A FRICA N D EV ELO PM ENT FUN D

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REF. N0 : M Al/PAA I/98/02LANGUAGE : ENGLISH

ORIGINAL : ENCLISHDISTRI*UTiUM ' : ZMITED :' -

CO NFIDENTIA L

APPRAJSAL REPORT

W AI.LHOLDER IY GAH ON PROR CT

REPUBLIC OF M ALAW I

This Repod is m ade available only to *t.:1 m embeo to wh-work it lxlata . Any fudher relea% m ust be aut.horiz>d by theViçvup- ident for Ox natioas, . .

. .

COVNTRY DEPARTMENT0 1J% 1 REGION SElqvm E'k 1* #

TA:LE OF CONTENTS

Basic Data Sheet, Currency and M easures, List of Abbreviations,List of Tables and Annexes, Project lnformation Sheet,Summary and Recommendations.

Project Matrix

' ''N RODUCT-ION AND BACYGFQIJND*

' . .

1. 1 Origin and History of the Project . . .. ' .' . . .1.2 Performance of Similar Projects in M. alawi . . . . . .

. . , . . , 1. '' ' ' , '

. ' . T. , .... . . .

THE AGRICULTURAI, SECTOR

2. 1 Salient Features . . . . . . . . . . . . . . . . .2.2 Performance of the Agriculture Sèctor2.3 Agricultural Instim tions . . . . . .2.4 Agricultural Credit Instim tions . : . .. . .. .

2.5 Agriculmral Marketing . . . . . . . . . t . . .2.6 . Government Policy in the Agriculmre Sector . . .2.7 . lmnd Tenure and lmnd Use2.8 Poverty and Agriculmre2 .9 Women and Agriculmre . . . . . . . . . . . . . . . . . . .2. 10 Agriculmral Constraints to Smallholder Production . . . .

THE IRRIGATION SUB-SECTOR

3. 1 W ater Resources . . . . . . . . . .3.2 Government Policy ifl the Irrigation Sub-sector . . .3.3 Donor Support Activities to the Irrigation Sub-sector

3.4 Project M ea . . . . . . . . . . . . .. . . . .3.5 Climate, Topography, Soil and Vegetation3.6 Project Beneficiaries3.7 Environmental Aspects

THE PROJECT4.

4. 1 Project Objective . . . . . . . .. . . . . ,. . . . 13

4 2 D' .' escription of Project Oumuts . . . . . . . . . . . . . . . . . . . . . 13* .

-4.3 ' -- D etailed Descriptioh of Project'' Comp' onents and Activities . . . . ... . . . 134.4 Project Assumptions and Risks . . . 184.5 IRCOJ-CCt (Tost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 94.6 Sources of Finance . . . . . . . . . 204.7 Environm ental Im pacts . . . . . . . . , . 204.8 lmpact on W omen and the Youth . . . . . . 2 14.9 Impact on Poverty Reduction . . . 22

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5. PROR CT IM PLEM ENTATION' ks

5 1 Executing Agency . . . . :. .'

1 . . . .',5.2 Organlzatlon and M anagement . .. . . . . i.,'

. I t.:)k..5 . 3 Dlsburseluent . . . . . . . .. ,. . . t. .

l . F -$.i5.4 Credit .Adrninistration . . . . . . . . . .

.. . . . . . ,..yI , .. ?5

.5 Procurement of Goods, W orks and. . S erk. .'':çes .. j . . . ,5

.6 Implem entation Plan and Expenditizre %'ched ule .5 .7 hllollltof ll1g allu L Vattlatlon . . . . . . . . . :; . . . . . . . 1t..,

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. . . .

.

. . . . . . . '

5. 10 Prœlect Sustalnablllty and Cost

. .l ' - '. '.. '. - - . .: ' .

1-..4): . .6. TEC C AL AND ECONOM IC JIU STIFICA IT ' ION 'v'

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. . ' '*10!116. 1 Teehnlcal Justlflcation . 30 '

I . . . .

'

v6.2 Prolect Beneflts . . . . . . . . . . . . 30 ... t

. l . . . . ' . (j; gj .y' j6.3 Fmanclal and Economlc Justlficatlö. n .. . . . . . . .

,.k.ji' -.k . *'' .CONCLUSIONS D RECOM . .N. D A T1 'O: X.' S.' i ' i

' .,j

7 1 Czonclusio:ns . . . . . . . '. . '. . . . . . .' ,

'

.' 'j . ; . . . . ' . . . 32 . :2,!':'. I , .!;

7.2 Recomm endatlons and Condltlons fp r Ldafl' Ap, prokal . . . 33 . .s:1k11

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' ï ' .. 1u, . . . .. . . . kt .This A'ppraisal Report was prepared by M r. Spmi Z . .' .M oussa, P rlnclpal. Aghculm.ral '-.1l

' ' .

*

Economist ission Leader), Ms. M . Anglow, Sèhibr Agtohomis. t? Mrf W . Sollm an, Séni or ', :)' i . . - , airtliu ' j-ss'. ,s.,yrp--i..usli.on. tot;M,,

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..'L''LkIrrigation Engineer and Environmentallst

, follpk' ing. ,g ,. . . :,.. . I . . . ' : k t ' ' ' ' % : . . . .

. . 'r ' ' ' ..11998. Addltlonal enqulries on this report should b e .ad.tl.d:!:.>#,d.' to Mr. .D. T.'tcl.p athy; Manager, qj

OCDS .2 (Ext. 4162) and Mr. E.K. Shaaeldln, M' a'nag-er 0 C''ï.D S..' '. 1, (Ext. 4135) . .j:. . . yj.2. O!kj. J'jt!û.'j

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BASIC DATA SIIEET

Comparative IndicatorsDevelo-Ping Develoyed

Year M ALAW I Africa Countries Countrle.s1996 1 18 30.305 - -1996 1 ! .37 661 4487 12141995 98 99 104 941994 48 45 35.6 2 1 .41994 4 3 5 131990 104 92.3 67 50.41995 13.50 34 37 7419O 87 66 63 261995 82 21 51 21

. . ' . . :. . . .. . .. . . - . ....u . x. . .gg4 . - .-.--36g u ww . .- . . ... . . .'. .. . ' -. . . - .-' '- ' 1985 . - '- :. . -. ' .r . . .. ' . . . .. ' . . . I

1995 56.4 ' 53 70 ' 991995 - 63 75 991995 42 42 - 62 99

.7C1, 'wL=#q1r' .fV .

DEMOGM PHIC AND SOCIO-ECONOM IC INDICATORS

A. GEN'ERALArea (Sq Km '000)Population size (111 million)Sex Ratio (100 femze)Population undtr tifteen years (%)Population sixty-five years and over (%)Dependency ratioUrban Population %Rural Population (%)Populauon Density (per km2lPo?ulation'per.sq'. 'km of arable land*. .7' w

oAdtilt Liteiacy hate (TotàI- M ale- Female

Letbour Force Panicipation Rate (%) Agric.- M ale- Femnle

GNP ptr habitant (USD)Almual growth 122 of GNP (%)

B. DEMOGRWPHIC INDICATOWS

Annual population growth (%)* 1992Urban population growth rate (%) 1992Cmde death rate (per 1000 population) 1995Infant mortality rate (per 1000 live birth) 1995Child mortality rate (/1000 child age 1 - 4) 1995Maternal monaliœ mte (/100,000 l.bizthl 1995Life expecmncy at birth (years) - Toul 1995

- M ale 1992- Female 19K

Crude birth rate (per 1000 pop.) 1995Total fertility rate (N* of children) 1995Median age 1995Population doubling time Wears) 19OWomen of child bearing age (% of a11 women) 1991Propolton of women using contraoeptive (%) 1993

C. IIEALTH & NUTRITIONAL INDICATORS

1996199419961993

70.3855180-1.2

K 01.7

359872.9

231952.2

3. 16 .920.5013221562044.804545.8050.407.0517204513

2.75l 510716763052

6.217.3244518

2.13.89.06891480

293.522.234

53

0.40.89.013163075

151.733.6!48

72

Population per physicianPopulation per nursing personsAccess to safe waterPercentage of fully immtlnized childrenAverage per capita calorie intakeBabies born with bi.rth weight< 2500 gm (%)Percenlage of GNP spenr on healthAverage per capita sptnding on health (USD)

D. EDUCATION LNDICATORS

Gross enrolment ratio :- Pdmary School Total 1994 79 93

.. Female 1994 63 92 ...- .

' , . .. . '

'' - Seconàary Schoof Tàtal 1994 ' '.58 .. -- ', 47 .Female 1994 21 40

Percentage of GDP spent on educauon 1991 12 10Average per capiu spending on education - -

Source : - African Dzvelopment Bank - Selected Stadstics on African Couneies. 1998.- W orld Demograplzic Estimates and Pros-peca, UNs 1938.

-.v:'. - n e State of World Population 1991, UNFPA.. a7!*t.' - Africa Recovery No.3, 1991, UN

-LQk.g:te - n e World Health Report, 1996$ .'- ' - World Bank Development Reporq 1993

- 1.,a situation des enfu t.s dans le monde/UNICEF 1996- n e World Health Repon, W 1-10 1996- Humnn Development Reporty UNDP 1995

Notes : * Namral rate of increase onlyqx> b< M

19901990199519951990

199019901990

270001400054982049

2051 1

18000

60

2328

4.014

7000170070852546

194.041

390180

873412

7141958

CURRENCY AND M EASURES

Currency Eguivalents(As of June 1998)

Currency UnitUA 1MK 1UA 1

M alawi Kwacha= M K 34.9936

..

'UA'' 0.028. 57. 66.= . USD 1.33536

W eichts and M easures

1 Metric Ton (mt) =1 Kilogram (kg) =1 Metre (m) =1 Kilometre (km)1 Hectare (ha) =

2,200 1bs (pounds)2.2 1bs (pounds)3.28 ft (feet)0.62 miles2.471 acres

FISCAL YEAR

July 1 - June 30

LIST OF ABBREVG TIONS

ADB African Development BankADC Area Development CommitteesADD Agricultural Developm ent DivisionADF : African Development FundADM ARC : Agricultural Development M arketing Company

ALDSAP : Agriculmre and Livestock Developyeny Strategy and Action Plan.. AMINA.. . : . Afficàn Develojmerit Ftfiîd f6i Micrö-Fi anc . . . ..

nm sl : above mean sea levelASAP : Agriculmral Sector Adjustment Progfnmme 'BCA : Bunda College of Agriculmre of the University of M alawiDDC : District Development Com mitteeDOI : Department of IrrigationEM A : Environm ent M anagem ent ActEPA : Extension Planning AreaFCs : Farmer ClubsFl.as : Front Line StaffGOM : Government of M alawiM ASIP : M alawi Agriculmre Sector Investment ProgrnmmeM FI : M icro-Finance Interm ediaryM II : M alawi KwachaMOAI : Ministry of Agriculmre anJ IrrigationM OF : M inistry of FinanceM OFFEA : M inistry of Forestry, Fisheries and Environmental Affairs

è Malawi Rural Finance CompanyMltF :NEAP : National Environment Action PlanNEP : National Environment PolicyNIPADS : National Irrigation Policy and Development StrategyNRC : Natural Resotzrce College 'PMO : Project Management OfficePM s : Programme M nnagers

PY : Project YearRDP : Rural Development ProjectSCCBU : Saving and Credit Community Based (self-owned) UnionsSNIP : Smallholder Irrigation ProjectSAP : Structural Adjustment ProgrnmmeSEDOM : Small Enterprise Development of M alawi OrgarlisationSW C : Soil and W ater ConservationUA : Unit Of Account

.u . x - . .. . .VbC : Villàge Development CommittèèW AB : W ater Association BondW FP : W orld Food Programm eW UA : W ater User Association

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LIST OF T A'BLL' E S r ' '?. . tj. . ;

1. J' 'j6

Number 'Title Paae ,:j' ti ,?!

' Cost Estim ates by Comppnent . . . . 19 i4. 1 Summ ary of Prolect j

. .,: . . . .;4 2 Summary of Project Cost by Cgtegory ûf Eàpëh, d iturq . . & . . .. .. . ,. a.!

. . . ' ', . .

* x

'

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. . '

. . ''

: '4.3 Sources of Finance . . . . . . . 20 ''

,;i-5. 1 Procurem ent Arrangem ents . . . . . . . . . . . 25

5.2 Expenditure Schedule by Component . . . . . . . . . 26 . lk't-

..i ' z .. L . qi.(' 5.3 Expendimre Schedule by Source of Finance 26 .:u i

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1

h . . 'LLIST OF ANNEXES

.:' z. '

..Number Title No. of Pages !j'

' Annex IA Map of M alawi: Project Area . . . . . . . . . . . . . . 1 ' ii1â

Annex 1B. Project Area and Targeted Farmers . . . . . 1 . ,1' ,1

Annex 2. Environmental Summ ary . ' . . . 1 :,'1.

. ' j I' Annex 3. Provisional List of Goods and Services . . . . . . 1 ,4/

. l ;(' '' , '1Annex 4

. Tentative Implementation Schedule. . . . . . . . . . . . . . . . . 1 .t1.!kkt.k

Annex 5. Crop Production Budget 1 !..!H,

jAnnex 6. Economic lpternal Rate of Return (EI ) . . . . . . . 2 j

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AFRICAN DEW LOPM ENT FUND

01 B.P. 1387, ABIDJAN 01Tel: (225) 20-44-44Fax: (225) 20-49-02

Telex: 23717

PROJECT INFORM ATION SHEET

. . ' ' '

. . ' ' ' .' ' ' ' . '. . . . . .

The information given hereunder is intended tp provide some guidance to prospectivesuppliers, contractors, consultants and a1l persons interested in tlze procurement of goods andservices for projects apprbved by the Boards of Directors of the African Development Fund(ADF) . More detailed information and guidance should be obtained frorrf the ExecutingAgency of the Borrower.

1. COU NTRY. ! .

' 2. NAM E OF PROJECT

3. LOCATION

. .D. .ate :- S#ptwçmber 1998.r ''' ' '.'

Republic of M alawi

Smallholder lrrigation Project (SIIIP)

Mwanza, Sllire Highlands, Nsanje, and Chikwawa RuralDevelopm ent Areasl

The Government of M alawi. ' .

';

M inistry of Agriculmre and IrrigationP.O. Box 30134, Lilongwe 3, M alawiAtt: Principal Procurement OfficerTel: (265) 784-299/783-456Fax; (265) 781-247/781-164:

'

4. BORROW ER: .

5. EXECUTING AGENCY

6. PROJECT DFSCRIPTION

The project will have three main components: i) Capaci? Building in Irrigationtechnology for Ministry of Agriculmre and lrrigation, Bunda College of Agriculmre (BCA)of the University of Malawi and Namral Resource College (NRC) through provision of ahydraulic laboratory, survey, soil and water flow measurement equipmept, formal andinformal training and strengthening the capacity of two NGOs and a fmancial intermediaryin micro-finance management; ii) Provision of Credit for treadle and motorized pumps,sprinkler irrigation systems, small farm implements, food processors, marketing, workshopsfor maintennnçç and repairs of irrigation pumps and any other projçct .related income'

geperatirv qçtiyity'; (iii) Establislamçpt of s. mallsçale.lrrigautionwschemes and rrhabilitatiop of- .7 . . . . . . . .. . .. . . .. . . . . . ..

earth dnm s.

7. PROTECT C-OST

(i) Foreign(ii) LocalTOTAL COST

UA 2.01 millionUA 4.39 m illionUA 6.40 m illion

Rural development areas are called Rural Development projects (RDpa)

r t .... x p vmysgg so. u jya sysu.. . pe . . . . , . m . . o ....- sq. . mssxx mm ywmmw wjmmamv'. . A ' ' 1.aK ' ' ,' , . e1 .%; 'z ' . . . ).. p :.. 4j .

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8 SOURCES OF FINANCE (i* . . . !.k..

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ADF UA 5.02 tillio d>.' . .. jINA UA 0.31 m. illion . , y,t

. '

. '

hjL )1.Governm ent lcontribution UA 0.77 mill.ion )F

armers' Contribution UA 0,2. 4 mitllionx'. .,. i.I . ..,. ' . . j .. . k . . .. . . .;P

rivate Sçcto'r Contribution UA .0.96 lm llfon .1 . z ,..k w dT

. OTAL. COST ... - - : . -UA .6.40..m i11 lonf' . .-.- . . ... . ; . .. . . :

- .. . '

z. j J . ; . . ..- . ,... . .. . . hx . . . . . ., . .)9. DATE OF M PROVAL September 1.998 'jl

. .,. -:

10. ESTIM ATED STARTING ' :, 7 I '. ' ë

DATE OF PROJECT January 1999 :'.I -

11. PROJECT DUM TION Five years

11

*

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12. PROC MENT Project goods and- serviees to. be fmanced' b,y thè ;' ''' .

Fund will be prtyçvred accord'iitz-.g. to. the. ADF. Rules ' 'C ' . .y . . j yand Procedums ftèr procuremeijt usting ''tlw F ùnd s .'.

Stnndard Biddtgg' , Dtxumentz. C' ivil works fQr . . :constnmtioli 4 fijptaia çahals, dcnm. , s. rehabillitatiöh. ahd'' '

. j : . . . j y .sm all bridgçs W/. ill. br canqièd, . . 0ut by coqtracttls .: i''''''x

, ' . . ' . . , .p

through Natit? !#. .1'.CUip petitive B' i4dihg, INCB'), v. Geojss ' J :. , . . . . x ... r . jk y..(velzicles, office e/l tzipme:t, field.. nlrv:y, àbil ând ..

'

jj .i hydaullc' ''i. qau,i.lj.lilt@pt') . wil.l lb' e .,' procured, t tlupugh ê't. A.,. ' u*'': k -'' ' ' ' ir :F e-' . t , L 1

Interrmtioqal', c ,:im..)ij btitive .B. idding. (IcB) . Irriggtion . '. '2 . ''' ..

' . , ' . ' ' . ' '

equipmellt ftrkadifè'. aiu. d motoriz, ed plmps , sp rl-.nk'''lets? ' -. . . .. , '. . '' . . .. : . . . . tn ' . .. .

z . . 'J'!.r..food proeestjnrsttjfg' .d' small 'farm lmplements) will be .,z. . . . , . . . k . jryprocùred . tbro,ag/k. llmited tompetitton using .

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shortlistlng and se lvkdtioil ciritgliig on quality andupricë .

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C'.' t1' ltay. èy sqrk' i ices irf, cluding the usè 1. ,as a factor; , ons

,

of loeatl spqqigliz. çd. .ï, agekcjbs or Non, .Go've.tn,.m 4rttal , ..

+ ' ' 7 ' 1 ' ' 1

Organisatie. til. s ;(',NG'O. -' ' .5$) %, wil 1 be leleztçd .thr-oug'h .5. hort, '. ,'ï.. . . . ; . sList mçthod (lf 'pro. çurement. ' . ' ' ' -

. ' . '. ' . ' 't1j

13. CONSULTANCY SERW CES : *.E' F I '

REOUIR'ED.AND STAGE OF SELECTION . 1'

I . '' ' ' . ' ' ''technology, one 'tTwo Civil Encineers with experience in irri.gatilm ,aa. d hy draulic ,

'Geodetic expert, one Extension Soecialist- and. olje?Acmlj-tl>. .si;.st will b.e rrecnzited ,tfo'zr a tatal . .. 1.I A . -' - :1':-' ) '-. ' - . .' ' - '- , -- . :. Mj. Iof 32 o. crsonymoùtks durinc the prolect Jmp.le-rzl.epœt.j4n.l fvr. 94$14. mt An g uin.,th..' ç .us-sutlf prsurypy -. g #.r

. Jk. ( q.-e u.. *e *- . . . k . . . .. r : .' ' irks design ànd imp''lomerftatioh. ' A ' 67..and hydraulic equlpment, s'upervision of the civil ..*0 .j ( J ,'k

'

. : .. . .,;z

number of short-term consultants will be required' f èr .ttàlfn. 1. qg ilf cret'dit m anâgem ent and ' m' ., - . ' î L r .. 1..

Participatolry Rural Appraisal IPRAI through AM.INA P Jtiîgrém. ,m.' ,'e fe thë. first two-yeatyxo. f . r .t: ' ' '.. . . .. R ' ' .

' i . lementation to build the capaciv of . tw (j: p'Go' s antl. one M icrövyinatlèi' .'. ?prolect mo . ,, ;.I. . . ; . ! .yj(j . hy . r a y .j; .ilntermedial-y (M' .. F1) in credit management. Additioha. 1 çxtvê;. asiqnists wl11 b é recm ited locqlly , ?,. :f. :

l . ' ' ' S ' ' *L% 7 ittltrough tlle NGOS and the M FI to train, organlz. ç a. tld sgr. otiip f àrmers. Audit sorvicej W,i.ll:a.1.s6 , . ..,tj . . y y . . .,; . .ua,,k,y . . . ., . j .

'be orocured throuch Short Listinc. Selection :r()cç..*j'.'w1'1'.1.. eom mence as soon as tlw' . loard . ' :'.,'. : l. x' G-? *--' A. . J . - ' 7 . .e '

approve7 the loan. '' s j'4

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SUM M ARY. CONCLUSION AND RECOM M ENDATIONS

1. BORROW ER

2. EU CIJTW G AGENCY

3. ADF LOAN> - .w . . e.. . . > * rl- ''fàltMj ' F

i) Duration

ii) Service Charge

Government of M alawi

M inistry of Agriculmre and lrrigation (MOM )

UA 5.02 M illion

. .. .. . w .. , . . x v- -.. .1 - --o . . . '' J . v..*' -< :h *

Fifty (50) y'ears including a grace'pefiod of 10 years.

0.75% per nnnum on nmounts disbursed andoutstanding.

iii) Commitment Charge 0.5% on the undisbursed portion of the loan, 120 'days after signamre of the loan Agreement.

1 % of principal loan amount payable annually from:

the eleventh (11th) year after the signing of the LoanAgreement through the twentieth (20th) year and 3%er annum thereafter. iP

.

Repayment

4. PURPOSE OF THE LOAN

The ADF Loan will fmance 92% of the foreign exchangç cpjts amounting to UA 1.85million and also part of the total cost of the project. This will imount to UA 3.17 or 49%of total project cost.

5. TIIE PROR CT

a) Objective

n e sector goal is to improve the well being of M alawians through poverty alleviation,especially among rural people, by promoting broad based and accelerated agriculmraldevelopment. Specifically, the objective is to contribute to food security by increasing theirrigated land by 4,600 ha, and increasing agriculmre productivity of 12,000 sm all olders.

b) Description. - . . -

. . . ,..p . .. . ,. - . .... .) . . u- . -: .k -YO aciieve ihe abové Objective, me Project design has taken into conjldef aiion trlree main .

components. These includez (i) Capacity Building of the Department of Irrigation, Universityof Malawi, Namral Resources Collegi, two NGOs and a M icro-Financial lntermediary, (ii)Establishment of a Micro-Finance Credit System, and (iii) Establishment of Small-scalelrrigation Schemes.

' '''*''r''.r'é T e Nr'xr '5 - -''l .s J: . . s. s . w-..-..-... . ... .. .yr . ..,..' . ., : :.. g ï- . .! '. . ' ' y .. : J g .

(ii)6. PROJECT COST

l - .The total cost of the project including physical .ylïd pticë c. ontingehcies is estimated, at UAl

. '..x.6.40 million. The foreign exchange component i.s UA 1.85 million i.e. 29% of thè total

- l . ' 'ptogect cost. A summary of the prolect cost is shöwn in the table helow.

l .Summary of Prolect Cost Estimatqs b. # Componentl

.-

'

. : .. .. . .. . . . . . . . . .. . . w

'

'' (In MK Million) . tln UA Million)Components . : ' .' jaj sumjgu '' taoaj Total % P.EForeign Local To

. .

Exchange Costs ' Costs - ' Er'r-ehange Costs Cùsts

. ' ' ). '

A. Capacity Building 22.32 42.38 64.70 ' ., ' 0.63 1.22 1.85 34.5

B. Rural M icro-Finance System 34.04 55.32 89.36 , 0.98 1.5.8 2.56 38.1

l . ' . ...C. Small-scale lrrigation Schemes 1.60 43.00 ' 44.40 . ' 0.05 1 .23 1.28 03.6

l . . . ' ' . . . '; . ..Total Bmqe Cost. 57.96 140.70 198.66 ; 1.66 4.03 5.69:. .

