World Bank Document€¦ · KILIMO - Ministry of Agriculture MDB - Marketing Development Bureau of Kilimo MOW - Ministry of Works PMO - Prime Minister's Office RIMU - Road Improvement

Document of

The World Bank VJ

FOR OFFICIAL USE ONLY

Report No.: 2749b-TA

STAFF APPRAISAL REPORT

TANZANIA

PYRETHRUM PROJECT

March 20, 1980

Regional Projects DepartmentEastern Africa Regional Office

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

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CURRENCY EQUIVALENTS

Currency unit = Tanzania shilling (Tsh)US$ 0.12 = Tsh 1.0

US$ 1.00 = Tsh 8.30

US$ 1,000 = Tsh 8,300

WEIGHTS AND MEASURES

1 meter (m) = 3.28 feet (ft)

1 kilometer (ki4) = 0.62 miles1 sq. meter (i ) = 10.76 sq: ft

1 hectare (ha) = 10,000 m = 2.47 acres1 kilogram (kg) = 2.204 pounds (lb)1 metric ton (m ton) = 1,000 kg = 2,204 lb

GLOSSARY OF ABBREVIATIONS

APO - Assistant Production OfficerGAPEX - General Agricultural Products Export CompanyGOT - Government of Tanzania

ICB - International Competitive BiddingIERR - Internal Economic Rate of ReturnKILIMO - Ministry of AgricultureMDB - Marketing Development Bureau of KilimoMOW - Ministry of WorksPMO - Prime Minister's Office

RIMU - Road Improvement and Maintenance UnitRMEA - Regional Mission in Eastern AfricaTAN-ZAM - Tanzania-Zambia HighwayTAZARA - Tanzania-Zambia RailwayTECO - Tanganyika Extract CompanyTIB - Tanzania Investment BankTPB - Tanganyika Pyrethrum BoardUAC - Uyole Agricultural Center

GOVERNMENT FISCAL YEAR

July 1 - June 30

TPB FINANCIAL YEAR

July 1 - June 30

FOR OFFICIAL USE ONLY

TANZANIA

APPRAISAL OF THE PYRETHRUM PROJECT

Table of Contents

Page No.

I. THE AGRICULTURAL AND RURAL SECTOR ............................ 1

A. Background 1......... 1B. Agricultural Services . .... 2C. Agricultural Marketing and Pricing .... 4D. Previous Bank Group Assistance . . . 5

II. THE PYRETHRUM SUB-SECTOR 5... .. 5

A. General . . 5B. Pyrethrum Production.. ............... 6C. Cultivation, Yields and Flower Drying . 7D. Services to Pyrethrum Growers. . . 8E. Producer and Export Prices . . .11F. Future Prospects ....... . .13

III. EXECUTING AGENCIES . . .14

A. The Tanganyika Pyrethrum Board .14B. The Uyole Agricultural Center .16C. The Ministry of Works .17

IV. THE PROJECT AREA .17

V. THE PROJECT . . .19

A,- General Description ............................... . 19

B. Detailed Features .... 20C. Project Costs .... 28D. Financing ... .30

VI. PROJECT IMPLEMENTATION. ... 31

A. Management .. 31B. Staffing .. 32C. Procurement .. 33D. Disbursement .. 34

E. Accounts and Audit ............................... 35F. Monitoring and Reporting .. 35G. Evaluation ....... .. ...... ... 36

This report is based on the findings of an appraisal mission, consisting ofJ. Mullan, P. Santos, G. Onaba and K. Nathan (IDA) and R. Faun (Consultant)which visited Tanzania in April/May 1979.

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

Table of Contents (Cont'd)Page No.

VII. PYRETHRUM MARKETS AND PRICE PROSPECTS ...................... 36

A. Uses of Pyrethrum ................. .. .................. 36B. World Production and Consumption ........... ........... 37C. Recent Price Trends ................................... 38D. Market Outlook and Price Prospects .......... .......... 40

VIII. YIELDS, FARMER RETURNS, PRODUCTION AND FINANCIAL ANALYSIS .. 42

A. Flower Yields and Pyrethrin Content ....... ............ 42B. Farmer Returns and Incomes ............................ 42C. Production of Dried Flowers, Extract and Marc ......... 44D. Financial Effects on TPB ............. .. ............... 45E. Government Cash Flow Implications ........... .......... 46F. Foreign Exchange Implications ............... . .......... 47

IX. ECONOMIC ANALYSIS AND JUSTIFICATION ........................ 47

X. AGREEMENTS REACHED AND RECOMMENDATION ...................... 50

ANNEXES

1. Supporting Charts and Tables

Chart C-1 TPB OrganizationChart C-2 Estimated Implementation Schedule

Table T-1 Dried Flower Production, 1963/64-1978/79Table T-2 Number of Farmers, Area Cultivated, Flower

Production in Major Zones, 1978/79Table T-3 Average Pyrethrin Content, 1962/63-1978/79Table T-4 Summary TPB Income Statements, FY75-FY79Table T-5 Summary TPB Balance Sheets, FY75-FY79Table T-6 Projected TPB 'Without Project' Income

Statements, FY80-FY90Table T-7 Projected TPB 'Without Project' Balance

Sheets, FY80-FY90Table T-8 Project TPB 'Without Project' Cash Flows,

FY80-FY90Table T-9 Road Improvement ProgramTable T-10 List of RIMU EquipmentTable T-11 RIMU Local Staff and Labor RequirementsTable T-12 Phasing of Project CostsTable T-13 Costs of Smallholder Production ComponentTable T-14 Costs of Pyrethrum Research ComponentTable T-15 Costs of TPB StrengtheningTable T-16 Costs of Roads ComponentTable T-17 Estimated Schedule of Disbursements

Table T-18 Production Costs and Returns for Pyrethrumand Maize

Table T-19 Farm IncomesTable T-20 Crop Labor Profiles and Farm Labor UtilizationTable T-21 Projected Incremental and Total Flower

ProductionTable T-22 Projected Incremental and Total Extract and

Marc ProductionTable T-23 Projected TPB 'With-Project' Income StatementsTable T-24 Projected TPB 'With-Project' Balance SheetsTable T-25 Project TPB 'With-Project' Cash FlowsTable T-26 Financial Rate of Return and Return to EquityTable T-27 Effects on Government Cash FlowTable T-28 Foreign Exchange ImplicationsTable T-29 Economic Prices of Extract and MarcTable T-30 Economic Costs and Benefits

2. Selected Documents and Data Available in the Project File

MAP IBRD-14436 - Pyrethrum Growing AreasMAP IBRD-14386 - Proposed Project Investments

f X f

TANZANIA

PYRETHRUM PROJECT

I. THE AGRICULTURAL AND RURAL SECTOR

A. Background

1.01 Tanzania's population (for the mainland, estimated at about 17million in 1979) is increasing at about 3% per annum. Per capita GNP for1978 is estimated at US$230. Real growth of GDP averaged about 5% per annumover 1976-78. Roughly 50% of GDP is derived from agriculture and relatedactivities, more than half of this from subsistence production. More than 90%of the population resides in rural areas, the vast majority engaged in agri-culture. About 70% of Tanzania's foreign exchange earnings from merchandizeexports are accounted for by unprocessed agricultural commodities, and afurther 7% by processed farm products. The major export commodities arecoffee, cotton, sisal, tobacco, tea and cashewnuts.

1.02 Large-scale agriculture is confined to a small number of privateestates and state farms producing sisal, coffee, tea, sugar, wheat, rice andlivestock. The largely traditionally managed national livestock herd, esti-mated at 10 million head, is grazed extensively over the 40% of the countryfree from tsetse fly.

1.03 Recent performance of the agricultural sector has been somewhatsluggish. Over the period 1967-77, the average annual rate of growth ofagricultural production was about 2.7%, less than the estimated populationgrowth. From the late 1960's onward, food crop production also failed to keeppace with population growth and, as a result, Tanzania became increasinglydependent on imports of maize, rice and wheat. The effects of this slowgrowth were exacerbated in 1973 and 1974 by the effects of a severe droughtwhich resulted in poor harvests and the need for large imports of food grains.Since 1975, overall agricultural production has recovered from the effects ofthe drought, increasing in real terms at an average annual rate of about 7%.At the same time there has been a shift in the pattern of production away fromcash export crops toward food crop production, so that cash crop productionhas stagnated and, for some crops, declined. Despite food crop productionincreases, rising demand has meant that Tanzania has continued to depend onimports of rice and wheat.

1.04 The Government of Tanzania (GOT) has undertaken a comprehensiveprogram to support the development of the agricultural sector, in conjunctionwith efforts to achieve balanced regional growth and more equitable incomedistribution. Within these objectives, GOT is paying particular attention toachieving self-sufficiency in food production and to supporting export crops.In the past few years, greater emphasis has been placed on the productiverather than the social aspects of rural development than was the case inearlier years. Beginning in 1970, GOT launched a wide-ranging program toresettle the country's rural population into villages in order to facilitate

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the provision of infrastructure and services and to encourage self-relianceand a community approach to rural development. There are now about 7,700registered villages, containing over three-quarters of Tanzania's ruralpopulation. The village is intended to be the country's primary social,economic and political unit. Basic social services, including healthfacilities, classrooms and water supply systems, are to be located in eachvillage. Economic services, including provision of credit, supply of inputs,organization of extension services and marketing of produce, are coordinatedat the village level. Economic infrastructure, such as storage godowns,processing equipment and small-scale industries, are expected to be village-owned investments. Early experience with villagization has been mixed, and itis too early to judge how effectively villages will be able to meet theirambitious goals.

B. Agricultural Services

Research

1.0.) Agricultural research in Tanzania is undertaken by a variety ofgovernmental agencies. The Ministry of Agriculture (Kilimo) is responsiblefor overall guidance of the national research effort, and operates a networkof crop and livestock research stations. Tanzania's research system hasseveral weaknesses. Kilimo has not been able to exercise effective controland, as a result, priorities have not always been firmly established, theregional emphasis has been unclear, and research resources have not beenallocated in accordance with development priorities. There is a need forgreater focus on improving knowledge about Tanzania's various agro-economiczones, and on improving the farming systems in these zones through a greateremphasis on field testing. The links between research and extension are weak,partly as a result of the failure of the Regions, which are responsib:Le forextension, to coordinate with Kilimo which is in charge of research andtraining.

1.06 Agricultural research in Tanzania is increasingly becoming linkedwith the various international agricultural research institutes under theConsultative Group for International Agricultural Research (CGIAR). IDA isintending to assist, through a proposed Agricultural Research Project, instrengthening the ability of the Tanzanian research system to carry out fieldtesting, and to forge effective links with the agricultural extension services.The Tanzanian research system also receives support under the Tabora RuralDevelopment Project (Cr. 703-TA) and the Mwanza/Shinyanga Rural DevelopmentProject (Cr. 803-TA).

Extension

1.07 Responsibility for agricultural extension in Tanzania is divridedbetween Kilimo (which trains extension staff), the twenty regional admin-istrations (which are responsible for the day-to-day management of about halfof the country's extension staff) and some crop parastatals (which employ theremaining extension staff). In early 1978, a total of 100 graduates, 3,000

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field officers with formal diploma- or certificate- level training, and 3,500field assistants with little formal training, were involved in extension work.Extension efforts have been relatively ineffective. As a result of the weakresearch base, relatively few proven technical packages are available. Fieldstaff are inadequately trained and supervised, and receive limited logisticalsupport. The situation was worsened in 1978 by the decision of Government toappoint salaried Village Managers to each registered village. Of the 4,000Village Managers already appointed, many came from the better-trained ranks ofthe extension services. The relationship between Village Managers, extensionagents and Village Management Technicians 1/ remains unclear, and Kilimo andthe Prime Mfinister's Office (which has overall responsibility for regionaladministration) hold differing views on how extension should be organized inthe future. IDA has made some proposals to Government on the re-organizationof the extension service, using the principles of the 'training and visit'system adapted to Tanzania conditions, and it is expected that the extensionservices in Mwanza and Shinyanga regions will be reorganized along these linesas part of the IDA-supported Rural Development Project for these regions (Cr.803-TA). Kilimo is currently drawing up a comprehensive plan for the overalldevelopment of agricultural extension. However, progress on the improvementof extension services has been, and is likely to continue to be, slow.

Credit

1.08 The major agencies involved in the provision of credit to theagricultural sector are the National Bank of Commerce (NBC) and the TanzaniaRural Development Bank (TRDB). NBC is the sole source of short-term credit toparastatals for produce marketing, and in addition provides about two-thirdsof the total production credit, mainly to large estates. TRDB provides long,medium and short-term agricultural credit, administers special funds on behalfof Government, and has been supported by the Bank Group as the major creditchannel for funds disbursed for direct use by farmers. A project to strengthenTRDB has recently been negotiated.

Rural Transport Services

1.09 An adequate road transport system is needed to ensure the efficientmovement of crops to market centers and railheads, and to support timelydelivery of agricultural inputs to the farmers. Despite Government's effortsto upgrade the road network, only about 10 percent of the 33,400 km of roadsprovide reliable, all weather service. The remainder are, in general, littlemore than earth tracks impassable in the rainy seasons. Rural roads are inespecially poor condition. In addition, the trucking fleet available for useby parastatals (either through ownership or hire) has been limited, thusmaking crop movement even more difficult. Crop marketing has suffered fromhigh transport costs, and deterioration of crops in villages with inadequatestorage facilities. Poor transport facilities cause delays in payment tovillages and often dictate that villages receive sums large enough to handlecrops over extended periods, leading to inadequate supervision and accountingof funds advanced for purchases. Current GOT action to address these

1/ For a description of the Village Management Technician Program, see theStaff Appraisal Report for the Fifth Education Project (Cr. 607-TA).

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problems is directed mainly at the public sector, and includes the provisionof staff training and equipment under several IDA-assisted projects, 1/ andthe recent creation of betterment and maintenance units, which are upgradingselected secondary roads in several regions. Assistance to the public truck-ing industry is being provided through the IDA- supported Trucking IndustryRehabilitation and Improvement Project (Cr. 743-TA). This has not provedsufficient to overcome transport bottlenecks in the critical area of cropprocurement and GOT, under IDA assisted projects 2/, has provided parastatalswith additional transport facilities.

C. Agricultural Marketing and Pricing

Marketing

1.10 In May 1976, the Primary Cooperative Societies and Unions, whichformerly played an important role in agricultural marketing, were dissolvedand their functions transferred to other district, regional and nationalorgetnizations, of which the most prominent are various parastatal bodies. Atpresent, there are separate parastatal organizations for coffee, cotton,foodgrains, sisal, tobacco, tea, cashewnuts, sugar, livestock and dairyproducts and pyrethrum; many have been established quite recently. Generally,ambitious expectations have placed severe strains on their physical andmanagerial resources; they not only provide marketing services to villages butalso provide processing services and have responsibilities for increasingproduction. The marketing system in Tanzania suffers from lack of comlpetition,high costs, poor service and slow payments to farmers. The Government isaware of these problems, and the Standing Committee on Parastatal Organizationis reviewing the structure and managerial performance of parastatals. TheBank Group is assisting in this process through its analysis of parastatalsinvclved in recent and proposed Bank Group loans and credits; i.e. the Cashew-nut Authority, the Tobacco Authority, the Tea Authority and the NationalMilling Corporation.

Pricing

1.11 The control of producer, wholesale and retail prices of major cropsis an important tool of GOT policy. Producer prices of all principal exportcrops except sisal and coffee are controlled as are major food crops exceptvegetables, fruits, fish and eggs. Responsibility for formulating pricingrecommendations rests with Kilimo, whose Marketing Development Bureau (MDB)

1/ These include the Hlighways Maintenance Project (Cr. 507-TA), and roadcomponents in the Tabora Regional Development Project (Cr. 703-TA), theGeita Cotton Project (Cr. 454-TA), the Mwanza/Shinyanga Rural DevelopmentProject (Cr. 803-TA) and Kigoma Rural Development Project (Cr. 508-TA).

2/ Including a number of trucks to the Tobacco Authority of Tanzania (TAT)under the Tobacco Handling Project (Cr. 802-TA) and to NMC, financed byBADEA (the Arab Bank for Economic Development) under the National MaizeProject (Cr. 606-TA).

carries out annual reviews of producer prices for major crops, taking intoaccount production costs, the need for incentives to producers, inter-regionalequity and the sales revenues and operating costs of marketing agencies. TheMDB, which was established in 1970 with financial assistance from UNDP andtechnical assistance from FAO, has progressively developed its skills in priceanalysis and formulation. MDB is currently being financed by IDA, on aprovisional basis, under the National Maize Project (Cr. 606-TA) and under theproposed Grain Storage and Milling Project would receive further IDA funds andlong-term technical assistance. During supervision of the Grain Storage andMilling Project, the Bank would continue and strengthen its dialogue with

Government on pricing.

D. Previous Bank Group Assistance

1.12 Previous Bank Group assistance to the agricultural sector in Tanzaniahas included IDA credits totalling US$145.2 million and IBRD Loans totallingUS$37.0 million for thirteen agricultural and three rural development projects.Agricultural projects include one for agricultural credit, three for livestock,two for tobacco and one each for the development of production of tea, sugar,cashewnuts, maize, fish, forestry products and cotton. Rural DevelopmentProjects have been financed by IDA in the Kigoma, Tabora, and the Mwanza andShinyanga regions. Project Performance Audit Reports for two projects (theFlue-Cured Tobacco Project and the Smallholder Tea Development Project) haverecently been prepared. In both cases, the economic rate of return is satis-factory. However, implementation experience highlighted the weakness of theparastatals involved, and the consequent need for considerable investment ininstitution-building. These lessons have been taken into account in the designof this Project.

II. THE PYRETHRUM SUB-SECTOR

A. General

2.01 The pyrethrum plant (Chrysanthemum cinerariaefolium) is a smallperennial growing to some 60 cm in height. It has one of the longest historiesof botanical substances used to control insect pests and has been commerciallyavailable for 150 years. Its dried flowers yield an extract, the activeingredients of which, pyrethrins, have excellent insecticidal properties withno adverse environmental side effects. The crop is grown in about sixteencountries, five of which, Kenya, Tanzania, Rwanda, Ecuador and Papua NewGuinea (in descending order of importance), produce over 97% of the world'soutput.

2.02 Growing conditions. Pyrethrum growing requires an altitude of1,800 m or above with a well distributed rainfall of 1,000 mm or more per yearand temperatures that fall to levels a little above freezing. Low temperaturesstimulate flower production. The plant prefers light, loamy soils, slightlyalkaline, but it has a fair degree of tolerance to acidity. It needs an openunshaded position and does not compete well with weed growth.

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2.03 Processing. The active insecticidal ingredients referred to as'pyrethrins' are obtained from dried crushed pyrethrum flowers by means of asolvent extraction process. The crude extract thus obtained is about 25%pyrethrins, the remainder being soluble oleo-resins also extracted from theflowers. The residue from extraction is referred to as 'pyrethrum marc,'which has some commercial value since it contains a low concentration ofpyrethrins, as well as being relatively rich in protein and hence in demand asa cattle feed ingredient. Crude extract can be purified in various degrees.Some of the oleo-resins can be removed from the crude extract by centrifuging,producing 'partially-dewaxed' extract. Further purification requires refiningby solution in further organic solvents. This produces a decolorized 'pale'extract.

2.04 Properties. Pyrethrum is basically a 'contact' insecticide, thatis, one which is absorbed through the body wall. It has a wider spectrum ofactivity than many other insecticides, and is effective against all commonhousehold insects. It has extemely low mammalian toxicity, and its long andimpressive safety record in actual use has led pesticide authorities toclassify it as one of the very few virtually non-hazardous insecticidalmaterials. Pyrethrum has the ability both to paralyze flying insects ('knock-down') and to kill them after a relatively short period. Exposure of crawlinginsects to pyrethrum results in temporarily increased activity; the insectsleave their hiding places and are thus further exposed to the chemical.Pyrethrum has a good repellent effect, so that new insects do not enter anytreated area. Despite its long use, pyrethrum does not seem to have causedthe development of any significant degree of immunity in treated insectpopulations. Unlike many synthetic insecticides, pyrethrum is rapidly de-composed after use into harmless compounds, especially when exposed to directsunlight.

B. Pyrethrum Production

2.05 In Tanzania, commercial pyrethrum cultivation began in the 1930's,on large farms and estates owned by expatriates in the highlands of the Mbeyaand Iringa regions of Southern Tanzania. During the 1950's, production spreadto the area around Mount Kilimanjaro, where land in high-altitude forestreserves was leased to large-scale pyrethrum growers. In the early 1960's,smallholders in Mbeya and Iringa regions were encouraged, by the distributionof pLanting material and the provision of extension and marketing services, tobegin pyrethrum production. As a result, production of dried flowers expandedfrom 2,300 m tons in 1963 to over 6,300 m tons in 1967. This expansioncoincided with a similar expansion in Kenya, and resulted in world over-production and marketing problems. The consequent reduction in pyrethrumprices, together with rising agricultural wages and the progressive expirationof forest leases, eliminated most of the large-scale producers, and reducedproduction by smallholders. Thus, overall production of dried flowers fell to2,416 m tons by 1969/70. Between then and 1974-75, production fluctuatedbetween 2,700 m tons and 4,700 m tons. From 1974/75, however, there has beena steady downward trend in production, from 4,700 m tons in 1974/75, to a lowof about 1,600 m tons in 1978/79. This decline resulted from producer prices

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for pyrethrum that were unattractive in relation to other prices (particularlyof maize) and from a lack of improved planting material. Detailed productionfigures for the period 1963/64 to 1978/79 are given in Table T-1 in Annex 1.

2.06 Over 95% of dried flower production now comes from the highlandareas of Mbeya and Iringa, where pyrethrum is grown almost exclusivelyby smallholders. Pyrethrum production by smallholders has also recentlystarted in Rukwa and Ruvuma regions, where physical and climate conditions arealso suitable. No accurate data exist on the number of growers involved, butit is currently estimated that about 20,000 smallholder families cultivate anaverage of 0.4 ha of pyrethrum each, giving a total area under the crop ofabout 8,000 ha. A more detailed estimate of the number of growers, areacultivated and dried flower production within each of the major productionzones is given in Annex 1, Table T-2. TPB operates two large farms (Mahenyeand Ilinde) in the Southern Highlands. Production from these is less than1% of total production and TPB does not intend to expand these productionactivities. Instead, these farms would be used under the Project for seedproduction and as bulking centers (paras. 5.04, 5.08).

C. Cultivation, Yields and Flower Drying

Cultivation

2.07 The average size of pyrethrum growing farms is about 2 ha. Culti-vation is mainly by hand; only in isolated cases are oxen or tractors used.Aside from the low availability of mechanized or animal power the steepness ofthe terrain usually precludes anything but hand cultivation. Trials andobservations have shown that pyrethrum will come into full flower productionin the second and third year and that production rapidly declines thereafter.In view of the soil pulverizing effect of the crop and the hazard of 'root-knotnematodes' it is necessary to uproot every third year, and to rotate witheither a grain crop or a period of fallow. Plant propagation is by seedlingsraised from seed or by splitting and replanting existing plants. Pickingtakes place the year round, but there are two flushes of flowers; the mainflush is in September-October and the lighter one in February-April.

Yields and Pyrethrin Content

2.08 No systematic data series exist detailing the yields of driedflowers. According to a survey of smallholders carried out in 1974 1/, theaverage annual yield of dried flowers per ha was 270 kg. Since then, staff ofthe Tanganyika Pyrethrum Board (TPB) estimate that yields have been falling,as a result of adverse climatic conditions and because of aging of plants in

1/ C. Bremer Jespersen, Pyrethrum in the Southern Highlands, 1974.

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the absence of replanting- Current average annual yields are put at 200 kgper ha, with yields of 100 kg in the first year and 250 kgs in both thesecond and third years. The pyrethrin content of dried flowers, which ismeasured prior to processing (para. 2.19), depends on the quality of theplanting material, on climatic conditions and on the efficiency -of dryingand marketing operations. Over the last sixteen years for which figures areavailable, pyrethrin content remained fairly stable around an average of about1.25% until 1970/71 since when it has steadily declined to the 1.1% averageoverall content recorded in 1978/79. This trend reflects the decline in largescale production, the absence of improved replanting material and, for thelast three seasons, adverse weather conditions. Details of average pyrethrincontents since 1962/63 are given in Table T-3 in Annex 1.

2.09 Flower drying. Pyrethrum flowers require drying before they canbe collected from farmers for processing. The aim is to reduce the moisturecontent from around 80% to 10% with minimum loss in dry matter and pyrethrins,which are heat sensitive and subject to oxidation. Rapid drying with aminimum of heat is therefore desirable. Natural sun drying is employed as faras possible. In some areas, however, limited sunshine hours and wet weatherfor most of the year make natural drying difficult. Indoor drying on beamsover the fire is not fully satisfactory but must be used in several areas.Drying in portable driers or barns is much more efficient, reducing the dryingtime from 12 days to 12 hours, or less. TPB has 50 small, portable driers onloan to villages in the Iringa Region and another 50 in Mbeya. Artificaldrying is constrained by scarcity of fuel; pyrethrum growing areas have fewtrees and the cost of delivering alternative fuels to isolated highlandstations is prohibitive. There is also scope for increasing the fuel effi-ciency of driers by design improvements. The Project would provide funds fora study by consultants of the extent of the drying problem and of possiblesolutions to it, and for construction of additional artificial drying capacity,should this prove feasible (para. 5.11).

D. Services to Pvrethrum Growers

Resea_rch

2.10 Pyrethrum research was started in the late 1950's at Igeri in IringaRegion. At that time, considerable work in plant selection was carried out byresearch staff with the assistance of pyrethrum field staff and growers. In1968, research was halted, following the decline in market prospects (para.2.05), and it was not until 1974 that research on pyrethrum was resumed. Atpresent pyrethrum research is carried out by staff of the Uyole AgriculturalCenter (UAC) (para. 3.11) at Uyole itself and at three offstations. Theemphasis of this research program is on the selection and multiplicationof high yielding plants which have flowers with a high pyrethrin content.Agronomic research, for example on the use of fertilizers, crop rotation,weeding and spacing, is also carried out. The present selection program isunderstaffed and too small to produce results in a reasonable period; it wouldbe strengthened and expanded under the Project (paras. 5.14-5.16). The statusof research on agronomy is generally satisfactory.

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Extension

2.11 Pyrethrum growers are provided with a low level of extension ser-vice. The Mbeya regional administration employs about one hundred extensionagents to cover over 500 villages, and in Iringa there are about sixty re-gional field staff to cover almost 600 villages. Until 1977, the regionalextension staff were solely responsible for pyrethrum extension. Sincethen, the Tanganyika Pyrethrum Board (TPB) has employed some Assistant Pro-duction Officers (APO's). TPB currently has eight APO's in Iringa Region (ofwhom three are certificate holders while the remainder have only short-coursetraining) and five APO's in Mbeya (of whom only one is a certificate holder).On average, each APO is therefore responsible for about 1,500 growers. TPB'slong-term objective is that these APO's should work through the region'svillage-level extension workers, and act as specialist pyrethrum advisers. Atpresent, the weaknesses of the regional extension service preclude this.

2.12 This low intensity of extension is in part responsible for therelatively low flower yields obtained in the Project area. However, theproblems facing the extension services are manifold and deep-rooted, (para.1.07) and it would be unrealistic to expect major improvement during thenext few years. The Project therefore provides for only a modest expansion ofTPB's field staff (para. 5.10) to enable TPB to manage the production anddistribution under the Project of improved planting material, and accordinglyonly modest improvements in flower yield are projected (para. 8.01).

