World Bank Document

RESIlRICTED Report No. PA-118a Public Disclosure Authorized

This report is for official use only by the Bank Group and specificaUy authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The ! Bank Sroup A.e -:taceptrespon:sibility for the ac-cu-acy or conm'...... e of the -- or.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEN;T LNTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

AGRICULTURAL SECTOR SURVEY

REPUBLIC OF ZAIRE

(in three volumes)

VOLUME III

Public Disclosure Authorized ANNEXES 7 THROUGH 11

June 19, 1972 Public Disclosure Authorized

grculture Projects Departr,,ent

BACl'GROu'1 DIATA US$1 = 0.5 zaires (Z) or 50 makuta (K) One zaire = 2.0 US$ 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 capita, 1970 (est.): Z 47 (US$94) Agricnltr1aloutpit a 5!nf GDPj 1969: 18% Commercialized production: 10% SubsisQntnce r,druclli-tion : RAl 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-, t-ea Value of Agricultural Imports, 1968: US$56 million Sha Qre of Total impfort.- * 1 1%Y Principal imports: cereals, fish and fish products, ineat and darty product.s, fruit and vegetables, tobacco Consumer Price Index (IRES - Kinshasa)

June 1970 (Tur:e 1960 = 100) 1 ,454A

GENERAL NOTE 011 DATA

The statistical data available on most facets of the economy and population oJ the Depubllc of 7Za-re are quite urreliable for te post-IUdeLIUndene L 1UUd -- a fact which official publications readily acknowledge. This report will ci te dlata fromm "-m,eto time for illustratv pu4o-s bu...-- attm,p ha,bee made to subjcct the data to extensive analysis of any kincl. Quantitative statements do appear in the. report, buL proDaDly wih less irequency tnan in other Bank documents, and should always he regarded with some caution. This generai quaiifying note is introduced at thze beginning of the report to alert the reader, and to avoid constant reDetition of thie same point wherever data are cited.

ANNEX 7 Page 1

REPUBTIC OF 7AIRE

ACRTCTTLTUJRAT SECTOR STRVEY

FORESTPY

A. General Overview

1. The forestry sector is currently estimated to contribute less i:han 5>' to the agpreRate value added in aRriculture and a similar fraction to the value of agricultural exports.

?Forest products have two main applications in Zaire. One is for household use in the form of firewood, hut supports, and charcoal raw material: the other is as lumber for commercial use in construction, furniture making, etc. The first, all for domestic consumption, carmot be properly auantified for lack of information, although its contribution to the household economv, tn cities and towns as well as in the bush, is unquestionably important. Some information exists on commercial lumber production, which suggests that it had in 1969 a market value of some Z 5.5 million. Approx- imately 60% of commercial. output was consumed domestically and the rest exnorted.

3. Commercial forest exploitation takes place mainly in the Mayumbe, hut has been spreading of late to parts of the Cuvette Centrale (Equateur and Haut 7aire provinces) along the Zaire River. After years of intensive cutting, the commercially explottable-standi. in the Mayumbe are now virtually exhausted and future exDansion in lumbering will have to be based in exploitation of the Cuvette.

4. As additional sawmills and plywood manufacturing facilities were installed In the past decade, the proportion of timber production procesised domestically has increased, and it currently stands at 80-85%. The depletion of the Mavumbe resources, however, has led to a steady decline in Lotal output durinR this period. While information on total production is not: available, exoort figures clearly reflect this trend (Table 1). ANNEXT 7 Page 2

TABLE 1: EXPORTS OF FOREST PRODUCTS, 1958-1970 ('000 n- 1)

Logs Sawn Lumber Plywood Veneer

1958 100 49 20 4

1959 106 60 25 5

1q60 97 57 23 4

1961 80 36 31 7

1962 76 35 30 6

196.3 89 35 26 7

1964 83 40 29 -

1q65 73 33 46 -

1966 85 36 47 -

1967 60 30 33 -

1968 50 36 43 -

1969 37 33 32 11

1970 0 34 31 -

Sutrcep Ministere AP 1 'Rennn,mip Natinaz%le and Banque Nationale.

5. Exports of logs.+were prohibited in October 1969 as an emergency measure to end 4wdnnt overexploftation of forest resources, particularly in the Mavumbe.

The Resource Base

6. Approximately 45% of the country's surface is covered with f!orests, wh-ich b-e classifi-edI as follows: £' L.~~ WILJJ.ALL mavua -L L~ ~ .LJ U L - -LJ

rUrestu oLLIU1 t .UeV--eLtt t:e1LntaLe I X.U ,I) PLUIvtJ [la OutI-yrnR Corridors 730,000 ha Mavumne worest 2L40,IJUU na Mountaln vorests 3nn0,0n ha

XTotal 102,27e0,00 ha ANNEX 7 Page 3

7. In addition, there are some 90 million ha of light and swampy forests and Guinea and Sudano-Zamberian savannahs, covnrilng a large e.^anse of the South of Zaire, but which have very limited fore,st product petcr-- tial (see Maps 4 and 8).

P. Cuvette Centrale. Variations in altitude result in signiflicant differences in the structure of the forest in the Cuvette. The ^entral denression, reaching 2° on either side of the Ecuator. has an aveeRe altitude of 45n m and is occupied bv evergreen equatorial f^rest. Its composition is quite heterozenous and the proportion of valuable spe~cies is generally modest. Considerable areas are, in addition, subject to periodical flo;ods, thus further constraining the potential for eonmercinl exnloitation. In this zone, however, pure stands of Gilbertiodendra are found, which can be exnloited at -verp lnw enot and have t-Ih- addd advantnv7e of nearly snont aneots regeneration. In the future this may find wide ma-ket occeptance, xlt it i8 lackino this -t~ nveaen-t

M%North and South of the eergre-rn forest, at an average altlt-Ade of 5?5 m, lie two wide strips of semideciduous forest. These fermations are fir richer in va1uable species and less iAhospitable than the central denression, and they constitute the most promising forest potential of zhe

10. uptlyln- ^orrid-ors. On the outskirts of the e---tria forestrr

''1L.L Ztt15 *1 L L U 1.L 1OaL~ LLfl...LU OJ L -. -_ two hands of savannah criscrossed by corridors of commercially valuable forest*. The hand i8A narrow in the North (TUb_.gui an.d tY1-N and 'airly wide in the South (northern reaches of Bandundu, Kasai and Katanga provinces).

Th roceV;Gss3 Iby wV-IIc* t; *IIGes areas eoriesvant UCC-Ih avisQidue to the IMICG-e .iL.oPr.X of man, and is a continuing one.

11. Mayumbe forest. Covering a quarter of a mdllion ha, this forest belongs to the semideciduous variety, and is rich in iuariketable species. This fact, together with its proximity to evacuation ports, have led to

erouus mi.smanagement ana overexploitation oJL 't5 reeuoUrce, which are believed at nresent to be seriously depleted. Additional pressures on the -fvta-vmbe forest have arisen from population grow-n i the a-reas. Since this growth is expected to continue for some years to come at a fairly brisk pace, a serious reforestation effort should promptly bDe undertaken.

1A. Mountain torests. Easr or tne Cuvetre tne relier rises snarpiy and the character of the forest tends toward premounrtainous (1,300 m average altitude) and mountainous (1,900o mj varieties. The tree population is highly heterogeneotus and generally suitable only for local exploitation and e.onsumption .

f%overnment Action

13. Althouph relatively little progress has been made of late, knowledre abouit the characteristics of Zaire's forest resources is fairly comniete owirn to the studies of INERA. It should be relatively easy to hrino these stud!es un to date and to complement them with studies concerning ANNEX 7 Page 4 the economic aspects ot torest exploitation, in view of the fact that most facilities and staff of the Forestrv Research Center at Yangambi have not experienced substantial losses or deterioration.

14. Direct government action affecting forest exploitation in recent years has been largely circumscrihed to varying the export tax rates affecting different products. The rate for log exports, which stood at 24% in 1967 after the monetarv reform, was lowered to 2?n in 1W6Q and to 6% in October 1Q69 (log exports were prohibited shortly afterwards, however). Rates on sawn timber were correspondingly lowered from 20% to 15% and 5%, and on nlvwood from 6% to 5% and 2%. Similarly to other agricultural products, a turnover tax applies to forest exnorts at a rate of 6.75% of fiscal assessment.

15. There appears to be little reason for the maintenance of export and turnover taxes on forest products, aside from their purely short run revenue effects. Their more serious impact will undoubtedly be to render forestry industries unprofitable in Zaire, especially in view of the fact that any feasible expansion in this activity will have to shift to less favorable locations in the Cuvette, with considerably higher transport costs than for the Mayumbe resources exploited until now.

16. Felling licenses are presently granted for renewable periods of one vear only. A considerable lengthening of the license period would have to be incorporated into any large scale program to encourage forest resource exploitation.

B. Commercial Exploitation of the Forest

17. The value of marketed timber production in 1969 is estimated at some 7 5.5 million, as shown in Table 2. ANNEX 7 Page 5

TABLE 2: TIMBER PRODUCTION, 1969

Volume Value

('000 i 3 ) (Z '000)

Exported 2,375

T ogs 37 581 Sawn timber 36 840 P,"jwood 32 633 Vfeneer 11 321

Domestically Consumed 3,150 Sawn timber 110 3,000 Plywood and veneer 5 150 'rotal 5,525

Source: Ministere de l'Economie Nationale and Union de Producteurs de Bois. Domestic consumption valued at retail market prices.

18. Production is carried out by a number of small enterprises serving local markets about which little is known, and by some 20 medium- and large- size industrial firms. Among the latter, there are four equipped t3 manufac- ture veneers, two have plywood making facilities, and one carries the nrneessing to the fiberboard and pannicleboard stage.

10T Industrial firms are heavily concentrated in the Mavumbe although other locations include Kinshasa and surrounding area, Lake Leopold II, alonig the 7 aire Piver as far aq _isanganif and one in Northern Kasai.

20. Approximately 80-85% of logs felled are processed. an unusuAally high rate by comparison with other countries in tropical Africa, whiere the rate presently varies from 30-60%.

21. Techniques and machinery of m.08t in.duatrial firms- are remarkably old and outmoded. Civen the concentration in the Mayumbe, where forest resources are larpely depleted, the obsolescence of the present nlant should make more attractive the relocation of firms and installation of more advanced machinerv andlrmethods irL selected points of the Cuve;"'-te Grele where the richest forest potential is to be found. Thus far this has not happened, anc unriver forest operatLons of Larfge firms ave beer. 14i4 tof cuttiLn- trees and shinping the Togs downstream to the mills in Mayumbe. Plars are tinder consideration, however, 'ny firma like AGRIr"OR and,INAmE'T, f^r InstallatIon of sawmills and veneer making facilities in the regicn of their exnlofitations in the C;uvette. ANNEX 7 Page 6

?2z. Preliminarv steps in facl"itating this shift in location should be the Dreparation of a detailed inventory of resources remaining in the Mayumbe, estab-isnment of an exploitat'on programL, andU allocation of concesslons in the Mayumbe among the various firms. F.laboration of an inventory of remaining stands in the Mayumbe is currently being considered by the "Agence Canadienne Internationale de Developpement" (ACTD). Plans are also underway to Drepare a reforestation and conservation program, an equally vital element for the rational exploitation of this forest.

Potential of the Cuvette

23. Forest production in the years ahead will undoubtedly gravitate towqard the Cuvette. it has been estimated that production, which currently 3 is about 50,000 m3 , can reasonably be expected to increase to 725,000 m during the next five years. The potential, however, is vastly superior to this, and measures should promptly be taken both to ascertain its magnitude and to render possible its exploitation.

24. Area and Yield Potential. The equatorial forest of the Cuvette covers an area of some 100 million ha. Not all of it, however, is economically accessible. An estimate has been made by the mission of the area economically exploitable for logging, taking into consideration approximate costs of felling, transportation from forest site to embarkation point, cost of river and rail transport, loading charges, taxes and custom duties, and FOB Matadi prices. These calculations indicate that, on average, exploitation would be economical within a distance of 100 km from a navigable waterway. The area included within this boundary is of approximately 70 million ha (see Map 8). Allowing for swampy and steep areas, it mav be estimated that the potentially exploitable area extends to some 6s million ha, largest in Africa without crossing national boundaries.

25. In order to make possible an expeditious and rational exploitation of this vast resource potential, an aerophotogrametric study of the area ought to be immediately undertaken, accompanied by a sample survey in order to determine the amount and nature of exploitable species. On the basis of this information, a precise forest resource inventory and an exploitation plan could easily be formulated.

26. A conservative estimate of the potential yield of this forest, ass.ming an average valuable species content per ha of 5 m3 and a 60-year interval between cuttings, would be 5.5 millioa m3 per year worth, at 1q96 log prices, 7 Q6 million, Production could be carried out in some 1R-?0 sites, and would reouire investments of about Z 35 million. Employ- men.t generation would be substantial at loast 5,0on pnostinn for production alone, and possibly 20,000 additional ones for transport and other

*1 Snk- - -

'OreTaration of the prior studies anrd the forest inventor, should take aDnroximately four vears. Large scale exploitation could start on the fiftn year and reach fuLl de-velopment b-yLhe tenth. ANNEX 7 Page 7

28. M?arket Outlets. Even assuming that domestic demEnd were to exuanr' substantilally as a consequence of increases in population and lncom.e and improvements in marketing and transportation channels, it is unlilely that bv 19P0 domestic annual consumption would exceed 700,000 m3 of logs (three times present consumption). Consequently, the bulk of the exploitation of tne Cuvette forest ought to be geared to the export market.

I9. Tne outlook for world market demand of tropical woods is l.vor- able, and no difficulty is presently anticipated in finding profitable out- Jets for the estimated potential output. The principal constraint to a^hiev- ing this potential resides in the deficiencies of the transportation network linking the Cuvette to the ports (Kinshasa and Matadi) and, particularly, the complete inadequacy of the ports themselves.

30. These deficiencies and inadequacies are well known, and trans;,ort survevs currently underway will undoubtedly take into cons[deration In their design and recommendations the very real export potential of Zaire in wood and wood products.

31. A partial inventory of the forest resources of the Cuvette, covering over 3 million ha in Equateur province in the area between the rivers T.opori and Maringa, will be undertaken shortly by ACID. Estimated cost is 7 1.5 million. This is a first step toward the complete inventory recommended above (pars 24), and may permit beginning commercial exploitation within four years. The need to give prompt consideration to the study and removal of transportation bottlenecks becomes in consequence all the more pressing.

C. Reforestation

32. Forest resources in some parts of Zaire have been so seriously depleted that reforestation programs have become imperative. This is par- ticularl.v true in the areas surrounding large urban centers, especially Rinshasa, but it is also observable in the areas along the main supply routes for those centers, particularly in Bas Zaire and Bandundu.

33. Two types of action are necessary. The first is the establishment of forest reserves in those areas that either have already been seriously depleted or where expected industrial and population expansion are likely' to make substantial demands on existing resources. Two clear instances of the latter case are the Inga and Maluku areas.

34. The second type of action concerns reforestationt. A beginning has alreadv been made in certain areas, especially around Kinshasa, where a pro- lect snonsored bv FAn and WFP is underwav. Effortg; however; have been scattered and do not anpear to have been soundly conceivedl or executed, and nropress to date has been extremelv haltine. A more intes'rated and ANNEX 7 Page 8 coordinated approach is clearly required, and a prerequisite for successful large scale action will be tne strengtnening and reorganization of the Forestry Service.

35. Reforestation plans affecting the Kinshasa area could advantageously he integrated with the plans for a green belt around the city to supply horti- cultural crops for the city (see Annex 2). Distribution of lands between crops and forest could be made according to the soil characteristics, taking also into consideration the growing demands on land from increased urbaniza- tion.

D. Pulp and Paper

36. Prospects for establishing a pulp and paper industry in Zaire are not promising at present. Pulp obtained from domestic leafy .:pecies is not suitable for newsprint, only for wrapping paper and cardbo-rd.

37. Consequently, it seems advisable for the time being to restrict activities in this area to research on the possibility of adapting pine and bamboo plantations to the Banana region.

E. Summary and Recommendations

38. The forest potential of Zaire is excellent, particularly in the vast expanses of the Central Basin. As much as 65 million ha may be exploitable there, and an annual potential output of 5.5 million m3 is a conservative estimate. In order to fully utilize this potential, however, several actions have to be promptly taken. These actions concern primarily the elaboration of an inventory and development program of forest resources, and the improvement of transportation links and ports required to handle efficientlv the additional exports expected.

10A Rational management and sunervision of forest resources and exploitation are not likely to be achieved without a substantial reorganization and strengthening of the Denartment of Water and Forests of the Ministrv of Agriculture. This, however, is not a problem peculiar to forestry, andr thep reoraz on of th4s Denart-mPnt qholuld 'h undertakpn in the context of a comprehensive revamning of the entire Ministry.

40. Suggestions have from time to time been made in Zaire to crate Foesn A_P_74 ot retr^7fi .+-^5. "iAAp *-e-4s;oni .ftn4A "vni-4~ffitl C. GOLCfGL a t V~C LC:>XL y 1 . L VWB1tZWLXV V_L _ J. t . , E. x,, ^ , _x in all aspects relatedi to forestry and forest industries. This suggestion has LreatLmerit, and t ought +-t'obe fmp upmentean t ed *V4 thout la, The Clenter mi-~bt convenientlY be located at Yangambi and launched jointly 7atoan efloate to rev.talize the Forest Division of the INA ^.tation locatel there. ANNEX 8 Page 1

REPUBLIC OF ZAIRE

AICTI 17TTRAL SECTOR SURVEY

Marketinf and Prosgectg for Export Products

5 gutyof Key Issues

1. The share of agricultural conwoditiee in exports :Ls now down to 157, as compared with 397, before independence -- a decline of. 62% (Table 1). Agricultural exports have aloo decraamed drastieallv in abolttite values from over ? 9n million in 1959 to Z 48 million in 1969. This trend reflected the Government't Doliev empkais on tke minn sector W.h.ile agriculture in a sense has been the vlctim of "copper psychology", there were also practical reasons for the relative decline of agriculture: (a) special efforts were made to ensure copper output during the civil disturbanxes; (b) price trends in me-tale rnrkets bave be maz e buoyar.t tha. in agricultural commodity markets! (e) production of most of the principal crops was sharply reduced in the areas affected by th civi*3 disturbances

Table 1! 8Wn OFv ACjC"LT,ATp.L P.OCTs IN TOTApTLL LUATS

Percent "EportlIndex Total Agricultural of Total Total Agricultural llxponsrt9 xports Exports Exports 'Expor es (million zaire.s ( T1959'iOO)

1q59 234.3 91.4 39.0 100 100 19q60 233.4 3R.4 16.5 99 42 1967 22n.0 39.9 18.1 94 44 196h 286.3 50.5 17.6 122 55 1969 332.4 48.3 14.5 142 53

Source: International Pinancial Statistics end Banque Nationale.

2. AmonR the malor export crops, coffee, tea, and cacao have been grorlng In imoortance and now exceed preindevendence export volumes. The value of cacao exports, however, is lower due to lower world prices. Rubber, palm Products, and cotton exports are lover in volume and in value. Ex- pansion of new planting has teaken place mainly in coffr.e and tea, the letter in Dnrticular througjh the oneouraeseent of Government. 1/

1/ rottnn and forest tAroduct are exam4ned eparately in Annexes 6 and 7. ANNEX 8 Page 2

3. The agricultural export sector is hignly concentrated among relatively few firms and agencles, and there are strong but not exclusive ties to Belgian trade channels. There has been little change in the structure of ownership since independence. The highest degree of concentration is in the palm uIl industry, where IJnilever interests account for half the export trade, and three or four other firms for the bulk of the remainder. Those firms also are the maior factors in the rubber and cacao trade, as well as in forestry products. The coffee trade is more diverse. In robusta coffee, Cafecongo, a cooperative of planters and exnort firms, does about 207 of the trade; it sells mainly to Italy, where it has a sales agency agreement with one of the biggest import houses in Goenna MTOROS, a private firm wyith its own mill in Kinshasa, also exports about 20% of the total: six otner large firms take a malor nortion of the ret. For the arablca coffee trade, catering in the Kivu, it is reported that two coonprstlvpq (of large nlanters and buverR) rontrol half th-^ epnort- business; together with four private firms, they handle nearly 90% of exports. In the Vi.,m ri, ion there are alsen spvpral minor agriculturl expnort cronps t-he1 most important of which are cinchona, pyrethrum and papain; the trade in the fi rst tuTo nre nPr mnnonTolieq benauqe only one ctraArtion mill exist s for each product. Tea also is exported by several dominant firms.

4. At this point in time, it appears more constructive to comment on rarticular aspects of ex.port marketing, rather than trylng to generalize on the organizational gtrcture as a whole. There are certain key elements of export policy thi-t .e woule like to emphasize -- certain aspects of fiscal policy coffee anl palm oil policies, agricultural wages, congestion

5J. Ad ataL LC1-L ] C prIf.J c 1t7LoJF *Mat4"a,i v.Cflt* 7s½'. 4CZ.t t intera' XCL l. ' transpotC x. xL. v . 4ng . F-tira_G:4. , 1

5. Fc 'hargei. mih di~ . InereLscussion is l i.ited- sca' levies± on agricultural exnorts, the duties on imports of agricultural inputs, and thle earmarkl leves. IToVge thIie-- thIese are s,XigIifilcant elemer.ts ofL ti-e cost structure to the export producer. The present array of fiscal charges is Inflexible in turns of doesQnDence, noL dlicrimaLe among commOlitles in terms of whether they should be encouraged or discouraged, and in some cases special-purnose levies are not being used ror tne purposes intended.

6. rThe present incidence of duties and taxes on important export commodities is heavy. The effect daties according to the positions of the various commoditiDs ? however. When -*eld market leve1s allows comfortable margins to the producer, as is presently the case with palm oil, coffee and cocoa, there is seme disincentive ef-.7ct whicn may or may not be important. However, when world market prices decline to or below the industry's break- even point, as is presently the case with rubber, the heavv fiscal burden (of 15%) can mean the difference between profit and luss to exporters. Each situation should be ludgeJ in terms if policy eobjectives, i.e., whether or not investment in an industry should be encouraged. As a general principle, where encouragement of Droduction is indicated to be in the best interests of the economv, the export levies should be removed. A3ETX 8C Page 3

7. 7,aties4on imports of ar 4 -11tural innuts act as disincentives to the innrovement of qualitv and vields. I-hen the importation of new var:ieties for P.lanting is held'back by inort duties, at actuallv happens is that 7aire is reducing the freely available benefits it eculd obtain frotm research an.1 exrerimentation iAn other countries. Import duties and taxes on seeis and seedlings should be removod.

Two levies on exporzs are earmarked. T;he Taxe de Selec-ion or ,-2%, applicanle to the principal aqrlcultural exports, ig Intended to finance research and development woirk on the commodities in question, namely pa'lm oil, rubner, coffee, cacao and cotton. However, there are no organized reseParch programs for these products. It is of crucial importance for the agricultural sector to implement a research and development program. But sInce the ,,.roceeds of this tax are nct ;,eing directed to t.e intended purpose, an, because it constitutes an across-the-board disincentive to the export trade, the tax should be eliTminated.

The Taxe R4munrg to. ; of 0 .5% ad valorem is levied on exports of cottee to finance reconstruction and modernization of' the facilities of the Of.7ice du Cafe Pobusta (0G?. al the Office d7s Prodv;tts Agricoles du K:Lvu (^OAK). However, it is reported that proceeds from t1hese taxes have not Snen transmitted to th.s t.e--1 recipient. in zile rmeantime, deteriorating o ant is causing delays in export processing of three to four months for both Offices. Since the Dtto r.-A.s from this itmpoct are being misdirected, the tax should be removed. In its place, the processing fees of the OC'R .n.d OPAK Installations shoirld t.e. raL.. OCPR has alreaiy raised its processing fees to some degree, but not enough to provide sufficient funds for nsrTv eouipment purchases. The p-.duc_rs and the of.4c.ern management stand to gain bv higher processing fees and no Taxe Rimun6ratoire. The initial out- lay is the same, whether the ra7vment is made ir.the form of a fee OT a taX- Powever, with a fee, management is assured of funds to reequip the plant, and it can engage in financisl planning.

10. Coffee Policy. In contrast to most other comiWdities, the coffee sector needs a policy to discourage further plantings. In response to orable prices over an exts-ndnd period, pla.nters, and particularly %airan smallholders, have been encouraged to extend their plantings. Prceently, production has reached the level of t:he export quota assigmed to 7aire hy the International Coffee Organization (ICO). Prospects for a substantial increase in the export *qiota are alight indeed, since world coffee consumption is rising at only abJout 2.5% per year. Continued new PTantings would create an unmanageable situation : n about: five years' time. Te time for action is now, however, and disincentive measures should not be delayed. The most practical. measure would be a graduated export tax, cluDled with a lowering ofL ninimum producer prices. The tax rate should be veryr heavv at hi,eh onrce levrels, and gradually s^aled do«mward.

ft. Thp effect or hea¶7ies exnort taxatior wouild be to lower export lrtrtfns. resulting in lower pavments to the producer. TIe minimum producer "rice now fq c:5 - r,.n makeua per kilo for robusta coffee, and 14.5 makuta Page 4

ner kilo for arahica parchment. These prices should be reduced initially nerhaps to 4s.5 makuta per kilo and 13.0 makuta per kilo, respectively. Also, it may he desirable to change the price relationship between the varieties, since a more dvnamic situation is now found in the robusta areas.

1i. ExDerimentation with coffee is beinig conducted by the large plantation comPanies. What is required is a research and development prop!ram directed and adTministered by the government, with the aim of dissemin.ting information, new seeds and seeelings to the smallholders. That program should be financed through the general budget for agriculture.

13. Palm Oil Policy. Palm oil exporters are required to sell a portion of their production on the local market, at an arbitrarily low price -- Z 62 per ton as compared with export prices of Z 106-110 per ton. There is, however, considerable diversion of oil intended for domestic supply, und a continuing scarcity of oil for domestic consumption. And instead of b,eing low as intended, local prices are often higher than the export price. Furthermore, the stipulated domestic price is below the costs of prodiction generally prevailing in the industry.

14. This means of supplying the domestic market with palm oil is not working. New private investment in the palm oil industry is also being discouraged -- remember that Zaire i.s in competition with other producing countries which do not impose such disadvantageous conditions on the industries. If a free market were established within Zaire, the normal forces of supply and demand would draw from the available supply the oil to fulfill demestio-rQquirements. Prices would uot tend to rise and, in fact, as local sunpry increased, local prices might fall from currently high levels. Elimina- tion of the domestic marketing requre-ment not only would enhance the position of the export trade, but would improve the investment climate in the palm oil in.dustry. Moreover, the palm o:[l producers, with improvng margins, would be in a position to offer better conditions to attract workers.

