets for the North Westand disseminate this promptly and widely in the Region;

Improve Marketing Skills: to upgrade the capacity (technical and business skills) ofmarketing participants in order to provide marketing services to the North West.

Marketing Financing: to provide micro-credit to finance worthwhile marketing activities;

ii

Improvement of Priority Markets: to enhance the effectiveness of these markets as keytrading centres and to stimulate rural marketing activities.

(iii) Rural Infrastructure: through the following:

Rural Access Roads Improvement: most access roads are in bad condition. The project willprovide resources for their rehabilitation and maintenance.

Building Construction/Rehabilitation: undertake construction of new buildings/ structures atNebbi and Adjumani DFIs; and rehabilitate existing ones at Arua and Moyo. This will alsoinvolve the construction of structures in the identified priority markets slated forimprovement (market gates, selling slabs, goods sheds, lock-up stores, etc).

Water Supply and Sanitation: provision of water points and sanitary facilities in the prioritymarkets and the proposed DFIs at Nebbi and Adjumani and rehabilitation at Moyo DFI.

(iv) Micro Credit: will coordinate micro credit delivery through a micro-finance institution.The component will provide support for:

Farm input purchase, such as improved seeds, animal traction units, fertilizers and otherfarm implements;

Marketing financing for produce buyers; and Off-farm agricultural-related enterprises, such as post-harvest processing.

(v) Co-ordination and Management: which includes support for a central coordinating unitwithin the Ministry of Agriculture, Animal Industry and Fisheries in Entebbe, and facilitatingcoordination at the 4 districts.

5. PROJECT COST

The total project cost is estimated at UA 19.60 million of which UA 9.82 million (50.1%) willbe in foreign exchange and UA 9.78 million (49.9%) will be in local currency.

6. SOURCES OF FINANCE

The project will be jointly financed by the ADF and the Government of Uganda: ADF fundswill be utilized to finance all vehicles, civil works, technical assistance, training and microcredit. Total ADF contribution representing 89.8% of total costs will be utilized to cover 100%of the foreign exchange costs and 79.5% of all local costs which represent 40% of the totalproject costs. The GoU’s contribution of UA 2.0 million, representing 10.2% of the total projectcosts, will be utilized to cover all personnel and general operating expenses.

7. PROJECT IMPLEMENTATION

Duration of Implementation: The project will be implemented over a five-year periodbeginning July, 2000

Implementing Agency: Ministry of Agriculture, Animal Industry and Fisheries, P.O. Box102, Entebbe, Uganda. Tel: 256-41-320722; Fax: 256-41-321335.

Other Implementation Actual implementation of project activities is decentralised to the

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Arrangements: four districts of Arua, Moyo, Adjumani and Nebbi. The PovertyAlleviation Project (a micro-finance institution supported by theBank Group) will administer the micro-credit. The private sector(farmers) will be involved in seed multiplication while NGOs willbe involved in training and capacity building.

8. CONCLUSIONS AND RECOMMENDATIONS

Conclusions

The proposed project addresses the pressing issue of poverty reduction in the North WestRegion of Uganda. Social indicators obtained during the appraisal mission confirm thatpoverty in the four districts is higher than national averages. The Government of Ugandahas developed poverty reduction plans to address these problems in which the proposedproject aptly fits. Limited marketing opportunities, low land and labour productivity andpoor state of the rural access roads are identified as some of the most critical factorsaffecting agricultural development in the Region. The project will directly target 51,000farm families but in general will benefit over 200,000 households or about 1.24 millionrural persons in the project area. The impact of the project will be reflected at the farmlevel through improved crop yields; increased return to labour; expanded cultivatedareaper household; improved crop combinations; improved farm-gate prices and moreassured markets for products. Improvement in farm-gate prices will be reflected inreduced regional and seasonal variations. Social benefits will include the creation ofemployment for local people. The development of micro-enterprises and the availabilityof good roads and other infrastructure in the project area will add significantly to thequality of life of the communities. The foregoing will increase total output which largelytranslates into increases in food security and household incomes and reduced poverty forproject beneficiaries. Improvement in water and sanitation in selected markets anddistrict farm centres will contribute to improved health and people’s welfare in theregion.

A strong emphasis on community consultation and participation, the use of existinggovernment structures (which reduces the overhead costs) and the reliance on privatesector service providers for input delivery, will create a self-sustaining system. Theproject approach is in line with government policies on decentralisation and Plan forModernisation of Agriculture. The project is technically feasible, economically viableand socially acceptable, and is in line with the Bank Group strategy for povertyalleviation. The overall economic rate of return of the project is 20.2%.

Recommendations

It is recommended that an ADF loan not exceeding UA 17.60 million be granted to theGovernment of Uganda (GOU) for the purpose of implementing the project as describedin this report, subject to conditions specified in the loan agreement.

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UGANDA: NORTHWEST SMALLHOLDER AGRICULTURAL DEVELOPMENT PROJECT

Objectively Verifiable Indicators Means of Verification Key AssumptionsSECTOR GOAL

- Poverty reduction through enhanced food securityand increased household incomes of smallholders inthe North West Region.

-Increase in household incomes in all four Districts (207,000 no. ofhouseholds to be reached by PY5). Return to person day improved from USH.1,712 to USH, 3,114 by PY5.

- Central Statistics Office and MAAIF Reportsand M&E Reports.

PROJECT OBJECTIVE

- Improved and sustained agricultural productivity forsmallholders in the four Districts of the North WestRegion .

-Increased yields by 30 –60% for most crops starting PY2.-At least 21,346MT of cassava, 4,658MT of f/millet, 16,767MT of maize,2,795MT of beans, 7,219MT of g/nuts and 1,863MT of simsim by PY5- 4.3 million cm3 of poles/fuel wood harvested by PY5.

- Annual statistics on crop outputs and M &EProgress Reports.- Interim monitoring and supervisionreports/Progress Report/MTR.- Final beneficiaries assessment/MTR/ PCR.

- Government priority to address foodsecurity and development in West Nileregion is maintained.- Marketing arrangements are efficientand market prices of crops remainfavourable for stakeholders.- Timely availability of inputs.

OUTPUTS

A. Crop Enhancement Component1. Increased small holder farm crop yields and

output.

B.Market Opportunities Component2. Small holder farmers have better access to

markets

C. Rural Infrastructure Component3. Small holder farmer related rural infrastructure is

improved

D. Micro Credit4. Access for rural communities to micro finance for

off-farm activities established and operational

E. Project Management5. Efficient project management.

-Total of 284 MT of improved seed varieties and 85,388 bundles (21.36million cuttings) of cassava distributed by PY2; 51,000 farmers reacheddirectly through extension by PY5. 20,000 farmers trained (10,400 women).

- 22 Number of priority markets places improved by PY5- 1000 marketers (600 women) trained in marketing skills by PY5

-200 km of access roads rehabilitated by PT2 and 3400 km routinely,recurrently and periodically maintained by PY5.

-26 no. water points improved by PY5

-At least 10,000 farmers (6,000 women) benefit from farm credit by PY5-At least 550 marketers get credit by PY5.- 2,000 households benefit from agri-business credit

- 5 project audits and 20 quarterly progress reports are submitted on time inline with Bank procedures.-The performance of consultants is satisfactory throughout the project life.-Goods are procured in alignment with Bank guidelines and are timelythroughout project life.

- 20 professional staff trained.

- Project Progress Reports- Annual work Plans- Supervision Reports

- Ditto

- Ditto

- PAP Reports.

- Audit Reports- Procurement Reviews.

1.1 Farmers adopt new technologies.

2.1 Security and peace remain stable.

3.1 District capacity for roadmaintenance developed and sustained.3.2 Underground water available and ofgood quality.3.3 Community follow through theirwillingness to participate in roadmaintenance works at Implementation.

5.1 CCU and District CoordinationUnits are adequately staffed.

5.2 Quality TA available andconsulting firms interested to bid.

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COMPONENTS/ACTIVITIES

1. Production Enhancement Programme1.1 Provide improved seed and seed distributionsystem1.2 Introduce and operate animal traction teams forhire1.3 Provide effective extension service and training1.4 Introduce and implement efficient soil

conservation and agro-forestry practices1.5 Improve farmer skills and technology2. Market Opportunities2.1 Establish an information gathering and

dissemination system on product markets2.2 Improve marketing skills of local people, farmer

associations, and private traders2.3 Develop marketing finance mechanisms to

support marketing activities2.4 Establish/improve priority markets3. Rural Infrastructure3.1 Rehabilitate and maintain rural access roads3.2 Construct and rehabilitate building structures3.3 Improve water supply and sanitation4. Access to micro-credit4.1 Establish a micro-credit scheme4.2 Promote the micro-credit scheme5. Project Management5.3 Provide CCU with equipment needed for

effective supervision/management5.4 Train CCU on management techniques5.3 Set up and maintain reporting system with the Bank

1. Project Financing (in million UA)

Source F.E L.C Total

ADF 9.82 7.78 17.60GOU - 2.00 2.00Total 9.82 9.78 19.60

2. Budget (in million UA)

Production Enhancement 5.18Market opportunities 1.63Rural Infrastructure 9.83Project Coordination & Management 1.29Micro credit 1.66Total 19.60

2. Human Resources

Staff years No 1,485T.A. (long term) No .108 person-monthsTA (short term) No. 46 person-months

3. Time5 years (2000/01-2004/05)

- Project reports- Quarterly progress reports- Supervision Reports.

- PAP reports.

1. Appropriate technologies for farmers

are available.

2. Beneficiaries receptive to new

marketing skills.

4. The credit scheme is efficiently

managed.

5. CCU staff appointed and retained.

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1. ORIGIN AND HISTORY OF THE PROJECT

Project Genesis and Background

During the period 1995 to 1997, the Government of Uganda (GoU), with a TAFgrant of UA598,684, undertook a study for smallholder agricultural development in theNorthwest Region, during which two projects were identified: (i) a Marketing OpportunitiesProject (MOP); and (ii) a Production Enhancement Project (PEP). The Bank later received aformal request from GoU to finance the projects. The Bank reviewed the report and suggestedto the Government to merge the two proposed projects into one inter-linked project – NorthWest Smallholder Agricultural Development Project. During June - July 1999, the Bankfielded a mission to Uganda to assist in the preparation of the proposed project, incollaboration with national counterparts. To ensure ownership of the project, the people ofNorth Western Uganda were asked to take a leading role in the exercise. The missionconducted extensive field visits to the districts and held a stakeholder workshop to agree onthe priorities for each district. It interacted with the donor community and NGOs in Ugandato inform them about the project and share their experiences on the ground. This appraisalreport is based on the identification report, the preparation mission and findings of the appraisalmission and as a consequence of the technical, financial and economic considerationsdetermined and discussed at various levels of consultations during the missions’ stay in Uganda.

2. THE AGRICULTURAL SECTOR

2.1 Structure and Performance

2.1.1 Agriculture is the dominant sector in the Ugandan economy. It employs over80% of the total population; contributes up to 45% to GDP and accounts for some 80% of exportearnings. In 1997/98, the contribution of the agricultural sector to GDP and exports was 43%and 90%, respectively. Food is produced using traditional agricultural technology and familylabor. Most of the food produced is consumed on the farm with limited opportunities forincreasing marketed surplus for food crops. Food production is by far the most important singleeconomic activity, accounting for over a quarter of GDP. Cash crops account for a further 6%and livestock 7.5% and fisheries 2%. Coffee contributes 60 – 80% of total export earning,depending on international prices. Women represent over 70% of the farm labour force,producing virtually all the food crops and around 60% of the cash crops.

2.1.2 Economic growth over the last decade has been concentrated in urban areasand has had relatively little impact on rural households. The concentration of poverty in ruralareas and its links to agricultural production are recognised in the Government of Uganda’sPoverty Eradication Action Plan. Strategies for the elimination of poverty in the countryfocus on growth in the agricultural sector where the livelihood of the vast majority of thepoor is based. Low levels of improved technology use coupled with a poor extension deliverysystem have become major constraints in the farming systems. Increased productivity inagriculture will enhance incomes through linkages to marketing and other activities withinthe rural areas.

2.1.3 Some livestock are found on most Ugandan farms but there are fewspecialised livestock operations. These have been developing in recent years mainly to supplythe Kampala market although development of the dairy subsector around Kampala dates backto the 1960s. Poultry and goats are reared in all parts of the country. Cattle, although raised inmany areas, tend to be concentrated on fewer farms and in certain regions. Most are dual-purpose animals but productivity levels (for both meat and milk) are very low. They are oftenused as a storehouse of wealth and to pay for brides according to tradition.

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2.1.4 Uganda has potential for fisheries development with 15% of its surface areacovered by open water, 2.2% by permanent wetlands. The main lakes are Victoria, Albert,Edward and George. Fishing is carried out by artisanal fishermen and to a lesser extent, by fishfarmers. As a result of trade liberalisation, there are 20 licensed firms involved in fish processingand exporting industries. The sub-sector engages one million people in direct and indirectemployment. Fish also plays an important role in food security and nutrition status, includingamongst poorer households.

2.1.5 The agricultural research system in the country has been restructured under theNational Agricultural Research Organisation, (NARO) in accordance with the NationalAgricultural Extension Plan (NAEP) which calls for the use of a group approach in unifiedextension service. This was developed under the IDA-funded Agriculture Extension Project(AEP) in 1992, and was based on the existing district, county, and sub-county structure. Theunified extension service makes a field extension worker responsible for groups of farmers fordelivery of extension services on crops, livestock, fisheries, and natural resource management.It provides for a single line of command from grassroots extension worker to the districtextension co-ordinator. Nevertheless, its effectiveness will depend upon (i) adequate funding,(ii) dedication of staff, and (iii) a continuing flow of relevant technology to the field workersso that they can pass it on to farmers.

2.2 Land Tenure and Use

2.2.1 The rights to land of Ugandan citizens are enshrined in the 1995 Constitution.Customary tenure prevails throughout the country and recognizes the rights of individuals topossess and use land, subject to the dictates of the clan/family, which was mainlydiscriminating against women. To give equal rights to land ownership to all Ugandan citizensthe Government enacted a new Land Act in July 1998. The new act outlaws practices andcustoms that discriminate against women. The British Department for InternationalDevelopment (DFID) is assisting the government in developing supporting actions requiredfor the smooth implementation of the new Land Law.

2.2.2 The majority of farms are small (less than 2 ha) and for most, size isdetermined by the amount of land that a family can cultivate (except the large sugar and teaestates). Up to 75% of the land is available for farming and farming conditions are generallyfavourable. Large area of land, including up to three-quarter of arable land is under-utilisedmainly because cultivation of land by the majority of smallholders is done by a hand-hoe.