Credit

2.13 Since pyrethrum requires virtually no material inputs other thanplanting material, and since planting material has been provided to farmersfree of charge, there has been no need for the provision of production creditfor pyrethrum growing. Some pyrethrum growers (the exact proportion is notknown, but it is likely to be less than 20 percent) receive credit for maizeproduction through the National Maize Project (supported by IDA Credit 606-TA).

Marketing and Processing

2.14 Primary Marketing and Transport. TPB buys dried flowers onlyfrom licensed growers. Flowers are purchased on a cash basis. Licenses areissued to individuals cultivating 2 ha or more of pyrethrum, or to groupsof farmers who collectively cultivate more than 2 ha. Individual licenseswere introduced in 1978/79, to encourage farmers to care for their crop;such license holders can sell their flowers either directly to TPB or throughtheir village. There are about 800 individuals at present with licensesand 300 active groups. A registration number is used to distinguish allflowers produced by the license holder. Most group licenses are held byvillages and about 90 are empowered by TPB to act as buying agents and receivea fee on pyrethrum that they handle. To qualify as agents, villages must beregistered, have a lockable store and a literate Village Manager or Secretary.Production from villages which are not TPB agents is handled by purchasingclerks operating from about 20 buying centers/stores. Purchased flowers

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are brought to the buying centers by four-wheel drive vehicles. The buyingcenters were originally built and owned by cooperative societies which arenow defunct and in the hands of a liquidator to whom TPB pays rent. Ihesestores are generally in poor condition. New market centers/stores would beconstructed in strategic locations under the Project (para. 5.12). Villagesin isolated areas are served by TPB mobile purchasing units.

2.15 Dried flowers are taken in 7-ton trucks from the villages and TPBbuying centers to four main stores operated by TPB in Mbeya, Njombe, Chimalaand Iringa (Map IBRD 14436) and from there by truck or truck and rail toArusha for processing. These operations are seriously constrained, however,by the poor state of the district and feeder roads and by poor management andorganization of the TPB transport fleet which is, in any case, insufficient.The long haul transport situation will be greatly improved when the newMafinga extracting plant comes on stream in 1980 (para. 2.16). The othertransport problems are addressed under the Project by the provision of trucksand four wheel drive vehicles to TPB (para. 5.13), by the improvement of TPBtransport management (para. 5.19) and by a program of road improvement (paras.5.23-5.27).

2.16 Processing. Flower processing is currently undertaken by theTanganyika Extract Company (TECO) (para. 3.10) in Arusha. The factory, whichwas built in 1961, has an installed capacity of around 6,000 tons of driedflowers. Another processing plant with a capacity of about 4,600 tons isunder construction by TPB at Mafinga (Iringa Region) and is expected to beoperational by mid-1980. When the Mafinga plant starts to operate, the Arushaplant will no longer be required, since practically no production now comesfrom the Arusha area, and since the Mafinga plant, which is designed forultimate expansion to 8,500 metric tons capacity, will be sufficient to handleproduction for the foreseeable future. During negotiations, GOT indicatedthat, once the Mafinga plant is operation, the Arusha plant would be closed,its Staff transferred to Mafinga, and any flower production from the Arusharegion sold as pyrethrum powder, which would be produced by an existing smallpowder plant and for which there is a local market.

2.17 Refining. Tanzania currently exports crude extract containing 25%pyrethrins. This product has a high wax content and requires refining for usein aerosols. The possibility of constructing a refinery in Tanzania is underconsideration by GOT, but a detailed feasibility study has yet to be carriedout. While in the long run it is probably desirable for Tanzania to establishits own refining capacity to diversify its market outlets, no marketingproblems for crude extract are expected over the next five years, during whichpyret:hrum will be in short supply in world markets (para. 7.15). Constructionof a refinery should be delayed until flower production has increased sub-stantially, until TPB's financial position (para. 3.09) can support suchan irnvestment and until the operations of a new refinery in Rwanda can beevaluated. This refinery is due to come on stream at the end of 1980 andincorporates a technology which is considerably cheaper than available alter-natives.

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2.18 Export Marketing. In 1974, responsibility for export marketing ofpyrethrum extract and marc passed from Mitchell Cotts to TECO and the GeneralAgricultural Products Export Company (GAPEX), a parastatal. In 1977, TPBassumed responsibility for these activities. Pyrethrum products are sold ona contract basis, at prices announced in advance by TPB after consultationwith Kenya and Rwanda, the world's other major producers. The volume ofexports over the last five calendar years for which data are available istabulated below:

Tanzanian Extract and Marc Export Volume, 1974-78

Pyrethrum Extract Pyrethrum Marc------------------ (m tons) -----------------

1974 86.3 1,2861975 137.2 2,2801976 118.4 1,8101977 95.8 1,6581978 74.1 2,812

Extract exports have been falling since 1975, as flower production has dec-lined. Exports of marc have been erratic, as sales are less regular, andstocks are often carried over from one year to the next. At the presenttime, 80% of Tanzania's exports of pyrethrum extract go to the US, and 16%to Canada. Almost all of the pyrethrum marc exported goes to Japan.

E. Producer and Export Prices

Flower Prices

2.19 The price paid to growers for dried flowers depends on the pyrethrincontent of the flowers, as measured when the flowers arrive at the processingfactory. At the time of purchase, farmers are paid in cash the price for thelowest grade; a second payment is made as appropriate after the pyrethrincontent has been determined. In 1974/75, TPB experimented with payment of auniform price, irrespective of pyrethrin content. This practice was discon-tinued after a year, since it appeared to have an adverse effect on growerincentives, and a quality-related price structure was reinstated in 1975/76.

2.20 The current grading system provides for five grades, ranging fromflowers with less than 1.10% pyrethrins by increments to flowers with pyre-thrin contents in excess of 1.40%. Producer prices are set by GOT (para 1.11)

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taking into account TPB's sales realizations and costs of operations, andfarmer incentives relative to other crops. Recent producer prices are de-tailed below:

Grade and Price Structure, 1977/78-1980/81 1/

1977/78 & 1978/79 Price (Tsh/kg) 1979/80 & 1980/81 Price (Tsh/kg)Pyrethrin Content 1977/78 1978/79 Pyrethrin Content 1979/80 1980/81

over 1.51% 6.50 6.50 over 1.40% 7.50 11.001.31-1.50% 5.50 6.00 1.30-1.39% 7.00 9.501.21-1.30% 4.21 5.00 1.20-1.29% 6.50 8.50less than 1.20% 4.00 4.60 1.10-1.19 6.00 7.50

Less than 1.10% 5.50 6.50

1/ These dates refer to marketing years, running from July 1 to June 30.

Prices have been increased substantially since 1977/78. In particular,prices of the lowest grade, which accounts for over 80% of flower purchases,have risen by over 60%. At current prices, pyrethrum provides attractivereturns to smallholders (para. 8.04). Assurances were obtained during negotia-tions that, in order to maintain producer incentives, the Borrower wouldcontinue to review and adjust producer prices annually taking into accountpricess, TPB costs and producer prices of other crops. These matters would beperiodically discussed by GOT and IDA in the course of IDA's involvemenlt withMDB (para. 1.11).

JXPOrt Prices

2.21 Export prices for extract and marc over the period 1974-1979 aregiven below:

Extract and Marc Unit Export Prices, 1974-1979

Extract Marc--- (Tsh/m ton) ---

1974 135,400 7661975 144,400 7251976 168,800 7441977 185,300 8791978 218,000 8361979 345,900 1,500

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The export price of pyrethrum extract has risen by over 150% since 1974, andthe price of marc has almost doubled over the same period. The increase inprices has been particularly marked in 1979. These increases reflect thegrowing shortage of pyrethrum extract and marc on world markets, as productionin Kenya and Tanzania, which accounts for about 90% of total world production,has declined (para 7.04).

F. Future Prospects

Prices

2.22 An analysis of future price prospects (see Chapter 7 of this reportfor details) concludes that the export price of pyrethrum extract and marc islikely to remain in real terms, at current levels through 1983/84, reflectingcontinued supply shortages in world markets. For the following five years,prices are expected to fall by 5% per year in real terms as the world supplyand demand situation progressively returns to balance. Correspondingly,prices paid to producers for dried flowers are expected to remain at presentlevels in real terms through 1983/84, and thereafter, in order to preserveTPB's financial position, to decline in real terms. Analysis indicates that togive TPB adequate margins, producer prices need to fall by 2% per year in realterms and would then stabilize in 1988/89 at levels equivalent to about 90% ofpresent producer prices. Analysis of farmer returns (para. 8.03) indicatesthat pyrethrum production would remain attractive even at these reduced levelsof producer prices.

Production

2.23 Production of dried flowers is expected to increase from the lowlevels of 1978/79 as a result of three factors. Firstly, producer priceincreases for the 1979/80 marketing year are beginning to result in an in-crease in area planted to pyrethrum. Secondly, flower yields have undoubtedlybeen depressed during the past three years by adverse weather conditions.Thirdly, a pyrethrum development program is being undertaken in Iringa Regionas part of a broader program of development in Iringa, supported by theEuropean Community. Under this program, sufficient planting material for upto 4,000 ha of pyrethrum is expected to be made available to farmers over thenext three years. The expected future pattern of production, (without Projectinvestments) is expected to be:

1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 onwards

Number of growers 20,000 22,000 28,700 29,100 31,100 33,100Pyrethrum area (ha) 8,000 8,700 11,200 11,800 12,600 13,400Dried flower yield (kg/ha) 200 235 235 235 235 235Dried flower prod. (m tons) 1,600 2,050 2,555 2,758 2,961 3,078Pyrethrin content (%) 1.10 1.10 1.10 1.10 1.10 1.10

By 1983, a total of about 33,000 farmers are expected to be growing pyrethrum,producing almost 3,100 m tons of dried flowers annually.

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III. EXECUTING AGENCIES

A. The Tanganyika Pyrethrum Board

Background

3.01 The Tanganyika Pyrethrum Board (TPB) was established by the PyrethrumOrdinance (Amendment) Act of 1965. Until 1974, TPB functioned solely asthe body responsible for licensing growers. In 1974, TPB acquired the sharesof the Tanganyika Extract Company (TECO) (para. 3.10) from the former owners,Mitchell Cotts, and thus assumed responsibility for flower processing. In1976, TPB took over from cooperative societies (which were dissolved bythe Government in that year) responsibility for flower purchase from farmers.In 1977, TPB took over responsibility for pyrethrum product marketing fromGAPEX and TECO.

3.02 The broad objectives of TPB are the promotion and supervision ofthe pyrethrum industry, and the development of increased production. Itspresent activities include the purchase of pyrethrum flowers, the marketingof pyrethrum products, the promotion of research, the operation of two large-scale farms, the development of production and, once the Mafinga extractplant (para. 2.16) is commissioned, the processing of pyrethrum flowers.

Organization and Management

3.03 TPB is controlled by a Board of fifteen directors, appointed by theMinLster of Agriculture, and chaired by an Executive Chairman who is appointedby the President of the Republic of Tanzania. The Board includes representa-tives of the Ministries of Agriculture (Kilimo) and Finance and Planning,the Regional Development Directors of Iringa, Mbeya and Arusha Regions, theGeneral Manager of TECO and representatives of growers. Day-to-day respon-sibility for TPB operations rests with the Executive Officer, who is also aPresidential appointee, and to whom all department heads report.

3.04 TPB's headquarters is presently in Dar-es-Salaam. This sitingis inappropriate, since it is distant both from the production areas andfrom the processing facilities. Provision would be made under the Project(para. 5.21) for the head office of TPB to be relocated to Iringa. TPBcurrently employs 230 persons, and is organized into four headquarters depart-ments and three regional offices; a Manufacturing Department will be addedonce the Mafinga plant is commissioned (Chart C-1, Annex 1). TheAdmiinistration Department is in charge of personnel management, publicity andthe provision of general services such as procurement. The Finance Departmentis responsible for maintaining accounts, for controlling cash flows and formoniitoring TPB's overall financial position. The Marketing Department isresponsible for sales (both domestic and export) of pyrethrum extract andother products. The Planning and Production Department is responsible foroverall planning of TPB operations, for operating TPB's two large farms, andfor providing marketing and extension services to producers. TPB's RegionalOffices are in Arusha, Mbeya and Iringa Regions; the Iringa Region would have

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two District Offices, in Mufindi and Makete Districts, once regional anddistrict office accommodation has been constructed under the Project (para.5.21).

3.05 TPB's current staffing is not commensurate with its responsibili-ties, which have increased markedly since 1974. Weaknesses are particularlyevident within the Finance Department, which lacks sufficient qualifiedpersonnel and effective accounting systems and controls, and within thePlanning and Production Department, which has insufficient qualified technicalstaff. TPB's staffing, particularly within these two departments, wouldtherefore be strengthened under the Project (para. 5.18).

Finances

3.06 Largely as a result of staff weaknesses within the Finance Depart-ment, TPB's accounts are not up-to-date. The last audited accounts relateto the year ending June 30, 1977 (FY77), and accounts for FY78 and FY79 areundergoing audit at present. Appraisal of TPB's current financial status isthus difficult. Summary income statements and balance sheets for FY75 - FY79are presented in Tables T-4 and T-5 respectively, in Annex 1. Figures forFY75, FY76 and FY77 are audited, figures for FY78 are from draft accounts andfigures for FY79 are based on TPB and IDA staff estimates.

3.07 TPB made after-tax profits of Tsh 104,000 in FY75 and Tsh 497,000in FY76. In these years, TPB's income was derived only from managementfees (based on export realization) and a levy (based on TECO throughout)which were paid to TPB by TECO. In 1977, TPB purchased flowers from growersand sold them to TECO for processing. TPB made a small loss (of Tsh 53,000)in that year. In FY78, when TPB began marketing pyrethrum products on itsown account, a loss of Tsh 1.2 million (equal to 5% of revenue) was made.These losses resulted from TPB's taking over responsibility for marketing (andthus raising its costs) while producer prices (set by Kilimo) had not beenadjusted to reflect this. In FY79, despite rising export prices, TPB isestimated to have a net deficit of about Tsh 3 million, as a result of decliningflower production (para. 2.05).

3.08 TPB's net worth (representing the sum of an initial capital grantfrom GOT, capital grants for smallholder development and for constructionof the Mafinga plant, and accumulated net income) rose from Tsh 2.3 millionin FY75 to an estimated Tsh 32 million in FY79. TPB had no long-term debt inFY75, but at the end of FY79 had accumulated, Tsh 21.6 million in long-termloans from the Tanzania Investment Bank (TIB) to finance construction of theMafinga plant. However, the long-term debt to net worth ratio remains satis-factory at 0.6:1. TPB had an overdraft estimated at Tsh 18 million at endFY79, and a current assets/current liabilities ratio of 0.9:1. Overall, TPB'sliquidity is thus somewhat strained.

3.09 Projections, in the 'without-Project' situation, of TPB's incomestatements, balance sheets and cash flows (in current price terms) for theyears FY80 through FY90 are given in Annex 1, Tables T-6, T-7 and T-8 respec-tively. These tables have been drawn up on the basis of producer prices,

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export prices and production figures given in paras. 2.21 and 2.22. Over thisperiod, except for FY80 and FY81 (when losses of Tsh 2.7 million and Tsh 1.1million respectively are expected), TPF is expected to earn consistentlypositive net incomes, which total Tsh 19.7 million (in current prices) overthe period. The balance sheet is expected to improve. Total n. worth wouldrise to Tsh 58.3 million, all long-term loans would repaid, and the currentassets/current liabilities ratio would remain satisfactory throughout theperiod. The cash flow statements indicate a cumulative cash inflow over theperiod of Tsh 49 million which wgould result in TPB's accumulating surpluscash reserves of Tsh 30.9 million, wnich would be available for furtherinvestment or distribution as dividends. TPB's future financial prospects

are therefore satisfactory.

The 'Tanganyika Extract Company

3.10 The Tanganyika Extract Company (TECO) was established in 1962 asa private company controlled by Mitchell Cotts (a British company). TECO'sfunction was to purchase and process dried flowers and to market pyrethrumproducts. In 1974, TECO was nationalized, and its shares held by TPB onbeha:Lf of GOT. TECO-s main asset is an extract plant in Arusha. However,the need for this plant will be eliminated once TPB's Mafinga plant comeson stream, and TECO would thus have no part in Project execution.

B. The Uyole Agricultural Center

3.11 The Uyole Agricultural Center (UAC) was initially established atUIyole in Mbeya Region by GOT with assistance from Denmark, Finland, Iceland,Norway and Sweden as an Agricultural Research and Training Institute, intendedto serve the regions of Mbeya, Iringa, Rukwa and Ruvuma. Most of the researchdepartments were established by 1973, and by the end of 1975, the trainingprogram was fully operational. In 1976, UAC assumed its present legal statusas a public corporation, w7holly owmed by GOT. TJAC is controlled by a Boardof Directors, appointed by the Minister of Agriculture. Responsibility forthe day-to-day operations of UAC rests with the Managing Director, who is apresidential appointee. The objectives of UAC are to carry out a production-oriented program of applied research, to deal with the problems of surroundingregions, and to provide diploma-level, certificate-level and short-coursetraining for agricultural staff.

3.12 The research activities of UAC are carried out by nine researchdepartments, covering crop husbandry, plant breeding, agro-economics agricul-tural engineering, horticulture, plant protection, soil science, pasture,agronomy, and livestock. UAC carries out research work at six offstations(of which three are used for pyrethrum research) in addition to Uyole. Thetraining activities at UAC cover eleven subjects - agricultural extension,agricultural science, agro-economics, agricultural engineering, agronomy,animal production, food processing, home economics, horticulture, land useplanning and veterinary science.

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C. Ministry of Works

3.13 The Ministry of Works (MOW) is primarily responsible for the plan-ning of highway investments and for the reconstruction and maintenance of

trunk roads. Maintenance of the secondary and tertiary road network isthe responsibility of the regional administrations, which also carry outthe maintenance of trunk roads, using equipment and funds from MOW. MOWalso gives administrative and technical support to several units set upunder externally-financed projects for the improvement and maintenance offeeder roads in rural areas. These include units set up under the IDA-financed Third Highway Project (Cr. 265-TA) and Tea Project (Cr. 287-TA), andfeeder road betterment units set up with Norwegian aid. MOW's long-termpolicy is to disengage itself from involvement in feeder road improvement andmaintenance, but the serious problems of organization, staffing, trainingand lack of equipment that affect regional roads departments make suchdisengagement infeasible in the short term.

3.14 MOW is organized into six operating divisions: Buildings Division,Mechanical Division, Roads and Aerodromes Division, Manpower Department andAdministration-Division, Planning Division and Government Stores. Respon-sibility for road construction and maintenance rests with the Roads andAerodromes Division, whose Director is a road engineer. The Division suffersfrom a shortage of qualified staff. Hence, technical assistance staff wouldbe financed under the Project to implement the Project's proposed feeder roadimprovement and maintenance component (paras. 5.23-5.27).

IV. THE PROJECT AREA

Altitude, Climate and Soils

4.01 The Project would be implemented in the pyrethrum-growing highlandareas of the Iringa and Mbeya Regions of Southern Tanzania (see Map IBRD14436), which comprise six major zones: Umalila, Mporoto, Uwanje, Ukinga,Ubena and Ludewa. The Pyrethrum growing areas range in altitude from 1,700 mto 2,700 m. Rainfall, which occurs in a single rainy season (December toApril at the lower altitudes, November to May at higher altitudes), rangesfrom about 1,000 mm per year in parts of Umalila and Ubena, to over 1,800 mmin parts of Ukinga. Soils in the pyrethrum growing areas encompass redclays, yellow clays, dark-brown loams of volcanic origin, sandy loams andred sandy soils which are slightly acidic. These conditions are good forpyrethrum cultivation (para. 2.02).

Farming Patterns

4.02 Average cultivated area per family on pyrethrum - growing farmsranges from about 1.4 ha in Mporoto zone to over 2.6 ha in Ludewa zone. Otherwidely-grown crops are maize, wheat and Irish potatoes. Maize is particularlyimportant in the Umalila and Ubena areas. Cropping patterns on a typicalpyrethrum-growing farm in each of the main pyrethrum-growing areas are esti-

rated to be as follows:

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Typical Cropping Patterns

CroF Umalila Mporoto Uwanje Ukinga Ubena Ludewa------------------------- Hectares -----------------------

Pyrethrum 0.47 0.34 0.32 0.40 0.53 0.53Maize 1.21 0.50 1.20 0.53 1.28 0.95Wheat 0.03 0.31 0.10 0.58 0.11 0.09Peas 0.43 0.12 0.02 0.07 0.19 0.21Others 1/ 0.06 0.14 0.11 0.60 0.47 0.87

2.20 1.41 1.75 2.18 2.58 2.65

Transport

4.03 The main transport arteries in Mbeya and Iringa Regions are theTanzania-Zambia (TAN-ZAM) highway and the TAZARA railway also linking Tanzaniato Zambia (Map IBRD 14436). The TAN-ZAM highway has been upgraded to two-laneasphalt standards with assistance from USAID and from the Bank Group underthe Second Highway Project (Loan 586-TA and Credit 142-TA). Pyrethrum trafficuses this highway in preference to the TAZARA railway, which is experiencingsevere operational problems, and this preference is likely to continue in thefuture, since the new extract plant at Mafinga is not located on the railway.

4.04 In the pyrethrum-growing areas, a network of district and feederroads provides access to the villages where pyrethrum is grown (Map IBRD14386). This network connects with the TAN-ZAM highway and with the pavedNbeya-Lake Nyasa road via local main and regional roads, which are in arelatively satisfactory condition and passable in all weathers. Districtand f'eeder roads, however, generally consist of bare tracks which can benegotiated only with difficulty in the dry season and which are impassableduring the rains. There is extensive rutting and potholing, culverts aremissing, and drainage ditches are inadequate and badly maintained. As aresult, transport costs are high and vehicle life shorts

4.05 Pyrethrum flowers are produced, and thus require to be marketed,year-round, and yields are in fact highest during the rains. The delays inmarketing and processing which occur as a result of the poor condition of thefeeder road network lead to a marked reduction in the pyrethrin content ofdried flowers because of oxidation. Under the Project, therefore, selecteddistrict and feeder roads serving pyrethrum growing areas would be upgradedand maintained to all-weather standards to facilitate pyrethrum marketing(paras. 5.23-5.27).

1/ Mainly potatoes, but also millet, sorghum, beans, sunflower, groundnutsand vegetables.

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4.06 Responsibility for the maintenance of all roads in Mbeya and Iringaregions rests with the Works Division of the respective regional administra-tions. However, these are constrained by lack of finance, equipment, work-shops and workshop tools, trained staff and spare parts, and as a resultmaintenance is only sporadic, and often carried out only on an emergencybasis following damage caused by heavy rains and flooding. In both Mbeya andIringa regions efforts are underway, supported by external financing agen-cies (Norway in Mbeya and the EEC in Iringa), to strengthen the capabilitiesof the Works Divisions. While such efforts will need time to come to fruition(and for this reason the road improvement and maintenance component proposedunder the Project would be administered by MOW), it is anticipated that theregional road maintenance capacities would be sufficient, after the end of theProject's road component, to continue the maintenance of the roads which wouldhave been improved under the Project.

Socio-economic Conditions

4.07 Although Mbeya and Iringa regions are, overall, amongst the weal-thier regions of Tanzania (Mbeya ranking fifth and Iringa tenth of the twentyregions, on the basis of per-capita GDP), the pyrethrum-growing regionsare relatively poor, mainly because of their isolation. Little systematicdata exist on farm incomes in the Project area, but it is estimated, onthe basis of cropping patterns, yields and producer prices, that the averageannual per capita income (including subsistence) of pyrethrum growers isabout Tsh 650 (US$80), and that annual per capita cash income is Tsh 425(US$50), all figures in 1979 prices. The absolute rural poverty level inTanzania is about $105 in 1979 prices, so that the majority of pyrethrum-growing families (probably about 85%) live in absolute poverty.

V. THE PROJECT

A. General Description

5.01 The Project was originally prepared by GOT with assistance from theBank's Regional Mission in Eastern Africa (RMEA) as part of a larger project,the National Agricultural Development Program Phase I (NADP I). NADP I wasappraised by IDA in June 1977. However, it was not possible to completeappraisal of the pyrethrum component at that time because the roads programhad not been adequately prepared and there was insufficient data available onthe financial status of TPB and on the costs of pyrethrum marketing andprocessing. During 1978 and early 1979, consultants undertook detailedreviews of these aspects, and project preparation was completed in February1979 by GOT with further RMEA assistance.

5.02 The Project would, over a five year period, have the primary objec-tive of raising the cash incomes of smallholder pyrethrum growers in thehighlands of Mbeya and Iringa Regions by assisting these farmers to expand

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their output of dried pyrethrum flowers through the provision of plantingmaterial and improved research, extension, marketing and road transportservices. Specificaliy9, the Project would provide for:

(a) the expansion of smallholder production through: theproduction and distribution of improved planting mate.aland, on ar. interim basis, unimproved planting material;the improvement of pest control; the expansion of TPB'sfield staff; the improvement of flower drying techniques;the construction of additional TPB market centers/stores;and the expansion of TPB's transport fleet;

(b) the strengthening of the existing research program of theUyole Agricultural Center (UAC) through: the constructionand equipping of additional laboratory facilities; thefunding of additional research staff and staff training;the establishment of three new off-stations; and the financ-ing of research operations;

(c) the strengthening of TPBs operations through: theprovision of both long-term and short-term technicalassistance and stafL training; the construction of newoffice accommodation for TPB; and the provision ofvehicles for TPB headquarters staff;

(d) the improvement and maintenance of feeder roads through:the establishment of a fully staffed and equipped RoadImprovement and Maintenance Unit (RIMMU); and the financingof the costs of operations of the RIMU.

5.03 Responsibility for implementation of the smallholder productioncomponent would rest with TPB as strengthened under the Project. UAC wouldimplement the expanded research program, and the RIMU, administered by andreceiving technical support from MOW, would carry out the roads program.The location of proposed Project investments is shown on Map IBRD 14386.

B. Detailed Features

Smallholder Production Program

5.04 Improved Planting Material. Six existing bulking centers, (threein Mbeya and three in Iringa Regions) would be expanded and four new centersestablished in Iringa; suitable sites have been identified, and land isavailable. The centers would be used to multiply selected improved material,obtained from UAC or TPB's two large farms, for distribution to farmers. Thedistribution and size of the centers reflects the fact that two-thirds of theplanting material produced under the Project is expected to be distributed inIringa Regior. Within Iringa, it is estimated that 75% of the material wouldgo to Njombe and the recently created Makete Districts with the balance of 25%

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going to Iringa and Mufindi Districts. The planting material to be bulkedwould be a clone which, although selected twenty years ago, is superior toplanting material now in general use. By the end of the Project period, thebulking centers would have access to improved clonal material from UAC.

5.05 Planting material produced by bulking centers would be furthermultiplied in village nurseries before being distributed to farmers. InYear I of the Project (PYI), 45 ha of village nurseries would be established.In PY2, this would rise to 135 ha and in PY3 and succeeding years, to 200ha. These nurseries would be located close to villages where planting materialis required, in order to reduce transport costs and plant mortality. The sizeof each nursery would vary according to demand; the average size is expectedto be 2 ha. They would not be permanent, but would be relocated periodicallyin accordance with farmer demand. Each nursery would be managed by a headman,recruited locally on a temporary basis by TPB, and supervised by TPB fieldstaff. TPB has had experience with the operation of village nurseries since40 ha were established and operated, generally satisfactorily, during the1978/79 season. The Project would finance the costs of operations of thebulking centers and village nurseries, which comprise the costs of fertilizers,nematocides, pesticides, transport, tools and labor.