15. Agricultural Wages. Decrees governing minimum wages throughout the CountrY are intended too eltminate inequit.ies and t.o ass-are workl-ers a minimal level of living in agricultural as well as urban areas. There is a de-ree of differentlat40n wlthin each labor category to allow for varyi'ng conditions among regions and zones, but the tendency under this system is tiowarA, stCandardA4.zatUisonn aLmonon. gtL-,e varLious areas. 'n 191, a 2u0/ i-cLease in the minimum wage scales was decreed, following a 1970 increase of 15,%. These were across-thL[e-1ar iLcLeases.

1.n , Wage policy debates in Zaire may overLook important considerations. An increasingly severe problem is being created by the fact that the basic cash wage accounts for oniy half the global cost of labor to the rlanter or the p1antation. For example, the present minimum wage cost of 10 makuta rer dav is doubled by the addition of various social welfare costs, so that the actual dishursement for the employer approximates 40 maklfu eta. ANNA A Page 5

17. It would be highly desirable to relate mininum agricultura' wages and, especially, welfare benefits more closely to the country's stag2 of development and to output and employment objectives. The compet'tiuvs position of Zairan exports should be a legitimate concern of wase pclicy. If the effect of higher wages were to price Zairan commodities cut of the world market. the benefits to the worker would be transitory indeed. The rubber industry is a case in point: with the cost of productior. .ow anoroaching the exnort nrice, there is no margin for further wage `n reases. In regions where palm oil yields are low, labor costs may be the detnnmining fa_tor as to whether or not nroduction. should be continued in a g`.ven area. Agricultural wage policy, therefore, must take into consideration both sides of the issue -- costs to the producer as well as mninmum level of income for the worker.

1R. The Ports Problem. Conditions in the port of Matadi are a major impediment to expansion of the export trade. 71h- basic dlffi-culty in that the port is limited in size. There is no possibility of expansion. The pvort of Bnnma, on thLe other sidle o0t- itheriver , 'Ls usefbul only for loading limited cargo from the Mavumbe such as palm producta, forestry products, and s..me coUIi'ee ar.d cacao. LT le present goverxLliUlrle po'li±cy of' char.neLli more copper from Katanga through Matadi, rather than shipping via shorter, more ULrect routes to Lobito in Angola or tO ports on tile Irn,iLan Ocean, Is aggravating the congested conditions in Matadi.

10. T)elays of several weeks to several months at Matadi are reported ,byexnorters. if' A principal cause of these deiays is that many ships now are passing up Matadi because they do not want to spend time in port waiting their turn to load. Whnen the mission visited Matadi and Boma, tnere were tWo ships lying off Boma, waiting to go up to Matadi, and five ships waiting at Banana. The average turn-around time in Matadi is said to be einht days, but frenuently is much longer. Because ships pass up Matadi, it becomes increasinglv difficult for exporters to find ships to go to specific destinations. This is particularly true for shippers of small lots, because it is uneconomic for ships to spend the required time in port to pick tip small cargoes.

Moreover, labor discipline has seriously deteriorated in Matadi. Fxnorters state that direct payments must frequently be given the work- gang supervisors to get action on a cargo. Pilferage runs as high as 25% on imnorted merchandise between discharge at Matadi and arrival in Kinshasa. Pilferage is less of a problem with outgoing shipments, however. Palm oil exDorters have special loading facilities which are under constant sulrveillance. It Is clear that the general labor situation at the port restlits in substantial increments to the normal costs of transit. The

11 Tn the case of coffee, these delays are further to the one-to-three mlonth transit time from the interior to the Office du Cafe Robusta in Kinshasa, anA the three-or-four month wait there to have the coffee processed. ANNEX 8 PaRe 6

government has recently appointed an expatriate port manager. It is not known howz much- freedom of action has been given him, hutt he should be in a position to improve the operational factors.

21. The only long-term solution, in the face of the rising volume of port traffic, is the develonment of the port of Banana. Some feasibility studies have been made, and further studies are being made as part of an integrated plan for develonment of the Voie Nationale from Lubumbashi to the nort of Banana. 1/ The primary concern is to expedite the movement of a mtirh larger volutme of conner, but this develonment will benefit a11 export trade.

22. Problems related to coffee shipments have been under study by tho rnato-l NMnt4nnn1 euCrqt fp- nmartie iAlnrlv, (a) ovgtio.n in t-ha porte of Kinshasa- (b) the inability to cope with the seasonal peak of coffee movement from the interior- and (r) congestlon in the port of Matadi. As relations with (B) Government have improved, the CNC has been investigating the feancibilitv of shifting snme of the tdirpt cnffpp shipment to the Brazzaville-Pointe Noire railroad. The findings thus far have been dis- courag4ng. That lin.e's car-ying capacity apparently is saturated. In the event that political considerations permit, development of this alternative route may ben enomic.n4 f pro4 ect coupled-ally with a "…razzav.il Kinshasa Bridge across the Zaire River.

23. Internal Transport. Internal transport difficulties are a serious problemn 'Lor exporters . Prob.alDly tClhe m.ost serious situatlon existsLin thLe eastern part of Orientale province. From there, commodities such as coLLee and cotton are brought in to KinLshasa or MatadtiU over a r.et-iwurkt tLtI requires from one to several months by truck, rail and river barge, and several possinie transfers from one mode of transport to another; roads are frequently impassable for days in rainy weather.

24. The Vicicongo railway runs to Aketi from a few interior points. From Aketi the cargo is transterred to river barges. in the dry season, special shallow-draft, small-capacity barges are used. For several weeks even these cannot navigate the itimbirl River. Traffic is backed up to interior points. Cargoes are refused because of lack of warehouse space at Aketi, Bumba, and other points. At times, commodities are backed up all the way to the plantations. At Bumba, the cargo again is transferred to large barges going down the Zaire River. Because of the congestion, and general lack of supervision, lots are frequently misplaced and delayed for months.

1/ TMT)P River Transport Study. IDA-financed study of the Vole Nationale comDrisinRt (a) alternate routes -- rail, river and road -- from Tubumbasbh to Kinshasa- and (b) a bridge across the Zaire River at Mlatadi and extension of the railroad from Matadi to Banana. ANNFJX e Page 7

An extension of the Vicicongo railway from Aketi to RUmba will eliminate the delays due to lower water in the Itimbiri. Transshipment from the rail-aV to barges at A-ket4 will no longer be necessarY. At Bumba, cargo can be loadecl directly from the rail cars to the large river barges or the 7aire rLver-Lbo-uUnd fLcor Ki.nshasa. CoUpletion of tLhe new rail extLUension is scheduled for 1973.

'Road transnort costs are'high mainly because of the high rate of break'-doiwn anO the short depreciation period (two years instead or five). Manv trucks are lost because of road conditions, e.g. collapsing bridges. Poad rehabilitation deserves high priority.

27. River crossings are the most vulnerable part of the internal transport system. In the Cataractes district (midway between Kinshasa and Matadi), the region north of the river, particularly the Luala valley, is practically isolated. There is a good road to the Zaire River from the vicinity of Tnysville, but the ferry functions only intermittently to Luozi on the northern bank. The area around Luozi is an excellent source for grounrnuts and other crops. In the Kasai, there perhaps are five ferries in use, of 85 that once operated there. At Matadi, the addltion of two or three ferries could facilitate the movement to the Kinahasa market of produce suc!l as bananas, in particular, which are no longer exported. Rehabilitation of the ferry system is most urgent and, in certain localities whtere ferries are the key to transport movement, such work should be given priority over all other transpott projects.

Patm Oil

Fxnort Trade. Palm oil is the most important agricultural commodity exported from Zaire, accounting for 40-50% of the total value of all agricultural exports. Zaire ranks second among the palm oil ex- portinR countries,, on a par with Indonesia and Singapore. Malaysia has very sharnly expanded its production of palm oil and has become by far the leading exporter, renlacing Nigeria whose production contracted very sharply.

7n. TThe palm oil export trade is heavily concentrated among the subsidiaries at uInilever and the important trading houses in Belgium. Thirty- five comnanies are organized into a trade association, Congopalm, which is dominated by a few large companies. This group represents R2.5% of palm oil exnorts. Congopalm acts as sales agent and has an agency agreement wilth the Societe Commerciale Anversoise. The Lever Company is the biggest palm oil, producer in Zaire; plantations of its two companies, Plantations Lever and Societe des Cultures, produce half of the national harvest. Lever has outlets through the parent company, but it may elect to sell on the market through Congopalm, of which it is the largest member. Companies not memberq of Conqopalm are: M5V/Sietac, with 4.1% of total exports; CCP/HPK, With A.Q7: Madail, with ?!%-- and Revea, with 4.5%. Thus, nornmembers account for 17. "t of totAl. exports. ANNEX 8 Page 8

in. Approximately two-thirds of the palm oil produced is exported. 1With domestic demand for oil rising, total output will have to expand con- tinuously to maintain the proportion going to the export trade. Normally abourt 9n7' of palm kcernel oil, a higher-value Droduct, is exported, mainly to the U.S.A. Of the byproduct palm kernel cake, more than two-thirds has been exported in recent years. Palm kernel products are produced mainly by Amato, Flbema, JVL, Madail and PLC (Lever). Export of palm kernels was Drohibited in 1969.

31. Palm oil exports in 1968 had recovered to 90% of their preindependence volume (Table 1). However, world prices were very low, and exchange receipts amounted to only half the 1959 revenue. Export volume dropned in 1969 and 1970, due in part to unfavorable weather conditions. The world market was higher in 1970 than 1969, so exchange receiDts were sharnlv higher in 1970 on similar volume.

3?. Production and Consumption. Oil palms are to be found in all lnw.Ind areas of Zaire. Plantations. however, are heavily concentrated in Equateur province, which produces one-third of the national total. In RanAi,nrlu, w1hpre tlhe largest area i8 harvested, there are mainly natural stands -- yields are very low, and the tall trees increase the difficulty of harvest4nr. The data shown in Table 2 hlave obvious shortcomings, but they illustrate the extremely low yields in that province and also in Kasai "cci8enalher naura sends -r an. important componientofteoal Data for earlier years show the rapid recovery of palm oil areas and yields.

IaLVLn_fortunately, dIsore attemptsI th r ie.- In . 1968 to estimate the natural stands bein harv.e-sted have distorted the series. ANNEX 8 Page 9

Table 1: EXPORTS OF PALM PRODLCTS

A. ?aimr Oil

Index Volunv eiaLUe Volune Val ue (ton) ( r,Oo Z) 9 I 0)0195

1954 159,691 18,654 100 100

19h6 78,026 8,441 4Q 4. 1467 108,486 11,115 68 60 196R 141,217 8,676 90 47 1469 124,995 9,731 79 52 197n 123,473 14,800 78 79

P.. ailm Rernel OilI

1959 60,654 8,963 100 100

1966 32,273 4,127 53 46 1Q47 37,3n3 4.063 62 45 lnohpt 44,814 7,245 74 81 loq6 41,929 5,778 69 64 197n 5n,Z51 7,01n 83 78

' Palm Kernel Cake

105 61,141 2o004 _io 100

10Qh _ __ 1,0m 46 52 1q67 37,423 1,363 61 68 1l A 44,903 1n,502 73 '5 1979 51,232 1,500 84 75 1n7n 5n,71 2 82

Source: Ministere de l'Economie Nationale, Colnjoncture Economigue No. 10, Octoberl7Oi SoCSjU.JS~ r.-ro… Octoher.t 97n Coc4 -Xt Zal ise Ae Su-, ilance and Banqun Nationale . ANNEX 8 Page 10

Table 2: PRODUCff ON OF PALM OfL BY PTrOVTNCF, 1968

Yield Province Ilectares Tens Per Hectare (ton)

Bas Zaire 12,607 17,413 1.38 Bandundu 293,970 /1 60,307 0.21 /1 Equateur 73,704 81,167 1.10 Haut Zaire n.a. 39,613 n.a. Kivu 8,327 20,563 2.46 Kasai Occidental 63,991 10,831 0.17 /1 Kasai Oriental 4>059 12318 3.03 Total 456,638 242,252 0.53 /1

/1 F,tirnates are very crude because natural palm stands are included.

Source: Ministere de l'Agriuulture.

33. Tne best ecological conditions are to he found in the Cuvette in Equateur province. The large modern plantation companies are located in this re,ion, where about 25% of the national crop is harvested. They are active in replanting with higher-yielding varieties and applying modern nroduction techniques. The replanted areas are expected to yield 3-3.5 t of palm oil per hectare, as compared with yields of 2-2.5 t from the older trees. Increases in output in this region are expected to be about 2,000 t Der year. Renewal of plantations is important for harvesting, because the trees become too tall for economic cutting of the palm fruit after 25 vears.

314. The largest area harvested is In the Kwilu area in Bandundu province wqhere the oil palms are mainly natural stands. This is the geographic supply area for Kasai and Katanga. Yields are decreasing mainly because of reluctantce to harvest the tall trees. Palm oil is the principal cash crop for the peasants in the region. Although ecological conditions are not as favorable as in the Cuvette, palm oil production should be encouraged because of the social consequences that may ensue should this cron be abandoned: i.e., a large-scale exodus to the cities may develop. Moreover, Kwilu is the natural supply area for the rapidly expanding urban markets in Lubumbashi, Luluabourg, and Mhuii-Mayi.

35. The Uele and Maniem regions are imDortant sources of palm oil supDlv for Kivu. IJhile ecological conditions are not as favorable as in the Citvette. economie nroduction is feasible. Smallholder plantations cbaracterize the palm oil industrv In these regions. Revitalization of these qTol l nI ln"-4mria ic urivent) fronm t:inehstrndn1nt nf snoial policy. Since the smnll71lnMers are not in nosition to obtain new material for replanting, tbe n1antat1ton are ra"lf anproaclne the end of t-heir eronomic Iflfe hesne Small.bhoMders mav soon ahandon their over-age trees and converge on tha Cl.ties. ANN-.M S Pa,(j: 1 1

wk. There is growing domestic demand for palm oil as ithe levrel of income in the towns and cities rises. In addition to sales in the local markets and on-farm use, palm oil is utilized by the food manufarturing industry and bakeries. Data in Table 3 give an idea of the order of magnitude of the quiantities of palm oil and kernel oil that were not exported in previous years. In recent years there have been some unregistered exports of nalm oil to neighborin- countries. The palm kcernel oil retainedi in Zaire is utilized mainly by the soao manufacturing industrn. There ap-'arently is no Problem of' diversion of supplies of palm kernel oil to zlarn-'estine channels.

Table 3- APPARPNT COTSUMPTION OF PALM AND KERNEL OIL

Palm Oil Palm Kernel Oil

j059 RA?,55 - 1966 46,644 4,790 1 QA7 40,97L 4,533 1065iR /'1 101,035 3,654

/1 The' 1Q$ ata mayi beh noversate-dA fo%-r nnlm nil

So,rc,e Ministre de 1n'Agriculture. Mistere e l mie Mationale, Conjoncture Economique No. 10, October 1970.

17. Government policy aimed at ensuring domestic supplies is not working as intended. Palm oil export ersps ' must supply the domestic market before consipning supplies for export, but government directives are aribiuous as to whIat C;nstiLtutes sufiier,;- supplie.T is no system of registering or reporting such transactions, but the exporters na'LntaiLn records against thLe ever[Lua'LLty o' enquiry U> a goverrLimELe.t agencv. Trade sources say that a quarter to a third of total availabilit:ies aref-dL~ channe.le.lLIdIiIC.e(i toL localJACJ ,jureaUS.JU dU Ted,.si1I UUI1I~LCtL.L 1 aepie. fJLL.A tplt-b the government, is extremely low -- Z 62 per ton, as compared with the export Dr.jce of' 1!03-11 per ton. substLntLial i.LLfLCLence creates a situation whereby it is extremely profitable for local buyers to divert t'ne ohlL Jnto covert export channels. A scarcLty o1l oL±4 on ±ULA.IL0LcrILNs is evidence that the system is not operating as intended, and it is reported that actual retail prices go as hiph as 17 makuta per liLter -- equivalen.t to more than 7 170 per ton. Such a situation is naturally conduci4ae to "under-the-counter" trade practices, pilferage, It and opportunistic onerators. Private truckers purchase palm oil in the Uele and transport it

1_ The transport situation also contributes to pilferage, particularly on the long river voyage fron the interior on the OTRACC) system. Recent measures, Such as stationing guards, using drums that: are harder to roll off the boats, etc., are reported to have decreased pilCerage 1.osses suhstanria.t. AINNE X Page 12

to r"ivu, wnere it is sold iocaily or taken over the border tO Uganda where prices are hipher. This trade encourages enterprising peasants in the Uele to crusn their palm fruit by crude means and seil the products directlv. A similar situation exists in the Bas Zaire near the border of Angola, wnere Portuguese traders encourage the peasants to crush their own oil and sell it across the border.

38. W^hile the government policy behind this confused marketing situation obviously needs to be changed, it should be noted that the peasant growrers are responding to economic incentives. The crude methods of crushing require much effort, and the yield of oil is very low. But the peasants still earn more than they could by selling the palm fruit to the local oil mill. One would assume that the oil mills, with their much greater extraction yields, and the attractive prices for palm oil, should he able to make it worthwhile for the peasant to elect the easier task of nicking more palm fruit and delivering the whole nuts to the mill (it is noteworthy that, in Uele, oil mills recently raised producer prices by 5n'%). The minimum producer price presently is 0.35 makuta per kilo. An important consideration is that the peasants earn a dual income when they nound and crack the palm nuts: they sell the oil and cake themselves, and in addition they sell the palm kernels to the oil mills. A free market in palm oil would wark in everyone's interest.

30. Cost of Production. Exporters' estimates for costs of production are in the range of 7 75-85 per ton (US$150-170). This range is well below the current export prices of Z 106-110 per ton. The actual margin is reduced first of all bv transport costs which add considerably to basic costs: from Yaligimba to Kinshasa, OTRACO tariffs amount to 7 4.35 per ton: from Kinshasa to Matadi (FAS basis) is 7 1.62 per ton. Transport from Kisangani is slightly higher than 7 6.17 per ton. Then there are the exnort duties and taxes: an export duty of 27 ad valorem; a statistical tax of 1%: a Taxe de Selection of 2%: and a TCA (Turnover Tax) of 6.75,' - a total of 12.0% ad valorem. On a valuation of 7 110, the charge would be 7. 13.79 per ton- at 7 106, it would be 7 13.25. On the basis of these figures, the current margin on exports is roughly as calculated in Table 4. Thp hf=her nrndurition rncct ranve would allow very small margins, on the order of 7 1.75-5.25 per ton. The lower end of range is more likely to holA fnr tho mTrne effic-ient- n-rnrlir.uers. ANNEX 8 Page 13

Table 4: ESTIMATED EXPORT COSTS AND MARGINS

(7 per ton)

Exnort Price 106.00 110.00 Exnort Duties and Taxes -13.25 -13.75 Transport to Matadi. (FAS) - 6.00 - 6.00 Net ExDort Proceeds 86.75 9n0.25 Cost of Production (Low) 75.00 75.00 jargin 11.75 15.25 Cost of Production (high) 85.00 85.00 Margin 1.75 5.25

Source: Various, see text.

An, Tn addition to the exnort duties and taxes, the producers position is arbitrarilv affected hv a heavy taxation of fertilizer imports. Presiently, the l,evv consists of a Fiscal Tax of 5% ad valorem: a Statistical Tax of 3%; and a Turnover Tax of 8.757 (on the total value of duty and tax). These imnosts act as a strong disincentive to the wider use of fertilizers and thev should he rescinded. Benefits to the economy from higher yields and i.ncreased exnorts would outweigh the loss of fiscal revenues.

41. Export Prospects. The world market outlook for edible oils is favorahle over the short term. Over the longer term, surplus conditionst are forecast. Sunnlies of palm oil are expected to expand by more than any other edlible oil -- by 2950 to 1.6 million t, by 1975. The main factor will be a sharp expansion in outout from new plantations in Malaysia. Pressure on nalm oil prices probably will be somewhat more pronounced than pressure on the edible oils nrice structure in general.

4?. The world market price is expected to decline to a range of TTSA155-165r per ton (rTF), or 7 78-88 by 1975. That range is roughly the sane as the range of production costs ex-plantation. nut forward by the exnorters (Table 4). Higher yields would enable exporters to lower their hreak-even point. On the other hand, input costs, particularly labor costs, w%ill_ Increase, miltgrating to some extent the benefits from higher yields. The marlket nrosnerts underscore the need for g,overnment measures to improve margins to exporters, as well as provide incentives for modernization of Drodlc-tion. As mentioned nreviousl-v these measures are to rescind the renuirement to sell. palm oil locally at an arbitrarily low price, to elimlnntp dnt-es andA taxes on agricltural irnntttsj and to reduce export taxation.

Al. The Banque Nationale has made forecasts of exports to n7r (TO.klp r). Palm o41 exnorts are to equal thp-xpect 1959 voliTme by 1^7f, CnJ4 In 1075 sl'inments abroad would exceed the 1959 level by 7%. That ".7o1d4 annenr to Be a rather modest l.ncrease but, in comparison w1Tth 1q7l osnorts, thre preAicted eqPanst.on is of the order of 3P7. In view of the ANOX 8 Page 1 i

dvnamic Ioca1. demand situation, that would li-mly a inuch higpher rate c imorovement in nroduction, 'Further recuo earion of abandonerl acreage, andl surhstanitial nexr production would be necessa"r to cover the projected qhirnents.

4e4 . eSome of the 'arger- Dlantarttions are rjursuing, replanting programns, andl tbit-s are delenonRtrating their confidflece in the market outlook andt int the comnetittve cavacity of Zaire (this is it' snarp contrast to the situation in the rubber sector). The present replcnc{Tg prograin at Lever will about meet renewal requirements, whereas at CCP an increase in acreage of ahout 1,non ha im planned. These activities are b;e1ing concentrated on thieir plantations in Equateur province. But it is problematical whether the npans of inriustry as a whole. so far as they are kiown., Justify the optimistic ex-Dort forecasts. It shotiutl be Lborne ill mind that replantings recitre seven years to artain fl'. product`dmi. The course of future production will depend largely oin autoimoniicus factors - political stabitity in the Droducing areas, the labor situatiouvi and governTment policy regarding taxation. No firm technical basis e fistsvor evaluating the trade projections in Ta¶'l-e 5. -owever, the order of magnitude is within the range of nossfhilitV.

Table 5. BANOLftF MATI["i.S; n)RFCAS

I IN r. E, t Volume llnit Price vUalse Vcluie Unit Price Value (ton) (lM ner kirlo) (Wt, 7)J^ aron)( 7}4 A. Pa 1 t. 041 E.xlp;-rts

1971 1Vn¾0n0 9.54 I 14;5 84

1o7? 140,0nnO 9.5( 14a,2'i 1:C. 79 96 107L 1e06),n5 j,200 130 79 103 1075 170,f100 9. 5s Th,1i5J 38 79 109

1 71 .50,00n 12.04 6,020 I00 86 86 1Q72 55,000t t2.o( , C 86 94 1(71 Cn,000 12A0r103 7,z 119 86 976 /0 65,f0017 7, O0 86 111 1Q75 7n,l)(0 12.000 4W; 86 120

Source: Banque Nlationale, Pre`viioLs tE- F.portations de Produitt Miniers et de Produits Agricolie, 1971-75, April 1971.

1. The PrIce forecast used by the Ytanque Nationale -- 9.5 makuta per 1-41o OyqtlT s rer ton) -- is more optimistic that: the IRTD rrojection of !T1C! 17DY for the next feour-vear oeriod, although it is below the recent t.0V 1. o0re4 e rrer , oft' y r eon. rne once trojectiOtil, ANNEX 8 Pa ge iJI15I annlied to the export volume forecast for 1975, would bring expected foreign exchanqe earnings down to 7 13.2-14.q million, or 89-100% of earnings recorded in 1070. The best oossibilitv that can be foreseen, in the event: that the volume forecast is achieved, is that exchange revenues will never recover to the 1(7n level.

IL6. The anrnque projects palm kernel oil exports in 1975 to be 3n0% greater than in 197n. This projection is more tenable because there is 1.ess domestic demand for this higher-value conmnodity. Export prices for kernel. oil. over the mediutm term are forecast at uS.24n per ton, as compared T7ith an averaee quotation of T.TSl79 per ton in 1970. This price forecast is more tenable than the one used for palm oil, because expansion in world sunn,lies vil.l noit be as dynamic.

%offee

47. Exnort: Trends. Cof fee has been second in importance to palm nroducts among agricultural exports. In recent years, the share of coffee in the exnort trade has increased to almost one-third of agricultural exnorts and its share of total, exports was 3.8% in 1969. Data are given in TahlT 6. This exnort performance was achieved despite civil disruptions in seoveral important producing areas. The upward trend in world prices undoubted%Y has been a ma inr factor encouraginR planters to return to the troutled areas and rehabilitate their plantations. In Equateur province, which was not affected bir the disturbances production has i.ncreased, comennsatinc in part for the lost production elsewhere. Drought conditions are affeetinnq riirrent stinnlv -- buit the uptrend in exports is expected to accelerate insofar as exnort quotas permit.

Table 6: COFFEE EXPORTS

I N D E X vTO1l.Umne V8A lue TTnit ValUe VoUlitme Value Unit Value (ton! ('000 7) (7 per ton) ------(1959=100) -

105n 5r,% 2797,5nn 39.8 10o 100 10o 1068 S,e0On 12,905 25.5 90 56 66 1 0f7 68.z100 1?',7F 18.6 120 5'6 47 1065 57,n00 16,28p 28.5 101 72 71 19h0 45,017 12,06(1 28.8 80 58 72 107n 2.,0n0n 24,450 39.4 110 1 r9 99

ASlrcPS ..1T. c ,c4'tU taYos de -u.illa-^and Bannue Nationale,

A - 'lfjis the os t it.m o rtta rketLLma fer the robusta exports, and nr`inarr.l tal'es ahbo'it one-third of the total.. Zaire rohblsta is stronger St. .: flrc~,.otov…r Afiric,…n countries, anA i ferd for the ANNEX 8 Page 16

-xwresso roast in Italy and southern France. Other Common Market countries

anrI tFII ,I* .S also ii p L.Lt L Y, q1uantiiest*-L1 -)LCZaireroIbusta. of Za're LUIUtL imnorters of iwvu arabica are the Netherlands, Germany, and the United

II. rnuring tne years oi troublee in Zaire, Lnere reporteoiy was lsu)stantial volume of clandestine traffic across the Uganda border: cOrfee was moven iv planters across the borner to evade taxation- at tne same time, coffee was being brought in from Uganda by exporters to ship ou! une1er the Zaire quota. This two-wav trade rlnurished because tnere fTas a surnlus in Uganda and, in Zaire, production was far below the cquota. Tn the mid-1960's unrecorded snipments aiso crossed tne frontier into Tanzania, Rwanda, Burundi, Sudan, Congo (B), and Central African Oepuhlic. it Clandestine traffic in coffee is no longer a major phenomenon. 17ith the rapid recovery in coffee production in Zaire, there is no demand for UtRanda cotfee trom exporters. Tighter control at the borders bas eliminated clandestine exports to TJganda and other countries to evade taxation. This traffic also is being discouraged by TUganda, which has a serious surplus problem.