2.3 Micro-credit System

2.3.1 Since 1994, Uganda has witnessed rapid advances in the development andimplementation of micro-finance programmes that bridge the financial intermediation gap byproviding savings and credit services to the urban and rural poor. There are about 95 Micro-Finance Institutions (MFIs) currently operating in Uganda. The limited capacity of most ofthe NGOs/CBOs functioning as MFIs inhibit their ability to effectively provide micro-financeservices to the poor. There is a general lack of their understanding of the industry’s bestpractices in service provision in Uganda. Formal financial institutions in Uganda stillconsider the poor who do not have formal guarantees/collateral as risky and not being creditworthy – the majority of women fall under this category. There is also a bias by MFIs tolending to the agriculture sector. During 1996 – 1998, there was a recorded decline of 33.4%in agricultural financing and an increase of 19.6% in trade and commerce financing. In 1998,the actual share of agriculture financed activities by the MFIs in Uganda was only 21%.Often repayments are required within one week of disbursement, a situation not consistent

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with agricultural production. On the average, a market based borrowing interest rate of 21%is charged as minimum. To-date, about 146,500 poor families have been reached with a totalloan portfolio of about US$ 28 million, of which the Bank-assisted Poverty AlleviationProject (PAP) stands out. PAP accounted for 20% of the total loan portfolio.

2.3.2 Established in 1993, PAP was the first ADF-financed project which heavilyrelied on NGOs in delivering financial services to the poor in selected districts of Uganda.The project used a participatory approach which relied on involvement of beneficiaries in allstages of micro-project development. PAP was successfully completed in December 1998and GoU has requested for an ADF financing of a second phase. The Project CompletionReport (PCR) prepared in April 1999 found that PAP expanded its outreach to 23,877beneficiaries from the poorest communities in remote rural areas and has significantlycontributed to improving their standard of living. Out of the total beneficiaries, 14,744 (62%)were women who received training, sensitization and awareness raising which contributed totheir empowerment, raised their self-reliance and improved their financial management skills,all of which contributed to their ability to improve their income levels and standard of living.

2.3.3 In the proposed project area, there are very limited MFIs or formal bankslending to the rural people. Their operational capacity and outreach, including PAP’s, arelow. However, PAP is to strengthen its intermediate entities (IEs) under its planned secondphase so as to improve its outreach in the area. Contrary to widely held perceptions, PAP hasproved that lending to farming is not as risky as many in the industry believe. Loans toagricultural activities were 60% of the total resources on-lent to clients. Out of the total, 34%was invested in crop production and 26% in animal husbandry. Compared to other sectorssuch as trade and services, agriculture-based lending scored the highest repayment rate whichstood at 97% as against the overall 92% recovery rate. PAP has achieved 60% increase ofbeneficiaries propensity to save. PAP’s maximum first loan size to an individual in a group isUSH. 200,000, with each group member saving consistently 12% of the loan amount beforeaccessing the first loan. To date, a total of 3,435 savings accounts are in operation with USH.1.2 million savings mobilised from clients.

2.3.4 PAP has also made a significant contribution to the development andexpansion of the microfinance industry by most notably strengthening the capacity of 60indigenous NGOs which are now providing microfinance services to the poor in both urban andrural areas. IEs active in the project area, and which are being used by PAP include WorldVision, Church of Uganda and the Adjumani Youth Association. In recognition of PAP’sgrowing capacity to deliver microfinance services to the poor and performance demonstratedduring its implementation, the GoU proposed that it will divest itself from the implementationof credit projects. It further proposed that other ADF financed project with credit componentsuse PAP to manage and deliver the credit to target clients. This was further prompted by theneed to minimize the risk of borrowers associating these loans with Government grants.During its second phase, PAP will be transformed into the Rural Microfinance SupportProject (RMSP) which will be implemented by the Microfinance Support Centre to beregistered as a company limited by guarantee.

2.4 Community Participation

Uganda has a rich tradition of community based development activities.Historically, communities have been able to mobilize local resources in order to build socialamenities. In some cases, the recent policy of decentralisation and the focus on governanceon the basis of accountability and transparency has created new opportunities forcommunities to participate in development programmes that affect their lives. At present,conducive environment that facilitates the participation of NGOs, CBOs and other members

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of the civil society in a variety of development activities in general and the delivery of basicsocial services in particular have been created. As a result, a large number of NGOs areinvolved in the delivery of basic services throughout the country. NGOs and CBOs are alsoencouraged to participate in the planning, implementation and maintenance of projects andservices at the local level. Participatory approaches have been adopted in the formulation ofthe Land Policy (para 2.2) and the various recent policies (para 2.8).

2.5 Gender Issues

2.5.1 As in many developing countries, regardless of their marital status, mostwomen in the rural areas of North West Region spend a significant amount of their time onagricultural work. Nevertheless, women farmers have less access to and control of basicresources and agricultural services than men. At the household level, most of the women havea great deal of responsibility and influence. It is the women's responsibility to cater for food,water and energy needs of the household and many women have financial obligations andface a wide range of constraints which limit their ability to generate cash and fulfil domesticneeds. In female-headed households, the burden on women is even greater in meetingexpenditure needs. There is a well-established traditional division of agricultural labour basedon gender and age, but over time this has slowly been eroded. Many farm activities aregenerally gender or age specific e.g. land clearing is the responsibility of men and youth. Fieldpreparation, planting, weeding and harvesting are the responsibilities of women and the youth.

2.5.2 Most of the women have little financial independence and few income-generating opportunities open to them. Employment opportunities are limited and the women donot have access to the resources necessary to initiate small businesses and enterprises. Many ofthe existing women groups often act as small local mutual assistance groups and their activitiesare often restricted to contributing funds to help members who are in need, for example, inpurchasing household goods. The emergence of women's groups in different parts of thecountry is an important development. Women are being organized to pool resources both forproducing and marketing food crops. The formation of women's groups is also facilitating theeffectiveness of micro-finance programmes.

2.6 Environmental Issues

2.6.1 The high rate of population growth, inappropriate agricultural practices and theincreasing demand for fuelwood for domestic use and tobacco curing has, aggravated the rate ofdeforestation and general environmental degradation in the North West Region. The loss offorest cover if not checked will diminish the capacity of the region to achieve sustainableagricultural production.. Action is needed to reduce pressure on natural forests. Measures tocreate alternative sources of fuelwood and to increases agricultural productivity are needed toenhance environmental management in the region.

2.6.2 In some parts of the region, there has been substantial degradation of riverbanks which has led to the silting of parts of rivers and streams. This situation hasperiodically caused flash floods during periods of heavy rainfall. Use of agriculturalchemicals is not currently a threat to the environment in the North West Region. The use ofchemicals is confined to tobacco, cotton, coffee, and cattle dipping but, even in theseapplications, it is very limited. Poorly designed and aligned roads have also been a source ofgully erosion in some areas of the region.

2.6.3 Although Uganda has elaborate forestry and environmental policies andregulations, lack of resources has made it difficult for the government to fully implementthese policies and regulations. In the North West Region, the government has been working

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with NGOs to encourage and support farmers to establish woodlots for soil conservation andto meet their needs for building poles and fuelwood. A number of individuals and groupshave established woodlots. However, lack of resources is constraining these individual andgroup efforts.

2.7 Development Experience in the Sector

Lessons learned from ADF agricultural portfolio and those of other donors inUganda include: (1) in order to be effective and sustainable, priority setting for ruralagricultural development projects should be transparent, demand-driven and with a broadclient involvement; (2) community groups, farmer to farmer extension and farmer to farmermultiplication and dissemination of improved seed, and other planting materials are highlyeffective mechanisms for farmer empowerment and involvement. (3) Another importantlesson is that effective extension delivery system, backed by sound research, is a prerequisitefor timely delivery of improved technologies, information and inputs to farmers. Concerningimplementation of projects, it was observed that start-up delays were associated withinadequate staff familiarity with procurement procedures and the financial management,accounting, and operating procedures required by donors. Furthermore, it was observed thatselection of qualified and committed project staff and technical assistance specialists iscrucial for the successful implementation of project activities. The project design has takeninto account the experiences gained

2.8 Recent Development Policies Affecting Agriculture

2.8.1 The Poverty Eradication Action Plan: The plan was produced in 1997 andprovides a basic measure for all projects and programmes implemented in Uganda. It aims toreduce the percentage of the population living in absolute poverty from the present 66% toless than 10%, and the percentage living in relative poverty from 86% to 30 % by 2017. Theplan calls for the eradication of poverty through sustainable development of the agriculturesector to improve food security and rural income generation.

2.8.2 Plan for the Modernization for Agriculture is spearheading the Government ofUganda drive to modernize the economy and promote sustainable economic growth as wellas reducing rural poverty. The plan specifies a financial resource envelope for investment tothe year 2003 and envisages growth in the production of most agricultural commodities bytaking advantage of demand and marketing opportunities in local, regional and internationalmarkets. The Plan anticipates increased adoption of available technology and gives greaterattention to: differentiated means of enhancing technology transfer to match the differentrequirements of the various categories of client farmers; and the fostering of a plurality ofmeans of service delivery. The Plan is viewed as a dynamic document subject to continuedelaboration and detailed definition of investment strategies.

2.8.3 Decentralisation Policy: The Government Policy Framework Paper ondecentralisation was released in October 1997. The policy has resulted in many of theplanning and budgetary control functions previously held by the central government beingtransferred to the local governments. Much of the resource allocation for government servicesand development activities is now at the district level. In contribution to upgrading theservices available at sub-county level, the Government has pledged to support deployment ofgraduate agriculturists in each sub-county.

2.8.4 Vision 2025: In order to harmonize all development aspirations in the countrythe Government has drawn a strategic framework paper for national development called Vision2025. Key elements of the vision relevant to agriculture include technological advancement,

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equal opportunities, participatory and democratic governance, empowerment and povertyalleviation, and the need to manage the environment sustainably.

3. THE CROP SUB-SECTOR

3.1 Farming systems

3.1.1 Basic food crops comprise cassava, sorghum and millet, matooke, maize,beans, sesame and groundnuts while cash crops include coffee, cotton and tobacco.. Non-traditional export crops grown in the Region include fruits, vegetables, and specialty crops.While most farmers have livestock, only a few have cattle. Production is exclusively rainfed.Mixed arable/livestock systems predominate and a range of crops is grown, both forsubsistence and to spread the risk. Inter-cropping is common, and consequently crop areasgiven tend to be misleading. Farming is dominated by poor-resource smallholder farmers. Itis further characterized by the use of rudimentary technology, low productivity, poorextension services, lack of adequate road and market infrastructure and information andlimited access to credit, which prevents the full realization of the sub-sector’s potential forgrowth. The government’s macro-economic and liberalization pollicies, which have increasedthe relative price of agricultural commodities and led to the removal of marketing boards, arebeginning to have positive impact on the crop sub-sector.

3.1.2 Since 1993, the Bank has been financing a successful Seed IndustryRationalization Project in Uganda which has set up the enabling environment for thedevelopment a private seed industry and sensitized the stakeholders on the use of improved seed.Though successful, its capacity is limited to producing enough seed to cover the seed demandfor the whole country.

3.2 Constraints and Opportunities to Crop Development

3.2.1 In attempting to increase or improve production, farmers in the North WestRegion face many constraints and some potential opportunities. These constraints andopportunities relate to resources, technologies, institutions and markets.

3.2.2 Resource Related: Although soil and climatic conditions in the region aresuitable for producing many different crops, the area cultivated per household is currentlylow. Time spent at marketing and collecting firewood limits the time women have forproducing crops. If draught power were available, more land could be brought intoproduction. There is potential to use oxen to expand animal draught power. Soil productivityis declining in heavily-populated areas where intensive cultivation does not allow for landfallow. Forest resources are being depleted and competition for land is already a problem infew counties and this problem is likely to exacerbate as population grows. Capital, even foroperating inputs, is a major constraint facing most farmers. Few are in a position to borrowand repay commercial loans, mainly because of their size of operation and the lack ofsecurity.

3.2.3 Technology Related: Crop yields could be increased if well-known and provenagronomic practices were used. Farmers are knowledgeable about many crops but most lacktechnical knowledge of improved cropping practices and how to produce the type of productsdemanded outside the region. The wide range of crops permits a wide selection choice forcrops with rotations that could allow for low cost soil maintenance and disease and pestcontrol. Improved seeds and planting material are not readily available in the area and, whenthey are, prices are beyond the reach of most farmers. Pest control inputs are virtuallyunattainable.

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3.2.4 Institution Related: Farmer support services have been largely ineffective, buthave shown some improvements since recent reorganisations and improvements in staffincentives. In the absence of successful co-operatives, farmers of the North West Region arejoining the Uganda National Farmers Association through which, it is hoped, farmers canreceive support services. NGOs could offer extra guidance in enhancing the community’sfarm productivity, especially when they work in coordination with the extension agents.However, NGOs and other organisations working in the field overlap and may even spreadcontradictory messages. Institutions responsible for provision and maintenance of ruralinfrastructures are weak and this is a major deterrent to expanding farm output. The DistrictFarm Institutes (DFIs) provide the vehicle for extension and farmers training. Run down by theafter-effect of the civil war, most of these are today in a sorry state of operation. There are nofunctional centres in Nebbi and Adjumani. Starved of operational funds and other resources, theexisting training centres in Arua and Moyo are also in dire need of rehabilitation and support.

3.2.5 Marketing Related: In general marketing constraints include low farm-gateprices and lack of buyers for produce. Existing transport and distribution systems are capableof handling products which do not have specialised needs such as cooling, refrigeration, orrapid movement to avoid product losses. The limited availability of processing facilities inthe Region constitutes a major constraint on short-term growth. Investments in processingwill be made by the private sector if they are profitable, and if there is sufficient certainty thatthis profit will be realised. Storage and handling facilities are currently adequate fortraditional exports but could be improved. The marketing systems within the Region,although very labour-intensive, are actually quite active in that many products move fromplace to place in response to seasonal/regional variations in supply or demand.

3.3 Institutional Framework

3.3.1 A new legislative framework (Local Government Act 1998) for theagricultural sector has been established which has redefined the roles of the Ministry ofAgriculture, Animal Industry and Fisheries (MAAIF). The core functions of MAAIF haveshifted from direct involvement in agricultural production to: (1) policy formulation; (2)training; (3) provision of technical guidance and (4) regulatory functions.