Physical Conthaekcv 4.87 5.07 9.94 0.14 0.14 0.28l ''

'

'd''' 'F' .

Price Contingency 7.45 7 .75 . : )1$'.30' . 0.21 0.22 0.43

Total Projeet Cost l 70.28 157 .52 237. .8Q . y 2.01 4.39 6.40 31 .4. '< . ''

w '' . . . . .,

' . .. - z

7. S A. XY OF PROR CT COST BY CATPG 'OR' Y OF E'X.'PE.M à' IT .

/ . . ..The total project cost by category of expendimr:' is sumr marized in the uble below:

Summary of Project Cost by Catqgory of Expendtiturel .

(1n MK Million) (ln UA Million). . oC

ategory of Expendimre ytk ' yifgjgj. ktaocal 'roul p ytForeign Local. T . .l Excsange cèsts ' .èoqts .

.

'

t, , txcby k.ç - costi çosa- . j . . '

j j (j:.;f g ag , 5yA. Goods 47.37 35..67 , 83.1 1.3 . .7 06 * ' j8 93 , ' ' 0 .05 1 .06 1>' i' 1 5B. Civil W orks 1 .87 3 . . . .

C Tecbnical Assistance 4.74 5.53 10:27 : 0.1,4 ' 0-16 0.30 45b. corusultancy serkices 1.60 0.18 1.78 0.0s 0.01 0.06 9tk. Tpining l 2.38 7.92 10.30 . 0.07 0.23 :0:30 23F.. Majrkytizïg amd 'F. ar $11h lpputs .

. 0.00 --..14.50 . 1.4.50 . 0.QQ 0,41 .0.41 . t) , . .

' 'G O eràtiok ,& Mâiktefiànce -'' '' l 0 0ù' 16 0d ''' .2 16' (+3- ' .i '0. t)(.) . ''' 0, 1.5 'r 0-4.à - 'b ' ''p j) . @ p w ., * . ! . e . . pI4. Gov. .stàff sal, arieà l 0.00 19.37 . ''$ 19.34. .

0.t)0 .0.:5 , 9..55 ô'i. Lznd, delsign, ienul 'yalue 0.00 4.41 . . k 4..41 ; 0.Q0 0.13 U.13 U. - .

. .g r . , .' . .

. . .

1 ' ''

vota, sase cost l 5,.96 i4o.,o . 198,..6.t . .. ..- 1. .66 4.03 s.69 . ., ... ,..jphysical Cöntingency 4.87 5.07 9.94 0.14 0.14 0.2 8 .

j 44Price Contingency 7.4.5.-22-: 7.75 15.20 0.21 0.22 . .:: I J ;.t ; c . ê ' . . .j J--- 1li8' 153 .52 223.40 2..01. . 4.39 6.40 31.4 .Total Project Cost : . . , .

!:

..' :. . . . .1 . è ztç : -:. .- - .-.. - . .)?' --. ; , . .,q .# t' . .-. . -... . .

wwx.m v yx

C '

(ii1-)

8. SOURCES OF FINANCE

The finandal plan of the project is summarized in the following table:

Sources of Finance (1n UA Million)..- - . - Foreigp - ..j

.( .j :.(j -.jj. . - Total .. g, ' g ej-jïaj*'; ..--.jource - . . . 0ca Os ,w . z .0

Hxchange costs .

ADF 1.85 *3.17 5'.02 78.44 ,AM INA 0.16 0.15 0.31 4.84Government Contribution 0.00 0.77 0.77 12.03Beneficiaries Contribution 0.00 0.24 0.24 3.75Private Sector Contribution 0.00 0.06 0.06 0.94

Total 2.01 4.39 6.40 ' 100

The ADF loan of UA 5.02 million will finance 92% of the entire foreign exchange costs' ' ' -'-' '''''-

.estimated at UA 1.85 million and part of the local cosys amounting to UA 3. 17 million i.e.49% of total. project cost. n e ADF M icro-fmance Initiative for Africa (AMINA) will

. '

finance UA 0.31 mlllion (5%) of .the total costs för capacity building for two NGOs and ohe(i in credit administratioé and managementM icro-Finance lntenmediary (MFI) to be involve

of the credit component of the project. The Government's contribution will nmount to UA0.77 million (12% of total project cost) comprising mostly the remuneration for Governmentstaff salaries, rental cost for the PM O offices, the land and design works for constnlction ofBCA hydraulic laboratory and salaries of some off-cnmpus professors who will teach at NRC

periodically. The project benetkiaries will contribute UA 0.24 million (3.75% of totalproject cost) in form of labour for construction of on-farm inigation canals and digging ofboreholes for treadle pumps. 'rhe private sector will contribute UA 0.06 million (0.94 % ofthe total project cost) in form of training campaigns and workshops in marketing, agronomyand irrigation practices for new cash crops. ' '

9. EXPEO ITURE SCHEDULE BY COM POM NT AND SOG VE OF FW ANCE

Expenditure Scheduli by Source of Finance(ln UA Million)

. Componepts . FY1 FY2 . FY3 FY4 FY5 Totq)ADF 0.96 1.16 1.10 0.91 0.89 5.02AM INA 0.15 0.16 0.00 0.00 0.00 0.31Government Contribution 0.14 0.16 0.16 0.16 0. 15 0.77Beneficiaries Contribution 0.05 0.04 0.05 0.05 0.05. 0.24Private Sector Contribution 0.01 0.01 0:01 0.02 0.01 0:06

TOTAL 1.31 1.53 1.32 1.14 1.10 6.40

. -'FY . r p . . .a xz.-P?'7 ) .*r' . . , o sv s ... ...s. . .., . . ..? . . ' . -! * ' . ' '

(iv)

Expenditure Schedule by Component(1n UA Million)

'

j ' vComponents FY1 FY2 FY3 FY4 FY5 TotalI '

.' I . ,

. ' ', r ' .

:

'

.

hv Capacity Building 00.80 0.5.9 0.27 6.22 0.22 2.05f ' . . . . ' ' ; . . . . . . . , . . . . . x . . w . . . . . , . . . .. . . . . . ..w .

B. Rural M icro-Finance System ' 0.23 . 0.56 0:72 0.71 0.70 2.92

J , .: . (; zj (;. j, y .4g.rC. Small-scale lrrigation Schemes 0.28 ., 0.38 0.38 !''

.

'

jj

d

'

'

.

'

GRAND TOTAL 1.31 ' 1.5j 1.32 1. 14 1. 10 . 6.402 . '

10. N PLEM ENTATION

!The project will be implemented over a five-year period with 1999 being PYI. Thel

' Uffice (P'M. 0 ). ijk pàjor p rqcprement of goods,establishment of the Prolect Manacement .. . . j ' w' '.'''- ' . , . . . .shortlisting and

, selection of the NGOs for form.. ation aitit )tr..' yln'lng of farmer groups wll'll . . ' ' . v...- . .

com mence dur.ing th e first year of the pmlect. Està' 'blishsmf/ en, t of demlùstration plots atNatural Resourcè; College (NRC), trainlng of DO1 staff ' .pljd' farm . ers groups leadcers. .land

. .

I j j of eajtjj dam. s wju aljosurvey, design, construction of irrigation canals-and reltas. f1; tait on ..

in project yeart 1 and continue into project year 4 7.., 'fl'ke.1* wtill be at mi; terin' review instart. ' . . .'o .prolect vear 3. Fgrmer croups formation 'and trainlnx will colïtinue. throughout broleètx'.. *'' - ' I *''e '*' '**'''' *' 'lmplerhentation fro 'm year 1 to 5.

l11. PROC M ENT OF GOODS SERVIC ES

jProcurement of goods, works and . acquisitiun, .of' qoqëiplting servi,ces firl.qncçd by the .

I . ' - ' 'ADF will be in aceordanee with the Fund's Ruless/ f kltrpdedtlure fd). rlprocurçment éf Göods) ' ' ' è :and Works or, as appropriate, Rules of Procedure f.ori4.#: U $:2p f C'zoTlslTl't. np, ty. Contracts for' t

'

' ' ' '

vehicles and office équipment will be awarded undèr lnternû,tlrtl nal Competltlve Bidding (I'CB) .l . . ':

procedures. Hydraulic laboratory equipment, survey' and soil and water t'l' ow measuringl d using IcB

. lrrigàtion çquipyiwrst. wil. 1 1?v, pzocumd by Natipnal.equipment will be lprocurel ic' B prcku

, wrement o.f civil' w'ot'ksshopping

. Marketig ecuipment will be procured. us. iqng N .( ''*' ' . ' ' . .including construction of main canals and . rehabilitatioatctf dlnm..' ks ,'will.be carried out underI . ;6. h ' .. ' .

Natîonal' Competitlve Bidding (NCB) procedurût; th. è' ltfdation and .size of the cbnstmetion1 rilike' ly tb àittitdtt bids' from outside 'M alawi.works to be undertaken are such that they are u. t,. . ; y. j .

j .The m aterials hneeded for civil works- (on-farm- cângl/. '.j. j: 'llz't.fi-/n, b asin, ioigat ion .dugwellé and..2ab1e... flffàihe shelt' goodsi''oese. will bemarket pla

, tformsll are diversified and readily ava.procured tlaroùgh National Competitive Biddipg (N'C' B); rsuo. h civil works' *i11 be undertak ep

j ; . . r L .. . .by beneficiary farm ers. Construction of the hydraglbç 1q%..o4 atpry and, the construction (jf tliel ' ' . 'demonstration plot.s will be undertaken throttg'k forç.e..lpçgltnt by t12 Departmelt bf. .ci%li

. ' ' . . . . . .

'

J $ ' ' ' 'W orks . Proçùrement Of Technlcal Assistént, ...S,kb, 1tt' CT. e:rmr . : , Consualtang, y S. ervices, ExternAlk ;.

,jy j .) . : . , ( u xajawp, wîjujjkAuditor and Jhe use of local specialized agehcles or ',N' 'G(Os wotkklg. .

.).z.wI

.undertaken through llmited competition, based op ghort ltitst using selection and procedtM Mf. 1 * ' Mr: ''

combilng technlcal quality with prices.

/!

. . ., ve . Z..J . .a $ a

<>: .%

(v)12. CONCLUSIONS AND RECOM M EO ATIONS

The Smallholder Irrigation project is in line with the ADF V11 Policy and strategy ofpoverty alleviation. The proposed project confonns to the Government's objectives Ofimproving smallholder crop production by promoting the adoption of improved irrigationteclmology to farmers and by providing the necessary capacity building for in-igation, creditand instim tional support to stimulate sustainable agricultural developm ent. A lthough,irrigation development will be new to the majority of the communities, the teclmology beingadvocated is limplë.and it Will bç batk/d by inlelpjvé f. àrtlwy' ahd. staff trairtiug. .

'

Poverty alleviation strategy of the project is conceived within the framework of totalbeneficiary participation right from the commencement of the project implementation. Theincorporation of two NGOs and a financial intermediary to train, impleldent and managecredit for the project Fill minimize Government intervention, strengthen decentralization andparticipatory com munity developm ent. The involvement of the Farmer Clubs and Savings andCredit Community Based Unions (SCCBU) in planning, implementation and management,especially for the credit component with a built-in-mechanism for credit recovery, willsustain project benefits after the project implementation period. Contribution to tlzeinves% ent in the construction of on-farm irrigation canals by the beneficiaries will provide

them with a sense of ownership of the project which will enhance the maintenance ofinfrastnzcmral facilities and add to the sustainability of the project.

Tllrough increased production of food crops and higher income accrual at householdlevels, the project will directly improve food security of the beneficiaries', specifically forrural women fanners, the youth and children, this will result in better nutrition and health.The development ot rural infrastructure will f'uther help the rural women to have betteraccess to markets for small scale trading activities usually carried out by women.

Communities outside the target groups will also benefit from imjroved access to markets andhigher levels of employment generation in project related activlties.

Participation of nlral women smallholder farmers and the youth in training. farmer clubsand credit unions will empower them to assimilate Mgher levels of farming teclmology, andalso create a sense of involvement, confidence and self respect. Tllis will assist rural womento achieve higher social stams which is vital for the success of any development effort. Theproject, therefore, is economically and financially viable, and socially desirable.

Recommendations and Conditions for Loan Aporoval

It is recommended that an ADF Loan not exceeding UA 5.02 million be granted to theGoyernment Qf. Mqlawi Jor the purpose . bf imple/ezqting thç project aj. described in thisappraisai report kubject io thé following cönditionj. '

A) Conditions Precedent to Enfrv Into Force

n e entry into force of the Loan Agreement shall be conditional upon the Government'sfulfllilent of the conditions set forth in Section 5.01 of the General Conditions'

216 ii b1e to Loans and Guarantee Agreements of the ADF..>. . j c a

7:7'. ' - . -. . . .; . ' ' Q '

. x 2 r . r )'

;

(vi)B) Conditions Precedent to First Disbursemen't

The obligations of the Bartk to make the First Disburserhent shall bç conditional upo'nthe following:

The entry into force of the Loan Agreement;

j2. The submission Of evidence, satisfactory to the ADF (?f:' - . .

: ' ... .. $ . 'L ' . . .. . -

j ' ' . .. . '' ' . . . . . ' .j ' . . . . s . x. w . .' . .. ; . . .. . . w, . , . . y , . ' .. '. '; .. . . , . . -.. . ... . .; = .. ' .. (.(i) tlle establishment of a Proiect M anazemerg Offj ce (PM O) bastd in Blantvre andI

-:' '--' ; ' C ; .

-') -- - , . -''

.the appointment of the required,professionâl And suppott stkff wkobé qualifièations. j . jj (and experience are acceptable to the AD

,I ,? . .(ii) the opening of a special account for the proj :ci .funds witl.l. a commercial bank

1 to the ADF and which has brahdh. èk in eàch of the Agriculturalacceptable

Devçlppment Divisions (ADD) covered by ith e project;lThe submission of a written undertaking by th. e G'twzrnment tà'' .â't any allocation of!

litilri a1# 'lapd, shull7be cart-ied out faitlyland to be used for the Proiect. includinc ctj .I -' - %'''' . )in accorda 'nce with the laws of M alawi', arid

IThe submission to the ADF of the course outliny of. the irrigation èurricula to be

introduced, as part of the project, in each itt' ihe' s'é' 'lzcted colleges.

C) Other 'C/nditions1

Provide evidence that the Government's cgntiibtitiè' n to the project is reflected on' l .an ammal basis in the M OAI budget,

l . .2. Prior to an'y disbursement of the f'unds for the credit component of the project:

'

1(i) the Gov lernment and NBM shall have 'éyecuttd, 'in a (014% j'ati' sfactory to the

' ' fzr the àdministration of the fundsADF, a binding and uncopditional agreeieut .I . .

'

ftlr the cfedit component,

j '(ii) the Gove'rnment and the MFI shàll have execufed, in a form satisfactory to the

ADF, a binding and unconditional àgttèmèhl 'för thé om lbnding of the cgeditl i j 'jrarmers;pprtion of the Loan funds to the benef c ary

l . .(iii) The Government shall hqve submitted tov41% ADF à cojy. U'f the model agreement.... - v ' . 'j -:.. ' >'-. - g .. --. y . .. . . . r ce ' .àetween the M#l and the àenetlciary farm' éi reèeivxihg ihe on-iedt loan funds; 'and

Every two-years, the Government shall submit: a repod oi' the capad.ty .buildtingcomponent of the project, including the course qtylinç for the irfigation curricula'

ber ot àttzclqh. is' iegisiered. énd, the ùumber gfin the pm icipating colleges, the num .I . . : - .sttxlents who have com pleted the ùèurse.

.xx.s

Y* N. ' vr v ' -M - :.Té ...'.J

PROJECT M ATRIXM AIUAW'I: Smallholder Irrigation Project (Sh1P)

Logical Framework

Narrative Summary IN. S) M easurable Perfurmance Means of Important M sumptionsIndicators (h1PIs) Verificatinms (MOVI

Goal: (Goa1 to Supergoal)

Reduce poverty among rural 1. 1 Average farm income Statistics of MOAI Government reformpeople by promoting broad significantly incr= ed; programme remains onbased and accelerated : 1.2 Statistical trackagriculturc developmenl. 1.2 Simple technology of high- Government '

. .. . . . . retunt-promoted-to anl a-tppted. publkatiop.. . .. . 1.2 Adequate .Gpvemmçnt . ..' . - . .by farmers. . '. . . . ''.- . . sujport to the psoject '

s ' .; . .oject Objd. tjve:'

. 1. 1 Irrigated land increased by 1. 1 Base-line data and Adequate institutionalAgriculture production and 4,600 ha in 25 EPAS by PY5; sample surveys; capacity for agriculturalproductiyity of the smallholder . sector;'

t>rget group increased lrough 1 .2 Average farm income increase 1 .2 Sample surveys forbetmr aq/ss to small-scale from U$ 260 to 2,225 afmually; target groups; 1.2 Accredited Financialirrigation development. intermedial to manage

1 .3 Irrigated land will be cultivated 1 .3 MOAI files and and adminlster credit.2.5 times per yeear and records; .

productivity Fill increasr more 1.3 Proje-ct Beneficiaries aret11% 2.2 times by end of PY5; responsive

1.4 Target group (12,000 families)adopt, form, own and manage400 Farmer Clubs anà 12Credit Unions by PY5;

Outputs:

1 . Building instimtional capacity in 1 . 1 Surveys soil, water flow an8 1 . 1 Sample surveysinigation technology and rural soil sampling practices in DO1, and base-line data 1. 1 Demonstration plots willmicro-finance credit nation 4 RDPS and 2 research smtions for target groups be established during 1stwide; improved by end of PY5; by APRU of Univ. 6 month of PY1 to start

of Malawi; training programme in .1.2 12 demonstration plots' in 2nd 6 month of PY1 ;

irrigation, food and marketing 1 .2 PMO's t'iles and .technologies esmblished in NRC records; l .2 Same as aboveby end of PYI;

1.3 DOI files and8 short-term training workshops records at ADDSconducted for 240 trainees and RDPS levels; 1.3 Trained staff eftkientincluding farmers' leaders by and accounmble to theNIRC each year starting PYI; projectCapacity of the two NGOsgroup fornmtion and trainingsignificantly improved by PY2;

Capacity of managing micro-credit by M FI significantlyimproved by end of PY2.

1 .6 12-15 B.SC. degrees inirri/ation technology graduated

. ' ' . . f M' BcA.b end of PY5; .- '- '' '.. . ' ' .. .-.- - : . rol'n y - . u . .: .: . : c : .;

2. Fwstablishment of a credit system 2.1 1,200 fanners reached, 40 FCs Same as above 2. 1 Farmer Groups adoptand efficiently managed by grouped and trained by one new technologies andNGOs; NGO each year covenng 2-3 credit system provided

EPAS stming PYI; by the project;

2.2 2,400 fanners (80 FCs) reached ' . 2.2 Market interest rate is'-czt ffordable by small-and facilitated by the credit kvw . a

services by M 171 covering 5 -LQZ--'..I ' holder farmers in theEPAS each year starting PYI. ,P* Project area.

7-

, M TM* avv ' x ma.:* . a k ' . ; .

, . : .1.. ,è-,1

j . . : . , . .,rNarrative Summary @S) Measurable Performnnce .. Means of Important Auumptions ' '

l Indicators (Nfpls) Verifiçations (M'OV)2.3 Fanners voluntarily participate ., in fonnaiion ofb fanner , : S.ame aj above Same as above '.. ''

grouys/clubs and Credit Unionsstartlng PYI;

2 4 UA 2.7 million efticiently ,'l' . ,

utilized for credit

3. Establishment of small-scale 3. 1 Needs assessment Dreoared. fnr , . 3. 1 Cost of irrigation. * * , 'i ::. . : . . . . . . . . . .; .... irrigation.schemes and managed. . ' . FCs. starting. PY 1.k-- -.... . - . . . : . ' -equibment affordable. by . .: '. ''' *' . . L . . ''''' J . * .- by. farmers. . . -. -' . ' ' farmers'.

3.2 80 FCs trained by end of PY'1j .3.2 Mazketing inforpation. *

3.3 1,008 ha irrigated by treeadle and chnnnels rellarly '. aépump by PY5; provided d used byfarfners; ..-

. /3.4 3,265 ha irrigated by motocized . .. .

',

'

pumps by end of PY5; 3.3 Projùct Behetkiaries 'âre.resyonjig'e to pteparp

3 5 284 ha irrigated by sprinkler thelr fi'ylds fo'/ watef' 'irrigation systems by end of distribut:ion afldPY5; maintenance of their

, pumps.3.6 95 ha irrigated by grayity-fed

system by end of PY5; . 3.4 Locl market capacity issufticieiit to absorb

3.7 6 earth dams rehabilitated by surplus of rcropend of PY5; production;

3.8 Average crop yield/ha increajèd 3.5 Commercial .orok prices .by 150% by end of PY5. promotes zmacketmg

, . .;activities. for sup . 1us of .3.9 A total of 2-3 thousRd credit prqdxuction; '

loans provided to the fanners ': '(30 Ioans to FCs) by end of 3.6 Farmers are wi.lling' to .PY5. participàte ià labour

work in th. eir t'iTlds, '

4. Activitie.s lnputs and Resources .

' l l Accoune Deparunent 1 . l Efûcient executinpagency.1 999 2000 2001 2X2 2003 C- records satiyfactqry cqorjination1

. Capacity Building arrftfng. participatlng ministrirs1 .1 0.80 0.59 0.22 0.22 0.22 I z M a, E rxortjs

2 Rural M icro Finance 6 () pz c.71 c.-/0 jzxo okswrjejpont 1 '2 Timely recruiunqnt of TAs- 1 .2 0.23 0.5 . j :j aud shorî term consultana

.' .

. llecordd -3. Srnallscale Irrigation 1 .3 0.28 0.36 0.38 0.21 0.18

.' u V '

%

'

;.ë

1.l

2 j- 'S

. . u . ,a. . t - : o :. .: ?. $ $.'.x . ;. ., . . . , .. uIQ. . aJt.u .. . :.,,.é.L x-.-uu . . a: r. .. w.a . . ; .,. . . . . . . .

1. W TRODUCTION AND BACKGROUNY

1. 1 Origin and Historv of the Proiect

1. 1. 1 M alawi is a land-locked country situated in the South-Eastern pal4 of Africa. It has atotal land area of 119, 140 1% 2 of which 24,200 km2 comprises Lake Malawi and othersm aller lakes. It is bordered'by Tanzania in the North and North W est, Zambia in the W estand M oznm bique in the East, Soùth and South W est. The extends from 90 45' to 170 5/ southof the e.qgato.r .for .gbouy .9. 00 k!p in lenglh .frqm nerr- h t.o southa. gnd vryipg kt wi4yh from

. . 80 to 16U k''m ' ' ' ' '' ' '' ' :' '- ' ' ' ''

1. 1.2 Malawi is one of the most densely populated countries ln stib-sàharan Africa. Itspopulation is currently estimated at about 11.37 million with an average growth rate of 3.3%per year. It is estimated thnt 48% of the population is under 15 years of age and about 87 %of the total population lives in the rural areas. M alawi is not endowed with many namralresources. Its main resource base is agriculture which plays a key role in the country'seconomy. The economy of the country is heavily dependent on rairtfed agriculmre bysmallholder farmers. It is estimated that rural per capita income is at US$ 66.00 per ammmwith the poorest area being as low as US$ 35.00 per armllm . Development of the sector istherefore central in the Government's effort to reduce poverty. Recent drough? have greatlyaffected agriculture production, and m ade rainfed agriculture unreliable means of achievingsustainable food security, particularly with the increasing population growth.

1. 1.3 In 1995, the Government of Malawi (G0M) produced the Agriculmral and LivejtockDevelopment Strategy and Action Plan (ALDSAP) with emphasis on rural povertyalleviation. This will continue to be the basis for formulating M alawi Agriculmral Sectorlnvestment Programme (MASIP). In 1996, a National Irrigation Policy and DevelopmentStrategy (NIPADS) was also prepared by the Government. The aim of the irrigation policyand development strategy is to contribute to poverty alleviation, improve food security bytargeting sm allholder farm ers for irrigation development and create an enabling environmentfor private inves% ent. The policy further promotes private sector investment in irrigationdevelopment and management. 'l'he Government of Malawi submitted a project proposal tothe Bank in December 1997 to consider funding of a Smallholdec lnigation Project (SMP)which is a very high priority area.

