World Bank Document

RESTRICTED Report No. PA-118a Public Disclosure Authorized

This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Rank Group dosnot acenp resnonshibiliy for the ---ray orcr.ltn f th rpot

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENr INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

AGRICULTURAL SECTOR SURVEY

REPUBLIC OF ZAIRE

(in three volumes)

VOLUME II Public Disclosure Authorized ANNEXES 1 THROUGH 6

June 19, 1972 Public Disclosure Authorized

Aogri niut ulr P =lnt-r DoTpon rtment

BACKGROUND DATA US$1 = 0.5 zaires (Z) or i0 ri-La'ruta (1x) One zaire = 2.0 US$ Total Land Area 234.5 million ha (905,000 square miles) of which (i) Forests 102.3 million ha (ii) Cultivated land 2.3 million ha (iii) Permanent pasture 2.3 million ha (iv) Savannahs, mountains, rivers and lakes 127.6 million ha Population (Official estimate, 1970) 21.6 million Distribution: Rural 70% : Urban 30% Annual rate of growth, 1958-70: 3.9% Gross Domestic Product Total, 1970 (est.) Z 1,014 million (US$2,028 million) Per canita. 1970 (est.): Z 47 (US$94) Agricultural output as % of GDP, 1969: 18% Commercialized production: 10% Subsistence production: 8% Agricultural Exports and Imports Value of Agricultural Exports, 1969: US$97 million Share of Total Exports: 14.5% Principal export products: palm oil, coffee, rubber, wood products, tea Value of Agricultural Imports, 1968: US$56 million Share of Total Imports: 11% Principal imports: cereals, fish and fish products, meat and dairy products, fruit and vegetables, tobacco Cnn9u.mpr Prrire Index (IRES - Kinsghaa) June 1970 (June 1960 = 100) 1,454

GENER.AL NOTE ON DATA

The statistical data available on most facets of the economy and population of the Republic of Zaire are quite unreliable for the post--Independence periods -- a fact which official publications readily acknowledge. This report will cite data from time to time for illustrative purposes, but no attempt has been made to subject: the data to extensive analysis of any kind.. Quantitative statements do appear in the report, but probably with less frequency than in other Bank doctments, and should always be regarded with some caution. This general qualifying note is introduced at the beginning of the report to alert the reader, and to avoid constant repetition of the same point wherever data are cited.

ANNEX 1 Page

REPUBLIC OF ZAIRE

AGRICuLMu-RAL SECTOR SUKVEY

Farm Systems and Organization

1. There are two major classes of farm systems in Zaire: the set of farming practices known as traditional farming, and the set of farming practices known as commercial or plantation agriculture. Traditional farming concerns mainly food crops, small livestock, and very limited nun- bers of cattle; it is done in very small units; it uses very little capital and almost no purchased inputs; agricultural techniques are based on experience; the rate of innovation is relatively low; and production is predominantly for self-subsistence. Commercial agriculture concerns mainly export crops', sugarcane, and cattle ranching: it is carried out in very large units; it is capital intensive; it uses only purchased inputs and advanced farming techniques; the rate of experimentation and innovation is often very rapid; and above all it produces only for the market..

2. In addition to these two major classes, there are many intermediate farm types that do not fit neatly into either category. For example, the horticultural farms near Kinshasa are usually very small and labor intensive, but they are market-oriented and often demonstrate a high rate of innovation in techniques or in cropping. In the Bas Zaire, cattle raising is carried out using techniques and attitudes that are not entirely traditional in type, but which at the same time are not commercial. Neverthe- less, although both traditional and commercial agriculture embrace a wide range of farming practices, and although there are many intermediate farm types that fit into neither category, the distinction between the two major classes of farming is clear, the differences are immense jnd of fundamental importance.

A. Traditional Farming

Major Characteristics

3. Traditional peasant agriculture is based on growing food crops following well-established crop rotations. The type of crop rotation depends on bioclimatic conditions (savannah or forest) and the necessity to restore soil fertility through fallowing after several years of cultivation. The main crops, which constitute the staple food for both the rural and the urban population are cassava. rice, and nlantain in the forest area and cassava, maize and groundnuts in the savannah. In the highlands, beans and peas also play an imnortant role. The fgllow neriod in the forest is of the order of 10 to 15 years, and in the savannah of six to 10 years. ANNEX 1 Page 2

4. The most striking characteristic of traditional farming is its variety. Crop mixes, cultivation methods, preferred tools, land clearing methods, and length of fallow periods - they all vary. The variety of traditional agriculture is caused by many factors -- climate, ecological conditions, scientific knowledge, capital resources, market availability, and attitudes of groups of people and of individuals -- all of which vary as among different places. In some parts of Zaire, one sees tribes who appear to work hard and farm well, and who look relatively healthy and well-fed. In other areas, one encnimters grouns Twho exhibit quite contrarv characteristics. One hears of groups of people who respond quickly to economic incentives, who adopt new techniques easily or who adapt themselves to new conditions easily. And one hears of others not so flexible.

S Much of this variationn in t-he response of indiv4iuidil and groups may be explained by differences in climate or health and diet, but some part also seems attribhiiit-a1l t-n the snoial pneraonliti- nf nprt-icunr t-ribehp. Snom tribes respond quickly to the opportunity to earn cash incomes, others respond Tnre clwlu ; omp tri4hp put a high valuatior.on n.n leaisure time, others do not. That is to say, some areas would lend themselves more favor- blhiv than nthers tn aariculturAl nromntion nr eyti-nsinn wnrk nont becsetR their natural resources are better, but because the people living there are mnre recentive-

6.A further cause of Uvariation lies in the effectuiness and weigh- of the administration, both appointed and traditional. Where the administration and local chIefs support and a4d the rural populaion, one car. - pect substantial collaboration and interest in agricultural development. Where the local administra#4or. ep1loi4t t-he rural population wIth fines, marginally legal taxes and levies, and long-run impositions of compulsory lablor, the populati-. i8 ar.d to giv litle .ollabo-I, a.aL.J... ~ a UA,J- .L -lbely- #-o% IleJ~U apathetic--.LnC~%LLA.. M L.~ 5 .LV = Ji.S. LL %WLU~LuUU ration on agricultural development. Moreover, the personality of the indi-

V %.&UUJC L.flfX-A.- O .LO 6LQfl* . M P U " .L -C. %.V LL1%ULiI.. D%ULL .L a LCU1L) ~.L±S.) O.iU L0 S, L.1U ulate the social organization to achieve defined goals.

7. However, traditional farming does have some major characteristics that are common to most types. F'rst is the very limited use of capital ana purchased inputs. Second is the division of labor between men and women. Third is the system of lard ownership and land use in most areas of traditional farming.

8. The main input in peasant agriculture is the farm family's own labor. Normally, there is very little specialization between families in villages. The division of labor between men and women is quite distinct. Generally, the major responsibilities of men include hunting, forest clearing and hut building; where there are cattle, these too are the men's responsibility. Women's responsibilities include sowing, cultivation, weeding, harvesting and post-harvest processing and marketing, besides the household chores and fetching water and firewood. Year-round, the women appear fully occupied; the men on the other hand are not. In consequence, the chief labor constraint on raising output is the availability of womens' labor. ANNEX 1 Page 3

9. ~~The domir.ant fomm of l-anA t-enure is thLa t of cla- property- . Thle

land belongs to the community and there is no individual ownership. However,

the crop areL CYO -Lwy V.iniuA.l pL%JF-L y aLnU LhL.Ls Lr.LriLL :; sLLtLrct.Ly LrseF--%-L ed. In certain cases, this crop ownership right extends also to the fallow, and this canr be considered as an hereditary land-use right. Abandoned plots revert automatically to the community. The size of the plot cultivated by a familyIc I _ inj any given .__year varies fromI aDout. 0.6.I ha in rorest areas to 1-2 ha in the savannah, depending on local conditions.

10. This system is satisfactory as long as populatlon density ren.ains low and there is plenty of land available. This is the case over most part of Zaire, and there appears to be no pressing need to change this landholding system. However, in a few restricted areas where a high population density has developed, the disadvantage of this land tenure system for intensification of agricultural production becomes apparenit. These areas are mostly in the vicinity of large urban centers, a few territories in the eastern highlands, and along densely populated roads (as in the Kasai). The main disadvantage of the communal landholding system for these areas is that tarmers are not willing to make investments for land improvement -- such as terracing, erosion control, small irrigations and fencing -- on land that they do not own. In the future, these overpopulated rural areas will undoubtedly increase and a change from the present communal landholding system to some form of private ownership or responsibility for the land would certainly be more conducive to an intensification of agricultural production. Changes in the land tenure system in the interior will come only very slowly; however, the economic necessity for modification will become much greater near big towns.

11. Change in the land tenure system should be accompanied by measures that will permit a freer migration of rural population to vacant lands. Un- der the present system, all the clan territories are conitiguous; therefore, there is no vacant land in the legal sense. Only exceptLonally, with the consent of the chiefs and possibly against payment of tributes was the Belgian administration able to authorize people from one clan to settle in the territory of another. Few of these migrations have withstood 10 years of independence. These restrictions on the free movement of the rural population is the main reason for a high density of rural population in certain areas, and is one of the reasons why people from over-Dooulated rural areas move to the cities rather than to other territories where they could continue to farm the land.

12. The Paysannat System. From about 1945 onwards. serious efforts were made by the colonial government to rationalize traditional agriculture. For this purpose paysannats were created. The navRannat movement was an attempt to reform agrarian structure and to modernize agricultural practices. The agrarian reform was designed to renlAce the traditional land ownershin system with individually-owned plots which could not be reallocated by the chiefs. It was also expected to entahlish new rotatinna and now land mrafn- agement practices, ensure the observation of fallow periods, and allow for ANNEX 1 Page 4 an eventual mechanization of certain field jobs. A paysannat was, cnere- fore, generally a village -- perhaps new or regrouped -- for whicli an agricultural plan was prepared and the new land use and cropping pattern implemented with supervision from the Agricultural Servicel/.

13. There were many variations in the paysannat formula. The particular form depended on local conditions and on the interpretation and objectives of those responsible for implementing them. Usually, the first problem was to obtain a concentration of farmers that was sufficient for the economic operation of an agricultural extension service. This was accomplished by grouping the often thinly scattered rural population, mostly along roads. Individual plots were given to the farmers which they were to cultivate according to the crop rotation best suited to the area. Improvement in farming methods consisted mainly of the introduction of better planting material, correct spacing of the crops, and timely planting. The main innovation was to induce farmers to grow cotton on top of the crop rotation.

14. Cotton was the first important cash crop for the Zairan farmer. Cotton was considered as the pioneer crop for peasant agricultural development, and this concept led to its introduction even into areas which are marginal for this crop. To ensure that cotton was grown, its culture was made obligatory over much of Zaire. Where the financial return per labor day was very high, cotton was grown quite willingly; where it was introduced in inappropriate places, its culture was neglected by the farmers (Annex 6).

15. Agricultural extension efforts were concentrated mainly on cotton production. But since cotton was grown in rotation with food crops, the extension effort also had a favorable effect on food production. In brief, the paysannat system produced mixed results. In many ways the system was a success: new crops were introduced, mechanization was tried, and some anti- erosion measures were taken. But paysannats were not accepted fully everywhere. There are several possible reasons for this. The fact that an agricultural plan was prepared for a paysannat did not mean that it necessarily would meet the economic and social objectives of the farmers. As a consequence, the plans were not always fully implemented. In other cases, cotton may hiave been planned, but the farmers found the yields poor or the work too hard and neglected it long before the plan or rotation were modified. In any event, few paysannats withstood the test of time and political turmoil.

16. Major problems of the paysannat system may be summarized in three pOin ts:

1) T sI,hld be not-d that not all villaaers were included in nAysannnts and not all village fields were in the paysannat blocs; on a sample of paysannat villages iin South 5sai, 437% of the are u lt ivted was outside the official paysannat blocs. ANNEX 1 Page 5

a. It called for a uniformity of plot size, when, in fact, the traditional syvstem in the villages permitted a hier- archy of holdings corresponding better to the rEtquirements and resources of individual fmilIes. Th.is allcation of individual plots (which could not be reallocated) in the large blocs led inevinbly t-o ran.AoM inequali4ti4e.s, and the permanency in the system of allocation and crop rotation left little room. for aAJustu.ent ~- ~ *II *U fl~~~j UOL L..U

b. The attitude of cultivators, anAd their responsiveness to innovation, varied quite widely, and the paysannat was not a compatibDle iLnstiLtutiLon 'in a'"' areas wnLere 'Lt was introduced.

17. The following conclusions are offered. First, there is still a need to modernize farming methods and to widen the range of agricultural choices open to individual farmers. Secondly, all programs to reform or to change traditional agriculture should be planned to allow tne individual farmers to realize their own objectives rather than to achieve objectives Lhey cons'LUer to be less relevant (e.g., control of erosion that does not yet appear a problem to them). Thirdly, the administration today has much less power than the Belgian administration to impose an agrarian program. Any modification of traditional farming therefore must be firmly based on incentives, voluntary participation, and relatively simple to adopt innova- tions.

18. Livestock. Cattle have a generally unimportant place in traditional farming in Zaire. This is partly because much of the country is unsuitable for cattle raising (owing to tsetse infestation and poor climate), and partly because the Zairans who do own cattle regard them as a sign of standing and wealth rather than as a source of income. Also, the limited amount of cattle raising is carried out as an independent activity, completely separated from crop cultivation; therefore, farmers do not benefit from cattle as a source of organic matter or as part of the crop rotation.

19. Herd size varies from only a few head in the Kasai, somewhat more in the Bas Zaire and up to 60 to 70 head in Ituri and in the mountainous parts of Kivu. Cattle are owned by relatively few people -- by chiefs, often by veterans of the Belgian army, or by clans who traditionally own catt].e. Owners do not always keep their own cattle, and communal grazing is tracli- tional habit.

20. Moreover, even the cattle-owners do not have undisputed title to their animals: cattle received as a bride price must be returned if the wife dies or leaves her husband, and a son-in-law has a right to one or two calves from cattle given at his marriage. Under these circumstances, cattle are often the subject of litigation that lasts many years, and few catt]Le proprietors can be said to have 100% ownership. As a result, cattle sale and slaughter are difficult to organize, and cattle improvement that re-- quires personal investment will often not be economically attractive. ANNEX 1 Page 6

21. Traditional cattle husbandry is often poor: the proportion of cattle surviving their first year is often as low as one-third, and mortal- ity among adult cattle is usually 8-12%. Worm infestations and other diseases are common as a result of poor hygiene and the absence of veterinary care; the quality and value of meat is therefore much reduced. Offtake may be as low as 6-8%, and even then cattle are often not sold until they are about to die.

22. Small livestock on the other hand are very imoortant in the traditional farming economy. Most households own small numbers of poultry, pias. and 2oats. These animals seavenge for themselves and their numbers are limited largely by food availability. They are not exploited commercially. This is not so much because they are sub-iert t-n rnanershdn disnuttP hbut rather because grains needed by humans are often not available for animals, and berause there is no vteprinarv nrnt-ec'tinn fnor neoiltry and hogs (goats seem generally in good health).

Outlook for the Development of Traditional Farming

23. Since independence, peasant agriculture has to a large extent reverted toa predom anrtly subsistence type of agriculture and t-he amnunt of marketed production has decreased. At present, the country has limited mearns and verv few agronomists to help reactuiate pensant agriculture. Un- der these circumstances, it seems important to place great emphasis on indirect meoa-sures h4ich may, create stror.er i.ncentive for the farmer to nroduce more. These measures concern mainly the improvement of transport atc1 l. s t*e marketingb systmA anLSA nf4 adequate .c l yt ------e 4 1 .ly 'a''X '' ' .' ' ' 'w - e, o * 1 - -.. cu- M4-, cus }L~p.. ;7 %.--\ ; w-i y - - Annex 2). But a more effective use of resources may also come about d-rough. A-irecteA produtir .o.pign--- 4 - ar.-A - The -4-r tagbei- sues in regard to such direct measures relate to planting materials, ferti-

. lie,pesticides,LLJ.L. LLU ) 1cultural U±U ± practicesJL. LAtC an'iu mechanization.U L I aLL .t-.LIJ

24. Planting Material. One direct measure that deserves prim4ary attention is the provision of improved planting material. Most of the seed now in use has not been renewed for the last 10 years. This has affected mostly cassava, rice and maize. Other seeds such as groundnuts and beans reportedly show a lesser degree of deterioration. Large-scale production and distribution of good quality maize and rice seeds may thus be a key element for higher production. Suitable planting material is available that does well under peasant cultivation, mostly derived from earlier INERA selections. The main problem is that the administrative mechanism to produce large quantities of high-quality seed and distribute it to the farmers no longer exists.

25. Fertilizers. Zaire consumes about 10,000 t of fertilizers per year. It is estimated that about 8,000 t of this go to plantation crops, and only about 2,000 t to peasant agriculture.

26. There is very little recent information available on the response of annual food crops to fertilizer that permits any assessment of the economic justification of fertilizer use. Before 1960, relatively small quantities of fertilizer were used on cotton only, and INERA had come to the ANNEX 1 Page 7

conclusion that the use of fertilizers on food crops was uneconomic. At present, only an indirect assessment can be made, based oni crop and fertilizer prices. To achieve a value/cost ratio of 2, which is generally the minimum attractive to peasant farmers, application of fertilizers should increase yields by 100%. Based on the available agronomic evidence, this is not likely to be the case. Unless good seed is used on a larger scale, widespread use of fertilizers cannot be recommended for peasant agriculture. In addition, since land is not a limiting factor in most parts of Zaire, soil fertility can be restored through fallow.

27. There are some areas with such a high ponulation densitv that the necessary fallow period can no longer be maintained, however, and where fertilizers may have an important role to plav. This is esneciallv true for certain areas of Kivu and Ituri and a Freedom-from-Hunger Fertilizer Project may be a valid effort in these areas. Such a nrniert would nrovide the necessary basic data to decide whether the use of fertilizers should be promoted in these areas.

28. PestriridPs Amnong the r-ops growanw in. traditionsal agricultre, there is only evidence for cotton and coffee that pest control is justified. In the Ganda1ika area -th nnlv reionn whpre pesticdpes are now used on a large scale on cotton, three treatments (costing Z 6.5/ha) give a yield inrreaqp nf nhaotii 3An lec o%f ceoat coteon (%mrvth' at, presr.tZ 13.5 per ha).

29 n og~t-h-(n vtherc theei no evider.ce thatl cides would increase yields substantially. Birds cause serious damage on rie an arghum. gai. but they ca-not be controlled by chemical means. Mosaic on cassava decreases yields considerably, but this can only be controlled through th.e introduction of sond plantIng material. A recent out- break in Bas Zaire and the Kasai of a new cassava disease, the causal agent of -whichi8 yet urnknown, causes severe da..ge. It- ylpoWtl $5 9~ .0 L A Sl- W, Ci ~ V L " M U~ c *la JLL yLJ ILULL.s~ seems to indicate that it cannot be controlled with pesticides.

30. The relatively low incidence of pests and diseases in traditional ag-riculture i8 m.ost likely Aue to the su.allr.ess and dispersal of the fields- **- J~O L. LI4. ~L~0L %AU A. . AJ A. tLl=~1 and the variety of seeds' in use. But it can be anticipated that any future estab1'LaLILLhuent of 'large hmUogenous fiel.ds may create pLar.; LInLestatLon probL- lems, at least for some crops.

31. Cultural Practices. Improvements are possible in cultural met'hods that should contribute to increased yields. LTe main improvement conceras better use of the soil. In general, crops are not grown in rows but in an Lrregular pattern. Ju±ls not only produces too low a stancl, but it also makes weeding a t$me-consuming operation. By planting only one crop in a field, and by following a correct spacing pattern, yields can probably be increased and labor saved.

32. Mechanization. Improved planting material and better cultural practices can contribute significantly to increase yields per unit of land. Hlowever, if the limiting factor to increased output per pe!asant family is not land but avrailability of tne relevant family labor (para 8), increasea physical yields/hectare may not bring about corresponding increases in output. ANNEX 1 Page 8

33. Labor requirements undoubtedly vary considerably according to land characteristics, type of rotation, and cultural practices. No recent studies are available that have investigated these requirements and identified the critical points in the production process where labor availability is likely to be the limiting factor to increased output. Studies conducted before independence, however, strongly suggest that such bottlenecks are likely to arise in post-harvest operations (Table 1).

Table 1: DISTRIBUTION OF FARM FAMILY LABOR BY TYPE OF OPERATION IN EQUATORIAL FOREST AREA (percentages)

Precultural Operations (Land Clearing and Preparation) 6.8 Cultural Operations 30.8 Planting and Caring of Crop (14.3) Harvest (16.5) Transportation (Field to Hut) 10.2 Processing (Drying, Shelling, Milling, etc.) 52.2

Total 100.0

Source: F. jurion et j. rienry, De l'Agriculture ItinCrante a l'Agriculture Intensifiee, Publications de l'INERA, 1967, p. 308.

34. The figures show the distribution of workdays applied to a rotation of maize, rice, cassava and groudnuts. The majority of the family labor inputs is devoted to transportation and processing operatiors. Mlore- over, since these operations are largely coincidental with the harvest, and all three are carried out by the women, it appears tnat a labor constraint to increased family output exists at this point. Consequently, the introduction of simple equipment to facilitate transport, and access to simple machiner-y such as maize shellers, rice threshers, cassava cutters, etc. would permit substantial savings in labor and eliminate this possible constraint.V1

35. Large scale introduction of such equipment would require that provision be made of credit facilities for traditional farmers. In addition, it would be necessary to tackle the problem of organizing the use of this equipment and training people in its operation and maintenance. As in the case of improved planting materials and practices, the introduction and success of these techniques would heavily depend on an effective extension service, and since there is very little at present, any progress is likely to be slow.

1/ Experiments in this area were carried out in the Gandajika region in the late 1950's and proved successful. ANNEX 1 Page 9

36. There seems to be considerably less scope in the medium term for engaging in mechanization of precultural or cultural operations in traditional agriculture. Mechanization in a broad sense implies the use of new or improved tools alone, with animal power or with mechanical power. Since very few Zairan farmers have any cattle to provide power, in practical terms mechanization consists of improvements to hand tools or the use of tractors and tractor-drawn equipment (and aerial spraying of insecticides).

37. Mechanization is useful to a farmer if it raises his net returrn, either by raising the gross value of output or by lowering his costs. Mech- anization is useful on a national scale if the net output of agriculture is raised in the same way. The advantages of simple mechanization -- new oIr improved tools alone -- are usually clear, and the costs are usually known and are incurred by those who benefit from them. In fact, however, the whole costs of mechanization frequently are not recognized -- when mechanized power is provided to traditional agriculture the farmers who benefit usually do not pay the full costs that are incurred. Mechanical services are provided to traditional farmers in two areas of Zaire, Thysville and Gandajika, and in both cases the services are heavily subsidized (Annexes 3 and 4). In plantation agriculture, on the other hand, users normally bear the full financial costs of mechaninal eauipment and nroblems arise only if financial costs do not reflect economic costs. This is of secondary importance in tradi-ional agricux1ltuirp where uRerA nnrmallv do not- pav the full financial costs.

38. Possibly because traditional farmers do not have to bear the full cost of mechanization, they often do not raise output in prOnOrtiOn to the potential. In Gandajika, for example, mechanization services are now prc- vided at less than cost, but far-m.ers have not increased the area they have placed under cultivation. The reasons are not entirely clear. The farmers almost certa4nly prefer n.creaseA leisure to increased work, and pro-s-s-j even money income, but there may be another labor constraint, as pointed out abJJove, hlat prever.ts an iacrease in output. .here are also phys4-J tions on the use of mechanized power in traditional agriculture -- sometimes the land surface is too hill1y for tractors to be used without danger of ero-rn sion, and sometimes the soil is too fragile for tractors to be used.

39. The problem of mechanization is worth considering because it is well recognized that trad'itlonal agriculture r,,ust, somelow be trar.sformed from the present low level equilibrium to a higher-input/higher-output eqLuLJ.'ruml. J.IIUs, someII mec AaLu LUL S.LLULLLLL~L .L.l LWL ffll_ equi.l.brumL . Ihs som L.ecanization ofL tradi't-iona'l agr'lcultur ma b found both necessary and economic. Under appropriate condItions, it can iLncrease L-tIle amlount of lar.d exploited b'y a peasar,t wamL.iLy, it c proid better and more timely cultivation, it can cheapen transport facilities. Moreover, the r,.oeUVaLLvacU LIe LftLimeLL1 LL(Lir.UUo p seIeLdJJLVVsfU;ilz;js pesticides), the more necessary is good and timely cultivation. Mechanization can a'Lu proV.LUe J'portant improvements iLn land use anU erosion contro'L . Having noted all this, mechanizing traditional agriculture is still difficult ecause L'armS are OfLten so widely dispersed thlat UupaiU travel tir,e becor,,es an excessive charge, and fields are often so small that implements cannot. be XU1NiLX 1 Page 10 properly used. For these reasons, mechanization is best introduced in the framework of specific crop production projects where management, farm size and layout, crop mix, cash return, and mechanization are all carefully planned, and where extension services can be used most effectively.

40. When mechanization cannot be introduced in this carefully planned way, governments are sometimes induced to establish mechanization or tractor- hire services. Because these services are so complex and expensive, governments are generally the only organizations willing to finance and to organize them. Practical experience in Africa with tractor mechanization schemes run by government departments or cooperatives has been almost always disappointing or bad. It is therefore essential that any senior officer responsible for considering mechanization centers as an approach to development should examine both successful and unsuccessful mechanization schemes in Ivory Coast. Kenya, Nigeria, Senegal, Sierra Leone or Uganda in order to review the les- sons of management that have been learned elsewhere.

41. A cautious approach to mechanization is important for good reasons. First, if the economic costs of mechanization services exceed their economic benefits. then the country is wastinz scarce resources that could be used otherwise. Second, if the farmers are unable to pay for the full costs of the mechanization services, then the government or some other body will be required either to provide cash subsidies or to maintain and replace equipment. Continued subsidies are difficult to iustify. It may also be difficult for Government to withdraw such subsidies once farmers become accustomed to services at a given price. Third, there may be constraints at the post- harvest time such that increased production by mechanization cannot be handled with existina labor and infrastructure.

1a2 Tf onn rnnRiderq the nonsihilitv of introdturing mechanization intn Zaire in the future, a return to the basic paysannat concept -- with indi- .vdual plots on which a rcrt-in crrop rntation in fnllo.wed -- would merit consideration. However, since the present administration is not in a position to impose the re-im.entation necessary for the function.ing of a paysannat, only a modified version of paysannat is likely to give favorable results. Tthis modf4 caton should be based on -rmr- v olu1 ary ollaboraonF on heo part of the peasant, and should leave more scope for individual initiative.

43. Policy Implications. Measures such as the use of improved plant- -ing mlaterials, offer short-term solutions .L. L L L. 1. 1_ I~.L L.L.LU 4L.L L.LUL toLU I-&~,h-eI problem,J JuL U LiZ.of LLWhowa toLU A.LLL-ir.crease agricultural production. Any long-term solution to this problem will depend on su'ustarLt'LaL ,-,,vifiuLcat'Lons ofL the present far,i.Lng systeui which pemUit sLze- able increases in per capita output of the Zairan farmer. Applied research on this problem should start as soUon a pos'Uble, in,cludin.g a pilot project to test the modified paysannat system described above.

44. At present, the Government is devoting very few resources to agricultural development and the output of peasant agricuiture cannot be expected to increase substantially on a broad front in the near future. The limited resources, especially those in trained manpower, should therefore be concentrated on integrated development projects in a few selected areas where all ANNEX 1 Page 11

the necessary inputs for agricultural development can be provided, including the improvement of transport and marketing facilities and an adequate extension service. One of these projects might also serve as a test site for tne modified paysannat system. Such development projects cou]Ld be based on spce cific cash crops for which there is a good demand. The following development project possibilities could fit into this category:

Cotton in Ubangui, Ueles, Maniema, Gandajika or Ruzizi. Rice in the territory of Bumba. Maize in the territory of Mweka.

B. Commercial or Plantation ARriculture

45. Commercial farn organizations range from large and modern, corporation operated plantations to small and under-capitalized! poorly managed plantations that work at much lower levels of technical and economic efficiency. Ranchine is a special case in that. on a per unit: basis, it is not capital intensive, but it requires a command over large areas of land and presents similar financial problems.

46. Trhe I%rae agricultural buninesses generally take! the form of loint stock, limited liability corporations owned by foreign financial interests, but having romnpete Zafran oorporate identity. Some are owned by reliz- ious missions and their exact business form is not clear. The major output of thasp enterpnrisP. nrP thp twn manIr exnort - nl nAlnim nrodurtq and rubber -- and two major products for the internal market -- sugar and livestock. Thesa hibusineoQse usainll nnperate sevwrnl nits annd have largp land holdings. One plantation firm has eight major plantations of oil palm alone, and the two largest plantations have areas of 14,000 ha aWnd 12,0o0 ha- Ni ne large firms produce 70% of the rubber output, one sugar plantation produces over 30,000 t of sugar per year, and thvar n-n oanraornl rncrhec wirth mnre than 30,000 head of cattle each. Moreover, they are often sufficiently large to engage iLn direct marketing of their pj

4.7. 'r.e plant-aton are cap4i-al in.-iv, rofit ,,:xi.,4,4 o managed by small supervisory staff with high technical ancd managc.ial quali- ficati-oas .. ons ritae better planrtations use advanrced agr4 cultural and m.ana-emoent techniques, modern processing methods (rubber production iis an exception, and all exports are of sm.oked sheet). SCe 1,h-avre deAasub.st-antial inavestmenits ir. applied research, one result of which is that the Plantations Lever is nDw a bu-etLter anAd more valluable source ofa i4mproved 04l pal. plant-ing material than the national agricultural research organization INERA.

48. In general, these multiunit plantation firms are high input/high output operatiLons wi.t'l good fin.ancial resources an.d high rates of returr. to investors and managers. These are the major reasons why production from large plantations was mtaintained so well even during the most difficult ANNEX 1 Page 12 years of the 1960's, and why it has recovered so quickly since then. Plan- tation firms with several units, or with interests in other industrieR or countries, have a diversified cash flow and are well placed to bear economic and political risks. Moreover- their resources enable them to react etiirk- ly to disturbances in production. Their willingness to continue in operation has been enhanned bv the imnortAnt fnrt tht- a-inrp mid-1Q67 thero have been no serious impediments to the repatriation and convertibility of incomes and nrofits.

49Q The= Iarge-scale plantaton4 annd ranches are 4m tnt to Zaire as sources of employment, cash income, and foreign exchange. In addition, they are imT%r%ar.t in ai.am..c sense q islands of technical and economic efficiency, and as a nuclei around which small business can be founded to supply inputs of goods and services or to serve th-e marketS cre= ated by paid employment. Nevertheless, there is little likelihood that the large-scale plantations sector. -411 become more iM.portant than it i0s tod-y at least in its present form of organization. Even given the present oppor- tuniti+4es to kle and toS rea profits-., ann -v.ifortUent of uncertalr.ty over the future status of such entities inhibits the inflow of new private cap-ital for long-term- agricultural in.vestments, and supplies of local capital are simply not available. Private plantations, of course, are making som..e 4nLvesW.-.ents -= they are replanting over=aged trees, t.hey are ce aringL some abandoned areas, they are building and modernizing processing factories, aLAU ranchers are building up herds of cattle. But thLe invest.uents that are being made are largely financed out of current cash flows. These investments are essenti4allyC OCIL.C.L.L defer.siveJ.J.ULIOV I~5Ameasures, 0 bothILJ LII Lfor U J C.eomipuossan' LULLU.LL; ]%AL jJIOCO .U LULfor jJUJ.purposes of corporate citizenship.

50. In view of the favorable short-run economic and financial situation, there is suostant'lal private interest in jointly financed projects. Basic- ally, private firms are prepared to offer their services either under management contracts or in association with limited private financing of short-term and medium-term investments, provided that the government will finance long- term investments. Private enterprise is sometimes interested in participation by international agencies in such schemes because the international participation is thought to offer a greater margin of security for the private capital. Governments also have an interest in such participation because it can reduce the national financial requirements and provide a degree of objective economic and financial analysis not otherwise available. In Zaire, this is a promising means to establish new agricultural investments, and would increase the inflow of modern business and agricultural techniques.

51. The smaller scale commercial agriculture consists of single-unit ranches and plantations producing mainly coffee, tea, and livestock. These ranches and plantations were established by individual colons before independence. Generally, they were managed with less advanced agricultural and business techniques than the large multiunit plantations, but it is not clear whether, on average, they were less profitable than the large plantations. Marketing was normally done through the parastatal marketing offices and through marketing cooperatives. The small plantations were less well- equipped to withstand the disturbances of the 1960's, which were particularly disruptive of economic activities in the east. Most colons had estab- A1NTh V I Page 13

lisheu themselves in tnat region, and a breakdown of tune marIketing OLfiLCeS was accompanied by a very widespread abandonment of plantations 1/. Those now back in production have been restored with as little capitai investmert as possible. These owners have much shorter time horizons than the owners of the large scale plantations -- first, because they are less able to bear the costs of any further insecurity, and second, because they are usually well into or even beyond middle age. There is little prospect that these enterprises will be continued by an heir, or that many will be purchased by other colons interested in plantation investment. Those traders who have bought or who have restored formerly abandoned plantations perhaps view their investment: in a different light, but they have expectations of a rapid recovery of their initial capital outlay.

52. Restoration and reinvestment have also been hampered by uncerta:Lnty of tenure. The Bakajika law, promulgated in 1967, was supposed to have been the basis upon which land ownership would be either confirmed or denied. Al- though action was slow everywhere, ownership in many parts of Zaire has been confirmed. Many large plantation firms were sufficiently sure of thleir economic importance that they could afford to make some restoration investments even before their ownership was confirmed. But the sLituation is diE- ferent in the east. The law has still not been generally applied, and few colons have enough confidence to justify new investments, even from current cash flows.

53. Policy Implications. For all these reasons, small expatriate- managed plantations are rapidly declining in economic importance. Their decline will be of some significance for many Zairans, however, because in many places plantations provided important marketing services for Zairan farmers nearby, as well as providing direct employment. A special situation may arise where Zairans have planted tea near plantations which accept their tea for processing: if these plantations close, the traditional farmers will lose their investment as well as their cash incomes.

