AFRICAN DEVELOPMENT FUNDGHA/PAAC/2001/01LANGUAGE : ENGLISHORIGINAL : ENGLISH

REPUBLIC OF GHANA

INLAND VALLEYS RICE DEVELOPMENT PROJECT

APPRAISAL REPORT

COUNTRY DEPARTMENT OCDWWEST REGION MARCH 2001

TABLE OF CONTENTSPage

PROJECT INFORMATION SHEET, CURRENCY AND MEASURES,LIST OF TABLES AND ANNEXES, LIST OF ABBREVIATIONS ANDACRONYMS, BASIC DATA SHEET, PROJECT LOGICAL FRAMEWORK,EXECUTIVE SUMMARY i -x

1. INTRODUCTION 1

1.1 Origin and History of the Project 1

2. THE AGRICULTURAL SECTOR 1

2.1 General Features 12.2 Land Tenure and Land Use 22.3 Poverty and Food Security 32.4 Institutional Framework 32.5 Agricultural Development Policy and Strategy 62.6 Donor Supported Activities 6

3. THE RICE SUB-SECTOR 7

3.1 Salient Features 73.2 Rice Production Systems 83.3 Strategies for Rice Development 10

4. THE PROJECT 10

4.1 Project Concept and Rationale 104.2 Project Area and Beneficiaries 114.3 Strategic Context 134.4 Project Objective 134.5 Project Description 134.6 Production , Market and Prices 164.7 Environmental Impact 164.8 Social Impact 174.9 Project Costs 174.10 Sources of Financing and Expenditure Schedule 18

5. PROJECT IMPLEMENTATION 19

5.1 Executing Agency 195.2 Institutional Arrangements 205.3 Supervision and Implementation Schedules 215.4 Procurement Arrangements 215.5 Disbursement Arrangements 235.6 Monitoring and Evaluation 235.7 Financial Reporting and Auditing 245.8 Aid Co-ordination 24

6. PROJECT SUSTAINABILITY AND RISKS 24

6.1 Recurrent Costs 246.2 Project Sustainability 256.3 Critical Risks and Mitigating Measures 25

7. PROJECT BENEFITS 26

7.1 Financial Analysis 267.2 Economic Analysis 267.3 Social Impact Analysis 277.4 Sensitivity Analysis 27

8. CONCLUSIONS AND RECOMMENDATIONS 27

8.1 Conclusions 278.2 Recommendations and Conditions for Loan Approval 28

The report was prepared by Messrs. W. Hara, Principal Agricultural Economist (TeamLeader), H. Dosso, Senior Agronomist and D. Lekorchi Principal Civil Engineer, all ofOCDW.3, following an appraisal mission to Ghana during 5 – 22 February 2001. Additionalinquiries relating to the report should be addressed to the authors or Mr. C. R. Spencer,Division Manager, OCDW.3 (Extension 4152).

LIST OF TABLES

TABLE Page

4.1 Summary of Project Cost Estimates by Component 184.2 Summary of Project Cost by Category of Expenditure 184.3 Sources of Finance 195.1 Expenditure Schedule by Component 215.2 Expenditure Schedule by Source of Finance 215.3 Summary of procurement arrangements 22

LIST OF ANNEXES

ANNEXES Number of Pages

1. Map of Project Area 12 Project organigram 13 Implementation Schedule 14 Summary of Economic Analyses 15. List of Annexes in Project Implementation Document 1

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AFRICAN DEVELOPMENT FUND01 BP V 1387, ABIDJAN 01, COTE D'IVOIRE

TEL: (225) 20 20 44 44FAX: (225) 20 20 44 90

PROJECT INFORMATION SHEET

1. COUNTRY : Republic of Ghana

2. TITLE OF PROJECT : Inland Valleys Rice Development Project

3. LOCATION : Twenty-five (25) sites located in five regions, namelyAshanti, Brong Ahafo, Central, Eastern and Western regionsof Ghana.

4. BORROWER : Republic of Ghana

5. EXECUTIVING AGENCY : Ministry of Food and Agriculture, Crop ServicesDirectorate, P. O. Box M37, Accra, GhanaTel: (233) 21 665066; Fax: (233) 21 780326

6. PROJECT DESCRIPTION: The project aims to increase the production of rice and theincomes for smallholder rice producers, traders and processors in the project area and neighbouring areas.The project components are: i) Land Management; ii) Credit for Crop Development; iii) Capacity Building;iv) Adaptive research and Surveys; and v) Project management. The main activities will include landdevelopment, crop development through the provision of short- and medium-term credits for financingproduction, processing and marketing activities, training of staff, farmers and entrepreneurs, and adaptiveresearch. The project will also make provision for HIV/AIDS and Family Planning campaigns, and theprevention of malaria in the project area.

7. TOTAL COST : UA 17.1 millionForeign exchange : UA 8.7 millionLocal cost : UA 8.4 million

8. ADF LOAN : UA 15.0 million

9. OTHER SOURCES OF FINANCEGovernment of Ghana (including Beneficiaries) : UA 2.1 million (0.4 million)

10. DATE OF APPROVAL : April 2001

11. PROBABLE COMMENCEMENT DATE AND PROJECT DURATIONCommencement : November 2001Duration : 5 Years

12. PROCUREMENT OF GOODS, WORKS AND SERVICESProcurement of goods, works and consultancy services financed by the ADF resources will be carried out inconformity with Bank Group Rules of Procedure. The procurement of civil works, vehicles, equipment, willbe undertaken through National Competitive Bidding whereas the consultancy services will be done throughcompetition on the basis of a short-list.

13. CONSULTANCY SERVICES REQUIREDConsultancy services for rice production, marketing and processing, land and water managementengineering, training, mid-term review and auditing of the project accounts will be required.

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CURRENCY AND MEASURES(February 2001)

UA 1 = ¢ 8,528.93UA 1 = US$ 1.29779US$ 1 = ¢ 6,571.89

FINANCIAL YEAR

1 January – 31 December

WEIGHTS AND MEASURES

1 MT (Metric Tonne) = 2,200 lbs. (pounds)1 kg (kilogram) = 2.2 lbs.1 m (metre) = 3.28 ft (feet)1 Ha (Hectare) = 2.471 acres

LIST OF ABBREVIATIONS AND ACRONYMS

AAGDS - Accelerated Agricultural Growth and Development StrategyACHD African Centre for Human DevelopmentADF - African Development FundAEA - Agricultural Extension AgentAFD Agence Française de DéveloppementAgDB Agricultural Development BankAgSSIP - Agricultural Services Sector Investment ProgrammeCEDEP - Centre for the Development of PeopleCIF - Cost, Insurance and FreightCRI - Crops Research InstituteCSD - Crop Services DirectorateDADU District Agricultural Development UnitDFR - Department of Feeder RoadsFAO - Food and Agriculture OrganisationGDP Gross Domestic ProductGIDA - Ghana Irrigation Development AuthorityGOG - Government of GhanaHIV/AIDS Human Immune-deficit VirusICPM Integrated Crop and Pest ManagementIPM Integrated Pest ManagementMOFA - Ministry of Food and AgricultureNGO - Non Governmental OrganisationPCT - Project Co-ordination TeamPPMED - Policy Planning, Monitoring and Evaluation DirectoratePPRSD - Plant Protection and Regulatory Services DirectoratePY Project yearSMS Subject Matter SpecialistSRI Soil Research InstituteUA - Unit of AccountUGARS University of Ghana Agricultural Research StationUNDP United Nations Development ProgramWARDA - West Africa Rice Development Association

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GHANA : BASIC DATA SHEET

COMPARATIVE SOCIO-ECONOMIC INDICATORS

Year Ghana Africa Developing DevelopedCountries Countries

Basic IndicatorsArea ( '000 Km²) 239 30,061 80,976 54,658Total Population (millions) 1998 19.2 748.0 4,718.9 1,182.2Urban Population (% of Total) 1998 36.9 38.2 39.6 75.6Population Density (per Km²) 1998 80.3 24.9 58.3 21.6GNP per Capita (US $) 1998 390 687 1,250 25,890Labour Force Participation - Total (%) 1998 47.0 43.7 … …Labour Force Participation - Female (%) 1998 23.8 37.0 … …Gender –Related Development Index Value 1997 0.5 0.5 0.6 0.9Human Development Index (Rank among 174 countries) 1997 133 N/A. N/A. N/A.Population Living Below $ 1 a Day (% of Population) 1989-94 ... 45.0 32.2 …Demographic IndicatorsPopulation Growth Rate - Total (%) 1998 2.7 2.4 1.6 0.3Population Growth Rate - Urban (%) 1998 4.2 4.3 3.1 0.6Population < 15 years (%) 1998 43.9 42.9 33.2 18.8Population >= 65 years (%) 1998 3.0 3.2 19.7 26.7Dependency Ratio (%) 1998 82.8 86.9 61.7 48.8Sex Ratio (per 100 female) 1998 99.0 99.3 103.3 94.8Female Population 15-49 years (millions) 1998 4.5 176.2 1,213.4 296.8Life Expectancy at Birth - Total (years) 1998 61.2 52.7 64.0 75.4Life Expectancy at Birth - Female (years) 1998 63.0 53.4 65.8 79.1Crude Birth Rate (per 1,000) 1998 36.2 37.7 23.8 11.0Crude Death Rate (per 1,000) 1998 8.8 13.7 8.4 10.3Infant Mortality Rate (per 1,000) 1998 61.2 80.7 58.9 9.0Child Mortality Rate (per 1,000) 1998 88.4 116.1 76.2 10.4Maternal Mortality Rate (per 100,000) 1996 740 698 488 30Total Fertility Rate (per woman) 1998 4.9 5.0 2.9 1.6Women Using Contraception (%) 1995 28.0 … 56.0 70.0Health & Nutrition IndicatorsPhysicians (per 100,000 people) 1990-96 4 23 76 253Nurses (per 100,000 people) 1988-96 28 89 85 780Births attended by Trained Health Personnel (%) 1983-88 40 … 54 99Access to Safe Water (% of Population) 1990-97 56 55 72 100Access to Health Services (% of Population) 1995 60 60 80 100Access to Sanitation (% of Population) 1990-97 55 45 43 100Percentage of Adults (aged 15-49) Living with HIV/AIDS 1997 2.4 5.7 … …Incidence of Tuberculosis (per 100,000) 1995 222 201 157 24Child Immunisation Against Tuberculosis (%) 1996 72 77 88 93Child Immunisation Against Measles (%) 1996 59 63 79 90Underweight Children (% of children under 5 years) 1990-97 27 26 31 …Daily Calorie Supply 1996 2,598 2,406 2,650 3,222Public Expenditure on Health (as % of GDP) 1995-97 1.6 1.4 1.8 6.3Education IndicatorsGross Enrolment Ratio (%)

Primary School - Total 1991 75.1 79.5 100.0 103.0Primary School - Female 1991 68.9 73.0 93.8 103.2Secondary School - Total 1991 36.4 28.3 50.4 100.3Secondary School - Female 1991 28.4 25.7 45.3 101.8

Primary School Female Teaching Staff (% of Total) 1991 35.2 45.0 51.0 82.0Adult Illiteracy Rate - Total (%) 1997 33.6 43.5 28.2 1.3Adult Illiteracy Rate - Male (%) 1997 23.5 33.0 19.6 1.0Adult Illiteracy Rate - Female (%) 1997 43.5 51.6 35.8 1.5Percentage of GDP Spent on Education 1995 ... 3.5 3.9 5.9Environmental IndicatorsLand Use (Arable Land as % of Total Land Area) 1996 12.5 5.9 9.9 11.6Annual Rate of Deforestation (%) 1990-95 1.3 0.7 0.4 -0.2Annual Rate of Reforestation (%) 1980-90 2.0 4.0 … …Per Capita CO2 Emissions (metric tons) 1996 0.2 1.1 2.1 12.5

Source: Compiled by the Statistics Division from ADB databases; UNAIDS; World Bank Live Database and United Nations Population Division.

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PROJECT MATRIX

Narrative Summary Objectively Verifiable Indicators Means of Verification Assumptions/Risks

SECTOR GOALSContribute to enhanced food security and reduce riceimports

1. Number of food insecure farmers reduced2. Quantity of rice imports reduced

1. Government statisticsMacro-economic policies remainedfavourable

PROJECT OBJECTIVEIncomes of smallholder farmers, women and men tradersand processors increased.

At full development1. Farm gross margin income raised from

GHC210,000 to 4 million2. Traders and processors annual gross incomeincreased from GHC37 to 85 million and 76million respectively

1. MOFA records2. Progress reports3. Supervision missions

1. Weather and rainfall remainedfavourable

2. World market prices remainstable

OUTPUTS1. Area of inland valleys, number of rice farmers and

quantity of quality rice increased.

2. Access roads and field tracks to production areaimproved

3. Credit scheme established and operational

4. Institutional capacity strengthened

5. Production technological packages promoted

6. Project Co-ordination Team established andoperational

1.1 4500 ha developed by PY51.2. 9000 smallholder producing rice by PY51.3 Yields increased from 1.5 to 4.5 t/ha by PY51.4 13000 tonnes of additional milled riceproduced annually beginning PY52.1 200 km feeder roads spot improved and 80

km access tracks upgraded.3.1 UA 5.6 million credit facility available to rice

producers, traders and mills operators3.2 200 power tillers, 250 threshers, 250 reapers,

50 rice mills, 60 digital moisture metres, 125weighing scales, 250 tarpaulins, 48 storagesheds, 57 drying floors used by PY5

4.1 9000 farmers; 50 mill operators , 100 traders,10 rice scientists, 36 extension agents trainedby PY5

4.2 450 farmer groups/associations formed andtrained

5.1 10 new rice varieties adapted and adopted byfarmers

5.2 9000 farmers use recommended fertilisers,pesticides, and ICPM

6.1 Project required staff recruited as planed6.2 Procurements made in conformity with Fund

rules of procedure

1. MOFA records2. Progress reports3. Supervision missions

Farmers, rice traders and millers willingto participate.