1. 1.4 A Bank identification/preparation mission was launched during the period of February20 to M arch 13, 1998. The mission held discussions with a1l the stakeholders viz:Government oftkials, field staff, prospectiye beneficiaries including women and the youth.fmancial intennediaries and non-governmental organizations operating in the project area.Other meetings were held with donor agencies represented in the country to ensure that the

.u project dqe.s n0t dpplicate on-going dpnoy.yçtivjt.ies tp the lpb-qeçtor'qpd .aljo learn frpm tlpp/.

u jjja wjo oeexperiences. Further discussions were held during project appraisal in aystakeholders. This report reflects the mission's findings and agreements reàched with theGovernment.

1. 1.5 The project is in line with the ADF-VII development strategy which lays emphasis onoverty alleviation. It further advocates a sm allholder strategy, especially wom en and the z LznsTLiiP

k. a,income generation and improved food security sip ation. The project also supports z>' .S.youth, for

!!q :.

' : e . . ... .. . c .. ' ' 'j e ' l.à .

2

the Govermnent development objective of eradicating pover'ty through the diversification ofthe econom ic base, especially the agriculture sector.

1.2 'Performance of Sim ilar Proiects in M alawi'

1 . . '1 .2. 1 Thç Bank drjoup has not specifically financed an jrrigation projbct in M alawi. The

-.. Agriculturaluservices Projéct co-financed with :the Worl.'(L,BV ' 'ânk. haj.xprékidtd support ..for-ihdtitutiohàl ltrefléthèning to thè Dèpartnierit of Irrigtfipn. It 4developmbnt qnd jdissemination of smallscale irrxiggtripil technologies, includtng theprocurement a'nd di 'stribution of treadle oumos and medlznftj ized iqigation' equipment for use

I 't J'' . !k. . . -7 . .by smallholder farm ers. The ADF financed kùral Incon'ïç Enhahçejnent Project IRIE.P)l i' i 'zfièn dubwcömponent

.approved in 1997, àlso hés an element of small-jcale l r g.'

I . . . '1.2.2 The Barlk Group commitments to the agriculture,seéitj j accoùnts for 21.7% (UA 83.54'

f the total In al1 14 projects have so far-o-èèn J-itki ççd ih V'alaWi. At ptesent 6tillion) o , . . ..p .1ll h 2 are 'pyal'.). j,t R'elöprdLdt .projects. , one sectoragricultural projects are on going, of w c ,

' ë' brli'veéib, ék éevkloprti ent project. TheAdjustmeni, qhe agricultutal service, one forestrv afi onI ' '

. . .'ç

. .Rural lncùme Enh ancemènt Project has not been dèclarqd 'èffective.

1.2.3 Performance of these projects have imptoved in reqept times and have been ratedsatisfàctory with an exception of the National Livestock Ptpjdect, which' faeed a numb' er ofihstitutional cpnktraints. The Bank has restructtzred tke Vprojhéèt ' and thè G overnment' has

. j 'intbrmed the Bank that all the conditions laid down b, y' th8 'sulak have been foltfllled. A Bank .mission will teview the simation and make appropriàiè tèttyrnih. èndution reg.àrdikg the projèct ''

1 'p' aK' ,'+ .'implem entation. .

2. THE AGRICULT SECTOR

l2. 1 Salieht Features

2. 1. 1 Agficulture is the major sector in MalaFi's ecbnomyr lt contributes 39% of the GDP,85 to 90% of the foreign exchange. earnings and employkj '90% .of the trtiral labour forc:. ItJprovides raw materïals for about two-thirds of the manufaeturing sector, and considerablydominates the com 'rn ercial and distribution sectors.

l , .*2 1.2 The agriculmral sector is dualistic in namre: ond'sub-dector consists relatively large* j

le moheci èstatel s while the other sublsector comptistsF smallholber fanns. h' bout 5.3sca ,. I , , j atkon. oui t èf .which abbut 3

.2mlllion hat or 60% of Malawi s total land is suitablç fer cu-lt # ,. j , . . (j.. y..j 5 g. , : ujytu jja .y yyyyu. () s,million ha. .is eslamated''tp be adtttally: undçt cul-f.jvàtign. . , ,#ç... . , m . ., . !. .-

illion ha belong tojthe eqtate sector while 3.8 milltöù'ha' a' re wunder inl' allholder sector. Them .' i d for forest' br gam'è reserves.rèmaining 0.6 million ha are currently set asidq as public lan

2. 1 .3 Estate farms are located in high potential greas and are engaged, prim arily, in.: ' . kq . . ,

agriculmral çxport erops syqh as tobacco, coffee, tèé artd spgvr. Smallholder fàrm ' ers are'

. t . .-: '1q .'engaged maitll. y in subj.k@xe farming and cultivate > V Y! ety of crop. s including maize,I

.: ==' g, j.s ' . syk atlholder fanh. sizes valtj acrgsssorghum, millet, corpxc, soya beans and pigeoh p . .the country, with 55% of al1 smallholders cultivating less than 1 ha, 31 % between 1 ha and2 ha and 14% more than 2 ha. M any of the estate fanns at: larger than 10 ha.

. u J .. x ak : .' '

2.2 Performance of the Agricultural Sector

2.2. 1 Since independence, agricultural growth rate has varied widely. ln the 1970. s it grewby nearly 5%, in the early 1980: by 1% and, from 1987 to 1990 by 2.7% . From 1992 to1994, the agricuoltural lector exprrienced a nçgative growth rate, painly dgç.to two npjor ..' -

jj i i l Following reasolia' ble' ' âins anb subs' idizèd 'è 'droughti iù t991 and 19 r spéct ve y. . rdistribution of seed and fertilizer to smallholder fanmers in 1994, the country enjoyed a goodharvest in 1995. Preliminary estimates indicate that tliere was a quantllm jump in agriculturaloutput in 1994/96. ln 1994/95 season; agricultural production grew by a robust 29.7 perèentand in 1995/96 the sector registered 38 percent growth over the previous year. Thisconthmous growth is mainly due to expnnsion of smallholder production by 40 per cent.

2.2.2 The estate sub-sector, irl the past, has grown faster th= the sm allholder sub-sector.Between 1980 and 1994, estates grew at an almual average rate of 5.0% while thesmallholder sub-sector grew at 0.36% only. M uch

. of this growth can be attributeb to an

expac ion of the area under tobacco. 'I'he increase in production of cash crops and thedeliberate expansion of public lands into national parlcs and forest reserves, resulted in areduction of available arable land for cultivation of food crops. Due to the pressure oncultivable land, farmers have been forced to cultivate marginally fertile land, consequentlyreducing crop yields.

2.3 Agricultural lnstitutions

The Ministry of Agriculture and Inigation (M0AI) has the overall responsible for thedevelopment and administration of the agriculmral sector. The M inistry has six technicaldepartmenl: Agricultural Extension Services (DAES); Agricultural Research and TechnicalServices (DARTS); Animal Health and lndustry (DM 1I); Agriculqzral lmnd Resbyrces andConservation (DALRCI; Department of Crops (DOC); and Department of Irrigation (DO1).In addition to these departments, the Ministry has a Planning Divisjon which is responsiblef tlle planning, executing, reviewing and monitoring and evaluation of bevelopmentorprogrnms. The two departments of interest to the project are DAES and DOI. The DOI waspreviously under the Ministry of Irrigation and Water Development (MOIWD), apd hasrecently been merged with the Ministry of Agriculture. It has four major sections whichinclude Agronomy, Engineering, W orkshops, and Administration. The Department is

responsible for planning and developing irrigation projects and also creating an enablingenvironment which encourages and empowers the private sector, smallholder farmers, estate

. and.commercial farmers tp hwçst in irrigated agricullral production. At present the DO. l h>s19 brèfessioùal Officers tPOs) including 10 Clvil Engineers ànd 9 Agrbnomists. It furtherhas 23 Technical Officers (TOs) and 60 Technical Assistant-s (TAs) in addition to 2,000 FrontLine Staff IFIwSI of irrigation extension officers.

2.4 Aericultural Credit Instituti-ons.

2.4. 1 The flnnncial system in M alawi consists of tWo m ain sectors - namely the form al andinformal sector. The formal sector apart from the Reserve Bank of M alawi includes theNational Bnnk of Miawi, the Commercial Bank of M alawi; the Inves% ent and Development

7 N 'r- r-v . r .' , . . .!

'

.: ! . .j x . 4' $ *' ' $ '. f:x . . . .

4

Barlk of M alawi - a merchant Bank; M ercantile Credit and Lzqsing and Finance Company. * ' ' .

of Malawi Limited, jboth are finance houses; the New' 'Bùildxpii.i.. c Sociqty, which provides loan.s' y ..b'.'e 'for construction and the insurance industry which comptijes compapiys all4 bll.b' k ers andieveral pepsion and provident fund managers.

. . '

.

2-.4 22-.- '.Thq inflyppal sec-t. (-I.I- ronsist-of .four'main develyp nt, . vti' t.kfiin rapcklnjtitu. tions (DF1s).-and . - .tw0 saviljg.s rirtàtimtions. The DFIS consist of Va1.â,Ws i. bv4r, PJ'(i. péierff Cérpd. iation (M.DC),l

y sjj yt) j .j? : ,o.evwj,opmyu:t'org,aneizati'on.lndustrial, Dekelb. pment Fund (INDEFUND) , tx.hé Sy myll . :1;p: JsI . . ,st jj t,y,y.,s otjjet twtfinforrftail, sAvingspf Malawi (SEDOM), and the Malawi Mudzi Ftmd IM'M F. ) ,. , :j

. y g j. q g . .yjj (y ojs. ayu u o, ujm juty ;dnd credit institutions are the Malawi Union o'f Savingà q:lt'd Cf.è.d,(MUSCCO). and the Post Office Savings Bank '(P.OS, B)., T ,1a,6 il4' ormél secto:r is th importantj . k .p , .. . a.gxj .j x . : . . . ;

y . ,sector and its éontribution to resource mobilizallon and (Y,-soutce allbcatitm às à W hole is1 ' .Jimportant for the M alawian economv. Its contribution.t.o lhe.hlp:io-ectjnomic development andi.

'= . . j ..' . .3.''*.. p.' ' r'ey ,. t '. . z . . , . '.'.' j . .welfare c)f . rejlmrce poor households cqmplements' G' ''OV' , i-h. .. iti. atives of promoti'éîg' grbwth1 Cty :r . .3133'6 . ... q; . ,: . . . .

, -

'through p o'verty alleviation. These informal inst.imljgilj qt.è- lalnly responsible fof mèeting: 1 . x *

the financial needs of the resource-poor households.

2.5 Agriculfu/al M arketine' .

, #

'

r - . , .The Agricultural Development Marketing Cumpany (ADMARC) was up until 198t the

sole buyer of smallholder produce with deoots nationwide. This mlmopoly h as been''mmokeG. l ' '*' '*' ' ''by structural adg. ustment reforms and ADM' ARC is nowr'ljne of 'many trad ers @lbeit it still

. j , . , . . o ..remains the buyer jof last resort. ln 1981 M alawi qmb'.' arke#. .en a <:t of structtttal édlustrhèntf rms supported by the W orld Ban'k IM F' and.iAb' B., 1: éc''t>e. Agriçulture sçctor, tlm refol'msre O , , . . , . . . .

have invnlved libel ralization of smallholder agcieuttk i'aêtt t--yi'..i1 ad, è th. arfketîqg. couyled' withr .

. . . .. -à iï..6,-kL . . ' - ' : . -. .removal of subtidles on producer and consumer p pke, ;.pî:p., eçiglly (#' maize and fértilizegj,j . a 1 ' ' x

'

. . : J2 .. . . '

, '

deregul,atiofl' ''of producer and consumeor pdcep w,itlz thetexcép. t.ltm o, f it/. àlze whyte prices àret . 1 . . '''k - . ) ' ' : 'supp. osed to . swing with the government maiz. e pr, i'gi b, and ; lib,' e?rzltzastipn of fertilizer! ' ' ' '' .

marketibg, ljberalization Of seed produçtion Andèk.ni.': alvk, et,.ià' g, ap d l'lbèràliz ation cf tobaccöl .

' . . . - - . , .)

productiort ând. marketing. The a1m of tlw mfo, ni1.. s , hzad . been .to' temove barriers and... . 11 ' .' . '' i' .

restriction in 'the 'production and m arketing of . agrikqftgitqùl .g(%m' 'm. l o'd'. ities dnd to .eùcourage''''-' :. 'vum u# ', . ..11 ) . . : Q 'i . .''' . - %ivate sector partiicipation in agricultural trade. Th.- ç lfbégljkyiibn èf .p. trbducè marketing andPr

.l - .-. . ? ' . - . , .the subseq. uzlj. t entry in the market by the privatç s

, 4,Qt()r

.' hàve prövidéd.. a wid: rûnge Uf

11 '' ' . '.options 'both in terms of types of markets and rulihg pfiçzj.

2.6 Goverhm ent Policy in the Agriculture Sector-

1 ' - bji 'ctivetfor

.tlie

. .ag. .rku. 11k1-* ra1 seclppay

ims at-ezh. ,'

ancidg $ e- , ..-.-2 .6 . 1 The G'Qkern', ment 's long-term. o. , l . .

j jejj-vufjkiency lnsocial Felfam and incomes of the agriculturalz,com. m tu sa,fli'ty b) y im pm y, ng. ) .. t i q' : .. ' . 'food productibn and expanding and diversifying algricù

z' l'ttlràl expptts +. hjle, simultaneb' usly,'1

VF 'i'k. ' a: .m ade seziaus' 'efforts to implementconserking natural resources. Since 1987, GO

.l . ,' ,strucmral and .sectoral adlustment measures in otder td liberaliz: the eountry s economy tol 8 iurity' and'inéomvs.of tke pqor. M öst'ensure efficient use of resources and to improve foo :se

.

l j 'tnr havp' àow b eert zlpp' Vtfémenfed:of the reform measures targeted to the agr.icultotàl.. :e a .' . ! . . : . . . . .: y . .,; mr..,- z . , ;

marketing and pricinc of agriculmral produce have b'.è-ijn' '.fu. ' 11y lîb' etaltiàéd kxA pt fDr some,

'*' ! '''''''- ''''''- * '' ' ' ' ' U * * '1: : * l ,aaminisuàuve eontrols on maize or whicu a coor.And a qei' ling priee u ve been maintained(para 2.5.1).

2.6.2 The Agricultural and Livestock Development Strategy and Action Plan (ALDSAP),which was prepared in 1995, emphasizes nlral poverty alleviation and constimtes the basison which the priority area; for investm ent under M alawi Agriculture Sector InvestmentProgramme (MASIP) will be pursued. Given the overwhelming importance of agriculmre tothe econom y, the ALDSAP is determ ined to accelerate broad-based agricultural and rural

. develppment as a major.element of. its tight.against -poverty. - . . - '. -. ' -- . .. .. :. . . , '....

2.7 Land Tenure and Land Use

2.7. 1 Lan- d- Tenure: 'I'he land tenurè system has three categories nnmely: Public taand,Customary Land and Private Land. Customary land is vested in the President who, under tlaeChiefs act, delegates power to allocate land to traditional Chiefs for use by smallholdersector. Private land is owned by individuals either under freehold or leasehtfld title, whilepublic land is used by the Governm ent for developing public institutions such as towns andmarkets or set aside for national parks and forest reserves. It is estimaie'd that 6.6 million haare customary land, 1.25 million ha are private lànd and O.6 million ha has been set asideas public land to be used for forest or gam e reserves.

2.7.2 Following the liberalization of the M alawi Land Act of 1971, smallholder farmers, inprinciple, can apply to register custorhary land, to which they hold usufruct rights byauthority of the village headman, as leasehold. Leaseholds are for 21 years at the first option.Extension of the leasehold f0r 99 years is possible once the necessary formalities of surveyand registration are completed. Custom ary landholders, in general, appear satisfied with thissystem of land allocation and security.

2.8 Povertv and Azriculture

2.8. 1 M alawi is one of the poorest countries in the world. lt has been ranked number 157Out of 17t cqunties by the 1996 UNDP Human Development Index On the basis of GD/,life expectancy and education. About 60% of the population is below the poverty line. Thisis exacerbated by precarious living conditions due to high unemployment rates, decliningincom es, lim ited access to sanitation and health, high illiteracy rates and food insecurity.Poverty is prevalent in al1 regions in M alawi however, in term s of distribution. it is more

pronounced in the Southern region where the project's trget groups live. The project designwill take into consideration these limitations to remove the constraints related tounem ploym ent, increm ental production? processing, storage and m arketing. This will improvethe food security situation, nutritional status, and raise farmers' income while creatingemployment .olpormrtities' mainly. .'for .womqn and lthe 'youth .who qie nmotlg the mpstvulnerable and poveity stricken groups.

2.8.2 Agriculmrç is characterized by sm allholder sub-sector m ainly for subsistence with littleor no sum lus due to small farm size, low productivity and lim ited productive assets. About

. 55% of smallholders have farm sizes below one hectare and another 25% have an averageNt

. f'r: size of only 0.25 ha to satisfy their basic food requirements. This food supply is enough for7- J = . (j ep e nd- only six months during the year. D uring the rest of the year, sm allholders have to6

'

on off-farm activities or ''ganyu'' to raise the necessary cash for their food supply. Thenational food suplly is heavily dependent on sm'allholder agriculmre which is mainly. rain-fed

, '

.%Ty. e=v , ,.: .,z '' ' . . ;y' '' 2. . .. y k . u ... .. . r.) ir r zcv'. cm jmm aam .om vm s

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6. i

and national food insufficiency is pervasive. A study pmparetl.. i.n 1996 by the svorld Food j. :' . I - - v x 'h - - > < ,Programmex Fp), USAID and GOM on Vulnerability Apès,yment and' Mapping. (VAM ) '

t l . - : - . .reyealed that iin Mélawi, rural per capita income is estitnàied at US$ 66.00 per annum withthe poorest areàcbeing as low as US$ 35.00 per annuth' .' 1 alpwvv. è1-, in the Govetnm . ent's view,

' .' . . ..

' .. : ' ' .thij is an uhd erstatement because it does not take ifffè conft. 'deration other parameters like

i helalth facilities, education rate afnd <ànitatioà'

, gekndzr d i'sparities. pd the lnukition, access o.

1 ;t,v .q..:?.1.a. 1 ( ; 1. ,,,.1 z,,.1 f,?ja t,....:/,...j.u . .: , . j,ja .ja . ' . . !' . -.--- .. : a zw. e .. 2. u . .uC.11 t. JICSC.....aSPjGC.t. q .âr. e zncz uueu , kaae w xxvu eltz'f.t'l at'eé' . :A,. .u' 3t t.tz'ose living in abso lute i. qy .. y ,, . ..s. . . .., .. . . .

.

, y . pg,...,j. y . .. s . .. . , s. , . . . .. . ... , m . .... . m yj' ' #qverty would reach '80%7.of the populatioï. .. - -. . .

- ..'' :

j. . . . . . . . . x . . t v. . ...

' .

'

y2.'8.3 The government is making deliberate effol'ts t

.p 'tâckl: poverty. A P.' overt y Allçviation ) 'rlaunlched in 1977. In additiop,, i.n cog' J'it.l,ik,tl''i(#é'' 'W ith donoftj

, ,A1'. nds 'h'ave been 1.

,:Piogramme was . , -' I , 7'. k: ' .

ob. tained for ca. pacity building and promotion of. Id. ' 'icm oni ti .rpiisk? to bertefit' the vulnerable j :' i ' .j ' v .

' ' '

group. Diversification in agriculture and uçyelxopm.e.ntaoif smft.-lil-tst:à'le. i'rrigation aré part of the 1 ,major strategiestbein'g promoted by the Governl

,

- ent t'o-allekiàtè ptwerty. , l ,

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,

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'

l l . !2.9 W onien and Aeritulture

,

'

. y . . . ' ' . z .,.2.9. 1 Women compjrise about 60 % of a11 smallholdeqtfàrmtr. st Their farm sizos rangé from . ' '

. . ,) ; f; ,j;.. .s who .aocpunt. för 40 % of '1é

.6 ha to less thzn 0.5 ha for female headed hnttfsdlp. : ,

r ! . ' ' s *

...+.' ' . . ' ' '

. . 3

households. Thè m, falority of the households obtailied, thzit .1.*. 'nd' 'fhleugh. .ktlzeir family lineage . ,.j ' .' . . j . .

.g y . . ' . y'lw, hile othèrs nbtained land from the villace headtiptt.. Fé4W. ' èléheadvdk fhouseltold s arè ei, ther . .,

1 h''- , . . v;g ;,,) '. ' ' Ajl..u . ' . ' ' . . ' .divorced, ulnmàrried, widowed or the wives of mznihold' id.g'b-'ff-farm. ' clobs'.awày Rom homç. . .j' . .

' . . .v ; 4. w. . . . .

A.' pm from married female households, the other categofiej gke the p'oorest wit,hr,no off-farm .. j:. . '. .

. ,ïcash éctivities ör iemittances. . ,k. . . j

2.9.2 On tlne qverace, the decision to crow most crons is. Vwken bv bot'h hws'band and wifç. . :'k''. l **-' - ---' ,T ' *' . -'' ' ' - '.3 . fHowever

, females tend to make more decisions on fpôd crépt sucltys sweet potatèes, beans, y'. .

'

cassava, pumpkin, groundnut rice, and peas, whilv. niin prtd omivàtenih deciiipn taking irè $. r . . ' ' -'* ' ljcash crqps such as soya-bean sunflower, exotic vegetables, tobacco, wheat, cotton ànd .z

l . ' ) .'. . . ' . . ,. r, 'coffqe. h part from crop production, women are also' involked in raisin'g bf cattls, làyers, atnd .!l . . .. jf broilers. ti:?

. .

.

.. . j

2.9.3 The constraints that prevent womep from incre&sitlg thzir agrkultural lp, roductioù 'jj . . , .y jyy; j . .. , . ..;;inclùde iinadeuuate on-farm labor, land to piodtlk e adeqd iatè . fo'sd' , l'ack of ot.ed. it, 1.f.1. puts,trainihg', i'nadequ 'ate extension advice and househpld XFet. sp oàsib. ilitiej such as. qqllecting wàter . ?f

. 2 . . , c . . . >il 11 take up to 40 m inutes and 3.3: .0.. 'hours iespeet-ively o.f their time. '. ,). , and ruewood wh c

I constr-a-ints to smallh- o-lder--ert ., .#. du-cdp'n .

' '

..,.,)'2.10 x icuuuma

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' r . . j . .. . . . .4-. * ' ' ..-. '-.. J. -' em j ' . . ' . . ... . .r:.:J y . . ..:y. . . . ... .. . . . . . . . .j2

. 10. 1 Although the structural énd kectofal adlùjtm, , crï. t. m zasup s hàve impm ved: , th..e pplicy - .. . jl - ' ' ' : - ' ? -' ' '*'* h 'V ' *'* ' :. . ,

' Y ' '* '1

environment and subsequently contributed to ihcreasèd aglicùltura'l pelformàhce. .) the ;.l è'l's stlll fated with an array of constrpjnts'. 'Por 'srrivllhtyt'ders to'râckiqve ldlghe<, 3.1)smallholt er

.

duqtivity ahd Jefficiency, they must overcolih . e.'' tlte bâ. ittier, s 'éllf'.sèel' 'o-eçonomic, , biqlogical . .t1( pro' ,. .. qa . . z. . . ; .;j . ' . . jland physicàil constraints aùd should have an enybfihg lt'ta'é, c

, ù.. ueçonoljlic. enyi.rop'gm.. etat ln stlpp.. (4'r't .:j4' ' ' fuficittlf 'dçaugh.ts' ia,.th. e 1990s:temàln tl'le ' ' ..,of their entlrprises. Erratic rainfall patterqs épd m

. . - yj. * l - ). : - j y .

most unpredictable tonstraint facing the sectgr. I-F,l1. rt-a jhl eimore, Fmallh oldefs. d: not hgve tJ . . ' . à ' (r2' -; . ; ' Idequate incenuves and support to produçe

.sù.'1> ltl.s.is,e' ratp. art frop , wh. at th ey requ. ire for ., '.. ''i. a j,.

, j . . ..u ,, . . '.j. t . . fl .subsistence., The conj. traints to smailholder agrj.yul,ufàli.ptv.pductiön.generally inclule, low and ')

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j't

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. . ). . '' .''a' . ..'s . . . , '.t ,? ..a., , , . . .

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' '* . u- . .x . . zk ' ., 2k7' .. .k .% . r . gl' ..zu. . ... z.. l .'. . .