3.3.2 The Ministry comprises of two directorates (Animal Resources and Fisheries;and Crop Resources), reporting to the Permanent Secretary, and constituting variousdepartments responsible for technical work. The Directorate of Crop Resources is made up ofthe Crop Production Department and Farm Development Department. MAAIF facilitatesstrategic planning in crops, livestock and fisheries sub-sectors through development ofguidelines for district planning and ensuring consistency of district plans with nationalpriorities and strategies. The MAAIF has established close links with other key stakeholdersincluding processors, marketing agencies, NGOs and the Ministry of Tourism, Trade andIndustry (MTTI). Other institutions relevant in the sector include the National EnvironmentalManagement Authority (NEMA), Ministry of Natural Resources (MNR), and the Ministry ofLand, Water and Environment (MLWE). In agreement with NARO, MAAIF maintains closeties with research organisations and extension specialists to monitor the sector’s progress indeveloping and disseminating new technologies.

3.3.3 The districts coordinate field level implementation, including private sectorinvolvement. The Chief Administrative Officer (CAO), the District Production Coordinator andthe District Extension Coordinator (DEC) are responsible for implementation within sub-counties through the extension system. There are inadequate extension staff at both village andsub-county levels and the districts are having difficulties attracting and retaining qualified

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extension workers. The various sub-sectors in agriculture, infrastructure, gender and socialdevelopment are represented in the district administration. A village environmental committeeexists at all district administrative levels.

3.3.4 The Ministry of Works, Housing and Communication (MWHC) has overallsupervisory responsibility for the planning, design, construction, improvement and maintenanceof all roads, railways, airports and waterways. The Ministry has full jurisdiction over classifiedor main roads, while District Local Governments remain responsible for maintenance ofunclassified, rural feeder roads. With decentralisation, responsibility for the rehabilitation andmaintenance of rural feeder roads and the provision of technical guidance during communityroad improvement now lies with the Works Department of district administrations. The districtsare almost entirely dependent upon conditional allocations from the Central Government forfinancing rural feeder road maintenance (routine and periodic) and for operating their road plantand equipment. Costs associated with any community road improvement are met fromcommunity-generated resources which limit the extent and nature of improvement. With theexception of the newly created Adjumani district, the other three districts of Arua, Moyo andNebbi were provided with road plant and equipment, with work efficiency rate estimated atabout 70% on the average. The districts’ capacity for road construction and maintenance is weakand they often rely on contractors for these activities. A system exists in the districts forcollection of levies and user charges from market places.

4. THE PROJECT

4.1 Project Concept and Rationale

4.1.1 Low yield is the single most important factor behind rural poverty, even whenproducer prices are good as was the case in 1997. In general, yields of agricultural commoditieshave not increased in recent years and are even declining in some crops and some localities.Labour utilisation in the sector is increasing despite these constant or falling yield levels,indicating a decline in labour productivity and/or labour being allocated to an expandedproduction area. The flow of new technology to farmers in the North West Region was disruptedby the civil disturbances of the 1970s and 1980s. While one finds scattered evidence oftechniques introduced in the 1960s, many of these have fallen by the wayside because of limitedavailability of inputs and/or lack of money to buy them. The institutions which provided thatflow of technology, while still in existence, are very largely ineffective. A number of NGOshave attempted to revive them or, in some cases, in frustration, to substitute for them. This hascreated a situation where resources, which are available for reaching farmers, are poorly utilisedand new technology, if and when it arrives, helps only scattered groups of producers.Furthermore, when projects finish, even those groups of farmers which were assisted havedifficulty continuing what they started. (For example, a few farmers may receive improved seedfor several years, but there is no system to continue supplying the seed after the project finishes).Changes will need to be made in the characteristics and management of farming and subsequenthandling of agricultural commodities if future demands and longer-term economic objectives areto be met. The proposed Production Enhancement and Market Opportunities Componentsaddress this situation by helping the districts to revamp ineffective institutions and thereby makethem attractive for all those organisations working with farmers to co-operate and complementeach other. The proposed Production Enhancement Component (PEC) also emphasises twotypes of technology — improved seeds and animal traction — in order to provide many farmerswith concrete means of increasing production with minimal purchased inputs.

4.1.2 The proposed project focuses on enhancing food crop production, with which thebeneficiaries are familiar and also encourages private supply systems for the above inputs so that

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the technologies, once established, can be sustained. The use of local radio facilities, mobilecinema and print media in order to overcome the immense challenge of communication in theregion is considered essential to the project success. Marketing information emerging from theMarketing Opportunities Component (MOP) will be disseminated by radio while the activitiesof PEC will provide the basis for many radio programmes on production methods. Thisapproach is considered essential if large numbers of farmers are to be made aware (at reasonablecost) of both production and marketing opportunities. The high levels of illiteracy, the majorrole of women in food production, and the high costs of printed material and farmer trainingcombine to make radio one of the preferred communication methods in the region.

4.1.3 Poor transport infrastructure is obviously an important and the most criticalcause of marketing problem in the North West Region. Even if these problems were resolved,however, there are still key constraints in the form of lack of marketing skills, lack of capitalfor marketing activities, and lack of information and understanding concerning the marketopportunities available to the region and how to access them. It is these particular constraintswhich the proposed Marketing Opportunities component is intended to address. The RuralInfrastructure Component, mainly feeder roads/building rehabilitation and maintenance,complements activities designed for production enhancement and marketing.

4.2 Project Area and Project Beneficiaries

4.2.1 The project area is located in the north-west corner of Uganda adjacent to thecountries of Democratic Republic of Congo (DRC) and Sudan (see Annex 1 for Map ofUganda showing the project area). Much of the region lies west of the Albert Nile and ispoorly connected by transport and communications links to the rest of the country. Thesefeatures make it somewhat remote or removed from the mainstream of social and economicactivity in Uganda. Nevertheless, the area has developed an economy of its own based largelyon small-scale farming with most of the production consumed within the region. The regionincludes the districts of Arua, Nebbi, Moyo and Adjumani. The region has an estimated 2,500km of main and feeder roads. The Albert Nile and Lake Albert provide the main opportunityfor water transport in the region. The river has long been used by local people for transportvia canoe. The region is serviced by three airstrips – one each at Adjumani, Nebbi and Arua.One is under construction in Moyo. Light aircraft can readily operate from the strips.

4.2.2 With an estimated population of 1.46 million (1999), the major source of incomefor the people in the Region is subsistence farming. Available data shows that about 85% of therural households identify subsistence farming as their main source of livelihood. Even in urbanareas, more than 40% of the households depend on subsistence farming. Unpaid family labour isthe primary source of smallholder production in the Region. Health conditions of the populationin the Region appear to be lower than the national averages. Key indicators in the Region are:infant mortality rate of 140 per 1,000 compared to only 122 at national level; child mortality at235 per 1,000 compared to 203 for Uganda; maternal mortality at approximately 500 per100,000, well above the national average; and, more than 50% of children under 5 years arestunted. There is certainly a lack of knowledge about balanced diets at the household level.

Uganda was one of the first countries where the problem of HIV/AIDS was recognisedearly. At present, it is also one of the few countries that have dealt with the crisis systematicallyand consistently. The most important elements of Uganda's relative success in fighting theepidemic include considerable political commitment and aggressive preventive campaigns at alllevels of government. The decentralised structure of government has helped the mobilisation ofcommunities in favour of educational and preventive campaigns in this regard. There are alsowell-developed self-help private groups organised to fight the epidemic. For instance, in two ofthe districts (Nebbi and Arua), women's and teacher's groups are involved in preventive

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activities. Although there is a risk of reduction in labour productivity in the project area due tothe epidemic, this risk is relatively small compared to that in other countries.

4.2.3 The project concept is based on a participatory approach and constantinteraction with the local communities. The Production Enhancement Component is directedat smallholder farmers, but through intermediaries such as extension workers, seed producers,owners of draught animals for hire, and others. On the other hand the MarketingOpportunities Component targets men and women involved in the marketing of farmproducts. Some of these will be smallholder farmers themselves but many may earn most oftheir income from marketing and, for this reason, the MOC is directed towards them.

4.2.4 In general, the only way to target farmers through MOC is to ensure thatproject activities are widely dispersed throughout the region. Specific efforts will be made toensure that women participate in most of the programme components. Some components,however, are more likely to benefit women than others. For example, most of the MOC sub-components should achieve a high level of participation by women while there may be only afew that participate in the seed multiplication sub-component. Women are also indirectlytargeted in PEC by efforts to increase their labour productivity as this has the potential toreduce the time they spend producing food and increase the time available for other activities.

4.2.5 The communication support sub-component will be used as a vehicle to ensurethat more farmers, particularly female-headed households and low income farmers participatein the activities which would enable them to benefit the most. In the early part of the project,however, it may have to focus on farmers who are most likely to adopt, then effort cangradually be shifted to other groups. Indeed, the use of radio to publicise the success of somefarmers may be a powerful tool for reaching others who are more likely to be followers thanleaders. Radio is expected to be particularly instrumental in increasing the participation ofwomen in improved approaches to marketing and the use of better farming methods. Air timewill be carefully selected to offer women the opportunity to listen to the programmes. Thelocal communities will be involved in deciding and prioritising the access roads forrehabilitation and maintenance. The local people will be employed as petty contractors for themanual recurrent road maintenance.

4.3 Strategic Context: Poverty Alleviation

4.3.1 The incidence of poverty in Uganda is quite high. In 1996, about 46 percent ofits population was below the poverty line. The high incidence of poverty in the country is themajor reason for the government's focus on poverty reduction strategies that aim at equitablegrowth and the development of the human capital of the poor. Both income and non-incomeindicators of poverty in the four districts suggest that the incidence of poverty in the fourdistricts is even higher (Average monthly household income based on a 1993 survey is USH.55,200 for Uganda and USH. 37,000 for the Region). The majority of the population dependon subsistence farming as a source of income. The development of the agricultural sector ofthe region, therefore, will continue to be the most important source of economic growth andpoverty reduction for each of the four districts.

4.3.2 The three most important considerations in the project are the recognition ofthe low productivity of farmers, the availability of abundant unpaid family labour and lowliteracy rates of farmers, particularly women farmers. These factors have influenced thedesign of the project both in terms of improving yields of crops as well as the extensionprogrammes that are pro-poor so that income and food security are increased and poverty isreduced. For instance, the plans for the distribution of better seeds, the introduction of animaltraction, the use of radio programmes for providing information on efficient and cost-

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effective agricultural production methods and marketing are designed with the beneficialimpact on the lives of poor farmers in general and women farmers in particular in mind.Compared to cultivation using hoes, the introduction of animal traction should release familylabour for important agricultural activities such as timely weeding thus increasing labourproductivity and consequently food supplies as well as farm income.

4.3.3 The micro-finance and the road rehabilitation and maintenance aspects of theproject are also considered not only for economic growth but also for reduction of poverty asmany poor farmers and women as possible are reached through increasing the access of thepoor to markets. Availability of potable water can reduce health hazards and improve theproductivity of the poor. The agro-forestry aspects focus on providing mitigation measures toprotect the environment and to ensure sustainable agricultural productive activities.

4.4 Project Objective

The project aims to contribute towards achieving reduction in poverty byenhancing food security and increased household incomes of smallholders throughout the NorthWest Region. The project’s objective is to improve agricultural productivity in the Region,consistent with the government policies of sustainable economic growth with regional equityand poverty reduction

4.5 Project Description

4.5.1 The project which will be implemented over 5 years has the following fivecomponents:

A. PRODUCTION ENHANCEMENT COMPONENT.

4.5.2 The constraints to production enhancement will be addressed through thefollowing sub-components/activities.

Improving farmer management skills: The project in collaboration with the field extensionstaff will facilitate the establishment of on-farm demonstration plots to show the superiorperformance of improved seed of finger millet, maize, beans, groundnut, sesame as well asthe elite virus resistant cassava variety to farmers. The project will build on the alreadyexisting farmers groups, most of whom belong to women. The demonstration plots will beused as training grounds primarily for other farmers in the group as well as to demonstrate theintegrated production and pest management techniques, cultural practices, land husbandrymethods to conserve moisture and reduce soil erosion. At least 0.5 ha demonstration plot willbe established per farmer group. This will belong to one of the group members chosen by thegroup. The project will provide improved seed for planting on the demonstration plots. Thefarmer will provide labour and other inputs. To ensure timely and adequate technical back-up, funds will be provided to procure vehicles, motorcycles and bicycles for extensionworkers. The provision of transport will enable extension workers to facilitate and support theestablishment and monitoring of the demonstration plots as well as provision of advisoryservices to farmers in areas that require their expertise. Field days will be conducted jointlyby the farmers and extension staff to provide a forum for the farmers to exchange ideasamong themselves and with extension and research staff on the other hand. One hundred(100) demonstration plots will be established during the first two years of the project. Radioprogrammes broadcasting various technical information on crop production and marketing invarious languages of the region will supplement the demonstration plots in popularising theuse of improved technologies as a means of raising crop production and household incomes.

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4.5.4 In-service training will be given to subject matter specialists and front linefield extension workers at the DFIs to sharpen their skills on how to introduce newtechnologies to farmers. Twenty-four (24) subject matter specialists and 60 field staff will betrained. Some of these will be women. The training will be given by crop experts from theNARO and the Extension Agronomist. The training will be given during the preparatorystage of the project so that during the project implementation the programme for farmers’training is ready. The training of farmers will be undertaken within the framework of thedistrict farmers training programme. The farmers will be trained in the following topics: cropproduction, post harvest handling, packaging, and crop marketing. In total, the project willprovide training for 20,000 farmers, with 10,400 of these being women. Farmers trained willin turn train the other members of their groups. The Government has given assurances thatadequate extension staff will be provided for project activities.

4.5.5 The Revitalisation of the District Farm Institutes (DFIs): To revitalise thedistrict farm centres, the project would establish a strong link with NARO and the DistrictExtension Services. Each DFI would have to be upgraded and revitalised to be responsive tothe needs of farmers. The aim is to establish a continuing capacity to carry out effective andefficient technologies transfer system and training of extension staff as well as farmers. TheDFIs will spearhead the demonstration and promotion of appropriate technologies forextension system. The project will finance the up-grading of physical and staff capacity of thecentres to enable them to plan and implement effective and efficient programmes within theresources available.

4.5.6 The seed/seedling multiplication and distribution system: During the first twoyears the project will procure 85,388 bundles of elite virus resistant cassava, 10 MT of fingermillet, 117MT of maize, 62MT of beans, 83MT of groundnuts and 12MT of sesame (simsim)seed from the Uganda Seed Programme and cassava bundles from Namulonge Researchstation in Kampala for multiplication. The seed will be multiplied by 20 selected groups offarmers. Each farmer will sign a contract with the project as an individual seed grower on themodalities and technical aspects of seed production. The selection of seed multiplicationfarmer groups will be done by the district project technical staff. The criteria for selecting thegroups will depend on the availability of land, suitable climate, and preparedness of the groupto adopt new farming technologies. The seed producers will have access to credit for buyingtheir farm inputs and for hiring animal traction. The produced imprved seed will be sold toother farmers for planting as a means of raising crop yields.