5n. The bulk of coffee exports are concentrated among a few large exnorters. migros-Comiture, the largest cottee export house, and Carecongo, a coonerative of large plantation companies and exnorters, each account for ,n of the coffee trade. Five or six other large tirms control most of the remairder. 'However, in the past year or two, the high level of coffee nr.ces has attracted manv small firms and also individuals to the coffee exnort trade. Because the volume of documentation and administrative work lias hecome onerous, the CNC may limit the coffee exporter list to those who can exnort at least 500 tons per year.

'1. roffee Quality. Coffee qualitv in 7aire is well standardized. The bulk of the robusta coffee is of superior quality, unwashed. The N2M grade accounts for about 75-A0% and small quantity of 1W2B (washed robusta) would add to the percentage of this grade. The OCR facility in Kinshasa rigidlv maintains the standards through its large bulking facilities, which process half the robusta exports. Together with the MICROS mill in Kinshasa, nearly three-quarters of the robusta coffee is standardized prior to bagging. Por coffee prepared in the interior, OCR samples each bag before export. Fach sample is subjected to the complete cycle of grading, roasting, and taste tests, and deficient lots are held up for resorting or regrading. This procedure is very thorougph and has earned a good reputation for Zaire coffee in world markets.

So. The arahica testing facilities at Goma follow similar procedures fnr tst-e and arona rharacteristics. Considering the high altitude at which ANNEX 8 Page 17 most Zaire arabica is grown, export quality appears to be oni the low side (Table 7). Improvement of primary processing facilities would favorably influence the final quality. Better prices would compensate for the expenditure on processing facilities -- mainly the pulping plants on or near the smaller plantations.

Table 7: ARABICA EXPORT QUALITY

Arabica K2 .... less than 1% K6 .... 5.7% K3 .... 11.3% K7 6.1% K4 .... 56.2% K8, K9, rejects .. less than K5 .... 17.8% :1%.

Source: Office des Produits Agricoles du Kivu (OPAK).

53. Coffee Production. Coffee is grown over wide areas of Zaire, but plantings are concentrated in Equateur, Orientale, and Kivu provinces.. All the arabica production is in Kivu province. The total area planted to coffee was estimated at 160,000 ha in the 1968/69 season, of which 80,000 ha were in production (Table 8). Planted area as well as area in production have increased in all provinces since 1959, but with relatively less expallsion in Orientale and Kivu provinces. 1/ Smallholders are exoanding more rapidly than the plantations. That is because the plantations are experiencing difficulties in securing labor in some areas, and also because of the investment climate in general.

1/ According to the CNC, in 1959 there were 150 European coffee plantations; I X000 ruropeRn ,-.i-ed planta-tior..s; ard 250,nn0 Z'70ran coffee plante-s The European planters employed 140,000 workers, while the Zairan p lanters' famllies n.bered 1.5 million persons. ANNEX 8 Page 18

Table 8: COFFEE AREA UNDER PRODUCTION BY REGION (1968/69)

Hectares Percent of Total Areas

Bandundu 2,500 5.0

Bas Zaire 1,500

Equateur 22,300 27.9

Ubangul (14,300)

Haut Zaire 33,000 41.3

Uele (28,500) Ituri ( 3,500) Kisangani ( 1,000)

Kivu 14,700 18.3

Kivu (12,000) Maniema (12,000) ( 2,700) Katanga 1.000 1.2

Kasai 5,000 6.3

Sankuru ( 4.000) South Kasai ( 1,000)

Total Area under production 802000 100.0

54. Detailed data on Zairan smallholders production are not available. Usually a family cultivates 1 ha or less of. coffee. For a major proportion of the Zairan planters, yield of robusta coffee probably is in a range of 800-1,000 kilos of dried berries per nectare. Tne smaiinoider takes his coffee berries to a nearby plantation to sell, or sells to an intermediary wno tours the Dush collecting small parcels. Tne minimum price for dried coffee berries is:

Robusta

6K per kilo ... Bas Zaire, Bandundu, Equateur

5.5K " ... Beni Region (Kivu)

5K " ... Other provinces

Arabica

14.5 K per kilo ... Kivu, Ituri for parchment coffee. ANNEX 8 Page 19

A peant fam41y wrhicb.h4hh- I ha of off expect to ear., at6 per kilo, Z 48-60 in the course of a season. This works out to 20-25 makuta per perman.=day ~ ~ for. . 240e&J£F4 J days, t-he169 estimated%aJ. L .U U la-1rLUU1J& AL~U.in-put ofJA. a,GLLarmL a-verage f-'fdyan.LLy. This is equivalent to, or better than, She min-imum daily wage for plantation labor. But the labor time ,r the feL±UW *o aMso QWVULCu Lo fwuudcrOpS, 8 %LCf as groundnuts, maize, cassava, etc. An accurate analysis of time spent orly on the coffee crop -- which brings in tue casn income -- probaDly wouild sow a substantially lower labor input and a higher rate of return per man-day. Coffee probably yields Dy rar tne mooSt *ucrative returns per unit or labor input.

55. No attempt has been made by the government to inform the peasant:s of quota limitations on export sales, or of a probable drop in prices. TIhe present producer price is justified by, and, tn fact, quite low relative to recent export prices. At the same,time, however, it sets the conditiotns for serious surplus problems.

56. Coffee probably is also the most lucrative agricultural commodil:y for plantation agriculture at the present time. For robusta, the cost of production in 1969 was estimated at Z 3Z9 per ton FAS Matadi, plus Z 45 per ton for duties and commission. The total of Z 374 per ton compares with an export values of approximately Z 410 per ton -- a comfortable margin. This production cost figure is based on a calculation by CNC for a 300 ha plantation, yielding 1.6 t/ha,*in 1968, adjusted for a 15% increase in costs for labor, supplies, and general expenses. The production cost breakdown: labor, 34%; expatriates, 14%; supplies and general expenses, 35%; amortization and replanting 17%.

57. For arabica, total cost for prantation coffee does not vary greatly from the robusta cost -r Z 370 per ton placed on the frontier. In the case of arabica, an additional cost of Z 40 per ton is incurred in shipping to Mombasa. The cost, FOB Mombasa, of Z 410 per ton compares favorably with recent quotations for i(ivu 4s of Z 467-475 per ton. The cost figures are from a study by a planters group in Kivu. Plantation costs were not detailed. On a kilo basis, the total cost at Mombasa was 37 makuta, of which primary costs were 25K for parchment delivered at OPAK, plus 2.3K for processing and bagging. The production cost is roughLy the same as for robusta (beach plantation).

58. In future, when coffee is allowed through the customs post at Kasindi, the arabica cost should be lowered by about Z 20 per ton. How- ever, until OPAK constructs a processing plant. at Beni, that saving would apply only to plantations equipped ta prpcess coffee for export. Mean- while, smallholders and small pLantations equipped to produce parchment coffee must continue to send their coffee 300-350 b to OPAK at Goma, paying 4 makuta per kilo for transport.

59. Crop Financing. Credit is available mainly to plantations and exporters. The smallholder is as yet outwtde the credit system. The nominal interest rate has been 7.5-8%, but with various charges the effective rate ANNEX 8 Page 20

was reportedly arounu 12%. hle rate was Deing increasec to 9-9.5%, raising effective rates to around 14%. Because of the scarcity of credit funds, the Sancue Nationale sets a ceiling for each commercial bank,, and on cate;,ories of credit. The ceilirng on seasonal crop financing was recently removed and macde subject to export prices and production of crops. For both commercial loans and seasonal credit, the available financing is absorbed by the strong- est borrowers. non-seasonal crop loans must be covered by 120X of the export price in convertible reserves or deposits of the bank concerned. Short- and medium-term investments for plant and equipment must be covered by varying degrees of convertible reserves or deposits. This requirement limits such investment Dossibilities to the large plantation companies or export houses.

60. The producer price (mercuriale) is used as the basic export value on which duties, taxes, and credit advances are calculated. It is period- ically adjusted for changes in the world market. In the case of coffee, the mercuriale is based on the ICO weekly Indicator Price with a considerable time lag. IThen the exporter ships the coffee to Kinshasa or Matadi (or to Hlombasa or Dar-es-Salaam) the commercial banks can advance on the basis of the OTRACO documents, 50% of the mercuriale. In April, that was set at 44 makuta per kilo. Of the 22 makuta per kilo obtained from the bank, the exporter is required to advance the planter 15 makuta. In practice, the proportion advanced to the planter may be less than the two-thirds required. Recently, buyers in the interior have been accepting coffee from planters only on consignment, on the basis of an advance. Full payment is made when the coffee is sold and exported -- a time lag of up to a year.

61. In recognition of the difficulties being encountered in the port of Matadi, the Banque Nationale has decreed a temporary extension of 30 days on loans to exporters on their stocks at Matadi.

62. The Storage Problem. The CNC has submitted a proposal to the Coffee Diversification Fund to build a warehouse in Kinshasa. Partlvy more storage is needed because the OCR processing facilities are inadequate to handle the current volume of coffee. But even if the plant were modernized, more storage is needed for administrative reasons. The annual export quota fo,r 7Zaire i- di-videdinto unterttirov nnr4nns dependpnt- n-, numbered export stamps issued by the ICO. During the low season for movement of coffee from the interior, about 100,000 bags were in storage in OCR facilities, a large portion already processed and awaiting shipment. At the peak of the s W.Aeas>hon...4moe i.mAfent MO m~An toil 'Li.e .| o za>o VJLL>OJ ULI.Jv w 11&1* iL s A, **J*~ S\_ Lflt-A--sL G W-LtOL.n, ~*v.. L L1LLI tht*1 v 1eolue IIIL_mms 1D UC1 stored. Rail cars are tied up and areas used for passage are filled, block- ing norr.ialJ~LL~LLULIikci± operations.LcL. AJLLa

63. Considering that the cUzLgbLULL 'n rKinshasa involves all commodities, improved storage facilities would benefit some commodities that would be considered alternatives to coffee, and thus be of interest to the Cofree Diversification Fund. As originally designed, capital requirements were Z 265,000, composed of Z 200,000 for buiiding construction, Z 50,000 for ANNEX 8 Page 21 additional rail siding (to the line from the OTRACO Port), and Z 15,000 for materials handling equipment. The building was intended to accommodate the increase in throughput to 40,000 t (667,000 bags) by 1972. That was based on projected exports of 78,000 t, which is in fact the latest export quota assigned to Zaire. Since the OCR facilities are located in the booming industrial zone of Limete, a warehousing complex several times the scope of the original warehouse, might be an economic alternative. This would offer a flexible arrangement .to handle the peak movement of coffee within the framework of a general warelhousing operation.

64. However, it is stressed that an immediately available partial solution to the problem of storage -- attthe least, relief -- lies in diversion of some of the robusta coffee from the Uele region to the !astern Frontier. That could easily b 4mheA by all.-i.g coffee to pass through the customs posts at Mahagi and Kasingi. The issue is a

e baLe oe t.A.he e . cL nieso bAs_-O 4S ,.noA A ar ------p le - - c from Kivu are in favor. The decision rests with the Government. In any event, thLe issue of upUj-penl theI - asg AUte L l1.ter the arguments in favor of general warehousing facilities in the Limite industrial zone.

65. As aln additional benefit, warehousing space in Kinshasa would enable importers to shift a portion of their stocks from ,latadi to Kinshasa, where customs facilities aLso are available. Such a move was attempted earlier this year, on Government order, in an attempt to ease the congestion at iIatadi. The result was near-paralysis in Kinshasa, and the Government rescinded the order; but the episode underscores the need for improved facilities.

66. The storage problem is also illustrated by the growing stocks of coffee (Table 9). While the stock Dosition takes account of all coffee in storage or transit in the country, the largest portion accumulates in ICinshasa. Moreover, all the coffee exports -- except 5,000 t of robusta and 9,000 t of arabica -- come through Kinshasa en route to Matadi. The heavy backlog in the OCR plant adds to the burden. The stocks aDnroach half the amount of the Zairan annual quota.

Table 9: COFFEE STOCKS (as of Sepntembhr 30)

Tans Bnas of An K1'los

1966 19,7q0- 329,173 1967 29,000 483,343 1968R 26A,700 445,010 1969 33,000 550,011 ANNEX 8 Page 22

67. CNC, ORC, and OPAK. The Conseil National du Cafe (CNC) is the government agency charged with national coffee policv. It orovides liaison with the ICO (remitting taxes to cover the various assessments), and has nresented a national coffee plan to the ICO featuring production forecasts and diversification projects. The principal officers of CNC are officials of the Ministry of AQriculturp. It works clnsFlv with the Offirc dii Cafp Robusta, which has the functions of control, licensing and processing of all coffoe evnorted through Matadi (in effect, nll the robusta coffee except for about 5,000 t exported to the east through OPAK).

68. The Office du Cafe Robusta (OCR) is an autonomous agency, managed b- -xptriates. Its processing plants have ve , obsolete equipment. In contrast, the only other mill in Kinshasa, the MIGROS facility with a capacity of about 150 tA, 4i n". eff4i,.4 moer- opneraio F com L.aaLJ.L, %~ OSJcA- *.. ------.1 petitive reasons, OCR has maintained processing fees that have not covered operating costs. Tnior.O, ORD haA -, ope-ting 108s about Z 7,000 on its processing operation; in 1970 the loss was Z 25,000. In the 1968 period, government subsidies of ZI 31,00J0 covereA roof repa4r, new r.achinery;, anA tractors.

69. OCR also has a small roasting plant supplying the local trade, wiL th a presenr.t throurghput of 1,200 t per monr.th*L. T.he operation proviAes an outlet for residues from its export processing operation which would otherwise b'iediscarded.

nL.. ft.CJ.. ~. f . .. 1.4.& A -1-4 .. V U f.(A AV't ... .. k..A- IV) 70.~litee1I Offi1ceftJ.L±L 'es ProduitsicL UU A.LLA ¶.zr-icoles ,L. LC %AduJ LU.. VU O1i u4u(PVAl~as iA50.ts A.0 headLAOu quarters and main offices at Goma. The coffee mill also is located there. in 17/U a uranlC[i ULL.LLC Wt- UpCaICU L DCLL. Lu .LCLICLU.La AA.ULLLOLL11 Beni and Butembo. A current issue is whether OPAK should build a mill at Beni, to handle both arabica anrd robuusta cofLee. ThLis location would be of particular interest to the arabica growers in the north in the region of Mahagi. Such proposals, whicn arfect the export trade pattern are subject to serious controversy in Zaire among the various trade interests. It deserves to be considered on its merits. OPAK is operating under dilflicult conditions, primarily because much of the plant machinery at Goma was pillaged, and the existing machinery does not function well. A substantial investment in machinery is needed to balance the processing line. An "Opak tax" intended to finance the rehabilitation of the installation, is levied on coffee exports, but the funds collected are not being remitted. Provision of finance is of urgency to prevent a complete breakdown of operations. rhere is also a space problem in the mill, insufficient conveyor belts, and inadequate storage. A large outbuilding, which could be of cheap construction because the temperate weather at Goma, is needed to protect the coffee. Typically, three to four months are now required for the coffee to be processed at OPAK, and the volume of coffee handled is on the increase (Table 10). Private interests reportedly are seriously contemplating construction of a mill near Goma, where it would be in direct competition with the OPAK plant. As matters now stand, the first priority should go to rehabilitation of OPAK's plant. Expansion could be considered as a secondary phase, and there is no reason why this should not be a private facility. ANN-NEX 8 Page 23

Table 10: COFFEE EXPORTS (EASTERN FRONTIER)

Arabica Robusta Total

1966 6,745 3,646 10,391 1967 4,564 2,835 7,399 1968 8,940 2,795 11,735 1969 7,172 4,880 12,052 1970 9,138 5.471 14.609

Source: OPAR

71. Coffee Transport in Kivu. Arabica coffee from the OPAK plant is exported through the port of Mombasa. Coffee is allowed to be exported only through the customs post at Ishasha. The distance from Goma to Ishasha to the railhead at Kasese in Uganda is 130 km. Until October 1970, all coffee had to be brought from the Beni-Butembo area to Goma to be unloaded, sampled, reloaded and transported to Kasese via Ishasha -- a distance of 450-500 km.

72. The new OPAK facility at Beni obviates the necessity for trans- porting coffee all the way to Goma. The coffee, mainly uniwashed robusta, can now be sampled and approved for export at Beni and trucked to the railhead at Kasese via Ishasha, a saving of 150 km, but that route is still unnecessarily long, when compared to the Kasindi alternative:

Beni-Ishasha-Kasese ...... 3)0-360 km Beni-Kasindi-Kasese ...... 130 km Extra distance travelled via Ishasha ...... 170-230 km

Kasindi was closed to coffee shipments because it was the main channel through which the clandestine two-way traffic had operated in earLier years. There appears no reason to continue this policy, since all other products are exported through Kasindi.

73. omestic Consumption. Very little if any coffee is consumed in the producing areas because the Zairan peasants have not developed a taste for coffee. But consumption is growing in the large urban centers.

74. Domestic consumption is estimated at 6,000 t. That figure constitutes the difference between exports and estimated production for the present. Data submitted to the ICO indicate expectations of an increase in domestic offtake to 7,500 t in 1972 and to 9,000 t by 1973. Since there are no data on coffee consumption except the roastings estimate of 6,000 t, there is no way to evaluate the forecasts.

75. Export Prospects. The future export potential depends entireLy on the export quotas allocated to Zaire within the ICO agreement. World coffee consumption has shown a stable growth rate of about 2.5% for many years. In the foreseeable future that trend is not likely to change. ANNEX 8 Page 24

Consumption in the largest market, the United States, which takes almost 40% of annual world imports, is static, and may show slight declines in the future. On the other hand, other countries are generally importing larger amounts of coffee. Tne net result is for little cnange in world market prospects.

76. The Zaire quota can be expected to rise in proportion to the increment in world import demand. An adjusted quota of 75,000 t is estimated for 1971. (Table 11), moving upward to about 79,000 t in 1972/73. Any additional quota allotments must come from distribution of shortfalls in shipments of other exporting countries. But those additions would only be temporary increases. Moreover, such developments cannot be predicted. These data indicate the emergence of a serious inventory problem within a relatively short time. They may be accentuated by the fact that projected domestic consumption increases may be overstated. In 1974, beginning inventories of coffee in Zaire will approximate 60% of the export quota.

Table 11: PROJECTED COFFEE PRODUCTION, EXPORT QUOTAS AND DOMESTIC CONSUMPTION

Production Consumption Export Quota Surplus Production

1970-71 90,300 6,000 75,000 9,300 1971-72 99,700 7,500 76,875 15,325 1972-73 110,600 9,000 78,796 22,804

Cumulative Surplus ...... 47,429

Source: B1aslc dat-a 'from C{C

7 I AA_.._ L.z___CC__v uA L..1. 4'_..L_

/I . WULJ.U %JUXL:C= FL.LAL=O 4&C =AjJ%L_=U L.U C s .L .&= .CWWUA.LLA&6J4XO. Factor influencing price predictions are: (a) the slowness in growth of world co..L'ee consIuLption.; (b) L.he expectation ofi a surUplu situatior. iLr Brazil after the 1972-73 season; and (c) expansion of production in other countries. RefleCting tLe pressure of Cexpandinlg supply, priCes are expected to decline gradually in the years ahead. In 1975, robusta quo- _ j ^ ] t ncytA ~1 _ e 1^s _ LJs__ _It_ J___2J tations are expecteu to be 17% below 170V levels, WHeLC W5 WLlh:U ratbicVA;s may decline by 15%.

78. Aside from the global production forecasts cited above, there are no definitive data on the current robusta situation, but it is certain that coffee plantings are increasing in all the important producing regions -- in Haut Zaire, Equateur, Bas Zaire and Kivu provinces. In the Uele (Haut Zaire) and Ubangui (Equateur), new plantings are of the order of 10% of current acreage. Estimates run as high as 20% for some localities. Plantings may be high in Bas Zaire, but the relative scale there is smaller. In the Kisangani region, which may have been hardest hit of all the coffee areas by the civil disturbances, traders estimate that efforts to recoup some of the abandoned plantations may shortly result in an increase of 30% in production. ANN'EX 8 Page 25

79. Detailed forecasts are available on arabica production in Kivui. Output is soon expected to surpass the preindependence level of 14,700 t. That estimate would have to assume recoverv of mnot of the ahandonnd plantations, because recent plantings would not be in full bearing. On the whole, the forecasts anDear to be overly optimistcir partriiua-rlu 4n view ofthe labor constraint cited by some planters.

Table 12: FORECASTS OF ARABICA PRODUCTION

1970-71 1071-72 191'72 1979=o8

South Kivu 1,500 1,600 1,750 '1,60 Rutshuru 4,000 5,400 7,000 12,000

North Kivu 7, )AA 080 A 9tinn 1 J,0 Ituri 500 500 500 500

Total Arabica 13,200 15,700 18,850 29,100

Increase over 1970-71 +25% +48% +78% +175%

Source: CNC

Tea

80. Export Trends. Tea production has been vigorously pursued in .\Vrd province, despite the fact that the tea region Wa8 particularly hard hit by the civil disturbances. Because of the disruption of most organiLzed activity, accurate data on thLe movement of tea are not available. Estiriates must take into consideration uncontrolled as well as controlled exports., Value data consist of customs decilarations, which accounted for an estiTnated one-half to two-thirds of total tea exports in the past decade. Statist:ics fror. thle Econo-utic Ministry apparently do not take into consideration uncontrolled exports, estimates of which are available from local authorities. Table 13 is based on data submitted to the Consultative Committee, the international control body which hopes to evolve into a coffee-style international agreement. Illegai exports can, in the main, be confirmed by statistics of importing countries. Observers in Kivu estimate current exportabie production at about 9,000 t, which would tend to confirm the order to magnitude of the combined estimates in Table 13. Acceptance o:E the combined estimates is implicit in the export quota to Zaire -- 10,000 t for 1970 -- by the Consultative Commrittee. ANNEX 8 Page 26

Table 13i TEA EXPORT ESTIMATES (tons)

Controlled Uncontrolled Total

1959 n=a n=a. 3,500 1966 5,800 6,000 11,800 1967 5,R00 4,000 9,800 1968 4,700 2,900 7,600 1969 5,100 2,900 8,000 1970 7,800 2,500 10,300

Source: Data submitted to Consultative Committee 2nd Session, New Delhi, December 1970.

81. Contraband traffic in tea is diminishing, however. A substantial reduction in such trade occurred after the monetary reform in 1967. The government is exercising more effective control in the border regions, but according to the authorities concerned, clandestine trade in tea is not expected to be completely suppressed until 1975.

82. Production. The cultivation of tea in Kivu province is a relatively recent development. The first plantations were started in 1940, and widespread planting occurred in 1950's. At the time of independence, tea cultivation was being rapidly expanded. Although the total area planted to tea is now well-documented, it is estimated at 8,000 ha in 1960, half of which had not come into bearing.

83. Altitudes of 1,500-2,000 m and favorable ecological conditions make Kivu an ideal region for tea cultivation. Plantation yields are high, ranging from 1,500 kg/ha for seedling tea to over 3 t/ha for clonal tea.

84. Attempts are being made to encourage smallholder production of tea. OPAK has taken over five abandoned tea plantations that could produce 3,000 t of tea, and organized smallholder cooperatives to operate them. Thus far. results have been disanpointing, due to lack of competent personnel to operate the tea factories. Modernized equipment and competent personnel would have to be brought in if these coonerative efforts are to succeed.

85. The FED haq initlatpd two tea nroiects. one near Butembo and one near Bukavu. Each will have a 200 ha plantation with a tea mill. The tea factories are installed but have to be modernized. Sm21lholder nlantings on 300 ha are to be developed in the area around the plantation. The plantations will have high-yielding clones and the smallholders will be given seedlings to plant. ANNEX P Page 27

86. An autonomous government agency, the Commission Agricole du Kivu, has been created to manage these projects. It will own the plantations and the tea factories. Two consulting firms, Ilaco and Agrar und Hydrotechnik, have been engaged to operate the project in Butembo and Bukavu respectiveLy. The Butembo project is well-established. The Bukavu project appears to be handicapped by inadequate preparation and by landholding problems which have arisen.

87. Production can be expected to increase as abandorned plantations are rehabilitated and current plantings come into bearing in the next few years. Conditions of production are favorable and apnear to iustifv the optimistic estimates of the authorities concerned.

88. Present tea acreage is estimated at 14,000 ha of which 1,500 ha roniszit of smallhonldings. That figure annpears tone optnmiqtir-. if one is to accept the estimate of 8,000 ha in 1960. There has been considerable nlnntina hv qmal11hldprq in r snons:p tn gnvPrnmpnt effortc tn nenntirnae them. The announced intention of the Government to reach a target of 15,900 ha by 1975 also wouild see more tenable. The target: for 1980, of 18,400 ha may be subject to reconsideration, depending on the evolution of the world market situation ir. the coming years.

89. Cost of Production.. Production costs for tea are presently low affording exporters comfortable margins. That situation, coupled with

Governmn.te.t tan -p-olicy w,h - i orie,.ted towaards nan privat-etncuragng investment, has generated interest in modernizing of the tea industry. Ihe limprovement in t"he tea f-CtOri-es mCay not reduce costs, but econorulc gainr will be achieved through a higher quality product that will command higher prices. Better cultivation will raise yields ar.d reduce costs on the plantations.

90. Cost of production calculations 1/ (ex-factory ready for export) indicate that primary costs per kilo amount Lo 15 makuta, p.Lus I.J mMULit for milling (OPAK), and 2.6 makuta for cases (125K for 48 kilos). Various taxes andLU fees briLng thLe LfLnaL ex-factorLy Cost to autU_ 27.6 LumauLa peJr. Private mills probably have lower processing costs than 7.5K per kilo. One company reportedly has a monopoly on tea cases, and it iLa charging the exporters 125K ($2.50), whereas cases can be imported for 87K and are of better quality. Tne tea producers are negotiatLng witn tne GovernmetLL to permit importation of tea cases. That would reduce the cost of production by 1.8K, bringing it down to about 25.80K per kilo. Actual costs of production, aside from the five OPAK mills, probably can be brought down below 25K per kilo, with a little assistance from the Government on the tea case issue. That compares with the world market price of approximately 48K per kilo (Malawi type).