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declining productivity on the dryland, lack of capital to purchase inputs and farmimplemenl, high cost of credit, lack of marketing channels and marketing informationsystems preventing smallholders from being competitive. inadequate extension advise,inadequate supply of seeds of improved varieties, high cost of inputs and inadequate village-level storage and processing facilities.

2-. 10.2. Investment,s -in .the - sub-seçtor . have been focpsed mairq : on increasing.. .the .., .. ..- .' ..-. .ductiviY öf srhallholdtrsi ventùrej whilè 'rharke'iing öf ag''ri8ultura'l roduce by tfle private' ' ' --- 'pr0 p

sector and. m arketing inform ation system s have not been em phasiz. ed. This has been acontributory factor in redùction of farmers' gains. In addition, due to recurrent drought,smallholder akriculmral production is considered by Commercial Banks as a risky venturecoupled with lack of collateral by sm allholder farmers to secure their loans. In thiscolmection, sm allholder farm ers' access to .cornmercial Bank is very limited.

2. 10.3 For the irrigation sub-sector in particular, the constraints to irrigation developm entinclude lack of improved irrigation technology and poor water control. Institutionalconstraints with regard to the staff of the lrrigation Department, comprise inadequate supportin water management, participatory methodologies as well as inadequate logistical support,are among the limitations to their pedbrmance. The proposed' project will support theGovernm ent's efforts to minim ize som e of these constraints.

3. T> IRQIGATION SW -SEC-T-OR

3. 1 W ater Resources

3. 1. 1 M alawi is endowed with surface as well as ground water resources. The country hastwo main river systems . (Lake Malawi-shire River and Lake Chilwa and RuvumaCatchments). There are two main groundwater systems, namely, the weathered basement of

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the plateau and the alluvial aquifers of the lakeshore plains and the Shire valley. Both surface 'and groundwater are important water sources in the project area.. The Shire River and itstributaries are the main source of water in the highlands. Apart from the rivers, shallowgroundwater represent.s the only viable supply for small-scale irrigation. Ammal nznoffaverages 16.14 billion m3, out of which only 7% are utilized for H igation.

3.1.2 Rainfall occurs from October to April. It varies from 1800 mm in the highlandsplateau and mountainous regions to less than 800 m m in the t'ifth valley areas. M ore than 90

: .per cent of the runoff occurs during the rainy season. Some 30 cubic kilometers of fresh . .

watér résource: aré .rtnewed -ammally--rf'hi. s eqbatqs to àbout 3,000 èubk'metets per.person , : . ; . :per year. Lzke M alawi has an average live storage of 90 cubic kilom eters which drains tothe Shire River. 1t.s total storage is 1,000 cubic kilometers. Periods of drought and 1owrainfall occur.

3. 1.3 n e Shire River: is the maior surface water sgurce in the project area. River flow is.

- NJperennlal even in the dry seasons. Flow record.j-#jgMaganga over the past twenty years showthat the annual average flow has varied from %-* *' ' um of 196 m3/sec to a rilaxim ùm of 5003 3 -' - ' ' :m ysec w ith an average of 308 m /sec. '

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3. 1.4 The Groundwater Sources: The lower Shite Valley has alluvial aquifers with higher. 'illed' or ljtànd dtl, g i'; the Lower Szhire Vélley.yields. Ove: 800 boreholes have been either dl ,, . , , .

. . . ? ,Usually, these have been located in villages or towils wkere thz 'deffl and for water is at itsm aximum . '

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3. 1.5 Water Harvesting'. A number of small dams haye Wetn coùstwçted oil small waterdhedsover the last fifty years in Shire Highlands, and M lanzà R.D Pis. Cùrrently these dams are

. ; . . . . . . ' . . ' . .. ' . . . L . *'; . . .$ ). i . , ' ' . .. ' ... - ., . . - . ... .... ilsed fof dö-ihesti: Wat.ér afid livdtbèk Wâteiiilg.pti,trjlthsiik JT., ap-télaflXy i,i&,-i7l% dry- sèaBp. Ff)mt,.-

it d' rsèry' iitttrg. altioùs-s. uppfemgntary irrigatiimstructures ate, howe.ver, used either for tobacco . t .l f' for other perennial crops' sue

. ht'as '',r#à)é'#.%. , 'fnycactrfp: ia5 etc. In adrdltitmfor tea and coffée, o . .i i kè .... é dams provîde oprpprtufiities forto direct absttaction from the reservoir for îrrigation, :p.

' l . . -. : '.j, .. . .using seepage water below structure for the same purp cf .:.l '3. 1.6 W ater qualitv: There has not been any signifitpnt 4 Ullution of Wàtèr both surface andground from possible pollutants. Therefore, the quràlity' of water to, d'ate is reasonably gpod

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. except fér contamination with some water borne dlseases.

l . .3. 1.7 lrrigatidn ex'periences: Currently, the area uàdèr ir/gation is estimatqd àt Just över

'22 000 lka out ttf' tlae çstimated irrigation p'otenuàl df. yb-klsk' t l0f ,1.t.,: li.à.'. P'lannéd irrigàtion; . . . . . . . (. l . .

.

.u ,y uju j jgtx two more schemçsdevelopment Started i!l Malawi in 1949 at Llmp,kxdé. 'Iï1'

be plhain afid ain'.i figated 'cmp resiafch stàtlon waswere developed onl the chilwa/phalom . .established at M ag 'anga. The largest irrigation schete is ,Q.$v, ned by .tlw Sugar' Company of

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j . . . . '' . . ' :'Malawi (SUCOMA) . It came into Droduction in 194.5. , anttèfztçlzqd itj f'ug. 11 develgpdme,mt ofl - . lw -'w ed, 'by tlu z setond làrg Jjt e. 'sktate ,9,200 ha öf sugarcane, at Dwangwa in 1979. This wa: 'fol' 1 i f' irrigâtio'n has continugd' in four6

,000 ha of sugarcane, at Dwangwa in 1979. Develop' mefl g.I i , .j tosjxtates dqyeloped ' cn public landcategories. The first and largest category is public s ç .

targely with private capital and expertise (growing'tvcamàirt4, r14. acadamiû, 'tea aild coffee).. . .x< , tk r. . . w.The second category is private estates on freedahd oi teà!4.d#.$' . f'd lbliïl, 'for p#. oduçing 'ltnainly$ '

.' ' - è ' ' .tea

, coffee- and. tobacco while the third is goverlmènt 'bwùed? settleinèrït. schefiu , e.s on pqb. lic ,l i l crop grown. T.1,e' 'otz rth' cpkgory i.s '.'s:1.f hé' lp'' schemê edland on which rice is the princ pa

. ,.' l . . . '(m customlary l'and, generally for rice produttion âtkll gomé vdgètables.' ' '

j- v * - a, '' ' 1 ricé, have lb

jeën develop'ed ip Lgwrr Shire3.1.8 Five inigation schemes growing maln yi ' V' 'ère ànd j UCOMA. TheValley . n ese include Kasinthula, Nkata, Mvona, C'hidzim6j, asenp

land of SUl COMA' uses pumped irrig'ation.

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sugarcane l

! .3.2 Govertlmènt Policr in the lrrieation Sub-sed:r

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Rllêjufcec Act- 8f'''. *1969 ah' d it: àube'''jp,j) 'iary. . x-'x'leytkta-t'ici'é'' àle 'thel mai.n tegàl!c2. 1 The èwatyf

: é *-à$cT'-k 'esources -board tj-empoweredinstruments for administration of water resources. Th . . .

. , , ..r y, . . j jojjjyus regartungto grant waterwuse permits for approved applications, .subpçf t o,.cèttàin o

loitatioln of the resource. w ater resoutce poliqy/ afdastrategy were consolidatedthè ovvrall exp

. k. j . .. . , jjin'1994 wittl tl+ preparation and approval of ''W ater Reseuml. Mànagoment and Strategies

Tlle policieF and sttategies are, however, bmited' iù. prbisoyftjg, thé Ititin tor ng,. l !. . ': , ê

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plynnlng and dekelöpment of water resources. T,hb Watlr D.. èpartment is responsible form onitoring, assesxing and planning of watet resourcès.

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= r <.

3.2.2 The overall objective of the National Irrigation Policy and Development Strategy(NIPADS) of 1996 is to promote social and economic development through sustainableirrigated agriculture. NIPADS aims at projects that are economically and financiallyjustified,socially acceptable and technically sound without causing unacceptable im pact on theenvironm ent. NIPADS also ensures that irrigation developm ent programmes benefit as m anyhouseholds as possible and in particular those that belong to the most vulnerable groups ofthe rural com.munity (pitlp l . 1.3) . . . ...y . . . .. .. , - -- . . - - .-. ... -

. - ' . -: . ' - . . ' . . . ' : . . .. -.' . -+ . .. . . .. . ' . - .

3.2.3 The NV ADS addresses the poverty and food insecurity simation in a number of wayss :1 : i) development of sm' all-scale irrigatlon schemes with fu11 participation ofname y

beneficiaries at all stages of development; ii) provision of low cost irrigation facilities', iii)development of tubewells and shallow wells in the lakeshore areas; iv) constnzction of smallem h dnms; and v) conservation of those catchment areas that supply water to the earth damsand inigation schemes.

3.2.4 The specific irrigation policy objectives are: i) contribute to poverty alleviation bytargeting smallholder farm ers to enhance 'farm incomes and by supplementing therecommended strategies outlined in the Agricultural and Livestock Development Strategy andAction Plan (ALDSAP); ii) improve agriculture production and food security throughinigation by supplementing rainfed agricultural output during the wet season, and ensuringsome production during the dry season and drought-s; iii) extend cropping opportunities andprovide a wide variety of crops in both wet and arid seasons to improve nutritional security;iv) create an enabling environment for irrigated agriculmre by facilitating and encouragingthe private sector to invest in irrigation development and manage their own operations; v)optim ize govem ment investment developm ent by applying principles of cost sharing and costrecovery (para 5.10.3).

3.2.5 The overall policy for financing inigation development is that it occurs withinm inimum governm ent subsidy. A11 operations, maintenancé and replacement costs are to beborne by the beneficiaries of irrigation schemes. 'rhe government encourages the applicationof cost sharing approach for capital costs of irrigation developmenl. Taking into considerationthe fanner's ability to pay. The strategy for financing irrigation development prom otes in-kind contributions from beneficiaries and credit availability in many ways: i) establishmentand growth of farm-oriented financial intermediaries such as Saving and Credit Co-operatives(SACCOSI; ii) encourage existing organizations/associations which have a vested interest inproviding suitable services to their members to act as channels for credit', and iii) promotefinancial institutions to recycle savings and invest in irrigated agriculmre production, whichwill help enhance productivity of sm allholder farmers.

3.3 Donor Support Activities to the lrrigation Sub-sector

A total of nine (9) projects are currently being supported by a number of multilateraland bilateral donors and GOM to assist in developing the irrigation sub-sector. These include

the small-scale lrrigation Project ftmded by IFAD. A grant aid of MK 20 million has beencom mitted by the Germ an Govenzment through GTZ for institutional strengthening of theDepartment of Inigation and development of smallholber irrigation schemes. The ShireValley Pilot smallholder Irrigation Schem e is being financed by the French Government;

7* '.%. rjsjm'v . . x .x. v n.va r - a v . .. .w.. . ..s . xm( . .. .. , ) . , , : a. . j u.,rm.lpm .r. y. . . .j: . j:; .:$( . . ,,: . q,. '.j , ..

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project financing is reported at US$ 1.25 million. The Govethm, ent of the Repub. lic of Ch.ina,. l . ..7. . - : : . . .hâs donated 200 pumps for irrigation development

. Ati estlimdteh U#$ I,5 million hés beénS ! l J . jà . , ;pmvided by Gokernment of Japan tltrouch Japan Intofûatlbvil 'Co-operation Azdndv (J'ICA)I - - - ' ''''à,tlon se-heu,e in B-wanj.

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e v alleyttj finanee :the design and construction of an 800 ha .ittlgt(salima ADI)).' The lEuropean Union (EU) upd; èr jtd.tl'tabiligatib.n' of Efports Programriae(STABEX) funding is financing the construction of i.0' ikdlqfkhelp 'irtijatibn sch. emes in th. eBlantyrep- M a. chjn.. .ga a-nzd .MN. zu ADDS . The Danisli 1n. tbtë.. .j tiqna.l Du-k.velppmçn.. t.. .A. gqnçy- .. . ..-.. .. . - ... -'

!: ' ; . .. ' ' . ' . . ' ' . ' ' ' ''(.b' AKIDA) ik provldlng'support for ftn alizing 'Trrigation Ptyllzcyo, ins'timtienal 'às,sessm ent ahd 'e* .

2 l -1 3 lmAkjttîiö. n. 0 .-ther irrigatiotl pfoject,jsm, dies of dam and dambo potential for a total US$. :. . .. ' 'œ

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being financed by Ithe Government of . Malawi zisc.lude tli e uonstrùction ot IrdigationBoreholes; smàllhol 'der Irrigation schemes Rehabil.li'aii'o n Plriljëet', D.. dvelopm eh, t of'sprinklerI . 1 .' 'i . ' 'Irrigption Schemes jproject arld Replacerflènt of Irtigdtitm '11.2 Trii ps. The pteop. (rsed projeœt has

I ities that will not duplicate thç â'è. tikitiej' .' öI- on-going ii,rigà; siti 'i1 p'rojects,components .and activl i i ation activities' espectélly. lêh. the sdercted . ptèjiect area iwhic'hbut it will rather complement rr gl . .

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hgs not bqnefitted from irrigation related developmelnia. 1 ând pçwerty alleviation activities.. : T ; . . .Under theq irrigation sub-sector al1 donor activitits ird coetdinatçd b#' the Irrigation Task

Force of the M OAI. '

3.4 Proiect Area:

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3.4. 1 The Smallholder lrrization Prolect (SMP) Fill cöv.è'r two Agriculturyl Developmentl '*'''- . *' ' . . .. . . ''-- .

Divisions (?kDDs): Blantyre and Lower Shire A'D: D :s, iri tk, 'ù jöttth regipn. of the èountry.. I $ ) . 4 y . yoyrs ((k0.7 pj) .. M wasza andPfOJCCt K tivities aFC Cflvisaged ifl flml- Rural Dqvelup' meld ..

j . . cy jkwjs, oxy yxjyjm vajuy app .Shire Highlapds of Blantyre ADD, as well as Nsaalè ànd à;About 4,600 ha scajtered in 25 Extension Plann:ng. 'mas (irrigation technolozïes and facilities under the project. Falrmers in the project area 'have'

*.'''' j '*' ' .çustomary tenuré thus security of the land in the projdct amà: is not threâthened. Accord ingI

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yto VAM , thlz xselected prolect ar.eas are tlle poorest EPAS 1. t'le eountry. Selected. EPAS f r' t arz showln in the country map and attachzd table of Annex 1

.the prolec

1 . the selection of .the Jwl Ap ' 0

: s w e

,.re.. i) coordination and3.4.2 The priqciples governlng

survey (lf stmiiar ) irfigation activities being lm, tlemeé, 9ed and '/pr pröposed , eqby 'donorçommuniiy as discu 'ssed in para. 3.3 above; ii) technicàil aàdJetvirlmm. ental criteria laid, ,'down'

jof Irrigation (DO1) and the p,1761à#' à'tf@n: ' mission' concerning ifrigdtio.b y the Departm ent .. -' - ' . .p' otentiality; iii) avgilability of accejs to market outlets; iv) egnsider, atitm of arzas with highincidenceyof povert 'y; iv) interventions that mat.ch 'Iocàl éàpycity for imp'' lëmentation; and' v)

. . . j. ? . ,conformity with the basic principles of the M alawi Agtidulttfre S 'eçtor I'lwestltl' ent Prog#amme(MASIP).

. . . . . . x . . . - s ' ' .' ' 2 .. ) ' ' 2- . - - : ... . , . .L : t : . -? .. ) . .' 3.4.3 The propyiéd prolect àreus fot iifigatlon'aie bf 'thr, çe types. 'f :he flrst èohsilfs of small' d Etjtflpuikkes up, Mrèam and d

sownstreamyots cuaently undqr rain-fed cultivation. The secon , ,àreas for. exilting dams that will be rehabilituted t0. use 'thk. s'liiall àam reservoir wàter f0rI . ' )irrigation. The third entails neF vast areas of flood plàihs by the $::1.:. i#è Rlver to be dèveloped

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.)o . .for inigation. This portion of the project area will b.è. ' al'locutêd yià prltèct benèfieiati. es on tlte

j . ? ' Ybasis of fair and transparent criteria-w-.xtj-

' bmissiop of the; èri. teria för allobation to proj. ectI - : r :7*.7Jv ) . 'beneficiaries will be retained as a condi

.tion. .Az'..1,

ak . ! . .x .:'. . =:. . ..l . â' 1% è tl . .=. er . ' '

3.5 Climate. Tooography. Soils and Veuetation

3.5. 1 The project areas have two defined seasons. The dry season which starts from May-to October and the wet season from N ovember to April. These climatic conditions are

j influenced by air pressure belts in the Inter-Tropical Convergence Zone. Rainfall is unilnodalI and is higher in the hilly areas; it ranges from 758 mm to over 1000 mm per year. Thç, .- . .- .. lp?jn tAinfatl in. the .ama is çpnvergignal .raiqfall .usually àn th. g fol'm- of ..h. qayy showers . and :. .-.j

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. thundergtonns. Evaporation in the aiea- exceeds the rainfall fo? àtzlèast seven mbtlths :1. a' '' ,

,.'b -7'''.-:- ,,r '. - ky. ,:t!.!.. ië

year, as a result, the effective rainfall fOr crop use is low. The temperamres are above 20 '#.degrees centigrade with the hottest period occurring in October and November whentemperatures reach 40 degrees celsigs. The coolest period is between June and July.

3.5.2 The terrain of the project area is gently undulating with an average slope of less thanone percent. ln the Rift Valley and the High-Altitude Plateaux, thè altimde ranges from 200meters above mean sea level to 3,000 meters in the highlands. Soil are mainly fertile alluvialdeposits from the Shire River and terraces lying on the bed rock of the Rift Valley. Soils

units identified in the project areas include Entisols, Inceptisols, Alfisols and Vertisols.

3.5.3 The vegetation in the project area consists mainly of fertile lowland savamm withremnants of forests or thickei. The comm on tree species found include Cordyl african,Sclerocrya birrea, Steculira appendiculate Acasia nigrescents, and Acasia tortilis. Othermultipupose tree species found namrally in the project area include fruit trees (Adonosiadigitali) shade trees (Moringa oleifereaj) medicinal tree species (M adiraachta indica andPterocappus angulensis), agroforestery species (Faidherbia albizia, sesbania sesban), polesand timber as well as trees for nmenities.

3.6 m oiect Benelkiaries

3.6. 1 A total of 12,000 poor smallolders including women farmers and the youth areexpected to benefit directly from the irrigation development and related activities. Subsistence

smallholder fanners identified in the project area and have demonstated their willingness topm icipate in the project will be targeted. Farmers eligible for participation will be organizedin Fnrmer Clubs (FCs) to benefit from the project's activities. Furthermore, Farmer Clubsand W ater User Associations exist and they are eager to participate in the project. Startingfrom the group organization stage, the NGOs will ensure that m embers of Farmer Clubs willcomprise at least 30% of women at the EPAS level.

3.6.2 To improve on information dissem. ination and credit m anagement, the GOM currently

. ' > .-. -'. -. --*' . .. - - ---- k . -- ' . . -' -*,- -. . - --'-.promotes the Clubs Approaci as an efficlent method of educating farmers on the importanceof irrigation to reduce dependence on rain-fed agriculture, due to erratic rainfall pattern. lnthe past, FCs were fonned, m ainly, as a m echanism for issuing seasonal credits. Due to itsrelative success in reaching the nzral poor, it is now widely accepted as a faster method foragricultural development and instimtionalized in the GOM Training and Visit (T&V)extension system. Furthermore, FCs and youth clubs will be eligible for the credit f'unds formarketing, inigation development and project related income generating activities.

v - . . : t t 7 ..r' v'r r'-* z .- - ' .: a h .k j.) .. c ' '.'' . ' -. t.t.. '

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3.6.3 W ith regards to training, graduate sttzdedt; wii.h'q i'rrigation and/ör agriculturalbackground, staff of DOI and extension staff of M O' AI Wil) beneflt from the forrhal and

1 tf''Màlawi anà MOM. Individtialsiilformal tfainitlg that will be provided by the University (i,

. j : : 'in the privâtè sector who are willing to invest itl irrigatld corrtmèrcial fârms or in löcalI ' ' . :production of treadle puiups will also be eligible ftj r' tiiinling in irrigattib.. il fechnologies.

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. <- ' : . . . . -.' ' -k. . rv ' . x . ' *' .. '3.7 Ehvironmentàl Aspécts

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j y. , k3.7. 1 The single mdst important problem across.M alawi i.s seil erosion, whfèh poses a threat

to soil fertility, cropl production, food secutity and .s.tt' ';tainhâbjtlsl.:b..: apricu. ltural 'ptroéuction. T' hestructure of m ost cultivated topsoil is weak, ow ing to intengik' e cultivation practices by hoe,

I ' 'kth 'h'. .i. h. 'rainf, afl tates , th'e soil isand not rettuntinc enouqh oreanic waste to the soil. Due tb e g

. . %-' l t-''- %''''' .highly ànd sheet erosion is com m on in m any ateas.

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l . .3.7.2 The a'veiagé annual rate of deforestation över the l/s't 25 yçiârr,s b ased on 'rétes ofagriculmral expansion is found to be 0.8 % . M bst öfmthë. ' a'rès, gs thât will be tâkeih ,up for

. l . ' ' ' .irrigation has alread 'y been under cultivation and the 'h. âmral' vdgetation cl/ared. Th. etù are no' -'' -

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.lârge mammals left in the project areas. Howekèr, à big ''vahriety Of birds ekist a1l overM alawi.

3 7 3 M alawi 'ius been engaged in a comprehensikè reviewt. o,f its enxironmenol legislationfor the last few vears. A National Enviröhmeétal 'qAotitm P'alan' was.'''d'.fà,*< up in '1994,

. *'' I ' . , . ,: .. -'' . .followed by the Natiönal Environmental Policv 'that wa7 adopted 1111 . Feb.fuàr'y. 199.6 :.

I - ' ''t. ; - . . - . - 'Py rlinment enacted subsequently the Environmental Managèm#nt Ad in Aitlguj't 199 6 '(A. ct.

1 tj js. ,' tlw. oepartmeut of23 ). The Guiddlines for Environmental lmpact Assespment #

. as issue

l d 'tt 'witl be*fbllowed 'by sector CpècificEnvironmental Affairs (DEA) in December 1997 ans : . .

j . g .,g., ere suppfiè'é ttj D EA n h d ' willguidelilws; However a set of ADB sector specific guid étlik:. . I ' . . . , <. .be currently lmplemented and used as a basis for thç ftltttte. country specifiç bnes.

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3.7 .4 The ' DEA is under the M inistry of Forestryj Fislh' t#ié.j àpd..Et1 vlkonmental. Axffairs.j , s . , y . ,,y yyyyj matyyys

. yue(M OFFEA) . Ii is responsible for coordination of çross-sect6iàl) è.iwilbn' 'ms.,,e; ..' j . , . . ., :, tj j,j yjyyjjjjty , qjj' j ' oj ,jj ,y.),y .jj..yà j yjayju. j s ty jas , .implementatioà of prtpects and programs falls undér th' e:re p o., . r ,, --' 1 -- œ . .* , : .

.

.departments and oth e'r implementation organizàtionk.A'ri' étFopkb' f é'. n*... itbn' m. eplal focal p . ointsi , t ; jyaig. yjzosj uoyy. jjsting of sçniorhas been establi#hed in èach of the appropriate impleméntihk. 'JL. ' : : --#5.jj; ' ' . .staff who will be p

lermanent contact points for f, AD . .. Thk-se' focàlr ppiijts hake specific' dinating environmental adivtti:

.j àatftbriizg' iàg. .

.ppjor enviromm' enu. lresponsibilities for coorl ' iW1 fodâtl' point wlt'k'' in thé M OA&1 isisw es to tlle attention of the EAD

. The environm ed . .j . . ' j . v . . ;' ,. , . jjj at: y, ye . . ..uizdçr the oçpsartmont of Agriculm ral. 1 mnds. -.'The . çekir. tlxnmenml tn'i. p. aqt.i gùd. .in g .. .'

d in ex 2.m easures are discusse

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4. THE PROJECT

4. 1 Proiect Objective

4.1. 1 The sector goal is to improve the well being of M alawians through poverty alleviation,especially am ong nlral people, by promoting broad based and accelerated agriculturaldevelopment.