4.5.7 The seed multiplication programme will be supported by an intensiveextension back-up in order to ensure that recommended cultural practices are strictlyfollowed and farmers’ training is effective. To further sustain the seed multiplicationprogramme the project will provide technical assistance of 24 staff months of aninternationally recruited extension agronomist who, in addition to supporting the overallproduction enhancement, will also oversee seed multiplication and distribution, qualitycontrol, processing and storage. He will also train the extension workers and seed producersin all facets of seed production. A seed demand survey will be undertaken during the first sixmonths of the project. The data obtained from the survey will be useful for distinguishingbetween “potential” demand and “effective” demand in order to avoid over/under productionof improved seeds.

4.5.8 The seed will be sold from the DFIs to private traders and individual farmers.The pricing of seed will be based on the cost for seed production with a 15% mark-up tocover the cost of seed distribution. The seed production activities will be fully handed over tothe private sector beginning PY3. The cassava bundles will be sold directly by the seedproducers to the farmers in order to offset the logistical problem of transporting large

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quantities of perishable vegetative material. Under special conditions arrangement will bemade to transport large quantity of material to a group of farmers.

4.5.9 Animal Traction: The objective will be to have animal traction increasinglyreplace the hand hoe as the major tool of production and thereby raise productivity. Theproject would support the establishment of 200 units of privately-owned and operatedsystems of draught power, largely on a hire basis. Since most farms are too small to justifythese individually, some sharing mechanism must be used and the private hire system makesbest use of market forces. As local cattle numbers and quality are limited, some draughtanimals would (if needed) be brought in for immediate use from outside the region. Locallyavailable draft animals would be trained along with operators and the private sector supply ofanimal draft equipment would be assisted. The project will provide financing for on- and offfarm training, collaboration with research institutes, workshops and seminars and technologyreview meetings, blacksmiting, prototypes and traction equipment and tools fordemonstration. These will include 20 each of ox-ploughs, harrows; ox-carts; planters; anvils,sledgehammers, work bulls and weeders which will be distributed to the DFIs fordemonstration purpose.

4.5.10 The Communication Support sub-component will utilise the services of thenewly established private radio stations (Radio Paidha and Voice of Life Radio) to disseminateagricultural practices and technologies, gender and marketing issues. This will also includeproduction of posters, leaflets and the use of mobile cinema vans. The sub-component will carryout programming in local languages in support of the marketing and production enhancementactivities in general. The project will finance training of staff in communication and production.

4.5.11 The Agro-forestry and conservation sub-component will build on theachievements of past government efforts in the Region to encourage and support farmers toplant trees for conservation and for the supply of timber products to reduce pressure onnatural forests and enhance soil fertility. The activities will involve at the farm level, theprovision of nursery inputs and establishment of tree nurseries and woodlots, soil erosioncontrol and fertility management, as well as support to extension services and the promotionof energy-efficient wood stoves. The proposed activities will provide mitigation measures tosustain the proposed agricultural enhancement activities and enhance environmentalmanagement in the project area.

4.5.12 The project will support farm households to establish 500 tree nurseries, 380Ha of coffee/ficus/gravillus plantations, 3500 Ha of woodlots on farms and homesteads, and2300 Ha for soil fertility/river bank rehabilitation annually. In addition, the project willsupport farmers to plant 0.25 million fruit trees annually. On the average, each participatinghousehold will establish and maintain 0.1 to 0.5 Ha of plantations. The main tree species tobe planted will include not be limited to Khaya senegalensis, Azaderatcha indica, Eucalyptusteristiconis, Cassia spectabilis/siamea, luceana lecocephella, Calliandra calothyrsus.Intercropping of banana and coffee plantations with Ficus natalensis and Gravillus robustaand the intercropping of beans, groundnuts and simsim with Markhamia platicalyx andLucena lecocephela will be promoted to provide shed to coffee trees and improve soil fertilityand yields. These species are already planted and are familiar to farmers in the project area.Farm household labour, in accordance with existing practices, will be used in all theseactivities. Fruit trees will include mangoes, oranges, lemons, annona spp etc.

4.5.13 The project will promote and popularise the use of wood-efficient stoves as ameans of reducing the volume of fuelwood used for cooking. One thousand (1000) stoveswill be provided as demonstration units. The micro-credit will provide support toentrepreneurs who wish to invest in wood stoves production.

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B. MARKET OPPORTUNITIES COMPONENT

4.5.14 The objectives of the Market Opportunities Component (MOC) are: to expandmarket opportunities; to enhance the market value of commodities; to reduce marketinglosses; and to enhance women’s access to market opportunities. The overall strategy forachieving these objectives is to strengthen private sector marketing activities, especially thosebeing carried out by farm groups (Co-operative Societies, Farmer Associations, and informalfarm groups) and those which link local markets with major towns in the North West Regionand markets outside the region. The MOC will include four sub-components/activities:market information and analysis; improve marketing skills; marketing financing; and,improvement of priority markets.

4.5.15 The market information and analysis: will both generate information onmarkets for the North West products and disseminate this information widely in the region.The project should assist greatly in overcoming the major information gap which currentlyexists. Thereafter, the private sector with some public support, should be linked toinformation sources which will allow them to keep abreast of changing market conditions.Detail activities will include developing a plan for establishing a sustainable marketinformation system, establishment of data collection and storage system, establishment of thedissemination system, identification of marketing problems and opportunities for analysis andundertaking of need analysis and reporting of results to end users.

4.5.16 The improvement of marketing skills: will target those local people who areinvolved with the two main marketing channels in the region (i.e. the local marketplaces forfood crops and the special channels for cash crops). Private traders, Co-operatives, andFarmer Associations will all be encouraged to participate. Detailed activities will includedevelopment of needs analysis, training programmes, delivery of programmes to clients andevaluation of utilisation of skills transfer. Training will be given in areas of book keeping,market information, loan sourcing and repayment.

4.5.17 The marketing financing: will be closely tied to the activities of microfinancing institution administering the micro credit. The project will provide funds to supportworthwhile marketing endeavours and to improve the effectiveness and recovery level offunds already available for lending. Detail activities will include a survey to determineborrowers’ needs, stakeholder workshops, development of arrangement with a micro-financing institution regarding the lending of project funds for marketing functions, includingprocedures for recovery and the augmentation of capital available for lending. The projectwill finance the recruitment of a Marketing Advisor for 2 years who will be responsible forpromoting the marketing opportunities component as well as developing modalities for credit.The mechanism developed for marketing financing will also be adapted for on-farm and off-farm micro-financing.

4.5.18 The improvement of priority markets is intended to enhance the effectivenessof these markets as key trading centres which can generate surpluses for sale to regionaltowns and also beyond. Detail activities will include identification and prioritization of themarket places, undertaking a needs assessment survey of the prioritized markets, inconsultation with the local people, develop a plan for improvement, implementing as agreed-upon plan in each market place, providing assistance to marketing groups to enhance storage,grading weighing or other facilities, and making recommendations regarding market levysystems. This is to be implemented in collaboration with the Rural Infrastructure component.

C. RURAL INFRASTRUCTURE COMPONENT

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4.5.19 Improving crop marketing, labour and land productivity will be better enhancedif the access roads linking the farms to the markets are also improved. Experience elsewhere hasshown that agricultural projects which have included support for improvements in ruralinfrastructure and marketing are more likely to realise production benefits. The Component willcomprise three main sub-components.

4.5.20 Access Roads Improvement: The project will provide resources for therehabilitation and maintenance of priority access roads. The project will fully rehabilitate to allweather level a total of 200 km of roads over 2 years, and undertake to maintain these. Accessroads maintenance will be under three regimes: routine/manual maintenance, recurrentmaintenance and periodic maintenance. All access roads rehabilitation and maintenance will bethrough contract. The Works Department in each district will develop eligibility criteria forselecting rural roads for rehabilitation or maintenance. Road selection and prioritization will bedone in consultation with the communities who will also contribute labour under themanual/routine maintenance. Each district will prepare on annual basis access roads design andplan, a copy of which is to be submitted to the Fund. The project will recruit for two years aRural Infrastructure Expert who will supervise the implementation of the rural infrastructureworks, especially the access road improvement. Each district Chief Engineer will be acounterpart to the Rural Infrastructure Expert. An Engineer from the Ministry of Works will beengaged to inspect and certify work done on a measured work basis. All applications forjustification of expenditure must carry proof of the inspection and certification of the work done.

4.5.21 Access road rehabilitation will comprise 60 km each in Arua and Adjumani; and40 km each in Moyo and Nebbi. After the roads have been rehabilitated, these will be turnedover for maintenance by the districts’ Works Departments and the local communities. Theproject will finance the maintenance in aggregate of a total of 3400 km over 5 years under thethree regimes. Out of this, a total of 1600 km of roads will be undertaken by routine/manualmaintenance through community participation. This involves light maintenance carried out on adaily basis as the case may be. These include 480 km each in Arua and Adjumani, and 320 kmeach in Moyo and Nebbi. Token payment (estimated at 12.5% of full cost) will be paid per kmand made to nominated individuals/groups (village maintenance groups) in the community whoare “contracted” by the project to undertake the works. The community will assist with labourand materials. The project will provide the communities with simple hand tools such as shovels,pick axes, cutlasses, hand rammers, wheel barrows, rakes, hand hoes, watering cans and headpans. These will further enhance employment opportunities for the youths and empower them toundertake income generating off-farm activities. The project will provide training for the villagemaintenance groups.

4.5.22 Recurrent maintenance will also cover a total of 1600 km made up of 480 kmeach in Arua and Adjumani; and 320 km each in Moyo and Nebbi. This type of maintenance,done before and after the rains, will involve light work items like reshaping of cambers, fillingof potholes, de-silting the drains and removing small corrugations which have not hardened.

4.5.23 Periodic maintenance will be carried out during the 3rd year. A total of 200 kmearlier rehabilitated will be maintained. The work items required here include removal of largecorrugations which have hardened, filling up of large pot holes, clearing of blocked drains andre-establishment of the longitudinal drainage, restoring the surfacing material to the originalthickness of 150 mm, and erosion control.

4.5.24 Building Construction/Rehabilitation: undertake construction of new buildingstructures at Nebbi and Adjumani DFIs and rehabilitate existing ones at Arua and Moyo. Thiswill also involve the construction of structures in the identified priority markets for improvement

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(market gates/ gate houses, selling slabs, goods sheds, lock-up stores, slaughter slabs, etc). Aspart of improving market opportunities, a total of 22 priority markets (7 in Arua and 5 each inNebbi, Adjumani and Moyo) will be improved. These comprise 6 No. Class A, 10 No. Class Band 6 No. Class C rural markets. Fresh construction of priority service buildings, e.g.classrooms, dormitories (males and females), dinning halls, principal’s and key staff quarters,multi-purpose storage, fencing, etc. will be undertaken. The project will finance maintenance ofstructures provided under the DFIs, while those at the priority markets will be maintained bycommunity participation through the market authorities or on owner/occupier basis. End-userenlightenment and training of existing market managers will be important for an effective userservices. User charges will be important factors for maintenance of the markets oncerehabilitated. To demonstrate ownership, districts will contribute labour and materials during theconstruction and rehabilitation and undertake to maintain the structures thereafter.

4.5.25 Water Supply and Sanitation: provision of water points and important sanitaryfacilities in the priority markets and the proposed DFIs at Nebbi and Adjumani andrehabilitation at Moyo DFI. A total of 26 potable water points made up of 16 boreholes (13 newand 3 for rehabilitation), 6 wells and 4 spring development have been proposed for the 22priority markets and the four DFIs. The boreholes and wells will be provided with submersiblepumps and hand pumps respectively, while the spring boxes will be provided with 1.5 – 2.0 HPsurface pumps to assist the flow into overhead tanks. With the choice of market places, a propergeophysical investigation will be carried out to locate the most appropriate drilling points. One100m Dip-meter and one Hach potable water quality testing equipment will be procured for eachDistrict’s Water Department for effective implementation and supervision. Beneficiarycommunities will contribute labour and materials and undertake proper maintenance of thestructures.

D. MICRO CREDIT

4.5.26 The project will assist farmers, produce buyers and small agriculture-relatedentrepreneurs with small credit. Farm credit will finance purchase of inputs, such as improvedseeds, planting materials, tree seedlings, fertilizers and small farm implements. Micro-financesupport will also be provided to farmers interested in purchasing animals and tractionimplements for traction-hire services. Credit for marketing financing will support tradersinvolved with produce buying and selling, while credit will also be provided for small agri-business. The UNDP-assisted Private Sector Development Unit in Nebbi provides advice andtraining on small income generating activities. This will be supported by the Department ofCommunity Development and Youths in each district. At an average farm size of 2 hectares, thesmall credit fund will initially support up to 10,000 farmers directly participating in the projectand support the establishment of 200 units of traction hire. As many as 550 persons are expectedto benefit from the marketing financing support and 2,000 from agriculture-related micro-entrepreneureship financing. About 60% of the lending will go to women, especially, female-headed households and widows, who produce most of the food crops and are short of collateralfor formal credit.

4.5.27 The proposed micro-credit funds will use the PAP delivery mechanism whichrelies on MFI’s to deliver credit to target groups (para 2.4). MFI’s with proven track recordwill access the funds on a wholesale basis at a market interest rate while small and emergingMFI’s will access the funds on commission basis at a rate equivalent to Treasury Bill Ratesplus two basis points. The margin between this rate and the market rate will enable this latercategory of MFI’s meet their operating cost. The MFI’s will bear the entire risk of recoveringthe loan and will sign a Standard Lending Agreement before the disbursement of resources.Clients will borrow funds from the MFI’s on market determined interest rate. Group lendingand village bank methodologies will be used as a conduit to deliver the financial services to

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clients. These two methods have the advantages of lowering operating costs and enhancingownership. More importantly, they ensure that selected beneficiaries are among the activepoor. Both methods emphasize the formation of strong management committees at the villagelevel and the participation of clients in decision making. This will be done through regularmeetings at the solidarity group and the group levels, to ensure that appropriate financialservices are provided to members and that repayments are done as agreed upon. Greateroutreach will enable reduced transaction costs, combined with the increased interest and fees,revenues will enable the project to assure operating and financial sustainability at both IEsand project levels.

