Report No. 462a-CM FILECOPY Appraisalof CocoaProject Public Disclosure Authorized Cameroon August 1, 1974 Western Africa RegionalOffice Not for Public Use Public Disclosure Authorized Public Disclosure Authorized Documentof the InternationalBank for Reconstructionand Development InternationalDevelopment Association This report was preparedfor officiai use only by the Bank Group.It nmaynot be published, quoted or cited without BfankGroup authorization.The Bank Croup does not accept responsibility Public Disclosure Authorized for the accuracyor completenessof the repoit. CAMEROON COCOA PROJECT CURRENCYEQUIVALENTS US$ 1 CFAF 250 CFAF 1 US$ 0.0040 CFAF 1,000,000 US$ 4,000 WEIGHTSAND )OEASURES (MetricSystem 1 hectare (ha) = 2.47 acres 1 kilometer = 0.624 miles 1 kilogram = 2.204 pounds 1 metric ton = 2.204.6pounds 1 liter - 1.057 U.S. quarts ABBREVIATIONS OCCE : Caisse Centrale de CoopérationEconomique (France) CENADEC : Centre National de Développementdes Entreprises Coopératives CINAM : Compagnied'Etudes Industrielles et d'Aménagementdu Territoire DPR t Departmentof Public Roadu FAC : Fonds d'Aide et de Coopération FONADER : Fonds National de Développement Rural IFCC : Institut Français du Café et du Cacao IRAT : Institut de Recherches Agronomiques Tropicales et de Cultures Vivrières LPAC : Lutte Phytosanitaire et Anti-Capside SODECAO : Societé de Développement du Cacao SEDES : -Societéd'Etudes pour le DéveloppementEconomique et Social SEMRY : Secteur Expérimental de Modernisation de la Riziculture de Yagoua UDEAC : Union Douanière des Etats de l'Afrique Centrale (Customs Union of Central African States) ZAPI : Zones d'Actions Prioritaires Intégrees CANEROON COCOA PROJECT Table of Contents Page No. SU1Q¶ARYAND CONCLUSIONS ................... ............ i - v I. INTRODUCTION ....... ............. ................. 1 II. BACKGROUND ....................................... 2 A. General ...................................... 2 B. Agricultural Sector ......................... 2 C. The Cocoa Industry ................... ........ 3 Institutions ................................ 3 Production .................................. 5 Marketing and Prices ........................ 5 Credit for Cocoa Farmers .................... 6 D. Development Prospects and Strategy .......... 6 General ....................... 6 Strategy for the Cocoa Industry ............. 7 III. THE PROJECT ...................................... 8 A. Project Area ................................ 8 B. Project Description ..... ............ 9 Summary of Main Features .................. 9 Rehabilitation and New Plantings . ........... 9 Extension Services .......................... 10 Training .................................... il Road Rehabilitation ......................... il Research .................................... 12 C. Organization and Management ....... .. ........ 12 SODECAO ..................................... 12 Consultants ................................. 13 1larketing ................................... 13 D. Accounts and Audit ............ .. ............ 14 This report was prepared by Messrs. M. Burer, M. Ballesteros, C. R. Delapierre, W. M. Schaefer and M. Wessel. TABLE OF CONTENTS (Cont'd) IV. COST ESTIMATES AND FINAiNCIALARRANGEMENTS ........ 14 A. Cost Estimates .............................. 14 B. Financial Arrangements ..... ................. 16 C. Credit to Farmers and Farmer Groups ......... 19 D. Procurement ................................. 19 E. Disbursement ................................ 20 V. PRODUCTION, PRICES, MARKETING ANID FIiNANCIAL RESULTS ........ ................................ 20 A. Production .................................. 20 B. Markets and Prices .......................... 20 C. Farmers' Benefits ........................... 21 D. Government Revenues ......................... 22 VI. ECONOMIC BENEFITS AND JUSTIFICATION .... .......... 23 VII. RECOIMNDATIONS .................................. 24 ANNEXES 1. Pest and Disease Control 2. Field Developments Table 1 Number of Farmers and Corresponding Areas Table 2 Establishment of New Plantings 3. Farm Labor Table 1 Available Labor for Cocoa Cultivation in Project Areas Table 2 Labor per ha of Newly Planted Cocoa Table 3 Labor Requirements for 1.2 ha Rehabilitation and 0.75 ha New Plantings 4. Improvement and Maintenance of Rural Roads Table 1 List of Roads 5. Research Table 1 Research Program for Cocoa 6. Marketing Table 1 Marketing Systems in Francophone Cameroon TABLE OF CONTENTS (Cont'd) 7. Project Costs Table 1 Project Costs Table 2 Project Costs: Personnel Table 3 Project Costs: Buildings Table 4 Project Costs: Vehicles and Equipment Table 5 Project Costs: Operations and Maintenance 8. AgriculturalCredit Table 1 Credit Component Cash Flows 9. Estimated Semestrial