Document of

The World Bank

FOR OMCLAL USE ONLY

Re"t No. 5340

PROJECT COH?LETION REPORT

MALAWI

SECOND KARONGA RURAL DEVELOPMENT PROJECT PHASE II

(LOAN 1286-T-MAI)

November 28, 1984

Government of MalawiMinistry of Agriculture

andEast Africa Projects DepartmentRegional Mission in East Africa

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

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ABBREVIATIONS

A.D.D. = Agricultural Development Division

ADMARC = Agricultural Development and MarketingCorporation

CADO = Chief Agricultural Development Officer

CSC = Cold Storage Company

IBRD International Bank for Reconstructionand Development

IDA International Development Association

KCRDP = Karonga-Chitipa Rural Development Project

MANR Ministry of Agriculture and NaturalResources

NRDP National Rural Development Programme

NRDP (PI) National Rural Development ProgrammePreliminary Investment

RDP = Rural Development Project

STA = Senior Technical Assistant

TO = Technical Officer

FOR OFFCIAL USE ONLY

KARONGA-CRITIPA RURAL DEVELOPMENT PROJECT, PHASE II

PROJECT COKPLETION REPORT

TABIE OF CONTENTS

Page No.AbbreviationsTable of ContentsPreface iBasic Data Sheet iiFootnotes iiiHighlights iv

Comments on and Summary of Government's PCR 1I INTRODUCTION I1I PROJECT OBJECTIVES I

III PHYSICAL IMPLEMENTATION 2IV PROJECT MANAGEMENT 2

V AGRICULTURAL SERVICES SUPPORTED BY THE KARONGA-CHITIPA RURAL DEVELOPMENT PROGRAM 3

VI NATIONAL RURAL DEVELOPMENT PROGRAM PRE-INVESTMENT 7VII PROJECT COSTS 7

VIII DISBURSEMENTS OF WINDOW TWO LOAN 8IX PROJECT BENEFITS 9X GOVERNMENT PERFORMANCE 13

XI BANK PERFORMANCE 14

Government PCR 16

Foreword 17

MAIN TEXT PART A : KCRDP II 181. Introduction and Summary 182. Background 193. Formulation 214. Implementation 245. Imnact 346. Financial Performance 447. Institutional Performance 458. Economic Rate of Return 489. Discussion and Conclusion 49

PART B NRDP PRE-INVESTMENT 501. Background and Formulation 502. Implementation 533. Financial Performance 564. Overall Evaluation 585. Conclusion 58

PART C LAKE TRANSPORT 591. Background 592. Implementation 603. Conclusion 62

KARONGA-CRITIPA RDP PHASE II - ANNEXES 63

Table of Contents 64

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

MALAWI

Karonga Rural Development Project, Phase II - Loan 1286-T-MAI

PROJECT COKPLETION REPORT

Preface

This is a completion report of the Karonga Rural DevelopmentProject, Phase II, for which a third window loan (Lu 1286-T-MAI) wasapproved on June 2, 1976. The loan was fully disbursed and clo3ed inDecember 1982.

This report consists of a project completion report (PCR)prepared by the Planning Div'ision in the Ministry of Agriculture, datedFebruary 1983, a revised economic analysis completed in October 1983 and asummary evaluation by the Resident Mission East Africa, completed inNovember 1983.

The PCR was submitted to OED but the Project was not selected foraudit. The 1DCR and the overview was sent to the Government for comments onAugust 31, 1984. i&1i.ng prepared the PCR, the Government did not send anyfurther comments.

ttt)

SECWD KAROXA RURAL EVLOErT PROJECr - WAN 1286-T-nl

PRO.ECa CtGClON REPORT

Basic Data Sheet

KFY PROJECr DATAActual or Actual as percentage

Apprisml Estimated of AppraisalEstimate Actual Estifmte

Project coat (USS dillion) 12.093 12.434 102.8Loan Amout (USS million) 9.2 9.2 100Date of Board Approval 06/30/76Date of Effectiveness 09/24/76Date Physical Components Completed 09/PD 03/82 Houses 10O:

Roads n3loreholes 9o0Markets 202Health 1O01Training Centers 1007

Closing Date : 03/81 12/82Econoidc Rate of Return: NRDP 14X 14t

- : l~~akeTransoort 18X LOz

Instittitonal Performance: Phor 1/Agronontc Performance : Variahle 21Financial Performance : Poor 31 -

Nober of Direct : 11.000 farmers 41Beneficiaries

aMIATIVE DISBURSEMENTS:

FY77 FY78 FY79 FY80 FY81 FY`82

Appraisal Estimate (USS nillon): 0.8 4.0 7.4 8.6 9.2 -

Actual (USS million) : 0.5 3.5 6.9 8.0 8.9 9.2Actual as 2 of Estimate : 62.5 87.5 93.2 93.0 96.7 100Dte of Final Disbursement : February 1982

MIS5ION DATA: Staffweeks Tpes t/Ifssion No. of Specializations In the Performance

5! 6/ of

Mission Source Date Persons Represented Field Rating Trend Problems

Preparation RMEA 10(28/74 2Preparation IMEA 01/22/75 1Appraisal HQ 10/04/75 5 Econ.Supervision RMEA 01/30/77 3 Econ/Publ.Health 6 2 - TOSupervision RMEA 01/10/77 1 Econ. 2 2 2 10Supervision RIEA 09/03/78 2 Econ.fAgronomy 4 2 2 FMSupervision RMEA 09/20/7R 2 Engin/Econ. 6 2 2 TOSupervision RICA D8/01/79 I Agronomy 2 2 1 TSupervision RIfA 05/09/80 2 Agric. Econ./Agron. 2 2 2 FTSupervision RSEA 01/21/81 1 Agronu-y 1 2 2 FT

OIE PROJECT DATA:

Borrower : Govertnnt of Malawi (GCI)Executitng Agency : Mtnistry of Agriculture. Halawi RailwaysFiscal Year of Borrower : April I - March 31Nne of Qarrency : Malawi Kwacha (MK)Carrency Exehange Rate

Appraisal Year Average (1975) USS 1.00 - 0.90 MKIntervening Year Average (1975-1981) USS 1.00 - 0.84Completion Year Average (1981) USS 1.00 - 0.90

FOLLOW-N PROJECr

:National RIral Development Progrsm (NRDP) Phase IIICredit iNumber : 183-MAICredit Amontt (USS million) : 7.3Date of Board Approval : 10/31/1%i

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FOOTNOTES

1/ Poor management and budget control in earlyProject years for Karonga Rural DevelopmentProject.

2/ Variable due to variability of rainfall and ofcrop prices. Farmer profits unsatisfactory forcash crops, cotton and groundnuts. Farmersreacted favorably to crop price Increase formaize and rice in particular. Insufficientdevelopment of extension messages.

3/ Excessive expenditures for operating costs inthe first Project years.The Ministry of Finance appropriated M1K 1.5million from the Credit Fund.Budget allocations generally satisfactory.

4/ Some 11,000 farmers representing 28% of thefarming cormunity were participating in thegroup credit schemes.Others benefitted indirectly from roads, watersupply and education provided under project.

5/ Status 1: Problem-free or Ninor Problems; 2: Moderate Problems3: Major Problems.

6/ Trend 1: Improving; 2: Stationery; 3: Deteriorating

7/ Types of Problems: F - Financial; T - Technical; P - Political;O - Other

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MALAWI

Karonga Rural Development Project, Phase II, Loan 1268-T-MAI

PROJECT I'IOMPLETION REPORT

Highlights

(i) The project, which was the seventh IDA/Bank supported ruraldevelopment project in Malawi, was the second phase of a rural developmentprogram in Malawi's far north. The first-phase Project was implementedfrom 1972 to 1976. It provided finance for rainfed and irrigatedagricultural development, health services and transportation in the Karongadistrict only. The irrigation component under the first phase project wasnot successful because of high costs overruns (unexpected requirement ofcanal lining) and the resulting shortfall in its economic viability. Inaddition berthing and handling facilities at the southern lake port ofChipoka could not be comnpleted because of cost overruns in other parts ofthe Lake Transport component and inability of Government to finance theoverrun. The second-phase project was extended in area coverage to includethe sparsely populated Chitipa district. The second phase project hadthree distinct components including (a) agricultural and livestock servicesand infrastructure in the Karonga and Chitipa districts, (b) a two-yearpre-investment phase to the National Rural Development program (NRDP), and(c) the completion of the Lake Transport component started under the phaseI project.

(ii) Project start-up was with funds from the first phase project.Project funds were used for 5 1/4 years compared to the original life of4 years. Disbursements for local operating and personnel costs for theKaronga Chitipa Rural Development program were 80% above estimates. Inaddition, an appreciation of the Mtalawi Kwacha relative to the dollarduring the project period reduced the Kwacha value of the Third WindowLoan. Government increased its Kwacha contribution to the project by .8million Kwacha (US$.94 million equivalent) compared to the appraisalestimate. Despite this, total costs denominated in Kwacha (10.5 millionKwacha, or USS12.4 million equivalent) were about 4% lower than appraisalestimates (10.9 million Kwacha). Annual work programs and budgets wereadjusted downwards to availabl-: finance, except for operating costs whichcould not be contained. Phys.cal road construction for example amounted toonly 32% of the appraisal estimate.

(iii) Only increased production from rainfed rice in Karonga, and maizefrom Chitipa contributed to project benefits. Favorable farmer profitsobtainable for these crops (due to relatively high prices) induced farmersto grow larger areas, and to devote more labor, management and inputs tothese crops. However, financial incentives were inadequate for obtainingincreased production of cotton, groundnuts and livestock.

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(iv) Surveys indicated that there was virtually no uptake of thetechnology advocated by extension agents during the project period.Farmers who were able to introduce the simple technology advocated byextension agents had already done so by the end of the first phaseproject. Both the extension and the research service failed to generateand communicate new technology of interest to the larger credit-worthyfarmers. Both services also failed to consider the strong risk aversion ofsubsistence farmers when designing agricultural improvements. Subsistencefarmers were untouched by the extension service. In this regard, the NRDPpre-investment component failed to strengthen agricultural research.

(v) Benpfits from the livestock component were minimal because of alack of market in the remote project districts despite increasing numbersof livestock. Indeed improved animal health facilities increased thenumber of livestock, while offtake did not increase. This exacerbatedover-grazing.

(vi) ADMARC had insufficient funds and incentives to construct themarkets/inputs stores foreseen at appraisal. Input supply services by thisparastatal were particularly poor. Marketing services were less bad,ADMARC handling an increase in rice and maize throughout despite the lackof construction of new facilities. However, the good performance was theunassisted parallel market which was able to handle increased productionoffered for sale.

(vii) Management of the Karonga Rural Development Project Area wasmediocre, in particular during the first 18 months when poor budget controlresulted in excessive operating costs. Management of the Chitipa area wasgood. In general however, Government procedures for creating positions andfilling posts with suitable qualified staff were lengthy and cumbersome.

(viii) The NRDP pre-investment component achieved its "hardware" objec-tives of providing the necessary infrastructure (houses, office facilitiesand stores) equipment and staff in three futture NRDP development areas(Mzimba, Thiwi Lifidzi and Kawinga). However, its "software" activitieswere nct met. It failed to appoint staff to the agricultural researchcomponent and agro-economic studies were not undertaken. Accounts andaudits were not received for this project component. The investtaeat costsfor the pre-investment component remained 12% below the appraisal estimate.

(ix) Malawi Railways was the executor of Chipoka harbor improvementsunder the Lake Transport component of the Project. Because of lowappraisal cost estimates, MK 310,000 of construction could not be includedin the tender. In addition, it was decided that barges undertake fueltransport instead of the oil tanker which the original project was to berehabilitated. Despite these shortfalls, cargo tonnages handled grew toapproximately the level foreseen at appraisal. Between 1976 and 1979(latest available data) the freight forwarded from Chilumba (in Karongadistrict) increased by 67Z, in part indicating the increased productionavailable for sale from Karonga. A crude estimate of the economic rate ofreturn on the Lake Transport component is 10%.

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(x) The project's economic rate of return (ERR) for the agriculturalcomponents of the project is estimated in the Government PCR at 14%,identical to that projected at appraisal. Higher rainfed rice and maizeproduction than originally envisaged offset the lack of project impact oncotton, groundnuts and livestock. This success compares very favorably toother Rural Development Projects in East Africa having similar design. Thecritical factor was probably the relatively favorable agricultural policyenvironment in Malawi, particularly price policy for rice and maize.Nevertheless, unfavorable price policy for cotton, groundnuts and beefcurtailed possible production benefits from these crops. The parastatalmarketing and input supply agency ADMARC performed poorly. However, thiswas largely mitigated by a flourishing parallel market which was notmolested by Government. Finally, there was some synergy effect inexpanding agricultural production resulting from high prices for rice andmaize, the flourishing parallel market, improved credit availability(credit use expanded to one-third of the farm population), roads, watersupply, and education provided by the project.

(xi) As can be judged from the above, the importance of the agri-cultural policy environment was seriousLy under-estimated at appraisal.This policy environment turned out to have as much of an impact onproduction in the project area as did project services. In retrospect, itis also unfortunate that the project attempted to assist the parastatalADMARC and not the private traders which constituted the parallel market.

MALAWI

Karonga Rural Development Project, Phase II - Loan 1286-T-MAI

PROJECT COMPLETION REPORT

Comments on and Summary of Government's PCR

I. Introduction

1. The Planning Division in Ministry of Agriculture, in conjunctionwith Karonga ADD personnel prepared a PCR for the above project, a finaldraft of which was received in RMEA on October 18, 1983. IDA staff havereviewed this PCR, and comments are provided below. The Ministry ofAgriculture has been self-critical in preparing its PCR. Most comments(though not all) made by IDA staff on earlier drafts have been incorpo-rated. The preparation of a PCR was not a condition of the Credit Agree-meent, and Government's efforts are therefore particularly commendable.The following comments should be read in conjunction with, or as addiLionsto Government's PCR. They try to clarify a few inconsistencies in data andexpress some views which differ from those expressed in the Government'sPCR.

II. Project Objectives

2. This integrated rural development project followed a first phasewhich was implemented in the Karonga District of northern Malawi, and wascomple:ed in 1976. This second phase expanded the project to anotherdistrict: Chitipa. Both projects were directed primarily to increasingagricultural production, income and social services. The total areacovered in the second phase was 900 thousand hectares of which 7% wascultivated and on which 38,000 farm families lived. The project containeda project management unity, development of agricultural research andextension, agricultural credit, livestock services, fisheries, soilconservation services, marketing and input supply facilities, water supply,health and education facilities, and roads. The project also was toundertake preliminary investment in infrastructure and the development ofCentral Ministry of Agriculture Services needed to accelerate theimplementation of a "National Rural Development Program" throughoutMalawi. Finally, the project included investment in transportationservices between Karonga and Chipoka harbors on Lake Malawi. Most cargobetween Karonga and southern Malawi is carried by ship on the ]ake (theroad link is poor). The component included harbor facilities, cargohandling equipment, and rehabilitation of an oil tanker.

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III. Physical Implementation

3. The Third Window Loan for the project became effective inSeptcmber 1976, and the project was closed in March 1982, one year longerthan expected at appraisal.

4. Karonga-Chitipa Rural Development Project. Civil worksconstruction commenced promptly and targets for staff housing, offices,health facilities (7 dispensaries and 5 maternity wards constructed), andprimary schools (36 schools) were reached early. Borehole drilling (watersupply) was about on target (83 boreholes drilled compared to 90 planned).However, because of substantial overspending in operating costs during thefirst 18 months, a rescheduling of funds was undertaken, along withimproved monitoring procedures and financial control. Operating costincreases were contained. In addition, several construction programs werereduced in scope due to insufficient funds to meet unexpectedly highcosts. The road construction program was cut back for this reason, andachieved only 30% of its original target (30 miles of road were constructedor rehabilitated). Livestock dipping tanks were not constructed becausecosts exceeded appraisal estimates and Government could not provide theadditional funds necessary. ADMARC (marketing and input supply parastatal)failed to construct markets and input stores because of its own financialconstraint. ADMARC constructed only five small marketing sheds.

5. NRDP Pre-Investment. Most of the staff houses and officesforeseen at appraisal were constructed. These were located in districts inwhich subsequent NRDP p-jects would be based (Thiwi-Lifidzi, Kawinga andMzimba districts). Road -uilding (largely in Thiwi-Lifidzi) was about 50%of that foreseen. I'ehicle acquisition for NRDP staff was largely asforeseen. The two ADMARC markets foreseen were not constructed.

6. Lake Transport. The oil tanker was never refitted. Instead, abarge was purchased to carry fuel. Cargo handling equipment was procured.Civil works construction at Chipoka harbor was largely completed. Costswere underestimated at appraisal, so some construction was dropped. Inaddition, due to a cement shortage in Malawi, construction was late.

IV. Project Management

7. Karonga Chitipa Rural Development Project. (a) There were 3Project Managers during the project's life in Karonga district. The firstManager allowed excessive operating expenditures due to overstaffing, poorcontrol of vehicle running, etc. A total of MK 803,000 was spent on

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operating costs above estimates in the first 18 months of the project.Following a detailed review of financial management by Ministry ofAgriclture staff, reprogramming of project activities and financing wasagreed with the Bank. Under the following two project managers there wasimprovement in program planning and budgeting, and execution of projectactivities. (b) Staff vacancies for several key posts and some poorquality support staff created management problems in both Karonga andChitipa districts. (C) A large number of surveys were carried out by theMonitoring and Evaluation section. The data was not always adequatelyanalysed and evaluated and was of limited assistance to management indecision making and forward planning. (d) ADMARC showed no interest in orcommitment to the project.

8. NRDP Pre-Investment Phase. This component was implemented by theMinistry of Agriculture and National Resources, under the authority of theNRDP coordinator. As indicated in para 5, management of physicalimplementation was good. However, management of software" (agriculturalresearch, socio-economic studies, and the resources survey) was poor (seealso para 18).

9. Lake Transport. This component was adequately managed. Freighttraffic through the two harbors increased substantially during the projectperiod. This was handled despite deficient pvrt facilities.

V. Agricultural Services supported by the Karonga-Chitipa RuralDevelopment Program

10. Agricultural Extension. This component was expected to be mostimportant in generating agricultural benefits. A new extension methodologywas successfully introduced, referred to as the farmer group approach.Extension agents contacted fixed groups of farmers on a systematicscheduled basis. The approach had some of the elements of T & V (indeed insubsequent years, it has evolved towaTd the T & V system). The groupapproach enabled more farmers to be reached than under the phase I project,and was relatively cheap since agents visited groups rather thanindividuals. To assess the impact of extension it is informative to lookat the major extension messages, combined with survey results including thedegree or uptake of extension advice. There were five categories ofextension messages for maize, groundnuts, rice and cotton:

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Message Percent of Farmers Following Message

1977/78 1979180(a) Use Improved Seed

Maize 35 7Rice 75 33

(b) Use Fertilizer, manureHaize 31 12Rice 48 49

(c) Plant EarlyMaize (before December 30) 68 75Cotton 60 91

(d) Optimum Plant DensityMaize 18 10

{e) Weed on Time-Maize 98 80Groundnuts 96 93Rice 93 81Cotton 98 100

The percentage of farmers following extension adrice for the most partdeclined during the project period.

11. Despite the above results, the Government's PCR shows data (page 19)indicating that farmers reached by extension got higher crop yields formaize, pulses and groundnuts than did farmers not reached by extension.However, from the information in para 10 above, it could be deduced thatthose farmers following extension advice were already introduced to theimproved technology in the first phase project. This would explain thehigher yields of those farmers who followed the advice of extension agentsand suggest the second phase project failed to introduce new technology toadditional farmers. The use of fertilizer, improved seed, and earlyplanting may be difficult for subsistence farmers who have little cash topurchase inputs, are not credit-worthy, and cannot hire labor (due to lackof cash) at peak labor-demand times for early and rapid planting, weeding,etc. Such farmers may plant at less than the "optimum" plant density inorder to give individual plants a greater chance of survival in :ase ofadverse weather conditions. They may use less fertilizer than recommendedto reduce the possible adverse financial impact from using costlyfertilizer in years of rainfall. Alternatively, the result of inadelquateand untimely supplies of inputs would produce a similar impact with alimited number of farmers able to utilize new technology. Despite thefocus of extension messages, the balance of farmers would have to adaptproduction systems that would function adequately without improved seedsand fertilizer. There is evidence from a recently completed crop survey(1979-83) 1/ to support this view point. Although maize plantingsincreased dramatically over the project period and this was sustained inthe follow-up project 2/, the expansion was totally confined to localmaize and inrerplanted maize prodoction neither of uhich requirefertilizer. National supply of fertil5zer has now been addressed through aBank/IFAD Project 3/. Most small farmers :,tercrop, for which noextension advice was available. This failure of extension was also thefailure of agricultural research which was inadequately executed under theproject. Indeed, the national agricultural research apparatus wasinadequate. This problem is only being addressed now.

12. Rice yields in Karonga district and maize yields in Chitipaincreased marginally during the project period, but there was a significantincrease in the area of maize planted in both project districts. Expansionin production of rice and maize accounts for the project's acceptableeconomic rate of return. How is this explained given the failure ofextensior and research and input constraints? The most importantexplanatory factor was the increase in the relative price of maize and riceduring the projer period. The resulting greater profitabilil-y of maize andrice stimulated greater farmer attention and labor input in cultivation ofrice and maize, hence leading to increased plantings. There was also truthto the concept of integrated rural development activities (water supply,credit, road building and education especially) having an impact onproduction. Better educated farmers with better educated children make

1/ Source: ADD Monitoring and Evaluation Unit 1984.2/ NRDP III (Cr. 1183-MA).3/ Smallholder fertilizer project (Cr. 1352-MAI)

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13. Seasonal credit was only provided through credit groups. Theintroduction of group credit helped double the number of credit farmers toabout 10,600. Thue 30% of farmers received credit. Late availability ofinputs tended to inhibit an even greater demand for credit. In addition,many farmers were either not convinced that the profitability of some cropsincreased when using expensive fertilizers, or were unprepared to take therisk of purchasing fertilizer on credit. Failure of sub optimal levels offertilizer to increase yields and income would have left these farmers in aperilous situation having a debt to repay and no additional income to repayit with. This rational risk aversion inhibited uptake of new technologyrequiring a cash outlay or credit. Less than expected demand for creditwas the result. The average loan per farmer was MK 25 per season. Creditrepayments were excellent at 98%, mainly because defaulting groups becameineligible for new credit. This component -as in general successful,although it did not reach as many farmers as targetted.

14. Livestock extension services concentrated on improving animalhealth (cattle dipping, castration) and on livestock management (culling,marketing of unproductive animals) after several development componentswere cut following Government's review of project activities in 1978.Results were not good in an economic sense. The marketing of livestock didnot increase (at least partly due to the inadequate official priceoffered), while cattle numbers did increase. Overgrazing is worse as aresult.

15. The Land Husbandry Component demarcated 7% more land into watercontrol areas in Karonga district than foreseen at appraisal. Watercontroi measures, however, were not successfully carried out, largelybecause of lack of funds for construction. Flooding is therefore still aproblem in Karonga. The Land Husbandry staff provided assistance withfeeder road layout and design. Feeder roads were then constructed on aself-help basis.