4.5.28 The component will emphasize savings mobilization through voluntary as wellas mandatory savings. Mandatory savings (12% of the loan) will be required as a condition ofsecuring a loan and will be mobilized during the weekly meetings of the group as they attendthe initial sensitization and training sessions. Savings mobilization will be used as a guaranteefor the loan until the entire amount is repaid. Voluntary savings will be mobilized throughoutthe loan cycle as decided by the group. Mobilized savings will enable clients to build/increasetheir business asset base and also to respond to emergency and other family needs. Thisensures client’s business growth and future independence while enhancing the socio-economic livelihood of the poor.

4.5.29 To ensure maximum transparency and to provide the project management withclear guidelines on the policies, rules and procedures to be followed, the Project OperationsManual used under PAP’s first phase has been revised taking into account lessons learnedduring its implementation. The manual is based on internationally recognized best practices andis developed in close collaboration with the practitioners, USAID/PRESTO and AMINA.Besides, establishing the rules and procedures of managing the credit fund, the manual willinclude a Standard Lending Agreement (SLA) with terms and conditions acceptable to the Fund,for lending to IE’s. The procedures laid down in the manual will govern the delivery of thecredit under the project. However, PAP will sign a memorandum of understanding (MOU) withthe CCU to agree on the target area, target groups and the credit delivery mechanism. Specificloan products will be developed for agricultural enterprises, taking into consideration theirspecific gestation periods and structure of their cash flow. Thereafter, it will open a subsidiaryspecial account into which agreed tranches of the micro-credit funds will be deposited by theFund following endorsement by the Executing Agency and the Ministry of Finance. This will bea condition for disbursement of funds to PAP. Recovered loans will be ploughed back to enrichthe portfolio and deepen resources available for investment opportunities and income generationin the region. It will be assured that such funds are used purposely for the activities identifiedunder the proposed project and agreed to in the MOU. PAP will be required to submit quarterlyprogress reports and audited accounts on the loan administration to the government through theExecuting Agency.

E. PROJECT COORDINATION AND MANAGEMENT

4.5.30 The project will finance a small coordinating office in the Ministry ofAgriculture, Animal Industry and Fisheries (MAAIF) and will also develop MAAIF’s capacityto work with and supervise the implementation work of the 4 Districts. No new structures willbe established but the existing administrative system will be strengthened to cope with theadditional responsibilities. Technical assistance, both foreign and local, will work withinexisting departments and services. It will provide for operational expenses for the centralcoordinating office and the office of each district coordinator. The project will finance theprovision of necessary vehicles, motorcycles and bicycles for effective implementation andsupervision. Motorcycles will be provided to the extension workers on loan and to be used only

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for the purpose of extension services. The project will work out a modality for recovering thecosts from the workers salaries.

4.5.30 As training is very important for the success of the proposed project, theproject’s annual work plan will include a training plan in accordance with the provisions in thevarious components. In addition, the Banks Agricultural Management Training for Africa(AMTA) programme will organise training to strengthen the management capacity of keyproject staff for project implementation.

4.6 Market and Prices

Services to the farming community are extremely limited. Commercial productmarketing is confined mainly to traditional exports although some cereal trading is becomingestablished to link outlying areas with Kampala and regional markets. Most other marketingservices are dominated by small-scale traders with products often moving through severalintermediaries before reaching the consumer. This gives rise to higher marketing margins andmarketing linkages which are slow to respond or adapt to innovations. There are over 300market places throughout the region. The project will improve infrastructure and sanitation in 22priority markets. The proposed infrastructure component will increase the profitability ofagricultural production, in addition to vehicular operating costs savings in the region. Improvedmarket information will be a major means of improving relative farm-gate prices, in addition tobetter product preparation and new varieties, especially commodities sold outside the region.Resumption of trade with DRC and Sudan would also have a very positive impact onagricultural marketing in the Region.

4.7 Environmental Impact and Mitigation

4.7.1 As the project aims at increasing labour and land productivity on existing farmholdings, and the rehabilitation and maintenance of existing access roads, project activities willhave no adverse impact on forest cover. The proposed oxenization programme will not haveadverse impacts on the soil as soil disturbance is expected to be minimal. Woodlots will providealternative sources of fuelwood and reduce pressure on the natural forest.

4.7.2 The micro-credit facility will provide financial support to farmers which mightincrease the use of inorganic fertiliser. But this is expected to remain moderate as extensionservices, will continuously provide advice, training and monitor quantities to be applied, inorder to maintain soil fertility, with no risk of ground water contamination.

4.7.3 Agro-forestry technology is practiced in the region. The project will build andexpand this practice. The project will promote a crop rotation scheme and a tree/crop farmingsystem to reduce fertilizer use. Extension services will use demonstration plots to trainfarmers and ascertain that the crop rotation scheme (cereal-legume-cereal) is adopted andproperly applied, so as to benefit from the nitrogen fixing ability of the legumes. Farmers andchemical suppliers will be trained to ensure minimal adverse impact.

4.7.4. The rural access road improvement activities may create a possibility ofinadequate drainage and excessive cross-fall. Proper planning and the provision of appropriatedrainage structures at regular intervals and raising the carriageway slightly above the existingground level will mitigate any adverse effects. Proper technical design of roads, based onMWHC specifications, will be used to ensure that steep gradients are avoided. Measures relatedto rehabilitation will be incorporated in the contractors’ contract briefs. Degraded river bankswill be rehabilitated through tree planting.

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4.7.5 The overall environmental impact of the project is expected to be positive as itwill increase agricultural production and reduce the pressure on natural forests through reducedagricultural land expansion and forest products demand from natural forests. The M&E staff willliaise with the NEMA to monitor any possible environmental impacts, which may result fromproject implementation and will adhere to environmental regulations and standards inaccordance with the Environmental Law of 1995.

4.8 Project Costs

The project is estimated to cost USH 39,026.68 million or UA 19.60 millionincluding contingencies. The foreign exchange component would amount to USH 19,563.06million or UA 9.82 million, representing 50.1% of the total project cost, while local cost wouldbe KSH 19,463.62 million or UA 9.78 million which is almost 49.9% of total project cost.Summaries of cost estimates by component and by category of expenditure are shown in Tables4.1 and 4.2 respectively.

Table 4.1Summary of Project Cost Estimates by Component

ComponentsUSH ('000) UA ('000)

F.E. L.C. Total F.E. L.C. Total %F.E

I. Production Enhancement 5,074,502.5 3,542,355.9 8,616,858.4 2,548.7 1,779.2 4,327.9 59II. Market Opportunities 1,625,265.0 1,071,845.0 2,697,110.0 816.3 538.3 1,354.7 60III. Rural Infrastructure 6,245,180.3 9,247,954.8 15,493,135.0 3,136.7 4,644.9 7,781.6 40IV. Micro Credit Financing 1,503,645.0 1,091,120.0 2,594,765.0 755.2 548.0 1,303.2 58V. Coordination &Management

1,940,971.5 300,298.5 2,241,270.0 974.9 150.8 1,125.7 87

Total Base Costs 16,389,564.3 15,253,574.1 31,643,138.4 8,231.8 7,661.3 15,893.1 52Physical Contingency 1,525,894.4 1,247,839.4 2,773,733.8 766.4 626.7 1,393.1 55Price Contingency 1,647,599.4 2,962,210.7 4,609,810.1 827.5 1,487.8 2,315.3 36Total Project Costs 19,563,058.1 19,463,624.2 39,026,682.3 9,825.7 9,775.8 19,601.5 50

Table 4.2Summary of Project Cost Estimates by Category of Expenditure

CategoryUSH '000 UA '000

%F.E

F.E L.C Total F.E L.C Total

A. Civil Works 6,873,386.0 10,310,079.0 17,183,465.0 3,452.2 5,178.3 8,630.6 40

B. Vehicles 873,164.0 45,956.0 919,120.0 438.6 23.1 461.6 95

C. Equipment 889,373.3 46,809.1 936,182.4 446.7 23.5 470.2 95

D. TA/Consultanc 2,955,625.0 0 2,955,625.0 1,484.5 0 1,484.5 100

E. Training 2,630,606.0 0 2,630,606.0 1,321.2 0 1,321.2 100

F. M/Credit Fund 1,500,000.0 1,000,000 2,500,000.0 753.4 502.3 1,255.7 60

G. V/E Maintena 416,570.0 178,530.0 595,100.0 209.2 89.7 298.9 70

H. CW Maintenan 250,840.0 376,260.0 627,100.0 126.0 189.0 315.0 40

I. Personnel 0 2,780,940.0 2,780,940.0 0 1,396.8 1,396.8 0

J. Gen. Op. Exp. 0 515,000.0 515,000.0 0 258.7 258.7 0

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Total Base Costs 16,389,564.3 15,253,574.1 31,643,138.4 8,231.8 7,661.3 15,893.1 52

Physical Continge 1,525,894.4 1,247,839.4 2,773,733.8 766.4 626.7 1,393.1 55

Price Contingenci 1,647,599.4 2,962,210.7 4,609,810.1 827.5 1,487.8 2,315.3 36

TOTAL COST 19,563,058.1 19,463,624.2 39,026,682.3 9,825.7 9,775.8 19,601.5 50

4.9 Sources of Financing and Expenditure Schedule

4.9.1 The project will be jointly financed by GoU and the Fund. The Government willcontribute UA 2.0 million or 10.2% of the total project cost. The GoU's contribution will meetall of the general operating and all personnel expenses. In addition, GoU will meet all duties andtaxes associated with procurement of project services. The Bank Group will contribute UA16.60 million, or 89.8% of total costs. ADF financing covers 100% of the foreign exchange costamounting to UA 9.82 million, and part of local cost amounting to UA 7.78 million, or 40% oftotal project cost, net of duties and taxes. Civil works, vehicles, equipment, micro-credit andvehicle/equipment/civil works maintenance will benefit from local cost financing by ADF.

4.9.2 The sources of financing are indicated in Table 4.3.

Table 4.3Sources of Finance

USH '000 UA '000 % Total

Source F.E LocalCurrency

Total F.E LC Total

ADF 19,563,058.1 15,475,563.9 35,042,622.0 9,825.7 7,774.8 17,600.5 89.8

GOU - 3,984,060.3 3,984,060.3 - 2,001.0 2,001.0 10.2

Total 19,563,058.1 19,463,624.2 39,026,682.3 9,825.7 9,775.8 19,601.5 100

Justification for Local Cost Financing

4.9.3 The financing of local costs by the Fund (40%) is justified on the followinggrounds : (a) the nature of the project focuses on activities that require inputs that are locallyavailable (for example, civil works is 60% of local costs); (b) as part of the economic reformeffort, GoU has strengthened its tax administration and revenue collection (enactment of a newincome tax law, the introduction of a tax on capital gains, and the cessation of tax holidays ;implementation of the value added tax resulting in the revenue-to-GDP ratio increased from11.3% in 1997/98 to 12.2% in 1998/99). In spite of these efforts, the Government does not havethe capacity to finance the entire local cost of the projects in the Public Investment Programmeas revealed by the public expenditure review conducted in May 1999; (c) much of the externalassistance received by Uganda is used predominantly to meet the foreign exchange costs ofprojects and programmes; (d) the level of aggregate domestic savings in Uganda is low (below10%) and therefore limits the country’s capacity to finance a project of this size entirely fromdomestic resources. Total local costs amount to about 49.9% of total project costs; and (e) theprevailing high interest rate on resources mobilized from the domestic banking system cannotsupport a project of this type which is oriented primarily towards poverty reduction.

5 PROJECT IMPLEMENTATION

5.1 Executing Agency

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The Ministry of Agriculture, Animal Industries and Fisheries (MAAIF) is the executingagency. However, actual project implementation will be undertaken at the district and countylevels under the direction of the District Project Coordinator through relevant existing lineagencies. No separate structures will be created (see Annex 2 for project organogram). TheMAAIF will be strengthened under the project to supervise and monitor implementation atthe district level.

5.2 Institutional Arrangements

5.2.1 In order for the project to be effectively integrated into the on-going activitiesof the North West, four types of coordination will be required: (i) co-ordination among thevarious components of the overall programme; (ii) co-ordination with District Governmentactivities and other projects (e.g. CAP and PAP) in the region; (iii) co-ordination acrossdistricts; and, (iv) co-ordination with national policies in co-operating ministries. These fourtypes of co-ordination will be achieved through: i) an overall central co-ordination andmanagement; ii) four District Technical Advisory Management Committees established toguide the operation of the project in each of the four districts; and, iii) the Project SteeringCommittee (PSC), including representatives from other Ministries.

5.2.2 Central Project Coordination and Management: In order to provide overalldirection and assistance to the Districts, including overall planning and budgeting, financialreporting, loan draw-down, and central procurement, the project will support a small CentralCoordinating Unit (CCU) within MAAIF, with a full time National Project Coordinator, ProjectAccountant, and Monitoring and Evaluation Officer. The Procurement Officer in the ministrywill assist the project. The National Project Coordinator will report to the Permanent Secretary.

5.2.3 A Project Steering Committee (PSC) will provide policy guidelines to the projectand approve annual work plan and budget. It will be chaired by the Permanent Secretary,MAAIF. Other members of the PSC will include representatives of Ministry of Finance,Planning and Economic Development (MFPED); Ministry of Tourism, Trade and Industry;Ministry of Gender and Community Development; Ministry of Land, Water and Environment;Department of Information in the President’s Office; Chairperson LCV and ChiefAdministrative Officers (CAOs) in the 4 Districts. The National Project Coordinator will be theSecretary of PSC. The PSC will meet twice a year. Women will be adequately represented inconstituting the membership of PSC.

5.2.4 At each of the 4 Districts, there will be a District Project Coordinator who will beappointed by the District Administration from among the District Department Heads tocoordinate implementation. He or She will liaise with the Central Coordinating Unit (CCU) forall activities concerning the District and ensure implementation through relevant DistrictTechnical Departments. This is in line with the decentralised administration in the country. Ineach District, a District Technical Advisory Committee (DTAC) will be established, with theCAO as Chairperson. Other members will include the Secretaries for Production and Marketing;Works (or Technical Services); Gender; Chief Finance Officer; a Representative of relevantNGOs present in the District; District Planner; and 2 Representatives of Farmers’ Associations(one male and one female). The District Project Coordinator will be the Secretary. The DTACwill meet quarterly and its functions will include approval of annual and quarterly plans, annualbudgets and review of project implementation performance and advise on corrective measures toattain project objectives. The project will finance the meetings of the PSC and DTAC.