5.06 The output of village nurseries would be sufficient to plant 160 haof farmers' fields in PYI, 610 ha in PY2, 1,080 ha in PY3 and 1,650 ha insucceeding years. This planting material would be treated prior to dis-tribution to ensure that it would be nematode-free, and would be distributedto farmers free of charge, in accordance with TPB's current practice. Thereis no established credit system for pyrethrum farmers (para. 2.13) and giventhe low input requirements for pyrethrum production and the scattered andisolated locations of pyrethrum producing villages, it would be prohibitivelyexpensive to establish such a system. Without credit, however, many farmerswould not be able to afford the initial cost of establishing pyrethrum plotsif improved planting material were charged for, and would therefore continueto use their present inferior material. Production and distribution ofplanting material through bulking centers and village nurseries would be apermanent long-term program to continually upgrade planting material throughthe dissemination of improved material selected at UAC. Assurances wereobtained during negotiations that TPB would continue to provide this serviceto farmers after the completion of IDA disbursements. In effect, the costswould be met by a reduction in producer prices, since these are set taking inaccount TPB revenues and costs.

5.07 Unimproved Planting Material. Substantial quantities of improvedplanting material would become available only in PY3 and subsequent years,since little improved material is currently available to be bulked. To meetthe present demand for planting material in areas where even unimprovedmaterial is in short supply, the Project would fund, in PYI, PY2 and PY3 only,a program to produce and distribute unimproved planting material grown fromseed. This program would complement the similar EEC program in Iringa Region(para. 2.22).

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5.08 In PYI, 40 ha of seedling nurseries would be developed, using seedproduced at TPB's Ilinde and Mahenye farms in 1979/80. In PYI and PY2, theProject would finance the production of seed at these farms on 125 ha and100 ha respectively. The resultant seed would be sufficient to plant 50 haof seedling nursery in PY2 and 40 ha in PY3. These nurseries would be 1-2ha in size, an- would be located close to a source of water for irrigationand close to the point of demand. These nurseries would produce sufficientseedlings for 500 ha of farmers' fields in PYI, 600 ha in PY2 and 500 ha inPY3. Planting material would be made available to farmers free of charge.Project investments would cover the costs of fertilizer, nematocides, toolsand labor. As a result of this program, it is expected that the number ofpyrethrum growers would be increased by 4,000.

5.09 Pest Control. One hundred knapsack sprayers and a supply of in-secticide (probably Sumithion) would be provided to combat "thrips," an insectinfestation which occurs sporadically in lower, warmer areas. Only about 5%of farmers' fields are affected in any one year and for this reason, routinespraying is uneconomic. The problem can become serious, however, if outbreaksare not controlled. The sprayers would be held by TPB staff at bulkingcenters and at selected villages in vulnerable areas. They would be lentto farmers free of charge when needed; farmers would pay for the costs ofinsecticide.

5.10 Incremental TPB field staff. At present, only four of TPB'sAssistant Production Officers are fully trained to certificate level (para.2.11). To assist in supervision of planting material production and distri-bution, TPB would be allocated by the Ministry of Agriculture a further16 certificate holders and two diploma holders, to be employed by TPB asfield staff. Twelve of these certificate holders and the diplomates wouldbe available, having completed training, in July 1980, and the remaining fourcert:ificate-level staff in July 1981. This level of field staffing wouldbe sufficient for implementation of this Project, but would still be lessintensive than desirable. GOT has indicated its intention to strengthenregional extension services (para. 1.07), but no decision has yet been made onhow this would be done. Assurances were obtairled during negotiations thatKilimo, TPB and the Iringa and Nbeya regional aut_rities, riot later thanJune 30, 1982, would review and discuss with !iDA the adequacy of extensionservices for the Project area including the number of extension staff andarrangements for supervision of village level staff, and if necessary, pro-posals for the improvement of such services. Amongst possible ways to improveextension services would be the further expansion of TPB's field staff coupledwith the transfer of the costs of operation of these field staff to the Kilimobudget, as has been done recently for other parastatals (most notably, theTobacco Authority of Tanzania).

5.11 Flower-drying Techniques. Present techniques used for flower-dryingin the Project area are sun-drying, barn-drying and drying in small portabledriers (para. 2.09). A considerable proportion of pyrethrins is lost withall of these methods. Provision would therefore be made for TPB to obtainfrom a consulting firm the services of a team of three consultants (a drying

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specialist, an economist and a draughtsman) to review the needs of the variousparts of the Project area, which differ climatically, to assess the economicviability of alternative methods of drying given the limited availability offuels in the Project area, and to draw up detailed proposals for the imple-mentation of improved drying procedures where necessary. The coxisultai.zswould be employed for a total of about 10 manmonths. Agreement was reached atnegotiations that their recruitment would be in accordance with IDA guidelinesand that their terms of reference and conditions of service would be acceptableto IDA. The likely outcome of the consultants' studies would be recommendationsfor the establishment of pilot drying facilities, and a sum of Tsh. 2.0million (US$250,000) would be made available to implement such recommendations.During negotiations, it was agreed that these funds would be disbursed by IDAonly after agreement has been reached between IDA and TPB on the consultants'recommendations and their detailed implementation.

5.12 TPB Buying Centers/Stores. TPB's existing buying centers/storesare often in poor repair, leading to some deterioration and spoilage of driedflowers. The present number and capacity of these centers/stores is notsufficient for safe storage of dried flowers and various inputs during therains when truck collections can be delayed. Provision would therefore bemade for the construction of stores in 12 locations where existing facilitiesare 4udged inadequate and in two new locations. All the stores would be90 m wish a capacity of 25 tons of flowers except for Ndulamo which wouldbe 175 m with a capacity of 50 tons of flowers. The stores would be locatedin Uwemba and Ndulamo, in Njombe District; Ujuni, Matamba and Ipeleke inMakete District; Kilolo and Lupila in Iringa District; Kipanga in MufindiDistrict; and Santilya, Ilembo, Simanbwe, Ileje, Igoma and Lufilya in MbeyaDistrict (Map IBRD 14386). Construction of these stores would be phased overthe first three years of the Project. TPB would continue to operate the fourmain collecting stores it now operates in Mbeya, Chimala, Njombe and Iringa,whose capacities are adequate.

5.13 Transport. Twelve 7-ton trucks would be provided to TPB for trans-port of dried flowers from TPB's buying centers to its main stores. Thetrucks would have specially constructed high sides since pyrethrum flowersare bulky in relation to weight. Such trucks are too specialized to beattractive to either private truckers or to regional trucking companies.Five four-wheel drive station-wagons would also be provided to reach pyrethrumproducing villages inaccessible to trucks, and to transport buying clerksand other administrative officials. All these vehicles would also be usedfor input supply, in particular for supply of planting material from thebulking centers (para. 5.05). In addition, 22 motorcycles would be providedfor the use of existing and incremental TPB field staff. It was agreedduring negotiations that these motorcycles would be purchased by the fieldstaff using loans from TPB, and that TPB would pay these staff monthly operat-ing allowances.

Pyrethrum Research Program

5.14 The main focus of the present pyrethrum research program (para.2.10) is on the selection and clonal propagation of improved planting mate-rial. Promising plants from farmers' fields are collected and put through

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a seven-year, four-stage process of single-plant observations, line obser-vations, initial yield trials and adaptability trials. The first two stagesare conducted at Uyole, W4ith the thi-d and fourth stages also involving threeoffstations, at Igoma in Mbeya Region and at Kinyika and Igeri in IringaRegion. The first recomviendations of improved selections are rLU expecteduntil 1982, reflecting the fact that research of this nature did not beginuntil 1974.

5.15 The present research program is understaffed (only one part-timeresearcher is currently assigned to it). The period between initial collectionof planting material and recommendations of improved material is relativelylong (seven years); the present number of offstations does not adequatelyreflect the ecological range of pyrethrum-growing areas, and the programis short of equipment and operating funds.

5.16 The Project would fund the employment of an internationally-recruited Research Officer, who would be stationed at Uyole and who would workfull-time on pyrethrum research. A tissue-culture unit (which would includean operations room, a laboratory, an evaluation room and greenhouse) would beconstructed at Uyole, and would be staffed by two laboratory techniciansfinanced under the Project. To assist UAC in the introduction of tissue-culture techniques (which would be new to Tanzania) funding would be providedunder the Project for UAC to obtain, on a contract basis, long term researchsupport from an institution (probably a university) with expertise in the useof tlhis technique, and to employ, for about four man-months, a specialist todesign suitable facilities and draw up a list of equipment required. Theintroduction of tissue culture techniques would, by facilitating the rapidmultiplication of clonal material, shorten by at least two years the timetaken to produce research recommendations. A further three offstations wouldbe established (at Santilya in Mbeya, Kitowa in Iringa and at one otherlocation to be determined); these, plus the existing offstations, would begiveni an adequate range of growing conditions. A special unit (staffed by twolaboratory technicians) for the speedy analysis of flower samples would beestablished in the laboratory of the Mafinga extract plant, to provide rapidand accurate feedback to research staff on pyrethrin content of researchmaterial. The Project would provide funds for the interchange of plantmaterial with other pyrethrum-producing countries, for visits to otherpyrethrum producers by research staff and for training of Tanzanian researchstaff. Six houses, a four-wheel drive vehicle and six motor-cycles would beprovided for incremental staff, and during the Project period, the operatingcosts of the expanded research program would be met under the Project.Assurances were obtained at negotiations that the research support serviceswould be obtained under terms of reference and conditions of contract satis-factory to IDA, and that GOT would provide, after the period of IDA disburse-ments, sufficient funds for the continued operation of the expanded researchprogram. It was also agreed during negotiations that GOT would give UACassistance as necessary to acquire sites for the construction of housing andfacilities.

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Strengthening of TPB

5.17 TPB's responsibilities have grown over the past few years and wouldbe further expanded under the Project. To assist TPB to manage these respon-sibilities, a series cf institution building measures would be financed underthe Project.

5.18 Incremental TPB Staff. A Financial Controller would be recruitedinternationally, who would have overall responsibility within TPB for account-ing and financial administration. The present Chief Accountant would serve asthe Financial Controller's deputy, would receive training under the Project(para. 5.20) and would be expected to become Financial Controller after aminimum period of five years. Two agronomists would be recruited inter-nationally. A Planning and Production Agronomist would work at TPB HQunder the Production and Planning Manager, with overall responsibility forthe planning and management of the Project's smallholder production component,and a Field Agronomist would work in close collaboration with the Iringaand Hlbeya Regional Production Managers, and would assist them in the day-to-day implementation of the smallholder production component, in particularthe planting material programs. The costs of employment of these inter-nationally-recruited staff are estimated at US$70,000 per annum, includingsalary, international travel and benefits. A Transport Officer, a CostAccountant, an Internal Auditor, a Planning Officer, a Statistician/EvaluationOfficer and a Procurement Officer would be locally recruited and financedunder the Project.

5.19 Short-term technical assistance. Six man-months of short-termconsultancy would be financed under the Project at an estimated cost perman-month (including salaries, overhead costs, fees, international travel andsubsistence) of Tsh 75,000 (US$9,000), for a study of TPB's transport managementsystems and the formulation of improvements. This study would be carried outby staff of the National Institute of Productivity in Dar-es-Salaam, which hasexpertise in this area. Completion of this latter study and agreement betweenTPB and IDA on implementation of its recommendations would be a condition ofdisbursement for trucks, four-wheel-drive vehicles and motorcycles purchasedby TPB. It was agreed at negotiations that these consultants would beemployed under terms of reference and conditions of employment satisfactoryto IDA.

5.20 Staff training. Funds would be provided under the Project forthe training of Tanzanian TPB staff. In PY1, all TPB field staff wouldreceive a two-week training course at Uyole. In each succeeding year,refresher courses would be given to half of TPB's field staff. UAC issatisfactorily staffed and equipped to provide such training. Funds are alsoprovided under the Project for TPB staff to participate in both overseas andlocal training courses and seminars, covering subjects such as administration,finance, marketing, factory management and personnel management. In addition,the internationally-recruited staff (particularly the Financial Controller)

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wou:Ld carry out on-the-job training of Tanzanian counterpart and subordinatestaff. It was agreed at negotiations that, no later than December 31., 1980,TPB would draw up, for discussion with IDA, a detailed training programto utilize the funds provided under the Project.

5.21 Offices and Houses. Under the Project, TPB's head office would berelocated to Iringa (closer to TPB's field operations). TPB's IringaRegional Office would then move to a new office in Njombe. The Project wouldalso finance the construction of a new district office in Makete, and a newRegional Office block in Mbeya, where existing accommodation is totally in-adequate. In view of the chronic shortage of staff housing in these locations,housing would be constructed and furnished for TPB stafS in Iringa, Njombe,Makete and Iringa. The new Head Office would ue 1150 m in size, the Iringaand Mbeya ReFional Offices would each be 190 m , and the Makete dkstrictoffice 100 m . A total of ten senior sWaff houses (each of 108 m ), fourteeemiddle level staff houses (each of 82 m ) and one junior staff house of 60 mwould be constructed. It was agreed during negotiations that GOT wouldassist TPB as necessary to acquire the sites for these houses and offices.

5.22 Vehicles. The purchase of five four-wheel drive vehicles would befinanced under the Project, for the use of TPB's Executive Officer, Planningand Production Manager, two Agronomists and Financial Controller, and asnecessary by other TPB staff involved in Project implementation.

Road Improvement and Maintenance

5.23 The Project would finance the improvement and maintenance of about200 km of selected feeder roads in the Project area. The roads to be improved(listed in Annex 1 Table T-9 and shown in Map IBRD-14386) were selected byGOT following a survey of over 400 kms of road in the Project area by consul-tants in 1978. Criteria for inclusion in the program included the presentroad condition, the volume of pyrethrum traffic carried and the economic rateof return on each road. The roads included are roughly equally dividedbetween Iringa and Mbeya Regions.

5.24 The roads would be improved so as to allow 7-ton truck traffic topass in all weathers. The roads would have a 5.5 m maximum formation width.As far as possible, gradients would be limited to 14% with no restriction ontheir length; the radii of horizontal curves in mountainous areas are expectedto be at least 30 m. Existing bridges would be repaired and new bridges wouldconsist of simple masonry or gabion abutments with sawn and treated timberdecks. Drainage would be improved with adequate masonry or cement concreteculverts and side ditches with lead-offs. Generally, roads would have aneartlh surface except in water-logged areas and along sections with excessivegradients where they would be gravelled. Roads completed under the Projectwould be maintained as part of Project activities until the improvementprogram was finished. The minimum acceptable maintenance standards would beset to insure that the roads are passable in all weather. This would entailregular repairs to avoid large pot holing and corrugations, grading to retaincambers and shape across road width, keeping side ditches, culverts andlead--offs clear, repair of culverts and bridges and protection of slopes.

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5.25 The road improvement program would be carried out, over a three-year period, by force account by a Road Improvement and Maintenance Unit(RIMU). It was agreed during negotiations that the RIMU would be estab-lished not later than March 31st, 1981 under the control of the Director ofRoads and Aerodromes in MOW. Machinery-intensive techniques would be used.Labor intensive methods would not be suitable in this case because of theshortage of labor in the mountain areas where roads would be constructed andthe high cost of importing labor. The relatively high wages for unskilledlabor (US$2 per day) and the dearth of managerial skills would also make theuse of labor intensive methods uneconomical in this case. Until the establish-ment of the RIMU, MOW would be responsible for procurement and staff recruit-ment. To allow adequate time for procurement of equipment and for constructionof housing, office and workshop accommodation, (which would be handled by MOW,which has adequate expertise in these respects), RIMU management staff wouldnot be recruited until the third quarter of PY1, and road improvement wouldnot start until PY2. The Project would finance the procurement of equipmentand spare parts for the RDMU (a full list of equipment is given in Table T-10of Annex 1). A Roads Engineer, a Construction Supervisor and a MechanicalSupervisor, would be internationally-recruited to manage the operations ofthe RIMU. The costs of employing these internationally-recruited staff areestimated at US$70,000 per annum, including salary, international travel andbenefits. About 135 local staff and labor (a list is at Table T-11 of Annex1), would also be employed by RIMU.

5.26 The RIMU would be based in Mbeya, which is the major town mostconvenient to its operations. The Project would finance the constructionof three houses for senior RIMU personnel, and a small office and workshopin Mbeya. It was agreed at negotiations that GOT would give MOW assistance asnecessary to acquire sites for these facilities. The Project would financethe costs of operation of the RIMU, including the costs of salaries, wages andmaterials such as cement, steel, lumber, tires, fuel, oil and lubricants.

5.27 Several alternative means of carrying out the proposed road improve-ment and maintenance component were explored during Project preparation andappraisal. There are few private road contractors in Tanzania; they arebased in Dar-es-Salaam and do not have the capacity to extend their operationsto carry out the proposed program. Because of the scattered character of theroad works proposed, and their location in mountainous areas of difficultaccess, international contractors are unlikely to be interested. Neither TPBnor Kilimo has the management capacity or expertise to be able to carry outthe program. The regional works divisions in Mbeya and Iringa, althoughreceiving support from external agencies (para. 4.06) are likely during thenext few years to remain unable to carry out such a program in addition totheir broader regional responsibilities. However, by the end of PY4, whenthe road improvement program would be completed, it is anticipated that theRegional roads divisions would, as a result of the external assistance theyhad received, be in a position to continue routine maintenance of the roadsimproved under the Project. During negotiations, agreement was reachedthat, not later than March 31, 1984, GOT would review the capacity of theRegional works divisions in Mbeya and Iringa to take over from RDMU main-tenance of the roads improved under the Project, and would furnish to IDA

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proposals regarding the responsibility for continued maintenance of theroads improved under the Project, and that RDMU equipment would, aftercompletion of the Project's road component, be used for the maintenance ofroads improved under the Project or for the development and maintenance ofother feeder roads in Mbeya and Iringa Regions. Agreement was also reachedduring negotiations that, throughout the Project period, adequate funds wouldbe budgeted by GOT for the maintenance of all main and local main roads usedfor the transportation of pyrethrum in the Project area, and that adequatefunds would be budgeted for the maintenance after the construction period ofroacts improved under the Project.

Implementation Schedule

5.28 A Chart showing the anticipated rates of implementation of thevarious Project components is at Chart C-2, Annex 1.

C. Project Costs

5.29 The total costs of the Project would be Tsh 109.4 million (US$13.2million), of which US$7.8 million (60 percent) represents the foreign exchangecosts. These total costs include about Tsh 4.0 million (US$0.5 million) oftaxes and duties, comprised mainly of import duties on trucks and motorcyclespurchased by TPB. The phasing of Project costs is summarized in Annex 1,Table T-12, and costs for each of the components are given in more detail inAnnex 1, Table T-13 through T-16. Project costs are summarized below:

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Local Foreign Total Local Foreign Total Exch % Cost %------ Tsh '000 ------- ------ US$ '000 -------

Smailholder ProductionImproved Planting

Material 3,435 2,285 5,720 414 275 689 40 7Unimproved Planting

Material 2,466 340 2,806 297 41 338 12 4Pest Control 113 337 450 14 41 55 75 1Incremental TPB Field

Staff 1,108 --- 1,108 133 --- 133 --- 1Drying Study and

Improvements 880 1,870 2,750 106 225 331 68 3Flower Stores 1,856 1,076 2,932 224 130 354 37 4Vehicles 674 3,281 3.,955 81 395 476 83 5

Sub-total 10,532 9,189 19,721 1,269 1,107 2,376 47 25

Research ProgramCivil works 1,591 1,076 2,667 192 130 322 40 3Equipment 24 467 491 3 56 59 95 1Vehicles 26 219 245 3 26 29 90 -Staff 1,030 2,465 3,495 124 297 421 71 4Operations 1,570 740 2,310 189 89 278 32 3Training & consultants 622 3,228 3,850 75 389 464 84 5

Sub-total 4,893 8,195 13,088 590 987 1,577 63 16

Strengthening of TPBIncremental Staff 2,555 7,845 10,400 308 945 1,253 75 13Technical Assistance 350 - 350 42 - 42 - -Training 380 500 880 46 60 106 57 1Offices and housing 8,108 5,210 13,318 977 628 1,605 39 17Vehicles 31 589 620 4 71 75 95 1

Sub-total 11,424 14,144 25,568 1,376 1,704 3,080 55 32

Roads ComponentEstablishment of RIMU 1,166 6,456 7,622 140 778 918 88 10Operations of RIMU 3,934 9,354 13.288 474 1,127 1,601 70 18

Sub-total 5,100 15,810 20,910 614 1,905 2,519 76 27

Total Base Cost 31,947 47,338 79,287 3,849 5.703 9,552 60 100

Physical Contingencies 3,973 5,804 9,777 479 699 1,178 59 12

Price Contingencies 8,283 12,013 20,296 998 1,447 2,445 59 26

Total Project Cost 44,204 65,155 109,360 5,326 7.849 13,175 60 138

Total Project Cost 40205 65,155 105,360 846 7,849 12695 62 133

(net of taxes andduties)

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Project costs have been estimated on the basis of prices prevailing in January1980. Physical contingencies have been included at a rate of 20 percent onthe costs of civil works and equipment for the research component and at arate of 10 percent on all other costs except the lump sum for improveddryers. Price contingencies on imported vehicles and equipment and on inter-nationally-recruited staff and consultants have been included at annual ratesof 10.5% in 1980, 9% in 1981, 8% in 1982 and 7% thereafter. For local equipmentand staff costs, price contingencies have been included at annual ratesof 11% in 1980, 10% in 1981 and 9% thereafter. For civil works, higherprice contingencies have been included at annual rates of 12% in 1980, 11% in1981 and 1982 and 10% thereafter, reflecting the pressure on constructionindustry capacity. Price contingencies total 26% of Project base line costs.

D. Financing

5.30 The financing of Project costs, net of taxes and duties, would beas follows:

US$ Million %

IDA 10.0 79Government of Tanzania 2.7 21

12.7 100

The proposed IDA credit of US$10.0 million would be on standard terms to theGovernment of Tanzania and would cover all the foreign exchange costs of theProject (US$7.8 million) and 44 percent of local costs, or about 79 percentof total Project costs. GOT would finance the remaining US$2.7 million,.netof taxes and duties.

5.31 Credit funds and GOT contributions for the smallholder productionprogram (Tsh 27.2 million, including contingencies) would be channelledby GOT to TPB in the form of equity. Credit funds and GOT contributions forthe pyrethrum research program (Tsh 18.4 million, including contingencies)would be channelled to UAC on a grant basis, through the Kilimo developmentbudget. Credit funds and GOT contributions for the road component (Tsh 27.8million, including contingencies) would be channelled to the RIMU on a grantbasis through the development budget of the MOW. The remainder of creditfunds and GOT contributions for the strengthening of TPB's operational capa-city (Tsh 36.0 million including contingencies) would be on-lent by GOT to TPBfor a period of 10 years, including 5 years of grace, at an annual interestrate of 10%, which is currently the interest rate charged by GOT to parastatalborrowers. In the case of TPB, the division of funds between equity and loanis in accordance with GOT's policy that 'non-commercial' parastatal invest-ments be financed by grants or equity, while 'commercial' investments (which

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are expected to generate a financial return to the parastatal), should befinanced by loans. The terms and conditions of this financing plan wereagreed at negotiations. Completion, in a form satisfactory to IDA, of anon-lending agreement between GOT and TPB would be a coaditioni of crediteffectiveness.

5.32 To ensure that the housing and offices for TPB (which are requiredfor effective Project implementation) and the study of TPB's transport systems(completion of which is a condition of disbursement of funds for vehicle pur-chase) are completed as expeditiously as possible, IDA has urged TPB to enterinto contracts, prior to Board Presentation, for the design of the houses andoffices and the preparation of tender documents, and for the conduct by con-sultants of the study. It is recommended that part of the costs of thesecontracts incurred after February 15, 1980, be financed retro-actively out ofthe proposed credit. The maximum sums likely to be involved would be:

Total Retro-activeContracts Financing…----------- us$- …

(a) Design of civil works,preparation of documents 115,000 97,500

(b) Transport management study 50,000 42,500165,000 140,000

VI. PROJECT IMPLEMENTATION

A. Management

6.01 The Tanganyika Pyrethrum Board (TPB) would have responsibilityfor implementation of the smallholder production component of the Project.The capacity of TPB to carry out this responsibility would be augmented by theinstitution-building component of the Project. Overall day-to-day responsi-bility for planning and management of the smallholder component would restwith the Planning and Production Manager of TPB, who reports directly to theExecutive Officer of TPB. He would be assisted in the detailed planning ofproduction activities by the internationally-recruited Planning and ProductionAgronomist who would be financed under the Project (para. 5.18). The Planningand Production Manager would also be assisted during Project implementationby a Planning Officer and a Statistician/Evaluation Officer (both locally-recruited graduates) financed under the Project (para. 5.18). Responsibilityfor field implementation of production activities would rest with TPB'sRegional Managers in Iringa and Mbeya Regions, who would be assisted incarrying out their responsibilities by the internationally-recruited FieldAgronomist who would be financed under the Project (para. 5.18). The FinanceDepartment, which would have responsibility for the maintenance of Project-related TPB accounts (para. 6.08) in addition to its normal accounting func-tions, would be strengthened under the Project by the provision of an inter-nationally-recruited Financial Controller and of a Cost Accountant and an

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Internal Auditor, both of whom would be locally-recruited (para. 5.18). TPB's

Administration Department, which would be responsible for procurement, for theorganization of staff training and for the management of the transport fleetfinanced under the Project, would be strengthened by the provision under theProject of a Procurement Officer and of a Transport Officer (pa-a. 5.18) whowould be based at the Mafinga factory, where there are workshop facilities.The mnarketing of the incremental pyrethrum products produced as a result ofthe Project would be handled by the Marketing Department, which is adequatelystaffed to handle its responsibilities. Assurances were obtained at negotia-tions that TPB would carry out the Project according to detailed annualwork programs,which would be sent to IDA for review. The first such program,that relating to FY81, would be sent for IDA review not later than May 31st1980. Thereafter, work programs would be sent for IDA review not later thanMarch 31st preceding the GOT fiscal year to which they apply.

6.02 The pyrethrum research component would be implemented by the Uyole

Agricultural Center (UAC). Overall responsibility would rest with UAC'sChief Scientific Officer, but day-to-day responsibility for component imple-mentation would rest with the internationally-recruited Research Officerfinanaced under the Project, who would be a staff member of the Department ofPlant Breeding. UAC would liaise closely with TPB's agronomists in carryingout ihe research program, and TPB staff would assist UAC staff in the selec-tion of promising plant material as required from farmers' fields. Assuranceswere obtained during negotiations that the research component would be carriedout in accordance with detailed annual work programs. The first of these pro-grams, that relating to FY81, would be sent to IDA for review not later thanMay 31, 1980. Thereafter, these work programs would be sent for IDA reviewnot later than March 31st preceding the GOT fiscal year to which they apply.