1/ Groupement: des Producteurs de Th'e du Kivu "Note sur la Situation des Producteurs de lhe en Re'publique du Congo". (no date). ANNEX 8 Page 28

91. The export tax was suspended in 1970. To the ex-factory costs, transport adds 14Kv% per kilo for the _omaU---a and-te IV per 1ilo for the Bukavu-Dar-es-Salaam route. Ocean freight and insurance add another IV per kilo.ILL AI com-,parison of costs- ar.du marginsA IsL given1 ir. TableNI It4

- I. VVfldXflt'P tfSi\C'tC AWTY% I.EA"f,~rVT Tabile 14#: EZd.XrORT COSTSa nuiiiI 1

I1970/ -19690~ -(K per kilo)-

London Auction Price 48 31

Freight Goma-Mombasa or Bukavu-Dar-es-Salaam 3-4 3-4

Ocean Freight 2 2

Insurance, Commission, etc. 4 4

Net to Exporter 40-41 21-22

Cost of Production 27 27.6

Margin 12.4-13.4 (5.6-6.6)

On the basis of these production cost estimates, the tea industry was in a loss position in 1969, but from 1970 onward has been in a very good profit position. An export price of about 33-34 makuta per kilo probably would be necessary for the well-managed plantations linked to modern tea factories to break even.

92. Tea Factories. There are 22 tea processing plants in the Kivu. One new plant was recently completed, with a capacity of 600 t. The total installed capacity of the industry now is 15,000 t. However, some of the mills were pillaged, and no data are available on the exact condition of the plants. Efforts are being made to reactivate the closed plants. The new tea factory at Ngweshe is evidence of renewed interest in the tea industry.

93. The 22 processing plants can be classified according to their systems: 11 use the orthodox process, four use the Legg-cutter process, and seven the CTC process. Two mills are changing over to the orthodox process. The main difference in processing is between the orthodox method and the others. The orthodox method preserves the flavor of the leaf. The flavor frequently is lost in the other processes, but the liquoring qiualities are enhanced. Such tea is particularly suitable for tea-bags. The processing phase is crucial in maintaining the quality of made tea. ERnpripncpd Pexntriatp te hnicians are essential in this stage of tea processing, because inferior quality tea sells at a substantial discount on the wonrld n,.rakt. ANNEX 8 Page 29

94. On the whole, Zairan tea is gradually inmproving in quality. Tlhie bulk of exports now is of medium quality. Export unit values are improving, and the tea is regarded favorably by the trade. Traders have confidence in commercial prospects for Zairan tea. It is important to raise the quality enough to change the classification of Zairan tea. Presently, most Zairan tea is classified in the Malawi category, which has fluctuated widely (31K per kilo in 1969, as compared with 48K per kilo recently). The higher quality teas are much more stable in price.

95. Tea Policy. The Government has supported this industry by providing incerntives to the tea producers and exporters to expand output. One possible explanation of the Government attitude toward tea, which is unique in the agricultural export sector, is the commitment it has made to the people of Kivu to support expansion of smallholder production of tea and to provide a good minimum price (the minimum of 3K per kilo of first grade fresh leaves is considered too high by mill operators, who have asked the Government to reduce it to 2K per kilo).

96. The export tax on tea of 12% was suspended in 1970 to enable exporters to compete with Kenya and Uganda in the world market. There i:3 no taxation of tea in these countries and they enioy Commonwealth preference in the important United Kingdom market.

97. Tea is the only commodity that is allowed to be exported from Zaire on consignment, without prior repatriation of exchange proceeds. That concession was made to tea exporters in recognition of the fact that tea is sold throueh the London tea auctions. and pavment by importers is made only after resampling and reconfirmation. Tea is a cdelicate, high-risk commodity. Therefore; the exporters are not in a nositioni to denosit large amounts of foreign exchange for long periods. Assuming normal routine sale at Londnn- the minimum time renqiired to enmnlpte an exnnrt- transaction is 15 to 17 weeks:

Weeks

Processing of Export Documents ...... 2 Shinment to Mombasa or Dar-es-Salaam ...... 4 Sampling and Inspection at Port ...... 2 Awa1 ting Rmharkat1On ----- 2 Shipment to Destination ...... 5-7

Total Time Required ...... 15-17

98. There have been reports of a Government credit scheme to help finance smallholder cooperatives. No information could be found on the details or progress of such a plan, but this seems to be an important political issue in certain sections of Kivu.

99. Domestic Consumption. Domestic consumption reportedly is growing very rapidly, reflecting increasing personal income in the urban areas. Con- sumption was estimated at 600 in the 1967-69 period. In 1970, the domestic ANNEX 8 Page 30 market is estimated to have expanded to 800 t and consumer offtake for the current year is forecast at 1,000 t.

100. Export Prospects. The short-term world price outlook is favorable although a world tea surplus is predicted over the longer term. Shortfalls in the India and Ceylon crops have served to strengthen tea prices. Quotations for Zairan tea in London have been averaging around 48K per kilo. The longer-term price outlook is less optimistic because of the increasing production in many countries. However. a decline to the level prevailing in 1969 is not likely. The longer-term prospects for the world market are clouded somewhat because of the changing internal market conditions in ma4or developing countries. Developing countries account for about 47% of world tea consumntion.

101- The lonaer term forecast of the IBRD for world tea nrices fs about 46K per kilo (average London auction). At that level, the inferior grades are relatively weaker and react downward more Rharnlv than do the better teas. On the basis of past year performance, the Malawi type probably woniuld decline to the low Or middle 30t8. Therefore; it is a matter of extreme urgency to pursue modernization programs and to employ competent technicrans; both in the fields and in the Drocessing nlants, in order to upgrade Zairan tea.

102. Projections of supply have been made by the authorities (Table 15). Thae yield figiures uisad sem reasonable and, in fart, on the low side for the distant years. The area and production seem overstated, particularly for the current year. The IBRR fnrecast for 7aire pnrntdtOinn in 1980 is 18,000 t. Labor problems may be a possible supply constraint. Apparently, the labor situation varies from one location to another. Due to the labrir factors, plantation prospects are reported to be good in the Beni-Butembo region, for exa.m.ple.

Table 1-5: ESITAI.P^TE ADVTA PRDUCTrIPON AM" VITDT

.~~~~Au.c. j 4 .a. un.u.t lLj *a,A ,.J,..,k V4*A A._

A-ea Prod~UC*4onL Yield. per H,a (Hectares) (Tons) (Kilos)

1970 14,000 11,100 794 11 - -1~4I l~f Itn^-1 nfl!' I1 f%1i.fl I / 114,V20 I4,90U 1,049 1975 15,900 17,500 1,101 4""" ~~40t'n1nn1 non I o1rn 1980 to,40U 23,00uu I,2 JU

Source: Delegation of the R.D.Z. to the Con- sultative Committee on Tea. 2nd Session, New Delhi, December 1970.

103. Export projections must take into consideration uncontrolled exports as well as the custoom data. With reference to Table 16, the export projection for 1975 exceeds slightly the IBRD projection for 1980. A major po4lic objecti.e apparently is tn estnhliqh and aain acenptance of nroduction ANNEX 8 Page 3I goals of 17,500 t in 1975 and 23,000 t in 1980, in order that these outptit levels be included in an international tea agreement, when such an accord materializes. The newer tea-growing countries of Africa are in fact engaged in a campaign to obtain recognition of their production goals.

Table 16: EXPORT ESTIMATES AND PROJECTIONS (tons)

Controlled Uncontrolled Total

1970 7,800 2,500 10,300 1971 11,900 1,600 13,500 1975 15,500 500 16,000 1980 21,000 - 21,000

Source: Consultative Committee on Tea, 2nd Session, New Delhi, December 1970.

Rubber

104. 1fort Trends. Zaire is the eighth largest producer of aatura:L rubber. Its share of world output is only 1.5%, however. World rubber prices began to improve in April 1968, reversing a prolonged decline. A high of 29.95 cents per pound was reached in August 1969, partly due to t:he suspension of sales from the U.S. strategic stockpile in February 1969. Tne supply position of Malaysia, the largest rubber exporter, is a significant market factor, as are demand conditions. The market turned lower in 1970. Uncertainties in the automotive industry in Europe and in the U.S. tire industry as well as reduced purchases by China, contributed to the unfavorable price situation. The competitive positions of natural and synthetic rubber are believed to be roughly in equilibrium. in 1968, the'Zairan export volume recovered to the 1959 level, but exchange receipts amounted to on;Ly 62% of the formier year's total. Planters have not been investing in repLant- ing and maintenance, and the quality of the production stock has declined. ANNEX 8 Page 32

Table 17: RUBBER EXPORTS

Index Volume Value (1959 = 100) (tons) ('000 Z) Volume Value

1959 40,178 11,135 100 100 1966 29,660 6,255 74 56 1967 31,132 5,999 77 54 1968 40,117 6,915 100 62 1969 35,686 7,786 89 70 1970 31,440 5,690 78 51

Sources: Soc'ret Zairolse de Surveillance, Conjoncture Economigue No. 10, October 1970, and Banque Nlationale.

105. Rubber proUuction is highly concentrated in Zaire. Nine plantations account for more than three-quarters of total rubber output. A..L tLile plantation corupaniSLers are subsiularies ofU Unri'L'ever andiu olf the principal trading companies in Belgium. Export sales are channeled through trading subsidiaries of the parent companies.

106. Zaire rubber exports consist of a large percentage of tne standard grades. Most of the exports consist of sheets: RSS 1 accounts for 82%; RSS 2 for 13%; RSS3 for 1%; RSS4 for 3%; and others, 1%. Tne large plantation companies buy smoked sheets from small planters and independent tappers. Tnese are uneven in quality and require reprocessing to bring them up to exportable standards. In the case of one plantation, 25% of their total export volume consists of such purchases. However the reprocessing cost is partially compensated by the higher quality crepe that is produced. Tnat product commands a premium.

107. Production. Rubber is produced mainly in the Cuvette in Equateur province, where ecological conditions are very good. In other provinces where rubber is planted, yields are low and, according to traders, no replanting is being done. ANNEX 8 Page 33

Tab'le 18: RUBBER AREA AND PRODMTTTTON 1Qt9R

Area Productio.n Yield per HPa (ha) (tons) (tons)

Equateur 41,627 31,536 758

BzaLLt.tndtAt.du '1,216Iu 3,2 2U9A7J Bas Zaire 7,155 2,082 290 Kalai Vr'Lental 5,726 1 110 Inc ~~.1~aL'JLLLLLJ J, ILU I~ I 10 l7J Haut Zaire n.a. 4,642

Source: Ministere de l'Agriculture.

Table 19: COST OF RUBBER PRODUCTION (ex-plantation)

Percent of Percent Projected K per Kilo Industrv Average Export Price 1970 1971 1970 1971 1971

Busira Lomami 15.46 15.20 109 104 95

P.L.C. 11.19 11.60 79 79 73

Bangala 11.30 11.92 79 81 75

Bamboli 13.85 14.63 97 100 91

Cie de l'Hevea 15.16 15.53 105 106 97 et Cenue

Forescom. 21.65 29.10 152 144 132

PIant._bang,i 14.89 1558 104 105 97

Scam 17.14 19.60 1t0 134 13'

Weighted Average 14.26 14.68 100 100 92

Source: Memorandum au Sujet de la Situation des Producteurs de Caoutchouc. Presented to the Minister of Finance by the Rubber Plantation Group, March 25, 1971.

108. Yields have been historically low except in the Cuvette. Rubber was profitable even at the low yields in earlier years, when prices were much higher. At current prices and prospective price levels, rubber plantings in the other provinces may gradually be phased out. Even though peasants may be willing to collect the latex, for 1.4K per kilo, processors may no longer find it economic. Some replanting reportedly has been done ANNEX 8 Page 34

in the large plantations in the Cuvette in recent years. Thus yields may improve somewhat when the new plants come into bearing. In the other provinces, yields can be expected to decline further as the rubber trees become overage. Some planting of cacao reportedly is in progress to replace old rubber acreage and maintain plantation income.

109. The only region where rubber cultivation is competitive at current and prospective world prices is the Cuvette. There, five plantations are reported to have yields in the neighborhood of 1,000 kg/ha. The average for all of Equateur province is way below the leading producer countries, and is only 40% of the best yields reported on the newest plantations in Malaysia:

Zaire (Equateur) ...... 760 kg/ha Liberia ...... 1,300 " Malaysia ...... 1,400-1,500 Malaysia ...... 1,800-2,000 (new plantings)

110. Production Costs. Negotiations between the Government and the industry are underway concerning the fiscal burden on rubber exports and agricultural inputs, in relation to the industry's profit situation. Pro- duction cost (Table 19) presented to the Government indicate that two plantations have production costs that are well below the export price of about 17.5K per kilo prevailing in early 1971. Even with the added costs of transport and export levies, they will have a small margin. Costs for four plantations, basis FOB Matadi, exceed the current export price, but are in a position where some economies in production might enable them to break even. Two plantations appear to be in difficult straits. No data are available on the rubber operations of the remaining major plantation company, Cotonco. Data on the structure of plantation costs are not detailed enough to evaluate the possibilities for rationalization of the rubber production. Yields per hectare are the main determinant of the incidence of various items on unit costs.

111. Shipping distances from producing regions are long -- averaging about 1X500 km. As a low-value bulk commodity; the freieht rate for rubber is relatively low. To the ex-plantation cost must be added 1.5K to bring the rubhpr t-o Matadi. Then there are the financing, fisca1 and incidental exnort costs, which bring the total added expenses to about 4K per kilo. Ocean frpiaht tn RulrnnnAn n"Art-t wn,ild rnt Ahnilt Q9K npr kiln- Tn nddiAinn there are the trucking costs from plantations to inland embarkation points. ANNEX 8 Page 35

TabLe 20: AVERAGE COSTS: EX-PLANTATION TO FOlt MATADI

(K per Kilo)

Transport OTRACO to Kinshasa 0.80 Railroad CFMK to Matadi 0.24

Transit/Kinshasa 0.36 Transit/Matadi 0.11 11.51

Weighing, OTRACO & Soc. Zairoise 0.17 de Surveillance documents Financing Costs 0.18 0.35

Fiscal Costs (on 13.6 k/kg)

Export Duty 5% 0.68 Statistical Tax 1 0!13 Taxe de Selection 2% 0.27 Turnover Tax 6.75%VVY9 :2.00

Total Cost: Plantation to Matadi 3.86

SOUrCe:RBuaB 4 ra Lommi

MI2. Owne of th-.-eprirnc4ipal det-errents to expar.sior. of rub'ber production is the heavy fiscal burden on exports. The total impost of duty and taxes approximlates 15%'.of the export value: Export Duty ...... 5X/ ~fljlSs~ .Yj . . ... Statistical Tax ...... 1% Selection Tax ...... 21% Tax Chiffre d'Affaires ..... 6.75%

Total Duty and Max .... 14.75%

On an export valuation of 18K per kilo, this comes to 2.66K per kilo.

113. Fertilizers are an important factor in plantation production, because soils in the rubber-produciqg areas are usually deficient in potassium and magnesiumn. Cpmmercia4 policy with respect to fertilizer imports discourages their use. Aitkiough fertilizer imports are duty-free, taxes amount to 18.48% ad valorem. Representations have been made to the Government requesting fiscal relief for fertilizer imports. in the case of fertilizers, internal transport costs are heavy - averaging about 3K per kilo. ANNEX 8 Page 36

11/4. Government policy also discourages importation of higher-yield seedlings. Seedlings from the Ivory Coast which cost 10K each, carry a fiscal burden of 70%:

Import Duty ...... 10% Fiscal Tax ...... 40% Statistical Tax ...... 2% Tax Chiffre d'Affaires ..... 7.5%

Total Duty and Tax .... 69.5%

Seeds carry a similar burden.

115. Export Prospects. The pessimism prevailing in the rubber-trade in 7Zalr evitdently In influrencing forecnats of future production, although some improvement is expected. The average export price in 1970 was 18.09R. per kilo. Predictionsa are for a similar price level in 1971, with furtheM declines in prospect in the oncoming years. Exports in 1975 are projectec to be 22Z greater th-ar. i 1970, .an fo:eigr exchange earr.lnrg 8 g:e-aer U~ £at LC..CL .L*in~ -f I I I 'J ULS- .L~ . jt. -lfLa - -L*54* -_I &~O,j 6 , ~ it is below the production figure for 1968.5 It is based mainly on6 the expectation- of better yields from repla.tings inEquateur provin- wi will1 compensate for the ageing of rubber trees elsewhere in Zaire.

Table 21: FORECASTS OF RUBBER EXPORTS AND PRICES

Index

aV;Lor.g /1 Val (197 100I= Tons Expo t Price (million Z) Volume Value

( Nk8)

lfl,l 'V~~~~~I.Afl 10 ~~~~~') £ (1~rn, mIin%', 1711 JI.2tU I 1t. IJ 6.07I I1O 10 1972 33,500 16.00 5.36 107 94 'IQ 7'I-l fldflAA- t PU1f II no 17/3 J30vvU 16.00 J.60 III 70 1974 37,000 16.00 5.92 118 104 4r%~~~ 1~0 ~ITAf e ^ I£ If If Itll 1 A0 19751 2X00vu 16.00 6.10 122 1'J08

/1 The average price forecast of 16K per kilo, FOB (14.5 cents per lb) is in line with the IBRD forecast of an average world export price of 16 cents per lb, CIF to 1975.

Source: Banque Nationale: Previsions des Exportations de Produits Miniers et de Produits Agricoles, 1971-75, April 16, 1971.

116. The Goodyear Company has offered a proposal for the establishmeht of a 1R, nnn h nlnzjt-ntinn in nahwp in thp nrn-rinrp nf RAndnindi. Tf :arpp- ment is reached and the project brought to fruition, about 25,000 will bef addedA t- th-e -proA,uct4n t-nt-ol, A r-alatdA t-ira fac-t-ny ($16.5 Till4nVNWAi h ANNEX 8 Page 37 would be constructed and operated by Goodyear, would not require a large quantity of natural rubber for the contempiated production of 184,000 rtireKI per year. A large proportion of the new produccion, therefore, would he available to augment exportable supplies. However, that increment cannot be expected until the late 1970's or early 1980's and, unless in the meantime considerable replanting is accomplished on the ageing plantations, the new supply may merely be replacing the declining output.

117. In order to stay abreast of marketing developments, the larger companies have prepared plans to convert to processing of block rubber, for which importers have beet showing increasing preference over the traditional smoked sheets. However, in Zaire, the changeover in processing technology must await modernization of transport facilities. Presently, OTRACO can only handle palletized units of one ton or less. Block rubber must be moved in larger bulking units. The rubber companies do not foresee a sufficient degree of modernization of OTRACO facilities for at least two or three years.

118. In the past several years, demand for number one plantation crepe has been very strong. With importers' biddfing actively for available supplies of high-grade crepe, that quality has been commanding good premiums. The technical-possibilities for exporting a larger percentage in the form of the high grade crepe certainly merit further investigation.

Pvrethrum

119. Pyrethrum production has declined in Kivu province over the pas;t several years, partly due to the generally unsettled state of economic and civic affairs. For reasons expiained below, there is now little interest among potential growers of)pyrethrum in Zaire, despite the excellent market potential and stable world prices. The principal market: for pyrethrum is the United States. Being a high-value product, the extract is exported by air freight. Demand in that market, as well as in the United Kingdom, has been consistent for many years. Its relatively high cost is; pyrethrum's main drawback. But gradually increasing world output over the years has been readily absorbed at stable prices. In the U.S. market, pyrethrum has been quoted in the range of US$10-12 per pound during the past decade. 1/ U.S. imports from Zaire have been averaging around US$7-8 npr nound; somewhat lower than imnort values from other places of origin, because the Zairan product is not dewaxed.

1/ Basis: pyrethrum oleoresin, dewaxed, 20% pyrethrins, dms. works. ANNEX 8 Page 38

Table 22: EXPOK1S OF PYKETHR-UM

Dried Unit Unit Flowers Value Extract Value (tons) ('000 Z) (Z/ton) (tons) (000 Z) (Z/ton)

1959 67 26.9 402 201 1,211.2 6,025

1966 - - - 5 49.6 9,920

1967 - - - -

1968 - - - 16 51.5 3,219

1969 - - - 9 n.a. -

1970 - - - 20.6 n.a.

Source: IRES: obtained from Customs Statistics.

120. The sole refining plant, which is located at Goma, has a capacity of 3,000 of dried flo-wers, but presently processes only 300 t. It is not yet equipped to carry out the dewaxing operation.

121. The root of the supply problem apparently lies in the low producer prLice paiLdU for fLreshil fJlowers. LLLe operators ofL the drying r.ills are payLi1ng only 2.5K per kilo for the fresh flowers. The minimum producer price was IIgher severaL years ago (. or 4 per kilo) , andU 'Lt is not cLear whiy thLe reduction came about. There are about 2,000 fresh flowers in one kilo, making har-vestLng a laborio-us process. Lack of interest on. teII paL of the Zairan peasants is understandable. An increase in price, say to 4K per kilo, might elicit a substantial increase in plantings -- perhaps enoughi to supply the refinery to capacity.

122. The operators of the dryers, who usually are the bigger planters, sell to the refinery for 24K per kilo of dried flowers. Tne yieid being 4.5:1 for the drying operation, the gross margin for the operators of the dryers is 12.75K per kilo. Tne refinery operator asserts he could pay 32K per kilo, if he could raise throughput to 1,000 t. That would compare favorably with the producer price paid in Kenya -- the equivalent of 35K per kilo. However, the primary condition necessary to provide the growers with an incentive to expand plantings is a higher producer price for fresh flowers.

123. The drying installations reportedly cost about Z 450. Attempts reportedly have been made to organize Zairan peasants in cooperatives around drying plants. The peasants would thus be able to gain the full benefits of the dryer operation. But for lack of capital, no cooperative has been launched successfully as yet. ANNEX 8 Page 39

124. Market prospects depend on rather complex factors. Increased public concern over the effects of toxic insecticides on humans has focusecl attention on possible alternatives to the widely used, relatively cheap compounds (particularly DDT). Although pyrethrum is practically nontoxic, and it is considered the best natural material, there are other pest control compounds that are widely used in many applications, and which have a low level of toxicity. The latter materials represent an important constraint to the dynamic development of the market for pyrethrum. Future developments affecting the demand for pyrethrum will depend largely on the degree of public concern about insecticides, the extent to which that concern is translated into legislation, and the restrictive nature of the legislation itself.

125. In view of the foregoing, world market conditions and the price outlook would seem to be favorable for the expansion of pyrethrum production. The stable price allows ample margin for the exporter. This should be transformed in part into incentives at the primary producer level, so that economies of scale can be gained in the processing stagies.

Cacao

126. Reflecting stable production of cacao in Zaire, export volume has been maintained at normal levels throughout the past decade. Export revenues have fluctuated, reflecting the wide variations in unit value. The world market for cacao is extremely volatile. Since 1966, prices have fluctuated in a range of about 22 to 48 cents per pound. Crop developments in any one of the five principal producing cotmtries exert an inordi- nate influence on the world market. Nonetheless, cacao is a relatively easy crop to grow, and pLanted in close proximity to oil palm and hevea plantations as a supplementary crop, it can be an important source of revenue. In Table 23, the effects of price fluctuations on aggregate foreign exchange receipts can be readily noted.

TABLE 23: EXPORTS OF CACAO

Index Volume Value Unit Value Volume Value Unit Value (tons) ('000 Z) (Z/ton) (1959 = 100) 1959 3,852 1,442 374 100 100 100 1966 4,104 600 146 107 42 39 1967 5,465 1,277 234 142 89 63 1968 5,063 1,366 270 131 95 72 1969 4,347 1,383 318 113 96 85 1970 4.389 1,380 314 114 96 84

Sources: Ministere de l'Economie Nationale, Conjoncture Economique No. 10, October 1970, and Societe Zairoise de Surveillance. ANNEX 8 Page 40

127. Cacao production has been maintained because it is grown mainly in Equateur province and in Bas Zaire, where the civil disturbances were minimal. Practically all the cacao is grown by the palm oil and rubber plantation companies. In Zaire, efforts to develop smallholder production have not been successful. Data for 1959, given in Table 24, are still largely valid in terms of major areas. However, by 1964, production had surpassed the 1959 figure, and reached 5,300 t. The latest data for 1968 show a further increase to 5,800 t. However, climatic conditions in 1969-70 were unfavorable, and production undoubtedly was lower.

Table 24: PRODUCTION BY PROVINCE, 1959

Yipld Per Area Production Hectare (Hprtarpc) (Tonq.) 1 IK

RBa Zair 6,174 1,400 228

Enuateur 10;680 3-070 287

Haut Zaire 680 32 47

Kasai525Q

Total 17,586 4, 514 257

Source: Ministare de l'Agriculture.

128. Reflecting sentiment as to the unfavorable market outlook for rubber, at least one large plantation company is replanting some of its rubber acreage in cacao. There is a FED project in the Ubangui region, which has programmed plantings of 10,000 ha. In the event that this project is fully realized, acreage will be expanded substantially from the present planted area of approximately 16,000 ha. However, full production from the new project may not be reached before the early 1980's. No information was available regarding the status of this project.

129. The two Unilever subsidiaries -- Plantation Lever and Societe des Cultures accounted for about 45% of the cacao crop in 1966, and five other companies account for another 40%. These companies also are engaged in palm oil, rubber, and forestry products. Agriumbe, SCAM and APC also exported bananas from Mayumbe in earlier years.

130. At the INERA station near Luki, in Mayumbe, experimental blocks of cacao plants from Brazil are virtually unattended. Although ecological conditions are not as favorable here as in the Cuvette in Eauateur, cacao is being successfully grown. The possibility of planting cacao on the reoni.ins of tlhe FFn hanana nroept shnould bh exnlnred- That wnutld cem to aIgcl0P1Al A ltornative to the planting of coffee -- a commodity that will eno-at e r ae r oua m a r kketing pr obeMl s 4n the foreseeable futur ANiNEX 8 Page 41

131. The only domestic demand for cacao is from the confectionary firm, Victoria-Aiglon-Parein at Lubumbashi, which utilizes about 100 t per year.

132. The Banque Nationale forecasts of cacao exports are for an increase of 48% by 1975 over the 1970 volijme. Exports in the latter year were low due to lower production. Compared with 1967 exports, the 1975 projec- t40r:s represents an 4. .prove..entof only 190. T.e 17 p LJJcLiLL was matched by estimated production in 1968. In view of the foregoing com- parisor.s, andA the stzbilit11y that 'as c.haracter,zed cacao production, the ~~O..~Ln4 ~~lL~- U= ~ LLIG LLO LtAIaL.L~L~ LcLU LU. I.L.XLL, LL 1975 forecast is reasonable. The unit price forecast is in line with the forecast of L-he IBIRD economiLcs 'departmenst.