5.2.5 Long term international Technical Assistance (TA) will be included in theproject to initially manage some of the project components and train their counterparts. Thesewill include Project Management Advisor (one year at the central coordinating office,

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Entebbe), Marketing Expert (2 years at Moyo but coordinating the four districts),Communication Support Specialist (2 years at Arua DFI), Extension Agronomist (2 years –Adjumani, coordinating all four districts) and a Rural Infrastructure Expert (2 years – basedin Arua). In addition, the project will utilise short term expertise (local and international),when needed, for specific studies, designs and short term consultancy services, includingrefining gender specific issues. The Management Advisor will advise the project managementon an effective means of setting up the project, procurement and disbursement. TheMarketing Specialist will be responsible for developing modalities for the delivery of theimproving marketing skills component across the region, delivery of the marketing financingcomponent, including supervision of the district marketing staff and for delivery of themarket information component. The Extension Agronomist will work closely with theDistrict Extension Coordinators and will be responsible for the management of seedmultiplication and distribution, and all other aspects of the crop enhancement component.The Communication Support Specialist will set up the equipment and develop programmesfor information dissemination to farmers and the rural community at large. He will train localproducers in production of radio programmes and videos in the main local languages. TheRural Infrastructure expert will oversee the implementation of the rural infrastructureactivities, as well as helping to develop capacity in the districts and communities for accessroad maintenance.

5.3 Supervision, Implementation and Expenditure Schedules

The project will be implemented over a period of five years, starting 1July 2000.During the period, the project will be supervised by the Fund twice annually. A mid term reviewwill be undertaken in the third year and a project completion report will be prepared by both theBorrower and the Bank in the final project year. The project implementation schedule is given inAnnex 5. Tables 5.1 and 5.2 give the project’s expenditure schedules by components andsources of finance respectively.

Table 5.1Expenditure Schedule by Component

(UA '000)

Components 2000/20 2001/02 2002/03 2003/04 2004/05 Total

A. Production Enhancement 1,918.4 1,224.7 673.6 667.0 699.0 5,182.7

B. Market Opportunities 628.0 514.8 295.0 95.3 98.8 1,631.9

C. Rural Infrastructure 1,657.9 2,530.6 2,382.8 1,079.4 2,182.0 9,832.7

D. Micro Credit Financing 12.4 344.5 420.2 435.2 450.9 1,663.1

E. Coordination & Management 502.3 213.7 201.7 207.8 165.5 1,291.1

Total4,719.1 4,828.3 3,973.3 2,484.7 3,596.2 19,601.5

Table 5.2Expenditure Schedule by Source of Finance

(UA '000)

Source 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 Total %

ADF 4,360.2 4,447.3 3,573.3 2,064.7 3,155.2 17,600.5 89.8

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GOU 358.9 381.0 400.0 420.0 441.0 2,001.0 10.2

Total 4,719.1 4,828.3 3,973.3 2,484.7 3,596.2 19,601.5 100

5.4 Procurement Arrangements

5.4.1 Procurement arrangements are summarized in Table 5.3. All procurement of goods,works and services financed by the Bank will be in accordance with the Fund's Rules ofProcedure for Procurement of Goods and Works and, in the case of consultancy services, inaccordance with the Rules of Procedure for the Use of Consultants, using the relevant BankStandard Bidding Documents.

5.4.2 MAAIF has had experience on procurement matters from implementing pastprojects. However, its capability is weak and will be strengthened under the project throughtraining, regular use of short term technical assistance on procurement and a Bank-organisedlaunching workshop prior to project take-off. The Districts will be responsible for procurementof civil works within each district and procurement of off-the shelves goods (office equipmentand stocks) through national shopping or direct purchase as applicable. The CCU will beresponsible for central procurement, especially of international nature.

5.4.3 Civil Works: Procurement of civil works scattered all over the region and valuedat less than UA 500,000 per contract and UA 10.74 million in aggregate, will be carried outunder National Competitive Bidding (NCB) procedures. Such major contract aggregates willinclude the rehabilitation of buildings at DFIs (UA 415,000), priority market improvements (UA200,000), and access road rehabilitation and recurrent and periodic maintenance (UA 9.28million). However, access road routine/manual maintenance valued at UA 105,000 will beundertaken by direct contracting of the local community personnel.

Table 5.3Procurement Arrangements

Project Categories UA '000

ICB NCB *Others Short-list

Non BankFunded **

Total

1. Civil Works 10,743.4(10,743.4)

105.2(105.2)

10,848.6(10,848.6)

2. GoodsVehicles

Office & Other Equipt

531.8(531.8)

552.3(552.3)

531.8(531.8)

552.3(552.3)

3. ConsultancyService/TA/Studies

1,708.0(1,708.0)

1,708.0(1,708.0)

4. Training 1,589.1(1,589.1)

1,589.1(1,589.1)

5. Miscellaneous Expensesa. Veh. & Equipment Maint

b.. Civil Works Maint

c. Personnel

d. Gen. Operating Expenses

e. Micro Credit Funds

395.7(395.7)

370.8(370.8)

1,604.2(1,604.2)

1,662.6(0)

338.4(0)

395.7(395.7)

370.8(370.8)1,662.6

(0)338.4

(0)1,604.2

(1,604.2)

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TOTAL PROJECT COSTS 531.8(531.8)

10,743.4(10,743.4

4,617.3(4,617.3)

1,708.0(1,708.0)

2,001.0(0)

19,601.5(17,600.5)

(Figures in parenthesis represent respective Bank financing)* Others include: National Shopping, Direct Purchase and Force Account.** Non-Bank Funded includes: Salaries and Allowances and General Operating Expenses

to be paid by GoU.

5.4.4 Goods: Contracts for goods valued at more than UA 100,000 each will beawarded under International Competitive Bidding (ICB) procedures. These will includecontracts for the supply of vehicles and motorcycles (excluding bicycles which will be procuredunder national shopping in the districts) valued at not more than UA 0.53 million. Othermiscellaneous goods such as office and field equipment estimated to cost less than UA 50,000per contract and not more than UA 0.55 million in aggregate will be procured through NationalShopping procedures. The items to be procured through National Shopping procedures are off-the-shelf goods having standard specifications, that can easily be obtained locally.

5.4.5 Consulting and Training Services: Procurement of technical and consultingservices numbering about 21 long term and short term contracts and valued in total at UA 1.70million will be undertaken in accordance with the Fund's Rules of Procedure for the Use ofConsultants, on the basis of shortlist, and selection will be governed by both technical and priceconsiderations. Training and local workshops for project staff, farmers, traders and thecommunities, including costs of associated local materials, valued in aggregate at UA 1.6million will be undertaken by direct contracting of suitable institutions acceptable to the Fundand local trainers, given the small values of individual expenditures. This will include 21overseas courses, 2 local courses for communication technicians, 64 training of trainers courses,5,100 person-days marketers’ training, 40 market information courses, and several farmers’extension training workshops, field days and agricultural shows.

5.4.6 Miscellaneous expenses, including expenses on the various committees’meetings, vehicle, equipment and civil works maintenance which are less than UA 50,000 perexpenditure will be by direct purchase and paid for through revolving funds. For values aboveUA 50,000 per expenditure, the items will be procured through national shopping procedures.Micro credit funds valued at UA 1.6 million will be administered through a financialintermediary (the Poverty Alleviation Project).

5.4.7 General Procurement Notice: The text of a General Procurement Notice (GPN)will be discussed and agreed with the Borrower, and this will be issued for publication inDevelopment Business, upon approval by the Board of Directors of the loan proposal.

5.4.8 Review Procedures: The following documents are subject to review and approvalby the Bank before promulgation: Specific Procurement Notices; Tender documents/Requestsfor Proposals; Tender evaluation/Evaluation of Proposals' reports, including recommendationsfor contract award; and Draft contracts, if these have been amended from drafts included in thetender invitation documents.

5.5 Disbursement Arrangements

The CCU will establish and maintain an interest bearing special account (SA)and a local currency account (LCA) at banks acceptable to the Fund. The SA will be used todeposit the loan/grant resources. Thereafter, funds will be withdrawn from the SA to bedeposited in the LCA for financing miscellaneous payments for some office equipment and

25

furniture, training and road manual/routine maintenance. The Bank will replenish the SA afterthe CCU has provided justifications for the use of at least fifty percent (50%) of the previousdeposit. Disbursement on contracts for civil works, consultancy services, vehicles andequipment will be made under the direct payment method. Each district will open a subsidiaryLCA into which its share of the loan proceeds will be transferred from the SA. PAP will also berequired to open a subsidiary SA into which the micro-credit will be deposited. The CCU willkeep records at all times of all disbursements made by the Fund and funds on-lent for micro-finance. The tentative list of goods and services (categories of expenditure) is given in Annex 3.

5.6 Monitoring and Evaluation

Monitoring and evaluation (M&E) of the project activities will be carried out as aregular management function by the CCU and the District Coordinators. A managementinformation system and monitoring indicators will be installed to facilitate this function. Theproject will prepare quarterly reports and a mid-term review (MTR) by June 2003. Thesereports, together with regular Bank supervision missions, will form an important aspect ofproject monitoring and evaluation. To facilitate assessment of project benefits, the project willundertake studies/surveys to establish baseline information to measure project impacts at mid-term and at the end of the project using pre-determined key performance indicators. The projectwill recruit a full time M&E officer who will be responsible for this activity. The project willensure that local communities are informed fully about the project development and progress,especially with regard to the community development activities. The local communities will beinvolved in determining what to monitor and evaluate, including choice of indicators, especially,on aspects which affect them. The Borrower will prepare a project completion report during the5th year which will form the basis for the Fund's project completion report prior to loan closure.

5.7 Financial Reporting and Auditing

The CCU will operate and maintain separate accounts for the project inaccordance with sound and acceptable accounting principles. A Project Accountant withqualifications and experience acceptable to the Fund will be appointed exclusively for thispurpose. Project accounts will be audited by an independent private firm, acceptable to the Fund,once every year. The project will finance the audit costs. The audited accounts together with theauditor's report will be submitted to the Fund not more than three (3) months after the audit iscompleted and not more than six (6) months after the end of the financial year. The CCU willalso submit to the Fund regular quarterly progress reports which will follow the official BankGroup report guidelines.

5.8 Aid Co-ordination

Among donors present in the country are the World Bank, the FAO, DANIDA,the UNDP, USAID and the British DFID. Several NGOs/CBOs are present in Uganda and theseinclude ACCORD, CAP, CARE, PRIDE AFRICA, World Vision, TechnoServe, FINCAUganda and Uganda Women Finance Trust. There also exists a regular GOU/Donorcoordination meeting in Uganda currently under the chairmanship of the Royal Dutch EmbassyRepresentative to discuss coordination of on-going and pipeline donor-supported programmes.Aid coordination is weak in the Districts even though donors respond very quickly when ameeting is summoned by the District administration. Proper coordination of donor/NGOactivities is imperative for streamlining of operations and operational efficiency and cost-effective application of scarce resources. Given DANIDA’s interest in the Moyo and Adjumanidistricts in particular, the Bank will programme joint missions with it to these areas duringimplementation. The proposed project has been designed to benefit from the existing

26

coordination mechanism. The project does not duplicate any donor supported on-going orplanned intervention in Uganda but rather builds on the experiences and achievements of theirinterventions.

6. PROJECT SUSTAINABILITY AND RISKS

6.1 Recurrent Costs

Recurrent costs under the project include maintenance costs of vehicles, plantand equipment and general expenses, as well as salaries and allowances for the staff secondedto the project. These costs have been kept as low as possible (only 14% of total costs). Theannual recurrent costs, including contingencies, are estimated to range from UA 537,000 in PY1gradually increasing to USH 597,000 in PY5 (an increase of 11% over 5 years). Total recurrentcosts over 5 years is estimated at UA 2.77 million. ADF financing of recurrent costs will be UA178,000 in PY1, declining gradually to UA 156,000 in PY5 (or 12% decrease). GoU willincreasingly take over the financing of recurrent costs through increasing beneficiaryparticipation (infrastructure maintenance), cost recoveries from sale of seeds, priority marketuser charges at 9 market stalls and water points), loan repayment (including motor cycle loans toindividual staff) and extra budgetary financing from districts’ internally generated revenues(increased district budgets and produce sales from the DFIs). Recovered costs will be recycled todeepen the resources available to sustain project activities into the future. Government gaveassurances that it will provide adequate budget to meet its recurrent costs contribution.Government budget (at both central and district levels) will be adequate to sustain this level ofrecurrent costs.

6.2 Project Sustainability

6.2.1 The different components and sub-components of the project will be sustainedin different ways. The Improved Farmer Skills sub-component should be sustained by theExtension Service, Farmer Associations, Co-operatives and private input suppliers orcommodity buyers. In this regard, the project will instil in these groups an appreciation forthe continuing need to assist farmers to become increasingly progressive in their farmingmethods. The agro-forestry and conservation sub-component is self-sustaining as it isparticipatory from the outset.

6.2.2 The DFIs will be sustained through a well-designed plan developed under theproject for their on-going operation. The strategies include the involvement of beneficiariesin the construction and maintenance and use of internally generated revenues of DFIs fromproduce sales and supplementary district budgets for the centres. These strategies seem to beappreciated by leaders and district officials but a co-operative effort by both the governmentand the private sector will also be needed to implement a successful continuing programme.

6.2.3 The Seed Multiplication and Distribution sub-component has been designed toassist the private sector to become established in producing commercial seed and seedlingsfor farmers in the North West Region. It will be continued by the seed growers themselves aslong as it is profitable for them. This will depend upon having a good local market for theirseed and seedlings, and a continuing source of certified seed. The Seed Growers’ Associationwill be encouraged as a means for local seed growers to obtain continuing supplies ofcertified seed, especially any new varieties or hybrids. The Extension Service will assist theseed growers by continuing to provide information to farmers on the benefits of improvedseed. This activity is assumed to be self-supporting after two years of project support.

27

6.2.4 The Animal Traction sub-component will also be sustained by the privatesector once all of the elements are established (i.e. source of animals, supply of tools andequipment, and a cadre of trained farmers throughout the region).

6.2.5 The Communication Support sub-component will be sustained by the privateradio stations currently established and already operating in the region. It is not expected thatthe agricultural programming will be continued at the same level after the project terminates.Efforts, however, will need to be made during the life of the project to find ways of fundingsuch programming, albeit at a reduced level. It is noted that private radio stations elsewherein Uganda have not yet begun to carry privately-sponsored agricultural programmes.However, these are common in other countries and could very likely be promotedsuccessfully on a modest scale in the North West. Many businesses in local towns depend onfarmers as customers and some may be willing to sponsor farm programmes.

6.2.6 Marketing Financing and Improvement of Priority Markets will be sustainedby the private sector. In the case of Marketing Financing, it is anticipated that, by the end ofthe project both borrowers and lenders would have an improved appreciation on how to applycredit to agricultural marketing activities. Deposits with financial intermediaries should beincreasing to permit expanded lending for these purposes. Market improvement wouldgradually be picked up by more markets throughout the region as required in order to handlesurpluses. The training of local market managers and application of user charges for marketservices will be able to sustain improvement in priority markets.