54. The issue remains how to get greater Zairan participation in commercial agriculture. This is important because there are a number of small-scale plantations that will eventually have to be taken over. In large-scale plantation agriculture, the problem is not so serious. The maior firms have reasonable training schemes and the employees do not need to acquire any ownership. On the smaller plantations, there are no adequate training systems and the plantation owners maY look for a manager who would be prepared to buy a plantation. In view of the immense number of jobs to be filled in the Ministry, and the substantial employment possibilities outside, much effort should be directed toward getting a significant expansion of entries into superior agricultural training.

1/ An inventory of abandoned plantations was under way at the time of the mi1Rion's visit.

ANNEX 2 Page 1

REPUBLIC OF ZAIRE

AGRICULTURAL SECTOR SURVEY

SUPPLY. DEMAND AND MARKETING OF FOOD FOR THE MAJOR URBAN CENTERS

1. The nrovision of dnmestica11v nroduned fond in Zalre is mainly a problem for the major urban centers in the Western and Southern part of the conulntry: 1insha.Qa_ Lxbumbashi and other indilstrial areas in the Conner Belt, Luluabourg, Mbuji-Mayi and Kisangani. These centers face the dual prble^m. of ra irrdubnizatrinn annd nooer rnmrmiinir.t-inn.Q; in the rcase of the two largest population centers, Kinshasa (1.3 million inhabitants) and Lubum.bashi-Likas± (0.5 m 4 lli4 n i-nhabit ) the food marketing nrnhlpm is accentuated by their location at the periphery of the country.

2. Food supply for the smaller towns is to a large extent, self generat4ing, as they are fed fro. their-4ediate i hinterland. In fact, a large proportion of small town dwellers produce a majority of their own staple foodI requirem,er.ts ly cu'l-ivat-ing s,uall pl1ot-s wl thin thle to 4-limits or J. L~U-L 1 ~L.L~L uy L4. V Lfl.. 5 L. L~ W.~ ".LL LI W- -I- ~ -- adjacent to the towns. The rural districts are self-sufficient with the

Lrequer.t exceptiLon of Li-sit, an.d LUULtr Aarly LUmetL. , LJW-Ve, th great vrto in supply and demand for these products prevent the formulation of any general conclusion or recoumenuat'Lon. Marketing links witbLt helarge urban centers are of greater concern in terms of consumer goods and farm input supply. LILe problem of inputs ileudiately arises only i- thet ae of seed, as fertilizer, pesticides, and equipment requirements are very small and the economic justification for their use remains limited outside of certain, well-defined development areas (see Annex 1).

3. In the major urban centers, the marketing of food products is exclusively in tle nands of private traaers, most of tnem operatLng only locally and with small turnover. Government regulation is restricted to the licensing of traders and the setting of minimum producer ana maximum wholesale prices. Cooperative marketing is practically unknown. It is generally held that marketabie surpluses of food crops have declined in recent years. mWile the deterioration of the road network is undoubtedly a major reason, there are a number of contributing factors: undercapitalization of trade, an expensive retail distribution system and unrealistic official price policy. All these factors have contributed to grossly distorting the market demand signals that are finally transmitted to producers. ANNEX 2 Page 2

A. The Problem of Food Supply

Apparer.t GUenera'l -iemand PEattern

'4. The LwU largest concentraLlion oUL urUan popu'latULoU (thLe capiLtaL and the Katanga industrial area) are located at either end of the country. Given tle size of the country and the poor state of1 col,iImun'LLatiLons , there are very large areas which play no role at all in supplying these cash markets. With the very rapid past growth of citLies, due to population movements from the agricultural hinterland, the problems of providing food supplies can be expected to become more severe if production incentives ini the traditional supplying areas are not increased, and/or new supply areas are not opened.

5. Information on total output as well as production of marketaDle surpluses is scarce, and that which exists is not very reliable. For one of the major food crops, maize, it is estimated that, in 1969, some 100,000 t out of a total domestic production of around 350,000 t was entering marketing channels. Estimates for Kasai Oriental, supplying primarily the city of Mbuji-Mayi, indicate the following percentage of total production entering marketing channels (for 1969/70): maize, 2%; rice, 25i0 ; groundnuts, 1 to 2%; dry beans, 1 to 2%; and bananas, 10%. While the market orientation in Bas Zaire and certain other supply areas is undoubtedly higher, the above data clearly indicate the basic situation of Zairan agriculture -- a prevalence of subsistence production, with a weak integration of many agricultural regions and the food supply pattern of urban markets.

6. Consumer habits differ from region to region. The relative importance of maize and cassava changes rather dramatically for example. In the southern part of Zaire, as one goes from East to West, cassava assumes increasing importance over maize. In Katanga, the staple food is maize; cassava is of lesser importance, being largely used during periods of maize shortage. In the two Kasai, maize and cassava are competitive components of the basic diet, with preferences depending upon relative prices between the two. Finally, in the Bas Zaire and in Bandundu, little or no maize is consumed and cassava constitutes the staple food 1/. Rice consumption appears to be more important in Kasai than in Katanga, but consumption in urban markets is limited by supply shortages; rice consumption in Bas Zaire outside Kinshasa also seems limited. In the northern part of the country, rice, cassava and beans appear to be the staple food, with only very limited demand for maize.

1/ In Kinshasa, cansava cnnstmntisn amongst the higher income groups is progressively being replaced by rice and by bread produced from imported wheat flour. ANNEX 2 Page 3

7. The major source of fat in all areas is palm oil. Aside from these stanles; all other fonds are nf mernndary imnnrtanre- and meat and milk consumption are generally very low. Apparent per caput disappearance of mpat fo-r the cruintyru asa t..hnle icz nnlu 2 kg/annum, anrd in TLl uabou:rg and Mbuji-Mayi only about 1 kg/annum. Demand in Kinshasa and Katanga is primarily for b-leef but in other r "4-a, 4t 4I for- ooat meot anr% muitton Amongst fruits and vegetables, bananas and plantains and cassava leaves rank first.

8.p . ~Fis.h appears~ ~ toL be~ ~,he A malor~ ~L proteinkLUL~LL~J sourceL ir.I all~LJ regior.s. I.6T.~fiLL is consumed mostly in stunriod or smok-ed form, hut is reportedly In shorit supp.Ly practically ever-y-WhLa.ere IL-Lsects are ar.othier .IMpOrtUant prLotei.LII sIuLrce; in the Kasai, they account for more than a fifth of total protein intake (see ULnex 1U).

In stumary, the rural population seems generally self-Sufficient in food, with trade restricted to fish (including tinned sardines), salt, and palm oil.

Factors Affecting Urban Food Demand

10. Urbanization was particularly fast in Zaire after independence:, partially as a result of the general lack of security in rural areas and partially because of the abolition ox migration laws. Development of population between 1958 and 1970 in the five largest cities was as follows:

1958 1970 1970 over 1958- ('000) ('000) (%)

Kinshasa 368 1,323 359 Luluabourg 107 429 401 Lubumbashi. 169 318 188 Mbuji-Mayi. 40 256 640 Kisangani 110 230 209

Source: "Les statistiques demographiques en Republique Democra- tique duAon.go,"' Co.ngo-Afrique, N. 47, Aug. -Sept., 1970.

11. The future growth of cities should be at a slower rate, because of a general im.-ro-ement in security conditions i4r.h4e -untryside. Hwever, Kinshasa might be an exception: current projections for the 1970's assume that Kinshasa will continue to grow at about 10 to 117 rer vear implying a population by 1980 of some 3.5 to 3.8 million people. For other cities, population in.creases are =expeOctOed to be /ov or less per y , or a total increase in the urban populations listed above (excluding Kinshasa) of around 1 1J11 J.. 1970 a e19o80 LLuLi I MILL.L.L.LonLIt Ue LWeen 17 1.1 an'U I YOU AM1XT'V q) Page 4

12~.. Je AMPJCZi. L. oL LtLh.O upon 6a,o..uLA.OULIEL du,anu WiL.L Ue fi rst of all in terms of basic per capita consumption. The additional factor to

consiLUder -i the possibLe inLA. LAuenc VLL cULLonUs1- LLL onUofUemUmt r u L 1eU Lea.L income generation in the cities. Until now, economic activity in the cities -- except possib.y iLn RiLnLsLhasa aLLU L.UUU1UUMbaij. -- hLLa niot prov.LeUi fUll employment for their growing nopti1ations and, therefore, Income growth hAs not been proportLonate to populat'on increases. In Kinshasa, for example, where the best employment possibilities exist, employment records for over a decade -- 1955-1967 -- indicate an increase in regular employment of 50% as compared with a population increase of around 260%. For Luluabourg, in 1971, the total number of salaried or wage-earning positions was estimated at 12,000 to 17,000 compared to a total population of 429,000 1/. And the labor supply - employment situation is further aggravated by tne very high proportion of young people who are already within the urban areas -- more than 40% in Kinshasa are below 15 years of age -- and who will be progressively coming into the labor market.

13. Wage data provide the only available indication of differences in salary (and income) levels in tne various markets (Table 1). Nominal nigner wages in the capital and the Copper Belt and the low wages in Bandundu must be related to consumer prices in the different areas. No comparable cost of living indices for the cities are available, but some evidence is provided by 1970 price differences for products in different markets (Table 2). It appears that nominal minimum wage rates are not necessarily related to costs of food and consumer items.

1! According to records of the Institut National de Securite Sociale. the percentages of registered workers (employed and unemployed) to total nnnulation are: Kinshasa, 13.6%; Lubumbashi, 40.9%; Kisangani, 25%; Luluabourg, 7.2%; and Mbuji-Mayi, 8.4%. ANNEX 2 Page 5

Table 1: MINIMUM LEGAL WAGE RATES FOR UNSKILLED LABORERS JUNE 1967 - JANUARY 1970

Increase In i June 1967/ April 1968/ July 1969/ June 1967 - Province April 1968 July 1969 Jan. 1970 Jan. 1970 January I<7P (makuta per day) Kinshasa and KtP..4atanga 17. 'n )a. '27.30 3. 89.6o ~~ I ~~~~* ~j'. .U. '?'J I*j *& UVJ UD

Y.aut Z.aireJ. 5.. IV IV. 2j3V .9. I28.70 90 Equateur and E. a U L Lu Bas Zaire 13.0 18.70 20.60 24.70 90.0

Kivu and Kasai 10.90 15.60 17.20 20.60 89.0

Bandundu 9.40 13.50 15.00 18.00 91.4

Source: Banque Nationale, Rapport Annuel 1969-1970. ANNEX 2 Page 6

Table 2: CONSu-±ER PRICLS FOR SELECTED CUMUMODITIES IN EIGHT MAJOR MARKETS, 1970 (Base: Kinshasa 100)

Mbuji- Lubum- Kisan- Mban- Mayi bashi gani daka Matadi Luluab. (Kasai (Katan- .(Uaut (Equa- (Bas Bukavu (Kasai Kikwit Commodity Or.) ga) Zaire) teur) Zaire) (kivu) Occ.) (Bandundu) Bread 213 136 150 121 115 116 118 136 Cassava flour 171 118 86 152 161 63 120 32 Maize flour Q9 6. n A. A. 700(1 rd. .An

Rice 80 80 n.d. n.d. 97 55 n.d. 71 Potatoes 105 70 59 n.d. 149 45 113 n.d. Cassava leaves 42 54 32 32 69 26 35 33 Leeks 110 158 n.d. n.d. 201 11 91 124 White beans n.d. 91 38 60 57 17 66 80 Groundnuts (shelled) 150 92 105 n.d. 90 84 122 36 Bananas 116 140 129 111 62 89 82 74 Smoked river fish 54 51 76 51 76 28 47 89 Beef with bones 90 73 129 n.d. 121 59 90 100 Eggs 116 120 96 86 64 50 98 n.d. Palm oil 120 140 89 99 86 146 103 69 Beer 186 125 125 188 125 125 142 189 Soap 13n 15; 15n 147 116 131 136 154 Pants 122 n.d. 106 109 115 n.d. 87 78 Blanket 118 n.d. 106 114 112 76 83 109

Source: Institut National de la Statistique, Prix et Indice des Prix l±4 U LL . Famli.ale, Deler.ber . 19'7r. ANNEX 2 Page 7

14. 1\edal ILinlor. LoLte sal'eidLLU popu.Lai On Lihs Lhardly 11ULnd5eUa aL al.L In Kinshasa, salaries rose by 508% in monetary terms between 1960 and 1967, but during the same time cost of living increased by 1 071%/ wnich implie, a reduction of real income by more than 50 percent. Since then, minimum wages have been increased by 897%e, wnile cost or iiving, baLsed on market prices, rose by nearly 93%. On the basis of past developments, and considering the growing urban unemployment, one has to assume that increases of average per capita income in real terms will remain small, if they snould occur at all. Consequently, urban demand for food will increase primarily in relation to population development. If one assumes constant relative prices, which seems warranted under existing circumstances, any shift from traditional starchy foods to higher value foods will be very small indeed.

Projected Demand for Food

15. Estimates of consumer demand based on family budget studies are restricted to Kinshasa 1/ and Lubumbashi 2/. In the Kinshasa study, which appears to be much more comprehensive and reliable, consumer habits of a. population segment of 8,631 persons, including 4,535 children under 14 years of age, were investigated. While more cassava than maize is consumed per capita in Kinshasa than in the Kasai and Katanga, the overall results should nevertheless be broadly indicative of urban populations elsewhere in Zaire. In the low income groups -- and it is estimated that 65% of the population in Kinshasa lives on family budgets of Z 20 per month or less -- total consumption of food is very low, as can be seen from Table 3. Physical consumption data for major foods are given in Table 4.

Table 3: INCOME AND FOOD CONSUMPTION (Kinshasa)

Income per Month Consumption per Day per Adult Z Protein Calories Less than 15 27.34 1,207 15 - 20 33.93 1,638 20.1 - 25 36.80 1,725 75 - 35429 1,961 35.1 - 60 50.16 2,184 u. anu more 7.3

1/ IRES - Resultats de 1'enquete sur les Conditions de Vie a Kinshasa, May l91I.

'1 fiPrniet A'ATmelinration niu RnvitAi iiement niu Katan a Iflndustriel. en denrees -~ A1 imentnireq - undated naRner. ANNEX 2 Page 8

16. Apparent income elasticities have been calculated (on the basis of Table 4). and these are shown in Table 5. Obviously, these elasticities cannot be more than a rough indication, but certain basic aspects come out very clearly. Elasticities for meat and milk are very high, as expected; the elasticities for rice are much higher than expected. On the other lhand, elasticities for fish and oils and fats appear to be low. The extremely high elasticity for beer, which is borne out by observation throughout the countrv, may have important implications 1/. The elasticity for cassava steadily declines with income -- as income increases, cassava apparently cvives way to bread. but even more so to rice.

17e The basic aspects of this survey, even though limited in scope, give a reasonably clear indicator of the directions towards which food production should be oriented. The relative proportion of Kinshasa's population having family incomes of up to Z 20/month (about 65%) is unlikelv to be reduced -- it will more likely increase. If real income for the low income groups is assumed to at least remain constant, or at best increase by 1% per annum, and that of higher income groups increase by a minimum of 1% and maximum of 4% per year, an incremental demand as shown in Table 6 rould be e-xnected to arise. Should improved production and marketing lead to a reduction in consumer prices, quantities demanded would increase even more rapidly.

1/ In the absence of income data for different urban centers, precise figures on beer sales in different markets might provide an indication of income. ANNEX 2 Page 9

Table 4: APPARENT CONSUMPTION BY INCOME GROUP, SELECTED FOODS (Kinshasa, 1969i/7)

Income Groups in Z per Month per Household Commodity Less than 15 15.1-20 20.1-25 25.1-35 35.1-60 60.1-more (Consumption in kgs. per adult per year) Cereals 18.0 28.0 37.4 48.7 67 of which: maize flour 0.66 1.1 0.7 1.3 2.2 2.7 rice 3.3 4.7 6.8 9.7 15.6 23.1 bread 13.6 21.4 27.7 3 5. 46.6 43.8

Tubers and plantains 68.7 103.0 118.3 136.5 148.8 112.6 of which: cassava _4 . a 99.6 *11. I'n.7 t54a1.4 9

Sugar 3.0 4.3 5.7 17.4 . 8.1

Legum,.es 8.1 9. 1.2 1.4* 13. 10.L of which:

ground'nuts 2. 3.1 5.3JJ. -. 4.5 . haricot beans '4.9 5.5 7.0 7.4 8.6 7.1

Vegetables 31.7 36.5 43.2 50.7 60.0 60.9 of W_icut_ European type /2 4.8 5.9 7.6 9.7 10.7 13.4 -n fin Ai - ,'C7r r cassava ieaves PI.4 21.9 24.9 40.0 jj.7

Fish 17.1 20.2 24.5 28.8 31.4 24.1

Milk /3 0.9 1.4 1.9 2.8 4.0 3. ,

Meat 3.9 6.1 8.4 13.0 18.2 25. 9 of which: beef 2.7 4.2 5.8 8.8 11.9 1.2

Beer 7.5 12.1 20.7 35.8 45.4 72.4

Oils and fats 7.8 9.4 10.8 12.3 14.2 i1.9 of which: palm oil 7.4 8.8 9.9 10.6 11.7 7.7

/1 Includes cassava roots, cassava flour, cassava paste. /2 Lettuce, carrots, spinach, tomatoes, cucumber, bell peppers. 73 Condensed and powdered milk.

Source: IRES, Resultats de l'enqu^te sur les Conditions de Vie a Kinshasa, May 1971. ANNEX 2 Pagoe 10

Table 5: APPARENT INCOME ELASTICITIES OF DEMAND FOR FOOD (Kinrshaa)

Inrnme Grounu - Z/mnnth1househoh1d Commodity 15.1-20 20.1-25 25.1-35 35.1-60 60.1-more

Cereals 1.21 1.17 0.91 0.66 0.23 T,ni 7P flouir 1.q9 (-l128) (2.57) 1.19 0.39 rice 0.92 1.56 1.28 1.04 0.83 bread 1.25 1.03 0.79 0.57 -0.10

Tubers & plantain 1.09 0.52 0.46 0.15 -0.42 cassava 1.12 0.51 0.44 0.07 -0.56

Sugar 1.98 1.14 0.84 0.52 -0.25

Legumes 0.40 0.59 0.59 0.03 -0.42 A tA A I. It c . fA )L A fli grourU.,u-t8 0.52J ~ 15I0. J. ~ = .26 ~ -0.6 haricot beans 0.27 0.44 0.17 0.28 -0.30

Vegetables 0.33 0.64 0.52 0.32 0.03 European types 0.50 1.01 0.83 0.18 0.43 cassava leaves 0.28 0.48 0.47 0.41 -0.04

Fish 0.39 0.75 0.53 0.16 -0.17

Milk 1.21 1.25 1.42 0.74 -0.17

Meat 1.23 1.32 1.64 0.69 0.73 beef 1.21 1.34 1.55 0.61 0.48

Beer 1.34 2.49 2.19 0.46 1.03

Oils and fats 0.45 0.51 0.42 0.26 -0.28 palm oil 0.41 0.44 0.21 0.18 -0.59 ANNEX 2 Page 11

Table 6 : ESTIMATED INCREMENTAL DEMAND (ACCUMULATIVE) IN KINSHASA, 1972-75

Basic Assumptions

1. 65% of population with average incomes of Z 15-20/month/household. 2. 35% of population with average incomes of Z 25-35/month/house!iold. 3. 45% of total population are children, consuming 75% of adult rations. 4. Population expansion equal for both income groups at 11% per annum. 5. Income development: Low assumption: 0% increase real income for low income group 1% increase real income for high income group High assumption: 1% increase real income for low income group 4% increase real income for high income group.

Low Assumption High Assumption 1972 1973 1974 1975 1972 197'3 1974 1975 …------…in metric tons…------…------Rice 1,900 3,000 4,200 5,600 2,400 3.850 5.550 7;400 Bread 7,400 11,750 16,600 22,000 8,650 13,900 19,800 26,500 In wheat flour equivalent /1 4,800 7,650 10,800 14,300 5,600 9,050 12,850 17,250 Cassava 30j6s0 48,700 68,700 90,900 33,300 53,250 75,400 100,350 Groundnuts 1,150 1,800 2,400 3,200 1,400 2,250 3,300 4,450 Beef 1,700 -2,750 3,850 5,150 2,250 3,650 5,250 7,100

Beer (hl) 39,400 6Z,650 89,350 119,050 58,450 95,900 141,000 194,100 Approximate maize equivalent for beer /2 300 500 700 900 450 750 1,")0 1,500

/1 Conversion rt t f-our bread 0..5:.. /2 Conversion rate beer to maize/hl: 7.7 kg. ANNEX 2 Page 12

18. A rough estimate of food consumption in the industrial area of

LKata-,ga A-.uuu-udLLLaL1± aIU LK ) L' K.LVC1 in TauLe I. ±Lese consumption figures very closely approach the data of supply shipments to Lubumbashi (Table 9).* lhe apparent difference in rice is made up by imports -- an average of 2,400 t ner vear. Constmotion of beans is probably too low because beans, locally grown, will be supplied tnrougn tne farmer markets, and the same is true for cassava. On the basis of constant per-,capita consumption and a population increase or 6% per annum, incrementai tood requirements by 1975 would be:

Maize 15,000 tons Potatoes 100 tons Rice 1,500 tons Beans 300 tons Cassava 8,000 tons Beef 500 tons; Fish 500 tons.

19. This incrementalE demand will place considerable stress on the agricultural production areas supplying the urban markets. Although until now agriculture managed more or less to provide the urban population with food, future demand increases of the magnitude suggested above require a concentrated effort by Government if they are to be met. This effort will depend on a clearer identification of supply areas for the various markets.

Table 7: FOOD CONSUMPTION IN KATANGA CONSUMPTION PER CAPUT PER YEAR

Maize 144 kg Potatoes 4 kg Rice 14 kg Beans 7 kg Cassava 76 kg Meat (beef) 12 kg Fish 12 kg

Indicated Total Consumption, Lubumbashi _197Q)

Maize 46,000 tons Potatoes 1,000 tons Rice 5,000 tons Beans 2,000 tons Cassava 24.000 tons Beef 4,000 tons Fish 4,000 tons

Source: Projet d'Amelioration du Ravitaillement du Katanga Industriel en denries Alimentaires, and the mission's own findings. AiiNJEX 2 Page 13

Apparent Food Supply Pattern for Kinshasa and Lubumbashi

20. Detailed information on market flows of agricultural food stuffs is onlv available in the form of transport data from OTRACO. This infor-- mation lacks accuracy in two respects. Firstly, the precise place of loading and unloading of goods is not given, only the general areas. Th:Ls implies that the data include supplies not actually going to the markets indicated, and it also implies that some goods might be double counted. However, this particular lack of specific information does not appear to affect the global picture too seriously.

21. Secondly, the data refer only to transport by rail and barge, and exclude shipments by motor vehicles and by headloads. This point is of great importance. In the case of Kinshasa. nearly all the supplies from Bas Zaire are brought in by truck, and in the case of Lubumbashi unknown quantities are brought in by truck and by headloads from the surrounding countryside. The available data thus give only a general outline of the supply nattern although they do indicate the most imnortant reeions suppLying Kinshasa and Lubumbashi.

22. For the other major markets -- Luluabourg, Mbuji-Mayi and Kisangani -- no comparable data are unilahlp. Tn thp case nf the fnrmnpr two areas, it is probably safe to assume that the bulk of supplies comes from the Kasai, with the exception of Mrize flour "imported" from the maize mills in Katanga and beef from the ranches in Katanga. In the case or Y ,sanganl,(uppA.U1s ap-par to- c.e -r-4il from theA 4fltf.fhn land and Kivu.

23. As for the relative importance of the major supply areas for

KinshLLa,'s C ~ 1.11 Lt= 05 , thLeV- LB Mallre is by far .e mostu- imporLtant s ler of cassava, the staple food in the capital 1/. The Bas Zaire also provides some fruits anri vegetables a.LLU sOre gr ourLULnuts . J uUdgi ng uy L.hiL, performance, the region has not yet reached its potential. For example, vely LLi livestock prdJLUctUsL aLr prov 'L'V±U>U LR-- majorItJy.L U is importecl, mostly from abroad. It should also be possible to increase supplies of fruits and vegetables; at presen[, about 2,00C t of fruits and vegetables are still being imported annually by air or road/river from Kivu.

1/ With the predominance of the Bas Zaire as major supplier of cassava to Kinshasa, the cassava mosaic disease and cassava blight, which are rampant in the region, deserve immediate attention. Should production be seriously curtailed, Kinshasa would face a severe food shortage. (For the development potential of the Bas Zaire, see Annex 3.) ANkAEX 2 Page 14

24. Bandundu and to a lesser extent Kasai Occidental, are also important suppliers for the capital city 1/. With the construction of the Kinshasa- Kikwit road, Bandundu might be able to step up supplies. On the other hand, growing requirements of the urban centers Luluabourg/t1buji-Mayi will probably reduce availability of food supplies trom the Kasai for Kinshasa and Katanga.

1/ A 1970 crop failure in the Kasai sharply reduced marketable surpluses. ANNEX 2 Page 15

Table 8: KINSHASA APPARENT MAJOR SUPPLY AREAS FOR FOOD AVERAGE 1968-1970

Provision in Percent of Total Supply from Domestic Sources Region Cassava Maize Rice Groundnuts

1. Bas Zaire 88.7 - - 6.1

2. Kwilu River 8.0 44.9 - 69.6

3. Kasai River 2.2 3.4 1.1 10.4

4. Kasai Occidental 0.1 20.6 6.4

5. Kwango-Wamba Rivers 0.6 0.2 - 12.5

6. Sankuru River - - 1.7 0.5

7. Fimi-Lukenie River 0.4 2.2 2.4 0.5

8. Mongala River - 26.3 3.6 0.2

9. Bumba - 1.1 44.6 -

10. Bumba-Mbandaka - 0.4 12.8 -

11. Vicicongo Railway - 0.6 16.4 -

12. Lulonga River - 0.2 5.0 -

13. Ruki River - 0.1 3.6 -

14. Kisangani Region - - 2.4 0.2

Total in tons 112,725 7,760 11,220 4,026

Note: This table excludes supplies transported by road from the Kikwit-Kenge region. No clear indications of the importance of this marketing channel are available, but with recently completed and ongoing road improvements this supply route is undoubtedly developing.

Source: OTRACO transport data and mission estimates of supplies from Bas Zaire. ANNEX 2 "age 16

25. The food supply pattern for Lubumbashi and Likasi (Table 9) shows ---- 1--- -- %-~-- …- - - - severa'± Ltee2st'Ln g fatur ues. One MUGtuL LIUU 6L Ut LI-LLUpULLMu uver considerable distances. Secondly, surprisingly large amounts of cassava were consw-umd i 19709n possibly as a result of maize supply problemu. Finally, Bandundu is very important as a supplier of maize, cassava, and millet, whereas the output from this supply area would be more economically channelled toward Kinshasa -- and, with the new road connections to the capital and demand from tne Luluabourg/bDuji-Mayi region, it mignt well be siphoned off. The eastern part of Katanga does not appear to play any role at all in supplying the Copper Belt, due primarily to poor comunications.

Table 9: MAJ-OR FOOD SUIPPLY AREAS FUOR LUBUMBASHL (1970 data)

Product Total N.Katanga Bandundu W.Katanga Maniema Haut Katanga Supply & Kasai (tons) …------…------(percent of domestic supply)------

Maize 27,800 7.2 42.0 5.8 36.3 8.7

Maize flour 15,510 2.1 - 0.8 - 97.1/1

roots 15,125 3.0 10.6 76.3 0.8 9.3 Cassava flour 4,025 11.5 - 57.0 - 31.5 Beans 1,845 1.4 - 0.3 84.4 13.9 Groundnuts 3,365 0.9 1.2 84.3 1.1 12.5

A.Jce Jr. 9.4 0.5 2.2 6 20.

Millet 1,115 - 58.9 - - 41.1 Bananas 2,240 97.9 - 0.6 0.2 1.3 Fruit and Vegetables 1,030 12.6 - 19.8 6.4 61.1 Palm oil 20,720 16.3 66.6 - - 17.1/2 Dried fish 1,280 8.1 - 3.0 61.7 27.2

/1 Includes maize flour produced from imported maize. /2 This probably represents transshipments, and thus could be double counted.

26. On the basis of these data, it would appear that there is a considerable amount of unnecessary transport. For example, Kinshasa seems to obtain some 1,600 t of maize from the Kasai Occidental, a distance of some 800 km, while Lubumbashi seems to obtain about 12,000 t of maize from ANNEX 2 Page 1I

Bandundu, an area much closer to Kinshasa tha.. Kasai Occidental. If this supply pattern ls correct, substantial savings in cost and time could De achieved through a relocation of supply areas. Such a relocation would at the same time reduce the pressure on OTRACO and the railways.

Future Demand and Production Orien,ation

27. Demand projections for the urban centers (Table 6 and pa.a ;8) indicate that the major requirements for incremental food production relate to cassava, maize, rice, fishi, and meat. In rough global terrns, and considering the likely demand of the Luluabourg and Mbuji-Mayi markets, incremental requirements for these coumodities by 1975 might reach the following dimensions:

Cassava 105,000 - 125,000 t Maize 35,000 - 40,000 t Rice 9,000 - 11,000 t Fish 5,000 - 9,000 t Meat (beef) 5,000 - 9,000 t

28. Very high priority should be giveen to securing the projected incremental quantities of food for the Kinshasa and Katanga urban markets. From the standpoint of an economic use of resources, emphasis should be given to developing the production potential of the traditional supply areas, and only in the second instance relving on supplies from "new" areas. This view rests upon the following considerations:

(a) A general, even if not fully developed, market orientation already exists among the rural population of the traditional supply regions.

(b) Transport linkages of some sort also exist, and these could probably be more cheaply developed to handle increased throughput than would be the case for many "new" supply regions.

(c) A market infrastructure, even if frequently a deteriorated one, is available and could be improved to handle additional throughputs.

29. Maize and Cassava. Maize production has special problems which are discussed in detail in Annex 4. For cassava, which is of great importance in Kinshasa. the production regions are already determined as the Bas Zaire and Bandundu. The major problems to be overcome are the elimination of the cassava blight, the introduction of improved planting material, the need for general improvements in marketing (analyzed in Section B of this annex) Such as better and more numerous buying poinits, and production incentives to producers. The expansion of cassava production should not be as difficult as expansion of maize: rice, and beef AN-NEX 2 Page 18 production. Nevertheless, the additional acreage necessary to meet the expanding requirements is substantial, and the threats of yield declines due to diseases are, as noted before, important.

30. Rice. Zaire has the technical potential to increase production of rice. The larger potential is for upland rather than irrigated rice, partially because of limited availability of suitable land, but more importantly because of the high investment costs for irrigation and the need for training and reeducation of producers. The rice "problem" arises as a result of demand expansion in urban areas -- estimated to reach somewhere around 10,000 t by 1975 - and the possibility of substitution for imports of rice which currently amount to around 25,000 t. With paddy yields of upland rice now about 1 t/ha, achieving complete self-sufficiency would renutre eultivation of an additional 70,nnn ha (at milling vields of 50%). Tt would he unrealistic to assume that 7aire could, or should, tackle thls. 1/ A more concentrated, and geographicallv more limited, approach which aims at increases in vield and quall.tv appears a preferable course of action.

31. The maior question to be asked, however, is not so much agronomic as it is economic. The country already relies very heavily upon imports, ayd the world market supply of rice is characterized by increasing surpluses and declining prices. Current prices for the cheaper types of Far East rice -- buit of a nualitv sunerior to local rice -- are around $85-90 per ton (FOB). 2/ For this rice, the following schematic cost structure wou-id develop: Z Equivalent

FOB Far East: $90 . 45 Transport Far East-Matadi: $10 . 5 Taxation - Import Duty: 5% . 2.50 Taxe Statistique: 2% .. 1.00 TCA: 7.5% .. 4.01 Port Handling . . ... 0.60 Other Expenses and Losses . . 0.70 Transport Matadi-Kinshasa . . 0.87 Price Kirishasa .... 59.68 Wholesale Margin Kinshasa: 10% .. 5.97 Total Wholesale Price, Kinshasa . . 65.65

The question is therefore whether locally produced rice could. compete.

1/ The suitable land necessary for such an expansion might be available, but would be found in small, often isolated pockets which would make collection and milling costly.

2/ Import prices are expected to decline further to levels somewhere around $79/t by 1975. ANNEX 2 Page 19

32. Present ex-mill prices in Bumba 1/ are fixed by Government at Z 75/t. Including transport charges of Z 2.70/t, a handling and wholesale margin of 15% (the wholesale margin for local produce is generally higheer than the onet fixed for imported produce), the wholesale prices Kinshasa would be Z 89.35 per ton. Thus imported rice has a price advantage of Z 23.70. It seems doubtful that increased yields per hectare and increased milling output would be able to overcome such a disadvantage. In addition, local rice is of lower quality than imports and would probably remain so even if better seed is used. Such comparisons would argue for discouragement of nrodurtion in Bumba.

33. An far aR irrigated rice in BaR Zaire is concerned. the calculation indicates a cost structure as follows:

Z per ton

Production Costs under Irrigation ...... 50/t paddy/i or A3It rioe at 65% vieldl Milling Costs ...... 8/t Tran.sport C0sts...... 75/!t Local Costs Kinshasa and

h.olesaleVWLAU..L.~ e sa.L J14LMa;gl.(15X r.LLL a#DJd...... t3760tf!:

'wILO.lesale Prifce, sUout...... 104.51

/1 Excluding costs of Chinese supervision and interest on investment.

The quality of this irrigated rice would be undoubtedly better than that of upland rice from B_.^.ba, bDuit the pric-e diiavandtage comnared to imnorted rice would be even higher. 34. Based on these cost structures, rice production in Zaire appears to be uneconoimic. However two1 fActnrn shnolA be considered. The first concerns the rate of exchange, which is largely a function of the oven4helming predominance of mineral exports. Tf one can assume a shadow exchange rate of 1:1.5 instead of 1:2 as more relevant to a comparison of agr _...r, l C.._-4 4-4e, importe rice … woud -

FOBFar East ...... Z 6 Transport ...... 6.60/t Charges ...... 20 .05/t Wholesale Price, Kinshasa ...... 86.65

I/ The Bumna region, in Equateur province, ia thLe mai8n r,Lce supply area for Kinshasa (see Table 8). ANNEX 2 Page 20

At this price, local Bumba production, particularly with improved yields, would crtainlv be nomnptit{vp. (Therp wnuild, still bh nn case for production of irrigated rice, however.) Savings in transport, milling and handling -- arising thronuih higheF throughput -- mTight compensate for reductions in world market prices. The second argument in favor of paddy

4xynncinn in Bi biahni8 the aO^tinl nnA Amnlni,ft 4wi,na-t nf su,ch a sche. Urbanization and urban unemployment are such a serious problem in the Congo that eve- , effort should be made to keep rural populations product4ve employed and thus not moving into the cities.

