RETURN TOREPORTS DESK ~~~~~RESTRICTEDREPORTS DESK FILE COPY Report No. PA-43a

ONE WEEK

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

EASTERN REGION COCOA PROJECT

GHANA

June 3, 1970

Agriculture Projects Department

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CURRNC! EBQUIVAL1NTS

US$ 1 NO X.02

NO1 = US$ 0.98

WEGHTS AND EASURES

I acre = 0.05 hectare (ha)1 mile = 1.61 kilonmeter (kw)1 pound (lb) = 453.6 grams (gm)1 long ton = 2,240 lb = 1.016 metric ton1 gallon = 3.79 Liters

ABBREVIATIONS

ADB : Agricultural Developmerrt BankBHC : Benzene HexachlorideCD : Cocoa DivisionCIB : Cocoa Marketing BoardCI4C : Cocoa Marketing Conpamy (Ghana) Ltd.CRIG : Cocoa Research Institute of GhanaGAM : Ghana Cooperative Marketing AssociationLBA : Licensed Buying AgentSSVD : Svollen Shoot Virus Disease

GHANA

EASTERN REGION COCOA PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ...... ....................... i

I. INTRODUCTION .............................................1

II. BACKGROUND ........................ * ................. 1

A. General .................... 1.................. IB. Agriculture Sector ............................ 2

III. THE COCOA INDUSTRY ....... ........................... 3

A. Background .................................... 3B. Producer Price Policies and Subsidies .... ..... 4C. Institutions .................................. 5

IV. THE PROJECT AREA .................................... 7

Population and Farm Community ..................... 7Land Tenure, Land Use and Farm Size . .............. 7Credit Facilities ................................. 8Communications .................................... 8

V. THE PROJECT ......................................... 8

A. Description ....... ............... 8B. Field Development ................ ... ....... ... 9

VI. COST ESTIMATES AND FINANCIAL ARRANGEMENTS ........... 11

A. Project Costs ...... ........................... 11B. Proposed Financing . ........................... 12C. Procurement .................. ................. 13D. Disbursement ................. ................. 14E. Accounts and Audit ............ . ................ 14

This report is based on the findings of a Bank appraisal mission to Ghanain October/November 1969, composed of Messrs. A. Denness, P. Th. Grosjean,J. J. Vieira and D. Murray (Consultant).

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Page No.

VII. ORGANIZATION AND MANAGEMENT ........................... 15

A. Organization .................. .................. 15B. Credit Arrangements and Terms of Sub-Loans ...... 16C. Field Operations ...... .......................... 18D. Staffing ., .. ....................... 19

E. Marketing Organization ........... .. ............. 19

VIII. PRODUCTION, MARKETS, FARMER BENEFITS AND GOVERNMENTREVENUES .............................................. 20

A. Yields and Output ............................... 20B. Markets and Prices .............................. 21C. Farmers' Benefits ............................... 22D. Government Revenue .............................. 23

IX. BENEFITS AND JUSTIFICATION . ........................... 23

X. RECOMMENDATIONS ....................................... 25

ANNEXES

1. Cocoa Marketing Board, and Cocoa Marketing

2. Technical Aspects of Growing Cocoa in Ghana and in the Project Area

3. Ministry of Agriculture, Organization Chart

4. Cocoa Division, Organization Chart

5. Cocoa Marketing Cooperatives

6. Agricultural Development Bank

7. Phasing of Project Development

8. Project Costs

9. Project Organization Chart

10. Projected Selling Price for Cocoa and Distribution of Proceeds

11. Costs and Returns per Acre, Rehabilitation and Replanting

12. Project Cash Flow and Impact on Government Budget

13. Calculation of Economic Rate of Return

MAP

GHANA

EASTERN REGION COCOA PROJECT

SUMMARY AND CONCLUSIONS

i. This report appraises a project for the improvement of the cocoaproduction industry in the Eastern Region of Ghana for which an IDA creditof US$8.5 million equivalent is proposed. The project which is designedto serve as a pattern for similar activities in other areas of the country,would be the Bank Group's first purely agricultural lending operation inGhana. In 1969 an IDA Credit of US$1.5 million equivalent was made toGhana for on-lending through the Agricultural Development Bank for the con-struction of 40 purse seine fishing trawlers; this project is progressingsatisfactorily. Cocoa accounts for about two-thirds - US$211 million in1968 - of Ghana's total exports, and the average annual total production ofabout 400,000 tons over the period 1960-69 represented about 30% of totalworld production. Effective government policies and satisfactory producerprices during the 1950's encouraged cocoa production, which in 1964 total-led 568,000 tons. However, unsound government decisions taken in the early1960's, affecting producer prices, marketing, use of price stabilizationfunds, and cocoa extension services, proved detrimental to the cocoa indus-try. Producer price decreased from US 12 cents/lb in 1959 to US 6.7 cents/lb in 1965. Farms were neglected, the consumption of pesticides fell, andnew plantings were curtailed. Ghana's ability to raise resources for de-velopment is critically dependent upon cocoa exports, and satisfactory pro-duction levels must be maintained by the proper care of existing planta-tions and the replanting of old cocoa farms producing sub-economic yields,and following a change in Government in 1966 steps have been taken by Gov-ernment to resuscitate the industry.

ii. The project involves the on-lending of US$8.5 million equivalent,through the Agricultural Development Bank, to project farmers for the re-habilitation of 51,000 acres of standing cocoa and the replanting of 36,000acres with high-yielding varieties. All project farmers would be membersof marketing cooperatives through which loan repayments would be secured.The project would also provide an improved cocoa extension service, farmertraining, feeder road improvement, and the establishment of 15 cocoa mar-keting cooperatives.

iii. For rehabilitating cocoa, project farmers would receive loansof up to NO 54/acre at 8% interest to be repaid over four years. Averageyields would increase from 150 lb/acre to 500 lblacre in four years as aresult of rehabilitation, and farmers' net incomes per acre would be in-creased by about No 22/annum. For replanting, loans of up to NO 172/acrewould be made and would be repaid at 8% interest over 13 years. Farmers'annual net cash incomes in the period following loan repayment would beabout NO 65/acre and would compare with about NO 20/acre on existing farms.Total incremental cocoa production at maturity would be about 19,000 tons/annum, which would earn about US$11 million in foreign exchange, at pro-jected world prices.

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iv. Project costs are estimated at US$15.6 million equivalent. Theproposed credit of US$8.5 million would finance 55% of project costs, cov-ering the foreign exchange costs which are estimated at US$4.7 million, and33% of local currencv costs. To help finance the project, Government wouldobtain loans of US$1.47 million equivalent (NO 1.5 million) each from GhanaCommercial Bank, Barclays Bank D.C.O. and Standard Bank of West Africa.Terms of these loans would be 6-1/2% interest, and a 15-year repaymentperiod including seven years' grace. Where practical, project procurementwould be by international competitive bidding; goods and services obtainedin this way would have an estimated value of US$1.5 million. Local competi-tive bidding would be used to obtain goods and services with a total valueof about US$2.4 million.

v. The project would be implemented by a project development unitestablished especially for the purpose within the Ministry of Agriculture,and whibh would maintain separate project accounts. A project steeringcommittee would be appointed to coordinate the work of other agencies con-cerned with the project and to oversee project progress.

vi. The project would make a significant contribution to Ghana'sforeign exchange earnings, would strengthen the cocoa industry, improvethe incomes of some 5,000 participating farmers, and help develop the Agri-cultural Development Bank. Based on the current forecast range of long-term cocoa prices, the estimated rate of return from investment in the pro-ject is estimated at 26%. A sensitivity analysis shows that if priceswere to fall to the lowest level of the predicted range and yields were re-duced by 25%, the return would be 15%.

GHANA

EASTERN REGION COCOA PROJECT

I. INTRODUCTION

1.01 The Ghana Government has requested an IDA credit to assist infinancing the Eastern Region Cocoa Project - a project for rehabilitatingthe cocoa industry in the Eastern Region and designed to serve as a pat-tern for similar activities in other areas of the country.

1.02 The project which is the subject of this report would assist far-mers by providing credit for the rehabilitation of existing cocoa, and forthe replanting of old cocoa areas with improved high-yielding cocoa varie-ties. The project would also include the improvement of farmer trainingfacilities, the establishment and strengthening of cooperative societies,and improvement of the feeder road system within the project area.

1.03 The project was prepared by Government with assistance from theBank's Permanent Mission to Western Africa (PMWA), staff of which made sev-eral visits to Ghana during project preparation. A Bank pre-appraisal mis-sion visited the project area in February 1969. This report is based onthe findings of a Bank appraisal mission, composed of Messrs. A. Denness,P. Th. Grosjean, J. J. Vieira, and D. Murray (Consultant) which visitedGhana in October/November 1969.

1.04 In October 1969, IDA approved a credit for US$1.5 million toGhana for the construction of fishing trawlers, the Bank Group's firstoperation in the agriculture sector of Ghana. The present project would bethe Bank Group's first purely agricultural lending operation in the country.

II. BACKGROUND

A. General

2.01 Ghana is centrally situated on the Gulf of Guinea on Africa'swest coast. The country, extending some 420 miles from north to south,and 335 miles from east to west, has a total area of about 92,000 sqmiles. Almost two-thirds of the total population of about 8.4 millionlive in the southern rain forest area, which is the center of the cocoaand timber industries.

2.02 Government has estimated population growth at between 2.5% and3.0% annually, but some authorities anticipate that this could shortlyincrease to as much as 3.3%. The movement of labor especially youngmales from farming areas, to urban centers has been pronounced, and dur-ing the period 1950-1968, the proportion of the labor force employed in

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agriculture fell from 80% to 60%. This movement of labor has reducedthe availability of labor for cocoa farms, and since industrial develop-ment has been limited, has contributed to a serious degree of urban un-employment. Action is urgently required to halt, and if possible, re-verse the trend.

2.03 In 1968, GNP at current market prices totalled US$1,994 millionequivalent and of this agriculture accounted for about 50%. In the sameyear, per capita GNP amounted to US$238. However, at constant prices percapita, GNP has been declining since 1964, since real growth of the economyhas not kept pace with the increase of population.

2.04 Total exports of domestic produce in 1968 were valued at US$327.4million equivalent. the cocoa industrv alone accounting for US$210.7 mil-lion or 65% made up as follows: cocoa beans 56%, cocoa butter 7%, and cocoapaste, cake and powder 2%. Non-cocoa agriculture and forestry accountedfor approximately US$33 million equivalent, or about 10% of total exports.Of these, timber, in various forms, represented 8%, coffee 1%, and a varietyof minor products about 1%.

B. Agricultural Sector

2.06 General - Although cocoa production dominates the agriculturalsector, food production on smallholdings for local consumption is the live-lihood of 60% of the rural population. Irrigation, small in extent, islimited to the north; farm implements are rudimentary; fertilizer consump-tion is low; and pesticides are rarely used except on cocoa. Current lowyields per acre must be increased by improving the availability of moderninputs and agricultural credit.

2.07 Increasing amounts of food stuffs are imported annually, and inrecent years, 1963-1968, expenditures on these and other farm-produced im-ports increased at an average rate of 6.8% per annum. Many of these, in-cluding rice, sugar, cotton, hard fibres, meat, dairy products and fatsand oils could be produced locally, although so far the Government hastaken no more than preliminary steps in this direction. The relativelyadvanced nature of the cocoa industry has made possible the preparationof a project suitable for consideration by IDA. While no project has beenproposed as yet, it is expected that future Bank Group assistance wouldalso be extended to import substitution crops.

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III. THE COCOA INDUSTRY

A. Background

3.01 In the period 1939 through 1959, Ghana's cocoa production rangedbetween 200,000 and 250,000 tons annually. In the 1960's production beganto climb rapidly culminating in a 1964/65 season crop of 568,032 tons.This growth reflected both the sound producer price policies of the state-owned monopoly, the Cocoa Marketing Board (CMB), which resulted in a sub-stantial expansion of cocoa acreage in the 1950's, and Government measuresto improve the control of cocoa pests and diseases. Since 1964/65, how-ever, the crop has declined and in recent years has averaged about 400,000tons annually. The decline resulted principally from Government decisionstaken in the early 1960's to:

(a) utilize funds accumulated by CMB for price stabilizationfor non-cocoa purposes;

(b) steadily reduce producer prices in line with fallingworld prices and in the absence of support funds;

(c) establish a new system of cocoa marketing; and

(d) disband, for all practical purposes, the Ministryof Agriculture's cocoa extension and disease controlservices.

The changes made are described further in Annex 1. They resulted in thecurtailment of new plantings through inadequate producer prices - thesefell from US 12 cents/lb in 1959 to US 6.7 cents/lb in 1965; the neglectof farm upkeep for the same reason; and a resurgence of pest and diseaseattack - the consumption of cocoa pesticides fell from a peak of 312,000gallons in 1962 to 27,000 gallons in 1966. Following a change of Govern-ment in 1966, steps have been taken to resuscitate the industry, but pro-gress has been slow and has been inhibited both by Ghana's weak financialsituation and the major task involved in rebuilding the industry's insti-tutions. Significantly, however, the producer price for cocoa has beenincreased and is now at US 13 cents/lb, slightly above the 1959 level.

3.02 While improvements are occurring, Ghana's cocoa industry is in aserious situation. Capsid pests and to a lesser extent virus diseases 1/are seriously reducing yields, and the output of older farms is decliningand tending to outweigh that of new or replanted farms. The scope for new

1/ Annex 2 contains details of the technical aspects of cocoa growing.

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planting is very limited as over the years the land most suited to cocoa hasbeen planted, and an estimated 4.5 million acres are under the crop at thepresent time. With the deterioretion of the industry, although Ghana remainsthe world's largest single producer of cocoa, its share of world cocoa pro-duction has declined from about 37% in the early 1960's to about 30% today.Since Ghana's ability to raise resources for development is criticallydependent upon cocoa exports, the decline in production must be reversedto allow the country to maintain its share of the supply of world cocoademand which, over the past decade, has been increasing at an average rateof 4.5% per annum.

3.03 While this decline in Ghana's production has contributed to highworld prices in recent years - prices reached nearly US 50 cents/lb cifNew York in November 1969, these high prices do not compensate the basicweakness of the industry. First, much of the benefit of high prices goesto speculators in the cocoa future markets; second, high prices inhibitconsumption in a world market capable of much expansion; and third, highprices encourage the development and use of cocoa substitutes. Consequently.it is in Ghana's interest to improve the production and productivity of itscocoa farms to levels where their operators receive adequate incomes whenworld prices are at levels which encourage the increasing consumption ofcocoa. Such world prices probably are in the range of US 25 to 35 cents/lb.

3.04 Ghana has recognized the need for strengthening its cocoa in-dustry, and the subject of this report, the Eastern Region Cocoa Project,is a first significant step towards this end.

B. Producer Price and Other Production Incentives

3.05 The ordinance which established CMB in 1947 permitted it to fixproducer prices for cocoa, to accumulate operating surpluses, to use thelatter to support producer prices at times of low world prices, and to fi-nance other assistance to cocoa growers, see Annex 1. The Board's pricestabilization reserve account amounted to some NC 90 million in 1957, butthese funds and others that accrued subsequently were used by the Govern-ment for non-cocoa purposes.

3.06 In 1965, new legislation prohibited CMB from accumulating re-serves and required it to transfer operating surpluses to the Government.Thus, from 1957 CMB has lacked the capacity either to support prices orto dictate the use of its surpluses for supporting the industry in otherways. The Board's authority to fix producer prices in advance of eachcrop season has been retained however, and the operating surpluses thatthe board budgets together with the very heavy export duties levied oncocoa, result in Government retaining a substantial share of the revenuesearned by the industry.

3.07 Annex 3 shows that under present producer price and export dutypolicies, net revenues to Government would amount to about NO 200/ton of

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cocoa if a median price in the Bank's forecast long-term range of cocoaprices (of US 27 cents/lb, US$605/ton equivalent cif New York) were ob-tained, see para 8.08. As is shown in paras 8.10 and 8.11, the resultingproducer price of NO 298/ton (NO 8 per 60 lb head load), which is the cur-rent producer price, is probably an adequate incentive to the efficientcocoa farmer. Nonetheless, the retention by Government of such a largeproportion of crop sales proceeds (NO 80 million annually if the crop re-mains at 400,000 tons) is justifiable only in the light of Ghana's presentoverall difficult economic and financial position, and if the Governmentis prepared to actively help farmers to achieve the levels of productivityrequired to make cocoa growing a profitable and rewarding occupation.

3.08 One of the steps the Government has taken in the latter direc-tion, is the sale at less than cost to farmers of capsid insecticides andthe sprayers to apply these. This scheme has been in operation for sev-eral years, and has operated successfully except when Government has ar-bitrarily restricted the supply of insecticides and sprayers as it did,for example, in 1964 and 1965.

3.09 Government's intention is to continue to operate and to expandthese schemes, and for the purposes of this report, it is assumed thatproject participants would benefit from them. During negotiations, as-surances were obtained from the Government that IDA would be informed ofany proposed changes in the capsid insecticide, sprayer, and fertilizersubsidy schemes, and that these changes would not be made without priordiscussion with IDA.

C. Institutions

3.10 The Cocoa Division (CD) of the Ministry of Agriculture is respons-ible for all cocoa extension work in Ghana and for the control of SwollenShoot Virus Disease (SSVD); for organization charts of the Ministry of Agri-culture and the Cocoa Division see Annexes 3 and 4. In addition to its maintask of regularly surveying all cocoa areas for SSVD, and implementing man-datory control measures 1/, the Division maintains a training school forjunior staff and farmers, workshops for repairing farmers' spraying machines,and high-yielding variety seed gardens. The CD currently has a shortage ofjunior staff. However, over 1,000 trainees graduated from the Division'straining school during 1969, and a further 500 will be trained in 1970 whichwill bring the Division up to strength and allow it to operate effectively.

3.11 Cocoa Marketing Cooperatives have existed in Ghana since 1928,and have proved generally successful. The basic unit of the cooperativesystem is the primary society which operates at village level. The apex

1/ See Annex 2.

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organization is the Ghana Cooperative Marketing Association. It is Gov-ernment policy that the cooperative movement should be assisted and en-couraged to expand in the agricultural sector. Further details on Coop-eratives are given in Annex 5.

3.12 Cocoa Marketing Board - The Cocoa Marketing Board (CMB) directlypurchases about 40% of all cocoa production, through its subsidiary ProduceBuying Company and employs Licensed Buying Agents (LBA) to purchase the re-mainder. One LBA is the Ghana Cooperative Marketing Association Ltd. whichpurchases about 30% of the country's total production from associated pri-mary cooperative societies. Farmers are paid a minimum price for cocoawhich is fixed by Government in consultation with CMB. The present priceis NO 8 per 60 lb of cocoa (US13.3 cents/lb), which is equivalent toNO 298.64 (US$292.67) per long ton. LBA's receive a fixed allowance fromCMB of NO 38.66/ton (US$37.89) to cover bagging, handling, and storage,overheads and profit. Details of LBA functions are given in Annex 1.Overseas marketing of cocoa is carried out by the (CMC), a subsidiary ofCMB with headquarters in Accra. CMB has offices and representatives inLondon and New York and all sales are made by private treaty at the mostfavorable world market prices obtainable.

3.13 The main source of agricultural credit in Ghana is the Agricultur-al Development Bank (ADB), established in 1965 to provide credit facilitiesfor the development and modernization of agriculture and allied industries.Details of ADB are given in Annex 6. In the past, loan appraisal has notbeen of a sufficiently high standard, but the situation is improving as moresuitably qualified staff are recruited.

3.14 The performance of ADB in debt recovery can be considered satis-factory when account is taken of the political situation ruling when it wascreated; under this, it was required to make, or take over, loans whichtoday it would reject. On August 31, 1969, the amount overdue on loansmade by the ADB head office, represented 33% of the total amount disbursedunder these loans. Loan recovery rates could be improved if more effectivesupervision was provided by ADB's loan officers, and if an improved report-ing system was introduced to allow tighter control and follow-up on eachindividual loan. ADB's manager, aware of this situation, intends to in-troduce new procedures, which should improve the debt recovery system.

3.15 ADB is the lending medium for IDA Credit 163-GH. The project,costing US$2.3 million, is providing credit to fishermen for the construc-tion of 40 medium sized purse seine fishing vessels. IDA's contributionof US$1.3 million covers the foreign exchange component of vessel construc-tion and is being made available, together with the Government's contribu-tion to eligible borrowers through ADB.

IV. THE PROJECT AREA

4.01 The project area comprises the central zone of the Eastern Region(see Map) and totals about 146,000 acres of cocoa, food crops and naturalbush. Koforidua, the administrative center of the Region, is situated justto the north of the project area.

4.02 Climatic and soil conditions are well suited to cocoa production,and after its introduction in 1879, a thriving cocoa industry developed andcommerce expanded throughout the area. During the early 1930's swollenshoot virus disease (SSVD) and capsids appeared as major pests. Neithercould be controlled at that time, and by 1950, cocoa in the area had becomecompletely devastated and production had substantially declined. Realizingthe seriousness of the situation, Government, through the Cocoa Division,initiated and supported cocoa rehabilitation throughout the area in the1950's. In 1962, the Nkrumah Government dissolved the Cocoa Division, andin the project area rehabilitation came to an abrupt halt, although improve-ment programs were subsequently restarted on a small scale in 1966. Annex2 gives details of cocoa cultivation in the area, and the improved tech-niques that would be introduced under the project.

