Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: PAD1459

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANTFROM THE DANISH DEVELOPMENT COOPERATION

IN THE AMOUNT OF DKK113 MILLION(US$20.37 MILLION EQUIVALENT)

TO THE

REPUBLIC OF NIGERFOR AN

INVESTMENT CLIMATE AND COMPETIVENESS SUPPORT PROJECT

May 23, 2023

Trade & Competitiveness Global PracticeAfrica Region

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

CURRENCY EQUIVALENTS

(Exchange Rate Effective {July 21, 2015})

Currency Unit = DKKDKK6.87 = US$1US$1.39 = SDR 1

FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMSAfDB African Development BankANIPEX Agence Nigérienne de Promotion des Exportations (Agency for the Promotion

of Exports) BDS Business Development ServicesCASCR CAS Completion ReportCCIAN) Chambre de Commerce, d’Industrie et d’Artisanat du Niger (Chamber of

Commerce)CEDP Competitiveness and Enterprise Development ProjectCFAF CFA FrancCFE Centre de Formalités des EntreprisesCGA Centres de Gestion Agréés (Management centers)CNIP Conseil National des Investisseurs Privés (The National Council of Private

Investor)sCPS Country Partnership StrategyDANIDA Danish International Development AgencyDB Doing BusinessDGI Direction Générale des ImpôtsDKK Danish KronerDPL Development Policy LendingDRO Danish Representation OfficeECOWAS Economic Community of West African StatesESMF Environmental and Social Management FrameworkFDI Foreign Direct InvestmentFSR Financial Sector ReviewFY Fiscal YearGDP Gross Domestic ProductGDPHCI3N Gross Domestic Product. Haut-Commissariat à l’Initiative 3NI3N 3N Initiative Strategy ICA Investment Climate AssessmentICT Information and Communication TechnologiesIDA International Development AssociationIFAD International Fund for Agriculture and DevelopmentIFC International Finance Corporation

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M&E Monitoring and EvaluationMCC U.S. Millennium Challenge Corporation MDG Millennium Development GoalME Maison de l’Entreprise (Enterprise Support Agency)MPTMCD Ministry of Planning, Territory Management, and Community DevelopmentNICCP Niger Investment Climate and Competitiveness Support ProjectOHADA Organisation pour l'Harmonisation en Afrique du Droit des Affaires

(Organisation for the harmonisation of business Law in Africa)PASSADEM Projet d'Appui à la Sécurité Alimentaire et au Développement dans la région de

Maradi (Food Security and Development Support for Maradi Region ProjectPDES Plan de Developpement Economique et Social (Social and Economic

Development Plan)PECEA Programme de Promotion de l’Emploi et de la Croissance Economique dans

l’Agriculture (Growth and Job Promotion in Agricultural Sector)PEFA Public Expenditure and Financial Accountability AssessmentPFM Public Financial ManagementPIU Project Implementation UnitPPD Public-Private DialoguePPP Public Private PartnershipPRACC Competitiveness and Growth Support Project PRODEX Niger Agro-Pastoral Export Promotion Project PRSP Poverty Reduction Strategy PaperRPF Resettlement Policy FrameworkSAI Supreme Audit InstitutionSDDCI Niger 2035 Strategie de Developpement Durable et de Croissance Inclusive Inclusive

Growth and Sustainable Development Strategy SME/SMI Small and Medium Enterprise/IndustrySMS Short Message ServiceSOHO Small Office/Home Office (Small businessTA Technical AssistanceTF Trust Fund UEP Unité d’Exécution de Projet (Project Excecuting Unit)UNDP United Nations Development ProgramUSAID United States Agency for International DevelopmentWAEMU West African Economic and Monetary UnionWBG The World Bank Group

Regional Vice President: Makhtar DiopCountry Director: Paul Noumba Um

Senior Global Practice DirectorGlobal Practice Director:

Practice Manager:

Annabel GonzalezCecile FrumanJohn F. Speakman

Task Team Leader: Magueye Dia

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iv

REPUBLIC OF NIGER Investment Climate and Competiveness Support Project (P148839)

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT........................................................................................................1A. Country Context...................................................................................................................1B. Sectoral Context...................................................................................................................2C. Donors involvement.............................................................................................................7D. Rationale for World Bank Group Involvement...................................................................8E. Higher level objectives to which the project contributes...................................................11

II. PROJECT DEVELOPMENT OBJECTIVES.......................................................................11A. PDO...................................................................................................................................11B. Key Results........................................................................................................................11C. PDO Level results indicators.............................................................................................12D. Project Beneficiaries..........................................................................................................12

III. PROJECT DESCRIPTION...............................................................................................13A. Project Components...........................................................................................................13B. Project Management..........................................................................................................17C. Project Financing...............................................................................................................17D. Lessons Learned and Reflected in the Project Design.......................................................18

IV. IMPLEMENTATION (to be finalized and summarized at appraisal)..............................19A. Institutional and Implementation Arrangements...............................................................19B. Results Monitoring and Evaluation...................................................................................20C. Sustainability.....................................................................................................................20

V. KEY RISKS...........................................................................................................................21A. Overall Risk Rating and Explanation of Key Risks..........................................................21

IV. APPRAISAL SUMMARY................................................................................................22A. Summary of the Economic and Financial Analysis (see Annex 7 for details)..................22C. Financial Management.......................................................................................................24D. Procurement.......................................................................................................................24E. Social (including Safeguards)............................................................................................25F. Environment (including Safeguards).................................................................................26

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Annex 1: Results Framework and Monitoring..............................................................................27Annex 2: Detailed Project Description..........................................................................................29Annex 3: Implementation Arrangements.......................................................................................39Annex 4: SORT.............................................................................................................................54Annex 5: Implementation Support Plan........................................................................................56Annex 6: Team Composition.........................................................................................................58Annex 7: Detailed Economic and Financial Analysis...................................................................59Annex 8: Details on the High-Potential Value Chains in the Zinder and Diffa regions...............66

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PAD DATA SHEET

Republic of Niger

Niger – Investment Climate and Competiveness Support Project (P148839)

PROJECT APPRAISAL DOCUMENT.

AFRICA

Trade & Competitiveness Global Practice.

Basic Information

Date: May 23, 2023 Sectors: General industry and trade sector (50%), Agro-industry, marketing, and trade (20%), SME Finance (15%), Central government administration (15%)

Country Director: Paul Noumba Um Themes: Micro, Small and Medium Enterprise support (25%), Regulation and competition policy (25%), Other Private Sector Development (25%), Export development and competitiveness (15%), Legal institutions for a market economy (10%)

Practice Manager/Senior Global Practice Director:

John F. Speakman/Anabel Gonzalez

Project ID: P148839 EA Category:

B

Lending Instrument:

Investment Project Financing

Team Leader: Magueye Dia

Joint IFC: No

Recipient: Republic of Niger

Implementing Agency: Ministry of Commerce, Industry and Handicraft

Project Implementation Period: Start Date:

August 1, 2015

End Date:

December 31, 2018

Expected Effectiveness Date:

Expected Closing Date: 30-June -2019

Project Financing Data(US$M)

[ ] Loan [X] Grant [ ] Other

[ ] Credit [ ] Guarantee

For Loans/Credits/OthersTotal Project Cost (US$M): 20.37

Total Bank Financing (US$M): 20.37

vii

Financing Source Amount(US$M)

BORROWER/RECIPIENTBeneficiaries

International Development Association (IDA) Grant

Danish Development Cooperation DKK113.00 million

Total DKK113.00 million (US$M20.372)

.

Expected Disbursements (in USD Million)

Fiscal Year 2016 2017 2018 2019

Annual 2.04 4.07 8.15 6.11

Cumulative 2.04 6.11 14.26 20.37

.

Project Development Objective(s)

The objective of the Niger Investment Climate and Competiveness Support Project (NICCP) is to improve critical elements of investment climate for the private sector and enhance competitiveness of SMEs in selected agriculture value chain.

.

Components

Component Name Cost (USD Millions)

Component 1: Modernization of the Business Environment 3.55

Component 2. Increase the competitiveness of selected agricultural value chains

13.75

Component 3: Project Implementation Support 2.10

TOTAL FOR PROJECT 19.4

WB Costs 0.97

TOTAL 20.37

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ]

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]

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Does the project meet the Regional criteria for readiness for implementation? Yes [ ] No [ ]

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 XNatural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50X

Projects in Disputed Areas OP/BP 7.60X

Legal Covenants

Name Recurrent Due Date Frequency

Description of Covenant

Team Composition

Bank Staff

Name Title Specialization Unit

Magueye Dia Task Team Leader GTCDR

Mahaman Sani Consultant GTCDR

Abdoul Wahab Seyni Senior Social Specialist GSURR

Yannick Saleman Trade and Competitiveness Specialist GTCDR

Peter White Consultant Agribusiness Specialist CMGA6

Josue Akre Financial Management Specialist GGODR

Ibra Rahamane Sanoussi Senior Procurement Specialist GGODR

Medou Lo Environmental Specialist GENDR

Marie-Rogers Augustin Legal Analyst LEGAM

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Ruxandra Costache Counsel LEGAM

Syed Estem Dadul Islam Operations Officer GTCDR

Amadou Ba Senior Agricultural Economist GFADR

Jean-Christophe Maur Senior Economist GTCDR

Inoussa Ouedraogo Senior Operations Officer GTCDR

Birima Fall Operationas Officer GTCDR

Tanangachi Ngwira Operations Analyst GTCDR

Irene Ayinda Program Assistant GTCDR

Non Bank Staff

Name Title Office Phone City

Locations

Country First Administrative Division

Location Planned Actual Comments

Niger Niamey

x

I. STRATEGIC CONTEXT

A. Country Context

1. Niger’s path to development is facing many substantial challenges. Niger is a poor country with a limited natural and human resource base. It ranks 186th out of 187 countries on the UNDP Human Development Index, with a GDP per capita in Purchasing Power Parity terms of US$967 in 2014 - one of the lowest in the world. Even though its 1.27 million square kilometers make it the largest country in West Africa, distance from the sea1 and a largely desert terrain combined present tough constraints for infrastructure development. The country constantly battles drought and only about 12 percent of all its land is arable, mostly located along the River Niger. Not surprisingly, most of Niger’s 16 million people are clustering along the banks of the river in the West and South of the country to take advantage of the tropical climate and more amenable agro-ecological conditions in that part of the country.

2. High population growth acts as a drag upon progress. Population growth rates in Niger are in excess of three percent per annum which will put increasing pressure on Niger’s stock of arable land: at the current growth rate, the population is expected to double by 2035 and reach 54 million by 2050. Niger’s population is young with nearly half of the population under 15 years of age. About 350,000 youth enter annually the job market, 90 percent of which without qualififactions. With current demographic trends, 70 percent of the population will still live in rural areas by 2035. Thus a very large share of the population will keep relying on agriculture for their livelihood, and the economy will remain dependent on the sector as a source of growth.

3. Agriculture is the most important sector of Niger’s economy and accounts for over 40 percent of national GDP and the main source of livelihood for the population, with 83 percent of employment2 depending upon rain-fed agriculture and livestock. It is estimated that 2.5 million people in Niger are chronically food-insecure and unable to meet their basic food requirements even during years of average agricultural production. During periods of constrained access to food, millions more can quickly fall into transitory food insecurity. Crop production in Niger takes place in a context of low and variable rainfall, and high and increasing pressure on cultivable land due to the high population growth rate. Production is further constrained by the predominance of traditional management systems, with limited use and potential for irrigation, poor acces to improved seeds, fertilizer, and mechanization and lack of information.

4. The mineral sector bears a high potential for Niger’s economic growth, with notably an expansion of the oil production (+40 percent in 2014, reaching an average of 18,000 barrels per day). GDP growth in 2014 is estimated at 6.5 percent, rebounding from a disappointing 2013 where growth was held back by the security situation and below average rainfall. The revenue from the mineral sector has enabled investments in boosting agricultural food production and infrastructure spending, which in turn has been driving growth. For the 2014 campaign, production of cereals was 12 percent higher than 2013, and 10 percent above the average of 2009-13.3

1 The distance between the most Southern point of Niger (Gaya) to Porto Novo/Benin is about 500 miles.2 World Bank. 2012. Niger: Investing for Prosperity, A Poverty Assessment. Report 61393-NE.3 Ministère de l’Agriculture, Direction des Statistiques. 2015. Résultats définitifs de la campagne agricole d’hivernage 2014 et perspective alimentaires 2014-2015.

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5. Medium term growth prospects look positive thanks to two large mineral resources projects and a stable macroeconomic environment.4 However, the country is exposed to important external and internal risks: First the security situation, notably in the border area of North East Nigeria and Lake Chad. These areas, at risk from infiltration of insurgents from Northern Nigeria, include several important regional trading capitals are particularly strategic in terms of economic relations with Nigeria and other regional markets. Second, the vulnerability of the contry’s agricultural sector. The sector remains vulnerable to climate shocks and climate change in the medium term.

6. Niger needs to diversify its economy and create value added beyond basic agricultural productions and mining, in order to create a path to sustainable growth and job creation. A significant potential for expansion of the manufacturing sector exists, in particular in the processing of agricultural products. Investment in the agricultural sector could provide important opportunities to help drive diversification and private sector job creation if well managed. Industry in Niger remains very underdeveloped and under-diversified as well as characterized by a lack of competitiveness. Manufacturing industries increased their contribution from less than 2 percent of GDP over the period 1990-2004 to 4 percent in 2011. It is important to note that aspects related to the state of production and productivity will be specifically addressed by the Climate Smart Agriculture (CSA) Project (FY 16, USD 111 M)

7. Increasing the export base and diversifying foreign investment will be necessary over the medium term, as growing urban markets will still represent relatively limited markets for excess agricultural supply, especially as poverty is also widespread in urban areas. Niger’s current account deficit also remains large -- estimated at 17.9 percent of GDP in 2013 (outside of grants). This deficit is financed by high foreign direct investments and project grants and loans.With the exception of few sectors (extractives, cotton, livestock), Niger’s private sector base remains very poorly connected to the global and regional economy. Most of the country’s export growth potential is associated with regional trade mostly with Nigeria (its main economic partner) and with the West African Economic and Monetary Union (WAEMU) countries.

B. Sectoral Context

Opportunities to develop agricultural value chains

8. Niger pastoral and agricultural potential is illustrated by the fact that the country is already a large regional exporter of livestock, onion, cowpea (cowpea) and sesame. Not counting recent oil production increases, livestock is after uranium the second export, followed by onion and cowpea exports.5 These three products alone represent a share of export higher than that of uranium and gold combined.

9. The livestock sub-sector contributes significantly to national GDP (13 percent of GDP and 40 percent of agricultural GDP) with pastoralists and agro-pastoralists supplying 80 percent of production. The various production systems provide a significant portion of the

4 IMF. 2015. 2014 Article IV Consultation and Fourth and Fifth Reviews Under the Extended Credit Facility Arrangement and Request for Waiver of Nonobservance of Performance Criteria and Modification of Performance Criteria—Staff Report. IMF Country Report No. 15/63.5 World Bank. 2010. Niger: Modernizing Trade During a Mining Boom, Diagnostic Trade Integration Study for the Integrated Framework Program. Report No. 59968-NE.