35. Meat. Zaire is a meat-deficit country with supply shortages nearly ever-,w*nere, but partiL4cu%larly- i.Uthe u- r.tcenLers.ceLL VstiCSmaLc of supply for the whole country are contained in Table 10. The per capita av.4 1 -1-1 1 .3 *y ...... mea 4n !9 70ap e r -o lave...... leen . VaJ.L uaX.L.L..LL UtL LU|L *R I V LU LI>VC U7ILl .

DnBeef L k(inc'ludu"n~.LILLUJU .UJULJi...... p..orts)j .... 1 .4 kg Pork .. .. 0.4 kg Mutton ... 0.03 kg Goat meat ... 0.1 kg n _ . ~~~~~_ n ~q .. ruuLtry ... Kg

Total .... 4.3 Kg

While these figures are very tentative, there is no doubt that overall meat consumption is extremely low, although probably somewhat higher than average in Kinshasa and Lubumbashi. In the rural areas outside Kivu, meat consumption is particularly low, and consumer preferences are for freshly slaughtered goat meat, mutton, and pork, in that order. In Kivu, Kinshasa, and the Copper Belt, demand preferences are for beef.

36. The most important market for meat is Kinshasa, and demand will increase most rapidly there. The beef supply to the city comes about 70% from imports -- nearly 8,000 t annually -- and the remaining 3,nn0 t largely from Bas Zaire, with very limited shipments from Katanga. Because of the income distribution, demand in Kinshasa is primarily for lower quality cuts (forequarters), and this will probably remain so.

37. Imported beef comes primarily from Chad - about 500 t/month. This meat is air-lifted from Fort Lamy in chilled form. The quality of imported meat corresponds to LAQ (low average quality) on the East Africa meat standard. It is unlikely that imports from Chad will increase, because of a decrease in herd numbers and increasing demand for meat elsewhere. ANNEX 2 Paae 21

Table 10: LIVESTOCK AND MEAT SUPPLY

A. l4v-etock Popuila*f E .- A A-a-e- -d T.af (numbers and percent)

Cattle Sheep Goats ('0) (% takeoff) SvV2, ______ak ) (0) 1 o-

1959 1,035 9.6 64+1 9.8 L, .7 i967 829 12.2 5- 1,J3

1968 887 8.4 521 ii.9 1,550 11.2

1970 1,173 - 689 - 2,050 -

B. Meat Availability (tons)

1959 1966 1968 19970 ('000)(% of total)('000)(% of total)('000)(% of total)('000)(% of total)

Beef 18.7 52 11.8 30 13.7 36 17.2 40

Pork 6.0 16 5.3 13 6.4 17 8.0 19

Mutton 0.6 2 0.5 1 0.6 2 2.8 7

Goat Meat 1.8 5 1.2 3 1.6 4 2.8 -

Poultry 1.0 3 3.2 8 4.8 12 3.8 8

Subtotal 28.1 78 22.1 55 27.1 71 31.8 14

Imports 8.0 22 18.3 45 11.0 29 11.0 26

Total 36.1 100 40.4 100 38.1 100 42.8 100

Source; Ministry or Agriculture. Meat availability figures for 171V are revised estimates. ANNEX 2 Psge 22

Another source of supply is the Republic of South Africa, in the form of frozpn fnrenuartprn Th{n mearnt in len n&ronrAhip to enn er thnn imports from Chad because the South African meat has more fat, and consumers also prefer frsh r phi1ed 'nn' Prlce for.mtion for imported beef from Chad is illustrated in Table 11.

Table 11: IMPORT PRICES FOR BEEF (Low Average Quality)

Export Price, IKnBu wwort Ta170 .- ~ A *~AJ5. U*W . A&" y . muJ

A4MAL r TransportL aLOJ.L. %(sub-8Altz^-A9) U -U1 M t6a.00W m

L.daneu VaUILUe 3.J 0U

Veter'Lnay Fee, 1Z, au va'Lorem U.JJ

Import Tax, 5% ad valorerm 1.65

Statistics 'Lax, 3X. adU valoA.emLU I.1

Total hnarges 3.10

Handling Costs to Wnolesalers 1.00

Refrigeration Cnarges, 3% 1.24

Wnolesale Margin, 12% (official) 4.60

Wholesale Price 42.94

Retail Margin, 22% (official) 9.45

Retail Price 52.39

38. The major question that arises is where the additional quantities of meat required by the Kinshasa market -- estimated at between 6,500 and 11,000 by 1975 -- can be secured. Increased domestic production clearly is of high priority. Beef production expansion possibilities in Katanga, as identified by a recent FAO/IBRD mission would, if realized, primarily satisfy the Katanga industrial zone. For the Kinshasa market, production of beef in Kivu, the Hauts Plateaux du Kwango or in the Bas Zaire might be considered. In Kivu, the major problems relate to disease and marketing or, more basically, the traditional attitude of cattle owners toward marketing their stock and the problems of ownership. German bilateral assistance may provide veterinary services in at least part of the region. The reluctance of producers to part with the animals might be overcome through better sales incentives and better purchasing and slaiighter mpthnds. There apnears to be also a possibilitv of expanding ranching in the Kivu. ANNEX 2 Page 23

The economic limitations to an expansion Gf beef production eltate to price and consumer income. Wholesale prices for Chad carcass a re currently around K 43/kg (Table 11). Can Kivu or other production r'egions within Zaire compete with this price? The entire marketing .. i:e'lce has to be considered. For Kivu to supply the Kinshasa market, it can be safely assumed that slaughter would take place in Kivu. Transport e .; could take place either by air or by road/river, the latter o.stricted to the Goma-Kisangani-Kinshasa route. With large supplies by -z~~e route, additional storage and me-at marketing facilit:ies, and possibly VXiholesalewh. meat market, would be required in Kinshasa. For the air route. ekJ.J.lllJg facilities would be required at the various air fiLelds to store earcass meat in readiness for shipment. Road transport wi:Ll depend upon completion of the Goma-Kisangani road. Once completed, insulated .:L-nsport from the slaughterhouse to Kisangani would be reqluireds annd so N: .l'' ~cold storage facilities in Goma and Kisangani. Whethter road-trars- p-orv!ed meat would have to be frozen -- other than for veterinary reasons -- .1ds upon transport time. If freezirTg is required, additional costs .-.n orocessine and marketing, comabined with lower -rices in Kis-has, igt n.;:. air-freighting. Airfreight charges for ieat from Goma to Kinshasa noti known; but thev would nrobably be in lirne wih airfreight charges .vegetables - currently K 15/kg. Under these conditions, the price £ inpected ~carcass beef ex-airport would be no higher than K 21.10/kg. Ai+ tne produjcer end, with slaughter yield probably not exceeding 55 percent, . 'inm- n;i,r'rchase pnrices could probably Pot exceed 10/kg liv eeigt. %-: feasibility of producing beef at these prices should be examined. I ' evei, as in the case of rice, the ir.fluen-e of a shadow exchange rate ai::se.s. At an exchange rate of Z 1:$1.5, the competitive breakeven point: -_--t beef from M. wouI 4r.crease to aroun.. R" 3ulkg exvarewlJouses airport, o: about K 17/kg liveweight producer price.

Av. Alternative sources of beef supply for Kinshasa would be Bas ;Z're 1amthe Hauts Plateaux du Kwango, both consideraDly closer to the t-:Apital -- the transport advantage over the Kivu would be substantial. Lut - rgios3h sfter from the prevalerce of ;e tsetse fly regionsLLSuft I.& Le A. LMI UL~L.'WI -an' theI~Buri general e-io.ttic stress that prevails in many areas along the West African coast. .e cr,o"Cmic arA .~. tec.'.r.ialI.~L1LLLLL feas-bIitiy o'c introd-uc.n -^-br-eedf should ~ ~.fl.4 L & OLUA.L.A.L UL A. uL U l.Jug ulc a uj U ~LIA LU beI eP.^dned, as well as the question of tse-tse eradication. The principal .pif.ccts of land availability and production for the Bas Zaire are j.ven in Annex 3. The possibilities of the Kwango are limited by water I~~.L.LL. u A. 0 I %area .i-:a.1a ty an' access ,n aun underpopu'ated area.Carrying capai J. J s 'r,'ho Kwango will not exceed 1:10 ha, but the problem of pasture deficiency race elemeriLts could more easily be overcome.

ILLmttention Ln &L11meat development schemes in Zaire has focused prwme'wv onl pee and the potential for small stock and poultry has been lrgul; .neglected. Ine possibilities for increasing production of goat weat and mutton need closer examination as to means of encouraging these i;:iS of- enterprise; the small stock field deserves to be given more weiiCht in future development plans, particularly within the framework of integrated :icvltural development schemes. Tne demand for this type of meat is strong, particularly because it is the traditional and preferred meat oonsumed at feasts and other major occasions. LUtL1EA L Page 24

42. Poultry production is based on very small scavenging farm flocks. Jutiglng by the very high prices in the North East (see Annex 5), there appears to be a shortage of poultry. In Katanga and Kinshasa, on the other haud, poultry meat prices are considerably below beef prices -- approximately at a ratio of l:2 -- but the reason could be sufficient supply or a very poor quality supply. Expansion of poultry production on a small commercial scale is entirely dependent upon grain availability. Since grain is available in Kivu, poultry development in that area -- to supply the North East market -- might be more a question of organization than anything else. In other parts of Zaire, no grain surpluses exist. There are, however, variou_- by-products of the milling and brewery industry which are presently either underutilized or wasted, e.g. bran from the Minoterie du Katanga. The industry should be encouraged to utilize these assets more fully, possibly through contractifng with farmers. Finally, in regard to, the Katanga, it is of interest that poultry development has been very successful across the border in the Copper Belt of Zambia.

43. The potential for basing a poultry industry in Bas Zaire on locally available by-products of the food industry and imported grain should be examined. A feed mixing plant already exists near Thysville which could be used to prepare the necessary feed.

44. Vegetables. Expansion of vegetable production to meet growing urban demand is of lesser importance quantitatively than maize. rice. cassava, and beef production. The major vegetable consumed by the African population is manioc leaves, for which production areas for the Kinshasa market are already determined. Supply schemes for European-type vegetables for the markets in Kinshasa. Lubumbashi. and Mbuli-Mayi are underwav. The two Katanga markets have reached self-sufficiency under the currently nrevaillna nrice structure. and they should be able to attract nrndiwtion increases in accordance with population growth.

45. Under these conditions, a discussion of vegetable production might nrot appear very import-nt, hut thprp i9 thp hnair niquetiion of whether to encourage production of high value perishable crops in high cost areas close to the ma-rketa ovr, rfrsnla, 4lr a bre asit4ahbl an.d consequently low cost region which is distant from markets. This low cost area, 4-s4.areaian in tehe. NrF9rr.Riu,m1ot--hern V4%nt *which.rA.h4" ~'nhas o ao traditior.t,.-,A4t-4^ ofoif ho:ticultuah,.rt..ultura,, production and excellent natural conditions for growing a wide range of vegetLabLe. A.t presen;t, thle Kiv-u regularly supp'L'Le8 most of thne -vesLeta-b3le requirements of Kisangani -- about 50 t/month -- and a large share of

1_~~~~~~~~T ZS 1__ __. =__=V- 1 - 4___A_t_<5.--L -1 . _&__J__w__=__ L'IC requirelmueLlt of KnshaslOa. L L. JL LA&C LC&fi-= ULCL AML. WLJ.L;Ll . UJ.u- UL.LaJ importance to further development of the Kivu horticulture. The supply of Kivu vegetables to Kirshasa tolloL…Mar.i.,&wo w4knuels:

(a) air snipments of thfe more perls'naoLe proucts -- 60-70 t monthly; and

(b) road river shipment, by a Kivu-based firm, of larger quantities of the more durable vegetables -- estimated at around 100 t/month. ANI'EX 2 Page 25

In addition, Kinishasa is supplied from the Bas Zaire and relatively recently from newly-established vegetable production areas within the zone verte around the city. Production potentials in the Bas Zaire have not yet been fully exploited, primarily due to the dispersed nature of the production areas (relatively small river valleys around Thysville), and the problems of marketing and transport. Production in the zone verte does not face any marketing or transport problems, but is t:hreatened by the rapid encroachment of rural settlement schemes. In view of the continuing rapid growth of the capital, the zone verte must: be discounted as a future major production area.

46. Current and future demand for vegetables in Kinshasa was the subject of a recent study 1/, and incremental demand by 1975 was calculated on the basis of this data. It was assumed that the African population of the capital would grow by 11% per annum, whereas the European population would remain constant. The incremental demand for green leaves is. as already stated, linked to cassava production and, therefore, does not enter the discussion. Leafy vegetables, such as spinach and lettuce, should be grown as closely to the market as possible. The remaining question is therefore whether production of such items as cabbaze. tomatoes. and sorrel should be promoted in the Kivu or the Bas Zaire. Preference should probably be given to the Kivu because production costs in that province are considerably lower than in the Bas Zaire, and opportunity costs are nracticallv nil. However- to encourage nrnduction and improve marketing requires a number of investments. These would primarily involve atdditinnal imnrnvtd st orargp anti nskekinrg farilitip- In the nrpoduetion reolnn, -- .7 ------…------,-- new transshipment storage at Goma airport and Kisangani port, and improvement of on-board storage between KisAngsni And Kinhasa.

47. PrIces- in lnshasa of produce from U.- are not any higher than prices of vegetables from the Bas Zaire, because high production costs in the latter province offset the s^ome hat loer tra4-,npor.t corst_s. A further price advantage of the Kivu production is the very low seasona:L ritcP fli,,ptiuneti nn P-riceis fnr "loc-al" pro.duce nt,A this inrcliiAsa nrtnA,tel r ------… from the fluctuate very widely on Kinshasa markets, and so do prices in shops for tomatoes, also larely of local origin. On the other hand, shop prices for cabbage, leeks and carrots from Kivu are remarkably constant. The K:Lvu would have a substr.4ial producer price advanao 4ir. the -p:ovm4 osi of frult4. and vegetables for markets even further afield (see Table 12). To what dextent the transport costsw1 ouldIA offstU thi i . *s UrS, Ut'. thUs. p:olm might usefully be studied.

1/ BDPA, Etude du marche des legumes a Kinshasa, 1971. ANNEX 2 Page 26

Table 12: PRODUCER PRICES FOR SELECTED VEGETABLES/ LUBUMBASHI AND MBUJI-MAYI (Makuta)

Price Der Ke Commodity Lubumbashi Mbuji-Mayi

Carrots 7 25 Leeks 15 25 Onions 10 25 Tomatoes 20 25 Celery 6 15 G.rppn hbans 15 15 Parsley 5 15 -ucmher ~~15 15 Cabbage, white 10 15 Bell pepper ? 15 Lettuce 5 10 Spinach 20 10 Radishes 5 10

/1 Producer price in Kivu for all vegetables is 3K/kg.

48. Further production expansion in the Kivu seems limited by marketing constraints. Exports of vegetables to Europe or neighboring African countries must be ruled out as no direct connections exist between Goma and importing markets. Transshipments of perishables involve high costs and losses, even under optimal organizational conditions and these certainly are not present in Zaire. Furthermore, most other African countries have under consideration horticultural development schemes of their own.

49. The possibility of processing might be considered. For technical reasons dehydration of vegetables grown under the climatic conditions of Goma is reportedly unsound. It might be worthwhile to follow this up if new processing methods emerge.

B. Marketing: Organization and Margins

Marketing Channels

50. The marketing system in Zaire has so far managed to maintain supplies to urban centers, but at high cost. One cannot but feel that in many instances the system has failed to stimulate production in accordance with market requirements. Real supply shortages, at least in the capital and in the industrial area of Katanga, have been avoided through imports of food, frequently of commodities which could be produced within the country. The deficiency of agriculture with regard to food is made even more glaring ANNEX 2 Page 27 when it is added that effective demand has been curbed by the very high consumer prices. The unsatisfactory performance of agriculture is not, of course. entirely due to the malfunctioning of the marketing system; but this system is a contributing factor.

51. Marketing channels are dominated by small-scale traders operatLng at orimarv and whoneaAl lpvplR- and retnil distrilution. i; PharArtpri7edl by a high degree of fragmentation. Added to this inefficient network are high nrofit margi1ns, relatively high transport costs, and Inanen in handllng and storage through climatic influences, insect and rodent damage, and theft. AA a result, total marketincg margins are very high. FRooAdstiffsa hrn more expensive than they need be. And the basic economic linkage betweena urrban consuiimerv Aomand an.d proAduc4in has be-o. Ah.ighlydtorted.

52. ^lAthough the collectior. system vari aa cng the regions, it a pears that trade channels up to the urban wholesale level are not unduly complicated. !.?ri.mary u n s carr.Led out t.Joa exter.tJ'-rge bILlynumeroM3 licensed traders, many of them of Portuguese or Greek origin. The largest oIf h eseri.pLM-l.-y- buy=ersa 0VIUL=L..LU=h L etlVh bUyLUiLnLgCU oUYn.Uir, L& the.LLL.rLLrL.L district(s). Producers either deliver directly to these points in headloads, orL, moreL fjrequently, Lraders se-uu their Uwn truc'IS LU0 collctL pLrUUc JLLU along the roads for assembly at the buying points. The number of buying points s small, LlUwever, anu has bueen further reduced since indepeudence, largely because of the security situation and problems of supervision. The majorLty_ _s___r of trauers __operate out or twons or citles_ (where they nave orLIcesj,t ____s _s_r_E__rs______jffi and purchase produce along the roads or in village markets. These buying expeditions se:idom foliow a derinite scneduie. As one consequence, farmers do not have prior knowleclge of when a buyer will arrive. From the buyer's standpoint, supplies are also highly irregular in quantity, but at the same time the trader is in a relatively strong bargaining position: due to tlhe uncertainties involved in holding back, producers are inclined to sell widen a trader appears. Producers seem generally aware of the Government minimum price policy, but official decrees do not carry much weight in the depth ot the countryside. Market news as such does not exist; price fluctuations in an auction sense remain unknown to producers, and even to most of the primary buyers. Practically all purchases are on a cash basis, although cases of preharvest purchase of cassava in Bas Zaire are known. Traders do not seem to advance credit in cash or kind, due apparently to lack of credit security and their own inadequate capital.

53. Once bought by traders, produce is bulked and stored to await resale. Storage facilities may be more or less adequate in capacity, but appear inadequate with respect to quality. As commodities may be stored up to six months --- the length of time is often a function of low water levels in rivers during the post-harvest period -- storage lossesi are high. The low milling quality of domestic maize is at least partially the result of the poor quality of storage at the primary buying level.

54. The second link in the marketing chain is normally a larger scale trader, generally based in an urban center. While there are no special problems of market channel at this stage, trade arrangemernts place most of the risk burden on the primary trader. Contracts are rare, and the primary ANNNIEA 2 Page 28 trader has no assurance of sales, and carries the full risks of storage and investment. On the other hand, modifying the foregoing statement somewhat, instances are reported of credit advances from larger traders to primary buyers. These credits are in cash and kind, but are reportedly very limited in scope. Purchase of crops is generally on a basis of ex-warehouse of the primary buyer.

55. The larger trader is responsible for transport to the consumer center, either by his own vehicle or by chartered vehicle, plus rail and barge (OTRACO). A limited number of these traders have their own retail outlets, others sell to other wholesale/retailers. In the case of maize, deliveries are made directly to the mills.

56. Up to this point, the operation of the marketing chain seems pretty clear, but later distribution within the cities is less easy to study and comprehend. Officially, retail sales are supposed to be carried out in municipal markets and through fixed retail outlets, the latter handling a much smaller proportion than the former. The markets are established and supervised by the municipalities. Fees payable by traders vary considerably from market to market -- from nothing to Z 2/month. No licenses are required. In some markets fixed prices are prominently displayed, stated on a weight basis (kg), although all transactions take place on a volume or piece basis. Price supervision is carried out by the Ministry of Economic Affairs through periodic checks, but the effectiveness of this is doubtful. The number of markets in the urban centers appears to be sufficient in the cases of Lubumbashi, Luluabourg and Mbuii-Mayi, but in Kinshasa consideration should be given to placing additional markets in some parts of the city.

57. Although some sales in the markets and at the fixed retail outlets are ma-de to ultimate consumers. a large proportion is nurchased by small traders for resale to other traders. In this process, quantities are pro- gressivelv broken down and new margins added.

58. Direct deliveries of nrnduirp by fnrmerA are also an imnport;nt channel up to the retail market level, particularly in Luluabourg and Mbu i-Maui Proiduce i8 primarily carried na hbadload freom a upply area of up to 30 km around the cities, with the sellers often remaining overnight at the m.arkets. The magnitude of these sales is inpossible to ascertain.

59. "or th1e syste... as a whole, competition. is not as strong as one might assume from the structure of marketing. Provincial Governments have att Le mp tted l t6o increase tCL1he degree of co.m.pettion at. the primary levelJ by replacing the former system of monopoly buying, whereby only one trader was perLLLLeu LU pULrchabs goUUUs iL11)' ULa UoLn Lds.tri Wct lA a mULtLple Lcensing system under which a number of traders are licensed to purchase in the same UdistrLect.

60. Fragmentation of primary trading, a major characteristic of the system, can be illustrated by the example of Kasai Occidental. In that province, the total number of traders in 1970 was 128, and licenses were distributed as shown in Table 13. It is obvious that many traders operate ANNEX 2 Pa8e 29 in more than one district; in one district, almost half the total number of traearsa ar sctive. The size of operati^n.^s, 4±dcatl in SectionCG of the* Table, represents an overestimate because substantial quantities of produce are -Arketed directly- by -roducers ir. u-rb--n m-r_kets.

Table 13: PRIMADRY TOATl D T TrrJCVC VACAT ITTMMIT'IAT A. Number of Tice*nseA U . NuVp-Uer ofl DisJ Lricts

Li. L.AIWJ L i.L."A. LADL Ai . 'L&UWU L A U.L~ Buyers per District per Licensed Buyer * 4 -__ _ _ ... \1__ juces ed nuuwer1.c o u- Lxv mW'uUsev, District Buyers Districts Traders

Mweka 78 30 UCLUUa J3 2 1 Luiza 45 3 54 T ._t I 'ef LUUU C 3' I V Port Francqui 33 5 and over 3 Kazumba 24 Tshikapa 21 Dimbelenge 17 Dibaya 6 Dekese 3

C. Average Purchase by Traders in Typical Districts-

Commodity in ton/trader District Maize Cassava Groundnuts Beans

Mweka 25 540 10 Luiza 40 500 30 1 Dimbelenge 60 550 110 80

/1 Relating nuim.hbr of tradesr to total nrodawtAonn- And assuming (optimLs- tically) a 20% marketable surplus.

61. The very small scale of the average trader, at least in Kasai Occidental is also lborne out b actual -rchae record of the 12 larglzt traders in that province (Table 14). These traders are really whclesalers with primary buying functtion..; the e4aini4ng 116 l_ers-eA tr4ad rs bhm considerably smaller in size, limited to primary buying afnd small sales at the Luluabourg market. ANNEX 2 Page 30

Table 14: PURCASAE OF L.ARGEST BRTFPS, .KAC.U OCCIDrn.TAT., 1970 (tons rounded)

Trader Coffee Maize Palm Fruit Beans Manioc Palm Kernels

1 - - 16,205 - - 1,000 If. '25 2,780 - 50 IJU 3 _ _ 2,045 - - 215 J4 - - - 10I 5 - 1,230 - 5 130 5 IC It (n-I~ 411^ 6 - I,013 - - - I'4 7 40 635 75 - 180 65 n r LP.i^ 1 inr o 5 4vv - - Z20 25 9 - 170 - - 290 5 I0 25 - - - 15 - 11 - 5 - - 15 - 12 - 5 - 5 5 5

Source: Unpublished reports, Chamber of Commerce, Luluabourg.

62. There is no evidence that the multitude of traders per district has increased the degree of comnetitionn as reflected in higher aricea beino npid to producers. This partly reflects the weak bargaining power of the farmer, but it may also be a si1Vn of the under-canitalizAtinn of mont traders. It appears that many of these buyers enter the trade without any prior experience in rnmmnodity handling, and without sufftrient canital to provide for necessary investments in storage or transport. As licenses are issued to practically arny apmnnlint, nn selective rcntrol over no traders is exercised. Be- cause of the limited financial resources of the average trader, and his lack of accss to credit, he cannot expand his purchasing activIties. Te Increa=- ing number of traders then has a relatively small effect upon competition. T.h.ere is a clear need to give traders access to- mrketing credit. 63. T.he effect of fragentation. at Fwhe reta41 level, th?e secr.d-- o -j -~*l* - , *L MLL~~& OU * Ot.'LU% 6 &Leaa ~ Uk=JUL issue arising out of the current marketing system, is more difficult to analyze. Co.tolovr -le nu-.ler o'c traders lr. .L %.,LILL .A.VJ UV= L.& LLUIIULJL UJL ~u~ L&L theL4I= sprm-ltr.&OjJLaWJ.AAj LL~LUtUL urb.n L aglomerat'on6~.LVUWL4LLULL- is practically impossible. A basic reason for the large number of hawkers is probably Lhe widespreadU utLemloyj ritL inLLA'ies 1/, WL4iL leae d't Lributive trade as one area of activity open to a commercially oriented population 2/. Clearly Lhe impact Of this upon general cOUaUMer prices and cost of living is substantial, and would theoretically affect the underemployed traders as well.

1/ The effect of unemployment upon hawking appears to be borne out by the fact that this system is considerably less prevalent in Lubumbashi, a city with low unemployment, then in Luluabourg and mbuJi-mayl where unemployment is particularly high.

2/ More expensive goods are often sold in minute quantities, as single ciarettes out of a pack and single sardines out of a tin. Page 31

On the other hand, the system can also be considered as a type of income re- distribution under which the salaried population provides uneconomic employment to those who would be otherwise unemployed. The persistence of the hawker trade must also be seen as a valued service, resulting from the apparent reluctance of many housewives to buy in the municipal markets or fixed retail outlets. This is probably due to the poor state of public transport and the great distances between urban markets, and may indicate the need for a larger number of markets or retail outlets. The limiting factors for such a measure are the relative low density of urban population per square kilometer and the relatively high investment costs per fixed retail outlet.

64. Another major issue relates to the transport of foodstuffs to urban markets directly by the producer. As a rough approximation of the situation, we assume that total purchases by traders of maize in Kasai Occidental are unlikely to exceed 15,000 t (Table 14), out of a marketable surplus of around 40,000 t, which leaves about 25,000 t for the producer to market. Of this, some 10,000 t might be transported by truck in small assignments and accompanied by the producer; the rest must be transported in headloads averaging about 10 kg each. This implies 1.5 million visits to the various markets, often involving absences from farms of 24 hours or more. Even if opportunity costs for the porter -- the farmer's wife -- are limited, the amount of time spent must limit the amount of jara which is; cultivated and the quality of cultivation. One possible way to overcome this would be to bring market-c tn ruir-al areas= Merely establishling collect:Lon renteFs (whether privately, cooperatively or publicly owned) would not necessarily indinv'4ndce fna,-mara'armrs'wives wiuoi,a totn d-iie-..-. ,e rha4rtheir p,iir-ra,inf tvneHInD hah4r~a9is.Urobedy 771A,iIAg-i,a*A1%v------there is an important social aspect of going to the market and, even more i.mportant, goirng too arket i4. larger cenrters pere,4ts w n to b-, a larger range of consumer goods.

65. A pro'bable major constraint on the effectiveness of an already weak buying syst-em is thtIL.CLLatLLorA.ly a ..LULA. L%A ILU.UJCA.ne L LofLU=L CLaLc as sJuJppL.er cfiA consumer goods to the rural population. Although there is no concrete evi- ti nn n,n.r.a na a y a. I an atyr- a-. a A_--...A aana.._ 4 A.ence, mar.y rurall areas .m.ay have ave weak d.UeLA Ld fo;Lm.ey i.come% n aealabecause -s.. spending possibilities are lacking, and this may be a major factor of whether s..all=scale farmers ir. a particular area are commCercal1y orenL.&.CA orWA. *V.J No assessment of potential demand for consumer goods among rural people in

Le iLfereLnt parts of aLreha Lul een maUe, UL'usu tuLere shIUU.LU uc cu room for demand creation. The undercapitalized trade, as it exists today, will not 'e 'n a position to udevelVop±th"is5 WioUUL an5iL lce.

Storage and Transport

U6. Primary storage at tne producer leve; takes piace in traditiornl storage bins or in farmers' houses. The system of central village stora&e for seed, as it existed prior to independence in Katanga and other provirnces, has largely collapsed. Losses and damage are consequently high; the quality of seed deteriorates. Marketable surpluses of grains and legumes which have to be stored at farm level, occasionally for considerable perilods, are often insect and/or mould infested and contain excess moisture by thef ANNEX 2 Page 32 time they reach traders' stores. In years of crop shortages, traders have little interest in rejecting poor crops, but they undoubtedly either refuse very poor quality shipments or buy at considerable discounts during years of more abundant production. No quality criteria or grading legislation exist nor could they be enforced. 1/ In the traditional marketing system, there is little appreciation of quality differences. Quality aspects including losses in commodities as they move toward the market should be considered in price comparisons and price formulation at the producer level.

67. Grains and pulses, purchased in bags from producers, are brought by the local traders to their unimproved stores. Storage of up to four months is not uncommon, and whatever good produce was acquired is likely to become infested in this period. Facilities for fumigation at this level do not exist, although dusting is occasionally carried out. Losses at this level probably average around 8%.

68. Modern storage facilities are found only at the maize mills. Here grain can be properly treated, but by this time the damage has already been done. The situation is reflected in the milling return. Imported maize from Southern Africa gives a yield of 91-92%, while local maize yields only around 70% flour. Mills react by over-milling, and as a result produce lower quality flour.

69. Assistance in improving storage and, where necessary, expanding storage could heln to increase food supplies. and storage improvement at the producer level should form part of any agricultural development program. The nAed for rredit for licensed traders has already been mentioned- and a maior credit demand might well be for improved storage. Any credit agency involved would have to provide the add4tional service of adviing on nrnnper storage facilities. Initial emphasis should be given to rodent-proof bag storage and the introduction of fimnniant4in iineier tarrnAiilinga At the termiial Ievel, little additional storage seems to be required, certainly in the case of m 4ze. Tb.e large wholesalers and millers do not re-uire techn.ical or financial assistance to improve or expand their storage capacity. Large- sc-alLe goverr.ment storage programn- for pri-e staik414zation orbuffersto-k schemes do not appear necessary, particularly as long as the country con- tinues to reLy or, iLmportJ.of gra4ln readl1y ava ll o.r e w -SJL . With any tendency toward self sufficiency, this situation might change.

70. Many Zairan officials and foreign advisors tend to regard the poor state of transport as the major, if not the sole, reason for the poor performance of agriculture and the decline in marketable surpluses. Un- doubtedly the poor state of roads is a disincentive to traders to penetrate much of the rural area, but there are a number of other contributing factors - producer prices, economic incentives and seed quality - which in total are likely to be as important as the transport problem. It therefore follows that construction of main roads and feeder roads per se will not necessarily lead to significant increases in production.

I/ A- exet-iona ova niqality recglatinna for .nize at the lnrge maize nilli - -K…a-an8a ---- a -… - in Katanga. ANNEX 2 Page 33

'71. Ir, reconstructi. the trnpor neWork, rmr mhDshss

I JL L...JL5O L L4 .g.LL Me~ transport &LA.WWULr. JLJ.LUCILY C~LULLaL.LD L1dJ CIV 6 far been given to major trunk roads. In the interior, however, the problem

i8 the lack V' frLLLre, WmLAy of Whic.L WeLr UdsLLUryU U Uoeteriorated badly during the last 10 years. Roads might be in poor condition but often still passable, even i..f at Lh'LLLer costs, bu the lack Of ferr'es brings transport to a complete halt. 1/

72. Transport by the OTRACO on the country's water and railway system is rather siow. For example, shipments of maize from Bandtndu to Lubumbashi take one to one-and-a-half months. Because of frequent transhipmernts and the generally poor quality of the means of transport, losses through wastage and pilfering are high. A special factor frequently delayiLng transport is the coincidence of low water levels at the Kasai river network and the local maize harvest. This is a special issue which could be attended to within the framework of a credit scheme for storage construction.

73. Road transport charges for agricultural commodities are obviously influenced by the poor state of roads, and have recently been increased further following the 25% price raises for motor fuel. In the Kasai and Katanga, charges are between K 8 and K 10 per ton-kilometer, not an excessive charge considering road conditions. In the Bas Zaire,, where road transport of fruits and vegetables to Kinshasa is important, trucks are hired at around Z 30 a day for a six-ton truck with driver. As the return run is at least two days, and fuel has to be paid by the trader hiring the truck, costs per ton/kilometer work out to be around K 6. This seems high considering that the road to Thysville and the Bas Zaire is in very good condition, and even feeder roads in that area are better than most main roads in the Kasai. Another serious problem with road transport is the very high accident rate and frequent mechanical breakdowns which lead to total loss of cargos. Insurance coverage for loads is very hi2h and most traders cannot afford it. A further burden on transport costs is the ille2al "taxation" or "fines" at roadblocks manned by police or security forces - a system particularly prevalent in the Bat Zaire.

74. Transport charges by the rail/river system are not high because they are subsidized. The rate structure is complicated, and it changes from one rail/river system to the next, and from one type of produce to another. Table 15 aives aome selected rateR. Rates are related to nroduce value, so one finds rate differences for various products transported over the same distance.

11 Tn the Knaeai there are; for examnle- RS feirry- nnints; Neerlyv A of these have now ceased to operate, thus effectively isolating large areas. in the Cataractes ares of the Bss Zaire the area tn the north of the river has only one ferry as access to the outside world. This oerates oi.ly twice daily at ost, with a capaclty -f ew- a per crossing. A^TTV'V Page 34

75. Transport of agricultural crops by ailr, apart from the imports of meat from Chad to the Kinshasa market mentioned earlier is restricted to shipments of fruits and vegetables from Goma to Kinshasa. TLhese shipments are carried out by Congo Frigo in the company's own plane. Total transport is around 65 tons/month at an average cost of K 15ikg.

