i

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 57177-BJ

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED IDA CREDIT

IN THE AMOUNT OF

SDR 3.9 MILLION (US$6 MILLION EQUIVALENT)

AND

ON A PROPOSED IDA GRANT

IN THE AMOUNT OF

SDR 16.1 MILLION (US$25 MILLION EQUIVALENT)

AND

ON A PROPOSED GRANT UNDER THE FOOD PRICE CRISIS RESPONSE CORE MULTI

DONOR TRUST FUND

IN AMOUNT OF US$15 MILLION

TO THE

REPUBLIC OF BENIN

FOR THE

AGRICULTURAL PRODUCTIVITY AND DIVERSIFICATION PROJECT

February 24, 2010

Agriculture and Rural Development Unit

Sustainable Development Department

Country Department AFCF2

Africa Region

This document is being made publicly available prior to Board consideration. This does not

imply a presumed outcome. This document may be updated following Board consideration and

the updated document will be made publicly available in accordance with the Bank‘s Policy on

Access to Information.

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ii

CURRENCY EQUIVALENTS

(Exchange Rate Effective January 31, 2011)

Currency Unit = FCFA

FCFA 480 = US$1

US$1 = SDR 0.640229

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ABE Agence Béninoise pour l’Environnement (Environmental Protection Agency

of Benin)

ACi African Cashew Initiative

AFD Agence Française de Développement (French Development Agency)

AGEFIB Agence de Gestion Fiduciaire des Initiatives à la Base (Local Development

Fidiciary Management Agency)

AIC Association Interprofessionnelle du Coton (Cotton Interprofessional

Association)

BOAD Banque Ouest Africaine pour le Développement (West African Development

Bank)

CAA Caisse Autonome d’Amortissement (Grant and Public Debt Management

Office, Ministry of Finance)

CAADP Comprehensive Africa Agricultural Development Program

CAS Country Assistance Strategy

CEM Country Economic Memorandum

CeRPA Centre Régional de Promotion Agricole (Regional Agricultural Promotion

Center)

CIF Cost Insurance Freight

CIGOP

CNP

Competitiveness and Integrated Growth Opportunity Project

Comité National de Pilotage (National Steering Committee)

CPI

CROS

Consumer Price Index

Commité Régional d’Orientation et de Suivi (Regional Orientation and

Monitoring Committees)

DA Designated Account

DNMP Direction Nationale des Marchés Publics (National Directorate of Public

Procurement)

DPQC Direction de la Promotion de la Qualité et du Contrôle (Quality Control

Authority of Benin)

EFSSP Emergency Food Security Support Project

ERR Economic Rate of Return

ESEFSP Emergency Support to Enhance Food Security Project

ESMF Environment and Social Management Framework

ESOP Entreprise de Service et Organisations Paysannes (Joint Venture between a

Service Provider Firm and Farmers‘ Organization)

ESW Economic and Sector Work

iii

FAO Food and Agricultural Organization of the United Nations

FCFA CFA Franc

FECECAM Fédération des Caisses d’Epargne et de Crédit Mutuel (Federation of Credit

and Savings Mutuals)

FENAPAB Fédération Nationale de Producteurs d’Anacarde du Bénin (Cashew

Producers Apex Organization of Benin)

FM Financial Management

FRR Financial Rate of Return

GAC Government and Anti-Corruption

GAFSP Global Agriculture and Food Security Program

GDP Gross Domestic Product

GFRP Global Food Crisis Response Program

GTZ German Association for Technical Cooperation (currently known as GIZ,

German International Cooperation)

HDT Handling, Distribution and Transportation

IDA International Development Agency

IDA International Development Association

IMF International Monetary Fund

INRAB Institut National de Recherche Agronomique de Benin (National Agricultural

Research Institute of Benin)

IPR Independent Procurement Review

IRR Internal Rate of Return

IS Information Service

ISP Implementation Support Plan

JICA Japan International Cooperation Agency

KIP Key Performance Indicators

LOA Loan Department of the World Bank

LVHD Low Volume High Density

M&E Monitoring and Evaluation

MAEP Ministère de l’Agriculture, de l’Elevage et de la Pêche (Ministry of

Agriculture, Livestock and Fishery)

MDG Millennium Development Goals

NAIP National Agricultural Investment Plan

NARI National Agricultural Research Institute

NGO Non-Governmental Organizations

NPV Net Present Values

ORAF Operational Risk Assessment Framework

PAD Project Appraisal Document

PADA Projet d’Appui à la Diversification Agricole (Agricultural Productivity and

Diversification Project)

PCU Project Coordination Unit

PDO Project Development Objectives

PDO

PDNA

Project Development Objective

Post Disaster Need Assessment

PDRN Projet de Diffusion du Riz Nerica (Nerica Rice Dissemination Project)

PEFA Public Expenditure and Financial Accountability

PEM Public Expenditure Management

PIM Project Implementation Manual

iv

PMP Project Management Performance

PMU Project Management Unit

PNPIP Projet National de Promotion de l’Irrigation Privée (National Private

Irrigation Promotion Project)

PPMA Projet de Promotion de la Mécanisation Agricole (Agricultural

Mechanization Promotion Project)

PPR Post Procurement Review

PRGF Poverty Reduction Growth Facility

ProCAD Programme Cadre (Framework Program for all World Bank‘s interventions

in the agricultural sector in Benin)

ProCGRN Programme de Conservation et de Gestion des Ressources Naturelles

(Natural Resources Conservation and Management Program)

PRODEX Agro-Pastoral Export and Market Development Project

PROVAC Projet de Vulgarisation de l’Aquaculture Continentale (Continental

Aquaculture Extension Project)

PRS Poverty Reduction Strategy

PRSC Poverty Reduction Support Credit

PRSP Poverty Reduction Strategy Paper

PSD Private Sector Development

PSRSA Plan Stratégique pour la Relance du Secteur Agricole (Strategic Plan to

Revitalize the Agricultural Sector)

PUASA Emergency Support to Enhance Food Security Project

PUASA Projet d’Urgence d’Appui à la Sécurité Alimentaire (Emergency Food

Security Support Project)

QER Quality Enhancement Review

SCRP Stratégie de Croissance et de la Réduction de la Pauvreté (Growth and

Poverty Reduction Strategy)

SIL Specific Investment Loan

SOE Statement of Expenditures

SONAPRA National Agricultural Promotion Company

SWAp Sector Wide Approach

TOR Terms of Reference

TWG Technical Working Group

UCPA Union Provinciale des Producteurs d’Anacarde (Provincial Cashew

Producers‘ Union)

UGP Unité de Gestion du Programme (Program Management Unit)

VAT Value Added Tax

WAAPP-1C West Africa Agricultural Productivity Project

WDR World Development Report

YARA Fertilizer Company

Vice President: Obiageli Katryn Ezekwesili

Country Director: Madani M. Tall

Sector Director: Jamal Saghir

Sector Manager: Karen M. Brooks

Task Team Leader: Kofi Nouve

v

Table of Contents

I. Strategic Context ...............................................................................................................1

A. Country Context ..........................................................................................................1

B. Sectoral and Institutional Context ................................................................................1

C. Higher Level Objectives to which the Project Contributes ............................................4

II. Project Development Objectives ........................................................................................4

A. PDO ...........................................................................................................................4

1. Project Beneficiaries .......................................................................................................4

2. PDO Level Results Indicators ........................................................................................4

III. Project Description .........................................................................................................5

A. Project components ....................................................................................................5

B. Project Financing ........................................................................................................8

1. Lending Instrument ..................................................................................................8

2. Project Financing Table ...........................................................................................8

C. Lessons Learned and Reflected in the Project Design ...................................................9

IV. Implementation............................................................................................................. 10

A. Institutional and Implementation Arrangements ......................................................... 10

B. Results Monitoring and Evaluation ............................................................................ 10

C. Sustainability ............................................................................................................ 11

V. Key Risks ........................................................................................................................ 11

VI. Appraisal Summary ...................................................................................................... 12

A. Economic and Financial Analysis .............................................................................. 12

B. Technical .................................................................................................................. 14

C. Financial Management .............................................................................................. 15

D. Procurement .............................................................................................................. 15

E. Social........................................................................................................................ 16

F. Environment ................................................................................................................. 17

Annex 1: Results Framework and Monitoring .......................................................................... 19