6.03 In view of the lack of a viable alternative method (para 5.27), theroads component of the Project would be undertaken by the Roads Improvementand Maintenance Unit (RIMU) which would be established under the Project andwhich would work under the administrative and technical supervision of theDirec:tor of Roads and Aerodromes of MOW. The MOW would be responsible forprocurement of the equipment required for the RI4U, for the selection andsupervision of contractors for the construction of the houses, office andworkshop required for RIMU and for the recruitment of the three internationally-recruited RIMU senior staff (Roads Engineer, Construction Supervision andMechEnical Supervisor). MOW would also assist the RIMU in recruitment of thelocal staff required for its operations. The RIMU would operate according toannual work programs which would be drawn up by the Roads Engineer of RDIUafter consultation with the Regional Development Directors of Mbeya and IringaRegions. Assurances were obtained at negotiations that the first such workprogram (that relating to FY82) would be sent to IDA for review not later thanMay 31, 1981. Therafter, such work programs would be sent for IDA review notlater than March 31st preceding the GOT fiscal year to which they apply.

B. Staffing

6.04 Assurances were obtained during negotiations that IDA would be con-sulted, prior to appointment, on the suitability, in terms of qualifications

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and experience, of candidates for the posts of Financial Controller, Planningand Production Agronomist, Field Agronomist, Research Officer, Roads Engineer,Construction Supervisor and Mechanical Supervisor, and that IDA would beconsulted prior to the appointment of successor staff to these positions. Itwas agreed at negotiations that internationally-recruited staff financedunder the Project would be employed under terms and conditions satisfactoryto IDA. It was further agreed during negotiations that appointment of aFinancial Controller after consultation with IDA on qualifications andexperience, would be a condition of credit effectiveness; that the ResearchOfficer, Field Agronomist and Planning and Production Agronomist would beappointed no later than September 30, 1980; and that the Road Engineer, theMechanical Superintendent and the Construction Supervisor would be appointedno later than March 31, 1981. Assurances were obtained that the TPB posts ofPlanning and Production Manager, Iringa Regional Manager and Mbeya RegionalManager would continue, throughout the Project period, to be filled by suit-ably qualified staff. A total of 30 man years of internationally recruitedlong-term technical assistance, and 20 man-months of short-term consultancyservices, would be financed under the Project.

C. Procurement

6.05 Procurement under the Project would be in accordance with BANK/IDAguidelines. Specifically:

(a) orders for new vehicles and spare parts (US$0.9 million) 1/ androad equipment and spare parts (US$0.5 million) would be bulkedas far as practicable, and orders of US$100,000 and above wouldbe procured through international competitive bidding (ICB) fromsuppliers who maintain (or agree to maintain) in Tanzania anadequate after-sales service and inventory of spare parts;

(b) orders for vehicles and roads equipment below US$100,000 wouldbe procured in accordance with existing local procedures whichare satisfactory; however, these orders would not exceedUS$300,000 in aggregate;

(c) orders for tools (USO.1 million), sprayers (US$0.1 million),insecticides, fertilizers and nematocides (US$0.3 million)and tires, fuel, oils and materials and supplies for roadconstruction (US$0.6 million) would be bulked to the maximumextent possible, and would.be procured on the basis of localcompetitive bidding in accordance with existing proceduresthat are satisfactory. ICB would not be appropriate in view ofthe variety of items involved, and small size and frequencyof order necessary;

(d) contracts for the construction of buying centers/stores(US$0.4 million), offices and workshops (US$0.6 million),

1/ All figures quoted in this paragraph exclude contingencies.

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laboratory facilities (US$0.1 million) and staff housing(US$1.1 million) would be too small and scattered to attractinternational interest. Procurement would therefore be bycontracts awarded following locally-advertised bidding,altki)ugh foreign firms would be entitled to compete;

(e) the selection and employment of consultants to provideshort-term technical assistance to TPB (US$0.1 million)and UAC (US$0.1 million) would be in accordance withBank/IDA guidelines.

Draf-t tender documents for all contracts expected to cost in excess ofUS$]L00,000 would be submitted to IDA for approval before bid invitations areissued, and bid analysis and recommendations for award would be submitted toIDA for comment before contracts would be awarded. In the evaluation of bidsfor (a) above, bonafide domestic manufacturers would be accorded a preferenceof 15 percent or the existing rate of duty, whichever is lower. Assuranceswere obtained during negotiations that the procurement procedures outlinedabove would be followed.

D. Disbursement

6.06 Disbursement of funds from the Credit would be on the followingbasis:

(a) 95% of the costs of construction of offices, houses, laboratoryfacilities, buying centers/stores and workshop (US$2.1million) and 100% of the cost of driers (US$0.25 million);

(b) 100% of the foreign exchange costs of vehicles, equip-ment and spare parts, and 85% of local costs when these arepurchased locally for TPB (US$0.55 million) and for UAC andRIMU (US$0.95 million);

(c) 100% of the foreign exchange costs and 85% of the local costof internationally-recruited personnel, consultants andtraining costs (US$3.0 million);

(d) 85% of the salaries of incremental local staff employedby TPB and UAC (US$0.2 million);

(e) 85% of the local costs of operation (other than internationally-recruited staff costs) of the RIMU (US$0.7 million);

(f) an unallocated amount of US$2.25 million, representing contin-gincies on the above categories, and transferable to them asrequired.

6.07 All disbursements under (a), (b) and (c) would be against contracts,and hence fully documented. Disbursements against (d) would be on the basis

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of certificates of expenditure signed by the Executive Officer of TPB or theChief Scientific Officer of UAC, as appropriate. Disbursements against (e)would be on the basis of certificates of expenditure signed by the RoadsEngineer and the Director of Roads and Aerodromes in the MOW. For disburse-ments under both (d) and (e), supporting documents would be retained torinspection by supervision missions. Funds remaining in the Credit at Projectcompletion would be cancelled, unless otherwise agreed by IDA. A scheduleshowing the estimated pattern of disbursements under the Project is atAnnex 1, Table T-17.

E. Accounts and Audit

6.08 Separate accounts relating to expenditures under the Project wouldbe kept by TPB, UAC and the RIMU. Assurances were obtained during negotia-tions that these accounts would be audited by independent auditors acceptableto IDA, and that such audited accounts would be submitted to IDA within sixmonths of the end of each financial year. The auditors would specificallyreview and comment on the procedures used for control of disbursement againststatements of expenditure. TPB's accounts are currently in arrears (para.3.06), but would be expected to be brought up to date and kept up-to-date as aresult of the employment under the Project of incremental financial staff forTPB (para. 5.18). It was agreed during negotiations that, by August 31, 1981,TPB would have updated its accounts and designed and begun the implementationof improved financial systems. The accounts of the UAC are currently up-to-date.

F. Monitoring and Reporting

6.09 The progress of Project implementation would be monitored closelyby the Planning and Production Agronomist in TPB, who would submit detailedquarterly reports of physical implementation and the use of funds to thePlanning and Production Manager and the Executive Officer of TPB, the Directorof Roads and Aerodromes (MOW), the Managing Director of UAC and the PrincipalSecretary of Kilimo, and to IDA. Input on the progress of the research androads components would be made available to TPB by the Research Officer andthe Roads Engineer, respectively. Particular attention would be paid in thesereports to:

(a) the progress of the smallholder production component, in termsof bulking centers and nurseries established, planting materialdistributed, utilization of knapsack sprayers, field servicestaffing, construction of buying centers/stores, dryingimprovements and procurement of vehicles;

(b) the progress of the research component, in terms of constructionof facilities, procurement of equipment, staffing, training andthe outcome of research operations;

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(c) the progress in recruiting incremental TPB staff, in training,in construction of housing and offices and in carrying outconsultant studies;

(d) progress in the procurement and delivery of roads equipment,the construction of RIMU housing, office and workshop, thestaffing of RIMU, and RIMU progress in road improvement andmaintenance;

(e) to put the above into context, data on dried flower production,estimated yields, pyrethrin content and sales of extract andmarc.

Assurances were obtained during negotiations that these reporting procedureswould be followed.

G. Evaluation

6.10 During the course of Project implementation, the Statistician/Evaluation Officer financed under the Project would, with the cooperation ofTPB field staff, carry out field studies and data analyses to evaluate theeffects of Project investments. He would carry out baseline and ad hocsurveys in areas in which improved planting material had been distributed, todetermine the effects of this on flower yields. He would, by analysis of thedata TPB collects on pyrethrin content of flowers marketed by each licencee,assess the effect of Project investments in raising pyrethrin content. Hewould carry out sample field surveys to estimate the area under pyrethrumcultivation, and to monitor changing cropping patterns in the various zones.TPB would be able to obtain technical assistance in the design of the studiesand analyses from the recently established Project Preparation and MonitoringBureau in Kilimo. The findings of these studies and analyses would be incor-porated into the quarterly progress reports.

6.11 Within six months of the completion of disbursements, TPB wouldprepare and submit to IDA a Project Completion Report, analyzing the imple-mentation of the Project and its impact in relation to its objectives.During negotiations, assurances were obtained to this effect.

VII. PYRETHRUM MARKETS AND PRICE PROSPECTS

A. Uses of Pyrethrum

7.01 The specific insecticidal properties of pyrethrum (para. 2.04),dictate its end-uses. Its sensitivity to sunlight, for example, makespyrethrum unsuitable for agricultural field use, except where the periodbefore harvest is short (one day or less) or for post-harvest applicationduring transportation and storage. Because of its low mammalian toxicity,

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pyrethrum is used chiefly in food-related industries, homes, animal sheltersand public buildings, usually as a liquid spray or in oil- or water-basedaerosols. It is also used in the form of creams and ointments, mosquitocoils and sticks, and powders and dusts (both dry and wettable). In manyof these formulations (particularly aerosols), pyrethrum is used with propel-lants, perfumes, etc, so that the value of pyrethrum used in the finishedproduct may be as little as 10%. Pyrethrum is almost always used, for reasonsof economy, in conjunction with a 'synergist,' 1/ usually piperonyl butoxide.

7.02 The safety and efficiency of natural pyrethrins has led to thedevelopment of synthetic chemical compounds (pyrethroids) with similarstructures and properties. The first pyrethroid, "allethrin," was developedin the USA in 1949, and several hundred other pyrethroids were formulated inthe 1950's and 1960's. These pyrethroids, which are now termed 'first-generation pyrethroids,' share with pyrethrins the property of being unstableto light. Only half-a-dozen are of commercial importance. Since 1970, asecond generation of pyrethroids has been developed. These are stable tolight, and so have greater agricultural potential than pyrethrins. However,these compounds may yield stable breakdown products, and thus have not beencertified for wide use in households or food-processing facilities.

7.03 Although pyrethroids (particularly first-generation) closelyresemble pyrethrins in chemical structure, no single pyrethroid can matchnatural pyrethrins in terms of knock-down, kill, flushing-out effect or broadactivity spectrum. The commercially-available pyrethroids are manufacturedby five companies: two in the USA and one each in Japan, the U.K. and France.The degree of substitution of pyrethroids for pyrethrins varies betweenend-uses and between countries. Their substitution for pyrethrins is mostmarked in the manufacture of mosquito coils, which are used extensively inJapan and developing countries, where allethrin is mainly used, since it ischeaper than pyrethrins (though also less effective).

B. World Production and Consumption

Production

7.04 The world's five leading pyrethrum producers (Kenya, Tanzania,Ecuador, Rwanda and Japan) account for about 97% of total world production,of which Kenya and Tanzania together contribute about 90%. Over the period1955/56 - 1976/77, world production increased at a rate of 4.7% per annum.This growth, however, was marked by wide cyclical variations. Details ofworld production of dried pyrethrum flowers in recent years are tabulatedbelow:

1/ An insecticidal synergist is a compound which while having little or noinsecticidal properties of its own, when combined with an insecticidesignificantly increase the toxicity of that insecticide, and may alsoincrease the speed of actioni.

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World Dried Flower Production

Year World Production of which: Kenya Tanzania…-- - - - - -- - - - - - tons…-- - - - - - - - - - - - -

1970/71 15,178 9,748 2,6661971/72 21,070 14,414 4,2761972/73 17,079 10,698 4,0161973/74 19,504 13,722 3,2821974/75 22,500 15,018 4,5441975/76 20,399 14,292 3,9471976/77 16,906 11,434 3,3121977/78 13,000 (est) 8,100 2,870

7.05 Production in 1974/75 was at an all time high. Since then, produc-tion has declined markedly, both as a result of adverse climatic conditionsand, more importantly, as a result of increased competition for land andlabor from food crops, whose prices in Kenya and Tanzania over the relevantperiod have been high. In recent months, both Kenya and Tanzania have raisedthe producer prices to pyrethrum growers, which is expected to lead to in-creased production.

Consumption

7.06 Virtually all of the output of pyrethrum is exported from, andconisumed outside of, the producing countries. Since pyrethrum cannot bestored for long without deterioration, no stocks are held by either producersor manufacturers, and consumption in any year is thus determined by productionin the previous year. Thus, the strong fluctuations in supply which haveoccurred in the past have led to corresponding fluctuations in world trade andin consumption. Although a large number of countries import pyrethrumproducts, the main users are the USA (about 40%), the UK (about 20%) and otherWestern European countries (20%). Demand appears to be growing fastest inJapan, Brazil, Mexico, the Federal Republic of Germany, the Netherlands andFinland.

7.07 Total world production and use of pyrethroids is not known withcertainty, but was estimated at 350-400 tons in 1975, when the production andconsumption of pyrethrins was 300 tons (both figures on a 100% activeingredient basis for comparability). More recent data is not available, butagricultural use of second-generation pyrethroids has expanded greatly since19-75.

C. Recent Price Trends

7.08 Below are tabulated, for the years 1962-1979, the export pricesof 25% crude extract from Tanzania, in both current dollars and constant1978 dollars. Also given are price indices (1978=100) for both currentand constant prices:

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Tanzania Export Unit ValueCurrent Prices Constant Prices 1/US$ Index US$ Index

per kg. (1978=100) per kg. (1978=100)

1962 21.0 63.7 63.8 193.31963 20.8 63.2 62.9 190.71964 20.5 62.3 61.1 185.11965 20.5 62.1 59.0 178.71966 20.3 61.6 58.0 175.71967 20.5 62.3 57.9 175.31968 19.0 57.6 57.0 172.61969 16.9 51.1 50.1 151.91970 18.0 54.4 47.9 145.21971 17.6 53.5 43.6 132.01972 18.5 56.1 41.3 125.01973 16.9 51.4 31.4 95.11974 18.7 56.8 27.7 83.91975 19.1 58.1 24.6 74.51976 20.0 60.8 25.3 76.61977 22.4 68.1 25.9 78.31978 I 28.7 87.1 29.7 89.9

II 37.2 112.9 36.4 110.41978 Av. 32.9 100.0 33.0 1001979 I 37.2 112.9 34.9 105.9

II 46.1 140.0 41.9 126.91979 Av. 41.6 126.5 38.4 116.3

1/ Deflated by the Bank's Index of International Inflation (1978=100), EPDIT,February 1979.

7.09 These data clearly indicate that the period 1962-1979 falls into twodistinct sub-periods. From 1962-1975, nominal prices for pyrethrum declinedand when prices are adjusted to allow for inflation, this trend is greatlyaccentuated. Thus the price of pyrethrum extract declined in real terms by60% over this period. This steady decline reflects the cautious pricingpolicy adopted by Kenya (which, as the dominant producer, is the price leader)in the face of intensifying competition from pyrethroids and a slight excessof production over demand that emerged around 1967/68.

7.10 From 1975 onwards, however, the real price of pyrethrum extracthas risen by over 50%, at an average annual rate of about 11%. This turn-around in prices is attributable to three main causes. Firstly, there hasbeen increasing concern over the adverse environmental effects of otherinsecticides, particularly in the USA, where it is now mandatory for allpesticides to undergo a stringent series of tests at the manufacturers'expense. Secondly, there has been a sharp rise in the costs of productionof pyrethroids, which are petro-chemical based compounds; raw materialsaccount for 80% of production costs. Thirdly, the decline in world productionhas resulted in supply shortages and has thus exerted upward pressure onprices.

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D. Market Outlook and Price Prospects

Factors Affecting Demand

7.11 Availability. Supplies of pyrethrum are subject to climatic factorsand to changes in crop pricing policy in producing countries. Pyrethroids,on the other hand, are in stable supply. The instability of pyrethrum sup-

plies force insecticide manufacturers to substitute pyrethroids in periods ofshort pyrethrin supply; these substitutions are not always reversed whenpyrethrum supplies increase.

7.12 Cost effectiveness. A systematic comparison of the relative pricesof pyrethrin and pyrethroids is not possible, since prices of the pyrethroids

are not published and vary markedly from country to country as a result ofcomplex licensing and patenting practices. Furthermore, the only economicallyvalid way of comparing different insecticides is by comparing cost-effective-ness in the same end use, and even this is complicated by the fact that thereare several criteria (knock-down, kill, repellency, etc) against which effi-ciency can be measured. The general consensus from industry sources is that,despite the marked increase in pyrethrum extract prices over the past fewyears, pyrethrum remains competitive with pyrethroids. However, it is felt

that pyrethrum extract prices cannot, in real terms, rise much above currentlevels, and certainly cannot approach the levels of the early 1960's. Indeed,to the extent to which present prices reflect a 'scarcity premium,' realprices might decline somewhat once pyrethrum supplies improve.

7.13 Population and Income Growth. The demand for non-agriculturalinsecticides is dependent on the number of potential users and their levelsof income and standard of living. In developed countries, the rate ofpopulation growth is low, and high standards of sanitary and housing condi-tions reduce the need for insecticides. However, high and rising disposablepersonal incomes have resulted in a rise in the demand for convenienceproducts such as aerosols. In developing countries, on the other hand,consumption of insecticides has remained at a relatively low level becauseof low disposable incomes. However, in the high-income developing countrymarkets (such as Brazil and Argentina), consumption of aerosols is growingrapidly.

7.14 Public Control of Insecticide Usage. As a result of environmentalconcerns, many governments now exercise strict regulatory powers over the useof insecticides, and this has led to greater demand for pyrethrum, with itslong record of safe use. For a time, the most widely used synergist, piper-onyl butoxide (para. 7.01), was suspected of being a carcinogen, but latestinformation is that these fears have been dispelled. Pyrethrum has benefittedfrom tight regulation of insecticide use and will continue to do so.Registration of a new insecticide in the U.S. can take up to ten years andcost US$15 million, which makes it unlikely that any new insecticides will bedeveloped purely for the non-agricultural market. It is possible that someinsecticides designed primarily for agricultural use (e.g. permethrin) willalso be registered for non-agricultural use, although even in these cases,

registration will take two to four years and cost up to US$4.0 million.

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7.15 Industry sources differ in their assessment of overall world futuredemand for pyrethrum, which was estimated at about 22,000 tons of driedflowers in 1975/76. One large US formulator estimates, on the basis of asurvey of major users, that US demand will grow by 8% per annum in the periodup to 1982. Other industry sources are less optimistic than this, but themajority view is that, even on conservative assumptions, world demand shouldremain at least at its 1976 level of 22,000 tons of flowers. It appearsunlikely that world production will approach this level for at least fiveyears. Kenya has recently begun a major effort to raise production, but itappears unlikely that production in that country will exceed 14,000 or 15,000tons even in five years time. The long-term production projections forTanzania in the 'with-Project situation' (Table T-21) thus are consistent withTanzania's retaining its historic share (20-25%) of a world market stabilizedat around the 20,000-22,000 ton per annum level.

Projected Prices

7.16 The export price projections tabulated below and used in the analy-sis of this Project are based on the above considerations. The extractprices refer to 25% crude extract, f.o.b. Dar-es-Salaam or Tanga. The marcprices are for coarse marc f.o.b. Dar-es-Salaam or Tanga. All prices are inconstant US dollars at January 1980 prices.

Year Crude Extract Marc(US$ per kg) (US$ per ton)

1980/81 47.10 196.001981/82 47.10 196.001982/83 47.10 196.001983/84 47.10 196.001984/85 44.70 186.201985/86 42.50 176.801986/87 40.40 168.001987/88 38.30 159.601988/89 onwards 36.40 151.60

7.17 The prices tabulated above reflect the likelihood of supply short-ages continuing through 1983/84, and of real prices remaining at currentlevels. For the years 1984/85 through 1988/89, real prices are expectedto decline by 5% per annum, as supply and demand come into balance. After1988/89 prices are expected to stabilize in real terms, at the levels obtain-ing in early 1978. These price projections are made with a lower degree ofconfidence than would be the case for the majority of agricultural com-modities, reflecting the scarcity of hard information on the costs of pro-duction of pyrethroids. The sensitivity analysis of the economic rate ofreturn of the Project (para. 9.06) examines the consequences of major changesin the assumptions made as to future world market prices.

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VIII. YIELDS, FARMER RETURNS, PRODUCTION AND FINANCIAL ANALYSIS

A. Flower Yields and Pyrethrin Content

Dried Flower Yields

8.01 Under the standards of husbandry presently practiced in the Projectarea, the improved planting material (clone 59/347, which is fully tested) tobe idistributed to farmers under the Project is expected to raise annual yieldsof lried flowers per hectare from their 'without-project' levels of 125 kg inthe first year of planting and 290 kg each of the next two years, giving anoverall annual average of 235 kg (para. 2.22), to levels of 160 kg in thefirst year of planting and 370 kg in each of the next two years, giving anoverall annual average of 300 kg over the three-year productive plant life.These yield projections are considered conservative, (on well maintained farmsin rCanzania average yields from the close to be distributed are 570 kg. ofdried flowers per ha and research yields of over 1,000 kg/ha have beenobtained) and reflect the fact that the provision of extension services is notexpected to improve markedly during the period of IDA disbursement (para.2.12). In 1974, average flower yields in the Project area were estimated at270 kgs/ha. The unimproved planting material to be distributed under theProject would produce the same yields as in the 'without-Project' situation,i.e., an average of 235 kg/ha. Adoption by farmers of improved plantingmaterial would raise overall average yields to 260 kg/ha by 1984/85, the lastyear of Credit disbursements. An overall average yield of 300 kg/ha would bereached by 1989/90.

Pyrethrin Content

8.02 The improved planting material to be distributed under the Projectis expected to raise pyrethrin content from the present level of 1.10% to1.30%. In addition, the Project's road improvement component would reducemarketing delays and loss of pyrethrin content. It is expected that roadimprovements would result in 10% savings in pyrethrin content of flowers beingmarketed over the improved roads. The weighted average pyrethrin contentwould rise as a result from 1.30% to 1.34%. Again this is a conservativeasstumption; past pyrethrin content has reached this level, and the plantmaterial which would be distributed under the Project has produced pyrethrincontent of up to 1.76% under research conditions. The unimproved materialdistributed under the Project would produce flowers with the same pyrethrincontent as at present - 1.10%.

B. Farmer Returns and Incomes

Comparative Crop Returns

8.02, An analysis of returns per hectare and per man-day of labor, inboth the 'without-Project' and the 'with-Project' cases, is presented inAnnex 1, Table T-18, for pyrethrum and for maize, its main competitor. In the

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'without-Project' case, on the basis of 1979/80 producer prices and presentyields and pyrethrin content, pyrethrum production provides a net return perhectare of almost Tsh 1,400 per hectare, equivalent to Tsh 7.50 per man-day.At 1980/81 prices the net return per hectare rises to almost Tsh 1,750,equivalent to Tsh 9.48 per man-day. For maize grown using traditional prac-tices (i.e local seed and no fertilizer), yields of 850 kg/ha are average inthe Project area, producing net returns per ha of Tsh 820 and returns perman-day of Tsh 6.72. For maize grown using an improved production package(improved seed, fertilizer and pesticide) yields of 2,000 kg/ha are average inthe Project area, producing returns of Tsh 1,750 per ha and Tsh 10.85 perman-day. The extent to which the improved technical package for maize isavailable to farmers in pyrethrum-growing areas is not precisely known, butthe required inputs (which are distributed under the IDA-supported NationalMaize Project) do not appear to be available in more than 20% of pyrethrum-growing villages. It should be noted that, although returns per man-day forimproved maize exceed man-day returns for pyrethrum, even at 1979/80 pricesinclusion of pyrethrum in a farm's cropping pattern raises overall farm incomeby about 13%. This results from the fact that the labor input peaks forpyrethrum and for maize occur at different times of the year (para. 8.08) sothat cultivation of both provides better utilization of farm labor, and hencehigher overall farm income.

8.04 In the 'with' Project situation, the improvements in dried floweryield (para. 8.01) and pyrethrin content (para. 8.02) resulting from thedistribution under the Project of improved planting material would raise netreturns per ha, at 1980/81 prices, by 62% to over Tsh 2,800; returns perman-day would rise by 44%, to Tsh 13.68 (Annex 1, Table T-18). Pyrethrumproduction would thus have a substantial advantage in returns per man-day overeven improved maize production. Pyrethrum producer prices would need to fall21% below 1980/81, or maize prices to rise 26% above 1980/81 levels, in orderto equalize returns per man-day from the two crops.

8.05 There are, in addition to maize and pyrethrum, other crops grownby pyrethrum producers, although these are of lesser importance. Averagewheat yields of 540 kg/ha are obtained in the Project area; at 1980/81 prices,this results in returns per ha of Tsh 890, and returns per man-day of Tsh 7.23.Average sunflower yields are 400 kg/ha, resulting in returns per ha of Tsh 600and returns per man-day of Tsh 6.32. Average pea yields are 430 kg/ha, pro-ducing returns per ha of Tsh 390 and returns per man-day of Tsh 3.79. Averageyields of Irish potatoes are estimated at 5,000 kg/ha. At prevailing prices,this results in net returns per ha of Tsh 2,400, and returns per man-day ofTsh 24.00. For all these crops except Irish potatoes, pyrethrum provideshigher returns per man-day. In the case of Irish potatoes, despite theattractive returns, production is constrained by the limited demand.

Effect on Incomes

8.06 The effects of the Project on farm incomes is shown in Annex 1,Table T-19. For a typical pyrethrum-growing farm in the Project area, inthe 'without-Project' situation, total annual cash income is estimated atabout Tsh 2,550 (US$307). The value of subsistence is put at about Tsh 1,400

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(US$170) giving total net farm income of almost Tsh 4,000 (US$480), equivalenton a per capita basis (assuming six members per family) to Tsh 670 (US$80).The introduction of improved planting material under the Project is expectedto raise cash incomes by about 17%, to almost Tsh 3,000 (US$360) per family.Analysis of the farm labor profiles (para. 8.09 below) indicates that use ofimproved planting material would not require a decrease in the output of othercrops, so that total net farm income (including subsistence) would increase byabout 11%, to about Tsh 4,400 (US$530), equivalent on a per capita basis toUS$38. Table T-19 also details the effects on farm incomes of the distri-bution of unimproved planting material to families not currently growingpyrethrum. In this case, the area of maize cultivated would fall from 1.18ha to 1.00 ha. Despite this, cash income would rise by 18%, from Tsh 2,150(US$260) to Tsh 2,550 (US$307), and total net farm income would increase byabout 11%, from about Tsh 3,600 (US$430) to Tsh 3,950 (US$475), equivalentto Tsh 660 (US$80) on a per-capita basis.

Distribution of Direct Benefits

8.07 The direct benefits from the Project would accrue, at full develop-ment,to about 37,000 smallholder pyrethrum producing families (containingabout 200,000 individuals). Average per capita incomes of these individualsare estimated at Tsh 670 (US$80 equivalent). This average is below theabsolute rural poverty level in Tanzania, which is estimated at US$105. Itis estimated that about 85% of the Project's direct benefits would accrueto :individuals currently living in absolute poverty.

