Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 49629-BF

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED

GRANT

IN THE AMOUNT OF SDR 25.6 MILLION (US$40 MILLION EQUIVALENT)

TO BURKINA FASO

FOR AN

AGRICULTURAL PRODUCTIVITY AND FOOD SECURITY PROJECT

November 1 1,2009

Sustainable Development Department Agricultural and Rural Development Unit Country Department AFC W 1 Africa Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

CPIA RCA CRAL

(Exchange Rate Effective 08/3 1/2009)

Country Policy and Institutional Assessment Regional Chambers o f Agriculture (Chambre Rkgionales de 1 'Agriculture) Litigation Arbitration Commission (Commission de RBglement des Litiges 2r

Currency Unit = FCFA FCFA459.45 = US$ 1 USs1.56607 = SDR 1

CRC/PSA

DANIDA DEP

FISCAL YEAR January 1 - December31

1 'Amiable) Regional Committees for Coordination o f Agriculture Sector Policies (Comitb Rbgionaux de Coordination des Politiques Sectorielles Agricoles) Danish International Development Agency Directorate o f Studies and Planning (Direction des Etudes et de la

ABBREVIATIONS AND ACRONYMS

DGMP Planijkation) General Directorate for Public Procurement (Direction Ge'ne'rale des

i

FOR OFFICIAL USE ONLY

DGPSA Marchis Publics) General Directorate for Agricultural Statistics and Forecasting (Direction

GTZ ICB I International ComDetitive Bidding

1 German International Development Agency ICRISAT IDA IFAD IFMIS IRR

International Crops Research Institute for Semi-Arid Tropics International Development Association International Agricultural Development Fund Integrated Financial Management Information System Internal Rate o f Return

LEIA MAHRH

MECV

I M&E I Monitoring & Evaluation I

Limited Environmental Impact Assessment Ministry o f Agriculture, Water Resources and Fisheries (Ministire de 1 'Agriculture, de 1 'Hydraulique et des Ressources Halieutiques) Ministry o f Environment and Livelihood (Ministire de 1 'Environnement et du Cadre de Vie)

MIS MRA NCB NEPAD NGO NPV

document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

Market Information Systems Ministry o f Livestock Husbandry (Ministire des Ressources Animales) National Competitive Bidding New Partnership for Africa's Development Non Governmental Organization Net Present Value

PDA Productivite' et a la Se'curite' Alimentaire) Agricultural Development Program (Programme de De'veloppement de

SDR SONAGESS

Rural Developmeni airaiegy (oiruiegia ue: ueveioppeni fiuruie) National Agency for Management o f Emergency Stocks (Socie'te' Nationale

PDO 1 'Agriculture) Project Development Objective

SWOT TCC VDC WAAPP WAEMU WFP

de Gestion des Stocks de Se'curite? Strengths, Weaknesses, Opportunities and Threats Analysis Technical Coordination Committee Village Development Council West African Agricultural Productivity Project West African Economic and Monetary Union World Food Program

iii

Vice President: Country Director: Country Manager:

Sector Director:

Obiageli K. Ezekwesili Ishac Diwan Galina Sotirova Inger Andersen

Sector Manager: Task Team Leader:

Karen M. Brooks Abdoulaye Toure

BURKINA FASO AGRICULTURAL PRODUCTIVITY AND FOOD SECURITY PROJECT

CONTENTS

Page

STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 A . Country and sector issues .................................................................................................... 1 B . Rationale for Bank involvement .......................................................................................... 3 C . Higher level objectives to which the project contributes .................................................... 4

I1 . PROJECT DESCRIPTION .................................................................................................. 4

I .

A . B . C . D . E .

I11 . A . B . C . D . E . F .

I V . A . B . C . D . E . F . G .

Lending instrument.. ............................................................................................................ 4 Project development objective (PDO) and key indicators., ................................................. 4 Project components .............................................................................................................. 6

Alternatives considered and reasons for rejection. ............................................................. -9 IMPLEMENTATION ..................................................................................................... 10 Partnership arrangements .................................................................................................. 10 Institutional and implementation arrangements ............................................................... -10 Monitoring and evaluation o f outcomeshesults ................................................................ 11

Critical risks and possible controversial aspects ............................................................... 12 Financing conditions and covenants ................................................................................. -13 APPRAISAL SUMMARY .............................................................................................. 14 Economic and financial analyses ....................................................................................... 14 Technical ........................................................................................................................... 16 Fiduciary ............................................................................................................................ 16 Social ................................................................................................................................. 18 Environment ..................................................................................................................... -18 Safeguard policies .............................................................................................................. 19

Lessons learned and reflected in the project design ............................................................ 8

Sustainability and Replicability ......................................................................................... 11

. . Policy Exceptions and Readiness ...................................................................................... 20

Annex 1: Country and Sector Issues .......................................................................................... 21 Annex 2: Major Related Projects Financed by IDA and/or other Agencies .......................... 32

iv

Annex 3: Results Framework and Monitoring ......................................................................... 33 Annex 4: Detailed Project Description ...................................................................................... 39 Annex 5: Project Costs ................................................................................................................ 51 Annex 6: Implementation Arrangements .................................................................................. 52 Annex 7: Financial Management and Disbursement Arrangements ..................................... 60 Annex 8: Procurement Arrangement ........................................................................................ 74 Annex 9: Economic and Financial Analysis .............................................................................. 83 Annex 10: Safeguard Policy Issues ............................................................................................. 93 Annex 11: Project Preparation and Supervision ...................................................................... 97 Annex 12: Documents in Project Fi le ........................................................................................ 98 Annex 13: Statement o f Loans and Credits ............................................................................. 100 Annex 14: Country at a Glance ................................................................................................ 101 Annex 15: Map: IBRD BFA33379 ........................................................................................... 103

V

BURKINA FASO

Beneficiaries IDA Total:

AGRICULTURAL PRODUCTIVITY AND FOOD SECURITY PROJECT

6.6 0.0 6.6 26.4 13.6 40.0 36.9 14.4 51.3

PROJECT APPRAISAL DOCUMENT

AFRICA REGION

AFTAR

Date: November 11 2009 Country Director: Ishac Diwan Sector Manager/Director: Karen McConnell Brooks

Project ID: P114236

Lending Instrument: Specific Investment Loan

Team Leader: Abdoulaye Tour6 Sectors: General agriculture, fishing and forestry sector (80%); Animal production (20%)

Themes: Capacity and institution building (S); Climate change (S); Other environment and natural resources management (S) ; Rural services and infrastructure (S)

Environmental Screening category: Partial Assessment- Cat B

For Loans/Credits/Others: Total Bank financing (US$m.): 40.00

Recipient : BURKINA FASO

Responsible Agency: MINISTRY OF AGRICULTUREy WATER RESOURCES AND FISHERIES Address: P. 0. Box 7029, Ouagadougou, Burkina Faso

Contact Person : Jean Martin KambirC Tel: (226) 50336508 Fax: (226) 50336508 Email: jmkambire@fasonet.bf

v i

/Cumulative1 4.0 I 12.0 I 22.0 I 32.0 I 40.0 I Project implementation period: Start December 10,2009. End: December 30,20 15 Expected effectiveness date: March 16, 20 10 Expected closing date: June 30,20 16 Does the project depart from the CAS in content or other significant respects? Re$ PAD I.C. Does the project require any exceptions from Bank policies? Re$ PAD I K G.

[ ]Yes [XINO

[ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [IN0 I s approval for any policy exception sought from the Board? Does the project include any critic.al risks rated “substantial” or “high”? Re$ PAD III. E. Does the project meet the Regional criteria for readiness for implementation? Re$ PAD I K G. Project development objective (PDO) Re$ PAD IIJ., Technical Annex 3 The Project’s PDO is to improve the capacity o f poor producers to increase food production and to ensure improved availability o f food products in rural markets. Project description. Re$ PAD II.C., Technical Annex 4 The project has the following three components:

[ ]Yes [ ] N o [ X ]Yes [ ] N o

[XIYes [ ] N o

Component 1. Improving food production (US26.7 million) This component will finance: a) Matching grants for the adoption o f high performing agricultural technological packages to qualified households, and communities. Those beneficiaries (households) with limited purchasing power who cannot provide their contribution in cash will be given the opportunity to participate in ccvoucher for work” programs.

b) Development o f community assets in support o f food production and marketing as planned and organized by Village Development Councils (with payment o f labor through a “voucher for work” program).