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meat and milk consumed both inside the country and in neighboring countries. Although estimates vary a lot according sources, export of livestock and meat products are arguably important: according to recent official figures they are estimated at nearly 12 percent of Niger total exports.6

10. Agricultural and livestock products are often not transformed and only capture a small share of the value generated along supply chains (through processing, but also marketing when they are exported or compete with imported products). Growth and value addition opportunities must be sought for these value chains in both the relatively small domestic and the more promising regional markets to generate income to farmers, entrepreneurs and employees:

11. Trade between Niger and Nigeria has always been significant and Nigeria is Niger‘s largest trade partner with important potential for expansion. Provided that the security environment and Nigerian trade policies allow, Niger can take further advantage of the large Nigerian neighboring market: According to the 2008 Country Economic Memorandum (CEM), Nigeria contributes significantly and increasingly to Niger‘s GDP growth; contribution estimated at 26 percent. Furthermore, the geography (with a 1500 km border) and community ties are other important factors which facilitate trade with Nigeria. Nigeria represents 80 percent of Niger non mining trade. This trade could even be expanded if Nigerian trade restrictions (such as temporary bans or informal trade barriers on import of beef and poultry meat) were lifted. Nigeria is not only the main trading partner, but also the country that offers Niger the greatest potential for export growth because of its size and diversified economy. Accelerating regional integration and reinforcing Niger‘s trade relations with Nigeria is a key priority given the offered opportunities. In view of the large trade potential, the Government of Niger has made it a strategic priority to strengthen regional integration with Nigeria.7

12. The two Easternmost (administrative) regions, Zinder8 and Diffa9 are probably most in need to receive support to the development of their agribusiness potential, whereas Southern Niger can all take advantage of furthering agribusiness opportunities, building on high availability of raw materials, low labor costs and with regard to exports to Nigeria locational proximity and greater political security at this time.

13. Despite environmental and security challenges, relatively lesser support from the donor community and government programs, as well as structural limitations facing Zinder and Diffa, there are five value chains with clear potential to lead to economic diversification, value addition, and job creation. These value chains, identified through an 6 BCEAO figures as reported by: Cowi (2013). Etude sectorielle et études préliminaires du Programme d'Appui à la Croissance Economique et à la Promotion d'Emploi vert durable basé sur le secteur agricole au Niger 2014-2018.7 World Bank (2012), ibid.8 Zinder is Niger’s second largest city (population of about 350,000), located within the region of the same name, with a relatively well diversified agro-industrial economy. Zinder’s industrial base includes a joint-venture oil refinery between the government of Niger and CNCP, China’s largest oil and gas producer and supplier, in operation since November 2011; a thermo-electric generation plant and telecommunications facilities. Agribusiness constitutes the region’s main economic activity, employing about 80% of the population.9 The city of Diffa and its region is one of Niger’s most remote and disadvantaged, suffering now from incursions by Boko Haram. Situated in the country’s south-eastern corner, the city of Diffa is about 1,300 km from Niamey but only 5 km from the Nigeria border and 500 km to north-eastern Nigeria’s major commercial city of Maiduguri. Like much of the sub-region, the region of Diffa has suffered from changes to the climate as well as, in its case, the retreat of Lake Chad and the surrounding water table tapped for limited irrigation. The city of Diffa has a “typical” rainfall of 200 mm to 250 mm, in the southern band of Diffa, farmers have cultivated some vegetables (chili peppers, onions, cabbage) as well as subsistence staples of millet and sorghum.

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assessment of sectors with the highest potential for value and employment creation10, include chili peppers, cowpea, ground nuts , poultry, and livestock11.

Table 1: Prioritized High-value Agriculture Crops and Value Chains

Crops Value Chain ProcessingChili Peppers Dried & powderedNiebé (cowpea) Substitute for imported pastasGround nut Oil & cake (animal feed)Poultry Broiler meat & eggsLivestock Butchery, milk/cheese, fodder

Source: Etude pour l’identification des chaînes de valeurs, Danida, 2013

14. Value chains were considered high-potential (see Annex 8 for details) if they met the following criteria, amongst others:12

a. Higher potential in terms of value addition, profit generation, employment and gender, concern for food security13, while being environmentally sustainable, which is absolutely central to the objective of diversification and development of agro-based economy;

b. A minimum degree of readiness (level of stakeholder expertise and engagement, governance) to benefit from the assistance provided under the project, and;

c. Some degree of complementarity with other value chains and donor supported initiatives, therefore laying the ground for future and more ambitious agro-cluster or pole comprehensive approaches.

10 Étude pour l’identification des chaînes de valeur à appuyer dans le cadre du Programme d’Appui à la Croissance Economique et à la Promotion d’Emploi vert durable basé sur le Secteur Agricole au Niger 2014– 2018, Danida, March 201211 Livestock was not part of the same sectoral analysis. However its selection was based on similar criteria, including the prime importance of the value chain in the Diffa and Zinder regions and potential/market opportunity aspects described in details in Annex 8, as well as the key geographical complementary and activity synergy with the PRACC project, as detailed further below.12 The full list of criteria arguably reflects DANIDA’s priorities as the donor behind the funding for this operation – noting in particular that 8 percent of the score is linked to existence of prior support from DANIDA and potential involvement of other Danish partners.13 The weighting and analysis made by DANIDA (ibid) regarding food security also ensures that the Principles for Responsible Investment (PRAIs, http://www.fao.org/3/a-au866e.pdf) for agribusiness investment are met. In particular, most transformed products supported under the project are targeted at reducing the dependence on imports. These principles, to which the WBG subscribes and is indeed a foundational partners, require that food security considerations be addressed in proposed agribusiness development. This is key here in particular for niebe, groundnut, and poultry. Food security considerations will be further insured through implementation arrangements: it is proposed that the government entity responsible for the food security and nutrition initiative (Haut-Commissariat à l’Initiative 3N, HCI3N) joins the steering committee of the project PIU (see section IVA on implementation arrangements).

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Constraints and Challenges

Business Environment Constraints

15. In addition to locational disadvantages, private sector development in Niger is hampered by a difficult investment climate and poor infrastructure. The effect of a poor investment climate is felt most keenly by micro and small enterprises, as they are least able to bear the compliance costs that such systems demand. In addition institutional capacity for private sector promotion and export is still very limited despite the recent creation of several institutions.

16. Niger’s most recent Enterprise Survey (2009) highlights several issues that are particularly problematic for Nigerien businesses compared to their counterparts in other sub-Saharan nations. For Niger, more businesses report that practices of competitors in the informal sector as their top problem than any other issue, and the proportion doing so is almost twice as high as the sub-Saharan average. A large informal sector as is the case in Niger can have serious consequences in terms of unfair competition for the formal private sector. Political instability, lack of access to finance, corruption, and tax rates are also seen as much more of a problem by Nigerien businesses than their counterparts elsewhere in Africa.

17. The private sector in Niger is indeed primarily comprised of informal micro and small enterprises, with particular significance for the agricultural sector. This has contributed to keep down productivity, and competitiveness. Both labor productivity and Total Factor Productivity are lower than in other Franc Zone countries such as Senegal, Burkina, Mali or Cameroon14. Niger’s formal private sector base is one of the smallest in the region: according to the National Statistical Institute (INS), there are less than 6,000 formal businesses in the country, 77 percent of which have less than 10 employees. INS estimates that 70 percent of Niger’s production takes place in the informal sector. According to another estimate, 40 percent of Niger’s overall economy is informal.15 In that context, making formalization more attractive for informal firms with the implementation of the OHADA entreprenant regime could contribute to increasing productivity of firms.

18. For the agricultural and agroindustrial products such as the high-potential value chains identified under this project, the following weaknesses in the general business environment impose particularly important costs on activities: inefficient trade and logistics, lack of access to financing, poor or inexistent contract enforcement, and high and and high level of informality.

19. Trade logistics: As a landlocked country, Trade logistics is key in Niger’s competitiveness. Niger faces several issues related to trade logistics that constraint access to regional and international market. Value chains involving perishable products, and for which timely access to markets may translate into significant price differences, are particularly sensitive to trade logistics failures. Access to the export market of neighbouring Nigeria also implies reducing costs of crossing borders. The issues to be addressed include: i) limited capacity in the customs; (ii) weak implementation of new technologies; (iii) cumbersome procedures; (iv) lack of transparency; and (v) road harassment. They ultimately lead to high cost and time to trade.

14 http://siteresources.worldbank.org/INTLAC/Resources/CH6.pdf15 Schneider F., A. Buehn, and C. E. Montenegro. 2010. Shadow Economies All Over the World New Estimates for 162 Countries from 1999 to 2007. World BankPolicy Research Paper No. 5356.July 2010.

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It is important to note that in addition to the above mentioned constraints, access to the Nigeria market for Nigerien products is constrained by the existence of unofficial barriers for export. The ongoing IDA funded Growth and Competitiveness support project is providing support to the Joint Niger-Nigeria commission for cooperation to implement the existing bilateral free trade agreements between the two countries and facilitate policy dialogue.

20. Access to finance: The lack of access to finance has been identified as one of the paramount challenges for the majority of Nigerien enterprises especially farmers and agro-processors16. It confined them to sub-optimal inputs and methods, and low productivity. Agriculture continues to receive less than 2 percent of total credit. Banks remain reluctant to expand loans to the sector because of structural challenges such as risks related to weather variability and climatic changes, weak value chains, lack of management and accounting skills, small size of projects to be financed, and lack of acceptable collateral (and enforcement). The project will contribute in addressing this challenge.

21. Contract enforcement: Commercial Banks and Business community groups have identified the dysfunction of the judicial as one of the main constraints for access to finance in Niger17. The 2015 Doing Business Report found out that the number of days to enforce a contract and settle a commercial dispute through the court system in Niger is about 545 days compared to 447 in Burkina and cost 52 percent of the debt, compared to 45 percent in Cote d’Ivoire. Addressing this challenge could positively impact contract farming in certain value-chains.

22. Institutional capacity for export promotion and private sector development: A number of institutions aiming to support SMEs and promote Niger exports are still not very active due to limited efficiency partly due to understaffing or limited financial resources. The project will provide additional resources to strengthen the capacity (including Public-Private Sector Dialogue) of the following institutions in supporting the value chains selected under this project.

a. Maison de l’Entreprise (ME) was created by decree in 2012. It has been incorporated into the CCIAN organizational chart and its aim is to promote enterprise creation and development. The ME includes a ‘one-stop shop’ (the business start-up center, Centre de Formalité des Entreprises) and an Investment Promotion center. Public centers (Centres de Gestion Agréés - CGA) were created in 2008 to support firms with tax advice and management and accounting training opportunities. The ME was set up with the support of the IDA-financed Competitiveness and Growth Support Project (PRACC). This type of structure also exists for the agricultural sector and professions: these are Regional Chambers for Agriculture (Chambres Régionales d’Agriculture – CRA) which are unified under a National Association (Réseau National des Chambres d’Agriculture – RECA)18;

b. The National Council of Private Investors (Conseil National des Investisseurs Privés – CNIP): this is a public-private consultation body responsible for analysis, decision-making and strategy-setting. The re-launch of CNIP activities was initiated under decree n° 2011-681/MC/PSP/PM of 26/12/11. The CNIP is chaired by the Prime

16 see Financial Sector Assessment Program and Rural Finance studies commissioned. 17 This is the result of background studies conducted for the prepration of the financial sector development strategy as well as in recent interviews with World Bank staff.18 http://www.reca-niger.org/

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Minister. It is expected to play a leading role in implementation of the Government’s action plan for investment climate reforms; and

c. The Permanent consultation committee between the Ministry of Trade and Private Sector Promotion and the Chamber of Commerce, Industry and Handicraft of Niger.

d. An Agency for the Promotion of Exports (ANIPEX: Agence Nigérienne de Promotion des Exportations) was created by export sector stakeholders in October 2006. Its activities are overseen by a Permanent Secretariat and strategies are defined by a General Assembly and Management Board.

Agricultural Value Chain Constraints

23. The five high-potential value chains identified for the Zinder and Diffa regions share several common constraints which require upgrading in order to exploit domestic and regional market opportunities. These improvements are in addition to the policy reforms and improved investment climates discussed above. The main constraints related to the selected agriculture value chains are the following (see details in Annex 8):

Limited institutional and technical capacity of major actors, notably individual farmers, small scale SMEs, cooperatives as well as value chain associations, and private sector market champions;

High cost of production through government premium, uneconomic capacity utilization of existing product lines, high cost of fuel and electric power, in addition to unfavorable economies of scale and

Inadequate logistics chains; Obstacles to marketing due to variations in food quality and non-competitive

pricing; Insufficient infrastructure (roads, warehouses, cross-border facilities); Weak market linkages; Limited access to finance for SMEs.

24. The existence of obstacles result in high levels of risk to the farmers and producers which are not adequately compensated for by the profit margins. A multidimensional approach to overcoming the obstacles requires a concerted and coordinated effort between donors and government.

C. Donors involvement

25. Significant new funds have been pledged by Denmark to support investment climate reform and enhance competitiveness of agricultural value chains in Diffa and Zinder areas. To respond to the Government of Niger’s request for assistance in the implementation of its action plan for investment climate improvement, support to value chains offering high potential for growth and employment, partners such as the Danish Development Cooperation (DANIDA) have committed DKK 113 million (about CFAF9.917 billion or US$20.372 million equivalent) in support of an enabling environment for private sector development including for agricultural

7

value chains in the Diffa and Zinder areas. These activities are part of a larger program of support by the Danish Government known as Programme de Promotion de l’Emploi et de la Croissance Economique dans l’Agriculture – PECEA - Niger 2014-2019) for which the government of Niger and Kingdom of Denmark has signed an agreement on June 25, 2014. The program seeks to promote employment and economic growth in the agricultural sector and to improve the business environment. It has two components:

a) Component 1. Promote green, inclusive economic growth, creating employment through the creation of added value in the agricultural sector.’ The objective of the component is to promote, through the chambers of agriculture and agricultural organisations, agricultural value chains based on production systems in Zinder and Diffa

b) Component 2. Improve the business climate and enhance the competitiveness of agricultural value chains. The objective of the component is to develop agricultural value chains by creating enabling environment for agricultural or agro-processing firms. In particular the component will support capacity building for private enterprises operating along the selected value chains and targeted investment climate reforms to create needed conditions for growth and job creation

26. DANIDA is seeking collaboration with the World Bank to implement the investment climate and agricultural value chains competitiveness component of their program. With the closure of its representative office in Niamey, DANIDA and World Bank teams explored options to implement PECEA Component 2 in synergy with the IDA-financed PRACC, a six years project which started implementation in mid-2012 and will close in March 2019.

27. In this perspective, DANIDA offered to establish a stand-alone Trust Fund (TF) to finance PECEA Component 2, to be managed by the World Bank for the funding of the proposed project, which will both leverage and add value to existing PRACC activities.

28. An administrative agreement has been signed between the Kingdom of Denmanrk and The World Bank Group (WBG) on December 12, 2014. The TF will be Recipient-Executed, and will include a Bank-Executed component for some of the investment climate related activities. The Project Implementing Unit (PIU) for the Recipient-executed window of the Trust Fund will be the same as the one responsible for implementing the IDA-financed PRACC. To ensure that the PRACC PIU has the necessary capacity to implement the additional activities envisioned under the TF, its capacity will be significantly reinforced. WBG staff will provide Implemetation Support to the PIU. The Bank-executed component of the operation will provide dedicated resources to strengthen the WBG Implementation Support team and improve its skill mix. Given the importance of the investment climate agenda under the proposed TF operation, IFC advisory services will play a key role in the delivery of the WBG support. .