C. Production of Dried Flowers, Extract and Marc

Effects on Production Patterns

8.08 Annex 1, Table T-20 details crop labor profiles for these cropscommonly grown on pyrethrum producing farms. It is readily apparent thatpyrethrum and maize, the major crops, are complementary, in the sense thatthe peak labor requirements for these crops occur at widely differing timesof the year. The peak months for maize labor are July and August, themonths of land preparation and planting, and over 60% of the annual laborinput for maize cultivation occurs in the months July-December. For pyrethrum,on the other hand, the peak labor input occurs in January, February and March,the months of planting and peak flower production, and almost 70% of the totalannual labor input for pyrethrum cultivation takes place during the months ofJanuary through June.

8.09 Table T-20 also shows the overall pattern of labor use and avail-ability on a typical pyrethrum farm growing pyrethrum, maize, wheat, peasand other crops (potatoes, sunflower, beans, cabbages). Family labor (about45 man-days per month) is virtually fully utilized in August. Surplusfamily is available at other months of the year. The extra labor requirementsassociated with the use of improved planting material (a total of 23 man-dayper ha, for flower harvesting) occur at months outside this main labor peak,

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and hence will not result in reduced production of other crops. It is alsoclear from this labor input analysis that there is no scope for increasingthe area of pyrethrum planted per family, without reducing the area plantedto other crops. For purposes of the analysis of this Project, therefore,the assumption has been made that the introduction of improved plantingmaterial would not affect cropping patterns, and that the average producerwould continue to cultivate 0.4 ha of pyrethrum.

Dried Flower, Extract and Marc Production

8.10 The overall impact of the Project on flower production and extractand marc production is detailed in Annex 1, Tables T-21 and T-22 respectively,and summarized below:

Incremental Incremental Incremental Incremental /1 Incremental /2Flower Extract Marc Flower Extract & Marc

Production Production Production Value Value…m tons---------------- -----------Tsh '000-----------

1980/81 69 -- -- 467 --

1981/82 255 3.3 45.8 1,982 1,1521982/83 494 12.5 174.9 3,677 4,7191983/84 610 26.8 342.7 5,473 8,7761984/85 731 37.1 423.9 7,029 13,7811985/86 1,001 49.6 508.7 11,281 17,5531986/87 1,253 69.1 698.0 15,320 23,1791987/88 1,264 88.2 874.8 16,311 28,1041988/89 1,202 94.6 883.4 16,954 28,5841989/90 1,524 94.1 838.9 18,345 26,9201990/91 and 1,451 110.4 1,064.7 17,676 26,897onward

/1 Valued at producer prices, in constant 1980 prices./2 Valued at export prices, in constant 1980 prices.

8.11 Incremental flower production is expected to be worth Tsh 7 millionto growers by 1984/85 (the last year of Project investments) and by this dateincremental extract and marc production would be worth Tsh 13.8 million. By1989/90, when all unimproved planting material would be phased out, incre-mental flower production would be worth about Tsh 18 million to growers, andthe value of incremental extract and marc production would be Tsh 27 million.

D. Financial Effects on TPB

8.12 In addition to the Project's capital costs, Project implementationwould also give rise to incremental expenditures of a recurrent nature whichwould be incurred by TPB during and after the five-year Idisbursement costsof the proposed IDA credit. These recurrent costs, which would be met by TPB

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from its trading margin on pyrethrum in the same way as other recurrent costs,include incremental flower collection and processing costs, incrementalvehicle operating and building maintenance costs, and the cost of operation ofbu:Lking centers and nurseries and of employing incremental staff after the endof the IDA credit disbursement period. These costs have been taken intoaccount into the projection for the period 1980/81-1989/90 (FY81-FY90), ofTP}3's 'with-project' income statements (Table T-23), balance sheets (TableT-24) and cash flow (Table T-25). These projections are all in currentprlces, on the assumption that domestic inflation in Tanzania would occur atannual rates of 11 percent in 1980, 10 percent in 1981 and 9 percent thereafter.

8.13 TPB's projected income statements show that TPB would make lossesof Tsh 6.4 million in FY81, Tsh 3.5 million in FY82 and Tsh 4.8 million inFY83. Thereafter, TPB would make positive after-tax profits ranging from 5%to 10% of net worth. TPB's projected balance sheets show that TPB's long termdebt/net worth ratio would reach a peak of 1.2:1 in FY82 and 83, and declinethereafter as TPB repays all its long-term debt by FY90. TPB's overdraftwould be eliminated by FY90. TPB's liquidity position would remain tightthrough FY83, but would improve thereafter. TPB's projected cash flow indicatesa consistently positive cash inflow throughout the period, with the exceptionof FY86, when expenditures on vehicle replacement would be needed. Over theperiod, TPB would have a cumulative net cash inflow of Tsh 21.5 million.Overall, therefore, TPB's financial prospects would be satisfactory.

8.1]4 The financial rate of return on TPB investments (in constant 1980prices) is estimated at 8%, and the pre-tax rate of return on equity at 9%.(Details are shown in Table T-26). The financial rate of return, althoughmaarginal, is acceptable, and the rate of return on equity is satisfac:tory.

E. Government Cash Flow Implications

8.15 The effects, in current price terms, of the Project on GOT's cashflow are detailed in Annex 1, Table T-27. Cash inflows to GOT would consistof IDA Credit disbursements, TPB loan interest and repayments, incrementalexport duties on extract exports and incremental income tax payments fromTPB. Cash outflows from GOT would provide for Project investments, servicecharges and repayment of the IDA Credit, and for the continued maintenanceof feeder roads improved under the Project and the continuance of thepyrethrum research program. Over the period of disbursement of the IDACredit, GOT would experience a cumulative cash outflow of Tsh 28.0 million.However, by the end of PYIO, GOT would have received a cumulative positivecash inflow of Tsh 10.9 million. The levels of expenditure on road main-tenance and on pyrethrum research would be considerably higher than expendi-ture in the past. Road maintenance costs are estimated, in 1980 prices, atTsh 1.1 million per annum, a substantial figure in comparison with the totalroad maintenance budgets for Iringa and Mbeya Regions which totalled Tsh 10.6million in 1978/79. However, the projected recurrent expenditures are

- 47 -

reasonable, and the fact that they would require increases in present levelsof recurrent allocations reflects the fact that road maintenance and researchexpenditures in Tanzania are currently too low. As indicated in paras. 5.16and 5.27, assurances were obtained during negotiations that GOT would providethe required levels of recurrent funding for road maintenance and researchafter completion of disbursement by IDA.

F. Foreign Exchange Implications

8.16 The foreign exchange impact of the Project would be favorable(Annex 1, Table T-28). Over the period 1980/81 through 1985/86, the Projectwould generate net foreign exchange earnings in current prices, of Tsh 55.1million (US$6.6 million). There would be a net foreign exchange outflowof Tsh 18.8 million (US$2.3 million) in 1980/81, as a result of disbursementsfrom the IDA credit lagging behind Project expenditures. Over the ten-yearperiod from 1980/81 through 1989/90, the Project would generate cumulativenet foreign earnings, in current terms, of Tsh 229.6 million (US$27.7 million).

IX. ECONOMIC ANALYSIS AND JUSTIFICATION

Economic Benefits

9.01 The major quantifiable economic benefits of the Project would bethe foreign exchange earned by the export of the incremental production ofpyrethrum extract and marc expected to result from Project investments(para. 8.10). In addition, the roads component, as well as contributingto the incremental production of pyrethrins (para. 8.02) would also resultin road user cost savings, which would accrue to the users of the roadsimproved and maintained under the Project. These road user cost benefitshave been quantified very conservatively; account has been taken only of roaduser cost savings relating to pyrethrum, since data does not exist to enablequantification of benefits accruing to other road users. However, these otherbenefits are likely to be substantial, particularly in the Umalila zone, fromwhich significant quantities of maize are extracted.

9.02 Since incremental extract and marc production resulting from theProject would be exported, it has been valued in constant 1980 prices atprojected export prices (para. 7.15), adjusted to reflect the divergenceof economic and financial exchange rates in the Tanzania economy by shadow-pricing foreign exchange at a rate of US$1 = Tsh 12. Details of the deriva-tion of economic prices for incremental marc and extract production are inAnnex 1, Table T-29. Foreign exchange has also been shadow-priced in thecalculation of road user cost benefits.

- 48 -

9.03 In addition to these quantifiable benefits, the Project is alsoexpected to result in some unquantifiable benefits. Investments in improvedflower drying techniques would be expected to result in savings of pyrethrins.Investments in pyrethrum research would be expected to produce plants withhigh yields of flowers having high pyrethrin content. Institution-buildinginvestments within TPB would be expected to result in an organization thatwould be more cost-conscious and better able to plan the future developmentof the sub-sector.

Economic Costs

9.04 The economic costs that have been taken into account in the economicanalysis of the Project are the capital costs (including physical contingen-cies) of the smallholder production program (except for the drying study anddrying investments, for which no benefits have been claimed), of the strength-ening of TPB, and of the roads component. The costs of the research invest-ments have been excluded, since no benefits have been included in the economicanalysis. A total of 81% of Project capital costs has been includedfor the purposes of economic analysis. In addition to these capital costs,incremental recurrent costs for farm labor input, flower collection andprocessing, vehicle operations and building maintenance have been included.The value of maize production foregone as a result of the distribution of un-improved planting material (para. 8.06) has also been included; a yield of2,000 kgs/ha has been assumed, and this has been valued at import parityprices, less costs of marketing and production (including labor). Incrementalfarm labor used under the Project has been shadow priced at 50% ofprevailing minimum agricultural wage rates. A recent study has indicatedthat a shadow wage rate of 65% would be appropriate on a nationalbasis and this has been adjusted downwards to reflect the isolation ofthe Project area and the greater-than-average lack of alternative income-earning opportunities. In the calculation of all economic costs, foreignexchange has been shadow-priced at a rate of US$1=Tsh 12.00. The Project isnot expected to have any undesirable environmental effects.

Economic Rate of Return

9.05 The internal economic rate of return (IERR) of the Project hasbeen calculated for the Project over a 20-'year period. In addition tocalculating the IERR for the Project as a whole, IERRs have been calculatedseparately for the distribution of unimproved planting material, for thesmallholder production component (excluding the unimproved planting materialprogram and the drying studies and investments) and the TPB institutionbuilding component taken together, and for the roads component (Table T-30).The result of these analyses are:

49 -

Percent of ProjectComponent IERR Capital Costs

Unimproved Planting Material 30% 4%Smallholder Production Componentplus TPB strengthening /1 18% 54%

Roads Component 11% 27%Overall Project Investments 17% 81%

/1 Excluding the unimproved planting program and the drying studyand investments.

Sensitivity Analysis and Risks

9.06 Sensitivity analysis has been undertaken to examine the effects ofchanges in cost and benefit assumptions on the IERR of the Project. This gavethe following results:

Changes in Assumption Resulting IERR

Benefits reduced by 10% 14%Benefits reduced by 20% 12%Costs increased by 10% 15%Costs increased by 20% 13%Costs increased by 10% and benefits reduced by 10% 12%Costs increased by 20% and benefits reduced by 20% 8%Without Shadow Pricing' 11%

The IERR is thus relatively robust with respect to changes in cost andbenefit assumptions. In particular, the assumptions made with referenceto the future sales price of pyrethrum products could be lowered consider-ably without rendering the IERR unacceptable. These prices would need to beabout 30% below projected values before the IERR would fall to 10%.

9.07 One major risk faced by the Project would be a future collapse ofpyrethrum export prices as a result of the development of new substitutes, orthe cheapening of existing substitutes. However, current research is aimedmostly towards developing agricultural chemicals, which would not competewith pyrethrum. Pyrethroid production costs are increasing as a result ofrising oil costs, and the cost of licensing new insecticides further protectspyrethrum's market position. In any case, the IERR is robust with respect toa shortening of the period over which the IERR is carried out. A fifteen-yeareconomic horizon results in an IERR of 15%. A further major risk of theProject is that implementation would proceed at a slower pace than anticipated,as a result of institutional deficiencies within TPB, MOW, RIMU or UAC. Thisrisk has been minimized by inclusion in the Project of substantial amounts oftechnical assistance for all of these institutions. The IERR would be 12% ifbenefits were lagged a year behind costs.

- 50 -

X. AGREEMENTS REACHED AND RECOMMENDATION

10.01 During negotiations, assurances were obtained that:

(a) th- Borrower would continue to review and adjust pyrethrumproducer prices annually, taking into account export prices,TPB operating costs and the producer prices of other crops(para. 2.20);

(b) TPB would continue to produce and distribute improved plantingmaterial to farmers after the completion of IDA disbursements(para 5.06);

(c) Kilimo, TPB and the Iringa and Mbeya Regional authoritieswould, not later than June 30, 1982, review and discuss withIDA the adequacy of extension services for the Project Area(including the number of extension staff and arrangements forsupervision of village level staff, and, if necessary, proposalsfor improvement of such services) (para. 5.10);

(d) consultants employed under the Project would be recruitedin accordance with IDA guidelines and that their terms ofreference and conditions of employment would be acceptableto IDA (paras. 5.11, 5.16 and 5.19);

(e) the TPB would establish a credit scheme to enable its staffto purchase the motorcycles provided under the Project, andwould pay staff monthly operating allowances for these vehicles(para 5.13);

(f) after the period of IDA disbursements, GOT would continue toallocate adequate funds for the continuation of the pyrethrumresearch program expanded under the Project (para. 5.16);

(g) GOT would assist TPB, UAC and MOW as necessary to acquire thesites for offices and housing to be constructed under theProject (paras. 5.16, 5.21, and 5.26);

(h) the RDMU would be established under the control of theDirector of Roads and Aerodomes in MOW not later thanMarch 31st, 1981 (para 5.25);

(i) not later than March 31, 1984, GOT would review the capacity

of the regional works divisions in Mbeya and Iringa to takeover maintenance of the roads improved under the Project, andwould furnish to IDA proposals regarding the responsibility forcontinued maintenance of the roads improved under the Project andthat RIMU equipment would, after completion of the Project's roadcomponent, be used for the maintenance of roads improved under theProject or for the development and maintenance of other feederroads in Mbeya and Iringa Regions (para. 5.27);

- 51 -

(j) throughout the Project period adequate funds would be budgetedby GOT for the maintenance of all main and local main roadsused for the transportation of pyrethrum in the Project area,and that adequate funds would be budgeted after the con-struction period for the maintenance of roads improved undetthe Project (para 5.27);

(k) TPB, UAC and RDMU would carry out the Project in accordance withdetailed annual work plans. In the case of TPB and UAC, thefirst of these plans (relating to 1980/81) would be sent to IDAfor review not later than May 31, 1980. Subsequent plans wouldbe sent to IDA for review by March 31st preceding the GOTfiscal year to which they relate. In the case of RIMU, thefirst work plan (stating to 1981/82) would be sent to IDA forreview by 31st May 1980. Subsequent plans would be sent forIDA review by March 31st preceding the GOT fiscal year to whichthe work program relates (paras. 6.01, 6.02 and 6.03);

(1) IDA would be consulted, prior to appointment, on the suitability,in terms of qualifications and experience, of candidates for theposts of Financial Controller, Planning and Production Agronomist,Field Agronomist, Research Officer, Roads Engineer, ConstructionSupervisor and Mechanical Supervisor; that IDA would be consultedprior to the appointment of successor staff to these positions;that internationally-recruited staff would be employed underterms and conditions satisfactory to IDA; that the ResearchOfficer, Field Agronomist and Planning and Production Agronomistwould be appointed no later than September 30, 1980 and the RoadEngineer, Mechanical Superintendent and Construction Supervisor nolater than March 31, 1981; and that the posts of Planning andProduction Manager, Iringa Regional Manager and Mbeya RegionalManager would continue, during the Project period, to be filled bysuitably qualified staff (para. 6.04);

(m) by August 31, 1981, TPB would have updated its accounts, anddesigned and begun the implementation of improved financialsystems (6.08);

10.02 Conditions of Credit effectiveness would be:

(a) completion of an on-lending agreement satisfactoryto IDA between GOT and TPB (para. 5.31);

(b) appointment of a Financial Controller, after consultationwith IDA on qualifications and experience (para. 6.04).

10.03 It would be a condition of disbursement against the funds forinvestment in improved drying facilities that agreement had been reachedbetween IDA and TPB on the consultants' recommendations and their detailedimplementation (para. 5.11).

- 52 -

10.04 It would be a condition of disbursement against TPB purchase oftrucks, four-wheel-drive vehicles and motorcycles that a study by consultantsof TPB transport management had been completed, and agreement reached betweenTIEB and IDA on implementation of its recommendations (para. 5.19).

10.05 The above assurances having been obtained, the proposed Projectwould constitute a suitable basis for an IDA Credit of US$10.0 million onstandard terms to the Government of Tanzania.

-53- ANNEX 1

TANZANIA

PYRETHRUM PROJECT

Supporting Charts and Tables

I

- 54 -

TANZANIA ASaNEX 1PYRETHRUM PROJECT Chart C-1

PROPOSED ORGANIZATIONAL CHART OF TANGANYIKA PYRETHRUM BOARD

MINISTRY OF AGRCICURTU

TF ES BOARD OF OIRECTORS

EOECUTIVE CHAIRMAN

AA CIEF7 eECTTE

I AIGFCOTOR I PE ADINS TRTONNE RUEIEI MARKET NO FFANN STATISTICA COO FINANCIALI

MANAGER CCOUNTANTAGER MARA T I A COUANT O UNTANT

1~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~SITN PRODUCTION 1

COST ACCOUNAT ACONNS

AGA OFFICER I_IA

d FEREONNEL 1 LREGION L S REIOA

I 2 FROCAREMENTN|GERI STORAGE OFFICER I I r

I ACCOUNANT E (M1EYA AV3S 2 3 X

PRODUCTION & IS| LCTIONE .NGINEEROFFICER O

ARSSHA FROCOOT OPURCHASINGFROSUCTON OFFICRSCIN-E.TE7 PRCUREMENT STAFF

PODRP OFFICETIOOUSME

C~~~~~~ D DTRANAER ANM TANSGOR T ANDNGE

STORAGE STAFFSCOAG-ATAF

Au-1S 2,9 W,ld B.,E 2 BOO9

- 55 - ANNEX IChart C-2

TANZANIAPYRETHRUM PROJECT

IMPLEMENTATION SCHEDULE

' - PROJECT PERIOD

1979/80 1980181 1981/82 1982/83 1983184 1984/85

Q1 02 03 04 Q1 Q2 03 Q4 01 Q2 Q3 04 01 021Q3 Q4 Q1 02 Q3 Q4 Q Q2 3 Q4

PROGRAM TO INCREASE ANDIMPROVE PYRETHRUM PRODUCTION

Product,on & D bstribution ofImproved C onay-Prapagated Material

- 1ulking Centers

| - V Ilage Nurseries 4 ~ - 9 l =

Short Term Program for the Productiom00d D bstrihotion of UoimprovedPloting Matrria

| Seed Farms- Seedngn Production

- Tools l l l -

Pest and DOsese Control Prograr-

K-KnPsack Spraer-

| - Insectcicdes _ _ | | | __ | *_|

Eicteosio Staff - -Im

larpr-e-et of Dryin Te-hniquesI Pilot D,y-~ ~ ~~~~~t - Pilot Orer mE I i..1 j

PFlower Stores/9uyimg Cen-trs .. I..s | | sill i .

Vehicles, for Flowers and Extension Seroice |ll 11* l

PROGRAM TO EXPAND PYRETHRUM RESEARCH

- Civil Works ilu h E- F-reitureand Equipment P l

- Vehioles **E* I

- Salecti-n and Multipli-ation Program 9 - -. . . -- Co-sultancy

STRENGTHENING TPB's ORGANIZATIONAND INFRASTRUCTURE

- hOffice Accommodation . .uhi

F- S itare lose io | m m m m m|- Vehicles

|ROAD PROGRAM

- Equipment Procu,rement-Staff Houses

- Road Improoement and Mainfeance I m, mum - m m m- Technical Assistance logo lI mi mlmi -Tu Ir

Other Consulting S-

Plaoning/Proc-re-ent, Bidding and Cootract AwardIrplemensation. Build,ng

Augs.t 2, 1979World Bank -- 20730

-56- ANNEX 1Table T-1

TANZANIA

PYRETHRUM PROJECT

Production of Dried Pyrethrum Flowers (Tons) 1963/64 to 1978/79

Season Iringa Region Mbeya Region Arusha/Kilimanjaro Total

1963-64 1,364 (59%) 1/ 282 (12%) 671 (29%) 2,3171964-65 1,484 (50%) 511 (17%) 989 (33%) 2,9841965-66 2,163 (52%) 1,063 (25%) 961 (23%) 4,1601966-67 3,236 (54%) 1,756 (29%) 1,023 (17%) 6,0151967-68 2,864 (55%) 1,338 (26%) 1,014 (19%) 5,2161968-69 2,747 (56%) 1,387 (29%) 708 (15%) 4,8421969-710 1,279 (53%) 764 (32%) 373 (15%) 2,4161970-71 1,484 (55%) 960 (35%) 287 (10%) 2,7311971-72 2,333 (55%) 1,505 (35%) 438 (10%) 4,2761972-7:3 2,364 (59%) 1,292 (32%) 360 (9%) 4,0161973-74 1,904 (58%) 951 (29%) 427 (13%) 3,2821974-7.5 2,840 (60%) 1,464 (31%) 437 (9%) 4,7411975-76 2,369 (60%) 1,071 (27%) 506 (13%) 3,9461976-77 1,918 (57%) 1,026 (31%) 388 (12%) 3,.3321977-783 1,816 (63%) 881 (31%) 173 (6%) 2,8701978-79 1,100 (69%) 450 (28%) 50 (3%) 1,600

1/ Percentage of total in brackets.

February 23, 1980

-57- ANNEX 1Table T-2

TANZANIA

PYRETHRUM PROJECT

Farmers, Area and Flower Production in Major Zones, 1978/79

PyrethrumNo. of Hectares of Dried Flowers

Zones Farmers Pyrethrum Productiontons

Umalila Zone 2,800 1,300 220

Mporoto Zone 3,300 1,125 250

Uwanje Zone 5,300 1,700 420

Ukinga Zone 5,300 2,100 420

Ubena Zone 2,200 1,225 180

Ludewa Zone 600 350 50

Sub-total 19,500 7,800 1,550

Arusha/Kilimanjaro 625 250 50

Total 20,025 8,050 1,600

February 23, 1980

-58- ANNEX 1

Table T-3

TANZANIA

PYRETHRUM PROJECT

Average Overall Pyrethrin Contents (%) 1962-1979

Year Content %

1962-63 1.291963-64 1.241964-65 1.281965-66 1.301966-67 1.231967-68 1.221968-69 1.181969-70 1.221970-71 1.261971-72 1.231972-73 1.211973-74 1.211974-75 1.171975-76 1.151976-77 1.111977-78 1.101978-79 1.10

February 23, 1980

-59-ANNEX I

TANZANIA Table T-4

PYRETHRUM PROJECT

Summary TPB Income Accounts, 1974/75 - 1978/79

1974/75 1975/76 1976/77 1977/78 1978/79(Audited) (Audited) (Audited) (Draft) (Estimated)----------------------- (figures in Tsh '000)…

Flowers 1/Purchases (in tons) --- --- 3,332 2,870 1,600Average Producer Price (Tsh/kg) --- --- 4.00 4.CO 4.60

Volume of Sales 2/Crude Extract (in tons) --- --- 120 71Pyrethrum marc (in tons) --- --- --- 2,180 1,122Pyrethrum powder (in tons) --- --- --- 330 151

Sales PricesCrude Extract (per m ton) --- --- --- 147 290Marc (per m ton) --- --- --- 1.4 1.3Pyrethrum powder (per m ton) --- --- --- 7 8

RevenueCrude Extract Sales --- --- --- 17,592 20,590Marc Sales --- --- --- 3,073 1,459Pyrethrum Powder Sales --- --- --- 2,293 1,208Management fees 3/ 496 1,755 1,451 --- ---Levy 4/ 237 197 --- --- ---Sales of Flowers --- --- 16,765 --- ---

Gross revenue 733 1,952 18,216 22,958 23,257

Variable ExpensesPayments to farmers --- --- 13,118 10,168 7,360Flower collection costs 5/ --- --- 1,695 2,030 1,400Processing costs --- --- --- 4,721 3.964

Sub-total --- --- 14,813 16,919 12,724

Variable margin 733 1,952 3,403 6,039 10,533(as percent of revenue) (100) (100) (19) (26) (45)

Non-Variable ExpensesAdministration 6/ 537 1,115 3,931 6,726 7,697Sales Expenses --- --- --- 944 1,057Depreciation 47 55 118 637 750

Sub-total 584 1,170 4,049 8,307 9,504

Operational margin 149 782 (656) (2,268) 1,029(as percent revenue) (26) (40) (-19) (-40) (4)

Other Expenses (income)Interest on overdrafts 46 84 505 1,092 1,516Pyrethrum development funds 7/ --- --- --- (4,146) ---Nursery development --- --- 56 2,100 2,550Sundry income 8/ (24) (197) (1,164) (130) ---

Sub-total 22 (113) 603 (1,084) 4,066

Pre-tax income 127 895 (53) (1,184) (3,037)Income tax 23 398 --- --- ---

Net income 104 497 (53) (1,184) (3,037)(as percent of revenue) (14) (25) (--) (-5) (-13)(as percent of net worth) (4) (5) (-) (-7) (-9)

1/ TPB did not become involved in flower purchasing until 1976/77.2/ In 1976/77, TPB sold its flowers to TECO, who handled processing and marketing.3/ Management fee paid by TECO, based on export realizati,on of processed output.4/ Levy paid to TPB by TECO on each kilogram of flowers delivered to TECO.5/ Including flower transport, cost of bags, etc.6/ Includes maintenance costs.7/ Payment by GOT to TPB to cover the costs of pyrethrum development.8/ Includes in 1976/77 a payment of Tsh 1 million from TECO to TPB to enable TPB to write off a loan from a

foreign bank. This item is included as income, although in fact it was more of a capital transfer.

February 23, 1980

-60-

ANNEX 1

TANZANIA Table r-5

PYRETHRUM PROJECT

Summary TPB Balance Sheets, 1974/75 - 1978/79

1974/75 1975/76 1976/77 1977/78 1978/79(Audited) (Audited) (Audited) (Draft) (Estimated)--------------- (figures in Tsh '000)-------------------------

AssetsFixed Assets 344 379 947 2,742 1,992Investment in TECO 2,496 2,496 2,496 2,496 2,496Work-in-progress 1/ --- 3,300 7,600 20,566 52,000

Total long-term Assets 2,840 6,175 11,043 25,804 56,488

Curreint AssetsSmall inventories, tools 23 46 160 306 306Stock, empty bags --- --- 790 1,288 1,300Accounts due from TECO 41 600 4,731 4,537 4,537Debtors, prepayments 66 281 320 7,062 7,062Cash, bank balances 422 4,939 770 3,082 3,474

Sub-total 552 5,866 6,771 16,275 16,679

Less Current LiabilitiesCreditors, accrued charges 94 232 874 1,759 1,759Provision for taxation 23 398 --- --- ---Bank loans 2/ 936 949 13 --- ---Overdraft --- 5,861 15,164 17,811

Sub-total 1,053 1,579 6,748 16,923 19,570

Net Working Capital (501) 4,287 23 (648) (2,891)

Total net assets 2,339 10,462 11iO66 25,156 53,597

LiabilitiesLong-term loans 3/ --- --- --- 9,026 21,626Net worth

Initial Government grant 1,560 1,560 1,560 1,560 1,560Accumulated surplus 779 1,276 1,223 39 (2,836)Capital grants 4/ --- 7,626 8,283 14,531 33,247

net worth 2,339 10,462 11,066 16,130 31,971

Total net worth & liabilities Q l462 11,066 252156 53,597

Long-term debt/net worth ratio 5/ neg neg neg 36:64 40:60

Current asset/current liabilities ratio 0.5:1 3.1:1 1.0:1 1.0:1 0.9:1

1/ Construction of the new pyrethrum processing plant at Mafinga2/ A loan from a private foreign bank.3/ Two loans from the Tanzania Investment Bank to finance part of the costs of the Mafinga Extraction Plant.