4.03 Population and Farm Community - The area's total population isabout 91,000 and there are about 5,000 cocoa farm operators, of which abouthalf are over 55 years of age. This makes it essential for sufficient in-centives to be provided for young people to remain in the area. One incen-tive ought to be the payment of attractive wages for farm labor but theability to do so is restricted by the low productivity of cocoa farms.About 2,000 seasonal laborers, mainly from Northern Ghana and Togo, areemployed in the project area, but Government's recent mass eviction of non-nationals probably has reduced this supply.

4.04 Land Tenure, Land Use and Farm Size - About 36% of farms are thebona fide property of their occupants, and have been acquired through out-right purchase. The bulk of the remainder have been acquired by matrilinealinheritance and are held by usufruct rights according to native law. Ab-sentee landlords are common and in such cases the farms are operated by farmmanagers who commonly receive two-thirds of farm output as payment. Thissystem works satisfactorily.

4.05 Surveys carried out by the Ministry of Agriculture show that the146,000 acres of the project area utilized as follows:

Cocoa Bush Food Farms Townships Total

55,858 71,330 15,500 3,312 146,000

A soil survey of the project area also made by the Ministry shows that ofthe 71,330 acres of bush about 48,860 acres are on soils suitable forcocoa.

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4.06 Most farmers own more than one plot of cocoa and the size ofthese varies from 0.3 acres to over 100 acres with about 70% of the plotsmeasuring from 0.3 to 5 acres. The smaller plots have resulted from frag-mentation of larger farms in the course of their inheritance. There areabout 15,700 separate cocoa plots in the project area but it is notpossible, since records do not exist, to establish the total area ofcocoa maintained by the average farmer. Detailed surveys of parts ofthe project area indicate, however, that about half the farmers maintaina total of less than 5 acres.

4.07 Credit Facilities - The only sources of credit to farmers in theproject area are LBA which sometimes extend short-term credit to farmers onthe security of their crop, and local moneylenders who generally chargeusurious rates of interest. Medium and long-term credit facilities are notgenerally available for either the rehabilitation of existing cocoa, or forthe planting of new farms and the replanting of senescent farms.

4.08 Communications - The project area is well served by major andminor roads; and the railway line from Accra to Kumasi traverses the proj-ect area and is used for the evacuation of cocoa. However, because of thefinancial problems which Ghana has had to face, especially the shortage offoreign exchange for the purchase of heavy earth-moving equipment andspares, road maintenance has been seriously neglected in recent years andthe evacuation of cocoa is seriously impeded in the wet seasons.

V. THE PROJECT

A. Description

5.01 The project would be a first stage of a national program to re-habilitate Ghana's cocoa industry and would be carried out over a five-year investment period. The project would involve:

(a) rehabilitation of up to 51,000 acres of existing andlow-yielding cocoa by controlling capsids, replantingvacancies and improving farm maintenance, and replant-ing of 36,000 acres on which cocoa had died out, orwhere it yields at sub-economic levels, with improvedhigh-yielding cocoa varieties. These programs wouldbe carried out through the provision of credit tococoa farmers for the hire of labor and for thepurchase of spraying machines, pesticides, fertilizers,and improved planting materials;

(b) training farmers in modern cocoa production techniques;

(c) improvement of cocoa marketing cooperatives through theprovision of technical assistance, and the establish-ment of fifteen new cooperatives;

(d) establishment of a project administration within theMinistry of Agriculture to plan and manage theproject; and

(e) improvement of some 100 miles of feeder roads in theproject area.

5.02 Credit needs of the project would be channelled through the ADBand the marketing of cocoa would be handled by the CMB and the Ghana Coopera-tive Marketing Association acting through primary cocoa marketing societies.The Public Works Department (PWD) would be responsible for the improvementof project area roads.

B. Field Development

5.03 The project would be phased as follows:

1970/71 1971/72 1972/73 1973/74 1974/75 Total

Project Year 1 2 3 4 5

Rehabilitation (acres) 4,080 20,400 20,400 6,120 - 51,000

Replanting (acres) - 3,600 10,800 13,500 8,100 36,000

Rehabilitation and replanting would be phased to coincide with the establish-ment of cooperative societies, organization of farmer groups and the develop-ment of the project authority. Thus Year 1 would be devoted largely to theconstruction of project buildings and facilities, the purchase of equipment,and the establishment of cocoa seedling nurseries for the plantings plannedfor Year 2. The rehabilitation component of the project would be completedin Year 4. Further details of phasing are given in Annex 7.

5.04 Rehabilitation - Participants in the rehabilitation scheme wouldbe eligible for credits for capsid control and fertilizers, and for replant-ing gaps in their farms where the cocoa has died out. In the case of capsidcontrol, credits would be provided in the form of a sprayer and the insecti-cides needed for two years, after which the farmer would be able to financethese activities out of current receipts. A limited volume of cash creditswould be provided in these two years for the hire of labor where a farmercould show a shortage of family labor would be a constraint. Capsid controlusually would involve four sprayings annually with "Gammalin" a proprietarybenzene hexachloride insecticide, but in areas where resistance to this in-secticide has developed, a carbamate insecticide would be supplied to farm-

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ers. Farmers who could show that their cocoa was yielding in excess of 600lb/acre, the probable minimum level at which it is economic to apply fertil-izers under Ghanaian conditions, would be encouraged to obtain fertilizerson credit; and it is anticipated that about 20% of participants would do soin the project development period. All cocoa farms are characterized bysmall areas where the cocoa has died out, and credits in the form of hybridseedlings would be supplied to farmers wishing to replant such areas. Forproject cost estimates it is assumed that the equivalent of 15% of the totalarea to be rehabilitated would be supplied in this way.

5.05 Replanting - Under the replanting scheme, participating farmerswould receive credits for crop establishment and subsequent capsid controland fertilizers. Credits would be provided in the form of cocoa seedlings,which would be produced on centralized project nurseries maintained by theproject authority; plantain suckers and yam tubers which would be plantedto provide temporary shade during the cocoa establishment period, and cashfor part of the labor needed for farm development and maintenance untilplantings are four years' old. For capsid control, credits would be in theform of sprayers and insecticide. Fertilizers would be supplied for appli-cation in the fourth year only. Thereafter, farmers would be able to obtainseasonal credits for fertilizer through the Agricultural Development Bankwhich would make arrangements for this.

5.06 Farmer Training - The Cocoa Division already provides some trainingfor cocoa farmers. They attend a one-week course at the Division's school,and receive training in capsid control and the care of spraying machines.Financial restrictions limit farmer intake and consequently NE 60 thousand(US$59 thousand) would be provided under the project to meet the part of thecosts of a weekly intake of about 30 project farmers throughout the projectdevelopment period.

5.07 Cooperative Societies - Membership in a cocoa marketing cooper-ative society would be a prerequisite of participation in both rehabilita-tion and replanting schemes, since project participants would commit them-selves to marketing all their cocoa through this society and would author-ize credit repayments to be withheld from the sales proceeds of theircocoa crop. In addition to the nine societies now existing in the projectarea, 15 new societies would be established. Because some project parti-cipants do not already own cocoa some of the new societies would lack thefunds to operate under the project, until their members produced more than100 tons of cocoa annually. Initially, such new cooperatives would receivea grant of up to NO 750 annually over a period of five years to help paythe wages and allowances of a secretary and provide for some casual laborneeded for cocoa handling.

5.08 Project Administration - While the Cocoa Division is responsiblefor all cocoa extension work, it is not sufficiently well equipped in termsof staff and experience to carry out the project efficiently. In order to

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ensure that the project would receive the proper attention, a project develop-ment unit would be established within the Ministry of Agriculture and theProject Director would report directly to its Principal Secretary. Theproject would provide funds to finance the capital costs of establishing thedevelopment unit which would include, among others, buildings, transportation,operating costs during the project development period, and the employment ofexpatriate staff in the posts of Project Manager, Deputy Project Manager, andFinancial Controller, should this prove necessary.

5.09 Feeder Road Improvement - Resurfacing of about 100 miles of feederroads is required in the project area to carry out the project and theevacuation of the cocoa efficiently. The project would provide earth-mov-ing equipment and funds required for the resurfacing of about 100 miles ofgravel feeder road by the PWD. During negotiations the Government gaveassurances that a program of feeder road improvement would be agreed annuallybetween the project authority and PWD, and that equipment purchased underthe project would not be used outside the project area during the projectdevelopment period without prior approval of IDA, and that thereafter suf-ficient equipment would be retained and sufficient funds would be madeavailable by the Government to maintain project area roads to a satisfactorystandard.

VI. COST ESTIMATES AND FINANCIAL ARRANGEMENTS

A. Project Costs

6.01 Estimated project costs total NO 15.90 million (US$15.59 million)of which the foreign exchange component is about NO 4.8 million (US$4.7 mil-lion) or 30%. The breakdown of costs is given in detail in Annex 8 and sum-marized in the following table:

6.02 Administration and supervision expenses account for about 38% oftotal costs. These expenses during the development period are as essentialas inputs of materials and equipment in the creation or recreation of as-sets producing benefits over a long period. They are therefore included ascapital costs.

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SUMMARY PROJECT COST ESTIMATES

ForeignLocal Foreign Total Local Foreign Total Exchange... Ne(m~illionsT ... .... US$(millions) .

On-farm Costs

New planting 4.27 1.13 5.40 4.18 1.11 5.29 21Rehabilitation 1.44 1.07 2.51 1.41 1.05 2.46 43

Sub-total 5.71 2.20 7.91 5.59 2.16 7.75 28

Buildings andvehicles 0.42 0.58 1.00 0.41 0.57 0.98 58

Administrationoperation andmaintenance costs 0.42 0.19 0.61 0.41 0.19 0.60 32

Administrationstaff costs 3.75 1.06 4.81 3.68 1.04 4.72 22

Feeder roadimprovement 0.05 0.36 0.41 0.05 0.35 0.40 88

Contingencies 1/ 0.75 0.41 1.16 0.74 0.40 1.14

Total 11.10 4.80 15.90 10.88 4.71 15.59 30

1/ 10% on all costs except hired labor.

6.03 Project costs are free of import duties since goods for Governmentuse are imported duty free by the Ghana Supply Commission, and exclude farmfamily labor to which a cash cost is not attributed. Costs are based on Gov-ernment salary and wage scales, up-to-date building costs, recent quotationsgiven by suppliers of vehicles and materials, and farm labor requirements col-lated over the years by a number of organizations.

B. Proposed Financing

6.04 An IDA credit of US$8.50 million (NO 8.67 million) would be madeto the Government and the project would be financed as follows:

NO Million US$ Million Z

Government of Ghana 2.73 2.68 17.2

Local Commercial Banks 4.50 4.41 28.3

IDA Credit 8.67 8.50 54.5

Total 15.90 15.59 100.0

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The proposed credit of US$8.50 million would be 55% of the total cost ofthe project. US$4.8 million, or 56% of the credit, would cover the esti-mated foreign exchange costs of the project. The balance of US$3.7 mil-lion, or 44% of the credit, would finance 33% of local currency costs.The size of the IDA contribution would be adequate to ensure the satis-factory organization and execution of the project. The Government con-tribution of US$2.68 million would be made from budgetary sources. Dur-ing negotiations assurances were obtained from Government that all fundsneeded for the project would be made available in advance and in block form,on the basis of quarterly estimates prepared by the project manager.

6.05 Three local banks, Ghana Commercial Bank, Barclays Bank D.C.0.,and Standard Bank of Western Africa will each lend to the Government US$1.47million equivalent in Ghanaian currency. These three loans totallingUS$4.41 million equivalent (NO 4.50 million) would bear interest of 1%higher than the Bank of Ghana discount rate - currently 5 1/2% - with aminimum of 6% per annum. The term would be 15 years including a sevenyear grace period for principal and a 1/2% commitment fee on the undrawnbalance. These terms are satisfactory and during negotiations it wasagreed that loan agreements satisfactory to IDA would be signed by theGovernment and the three commercial banks before the credit becomes effective.Details of project costs financing are given in Annex 8 Table 9.

6.06 The proposed IDA credit would be made on standard terms to theGovernment of Ghana. Government would apply proceeds of the credit, thethree Commercial bank loans, and its own contribution as follows:

(a) to the Ministry of Agriculture, an amount of NO 7.83 mil-lion (US$7.67 million) for project authority investmentsand operation, farmer training, and the establishment ofnew cocoa marketing cooperatives;

(b) to the Public Works Department, an amount totallingNO 448,000 (US$440,000) for the purchase of road mak-ing equipment and the resurfacing of up to 100 milesof feeder roads; and

(c) to selected sub-borrower farmers through ADB for: 1/

(i) cocoa rehabilitation in an amount totallingNt 2.15 million (US$2.11 million),

(ii) cocoa replanting in an amount totallingNO 5.47 million (US$5.36 million).

The IDA credit would finance about NO 7.0 million (US$6.9 million) of thetotal on lending through ADB, estimated at NO 7.62 million (US$7.47 million).Details of the terms and conditions for sub-loans to participating farmers,and the arrangements between the Government and ADB are given in paras 7.06through 7.11.

1/ These amounts exclude ADB loans to be made from 1975 to 1978 after theIDA disbursement period, amounting to NO 1.05 million (US$1.03 million).(See Annex 6 Table 5).

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C. Procurement

6.07 Procurement of vehicles, tractors, and building equipment, sprayingmachines, tools and fertilizers valued at about US$1.44 million would bathrough international competitive bidding. Gammalin insecticide valued atabout US$810,000 would be procured by negotiated contract with a local manu-facturer. Gammalin has been accepted by cocoa manufacturers as Aaving notaint effect on cocoa beans, and any alternative benzine hexachloride in-secticide would require further testing for its taint effect. The projectbuilding program of housing and stores, costing about US$665,000, would betoo small to attract international competition, because of the m.8ll, sizeof individual contracts. These would be subject to local competitive tender.All Government tenders, local and international, are processed by the GhanaSupply Commission. The Commission's procedures are satisfactory anld itwould handle project tenders on the project authority's account.

D. Disbursement

6.08 Disbursement of the IDA credit would be made against 100% of theCIF cost of imported materials, about US$1.44 million; against 100% of theforeign exchange cost of expatriate staff, about US$130,000; and a percentage,presently estimated at 82,, of sub-loans made to farmers for insecticideE,hired labor, and planting material, and of the cost of project administrationbuildings, in total about US$6.06 million; US$0.87 million would remain Uri-allocated and would be disbursed to meet contingencies as required. Expendi-ture would be evidenced by contracts, shipping documents, certified recordsof expenditure, and records certified by ADB of sub-loan disbursement tofarmers. Any surplus credit amounts would be cancelled. Estimated dis-bursements of the credit over the five year development period are:

Project Year 1 2 3 4 5

…--------millions--------------

US$ 1.16 1.38 2.14 2.16 1.66

NO equivalent 1.18 1.41 2.18 2.21 1.69

E. Accounts and Audits

6.09 Separate project accounts would be maintained by the projectauthority. Loan accounts of participating farmers would be maintained byADB. Project authority accounts, including ADB project loan accounts,would be audited annually by an independent auditor, mutually acceptableto the Government and IDA. Assurances to this effect have been obtainedfrom Government. The auditing of cooperative society accounts would continueto be the responsibility of the Registrar of Cooperatives. Audited annualaccounts of the Project Authority, ADB project loan accounts, and the coopera-tives would be submitted to the Association within four months of the closingof the financial year; during negotiations, assurances to this effect wereobtained from Government.

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VII. ORGANIZATION AND MANAGEMENT

A. Organization

7.01 The project would be carried out by a project development unitestablished within the Ministry of Agriculture, which would enjoy a largemeasure of autonomy. The Project Manager would be responsible to the Ministerof Agriculture, through the latter's Principal Secretary. The initial surveyand cutting out of SSVD infected trees and their contacts in the project areawould be carried out by the Cocoa Division in advance of project activities.Subsequent replanting of trees cut out (see Annex 2 para 27), and monthlyreinspection, would be carried out by the Cocoa Division. Assurances to thiseffect have been obtained from the Government.

7.02 The project development unit would maintain its own accounts, andoverall management and financial control would be exercised from a projectHead Office located at Suhum in the approximate center of the project area.This would be staffed by the following key personnel: Project Manager,Deputy Project Manager, Cooperative Officer, Financial Controller, LoanOfficer, and an Administrator. A condition of effectiveness of the proposedcredit would be the establishment of the project development unit with termsof reference satisfactory to IDA.

7.03 Field management would be effected through three senior Agricul-tural Survey Officers (SASO) who would each control a zone comprising a totalof about 50,000 acres (8 sq. miles). Zonal offices and housing would beestablished at Suhum, Nankese and Mangoase. A zone would consist of fiveunits, each of about 10,000 acres, although unit areas would vary dependingon the proportion of cocoa available for rehabilitation and land for re-planting. Project activity in each unit would be directed by an AgriculturalSurvey Officer (ASO) and the unit would be divided into 10 blocks of about1,000 acres in total, each with an Agricultural Assistant (AA) in charge,assisted by four Field Assistants (FA). Within each block of 1,000 acres,groups of between 30 and 40 farmers would be formed to facilitate sprayingorganization and the siting of seedling nurseries. These arrangements shouldgive a coverage of one FA to about 60 acres of replanted cocoa and 85 acresof rehabilitated cocoa, and to between 15 to 30 farmers. Proposed super-vision density at the FA level is high, but would be reduced only in theevent of such action being proved to be practical.

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7.04 Prolect Steering Committee - Several agencies in addition to theMinistry of Agriculture are involved in the productioli and marketing etcocoa and would be concerned directly or indirectly with the project. Tocoordinate the work of these agencies and to oversee project progress, aproject steering committe would be formed. Under the chairmanship of thePrincipal Secretary, Ministry of Agriculture, the committee would be madeup of senior nominated representatives of the Ministry of Agriculture,Cocoa Research Institute of Ghana, CMB, the Cooperative Department, theMinistries of Finance, and Economic Planning, and the Ghana CooperativeMarketing Association, who would be of such seniority as to ensure thesupport of the Departments and entities represented. The. Project Managerwould be the executive secretary of the committee which would meet not lessthan once every three months. The committee would receive the technicaladvice of its members and would be able to call upon a project inspectionunit which would be created in the Cocoa Division to make spot checks andprogressive evaluation of the project. The membership and ternis of referencefor the committee were agreed during negotiations and it would be a conditionof effectiveness of the proposed credit that a committee with a membershipand terms of reference acceptable to the Association had been established.A project organization chart is at Annex 9.

7.05 Cooperatives - Since membership in a cocoa marketing cooperativesociety would be a prerequisite for project participation, 15 new societieswould have to be established during the project development period. TheDepartment of Cooperatives is under-established and would he unable tosatisfactorily supervise the establishment of 15 new societies; thus pro-ject headquarters would include a Cooperative Officer, a senior AssistantCooperative Officer and two Assistant Cooperative Officers, who would beseconded to the prolect authority from the Department of Cooperatives andwhose salaries would be met under the project. Assurances were obtainedfrom Government that the above cooperative staff would be seconded to theproject authority, and that all cocoa marketing cooperative societies inthe project area would be placed under the control of the project Coe,verativeOfficer.

B. Credit Arrangements and Terms of Sub-Loans

7.06 Loans to project farmers would be made by the Agricultural Develop-ment Bank. Sub-borrowers for cocoa rehabilitation would receive credit forup to NO 54/acre in two annual installments of up to NO 22 and NO 32 res-pectively. These credits would be repaid at 8% interest over four yearsafter a grace period of one year for both principal and interest, seeAnnex 11, Table 1.

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7.07 Sub-borrowers for cocoa replanting would receive credit for up toNO 172/acre in four annual installments of up to NO 123, NO 18, NO 12 andNO 19 respectively. The term of the credit would be 13 years and repay-ments in the form of annuities at 8% interest would start in the seventhyear. Interest would be waived during the first four years and capitalizedduring the fifth and sixth years. 80ce it would be desirable for participantsin the replanting scheme to accept and understand the discipline of creditrepayment, progressively increasing token repayments of principal would bemade in the fourth, fifth and sixth year, see Annex 11, Table 2.

7.08 The proposed interest rate of 8% on sub-loans is in line withADB policy of charging between 7% and 9% on its current loans; and while alower interest rate could be justified in view of the very heavy taxationof the cocoa farmer, the terms of the sub-loans would allow sub-borrowersa reasonable debt service coverage of about two times during their loanrepayment periods. Assurances have been obtained from Government that theabove terms and conditions of sub-loans would apply and would not be changedwithout the prior approval of IDA.

7.09 ADB would repay the Government the capital element of sub-borrowers'repayments as these were receivable, together with interest at 5-1/2%. Ofthe remaining interest, 1-1/2% would be retained by ADB to cover its ex-penses, and 1% would be paid to the Ghana Cocoa Cooperative Marketing Agency(GCMA) which has stated that it would guarantee sub-borrowers' repaymentsin return for such a foe. Project participants would market their cocoathrough GCMA, see para 7.18, and GCMA concern with both credit recoveryand marketing should have a beneficial effect on both operations. In orderto ensure satisfactory yields from project farms following the conclusionof sub-loan disbursements under the project it is essential that creditfacilities for fertilizer would be available. To finance such credits,ADB would retain. aproportion of farmers' interest payments due to Govern-ment, totalling about US$350,000. It would be a condition of effectivenessof the proposed credit that Government had entered into a subsidiary loanagreement with ADB which covered the above issues and was satisfactory to IDA,and also that GCMA had concluded a guarantee agreement with ADB satisfactoryto IDA. The subsidiary loan agreement would provide for the establishment ofa fertilizer credit fund, and in addition, for the project development unitto disburse sub-loans to project farmers on ADB account.