Annex 2: Detailed Project Description .................................................................................... 23

Annex 3: Implementation Arrangements ................................................................................. 41

Annex 4: Operational Risk Assessment Framework (ORAF).................................................... 54

Annex 5: Implementation Support Plan ................................................................................... 58

Annex 6: Team Composition ................................................................................................... 62

Annex 7: Economic and Financial Analysis ............................................................................. 63

vi

List of Figures

Figure 1: Organizational Chart of the ProCAD......................................................................... 42

Figure 2: Flows of Fund .......................................................................................................... 44

Figure 3: ERR and FRR versus time ........................................................................................ 71

Figure 4: Probability of ERR considering uncertainty for yields and prices ............................... 73

List of Tables

Table 1: Types of Financing Requirements per Value Chain ......................................................3

Table 2: Project Financing Table ...............................................................................................8

Table 3: Estimated changes under PADA ................................................................................ 13

Table 4: List of aquaculture technologies to be demonstrated ................................................... 29

Table 5: Summary situation of major rice production basins in Benin ....................................... 31

Table 6: Relative importance of financing instruments for the targeted value chains ................. 35

Table 7: Project Financing by Categories of Expenditure ......................................................... 45

Table 8: Summaries of Actions by MAEP to strengthen the Project‘s FM ................................. 48

Table 9: Procurement and selection review thresholds .............................................................. 49

Table 10: Project Preparation Action Plan ................................................................................ 50

Table 11: Summary of Main Implementation Focus ................................................................. 59

Table 12: Skills Mix Required ................................................................................................. 60

Table 13: Partners ................................................................................................................... 60

Table 14: Estimated changes under PADA............................................................................... 69

Table 15: Baseline results ........................................................................................................ 70

Table 16: Sensitivity analysis .................................................................................................. 72

Table 17: Distribution assumptions for uncertain variables under PADA .................................. 73

vii

PAD DATA SHEET

BENIN: AGRICULTURAL PRODUCTIVITY AND DIVERSIFICATION PROJECT

PROJECT APPRAISAL DOCUMENT

AFRICA

AGRICULTURE AND RURAL DEVELOPMENT UNIT

Date: February 24, 2010

Country Director: Madani M. Tall

Sector Director: Jamal Saghir

Sector Manager: Karen M. Brooks

Team Leader: Kofi Nouve

Project ID: P115886

Lending Instrument: Specific

Investment Loan (SIL)

Sectors: General agriculture, fishing and forestry

sector (40%); Crops (40%); Agricultural extension

and research (20%)

Themes: Rural markets (40%); Other rural

development (40%); Rural policies and institutions

(20%)

Environmental Assessment Category: B – Partial

Assessment

Project Financing Data:

Proposed terms:

[ ] Loan [ X ] Credit [ X ] Grant [ ] Guarantee [ X] Other:

Source Total Amount (US$ million)

Total Project Cost: 61.3

Co-financing: Global Food Crisis Response

Program (FPCR-MDTF-Core):

15.01

Borrower: 8.7

Local communities: 6.6

Total Bank Financing: 31.0

IBRD -

IDA 31.0

New 31.0

Recommitted -

Borrower: Republic of Benin

Responsible Agency:

Ministry of Agriculture, Livestock and Fishery

Contact Person: Yénakpondji Janvier Capo-Chichi

Telephone No.: +229-21 30 99 30

Fax No.: + 229-21 30 99 21

Email: yjcapochichi@hotmail.com; info@dppmaep.org

Estimated Disbursements IDA (Bank FY/US$ million)

1 Approval and formal commitment of the funds allocated to this project by the GFRP is still pending.

mailto:yjcapochichi@hotmail.commailto:info@dppmaep.org

viii

FY 11 12 13 14 15 16

Annual 2.4 6.5 6.4 6.7 6.0 3.1

Cumulative 2.4 8.8 15.2 21.9 27.9 31.0

Estimated Disbursements GFRP (Bank FY/US$ million)

FY 11 12 13 14 15 16

Annual 0.0 5.9 6.2 2.8 0.1 0.0

Cumulative 0.0 5.9 12.1 14.9 15.0 15.0

Project Implementation Period: IDA: March 22, 2011- August 15, 2016;

GFRP: March 22, 2011- August 15, 2014

Expected effectiveness date: IDA: August 1, 2011; GFRP: August 1, 2011

Expected closing date: IDA: December 15, 2016; GFRP: December 15, 2014

Does the project depart from the CAS in content or other

significant respects?

○ Yes ● No

If yes, please explain:

Does the project require any exceptions from Bank policies?

Have these been approved /endorsed (as appropriate by

Bank management?

Is approval for any policy exception sought from the Board?

○ Yes ● No

○ Yes ○ No

○ Yes ● No

If yes, please explain:

Does the project meet the Regional criteria for readiness for

implementation?

● Yes ○ No

If no, please explain:

Project Development objective: The Project Development Objective of the Agricultural

Productivity and Diversification Project (PADA) is to restore and improve productivity

and value addition for selected value chains in the Recipient‘s territory.

ix

Project description

Component 1. Adoption of Improved Technologies and Restoration of Productivity

(US$27.3 million; of which IDA support of US$10.0 million and GFRP support of

US$11 million; Government and Beneficiaries: US$6.3 million). Under this component

the Project will finance adoption of improved technologies for the development of the

food security and export-oriented value chains (aquaculture, maize, rice, cashew and

pineapple). It will also support the restoration of the means of production of households

affected by the flood, particularly the productions of cereals (maize and rice), aquaculture,

and livestock.

Component 2. Development/rehabilitation of Irrigation and Market Infrastructures

(US$17.7 million of which IDA support of US$9.0 million and GFRP support of

US$4.0 million; Government and Beneficiaries: US$4.7 million). The component will

finance the rehabilitation and development of small scale irrigation infrastructures to

improve productivity and reduce output variability; and the construction and rehabilitation

of market and storage infrastructures, some of which were destroyed by the recent floods.

Component 3. Value Chain Coordination and Agricultural Financing (US$8.2

million of which IDA support of US$5.6 million and Government and Beneficiaries:

US$2.6 million). This component aims to improve the coordination of targeted value

chains and to help improve access to financial services for project beneficiaries. It will

provide business development services to help address critical supply and demand

constraints to the provision and access to credit and financial services in agriculture. It

will also support building value chain institutions through the organization of value chain

participants into a well structured inter-professions and the organization of producers

around structuring activities, such as rice milling, fingerlings and fish feed production.

Component 4. Sector Program Coordination and Project Management (US$8.1

million of which IDA support of US$6.4 million and Government and Beneficiaries:

US$1.7 million). This component will help strengthen the capacity of the Ministry of

Agriculture, Livestock and Fishery (MAEP) to effectively coordinate the implementation

of the sector program (including PADA) and to manage and monitor the Project.

Safeguard policies triggered

Environmental Assessment (OP/BP 4.01)

Natural Habitats (OP/BP 4.04)

Forests (OP/BP 4.36)

Pest Management (OP 4.09)

Physical Cultural Resources (OP/BP 4.11)

Indigenous Peoples (OP/BP 4.10)

Involuntary Resettlement (OP/BP 4.12)

Safety of Dams (OP/BP 4.37)

Projects on International Waters (OP/BP 7.50)

Projects in Disputed Areas (OP/BP 7.60)

● Yes

○ Yes

○ Yes

● Yes

○ Yes

○Yes

● Yes

○ Yes

●Yes

○ Yes

○ No

●No

● No

○ No

● No

●No

○ No

● No

○ No

●No

Conditions and Legal Covenants:

Financing Agreement

Reference

Description of Condition/Covenant Date Due

Article IV, Section

4.01 (a)

The Recipient has adopted the Project

Implementation Manual;

Before effectiveness

of the Project.

x

Article IV, Section

4.01 (b)

The Recipient has established the

Steering Committee;

Before effectiveness

of the Project.

Article IV, Section

4.01 (c)

The Recipient has recruited, for the

PMU, (i) a chief Project coordinator; (ii)

a specialist for procurement; (iii) a rural

finance specialist; and (iv) a value chain

development specialist, each in

accordance with the provisions of

Section III of Schedule 2 to this

Agreement;

Before effectiveness

of the Project.