Marketing Margins

76. There are few comparable price data to allow a calculation of marketing margins, and any understanding of the situation is obscured by the structure of the retail trade. The only group to undertake thorough studies is the Institut de Recherches Economiques et Sociales (IRES) at Lovanium, whose research has been concentrated on the Kinshasa market. The data in Table 16 can be regarded as indications of overall trends of prices and marketing margins. As can be seen, semiwholesale and retail margins in particular increased rapidly, although the services performed by this link in the marketing chain did not increase. Labor cost increases alone cannot possibly justify the steep rise in distribution margins. It must therefore be assumed that these increases result from deteriorating efficiency of the marketing system, including further proliferation in distribution and/or increasing profits in the semiwholesale and retail trade. ANNEX 2 Page 35

LaI.)IX .5: rL.±rc,CE L ~TRAPORTz-uAu- Puzr AblJL.ULRAAGRI LMURALP3ROMUCTS %17IU)

Transport Approx. Rate Commoditv From To Distance ver Ton (kmo (Z)

Rice Bumba Kinrhasa 1,200 2.70 Aketi Kin-hasa 1,500 2.80 Buta Kinshasa 1,600 4.95 Tsiro Kinshnas 2,00o 5R85 Port Francqui Kinshasa 700 2.16 gnsongo Kinshasa (via Kisangan4) 2,200 5.32 Kasongo KTihhasa (via Port Francqul) 2,100 6.88 Kasongo Lubumbashi 1,200 4.99 Kindu Kinshasa (via Kisangani) 2,000 4.10

Maize Lilonge Kinshasa 1,100 1.83 -Buta 7K±nshasa 1,600 2.17 Isiro Kinshasa 2,000 3.85 Kasorngo Luluabourg 1, 1 n0 LIT2 Kasongo Kinshasa (via Kisangani) 2,200 1.52 r-ene-Ditu LdbumbashAi Ono 1.'i Mvene-Ditu Luluabourg 250 0.56 -01 - *1t7J -1 n i rLwene-Ditu r'.uLshasa 1,3 1."100 Port Francqui Kinshasa 700 0.93 AKeti Kinshass 1,500 1 .50

Groundnuts Isiro Kinshasa 2,000 7.44 Buta Kinshasa 1,600 4.12 Kasongo Lubumbashi 1,200 2 *64 Kasongo Luluabourg 1,100 2.56 Kasongo Kinshasa (via Kisangani) 2,200 4.79 Mwene-Ditu Lubumbashi 900 2.94 Mwene-Ditu Luluabourg 250 1.t5 Mwene-Ditu Kinshasa 1,300 3.75

Source: OTRACO ANNEX 2 Page 36

Table 16: PRICE STRUCTURE FOR SELECTED AGRICULTURE PRODyJE DELIVERED BY ROAD FROM BAS ZAIRE TO KINSHASA (1st QUARTER OBSERVATIONS)

Producer Transport Wholesale Semiwholesale Retail Price Costs Margin and Retail Price Year Index Index Index Margin Index 'ndex

1961 100 100 100 100 100

1962 183 196 204 144 180

1963 319 274 462 1,234 489

1964 366 439 372 971 513

1965 326 366 560 1,397 492

1966 469 467 501 1,330 541

1967 623 677 748 3,425 994

1968 1,025 1,028 957 7,229 1,720

1969 1,233 1,206 1,072 3,983 1,738

1970 1,166 1,390 1,711 4,370 1,932

I Prod'ucts iLnc.ludLedU are; Caassava flourL cassav4a cossettes, S&Lel.LA groundnuts, dry beans, tomatoes and bananas.

Source: IRES

77. Actual marketing margins for some produce shipped by road from Bas Zaire to Kinshasa are given in Table 18. The data have to be inter- nreted with care, because producer prices and consumer prices do not necessarily relate to precisely the same commodity. Two remarkable aspects of the situation are the very high wholesale margin for such durable products as dry beans, and the extremely high retail margins for tomatoes, pineapples and avocados, which cannot be it,t-if{ed mprelv on groiinds of nerishability, ANNEX 2 Page 37

Table 17: MARKETING MARGINS FOR SELECTED FOOD CROPS KINSHASA, MARCH-APRIL 1970 /1 (Makuta/kg)

(W1) (2) (3) (4) (5) Producer Transport Wnolesale Price Cost Margin Retail Margin Reta:Ll Price As % of As % of As % of As % of Price Price As % of Consumer Producer Paid Paid Producer Commodity K/k Price K/kg Price K/kg (1)+(2) K/kg (1)+(2)+(3) K/lg Price

Chikwangue 3.30 34 1.67 51 1.70 34 3.05 46 9.72 294 Cassava (cQosette) 1. 54 2L .7L 4 2.84 10n 2.1 4L 7.3A41 5 Groundnuts (decorticated) 7.44 43 1.12 15 2.98 39 5.60 49 17.14 230 Dry beans 11.46 34 1.50 13 17.66 136 3.30 10 33.92 296 Bananas 1.25 27 .18 14 1.50 10 1.62 55 4.55 364

A.. ocados 3.4 9 .0280 25 .38 9 12) 2 6A 1 7.) 1.040

Tomatoes 3.39 16 .86 25 3.45 81 14.11 183 21.81 643 Pineapple 3.50 19 .90 26 1.78 40 12.54. 203 18.72 535 Fish Fresh /2 15.50 30 4.70 30 19.30 96 11.75 30 51.25 331

/1 Produce transported by road from Bas Zaire. The margins relate only to produce entering established marketinR channels and retail prices refer to urban retail market prices not prices charged by hawkers. /2 From Lake Leopold II, September 1970. Source: IRES nrice and marketine renorts.

C. Government Policy

Price Policy

78. In October 1967, the Central Government, in connection with the currency reform, introduced a new system of minimum producer prices, applicable throughout the country, for a number of agricultural commodities. These prices are shown in Table 19. Provincial governments might also fix minimum prices for other produce in which case the price should not be higher than 10 times the producer price of June 30, 1960. A separate decree, also ANNEX 2 Page 38 dated October 1967, established producer prices for seed cotton at K 2.40 to K 3.60/kg depending upon quality. At the same time, Government fixed wholesale prices for some major commodities. Provincial Governors were to stipulate minimum producer prices for maize. cassava and groundnuts; these prices were to include a transport differential on the basis of distance to rail or river. Lastly. Government introduced in December 1969 a system of maximum wholesale and retail margins for imported items, including food, and these margins were to be indicative for margins charged for domestically- produced food.

Table 18: OFFICIAL MINIMUM PRICES

A_ PrnFiurer Prires Fixed bv Decree No. 422/AE/0024 of October 7. 1967

1 For the Whole of the Reni,hl i of Zaire

Product Mn1riift e

Palm Fruit 03 Coffee Arabica (parchment) 14.50 Latex 30 rTr 1.40 (per liter) Tea (green leaf) 2.0-3.0 depending ona qualit-y Pyrethrum - Fresh Flowers 0-150 km from plant 2.4 more than 150 km from plant 2.0

.yLLILuLk - %LACUc 4'JW%LO A V M.T s'v Rice (paddy) 2.0

2. Regional Prices for Robusta 3. For Maize, Cassava and Groundnuts I.fLee (at shipmenjJW Lt pVoiLnt)

r1AKULt/ Kg M14kUL.4 Mr

Bas Zaire *-dry cherry 6 Maize: Kasai Occidental, Kasai 2.0 Bandundu - dry cherry 6 Oriental, Katanga 2.0 Equateur - dry cherry 6 Other provinces 1.5 Beni region - dry cherry 5.5 Cassava (cossettes) 1.0 Other regions - dry cherry 5.0 Groundnuts, Decorticated 4.0 In Shell 2.0

Note: Farmgate minimal to include transport differentials set by Province Authority. ANNEX 2 Page 39

B. Wholesale Prices Fixed Since 1967

Rice Bumba ex mill Z 75.00/t Maize flour Katanga ex mill Z 3.00/60 kg Palm oil Kinshasa ex mill Z 62.66/t Sugar SUCRAF ex mill Z 92.20/t Sugar SUCRAF wholesale Z 112.74/t Sugar Moerbeke ex mill Z 92.14/t Sugar Moerbeke wholesale Z 104.47/t Cattle Grade 1 Z 0.18/kg liveweight Cattle Grade 2 Z 0.16/kg liveweight Cattle Grade 3 Z 0.155/kg liveweight

C. Margins on Imported Foods

Product Wholesale Margin Retail Margin (Z of purchasing price including transport, insurance, etc.)

Wheat flour 10 10 Other flour 12 1C Table oil 12 1t Yzy 'beans 10 1C Eggs 12 1C Fresh fish 14 25 Rice 10 15 Sugar 10 1i Beef 12 22

Table 19: SEMIWHOLESALE PRICES FOR SELECTED CONSUMER GOODS IN RURAL MARKETS -- KONGO CENTRAL (1964 - 100)

District Madimba Thysville Commodity 1969 1970 1969 1970

Beer 150 200 150 200 Condensed Milk 136 213 187 228 Palm Oil 206 263 208 278 Fresh Fish (sea) 234 266 282 404 All Food 200 277 217 303 Men's Shirts 165 205 203 217 Pants 177 201 236 224 Women's Dress 137 163 167 166 Sandals 129 161 150 173 All Clothing 178 220 194 227 Matches 169 193 152 193 Soap 214 217 172 214 CnniA"sA 166 171 160 172 Charcoal 179 224 281 336 rj0AretPs; Class A 224 263 1790 263 All Household Goods 190 235 1B2 239 ANNEX 2 Page 40

79. The aim of price policy was to curb inflationary trends and, at the same time, to protect producers and consumers. By and large, however, these goals have not been achieved. The reasons for this failure might be summarized as follows:

(a) lack of flexibility in Government policy on producer and wholesale prices;

(b) traders and Government officials have on occasion taken minimum prices to be fixed prices;

(d) lack of any control over the retail trade as well as much of the wholesale trade; and

(e) contradictory objectives within the controls promulgated.

80. With the exception of cotton, for which prices were raised in 1969 to K 3.0-4.5/kg, the minimum producer prices introduced in 1967 have remained unchanged. Even if production costs might have changed but little, costs for consumer goods used in rural areas have certainly increased (Table 20). Under these conditions, the minimum producer price policy clearly acts as a disincentive to production. Furthermore, in years of normal supply, fixed minimum producer prices have on occasion been interpreted as fixed or maximum prices. For example, a report on the Central Government-sponsored buying campaign for "surplus" food in Kasai Oriental indicates that even Government officials operated under the impression that the Government pricing system related to fixed producer prices.

81. Government lacks the machinery to enforce any sort of minimum pricing policy because it cannot effectively intervene on the rural markets. Without a network of Government buying points which would offer an alternative market outlet to producers, minimum prices just cannot be enforced. Simnilarly, maximum wholesale Drices under given trade conditions have frequently had little impact on consumer prices. No doubt wholesale prices of the few lare-Rarale eatablished traders can be supervised and their price policies might be controlled. But the previously discussed retail trade structure mnakes enntrnl of wholesale nrices a futile effort. Finally, enforcement of fixed wholesale and retail margins cannot be carried out when the rtnail chain is an nver-extended asA in the urban areas.

82. Under the present -olic-, prices are -fiYe onnn A weight (kg) basis, but farmers sell their produce on a traditional volume basis, and many have li;;le or no coprehenio. of I/1/ Scalar vi n w4s in rural areas, and even the provincial departments of the Ministry

;/ At tne various retaiLaL tLages, co,unoudltiLes are general I - volu..e basis or by numbers. ANNEX 2 Page 41 of Economic Affairs, responsible for the implementation of the price policy, arc not equipped with su'fficient number of scaleu 1/. For all these reasons it is suggested that the Government price policy be abandoned. Ot-her Government Action

83. Apart from price policy, Government has no other policy or means of intervenirng in the mitarket for domestically produced food. Tnere are the parastatal bodies for coffee, Office du Caf4 Robusta (OCR) and Conseil National du Caf' (ONC), as well as COGERCO for cotton, and also two regional agricultural boards, the Office des Produits Agricoles du Kivu (OPAK) and the Office des Produits Agricoles et d'Elevage de Kisangani (OPAEKI). OPP&i is doing relatively effective work with coffee, but its role in marketing of other crops is negligible despite the fact the Board has far-reaching powers. The OPAEKI Board is a legacy from colonial times. This Board is supposed to control and promote export crops, livestock and a number of food _:rops; in fact, the Board's activities are very limited and in no way assi5st in the marketing of domestic foodcrops.

804. Market information services are carried out in the form of monthly price reports by IRES 2/ and INS (Institut National de Statistique). The value of these reports is restricted, due to delays in publication and the limit:ed distribution they receive.

85. Quality standards and product quality supervision for domestic food crops exist only in the case of maize purchased by the large maize m:Llls in Katanga. Supervision is entrusted to the Office de Surveillance which also controls export qualities for coffee, but which is not represented in the interior provinces (except Katanga).

86. There have been sporadic attempts by Government to influence marketing, but with little success. In 1967 Government established the Economat du Peuple, a buying and sales organization which was to act as a parallel marketing chain in order to influence retail prices. The Economat established retail outlets in most larger cities, but after only one year of operation it had to close down because the initial capital of Z 500,000 had disappeared. In spite of further Government subsidies, trading losses mounted and the management could not cope with the scheme. The Economat lingers on under the temporary management of an expatriate, supplying hospitals, army and prisons with limited quantities of cassava, bananas and pineapples from the Bas Zaire, and importing some food products which are resold to private traders.

1/ In Kasai Oriental, the local department of the Ministry has one bar scale, which has no so far been used.

2/ IRES which, among other quality relevant economic research work, provides the only market research services for food crops in the country, might be forced to drastically curtail its activities due to lack of funds. It is very strongly recommended that immediate stens be taken to maintain and even strengthen this Institute. ANNEX 2 Page 42

87. Another scheme introduced in 1969 was the Mission d'Achat. Under thisnprogram, trhe Gpntral GnvernmPnt- nrnuirieti fitinrI to nrnv4nrcial cgovernmentn for the purchase of agricultural produce from regions where private traders did not penetrate. Produce thus obtained w4, to be sold i.n the first instance to hospitals, prisons, administration, etc. The campaign was a no= I ete fa41ure, 1ngt-ly- t o4u poor pl-nr4- n anA ad4inistrat4i an.d finen- cial irregularities 1/.

D. Sumumary of. £RWcommenUdati.onus

88. Urban demand for food is growing rapidly primarily as a result of the fast growth of the cities. Act'on to encourage production should in the first instance be concentrated in the traditional supply regions of the various urban markets where at least a minimum of infrastructure and commercial orientation already exist.

89. Major production drives will be necessary for:

(a) Cassava for the Kinshasa market, to be promoted in Bas Zaire and Bandundu. Primary emphasis will have to be given to eliminating cassava blight and cassava mosaic diseases, introducing new planting material and improving marketing infrastructure;

(b) Rice for the Kinshasa market. Complete self-sufficiency of the country should not necessarily be the immediate aim but rather a more locally restricted development aiming at making domestic production competitive with imports. Emphasis should be given to development of upland rice in the Bumba region;

(c) Beef production, particularly for the Kinshasa market, should be encouraged and the production potential of Kivu, Kwango and Bas Zaire should be examined. This would include examining the capacity of the various areas to produce beef at prices competitive with imports and

1/ The example from Kasai Oriental might be typical for the impact of this venture. A Central Government grant of Z 100,000 was received by the provincial government and a first buying mission went into the immediate hinterland of Mbuji-Mayi where it was found that no agricultural "surplus" were available. (It is interesting to note that this mission went out under the impression that official minimum produce prices were maximum prices.! A second mission penetrated somewhat deeper into the province and managed to purchase a total of 68.8 tons of produce - of which 48 tons were paddy - for a total cost of Z 1,530.75. The cost of the mission was Z 788.76 or more than 50% of the value of the commoditie ra whi4ch wevo salA to the trade. No indication could be found as to sales returns or the use of the remaining funds. ANNEX 2 Page 43

the technical feasibility of introducing higher yielding animals than the N'Dama in Kwango and Bas Zaire. This in turn could imply studying the feasibility of tsetse eradication;

(d) Production of meat from small stock and poultry should be given higher priority. Poultry meat production, especially in the Kivu but also in Katanga and Bas Zaire, appears worth exploring further; and

(e) Vegetable production, primarily for the Kinshasa market, should be concentrated in the Kivu as far as the more durable products are concerned. Leafy vegetables should be grown in the Bas Zaire. If the Kivu production is to be further developed investment in market infrastructure will be required.

90. Traditional supply patterns appear to involve considerable cross hauling of food; encouragement should be given to redirecting some of the market flows to save transport costs and reduce the pressure on means of transport.

91. Retail markets in most urban centers seem to be sufficient in quantity and quality. An exception seems to be Kinshasa. where additionaLl markets might be usefully established to reduce reliance upon hawkers. Establishment of a wholesale meat market. particularlv if domestic supplies of beef are to be stepped up, should also be considered.

92. Primary buying of agricultural commodities is characterized by a large number of small traders with verv limited canital reserves and insufficient knowledge of commodity handling. As a result, effective competition In weak; in snite of the numeTr of traders involved. It is suggested that provision be made for access to credit to qualified traders.

93. The high volume of direct producer marketing in urban centers must be considered an a serious constraint to aartcultural production expansion. Establishment of additional rural markets offering consumer gonnd shniouli ha enris agd- sin-e shortagP of eonnatmer goods in au.intitv and variety in many rural areas probably acts as a strong production dis--

Q94 qtnraaa<>- fnr11tia-v----r- -- --nt --fnvom leverl nntd asl at nrimsnrv huyvina leitel are poor and result in losses and damage. Assistance in the form of tech- .ical advice --nd credit should be provided.

95. Primary emph as4is has o-far brg . toa 4 vnnrnn4 nC tranannrt through rehabilitation of main roads. It is suggested that provision of Si"mple ferry fAaci14ities will have a greater i-ac pr o.-eca rdc tion.

96. A system of minimum producer and maximum wholesale prices was introduced ifn 1967. It…ai suggested that thi pol.cy be abar.doned, since the necessary machinery to enforce it does not exist.

ININ .. ) Page 1

RLEPUBLIC OF ZAIRE

AGRICULTURAL SECTOR SURVEY

Potential and Prospects in Bas Zaire Province

Introduction

1. Over the next few years, an important problem facing Zaire will be how to meet the rising food demand of the rapidly growing population in Kinshasa. While domestically produced foodstuffs reach Kinshasa from all parts of Zaire -- vegetables from Kivu, beef from Katanga, rice from Equateur, maize from Bandundu -- the basic source of Kinshasa's food supply is the immediately adjacent Bas Zaire province. For purposes of this Annex, the projected food demands of Kinshasa over the next few years (Annex 2) will be taken as targets. The discussion will focus on the contribution Bas Zaire can make toward meeting these demands. There are two questions to be asked in this connection. Firstly, can the province produce a particular foodstuff economically and profitably? Secondly, does the province ha-ve a relative advantage over other locations in Zaire in meeting the demand?

Characteristics of Bas Zaire

2. Bas Zaire has several definite advantages relative to other parts of Zaire. First, it has easy access to Kinshasa. both because of proximity and because the road network is in better condition than in other nrovinces- The nrovince is biseeted by the main Kinshaaa/Matadi road which allows rapid truck transportation to the capital. While the secondary roads whirh feed into this highway are often not in oood condition; trucks nevertheless manage to reach nearly all parts of the province south of the Zaire river. Transnort costs are not low, however: hiring a six-ton truck with driver costs Z 30 (US$60) per day (see Annex 2, para 73).

3. Second, agriculture in the province waB not as severely disrupted by t-he int-prnal trouihles as was outntit in mAny other nart8 of the countrv. Reliable production figures are not available to document the case, but observers agree that produtioIttlnf evnandeaerl nuv the nant depade= The relative stability of the area perhaps explains the relative concentration of technical assistance personnel Ant reganllr Mi*instrv of AcFiritrtltitrA Rtaff in this part of the country. French technical assistance is encouraging vegetable production around Kinshasa, Belgian aid is supporting the Grouine d'Economie Rurale (GER) (see para 16 below), the United States is helping wt.4- A. t..,fl a= supe_.isAC . , A edcrA4U ,..U ^edi- S ^ ^\- _Fa- l Th,..411y-- s,A _W 4lhethe- *pb 14..-A ^f (h hoc a rice scheme in the same general area.

4. Third, population densities have generally remained low in the provLnce. e L.airar. populatior. 4ncrease.I about.JLI. the cese ANNEX 3 Page 2 of 1958 and 1970; the non-Zairan population -- mainly refugees from Angola -- has become of much zreater significance; but resettlement of the refugees into villages has been accepted with remarkably little dislocation. In Songalo territory, where the greatest concentration of refugees i8 found, the proportion of non-Zairans reaches 60%; in Cataractes District, cover- Ina moat of the nrnvlnre; the nronnrtion of non-Zairana in the nonulatlon is about 20%. Population densities remain at less than 20/km2 in all parts of the Distrint of Cataraetes; exenpt for Thv4ui11l tprritorv whprp it ia 35/km2; in the western part of the provi ce (Bas Zaire District), densities are generallv hivher- ranaina from 22/km iin eke-Rann7 tprrito-v- whprp most food crops are grown, to a peak of 66/km2 in the heavily-forested Tsahp1a tprritorv- The largest it-v in the pronce,'0 MatadI, has a population of 110,000. An industrial center is planned for development around iTnta inA if Gv-mAent AeA-ctao4 ns are fulfill4 11d,A the next AdeAA conu1A C)~~~~~ -r- -,_ . . witness a rapid growth of a relatively high income population there.

5. Fourth, there is more information about agriculture in Bas Zaire t.htOan for ar.y othl*er area in Uflhe country, al'tIhough. it is s.till -r - mentary. The land potential has not been fully exploited. A study done in

1 9rS, by the Aii SociLite Ge . LC4LA A AIIv...A AO A 14- 4.- (SOGREAH), concluded that some 250,000 ha were capable of being developed for production.purposes wit.h some in.vestment 4in Arainage and othler Jnputs. On the price side, information available from several studies carried out by1J~ IDVS,LL1.E..) atS. ILovalirmA." Jd.L±U Uri4verslty,,U LL±V LO..L glveL a som-e,astDII,=WLIL ruixedLLL" U picturej A L.L L ~ ofL hwLLiW th1eVLLL farmers have fared during a period of rapidly rising prices.

6. Table 1 shows the prices paid to the producer for basic foods -- cassava meal and cossettes, shelled grou-dnuts, dry bears and barnanas -- the retail price index for these goods, and an index of prices of local manufactures. Lne comparison gives some idea of tne relative purchasing power of the farmer. Two points emerge from the data. Producer prices in the Bas Zaire have kept more or less in line with the prices of goods purchased by farmers; the relative advantage enjoyed just after the currency reform in 1967 has, however, been rapidly eroded in the last two years.

Table 1: PRICE INDICES: BASLC FOODS VS. OTHER CONSU-MER GOODS (February-March 1961 = 100)

1962 1964 1966 1968 1970 /1 Prices for Food- - Producer 183 366 469 1,025 1,166 - Retail /2 180 513 541 1,720 1,932 Prices for Other Consumer Goode- (Retail) 174 365 483 905 1,223

11'/- ~~BasedI or. foodstuffsLUULU.L ~1_8jj~shiLpped buy1 roaduU4 fromLWLL the ilas ZlaiLre. /2 Index of local manufactures. Source: IRES ANNW Y -4 Page 3

7. O~n th ohrhn,rtiprcs, od-uffs have increasedu * ~ .1I1L.LLt% %JL.1CL L1dUIU, JLCLA.LJ. pL.LL;Ct UJ. Loo'UUU. J.I IL~V L.A~~a~ much faster than producer prices. The reasons for this are discussed in A _ _ :ne- 2.n H:ere11 -_ iLL iS._ bsuLLff.entI_ . ._ tO_ _ Lnote Ltat_ .-- ffi Lte_ _ produceUr, price,_e_ even for_ foodstuffs from Bas Zaire, is rarely more than one-third of the retail price in Kinshasa (Table 2). As a generalization, it wouid perhaps be faiLr to say that marketing constraints have kept the full effect of the rapid growth in demand for food from being transmitted to producers in the form of price incentives. Although there certainly are commercial operations which exploit existing opportunities (e.g., beef and sugar production), the traditional sector in general has not yet responded fully to the production possibilities which undoubtedly exist.

Table 2: PRICE STRUCTURE OF FOOD PRODUCTS IN KINSHASA (Shipped by Road from Bas Zaire, January-March 1970)

Cassava Shelled Chikwangue /1 Cossettes Peanuts Beans Tomatoes Bannias ------(makuta per kilo)…-…

Producer price 3.35 1.58 5.14 10.75 3.74 1.23 Transport 1.62 0.73 1.14 1.40 0.83 0.17 Wholesale margin 1.52 0.81 3.72 9.94 4.20 0.93 Retail margin 5.89 5.28 7.11 14.23 34.31 2.59

Retail price 12.37 8.40 17.11 36.32 43.08 4.92

/1 Cassava meal. Note: Data on waste, rejects, losses, etc., not available. Oo-unce;. Banque Nation.ale ar,d IAQ0.

8. hne physical resource base varies in quality. Most of the province consists of rolling savannah country. There are forest galleries along the river valleys an,d tops of hills, and a few plateaus inLerrtUpL the generaily undulating relief. The fraction of the province which lies to the east of KiLnshasa is part of the immense Kwango Plateau and ib characterized by relatively poor Kalahari-type soils. The soils improve as one moves to the west away from Kinshasa until, in the territories of Thysville and Luozi, one finds much more favorable cropping conditions, suitable in places for production of high value vegetables such as avocado, lettuce, and tomato. Con- tinuing to the west, into Songalo territory, the hills become much more pronounced, and some of the terrain is too steep to permit cropping without the danger of erosion. All of these areas, which now form part of the District of Cataractes, lie at altitudes of 500-1,000 m and have rainfall exceeding 1,000 mm, reaching 1,600 mm per year between Thysville and Kinshasa.

9. Across the Zaire river to the west, one enters the District of Bas Zaire. This is lower, hotter (25.1°C annual average) and, in the north and west, heavily forested. The forested region is known as the Mayumbe, the ANNEX 3 Page 4

source of much of the Zaire's past timber exports (forestry 4S discussed in Annex 7). Most of this district is not suitable for food crop production. The territory of Seke-Banza, withe a pla-eau area ot he same name, is an important exception to this rule, as it provides a large part of the food supply for Matadi. Th^e northlerr. ad weste.,. parts of tie District are dUe- voted more to perennial cultivation (oil palm, bananas, coffee, cocoa), &.t,4r.lyon an indus aiascale.

10. I.m.ereis also some perenr.r.ia cuJ'tvatLor± 'n the central part of the Province. The firm Jean van Lancker (JVL), which has its field headquar- ters not far from T.ysville, maintains 3,000 ha of oil palm and a few hundred ha of sisal. The Compagnie Sucriere du Zaire (CSZ) located in the same area, produces just over 30,000 t of irrigated sugarcane per year. Most of this central region is, however, devoted to food crop production and livestock raising. Tne most important food crop is cassava, followed by green beans, rice, maize, and groundnuts. Cattle-raising is mainly in the hands of the large private societies, such as JVL (which has 34,000 head in the province), though there are many Zairans with herds of 25 head or more 1/.

Production Requirements and Opportunities

11. The prospective growth of food demand in the Kinshasa market poses a real challenge for the Bas Zaire over the next tew years. Assuming constant prices, cassava demand is projected to increase by a minimum of 90,000 t, and possibly 100,000 t over the next four years, depending on the growth in per capita income. Similar projections for other products show demand increases at 5,600-7,400 t for rice, 5,100-7,100 t for beef, 14,300- 17,300 t for wheat flour, 3,200-4,500 t for groundnuts, and 900-1,500 t for maize (Annex 2, Table 5). In addition to being a main supply source of food for Kinshasa, the Bas Zaire will also be called upon to meet the demands of the smaller urban centers (Matadi, Boma) and industrial development in Inga, as well as to feed the growing rural population in the province.

12. Cassava is a major concern. At present, the Bas Zaire supplies something like 90% of the cassava shipped to Kinshasa. The only other important source of supply is Bandundu province, which has been shipping about 10,000 t annually to Kinshasa over the last few years; regardless of the efforts made in Bandundu, however, the major burden for supplying Kinshasa will fall on Bas Zaire. One major uncertainty affecting cassava supply is the seriousness of reported disease problems. Cassava mosaic, which arises because planting material has not been renewed for the past decade or more, can lower yields by 10-15% in affected plants. Possibly even more serious is a new form of blight which has been reported to affect plants in Bas Zaire, Bandundu, and Western Katanga. As of late sprinR 1971! INERA had not been able to identify the nature of the disease. The high priority given this effort was deserved, and an accurate diagnosis of the cause

1/ Based on credit applications received, staff of the Controlled Agricul- tural Credit nrogram at Thysville estimate there are perhaps 50 such herdsmen in Thysville territory aIone. ANNEX 3 Page 5

(which may already have been accomrplished) should be followed by continued enquirv into the extent and treatment of the dise; A-, a fore.ast of its probable effects on production, and the planning of measures to overcome its ill effects.

13. Little is knowjn about the factors of cassa a production.. Possible constraints on increased production are availability of suitable land and. labor requirements- Land as such does not appear to be1a contraint in Bas Zaire, at least at present. For example, individuals applying for credit to develop exterive beef cattLe operation. have no d4fficulty getting permission from local chiefs to enclose the necessary land. How long this without better informati-on situatior,O.LLUOL± Lwill1 W±.L. lastDLL 'sLO veryvi UA..Ldifficult L LUL, L. to pre`ictJLU~..L WL..LAL JL. U'L, _L.~~l & ~~ on fallowing practices, for example, which are followed in the province ELnd or. the landU area whfich is fLertiA.le er.ough' to repty-r cultivatior, effOAorts andL yet not so steep as to entail a serious danger of erosion. One concrete measure -which can and should be taken to iLUcrese t4e land area ale to EUp- ply Kinshasa is to improve the ferry ser-V4ce wibch links Luozi territory (specifically the Luela valley) with the main Matadi-Kinshasa road.

14. Is labor supply a constraint on production? It is true that c<-- sava cultivation, as most farr. work, is considered women's work, so that the existence of unemployed male labor is not necessarily inconsistent with- a labor constraint on cassava production or on the tedious and time-constuming processing activities which follow the harvest. But the labor inputs required at each stage of cassavia cultivntion and post-harvest processing are not known. The problem may not be an absolute limitation on (female) labor available, but rather a lack of adequate incentive or reward to the labor supplied.

15. To obtain a clearer picture on these points a preinvestment study could make a very valuable contribution. This proposed study should include labor, farm management, and marketing aspects of cassava production. From the farm management point of view, it would be important to establish what the tradeoffs are between extra labor input into cassava as compared to ail- ternative cropping possibilities or domestic activities. The marketing slide of the study would look in detail at the entire marketing chain, from the village to outlets in Kinshasa, in an attempt to pinpoint possible ways t:o increase producer prices. The proposed study should provide data necessary to analyze the costs and benefits of mechanical preparation of land for cassava cultivation. At present, tractor services are provided by the GFER, based at Thysville, which is an arm of the Ministry of Agriculture; it services five paysannats (a total of 1,800 cultivators), charging fees that do not cover costs at present levels of utilization 1/.

16. Factors influencing yields are another aspect of cassava production. With adequate weeding, yields of 18 t/ha can be attained; but yields of only

1/ Costs are estimated at Z 15/ha versus the fee of Z 10/ha. The difference is borne by GER and in effect is a Government subsidy. Credit aspects are discussed in Annex 9. ANNEX 3 Page 6

two-thirds this amount are common. This may be partly due to the difficulty of nroviding effective extension support under vresent conditions -- as one factor, for instance, GER staff have limited means of transport. It is also a nituetioii of attitudes on the part of the neonle and: in narticular- on the part of local chliefs. Where a local chief is interested and energetic, the Cassava fields annpear to be nronerlv weeded desnite the lack of extenqion support.

17. Since maize and haricot beans are often grown in rotation with cassava, any expranCSion prolgram fnr rCas-va- w4 11 ailmyno rert-Anly hlpl to^ meet Kinshasa's needs for these foods as well. For groundriuts, Bandundu is reltively ".-^ n r. cia c 8 sorre-a of siiTpp-ly ItT nrr.hcahl t-hnt- th opening up of certain areas suitable for groundnuts (the central and southern 4 pi-alateauA b-y Iprovem4th K flti.-a/14 i"y t ro-ad ri1 4i.du_e rgreat er groundnr.u production; also more grouadnuts are likely to be forthcoming from thie area 4 4 a.roun. L A oa 4. _eas,-er n..AU.A4.. -4- -- a,rrn.-.e..r .el4 o. .-.4sts .. ac_ ClL UULLU -LU±U.J0 .-L* U .0 LGU a tW GGSt5A-- , -- t tive. Within Bus Zaire province, improved access to the Luela vallev

dUAI sur-udn5UkLUULLU.LIL~L6ZL terr LLLIJ.LY tor wolWVU.LJA UAAIjJ'.VC 6L ILLLLIALIUL. QO WC4J arrv.ronntoselz~ cassava.. Cs~c oUjJJL=.Lsupp'li .

I80. nThieLiS porospectz#*LIk_.t L,J-'or r_o devlo- VC~J~S&fl 4- .4.S t*-Zaire,.7n 4 _L ar4teteOt Annex 2. One conclusion is that the irrigated rice produced at Mawunizi, not far from £LJysvi1l1e, 'Ls 'Lar cou expensive 0to compete'wlth1J iA ph Ls -r. Kinshasa market (despite the success of this experiment from a teelhnical point ot view) . rrospects for montain rlce, particularly L-a L'%UU vaLet.y, are somewhat brighter, since costs are lower and yields of 2-3 t/ha have been obtained with fertilizer application of 250 kg/ha. NevertheLL Uisst ter of national priorities it would appear that the first effort at expanding rice product-i'n for the Kinshasa market shoul.d be -U--ueat eDUUba inL the iiorth.