7.10 ADB would second four Loan Officers to the project developmentunit. These would be directly responsible to the Project Manager until suchtime as the disbursement of sub-loans to farmers is complete. Their salarieswould be met under the project and they would be responsible for approvingthe creditworthiness of project participants, and ensuring that participantssign suitable legal loan agreements before credits are disbursed by theproject authority. In addition, ADB's Board, would approve loans appraised

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by project loan officers. The loan agreements would make provision forsettlement of any outstanding loan by the inheritors of a deceased partici-pant's farm. During negotiations, assurances were obtained that ADB wouldsecond four Loan Officers to the project authority and that the terms of theloan agreements to be signed by project farmers would be satisfactory to IDA.

7.11 Farm Size - Farm size would not be a limiting factor to partici-pation in the rehabilitation scheme as the most efficient capsid control inobtained when all cocoa in an area is sprayed, leaving no sources of re-infestation. The minimum area for which credits would be granted under thereplanting scheme would be 1 acre and a participant would only be grantedcredits for 2 acres in the first instance. The granting of additional creditswould be dependent upon satisfactory maintenance of the first two acres.

C. Field Operations

7.12 Using Cocoa Division maps of existing cocoa plots, the AgriculturalAssistant and Field Assistant would contact farmers and explain the project.Existing cooperative societies would be strengthened, and new ones esta-blished where necessary for farmers wishing to participate in the project.

7.13 Surveys conducted in the project area have shown that the majorityof farmers are willing to participate in the project. Neighboring farmerswould be formed into groups and their block of land examined by the Agri-cultural Assistant. He would prepare a work program for the group, whichwould include its phasing and scheduling of input requirements and laborrecruitment, and through project headquarters make suitable arrangementsfor SSVD control. The creditworthiness of project participants would beapproved by ADB through its Loan Officers seconded to the project beforegroup work programs were approved by the Project Manager.

7.14 Project Implementation - Gammalin and sprayers for rehabilitationwould be purchased by the project development unit and supplied as credits toparticipants from its stores. While all farmers would be encouraged topurchase a spraying machine, those with small plots would be able to hirea sprayer from the project development unit initially, but cooperatives wouldbe encourgaged to assume this role. Since most farmers participating in therehabilitation scheme would also receive credits for replanting, it is ex-pected that the majority of participants would own sufficient cocoa towarrant the purchase of their own spraying machines. Spraying would beorganized so that all cocoa in a block would be sprayed at the same time,thus minimizing the spread of capsids from treated to untreated plots.Records of all inputs used would be maintained by the Agricultural Assis-tants and unit ASO's (Agriculture Survey Officers) would supervise thepayments, after the completion of spraying, of any labor that might behired for such work. The project development unit would advise ADB of creditsissued, and ADB would prepare loan accounts and subsequently submit farm-er's loan repayment schedules to the appropriate cocoa marketing societyand to the Ghana Cooperative Marketing Association.

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D. Staffing

7.15 The Project Manager has already been selected in consultation withIDA. The Financial Controller would be recruited internationally if a suit-able Ghanaian cannot be appointed immediately. During negotiations, assur-ances were obtained from the Government that appointments to the posts ofProject Manager, Deputy Project Manager and Financial Controller and theterms of reference and conditions of employment of these officials would bemutually acceptable to Government and IDA, and that IDA would be sonsultedprior to the appointment of a project cooperative officer. The appointmentsof the Project Manager, Deputy Project Manager, and Financial Controllerwould be a condition of effectiveness of the credit.

7.16 The remaining staff required for the project would be drawn fromqualified experienced staff already serving in the Ministry of Agriculture,and there should be no difficulty In filling these appointments. The Minis-try would need to second the following staff to the project development unit:

Project Year inTitle Number which required

1 2

Senior Agricultural Survey Officer (SASO) 3 3 -

Agricultural Survey Officers 15 6 9

Agricultural Assistants (AA) 150 60 90

Field Assistants (FA) 600 240 360

During negotiations, assurances were obtained from Government that the abovestaff would be appointed to the project.

E. Marketing Organization

7.18 All project participants would be members of a cocoa marketingcooperative society, and such societies would operate as agents of theGhana Cooperative Marketing Association (GCMA), itself a licensed buyingagent of the CMB. GCMA would advance funds, obtained from CMB, to projectcocoa marketing cooperative societies. All cocoa purchased by these pri-mary societies would be transported and sold by GCMA to the CMB. GCMAwould retain part of the buying allowance (see para 3.12) paid to it byCMB to cover its operating expenses and the remainder would be distributed

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to project societies according to the volume of cocoa handled. The fore-going procedures are standard practices and work well provided that timelyadvances of funds are made to the societies to allow im_ediate cash pay-ments to be made to farmers for all cocoa purchased. During negotiations,assurances were obtained from Government that CMB, through the GCMA, wouldmake sufficient funds available to all project cocoa marketing cooperativesfor the prompt purchase of participating farmers' cocoa. Further detailsof cocoa marketing are given in Annex 1.

VIII. PRODUCTION, MARKETS, FARMER BENEFITS AND GOVERNMENT REVENUES

A. Yields and Output

8.01 Rehabilitation Cocoa Division production records show an averageyield of 150 lb/acre for cocoa in the project area, although field inspect-ion indicates a wide range of yields. Experience has shown that by usingthe rehabilitation tachniques provided under the project, the average yieldwould be increased to 500 lb/acre although there would be an appreciablevariation between different farms and plots. For project calculations, itis assumed that the incremental yield increases of rehabilitated cocoa wouldbe: Year 2 - 100 lb, Year 3 - 200 lbs, and Year 4 - 50 lb; and thatthereafter under continuing good management, the average annual yieldvould remain at 500 lb/acre. Assuming treatment of 51,000 acres underthe project, incremental cocoa production would amount to some 8,000 tonsannually from 1977 valued, on the basis of the Bank's price forecastsgiven in para 8.08, at US$4.6 million in foreign exchange.

8.02 Replanting A replanted farm would begin to yield in its fourthyear, and its production would increase progressively up to its seventh year,when for project calculations it is assumed to roemin stable until it reaches25 years of age. On the basis of trials conducted in Ghana and elsewhere,it is estimated that faria replanted under the project would yield anaverage of 700 lb/acre from the seventh year after planting and thus, thatfrom 1982 project replantings would have an annual output of about 11,000tons valued at US$6.2 million in foreign exchange.

8.03 The above yields are cousidered achievable both in view of thedemonstrated capacity of m elonado and hybrid cocoa to sustain yields wellIn excess of 1,200 lb/acre under Ghana conditions, and the recorded res-ponse of low-yielding a olonado cocoa to rehabilitation techniques, "ea

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Annex 2. They would be achievable however, only under the high degree offarmer supervision and assistance provided under the project.

8.04 Food Crops It has been assumed that the majority of project farmerswould plant plantain and coco yams as temporary shade for their replanted co-coa. Using data from Cocoa Division demonstration cocoa replantings, it isestimated that on average, plantain would produce during the four yearsof cocoa establishment a total yield of about 6 tons/acre, which atcurrent market prices would be valued at NO 126.00. In addition, cocoyams would give a total yield of 1 ton/acre valued at NO 30 in the secondyear of replanting. These crops would thus provide a source of cashincome to participants during the development of their replanted cocoa.It is difficult to estimate the amounts of such cash income, however, sincethese would depend upon the amounts of food crops consumed by the farmfamily and the location of farms in respect to roads and markets.

B. Markets and Prices

8.05 The world cocoa market in the last decade or so has been charac-terized by fairly steadily increasing production and consumption, bothrising at approximately the same average rate of 3.7% per annum. Worldproduction rose from an average annual level of 776,000 long tons duringthe first postwar decade to an average of 1,190,000 long tons in the lastten years, an increase of 53%. As pointed out by the Bank's EconomicsDepartment, "A notable feature of the postwar cocoa situation has been thatlarge increases in output, as in 1965, have not led to prolonged surpluses.On the contrary, consumption has responded quickly to increased suppliesand lower prices, with the result that the market has tended to be clearedin a brief period. Considering that the levels of per capita consumptionof cocoa are rather low even in the developed countries, there is scopefor avoiding a structural imbalance between supply and demand in the medium-term future." 1/

8.06 World cocoa prices have fluctuated sharply in the postwar period.After a pronounced year-to-year decline from US 44.3 cents/lb (Spot NewYork) in 1958 to US 21 cents/lb in 1962, prices went up slightly in 1963only to drop again in 1964 and 1965, reaching a record low of US 17.3cents/lb in 1965 which was the year of the world's largest cocoa crop.Largely because of the decline in Ghana production since that time, worldconsumption has exceeded production during the last four years and current-ly stocks are very low. This situation is reflected by the sustained risein prices which began in 1966 and culminated in an average price in 1969 ofUS 45.7 cents/lb. In 1970 prices have again fallen and the Spot New Yorkprice is now about US 33 cents/lb; how prices will move in 1970 is dependent

1/ Stabilization of Prices of Primary Products - Cocoa, IBRD EconomicsDepartment, May 1969.

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largely upon the forecasts that are yet to be made of Ghana's 1970 main cropwhich will not be harvested until the fall.

8.07 As noted in the Bank's study previously mentioned, "It is ex-pected that high prices will induce intensification of inputs in cocoawith the result that current production capacity will be exploited to itsmaximum. The increased supplies will no doubt tend to induce a gradualdownward readjustment of the price level over the next few years.'"

8.08 Project calculations have been based on a price of US27 cents/lbSpot New York for Accra cocoa. This price is slightly below the Bank'sEconomics Department forecast of the price trend by the mid -1970's of 30US cents per pound Spot New York. The price of US27 cents/lb allows paymentof a producer price of US13 cents/lb, a CMB trading surplus of US1.5 cents/lband a Government export duty of US7.7 cents/lb, see Annex 10.

C. Farmers' Benefits

8.09 The large variation in farm sizes precludes establishing typicalfarm budgets for rehabilitation and replanting, and consequently, modelbudgets for one acre units of replanted and rehabilitated cocoa have beenconstructed. These models are at Annex 11. The models are based on thecurrent producer price of No 8 per 60 lb head load of cocoa (US13 cents/lbequivalent). It is believed that this price is sustainable in view of theBank's forecast of world prices.

8.10 Rehabilitation Cocoa rehabilitation would more than triple thecash income of a participating farmer, raising it from a pre-rehabilitationaverage of NO 20.00/acre (US$19.60) to NO 66.67 (US$65.34). From an annualincremental gross income of NO 46.67/acre, a project farmer would pay in-creased production costs of NO 22.89 and a debt service of NO 15.80, andwould enjoy a net incremental income of NO 7.98 (US$7.82) during a four-yearloan repayment period. After completion of loan repayment, total net incomewould be NO 41.60/acre (US$40.77) of which No 21.60 would be incremental. Alarge number of participants own at least 3 acres of cocoa and their totalnet income after loan repayment would be NO 125; an increase of 100%. Thefinancial rate of return to the farmer calculated over 15 years would be 43%.

8.11 Replanting At maturity, sales from replanted cocoa would grossNO 93.33/acre. From this income, the farmer would pay NO 28.03 for farminputs and NO 33.59 for debt service over a seven-year loan repayment period,and be left with a net income of NO 31.71/acre (US$31.07). During the esta-blishment period, the cost of farm inputs would be higher and no income fromcocoa would be obtained until the fourth year. In this period, however, thefarmer would have revenue accruing from the sale of coco yams and plantainsplanted as temporary shade. Few farmers would market their total produc-tion however, as some foodcrops would be consumed on the farm and not all

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of the project is conveniently located for their commercialization. None-theless, foodcrop sales would be an important source of income in thedevelopment period, and sales in this period could amount to as much asa total of NO 150/acre. After completion of loan repayment, net incomewould rise to No 65.03 (US$63.07)/acre. The financial rate of return tothe farmer on his investment in replanting, calculated over a 20-yearlife, would be 19.2%, assuming no foodcrop sales.

D. Government Revenue

8.12 Government would be in receipt of substantial revenues from theproject. Annex 12 shows that, taking into account export duties and CMBoperating surpluses, the Government would earn an annual cash surplus from1975, and would recover all expenditures on the project by 1977. The totalsurplus accruing to Government over the life of the project is estimatedat NO 46.8 million (US$45.9 million equivalent).

IX. BENEFITS AND JUSTIFICATION

9.01 The project's primary benefits would be the increased productionof cocoa and resultant foreign exchange earnings, a satisfactory return oninvestment, and higher incomes for participating farmers. Based on a worldprice of US 27 cents/lb it is estimated that at full production the projectwould generate about US$11 million a year in net foreign exchange earnings.

9.02 The project would also help Ghana to regain its share in theworld cocoa market, and would make a significant contribution to the coun-try's economic development by providing rural employment opportunities,and by demonstrating the efficiency of supervised credit schemes as ameans of promoting agricultural development.

9.03 The calculation of the return to the economy from the project isshown in Annex 13. It takes into account only 68% of labor costs. This isthe proportion of farm labour requirements that would be met by hired mi-grant labor, the remainder being provided by the farm family, at no cash cost.In view of project farmers high average age (para 4.03) and their associatedreluctance to either move from the area or work for a daily wage, and theabsence of alternative work during the cocoa reason, the opportunity costof farmer's labor is low. It is difficult to determine a value for thisopportunity cost, but if it is costed at the official minimum wage rate ofNO.70/day, the rates of return given below, would be reduced by about 3%.The calculation assumes also that the life of replanted farms would be 25years and that of rehabilitated farms 15 years.

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9.04 On the basis of the yields and costs estimated in this report,the assumed cocoa price of US27 cents/lb, and the treatment of labor costsand farm lives described above, the return to the economy would be 26%.The return has been tested for sensitivity at various prices combined witha 25% reduction in yields. The results are as follows;

World Price in US$ cents per lb

20 25 27 30 35

With assumed yields 16% 23% 26% 30% 35%

With reduction inyield of 25% 9% 15% 18% 21% 25%

The sensitivity of the rate of return to possible variations in yields andprices, shows that the project would be justified economically even in theunlikely event of substantial price variations combined with yields muchbelow estimate.

9.05 The rehabilitation and replanting components of the projectshare the same administrative and overhead costs Since the two componentsare mutually interdependent for their success - the rehabilitation schemebenefits from the close supervision that is required by inclusion of re-planting in the project, and replanting benefits from the general improve-ments, especially in pest and disease control, of the existing cocoa indus-try in the project area brought about by rehabilitation - it is difficultto calculate realistic rates of return separately for rehabilitation andreplanting. For comparative purposes, the rate of return to the economyfrom the replanting component has been calculated assuming that it wouldbear all project administrative, staff, and overhead costs, and has beentested for sensitivity to varying prices and yields. The results, whichfurther demonstrate the economic merit of the project, are as follows:

World Prices in US$ cents/lb

20 25 27 30 35

With assumed yields 10% 14% 15% 17% 20%

With reduction inyield of 25% 5% 10% 11% 13% 15%

9.06 The rate of return from investment in rehabilitation is higherthan that from replanting. This is because less supervision is requiredfor rehabilitation and its benefits are generated within a much shorterperiod of time. This can be shown by assuming that the rehabilitationcomponent could be carried out on its own with only 30% of project adminis-tration and overhead costs and further, that no cost is attributed to family

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labor and that incremental yields would be 25% lower than those assumed inthis report. Under these circumstances, the rate of return from rehabili-tation would be 36% at a world price of US27 cents/lb. However, if familylabor is coated at the minimum Government rate of N0O.70/day, the rate ofreturn would decrease to about 23%. In view of the superior benefits ofrehabilitation the inclusion of replanting as the major component of theproject can be questioned. As stated in para 3.03, however, the long runfuture of Ghana's cocoa industry is dependent upon the greater use of mod-ern production technology, and this is not possible without the replace-ment of old low-yielding cocoa, badly laid out and managed, by plantingsof high-yielding cocoa varieties properly spaced and maintained, and thuscapable of providing their owners with the cash incentives to use modernmethods and inputs. Old cocoa cannot be successfully rehabilitated, andthe high returns from rehabilitation under the project would result fromthe relatively young age of the cocoa so treated.

X. RECOMMENDATIONS

10.01 During credit negotiations agreement was reached on the followingprincipal points:

(a) Government would make available all funds needed forthe project in advance and in block form on the basisof quarterly estimates prepared by the Project Manager(para 6.04);

(b) the Cocoa Division would carry out satisfactory initialSSVD control throughout the project area in advance ofproject authority activities and thereafter would ensurenecessary reinspection (para 7.01);

(c) cooperative staff would be seconded to the projectby the Department of Cooperatives and all cocoamarketing cooperative societies in the project areawould be placed under the control of the projectCooperative Officer (para 7.05);

(d) a subsidiary loan agreement, satisfactory to IDA,would be entered into by Government and ADB definingthe terms and conditions of Government on-lending toADB, and these of ADB's loans to the project farmers;providing for secondment of ADB staff to the projectauthority; and for post-project seasonal fertilizerloans to the project participants; and that suchagreement would not be changed without the priorapproval of IDA (paras 7.08 and 7.09);

- 26 -

(e) GCMA vould enter into an agreement, satisfactoryto IDA, with ADB to guarantee repayment of farmers'loans, and such agreeecnt would not be changed with-out the prior approval of IDA (para 7.09);

(f) sufficient funds for efficient cocoa purchasingwould be made available to all project cocoa marketingcooperatives through CMB and GCMA (pare 7 .18); and

10.02 Conditions of effectiveness of the credit are that:

(a) an agreement, satisfactory to IDA, had been signedbetween Government and Ghana Commerical Bank,Barclays Bank D.C.O. and Standard Bank of WestAfrica (para 6.05);

(b) the project authority, with terms of references sa-tisfactory to IDA, had been established (para 7.02);

(c) a project steering committee with membership andterms of reference satisfactory to IDA, had beenestablished (para 7.04);

(d) a subsidiary agreement, satisfactory to IDA, hadbeen signed between Government and ADB (par"s 7.08and 7.09);

(e) an agreement, satisfactory to IDA, had been signedbetween ADB and GCMA (para 7.09); and

(f) the Project Manager, Deputy Manager, FinancialController, and Cooperative Officer had beenappointed (para 7.15).

10.03 The proposed project constitutes a suitable basis for a Develop-ment Credit of US$8.5 million, on standard terms.

ANNEX 1

GHANA

EASTERN REGION COCOA PROJECT

COCOA MARKETING BOARD, AND COCOA MARKETING

Background

1. As shown in Table I the tonnages of cocoa produced in Ghana arelarge, and the purchasing of these from many hundreds of thousands of smallfarmers and their subsequent export is a substantial task. The develop-ment of cocoa marketing in Ghana is divisible into five distinct phases.The first was the period up to 1939, when the purchase and export of cocoawas carried out by expatriate commercial firms, who had established agentsand buying stations in cocoa producing areas. In this phase there was nogovernment intervention or control other than compulsory grading and in-spection before export.

2. The second phase, 1939 to 1945, followed an official study whichrevealed a number of deficiencies in existing marketing methods, especiallypractices on the part of middlemen which were detremental to producers. Tocorrect such deficiencies and ensure the delivery of essential commoditiesduring the war period, the British Government established statutory mar-keting organizations and an export monopoly of all essential crops, includingcocoa, produced in the British West African territories. An agency -- theWest African Produce Control Board -- was established for the purpose ofhandling the marketing of all cocoa (as well as other commodities) duringthe period 1939/45.

3. The third phase was the postwar period 1947/61, when the statu-tory control of cocoa marketing was taken over by the Ghana Cocoa MarketingBoard, established by ordinance in 1947. At the same time, the Ghana CocoaMarketing Company was established in London as a subsidiary of the Board,to sell Ghana's cocoa abroad.

4. The basic functions of the Board were "to secure the most favor-able arrangements for the purchase, grading, export and selling of cocoa,and to assist in the development by all possible means of the cocoa industryfor the benefit and prosperity of the producers".

5. The principle instrument to perform these functions was the pre-rogative to hold reserves and build up a producer price stablization fund,which the Board was able to maintain from 1947 to 1957. After 1957, however,because of increasing fiscal difficulties the Government borrowed from theBoard's reserves which were soon depleted.

6. In the purchase of cocoa the Board acted through individuals andfirms, including cooperatives, to which it delegated authority to buy cocoaat a fixed minimum producer price under a licensing agreement renewable

ANNEX 1Page 2

annually at the Board's discretion. These buyers were designated as LicensedBuying Agents (LBA) and several had been in the cocoa business for many years,operating throughout the country.

7. The fourth phase began in 1961 and lasted until early 1966.During this period, the Nkrumah Government significantly changed the systemof cocoa marketing. Farmers were organized under an entity known as theUnited Ghana Farmers' Council Cooperatives (UGFCC), which became the solebuyer of cocoa in the country on behalf of the Marketing Board. The UGFCCwas essentially a wing of Nkrumah's political party and only farmers havingparty cards could be members. It was never able to set up a cocoa buyingnetwork that functioned as effectively as the system it replaced. Duringits five years of operations, the multifarious activities of the UGFCCbrought about a serious disruption of cocoa marketing in Ghana. Followingthe 1966 coup it was immediately disbanded.

8. The fifth and last phase started in 1966. Under the new Govern-ment, the Cocoa Marketing Board began to rebuild the domestic marketingstructure that had existed previously. The Board restored the licenseof the Ghana Cooperative Marketing Association, which had been one oE themajor buying agents, handling on an average about one-third of the crop,but which had been forced to cease operations during the five years of theUGFCC. The Board also restored the licenses of two other local firmswhich had been active buying agents. However, the expatriate firms whichhad also been important buying agents and which had disbanded their fieldorganizations declined to resume their operations when invited to do so bythe Board. Subsequently, other local firms qualified as buying agentsand were granted licenses by the Board. There are now 10 active buyingagents, including the Board's own subsidiary, the Produce Buying Company,established in 1966 when there was an insufficient number of buying agentscapable of handling the crop.

