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Lessons from East African agriculture: A review of Bank projects, 1972–82

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 1984
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A review of the design of Bank agricultural projects in the region over 1972–82 shows mixed results

Christopher Walton

The 1982 World Development Report, in its review of the critical role played by agriculture in economic development, notes that, in contrast to other parts of the world, agricultural output per capita in sub-Saharan Africa actually declined by 1.4 per cent a year during the 1970s. The critical nature of this state of affairs is exemplified by the fact that agricultural production is for most countries in the subcontinent the largest single contributor to GDP, the major source of export earnings, and the source of most employment. Many reasons have been advanced for this unsatisfactory situation, particularly the difficulties that most African countries had to confront in adjusting to higher oil prices and deteriorating terms of trade. Nonetheless, it is also relevant to examine how donor-supported agricultural projects fared during this period.

The World Bank had an important role as the largest external donor for agricultural projects and programs, devoting about one third of its total lending to the region to this sector during 1972–82. During this period, agriculture and rural development assumed a high priority for most of the countries of the region and for external donors. The Bank’s emphasis on lending for rural development was laid by former President Robert McNamara in his Nairobi speech of September 1973. Although this review of the Bank’s lending experience focuses solely on the 20 countries that comprise the Bank’s East Africa region, empirical evidence indicates that the pattern of lending and project experience was not very different in West Africa, the other sub-Saharan African region.

The Bank’s agricultural portfolio in East Africa grew 12 times during this period, with new loans and credits amounting to a total of $1.8 billion for 116 projects and programs in the sector. This compared with total Bank commitments in the region for all sectors of $6 billion for 345 projects during the decade. These figures do not, of course, include financial commitments from other official agencies that joined the Bank in promoting these projects. Over $700 million of cofinancing was associated with Bank agricultural lending. This was significant, not only for the volume of financial transfers but also for the broader influence that Bank project lending exercised over the policies of other donor organizations. Even allowing for inflationary factors and the additional membership of four countries, this large increase in the volume of Bank lending for agriculture over the decade and its sizable share of total commitments demonstrated the importance that the World Bank and its borrowers gave to the sector.

With allowance for some country variations, four different types of projects emerge from the present review. These are (1) the single crop project; (2) the area or regional agricultural and rural development projects; (3) the national agricultural programs; and (4) the structural adjustment and rehabilitation projects. Although these did not follow in a precise sequence, the single crop project was more significant at the beginning than the end of the period, the rural development and national agricultural programs emerged strongly in lending during the mid-1970s, while the structural adjustment and rehabilitation interventions are a relatively recent response to the difficult macroeconomic conditions that were becoming pervasive toward the end of the period.

Single crop projects

The Bank’s first significant involvement in the promotion of crop production (as distinct from investments in agriculture infrastructure such as dams) was made in 1964 for the successful development of a single crop, tea, in Kenya. However, its objectives were simple when compared with projects that were to follow. As a perennial crop, tea was relatively easy to promote because, once planted, it did not require annual decisions on whether to replant or shift to another crop that, in changed conditions, might appear more attractive. When it was in the ground, short of uprooting, tea was there to stay, and after a few years would yield a crop for 50 years or more. Thus at least one uncertainty was removed.

The ecology of the East African countries unfortunately offers few other perennial cash crop opportunities. Thus when, in the 1970s, the single perennial crop approach evolved into projects supporting a single annual cash crop, such as cotton, tobacco, and groundnuts, a number of new difficulties were experienced. Unlike the tree crops, these crops typically were part of a crop rotation and their economic and social value to the farmer was less distinguishable from foodcrops grown mainly or wholly for subsistence purposes. The extent to which they were planted each year was therefore very much dependent on the level of price and other administered support factors. Bank-supported projects for the promotion of tobacco (in Zambia and Tanzania), cotton (in Tanzania), and maize (also in Tanzania) all met substantial problems from the lack of price incentives. Indeed, in the wake of the widespread food shortages of the middle 1970s (and thus higher grain prices), each of the tobacco and cotton projects was transformed into relatively successful maize projects.

Area and rural development

Since the single crop approach, at least for annual crops, was found to have serious disadvantages, there was a marked shift in project design in favor of investments that would address the total needs of the farm, for food crops, and perhaps livestock, as well as cash crops. These regional or area agricultural development projects were designed for limited geographical areas (unlike the single crop projects that usually had a national dimension). Early examples of this group were projects in Malawi, where the Lilongwe Land Development Project was particularly successful, and in Ethiopia; over the course of time, they came to be represented in most countries of the region. While their performance varied considerably, they were generally recognized to have the disadvantages of relatively high cost per beneficiary, more demanding management requirements (usually expatriate staff), and an uneven impact within a country.