Article IV, Section

4.01 (d)

The GFRP Grant Agreement has been

executed and delivered and all conditions

precedent to its effectiveness or to the

right of the Recipient to make

withdrawals under it (other than the

effectiveness of this Agreement) have

been fulfilled;

Before effectiveness

of the Project.

Article IV, Section

4.01 (e)

The Recipient shall have (i) opened the

Project Account, and (ii) deposited the

Initial Deposit therein.

Before effectiveness

of the Project.

Schedule 2, Section 1,

A(4)(a)

The Recipient shall establish a regional

steering committee (―Regional Steering

Committee‖) in each of the Relevant

Regions, with functions and resources

satisfactory to the Association.

No later than three

(3) months after the

Effective Date, and

thereafter maintain.

Schedule 2, Section 2,

B.4

The Recipient shall appoint an external

auditor in accordance with the provisions

of Section III of Schedule 2 of the

Financing Agreement.

No later than four

(4) months after

effectiveness of the

Project

Schedule 2, F-3 The recipient shall deposit an initial

amount of (or equivalent to) three

hundred million CFA Francs (FCFA

300,000,000) or such amount as agreed

with the association in to the Project

Account as part of required counterpart

funds.

On or prior to

Effective Date.

Schedule 2, F-4 The Recipient shall deposit in the Project

Account as part of the Counterpart Funds

an amount equivalent to not less than

$375,000 or such other amount as agreed

by the Association.

On the end of the

first quarter, after

the Effective Date,

and at the end of

every quarter

thereafter until the

closing date.

1

I. Strategic Context

A. Country Context

1. With a per capita income of US$690 in 2008, Benin ranks in the lower income group of countries. The country has consolidated its democratic process since 1990. The country also

engaged since the 1990‘s in important economic reforms which resulted in a sustained economic

performance with an average annual growth rate of 4.3 percent over 1990-2009. The

development outcomes of this positive growth have, however, been limited due in part to the

relatively high population growth (3.2 percent), and in part to the vulnerability of the Beninese

economy to external shocks, including regular spikes in food prices and recurrent floods Poverty

has been reduced but remains relatively high. According to the latest estimates in 2007, one-third

of Beninese continues to live under the monetary poverty line, while approximately 40 percent of

the population lives in structural (non-monetary) poverty. Access to basic social services has

been improved, in particular in the education, water and health sectors. However, achieving the

Millennium Development Goals (MDG) targets in some other sectors remain a significant

challenge. The economy of Benin is heavily dependent on the agricultural sector, notably cotton,

as well as on re-export trade, mainly to Nigeria. Cotton remains the country‘s major export

commodity. It generally represents 70 percent of total exports, although its share of exports

declined from 75 percent in 1996 to 47 percent in 2006 and further to 40 percent in 2008. Re-

exports represent an average of 7 percent of GDP. The economy remains poorly diversified and

vulnerable to external shocks, as witnessed by a significant deceleration of growth to 2.7 percent

in 2009, from 4.6 percent in 2007 and 5 percent in 2008. This vulnerability underscores the need

to promote economic diversification (including exports) as recommended in the 2009 Country

Economic Memorandum (CEM) for Benin.

B. Sectoral and Institutional Context2

2. The agricultural sector accounts for about 32 percent of GDP and nearly 70 percent of

total employment in Benin. Yields of major crops, including cotton, have remained persistently

low over time. Overall agricultural growth is around 3 percent, which is often offset by the

relatively high population growth (3.2 percent). The agricultural production systems rely on

extensification and family labor, with no or limited use of improved inputs, production methods,

and farm equipment. Access to financing is limited outside the cotton system. The country‘s

agricultural trade performance is generally weak, with a persistently negative agricultural trade

balance. Agricultural exports are concentrated on three groups of products: cotton, fruits

(pineapple), and nuts and oilseed (cashew, soy and cottonseed). To meet the needs for a growing

urban population, Benin continues to import a large share of horticultural products from

neighboring countries (such as Burkina Faso and Nigeria), rice from Asia, wheat, frozen meat

and milk from Europe, and frozen poultry products from Brazil. The sector faces the triple

challenges of diversifying exports (consolidating cotton exports and increasing export volumes

for pineapple and cashew nut), increasing food production, and sustainably increasing farm and

post-harvest productivity.

2 Detailed discussions on the sectoral and institutional context for Benin‘s agriculture is available in a separate,

concurrent, report on ―Sustainable Options for Agricultural Diversification in Benin‖, World Bank Report No.

54495-BJ, Draft (November 2010).

2

3. These challenges must be addressed by taking into account the structural vulnerability of

the country‘s agricultural production system to floods and occasional droughts. Benin has been

hit very hard by the recent floods between June and October 2010. The country is currently

considered by the UN system as the country in West Africa most severely affected by floods in

2010.3 While flooding has been a recurrent phenomenon in Benin for some time now, this year

there has seen exceptionally high levels of flooding by the four major rivers of the Country

(Niger, Ouémé, Couffo and Mono) almost simultaneously and this has resulted in widespread

inundation of at least 55 communes out of the total of 77. Food insecurity is rising and will be

widespread within the next year, given some estimates that 40 percent of the harvest (more than

200,000 ha) has been lost, along with many village food stocks and seed supplies. In addition,

substantial flood-related losses were recorded in the livestock and aquaculture subsectors.

National food security stocks are also being drawn down at a fast rate. It is expected that this

would result in severe food shortages and high prices in most of 2011. Given the likelihood of an

immediate food crisis, it is important that quick relief be provided to help restore productivity in

the short run, and strengthen the basis for long term gains in productivity and greater

diversification in agriculture.

4. Improving productivity and strengthening diversification are on the top of the agenda of the agricultural and overall development strategy in Benin. The agriculture sector strategy in

Benin is being defined within the broader framework of the Comprehensive Africa Agricultural

Development Program (CAADP) by which the country commits to achieve a 6 percent growth in

agriculture and to allocate at least 10 percent of the national budget to agriculture as

recommended in Maputo in 2003. The government‘s strategy for agricultural diversification is

supported by three documents: the Growth and Poverty Reduction Strategy (Stratégie de la

Croissance et de la Réduction de la Pauvreté – SCRP)(SCRP/2007-2009 and draft SCRP/2011-

2015), the Benin Development Strategy and Orientation Document (2006-2011), and the

Strategic Plan to Revitalize the Agricultural Sector (Plan Stratégique pour la Relance du

Secteur Agricole -PSRSA)and the related National Agricultural Investment Plan (NAIP)

(PSRSA/NAIP 2010-2014). All these documents base their orientation on the country‘s long

term development strategy (Benin 2025 - Alafia) which establishes the long-term vision of the

country and gives clear directions in relation to the promotion of agricultural value chains. The

vision is that the country must move towards a greater diversification of agricultural production

in order to become a major exporter of agricultural products in 2025.

5. The achievement of this vision would require a sound public and private financing of

agriculture. The concurrent Economic and Sector Work (ESW) on Sustainable Options for

Agricultural Diversification highlights the lack of financing for agricultural activities as an

important factor limiting agricultural growth in Benin. The study underscores the need to alter

the current structure of financing supply and demand, which is characterized by the dominance

of short-term and high interest loans and the scarcity of medium and long-term resources. Table

1 shows the types of financing requirements for selected value chains and how the lack of

medium and long-term financing is directly linked to the well known weak performance of post-

harvest activities and strategic investments in the agriculture sector. The study further highlights

the need for financial sector reforms that would support the promotion and implementation of

specialized financing instruments for accelerated productivity growth and sustainable

3 UNOCHA SitRep # 4 dated October 14, 2010. The current estimate of number of victims from the flooding is

about 800,000, close to 9% of the population.

3

diversification in the agriculture sector. Such reforms, and related instruments, would include:

(i) warehouse receipt systems to facilitate a combined access to finance, inputs and markets; (ii)

marketing cooperatives structured around inter-professions for improved control over output and

access to stock-based credit; (iii) matching grants to ease short-term access to credit when

aligned with national development objectives; (iv) lines of credit, guarantee funds, and trainings

provided to commercial banks and micro-financing institutions to support the development of

sustainable financing instruments adapted to agriculture; (v) national agricultural development

funds based on sub-regional successful experiences; (vi) agricultural insurance instruments to

protect farmers and agro-businesses against insurable risks; and (vii) information technologies

and credit reporting bureaus to reduce asymmetric information and ensure greater transparency

in credit information.