Component 2. Improving the availability of food products (US%5.4 million) This component aims at strengthening the capacities o f stakeholders to manage the variability o f food supplies at local and national levels. This component will have two sub-components: (i) Matching grants to producer groups for reducing post-harvest losses; and (ii) Supporting the marketing of foodproducts.

Component 3. Institutional development and capacity building (US7.1 million) The component aims at reinforcing the capacities o f institutions and service providers directly involved in project implementation. Specifically, project activities will focus o n the following

vii

areas: (i) Building capacities of service providers; (ii) Strengthening agricultural input supply delivery systems; (iii) Strengthening the capacity of producer organizations and; (iv) Management and Monitoring & Evaluation (M&E) of project activities. Which safeguard policies are triggered, if any? ReJ PAD IKF, TechnicalAnnex 10 (i) Environmental assessment (OPBP 4.01), (ii) Pest Management (OP 4.09) and (iii) Involuntary Resettlement (OPBP 4.12). Significant, non-standard conditions, if any, for: Re$ PAD III. F.

Conditions of Board presentation: None

Board presentation: Scheduled on December 10,2009

Conditions of effectiveness:

The Recipient has established (i) the Steering Committee and (ii) the Technical Coordination Committee for the Project.

Conditions o f Disbursement:

Disbursement under Category 2 (funds allocated to Matching Grants to households under Component 1 (a) o f the Project): The Technical Operator Agreement, the Financial Institution Agreement and the World Food Program (WFP) Agreement have been signed.

Disbursement under Category 4 (funds allocated to Matching Grants to producer associations under Component 2(a) o f the Project): The Technical Operator Agreement, the Financial Institution Agreement and the Regional Chamber o f Agriculture (RCA) Agreement have been signed.

Recipient’s Covenants regarding project implementation:

No later than one month after the Effective Date, (i) the Ministry o f Agriculture shall have recruited for the Project: (A) a financial management specialist, (B) a procurement specialist and (C) a monitoring and evaluation specialist, and (ii) the Regional Chambers o f Agriculture shall have recruited for the Project: (A) a procurement specialist, (B) four internal auditors and (C) an accountant with qualifications, experience, and terms o f reference satisfactory to the Association and in accordance with the procurement procedures outlined in the Financing Agreement.

No later than April 30, 2010, the Recipient shall have opened the Project Account and deposited 500,000,000 CFA Francs in the Project Account.

No later than January 1 and July 1, or such other dates as may be agreed by the Association, each year throughout the implementation o f the Project starting on January 1, 201 1 , the Recipient shall deposit in the Project Account as Counterpart Funds an amount equivalent to not less than $450,000, or such other amount as agreed by the Association.

vi i i

N o later than 4 months after the Effective Date, the Recipient shall have recruited an external independent auditor with qualifications, experience, and terms o f reference satisfactory to the Association and in accordance with the procurement procedures outlined in the Financing Agreement.

I I

i x

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

Geography, growth and food security

1. Geography. Burkina Faso stretches over 274,400 square kilometers, with a population o f nearly 14 million in 2007, and a population growth rate o f 3.1 percent. The tropical arid climate i s characterized by one long dry season (7-9 months) and a short rainy season (3-5 months). Based on annual average rainfall, which varies from 600 mm in the North to 1200 rnm in the South, the country can be divided into three major agro-ecological zones: the Sahel, Sudan-Sahel and the Sudan zones. The agrarian economy i s particularly vulnerable to climatic and external shocks. Burkina Faso’s fragile Sahelian environment i s drought-prone and susceptible to flooding.

2. Growth and Poverty. The country i s one o f the poorest in Sub-Saharan Africa, and remains largely dependent on foreign aid, which represents 10 percent o f the gross domestic product and accounts for 80 percent o f public investments. Per capita income was US$430 in 2005, much lower than the US$590 average for low income countries. The literacy rate was 24 percent, and l i fe expectancy averaged 53.8 years in 2008 when the country ranked second to last according to the United Nations human development index. Between 2000 and 2006, economic growth has been sustained at an average annual rate o f 6 percent. This period was marked by large investments in social sectors, mainly health and education, which contributed to a reduction in poverty from 46.3 percent in 2003 to 42.1 percent in 2006. The economy has slowed down since 2007 following the food and energy price crises. The persistence o f these crises, coupled with the recent financial crisis, resulted in a three percent increase in the incidence o f poverty in 2008, bringing the share o f the population living in poverty back to 2003-04 levels.

3. Food Security. Burkina Faso i s characterized by chronic food insecurity. According to the national household survey o f 2007, more than 38 percent o f households had difficulty satisfying their food needs. Historically, Burkina Faso has relied mostly on extensive agriculture to meet i ts population’s food needs. However, in the past two decades, i t s population has grown at nearly three percent per year whilst crop productivity has stagnated. This has been an important factor in the lack o f improvement o f the country’s food security status. Average cereal yields are st i l l below one ton o f grain per hectare. Livestock production, largely practiced under extensive pastoral and agro-pastoral conditions, displays equally low productivity. Food security varies greatly between years, as large annual fluctuations in rainfall lead to erratic cereal production. Being a net food importer, food security in Burkina Faso has also been significantly affected by the recent surge in food prices worldwide.

1

Issues and challenges

4. Beyond the country’s vulnerability to climatic shocks, the following key factors explain poor agricultural production: (i) low productivity due to the extensive nature o f production practices; (ii) wide gap between agriculture research station and farmer’s yields due mainly to weak technology transfer and difficult access to improved technologies; and (iii) high seasonal (intra-annual) and cyclical (inter-annual) price volatility, which creates very difficult conditions for poor rural dwellers to access food in deficit years and during the annual ‘hungry’ season at the time crops are yet to be harvested. As a Sahelian country, Burkina Faso faces serious problems o f price variability. During project preparation, an analysis o f the nature and extent o f the coarse grain price instability in Burkina Faso was carried out using seasonal and annual data from the past 11 years. According to official statistics, this period corresponds to growth in the production o f food grains that exceeds population growth. Food grain prices exhibit two kinds o f price variability: seasonal and cyclical. The average increase in producer prices between the November-December (post-harvest) period and the May-August (planting/production period) i s 26% for millet, 33% for sorghum, and 37% for maize. The cyclical or inter-annual price variations reflect changes in the overall supply situation in West Africa. Since the latter 9Os, these have been occurring every 3-4 years. These cycles cut across seasonal trends, sometimes reinforcing them and sometimes diminishing their effect. When prices are at their l o w point, they are often below production costs for maize-the one crop that is produced on a commercial basis with substantial quantities o f fertilizer.

Government strategy

5. The Government o f Burkina Faso’s most recent Rural Development Strategy (SDR) dates from December 2003. The SDR defined seven strategic pillars and priority actions for advancing the rural development agenda. Three o f these pillars are most relevant to the proposed project: (i) increasing, diversifying, and intensifying crop, livestock, and forestry and fishery production; (ii) reinforcing the l i n k s between production and markets; and (iii) increasing and diversifying income sources. More recently in the Green Revolution Document (2007), the Government has also recognized the need for renewed emphasis on food security.

6. In the wake o f the rising food prices, the Government prepared an Emergency Plan for Food Security (2008) to mitigate the impact o f the food price crisis. In accordance with this plan, the Government initiated a number o f short-term measures to deal with the immediate effects o f rising food prices, including: (i) tax relief on high consumption food items, such as rice and milk; (ii) distribution o f seeds and fertilizer to farmers; and (iii) use o f safety nets in the health and education sectors. The Government recognized that these short term measures provided much- needed immediate assistance, but were insufficient to address the more structural aspects o f food insecurity. Hence, the Government has decided to complement short-term measures with dedicated efforts aimed at improving the productivity and post-harvest conditions o f food crops and animal products, and facilitating their access by those segments o f the rural populations that are most impacted by food insecurity.

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B. Rationale for Bank involvement

7. The Bank has a long standing experience in supporting rural development in Burkina. From 1995 to 2005, it financed five projects: (i) The Burkina Food Security and Nutrition Project addressed food security issues mostly from a demand side, by developing nutritional education, safety net, early warning, and market information systems; (ii) the Pilot Private Irrigation Development Project (DIPAC) promoted small-scale private irrigation and post-harvest technologies; (iii) the National Agricultural Services Development Project (PNDSA-11) worked on extension servicesreforms, reinforced agricultural research capacities, and promoted farmer- based organizations; (iv) the first phase o f the Community Based Rural Development Project (CBRD I) strengthened community capacities in local development planning and management; and (v) the Sustainable Wildl i fe and Biodiversity Project (PAGEN) promoted community involvement in sustainable ecosystems managements.