D. Rationale for World Bank Group Involvement

29. The World Bank is already supporting private sector-led growth in Niger. In particular since 2012 the PRACC project has been addressing the challenges of Niger’s poor business environment including conditions for trade with Nigeria with the, focusing on two of the key areas in the South,Niamey and Maradi(and in particular targeting the Kano-Katsina-Maradi or K2M corridor), and on the meat value chain.

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30. The design of the proposed project is underpinned by the same assessment informing the design of the PRACC, but, seizing the opportunity of supplementary resources being made available by DANIDA, aims to complement and leverage the set of reforms and investments envisaged in the PRACC, including by targeting additional reforms and value chains in the Diffa and Zinder regions.

31. The proposed intervention therefore follows a logic very closely related to that underlying the PRACC and aims at achieving similar outcomes, in agreement with DANIDA.

32. In seeking to complement the interventions undertaken under the PRACC (see Figure 3), the proposed project seeks to achieve the following additionality:

a. Expand to regions not currently covered under the PRACC;

b. Expand to four out of five identified high-potential sectors/value chains not currently covered under the PRACC (Chili Peppers, Niebe, Ground nut, poultry);

c. Complement the interventions under PRACC by targeting and accelerating Doing Business reforms that will be of direct benefit to businesses operating in the value chains selected under both projects;

d. Scale up the interventions relating to institutional capacity- building and Public-Private Sector Dialogue and promotion of exports to accommodate the additional value chains and firms spported under this project.

33. The choice to go for a new, self-standing operation in an additional area of intervention from the area covered by PRACC – as opposed to the possible alternative to intensify and scale up existing interventions under PRACC - was mainly determined by the relevance of the selected two regions for the livestock sector in Niger: The project would allow to work on a third market in Zinder, which houses one of the four refrigerated slaughterhouses of Niger. Zinder is also one of the largest livestock rearing regions in Niger. Likewise there are complementarities between working upstream in the region of Diffa, a region of significant transhumance for livestock.

34. Another motive for intervening in different geographic areas is the opportunity to leverage previous interventions on the agricultural production systems in the regions of Zinder and Diffa. The project’s interventions will benefit from the foundations laid by DANIDA’s PASSADEM that closed in 2012. Moreover the Swiss cooperation is continuing support to agricultural production in the two regions under the second component of DANIDA’s PECEA (PECEA 2).

35. Further, given the relatively low capacity of Niger’s local institutions in the agricultural sector, it indeed appears preferable to adopt as a scaling up strategy an extensive approach rather than one providing additional resources that may go beyond the limited capacity of absorption of stakeholders. This strategy is not without creating additional costs as economies of scale are more limited; a mitigating strategy as described later is proposed in creating synergies around the project implementation unit.

36. This intervention offers possible synergies with the Additionnal financing of the IDA-funded Niger Agro-Pastoral Export Promotion Project (PRODEX). The objective of the PRODEX is to enhance the value of selected products (onion, cowpea/cowpea, souchet and

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livestocks products) by among other things addressing the needs for the development of micro-enterprises (MEs), and small and medium enterprises (SMEs) and cooperatives for business expansion in the short term, while fostering access to sustainable financial services. When possible, joint activities (trainings, sub-project financing) will be organized between both projects in Diffa and Zinder regions. 37. The Shahel Regional Pastoral under preparation will be targeting transhumance corridors and transboundaries areas. Project has a componenent supporting marketing related aspects.. The exact locations of the markets that will be built by PRAPS are not yet known. Close coordination with PRAPS will be establish to avoid duplication and develop synergies between both Projects.38.

E. Higher level objectives to which the project contributes

39. The Project would contribute to the achievement of the government’s goals as spelled out in Niger’s Economic and Social Development Plan (PDES 2012-2015): “A competitive and diversified economy for an accelerated and inclusive growth” (axis 4), and in the Strategy for Sustainable Development and Inclusive Growth (SDDCI Niger 2035): (i) ensure a robust growth of 7 percent per annum on average and (ii) ensure the diversification of production, intensification of research and the improvement of the institutional environment to promote private sector investment.

40. The project is aligned with the FY13-16 Country Partnership Strategy (CPS; Report No. 76232). The CPS was discussed by the Board of Executive Directors on April 30, 2013. It recognizes that increasing per-capita incomes is the central challenge for Niger to reduce poverty. In line with the PDES (see above) and the WBG’s twin goals, the CPS focuses the WBG support on key programs aiming at accelerating economic growth and reducing volatility, in combination with reforms that will ensure inclusive growth. The strategic pillars of the CPS are assisting Niger (i) achieve resilient growth, (ii) reduce vulnerability and (iii) strengthen capacity for service delivery. The Project is therefore fully aligned with the CPS through business environment reforms and support to growth opportunities is less volatile sectors (agro-transformation), include as criteria a reduction in dependency on imports for locally-consumed transformed agricultural products, and support institutions designed to improved service deliverty to the private sector.

41. Linkages will be made with current interventions and donor coordination. In the past, up to 2009, assistance to promote private sector development and value chains in Niger have been supported and financed by several development organizations, notably the World Bank, the Arab Funds and the African Development Bank (AfDB). More recently, the U.S. Millennium Challenge Corporation (MCC) is helping Niger improve its infrastructure and identify sources of growth. IDA is currently supporting both PRODEX (Additional Financing), and PRACC. The International Fund for Agriculture and Development (IFAD) is financing the PASSADEM project in the Maradi region (financing of markets for agricultural products). USAID is also supporting actions to improve the investment climate, while Luxemburg is supporting training programs.

II. PROJECT DEVELOPMENT OBJECTIVES

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A. PDO

42. The objective of the Niger Investment Climate and Competiveness Support Project (NICCP) is to improve critical elements of investment climate for the private sector and enhance competitiveness of SMEs in selected agriculture value chain.

B. Key Results

43. The PDO will be achieved by improving the competitiveness and promoting the investment in support of the selected value chains; providing Business Development Services and enhancing access to investment to the SMEs through a matching grants fund; and supporting the development of green technologies and market infrastructure in the Diffa and Zinder regions; contributing to improvements in critical Doing Business indicators; Implementing the “Organisation for the Harmonisation of Business Law in Africa (Organisation pour l'Harmonisation en Afrique du Droit des Affaires – OHADA) Entreprenant regime” for enterprises operating in Niger; improving public private dialogue; developing selected agricultural value chains; and supporting the implementation of institutional reforms designed to promote exports of agricultural products supported under the project. (See Annex 1 for the results framework).

C. PDO Level results indicators

44. The PDO Level results indicators are:

(i) Number of Doing Business (DB) reforms implemented in starting a business, trading across boarders, enforcing contracts.

(ii) Increase of sales revenue (US$) of SMEs operating in selected agriculture value chain supported under the project.

(iii) Direct compliance cost savings

(iv)Number of direct project beneficiaries, and share of women. The indicator aims to capture data relative to all direct beneficiaries of the project activities disaggregated by gender.

D. Project Beneficiaries

45. The Project’s direct beneficiaries are estimated at around 2,300 enterprises, of which 20 percent are led by women.

46. The project will have two main groups of beneficiaries, i.e.,firstly, all kinds of private sector stakeholders (primarily private enterprises and investors) related to the supported value chains; and, secondly, government and private sector agencies playing a key role in the interaction between government and private sector (ANIPEX, APEN, CNIP, CCIAN/ME).

47. Among private micro, small and medium enterprises (MSMEs) primary beneficiaries will be those in the selected value chains (peppers, cowpeacowpea, groundnut, poultry) in the Zinder

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and Diffa areas. In addition to benefiting from the overall improvement in the business environment, they will directly benefit from the technical assistance and financing provided through the Project, the financing of infrastructure to improve logistics and in particular exports, and services to increase storage capacity and public/semi-public goods.

48. MSMEs and investors: Entrepreneurs and investors will benefit from the improvement of the business environment. The increase in transparency and predictability will benefit both MSMEs, which normally tend to have limited bargaining power, as well as foreign investors, by reducing uncertainty and transaction costs. Additionally, SMEs will directly benefit through the Matching Grant Program which is expected to increase their performance and managerial capacities.

49. Workers: A key objective of the project is to create jobs through various channels by promoting investments and creation of companies which will result in the improvement in the business environment; supporting the expansion of SMEs which will result in the improvement in managerial capacity.

50. Government and private sector agencies: The project will directly support various government and private sector agencies that are especially important because of their interactions with technical assistance, training, etc. The public/private sector agencies that will specifically benefit from this direct support are the ANIPEX, APEN, CNIP and CCIAN/ME.

III. PROJECT DESCRIPTION

51. The NICCP will feed into one of the two components of PECEA 2 which overall objective is to “improve Niger business climate and create the conditions for private sector development”.

52. The NICCP will support the development of agriculture related value chains with a focus on MSMEs to enhance their possibilities to foster growth and job creation. From the PECEA 2 appraisal document this support would require a combination of interventions including: i) enhancement of the competitiveness of selected value chains; (ii) provision of Business Development Services to support enterprise development; (iii) provision of resources to MSMEs along the agricultural value chains to support investment; and iv) development of green technologies and market infrastructure in the Diffa and Zinder regions. Combination of these interventions would contribute to enhancing the business environment pertaining to the selected value chains, and impove their competitiveness.

53. Denmark will commit DKK113 million (about US$20.372 million) over an operational period of 41 months from August 1, 2015 to December 31, 2018 (see Tables 2 and 2.2) to be disbursed into a single donor trust fund. The project will be structured into three components building from the three Immediate Objectives of the Component 2 of the PECEA. Its activities will complement those being undertaken by the IDA-financed Niger Competitiveness and Growth Support Project (PRACC), especially those related to selected Doing Business Indicators and value chains competitiveness. It is important to note that the NICCP has been shaped to maximize synergies with PRACC.

A. Project Components

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The project would have the following components and activities:

Component 1: Modernization of the Business Environment (US$ 3.55 million)

54. Activities under this component aim to support the implementation of reforms which could be easy to implement and have a quick impact on the business environment. This component will contribute also to the strengthening of institutions geared toward private sector development and export promotion.

Subcomponent 1.1: Implementing Investment Climate Reforms (US$2.47 million)

55. Under this sub-component, the following reforms will be supported: (i) Operationalization of the commercial court in Niamey to address one of the key constraints to access to finance; (ii) implementation of the OHADA entreprenant regime to address informality issues; (iii) trade facilitation; and (iv) construction permit.

(i) Establishing a commercial court

56. The project will support the operationalization of the Niamey Commercial Court after the legislation on the creation of the commercial court, (prepared with support of the PRACC) was approved by the parliament in March 2015. The project will finance the implementation of the operational framework (also prepared with the support of PRACC) that will serve as an action plan for the component (Additional details in Annex 2).

(ii) Implementing the Entreprenant Regime

57. The objective of this component is to facilitate the migration of businesses operating in the informal sector into the formal sector. To that end, the project will support the implementation of the “entreprenant status,” (introduced by the OHADA General Commercial Law) a simplified legal regime specifically designed for small entrepreneurs.

58. The project will finance the deployment of a package of services that could include : (i) regulatory simplification; (ii) development of a specific business registration system; (iii) provision of information on the new registration system; (iv) elaboration and implementation of tax incentives attractive enough to bring informal firms under the new regime; (v) provision of business support services; (vi) facilitated access to bank services.

(iii) Improving Trade Logistics

59. Improving trade logistics to reduce time and costs for import and export could therefore have a catalytic role and facilitate access to regional and international markets. The efforts undertaken under this component on trade logistics will complement the initiatives already being undertaken by the government with the support of the PRACC to formulate and implement key reforms to streamline administrative procedures and practices and provide technical assistance to the customs administration.

60. The sub-component will finance: (i) the acquisition of modern equipment to improve customs clearance system; and (ii) provision of training for the customs administration.

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Subcomponent 1.2: Enabling Institutions for Private Sector Development (US$1.08 million)

61. The objective of this component is to help government put in place institutions and instruments that will enhance private sector development and foster investment in Niger.

(i) Public-Private Dialogue (US$0.31 million)

62. This component will provide resources to CNIP to develop sector agribusiness specific Public-Private dialogue. The objective is to bring together the various stakeholders of the agricultural value chains supported under the project (Government, producers, traders, processors, consumers, etc.) to help them identify integrated response to factors constraining sector growth and improve the pace of sector reforms. More specifically, this component will finance provision of technical assistance, capacity building and south-south learning with countries that have been successful with this type of approach. The issues to be addressed could include: (i) applicable business regulation; (ii) investment policy; (iii) certification process; (iv) taxation; and (v) performance of public agencies but will be determined as part of the PPD process.

(ii) Support to the Operationalization of the Export Promotion Agency – ANIPEX (US$0.77 million)

63. ANIPEX has been created in 2004 for the promotion of exports in Niger including livestock and agricultural products. Under this subcomponent the project will support the elaboration and implementation of an export promotion strategy for the agricultural value chains supported under the project to facilitate their access to the Nigerian market. The sub-component will finance an outreach campaign targeted to supported value-chains The proposed support will come as a complement to the funding provided by PRACC to cover operational costs of ANIPEX in the initial years of the implementation of its business plan.

Component 2: Increase the competitiveness of selected agricultural value chains (US$13.75 million)

64. This component will contribute to improve the competitiveness of SMEs along the agricultural value chains in Zinder and Diffa. 

Sub-component 2.1: Support to the Maison de l’Entreprise (ME) (US$1.9 million)

65. Under this sub-component, support will be provided to build the capacity of ME as well as private sector organizations to offer a suite of services tailored to the relevant agribusiness sector stakeholders.

66. This will include the following activities:

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(i) Support to the ME to offer business development services; (ii) Capacity building at the Central level and in the Zinder and Diffa regions; (iii) Support to private sector programs developed to offer business development

services;(iv) Identification, selection et training of service providers and set up of a registry(v) Support to the action plans of value chain-related business associations(vi) Support to information and visibility for the matching grant components: press and

radio releases, ads; and(vii) Support to good governance and a human rights approach in the activities: a

national audit firm will be recruited. Sub-component 2.2: Provision of financial and non-financial business development services (US$6.3 million)

67. This sub component will support the operationalization of a two windows “matching grant” scheme, namely: i) a fund to finance the provision of consultancy services to MSMEs operating in identified high-growth value chains and ii) a business plan competition to provide financial support for MSMEs investment projects.

68. Business Plan competition: The objective of the activity is to identify and support new or existing businesses with a high potential for innovation in identified value chains. Award winning business plans will be provided with basic funding to implement the project through providing working capital and longer term financing. This will serve as a catalyst for complementary funding from local commercial banks. Award winning projects will be provided with Technical Assistance and coaching services during the initial stage of the implementation of their business plan.

69. Provision of Business Development Services (BDS): Under this window, the matching grant will provide assistance to improve presentation and packaging of harvested crops; development and adoption of innovative production processes; processing; increase awareness of quality control and food-safety standards; identify new markets and market linkages (urban and cross-border); expand use of information and communication technologies (ICT) including mobile phone and SMS technology to disseminate weather, crop and real-time market information and, generally, reduce farmer transaction costs; promote use of basic record keeping to register inputs, outputs, and prices, etc.