. .- . ..- .., - ' ..* . . .' - ..w.m .

1 .. . .% ' -v.. . ) . :- . .

-.- . - . . . . . , -. . .. . ' .v .- . . . . . . .. .-

4. 1 .2 The specific objective is to contribute to food security by increasing the irrigated landby 4,600 ha, and increasing agriculture productivity through intensive cropping and yieldm aximization. This will be achieved through capacity building in both irrigation technologyand rural credit management, better utilization of farm' ing communities' natural resources,supply of simple inigation systems, provision of credit and marketing facilities for 12,000sm allholders.

4.2 Description of Proiect Outputs

As a result of project intervention, 12 demonstration plots will be established atNatural Resources College (NRC), 8 training workshops will be conducted, and a total of1,000 Front Line Staff IFIwSI and farmer groups leaders will be trained annually at NRC.Under Credit, 400 Farmer Clubs (FCs) and 12 Saving and credit self-owned CommunityBased Union (SCCBU) will be established. Under inigation, a total of 1,008 ha will beirrigated by treadle pumps, 3,265 ha by small-motorized pumps, 284 ha will be undersprinkler irrigation and 95 ha will be under gravity-fed irrigation. There will be a total

incremental crop production of 60,600 tonnes of the crops being proposed under projectwhich include maize, rice, paprika, beans, potatoes, tom atoes and groundnuts.

4.3 Detailed Description of Prqiect Components and Activities

4.3. 1 The project design has taken into consideration three main components. These include:i) Capacity Building of the Department of Irrigation, Natural Rèsources College (NRC),Bunda ' ' 'Cbllege of Agriculmre (BCA), two NGOs, and a fmancial intermediary;iilEstablishment of a Credit System', and iii) Establishment of Small-scale Irrigation Schemesand rehabilitation of earth damsf

(A) Caoacitv Buildinc

4.3.2 To have A meaningful and sustainable irrigation deyelopment bolh in thç seleçted' ' . .. . ' . '

' projéét aréa ind at ntationél level,' thi projecteè' ill srrèngthen thè cap-aiity of DUl staff andIrrigation Engineering smdents, in irrigation teclmology and related areas as well asstrengthen the capacity of selected NGOs .dealing in rural m icro-finance. This will beachieved tlu-ough building the capacity of the following five relevant instimtions:

-$3.3 Department of Irrigation (D09: The technical capacity of DO1 staff will be. (*.-' -.-tN strengthened through training in iG gation teclmology, the provision of survey, soil water andP

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ing equipment and èffice equipment for project related ADDS and RDPS.c . water now measurThe project will provide DOI with five Technical Assistants (TA); two Civil Engineers with

experience in irrigation and hydraulic technology, one Geodetic expert, one Extensiont A ronomist

. The project will also p.rovide short and long te'fm tfàillingSpecialist, and 0ne g. b . ' .' programs to the staff of DOI and M OAI. The TA Specialists will train the jtaff of DOI' in

the use of the lnew field hydraulic equip, mç. pta gnperuvise . the civll' p btks, projectlmplementation, a 'nd fanners training in land levelli.n, gyf. eeagfface irrigatioq td'hnikd ues. Such

z l ' . . .training .progrymme will be in the fonn of on-the-lob (raining and workshojts specifically

2 ' ' d-to i'rrigagonl supervision. and -m anagem ept:. ... '. . - . ' -.... ''' : ..-r . - . ' -.... . -... . geare. . . . . . . . .. . . . . z . . ... . . . . . . . . . ' .; . - .-. . -

, '

0. '

4.3.4 Key ptolect implementation and minagement staff will be t'rained i'n qpurses organizedby the Agricultural Management Training for Afrkg (AM. . .TAI. program, , m , e. AM TA'S tràiningprogramme will colver procurement, financial repprtivg asd.. . auditing of hp.tojàcts ,in addition

tgrizulture projects. W ith the suppe/ ', of t1*, TAs' and ' Pkolect V- anagementto managernent of aOffice (PMO), the DOl will be responsible for th: p. rocartement of irrigétion pumps andàprinkler ilTigation systems, recruitment of consultant. s fèr civil work-s design, dam' -

. .

vehabilitation design, project implementation and' supervittion. 'j4.3.5 Btmda College of Agriculture (BCA) : The p.rojectjywill .also bvl1d the capacity of4 ' j . . .; . x ,Irrieation smàents at BCA of Universitv of Malawi, 'thrpux'l;t fk' e colptfà' (jttitj' lt.1 o'f a h ydraulic$ G ' j - . . . '.e'- . y .) .laboratory and

.equipj it with the necessary equipmept,, ..e.Q,. .9. Mtlk.uy's p rôvld. :'d tlw Ke,cessgry lahd

' he domain of Upiye. rstty. (#I.M. vlaWi . , T' kî 2'- : qdesign for thefèr buildKg the' laboratory at tj .

.. . ,

,,;, orjjjsyyiajjyjou.ssjjyj,ye uujsrtakej.jlaboratory w'ill be prlwided by the Uhiversity arch 'it:ctss, gtl4.. j . . ,b# the Depallment of Civil W orks through force aççnunt

, (;,p',a4a 15.5.3) Tl)'8àe' féciiities willi .

- . . -.

enable the Universityj to train and furnish academic: 4, egree, (t3 1fSc.) in irrleg-atton tèch. nology' 'f t the national 1:v11.. A mew i.rrigatiln 'curriéula hasfûr university graduates and DO1 s stat a

.l .

' . .

-

already been developed by BCA and approved by th: Univqrsity f'o).ï B.,:Sd . in ifrigatiènhnology. Furthers IBCA will provide for DO1 staff short tçtrin training. a'nd

.. workshops inteè

l .soil survey, soil water managem ent, water flow measures, and' earth dam design..

'

l , ' .. . . .. . ' '.' . - . ,, .. .4.3.6 Natural Rvsou'rces College @ RC): The instimtional cipacity of stttdénts and staff O.f

i ively will be stzengthened: tthrejfgli erovision .of ,12 dçmonstrationNRC and M OAJ resp.ect .' l Imologies and) fetld- ''/prq'à' tessiàj/iq ukitpsens. GoM .hasplots for differetk types of irrigation tec ..-

lrç' ady provkled fo ja of land at the domyin of '.Nk.'c' f'pf: the ettabltisb. ,m çnt of thea > e .' .v .demonstrytionplois. Two hew irrigation curricula have.alteady.b' ççn àevelkp, ed. b t universityf Malawi for dijlomal and certificate in practical irrigation tethnoloty' .' .Sb. ch d'iplomas willo

t i sity of M alawi for Dol staff comp leting tk. ç trainingbe accredited by tlw Un ver

c wik 1, in collaboration with BcA ,and, Dol. , p repAre shop'. telw trainingreq:irements. NRcoutses and workshopslfor FLs, NGOs and DOI staff, irrigatio.u exteflti/nisits, fàrmer groupsleatlers and the youua, 'and private sector individuals sill, Cit). k iù i:nvest in lrrk. .àtéè'(1 ialgritulture .

: I . -- -- L ; è - ( -- ' . - . - . .. wproductioik -T. rain'ing sublects willuinclude wirrjgatiof 'prk. ctices, crop wztes .tqeqtlirerri, ents, .c . . - .l ion an# qtyel' lîng; f/nufatmt *' ater d' iàttibtt' tionirrigation sthçmes..m ahagem ent, land preparat . .

k exoàvaiion oj dug wells for irrigation, con). t'rtwtion.rtj f' Wellikei'd proteetion'? èropnetwor ,è ùd aèkaging, marketing and operation kmd ?maiigehàdce .of irf,igatl'pn plimps,proc ssing à pl ' . ' -maize, rice, and oil mills. Trained Fl.,s and NGOs stàff will in turn train the prolect

. ...... ' ' ' ' ''''

3benetkiaries in rélated sublects. l-iurthermorei t.w0 .# Jtlik at/: 'sfctor coltzpaqies ûrl)d Oile

i .: u ., . x , . sy yjjojat sujj andparastatal will pro#ide training materials and copdlwt @.èr.k. s bps .beneficiaries ùp '

, @ sustainable basis. These compap. iqsts-amf LAD'. M A'RC fdr marketing,

p . j ' . . ' . ' . .PANKAR seed Ltd. for eeftification of improved seeds, and Ckketah Ltd.' forwprodtlction and. 1

marketing of Paprika. R'he W omen

t

*

15

Programme Section (WPS) of MOAI will also conduct training workshops for projectextension staff including NGOs staff in women in development.

4.3.7 Non-Government Organizations (NGOs): Through the ADF Micro-finance lnitiativefor Africa (AMINA), micro-finance instimtions selected by AMINA including credit orientedN GOs, credit unions, savings and credit co-operatives, village banks, comm ercial and othertypes .of fin. ancia) institutions in M alawi will be offered the oppoltunity to build theii .professional capacity. This will be achieved through ihe provision of technical assistance,.. . .,' '*.... .

: .- -

specialized training, development of organizational structures, policy and procedures, and . :' . .' ., in.establishing efficient m anagement iwnformatio'ft s'ystems. Tw0 seleéted NGOs will becontracted to organize, train, and support the project target group in preparation to accessthe credit facility and manage water user associations for irrigation. Irrigation FLS of DOIand selected NGO's staff will be trained on gtoup fotnnation and dynamics, irrigation andmarketing technologies. n ey will also be trained in the use of new irrigation equipment, soilwater and water flow m easuring equipment; as well as the operation and maintenance ofirrigation and food processing equipment.

4.3.8 M icro-Financial Intermediaries (MF1s): The project will contract 0ne of the MFlswhich will be selected by AM INA programme for capacity building in managementinform ation system , credit software for relevalit data collection and eftk ient management ofrural micro finance credit. For sustainability of the credit system at the community levels,the selected M F1 will create Savings and Credit comm unity based unions/cooperatives(SCCBUI to be owned and managed by beneficiary farmers. 'rhe MFI will provide thenecessary backstopping and will be responsible for credit administration and managementincluding group assessment and credit recoveries.

(B) Establishment of a Credit Svstem

4.3.9 It is estim ated that UA 2.6 million will be available for credit. The f'unds will becharmelled through the National Bank of Malawi (NBM) to the financial intermediary (MFI)for on-lending to project benetkiaries. A portion of the credit fupd will be available 'to DOIto purchase and examine, on the basis of quality control, the irrigation equipment to behanded over to the MF1 to be provided to project beneficiaries on credit. The starting pointof this sub-component will be awareness cgmpaign in each EPA to introduce the projectcomponents, m echanism , and methodology for participating fnrmers. This introductorycam paign will be undertaken by two NGOS in collaboration with the FLS and W PS. TheNGOs will further train the smallholders fàrmers in the Participatory Rural Appraisal IPlkA)for needs assessment taking into consideration the source of water, and land terrain. Based

on tlw resplt bf PRA, parjcipajing fynners.will be sçl. ected apd regijtered as snpll (FCs) for-'' d' it 'tt' is esilrfmte-'d that 'a toial of 12

,000 ben' eficiary fâv erj' ln thE seleded 25' Eèxs Mill'crè .be organized into 400 legally registered FCs. The M FI will administer and manage the creditfunds (para 4.3.8 and 5.4.2). The credit funds will be accessible by project benetkiaries forany other project related income generating activity (para 5.4.3).

M1k will be introduced to farmers as a separate4.3.10 To avoid confusion among fatpers, ...:dit entity. n e FCs will be orgnnized 111tb.: ' 'k2h- iger groups to establish 12 Saving and Creditcre

=Community Based and Farmer-owned Umons (SCCBU) for credit management and whennecessary into W ater Association Bond (W AB) f0r mutual concern in the water management

XQNJY - -e F ' v '') N. . ... 7 .'. ..y. . jy . ac . ,.; . .' :q.

16

for large canal pùmp-based irrigation or rehabilitated ' ($a.4:w. .F. rrmers will be inyited to

comio lete an ppplication/fonn and pay an affordable entrance fk'r 2to confinn their membershipto participate and. dçvelop sense of ownership. Participktipg t-'A'l2m' zers Yîll be encouraged to'

d Jbuy shares On a regular basis u#' bi'l tbey ha'vè acqli ired the rpinitnutilsave with SCCBU anshaies, to be agreed uoon by union m embers, to ber @, f'u', 1'1 .m çm ber. Next, memberj ofl -' ' * ' -

. ,SCCBU will open a demand deposit account. and takû an activq part ln SCCBU through5 '*' I ''*' . - c ' ' '. ': : '- '*'u... . .. ';' . ... .. ' - . . *'''' --...

eduMation. apd . participxt. iyrïq- shpfelplperj will jh-. are ttri#i'lti.hvidkz% at 1h6 kikitst(5tf the #ear anil. . . w . I ' . . ' . ' ' ') .. /

'

, .

rot'it market interest 'rjate for their deposits. On the othé,/.. i7 s'antl, lp.efrï: ) Vrs will be charged aP ; . . .

market interest rate (m th8ir credits. A legal owlj çtshiparpilysc, /BU (),r Wi XB will bei t) 1 ficil menïbers of the communily. , BenoflJçittrigs,s.Who i w full melberstransferred t nene l'y

.. I '. . . . . . ' . ' ' - ,

in FCs or W AB för i 'cigation schemes or SCCBU for .érçdig, Wi'll etecy qpe arep:lkseritativel tll agree .o'n an ppe-ration andand decide pn h

. ow the svstem will be managed. M çiobers .W. #l * . n- . . .maintenanc: fee tq be 'collected by their representative -farithqzikbllrfent tpst of operating fuel

' I '*' '- ' e , '#'' 'and maintenance of the irricàtion systems. Art ob' erator tg bl. plççtçd by projçct beneficiariesj1 ' j *'''' - 'w' , u '*'' r . ' . .

will be fully traihed a'cd supervised by F1-% of DOI and NGO's staff.

l4.3. 11 The project will nrovide materials for constructiém .taf, 25 myrkset pl.a4formj at the. . j 'œ ' e ' , . . . y .pruject area. Membe Irs of FCs, W AB, or SCCBU wi1.1. selfpt vtt,ràttçy.ic lötpiio- and provide

nstructioj of the p. latfonus. Management a; 'wçq..'.as':. # .asin.. tkqance pf 'ties: niarketslabor for co61l be the rsole respojnsibility of the FCs. It is proposçd. thàt'fkdtrk,l. ç'4' s bè Vlkgitk rtheit p rpduc'eW1 ., .'. xj. - j .

to; the market Will pay an affordable fee to be detqtmip#d..' , b y. t. he F. Cs to be used in theJ ' . - I .. .m'aintenance of the market platfèrms. Further, to asslgt. farmwti epi, in th e.i'r in' yrkeiitfg ventures,selected NGOs will identify marketing channelC, ttt 'itkrfsrmà (jvtrs anit facxilitatç the linkagebetween fanners and prospective buyers. ln additinn, tk. q .Ms.a1r/wi Export W oili' ''otioh Cöuncilhas agreed to assist project beneficiaries to identify regional and lntèrnaiional markets.$' ..

4.3. 12 Credit wiil also be provided for eligible F.Cs apd S'CCBU to finapce irrigationequipment, cpnstruttion of improved village-levd .étçyagç facititks, sm

, alt-scale food

l t such as maize, rice, and oil mills à'j: brll as rik.

'

ak'ketlvg aotiv' itiès andprocessing equipmep , . .- . . .

â riculmral, inp'u' ts. To promote private sector 111, itiattvl çj. t0e N' RC Fîll ttc.. ain eligible' youthg . ? , .l

, . t, isuy, in oe.projectgroups or clrqbs to benefit from the credit facility to esctAkb. 1.,i. lllj, .Ij1. icro-èpf.im. r .l d repairs of treadle and mcitplji/kd Tumps for prp Jtt,t beneficiaries.ûrea for maintznanoe an

) ' l .'e -p roject benetkiarieis will be requized to rep. ay tlw (ttqafz, .bv'. 'the M,rI thtcugh its >cs or

1.SCCBU or cooper

. atives within 12-18 months after'reeeipt .of ,tlw inikatien equipment.' -' : -.

/(C) Establishm ent of Sm all-scale Irrigation Schem es;( !: ''' -,4

.3. 13 Fo'r the pupose of sustainability, the project is ('aërigned t; estqb. lidh slmpxle inigation.. . . ( . . . . . . r . -.. praaîces. seluczion.of'ux ostopriate:.irrikatiow. tech,nLiqvesik bade: etî. tlt, klzcaidn and soufce,

j '&' '*' '*' *''''' ' * %œ . ' ' ' .of water (para. 3.4.3). Four patterns are' propdjèd t'o 4 fpmote irrigatéd agrioulture in 'the) .

Southern Region of M alawi as follows'.

4.3. 14 Treadle pumps: At the identified shallow grovpdvwatelr aiea's and land jlopes aremild, bejneficiary farmers will be provided tread. ,le p.unlup.@a.v,#,'' ne pùmp iy expeeted to serve an

' 1 P rticipating fanxwrs witl. undertak''é the extavation of dugarea o,f 0..3 hectaqe on average. a .' ' 1,1 tllilqad' prètkalpn, 1:ù. ct jreparâtion,wells .for in-ication water supply, constnzction of t ç .we )

, ,! %.''' j ' . . .and on-falan water distribution network on their, respectiNt? p lotsr A.,11 participating fyrmdtkkired to complete construction of the dug-well anti head p rotection, landwill be requ

I

. J. .u v

-. .

17

preparation and water distribution before receiving their punp s. A total of 2,750 locallym anufactured treadle pumps will be procured by D OI and supplied by the M FI through theirrelevant established SCCBU to individual m embers of the FCs. A total of 1,008 ha will beirrigated by treadle pumps in both Blantyre and Shire Valley ADDS. Total beneficiaries willbe around 2,700 smallholder farmers.

4.3.15 Sm all-motorized pumps for surface water: Vast areas with mild slopes exist in the'' icini: bf 'th: Sliibe' Rivet'' affd. iorrfë (ghkr sliiàller 'jerenii' iàt fiverf'' bbve- 'ihe Lfll%d- lainsY . . . . . a p .Very little portions of these areas are currently rain fed cultivated. It is anticipated toestablish 16 irrigation schemes of areas larger than' 120 ha. Each scheme will be served bya m ain distribution canal that abstracts water directly from Shire River. The schem e is thendivided into small farms of an area of 6 ha where field in-igation and drainage distributionsystem s are to be established by beneficiary farm ers. The m ain distribution canals will beserved by a large motorized pump to lift water from the river, while the small farms will beserved with small-motorized pumps. In addition, 7 smaller schemes will be established forareas less than 120 ha.

4.3. 16 Many natural river feeding strenms (creeks) exist in the project area. To reduceenvironm ental impacts, such stream s will be incorporated when possible as drains in thedrainnge network instead of building new ones. During the rainy season, these naturalstreams will be used to drain excess rain-water to the river while the irrigation rem rn flowwill be minimal and will not cause over-flooding. The complete irrigation and drainajenetworks as well as the necessary civil works will be designed by consultantts) andsupervised by the DOI through the provision of irrigation assistance provided by the project.'rhe required. civil works for the main distribution canals will be contracted out f0rconstruction by contractor i'irms.

4.3. 17 On the on-farm level, secondary distribution systems will be designed byconsultantts) and constructed by trained farmers to ensure sense of ownership. Small-motorized eight-horse-power pumps will be procured by DOI and supplied by the M FItllrough the relevant established Saving and Credit Community Based Unions (SCCBU). Onepump is expected to serve an area of 6 ha which on the average is êultivated by 13 fnmilies.A total of 3,270 ha will be inigated by the small-motodzed pumps in both Blantyre and ShireValley ADDS to benefit about 6,630 sm allholder farm ers. Benetk iaries w ill agree on waterm anagement and fees by appointing an operator to m anage water discharges on a pre-scheduled basis.

4.3. 18 Rehabilitation of six earth dnmq: M any earth dams have been built in the latefifties and early sixties for purposes of recreation and. fisheries,' but rarely for agriculm re. .

. . . '

.. . J . . . ... . . .

.'Six.dams were-selected in Blantyre'' A DD 'for 'reiabiliùtiotl for lrrigàiion purpéses. Somedam s are heavily silted and som e feeding stream s are largely blocked with weeds. Althoughother dams are in good condition, the spillways of al1 dams need rehabilitation. The first stepin this sub-component w ill be to provide proper simple field tools for benetk iary m embersof FCs and train them to clear the silted dams from weeds during the dry season asbenetk iaries' contribution. Dam s will then be de-silted by contractors using proper .-b;.Lipment . ' a kJ'' JSXequ

4.3. 19 Dam spillways were originally built in the form , flf plain concrete sldb to relea<eTlesè spillways provide good oppermnity: ftj'' 'c energy-less. .qurface irrigattonsurplus water..

. ' ( .. .downstream the dams. FOr downstream irrigation, a new sgyted sp. ifllwây will be d 'çsignçd byl .

consultantts) and built by contractors in all dam's to allow for contiolled'' watet release ?orl .gravity surface irrigation of a total of 95 ha down stream the sik. dams

. Controlled siphoni ' , . .

'

mbes, as alternative to spillways, will be proposr,d tp bv qfiçiaries to decide i'n consultbtionj ;

. . . us o yajyty y sy ,.L .syjy.with'''Dol' bas'ed' on cost and sust.aj-nab. ility.. Dpl' , 1p, 4kllvkq/bi-atit'm Fjlh P.. . .. ' . . . . .. ,.n. j . . . . . . . . v . . ( .

recnlit consultantts) and supervise the construction of çilvTl wzrks. Th' e s/llway d'itches will' 1 . ..be rehabilitéted' and lined by contractors and a netsy (jrk (?f field canals will. be constm cted byldistribute water by grav

, ity to gatt. s, at-xilu é fa'rm' ets' ptlots. For in-igatio'nltrained fttnhers to *

1 . .upstream o.f the dams, g total of 65 ha are found suisg.blle for cultikatiph. Sprinkldr systemsj

k j ,$ s ym iys uarjy.'with motorized pumps will be suTmlied and instalklzvd lns olofs o.f 13 .èha/40! - - - ' -%: .

- ' .B. enefieiaj'y fapners will be trained to participate by. vbuildlng th e sxyitel'ti reserkoirs and1

, , jjperforming the necessary land preparation. A legal ovpership. of the reh' .a:btlitatèd dams wi' 't''h ill elect th eiT rep resentative whobe transfen-ed. to thq beneficiaries in the community. . ey w

will be trained by FLS and NGOs to manace waier dischark.es from the soillwav (or the tuàe)l <e ) *-- A <..

on a pre-scheduled basis. This operation will graduzly be managed by' participatih' g farmers..l ' -4.3.20 Establish 'ment of sprinkler irrigation schemqs: Sqme terrain in t.he vicinity of the

shire River and some otlier smaller local rivers hayç .,.çfjgl-4. jdterable irrzguvrity while soilI :. j.tlae sim tê. ,j-A ,1a ectares eaefl,dharacteristics are promising. sprinkler inigation sqh. çmesô. p!

il1 be developed irj these areas using water direcgy.iont'tlje str:ams. f$':.rvlnk 1er irrlgatibnWis generally >daptable to many crops and soils: Altk. eug. hlkijt' @ systém ap peais to be' higltl y

. . . . 1 1. 'tichnlcal, it is eàsy to operate. In addition to those prgposed 'vhstream tlœ rebabilitattd dams,

' l ' b h B'lantyre and S'li iye' Valley ADDS.about 65 ha are prooosed for sorlnkler irrication in' ()f

*'1 ''' *''- . .As with the pérvious patterns, FCs will be formed tlmt will manage t,he schemes.

l4.4 Proiect Assumptions and Risks

!