16. Marketing and Input Supply. ADMARC not only failed to constructmost of the facilities foreseen under the project, but also generallydistributed inputs late or not at all, and was somewhat inefficient in itsmarketing activity. Government ignored a flourishing parallel market whichwas able to absorb additional rice and maize production. In retrospect, itwas unfortunate that the efficiency and resourcefulness of this parallelmarket was not recognized and assistance provided through the project toits development. This could have had a much larger impact than did theattempt to assist ADMARC.

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VI. National Rural Development Program Pre-Investment

17. The objective of this component was to create the necessaryinfrastructure, central services and staff necessary to launch the nationalrural development program which was to eventually (in about 20 years) coverthe entire country. The concept was to prepare for the introduction of lowcost, replicable investments in marketing, extension, input/creditorganization, roads, and water supply. The pre-investment phase financedunder the Karonga/Chitipa Rural Development project succeeded in meetingmost of its infrastructure and equipment targets. However, the CentralMinistry of Agriculture Services which were to be developed to serve theentire NRDP Program were not strengthened as foreseen except in itsaccounting department. This hurt the start-up of adaptive agriculturalresearch in particular, in turn retarding the process of developing validextension messages. Other central services such as agro-economic surveysand land resource analysis were not undertaken. In conclusion, the'hardware element of this component was successfully implemented, but the"software- element was not.

VII Project Costs

18. The various tables in Government's PCR show coflicting total costdata. The data in Annex IV is correct. Total cost was MK 10.537 million.The Bank provided US$9.2 million (MX 7.8 million equivalent) or 74%. Totalcost at appraisal was estimated at MK 10.9 million of which 75% was to befinanced by IDA. In local currency there was a 3% cost underrun.5! Thiswas due to an appreciation of the Malawi Kwacha which caused the Kwachaequivalent of the Third Window Loan to decline, combined with ADMARC'Sinability to finance its share of the input supply and marketing facilities(which were not constructed).

Financial Source Appraisal Estimate ActualAmount % Amount X(MK mil) (MK nil)

IDA 8.3 75 7.8 74Government 1.9 18 2.7 26ADMARC 0.7 7 0 0

Total 10.9 100 10.5 100

Government's contribution increased considerably to finance overruns oflocal (largely operating) costs. 1

5/ In the Basic Data Sheet, total project costs are shown in US$equivalent. Because of the appreciation of the Kwacha, actual totalcost denomination in dollar equivalent was 2.8% higher than expectedat appraisal.

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Recurrent Costs

19. The PCX shows high operating and personnel costs during projectexecution (about US$1.1 million p.a. equivalent in current prices). Thislevel of operating costs is excessively bigh. An attempt should have beenmade during project execution to reduce operating costs and increase costrecovery in order to impose less of a burden on the Government budget. Thegeneral issue of high operating costs of agricultural projects in Malawi isbeing addressed in the SAL. In addition, under the third phase of thisProject (NRDP III, Credit 1183-HAI) high recurrent costs for staffsalaries, vehicle operations and building maintenance are being funded byIDA on a declining basis over the Project period. This procedure whichpasses an increasing share of the financial burden of operating costs ontoGovernment during project execution, is intended to provide an additionalincentive to Government to reduce and/or to recover costs. Unfortunately,the overruns of operating cost during the second phase project, largelyfinanced by Government, did not induce Government to reduce such costs orrecover more cost. Greater attention must be given in project design tothis issue.

VIII. Disbursements of the Window Two Loan

20. The following table compares Loan allocation with actualdisbursements.

Allocation Actual ZCategory at Appraisal

_ _ _- IJS$ -

IA Karonga RDP - vehicles, machinery, 600,000 393,085 65.5equipment

B - civil works 1,000,000 1,277,909 127.8C - personnel 1,000,000 1,447,751 144.8D - operating costs 1,000,000 2,151,415 215.12A NRDP pre-inv. - vehicles, machinery, 400,000 370,710 94.3

equipmentB - civil works 900,000 1,028,126 114.2C - personnel 400,000 198,367 49.4

D -- operating costs 300,000 401,309 133.7E ' - consultants 130,000 87,292 67.23A Lake Transport - civil works 1,500,000 1,652,073 110.1B - cargo handling eguip. 150,000 191,963 128.0C - Mpasa refitting 20,000 -

Unallocated 1,800,000

TOTAL 9,200,000 9,200,000

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21. Disbursements for local personnel and operating costs exceededdisbursement estimates at appraisal by 80%. Physical completion of civilworks was somewhat less than expected at appraisal. Cost was 20% higherthan the appraisal basic (before contingency) estimate, reflecting theexpected rate of price inflation. Expenditures for foreign personnel andconsultants were lower than expected because not all staff anticipated atappraisal were appointed. Equipment purchases were lower than anticipatedat appraisal to keep costs down. In effect there was a substitution ofoperating and personnel costs for equipment and for foreign personnel.This was undesirable. Greater efforts should have been directed tolimiting persor:el and operating costs.

IX. Project Benefits

Crop Production

22. Most project benefits were expected from increased production ofmaize, rice, cotton and coffee, with smaller production increases ofgroundnuts, beans and beef. The concept was that the development ofagricultural services, infrastructure, and people (health and education)would combine to have an impact on production. It was recognized that theindividual impact of each component would be difficult to identify.Unfortunately, the PCR presents conflicting data on the evolution ofcropped areas, crop yields and production. This reflects the inadequacy ofthe monitoring and evaluation system. In addition, different sourcesprovide different data. Inconsistencies of data in an early draft of thePCR were reported to Government. Government in response provided acorrected Annex X entitled "Economic Analaysis'. The data in this annexare the best available.

Crop Production in Karonga District

23. Crop Area. 6/ Appraisal estimates were for 1,420 ha each of theimproved crops maize, groundnuts, cotton and unimproved cassava or maize.The PCR indicates that the maize area exceeded this target significantly(4,500 to 5,200 ha in the last 4 years) but cotton and groundnut areasdeclined to less than 150 ha in 1980/81. Rainfed rice was expected toincrease to 4,490 ha. This area was slightly exceeded in 1978/79 and in1979/80 but almost doubled to 8,800 ha in 1980/81, no doubt due tofavorable producer prices and good rains.

6/ Data on cropped area reported in the Government's PCR may not beaccurate.

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24. Crop Yields were expected at appraisal to increase toapproximately 2,000 kg/ha foDr maize, 720 kg/ha for cotton, 410 kg/ha forgroundnuts and 2,200 kg/ha for rainfed rice. Yields varied considerablyfrom season to season mainly reflecting rainfall and price as discussed inDara 10 above. Maize yields averaged about 1,150 kg/ha or slightly betterthan half the target yield. Average cotton yields appear to have slightlyexceeded the target, and average groundnut yields were below that antici-pated. Rainfed rice yields ranged from an unusually high 3,000 kg/ha in1980/81 to 1,037 kg/ha in 1977/78.

25. Crop Production. Project crop production varied considerablyfrom year to year, mostly depending on seasonal conditions (rainfall) andproducer prices. Maize and groundnut production in Karonga was less thanprojected without the project. This occurred as rice production wassubstituted for maize and groundnuts due to increased paddy prices. Cottonproduction increased only marginally compared to the without projectprojections.

26. Official Crop Purchases. ADMARC data on crop purchases forKaronga do not indicate substantial increases during project imnplemen-tation. Rice purchases in Karonga were highest in 1977/78 with 10,850tonnes and then declined to about 7,500 tonnes per annum. Cotton purchasesstabilized at about 380 tonnes, while maize and groundnut purchases werenegligible. This means that much of the incremental production wasmarketed through unofficial channels, possibly the result of insufficientADMARC prodived marketing facilities and, no doubt, also due to higherunofficial produce prices.

Crop Production in Chitipa District

27. Crop Area. The SAR indicates that the pre-project maize area of2,732 ha (mostly intercropped with beans and grounduuts) would be replacedin 1980/81 by 1,093 ha each of composite and improved local maize and 547ha each of improved beans and groundnuts. During project implementationthe maize area stabilized at about 10,500 ha, or at 4-5 times the appraisalestimate, mainly due to attractive prices on informal markets. The ground-nut area was close to estimates but more than doubled in 1979 to 1,300 ha.Bean areas exceeded the appraisal target and stabilized at about 1,900 hain 1979/80.

28. Crop Yields. Maize and groundnut yields were expected to beabout 2,370 and 525 kg/ha respectively. Only in 1977/78 was the appraisalestimate for maize yield reached; in the following years it ranged from1,734 to 1,937 kg/ha. Groundnut yields varied between 280 and 645 kg/ha.

29. Crop Production. Incremental maize production exceeded appraisaltargets while groundnut production did not.

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30. Official Crop Purchases. Since 1976/77 maize purchases by ADMARCmore than tripled the average of the previous five years. Furthermore, ithas been alleged that some over-the-border trading has occurred. Sales ofgroundnuts and pulses were highest in 1979/80 with only some 30-40 tonnesrespectively.

31 Causes for Production Changes. It is clear from the data thatproducer price and rainfall were critical factors in determiningproduction. Because of inadequate producer prices cotton and groundnutproduction was not stimulated as expected. Rice production in Karonga wasstimulated as was maize in Chitipa. Extension messages appear to have hadlittle impact during the project period as indicated in para 10. Littlebenefit accrued from the livestock component, although the cattlepopulation increased qt a more rapid rate because of increased dipping andimproved veterinary services. The essential constraint to achieving theobjectives of the livestock component was Karonga-Chitipa's isolation whichprevented the Cold Storage Company from purchasing all offered stock(because the company had a limited imprest account reducing its ability topurchase from areas which have high transport costs).

32. The "synergy" effect on agricultural production expected from asimultaneous, integrated development of agricultural services, infra-structure and social services was important, with however some unforeseencauses. Expanded agricultural credit services, roads, water supply andeducation contributed directly or indirectly to increasing agriculturalproduction. However, the predominant unforeseen factors were the high riceand maize prices making these two crops profitable, and a dynamic parallelmarket. Rainfall was also of great importance.

33. Annex 10 of the Government's PCR provides an economic rate ofreturn calculation. It includes incremental crop production benefits, andthose project costs related to production. 7/ It excludes Lake Transportservices, health, hydrology studies, monitoring and evaluation andlivestock (for which benefit data are not available). The result is an ERRof 14%. The ERR for the livestock component (not computed in theGovernment's PCR) is likely to be about 0%. The total cost of thelivestock component was MK 147 thousand, or 2% of costs. Assuming a 0%rate of return to livestock if this component is included, the FRR falls

7/ The economic rate of return analysis contained in the Government's mainreport (page 48) was not correctly prepared, and was sent back toGovernment with a request for changes. These changes were made in anew Annex 10, which is to be taken as the correct calculation.

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insignificantly. It would still be rounded off to 14%. The ERR projectedat appraisal, which was estimated on the same basis, was also 14%.8/

34. Ex-post economic rate of return analysis does not distinguishbetween agricultural benefits generated in a project area by projectservices, and those generated by other factors. Agricultural projectssituated in countries having appropriate agricultural development policiestend to succeed, while those projects situated in countries havinginappropriate policy tend to fail (see the World Bank's Eight Annual Reviewof Project Performacne Audit Reports for this conclusion). In Malawi,agricultural policies were relatively good. The economic rate of return of14% reflects this fact as much as it does the impact of project services.Only recently has the Bank realized the overwhelming importance of thepolicy environment. Presently, considerable assista:ice is being providedto improve agricultural policies in Malawi through SALs, technicalassistance, and Bank agricultural sector work.

35. The impact of the project on the Government's budget has beennegative. The budget has benefitted little from increased taxes andduties, and was negatively affected by the high operating costs of theproject. ADMARC, the main purchaser of surplus produce, de..lved little orno benfits from the project because of its high costs of handling themostly Chitipa maize and because of financial losses incurred in marketingKaronga rainfed rice.

36. Social benefits are significant and observers have repeatedlyremarked on the improved education facilities for the population. Thenumber of pupils attending primary school in Karonga rose from 20,000 in1974 to 23,600 in 1981. In Chitipa, attendance rose from 13,600 to 21,000in the same period. The boreholes have improved water quality, reduced thedrudgery of obtaining water, and liberated labor or farming. Only healthcare has not improved significantly because of understaffing in the healthcentres created. In addition, these facilities and services requireconsiderable recurrent expenditures. For the time being the latter arefunded from the third phase project (NRDP III ) and SALs. It would beuseful to introduce cost recovery mechanisms which would contribute to theoperation of health facilities and help finance better health services.

8/ If all project costs are included, the rate of return would fallto 7%. This estimate is not particularly useful since it included thecosts of social and extra-project services which were intended to (anddid) have social benefits and economic benefits outside the projectarea. These components were not intended to directly stimulateagricultural production.

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37. As stated above the NRDP Pre-investment phase succeeded increating certain basic infrastructure useful in accelerating start-up ofsubsequent NRDP projects. However, this component did not undertake theadaptive agricultural reserach foreseen, which was intended to generatemore appropriate extension messages. Nor did it undertake theagro-economic analysis foreseen.

38. Lake Transport. The appraisal report calculated benefits of theLake Transport component on the basis of increased cargo which would becarried to and from Karonga permitted by project harbor improvement andrehabilitation of the oil tanker. The increased cargo was expected to comefrom additional agricultural production in Karonga. Freight traffichandled through the two ports which were partly rehabilitated by theproject did increase rapidly during the project period (by 39% in terms ofweight handled from 1974 to 1979). No economic rate of return wascalculated in the PCR. However, project costs were approximately equal tothe appraisal estimate of Kwacha 2 million. Freight traffic grew at a ratenearly identical to that projected at appraisal. Given this situation, theactual ERR was probably close to the 18% estimated at appraisal, andcertainly above 10% (10% has been placed in the basic data sheet).

X. Government Performance

39. Government commitment to the project was satisfactory as istypified by its willingness to finance cost overruns from its budget.Project management initially was weak, particularly in workplan and budgetpreparation and in containing operating costs. Throughout the Project veryclose Ministry of Agriculture assistance and supervision was required (fromthe Chief Agriculture Development Officer). Staff appointments weredelayed because of cumbersome and time-consuming procedures, and there were3 Project managers in Karonga district in 4 years, all factors whichaffected Project management adversely. The only major curtailment inplanned Project activities occurred in road construction (only some 32% ofthe target) and in ADMARC's inability to construct markets and inputstores. The Government provided insufficient crop price incentives forcotton and groundnuts to allow appraisal targets to be reached. TheMinistry of Finance also withdrew MK 1.5 million from the revolvingagricultural Credit Account. It has been agreed, however, that this amountwill be refunded to the Karonga ADD Credit Fund or to a Central Credit Fundif and when this latter is established.

40. The major Project weakncss was the inadequacy of on-farmresearch, in particular that focussing on the needs of subsistencefarmers. As a result there was no strengthening of extension messagesduring the project period. Although the extension sevices adopted a farmergroup approach, its focus remained mostly on creditworthy farmers who hadland in excess of subsistence requirements.

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41. The withdrawal of the post of NRDP Coordinator contributed topoor coordination of NRDP pre-investment activities. Accounts and auditswere never received for this component, nor were they received for the lastfew years of the Karonga-Chitipa Rural Development Project. Othercovenants were complied with in a timely manner.

XI. Bank Performance

42. The appraisal team suitably reduced the scope and cost of theKaronga-Chitipa component (deleting coffee development proposals andscaling down credit and ADMARC components). This contributed positively tothe Project design. The change in approach of the agricultural researchcomponent from the originally proposed large number of replicated trials tothat of on-farm trials was sound, but trial implementation was less thansatisfactory because the required staff were not appointed. The inadequacyof the national agricultural research system was overlooked. The impact ofexisting extension messages was over-estimated. The extension service hadmuch less to offer in terms of improved technology than was anticipated.Input usage (except improved rice seed in Karonga) was overestimated, butthe appraisal team could not foresee the external logistical problems ofgetting farm inputs into Malawi, nor were the unfavorable crop prices forcotton and groundnuts predictable. Nevertheless, as with other agricul-tural project appraisals in East Africa, the importance and impact of thepolicy enrivonment was grossly under-estimated.

43. There was too much faith in the possibility of assisting aninefficient marketing, and input supply parastatal (ADMARC). It isunfortunate that no thought was given to assisting energetic traders on theparallel market.

44. NRDP pre-investment proposals by the Government were suitablyreduced by the appraisal team to allow more time to establish the necessaryinstitutional framework and to collect and analyze essential data on whichspecified NRDP development proposals were to be based. In the event, thisproved to be an excellent decision since the administration of thiscomponent was relatively poor.

45. Although the appraisal team altered project design in order tominimize investments and recurrent costs, there was not enough attentiongiven to ways in which to wean the project from dependency on highGovernment expenditures for operating costs. The project is too costly tooperate, and offers little in temrs of cost recovery.

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46. The Bank's Resident Mission in East Africa srnt 7 supervisionmissions to Karonga-Chitipa, which provided considerable technicalassistance, particularly on extension organization and projectmanagement. The project was probably somewhat better managed as a result.Supervision missions for example asissted in resolving staffing andfinancial problems. Excessive operating expenditures were detected earlywhich resulted in a rescheduling of project activities and expenditures.Nevertheless, recurrent costs were excessive and no system was recommendedfor reducing recurrent costs or increasing cost recovery. Althoughsupervision missions pointed out the negative impact on cotton andgroundnut production of price policy, they were unable to influence achange in such policy. Errors made at the design stage marked the projectfor its life.

47. In summary, the Bank appraisal mission did marginally improveproject design, and Bank supervision did improve management. However, Bankstaff did not fundamentally alter or improve design nor were theyinfluential in changing Government price policy or project design duringimplementation.

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MALAWI

SECOND KARONGA RURAL DEVELOPMENT PROJECT PHASE IIoIZan 1286-T-MAI)

PROJECT COMPILETION REPORT

Government of MalawiMinistry of Agriculture

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FOREWORD

This project completion report for Karonga-Chitipa Project PhaseII has been prepared by the Central Evaluation Unit of the PlanningDivision in the Ministry of Agriculture. It is the second completionreport, after that of Lilongwe Land Development Programme Phase III, to beprepared by a local team. Therefore local experience is being developedin the preparation of project completion reports.

While the Preparation of the report started in good time to allowfor the presentation of the report about six months after the completionof the project to the World Bank, a number of problems emerged. Firstly,the then Senior Economist (Evaluation) who initiated the work left thecountry at the end of his contract with Malawi Government in April, 1982.At the same time, he took away with him all the information that had beengathered with the promise that he would work on the report while outsidethe country. This did not materialze even after numerous correspondences.The data was returned in September 1982. Therefore, the work had to bestarted again. Secondly some key data could not easily be traced andretrieved for instance, the performance of the pre-investment phase and theLake Transport Component.

The draft report was prepared in October 1982 and valuablecomments on its content were received from various government officers aswell as World Bank staff from the Regional Office in Nairobi. Thesecomments have, either whole or in part, been incorporated in this finalreport.

As -will De gathered from the report, the project had beensuccessful in incressing crop production during the phase and a network ofsocial infrastructure was provided in order to improve the living standardof the people.

This report is a result of joint effort by staff of the PlanningDivision and Karonga Agricultural Development Division (KADD). The write-up of the report was done by Messrs. D.M. Chembezi and F.R. Mwambaghi, allEvaluation Economists in the Planning Division's Central Evaluation Unit.The Senior Economist (Planning) assisted the team in finalizing the report,especially in producing the chapter on Economic Analysis. The ChiefProjects Ofticer provided valuable guidance in the preparation of the FinalReport.

G.B. ChirwaCHIEF PROJECTS OFFICER

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1. INTRODUCTION AND SUMMARY

1.0 This is the second Project Completion Report to be prepared andpresented to the Bank by Malawi Government, thie first one being that of theLilongwe Land Development Programme Phase III prepared in 1979. Phase ICompletion Report for Karonga Rural Development Project was prepared by theBank itself. Although some mention has been made of how much investmentwent into Phase I, this report has laid emphasis on the activities andimplementation of Phase II which included Chitipa District originallyomitted _n the first phase.

1.1 Basically the presentation of material in this report fo]lowsguidelines detailed in the Bank's Operational Manual Statement (IBRD,February 1979). This manual clearly presents and indicates what aspectsought to be included under each section. An attempt has been made toinclude as much information in the text as possible, however, follow-updetails have been presented in the form of Annexes and referenced withinthe text.

1.2 This report finds that physical implementation of the project wasgenerally good although markets and roads fell short of the appraisaltarget. The project was however implemented with weak management andfinancial control. Autonomy, within the frame of decentralization, appearsto have been granted to the project far too early and because of thiscoupled with lack of proper financial control, cost over-runs wereexperienced during the first two years of the project life.

1.2.i The Project has had considerable impact and success on cropproduction. Incremental crop production for rice, maize and somehow cottonbeen increasing annually, and higher yields except for groundnuts have beenmaintained. Reduced land under cultivation and change from Malimba toManipintar groundnut appears possible cause for the poor productionperformance of cotton and groundnuts respectively. The estimated economicrate of return is 33% over a period of 25 years. This excludes costs ofcomponents left out in the analysis at appraisal. If all component costsare included, the rate of return falls to 18%. Because of lack of phase Icost streams, no attempt has been made to calculate a combined rate forphases I and II.

1.2.2 Research has not focussed their attention on local needs and liukwith the extension service has been weak. Credit use has expanded andrecovery rate has also improved considerably. Seasonal inputs on credithave however fallen short of the appraisal targets probably because of theintroduction of credit groups and the policy which restricted loans togroups.

1.2.3 Little attention has been paid to land use planning and data forthe monitoring of envircnmerntal effects are hardly available. Onlivestock development, little emphasis was laid on inproved livestockdevelopment programmes instead general livestock extension was undertaken.

1.3.0 Regarding the preliminary Investment Phase of the National RuralDevelopment Programme, considerable infrastructural development has beenac ieved. Work which was suppose to be done by Land Resources andAgricultural Research in proposed NRDP project areas never took shape

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because of the problems of filling the posts agreed at appraisal. On thisbasis therefore, the Pre-Investment Phase has been a failure.

1.4.0 A considerable part of the work proposed at appraisal under thegeneral objective of Lake transport improvement has been done. BothChipoka and Chilumba harbours are being used and the amount of cargohandled is increasing with time.

1.5.0 In conclusion, the project (KCRDP II) has demonstratedconsiderable success in as far as crop production is concerned therebyccntributing to the improved socio-economic life of the target populationand the nation as a whole. Mention also needs to be made of the valuablelessons learnt from the planning and implementation of KCRDP II. This hashelped to improve the planning and implementation of the project's thirdphase and also other Rural Development Projects (RDPs) within the NationalRural Development Programme (NRDP).