One loan is for Tsh 18.6 million, repayable over 10 years at 10 percent annual interest. The second isfor Tsh 8.9 million, repayable over 11 years (with one year of grace) at an annual interest rate of 11percent.

4/ Payments from the Government budget for nursery development and for the Government contribution towardsthe costs of the Mafinga plant.

5/ 'Neg' indicates that long-term debt is negligible.

Zebruary 23, 1980

TANZANIA

PYRETNiRUM PROJECT

Projected TPB 'Without-Project' Income Statements 1/

1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 198990------------------------------------------------ (Figures in Tsh '000)…-----------------------------

FlowersTPB purchases (m tons) 2,050 2,555 2,758 2,961 3,061 3,193 3,193 3,193 3,061 3,193 3,193Average producer prices (Tsh/kg) 6.0 7.5 8.3 9.2 10.0 10.9 11.6 12.4 13.3 14.1 15.1

Volume of sales 2/Crude extract (m tons) 77.6 108.5 112.4 121.4 130.3 134.7 140.5 140.5 134.7 140.5 140.5Pyrethrum marc (m tons) 1,238.6 1,731.7 1,793.9 1,937.6 2,079.6 2,149.8 2,242.4 2,242.4 2,149.8 2,242.4 2,242.4Pyrethrum powder (a tons) 83.0 100.0 100.0 100.0 100.0 100.0 100.0 100,0 100.0 100.0 100.0

Sales Prices 3/Crude extract (per m ton) 383.0 426.2 468.9 511.1 557.1 576.7 596.2 615.2 637.2 658.5 717.8Marc (per m ton) 0.9 1.0 1.1 1.2 1.2 1.2 1.2 1.2 1.2 1.1 1.1Pyrethrum powder (per m ton) 10.0 11.1 12.2 13.3 14.5 15.8 15.8 17.2 18.8 20.5 22.3

RevenueCrude extract sales 29,721 46,243 52,704 62,048 72,590 77,681 83,766 86,436 85,831 92,519 100,851Marc sales 1,115 1,732 1,973 2,325 2,496 2,580 2,691 2,691 2,580 2,467 2,467Powder sales 830 1,110 1,22 1,330 1,450 1.580 1.,580 120 1,880 ,8050 2. 230

Gross revenue 31,666 49,085 55,897 65,703 79,032 81,841 88,047 90,847 90,291 97,036 105,548

Variable ExpensesPayments to growers 4/ 12,300 19,162 22,891 27,241 30,610 34,804 37,039 39,353 40,711 45,021 48,214Flower collection costs 5/ 1,973 2,706 3,213 3,760 4,237 4,817 5,250 5,723 5,981 6,799 6,895Processing costs 6/ 5,042 2,484 2,967 3,531 3,968 , 4,814 5_248 5485 6,326

Sub-total 19,315 24,352 29,071 34,532 38,815 44,132 47,103 50,324 52,177 58.055 61,435

Variable margin 12,351 24,733 26,826 31,171 40,217 37,709 40,944 40,523 38,114 38,981 44,113(as percent of revenue) (39) (50) (48) (47) (51) (46) (47) (45) (42) (40) (42)

Non-Variable Expenses -

Admiristration 7/ 8,624 9,764 10,955 12,180 13,276 14,471 15,773 17,193 18,740 20,427 22,265Sales expenses 1,163 1,291 1,420 1,548 1,687 1,839 2,005 2,185 2,382 2,596 2,830Depreciation 750 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500Manufacturing overhead 8/ --- 4,400 4,840 5,276 5750 6,268 6,832 7,447 8,848 9,644

Sub-total 10,537 20,955 22,715 24,504 26,213 28,078 30,070 32,325 34,739 37,371 40,239

Operating margin 1,814 3,778 4,111 6,667 14,004 9,631 10,874 8,198 3,375 1,610 3,874(as percent of revenue) (6) (8) (7) (10) (18) (12) (12) (9) (4) (2) (4)

Interest: on long-term debt 2,822 2,822 2,544 2,262 1,980 1,697 1,415 1,133 851 567 286Interest: on overdraft 9/ 1.745 2.017 1,204 952 409 --- ___ ----- - ---

Sub-total 4,567 4,839 3,748 3,214 2,389 1,697 1,415 1,133 851 567 286

Pre-tax income (2,753) (1,061) 363 3,453 11,615 7,934 9,459 7,065 2,524 1,043 3,588Income tax --- --- 182 1,727 5,808 3,967 4,730 3,533 1,262 522 1,794Net income (2,753) (1,061) 181 1,726 5,807 3,967 4,729 3,532 1,262 521 1,794

(as percent of revenue) (-9) (-2) (-) (3) (7) (5) (5) (4) (1) (1) (2)(as percent of net worth) (-8) (-3) (-) (5) (14) (9) (9) (6) (2) (1) (3)

1/ In current prices,assuming annual inflation rates of 11 percent in 1980, 10 percent in 1981 and 9 percent thereafter.2/ On the basis of flower production patterns as in para. 2.23, with the extract and marc from flowers purchased by TPB in one year assumed sold in

the following year. v

3/ On the basis of the export prices detailed in para. 7.16.4/ On the basis of producer prices as projected in para. 2.22.5/ Including transportation costs and the costs of bags. '6/ Processing in 1979/80 takes place in Arusha; TPB processing costs in that year are sufficient to meet full costs of processing. In succeeding

years, processing assumed to take place in TPB's Mafinga plant.7/ Costs of administration assumed to increase by 2 percent per annum in real terms through 1984/85, and to remain constant in real terms thereafter.8/ Overhead costs of operation of Mafinga plant.9/ At an annual interest rate of 10 percent.

February 23, 1980

TANZANIA

PYRETHRUM PROJ CT

Proiected TPB 'Witho,,t-Project' Balance She-ts J/

1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90------------------------------------------------ (Figures in Tsh '000)------------------------------------------------

AssetsFixed assets at start of year, 2/, 3/ 56,488 68,138 60,142 54,642 49,142 43,642 38,142 32,642 27,142 21,642 16,142Additions 12,400 --- --- --- --- --- --- --- --- --- ---Fixed assets at end of year 68,888 65,642 60,142 54,642 49,142 43,642 38,142 32,642 27,142 21,642 16,142Less: Depreciation 4/ 750 5500 5,500 5,500 . 5.500 5, 5Q 5.500 55500

Net fixed assets 68,138 60,142 54,642 49,142 43,642 38,142 32,642 27,142 21,642 16,142 10,642

Current assetsSmall inventories, tools 337 374 411 449 489 533 581 633 690 752 820Stocks, empty bags 1,430 1,587 1,746 1,903 2,074 2,261 2,464 2,686 2,928 3,192 3,479Amounts due from TECO 5/ 4,537 --- --- --- --- --- --- --- --- --- ---Debtors, repayments 7,062 7,062 7,062 7,062 7,062 7,062 7,062 7,062 7,062 7,062 7,062Working cash balances 3,672 4,076 4,484 4,887 5,327 5,806 6,329 6,898 7,519 8,196 8,933Cash reserves --- --- --- - 7,910 12,086 19,564 23,816 24.647 26.185 30,879

Sub-total 17,038 13,099 13,703 14,301 22,862 27,748 36,000 41,095 42,846 45,387 51,173

Less: Current liabilitiesCreditors, accrued charges 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759Provision for taxation --- --- 182 1,727 5,603 3,967 4,730 3,533 1,262 522 1,794Overdrafts 20,173 12,039 9,520 4,087 --- ___ ___

Sub-total 21,932 13,798 11,461 7, 573 7,567 5,726 6,489 5,292 3,021 2,281 3,553

Net working capital (4,894) (699) 2,242 6,728 15,295 22,022 29,511 35,803 39,825 43,106 47,620

Total net assets 63,244 59,443 56,884 55,870 58,937 60,164 62,153 62,945 61,467 59,248 58,262

Liabilities

Long-term loans 6/ 27,440 24,700 21,960 19,220 16,480 13,740 11,000 8,260 5,520 2,780 ---

Net worth:Initial GOT grant 1,560 1,560 1,560 1,560 1,560 1,560 1,560 1,560 1,560 1,560 1,560Accumulated net income (5,589) (6,650) (6,469) (4,743) 1,064 5,031 9,760 13,292 14,554 15,075 16,869Capital grants 7/ 39.833 39.833 39,833 39,833 39,833 39,833 39,833 39,833 39,833 39,.833 39.833

Total net worth 35,804 34,743 34,924 36,650 42,457 46,424 51,153 54,685 55,947 56,468 58,262

Total net worth & Liabilities 63,244 59,443 56,884 55,870 58,937 60,164 62,153 62,945 61,467 59,248 58,262

Long-term debt/net worth ratio 43:57 42:58 39:61 34:66 28:72 23:77 18:82 13:87 9:91 5:95 0:100

1/ In current prices, assuming annual inflation rates of 11 percent in 1980, 10 percent in 1981 and 9 percent in succeeding years._/ Since the major asset of TECO, (the Arusha processing plant), is no longer required after 1979/80, TPB's interest in this is assumed writteni off

in 1980/81.3/ The Mafinga plant is expected to comsence operations at the beginning 6f 1980/81.4/ The Mafinga plant has been depreciated at the following a:,cmal rates: 4 percent on the factory buildings, 8 percent on tmwhinery, 20 percent on

vehicles, 15 percent on furniture and fittings and 20 percent on pre-operational expenditures.5/ It is assumed that the amount due for 'ITECO (representing accumulated profits) is transferred to TPB once the Arusha processing plant is closed.6/ Two loans from the Tanzania Investment Bank (TIB) for the construction of the Mafinga plant. One loan is for Tsh 18.6 million, repayable over

10 years at a 10 percent annual interest rates. The second is for Tsh 8.9 million, repayable over 11 years (with one year of grace) at an Hanntual interest rate of 11 percent.

7/ Payments for Government in previous years nursery development, and Government contribution towards the costs of construction of the Mafinga mplant.

February 23, 1980

TANZANIA

PYREThRUM PROJECT

Projected 1PB 'Without-Project' Cash Flows 1/

1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90

Cash InflowGovernment grant 2/ 6,626 --- --- --- --- --- --- ---

TIB loan 3/' ,77'- --- --- ---'''

Nct income (2,753) (1,061) 181 1,726 5,808 3,967 4,729 3,532 1,262 521 1,794

Depreciation 750 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500

Cash reccived from .;EC --- 4,537 --- --- --- --- --- --- --- --- ---

Provision for taxation --- --- 182 1,727 5,807 3,967 4L7

30 _3,53 _1-262 522 1,794

Total cash inflow 10,397 8,976 5,863 8,953 17,115 13,434 14,959 12,565 8,024 6,543 9,088

Cash OutflowExnenditure on Mafinga plant 12,400 --- --- --- --- --- --- --- --- --- ---

Repayment of TIB loans 5/ --- 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740

Increase in current assets 359 598 604 598 651 710 774 843 920 1,003 1,092

Payment of taxation --- --- --- 182 1,727 5,807 3,967 4,730 522

Total cash outflo- 12,759 3,338 3,344 3,520 5,118 9,257 7,481 8,313 7,193 5,005 4,354

Net cash inflow (outflow) (2,362) 5,638 2,519 5,433 11,997 4,177 7,478 4,252 3,596 1,538 4,734

Cumulative net cash inflow/ (2,362) 3,276 5,795 11,228 23,225 27,402 34,880 39,132 42,728 44,266 49,000

(outflow)

1/ In current prices, assuming annuial inflation rates of 11 percent in 1980, 10 percenIt in 1981 and 9 percent thereafter.

2/ For construction of the Mafinga plant.

3/ Final installment of loan for the Mafinga plant.

4/ Accumulated earnings transferred from TECO to TPB after the Arusha processing plant is no longer required.

5/ Two loans for TIB for construction of the Mafinga plant. The first is for T h 18.6 million, repayshle over 10 years at a 10 percent annual

interest rate. The second is for Tsh 8.9 million, repayable over 11 years (with one year of grace) it an annual interest rate of 11 percent.

February 23, 1980 H>

X t

to,

ANNEX 1-64- Table T-9

TANZANIA

PYRETHRUM PROJECT

Road im.provement Program

RoadMbeya Region Classification Km

Group I: Santilya-Ilembo District 13Ilembo-Ibaba District 27Access Road to Izombwe Feeder 6Access Road to Masoko Feeder 7Access Road to Mbagala Feeder 3Access Road to Mbawi Feeder 4

Group II: Access Road to Mwela Feeder 10Access Road to Nyalwella Feeder 4Access Road to Ngolo Feeder 8Access Road to Ilungo-Manshese Feeder 10

Sub-total 92

Iringa Region

Group III: Access Road to Kinyike Feeder 6Access Road to Mlondwe Feeder 10Access Road to Lugonda Feeder 3

Group IV: Bulongwe-Kitulo District 45

Group V: Jct.Ivilikingi-Kitulo District 23Access Road to Ivilikingi Feeder 8

Group VI: Mangoto-Ibaga Feeder 12

Group VII: Access Road to Mahenye Farm Feeder 5Sub-total 112

Total 204

-65-

ANNEX 1Table T-lO

TANZANIA

PYRETHRUM PROJECT

Roads Component - Equipment List and Cost

Number Unit Costj/ Total Cost FE % FE Cost---…=(Tsh '000)-------- (Tsh '000) (US$ '000)

Heavy PlantCrawler Tractor (Angle Razer

and Ripper (180-220HP)) 1 1,140.7 1,140.7 95 1,083.7 130.6Motor Grader (115-135HP) 2 629 1,258 95 1,195.2 144Front End Wheel Loader (15 m

3) 1 524.6 524.6 95 498.4 60.1Self-propelled pneumatic compactor

(8-10 ton) 1 320 320 95 304 36.6Towed vibro-compactor (6-8 ton) 1 44.6 44.6 95 42.4 5.1Industrial Tractor with bucket andback-hoe (80HP) 1 296.6 296.6 95 281.8 34

Water bowser (6,000 1) 1 170.9 170.9 95 162.4 19.6Sub-total 3,755.4 95 3,567.9 430

VehiclesPick-ups (750 kg) 1 51.4 51.4 95 48.8 5.9Tipper trucks (7 ton) 3 208.9 626.7 95 595.4 71.7Platform trucks (2m3 /3 ton) 1 18.5 18.5 95 17.6 2.1Mobile service workshop 1 604.8 604.8 95 574.6 69.24 WD stationwagon 4 139.5 558 95 530.1 63.9

Caravan trailer 1 56 56 95 53.2 6.4Sub-total 1,915.4 95 1,819.6 219.2

EquipmentCompressor (125 cfm) 1 45.1 45.1 95 42.8 5.2Concrete mixer (300 1) 1 109.3 109.3 95 103.8 12.5Water pump (75 mm) 1 13.7 13.7 95 13 1.6Welding machine (600 omp) 1 55.6 55.6 95 52.8 6.4Machine tools 200.8 200.8 95 190.8 23Air tools 1 set 5.9 5.9 95 5.3 0.6Mechanics tools 5 sets 9.3 46.5 95 44.2 5.3Fuel tank (400 1) 2 23.2 46.4 95 44.1 5.3

Sub-total 523.3 95 496.8 59.9

Total 6,194.1 95 5,884.3 709.1

1/ Prices delivered to RIMLT in Dar-es-Salaam.

October 18, 1979

ANNEX 1-66- Table T-ll

TANZANIA

PYRETHRUM PROJECT

RIMU Local Staff and Labor Requirements

Staff Category Number Required

Construction Superintendent 2Equipment Superintendent 1Technical Officer 1Accountant/Administrator 1Accounts Clerks 2Store-keepers 2Foremen 2Mechanics 5Plant Operators 7Drivers 10Carpenters 5Masons 5Unskilled labor 92

135

TANZANIA

PYRETHRUM PROJECT

Phasing of Project Costs

PYl PY2 PY3 PY4 PY51980/81 1981/82 1982/83 1983/84 1984/85 Total FE % FE Amount---------------------(Figures in Tsh '000)-------------------- (Tsh '000)

Smallholder Production Program 1/Improved Planting Material Program 650 1,040 1,370 1,330 1,330 5,720 40 8 285Unimproved Planting Material Program 1,266 955 585 --- --- 2,806 12 340

Pest Control Program 145 70 75 80 80 450 75TPB Extension Service 180 232 232 232 232 1,108 --- ---Drying Study and Investments 300 950 500 500 500 2,750 68 1,870Flower stores/buying centers 981 774 1,177 --- --- 2,932 37 1,076Vehicles 3,955 --- ___ --- ----- 3,955 83 3,280

Sub-total 7,507 4,021 3,939 2,142 2,142 19,721 47 9,213

Research Program 2/Civil works 524 2,143 --- --- --- 2,667 40 1,076

Equipment 291 200 --- --- --- 491 95 467

Vehicles 200 45 --- --- --- 245 90 219

Incremental staff 651 711 711 711 711 3,495 71 2,465Research Operations 246 401 457 524 682 2,310 32 740Training and Consultancy 897 792 867 672 622 3.850 86 3.228

Sub-total 2,809 4,292 2,035 1,907 2,015 13,088 63 8,195

Strengthening of TPB 3/Incremental TPB staff 2.080 2,080 2,080 2,080 2,080 10,400 75 7,845Short-term technical assistance 350 --- --- --- --- 350

Staff training 200 170 170 170 170 880 57 500

Offices and Housing 3,901 7,527 1,890 --- --- 13,318 39 5,210

Vehicles 620 --- --- --- --- 620 95 589

Sub-total 7,151 9,777 4,140 2,250 2,250 25,568 55 14,144

Roads Component 4/Establishment of RIMU 7,622 --- --- --- --- 7,622 85 6,456

Operations of RI.MU 1,618 3,831 3,886 3953 13,288 66 9,354Sub-total 9,240 3,831 3,886 3,953 --- 20,910 76 15,810

Total Base Cost 26,707 21,921 14,000 10,252 6,407 79,287 60 47,362

Physical Contingencies 3,353 3,201 1,658 975 590 9,777 59 5,804Price Contingencies 2,902 4,903 4,640 4,355 3,496 20,296 59 12,013

Total Cost 32,962 30,025 20,298 15,582 10,493 109,360 60 65,179

/ .e summar in TaleT1

1/ Detailed summary in Table T-132/ Detailed summary in Table T-14 5m3/ Detailed summary in Table T-15 6/ Detailed summary in Table T-16

February 23, 1980

-68- ANNEX 1Table T-13

TANZANIA

PYRETHRUM PROJECT

Smallholder Production Program: Cost Summary

PY1 PY2 PY3 PY4 PY51980/81 1981/82 1982/83 1983/84 1984/85 Total FE % FE Amount----- <Figures in Tsh '000)---------------------- (Tsh '000)

Long-tarm Planting Material ProgramBulking centers 1/ 420 400 400 420 400 2,040 39 805Village clonal nurseries 2/ 230 640 970 910 930 3,680 40 1,480

Sub-total 650 1,040 1,370 1,330 1,330 5,720 2,285

Short-term Planting Material ProgramSeed farms 3/ 663 235 --- --- --- 898 20 180Village seedling nurseries 4/ 603 720 585 --- --- ].908 8 160

Sub-total 1,266 955 585 --- --- 2,806 340

Pest Control ProgramYnapsack sprayers 5/ 85 --- --- --- --- 85 75 64Insecticide 6/ 60 70 75 80 80 365 75 274

Sub-total 145 70 75 80 80 450 338

TPB Extension ServiceAssistant Production Officers 7/ 144 196 196 196 196 928 --- ---Production Officers 8/ 36 36 36 36 36 180 ---

Sub-total 180 232 232 232 232 1,108 --- ---

Drying Study and InvestmentsConsultant study 9/ 300 450 --- --- --- 750 89 670Pilot drying investments 10/ --- 500 500 500 500 2,000 60 1,200

Sub-total 300 950 500 500 500 2,750 1,870

Flower Stores/Buying Centers - Construction 11/ 900 710 1,080 --- --- 2,690 40 1,076- Fees L2/ 81 64 97 242 -- 24

Sub-total 981 774 1,177 --- --- 2,932 1,076

Vehicles4 WD vehicles 13/ 775 --- -- --- 775 95 736Motorcycles 14/ 330 --- --- --- 330 80 264Trucks 15/ 2,880 2880 80 2,304

Sub-total 3,985 --- --- --- --- 3,985 3,304

Total Base Cost 7,507 4,021 3,939 2,142 2,142 19,751 47 9,213

Physical Contingencies 849 429 462 164 164 2,068 47 972Price Contingencies 812 896 1,367 999 1,287 5,367 47 2,520

Total Cost 9,168 5,346 5,768 3,305 3,593 27,186 47 12,705

1/ Includes cost of labor, insecticides, fertilizers, nematocides, tools and the transport of planting material to the bulkingcenters.

2/ Includes cost of labor, insecticides, fertilizers, nematocides, tools and the transport of planting material to the villagenurseries.

3/ Includes cost of labor, insecticides, fertilizers and nematocides and tools.4/ Includes cost of labor, fertilizer and nematocides and tools.5/ 100 sprayers at a unit cost of Tsh 850.6/ Calcul,ated on basis of use of 2 1. of sumithion insecticide annually on 5 percent of planted area.7/ Incremental certificate-level staff -- 12 in 1980/81, 16 in succeeding years.8/ Incremental diploma-level staff -- two in 1980/81 and succeeding years.9/ A four man-month reconnaissance survey followed by a detailed six man-month study.10/ To implement the findings of the consultant study.11/ Stores of 90 m

2would be built as follows: in 1980/81, at Ujuni, Kilolo, Kipanga, Santilya and Ilembo; in 1981/82, at

Lupila and Ipelele; and in 1982/83 at Uwemba, Simambwe, Bulambya, Igoma, Matamba and Lufilyo. A 175 m2

store would bebuilt at Ndulamo in 1981/82. The base unit cost for construction of these stores has been taken as Tsh 2,000 per m

2.

12/ Design fees of 6% of construction cost, supervision fees of 3%.13/ Five fcur-wheel drive vehicles, for regional field staff.

4/ Twentv-two motorcycles for extension staff.15/ Tvelve high-side seven-tor. trucks.

February 23, 1980

-69-

TANZANIA ANNEYC ITable T-14

PYRETHRUM PROJECT

Research Program: Cost Summary

PY1 PY2 PY3 PY4 PY51980/81 1981/82 1982/83 1983/84 1984/85 Total FE % FE Amount_____ ........ ___--(Figures in Tah '000) … … ……---------- (Tsh '000)

Civil Works -- 44-- ---- 44 5 1Tissue Culture Building 1/ --- 424 --- --- --- 424 50 212Glasshouse 2/ ~ 504 --- --- --- 504 50 252Houses 3/ 374 1,155 --- --- --- 1,529 40 612Fees 41f 150 60 --- --- 210 --

Sub-total 524 2,14 --- --- --- 2,667 1,076

Equipment j/ 291 200 --- --- --- 491 95 467

VehiclesMotor cycles 6/ 45 45 --- --- --- 90 80 72Four-wheel-drive vehicles 7/ 155 --- --- --- --- 155 95 147

Sub-total 200 45 --- --- --- 245 219

Incremental StaffResearch Officer 8/ 580 580 580 580 580 2,900 85 2,465Local staff 9/ 71 131 131 131 131 595 --- - --

Sub-total 651 711 711 711 711 3,495 --- 2,465

Rese rch 0 erationsField costs 10 126 234 252 252 252 1,116 20 223

Operation of tissue culture unit --- --- 55 105 280 440 5 22Exchange of planting material II/ --- 17 --- 17 --- 34 80 27Operation of vehicles 12/ 120 150 150 150 150 720 65 468

Sub-total 246 401 457 524 682 2,310 740

Training and ConaultancyTong-term research support 1 622 622 622 622 622 3,110 80 2,488Consultancy 14/ 225 --- 75 --- --- 300 100 300

Courses and study tours 15/ 50 50 50 50 --- 200 100 200Training 16/ --- 120 120 --- - 240 100 240

Sub-total 897 792 867 672 622 3,850 84 3,228

Total Base Cost 2,809 4,292 2,035 1,907 2,015 13,088 8,195

Physical Contingencies 362 659 204 191 201 1,617 1,019Price Contingencies 305 937 628 783 1,061 3,714 2,340

Total Cost 3,476 5,888 2,867 2,881 3,277 18,419 11,554

1/ Consisting of a laboratory and an incubator room, with a total area of 113 m2, at a unit cost of Tsh 3,750 per m2.

2/ Of 126 m2, at a unit cost of Tsh 4,000 per m

2.

3J One type H-108 (108 m2), 1 H-82 (82 m

2) and 4 H-60 (60 a1

2), at a cost per m

2of Tsh 3,000 for H-108, 2,600 for H-82 and 2,200

for H-60 plus furniture for each house.4/ At a rate of 6% of construction cost for design and 3% for supervision.5/ Plant selection equipment, pyrethrin content testing equipment and laboratory equipment.6/ 6 motorcycles, for the Field Office and Field Assistants.7/ For the Research Officer.8/ Internationally-recruited.9/ One Field Officer (Diploma), 5 Field Assistants (Certificate holders), 2 Laboratory Assistants and a driver.10/Provides for the operation at full development (1982/83 and after) of four hectares of selection fields at Uyole and a

total of ten hectares at five outstations, at a unit cost of Tah 18,000 per hectare.fl/Provides for a trip by chartered aircraft in 1981/82 and in 1983/84 to exchange planting material with neighboring

pyrethrum producing countries.12/Operating costs of a four-wheel-drive vehicle (30,000 kms annually at Tsh 3.0 per km) and 6 motor cycles (10,000 km each

at cost of Tsh 1.0 per km).13/Research support on a contract basis from an overseas university specializing in tissue culture. Annual costs estimated

at Tsh 230,000 for staff, Tsh 230,000 for services provided (printing, use of glasshouses, etc), Tsh 46,000 for traveland Tsh 116,000 for subsistence.

14/ Three months of short term consultancy in 1980/81 and one month in 1982/83 (at a cost per man-month of Tsh 75,000) toadvise on tissue culture.

15/ Provides for study tours in 1980/81 and 1982/83 to pyrethrum producing countries and countries using tissue culturetechniques, and for attendance by laboratory personnel in 1981/82 and 1983/84 at courses in tissue culture techniques.

16/ Provision for MSC course for Tanzanian research worker.