19. The dom.pagnie Sucriere du Zaire 'CSZ) at Moerbeke h-ts been producing about 30,010 t of su,gai annually for the past few years. The CS' has plans for an expansion of production in the same area up to a total of 50,000 t, which1 the company eonsiders to be the upper limit tor develoument. The other important producer is SUCRA,F, wnich is now half owned b'y tile Gov- ernment, located in the ouzi.z valley on the eastern edge of the country. Although interrupted several times by the unrest which aftects the area, SUCRAY has exivanded production from an average of 4,000 t in 1965/66 to 9,800 t in 19T'h. Factory capacity is 14,000 t. Total consuzaptioii in the Zaire is about 60,000 t, of which nearly one-third is imported. Over half of domes tic consumption <57%) is 1in Kinshasa and Bas Zaire. ''here seems little doubt that demand growthii in tue Kinshasa area (i.e., includinrlsg Bas Zaire and B3amdundu) will be sufficieut over the next several years to absorb the iucre;Ase in production envisaged by CSZ. The 'ssue is net whether the CSZ could supply this market more cheaply than other domestic sources of supply -- it .proabably coutld. But can CSZ compete witl imports? Lt does so at present on.v because, of import duties and taxes totallit. 38% (or about Z 22 per ton) now levied on imported sugar. These levies bring the price of i±mported sugar to about Z 105 at Kfinshasa, or some Z 9 inure than the official price for locally producced sugar. It is possible, of course, that the average price for domestic sugar overstates the additioi?al cost to ANNEX 3 Page 7

CSZ of expanding production at Moerbeke. Also, as suggested elsewhere (,Annex 2, para 34), a shadow exchange rate somewhat lower than the official rate may be more relevant to compare internal and external prices of agricultural commodities. The estimated cost of the expansion program, which would take about four vears; would be annroximatelv Z 2.3 million. The enterprise would require additional capital for the expansion program.

20. The major demand for vegetables in the Kinshasa market will be for cassava leaves, cnnected with the prospcat for cassava produ-tlon. The supply of other vegetables such as tomatoes, spinach, pimientos, etc., raises irnteresting questions. Here, the issue is the appropr- ate "A4i,ti4a4n eof labor" between producing areas in Kivu, in Bas Zaire, and on the outskirts of Kinshasa. Although certair. crops car. be co.mpei4t-4vey produced in. both t:he L.-~ltAf*I.. .~ - a -.. ~ ll - -. V _') - - . Kivu and Bas Zaire, the basic principle would appear to be to encourage

LLAe lesO peCr.l-auC pLroUc.sO fg, cabbaSg, leeks, carr o.ts _ L4*--tbe Kivu anA to produce the more perishable ones (e.g., spinach, lettuce) nearer the in-

ten,ledl marklet. T I.7ile th=e 0-CLh=em=L0 or, the outskirts of KRinshasa have had sCome success from a technical point of view, their economic soundness is less apparent and',nin ay case, the outwaru pressure o' a clty growing at 10% or more a year may soon make unavoidable the use of the cropping land for other purposes suclL as housing. IaLss uoes not mean Lthat tsIe5e sc-lemes sIIUUldU necessarily be abandoned, but rather that relatively greater attention shiould be paid in the future to alternative production possibilities in the Bas Zaire. In particular, there are numerous river valleys around Thysville where vegetable production would appear to be quite promising. As has been done in the Kinshasa schemes, it will be necessary to closely integrate ithe production and marketing aspects of any project.

21. rne Thysville area may also offer opportunities for fruit production. Various types of citrus are grown at the INERA station at Mvuazi, but due to lack of staff not much impact has been had on production in the surrounding area. The JVL operation of Kolo, immediately adjacent to MvuazL, has also had very good results with pineapples. While the potential for fruit production in this area is not very well defined, the few promising signs deserve to be followed up. A better known fruit potential exists in the Bas Zaire District, where bananas are a well established crop. There would not appear to be any realistic prospect for reviving the banana export trade in the near future, but prospects are somewhat brighter for expanded production to meet the demand at Kinshasa once the bridge over the Zaire river at Matadi is completed. Because bananas are traditional in this region, production may be expected to expand spontaneously once a new market outlet is established.

22. Another crop which may have some future in the Bas Zaire District is cocoa. At present it is mainly a plantation crop (5,200 ha out of 6,000 ha in the District), but it could be expanded on a smallholder basis for export if the economic attractiveness of the operation can be demonstrated. A first step should be the testing of improved varieties at the experiment station in the area. Some work along these lines is underway, but it should be intensified. A ready-made site for cocoa development may be at Lukula, where a FED banana project operated from 1966 to 1968. Once the banana ANNEX 3 Page 8 project was abandoned, there was a danger of the 2,800 ha cleared reverting to bush. Ministry of Agriculture staff have encouraRed coffee plantinR to prevent such reversion. If new cocoa varieties prove successful, they would provide a useful diversification away from coffee.

23. In regard to livestock, the most interesting auestions concern beef cattle. Official Government estimates show nearly 150,000 head of cattle in the province. The maioritv of these (about 80,000) are held by large private societies, in particular JVL near Thysville and Profrigo on Mateba island near Boma. Religious missions hold some 13;000 head and the remaining 53,000 are held by individuals scattered throughout the province. Both Prnfrion nrid JVT. are i-ntprestpei in exnandincg nnprationq. JVL has already built up a medium-sized herd on a ranch near Mushie in northern Bandundu province; thn niarnea l oa8 n attvArtive for ranchincy thnr Bas Zairpe bit it has the great advantage that substantial land areas can be set aside for commercial ra.ching without enconntering m 4 n-r lnnA tenur proble.mn; the rate of expansion appears to be limited by a reluctance to invest by the large rar.chin.g societies. In Bes Zaire p the major ptent4al i certainly the development of individual livestock enterprises, based on variations of the metayage system, in which individuals are- advuannced breeding stock in return for a commitment to repay in kind from the progeny. The demand for cattle under this arrangemt exceeds the supply available. There are, however, certain constraints other than the difficulties inherent in

IUa U-rt LL L4 L_Xe4L 0 LL A-iLAa4L L1r- a lAv=-.. tAC, prog 6 -A_- m LULf W r sml_cl0 enterprises.4 AO -

24. The met-ayage system rases a number of issues. One i8 the availability of breeding stock. It is generally accepted that the only breed well 5U~~~U Li~ L~.LUL .50 L.LAC V4 LiMWC. ZViL..L[1UUA6LA LLL IL&= C L ..I. WCLO JWOLVU.L_ ad'apted' toL the regiLor. 'L the-'aa Iir.- 'thug .he- pas it -_a +.-ilet import this breed from West Africa (Guinea, Dahomey), this source of supply has dried up in recent years. Thus, expans'ion wit-h N'Da1a i8 limited by the breeding stock available locally. This supply now amounts to perhaps 1,500-2,000 head per year from the expansion programs of large ranching societies, which absorb part of the supply themselves. It should also be recognized that a rapid growth in individual cattie operations could expose the industry to increased risk of epidemics -- animal disease spreading from individual operations which were not properly controlled. The disease probiem for small livestock owners under existing metayage schemes is reported to be minimal, but it could very well become more serious if these small operations were to increase substantially in number. An expansion of metayage should therefore include a strong animal health component, which raises the question of veterinary costs.

25. More generally, economic considerations are the key issue in regard to the metayage system. At current prices for three- to four-year-old breeding heifers (Z 100 or more), several analyses of commercial ranch expansion plans in the N'Dama zone (where tsetse is thought to be a problem) have shown marginal economic returns, even after assigning a relatively low shadow wage rate to unskilled labor. For small operations, the investment cost per animal would almost certainly be higher. Metayage schemes should have an advantage in management costs (expatriate salaries, vehicle costs, etc.), but ANNEX 3 Page 9 vnterinarian support costs for a metayage scheme as a whole could more than .ffsct that advantage. Given the probable size of a scheme -- set by the avaiiability of breeding stock -- supervision expenses may be higher for netayage than for commercial ranching. Thus, in relation to both investment oad running costs, metayage may be more costly than commercial operations, which are themselves only barely economic. The demand for metayage credit io strong, despite this fact, because the metayer is not now asked to bear thrt cost of veterinary supervision and also because local sales in smal:L num- berrS bring higher prices than would sales in Kinshasa. This latter advantage would disappear as the scale of operations increased.

26. Two lines of approach might help to ease this economic squeeze. Fi.3t, the situation would improve radically with a more productive breed. The potential adaptability of breeds suich as Afrikander and Boran, accoin- pa.ied by partial or conmplete tsetse clearing, deserves careful study in the particular conditions of the Bas Zaire. There are reports of Afrikander cattle doing well in areas of light tsetse infestation in neLgh- boring Angola. And even if partial clearing is not feasible it is still conceivable tl-hat full tsetse eradication could pay in Bas Zaire where carrying capacities of one head per hectare (with artificial pastures) are attainable. A second line of approach might be to try grouping a relatively small number (say 100) of the larger individual livestock owners (say 50 head or more) into a limitcd area,; to overcome the diseconomies of super- vi1.2ion. Without further investigation it is not possible to say whether slok. an aTinroach would be acceptable to the lives tock owners themselves, or whether the requisite amount of contiguous land area could be found.

27. Finally, the prospects for development of a poultry industry should not be overlooked. In view of the grain situation in thisa part of the Zaire, a poultry enterprise would have to be based on some combination of crop resi- dutes and imported feed. A fee9d mixing ,mll already exists. Also. some ex- pserimental work on crossing exotic birds with the more hardy indigenous strans is beina done at Kimppese bv cnEDFln.. a church-supported training center established in 1966 to help Angolan refugees. It would be worthwhile to exanine more closely the possibilities of building on th s work. Small- scale poultry operations might be more feasible if the inidividual growers

*ere 'rou,ped ni-nto some fo-.n. of coopefrative

U..;.-ar,,J and ormncluio-a

25. ".-e ger.eral li.nes of developen.t for the Baa Zaire are Apt by the demands of the Kinshasa market and by the competitive position of Bas e.a4 re viGs a=vis otha-er provincca ir, meeting th-1-ese de-wr.ds. Ir. some cal-ae8 (e.g., rice, nonperishable vegetables), the balance of advantage would ap- pe-ar to Lie wie Lii. otLher pro-vLinces; ln other cases /e.g., sugar" the ability of the province to compete with imports is the main issue. On the other .,and, the advantages enjoyed by the province (e.g., proximity to market, relatively good infrastructure) create a number of opportunities for agricultural development. AN-NEX 3 Page 10

29. Two of these opporcunities require further study in depth. Cas- sava is a basic food crop in which Bas Zaire should be relied upon to meet the expected build-up in demand. The question is not whether cassava output can be increased but now best to du it. To aaswex this question w;e need further basic information on the cotstraints to increased output both on the side of production and on the side of marketing. Beef is also a product for which the demand is not a probleim. The issue is how to expand production economically. A study to deteruine whether alternative bireeds can be introduced with either partial or complete tsetse clearing could open up a promising avenue for new investment.

30. There are also other opportunities which, while less important in terms of volume than cassava or beef, are rcnvertheless potentially quite rewarding. These include perishable vegetables, fruit and perhaps poultry. All could be developed in.the central part of the province. All require carefully supervised credit and assistance on the marketing side. Alone or in combination, these opportunities might form the basis for an agrIcultural credit project. ANNEX 4 Page 1

REPUBLIC OF ZAIRE

AGRICULTURAL SECTOR SURVEY

POTENTIAL OF THE SOUTH AND THE PROBLEM OF MAIZE

Introduction

1. One of Government's principal objectives in agricultural development is to arhieuv splf-s,,ffit1pnp-v in crta-in imnnrtnnt fondi rronnp sRteh aR maize and rice. This annex focuses on the prospects for maize. The "prob- lpm nf mnaIe7" hs twon hrnAAd haracteri8ati8a of 8eij.a1 4irtrcst-: it is closely connected with the southern provinces, and it is interconnected with tehn -rrnl,.4 mmonA d rr- as neC t- 1nfa_ ros_ .

2. Although maize is prod t 4 g t p a more important role in Katanga and the two Kasai than elsewhere. Before 1960, tSh.e major surplus producing area was o.ld provirce ofL K;a -- A L-Jtody the best opportunities for expanded maize production are still found in this area and certain parts of ratanga. ConLsUmpLt'oL1 Uo Ua4LreLU H-ie L8 also concentrated in the southern provinces, especially the so-called "copperbelt" towns of Lubumbashi, Likasi, anu Kolwezi It is not too great a sim- plification, therefore, to regard maize as essentially a staple food, and its scarcity a problem, of the soutnern part of the country.

3. In traditional agriculture, maize is normally grown in rotation with other crops such as cotton, groundnuts, tobacco, and cassava. Consid- eration of the "'maize problem", therefore, naturally raises the question of prospects for these other crops and livestock products, and so provides a convenient framework for examining the agricultural potential of the southern provinces in a broad framework.

4. In economic terms, the maize problem translates into a problem of strategy. Tnree questions are involved. First, the scope ot the probiem: What are the long-term trends of production and consumption? Second, what are the production potentials of the maize-growing areas, and thus the op- tions offered? Finally, how do the ongoing schemes and proposals relate to each other, and to prospects for reducing the dependency on imported maize?

Scope of the Maize Problem

5. Availability and Consumption. Production data are not very reliable because of estimating difficulties, and furthermore, the official data for 1968 -- the so-called "year of agriculture" -- appear inflated by an enthusiastic response by reporting officers. It would be surprising if actual production in 1968 were much over half the official estimate of 721,000 t, and it could have been as little as 300,000 t. ro this must be A1IU b Y A. Page 2

added imports of 50,000-75 t, givin z toatal domestic absorption of some 350,000-400,000 t. This compares with a consumption level of about 350,000 t- in thee yeara iu-ed4iately befor independence. Gienth 1- -- . y. - _~ d t,y U~L%JLM = * U=.LV=L& LAM~ yIJjUJ.Llppua tion increase in the intervening years (60% for the whole country, and 85% Lor Katanga d th.e Kasai tCogether, per capiLtLa consu.-,ption hLIas al.-uos certainly declined.

6. Government estimates of marketed maize volume (Table 1) relate to the urban marlets. Te estLmate that 120,000 t were supplied locally in 1969 appears high when related to available information on consumption in Lhe uruan areas, and to the probability that imports were underestimated in that year. The copperbelt in Katanga consumes about 75,000 t annually; the urban areas in the two Kasai consume perhaps 40,000 t; Kinsnasa absorbs 10,000 t. It is difficult to estimate consumption in other urban areas, but 25,000 t is probaDly a good guess. Tnis gives a total consumption of marketed maize (i.e. excluding subsistence) of roughly 150,000 t. Imports in 1969 probably amounted to at least 50,000 t, instead of the 44,000 t listed in Table 1. These figures suggest a marketed domestic production of maize in 1969 on the order of i00,000 t, or virtually the same as in 1959.

TaDle l: MARKETED SU±TLY UOF MAIZE (UOFLFIAL EblSMATES) ('000 t)

1959 1966 1967 1968 1969

Domestically Produced 97 65 76 103 120/i Imports 6 74 69 58 44L- (Exports) (9)-

Total: 94 139 145 161 164

/I Irolally underestlm.ated to a sigL-5 l cant degree. For example, "Minoteries du Katanga" report im-

/C.' Ann & .- 11'A__.-. F7r~t I . IAA ports of 41,000 tons anu "toL- Feres" , 4,5JV tons.

7. Availability of maize for the market can be sharply reduced in poor crop years. This was apparent in the first quarter or 1971, foliowing a poor growing season in most parts of the Kasai provinces. South Africa also had a poor crop year, so the disruptions were amplified by the necessity for importers to shift suppliers. The mill in Luluabourg was faced with a severe shortage of maize, and flour normally supplied to tnis town by the mills in Katanga was not arriving as usual. Prices rose considerably, particularly in the Kasai provinces: farmers were being paid three or four times the 1970 level of 2-2.5 makuta per kg (USe 4-5). Kasai Occidental put a licensing system into effect - one objective being to prevent maize shipments into neighboring Kasai Oriental province (Arrete No. 291/13; April 1, 1971). While these events relate to only one crop year, they il- lustrate the pressures generated by the precarious supply of a staple food. LUJ . JL 4 Page 3

8. The consumption of ma'ze is influenced by differences in tastes and habits and in income levels. The form of consumption is different in Katanga than in the two Kasai. In Katanga most maize is processed by the large mills and sold as maize flour. Consumption, which averages about 144 kg per capita in the relatively prosperous copperbelt towns, is in the form of a moist paste, midway in consistency between porridge and bread. In the Kasai, per capita maize consumption in the urban areas is only about 50 kg per annum, or just over one-third of the average in Katanga. About one-third of the marketed maize passes through the large maize mill, so the small hammer mills and traditional grinding techniques are more important than in Katanga. Consumption is usually in the form of a paste mixture of maize and cassava flour. The proportions of maize and cassava vary, reflecting the availability and relative price of the two staple foods. Lower consumption in the Kasai may be partly attributed to tastes, as reflected in the different forms of consumption, but the lower per capita income is no doubt an important reason as well.

9. Production Trends. At one time the Kasai region produced nearly half of the marketed surplus for the entire Zaire. This portion of the surplus, amounting to some 50,000 tons, was sufficient to satisfy local needs, to meet the deficit of Katanga, and to ship about 12,000 tons down- river to Kinshasa. The surplus had begun to disappear before independence. under the pressure of growing demand (population) and declining yields due to over-intensive cultivation. These influences continued after independence and were reinforced by other developments in the economy.

10. Population increase in the southern provinces, particularly through migration, was a maior factor in the decline of the. available surplus of maize. In addition to a high natural growth rate, total population in the region increased bly the return of the Raluba neonle to their an'es- tral home in Kasai Oriental 1/. This influx helps explain the 100% population increase recorded in the Kasai between 1958 and 1970. There has also been a shift of population from rural to urban areas. Lultuabourg has quad- rupled in population since 1958 and Nbuii-Mayi has increased tenfold in the same period. Smaller towns have also exhibited spectacular growth. Ganda- iika, which before independence had only 5,000 inabitantn has nearly 60,000 today.

11. Reasons why rural areas -- i.e., the maize production areas -- have been in disfavor are not hard to find. One is safety: until recently, the cities were simply a safer place to be. But the relative attractiveness of rural versus urban arean is by no means merely a matter of security. Differences in amenities such as schools and medical dispensaries strongly favor the urban dweller. There s also the quest4Io of direct mon.ea. 4n- centives for the rural dweller -- i.e., the agricultural'producer. With the excention of he once-and-for-all improvement which accompanied the monetary

1/ The Baluba, noted for their industriousness, had taken up jobs throughout Zaire prior to independence. ln thLLe periAodu imUed:.Lattely Ut:ore 176u and for a few years thereafter, intertribal strife led the baluba tc, retur.-. ho.- lrom the othelr parts of the country. ANNEX 4 Page 4 reform of 1967, the "terms of trade" for the Zairan farmer have deteriorated steadil.~UL4" yL overVL Ith11e -L FCXOpast #_ decadeU.U '..Ee.aar;E * L LL L IJ . L.ULIUrr LALk=eqtino %4UC0.LUL1 A vi.ULU u'e there is limited opportunity in the countryside to buy consumer goods. Tlhese gerteraC influences on farming as a livelihoo0d have undoubtedly contributed to creation of the "maize problem".

12. Declining productivity is another broad cause of the declining surplus. Yields of less than 600 kg/ha, which are common in the Kasai, are very low. One major technical influence on productivity is the continued deterioration of the fertility and structure of soils, due to inadequate fallowing of the farm land. Fallowing is especially inadequate in areas adjacent to the main roads, where population pressures and access to markets encourage intensive production. A related factor is a decline in standards of cultivation, partly because the paysannats abandoned after independence have been only partially reactivated, and partly because the extension service has not been in a position to fulfill its basic function of advising farmers on appropriate cultivation practices.

13. The degeneration of seed is another major cause of falling productivity. When the synthetic maize variety in use, GPS-4, was introduced over a decade ago, it was well adapted to the conditions and cultivation methods used in the Kasai. With few exceptions, it has not been replaced since. Over the years it has been grown in close proximity to less productive local varieties, and the resulting crosspollination has led to a cumulative loss of variety -- a "GPS-4 seed" today bears only the faintest re- semblance to the original. Moreover, the farmer normally uses seed from his previous crop stored under conditions that are conducive to infestation by insects; germination qualities are bound to be affected. Very uneven maize fields can be observed throughout the maize growing area: plants are of very unequal height and, where seed has not germinated, gaps are frequent. The low quality of seed helps explain the poor yields.

14. The deterioration of the transportation network is the third broad reason for the vanishing maize surplus. Some formerly surplus areas have undoubtedly become cut off from traditional market outlets, and the farmers in these areas have ceased to produce beyond subsistence requirements. It has not been possible to determine to what extent this kind of situation holds today. It was believed by some observers that local unmarketed sur- nh1tRse did exist over a wideBnread area. This contention led the Government. in 1969, to mount a campaign to purchase unsold surpluses at official prices. The results wprp diRapnninting Tn Rasai Ocrldental- fnr examnlpl nnlv 30 t of maize were purchased in the entire province. This evidence is not con- clusive, because the campaign was not comprehensive, many farmera with a surplus may not have been reached, or they may have temporarily reverted to subsistence pr--- d ui ,e tdu c of ir.nprevalr81e sea a ns TIn ar.y case, the indirect effects of a deteriorating transport network probably are ..ore important, because tra.sport Csts adA 4iff4-clti4es canr becom andei- sive factor for the marginal producer. The differential impact of transport

I WiLh tile possible exceptiLon of BDas Za'ire proviCUC ( ... eLL1A'), ANNEX 4 Page 5 deterioration on the more isolated producer can be inferred from the reported sharp increase in reiative transport charges on secondary roads in Kasai over the past decade (Table 2).

Table 2: TRANSPORT RATES PER TON/KILOMETER/ 1 (makuta)

1959 1970

Main Roads 5.80 7.50 Secondary Roads 6.10 11.00 Difference: Absolute 0.30 3.50 Relative (M) 5 46

I' nnkese ig-ares refLer t-o Itb.e hire ratZs for I LL~ LU~ &LLL L L1.LLOL.L torL transportation of seed cotton in the southern part of Kasai Orien,tia" «Uu LUe sou;,l- eastern part of Kasai Occidental, as reported by a cotton ginning compawy.

Ine rate differentll be.ween -iU .L aLLU OUCCu&waLy LUoU, WLI.LhcL Was oLn.Ly PA, fn 1 vn.'ured to 46% In 1970. The re.10t1ve1 high cost of transport on secondary roads not only affects the money return a farmer receives for his surplus crops (except cotton, for which the farm-gate price is the same everywhere), but also affects the prices of consumer goods and thus has a doubly detrimental effect on the real return to productive efforts. In these circumstances, it is not surprising that surplus production of food crops has tended to become increasingly concentrated along the main transport links, despite the deterioration of soil conditions in these areas.

15. In summary, the maize deficit which has emerged over the past decade or more is a result of a combination of factors: a rapidly growing population, especially in the urban areas; stagnant or declining productivity; and a deteriorating transport network. The types of actions which could contribute to a revitalization of maize production are numerous, but it is desirable to relate them to specific potential in the southern provinces, ongoing schemes, and proposals under consideration.

Production Potential: Katanga

16. Total production of maize in Katanga has been officially estimuated at 40,000-50,000 t in recent years. The largest part of this production (about 40%) occurs in the northern and eastern parts of the province (Tanganika district); the remaining 60% is spread in rough equality among the other three districts. Only a very small part of this production, probably less than 10,000 t, is marketed outside local villages.

17. Natural conditions for maize production are favorable in certain parts of northern Katanga bordering on Kasai (e.g. in Kaniama, Kabongo, Kabalo and Kongolo territories) and in certain river valleys in other parts ANNEX 4 Page 6 of the province. Unfortunately, the areas which are potentially quite pro- dcrltiue are also very thinly nonulated. In Kaniama territory, for instance. which has some of the best soils for maize production in Zaire, the 2¶vW¶oO drIcncitr u ic nnlv thre nervann ner km2 R1nop the nrnnlp rnmmnnlv …u- r------v -- - - r---- -*-Z-… r- ---- r - live in small, widely scattered villages, the costs are very high for supplying 4,prv s prorpaer evtean'Sio. advice, nnd mnrketino farilities.

18. 7Lle problem of reach.in.g the producer. i well i1u-strated b- t-h experience of the Agricultural Commission for Katanga (CAK), which was es- tbishe 1967 wit the supor of_th+e rED. q"k- .4 o4-,ti4-e^n was to ain-A4IJLaU.. LUUU ~LU. I_Ul WA. LU -LC&~ GI.AJIa tJ.LW -LL .-i. -C*- M _. _-SU-- - increase tobacco production for use in local manufacture of cigarettes, with maize and groundnuts as part of the rotation. T- m.aize yields of 500-660 kg/ha are now being obtained, whereas the residual value of the fetL.L'.LzeLr usedU on tobacco shouAldI eUn.Pl.le yields double or more th..ese le vel'sA to be obtained, if proper cultivation techniques were followed 1/. Consid- ering the' llmportance o'L such UdeveCLopmer,; efforts, .tL8 releVant to tzke a closer look at the entire scheme.

19. Over a five-year period, the CAK authority hoped to involve 8,500 planters and to produce a substantial part of the 1,000 t of tobacco (400 t of Kentucky; 600 t of Burley) which is now imported annually from Malawi, Rnodesia, and the United States. In atteri-ptlng to reaCL tLese targets, the project has been severely handicapped by the financial and manpower requirements for reaching the widely dispersed producers. The main areas are around Likasi for burley tobacco and around Kisenga/Kasaji (in Dilolo territory) for Kentucky tobacco. Each area is divided into zones. in tne area around Likasi, one zone may involve villages scattered along a 250 km cir- cuit. Collection costs alone amount on average to 10 makuta per kg, compared to a tobacco world market price of roughly 40 makuta per kg. Super- vision for each zone requires an expatriate assisted by two agronomes and 10 or 12 moniteurs.

20. The CAK management is aware that greater concentration of production is required if the scheme is to be successful. One way to improve the situation would be to select zones where the response has been relatively favorable, and to concentrate efforts in these areas. Producers in other zones would have the option of moving to the selected zones or remaining in production without assistance. This approach would not be popular, but, if the alternative is the eventual collapse of the scheme, it could be the lesser of two evils. Moreover, amenities such as schools and medical dispensaries, provided with Government assistance, could enhance the attractiveness of the selected zones. The willingness of farmers to move to new areas may be constrained by social factors, but at the same time it should not be forgotten that tobacco, properly grown, is many times more profitable than any other crop now available in rural areas of Katanga. With a burley yield of 1 t/ha, a farmer on half a hectare could earn Z 100 (US$200) net at current prices. Success for maize and groundnuts would follow in train.

1/ in the MKushi area of Zambia, a tobacco/maize area is roughly the same latitude, the average yield of commercial farms is around 4-5 t/ha. ANNEX 4 Page 7

21. Other possibilities for oroducing additional maize in Katanga relate to modest improvements in subsistence cultivation, and perhaps through snecific maize nroduction schemes. Improvements in subsistence cultivatic,n are being sought in the conventional manner through use of the Ministry of Agcricuiiltuire's xtPnio-n st-aff. As with the maize-tobacco scheme, this effort is handicapped by the dispersion of producers. The limited activity of the Ministry is complemented by the work of CEPSI (Centre 'Etrude des Problemes Sociaux Indigenes), a nonprofit organization financed by an ar.nual grant 'f7 Q1 rfl -Fro.m. G-ECOMINES, the Go-ernment-w-ned ai.ning company. To implement its program of "rural promotion", CEPSI maintains 10 agronomes and about 100 .moniteursin the f4eld; some 0f tefo: 4 c cerned with social and domestic matters (e.g. problems of diet), but the program is essentially a agricultural exCen-Uion campaig.. 22. CEPSI a'so operate t,wo trair,irg schemes cor.cerr.ied w-ih agricul==- LL. CEPI~rr,±uLUL~.LLl ML lLULI LAu J. LAI ture: one is directed toward children of mineworkers and the other towarcl young people from rural villages. From the po'ut of view of maize production, the latter scheme is more interesting. It is based at Magombo, about half-way between Lubumbashi and Likasi. ADout 8o young men, nominated by their local chiefs, are taught improved methods of cultivation. Proceeds from sales of farm produce are credited to them individually; these earnings, of Z 120-150, are to be used for establishing farms of their own. wnen the trainees leave this school, they are often settled in groups of ilO, so that they can better defend their use of improved techniques in a traditional environment. At best, however, since each family can hardly plant and care for more than 1-2 ha of maize this program will have a limited irn- pact on maize production.

23. The other CEPSI training program is aimed at the increasing num-- bers of mineworkers' children who will not be able to obtain work in the mines. The objective is to foster transitions to rural life. The initial training phase is on a vegetable farm on the outskirts of Lubumbashi, a location that allows youth to learn about agriculture without leaving the city. In a second phase, the ones who have shown dedication to farming are moved to a training center at the Keyberg research station, a few kilometers north of Lubumbashi. The enrollment is at present quite small: only 40 trainees in phase one and 50 in phase two. Training is expensive on such a small scale, but it is a valuable pilot program and a release valve for unemployed youth. The training is also creating a manpower basis for the formulation of production schemes in the area immediately around Lubumbashi. CEPSI is completing a market study for vegetables in Lubumbashi, and poultry production is another possibility.

24. Specific maize production schemes in Katanga are closely geared to mechanization which, however, is likely to be economic only under special circumstances. Considering that current yields under field conditions are low, rarely exceeding 800 kg/ha, relatively large increases of yield would be necessary. This suggests that fertilizer input would be needed along with mechanization. An immediate drawback is the relatively high cost of ANNEX 4 Page 8

fertilizer in relation to the current price of maize 1/. The maize price is not the cause, however -- maize prices are lower in Tanzania, Uganda and Malawi. Rather, fertilizer prices are exceptionally high in Zaire because of duties and taxes and high transport costs.

25. Mechanization may be advantageous in two particular situations in -'atanza. The '4rst 4S Tere t"e co!its f, 'nlr c''4r- -r -reparation may be low for special reasons -- for example at Lukuni, a former mining site south of Lubumbashi, where CEPSI believes mechanized maize production may be economic because a 1,000 ha block of cleared land is available. This land was cleared about 10 years ago in anticipation of a forestry project. which was not completed, and the new growth on the land is still quite moderate. Consequently, the land can be prepared for cultivation at relatively low cost. Also, the dwellings connected with the mining operation could be renovated at low cost. CEPSI intends to make available 20 ha lots to Zairan farmers interested in mechanical cultivation.

26. Mechanized cultivation in association with fertile soils is a second possibilty. Several schemes have 1eer. Aisa,v.sed for southern Katanga, usually located in river valleys and based on available soil surveys 2/. The sitet of one pontentlanl1, 4mnnrtant a hame is in theaMera valley only a few km from Magombo. The area suitable for cultivation is about 11,000 ha. The black soil are rich in. humus, - a fi t u ,Al though a definite rotation has yet to be established, it is probable that

u1uuL.o t jfo 0uE LEEC ova. 1"Ieaa-c -a W,UA. I-; -I.-+s,-_A ..-J UOA.t- 41. .;A ,,Ad CWV >A vR VJ.Wft v 6J -_ -sZ_VM - uVy^- S^bMS^v. _. Land preparation would be done mechanically, with weeding and harvesting carried. out bUy indLV.Luual t1Iern.nts theirLt. cJr.WWL& dE.e _u F. o an assumed yield of 2,500 kg/ha, the scheme would be able to produce roughly at full udevelopment. Sin.ce t'ransport cost's to -.*,JVU...0 t LU.of maize~ L& annuallydL UUL.L)'~.A.J UVJJjLIIIL JJIL LLLOJLL LIO market would be relatively low, the standard mill price, 3.4 makuta/kg, would be equivalent to a farm-gate net somlewhat asbove the norral 2 .a,uta/kg.

2i. Anoener proposa; for establi±sh7ing mechanizeu m-ize produuct'Lon ,Ln-1 northern Katanga is at Kasese, in Kaniama territory, where soils are good and population sparse. As a Special factor, an area of nearly 60,000 ha is owned directly by Government, and so is not subject to the uncertainties of customary (or tribal) land tenure. A proposed development scneme, toward which preliminary work was started by a Belgian aid team in 1971, calls for fully mechanized production of hybrid maize on 10,000-13,000 ha pius tne support of 15,000 head of cattle. More or less continuous cultivation of

- nrice ner ka of nutrient 1/ In other words, the ratio: price per kg of maize. This ratio is about 2.5 in the most favored coulntries (Ge-rmany; UIS.qA=) Fert4.14zer use annually remains attractive up to a ratio of 5 (Kenya, Ethiopia).

Tn Ktanga, thle ratio a4 4-i, 0 ._ 1 r. 7

'1 a.1... ..4~A ,...... - A ---- A---- 1.'. VTTTOVAt' a ,a a,h ,ra 2/ MostL.Ly carried out4 p.ri&o to lr.dpnec by * a research organization formed by a group of Belgian university professors. Page 9

thI,e A.lanaLu .LAs ~JCplannedL~ LLU '..TfIfI . A.4. L~LLMthe- 1VJjJt:U-LVLhoped-fo__ A-Z--- yildYi.LCJU. U.Lof 4- t/haL/ LLa dILare UU-btained, Lcd.LLLtL1U this scheme alone would replace virtually the whole of Katanga's current mfaize iIpUILL.' lUW VhevLe,Lite LteCCL.LCaL ana organizaiional dirr1iculties likely to be encountered in a scheme of this type and scale should not be underestimated. Perhaps the most serious technical risk is that, under continuous cultivation, the organic matter in the soil will be depleted, the soil will become mineralized, and its tiexibility will be permanently damaged. The project planners believe that the leguminous crop (probably stylosantes) will maintain soil fertility; it is, hviwever, difficult to be sure on this score without actual field experience on the spot. Risks related to diseases also would be great for such a large scheme. Production of double hybrid seed ('about 500 t will be required at full development) may prove difficult in view of the high temporary labor input needed to perform the castration at the correct time. And on the organizational side, recruit- ing, training, and maintaining the labor force required, estimated at 700-1,000, will not be an easy task. On the basis of available information, it seems clear that serious consideration has not yet been given to possible alternative organizations for the scheme. For example, there appears to be no technical reason why the Kasese project could not be implemented with only partial mechanization, i.e., mechanical land preparation with the weeding and harvesting done by individual tenants. Such an approach would give greater employment but would encounter the social and organizational problems inherent in large-scale resettlement. It could well be the case that social or tribal difficulties would rule out resettlement on the scale required. But, if so, this should be demonstrated. The role of the Kasese proiect in the Government's overall strategy for maize production will be taken up in the concluding section of this annex. Here it is sufficient to note that a rnutious annroach is stronglv rerommended.