8. Drawing on the lessons from these projects, the World Bank has provided since 2005 a combined financing o f approximately US$145 mi l l ion to Burkina Faso, to support three rural development projects: (i) the GEF-financed Sahel Integrated Lowland Ecosystem Management Project (US$4.5 million, FY04) finances activities aimed at improving watershed management across the country; (ii) the Agricultural Diversification and Market Development (ADMD) Project (US$66 million, FY06) supports increased productivity and diversification in commercial and export-oriented agriculture, including the critical cotton sector and the cattlebeef, poultry and fruit and vegetables supply chains; and (iii) the second Community Based Rural Development (CBRDP-11) Project (US$74 million, FY07) supports investments in decentralized service delivery in rural communities and contributes to strengthen the local governance and management capacities.

9. The current Bank projects in the rural sector focus on reinforcing the delivery o f basic services and supporting agricultural diversification, as wel l as improving natural resource management. However, they do not explicitly serve the need to increase domestic crop and livestock production or address associated production and commercial risks which should contribute most to rural households’ food security given Burkina Faso’s vulnerability to food shortages. The project i s intended to do that by supporting agriculture and livestock productivity, as well as better risk management, and increasing accessibility to food products on the part o f rural populations. It will support activities along the supply chains that are most critical for improving food security, i.e., food crops (prominently cereals) and livestock production (prominently milk, swine and poultry production). It will place special attention on facilitating access to food on the part o f the poorest and the most food insecure rural households.

10. The Bank is particularly well placed in Burkina Faso to spearhead such an effort as it is the lead donor in the rural sector. This project will support productivity growth in food production, building on the successful implementation o f ongoing Bank projects in Burkina Faso and on the Bank’s long experience in the rural sector (in particular the work under PNDSA on producer organizations, the community works under CBRD, and the value chain development under ADMD). Support to food production has received l imited attention in donor priorities in the past, because staple food commodities are generally not perceived as the leading sectors for growth, despite their significant contribution to the livelihoods o f the poor and the most food insecure household. This project responds to the Government’s desire to revitalize the staple

3

food sector as a means to reduce poverty and food security. This project i s fully consistent with the country’s PRSP and the Bank’s country assistance strategy.

C. Higher level objectives to which the project contributes

1 1. The proposed project i s fully aligned with the Country Assistance Strategy (CAS) which places great emphasis on the agriculture sector. It will contribute to the CAS objectives o f accelerated and shared growth, increased employment opportunities, and reduced income risks in rural areas. Contrary to the recent Bank emergency assistance in the wake o f the food price crisis which is inherently short term, the project offers a medium to long term framework for strengthening food production and marketing on a sustainable basis. The proposed project is consistent with the Africa Action Plan (AAP), the Bank’s Global Food Crisis Response Program, and the N e w Partnership for Africa’s Development’s (NEPAD) Comprehensive Africa Agriculture Development Program (CAADP). By supporting large scale dissemination o f improved technologies, the project will contribute in tandem with the West Africa Agricultural Productivity Project (WAAPP) to the implementation ’ o f CAADP Pillar 4 on agricultural technology adoption and dissemination.

11. PROJECT DESCRIPTION

A. Lending instrument

12. The total cost o f the project is US$51.3 mi l l ion equivalent, o f which US$40 mi l l ion equivalent will be financed by an IDA sector investment grant and additional contributions will be made by the Government (US$4.7 million) and beneficiaries (US$6.6 million).

B. Project development objective (PDO) and key indicators

13. production and to ensure improved availability o f food products in rural markets.

The Project’s PDO is to improve the capacity o f poor producers to increase food

14. To achieve this objective, the project will: (i) scale up agricultural technology transfer and dissemination to improve productivity and overall food production; (ii) strengthen the capacities o f stakeholders to manage the variability o f food supplies at local and national levels through increased storage and access to credit under the warrantage scheme (i.e. inventory credit system or warehouse receipt system); and (iii) improve the provision and efficiency o f core public and private services.

15. The key indicators against which the PDO will be measured are: (i) increase in crop productions (millet, sorghum, maize, rice, cowpea) in the project’s targeted zones; (ii) increase in milk production in project targeted zones; (iii) increase in quantity o f products stored in the warrantage scheme in project targeted zones; and (iv) reduction in cereal consumption poverty among rural households (share o f rural households with annual cereals consumption less than 190 kg per capita).

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Targeting

16. Targeting i s based on geography and beneficiary characteristics.

Beneficiary targeting

17. around protected areas.

The project will target poor rural households, producer groups and communities living

18. Households. The targeted households are among those who face the biggest poverty and food security challenges in Burkina Faso. According to the 2006 general census on agriculture, there are approximately 1.4 mi l l ion agricultural households in Burkina Faso. Nearly 97% o f these households are food crop producers. Out o f the 1.4 mi l l ion agricultural households, approximately 80% (1.1 million) are non-cotton farmers, who face the most difficult challenges in terms o f access to improved technologies. Poverty incidence i s also highest among this group o f food crop farmers who account for 72% o f rural poverty (estimated at 52.3% in 2003). Compared to cotton producers for whom cereals poverty in 2006 was 17%, approximately one- third (32%) o f food crop farmers are considered to be living under cereals poverty line. Cereals poverty line i s equivalent to 190 Kghapitdyear according to national estimates. Cereals are important components o f food poverty in Burkina Faso, contributing to nearly 77% o f total energy intake in the country.

19. Selection o f household beneficiaries will be based on criteria, such as farm size, type o f crops and gender. The project will cover 300,000 rural households selected among the poorest producers who have a subsistence agriculture livelihood and who produce crops such as cereals, cowpea, roots and tubers, milk and short cycle livestock. Essentially these are households that have been identified as living in cereal consumption poverty (less than 190 kghapitdyear). For agriculture, priority will be given to producers with less than 5ha land size with no farm equipment. For livestock production, priority will be given to households having less than 5 dairy cows, 5 hogs or 30 chickens. Approximately 50% o f the subsidies will be provided to women and young household heads, given the critical role o f these demographic groups in supporting rural economic growth and food security in the country. Regarding milk production, the project will also give priority to organized women groups around the existing 150 small milk collecting units. The project will also support income generating activities, particularly through the promotion o f non-timber forest products, for communities adjacent to the 7 protected areas targeted under the project.

20. Producer groups. The project will also target existing producers groups who are recognized by the chamber o f agriculture and are officially registered. The project will primarily target women and youth groups who are especially active in the post harvest and processing o f food crops. As far as warrantage schemes are concerned the project will be demand driven.

Geographic targeting

21, The project will target communities living around the following protected areas: Nazinga Forest Reserve and Game Ranch, Po or KaborC Tambi National Park, Boulon-KoflandC Forest Reserve, ComoC-LCraba Forest Reserve, Arly National Park, Hippo Lake Biosphere and Forest Reserve, and Sahel Forest and Game Reserve. These communities are already organized in

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associations and have prepared community development plans including the development o f non timber forestry products.

22. The project will use different tools to cover the two main zones identified on the basis o f food balance sheet. In zones with a structural food deficit, the project’s activities will essentially be geared toward improving productivity through the development o f the voucher-for-work system (component 1). In surplus zones, priority will be given to strengthening the production- market linkages, particularly through the development o f the warehouse receipt scheme (component 2). The project’s actions will be conducted in complementarities and synergy with projects and programs financed by other development partners.