Narrative Summary Objectively Verifiable Indicators Means of Verification Assumptions/Risks

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ACTIVITIESA- Land Management

Survey and designs of valley sites Land clearing and levelling Construct water control structures Upgrade access roads and field tracks

B. Credit for Crop Development Establishment of credit facility Select NGOs to facilitate delivery and recovery

C. Capacity Building Recruitment of NGOs for farmer group

formation and training Conduct Study tours for research scientists Conduct Training workshops and seminars for

farmers, traders and millers and agriculturalextension agents

Conduct Farmers' visits to other groups Conduct Farmers' field days Conduct HIV/AIDS and Malaria prevention and

family planningD. Adaptive research & Surveys

Conduct On-farm adaptive research trials Conduct On-farm seed production training Conduct Farmers' field schools Conduct Soil fertility survey Conduct Baseline and ethno-botanical surveys

E. Project management Procurement of vehicles, motorbikes equipment

and office supplies

Recruitment of project staff and establishmentof agreement with participating institutions

Undertake Monitoring and evaluation

Prepare Reports and conduct Audit

Undertake Mid-term review

Undertake Study tours and training

RESOURCES/PROJECT BUDGET(UA million.)1. SOURCES:ADF loan : 15.0GOG : 2.1TOTAL : 17.1

2. BUDGET:A. Land Management : 8.3B. Credit for Crop Development : 4.8C. Capacity building : 1.6D. Adaptive research & surveys : 0.5E. Project co-ordination 1.9

Total 17.1

3. HUMAN RESOURCESA. Technical Assistance (180 person-months)B. Short-term ConsultantsC. Counterpart Staff

4. TIME

5 years

1. Project Accounts.2. Supervision missions3. Disbursement records

1. Counterpart fund available asplanned.

2. Competent staff designated

3. Staff turnover will be minimal

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EXECUTIVE SUMMARY

Project Background.

Rice is increasingly gaining in importance as a staple food in Ghana next to cassava (7.2 MillionMT), yams (3.0 million MT), plantain (2.0 million MT) and maize (1.0 million MT). Rice is nowthe third cereal grown in the country after maize and sorghum (0.4 million MT). Rapid populationgrowth mainly in the urban areas, and the relative ease of preservation and cooking of rice havefavourably influenced that trend for more rice consumption. Despite increased domestic riceproduction over the last six years from x to about 280,000 tonnes, around two-thirds of thenational rice requirements are still imported. Under Ghana’s vision 2020 socio-economicdevelopment initiative, emphasis was put on inland valley rice production as an important sourcefor achieving national food security, contributing to reduction of poverty and reducing imports.This emphasis has again been reiterated in the recently released Budget Statement and EconomicPolicy for the 2001 Financial Year issued on 9/03/2001 of the new Government, which inParagraph 179, reads “The first priority is to reduce rice importation by at least 30% in value fromthe approximately USD100.0 million spent on importing rice annually to supplement localproduction. The reduction in rice importation will be substituted by a local production of 72,000MT milled rice which will create jobs to increase rural incomes. In this regard, steps will be takento ensure that rice farmers are provided with high yielding improved varieties”. In May 1999, theGOG submitted a request for financing an inland valley rice development project. The proposedproject is thus consistent with the Government strategy for the development of the agriculturalsector and with the Bank Group development strategy for Ghana which emphasises povertyreduction.

Purpose of the loan

The ADF loan of UA 15 million, amounting to 88 % of the total project cost estimated at UA 17.1million, will be used to finance 100 % of foreign exchange (UA 8.7 million) and 76% of local cost(UA 6.3 million).

Sector Goal and project Objectives

The project will contribute towards achieving the following sector goals: i) enhanced food security;and ii) reduce imports. The project objective is to increase incomes of smallholder rice producers ofboth sexes, women and men rice traders and processors in the country by increasing the productionof good quality local rice.

Brief description of the project’s Outputs

In order to achieve these objectives, the project will focus attention on (i) Land Management, (ii)Credit for Crop Development; (iii) Capacity Building; (iv) Adaptive research and surveys; and (v)Project Co-ordination.

Project Cost

The total project cost is estimated at UA 17.1 million out of which UA8.7 million (51%) will beforeign currency and UA 8.4 million (49%) will be in local currency.

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Source of Finance

The project will be financed by the African Development Fund, the Government of Ghana, and theBeneficiaries. ADF funds will be utilised to finance land development, credit for crop production,capacity building and project co-ordination. Total ADF contribution representing 88% of the totalcosts will be used to cover 100% of the foreign exchange costs and 76% of local costs, whichrepresent 37% of the total project, cost. The Government of Ghana’s contribution of UA 2.1 millionrepresenting 12% of the project total cost will be utilised to cover staff salaries, office utilities, andoperating and maintenance costs. The Beneficiaries will contribute UA 0.4 million throughprovision of labour to land development activities.

Project implementation

The project will be implemented over a period of five years within the framework of the AgSSIP.The overall implementation of the project activities will be the responsibility of the Crops ServicesDirectorate of MOFA.

Conclusions and Recommendations

The proposed project will directly benefit about 10,000 households (60,000 people) and createadditional 8,500 seasonal jobs. It will also contribute to increased domestic milled rice productionestimated at about 13,000 tonnes per year starting in Year 5. Hence, the project will contribute toforeign exchange savings valued at about US$ 3.7 million per annum. Increased production inducedby the project will lead to increased employment and income generation opportunities and thereforeit will contribute substantially to poverty reduction in the rural areas by focusing its support on thesmallholder rice producers and processors, especially women. 450 farm groups will be createdand/or strengthened and about 9,000 farmers will be trained by the project. The group formationand training will facilitate technology adoption, while the improvement of access roads and trackswill facilitate distribution of inputs and crop marketing. The increase production and of rice willlead to increased incomes of the project beneficiaries which will result in improvement in the ruralliving conditions. The project is technically feasible, socially desirable and environmentally sound,and financially and economically viable. The proposed project is a high priority in the agriculturedevelopment strategy of the Government of Ghana and it is consistent with the Bank Group visionas well as the Bank Group strategy for Ghana.

1. Introduction

1.1 Origin and History of the Project

1.1.1 Rice is increasingly gaining in importance as a staple food in Ghana next to cassava (7.2Million MT), yams (3.0 million MT), plantain (2.0 million MT) and maize (1.0 million MT). Rice isnow the third cereal grown in the country after maize and sorghum (0.4 million MT). Rapidpopulation growth mainly in the urban areas, and the relative ease of preservation and cooking ofrice have favourably influenced that trend for more rice consumption. In 1996, a detailed study ofthe rice sub-sector undertaken by the Government of Ghana (GOG) concluded that the domesticconsumption is likely to reach 672,000 MT of paddy equivalents in 2006, while current productionbarely exceed 221,000 MT. Despite increased domestic rice production from 100,000 MT in 1989-91 to about 280,000 MT in 1998-99, around two-thirds of the national rice requirements are stillimported. In 1998, rice imports in Ghana were estimated at about 200,000 MT valued at about 245billion Cedis (US$61.25 million).

1.1.2 Under Ghana’s vision 2020 socio-economic development initiative, emphasis was put oninland valley rice production as an important source for achieving national food security,contributing to reduction of poverty and reducing imports. This emphasis has again been reiteratedin the recently released Budget Statement and Economic Policy of the new Government for the2001 Financial Year issued on 9/03/2001, which in Paragraph 179, reads “The first priority is toreduce rice importation by at least 30% in value from the approximately USD100.0 million spent onimporting rice annually to supplement local production. The reduction in rice importation will besubstituted by a local production of 72,000 MT milled rice which will create jobs to increase ruralincomes. In this regard, steps will be taken to ensure that rice farmers are provided with highyielding improved varieties”.

1.1.3 The study also indicated that large-scale irrigation schemes could not at present be fullysustainable in economic terms because of their high investment cost. At the same time, there is alarge market potential for rice in Ghana, and the country has large agro-ecological zones, which aresuitable for the development of rice production. Within these zones, there are numerous inlandvalleys used traditionally for rice production by small-scale farmers, which could be developed forthis purpose. At present, only 20% of the total valleys suitable for rice production are being utilised.Consequently, realising the urgency of, inter alia, the drain on foreign exchange reserves, and inorder to realise this potential, the Government of Ghana in May 1999 submitted to the Bank Group,a request for financing of an inland valleys rice development project. A preparation mission wasfielded in March 2000 but was only able to gather detailed information on eight sites out of 31originally supposed to be covered under the project because the Ministry of Food and Agriculture(MOFA) was not able to provide all the required information. As a result, the preparation reportcould not be finalised. Hence, a pre-appraisal mission was fielded in October 2000 followed by anappraisal mission which was fielded during the period 5 - 22 February 2001.

2. The Agricultural Sector

2.1 General Features

2.1.1 Agriculture, comprising crops, livestock, fisheries and forestry subsectors, is the dominantsector of the Ghanaian economy. In 1998, the agriculture sector directly employed about 65% of thework force, accounted for 43.8% of total export earnings and contributed 41% to the GrossDomestic Product (GDP). The country Rural Development Indicators (World Bank Handbook1998) show that the rural population represents 12 million people (63 %) of the total population of19.2 million. There are about 2 million smallholders who farm principally under rain-fed

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conditions, producing mainly food crops for subsistence. The food production index as compared tothe reference period of 1989-91 (100%) increased to 144% in 1998. The cereal crops average yieldshave increased from 718 kg/ha (1980) to 1,300 kg/ha (1998). Farm sizes are small, generally notexceeding 1.2 ha and very few farms are greater than 2.0 ha.

2.1.2 Climate and agro-ecological zones. The amount of the annual rainfall varies between 800 and2,400 mm, generally decreasing from South to North and from West to East. Three distinct rainfallregimes cover the country: 1) The Monomodal regime (1000 –1300mm) with the rainy seasonbetween May and September (Northern and North-Central Brong Ahafo Regions); 2) The Pseudo-bimodal regime (1100 – 2100 mm): the humid period is continuous from March/April toOctober/November (Ashanti, Brong Ahafo and North of the Eastern and Volta Regions); and 3) Thebimodal regime (1300 –2000 mm). There is a major humid period of four months (March-April-through July) and a minor one (September through October-November). This regime is found inSouth of the Volta, Eastern, Western, Central and Greater Accra Regions. Based on the rainfallregime the country is divided into six agro-ecological zones, namely, Rain Forest; Deciduous Forest;Transition Area; Coastal Savannah; Guinea Savannah; and Sudan Savannah.

2.1.3 Land availability and Cropping: Out of a total land area of 23.9 million hectares, 13.6million hectares are suitable for agricultural production. In 1999, MOFA estimated that only 5.4million (40%) of the 13.6 million ha of arable land areas are actively cultivated. Irrigated agriculturerepresents less than 11,000 ha. Food crop production account for about 3.0 million ha, with anestimated 2.5 million ha under root and tuber crops, cereals and plantain. The most important foodcrops are maize, cassava, sorghum, plantain, pulses, yam, millet and rice. Domestic production ofcereals (maize, sorghum, millet and rice) is estimated at 1.5-1.8 million tons per year. Productionof starchy root-staples and plantain is about 12 million tons per year. Due to the rainfed and shiftingcharacteristics of this agriculture, production fluctuates significantly from year to year due tochanges in the total planted area and rainfall distribution.

2.1.4 Agricultural production pattern follows the agro-ecological zones; gradually changing fromtree crops, including rubber, oil palm, coconuts, cocoa and coffee in the Forest zone, to food cropssuch as cereals and food legumes, vegetables, tobacco and yam, cassava in the northern andtransitional savannahs. A wide range of mixed cropping systems is the practice in all the regions.This practice contributes considerably to ensure food security by spreading the risk of total cropfailure in a bad year. The main crops grown in the valleys are rice and vegetable crops. In 1990, TheGhana Irrigation Development Authority (GIDA) identified 12,820 hectares of under-developedinland valleys throughout the country.

2.2 Land Tenure and Land Use

2.2.1 Land Use: Land use in Ghana can be grouped into eight major categories, namely; i) forestreserves (approximately 11% of the total land area); ii) wildlife reserves (5%); iii) unreserved highforest (2%); iv) savannah woodlands (30%); v) tree crops (7%) annual crops (25%); vii)unimproved pasture (15%); and viii) bush fallow and other uses (5%). Inland valley farming ispractised by means of simple bunds and gravity water control methods.

2.2.2 Land Tenure: According to customary land law in Ghana, every parcel of land has anowner. There are four main tenure systems, namely, individual, family, communal and Governmentor State lands. Most of the agricultural land in Ghana is under communal ownership, which iscontrolled by lineage, or clan based land-owning groups and allocated to individuals or householdson a usufructuary basis. Both men and women can access land as long as they are recognisedmembers of the local community.

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2.2.3 The national Land Policy published in June 1999 provides a framework for free access toland by all Ghanaians provided that a) land is available for disposal in any part of the country wherea male or female operator seeks to have it; b) the individual agrees with land owners to adhere tothe covenants and other customary practices governing the disposal of the land; c) the individualundertakes to put the land to a use which conforms to land use plans for the area and to principles ofsound land use and management. The policy document also stipulates that all traditional sources ofland tenure and rights are recognised as legitimate sources of land titles and law protects suchtenure rights.

2.3 Poverty and Food Security

2.3.1 According to the Development Strategy for Poverty Reduction published in March 2000 bythe Ministry of Finance, poverty is widespread in the country, with 42.6% living below the povertyline. Poverty levels are substantially higher in rural areas, at 62.4% compared to 27.5% in urbanareas. The incidence of poverty on the population is disproportionate from region to region: UrbanCoastal (26.8%); Urban Forest (24.8%); Urban Savannah (42.2%); Rural Coastal (46.3%); RuralForest (41.4%); Rural Savannah (70.5%). Poverty is also directly related to the economic activitiesin which households are engaged. At the national level, almost 58% of those identified as poor arefrom households for which food crops cultivation is the main activity. These statistics show that theincidence of poverty widespread and need to be addressed in all regions. Government Statisticsmentioned above indicates some improvement in living conditions. Nation-wide, poverty has fallenfrom about 51% in 1991/92 to about 43% in 1998/99. For the same period, extreme poverty hasdeclined from about 36% in 1991/92 to about 29% in 1998/99. Despite a downward trend in theincidence of poverty, about 58% of those identified as poor are among households for which foodcrop production is the main activity. According to the UNDP Human Development Report 1996,70% of the poor are women.