6.2.7 Part of the Market Information sub-component would be sustained by thepublic sector (i.e. collection of price and quantity data) while the radio station should be ableto continue to provide market reports to the general public based on data collected. Analysisof marketing problems and opportunities would not likely be picked up by any group but thebenefits of analyses carried out with project funding should continue, especially if the resultsof these are widely disseminated during the project life.

6.2.8 The Improve Marketing Skills sub-component is designed as a one-timeinvestment in human resources. Thus, it would not be programmed as a sustainable activity.However, there may be some continuing need for marketing training in the region. If so, theDFIs may find it appropriate to include this in their set of on-going activities. The viability ofthis would be investigated in the process of examining alternative structures for the DFIs. Therural access roads improvement will be sustained by the communities themselves and throughenhanced districts’ budgetary provisions.

6.2.9 The access road maintenance will be sustained by a combination ofgovernment annual budgetary allocations as well as the training of communities and projectstaff in road maintenance and supervision. Manual/routine maintenance is essentially acommunity-based affair with the project contributing only 12.5% of maintenance costs. Theposition of the TA Infrastructure will enhance the sustainabilty of the infrastructure activitiesthrough the training of stakeholders for rural infrastructure maintenance.

6.2.10 The project will depend on sustained linkages between numbers ofstakeholders with deferring structures and operating systems. The project managementframework is designed to minimise conflict and disruption through wide but focusedrepresentation and regular consultations with stakeholders.

6.3 Critical Risks and Mitigation Measures

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6.3.1 The major assumptions made and risks envisaged under project objectivesinclude the following: (i) The government priority to address poverty and food security issueswill remain. The Government is finalising actions on the Plan for Modernisation ofAgriculture and the National Poverty Action Plan as well as Vision 2025. All these supportaction for addressing food security and poverty; and that (ii) marketing arrangements andmarket prices are favourable for all stakeholders and timely availability of inputs. A majorconcern is the need to have all project inputs arrive on schedule so that work can go forwardas planned. In the past, procurement of supplies for Ugandan projects have been so delayedthat essential commodities often arrived part way through or almost at the end of the project.Careful selection of the approach to programme delivery will reduce the risk by ensuring theright combination of programme resources is applied in a timely fashion. Training onprocurement procedures will be given to project staff to deliver services on time. Inter marketand seasonal variations in prices will be mitigated through adequate market information.

6.3.2 The major assumptions made and risks envisaged under project outputs andactivities include the following: (i) farmers will adopt new technologies; (ii) security and peaceremain stable and (iii) communities follow through their willingness to participate. Properfarmer mobilisation and training will ensure effective participation.

7. PROJECT BENEFITS

7. 1 Financial Analysis

Indicative farm model analysis for food crops and oil seeds based on a typicalfarmer adopting project initiatives (with farm configuration comprising cassava 0.5 ha, fingermillet 0.3 ha, maize 0.8 ha, beans 0.3 ha, groundnuts 0.2 ha and simsim 0.2 ha) shows yieldincreases ranging from 31% for cassava to 60% for beans, even without fertilizer applications byPY5. On average, the net value of production by a typical farm family adopting improvedpractices as a result of the project will increase from USH. 469,180 without the project to USH.853,212 with the project, giving an increment of USH 384,032. Return per person-day has beenestimated to increase from USH. 1,712 without the project to USH. 3,114 with the project. Totalcrop production by PY5, given a conservative rate of adoption of 25% in aggregate (2.5% inPYI-II, 5% in PYIII, and 7.5% thereafter) will be 21,345 MT of cassava, 4,658 MT of fingermillet, 16,767 MT of maize, 2,795 MT of beans, 7,219 MT of groundnuts and 1,863 MT ofsimsim, even without fertilizer application. Marketing losses will decrease in the order of 2 –5%, resulting in significant economic gains for the region. Farm model analysis of the agro-forestry programme shows an incremental harvest of 625 cm3 of poles/fuelwood per ha. or a netvalue of USH. 1.87 million per cycle.

7.2 Economic Analysis

7.2.1 All investment and recurrent costs (excluding price contingencies) concerningthe project categories have been included in the calculation of the economic rate of return. Localcost components have been shadow priced using a Standard Conversion Factor (SCF) of 0.9.

7.2.2 Benefits considered in the calculations of economic analysis include values ofincremental production resulting from food crops and oil seeds only. Additional benefits wouldcome from traditional cash crops (cotton, coffee and tobacco), but these have not been includedin the analysis as project intervention in these crops will be minimal. Also benefits that accrueto road users outside the farm (e.g. Vehicular operating cost savings) have not been included.Incremental traffic counts will be adequate to justify the investment. Traded commodities(maize, groundnut (67% of groundnut oil price), beans and simsim (soya bean price)) have been

29

valued at their import parity prices, while non-traded commodities (cassava, finger millet andfuel wood) have been shadow priced using an assumed standard conversion factor of 0.9. Inputand all other local charges have similarly been shadow priced at the same rate. The economicrate of return (EIRR) for the project over 20 years is estimated at 20.2%.

7.3 Social Impact Analysis

The project will directly benefit 51,000 farm families, and in general over200,000 households or about 1.24 million rural persons will be affected by the project initiatives.Some of the households are headed by women, and in most cases women provide much of thelabour. By increasing returns to labour, this will lead to higher household incomes which will beless variable than that achieved under the “without project” situation. The impact of the projectwill be reflected at the farm level through improved crop yields; expanded cultivatedarea/household; improved crop combinations; improved farm-gate prices and more assuredmarkets for products. Improvement in farm-gate prices will be reflected in reduced regional andseasonal variations. Social benefits will include the creation of employment for local people.The development of micro-enterprises and the availability of good roads and other infrastructurein the project area will add significantly to the quality of life of the communities. . Improvementin water and sanitation in the priority markets and District Farm centres will contribute toimproved health and people’s welfare in the region. The foregoing will increase total outputwhich largely translates into increases in household incomes and reduced poverty for projectbeneficiaries.

7.4 Sensitivity Analysis

Sensitivity analyses show that the rate of return would decrease to 17.3% and14.2% if benefits are down by 10% and 20% respectively. The ERR will reduce to 17.6% and15.3% if costs are up by 10% and 20% respectively. A 2-year delay will reduce the ERR to12.8% thus indicating that delays in implementation and thus the flow of benefits have thestrongest effect on project outcome and thus constitutes the single most critical factor. Theproject is not very sensitive to fluctuations in costs and benefits. It will take a simultaneous20% reduction in benefits and 20% increase in costs to reduce the EIRR to 9.8%. This is anunlikely scenario.

8 CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions

8.1.1 The proposed project addresses the pressing issue of poverty reduction in theNorth West Region of Uganda. The Government of Uganda has developed poverty reductionplans to address these problems in which the proposed project aptly fits. Limited marketingopportunities, low land and labour productivity and poor state of the rural community roads areidentified as the most critical factors affecting agricultural development in the North West. Theproject will directly target 51,000 farm families. Overall, over 200,000 households or about 1.24million rural persons living in the project area will benefit. The impact of the project will bereflected at the farm level through improved crop yields; expanded cultivated area/household;improved crop combinations; improved farm-gate prices and more assured markets for products.Improvement in farm-gate prices will be reflected in reduced regional and seasonal variations.Social benefits will include the creation of employment for local people. The development of

30

micro-enterprises and the availability of good roads and other infrastructure in the project areawill add significantly to the quality of life of the communities. Improvement in water andsanitation in the priority markets and District Farm centres will contribute to improved healthand people’s welfare in the region. The foregoing will increase total output which largelytranslates into increases in household incomes and reduced poverty for project beneficiaries.

8.1.2 A strong emphasis on community participation, the use of existing governmentstructures (which reduces the overhead costs) and the reliance on private sector service providersfor input delivery, will create a self-sustaining system. The project approach is in line withgovernment policies on decentralisation and plan for modernisation of agriculture.

8.1.3 The project is technically feasible, economically viable and socially desirable,and is in line with the Bank Group strategy for poverty alleviation. The overall economic rate ofreturn of the project is 20.2%.

8.2 Recommendations

It is recommended that an ADF loan not exceeding UA 17.6 million begranted to the Government of Uganda (GOU) for the purpose of implementing the project asdescribed in this report, subject to the following specific conditions:

A. Conditions Precedent to Entry into Force

The entry into force of the Loan Agreement shall be subject to the fulfillment by the Borrowerof the provisions of Section 5.01 of the General Conditions of the Fund.

B. Conditions Precedent to First Disbursement

The obligations of the Fund to make the first disbursement shall be conditional upon the entryinto force of the Loan Agreement and the fulfillment by the Borrower of the followingconditions: The Borrower shall have, to the satisfaction of the Fund:

(i) opened a special project account into which the loan proceeds shall be deposited on therequest of the executing agency (para. 5.5);

(ii) established a central project coordinating unit at Entebbe and appointed a National ProjectCoordinator, Project Accountant and Monitoring & Evaluation Officer; and the District ProjectCoordinators, whose qualifications and experience are acceptable to the Bank (para 5.2.2);

(iii) established a Project Steering Committee (PSC) at the centre with the followingmembership: Permanent Secretary (PS) MAAIF as Chairman, PS (or Representatives) forFinance; Trade & Tourism; Gender & Community Development; Water, Land & Environment;MOWHC; Information Department in the Office of the President; and the National ProjectCoordinator as Secretary. Other members of the PSC are LCV Chairmen and CAOs of theconcerned districts (para. 5.2.3); and

(iv) established a District Technical Advisory Committee with the following members: CAO(Chairman), District Project Coordinator (as Secretary), Secretaries for Works/TechnicalServices, Production/Marketing, Gender, Chief Finance Officer, District Planner, Representativeof NGOs in the district and 2 Representatives of Farmers Association [one female and one male](para. 5.2.5).

Undertaking:

31

(i) The Borrower shall have undertaken to provide adequate staff for the extension Departmentsin the districts (para. 4.5.4).

Other Conditions: The Borrower shall:

(i) provide an adequate annual budget to meet its contribution to the project (para. 4.9.1and 6.1);

(ii) submit by 31 January of each year its annual work plan and budget and annual reviewreports (para. 5.6);

(iii) submit by 31 January of each year its annual training and annual access road plans forthe approval of the Fund (para. 4.5.31); and

(iv) by 30 June 2001, sign a Memorandum of Understanding ( MOU) with PAP on creditfund management and PAP to open a subsidiary special account into which the creditfund will be directly deposited (para. 4.5.29) .

Annex 1: Uganda Northwest Smallholder Development Project – Map Showing the Project Area

ARUA

MOYO

ADJUMANI

GULU

NEBBI

KITGUM

KOTIDO

MOROTOLIRA

KATAKWI

SOROTI

KUMI

PALLISAMBALE

TOROROB

US

IABUGIRI

IGANGA

JINJA

KAMULI

MUKONO

MAKASONGOLA

LUWERO

APAC

MASINDI

HOIMA

KIBAALEKIBOGA

BU

ND

IBU

JO

KABAROLE

KASESE

BUSHENYI

RUKUNGIRI

KIS

OR

O

NTUNGAMO

KABALE

MBARARA

RAKAI

MASAKA

SEMBABULE

MPIGI

MUBENDE

KALANGALA

SUDAN

D.R.C.

TANZANIA

KENYA

KAPCHORWA

Project area

This map has been drawn by the African Development Bank Group exclusively for the use of the readers of the report to which it is attached. The names used andthe borders shown do not imply on the part of the Bank and its members any judgement concerning the legal status of a territory nor any approval or acceptance ofthese borders.

Annex 2: Project Organisational Chart

Annex 2: UGANDA: NORTH WEST SMALL HOLDER AGRICULTURAL DEVELOPMENT PROJECT

PROJECT MANAGEMENT & ORGANISATIONAL STRUCTURE

PROJECT STEERINGCOMMITTEE

(PSC)MAAIF

PROJECT CENTRAL COORDINATINGUNIT (CCU)

MAAIF

District Technical Advisory Committee(DTAC) X 4

ARUA, MOYO, NEBBI, ADJUMANI

BENEFICIARIES

*DTRICT TECHNICALDEPARTMNETSIS

PRIVATE SECTOR

DISTRICT PROJECTCOORDINATOR x 4

*DISTRICT TECHNICAL DEPARTMENTS INCLUDE

PRODUCTION & MARKETING COMMUNITY BASED SERVICES

TECHNICAL SERVICES & WORKS

FINANCE & PLANNING

HEALTH & ENVIRONMENT EDUCATION & SPORTS

MANAGEMENT & SUPPORT SERVICES

1

Uganda: Northwest Smallholder Agricultural Development ProjectAnnex 3: Provisional List of Goods and Services/Disbursement Accountsby Financiers (UA’000)

LocalThe Government ofUganda

African DevelopmentFund Total (Excl.CATEGORIES OF EXPENDITURE

Amount % Amount % For. Exch. Taxes)

1. Civil Works 0.0 - 10,848.6 100.0 4,165.8 6,682.8

2. Vehicles 0.0 - 531.8 100.0 504.4 27.3

3. Equipment 0.0 - 552.3 100.0 523.5 28.8

4. Technical Assistance/Consultant - - 1,708.0 100.0 1,708.0 -

5. Training - - 1,589.1 100.0 1,589.1 -

6. Micro Credit 0.0 - 1,604.2 100.0 929.5 674.7

7. General Operating Expenses 338.4 100.0 - - - 338.4

8. Vehicles Equipment & Maintenance 0.0 - 395.7 100.0 263.1 132.7

9. Civil Works Maintenance 0.0 - 370.8 100.0 142.3 228.5

10. Salaries & Allowances 1,662.6 100.0 - - - 1,662.6

Total Costs 2,001.0 10.2 17,600.5 89.8 9,825.7 9,775.8

Annex 4: UGANDA: NORTHWEST SMALLHOLDER DEVELOPMENT PROJECTSUMMARY OF FINANCIAL AND ECONOMIC ANALYSIS

A. INTRODUCTION

1. The proposed Project has three major core and one support components: (i) MarketOpportunities Component (MOC), Production Enhancement Component (PEC), Rural InfrastructureDevelopment Component and Project Coordination and Management. Detailed cost tables have beengiven in Working Paper 1. Tables generated for the Analysis are in Working paper IV

B. COST ESTIMATES

2. In estimating project costs, the following basic assumptions have been made:

- the Project would be implemented over a five-year period;

- costs are based on most recent updated prices, as determined during the appraisal mission inSeptember/October, 1999, excluding taxes. Project costs are expressed in USH, converted at USH 1991to the UA, rate for 1 October, 1999;

- unit cost estimates for civil works are based on provisional estimates. Competitive bidding will bepractised for the implementation of the Project and this is expected to result in more realistic,market-based, costing of civil works;

- domestic prices, in line with projections in the Country Strategy Paper for Uganda are assumed at 5%all through project period;

- price contingencies for foreign costs have been derived from the MUV index

- cost estimates include physical contingencies of 10 per cent of base cost (except for salaries).