70. The matching grant scheme will provide training and business development services to MSMEs operating in the selected value chains to improve their credit worthiness. Eligible activities could include preparation of quality business plans, financial statements and applications that meet the criteria of Nigerien Commercial Banks.

71. The provision of consultancy services will be extended also to financial institutions interested in the development of financing instruments adapted to the needs of the MSMEs operating in the selected value chains. In particular, the project will support opportunities to introduce leasing programs, e-banking, and expand weather index insurance and other risk mitigation tools (forward sales by producers to processors etc..). Regarding leasing, IFC is currently providing support for the establishment of a conducive legal framework in Niger. The proposed activity will complement IFC program.

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Sub-component 2.3: Infrastructure Development (US$4.95 million)

72. Investing in basic infrastructure to improve linkages to the end markets is essential to ensure the development of agricultural supply chains and improve their competitiveness. This entails investment in key commercial infrastructure such as export facilities, cold chain, storage facilities, pack houses, wholesale markets, etc. On the other hand, the existence of a network of feeder roads in good condition is critical for post-harvest marketing operations. This sub-component will support the identification, financing and management of infrastructure to support the development of supported agricultural value chains in Zinder and Diffa areas. The project will work closely with the regional chambers of agriculture, professional associations and local authorities to identify through a study funded by the project the infrastructures to be constructed. PPP will be investigated as a first option for the realization of these infrastructures. If not viable public investment with retrocession to the private sector will be considered.

Subcomponent 2.4: Community Engagement (US$0.6 million)

1. Under this subcomponent, the Project will provide technical assistance to undertake a robust mapping of stakeholders exercise to inventory professional organizations for the selected value chains who can play constructive roles in helping achieve Project objectives. The Project will fund development and strengthening of these organizations through grants and other technical assistance so that they can better fulfill their missions. These missions will target economic empowerment for women and vulnerable persons, governance, transparency, environmental and social protection,. In this way, these organizations will turn Project risks into positive impacts.

Component 3: Project Implementation Support (US$2.18 million)

73. Implementation of the activities of the proposed Project will be undertaken mainly through the Project Implementation Unit (PIU) of the IDA-financed Competitiveness and Growth Support Project through the on-going arrangements. Additional staff members, including an investment climate expert, a procurement specialist and a financial management specialist, a matching grant expert and an agriculture value chain specialist will be added to the PIU team to ensure that proper attention is given to the additional activities. The TF will also finance additional operating costs of the PIU including: equipment; consultant compensation; organizational and systems development; training, capacity building; and technical assistance. .

74. TF will be implemented through two windows: (i) Recipient-Executed window for which the Recipient (Government of Niger) has implementation responsibility and, (ii) Bank-Executed window for which the World Bank Group has implementation responsibility including among other things management and financing of project activities and supervision of project activities by the WBG teams. Trade and Competitiveness Global Practice Investment climate and competitive sectors team will be mobilized to support the implementation of project activities. Cross-support will be provided also by the Agriculture Global Practice for the implementation of value chains related activities.

B. Project Management

75. Implementation of the TF activities will be undertaken through the Project Implementation Unit (PIU) of the IDA-financed PRACC through the on-going arrangements.

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Additional staff members, including an investment climate expert, an accountant and a financial management specialists will be added to the PIU team to ensure proper attention is given to the additional activities. The WBG team will provide support for Project implementation. Financing to be provided for the PIU may include: equipment; consultant compensation; operating costs; organizational and systems development; training, capacity building; and technical assistance.

C. Project Financing

76. The overall project costs of US$20.37 million (DKK 113 equivalent) will be covered by the Danish Government through a self-standing TF manged by the World Bank. (See detailed cost break-down in Table 2.1)

Table 2.1. Overall Project costs1 (DKK million converted in $US million) Description Budget in DKK

millionBudget in

USD millionComponent 1. Modernization of the Business Environment 19.7 3.55

1.1 Implementing Investment Climate reforms 13.7 2.471.2 Enabling institutions for Private Sector Development 6.0 1.08

Component 2. Increasing the competitiveness of selected agricultural value chains

76.3 13.75

2.1 Support to the Maison de l’Entreprise (ME) 10.5 1.92.2 Provision of Financial and non-financial business development services

35.0 6.3

2.3 Infrastructure Development 27.5 4.95

2.4 Community Engagement 3.3 0.6

Total for project (C1+C2) 96.0 17.3

Component 3. Project Implementation support* 11.6 2.1

3.1 Support to UGP/PRACC financial management 0.6 0.1

3.2 Technical Assistance 11 2.0

C - WB 5.4 0.97

1. Fees for TF administration3 2.4 0.442. Supervision 3 0.53

Total 113 20.373. Cost recovery fee for TF is 2%* Excluding WB supervision

77. The TF will be implemented through two windows: i) Recipient executed window and, ii) Bank-Executed window. (See Table 2.2)

Table 2.2: Overall Project costs by component and Implementation Responsibilities (in US$ million)

Components

Budget Global Organization Responsible of Implementation

A - Recipient Executed Window

B - Bank Executed Window

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Component 1. Modernization of the Business Environment 3.55 2.43

1.12

Component 2. Increasing the competitiveness of selected agricultural value chains 13.75 13.75 -Component 3. Project Implementation support* 2.63 2.1 0.53Total for project (C1+C2+C3) 19.93 18.28 1.65

C - WB Fees for TF administration 0.44 - 0.44Total 20.37 18.28 2.09

Percent (%) 100 89.74 10.26

78. *Including WB supervision

A. Lessons Learned and Reflected in the Project Design

79. Public Private Dialogue  PPD has been identified as key aspect of the project  mainly to support the development of the agriculture sector which is very important for the country.  It is good that we resort to PPD at  sector level  because it will lay the emphasis on how to improve the competitiveness of the sector.  Besides, at sector level, PPD has demonstrated its impact and its added value in supporting the development of sectors. A survey of the WBG on PPD for sector development competitiveness and local Economic development: Lessons learnt from the Mediterranean in 2011 has confirmed how PPD has boosted subsectors in the agribusiness by increasing the production and the level of exports  of some products in some countries . So,    PPD at the sector level will help (i) identify the comparative advantages of the sector (ii) create   a consensus among stakeholders  on  the gaps and opportunities in the sector and possibilities of collaboration between the public and the private sector to improve the competitiveness of the sector (iii) define the process and the roadmap to implement the action plan for the development of the sector.

80. Matching grants. The design of the Project’s proposed matching grants scheme also draws lessons from past experiences on World Bank support to SMEs and the March 2011 Independent Evaluation Group (IEG) assessment of World Bank intervention on growth and productivity in agriculture and agribusiness. Since the first such support to SMEs was developed in 1993 with successful results, more than a dozen matching grants funds or similar approaches have been funded by the World Bank in sub-Saharan countries. The matching grants mechanism integrates the following: (i) capacity building to ensure that the implementation agency is capable; (ii) incorporating good governance practices in the procedures manual; (iii) maintaining a demand-driven approach, while at the same time stimulating demand through targeted hand-holding; (iv) from the outset, building strong monitoring and evaluation (M&E) systems that measure outcomes; and (v) keeping the scheme simple.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

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81. The Trust Fund will be Bank and Recipient-executed. The World Bank will implement activities or provide implementation support through joint supervision missions with DANIDA. The Role of the Government of Niger will be to implement the Project through the PRACC PIU hosted under the Ministry of Planning and through the other ministries involved. The PIU will manage the Project according to its current administrative and financial management procedure manuals.

82. The PIU reports to the PRACC steering committee including representatives from all institutions associated with the project, namely the Ministry of Commerce, the Ministry of Industry and Mining, the Ministry of Oil, and the Chamber of Commerce, and chaired by the Ministry of Planning. It meets twice a year to approve among other things annual work programs.

83. The government entity (Haut-Commissariat à l’Initiative 3N, HCI3N) tasked with the overall coordination of the two components of the Danish program will be invited to join the steering committee of the PRACC. On the other hand, the coordinator and the president of the steering committee of PRACC will participate in the coordination mechanism for the Danida Program.

84. This approach will contribute to the development synergies between the two components of the PECEA 2.

85. The PIU will work in close collaboration with the different ministries involved in the project, as well as with private sector representative bodies and other stakeholders (Chamber of Commerce Industry, ANIPEX, etc.), through the designated focal points for PRACC project. These agencies/ministries are (i) the Ministry of Commerce for the Public Private Dialog and the Doing Business Subcomponent (component 1.1); (ii) the Maison de l’Entreprise for the Matching Grant sub component; (iv) the Chamber of Commerce though its ANIPEX for the export and investment promotion component. A new focal point will be appointed within the ministry of Agriculture which was not involved in the PRACC.

86. Finally a locally recruited PECEA National Institutional Advisor will be hired under the TF to strengthen synergies between the two components of PECEA and ensure liaison with the HC3N and Danish Ambassy in Ouagadougou. This adviser will be invited to meetings of the PRACC steering committee.

87. The World Bank has signed an administrative agreement with the Danish development cooperation that will include the rules underlying the governance arrangements and cost recovery under this TF.

Decision-making and Approval Procedures

88. Any revisions or modifications to the program will be carried out in accordance with: The agreements signed by the Danish Representation Office in Ouagadougou and

Nigerien parties; The agreements signed by the Danish Representation Office in Niamey and the World

Bank; The relevant Danish Development Cooperation directives.

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B. Results Monitoring and Evaluation

89. Institutional framework. The M&E system will be based on the agreed Results Framework (Annex 1) and Implementation arrangements. The PIU will be responsible for conducting M&E activities. Data collection for the agreed indicators and component under their responsibility will be initiated by Maison de l’Entreprise and ANIPEX. The beneficiaries’ associations will participate in data collection at their point of operation in collaboration with Maison de l’Entreprise. Overall, ANIPEX and Maison de l’Entreprise (for their respective activities) will be responsible for consolidating and preparing all periodic M&E reporting, including impact and output indicators. In addition, ANIPEX and Maison de l’Entreprise will be required to furnish to the Government for forwarding to the Association a quarterly Implementation Progress Status Report.

C. Sustainability

90. The sustainability of the Project’s impact will depend on several institutional, economic, and environmental requirements.

91. Strength of the policy and institutional framework for project implementation. The Project will be implemented by the PRACC PIU housed within the Ministry of Planning and staffed with dedicated personnel recruited to ensure adequate project implementation.

92. Ownership and beneficiaries’ commitment. The Project has been tailored to national development needs as expressed in the Government development strategy. The Government of Niger has stressed its commitment to significantly improve the business environment as shown by Government’s implementation of key reforms and the creation of the National Private Investors Council (CNIP), chaired by the Prime Minister considered by private sector representatives as an effective tool for fostering public private dialogue and resolving business constraints.

93. Financial sustainability of sub-projects funded by matching grants. The Project will help improve the capacity of local enterprises in selected agricultural value chains through provision of financing and TA. Lessons of experience demonstrate that the combination of technology adoption and advisory services, market facilitation, capacity building, and capital underpin financially and economically sustainable sub-projects.

94. Capacity of beneficiary associations. The sustainability of the Project’s benefits depends on the strength of the beneficiary associations as well as the capacity of their leaders and members to manage the proposed Project investments and future improvements and reforms. The Project’s matching grant program will provide capacity-building efforts to build technical expertise and social capital and expand the knowledge frontier.

95. Environmental and social sustainability. Safeguards assessments and frameworks for the PRACC has been revised to reflect new activities funded under the Trust Fund.

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V. KEY RISKS

A. Overall Risk Rating and Explanation of Key Risks

96. The overall implementation risk of the TF Project is Moderate. The main risks are linked to the security situation and political stability in Niger. For instance a deterioration of the security situation in the country could jeopardize the implementation of the program. Other important factors include the Government of Niger’s political willingness to carry out these reforms and the capacity of the private sector to both support the reforms and enter into meaningful dialogue with the state. By joining forces, the World Bank and DANIDA will be able to lend additional “weight” to state–development partner political discussions. The support provided to the private sector will help increase its lobbying power to ensure the reforms are implemented. Permanent state structures and the private sector will be used to implement the component, thus fostering the sustainability of results and facilitating the exit strategy.

97. Another area of risks are related to weaknesses in the implementation capacity of the PIU. In order to mitigate these risks, regular evaluations of the PIU team’s capacities and needs will be carried out and corrective measure introduced when necessary. On the technical side, a specialist agricultural value chains manager will be recruited to consolidate the PRACC management team. In order to mitigate any potential negative environment impact or other harm caused from Project implementation, the WBG social and environmental safeguard procedures will be applied during implementation, together with DANIDA’s human rights-based approach.

98. SORT MATRIX:

Risk category Rating (H, S, M or L)1. Political and Governance Substantial2. Macroeconomic Substantial3. Sector Strategies and policies Moderate4. Technical design of project or program Moderate5. Institutional capacity for implementation and sustainability Moderate6. Fiduciary Substantial7. Environmental and Social Moderate8. Stakeholders Moderate9. Other

Overall Moderate

IV. APPRAISAL SUMMARY

A. Summary of the Economic and Financial Analysis (see Annex 7 for details)

Reason for public intervention

99. Improvements in the business environment have been shown to be necessary for a long term growth of the private sector. This business environment in turn is largely dependent on the

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existing set of rules, regulations and institutions governing the functioning of the market, most of which are decided by public sector actors.

100. The competitiveness of sectors is strongly influenced by the existence of infrastructure such as roads that allow for easier and cheaper access to markets, storage infrastructure that allows for improved logistics and in time better cashflows, or marketing infractructure that provides for economies of scale. The lack of infrastructure hinders the supply into the market. This failure is especially stringent in sectors like agribusiness in poor countries, where the sector is largely dominated by a large number of micro or small firms, which face an even harder challenge to organize themselves and finance semi-public goods

101. Similarly access to finance is the biggest obstacle faced by small enterprises in Niger, according to the most recent Enterprise Survey (2009) – see section I.B for details. This is a market failure as this means that the market is not providing enough financing for the potential investment projects coming from small firms. This means that these firms are not allowed to grow, preventing them from becoming more creditworthy to banks, and therefore leaving them into a low-level equilibrium where they remain small.

102. The three key aspects of competitiveness to be tackled by the Project therefore require a public intervention.

Value added of the WBG

103. The WBG has the most extensive and recognized experience in helping developing countries improve their business environment. It also has the unique benefit of worldwide experience and lessons for the design and implementation of targeted infrastructure as well as matching grants and access to finance components to sustain the competitiveness of sectors and of agribusiness in particular. Finally the Project has been designed to be complementary to other donor interventions on the business environment and agricultural value chains.

Summary of Economic and Financial Analysis

104. As shown in detail in Annex 7, significant economic benefits are expected to be derived from this project. The project will create a business environment conducive to private investment, enterprise creation and growth. Enhancing the competitiveness of the selected agricultural value chains will generate value-added and create more jobs, and increase the contribution of the agricultural sector to sustainable development.

105. Ultimately, through its economy-wide demonstration effect, the project is likely to generate benefits for a much larger number of SMEs, with wider implications for private sector growth job creation and poverty reduction.

B. Technical

i. Improving the business environment;

ii. Support to improve entrepreneurial capacities; and

iii. Development of agricultural value chains.