February 23, 1980

-70-

TANZANIA ANNEX 1Table T-15

PYRETHRUN?, PROJECT

Strengthening of TPB: Coat SummarY

PYi FY2 y4 r1980/SiL l981/8 2_:2283 1983184 1984/85 Toftal FE FE Amount

(Tsh '000)Incremental TPB StaffFinancial Controller 1/ 580 580 580 580 580 2,900 85 2,465Planning and Production Agronomist 1/ 580 580 580 580 580 2,900 85 2,465Field Agronomist 1/ 580 580 580 580 580 2,900 85 2,465Accounts Staff 2/ 180 180 180 180 180 900 50 450Local Staff 3/ 160 160 160 160 160 _800

Sub-total 2,080 2,080 280 2, 080 0 2,080 10,400 75 7,845

Short-term Technical AssistanceTransport Management Study 4/ 350 --- --- _350 --

Sub-total 350 --- --- --- --- 350 --

TrainingTraining for Field Staff 5/ 50 20 20 20 20 130 --Overseas training and seminars 6/ 100 100 100 100 100 S00 i0 500Local training and seminars 7/ 50 50 50 50 50 250 --

Sub-total 200 170 170 170 170 880 57 500

Offices and MousingHead office, Iringa 8/ --- 1,840 1,840 --- --- 3,680 40 1,472Regional Offices: Iringa 9/ --- 570 --- --- --- 570 40 228

: Mbeya 9/ --- 570 --- --- 570 40 228District Office - Makete tO/ --- 280 --- --- --- 280 40 112Houses - Senior Staff 11/ 1,620 1,620 --- --- --- 3,240 40 1,296

- Middle-level staff 12/ 1,200 1,785 --- --- 2,985 40 1,194- Junior staff 13/ --- 132 --- --- --- 132 40 57

Cosign and construction supervision fees 14/ 681 300 50 --- --- 1,C31 --- ---Furniture for houses 15/ 400 430 --- - --- 830 75 623

Sub-total 3,901 7,527 1,890 --- --- 13,318 39 5,210

Vehicles 15/ 620 --- --- --- --- 620 95 589

Total Base Cost 7,151 9,777 4,140 2,250 2,250 25,568 55 14,144

Physical Contingencies 1,105 1,730 603 225 225 3,888 55 2,138Price Contingencies 816 2,267 1,416 900 1,148 6,547 55 3,601

'rotal Cost 9,072 13,774 6,159 3,375 3,623 36,003 55 19,883

1/ Internationally recruited at an estimated annual cost inclusive of benefits of Tsh 580,000 (US$ 70,000).2/ Cost Accountant and Internal Auditor, assumed to be expatriate staff recruited locally at an annual cost of

Tsh 90,000 (US$ 11,000).3/ PlannirLg Officer, Statistician/Evaluation Officer, Procurement Officer and Transport Officer, all at anl

annual cost of Tsh 40,000.4/ To be carried out in an estimated six man-months by the National Institute of Productivity.5/ A two-week training course at Uyole for all TPB field staff in 1980/81, at a cost per staff member of Tsh 2,000,

followed by refresher courses for half of TPB's field staff each year, at a cost of Tsh 1,400 per staf:- member.6/ For training of staff in management, marketing, finance and personnel administration.7/ For training o5 staff at local training institutions in factory management, administration and finance.8/ Of size 1150 m at a cost per m of Tsh 3,200.9/ Of size 190 m2 at a cost per m

2of Tsh 3,000.

10/ Of size 100 m2 at a cost per m22of Tsh 2,800.

l1/ Of size 108 m2 at a cost per m of Tsh 3,000.12/ Of size 82 m2 at a cost per m

2of Tsh 2,600.

13/ Of size 60 m2at a cost per m

2of Tsh 2,200.

14/ At a cost of 6% of construction cost for design and 3% for-supervision.15/ At a cost of Tsh 54,000 for each senior staff house, Tsh 40,000 for each middle-level staff house and Ish 10,000

for each Junior staff house.16/ Five four-wheel-drive vehicles, for the Financial Controller, the two agronomists, the Planning and Production

Manager and the Executive Officer.

February 23, 1980

TANZANIA

PYRETHRUM PROJECT

Roads Component: Cost Summary

PYl PY2 PY3 PY4 PY5

1980/81 1981/82 1982/83 1983/84 1984/85 Total FE % b Amount

-(Figures in Tsh '000) -…(Tsh '000)

Establishment of RIMUHouses l/ 1,134 --- --- --- --- 1,134 40 454

Offices 2/ 140 --- --- --- --- 140 40 56

Workshop 3/ 154 --- --- --- --- 154 40 62

Equipment 4/ 6,194 ___ ___ ___ ___ 6,194 95 5,884

Sub-total 7,622 --- -- ---- 7,622 6,456

RIMU OperationsSpare parts 5/ 1,037 24 24 24 --- 1,109 95 1,054

Tires, fuel, oil, lubricants 6/ --- 440 440 440 --- 1,320 65 858

Materials and supplies 7/ --- 989 989 989 --- 2,967 55 1,63

Staff-technical assistance 8/ 581 1,743 1,743 1,743 ___ 5,810 100 5,810

Staff-local salaried 8/ --- 113 113 113 --- 339 --- ---

Staff-local road improvement 8/ --- 489 489 489 --- 1,467 --- ---

Staff-local road maintenance 8/ --- 33 88 155 --- 276 --- _---

Sub-total 1,618 3,831 3,886 3,953 --- 13,288 9,354

Total base cost 9,240 3,831 3,886 3,953 --- 20,910 76 15,810

Physical Contingency 1,037 383 389 395 --- 2,204 76 1,675

Price ConLingency 969 803 1,229 1,673 --- 4,674 76 3,552

Total Cost 11,246 5,017 5,504 6,021 27,788 21,037

I/ 3 houses each of 108 m2 for the three technical assistance person5el, in Mbeya.

2/ 50 m2 of office space in Mbeya at a unit cost of Tsh 2,800 per m .

3/ A small workshop (55 m2) adjacent to the RIMU office in Mbeya at a unit cost of Tsh 2,800 per m2 .

4/ A full list of equipment to be procured under the Project is in Table T-10.

5/ At the time of equipment purchase, spares would be purchased to the value of 20 percent of initial cost for equipment and

15 percent of initial cost for vehicles. Thereafter, small spares would be purchased as required.

6/ These costs have been calculated on the basis of annual requirements for tires of 5 percent of the cost of equipment using

tires and 10 percent of the cost of vehicles. Annual requirements for fuel, oil and lubricants have been calculated on the

basis of 10 percent of the cost of these items,

7/ Steel, lumber and cement for road reconstruction and maintenance.

8/ Estimated local staff requirements as in Table T-11. Technical assistance costs assume that the staff involved would be

recruited by February 28, 1981.

H-'

February 23, 1980

-72- ANNEX 1Table T-17

TANZANIA

PYRETHRUM PROJECT

Estimated Schedule of Disbursements 1/(US$ '000)

Bank GroupFY and Quarter Quarterly Disbursement Cumulative Disbursement

FY81 Qi ---Q2 -Q3 100 100Q4 200 300

FY82 Ql 400 700Q2 600 1,300Q3 700 2,000Q4 600 2,600

FY83 Q1 600 3,200Q2 600 3,800Q3 600 4,400Q4 600 5,000

FY84 Ql 600 5,600Q2 600 6,200Q3 600 6,800Q4 600 7,400

FY85 Ql 600 8,000Q2 500 8,500Q3 400 8,900Q4 400 9,300

FY86 Ql 400 9,700Q2 300 10,000

1/ This schedule assumes that the Credit would become effective in August 1980and would close on December 31, 1985.

February 23, 1980

TANZANIA

PYRETHRUM PROJECT

Hectare Budgets for Pyrethrum and Maize

Pyrethrum Maize

Without Project Without Project With Project Traditional Production Improved Production

1979/80 Prices 1980/81 Prices 1980/81 Prices

ProductionAverage yield (kg/ha) 235 235 300 850 2,000

Pyrethrin content (%) 1.1 l.t 1.3 --- ---

Producer price (Tsh/kg) 1/ 6.0 7.5 9.5 1.0 1.0

Gross revenue (Tsh) 1,410 1,763 2,850 850 2.000

Labor Input Costs Labor Input Costs Labor Input Costs Labor Input Costs Labor Input Costs

(mandays) (Tsh) (mandays) (Tsh) (mandays) (Tsh) (mandays) (Tsh) (mandays) (Tsh)

Establishment Costs 2/Land preparation 17 6.7 17 6.7 17 6.7 ---

Planting 25 - 25 - 25 --- --- ---

Sub-total 42 6.7 42 6.7 42 67 --- --- --- ---

Production CostsLand preparation --- --- --- --- --- 50 5.0 50 5.0

Seed costs and planting3! --- --- --- --- 10 25 10 61

Fertilizer costs and application 3/ ------ --- --- 12 143.5

Weeding 50 --- 50 --- 50 --- 30 --- 30Insecticide costs & application 3/ --- --- --- --- --- --- --- --- 5 32.5

Flower picking/maize harvesting 57 --- 57 --- 72 --- 19 --- 25 ---

Drying 14 12 14 12 18 12 --- --- ---

Shelling ---- -------- 11 -25 ---

Marketing & transport 12 --- 12 --- 16 --- 2 --- 5 ---

Cutting back/destalking 9 --- 9 _ 9 --- - --- ---

Sub-total 142 12 142 12 165 12 122 30 162 242

Total labor input & costs 184 18.7 184 18.7 207 18.7 122 30 162 242

Return per hectare (Tsh) 1,391.3 1,744.3 2,831.3 820 1,751

Return per man-day (Tsh) 7.5 9.48 13.68 6.72 10.85

1/ Pyrethrum producer prices as in para. 2.20. The producer.price of maize is Tsh 1.00 per kg in both 1979/80 and 1980/81.

2/ Since pyrethrum has a productive life of three years,the establishment costs have been allocated over a three-year period. This is equivalent to

assuming that producers have a 'balanced' pyrethrum area, with one-third first year, one-third second year and one-third third year.

3/ The input prices charged to farmers are subsidized to fifty percent of full market cost. 13>

October 19, 1979

TANZANIA

PYRETHRUM PROJECT

Typical Farm Budgets

Without Project With Project Faru not growing Pyrethrum iiCrops Crop Area Labor Input Net Income Crop Area Labor Input Net Income Crop Area Labor Input Net Income

(ha) (mandays) (Tsh) (ha) (mandays) (Tsh) (ha) (mandays) (Tsh)

Pyrethrum 2/ 0.4 73.6 698 0.4 82.8 1,133 Maize 3/ 1.0 162 1,758 1.0 162 1,758 1.18 191 2,074Wheat 4/ 0.4 48 356 0.4 48 356 0.4 48 356Peas 57 0.3 30.6 116 0.3 30.6 116 0.3 30.6 116Other crops 6/ 0.5 89 1,020 0.5 89 1,020 0.5 89 1,020

Net farmincome 7/ 2.6 402.2 3,948 2.6 412.2 4,383 2.38 358.6 3,566

(Net income perman-day, Tsh) (9.8) (10.6) (9.9) >

Subsistence needs 8/ 1,410 1,410 1,410

Cash income 2,548 2,973 2,156(Per capita) 9/ 425 499 359

1/ It is assumed that, on farms not growing pyrethrum, maize acreage is expanded until labor utilization in the peakmonth equals family labor availability.

2/ Using returns per ha from Table T-18 and labor input from Table T-20.3/ On the basis of improved cultivation techniques, giving returns per ha in Table T-18, and using labor input figures

from Table T-20.4/ On the basis of average yields of 540 kg per hectare at the 1980/81 producer price of Tsh 1.65 per kg.5/ On the basis of average yields of 430 kg per hectare at the prevailing market price of Tsh 0.90 per kg. >6/ On the basis of: (a) 0.1 ha of sunflower at a yield of 600 kg per ha and a selling price of Tsh 1.50 per kg. a z

(b) 0.2 ha of beans, at a yield of 450 kg per ha and a selling price of Tsh 2.00 per kg.(c) 0.1 ha of Irish potatoes, at a yield of 5,000 kg per ha and a selling price of Tsh 0.80 per kg.(d) 0.1 ha of cabbages, with an average value per ha of Tsh 3,500.

7/ Including subsistence crops, valued at producer prices.8/ On the basis of retention of 800 kg of maize, 90 kg of beans, all of the cabbages produced and 100 kg of Irish

potatoes, which represents sufficient food to meet basic needs.9/ Assuming 6 members per family.

October 19, 1979

TANZANIA

PYRETHRUM PROJECT

Farm Labor Profiles

July August September October November December January FebruarY March April may June Total

I. Crop Labor Profiles (Mandays/ha)

Pyrethrum (Without-Project) 1/ 8 8 6 11 11 14 31 26 23 16 15 15 184

Pyrethrum (With-Project) 2/ 8 8 9 14 14 16 33 29 26 18 17 15 207

Maize3/ 25 29 16 16 16 13 8 7 4 3 10 15 162

Wheat --- 5 15 15 5 --- --- 10 35 25 7 3 120

Peas 3 3 7 --- 3 7 23 46 10 102

Others 4/ 16 18 14 16 14 12 16 16 16 14 14 12 178

II. Typical Farm Labor Profiles (Mandays) Total% of Farm

A. Without-Project Maydays Labor

Pyrethrum (014 ha) 3.2 3.2 2.4 4.4 4.4 5.6 12.4 10.4 9.2 6.4 6.0 6.0 73.6 18

Maize (1.0 ha) 25.0 29.0 16.0 16.0 16.0 13.0 8.0 7.0 4.0 3.0 10.0 15.0 162.0 40

Wheat (0.4 ha) --- 2.0 6.0 6.0 2.0 --- --- 4.0 14.0 10.0 2.8 1.2 48.0 12

Peas (0.3 ha) --- 0.9 0.9 2.1 --- --- --- 0.9 2.1 6.9 13.8 3.0 30.6 8

Other crops (0.5 ha) 8.0 9.0 7.0 8.0 7.0 6.0 8.0 8.0 ' 8.0 7.0 7.0 6.0 89.0 22

Total 36.2 44.1 32.3 36.5 29.4 24.6 28.4 30.3 37-3 33-.3 39.6 31.2 402.2 100

Labor availability 5/ 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 540.0

B. With Prolect

Pyrethrum (0.4 ha) 3.2 3.2 3.6 5.6 5.6 6.4 13.2 11.6 10.4 7.2 6.8 6.0 82.8 20

Maize (1.0 ha) 25.0 29.0 16.0 16.0 16.0 13.0 8.0 7.0 4.0 3.0 10.0 16.0 162.0 39

Wheat (0.4 ha) --- 2.0 6.0 6.0 2.0 --- --- 4.0 14.0 10.0 2.8 1.2 48.0 12

Peas (0.3 ha) --- 0.9 0.9 2.1 --- --- --- 0.9 '2.1 6.9 13.8 3.0 30.6 7

Other crops (0.5 ha) 8.0 9.0 7.0 8.0 7.0 6.0 8.0 8.0 8.0 7.0 7.0 6.0 87.0 22

Total 36.2 44.1 33.5 37.7 30.6 25.4 29.2 31.5 38.5 24.1 40.4 32.2 442.2 100

Labor availability 5/ 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 540.0

1/ With an average annual yield of dried flowers of 235 kg/ha.

2/ With an average annual yield of dried flowers of 300 kg/ha.

3/ Assuming the use of improved cultivation practices.

4/ Comprising 0.1 ha sunflower; 0.2 ha beans; 0.3 ha Irish potatoes; 0.1 ha cabbages.

5/ On the basis of 24 m.d. from the man, 24 x 0.7 m.d. from the wife, plus 4 m.d. x 0.5 for each of two children of working age.

- m

October 22, 1979 H

C

-76-

ANNbdX 1TANZANIA Table T-21

PYREThmRS PROJECT

Pyretbrum Area. Production and Yields

1990/91-1980/81 1981/82 1982183 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1999/2000

Without Project-

A. PyrethrmLa,rea (ha)

lst year plants 4.200 4,200 4,200 5,000 4,200 4,200 5,000 4,200 4,200 5,000 4,367Znd your plants 3,500 4,200 4,200 4,200 5,000 4,200 4,200 5,000 4,200 4,200 4,3673rd year plants 3,500 3,500 4.200 4.200 4,200 5.000 4.200 4,200 5.000 4,200 4.367

Total area 11,200 11,900 12,600 13,400 13,400 13,400 13,400 13,400 13,400 13,400 13,400

B. Dried flower production Cs tons) 1/

From lst year plants 525 525 525 625 525 525 625 525 525 625 546Fros 2nd year plants 1,015 1,218 1,218 1,218 1,450 1,218 1,218 1,450 1,218 1,218 1,266Fros 3rd year plants 1.015 1.015 1.218 1.218 1,218 1.450 1.218 1.218 1.450 1,218 1,266

Total production 2,555 2,758 2,961 3,061 3,193 3,193 3,061 3,193 3,193 3,061 3,078

C. Average flover yield (kg/ha) 228 232 235 228 238 238 228 238 238 228 235

With Project

A. Uniaproved pyrethru= area (ha) 21

lt year plants 4,540 4,190 3,720 3,690 2,090 1,150 390 -- --- --- ---2nd year plants 3,500 4,540 4,190 3,720 3,690 2,090 1,150 390 --- --- ---3rd year plants 3,500 3,500 4,540 4.190 3,720 3.690 2.090 I,1o5 390-----

Total unimproved area 11,600 9,500 6,930 3,630 1,540 390 --- ---

B. I=proved pyrethrum area (ha) 3/

lst year plants 160 610 1,080 1,810 2,710 4,380 4,380 4,800 5,530 4,770 5,0332nd year plants --- 160 610 1,080 1,810 2,710 4,380 4,380 4,800 5,530 5,0333rd year plants --- --- 160 610 1,080 1,080 2,710 4.380 4,380 4,800 5.033

Total improved area 160 770 1,850 3,500 5,600 8,170 11,470 13,560 14,710 15,100 15,100

Total area 11,700 13,000 14,300 15,100 15,100 15,100 15,100 15,100 15,100 15,100 15,100

C. Dried flowor productiou (s tons) 1/,4/

Unimproved let year plants 568 524 465 461 261 144 49 --- --- --- ---2rd year plants 1,015 1,317 1,215 1,079 1,070 606 334 113 ---3rd year plants LflU 1,015 1.317 1,215 1.079 1.070 606 334 113 -----

Solb-total 2,598 2,856 2,997 2,755 2,410 1,820 989 447 11--- ---

Average yield,unimproved area(kg/ha) 225 234 241 238 254 263 272 290 290 --- ---

Improved: 1st year plants 26 98 173 290 444 701 701 768 885 763 8052nd year plants --- 59 226 400 670 1,003 1,621 1,621 1,776 2,046 1,8623rd year plants --- --- 59 226 400 670 1.003 1.621 1.621 1.776 1,862

Sub-total 26 157 458 916 1,514 2,374 3,325 4,010 4,282 4,585 4,529

Average yield, inproved area 160 204 248 262 270 291 290 296 291 304 300

Total production 2,624 3,013 3,455 3,671 3,924 4,194 4,314 4,457 4,395 4,585 4,529

Overall ave-age yield 224 232 242 243 260 278 286 295 291 304 300

Incremental flower production 5/ 69 255 494 610 731 1,001 1,253 1,264 1,202 1,524 1,451

1/ On the basin of yield for unimproved eaterial of 125 kg/ha for first year plants and 290 kg/ha fot plants in each of t:their sercod mod third years, giving an average yield over the three-year productive life of 235 kg/ha.

2/ I-cludiog plants of 500 ha in FYI, 600 ha in PY2 and 600 ha in PY3 under the Project's short-tern planting program.(para. 5.07).

3/ Planting under the Pro3jet's lung-torn planting program. Includes replanting of two hectares for each one hectare ofitproved rsotriol uprooted af toe thnee years.

4/ Ic the basis of yields for isproved plant saterial of 160 kg/ha for first year plants and yields of 370 kg/hafur plants in -,rch of their second and third years.

S/ Total 'With Project' production less 'Without Project' production.

October 10, 1979

TANZANIA

PYRETHRUM PROJECT

Pvrethrin Content, Crude Extract and Marc Production

PY1 PY2 PY3 PY4 PYS 1990/91-1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1999/2000

Without Prolect

Dried flowers processed (m tons) 1/ 2,470 2,555 2,758 2,961 3,061 3,193 3,193 3,061 3,193 3,193 3,078Pyrethrln content (%) 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1Production of crude extract (m tons) 2/ 108.5 112.4 121.4 130.3 134.7 140.5 140.5 134.7 140.5 140.5 135.4

Production of pyrethrum marc (m tons) 1,731.7 1,793.9 1,937.5 2,079.6 2,149.8 2,242.4 2,242.4 2,149.8 2,242.4 2,242.4 2,149.8

With Proiect

Unimproved flowers processed (m tons) 1/ 2,470 2,598 2,856 2,997 2,755 2,410 1,820 989 447 113Pyrethrin content, unimproved (Z) 3/ 1.1 1.1 1.1 1.11 1.12 1.13 1.13 1.13 1.13 1.13 ---Extraction production, unimproved flowers (m tons)2/ 108.5 114.3 125.7 133.1 123.4 108.9 82.3 44.7 20.2 5.1 ---Improved flowers processed (m tons) 1/ --- 26 157 458 916 1,514 2,374 3,324 4,010 4,282 4,585Pyrethrin content, improved flowers (%) 4/ --- 1.3 1.3 1.31 1.32 1.34 1.34 1.34 1.34 1.34 1.34Extract production, improved flowers (in tons) 2/ --- 1.4 8.2 24 48.4 81.2 127.3 178.2 214.9 229.5 245.8

Total Extract Production (m tons) 108.5 115.7 133.9 157.1 171.8 190.1 209.6 222.9 235.1 234.6 245.8

Increased Extract Production (m tons) --- 3.3 12.5 26.8 37.1 49.6 69.1 88.2 94.6 94.1 110.4

Total marc production (m tons) 1,731.7 1.839.7 2,112.4 2,422.3 2,57).: .35. 2,940.4 i.0('4.6 3,125.8 3,081.3 3,214.5Incremental marc production --- 45.8 174.9 342.7 423.i 8,M.§ - &h, 883.4 838.9 1,064.7

1/ Flowers processed in each year are assumed to be those grown in the previous year.2/ 25 percent crude extract3/ Increases in years 1983/84-1985/86 as a result of the Project's roads components, which reduces the loss in pyrethrin content

during transport and storage. It is assumed (see para. 8.02) that 10 percent of the pyrethrins content is saved for these iflowers transported over the improved roads, and as a result the pyrethrin content rises to 1.212 on these flowers. - M

4! For improved flowers, pyrethrin content on some flowers will rise to 1.43% as a result of the roads component (see 3/ above). rx

October 19, 1979

-78- ANNEX I

Table 1-23

TANZANIA

PYRETHRUM PROJECT

Projected TP8 'With-Project' Income Statements 1/

PY1 PY2 PY3 PY4 PY5 PY6 PY7 PY8 PY9 PY101980181 1981/82 1982183 1983184 1984185 1985186 1986187 1987/88 1988189 1989190

clowersTPB purchases (n tons) 2/ 2,624 3,013 3,455 3,671 3,924 4,194 4.314 4,457 4,395 4,585Average producer price (Tsh/kg) 2/ 7.5 8.4 9.3 10.5 11.7 13.1 14.6 16.1 17.4 18.6

Volucme of sales 4/Crude extract (m tons) 108.5 115.7 133.9 157.1 171.8 190.1 209.6 222.9 235.1 234.6Pyrethrun marc (m tons) 1,731.7 1,839.7 2,112.4 2,422.3 2,573.7 2,751.1 2,940.4 3,024.6 3,125.8 3,081.3Pyrethrum powder (m tons) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Sales Prices )Crude extract 426.2 468.9 511.1 557.1 576.7 596.2 615.2 637.2 658.5 717.8Pyrethrun marc 0.9 1.0 1.1 1.2 1.2 1.2 1.2 1.2 1.1 1.1Pyrethrms powder 10.0 11.1 12.2 13.3 14.5 15.8 17.2 18.8 20.5 22.3

RevenueCrude extract sales 46,243 54,252 68,436 87,520 99,077 113,338 128,946 142,032 154,813 168,396Mare sales 1,559 1,840 2,323 2,907 3,088 3,301 3,528 3,630 3,438 3,369Powder sales 1.000 1,110 1,220 1,330 1.450 1,580 1.720 1,880 2.050 2,230

Cross revenue 48,802 57,202 71,979 91,757 103,615 118,219 134,194 146,544 160,301 174,015

Variable expensesPayments to growers 6/ 19,680 25,309 32,132 38,546 45,910 54,941 62,984 71,758 76,473 85,281Flower ccllection costs 7/ 2,779 3,510 4,387 5,081 5,920 6,897 7,732 8,708 9,359 10,643Processing costs 6/ 2.551 3,220 4,025 4.661 5.431 6,328 7.094 7,989 8.586 9,764

Sub-total 25,010 36,039 40,544 48,288 57,261 68,166 77,810 88,455 94,418 105,688

Variable margin 23,792 25,163 31,435 43,469 46,354 50,053 56,384 58,089 65,883 68,327(as percent of revenue) (49) (44) (44) (47) (45) (42) (42) (40) (41) (39)

Non-variable expensesAdministration 8/ 9,764 10,955 12,180 13,276 14,471 15,773 17,193 18,740 20,427 22,265Sales expenses 1,291 1,420 1,546 1,687 1,839 2,005 2,185 2,382 2,596 2,630Depreciation 6,600 7,015 7,079 7,079 7,079 7,611 7,611 7,611 7,611 7,611Manufacturing overhead 4,400 4,840 5,276 5,750 6,268 6,832 7,447 8,117 8,848 9,644Project related expenses: staff 9/ --- --- --- --- --- 984 1,073 1,169 1,274 1,389

vehicle operations jO/ 2,376 2,614 2,849 3,105 3,385 3,689 4,021 4,383 4,778 5,208building maintenance 11/ --- 106 288 330 360 392 427 466 508 553bulking centers, nurseries 12/ -- --- -- --- - 2,288 2.493 2,718 2,963 3,229

Sub-total 24,431 21,950 29,220 32,055 33,402 39,574 42,447 45,586 49,005 52,729

Operating nargin (639) 3,213 2,215 11,414 12,952 10,474 13,937 12,503 16,878 15,598(as percent of revenue) (-1) (6) (3) (13) (13) (9) (11) (9) (11) (9)

Interest: on GOT loan 907 2,285 2,901 3,238 3,600 3,600 2 880 2,160 1,440 720on TIB loan 2,822 2,544 2,262 1,980 1,697 1,415 1,133 851 567 286on overdraft 13/ 2,017 1,876 1,858 1,963 1,170 373 1.284 991 898 259

Sub-total 5,746 6,705 7,021 7,181 6,467 5,388 5,297 4,002 2,905 1,265

Fre-tax income (6,385) (3,492) (4,806) 4,233 6,485 5,086 8,640 8,501 13,973 14,333Incomo tax --- --- --- 2,117 3,243 2,543 4,320 4,251 6,987 7,167Net income (6;385) (3,492) (4,806) 2,116 3,242 2,543 4,320 4,250 6,986 7,166

(As percenl: of revenue) (-13) (-6) (-7) (2) (3) (2) (3) (3) (4) (4)(As percent of net worth) (-17) (-9) (-12) (5) (6) (5) (7) (7) (10) (9)

1/ In current prices assuming annual inflation rates of 11 percent in 1980, 10 percent in 1981 and 9 percent thereafter.2/ On the basis of para. 2.22.3/ On the basis of Table T-

2,

41 On the basis of Table T-22.5/ On the basis of Table T-29.6/ On the basis of para. 8.02.71 Including transport costs and the costs of bags.8/ Costs of administration increase by 2 percent annually in real terms through 1984/85 and remain constant thereafter.9/ Costs of local extension and HQ staff included in Project costs through 1984/85; thereafter met by TPB. Costs give in Table T-23.