28. This list of nrodlition opnortunitiesQ 1 n Katanga is not exhaust:ive. Two other possibilities can be suggested, and there may well be others. Ti rp man7 hp ares in the western nprt nf the proivince, near Dlo1lon or Sandoa, where maize production could be intensified and perhaps also ex- tendeni tlhrough the use of ox riltivation; this 4S one of the very few narts of the country where ox cultivation is not entirely strange to the inhabitants; and it is also an area with a 1siiht-nt--Ial r.n nontratinn of crttle owned by Africans,, so that there may be opportunities for the development: of mixed farmin- Anothe e of interest is i. northern Katanga arounc Kongolo and Kabalo, where it is reported excellent soils exist, especially for cotton; lack of populatio.. is thie tr m here,li ait i.S4nKaniama and Haut Katanga; and since the region is less well situated than Kasese for supplying, t he copperbelt. - #-I -4 - - 4 s .4 IA A_- -4- 9--^4-_ 1 h^-- 1-p:Q ~ WUII ILLa.~~~ SI.WU~AS QCCCUL jj&UUIIIO ,a., -. *..- a--Lfl priority for development from the point of view of maize.

1/ The tentative rotation is: Year I -- maize, stylosantes; Year 2 -- maize, stylosantes; Year 3 -- stylosantes only; Year 4 -- cycle recom- mences. ANNEX 4 Page 10

Development Potential: Kwilu (Bandundu Province)

29. Ilaize production in Bandundu centers mainly along the Kwilu river and its tributaries in the central part of the province; there is also some surplus production in the area near Idiofa on the eastern side. Production takes place in areas cleared from the forest, which can be quite tniick in the river valleys. The savannah areas around these forest galleries have very poor (Kalahari-type) soils, so that, apart from some groundnut production, tiheir main potential is extensive livestock raising. Even in the cleared forest areas, only one maize crop, interplanted with cassava, is normally grown before the land is returned to fallow for four years or more.

30. Total production in Bandundu is probably of the same order of magnitude as in Katanga, roughly 50,000 t. However, a much higher proportion of the maize production, perhaps as much as 50%, enters the market. In recent years, the Kwilu area has been the major supplier for the Kinshasa market, thoughi tonnages shipped have shown a declining trend, from 10,000 t in 1968 to 5,800 t in 1970. Smaller amounts are also shipped from the eastern part of the province (around Idiofa) to Kasai Occidental and Katanga. It is highly probable that Kikwit, the district capital, has absorbed an increasing proportion of the marketed maize, considering the town's eight- fold growth of population since 1956.

31. Because of the hard work involved in clearing land, and the meagre return, there does not appear to be much scope for increasing the area planted to maize in the Kwilu region. Some ox cultivation is being introduced around Idiofa with the help of a Catholic mission. Othier missions elsewhere in the province also have agricultural objectives, much of the activity being concerned with improving the diet (Annex 10). The Chinese mission also started work in Kikwit in 1971: there appears to be some scope for irrigated rice production in the river valleys, and the Clinese are also experimenting with the introduction of soya cultivation, mainly for its protein value.

32. Within the next few years, after the road from Kinshasa to Kikwit is greatlv iinnroved- road transport will become a feasible alternative to river transport in reaching Kinshasa. The implication for agricultural product-ion in the Zwi lii region il di fficilt- to nredi ctr- Tn cgeneral, it ean be expected that a larger share of marketed production will be channelled toward Kinhasa, cislhonling off patrt of t-l- flowr that cuirrently cgoep to Kasai and Katanga (Annex 2). A limited amount of new production may be encouraged wh.ere t1,he i4.proved road crosses river valleys; xvecry little new nrnductonn should be expected in the savannah regions traversed by the road.

Production Potential: Kasai Oriental and Occidental

33. The bulk of maize production in Kasai Oriental is in the southern part of the province (Kabinda district), particularly in Gandajka andu Tshilenge territories (Table 3). The northern part of the province (Sankuru district) is forelted and is quite thinly popuiated, witn average popuiation densities of 5/km or less in all territories except one; rice is normally a more important food crop than maize in this district, and totai maize A!NIEX 4 Page 11 production does not exceed 5,000 t. In Kasai Occidental, maize cultivation is spread more widely throughout the province, output per capita is about the same in the two districts, but cultivation is spread over a wider area in the north, reflecting the lower density of population.

Table 3: DISTRIBUTION OF MAIZE PRODUCTION, KASAI PROV:INCES (1968-69)

Province Maize Population Output/ and District Output Area 1970 head ('000 t) ('000 ha) ('000) (kg/head) Kasai Oriental

Sankuru District 3.5 104 497 7

Kabinda District 53 64 1,119 47 Gandajika ii 5.7 148 75 Tshilenge 26 7.4 533 50 Sentery 8 22.5 82 98

iKasai Occidental

Lulua District 44 61 1,171 38 Demba 13 9.0 195 66 Luiza 7 14.7 233 30

Kasai District 32 9.6 834 38 Mweka 8 20.2 193 41

Source:. 1ize produuct'Ln estLmatesLrorl a special study carriLedU out by IBRD/UNDP highway study team operating in the Kasai provinces. The estimates should be taken only as rough guesses.

34. The provinces on the whole are not heavily endowed Witll hLigh quality agricultural land. In Kasai Oriental, for example, soil surveys carried I - I - -- ~~~ - _ _~-- ~~~-_ _1- -t- a- flEC~y out over large areas in- tle south of the province shaw- LLaL only aboutL 2JI of the soils can be classified as "better than average" or "good" in terms of productive potential. Tnere are vast areas of very poor soils. A Belgian consulting firm (Bureau d'Etude d'Industrie, Agriculture et Commerce) has been trying to promote agricultural improvements in the area northwest of Mbuji-Mayi, but soil conditions have thus far limited the results obtained. While there is sonme scope for groundnuts and perhaps soya, the environment seems basically better suited for extensive livestock raising than for crop production. the area around Laluabourg is also quite poor. In fact, of the areas visited by the mission, only Gandajika territory and some parts in the south of Mwene Ditu territory were favorably endowed for maize production. Reportedly there are good soils as well in Sentery territory on the eastern side of Kasai Oriental. As for the maize-growing potential of Kasai Occidental, a recent Belgian reconnaissance mission found sandy soils in all territories, exccpt in Luiza and Kazumba in the soutlh where some clay soils exist. The nearest equivalent to a "maize center" in Kasai Occi- ANNEX 4 Page 12 dental is probably tile northiwestern part of Demba territory and thilt southi- eastern part of Mweka; as yet neither of these territories is as productive as the maize centers in Kasai Oriental.

35. Gandajika territory is the scene of a successful multicrop production project, directed by the FED and begun in 1968, wihicli was designed to reactivate the paysannats of Gandajika and Kalenda-Kashile. Tihe principal cashi crop was to be cotton, in rotation with maize, groundnuts, and manioc. The project has been based on a specific, well-staffed production campaign which, during the 1970/71 season, reached some 18,000 planters -- 90% of the active cultivators in the target region. In contrast to thie CAK project in Katanga, the cultivators are fairly well concentrated. Six expatriates, each assisted by two agronomes, supervise about 150 moniteurs -- about one moniteur per 120 farmers. The project management believes this to be a satisfactory extension coverage, considering that the crops grown are famil- iar to the farmers. There is, of course, much room for improvement in current practices, such as planting densities, spraying, etc.

36. In general, one of the constraints on improving practices is the traditional resistance to change among the farmers. There are othiers as well. There is farmer dissatisfaction with current cotton prices, for instance, a phenomenono of wider incidence which is discussed in Annex 6. Here it is important to note that, partly as a compensatory measure to provide incentives for the producers, the project management is undercharging for its services. Fbr mechanical land preparation, the farmer pays only Z 8/ha, whereas it costs an estimated Z 11.7/ha to 'provide this service; for cotton spraying, he pays nothing at all. Credit for seasonal inputs (seed, fertilizer) is given free of interest. It is important that a definite arrangement be made for funding these services after the FED project ends.

37 From the standpoint of further develoDment, two asDects of the FED project are of particular interest. As a result of the currently favor- nhl prices, nrioiet- management is olanning to introduce an additional maize crop at the head of 'the rotation. If universally adopted, this pattern of production couildA nrodu,e nperhapsnq milrl, S an Pxtrn 57000 t of matizp or 11 r------n~_ _ - an increase of about 30% over, the expected 1970/71 output (16,200 t). Since the territory is already a net exporter of maize -- in 1970/71 arouind 200 t were sold outside the territory, mainly in Mbuji-Mayi -- the bulk of addi- tiLonaL L production may be expected tot -- 41va la for sh4--.et- to othez areas.

38. The second aspect of interest is the scope for expanding the FED project into contiguous areas in IKabinda and '--rene Ditu districts. The general prospects do not indicate high priority for this expansion. Soil conditions are less favorable and population densities thInner (Gandajika: 26/1km2 ; Mwene Ditu: 15/km2 ; Kabinda: 111km2 ). Good soils are available in Sentery territory, but there are very rew cultivators. in other.parts or the province, such as Tshilenge territory surrounding Mbuji-Mayi, there is dense population (72/km2 ) subsisting on poor soils. Tne obvious question is wheth1er it would be possible to move people from Tshilenge (or other poor ANNEX 4 P2aop 13

areas) to Sentery. Resettlenient might be easier in thits cnu-e thani it8 chi boundaries. One scheme along these lines apparently was undert.aken a 1'ewq years ago anu 'Ls reported to hLave succeeded in r,oUv±ingo people iILo Senltery territory and to have achieved satisfactory production levels; after two or three years, Lhowever, thLe mligrants deciUedu to return to tiieir orig-inal homes, and it is not known. whether this was due to complicated social fact:ors or to specific considerations such as a lack of amenities. Careful socio-- logical study is required to determine whether there is significant potential for resettlement as a means of alleviating production and peasant income problems.

39. To date, no large-scale production effort has been mounted in Kasai Occidental. Eff'orts to introduce soya cultivation are very important fron a nutritional standpoint (Annex 10), but we are here focussing on maize within the context of the broad agricultural potential. Possibilities for mechanized maize production in Kasai Occidental were examined by the recent Belgian reconnaissance mission, and the conclusion was negative. The pro- notnced undulations in the terrain, the sandy nature of the soil, and the rather dense forest cover (particularly in the north) all argue against mechaniization. In more general terms, the problems of Kasai Occidental would appear to be quite similar to those in Kasai Oriental, except that the ecological problem is more pronounced. Since several territories produce substantial tonnages, and these production centers are more distant from the rmain consuming centers, it is possible that transport problems play a relatively greater role in Kasai Occidental. Another difference may relate tco tribal characteristics, though social factors are probably most relevant when related to particular objectives. In both provinces, a good deal of energy has been diverted into illegal diamond prospecting and smuggling; the importance of these activities probably is on the decline, due to stringent Government controls, but they are virtually impossible to eliminate alto- gether.

40. The provincial authorities in Kasai Occidental have given a clear indication wlhere they plan to concentrate their development efforts. First priority is accorded to Mweka/Demba, an area which formerly was a major surplus producer of maize. The physical potential of the area is indicated by the relatively higlh average yields, estimated at 1,200 kg/ha, currently being obtained in many areas. Maior road communications are to be considerably improved (projects are being prepared for Bank consideration). The people of the region are believed to be relatively responsive to opportunities to increase production. Finally, the seed multiplicatLon service at Bena-Longo, whichi is to be reactivated with Belgian aid, is well located to serve this region. In viexw of these advantages, the priority accorded to Mweka/Denihn annpars well founded.

41. Second prinrity is giuvn to Luiza tprritnrvy The main cron in the territory is cassava, though natural palm oil, groundnuts, maize, and (to a dprreansing extent-) eottron also nlay a rnole Mqi7e is ron-sumpei dire-rt- ly off the cob in this region, rather than as flour. Also, maize is inter- plante uns~ys tema~tlcay1v in the bai r' ptt,n-or,ninint-nnanioc rotation; no ANNEX 4 Page 14 estimates of yield are available, but they are likely to be low. As compared with Mw-eka/Demba area, any project in Luiza territory would probably ihave a larger transport content, though improvement of the major penetration road Tshimbulu-Tumba is under consideration. Also, considering the secondary importance of maize in the Luiza economy, both in production and consumption, and the difficulty of organizing effective extension efforts under the production system, Luiza should indeed have a lower priority than Itweka/Demba.

Elements of a Maize Strategy

42. The stated objective of Government is self-sufficiency in maize. However, because of the amounts involved as well as supply uncertainties, the present dependence on imports is of primary concern in regard to the southern provinces. Maize is a staple food in this part of Zaire, and at present there is heavy dependence on supplies from southern Africa; there is real risk of supply interruptions (as in 1971) at critical times; and the impact of shortages, even if temporary, can create serious social and political tensions. It should be noted that "self-sufficiency", while a legitimate objective, represents an oversimplified statement of maize policy. The immediate concern is to reduce the seriousness of the maize problem by increasing domestic produLction via soundly conceived production programs. In the southern provinces, as reviewed in the previous sections, there are a numb,er of ongoing programs, project proposals, and other ideas for increasing maize production. Government now has the task of comparing these schemes. relating them to economic obiectives, and to decide on the key issues related to a maize strategy.

43; The key issue in choosing a strategy for increasing maize output is the rnle nf tlhe V-seseP scheme AsSUming full merhnnizntinn at full development -- after ei,g,ht years or so -- this scheme could come close to 1- 4 -4 - 4r al~ clf(~,r,$ 1 fA ff-f ) (0 t A overcorninthe defict in m.aize by it-self (output o-f AL0,000 - 50,000 t ). A cautious approach was recommended in paragraph 27. The entire scheme would cost an estimated Z 1. ,m--; .on(n T 2 A .mllli)-41 4 f.f t-he filct- fivr yiarc over and above the comamitments already made. In view of the considerable 1 --> __ .- _11 S-41 1 1-A IA--- 4oA.1oF. .A*1o nDn

Finally, the expected rapid impact of the Kasese project, which is perhals its most attractive asnect; is not an uinmixed blessing. Since the potenti-Al for increasing maize output througlh other methods may not be known with any precrison for a few years to come, the Kasese pro4ect, if implemented in full, might preempt a larger part of the total production requirements than w.7-ould appear. desirable once all the facts are ian. Maize 4;, only part of a rotation, and cultivation of other crops could be inhibited as well. A pilot phase for th,e Kasese project would perr.it a r, re rational evaluation of the issues before Zaire commits itself to a capital-intensive stra- t-egy.

44. If Government adopts a cautious approach to Kases-e, it will then have to review other production possibilities. A useful approach would be to try and settle on definite schemes to include in an interim or "nuclear program" for maize. The first advantage would be to provide perspective on the prospects ior al'eviating the maize problem. To begin with, a pilot scheme at Kasese could be expected to produce maize of about 4,000 t at Year 2. This could be considered a reasonably firm source of additional maize.

45. What assumptions should be adopted as to the contribution of resettlement scihemes? The effects on maize supply would obviously depend on the scale and scope of the resettlement schemes. If no special production efforts accompany the resettlement one might expect to see maize yields increase by 300-400 kg/ha just from a change in location. If 10,000 families were involved, each cultivating 1 ha of maize in two crops per year, the extra production would be 4,000 t. However, it would probably not be wise to count on resettlement as part of a nuclear program. Too little is now known about the social barriers and the effectiveness of incentives (such as provision of schools and dispensaries). A preinvestmenl: study to explore the questions in detail should prove extremely useful. In the meantime, the role of resettlement in any future agricultural strategy must remain vague. For similar reasons, the nuclear program should exclude possible increases of maize from a joint tobacco/maize scheme in Katanga, or for an integrated effort in the Dilolo/Sandoa area. Too little is known about these possibilities at thiis stage for estimates to be meaningful. However, neither of these two possibilities would be likely to yield more than several hundred tons.

46. A main component of the nuclear program could be provided by semi- mechanized scheines: the Mwera valley scheme and an expansion of Gandajika. Semi-mechanized maize production will have to be very carefully designed if it is to be an economic proposition. The experience in Gandajika, where otner conditions3 are relatively favorable, shows tnat mechalnized land preparation does not necessarily lead to greater cultivation efforts by the farmer. In fact, tractor services may mostly be a substitute for farnier labor -- rati-mer than increasing production, the principal effect may be to increase leisurc. Since the twera Valley scheme would opeii up an entirely new and quite fertile area, and since participants in the scheme would pre- sumably be especially selected and moved into the area, prospects for a substantial increase in farmer efforts are relatively favorable. The Mwera A^M?C!VA?,NT'JLI '4r4 Page 16 sCelLme also h1as an apparent transport advantage, being located not more than 50 kr,,from Lubumbashi. This locational advantage is not as substantial as it might appear at first sight, at least if competition with Kasai is the issue, because the real costs of bulk transport of maize from northern Katanga or iKasai to the copperbelt are low 1/. For purposes ot planning, it is assumed that development of the Mwera Valley would take 10 years, after whicIi an additional 5,500 t of maize per year could be produced. This rate of development could be accelerated if extra funds were available.

47. Extra output from1 Gandajika could come from two sources: adding a maize crop to the rotation, and by development of a new area adjacent to tile present scheme. For a new crop, an addition to the maize surplus of about 5,000 t per year could be brought about quickly from Year 1, and this opportunity should not be missed. An extension might take three years to develop, withI additional output of 3,000 t per year, but this possibility does not seem as promising as the new crop.

48. There remains the possibility of expanding surplus maize production by intensification efforts within selected areas. The employment and income distribution effects of this approach are certainly the most favorable of any option available to Government. The main doubt concerns the economics of this approacth -- specifically whether costs of extension services and simple road and marketing improvements can be kept at reasonable levels in relation to the increases in output. On the basis of the discussion of these general aspects below (para 50-52) the prospects for this approach appear favorable enough to warrant a specific effort at project preparation in the Weka/Demba area. Very tentatively, it is estimated that added output of 12,500 t per year mighit be produced after Year 5.

49. TIhese candidates for a nuclear maize program are summarized in Table 4. Further study will be required, of course. But at a minimum, the cumulative effect of a successful sclieme in the Mweka/Demba area (12,500 t), a pilot operation at Kasese (4,000 t), an extra crop a year in the Gandajika scheme (5,000 t), and possibly an accelerated project in the tiwera Valley (5,500 t), would be an extra 27,500 tons of maize. This has to be set a,a-inst the current deficit of more than 50;000 tons. No account has been taken of spontaneous increase in surplus production associated with planned major road imnrovement. or of surh nossbih1ities as maize/tobacco dpulopn- ment or resettlement. Nor, on the other side, has account been taken of furthler urhbn rowtrth thonuh this is enpcrteprd to hp very modrpretp n Kitnnga and far less inmportant in tihe two Kasai than it has been in the last several Jyears.

1/ Sinc thc major conmmodiLty flow on tt:e lubu.mbashi-Port Francqui. rail line is in tine dIirection of Kinshiasa, there is spare capacity on the return haul whLicI would not ble used except for mIa.ze. Thls .mIeans that costs of transport would be only perhaps 10% of the cost of production. IIence a sm,all1 percentage -I-(ereII c n rdcto cs ancmpnae o lrci~IIdu1 Ci Lt.Li_, ULkLLL advtLULLI PiUULL.LJLL cos'L Cparn COmansportate a large apparent transport advantage. ANNEX 4 Page 17

Table 4: IMPACT OF PROPOSED NUCLEAR MAIZE PROGRJAI

Extra Output at Development Scheme Full Development Period Comments (t) (years)

Mwera Valley 5,500 10 Could be accelerated if extra funds were available. Xasese (pilot) 4,500 2 Taking interniediate yield. Gandajika (new crop) 5,000 1 Adding maize crop to rotation. !iweka/Demba 12,500 5(?) Very tentative estimate.

Total 27,500

5'J. There are a number of basic ingredients that apply to almost any effort to increase output through production campaigns. These remarks apply particularly to thie PKasai. High priority attaches to replacing the degen- erated seed now in use. The Belgian aid program currently has one person in Kasai Occidental attempting to reactivate two seed multiplication stations, one at Bena-Longo (a few km east of Mweka), and another at Pania (south of Luluabourg). In the initial phase, emphasis will be entirely oni raaize, using a seed stock supplied by the Gandajika research station. Pro- duction of improved seed is likely to be relatively easy compared to the problenm of distributing the seed once it is available. The most obvious channel for seed distribution is the extension service. At present, the extension service is ineffective due at least in part to lack of adequate transport. If the extension service is to be reactivated, transport is a key requirement, including maintenance and repair facilities. The most effective policy would be to redeploy the available extension staff to high priority areas, such as the 1weka/Demba area.

51. A proposal for a production-oriented research project into improved maize varieties has been presented to the Government by USAID. Assistance in the execution of this project, which appears to fit in well with the more diversified strategy to increasing maize production suggested here, wouldl be provided by CINMfT. The project would be located in the Luhunbashi area and, in addit-on to research, it rontemplates training and extension activities.

52. Improvement of the transport network is another necessary ingredi- Pnt of nroduction campaigns. This annii espnecially to secondarv routes; and particularly to the provision of barges and regular road maintenance.. Plann are alrcadu in handI for the imnrovemnt of several imnortant main roads in th-e two Kasal provinces. This will doubtless lower transport costs and providle some encouragement for production. But in view of the deter:Lor- atinIg soil conditions along the main axes, where producers now tend to con- ,gre,ate, it 4s very important that these .major roads be comnpleamented by improved access routes. The main difficulty will be to provide for the necessary M,.a4ntenance of secondary road.s once thLey hLave buee. imiprovd. n these provinces there exists a considerable male labor pool which is unemployed for all or part of tlle year; it.. wouIdU malldte obvious econo4LCLI. sense to utilize ANNEX 4 Page 18 this labor for the required maintenance work. Such work was imposed by the Belgians prior to independence, and it is reputed to be unpopular still. The establishment of a work force will likely require strong political support. The political authorities in Kasai Occidental are aware of the need for a road improvement scheme, but there is a need to relate improvements to specific agricultural production efforts.

53. Improvement in primary storage at key points may well be justified, if loss rates are actually as high as reported (a minimum of 10-15%, but running up to 40%). This would have to be investigated in detail in the areas chosen for intensive development.

54. The main concern of this Annex has been to identify the priority issues concerning maize, and to set forth the elements of a maize strategy. The conclusion is that more could be lost than gained by rushing ahead toward self-sufficiency. The overriding issue at the moment is for the Government to decide on the merits of a pilot phase for the Kasese project. This de- e--ison wouiild imnlv the undertakinc of a broad-ranging study of the maize production issues, including the resettlement question. ANNEYX 5 Page 1

RPURBLIC OF ZAIREP

AGRICULTURAL SECTOR SURVEY

DE'v'LOP.r-WINT PROSPECTS IN T±iE NORU1H

Introduction

1. This annex deals with major policy lines that could contribute to the economic development of the northern section of Zaire. A main objective would be to provide greater cash income and employment for the inhabitants. 1/

2. rhe north of Zaire comprises Equateur and Haut Zaire provinces and the district of North Kivu in Kivu province. Ecologically, the region is very diversified. But broadly speaking, from the standpoint of economic potential, there are two major economic zones: (a) the forest and savannah regions, and (b) part of the eastern highlands. Equateur and Haut Zaire provinces include the humid tropical forest of the Cuvette Centrale, and the lighter forest of Ubangui and the Ueles which gradually merges into savannah. The eastern highlands, which run from the Sudanese border in the north down to Lake Tanganyika in the south, comprise the district of Ituri in Haut Zaire province and the district of North Kivu.

3. In an economic sense, the two zones are distinguished by their differing output mix, and by the fact that the forest and savannah regions are almost entirely dependent on links with Kinshasa for all supplies and for marketing, whereas the eastern highlands are not. However, the Cuvette- Ubangui-Ueles regions have only weak economic linkages: a large proportion of the plantation labor force in the Cuvette is recruited in the Ubangui and Ueles and this is their only real economic connection. Also, the climate and crops are very similar in Ubangui and the Ueles, leading to limited commerce except for some north-south trade in foodstuffs within both regions due to complementarity of the forest and savannah. There is, however, some significant if small scale trade between the eastern highlands and the Ueles, with some of the vegetables from the east being solcl all along the Zaire River.

4. The malor city in the north is Kisangani. an administrative. educational, and entrepot city with a population of 229,000 (more than twice as much as in 1958). Its importance as an economic hub has declined sinne

1/ Export products constitute a major component of agricultural output in the North of Zaire. Concise coimments on the nrinr1pal ones are included here; for a more detailed analysis, see Annexes 6 (cotton), 7 (forest products); and R (remnan1ng pnrnodurct-). ANNEX 5 Page 2

indenendenee -- many nearby plantations have been abandoned- trade with Kivu has declined, and transport links with the depressed Maniema area have weakened= But the Hi-v is sti1l a Rlanifirant rash market for traditional farmers. Kisangani imports food from the Ueles, from Ituri, and from Kivu, s well as buyhing fnnd in thp nearby agrirultuural supply areas.

The riuve-tto

5. ThD rtprcte-t- ls the er.itemr of tho humdl trirnrvft'al fnraet. It offerc especially favorable natural conditions for forestry, rubber and oil palm. Production of these ^ommZodities for the export market is characterized by industrial scale plantations. Smallholder farming is limited to rice, which its theC only coIUUercial foodd crop exported from thble Cuvette, anA t.o subsistence crops and fish, of which small amounts are sold in Kisangani, in i ALwUan4uadN-a I andUJ Lo LL'.Le LaUorL ¢1 Lorce on plantat.ons.

6. Rlce6 gruws on ther.orthe nbk of the Zaire River 'et-ween o * ItLce is growl! oni tul LiULlrI LdL I IL L. L~ rI.~L u~ Lisala and Kisangani, with the bulk of production coming from the Bumba area. The rice produced is upland rLce, generally of pour quality as a result of serious degeneration of the seeds, and is marketed in Kinshasa and

_n 'Das t'a're.

7. Rice is grown by approximat2ey 15,000 to 20,UUU peasant faudilies, each cultivating about 1 ha on the average. Paddy yields are about 1 t/ha. Tne variety originally used was R 66, developed and introuuced by INERA before 1959. Seeds have not been renovated during the past 12 years, and the ensuing degeneration has resulted in relatively low yields, low DullLing percentages (less than 50%), and poor quality.

8. Milling facilities in Bumba are adequate. With the imminent completion of a tourth tactory, milling capacity will exceed 30 t/day, more than ample to accomodate present output levels and any short-term increases. In recent years, less than 15,000 t of paddy have been available annually for processing by the mills.

9. Under present price and quality conditions, Bumba rice competes at a disadvantage with imported rice. In fact, a steady drift of consumer preferences toward imported rice has been observed in the past few years. A project to expand output would be economically justifiable only if significant yield and quality increases can be achieved under traditional cultivation methods (see Annex 2).

10. The key to improving Bumba rice is restoration of seed quality. Currently, the Republic of China mission operating in Bumba obtains yields of over 2 t/ha with R 66. Under traditional growing conditions, pure R 66 seed should increase yields by at least 30% over current levels. In addition, concomitant improvements in quality and uniformity should result in a much better milling Dercentage as well.

11. Mutlttnlication of R 66 variety was started in a very limited way by the Chinese mission in 1969; in 1970, approximately 10 ha were destined ANNEX 5 Page 3

for seed multiplication. Distribution was undertaken by the millers who, in nrdor tn corg ts adoptlor., sodA ipoe seed ton "Onco at the same price at which they bought their paddy (2 k/kg), well below the 6 k/k, t i for it. Given te ready availal f a- a- tribution system, a much expanded seed multiplication project appears to be economicallyOfaln 4nl1 in war.antd..y,.-.,*AA

12. Forest Products, Rubber ar-d- Pa' Oil. -h -croi-the fuu. of Cuvette will largely depend upon the market prospects for wood and wood products andi fcor ruuUber aLu o.Ll. palu proucs. Several large scale foresry firms -- previously established in the Mayumbe -- are now opening up acti-- vities in the C-vette. The Lorestry potentia'l 's enormous T LU ully realize it will require a carefully planned approach to the allocation of concessions and forest management, as well as very large investments for lumbering and transport infrastructure. Output, now about 50,000 m3, probably could be increased to about 725,000 m3 during tne next five years. Tnis expansion of output would raise employment by 6,000-7,000 men and would require investments in logging equipment and in river and rail transport equipment of approximately Z 7 million (US$14 million). Any expansion of output beyond this level would be dependent upon substantiali investments in port facilities at Kinshasa and at Banana and a development of railroad capacity (see Annex 7).

13. For plantation agriculture, the situation is complex. The world market prospects for rubber and oil palm products are not promising; the outlook is for a strong downward drift in world rubber prices up to 1975, and perhaps beyond, and for price weakness in palm oil as well. The agricultural potential of the better parts of the Cuvette is such that, even at these lower prices, palm oil production for export would still be profitable. Rubber production, however, is not likely to be generally profitable and projected low prices would force low yielding plantations out of production.

14. There is therefore some scope for additional proi.itable investment in oil palm production. Plantations would have to be situated in the best part of the Cuvette, that is within the area north of a line drawn between Mbandaka and Kisangani and south of a line passing from Kisangani to Mbandaka slightly to the north of the Zaire River. The possibility exists that a rubber plantation project would be profitable, though a final decision on this should await a detailed study of the Goodyear proposal for a rubber plantation at Oshwe.

Ubangui and the Ueles

15. Although the administrative districts of Ubangui and Bas Uele include part of the Cuvette, this discussion is limited to the region of savannah and lighter forest to the north of the Cuvette. Both the savannah and the lighter forest are more densely populated than the Cuvette, largely because they are climatically more attractive and because the agricultural potential is greater; they are at a disadvantage for rubber and oil palm but ANNEX 5 Page 4

better suited for robusta coffee, cocoa, and food crops. Plantation agriculture is well renresentea in the light frerat area, both large scale multiunit operations for oil palm products and even for some rubber, and smaller scale opera ~f-Jncm.4Tnl, fovr robusta coffee Trhe r,ubber -Intatio.n are now being abandoned, and even the oil palm plantations are both outside their best production area and not well located for export. Mreover, oil palm plantations in the Ueles suffer from a scarcity of labor.

16. Robusta Coffee. The smaller individual robusta plantations are run meny-yca1a.X.. 1- -, O^ff .^ ... fe are *4 1 1 .,g_r._4 al owners or ...eir managers, but more and more frequently these plantations have been bought by Greek traders and a few have been taken over or started by Zairans. The balance of production of robusta coffee is swinging to the smallholders, -who ha-ve been planrting very rapi'dly inrrecent years. Further Increases in planting and output can be expected in the future. The market constraints imply substanltial marketing difficulties anu dOwnward pressures Onl prices in the future if output rises above quota levels. But Zairan farmers will go on planting as long as robusta appears to yield a greater or more easily obtained cash income than cotton or other annual crops. In any event, there is no need for a project to develop robusta production.

17. Palm Oil. Tne prospects for the production of palm oil are somewhat different in Ubangui and the Ueles. The local market in Ubangui is very limited and is met by local producers; further production therefore would have to be for export. But since Ubangui is less suitable for oil palm than is the Cuvette, both for climatic and transport reasons, export plantations should be established in the Cuvette in preference to Ubangui. In the Ueles, however, the outlook for oil palm is rendered relatively more favorable by the existence of a strong demand for medium or low quality table oil from the eastern highlands which are relatively close by. Export- oriented plantations do not find this market attractive because volume is relatively small and prices lower than for export; in fact, the quality of their oil is too high for this market. Consequently, palm oil can be produced reasonably successfully in the Ueles even though the cost of production and quality cannot compete with production from the Cuvette. Production could perhaps be based on smallholder development around nucleus plantations, to serve palm oil factories now working well under capacity or to supply new small scale factories.

18. The market for this production would be the Districts of Ituri and North Kivu; some might also be sold in the northern and eastern parts of the Haut Uele. The population of the first two districts is 2.4 million; and if sales were to be made in parts of the Haut Uele, the total market might exceed 2.6 million people. Average palm oil consumption is not known, but taking the estimated consumption in Kinshasa (6 kg/head annually) as an approximation, annual consumption in the potential market area might amount to 19-)fO-16OOO t of nalm oil.

19. e'rmarket is nnw supnlied by small truckers. many of whom buy palm oil in Isiro at Z 18 for a drum of 185 kg (a rate of Z 97/ton compared -ith the "official" domestic market price of 2 62.50/ton) for sale in the ANNEX 5 Pave 5 eastern highlands reportedly for Z 29 per drum (or a rate of Z 155/ton). 1! Given a total market of 15,000 t and some supplies fr^m 74Qsa n-n4 and pos sibly from Beni, one could envisage a market for oil from the Ueles that woulA be- maxi.mum. of 10,000 t per year, but surely or thz-n 5,00 t.

I0. T.his profitable market for palm I encourages manymal...ar.sr.allhol to make oil themselves for sale directly to traders instead of supplying pal.mL fruit for locaU l oi.L± M.LL.Ls WLhicL are in Lact suffLUering 'Lrom anll acute shortage of raw material. In a sense, this entrepreneurial reaction satisfies uhe eastern demand for palm oil as well as the smallholders' need for money, but it uses palm fruit very inefficiently since the yield of home-made oil is very low. In an attempt to elicit increased deliveries, oil mills recently raised by 50% the price paid for palm fruit.

21. An oil palm production scheme in this area could conceivably be based either on smailholder plantings to supply existing oil mills or on the establishment of much smaller mills, capable of being supplied by as little as 100 ha. The advantage of the smaller mills would be that the scale would be suitable for financing and management by local entrepreneurs (with some external participation). In this sense they would be better suited to local ownership than mills whose optimum size required plantations of at least 3,000 ha. A smallholder plantation project might be expected to yield about two t of oil per hectare: this would imply a total area of 2,500 to 5,000 ha in smallholder plantation. 2/

22. Cotton. The major cash crop for Zairan farmers in the Ueles and. Ubangui is cotton (in addition to rice in the forested area). Cotton is grown both in the savannah and in the forested area, generally in rotation with maize, groundnuts and cassava. Output in the Ubangui appears to have: reached a peak in 1951/52 with almost 20,000 t of seed cotton; it declined during the 1950's to 14,000 t by 1959/60, and then fell off sharply to 5,C'00 t in 1967/68. Production has now recovered to about 11,000 t. In the Ueles,

1/ These figures are consistent with observed retail prices of 17.5 k/kg in Ituri, but are higher than a reported retail price of 15 k/kg in the markets of Bunia. The lower price in Bunia may arise because there are some supplies now coming up the improved road from Kisangani to Bunia. (see also Annex 8, para 36-38).