The Present Marketing Organization

9. Under the ordinance of 1947 (see para 3) the composition of CMBprovided for a balanced representation of the various sectors of the cocoaindustry. Board membership consisted of representatives of the following:

No. of Members

Central Government 4Cocoa Farmers 4Provincial Councils 2Trading Firms 1Chamber of Commerce 1

Total: 12

ANNEX 1Page 3

10. A series of amendments to the 1947 ordinance culminated in theenactment by the Nkrumah Government of Legislative Instrument No. 433 ofMarch 1965, which reduced CMB membership to 7 members appointed by theMinister of Trade, with prior approval of the Cabinet, for a period of oneyear (except tthe managing director whose tenure remains at the discretionof the Cabinet). Trhe members are: a Chairman, selected from among themembers of the Minister of Trade; the managing director; the managingdirector of the Cocoa Marketing Company, one representative each of theBank of Ghana and the Ministry of Trade, and two members representing thefarmers. These changes effectively gave Government much greater controlover CMB than was previously the case.

11. When CMB was establislhed in 1947, it had an initial capital ofNV 27 million, whiich was Ghana's share of the surplus of the dissolvedWest African Produce Control Board. This surplus grew over the years andby 1957 had reached :4 154 million (held mainly in British Governmentsecurities). About NV 90 million of these were in a price stabilizationreserve account. As mentioned previously, the original CMB ordinancespecified that these reserve funds were to be used to build up the producerprice stablization fund, and to finance cocoa purchases and provide assis-tance to the farmers in all aspects of production. The new ordinance re-quired CMB to transfer all operating surpluses to the Central Government,including reserves held at that time. Thus the CMB was prevented fromaccumulating reserves for the purposes mentioned above.

12. Tile various changes in regulations affecting cocoa created con-fusion and insecurity in thie minds of the cocoa farmers, resulting in dis-content and mistrust of the CMB. The new Government which took over in1966 recognized the problems faced by the cocoa farmers and initiatedaction in support of their activities. With the recovery of world marketprices which began in 1965/66, the Government was able to start an upwardadjustment of prices to producers. Prices per 60 lb load were raised fromNO 4.00 in 1965 to NO 4.50 in 1966, NV o.50 in 1967, NV 7.00 in 1968 andNO 8.00 in 1969 to present. In addition, the Government resumed the pro-vision of Gammalin and sprayers, as well as fertilizers at subsidisedprices to cocoa producers. Moreover, thie Government is now revising the1965 cocoa legislation to adjust it to the institutional conditions nowprevailing in the country. In the liglht of the experience already gained,and of the Government's understanding of the need to strengthen the cocoaindustry, it is probable that any new regulations will benefit the producersand the industry as a whole.

The Buying of Cocoa

13. Purchase of cocoa from the producers is carried out by LicensedBuying Agents (LBA). In addition to thie CMB's own Produce Buying Companyand the Ghana Cooperative Marketing Association, the CMB grants licensesto firms meeting specific conditions.

ANNEX 1Page 4

14. Main functions of LBA are to:

a) Purchase grades I and II cocoa at the minimum price tothe producer as established by the CMB. Producer priceis the ex-scale price received by the farmer at the buyingstation.

b) Grade, bag, mark, and arrange for inspection of the cocoaby the Produce Inspection Division of the Ministry ofAgriculture.

c) Finance the purchases and provide storage for cocoa untildelivery into CMB stores.

d) Submit regular reports on purchases and stocks to CMB.

e) Arrange delivery of cocoa at CMB port stores at Tema andTakoradi.

15. The annual producer price is determined by Government in con-sultation with CMB. Before each buying season opens, CMB announces theprice per 60 lb. load to be paid at all buying stations. The producerprice remains fixed for the entire season, regardless of fluctuations inworld market prices. CMB maintains inspectors in the field to ensure thatproducers receive the official minimum price.

16. CMB pays the LBA a block allowance, at present NO 38.66 per longton (for breakdown see Table 2) to cover all expenses of handling cocoafrom buying points up to loading for truck or rail transportation to port.Transport costs from local stores to port stores are not included in theallowance as they are paid directly by CMB. The block allowance includesa profit margin for LBA of 2.4% of the producer price. It also includesa commission of NO 3 per long ton which LBA usually passes on to producersas a bonus at the end of the buying season.

Sources of Funds for Financing Cocoa Purchases

17. LBA are responsible for financing cocoa purchases. However, theyactually finance only part of their purchases since under existing financialarrangements they are able to raise most of the required funds by borrowingfrom commercial banks with the guarantee of the CMB. Cocoa buying is fin-anced as follows. At the beginning of the buying season (early October)the LBA submits to the CMB an estimate of expected cocoa purchases. TheLBA then draws a 60-day or 90-day bill of exchange on CMB for 90% of thevalue of the first 4 weeks' purchases. This bill is accepted by CMB andthe LBA in turn discounts it with a commercial bank, thus securing theinitial working capital. In addition,as the LBA submits weekly declara-tions of the actual quantitites bought, CMB pays 90% of the value of de-clared purchases. After cocoa is delivered at port stores, the LBA presentsport stores receipts to the CMB and collects the balance of 10% plus theblock allowance for tonnage delivered.

ANNEX 1Page 5

18. To raise the necessary funds, CMB draws bills on the Cocoa Market-ing Company, covering the volume of cocoa exported. These bills are guaran-teed by the Bank of Ghana and discounted by a commercial bank. Finally, theCocoa Marketing Company redeems the bills with proceeds received from cocoasales abroad.

Export Duties

19. The export duty on cocoa is heavy, and applied on a sliding scalebasis. Table 3 shows the rates of export duty proposed for the 1970/71season.

The Selling Of Cocoa

20. From 1947 to 1961 the sale of Ghana cocoa overseas was the re-sponsibility of the Cocoa Marketing Company, a Board subsidiary establishedin London in 1947. In mid-1961, the operations of the company were trans-ferred to Ghana and placed under a new company incorporated locally -- theCocoa Marketing Company (Ghana) Limited (CMC). Since then, cocoa saleshave been made in Accra. All sales by CMC are on a net c.i.f. basis andare made only to firms which are registered with CMC as buyers. Firmswishing to be registered as buyers of cocoa are required to apply directlyto the company in Accra. They must provide evidence that they have beenengaged in some capacity in the cocoa trade of a consuming country, andpossess first class bank references indicating also that they haveLfinancialresources to handle at least 1,000 tons per season. CMC has the right togrant, renew, and suspend buyers' licenses for each season, and to establishthe conditions of the licenses.

21. CMC maintains an office in London and one in New York. Theseoffices do not have the authority to conclude sales but merely serve toreceive bids and pass them on to CMC in Accra for a decision. Only theCMC managing director and his deputy have the power to execute sales. Over-seas buyers can also purchase cocoa by communicating directly with CMC inAccra, or they may negotiate through their own Accra office or accreditedrepresentative with CMC. The operations of CMC begin where the CMB'soperations end, that is, after cocoa is shipped on a vessel designated byCMC. In actual practice, the operations are not so clearly defined, as amajor portion of the cocoa crop is sold before the buying season officiallystarts, since most manufacturers like to assure a supply long in advance ofthe cocoa season. Selling in advance of the season requires of course acareful evaluation of the price trends. CMC makes such calculations byanalyzing the fundamental market determinants -- importantly forecasts ofsupply, demand and inventories. Such analyses are not always satisfactoryand have often caused Ghana to obtain lower prices than would have beenpossible. The Bank is providing Ghana with technical assistance for theimprovement of its crop forecasting methods by financing a specialist inthis field.

ANNEX 1Page 6

22. Legislative Instrument No. 433 of 1965 made the CMB responsiblealso for the marketing of: (1) palm oil, palm kernels and palm kernel oil;(2) copra and coconut oil; (3) sheanuts and shea butter; (4) coffee;(5) groundnuts; and (6) bananas. But, compared to cocoa, the volume andvalue of these other commodities handled by the CMB is still very small.Annual export value has been less than NO 2 million (US$1.9 million) inrecent years.

23. Although the CMB operations and the marketing system are still inthe process of reorganization, following the UGFCC period, cocoa marketingis being conducted reasonably well.

Conclusion

24. Ghana has considerable experience of purchasing and marketingcocoa. While the present system is still suffering from the ill-plannedchanges of the early 1960's, and is in the throes of reorganization, pur-chasing and marketing procedures are generally satisfactory, are improving,and are likely to improve further. They are adequate for the satisfactorymarketing of the cocoa that would be produced by the project appraised inthis report.

ANNEX ITABLE I

GHANA

EASTERN REGION COCOA PROJECT

COCOA: GHANA AND TOTAL WORLD PRODUCTION,19)49/50-1969/70

(Thousand long tons)

Year Ghana World % Ghana

19L9/50 2)h8 753 32.91950/51 263 799 32.91951/52 211 635 33.21952/53 247 78h 31.51953/5)i 221 759 29.1

1954t/55 23)4 788 29.71955/56 229 823 27.81956/57 264 881 30.01957/58 207 76L 27.11958/59 256 891 28.7

1959/60 317 1902)h 30.91960/61 432 1,156 37.41961/62 109 1,12!1 36.1,1962/63 L21 1,155 36.51963/61, I421 1, 9ll 35.3

196L/65 572 1,h190 38.1,1965/66 409 1,205 33.91966/67 375 1,321, 28.31967/68 l17 1,3L5 31.01968/69 334 1,229 27.2

1969/70 370* 1,311* 28.2

*Fstimated.

Source: Cocoa Statistics Bulletin, FAO, various issues.

ANNEX 1TABLE 2

GHANA

EASTERN REGION COCOA PROJECT

COCOA MARKETING 9OARDFICED ALLOWANCE PAID TO LICrMU) PUYPTG AGiNITS

N per long ton

1. Packing

16 bags @ 65 Np each 10.O10h.57 on twine A 35 Np an 1 lb

on the basis of 1 lb and5% service on bags o.65 11.05

2. Handling, Storage,etc.

Handling up country o.81Store to rail 0.73Rent of store 0.73Grading 0.29Road transport 4.o0Comission 3.00 9,59

3. Overheads

Salaries and wages L.20Watchman's wages 0.32Office rent 0.27Stationery and telephone 0.23Depreciation o.lo 5.1,2

IL. Variable Costs

Local remittance cost onnaked cost 0.75Insurance up country to port 1.70Bank fee 0.32Other finance charges 2.66Allowance for profit, 2.1% onnaked cost 7.17 12.60

Licensed Ruying Agents' Allowance 38.66

ANNE 1TABLE 3

GHANA

EASTERN REGION COCOA PROJECT

Schedule of Rates of Export Duty

FOB price below NO 280 10%

FOB price between NO 280 - 440 FOB price - 168

FOB price between No 440 - 600 FOB price - 2302

FOB price above No 600 FOB price - 411.60

I/ Proposed to go into effect in 1970/71 season.

ANNEX 2

GHANA

EASTERN REGION COCOA PROJECT

TECHINICAL ASPECTS OF GROWING COCOA IN GHANA AND IN THE PROJECT AREA

I. BACKGROUND AND GENERAL DESCRIPTION OF COCOA PRODUCTION

His tory

1. Cocoa was introduced to the islands of the Gulf of Guinea fromCentral and South America in the seventeenth century, and thence to themainland of West Africa at the end of the nineteenth century. The growthof cocoa production in West Africa, principally in Ghana, Nigeria, IvoryCoast and Cameroon, increased rapidly thereafter and now accounts for over60% of world production. This growth was due to the favorable climaticconditions and greater freedom from cocoa diseases of West Africa and tothe preponderance of peasant farmers who were less affected by price fluc-tuations than the highly capitalized estates in the Americas.

Climate, Soils and Ecology

2. Cocoa requires a hot wet climate with temperatures between 200Cand 27 C, and a rainfall of between 50 and 70 inches a year. The rainfallshould be evenly distributed through the year but a dry sunny period isdesirable to limit fungal diseases and to increase photosynthesis.

3. Soils should be free-draining and should permit adequate rootdevelopment, and much of the world's cocoa is grown on structural clay-loams, loams and sandy loams. In Ghana, cocoa soils are usually associatedwith undulating country where the soils are mainly derived from igeneousrocks.

4. Cocoa is grown most successfully in tropical rain forest areas,where it is planted under virgin or old secondary forest, and benefits fromthe accumulated soil fertility and more even climatic conditions broughtabout by the forest.

Cocoa Varieties

5. The original introductions of cocoa into Ghana were of the Amelonadotype, and this became the traditional planting material of the country.The introduction from Trinidad in the early 1940's of varieties collectedin the Amazon valley of South America has resulted, however, in the pro-duction by the Cocoa Research Institute of Ghana (CRIG), formerly the WestAfrican Cocoa Research Institute (WACRI), of hybrid cocoa, both among theAmazon families and between the Amazon and Amelonado varieties. TheseAmazon hybrids come into bearing much earlier and are higher yielding than

ANNEX 2Page 2

Amelonado varieties. This is illustrated in Table 1 which gives yieldsof on of the progeny trials conducted by CRIG at its Tafo research station.

6. The table shows that in the first five years of cropping, i.e.for trees up to eight years of age, hybrids gave some 70% more crop thanAmelonado. The gap narrows with age, but at 17 years the hybrids had pro-duced 40% more cocoa than the Amelonado. It is unfortunate that there arebreaks in the records of similar trial plots elsewhere in Ghana, but thesuperiority of the Amazon hybrids with respect to precocity of bearing andyield under Ghana conditions may be considered established. Similar resultshave been obtained in Nigeria, Ivory Coast and Sierra Leone.

7. Hybrids, however, do have some disadvantages. They tend to bemore susceptible to Black Pod, and Stem Canker fungal diseases; the crop isproduced over a much longer period of the year than Amelonado, and sincefarmers may be disinclined to harvest the very early and late pods, the riskof Black Pod fungus disease spreading from ripe to unripe pods is increased.The wider spread of the crop also leads to increased damage from Bathycoeliathalissina, a pentatomid bug, see para 15; the more vigorous growth requiresgreater care in pruning and shaping; and production of pods on canopy branchesmakes harvesting more difficult. Finally, it has been suggested that hybridshave a shorter economic cropping life than Amelonado. There is no establishedreason for this, and although yields have been shown to decline from aboutyears 8 and 9 onwards, this is likely to be due to soil exhaustion resultingfrom continuous heavy yields, and probably could be reversed by the use offertilizers, as already indicated by CRIG experiments.

8. Nevertheless, while existing Amazon hybrids are not the ultimatein cocoa breeding, given sound management and efficient disease and pestcontrol, they are the best material now available.

9. Work is proceeding at the Tafo research station on breeding forboth virus tolerance/resistance and Black Pod disease resistance. Suchmaterial is unlikely to be available for commercial use, however, foranother 15-20 years.

Planting

10. Planting preparation procedures vary according to the type of landto be planted. In high and secondary forest, the forest must be selectivelythinned or cleared, while in cleared land, ground cover and shade must beprovided at an early stage. In West Africa, ground cover is usually pro-vided by food crops such as cocoyams, maize, cassava and plantains.

11. Under traditional methods, cocoa is planted either as beans atstake or as bare-root seedlings, and plants are closely spaced at 5 ft x5 ft or 4 ft x 4 ft. However, with the introduction of improved varieties,seedlings are now raised in polythene pots in nurseries, and the plants aretransplanted to the field after between four to six months.

ANNEX 2Page 3

Maintenance of Young Farms

12. Under traditional methods of randomly planted Amelonado whichresult in a stand of about 500 trees/acre, seedling cocoa receives littleattention once the nurse shade has ceased to yield food crops. For hybridmaterial planted in lines, with up to 720 trees/acre, brushing along theplanting lines must be carried out whenever necessary, if the high yieldpotential of the hybrid is to be realized.

Harvesting

13. Cocoa trees come into bearing abotut four years after planting andreach full production in about the eighth year. The main harvest usuallybegins at the end of the wet season and continues during the first few monthsof the dry season with possibly a minor harvest during the first months ofthe following wet season. Thus, in Ghana, the peak harvesting period isfrom September to December with a mid-crop harvesting from June to August.Ripe pods can be left on the tree for up to two weeks but unharvested podsare liable to Black Pod disease and germination of beans within the pod,and farmers aim to pick pods every three weeks in peak periods. Afterpicking, the pods are left for three to seven days before being taken toa central collection point where the beans are extracted, fermented overabout seven days and sundried in about ten days. The dry beans are thenbagged, headloaded to the nearest buying center and sold.

Pests and Diseases

14. The most damaging of cocoa insect pests is the Capsid. Capsids(more correctly mirids) feed by injecting cell destroying enzymes intoyoung tissues of the tree, twigs or pods, and sucking out the resultingfluids. The feeding points are sites of secondary infection by the fungusCalonectria, and it is this fungus permeating through the plant tissue whichultimately kills the affected portion of the tree.

15. Damage from capsid was first identified in the 1920's and quicklyspread to become severe in all cocoa areas of Ghana. In 1954, Gammalin, aproprietary Benzene hexachloride (BHC) insecticide, 1/ was found to giveeffective control. Extensive spraying was introduced in 1957, using motor-ized knapsack sprayers applying 4 ozs of active insecticides per acre fourtimes annually. The first application is usually made in June followedby a second after three weeks; the third is in November followed by thefourth three weeks later in December. In recent years capsid resistance toBHC has been identified in certain locations, but fortunately a carbamateinsecticide has been found to be effective in these areas. In additioncarbamate gives an effective control of the only other serious pest Bathy-coelia thallissina (see para 7).

1/ BHC use in Ghana has not been shown to have undesirable side-effectson the environment.

ANNEX 2Page 4

16. The principal cocoa disease is Swollen Shoot Virus Disease (SSVD)which can kill a tree within a year from initial infection. The diseasewas first reported in the Nankese area of the Eastern Region of Chana in1935 where it wiped out most of the cocoa within a 20 mile radius of Nankese.In the early 1940's isolated outbreaks were recorded throughout Ghana. Thevirus is transmitted by several species of mealybugs which have a wide hostdistribution throughout Ghana. The only satisfactory control lies in cuttingout infected trees and their immediate contacts, followed by regular inspec-tion to locate and remove any further trees which show signs of infection.

Fertilizers

17. The use of fertilizers on cocoa in Ghana is a recent innovationbecause:

(a) in the past, when yields declined due to loss of soilfertility, farmers tended to move to new forest areas,which were readily available;

(b) the value of fertilizers could not be proved or guaranteedbecause experimental results were commonly masked by capsiddamage and varying shade intensities.

CRIG Fertilizer Trials

18. The results of fertilizers trials carried out by CRIG on farmers'plots of Amelonado cocoa and Cocoa Division Amazon cocoa plots have beenvariable. However, phosphate and potassium fertilizers have given fairlyconstant positive increases in yield on mature Amazon cocoa and as a generalrecommendation, CRIG suggest that 80 lb P205 and 50 lb K20/acre applied towell maintained cocoa, would give yield increases of between 15-30%. Theeconomic use of fertilizers, however, depends upon maintaining a high stan-dard of cocoa husbandry. Average cocoa yields in Ghana are low and the useof fertilizers probably is economic only when cocoa is well managed andyielding about 600 lb/acre. In addition to increasing yields, fertilizeris almost certainly necessary to maintain the high potential yields possiblewith Amazon hybrids.

II. THE PROJECT AND PROJECT AREA

Climate and Ecolog

19. The project area is well suited to cocoa cultivation with eventemperatures, adequate rainfall and two short dry seasons. The areaoverlies granitic rock, giving good drainage, and the soils of the area,apart from about one-third in the valley bottoms, are suitable for cocoa.

20. The area was an important cocoa growing area in the 1930's whenabout 95% of the land was under cocoa. Swollen shoot disease destroyed

ANNEX 2Page 5

almost all the old plantings by 1950 and most of the cocoa in the areatoday, about 56,000 acres, was replanted. Subsequent to this, after theloss of the original cocoa, many farms turned to food crops, and theproximity of the area to large consuming centers such as Accra, Tema andNsawam increased the demand for food crops, and charcoal and firewoodproduction. Thus, much of the area is deforested and this, together withthe fact that cocoa is being established for the second and, in some cases,the third time, requires modified techniques, greater use of fertilizers andbetter pest control.

Planting Material

21. The main source of hybrid seed for the project would be the existingseed garden at Bunso. About 1.1 million pods (each containing about 35 seeds)would be required. Assuming a requirement of 30 pods per acre, the podswould be needed as follows:

1971 1972 1973 1974

90,000 270,000 360,000 360,000

Four different hybrid varieties, which have performed best in progeny trials,would be used, the A, J, H and M crosses of the CRIG Series 11 hybrids. Ex-isting seed production at Bunso is insufficient to meet project and CocoaDivision requirements, but production would quickly be increased by handpollination techniques. Hand pollination would also enable the timing ofpod production to be controlled so that seed would be available in December/January; the most suitable time for nursery planting.

Planting

22. Much of the non-cocoa land in the project area has been used forfood farming in recent years and generally, it will be necessary for cocoato be established under a nurse shade of plantain and cocoyam. Cocoa seed-lings will be raised in polythene bags as close to the area to be plantedas possible. Seeds would be planted in the bags from November through Feb-ruary and the plants would be transplanted to the field in April and May.Planting would be in lines with a spacing of 6' x 10' giving 720 plants/acre.Maintenance of the young trees would follow the procedure outlined in para12 above.