10/ Costs of operating the 4 WD vehicles and motor cycles purchased under the Project. Costs of operating trucks covered unier flower collection costs.11/ On the basis of 2 percent per asnum for the offices, houses and stores constructed under the Project.12/ The cost of operating bulking centers and village nurseries assumed met by TPR after 1984/85.13/ At an annuLal interest rate of 10 percent.

February 23, 1980

TANZANIA

PYRETHRUM PROJECT

Pro jected TPB "With-Pro ject" Balance Sheets 1/

PY1 PY2 EY3 PY4 PY5 PY6 PY7 PY8 PY9 PYIO1980/81 19811/82 1982/83 1983/84 1984/85 198586 1 987/88 1988,/89 1989/90

-------------------------------------------------- (FiRures in Tsh'OOO)---------------------------------------------

Assets 68,138 67,253 70,844 66,598 59,519 52,440 52,698 45,087 37,476 29,865Fixed assets at start of year 5,715 10,606 2,833 --- --- 7,869 --- --- --- ---

Additions 2 e 73,853 77,859 73,677 66,598 59,519 60,309 52,698 45,087 37,476 29,865Fixed assets at end of year 6,600 7,015 7,079 7,079 7,079 7,611 7,611 7,611 7,611 7,611Less: Depreciation 67,253 70,844 66,598 59,519 56,440 52,698 45,087 37,476 29,865 22,254Net fixed assets p12,525 21 039 30.133 36,813 44,029 44.029 44.029 44.029 44.029 440.29Development Fxpenditure 3/ 79,778 91,883 96,731 96,332 96,469 96,727 89,116 81,505 72,894 66,283

Net Long-term assets

Current AssetsSmall inventories,tools 374 411 449 489 533 581 633 690 752 820Stocks, empty bags 1,587 1,746 1,903 2,074 2,261 2,464 2,686 2,928 3,192 3,479Debtors, repayments 7,062 7,062 7,062 7,062 7,062 7,062 7,062 7,062 7,062 7,062Working cash balances 4,076 4,484 4,887 5,327 5,828 6,329 6,898 7,519 8,196 8,933Cash reserves --- _1293

Sub-Total 13,099 13,703 14,301 14,952 15,684 16,436 17,279 18,199 19,202 21,587

Less: Current liabilitiesCreditors, accrued charges 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759Provision for taxation ---..-- --- 2,117 3,243 2,543 4,320 4,250 6,987 7,167Overdrafts 18,759 18,580 19,625 11,704 3,729 12,836 9,911 8,981 2.591 ---

Sub-rotal 20,518 20,339 21,384 15,580 8,731 17,138 15,990 14,990 11,337 8,926

Net working capital (7,419) (6,636) (7,083) (628) 6,953 (702) 1,289 3,209 7,865 12,661

Total net assets 72,359 85,247 89,648 95,704 103,422 96,025 90,405 84,714 81,759 78,944

LiabilitiesLong-term loans - TIB 4/ 24,700 21,960 19,220 16,480 13,740 11,000 8,260 5,520 2,780 --

- GOT 5/ 9,072 22,846 29,005 32,380 36,003 28,803 21,603 14,402 7,201 ---

Net worthInitial GOT grant 1,560 1,560 1,560 1,560 1,560 1,560 1,560 1,560 1,560 1,560GOT grant for Project 6/ 9,168 14,514 20,282 23,587 27,180 27,180 27,180 27,180 27,180 27,180Accumulated iocome (11,974) (15,466) (20,252) (18,136) (14,894) (12,351) (8,031) (3,781) 3,205 10,371Capital grants 39,833 39,833 39,833 39,833 39,833 39,833 39,833 39,833 39,833 39,833

Total net worth 38,587 40,441 41,423 46,844 53,679 56,222 60,542 64,792 71,778 78,944

Total net worth plus liabilities 72,359 85,247 89,648 95,704 103,422 96,025 90,405 84,714 81,759 78,944

Long-term debt/net worth ratio 47'53 53:47 54:46 51:49 48:52 41:59 33:67 24:76 12:88 0:100

Current asset/current liability ratio 0.7:1 0.7:1 0.7:1 1.0:1 1.8:1 1.0:1 1.1:1 1.2: 1.7:1 2,4:1

1/ On the basis of annual inflation rates of 11 percent in 1980, 10 percent in 1981 and 9 percent thereafter2/ Includes the buildings and vehicles financed under the Project.i/ Expenditure under the Project on all items excluding buildings and vehicles.4/ Two loans from TIB to finance the construction of the Mafinga extraction plant. One loan is for Tshs 8.6 million, repayable over 10

years at a 10 percent annual interest rate. The second is for Tsh 8.9 million, repayable over 11 years (with one year of grace) at an annual interest rate of 11 percent. t s|/ A loan from GOT under the Project for strengthening TPB. The loan is at an annual interest rate of 10 percent, and is for ten years, including five years of grace on repayment 0'

of the principal. H -6/ To finance smallholder development under the Project.

February 23, 1980

TANZANIA

PYRETHRUM PROJECT

Project TPB 'With-Project' Cash Flow 1/

PYI PY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY10

Cash Inflow 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90

GOT grant 2/ 9,168 5,346 5,768 3,305 3,593 --- --- --- --- ---

GOT loan 3/ 9,072 13,774 6,159 3,375 3,623 --- --- --- --- ---

Net income (6,385) (3,492) (4,806) 2,116 3,242 2,543 4,320 4,250 6,986 7,166

Depreciation 6,600 7,015 7,079 7,079 7,079 7,611 7,611 7,611 7,611 7,611

Cash from TECO 4/ 4537-

Tax provision --- _--_-- 2,117 3,243 2,4 4,2 4,251 6,987 7,6

Total cash inflow 22,992 22,643 14,200 17,992 20,780 12,697 16,251 16,112 21,584 21,944

Cash Outflow

Expenditure on Pro4ect 5/ 18,240 19,120 11,927 6,680 7,216 7,869 --- --- --- ---

Repayment of GOT loan --- --- --- --- --- 7,200 7,200 7,201 7,201 7,201

Repayment of TIB loan 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,780

Increase in current assets 598 604 598 651 732 752 843 920 1,003 1,092 X

Payment of taxation --_-- __ _ - 2,117 3,243 2,543 4,320 4,251 6,987

Total cash outflow 21,578 22,464 15,265 10,071 12,805 21,804 13,326 15,181 15,195 18,060

Net cash inflow (outflow) 1,414 179 1,065 7,921 7,975 (9,107) 2,925 931 6,389 3,884

Cumulative net cash inflow (outf.x\) 1,414 1,593 528 8,449 16,424 7,317 10,242 11,173 17,562 21,446

1/ In current prices assuming annual inflation rates of 11 percent in '980; IC percent in 1981 a,od 9

percent thereafter2/ GOT grant (through the Development Budget) to TPB for implementation of the Project's smallholder

production component.3/ GOT loan for implementation of the Project's component to strengthen TPB. Loan is repayable over

10 years, with 5 years of grace, at an annual interest rate of 10 percent.

4/ Accumulated TECO net income transferred to TPB after closing of Arusha processing plant.

5/ Includes Tsh 7.9 million in 1985/86 for replacement of venicles purchased under the Project.bu x

February 23, 1980M

TANZANIA

PYRETWRMI PROJECT

Financial Rate of Return and R tR ente 2/

PY 1 PT 2 PY 3 Pn 4 PY 5 PY 6 Pn 7 Pn 8 Pn 9 Pt 10 PY 11 n 12 P 13 Py 14 pn 15 pT 16 PY 17 PT 18 Pn 19 PY 20Inere-eetul Net Renef it

InflowNet cash inflow from operations 2/ (2,988) 738 (2,160) (616) 3,256 909 4,193 6,920 10,313 7,024 8,669 8,669 8,669 8,669 8,669 8,669 8,669 8,669 8,669 8,669

utflow

Increase ie gross fixed assets 2/ 10,336 12,345 6,905 4,640 4,831 2,880 --- --- --- --- 2,880 --- 2,880--- --- ---

Nee be-ofitt before fi-ancing (13.324) (11,607) (9,065) (5,256) (1,575) (1,971) 4,193 6,970 10,313 7.024 5,288 8,669 8,669 8,669 8,669 5,799 8,669 8,669 8,669 8,669

Leeg-tere loses received b/ 7,196 8,149 2,916 2,475 2,475 --- --- --- --- --- --- --- --- ---Repsyi.e.t of long-toer loans 4/ --- --- --- --- --- (3,404) (3,123) (2,865) (2,629) (2,412) --- --- --- ---- ---- --Ireoeeotol iteroest puy-ennt / (717) (1,467) (1,638) (1,750) (1,853) (1,702) (1,253) (861) (527) (242) --- --- --- ----

Net benefits after finaecitg (6,845) (4,937) (7,787) (4,531) (953) (7,077) (183) 3,194 7,157 4,370 5,789 8,669 8,669 8,669 8,669 5,789 8,669 8,669 8,669 8,669

Finaecial Role of Reetre: 9% _/

Reate oeequity: 11% 6/

1./ le eoelut 19888 pit-.2/ The differe-ee belseece net io-eo pre-tCe pIes depreciarion io the 'with-Project aed the oitboet-PtojOct& aittatioo, deflated to

..e eust 1998 price.2/ The differoec- bet.en. greee fiord assots if Ihl w.ith-Project' aed 'eithbut-Projeet' titsatioe, deflated to o-stuet 1980 prices.4/ Defloted to cosutant 1980 prites.5/ Rute of return on eet benefite before finaecies./ Rate of return ee set b-nofite after flnaecie.8

TANZANIA

PYRETHRUM PROJECT

Government Cash Flow (1/)

PYI PY2 PY3 PY4 PY5 PY6 PY7 PY8 PY9 PYIO PYII1980/81 1981/82 1982183 1983/84 1985 /85 1985186 /87 1987/88 1988/89 199/90 9

---------------------------- I___ ----------------- ---- ------- (Figures in Tslh '000) ------------------------------

Cash InflowIDA Credit Disbursements 2,490 19,090 19,920 19,920 15,770 5,810 --- --- ---

TPB interest payments 907 2,285 2,901 3,238 3,600 3,600 2,880 2,160 1,440 720 ---TPB loani repayments --- --- --- --- 7,200 7,200 7,201 7,201 7,201 ---

Incremental export duties on extract 2/ --- 7 28 59 82 109 152 194 208 207 243Incremental income tax from TPD 3/ --- (182) (1,727) (3,690) (724) (2,187) 787 2,989 6,464 5,373 7,017

Total cash inflow 3,397 21,200 21,122 19,527 18,728 14,532 11,019 12,544 15,313 13,501 7,260

Cash OutflowLoan to TPB 9,072 13,774 6,159 3,375 3,623 --- --- --- --- ---

Grants for Project implementation 23,890 16,251 14,139 12,207 6,870 --- --- --- --- ----

Maintenance of feeder roads 4/ --- --- --- --- 1,730 1,890 2,060 2,250 2,450 2,671 2,911

Continuation of research program 5/ --- --- --- --- --- 2,315 2,523 2,750 2,997 3,267 3,561

Service charge on IDA Credit --- 19 162 311 461 546 579 623 623 623 623

Total cash outflow 32,962 30,014 20,460 15,893 12,684 4,751 5,162 5,623 6,070 6,561 7,095

Net cash inflow (outflow) (29,565) (8,814) 662 3,634 6,044 9,781 5,857 6,921 9,243 6,940 165

Cumulative cash inflow (outflow) (29,565) (38,379) (37,717) 34,083 (28,039) (18,258) (12,401) (5,480) 3,763 10,703 10,868

1/ In current prices, assuming annual inflation rates of 11 percent in 1980, 10 percent in 1981 and 9 percent in succeeding years.2/ Assuming continuance of present duty rate of Tsh 2,200 per m ton.3/ Difference between 'With-Project' and 'Without-Project' TPB income tax payments.4/ Maintenance of feeder and access roads improved under the Project.5/ Assumes maintenance of research program at its 1984/85 level.

February 23, 1980

TANZANIA

PYRETHRUM PROJECT

Foreign Exchange Inflows and Outflows 1/

1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90

----------------------------------- (Figures in Tsh '000).-------------------------------------------------

InflowIDA Credit 2,490 19,090 19,920 19,920 15,770 5,810 --- --- --- ---

Export of pyrethrum marc 2/ --- 90 373 796 1,035 1,284 1,821 2,365 2,469 2,556

Export of pyrethrum extract 2/ --- 1,575 6,504 15,202 21,782 30,115 43,326 57,325 63,550 68,909

Total inflows 2,490 20,755 26,797 35,918 38,587 37,209 45,147 59,690 66,019 71,465

OutflowFE content of Project investments 3/ 19,777 18,015 12,178 9,349 6,296 6,689 --- --- --- ---

FE content of flower collection 4/ 47 194 410 552 721 1,074 1,462 1,609 1,667 1,724

FE content of flower processing 5/ --- 62 246 522 887 1,322 1,799 1,979 2,050 2,122

FE content of vehicle operations 4/ 1,544 1,712 1,886 2,055 2,240 2,442 2,662 2,901 3,163 3,447

FE content of road maintenance 6/ --- --- --- --- 7,136 7,778 8,478 9,241 10,072 10,979

IDA credit service payments --- 19 162 311 461 546 579 623 623 623

Total outflows 21,368 20,002 14,882 12,789 17,741 19,851 14,980 16,353 17,575 18,925

Net inflow (outflow) (18,878) 753 11,915 23,129 20,846 17,358 30,167 43,337 48,444 52,540

Cumulative net inflow (outflow) (18,878) (18,125) (6,210) 16,919 37,765 55,123 85,290 128,627 177,071 229,611

1/ In current terms, assuming annual inflation rates of 11 percent in 1980, 10 percent in 1981 and 9 percent in 1982.

2/ On the basis of incremental production as in Table T-22 and financial export prices as in Table T-29.

3/ Including replacement of Project-financed vehicles in 1985/86.

4/ On the basis of an FE content of 65%.5/ On the basis of an FE content of 80%/.61 On the basis of an FE content of 79%.

February 23, 1980o:

TANZANIA

PYRETHRUM PROJECT

Price Structure for Extract and Marc Exports 1/

1980181-183/84 1984185 1985186 1986187 1987/88 1988/89 onwardsFinancial Economic 2/ Financial Economic 2/ Financial Economic 2/ Financial Economic 2/ Financial Economic 2/ Financial Economic 2/

1. Crude Extract (25%,)

FOB Dar-es-Salaam (Tsh '000 per m ton) 3/ 391.2 565.3 371.6 537.0 353.0 510.1 335.3 484.5 318.6 460.4 302.6 437.3

Less: Wharfage 4/ 3.1 3.1 3.0 3.0 2.8 2.8 2.7 2.7 2.6 2.6 2.4 2.4Port handling/storage 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3Transport,Mafinga-Dar 5/ 0.6 1.2 0.6 1.2 0.6 1.2 0.6 1.2 0.6 1.2 0.6 1.2Clearing, forwarding 6/ 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5Export du t y 7/ 2.2 --- 2.2 --- 2.2 --- 2.2 --- 2.2 --- 2.2 ---

Sub-total 6.7 5.1 6.6 5.0 6.4 4.8 6.3 4.7 6.2 4.6 6.0 4.4

Net price, ex Mafinga 384.5 560.2 365.0 532.0 346.6 505.3 329.0 479.8 312.4 455.8 296.6 432.9

2. Pvrcthrum Marc

FOB Dar-es-Salaam (Tsh per m ton) 1/ 1,602 2,315 1,545 2,233 1,468 2,121 1,395 2,016 1,325 1,915 1,259 1,819

Less: Wharfage 13 13 12 12 12 12 11 11 11 11 10 10Port handling,storage,clearing 6/ 145 145 145 145 145 145 145 145 145 145 145 145Transport, Mafinga-Dar 5/ 600 1,207 600 1,276 600 10007 600 1,20 600 1,207 600 1_207

Sub-total 758 1,365 767 1,364 757 1,364 756 1,363 756 1,363 755 1,362

Net price, ex Mafings 844 950 788 869 711 757 639 653 569 552 50 457

1/ In constant January 1980 prices2/ On the basis of a shadow foreign exchange rate of Tsh ]2.00=US$1.003/ On the basis of prices as in para. 7.16.4/ On the basis of 0.8 percent of FOB vaue._/ By road, with a foreign exchange content of 70 percent6/ Including documentation, agency fee, etc. >7/ At a flat rate of Tsh 2,200 per m to,l of extract.

October 26, 1979

TANOANIOA

FT8ETHRUH PROJECT

Econoamic Analyvsis

FYI PY2 PY3 PY4 Pn5 nY6 PY7 PY PT PY1O PYll FY12 PY13 FF14 PY15 PY16 FY17 FF18 FY19 PY20

1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 8 1987/88 1888/89 19890 1990/91 1991192 1992/83 1993/94 1994/9 5 1 995/96 1996897 197/98 1998/99 1999/2000

Unim-r-oed PlLntine Material Distribution

Rcoenoic QuitePro..ct inv:stments 1,468 1,188 679 --- --- --- --- --- ---

Incremental flower collection costs 86 301 523 523 500 523 437 199 ---

Incremental floer trnosina costi --- 90 316 5949 549 525 549 459 209

Loin of naten pcuductlun 655 1,470 2,240 2.263 2,285 2,285 2,285 1,598 733

Ltbor usi it pyreth-um production 644 1.417 2,061 2,061 2,865 2,061 2,061 1,417 644

Inputne in pyr-th.r. production 9 21 30 30 30 30 30 21 9

Total conittcost 2,862 4,407 5,849 5,426 5,429 5424 5,362 3.694 1,595

Pcowiuwic lenefitoIncrenectul entract sales _-- 1,540 5,422 9,411 8,938 8,115 8,061 6,399 2,762

Lnccenencal narc salon _ ... ~42 147 7 -55 233 194 179 124 47

Tota1 economic benfilts --. 1,582 5,569 9,666 9,171 8,309 8,236 6,523 2,809

Imnrnement of ma11holder -rod-ctio- cod TPB

Rcncntmc Quostellzeect ononsLucoco 19,690 18,584 5,729 5,359 5.359 --- --- --- --- --- --- --- --- --- --- -__ --- --- --- ---

Rcplacementu -s --- -- --- 6,959 --- --- ... 6,959 --- --- --- 6,959 --- --- --- ---

Onccczncal fIerce ccllccci- o coci --- 48 155 315 505 854 1,289 1,544 2,103 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002 2,002

1-crenntal floe- procesaing coits --- --- 50 169 131 530 897 19953 1,621 7,208 2,102 2,102 2,102 2,102 2,102 2.102 2.102 2,102 2,102 2,802

Veiclr cperatlo- 3,072 3,072 9,072 3,072 3,072 3,072 3,072 3,072 3,072 3,072 3,072 3,072 3,072 3,072 3.072 9,072 3,072 3,072 3,072 3,072

ullciicenters &4vilullennuricrin ---- --- 1,776 1,726 --- --- --- _ -__ --- ___ --- - --- --- ---

Yutensiuu staff - --- - .--- --- 255 255 255 255 255 255 255 255 255 255 255 255 255 255 255

HQ staff --- --- --- --- --- 374 374 374 374 374 374 374 374 374 374 374 374 374 374 374

luildigtwonaintenacc -- 113 281 293 293 293 293 293 293 293 293 293 293 293 293 293 293 293 293 293

Incremenral un-fern labur 26 124 298 56t4 _ _ 902 1,315 1,847 283 ,2368 243 2,3 2.431 0 2,491 2431 2.431 2.431 2.431 2.431 2,431_

Tfucl c -onomic cots 72,788 71,941 14,585 9,766 1 0,462 15,378 9,753 9,074 10,086 11,035 17,488 10,529 10,529 10,529 10,529 17,483 10,529 10,529 10,529 10,529

Ecunomic BenefitiTocremectal cotract nules -- 309 811 3,373 8,035 14,151 22,223 30,850 35,000 37,546 44,602 44,602 44,602 44,602 44,602 44,602 44,602 44,602 44,602 44,602 c

lncremcntal curt naler __- 2 19 81 _ 135 191 281 359 357 383 487 4487 487 482 487 487 487 487 487 487

Tutu] econic benefits ___ 911 030 5,454 0,170 14,342 72,904 31,209 95,957 37,929 45,089 45,089 45,089 85,089 45,089 45,089 45,009 45,09 49,089 45,09

Rued Conponent

Ecunonic CostaRo.d in opuco-ent cones 10,278 5,647 5,729 5,826 --. .. - --- - - --- --- --- --- --- --- --- --- --- --- ---

Raud mateenanceesta 316 ___30 853, IU J 1_1 .l.a111 ,_1.OL 1_117 1,11 1 1,117 101,817 ,_, 1 77,117 1.117 1.187 1_1 1.117 1_117 1 17

Total -nmine cccti 10,278 5,647 6,045 6,679 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117

Lueonoic Renet itiValue of pyr:thrin: :ed.. - 770 2,229 7,764 2,797 2,870 2,953 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,190 3,196 3,190 3,190 3,190

Maid co:t -i9-s-TlB trafftc --- --- 47 139 257 274 294 317 355 355 355 355 355 355 355 355 355 355 355 355

RicLdual calce nf hounrs &eqcipent -- _ 6.820_ --- --- _-- --_ --. _-

Total nconemtc b2ncetir -- _ - _ _ 819 9,188 9,021 3,071 3,164 3,270 3,545 3,545 3,545 3,545 3,545 3,54 5 323Y T,545 373 ys~j

0noe11

Economic TeatsUnioproc-d plantiwg materiel 2,862 4,407 5,849 5,426 5,425 5,424 5,362 3,694 1,595 --- --- --- --- --- -.-

Improcd of -nattheld-t pred-ctiwn & TPB 22,788 21.941 14,585 9,766 10,462 15,378 9,753 9,074 10,086 11,035 17,488 10,529 10,529 10,529 10,529 17,488 18,529 18,529 10,529 10,579

leads 10.2 70 5,647 6,045 6_6)9 1_1 17 1.117 1.117 1,1 17 J,_5 44J7 1.117 1,117 1,117 1,117 1_ 117 i1.17 1_11 1 .1_I17 _1,117 1_17 1_117

TtaL1 economic cons 35,928 31,995 26,479 21,871 17,004 21,919 16,232 13,885 12,798 12,152 08,605 11,646 11,646 11,646 11,646 18,605 11,646 11,646 11,646 11,646

Econnmic OsnefitsOncremectal1 retract ialoo 0~~ 1,849 7,003 15,013 19.737 25,063 33,154 40,202 40,952 40,736 47,792 47,792 47,792 47,792 47,792 47,792 47,792 47,792 47,792 47,792

Inccsnce,rel marcusalen --- 44 166 326 368 385 456 483 404 383 487 487 487 487 487 487 487 487 487 487

load wane cnt-aings 47 6,959 2. 57 274 ..294 31l7 355 305 355 355 355 355 3535 35 353535

Totalecenonri benefits 1,893 7,216 22,398 20,362 25,722 33,904 41,002 41,711 41,474 48,634 48,634 48,634 48,634 48.634 48,634 48.634 48,634 48,634 48,634

Febe-ary 24, 1980 - j

-86- ANNEX 2Page 1

TANZANIA

PYRETRRUM PROJECT

Selected Documents and Data in the Project File

A. Selected Reports on the pyrethrum sub-sector

Al Pyrethrum: A Case Study of Industrial LocationR. Eastwood, for UNIDO 1977

A2 Pyrethrum: The Natural InsecticideJ. E. Casida, 1973

A3 Pyrethrum FlowersR. H. Nelson, 1975

A4 Pyrethrum in the Southern Highlands of TanzaniaC. B. Jespersen, 1974

A5 The Pyrethrum Ordnance and Amendments, 1960

A6 The Uyole Agricultural Center Establishment Order, 1976

A7 TPB. Audited Accounts for year ending June 30, 1977

A8 Investigation into Financial and Operating Position of TPBNDB of Kilimo, May 1979

A9 Report of Pyrethrum Research Program, UAC, 1977 and 1979

B. Selected Reports on the Project

BI Preparation ReportFebruary 1979

B2 Report on the Costs of Collecting, Processing and MarketingPyrethrum in TanzaniaCooper and Lybrand, July 1978

B3 Feeder Roads for the Pyrethrum Industry in the SouthernHighlands of TanzaniaJohn Burrow and Partners, 1979

C. Selected Working Papers

Cl Pyrethrum Production in Tanzania

C2 Smallholder Production Component - Detailed Features

-87- ANNEX 2Page 2

C3 Research Component - Detailed Features

C4 Strengthening TPB - Detailed Features

C5 Roads Component - Detailed Features

C6 Farm Labor and Budgets for Major Zones

__________ ______ _____ ___________ _______ ______________________________________ I~~~~IPRD 4436

TANZANIA 17

PYRETHRUM GROWING AREAS/Pyerhrm growing aireais Koe Db

U Go-downs /~- Trunk roads -

-I ~~~Other roaids FCO KeeoRailway ~ ~ ~ /

--- International boundaries~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~N t5aone,o

i~~~~~~~~~~~Iedinnah5nsatce

G 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o,/npv nrtnn/h

f '\~~~~~y '9

_\e M LWt- Tngninn oe

N~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~W,ph -p~ . ,hK~~~~~~~~~~~~~~~~~~~~~~~~ .~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 5.ZAM5IA KILOMETERS 9 ~~~~~~~~~~~~~~~~~~~~~~~~ 20 09 49 09 ZAMBA / kn~~~~~~~~~~~~~~~T. d d hA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P -/ny-n

E~~~~~~~~~~~~~~~~~~~5Ap/

j 111d,-1 Ih, kg~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l ~~~~~~~_reSnen

IBRD 14386

34 /TANZANIA i5 AUGUST 1979

PYRETHRUM PROJECT Kigango 0

PROPOSED PROJECT INVESTMENTS - - -, I\I GA

Mbeya and Iringa Regions - .Internalional trunk road (Tan-Zam Highway) . e

-Other trunk roads-/ / Regional and local main roads

- District and feeder roads-8 I / - - - ~~~~~~~~~~~~~~Roads to be irmproved under project///f\ °

LI[ Jr/--r--Tazara Railway J

0 / AirfieldsK Proposed TPB Offices-i /~ (. Proposed permanent buying centers

Proposed bulking centersRegional boundaries ,

-*-* International boundaries i-rSeeoHilII

KILOMETERS 0 10 30 0 0 u |- r ngrMILES ito 2e 3o-

o2r)__ _ | _ - (0 ) g Kipangs

huny J ames Corner / _

-/--1- 9 V ~Ntoekela0goma m - lsuJng5oh Lugoda / A1

'> -\-t/ \ (; /1 R.,odo >- k

b <f:: u j wi j 0U ~N X \- .--- ~ I V / . A TA N ZAI A I nuK tinyri

Vyi 0 A /-- or o o tr ablSrrrW

yos e

<~~~~~~~~~~~~~~~~~~~~~a g t rL U L ' 0 04 ' ; 1'1 ;Pt S IOt I< ,CA NBftYSOA loOt

owa )zumb ap n a -0 Fwe r , 'rta f

- : 'u ' 0 s t 34- Sv E 35. <.f t f K-3ZLupIOt E

anti . Or tei .rt \ A I

Magoma~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~m wTh OZMBOU