2/ That a demand for this type of plantation exists was quite clear. Th,e mission visited one 15-ha plantation established by a smallholder near Isiro. This man and others in the area are working under the extreme disadvantage that they cannot obtain improved planting material from anyone, not even from the Ministry of Agriculture which should have this responsibility. They are obtaining their planting material from palmi nuts picked up in the forest. Since commercial plantings today should be made with tenera hybrids, and since only some of the nuts picked up in this forest will be hybrid and none will be high-yielding, these planters' ambitions will be ill-rewarded. AMNVN 5 Page 6

wh.ere ecologi calj coduitions are c.ore favoraul'Le folr CUot tUn, a bLIUidL bstLu.atLLUI is found. Comaco's output reached a peak in 1950 with 51,000 t of seed cotton, it fell off to 43,000 t in 1959 and then collapsed to just over 1,000 t in 1965. Production has now recovered to about 9,000 t of seed cotton.

23. The general explanation for the limited recovery of cotton in UDangui is that, at current prices, farmers find cultivation or groundnuts more profitable, and they find planting robusta more interesting as a medium term investment. This reasoning, however, does not seem entirely applicable to the Ueles where shortages of groundnuts, of palm fruit, of maize, and of rice exist as well. A general disaffection for agricultural activity seems to pervade the region, which may be partly a response to the particularly painful experience during the rebellions and an unsympathetic administration and may also reflect tribal characteristics. Certainly, the activity and attitude of local chiefs is important. Where they lmpose illegal levies or taxes, disincentives are created for producing crops for the market. In contrast to the general situation, there is at least one paysannat in the Ueles that withstood all the difficulties of the past decade, and here the general level of income and social welfare seemed quite high. That this paysannat still exists can be explained only by the personality and will of the chief. The cotton problem is analyzed in Annex 6.

4. Food Crops. The savannah area along the northern limit of the forest has favorable ecological conditions for annual crops due to fairly good soils and well-defined dry and rainy seasons. This belt has a good overall potential for food production. The main crops are maize, cotton, groundnuts, and cassava. However, the area is remote from the main urban centers such as Kinshasa, Lubumbashi and Luluabourg, and therefore increases in food crop ptoduction must be geared to the local market. One exception could be groundnuts, provided they were processed in the area. An increase in production of groundnut oil, for which there is a good internal demand, seems feasible because oilseed crushing mills already exist. These mills were established by the cotton companies for processing cottonseed and are located at Businga in Ubangui and at Aketi and Isiro in the Ueles. Because of the decline in cotton production, only the Aketi plant is in operation now. The others are closed down but still in operating condition.

25 In addition. there is a modern oil industry, Socituri, at Isiro, that has an annual capacity of 3,600 t of refined vegetable oils. This industry was established to cover mainly internal demand for oil, which is considerable since the eastern highlands depend mostly on the Ueles for their oil supply; the possibility exists, however, to increase oil exports to East Africa. At present, this plant is working at about half capacity due to lack of raw material. No efforts have vet been made to increase groundnut production in the area of Isiro, but it is generally assumed that a promotion of cotton p. would also increase agroundnut nrodtuction as these two croos are grown in rotation. Over the longer term, however, implementation of an oil palm project as described earlier (paras 17-21)9 ould limit the expansion possibilities for groundnut oil. ANNEX 5 Page 7

The Eastern Highlands

26. The second major economic region in the north of Zaire is part of th.le eastern i ghlan.ds an.d consist.s of the districts of l-tai7Ituri .re Hu Province) and of North Kivu (Kivu Province). They are both a long and cost'ly distance from fLor them, Af'ri.a 's the quickest and CO~~~U.L~~~~ LdIIL~~~~1. L UUI Kinshiasa..LL1~~~~~~~~~1IC1~~~~d ~~LIUand £I.JL LIL~~~~~~~~ZIIEast-L3~~~~~~ L ~~~ILL±L4 .L~~~~~~_ CILLLrLLLC jUJE..C~~~~~~~~LLI.. least expensive access route for exports and imports. National policy, Lho-wever, dicLates that in.flow aUd outfLL.oLw OLU goous fLror, the regiLon 'we predominantly made through Kinshasa and Matadi.

27. To some extent, however, exports do go through Ecst Africa. But even then, restrictions exist wnicn pose unreasonable burdens in many instances. For example, robusta coffee grown at Beni must be exported by Goma instead of taking the shortest road througn the border post at Kasendi for the railhead at Kasese in Uganda. Arabica coffee, growm by smallholders in the north of the Ituri, cannot be exported at all because there is no office with authority to export arabica coffee directly from Mahagi, and it is worth no one's while to export the coffee via Kinshasa or Goma. Moreover, even the arabica exported through OPAK (Office des Produits Agricoles du Kivu) suffers quite unreasonable delays in cleaning and grading, and coffee processed by OPAK is subject to a charge that is approximately twice the cost incurred by private dealers.

28. The major export crops of the eastern highlands are arabica coffee, pyrethrum, tea, quinine, and papaine.

29. Coffee. Arabica coffee is grown in Kivu and in Ituri. The Kivu coffee growing area has generally good soils and yields are higher than in Ituri, where the soils are less fertile. In both areas there has been a substantial shift from estate coffee production to smallhoLder coffee production. Before 1960 about 80% of production in Kivu and 90% in Ituri came from estates. At present, only about about 20-25% of Kivu production comes from estates, and in Ituri estate production is negligible. Many estates have been abandoned, and in those that are still in production yields have decreased. It is expected that future estate production will remain at its present level of about 2,000-3,000 t, but that smallholder production, which has already reached about 8,000 t will continue to increase at a fast pace.

30. For arabica coffee, there are no serious productLon problems, but in the field of processing and marketing considerable improvements can be made. The smallholders have, in general, no pulping equipment and therefore the coffee is poorly pulped and fermented. In the areas of Butembo and Lubero in Kivu and Diugu. and Mahagi in Ituri, where there is a high density of small coffee producers, the establishment of small central pulping stations, where the smnllhnlders rcould nuip their cronp would considerablv improve the quality of coffee. Marketing improvements would mainly concern increasing the efficlency nf the OCR and OPAK, and the establishment of an office in Ituri for grading and taxation that would permit the export of coffee through Mahagi. ANNEX 5 Page 8

31. Pyrethrum. Before indenendence, the highlands of North Kivu had a prosperous pyrethrum industry. Zaire produced about 3,000 t of dry flowers and was the second largest producer of pyrethrum (after Kenya). In 1959, a pyrethrum extract factory was completed near Goma with a processing capacity of 3,000 t of dry flowers per year. All the pyrethrum was produced on large estates and smallholder plantations were unknown. Since independence. all these plantations have disappeared. Pyrethrum has not found favor as a smallholder crop, and at present only about 300 t of dry flowers of poor quality are produced.

32. During the last 10 years the trend in the world's pyrethrum industry has been a shift from estate to smallholder production; therefore, a revival of plantation production seems out of the question. However, since North Kivu has particularly favorable conditions for pyrethrum in the territories of Masisi, Rutshuru, and Lubero, and a pyrethrum extraction plant at Goma; it annears reasonable to promote smallholder production.

33. Past attemnt to indpre smallholders. to grow pvrethrttm. appear to have failed because they were not based on an integrated program that took into consideration all the necessarv innuts for nroduction- as well as nroce.sing and marketing. A well-prepared project based mainly on experience of the Pvrethriim RnBrd of Kpnyv, with snmp adapttlns to lora1 ronditionn. anppearc to be feasible. The main inputs would be: high-yielding planting material; small qnuntities of fertili7er fnr tho estah1ishment of the plantationn; dryers, probably using fuel oil; one project manager and 12 extension workers; and trnn.sport facilities for the pro4ect personnel. Assuming production of 3,000 t of dry flower and on a price of K 4 paid to the farmers per kg of fresh flowerr, such a pyrethrum deveal opmentm project wrould gener-ate a gross farm income of about Z 500,000 per year and benefit from 10,000 to 15,000

LaILk. L.L~

34.~~'Tr.1 Tea gr,,wing was started .n th iuinte150s oa J'4 * .Lr-.d Ld~ WL~ W ~ ~ A .LI L.1L "'±U A.L LkiA I J JSJ . lo-a' area nlanted to tea is not well known: at the time of independence, there were ~~~erearoinndlaroI Q,^^n I i at and'TlH am,sI III5J L !ld3,.afoith1n;ve I UI 1I [dill [[U L Yte L comeLLI'C wnopouton.I kAj PLp kU%L_LL l After in4enendence, a few nlantations were abandoned, but yields on those kept in production gradually increased. For this reason, total production remained at more or less the same level of about 10,000 t of made tea.

35. Kivu, with elevations from 1,500-2,000 m, has very favorable conditions for quality tea production. Existing plantations are well-kept and yields are high. Seedling tea produces, on the average, 1,500 kg of made tea per ha and some plantations have planted clonal tea that produces over 2 t/ha.

36. Some recent attempts to interest Zairan farmers in tea production have failed. OPAK took over five abandoned tea plantations with a capacity of about 3,000 t and organized them into smallholders' cooperatives, but the results have been disappointing, mainly due to the lack of competent management of the tea plants. These plantations could still be exploited ANNEX 5 Page 9 rationally. This would require a renewal of the processing equipment and competent management of the piants by expatriates for severai years.

37. The Government has shown considerable interest in promoting the tea industry in the Kivu. Two FED-financed tea projects were started recently, one near Butembo and one in the vicinity of Bukavu. The goal of each project is to plant 200 ha of estate plantations around a tea factory and to promote the establishment of 300 ha of smallholder plantations in the vicinity of the plant. The estate plantations will be planted with high-yielding clones and the smallholder plantations with seedling tea.

38. A special autonomous government agency, the Commision Agricole du Kivu, has been created to manage these projects. The Commission will be the owner of the estate plantation and the tea processing facilities. Implementation has been entrusted to two consulting firms, Ilaco for the project in Butembo, and Agrar und Hydrotechnik for the project in Bukavu. The project in ]3utembo has made a good start and is likely to be successful. The project in Bukavu has serious landholding problems which may seriously handicap its execution.

39. Except for these two proiects, few new plantations are being established. Nonetheless, an increase in production during the next few years can be exnected because there are still Dlantations that have not reached maturity. A sizeable increase in production could also result from a rehabilift%rinnof the OE'AK n1antationn,

40. Food Grops Ecolofgil tnditiio1ins in the eastprn high1lnds are very favorable for food production. The main crops are cassava up to an altitude of 1,800 m followed by beans up to 2,000 m and peas at still higher altitudes. At over 2,400 m wheat can be grown, and production amounts to about 1,500 t,Iall- LL.&lled ltocally to m,ake a coarse biscuit. BLanas are another important crop grown everywhere, mainly for beer. In addition to these staple foods, the eastern hlghlands produce a large variety of subtropical and temperate climate food crops, in particular vegetables. Kivu produces cabbages, leaks, onions, lettu.es, other vegetables and potatoes.

41. The eastern highlands as a whole are a food surplus region, althiough food scarcLity proLeriIs exiLst in the fLar nortLh anud Lncertain vey de ey populated parts of Ituri and Kivu. Kivu is a more important source of supply tLadn X LUtr, IJUL 'ULoIL regULos exportUL L UeaLns d vegetabLU oV L saingan to Kinshasa and to other parts of the lowlands.

42. The major constraints on expanding food production in this area are the distance from the major markets, and the difficulties and defects of transportation and storage facilities. About 50 t of vegetables a month are shipped from Butembo for sale in Kinshasa. Tney are trucked from Bute-TTo to Coma and then airfreighted from Goma to Kinshasa. Total shipping costs are approximately 15 makuta per kilo and transport takes a matter of 24 hours; ANNEX 5 Page 10

the vegetables arrive quickly and in good condition. The alternative route is via Kisangani and takes approximately one week. Shipping costs are much lower (4 to 5 makuta per kilo), but the vegetables are not well handled or stored, their condition on arrival in Kinshasa is generally very poor, thev command lower prices. Price differences for food products between Kivu and the lowlands are very large and there would seem to be still considerable potential for increasing food crop shipments to Kinshasa and to other parts of the lowlands- Obviously, one could not develop North Kivu on the basis of vegetables alone but these would be an important component of any program to pynand food exnorts. Undoubtedlv most of the difficulties stem from the state of the transportation network; when the improvements underway in the road bet.een Goma and Xomand1 a rnmnlptpd it sppmq likelv that greater quantities of foodstuffs will be sent by road through Kisangani. However, improvements will also be needed in the OT Ar0 services, not only in the provision of adequate cool storage on boats going down the river but also in ,1an d.lLnb and n s.trage t r

A 3 . TLivestock-. q.he eatr--glnshaei mpra. ctl op-to owned partly by traditional herdsmen and partly by commercial ranchers. The traditional hLerdUsren are mainl.y Nilotic Cpeople who ..igrated Jnto Zaire from the east, either a long time ago, as in Ituri, or more recently -- e.g.

t IL-L wh _ A.,_;r 19/.nt_ -tA 1aqRnl -4 th LEIC JWAlWI.._.,1.andesciLUC C Wit cm4n+-S.altJ t...,,,.S ZaAL,a A.l*( SI ''IA. theSalt u v..o_ - V ,O ,S .S O, L .Lt.tA ... refugees who came in the 1960's. Traditionally owned livestock in Ituri are tought to nu--Lber Cabout 2650,000 and in Kivu about 170,000 h-e-ad. Cae-le LUIOugi ttoUIJL uFleL~US SJJSJ~LL .LA JLV ~ JL1. JAJS LI~~ * L-. keeping is not a commercial business and the animals are generally underfed, diseased anu Lnfiested wi thL' wormis anu receive li ttLLe or no vetLeriLLary care. Meat prices are low and cattle are sold only with reluctance or when they are about to die (see Annex 1). The potential fLor cattl developmuent is greater in Ituri, where there is little competition between man and beast for land and where grazing is generally available. In Kivu, on the oLher hand, the population is much denser and, except for a few areas, it is not possible to envisage any extensive cattle raising nor is it yet possible to envisage an intensification of cattle keeping for meat production until the whole complex of attitudes about cattle keeping is changed.

44. Before indenendence, there were about 31 private ranches in Ituri, mostly owned by Belgian colons, which had herds of about 100-700 head of cattle. Belgian cattle men used to buy old cattle from the Africans, or exchanged them for young animals, and fattened them on their pastures. This finishing operation constituted a sizeable part of their income, and it facilitated the sale of cattle of the African herdsmen. This type of collaboration between the ranches and the herdsmen, together with an efficient animal health service, led to a gradual improvement of the livestock industry and brought some herdsmen into commercial cattle production.

45. After independence, all the Belgian cattlemen left and the veterinary service brolce down. Since then, all the programs to improve the herdsmen cattle industry have focussed their attention mainly on the restoration of the veterinary service, aining at an improvement of animal health, 1/ but 1/ The Federal German Republic has recently agreed to provide US$1.1 million for the INEKA station at Nioka in Ituri to reestablish research and extension activities. ANNEX 5 Page 11

little attention has been given to the marketing aspects for cattle. Every transaction is now subject to various taxes or levies which constitute a serious disincentive for the herdsman to sell his animals.

46. The role played by the Belgian cattlemen could now be played by some of the Kilo-Moto cattle ranches if they were to be rehabilitated. Kilo-Moto, a parastatal gold-mining company, has about 30,000 ha of fenced pastures in several areas of Ituri. These pastures are sti:Ll in relatively good condition, or could be recuperated at low cost, because the main range infrastructure still exists. Kilo-Moto's herd. which amounted to 22,000 head before independence, now numbers about 3,500 head.

47. The basic approach to development of the cattle industry in Ituri should be re-examined frnm tho standnoint of integrated develonment;. of both the African stock-raising and the Kilo-Moto ranches, and within the context of a preinvestment study. ,An. investment pro4ect baed on a parallel development would offer more favorable economic prospects than the cattle disease=co,ntrol proje.ts o.ntem,..plated S0 far, a-nd could have a more far reaching and dynamic impact upon the Zairan livestock industry. It would, however, be clearly a attractiv,finan.ialfless 4Ivestment than a ranching project. The Director of Kilo-Moto expressed much interest in the rehabilitation ofL the m-ine's rar,ches.

48. After Ituri, the highlands o' the Kivu have the second largest African cattle herd. In this area, the tall 'Rwanda cattle is bred. In certain areas of these highlands, population pressure is so great that it excludes extensive cattle production. This is the case in the areas of Butembo and Bukavu. However, there are other large areas 'n LIe territorlits of Masisi, Rutshuru and Walikale, with a much lower population density. Tfnese areas, situated at elevations of 1,500-2,500 m have an extraordinarily rich volcanic soil and offer very favorable conditions for cattle, both for beef and milk production.

49. In these areas, Kikuyu grass grows spontaneously after iand clearing. These pastures can be improved at low cost, about Z 7/ha, by interplanting them with ladino clover. Tne introduction of this clover, which can easily be done, may increase the carrying capacity from 2 ha per head on pure Kikuyu pasture to as much as 2 head/ha on the ladino-Kikuyu mixture.

50. In the Masisi area, there are 10 cattle ranches which have, together, about 6,500 ha of Klkuyu pasture of which so far less than 500 ha are planted with clover. These ranches have about 3,000 head of cattle. It is mainly Rwanda cattle crossed with European cattle, mostly Brown Swiss and, to a lesser extent, Friesland. Most of these cattlemen have purebred bulls of the respective European breeds. The carrying capacity of these ranches could at least be doubled through the planting of clover. To upgrade the stock some pure bred bulls would have to be imported. A modest credit project to improve the cattle industry of this area stuggests itself; the main requirements would be for pasture improvement, imports of breeding stock and, possibLy, for purchases of cattle from the herdsmen. ANNEX 5 Page 12

51. In addition to these ranches, there are in this area an estimated 30,000 to 40,000 head of cattle belonging to African herdsmen. These are Rwanda cattle, which mature very late, and afford meat, as well as milk production, would considerably increase if they were crossed with European breeds. As in Ituri, an integrated development program for the ranches and the cattle of the African herdsmen should give the best results. The ranches cotild function in part as finishing operations for the cattle of herdsmen and the ranclhes could sell or exchange half-bred cattle with the herdsmen to upgrade their stock. This system is already practiced by one rancher on hlis own initiative, and response of the herdsmen is encouraging. Some of them have also started to improve their pasture with clover. No institutions exist for extending credit to African herdmen, and it might be worthwhilp to investigate the possibilities of metayage in this area.

52. There are also in the easten highlands a large number of poultry, hogs, and goats fendina for themselvep and living off whatever food is available. The price of poultry meat is approximately twice as high as the nrirp of agoat mapt, nork, nnd hppf Sinrc mni7 can hb hbought for arnnxi-. mately 1.8 makuta per kilo and poultry sell for about 60-70 makuta per live- bird (1-2 kg); tliere might be a nossibility of undertaking a comm.ercial production of poultry based on local maize supplies for feed. Initially, this operation might be for local consumption and could start with a limited number of people who would be supplied with improved breeding stock and who would vaccinate and feed the4r bi rds nA keepn 1-1rn -nc-lose. An Ve approach might be to improve village flocks. Eventually, it should be possible to develop an industrial production for export to cities in the lowlands.

CZ1 .Lio _A2. prdcto wol- n len itsf .o s . m 1A 240Ardeeomn leAuse41_ .1X .J .j u I .LS .5..Lu OC.L SA OXLIL.LXOL uSAC J.L 1UCIL UtZLdUijU hogs are under the constant menace of African swine fever, which is endemic -in ths area, and causes severe losses at regu'Lar intervals. There iSno known protection against it. A substantial increase in goat meat production would be possible also if the present scaveniger type system of goat keepinig were to be supplemented or replaced by more intensive feeding. As far as is known, goat meat is not produced on an intensive Dasis elsewnere in Afrrica, but the possibility exists for increasing goat meat production and this would merit closer study.

54. Overpopulation and Nutritional Problems. In spite of the high potential of the region for food production, there are limited areas where an over-population problem has developed, and where serious malnutrition problems exist. This is particularly the case in the territories of Djugu and Mahagi in Ituri, and the territories of Kalahe, Kabare and Walungu surrounding Bukavu. Even in the Rutshuru valley, which is said to have the richest soil in Zaire and has remarkably fine arabica coffee plantations, the population appears surprisingly poor and depressed.

55. In both these areas, rural population has reached such a density that the necessary fallow period, which is here only two to three years, is no longer observed and soil fertility has deteriorated. In Ituri, the erosion control structure, which consists mainly of elephant grass and ANNEX 5 Page 13 s,earia strips planted as contour lines, is still maintained and the land has not yet suffered lasting damage. However, immediate measures should hie taken to prevent a further deterioration of the land, especially since the population is increasing at a fast rate.

56. Two measures should be taken to improve the present situation: (a" to facilitate migration from this over-populated area to surrounding under-populated areas, the construction of penetration roads towards the iore-3ted lower lands appears to be of firat priority; and (b) to intensify agricultural production on the over-populated land, erosion control measures mnd terracing are required; these depend on higlher inputs of labor, and a. prerequisite is a change in the land tenure svstem. The nresent communal 'iand tenure system, which does not givc far,ners ownership rights to the land, is the most serious deterrent to any land imnrnuement

57. In the Bukavu area the R4tuatinn is even mnre serinus. Erosion 7antrol structures have broken &Ywfl and there is severe soil erosion in the denselv nonulated areas. To restore the asi fevrt-ilit-v nf this land. tar-reaching erosion control measures have to be taken: (a) reafforestation or part fn thoe land1 that- is t,naiijta-lel fni- agricultural production, and 'h) re-establishment of the grass strips in contour lines. For this ptlrnnros the TINEA station at Mu1.-g has developed a tecn4-.qf vmainc Cuatemala grass, which gives good results.

58. The reafforestation component of the erosion control program could have favoraable econom,4. prospects buecause th=e -Wol&U1e area under- consideration has a severe shortage of firewood. In the city of Bukavu,

f reood s .L0J.Usold fr_LIJL IIIULCr..or th,-LLLO.k L.. 1-'ZI PC&per m3Wl (cEkILUU1kILCU dw.h2 W.LLLA IA.V N/UL1/m3 r,earL&1_ai. Kisangani). This may offer the possibility of implementing an afforestation project as aifirst step for erosion control.

.n hlowever, as mentioned for Ituri, effective relief of the present situation will require migration of part of the population to less densely-

Populated areas, an.U tLo thL en.U 'Lt seem essential to imuprove rLoaCL communications to Maniema anid to open new penetration roads to the west towards the forest area.

UV. integrated Development rroject rossiDliities. Tne eastern highlands offer an interesting potential for expanding production of pyret'hrum, improving the marketing of vegetaDies, promoting and improving poultry production and producing firewood and controlling land erosion that aeready threatens urban areas in and around Bukavu. None of these activities alone would justify an investment project. But, for at least three areas, one could envisage small agricultural development campaigns, or projects to promote agricultural change, improved marketing, and expansion of production. the projects would be handled by multidisciplinary teams basically performing the function of an extension service, but with an emphasis on aspects that the present extension staff is not trained to do and does not try to do. Tne teams would have a much more investment-and-output orientation than most: extension services; they would have to have access to adequate financial ANNEX ' Page 14 reso,urccs or the capacity to submit private or group proposals for financing by an Agricultural Development Bank (see Annex 9).

61. ThLe three areas that might be considered are the territories of Mahagi and Djugu in Ituri, Lubero in North Kivu, and the three areas around Bukavu (Kalahe, Kabare, and Walungu). All three areas are characterized by populations of hardworking, good farmers. In addition, Lubero has the advaintage of a flourishing network of indigenous traders, some of wthom own several modern trucks and others have recently forned an association that has financed a coffee treatment factorv. The economic potential in Luhero is undoubtedly the most favorable; the action in the other two regions would tend to De uLore to reverse or slow dowu a sivrious deterioration of inrnmes and soil resources.

62. Tne basic components of a project for Lubero (centered on Butembo) are ctei:s--r ta -thp nrfifr two=- Ne first ohiective would be no ny-nn,ote the marketing of foodstuffs -- particularly beans and vegetables -- in Vi nsnnrgi and (i .-hasa; thus it would in r.ol.e improvements 4. s-trage an- handling facilities all along the transport inetwork, in cunjunction with road 1mlnrn,!,meu' -q -xnPrtPdr tr- hi , Tadet imOurl p-robarbly inwr1i.'> n,.cirintinn with traders in Kinshasa and perhaps even a measure of contract production. Seconldly, t4-cv r o, wou-dct 1,rnm.or poultfry roduct-im for rth ,narkbt -- locally and in Kisangani to begin with. Thirdly, the project should seek to interest sr.all:holders in pyrethrum growi4ng, and prov4ide- relat-e4d d,rying- ~iJ.~t. L&~.t L*.L.t* ~4~t.* .t* j7 - f. fU J -L~~alt k 13V.IC U ~ U ~..tLL. LLr, facilities. Fourthly, investments would be made in coffee pulping equipment and storage in th-e villages; these investmets would be associated with a reform of existing restrictions on coffee exports through the east.

63. A project of this nature should last: at least five years and involve four or five technic-al experts ,lvinIg Lartieular wei'ght to mUarketinlg and organization. Investment would be required in storage, harvesting equipment, trarLs-port equipmLientL, L.L1d[iCLb LO provLUe lUaL&KeL iIuormdL.LU1iV PyreLTruM driers> improved seeds and planting material, small coffee-washing machines, and improved potU-trV breeds.

64. The Ruzizi Plain. Another area witn potential for a significant increase in agricultural production would be the Ruzizi plain, which is on the Burundi frontier, northi of Laka Taagk.nyika. The plain is well suited to growing cotton and irrigated rice and sugarcane, and also for livestock raiscing. The general advantages. tUo cutton production are striking, the cotton is 1-3/32" staple length, whichi connnands a price advantage in export markets; the region is well situated for export through the east, even though thare are problems concerning port facilities at Kisama and Dar es Salaam; production and transport costs (1971 budget estimates) are lower thaii anywhere else in Zaire.

65. Water availability, however, is a problem for sugarcane and for rice. The use of water from the Ruzizi River is limited due to a high magnesium conLent. There is enough irrigation water available to raise sugar production from the SUCRAF factory to about 14,0Q0 t per year; any ANNEX 5 Pagep 15 increase beyond that will require either more irrigation works on Zaire side or th eeop -e.f care pod.ti#on ir. the Bur--,-A at f h Ruizi plain where irrigation water is available. Rice production can also be Aincreased, ut little car. be saidU wLt.h certaL.in.LtLy a-JuJ the phyc.aL'. poten6ial or about the probable markets for any large increase in production. In- vestigations uy the ZIClnese mission sh.ou'Ld -LUiUWkae iLt possib±LV tiUCLL.LLyLU L.Lrc production prospects more precisely.

66. A revival of cotton production will probably take place, and a producrion project may merit consideration if tne cotton industry is reor- ganized as proposed in Annex 6. A small increase in sugar production, up to 14,000 t will probably be financed by the SUCRAF firm; any increase beyond that would imply an externally financed irrigation project. Two constraints are important: water availability and the state of security :in the area.

ANNEX 6- Page 1

nDl)T1 TrT 'n 7ATDV L\Lt UJLL' V 'U. A.LNIA

AGRICULTURAL SECTOR SURVEY

Tne Cotton Problem

Summary of Situation

1. Cotton no longer constitutes the major cash crop for Zairan farmers. The breakdown of the paysannat svstem, the deterioration of the transportation network, the lingering unrest in certain parts of the countryside, and growing producer dissatisfaction with prices received for this crop, have all contributed to a lessening of the importance of cotton as a source of cash income. At the same time, rapid urbanization and expansion of demand for foodstuffs have rendered food crops attractive as alternative cash crops. Nlevertheless, cotton still yields farmers, all smallholders, nearly Z 2.5 million ($ 5 million) in cash income. And, with very little reorganization of the industry, production and earnings could be substantially increased. It is clear that an expansion of output would be economically justifiable.

2. The factors that are impeding expansion relate primarily to the financial and institutional arrangements. Because these mnatters are subject to the decision making powers of Government, the cotton industry deserves special attention at the present time. In particular, the following points are crucial:

(a) Producer prices for seed cotton, which are set by the government at a uniform level for the entire country, are now so low that manv farmers are barely interested in growing cotton and in many cases they do so only under duress.

(b) Prodlucer prices cannot be increased (at present world prices) because collection and processing costs are overinflated. the cotton reserve fund hag inadeauate caslh reserves, and the financial arrangements provide tlhat nrocessing cost6 are a prior rharge on sales revenue.

(c) Financial losses on cotton fiber exports are partly sunnorted bv arhitrarilu higch pr4ices o. sales to-r(ompatir spinners; this policy puts a regressive financial burden on the users of 7airan cotton goods. 1/ This Annex has been left as it appeared in the original draft version of

the Sector Survey, althLough. events siC taltIL L,me1 LhaVe U gUtA- ,ma4 institutional changes in Zaire which have been touched on briefly in the General Report, Voltine I. The barkerotrnd to those changes. which is the substance of this Annex, could be of interest and va]ue in considering next steps to revive the production of cotton in Zaire, and it is that thought which led to the decision to retain the original descriptive and analytical material provided herein. Page 2

(d) (nonrrnI nuer rhs'sw nitrtrro nrir.ar4lw t-Ii r,.ponnnalillr of the parastatal "Comite de Gerance de la Calsse de Onoaerna (!nrtnri4ora' fra!>EPDO$n * has rwrs.sql 7.yn lapsed.1:$

,t~~~o~~&V _ 14 *&-4 A$ 3. ' he ...rabat cutlonk for r... n,.i*w'e ai ,nj f- the AnsnctIc side, internal consumption now uses up ab3ut 12,000 t of fiber per years and *.J ...... kn4lr.41'.4 4;. LIAJ.C WilJ.L .wM UtJu t.I. t%..LcaCx A aacw z o LIL UnJ.J:.A.1 now*is bei 5 Ib A. . -L.. Kisangani. Domestic consumption woulc algs pteE-abiy £ncrea£e further if theC p-ie oSfI _iLLCLLIC.l o toL. L.LU--L w-Ca e -4t r -r -InO J, d at. a..aLC ific ally high level. However, the main outlet for increased output twotld have to be

Hle wurla sUaE LtCL exterC vJLaL 'L8£ 1 CLLUVUZSL .U aOUbULU an.y ±AN4CJJ=y expansion in Zaire's cotton production, particularly of the longer staple varieties. Production areft-r in.ane easLerr. CrGe.r acr pa4ZL_UUaLry WCll placed to serve the rapidly growing Far Ea4tern market, Even a: the slightly lower wor-d prices projected for Zaire beDIIoIIk sble LU IJEUU1Jce and export cotton profitably in substantially larger quantities thanl at present -

us - .v,%n o .e -A-e_ar_e to both Q. 4. ~~~~~~ine basiD&S1C ul^clteUILLICU±.LJXb~~~~ o LIUaU :u -LtJL d±U~ ,4- r,k LU A costs and level of production -- are caus-ad by the contra.zts, lbetwetn L COOGERCuO ;fi£u t hie co0;t t _i.oi-* _. f ..i.r _mW_ ;A. Sa e ;1f seed cottor, and cottonseed. Thie -it1.Cor.rota entract provides for a full reimburseiaeat ut costs iictzrrt dott.onby.he iirwt pJ!.s .3 fee that is ln part proportionate to average costs; the cotronzeed1 contract rjrroides for a sharing of profits and Losses. lcntivee or eeOnomi iz±.SCi::tency are inherent in these contracts. Furtherowre, the iniherent forces favoring inetriciency rhave been compounded bezause COCERCOf has nio- FpCo)perly audited the accounts of the cotton firms; i9 lhas not properly polic2d the agree- ments; and it has not promuigated .n e_onomi..:tai., sounid pSlcy for expanding cotton production. Rationalization of the industry is therefore imtperative.

5. By rationalization, we mean steps that will enable Zaire to have a cotton industry that can producrz profiltably f.or LuUesticd tten.e,al markets. The changes must aim at reducing the costs and margins incurred in transport and processing, so that yrc.duer prices carn bt rai&sed,. DrUduly, there appear to be two major appruathes by tAiich processiig costs and margins could be reduced: by expanded administrative controls w-ithin the present institutional framework; or, by aodciLfing the ±rs:titutional framnework and allowing a freer play of market forces.

6. The tirst alternative -- expandedt'. administrative controls -- implies that COGERCO would have aa in"zerventitait rol.. Its cask would be to reduce costs through direct. actions.. -t wouid investiga-e t-e production costs of ginning mille it would check transport costs, and distances that seed cotton is transported; it would assess whether transport enterprises were charging reasonable rraxrsport fees; etc. It would also have to decide in which areas cotton purchases sinould be financed, which cotton ginning mills should be abandoned, .-.c. In short, CGO,ERCO would have to become a financial investigator and arbiter of business decisions. To do all this, COGERCO would need a larger staff than at present, and one that could not be swayed by the pressures that such a process would gene- rate. Moreover, the administrative task1 would be permanent. Supervision of the industry would require staff ou a high ealiber -- scarce manpower which could be used productively on other jobs. Yet even if COGERCO were ANNEX 6 Page 3

able to fulfill this cost control function, it is likely that t:he admin- istrativp cosnts would be high, and f,,rthe-rnire t-hat t-hpre wnuilA be co,in- tinual disputes between COGERCO and cotton firms conceniing the justification of specrific, nopert-ionavnaneca anel a-eundtin Lo'4nlos-InaIly, it would still be necessary to change the contract between COGERCO and the

LA) L LS A. .1. LIeh aF_O t..&&al., 4 11 CAt*4 -U- O * rL& 01 L.A. .L. . UJ U, the fees would be lower where average production costs were high and vice versa.

7. T,he alternativ apra. would treat.cost contro'l as a fL'uct' orn of the ginning companies. Why should COGERCO -- or any other government institution -- concern itself with detailed business matters such as management salaries, maintenance costs, or the real conversion rates between seed cotton and cotton fiber at each mill? Cost controls would follow of necessity if the cotton ginning firms were obliged to earn their income by processing and transporting cotton efficiently.

8. The present institutional structure derives from a concept, adopted some years ago by the Zairan Government, that the planters own the cotton up to the point of sale to domestic spinners or international buyers. In theory, the cotton firms work for the planters, providling ginning services at cost plus a fee; COGERCO provides the planters with financing and management services and represents them in discussions withl the cotton firms; and the "tComptoir de Vente des Cotons du Congo" (COVENCO) sells the cotton for them. When this approach was adopted, it was expected that a strong cooperative system would soon take over some parts of the cotton business from COGERCO, and deal directly with the cotton firms. But today that rationale no longer holds, because there is no hope that such a developiaent will take place. In the meantime, the position of the farmer has become the reverse of the original intention: instead of the cotton firms working for the cotton farmer, it is the cotton farmer who works fcr the cotton firms; and it is the state and the consumers who finance the inefficiencies.