Harvesting

23. The processes of harvesting, fermentation and drying would followtraditional practices, but the use of hybrid seed will present some featuresnew to Ghana cocoa farmers, and which would necessitate improved managementtechniques. The wider spread of crop over the year would mean an increasednumber of harvestings' the higher proportion of pods in canopy brancheswould make harvesting more tedious and increase the chances of missed pods;the pods would be larger and heavier than Amelonado; and bean size would bemore variable.

ANNEX 2Page 6

Anti-Capsid Control

24. Widespread anti-capsid spraying with BHC was carried out in 1957-60by Government gangs and later by farmers themselves. In the late 1960's,however, shortages of insecticides led to a resurgence of severe capsiddamage and loss of production. In the project area capsid damage is exten-sive and rehabilitation of existing cocoa would require effective capsidcontrol. While BHC would be effective against most outbreaks of capsid, itis anticipated that pockets of BHC resistant capaids would occur in the pro-ject area. In these cases, a carbamate insecticide would be used. Farmerswould be trained in spraying methods at the Cocoa Division's farmer's train-ing school and on their own farms, where they would be formed into groups toensure that fairly large blocks of cocoa would be sprayed at the same time,thus increasing spraying efficiency and minimizing reinfestation from un-treated farms.

25. The rate of application of BHC would be 4 ozs active ingredientper acre in June and November with repeated applications in July and Decem-ber to deal with capsids hatched after the first spray. Spot spraying wouldalso be carried out as necessary during the year.

Swollen Shoot Virus Disease (SSVD)

26. Part of the project area which was devastated by SSVD between 1935and the early 1950's was systematically treated for the disease between 1950and 1961. A considerable acreage was replanted and spread of the diseasesubstantially brought under control. Unfortunately, in 1962 implementationof control measures lapsed and SSVD again began to spread through the treatedarea and small isolated outbreaks are still present. The remainder of theproject area has never been treated for SSVD, and replanted cocoa has becomeinfected.

27. The Cocoa Division is responsible for SSVD control throughout thecocoa producing areas of Ghana, including the project araa. Stich controlconsists of cutting out infected and contact trees and replanting them atthe beginning of the next rainy season free of charge. As no SSVD controlhas been carried out since 1962, no accurate estimates for the extent ofSSVD in the project area and of the cost of consequent replanting awe avail-able. The Cocoa Division would implement the initial cutting out of infec-ted trees in advance of project activities and secure monthly reinspectionthereafter.

Fertilizers

28. Fertilizer would be applied to the hybrid cocoa planted under theproject. It would be compound which would provide 60 lbs P205 and 75 lbsK2 0 per acre when used at the full rate, i.e. a 0:15:18 granular fertilizer

ANNEX 2Page 7

at 4 cwts/acre. Fertilizer would be broadcast twice yearly, in equal quan-ties, after the canopy of the young cocoa had joined, from about the fourthyear after planting. In the fourth and fifth year the amount would be halfthe full rate. After the sixth year, farmers would be encouraged to continuewith twice yearly applications of fertilizers, and seasonal loans for thispurpose would be made available to project farmers by the Agricultural Deve-lopment Bank.

29. For rehabilitation, the use of fertilizer is recommended on areasyielding more than 600 lbs/acre, with an application rate of about 4 cwts/acre. Project costs assume that 20% of farmers in the area to be rehabili-tated would apply fertilizer.

GHANA

EASTERN REGION COCOA PROJECT

COCOA VARIETY TRAILS - TAFO

NET YIELDS, LBS DRY COCOA/ACRE

Variety Age (Years) 3 h 5 6 7 8 9 10 11 12

Amelonado 0 70 210 750 1,050 1,120 780 820 1,220 1,990

Series II HybridsVarieties to be -usedin Project. (Averageof IIA, IIH, IIJ, I131) 71 534 908 1,187 1,4h3 1,230 1,270 1,250 1,166 987

NET YIELDS, LBS DRY COCOA/ACRE

o-8 8-12

Amelonado 2,190 4,olo

Series II Hybrids 5,373 4,673

I-3

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GHANA: EASTERN REGION COCOA PROJECTCOCOA DIVISION

ORGANIZATION CHART

CHIEF COCOA OFFICER

DEPJ1Y CHIEF COCOA OFFICER

PRINCIFML AGUCULTA OFFICER

MNCIPAL AGtlCULTUltAL SURVEY OFFICER

RDIASUIATION P.A.O.S&JSODISEASE & PEST CONTROL DEVELOPMENT AGRONOMSY EXTENSION TRAINING

I LINK WITH COCOA RESEARCH INSTITUTE COCOA STATION EXPRIMENTATION FAtMERS TRAINING DEPRTMENTAL STAFF

EXPERIMENTATION AND REDUCTION OF RESEARCJOINT COCOA DIVISION RESULTS FOR APPUCATION EY FARMERS

COCOA RESEARCH INSTITUTE (AGRICLILTURAL OFFICERS)FIELD TRIALS

ISRD - 4739 (R) I.

ANNEX 5

GHANA

EASTERN REGION COCOA PROJECT

COCOA MARKETING COOPERATIVES

Introduction

1. The Cooperative Movement in Ghana officially started in 1928,under the responsibility of the Department of Agriculture. By helpingcooperative members to improve cocoa husbandry and marketing, the Depart-ment demonstrated the benefits of cooperative associations, and establish-ed a nucleus for further cooperative development. The Cooperative Movementprospered in cocoa areas and gradually spread throughout the country, em-bracing other activities such as the bulk purchase of agricultural inputs,thrift, transport, and credit facilities. In 1944, a Department of Coopera-tives was established to enact cooperative society legislation and to con-trol their development and operations. The Department operated successfullyuntil 1962 when it was abolished by the Nkrumah government, and all societieswere merged into the United Ghana Farmers Council Cooperatives (UGFCC).UGFCC combined the roles of the previous Department of Cooperatives andthe Ohana Cooperatives Marketing Association, which was disbanded at thesame time. UGFCC lasted four years, but soon after the 1966 coup, theDepartment of Cooperatives was restored under the Ministry of Labor andSocial Welfare and the Ghana Cooperatives Marketing Association resumedits activities. During the UGFCC period, the Cooperative Movement suffereda serious set back, and the affairs of its constituent societies and incomesdeteriorated due to bad UGFCC management and its sponsoring uneconomic acti-vity.

The Primary Societies

2. The basic unit of the Cooperative Movement is the primary societyorganized at village level. During their Annual General Meeting the membersof a primary society elect a Committee of seven members, which includes aPresident, Vice President and Treasurer. The Committee appoints a Secretary,to manage the day-to-day operations of the society, under its supervision.The Secretary is responsible for purchase of cocoa from society members,book-keeping, stock maintenance and cash operations. He prepares the socie-ty profit and loss account and the balance sheet which are presented by theCommittee to the Registrar of Cooperatives for approval.

3. To become a member of a primary society, a farmer must be over18 years of age and own a cocoa farm. He pays an entrance fee of NC 0.20to 0.50 and subscribes at least one share of NC 2.00. A member must sellhis cocoa only to his society, except where prior permission has been givenby the Committee. This system works satisfactorily as long as the coopera-tives are able to make immediate cash payments for their members' cocoa.In practice, however, there are occasions when the societies are short ofcash and consequently members sell to other buying agents.

ANNEX 5Page 2

4. The primary society's main role is to purchase cocoa from itsmembers and to transfer it to its parent Union or directly to the GhanaCooperative Marketing Association. Each primary society acts as an agentof the Ghana Cooperative Marketing Association itself a Licensed BuyingAgf.,it (LBA) of the Cocoa Marketing Board. The primary society pays the:,ducer price (currently Ni 8.00 per headload of 60 lbs) in cash to theirmers and the funds required for such purchases are provided by the

,hana Cooperative Marketing Association. Intended solely as a marketingcooperative, the primary societies do not provide production inputs orconsumption goods. They may, however, act as a credit organization, byproviding short-term advances on future sales, or by granting productionloans to members for extension of their farms.

The Unions and the Ghana Cooperative Marketing Association (GCMA)

5. The primary societies are grouped in Unions organized themselvesas cooperatives, their members being the constituent primaries. The Unionsassist in the collection and transportation of cocoa from the primary socie-ties to Accra. They distribute funds for cocoa purchases amongst theprimaries and also provide loans, and their main role is to link the pri-mary societies with GCMA.

6. GCMA, with headq. rters in Accra, was formed in 1944. After afour year interruption between 1962 and 1966, it resumed its activitiesnot only as a CMB Licensed Buying Agent for cocoa, but also for the pur-chase of other products such as coffee, copra, palm kernel, groundnutsand rice. GCMA is a cooperative made up of its constituent Unions. Itis managed by a Director assisted by a Secretary. GCMA throughput sinceits reestablishment is summarized in the following table:

1967/68 1968/69----- tons…------------

Cocoa 177,245 123,347

Coffee 2,910 1,337

Copra 2,666 1,056

Palm Kernels 37 37

Shea Nuts 39 426

Groundnuts - 115

During the past two years, GCMA has been handling about 30% of Ghana's totalcocoa produ.-tion. Table 1 and 2 shows a summary of the profit and loss ac-counts and the balance sheets of GCMA for 1967/68 and 1968/69.

ANNEX 5Page 3

7. GCMA is a member of the Alliance of Ghana Cooperatives. Membershipof the Alliance, established in 1951, includes the Ghana Cooperative Dis-tillers Association, the Ghana Cooperative Fish Marketing Association, theGhana Cooperative Transport Association and the newly established GhanaCooperative Wholesale Agency. The main objective of the Alliance is topromote the cooperative movement in Ghana by assisting newly establishedcooperative societies; running a college for training cooperative officers;collecting and publishing marketing and financial data useful to its members;and representing the Ghana Cooperative movement in the International Coopera-tive Alliance.

The Department of Cooperatives

8. The Department is within the Ministry of Labor and Social Welfareand is directed by a Registrar. The Department controls the cooperativemovement, using the legislation provided by the Cooperative SocietiesDecree of 1968. Besides the registration of eligible societies, theDepartment, carrying out the supervision of societies, unions and associations,audits all cooperative accounts at least once a year, and approves balancesheets and the allocation of bonuses. The Registrar's consent is needed forcooperatives to grant loans above a fixed ceiling set for each society, andif a society is mismanaged or does not fulfill its legal obligations, theRegistrar has power to dissolve the Committee, and appoint a temporary managerto run the society for a period not exceeding two years.

9. New societies undergo a probationary period before registration.After applying for registration, new primary societies are supervised andaudited by the Department of Cooperative as for a fully registered society.Full registration is granted after a period of one or two years if theRegistrar is satisfied that cooperative legislation is being applied, thata sufficient number of members have paid in their shares and that thevolume of cocoa handled has reached at least 100 ton/year. The Departmentmay provide grants to meet primary society development costs, before in-come from the first sales of cocoa are received.

10. The Department also organizes revision courses for its own officersand cooperative secretaries in cooperative principles, law, book-keeping andcommercial practices. The training program is staffed by cooperative offi-cers.

Cooperatives in the Project Area

11. The following table summarizes principal data on the nine coopera-tives in the project area. Further details are given in Table 3 and 4.

ANNEX 5Page 4

1967/68 1968/69Total Average Total Average

6 societies per society 9 societies per society

Membership (No.) 1,370 228 1,728 192

Cocoa purchased (Tons) 1,137 187 721 80

(Value NC) 297,210 49,545 215,448 23,960

Total expenses (N¢) 305,639 50,951 226,191 25,232

Total income (N.) 307,185 51,208 222,149 24,701

Profit (Loss) (NC) 1,546 258 (4,042) (531)

Poorer performance in 1968/69 resulted from bad weather and a resultingdiminished crop. The tonnage of cocoa marketed through the cooperativeswas low entailing high costs per ton handled and financial losses for allbut two of the nine societies.

12. The income of primary societies is principally that portion ofthe LBA allowance passed on to them by GCMA. Such income averaged NC 7.75per ton of cocoa handled in 1968/69 and NC 7.25 in 1967/68. Other incomeaccrues from such sources as the transport of cocoa and farm inputs withhired trucks; interest on short-term advances to members and debt serviceon medium-term loans for improvement of members farms. Assets of theprimary societies, consisting usually of a cocoa store and small office,are financed with members shares. On the average members have paid inNC 0.60 of their NC 2.00 shares. This low rate is explained by the recentresumption of cooperatives in 1966/67 and the poor results of the 1968/69campaign.

Conclusion

13. Despite undoubted management weakness, and poor financial resultsin 1968/69, it is felt that cooperatives in the project area, with theassistance of project staff officers, would be able to provide the basisfor a satisfactory system of debt recovery. A key issue, however, wouldbe the timely provision of funds to the primary societies for the cashpurchase of members' cocoa for which the project provides.

ANNEX 5Table 1

GHANA

EASTERN REGION UOCOA FROJECT

Ghana Cooperative Marketing Association, Ltd.

Balance Sheet(as at March 3L)

1968 1969....... ..

ASSETS

Fixed assets (net of depreciation) 299,637 298,263

Current assets 938,571 653,331

Loans,and advances, members 3,310,213 3,890,309

Sundry debtors 132,288 58,759

Prepaid expenses 9,375 53077

Cash on hand and in banks 167, 142 171,612

Total Assets 4L857,225 5,077,351

LIABIIaTIES

Membership contribution 130,977 131,577

Reserves and provLsions 267,947 516s452

Current liabilities 15,110 iU40,542

CMB advances 4,020,224 3,183,932

Government and other 21,454 33,500

Trading companies 143,816 34,501

Sundry creditors e4L5,'Y9 Y3,241

Bank overdraft - 933,870

Surplus 11,717 9,736

Total Liabilities 4,857,225 5,077,351

ANNEX 5TABLE 2

GHANA

EASTERN REGION COCOA PROJECT

Ghana Cooperative Marketing Association, Ltd.

Statement of Profit and Loss(As of March 31)

1268 1969....... N... N¢

CREDIT

Cocoa sales 566,453 788,287

Other produce and sundry goods 283,491 80,408

Interest on loans to members 86,985 10,952

Rent and other earnings 23,148 77,290

Total Credit 960,077 956,937

DEBIT

Addministrative expenses 452,574 545,61b

Financial expenses 376,198 328,488

Director's fees and travelallowance 9,222 12,913

Depreciation 99,366 29,743

Provisions 11,000 30,439

Net profit 11,717 9,736

Total Debit 960,077 956,1937

GHANA

.ASTERN REGION COCOA PROJECT

1/BASIC DATA ON FROJECT A.RA COOP-t4TIVES-

1967 - 1)68

Average per Average per tan

SUHUM APCNOAPONO AXANHIA NANKESE KRABOA-COALTAR KUKUA TOTAL society of cocoa

,Žembers&ip (No.) 219 300 150 305 88 308 1,370 228

Cocoa purchased (Tons) 236.2 151.3 90.7 397.3 140.9 120.9 1,137.3 189.6

Capital paid in (Ne) 40.oo 107.00 44.00 30(.00 172.00 64.oo 727.0 121.2 -

Profit and Loss Account

&cpenses account

Purchases of cocoar' 61,726.15 39,539.23 23,702.63 103,826.41 36,821.40 31,594.80 297,210.61 49,545.00 ' 261.33

Rents and utilities 126.64 33.70 45.23 197.25 82.03 82.94 567.79 94.65 0.50

Aaintenance of fixed assets - 150.60 - 50.00 61.37 1.92 263.89 43.99 0.23

Carriage and Transport 598.60 208.93 68.50 817.21 210.20 71.55 1,974.29 329.11 1.74

Wages of labourers 1,478.65 336.59 228.08 2,019.12 619.50 413.40 5,095.34 849.39 4.48

Administrative Costs 14.08 5.67 2.35 19.60 3.10 6.34 51.14 8.52 0.04

Committee meetings 45.05 5.00 10.20 22.60 0.78 30.50 114.13 19.02 0.10

Miscellaneous 23.00 5.00 - 12.25 - 40.25 6.71 °-°4

Total (Current 3bcpenditure) 64,012.17 40,284.02 24,056.99 106.964.44 37,798.38 32,201.45 305,317.44 50,896.39 268.46

Depreciation 31.40 12.92 7.01 6.92 - 52.00 110.24 18.38 0.09

Interest on loans 13'.00 37.81 - - _ 38.50 211.31 35.23 0.19

Income tax - - -

Total Excpenses 64,178.57 40,334.75 24,063.99 106,971.36 37,798.38 32,291.95 305.638.99 50,950.00. 268.74

Income

From LBA's allowance (Ne/T) 7.25 7.25 7.25 7.25 7.25 7.25 _ 7.25

Gross Income 63,848.27 40,660.73 24,378.53 107.501.04 38,246.31 32,550.57 307,185.44 51,207.81 270.10

Profit (Loss) (330.30) 325.98 314.54 529.68 447.93 258.52 1.5:6,.45 257.79 1.36

Average current expendituresiHandling Cost (NO/T) 9.68 4.92 3.91 7.90 6.93 5.12 _ 6.39

Purchase (Nc/T) 261.33 261.33 261.33 261.33 261.33 261.33

Total average currentexoenditure (NW/T) 271.01 266.25 26124 268.23 268.26 266.35 267.72

1/ See also footnotes Table 147/ N* 7.00 per 60/lbs. or N. 261.33/r.

GHANA

EASTERN REGION COCOA PFOJSCT

BASIC DATA ON FROJECT AREA COOPERATIVES

1968 - 1969 1/

2/ 2/ 2/ AVERAGESUHUM APONOAPONO AMANHIA NANKESE KRABOA AKORAB KUKUA ONYAME CKO-ASE TOTAL AVERAGE Per Ton

COALTAR _ BEKYERE Per Soc. of Cocoa

Membership (No.) 219 180 155 302 90 304 321 80 77 1,728 192 -Cocoa purchased (tons) 103.56 69.70 62.o6 159.30 86.40 83.50 112.56 32.40 11.60 721.08 80.18 -Canital paid in 3/ 40.00 107.00 54.00 410.00 190.00 72.40 69.20 46.oo 20.00 1,008.60 112.16 -

Profit and Loss Account

Expenses Account

Cocoa purchases 4/ 30,947.87 20,829.15 18046.011 47,605.21 25,819.78 2s4,953.114 33,637.43 9,682.42 3,466.54 215,487.55 23,943.06 298.84Rents and utilities 58.80 2.27 111.45 157.99 36.74 2.04 97.35 51.22 37.40 555.26 61.74 0.77Maintenance of fixed asset 5.00 26.14 - - 9.50 28.00 43.14 - - 111.78 12.43 O.I6Carriage and Transport 99.45 164.60 96.05 640.52 122.70 560.97 28.90 24.10 11.40 1,748.69 194.45 2.43Wages of laborers 581.10 561.00 926.60 1,826.76 438.28 1,293.59 947.21 188.55 66.60 6,829.69 759.46 9.47Administrative costs - 11.13 - 7.21 114.16 1.54 11.13 17.49 19.16 81.81 9.10 0.11Committee meetings 43.97 49.70 13.10 72.02 - - 81.00 3.80 11.20 274.79 30.56 o.38Miscellaneous 56.oo _ _ - 50.00 9.30 61.60 197.90 22.01 0.27

Total (Current expenditures) 31,792.19 21,643.99 19,714.21 50,309.71 26,441.16 26,839.28 34,896.16 9,976.88 3,673.89 225,287.47 25,032.81 312.43

Depreciation 31.40 13.35 7.00 6.92 13.30 - 58.86 78.46 30.66 239.95 26.68 0.33Interest on loans - - 45-00 - - -- - 45.00Income tax 123.23 138.54 n.a. 225.11 n.a. n.a. 131.79 n.a. n.a. 618.67 154.675/ 0.86

Total expenses 31,946.82 21,795.88 19,766.21 50,541.74 26,454.46 26,839.28 35,086.81 10.055.34 3,704.55 226.191.09 25.132.34 313.62

Income

From LBA's allowance (NO/T) 8.00 8.00 8.00 8.00 8.00 0oo 8.00 4.o00 4.00 7.76 7.76Gross Income 6/ 32,083.03 21,493.85 19,072.18 49,147.63 26,577.06 25,692.49 34,702.26 9,863.12 3,516.89 222.148.51 24,683.16 308.08

Profit (Loss) 136.21 (302.03) (694.03) (13914.11) 122.60 (1,146.79) (384.55) (192.22) (187.66) (4,042-58) 1449.18) (.54)

Current expenditure: handling costs (NO/T) 8.15 11.69 18.82 16.98 7.19 22.59 11.18 9.09 17.87 - 13.59purchase price (N9/T) 298.84 298.84 298.84 298.84 298.84 298.84 298.84 298.84 298.84 - 298.84

Total Current Expenditure(NO/T) 306.99 310.53 317.66 315.82 306.03 321.43 309.92 307.93 316.71 - 312.43

1/ Financial year ending March 31, 19692/ Proposed society not yet registered3/ Ng2.00 per share.;/ N08.00 per 60/lb

Average for 4 societieso Sale of cocoa to GCMA nlus a fraction of IBA's allowance.