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C. Financial Management

106. The State Ministry for Planning, will be responsible for the overall coordination and implementation of the activities under the proposed project. It will rely on the Project Executing Unit (UEP, Unité d’Exécution de Projet, in French) and Maison de l’Entreprise (ME) which have a good track record in implementing the Competitiveness and Growth Strengthening Project (PRACC). . Both PRACC coordination unit and Maison de l’Entreprise are staffed with qualified and well experienced FM staff. The FM performance and the FM risk have been rated respectively satisfactory and moderate following the last supervision mission conducted in May 2014. Fiduciary compliance is also deemed satisfactory. However: (i) the interim non audited financial statement (IFR) have not been submitted on time, but with acceptable quality; (ii) the first audited financial statements, for the period ending December 31, 2012 were submitted at the Bank in a timely manner, but with qualified opinion.

107. However, the following actions need to be completed to ensure that the PCU of the State Ministry for Planning, Land and Community Development, has adequate FM arrangements to handle the activities under the proposed project: (i) before effectiveness update the administrative, accounting and financial procedures manual to incorporate activities under the proposed project; (ii) within two months of effectiveness, upgrade the accounting software to include the proposed project; (iii) within four months of effectiveness, recruit an external auditor based on terms of reference acceptable to the Bank, to audit the project’s annual financial statements. The current financial management arrangements, considering the nature of the program (community driven development program) and with the proposed actions the residual financial management risk of the project was rated as substantial.

108. The conclusion of the assessment is that financial management arrangements have to be set up and do not yet meet the Bank’s minimum requirements under OP/BP10.00. Once the proposed actions are undertaken the residual financial management risk of the project will be revised and rated as substantial.

D. Procurement

109. The procurement activities will be carried out by the PIU of the Competitiveness and Growth Support Project. The PIU’s procurement staff has gained experience attending several trainings on World Bank procurement procedures and on-the-job in the process of the implementation of active projects as well as previously closed projects.

110. However, the procurement risk has been evaluated substantial during the last supervision missions and mitigations measures have been recommended to strengthen the procurement transparency and the internal control.

111. Recently the procurement specialist supporting the PIU has resigned and the replacement process is completed. The new recruited procurement specialist is on board since March 13 and will ensure quality control of all procurement documents and compliance with World Bank procedures for all projects managed by the PIU.

112. The procurement risk for this project is rated substantial. The following mitigations measures have been identified :

Recruit in addition a procurement assistant to support notably the activity related to

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the present financing. Strengthen the internal control as recommended during the last supervision mission

notably : (i) External staff from the PIU to chair the procurement committees (the SG or DG in Ministry of Planning to chair the Award Committee, the Technical Director from the recipient Ministry to chair technical committee); (ii) involve more the Public Procurement Unit of the Ministry of Planning in the Procurement Processes; (iii) As required, request prior review controls by bodies in charge at the level of the Government; (iv) During bid opening ceremonies, insure that the Bailiff set according the National law, signs all the envelopes containing the financial proposals ( after technical bid opening ceremonies ) and all the pages of financial proposals (after financial bid opening ceremonies).

113. Frequency of procurement supervision. In addition to the prior review supervision to be carried out from IDA, the capacity assessment has recommended two supervision missions in the field and at least one annual post-procurement review. The World Bank Procurement Specialist based in the Niamey Country Office, will provide continuous support to the implementing agency. An Independent Procurement review could be carried out if necessary.

114. Procurement plan. The Recipient, has developed a procurement plan for project implementation which provides the basis for the procurement methods and the prior review by the Bank. This plan has been agreed upon between the Recipient and IDA and approved by the Bank on Feb 23, 2015. With the Recipient’s agreement, the plan will be published on the Bank’s public website and made available at the Project Implementation Unit. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

115. More details on fiduciary arrangements are provided in Annex 3.

E. Social (including Safeguards)

116. The project, by the nature of its development objective, brings together a diverse group of stakeholders and beneficiaries, consisting of investors, SMEs, business owners, livestock wholesalers, intermediaries, meat and livestock exporters, (organized through 7 associations/Groupement d’Intérêt Economique in Niamey and Maradi) with diverse and sometime conflicting interests. It will also bring together big mining companies, local (mostly SMEs) and international suppliers, etc. As the project is primarily offering technical assistance and capacity building, with limited infrastructure rehabilitation, the social impacts of the project are largely expected to be positive. Under component 1, the project will help improve the business environment of the country and develop skills of beneficiaries to enter and exploit private sector opportunities. Component 2 which will support the development of the value chains will encourage job creation, especially for the butchery industry as well SMEs providers of goods and services to main mining conglomerates (AREVA, China’s CNPC etc.) thus improving social inclusion in the mining zones.

117. Involuntary resettlement. Although the project will not involve any land acquisition nor restrict access to income sources of the population, the involuntary resettlement safeguard (OP/BP 4.12) is triggered for precautionary measures and because of the proposed works under the project comprising mainly of rehabilitation of existing structures. The Recipient has prepared

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a Resettlement Policy Framework. It has been cleared by the Bank on March 26, 2012. It has been disclosed in country on March 27, 2012 and in the Infoshop on March 28, 2012.

F. Environment (including Safeguards)

118. Environmental Assessment OP/BP 4.01: The potential environmental impacts of the proposed operation are related to the Sub-component 2.3 which will support financing of infrastructure to support the development of specified agricultural value chains. The ESMF for the ongoing Competitiveness and Growth Support Project (P127204) will be updated, consulted upon and re-disclosed before appraisal.

119. Physical Cultural Resources OP/BP 4.11: Due to potential impacts on Physical Cultural Resources associated with civil works, the updated ESMF will formulate standard measures to be included in the companies’ contracts, in case any chance finds occurs.

120. Involuntary Resettlement OP/BP 4.12: Sub-component 2.3 may require some land acquisition related to the construction of infrastructures to support the development of specified agricultural value chains. The RPF for the ongoing Competitiveness and Growth Support Project (P127204) will be updated, consulted upon and re-disclosed before appraisal.

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment (OP/BP 4.01) [X] [ ]Natural Habitats (OP/BP 4.04) [] [X]Pest Management (OP 4.09) [] [X]Indigenous Peoples (OP/BP 4.10) [ ] [X]Physical Cultural Resources (OP/BP 4.11) [X] []Involuntary Resettlement (OP/BP 4.12) [X] [ ]Forests (OP/BP 4.36) [ ] [X]Safety of Dams (OP/BP 4.37) [] [X]Projects on International Waterways (OP/BP 7.50) [] [X]Projects in Disputed Areas (OP/BP 7.60) * [ ] [X]

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Annex 1: Results Framework and Monitoring

COUNTRY: Niger Invesment Climate Competitiveness ProjectPDO Indicator Baseline

1/7/2015 Target value 03/31/2019

Data source/methodology

Responsibility for data collection

The PDO is to improve critical elements of investment climate for the private sector and enhance competitiveness of SMEs in selected agriculture value chains.

Number of DB reforms implemented

0 4 Doing Business PIU

Direct compliance cost savings

0 2 million PIU

Increase of sales revenue of beneficiary firms ($)

10%

Direct project beneficiaries, of which female (%)

2300 PECEA reporting and M&E

PIU

Intermediate Level Results Indicators

Results Indicators Baseline 1/7/2015

Target value 03/31/2019

Data source/methodology

Responsibility for data collection

Simplified business registration procedure

Number of of procedures in starting a business

6 4 Doing Business PIU

Faster contract enforcing mechanism

Number of dasy to settle a commercial case

545 445 Doing Business PIU

Simplified construction permit issuance sytem

Number of procedures to obtain a construction permit

12 9 Doing Business PIU

Streamlined cross-boarder trading process

Number of documents required to export

8 6 Doing Business PIU

Number of documents 10 8 Doing Business PIU

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required to import

New regime for small-scale entrepreneurs is effective

Number of new “entreprenant” registered

0 1000 Maison del’entreprise

Maison de l’entreprise/PIU

The Maison de l’Entreprise and private sector organizations offer services tailored to MSMEs in agricultural value chains

Increase in number of services offered to members

0 At least 2 for the Maison de l’Entreprise

PECEA reporting and M&E

PIU

The capacity of actors along the value chains is improved

Number of firms that have business plan prepared

0 500 PECEA reporting and M&E

PIU

Number of new direct jobs created

0 1000

Infrastructures to support the development of the specified agricultural value chains are identified, built, and managed

Number of collective market infrastructure constructed

6 Reporting and M&E PIU

Citizens and/or communities involved in planning/ implementation/ evaluation of development programs (yes/no)

No YesReporting and M&E PIU

* Core Sector Indicator.

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Annex 2: Detailed Project Description

Niger – Investment Climate and Competiveness Support Project (NICCP)

121. The NICCP is derived from one of the two components of a larger Danish Government program (PECEA 2) which overall objective is to “improve Niger business climate and create the conditions for private sector development”.

122. The NICCP will support the development of agriculture related value chains with a focus on small and medium-sized agribusiness enterprises (SMEs) to enhance their possibilities to foster growth and job creation. It appears from the PECEA 2 appraisal document that this support would require a combination of interventions including: (i) enhancement of the competitiveness of selected value chains; (ii) provision of Business Development Services to support enterprise development; (iii) provision of resources to MSMEs along the agricultural value chains to support investment; and (iv) development of green technologies and market infrastructure in the Diffa and Zinder regions.

123. Denmark will commit DKK 113 million (about US$20.372 million) over an operational period of 41 months from August 12015 to December 31, 2018 (see Table 2) to be disbursed into a single donor trust fund. The project will be structured into three components building from the three immediate objectives of the Component 2 of the PECEA. Its activities will complement those being undertaken by the IDA-financed Niger Competitiveness and Growth Support Project (PRACC), especially those related to selected Doing Business Indicators and value chains competitiveness. It is important to note that the NICCP has been shaped to maximize synergies with PRACC.

A. Project components

The project would have the following components and activities:

Component 1: Modernization of the Business Environment (US$3.55 million)

124. Activities under this component aim to support the implementation of reforms which could be easy to implement and have a quick impact on the business environment. This component will contribute also to the strengthening of institutions geared toward private sector development and export promotion. This component will also complement the support to the ANIPEX provided by the IDA funded Growth and competitiveness support project (PRACC).

Subcomponent 1.1: Implementing Investment climate reforms (US$2.47 million)

125. Under this sub-component, the following reforms will be supported: i) Operationalization of the commercial court in Niamey, ii) implementation of the OHADA entreprenant regime, iii) trade facilitation, iv) construction permit.

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(i) Establishing a commercial court

126. The project will support the operationalization of the Niamey Commercial Court after the legislation on the creation of the commercial court, (prepared with support of the PRACC) was approved by the parliament in March 2015. The project will finance the implementation of the operational framework (also prepared with the support of PRACC) that will serve as an action plan for the component. More specifically the sub-component will finance:

(i) Training of judges and court staff in matters, as required. A detailed training program will be prepared with the project financing.

(ii) Studies to define staff functions and the organization of the office of the registrar of the commercial court

(iii) Provision of facilities for the court, including rehabilitated building and provision of information systems equipment and supplies.

(iv) Creation of a website to publish the court decisions

(v) the modernization of the RCCM.

This sub-component should contribute to improving conytract enforcement in Niger.

(ii) Implementing the Entreprenant Regime

127. The objective of this component is to facilitate the migration of businesses operating in the informal sector into the formal sector. To that end, the project will support the implementation of the “entreprenant status,” (introduced by the OHADA General Commercial Law) a simplified legal regime specifically designed for small entrepreneurs.

128. In light of the findings of the pilot program conducted in Benin, the project will finance the deployment of a package of services including : i) regulatory simplification; (ii) development of a specific business registration system; (iii) provision of information on the new registration system; (iv) elaboration and implementation of tax incentives attractive enough to bring informal firms under the new regime; (v) provision of business support services; and vi) facilitated access to bank services.

(iii) Improving Trade Logistics

129. The objective of this component is to contribute to improving trade logistics procedures by establishing a favorable environment in the customs administration. As a landlocked country, trade logistics is key in Niger’s competitiveness and economic growth. The country is expericing several issues related to accessing regional and international markets, and faces constraints such as : (i) limited capacity in the customs; (ii) weak implementation of new technologies; (iii) cumbersome procedures; (iv) lack of transparency; and (v) road harassment. They ultimately lead to high cost and time to trade.

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130. Improving trade logistics to reduce time and costs for import and export could therefore have a catalytic role and facilitate access to regional and international markets. The efforts undertaken under this component on trade logistics will complement the work already being undertaken by the government with the support of the PRACC to identify (based on a diagnostic funded by the project), formulate and implement key reforms to streamline administrative procedures and practices and provide technical assistance to the customs administration.

131. The sub-component will finance: i) the acquisition of modern equipment to improve customs clearance system, ii) provision of training for the customs administration

Subcomponent 1.2: Enabling institutions for private sector development (US$1.08 million)

132. The objective of this component is to help government put in place institutions and instruments that will enhance private sector development and foster investment in Niger.

Public-Private Dialogue (US$0.31 million)

133. This component will provide resources to CNIP to develop sector agribusiness specific Public-Private dialogue. The objective is to bring together the various stakeholders of the agricultural value chains supported under the project (Government, producers, traders, processors, consumers, etc.) to help them identify integrated response to factors constraining sector growth and improve the pace of sector reforms. More Specifically, this component will finance provision of technical assistance, capacity building and south-south learning with countries that have been successful with this type of approach. The issues to be addressed could include: (i) applicable business regulation; (ii) investment policy; (iii) certification process. iv) taxation; and (v) performance of public agencies but will be determined as part of the PPD process.

Support to the operationalization of the export promotion agency – ANIPEX (US$0.77 million)

134. ANIPEX has been created in 2004 for the promotion of exports in Niger including livestock and agricultural products. Under this subcomponent the project will support the elaboration and implementation of an export promotion strategy for the agricultural value chains supported under the project to facilitate their access to the Nigerian market. The proposed support will come as a complement to the funding provided by PRACC to cover operational costs of ANIPEX in the initial years of the implementation of its business plan.

Component 2: Increase the competitiveness of selected agricultural value chains (US$13.75 million)

135. This component will contribute development objective #1 of the Danish program: Improve the competitiveness of the SMEs along the agricultural value chains in Zinder and Diffa. 

Sub-component 2.1: Support to the Maison de l’Entreprise (ME) (US$1.9 million)

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136. Maison de l’entreprise (ME) is an agency for enterprise promotion created with the support of the PRACC in 2012. Its mandate is to provide nonfinancial services and act as a one stop shop for business to access various services necessary for their establishment or operations, including via matching grant schemes.

Under this sub-component, support will be provided to build the capacity of ME as well as private sector organizations to offer a suite of services tailored to the relevant agribusiness sector stakeholders.

137. This will include the following activities:

(i) Support to the ME to offer business development services in : Value Chain Analysis ; Proposal Writing ; Project Fund Raising ; Liaising with producers and other actors of the value chain etc. through:

Human Resources Support :

- Financing for the Director, CFO and procurement manager in synergy with PRACC financing

- Recruitment of 6 young graduates of whom two each will be posted full time in Niamey, Zinder and Diffa

- Recruitment of 4 managers for the business development services to promote delivery of services and recruit and train BDS providers at the central level (2) and in region (Zinder (1) and Diffa (1)),

(ii) Capacity building at the Central level and in the Zinder and Diffa regions:

- Training for managers

- Logistics support on the basis of the business plan: 1 four-wheel drive Niamey, Zinder, Diffa ; 6 motorcycles (for the graduates) ; equipment, computers ; support to logistics and administration

(iii) Support to private sector programs developed to offer business development services

(iv) Identification, selection et training of service providers and set up of a registry

(v) Support to the action plans of value chain-related business associations

(vi)Support to information and visibility for the matching grant components: press and radio releases, ads

(vii) Support to good governance and a human rights approach in the activities: a national audit firm will be recruited. The ME will elaborate a multi-year business plan.