C. Project components

23. Project activities will be organized around the following components and sub- components.

ComDonent 1. Improving food production (US$26.7 million) 24. This component will finance (a) matching grants and (b) community works to support the adoption o f high performing technological packages by poor households. The technological packages for food crop production include improved seed, fertilizer, manure, sustainable soil management technologies, animal traction, and improved post-harvest technologies. For livestock production, the focus will be on milk production and short cycle livestock products and the technology packages will include: genetic improvement (local and exotic breeds) and access to veterinary services and products (including, vaccination, and animal feed). For zones adjacent to protected areas in which agricultural production has been curtailed or prohibited by law the focus will be on technologies for valorization o f non-timber forestry products. This component will also promote integrated crop and livestock production systems/technologies to raise overall productivity (fodder production, manure etc.). To help mitigate climatic risks, the project emphasizes the dissemination o f drought-resistant, combined with technologies for sustainable land management, including water-harvesting technologies. 25. A minimum cash contribution will be required to enroll in the matching grant program for technology adoption. The contribution will vary according to the type o f beneficiary and the type o f activities, as specified in the project implementation manual (PIM). The project will finance community works planned and organized by Village Development Councils. The project will also pay for the labor necessary to carry out these works using a “voucher for work” system. The voucher for work program will give the opportunity to those matching grant household beneficiaries with limited purchasing power who cannot provide their contribution in cash to be compensated with vouchers that can be used as payment o f their cash contribution. It i s expected that at least 80% o f project household beneficiaries will participate in the voucher-for-work program. Within the context o f i t s assistance to the Government, the World Food Program (WFP) will provide support to the implementation o f the “voucher for work” program. The World Food Program will specifically assist in printing secured vouchers, and participating in joint supervision o f the program. The public works will focus on building community assets in support o f food production and marketing (lowland development, rural roads, marketing infrastructure, etc). Eligible list o f public works i s included in the project implementation

-

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manual. For increased security o f the production for small scale farmers, approximately one-third o f resources will be used on the development o f lowlands. Village Development Councils (CVD), which have been strengthened through the CBRD program, will have the responsibility to plan and organize public works.

Component 2. Improving the availability of food products (US$ 5.4 million)

26. This component aims at strengthening the capacities o f stakeholders to manage the variability o f food supplies at local and national levels. This component will have two sub- components :

Sub-Component 2.1 : Reducingpost-harvest losses

27. This sub-component will provide matching grants to eligible producer groups to : (i) ensure dissemination o f improved technologies for reducing post-harvest losses, including improved granaries and double-bagging; (ii) finance multifunctional platforms to facilitate adoption o f food processing equipment; (iii) support the reinforcing o f small scale improved food processing units managed principally by women groups in rural areas. Beneficiary contribution will be modulated according to the type o f micro-projects. Operational mechanisms will be detailed in the PIM.

Sub-Component 2.2: Supporting the marketing of foodproducts

28. This sub-component will finance consultant services, workshops, study tour training and c iv i l works for: (i) the development o f village level warehouse receipt (warrantage) schemes in surplus areas (see Annex 4 for details); (ii) the restructuring o f cereal banks into marketing cooperatives in deficit zones, the networking o f these cooperatives with the National Agency for Management o f Emergency Stocks (Socie'te' Nationale de Gestion des Stocks de Se'curite' - SONAGESS); (iii) the strengthening o f market information systems (MIS) with the Regional Chambers o f Agriculture. Regarding the implementation o f the warehouse receipt system, the project will sign protocols with decentralized financial institutions, which have expressed their interest in the system. Microfinance institutions, such as the Re'seau des Caisses Populaires, have already launched pilot warehouse receipts operations in Burkina Faso

Component 3 - Institutional development and capacity building (US$ 7.1 million) 29. This component aims at reinforcing capacities o f institutions directly involved in project implementation. Specifically, the component will finance consultant services, equipment, training sessions, study tours and farmers' field day, and communication and information activities (e.g. awareness-raising campaigns, technology workshops, etc.) The project activities will focus on the following sub-components:

Sub-Component 3.1 : Building capacities for extension and advisory services to farmers

30. This sub-component will focus on: (i) building capacities o f private and public extension services providers to support technology transfer to farmers; and (ii) Strengthening capacity o f public services involved in project implementation.

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Sub-Component 3.2: Strengthening a@icultural input supply delivery systems

3 1. This subcomponent will support: (i) dissemination and implementation o f the new laws on seed and agricultural inputs, and o f legislations on veterinary products; (ii) strengthening and expanding o f improved seed production and distribution systems; and (iii) expanding o f existing network o f input distributors in the rural area, and strengthening their capacities to provide advisory services to farmers.

Sub-Comvonent 3.3 : Strengthening the capacity of Producers ’ Organizations

32. The project will finance: (i) capacity strengthening o f Regional Chambers o f Agriculture to allow them to efficiently undertake their mandate under the project; and (ii) capacity strengthening and networking o f grass roots farmers-based organizations to help them play a more active role in technology transfer and marketing o f food products.

Sub-Component 3.4: Management and Monitoring & Evaluation (M&E) ofproject activities

33. Project execution i s coordinated by existing directorates o f implementing ministries, and Regional Chambers o f Agriculture. In this context, the Project will provide financial and logistic support to these institutions, particularly in the areas o f fiduciary management and the development o f the Project’s monitoring and evaluation system, including the social and environmental impacts o f the project.

D. Lessons learned and reflected in the project design

34. Holistic approach to technology.transfer. Lessons learned in Burkina Faso and the sub- region indicate that there i s a huge gap between yields on farmers’ fields and on research station plots, in large part due to ineffective technology transfer systems. Past agricultural support projects focused mainly on technology generation and support to public extension services, which are necessary but not sufficient for effective adoption o f improved technologies. Financial and physical accesses to improved technologies are also key factors in the adoption process. Therefore, the project will address the determinants o f technology adoption as a whole, in order to obtain the maximum impact. These include: (i) building capacities o f public and private service providers (input suppliers, Non-Governmental Organizations (NGOs), consulting firms, and producer organizations); (ii) supporting the input delivery system (network o f seed producers and, input suppliers); and (iii) providing vouchers to facilitate financial access to improved technology.

35. Demand driven process. Past projects have mainly proposed a unique and high cost technological package to fanners, making adoption difficult for farmers, particularly small scale farmers and women. Recent experience with the community driven development project and pilots under the small irrigation development project and the agricultural service delivery project have demonstrated superior outcomes using demand-driven approaches. The project will propose a menu o f options from which farmers will make their own decisions.

8

36. Post-harvest technologies and marketing. Past projects indicate that the adoption o f production-boosting technologies can be substantially curtailed or even reversed if post-harvest and marketing issues are not addressed. The project will therefore fol low a value-chain approach, including addressing post-harvest and marketing issues.

37. Public-private partnerships and accountability. Past research and extension projects have contributed to the generation o f a wide range o f efficient technologies. However, the dissemination and adoption o f these technologies have been limited due in part to the supply-side focus o f past agricultural projects, and in part due to the high cost o f technology adoption for small scale producers. In addition, a hiring freeze o n public servants, combined with the retirement o f state agents, has resulted in a drastic reduction o f extension agents from 1,200 to approximately 300 over the past 10 years. Over the same period, private service providers, producer organizations and NGOs have been increasingly active in providing contract-based extension and advisory services to farmers. The Government has made the choice to encourage public-private partnerships in the implementation o f i t s development projects. This project will be implemented against this background o f increased public-partnerships in delivery o f efficient extension and advisory services in support o f the dissemination o f improved technologies. The project will develop mechanisms to ensure that extension agents are accountable to beneficiaries.

3 8. Result-oriented monitoring and evaluation. Some past IDA projects in Burkina Faso failed to establish functional M&E systems. The project will build on the positive experience o f the Programme National de Gestion des Terroirs 11 (PNGT-11) and the Projet d’Appui aux FiliBres Agro-Sylvo-Pastorales (PAFASP) to establish sound M&E systems, based on performance and outcome indicators designed to track progress and allow adjustment.

39. Genderfocus. Past experience shows that there i s a persistent gender bias in the rate o f technology adoption in agriculture, despite the critical role o f women in household food security. Therefore, gender will be mainstreamed systematically in al l project components. The project will also allocate 50 percent o f the technology package resources to address the specific needs o f women and youth.