ANNEX 6

GHANA

EASTERN REGION COCOA PROJECT

THE AGRICULTURAL DEVELOPMENT BANK

Introduction

1. In April 1964, the Bank of Ghana established a Rural Credit De-partment to study the problems of agricultural credit and to prepare thenecessary legislation, plans and procedures for the establishment of anagricultural credit bank. In April 1965, Parliament passed an Act (Act286) to incorporate the Agricultural Credit and Cooperative Bank. Thenew Bank started its operations in August 1965, taking over the assetsand liabilities of the Rural Credit Department of the Bank of Ghana. InApril 1967, the initial Act was amended by a Decree of the National Libera-tion Council (Decree 182), and the Bank's name changed to the AgriculturalDevelopment Bank - (ADB).

Functions and Objectives

2. ADB was specifically established to provide credit facilities forthe development and the modernization of agriculture and allied industries.To achieve this purpose, ADB may either enter into loan agreements withindividuals, cooperatives and companies, or subscribe a part of the sharecapital in new ventures. The Bank is also empowered to initiate or par-ticipate in training and research facilities aimed at promoting agriculturaldevelopment.

3. The Bank may mobilize funds by accepting deposits on savingaccounts and transact business normally confined to commercial banks. WithGovernment approval and guarantee, the Bank may also raise loans from inter-national financial organizations or foreign financial institutions.

Organization, Capital and Management

4. ADB's authorized share capital is NC 30 million (US$29.4 million)and, although open to public subscription the Government and the Bank ofGhana with a total paid-up capital of NC 8.55 million, are the only twoshareholders. The Bank of Ghana's contribution amounting to NC 3.5 millionwas made available in cash while Government provided N¢ 3.78 million insavings bonds (3%) and N¢ 1.27 million in cash. There is no fixed schedulefor the paying-in of capital and the two shareholders fix each year withADB the amount to be paid in during the following financial year.

5. The Bank's operations are controlled by a Board of seven Directorsrepresenting the Ministries of Finance and Agriculture, the Bank of Ghana,and the Department of Cooperatives. The Chairman of the Board is also the

ANNEX 6Page 2

full time Managing Director of the Bank; he is assisted by an ExecutiveDirector, who is also a member of the Board. Under an agreement betweenthe Government and USAID, ADB is being advised by an American expert inagricultural credit.

The day to day activities of the Bank are under the control ofa Managing Director, who is appointed by the Government for a five year

period. The Bank retains the services of an independent auditor: Amorin,Agyeman, Ayew and Co., chartered accountants with an office in Accra.

7. There are two main Departments in the Bank, the Loans Departmentand the Administrative Department which in turn are split into variousdivisions. Each Department is under a Director responsible to the ManagingDirector, see organization chart.

8. Besides its headquarters in Accra, ADB has opened four branches,in Kumasi, Koforidua, Tamale and Hohoe.

9. The staff of ADB totals about one hundred of which 39 are quali-fied professionals with university or post-secondary school diplomas; 21of them having obtained degrees either in Great Britain, USSR, USA andGermany. Although many of t ? professionals have graduated in agriculture,only a few have adequate practical experience, and consequently the techni-cal appraisal of agricultural projects is rather weak. On the financialand administrative side, however, ADB's personnel is reasonably competent.

Activities and Performance

10. As of September 30, 1969, ADB had approved 351 loans totallingNE, 4.66 million and disbursed NE 3.96 million. The breakdown of these loansamongst different activities is summarized below and detailed in Table 1.Table 2 shows the different branches of ADB that have disbursed these loans.

Number of Amount % of TotalLoans ('000 NC) Amount

Tobacco 32 955 20.4

Sugar 83 844 18.1

Food Crops 137 733 15.7

Fisheries 29 698 15.2

7ultry 31 617 13.2

t't ;.~-rs 3 39 814 17.4

351 4 661 100.0

ANNEX 6Page 3

While over 80% of existing loans have been granted through the head officein Accra, the activities of the four other branches, which were createdafter June 1967, are expanding.

11. The loans cannot be defined into short, medium and long-term cate-

gories as the terms depend on the type of crop financed. Terms vary from6 months for food crops and tobacco, to 7 years for cattle, and 10 yearsfor oil palm. Rates of interest vary between 7% and 9% according to thelength of the loan. For many loans, the annual repayment required isexpressed as a percentage of the actual gross return from the projectwith a fixed minimum which varies for each individual loan. This methodresults in delays in debt recovery and prolongation of loan repayment

after the established date of maturity. However, this does not explainfully the rather poor performance in debt recovery. For loans made bythe head office in Accra, the amount overdue on August 31, 1969 represented33% of the total amount utilized and some 20% of ADB total lendings. Thesepercentages could be reduced if more effective supervision was provided byADB's loan officers, and if an improved reporting system was introducedwhich would permit a tighter control and follow-up on each individual loan.ADB's managers, aware of this situation, intend to introduce new procedureswhich should improve the debt recovery system.

12. ADB's reserves are increasing steadily, since under the Act es-tablishing it, net profits during first five years are paid into the Ge-neral Reserve Account. At September 30, 1969, the reserve accounts wereas follows:

N¢

Capital Reserve 5,959

Contingency Reserve 121,854

Exchange Reserve 479

General Reserve 20,452

Loan Loss Reserve 209,666

Project Identification Reserve 40,000

TOTAL RESERVE 398 510

The Loan Reserve account represents 5.04% of the total approved loans and

5.28% of the utilized amounts, while the total reserve represents 9.58%and 10.05% of the same amounts respectively. Furthermore, ADB holds, fromits borrowers, indemnities valued at some N¢ 9.5 million.

13. In early 1968, ADB commenced accepting funds on current anddeposit accounts, both at the Head office in Accra and at all branches

ANNEX 6Page 4

of the Bank. On September 30, 1969, 791 deposit accounts amounted to N¢161,291.13 including N¢ 34,267.52 in savings accounts bearing interest at3.1/2% per annum, see Tables 3 and 4.

14. ADB has also started to finance new companies. In a joint ven--.ire with the Government, the National Investment Bank and the Pioneeri'obacco Company, ADB subscribed in March 1969, 20% the Ghana Tobacco Co.capital amounting to NC 1 million. The latter company will process curedtobacco purchased from smallholders, and provide local manufacturers withtobacco required for local consumption. Also, ADB intends to enter thecotton industry in a similar way.

IDA Credit 163-GH Fisheries Project

15. ADB is the lending medium for IDA Credit 163-GH. The project,costing US$2.3 million, is providing credit to fishermen for the construct-ion of 40 medium-sized purse seine fishing vessels. IDA's contribution ofUS$1.3 million covers the foreign exchange component of vessel constructionand is being made available, together with the Government's contribution,to eligible borrowers through ADB.

16. After approving ehe credit worthiness of an applicant, ADB re-ceives from the borrower - .iown payment of N¢ 11,000 (US$10,780) represent-ing some 20% of the total cost of a vessel. ADB then credits the borrower'saccount with another NC 35,000 (US$34,000) and the Boat-yard Division 1/draws from this account the expenses it incurs in the construction of theborrower's vessel. The Boat-yard Division will later collect debts on ADB'sbehalf through the medium of a hire-purchase type arrangement.

17. Government on-lends IDA funds and its own contribution to ADB at6-1/2%. ADB charges the borrower 9%, pays 1-1/2% to the Boat-yard Divisionfor its services, and bears the credit risk from the remaining 1%. Loansare to be repaid in six years after a one year period of grace; this iswell within the expected vessel life of 10 years.

18. Further details on the fisheries project are given in IBRD-IDAReport Pa-7a of September 8, 1969 - "Fisheries Project - Ghana."

'DB and the Cocoa Project

19. ADB's role in the Cocoa Project would be very similar to that itplays in the Fisheries Project (see para 15). ADB loan officers wouldappraise the credit worthiness of each borrower and ADB's Board would ap-

ve the loan. The project development unit would then disburse the loan

1/ Branch of the State owned Company, Ghana Industrial Holding Corporation,in charge of fishing vessels construction.

ANNEX 6Page 5

in kind, as does the Boat-Yard Division in the Fisheries Project, and makesure that the proceeds of the loan are properly used. Cooperatives wouldcollect required repayments by deductions from the sales of cocoa, and paythese to ADB and the Ghana Cooperative Marketing Association would guaranteethe global repayment of the loans to ADB. These procedures would reduce thecredit risk undergone by ADB to a minimum. Table 5 is an estimated scheduleof the loans that ADB would make under the Eastern Region Cocoa Project.

20. The initial establishment of a loan accounting system by the projectdevelopment unit for project participants would assist the improvement ofADB's methods. The involvement of ADB staff together with the project develop-ment unit in the appraisal of farmers application, and in the disbursement ofloans would give them practical experience in this type of operation and, inaddition, participation in the Cocoa Project would imporve ADB's lendingpotential, and financial reserves. Besides those advantages, ADB's involve-ment in the project would meet the declared Government policy of establish-ing ADB as one of the main institutions for agricultural development in Ghana.

Conclusion

21. Although ADB's record is not particularly impressive, and defi-ciencies should be considered in the light of the difficult period in whichoperations began, and when ADB was obliged by the Nkrumah regime to enterinto doubtful business with State owned corporations and cooperatives forpolitical reasons. The main efforts towards improving ADB's operationsshould be oriented in two directions. Firstly, the practical experienceof its field staff should be increased by the recruitment of officers withpractical field experience as well as formal agricultural education and alsoby improving collaboration between ADB and extension services of the Ministryof Agriculture. This would enable ADB's staff to improve project appraisalsand supervision and strengthen personal contacts between the Bank and itsborrowers. Secondly, loan accounting, reporting systems, and internal admin-istration of debt recovery should be reorganized to provide an accurateup-to-date position of each loan, and enable immediate action to be takenin case of a borrower's default.

EASTERN REGION COCOA PROJECT

Agritulu.ral DeYe1opment Bank

Loans by Sector as of September 30, 1969

Average % ofNumber of Amount Amount Amount Payment AmountVi/ Approved Total Amount of

Loans Approved Utilized Outstanding to Date Overdue Loan Approved Loans

Food crops 137 733 584 584 78 J2I 5.35 15.7Sugar 83 844 666 514 228 170 10.17 18.1Oil palm 14 126 52 56 3 - 9.06 2.7Rubber 2 1. 8 10 - - 5.50 0.2Poultry 31 617 600 503 179 123 19.90 13.2Fisheries 16 198 197 193 34 102 12.37 4.3Cattle and Piggery 6 157 147 167 18 43 26.152/ 3.4Tobacco 32 955 949 340 696 316 2.02- 20.5Marketing and Agro.

Industries 13 432 287 254 29 14 33.25 9.3Miscellaneous 4 86 16 16 5 _ 21.92 1.9

Sub-total 338 4,161 3,506 2,637 1,270 910 12.31 89.3

Funds from Govern-ment for fishingboats 13 500 457 416 83 n.a. 36.00 10.7

GRAND TOTAL 34561 3,963 3,053 ,353 910 3.2800

1/ Outstanding amounts after date of maturity.

2/ Excluding one grouped loan of No 892,115 to cooperatives.

GHANA

EASTERN REGION COCOA PROJECT

Agricultural Development Bank

Loans per Branches as of September 30, 1969

Start of Nunber of Amount Amount Amount Payment % of TotalBranch Operations Loans Approved Utilized Outstanding to Date Loans

0... &....NO ..6..... ......... t o ...........

ACCRA Aug. 1965 217 3,875,468 3,314,793 2,434,308 1,260,140 83

KOFCRIDUA June 1967 52 183,350 123,143 127,185 8,306 4

KUMASI June 1968 29 187,709 189,468 170,586 44,278 4

HOHOE Aug. 1968 22 54,870 45,051 44,435 4,249 1

TAMALE Nov. 1968 31 359,758 291,245 276,136 36,122 8

Total 351 4,661,155 3,963,700 3,052,670 1,353,095 100

ro 01

ANNEX 6GHANA TABLE 3

EASTERN REGION COCOA PROJECT

AgricuLtural Development Bank

Profit and Loss Account (*)(NO)

1966-/ 1967 1968

INCOME

Interest n.a. 91,329 113,254

Investment n.a. 183,346 24ls957

Commission n.a. 4,174 15,206

Miscellaneous n.a. 7,490 6,558

Total Income n.a. 286,339 376,975

EXPENSES

Salaries and social charges n.a. 86,020 154,665

Operating expenses n.a. 19,600 28,123

Depreciation n.a. 16,650 24,700

Miscellaneous n.a. 24,824 31,086

Total Expenses n.a. L47,094 238,574

Available Profit 141.632 139.245 138,401

n.a. 286,339 376,975

Allocation of Available Profit

To general reserve 136,165 132,597 129,153

Undistributed profit 5.467 6,648 9,248

i41,632 139,245 138,401

I/ For the period Augast I, 1965 to December 31, 1966.

2/ Under the ADB Act, all profits are paid into the reserve accounts up to 1971.

(4) Unpublished information considered by ADB as confidential.

GHIANA

EASTERN REGION COCOA PROJECT

Agricultural Development Bank

Balance Sheets(NO)

1966-/ 1967 1968

ASSETS

Cash at Banks and in hand 59,331 139,932 166,465

Short-term investment 364,183 1,534,710 1,792,712

Loans and advances:(a Private sector n.a. 1,130,025 1,482,335(b) Public sector n.a. 354,277 658,052

1,L41,447 1,484,302 2,140,387Other accounts 49,904 128,300 176,988

Medium and long-term investment 3,380,000 3,382,000 4,382,000

Fi.xed assets(Net of depreciation) 71,638 71,637 98,018

Castomers' liability onguarantees 7,191,345 9,889,388 9J,0oi584

Total Assets 12.257,848 16,630,269 18,258,154

LIABIIITIES

Paid-in capital 4,780,000 6,280,000 8,240,000

General Reserve Fund 10,515 17,163 26,411Deposit and other accounts(including other reserves) 275,988 U43,718 490,159

Liability on guarantees 7,191,345 9,889,388 9.501,584

Total Liabilities 12,257,848 16,630,269 18,258j154

1/ Financial year of 17 months (August 1, 1965 - December 31, 1966) -

Revised data given in the 1967 Report. CIN

GHANA

EASTERN REGION COCOA PROJECT

Agricultural Development Bank

Estimated ADB Loan Disbursement under the Project(NO)

1970/71 1971/72 1972/73 1973/74 1974/75- J.1975/76 1976/77 1977/78

Disbursement

Replanting - )42,296 1,392,876 1,900,242 1,439,577 O,h084 345,573 114B,392

Cumulative - 442,29 6 1,835,172 3,735s414 5,174h,991 5,685,075 6,030,648 64179,040

Rehabilitatiom v 61,037 407,510 816,816 603,187 153,490 _

Cumulative 61,037 468,547 1,285,363 1,888,550 2,042,o40 - -

Total Disbursement 61,037 849.,806 2,209,692 2.503,429 1,593,O67 510,084 345,573 148,392

Contingencies 3,100 47,300 124,600 141,000 85,900 25,504 17,279 7,420

Total NP + RH 64,137 897,106 2,334,292 2,644,429 1,678,967 535v588 362,852 155,812

Cuunlative 64,137 96L 243 3,295,535 5,939;964 7,618,3 81519 8,7,371 8,673,183-

1/ Last year of IDA disbursement.

2/ Total disbursement after the project period: NO l,054,252.

CP%

GHANA: EASTERN REGION COCOA PROJECTAGRICULTURAL DEVELOPMENT BANK

ORGANIZATIONAL CHART

BOARD OF DIRECTORSl

INTERNAL A_II MA I - MD'S SECRETARY|

MANAGEMENT COMMITTEE: l

| LOANS DEPARTMENT l|ADMINiSTRATIVE DEPARTMENT|

r DIRECTOR-LOANS l DIRECTOR-ADMINISTRATION l

..

.. 0 I

>- 2 0|i BRANCH lzl BRANCH } L BRANCH i BRANCH l

'WE *9e -2 x968 0 0 0 l ghi ~~~~0 o LM

REGIONAL OFFICE

KUMASI KOFORIDUA TAMALE HOHOEBRANCH BRNCH BRANCH BRANCH>

j ~~~~~~~xZ

Novernber 20, 1969 8D-42(R

GHANA

EUTgRN REGION COCOA PROJECT

pHASING °F ,,.LANTING REHABILITATION PROGRAM

(acres)

1970/71 1971/72 1972/73 973/7h 1974/75 TOTALRP RH ~ RP Hu HF mi R RH RP015 RH RP RH re.

Unit 1 680 600 1,360 900 1,360 900 - 2,400 3,1400 5,8002 _ 680 600 1,360 900 1 ,360 900 _ - _ 2,400 3,400 5,800

Zone 1 3 - - 1,360 6O0 1,360 9oo 680 900 - 2,400 3,400 5,800( 4 - - - 1,360 600 1,360 900 680 900 - 2,400 3,400 5,800

- - -_ _ _ 1,360 600 1.360 900 680 900 - 2,400 3,400 5,800

Total Zone ' - 1,360 1,200 6,800 3,600 6,800 B 4,500 2,0140 2,700 - 12,000 17,000 29,000

Unit 6 - 680 600 1,360 900 1,360 900 - - - 2,400 3,400 5,8007 _ 680 600 1,360 900 1,360 900 - - - 2,400 3,400 5,800

Zone 2 ( 8 - - - 1,360 600 1,360 900 680 900 - 2,400 3,400 5,8009 - - - 1,360 600 1,360 900 680 900 - 2,400 3,400 5,800

10 - _ - 1,360 600 1.360 900 680 900 - 2,400 3.,400 5.800

Total Zone 2 - 1,360 1,200 6,800 3,600 6,800 4,500 2,040 2,700 - 12,000 17,000 29,000

(Unit 1 - 680 600 1,360 900 1,360 900 - - - 2,400 3,400 5,80012 - 680 600 1,360 900 1,360 900 - - - 21400 3,400 5,800

Zone 3 ( 13 - - - 1,360 600 1,360 900 680 900 - 2,400 3,400 5,800114 - - - 1,360 600 1,360 900 680 9a) - 2,400 3,400 5,80015 - _ - 1,360 600 1,360 900 680 900 - 2,400 3,4100 5,800

Total :e 3 - 1,360 1,200 6,800 3,600 6,800 4,500 2,040 2,700 - 12,000 17,000 29,000

TOTAL REHABILITATION - 4,080 - 20,1400 - 20,400 - 6,120 - - 51,000TOTA REP?;ANTTNG - - 3,600 - 10,300 - 13,500 - 8,100 - 36 (J,o

TOTAL r. .:' - _ 14 08o 24,Q00 3i,200 19620 8100 87.000

ANNEX 8TABE 1

EISTERN RUIION COOOA Sj0T

PROJZt COSTS

Foreign geug oa1970/71 1971/72 1972/73 1973/74 1974/75 Total % Total Costs

ON FARM COSTS

Maplanting

Hired Labor 179.4 569.5 795.3 642.3 286.5 1.0 21'.7 2"67.8Planting Materials f T 577 163. 29 5 .3Tools lo. 8 32.4 40.5 24.3 1W.0 95.0 102.6 5.6Fertilizer 22.9 22.9 70.0 11.0 6.9InEecticides 16.3 65.1 126.2 162.8 370.4 70.0 ?59.3 111.1ar'arcv9 24.8 74.4 93.0 55.8 248.0 95.0 235.6 12.4Transport 0.2 0.2 50.0 0.1 0.1

Sub-total Materials 282.9 884.7 1,185.4 860.1 3213.1 28.3 908.9 2,304.2Contingencies 10% 28.3 88.5 118.5 86.o 321.3 28.3 90.9 230.4

TOTAL - Replanting 490.6 1,542.7 2,099.2 1,588.4 5,720,9 21.3 1,218.5 4502.4

Rehabilitation

Hired labor 30.0 197.6 388.4 283.5 71.5 971.0 10.0 97.1 873.9Plnting Materials 36 Ifl 1" 15r7 382 76. 73%0Fertilizer 10.1 62.2 106.6 86.9 51.4 317.5 70.0 222.3 95.2Inoecticidee 18.5 110.7 186.1 129.3 44.8 489.4 70.0 340.5 146.9Sprayers 28.1 140.4 140.4 42.1 - 351.0 95.0 333.4 17.6Toansport _ 0.3 1.0 1.7 2.2 5.2 So o 2.6 2.6

Sub-total Materials 57.0 344.2 587.1 413.0 144.3 1645.6 69.5 977.3 568.3Contingencies 10% 5.7 34-5 58.7 1a.3 14.4 154.6 69.5 97.7 56.9

TOTAL - Rehabilitation 62.7 576.3 1,034.2 737.8 230.2 2671.2 43.9 1,172.1 1,99.1

TOTAL - On Farm Costs 92.7 1P66_9 2.576.9 2.837.0 i,488.6 8392.1 28.5 2,390.6 6501.5

PROJECT ADMINISTRATION INWSTYNT

Buildings and equipment: HQ 124.1 - - - - 124.4 - -

3 ones 89.4 - - - - 89.415 unite 465.0 - 465.0 -

Subtotal 678.8 678.8 40.6 275.6 403.2

Vehicles, En 937 __77 z- - -3 zones 9.9 - - - 9.9 19.8

15 units 168.0 54.0 - - 49.5 271.5 -

Subtotal 187.2 6 58.8 319.5 95.0 303.5 16.oContingencies 10% 68.14 - _ 6.8 99.8 79 4 1.9

TOTAL - Adoaistration Inest-mnt 952.6 70.0 - - 75.5 1098.1 58.0 637.0 461.1

PROJEOCT ADMIniSTRATION MAINTENANCEAND OTUATINOG WST

Buildings and equipment: HQ 6.2 6.2 6.2 6.2 6.2 31.0 20.0 6.2 24.83 nones 4.5 4.5 4.5 4.5 4.5 22.5 20.0 4.5 18.o

15 units 27.8 27.8 27.8 27.8 27.8 139.0 20.0 27.8 111.2Vehicles: HQ 2.3 4.7 4.7 4.7 4.7 21.1 50.0 10.6 10.5

3 zones 2.5 2.5 .5.5 2.5 2.5 12.5 50.0 6.3 6.215 units 42.o 55.5 55.5 55.5 55.5 264.0 50.o 132.0 132,0

New Cooperative Development 11.3 1:.3 11.3 11.3 45.2 4 - 45.2Training of farners - 20.0 20.0 20.0 - 6o.o - - 6o.oProduction of seeds 3.0 3.0 3.0 3.0 - 12.0 - - 12.0

Sub-total 99.6 135.5 135.5 135.5 101.2 607.3 30.9 187.4 419.9Contingoncies 10% 10.0 1.35 1S.6 13.5 10.1 60.7 30.9 18.7 42.0

TOTAL - Operating Ctst 109.6 149.0 149.1 149.0 121.3 668.0 30.9 206.1 461.9

PROJECT ADMINISTRATION STAF

RHadquartsrs 88.8 89.4 89.4 89.4 89.4 446.4 43.0 19° 3 2r3 sones 34.5 34.5 34.5 34.5 34.5 172.5 20.0 34.5 1I,8o15 units 126.8 142.9 142.9 142.9 142.9 698.4 20.0 139.7 558.7150 blocks and 600 groups 317.5 793.8 793.8 793.8 793.8 3492.7 20.0 698.5 2791.2

Sub-total 567.6 1,060.6 1,060.6 1,060.6 1.060.6 4810.0 22.0 1,063.5 3, '6Contingencies 56.8 106.0 106.1 10690 106.1 481.0 22.0 n, n7.