2. BACYrROUND

2.1 Following the implementation of regional intergrated developmentprojects in the Central and Southern Regions of Malawi in 1968, theNational Development Council, early in 1969, directed that an economicallyviable integrated development project be mounted ir the Northern Region.The Northn Region was regarded as disadvantaged by being at the extreme endof a long line of communication with a severe lack of feeder roads. KarongaLakeshore produced practically all the saleable surplus of the Region andwas viewed as the area with the greatest immediate potential in terms ofirrigation, and human and cattle populations. A Phase I for Karonga RuralDevelopment Project was subsequently appraised in 1971 and commenced withfinanzial assistance from in 1972 VCredit Agreement 282-MAI).

2.2 The first Phase was originally expected to run for five years (to1977) however, due to initial difficulties in staff recruitment anddelays in housing construction, progress in the first year was slower thanexpected. Revisions were made and the Phase was shortened to four years.Proposals were then prepared by Malawi Government for a Second phase andthis was subsequently appraised by the World Bank in 1976. Phase IIcommenced with financial assistance from IBRD (Third Window) in the sameyear (Credit Agreement 1286-MAI). This Phase was designed to last for fouryears (to early 1981), was however subsequently extended by one year toclose on 31st March, 1982.

2.3 These two phases of the project received finance from IDA/IBRDCredits Malawi as follows:-

Phase AppraisalReport Credit Amount Period

I PA 106a 282-MAI US$6.6 Million 1972-1978II 1084-MAI 1286-MAI USS9.2 Million 1976-1981

There has been an cverlap between phases I and II in finances: residualfunds from Phase I have been used in Phase II.

Included was funding towards improved Lake Transportation Services and aPre-Investment for the National Rural Development Programme. Thesetogether made up some (46) per cent of the total.

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2.3.1 The total cost of the two phases (including contributions fromMalawi Government) amounted to an estimated MKI5.85 million. This wasallocated as follows:

Phase I Phase II Total(MK "Million)

Karonga and ChitipaProject: Development

Account 6.61 5.14 11.75Karonga and ChitipaProject: Revenue

Account 0.10 1.58 1.68NRDP Pre-Investment - 2.42 2.42

Total 6.71 9.14 15.85

2.4 The Completion Report for Phase I concluded that the Project hadprovided a stimulus to the development of Karonga; not only through theprovision of inputs and extension services but also from the improvedphysical infrastructure which had been achieved. The purpose of Phase IIwas to continue this support for the development of agricultural productionin Karonga and spread this development to Chitipa District. In additionthe second Phase included a component to support the preparation of theNational Rural Development programme through a strengthening of theplanning capacity withiMANR and through preliminary investment in threeselected 3-eas of Malawi. A component for the further improvement of Laketranspoication services was alincluded.

2.5 The total area of the Karonga and Chitipa Districts is 0.89million hectares of which 7% were estimated to be under cultivation at thecommencement of Phase II. The project area is bounded by Zambia to theWest, Tanzania to the North and Lake Malawi to the East. A large mDuntainrange to the South confined road accsss between the project and the rest ofMalawi to a single unreliable lakeshore route. The two districts could be

divided into five main natural areas, namely: the steep-sidedcoffee-growing Misuku hills, the scarcely populated undulating Chitipaplain, the agriculturally unproductive and unpopulated Karonga scarp zone,the fertile North Karonga Lakeshore plain. Annual average rainfall rangesbetween 750 to 1500 millimetres, most of it falling between November andMay. An estimated 38,000 farm families lived ithe two districts at thecommencement of Phase II.

2.6 To some extent the design of the second phase represented anadjustment in policy from an intensive Scheme approach towards a moregeneral approach covering all farmers and all crops-. This was in linewith the present National extension policy which aims at covering allSmallholder farmers.

2.7 By the commencement of Phase II, a considerable facility ofinfrastructure and staffing was already available in both Karonga andChitipa Districts. A summary of these facilities is provided at Annex I.

2.8 The principal sources of information which have been used forcompiling this project completion Report were the reports and records ofthe project Evaluation Unit, the Financial Division (cost accounts and

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Credit Fund Control), Programme Management and component heads and thefiles and records stored at Ministry of Agriculture Headquarters. Numerousother specific sources are quoted in the text and a list of the mainreference at Annex II.

3. FORMULATION

3.1 Initial discussion and Project Identification outline for asecond phase of Karonga Project took place at a meeting with leaders andpoliticians of Karonga and Chitipa districts at Karonga in October, 1971.Provisional proposals for this second phase were then prepared by a jointteam from Planning Division (Ministry of Agriculture and Natural Resources)and Karonga project management. These proposals were prepared in full

consultation with senior staff working on the project and with allMinistries and departments concerned;particularly the AgriculturalDevelopment and Marketing Corporation, Cold Storage Company, Ministry ofHealth, Ministry of Works, and other Departments within the Ministry ofAgriculture and Natural Resources. Following this integrated planningprocedure, the Project Proposal Document was submitted to a World Bank(IBRD) Appraisal team in October 1975.

3.2 The concept of a National Rural Development Programme was beingactively discussed within Government at that time. The extension of theproject phase II to Chitipa District was originally envisaged as a firstpilot for the concepts of NRDP.

3.3 The Malawi Government Proposals for Phase II over a four yearperiodcommencing 1st April, 1976 amounted to a base cost of K6.603million. Physical and price contingencies were calculated at K2.892million giving a total o K9.50 million. Detailed cost breakdown bycomponent were presented and an internal rate of return of 13.3 per centwas estimated over a 25 year period. This economic analysis omitted thecomponents of research, hydrology, fisheriesevaluation, health andlivestock. The primary benefits of the project were expected to beincreased production of maize, rice, cotton and coffee, with smallerproduction increases of groundnuts, beans and beef.

3.4 An IBRD Appraisal Mission of five team members visited Malawi inOctober/November 1975. An additional team of two visited in February, 1976concerning the lake transport proposals.

3.5 There were some considerable differences between the finalappraisal document and the original Malawi proposals. The main points ofdifference we as follows:

(i) The Appraisal document required an additionalMalawi Government provision of over K1.5 millionaccording to an enlarged project design and achange of contributory financing proportion.

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Text Table 1: Financing Arrangements compared (MK'OOC

Project Proposal Appraisal Prov.Source by Malawi Govt. (1084-HMAI)World Bank Loan 8,071 (85%) 8,300 (75%)Malawi Government 338 ( 4%) 1,900 (18%)ADMARC 1,066 (11%) 700 ( 7Z)TOTAL 9,495 100% 10,900 100%

(ii) Components for Fisheries and coffee developmentwere dropped by the Appraisal document;

(iii) Two large new components, which involved pre-investment for the National Rural DevelopmentProgramme and the development of lake transport-ation facilities, were introduced at appraisal.These components alone made up some 46 per centbase cost provision in the new project design.

(iv) The proposals for staff housing were amended atappraisal with provision for less junior (P-type)housing and more senior (C and D type). At thesame time the cost provision for the constructionunit and civil works was out at appraisal by almostfifty per cent to cover what was virtually anequivalent programme.

(v) For extension the farmer to technical assistant(extension worker) ratio was reduced by abouttwenty per ceiLt (to 1:600). Although a groupextension approach was emphasised by the proposalswith concentration on defined areas (schemes),these aspects were not specifically mentioned bythe appraisal document.

(vi) Allocation of new funds, the farmers revolvingcredit fund were reduced at appraisal. This wasbased on a revised estimate of loan requirementsduring the phase representing only one-thirdthat anticipated by the project proposal. Theappraisal document revised downwards the project-ions of package-adopting maize and cotton farmers(by 50 per cent) and of medium term credit inputs(by 80 per cent). The projection of groundnutadopters' (Karonga) was however increased by 30per cent. Credit for coffee production wasdropped. A schedule for phasing farmers off credittowards cash purchases of inputs was adopted bythe appraisal document with a more rapid move tocash (advanced by two years).

(vii) The Appraisal document considered that the LandHusbandry work programme should give increasedemphasis to encouragement in adoption of good land

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use practices. To this end it was recommendedthat this component be absorbed into the extensionservices during the last two years of Phase II.This was not the object of the original projectproposal which had emphasised concentration onrainfed rice schemes (as in Phase I) and thesurvey of alignments for farms and roads.

(viii) Proposals for the development of a holding groundin the south of Karonga District (at ChLilumba)for marketed Livestock together with an investiga-tion of the possibility of their movement by lakebarge to Central Region markets were not adoptedat appraisal. Further appraisal omissions were fora temporary cattle market and three pilot grazingschemes in Chitipa District.

(ix) For the Research component, the appraisal documentplaced emphasis on a programme of project specificresearch. This was to be based on an extension systemof farm scale tests to be initiated with the help ofextension staff. The project proposal had based itsresearch component on large numbers of replicatedtrials to fit within the national framework of researchdepartment headquarters.

(x) The programme for development of ADMARC facilitieswas reduced at appraisal from an original proposalof twelve input stores and thirteen market complexesto eight input stores and nine market complexes.

Summarised comparison of component costs are as follows:

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Text Table 2: Component costs compared (K14'0O)(a)

Project Proposal Appraisalby Malawi Govt. Document

1084-M&IComponent (4 years) (4 years)

Karonga Project Area:Management Unit 398 255Financial Control 254 625Mechanical Maintenance 158 169Construction 1,540 836Extension 952 719Credit Operations 450 (b)Land Husbandry 161 143Livestock 306 262Research 251 208Hydrology 131 136Evaluation 149 181Health 351 399Fisheries 58 0Component Costs sub-total 5,159 3,833

Credit Fund Injection 763 173ADMARC Construction 681 466Total Base Costs (KCRDP) 6,603(100Z) 4,472(54Z)

NRDP Pre-Investment: 0 2,276Lake Transport: 0 1,536Total All Base Costs 6,603 8,284

Contingencies: Physical 584(9X) 540(7%)Price 2,308(35%) 2,059(25%)

Total Project Cost 9,495 10,883

Note: (a) These are costs on Development Account only.

3.7 Description of the Project

A formal description of the Phase II project, as given by theDevelopment Credit Agreement (1286-T-MAI) Schedule 2, is reproduced atAnnex III.

4. IMPLEMENTATION

4.1 Effectiveness and Start-up

4.1.1 The funding for Phase II (Credit 1286 MAI) was officially agreedon June 24, 1976 and became effective on September 24, 1976. After anextension in the life of this phase, to allow for the completion ofoutstanding infrastructure and the financial arrangements for a third

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phase, the available funds were finally used ui on 31st March 1982 giving atotal implementation of 34 years.

4.1.2 With a considerable (HK440,000) carry-over of funds from Fgase I(282-MAI) and the basic managemeat and staffing already available, thePhase II project was able to start-up on schedule without any delays onOctober lst, 1976. Funds were actually warrainted by Treasury on October13th.

4.2 Revisions: Although there were no major revisions duringimplementation to the basic design of the p7oject for its principalobjectives, some changes were found to be necessary both in the life of theproject (as mentioned above) and financial aLlocations between loancategories. These changes were introduced to meet both the growingdifficulty of Malawi Government funding of local contributions and 8a aresult of a particularly excessive over-expenditure in operating costsduring the first eighteen months of project life.

4.2.1 Ailnual. Treasury allocations to development account for thisproject Phase, compared to those anticipated at appraisal, were as follows:

Fundiag (MKt 000)

(1) (2)Financ'al Period AppraieaJ Plan Treasury Allocation

1976-77 3,435 8001977-78 5,010 1,5351978-79 1.527 1,5041979-80 911 8821980-81 0 4001981-82 0 0

(1) From 1084-MAI Annex 8 Table 1.(2) From Development Estimates. Malawi Government.

Excluding Lake Transportations and NRDP Pre-investmentcomponents.

4.2.2 Following a monitoring and supervision visit to the project by ateam from the Central Evaluation Unit (MANR) in 1978, weaknesses infinancial management were uncovered and an excessive over-expenditure inoperating costs was highlighted. The Report on the findings resulted inthe development of improved monitoring procedures and tighter financialcontrol. A request for the re-programming of funds for the Karonga-ChitipaProject component was then prepared; this is reproduced in details at AnnexIV, and includes adjustments to allow for a correction to the originalproject financial design (re-ADMARC Contribution), fluctuations in thevalue of US$ and an increased provision to operating cost categories.

4.2.3 Plans for the construction of livestock dipping tanks weredropped because funds allocated for these became inadequate as a result ofraising the standards for construction of dipping tanks. The funds werethen reallocated to the construction of other civil works.

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4.3 Infrastructure Development: A sumanary of infrastructureachievement compared to target for Phase II is given at Annex l(b).Achievements of appraisal targets have been varied as is indicated in thefollowing paragraphs.

4.3.1 The construction programme was largely satisfactorilyimplemented. Housing, training centres, borehole, health facilities,offices, workshops and stores were all completed to the required standardin good time as shown in Annex V.

4.3.2 Of the 96 miles of roads planned, 30.4 miles were constructed,incorporating 6 bridges, 17 culverts and one drift. The coatings used atappraisal were found to be considerable underestimates; funding wasinsufficient for the full construction programme.

4.3.3 Responsibility for construction of marketing facilities (creditinput stores and ADMARC sheds) was handed over to ADMARC. Owing tofinancial problems within ADMARC, no facilities were constructed underPhase II, although five ADMARC sheds were constructed in Chitipa districtusing ADMARC maintenance funds late in the Phase.

4.3.4 Out of 92 boreholes planned, 83 were drilled representing 90%achtievement of target. This is an impressive achievement when comparedwith that of road construction programme.

4.4 Crop Development: During Phase II, general approach to cropdevelopment was adopted for both rice and dryland crops. To achieve thisend, group approach in extension activities was the principal method ofreaching farmers. The general approach and the group approach to extensionare in line with NRDP policy.

4.4.1 The advantages of the group approach are that the staff farmersratio can be reduced considerably without adversely affecting extensioncontact, and that farmers easily learn from each other. The groups mayalso be used for other project activities such as credit disbursement. Thegroup approach and the general approach to crop development in KarongaPhase II has been an improvement over the scheme approach which wasfollowed in Phase I.

4.4.2 Rice: Phase II concentrated largely on rainfed rice which ispredominant as opposed to irrigated rice; as Table 3 shows the increasedproduction was to be achieved by increases in area cultivated and yield.Yield was to increase as a result of improved cultural practices, use ofimproved varieties and fertilizers and also the ability of Faya rice toyield well even without inorganic fertilizers.

4.4.3 The appraisal yield target of 2400 Kg/ha was achieved by 1978/79season and by the end of the second phase rice yields in Karonga were 27%higher than the appraisal target. Exact reasons for this impressiveachievement of yield targets are not known, however, favourable rainfallcould be one of the reasons. Appraisal hectarage targets were alsoachieved during the phase, emphasising the importance of rice as source offamily revenue.

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4.4.4 Dryland Crops: Planning of Phase II envisaged that developmentof dryland crops would be achieved by yield and area increases. Tables 4and 5 show planned cropped area and actual in Chitipa and Karongadistricts. In none of the years, are the appraisal targets achieved. Thedeviation from appraisal estimates was most pronounced for cotton andgroundnuts, and this is due to the low returns per hectare relative to theothe crops (see Text Table 3).

TEXT TABLE 3 : GROSS MARGINS (M I(ACHA/HECTARE)

II S E A S 0 N I

C R O PICRIP 1980/81 1981/82

Rice (Faya) 220.00 220.00

I .i IMaize (MH12) 118.17 269.29

I I iGroundnuts (Malimba) 80.00 80.00

I Cotton 160.29 195.29

Source: KCRDP Evaluation Unit.

TEKX TAKE 4 CROP EEIELDR1JT (HA)

KAOW

IDescip. 1976/77 1977/78 1978/79 1979/80 1980/81 1Year P=ied Achiev. lamed Ahiev-. Planed Achieve. Eanne_ ATieve BI. T1.aIj Achie'v.

lR1oe 2,040 4,050 2,653 4,250 3,265 5,000 4,490 5,200 4,490 8,808 1ICOtte 1,517 sXo 1,705 870 1,898 856 2,126 770 2,309 125

IMaize 7,494 3,450 7,568 4,250 7,680 5,000 8,080 5,235 8,469 4,526

fGroLm&nts 2,371 500 2,542 509 2,724 300 2,977 360 3,189 140

TDTAL 13,422 8,900 14,468 9,879 15,567 11,156 17,673 11,565 18,457 13,600

Source: World BaRk appraisal (Revised) and Evaluation Farm Su-rvys.

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TEXT TABLE 5: CROP DEVELOPKENT (HA)

CHITIPA

I . $~~~~~~~~~~~~~~~~~~~~~~~~-

1976/77 1977/78 1978/79 1979/80CROP Planned Actual Planned Actual Planned Actual Planned Actual

Maize 13,325 10,500 13,650 10,600 14.025 10,275 15,075 10,400

Groundnuts 4,850 400 5,000 550 5,175 450 5,400 1,300 I

Pulses 8,225 3,000 8,225 2,100 8,250 1,950 8,250 1,900

Millet 2,650 1,050 2,700 750 2,800 600 2,875 800

Cassava 5,175 600 5,225 450 5,275 800 5,325 650

Source: World Bank Appraisal Report and Evaluation Farm Surveys.

4.5 Management and Organization: The Programme Management Structureis summarised in the organization chart at Annex VI. No major changeoccurred during the phase. The overall implementation of the project isthe responsibility of the Ministry of Agriculture. The Programme Managerwho looks after the day-to-day implementation of the activities is directlyresponsible to the Chief Agricultural Development Officer (CADO). In linewith the NRDP set-up and also following the appraisal document, the post ofProject Manager (F7) upgraded to Programme Manager (P6).

4.5.1 Mention needs to be made of the fact that the Programme Managerexperienced some form of autonomy within the frame of decentralisation.This is right and good if decisions are to be made and corrective actionstaken where deviations are imminent without having to wait from theMinistry headquartersfor action. Supporting the question of autonomy isthe fact, for example, that some procurements in Phase II had to be made bythe Project directly through the Blantyre Office. The idea of having acertain degree of autonomy has so farbeen advocated and appears now toexist in all the eight Development Divisions.

4.5.2 Staffin*: The senior staff chart at Annex VI shows the situationsenior staff level. The posts of Programme Manager, Assistant ProgrammeManager, Financial Controller, Senior Extension Officer and EvaluationOfficer were generally always filled during the phase. However, change ofmanagement was prevalent, and this may have had some adverse effects on theoverall implementation of the project (lack of continuity). At both seniorand lower levels, most sections suffered from staffing problems. Forexample, the Project was without Senior Administrative Officer and Engineerfor the whole phase. Financial control had to rely on untrained staff andCredit Section iad to run without the Credit Accountant.

4.6 Extension and Training Component: The following table summarisesratio of field assistants (TA) to farmers and the staffing situation (TAsand DAs) as at the end of Phase II, Development Assistants reduced to two(2). This was expected as the aim was to increase staff of TA grade.

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to be carried out, for -sample, flood control in rice fields which is stilla problem. The other problem was that of transport forcing the sectio. tofail to achieve some of its objectives.

4.9 Livestock Section: The Livestock Section placed emphasis onconventional livestock extension methods, i.e. cattle dipping, castrations,culling and emphasis on marketing unproductive animals. The envisageddevelopment programmes of Weane:/Yearling, grazing schemes, demonstrations(Lu_lta) etc. were not achieved. Lack of adequate funds and shortage ofstaff contributed to failure to implement the programmes successfully. Theprices the weaners did not provide enough incentive and as a result,farmers found more profitable to sell animals amongst chemselves orslaughter them at locamarkets.

4.10 Research Section: Like the Construction Unit, this section alsosuffered understaffing at senior level. The project was without SeniorAgricultural Research Officer for most of Phase II. Although a post wasavailable at Karonga for Senior Agricultural Research Officer, policywith'i Research Department demanded that the post be filled by aProfessional Officer and so the Senior Agricultural Research Officer wasposited out of Karonga. It should be noted that Research programmes werealmost entirely designed to fit the National trials programmes. Therewasn't sufficient emphasis on project specific trials and resultsinterpretation for localised packages. The achievemants of the section,however, included accompli-ment of selection and multiplication of improvedfaya seed; establishment of natural grass/legume sward in Chitipa;introduction of UCA and CCA maize varieties in both Chitipa and Karongadistricts, and also some recommenda-tions on groundnuts fungicide (Sulphurand Daconil).

4.11 Financial Control: No accounting machine was used during thephase. All financial control work was done manually. There was problem ofinsufficiently trained staff and untrained industrial grade staff had to beused. Initial problem in lateness of financial records production causedproblems in monitoring of costs and expenditures. These were largelyovercome towards the end of the phase. Accounts and statements ofexpenditures were however audited every year.

4.11.1 A Senior Credit Accountant to control credit finance was not inpost for most of the phase (see Annex VI). This placed extra burden on theFinancial Controller.

4.12 Health Section: The major problem in this section was the lackof staff to man the health facilities which were constructed. The sectionhowever, implemented some bilharzia programmes searching for existence ofsnails and prevention of bilharzia in the rice schemes and in some villagesoutside these schemes. Annex VII(L) under "Social Impact" indicates theactivities of thesection in great more detail.

4.13 Evaluation Section: There was satisfactory success in theimplementation of the section's programmes during phase II. Several surveywere conducted and coverage was quite good, ensuring more representativedata base. Resident enumerators were used in the enumeration areas. Thesection experienced some staffing problems (enumerators). There was highturnover of enumerators during the phase due to non-established posts.

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4.13.1 Data handling and processing improved considerably by the useof the Central computer in Blantyre. These improvements have ensuredadequate analysis and more timely reporting. Clear and simplifiedreporting system and interpretation of data were used for rapid referenceand effective use of the survey findings.

4.13.2 The Evaluation section conducted several farm surveys during thephase. Garden, household composition and yield surveys were/are run everyyear to monitor and measure progress on crop mixtures, crop husbandrypractices, input/output relationship etc. Other surveys were conducted asand when required at the request of the Programme Management. Analyseswere done and working papers written up as follows:-

Survey TitleCrop Disposal (1975/76)Yield Study (1975/76)Yield Study (1976/77)

Household Composition (1976/77)Garden Survey (1976/77)Yield Study (1977/78)Household Composition (1977/78)Garden Survey (1977/78)

Survey Title (Cont'd.)Local Market Survey (1977/78)Irrigated lice Survey (1977/78)Resource Survey (1977/78)Garden Survey (1978/79)Pilot Livestock Survey (1978/79)Local Market Survey (1978/79)Yield Study (1978/79)Household Composition (1978/79)Household Composition (1979/80)Garden Survey (1979/80)Yield Study (1979/80)Local Market Prices Survey (1979/80)Garden Survey (1980/81)Yield Study (1980/81)Household Composition (1980/81)Resource Survey (1980/81)Extension Survey (1980/81)Energy Survey (1980/81)Livestock Survey (1980/81)NatioTal Survey (1980/81)Local Market Prices Survey (1930/81)Income and Expenditure (1980/81)Crop Storage Survey (1980/81)

Note: 1980/81 information has been processedjointly by the Project and NationalStatistical Office. Working papers tobe prepared.

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4.13.3 A number of working papers have been useful in exercises carriedout by Management such as:- Crop Estimates, Gross Margin calculations andAnnual Work Plans. Information from Evaluation has also been useful in thepreparation and production of this completion report.