2.3.2 Food and cash crops agriculture in Ghana is predominantly rain-fed. Consequently, foodproduction fluctuates both quantitatively and qualitatively, from year to year due to frequentoccurrence of climatic stresses during the growing seasons. Thus, food insecurity is frequent and ismore severe in areas with high population densities. This affects mostly vulnerable groupsespecially, women and children given their special needs given the gender division of labour whichtaxes women’s energy levels especially those with lactating children. In 1996 per capita foodconsumption was estimated at about 90 kg of cereals and 330 kg of starchy food plus about 25 kg ofleguminous grains per year. The country self-sufficiency is estimated to be about 77% for cerealsand over 160% for starchy staples. Cereal imports are estimated at 350,000 tons per year, of whichrice and millet are main types.

2.4 Institutional Framework

2.4.1 The Ministry of Food and Agriculture (MOFA) is responsible for the agricultural sectorcomprising crops, fisheries and livestock sub-sectors, with the exception of cocoa, coffee andforestry. Its primary roles are the formulation of appropriate agricultural policies and planning,monitoring and evaluation within overall national development. Since the adoption of thedecentralisation policy in 1997, the Ministry has been organised into single line technicaldirectorates. These directorates are Policy Planning, Monitoring and Evaluation Directorate(PPMED); Animal Production Directorate (APD); Crop Services Directorate (CSD); AgricultureExtension Services Directorate (AESD); Women In Agricultural Development Directorate (WIAD);Plant Protection and Regulatory Services Directorate (PPRSD); Veterinary Services Directorate(VSD); Directorate of Fisheries (DF), and the Agricultural Engineering Services Directorate(AESD).

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2.4.2 Ghana is administratively divided into 10 Regions and 110 Districts. The decentralisedstructure of MOFA comprises 10 Regional Agricultural Development Units (RADUs) and 110District Agricultural Development Units (DADUs). These units are technically, financially andadministratively responsible for the co-ordination, management and implementation of MOFA’sprojects and programmes respectively at regional and district level. The Regional Director ofAgriculture (RDA) is assisted by Regional Development Officers (RDOs) with technicalbackground related to the agro-ecological specificity of the respective region. All otherprofessionals are designated as Subject Matter Specialists (SMS) at region level; and as AgriculturalExtension Agents (AEA) at District level. Field missions of the entire MOFA establishment are co-ordinated by District Directors of Agriculture (DDA) assisted by District Development Officers(DDO).

2.4.3 The Agricultural Engineering Services Directorate (AESD) has the mission of ensuring theavailability and judicious uptake of appropriate farm machinery, equipment, tools and agriculturalengineering technologies. The Post-Harvest Management Division within this Directorate is incharge of storage and processing issues. The Soil and Water Conservation Engineering Unit offerstechnical backstopping to the Regional and District Directorates, specifically on the development ofsimple bunding and water harvesting technologies. The staff includes 30 professionals and 31technicians spread between headquarters, and the regional offices.

2.4.4 The Crop Services Directorate provides a technical link between research and the extensionservices. The Directorate is organised in six divisions: agronomy; agro-forestry; horticulture; soilconservation and water management; soil fertility; and post-harvest. This Directorate will beresponsible for co-ordinating the implementation of the rice development project because they arethe technical directorate mandated to implement crop development in the country. The CSD hasimplemented and is implementing several donor financed projects, among which are the FoodCrops Development Project and the Cashew Development Project financed by the ADF, and theRoot and Tuber Crops Development Project financed by IFAD.

2.4.5 GIDA, a semi-autonomous technical structure of MOFA established in 1960 has themandate of formulating and implementing irrigation development programmes in the country. Theirmain activities include providing technical services in irrigation agriculture. GIDA has technicalstaff with competencies in land and water resource development, engineering, irrigated agricultureand socio-economic studies. Due to the Government’s policy to hand over the management of theirrigation schemes to the beneficiaries, and the restructuring and streamlining of MOFA, GIDApreviously represented in all regions with a staff of 1500, is now mainly based in Accra, with areduced staff of 300. GIDA is presently managing two of the ADF financed projects (KpongIrrigation and Smallscale Irrigation Development) and has a good track record in managingirrigation projects.

2.4.6 The Crops Research Institute (CRI) was created in 1964 and is one of the eight institutionsresponsible for agricultural research under the Council for Scientific and Industrial Research(CSIR), an autonomous body of the Ministry of Environment, Science and Technology. CRI has abroad mandate covering research on all food and industrial crops except cocoa, cola, sheanut,coconut, oil palm, sorghum and millet. The Institute is adequately staffed and equipped. The staffcomprise 90 professional research scientists (32 holding PhD. D, 45 M.Sc./M.Phil. and 14 BSc) and320 support staff. The areas of competence include agronomy and crop physiology, plant breeding,farming systems research, plant protection, seed technology, and agricultural economics coveringcereals, Horticulture, Roots and Tubers. The Institute has outstations located in the various agro-ecological zones of the country where research results are tested before they are disseminated tofarmers. Current research programmes cover maize improvement, Rice improvement, Legume

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Programme, Roots and Tubers Improvement and farming systems. They receive funding directlyfrom the Government and from various aid and development programmes. CRI as a member of theInland Valley Consortium (IVC) which is headed by WARDA, co-ordinates the rice researchprogramme in the country. In addition, the Institute works in close collaboration with IITA,CIMMYT, and ICRISAT among others. It will co-ordinate the implementation of adaptive researchactivities of the project. Additional information on the organisation, staffing, and ongoingprogrammes and projects completed are provided in volume II.

2.4.7 The Agricultural Development Bank (AgDB) is the principal financial institutionresponsible for providing credit for the development of agriculture in Ghana. Established in 1965, ithas been a major channel for bilateral and multilateral credit schemes to agricultural production andagro-based industries. It has a wide geographical coverage with branches in all regions and in mostdistricts of the country. The lending approach includes various methods using Groups, NGOs andFarmers’ Associations. Based on the recent assessment of the institution by OPEV, under the 2nd

and 3rd Lines of Credit performance evaluation, the financial condition of the AgDB is very sound.It has experienced a growth of over 160% in its asset base over the last five years. Although itexperienced a decline in profits in two consecutive years, 1998 and 1999, it envisages an increase innet profits this year of 14% and projects successive increases in profits during the next three years.At present, the lending rate is 36%.

2.4.8 Between 1982 and 1998 the AgDB administered three lines of credit funded by the BankGroup in a satisfactory manner, as indicated in the Project Performance Evaluation Report on theSecond and Third lines of credit (completed in August 2000). This led to the approval in 1999 of aFourth Line of Credit, which became effective in June 2000. Under the first three lines of credit,AgDB received institutional capacity building support to improve its performance, with senior andmiddle management staff receiving training. A direct outcome of this institutional support was astrengthened management capacity leading to improvement in the loan recovery rate in theagriculture sector, from 76% in 1996 to 80% in 1999 (AgDB data). Other outcomes have been theconsiderable increase in its asset base, deposit base, shareholders’ funds, profitability, andimprovement in prudential ratios, enabling it to consistently maintain a capital adequacy ratio wellabove the threshold of 6% established by Ghana’s Banking Law PNDCL 225 in 1989.

2.4.9 There is also a network of Rural and Community Banks (RCB) throughout the countryunder the supervision of the Bank of Ghana, but their credit delivery to small-scale farmers is verylimited. The RCBs are presently being strengthened through a Rural Financial Service Project underADF, IFAD and World Bank financing.

2.4.10 Non-Governmental Organisations (NGOs) also play an important role in promoting groupdevelopment, by providing technical assistance services and facilitating access to credit to the ruralsector in Ghana. An umbrella organisation, the Ghana Association of Private VoluntaryOrganisations in Development (GAPVOD) acts as liaison and co-ordinating agency. There areseveral international NGOs running participatory projects (e.g., Technoserve, CEDEP, and WorldVision) which have been operating in the rural areas for a long time. For example Technoserve hasbeen in Ghana since 1971, CEDEP for 16 years and ACHD since 1987. There are also nationalNGOs (e.g., GEO, Friends of the Earth, Friends of the Nation, African Centre for HumanDevelopment) which are small, but well integrated in the local communities. Generally, the NGOsare adequately staffed, and capable of carrying out their objectives. Details of capacities of someNGOs are given in the Project Implementation Document.

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2.5 Agricultural Development Policy and Strategy

2.5.1 The Government’s long term objectives are to: (i) ensure adequate food supplies at areasonable cost; (ii) reduce unemployment in rural areas; (iii) encourage balanced regionaldevelopment; (iv) increase the sector’s contribution to GDP; (v) increase foreign exchange earningsthrough greater production of traditional export crops and diversification into non-traditional crops;and (vi) improve agricultural and industrial linkages. The Government’s sector objectives are in linewith the Bank Group’s Vision and Strategy.

2.5.2 As part of a series of policies aimed at realising the above-mentioned objectives, in 1995,the Government of Ghana (GOG) launched a 25-year perspective plan for national development, theVision 2020, which aims at transforming Ghana from a low-income into a middle-income countryby the year 2020. To attain the rates of economic growth required to make such a transformation,the agricultural sector would have to play a key role. Consequently, the Ministry of Food andAgriculture (MOFA) formulated a medium term (1997-2007) Accelerated Agricultural Growth andDevelopment Strategy (AAGDS) designed to increase the sector’s annual growth rate from 2-3%(1990-96) to 5-6 percent in order to achieve rapid, sustainable and equitable growth. These rates ofgrowth would result in an increase in the annual agricultural contribution to GDP from an averageof US$2.9 billion to about US$5.5 billion, within an overall GDP of about US$15 billion.

2.5.3 The government has adopted the Agricultural Services Sector Investment Programme(AgSSIP) as the vehicle for implementing the AAGDS. According to AgSSIP, all projects andprogrammes in the agricultural sector are to be incorporated under the same umbrella and followunified procedures in order to avoid duplication. AgSSIP is the framework for co-ordinating donorsupports for implementing programmes and projects under AAGDS. This project will beimplemented within the framework of AgSSIP. As at the time of appraisal, AgSSIP had not yetbeen ratified by Parliament. Consequently, the unit is not fully staffed and operational.

2.6 Donor Supported Activities

2.6.1 Under the framework of the AAGDS, various projects and studies are being implementedthrough the financial and technical support of various donors including the Bank Group. Donorprojects in agricultural sector are co-ordinated by MOFA and regular meetings are held with FAOproviding Secretariat. The Bank Group's intervention includes the following operations: (i) KpongIrrigation co-financed with BADEA, (ii) Afram Plains and Agro-industries Studies, (iii) SpecialProgram for Food Security Pilot Project, with FAO technical assistance; (iv) Food CropsDevelopment Project; (v) Small-scale Irrigation Project; (vi), Cashew Development Project. TheBank Group is also co-financing a Rural Finance Services Project with IFAD and the World Bank.The Bank Group support to projects is intended to help achieve household and national foodsecurity, crop diversification, and agricultural processing and environmental protection.

2.6.2 The National Agricultural Extension Project (NAEP) and the National Agricultural ResearchProject (NARP) both funded by the World Bank are completed. The objectives of both projectswere to develop technologies, and establish operational extension procedures, respectively byNARP and NAEP. Low Risk Programme in the Northern Region also financed by the World Bank;was conceived as an inexpensive water harvesting practice for the conservation of water and soils.Water control was achieved by the construction of bunds under the supervision of the AgriculturalEngineering Services Directorate. The World Bank supported Village Infrastructure Project (VIP)launched in 1998 aims at improving and sustaining basic village-level infrastructure. Finally, theWorld Bank also funds an Institutional Support of AgSSIP, which aims, among others, atsupporting the enhancement of the efficiency of public agricultural services so as to increaseproduction while maintaining or improving the natural resource base.

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2.6.3 IFAD projects include: 1) the Smallholder Credit, Input Supply and Marketing Project(SCIMP) for the establishment of a smallholder inventory credit scheme, improvement ofproduction, storage, processing and marketing of food crops in Brong Ahafo, Ashanti and Voltaregions. The project is near completion; 2) A second phase of the Land Conservation andSmallholder Rehabilitation Project (LACOSREP) in Upper East region, which promotesparticipatory rehabilitation of small dams originally built for livestock watering, and integratedthrough the project with a small irrigated command area by gravity; and 3) the Root and TuberImprovement Project to further increase smallholder productivity of cassava, yams, cocoyams andsweet potatoes, and the utilisation of their end products.

2.6.4 The Agence Française de Développement (AFD) is presently supporting the Lowland RiceDevelopment Project in the Northern Region. The objective is to alleviate, through an integratedapproach, the main constraints to the development of inland valley rice; and to promote animproved and economically viable production system. The project started two years ago and has sofar developed 150 ha. The main lesson drawn from implementing this project is the importance ofthe active participation of beneficiaries in land acquisition. In 1995, the EU financed a feasibilitystudy under the Western Region Agricultural Development Project which aimed at developinginland valleys in the region. The recommendations of the study were not implemented but thepresent project makes use of the information and data collected during this study.

2.6.5 The Promotion of Seed Production and Marketing in West Africa is a joint IITA/GTZ/CSIRproject with the aim to improve the certified seed industry assisting the seed growers in Ghana. TheTraining of Trainers (TOT) and Farmers Field School (FFS) approaches have been promoted byFAO’s Global IPM facility on integrated pest management in rice and by the UNDP-financedNational Poverty Reduction Programme with a specific FAO assisted project on IPM/FFS for rice,plantain and vegetables. These programmes have enabled the training in IPM techniques of some 85MOFA cadres and about 1,745 farmers.