Table 2J FORECAST OF CACAO EXrORTS

Index Volume Unit Price Value Volume Vfalue ( tons ) fK(1K/kilIo) ( 000 Z) (097;0 - 10(0)

1971 5 ,000 30.00 1,500 114 109

1972 5,000 30.00 1,500 114 109

1973 5,800 30.00 1,740 132 126

1974 6,100 30.00 1,830 139 133

1975 6,500 30.00 1,950 148 141

Source: Banque Nationale: Previsions des Exportations de Produits Miniers et de Produits Agricoles, April 1971. Bananas

133. Banana production for export has not been revived very successfully (Table 26), and in recent years has virtually stopped. The small quantities of exports recorded in 1969 and in 1970 probably were destined mainly for ships' provisions. The principal constraint is the lack of a suitable market within relatively easy shipping distance. In the 1960's, but prior to 1969, all banana exports were shipped to France. That country granted special preference to African producers so that Zaire, along with other Associated States of the EEC had a protected market. They did not have to compete directly with the Latin-American product. In 1969, for political considerations, the French Government suspended import licensing of bananas from Zaire. Thereupon, efforts were made to seek other outlets. Zaire could not begin to penetrate other European markets in competition with the Latin-American producers, the Canary Islands, or the Ivory Coast. Ideally, bananas should not be stored in transit more than 14 days. The Ivory Coast -- at a shipping distance of 10-14 days from European ports -- is very close to the outer limit. Zaire -- at a ANiNEX 8 Page 42

shipping distance of 14-18 days from European ports -- is pressing the limit for this delicate fruit.

Table 26: BANANA EXPORTS

Index Volume Value Unit Value Volume Value Unit Value (tons) (Z) (Z/ton) (1959 = 100)

1959 31,099 622,900 20 100 100 100

1966 7,122 71,707 10 23 12 11

1967 4,724 66,282 14 15 11 11

1968 2,964 87,176 29 10 14 14

1969 399 12,580 32 1 2 2

1970 134 n.a. - - - -

Sources: Institut National de la Statistique and Societe Zairoise de Surveillance.

134. Previously, exporters in Zaire had relied on their traditional trade connections to handle their bananas, and thus had been able to over- come their handicaps of distance and time. With the French market closed by official policy, the only logical market remaining seemed to be South Africa. But efforts to breach that market were unavailing. At that junc- ture, the main exporter in the Mayumbe was compelled to suspend banana operations altogether.

135. Local sales to supplant the lost export sales are not feasible, because of the river barrier to Matadi and Kinshasa. The latter market probably could absorb the tonnage previously destined for the export trade, but presently there is only a make-shift little ferry that accommo- dates four trucks with long waiting periods. Bananas are carried in baskets by peasants to the local market in Matadi. Trucking to Kinshasa would cost about 4K per kilo, where local prices now are about 5K per kilo in the main markets. Construction of a bridge across the Congo River at Matadi, together with the projected extension of the railway to the port of Banana on the seacoast- would at once open up the growing local market in Kinshasa for bananas from the Mayumbe, as well as possibilities for improved access to ocean shinning- That nrniect nrobablv will be comnleted in the 1975-1980 period. In the meantime, improvements in the ferry service may help to exbdite banana shipm-ents to Kinshasa.

136. With a. irriation system, wh1ch is feasibhi in the Maymbe, yields can be raised to 20 t/ha -- double the present average yield (one ANNEX 8 Page 43 planter in Seke Banza had successfully installed an irrigation system). In the Mayumbe, that relatively low yield per hectare is considered economically feasible and, in fact, highly acceptable. Irrigation would mitigate the effects of the long dry season, which encompasses five to six months in the Mayumbe, and lengthen somewhat the harvest period.

137. Aside from the relatively small acreage in the Mayumbe organized on a commercial basis, very little is known about banana production. Production statistics are very imprecise. In most areas where bananas are grown, the fruit is picked only when there is demand for it. Bananas are mainly grown as a subsistence crop, for use in brewing beer, or for sale to local markets.

138. With the conditions of production established on an economic basis to supply the domestic market, Zaire exporters would be in better position to compete for markets abroad. According to maritime agencies in Boma, regular cargoes of 2,000 tons would be attractive to shipping lines that could call at Banana. Shipping companies ordinarily want to contract on a 12-months basis, whereas the banana harvest in the Mayumbe would run about seven months with irrigation. However, this has not proved to be an obstacle in the past. 'rhe transport situation should be vastly improved in five to ten years' time.

139. At current world market levels, Zaire (or Zairan) bananas barely break even on sales to Europe:

Current Price CIF European Port ...... 7K/kg,

Costs: Shipping ...... 4K/kgt Carton ...... 1K/kg Producer Price/i ...... 2K/kf

Total Cost 7K/kg

/1 Producer ripce I 1K per kilo but there is a 50% loss in packing.

However, production for the market is not completely dead. Agryumbe in Luki has installed a packing -uant. Cartos are imported from Belgium for 15K apiece for a 13-kilo box (compared with US$1.00 for a 20-kilo box in Central America). Better quality control, facilitated by larger- scale production, should reduce losses in preparation for export. In fact, sim.ultaneo-s packing for the Kinshasa market would proovide an outlet for off-grade bananas. Reasonable operational margins should result.

140. FED Banana Project. In 1965, the FED initiated a banana project. Tof left mi late 1of6 or early 109m. 'i,ieproweCd comsedced 3 0tha furd of FB 14 million, of which FB 10 million was disbursed: FB 300,000 for ANNEX 8 Page 44

payment to villagers for clearing and nrenaration of land: FB 9.2 milllin as progress payments to villagers; and FB 494,000 for vehicles, truck and tractors for evacuation of bananas.

141- The nrnioet called for planti-ng of 2,500 ha; 1,600 ha were actually planted to bananas. Exports from the project were boxed, shipped and sold by AgryTutien The main reason for the demise of the pro4ect was the cutting of f of the export market. A major contribution credited to the FED project wne thirvahna4liation of 200 um of ronna4 in tho nvar butit dator tn-inn again is beginning to set in.

142. The provincial agricultural office in Boma is attempting to save 4 4 t-he nrCa a,.- a~-raan~a fv.r. -raf-av,i4n i'ms- h,,h k'mal, onl #-4 n ^^ffa mI"ano A- th ro4c aceg----- from ir to bQh by plantir.g ------.gs4de the banana trees. One hundred and sixty hectares have been planted so far, ndA Q84l ,t-o .. v-nt-, al a-ter hor 4^4"na tl.4 a-e-fft I?turoa 1l..1w., -CA tJ*ff V w . ,V -aCve - Joi e ao new I- -. 45- - personnel are dedicated, but inadequate in preparation and are working with practically rno rensnources. In -iew , f t-h a 4im A1r. 4 I it 4io in coffee, it would be advisable to replant the banana acreage with cacao ra tIher thanr. eowff ee .

(wa,ens An. it

14. Before n.dependence, grot..0ut oil ranked eleven.tht mon,g agri cultural exports. There were indications of vigorous recovery in commercial processirngpro~5~LLL, activity~L.I±I. ir.LI !C68,I UI.v oO~based on prodctojLU L.A.JL i.LLn thL41"&L& e dstrict--L of Kiu.X.. However, the world market for edible oils weakened in that year, and the processor s-uULpenluedU purchases of gro.Adnu.t. Since there --- -- distribu tion channels to move groundnuts from Kwilu onto the Kinshasa market, where large tonnages couLU be absobUed at LoWeL pLr.Lcb, tLII far.-..es coul not dispose of their crop. The following year there was a sharp resurgence in world demand for groundnut oil because of shortfalls in other producing countries. Exports of groundnut oil in 1969 surpassed 1,000 t, some of it probably from stocKs because of reduced plantings foliowing the experience in the preceding season. ANNEX 8 Page 45

Table 27: EXPORTS OF GROUNDNUT OIL

Index Volume Value Unit Value Volume Value Unit Value

(tons) (Z) (Z/ton) (1959 ' 100)

1959 6,959 787,150 113 100 100 100

1966 2 437 - - - -

1967 11 15,181 138 - 2 122

1968 264 26,150 99 4 3 88

1969 1,004 131,769 131 14 17 116

1970 - - - - -

Source: Institut National de la Statistique,

144. Groundnuts are groin in every province. B-a 7Z4r a.-n BanduA are the most important producing areas. High yields in the Bas Zaire 4 .. 1haD . 1 n ..e by 4,intAn.4- 4-4 4 Ca 4-:_, V44 .ini,-. ..on rlzQ Tn Bandundu, high yields probably result from organization of production and collection in Kwilu to0 supply th1e 0il processors. 'Production -in tha area- reportedly dropped very sharply in 1969. Yields are high in Equateur, but th_at region is rem,ote from, large markets, an' there is r.c;organi4zatilon for oil processing. Production of groundnuts did not dec:line drastically djuring the ci'l%j disturbances, becaus the bulk ofteouptl L.LLU I LI LI V.L± UI L LL)aLLL%.0t , PLVUtU.ZLy 1J:;1LJ -IL-bl-LiC UU.Lr, VI L.ILM UJLALpFU_ J.0 for subsistence or for 'Local cash sales. Moreover, a large part of the productiLon 'Ls i1n areas that were re'Lat'Lve.Ly u-affected.

Table 28: IDMAM 1rTAWI AV G3TO%T1r,C! 'IV BY At7TTMIr1, 19aI ± U±A __. . I MX JU.A ..L'.4JA2I SJK i3flAJU&L1U .~L. Iii . L JXW VLLI~Li, IJLi'.'

V41 Province Hectares Tons Per Hectare

Bas Zaire 67,188 181,843 2,706 Bandundu 86,414 84,968 983

E:quateur If.0,5624 17,61 857IU0 Haut Zaire 39,745 28,250 711 Kivu 34,767 17,647 508 Katanga 41,821 19,510 467 Kasai. Occidental 79,251 45,173 570 Kasai. Oriental 41.130 19.672 478

/1 1968 data may be overstated. AILIVJJXAI%Th¶VV 80 Page 46

IbUl. L_2 PRODU'1L%JION OE 'JI%'JVL'4JL4U±O, 1I^i7 uo

Index _ - Kilos Kilos Per Area ProductiLonL Per ectare Area Production Hectare (ha) (ton) (1959 100)

1959 262,359 174,121 664 100 100 100

1966 231,112 149,104 645 88 86 97

1967 253,067 163,266 645 96 94 97

1968/1 410,878 369,502 899 157 212 135

/1 1968 data may be overstated. Source: Ministere de l'Agriculture.

145. There is good export potential for groundnut oil, and growing depmand for hoth groundnuts and groundnut oil in the urban rentprq in Zaire. Groundnut production must be organized to supply these outlets. A system of guaranteed groundnut Durchases and minimum oroducer nriepq con be developed as an integral part of a cotton production scheme based on hptter nricp ineentives to the farmers to grow cotton. Grouindnts-q ar the best crop for planting after cotton in the rotation. By providing the farmer with a gairanteed market for groundnuts as well AR cotton, his potential income can be enhanced. The result would be a more effective ins-entiuca than a guaranteed m2rket for only one crop. Th. nreseont m niymu.. producer price of 4K per kilo should constitute a sufficient price incentive ,nder the new system.. In fact, under aoordin.te groundnut-cotton marketing system, that minimum might even be lowered. This could be calculated on the basis of the input-output relationship between the two crops. Plentiful supplies for domestic consumption, as well as for the export trade, can thus be asgured

1.K. Tower m.arket4ng co9t would rezsult thro-g, better u*i44zation of * 'J*LSWV L IIL L. ...t t O- -O 'J *-- . 1.&JLJ .A55 U~- %. IAL. J L±.JL equipment and personnel in the collection process, whether collection be -lone b-y th-e cotton com.panies or by prilvatle truckers. T.Me o1 -.Ills that UL uC I-LIC ..I ~L .~lIaIc i. L_ 5'jL . . .I.. 0 *LI& AiSA. IILL.L±±aL I L1 are processing cottonseed and operating at a fraction of rated capacity could raiLse their th'rougihput buy processiLng oil rn-iall coldb L d~C LICLLLLIIJU,IIULLIypLU~~.LL~ gromndnuts.~LUULULUL *F. Idle± U.L JILL.LS± cou'Ui De reactivated, based on cottonseed and groundnut crushing volume. Thus, DenefLts wouLU accrue to thle farmLers andU tLhe cottori comnpanles alike.

147. Export Prospects. nThe worlU market outLook for edible oils is relatively more favorable than for most other agricultural commodities. Groundnut oil prices are expected to decline to Z 135-140 per ton by 1975. Those levels prevailed in the world market in 1968 (when groundnut purchases were suspended in Kwilu). For Zairan exports, however, the unit value was only Z 99 per ton -- far below the average world price level -- even taking into account shipping costs. There is probably need for better quality control. Exporters should be able to meet standard requirements and obtain better prices, as they do with other oils. ANNEX 8 Page 47

148. Table 30 shows the price spread betweeni groundnut and palm oil. Tne latter tends to be cheaper. However, groundnut oil quotations on the world market have been lower than prevailing prices for palm oil in Kinshasa and other large urban centers. Therefore, groundnut oil should be competitive in the local market as well. Moreover, combined groundnut-cottonseed crushing operations should result in lower break-even points for both oils.

Table 30: PRICES OF GROUNDNUT AND PALM OIL (Z per ton) Oil1 Pam /2 Groundnut Oil/1 Palm Oil-

1959 101 118

1966 149 118

1967 143 112

1968 135 134

1969 165 141

1975 135-140 78-83

/1 Nigeria, 3-5%, bulk, CIF Europe. /2 Malaya, 5%, bulk, CIF Europe. Source: IJnilever. 1975: IBRD Forecast.

149. Over the period to 1975, world supplies of groundlnut oil are expected to expand very little as compared with most other maior edible oils. The relatively favorable price trend projected for groundnut oil is based on the foregoing supply outlook. Although groundnut oil is one of the higher priced oils, it is preferred for some end uses such as margarine. There is also good demand for table use. There is also a market on groundnut cake, which is a by-product of the oil crushing process.

Others

150. Fibers (Urena-Punaa). The Droduction of fibers has been, with rare exceptions, sufficient to cover domestic requirements plus an exportable surplus. Imports of fibers were necessary only in 1953 and in 1968. In 1964, production barely covered demand from local industry. Their principal utilization in Zaire is for gunny sacks for commodities. One firm, Tissaco, is the principal manufacturer of sacks. The excess, over and above the renqiirements nf thil firm's operations; is exported. There is a seco'nd firm, M. Baert at Ngidinga, which manufactures, among other itemq- sasks and sord utilizinc 108nal fihern That firm is a very small family enterprise. ANNEX 8 Page 48

151. Presently, large imports of maize, rice and malt result in substantial additions to the local supply of sacks -- an estimated 2 million units per year. Most of these sacks are reusable. Demand for locally manufactured sacks will remain limited until local production of maize and rice can be augmented to replace imports. Substitution of imports will decrease the supply of used sacks and, at the same time, increase local requirements for sacks, thus raising demand from local manufacturers for fiber.

Table 31: EXPORTS OF FIBER

Index Volume Value Unit Value Volume Value Unit Value (tons) ('000 Z) (Z/ton) (1959 = 100)

1959 4,181 543 130 100 100 100

1966 2,126 195 92 51 36 71

1967 1,095 84 77 26 15 59

1968 35 - - - -

1969 2,980 353 118 78 65 91

1970 3,153 n.a. - 76 -

Source: Ministere de l'Economie Nationale, Conjoncture Economigue No. 10, October 1970.

152. Cinchona. In southern Kivu, there are now about 4,000 ha planted to cinchona. This region supplies 35-40% of the world market, according to local trade sources. The Pharmakina Company, which operates the sole extraction plant, has plantations of 2,000 ha -- half the total area planted to cinchona. These plantations are very well maintained. Tne remainder of the area actively cultivated also consists of plantations. There are no smallholders, and planting by smallholders is discouraged. Production is being concentrated in a few plantations so as to control the quality. If the trees are not properly maintained, quality is irregular and yield is low in the extraction process. Some abandoned plantations are now being planted to coffee and tea.

153. Pharmakina relies mainly on its own plantation for raw material, but processing also is done for other planters. Quality control on the plantation is a key factor in acceptance of processing work for other planters. The extraction plant has a capacity of 2,000 t of bark. About 80% of the available supply of approximately 4,000 t of bark is processed by Pharmakina. The remainder is exported. Expansion of the plant is under consideration. ANNEX 8 Page 49

154. Presently, quinine content is 5.5% for bark and 7.5% for trunks. At the TNERA tation at- Rikai new c1ones have heen iievelnrie that are expected to yield up to 19% sulfate of quinine.

155. The sharply divergent trends of volume and value (Table 31) reflect the increasing importance of extract in exports. Trade data for bark and extract are not compiled separately. Export demand appears to b'e expandi'ng moderately. .petiton froru is an U~~ ~~A~J~~ILU.LLL~~~Lu~~JU~~L aL~~~J.y * f'--.-ALLIIJL..L LLIJL A. LULU A-laLW l L clte'IL~U db~L~IIJLLLas rir.-portant constraint on export prospects. Nonetheless, Pharmakina's plans to invest in expans'on of process'ng capac'Ly rn.dicate bas'c confidence irn the longer term outlook for the quinine market.

Table 32: EXPORTS OF CINCHONA ('bark and extract)

Index Volume Value Volume Value (tons) (Z) (1959 = 100)

1959 1,762 591,220 100 100

1966 552 586,160 31 99

1967 197 271,835 11 46

1968 301 294,050 17 50

1969 428 1,055,662 24 179

Source: Institut National de la Statistique.

156. Rauwolfia. Demand for rauwolfia for pharmaceutical applications has been good in recent years. Prices have trended moderately upward and production is being expanded. Very little information is available on this commodity. In 1967, 572 t of root reportedly were produced in Bandundu province, the only locality in which rauwolfia production is recorded. In Kivu, there appears to be active interest in investment in this commodity. This undoubtedly is based on favorable market conditions. ANNEX 8 Page 50

Ta-ble 33: EXPORTS OF RAUWOLFIA (Roots and Extract)

Index Volume Value Volume Value (tons) (Z) (1959 = 100)

1959 269 175,310 100 100

1966 255 198,233 95 113

1967 428 351,494 159 200

1968 500 346,043 186 197

1969 485 294,170 180 168

1970 488 181

Sources: Institut N'ational le 'a 'tat'sticque an' Soc-ete ~~UU~L * L .LL . LL I. 1 L±IJL .L U~ Ld a~L~ L±( Ue dLU a 1eLe Zairoise de Surveillance.

157. Copal. This product has experienced a decline unparalleled in the export trade of Zaire. Exports in 1969 amounted to about Z 30,000, or less than 10% of the amount a decade ago. The principal outlet for copai was thfe paint anu varnish industry and synthetics have, for all practical purposes, replaced it. Reduced quantities are still collected and exported. Tnis product is now utiilzed mainly in the manuracture ot specialty varnishes. Unit values have been firm in recent years despite the diminished volume. Tnis is explained by the fact that current demand is from a specialty trade.

158. Production was recorded only in Bandundu province in 1968. In that year, total output was about 220 t. rhe crude copal is refined before it is exported. The Madail company refines, in its Kinshasa mill, most of the copal now being shipped.

159. In the opinion of traders, copal eventually would have priced itself out of the market, even without the rapid development of cheap synthetic substitutes. Collection requires arduous labor. Workers must stand in water as much as waist-deep. In the past several years, it has become increasingly difficult to find workers for this task. Traders, therefore, do not foresee any prospects for a resurgence of trade in copal. Minor quantities probably will continue to be collected and refined to meet demand from the specialty trade.

160. Papain. Shipments of papain recovered rapidly from the reduced levels recorded during the middle 1960's. In 1969, export volume surpassed the preindependence level. Export values were still lower than in 1959, reflecting lower prices in the wor!.d market. ANNEX 8 Page 51

Table 33: EXPORTS OF PAPAIN

Index Volume Value Unit Value Volume Value Unit Value (tons) (Z) (Z/ton) (1959 100)

1959 153 244,120 1,556 100 100 100

1966 55 87,910 1,598 36 77 103

1967 61 n.a. - - -

1968 78 89,357 1,146 51 37 74

1969 174 227,525 1,308 114 93 84

Source: Institut National de la Statistique.

161. Papain is produced in the northern part of Kivu.. Before independence, papain was produced mainly on plantations, frequently interplanted with coffee. The crop is now planted almost entirely by smallholders -- estimated to number about 7,000. About 6,500 ha of papaya are cultivated.

162. In January 1971, a plant was installed in Beni to produce stabilized papain. That plant has a rated output of 5 t of stabilized papain per month. Recently, production has been averaging about 1,000 kilos per month. Prior to the opening of the new plant, exports had consisted of crude papain. Operators of the new plant have organized a collection system, with fresh latex collected daily for processing. Stabilized papain is valued at 3.5 to 4.5 times more than the crude papain. Therefore, export proceeds in 1971 from this coimnodity should be sharply higher than in previous years.

163. Papain has two principal uses: as a meat tenderizer and as an, ingredient in export beer. The demand from the U.S. meat industry has expanded tremendously in recent years with the development of flash-freezing techniques. Tough, low-priced meat is imported and the steak cuts are tenderized and frozen for the restaurant trade. But there is competitic,n from papain suppliers in other tropical countries. Experimentation reportedly is being conducted with papain as a possible bioactive componernt in detergents. In the event that trials are successful, a dynamic expart- sion in demand for papain would occur.

ANNEX 9 Page 1

REPUBLIC OF ZAIRE

AIU'T'TT"rTTD AT CrTORD DVVITT7T.

FINANCE FOR AGRICULTURAL PRODUCTION

A. Introduction

Definitions

1. This Annex discusses finance for agricultural production purposes only, and does not take into account the large volume of tfunds used in marketing agricultural produce. In Zaire, production is divided between individual farmers and large commercial enterprises (mainly plantations and some ranches), and the same division is used in this Annex. In practice, very few individual farmers cultivate more than 100 ha or have more than 500 ha under pasture.

Background

2. Attempts to establish credit channels for agriculture in Zaire have a rather long history. Earlier activities by the colonial government in this field are relevant, because attitudes toward credit have been fotmed over many years. Thus, a brief historical review is presented below.

3. The first attempt at financing production was in 1911, when Gov- ernment put up the capital costs of installing some Belgian colons on farms in Shaba; the colons were expected to repay the loans over a number of years. Lack of farming experience under local conditions led to almost complete failure, and the colons were excused repayment. Their loans thus became grants. This attempt is sometimes cited as the start of the attitude among farmers, which is still very strong throughout the country, that loans from Government are in fact grants or subsidies, and need not be repaid. This attitude is common to many other developing countries.

4. In 1930, during the world depression, Government created a fund to Drovide some credit for agriculture! mainly for maintenance of plantations. A year later, it was widened to include long-term loans for farmers, but it remainevd exc1usivelv for colons. Ten years later (1941), Government established a similar fund for Zairans, under which individual loans were limited to Z 10 for agriculture and 7 S for livestoek. These sums had considerably more purchasing power in 1941 than they do at present. In 1957, these limits were raised to 7 50 for both catenries.- Government onerated both funds through its ordinary administrative procedures. ANNEX 9 Page 2

5. In 1947, Government reorganized the credic channels for colons. rhe agricultural fund was abolished, and two separate institutions were set up to provide finance for them on a wider basis. The first was the 'Societe de Credit aux Classes Moyennes et a l:Industrie" (SCCMI), to provide medium and long-term loans for agriculture, mining, commerce and industry, to small and medium-sized institutions, professional people and artisans. The second was the 1ISociet6 de Colonisation Belge au Katanga", to finance a wide range of colonization activities in Katanga. These two were later amalgamated. In 1948, the Government also set up a "Societe de Credit au Colonat et a l'Industrie", which gave some agricultural credit to colons.

6. Of the various funds and institutions above, only SCCMI is still in existence. But it is now almost inoperative and unlikely to be revived as a source of agricultural credit. In 1967, Government enacted legislation to set up a "Fonds National de Credit Agricole et Artisanal", but it never became effective. The Fund was sponsored by the President's Office and not by the Mlinistry of Agriculture.

7. Some of the programs for providing farms inputs were in operation prior to Independence. Some of the numerous agricultural marketing cooperatives had limited activities in this field. Inputs were also supplied to individual farmers by COGERCO (cotton seeds), INEAC (groundnut seeds and rubber plants), and through the paysannat program and the 1948 GER project (see below).

Current Sources of Production Credit

8. For individual farmers there are at present only a few credit schemes in ooeration, generally started or revived over the past two or three years. Of these, the most important are:

Service du Credit Agricole Controle (SCAC): a supervised credit nrniect started by the ministry of Agriculture with tecehnica1 assistance from USAID, for medium-sized farmers in the Kinshasa and Mhnn7-Ngungu areas I-t is deRsrih4bd in deta4 1bhlow in Section B.

Groupe d'Economie Rurale (GER): a 1968 revival of a project started in 1948 to provide mechan_zed and other servi4ces for groups of small farmers by the Ministry, with financial and techlnical assisztannce fromn USl(ATTD a.n.d Repubici. of Ghina (Ta4.war.) It is active in the Bas Zaire, and is described more fully in Ane 3. Th cre1v 4,- aspecs ar dicsed 'below in Sectoio BA1A.7

Paysannat project,t provdeasmall I' El iL U~~L .cLLa.E.. CZ tl jJLUJ=tL L_U JLL)V.Ltii- Z201±±.. fanrers in the Candajika area with farm inputs and mechanized

serv-Vces, operated' b'Ly VVT:,. IL is descibed LiL. fully lr. Annex 4. The credit aspects are discussed below in Section B.

A Caisse i'lationale de Credit Agricole has been proposed and is under consideration by tile Government. ANNEX 9 Page 3

9. For the commercial sector, very little medium- and long-term finance is available from the private banks, although they advance about Z 20 million a year for seasonal production and marketing purposes. The only institution devoted to development finance is the Societe Zaliroise Financiere du Developpement (SOFIDE), which was establishecd in January, 1970. Its purpose is to provide medium and long-term finance for private enterprises in all productive sectors of the economy, in particular the manufacturing and processing industries, but also commercially oriented agriculture, forestry, fishing, transport and tourism. It has mixed public and private ownership (national and foreign). SOFIDE has not yet extended any loans to agriculture. It is discussed in Section C, along with the demand for finance and the need for an Agricultural Credit Bank.

B. Production Credit for Individual Farmers

10. The most important of the present schemes in operation (intro- ducecl briefly in para 8) are discussed below- followed by a summnry judgment on the impact of these schemes, the interest rates involved, and rthe GovernmPnt's, proposed Gaisse Nationanl de Grrdit- Agrilo-le (rNGNA).

Present Srcipmes

11. Service duGr'dit AgricoleControle (SCAC). This pro4ect Jas originally intended to give supervised credit to small farmers, generally tl:rg-u- cooperatives . BRecuse no coor- atives were operat:iLng in the areas chosen (ICinshasa and Mbanza-Ngungu), the project was amended to embrace gmedium- 1 si zen, fa-mrns.o Ts-c, on_ .>, -,a_1 4 f-h- dAe elopment o r. a nainal ,cre, 4 - w~~~~~~ | ,. v ~~~v.D Lls-as1, b Ve. at a qJlLi Lzv IS L a akL.w-;U L.a*lj-a.a %w J institution for individual farmers. Its immediate objective is to design and

UI. V_L)p L"ieopte tH basicLJc1.nJA. _ k 1i aLU ---L4 IzaloafrmeorI ci ~ IJ foUL cia. P.L.Upilo L Cl~Lagrculura .LL_UILUL-. dL.LL redit___L system, which would conform to local conditions and needs. In the field, its ei,-lphasis is on in-service training of Zairans in all phases of credit operations.