E. Alternatives considered and reasons f o r rejection

40. At the request o f the Government, an adaptable program lending (APL) instrument with two or three phases was initially envisaged to support agricultural productivity and food security in Burkina Faso. However the idea was rejected in favor o f a sector investment grant, with the expectation o f a follow-on project. The rationale was that the Government i s in the process o f preparing a new comprehensive rural sector development strategy with the support o f i t s development partners and that this process should be completed before committing to an A P L program

41. The option o f including activities focused on the nutritional and access dimensions o f food security was considered and eventually rejected in order to focus on food availability. The project will collaborate with the existing health project, which includes a nutrition component,

9

111. IMPLEMENTATION

A. Partnership arrangements

42. The Agricultural Productivity and Food Security Project (Projet d'Appui ir la Productivite' et ir la Se'curite' Alimentaire) will develop synergies with other donors intervening in agriculture development and food security. In particular, the WFP will provide technical assistance to the Government for the implementation o f the "voucher for work" scheme to be implemented under Component 1 o f the project and the Food and Agriculture Organization (FAO) will be associated with the technical supervision o f project activities. During project preparation, the Bank agreed with other donors - particularly the International Fund for Agricultural Development (IFAD), the Danish Aid Agency (DANIDA), and the German Technical Cooperation Agency (GTZ) that fund similar operations in Burkina Faso - to conduct joint supervision missions and coordinate closely on key issues such as delivery mechanisms for agriculture support services, and M&E systems. The project will also develop a partnership with the International Crops Research Institute for Semi-Arid Tropics (ICRISAT) and the Permanent Interstate Committee for Drought Control in the Sahel (CILSS) and i t s regional agro-meteorological center (AGRYMET) to support the adoption o f improved technologies that are adapted to the climatic stress o f Burkina Faso semi-arid ecosystems.

43. The project will develop a collaborative framework with the following Bank projects and programs: (i) the Agriculture Diversification and Market Development Project (Projet d 'appui awcjliBres agro-sylvo-pastorales PAFASP) for development o f key value chains; (ii) the Second Community Based Rural Development Project (Programme National de Gestion des Terroirs I1 - - PNGT-11) for community infrastructure and l i n k s with local governments, (iii) the Health Support Program (Programme d 'appui au de'veloppement sanitaire - PADS) for nutrition; (iv) the Sector Transport Project (Projet sectoriel des transports - PST) for local roads; (v) the West African Agricultural Productivity Project (WAAPP) for technology sharing at regional level; and (vi) the Irrigated Agriculture Development Project currently under preparation. PAPSA will develop a particularly strong partnership with the scheduled WAAPP operation, with the goal o f strengthening technology generation and dissemination o f the national agricultural research system.

B. Institutional and implementation arrangements

44. Overall management o f the project will be under the Ministries in charge o f Agriculture. Each o f the three implementing ministries (Agriculture, Livestock and Environment) will implement the Project's activities in its own areas o f competence. Project implementation will be coordinated by a designated Coordinator in the Ministry o f Agriculture, complemented by designated focal points from each o f the implementing ministries, the Director o f the National Office for Protected Area (Ofice National des Aires Prote'ge'es - OFINAP), and the Executive Secretary o f the National Bureau o f the Regional Chambers o f Agriculture. A Project Steering Committee comprising representatives from the Government and c iv i l society will be created with responsibility for defining the strategic orientations and approving work plans and budgets at central level. A Technical Supervision Committee will also be set-up with responsibilities to vet al l technical aspects underpinning project implementation. Existing regional sector policy coordination committees will have the responsibility o f Project coordination at regional level.

10

45. At the regional and local level, responsibility for dissemination o f agriculture and livestock packages will be delegated to the Regional Chambers o f Agriculture. The Regional Chambers o f Agriculture will be strengthened to contract service providers (advisory offices, NGOs, and front l ine extension agents when they exist) to support technology dissemination and marketing activities. The Regional Chambers o f Agriculture will be responsible for the implementation o f Project activities at the local level by signing contracts with private service providers, as wel l as conventions with regional directorates in charge o f agriculture and livestock production. The project will delegate to the National Office o f Protected Areas the coordination o f support to the targeted communities around the seven protected areas covered by the Sustainable Wildlife and Biodiversity Project (Projet de Partenariat pour 1 'Ame'lioration du Partenariat pour la Gestion des Ecosyst2mes Naturels - PAGEN). This agency will delegate implementation responsibilities to communities at local level. The Regional Chambers o f Agriculture and the National Office o f Protected Areas will coordinate with the WFP, the Technical Operator and the Financial Institution for the provision o f the Matching Grants.

C. Monitoring and evaluation of outcomeshesults

46. M&E activities will be undertaken by each implementing ministry through its in-house M&E system implemented by the planning unit. A mechanism to involve implementing agencies (e.g., R C A and OFINAP) in the system will be established to elicit ownership and promote the use o f M&E outputs. In this regard, implementing agencies will be strengthened to monitor and evaluate their activities. Data collected and processed by implementing agencies will be transmitted to the implementing ministries, which will consolidate them and produce M&E reports and dashboards. The Ministry o f Agriculture, Water Resources and Fisheries (MAHRH) focal point will ensure that al l M&E outputs are aggregated and presented in the form o f comprehensive documents for al l project activities. The technical coordination committee will review these outputs prior to dissemination to al l the stakeholders involved in project implementation. The project will support the M&E units o f the three ministries, through specialized technical assistance and equipment, so that they are strengthened to collect, process, and disseminate data concerning project activities. The baseline data shown in Annex 3 will be updated at the beginning o f project implementation.

47. The M&E section o f the Project Implementation Manual will identify data sources and detail data collection methods, both as regards primary and secondary data, and quantitative versus qualitative data. The Project Coordinator will prepare bi-annual and an annual report that will make an in-depth assessment o f progress achieved during the year.

D. Sustainability and Replicability

48. One o f the mechanisms for ensuring sustainability i s the underlying profitability o f targeted activities. As the project contributes to achieve higher yields and to develop marketing cooperatives, input banks and input delivery systems around these banks, sustainability in terms o f physical and financial access to improved technologies will be achieved. The project would aim at participating farmers exiting the voucher scheme upon completion o f three production cycles.

11

49. As a condition for participating in the project activities, farmers will be asked to put aside small savings, starting at the end o f the f i rs t year. The savings accumulated during the three years will constitute the farmer’s operating capital to guarantee his financial access to improved technologies in future years. Sustainability would also be achieved through the scaling up o f the inventory credit scheme (warrantage), which would help resolve marketing and input access problems.

Level

S

M

M

50. Regional Chambers o f Agriculture will be strengthened and given the means to support and organize producer associations and facilitate their access to advisory services. The strengthening o f research, extension, and training institutes and private providers wil l also serve the sustainability objective.

Mitigating measures

Dissemination o f drought-resistant technologies, water- harvesting technique, and soil management technologies.

Establishment o f demonstration programs and farmer field days; provision o f matching grants to support adoption.

The “Crop Protection” services (Protection des vdgdtawc) and the Veterinary Services will be strengthened to monitor and address the crop pest and epizooties

51. sustainable agricultural development fund based on relevant experience across West Africa.

The project will also support studies and activities aiming at the establishment o f a

M

M

M

M

E. Critical risks and possible controversial aspects

Regular training and supervision will be provided to strengthen capacities of service providers

Signature o f agreements between participating financial institutions and the project; Establishment and training o f management committees; regular supervision

Support to scaling-up processing o f agricultural products; Linking the warehouse receipt system to the SONAGESS.

The management o f the financing mechanism will take into account successful Financial Management (FM) experience from other IDA-financed projects.

R i s k s Technical (i) Climatic r isks

(ii) Low adoption o f improved technologies

(iii) Crop pests and epizootics

Implementation: Inadequate capacities at local level to implement activities

Lack o f interest o f financial institutions in the warrantage scheme

Price variation shocks Financial Management: Management o f the financing mechanism i s not transparent.

Overall Rating

H = High S = Substantial M = Moderate N = Lowhegligible

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F. Financing conditions and covenants

52. Conditions of Effectiveness

The Recipient has established (i) the Steering Committee and (ii) the Technical Coordination Committee for the Project.

53.

54.

Conditions of Disbursement:

(a) Disbursement under Category 2 (funds allocated to Matching Grants to households under Component 1 (a) o f the Project): The Technical Operator Agreement, the Financial Institution Agreement and the WFP Agreement have been signed.

(b) Disbursement under Category 4 (funds allocated to Matching Grants to producer associations under Component 2(a) o f the Project): The Technical Operator Agreement, the Financial Institution Agreement and the Regional Chamber o f Agriculture (RCA) Agreement have been signed.