- the Bank loan will cover all foreign exchange costs and some local costs with the exception of salariesfor incremental staff and general operating expenses;

- the following foreign exchange components have been assumed for the various categories ofexpenditure: civil works 40%, vehicles and equipment 95%, technical assistance and training 100%,micro-credit 60%. Others are vehicle and equipment maintenance 70%, civil works maintenance 40%and general operating expenses and salaries and allowances 0%.

C. BENEFITS

4. The project is expected to benefit directly 51,000 farm families and impact in general207,000 rural households or about 1.24 million rural people living in the North West Region. Some of thehouseholds are headed by women, and in most cases women provide much of the labour. By increasingreturns to labour, this will lead to higher household incomes which will be less variable than that achievedunder the “without project” situation.

5. The impacts of the project will be reflected at the farm level through improved cropyields (Production Enhancement Component); expanded cultivated area/household (ProductionEnhancement); improved crop combinations (Production Enhancement); improved farm-gate prices(Marketing and Community Roads improvement); more assured markets for products (MarketOpportunities Component). Improvement in farm-gate prices will be reflected in reduced regional andseasonal variations. Average farm gate prices will be expected to be increased while marketing losses willdecrease in the order of 2 – 5%, resulting in significant economic gains for the region. Social benefitswill include the creation of employment for local people and improved nutrition and health. The off farmactivities will provide additional incomes to the community

2

Financial Analysis

6. Indicative farm model analysis for food crops and oil seeds based on a typicalfarmer adopting project initiatives (with farm configuration comprising cassava 0.5 ha, fingermillet 0.3 ha, maize 0.8 ha, beans 0.3 ha, groundnuts 0.2 ha and simsim 0.2 ha) shows yieldincreases ranging from 31% for cassava to 60% for beans, even without fertilizer applications byPY5. On average, the net value of production by a typical farm family adopting improvedpractices as a result of the project will increase from USH. 469,180 without the project to USH.853,212 with the project, giving an increment of USH 384,032. Return per person-day has beenestimated to increase from USH. 1,712 without the project to USH. 3,114 with the project. Totalcrop production by PY5, given a conservative rate of adoption of 25% in aggregate (2.5% inPYI-II, 5% in PYIII, and 7.5% thereafter) will be 21,345 MT of cassava, 4,658 MT of fingermillet, 16,767 MT of maize, 2,795 MT of beans, 7,219 MT of groundnuts and 1,863 MT ofsimsim, even without fertilizer application. Marketing losses will decrease in the order of 2 –5%, resulting in significant economic gains for the region. Farm model analysis of the agro-forestry programme shows an incremental harvest of 625 cm3 of poles/fuelwood per ha. or a netvalue of USH. 1.87 million per cycle.

Economic Analysis

7. The economic analysis focuses on the wider impact of the project intervention not onlyon the immediate beneficiaries but also on the country as a whole. All investment and recurrent costs(excluding price contingencies) concerning the project categories have been included in the calculation ofthe economic rate of return. Local cost components have been shadow priced using a SCF of 0.9. Benefitsconsidered in the calculations of economic analysis include values of incremental production resultingfrom food crops and oil seeds only. Additional benefits would come from traditional cash crops (cotton,coffee and tobacco), but these have not been included in the analysis as project intervention in these cropswill be minimal. Also benefits that accrue to road users outside the farm (e.g. Vehicular operating costsavings) have not been included. Incremental traffic counts will be adequate to justify the investment.Traded commodities (maize, groundnut (67% of groundnut oil price), beans and simsim (soya beanprice)) have been valued at their import parity prices, while non-traded commodities (cassava and fingermillet) have been shadow priced using an assumed standard conversion factor of 0.9. Input and all otherlocal charges have similarly been shadow priced at the same rate.

8. The economic rate of return (ERR) for the project over 20 years is estimated at20.2%. Sensitivity analyses show that the rate of return would decrease to 17.3% and 14.2% ifbenefits are down by 10% and 20% respectively. The ERR will reduce to 17.6% and 15.3% if costsare up by 10% and 20% respectively. A 2-year delay will reduce the ERR to 12.8% thus indicatingthat delays in implementation and thus the flow of benefits have the strongest effect on projectoutcome and thus constitutes the single most critical factor. The project is not very sensitive tofluctuations in costs and benefits. It will take a simultaneous 20% reduction in benefits and 20%increase in costs to reduce the EIRR to 9.8%. This is an unlikely scenario.

2

Annex 6

CATEGORY II JUSTIFICATION AND ENVIRONMENTAL MITIGATION STATEMENT

A) JUSTIFICATION FOR CATEGORIZATION

Project is listed under category II of figure 1 of the ADB Environmental Assessment Guidelines Y

The project is located in or close to an environmentally sensitive area N

The project has no major physical interventions on the human and natural environment Y

The project is a rehabilitation project (rehabilitation and management of natural resources) Y

The project is a small scale project Y

The project is a low-cost project Y

Mitigation measures are included in the design of the project Y

B) MAJOR PROJECT COMPONENTS:(I) Production Enhancement Component: to improve the value productivity of farm labour by increasing

crop yield, encouraging more profitable crop combinations and expanding cultivated area perhousehold;

(II) Market Opportunities Component: to improve farm gate prices, expand market opportunities,enhance the market value of commodities and reduce marketing losses;

(III) Rural Infrastructure Development: improvement in access roads, water and sanitation in marketplaces and rehabilitation of structures at district farm training centres;

(IV) Micro-Credit: support for farm, off-farm and marketing financing; and(V) Coordination and Management: to provide support for coordinating implementation in the districts

and for supervision and monitoring of implementation.

C) PROJECT AIM & OBJECTIVEThe proposed project aims to reduce poverty by enhancing food security and increased household incomes of smallholdersthroughout the North West Region. The project objective is to improve and sustain agricultural productivity. Supportingobjectives include better conservation and environmental practices; alleviating gender constraints; and the advancement ofcommunity services and amenities. The project is focused on traditional cash and basic food crops as these are considered tobe the commodities with the greatest potential for increasing incomes of large numbers of smallholders in the near term. Theproject focuses on some of the poorest districts in the country, and addresses land and labour productivity issues on which thelivelihood of the majority of the people is dependent. The project objective therefore is consistent with the poverty reductionobjectives of the government.

D) POTENTIAL ENVIRONMENTAL IMPACTS:

POSITIVE IMPACTS1 - Promotion of establishment of wood-lots;2 - Increased off-farm income generation activities and benefits;3 - Minimised environmental degradation from farm input utilisation;4- Increased training and awareness and skills for sound environmental management;5 - Better access to social services thus improved living standards.

NEGATIVE IMPACTS1. possibility of inadequate drainage and excessive cross-fall.2. possibility of poor soil conservation resulting from land fragmentation

E) MITIGATION MEASURES: Proper planning and provision of appropriate drainage structures at regularintervals and raising the carriageway slightly above the existing ground level will mitigate any adverse effect frominadequate drainage; proper technical design of roads will be used to ensure that steep gradients are avoided.Adequate storm water drainage, enrichment planting and constant maintenance will prevent gully erosion along roadedges. Rehabilitation measures related to rehabilitation will be incorporated in the contractors’ contract brief.environmentally sound practices will be fully integrated into the project’s activities, such as tree planting andestablishment of wood-lots and other soil conservation practices. All the environmental and social aspects of theproject will be closely monitored, and the findings integrated in the project’s planning process and implementationon a regular basis; farmer training and awareness activities.

Annex 7: Bank Group Operations in Uganda as at 30 June, 1999

PROJECT TITLE DATEAPPROVED

COMMITMENTS(UA MILLION)

AMOUNTDISBURSED

(UA MILLION)MAIN ROADSUPGRADING PROJECT

24/08/92 ADF: 11.24 10.35

INSTITUTIONAL SUPPORTTO UGANDA ELECTRICITYBOARD

15/05/90 ADF: 4.47 4.14

MASTER PLAN STUDY FORHYDROPOWERDEVELOPMENT

21/10/93 ADF: 1.46 0.537

DAIRY REHABILITATIONPROJECT

17/06/85 ADF: 12.90 7.25

RURAL FEEDER ROADSMAINTENANCE PROGRAM

30/10/91 ADF: 18.05 8.80

EXTENSION OWEN FALLSGENERATING STATION

27/08/91 ADF: 18.42 18.27

SEEDS INDUSTRYRATIONALIZATION

28/01/91 ADF: 6.45 5.99

STRENGTHENING OFSCIENCE-TECHNICALTEACHER EDUCATIONPROGRAM

28/08/90 ADF: 14.18 9.36

SECOND HEALTHSERVICESREHABILITATION PROJECT

21/10/93 ADF: 22.56 17.78

HEALTH SECTOR STUDIES 21/10/93 ADF: 2.80 1.50

HEALTH SERVICESREHABILITATION PROJECT

18/12/9018/12/89

ADF: 25.33NTF: 5.00

12.712.58

OLWENY SWAMP RICEIRRIGATION PROJECT

22/12/86 ADF: 15.66 6.27

URBAN POWERREHABILITATION PROJECT

06/11/96 ADF: 18.00 0.00

SECOND STRUCTURALADJUSTMENT LOAN (SALII)

16/07/97 ADF: 27.77 13.885

KYOTERA-MUTUKULAUPGRADING PROJECT

17/09/98 ADF: 8.26 0.00

INSTITUTIONAL SUPPORTTO EXTERNAL AIDMANAGEMENT PROJECT

16/12/98 ADF: 1.47 0.00

SUPPLEMENTARYFINANCING MECHANISM

16/12/98 ADF: 1.078 0.00

SOUTHWEST-SOUTHEASTINTEGRATED WATERSHEDMANAGEMENT

02/12/98 ADF:Loan: 5.03Grant: 2.87

0.000.00

Annexe

CONFIDENTIAL

AFRICAN DEVELOPMENT FUND ADF/BD/WP/99/142/Corr.19 December, 1999Prepared by: OCDEOriginal: English

Probable Date of Board Presentation:13 December 1999

FOR CONSIDERATION

MEMORANDUM

TO : THE BOARD OF DIRECTORS

FROM : Philibert AFRIKASecretary General

SUBJECT : UGANDA: PROPOSAL FOR AN ADF LOAN OF UA17.6 MILLION TOFINANCE THE NORTHWEST SMALLHOLDER AGRICULTURALDEVELOPMENT PROJECT

CORRIGENDUM*

Please find attached hereto, a corrigendum to the above-mentioned document

Attach:

c.c. The President

*Questions on this document should be referred to:Mr. A. D. MTEGHA Director OCDE Ext. 4056Mr. L. I. UMEH Division Manager OCDE.2 Ext. 4133Mr. C. OJUKWU Prin. Agricultural Economist OCDE.2 Ext. 4330

SCCD:C.H.

1

REPUBLIC OF UGANDA

NORTHWEST SMALLHOLDER AGRICULTURAL DEVELOPMENT PROJECT

CORRIGENDUM

The following changes are made in the Appraisal Report:

1. Project Information:The Telephone/Fax numbers of the Executing Agency will be as follows: Tel: 256 41 320004; Fax:256 41 321255.

Consultancy Services: Miscellaneous Services (10 person-months) is replaced with MIS Installation(2 person-months).

2. Matrix:26 water points replaced with 29 water points95% recovery rate for credit included as verifiable indicator under project outputNumber of person months for short term TA reduced from 46 to 38.

3. The Crop Sub-SectorPara 3.3.1 first statement to read: A new legislative framework (Local Government Act 1997) for thecentralisation and devolution of powers, functions and services from the centre to the localgovernment has been established for the line ministries, including the agricultural sector and theMinistry of Agriculture, Animal Industry and Fisheries (MAAIF).

4. The ProjectPara 4.5.25 on water points to read: A total of 25 potable water points made up of 12 boreholes, 6hand dug wells and 7 spring development have been proposed for the 22 priority markets; and 4boreholes for the DFIs.

Para 4.5.29: PAP will sign a memorandum of understanding with the MAAIF (not with the CCU).Last statement to read: PAP (MSC thereafter) will be required to keep records of all funds on-lentunder the component and submit quarterly progress reports and audited accounts on the loanadministration to the Government through the Executing Agency.

Para 4.8.1 KSH. is replaced with USH.

Para 4.9.1: UA 16.60 million is replaced with UA 17.60 million

5. ProcurementPara 5.3.4: Procurement of goods by ICB will exclude the cost of bicycles valued in aggregate at UA11,100 which will be procured through national shopping procedures in the districts.

6. AuditingPara 5.7, line 4 to read: Project accounts will be audited by an independent private firm appointed bythe Auditor General, acceptable to the fund, once every year.

7. Loan Conditions:The following changes were made:

B. Condition Precedent to First Disbursement

Condition (iii) now to read: “established a Project Steering Committee (PSC) in the Ministry ofAgriculture, Animal Industry and Fisheries Head Office, comprising the following membership:Permanent Secretary (PS) Ministry of Agriculture, Animal Industry and Fisheries as Chairman;Permanent Secretary (or Representatives) of Ministries of Finance, Planning and EconomicDevelopment; Tourism, Trade and Industry; Gender, Labour & Social Development; Water, Lands &Environment; Works, Housing and Communications; Office of the Prime Minister; Secretary,Office of the President; and the National Project Co-ordinator as Secretary. Other members of theProject Steering Committee are the Chief Administrative Officers of Moyo, Arua, Adjumani andNebbi districts” (para. 5.2.3);

Undertakings of the Borrower: to read: “ The Borrower hereby undertakes to provide adequateextension staff in each District Production Department in Moyo, Arua, Adjumani and Nebbi” (para4.5.4)

Other Conditions:

Condition (ii) to read: “submit its annual training programme, annual work plan, budget, quarterlyand annual review reports by 31 January of each year” (para. 5.6);

Condition (iv) to read: “conclude and sign a Memorandum of Understanding (MOU) by 30September 2000 with the ADF funded Poverty Alleviation Project (PAP) and/or its successorpursuant to which PAP will manage the credit fund component of the Project” (para. 4.5.29)

Condition (v) to read: “open a special credit fund account on terms and conditions acceptable to theFund into which the credit funds for the credit component of the Project will be deposited by theFund” (para. 4.5.29).