12. The project started at the beginning of 1971, with USAID proviai-

lng 1 fL.LCIU UIc[.LtLbrs. IJ.L Wais ULig±inall±y L1LteLLUdU LU CUoILnL.Ue for foUUL rL five years, but USAID assistance is scheduled to be withdrawn at the end of 1971. There is a revolving fund of Z 350,000 to provide creuit for: short- term investment, tip to two years at 11% interest a year; medium-term investment, two to five years at an o8%interest rate; ana ioQag-term investment, five to 10 years at a 6% rate. Up to the end of April, 1971, 27 lcoans totalling Z 65,400 had been approved, of which about 55% Dy value were for crops, the rest for livestock. Most of the crop loans were short term, while most of the livestock loans were medium term for beef production. Almost all the production from these farms will be sold on the Kinshasa market. The average size of loan is about Z 2,100. Farmers provide an average of under 20% of the total cost of each investment. Loan payments for labor only are made in cash; tor other inputs, the project pays the suppliers' bills. In practice, a number of the farmers receiving loans have other occupations, although at least five are ex-Government agronomists. AN4NEX 9 Page 4

13. After full appraisal in the field, loan reqtuests are sent to Kinshiasa for approval by a Central Credit Committee. At midl-Hay, 1971, a further 57 loans (valued at about Z 120,000) were awaiting approval by the Coummittee, which needs to meet more frequently if loans are to be approved expeditiously. One of the main problems at field level has been to find enough qualified Zairan workers for training in credit operations. Only nine of the anticipated 18 trainees are at present in the field. Visits by extension officers to project farmers are very infrequent.

14. It is too early to gauge the project's impact, particularly on production, and loan repayment performance. There are indications that not many more farmers similar to the ones now receiving credit can be found in the two existing project areas -- perhaps no more tl-an about 300 farmers. Thus, without an expansion in area, the project is likely to be fairly limited. The existing trainees are receiving useful training at field level, but unless the project is continued beyond 1971, for at least a few more years, their trainilg will almost certainly be wasted.

15. The decision to withdraw USAID technical assistance at the end of 1971 was partly due to the general curtailment of U.S. overseas aid funds, partly because the project is supplying funds to absentee farmers and does not reach the small farmers as originally intended, and partly also to a failure to obtain trainee candidates. Government has approached the Chinese Government for technical assistance to continue the project for at least another two years, but as of mid-May, 1971, the outcome was still uncertain. Provided adequate teclnical assistance is forthcoming, the project is worth continuing for a further two years, by which time its impact and potentialities could be usefully assessed.

16. Groupe d'Economie Rurale (GER). Under this progranm (in the Bas Zaire), the Ministrv of Agrircilture nrovides mTninlv mechanized services and seeds on credit to groups of small farmers, who repay after the harvest. The M4inistry tried giving livestock on credit to these grous- hibt- it provedpr un- workable, and livestock loans are now confined to individual farmers.

17. In 1970/71, about 4,000 farmers (40 groups, averaging, 100 farmers AcALiL o rece4 vk t1 cal cr.A15 of nabut Z , un t e c r which covered an area of about 1,800 ha. The average loan was thus about

7 10 per[hai, UoL 4.5 0=Lper tLer. NLAodetaled XLnanciLal st.-atem-* cnts were made available, but according to one source the cost of these services to thLe GUoverni,,Lent was about ZU717.50 per ha. Thsefgue ilia h L[i~\I~ iilili U WU .UU L t. I I*J4J ICL * ±Ie C £UL~o- program is heavily subsidized, but without financial details it is not possible to separate the subsidy elemeent a-nd calculate loan interest rates. Loan repayments after the narvest were stated to be over 80% in past years, but no details were available. Included in this prograril is credit for the Chinese Agricultural mission operations (described in Annex 3). In 1970/71, these covered about 215 ha of irrigated rice and rainfed crops for about 615 farmers in 12 groups. Again, no financial details were available. ANNEX 9 Page 5

18. For livestock loans under the program, the individual farmer encloses his pasture and makes a kraal, and then is provided with cattle. Instead of cash payments, the farmer makes payments in kind under a system called metayage locally: for every five breeding females and one male received, he repays seven females and two males (aged 8-10 months) within five years. On this repayment basis, the annual rate of interest to the farmer would be of the order of 8% to 10%. By mid-1970, almost 300 farmers had received some 2,250 head of cattle since the program was restarted in 1968.

19. There is insufficient data on which to judge the merits of the crop section of this program from the credit point of view, but if the subsidy is as high as suggested above, then the project's potentialities as a credit program are small. It will take further exnerience with the metavage svstem to show whether it has useful potentialities for financing livestock development.

20. FED PaysannAt Prnipet- GAndai4ka. Under the nrnipr t, in thi8, 1969/70 season, about Z 14,000 was extended as credit to about 12,000 fairmers (ust over Z 1 per farm-er) for maize seed and fertilizer. About 14,000 ha were planted with maize and cotton. Credit was repaid after the harvest, either by deduction from proceeds when ctton s sold to the project authority, or in cash when farmers sold their produce elsewhere. Repayments were over .04.J/Q,WA.hich. is very satisfactJLy co&side 5 Uthe aAMd.u4strative difficulties of collecting small loan amounts from large numbers of farmers. In +t'e-1970A/71 season, credi +-exter,deAwas to cover charges for meuanhzized ~*~~ I 9 ~J%I I 0~_aaULL, L.L U~ WCLW L. %A LU ~L.V L lL&L~-D LUL U &LA LL £IU plowing. As in the GER scheme, these charges involved a considerable subsidy elleme.t: total Cost per Iia was estimated at L".Z1 1-12, butULar-uers were charged rates of Z 7-8/ha only. About 19,000 farmers received Z 91,000 in credilt (almostL 2 5 per farmer) for maize seed, fertiLizer anu mechlanizeu services, and about 18,000 ha were planted to maize and cotton. The project authority expects repayments after the harvest to be as goou as last year, in spit-e of the increased size of individual loans.

21. Because of the heavy subsidies, the project's potentialities as a credui program are sma-11. AtL LnU same tXime, proviued repaymelLns are as goou in the future as last year, the project should demonstrate that the concentration of tecunica'l services, coupled with competent management, does make it possible for credit programs to small farmers to be successfully incorporated in integrated projects of this type.

Other Credit Sources

22. Apart from the above, there are other minor sources of credit, but their impact is quite small. A few of the marketing cooperatives still functioning provide very limited farm inputs to their members. Some of the religious missions provide a few seeds and other inputs to farmers nearby. There are also very small schemes for inputs (mainly seeds) for tobacco (Katanga) and pyrethrum (Kivu). Some Lake Albert fishermen obtain small loans from wholesalers. CEPSI runs a savings scheme for its trainees, using the savings to set up the trainees on new farms (Annex 4). Moneylenders as such are virtually unknown in the country, but farmers are able to obtain ANNEX 9 Page 6 loans locally for social purposes (para 24). Local loans for farm inputs are unusual, but in times of emergency a farmer can sometimes borrow seeds from a neighbor at planting time, repaying at the harvest up to double the amount borrowed.

Credit ImDact

23. The total number of individual farmers receiving oroduct10n eredit at the present time from all sources is probably no more than 30,000. The annual amount involved may be of the order of Z 400;000: the average of around Z 13 per farmer varies considerably, from Z 2,100 in the SCAC project to Z 5 or less In the GER and FED nroiects; and m.uch less still from m4inor credit sources. About two-thirds of this is short term, repayable in less than one year, and the rest (most of which is in the SCAC project) medium term, repayable in less than five years. With over 2 million farming fam-ilies in the countr-, only about 1.5% of them are at present affected by credit programs. With present annual value of production by individual farmers of the order of Z 120 million, the current value of credit represents only around 0.3% of production.

24. These rough comparisons emphasize the almost negligible impact which credit now has on farm family operations. To provide perspective, however, the situation is fairly similar to that in Malawi in 1964/65, just prilor to the start of four major devellopm.ent- proJeCt-S 4. that country. '.e friA.Ut A0 tL~LAl~.Lt Li *JtA. UAJ LU tCV SJA L C jt JJ 6L AO1.0 L11 L. LA UI LL * ±i comparable starting point, and the progress made in Malawi in six years, is as follows:

.7ATn' thAL ATLAW 1970/71 19-64/65 1970/71

Credit as % value of production 0.3 0.8 4.9 % larmLL Lamil'es wLit credit I.5 A.0 2.8

VW4Le the constraints in Zaire to agricultural development in general, and credit in particular, are undoubtedly more serious than in Malawi, the experiences of this country suggests that continued efforts to establish appropriate channels of credit for Zairan farmers would be well worth the resources required.

Major Constraints to Credit

25. The development of credit in Zaire will be retarded, broadly speaking, by the major constraints to agricultural development (such as transport, inadequate technical services, marketing weaknessess, etc.) which are brought out elsewhere in this report. There are other more specific problems which particularly concern credit to individual farmers, of which the more important are:

(a) the use of funds by farmers for social purposes -- including dowries, weddings, funerals and feasting -- takes precedence over use for agricultural production; ANNEX 9 Page 7

(b) past experience has conditioned farmers to look uLpon a credit as a gift, particularly wnen it comes from Government funds, and thus credit recipients do not generally feel they have a moral or civic duty to repay it; and

26. The first two problems relate to farmers' attitudes, and it will take many years to change these. But only by the spread of credit among them, and by instruction and demonstration of its value, can the change be brought about. Although individual loans averaged little more than Z 1, the relatively good repayment record (over 95%) in the first year of the FED project shows that the outlook is not unpromising. If a similar repayment rate is obtained in the current season, when the size of individual loans has been increased to Z 5, the prospects will be even more hopeful.

27. As; to tangible security for a loan, a lien on crops is legally permissible, but in practice difficult to enforce. Land is; traditionally owned and administered collectively according to customary rights, which vary widely in different areas; but in general local chiefs allocate the usufruct of land (in cultivation or fallow) to individual families. In the SCAC project, farmers receiving these relatively large loans (Z 2,100 on average) hIave obtained papers from the local chiefs authorizing them to use the land throughout the duration of the loan, and this has provided at least some security of tenure. In the GER and FED proiects. the much smaller individual loans have been made without any such.documents. In the GER proecrt, some securitv is included because many farmers se]1 at least part of their produce through the project, and sums due are deducted before npayment fnr p-rnciierp sold - The 1nrk of tncYih1e secuiritv frnm individual farmers should not be a serious constraint when formulating future credit pro;,rams, flldedtht-: for lnrapr IAoansj nriritiv of tenure is assured and the farmers have an honorable standing in the local community; and for smaller loans, there are other factors (e ag. grou responsibility, control of marketing, intensive collection efforts, etc.) which afford reasonable chiances of repaylment.

28 ic clseJy,Creit i-ntsrlinked with the Tnnrni 7niti-on nrorepss Successful credit programs to individual farmers have the effect of trans- forming tradi tional agriculture, and changing its truct In turn, these changes can produce the security necessary for large scale credit operations in the .more distant future.

In tercs t Rater; '. Si.nce-J bot- the7 --- I LIVI prJc-s----- contaln subsid'ies, the real * U iILL UU LII LiCU 1..4DI\ CIILU £L.U& jJ LI.J tL- LLJId.II~L UZIS.I._0.L_1L interest rates chargedI on loans cannot be worked out. As noted above for tllI .S.s-^v piJIject,J the rates are 11% Ca yeCar- sh`orttLerru (up to tLWo yeUaJrs) a.Ld 8% medium--term. Its 67 long-term rate is notional only, since no long- term lo0ar1s fiave been or are llkely to bUe Ti-aude. SaCAC's LWO operatlorLal rates compare with thc! commercial banks' rates of 8.5% a year for agricultural ANNEX 9 Page 8 mrketilnQ 'oans, and 9.5% to 11.5% for commercial and industrial loans (mostly under one Year). SOFIDE charges 10% for most medium and long-term iirduhstrial loans.

3. To rea-in fiinannially viable, a credit institlltioTI (or the credit section of an integrated project) must charge interest rates on its loans thit- will rmect- tHi fTill rosts of its ndministr2tion, the cost of any borrowed funds, and allow adequate sums to be set aside for general and bad dlebts reserves before it can pay dividends to its shareholdrs- (or- in the case of a crodit section, slow a surplus). Of the three projects discussed here, only SCAC c:arges recognizable interestrates to its borrowers, but the project has not been operating long enough to produce meaningful accounts fron whichl the overall cost of its credit operations can be calculated.l otr the time being, one can only say that its 11% short-term rate is in line wit1hI co-I-mercial4 rates , but its 8%mLedium.-termArate may eventually prove to be low, particularly when compared with SOFIDE's 10%.

Caisse Nationale de Credit Agricole

31. For the past few years Government has been considering the forma- tiLonLL L[oi'Ut an,CU institutiontoiiZ L L U,4CL UIStU providei.i. cre-i.. CL4.I._ forA. indviuaLL4Li44A.-.L.i . ta - - -1C- --O ErylT tXl 4.1-amr. 1970 the Brussels firm, Recherchie et Developpement, was asked to develop plans for such a countr-ywide cLedit systerm. In Septe-.Uber, 170I, it put forward proposals for the formation of a Caisse Nationale de Credit Agricole (CNICA), wihichl would take over the credit operations ir exsLngIL piuJects and be responsible for those in future projects. A more recent study by CCCE is expected to be published shortly.

32. iBRD/IDA experience with agricultural credit in African countries has shown that best results have usually been obtained by integrating credit into each development project, whether related to an area or a crop. mne main reason is that such a project usually contains a concentration of management and technical expertise, together with a capability to supply farm inputs at the proper time and the organizational effort necessary to keep the project moving. in such cases credit becomes a normal part of its operations, and as such can generally be administered more efficiently than through an outside institution.

33. Where separate institutions have been set up to deal with farmers' cre(lit on a countrywide basis, in many cases they have failed. Two causes can be cited: either they were not associated closely enough with the projects handlingy credit, or they were responsible only for the residual credit needs not handled through projects. In both cases, the cost of providing credit has generally been higher than when given directly through projects. Some institutions have failed because, usually for political reasons, their energies have been scattered throughout the country instead of being concentrated on the most promising outlets. In other cases, institutions have been formed to assist farmers making the transition from subsistence to a cash economy, where, because of the heavy concentration of technical services, the initial cost of providing credit is usually highest. In contrast to a project where the resulting losses in the early ANNEX 9 Page 9 years are generally written off as development expenses, in a credit institution they are frequently carried forward trom year to year; on occasion such accumulated losses have eventually led to insolvency of the institution. Few governments have been prepared to underwrite annual losses during tne formative years of an institution by way of a grant, although to do so would keep the institution solvent. Sooner or later, ot course, any iosses in the early years have ultimately to be borne by Government, whrlether credit is given tlhrough a project or a credit institution. While this general experience would not necessarily hold in Zaire, it argues strongly for caution.

34. There appears to be no advantage in setting up a CNCA to provide farmers' credit throughout the country at the present time, and further consideration of the proposal seems higlhly premature. The only credit programs likely to have Some measure of success in the near future will be those in which credit is part of development projects, along witlh other inputs -- management, technical assistance, timely farm inputs, improved transportation, etc. -- necessary to increase agricultural production meaningfully. In t:he morc distant future, after a number of development proiects had been successfully establislhed, there may be some point in reexamining the CNCA proposals, particularly in cases where specific proiects were about to terminate, in order to provide alternative credit sources for project farmers. It is appropriate also to mention that an Agricultural Development Bank, to help finance commercial agriculture, is proposed at the end of Section C below. If accepted and nut into oneration, it should be in a Dosition to assist with credit to individual farmers, possibly by managing Government funds earmarked fnr this purnose This latter nrospect now annears the more Dromising a]ter- native.

C. Production Finance For Commpercial Aar1iulti,rP

35. At present, medium- and long-term finance for production purpoSes -n thie cnmm-rcinl secto,r ic not available frnm omm.proin1 hanks A smalL amount of seasonal credit from them is rolled over each year and used for in- vestm.fnt purposes, but it is iinlikely tn Pex-cee 7 500,00 a yr= The larger foreign-owned enterprises (mainly plantations) have financed some rehab1li t;a 4onand 1 very lm ted development out o .etaie pr-oft over the past few years, but the scope and volume of this is not known. There are no oth.er local i4nstituti4-o1al sou - of .aA4- -An 1org-te-m A-vIeoment- finance available to the commercial sector, although the commerciatl banks provide about Z2 -,4llion a yez;- Ior seasonal -rdciwrd-Arei.puos.

JU T ILL'. ULcLCLe rinL1aLLiLcLr UU IJCV=.LUpJJC1Let:LL kO;JriJI"J Was esta. in January, 1970, to provide medium and long-term finance for private enterprises in all productive sectors Of the economyr in paLcular the ,,1nu= facturing and processing industries, but also commercially oriented agriculture, forestry, fishing, transport and tourism. Its sharcholders include AN-1EX Page 10 the Government, Central Bank, private investors (rnational and foreign), and thie International Finance Corporation (IFC). Its present resources are abouit Z 4.5 million. 1/ Since its inception, SOFIDE has received a total of 35 requests from the commercial agricultural sector for development funds rot-alinq 7 77 million, an average of Z 91,000 npr renuest=

37' A breakdown of these reuneists i giaven in Tahbl 1 The hevuiest demand for finance is for export crops and livestock, while the highest average value of individual requests is for lIvestock.tmanage- SOFIDE'S ment has reluctantly had to turn down these requests, mainly on the ground that it can f-lly e n1nx,l,r aI its resource 4n the nom1nufacTrI' nnA cessing industries for the foreseeable future, but also because investment in agrIculture requ-res s-1ecialist staff, *hich it could not Justify at present, in view of the heavy demand for its funds from industry. The L'03rdl of nirectors is expected shortly to confi r------ft' view- that~f SOFIDIE will be unable to finance agricultural development in the foreseeable

'I 1-1 . Tn/AK'1 flTfI11UC'1r'Q 'rn o ~'r nr.T liD-LU I . Luu'iU £u:'uj'0D L%j Dur £in

Total A - --e Value Number Value per Request

Export Crops (coFfee, tea, cacao) 57 4,J03 79 Livestoc:c. 16 2,662. 169 i"ood Crcps (groundnuts, maize, ma-nioc) 9 14 44 Oil Palm Plantations 3 234 78

Total 85 7,713 91

Demand for Finance

38. T'clatively little is known about the actual size of current pri.vate investment -inZaire. However, over the last three years, the investment that has been made has been financed through reinvested profits rather than new capital from abroad. In this same period, private investment ihas incrc.ased considera3bly, partly because of the 1969 Investment Code, which gives ta:' r(lief to all approved investors and guarantees transfer of profits anid some capital to fore-iin investors, and also partly because tlle 1969 set- tlIemen)t of the lon,--standing dispute between Government and the Union 'inriire has given increased confidence to investors. Most of this increased private investment went to industry, but there are signs of reniewed investment activity in agriculture, particularly for rehabilitation of plantations and factory maclhinery.

1/ An IDA credit of US$10 milli-on was signed September 24, 1971. ANNEX 9 Page 11

39. IBPD's estimate of the total investment for productive purposes in 1969 is about Z 145 million. Assuming between 5 and 10% of this went into airiculture. the amount would be between Z 7 and Z 14 million. All the 35 requests for loans to SOFIDE would have been unlikely to materialize as viable Droiects, but assuming only one quarter became proiects, then between Z 2 and Z 4 million would have been required over the past 18 months to finann_e themn Tn enptember; 1970 an FAO/IBRD mission prepare1 a nro½irt for the extension of livestock production on large and medium-sized private ranches, for the extension of the Katanga State ranch at- Miila, and for the establishment of al new commercial ranch, at a total cost of about Z 3 million over four years. 1'/ Experience elsewhere shows that most foreign owned enterprises are keen to be associated with local finance once it becomes availabe to teUm. Thus, -stab4ls-ed coLanerclal ventlures could be expected to rehabilitate and initiate new development at a faster rate if a local f-iilance ins-iu-ion was set up. h>.M41 it 4s 4,-,pos4ibe to- quatiy -,la ILLLLCI LL ±1 L.L L.Utl.JL Wc~CL.5 t-I Up . V*.~ . . .O ..LUlpJ ooU LJ .L L - U.)'ua L.A.A. .I-IaaU with any degree of accuracy at this stage, there is clearly a need for finance Lor investment 'Lnco,L,U,mercial agric-'lture. T*enLLtaU ti veLUy- aLU± .LLLVs.,LeLLL. requirements might at present be estimated to be of the order of Z 5-15 mril- Lilon .

Agriculturai Development BanK: A Proposai

40. Background. In view of the foregoing, the time may be opportune to set up an institution to supply finance for the commerclal agricultural sector. This could be done either by starting up a separate section of SOFIDE and providing it witll suitable funds, or by setting up a new Agricultural Development Bank (ADB). The latter course seems preferable in Zaire, since SOFIDE is fully occupied in the industrial sector, and since also a separate management team, completely oriented to agricultural development, would be required in either case. As explained above, there would be no advantage at the present time in setting up the proposed CNCA to provide credit for individual farmers, since such credit should only be provided as a part of fully integrated development projects. A CNCA would have to obtain thie bulk of its funds from Government, whereas an ADB should be able to obtain a fair part of them from the private sector. Thus, the approach to the new institution should be considerably more commercially oriented than if credit to individual farmers had to be included. There is at present insufficient data available to give precise suggestions as to ADB's constitution, capitalization, organization and operations; the following proposals take into account these shortcomings.

41. Steering Committee. To obtain more details of the demand for finance, to sound out likely investors, and to obtain a better idea of A)B's precise role, Government should set up a Steering Committee. Its member-- ship should include a representative each from the Central Bank (Chairman), the Ministry of Agriculture, SOFIDE, two of the leading commercial banks.

1/ The proposed project financing was through a Livestock Fund, which SOFIDI would manage for a fee. ANNEX 9 Page 12

the rubber estates, the oil palm estates, the sugar producers, and the large commercial livestocik producers. Its terms ot reference shiouldc include the following:

(a) to estiiiiate the demand over the next five years for (icvelopllenit finance in the commercial agricultural sector; and

(b) to consider the setting up of an ADB and to make recommendations as to its constitution, capitalization, organization, management, staffing and operating policies, includinig financial estimates.

'tl-e Steering Committee should submit a report to Government within six months of its formation. Some of the more important points which it should consider are discussed below. While the list is not exhaustive, it includes the major issues which appear important at the present time.

42. Constitutioni. The main requirement is that ADB should be free from political interference, and have efficient management that would be able to function with enough flexibility to meet changing circumstances. It seems likely that a limited liability company ("Societe Anonyme") would be the appropriate form.

43. Obiectives. The main objective would be to supply development finance for the commercial agriculture sector; in the agroindustries sector, agreement should be reachied with SOFIDE to avoid unnecessary overlapping of investments. ADE should also be equipped to provide finance, or be a conduit for it, for individual farmers participating in well-defined development projects.

44. Capital and Finance. It should be possiDle to find a reasonable part of the equity froTn cnmmmprrial sources; including thp Central Bank and thie lrnral and foreign banks, but doubtless some funds would be required from Government. If Government participation ws iinlikely to hp very large, an approach to IFC for equity investment might be considered. Sources of possible loan funmds (including I13R!)) andD suItable debt-equity ratios would be Important.

!;5. I litro t-LACIIJ il,-I pC.-l A cag i- rates lts4o loans th;at, together with estimated income from dividends on its equity holdings, wo-u]WlU.UI cl enab)leZi l) -i-.5. ICtIh tomc Ci 15L t:Ci_C I~4ull - costs.J -CO Lof - ad...in4a,uij.L,x st-ra-ionIL aC_ ,L ChLan-' the%_S costL. ofhi borrowiedl funids, and to allow adequate sums to be set aside for reserves beUt -LULL..orc payngjJd,Y-±Ii~_ UIV.Ldivendis 1ILU to- JLits i shareholdersLL ~~iI~hLUt:L.0 TnLii JLits L ~early -L form,ati.veAAL IdIV years,eas thie high cost of overseas specialist staff (see Management, para 48) would almost certainly lead to annual operating losses; thus the possibilities of obtaining technical assistance funds from an international agency for such staff should be tnoroughly explored.

46. Board of Directors. The Board would doubtless reflect the composition of the shareholders. ANNEX 9 Page 13

47. Operating Policies. These should include liaison with Government and institutlon Scon-c e..ed _wlth, e Z8 Iand _-~_~_ ag,r-clt1 CL..ea We-.L..I.wel asL W.±wit LI Lth M bank1UIZ. ___- L. other financial institutions.

48. Management. For the first few years, ADB would doubtless have 'Lo be run b'y speciLa'Lst staff recruited from overseas. In the first instance, the minimum overseas staff would probably be a Managing Director, Flnancial Controller, Agricuulturalist, Agricultural Economist, and Live- stock Specialist. The training of Zairans for senior management positions should be an important part of the management team's duties. The possibility of employing management consultants to provide the whole team, rather than employing individual expatriates, should be considered, particularly in the interests of continiuity.

49. Timing. Provided the report of the Steering Committee were favorable, ADP, should be formed without delay.

AMMThV I n Page 1

DVPDTTUTTf1r n 9ATDVL .LAC O, £.L.L%Ai

AGRICULTURAL SECTOR SURVEY

Protein Deficiency and the Role of Agriculture

Introduction

1. The Zairan Government is anxious to improve the diets of the population as part of its overall program for economic and social development. Particular attention has been focused on the reduction of protein deficiency in areas where extreme conditions, as evidenced for example by the existence of Kwashiorkor, are known to exist. In the course of its agricultural investigations, the sector survey mission gathered some informat:ion on the scope of protein deficiency in Zaire and on some of the activities currently underway to remedy existing deficiencies. The purpose of this Annex is to describe the situation and to comment briefly on the role which agriculture can play in improving dietary standards.

Protein Deficiency: Its Types, Location and Attempted Cures

2. There are four general circumstances in Zaire which give rise to protein deficiency. First of all, temporary deficiency often exists due to an interruption of food production. The cause might be a breakdown in security in the countryside or crop failure because of bad weather. In t:hese circumstances, protein deficiency is likely to be accompanied by other forms of undernourishment. Secondly, there is chronic deficiency due normally to a combination of limited production potential and unbalanced dietary habits. In Zaire. these circumstances are usually confined to savannah reRions in which manioc is the staple food crop, though population pressure in parts of Kivu province is creating a chronic problem there as well. Thirdly, there is urban deficiency due to lack of purchasing power. This is basically a problem of poverty which affects large cities in Zaire and most other countries in the world. Fourthly, the refugee problem represents a special circumstancre that results in protein deficiency, because production has not been organized in a refugee area, or because the refugees have not fully adanted to a new ranae of available foods in their new environment.