Dated Legal Covenants:

(a) No later than 1 month after the Effective Date, (i) the Ministry o f Agriculture shall have recruited for the Project: (A) a financial management specialist, (B) a procurement specialist and (C) a monitoring and evaluation specialist, and (ii) the Regional Chambers o f Agriculture shall have recruited for the Project: (A) a procurement specialist, (B) four internal auditors and (C) an accountant with qualifications, experience, and terms o f reference satisfactory to the Association and in accordance with the procurement procedures outlined in the Financing Agreement.

(b) No later than April 30, 2010, the Recipient shall: (i) open, and thereafter maintain throughout the implementation o f the Project, an account in a commercial bank acceptable to the Association, under terms and conditions acceptable to the Association, including appropriate protection against set off, seizure and attachment, for the payment o f Counterpart Funds (the “Project Account”); and (ii) deposit in the Project Account an amount o f or equivalent to five hundred mi l l ion (500,000,000) CFA Francs (“Initial Deposit”), or such other amount as agreed with the Association, required to finance activities relevant to the Project but not eligible to be financed from the proceeds o f the Financing, including the acquisition and maintenance of, and gaz for, three hundred (300) motorcycles for the Project, the deployment o f service providers for the extension o f services to producers, the refurbishment o f the Regional Chambers o f Agriculture, and indemnities paid to the Recipient’s c iv i l servants in addition to their salaries for their involvement in the implementation o f the Project, a l l as counterpart funds (“Counterpart Funds”).

(c) N o later than January 1 and July 1, or such other dates as may be agreed by the Association, each year throughout the implementation o f the Project starting on January 1 , 201 1 , the Recipient shall deposit in the Project Account as Counterpart Funds an

13

amount equivalent to not less than $450,000, or such other amount as agreed by the Association.

Millet

Yield gain 60% Gross profit 46%

(d) No later than 4 months after the Effective Date, the Recipient shall have recruited an external independent auditor with qualifications, experience, and terms o f reference satisfactory to the Association and in accordance with the procurement procedures outlined in the Financing Agreement.

Sorghum Cowpea rice Maize Poultry Milk

50% 60% 8 8% 63% 50% 44% 54% 83% 97% 81% 45% 45%

' IV. APPRAISAL SUMMARY A. Economic and financial analyses

25% Returns on labor

55. Cost Benefit Analysis was carried out for Component 1 which supports the diffusion o f improved crops and livestock technologies. Returns on Component 1 are enhanced through the interventions o f Components 2 which supports post-harvest loss reduction and market coordination. Component 2 interventions contribute to an increase in prices received by producers and improve the seasonal availability o f food products in targeted areas by developing or improving food product storage/conservation techniques and marketing systems. For component 3, which supports institutional development and capacity building, cost benefit analyses were not conducted due to the difficulty to measure and to quantify direct benefits that can be attributed to the project.

32% 67% 77% 21% 34% 81%

56. The financial analysis o f crop production was carried out based on farm types and technology packages, with average cereals and cowpea land use patterns across the five agro- ecological zones. Livestock activities are based on a poultry production batch and a typical milking cow. Returns to investment are measured in terms o f the percentage increases in the value o f family labor and gross margins.

57. Increased returns on family labor. Compared to the without-project scenario, the returns on family labor reflect an average increase o f 48 percent (44 percent for crops and 58 percent for livestock). Milk and lowland rice productions provide the highest gains for the family workday (77 percent and larger with the project), while millet, sorghum, maize and poultry provide the lowest gains for family labor (given yield assumptions).

58. Increased gross profts. Increases in gross profits for crops under the with-project scenario are substantial, with an average rate o f increase o f 72 percent for crops and 45 percent for livestock. Targeted crops will therefore generate an adequate cash f low for coverage o f the

14

additional costs (investment and farming costs) incurred as a result o f access to improved technological packages.

59. Internal rate of returns (IRR) at financial prices. The resulting IRR are 60.4 percent when technology packages are subsidized and 47.6% in the absence o f subsidies. These returns remain robust to variations in productions costs. With a 20 percent increase in technology cost, the internal rates o f returns fal l to 52 percent with subsidies and to 40.6 percent without subsidies (Table 2). These returns remain robust to variations in productions costs. These results show that subsidizing technology packages wi l l boost their attractiveness to producers, although unsubsidized packages are sufficiently attractive to ensure sustainability o f project induced changes following support over three crop cycles.

Table 2. Summary o f Economic and Sensitivity Analysis Results

Assumptions EIRR ( NPV = 0) NPV (0%) NPV (12%) Sensitivity analysis With respect to increasedproduction costs EIRR if costs increased by 10% EIRR if costs increased by 20% With respect to reduced output price EIRR if prices fall by 5% EIRR if prices fall by 10% EIRR if prices fall by 20% EIRR if prices fall by 30% With respect to reduced yields EIRR if yields fal l by 5% EIRR if yields fall by 10% EIRR if yields fall by 20%

Economic Analysis

46.6% 148,548 50,974

42.9% 39.7%

42.9% 39.0% 30.8% 2 1.4%

33.9% 18.5% 13.6%

Financial analysis

With subsidies 60.4% 159,660 57,458

55.9% 52.0%

Without subsidies

47.6% 152,948 52,728

43.8% 40.6%

60. Economic Internal Rate of Returns (EIRR). The project's EIRR i s estimated at 46.6 percent; under the same conditions, the net present value (NPV) o f the net economic cash flow generated by the project i s approximately CFAF 149 billion at an interest rate o f 0 percent, and CFAF 51 billion at an interest rate o f 12 percent, which i s regarded as the capital opportunity rate in Central and Western Africa (Table 2).

61. These results remain robust to significant changes in key parameters. Overall, the project i s less sensitive to fluctuations in costs than it i s to variations in output prices, and particularly, in yields. A 20 percent increase in technology costs, or reduction in output prices, would lower the EIRR to 28.5 and 18.5 percent, respectively. A similar rate o f reduction in yields would reduce the EIRR to approximately 9 percent. However, a 20 percent reduction in yields i s likely

15

to result in severe supply shortages, leading to higher output prices and ultimately higher EIRR. Even at 9 percent, the EIRR may s t i l l be viewed as robust and at an acceptable level, because the project will contribute to generate other benefits that are hard to quantify and not included in the project’s income stream.

B. Technical

62. The technical approach is built upon past World Bank experience in Burkina Faso and in the West African region, as wel l as lessons learned in East Africa and Asia. The design has been widely discussed and agreed upon by Government and stakeholders. Technical features o f the project include:

63, Technolorn transfer. The project will address al l key determinants o f technology transfer, including provision o f advisory services and trainings, scaling-up the network o f input suppliers, and providing matching grants to facilitate producers’ access to technologies. The project will also facilitate poor producers’ access to technology by developing a voucher-for- work scheme, in collaboration with the WFP, which has a longstanding experience with such schemes. This design directly responds to the request o f stakeholders who have expressed their satisfaction. They consider that the project helps address the shortcomings o f earlier agricultural development project approaches, which were not based on a holistic approach.

64. Warrantage and restructuring of cereal banks. The development o f the warrantage scheme and the restructuring o f cereals banks into marketing cooperatives will address both the marketing and access to credit issues. The warrantage scheme i s warehouse receipt systems managed at village level that can help producers develop marketing strategies and access loans from financial institutions.

65. The design o f the warrantage scheme i s derived from lessons learned from successful programs in Niger, Togo, Madagascar, and pi lot schemes conducted by research institutes and rural banks in Burkina Faso. Across the West African region, traditional cereal banks have failed while positive results have been obtained with the restructuring o f cereals banks into marketing cooperatives. The project will build on these lessons to scale up the marketing cooperatives and their networking.

66. Sustainabilitv and accountabilitv. Project implementation will be entrusted to ministerial departments and RCA. This will ensure capacity building o f existing institutions to efficiently carry out their mandate. As representatives o f beneficiaries, the RCAs will be empowered to contract public and private service providers, which will ensure accountability and more efficient services to farmers.