Table 1: Types of Financing Requirements per Value Chain

Requirement for: Cashew Pineapple Rice Aquaculture

Operating capital ST ST ST ST

Storage facility MT-LT N.A. N.A. N.A.

Equipment N.A. N.A. MT MT

Processing facilities MT-LT MT-LT MT-LT MT-LT

Investment/infrastructure N.A. MT-LT LT LT

Land development N.A. N.A. LT LT

Notes: ST: Short Term; MT: Medium Term; LT: Long Term; and N.A. Not applicable.

6. The proposed Project, along with the West Africa Agricultural Productivity Project

(WAAPP-1C), are part of the Bank‘s financing package to support the implementation of the

crop and aquaculture development programs of the PSRSA and the related National Agricultural

Investment Plan (NAIP). The crop development program aims to strengthen crop production

systems and increase crop production in order to improve food and nutritional security, reduce

imports, and increase exports; the aquaculture development program aims to increase, on a

sustainable basis, domestic aquaculture production and market supply in order to reduce imports

of frozen fish and seafood. The following targets are defined in the PSRSA/NAIP: (i) increase

rice production from 150,000 tons in 2009 to 385,000 tons in 2015; (ii) increase and stabilize

cotton production at 600,000 tons by 2015; (iii) increase pineapple production from 222,000 tons

in 2009 to 600,000 tons in 2015; (iv) increase cashew processing rate from the current 5 percent

to 10 percent in 2015; and (v) increase fish production from the current 40,000 tons to 60,000

tons in 2015, and reduce frozen fish imports from the current 45,000 tons per year to 36,000 tons

per year in 2015.

7. As identified in the country‘s Growth and Poverty Reduction Strategy - , the agricultural

diversification strategy in Benin has two major components: (i) strengthen food security by

competitively producing staple food products (cereals, roots, tubers, livestock) and import

competing goods (rice and fish) for domestic and regional markets; (ii) increasing export

diversity by increasing export volume of traditional but low volume exports, such as cashew, and

by providing targeted support to emerging high value exports, such as pineapple. The

Agricultural Productivity and Diversification Project (Projet d’Appui à la Diversification

Agricole – PADA) will work to remove the constraints to the development of key value chains

(rice, cashew nut, pineapple and aquaculture), in support to the implementation of the country‘s

agricultural diversification strategy.

4

C. Higher Level Objectives to which the Project Contributes

8. This Project is one of the World Bank‘s instruments to achieve the Country Assistance

Strategy‘s (CAS) goal of strengthening competitiveness and accelerating private sector-led

growth. In the agriculture sector, the CAS aims to enhance the contribution of agriculture to

growth (CAS outcome 1.3) by supporting: (i) short-term emergency measures to enhance

domestic food crop production in response to the food price increases, and (ii) medium to longer-

term interventions to improve competitiveness and diversification in the sector. The CAS is

expected to contribute to the following results in the agricultural sector: (i) by 2012, 40 percent

of producers receive extension services; (ii) a new system of cotton and food crops input

distribution system is developed and put in place; (iii) increase in cotton production by 30

percent during the CAS period, to about 360,000 tons; (iv) increase in non-cotton agriculture

export revenues by 3 percent per year; (v) by 2012, 5,000 additional hectares are irrigated and

exploited; and (vi) productivity increased by 15 percent for food crops by 2012.

9. Other instruments, in addition to PADA, for delivering CAS results in the agricultural sector include: (i) an analytical and advisory activity on agricultural diversification, (ii)

emergency food security operations, and (iii) other investment lending operations, including the

West-Africa Agricultural Productivity Project (Fiscal Year 2011) and the Competitiveness and

Integrated Growth Opportunity Project (CIGOP).

II. Project Development Objectives

A. PDO

10. The Project Development Objective is to restore and improve productivity and value

addition for selected value chains in the Recipient‘s territory.

1. Project Beneficiaries

11. Project beneficiaries include farmers, fish farmers, fishermen, agribusinesses and professional groups of farmers and agro-enterprises. The Project is expected to contribute to

increase beneficiaries‘ access to improved technologies, production infrastructure (such as small

scale irrigation systems), agricultural financing and market infrastructure (such as storage

facilities and cold chambers). Beneficiaries are expected at the end of the Project to use

improved techniques and practices regarding the production, processing and marketing of

products from the targeted value chains.

2. PDO Level Results Indicators

12. Key performances indicators are measured in the Project area and include the following: (i)

Number of direct Project‘s beneficiaries, 40 percent of whom are women; (ii) Quantities

processed (milled rice, processed cashew and pineapple juicing); (iii) Quantities exported

(cashew and pineapple); and (iv) Yields of rice, maize, pineapple and cashew (tons/ha) and fish

(tons/ha/year).

5

III. Project Description

A. Project components 4

13. Project activities will be organized around the following four components: (i) Adoption

of improved technologies and restoration of productivity, (ii) Development of irrigation and

market infrastructures, (iii) Value chain coordination and agricultural financing and (iv) Sector

program coordination and Project management. Total project cost is US$61.3 million, of which

(i) US$46 million will be financed through the Bank from a proposed US$31 million IDA

allocation and a proposed US$15 million grant from the Multi-Donor Trust Fund for Food Price

Crisis Response Core; (ii) US$8.7 million will be provided in the form of counterpart financing

from the Government of Benin; and (iii) US$6.6 million will come from the contributions made

by Project beneficiaries.

14. Component 1. Adoption of Improved Technologies and Restoration of Productivity (US$27.3 million; of which IDA support of US$10.0 million and GFRP support of US$11.0

million; Government and Beneficiaries: US$6.3 million). This component has two sub-

components: (i) restoration of means of subsistence in flood-damaged areas and (ii) adoption of

improved technologies.

15. Sub-component 1.1 Restoration of productivity (US$8.0 million of which: IDA US$2.0 million; GFRP US$6.0 million). Under this sub-component the Project will support the

restoration of the means of production of households affected by the flood, particularly the

productions of cereals (maize and rice), aquaculture, and livestock. The resources will be mainly

used to: (i) purchase and distribute maize and rice seeds and fertilizers to crop farmers; (ii)

purchase fingerlings for fish farmers; and (iii) purchase and distribute poultry kits, and vaccinate

chicken and small ruminants to help restore subsistence means of livestock producers. This

component will be implemented by the technical directorates of Ministry of Agriculture,

Livestock and Fishery (Ministère de l’Agriculture, de l’Elevage et de la Pêche -(MAEP) and the

Regional Agricultural Promotion Center (Centre Régional de Promotion Agricole-CeRPA), in

collaboration with NGO (in regard to the selection of beneficiaries and the supervision of

Project‘s activities) and with private operators regarding the procurement of inputs, materials and

services.

16. Sub-component 1.2 Adoption of improved technologies (US$19.3 million of which: IDA US$8.0 million; GFRP US$5.0 million; and Government and Beneficiaries: US$6.3

million). This sub-component will finance the adoption of improved technologies for the

development of the food security and export-oriented value chains (aquaculture, maize, rice,

cashew and pineapple). Under this sub-component, the Project will develop a strong partnership

with and complement the Bank-financed WAAPP-1C to support the adoption of readily available

improved technologies and management practices, with the goal to immediately boost farm

productivity and incomes. A list of improved on-farm and post harvest technologies has been

identified for the targeted value chains. For cashew, emphasis will be placed on: (i) varietal

improvement through selection and grafting of existing root stock material and through support

to in-vitro multiplication in partnership with National Agricultural Research Institute of Benin

(Institut National de Recherche Agronomique du Bénin (INRAB), (ii) dissemination of the

planting materials through support to nurseries, (iii) promotion of best farms management

practices through farmers field schools.

4 Value chain specific details are presented in Annex 2.

6

17. To this end the sub-component will provide matching grants to strengthen producers‘ and

agro-processors‘ financial access to the improved technologies. The sub-component will also

provide competitive grants to finance innovative activities for the development of the targeted

value chains, including rice, cashew, pineapple and aquaculture. The matching grant and

competitive grant mechanisms are defined in the Project‘s Implementation Manual (PIM).