TOTAL - Sta 624.4 1j,66. 1.166.7 i16.6 1.166.7 5291.0 22.0 L,iAa ;,121.

FEEDER ROAD INEVECOCT

Squip ment 255.0 - - - 255.0 100.0 255.0 -Road resurfacing - 76.5 76.5 153.0 70.0 107.1 45.9

Sub-total 255.0 76.5 76.5 W M 108.0 88.7 362.1 45.9Contingencies 10% 25.5 7.6 7.7 _ - 40.8 88.7 36.2 4.6

TOTAL - Feeder Roads 280.5 84.1 84.2 _- _48

.8

88.7 398.3 50.5

TOTAL PMJECT COSTS 2)590 2 ,536.6 3,976.9 4.152.6 3,172.1 898.0 30.2 so i

GHANA

EASTERN REGION COCOA PROJECT

PROJECT COSTS, RXHAIDLITATION

PER ACRE ANNUAL COST TO FARMERS

(Man Days and NO)

Year 1 Year 2 Year 3 Year 4 Year 5TMD HMD TMD HMD TMD HMD TMD HMD TMD HMD

Labor (Man-Days) MD/operation

S')raying Lper acre per year) 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5Replanting'(25P of acreage) 7.5 - - 7.5 5.3 - - - - - -Brashing 4.0 12.0 6.o 12.0 4.8 12.0 4.o 12.0 2.4 12.0 2.4Fertilizer application 1.0 1.0 - 1.0 - 1.0 - 1.0 - 1.0 -Harvesting (per 100 lbs of incremental yield) (3.0) -) (3.0 2.1) (9.0 6.3) (10.5 7.4) (10.5 7.4)

(per 4OG lbs of total yield) 3.0 4.5 3.2 7.5 5.3 13.5 9.5 15.0 10.5 15.0 10.5

Total labor 22.0 13.7 32.5 19.9 31.0 18.0 32.5 17.4 32.5 17.4Total incremental labor (17.5) (10-5) (28.0 16.7) (26.5 14.8) (28.0 14.3) (28.0 14.3)

------- _____-------_-------------------- NO --------------------------------------------

Total hired labor cost 9.59 13.93 12.60 . 12.18 12.18Total incremental hired labor cost / (7.35) (11.69) (10.36) (10.01) (10.01)

Material Cost/acre (Ne)

Seedlings for replacement (150/ac at NV 0.05) 7.50 - 7.50 - - -Fertilizers 8.70 8.70 8.70 8.70 8.70 8.70Insecticides (per acre per year) / 4.14 4.14 4.14 4.14 4.14 4.214Sprayer 30.00 1.72 - - - -Transport cost (per 100 lb of incremental yield) 0.01 (-) (0.01) (0.03) (0.04) (0-04)

(per loo lb total yield 0.01 0.02 0.03 0.05 0.05 0.05

Total zmterial 14.58 20.37 12.89 12.89 12.89Total incremental material (14-57) (20.35) (12.87) (12.88) (12.88)

Total Cash Cost 24.17 34.30 25.49 25.07 25.07

Total Incremental cost (21.92) (32.04) (23.23) (22.89) (22.89)

N$ 0.70 per man-day./ Calculated on the basis of 3/4 acre sprayed with Gamnalin and 1/4 with a carbamate

for jammalin resistant capsids. II

GHANA

EASTERN REGICt COCOA PROJECT

PROJECT C(STS, REPIlNliG

PER ACRS ANNUAL COST TO FARMERS

(Man Days and Nf)

Year I Year 2 Year 3 Year 4 Year 5 Year 6

THD HND TMD HMD TMD HMD TMD HND TlH T HMD

labor (Man-Days) MD/operation

Land clearing 34 34.0 23.8 _ _ _ _ _ _ _ _ _ _

Peg. cutting 4 4.0 2.8 _ _Lining and pegging 5 5.0 3.5 - - _ _ _ _ _ _ _ _

Holin 9 .0 .---- ---- --

Planting cocoa .0 899 8 8°.1Planting shade o.0 7.2 _ _ _ _ _ _ _ _ _

9%us ni and pruningi 4 brusbing) 7 4 16 ° .° 16.0 6.4 16.0 . 12.0 2.4

Spraying (per year)gj2 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4U5

Fertilizer application 1 - - - - - - 1.0 - 1.0 - 1.0 -

Harvesting (per 100 lbs of dried cocoa) 3 - - - 3.0 2.1 9.0 6.3 12.0 8.4 21.0 14.7

Filling vacancies 3 _ 3.5 3.0 1.5 - - - - - - - -

Total labor (Man days) 96.5 71.2 23.5 12.4 23.5 11.4 30.5 I4.0 29.5 15.3 38.5 21.6

---------------------------------------------- N- ----------------------------------------------------------------

Total hired labor cost (N¢O.7/MD) 49.84 8.68 7.98 9.80 10.70 15.12

Materials Cost/acre (Ne)

Cocoa seedlings ( 735/ac at NMO.05) 36.75 36.75 - -

Replacement (15%'of 1st planting) 5.51 _ 5.51

Shade material plantain 13.50 13.50 -

cocoyam 13.91 13.91Tools 3.00 3.00 - -- -

Fertilizers (per year) 8.70 - - - 4.35 4.35 8.70

Transport of cocoa (per 100 lbs or,4 miles) 0.01 - _ 0.01 0.03 0.04 0.07

Insecticides (per acre per year) 4 414 4.14 4.14 4.14 4.14 4.14 4.14

Sprayer (unit cost) 30.00 1. 7? - - - 1.72

Total material 73.02 9.65 4.15 8.52 8.53 14.63

Total cash cost per acre 122.86 18.33 12.13 18.32 19.23 29.75

/ TM Total of nan-days required.HMD - Number of hired man-days required

i/ Calculated on the basis of 3/4 of an acre sprayed with Gammalin and 1/4 with a rarbarqate for GaSsealin resistant capsids.

GHANA

EASTdEiN RItGION COCOA PROJ:rf

PROJECT COSTS - HEIDQUAtRTERS

Annual Total 1970/71 1971/72 1972/73 1973/74 1974/75 Total Foreign Exch geParts or ItaAns Salary Allowance (Unit Cost) Total

Personnel

Project i4anagar 10,300 5,000 15,300 15,300 15,003 15,000 15,0o0 15,000 75,000 90 67,500Deputy Project ianager (PASO) 6,00o 2,000 8,000 8,000 8,000 8,000 8,ooo 8,000 40,000 20 8,000Financial controller 9,005 5,000 14,000 14,000 14,000 14,000 14,000 14,000 70,000 90 63,000Administrative officer 3,500 1,500 5,000 5,ooo 5,0oo 5,303 5,000 5,000 25,000 20 5,000Project Accountant 3,250 1,500 4,750 4,750 4,750 4,750 4,750 4,750 23,750 20 4,750Internal auditor 1,150 600 1,750 3,500 3,500 3,500 3,500 3,500 17,500 20 3,500Cooperative officer 5,000 1,500 6,500 6,500 6,500 6,500 6,500 6,500 32,500 20 6,500Senior Assistant Coop. officer (SACO) 1,250 1,100 2,350 4,700 4,700 4,700 4,700 4,700 23,500 20 4,700Assistants Coop officers (ASC) 9g0 500 1,400 2,800 2,800 2,800 2,800 2,800 14,000 20 2,800

gnior Project officers ADB 3,800 1,200 5,000 10,00o 10,000 10,00o 10,0o0 10,000 50,ooo 20 10,000Junior Project officers ADB 2,000 1,000 3,000 6,ooo 6,ooo 6,0o0 6,ooo 6, Coo 30,000 20 6,ooo

Draftsman 1,150 100 1,250 1,250 1,250 1,25,) 1,250 1,250 6,250 20 1,250Clerical officers 410 100 510 1,530 1,530 1,530 1,530 1,530 7,650 20 1,530Secretaries 325 100 425 1,700 1,700 1,700 1,700 1,700 8,500 20 1,700Account typist 325 100 425 425 425 425 425 425 2,125 20 425General typists 325 100 425 1,275 1,275 1,275 1,275 1,275 6,375 20 1,275

Drivers 575 575 1,150 1,725 1,725 1,725 1,725 8,050 20 1,610Office boys 275 - 275 550 550 550 550 550 2,750 20 550Watchmen 350 - 350 700 700 700 700 700 3,500 20 700

Total HQ Personunsl 88,830 89,405 89,405 89,05 89,405 446,450 42-73 12_,790

Building and Equipmient

'Main office 26,000 26,000 - 26,0o0 40 10,400Bunealows (3 bed-rooms) with furniture 16,ooo 48,ooo - - - - 48,ooo 40 19,200Bungalows (2 bed-rooms) with furniture 14,800 44,400 - 44,400 40 17,760Office equipment and furniture 6,000 6,ooo - - - - 6,ooo 50 3,000Cars 3,000 6,ooo 3,o000 - 6,000 15,000 95 14,250Four wheel drive 3,300 3,300 6,600 - - 3,300 C13,200 95 _12,540

Total building and equipment 133,700 9,600 - -9,300 152,600 50.56 77,150

Total Headquarter. 222,530 99,005 89,405 89,405 08,705 59s,o50 44.72 267,940

GHANA

ZASTERN REGION CoCaK PROJ?CT

R1JWT LtDSxS - 3 ZOM

(NO)

Annual Total 1970/71 1971,'72 1972/73 1973/74 1974/75 Total Foreign ExchangeParts or Items Salary Allowance (Unit Cost) I Total

Personnel

Senior Agricultural Survey Officers 2,784 1,000 3,784 11,352C3) 11,352(3) 11,352(3) 11,352(3) 11,352(3) 56,760 20 11,352Zone store superintendent 2,208 800 3,008 9,024(3) 9,024(3) 9,024(3) 9,024(3) 9,024(3) 45,120 20 9,024Zone accountant 1,488 600 2,088 6,264(3) 6,264(3) 6,264(3) 6,264(3) 6,264(3) 31,320, 20 6,264Clerical officers 408 100 508 3,048(6) 3,048(6) 3,048(6) 3,o48(6) 3,o48(6) 15,240 20 3,048Typist 325 100 425 1,275(3) 1,275(3) 1,275(3) 1,275(3) 1,275(3) 6,375 20 1,275Watchman 346 _ 346 1,038(3) 1,038(3) 1,038(3) 1,038(3) 1,038(3) 5,190 20 1,038Office boy 273 - 273 819(3) 819(3) 819(3) 819(3) 819(3) 4,095 20 819Driver 564 _ 564 1,692(3) 1,692(3) 1,692(3) 1,692(3) 1,692(3) 8,460 20 1,692

Total Personnel 34,512 34,512 34,512 34,512 34,512 172,560 20 34.512

Building and cquipment

Office 12,000 36,000(3) - - - - 36,ooo 40 14,400Bungalow with furmiture 14,800 44,400(3) - - _ _ 44,400 40 17,760Office equipment and furniture 3,000 9,000(3) 50 4,500Four wheel drive 3,300 9,900(3) _ _9_9_0 19_800 95 18,iO

99,300 - - - - 109,200 50.80 55,170

Total Cost for 3 Zones 133,812 34,512 34,512 314,512 4412 281,760 31.94 89,982

_________ ________ ________ _______ ~ 281,760 1.914 89,98

GLLANA

iASTESN ClGGIOii COCQA PROJECT

. ROJECT COSTS - 15 UNITS

(N¢)

TotalAnnual Total 1970/71 1971/72 1972.73 1973/74 1974/75 f oor F Li chan!e

Parts or IE;ens Salary Allowance (Unit Cost) 15 its Total

Personnel

Agricultural Survey Officer 2,200 1,200 3,600 54,000(15) 54,000(15) 54,On(15) 54,000(15) 54,000(15) 27,000 20 54,000Clerical officers 408 100 508 7,620(15) 15,240(30) 15,240(30) 15,240(30) 15,2140(30) 68,580 20 13,716Unit accountant 1,008 100 1,108 16,620(15) 16,620(15) 16,620(15) 16,620(15) 16,620(15) 83,100 20 16,620Storekeeper 828 100 928 13,920(15) 13,920(15) 13,920(15) 13,920(15) 13,920(15) 69,600 20 13,920Watchman 346 _ 346 5,190(15) 5,190(15) 5,190(15) 5,190(15) 5,190(15) 25,950 20 5,190Drivers 564 _ 564 25,380(45) 33,840(60) 33,840(60) 33,840(60) 33,840(60) 160,740 20 32,148Office Boy 273 - 273 4,095(15) 4,095(15) 4,095(15) 4,095(15) 4,095(15) 20,475 20 4,095

Total Personnel 126,825 142,905 142,905 142,905 1142,905 698,445 20 139,689

Building and Equipment

Office - - 12,000 180,000(15) - - - - 180,0oo 40 72,000Store 1/ _ - 10,000 150,000(15) - - - - 150,000 40 60,000Temporary bungalow- with furnitijre - - 7,000 105,000(15) - - - - 105,000 40 42,000Office furniture and equipment - - 2,000 30,000(15) - - - - 30,000 50 15,000Four wheel drive - - 3,300 49,500(15) - - - 49,500 99,000 95 94,0505-ton truck - - 4,300 64,500(15) - - - - 64,500 95 61,275Tractors and trailers - - 3,600 54,000(15) 54 000(15) - - - 108000 95 102 600

633,000 54, 000 - - 49,500 736 500 6LS49

Total Costs for the 759,825 196,905 142,905 142.905 192,1405 1,434,945 40.88% 586,61415 units - _ __ __ __ ___ __

1/ Houses ould be rented wherever Dossible. However, an average allowance is made forvillages without accommodation facilities co

GHANA

SASTERN R-GION COCOA PROJ2CT

1IROjBCT 0=TS - 15o0 BOC1i3 AND 600 =uPS

(NO)

Annual Total 1970/71 1971/72 1972/73 1973/74 1974/75 Total Foreign ElxchangeParts or Items Salary Allowance (Unit Cost) Tota

Personnel

Senior Agricultural Survey 261,000(150)Assistant 1,140 600 1,740 104,400(60) 261,000(150) 261,000(150) 261,000(150) 261,000(150) 1,148,400 20 229,680

Field Assistant 588 300 888 213,120(240) 532,800(600) 532,800(600) 532,800(600) 532,800(600) 2,344,320 20 468.864

Total Blocks andGroups 317,520 793,800 793,800 793,800 793,800 3,492,720 20 69

GHANA

EASTERN REGICN COCOA PROJECT

PROJECT COSTSMAINTE:NNCE SAD OPEMATI1a COSTS

Foreign E:xchange

Items 1970/71 1971/72 1972/73 1973/74 1974/75 Total % Total

Headquarter

Buildings and equipment 6,220 6,220 6,220 6,220 6,220 31,100 20 6,220

Vehicles 2,325 4,725 4,725 4,725 4,725 21,225 50 10,613

Zone

Buildings and equipment 4,470 4,470 4,470 4,470 4,470 23,350 20 4,470

Vehicles 2,475 2,475 2,475 2,475 2,475 12,375 50 6,188

Unit

Buildings and equiDment 17,250 17,250 17,250 17,250 17,250 86,250 20 17,250Temporary bungalows 10,500 10,500 10,500 10,500 10,500 52,500 20 10,500

Vehicles 42,000 55.500 55.500 55,500 55,500 2614,000 50 132,000

Total Maintenance and 0.C. 85,240 101,140 101,140 101,140 101,140 489,800 38.23 187,241

GA_

EASTERN REGION COCOA PROJECT

FINANCING OF PROJECT COST

(Ng '000)

% of US$1970/71 1971/72 1972/73 1973/74 1974/75 Total Total Cost Equivalent

Ghana Commercial Bank 291.7 300.0 350.0 350.0 208.3 1,500.0 9.44 1,470.0

Standard Bank of West Africa 291.7 300.0 350.0 350.0 208.3 1,500.0 9.44 1,h70.0

Barclays Bank, D.C.O. 291.7 300.0 350.0 350.0 208.3 1,500.0 9.44 1,470.0

IDA 1,184.7 1,407.5 2,181.4 2,207.2 1,689.2 8,670.0 54.53 8,500.0

Government - 229.1 745.5 895.4 858.0 2,7280 17.15 2,673.4

TOTAL 2 9.8 2536.6 3,69 4152.6 3 172.1 15,898.0 100.00 15 580.0

Project revenue accruing to govern-ment during the disbursement period.

- Farmers' loan repayment - 59.0 355.1 657.9 728.7 1,800.7 11.33 1,764.7

- Export tax on project - 31.9 255.1 749.4 1,224.0 2,260.4 14.22 2,215.2

produced cocoa

- Surpluses accruing to CMB - 6.1 48.8 143.3 234.1 432.3 2.72 423.7

from project produced cocoa __ _

Total Revenue - 97.0 659.0 1,550.6 2,186.8 4,493.4 28.26 - 3.6

\ CD

GHANA: EASTERN REGION COCOA PROJECTPROJECT ORGANIZATION

MINISTRY OF LABOR MINISTRYAND SOCIAL WELFARE OF AGRICULTURE -,

PROJECT (

I ~~~~~~~~~~~~~~~~~~~STEERIN GCOMMITTEE

SEC) MINIStRY OF AGRICULTURE

I MINISTRY OF FINANCEMINISTRYOFECONOMIC …_ ADB

a PPANNINGI . _ COOPERATIVE DEPARTMENT

I ,___________ ____ _ __v _ ______ __… COCOA RESEARCH INSTITUTEOF GHANA

! COCOA MARKETING BOARD

DEPARTMENT IPROJECT PROJECT AUTHORITY

OF COOPERATIVES DIVISION INSPECTION UNIT PROJECT MANAGERASST. PROJECT MANAGER ____________JFINANCIAL CONTROLLER

L…- COOPERATIVE OFFICER

ADB LOAN OFFICER

MARKETING COOPS SENfOR AGRICULTURALSURVEY OFFICER

SASASTORE SUPERINTENDENTACCOUNTANT

UNITS 5/ZONE

AGRICULTURAL SURVEY OFFICERASA ACCOUNTANT

BLOCK IO/UNIT >

I AGRICULTURAL ASSISTANT AA z

4 FIELD ASSISTANTS FA A

I BRD - 4831 (R)

ANNEK 10

GHANA

EASTERN REGION COCOA PROJECT

PROJECTED SELLING PRICE FOR COCOA AND DISTRIBTiTION OF PROCEEDS

CIF New York, US cents per lb .27

CIF New York, US$ per long ton 604.80

Insurance and freight, US$ per long ton 36.00

FOB Ghana, US$ per long ton 568.80

FOB Ghana, NO per long ton 580.18

Export duties, NO per long ton- L75.09

Net export proceeds, NO per long ton 405.09

Distribution of Proceeds NO per long ton

Fixed price payable to farmers by LBA's-/ 298.64

Fixed allowance payable to LBA's-/ 38.66

4/Commission to Cocoa Marketing Company- 3.02

Operating costs, Cocoa Marketing Board:

(a) Storage time allowance 0.20(b ?Transport, fumigation, etc. 14.64(cJ Financial costs 10.27(d) Administration 6.17 31.28

Surplus accruing to CMB 33.49

1/ Based on proposed new rates applying to 1970/71 season, see Annex 1, Table 3.!/ At present rate of NO 8 per 60 lb. head load.37 For breakdown of block allowance see Annex 8.i is of export contract (CIF value5

GHAJA

E&STZRN RKEION COCOA PROJFCT

REHP.BI-41TATION, c AtI) RErURNS PM1 Ar,E

Year 1 2 3 4 5 6 7 8 9 10 11 12 13

Producticn of cocoa (lb)

Pre-developnent production 150 150 150 150 150 150 150 150 150 150 150 150 150

Incremental producti on - 100 300 350 350 350 350 350 350 350 350

Total Production 150 250 450 500 500 500 500 500 500 500 500 5 500

Financial Results

Source of Funds

Pre-development inoue 20.00 20.00 20.00 2f0. .0 20.00 20.00 20.00

Incremental Incone -3:.3 1° 46.67 -i6.67 46.67 146.67 46.67 46.67 46.67 46.67 46.67 46.67

Total Inoome!/ 20.00 33.33 60.00 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67

ADB Loana/ 21.92 ,2.04 _ _ _ _ _ _ _ _ _ _ _

Total Source of Funds 41.32 65.37 60.00 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67

Application of Funds

On-farm expendituresPre-development 2.25 2.26 2.26 2.18 2.18 2.18 2.18 2.18 2.18 2.18 2.18 2.18 2.18

Incremental 21.92 32.04. 23.23 22.89 22.89 22.89 22.89 22.39 22.89 22.89 22.89 22.89 22.89

Tctal On-farm Expenditures 24.17 34.30 25.49 25.07 25.07 25.07 25.07 25.07 25.07 25.07 25.07 25.07 25.07

Return before debt service 17.75 3J1.07 3L.51 la.60 L1.60 41.60 41.60 41.60 41.60 41.60 141.60 41.60 41.60

Debt Service - 15.00 15.80 15.80 15.oJ _ _ _ _ _ _ _ _

2/Net Income per acre - 16.07 18.71 25.80 25.80 41.60 41.60 41.60 41.60 41.60 41.60 41.60 141.60

V Cocoa at NJ 8.00/60 lb.