C. Fiduciary

67. Financial Management. A financial management assessment o f the Agricultural Productivity and Food Security Project was conducted by the Bank’s financial management team in February 2009. During the assessment the Bank’s financial management team (i) consulted the December 2003 Rural Development Strategy and the 2007 Green Revolution Document issued

1 6,

by the Government, (ii) reviewed the different Implementation Completion Reports o f the latest Bank-financed projects in the agriculture sector, and (iii) evaluated the Directorates o f Finance o f the three Ministries as wel l as the National Bureau o f the Regional Chambers o f Agriculture implicated in the current project. The Agricultural Productivity and Food Security Project involving communities at the decentralized level i s being developed in the context o f a satisfactory implementation o f the ongoing Community Based Rural Development Project (CBRDP). As such, the Project will benefit from the capacity building activities in fiduciary and local governance areas financed under the CBRDP. After reviewing the project's financial management capacity, inherent and control r isks were identified and related mitigation measures were developed. The residual control risk is modest. The proposed financial management arrangements for this project are considered adequate to meet the Bank's minimum fiduciary requirements under OP/BP10.02. The assessment recommended among other measures: (i) the elaboration o f a manual o f procedures, (ii) the recruitment o f FM staff, (5) the selection o f the financial intermediary as well as the external auditor, and (iii) the procurement o f accounting software. The detailed assessment, together with the proposed arrangements for disbursements, accounting, audit, and monitoring i s provided in Annex 7.

68. Governance and Corruption. The inherent r isks related to poor governance and corruption have been assessed at country level and at the implementing ministries' level. The reforms supported by the Poverty Reduction Support Credits (PRSC) (particularly the strengthening o f the Cour des Comptes (Court o f Accounts), and the establishment o f the High Authority for State Oversight (Autorite' Supe'rieure de ContrGle de 1 ' i ta t ) ) have brought the Country Policy and Institutional Assessment (CPIA) rating for control to 4 and the residual risk i s rated as low. Mitigation measures have been identified, as part o f the FM assessment, to strengthen corporate governance by reinforcing the internal audit function and setting up mechanisms to detect fraud and corruption.

69. Procurement. The project will be implemented separately by the three ministries concerned (Agriculture, Livestock and Environment). The overall responsibility for institutional coordination o f project activities i s given to the Ministry o f Agriculture (MAHRH), which will also conduct al l the principal procurement activities for goods (vehicles, computers, motorcycles, etc) for all three ministries. The two other ministries will carry out only shopping for office supplies and procurement o f Consultant Services in their area o f expertise. Procurement for crop and livestock activities at the regional level will be carried out (under the supervision o f the central procurement units) by the National Bureau o f the R C A and the Regional Directorates o f the line ministries in the 13 Regions.

70. An assessment o f the capacity o f the three ministries and the National Bureau o f the R C A was conducted in March 2009 by a Bank Procurement team. A small Procurement team exists in al l three ministries, but they have limited experience with IDA projects. The major issues concerning procurement activities for project implementation have been identified and include: (i) the limited experience o f staffs o f the procurement departments o f the three ministries, (ii) the lack o f internal control in the procurement process, (iii) the workload in the different procurement departments, and (iv) the weak capacities in the regional level.

17

71. To mitigate the risks the following corrective measures recommended during pre- appraisal are either completed or being implemented by the Government under the Project Preparation Fund (PPF): (i) the recruitment o f a qualified procurement specialists with good knowledge o f IDA procedures, to be based in the Procurement Department o f MAHRH and the National Bureau o f the R C A and with a primary supervisory responsibility over al l project’s procurement activities at national level (planned under the PPF to be executed before December 2009); (ii) the nomination o f a procurement focal point in the three ministries (completed); (iii) the training o f procurement staff and focal points o f the ministries in relevant six weeks general procurements courses (planned under the PPF by December 2009); and (iv) the provision o f procurement refresher courses for the regional staf f o f the three ministries and the Regional Chambers o f Agriculture (planned under the PPF). The three ministries have already developed a consolidated procurement plan for the first 18 months o f the project implementation (See Annex 8 for details). The overall procurement risk was assessed as moderate.

D. Social

72. Consultations with key stakeholders within the public sector, the private sector, and civ i l society were conducted throughout project preparation. Key actors were involved in the definition o f the scope o f activities and they will remain engaged during implementation, supervision and evaluation stages o f the project. Youth and women, in particular, are expected to benefit from this project because they are heavily involved in most o f the activities and processes along the food crop supply chains. The food security status o f fami l ies impacted by the project i s expected to improve, with a successful adoption o f the proposed production, storing and marketing technologies and know-how.

E. Environment

73. The Agricultural Productivity and Food Security Project (PAPSA) i s a Category B project. Hence, the environmental and social impacts o f the project will be minimal, site specific and manageable at accepted levels. There are three Bank Safeguard policies applicable to the project, including Environmental Assessment (OP/BP 4.0 1); Involuntary Resettlement (OP/BP 4.12) and Pest Management (OP 4.09).

74. During the appraisal mission, the range, scale, locations and number o f sub-projects, as part o f PAPSA initiatives were unknown. The difficulty o f defining what the real environmental and social impacts o f envisioned sub-projects are and determining which mitigation measures should be put in place, required the development o f an Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF). In addition, it was determined, based on project envisioned activities leading, in particular, to intensification o f agriculture, that the Pest Management Policy is triggered.

75. All project safeguard instruments have been prepared, in full compliance with World Bank and national safeguard policies, by local consultants, following a broad consultation framework, involving al l relevant stakeholders, both public and private.

76. The ESMF describes standards methods and procedures specifying how unidentified future subprojects whose location, number and scale are unknown will systematically address

18

environmental and social issues in the screening and categorization, location, design, implementation, operational phases and maintenance o f the subproject lifecycle.

77. I t includes: (i) systematization ' o f environmental and social impact assessment for all identified sub-projects before investment; (ii) procedures for conducting sub-project specific Environmental Impact Assessments (EIAs), be they Limited Environmental Impact Assessment (LEIA) or Full Environmental Impact Assessment (FEIA) as applicable; (iii) capacity strengthening and awareness raising campaigns targeted at relevant stakeholder groups for better implementation and monitoring o f project safeguard measures; and (iv) establishment and implementation o f an intersect consultation framework for the environmental control and monitoring.

78. The RPF looked into the policy, legal and regulatory mechanisms on how to address cases o f land acquisition, loss o f economic activities, on the part o f affected people, as a result o f project activities. It also provides a coherent framework, eligibility criteria and asset valuation methods for compensation and/or resettlement o f affected people, as well as grievance mechanisms o f affected persons, in case o f unsatisfactory arrangements. Together, these safeguard instruments, are considered both as a planning tool and a means for a harmonious integration o f the project in i t s bio-physical and social environment and as a way to maximize positive effects on the same environment.

79. The pest management plan (PMP), on the other hand, addressed the concerns relating to the r isks associated with potential increases in the use o f pesticides for agricultural production, intensification. The PMP also identifies national agencies and other partners that could effectively collaborate in, as well as the institutional arrangements for implementing the plan. The ESMF and RPF include institutional arrangements, outlining role and responsibilities for the various stakeholder groups involved, for screening, review and approval o f subprojects, as well as implementation and monitoring o f their mitigation measures. The PMP also includes clear institutional arrangements to implement and monitor the plan.

F. Safeguard policies ~

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [XI [I Physical Cultural Resources (OP/BP 4.1 1) [I [XI Involuntary Resettlement (OP/BP 4.12) [XI [ I Indigenous Peoples (OP/BP 4.10) [ I [ XI Forests (OP/BP 4.36) [ I [ XI Safety o f Dams (OP/BP 4.37) [I [ XI Projects in Disputed Areas (OP/BP 7-60). [ I [ XI Projects on International Waterways (OP/BP 7.50) [ I [ XI

* By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of the parties' claims on the disputed areas

19

G. Policy Exceptions and Readiness

80. N o policy exceptions are required for this project.

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Annex 1: Country and Sector Issues

BURKINA FASO: Agricultural Productivity and Food Security Project

A. Geography, growth and human development

1. Burkina Faso i s a landlocked country, bordered by Mal i in the North and Northwest, Niger in the East, C8te d’Ivoire, Ghana, Togo and Benin in the South. The country stretches over 274,400 square kilometers, with a population o f nearly 14 million in 2007, and a population growth rate o f 3.1 percent. The tropical arid climate i s characterized by one long dry season (7-9 months) and a short rainy season (3-5 months). Based on average annual rainfall, which varies from 600 mm in the North to 1200 in the South, the country can be divided into three major agro-ecological zones from the North to the South: the Sahel, .Sudan-Sahel and the Soudan zones. The agrarian economy i s particularly vulnerable to climatic and external shocks. Burkina’s fragile Sahelian zone i s drought-prone and susceptible to flooding.