18. Component 2. Development/rehabilitation of Irrigation and Market Infrastructures

(US$17.7 million of which IDA support of US$9.0 million and GFRP support of US$4.0

million; Government and Beneficiaries: US$4.7 million). The component has two sub-

components, namely:

19. Sub-component 2.1. Development/rehabilitation of Irrigation Infrastructures

(US$10.3 million of which: IDA: US$3.6 million; GFRP: US$4.0 million; and Government

and Beneficiaries: US$2.7 million). This sub-component will primarily focus on the rice value

chain. It will be implemented using the same principle as was used with the Bank-supported and

EU-financed Emergency Support to Enhance Food Security Project (ESEFS). The rehabilitation

and development of irrigation systems under this emergency Project uses simple techniques that

are rapid and easily implementable by beneficiaries and local entrepreneurs. This sub-component

will target in priority the rehabilitation and development of irrigation lands under the National

Private Irrigation Promotion Project (Projet National de Promotion de l’Irrigation Privée-

PNPIP), The sub-component will specifically finance the expansion of the successful small -scale

irrigation infrastructure activities, including complementary studies5, works, small equipments,

and capacity building to ensure proper use of irrigation facilities and help rehabilitate perimeters

affected by the floods. The development of private irrigation lands and community irrigation

infrastructure will benefit from matching grants according to clear guidelines (as in Component

1). The project will contract out the realization of works for the small scale irrigation

infrastructure through competitive bidding.

20. A total 9,000 ha of irrigation lands will be developed under the Project. Half of these

lands will be rehabilitated in the Ouémé (2,500 ha) and Glazoué (2,000 ha) production basins

using GFRP resources whereas IDA resources will be used to rehabilitate and expand the

successful small-scale irrigation infrastructure activities on 4,500 ha in the Malanville (2,500 ha)

and Tanguiéta (1,500ha) and Glazoué (500 ha) production basins.

21. Sub-component 2.2. Development of Market Infrastructure (US$7.4 million of

which: IDA: US$5.4 million; and Government and Beneficiaries: US$2.0 million). Under

this sub-component, the Project will finance the construction and rehabilitation of critical market

and storage infrastructures, some of which were destroyed by the recent floods, and provide

critical market information and services. For improved market facilitation, the sub-component

will finance the construction or rehabilitation of critical infrastructure for input and product

storage and marketing. Specific infrastructure construction and rehabilitation activities will be

planned taking into account ongoing initiatives, such as those supported by the Bank-financed

CIGOP and similar value chain development projects (including the one currently being prepared

by the European Union).

22. Component 3. Value Chain Coordination and Agricultural Financing (US$8.2

million of which IDA support US$5.6 million and GFRP support US$0.0 million;

Government and Beneficiaries: US$2.6 million). This component has two sub-components: (i)

5 Key studies for the realization of the irrigation infrastructure have been completed in 2002 and updated in 2009.

7

building value chain coordination institutions (including facilitation of access to market) and (ii)

facilitation of access to agricultural financing.

23. Sub-component 3.1. Value Chain Coordination (US$5.0 million of which: IDA: US$4.6 million; and Government and Beneficiaries: US$0.4 million). This sub-component

will support the building of value chain institutions through the organization of value chain

participants into a well structured inter-professions and the organization of producers around

structuring activities, such as rice milling, fingerlings and fish feed production. The sub-

component will also finance the Cotton Interprofessional Association (Association

Interprofessionnelle du Coton-AIC). The sub-component will specifically support the creation

and/or strengthening of partnerships between the public and the private stakeholders in support

of improved coordination among the key links of the targeted value chain.

24. Furthermore, to facilitate the marketing of products from the targeted value chains, the

sub-component will finance the provision of business development services, market information

system, quality control systems, and grades and standards, including those pertaining to food

safety. In addition, the Project will work with CIGOP (as well as all relevant on-going projects)6

under this sub-component to pilot the grouping of these support services. In addition, the sub-

component will finance the promotion of Benin‘s products (through participation in trade fairs

and related events, specific packaging, advertizing) and market prospection at regional and

international level.

25. Sub-component 3.2. Facilitation of Access to Agricultural Financing (US$3.2 million

of which: IDA: US$1.0 million; and Government and Beneficiaries: US$2.2 million). This

sub-component aims to help improve access to financial services for project beneficiaries

including to farmers and service providers along the full value chain, through the use of credit

facilitation and guarantee funds. To this end the Project will seek to develop partnerships

between the Project and selected microfinance institutions and commercial banks with a

significant presence in the rural areas, especially in areas where the Project will be operating.

Annex 2 provides the details of use of each instrument.

26. Component 4. Sector Program Coordination and Project Management (US$8.1 million of which IDA support US$6.4 million and Government and Beneficiaries: US$1.7

million). This component has two sub-components: (i) building value chain coordination

institutions, including strengthening the capacities of MAEP in coordinating the agriculture

sector program, and (ii) supporting Project management and monitoring and evaluation.

27. Sub-Component 4.1. Sector Program Coordination (US$2.6 million of which: IDA:

US$1.3 million; and Government and Beneficiaries: US1.3 million). Through this sub-

component, the Project will strengthen the capacity of MAEP to coordinate the implementation

of the PSRSA and the related NAIP currently being finalized by the Government of Benin. The

sub-component will finance studies and consultant services to support: (i) the implementation of

sector coordination tools (planning, monitoring, evaluation, dialogue with other sectors), (ii) the

strengthening of fiduciary capacities (procurement, financial management), and (iii) the

improvement of the quality and targeting of public expenditures in agriculture.

28. Sub-Component 4.2. Project Management, Monitory and Evaluation (US$5.5 of which: IDA: US$5.1 million; and Government and Beneficiaries: US$0.4 million). This sub-

component will finance costs associated with Project management, monitoring and evaluation.

6 Details of the arrangements are described in the Project Implementation Manual.

8

These include: (i) incremental costs associated with the staff of the Project Coordination Unit (at

central and departmental levels), including training costs; (ii) equipment and operating costs,

including costs associated with the Project‘s financial management system (including external

audits, periodic activity planning and budgeting at departmental and national levels); and (iii)

costs for establishing and running the Project‘s monitoring and evaluation system.

B. Project Financing

1. Lending Instrument

29. Following the preparation of the PSRSA and the related NAIP, a Sector Wide Approach

(SWAp) was initially envisaged to support agricultural productivity and diversification in Benin

through the implementation of these plans. However, the idea was rejected in favor of a Specific

Investment Loan (SIL). The rationale was that Benin does not currently have the required

institutional framework and fiduciaries capacities to implement a SWAp in the agriculture sector.

It was decided that the Project will be implemented as a SIL, while working to strengthen the

capacity of the MAEP to plan, implement, monitor and evaluate the agricultural sector program.

30. The option of excluding the cotton value from the project activities was considered and

eventually rejected because the central role of cotton in the economy, as the major agricultural

export commodity, as a major source of cash in the rural economy, and as an entry point for

access to credit and advisory services for greater productivity of cotton-based production systems

in Benin. However, the focus on cotton is limited to strengthening stakeholders‘ capacity to

improve the self-governance in the sector.

2. Project Financing Table

Table 2: Project Financing Table

IDA

Credit

IDA

Grant GFRP

7 Others* Total

Cost Project Components (in million US$)

1. Adoption of improved technologies and

restoration of productivity 2.7 7.3 11.0 6.3 27.3

1.1. Restoration of productivity - 2.0 6.0 0.0 8.0

1.2. Adoption of improved technologies 2.7 5.3 5.0 6.3 19.3

2. Development of irrigation and market

infrastructure - 9.0 4.0 4.7 17.7

2.1. Development/rehabilitation of irrigation

infrastructure - 3.6 4.0 2.6 10.3

2.2. Development/rehabilitation of market

infrastructure - 5.4 - 2.0 7.4

3. Value chain coordination and agricultural

financing 3.3 2.3 - 2.6 8.2

3.1. Value chain coordination 3.3 1.3 - 0.4 5.0

3.2. Facilitation of agricultural financing - 1.0 - 2.1 3.2

4. Sector program coordination and project

management - 6.4 - 1.7 8.1

4.1. Sector program coordination - 1.3 - 1.3 2.6

4.2. Project management, monitoring and - 5.1 - 0.4 5.5

7 Approval and formal commitment of the funds allocated to this project by the GFRP is still pending.

9

evaluation

TOTAL 6.0 25.0 15.0 15.3 61.3

* Others include Government and Beneficiaries.