Sub-component 2.2: Provision of Financial and non-financial business development services (US$ 6.3 million)

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138. This sub-component will facilitate access to finance and BDS to actors along the full value chains to support production, processing and, ultimately, product delivery and export, where appropriate, with a view to improve the actors’ performance and competitiveness. To do so, the sub component will support the operationalization of a two windows “matching grant” scheme, namely: i) a fund to finance the provision of consultancy services to MSMEs operating in identified high-growth value chains and ii) a business plan competition to provide financial support for MSMEs investment projects.

139. These facilities will be designed to be used as appropriate tools for the ME. The funding will be used, in part to create in close coordination with stakeholders an execution manual to outline the operating principles and procedures of the fund, as well as the governance and internal control mechanisms.

Business Plan competition: This subcomponent will provide resources for the financing of a business plan competition. The objective of the activity is to identify and support new or existing businesses with a high potential for innovation in identified value chains. Award winning business plans will be provided with basic funding to implement the project through providing working capital and longer term financing. This will serve as a catalyst for complementary funding from local commercial banks. Award winning projects will be provided with Technical Assistance and coaching services during the initial stage of the implementation of their business plan. The table below describe the targeted beneficiaries for the business plan competition.

Financial business development services will be targeted as follows:

Type of support Firm type Number of supported firms* Financing for micro firms Micro 38* Financing for informal firms Informal 750* Financing for SMEs SME 41* Financing for producer cooperatives Cooperatives 300* Financing for Green Projects: Renewable energy

Green Projects 15

Provision of Business Development Services: Under this window, the matching grant will provide assistance to improve presentation and packaging of harvested crops; development and adoption of innovative production processes; processing; increase awareness of quality control and food-safety standards; identify new markets and market linkages (urban and cross-border); expand use of information and communication technologies (ICT) including mobile phone and SMS technology to disseminate weather, crop and real-time market information and, generally, reduce farmer transaction costs; promote use of basic record keeping to register inputs, outputs, and prices, etc.

a. The matching grant scheme will provide training and business development services to MSMEs operating in the selected value chains to improve their credit worthiness. Eligible activities could include preparation of quality business plans, financial statements and applications that meet the criteria of Nigerien Commercial Banks.

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140. The provision of consultancy services will be extended also to financial institutions interested in the development of financing instruments adapted to the needs of the MSMEs operating in the selected value chains. In particular, the project will support opportunities to introduce leasing programs, e-banking, and expand weather index insurance and other risk mitigation tools (forward sales by producers to processors etc..). Regarding leasing, IFC is currently providing support for the establishment of a conducive legal framework in Niger. The proposed activity will complement IFC program. Non-financial business development services will be targeted as follows:

Type of support Firm type Nb of supported firms* BDS for micro firms Micro 50* BDS for informal firms Informal 1 000* BDS for SMEs SME 50* BDS for R&D R&D 20* Training of service providers Service Provider 20Financial Institutions 5

Sub-component 2.3: Infrastructure Development (US$ 4.95 million)

141. Investing in basic infrastructure to improve linkages to the end markets is essential to ensure the development of agricultural supply chains and improve their competitiveness. This entails investment in key commercial infrastructure such as export facilities, cold chain, storage facilities, pack houses, wholesale markets, etc. On the other hand, the existence of a network of feeder roads in good condition is critical for post-harvest marketing operations. This sub-component will support the identification, financing and management of infrastructure to support the development of supported agricultural value chains in Zinder and Diffa areas. The project will work closely with the regional chambers of agriculture, professional associations and local authorities to identify through a study funded by the project the infrastructures to be constructed. Special attention will be given to effective management of infrastructure constructed under the project , based on Public-Private Partnerships.

Infrastructure Development support will target the following types of infrastructure:

Support type Example * Transport infrastructure (critical access points)

Small bridges etc.

* Collective market infrastructure for transformation and distribution

Storage facilities, Selling points, Markets, Slaughter Houses etc.

* Industrial/enterprise infrastructure Industrial and commercial zones, sewage network

* Other collective infrastructure Electrification, renewable energy infrastructure (e.g. solar pannels), driers, kitchens, vaccine storage, multi function platform etc.

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Subcomponent 2.4: Community engagement (US$0.6 million)

142. Under this subcomponent, the Project will provide technical assistance to undertake a robust mapping of stakeholders exercise to inventory professional organizations for the selected value chains who can play constructive roles in helping achieve Project objectives. The Project will fund development and strengthening of these organizations through grants and other technical assistance so that they can better fulfill their missions. These missions will target economic empowerment for women and vulnerable persons, governance, transparency, environmental and social protection,. In this way, these organizations will turn Project risks into positive impacts.

Component 3: Project Implementation Support (US$2.18 million)

143. Implementation of the TF activities will be undertaken mainly through the Project Implementation Unit (PIU) of the IDA-financed Competitiveness and Growth Support Project through the on-going arrangements. Additional staff members, including an investment climate expert, a procurement specialist and a financial management specialist, a matching grant expert and an agriculture value chain specialist will be added to the PIU team to ensure that proper attention is given to the additional activities. The TF will also finance additional operating costs of the PIU including: equipment; consultant compensation; organizational and systems development; training, capacity building; and technical assistance.

144. In addition, Word Bank Group (World Bank and IFC) teams will be mobilized to support the implementation of project activities. For instance IFC advisory teams will directly support the implementation of investment climate reforms, using its own experts or hiring external expertise.

145. As a consequence the TF will be implemented through two windows: (i) Recipient-Executed window for which the Recipient (Government of Niger) has implementation responsibility and, (ii) Bank-Executed window for which the World Bank Group has implementation responsibility including among other things management and financing of project activities and supervision of project activities by the World Bank Group team.

B. Project Management

146. Implementation of the TF activities will be undertaken through the Project Implementation Unit (PIU) of the IDA-financed Competitiveness and Growth Support Project through the on-going arrangements. Additional staff members, including an investment climate expert, an accountant and a financial management specialists will be added to the PIU team to ensure proper attention is given to the additional activities. The WBG will provide support for Project implementation. Financing to be provided for the PIU may include: equipment; consultant compensation; operating costs; organizational and systems development; training, capacity building; and technical assistance.

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C. Project Financing

147. As mentioned above, the TF will be implemented through two windows: (i) Recipient Executed window and, (ii) Bank-Executed window.

148. Table 2.1 and 2.2 provide overall project costs and describe budget allocation and implementation responsibilities

Table 2.1. Overall Project costs1 (DKK million converted in $US million2)

Description Budget in million DKK

Budget in million USD

Component 1. Modernization of the Business Environment

19.7 3.55

1.1 Implementing Investment Climate reforms 13.7 2.47

1.2 Enabling institutions for Private Sector Development 6.0 1.08

Component 2. Increasing the competitiveness of selected agricultural value chains

76.3 13.75

2.1 Support to the Maison de l’Entreprise (ME) 10.5 1.9

2.2 Provision of Financial and non-financial business development services

35.0 6.3

2.3 Infrastructure Development 27.5 4.95

2.4 Community Engagement 3.3 0.6

Total for project (C1+C2) 96.0 17.3

Component 3. Project Implementation support* 11.6 2.1

3.1 Support to UGP/PRACC financial management 0.6 0.1

3.2 Technical Assistance 11 2.0

C - WB 5.4 0.97

3. Fees for TF administration3 2.4 0.44

4. Supervision 3 0.53

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Total 113 20.37

Notes: 2. $US1= 5.547DKK3. Cost recovery fee for TF is 2%

* Excluding WB supervision

Table 2.2: Overall Project costs by component and Implementation Responsibilities (in US$ million)

Components

Budget Global

Organization Responsible of Implementation

A - Recipient Executed Window

B - Bank Executed Window

Component 1. Modernization of the Business Environment 3.55 2.43 1.12

Component 2. Increasing the competitiveness of selected agricultural value chains 13.75 13.75 -

Component 3. Project Implementation support* 2.63 2.1 0.53

Total for project (C1+C2+C3) 19.93 18.28 1.65

C - WB Fees for TF administration 0.44 - 0.44

Total 20.37 18.28 2.09

Percent (%)100 89.74 10,26

*Including WB supervision

D. Lessons Learned and Reflected in the Project Design (Optional)

149. Public Private Dialogue  PPD has been identified as key aspect of the project  mainly to support the development of the agriculture sector which is very important for the country.  It is good that we resort to PPD at  sector level  because it will lay the emphasis on how to improve the competitiveness of the sector.  Besides, at sector level, PPD has demonstrated its impact and its added value in supporting the development of sectors. A survey of the WBG on PPD for sector development competitiveness and local Economic development: Lessons learnt from the Mediterranean in 2011 has confirmed how PPD has boosted subsectors in the agribusiness by increasing the production and the level of exports  of some products in some countries . So,   

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PPD at the sector level will help (i) identify the comparative advantages of the sector (ii) create   a consensus among stakeholders  on  the gaps and opportunities in the sector and possibilities of collaboration between the public and the private sector to improve the competitiveness of the sector (iii) define the process and the roadmap to implement the action plan for the development of the sector.

150. Matching grants. The design of the Project’s proposed matching grants scheme also draws lessons from past experiences on World Bank support to SMEs and the March 2011 Independent Evaluation Group (IEG) assessment of World Bank intervention on growth and productivity in agriculture and agribusiness. Since the first such support to SMEs was developed in 1993 with successful results, more than a dozen matching grants funds or similar approaches have been funded by the World Bank in sub-Saharan countries. The matching grants mechanism integrates the following: (i) capacity building to ensure that that the implementation agency is capable; (ii) incorporating good governance practices in the procedures manual; (iii) maintaining a demand-driven approach, while at the same time stimulating demand through targeted hand-holding; (iv) from the outset, building strong monitoring and evaluation (M&E) systems that measure outcomes; and (v) keeping the scheme simple.

E. Alternatives considered

151. Choosing an instrument. The lending instrument is a Trust funded project. The TF will complement the ongoing IPF project that is on-going.

152. The possibility of a Bank-Executed window, implemented by IFC to deliver on the regulatory reforms had been considered by the team and discussed with the Government and Danida. It was finally rejected as the former officially requested a PRACC led and executed arrangement and the latter expressed its preference for a simplified arrangement involving a maximum of two partners.

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Annex 3: Implementation Arrangements

I. Project Management

153. Implementation of the TF activities will be undertaken through the Project Implementation Unit (PIU) of the IDA-financed Competitiveness and Growth Support Project through the on-going arrangements. Additional staff members, including an investment climate expert, an accountant and a financial management specialists will be added to the PIU team to ensure at proper attention is given to the additional activities. The TF will also provide support for Project implementation. Financing to be provided for the PIU may include: equipment; consultant compensation; operating costs; organizational and systems development; training, capacity building; and technical assistance.

A. Project Administration Mechanisms

Project Institutional and Implementation Arrangements

154. The Trust Fund will be Bank and Recipient-executed. The World Bank will implement activities or provide implementation support through joint supervision missions with DANIDA. The Role of the Government of Niger will be to implement the Project through the PRACC PIU hosted under the Ministry of Planning and through the other ministries involved. The PIU will manage the Project according to its current administrative and financial management procedure manuals.

155. The PIU reports to the PRACC steering committee including representatives from all institutions associated with the project, namely the Ministry of Commerce, the Ministry of Industry and Mining, the Ministry of Oil, and the Chamber of Commerce, and chaired by the Ministry of Planning. It meets twice a year to approve among other things annual work programs.

156. The government entity (Haut-Commissariat à l ’Initiative 3N, HCI3N) tasked with the overall coordination of the two components of the Danish program will be invited to join the steering committee of the PRACC. On the other hand, the coordinator and the president of the steering committee of PRACC will participate to the coordination mechanism for the Danida Program.

157. This approach will contribute to the development synergies between the two components of the PECEA 2.

158. The PIU will work in close collaboration with the different ministries involved in the project, as well as with private sector representative bodies and other stakeholders (Chamber of Commerce Industry, ANIPEX, etc.), through the designated focal points for PRACC project. These agencies/ministries are (i) the Ministry of Commerce for the Public Private Dialog and the Doing Business Subcomponent (component 1.1); (ii) the Maison de l’Entreprise for the Matching Grant sub component; (iv) the Chamber of Commerce though its ANIPEX for the

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export and investment promotion component. A new focal point will be appointed within the ministry of Agriculture which was not involved in the PRACC.

159. Finally a locally recruited« PECEA National Instutional Advisor » will be hired under the TF to strengthen synergies between the two components of PECEA and ensure liaison with the HC3N and Danish Ambassy in Ouagadougou. This adviser will be invited to meetings of the PRACC steering committee.

160. The World Bank has signed an administrative agreement with the Danish development cooperation that will include the rules underlying the governance arrangements and cost recovery under this TF.

Decision-making and approval procedures

161. Any revisions or modifications to the program will be carried out in accordance with: The agreements signed by the Danish Representation Office in Ouagadougou and

Nigerien parties; The agreements signed by the Danish Representation Office in Niamey and the World

Bank The relevant Danish Development Cooperation directives

B. Financial Management and Disbursement

III. COUNTRY ISSUES

162. Recent assessments performed by or at the request of the authorities have identified a range of weaknesses in Niger’s Public Financial Management (PFM) system. These assessments include the 2008 Public Expenditure and Financial Accountability Assessment (PEFA) and the repeater PEFA conducted in 2012. The draft report of the 2012 repeater PEFA highlighted limited progress in comparison with the situation reflected in the 2008 PEFA report. Only 8 indicators have been upgraded in particular in the areas of policy-based budgeting, multiyear perspective in fiscal planning and public expenditure policy, public access to key fiscal information, predictability in the availability of funds for commitment of expenditures and timeliness of submission of audit reports to legislature. The reports identified a number of critical shortcomings in budget credibility and execution processes as well as accounting, financial reporting and internal and external controls.

163. In response to PEMFAR II, the government, among others introduced measures to implement progressively the PFM reform, and has: (i) proposed in the short term, the recruitment of agents to reinforce the National Directorate of Taxes (DGI: Direction Générale des Impôts) fiscal actions capacity under the DGI’s action plan; (ii) accompanied installation of the Supreme Audit Institution (SAI) since May, 18 2010 under the ordinance n°2010-17 of April 15, 2010 taken by the President; This ordinance has since been upgraded to Organic Law as per WAEMU directives; (iii) elaborated on an institutional support project aimed at strengthening the SAI ; and (iv) installed the “Direction Générale du Trésor et de la Comptabilité Publique” under the ordinance n°2010-15 of April, 15 2010 . Considering the weaknesses identified in the public

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financial management for Niger the country risk rating is deemed substantial. Within the Ministry of Finance, the Directorate of Public Financial Management reforms is charged with the task of initiating and following through the implementation of the action plans of the PFM reforms. The action plan for PFM reforms was adopted by the Council of Ministers in December 2011. The translation of WAEMU PFM directives into National law and their timely implementation will also accelerate the PFM reforms in Niger.