'

4.4. 1 The credit facility for project bençficiaries w,i. 11 bç- At lmarket interest tûtes. It h' 'as beenlhanism to be provided under thq .pwjçet. for créd .iy wi'11. ehsure that theassumed that tlp meo. . l ' .vulnerable groups

, sm, allholders, women farmers an4,,,/ke.'j(i. 4.'th . 'will, 'have access to crediteThe esublishment o 'fj on-farm canal for water distrlb tTtillrjrewvyr#'t dn'm rethabilitatibh wjll bedem ken .by ptoject beneficiaries. The implemenu. tio' n of ititiij simpleacivîlk' work will beUn

l Eacçomplished if farmers are responsive to provide lab O.r for :onstruction of On-farm canals'- î

'

' ' '

in their respectike fields. Intrnducing FCs, SCCBU to be 'pwned and managld by project

benetkiaries with fullland legal membership will confjrm', .? sk. i. 'iè.lpadic'ipàt',iol''''énd rédtzce tliisrisk. The availability of market outlets for farmers in: the plpjeet is and. ther sh. grtcom, . lhg tothe project. It 'h..u. s beén asjùmed 'thatthe'pfovisibn for celgNthzctibn ofmàik' dting'kh. anmels-ih

.lthe: project area will overcome this constraint.

4.4.2 The inadequate administrative skills at DO1 which is mqçired , fçr projeot managementj . yjis a

. risk for the projeet implementation. The introducliqn of XMTA .:. tr*iff' ing programmeI - . ï jyjj stfengthen thefor procurement, financùli. reporting and auditing .of thk vproject wi V '-JID 01 staff . It was agreed w'ith tki. Governm: ent th at MOM willadministrative câjacity. .

.

,

secqnd one or two atimnrnistrative specialists to 'DOI priqr to bntry into. foree o.f the loan and!. '

this' will be retained as a loan condition.

l - 4 .,Y -k-u'.;=::' , .-- 7 -'' -*-z '''

'

' Y * * *' ''-Z'YW '' ''W *'' ' SWYW W'

. , v t . %C#. ; y <. x .,. . . v

19

4.5 Proiect Cost

The total cost of the project including physical and price contingencies is estimated atUA 6.40 million (MK 233.80 million). The foreign exchange component is UA 2.01 million(MK 70.28 million) i.e. 31% of the total project cost. UA 4.39 million'tMK 153.52 million)i.e. 69% of the total project cost will be in local currency. Physical contingencics have been.applied.to altjrriggtiqn çquipment, tools, gnd civil Forks.at .5% ... This physicgl con4ingency ..-....

. .. ' . ' . . ' .' . .

was derived on the basis of the nàture öf the prbjèct aètivities Which is niainly lsasètl ondem and-driven approach. Price contingencies have bçen applied to a11 cost item s at an annualrate of 2.5% compounded, which is based on the most recent estrm' ates of p'rojected inçreasesin the world community prices. Cost estimates by component summarized in Table 4. 1 arebased on prices prevailing in Marcù 1998 and colénned

. in June 1998. Project. cost bycategory of expendimre is summarized in Table 4.2.

Table 4.1

Summary of Project Cost Estimates by Component

(In MK Million) (In UA Million)%C

omponents porejgn Local Total Foreign Local Total F.E

Exchange Costs Costs Exchange Cost.s Costs

A. Capacity Building 22.32 42.38 64.70 0.63 1.22 1.85 34.5B. Rural M icro-Finance System 34.04 55.32 89.36 0.98 1.58 2.56 38.1C, Small-scale Irrigation Schemes l .60 43.00 44.60 0.05 1 .23 1 .28 03.6

Total Base Cost 57.96 140.70 198.66 1 .66 4.03 5.69Physical Contingency 4 .87 5.07 9.94 0.14 0.14 0 .28Price Contingency 7.45 7.75 15.20 0.21 0.22 0.43

Total Project Cost 70.28 153.52 223.80 2.01 4.39 6.40 31 .4

Table 4.2

Sllmmary of Project Cost by Category of Expenditure

qn MK Milnon) qn UA Million)%C

ategory of Expendimre yoreign Local Total Foreign Loçal Tnol F.E.

Exchange Costs Costs Exchnnge Costs Costs

A. Goods 47.37 35.67 83.04 1 .35 1.03 2.38 57B. Civil W orks 1.87 37.06 38.93 0.05 1.06 1 . 1 1 5C. Trchnical Assistance 4.74 5.53 10.27 0.14 0.16 0.30 46

..D. Qorssultancy Sepvicbs . v -.' .1.60.: ' .'..0. 18 ' - 1.78 - :0 .05 0.01 0.06.. . .' 90 -E. Traininj 2.38 7.92 10.30 0.07 0.23 0.30 23F. M arketmg and Fal'm Inputs 0.00 14.50 14.50 0.00 0.41 0.41 0

- G. Operation & M aintenance 0.00 16.06 16.06 0.00 0.45 0.45 0H. Gov. Staff Salaries 0.00 19.37 19.37 0.00 0.55 0.55 01. lmnd, design, rental 0.00 4.41 4.41 0.00 0.13 0. 13 0

Total Base Cost 57.96 140.70 198.66 1 .66 4.03 5.69

Physical Contingency 4.87 5.07 9.94 0.14 0.14 0.28Price Contingency 7.45 7.75 15.20 0.21 0.22 0.43

Total Project Cost 70.28 153.52 223.80 2.01 4.39 6.40 31.4

.m . . wsgm aslkj .. W o>, . > x '. *

'

20

4.6 Sources of Finance

l4.6. 1 The fingncing plan of the project is surnmariâed i'p table 4.3 below. The ADF loanof UA 5.02 milli 'on will finance 92 % Of the entire förki,jn exè. hange costs estimated at UAl

. .. .

1.85 million aqd nart of the local costs amounting to UA, 3:17 millipn i.e. 4 9.% of the total'

' f t Afric: '(X''''M'..INA ') will finance. 5% of theproject costv The IADF Mièro-finance lnitiative o ,

e ' - kition or dvijist-fllâiït! .i,tit,ski. piêâl: asftyta' lt. (z , a,14d. ttaining 'ttf 'toul.cags F'lqch lwi-l ihcl-ude.pm . : s , .' ' ' F il J àè ement

. T.k e Gevernment will.two NGOs pnd one M Fl for credit administratiou ttfi. rp pqg .

finnnee Uyk, 0.77 lmillion of the total project costs'' Fhikçh , Will incluàe G ove.rluinent staff. ..salaries, r

, ental cos 't for the PM U offices, the land and delftgn works f0r Lonstl-uction Of BCAj

. . .

thydraulic laboratoxv and salaries of some off-camptl: prkf. è, ssors who will teach at NRC. '''/r dlh. ..

.1$,. . . ,, ., tj .;periodically

. The pkoject beneficiàries will conttiiute Wotk' t 4% ot.the .totârl p. rejeet çost by'

- 1 boul r for construction of on-farm itrijAtibjl cqnals and', digging of boreholesproviding flee a . , .

for treadle pumps. S'l-heir total contribution will atnotlltt. itb UA 0.24 million. The privatesector will contrib 'uite UA 0.06 million i.e 0.94% t)f thwç. t:tal project cost. The source of. l ' ' ' -flnance is detailed in Table 4

.3.

Table 4.3

Sources of Finance lq U.A M illton'

.t Foreign ' j-aocaj c' osts

cYOt31 :

, % of Total ' 'Vurce Excuan e ostsl

ADF ' 1 .85 3. 17 ' 5..02 7à.44AMINA 0. 16 0.15 ' 0.31 4.84 '1 Government U pntribution 0.00 0.77 0.77 12.03'

Beneficiârips tconiibution 0.00 0.24 0.24 3.75Private Sector Colitribution 0.00 0.06 0.06 0.9 .4

. .. '

: . .Total l 2.01 4.39-:: 6.40 100r

'

. ,

l4.6.2 The contributien of ADF resources to the financing of local costs is justified by thefaclt that the country'sleconomy has suffered setbacks as .a. msplt of.rdcurreht drought.s duringparts of 1980s: and 19!90s. The Government is not in a posi.tibm to mab ll'li'z: adequate Ipcélresburces to'meet the developmental resource needs. Howevefy G gvernm? qqf is making efforts

$

'

. '

- 'J' ' . 'to tevitalize the etonomy through a series of economic rqtorms, This is cenfi rmed by the factl 1 ' f the m acroeconomic andthat hlalawi has

rremained committed to the implementatièp ()1structural refolms initiated since the 1980s. As a result ef sucèessful implemenltion of theseI .

'

programmes; the Gove'rnment reached an agreement, .wifh, tlzè IV F for an En.h. ancedzstnzcm ral.

' ., , ' ' .

Adjhstment Facili? :111 support of a medium-term Tefbrnd .pmgyamm.. ç covvljpg uth. e pefiod .-'*199 '6/97-4998, /99. f'Phe extèrnal' assistânce'received 'i# 'predp

. ni irib.ntly ùsed'fof finanéing the

jy . j; yk ojforéign exchange cost ln addition, the nature pf t e ppjpçt. is such that the uI ( jj orij. u sr îrrîgàtionreqùirements for its implementation - mainly training of e'xtpptjisôh sta ,

f ent simple civij works to be implemented by farmeisy. lpçal materials for b oreholes,equ pm , .construction of irrigation facilities and the treadlé pumos canzib' e orocured locally.

l - ' '' ..-L''L. jyg .4.7 Environmental lmpacts ,LJI..K

..

. q. -4.7. 1 The project has been placed as category II, accoydipg Cto the Bank 's guidçlines.

(t' 'èd àre not likely to V ve' anyOverall, the scale and disperszd nature of the propose ptoj .

' '< uu--u-wuuub'h'-il-l'' ' -'' -' ..2.:'1-:--';.-*--- ' '-' ''' '

. . .L'1-..: -Xlwtu- .-.:.4=2.* Za*'-'ks '- ''' '

W.r .

e . . . .. %.

major effects on the environment. Training and capacity building will focus on soil and waterconservation technîques, crop diversification and improved crop and land husbandry

activities. Limited use of fertilizers and pesticides will be stressed in the project.

4.7.2 Positive Impacts: The project positive impacts include minimizing natural vegetationburning and random settlem ent, intensifying production and soil conservation, storm watercollection using small structures, ipproving sel

.f-sufficiençy in staple food, and imprqving .

. the well belhg ot jmallholde'i falilies. .In addition, lncreaseb incorries.. tflrough the prfjéct . ' .'. .'.' ..'will indirectly im prove health conditions tllrough nutrition and possible im provement in waterand sanitatiôn and local ecology. ' .

4.7.3 Negative lmpacts: There are no sijnificant negative impacts expected to result.However, there is some inherent pollution risks from the misuse of fertilizcrs and pesticides.Itisks of soil deterioration due to salinity and sodicity affecting soil suitability for agriculturalproduction are present in m ost alluvial soils especially in the south. There m ay also be slightrisks of adverse im pact on the ecology of som e water bodies and on disease ecology in thehealth area. The mitigation and monitoring of' environmental' issues are provided in Annex2.

4.8 Im pact on W om en and Youth

4.8.1 The project is designed to have a positive impact on both women and the youth in anumber of respects. Under current practices benetkiaries of micro-schemes are mostly

women. The aspect of grouping project benetkiaries into Farmer Clubs will be a majorfeature of the project design to ensure massive participation of women, who are usually shyto come forward during sensitization cnmpaigns, as well as the youth in the project area.Provision has been made under the project to address the training and resource requirementsof both women and the youth. The W omen's Program Section (W PS) of the MOM , incollaboration with selected NGOs, will identify, train and assist women and youth to establishFarmer clubs and youth clubs. The form ation of groups will provide group security andfacilitate beneficiaries' access to the credit line under the project. It will also provide thevehicle for collective bargaining of input supplies while providing a focus point to facilitatetraining and transfer of research and extension m essages to beneficiaries.

4.8.2 The projeçt Fill also direct its efforts towards easing women's labour constraints, afactor which affects the ability of wom en to cultivate effectively, by providing credit forsm all farm implements for ploughing. To prom ote private sector initiatives, the creditcomponent will be made available for b0th individual and group. activitiej. Individual women

. A. .. .. . . . (. g . . ....g, . f . .. y

will have aècèss' to the credlt fuhds to 'ptltc-lùse'' and market agrifùlttlràl' pro'dilce ' from theprojeçt area. As women are also engaged in post-harvest activities, they will have access to

li f d rocessors (mainly maize and rice mills and groundnut cnlshers) tocredit to purc ase oo pbe managed ,by women groups. Further, credit will be provided for the construction ofimproved village-level storage facilities to increase the shelf-life of wom en's produce. Thiswill strengthen wom en's bargaining power and consequently increase their incom e. For theYouth, credit will be available for irrigation related micro-entep rises such as constructionof workshops and purchase of some spare parts for maintenance and repairs of treadle andmotorized pumps and sprinkler irrigation systems. Established youth groups or clubs will also

: > r. D -gcwY. - ' . ' . . . : y ; lt. . . . w T'';R 7' .'' ) . '. h '

22

have access to the éredit line for farm inputs and marketing of égricttltural produce. This will

enhance the employment and income stams of the rural youth.J4.9 lm pact on Povertv Reduction

l . , ,The pmposed project activities will complepert thJ tloveènment objectives toivl' y mn .the. dambos. (flood. jlains) bf iéèija' elitg actce'ss wto wate'r 'for .-- ...-.inçrease the product.. . i%'. . j ' . : .. . . ; ' . . . .. .. . . - . y. yj. k; . , u; xgjyoyjt (6(j$) ; wjjo' aye ther Jores' t 'll-figititm fOr Smillhölder dryland anùeis, rrios y w me ( , , . p1

' ' i i'll npt tjnl. y. piovideof smallholders cultivating the smallest plots of land. T'hl ?,,#.' ject wadditional fbod dùring the lean season, it will also asjist ip l.i'm' iting and/or 'removihg theconstraints (Jiala 2. 10) related to increased productivity; cfkdit, foud processing, storagefacilities and rmarketinc of acriculttzral sum lus. Th. i! will' i'n the medium tb lonc term enhance. h'''' *''''#' .l. r r : 2..4 4 .? . .''.''' . .the .food security .sittlation, ilnprove .the nutritional staiu, . 7.. ànd' ràise àenefièlaries' .incom e

. l loyment opportunities for the mg'-'si 'vtclysrab' 1 è Womeii a'nd the ybuthwhile creating morè emp

,l ' 4. ' . . f .'groups. ln addition, .the non-participant poor in tht projçct Mep will Atlso benifit i'adimctly..- .

. f - .from generation of project related employment as a rçsfllt of itzervased àgriculmral1 . ' ' . .

'

production. The activities to be implemented under the proiéct will have a positive impactl '*' '*'. -' . '*' '

and thereby reduce poverty in the project area.

5. PROJECT IM PLEM ENTATION

I5.1 Executiing Azencv

'

I. j . :''rhe Ministry of Agriculture and Irrigation (MOA1) 'WilI b' e the Exeùutihg Agency. lt

l ' l - ' 'will play the sunerviserv role for the proiect implementatiop, The structtzre bf the M OM isv ..'> j *'

'

'*' '.'' '>' ' .

discussed in detail in section 2.3.

;5 2 Organizài ion and M anagement1 - .5

.2. 1. In order ' to qnsure effective coordination and: ttrit. ç'ly kmplèmentation of project. '

. ;

'

activities, a Project Management Office (PM.O) will bç t,j .jab. liîhed . in Blilttyf'e ADD tol ' $ i:coordinate tlx day-to-day activities of the project. 'f'hù PMô' will be htaded. by a Projectl ' ' î' ! 'Manager (PA4. ), who will report to the Controller bf lvrâgàtion thrbugh the Program me1

kted' b' y a quali'f i'8 d acçkuntant whoManagers öf the respective. ADDS. The PM will be assi

.l ècouinting system bothwill be resjonjible for the setting up of an internationally reeognized g ,

f 'tbe projea heâdqularters and at the respective ADDF. TV Projèct Manager and q ualifieda , j (.,

jjuo ujjj j) e supportedaccountant will'be ayisted by two local assistapts. Fgrth elpwrt, , the .

tqchnically by two Civil Engineers wit.h experiepce in irrilptl'dsqtt, pd hlhdxrb. 'ulic technology and

tic 'expertj one Extension Specialists, and ope Aglmiiomist. Th..e,'P' ' VO 'x'local àtaff-'.-pne Geode thiough AM TA programme in procvre'mèh' i an' d manggem. ent. Thty will alsowill be traiàed ,,

b i d in irrkatitm hydrology, and geology tecL'' nlogy tluough NRC p'hd' the TAs. Al1e tra ne . , . .. . l ;> . . .the project staff will be existing staff of DOl and. VO!X1: and they will be pïaid tby . thel !' : ' . .Gr Overnmçnt. However, field allowances for a11 th: spff S'f PMO afld offlce' operaljioh cost

will be pald fot by the ADF. The support staff anfl the offi t.e Espabe fp'r tlz PMO will beprovided by pe Govermnent. The qualifications and vxperièft' è. e of staff for PMO should' bel k

titjn.acceptablxe to the Fund. This will be retained as a loan condl

l.'u. . .<.. . ..'z ., z.,... :' ) ; . e..

23

5.2.2 Project Manager will liaise with related departments of MOAI including NRC, BCAof University of M alawi, selected NGO and Financial Intermediary to coordinate projectimplementaticm. The PMO will be responsible f0r Overseeing the general direction of theproject as a whole and ensuring that a11 the activities are implemented in accordance with theguidelines stipulated in the project document. ln doing so, it will: (a) review and approve thealmual work prograrnme and budget of the project; (b) review the main and secondary

. .- . . i.rrigatign qivil work .d.e-signs and ensure-, yhat -th. ey confqrm to th. e .tqqusixtçd st.ynd.g-rds apj - .-.. .. - .. . .- ' requiremehts ' of the ' project', (c)' ' revieW'' progress ' r'eports and ensure ihat' pröject - .

implementation schedules are adhered to; and (d) çnsure effective coordination between theproject and University of Malawi, selected NGO, the Financial Intermediary and thesupporting institutions and resolve any issues. The PM O will follow-up on a daily basis theprogress of the project, exnmine constraints in implementation and provids solutions. Theestablishment of the PM O in Blantyre will be a loan condition.

5.3 Disbursement

5.3. 1 The Government will open a foreign exchange denominated account with the Reserve

Bank of Malawi in the name of the project. An operating account denominated in Kwacha,will be opened in National Bank of Malawi (NBM) which has branches in Lilongwe andBlantyre. Funds for the credit component will be held in the Lilongwe account to facilitatedrawing of funds by the financial interm ediary and also facilitate m onitoring of the credit 'hm ds by the com mercial bank. Funds for credit activities will be drawn by the financialintermediary ppon submission to the commercial bank, of a list of beneficiaries, the intendedactivities and corresponding amount required.

5.3.2 The account in Blantyre where the PM O will be located, will be for the PM O and thevarious implem enting agencies in the 2 ADDS - Blantyre and Shire Highland. Both the

project accounts in Lilongwe and Blantyre will be replenished qum erly by transfer of fundsfrom the foreign exchange account on tlze basis of DOI approved Annual W ork-programmeand Budget converted into Kwacha at the prevailing exchange rate. Larger procurem ent willbe paid for by direct method of paym ent. The signatories of the .account in Blantyre will bethe Project Manager, the project Accountant and the Assistant Project Manager. At the ADDlevels, the signatories will be the ADDS Programme M anagers, the Civil Engineer in chargeof the relevant ADD S, and the Extension Specialist attached to the ADD .

5.4 Credit Adm-inist- -ration-

5..4. 1 The current tenns and conditions of financial marke? in Malawi make it practically.:''

. . . '.

'impttssible for .resource ..poor hopsqholds to access credit. Aoart. from thç.estàyes sub-sectbr .. -' .. o

: -z Jk .. . x . n .. . - . : . . .x

rural households have inadequate access to folnnal credtt since agriculmral actikities aréconsidered by commercial banks as risky ventures (para 2. 10.2). However, without the creditfacility, rural households will be unable to purchase the inputs required to increase theiragriculm ral production and subsequently improve the food insecurity situation.

tlk' 'C roject to allocate about 2.6 million for the credit5.4.2 Provision is m ade ,under . p

- 7*-: thcomponent. A financial interfqel. ary with agencies in the project area and specialized in e

establishment of savings and Jredit community owned unions (SCCBU) will be recruited toadminister and manage the credit facility. Two NGOs will also be recruited for formation

+w. l

24

of farmer groups, group dynam ics and training o.f farm érs for credit. The NGO will act as,

' . . . >' . ' '

è a fécilityttlr for the farmer groups access credit. lé 'poll.liboration with the financialt . ., .

intermediav, the. INGO will select after training, eligiblk-' fatmèr groups to aecess .the credit' l ' tj be pttrchased

.by the D Ol and.fund. llt3 this,sçqn. nection, al1 the irrigation eqùipnïent wi ,l . ' . . .handed over

. $o thg tinancial intermediary afteè î'ik' speètll ts1) b# DOl. Fà' tmers groups andindividgal ppject beneficigriej eligille to. .a:ccejj tlj' e :ç!.'J.4-.it Jinç. Fill k.ç sunplied. with, the -.il-iigation etltllpment by. '(1V flnancrlart intermeéiàry . -, - ' ' '

l . ' . . uyjm. . , oy ayu. youu soups a. s well as5.4.3 The credit facilitv Will be extended to establislkf qdl -e

'

. .

eligible individual project beneficiaries for seasonal l.oq'ii> alid frlddiul'n term càpital. Theactivities 'to b.e fu . nied under the credit facility will i'nâlud' 'e pumhâkt' o.f seasùnal input/

: l t jj. umps, sprinkler(improved seed varieties, agro-chemitals), treédle ptltkps, motoèiz pI ' ' ' '

systems, donstruction of workshops for repairs and paihtetzance of irripation rçlvted pumps'

nd systems, smalll farm implements, marketing ot' àgricultural prodtlçe, fbgd processorsa(maize and rice mills and groundnut crushers) villace-level storage fadlities apd any otherl *-r

.

:project related. income generating activities.l .

5.4.4 The loan' recovery will be ensured by the MFI anq' its 'field 'staff Who. llave a directl ' ' ' ' 'inter

-face with, tlle benetkiaries in the communityy T, h:. , l't$'tài rkcovery W' ill. Alsq be ensured1 C ' '' '' f: ' 'by project bemeficiaries themselves' througlhl peer pvesjtlre aiab g'ruup. lilllfli

.ty. In' this type of' l . ' . .' k '

credit and msayings set up, the beneficiaries theniplgès are the owners of #). e credit andsavings coetpeirAtive. l'rhey will therefore énstlre thai' rio ( çni' b' èrs rep. ay t11. ej f 'ldâny to. avoibbeing penalled for fu'ture credit. The funds recovered ffils. rti ppj 'egt beheficiariej by the cred' it) ' . . '

and savingF cooperatlve at the community level will Jpç é,lG#) dlled to t148 nearest brant. h

office of th. . i financiallintermediary in thc ADDj whicyhs 'wisltlk',t,n' tu til forwa, rd t'he hmds i o theco 'm m ercial rbank. whe're the credit f'unds will bé held, fdr' Lf'u' ' rttzi tlsb.

5.5 Procurement of Goods. W orks and Services

l5.5. 1 Procurement arrjangements are summarized in Tatp ,le 5.1 bglow. All pfljèpmmçnt of

fin services ' 'finâpxçad' ' by tke Ba' n'tm will b e ingoods, works and acquisition of cqnsul g .

' k' ' Rules of Procedure for Proçvremeilt bf Goods and W orks or, asaccordance with the Bnn s , ,1 t he relevant BainYk'' S'tàndardappyopriate

, Rules of Procedure for the Use of Consultâùtà, us ng t .Bidding Documents.

5 5 2 Malawi's nqtionàl. proçurelept laws and rrg'u, . l'Jtîo-rl. hayg . btçn myiewed andh . w . .. . .-gz. .. . .- . 1 t ' 2 x -:. . - . . ï .. . w ' '! - - - ' ' ..determined to bè

.waccept.yble. Yhe VOAt is thè tk eçùitilj. 'Ajé# (sn. tt h@.' i è' toçvrefizent Unitstaffed by qualified per'sonnel. The Unit is suppörted by the W' offd Bank. It ijk conversantwith Bank procurement rules and procedures.

t

5.5.3 Civil W orks: Procurement of civil works valued between JJA 0.09 and 0.62 millionl . luxigdjaj jxctg) p. roced. ures.per contract wil'l . be carried out under National Cortmçiitive 4.'*'. . . ': '

. . . ':' 7

Three of s'uc'h contraca will be awarded for const/ctih n of l1ï.ràit1. irtigation distribution. . ' ' ''e'' ' '

canals, rehabilitation of six dams, and conjtrudtion of jpal'l bridges', and valued in tot>l atl .