C. Lessons Learned and Reflected in the Project Design

31. Lessons are learned from: (i) past Bank and non-Bank projects in Benin, including the ongoing emergency food security project; (ii) past value chain development projects in Burkina

Faso, Niger, Nigeria, Senegal and other countries; and (iii) analytical work, including the 2009

CEM on the constraints for growth and potentials for diversification and innovation, and the

ongoing ESW on agricultural diversification. They highlight the following messages:

Prerequisites for successful value chain development. Value chain development

requires a holistic approach which ensures that critical bottlenecks are removed along the

supply chain. The Project design emphasizes: (i) specific focus on export promotion

(pineapple and cashew) and import substitution (rice and fish); (ii) selectivity in product

coverage, with four major value chains targeted out of the 13 priority value chains

identified in the country‘s agriculture sector strategy; (iii) equitable distribution of value

added by promoting producers groups and supporting integrated value chain models with

shared responsibilities and benefits; (iv) transfer of the management and ownership of

large scale industrial mills to the private sector;

Prerequisites for technology adoption. Availability of credit, inputs and advisory

services are key ingredients for boosting production through productivity-enhancing

technologies. The Project will not only provide matching grants and competitive funds to

facilitate short-term access to finance, but also work to improve the demand and delivery

of sustainable agriculture sector financing services using various financing instruments.

The Project will also draw on lessons learned from the use of guarantee funds in Burkina

and elsewhere to ensure that only viable loans are guaranteed by the fund, as

recommended by the concurrent study on agricultural diversification.

Commodity choice. A key recommendation from both the CEM and the ongoing

Agricultural Diversification ESW is that an effective agricultural diversification strategy

would aim to scale up the production and agro-processing of low volume exports such as

pineapple and cashew nuts, and capitalize on the country‘s endowment to increase

production of import competing commodities such as rice and fish. The Project will

support the implementation of this recommendation.

Support to irrigation. Lessons learned from the implementation of the PUASA,

supported by findings from the Agricultural Diversification ESW, show that dam-based

systems for rice production are not cost-effective. This Project would, therefore, support

the resulting recommendations that rice production be based on low cost irrigation

schemes that use appropriate technology and equipment that are readily available in

Benin. In addition, the small-scale irrigation infrastructure emphasized in the Project is

easily implementable by farmers and local businesses.

Implementation arrangements. Lessons learned indicate that value chain development

institutions must be built on existing bodies that optimize competition and coordination

between various stakeholders. In addition, the roles and responsibilities of each actor

need to be clarified on the onset. The integrated value chain development model adopted

10

in this Project allows for greater efficiency through competition and greater scope

through coordination.

IV. Implementation

A. Institutional and Implementation Arrangements

32. The MAEP issued a decree on February 9, 2011 to create the Programme Cadre

(ProCAD), which is a framework program that will be responsible for the management for all

Bank interventions in the agriculture sector in Benin. Through its Program Management Unit

(PMU), ProCAD will be responsible for managing not only the on-going Bank-financed

Emergency Food Security Support Project (EFSSP) and the Emergency Support to Enhance

Food Security Project (ESEFSP), but also the proposed PADA and WAAPP-1C projects as well

as any future Bank-financed projects.

33. The institutional arrangement for ProCAD will be built on the existing capacities of the

Project Management Unit of the EFSSP/ESEFSP, both in terms of logistics and human capacity

as well as the solid technical and fiduciary capacities to manage Bank-financed projects. The

details of the institutional and implementation arrangements are described in Annex 3 and the

PIM respectively.

34. The implementation of the new projects, including the PADA, will be through partnership arrangements. For PADA, the ProCAD will sign memorandum of understanding and

results-based agreements with public service providers, such as the MAEP‘s directorates in

charge of crops, livestock and fishery productions, CeRPA, and INRAB; it will also sign result-

based contracts with private service providers, including financial institutions, NGOs, and

technical operators. The Project‘s implementation arrangements, including for each value chain,

are detailed in Annex 3.

35. The PADA will also have a National Steering Committee, chaired by the Secretary General of MAEP, and comprising representatives of producers‘ organizations, the private

sector, and the ministries of Economy and Finance, Agriculture, Commerce, Industry, and

Development. The Committee will have the responsibility to oversee the project‘s activities

through review of the work plan and the budget, and regular review of the Project‘s reports ,

Regional Orientation and Monitoring (Commité Régional d’Orientation et de Suivi-CROS),

chaired by the President of the Interdepartmental Chambers of Agriculture covering the region,

will also be created with the responsibility over the supervision of program activities at regional

level. A ministerial directive will be issued to create the National Steering Committee and the

CROS.

B. Results Monitoring and Evaluation

36. An M&E system will be developed to monitor expected results to be achieved under the Project, and guidelines on the use this system are provided in the M&E manual, which is part of

the Project Implementation Manual. The Program Management Unit (in charge of the

implementation of PADA) will include a central M&E Unit which will work with all public and

private stakeholders involved in the implementation of Project activities, in order to ensure

adequate monitoring of Project‘s performance indicators. The Direction of Prospective and

Programs of MAEP will play an important role in monitoring the Project‘s support to the

implementation of the agriculture sector program. To this end, the Direction will benefit from

capacity reinforcement. Regular evaluations will be conducted by the Project implementation

11

team to help improve the delivery of results, but the Project will also rely on independent

evaluations. Although baseline data exist for the Project‘s key performance indicators, the base

value indicators will be refined at the beginning of Project implementation. The Project M&E

system will also rely on a baseline survey at Project inception and follow-on surveys for

monitoring the Project impact among beneficiaries. Training will be provided to strengthen the

capacity of M&E specialists, both at the Project level, and within the Ministry of Agriculture,

Livestock and Fishery.

C. Sustainability

37. Project‘s sustainability will be ensured through several mechanisms. First, the Project

supports the increase in productivity and value addition of the targeted value chains by

emphasizing the dissemination and adoption of relevant technologies, the provision of matching

grants to facilitate financial access to technological packages, and the provision of advisory

services to ensure effective use of the technological knowledge. Second, the Project puts great

emphasis on the reinforcement of the capacity of the value participants through support to the

development of value chain coordination bodies or interprofessions. This support is expected to

empower these bodies, which must play a key role in maximizing coordination benefits within

the value chains. Third, the Project will finance the development of sustainable mechanisms to

facilitate access to inputs, markets and credits by promoting integrated value-chain development

models (such as the ESOP8 for the rice value chain) or by supporting the development of

warehouse receipt systems. Fourth, the Project is implemented through contractual relationships

with the private sector, which is expected to benefit from a larger volume of activities through

participation in new markets, including the food crop fertilizer‘s market which is traditionally a

missing market in Benin. Fifth, the environmental and social sustainability is ensured through

appropriate mitigation of environmental and social risks, as thoroughly discussed in the Project‘s

safeguard documents. Finally, the Project will also help strengthen the capacities of the Ministry

of Agriculture and other public sector stakeholders regarding the implementation of the country‘s

agricultural investment plan. It is envisaged under this plan the setting-up of an independent and

professionally managed fund to support a sustainable financing of agriculture sector in Benin.

V. Key Risks

38. An Operational Risk Assessment Framework (ORAF) has been prepared for the project (Annex 4). Some of the risks for this Project are those related to the restoration of flood victims‘

productivity. These include: (i) the availability of the required quantity of production inputs

(seeds, fertilizer and other agricultural inputs) to be distributed to the victims within a very short

lapse of time, (ii) the price fluctuations of inputs that are to be distributed to the flood victims,

(iii) the underperforming inputs distribution systems that disrupt and delay the input distribution

operation, and (iv) the inefficient targeting and identification of beneficiaries. These risks are

mitigated through careful planning of activities targeted to households affected by the floods.

Technical directorates of the MAEP will be responsible for supervising the implementation of

8 ESOP stands for Entreprise de Service et Organisation Paysanne, which is a joint venture between an industrial

rice milling firm and producers groups. A typical ESOP operates as follows: the firm supplies inputs, provides

advisory services and collects paddy from producers; the firm also mills the paddy into high quality (import -

competing) rice, and ensures the marketing of the final products; producers usually received grants from a third

party (such as this Project) to finance their co-ownership of the industrial mills; the organization of the production in

the ESOP model follows the standard outgrower scheme, with the additional benefit that producers are co -owners of

the mills, which provides additional guarantee for equitable distributions of values among value chain participants.