164. The Project Coordination Units of the Competitiveness and Growth Strengthening (PRACC).

165. The PRACC coordination unit and Maison de l’Entreprise have been the implementing agencies of the Competitiveness and Growth Strengthening Project (PRACC-P127204) ending in March 2019. The PRACC unit and Maison de l’Entreprise operate respectively under the Ministry of Planning, Territory Management, and Community Development (MPTMCD) and the Chamber of Commerce (Chambre de Commerce, d’Industrie et d’Artisanat du Niger - CCIAN) and will be responsible for the implementation of the activities of the proposed project. Both PRACC unit and Maison de l’Entreprise have a track record in implementing Bank funded projects. The FM performance and the FM risk have been rated respectively satisfactory and moderate following the last supervision mission of the PRACC conducted in May 2014. Fiduciary compliance is also deemed satisfactory. However: (i) the IFRs submission have been delayed but with acceptable quality; (ii) the audited financial statements of the first audited period ending December 31, 2012 have been submitted at the Bank in a timely manner, but with a qualified opinion.

IV. PROJECT OVERVIEW

The proposed program will have three components:

Component 1: Modernization of the Business Environment (US$3.55 million):

Component 2. Increase the competitiveness of selected agricultural value chains (US$ 13.75 million):

Component 3: Project Implementation Support (US$2.18 million) -

V. RISK ASSESSMENT AND MITIGATION

166. The table below shows the results of the risk assessment from the Risk Rating Summary and identifies the key risks the project management may face in achieving project objectives. It also provides a basis for determining how management should address these risks.

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Risk Risk Rating

Risk Mitigating Measures Incorporated into Project Implementation

Conditions/Covenants (Y/N)

Overall Residual Risk rating

INHERENT RISK

S S

Country level: Risk of delay in implementing the recently adopted PFM plan on improvement of on quality of PFM.

Corruption and poor governance may affect public sector performance.

S Joint donor and government regular review and evaluation of implementation progress of the PFM action plan.

Successful implementation of the current Bank financed TA project, Institutional strengthening of the External Audit through an IDF grant under preparation.

Continued Bank policy dialogue through the DPO series which includes triggers linked to PFM reforms. A number of institutions to help fight against corruption have been set up and are currently operational. Some of these institutions include: the Procurement Regulatory Agency, the High Commission of Anti-Corruption, and the General Inspection of Government Administration.

N S

Entity level:

Weak Capacity and high risk of political interference.

S Establish and clearly outline the role of the Ministries and institution involved in the implementation of the program activities in the project implementation manual and the manual of procedures and in relevant legal texts. The role of other institutions involved in project activities implementation will also be clarified.

Y - Before Disbursements

S

Project level: a) The activities of the project involving several sectors may entail a delay in implementing the project activities.

b) Specific activities under the sharing-costs may lack the necessary

S The Steering committee will ensure a regular monitoring of the project activities.

A locally recruited PECEA National Institutional Advisor with the DANIDA competence has been hired under this TF whose experience will be useful in implementing these activities.

N S

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Risk Risk Rating

Risk Mitigating Measures Incorporated into Project Implementation

Conditions/Covenants (Y/N)

Overall Residual Risk rating

capacity.

CONTROL RISK

S S

Budgeting: Low budget execution due to slow process of contracting.

SThe Steering Committee will review and approve the work plans and annual budgets at the beginning of every year and the financing management staff at UEP and ME will closely monitor the budget execution trough the quarterly consolidated IFRs.

N S

Accounting:Limited accounting staff at the UEP and ME to accommodate the workload

S

Recruit 1 additional Assistant Accountant in each of the 2 implementing entities to accommodate the workload.

Y- Within 2 months of effectiveness

S

Internal Controls and Internal AuditInadequate internal controls to sufficiently cover the requirements of activities under the sharing-costs activities.

Absence of an internal audit function

SUpdate the administrative, accounting and financial procedures manual to incorporate activities under the proposed project.

Clearly outline, describe and document policies and procedures in a separate administrative, accounting and financial procedures manual for implementation of the sharing-costs activities.

Set up an internal audit function to strengthen the internal control system.

Y- Before Effectiveness date

Y- before effectiveness

Y – Within 3 month of project effectiveness.

S

Funds Flow

Funds may be diverted and used for non-eligible activities.

S

2 Designated Accounts will be opened at commercial bank acceptable to the Bank into which project funds will be deposited (DA-A and DA-B will be manage respectively by UEP and ME.

NS

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Risk Risk Rating

Risk Mitigating Measures Incorporated into Project Implementation

Conditions/Covenants (Y/N)

Overall Residual Risk rating

Funds flow arrangements may not be well understood by the selected SMEs under the sharing-costs activities.

The technical committee to carry out regular technical and value for money audits.

Using the separate manual of procedures the 2 project implementing agencies will train the selected SMEs in the areas covered by the project activities.

Financial ReportingInvolvement of 2 implementing entities and the high volume of information to be processed from the selected SMEs may delay the preparation of consolidated IFRs and annual financial statements for the audit.

S

Update the accounting system used by FM staff at the regional level to ensure continued processing of accounting information in a timely manner for IFR and annual statements preparation at the NCU level.

Agree on the IFR reporting and the annual financial statements format.

NM

AuditingInadequate external audit arrangements.

SUEP under the Ministry of Agriculture will be responsible for the recruitment of a reputable, competent and independent audit firm for the external audit.

Y- Within 4 month of effectiveness.

M

Overall FM Risk Rating

S The functioning of all these FM arrangements and mitigating measures outlined above will be followed up by effectiveness and during supervision missions.

S

H=High; S= Substantial; M= Moderate; L=Low

167. In view of the general country financial management issues, the current financial management arrangements at the Project Coordination Unit under the State Ministry of Planning, Territory Management, and Community Development (MPTMCD), and at the Maison de l’Entreprise and the informality of the sector to be covered by part 2 of the project, the overall financial management risk rating for this project is rated as Substantial.

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VI. SUMMARY OF STRENGTHS AND WEAKNESSES

Strengths of Financial Management:

168. The Project Executing Unit (UEP) in the State Ministry of Planning, Territory Management, and Community Development (MPTMCD) and Maison de l’Entreprise (ME) have a track record in implementing of the IDA-financed Competitiveness and Growth Support Project (PRACC-P127204) which was approved by the Board on July 4, 2012 and became effective on November 29, 2012. The UEP also managed the PPA of two IDA-financed projects (P145261 and P145268). In addition, (i) PRACC Executing Unit has developed an administrative, accounting and financial procedures manual, (ii) a separate manual of procedures is being developed for the sharing-cost activities under PRACC and the proposed project; (iii) the two implementing entities have computerized accounting systems; (iv) qualified and experienced staff are in place at both PRACC coordination unit and ME.

Weaknesses and Action Plan:

169. The following actions need to be taken in order to enhance the financial management arrangements for the Project:

Weakness Action Responsible Deadline

Weaknesses identified in the internal control system

Update the existing administrative, accounting and financial procedures manual to include the activities under the proposed project.

Finalize the manual of procedures of the sharing-costs activities

Recruit additional accountants to accommodate the workload.

UEP/ME

UEP/ME

UEP/ME

Before effectiveness date

Before Effectiveness date

Within 2 months of effectiveness

Lack of an internal audit function Recruit an internal auditor at the UEP level.

UEP Within 3 months of effectiveness

Absence of external audit arrangements Recruit an external auditor to audit the financial statements of the project.

PCU Within 4 months of effectiveness.

VII. PROJECT FM ARRANGEMENTS

170. A summary of the key findings of the FM arrangements includes the following:Budgeting

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171. The budget process will be clearly stipulated in the updated administrative, financial and accounting procedures manual. Annual budget and work plans for the proposed project will be coordinated and prepared by the PCU and approved by the Steering Committee with Bank no-objection in November of each year and any changes in the budget and work plans will also be approved by the Committee with the Bank no-objection. In addition, the Steering Committee of the PCU will: (i) discuss and review implementation strategies of the project; and (ii) monitor and assess the implementation progress and results of the project.

Accounting

172. Accounting System and policies: Two integrated financial and accounting systems TOMPRO and TOM2PRO are in place and have been used respectively PRACC unit and Maison de l’Entreprise. The Project code and chart of accounts will be developed to meet the specific needs of the project and documented in the manual of procedures being drafted. The prevailing accounting policies and procedures in line with the West African Francophone countries accounting standards – SYSCOHADA - currently in use in Niger on-going Bank-financed operations will apply. The accounting systems and policies and financial procedures used by the project will be documented in the project’s administrative, accounting, and financial manual.

173. Staffing arrangements: Within two months of effectiveness, an additional assistant accountant will be recruited in each of the two implementing agencies (UEP and ME) to reinforce the existing accounting staff in order to ensure adequate segregation of duties to accommodate with the additional workload under the proposed project. The FM team at the UEP and the ME will be responsible for collecting and controlling the invoices, maintaining the books of account, processing financial data, making payments to suppliers and service providers. The FM team at the UEP will be responsible for monitoring the approved consolidated budget and consolidating the quarterly interim financial reports and annual financial reports for the annual audit.

Internal Control and Internal Auditing

174. Internal controls and Internal Audit: The Steering Committee will ensure that staffing arrangements at the UEP and at the ME are in place and sufficient to ensure adequate internal controls, preparation, approval and recording of transactions as well as segregation of duties. Due to the volume of activities to be implemented by the UEP and ME under the PRACC and the proposed project, it is recommended to recruit an Internal Auditor whose terms of reference will cover all the implementing entities for activities under this project. The financial management and administrative procedures will be outlined in the updated administrative, financial and accounting manual.

175. Procedures Manual: The administrative, financial and accounting procedures manual will be updated and will detail and document the project’s accounting, policies and procedures. The accounting software will be programmed to facilitate processing of financial information and to prepare interim financial statements as well as annual financial statements. Detailed FM documentation will be maintained in the Project’s files for the implementing entities.

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Financial Reporting

176. Financial reporting: The UEP will be responsible for the reporting on the implementation of parts 1 and 3 of the project activities and the ME will be responsible for the reporting on the implementation of part 2 of the project. The Steering Committee will ensure that UEP and ME monitor and evaluate the progress of the relevant parts ascribed to them. Thus, it will ensure, through the financial management staff at the UEP, that the quarterly consolidated Interim Financial Reports (IRFs) are prepared and transmitted to the Bank in a timely manner. The reporting format will be documented in the updated administrative, financial and accounting procedures manual. The quarterly consolidated Interim Financial Reports covering all project expenditures will be furnished by the UEP to the Bank no later than 45 days after the end of the quarter. Annual consolidated financial statements will be prepared by UEP and approved by the Steering Committee and will be subject to annual external audits.

Funds Flow and Disbursement Arrangements

177. Designated Account: Two Designated Accounts DA-A and DA-B will be opened at a commercial bank in Niger that is acceptable to the Bank and managed respectively by the UEP and the Maison de l’Entreprise. These accounts will be used to make payment for the activities implemented respectively by the UEP and the Maison de l’Entreprise according to the disbursement procedures described in the disbursement letter. The currency for the designated accounts will be the Franc CFA (FCFA). Documentation for all transactions shall be retained by the implementing entities and shall be made available for audits and to the Bank and its representatives, if requested. Disbursement procedures arrangements will be detailed in the manual of accounting, administrative and financial procedures and the disbursement letter (DL).

178. Disbursement Methods: Disbursements from the Bank Grant/Credit will follow the transaction-based method, i.e. statements of expenses (SOEs). Other disbursement arrangements will include Direct Payments, Reimbursement, and Special Commitments. The initial deposit into the Designated Account (DA) will be submitted with a Withdrawal Application requesting for the maximum ceiling amount as per the disbursement letter of the implementing entities. Subsequent disbursements into the DA will be based on SOEs accompanied by Withdrawal Applications, bank statements and bank reconciliations. The supporting documentation for requests for direct payment should include records which provide evidence of eligible expenditures (copies of receipt, supplier’s invoices).

Audit Arrangements

179. Annual Audit Reports and Management Letters: The annual financial statements will be consolidated by the UEP covering all project expenditures regardless of implementing entity. The financial statements as well as the system of internal controls will be subject to an annual audit by a reputable, competent and independent auditing firm, recruited by the UEP based on terms of reference (ToRs) satisfactory to the Bank. The auditors will provide an opinion on the consolidated financial statements of the project prepared by the UEP as per auditing standards

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acceptable to the Bank. The audit reports will be submitted to the Bank not later than six months after the end of each financial year. The auditors will also provide a management letter detailing the status of the internal control systems in the UEP and the Maison de l’Entreprise.

180. Audit Completion Timetable: The PRACC unit and Maison de l’Entreprise committed to a clear timetable for the completion of the annual audit and the submission of the audit reports and management letters. The audit reports to be submitted are summarized below:

Audit Report Responsibility Due Date Audited Project financial statements and opinion

(incorporating DA opinion) and management letterPRACC unit June 30

VIII. CONDITIONALITY AND FINANCIAL COVENANTS

Conditions of effectiveness:

a) FM Procedures Manual has been updated in form and content satisfactory to the Bank.

b) Develop a separate manual that clearly outlines, describes and documents policies relating to the sharing-costs activities.

Condition of disbursement:

181. Roles of the Ministries and institution involved in the implementation of the program activities established and clearly outlined in the project implementation manual and the manual of procedures and in relevant legal texts. The role of other institutions involved in project activities implementation will also be clarified.

Other FM related conditions:

182. The Recipient shall establish and maintain a financial management system including records, accounts and preparation of related financial statements in accordance with accounting standards acceptable to the Bank. The Financial Statements will be audited in accordance with international auditing standards. The Audited Financial Statements for each period shall be furnished to the Association not later than six (6) months after the end of the project fiscal year. The Recipient shall prepare and furnish to the Association not later than 45 days after the end of each calendar quarter, interim un-audited financial reports for the Project, in form and substance satisfactory to the Association. The Recipient will be compliant with all the rules and procedures required for withdrawals from the Designated Accounts of the project managed respectively by the UEP and the Maison de l’Entreprise.

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IX. IMPLEMENTATION SUPPORT PLAN

183. Based on the outcome of the FM risk assessment, the following implementation support plan is proposed. The objective of the implementation support plan is to ensure the PCU maintains a satisfactory financial management system throughout the project’s life.

FM Activity FrequencyDesk reviewsInterim financial reports (IFRs) review QuarterlyAudit report of the project’s financial statements review

Annually

Review of other relevant information such as interim internal control systems reports

Continuous as they become available

On site visitsReview of overall operation of the FM system Semi-annual

(Implementation Support Mission)

Monitoring of actions taken on issues highlighted in audit reports, auditors’ management letters, internal audit and other reports

As needed

Transaction reviews (if needed) As neededCapacity building supportFM training sessions During implementation and

as when needed.

CONCLUSION OF THE ASSESSMENT

184. The FM assessment indicates that Unité d’Exécution de Projet within the State Ministry for Planning, Land and Community Development and the Maison de l’Entreprise within the Chamber of Commerce have their financial management arrangements in existence that satisfy the Bank’s minimum requirements under OP/BP10.00. The overall residual risk rating is Substantial.