2. The country i s one o f the poorest in Sub-Saharan Africa, and remains largely dependent on foreign aid, which represents 10 percent o f the gross domestic product and accounts for 80 percent o f public investments. Per capita income was US$430 in 2005, much lower than the US$590 average for low income countries. The literacy rate was 24 percent and l i fe expectancy averaged 53 years in 2008, when the country ranked second to last according to the United Nations human development index. Between 2003 and 2006, economic growth has sustained an average annual rate o f 6 percent. This period was marked by large investments in social sectors, mainly health and education, which contributed to a reduction in poverty from 46.3 percent in 2003 to 42.1 percent in 2006. The economy has slowed down since 2007, following the food and energy price crises. The persistence o f these crises, coupled with the recent financial crisis, resulted in a 3 percent increase in the incidence o f poverty incidence, bringing the share o f the population living in poverty back to 2003-04 levels (Figure 1).

3. As a land-locked country, bordered by six neighbors, Burkina Faso i s highly dependent on good relations with i t s neighbors for transit, trade with external markets and political stability. Structural reforms, sound macro-economic policies and steady investment have enabled Burkina Faso to maintain relative macro-economic stability, yet the economy remains highly vulnerable to exogenous shocks. External factors, such as fluctuating fuel, food and cotton prices, have a significant impact on the nation. This series o f external shocks resulted in a significant decline in GDP growth from 6.0% to 3.6% - between 2006 and 2007. But due to a strong agricultural season in 2007-2008, and a series o f government stimulus measures (Box l), GDP growth for 2008 rose to 4.5%, despite a terms o f trade shock o f -3%. GDP growth i s expected to remain below trend in the near term as the full impact o f the global financial crisis i s felt. As a consequence o f the crisis, projected GDP growth for 2009 has been revised from 6 percent to 3.5%.

21

Figure 1: Trend in Economic Growth and Povew, Burkina Faso 2003-08

60 Poverty incidence ( O h )

46.4 45.4

Cumulatim GDP growth in YO

0 1 2003 2004 2005 2006 2007 2008

Source: Government o f Burkina Faso’s Official Statistics

B. The Agricultural Sector

4. The crop, livestock, forestry and fishery sector i s an important component o f Burkina Faso’s economy, in terms o f i t s contribution to the creation o f wealth and rural employment, its contribution to food and nutritional security, and i t s large share in total exports. The agricultural sector employs nearly 86 percent o f the working population, represents nearly 40 percent o f the GDP (25% for crops, 12% for livestock, and 3% for forestry and fishery), and approximately 80% o f the country’s export earnings.

5. Burkina Faso has an estimated 9 mi l l ion hectares in arable land, which represents one- third o f the country’s total surface area. Out o f the 9 mi l l ion hectares, approximately 3.5 mi l l ion (39%) are used for agricultural purposes each year. Agriculture has strong multiplier effects on secondary and tertiary sectors, and helps strengthen interrelationships in the economy. However, agricultural sector production i s essentially characterized by an extensive and l o w productivity system. There are approximately 1.3 mi l l ion smallholder farmers in the country, 87 percent o f whom practice subsistence agriculture and extensive livestock husbandry activities. Smallholder farmers have limited access to credit, markets, and agricultural extension services. The sector also suffers from limited integration between agriculture in livestock husbandry (Box 1).

6. Despite these difficulties (see Appendix 1 for details), the agricultural sector has exhibited strong growth over the past decade. Annual cereal production has increased by 7 percent on average over the 1997-2007 period, despite intermittent climatic shocks. Over the same period, the cereals self-sufficiency ratio averaged 102% according to official statistics; however the ratio displayed wide annual variations, ranging from 68 to 123 percent (Figure 2). Domestic cereal supply averaged 2,525,110 tons per year, while average yearly requirements were estimated to 2,405,423 tons; th is resulted in an annual average surplus o f approximately 120,000 tons. The official statistics also show that the average annual surplus masks important occasional deficits, estimated at more than 420,000 tons in 1996/97, 123,000 tons in 1997/98,

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723,000 tons in 2000/01 and 77,000 tons in 2004/05. The country relies on cereals imports to fully or partially cover the deficits, and supplement domestic supply during the years when the self-sufficiency ratio i s less than one. In any given year over the past decade, net cereals imports in Burkina Faso amounted to more than 200,000 tons in average; reaching up to 320,000 in 2006/07.

7. Based on the official statistics alone, the project’s emphasis on increasing domestic food production can be justified since the current level o f the production is barely enough to cover food requirements o f the population. Increasing food production through adoption o f yield enhancing and post-harvest lost reduction technology will raise the level o f domestic food supply while increasing labor productivity (and thereby producers’ incomes), with an overall positive impact on the country’s food security. The case for supporting domestic production i s even stronger given the fact that the official statistics appears to overestimate the self-sufficiency ratios. The official data present an upward bias in estimated domestic supply and a downward bias in the estimated consumption requirements. Domestic supply i s overestimated because it does not fully account for post-harvest losses which are significant in Burkina Faso (up to 20% o f total production). The underestimation o f cereal requirements i s due to: (i) the use o f annual consumption figures o f 190 kg per capita while recent estimates from the agricultural statistical division show that an average value o f 215 kg per capita would be more accurate; and (ii) the underestimation o f the overall population growth by 0.5 percentage point between 1996 and 2006. Correcting for the biases will result in self-sufficiency ratios that are much lower than those revealed in the official statistics. Average self-sufficiency ratios drop to 90 percent between 1997 and 2007, if one o f the two biases i s corrected; the ratios dropped 80 percent in average if both the per capita consumption and the population growth are readjusted (Figure 1).

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BOX 1: MAJOR CONSTRAINTS OF THE AGRICULTURAL SECTOR IN BURKINA FASO

Land insecurity. Land tenure i s characterized by widely used customary systems with limited tenure security. This situation creates uncertainty among modern farm producers who are less l ikely to make important productivity enhancing investments. A new law i s being prepared to address this question, in addition to the already existing national policy document on rural land security.

Low productivity of local seed varieties and animal breeds and limited access to technologies. The low productivity o f agro-pastoral activities i s essentially due to the l imited use o f improved seed varieties and to the l ow productivity o f local animal breeds. Agricultural practices in Burkina are extensive-more than 1 10,000 hectares are cleared every year for agricultural purposes. Although wel l performing technologies exist, they are not often accessible to producers and processors. Generally, the initial investments and maintenance costs o f these technologies are too high. The mechanization rate in agriculture i s very low, with one in three farmers using animal traction. For In animal production, farmers rarely use genetic improvements (local or exotic breeds, artificial insemination) to improve their genetic materials because o f the lack o f availability and the high cost o f this technology (CFAF 80,000 more than US$160 per head). Increased productivity would require greater use o f improved technologies. For animal production, this would include better access to improved animal feed (fodder and supplementation) as wel l as to animal health services and drugs (including vaccines).

Insufficient provision of extension services. The structural adjustment programs at the beginning o f 1990 came with a hiring freeze o f agricultural extension workers. At the same time, the retirement o f aging extension service workers has continued although at a slower rate due to increase in retirement age. Since 2002, hiring has resumed on an exceptional basis, but the current level o f extension service provision i s insufficient. Overall, the geographic coverage o f extension services has decreased over time, and a number o f farmer training centers have been closed due to the lack o f personnel. There i s also a need to reinforce the capacities o f existing extension services so they are capable o f assisting producers with issues related to value chain development and the promotion o f modern farm businesses.

Limited use of irrigation in agriculture. The agriculture in Burkina Faso i s essentially rainfed. However, surface water f low i s very irregular, with an up to eight fo ld difference between drought and good rainfall years. Under these conditions construction o f dams to retain additional surface water appears to be an important factor in reducing variability o f food production in the country.

Limited public and private investments in agriculture. The current level o f public investment in agriculture (less than 5 percent o f the total budget) i s insufficient to ensure strong performance o f the sector. Increased investment in public goods i s necessary for more effective agricultural development. The agriculture sector in Burkina also lacks the private investments needed to increase agricultural productivity and incomes. Crop and livestock producers lack access to financial products that respond to their needs. There are s t i l l unmet demands for short term credits to finance current agricultural campaign activities; medium term loans to finance the purchase o f agricultural equipments and dairy production activities; and long term credits to restructure and modernize production systems.

Limited access to markets. Food crop production has been primarily subsistence;