9. The mission, therefore, considers that it would be economically advantageous for Zaire to abandon the present institutiona:L framework, to transform COGERCO and COVENCO into a conventional cotton marketing board or cotton development agency, to introduce financial arrangements that would induce the cotton firms to collect and process cotton efficiently, to induce a gradual reduction of cotton growing in marginal production areas, and to greatly strengthen research and extension concerned with cotton. The outline of a recommended organization is given in the final section of this annex, following a more thorough analysis of the difficulties facing the industry.

Institutional Background

10. Cotton production in Zaire is exclusively in the hands of small hoIder peasants who C!l tivatp an auvrnag of onp-thirdl tn onp-half hectare of cotton per family. Average yields throughout Zaire are very ANNEX 6 Page 4 low, about 300 kg/ha of seed cotton, reflecting the poor methods of cultivation. Cottorn is generally grown in rotation with rice, maize, groundnuts, or cassava. Production is widely dispersed and extends throughout the North, (Uele and Ubangui regions), and the South and Southeast (Katanga, Kasai, Ruzizi, and Maniema regions).

11. Cotton production and marketing are financed and organized by three major institutions: COGERCO, representing the planters, the state, and private cotton firms; COVENCO, a sales organization jointly owned by COGERCO and the private cotton firms; and the Comite Cotonnier Congolais, representing the private cotton firms themselves. These three institutions have specific responsibilities over the three phases of cotton production, processing, and sale.

12. COGERCO and COVENCO. The entire cotton economy is the responsibility of COGERCO, which is an autonomous Government agency. The main work of COGERCO consists of:

(a) financing, through the cotton companies, purchase of seed cotton from farmers at a fixed price;

(b) financing ginning costs and transport costs through refulnding the cotton companies all expenses incurred in these activities;

(d) development of cotton production through distribution of insecticides, improved seeds, and farming equipment (this act.Lvity has n.ow ceased for lack of funds).

13.~P Throughou the 1960's, COGERCODP -4--ut-1- f-lfilled 4its -epo--4 bilities as a financial medium for the cotton growers and firms. However, i5t did not properly -upervise the- LL-cotton wr ao11 -ost t g out of hand and this, together with depreciation of liquid assets, led COGERCO to serious finalLLacia 'losses. In additionL, COGERCO suffered from executive difficulties: in fact, for some months it did not even have a chief executive and was, instead, managed by tne PMllnSter 01 aLiCulturte.

14. COVENCO is in charge of transport and sales of cotton fiber. it is a nonprofit corporation under the supervision of COGERCO, which has 50% owmership. COVENCO has the monopoly of sales of Zairan cotton inside and outside Zaire. In November 1968, COVENCO made a contract with a Belgian firm, the Societe Commerciale Anversoise (SCA), giving SCA exclusive rights to buy and to sell cotton from Zaire on world markets.

15. Cotton Companies. Field activities are the responsibility of a number of cotton companies, eight of which are merged in COTONCO 1/, which

1/ "Compagnie Cotonnieri Congolaise". Page 5 covers almost 90% of the total cotton production in the Congo. These companies undertake, on behalf of COGERCO, the purchase or seed cotton from farmers, its transport from the collecting centers to the ginning plants, and the ginning and transport ot tne cotton fiber to the points of delivery to COVENCO. The companies undertake to purchase all the seed cotton produced within their respective regions. Advance funds to cover seed cotton purchases and related expenses are made available by COGERCO, while refunds oE all collection, transport, and ginning expenses are paid to the cotton companies by COGERCO, through COVENCO, at the end of the season after submission of detailed accounts. In addition to reimbursement of their total costs, the cotton companies receive a fee for their services. The fee comprises:

(a) Remuneration for the amortization costs of equipment and buildings equal to 2% of total sales value FOB Matadi.

(b) Remuneration of the capital employed, according to a percentage calculated on the average selling price FOB Matadi. This percentage varies between 2% and 4%. according to quantities sold.

(c) Remuneration for services and for the financing of the cotton ginning phase, according to a percentage of the average total costs. This percentage varies between 5% and 7%.

The coefficient of remuneration under (c) is at present fixed at 5%; nevertheless. the companies' remuneration increases directly with their average total costs, irrespective of the volume of production.

16. A new privately financed cotton firm is now building a cotton ginnery at Mahagi in Ituri. COGERCO has never financed cotton purchases in this area (in the extreme northeast corner of Zaire). The new firm intends to oDerate Lndependentlv of COGERCO and COVENCO. but it is not yet clear whether it will be allowed to export cotton fiber privately through the east.

17. The Textile Mills. The domestic cotton textile industry presently consists of four mi11s In 1970W rotton utilization totaled 12,000 t. compared with an industry capacity of 14,400 t. The four companies, in order of imnortanrp, are: ANNEX 6 Page 6

Percent of Cotton Lint Total Industry Company Location Capacity Capacity (t/per month)

UTEXCO Kilnhasa 800 65 FILTISAF Kalemie 150 15 AMUAW. T ubuAm.asO4 125 1 SOLVENA Lubumbashi 125 10

Total monthly cotton utilization capacity - 1,200 t

18. Cotton officials expect full capacity production in 1971-72. Con- struction has been started on a new mill 'n Kisangani, and it may be in operation some time in 1972. In Kinshasa, another mill will be constructed for the manufacture of synthetic fabrics. Prospective irncreases in dermnand for cotton in any event, even with the construction of the new mill, will be insignificant relative to the potential ror expansion in cotton product'ion. Most of any future increase in cotton supplies therefore will be destined for the export market.

Production, Prices and Costs

19. Production. Wnen cotton production in Zaire was at its peak, in the 1950's, an estimated 800,000 families were growing cotton. Output in 1959 reached 183,000 t of seed cotton -- 53,000 t of fiber were exported and about 10,000 t were utilized in Zaire. In the following years, the extension services broke down, the marketing structures were severely weakened, and production fell drastically; a low was reached in 1965. Since then, output has risen slowly, and now appears to have stabilized at about 55,000-60,000 t of seed cotton. As mentioned, domestic consumption has risen to about 12,000 t of fiber and exports to about 9,000 t.

Table 1: COTTON PRODUCTION AND TRADE

Cotton Fiber Fiber Fiber Fiber Seed Cotton Production Exports Local Sales Imports (t) (t) (t) (t)

1959 183,000 63,200 50,000 n.a. n.a. 1960 140,077 47,688 40,000 n.a. 450

1965 17,016 6,020 n.a. n.a. 11,020 1966 18,370 6,370 n.a. 7,405 3,365 1967 23A118 8.356 n.a. 6,371 5,879 1968 37,828 13,430 n.a. 6,477 2,900 1969 54,180 19,000 10;866 7,201 n.a. 1970 58,000 20,000; 8,934 11,270 n.a. 1971 63,000 21,0Q0 (est) 9,00Q n.a. n.a.

Source: COGERCO. ANNEX 6 Page 7

20. Major external markets are Belgium, France, and Germany, with smaller amounts going to Italy and the U.K. In 1970, 25% of exports went to Japan and Hongkong. It appears that Asian markets offer a good opportunity for expansion ot Zairan cotton exports, and the producing area favored in this regard is the eastern part of the country.

21. Zaire produces short and medium staple varieties, which command good prices on the world market. The approximate proportions produced, as estimated by COGERCO, are:

Grade by Zone

North ...... 1-1/16" South ...... 1-1/16" - 1-3/32" East ...... 1-3/32" - 1-5/32"

Percent by Grade

1-1/16" ...... 70% 1-3/32" ...... 20% 1-1/8" plus ...... 10%

22. Longer staple cotton from the Ruzizi area brings a premium of about 1 K/kg. That cotton usually is exported through Dar-es-Salaam. Long staple un to 1-3/32" renortedlv is grown in the Mahagi region. Cultivation of longer staple has been tried in various zones, and feasibility has been proved; but changeover renortedly has not been cnnsidered by growers because of substantially lower yields.

23. The problem at present, however, is not so much to find outlets as to encourage production to rise from the present low levels. The question: why has output recovered so slowly from the 1965 low and why is it now stagnating at about 20,000 t of fiber? Speurity is nv restore in most parts of Zaire, the cotton firms are prepared to collect cotton for COGERCO alraos trnon.here in 7aire, and the -nc-dents of irreAular levies and fines, although cotton growers still suffer from them, is not so severe that they alone would cause production to stagnate. A more likely explanation is the relative decline in cotton prices and in the inco.,.Le Lto be obtainl v Lr. cotton gr,w4Un.g.

L2riLces. L rouce r p ri eLs a r e se bu)y CUOlG ERLCO subJect to approval by the M4inistry of Economy. They are the same in all parts of the country, wiLthlout alLLo-wance J.or tranLsporL differe.tials . Currentl -y , thLLey ar-CLe 4. a' v.R/kg for first quality seed cptton, and 3.6 K/kg for second quaLity. One reason for tile slow recovery oi prouuct'Loi '8 that these prouucer pr'ces ULorcotton now yield a lower return per man-day than competing crops. As one cause, thie deficiencies in transportation and processing inhibit COGERCO from,, paylng a higher cash price. Also, competitive food crops have become far more important as cash crops. AN-NEX 6 Page 8

25. The differences are quite striking when one compares the change over an interval of a dozen years. Table 2 compares producer prices in the region of Bengamisa and implied labor earnings per day for cotton and other crops in 1958 and 1970 1/.

Table 2: RELATIVE PRODUCER RETURNS IN BENGAMISA REGION 1958 AND 1970

1958 1970 Average Earnings Average Earnings Price Yield man-day Price Yield man-day (FB/kg) (t/ha) (FB) (K/kg) (t/ha) (K)

Cotton 5.0 0.5 17.9 4.5 0.3 9.6 Rice 1.75 1.25 13.9 2.5 0.8 12.7 Maize 1.0 1.75 11.7 2.0 0.8 10.7 Groundnuts 2.0 0.8 11.9 4.0 0.6 17.9

Source: For 1958: Beguin, H., Geographie Humaine de la region de Bengamisa, INERA, 1958. For 1970: Data collected by the mission at Yangambi.

These figures show that, in contrast to the present situation, cotton once yielded a higher return per man-day of labor input than any of the other three crops. Cotton production was also aided by the presence of assured marketing channels and the fact that cotton cultivation was in many places obligatory as a "travail d'ordre educatif'. These "other" factors have not changed so drastically: an assured market is still there, and in many places farmers are once more officially compelled to cultivate cotton. The big difference is the relative fall in the value of cotton to the producer.

26. Returns to the farmer are a function of price and yield. The yields of all crops have declined. The fall in yields has been greatest in maize (55%) and least in grcundnuts (25%), while yields of both cotton and rice have fallen somewhere in between (30-35%). The causes of these lower yields are the degeneration of seed quality, the absence of effective extension service to maintain improved cultivation practices, and the breakdown of all applied experimentation work. Although maize yields have fallen most severely, this adverse influence on return per man-day has been just about offset by an increase in the price of maize relative to the prices of other crons (except groundnuts). The competitiveness of groundnuts as a crop has increased not only because the fall in yields has been least, but because the rpeltive inerease in nrice has been large. In consequence, the return per man-day from groundnuts is now relatively high, and even the return from .maize production has risen relative tn the return from cotton. Changes in prices and yields may explain a large part of the lack of interest in cotton and the tendency in some areas for farmers to grow groundnuts instead.

1/ Uk.lo theo natiirp nf the data is surh that actual values may be somewhat suspect, the relative picture revealed is unquestionably an accurate one. ANNEX 6 D_ 0

27. At the same time, the real purchasing power of cotton declined. As measured against a consumer price index for Kinshas (Table 3), the relative cotton price "terms of trade" declined from 100 in 1960 to 52 by mid-1970 Sirnce it is almost certain that the prices of consurmer goous irL the interior rose more than in Kinshasa, this index is a minimum measure of the deterioration in the ter;ns of trade.

Tab le 3 : REl;-LA1rTIriE PRICE CnNGES: CO-l'1ON AND CONS-URER GOODS (price per kilo)

1960 1963 1967 1969 1970 J-unLe Nov. June Oct. iuly Jan. June (francs/kilo) (makuta/ kilo)

Cotton Price Grade I 6 18 2.4 3.6 4.5 4.5 4.5 i'roducer Price Index 100 300 400 600 750 750 750 Lrice Index of Consumer Goods 100 361 691 901 1,395 1,444 1,454 Terms of Trade 100 83 58 67 54 52 52

Source: Central Bank, for cotton producer prices. IRES index (61 articles) of consumer goods sold in the markets in Kinshasa (1960 100).

28. Cotton nrices to the producer are lower in Zaire thaan in the other countries in Africa. It would require a special study to determine all the factors inmolved, but distance from market hard'ly explains why Zaire is at the bottom. For the record, producer prices (makuta/kg) descend from 7 in Ivory Coast, to 6.4 ir Cameroon, 6 irn Central Afr:Lcan Republic, 5.6 in Dahomey, 5.2 in Chad, and finally to 4.5 in Zaire.

29. It should be recognized that cotton prices on world markets have been errati-r for the past two decades, especial- since the success of synthetics as a blend component with cotton. World market prices were declining from the nid-19O50s, then they stablized at a low level in hLe early 1960s when Zaire ceased to export cotton. Prices strengthened in 1971, and they are now near 1959 levels. The upsurge is considered to be temporarLy, however. Recent projections indicate a decline of 10% to 15% in world market prices by 1975. Zaire should be able to produce and export cotton profitably even at the slightly lower prices projected. Moreover, given the country's -1 '--are -in world cotton trade, additional exports from the Congo are unlikely to have any significant effect on world market prices.

30. Price policy in regard to internal sales of cottoni can be related to export prices. Since 1962, Zairan cotton lint has been sold to dlomestic cotton spinners at 34-35 K/kg. At the beginning of this period, the domestic price was 127 higher than a theoretical export price. From October 1963 until June 1967, the premium was about 34%; after the currency reform,, the premium declined to 4% until the end of 1968. In 1970, the premium averaged about 40%. This premium price was supposed to cover ANNEX 6 Page 10

COGERCO's deficit, and therefore to support the cotton growers; however, in fact it seems to have been absorbed by processing and marketing charges. As a means of shifting the burden for an inefficient system, the high local price amounts to a regressive levy on the population at large.

31. Costs. Table 4 presents official data comparing the costs of producing and processing cotton for the periods 1957-59 and 1969-71. While the data should be treated with caution (see footnotes to Table), it can be said that reimbursed charges for cotton collection and processing in 1969-71 were somewhat higher than in 1957-59. while Davments to farmers were somewhat lower. Unfortunately, it is not clear how much of the increase in processing costs represents a real increase in the economic and financial costs incurred by cotton firms, how much arises from the use of data that are not strictly comparable, and how much is simnle over-renorting by the companies. However, for the more recent years, the sources of difficulty are clear enough. In 1969 anfd 1970) Mr.FERrO ws inulirrino n nn rnttnn exports because total production costs exceeded the sale price at Hlatadi. Tn 1971, the Ingses may be less severe hpbe-as of strong wnorld cotton prlces. In 1970, losses on exports amounted to Z 72.60 (US$145) per t, but the full imnortance of thses losses wan hidden by the premium nrire paid hby dnmestir spinners. The case seems reasonably clear that processing costs are indeed akey issue for the cotton industry as a whole.

32. One reason why processing costs may in fact have risen is that cotton firms have no incentive to process cottor. cheaply or to employ their equ4pM..ert at -pa-4cty. Ass m Lention.edearlier, a.l "Justified" cost incurr by cotton firms are reimbursed; above this their fees are comprised as a percentage of th"-e pr4ce of cotton (FOBnw-Matadi in the cotac-t,_-- bu 4ln practice the average price for all sales) and of their average total unit production costs . Thus, any .. ,easures thliatL wouLdU 'lower uniLt costs -- i.Lore efficient operations or expansion of output -- would result in lower re- MuursemLLents arIiu ±lower Lees. ANNEX 6 Pane 1 1

Table 4: COTTON PRODUCTION COSTSL

1957 1958 1959 1969 1970 1971 FBk------FBFkeg----- /2 1. Payments to Planters - 14.45 14.30 14.30 11.97 11.97 11t.7

2 Gosts nf Trazunnnrt, Processing and Sales:

Phase I/ (COG-ERCO0- and Cotton (13.95 1.0x 0 I .50fl 6 .3n 4.7 5.8 Firms) ( 3.28 ( 2.61 ( 2.10

Phase II-(

Cotton Firms: ( ( ( Losts ( ( 10.84 11.44 10.39 Fees ( ( ( 1.68 1.78 1.78 CON'VLNCO - - - 2.17 1.80 i.80

Subtotal 17.23 15.61 13.60 21.03 19.99 19.81

3. Total Cost at Matadi 31.68 29.91 28.01 33.00 31.96 31.78

4. Price: FOB Matadi 34.44 30.93 26.61 25.55 24.70 (August)

!1 1957-59 fig,uires ar in Rpicinn franics; 1969-71 are in Makuita. The conversion is: 1 FB = 2 USJ = 1 K (Mtakuta). There are problems in treating as equivnlalent 5lQr RBiain fr-nnc &nd 1070l -m-- ',nAn i co..pring ,1,At.t from different sources. Consequently, the figures should be treated with some caution, although they apenar on the whole give a realistic picture of actual changes. /2 Assuming 80% grade I, 20% grade II; conversion of seed cotton to cotiton fiber 35.1. /3 Collection and transport of seed cotton to the ginning plants. /4 Ginning, transport of cotton fiber to COVENCO delivery points, and transport of cottonseed from ginning plants to collection centers. Source: The first three columns from COGERCO documents. The next two,

N,OVI.NCOI MLLilUl. IXJUL LR for 1969 aSLLU 1970:; baseU On LULtl. payiiieiili by COVENCO in 1969 and 1970 to COGERCO for Phase I costs; Phase II costs are a weighted average of actual processing costs of 10 oui; of 15 firms as shown in published COVENCO accounts. The last coLumn is estimated from 1971 cotton budgets submitted to COGERCO. Actual costs should be expected to exceed these budget estimates. ANNEX 6 Page 12

33. Cost accounting is made difficult by the engagement of most cotton companies in legitimate commercial activities in addition to their cotton collection and ginning operations. This is as it should be, since the cotton companies, generally speaking, are the major economic element in the area of their respective installations -- they have personnel witlh business and managerial experience and they also have capital resources. This situation is not unique to Zaire. In most developing countries, inter- mediaries and agents who collect crops from the bush also sell consumption goods, tools, equipment, fertilizers, seeds, etc. It is an economic two- way operation. Some of the cotton companies in the north also collect other crops such as rice, maize, palm nuts, etc. This increases utilization rates for equipment and personnel and certainly is to be encouraged. In the south, the COTONCO companies are sole distributors for beer. This business undoubtedly overshadows the operations of their cotton department and probably is far more profitable. In that region, the COTONCO companies also have the exclusive distributionship for the Mobil Oil Company. This business also undoubtedly exceeds in importance their cotton department. Additional noncotton activities undoubtedly exist.

34. COGERCO management is in complete agreement that, from the standpoint of developing the rural economy, and increasing availability of consumer goodsR as well as imnrovina the utilization of enuinment and personnel, the cotton companies should be encouraged to broaden their scope of operat_ons.n The nbiectIon voired by GOCERGO iS that many of the noncotton operational costs are charged to the cotton accounts. That extends to office facilities and oenernl ndministration penpnsPs, ht- f-hp itemrs that weigh most heavily on the cotton operation, and contribute mainly to the deficit operations of COGERCO, are personnel costs and transport. it is asserted that the cotton companies are heavily overstaffed with expa- trlates, because a large proportion of expatriate tinme is devoted to super- vising tne noncotton departments. The incidence of salaries and transport costs on total costs of cotton collection, ginnln.g and dispatch i.s clearly shown in Table 5. tU1UNX% 6 Page 13

Table 5: COST STRiUCTURE OF COTTON FIRMS, 197i

Cotton Cotton Ginning Percentage of Collection and Dispatch Total Total Costs Phase I Phase Il …------'000 Zaires ------

Fixed Costs 473.3 1,610.0 2,083.3 60 (of which Expatriate Staff) (227.9) (424.3) (652.2) 18 ( Local Staff) (109.9) (557.0) (666.9) 19 Variable Costs 764.0 592.6 1,356.6 40 (of which transport) (649.4) (289.9) 1(948.3) 27

Total Costs: 1,237.3 2,202.6 3,439.9 100

Note: Fixed and variable costs are defined in terms of annual budgeting. Fixed costs comprise: wages, salaries, travel costS, equipment purchases, light, water, heat, office supplies, transport cotton seed. Variable costs comprise: transport of seed cotton and cotton fiber, handling and ginning costs, insurances, payments to chief, etc. Source: COGERCO, on the basis of budgets submitted by cotton firms.

35. Transport costs, another operational issue, are now very high mainly because of the state of the roads, the difficulties of getting suF'plies and spares in the interior, and because the collection network is not dense around all ginneries. This situation has led to extremely high damage and repair costs, shortened vehicle life, and relatively long periods of lost: time when vehicles are damaged but unrepaired. Moreover, the distance that seed cotton is transported to the ginneries is simply enormous: in the Ueles and Ubangui, the average distance of collection centers from a ginrtery appears (from the 1970 budget) to be 80 km; in the whole of Zaire in 1969 it was 106 km, implying an outward and inward truck journey for seec6 cotton averaging 212 km. At a charge of 12 K/t-km this would imply that the collection of seed cotton alone involves an average charge of 3.4 K/kg of cotton fiber (or US4 3.1/lb).

36. Much has been made about the long distances that the trucks muSt go to collect the seed cotton, and the fact that they must travel in marginal areas where small quantities are grown. The cotton companies have used this argument as a lever to raise ton-kilometer tariffs to COGERCO. Those charges range from 8K to as much as 14K per ton-kilometer. Some companies maintain that cotton collection in a one-way operation, since trucks always go out empty. They therefore iustify doubling the ton-kilometer charge (on the previous example, this would amount to 6.8 K/kg for collection). Others maintain that the trucks used for cotton transport are not suitable for other cargo, so they must remain idle for six months of the year. Nothing is known about how the cotton companies' other business operations affect these operations. How often do cotton trucks actually go out empty? What other oroducts can these trucks haul along the same routes? The problem is complicated by the fact that much of the cotton AiqNEX 6 Page 14 collection is contracted by the cotton companies to trucking companies or to private truckers, some of which belong to the same financial groups as the cotton firms. 37. The Cottonseed Contracts. There is a special contract concerning the nrocessing of cottonseed. The cotton firmq nbtain cottonseed nnd 1inters without charge; they process and sell them for their own account. From arRR salPh nrodititinn rnotR R-nlpq onts: and amnrti7.qtiinn rh1irges are deducted and the balance is shared 50-50 by the cotton firms and COGERCO. For flipast decade, the arro,nts submitted hb the cotton 1r.m have demonstrated that cottonseed processing is unprofitable, and COGERCO has shiared the losses, which in 1968 amounted to 7 224,0001 an-A in 19A69 to Z 75,600. According to the accounts, the cotton firms have absorbed losses totaling Z 185,000 over the last three years. It is difficult to understand why private firms have maintained such a consistently unprofitable oneration.

COGERCO's Financial Position

38. The situation in the cotton industry has already had results that are-n ecn,,al osl. Fis,ouptisr.c lower than, aL ------1 IULWLA_C.L.Ly1 %LIU _L.LCL~LULCL.±L.LYl IL;V. L.Ly r .LLt>L UULIpUtL.Z. 111(._1I L.LU ~ LLd it should be and this implies a loss of national economic welfare as well as cash inc..e to farlmers. Secon.dly, thIL-Lef4nancial conseque.ces fall on t-he shoulders of COGERCO (i.e., the Treasury). Thirdly, the only measure taken soF.UV_ far to iC'o ou,ages t'.Le use of ZaiLrani cotton in Zaire and penalizes domestic cotton consumers. Fourthly, COGERCO rerit.Lins on thiLe verge ofL financial fLaLalure.

-3 A - - ^nfltI. 1± ~ . _s … - I - - _ S I J _ ,fl rI., . j7. tUUt'UU s LLqu.Lu.LLy was serlousiy weakened dur.Ling Lite JirstL half of the 1960's, as inflation eroded the real value of working capital and othler financial assets, and as COGERCO expended resources on cotton production campaigns that were followed by continuing production declines. More recently, COGERCO has been weakened by operating losses on cotton exports. However, it seems likely that the inflationary depreciation of the financial assets has now stabilized or stopped and that the production decline has "bottomed out". These factors, therefore, are no longer threats to any further worsening of COGERCO's tinancial position. un tne other hiand, further losses on exports are a very real threat unless the industry is rationalized. Although the rate of loss on exports is probably lower in 1971 than in 1970, export prices are expected to decline in the future.

40. It is clear that COGERCO is in a precarious position. During six of the years between 1959 and 1969, COGERCO suffered operating losses, and these, together with the inflationary erosion of liquid assets, contributed to a fall in its capital assets from the equivalent of $22 million to about $1.2 million. A number of stop-gap measures were taken to find finance for the annual cotton purchase campaigns. The Banque Nationale advanced COGERCO funds and guaranteed loans made by commercial banks; COGERCO also received subsidies (and trucks) from the Government. However, these financing devices did not enable COGERCO to put its operations on a sound financial basis, since only one measure to improve the operating position of COGERCO was implemented. This measure -- taken in 1962 -- was to restrict imports ,u'liNEX o Page 15

of cotton and to require domestic spinners to use Zairan cotton sold to them at a price designed to cover a large proportion of production costs. in spite of these efrorts, CUULKCU's tinancial position is now worse than. it has ever been. It is not clear whether or not the Government will provide further subsidies, and thie economic argument is for lowering, not further raising, the domestic price for Zairan cotton. The question remains: how should rationalization of the industry be approached?

41. In the last two years, COGERCO has tried to improve its financial position by contesting some costs in the budgets put forward by the cotton firms. COGERCO has analyzed the budgets submitted to it and tried to force all firms to accept the lowest or low cost rates for particular items, unless a particular firm can substantiate that it has in fact paid lhigher prices or has sufferecl higher cost rates. This approach undoubtedly can cut out some exaggeration in cost charges incurred. But it leaves intact a system thai: accepts cost rates as data and requires sale prices and financial subsidies to be adjusted accordingly.

42. The conflicting interests inherent in the payment arrangements, as defined in the contract between COGERCO and the cotton firms, have led to years of ill feeling and misunderstanding. This situation has resulted inI several proposals for a reorganization of the cotton business. For instarnce, one proposal, put forward by the Ministry calls for nationalization of thE cotton firms and the establishment of an Office Nationale du Coton. Another proposal, put forward by the cotton firms, calls for the State to purchase a participation in the firms (the participations suggested were any holding up to 49% of the capital, or a holding of 100% and a management contract to be awarded to the cotton firms). It is clear that some changes are indisnens- able, and from available evidence it appears that the establishment of a marketing board would be the best annroach to nputting the *otton industry on an economically sound footing. The implications of this proposal are discussed below.

A Pronosed Reorvanizatitnn

43. The basir chnnges wniild bh tn ahAanAn the. nprcnt intiftiitinnnl framework, to transform COGERCO and COVENCO into a conventional cotton m,nrkpfinu'rord r cttotn dlokJipment iager.d titroduce firn-cial arrangements that would induce the cotton firms to collect and process cotton efficiently. Aa -- 4venience the ne.w agercy i9 referre A to here as a Board, which would be established through Governmental procedures and endowed with adequate capital.

L4. The basic funrctIon of the Board would be to buy cotton fiber front the cotton ginning firms and to sell it internally or for export at the sante price Tn advance of the planting season, the 'oar' woul announce u JL t-it ±L L~L~b~L,LL DUU WuU±U diIIIOUIiL prices for given grades of cotton fiber -- CIF Kinshasa, Kisangani, Kalemie or Kiga.a =-= att wh ich iLt wouLdUpurchase he enire outpu£ of the cotton ginnin,g firms. These prices would be based on world prices and would be set so that the Board could expect to balance its accounts over the years -- good years taken with bad years. ANNEX 6 Page 16

45. Producer prices would be jointly determined by the Cotton Marketing Board and the ginning companies, and announced to the farmers in advance of the planting season. Transportation costs from the different cotton production zones to the ports of export or domestic utilization may differ sufficiently to warrant differences in producer prices according to zone. Within each zone, however, a uniform minimum price for seed cotton should be paid to producers within the normal supply area of each ginnery. Collection points within these areas should be reestablished or upgraded, and they should eventually become trading centers where products other than cotton could be sold and Durchased by farmers. The limits of the normal suDulv area would vary according to local conditions and capacity of the ginneries, and would be iointly established by the Board and the cotton firms. In de- marcating normal supply areas, special consideration should be taken of the nroduction Dotential of the resnective areas. No attemot should be made to encompass all points where cotton is presently grown. It is freely acknowl- edged that nroduction now takes nlace in marginal areas, wherp the very high cost of transport of seed cotton to the ginneries renders production uneco- nomir.. Aq mpntinnpd Parlipr, nne of the elements in the rporgani7atinn nf the industry would be the gradual elimination of this uneconomic production.

46. Many advantages would be obtained from this system. Cotton firms wniiul have,L ince-ntives tn raise theo thrniiouhiut nf onttnn and to r-duce~the4r operating costs: the more efficient their collection and ginning, the higher their profits. This should be exvpeected to result in higher producer prices and output and lower collection and processing costs. Also, the Board would notl have the fruitless Job o c ulting tts; C instead, it could concentrate on assessing the market for cotton and what prices ift could afford to pay for cot-t-on fiber. 4-7. Thl-e greatest danger would b-e that the cottor, ginnerles woull not 4 I III L L U WJJU L~~ LJ 6LL L~ LALL L. L. UL .L1L L I UJ.UL I pay the full price to cotton farmers, but would pay instead a special fee to chiefs, capitas, or a4dUIlLn.istrators, thereby induciLnLLg cor cive- rLauL LtU force the farmers to grow and sell cotton. The announcement of purchase price at the mill would be one safeguard aga±inst this practLce, andU perhaps payment of fees to nongrowers could be made a punishable offense.

48. The Board would insulate producer prices from sharp year-to-year changes in the world market price. It wouid do so by dampening identifiabie short-term fluctuations, and by reacting to medium- and long-term price trends in a moderate manner, i.e., in easy steps. The Board should not try to protect producers from medium- and long-term price trends.

49. The cottonseed crushing mills present no particular problems. They are privately owned, and there is no reason why the State should subsidize operating costs. If the cotton firms continue to obtain cottonseed free of charge, they should be able to decide whether, and where, they should crush the seeds. ANNEX 6 Page 17

50. Associated with these proposed institutional changes, there should be an investment program to promote cotton production in the better areas and to enable the cotton firms to modernize and to adapt themselves to the new principles of the industry and the profit opportunities open to them. The portion of the investment program concerning cotton production raises two important issues: what should be the orientation of the program, and where should investments be made first?

51. The orientation of the program concerns a choice between cottoi promotion in isolation, and cotton promotion in the context of a balanced agricultural development proiect. Ideally. balanced develonment would be preferable, but it would be slower and more costly than promoting cotton a1nne -- hbriiqs it is peaipr to train or t-n ret-rain etnoinn field staff to provide advice about one crop and one set of cultivating methods than it isc to don the Sanne for sevrehrDal crops.

52. Where should cotton production be promoted? The evidence suggests that the best areas are Maniema, the Ruzizi valley, Ubangui and Bas Uele. In addition, Gwandajika is a re-onably favorable area anA a project (heavily subsidized) is already underway there. Maniema is fertile, andQLL alth1,ough La.L..I UIL L-Z1the, %~WL.IJLIO .. .J._ost colecin .LL seed1--- coto.arhgLULL= IL= LI.Lr,1I, ,-th_cstLAI= 1-W L.0 oUJ. ginning and of transporting cotton fiber to market are relatively low. Ihe Ruzizi 's part i4cularly favored, and average ginning an' transport cos's (budgeted for 1971) are lower than anywhere else in Zaire. Projects

in ItLiL areas wouLd face severe difficulties; the re-estL).l-h-Ie L1t of a road system in Maniema, and the unsettled question of security in the Ruziz-i valley.

53. That leaves uDangui and Bas uele, two important cotton production areas. In 1969, when a cotton project was identified, they were undoubtedly the most promising areas for a cotton project. Bas Uele is. agronomically more favored than Ubangui, but is hampered by some social t:ension and a disaffection for agricultural production which are absent in Ubangui. Whetner production costs in Ubangui are lower than in Bas Uele is riot clear: in 1968 average costs in Bas Uele were two-thirds of average costs in Ubangui, in 1969 they were about equal, in 1970 average costs in Ubangui were less than two-thirds of the level in Bas Uele; in 1971 the (budgeted) cost margin had begun to narrow again. Certainly transport costs favor Ubangui, although the new cotton mill in Kisangani will diminish the importance of this advantage.

54. The cotton development project would provide for improvement of the economic infrastructure, investment credit for cotton ginning and transport equipment, and some production credit.

55. The infrastructure component would be administered by the Iinistry of Agriculture and would include feeder road improvements (surface, bridges, ferries); local storage facilities; applied experimentation by INERA (re- equipment of an experiment station and initial foreign exchange operating costs); production and distribution of improved seeds if necessary; retrain- ing and strengthening of the extension service and bicycles, vehicles, and extension aids. ANNEX 6 Page 18

56. Investments in cotton einning and Drocessinq would allow firms tn replace old equipment and to expand ginneries in areas selected for devel- onmpnt= Tnvestments would probablv be needed in marhinervy vh4clepq snpre- parts and storage. Investment credit would be made available on normal cnmmornr-inl torm tn cot-t-on ginning firms and to local transporters from the Board, the Ministry of Agriculture or, preferably, from an Agricultural D)evelopm.ent Bank (Annex 9).

R7~~~ T o ,..pz t;- S4FanDt-i- l.TflIl A l-so frvr cm 1 t,-ral c oirl E~,i41 4o .,t. ,,7. . .. e production credtasrc l b.C for tn "Af-- 14 zers required by farmers. Under the new financial arrangements, the cotton firms m.ight finance most of these investments. The balance could be financed by the Ministry of Agriculture.