/ Total loan withcat interest: Ni 53.96

/ac.

2/ Finmidal rate of return, calculated over 15 years, is 42.899.

GH&ANA

EiSTERN REGION COCOA PROJECT

REPLANTING, COSTS ANND RErURNS PFE ACRE(NO)

Tear 1

2 3 4 5 6 7 8 9 10 11 12 13 14 15

Production

Cocoa (lb/ac) - - 100 300 4°° 700 700 700 700 700 700 700 700 700Plantain (lb/ac) - 7,200 3,600 1,800 - - - - - - - - - -

Cocoyam (T/ac) - 1

Financial Results

Source of Funds

Cocoa (Ng8.00/60 lb) - - - 13,33 40.00 53.33 93.33 93.33 93.33 93.33 93.33 93.33 93.33 93.33 93.33Plantain sN00.01/lb) 1/ _ 72.00 36.00 18.00 - - - - - - - - - - -Cocqyam (N030.00/T) 1/ _ 30.0o -_ - - - - - - - - - - - -

Total Income - 102.00 36.00 31.33 40.00 53.33 93.33 93.33 93.33 93.33 93.33 93*33 93*33 93.33 93.33

Long-term loans from ADD 2/ 122.86 18.33 12.13 18.32 - - - - - - - - - - -

Total Source of Funds 122.86 120.33 48.13 49.65 40.00 53.33 93.33 93.33 93.33 93.33 93.33 93.33 93.33 93.33 93.33

Applicatimo of Funds

On-farm Expenditures:

Labor 3/ 49.84 8.68 7.98 9.80 10.70 15.12 15.12 15.12 15.12 15.12 15.12 15.12 15.12 15.12 15.12Material 73.02 9.65 4.15 8.52 8.53 12.91 12.91 12.91 12.91 12.91 12.91 12.91 12.91 12.91 12.91

Total On-farm Expenditures 122.86 1l.33 12.13 18.32 19.23 28.03 23.03 28.03 28.03 28.03 28.03 28.03 28.03 28.03 28.03

Return before debt service - 102.00 36.oo 31.33 20.77 25.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30

Debt Service - - 46.o 8.00 12.00 33.5) 33.59 '5.59 33.59 33.39 33.59 33.59 - -

Net Inccame 4/ - 102.00 36.00 27.33 12.77 13.30 31.71 31.71 31.71 31.71 31.71 31.71 31.71 65.30 65.30

I/ Or?ly part of food crop incorme i3 i0 cash.

2/ lOTAL loan wdthout interest Na171.64/ac.

3/ It is estimated that a farm family would supply 32% of total labor requirements and that the rest would be hired at N,1.70/day.

4/ Financial rate of return to the farmer, calculated over 27 years, is 38.00% including food crops and 19.23% based on cocoa alone.

i.< -,I,)N -1l. A Ph,1J,

2710J20T rASH FLCWIMPACT ON tOVERNNFNT 8U13T

1770'71 1)71/72 1972/ 17 )73/74 1974/75 1975/76 1776'77 1977 78 1978/79 197)987 1980/81 19811/2 1992'83 1983/84 1984,'85 1985'86 1986/87 1987/88 1988/89 1989,90

3-r-vo of Funds

loc 1 barucre I e~~~~~~~~75@l 9YOO0 1,050@0 I,O0.( t'?4.9 - - - - - - - -- ______Loal bit io.n 1,184.7 1,hO7.5 2,181.4 2,207.2 1,689.2 - _ _ _ -Mi credit0ccereen nt revenueFar--vrs dent service: Prlncipal - 54.1 321.5 581.4 672.8 651.6 381.4 16o.i 287.9 575.5 780.3 842.7 910.1 982.9 940.7 653.3 252.0

Intertst 1/ _ 4.9 33.6 76.5 55.9 11.2 3.3 74.7 230.3 311.1 294.9 252.0 205.7 155.5 101.4 49.7 13.9

Petal debt s-roics - 59.0 355.1 657.9 728.7 662.8 381.7 234.8 518.2 886.6 1,075.2 1,094.7 1,115.8 1,138.4 1,042.1 703.0 265.9

xp-rt tax 2 _ 31.7 255.1 749.4 1,224.1 1,539.9 1,866.0 2,308.8 2,793.8 3,173.2 3,363.1 3,363.1 3,363.1 3,363.1 3,363.1 3,363.1 3,363.1 3,363.1 3,363.1 3,363.1li,rpi- n-cruPrg to .M8 3' _ 6.1 48.8 143.3 234.1 294.6 356.9 441.6 534.4 606.9 643.3 643.3 643.3

643.3 643.3 643.3 643.3 643.3 643.3 643.3

i3b-otAtl 38.0 303.9 892.7 i.458.2 1,834.5 2,222.9 2.750.4 3,328.2 3.780.l h 6.O 4,006.4 LboO6.4 4.006.4 4006.4 4006.4 4006.4 4 6.4 ,6.L 4,006.4

.sovevn,vnt rvevenu _ 97.0 659.0 1,550.6 2,186.9 2,497.3 2,604.6 2,985.2 3,846.4 4.666.7 5,081.6 5,101.1 5,122.2 5,144.8 5,048.5 4,709.4 4,272.3 4,0b'6.4 4,006.4 4,006.4

rP AL 3002222 2,C59.8 2,404.5 3,890.4 4,807.8 a,501.? 2,497.3 2,604.6 2,985.2 3,846.4 4,666.7 5,081.6 5,101.1 5,122.2 5,144.8 5,048.5 4,709.4 4,272.3 4,oo6.4 4,006.4 4,oO6.4

epplicatvon of toods

,:I-:arn 'vets 92.7 1,066.9 2,576.9 2,837.0 1,818.6 646.3 632.6 517.5 333.0 285.3 262.4 375.4 416.4 3i0.7 285.3 262.4 375.4 416.4 350.7 285.3"r.nl 'a admrlnutratien vests 1,686.6 1,385.6 1,315.8 1,315.6 1,353.5 672.2 382.2 172.3 84.4 73.6 73.6 73.6

84.

473.6 73.6 73.6 73.6 73.6 73.6 73.6

ier reads ieprovecmet 280.5 84.1 84.2 - - - 84.1 84.1 280.5 - - 84.1 84.1 - - - 364.6 84.1 - -

20tal appli-ation before debt service 2,759.8 2,536.6 3,976.9 4,15216 3,172.1 1,318.5 1,298.9 773.9 697.9 358.9 336.0 533.1 58

b.9 424.3 358.9 336.0 813.6 574.1 42L.3 358.9

Debt Service

local baskic oan - 75.0 129.0 192,3 255.0 292.5 292.5 739.1 739.1 739.1 739.1 739.1 739.1 739.1 79.1 - - - - -IDA credit _ 8.9 19.4 35.8 52.4 65.o 65.0 65.2 65.o 65.o 151.1 150.4 149.8 19.1 143 85 147.8 11W.2 146.5 145.8 145.2 5/

rotal debt serv-ice _ 8 1 2. , 3 3% 804.1 804.1 804.1 d9t3.2 889.5 b88.97 8813.2 88l7.6 147.8 147.2 16.5 5.8 145.2

TOTAL APPLICATION 2,059.8 2-om.j 4,125.) 4,380.h 3,4179.7 1,76.0 1,956 4 1,578.0 1,502.0 -L.63.0 I >76- 1,h776 1 ),71-8 11,.Ma5 C 1 483.8 96o.8 720.6 570.1 5'4.1

N.T dASH FLBW 1_216.01 ( 23la 827.3 1,1.2 1,407.2 2,344L . 3,503.7 3 , a. 3 ,678. C .3 .4 3.502.3

aUMISLATIV& - (.2.011) (450.9) (23.5) 998.9 li9 2 0

.2

2,9168.4 4,375 5 72

O.O 10,223.7 14,0791. 17.757.6 2A.4jb.O 25.238.3 29.060.3 3,a26L.9 36-q77.h 396.t ,1L299.i5 h.6.80 -

1/ Net yr ASB and CMCA -nesis-in, ann of funds required for the fertili-er recurrent funds.

2/ Calcalated at tie equivalent of US$ 0.27 lb N.Y. spat price.

3/ Difference botn.an the f.o.b. price and thi total of farmer price, LBN atlowance, PM3 costs and export taxes.

4/ Financial rat. of eturn is 17.46%.

5/ Approxivatoly NO 7.5 -lli-s eould re-a,- te o repaid -ver the paesi r, 10/91 to 2019/2020.

ANNEX 13

GHANA

EASTERN REGION COCOA PROJECT

RATE OF RETURN CALCULATION

1. Table 1 shows the calculation of the economic rate of returnfrom investment in the project; Table 2 shows the calculation of theeconomic rate of return from investment in the replanting component ofthe project under the assumption that replanting would bear all projectadministration and overhead costs; Table 3 shows the calculation of therate of return from the rehabilitation component under the assumptionthat this could be carried out with 30% of total project expenditureson administration and overheads.

2. The following assumptions and inputs have been used in theabove calculations:

(a) Project life

(M) The life of the replanting component of the projectis assumed to be 25 years as from Project Year 1. Thusfarms replanted under the project and which would comeinto bearing in the fifth year would produce benefitsfor periods ranging from as high as 20 years for farmsestablished in Project Year 2, to as low as 16 yearsfor those established in Project Year 5.

The life of the rehabilitation component of theproject is assumed to be 15 years, and thus benefitsfrom cocoa farms rehabilitated in Project Year 1 accruefor 14 years, and those farms treated in the last yearof rehabilitation (Project Year 4) for 10 years.

(b) Costs

(M) On-farm investment and operating costs

These have been developed basically from Tables 2and 3 of Annex 8, which give a breakdown of these costson a per acre basis. A contingency of 10% on the costsof materials has been included in the rate of returncalculation. On-farm costs include the cost of hiredlabor. In rehabilitation, as shown in Table 2 of Annex8, and in replanting, Table 3 of Annex 8, the percentageof total labor requirements assumed to be supplied byhired labor varies from year to year in line with labor

ANNEX 13Page 2

needs. It is assumed that for rehabilitated cocoa hiredlabor would meet about 52% of all labor needs, and inthe case of replanted cocoa 63% in the development period,and 56% thereafter. The cost of hired labor is assumedto be NO 0.7/man-day, the present official minimum wage.No cash, or economic cost is attributed to family labor,see para 2b(v). The full costs of insecticides, sprayersand fertilizers are taken account of in on-farm costs,although participating farmers would obtain these atsubsidized prices.

(ii) Treatment of incremental on-farm costs underrehabilitation

Rehabilitated farms would be in production prior tothe project; costs attributed to the project are those ad-ditional incremental costs incurred (labor and materials)in rehabilitating the farm and maintaining it in its im-proved and higher yielding condition. These incrementalcosts are shown in Annex 8, Table 2.

(iii) Project Administration

All project administration costs, both capital and re-current arising from implementation of the project and in-cluding the costs of extension services are taken into ac-count. No residual value is attributed to Government assetscreated under the project. The costs of project administra-tion are detailed in Annex 8, Tables 4, 5, 6, 7, and 8.

(iv) Marketing costs

The full costs of moving project-produced cocoa fromfarm-gate to FOB Ghana are taken into account. These costson a per long ton basis are shown in Annex 10.

(v) Family labor costs

No economic cost is attributed to family labor in viewof the high level of unemployment and underemployment inGhana. Nevertheless, an allowance for hired labor is madewhich is considered generous, see para 2b(i). However, iftotal labor required is costed at the official minimum wagerate of NO 0.70/day, the different rates of return are re-duced by about 3%.

ANNEX 13Page 3

(vi) Road improvement and maintenance

The cost of road improvement, see Annex 8, Table 1,and subsequent maintenance is not taken into account. Itis believed that road user savings alone would justifythese expenditures.

(c) Benefits (No benefits are assumed from food crops)

(i) Food Crops

While no benfits from food crop production are in-cluded in the calculation, if 50% of potential food cropproduction is included, all rates of return would increaseby about 2%.

(ii) Yields from rehabilitated farms

Incremental yield benefits are used. These are assumedto be 100 lb/acre in the year following the start of rehabili-tation, 200 lb in the second year, and 350 lb in the third andsubsequent years. The yield without rehabilitation is esti-mated at 150 lb/acre. See para 8.01 of main report, and Annex11, Table 1.

(iii) Yields from replanted farms

Replanted farms are assumed to begin to yield in theirfourth year, and production would increase to 700 lb/acre inthe seventh year and remain at this level throughout the lifeof the project. See para 8.02 of the main report, and Annex11, Table 2.

(iv) Prices

An f.o.b. price equivalent to US$ 27 cents/lb CIF NewYork is assumed.

aHM

SASTE REGION COCOA PROJCT

ENOKE RATE w RET1RN

1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983-1995

Oni-Farm Develoyo_nt

Replanting (From Table 3) - 490.6 1,542.7 2,009.2 1,5 8 8.4 647.4 784.9 1,039.0 1,217.1 1,269.9 1,212.7 1,238.1 1,288.9 15,207.9

Rehabilitation (From Table 2) 62.7 576.3 1,103.0 1,149.2 978.6 933.8 1,046.8 1,046.8 94 6.1 902.9 810.5 810.5 810.5 2,431.5

Sub-total 62.7 1,066.9 2,645.7 3,158

.4 2,567.0 1,581.2 1,831.7 2,085.8 2,163.2 2,172.8 2,023.2 2,04

8.6

2,099.4 17,639.I

Project Admizietration

Staff, construction and equip,l;t,and cooperative developent 1,686.6 1,385.6 1,315.8 1,315.6 1,353.5 672.2 382.2 172.3 84.4 73.6 73.6 73.6 84.4 912.0

1Srketint

LBL allowance - 7.0 56.3 165.5 270.3 340.1 412.2 510.0 617.2 701.0 691.7 691.7 691.7 5,989.1CMB operating costs _ 6.3 50.2 147.3 240.6 302.9 365.0 454.1 549.5 624.1 615.8 615.8 615.8 5,332.2

Sub-total _ 13.3 106.5 312.8 510.9 6

43.o 777.2 96

4.1 1,666.7 1,325.1 1,307.5 1,307.5 1,307.5 11,321.3

Total Cost 1.1749.3 2,465.8 4,068.o 4,786.8 4,431.4 2,896.4 2,991.1 3,222.2 3,414.3 3,571.5 3,404.3 3.429.7 3.491.3 29,872-7

Sales Proceeds - 105.6 845.4 2,483.3 4,056

.1 5,103.4 6,194.0 7,662.5 9,270.7 10,529.1 10,379.1 10,379.1 10,379.1 87,874.8

Ann-a Surplu (Deficit) (1.749.3) (2,360.2) (3,222.6) (2,303.5) ( 375.3) 2,207.0 3,202.9 4,440.3 5,856.4 6,957- 6 6,974. 8 6

,949.4 6,887.8 58,002.1

Economic Rate of Return 25.9%

GHANA

EASTERN REGIONA COCOA PROJECT

REHABILITATION - ECONOMIC RATE OF RETURN

(NOI '-00)

1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980-1985

On-Farm Development

Investment 62.7 576.3 1,034.2 737.8 230.2 - - - -

Operating costs - - 68.8 411.4 74 8.4 933.8 1,0I6.8 1,o46.8 946.1 902.9 4,863.3

Sub-total 62.7 576.3 1,103.0 1,149.2 978.6 933.8 1,046.8 1,046.8 946.1 902.9 4,863.3

Project Administration 1/

Staff, construction and equipment 501.2 416.5 394.4 394.4 406.1 201.6 l.2 51.7 25.3 22.1 114.5

Marketing

LBA allowance - 7.0 56.3 165.5 264.1 302.8 308.1 308.1 308.1 308.1 1,540.5

CM operating costs 6.3 50.2 147.3 235.1 269.6 274.3 274.3 274.3 274.3 1,371.5

Sub-total - 13.3 106.5 312.8 499.2 572.4 582.4 582.4 582.4 582.4 2,912.0

Total Cost 563.9 1.0060.9 156.14 1707 743.4 809 16553.8 107& 7.889,8

Sales Proceeds - 105.6 845.4 2,483.3 3,962.7 4,544.1 4,623.2 4,623.2 4,623.2 4,623.2 23,116.0

Annual Surplus or (Deficit) (563.9) (900.5) (758.5) 626.9 2,078.8 2,836.3 2,879.8 2,952.3 3,069.4 3,115.8 15,226.2

Economic Rate of Return (%) 55%

I/ Assumes 30% of total project adninistration costs.

GHANA

EkSTERN REGION COCOA PROJECT

REPLANTING - SCCNOMIC RATE OF RETURN

(No - noo)

1970/71 1971/72 1972'73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983-1995

On-Farm Development

Investment - 490.6 1,542.7 2,099.2 1,588.4 V 575.i 455.7 325.2 - - - - -

Operating Costs - - - - - 72.3 329.2 713.8 1,217.1 1,269.9 1,212.7 1,238.1 1,288.9 15,207.9

Sub-total - 490.6 1,542.7 2,099.2 1,588.4 647.4 784.9 1,039.0 1,217.1 1,269.9 1,212.7 1,238.1 1,288.9 15,207.9

project Administration I/

Staff, construction and equipment,and cooperative development 1,686.6 1,385.6 1,315.8 1,315.6 1,353.5 672.2 382.2 172.3 84.4 73.6 73.6 73.6 84.4 912.0

Marketing

LBA allowance - - - - 6.2 37.3 104.1 201.9 309.1 392.9 434.9 434.9 434.9 5,218.8

CMB operating costs _ - - - 5.5 33.3 92.7 179.8 275.2 349.8 387.2 387.2 387.2 4,646.4

Sub-total - - - - 11.7 70.6 196.8 381.7 584.3 742.7 822.1 822.1 822.1 9,865.2

Total Cost 1,686.6 1,876.2 2,858.5 3,414.8 2,953.6 1,390.2 1,363v'9 1,593.0 1,885.8 2,o86.2 2.1084 2,133.8 2,195.14 25, 5.1

Sales Proceeds - - - - 93.4 559.3 1,561.8 3,030.3 4,638.5 5,896.9 6,526.4 6,526.4 6,526.4 78,316.8

Annual Surplus or (Deficit) (1,686.6) (1,876.2) (2,858.5) (3,414.8) (2,860.2) K830.9) 197.9 1,437.3 2,752.7 3,810.7 4,418.0 4,392.6 4,331.0 52,331.7

Economic Rate of Return (,) 15.13%

1/ Includes 100% administration costs.

oX OZT' ois' GHANA

EASTERN REGION COCOA PROJECTSwirenkylren D e n s u s Enkum \ _ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Unit boundaries

g ~~~~Bretema AdrwKNAKS^ Zone headquarters

s ~~~~U N I I\ 1 CiTriao / Main roads

_J ~~~~~~Kab Hilt P AboautI n Railways wRjptt _Ornena~~ ~ ~ ~ ~ ~~ko i, 2< ,t

AtiebuO OKponkpron ( U N I T 7 f W

/ U N I T 3 \\;_ _ _ _ +~~~~~~Aanh Supres U N I T 8

S ~~~~~~OAbesim XU UM Kwanbn w hia Trayo g > Okorasi

~~~~~~~~~~~~~~~~~~oAbuau N I v V/ T 9)EODomi ogOkaratr p6 8;orasi ~~~~~U N I T 6 a l\e o uKkr\~ Auoya

Sowoteyetenasi \

-6'00 '-9 Sowatey 0Tbou t Koransang Atlebu 3\D ¢n°

U N I T 4 Aoai osrntromukuo OKoransang Dedewa o / _ \

/ n g OWrJrobenya\ < U N I T 1 2 5 />J OT A

~/ \ l KukosuO Budumonkron T Wb L \

\ILES -.Iflternotronol b\ ndoeMnkron SontramaAw\

dulmcdurno- 9 Kukosui~ \°Wawasi 20

CfoForn KoJsie i miherez /1 U N I T I13 \~> .fU N I T 1 0 4

/ oAbude Oborgo oAnom kAsuboi \/ P ,

IU N I O 1E 0t5 0

Krowa U N I T 1 4 0Ei E6Dedewo

_ Dokrochiwo V\\ _

FILOMETERS ~~~~0 27 0918O !AO6wCETR

FEBRuARY 1970IBO82