2.6.6 The main lessons drawn from the implementation of the ongoing Kpong Irrigation Project,where the main crop is rice, relate to the importance of active beneficiary participation in the designand implementation of projects especially where land acquisition is envisaged. Where beneficiaryparticipation was effective, land development progressed quicker as less time was spent onacquiring land. The training and farmer group formation activities have led farmers to better waterand crop management. Yield of rice increased up to 3 MT/ha. The use of high yielding varieties andfertilisers contribute significantly to production increase. The need for improved marketing andcredit delivery is critical to the success of such projects.

3. The Rice Sub-sector

3.1 Salient Features

3.1.1 The country imports about two-third of its rice requirement. In 1998, Ghana rice importsaveraged 200,000 tons for a value of about 245 billion Cedis (US$ 61.25 million). The domesticproduction was estimated at about 182,000 tons milled-rice in 1998. Rice production covers some130,000 ha which represents about 2.7% of the total land covered by all cereals (1.3 million ha). Ingeneral, rice is produced in the inland valleys throughout the country. With the full liberalisation ofthe rice sector, the production system has shifted from mechanised large-scale to less intensive, lowinput small-scale farming system. Farming is mostly done with traditional tools (cutlasses, hoes,etc). In few production areas, power-tillers are used both for transportation and land preparation.Farmers in these valleys are familiar with field bunding technique for water harvest. However, dueto lack of credit and insufficient technical assistance from extension, their skills for water harvestand management are limited.

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3.1.2 The rice subsector is characterised by low production due to poor seed quality. The milledrice tends to be of low quality due to varietal admixtures at the mill as well as poor processing(destoning, milling and grading). The paddy to milled rice ratio is between 60 and 65 percentdepending on the quality of the paddy. The percentage of broken rice obtained from the local millsis about 45%, which is higher than the imported Vietnamese (35%), the cheapest of the Importedrice. In rural areas, the marketing is very informal and rudimentary with no grading, no weighingscale. Purchases are made by plate and not standardised. No cash payments are made at time ofpaddy delivery until the rice is milled. The volume of transactions is based on visual estimation atall levels of the market chain. Consequently, it is difficult to assess the profitability of the industry.

3.1.3 Markets. The market is characterised by two products: local and imported rice. Local rice ismainly marketed by small traders who are mainly women, who move within the production zone tocollect the paddy or milled rice. In general, farmers mill their own production before selling totraders. The existing mills are inefficient resulting in low quality milled rice due to impurities,stones and high proportion of broken grains. Mainly because of cashflow problems, the currentpractice is that traders collect paddy from farmers and pay after the rice has been milled and sold.The cost of milling, normally 10% of the milled rice equivalent, is borne by the farmers while themill owner bears the cost of paddy transport from the farm to the mill. This means farmers stay forlong periods without receiving cash after delivering their paddy. This system is well organised asfarmers and traders have established informal business contracts among themselves. The currenttrading of local rice generates no statistics of quantities as the volume of trade is only visuallyestimated. The whole network is not equipped with basic measuring tools like weighing scales. Thetargeted consumers for the local rice are the low-income rural and urban populations who cannotafford the imported rice. The market channel for imported rice is formal with standardisedmeasurements. Importers and distributors are known by the customs officials, they pay taxes andother duties, and they have established warehouses in the major cities of the country. At present, theimported rice has the biggest share of the whole rice distribution channel in the country. This islikely to remain like this if the quality of the local rice does not improve significantly.

3.1.4 Prices. Since 1990, all prices in the rice sector, in line with the general economic policy,have been liberalised. Subsidies on inputs have been completely removed, Since marketliberalisation; the average price of local rice varies between 2,200,000 to 3,000,000 Cedis/MT(USD320 to 440/MT) while the price of imported rice averages 4,400,000 to 5,740,000 Cedis/MT(USD640 to 1,100/MT). The price of imported rice is more than double that of locally producedrice. The import parity price for rice of similar quality from Vietnam is estimated at USD284/MT.Other than the price differential between imported and local rice, there is no price differentiationamong local rice of different grades. The project will produce additional 13,000 tonnes per yearstarting from 2006, which is too small to influence the local market price for rice.

3.2 Rice Production Systems

3.2.1 Rice is grown under two major production systems: the rainfed and irrigated systems. Underthe rainfed rice production system, production is entirely dependent on the distribution and theamount of rainfall during the growing season. It is the predominant production system accountingfor more than 90 % of the national rice production and covers about 90% of the total land areacultivated with rice. This system is practised in the uplands and the inland valleys. In this system,frequent occurrence of drought is the main constraint leading in some years to total crop failure.The crop is produced with traditional farming technologies: manual land preparation with cutlassesand hoes; manual seed broadcasting; and no fertilisers and pesticides.

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3.2.2 Upland rice production - Upland rice production accounts for about 10% of the area underrice production. Yield levels are very low, ranging from 0.7 - 1.5 ton/ha. The cropping season startswith the on-set of the first rains in March-April each year.

3.2.3 Inland valley production - Ghana has many major river basins and the coastal basins, whichconstitute the inland valleys and flood plains distributed all over the country. It is estimated thatinland valleys account for about 1.1 million ha of Ghana’s land (PPMED, 1991). Currently, about2,000 hectares of inland valleys are considered developed for rice production. Approximately 83 %of Ghana’s rice is cultivated in the valleys. Recently, the Government has put emphasis on thedevelopment of inland valleys for rice-based cropping systems. The development of inland valleyswill go a long way towards increasing the productivity of rice and other crops. The inland valleyproduction system is made of midland and lowland valleys where the rice plant depends on acombination of rainfall, groundwater and temporary flooding.

3.2.4 Midland valleys -The prevailing production system does not include any water harvesting orwater control system. Average size of individual rice farm is very small (about 0.25 ha). Averageyields range from 0.8 to 1.5 tons/ha depending on rainfall distribution. When water harvesting andbunding is practised, yields of up to 4 tonnes/ha have been recorded. Midland valley rice farming isgenerally associated with other food cropping activities in the uplands. The use of fertilisers andpesticides is recognised and practised whenever financing is available.

3.2.5 Lowland. The lowlands are also referred to as valley bottom swamps flood plains. Watersource is mainly or partly from surface flow, run-off, and streams. They are flooded for longerperiods during the rainy season, providing a suitable environment for rice growth. In the NorthernGhana, lowlands are not utilised for cultivation to a larger extent as they are in Southern Ghana. InSouthern Ghana, lowlands are cultivated with rice, sugarcane or both. Average individual farm sizevaries from 0.25 to 0.50 ha and the average yield, from 0.8 to 1.5 tons/ha under the traditionalcropping system with no inputs. Potential yield of more than 6 tonnes/ha could be reached in thelowland valleys with the improvement of agronomic practices. Where level of residual moisture issufficient, the rice crop is often followed by a ratoon crop or by an early-maturing crop such ascowpea. In some valleys, farmers use power tillers (rental or ownership) for field preparation(Besease and Kobina Ano Krom), to reduce the shortage of manpower during peak season.

Irrigated rice production

3.2.6 The irrigated system is characterised by full control of the water supply. There are presently22 public schemes in the country, representing about 7% of the total area under rice production. Theaverage individual farm size is rather small, from 0.5 to 2 ha on most schemes. Mechanisation(tractors and power tillers) and farm inputs (fertilisers, high yielding varieties, pesticides) arecommonly used in these schemes. However, due to lack of credit, the majority of the farmers usemanual weed control and harvesting. Yields are generally good, varying from 3.5 to 6 t/ha. Farmersusually practise two rice crops a year.

3.2.7 Principal constraints. Inland valley rice production systems is constrained by technical andeconomic factors such as:

- Poor access to some sites especially during the rainy period;- Absence of adequate land and water management structures;- Inadequate seed supply of improved varieties;- Weak research-extension linkages with farmers which leads, in some areas, to low adoption

rate of modern agronomic packages;

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- Inadequate paddy drying and storage facilities;- Seasonal labour shortages at peak time of production;- Insufficiently organised marketing and processing channel;- Competition from good quality imported rice.

3.3 Strategy for Rice Development

3.3.1 A study commissioned by MOFA in 1997, and financed by the AFD, to compare differentrice cropping systems within the country concluded that inland valleys have a high potential forimprovement of the rice production. The study also concluded that large-scale irrigated rice has nocomparative advantage, despite the potential high yields obtained, due to the high investment costsrequired (up to US$40,000/ha) over the small schemes with lower investment costs. Significanthigh yields and economic performances can be achieved and national rice production could bedoubled within the next ten years through a development strategy focused on the improvement ofinland valley rice cropping conditions. Thus, making use of inland valleys will contributesignificantly to food security.

3.3.2 The government strategy is two-pronged: (i) the intensification of existing cropped areas,through building water retention structures and improving cropping practices to raise the presentaverage yield from 1.5 t/ha to 4.5 tons/ha; and (ii) the increase of the areas of cropped valleys. Thisproject will contribute to the goal by developing an additional 4500 ha in the inland valleys thusincreasing the cropped area from the current estimated 2000 ha to 6500 ha.

4. The Project

4.1 Project Concept and Rationale

4.1.1 The country imports about two-thirds of its rice requirements. There is potential forincreasing local rice production due to the presence of abundant favourable natural resource base,especially in the inland valleys. As the development of large-scale irrigation schemes has failed toachieve the national rice production targets towards self-sufficiency, the Government has shiftedemphasis for rice development to the inland valleys as a way of boosting domestic rice production,employment generation, and saving scarce foreign exchange through import substitution. The targetis to reduce importation by 30% in value annually. The proposed project seeks to partly address theidentified constraints by providing a basis for sustainable rice development in the inland valleysthrough low-cost, traditional water management, use of improved production inputs and post-harvest methods.

4.1.2 The design of the project is based on participatory approach as it builds on the experienceand know-how of the target beneficiaries who are presently engaged in the inland valley riceproduction. During the preparation, pre-appraisal and appraisal missions, a wide consultation wasundertaken with the operators of the rice industry (both female and male farmers, farm groups,millers, and traders) NGOs and resident donor community. Individual and group discussions wereheld with farmers on the fields, women traders in the markets, millers at work and representatives ofNGOs and bilateral and multilateral donors as well as as local communities elders andparliamentarians. The project design includes measures to address current processing and marketingconstraints in the form of improved mills and inventory credit.

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4.1.3 The design also builds on the experiences from the ongoing Lowland Rice DevelopmentProject financed by the AFD in the northern region, the COWIconsult study financed by the EU in1995 for the Western Region, and the ADF financed Lowland Agriculture DevelopmentProgramme (LADEP) in The Gambia. Further, the project design incorporates the experiencegained from the Valley Bottom Rice Development project initiated by JICA in 1989 to developsustainable technologies for integrated soil, water and crop management in the production of riceand other crops in the inland valleys, known as Ecotechnology Based Sawah Development in inlandvalleys. The executing agency will commence beneficiary sensitisation and group formationactivities before the start of the project. The project, drawing on lessons learnt from the ADFfinanced Kpong Irrigation Project, further incorporates appropriate conditions for their fullparticipation during the project implementation in a demand driven approach.

4.1.4 Eligible farmers will be required to contribute their labour to land development. Bushclearing is envisaged in a selective manner so as to preserve those tree species that will be identifiedas valuable through the ethno-botanical survey. All categories of beneficiaries will be represented inthe Regional Committees. Their representatives will be members of the Project Steering Committee,which will oversee the implementation of the project and ensure the achievement of the overallobjective. In addition, workshops will be organised during the course of the project implementationto create fora for exchanging views and incorporating the concerns of the project beneficiaries andother stakeholders in order to take appropriate corrective measures as necessary during theimplementation of the project. The use of NGOs in channelling the credit from the AgDB will helpensure the farmers, the women and men traders and rice millers to get better access to the credit andimprove on the management of the credit. The above will increase the stakeholders’ sense ofownership and responsibility, leading to more sustainable rice production activities.

4.2 Project Area and Beneficiaries

4.2.1 Project Area. The project area covers the Ashanti, Brong Ahafo, Central, Eastern andWestern Regions. The list of proposed sites is given in the Project Implementation Document.Twenty-five (25) inland valley sites covering a total of 4,500 ha will be developed. The size of anindividual site ranges from 100 to 300 ha and is composed of many scattered valley bottoms eachone roughly 10 to 20 ha. About 200 to 600 farming households operate in one site. The project siteshave been selected based on the following criteria: (i) farmer's experience and know-how in riceproduction; (ii) potential of inland valley area as a result of previous survey by GIDA; (iii) physicalaccessibility and distance to site from farmer's village; (iv) precedent level of Inland valleydevelopment. About 90% of the valleys are fallow land with secondary shrub and 10% havereceived scattered development by the farmers themselves. The vegetation of the latter is largelyscattered raffia, swamp trees and grass.

4.2.2 Rainfall. The project area is characterised by three rainfall regimes. The monomodal rainfallregime found in North-Central Brong Ahafo Region; the pseudo-bimodal rainfall regime, in AshantiRegion, Brong Ahafo and North of the Eastern Region; and the bimodal rainfall regime, in CentralRegion, South of the Eastern and Western Regions. In each of these agro-climatic regimes, waterrequirements for rice are potentially covered during the main rainy season from March to July butthe distribution pattern is the problem.

4.2.3 Agriculture land use in the project area. The soils and land uses differ greatly, both withinand between individual valleys in the project area. In the Forest-Savannah transitional zone, land isused for the major food crops: maize, yams, cassava, and rice. In the Forest zone, cropping of staplefood crops such as plantain, cassava, maize and cocoyam, is integrated with the cropping of cocoa

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and other perennial cash crops (Coffee, coconut, rubber, and oil palm). This zone covers theAshanti, Brong Ahafo, Eastern, Western and Central Regions. In the Savannah zone, maize is themain crop. Near the big towns, horticultural crops such as fresh vegetables (tomatoes, eggplant,shallot, onion, okra, and pepper) and pineapples are cultivated on a commercial scale. Rice farmingis mostly a family operated activity with all its members helping at different stages of the farmdevelopment. Both men and women are involved in rice farming although most of the femalefarmers do not cultivate rice themselves, but help the on the farms especially with weeding, birdscaring and marketing.