The mid-1970s witnessed two parallel changes in project design, each in its different way building upon and interpreting the experiences gained from the area agricultural projects. On the one hand, it was but a short step to extend the scope of the area agricultural projects to include other rural needs, such as water supply, primary education, and health care, and a new type of intervention known as the rural development project emerged. The main difference between the rural and the area agricultural projects was that the rural development project aimed to provide over a limited area an integrated package of infrastructure and social services at levels beyond those that were directly required to support agricultural production. Thus these projects were more broadly aimed at improving living standards in the rural areas. Projects of this kind were prominent in Tanzania (for example, the project in the Kigoma region). This approach also found favor in the Western Sudan and some of the provinces in Zambia. The rural development projects carried the same inherent disadvantages as the area agricultural projects and, in addition, the complexities involved in addressing simultaneously issues presented by a number of sectors. Moreover, it was increasingly apparent that they did not provide a suitable vehicle for tackling national agricultural problems.

National programs

In response to the difficulties encountered with the area agricultural projects, there was also a swing in the other direction toward a more selective and extensive lending program that would address both limited needs and broad policy issues on a national scale. The so-called national agricultural programs evolved out of the recognition that the high unit cost of the intensive area projects would have to be substantially reduced if the benefits of those earlier projects were to be extended to the large proportion of the people who had remained outside their scope. Thus if the regional rural development projects could be characterized as moving horizontally, with successions of projects based on different regions, so the national programs moved vertically, each project in a country separately addressing a major agricultural or support activity on a nationwide basis. The first and relatively successful national program was the Minimum Package Program in Ethiopia (1973), which, starting with a simple expansion of fertilizer use and the rural road network, was over time extended to include other components. Other countries, for example, Malawi, Lesotho, Swaziland, and Kenya, attempted to follow this sequential approach.

Both the area project and the national program approach presented implementation problems; the former because of their weak links with sectoral management and policies at the national level and the latter because they only addressed selected rural needs. Whatever their respective merits, the national programs provided a necessary opportunity for a dialogue between the Bank and member countries to develop understandings on national macroeconomic problems.

Structural adjustment

Bank lending under the most recent concept, the structural adjustment and rehabilitation approach, differs from the earlier projects in that it takes the form of program, not project, loans. These loans finance imports and the related costs of adjusting national economies and are based on the acceptance of substantial policy reforms by the borrower, not necessarily but usually including measures to benefit the agricultural sector. They assist structural adjustment on behalf of the borrower, with fast disbursement of program loans by the donor. Up to the end of fiscal year 1982, only three countries in the region had received structural adjustment loans (Kenya, Malawi, and Mauritius) but the increasing need for restructuring of national economies has led to some program loans specifically directed at the agriculture sectors, of which the Sudan Agricultural Rehabilitation Program (1980) was an important and successful example. This type of lending can encourage domestic reforms, in this case cotton pricing and cost recovery; provide high priority capital goods to revitalize irrigation schemes; and reinforce the effectiveness of existing and planned project lending.

The four different types of projects described above represent more than three quarters of Bank agricultural lending to the region over 1972–82. Other lending went for projects including irrigation, credit, and livestock.

Looking back over the 20 years since the Bank first became directly involved in the promotion of crop production, it is evident that the process of agricultural development has become vastly more complicated and uncertain. On the one hand, there has been a recognition that the overall development of a country’s agricultural economy cannot be achieved by a narrow definition of project lending, whether it be crop- or area-oriented. Agricultural training, extension, crop processing, storage and marketing, research, management system, monitoring, and evaluation are but a few of the legitimate concerns that find some place in most agricultural projects of the early 1980s. On the other hand, experience has shown that the standard of implementation has usually declined as the projects have become more ambitious in their scope and more complex in their design. Moreover, experience has also shown that both sector and project performance depends heavily on the macroenvironment, notably price incentives and dependable support services that can only meaningfully be addressed at the national level. The lessons of experience are legion and often contradictory. Four broad areas merit particular attention in future by donors and borrowers alike.

The technological package

A review of the design of past Bank agriculture projects shows that expected benefits were based on relatively modest improvements in the technical package (usually the introduction of fertilizer) or improved planting techniques, improvements in product quality (for example, through better processing), efficiency savings, the upgrading of infrastructure, or a combination of these factors. Actual experience indicates that the strength of the technological innovations was generally inadequate to overcome institutional weaknesses or to induce changes in traditional on-farm practices. All too frequently, project completion reports reveal a lower than expected stream of production increases and an anticipated economic rate of return that only remained positive because product price increases were higher than costs. The latter condition prevailed in the first part of the 1970s but no longer applies. The response to this situation was often to address on-farm ‘social’ constraints—important but difficult to influence by any outsiders to the systems—and to improve financial incentives for agricultural production. But regrettably the basic generator of change, significant technological innovation leading to strong financial incentives, has usually been lacking.

An important exception to this (and one that demonstrates its significance) was the large-scale adoption of high-yielding maize varieties in Kenya in the early 1970s, following some 20 years of research. Its rapid and widespread acceptance in Kenya needed little promotion, institutional development, or infrastructure to bring about a major change in the rural areas: in short, the strength of the technological innovation was itself sufficient to overcome other constraints within the broader system.

During the past decade, only one Bank-sponsored project in East Africa was specifically directed at agricultural research (Sudan, 1978). Although many multipurpose projects included a research component and donors other than the Bank made contributions, nonetheless, the research capability in most countries of the region remained woefully inadequate. It is too much to expect a large number of small countries to undertake major research on their own, and there is therefore an important role to be filled by donors, including the Bank with its important contribution to the international agricultural research centers.