3= The lnratinnR nf the urban and refuQee-relatad deficiencies are rather specific, of course. Some degree of protein deficiency may be as- sumed to exiat in virtually All larva c-itiesa thougc-h statistic-al evidence is not available. An education program has been undertaken by the Ministry of Health , tith the Asscitanea nf th WorlAd Realth OrgnnIzation- to train personnel in better dietary practices and make knowledge of these practices available to urban mothers. To date, Kinahana han rr'ivedi trhe mont attention, ANNEX 10 Page 2 but the officials concerned are well aware that similar problems exist in the other urban renters. The refuvee nroblem exists primarily in two arean! in Haut Zaire province along the border with the Sudan, and in Bandundu province alnno the hnrder wit-h Angnlsn Tn the rer-ent nast- there hn. Aaln hben a serious problem in Bas Zaire, again concerning refugees from Angola, but many of these ref uraee have noo. been euirneeRfu1ly settied into villages and are producing food for their ovwn subsistence. The High Commission for Refugees hA h__n _ ptlo _In _n.-h nf t he sn_ an Acaiat-nrn_-e hAQ al,A h_ n f,nrthr.n n_ from several voluntary agencies and, especially in the Kwango district of Bsa.dudu, from religious missions.

4. Ao for secur4ity-related A4disr-pt4i- of -r--A..ot-4 n effrts, prap the most important location where this has taken place is the Maniema region J.VJ. t _ I _ e _ 4. . t1..1 A A kaan.1a..~ 1 L,as p. ovr LU £%..LVL Uv±LLI..V)L .JIALA. Uy .. ±n ,LL,L LV 5 L'.WLA LACLaO, aJY_&Q jLFU.Lc ong period, and the roads and Government services have deteriorated markedly.

5. Another area with "temporary" malnutrition problems is the Kasai. to the cities (Lul VAU.44_-g,u =-i s -- A e spectacular V94gration.J:L L .L~.LIL &_ &-l L.LJ. 1,L,A.LU1&U0UZrAL5 AKW-j-MCLA YJ . LAOO C ~ increases in urban population (200 to nearly 700% over the past 15 years) and has helped t'p the supply-demanud balance fLrom surplus to deficit in basic foodstuffs. Whether this flood of people away from the countryside is "temporary" or not is problematical; hence, the problem of such areas i8 distinct only in degree and not in kind from the chronic problem areas.

6. Three chronic deficiency areas are generally recognized to exist in Zaire. One is in the southern part of Bandundu (especially Kwango district); another is in the savannah areas of southern Kasai Occidental; and the third is in central Kivu, in very densely populated territories such as Ngweshe and Kabare. In central Kivu, it was estimated that, in the mid- 1960's 1/, between an eighth and one-fifth of ail children suffered from Kwashiorkor, though insecurity during these years was part of the cause. Even before the troubles, however, Dr. Maeyer reported that there were parts of the savannah regions in Kwango-Kwilu (Bandundu), south Kivu, and Kasai ou les indices chez !es enfants de 1 a 6 ans attaignaient suivant !es regions entre 5 et 26 pour cent" 2/. More recent estimates in Kasai Occi- dental suggest that more than 50% ot chtidren between the ages of one and four suffer from malnutrition 3/.

1/ Tnr. 1Tuv1.eqte, Le Prohleme de Nutrition dans le Republique Democratique An r^"ft- 4n the collection of semInar nqnprq, eiTinaire siir T'A1imenta- tion et L'Fconomie Rurale, TRES.

?/ rited bv nr. Mpuete, Principales rarences et Leur Localisation in Semi- natre sur l.'A14mentation et L'F:conomie Rurale, TRES - Lovanium.

4 … 4-a r.a. Tutte Contre Ta- a.. t- ai, (mimem). t' !~. * Ifl nesCte l.f TILua C '.JJLL L.JtAk*.. ANNEX 10 Page 3

7. In central Kivu, a special campaign -- supported Dy Government and a number of voluntary agencies -- is underway to combat the widespread ml].- nutrition 1/. Firstly, emergency rood supplies are being brought in for direct distribution to the affected population. Secondly, and more long-- term in nature, the introduction of soya bean cultivation is being encouraged. A similar effort with regard to soya beans has been carried out in Kasai Occidental during the past several years.

8. The soya campaign in Kasai has had some success, as shown by the production figures in Table 1. It should be emphasized, however, that the success of the program is due in large measure to long years of effort by volunteers ---Pere Vanneste, Mlle. D'Heer and their collaborators -- at the mission school at Tshibashi just outside Luluabourg. Soya has been J3uc- cessfully introduced into the local diet by providing it in the form of flour, which can easily be mixed with maize flour and manioc to produce an only slightly modified version of the basic food dish, the bidia. No special cooking procedures nor utensils are required. No dietary taboo is violated. The taste is not modified substantially. As a result, consumer acceptance has been accomplished with relative ease. Before this successful approach was found, other less well adapted methods were tried and had all failed. The point is: the introduction of a new food such as soya into the diet is not an easy matter. Careful research into local dietary habits and experimentation are required.

9. The method discovered to work in the Kasai has great advantages. Since the soya is integrated into the basic food dish, its benefits can be realized on a regular basis for the whole population. In contrast, consLder the situation whereby. by some means, it had been possible to greatly expand the number of chickens and eggs available to the population. Chickens are traditionally consumed at irregular intervals to celebrate some local event or to honor an important guest; neither meat nor eggs are eaten by pregnant women. Thus; IncreaRed sunplies of these foodstuffs would not necessariLy lead to greater or more regular protein intake. Also, the diet of weaned infants is a form of porridge which is nothing more than a partly prepared bidia. Thus, without any extra effort being required of the mother, the nrntpin advantaPeR of soya are passed directly to the age group most in need of protein supplements.

1/ Cf. Oeuvre pour La Lutte Contre le Bwaki et la Protection de L'Enfance, Rapport Annuel, January 1969-December 1969. Bwaki is the local term of Kwashiorkor. ANNEX 10 Page 4

Table 1: SOYA CULTIVATION IN KASAI OCCIDENTAL, 1965-69

1965 1966 1967 1968 1969

Crops (tons) .2 2.6 13.7 n.a. 763 Equivalent Improved Diets /1 18 200 1,050 n.a. 58,000

/1 Number of adult yearly rations of recommended quantities of soya flour, i.e., 30 grams per day, assuming a milling percentage of 83%.

Source: Figures 1965-1967 are purchases of Tshibashi; 1969 is Ministry of Agriculture estimate.

10. The cultivation of soya beans in Kasai has not presented special problems. In fact, given that it brings a higher price than groundnuts, soya has distinct attraction to farmers. It makes less of a demand on the soil than its three main competitors in the region, haricot beans, groundnuts and voandzou (Bambara nuts). It also has higher yields and shorter maturation (depending on the variety -- about 90 days), so that two crops a year are possible. The strictly agricultural problems of introducing soya are therefore much less complex than the key problem of social acceptance.

Basic Determinants of the Protein Problem

11. Protein Supply. In 1957, the colonial government initiated a vast survey, covering the whole of Zaire, of animal protein sources available to the population. A principal aim was to determine areas where introduction of fish culture could be justified by animal protein shortages. The survey report, published in 1961, still constitutes the best source of information on general protein availability in Zaire. A global summary is produced in Table 2. No account was taken of imports or internal trade, so that im- balance in actual diets would have been less than indicated by regional production figures alone. This is esDeciallv the case for Leopoldville Drovince. which received sizeable imports.

Table 2: ANNUAL LOCAL PRODUCTION OF ANIMAL PROTEIN (nprrpnt-aop diatrihutinn within Provinces)

Province Insects Hunting Fish Fiah Cuiltuiire TALivatnesk Pnultry Totnl

-1-opoldvil-Ille 15 16 56 2 10 1 t OO Equateur 9 28 56 - 4 2 100 Y.aut Zaire 10 55 22 - 11 2 100 Kivu 4 26 49 - 18 3 100 Katar,ga-7 24 61 7 1 100 Kasai 22 30 33 1 10 4 100 Total Zaire 10 30 47 1 10 2 100 Source: Gomez, P.A.; Halut, R.; Collin , A. Production de piutines animales au Congo, Bulletin Agricole du Congo, 1961, pp. 788-789. ANNEX 10 Page 5

12. Note the very high proportion of animal protein der'ving from natural production (fishing, hunting, insects), as opposed to production initiated by man (fish culture, livestock, poultry). Since the survey, it is quite possible that the relative importance of natural sources has increased. Substantial variations within provinces are not revealed by the table. The northern part of Kasai province, which is thinly populated and includes areas of rain forest, is more similar to the pattern shown for Haut Zaire province, where heavier reliance is placed on hunting. In contrast, the southern part of Kasai province is forced to place heavier reLi- ance on insects as a source of animal protein. Studies carried out by stu- dents at the mission school in Tshibashi confirm that insects are the principal source of animal protein in the villages of the old Lulua district, accounting for 60-80% of the total.

13. In the provinces most affected by protein deficiency, the survey gave some indication of the absolute amount of animal protein available per person per day (Table 3). Considering the increases in population which have occurred since the study, it is likely that these figures overstate the current availability.

Table 3: ANIMAL PROTEIN AVAILABILITY, SELECTED AREAS (1957-58) (gram equivalent per adult equivalent per day) /1

Fish Area Insects Hunting Fishing Culture Livestock Poultry Total

Leopoldville 2.2 1.4 5.0 0.1 0.9 0.1 9.7 Kivu 0.7 4.8 9.2 0.1 3.4 0.6 18.9 Kasai 2.1 2.8 3.2 0.1 0.9 0.4 9.5

/1 Conversion factors: insects, 20%; from hunting, livestock, fish, poultry: fresh 20%. smoked or dried 50%. One child = 0.5 adult equivalent. Source: As for Table 2.

14. Comnarable figures on vegetable sources have not: been compiled for the whole country; some very rough estimates for selected areas are shown in Tahip 4 TIn BanWdundu and Knnai Occidental, groundnuts and maize are much more important as sources of protein than they are in Kivu. On the contrary, hari -ntt hbanin na the dominant nource of nrntein in Kabore- territory of IKivu province, whereas they are much less important in the other two provinces. ANNEX tI0 Page 6

assava, the most important food crop in Bandundu and Kasai, has been excluded

Ior 1ack of reli-able estimates but i t i8 in any c-ase extremeyv low in protein content 1/.

Table 4: VEGETABLE PROTEIN AVAILABILITY, SELECTED AREAS (gram equi4valent peir pearsonn perv day)

Sweet Area Maize Millet Groundnuts Haricot Rice Potatoes Total

Bandundu/1 2.7 1.2 8.3 - 0.4 n.a. n.a. Kasai Oucidents' n. . r .n...... 1312r.a.a. Kabore (Kivu)/2 - 1.9 - 14.3 - 6.8 30.6/2

/1 Calculated using mission estimates for maize product'on and Ministry of Agriculture estimates (1969) for other products. Protein equivalents taken from Vanneste, P., Comparaison de la Valeur Proteique d'un Bid'a Ordinaire avec un Bidia Enrichi par la Farine de Soya. Tshibashi, mimeo. /2 Source as for Table 1. Note that total includes meat (3.3 g) and fish (0.7 g), which corresponds to the Kivu average for meat (Table 3) but is much below for fish.

15. Protein Requirements. Protein requirements differ somewhat between men and women, but roughly speaking the gross requirement for an adult is about 0.5 g per kg of body weight 2/. A growing cnild requires about three times as much, about 1.5 g per kg of body weight. The age, sex and body weight distribution of the population is not the same in all parts of Zaire. Roughly speaking, however, somewhere between 30 and 35 g per day would seem to be a minimum requirement in most areas. Wnen this range is comparead with rough estimates of protein availabilities (Tables 2 and 3), it is easy to understand how the symptoms of protein deficiency described earlier came about.

1/ The adequacy of protein supply is complicated by the chemical properties of the amino acids involved, and also by the relation of protein supply to calorie supply. Of the amino acids which make up proteins, 10 are unique in the sense that they cannot be replaced by any others. The human body needs these 10 acids in certain quantities and in the propor- tions found in an egg or in mothers' milk. Absorption of protein intake is in proportion to the amino acid which is available in the low- est concentration. Thus, for example, the protein supply from a diet consisting almost entirely of grain is limited by the amino acid lysine. Tn contrast; legmerms such as neas or beans are relatively rich in lysine. Thus a combined diet of grain and legumes is more beneficial than the same total amount of nrotein from grain alone. Also, the calorie component of a diet can "overpower" the protein component to some extent, if the proportion of nrotein bv weight is below a certain minimum. An example is found in parts of Kivu, where the dominant source of calories and the dominant source of nroteln is the same, namely haricot beans. 2/ Most estimates of protein requirements are based on the recommendations of a joint FAO and WHO committee of experts (1965). . -- T 4 ^ AUMIP,A I V Page 7

16. Also, the complicating factors should not be forgotten -- there are sharp geographical differences in supply; the better-off members of the community will receive a higher share; adults, more than children; supplies are unevenly distributed through the year, etc. While these points may seem obvious, they can all too easily be forgotten when it comes time to recommend programs for alleviating protein deficiency.

The Role of Agriculture

17. Limits. The first and most obvious limitation oni the role of agriculture is lack of consumer acceptance of specific food products or programs. Any number of soya schemes in Africa have failed for this reason. The practical implications of this limitation are twofold. The first is the importance of trying to increase the availability of proteiLn-rich foods already consumed by the population. This course of action depends on the potential of particular local foods as well as the strength of dietary habits -- preferences or taboos can preclude increased consumption of foods that do have potential by the groups in the population that most need extra protein (e.g. eggs for pregnant women in Kasai). The second implication is that careful study of existing dietary habits, and the acceptability of possible modifications, should precede any major agricultural campaign to introduce a new food cron as a means of alleviating nrotein deficiency.

18. Another limitation on the role of aariculture is suggested by the high relative importance of "natural" sources of protein, such as insects, htint-4na -nne fisnhina. More effect-ive resnulta might he obtained by devotin2 limited resources to improving the "yield" from these sources rather than by using these resources for a more conventionAl aorie tiltt,ral program. For example, research carried out before independence in the Kwango district (preaaert RanAndu province) carme Up with severAl rnusila e reianm for increasing the harvest of insects. Some of the means (forbidding the felling of certain trees or harvesting pupae; adherin- to a certa4n tImetahle for burn- ing the savannah) would involve propaganda campaigns and possibly also certain enforimant satAff- Siffirent lnfnrmatinn in not available to permit a judgment as to whether this sort of program would be a more cost-effective means of reducinr. prote-in def1icrienc.y than mnre rnnvpntional agricultural alternatives (e.g. soya or beef cattle development). The basic point is that, before agricultural programs are Ii"tIated, alternsatives based on "natural" resources ought to be considered.

19. A third limit on the role of agriculture is basecd on the complicated chemis try of proteins (see footnote, para 15). Yeasures to increase protein supplies are more effective if they "fit in" with the existing production

pattern i±n a teclh1niLca1l se.Lse -- tLhILat 'L.1e CWLL cLdsupleD suppleJ.me rather than duplicate the amino acid composition of existing consumption patterns.

20. Opportunities. In view of the need to tailor a to specific Local characteristics of the protein supply, i: is not possible to say very much in general terms about opportunities for agriculture. An ANNEX 10 Page

exception relates to the urban centers, where protein deficiency is primarily a problem of poverty. The general opportunity here is the downward pressure on prices that increased agricualtural production, and especially yields, would create. This potential to influence protein-rich foods in this fashion is less important for Kinshasa than for cities in the interior. In Kinshasa, apart from tariffs and small transport costs, it is world prices that largely determine wholesale (but not retail) prices. Elsewhere prices should be more responsive to output increases. Suppose that an agricultural inten- sification scheme in Kasai Occidental significantly increased groundnut surplus in the province; some decrease in the price of groundnuts could be expected, and hence, the dietary standards in Luluabourg would be improved as an indirect benefit for the scheme. It should be noted. however, that prevailing retail margins (See Annex 2) would tend to dilute this effect.

21. A few specific comments can be made in regard to agricullture's potential role in the Kasai Occidental and Bandundu areas where protein deficiency is chronic. These comments are quite tentative and are intended more to raise questions than to provide answers 1/.

22. Kasai Occidental. The most striking agricultural opportunity in this region is no doubt further development of soya cultivation, possibly in connection with area development schemes. Since soya beans must be given a simple heat treatment (to eliminate certain toxins), and then milled before consumption as flour, it will probably be necessary to expand the number of processing centers, which require simple hammer mills. To ensure satis- factory results it might be advisable, at least initially, to entrust soya processing to religious missions in the province. Since there are at least two or three missions in everv territorv; this should nresent no nroblem. Seed distribution could take place through the same channels. Seed multipli- catinn mny perhann he taken lin at- a later stage hb the t-wno %atations at Ben>- Lango and Panya, which are to be reactivated with Belgian assistance.

23. There is almost certainly potential for developing livestock in the region, especially small stock like goats and poultry. Gver-nment estimates show a total goat population of over half a million in the two Rasaa (roughly thre.e-qu.arters in KVQai Orienrtal). The f4igur for bef 84- not much more than 10% of this and, what is more, the ownership pattern is ern.iJLey r deA.*.Lifferent. GoLats are o-wne. by villages, whItLe th Lrater parLt of the cattle are in the hands of one large ranching society and the religious missions. "llat 1little beef L8 cons-mred' ir.thL'e provir.ce 'Ls zalmost entirely in Luluabourg and Mbuji-Mayi, where per capita consumption is about I kg per eap'ta per year. Ever. th's sma.l amouriLt is not evenly spread through the population because of the relatively high price of beef.

1/ For additional comments on the zone of Kivu, see Annex 5. ANNEX 10 Page 9

24. The Dotential for fish is not especiallv Dromising. Estimates of the total potential for the Kasai river and its tributaries are only about 8.000 t a year. most of which would not hpln the areae in snuthern Kasai where protein is short. Potential for fish culture is also rather poor in general fnr qnstt-hprn Ka8ai- wptern Iatangap sand the southern hllf of Bandundu 1/. Despite the poor conditions, it might be possible to promote fiah fish~eiil turew-t-,irp~~~ lnteae-rudin t-hp n-ron---- armnlsrIr 4li iti-It- 4n RlneiiiA,,-i,nd whereWj.~6ya-"l . somesprtno~ activity has taken place in recent years; but without such an indication of li-al intereast in Ksni it w^lA not appear a prom44sin opportnl ty there.

25. Consideration might also be given to voluntary resettlement within Kasai- Occidental a a of relieving are ,chron.icallyeficlent -In protein. Two development schemes having the support of the provincial

~~ ~~~~~ - -&&4Id_X LL~~ ~ ~L L L&WLL.&LI .J L.L&~1 .LA.A.ULJU, would appear to be an especially promising area for resettlement, since soil potertial 6Ls favorable and the population. dUe-u.Ly is 'LuIw Uue to lack- of secondary roads. As one limitation to this approach, the people most aff'ected uy chirorL,c prote'n Ue'L'Lc'ency are aL he same time Lhe oiLes lesL Kikly LO undertake voluntary resettlement.

26. Kwango-Kwilu (Bandundu). Among existing crops, there appears to be some potential for expanding production of groundnuts, rice, and voancizou. A Chinese team based at Kikwit has already started investigating the scope for rice. The team will also experiment with soya interplanted in customary cassava fields. It is to be hoped that this experimentation will be complemented by dietary studies of the sort done in Kasai. Voancdzou is reported to be a common crop well accepted by the local people. If this is true and consumption can be expanded, it could be an alternative to soya as a source of protein.

27. The position in regard to livestock is roughly the same as in Kasai Occidental, though the concentration of goats in relation to the human population is higher (about 1:7). While the fishing potential, both natural and artificial, of the Kasai and its tributaries is not great (para 24), there is a significant unexploited potential in Lac Leopold I] in the northern part of the province. Estimated potential is 10,000 t per year compared to a current yield of 225 t annually. The natural outlet for this production would appear to be Kinshasa, but appropriate efforts at improving marketing links between the lake and the southern part of the province could make possible some diversion of supplies in the direction of Kikwit.

28. Possibilities for improving insect "yields" should not be over-- looked. Moreover, since the Kwango area is a traditional source of honey, and since the population of this district includes numerous people who

1/ Cf. paper by A. de Bent in Seminaire sur L'Alimentation et L'EconoxLe Rurale,I.R.E.S. ANNEX 10 Page 10 subsist on hunting, it might be worthwhile to explore in detail the prospects for encouraging honey gathering, both as a direct source of protein and as a source of cash income.

Concluding Remark

29. If these comments on agriculture and the problem of alleviating protein deficiency seem fragmented and rather ad hoc, that is probably an accurate impression of agriculture's role in this complicated matter. Sweep- ing solutions that apply over wide areas are very likely to be ineffi- cient or even, in part, unacceptable to the people they are supposed to help. The range of situations in which protein deticiency arises; the variety of available sources; the diversity of dietary habits and taboos -- all these factors prescribe programs that are multifaceted and carefully tailored to the needs of the particular situation. ANNEX 11 Page

REPUBLIC OF ZAIRE

AGRICULTURAL SECTOR REVIEW

STATISTICAL ANNEX

TABLE OF CONTENTS

SECTION I POPULATION AND EMPLOYMENT

Table 1.1 Population by Province, 1958 and 1970 Censuses Table 1.2 Employment in Large Enterprises, 1960-1968

SECTION II NATIONAL ACCOUNTS

Table 2.1 Estimated Gross Domestic Product at Constant Prices, 1959 and 1964-1969 Table 2.2 Sectoral Breakdown of Gross Domestic Product, 1966-1968

SECTION III PRODUCTION

Table 3.1 Agricultural Production, Selected Commodities, 1959 and 1966-1970 Table 3.2 Marketed Production of Major Food Crops, 1959 and 1967-1969 Table 3.3 Value of Fisheries Production, 1959-1968

SECTION IV CONSUMPTION

Table 4.1 Dome!stic Availability of Major Food Crops, 1959 and 1966-1969 Table 4.2 Apparent Consumption by Income Groups, Selected Foods, Kin8nhana; 1969-1970

SECTION V F0R_VIG1 TRAM.

Table 5.1 Volime nf Prlnc{npl Agricultural Exports, 1959 and 1966-1970 Table 5.2 Value nf Prine-inal AQrir{ lttiral Exnort -t Total Agricultural Exports and Total Merc:handise Exports, 1959 and 1966-1970 Table 5.3 Volume of Imports of Principal Agricultural Products and of inaputs to the Agvlr,,1 tiarn1 ';ectonr, 1959-1i6R ANNEX 11 Page 2

SECTION VI PRICES AND WAGES

Table 6.1 Retail Price Indices (Kinshasa Stores), 1960-1970 Tabhl 6.2 Retail Price Indices (Kinshasa Markets). 1960-1970 Table 6.3 Sectoral Evolution of Retail Prices (Kinshasa Markets) - 1960-1970 Table 6.4 Prices for Selected Commodities in Eight Major Mnrkprt8 1970 Table 6.5 Producer Prices for Selected Agricultural Commodities, 1967 and 1970 Table 6.6 Minimum Legal Wage Rates for Unskilled Laborers, TJne 1967 - JTnuary 1970

C2rrrTAM IrTTT1TURT Tr ITMANMr AUT) PR12nTT

Table 7.1 Centr --ve--m-nt Revelue, 1966-1970 Table 7.2 Central Government Expenditures, 1967-1970 Table 7.3 Com ercial Bar.ks redit O,its-mnd1ina hby Retnrs December 1966 - December 1970 A MTMI'V 1 1 sulAliA i; SECTION I

SE;CTION I: POPULATION ANID EMPLOYMENT

Tabl 1.1: POPULATION BY PROVINCE, 1958 AND 197C) CENSJSES

1958 Census 1970 Census Annual Rate of Growth Zairaxi For ign- Total _iran Foreign Total Zdl;L; Total -- thousands ------

Kinshasa 368.o n.a. n.a. 1,:L13.5 209.5 1,323.0 9.7 n.a.

Bas Zaire 397.38 n.a. n.a. 1,280.0 224.0 1,504.4 10.2 nr*.a.

Bandundu 1,923.:3 n.a. n.a. 2,592.5 8.1 2,600.6 2.5; n.a.

Equateur 1,801.6 n.a. n.a. 2,L.27.7 4.1 2,431.8 2.5' n.a.

Haut Zaire 2,474h.6 n.a. n.a. 3,320.3 36.1 3,356.4 2.5' n.a.

KiLvu 2,261.8 n.a. n.a. 3,014.5 347.4 3,361.9 2.4 n.a.

KAtanga 1,654.2 n.a. n.a. 2,654.5 959.2 2,753.7 4.() n.a.

Kasai Occidental 1,246.5 n.a. n.a. 2,431.5 2.4 2,433.9 5.7lm.a.

Kasai Oriental 912.2 n.a. n.a. 1,870.8 1.4 IL,872.2 6.;2 n.a.

Total 13,540.2 118.0 13,658.2 20,705.9 932.0 2L,637.9 3.6c 3.9

Source: Leon de Saint Moulin, "Les Statistiques Demographiques en Republique Democratique du Congo," Congo-AfriquEL, August - September 1970.