4.2.4 Demography: The land area and the population for the 5 Regions in project area estimatedin 1995 are in the table below. The distribution of the population is strongly determined by theeconomic strength of the various regions and the climatic and soil conditions for agriculturalactivities.

Area Population Rural PopulationRegion ‘000 km² % of total ‘000 % of total ‘000 % of totalAshanti 24 21 2,930 29 2,003 68Eastern 19 16 2,363 23 1,700 72B/Ahafo 40 34 1,700 17 1,234 73Western 24 21 1,630 16 1,258 77Central 10 8 1,607 15 1,140 71Total/Av 117 100 10,230 100 7,335 72

Source: WARDA, 1995. Inland Valley Consortium

4.2.5 Communication and Marketing infrastructure: There is a fairly good network of trunk andfeeder roads connecting towns and villages within the project area. The trunk roads are often pavedwhile most of the feeder roads are not paved, but are motorable throughout the year. All the 25selected valley sites are located within one to four kilometres from the farmers’ villages. Althoughthese sites can be easily accessed during the dry season by field tracks, their accessibility becomesrestricted during the main production season, making it difficult to bring in farm inputs andevacuate farm products. The access between fields and nearest feeder road or villages is mainly byfootpaths, which cannot be used by two wheeled tractor or trailers.

4.2.6 Land Tenure in Inland Valleys: Inland valleys in general belong to the chief of the areaexcept for a valley running through a family’s land, which automatically belongs to that family.Anybody wishing to use inland valleys seeks the chief’s permission and also the concerned family.Inland valleys in Ghana are accessible to farmers other than customary owners on rental basis.When land is used for permanent tree-crops, well-defined tenurial arrangements are established.Tenancy agreements are mostly for one year subject to renewal. The practice is that mostlandowners continuously lease out the same piece of land over a longer period of time to ensureusufruct rights. Such leases are recognised by customary law. During the appraisal mission, theteam met migrant farmers with their families who have been leasing the same piece of land for overten years. The majority of rice farmers in the inland valleys are migrant farmers mostly fromNorthern and Volta Regions. They rent the land on which they cultivate rice. Rent is collected justafter rice harvest either in kind or in cash. Presently, the rent ranges from Cedis 100,000-200,00/hain addition to one and half bags of milled rice for every 40 bags of milled rice realised. Theirincomes are around 500,000 Cedis per year.

4.2.7 Project Beneficiaries. The project's target beneficiaries are smallholder rice farmers,millers, and traders including both men and women and their families. The farming population isyoung with ages ranging from 25 to 45 years. The family size tends to be large averaging sixchildren per family. Both men and women are involved in rice farming. Men are mostly responsible

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for land clearing and preparation while women are mostly responsible for planting, weeding andharvesting. In addition, women are also responsible for processing activities and marketing of farmproducts. Rural women make up over 60 percent of the farming population and are often the majorproviders for their families.

4.2.8 The incomes are very low and reported to be in the region GHC200, 000 per year.According to the Poverty Reduction Strategy Paper, this group falls within the 51% classified as“extremely poor”. These beneficiaries are organised on the basis of geographic proximity (people inthe same vicinity) or of the same economic interests (farming, trading, etc). Many have electedofficials who run the daily affairs of the group. Generally, their main purpose is to organiseproduction and at times, marketing and through their associations they obtain credit. The farmers inthe valleys are involved in production of sugarcane, vegetables, maize, cocoyam and plantain. Nonfarm activities such as basket making from raffia and palm leaves are practised. The incidence ofHIV/AIDS among this group is between 4 and 6%.

4.3. Strategic Context

The overriding aim of the GOG's economic development programme is the reduction ofpoverty. As most of rural population earns livelihood from farming, the GOG has adopted anAccelerated Agricultural Growth and Development Strategy (AAGDS) to be implemented throughAgricultural Services Sector Investment Programme (AgSSIP). It will contribute to broad-basedpoverty reduction and to ensure food security by promoting selected agricultural commodities forwhich Ghana has or can develop comparative advantage to satisfy domestic requirements for foodand to increase incomes of smallholder farmers. Consequently, rice production is expected to play akey role in achieving national food security, reducing rural poverty and contributing to the overalleconomy given its potential for generating incomes, import substitution, and foreign exchangesavings. The proposed project is within AgSSIP and is in line with the GOG's AgriculturalDevelopment Strategy. It is also consistent with the Bank Group's vision and strategy for Ghana,which focuses on food security and poverty reduction.

4.4 Objective

The sector goal is to enhance food security and reduce imports of rice. The specificobjective is to increase incomes of smallholder rice producers in the project area by increasingproduction of good quality rice.

4.5 Project Description

4.5.1 The project has five main components, which are Land Management, Credit for CropDevelopment, Capacity Building, Adaptive Research and Surveys, and Project Co-ordination. Themain outputs will be: development of 4,500 ha rice cultivation; improvement of 280 km of accessroads and field tracks; provision of UA4.9 million credit for farm inputs and equipment; training ofbeneficiaries and technical staff; development of rice agronomic packages and technologies; andstrengthen project co-ordination. Overall, 9,000 farmers and 150 women and men involved in ricemilling and trading will benefit directly. Rice paddy production will increase by 60,000 metric tonnesover five years (equivalent to 36,000MTof good quality milled rice).

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4.5.2 The summary description of these components and the activities to be financed in order toachieve the envisaged outputs is given below:

A. Land Management Component

Land Development

4.5.3 The project will develop 4,500 ha scattered over 25 inland valley sites ranging from 100 to300 ha in the five Regions. Simple and low-cost technologies of water control and management willbe used. Land development will involve three main activities: Land clearing will be undertaken forsites, which are selected, and the farmers mobilised and express the need. The sites will be surveyedand land preparation, mainly involving land levelling and bunding will thereafter be executed.Finally, adapted designs will be prepared for each site, and construction of low-cost watermanagement structures such as contour bunds, small dikes, irrigation and drainage canalsundertaken. The purpose is to collect and make water available during the whole rice-croppingseason, and reduce moisture stress; and drain excess water. The project will support the cost of landclearing, survey, design and supervision, as well as construction of land and water managementstructures. During land development, the beneficiaries will contribute labour to clear spots wherethe vegetation is light and in the construction of infield bunds.

Improvement of Access Roads and Field Tracks

4.5.4 Due to difficult access to the sites, especially during the rainy season, the project will makeprovision for the improvement of 200 kilometres of access roads and 80 km of field tracks from thevillages or nearest feeder to the sites. The rehabilitation will consist of spot improvement of theexisting access roads and tracks. This will involve filling of potholes, re-grading, gravelling,construction of side drains and/or rehabilitation of small bridges and culverts. Field tracks or pathswill be upgraded to motorable state by widening and providing side drains. Beneficiaries willcontribute labour to the upgrading of the 80 km field tracks.

B. Credit for Crop Development

4.5.5 The project will support the increased use of improved varieties through the credit scheme.250 farmers (10 per site) will be selected and encouraged to produce rice seeds to be sold to otherfarmers. CRI and the Seed Division of PPRSD will provide technical supervision to ensure that theseeds produced by the farmers satisfy all the quality requirements. A credit scheme of UA 4.8million will be established to support crop intensification, expansion and improved post-harvesthandling. Short-term loans (6-12 months) will be provided for production inputs (such improvedseed of high yielding rice varieties, fertilisers and agro-chemicals) to farmers; and inventory creditto rice traders for purchases of paddy from farmers. Medium term loans (up to 5 years) will beprovided to entrepreneurs for the acquisition of 48 storage facilities, 57 drying floors, purchase of50 mini rice mills and farm equipment (200 power tillers; 250 threshers; 250 mini rice reapers; 250tarpaulins) and other farm tools (125 weighing scales, and 60 digital moisture meters).

C. Capacity Building

4.5.6 The main activities under this sub-component are (i) entrepreneurs, farmers' groupformation and training, and (ii) HIV/AIDS, malaria prevention, and family planning campaigns.The project will contract selected NGOs with expertise in group mobilisation and formation,training in business and management skills to implement these activities. About 450 rice farmer-groups will be formed and trained. Existing and new small-scale rice millers and traders-groups willalso be organised and trained. Funds will be provided to train and supervise rice farmers in crop

15

management techniques. Farmers field schools, workshops, seminars and field visits will beorganised. Environmental training by the Environmental Protection Agency will form an integralpart of these training sessions.

4.5.7 Training support will be provided to 9,000 smallholders and technical backstopping given to36 Agricultural Extension Agents (2 agents per District) in on-farm efficient utilisation of nutrients,intensification of the rice-based cropping system, and Integrated Crop and Pest Management(ICPM). Training topics will include: a) land preparation; b) rice varieties and seed production; c)identification and management of insect pests; d) identification and management of diseases; e)identification and management of natural enemies; f) water management; g) weed management; h)soil fertility and nutrient management; and I) crop rotations and associations. A training manual willbe developed. The project will provide funds for short-term training, study tours for 10 researchscientists at WARDA and IITA Headquarters, as well as to similar rice projects in the sub-region.

4.5.8 The GOG has adopted a strategy of integrating routine HIV/AIDS activities into regionaland district plans and budgets, and building capacity of key institutions in order to further promoteAIDS control activities in other sectors. Malaria and family planning constitute another scourge anda serious disincentive to rice-based cropping in the inland valleys of Ghana. Farmers, millers,traders and extension agents in the project area will receive HIV/AIDS, malaria and family planningawareness and prevention campaigns. This will be achieved by incorporating training modules onthe subject in the courses that will be organised for the various target groups. The process willinvolve close collaboration with the Ministry of Health officials, at all levels of the administrativestructure.

D. Adaptive Research and Surveys

4.5.9 It is proposed that in each of the five participating regions, two locations will be selected toserve as sites for testing of technologies (demonstration farms), and to serve as Farmers’ FieldSchools (FFS). Technical manuals and fact sheets will be produced based on existing knowledgefrom existing Research institutions. The activities will be 1) Seed production and on-farmevaluation of improved varieties; 2) Nutrient management; 3) Rice-based cropping systems; and 4)integrated crop and pest management (ICPM).

4.5.10 Seed production and on-farm evaluation of improved varieties will involve production offoundation seeds of new superior varieties, and on-farm testing of these varieties. Nutrientmanagement trials will be conducted on rate and nature of fertilisers. Critical nutrients affecting riceyield will be tailored site by site. Intensification of rice-based cropping system will be assessed andtheir socio-economic importance evaluated.

4.5.11 Two surveys will be undertaken at the start of the project. These are Baseline Survey andethno-botanical survey. These will establish parameters for the verifiable indicators for use inmonitoring of project performance and reconfirm the poverty profile, gender issues, populationcomposition, whether migrants or indigenous, cultivation practices, and species composition of theexisting vegetation. These surveys will provide information on specific project sites and on ricemarkets and existing processing capacity, and benchmark data for monitoring the project on-goingactivities.

E. Project Co-ordination

4.5.12 The project will be implemented by the Directorate of Crop Services, through the five RegionalDirectorates of MOFA. The Directorate will be strengthened by a team of three national expertscomprising of a rice production specialist, a Post-harvest/marketing Specialist, and water management

16

engineer. The five RADUs, the three Specialists, and the AEAs will be provided with vehicles andmotorbikes, equipment, field allowances, office running costs.

4.6 Production, Markets and Prices

4.6.1 The domestic rice production was estimated at about 182,700 tons of milled rice in 1998. Atfull development, the incremental production from this project is estimated at 13,000 tonnes/year.With rice imports estimated at about 200,000 tons per year (value of about 245 billion Cedis(US$61.25 million), there is a large market potential for domestic rice in Ghana as long as thequality matches that of imported rice.

4.6.2 Prices. Since 1990, all prices in the rice sector, in line with the general economic pricepolicy, have been liberalised. Subsidies on inputs have been completely removed; the floor andceiling prices abolished and restrictions on rice trade and the control of price of foreign exchangecompletely relaxed. Since market liberalisation, the price of local rice varies between 2000 and3000 Cedis/kg while the price of imported rice between 4,000 and 7,000 Cedis/kg. In general, themarkets for rice in Ghana are not saturated and with devaluation of the Cedi, there is an opportunityfor increasing rice production in Ghana and thereby increasing farmers' incomes in the project areasince imported rice will be more expensive than it is now.

4.7 Environmental Impact

4.7.1 The project has been classified as Category II under the Bank’s Environmental AssessmentGuidelines. The development schemes proposed would have limited environmental impacts that canbe routinely resolved through application of mitigating measures and/or design changes. The projectwill target existing rice fields for bunding, and additional land will be cleared for area increaseunder valley rice production. For the existing developed sites, the activities will mostly be forrehabilitation and improvement of existing structure involving bush clearing, bunds rehabilitation,and land levelling and will have limited effect on the environment. The use of such instruments aspower tillers for plot preparation will have minor impact on soil structure. The project will improvethe management and control of water in the valley bottoms.

4.7.2 The environmental considerations associated with lowland flooded rice production usuallyarise from the construction of dikes and bunding which can interrupt the spawning of migratory fishspecies, in the case that a permanent stream runs across the land. Other potential hazards are the riskof water-born diseases due to longer periods of stagnant water in the fields, loss of habitat,groundwater pollution from agrochemical runoff, waterlogging and salinization due to poordrainage. As described in 4.2.1, the project area has neither any permanent stream crossing the landnor affected by long periods of stagnant water. Therefore, under the present project, suchenvironmental hazards will not arise. Potential physical impacts that may arise from poor landlevelling and water management include soil erosion and declining soil fertility. The land clearingrequired by the new valley development may induce loss of socio-economic services such asfuelwood and grazing, hence resulting in increased pressure or conversion of other lands.