4.14 Hydrology Section: With the beginning of the Karonga ChitipaProject, it was found necessary to expand the collection of data onrainfall, stream flow, evaporation and other relevant data useful indesigning hydraulic structures like dams and determining sowing dates forcrops and climatic suitability of an area for new crops. Such surveysweve/are also important for the better understanding of the irrigationpotential of the Karonga Lakeshore Plain.

4.14.1 During phase I the Hydrological and Meteorological network withinthe project was expanded and improved and a paper on the Hydrology of theSongwe River catchment was prepared. In Phase II these hydrometeorologicalactivities continued; data processing and analysis was completed andpapers on the hydrology of the Wovwe and North Rukuru rivers catchmentcharacteristics were produced. Further expansion work to stations was doneand new gauging stations were established. The hydrological andmeteorological network was as follows at the end of Phase II:

Karonga ChitipaHydrological Station 15 12Evaporation Fan Stations 4 5Rainfall Stations 29 39Weather Stations 4 4

4.15 ADMARC: Existing markets and input storut; were maintainedand staffed by ADMARC. The planned construction of new markets and inputstores was not achieved, horever, because of ADMARC's financial problems.Late distribution and availability of inputs by ADMARC was greatlyexperienced in Phase II, but this improved during the last two years ofthe phase. Lack of storage space in ADMARC Depots aused a slow down inmarketing activities.

4.16 Credit and Marketing Component: In Phase II of the Project,credit policy changed to provide seasonal credit zo credit groups only (seeAnnex IX(a) Table 1). In the first season of Phase II (1976/77) the firstcredit groups were organised (70 in Chitipa and 30 in Karonga), while atthe same time some individual farmers still continued to receive credit.In the following years, however seasonal credit was disbursed to groupfarmers only.

4.16.1 Disbursement of medium-term credits were slow during the phasebecause in most years items were not available and there was a shortage ofspare parts. In addition, rising prices of implements reduced effectivedemand for ox-drawn implements. Credit recovery was low because prioritywas on recovering seasonal credit during marketing.

4.16.2 As already pointed out in 4.11.1, the credit section was withouta Senior Credit Accountant for most of the phase. There was also lack ofadequate and more perrmanent staff in the section and, consequently, lack ofproper basic data in credit offices of the project was experienced.

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4.16.3 Other problems faced in Phase II included difficulty in operationof markets due to poor roads and lack of adequate ADMARC transport at peakmarketing periods. It should also be mentioned that in Karonga concen-tration of credit issues was only on Scheme farmers due to lack ofcaretaker committees. More problems regarding credit issues ar:d adminis-tration are discussed in greater detail in Chapter 5.

4.16.4 Text Table 6 presents disbursement of seasonal credit inputs byyear compared against targets and shows that targets were generally notachieved. More details on constraints are presented in paragraph 5.5.5.

MT TABLE 6: TAR(EI AGANSr ACHanYJf?S ON SEASOAL CRDILT DIN5(MEMC EON-S)

1975/76 1976/77 1977/78 1978/79 1979/80 1980/811=Target Achiev. Target AchIev. Target Addev. Target Adiev. Target Adciev. Target Aduiev.

'Am=da (S/A) 594 251 804 324 1029 514 1271 536 1486 645 1585 767: I120:2D:0 104 52 165 109 239 246 331 152 436 144 535 194

IRice Seed 105 254 126 356 154 367 182 139 198 300 138 461

jMaize Seed 11 4 17 9 23 29 31 13 40 21 48 19l

IG/nuts Seed 35 - 52 - 72 40 95 9 120 13 147 14 lt ICaDtton'i

lInsecticideslper acre package / 1125 47 1625 567 2125 1139 2625 1096 3125 480 3500 436 I

1/ Cottor. insecticide pacage is based cn ecomendatioor of 50 sachets sevin, 24 sachets MDT75% and 7 sachets Dimethoate. Ihe package hanged to 50 sachets sevin, 30 DET and 10Dimethoate in 1979/80. It is apparent that some insecticides were obtained outside thepackage.

crce: KRDP, Credit and Marketing Section.

5. lMPACT

5.1 Introduction

Project impact is mainly achieved by increased agriculturalproduction as a result of project activities. Karonga Phase II aimed atincreasing the production of both livestock and crops. Rice, cotton,maize, groundnuts and pulses were given priority.

5.1.1 Methodological issues do not allow attributing increase of yield,hectarage and production directly to project impact because even withoutthe project, crop development would still take place probably at a reducedrate. Methodological issues also do not allow us to assess project impact

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by comparing achievement in Karonga project with that of other projectsbecause of climatical weather and soil differences. Because of thesereasons impact assessment is based exclusively on the extent the appraisaltargets have been achieved.

5.2.0 Crop Yields

Yield estimates for Phase II are shown in Text Table 7 for bothChitipa and Karonga Districts. Appraisal targets are also presented forcomparison with the actual yields. In general, rice (which is predomi-nantly Faya type) and cotton yields were achieved and did not deviate muchfrom the expected. This is a result of improved cultural practicesfollowed and the ability of these crops to yield well without fertilizer.Yields of other crops deviated considerably from appraisal estimates. By1980/81 season, groundnut yields were 69 and 80 per cent of appraisaltargets in Karonga and Chitipa respectively.

IEI TABLE 7: YIAD LEVELS BY CROP AND BY YWR (OG/HA)

rescri n Araisal I ACaL 198/81 as %IDescription j Targets 11976/77 1977/78 1978/79(2) 1979/80(2) 1980/81(2)1 of Targets I

iChitipa - Xaize 2,400 1,265 2,398 1,734 1,836 1,937 1 80

I - I5 251 526(1) 530 465 -346 69

| -Puflses 1 400 338 462 645 540 277 I 69

Karcga - R ice 2,400 i1,774 1.037 2,669 2,266 3,037 127

-Cotton | 800 IN/A 1,188 713 839 N/A I N/A

-Maize i 2,400 | 1,131 1,947 1,153 1,158 1,105 46

Erun&wts; 450 395 360 346 365 .12 a p

Notes: (1) Pure stand average for different varieties.(2) Evaluation Sunry tabblatiors 1078/79, 1979/80 and 1980/81.

Source: IWbrkig peprs, Evaluation Section, Karonga.

5.3 Total and Incremental Production: Incremental production isshown in Text Table 8. By the end of Phase II, 1980/81 estimatedincremental production of maize and rice in both Karonga and Chitipadistricts had already exceeded appraisal estimates, while that ofgroundnuts and cotton was below targets. The incremental production ofmaize and rice is primarily a result of increased hectarage (see TextTables 4 and 5). As noted earlier, yields of cotton were satisfactorywhile groundnut yields in Karonga were 60 per cent of appraisal target.These yield levels combined with areas under these crops indicate that thepoor production performance of cotton is a result of reduced area and thatof groundnuts is due to yield and area reduction.

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5.3.1 Cropping Pattern: According to the 1980/81 NSSA preliminaryreport, mean cultivated area in the project area is 0.97 Ha per householdgiving 0.88 and 1.07 hectares per household for Karonga and Chitiparespectively. In 1980/81, the cropping pattern was as follows:-

Average Cropping Pattern KXRDP

Crop Chitipa Karonga

Maize(l) 51.2 27.9Groundnuts(l) 0.9 2.0Cotton(l) - 1.1Rice 43.4Cassava(l) N/A 15.0Other 47.9(2) 10.6(3)

Note: (1) Pure stand only.

(2) Composed of maize/pulses mixtures, maize/groundnuts mixtures, sweet potatoes andmillet.

(3) Composed of maize/cassava mixtures, fruitand maize/groundauts mixtures.

Source: 1980/81 NSSA preliminary Report, N.S.O., 1982.

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TEXT TABLE 8 : INCREMENTAL PRODUCTION(Metric tonnes)

Karonga

Description 1976177 1977/78 1978179 1979/80 1980/81

RiceHectarage 4,050 4,250 5,000 5,200 8,808With Project Production 7,290 9,350 13,500 11,960 26,424Without Project Prod.l/ 6,480 6,800 8,000 8,320 14,092Incremental Production 810 2,550 5,500 3,640 12,332

- (Appraisal) - 600 1,200 1,800 2,400CottonHectarage 900 870 856 770 126With Project Production 540 1,044 599 616 N/AWithout Project Prod.l/ 270 261 257 231 38Incremental Production 270 785 342 385 385

(Appraisal) - 185 370 555 755MaizeHectarage 3,450 4,250 5,000 5,235 4,526With Project Producticn 3,795 8,075 6,000 6,282 4,979Without Project Prod.1/ 2,760 3,400 4,000 4,188 3,621Incremental Production 1,035 4,675 2,000 2,094 1,358

(Appraisal) - 70 140 210 160GroundnutsHectarage 500 509 300 360 140Project Production 200 183 120 144 56Without Production Prod.1/ 150 153 90 108 42Incremental Production 50 30 30 36 14

"(Appraisal) - 165 247 360 445Ghitipa - MaizeHectarage 7,300 8,150 8,025 7,400 6,557With Project Production 9,234 19,544 13,915 13,586 12,701Without Project Prod. 6,300 6,360 6,165 6,240 5,788Incremental Production 2,934 13,184 7,750 7,346 6,913

-(Appraisal) 405 945 1,620 2,430 3,240GroundautsHectarage 150 250 200 300 104With Project Production 38 84 129 162 29Without Project Prod. 80 110 90 260 134Incremental Production (42) (26) 39 (98) (105)

(Appraisal) 9 9 27 46 59

1/ Appraisal yield estimates are used.

5.4.0 Livestock Development: Cattle population in Karonga RuralDevelopment Project area is now estimated at 84,000 and is increasingannually at an estimated average rate of about 3.6%. There has been someincrease in the annual growth rate and this is attributable to improvementin disease control and general extension advice on animal husbandry.

5.4.1 Livestock productivity as measured by growth rate and off-take,has shown some steady increase. There are however some differences inproductivity between Karonga and Chitipa, the latter showing higher annual

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growth rates and off-take values. The construction of more dipping tanksin Chitipa means wider dipping coverage resulting into higher dippingpercentage. It is interesting to note that in 1972, an estimated 75Z ofthe total herd in Karonga were within 8 kilometre radius of a dip tank andin 1980/81 over 90% (Table 2 Annex VIII).

5.4.2 From the available statistics, only cattle records in Karongahave been clearly broken into three distinct registers. Chitipa cattlerecords leave much to be desired, consequently, it is not easy to detailthe impact of project activities on cattle herd. However, because of thesize of the district and unaccessible terrain, Chltipa has more dip tanksthan Karonga has (23 Chitipa and 21 Karonga) although cattle population islower in Chitipa than in Karonga.

5.4.3 Cattle market sales and slaughter (Annex VIII(a)) reveal a highercommercial off-take in Chitipa than in Karonga. Possible reasons includethe fact that cattle owners in Karonga attach great value of wealth totheir herds. Secondly, prices offered by commercial buyers have been muchlower than those of local markets. The animals have therefore beenwithdrawn by owners. Cattle owners would like to sell their animals tolocal butchers or slaughter them themselves for sale at rural slaughterslabs rather than dispose them at minimum floor prices (Annex VIII(d)).The other reason relates to the inability on the part of the Cold StorageCompany, sole authorized residual buyer, to buy all the animals unsold dueto its limited cattle purchase imprest of K1O,000.

5.4.4 Cold Storage is also faced with the problem of moving cattle fromKaronga to the slaughter houses in Lilongwe and Blantyre. Transport costsare high and in addition cattle lose weight on transportation which is acost to the Cold Storage Company. Some consideration towards constructionof a chilling plant in the Northern Region should be able to alleviate thisproblem. Slaughter statistics for the small livestock classes, namely,goats, sheep and pigs have also gone-up (see Annex VIII (f)).

It should however be noted that although this is so, negligiblenumbers of sheep, goats and pigs are maintained in the two districts.

5.4.5 Cattle castrations have gone up in the project and this reflectsthe effect of increased Veterinary Services in the project and alsoincreased awnreness by livestock owners to castrate their animals with aview to using them for draught power (Annex VIII(e)).

5.5 The Credit Facility: In phase I the seasonal credit was extendedto individual farmers only. The use and recovery of credit were lower thanenvisaged but began to improve after the end of Phase I. The figures shownin Annex IX(a) give the accummulated recovery rates.

5.5.1 In Phase II of the project, credit policy changed to provideseasonal credit only to groups. In the first season of the phase (1976/77)the first credit groups (70 in chitipa and 30 in Karonga) were organizedwhile at the same time a portion of individual farmers still continued toreceive credit. Recovery rates of above 90% have been maintained since1976 (Annex IX(a)).

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5.5.2 Availability of credit facilities in the project area hasbenefited a substantial number of farmers. This is evidenced anddemonstrated by the increase in the total annual issues and total number offarmers and groups receiving credit each year (Annex IX(a)). The number offarmers receiving credit in the season 1980/81 was about 11,000representing about 28% of the total number of farmers living in the Projectarea. Until 1980/81. the number of groups increased to 631 with an averageof about 25 members. The average credit amount per group borrower washigher than the amount of credit taken by individual borrowers in formeryears.

5.5.3 Credit targets in phase II, both seasonal and medium term targets,were generally not achieved. There were a number of problems and obstaclesthat resulted in targets not being achieved. Some of which are:

(a) Defaulting individuals in credit groups have increasedconsiderably thereby causing some groups to drop outfrom the list of groups eligible for further credit.The number of defaulters has increased since 1976. Inaddition, the fact that so.aiebody drops out from theborrowers list even if his group has few defaultingfarmers has had some adverse effect on the number ofcredit farmers.

(b) In Karonga area, input issues were only made to schemefarmers. Farmers outside scheme areas were not consideredfor credit because there were no caretaker committees.

(c) Late distribution and insufficient inputs in ADMARCselling points contributed to low uptake of seed andfertilizer. Input distributions were limited becauseof poor road conditions, the late opening of ADMARCmarkets and shortage of input packages.

(d) Rising prices of farm implements offered had some adverseeffects on medium term loan.

te) Some farmers are still not convinced of the benefits offertilizer application at recommended application rates.The difference between fertilized and non-fertilizedmaize and rice in some parts of Karonga is not substantial.This has therefore meant a decrease in quantity offertilizer issued.

(f) Over optimistic targets. It would appear creditinput issues targets were overestimated.

5.6.0 Extension and Training: The extension component has providedfarmers with a considerable exposure to advice on improved farm practicessuch as time of planting, fertilizer application, improved seed, plantingdensity etc. (see Text Table 9). It is apparent that emphasis was mainlyon crop production.

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5.6.1 The extension component still has a task to accomplish In KRDP.Although fertilizer application has been emphasised (para. 5.6.0), uptakehas been slow for reasons given in para. 5.5.3(e) especially among farmersin some Karonga Dryland Schemes, like Lupembo, Lupaso and Mlare. This hasresulted in few farmers taking fertilizer packages. Research in Karongashould therefore have emphasized on adaptive trials to produce specificrecommendations for the area (para. 5.7.0).

5.6.2 Scheme/Group Approach: There is need to look critically at bothscheme and group approaches. In the case of the former, extension serviceswere only rendered to the scheme farmers and their non-scheme counterpartswere more or less ignored. As regards the group approach, which wasformed for the purpose of obtaining credit (para.4.6.4 and 4.6.5), thegroup would discuss development plans with the help or the extensionworker. This was fortunate to the group farmers and unfortunate to thenon-group farmers and the development programmes as a whole as extensionefforts were concentrated on group farmers.

5.6.3 From the training point of view, it would appear that both staffand farmer training addresses a wide range of topics and issues in generalterms including crop and animal husbandry, home economics, health, credit,crop storage, etc. The most critical aspects of crop and livestockmanagement practices were, however. not addressed in a manner sufficient tomotivate the necessary improvements (Text Table 9), for crops. The lowplant population density is due to ridge spacing and spacing within theridges.

5.7.0 Research: Research activities in Phase II were tailored to fitthe requirements of the national programmes. There was little emphasis onsolving project oriented problems. In a district as ecologically diverse asKaronga, it is necessary that locally based programmes should be carriedout. Because of the way the research programmes operated, projectmanagement did not get the requlated information in time.

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Text Table 9: Agronomy Results - KCRDP II

1977/78 1978/79 1979/80--- (X of growers)---

(i) Using improved seed- Maize 35 1 7- Groundnuts - 2 4- Rice 75 42 33

(ii) Using fertilizer/manure- Maize 31 3 12- Groundnuts - - -

- Rice 48 52 49

(iii) Planting early- Maize (before 30th December) 68 62 75- G/Nuts (before Jan. 15th) 64 71 59- Cotton (before March 15th) 60 97 91

(iv) With Option density- Maize (35,000 Plants/Ha) 18 20 10

(v) Weeding on time- Maize 98 93 80- Groundnuts 96 93 93- Rice 93 75 81- Cotton 98 100 100

Note: The figures are low under (i) and (ii), probablybecause of late distritution of inputs.

Source: Evaluation Section Annual Surveys - KCRDP.

5.8 Economic Impact - Evidence on the impact of the project on theeconomy of Karonga and Chitipa is incomplete, such information as there is,however, can provide a general picture of the direction of changes (Formore details see Annex VII).

5.8.1 The National Sample Surveys of Agriculture Income and ExpenditureSurvey was designed on a national basis, and at project level the smallsample size produces unreliable results. Data on ADMARC purchases show thetrend in income from farm produces through-official channels. An estimateof changes in the volume of sales of produce sold in local markets, tosupplement this, can be obtained from records of market fee collections.

5.8.2 Beyond this, an idea of the direction of change of incomes can befound from information on savings and investment. Investment in humancapital can be estimated from primary school attendance figures which is ahigh priority in most households budgets. The District Councils selllicenses to all traders and craftmen, but records are unreliable ornon-existent. The effect of changing incomes on local businesses can beassessed, however, by considering savings data (Annex VII(f)).

5.8.3 Eviden.- cnr. income from sales to ADMARC, farmer's institutionalsavings and debts, cash purchase of farm implements, spending on educationand the non-agricultural economy in Karonga district shows a marked, evenquite rapid, improvement until the late 1970s. There is a small down-turnin the value of ADMARC purchases 1974, reflected in other variables a yearor s0 ' The value of ADMARC purchases reached a peak in 1977/78, andclas declined consistently since then, followed with various time lags, bythe other variables (Also sse annex VIII(a/b)). The only variable notfollowing this pattern is the uptake of implements and oxen on credit,which has increased steadily throughout Phase II. Credit for these items islargely unpaid, however, and unless other variables begin to show a renewedimprovement debts are likely to rise and foreclosure of some of the loanswill follow, as farmers find themselves unable to repay the credit.

5.8.4 Despite this downturn, most variables demonstrate an overallimprovement in Phase II as well as Phase I. ADMARC purchases appear tomove closely with seasonal variation in rainfall - 1977/78 was anexceptionally favourable season, and rainfall has been progressively lessbeneficial in the years after this. It is possible to view the downturn,therefore as a temporary lull in an upward overall trend.

5.8.5 In Chitipa District, improvements have been more consistentreflecting a more stable rainfall regime. Considerable increases in almostall variables have occurred. These have taken place from a general lowerlevel than in Karonga.

5.8.6 The non-agricultural sector consists largely of wage and salaryearners, and retail and food processing businesses. The project has hadsignificant effect on the former, especially in Karonga, and this probablyaccounts for some of the growth in savings in the mid-1970s in Karonga andthe late 1970s in Chitipa. The impact of the decline in Civil Servant'sreal incomes in recent years probably also contributes to Karonga's laterfall in savings.

5.8.7 The major movements in non-agricultural savings are closelylinked to change in agricultural incomes, however, with a lag of one to twoyear's. In Karonga, where farmer's incomes appear to have fallen in recentyears, non-agricultural savings have declined also. In Chitipa,non-agricultural savings have continued to grow, at an increasing rate.97% of the total growth in institutional savings since 1972 isnon-agricultural, almost all of any rises in farmers' incomes goes towardsconsumption or investment (Annex VII(i)).

5.9 Social Impact: The benefits from an integrated rural developmentproject like Karonga-Chitipa Project are numerous yet extremely difficultto quantify. It is apparent that with the project, there has been improve-ment in housing, eating habits, awareness of education, job opportunity,general infrastructural development, etc.

5.9.1 In Karonga, the number of Schools has increased from 56 in 1974to 75 in 1981. Correspondingly, the number of pupils attending primaryschool has risen from 20,000 in 1974 to 23,600 in 1981. In Chitipa,attendance has risen from 13,600 in 1974 to 21,000 in 1981 while the numberof schools increased from 54 in 1974 to 69 in 1981. These schools both in

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Chitipa and Karonga have been built largely on self-help basis (AnnexVII(k)).

5.9.2 Primary School attendance depends on the number of schools in adistrict, on rural incomes and the cost of school fees, and on the level ofpriority given to education in households' budgets. The project may havean indirect influence on the first and third factors, by contributing tothe stimulus towards self-help work and committee participation and bystressing education in its extension work. The Project's direct impact onrural incomes, and the movement of attendance figures with changes in thevalue of ADMARC purchases suggests that incomes are the limiting factor.It is reasonable, therefore, to state that the project has contributed in amajor way to the growing success in primary education in Chitipa district.The rising number of uneducated children in Karonga district must be causefor concern, however. It seems that the project's economic impact has notbeen sufficient to offset the increasing education needs of a growingpopulation. It may be, however, that without the project, the number ofuneducated children would have grown at a faster rate (see Annex VII(k)).

5.9.3 In phase IT health posts and maternity clinics were constructedin Chitipa. In addi.:ion to this direct contribution, project staff assistat "Under-Five Clinics" and teach health subjects to women's groups, andassist in vaccination campaigns. Despite this input and from the dataavailable, it is difficult to recognise success in Karonga. Unless therehas been dramatic improvements in health, a drop of over 50% in outpatientsattendance at health centres in Karonga has been observed. Data onvaccinations fluctuate widely, reflecting the difficulty of obtainingvaccines and the emphasis on a periodic campaign approach. Attendance at"Under-Five Clinics" grew slowly to 1978 and has since declined. Thisreflects a decline of interest by the mobile team (Annex VII(L)).

5.9.4 In Chitipa, attendance by outpatients has improved, though thiscanno_ reflect on the project since its facilities remain unstaffed.Deliveries at maternity clinics have risen and this could be attributed toadditional facilities constructed by the Project. The number ofvaccinations fluctuates, though not widely as in Karonga, and it is hard tosee an improvement.

5.10 Impact on Ministry's concept to Rural Development: The KCRDPexperiences have had some impact on the Ministry's planning and managementof Rural Development Projects (RDPs). A more intensified way of monitoringproject implementation was developed in a form of more organized ProjectEvaluation and Monitoring Committee. This Committee now operates fromMinistry Headquarters and effects some spot checks on the various ADDsincluding Karonga's implementation activities. This has enabled theGovernment to spot deviations and take corrective measures in time.

5.11 Environmental Impact: Very insufficient data on river flow,conservation, siltation etc. exist. In view of this fact, it is difficultto assess the impact of the Project on the overall environment. There istherefore need for data for adequate monitoring.