A sharper focus

Agricultural development involves the interaction of many types of investments and policies. Thus the Bank’s agricultural and rural development projects have typically included a wide range of components. In different ways, both the integrated rural development projects and the national agricultural programs were victims of attempting to do too much, the former by addressing a multiplicity of sectors and the latter by attempting to mix measures designed to address the increasing concerns at the macroeconomic level with the problems faced by specific projects. As a result both approaches, in different ways, ran into trouble. A not unexpected response to this situation were pleas for “simpler” projects (which by the nature of this sector offers limited opportunities) or, in areas of particular uncertainty, for pilot projects (which were not consistent with the demand for rapid improvements in rural incomes).

The more recent and increasingly shared recognition of the importance of the structural adjustment has gone a long way to remove these difficulties and make for more directed agricultural lending in the 1980s. By separating the macropolicy issues in a specially designed series of financial interventions, project designers and implementors can now more closely focus on specific project concerns and a conscious effort more easily be made to direct lending toward more limited objectives within a given time frame.

Thus a logical development of the important start that has been made in this area would be to seek to extend structural adjustment or program lending to all countries with significant agricultural economies. This would imply recognition of the critical importance of a macroeconomic framework in which agriculture can flourish. Although separate, the structural adjustment stream of interventions has to be closely integrated with project lending and indeed, the scale of project lending related to progress under the former simply because the effectiveness of project lending depends on the macroeconomic framework. However, a more conscious effort also needs to be made to limit the scope of individual projects to ensure design quality and appropriate attention to detail.

A realistic time frame

The Bank’s agricultural projects are typically designed to be fully implemented over four to six years—considered a maximum period for realistic planning consistent with the achievement of a given set of objectives. Such projects can be, and frequently are, followed by subsequent projects, but the principle remains that each project is intended to be complete in itself and that subsequent phases of the same activity address incremental objectives with incremental resources. Thus, it is assumed that over the given life of a project, the resources made available to it—financial, human, and institutional—will be sufficient to produce additional resources to maintain its activities on completion.

Experience over the last ten years has shown that this is far from the case. Financial benefits have typically failed to percolate through to governments or their agencies that are obliged to maintain, for example, a cadre of extension staff or capital investments in infrastructure. Moreover, on project completion governments have become unaccustomed to making adequate budgetary provisions for recurrent costs of maintaining projects and their programs. Likewise, the infusion of a large element of expatriate technical assistance, introduced with the objective of more quickly achieving high production targets, increases the improbability of an orderly transfer of management and technical direction to qualified local people on project completion. Both these factors tend to distance a project from well-grounded local institutional support, which in the broadest sense includes a borrower’s political commitment and which is a critical factor in continuity of a development program.

The overwhelming evidence from East Africa suggests the need for follow-up projects, not so much to take an operation to a higher level of activity but more essentially to sustain the earlier achievements. For its part the Bank—and other donors—should be prepared overtly to finance some recurrent costs arising out of projects at their completion against a plan agreed with the borrowers that such further lending would be phased out over an agreed period. For the Bank, such financing could form part of regular follow-up project phases but there would also be a case for incorporating such financing in structural adjustment lending.

The private sector

Most of the Bank’s agricultural lending in East Africa over the past decade has been either directly or indirectly in support of the small farmer. This approach conformed not only to the perceived priorities of the time but also to the realities of the local farming structure, which (unlike some other parts of the world) comprises a preponderance of smallholders. This emphasis was not without costs and the absence of an agricultural hierarchy has not only constrained the emergence of private support services in rural areas but also inhibited the development of an effective and vocal constituency in the countryside that could begin to counteract well-established economic groups in the towns. In its absence, the rural cause has had to be espoused by donors and overseas lenders. The rural service problem is well illustrated by the demand for tractor services by small farmers. Their small holdings do not justify sole ownership. In the absence of private entrepreneurs who could provide such services, tractors have been supplied by a succession of government agencies or cooperative societies with a regularity only matching their failures. On both counts, therefore, the emergence of a class of rural entrepreneurs ready to speak up for the interests of the farmer, and to increasingly take on the provision of services in the rural areas, must be seen as an essential element in the transformation of the agriculture sectors.

This article essentially focused on the World Bank’s response to its perceptions of the changing demands and constraints of the agricultural economies in East Africa during the past decade with some prescriptions for the next. For the most part, its past lending has represented a concurrence between the Bank and individual borrowers as to what appeared needed at a particular point in time; where such broad agreement has not been reached, its lending program has been more modest. It is evident, however, that a considerable investment in money, time, and intellect has achieved at best mixed results and, overall, less than the situation demanded. The time has therefore come for a new set of understandings that, while building on the considerable body of past experience, can encompass the broad measures of macroeconomic and sector reform necessary for the revitalization of agriculture in the region. Given that determination on the part of both borrowers and lenders, there is no reason why the 1980s should not witness a more successful outcome for these important endeavors.

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