'' -

UA 1.00 million. The materials needed for civil works (on-fûrm canal.s, sùction bAsin,'

( .irrigation dugwells and market platforms) are different in type, quantity and usage; valued

lb '' '' - 'i CQ * '1- 'Ji-

..'

.. ...'

.r:;.:lI!!I;IIIiE!!,1I!,'.''.'

25

at UA 0.203 million will be procured through National Competitive Bidding (NCB) and willbe undertaken by beneficiary farm ers. The following civil works: the constnlction of thehydraulic laboratory at BCA of the University of M alawi valued at UA 0.019 million and theconstruction of the demonstration plots at NRC of M OAI valued at U A 0.037 m illion willboth be undertaken through force account by the Departm ent of Civil W orks. Civil worksfor construction of m ain canals, dams rehabilitation and sm all bridges will be carried 0ut bycontractors through National Competitive Bidding (NCB) .

I t5.5.4 Goods: Contracts for vehicles and office equlpment valued at UA 0.34 mlllion willbe awarded under International Competitive Bidding (1CB) procedures. Hydraulic laboratoryequipment, survey and soil and water flow measuring equipment valued at UA 0.24 millionwill be procured using ICB. Irrigation equipmens valued in aggregate UA 1.71 million willbe procured by National Shopping as they are diversified and readily available off-the-shelfgoods. M arketing equipment valued UA 0.83 million will be procured using NCB. The listof qualitied suppliers will be subject to ADF approval. Provisional list of goods and servicesis shown in Annex 3.

5.5.5 Consulting and Training Services: Procurement of consultinj services for CivilW ork Design, as detailed in Table 5. 1 above, will be undertaken .in accordance with theFund's Rules of Procurement for the Use of Consultants, using the Standard Request for

Proposals. Procurement will be throujh competition on the basis of a short list following theselection procedure of technical quallty w ith price as a factor. The training component willbe basically implemented by the irrigation technical assistance who will train the inigationengineers in the BCA and NRC and in ttzl'n the front line extension staff . TechnicalAssistance involves the use of local specialized agencies or Non Governmental Organizations(NGOs) working in Malawi, and their procurement will be through competition on the basisof Short List. Audit services will also be procured titrough Short Listing.

5.5.6 General Procurement Notice: The text of General Procurement Notice (GPN) willbe diszussed and agreed upon with the Government of M alawi during negotiations. It willbe issued for publication in Development Business, upon approval of the Loan Proposal bythe Board of Directors.

5.5.7 Review Procedures: The following document.s are subject to revieW' 'and approval bythe Bank before promulgation:

Specific Procurement Notices;Tender Docum ents/Request for Proposals;

- Tender Evaluation/Evaluation of Proposals Reports, including recomm endations for-coniract-awards; ''- ' '. ' '' - ' -'- ': ' . - . ' -' . -: .'- - .- 'Draft Contracts if these have been amended from the drafts included in the tenderinvitation documents.

! '- ',37.'..-.-,- 'N ftr 7$ ''= .t t.j? ,, . . o : ,. k --- -- ''' -'q '

26

Table 5.1Procurement Arrqpgqmsm s .:

l .. (.!31 -UX'. &1i' Ilion) . . .. .I'ROJECT ITEM . ;. .,r. .è

'

ICB NCB ,. () thecs . Short Tdtal. . List

' .1....ç ivi, I B'o.rbé . u. y

l yr,j . q. j y . .j,j-tjy,y . ...

..

.y .j . j ..

.))) yjyj. ., .

,

-

.

..,.- i Mhi!l blstiibuiiyn ça lals . 0..62 (0.'

Dams Rbhabilttation 0.29 (0.29) .. ';0.?U6 (0.:00) , 0.35 (0.29) .small Bridges 0.09 (0.0,$ 0.:j (t.00) , 0.12 (0,.09)

:2. GoodsVehicles & Office Eqyipment 0.34 (0.34) 0.34. (0.34)surv./hydr./sjil/tield Equ.& land 0.24 (0.24) 0.Q# (0.00) 0.31 (0.24)

. Irrigation Equipment l 1.71 (1.73) 1.71 (1.71)'3. Consultancv Serv-& Traininc .

Technicil Assista:ce . 0.34 ('0.34j 0.34 (0.34) 'Consultancy Services à.O6' (0.06j .0.06 (0.06)Training . O.j6 (0.30) 0.35 (0.30) '

:4. M iscellaheousCredit fdr Alark. Act.& Enuin. 0.83 (0.83) 0.83 (0.83)Operation & Méi'nt'endnce Costs ,'Vehkcles ' ' ' l 0 ..d 9 '((? '.,09) . 0.09 (0.09) '

,

Proj'ect./ànagk& su 'pervision 9.40 (0.40) 0.40 (0.40)DataBasç surveys &.1 Analysis 0.92 (9.02) 0.02 (0.07) .i Gov. sia. ft sa'laries l .

. 0-.70 ,(.t) *.'00) Q.70 .(0.00) ..i . . ., , ,. . k . . . . ,.. ..

j , C . l . , l x.ToTAI- E 0.58 (0.58) . 1 .83 (J,.,s. ). ).. ; t :.)!u :,..jà -..:,8. 1) , z,..J.!. (p:J $... . .. ..6,40 j5. .33)* This figure represents! the shlp ADF of UA 5.02 pillion andïthe XVVRX cdntribgtlon'eùf'ux'j 31 mitlion., . *

5.:6 Implementation Plan and Expenditure Schedule

l . .. .5.6. 1 The project wjill be implemented over five-year periöd with 1999 being PYI. ThePM O will be respon'sible for overall supervision and implementation of al1 components incöllaboratiôn with:

a) DOI of M OAI will implement the small-scale irrigatioq schemes component.Benetkiariès will participate in the construction of on-farm d.istiibutioà canals, boreholes/welldigging and head protection thzough the orovision of lokal Materials and free labbur. Design

. l '* ' ' .of civil work including small bridges and dam rehab, ili.tatitm wi.ll be çontracted to local: j . .Consultants. 'Cqnstnlction Of the m ain distribution èanals includiag sm all bridges and

j , ' .rehabilitation of dam s will be contracted out to local construction firm s on the basis of1 'National Conlpetitive Bidding (NCBI; and

b) M OAI tllroueh its ADDS. RDPS and EPAs.wil1 assien irrieation FES. extensionist to* -.. F .. 2. . '- . . . . r * IrES -- . .. . . : , . ' . - - . . - .- . a.:..-a 6k)? ' ' i-,C . -J.' ' 'r ('. *' '' ' . r; ' 7 .( ' xasljist in the implelientation of irrication extension procramme ànd' train farmers for

1 A.''e

'

.*. %.;''' .* '

irrigation practices. Fjurther, 125 FLS will be assigned to coflgborate wit.h th. q.içlected. NGOS-z#f . '

and the financial intermediary (MFI) for fanner groups fonnatio'n and cfedi't maùagement.l , ijuîng tjaeTh e Village Development Committees (VDCS) will be responsiblç för ltnob

beneficiary communit'y to provide free labour for the construction of the on-farm distribution. .........,,.. ,;;,..

,y4;;,canals ; (.;:.. ..t..7k.#, -

t. ï.-.- , . . .s . . . o. , . . k kkr x ' . . q t - m:tf. -. . k i. .:.C, ),q ; .-.... .- .., - .!r k ijlë : y.uq w. - .. : ,-z '

t

N u

27

Table 5.2

Expenditure Schedule by Component (1n UA Million)Components FY1 FY2 FY3 FY4 FY5 Total

A. Capacity Building 0.80 0.59 0.22 0.22 0.22 2.05. . ..= . - . ' -. '' .2 . ' -.. .. .. - - . ..

. - . .B. .

'.Rural MiçrtslFinanéè systtin . 0'.23 ' ' . 0.*56 0..72 - '' -' .0.'71 :.' '.' ' -' '0 70 ' '2.92 ' ''. . - .. . . . . . . * . . .

C. Small-scale Irrigation Schemes 0.28 0.38 0.38 0.21 0. 18 1 .43

G TOTAI, 1.31 1.5j . 1.32 1. 14 1 . 10 6.40

Table 5.3

Expenditure Schedule by Source of Finance (In UA Million)

Components FY1 FY2 FY3 FY4 FY5 Total

ADF 0.96 1.16 1. 10 0.91 0.89 5.02AM INA 0. 15 0.16 0.00 0.00 0.00 0.31Government Contribution 0. 14 0.16 0. 16 0.16 0. 15 0.77Beneticiries Contribution . 0.05 0.04 0.05 0.05 0.05 0.24Private Seçtor Contribution 0.01 0.01 0.01 0.02 0.01 0.06

GRAND TOTAL 1.31 1.53 1.32 1.14 1.10 6.40

5.6.2 'l'he expenditure schedule by component and by source of finance over the projectperiod is projected to be as shown in tables 5.2 and 5.3 above. The tentative implementationschedule is shown in Armex 4.

S.7 M onitoring and Evaluation

5.7.1 Monitoring and Evaluation of the project's activities including implementation progressand expendimre will be carried out as a regular m anagem ent function. lt will be performed

by the Project Management Office. The staff of the PMO, will design and implement amanagement information system with activities checklist for the control and m onitoring ofa1l project activities il'l collaboration with M&E officers at the ADDS level. The perfonnanceindicators that are listed in the project matrix will be used. for monitoring implementation ofproject activities.

5 7 2 'ln addition to'' the stiper-visions. missions by the Fùnd a mid-term . review will be .

undertaken no later than the end of the third year of project implementation. The mid-termreview report will assess the progress of the project and identify major problems andconstraints. Performance indicators designed in the project matrix will be used to monitorthe project performance and measure achievements of the project at that stage. lt will makerecommendations for any desired modifications of the project as designed.

5.7.3 Baseline Survey: A baseline survey to update previous surveys On the project area willbe condtlcted im mediately after loan effectiveness by the Agriculmral Policy Research Unit

.

.>.w. . . .. .......- . . - .(*k . . . v y6u err . . x , w .m . mwvm m m x. . ... ..... ... . ..' r ' . . . ) ,j . . . . ' ' . j.r . z . ' ;- . ...g,s-..;. ..... .. . . . saa.wjp.. ;I..s

28

IAPRUI of the University of M alawi. The APRU will conduct 'in. selected EPAS of thel . .:project area a baseline survey to provide a benchmark. àgaiflst which pmjeçt progress can beI

. .

. -

measured and also provide a better assessment of thé oreblefns of womeh. ap.d the youthI '*' ' .

participating in th. e /r'oject. This will provide an oppormnity for the execsting agency to fine-l .

' k .tuùe project iniervçntions and re-orient project actlvities .at an early stage to retjèct thef women alnd the youth.

'

concerns o' 1* ' -... . <. , . - .- yysjyysr osj. ( .wjjj aruj yj

. yâ' . .. j-jjo. jjoj; yo( jtyj y; .5.7.4 The baseline sùfkey will be dèsigned in a

' l '7ï éity rihclqding the rple of 'womon anddrtermlne the sckio-economic aspects within the cnmmè.. tt . ,

' ii) xçstàblislh the size of the community 'ijl tt)e sekcie; EPA. s; iif) determikne l'andthç youth,

holding per househ 'old includ. ing female headed households, farmimg . sy. stems, culturalt' iv) 'estimate farmers accessib'itity .-.$0, 'foztmal and infolrmal cred, it, thepiactices and income,l

; è, t beyeficjafies at .frequency of use, magnitude and cost of informal credit .tto the projel ' id be addtyv'ottl: tp, enable the , 'E'pmsent; v) identify and rçpoft any constraints whieh- pli. öjt . , . .'

y . ' . jr ' ' , - i ê # ' ' .project to achieve its objectives', and vi) establish critey ié foi détetmininp' tle lmpact of the

project especially on women and the youth.

5.8 Accounts. Audit and Reportina Requirements .

5.8. 1 Accotmts and Audit: The GOM will open a àpqci>'l àèkia uKt f0r .tl4 b #. rojec't 'funds . Thel ' . . jjj . z, wljyrg; ktjé ' p . Mo wjl) bepyoject f'urids will be disbursed to a comm ercial barik in :l.à., tzyr .. .I . ' J . ., .

licated to fadlitate the project implementation and ayoid urkleùbssal'y' tlansAttion delays. Aproject account willj algo be opened in each of th e AD. Ds' às' dtscussed in. para 5.3. TheAccounyant will b,,e 'rjesponsible f0r the design and insjgttatiimlgf a teliz' p.rterized àccounting.

' dt ' ilil ensurç kth' ii tlae 'accounts areand managèl-peflt information svstem. The Accounta . * . ., .. 1. - 'maintained by the category of expenditures source ef firphc: and t.11. qt a syitem pf jnttrnàlI

. . ' . '' '

cpntrol is put in place to enable prompt recording of tmnsactions.. timely produdion ofI

accounts and reports and safeguard of the project assets.1 ' iorf recordj; lh. aintaiiied in5.8 .2 There W ill b: a set of fmancial and managemeny i'nform? . as

' 1 . . teach RDP from wlzich monthly accounts and npnageëçri. # ltlillf. 0nn, , ation,yFojtjd bç .p. repq

,ted.

. ! - .: . . . . , ..n ese will be integrated into the accounts of the PM O 'frolpfwkere d, omblljydat. eè qvprterly'

tatements and management repom will bé. prepalr#ld fpr xilèltlslïon in the Q't3 lt f'orfinancial s .

b ' i 1'6 the Fund. The financial statements of tliè proj eçt w'll' l be intlmally aùdited byStl IMISS On . .fGeneral. An externally recognised Aùtlit F. irwa.. . gccqgtà/ble go the Bank.th e GoM zp ditor- . ,. l . - .will be retaihed to audlt the oroiect on a vearlv basis. Ptoyisi. ong. have' beçn rààde for this

. l '*' '.' -' - .- ' ' - . dp. urpose. The audited financial statements will be submitted to th e Fund for review an

. . *

tomments not later than six monthx after the etld of each adcuunting year.

5.8.3 Reporting: Quarterly Progress Reports (QP R) will be prepared and submittjd to theI ' '

: .rund in accordance with ADF procedtlrej. Repotting ohvprog-ress sofr, Atbjpct activàkes willtet targets of the AWPB. The Q PR.wi11 also include detàile' d. dçlcrip. fip,pbe compared with sèf achievenients of1 the various compùnents and. su' bzcompp.' pepts, exp. qpdimre and physidàl .

isitions m ade 1as well as problem s encountered dukiljg,.tt!, t pportiyng period. . The h&. ,:E 'acqu :

I kop . yz jsymit to thg t;2. 30--officers in the 2 ADDS will collect and compile data frpm Sh,',e s a .u.. .

is of the Idata gaiered, the PM will prepagç quartelt'y prqgreo reports anï--i -rtz-bmitOn the bas k'copies to ADF within tw0 months of the end pf eac'h relibrtiqg period. '

l

ii ' ''''ii'''ii'1 .... A.Q cy, g x. u. y .kta -.4.

Y ' . k '

29

5.9 Recurrent Costs

Project recurrent cost expendimres will cover the costs of Government staff salaries,field allowances for supervision, project managemellt l'unning costs and operation andmaintenance of vehicles. Thqse costs are estimated at UA 0.69 million (MK 16.87 million)during the five-year implem entation period. The Government will provide f'unds for the localcost associated with salaries of the extension and training staff. The staff salaries are already

-. jp -the Gqvernment payrpll and will' not haye' 'any'ineremental effect 'on thè Gov4rnrfznt. 's '--

budgei. As the project is designeà based on Fanner Ciubs formation, orpfbnn distributioncanals for the irrigation system will be mairltained through the FCs system . Any other

maintenance cost beyond the project completion will have a marginal impact on theGovenzm ent budget.

5.10 Proiect Sustainabilitv and Cost Recoverv

5. 10.1 Project Sustainability: The sustainability of the project will be ensured throughi ion of capacity building of five related instim tions in term s of irrigation technology andprov s

m icro-finance rural credit. Intensive irrigation and credit training programm es both form aland informal, on-the-job training and workshops will be provided to project beneficiaries.Further, long training courses will provided nation wide through BCA of University of

Malawi and NRC of MOM . Project beneficiaries, in Farmer Clubs will be yrovided creditand training to empower them and ultim ately manage their own credit, lrrigation, andm arketing activities as well as com munity-based development activities such as village-levelstorage facilities and food processing.

5.10.2 Adequate design has bcen made to ensure effective experience and group-behavioralchange for self-charge of irrigation cost and water use to ensure sustainable m anagem ent ofthe irrigation schemes. Further, establishment of community-owned savings and credit union

would create practical ownership for sustainability. Provision has been made in the projectto effectively supervise the activities and provide incentives to the beneficiaries so as toensure their fuller participation even after project implementation.

5. 10.3 Cost Recovery: The GOM hâs put in place a mechalzism for cost recovery in publicfinanced programmes and projects (para 3.2.4). Beneficiaries under the project will pay infull for all the fann inputs, irrigation equipment and services. Project beneficiaries will paya fee at least to cover the operation and m aintenance of the irrigation schemes and 'themarketing platforms. Established and qualified farmer and youth groups will obtain credit atm arket interest rates. The Crop Production Budget shown in Almex 5 dem onstrates that

' ' oject bdhefèciariek Will be in' a positioh to servièe the-credit facifity. - ' nz ' . cpr

r'= . 'rt. .. . , .. m ..,.v , j .. ! . :,$ $: oj .;s. r : .

30

6. TECHNICAL AND ECONOM IC JUSTIFICATION

/6.1 Technical Juétification

. e u .6. 1. 1 Malawi ustd to have abundant surface and grouà. d watqr J'ot. ists iltrlka.tion which has. l . . ; y - ' t jyjjajjbeen Practiced Since time- lmmemorial. llowever, aS a Tejult' L)' f rmtrenlely er,rétfc raI (t: jojys.xo, yy, y. uu, souxes. - - patt. erps and .suuseqtlèflt Tecurrent df Ought..thel-e .has beçn a-twlj@ljkijledllçt. ..

. . j . . . . ., .. ; y . jjyuyyj, sjuuy.. jjxjso. jy; g.u.,of Wpter. rfhis oheiiofnédön calls for imlilediàtd cefkserkvf.ti4qt.Qt av . , , -! 2k . . . I .

--' . g . . .rainwater harvestin?g and Judicious utilization of waterk. ;,..he 4.,r, ox.tl'kpsed prtqect are. as' hage

consiqerable potenlial for irkreasing agriculmral prc/d.ftl. .fjtj'%i't# . 1. ; ,7 ; l . . -popufation ha; reallzed the importance of irrieation in cfob orotdiié' tibq and t'hè dem' and' for

1 I *''''' ''' ''

'

.irrigation is presently very high.

) j6. 1.2 The irrigation teclhnolozv prtmosed under this Kroieçt is s'l'rm.f ple and aliread.v qvailable

) *'''' -' .%' A' ' ' ' -''' 'i'è ' ' xu g : - ) .t ''K

'

' ' . 4

' . : .y . ' *''' . . .in a Small scale ip tlae country; it has been tried by smàll,iaoldqrs .ti,î.d. ptivi .iè s:vtffr-attd sfoand

. ' ' ' .

- ' '

to be suitable'. ,F. urther, as selected project area is. nt aio.y',:.w.fp1; aliài1ï' fèd' ju.bjistend..e fârm, s ,' è r k ï '- , ' 'smallholder farmers use hand carried water containers 'fpz.ipit:qttitin .i1:t!nv.g tlrgugh't seasbù.

8 i training in simple irrigation. teehniques and' .# lpqti/tjf ol f ' trr' ') atibkspumps withEffe t ve . g .,micro-credit fx ilitjes for pazticipating farmers will uxp4d...'t.'t.e àztkption fl:f the tqch .noligy andJ I

:. , . - , . .

subsinntially 'improve productivity. The training of ' DO l â, taff both in the. M $'hi' stry of-.

k. e-'j . . ( : . w 'Agrsculmre apd. ln the project areas will enhance thelir qàpacityïto effect.ivily uotmtn' .yùibicate.l hnologies to farmers and alstl,..p rovi4.p' ll.le nçqgisary batkstb'ppingirrigation and related t c

.. l , jjg wjy otytj wjjj ygfor 'prolect beneficiaries. The training and technblogy ..p .ackazt e$. to p; ! ,. . j:jjj. jj h:developed in close collaboration with prolect benetkiarieg wh: are the en uk ers

, frorit linéI . .staff as well as extensibn and research staff.

. '

. . ( ' ,6. 1.3 Beneficiaries will increase their benefits through d. ivetsiificatièn of high vàlue' crops.n e crops proposed (p ara 4.2. 1) are cttfrently 'beink grciWn ljy benefj 4i.t ries.. but higher' k ''*''' ' '*.*'. . ' = ) .cropping intensities anL improved crop husbandry w111 resùmtlt ih. gilllcreasçd Outp 'ùt.

.

j ;j.. .6.2 P/oject Benefits

6.2. 1 At the national and community levels, the projeçt wkill.se'tjzntribqtç siïgnifi. çantly to foodseçurity and pqverty lreduction. A total of 12,000 fnmt'i,:l'k: i1t...A' e 2..5 t PAk wi.l,1 b-qpefitvfrom

'

ning in ' irrigationyl technology and related aetivitip' s tolibe p,rovtdr -td b y the' project.trai

Azcording to available statistics, about 40% of the 'totâ'l be:neficiaries are e:tected to beW om en .

4 .

6:,2..2 W ith 'regyrd .to pe= apent.iciga.tion'schemes, With th@ :Klpnsion of Q,1. e irtigate; area..r ruj.. jyjad. oorsequentlyfaêrmers will switch to more productive and profitable.reyorpping. syste ,

increase the irrigated/ area under maize, sweet potatoei, ricea'ipigeonpea, pat rika, groundnutan. d beans. The proj 'ect benefits arise principally from the iiùsrpduetion of more h'igh valuel

, (j s on the bàsiscrops as well as from improvements in the productivity (ttltaple fpo crop .I .-. jwj.uevelorpment,of the analysis undertl aken for the selected schemes, it is estlmated t'hat, at

i cremental crop pr'oduction will be 12,420 tonnes of malze, 8,734 ton'ne! of' rice, 6,958nj '

tonnes of paprika 3,680 tonnes of groundnut, 4,600 to> es onion, 9,775 tormes Of tomatoes,l ' F f sweet potatoes

, and9,200 tonnes of green maize, 1,380 tonnes of beans, 2,583 tb. ?nnes 0

/. l ; ' ' ft; ' ;4' ' l 1 ;<k :.% A.' .. ...!rm. . iIILJI. e :

--

'

.

'

,,.:pj;,'''$i;i1r;:;?!;r:'':!!,.... ., .

'

'# '

' G* ''. .>< .

3 1

1,265 tonnes of pigeon pea armually. Furthermore, due to crop diversification, nutritionlevels and farm income will improve and consequently poverty reduction will be achieved.

6.2.3 Social Impact: The labour intensive nature of agriculmral activities will result in asignificant level of incremental employment will be created by the project. ln addition, theconstruction of civil works and the subsequent afmual operation and maintenance, especiallyfor irrigation and food processing equipment by youth, will contribute to labour demand'.

. ex < ' ov . ' '''* -v

There'will a'Yo' ht an-ihcmaàë' in ktrtplöyfzwl)t oppottunitièA.iùa'thç markèting àrid pibèekàiilg . .: ... '-* . jof farm produce at the community levels as well as for suppliers of crop inputs (fertilizers, '

pesticides, and seeds) and contract 'services. Although, there are some ,secondal'y impactsthat have not been formally included in the project analysis, they should npt be overlcoked.These indirect/secondary impacts are improved nutrition and welfare of the beneficiarieswhich will no doubt m ake a significant contribution to the social and econom ic development

of the vulnerable sections, through poverty reduction in the project area.

6.3 Financial and Economic Justification

6.3.1 Financial Justification: In order to analyze the financial benefits that would accrueto the target farmers, farm m odels were prepared for smallholder farmers who are expectedto be trained and provided with irrigation facilities. Crops expected to be grown underirrigation are' maize, rice, pigeonpea, paprika, groundnut, beans, sweet potatoes, onion,tomatoes, and green maize. Quantifiable benefits would be an increased produciion from the4,600 ha irrigated.

6.3.2 'l'he resulting finandal analysis shows that the annual gross revenue from cropproduction under irrigation cropping by the target group is expected to rise from its presentlevel (rainfed cropping) of MK 13.27 million (US$ 0.51 million) to MK 499.89 million (USS19.08 million) at full development. Net Revenue, at constant prices, will increase from MK8.03 million (US$ 0.31 million) to MK 382.46 million (USS 14.68 million).