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6. FINANCIAL PERFORMANCE

6.1 The contributions to sources of finance compared with thoseplanned at appraisal were as follows:-

Appraisal Plan Actual DevelopmentSource (NK'Million) (MK'Million)

-Amount X Amount X

IBRD 8.3 75 7.8 74Malawi Government 1.9 18 2.7 26ADMARC 0.7 7 0 0

10.9 100 10.5 100

Contribution to Development account by Malawi Government was 42% more thanenvisaged at appraisal. This was due to the following reasons:-

(i) expenditure on 100% reimbursible foreign currencycapital goods was lower than initially envisaged.This explains the lower contribution of the IBRD;

(ii) on the othcr hand, expenditures on capital goodswith the higher componant of local resources(less than 100% reimbursible) was considerablyhigher than initially foreseen. Consequently,the contribution of Malawi Government had to beincreased from MK1.9 Million to MK2.7 million,42% more than appraisal plan;

(iii) investments by ADMARC never took place during thephase and were postponed to later developmentphase.

6.2 The cost on Development and Revenue Accounts of the KCRDPcomponent was MK1.2 million above the anticipated amount at appraisal (seeAnnex IV(b)). This increase in expenditure was financed mainly from anincreased Malawi Government contribution. Expenditures are again revealedwhen comparison of planned and actual withdrawal of the loan by loancategories is made. For example overexpenditure in the KCRDP operatingcosts, underexpenditure in the NRDP Pre-investment personnel andconsultants costs (see also Table 1 of Annex IV(b)).

6.3 As indicated in Annex IV(c) the amount of finance from IBRDsources was less than anticipated for NRDP Pre-Investment component. Thiswas compensated for by an increased contribution of Malawi Governmentresulting in a total expenditure near the appraisal plan.

6.4 The Lake Transportation (Table II of Annex IV(c)) componentresulted in some under-expenditure compared to the original base costallocation with contingencies added. In addition the proportion ofcontribution from Malawi Government was above the amount envisaged atappraisal.

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6.5 Further comparison is made of the component operating costs forthe KCRDP. Costs of the construction unit and management componentsexceeded the anticipated levels. These two components took up 49Z of totaloperating costs of the project compared to the originally planned figure of20%. Extension, livestock and land husbandry components utilized 24% ofcosts compared to the 36Z planned. Evaluation, Research, and Hydrologyitilized 10% compared to the 16% originally planned. Health crets amountedto a 2% of the total compared to the planned 7% (see Table V of AnnexIV(f)).

6.6 Drawdown of the Credit 1286-T-MAI as presented in Annex IV(e)provides a comparison of the anticipated with actual drawdown. Afterinitially keeping pace with the planned cummulative drawdown to mid 1978,the drawdown rate reduced to less than planned following the tightening ofproject expenditure control at the time. The balance of loan remainingat the originally planned completion of drawdown was subsequently used forextension of the project life by one year.

6.7 Financial Control/Monitoring wes generally inadequateparticularly during the first two years of the project, due to:

(i) staffiLig difficulties;

(ii) no computerised system, everything had to be done byhand;

Xiii) and inadequate system of quarterly report monitoring.Financial Statements were however generally producedon time. But they were inadequate for detailedmonitoring purposes.

6.8 Project funding was basically adequate, except the ConstructionUnit funding which was cousiderably below required levels due to:

(i) low costs made at appraisal;

(ii) the very high inflation of costs (materials) duringthe period compared to price contingencies.

7. INSTITUTIONAL PERFORMANCE

7.0 Institutional performance is reviewed in five components:performance of the project itself, of the parent Ministry Headqup'ters, ofthe parastatal organisations, ADMARC and the donor agency involv-d.

7.1 Performance at Project Level: The organisational structureeffected in Phase I continues in Phase II. Each project component orsection was headed by divisional chief or sectional head who in turn wasresponsible to the Programme Manager.

7.1.1 Management Organization: The size of the project in terms ofnumber of components and area covered and its diversificaticn in terms ofthe natural regions invo-ved and different levels of development - (whileKaronga district was in its second phase of the project, Chitipa was in

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first phase) - gave management no easy task. Manpower constraints in keyposts and quality of staff in supporting staff were faced in Research,Construction and Finance sections. Delays in procurement of vehicles andequipment were also experienced because of the lengthy proceduresfollowed. Despite these difficulties, management has done a satisfactoryjob through a series of project reprogrammes, and by the system of AnnualWorkplan, and budgets which allows adjustment of the project activitiesaccordingly, and also through a series of Ministerial Monitoring andSupervision Cormittee meetings.

7.2 Administration: The Administrative Unit which is part of projectmanagement, has responsible for personnel recruitment and staff welfare;and the maintenance of an adequate store of stationery and equipment.

7.2.1 Personnel recruitment in KCRDP II followed Governmentprocedures. It has been noted in other reports that these procedures arecumbersome and time consuming and therefore slowing down replacement of keystaff.

7.3 Finance Section: As noted in Chapter 5, the section did not keepadequate and regular records of expenditure in the first few years of theproject, two reasons explain this shortcoming:

(a) the unavailability of aczounts assistants inthe section resulting in using industrial classstaff to compile accounts information, and

(b) lack of accounting machines to process the datawith. As a result of this deficiency, financialreporting was inadequate and consequently seriousover-expenditure followed in 1978. By the end ofthe phase, the situation was under control.

7.4 Evaluation: In 1978, Evaluation Unit, together with otherEvaluation Units in other ADDs in conjunction with the Central EvaluationUnit in the Ministry, adopted a common survey design and computer programmeto monitor and analyse crop yields and associated management practices.Since the introduction of the above system, a number of surveys have beenconducted as given in paragraph 4.14.2.

7~5 Livestock development: Most of the original objectives oflivestock component as given in the project document have not been achievedmainly because financing of this component was withdrawn from developmentaccount after the 1978 budgetary crisis. Construction of dipping tanks wasdropped and the envisaged development programme of weaner/yearlingdemonstrations at Lufita was not achieved. Alternative grazing area atChisi intended to reduce overgrazing problem on the fertile Karonga plainproved a failure because farmers lacked confidence of the security of tneiranimals whilst at Chisi. The secEion, however, concentrated its activitiesin the usual livestock extension aspects i.e. cattle dipping, castrations,culling and marketing of the unproductive animals. Achievement on theseactivities has been considerable, proportion of animals dipped haveincreased, cattle population has been increasing at the rate of 3.6% perannum and the off-take also improved during the phase.

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7.6 Reporting: Overall reporting on the implementation of projectactivities has been satisfactory. Section heads submitted to theManagement monthly and quarterly reports for collation into projectreports. There has been a steady flow of quarterly reports between theproject, the Ministry and the donors. In 1978, the Central Evaluation Unitof Ministry of Agriculture produced a standard reporting format for allmajor projects in Malawi. This was also revised in November, 1981 andintroduced in all the Rural Development projects.

7.7 ADMARC Performance: At appraisal, it was envisaged that ADMARCwould buy, store, process and market all marketable produce grown in theproject. Additionally, it was establish that ADMARC would provide inputsand marketing facilities to smallholders. The Programme was responsiblefor the credit institution whilst marketing was organised by ADMARC incollaboration with the Programme Credit and Marketing Section. As indicatedin Chapter 5, the credit facility in the project helped a lot of farmersand allowed for improved agricultural production. It was only unfortunatethat ADMARC's services in certain cases were not adequate and timely.

7.7.1 The Programme's marketing section together with ADMARC preparedmarketing schedules and the section monitored the progress of distributionof farm inputs and implements to selling points and issues to farmersthereof. It also collected data on credit and cash sales of these inputs.Recommendation for upgrading of some mobile markets to seasonal marketswere done in conjunction with ADMARC and Extension Section. This resultedin increase in seasonal markets during the phase. Because of this closeliaison between these sections constraints in the marketing system werequickly identified although necessary adjustments were not always made.

7.7.2 ADMARC did not manage to provide seasonal inputs on time althoughthis improved during the last two years of the Phase. This prevented somesmallholders to adopt the extension recommendation correctly. SecondlyADMARC markets operated with difficulty due to poor roads and lack ofadequate transport at peak marketing periods. Lack of adequate storagefacilities in ADMARC Depots caused a slow down in marketing. Many of theseproblems could have been solved if ADMARC constructed the inputs storesplanned and if ADMARC brought inputs to the EPA Markets at the time oftransporting their produce back to the depots. There is therefore need toexplore ways and means in which constraints of similar nature could beminimised or eliminated altogether during the course of Phase IIIimplementation.

7.8.0 Malawi Government Performance: The Government contributed 42%more to development account than what was envisaged at appraisal and thusfilling gaps or meeting the shortfall in project funding. As regardsstaffing, the Government has shown some weakness. As Annex VI indicatesthe project was without Senior Field Devolopment Engineer and SeniorResearch Officer throughout the phase. Other senior staff such as SeniorAdministrative Officer, Hydrologist and Chief Credit Accountant have beenin post for only part of the phase. This inadequate staffing and highturnover of project managers during the phase (3 Programme Managers in 4years) must have affected the performance of the project.

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7.8.1 Ministry of Agriculture headquarters on the other hand, providedadequate support and assistance to the project. The Ministry assistedproject managenent in re-programming available funds to enable projectcompletion. Tighter financial control was achieved after 1978 with helpfrom the Ministry. Annual Workplans and Budgets introduced by the Ministryproved useful in replanning and rescheduling some project activitie3 inlight of available resources.

7.9.0 Donor Agency Participation: The involvement of Donor Agency isreviewed here from two points of view - clarity of the Appraisal documentand supervision Missions during project implementation period.

7.9.1 Donor Agency involvenent was adequate. The Bank provided fivesupervision Missions during project implementation which allowed the MalawiGovernment together with the Bank to examine the problems and arrive atappropriate solutions. As would be expected, most of the problemshighlighted herein were identified and discussed at supervision round-upmeetings - i.e. problems of staffing, finance and general implementation.

7.9.2 The Appraisal document (1084-MAI) provided adequate basis onwhich to formulate component budgeting and overall implementation of theProgramme. It was easy to follow and gave a lucid indication of projectobjectives and targets. Annual work plans and hence compilation of thiscompletion report has been made easier because of the comprehensiveguidelines to project implementation outlined in the appraisal document.Although there were overexpenditures in operating costs during the firsteighteen months of the project life, this was purely domestic and nothingto do with Donor Agency.

8. ECONOMIC RATE OF RETURN

8.1 Economic rates of return have been estimated for the project attwo l1vels. The first level is where all costs for components left out atappraisal havs been excluded and the second level is where all projectcosts have been considered. Although it was initially envisaged to carryout another analysis comprising Phases I and II, lack of requisite data(cost and benefit streams used in the first phase) does not permit us to doit and instead only second phase analysis has been carried out.

8.2 Because of the problems of identifying and quantifying benefits,it has been difficult to determine rate of return for tbe Lake ServiceComponent. Again no rate of return has been estimated for the NRDPPreliminary Investment as the objeetive of this project component was nottailored to orovide impact but rather to strengthen and expand MANR'sCentral Services and increase its capacity to prepare and implement futureinvestment phases of the National Rural Dcvelopnent Programme.

8.3 The estimated economic rate of return (ERR) for Karonga/ChitipaProject is 33%. This excludes all costs of components left out in theanalysis at appraisal (i.e. livestock, hydrology, evaluation, health andresearch). Considering all project costs proportionately, an 18% economicrate of return is obtained. Mention needs to be made that benefits used inthe analysis were exclusively derived from incremental crop production, andin view of this, the project has demonstrated a very high rate of return

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(33%) over a period of 25 years compared to 16Z at appraisal, reflectingsubstantial increases in production (of rice, maize and cotton) fromrelatively low-cost improvements of use of fertilizer and improved seed.

8.4 The treatment of costs and benefits is discussed in detail inAnnex X.

9. DISCUSSION AND CONCLUSIONS

9.1 Discussion on the overall project performance is hereby presentedfor the following components:-

(i) Overall implementation and general organization;

(ii) Financial performance and

(iii) Project impact with specific reference to cropdevelopment.

These areas are felt to be important components of the project.

9.1.1 Implementetion: Phase II began in 1976/77 season and theorganizational structure is shown in appendix VI(b). Project management wasresponsible for day to day running of the project and was given aconsiderable degree of autonomy within the frame of decentralisationprogramme. Planning of Karonga Phase II was in line with NRDP proposalswhere a degree of autonomy is deemed necessary if management is to assumeresponsibility of an Agricultural Development Division. The autonomy washowever granted to the project management too early before key staff werein post to assist the project manager and even before adequate supportingstaff with sufficient qualification and experience were in post. As aresult of this, project management especially financial control slackenedin the first two years of the project. The situation was however controlledby ]978 with the help from Ministry headquarters.

9.1.2 Achievement in construction of buildings, roads and drilling ofboreholes has been satisfactory even though the project was without SeniorField Development Engineer throughout the phase.

9.2.0 Financial Performance: In general, financial performance wasunsatisfactory during the first two years of th- project. Seriousoverexpenditure was uncovered by 1978 and this was a result of inadequatefinancial control which arose because of inavailability of sufficientlytrained accounts staff and lack of a proper accounting procedures andmachine. The introduction of Annual Workplans and Budgets where projectactivities for the coming year are documented in fairly detail and acorresponding budget drawn has helped project management in financialplanning and control. By the end of the phase, ove;all financial controlin the project had improved considerably. There is need however, toimprove the level of detail of accounting data which is presented to enableeasy compilation of project completion report.

9.3.0 Crop Development: High incremantal crop production has beenachieved in rice and maize (see Text Table 8 section 5.3). Incremental

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crop production in these crops has consistently been increasing during thephase because of mainly favourable producer prices which encouraged farmersto increase cultivated hectarages (see Tables 4 and 5 in Chapter 3).Yields of rice and maize have also been within the appraisal targets. Inrice, this satisfactory yield increase is a result of favourable rainfallwhilst high maize yields are a result of combination of favourable rainfalland greater use of recommended inputs.

9.3.1 Production of cotton in Karonga district and groundnuts in bothChitipa and Karonga districts has been below appraisal targets. Estimatescultivated area under both cotton and groundnuts are aiso below targets andgroundnuts yields have been low. Relatively lower gross margins for cottonthan maize and rice is the main contributing factor. As for groundnuts, thechange from Malimba groundnut, a variety preferred for local consumption,to Manipintar, an oil nut, is the main reason. In addition to this,Caronga district is generally not a groundnut growing area and the littlethat is grown there is not even enough for local demand.

9.3.2 The decline of cotton and groundnut production in the country asa whole has been noted in other reports (see a report on Evaluation Studyof Lakeshore Rural Development Project). Because of the wide coverage ofthe problem and the importance of cotton and groundnuts as foreign exchangeearners, it is essential for government to explore means by whichproduction of these crops could be improved.

9.4.0 Conclusion:

In general the project has been a success in as far as cropdevelopment is concerned. Incremental crop production targets for maizeand rice have been exceeded through increases in cropped area and yield.

9.4.1 Achievement of construction programme has been satisfactoryexcept that of road construction which-was far below appraisal targets.

9.4.2 It is difficult to assess conclusively the impact of groupapproach of extension activities at this stage. On the face value,however, the method appears an improvement over the scheme approach in asfar as number of farmers who can be contacted in a given time is concerned.

9.4.3 ADMARC have not constructed the market/input sheds complexes inKaronga and Chitipa districts as was originally planned because of ADMARC'sfinancial prob ems.

9.4.4 Overall, planning and implementation of Karonga II followedclosely that of NRDP proposals. The experience gained has been useful inplanning Phase III of the project and also in the overall planning andimplementation of other Rural Development Projects (RDPs) within theNational Rural Development Programme.

PART B : NRDP PRE-INVESTMENT PHASE

1.0 BACKGROUND AND FORMULATION OF THE PROJECT

1.1 The concept of the National Rural Development Programme (NRDP)was born out of joint discussions between the officials of the then

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Ministry of Agriculture and Natural Resources (MANR) and those of the WorldBank/IDA on th'_ impact of major Agricultural Projects in Halawi and thepossibility of these being extended to other areas of the country. Theheavy capital outlay required for the major projects weighed against theidea of extending them over the whole of Malawi. Therefore as analternative, a rolling rural development programme which would cover allthe rural areas of Malawi over a period of 10-20 years was agreed on. Thiswould place emphasis on minimum initial investment on improved marketing,extension, input/credit organization and roads and water supplyimprovements in any given area in order to effect a maximum distribution ofavailable capital and manpower resources (see a document on NRDP proposalfor detailed discussion).

1.2 Malawi Government launched NRDP Pre-Investment Phase (1976-1978).In the context of UNDP, the objectives and detailed activities of thispre-investment phase were as follows:-

(1) Expansion of MANR's Central Services in Lilongwe toincrease its capacity to prepare and implement futureinvestment phases of NRDP through:

(a) strengthenirg of the:

(i) land husbandry section;(ii) agro-economic survey section; and(iii) accounting services by provision of

additional staff, and the necessarysupporting facilities;

(b) provision of agricultural research staff to conductcrop experiments in six future NRDP sub--projects;

Cc) Construction of about 35 staff houses in Lilongwe.

(d) establishment of an evaluation unit comprisingof 15 staff with supporting facilities at MANR'sRegional Headquarters at Mzuzu;

(e) establishment of a road construction unit basedin Lilongwe and

(f) provision of consultants to undertake specialstudies on various subjects related to theimplementation of the Project (Type of studiesrequired listed in Appraisal report).

(2) Preliminary investments in three NRDP sub-projects asfollows:

(a) Construction of about 20 houses in North-WestMzimbal/ about 30 houses in Thiwi-Lifidzi andabout 30 houses in Kawinga;

1/ This project is now known as Mzimba Rukuru-Kasitu.

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(b) construction of one training centre in North WestHzimba, 2 training centres each in Thiwi-Lifidziand Kavinga;

(c) construction of about 20 boreholes in North WestNzimba, about 16 boreholes in Thiwi-Lifidzi andabout 10 boreholes in Kawinga;

(d) construction of about 3 bush markets inputs storesin North West Mzimba, about 3 input stores inThiwi-Lifidzi and 2 input stores and one market inKawinga;

(e) expansion of the extension and land husbandryservices staff;

(f) construction of the necessary office accommodationin North West Mzimba, Thiwi-Lifidzi and Kavinga;

(g) construction of 2 bridges in North West Mzimba;

(h) construction of about 50 miles of rural roads inThiwi-Lifidzi and

(i) construction of additional health facilities in NorthWest Mzimba.

1.3 Funding of this project was done jointly with that of KarongaII. The total estimated cost of this preliminary investment phase was K5.3million or US$6.4M with a foreign exchange component of K2.6 million orUS$3.1 million (49%). The total project cost included physical and pricecontingencies estimated at KO.851M or US$1.02M. These costs, were brokendown as follows in the proposal documents:

TABLE 1:Foreign

Amount ExchangeCost Component K'000 U.S. $1000 %

Mzimba R.D.P. 1,060 1,272 52Thivi/Lifidzi 1,060 1,279 48Kawinga 1,270 1,524 49Central Services 1,938 2,326 50Total Project Cost 5,334 6,401 49

Source: NRDP Pre-Investment Phase 1976-1978 Proposals. The amountrequested from World Bank/IDA to finance this project wasK4.5 million or US$5.4 million (85Z of total project cost).The balance or 15% of the total project cost was to be metfrom local resources.

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1.4 Ministry of Agriculture and Natural Resources assumed the overallresponsibility of the execution of this project while the Department ofExtension and Training was responsible for implementing the project on theground, under the NRDP Coordinator, an Officer charged with the day to dayrunning of the NRDP Preliminary Investment Phase.

2.0 fl4PLEMENTATION

2.1 As shown in the objecti-es, NRDP (PI) was intended to establishbasic infrastructure in the form of houses, roads, staff in differentcomponents, health facilities, ADMARC markets and procure plants andvehicles. NRDP (PI) was also intended to strengthen Central Services interms of increasing its capacity to prepare and implement future investmentphases of National Rural Development Programme (NRDP). Discussion on theimplementation of NRDP (PI) is therefore based on whether these objectiveshave been achieved or not.

2.2 Civil Works: Tables 2 and 3 presents type of civil worksconstructed by component. Most of the civil works proposed were in form ofhouses for staff, offices and boreholes. Out of 118 houses planned, 107were built giving a 90% achievement of target. Fifty-seven percent ofoffice space planned was constructed and 23 miles out of 50 miles of roadplanned has also been constructed. No details are available of the numberof boreholes drilled.

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TAME 2: CIVIL W1S COS1W LCTION

Houses LRT.C. dge rkets(N.) OfficEes (NO.) (Ob.) (No.)

Description Planred Actal Plmed Actual Planned Actual Plamea Actual Plamed Actual

Central Serces

-Tad esures Survey 3 3 -Agro-Econoffc Survey 5 6 - - - -

-Accoumting 15 15 - - _ _Evaluation (Muzu) 6 6 1 1 - -

Crop Exeriments 6 2 - - - -- - - -

Mzitba/likuru FM 21 21 1 1 1 N/A 2 2 2 0Thwi/ULifidzi RDP 33 27(2) 1 0 2 1 - - - -

Kariga RDP 28 27 1 1 2 -

Health 2 N/A - - -

Source: NRDP Central Services.(2) Inchldes a hms bcught at Dedza Boma.

TAEE 3: OIHER CIVILW CONS W IED

Description Planned Actual

Boreholes 47 exact rhuber not krnon.Roads (miles) 50 23Maternity Wards 1 -

Demrstration Kitchen L -

Source: NEDP Central Services.

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TABL- 4 PLANTS AND VEHICLES

Description Type Planned Actual

Agro-Economic Survey Motorcycle 2 2Crop Experiment Motorcycle 1 1Mzuzu Evaluation FWO Pick-up 1 1

Motorcycles 1 1Bicycles 2 1

Accounts/Construction FWO Pick-up 2 4Caravan 1 -D6 1 1Grader (120) 1 1Roller 1 1Tanker 1 1Flat lorry 1 1Tipper 3 3Tractor (165) 1 1Tipping Trailer 1 1Front End Loader (930) 1 1

Mzimba Project FWO Pick-up 2 1Peugeot Pick-up - IMotorcycle 3 3

Thiwi/Lifidzi Project FWO Pick-up 1 1Flat lorry 1 1Motorcycles i 7

Kawinga Project FWO Pick-up 2 2Motorcycle 1 1

Source: NRDP Central Services

ADMARC markets and health facilities were not constructed. As Table 8indicates, there has been a shortfall on civil works constructed thanenvisaged at appraisal because of high costs.

2.3 Vehicles and Plants: Table 4 presents number of vehicles andplants by ccmponent. Almost all plants and vehicles budgeted for wereacquired by end of the phase.

2.4 Staffing: Table 5 presents number of staff by section indicatingnumber of posts agreed at appraisal, posts created and then posts filled byDecember 1978. By 1978, all the agreed posts were created but only 72% ofthe total posts had been filled. Delays in filling posts are explained bythe delays in recruitment procedures. The overstaffing in accounts sectionis explained by the extra accounts assistants employed probably to help inthe accounts section. Table 6 indicates number of staff by grade as atDecember 1978. it would appear it was equally difficult to fill differentgrades of staff.