4.7.3 The project will provide technical support and training throughout the process and put inplace measures to be utilised by the farmers in order to reduce hazardous effects on the beneficiariesand the physical environment. The mitigation measures will include Integrated Crop and PestManagement (ICPM), integrated soil fertility management and environmental education. Thecontrol of the water flow to prevent stagnation will also contribute to reducing the risks of diseasessuch as malaria and bilharzia. In addition, the project has included malaria prevention campaigns toaddress this aspect. The drainage system will be designed so as to prevent agrochemical residues

17

from affecting watercourses as a result of misapplication. New land will be subjected to survey andlocal consultation for selective clearing to preserve beneficial botanical species. The mini mills willbe purchased based on the international norms of technical specifications and operated withnegligible concern for gas emissions and occupational safety. The rehabilitation of the access roadnetwork is only spot improvement, consisting of small works.

4.7.4 The Environmental Protection Agency (EPA) will assist with evaluating and monitoring theimpacts throughout project implementation. The Executing Agency, in consultation with the EPA,will ensure that the international and national safety standards are applied to the agrochemicalprocurement process. The Environmental Protection Agency will ensure that the environmentalmitigation measures are implemented, and mechanisms put in place in order to monitor the long-term ecological effects of the project. A budgetary provision has been made for that purpose.

4.8 Social Impact

The social impact of the project will come from three main sources, namely increased riceproduction, improved roads and tracks and training. Increased rice production will create moreemployment in the rural and urban areas; increase incomes for smallholder rice producers andentrepreneurs including both men and women. Improved access to and from the rice fields willreduce drudgery for carrying inputs and farm outputs on the head and by bicycle. Training willenhance the people’s awareness and capability to solve their own problems and empower the localcommunities to take care of their needs. It will further enhance the capability of the entrepreneurs tomake better business decisions. The HIV/AIDS, malaria and family planning awareness campaignswill contribute to the health of population. All of these improvements will contribute to povertyreduction. The participatory approach adopted by the project will help address the needs of thepoorest farmers, many of whom are women. Increased incomes for women will improve householdfood security and well being, as women spend most of their earnings on their families, especially ontheir children. In addition, the introduction of the power tillers, threshers, reapers, and mini ricemills will help ease the workload on farmers, particularly women who have multiple roles inproduction and household.

4.9 Project Costs

4.9.1 The total cost of the project, exclusive of custom duties and taxes but including physicaland price contingencies, is estimated at C 145,800.1 million equivalent to UA 17.1 million. Theforeign exchange portion is estimated at UA 8.7 million representing 51% of the total project cost.The local cost portion is UA 8.4 million equivalent to 49% of the total cost. A summary of costs bycomponent and by category of expenditure is provided in table 4.1 and 4.2 below.

Table 4.1: Summary of project cost estimates by component.(Ghana Cedis Million) (UA '000)

Local Foreign Total Local Foreign Total F.E1. Land Management 26,218.2 31,114.9 57,333.1 3,074.0 3,648.2 6,722.2 542. Credit for Crop Dev. 7,406.4 30,320.5 37,726.9 868.4 3,555.0 4,423.4 803. Capacity Building 10,501.8 167.5 10,669.3 1,231.3 19.6 1,251.0 24. Surveys & Adaptive Research 2,158.1 1,992.2 4,150.3 253.0 233.6 486.6 485. Project Co-ordination 10,199.0 3,261.4 13,460.4 1,195.8 382.4 1,578.2 24

TOTAL BASELINE COSTS 56,483.5 66,856.6 123,340.1 6,622.6 7,838.8 14,461.4 54Physical Contingencies 2,932.9 3,390.4 6,323.3 343.9 397.5 741.4 54Price Contingencies 12,255.9 3,880.9 16,136.8 1,437.0 455.0 1,892.0 24

TOTAL PROJECT COSTS 71,672.3 74,127.8 145,800.1 8,403.4 8,691.3 17,094.8 51

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Table 4.2 Summary of Project Cost by Category of ExpenditureMillions Cedis UA’000Category of Expenditure

F.E L. C TotalCosts

F.Ex L.C Total%

F.E

Civil WorksCreditEquipmentVehicles and MotorbikesSpecialist ServicesSurveys & StudiesTrainingSalariesOperating costs

29,030.130,320.5

73.71,769.61,678.7

802.9323.6

02,831.3

21,340.97,406.4

100.50

7,898.21,794.17,541.63,295.57,106.3

50,371.037,726.9

174.21,769.69,576.92,597.07,865.23,295.59,937.6

3,403.73,555.0

8.6207.5196.8

94.137.9

0332.0

2,502.2868.4

11.80

926.0210.4884.2386.4833.2

5,905.94,423.4

20.4207.5

1,122.9304.5922.2386.4

1,165.2

548042

1001831

40

29Total Base CostPhysical ContingenciesPrices Contingencies

66,856.63,390.43,880.9

56,483.52,932.9

12,255.9

123,340.16,323.3

16,136.8

7,838.8397.5455.0

6,622.6343.9

1,437.0

14,461.4741.4

1,892.0

545424

TOTAL PROJECT COST 74,127.8 71,672.3 145,800.1 8,691.3 8,403.4 17,094.8 51

4.9.2 All project costs were estimated on the basis of the prevailing prices in Ghana in February2001. The prices of imported goods and services were obtained in Cedis then converted to Units ofAccount using February 2001 exchange rates. Cost for civil are based on ongoing similar workswhile the unit cost for the roads were obtained from the Feeder Roads Department. A rate of 10%for physical contingencies was applied to the costs of civil works and goods to be purchased underthe project. Given a high level of inflation rate in Ghana, it was deemed necessary to separate theeffect of price contingencies into local and foreign expenditures. A rate of 2.5% was applied to allimported goods and 8 percent to local goods and services. The latter rate reflects the long-termtrend of the expected local inflation over the period of the project.

4.10 Sources of Financing and Expenditure Schedule

4.10.1 The project will be financed by the African Development Fund (ADF) and the Governmentof Ghana (GOG). The total ADF financing will be UA 15.00 million, representing 88% of the totalproject cost. The ADF resources will finance 100% of the foreign exchange costs and local costsamounting to UA 6.3 million (76% of total local costs) associated with civil works, equipment andvehicles operations and maintenance, adaptive research activities and training of staff, farmers andentrepreneurs. The Government contribution (including beneficiaries) will amount to UA 2.1million, equivalent to 12% of the total project cost to cover salaries of staff to be involved in theproject implementation, office utilities for the project co-ordination unit and operating costs. Thebeneficiaries will contribute labour towards the cost of land clearing and the construction of infieldbunds and this is valued at UA0.4 million. The financing plan of the project is shown in table 4.3.

Table 4.3 Sources of Finance (Millions UA)Source Foreign Exchange Local Costs Total Costs % of Total

ADFGovernment

8.7 6.32.1

15.02.1

8812

TOTAL 8.7 8.4 17.1 100

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4.10.2 Justification for ADF for financing of Local Costs. During the last decade, Ghana has madesubstantial efforts towards achieving sustainable development in general and towards mobilisationof external and internal resources to finance its development activities. Furthermore, since 1983GOG has undertaken comprehensive and sustained economic reforms to stabilise and liberalise theeconomy, financed in part by the Bank Group.

4.10.3 The project has a relatively high local cost content estimated at UA8.4 million mainlybecause of the nature of the development to be undertaken. The major developments will compriseconstruction of low cost traditional land and water management infrastructures, adaptive researchand capacity building which will mostly use local materials and services. The financial system hasrecently come under strong pressure from sharp declines in the world prices of cocoa and gold,Ghana's principal foreign exchange earners, and simultaneously, rising prices of petroleumproducts. The negative impact of these developments has been exacerbated by substantial shortfallsin revenue collections. The overall fiscal deficit increased from 6.3% in 1998 to 6.5% in 1999 andthe domestic primary balance declined from 3.8% of GDP in 1998 to 2.3% in 1999. As a result, itwould not be prudent for the Government to resort to local borrowing due to the existing highdomestic debt and the crowding out effect that would derail its ongoing reform programme. It istherefore necessary that the ADF resources be utilised to meet large part of the local costs.

4.10.4 The Government has taken several measures to improve fiscal performance. These includethe creation of a Central Revenue Board (to improve tax administration), implementation of theMedium Term Expenditure Framework that has streamlined expenditure; adoption of revenuecollection measures that include the tightening of procedures relating to revenue collection,strengthening the audit program and reintroduction of the Value Added Tax. It is expected that overtime these measures will improve GOG finances, enabling it to eventually fund the local costs ofthe project activities from its own resources. The ADF will finance part of the local currency costs,amounting to 37% of the total project cost, considering the GOG would not be able to bear theentire burden of costs related to land development, operation and maintenance of the infrastructuredeveloped, research activities and beneficiaries group formation and training.

5. Project Implementation

5.1 Executing Agency

5.1.1 The Ministry of Food and Agriculture (MOFA) will be the executing agency. No ProjectImplementing Unit is being created, as the day-to-day management of the project will be theresponsibility of the Crop Services Directorate strengthened by a team of three technical staff. Theexisting National Project Steering Committee will be activated and proof provided. In addition aRegional Technical Committee will be established at each RADU under the chairmanship of theRegional Agriculture Director and will include representatives of beneficiaries to oversee theimplementation.

5.1.2 The project will be implemented over a period of five years. The overall implementation ofthe project activities will be the responsibility of the Director of CSD and the respective RegionalAgriculture Directors. Each Regional Agriculture Director will designate a Regional DevelopmentOfficer to implement and co-ordinate the project in his/her respective RADU. The assignedRegional Development Officer will liase with the technical staff based in Kumasi, NGOs andInstitutions assigned to implement specific activities of the project. The Agricultural DevelopmentBank will manage the credit component, but selected NGOs will intermediate between AgDB andthe beneficiaries to facilitate credit delivery and recovery. Selected NGOs who will collaborate withthe Ministry of Health will conduct HIV/AID, malaria and family planning and population controlawareness.

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5.2 Institutional Arrangements

5.2.1 As the project covers 5 regions, central co-ordination of activities is necessary. In line withthe Government’s decentralisation policy, the technical staff will be located in Kumasi where theywill share the office space and accounting facilities of the Project Management Unit for Food CropsDevelopment Project also financed by ADF resources. The project technical staff will comprise ofnational specialists in Rice Production, Agricultural Processing and Marketing, and WaterManagement Engineering. The agricultural specialist will advise on rice production, the post-harvestand marketing specialist on marketing of rice products; and the water management specialist will guidethe farmers in the adoption, implementation and maintenance of the water management infrastructureand access roads. At field level, the project will be co-ordinated by five Regional DevelopmentOfficers.

5.2.2 Project Steering Committee. The existing Project Steering Committee (PSC) chaired by theMinister of Food and Agriculture for the Food Crops Development Project will be used. The PSCcomprises representatives of the various departments of MOFA directly involved with the project(CSD, DAES, PPRSD, PPMED, WIAD), CSIR, CRI, Environmental Protection Agency,Department of Feeder Roads, Agricultural Development Bank, and representatives of the Regionscovered by the project and two representatives of beneficiaries (farmers and traders/millers), andNGOs. two representatives from NGOs, and at least one representative from the farmer groupsrepresentatives at regional level. The PSC will provide policy guidance for the smoothimplementation of the project and ensure liaison with project beneficiaries and associatedinstitutions. It will approve annual budgets for the programme. The Director of CSD will be theSecretary to the Steering Committee. This will be a condition of the loan.

5.2.3 Implementation modalities. The implementation of individual activities at the District levelwill be realised through the existing DADUs. The respective specialist will collaborate with theDCS, both the Regional and District Directors of Agriculture in the drawing up of theimplementation programme and the implementation of the crop production activities. The projectWater Management Engineer will be responsible for the design and supervision of the landdevelopment in close collaboration with GIDA and AESD. Based on standard design of inlandvalley, the Project will enter into a Contract Agreement to adapt this design to specific areas forwhich farmers will make the request. Local contractors supervised by the Department of FeederRoads will be responsible for the programme of access roads and field tracks. The adaptive researchprogramme will be responsibility of the respective Research Institutes under contract. The groupformation and other activities will be contracted out to local NGOs with experience and capacity formobilising animating and training farming and entrepreneurial groups. The implementation of theHIV/AIDS, Malaria prevention and family planning sub-component will be the responsibility of theNGOs in collaboration with Department of Health under contract with the project. Land clearing,levelling and construction of the water control structures will be contracted. Onfarm structures suchas bunding as well as the operation and maintenance of these structures will be carried out by thebeneficiaries under the technical guidance the Project technical staff.

5.2.4 The credit funds would be managed by the Agricultural Development Bank. Selected NGOsunder contract will mobilise and sensitise the beneficiaries and link them to AgDB. The NGOs willfacilitate the distribution and collection of the loans. AgDB is already collaborating with NGOs inother fields of loans. The GOG shall on-lend these funds to the AgDB on the basis of a subsidiaryloan agreement between the two parties, on terms and conditions acceptable to the Bank. Details ofthe administrative arrangements between the GOG and the AgDB will be included in the on-lendingagreement, which shall have been reviewed and approved by the Fund prior to the signature. TheAgDB will charge prevailing market interest rates for agricultural lending. This shall be made acondition of the loan

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5.3 Supervision and Implementation Schedules

The project will be implemented over a period of 5 years. At the start of the project, a globalprogram and implementation schedule of the development of the sites shall be submitted to theBank. During the first year, emphasis will be on the inventory surveys and the designs of the valleysites, land clearing, access roads and some construction of water control structures. Details of theimplementation schedule are given in Annex 4.As the valley development will be demand driven,starting from the first year; this process will be repeated every year until the fifth year.