12

these activities in coordination with the CeRPA and selected NGOs for greater efficiency and

transparency. The Project will also provide training to service providers, include input suppliers,

to ensure that they will make the expected contributions to planned activities.

39. In addition to fiduciary risks, the Project will also face risks associated with the limited

capacity of Project‘s stakeholders, particularly with respect to the activities directly managed by

the commodity groups in the aquaculture, rice, cashew and pineapple value chains. The Project

will mitigate these risks by providing training and consultant services to support and monitor the

implementation of results-based value chain development plans, which will be prepared by these

groups. Climate change and erratic rainfalls (with impact on yields) may affect the overall rate of

return of the Project. These risks are mitigated through the Project‘s emphasis on the adoption of

drought-resistant varieties and cultural practices as well as of small scale irrigation scheme

VI. Appraisal Summary

A. Economic and Financial Analysis

40. The economic and financial analysis of PADA is presented in Annex 7. The analysis (i) presents a baseline review of the Project‘s selected value chains and their economic importance,

(ii) documents the Project‘s expected quantifiable and non-quantifiable benefits, (iii) presents

typical farm models producing cashew, rice, maize, pineapple and tilapia/catfish (―without

Project‖ farm analysis), and (iv) gives an estimate of the Financial Rate of Return (FRR) and the

Economic Rate of Return (ERR) together with a sensitivity and risk analysis.

41. Identification of Project’s benefits. The directly quantifiable benefits are expected to

come from restored productivity, improved crop, horticultural and aquaculture production (rice,

cashew, maize, pineapple and catfish/tilapia), increased production of processed products

(cashew, rice, pineapple) and increased exports (fresh pineapple, pineapple juices, and cashew).

Indirect benefits are expected to come from: (i) improved food security and farm revenues, (ii)

new rural employment opportunities for women (who are particularly involved in rice-processing

activities) and youth, which at the same time could help decrease city migrations, and the (iii)

strengthening of human capital through the capacity building activities and technical assistance

towards value chain apex and grassroots producers‘ organizations and value chains inter-

professions.

42. Methodology. Expected increases in yields are assumed in order to design the ―with-

project‖ situation and appraise the incremental financial benefits (surpluses of rice, cashew,

pineapple, fish and maize) brought about by the project at the farmer level. The incremental

returns from increasing yields of farms have been calculated net of farm costs increases. Almost

all improvements in productivity are associated with increases in farm costs9, due to the increase

in the quantity or quality of purchased technologies or an increase in labor inputs (improved soil

preparation prior to planting, incremental outputs to handle). Whenever data on total incremental

cost of production and processing was unavailable, it has been assumed in the baseline scenario

that the associated increase in cost is 50 percent the increase in productivity10

.

9 The maize value chain will only benefit from flood-related activities (grants for the distribution of fertilizers and

seeds). In this case, no incremental costs at the farm level were considered for maize. 10

This hypothesis was used in several other Projects, such as the WAAPP, the Tanzania National Agricultural

Extension Project-phase 2 (NAERS 2), and Kenya Agricultural Productivity and Agribusiness Project (KAPAP).

13

Table 3: Estimated changes under PADA

Enterprise Yield (baseline) Yield (target, with Project)

Rice Inland production systems : 3 tons/ha

Irrigated basins : 5 tons/ha

Inland production systems :

4 tons/ha

Irrigated basins : 6 tons/ha

Maize 1.2 ton/ha (« after disaster » national

estimate)

1.4 ton/ha (« before disaster » level)

Pineapple 60 tons/ha 70 tons/ha

Cashew 0.45 ton/ha 0.85 ton/ha (with improved farm

practices, benefits after 1 year)

1 ton/ha (with improved

technologies, benefits after 5 years)

Aquaculture 2.8 tons/ha/year 2 crops of 5 tons/ha/year

Note: Calculations by the Bank team. Typical farm models were obtained during the identification and

preparation missions in Benin. Targets are those of the results framework (Annex 1).

43. Beneficiaries. From the incremental benefit at the producer scale, the total incremental

benefit has been evaluated by extrapolating the producer-level benefit at the total number of

beneficiaries. The overall project‘s gross benefit has been obtained by aggregating benefits

arising from each enterprise sub-projects. The total numbers of beneficiaries by value chain are

as follows: rice (30,000 under inland and irrigated production systems), maize (50,000), cashew

(75,000), pineapple (10,000) and aquaculture (1,100 farms).

44. Phasing of benefits (pace of adoption). Given the lessons learnt from other projects in

Africa11

targeting agricultural research and technology dissemination, the analysis will

conservatively assume a step-wise realization of average Project benefits. Those were estimated

as follows: 25 percent for year 1; 40 percent for year 2; 60 percent for year 3; 70 percent for year

4; and 80 percent for year 5.

45. Stream of net benefits over 15 years. The total Project costs have been computed with

the overall net benefits (sum of the benefits arising from rice, cashew, pineapple, fish and

maize). Costs from the four Project components were included in the economic analysis as they

lead to productivity and income increases for farmers. The cost to maintain the project after year

5 (recurrent costs) is assumed to be 70 percent -of the fifth year‘s expenditure.

46. Results- Economic and financial rate of return. Under conservative assumptions, the results show that PADA is an economically viable Project. For a 15-year Project lifecycle, and

using a 12 percent discount rate, estimated Net Present Values (NPV) varies between US$53-55

million. Both the FRR and the ERR are above the opportunity cost of capital (30.8 percent and

33.1 percent respectively).

11

See (i) World Bank. 2010. Project Appraisal Document on a proposed Grant in the Amount of USD 120 million to

the Democratic Republic of Congo for a Agriculture Rehabilitation and Recovery Support Project, Report No

49169-ZR. Washington DC; and (ii) World Bank. 2010. Implementation Completion and Results Report on a credit

in the amount of USD34.2 million and on an additional financing in the amount of USD20 million to the Republic of

Mali for a Agricultural Services and Producers Organizations Project, Report No: ICR000243. Washington DC.

14

47. The sensitivity analysis shows that the results are very robust against changes in output

prices, but the profitability of the project is sensitive to decreases in yield levels. More

specifically, if yields decrease by 15 percent, the critical value of the rate of the economic rate of

return could be reached. It must be noted, however, that the Project will specifically invest in

irrigation technologies that will mitigate the effects of weather volatility and climate change.

Finally, the baseline Internal Rate of Return (IRR) is at under-optimum level due to conservative

assumptions, so the probability of this ―low performance scenario‖ to happen is quite unlikely.

48. The detailed Economic and Financial Analysis is presented in Annex 7.

B. Technical

49. The project‘s approach builds on lessons learned from: (i) the Benin Agricultural

Diversification ESW carried out in 2010, (ii) past Bank and non-Bank projects in Benin,

including the ongoing Bank-financed EFSSP and ESEFSP, (iii) past value chain development

projects in West Africa (such as the Agro-Pastoral Export and Market Development Project -

PRODEX Project in Niger). The project technical design has been widely discussed with and

agreed upon by the government and stakeholders. Technical considerations relevant to the

Project are as follows:

Value chain approach: Through a holistic methodology, the Project design has included

all the features that are necessary to enhance value chain development and remove

critical bottlenecks (see above ―Lessons Learned and Reflected in the Project Design‖

section).

Technology transfer and adoption of improved materials: through advisory services and trainings performed through Farming Field Schools approaches, extension services

will accompany the distribution of agriculture inputs including improved varieties,

fertilizers, pesticides, etc. Matching grants will be provided to facilitate producers‘ access

to these technologies. As regards to cashew, the acquisition of high performing planting

materials from Brazil and Vietnam will be encouraged. With regards to pineapple, the

Project will support the formulation of fertilizers better adapted to Beninese agro-climatic

and soil conditions. Improved seeds of rice will be certified by the Quality Control

Authority of (Direction de la Promotion de la Qualité et du Contrôle du Benin -DPQC),

Finally, uptake of improved fish feed and fingerlings will be encouraged by prospective

aquaculture advisors following demonstration protocols.