6.3.3 The average farm income per person day under rainfed conditions for an averageholding area of 0.46 ha is expected to increase from MK 15 (USN 0.57) to MK 130 under(USS 5.0) irrigation conditions. The average net family fann income for smallholderbeneficiaries under irrigation conditions is estimated to increase from MK 6,750 (US$ 260)to MK 58,515 (US$ 2,225) per almum for an average holding of 0.h6 ha at f'ull development.The Crop Production Budget is presenfed in Annex 5.

6.3.4 Economic Justification: An economic analysis was also undertaken in order to assessZC CCOIWIIVC Vizbility Of tlw PFOjCX by Czlclltating the Economic ljlterlpl Rase of Return '

t . . ... ' ' $d tjjj-assumptiolls 1Xl'dC Y :' ' i G : 6IEIRIRI: The éstimated EIRR was 31 % . The éâlculàtion of EIRR aare presented in Annex 6 and Annex 6A respectively.

6.3.5 Sensitivity analysis was also undellaken for various possible situations. An assum ption

was made of a 20% increase in project and production costs which reduced the EIRR to19%. An assumption of 20% reduction in expectedub. enefits resulted in an EIRR of 17 % .J -

-è h.; %' .

-ttiy. (Jé .

! D ' TT 5 ' % 7 @'P X 1: . J C ( X. .. s ' , ' .. ' XWW vklv'M v 'XX'W'- u. êlk?7ê:'?-F J .- - ., - ' . u -:as. .T ' v 'J ' . .- . . ' . v .

. . %

.4'.k

+ 1

'jj'4!

32 .

7. CONCLUSIONS ANTD RECOM M ENDATIONS

7.1 Conclusions ..1-8

' is in line with the ADF Vl1 Policy alld strategy of ,17 . 1. 1 The Smallholder Irrigation prolectp p verty al le 5, i ati 0 n . j The p. rop o s e d p roj e c t q o nf () nnts ..-stoy. tty. yesjyyyckvyjertynyy. jémfl. pttjsj' .vo.ybyj'.e.. jcstriyvyezsyjoctf .., . .. . . .. yyi'improving smallhqldertcrbp' pmd

.uc. titp by -prom. Dting . .@ . - : , e, ,

tevhnology to farmers and by providing the necessary capAoify builedilgftfàr i.rrigation, c&edit ..',i.

instimtional su; pol4 to stimulate sustainabl: àgriqujtrtaal de/velop'me' nt. Although, '.,1,.aljdirrigation devçlon. men' t will be new to the majority of ,lhq 'cdlokj' ulities, thçï t'ec,hnology being 1$. '*. t . ' , . . . 'j,advocated is Finiple and as it will be backed bv intensive' farmit and staff trainlnz . it. Will be ' ?)l

- ' ''-' ' ; !mastered within a reasonably short period.

#l . .t'7. 1.2 Poverty alleviation stratecv of the prolect is coriceived. within th. e framework of tota'l

!. ''''''-' -''' -'-' -'.'' ,''

..

. -' . ., -.beneficiary participation right from the commencemeat, (if tlt,e., pmleet. implementatipn. Xh'' z

inct orporation of otwo I NGOs and a financial interm vdiary ttj. t'r, ain, im plement ynd managecredit for th e prolect 'will minimize Government intvr#testioh.' stre.ncthen dècçàetkaliéation and

I ' . *'''' ' '- .pairticipatory commu 'nity development. The involvemem öf' LtlteTtànner C lqbs and ,t:afvings anvd' '; ' l ' .'''' '' lk

d

î' . ' 'ê

Credit Commurjitv Based Unions (SCCBU) in olaqninz, ilplèmentation 'and. man'a' g ementj' ''' '- j . x' '' *' s'''''?.especially for the .-' cre. dit component with a b uiltwin-f/ùch, ainiqs,nd . 'Cfqr ç're. djit reçovery, willo j ' .

sustain prtyect, betlefits after the project implemeh. tatipn. ' Ctperioxds Contyibtftion to the.. l ' ' . l 'ingestment in the construction of on-fann irrigation canakls by' the ben:fkiariqs will providel

. '

, jjj enja. anx the maintenance ofthèm with a sense ojf ownership of the prolect which w : . .

infrastnzcttzral façilities and add to the sustainability of. '.t.h. eop rojçct.l . .-.ù..,. '

7. 1.3 Through inc. reased production of food crops aqd higjXr incom.. ç aocrual at kousehold1 . .

7' ... 'levels, the projeejt will directly improve food security öf' 'tk 'tè) b'àhofièlarjesa' jp. ed.ifically for.

. . . . .

., .,y .

rural women farm' ers.l the youth and children, thls willr resitjll. tvinqbeyt:rsntg 'fliition and health ..The develbpmeht of 'rural infrastrucmre will further hèlf) the nzral womeq to have better

l '*'' . 'acçess to m arklts for small scale trading actikities' ttstt' q.l1y carried ' out by wohzen.

Communities outiide 'tlle target groups will also benefit Tromàtiimiimvèd qccess to markets and1 . : '?i. -higher levels ()f çmployment generation in prolect related' ak tfvitîes .

l7. t .4 Partieipatifm of nlral women smallholder favrmets 7à14d t14 e youl in traln ihg, fanuer

I . . j . . .

.' c

. .

clubs and cwdit unions will empower them to asslmilat'e hi-g'libp,levels of faknililj g.techn ology,t f involvement

, confidence apd' d81f respect. T' h:, i's will assi:t rura'land also create a. sense o

! 1 ,women to avbieve higher social stams which is vltal, far 1.14 . e swccess .of 'al+ development .ffort Thù p. roject, the' refore, is economically and. finarmially .Aiable, and sbeial ly desirable.e . . q

. .--

.

'

.

'

. - .,' '' .

...j -. ' ...

'

''J'' ., ... *' .'' '' '' ' ( 'J ' ' - .7.2 Recomlilendations and Conditions for Loah .X' p. priwa-l

.. -. li55

6

Si' *l*

Siii5

'

'

'

''i'

It is recom. xmended that an ADF Loan not exceed jru .LJ. A, 5.02 mill,iop be granted to ,I ' -'''-% .t' ' -- . - . , ' 'Jjthe Government Of Malawi for the purpose of implemeritinfalth e

..p. rtyect as described in this. '. . I ' ;.i

appraisal report sublect to the following conditions. rjï

t - '' ' -piX) Conditions Precedent to Entry Into Force . -?,'; , . I .. , - 11The entry into force of the Loan Agreement shall be ctmditional up on the Ggvernment s /1

l ï ' -:f'ulfillment of the conditions set forth in Section 5.01 of the General Conditions pii.

'

1

k. k= ' .'-!1 -, ... ..

' ,-u..--z .su.-s.:.s:--- -...- .-,u=u ':;i' ',,'2,u' ...-z-, .,-z.---' . .-.. ..---- -.---z--x .

'

.u .,,.- - z- iz.,..%-î

> . . ' v,

33

Applicable to Loans and Guarantee Agreements of the ADF.

B) Conditions Precede-nt to First Disbursement

The obligations of the Bank to make the First Disbursement shall be conditional uponthe following:' . ' '. . . . . . . : ' ; . . .. ..: .. . .. . . . .

'

1 . The entry into force of ihe Loan Agreement;

2. The submission of evidence, satisfactory to the ADF of:

(i) the establishment of a Project M anagement Office (PMO) based in Blantyre andthe appointm ent of the required professional and support staff whosequalifications and experience are acceptable to the ADF;

(ii) the opening of a special account for the project funds with a commercial bankacceptable to the ADF and which has branches in each of the AgriculmralDevelopment Divisions (ADDs) covered by the project;

3. The submission Of a written undertaking by the Government that any allocation ofland to be used for the Project, including customary land, shall be carried out fairlyin accordance with the laws of M alawi; and

4. The submission to the ADF of the course outline of the irrigation curricula to beintroduced, as part of the project, in each of the selected colleges.

C) Other Conditions

Provide evidence that the Government's contribution to the project is retlected onan annual basis in the M OAI budget;

2. Prior to any disbursement of the funds for the credit component of the project:

(i) the Government and NBM shall have executed, in a form satisfactory to theAD F, a binding and unconditional agreem ent for the administration of the fundsfor the credit component; '

(ii) the Government and the MF1 shall have executed, in a form satisfactory to theADF,; a binding and unconditional agryem éht. for the on-lending of . .the credit ï '' ..portion of the Loan funds to the beneficiary farmers;

(iii) The Govermnent shall have submitted to the ADF a copy of the model agreementbetween the M FI and the beneficiary farmer receiving the on-lent loan funds; and

'x'rQ3. Every two-years, the Governm ent shall subm it a report of the capacity building k q.'.::

A. - J ?.zcomponent of the project, including the course outline for the irrigation curricula ..

ë .in the prticipating colleges, the number of smdents registered and the number of 'students who have completed the course.

ANNEX 1A

T Z AN'N E P B 1,1C F T, I

* . .N . Ic TaT Ia SEC T

p JECT E s

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. . . a, 4NATIONAL .:J, . ....: .

- . . B O ARY . . . . . . u ' - . . - .

-' *% ee INW RNATIONAL. . .: ' '

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. . . . . . . . tg z o .. . ' . ' . ' . ' ' ' l .-

0 20 50 100 200 K;d . -I â # â *' - '. - . .t j

n is map has been prepared by the ADB Oroup's afaff exclusikely for thecofwenience of the readers of the rfhw'oft of. which it is altached. .n e de- . .nominatièns usecl and the boundarie: sbown on this rnap do not imply. on . 'the part of the Group and it.s affiliatts. arïy judgcment on tNe legal suiu ofany territory nr any endorsement or acceptance of such boundaries. '

Wp . , . . ... : . q . 'K '.. x .x& x !k, . .:., . .

M alawi: Sm allholder Irrication Prqiect Annex 2

Environmental Summarv

The project is classified as Category 11 according to the ADB Environmental guidelines, as al1the necessary mitigation measures will be incorporated into the project design as follows:

Hydrology: This is a small-scale irrigation project with individual schemes widely scattered infour RDP's. Consequently, seyerç r

.sductiop in the Fatergourses f1. gw ik pot qxpçctpd. 0n thç. - .. . .. .

.. .

n. ôther hand. the use of ireadle pumps will. not cause ariy risk to ihe groundwater aqukfer.. . . .

Pollution: n e use of pesticides and chemical fertilizers will be kept at the minimum , with t.heuse of non-residual pesticides and organic fertilizers (e.g. muure and compost) reéom'' mendedby the project to avoid pollution to both surface and groundwater. ' . .

Soils: Inigation will provide dense land coverage (crop vegetation) al1 around the year. This willhelp reduce soil and sheet erosion due to heavy rains and winds. Slight risks of salinity are

common in most alluvial soils as the case in the project areas, especially in the south becauseof high evapotranspiration and 1ow rainfall. Problems of salinity, water logging and groundwatertable rising will be avoided through the Best Management Practices (BMP) introduced in theproject. n ese mainly include design and implementation of a good drainage network, goodon-farm water application to minimize agrochemical trnnqport in the environment (via leveling,water control, etc.), and deep tillage when necessary. Finnlly. the use of orgnnic fertilizersm entioned above will increase soil stability in the long term .

Feology and Biodiversity: M ost of the areas were recently cultivated and there is no danger toany native species of fauna and flora. In addition, irrigation will likely have some beneficialeffects on many living organisms including aquatic and terrestrial annual and perermial 'plants,soil and air microorgnnisms, fish, small mammals, and birds.

Socio-economics: The project does not involve displacement or (involuntary) resettlement. Onthe other hand, the project will result in Mgher incomes, improvement in the role of women andempowennent of producers through their involvement in identitkation, design, and

implementation and management of the project schemes.

110 1th: Primary positive impact is the better nutrition resulting from increased production ofa broader range of crops. The risk of waterborne diseases (e.g. mzaria and schistosomiasis) inthe irrigation water will be minimized through proper canal design to avoid stagnant or slowmoving water. Moreover, pests and weeds (as habitats for snails) should b.e reduced usingbiological methods when possible or the application of limited quantities of pesticides. In a1l

. . .pmjeçt ar.tas, especially .whepr. neF commgnities .<e ..f. ormed on the b.iggçr. schemes, ..the .:Depnrtment (Ministry) of Health would provide the health services deemed necessary.

M onitoring of Environmental M easures: DOI will have the mandate to implement therecommended mitigation measures and monitor the environmental stams in the project areas.In addition, project activities will be monitored regularly by DEA as part of their routineactivities. Further, DEA is expected to commence specific missions to monitor certain pollution

problems as discussed above and those arising during project implementation. Environmentalaspects of the project will also be monitored by the Bnnk supervision missions.

Annex 3

M ALAW I

SM ALLHOLDER IRRIGATION PROR CT (ShIP)

Provisional List of-soods and Serviçe,

F.E. L.C. Tptal cost Total cost .COM PONENTS (UA '000) (UA 9000) (UA '000) (MK'000)

A CAPACITY BUILDING

1 Vehicle and otice euipment 101 .2 151.7 252.9 8,849.92 Survey, soil, water and field equipment 94.0 141.1 235.1 8,227.03 Demonstration plots 82.0 123.1 205. 1 7,177.24 Teclmical Assistancee & Training 81.9 122.8 204.7 7, 163.25 Training & field allawance 34.0 50.9 84.9 2,971 .06 NG0s & M Fl Capacity Building 123.6 185.6 309.2 10,820.07 Project Management 107.2 160.9 268.1 9,381 .88 Research and database for M&E 9.6 14.3 23.9 836.4

B M ICRO-FINANCE CREDIT

1 Credit for irrigation equipment 735. 1 974.5 1,709.6 59,825.12 Credit for food processing equipment 168.0 222.8 390.8 13,675.53 Credit for establishing workshops 13. 1 17.3 30.4 1 ,063.84 Credit for marketing activities 127.8 169.4 297.2 10,400. 15 Credit for fann inputs 63.3 83.9 147.2 5, 151. 1

C SM ALL SCALE IRRIGATION

1 Consultation services--design 1.6 53.0 54.6 1,910.72 Civil works 20.7 668.5 689.2 24, 1 17.63 Local material for constnzction 6. 1 196.9 203.0 7, 103.74 Training as private sector contribution 1 .7 53.3 55.0 1,924.7

ADF LOAN t. . -. - . . x .

4

5

6

8

N .J.NW'. rre!t +'+. - rz- -1 &. ..-.. A' P' '

M ALAW I Armex-4SM ALLHOLDER m RIGAO ON PRQJ%CT (ShIP)

Tentatlve Implementation Schedule

Activitv/Action Initiator ' Startina Endinc

AdministrationBoard Approval ADF Sep-98 Sep-98LOM Agfeement Signed ADF/GOM Nov-98 Nov-98

Loan Effective j ADF./GOM Feb-99 Feb-99.'Proiect'M lmace'men 't .and ''NGOS - .- ' ' ' x- '' -'' - ' ' '.. - ' ' --

. : . 7 . .. . .

Officù' àllotvtqd' ahd furnikhed VOAI/bOI - ' NovJ98 Novr'98y,. . tj jywjs. oatsgg jalsqyPersonnel assigned MOAI , .

List of NGOs approyed and contracted MOAI/fV O/IAO' I/AbF .1a14-99 51r-994Sélection of two NGOs DOI/AD# JAV' 'IXA 51%-99 Mr-99

1Legal agreements signed MOAIXMINA Apr-99 Apr-99C mmencement o'f fanner grouping & training MOAI/PMO/NGOS Apr-99 ' Cohtin'uousoDemonstrat-ion Plotsl and TrainincList of suppliers draozn and approveb MOAI/PMO/BUA/ADF Feb-99 Feb-99:

Ao/.Bd.'x/àby' >eb-99 M-.-99Tender docttments prepared and approved MOAI/P .Equipment recçived Fd established ' MOAI/PMU' fRç' A'/DOI Mm=9. 9 Jun-99' 'Training progrnmm 'ej stm ed MOAIYVO/BC. A/DOI 1111-99 ContinuousVehicles. Offiqe & Field EquipmentList of suppliers dralvn and approved MOAIJPMO/DIXIADF Peb-99 Feb-991

.. -

,Tender documents prepared and. approved MoAI/tA:/I14' ItWDF F. *-99 Feb-99B'ids invitez ' I MoAl/lzM'o/:.y,i Mar-99 May-99Bids received' and e 'vyuated MoA.I/PMp. /D'û.' I May-99 Jun-99Evaluatipn report ppproved MOAI/PVO/INI/ADF J=-9,9 Jun-99

tj i/pk' à' /AIJF Jun=99 3=-99Tenders awarded MOAI/D .., .Goods received suppliqr/. V'o/otk Jul-99 Dec-02consultanc'v servicesshonulisk drawn and approve MOAI/PMO /Ap' F Apr-99 Apr-99Proposals invited MOAI/DOI . M ay>99 May-99Proposals received and evaluated MOAI/PMO/Dd t Jun-99 .1=-99

' evalualionls approved MOA'I/àQ' O/*bIF Jul=99 Ju1-99Proposalscontracts awarded MOAI//AUJD-OSI7AD'F 1.u1-99 2111-99contracts signed MoM /pMti /o o;I Aug-99 A:ig-99Commencenient of services Consultlts <'' Aug-99' Dec-02

I s stemEstablishment ,of Credit v

M FI shott-listed énd proposal invited DOI/ADF/AM INA Feb-99 Feb-99Selection of MFI DOI/ADF/AMJNA Mr-99 Mr-99Legal agréements sigped DOI/ADF' /AMX A Apr-99 App99Commencement of s 'ervices MOAI/M FI/PM O M ay-99 Codtinuous

ISmall Scale Inication EquinmentList of suppliers dra jin and approvz PMO/DOI/ADF Feb-99 Feb-99

' bD/J/ADF Feb-99 Feb-99Tender documents p jrepared and approved PMO/Bids invited ) MOAI/'b P ?LI A1F - - Ma-99 M.&-99Bids riçeived apd evm atea and approvu M. oA. 1/b.. tl'ï./p./o/xvy M.-99 Ma?-99.

. . . . ,. . . ... -. ... - u . sojyp. ko - - xjj-qq : Apj-qqTindeij awlded MOAIGoods received Stlpplier/Dol Apr-99 Jtm-02Civil W orkyTender documents prjepared and Vproved MOAI/PMO/. DOtI/ADF May-99 1= -99Bids invitecl j MOAI/P. Q.' '0/Rd' iI. 1*-99 Jun-99Bids received and evaluated M OAI/PMO 1% -99 Ju1-99

I lu1-pp xug-qpEvaluation report approved ADF

Tenders awarded ) MOAI/DOI/PMO Aug-99 50-99Consm lction commence Contractors Sep-99 17* -99V Contractors Sep-x Dec-xConstruction complet

..ux 1 l....M' .

> % n ::. .. vk.

MALAW ISMALLHOLDER IRRIGATION PROJECT

Crop Produetion Budoet

X. . . . V. . . . r

Annex 5

Existino Situation per baof Rainfed Farminn

W iD CKSOVA Su el Xound PiWon SGghum Soya Yohneo COHM C* PO ' XW '' POMVM NtX PO R--n(0,494 (0.144 0.055 0.05 0.043 0.129 0.02 0.03 0.025 0.01 .0.4.9).

l PRODUCTION - -'-Average Productionma 1 ,500 2.800 3,000 400 250 425 675 950 700 200 1.45:Pric; IMKJK/ . v . . . . ..2.5 . .3- s. . . 2 !: u.. -- 3 . .. - ..3. . 1.5. - 5 .2 . . 4 - .1 . ' . . ' . - . . .

' . . .

w. -

Grv Incor- *,750 8,4* 6,*0 7.200 750 1.275 2.025 14.2K 3,500 4* iss/'i-1 11 INPG S COSTS ' --- ''j Seed 30 125 185 2,500 2* 54 27Q 200 40 60 197Fertilàer 0 0 0 Q 0 0 c 2,0:0 77û 0 79Manure 0 c e () e c 0 e () o cPestcides : () c : c : 0 ax 100 Q 12Bag: 75 15Q 225 30 0 Q 45 75 0 0 76Hired Labour ; c ' n 0 c c () 3()0 () c 9Credit ReNyment 38.85 101.75 151.7 936.1 74 19.QB 116.55 952.75 336.7 22.2 134

T-nl cosh 143.m5 a'n * 2 3.466 27* 74 4% 3,82: 1 47 82 -- -YV

111. œ t Beewm 9,60 8,02: 5,A% 3,734 47e 1 ,201 1.593 10.*22 2.253 318 4u##.?.Total Persons/day 125 125 140 180 40 1X 55 180 108 40 121

Returnmv on tla 2:.8 > .2 38.8 20.7 11.: 12.0 29.0 574 20.9 7.9 /.2- - As the avezage holdbg Iand is 0.46 ha, return per person Xy is calculated to be (Mk 32 xQ.46 ha) = Mk 15

Envisaned Situation per ha (three seasonsl/ *of Irrioated Land

W ize Ri* Pa-ie n'-M Su el œound Pi- n T---t- Onbns Geen Totai'-Wbrid hyb:d Pou'' ' ' N* P- Maia0,4 0.35 :.55 0.20 Q.1Q 0.2Q 0.10) 0.25 (Q.10 (Q.20 250 / *

1. PRODUGTION ' 'Avefage Production;u 6,*0 5,425 2,4* 1,500 6,500 4,000 2.750 9.*0 1Q,GD 10,K 0 13,194Price IMVK: 2.5 12 25 15 2 13 2 6 4 4 28

I+ eseo Income 1# nM s5 1o: sonnn 22 KM la (xm s2 rvm s sx s4 o:c 4: nx 4o = !-g!'ïG. .. ,..- ..II. lNPUK cos'rs

Seed 42o 16:: 1250 850 320 :50 450 85G 580 38o 2.248

Fertilher 1 1 o50 38:0 2:0: 1:5c 280 635 1j0 1 ,150 880 48Q 4.1 94Manure l 0 0 0 c : n c 0 : c o

Pestcides 0 c c : : : : 750 :gc o a2o1% gs 445 580 250 5% 350 450 95 650 7K 200 1

.064Fuel & Maintenance 750 1:K 124Q 880 580 450 58Q 1040 88Q 1025 2.462 1l Hired t-abour 1880 :160 26X 2160 1440 2120 6B0 1960 1600 2280 5,576

1, Credit Repayment 1681 .7 3947.9 3011 .8 2042.4 10R .9 1703.9 723.4 2368.0 1Q31 .4 161 5.1 5834.6l

1 T-nl R.n<ts 4.-227 14 e18 11 1S2 7 R2 4 fM 6 3* 2 f7: 8 76B 7 551 5 980 ..1 664

111. NG Bex fk 8,773 50.482 48,*** 14.938 8.931 45,691 2,822 45,232 32,849 34,020 ...4/.181

j'rotal Persons/xy 235 395 325 27Q I80 265 85 245 225 285 697279' Return/person iq 37.3 - 127.8 1K .a 55.3 .' ' . 4:.6 172.4 . 332 1B4.e ... 1R .0 . ' 1 19.4 - . . 2' 83

/ * Under irrigation. one ha is expected to be cultkated 2.5 times during the year at the project completion- - Aql the average holdhg land is 0.46 ha, return per person œy is Olculated to be (Mk 283x 0.46 ha) = Mk 130

Shlp-crop

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ANM X 6 AAssumptions M ade in the Calculation of the EIRR

1. Some benefits are quantifiable while others are not quantifiable. The quantifiable projectbenefits have been identified as the value of incremental production of various cropsunder small-scale irrigation. The benefits which are not quantifiable are the benefitsderived from capacity building including training and institutional support.

since market of agriculture products has been liberalized, it is assumed that the financialir- Dntkmic 'prlco.. Piices used in-tlw calculation. ' .-.. . ..prices fpr tespect produçts rqflect tlr .w ... .- ..

. .ElR: are as follows: ' ' ' '' i 'of the

M arket Price(in M K/Kc)

2.5012.0025.0015.002.0013.002.006.004.004.00

M aizeRicePaprikaBenn:Sweet PotatoesGroundnutsPigeon PeasTom atoesOnionsGreen rpaize

3. The exchange rate has been fully liberalized in the country so that the prevailingexchange rate retlects the true value of the M alawi Kwacha in the financial market.