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Table 5 Staff Establishment by SectionDecember 1978

Description Appraisal Created Filled

Land Resources 4 5 -

Agro-Economic Surveys 3 3 2Crop Experiments 6 6 -Evaluation - Mzuzu 6(1) 5 -

Accounts 17 16 29Mzimba/Rukuru 19 19 17Thiwi/Lifidzi 31 31 16Kawinga Project 2 2 -

88 88 66

Note: (1) Excludes Enumerators.Source: Consolidated Report on the NRDP Pre-Investment

Phase, December, 1978.

2.5 Strengthening of Central Services: Strengthening of CentralServices as regards filling of posts in Land Resources, AgriculturalResearch and Evaluation Unit as agreed at appraisal was not achieved byDecember 1978 (see Table 5 above). As a result of this delay, adaptiveresearch in subsequent NRDP Projects was not carried out and it is mostprobable that land husbandry work in these project areas also suffered.This in turn resulted in lack of valid and relevant messages for theextension staff to use at the beginning of NRDP I. The authors therefore,feel that NRDP (PI) as a "curtain raiser" for NRDP as regards generatingrelevant advice for farmers has not been achieved.

Table 6 Staff Establishment by GradeDecember, 1978

Post(l) Appraisal Created Filled

P8 2 2 1PO/CEO/CTO 5 4 2STO/SEO 4 4 3TO/EO 17 18 8TA/CO/Copy Typist 56 58 47STA/SCO 4 2 3

88 88 64

(1) For definition of different grades of staff seeAppraisal Report.

Source: Consolidated Report on the NRDP Pre-InvestmentPhase, December, 1978.

3.0 FINANCIAL PERFORMANCE

3.1 Financial performance reviews the project's financial affairs withparticular emphasis on: performance, in terms of comparing actual andplanned expenditure, and drawing out key changes. Table 7 presents amount

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of funds allocated, final drawdown on the loan and final expenditure, andpresented by category. Overall, MK2.49 million was the amount allocated,MK2.44 million finally claimed from the donor and MK2.48 million is thefinal expenditure on the NRDP (PI). Final expenditure is roughly equal toamount of funds originally allocated.

Table 7: Amount of funds allocated, final drawdown andfinal expenditure of NRDP(PI)

Amount Final FinalAllocated Drawdown Expend.

Description MK (1) (MK) (2) (MK)(3) (3 - 1) X

Vehicles, Machineryand Equipment 468,000 433,730 455,245 97Civil Works etc. 1,053,000 1,202,907 1,157,548 109Personnel 468,000 232,089 286,450 61Other Operating Costs 351,000 469,532 525,212 149Consultants 152,100 102,132 58,299 38TOTAL 2,492,100 2,440,390 2,482,754 99

Source: Ministry of Agriculture Headquarters,Finincial Coordinator.

3.2 Expenditure within categories indicate that there wasoverexpenditure on the 'Other Operating Costs' and Civil Works categoriesand there was underexpenditure under 'personnel and consultants'categories. The high overexpenditure on the Operating Costs suggests thatprovision for price contingencies under this category was inadequateconsidering that pet-ol costs have risen some 97% between 1976/77 and1980/81. The price contingency provision for civil works conistruction alsoappeared inadequate as noted from the modest overexpenditure and the actualcost of the construction programme as indicated on Table 8.Underexpenditure in personnel can be explained by the delay in fillingposts and the underexpenditure on the provision for consultant fees is aresult of fewer studies carried out than originally envisaged.

NRDP I PRE-INVESTMENT PHASEExpenditure on Civil Works (as at 31.3.79)

Capital Costs No. in Estimated No. ActualCivil Works Grey Book Cost (MK) Completed Costs (K)

Training Centre 5 22,500 - -Offices (sq. ft.) 3,500 42,000 1,220 6,941C 5 106,600 5 108,918D 24 209,100 22 271,082E 4 16,400 4 23,690PH2 84 204,500 74 263,467Boreholes 46 116,000 - -Bridges 2 90,000 (?) 156,000Roads (mls.) 50 75,000 23 76,407

882,100 906,505

- 58 -

Other Capital Costs

FWD Vehicles 8 59,410 11 86,484Flat lorries 2 27,500 1 11,985Tippers 3 46,500 6 88,419Tractors (MK 165) 1 10,280 1 9,300D6 1 77,400 - -Graders 1 52,650 1 49,500Tanker 1 10,600 1 5,075Motorcycles 15 9,000 13 7,440Roller 1 29,250 - -Caravan 1 4,500 - -Galion Shovel - 1 48,387Other Equipment 66,000 43,720Total Other Costs 393,090 350,510Total Civil Works 1,275,190 1,257,015

4.0 OVERALL EVALUATION

This section brings together the various key issues from section2 to 3 to provide overall evaluation of NRDP (PI). Repetition of previouscomments is inevitable but serves to emphasise the points already made.

4.1 Housing and Buildings

Ninety per cent of houses planned, 57% of all offices, and 46%of the road programme have been built. Cost overruns in the constructionprogramme has been the main problem. By December, 1973, most of thebuilding was underway indicating that the constructing programme was notbehind schedule. The exact number of boreholes constructed is notavailable.

4.2 Staffing

All posts proposed at appraisal in Land Resources, research andevaluation were created, but there were delays in filling these pcstsresulting in delays in carrying out relevant trials in subsequent NRDPproject areas.

4.3 Financial Performance

Overall, there was no overexpenditure at the end of the phasesuggesting that financial control was satisfactory. There was howeveroverexpenditure in some of the categories such as Operating Costs and CivilWorks as a result of the inadequate provision for price contingencies. Inawareness of the incoming overexpenditure, the governnent curtailed theconstruction programme to balance up the expenditure.

5.0 CONCLUSZ.NS

5.1 Infrastructural development has been achieved. No attempt hasbeen mede to assess the effect or impact of the developed infrastructurebecause the project was only for two years and its objectives were notgeared towards this end. The work which was supposed to be done by Land

- 59 -

Rssources and Agricultural Research in proposed NRDP project areas was notdone because of the problem of filling the posts agreed at appraisal onthis basis, therefore, NRDP(PI) has been a failure.

PART C - LAKE TRANSPORT

1.0 BACKGROUND

1 1 Efforts to improve lake transport between Karonga and Chipokaharbour began in Phase I of Karonga Project. In Phase 1, the improvementof the lake transport was in the form of constructing two jetties andassociated structures at Chilumba in Karonga district and Chipoka in Salimadistrict. The need to improve lake transport was felt necessary becausemost of the cargo between Karonga and the Southern Region was normallycarried by ship as a result of poor road condition between Karonga and theSouth.

1.2 Karonga town has no natural harbour, therefore, it was agreedthat Chilumba which is 80 kilometers from Karonga town be improved.Chipoka harbour was chosen because it is connected to the railway.

1.3 Karonga Phase I proposals justified the improvement of laketransport by the increased cargo which would be carried to and from Karongaas a result of the agricultural groject. Phase I completion report statedthat construction of the jetty at Chipoka was not carried out because fundsallocated were insufficient (for details see completion report Phase I).

1.4 Like Phase I, the need for the improvement of lake transportbetween Karonga and Chipoka in Phase II came about because the road linkbetween Karonga and the South was poor. Unlike Phase I, discussions forthe improvement of the lake transport were going on parallel to proposalsto improve the road link between Karonga and the So-th.

1.5 Improvement of the lake transport was to take the form of:

- 60 -

Chipoka Port Estimated Cost (MK'OOO)

Construction of berthstransit shed, rail-sidingaccess road, utilities andsupporting facilities 1/ 1,376Cargo handling equipment 139Refitting of MV Mpasa 21

Sub-total T136

Physical Contingencies 2/ 139Price Contingencies 3/ - 404

TOTAL COST 2,079

Note: (1) Includes 12% for design and supervision.(2) Included at 10% of base cost, excluding

design and supervision.(3) Included at 13% of base co08 plus

physical contingencies for years 1 and12% for year 2.

Source: Karonga II Appraisal Report.

1.6 Refitting of the MV Mpasa, an oil tanker, was viewed necessary inorder to increase its oil carrying capacity to 200 short tons, in order tocope with the expected increase of vehicles in the project area and alsothe expected traffic increase on the lake. Justification of theimprovement of lake transport like in Phase I was in form of increasedvolume of cargo carried on the lake.

2.O IMPLEMENTATION

2.1 Implementation of the lake transport component was the responsi-bility of Ministry of Transport and Communication. Malawi Railways, astatutory body, was responsible for the management of the project on siteand the day to day decision making. Chipoka harbour civil workconstruction was contracted out in October 1977. The rehabilitation of MVMpasa was never carried Out because of various technical reasons and,instead a barge was brought to carry fuel. The cost of this barge was metfrom local sources. Procurement of cargo handling equipment was donedirectly by IDA under Clause 6 of the Standard payment procedures of WorldBank.

2.2 Chipoka Harbour Improvement: Funds allocated for Chipoka wereinsufficient because allocation of funds was based on preliminary estimatesometime before design was completed. As a result, the following wereomitted from the contract to avoid overexpenditure:

- 61 -

3 of the 4 pipelines K45,000 estimateRo-ro facility, except the) 78,000

land based work )Port Masters office block 15,000Workshop 16,000Foot bridge 21,000Total 175,000

Escalation and contingency 21,000Associated works 1/ 115,000Total K311,000

Note: 1/ possibly includes contingencies.

Source: Ministry of Transport and Communicstions.

2.3 Table 1 presents detailed breakdown of estimated and actualexpenditures.

Table 1: Actual and Estimated Expenditure on Lake Transport

Description Estimated Actual X

Civil Works at Chipoka,design and supervision 1,879,502 1,824,786 97

MV Mpasa and Handlingequipment 182,048 163,725 1/ 89

Total 2,070,550 2,057,969 2/ 99

NOTE: 1/ Excludes provision for refitting the MV Mpasa.

2/ Total Final expenditure does not tally with thatshown in Annex IV(c) because it is not clearwhether or not the cost of the handling equipmentwas met from local contribution.

Source: Ministry of Transport and Communication files.

Final expenditure was within the appraisal estimate of MK2.07M becauseother items mentioned in paragraph 2.2 were excluded in the contract. Ifall items proposed at appraisal were included and the MV Mpasa refitted asplanned there would have been overexpenditure. The civil worksconstruction at Chipoka, however, was not completed on schedule because ofthe nation-wide shortage of cement at that time.

2.4 Freight traffic - Table 2 shows actual dry cargo traffic inshort tons at Chilumba harbour. Estimated dry cargo traffic is alsoprovided for Chipoka harbour for comparison. It is apparent from thistable that the amount of cargo either forwarded or received from each ofthese harbours has been increasing with time indicating how busy theseports have been.

- 62 -

Table 2: Lake Transport Service (tonnage by Port), 1974-1979

l l Y E A R SHarbour

l 1974 1976 1979IF~ ~~_

I Forwarded 23375(16800)1/ 24460(16240)1/ 25323(19050)JChipoka

Received 6563(10600j1/ 6722(12780)1/ 9545(16450)

I Forwarded 5115 5359 8935IChilumbaI Received 3970 8573 10530

Note: 1/ Estimated dry cargo traffic. Figures in brackets areestimated appraisal targets.

Source: Ministry of Transport and Communication files andAppraisal Report, Annex 13.

3.0 CONCLUSIONS

3.1 From the above, it can be concluded that a considerable part ofthe work proposed at appraisal under the general objective of laketransport improvement has been done. The barge has been bought instead ofrehabilitating the MV Mpasa. Considerable civil works have been completedat Chipoka harbour. Overexpenditure was avoided by replanning and.reviewing the priorities of the structures to be constructed or items to bebought.

3.2 Chipoka and Chilumba harbours are being used and amount of cargohandled is increasing with time.

- 63 -

MALAWI GOVERNIENT

P R O J E C T C O M P L E T I N R E P O R T

KARONGA-CHITIPA

RURAL DEVELOPMENT PROJECT

P BASE II

ANNE NX S

Ministry of AgriculturePlanning DivisionLilongwe 3, Malawi

February 1983

- 64 -

PROJECT COMPLETION REPORTKaronga-Chitipa Rural Development Project, Phase II

TABLE OF CONTENTS

ANNEXES Annex No.

Summary of Infrastructural at the Commencement 1and end of Phase II

Infrastructural Development, KCRDP II l(b)

References II

Description of the Project III

Request for Re-Programming of Funds for Loan1286-T-MAI IV(a)

Withdrawal of the Proceeds of the Loan 1286T-MAI IV(b)

Estimates of Expenditure in Malawi Kwacha IV(c'

Final Expenditure by Category IV(d)

Drawdown of the Credit (1286T-MAI) IV(e)

KCRDT Operating Costs by Component IV(f)

Procurement of Plants and Vehicles V

Senior Staff Personnel, KRDP, KCRDP VI(a)

KCRDP Organization Chart VI(b)

Value of ADMARC Purchases VII(a/b)

Incremental Value of ADMARC Purchases, by Phase VII(c)

Market Fees VII(d)

Savings by Farmers VII(e)

Credit Outstanding as on 30th September, 1981 VII(f)

Investment in Farm Implements VII(g)

Savings, Non-Agricultural VII(h)

Spending on Primary School Education VII(i)

Primary School Attendance VIlI(J/k)

Health Statistics VII(1)

- 65 -

ANNEXES (Cont'd.)

Annex No.

Cattle Numbers, Growth Rates and Offtake VIII(a)

Dipping Tank Statistics VIII(b)

Dipping Statistics VIII(c)

Cattle Market Statistics VIII(d)

Number of Castrations per year by District VIII(e)

Livestock Slaughter Statistics VIII(f)

Seasonal Credit Issues and Recovery IX(a)

Medium Term Credit Issues and Recovery IX(b)

Number of Credit Farmers IX(c)

Economic Analysis X

- 66 -

Annex 1

Summary of infrastructure facilities availablein Karonga and Chitipa districts at the commencement

and end Phase II Project

Commencement of Phase II (1976) End of Phase II

Staff Housing MANR) Type NumberB 1)C 12) See Annex 1(b)D 22) for additionalE 78) houses.p 73)

Education Facilities Secondary Schools 3 3Correspondence Centres 6Primary Schools 108 144

Health Facilities - Hospitals 3 3Primary Health Centres 2 3Sub-Centres 15 15Health Posts 4 11Dispensaries 1 1

Communications Post Offices 2 2Postal Agencies 12 12Airfields 3 3Resthouses 3 3Telephone Communications Karonga & Chitipa towns

onlyRoads See map No. 14

Livestock Facilities Dip Tanks 41 44Cattle Markets 4 4

ADMARC Facilities Depots 3 3Bulk Markets 49 84Local Produce Markets 8 9

Extension & Training Residential TrainingCentres 1 3Day Training Centres 5 7

Boreholes and Wells - 112

Source: KCRDP Phase II and III Proposal documents.

- 67 -

ANNEX 1(b)

Infrastructure Development: Phase II(Karonga/Chitipa Districts)

Phase IITarget Achievement

Dip Tanks 2 0

Boreholes: Livestock 4 )Health 8 ) 83General 80 )

Roads: Construction 44.5 (miles))Improvement 54.5 ( )) 30.4

Bridges 67 6

Culverts 20 17

Drifts 2 1

Maternity Wards 5 5

Health Posts 7 7

Houses: Type A 3 )B 13 )c 13 ) 95D Health 23 )D General 46 )

Market and Input store complexes 9 0

Small Input Sheds 8 0

Training Centre: Day 1 1

Training Centre: Residential(upgrading) 2 2

Source: Malawi Appraisal Report and KCRDP Headquarters

- 68 -

ANNEX II

ANNEX II

References

1. Karonga Development Project Proposals submitted by MalawiGovernment 1970.

2. A review of the Agriculture in the Northern Province ofMalawi and Recommendations for future Development andReorgrnization, IBRD/IDA 1967.

3. Appraisal of Karonga Rinal Development Project, Malawi.IBRD/IDA Report No.7A-106a 1971.

4. Project Performance Audit Report. Malawi Karonga RuralDevelopment Project - Phase I. The World Bank OperationsEvaluation Department, 1979.

5. Karonga Rural Development Project Proposals for Phase II.Malawi Government, 1975.

6. Malawi Appraisal of the Karonga Rural Development Project,Phase II. World Bank Report No.1084-MAI 1976.

7. Files of Ministry of Agriculture and Natural Resources.

8. Report on Audit/Supervision Visit to Karonga Project,Central Evaluation Unit, 1978. (Confidential andRestricted)

9. National Rural Development Programme National Credit StudyPhase I, 1980.

10. Evaluation of Lakeshore Rural Development Project,February 1982.

11. Ministry of Transport files.

12. 1966 and 1977 Population Census.

13. NSSA 1980/1981 Preliminary Report.

- 69 -

ANNEX III

ANNEX III

Description of the Project

A. For Karonga and Chitipa Districts, the Project was described asfollows:

(1) Continuation and expansion of field extensionservices to farmers.

(2) Continuation and extention of animal and Iandhusbandry services.

(3) Continuation and expansion of seasonal andmedium-term credit for farm inputs.

(4) Continuation of agricultural and hydrologicalresearch.

(5) Construction of about 6 market complexes in Karongaand about 3 market complexes in Chitipa. EachSuch complex will consist of about 280 ton inputstore, a market building and staff housing and theconstruction of about 8 small input sheds in Chitipa.

(6) Expansion of health facilities including the constructionof 3 maternity wards in Karonga, 2 maternity wards and7 health posts in Chitipa.

(7) Construction of about 20 staff houses in Karonga andabout 75 staff houses in Chitipa.

(8) Construction of office accommodation.

(9) Construction of one training centre and upgrading oftwo trnining centres in Chitipa District.

(10) Construction or upgrading of about 90 miles of feederroads and improvement of other access roads, constructionof about 85 boreholes, about 70 minor bridges and about20 culverts and 2 drifts.

(11) Continued ProJect Evaluatrion.

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ANNEX III

B. For Pre-investment of the National Rural Development Programme.

(1) Expansion of MANR's Central Services to increaseits capacity to prepare and implement future investmentphases of NRDP through:

(a) Strengthening of the

(i) land husbandry section;

(ii) agro-economic survey section; and

(iii) accounting services, by provision ofadditional staff, offices and thenecessary supporting facilities;

(b) Provision of agricultural research staff to conductcrop experiments in six future NRDP sub-projects;

(c) Construction of about 55 staff houses;

(d) Establishment of an Evaluation Unit comprising of 15staff with supporting facilities at MANR's RegionalHeadquarters at Mzuzu;

(e) Establishment of a road construction unit withinMANR, and

(f) Provision of consultants to undertake special studieson various subjects related to the implementation ofthe project.

(2) Preliminary investments in NRDP sub-projects as follows:

(a) Construction of about 20 houses in North lestMzimba, about 30 houses in Thiwi-Lifidzi andabout 30 houses in Karonga;

(b) C',nstruction of one training centre in NorthWest Mzimba, 2 training centres each in Thiwi-Lifidzi and Karonga;

(c) Construction of about 20 boreholes in North WestMzimba, about 16 boreholes in Thiwi-Lifidzi and about10 boreholes in Karonga;

(d) Constructicn of about 5 bush markets/input storesin North West Mzimba, about 3 input stores inThiwi-Lifidzi and 2 input stores and one marketin Karonga;

- 71 -

ANNEX III

(e) Expansion of the extension and landhusbandry services staff;

(f) Construction of the necessary officeaccommodation in North-West Mzimba,Thiwi-Lifidzi and Karonga;

(g) Construction of 2 bridges in North-WestMzimba;

(h) Construction of about 50 miles of ruralroads in Thiwi-Lifidzi; and

(i) Construction of additional health facilitiesin North West Mzimba.

C. Lake Transport

(1) Expansion and improvement of berthing and relatedfacilities at Chipoka Lake terminal;

(2) Provision of Cargo handling equipment at ChipokaLake terminal;

(3) Refitting of the motor vessel Mpasa to increase itsbnlk fuel carrying capacity.

- 7I -

ANNEX IV

ANNEX IV(a) : A REQUEST FOR RE-PROGRAMMING OF FUNDSYOR LOAN 1286T-MAI

Ref. No.: 21/5/29/52 22nd November, 1978

FROM: THE SECRETARY FOR AGRICULTURE, P.O. BOX 30134,LILONGWE 3.

TO : THE SECRETARY TO THE TREASURY, P.O. BOX 30049,LILONGWE 3.

Copy to: The Project Manager, KCRDP, BOX 43, Karonga.Financial Coordinator, Box 30134, Lilongwe

LOAN 1286T - MAIYour 28/7/62/7/III/150 of 25th October, 1978 refers.

1.0 With reference to the re-program4ng of funds for Karonga-ChitipaRural Development Project, and your previous letter to RMEA of 12th June,1978 (Your 28/7/62/7/Il/113). Subsequent to suggestion raised at the roundup meeting with an IDA Supervision Mission on 26th September, 1978 and inthe light of more recent cost-performance analysis of KCRDP, it isproposed that the Project now attempt to run its full life of four years(to 30th September, 1980) and complete the majority of the civil worksprogramme as agreed at appraisal.

1.1 The enclosed Paper No.1 entitled 'KCRDP a re-programming ofavailable funds to achieve project completion", indicates tbet theprojected deficit of K562,200 could be financed from the uncommitted PhaseI funds available and recoveries of outstanding debts owed to the projectand over-payments made.

1.2 The only proposed ommission from the originally agreed civilworks programme is for two dip tanks which are now no longer required.

1.3 We therefore request that you withdraw the originalre-allocation of.funds proposed by your letter to RMEA of 12th June(28/7/62/7 ':II/113) and substitute the re-programming as outlined by ourenclosure Paper No.1).

2.0 The reimbursement percentage of the total loan 1286-T-MAI is thesubject of the enclosed Paper No.2 entitled "The Problem of Drawdown orFunds from Loan 1286-T-MAI."

2.1 This paper indicates that there is no way, on the basis of theexisting 75 per cent reimbursement claim, that the full $9.2 million (K8.3

- 73 -

ANNEX IV(a)

million equivalent at appraisal) can be drawn. Two factors havecontributed to this problem. Firstly, the proportion of (100%reimburseable) foreign exchange expenditure has been much lower thananticipated at appraisal. And secondly, the ADMARC contribution to theProject which makes up part of the local 25% is not claimable.

2.2 On the basis of these calculations the Malawi Government wouldhave to increase its contribution to the Project by K700,000 in order tocomplete the drawdown of the loan at 75 per cent reimbursement (based onthe exchange rate at appraisal). Or alternatively request a chaage inreimbursement percentage upwards. If for example the reimbursementpercentage was increased to 85% than increased M.G. contribution requiredwould be K200,000. At 80% then K500,000 would be needed.

2.3 You will therefore please make the necessary approaches to IBRDto ensure sufficient availability of funding from 1286-T-MAI.