Table 5.1 Expenditure Schedule by Component (UA’000)Component 2001 2002 2003 2004 2005 Total

A. Land ManagementB. Credit for Crop DevelopmentC. Capacity BuildingD. Adaptive Research & SurveysE. Project Co-ordination

636.31,548.8

304.3398.4518.5

1,676.11,737.7357.851.8

283.6

2,423.8662.8

374.745.4

358.1

1,849.5584.1

355.142.5

354.8

1,699.8305.5

170.70.0

354.6

8,285.54,838.91,562.7

538.11,869.6

TOTAL 3,406.3 4,107.0 3,864.8 3,186.1 2,530.6 17,094.8

Table 5.2: Expenditure Schedule by Source of Finance (UA’000)Sources of Finance 2001 2002 2003 2004 2005 TotalADFGovernment

3,212.9193.4

3,682.2424.8

3,328.4536.4

2,711.6474.5

2069.5461.1

15,002.62092.2

TOTAL 3,406.3 4,107.0 3,864.8 3,186.1 2,530.6 17,094.8

5.4 Procurement Arrangements

5.4.1 All procurement of goods, works and services financed by the Bank Group will be inaccordance with the Bank’s Rules of Procedure for Procurement of Goods and Works or, asappropriate, Rules of Procedure for the Use of Consultants. The Executing Agency, i.e. the CSDwhich is within MOFA has implemented and is implementing several donor financed projects,among which are the Food Crops Development Project financed by the ADF, and Root and TuberCrops Development Project financed by IFAD. It is adequately staffed and equipped in order toprocess procurement issues and prepare required procurement documents. The EA is thereforefamiliar with ADF Rules of Procedure for the Procurement of Goods, Works and Services

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Table 5.3: Summary of Procurement Arrangements

UA ‘000Expenditure Categories

NCB Others SL Total

1.Civil Works1.1 Land clearing1.2 Land Development1.3 Access Roads ImprovementSub-total

1,690.52,360.53,270.3

1.690.5 [1,598.3]2,360.5 [2,231.5]3,270.3 [3,091.5]7,321.3 [6,921.3]

2. Goods2.1 Vehicles & motorbikes2.2 EquipmentSub-total

210.121.0

210.1 [210.1]21.0 [21.0]

231.1 [231.1]

3. Consultancy Services3.1 CW Survey, Design and Supervision3.2 Agric. Surveys3.3 Adaptive Research3.4 Monitoring & Evaluation3.5 Mid-term review3.6 External Audit3.7 Training3.8 Other servicesSub-total

213.4300.4237.7230.127.553.0

947.3811.9

213.4 [213.4]300.4 [300.4]237.7 [237.7]230.1 [230.1]

27.5 [27.5]53.0 [53.0]

947.3 [947.3]811.9 [456.5]

2,821.3 [2,465.9]4. Miscellaneous4.1 Operating costs4.2 Local Staff Salaries4.2 CreditSub-total

1,415.9471.5

4,838.9

1,415.9 [665.1]471.5 [0.0]

4,838.9 [4,716.6]6,726.3 [5,381.7]

Total 17,100.0 [15,000.0]Figures in brackets are amounts financed by ADF.

5.4.2 Civil Works. Procurement of civil works with regards to land clearing, land levelling, andterracing, and construction of water control works amounting to UA7.3 million, out of which UA 6.9million will be financed by ADF. It is envisaged that 25 contracts, each worth UA 277,000 will beawarded through National Competitive Bidding procedures (NCB). Participation in land clearing andbunding to be carried out by the beneficiaries amounts to UA 0.4 million, and represents theircontribution. The NCB procedure has been selected because of the small scope and scattered nature ofthe works involved (25 remote sites). In addition, there are an adequate number of qualified nationalcontractors capable of undertaking these works.

5.4.3 Goods. The Contract for vehicles and motorbikes, amounting to UA 210,100 will be awardedunder NCB procedures. There is an availability of adequate number of local agents of internationalsuppliers to ensure competitive prices. Contracts for equipment valued at UA 21.000 will be carriedout under NCB procedures. This involves various sets of equipment such as computers, photocopiers,air-conditioners, and locally manufactured furniture.

5.4.4 Consultancy Services and Training. All consultants required for the project will berecruited through competition on the basis of a short list, in accordance with the Bank's "Rules ofProcedure for the Use of Consultants". This applies to survey, detailed design, and constructionsupervision valued at UA 213,400 and the agricultural surveys valued at UA 300,400. For externalaudit of the project accounts valued at UA 53,000 and the mid-term review valued at UA27, 500.0,the recruitment of consultants will be done through a short list of consultancy firms atnational/regional levels considering the small amounts involved. The selection procedure based onthe technical quality with price consideration shall be used. Training valued UA 947,300 and

23

HIV/AIDS and malaria prevention and family planning campaigns will be done by specialisedinstitutions.

5.4.5 Credit (UA 4.9 million). Goods to be procured under the credit component includingfertilisers, agro-chemicals, power tillers, mills, etc. will be carried out by the respectivebeneficiaries in accordance with established commercial practices acceptable to the Bank.

5.4.6 Review Procedures: The text of a General Procurement Notice (GPN) will be agreed withthe Crop Services Directorate and it will be issued for publication for publication in DevelopmentBusiness upon approval by the Board of Directors of the Loan Proposal. The following documentsare subject to review and approval by the Fund before promulgation:

Specific Procurement Notice Tender Documents or Requests for proposal for Consultants Tender Evaluation Reports or Reports on Evaluation of Consultants’ Proposals, including

recommendations for contract award Draft contracts, if these have been amended from the drafts included in the tender documents

5.5 Disbursement Arrangements

The project funds will be disbursed according to the expenditure schedule by componentand by source of finance shown in tables 5.2 and 5.3 respectively. The Government will open twoseparate accounts in the name of the project for the funds provided by ADF and the Government.The ADF funds will be disbursed according to an annual work programme, which will be approvedbeforehand by the Government and ADF. Initial request for disbursement of the special accountwill be submitted to the Bank for approval and shall cover a period of four months. Thedisbursement of subsequent funds will be subject to justification of the utilisation of the precedingfunds. Other disbursements under the project will be made in accordance with the procedures inforce. The contribution of the Government to the project costs will be deposited in a special accounton a quarterly basis as set out in table 5.3. This will be a condition of the loan.

5.6 Monitoring and Evaluation

5.6.1 The project monitoring and evaluation will be the responsibility of the Monitoring andEvaluation Unit of PPMED of MOFA. The Ministry of Finance will periodically monitor theoverall implementation of the project. The M&E Unit will be required to provide quarterly reportsprior to each of the PSC meetings. A baseline survey will be undertaken within six months ofproject commencement to establish the parameters of the verifiable indicators. A mid-term reviewof the project’s performance will be undertaken in the third year, which will form the basis formodifying the project’s approach, if, found necessary.

5.6.2 The project will prepare annual workplans, quarterly (according to the Bank Group format)and annual progress reports indicating physical progress and procurement activities andexpenditures, according to the requirements of ADF. The quarterly reports should reach the ADFwithin two months of the end of the reporting period, while the annual report should be submittedbefore the end of March of the following year. A project completion report will be submitted byMOFA within six months of the end of project implementation.

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5.7 Financial Reporting and Auditing

The Project will keep financial records in accordance with sound accounting practices andwill ensure that all project accounts are audited annually by an independent auditor acceptable tothe GOG and the ADF and the corresponding reports will be regularly submitted to the Bank forreview. The CSD will be responsible for timely submission of annual financial statements. Aseparate audit will be undertaken on the use and application of the credit funds managed by theAgDB. Fully audited certified financial statements for the preceding financial year shall besubmitted to ADF not later than six months after the closing of the financial year.

5.8 Aid Co-ordination

5.8.1 Co-ordination of aid in Ghana is currently being effected on a pilot basis through theComprehensive Development Framework. Under this framework, inter-agency co-ordination isreinforced through sector co-ordinating groups and Mini-Consultative Groups meetings organisedon a quarterly basis. MOFA is responsible for co-ordinating donor assistance in the sector at thenational level through the AgSSIP. All donors are required to support the government efforts in theimplementation of AgSSIP and all projects/programmes financed should fit into this framework.FAO is the lead institution for the Agriculture sector co-ordinating Group.

5.8.2 The ADF missions met with representatives from the European Union (EU), World Bank,Japan International Co-operation Agency (JICA), Agence Française de Développement (AFD) andFAO. The preparation mission participated in the Donor’s Co-ordination meeting of the AgriculturalSector attended by the main donors. Those present included FAO, Canadian High Commission(CIDA), GTZ, AFD, DFID, The World Bank, USAID, EU, JICA, UNDP and WFP on 22 March 2000.During the meeting, the mission briefed the different donors on the proposed project. The mainconcerns raised by the representatives were the need to ensure complementarity with the SPFS,especially with regards to water control; and to take into account the recommendations of the EU studyin the Western Region; and monitor the impact of the world trade in rice. The proposed Inland ValleyRice Development Project to be funded by the Bank Group will complement and draw lessons fromthe Lowland Rice Project being funded by AFD in the Northern and Volta regions, as it will coverthe other Regions. This has been achieved through active donors' co-ordination.

6. Project Sustainability and Risks

6.1 Recurrent Costs

6.1.1 Recurrent expenditures under the project are estimated at UA 1.1 million for the entireperiod of the project. The major cost items under the ADF financing include operating costs for theProject staff and office, operation and maintenance of vehicles and motorbikes at the regional anddistrict level for extension workers and field allowances estimated annually at UA 0.2 million. Thecost items to be borne by the Government comprise salaries, office utilities and part of running andmaintenance of motorbikes, valued at UA 0.02 million per year and will easily be absorbed by theGovernment. The operations and maintenance of the water control and management infrastructuredeveloped by the project estimated at UA 0.14 million annually would be the responsibility of thebeneficiaries as normal farm operating costs. Salaries of existing staff, estimated at UA 0.07 millionper year, are already in the Government budget.

6.1.2 At the end of the project implementation, the Government will only bear the additionalrecurrent costs associated with the operation and maintenance of vehicles and equipment used bythe Project. The running and maintenance costs associated with motorbikes will be the

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responsibility of the Agricultural Extension Agents under MOFA’s current arrangements whichstipulate that that staff should gradually take ownership through monthly deductions from salary.Recurrent costs related to production, bunding maintenance and processing would be borne by theproject beneficiaries. The maintenance and spot improvement of access roads and field tracks willbe the responsibility of the Department of Feeder roads with inputs from the project beneficiaries,the latter being limited to the field tracks.

6.2 Project Sustainability

6.2.1 The project is designed on demand-driven and participatory approach. The land and watermanagement works to be undertaken are all based on simple low cost traditional technology, whichwill be easily mastered by the beneficiaries through the training provided by the project. Sincefarmers will participate in the works and will be trained to maintain them, project sustainability willbe enhanced. The maintenance of the access roads infrastructure will be solely the responsibility ofDFR, while the participation of the beneficiaries will be required in the maintenance of accesstracks. Through the training programmes under the project, farmers, women traders and riceprocessors will build upon their experience and strengthen their capacity to undertake theiractivities.

6.2.2 The improved rice varieties to be promoted will be selected on the basis of theiradaptability to the agro-climatic zones and the consumers‘ preferences. The use of improved inputsand cultural practices, and appropriate technology will improve soil fertility and structure, leadingto sustained production and productivity. The improved processing facilities will raise the qualityand competitiveness of local rice, which will attract more consumers, boost the demand andsubsequently trigger more production, thus making the process self-sustaining. The crop budgetindicates that income gains from growing rice with improved management are substantially higherthan traditional practices, which makes it very attractive thus providing adequate incentives forfarmers to expand production. Under the Government's current macro-economic policies(devaluation of the Cedi), the local rice production has a comparative advantage over imported ricesince it is becoming gradually too costly for the majority of Ghanaians. In addition, individualfarmers, farmer groups and entrepreneurs will be accustomed to formal banking practices andaccess to credit. These credit funds will be recovered regularly by AgDB, assisted in this task by theNGOs, and it will be used as a revolving fund to meet future investment needs of the beneficiaries,thus developing a sustainable processing.

6.3 Critical Risks and Mitigating Measures

6.3.1 The overall success of the project depends on the assumptions that the Government on-going macro-economic policies, particularly in the agricultural sector are expected to provideadequate incentives for farmers to intensify valley rice production through adoption of improvedcrop management practices. The most important risk factor is related to rainfall in the project area.As the project is based on a rain-fed agriculture system, severe prolonged drought could havedetrimental effect on the rice production. However, the project sites are located in the agro-ecological zones with highest rainfall, and therefore the risk of frequent and severe moisturestresses is minimal. The farmers’ lack of interest and commitment to the launched developmentprogrammes is also a risk, but very unlikely to happen at all, as the project is demand-driven. Thecrop budget indicates that income gains from growing rice with improved management aresubstantially higher than traditional practices, which makes it very attractive.

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7. Project Benefits

7.1 Financial Analysis

7.1.1 The farm models assume single rice cropping under rain-fed conditions and land clearing,levelling and terracing by the project. The increase in the cost of production for the farmer as aresult of the project will be financed by the project under the credit component. Prices and otherdata used to calculate farm inputs and outputs were obtained from MOFA during projectpreparation and pre-appraisal missions and confirmed by the appraisal mission.

7.1.2 On the basis of farm budgets using estimated incomes, farm gross margins incomes willincrease by Cedis 3.72 million per ha annually. This increase will ensure the full and activeparticipation of rice farmers in the operation and maintenance of the production schemes under theproject. The “without project” farm budget results in a gross margin income of Cedis 210,000 perha annually. The gross income of rice traders and millers will increase from Cedis 37 to 85 millionand 72 million respectively because of the increased volume of rice to be handled by these peopleunder the project. The tables for estimating the farm and entrepreneurs gross incomes are providedin the Project Implementation Document .