Improvement of irrigation schemes: The Project will specifically finance the expansion

of the successful irrigation infrastructure. Small-scale irrigation technologies (power

pumps, drilling of boreholes, irrigation canals, water control gates), together with

improved land management practices and technical itineraries will be promoted in the

Project areas (inland valley schemes and irrigated perimeters). Land development in the 4

basins (Ouémé, Tanguiéta, Glazoué and Malanville) will seek to maximize alignment

between production and milling capacities (see Annex 2).

Processing and marketing of agricultural products: One of the striking activity of the

Project towards the rice value chain will be the partnerships with the private sector and

medium-scale industrial rice milling firms known as Joint Venture between a Service

Provider Firm and Farmers (Entreprises de Services et Organisations Paysannes-ESOP),

in view of securing the delivery of improved inputs (such as fertilizers and seeds), milling

and marketing of import quality white rice. The industrial milling firms will develop

15

close and equitable relationships with rice producers groups to whom they will provide

input credit. In turn, the producers groups will guarantee credit repayment and delivery of

paddy to these firms. In order to help strengthen the business relationship between

producers groups and industrial milling firms, the Project will promote co-ownership of

the industrial mills by financing producers‘ shares in the capital of these mills. Each

production basin will benefit from irrigated land development to secure sufficient paddy

supply to mills.

C. Financial Management

50. The project team has assessed the Financial Management (FM) capacity of MAEP,

especially of the Project Coordination Unit (PCU) previously set up under the Bank-financed

EFSSP and ESEFSP. This unit, which has demonstrated solid technical and fiduciary capacities

to manage Bank-financed Projects, will serve as the Programme Management Unit (PMU) of

ProCAD. The coordination of PADA will be assumed by this PMU. The assessment has

concluded that with the implementation of actions identified to strengthen the coordination unit,

the proposed FM arrangements will satisfy the Bank‘s minimum requirements under

OP/BP10.02. Therefore, for the PMU to be able to handle the additional FM activities of PADA,

it has been recommended (i) to recruit an additional FM Officer, (ii) to set up of appropriate

multi-projects accounting software, and (iii) the preparation of Project Manuals (including FM

and accounting procedures). Taking into account these proposed risk mitigation measures the

overall FM risk rating for this project is Medium likelihood.

51. To minimize the risks of corruption , the following measures are incorporated into the Project design as follows: (i) a technical audit will be carried out every two years to supplement

the annual financial audit, (ii) an Agreement will be made with MAEP, on regular internal audit

missions to be completed by MAEP internal audit department, (iii) a reasonable sample of grants

will be reviewed each year by the financial auditor to ensure that activities were completed

pursuant to the agreed procedures related to the Matching Grant and Competitive Funds

operations and that funds were used for the purposes intended. Annex 3 provides additional

information on FM arrangements.

D. Procurement

52. Procurement of Project activities will be carried out in accordance with the World Bank‘s

―Guidelines: Procurement under IBRD Loans and IDA Credits‖ dated May 2004, revised

October 2006 and May 2010; and ―Guidelines: Selection and Employment of Consultants by

World Bank Borrowers‖ dated May 2004, revised October 2006 and May 2010. The Board of

Executive Directors has approved the revised Guidelines: Procurement of Goods, Works and

Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank

Borrowers and Guidelines: Selection and Employment of Consultants under IBRD Loans and

IDA Credits & Grants by World Bank Borrowers (jointly, ―the revised Procurement and

Consultant Guidelines‖) The procurement activities will also be managed by Project

Coordination Unit (PCU) in charge of managing the Bank financed EFSSP and ESEFSP. The

capacities of this PCU will be transferred to the PMU of ProCAD. The capacity assessment

shows that the current PCU (i.e. the future PMU) is experienced in the management of Bank-

financed projects. The procurement capacity assessment at the MAEP, the Ministry responsible

for the proposed Project, was carried out and actualized in July 2008 and December 2009,

respectively. Following this assessment, it was recommended that a Procurement Specialist be

recruited to support the implementation of the two emergency projects financed by the Bank

16

(EFSSP and ESEFSP). The recruitment of the Procurement Specialist is completed. The

Procurement Specialist will be responsible for the implementation of all procurement activities

under the Project. An Assistant Procurement Specialist will be recruited under the proposed

Project to help with the additional procurement activities of PADA.

53. Bank‘s prior and post reviews will be carried out on the basis of review thresholds indicated in Annex 3. The Bank will conduct six-month supervision mission and annual Post

Procurement Review (PPR); the ratio of post review is at least 1 to 5 contracts. The Bank could

also conduct an Independent Procurement Review (IPR) at any time until two years after the

closing date of the Project.

54. In view of (i) the experience of the PCU in carrying out procurement activities for EFSSP

and ESEFSP, (ii) the ongoing recruitment of a Procurement Specialist and the recruitment of an

Assistant Procurement Specialist for PADA, and (iii) the possibility to draw on the support of the

Local Development Fiduciary Management Agency (Agence de Gestion Fiduciaire des

Initiatives à la Base -AGEFIB) procurement experience on a need basis, the overall Project

procurement risk has been rated as moderate. The following measures were agreed upon to

mitigate the remaining risks plan: (i) all procurement activities will be carried out in accordance

with the original or formally updated agreed procurement plan; (ii) the PCU in charge of EFSSP

and ESEFSP will be responsible for the preparation and updating of procurement plan; (iii)

procurement plans will be updated at least annually or as required to reflect the actual project

implementation needs and capacity improvements; and (iv) AGEFIB will continue to provide

procurement support to the Project as needed. ―Guidelines on Preventing and Combating Fraud

and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants‖, dated

October 15, 2006 and updated January 2011 shall apply to the project.

E. Social

55. Stakeholders’ inclusion. Extensive consultations with key stakeholders involving the

private sector (producers, small and medium-sized enterprises engaged in agro-processing and

agribusiness), the public sector (line ministries) and the civil society (roots and apex producers‘

organizations) have been conducted during the preparation stage. Key actors have been involved

in the definition of the scope of activities through participatory approaches. These consultations

have stressed the need to mainstream gender in Project activities, leading to the decision to

ensure that at least 40 percent of Project beneficiaries are women. Specifically in regard to the

development and rehabilitation of small scale irrigation infrastructure and equipment, the

consultations recommended a strong implementation of local communities in the choice of

beneficiaries, to guarantee access to the irrigated lands are consistent with cultural practices in

these communities.

56. Social benefits. With regards to Project‘s positive externalities, PADA is expected to bring welfare and well-being at the household level, due to improved food security (increased

self-consumption) and farm revenues, helping to reduce poverty and malnutrition. Other

beneficiaries are the consumers who will have improved access to agricultural food produce.

New rural employment opportunities for both women (who are particularly involved in rice-

processing activities in Benin) and youth are expected to be brought by the Project (handling of

incremental agricultural outputs) and decrease migrations towards urban areas. The Project will

also strengthen human capital through the capacity building activities and technical assistance

towards value chains apex and grassroots producers‘ organizations and value chains inter-

professions.

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F. Environment

57. The PADA is a Category B Project. Therefore, the environmental and social impacts of

the Project are expected to be moderate, site specific, and manageable. The Project is expected to

have a positive environmental impact through its support for agricultural technologies that

promote the better use of land and water resources. Potential environmental risks could include

point and nonpoint pollution of water sources, and other issues associated with the use of

agricultural chemicals, and negative environmental impacts associated with the rehabilitation of

irrigation or small-scale civil works.

58. Four Bank safeguard policies apply to the Project: Environmental and Social Assessment

(OP/BP 4.01), Pest Management (OP 4.09), Involuntary Resettlement Policy (OP/BP 4.12) and

Projects on International Waterways (OP/BP 7.50).

OP 4.01 is triggered to provide a framework within which Project activities will be

implemented using practical due diligence mechanisms to address potential

environmental and social impacts. The Project will finance the construction and

rehabilitation agricultural facilities (irrigation, storage, processing, etc.), which will

essentially be small-scale civil works. The potential impacts of these infrastructures are

likely to be small-scale and site specific, typical of category B projects. Since the exact

location of these infrastructures to be rehabilitated or built was not known, the borrower

has prepared an Environmental and Social Management Framework (ESMF), which has

been reviewed and disclosed in-country and at the Infoshop prior to project appraisal.

En