HtD> ANNEX 11 Table 1 .2

Table 1.2 : EMPLCf'NT DI LARGE NTETYRISIES, 1960-1968

1960 1966 1967 1 968

Ah7rimiL1 tirn 1.08 05oA9 1)A 297 3v6 -831 V4 (3QA

M-n-irc n,,A An1lv81,52 5,8 OP KQ9 927t C5A AC,O

TJ^n,xA 1 t7 1.1...... O~L040 .|_; -v. i vz IL. oRo

'.Otdher marn1 P act4;dLlriIU[ 1U2c807 I I1I874 1 7 I If,7U9 ^ V _~A'.L^ Q J I jj* I~V VV JVV 'J'-4.J * x ~ 1JJ-1 5fC,

'9. L4 1chng -4 ron S.drac4-' i o7 1 '70 i ifin atir n i n,1< nOoio I i 1

1-anspoL-to andu 'Cormam-i,Wicat U11ns 6017 1,43 56U,697 UV,C67

Cummerce and banking 20,913 22,305 2 2Y, 40

Total 1i241,933 542,146 575,377 575,694

of which: African salaried workers 379,175 303,933 327,514 335,257

Other African workers 847,699 227,358 237,002 230,651

Expatriates 15,059 10,855 10,861 9,756

Source: Banque Nationale. ANNEX 11 SECTION II

SE,T.IONr,mTT TT - ATArAT AT A CCOU'NTST1TM ,

Table 2.l1

Table 2.1: ESTIMATED GROSS DCMESTIC PRODUCT AT CONSTANT PRICES, 1959 AND 1964-1969 (in thousands of zaires - 1966 prices)

1959 1966 1966 1967 1968 1969

I PRIMARY SECTOR 97,300 76,830 77,72C 80,706 56,29 85,857

Agriculture, Livestock, Fishing 75,300 57,600 56,325 59,22b 6h,79- b2,895 of which: commercialized (46,100) (28,400) (27,125) (29,626) (304,791) ( 2,t4U) non-comnmercia- lized (31,200) \ I ,, ,, \ (2,6)I~'- nn~ I t coAn N ( n n I (~n Icr

Mining 22,000r I19 I,n 21J9 21 i.78 21.b0() 22.962

II SECONDARY SECTOR 57,190 51,080 59,908 59,3961 61,627 68,677

Metallurgical Industries 29,260 28,000 32,7C5 32,967 36,000 37,366 Other Industries 16,600 16,120 18,613 17,962 16,77 148,)i22 Energy 2,150 1,930 2,290 2,015 2,980 3,40U Building and Construction 11,180 5,030 6,00 6,L50 7,90'( 9,,80

III TRRTIA.RY SECTOlR 1l.9,1('0 120.370 138.00C. 136.2L C0 152.020 162J468

Transport arid Telecomrmuni- cations 26,000 15,420 16,340 17,300 19,67( 21,268 Services 28,750 23,250 30,50C 28,500 31,77( 35.581 Commerce 27,350 36,700 61,000 38,500 61,500 65,027 Government. 37,000 62,000 50,160 51,960 59, 080 6C;0,t Gross Domestic Froduct (at factor price?) 273.590 250,280 275,628 276,260 299,931 317,002 Indirect Taxes (net of subsidies) 11,2500 19,$20 28,480 24,795 2),00, u u._

Gross Dori,estic P roduct (at market prices) 285,090 267,530 306,108 301,135 326,611 3h7,--.

Source: Banque Nationale. ANNEX 11 Ina',le 2. 2

Table 2.2: SECTORAL BREAKDOWN OF GROSS DOMESTIC PRODUCT, 1966-1968 (in millions of zaires - 1966 prices) i 966 1967 1969

X pRI?JS:OR 77.7 80.7 86.3

A.Cormrcializod ngriculture 23.1 25.2 30.0

a. FoodstufiNs 8.5 9.3 10.? b. Export crops 10.0 11.3 13.9

ofv,nicn: pls oil (. (5 coffee (3.5) (3.7) (1.7) rubber (1.71 (1.8) (2.3)

a. Dmostic industrial crops 464 . .6 5.4

of which: palm oil (1.6) (1.7) (1.8) vood (1.0) (0.8) (.1) cotton (0.9) (1.0) (1.4)

B.Non-cczrmarcialized agriculture 29.2 29.6 30.0 4 C.Livestock a3d Fishing 4.0 .4 4.8 D.Kingnz 21.4 21.5 21.5

rT SyzuKD.A.RY SECTOR 59.9 59Th 61.6 A.Metallurgical Industries 32.7 33.0 314.0 of wich: copper (27.5) (28.5) (29.3) cobalt (2.9) (2.1) (2.7)

B.OLber Industries 18.4 18.0 16.7 Fi..nl Corn-ser GoosR 11.2 10.9 10.3

of which: fcods end beverages (4.8) (3.9) (3.9) clotling (1.1) (1.1) (0.9) leather and shoes (1.3) (0.2) (1.9) tobacco (0.9) (0.9) (0.9)

b. Intemediate Goods 7.2 7.1 6.4

of Yhich: - (2.8) (2.8) (2.14) ntn-rotalic rinerals (1.5) (1.7) (1.5) sochanical industries (0.9) (0.d) (0.7) cLoical (0.9) (1.0) (0. C.Ehorgy 2.3 2.0 3.0

D.BuildA-ng and Construction 6.5 6.4 7.9 ni TIDTTAPX SECZWR 138.0 136.2 152.0

A.Transport and Telecormunications 16.3 17.3 19.6

B.SeyCOB 30.5 28.5 31.8 C.C=erce 41.0 38.5 41.5

D. Gover-nent 50.2 .51.9 59.1

(Let o 8 'iu.ies) 28.5 24.8 24.7

GIC6S DaST}C Pi')UCTr 304.1 301.1 324.6 (at market pricne)

Source: Banque Nat.ionale.- - ANNEX 11 SECTI1ON III

SECXTION III: PRODUCTION

ANIEX 11. Table 3.1

Table 3 .1: AGRICULTURAL PRODUCTION, SELECTED COMMODITIES, 1959 4AND 1966-1970

1959 1966 1967 1968 1969 1970 ------thosnd metric tons ------

Pa1,.. ol 2l.t 'X6.9 178.90 nXS 2)A 200. Q'7. 0 * ~~*~** ****** *** 5.. 414 * -, J.L.J. ..1J 7 ^. C. C. JJ._) f 7 f *7 Palm nut oil 61.1 37.1 41.8 4h8.5 45.8 24.6 Pal-m, h.usks* ~--"fl*S'4"~ ~ (ftourtteaux)UUULL~UJ'/ ~ 67.0nJ 0 5 LI.n4.1.7 45.1f74,1.1 51.4,)L4 . 4 52.)L. -7 28.rC%'A .'.) Palm nuts 39.8 0 4.1 2.2 0 0

Robusta coffee 52.0 29.8 37.2 46.1 43.9 26.1 £ - abica Copp' -; .. ) 6.8 4*.6 .0 7.2 ,.0

PXIUbber 4.

M.±.a.. 2w.\?/ 0 I OL n, rI, r ±iiaber 1k.LU 4b J. U ±UU. - ±L-'4.-V ±f~ ±'. 7 Timber (sawn) 2/ 212.5 130.7 123.9 119.5 124.8 67.7

Cotton (fiber) 63.2 7.4 8.0 11.8 18.0 9.0 Cotton husks (tourteaux) 27.6 2.2 3.6 3.7 6.1 n.a. Cotton oil 6.0 0.7 0.7 0.8 2.0 n.a.

Groundnuts 28.8 28.0 0 0 n.a. n.a. Groundnut oil 8.2 1.3 1.0 0.9 0.5 0.2 Groundnut husks (tourteaux) 11.9 1.9 1.4 1.3 0.7 0.2

Tea 4.2 6.0 4.5 4.7 5.0 n.a. Cocoa 4.5 4.1 5.6 ',.1 4.4 2.9 Sugarcane - 38.1 31.9 3h.7 38.4 36.0

1/ Exports only. 2/ ln thousands of cubic meters. 3/ Sugar equivalent.

Source: Banque Nationale, Rapport Annuel 1967 and Rapport Annuel 1969-1970.

Note: The table excludes food crops for domestic consumption, mainly manioc, bananas, rice, corn, fruits, and vegetables. Other products not shown in the table include bananas for export, ivory, sisal, fiber Urena- Punga, copal, rauwolfia and quinquina. ANNEX 11 Table 3.2

Table 3.2 MARKErED PRODUCTION OF MAJOR FOOD CROPS, 1959 AND 1967-1969

1959 1967 1968 1969 - - thousand metric tons -

Cassava 1,291 100 1;200 1A9O0

Plar.tan 389 365 390 370

,Mai ze 98 76 103 ~ 120

Rice 653041- '41

Ground'nuts (kshelleld) n1.a. n.a. rn.a.

Bear.Ls arnd peas 24 ~ 43 50n 48 uruu.riunui' j 1~i~± 0~. ~n.a. n.a.

Sugar L4 35 38 36

Y~~~~~~~~ >0 1/ 1958

Source: SEDES on the basis of data from t-ei niiist.ere de 1,gricultur anidu the Banque Nationale. Tab,le 3.3

Table 3.3: VALWE OF FISHERIES PRODUCTION. 1959-1.968

Year 93a Fisheries Inland Fisheries Total (Q000 Zaires)

1959 6.o 122.3 128.3

1960 <0 107.0 112.0

1961 7.0 107.4 11L. 4

1IQ 70 12OI go-

1963 10.0 99.8 109.8

1964 ilA OR 108.8g A

1965 11.0 97.3 108.3

-1966 i2.0 97 .5519.

1967 12.4 100.2 112.6

1968 -3 * I i4-3 127

Source: Ministere de l'Agriculture.

JnTOT.A2AMA) : AT NJT.Te.

AI NOILDSS i[L LMNNV

I>IaIaI- ~ ~ 0

- 1- [

W- D of

l-= 0' a

I~ ~ ~ ~ ~ ~v ~ ~ a tO '0

11X5Nt. ~ ~ ~ ~ ~ ~ ~ ~ 0 ANNEX il. Table b.2

Table 4.2 : APPARENT CONSUMPTION BY INCOIvE GROUPS, SELECTED FOODS KINSHASA, i969-i970

Income Groups in Z per Month and Household Less than 15 15.1-20 20.1-25 25.1-35 35 1-60 60--more (Consumption in kgs, per adult per year}

Cereals 18.0 28.0 37.4 48.7 67.3 76.6 of which maize flour 0.6 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 35.0 46.6 43.8

Tubers and plantains 68.7 103.0 118.3 136.5 1148.8 112.6 of which cassava 1/ 65.9 99.6 114.0 130.7 135.9 91..

Sugar 3.0 I4.3 5.7 7.3 9.5 8.1

Legumes 8.1 9.6 11.2 13.14 13.6 10.3 of which groundnuts 2.5 3.1 3.5 5.3 4.5 2.9 haricot beans 4.9 5.5 7.0 7.4 8.6 7.1

Vegetables 2/ 31.7 36.5 43.2 50.7 60.0 60.9 of which Europnen type - 5.9C4 7.6 9.7 10.7 I U_ cassava leaves 19.4 21.9 24.9 28.8 35.7 35.0

Fish 17.1 20.2 24.5 28.8 31.4 24.1

Milk -'/ 0.9 1.4 1.9 2.8 4.0 3.6

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 15.2

Beer 7.5 12.1 20.7 35.8 45.4 72.14

Oils and fats 7.8 9.4 10.8 12.3 14.2 11.9 of which palm oil 7.4 8.8 9.9 10.6 11.7 7.7

1/ Includes cassava roots, cassava flour, cassava paste. T/ Lettuce, carrots, spinach, tomatoes, cucumDer, bell peppers. P/ Condensed and powdered milk.

Source: Compiled from IRES, Resultats de l'Enquete sur 2is Conditions de Vie a Kinshasa, May 1971. ANNE:X 11 SECTION V

.q.TTONYV- Wf.W-Tfr TRPA7R I ANNEX 11 Table 5.1

,Table 5.1: VOLUME OF PRINCIPAL AGRICULTURAL EXPORTS, 1959 and 1966-1970

1959 1966 1967 1968 1969 1970 - thousand metric tons ------

Palm oil 158.7 78.0 108.5 1b1.2 125.0 123.5

Palm kernel oil 60.7 32.3 37.3 hh.8 41.9 50.3

Palm kernel cake 61.1 28.2 37.4 4h.9 51.2 50.7

Coffee 59.5 50.6 68.1 57.0 45.G 62.0

Cotton 50.9 0.0 0.0 0.0 6.8 8.2

Tea 3.5 5.6 3.0 4.3 5.0 -

Rubber 40.2 29.7 31.1 40.1 35.7 31.4

Pvrethrum a. dried flowers .1 0.0 0.0 0.0 - - b. extract 0.2 neg. neg. neg. neg. neg.

Cocoa 3.9 4.1 5.5 5.1 4.3 4.4

Bananas 31.1 7.1 4.7 3.1 0.5 0.1

Sources: Ministere de 1.'kconomie National, Conjoncture Economigue No. 10, October, 1970. Soci6te Zairoise de Surveillance Banaue Nationale TabLe 5.2: VALUJE OF PRINCIPAL AGRICULTURAL EXPT'TS, TOTAL ACRICIILTURAL EXPORTS AND l'OTAL MERCHANDISE EXPORTS', 1959 AND ].966 - 1970

1959 1966 1]967 1968 1269 1L970 -~~~~~-milli on I

Palm oil 37..4 16.8 22.2 17.4 19.14 29.6

Palm kerniel oDil 18.0 8.2 8.2 I1.L, 1] .6 1L.O

Palm kernel cake 4.0 2.0 2.8 3.0 3.0 n.a.

Coffee 45.0 25.8 25.4 32.6 26.0 148.8 1/ Cotton 26.4 0.0 0.0 0.0 3.4 4.0

Tea n.a. 23.6 19.6 15.2 16.0 20.6 Rubber 22.2 12.6 12.0 13.8 15.6 11.14

Pyre thrun 2.1h 1.2 nfeg. neg. neg. neg. Cloc Oa 2.8 1.2 2.6 2.8 2.8 2.8

.Bananas 1.2 Total Agricultural Exports 182.8 76.8 79.8 101.,0 96.6 n.a. Agricultural exports as a % 39.0% 16.5% 18.1% 17.6% 14.5% n.a. of total exports

:1/ Estimate

Sources: Ministere de 1.'Economie Nationale, Conjonctur3 Economique No. 10 October 1970. Societ,e Zairoise de Surveillance Banque Nationale AIT TU 11 Table 5.3

Table 5.3: VOLUME OF IMPORTS OF PRINCIPAL AGRICULTIURAL PRODUCTS AND OF INrUTS TO ThrE AGRICULTURAL SFiCTOR, 1959-19608

1959 1963 1964 1965 1966 1967 1968 - - - -rhousand metric: tons ------

MBat and meat products 7.9 19.5 14.4 14.4 18.2 iW.9 8.4

Fish and fish products 34.2 24.0 20.7 40.8 38.4 29.7 27.7

Eggs and milk products 11.3 18.3 2.9 6.2 9.0 7.7 8.4

Maize 6.0 61.7 72.6 45.1 74.4 68.6 57.7

Rice 2.3 39.9 16.7 22.8 33.4 23.1 18.3

Wheat flour 38.7 74.5 40.9 55.7 52.3 60.3 49.4

Malt 16.5 20.9 17.0 23.5 27.1 14.9 19.9

Fruit and vegetables 19.8 20.3 8.7 13.2 16.3 11.7 14.1

Sugar and products 8.0 2.2 0.6 0.3 6.1 10.5 0.1

Seeds and industrial plants 1.4 2.7 0.9 0.6 0.5 0.2 0.9

Fertilizers 13.2 7.9 7.3 5.6 6.0 6.0 10.9

Source: Central Bank, BulletIn Trim,Aestrlel des °Iatistiques G0r;rIes.

ANNE.I 11 SECTION VI

SECTION VI: PRIGES AND WAG-ES

ANNEX 11

32'on Ai' RETAIL PRITCI TNDTGEq (KTNTs3AqA TRRSqPA j 1QAn-1Q70 Base: June 1960 * 100

Food Other Gerera. lndiex

1960 June 100.0 100.0 100.0

1961 June 129.8 124l. 2 127.5 Docember 152.1 145.l1 14.1

1962 Jume 168.6 1 42.3 157.5 Decembor 189.5 166.6 179.8

1Ig6I Jimn 211.4 184. 8 200.2 Decembor 300.7 206.,6 26i.1

1964 Jwune 466.5 262.9 380.8 DoCenI53r 454.0 270.B 376. 9

196> J~~~~~~~~~~~~~~e., 515 | 208. 1 41;91 . Dooelibor 498.8 323.5 425.2

1966 June 629.2 386.3 527.0 December 532.9 397.4 475.9

o _ w o | r H ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C!t 4 1967 June 699.1 429.9 58. I Dscomber 1, 1 0.9 622.9 892.0

1968 June 1,206.0 813. 1,031.5 December 1,230-7 852.0 1C,00.8

1969 JuIe 1,282.5 893.7 1, U.1 December 1, 283.4 945.7 I ,1 31 .9

1970 June 1,324=3 1,0.' AI 194.4 September 1,290.7 1i037.4 1,177.8

+ A.. nwse+- n.ae -j nl n4q Tenjn University.------_____Sor-ce: T-44.LLJUL.L ,.re .U *~Se^m-w j .,% . a .- re ANNEX II

Table 6.2: RETAIL PRICE INDICGS (KINSHASA MARKETS), 1960-1970 Base: June 1960 = 100

Food Clothing Other General Index

1960 June 100.0 100.0 100.0 100.0 December 113.2 109.7 111.2 112.5

1961 June 125.9 112.5 141.1 126.8 December 145.2 186.6 163.1 151.8

1962 June 188.1 258.4 190.9 194.7 December 261.4 339.9 285.2 273.6

1963 June 344.1 392.7 303.6 342.9 December 384.2 577.5 309.4 392.7

1964 June 521.8 607.7 454.8 521.6 December 443.8 501.0 440.9 450.7

1965 June 466.1 513.2 435.7 466.5 December 490.1 544.8 445.7 488.5

1966 June 597.3 600.9 485.4 573.9 December 665.1 597,0 488.0 616.1 1967 June 751.5 631.5 562.9 691.2 December 1,174.7 891.6 933.3 1.074.1 1968 June 1,106.8 1,133.7 1.094.0 1,293.4 December 1,369.6 1,169.8 1,086.2 1,276.3

1969 June. 1,486.2 1,211.4 1,137.6 1,365.3 neeepmher 1 ;87.6 1.235.0 1.168.5 1.;37.2

1Q70 .Jin 1.612.0 1.215.9 1.197.3 1;454-3 September 1,582.1 1,224.6 1,189.3 1,435.9

Source: Ins'iut de Recherches et -nor,4ques------g I Ui ,rsity. SETORAI, EVOLUTION OF RETAIL PRICES (KMISAsA MARKETS), 19&6-19'70 Base: June 1960 - :LOo

Local Products ManufactuLred Products Imorted Agricu:Ltural "Mixed" Products Products ClothinR Other Total Other Total Products

1960 June 100.0 100.,0 100.0 100,0 100.0 100.0 100.0 100.0 December 109.7 114.,8 109.7 104.5 106.6 113.2 111.4 121.8

1961 June 114.7 120.2 112.5 3149.3 132.7 .127.6 126.6 153.6 December 124.0 140--4 186.6 165.2 173.8 146.5 153.7 206.,1

1962 June 167.7 '188.6 258.4 185.6 213.0 196.1 199.4 226.2 December 311.6 249,1 30]L.8 212.3 245.9 235.9 244.5 383,,8

1963 June 410..4 338-,9 339.3 250.3 284.1 324.6 313.8 383,.6 Decembier 470.6 3674.3 516.3 271.0 364.8 359.9 364.6 411,, 8

1964 June 547.0 481-,3 578.8 445.1 502.5 440.7 479.2 755.8 Decembier 419.7 4344,7 493.9 412.4 448.1 413.5 434.7 635,1

1965 June 44o.2 434.5 512.8 423.7 462.7 443.6 447.5 658,.6 Decembter 487.2 429.8 5295.4 447.7 483.5 482.2 464.3 656.6

1966 June 543.4 542.0 579.5 510.1 540.9 580.5 547.9 839.4 December 500.6 708.2 589.0 506.8 543.2 645.2 612.0 979.7

1967 June 572.3 755.9 611.1 623.0 615.9 665.6 665.4 1,360.2 Decemuber 977.7 1,2808.2 044.7 969.0 905.6 1,017.1 1,034.1 1,496.0

1968 June 1,1,49.8 1,442.7 1,106.3 1,219.1 1,160.8 1,283.7 1,266.7 1,651.8 Deicember 1,,1094,6 1,377.7 1,1147.1 1,191.4 1,166.6 1,271.1 1,249.0 1,750.2

1969 June 1,1143.1 1,575.6 1,182.2 1,226.2 1,202.7 1,427.7 1,356.4 1,815.8 December 1,194.5 1,750.3 :L,202.6 1,249.0 1,222.5 1,466.8 1,420.8 2,045.4

1970 June 1,193.4 1,746.3 1L,190.1 1,319.9 1,253.9 1,478.2 1,437.2 2,143.8 j September 1,1147.6 1,827.2 1L,1983.0 1,299.5 1,251.6 1,428.9 1,442.3 2,056.9

Source: T titut de Recherches Economiques et Sociales, Lovanium University. Table 6.4: PRICES FOR SELECTED COMM)DIT:[ES :[N EI[GHT MAJOR MARKETS, 1970 (Base: Kinshasa = 100)

Kisangani Matadi Luluab. Commo(dity Ylbuji-Mayi Lubumbashi (Haut Mbandaka (Bas Bukavu (Kasai Kikwit (Kasai Or.) (Katanga) Zaire) • uateur) Zaire) (Kini) Oc (Bancndu)

Bread 21.3 136 15 0 121 115 116 118 136 Cassava f:lour 171 118 86 :152 161 63 120 143 Maize flour 89 61 65 . 79 104 40 Rice 80 80 . . 97 44 . 71 Potatoes 105 70 59 .1,9 45 113 Cassava lieaves 42 54 :32 32 69 26 35 33 Le eks 11.0 158 . . 201 11 91 124 Wlihite beans 91 38 60 57 17 66 80 Groundnuts (dec.) 15;0 92 1(5 * 90 84 122 36 Bananas 116 140 L29 111 62 89 82 74 Smoked ri ver fish 514 51 76 51 76 28 47 89 Beef with bones 590 73 129 121 59 90 100 Elggs 11.6 120 96 86 64 50 98 Palm oi1 120 140 139 99 86 146 103 69 Beer 186 125 1,25 188 125 125 142 188 Soap 130 125 150 147 116 131 136 154 Pants 12'2 * 106 109 115 87 78 B:La nk'sts 11.8 106 :114 112 76 83 109

(.) = no information available

Source: Institut National de la 'Statistique, Prix et Ind:ice des Prix a la Consomation Familiale, Kinshasa 1970.

. ., _ _ _ _ _ . -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C H AINEX 11 Table 6.5

Table 6a PRODUCER PRICES FOR SELECTED AGRICULTURWL COMMODITIES, 1967 AND 1970

June 126 October 1967 June 1'70 Fixed Price Minimum Price Mini.mum Price Actual Price Paid ------makuta per kilo ------

Cassava (cossettes) Koneo Central 1.6 1.0 1.0 1.6 Other Provinces 0.8 1.0 1.0 1.5

Rice (paddy) 0.8 2.0 2.0 2.0

Maize WsARai. Katanaa 0.9 2.0 2.0 2.4 Other Provinces 0.8 1.5 1.5 2.0

Cotton grain (lst quality) 21.4 3.6 4.5 4.5

Oil Palm fruit 0.20 0.35 0.35 0.40°

Coffee (robusta) .2-2.5 5-6 5-6 8-9

Groundnuts (shelled) 2.0 4.0 4.0 4.5

Tea (fresh leaves - 1st i - +- I n '1 n 'A 'n qtm A. ,, . ,. ,.

.j Up to 0.60 K in Bas Congo. 2/ In Equateur and Haut Zaire.

Source: Banque Nationale, Rapport Annuei 1969-1970. i

I ANNEX 11 Tatie 7 .1

Table 7.1: CENTRAL GCOVERNMET REVENUE, 1966-1970 (in millions of zaires)

Actuals Estimate

1966 1967 1968 1969 1970

Income Tax 8.30 8.49 27.o6 69.78 55.43

Corporations (6.20) (3.78) (17.53) (43.16) (32.11) Wages and salaries (1.17) (3.96) ( 7.87) (20.71) (17.00) Other (0.93) (0.75) (1-66) (5-91) (6.32)

'Property Tax 0.80 0.12 0.15 3.84 3.68

Lnternal Turnover Tax 2.94 6.83 10.59 17.12 18.03

Excise Taxes 6.40 6.73 7.88 9.90 10.55

Taxes on international trade 34.58 78.50 124.06 166.53 192.64

Import duities (7.28) (13.26) (30.43) (39-80) (40.00) Export duties (0.82) (39.09) (65-56) (93.04) (11?.67) E>port turnover tax ( - ) (15.16) (20.64) (24.07) (26.60) Exchange tx (I *22) (7,3R) ( __ ) ( __ ) --- ) Other (3.26) (3.61) (7.43) (9.62) (8.37)

Other Taxes 2.02 0.11 0.83 1.18 o.69

Total Tax Revenue 55.04 100.78 170.57 268.35 281.02

Other revenue 1.32 3.55 9.57 4.60 10.16

Adjustment-s 1/ 5.49 -9.22 5.42 - 4.84 -

Total Revernue 61.85 95.11 185.56 268.11 291.18 Om-sutan wa:MMO======w=Mw

1/ These adjustments result from receipts not yet classified by revenue catego.VO or not yet tUr5ansfesrrUed too0en thle tr.t ral accounts of'J4Lthe Treasury.

nnrr.n. M4ini r de.s Finan.esr,css andA Nationale.ane ANNEX 11 Table 7. 2

Table 7.2: CENTRAL G VEENMENT EXPENDITURES 1967-1970 (in millions of zaires3

Actuals E;s ti rate

, , o67 i9°8 b n 7r,

ITmTOt {r -l.T 7 %, 163i.t 9 n f 2017.

General SerViCa9 40U.C4 75.76 8, of which: Defense (13.45) (21.92) (23.16)

Social Services 15.64 29.41 57.26 of which: Education (13.12) (25.76) (44.81) Health . (1.21) (1.46) (7.91)

Economic Selvices 5.93 7.87 9.6,3 of which: Agriculture (o.84) (O.55) (1.79)

Interest on Public Debt 2.96 7.66 6.32

Unclassified expenditure 22.72 43.29 42.98

II CApITAL EPENDITURES 13.86 25.53 55.99 614. o0 Investment budget 4.55 16.81 29.05 Durable goods 6.74 5.30 3.36 Priority expenditure 2.57 3.42 23.58

III PUTrV DET AY.ORTIZATIC!I 2.70 3.89 5.93 9.00

TOTAL 104. tOt1.1 263l.19 2 0.00

Source: Ministere des Finances and Banque Nationale. Table 7.3: COMERCIAL BANKS CREDIT OUTSTANDING BY SECTOR,O DECEYER 1966-DECEMBER 1970

End of MDnth _ 12/66 6/67 12/67 6/68 122/68, 6/69 12/159 6/70 12/70

In Zaire Mi1' ions Agriculture 8.01 7.76 11.23 11.80 13.02 13.27 Forestry o.41, 0.33 0,39 0.43 0.54 0.42 Livestock and fishing 0.08 0).07 0.09 0.15 0.07 0.18

Total Agri. Sector 3.28 3.89 3.20 8.53 8.16 11.71 12.38 13.63 13.87 To-tal All Sectors 12.14 16.97 15.31 19.34 159.97 26-.84 27.59 40.73 41.9h

Ipercientage of Total Agriculture 21 23 21 44 41 44 45 34 33 Commerce 30 34 33 27 291 23 24 21 19 Industrial Manufacturing 30 29 31 20 16 20 19 19 19 Transport (a) (a) (a) (a) 6 5 4 19(b) 20(b) Other 19 14 15 9 8 8 8 7 9

Total 100 100 100 C0O 1)10 100 100 100 100

(a) L9ss than 0.2% (b) Main increase due to financing modernization of' Air Coingo.

Source: Banque Nationale.

_. ,

* I-