3.0 A third problem we would wish to bring to your attentionconcerns the effects of decline in value of the US dollar. Our Paper No.3enclosed, entitled The Problem of Decline in relative exchange value ofUS$ for loan 1286-T-MAI", indicates that on current trends the IBRD Loan of$9,200,000 would be fully drawn on a total Malawi Kwacha value which issome K368,315 short of the original K8,280,000 to be funded by appraisalcalculations.

3.1 This is because at appraisal the US Dollar value was taken at 90tambala. In effect drawings thus far have averaged at 87 tambala to thedollar and based on current trends of exchange values future claims willprobably average out at 85 tambala to the dollar- Only if the exchangerate were to average at 93 tambala to the dollar for the rest of thedrawing period could the situation right itself; such an average exchangerate would now seem very unlikely.

4.0 Combining the two problems outlined above, namely reimbursementpercentage and decline in value of dollar, would seem to indicate that theone problem offsets the other to some extent. Thus the low currentreimbursement percentage reduces the drawing of the IBRD loan whilst thelow -value of the U.S. dollar has the effect of increasing thereimbursemient for the same Kwacha exper.diture. Either way, however, itwould seem to be necessary to increase Malawi Government contribution inorder to satisfactorily draw down the loan and complete the Project. Yourcomments on this aspect would bo welcome.

- 74 -

ANNEX IV(a)

PAPER 1: KCRDP A RE-PROGRAMMING OF AVAILABLE FUNDS TOACHIEVE PROJECT COMPLETION

ARM IV (a)

PAPR 1: (RP A RE-F-1Wtff4 OF AVAIlABLE F[D TOACHIE P)JECr Q4=0I

K-GR1P CDSIS TO 31/10/78 AMD FuRSE C0SrRE-ALTXOCATIONt BAIANCES AVAILABLE

CDSts aJlocated Estiatedas per original Amount Projected4 year programm Total. CGsts (+) Required to Deficit(catingencies up to Balance Cmpleted or

CategOry added) 31/10/78 Pn2-d Project 9urpln

Capital 807.5 379.0 + 428.5 101.0(1) + 327.5

Operating:Personnel 1,254.3 829.1 + 425.2 594.0(2) - 168.8Other 1,225.1 1,262.4 - 37.3 8D5.0(3j - 842.3

Civil Works 1,636.5 1,580.2 + 56.3 394.0(4) - 297.7

On Farm Credit 519.1 0 + 519.1 100.0(5) + 419.1TUAL 5,442.5 4,050.7 + 1,391.8 1,954.0 - 562.2

IUAL EEFICITFinanced By: 320.7 A. ULcommitted Phase I funds.

200.0 B. Previous overpayments and outstandingdebtors recvered.

35.0 C. Airmt received from M.C.W. for RoadspLorannew

50.0 D. Provisional estimate of aiunt od by MANRReverxm accomt to EDP.

12.0 E. Anmt oed to project by MN in respect ofK 617.7 funds paid in advance fwr one dip tank

(Chfwanga) n no longer required.

(+) Nte source Financial Coordinator, MANR For Costs since February 1978 seeAttacbed B. Other Notes to table see paper I Appendix 1

- 75 -

ANNEX IV()

Paper 1Appendix 1

(1) Capital Equipment

Previous budget of remaining expenditure K117,000

Less Amount spent on this budget(February to October) 16,000

Remaining expenditure by budget 101,000

(2) Personnel: Based on the phase over KCRDPstaff to Revenue Account according to thatprogramme agreed at appraisal. Plus anadditional K50,000 for A.D.S. FinancialController for one extra year.

(3) Operating Costs: Based on existing average-osts of K35,000 per month (see attachedPaper 1 Appendix 3).

(4) Civil Works

19 boreholes at K4,000 76,000

Road: as per attached schedule (Paper 1,Appendix 2) 278,000

TOTAL: 354,000

(5) On Farm Credit: latest estimate of new fundsrequired in revolving account.

- 76 -

ANNEX IV(a)

Paper 1Appendix 2

Road Priority K

1. Completion of 25 miles of Chitipa roads(already constructed) with outstanding bridgeapproaches and culverts to bring to M.O.W.Class II standard for Landover (1). 28,000

2. Completion of work on Nilwi-Ngerenge-LifiraLoop (2) 30,800

3. Completion of work on Makoma-Ngerenge Dip (2) 9,700

4. Completion of work on Sefu-Kasoba Loop (2) 46,000

5. Construction and/or realignment and/orcompletion of Nkumbilende-Songwe (3) 6,000

6. Construction and/or realignment and/orcompletion of Kamome-Mwamkhumbwa 24,000

7. Construction and/or realignment and/orcompletion of Mwamkumbwa-Kapanda(3) 7,500

8. Nkhangwa-Ifumbo (3) 27,000

9. a Ifumbo-Chinunkha (3) 15,000

10. James Kameme-David Kameme (3) 27,000

11. - Chinunkha-Ngoya (3) 19,500

12. Ipenza-Titi (3) 18,000

13. Upighu-Kapenda (3) 19,500278,000

(1) Source: Project Management.

(2) Source: Road Report, KCPDP, (SCPO NRDP, 25/5/78).

(3) Provision based on preparing roads to Class III (District)road standard (16 foot carriageway and 2 x 4 feetshoulders). Gravelled only where necessary (e.g. bridgeapproaches on hydromorphic patches). Estimated at K3,000per mile to include necessary cdlverts and minor rivercrossings.

(4) Note that roads improvement for Karonga Housing Area(K49,000 has been omitted from this amended programme).

- 77 -

ANNEX IV(a)

Paper 2

1.5 To overcome this projected shortfall and enable the fulldrawdown of loan 1286-T-MAI (K8.3 million equivalent), Malawi Governmentwould have to contribute an additional K0.7 million. This would providethe Project with additional funds as follows:-

IBRD 75Z 2.1 (MK million)Malawi Government 25% 0.7

Sub Total 2.8Funds available 8.1as per 1.3 aboveTotal Available 10.9

The effect would be to increase total project funds by KO.7 million abovethose originally allocated at appraisal, leaving IBRD loan unchanged atgS.3 million (equivalent).

THE PROBLEM OF DECLINE IN RELA'ZIVE EXCHANGE VALUE OF $US FOR LOAN1286-T-MAI

1.0 The IBRD Loan cf $9,20O,000 is in terms of US Dollars. Atappraisal the exchange rate was taken as 90 tambala to the dollars, theloan was therefore expected to provide Kwacha 8,280,000 towards projectcosts.

1.1 Total claims to date (up to and including No.85) have amounted toK4,173 which have drawn reimbursement to an amount of $4,802,040. Thismeans that the average-exchangc rate for drawings to date has been 87tambala to the doJlar.

1.2 The balance of the IBRD loan available is now $4,397,960. The-value of the dollar has recently declined to 83 tambala although there issome indication of a reversal of this trend. If it is assumed that thebalance of the IBRD loan would provide an average of 85 tambala to thedollar then completed drawdown of the loan would only provide a furtherK3,738,266 toward Project costs (or a total of K7,911,685). There wouldtherefore be a shortfall of K368,315 on the original funds budgetted forthis project.

- 78 -

ANNEX IV(a)

THE PROBLEM OF DRAWDOWN OF FUNDS FROM LOAN 1286-T-MAI

1.0 The original allocation of funds to the three project parts(excluding ADMARC contribution) was as follows: (MK Million)

KCRDP II NRDP LAKE TRANS. TOTALIBRD (81.4%) 4.4 2.2 1.7 8.3Malawi Govt. (18.6%) 1.0 0.5 0.4 1.9TOTAL 5__ __ 2.1 10.2

(Source: Appraisal Report, paragraph 4.19)

1.1 This loan falls within the IBRD "Third Window" category which bydefinition amounts to a funding of 75 per cent of Project Cost. Leavingout the ADMARC funded component however (which does not pass throughgovernment account-and therefore is not re-imbursable) the proportion ofIBRD contribution to the total of K10.2 million amounts to 81.4%

1.2 The actual total drawdown of IBRD funded is determined by thecombined total of claims on foreign exchange expenditures (100Zreimbursement) and claims on local expenditures (75% reimbursement). Atproject appraisal and negotiation it was anticipated that the proportion of100% reimburseable claims was going to be sufficient to enable the fulldrawdown of the K8.3 (equivalent) loan. In fact the 100% reimbursableclaims to date have amounted to only some 5 per cent of total (0.2 millionout of K4.2 million); giving an average IBRD contribution (excludingADMARC) of only some 76 per cent compared to the required 81.4 per-cent oftotal project.

1.3 In fact, if at negotiation it was realised that ADMARCcontribution could not form part of the reimbursable percentages, then onthe basis of the existing agreement there is clearly no way in which theloan could reimburse 81.4 per cent of the Project on the basis of 75 percent claims.

1.4 On the basis of current trends, therefore, the probable outcomecan be summarised as follows:

- 79 -

ANNEX IV(a)

(MK'Millions)KCRDP II NRDP Lake Transport TOTAL

IBRD Reimbursement onForeign expenditure(100%) 0.8 0.1 0.2 0.5

IBRD Reimbursement onlocal currencyexpenditure (75%) 3.0 1.5 1.2 5.7

Total IBRD fundsclaimable 3.2 1.6 1.4 6.2

Malawi Government(unchanged) 1.0 0.5 0.4 1.9

Total funds availableto project 4.2 2.1 1.8 8.1

Project shortfall 1.2 0.6 0.3 2.1

Total as per intendedproject 5.4 2.7 2.1 10.2

Which indicates that the current system of reimbursement willonly be able to drawdown some K6.2 million (equivalent) of theprojected IBRD loan K8.3 million (equivalent). And the projectwould be short of the difference being K2.1 million.

- 80 -

ANNEX IV(b)

LOAN 1286 (MAT)Withdrawal of the Proceeds of the Loan

TABLE IOriginal Amountof the loan Allocated(Expressed in Dollar Final

Category Equivalent Drawdown

1. KRDP

(a) Vehiclcs, Machineryand equipment 600,000 393,085

(b) Civil Works otherthan market facilitiesto be constructed byADfMARC 1,000,000 1,277,909

(c) Personnel 1,000,000 1,444,501{d) Other operating

costs including creditoperation and drugsfor health component 1,000,000 2,154,665

2. NRDP (PREINVESTMENTS)

(a) Vehicles, machineryand equipment 400,000 370,710

Cb) Civil Works other thanmarket facilities to beconstructed by ADMARC 900,000 1,028,126

(c) Personnel 400,000 198,367(d) Other Operating Costs

including creditoperations and drugs forhealth component 300,000 401

(e) Consultants 130,000 87,292

3. LAKE TRANSPORT

(a) Civil Works 1,500,000 1,652,073(b) Cargo handling equipment 150,000 191,963(c) Refitting of the motor

vessel Mpasa . 20,000 -

4. UNALLOCATED 1,800,000 -TOTAL 9,200,000 9,200,000

Source: KCRDP II Credit Agreement document, Treasury and Ministry ofAgriculture.

- 81 -

ANNEX IV(e)

TABLE II ESTIMATES OF EXPENDITUREIN MALAWI KWACHA

The original appraisal anticipated the following in MK million:-

BASIC CONTINGENCY TOTALKCRDP 4.0060 1.4300 5.4360NRDP (PI) 2.1864 .4807 2.6671LAKE TRANSPORT 1.5360 .5430 2.0790ADMARC .5560 .1449 .7009

8.2844 2.5986 10.8830

This appeared to be revised as ADMARC is not a cash item as far as cashflow is concerned.

BASIC CONTINGENCY TOTALKCRDP 4.4720 1.5514 6.0234NRDP (PI) 2.2764 .5042 2.7806LAKE TRANSPORT 1.5360 .5430 2.0790

8.2844 2.5986 10.8830

FUNDS PROVIDED BY GOVERNMENT (1980/81 DEV. ESTIMATES)

TEC LOCAL CONTRIB. DONOR FUNDS077/050 KCRDP 4,881,800 1,011,744 3,876,436077/052 NRDP (PI) 2,681,520 482,674 2,198,846085/038 L.TRANSPORT 2,079,000 386,690 1,692,310

9,642,320 1,881,108 7,767,592

FINAL TOTAL EXPENDITURES

KCRDP 6,091,340 1,522,835 4,568,505NRDP (PI) 2,482,754 620,688 1,862,066L.TRANSPORT 1,963,515 490,879 1,472,636

10,537,609 2,634,402 7,903,2072,727,221.00 7,810,388

Reimbursement claims from the Donor Totalled MK7,810,388(Dollars 9,200,000).

Source: Ministry of Agricultuire - Financial Coordinator.

- 82 -

ANNEX IV(d)

TABLE III LOAN 1286 (MAI)

FINAL EXPENDITURE BY CATEGORY (VIDE TABLE 1 FOR DETAILS OF CATEGORIES)

(1) KCRDF MK SUMMARY DESCRIPTION(a) 516,052 Vehicles, Machinery, etc.(b) 1,519,317 Civil Works, etc.Cc) 1,605,348 Personnel(d) 2,450,623 Other Operating Costs

Sub-total 6,091,340

(2) NRDP (PI)(a) - 455,245 Vehicles, Machinery, etc.(b) 1,157,548 Civil Works, etc.Cc) 286,450 Personnel(d) 525,212 Other Operating CostsCe) 58,299 Consultants

Sub-total 2,482,754

(3) Lake Transport(a) 1,799,789 Civil Works(b) 163,726 Cargo Handling Equipment(c) - Refitting M.V. Mpasa

Sub-total 1,963,515

TOTAL MK 10,537,609

Source: Ministry of Agriculture - Financial Coordinator.

- 83 -

ANNEX IV(e)

TABLE IV: PHASE II: DRAWDOWN OF THE CREDIT (1286-T-MAI)Table 6 U$0'OOO

QUARTER PLANNED CUMUlATIVE ACTUAL CUMULATI'V,DRAWDOWN DRAWDOWN

June 30, 1977 800Sept. 30, 1977 1,600 J,5>6Dec. 31, 1977 2,400 :',455March 31, 1978 3,200 3,119June 30, 1978 4,000 3,472Sept. 30, 1978 4,900 4,156Dec. 31, 1978 6,000 4,950March 31, 1979 7,100 6,298June 30, .1979 7,400 6,868Sept. 30, 1979 7,700 7,325Dec. 31. 1979 8,000 7,521March 31, 1980 8,400 7,754June 30, 1980 8,600 8,023Sept. 30, 1980 8,800 8,235Dec. 31, 1980 9,000 8,517March 31, 1981 9,200 8,569

LO-AN PERIOD EXTENDED

June 30, 1981 9,200 8,742Sept. 30, 1981 9,20C 8,948Dec. 30, 1981 9,200 9,010March 31, 1982 9,200 9,200

Source: Treasury and KCRDP Files

- 84 -

ANNEX IV(f)

TABLE V : KCRDP Operating costs by Component: Actual Totals andProportions Compared to Proportions Allocated (BaseCost) at Appraisal

To-_al operating % AllocatedComponent Cost (Malawi Kwacha) a at Appraisal

Extension 392,099 16 24

Land husbandry 49,012 2 3

Livestock 147,037 6 9

Construction unit 490,125 20 5

Research 98,025 4 6

Hydrology 37,013 2 4

Finance 147,037 6 9

Credit 196,050 8 12

Evaluation 122,531 5 6

Management 722,680 29 15

Health 49,016 2 7

2,450,623 100 100

Sources: Quarterly reports and Financial records of Project.

Note Un-allocated proportion of Operating costs ofmechanical maintenance component have been proportionedout pro-rata according to vehicle operations charged.

- 85 -

ANNX VPage 20

ANNEX V : PLANTS AND VEHICLES PHASE II

Appraisal Bought asDescription Plan BougEt . a Z of Planned

LWB 10-Seater 2 A 100

SWB 7-seater 3 3 100

LWB hard-top 3 4 133-

LWB pick-up 23 17 74

Personnel Carrier 2 1 50

Light PicI-up 2 1 50

Motor cycles 48 39 81

Lorry 5-ton 1 1 100

Lorry 7-ton 2 1 50

11-ton 2 - 0

14-ton* I -

Tipper 7-ton 4 2 50

Tractor 165/185 4 2 50

Grader 1 1 100

Lawn Mower* - 2 -

Trailer 2 1 50

Plough 1 1 100

Water Bowser 2 1 50

Cinema Van 2 -- 0

Mobile Workshop 1 - 0Note: Nothing was planned for items with an asterisk.

There might have been some need for them duringthe course of Projects life.

Source: World Bank Appraisal document and Karonga Projcct.

- 86 -

ANNEX V

ANNE VICb)

ANNEX VI SENOR STAFF PERSCNL KW, IOP PBASES I AND 311

POST 1972 1973 1974 1975 1976 1977 1978 11979 1980 1981

rograrzEe Manager - -- - = =H--

A'sst. P nrm Mager -l l

Financal Controller I- -l - -

Senior Adndn. Officer

Senior Field DevelopmentEngineer

Field Development Ergineer

Senior Extension Officer (1) - - -

Project Of cicer (Karrna)

Project Officer (Chitipa) I_Training Officer - - - -

Womz's Program.e Officer .

Sen.Agric. Fesearch Officer (2) ---

Agric. Research Officer F - -

Hydrologist (3) .___

Chief Iechdiical 5pervLior

KUMAKARCNrA NR41, DEMOR FROEC - HIA5 1OI

KRIU OrgzZdatin Chst

ecjt Ad distmtior

gl :mmmrltmesl~~~~~~~~~mmmAglitural

and mI" Hiubaridry HydrologyI Credit IIArcraffMatsnProru

H

- 88 -

ANNEX VlI(a)

ANNEX VII(a)

VALUE OF ADMARC PURCHASES (K), 1967/68 - 1980/81

Note: Value - Volune of sales x current producer price. Minor crops are excluded.

1967/68 1968/69 1969/70 1970/71 1971/72 1972/73

Maize 1,104 1,716 7,008 9,020 4,675 6,215

CHITIPA Groundnuts 5,170 1,760 1,210 1,584 1,452 1,430

Beans 132 660 66 2,736 864 2,656

TOTAL 6,406 4,136 8,284 13,340 6,991 10,301

Rice 33,704 255,156 264,400 420,115 464,499

Maize 621 110 - - 138 3KARONGA

Cotton 28,545 21,863 12,953 5,984 15,615 23,617

Groundnuts n.a. D.a. n.a. 1,584 616 2

| TOTAL 62,870 159,341 268,109 271,974 436,484 488,121

Source: KCRDP liwnagement Unit

MAJiKAFA MML DEVELDRIJU RE PRDl. -RUSE IOI

IRDP Orgwization Chart

AO4AR~ Minitry of Atnture

Poect Adadnlstrati(i

AprcLLitural

1I1 __N 1:z1 1t 1z1 1r1 t1 1r1 1:1 1r1 1z1

Iai~iI taid Hubsrdry Lvtock PeBearch dr

-88 -

ANNEX VII(a)

ANNEX VII(a)

VALUE OF AELARC. PURCHASES (K), 1967/68 - 1980/81

Note: Value = Vrlume of sales x current producer price. Minor crops are excluded.

1967/68 1968/69 1969/70 1970/71 1971/72 1972/73

Maize 1,104 1,716 7,008 9,020 4,675 6,215

CHITIPA Groundnuts 5,170 1,760 1,210 1,584 1,452 1,430

Beans 132 660 66 2,736 864 2,656

TOTAL 6,406 4,136 8,284 13,340 6,991 10,301

Rice 33,704 255,156 264,400 420,115 464,499

Maize 621 110 - - 138 3KARONQA

Cotton 28,545 21,863 12,953 5,984 15,615 23,617

Groundnuts n.a. n.a. n.a. 1,584 616 2

TOM 62,870 159,341 268,109 271,974 436,484 488,121

Source: KCRDP Management Unit

- 89 -

ANNEX VII(b)

ANNEX IV(b) MEAN ANNUAL VALUE OF ADMARC PURCMASES BY PHASE(K)

Pre-'Iroject Phase I Phase !I(1967/8-7172) (1972/73- (1976/77-

1975/76) 1980/81) MEANChitipa

Maize 4,705 17,265 130,740 53,306

Groundnuts 2,235 998 4,891 2,830

Beans 892 2,105 2,494 1,811TOTAL 7,832 20,368 138,125 57,947

Karonga

Rice 222,150 579,182 761,9ZE 516,936

Maize 174 384 3,216

Cotton 16,992 35,511 76,670 43,597

Groundnuts n.a. 604 80TOTAL 239,756 615,681 841,892 562,309

Source: KCRDP Management Unit

- 90 -

ANNEX VII(c)

ANNEX VII(c) INCREMENTAL VALUE OF ADMARC PURCHASES BY PHASE(K)

Phase I (1972/73- Phase II (1976/77-1975/76) 1980/81)

Chitipa

Maize 576,375

Grouudnuts 19,465

Beans 1,945TOTAL 588,785

Karonga

Rice 1,428,128 2,698,880 4,127,000

Maize 840 15,210 16,090

Cotton 74,076 298,390 398,466

Groundnuts - 1,984 - 5,100 - 7,9841,501,060 3,007,380 4,508,440

Note: For Chitipa, incremental value (mean annual value Phase II -

mean annual value Phase I) x 5;For Karonga, incremental value Phase I - mean annual valuePhase I - mean annual value Pre-Project) x 4;Incremental value Phase II - (mean annual value Phase 1I -mean annual value Pre-Project) x 5.

- 91 -

ANNEX VII(2L

ANE Vl(d) : IW3 FES(K)

1972 1973 1974 1975 1976 1977 1978 1979

Ngana 35.57 44.28 95.78 144.47 135.90 111.32 150.84 116.40

Ngereige 552.25 614.39 655.44 712.18 601.29 740.15 1254.31 1306.15

Mbande n.a. n.a. 51.23 139.72 198.06 100.01 n.a. 136.

ILpenbe n.a. n.a. 184.04 194.01 189.39 225.28 235.65 239.13

N5yunge n.a. n.a. 93.11 153.85 162.51 279.92 233.0 265.73

CbihJuta n.a. n.a. 467.21 650.61 761.57 855.69 1291.75 1729.38

1TOrAL - - 1546.81 1994.84 W48.72 2312.37 3165.55 3792.79

Armual average increas = 23.8Z

Note: (i) Kanga Boma ard Chitipa District maket data umvai]able.

(ii) Chages in fees have had an insifint iizpact mo the totalreve oDlected; these data therefore indicate dages inuLnber of trader-days spent at mnrkets. If traders sell

approxiutely the volume of produce per day tbrougesut theperiod, the data represext cages in volue of produce sold.

- 92 -

ANNEX VII(e)

SAVINGS BY FARMERS (K)

YEAR KARONGA DISTRICT CHIT IPA DISTRICT

Deposits Withdrawal Growth Deposits Withdrawal Growthin in

Savings Savings

1972 18,241 12,653 5,588 4,217 3,058 1,159

1973 25,980 17,672 8,308 7,587 5,985 1,602

1974 52,690 40,500 12,500 10,532 10,182 4,350

1975 47,734 61,505 -13,771 18,224 14,641 3,583

1976 56,286 60,428 -4,142 16,286 18,602 -2,316

1977 66,477 66,339 138 26,305 20,692 5,613

1978 69,632 65,426 4,426 33,352 23,521 9,831

1979 58,685 56,949 1,736 21,024 20,479 545

1980 57,024 77,694 -20,670 20,666 18,458 2,208

1981 47,350 54,064 -6,714 20,573 16,093 4,480

TOTAL -12,601 31,055

TOTAL PHASE I (1972-1976) 8,483 8,378

TOTAL PHASE II (1977-1981) -21,084 22,667

Note: Figures are totals for all Post Offices and Post Agencies,except Karonga and Chitipa Bomas.