7.2 Economic Analysis

7.2.1 The economic analysis of the project was undertaken to evaluate its net social impact. Theeconomic benefits arising from the proposed project are quantified by comparing “with” and“without” project situation to identify incremental benefits. The economic benefits of the project willbe derived from increased rice production encouraged by increased use of improved inputs, improvedcultural practices and improved rice varieties. With the project the yields will increase from 1.5 to 4.5MT/ha and the area expanded from 2,000 to 4,500 ha which will lead to substantial increase in riceproduction. Hence the project EIRR of 33%. The assumptions used in the evaluation of the projectcontribution to the national economy are the following:

The net benefit stream has been estimated over a period of 20 years. Economic prices have been valued at market prices. For rice price, an import parity price of

US$284 per ton has been applied, derived from the price of imported rice from Vietnam ofequivalent quality.

Financial costs of the project have been adjusted to economic costs by excluding taxes, dutiesand price contingencies. The costs of roads, surveys, training and adaptive research have beenexcluded from the project costs because benefits to be derived directly from these activitiescannot be easily quantified in monetary terms. Moreover the costs of these activities arenormally borne by the government and should be spread over a much longer period.

7.2.2 Based on the foregoing assumptions, the economic internal rate of return (EIRR) of theproject is estimated at 33% and a Net Present Value (NPV) of Cedis 40.7 billion, at the opportunityof cost of capital of 12%. The detailed results of the analysis are shown in annex 4, Table 1. Theadditional milled rice production from the project is estimated to be about 13,000 tonnes/yearbeginning in year 5. With this level of production, the project will substantially contribute to thesaving of foreign exchange to the tune of USD3.7 million annually at the conservative import parityprice of USD284/ton. At the market price, the saving will be about US$14.0 million annually.

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7.3 Social Impact Analysis

7.3.1 The project will directly benefit about 10,000 households (60,000 people) on continuousemployment and create additional 8,500 seasonal jobs as a result of the project production activities.In addition, the construction of civil works, the subsequent land preparation, annual operation andmaintenance of structures will also contribute to labour demand. Other employment opportunitiesare expected to increase substantially in marketing and processing of rice, as well as for suppliers ofinputs (seeds, fertilisers, pesticides), farm tools and equipment such as power tillers and mini ricemills to be financed through the credit. The jobs to be created will generate disposable income forthe rural communities and hence contribute to poverty reduction in the rural areas.

7.3.2 Women farmers and businesswomen play an important role in rice production. They areengaged in planting, weeding, bird scaring, harvesting, threshing and transport of paddy; and almostdominate the processing and marketing activities. Specific training programmes will focus onwomen farmers, women processors and women traders to improve their technical, business andfinancial management skills. Since rural women make up over 60 percent of the farming populationand are often the providers for their families, increased incomes for women will improve householdfood security and well being as women spend most of their earnings on their families. In addition,the installation of appropriate processing plants will contribute to the reduction of drudgeryassociated with work of women in the project area.

7.3.3 The dissemination of HIV/AIDS and malaria awareness and prevention messages to theproject beneficiaries will have a positive impact since it will contribute to preserving labour force inthe project area by having a healthy population.

7.4 Sensitivity Analysis

7.4.1 The sensitivity analysis shows that rice revenues have to decrease by 20% for EIRR to fall to21%. This situation is unlikely to happen unless there is a prolonged drought during the project life.On the hand, EIRR falls to 22% when both investment costs and benefits fall by 10%. All selectedlevels of changes in key factors show EIRR higher than the opportunity cost of capital (12%) asfollows:

i) At current benefits 33%ii) 20% yield decrease 21%iii) 10% investment costs increase 23%iv) 10% costs increase and 10% fall in revenue 22%v) Two-year delay in revenue 17%

8. Conclusion and Recommendations

8.1 Conclusions

8.1.1 Rice has become an important staple food throughout Ghana. About two-thirds of thenational rice requirement is met by imports using scarce foreign exchange. At full development, theproposed project will increase domestic rice production by 13,000 tonnes per year. Hence, theproject will contribute to foreign exchange savings valued at about US$14.0 million per annum. Byparticipating in the project farmers incomes increase from GHC210, 000 to Cedis 3.72 million perha per year. About 450 farm groups will be created and/or strengthened and about 9,000 individualfarmers will be trained by the project. The project will directly benefit about 10,000 households

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(60,000 people) and create 8,500 seasonal jobs. Increased rice production by the project will induceincreased employment and income generation opportunities in backward and forward linkedindustries. The group formation and training along with the improvement of access roads willfacilitate technology adoption, access to inputs and marketing. The training will make thebeneficiaries better citizens and better able to participate in the affairs of the country. There will bean improvement in the rural living conditions as a result of increased incomes.

8.1.2 The project is socially desirable and environmentally sound, technically feasible, andfinancially and economically viable. The proposed project remains a high priority in the agriculturedevelopment strategy by the Government of Ghana and it is consistent with the Bank Group visionas well as Bank Group strategy for Ghana.

8.2 Recommendations and Conditions for Loan Approval

8.2.1 It is recommended that a loan of UA15.00 be granted to the Government of Ghana for thepurpose of implementing the project as described in this report subject to the following particularconditions:

A. Conditions precedent to entry into Force

The entry into force of the Loan Agreement shall be subject to the fulfilment by theBorrower of the provisions of sections 5.01 of the General Conditions of the Fund applicable toLoan Agreements and Guarantee Agreements.

B. Conditions prior to first disbursement

The obligations of the Fund to make the first disbursement of the loan shall be conditionalupon the entry into force of the Agreement and the fulfilment by the Borrower of thefollowing conditions. The Borrower shall:

(i) Provide evidence satisfactory to the Fund for the activation of the Project SteeringCommittee and the five Regional Technical Committees to oversee projectimplementation; (paragraph 5.2.2). The Project Steering Committee should bechaired by the Minister of Food and Agriculture and include representatives of thevarious departments of MOFA directly involved with the project (CSD, DAES,PPRSD, PPMED, WIAD), CSIR, CRI, Environmental Protection Agency,Department of Feeder Roads, Agricultural Development Bank, and representativesof the Regions covered by the project and two representatives of beneficiaries(farmers and traders/millers), and NGOs. two representatives from NGOs, and atleast one representative from the farmer groups representatives at regional level EachRegional Technical Committee, chaired by the RDA, will be composed of the DDA,the RDO (Secretary), a Representative of the District Assembly, the three NationalSpecialists and three Representatives of the beneficiaries (one farmer, one trader andone processor), of which at least one should be a woman.

(ii) On-lend the credit funds to the AgDB on the basis of a subsidiary loan agreementbetween the two parties, on terms and conditions acceptable to the Bank. (paragraph5.2.4);

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(iii) Provide evidence for the commitment of farmers in the form of formation of farmersgroups, readiness to undertake the works supported by a formal request to theDistrict Director (paragraph 4.1.2);

(iv) Provide evidence of the recruitment of the three national specialists (one in RiceProduction, one in Agricultural Processing and Marketing and one in WaterManagement Engineering); (paragraph 5.2.1).

(v) Provide evidence of the designation of the five Regional Development Officers, ofwhich one should be a woman; (paragraph 5.2.1).

(vi) Provide evidence of the establishment of Agreements with CRI and the DFR.

C Other Conditions

The GOG shall:

(i) Disburse to the project, counterpart funds for each year of implementation, inaccordance with the financing plan agreed with the Fund; (paragraph 5.5.1);

(ii) Provide evidence that the maintenance of the feeder roads rehabilitated by the projectshall be included in the Road Fund Budget. (Paragraph 4.5.4).

ANNEX 1INLAND VALLEY RICE DEVELOPMENT PROJECT

PROJECT LOCATION MAP

This map was provided by the African Development Bank exclusively for the use of the readers of the report to which it is attached. Thenames used and the borders shown do not imply on the part of the Bank and its members any judgement concerning the legal status of aterritory nor

any approval or acceptance of these borders.

Atebubu

ATEBUBU

Ejura

EJUR

A

SEKY

EDUM

ASE

Bechem

TANO

Mankranso

AHOFO

ANO

SOUTH

MampontengEjbu

EJISU

JUABEN

Bekwai

AMANSIE EAST

Fosu

ASSIN

BIRIM

NORTH

Abirem

Kade

KWABIBIRE

M

Akim Oda

BIRIM SOUTH

JUABESO-BLA

Juabeso

Wlawso

SEFWI-WLAWSO

Bib

lani

BIBLA

NI

ANHW

IASO

BEKW

AI

EnebiAOWLY-SUAMAN

Asankraguan

WASSA-AMINKI

WASSA-WEST

Tarkwa

NZIMA EAST

Daboss

i

MPOHOR-W

ASSA

EAST

LEGENDInternational boundary

Regional boundary

National capital

Regional capital

District capital

Project site

TOGO

BURKINA FASO

COTE D’IVOIRE

ANNEX 2

INLAND VALLEY RICE DEVELOPMENT PROJECTORGANISATION AND MANAGEMENT CHART

Ministry of Food& Agriculture

PROJECTSTEERING

COMMITTEE

CROP SERVICEDIRECTORATE & 3TECHNICAL STAFF

5 REGIONAL DIRECTORATES OFAGRICULTURE DEVELOPMENT

UNITS ( RADUs)

Ashanti BrongAhafo

Central Eastern Western

17 DISTRICT AGRICULTURAL DEVELOPMENT UNITSAND 25 PRODUCTION SITES

9000 INDIVIDUALFARMERS & 450

FARMERS’GROUPS

50 SMALL-SCALERICE-MILL

OPERATORS & 100TRADERS

5 RTCs

ANNEX 3INLAND VALLEY RICE DEVELOPMENT PROJECT

IMPLEMENTATION SCHEDULE

PY1 PY2 PY3 PY4 PY5

LAND MANAGEMENT Global Programme & Implementation

Schedule. Inventory survey & designs of valleys sites Land clearing & Levelling Construction of water control structures Access roads & field tracks improvement

CROP DEVELOPMENT Credit Admin. Agreement with AgDB Selecting NGOs Credit Management & Loan to Beneficiaries

CAPACITY BUILDING Recruitment of NGOs Farmers’ groups formation Training workshops and seminars Farmers’ visits to other groups Farmers’ field days HIV/AID, Malaria & Family planning Study tours for research scientists

ADAPTIVE RESEARCH & SURVEYS On-farm adaptive research trials On-farm seed production training Farmers’ field Schools on ICPM Soil fertility surveys Baseline survey Beneficiaries assessment Marketing & Processing study

PROJECT MANAGEMENT Recruitment of project staff Agreements with participating institutions Procurement Monitoring & Evaluation Report & Audit Mid Term Review Study tours & training Project Completion Report

ANNEX 4: Summary of Economic Analysis

OPERATION AND PRODUCTIONWithout Project, '000' Cedis Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10-Y20

Area under cultivation (ha) 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000Estimated yield (t/ha) 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5Estimated paddy production (t) 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000

Milled Rice Yield from Paddy 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65Estimated milled rice production(t) 65% of paddy 1,950 1,950 1,950 1,950 1,950 1,950 1,950 1,950 1,950 1,950Milled Price (Cedis/t) 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000Value of milled rice production ('000 Cedis) 3,705,000 3,705,000 3,705,000 3,705,000 3,705,000 3,705,000 3,705,000 3,705,000 3,705,000 3,705,000Estimated Production Cost (Cedis/ha) 1,556,000 1,556,000 1,556,000 1,556,000 1,556,000 1,556,000 1,556,000 1,556,000 1,556,000 1,556,000 1,556,000Total Cost of production ('000 Cedis) 3,112,000 3,112,000 3,112,000 3,112,000 3,112,000 3,112,000 3,112,000 3,112,000 3,112,000 3,112,000

Net economic benefit without project (Cedis) 593,000 593,000 593,000 593,000 593,000 593,000 593,000 593,000 593,000 593,000

OPERATION AND PRODUCTIONWith project, '000' Cedis

Investment cost 13,327,500 21,207,500 16,844,900 11,729,700 8,070,300Operating costs 658,600 1,173,300 1,620,100 1,173,300 1,024,300 1,024,300 1,024,300 1,024,300 1,024,300 1,024,300Total Economic Costs 13,986,100 22,380,800 18,465,000 12,903,000 9,094,600 1,024,300 1,024,300 1,024,300 1,024,300 1,024,300

Area under cultivation (ha) 450 1,350 2,925 3,825 4,500 4,500 4,500 4,500 4,500 4,500Estimated yield (t/ha) 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5Estimated paddy production (t) 2,025 6,075 13,163 17,213 20,250 20,250 20,250 20,250 20,250 20,250

Milled Rice Yield from Paddy 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65%Estimated milled rice production(t) 1,316 3,949 8,556 11,188 13,163 13,163 13,163 13,163 13,163 13,163Milled Rice Price (Cedis/t) 1900000 1900000 1900000 1900000 1900000 1900000 1900000 1900000 1900000 1900000 1900000Value of Milled Rice Production ('000 Cedis) 2,500,875 7,502,625 16,255,688 21,257,438 25,008,750 25,008,750 25,008,750 25,008,750 25,008,750 25,008,750

Net Economic Benefit With Project -11,485,225 -14,878,175 -2,209,313 8,354,438 15,914,150 23,984,450 23,984,450 23,984,450 23,984,450 23,984,450

Overall Economic Analysis, '000 CedisNet Economic Benefit with Project -11,485,225 -14,878,175 -2,209,313 8,354,438 15,914,150 23,984,450 23,984,450 23,984,450 23,984,450 23,984,450Net Economic Benefit without Project 593,000 593,000 593,000 593,000 593,000 593,000 593,000 593,000 593,000 593,000

Marginal Economic Benefit from project -12,078,225 -15,471,175 -2,802,313 7,761,438 15,321,150 23,391,450 23,391,450 23,391,450 23,391,450 23,391,450

NPV at 12%, '000 Cedis 40,723,028EIRR 33.12%

List of Documents in Project Implementation Document - VOLUME II

1. Detailed estimated costs tables and List of Goods and services 72. List of Project Sites 13. Detailed Project Organisation Chart 14. Tentative Implementation Plan 15. Farm and Entrepreneurs (Rice Traders and Millers) Business Models and Budgets 56. List of Bank Group Operations. 17. Non Governmental Organisation8. Crop Research Institute – Mandate, Capacity and Organisation9. Profiles of National Experts