Schedule of Disbursements 10. Production Table 1 Estimated Production of Project Area Table 2 Estimated Production of RehabilitatedCocoa Table 3 Estimated Production of New Plantings i1. Farm Budgets Table 1 On-farm Inputs (with Project) Table 2 On-farm Inputs (without Project) Table 3 Farm Budget: 1.2 ha Rehabilitation Table 4 Farm Budget: 0.75 ha New Planting with Project, Existing Farmer Table 5 Farm Budget: 0.6 ha New Planting without Project Table 6 Farm Budget: 1.5 ha New Planting with the Project New Farmer 12. GovernnentCash Flow 13. Economic Rate of Return Table 1 Economic Value of Cocoa Table 2 Economic Rate of Return Calculation ttIAP CAMEROON COCOA PROJECT SUMIMARYAND CONCLUSIOlIS Background i. The Goverrwent of the United Republic of Cameroon has requested Bank assistancein financing a US$23.8 million cocoa planting and rehabili- tation project covering 50,000 ha in the central southern provinces, adjacent to the capital city, Yaounde. The proposed project would be the Bank Group's fifth lending operation for agricultureand the first for cocoa production. It would be financed jointly with the French agencies Caisse Centrale de CooperationEconomique (CCCE) and Fonds d'Aide et de Cooperation (FAC), and Government. The feasibilitystudy for the proposed project was prepared by Societe d'Etudes pour le DeveloppementEconomique et Social (SEDES) in 1972-73 and the project was appraised by a Bank mission in October/November 1973. Project Description ii. The project would aim at raising farmers' incomes, the country's foreign exchange earnings and Government revenues by increasing the produc- tion of cocoa. It would be carried out over a six-year developmentperiod and would involve: (a) rehabilitatingsome 35,000 ha of existing cocoa and planting up to 15,000 ha of new land with high-yieldinghybrid cocoa; (b) strengtheningthe extension services, to help farmers control disease and improve their cultivationpractices and to supply them with the necessary inputs and credit facilities; (c) providing training for some 230 extensionworkers and 2,000 new cocoa farmers; (d) improving 950 km of rural roads; (e) adaptive research on cocoa and food crop growing; (f) equipningand staffing the new agency, SODECAO, to carry out the project and take over responsibilityfor the developmentof cocoa production in the area; (g) employing consultants to: (i) advise on tr crganizationof the new agency; (ii) evaluate the jrc,ress and impact of the project; (iii) prepare a fo!LOiJ-_p project; and - fi - (h) encouraging the formation of farmers' groups that would increase the role of farmers in marketing and credit. Project Execution iii. The ZAPI, a development agency, which is presently responsible for agriculturaldevelopment over most of the project area, has been criticized for its lack of attention to production; and its marketing policies have proved unpopular with farmers. To stimulate participationin the project, therefore,a new authority,Societe de Developpementdu Cacao (SODECAO),has been established that would abosorb, gradually and selectively,ZAPI's func- tions and staff. iv. SODECAO would be generally responsiblefor the execution of the project. It would make arrangementswith other agencies for the execution of certain project componentssuch as road improvementand research. SODECAO's senior management would consist of a General Director, a Deputy General Director in charge of technical affairs, a Deputy Technical Director, a Marketing and Credit Director, a Senior Inspector and a Chief Accountant. Government has already appointed a CameroonianGeneral Director and recruited, with Bank approval, an expatriateDeputy General Director. The posts of Senior Inspector and Chief Accountantwould be filled through international recruitmentand after Bank approval of such candidates. From the beginning, local staff would be trained to take over the functions of some expatriates after periods ranging from three to six years. v. SODECAO would angage consultants to: (a) advise on its organiza- tion aid the takeover of activities from ZAPI, (b) assess the progress and impact of project, and (c) carry out a feasibilitystudy for a follow-up project. vi. SODECAO would encourage the fornation of farmers' groups which would gradually take over marketing functions,including storage, and enter into direct contractswith exporters. The earnings of such groups from marketing margins and quality and quantity bonuses would be distributed to farmer members after meeting their costs. Project Costs and FinancingArrangements vii. Project costs are estimated at US$23.8 million, including contin- gencies of US$7.0 million. About 5% representsindirect taxes and the foreign exchange component is estimated at US$9.5 million or 40%. viii. The Bank would make