- 93 -

ANNEX VII(f)

CREDIT OUTSTANDING AS ON 30TH SEPTEMBER(K)

Medium Term Seasonal Total

Karonga

1977 33,782 43,295 79,077

1978 38,762 51,037 89,799

1979 47,779 39,371 87,150

1980 59,028 58,509 117,537

1981 81,032 73,977 155,009

Chitipa

1977 - 11,705 11,705

1978 11,539 42,234 53,773

1979 17,888 27,214 45,082

1980 17,256 16,746 34,002

1981 16,519 20,437 36,956

Source: KCRDP Quarterly Reports

- 94 -

ANNEX VII(g)

INVESTMENT IN FARM 1DHPLEMENTS

1. KarongaPhase I 1976/77 1977/78 1978/79 1979/80 1980/81

Cash n.a. n.a. 9,572 9,771 7,221 992

Credit 32,701 16,081 15,292 18,988 27,568 39,712

TOTAL - - 24,864 28,759 34,789 40,704

2. Chitipa

Cash n.a. n.a. 305 3,042 1,864 1,266

Credit - - 13,561 9,332 4,996 6,947

TOTAL - - 13,866 12,374 6,860 8,213

Note: (i) Karonga credit in 1976/77 includes Chitipa Credit.

(ii) Credit is implements issued on credit, not repaymentof credit.

(iii) Cash sales data not available before 1977/78.

(iv) Credit includes work oxen; cash sales do not.

- 95 -

ANNEX VII(h)

SAVINGS, NON-AGRICULTURAL

WEAR GROWTH IN SAVINGS (F)

POST OFFICE BANK

KARONGA CHITIPA

1972 7,922 417 n.a.

1973 9,629 240 n.a.

1974 11,831 8,288 n.a.

1975 2,206 2,953 n.a.

1976 24,499 3,663 n.a.

1977 21,152 - 804 80,184

1978 10,506 10,584 119,64

1979 4,012 9,239 120,46

1980 -8,769 40,477 665,40

1981 -10,805 44,875

TOTAL 72,183 119,098

TOTAL PHASE I 56,087 14,727 n.a.

TOTAL PHASE II 16,096 104,371

NOTE: Figures are for Karonga and Chitipa Boma PostOffices, and for National Bank Sub-Branch andall its agencies.

Source: KCRDP

- 96 -

ANNEX VII(i)

SPENDIUM ON PRDMARE' EDUCATION(K)

1974 1375 1976 1977 1978 1979 1980 1981

Karonga 60,180 59,223 57,504 67,911 69,522 72,711 72,051 70,820

Chitipa 40,788 44,631 45,639 42,693 51,762 55,629 57,156 63,070

TOTAL 100,968 103,854 103,143 110,604 121,294 128,340 129,207 133,890

Notes: Ci) Based on primary school attendance dataFees are 12.50 for standfards 1-5 and K4.50for Standards 6-8.Approximately 25X of pupils are in Standard 6-8.

(ii) Data on secondary school attendance not available.

Source: ICRDP

- 97 -

ANNEX VII(j)

EDUCATION : PRIMARY SCHOOL ATTENDANCE

Chitipa

1974 1975 1976 1977 1978 1979 1980 1981

No. of Schools 54 52 51 55 67 67 68 69

TOTAL 13596 14877 15223 14231 17254 18543 19052 21023

School-agePopulation 28345 29036 29745 30470 31213 31974 32754 33553

% attendance 48.0 51.2 50.8 46.7 55.3 58.0 58.2 62.7

No. not attending 14749 14159 14622 16239 13959 13431 13702 12530

Notes: 1. Attendance figures are for July (Ministry of Educationrecords).

2. School-age population for 1977 is Malawi PopulationCensus estimate of 5-19-year-olds in the District.Growth rate to determine other years is intercensalgrowth rate (1966-1977) for 5-19-year-olds.

3. % attendance - total attendance x 100 + school-agepopulation.

4. Number not attending - school-age population - totalattendance.

- 98 -

ANNEX VII(k)

EDUCATION : PRIMARY SCHOOL ATTENDANCE

Karonga

1974 1975 1976 1977 1978 1979 1980 11981

No. of schools 56 57 59 68 70 74 75 75

TOTAL 20060 19741 19168 22637 23174 24237 24017 23607

School-agePopulation 36312 37548 38826 40147 41513 42926 44387 45898

% attendance 55.2 52.6 49.4 56.4 55.8 56.5 54.1 51.4

No. notattending 16252 17807 19658 17510 18339 18689 20370 22291

Notes: 1. Attendance figures are for July of each year.(Ministry of Education records)

2. School-age population for 1977 is Malawi PopulationCensus estimate of 5-19 year-olds in the Distriat.Growth rate to determine other years is intercensalgrowth rate (1966-1977) for 5-19 year-olds.

3. % attendance = total attendance x 100 + school-agepopulation.

4. Number not attending - school-age population - totalattendance.

- 99 -

ANNEX VII(l)

HEALTH STATISTICS

1.OUTPATIENTS 1975 1976 1977 1978 1979 1980

KARONGAAttendance 278225 332483 187201 166221 165024 n.a.per 100 population 285 326 175 148 141 n.a.

CHITIPAAttendsuce n.a. 84748 98671 124121 133872 153600per 100 population n.a. 120 136 168 178 201

2.MATERNITY CLINICS(Deliveries)Karonga 2231 2566 2194 2561 2453 2791Chitipa n.a. 1448 1602 1942 1726 1905

3.VACCINATIONS

KaronlgaSmallpox 4845 2164 4978 4769 4103 2620BCG 6547 7035 5860 5202 4654 5682DPT 14159 9243 13597 13245 11099 13306Polio 3941 8897 12333 4964 10497 13675Measles 7242 0 0 8 133 3539

ChitipaSmallpox n.a. 1971 2093 2425 1841 1266BCG n.a. 2597 2666 2919 2546 2195DPT n.a.* 5380 5467 5763 5857 6248Polio n.a. 7035 5161 4457 4679 6277Measles n.a. 2475 3671 2365 1663 1860

Notes: Smallpox includes revaccinationDPT and polio are sum of 1st, 2nd and 3rd vaccinations.

4.UNDER FIVES CLINICS 1974 1975 1976 1977 1978 1979 1980KarongaNew Attendance 117 725 541 627 580 466 511Total Attendance 4072 4296 3571 4794 4023 3478 2952

Note: Chitipa data not available.

Note: Throughout, health data have gaps and appear to be inconsistent.These data should be handled with care.

- 100 -

ANNEX VIII(a)

ANNEX VIII(a) - Table 1: Cattle Nmbers, Growth Rate and Offtake

1975 1976 1977 1978 1979 1980 1981 Average

Karonga District

Total Herd 39,862 40,328 41,262 42,614 41,309 44,118 43,849Slaughter 3,024 3,473 3,243 3,443 3,461 3,986 4,648Market Sales 6 4 17 47 19 301 299Total off-take 3,030 3,477 3,260 3,490 3,480 4,287 5,947Z off-take 10.6 1.2 2.3 3.3 -3.1 6.8 -0.6Productivity (Z) 18.2 9.8 10.3 11.0 5.3 16.7 10.7

Chitipa District

Total herd 32,560 35,313 36,783 37,135 37,734 40,517 40,100Slaughter 2,101 2,387 2,594 2,449 2,797 3,055 3,482Market Sales 630 723 506 1,103 1,120 821 383Total off-take 2,731 3,110 3,100 3,652 3,917 3,876 3,865% off-take 8.4 8.8 8.4 9.8 10.4 9.6 9.6Growth rate 8.5 8.5 4.2 1.0 1.6 7.4 -1.0Productivity (Z) 16.9 17.3 12.6 10.8 12.0 17.0 8.6

Total cattle population(project) 72,422 75,641 78,045 79,749 79,043 84,635 83,949

Growth rate x 9.7 4.4 3.2 2.2 -0.9 7.1 -0.8 3.6Productivity 17.7 13.1 11.4 10.8 8.5 16.7 9.3 12.5

Source: KCRDP

- 101 -

F ANNEX VIII(b)

Table 2 : Dipping Tank Statistics : Total Number of Animals within Each Registerin Karonga District by Year and Register

1975 1976 1977 1978 1979 1980 1981

A- Register(1) j *

Total herd 39,862 40,328 41,262 42,614 41,309 44,118 43,8494/Total in A-Register N/A 36,427 37,795 38,636 37,769 40,006 40,051Z of total in A-Register I - 90 92 91 91 91 91

B - Register(2) l

Z of total in B-Register N/A 7 6 7 6 7 6Total in B-Register N/A 2,866 2,496 2,868 2,578 3,067 2,653

C - Register(3) I% of total in C-Register N/A 1,035 971 110 962 1,045 1,145Z of total in C-Register N/A 3 2 2 3 2 3

1 1(2) All animals within 8 kilometers of the Dip tark.

(2) All animals within 8-16 kilometers radius of Dip tank.

(^3) All animals outside 16 kilometers radius of Dip tank.

(4) Total herd in 1981 fell from 44,118 to 43,849 due to probableincidence of food and mouth disease (FMD) in 1980.

Source: KCRDP

- 102 -

AME~X VmIc)

Tam 3: Dipping Statistcs: xbr oEf A18ls dipped 'per mek" for FebruarY nmd AuutM.=tbs by Ye-r and District

I I l~~~~~~~~~~~~~~~~~~~~~~98D asA%!1975 1976 1977 1978 1979 198D 1981 f total

l l cattle I§ ~~~~~~~~~~~pquld I

_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_ I.I

Ehary |27,542 22,421 30,648 34,744 31,480 25,866 25,443 58

i 1 st 25,451 32,687 32,434 31,708 26,322 27,684 2B,223 63 I

CE[TIPA j iFebruary 18,578 20,899 25,473 24,287 19,325 26,602 N/A 66A3gilst 1 23,811 26,257 24,825 26,543 30,221 30,222 N/A 75

I E crIiFeb; ary 46-,112 43,320 56,121 X,031 49,547 52,468 N/A 62Aujst 46,262 58,944 57,259 58,251 56,543 57,906 N/A 68

1/ More ardals ame dipped during tie dry steas tbai they a intS e rainy s

Som: KCRDP

- 103 -

ANNEX VIII(d)

Table 4 : Cattle Market Statistics for Karonga by Year and Discrict

1977 1978 1979 1980

Karonga

Number presented 20 69 - 694Total unsold 3 22 - 259Total. withdrawn 3 22 - 131Total sold 17 47 - 301Liveweight/head (axerage) 776 739 - 771Average Price/head (Kwacha) 89.88 86.98 - 120.09Price tlkg 25.48 25.89 - 34.28

Chitipa

Number presented 1,110 1,255 - -Total unsold 325 339 - -Total withdrawn 277 225 - -Total sold 799 973 821 -Liveweight/head(average) 615 593 594 -Average price/head (Kwacha) 62.32 71.14 82.1) -Price t/kg 22.89 ?6.42 30.4 -

Note: Information is not available for 1975, 1976 and 1981.

Source: KCRDP Headquarters.

- 104 -

ANNEX VIII(e)

Table 5: Number of Castrations per year by District

YEAR KARONGA CHITIPA WHOLE PROJECT

1975 1,983 1,311 3,294

1976 567 1,475 2,042

1977 2,024 1,643 3,667

1978 2,325 1,475 3,800

1979 1,817 1,410 3,227

1980 2,024 1,534 3,558

1981 2,430 1,272 3,702

Source: KCRDP Management Unit.

- 105 -

Annex VIII(f)

Veterinary Department - Livestock Slaughter StatisticsSummary of Each Year 1972 - 1981

ChitipaDistrict Cattle Goats Sheep pigs

1975 2,101 28 6 18

1976 2,387 18 11 37

1977 2,594 49 17 43

1978 2,449 72 18 43

1979 2,797 112 50 67

1980 3,003 183 91 42

1981 3,482 78 147 64

Source: KCRDP Management Unit.

- 106 -

ANNEX IX(a)

Table 1: K e: asal Credit lsses and Pecovery

I 4 - 4 1~I Il [I divi- Credit Groips Credit lTotal1/ Total I dLal I Ammge

l ~ ual mer al N' A l Nuimber *ma1 e e T hsae per P-c'Y-rylI lsats o Isae of Isv Es of cf BDrramrs Z

Year (K'000) Borrrs (VOKOO) Borrcws (K000) Grups Borrawers1 (K) .

1972/73 1.4 43 1.4 43 - - - 33 9811973/74 24.9 2,050 24.9 2,050 - - _.1 12 9911974175i 75.0 4,073 75.0 4,073 - - 18 9511975/76 1 80.0 5,115 80.0 5,115 - - 16 9511916/77 j 109.5 7,253 1.109.52! 7,2532/ - - 15 9011977178 186.5 8,929 - 186.5 267 8,929 21 971978/79 147.4 6,522 - 147.4 265 6,522 23 981979/80 2D3.3 8,940 I - aD2.3 423 8,267 23 981980/81 263.3 10,597 - - 263.3 631 10,597 25 98

1/ Rcumded, incldiSng credit charges.

2/ About 100 groups are involved.

Source: KCRf,quarterly reports

- 107 -

ANNEX IX(b)

Table 2 : KCRDP Medium Term Credit Issues and Recovery

TotalTotal Number AverageAnnual of Issue per Recovery

Year Issues Borrowers Borrower %(MK'0Oo) (K)

1975/76 22.9 N/A N/A 53.6

1976/77 16.1 N/A N/A 12.0

1977/78 44.9 N/A N/A 62.0

1978/79 73.3 406 180.4 84.0

1979/80 105.8 631 167.7 63.0

1980/81 52.5 872 174.9 63.

Source: KCRDP Quarterly Reports

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ANNEX X

1.0 ECONOMIC ANALYSIS

1.1 INTRODUCTION

Following the Bank's advice on the computation of the EconomicRate of Return (ERR) of Karonga Phase II PCR, a revised ERR has beencomputed. The main difference between the revised ERR and the previous oneis the computation of Phase II incremental crop production and economicpric es used. In the original ERR the method used to compute incrementalcrop production failed to separate incremental production of Phase I fromthat of Phase II. In this revised ERR, this problem is overcome. Farmgatevalues derived from actual prices have been used as noted below as opposedto projected farmgate values used at Appraisal.

1.2 COSTS

Two economic rates of return have been calculated and these areestimated on the basis of two different assumptions about cost streams:

(a) Exclusion of costs for project components not directlyrelated to crop production.

(b) Assuming all project costs are allocated to crop production.

In the first estimate, costs of the Lake Service, Health,Agricultural Research, Hydrology, Evaluation and Livestock components areexluded. Costs included, therefore, compr:ise nverhead and recurrent costsfor extension and Land Husbandry components; 80% of the costs of mechanicalmaintenance and construction components and the management unit, and then90% of the costs for Finance and Credit components. The reason forapportioning costs in some of these components is that even thoughcomponents such as Management Unit are related to crop production, themanagement unit serves the entire project. It is therefore logical thatcosts for such components be apportioned.

In the second estimate of ERR, all project costs related to theproject are considered. These include costs for livestock, 80% of researchand evaluation, 50% of hydrology and health components. The reason forapportioning some of these costs is the same as above.

1.3 BENEFITS

Benefits consist of incremental rice, maize, groundnuts andcotton production. Incremental crop production for Phase II is thedifference between production levels "with and "without' projectsituations minus the base year production. Incremental productions fordifferent crops, from year one to year 5, are then multiplied with computedfarm gate prices calculated from actual prices and the products summed upto derive value of incremental crop production for each year of the projectlife. After year 5 it is assumed that crop production levels (except thatof rice) will remain constant up to year twenty-five. In projectingincremental production for rice from year six onwards, the very sharp risein year five has been ignored and considered temporary.

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ANNEX X

No attempt was made to calculate incremental Livestock productionbecause this component was also excluded at appraisal.

1.4 FARM GATE PRICES

A brief analysis is made of the market situation for the projectsmain crops. Information from ADMARC and Marketing Section of PlanningUn-t has been used to compute farm gate values at Chirumba and forecastingcommodity prices up to year 25. From years one to five, actual farmgatevalues have been calculated based on export parity, and from year sixonwards price forecasts have been worked out based on the projected ratesof inflation on international commodity prices as outlined in CropMarketing and Price Projections report (1980) by Planning Divieton.

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ANNEX X

Table I : Total Project Costs by Component and Year, 1976/77 - 1980/81

COMPONEM/YEAR 1976/77 1977/78 1978/79 1979/80 1980/81 TOTAL

Plant and Vehicles - 295,163 104,738 116,151 - 516,052

Civil Works 284,872 379,829 569,744 284,872 - 1,519,317

Personnel 321,069 321,069 321,069 321,069 321,069 1,605,348

Exteasioa 61,990 61,990 61,133 82,200 124,786 392,099

Liveseock 38,632 38,632 24,873 24,105 20,795 147,037

Land Husbandry 6,984 6,983 9,060 11,752 14,233 4,912

Construction and Maintenance 60,023 60,023 105,220 131,110 133,749 490,125

Research 40,038 40,038 4,956 4,618 8,375 98,025

Hydrology 6,750 6,750 5,184 9,011 9,317 37,013

Finance 8,662 8,662 51,533 36,670 41,509 147,037

Credit 35,823 35,823 30,268 39,479 54,662 196,050

Evaluation 23,172 23,172 22,468 24,686 29,032 122,531

Managevent 84,360 84,359 138,688 231,268 184,005 722,680

Health 6,726 6,727 7,188 14,815 13,560 49,016

TOTAL COSTS 979,101 1,369,221*1,456,117 1,331,806 955,095 6,091,340

Should read 1,369,220Should read 1,369,220

- lii -

ANNEX X

Table 2 : Total Project Costs (excluding Health, Evaluation, Research and Livestock Costs,(1976/77 - 1980/81)

COMPONENT/YEAR 1976/77 1977/78 1978/79 1979/80 1980/81 TOTAL

- - - - - - - - - - - - - - - MK - - - - - - - - - - - - - - -

Plant and Vehicles - 295,163 104,738 116,151 516,052

Civil Works 284,872 379,829 569,744 284,872 - 1,519,317

Personnel 321,069 321,069 321,069 321,069 321,069 1,605,348

Extension 61,990 61,990 61,133 82,200 124,786 392,099

Land Husbandry 6,984 6,983 9,060 11,752 14,233 49,012

Construction and Maintenance 48,018 48,018 84,176 104,888 106,599 392,099

Finance 7,795 7,795 46,379 33,003 37,358 132,330

Credit 32,241 32,241 27,236 35,531 49,195 176,444

Management 67,488 67,488 110,950 185,014 147,204 578,144

Sub Total 830,457 1,220,576 1,334,485 1,173,480 800,844 5,359,842

Input Costs 169,000 307,000 228,000 264,000 329,000 1,2975,00

TOTAL COSTS 999,457 1,527,576 1,562,485 1,437,480 1,129,844 6,656,842

- 112 -

ANNEX X

Table 3 Incremental Crop Production (Metric Tonnes)

Years Karonga Karonga Karonga Karonga Chitipa ChitipaR:Lce Cotton Maize G/Nuts Maize G/Nuts

1 (1008) (83) (1718) (81) 1,312 (103)2 732 430 1922 101 11,562 (87)3 3682 (11) (753) (101) 6,128 (22)4 1822 32 (659) (95) 5,724 (159)5 10514 32 (1395) (117) 5,291 (166)6 4187 32 (1395) (117) 5,291 (166)7 4187 32 (1395) (117) 5,291 (166)8910111213141516171819202122232425 4187 32 (1395) (117) 5,291 (166)

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ANNEX X

Table 4 : Economic Farm Gate Prices (MK/Metric Tonne)

Crop/Year l(a) 2 3 4 5 6 7 8 9 10 - 25

Rice 170 182 198 216 236 256 260 260 260 260

Maize 65 67 67 70 73 82 82 85 87 90 90

Cotton 351 330 375 440 451 499 534 571 611 611 611

Groundnuts(b) 245 233 234 217 210 210 205 205 205 211 211

Notes:

(a) 1976/77 season.(b) Manipintar groundnuts only.

Source: Planning Unit and ADMARC Headquarters.

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ANNEX X

Table 5 : RDP II - Internal Rate of Return - Excluding Costsleft out at Appraisal

Total NetYear Cost Benefits Benefits

(MK'ODO) (MK'OOO) (MK'O00) DS CF DSC FCT NPV

1 999 215 -1,214 -1,062.238 0.14287 0.02818832 1,527 1,134 - 394 301.64953 1,563 1,037 - 526 - 352.3674 1,493 708 - 785 - 460.13195 999 2,270 1,721 882.666636 999 1,348 349 156.618997 999 1,367 368 144.500718 999 1,380 381 130.903229 999 1,390 391 117.5453

10 999 1,400 401 105.4814411 999 1,400 401 92.29522112 999 1,400 401 80.7574113 999 1,400 401 70.66193814 999 1,400 401 61.82850115 999 1,400 401 54.09A2916 999 1,400 401 47.33638117 999 1,400 401 47.41886718 999 1,400 401 36.24110119 999 1,400 401 31.71060720 999 1,400 401 27.74646921 999 1,400 401 24.27788722 999 1,400 401 21.24291223 999 1,400 401 18.58733924 999 1,400 401 16.26373925 999 1,400 401 14.230611

IRR = 14.3%

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ANNEX X

Table 6 : KCRDP II - Internal Rate of Return - Including Costsleft out at Appraisal

Total NetCost Benefits Benefits

Year (MK'000) (iK'000) (MK'000) DS CF DSC FCT NPV1 1,171 - 215 1,386 -1292.553 0.0722967 0.00433972 1,700 1,134 - 566 492.25093 1,693 1,037 - 656 - 532.05794 1,573 708 - 865 - 654.26885 1,269 2,720 1,451 1023.51116 1,125 1,348 223 146.694917 1,125 1,367 242 148.460388 1,125 1,.80 255 145.888299 1,125 1,39f 265 141.3875410 1,125 1,400 275 136.8305311 1,125 1,400 275 127.605112 1,125 1,400 275 119.0016713 1,125 1,400 275 110.9'83114 1,125 1,400 275 103.4958915 1,125 1,400 275 96.51796416 1,125 1,400 275 90.01050217 1,125 1,400 275 83.94178818 1,125 1,400 275 78.2822419 1,125 1,400 275 73.00427220 1,125 1,400 275 68.08215721 1,125 1,400 275 63.49190222 1,125 1,400 275 59.21113223 1,125 1,400 275 55.21898224 1,125 1,400 275 51.49399225 1,125 1,400 275 48.024014

0.0043397

IRR 7.2%

- 116 -

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- 117 -

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