Procurement

A. Procurement Arrangements

185. Procurement of selection of consultants shall be conducted in accordance with: ("Guidelines: Selection and Employment of Consultants Under IBRD Loans and IDA Credits & Grants by WB Recipients," dated January 2011 revised in July 2014; and (iii) “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants,” dated October 15, 2006, and revised in January 2011.

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186. Fraud, Coercion and Corruption. All procuring entities, as well as bidders, suppliers and contractors shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraph 1. 16 of the Procurement Guidelines and paragraphs 1.23 of the Consultants Guidelines.

187. For all trainings to be organized, the prior review by the Bank is required on the Terms of Reference and the Budget.

188. Operating Costs include, inter alia, non civil servant support staff salaries, office space, utilities and office supplies, bank charges, communications, vehicle operation, maintenance and insurance, building and equipment maintenance costs, travel costs.. These will be procured in accordance with administrative procedures, acceptable to the Bank and detailed in the existing manual available at the level of the PIU.

B. Procurement Assessment

189. The procurement activities will be carried out by the PIU of the Competitiveness and Growth Support Project. The PIU’s procurement staff has gained experience attending several trainings on World Bank procurement procedures and on-the-job in the process of the implementation of active projects as well as previously closed projects.

190. However, the procurement risk has been evaluated substantial during the last supervision missions and mitigations measures have been recommended to strengthen the procurement transparency and the internal control.

191. Recently the procurement specialist supporting the PIU has resigned and the replacement process is completed. The new recruited procurement specialist is on board since March 13 and will ensure quality control of all procurement documents and compliance with world bank procedures for all projects managed by the PIU.

192. The procurement risk for this project is rated substantial .The following mitigations measures have been identified :

193. Recruit in addition a procurement assistant to support notably the activity related to the present financing.

194. Strengthen the internal control as recommended during the last supervision mission notably : i) External staff from the PIU to chair the procurement committees (the SG or DG in Ministry of Planning to chair the Award Committee , the Technical Director from the recipient Ministry to chair technical committee), ii) involve more the Public Procurement Unit of the Ministry of Planning in the Procurement Processes; ,iii) As required, request prior review controls by bodies in charge at the level of the Government, iv) During bid opening ceremonies, insure that the Bailiff set according the National law, signs all the envelopes containing the financial proposals ( after technical bid opening ceremonies ) and all the pages of financial proposals (after financial bid opening ceremonies).

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195. Frequency of procurement supervision. In addition to the prior review supervision to be carried out from IDA, the capacity assessment has recommended two supervision missions in the field and at least one annual post-procurement review. The World Bank Procurement Specialist based in the Niamey Country Office, will provide continuous support to the implementing agency. An Independent Procurement review could be carried out if necessary.

196. Procurement plan. The Recipient, has developed a procurement plan for project implementation which provides the basis for the procurement methods and the prior review by the Bank. This plan has been agreed upon between the Recipient and IDA and approved by the Bank on Feb 23, 2015. With the Recipient’s agreement, the plan will be published on the Bank’s public website and made available at the Project Implementation Unit. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

C. Procurement methods and Procurement prior review thresholds

197. Procurement methods. For Niger, International Competitive Bidding (ICB) thresholds have been set at US$5 million for works and US$500,000 for goods.

198. The table below summarizes the procurement and selection thresholds applicable to this project

Table 1: Procurement Thresholds

No ExpenditureCategory

Contract ValueThreshold**(US$)

ProcurementMethod

1Works

C>=5 000,000 ICB

50,000= <C < 5 000,000 NCB

C<50,000 Shopping

All values Direct Contracting

2Goods and Services (other than Consulting Services)

C>=500,000 ICB

50,000= <C < 500,000 NCB

C<50,000 Shopping

All values Direct Contracting

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3

Consulting Services Firms

C>= 200,000 firms QCBS, QBS

< 200,000 firms QCBS, FBS, CQS, LCS

All Values Single Source Selection

Individual ConsultantAll values IC

All Values Single Source Selection

3 Training, Workshops, Study Tours All Values With the approval of

the TTL

199. Procurement prior review thresholds

200. The procurement prior review thresholds tied to the substantial procurement risk are shown in the table below and are reflected in the approved procurement plan.

Table 2 : Procurement Prior review thresholds (Substantiel risk)

No ExpenditureCategory USD

1 Works >=10 000 000

2 Goods and Services (other than Consulting Services) >=1 000 000

3 Consulting Services >=500 000

4

All Direct contracting and Single Source contracts with consultant (firms)

Works

>=100 000 Goods

Consultants services

5Individual Consultants (Single Source contracts) >= 100 000

>=200 000

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Individual consultants (based on comparison of CVs)

201. Contracts estimated to cost above these thresholds for works and goods, consulting services will be subject to prior review by IDA.

202. Further, it was agreed on the following additional mitigation measures: :- All the TORs for consulting services will be subject to prior review by Bank- At least once a year, the Bank and the Government will agree on a procurement plan

which will detail the procurement methods to be used and specific contracts to be reviewed by the Bank;

203. Post Review: for each contract for goods and public works not submitted to prior review, the procurement documents will be submitted to IDA post review in accordance with the provisions of Paragraph 4 of Annex 1 of the Bank’s procurement Guidelines. The post review will be based on a ratio of at least 1 to 5 contracts

204. Revision. The prior review thresholds and other measures to be taken to mitigate the procurement risk should be re-evaluated once a year with a view of adjusting them to reflect changes in the procurement risk that may have taken place in the meantime and to adapt them to specific situations. In case of failure to comply with the agreed mitigation measures or Bank guidelines, a re-evaluation measure of both types of thresholds, ICB and prior review, may be required by IDA.

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Annex 4: SORT

Decision Meeting Package Version19

Risk identification Risk rating

Mitigation measures

Project stakeholder risks.Public and Private sector actors are unable to agree on the reforms to be undertaken.

Moderate Provide a wide range of component support information

Develop and improve public-private sector dialogue

Country risksLoss of political appetite and will for undertaking the reforms

Low The Government has shown its commitment to reforms by adopting an action plan and putting in place responsible agencies for implementation

Implementation Agency RisksCapacityThe PIU may lack capacity to undertake TF activities

Moderate Recruit a specialist agricultural value chains manager to consolidate the PRACC management team.

Carry out a regular evaluation of PRACC management team needs and capacities and introduce corrective measures if required.

GovernanceWeak and fragile institutions may lead to inefficiencies, lack of required quality control and proper oversight of project. For example, lack of transparency in selection of consultants may result in poor selection and hence poor outputs.

Substantial The Bank procurement staff will be involved from the beginning and will meticulously review the procurement processes and actions undertaken. A procurement plan will be drawn and cleared by the Bank, identifying among other things, the procurement methods to be adopted, and limiting the potential for sole sourcing. Also, capacity building measures are an integral part of the Bank’s portfolio in Niger. A dedicated capacity building program for the Ministries of Finance and Planning became effective in 2010. The creation of an Anti-Corruption body (Haute Autorité de Luttecontre la Corruption et les Infractions

19 This is the version that should be used for Negotiations and submission for Board Approval.

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Assimilés), and the setting up of a hotline in the Ministry of Justice to report corruption cases might help alleviate the overall corruption risk.

Project risksDesignWeak engagement and commitment of Ministries and Government agencies

Low The PRACC steering committee will provide a forum for the identification of issues and for holding key stakeholders to account. Provision will made in the TF that in case of non-performance, resources will be allocated elsewhere.

Social and EnvironmentNegative environment impact may result from Project implementation or may cause harm

Moderate

Apply Bank social and environmental safeguard procedures during implementation.

Use DANIDA human rights-based approach

Program and Donor.Impact and efficiency of project may be undermined by non-collaboration of other donors undertaking similar activities and unwilling to collaborate

Low The World Bank and DANIDA will have no choice but to collaborate closely. They will undertake joint supervision missions.

Delivery Monitoring and SustainabilityA newly created PIU may not be capable of handling a multi-sector project. Delivery quality may be affected by weak monitoring and evaluation capacity of PIU.

Put in place a rigorous M&E system to track identified measurable indicators.

1. Overall Implementation Risk Moderate Bank supervision through PRACC in close coordination with DANIDA will limit exposure to overall implementation risks.

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Annex 5: Implementation Support Plan

Table 1: Readiness Checklist

Readiness Checklist CommentsProject management The project will be managed byPRACC PIU. TORs for the

additional key staff to be hired will be available by effectivemess.

SORT drafted and discussed with the Country team

SORT risk matrix has been drafted

Safeguard policy issues addressed and documents disclosed

This is a category B project ESMF and RPF and PMP: RPF, ESMF and PMP for the PRACC has been updated to reflectthe TF activities.

M&E system in place Same as the PRACC M&E system Fiduciary (Financial management and procurement arrangements are in place)

Will be manged with systems already in place.

Project Implementation Support Plan (ISP)

See Table 2 of Annex 5.

Policy exceptions N/ACounterpart Funding N/A

The following tables indicate the main focus of support to implementation during the project’s lifetime, skill mix requirements, and involvement of other partners.

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Table 2: Focus of support to implementation during the project period

Skills Needed Number of Staff Weeks Number of Trips Comments

Task Team Leader 10 SWs annually 2 Based in Lomé

Trade and Competitveness

Specialist6 SWs annually 0 Based in Niamey

Investment climate reforms

specialist4 SWs annually 2 Based in the region

Entrepreneurship specialist 3 SWs annually 2 Based in the region

Agricultural specialist 4 SWs annually 1 STC

Financial management

specialist3 SWs annually 0 Based in Niger/or in the

region

Procurement specialist 4 SWs annually 0 Based in Niger/or in the

region

Social specialist 2 SWs annually 2 Based in Niger/or in the region

Environment specialist 2 SWs annually 2 STC

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Annex 6: Team Composition

World Bank staff and consultants who worked on the project:

Name Title Unit

Magueye Dia Task Team Leader GTCDR

Mahaman Sani Consultant GTCDR

Abdoul Wahab Seyni Senior Social Specialist GSURR

Yannick Saleman Trade and Competitiveness Specialist GTCDR

Peter White Consultant Agribusiness Specialist CMGA6

Josue Akre Financial Management Specialist GGODR

Irene Ayinda Program Assistant GTCDR

Ibra Rahamane Sanoussi Senior Procurement Specialist GGODR

Medou Lo Environmental Specialist GENDR

Marie-Rogers Augustin Legal Analyst LEGAM

Ruxandra Costache Counsel LEGAM

Syed Estem Dadul Islam Operations Officer GTCDR

Amadou Ba Senior Agricultural Economist GFADR

Jean-Christophe Maur Senior Economist GTCDR

Inoussa Ouedraogo Senior Operations Officer GTCDR

Birima Fall Operations Officer GTCDR

Tanangachi Ngwira Operations Analyst GTCDR

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Annex 7: Detailed Economic and Financial Analysis

Objective of the project

205. The objective of the Niger Investment Climate and Competiveness Support Project (NICCP) is to improve critical elements of investment climate for the private sector and enhance competitiveness of SMEs in selected agriculture value chain.. The project will be implemented through three components, namely, (a) Modernization of the Business Environment ; (b) Increase the competitiveness of selected agricultural value chains; (c) Project Implementation Support.

Reason for public intervention

206. Improvements in the business environment have been shown to be necessary for a long term growth of the private sector. This business environment in turn is largely dependent on the existing set of rules, regulations and institutions governing the functioning of the market, most of which are decided by public sector actors.

207. The competitiveness of sectors is strongly influenced by the existence of infrastructure such as roads that allow for easier and cheaper access to markets, storage infrastructure that allows for improved logistics and in fine better cashflows, or marketing infractructure that provides for economies of scale. The public or semi-public good nature of these elements results into a market failure whereby these goods are under-provided by the market. This failure is especially stringent in sectors like agribusiness in poor countries, where the sector is largely dominated by a large number of micro or small firms, which face an even harder challenge to finance even semi-public goods alone, or to organize between themselves to do so.

208. Similarly access to finance is the biggest obstacle faced by small enterprises in Niger, according to the most recent Enterprise Survey (2009) – see section I.B for details. This is a market failure as this means that the market is not providing enough financing for the potential investment projects coming from small firms. This means that these firms are not allowed to grow, preventing them from becoming more creditworthy to banks, and therefore leaving them into a low-level equilibrium where they remain small.

209. The three key aspects of competitiveness to be tackled by the Project therefore require a public intervention.

Value added of the WBG

210. The WBG has the most extensive and recognized experience in helping developing countries improve their business environment. It also has the unique benefit of worldwide experience and lessons for the design and implementation of targeted infrastructure as well as matching grants and access to finance components to sustain the competitiveness of sectors and of agribusiness in particular. Finally the Project has been designed to be complementary to other donor interventions on the business environment and agricultural value chains.

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Methodology

Main beneficiaries.

211. The Project direct beneficiaries are estimated at 2300 enterprises of which 20 percent are led by female. These include (i) firms and associations supported by the Project through the provision of non-financial business development services; (ii) enterprises involved in selected agricultural value chains, iii) the business consulting sector with an improvement of availability and efficiency of business services. A large number of private sector firms is also estimated to directly benefit from an improved investment climate, though this is harder to quantify. The project will also provide economic and social welfare to the beneficiaries in the Zinder and Diffa regions and to the national economy.

212. The economic analysis of this type of private sector development project faces some difficulties particularly where there is sometimes indirect relationship between the technical assistance provided under the project on its stream of benefits. Therefore in keeping with common practices in the appraisal of project of this type, a mix of quantitative and qualitative techniques has been used to analyze the economic benefits and costs of the project.

213. In particular economic rates of return have been calculated based on the Project’s activities towards direct SME support through financial and non-financial Business Development Services (subcomponent 2.2). The infrastructure provision sub-component (2.3) will amplify the multiplier effects of the BDS components, and has been accounted as such. The overall resulting NPV and ERR is then calculated for 2.2 and 2.3.

214. A qualitatitve analysis is then developed for each of the remaining components.

Quantitative analysis of matching grants and infrastructure sub-components

Sub-component 2.2 Provision of Financial and non-financial business development services

215. Subcomponent 2.2 supports the provision of Business development services as well as project investment financing to SMEs operating in the selected agricultural value chains with a matching grant.

216. The provision of financial and non-financial Services through this project has been designed in a manner that on one hand it would result in tangible economic benefits such as improved sales and growth of SMEs. And on the other hand this component would yield intangible benefits such as enhancing the ability of SMEs to develop specialized and innovative skills in different segments of the selected value chains, creating a sustainable market for providers of business development services. Owing to these benefits, this component would also help in achieving increased employment and income generation in the local economy.

217. In order to get a quantitative sense, a conventional methodology is used to carry out the economic analysis of the matching grant by estimating future stream of costs and benefits and deriving net benefits to calculate the net present value (NPV) and economic rate of return (ERR) in a “with” and “without” project framework based on 10-year time horizon. To address the limitations of this approach a conservative set of assumptions is used and sensitivity analysis has also been conducted to assess the robustness of results. In addition, for

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a project of this type the focus of analysis is on estimating the economic benefits and costs rather than financial analysis.

218. Based on experience from similar projects in other African countries, the following assumptions were made:

The discount rate used for the economic analysis is 12 percent. Given the global financial crisis and the economic environment in Niger, this is slightly more conservative than the standard assumption in most of World Bank Projects, which is that the economic opportunity cost of capital is 10 percent20;

The project impact is expected to start materializing during project implementation. The maximum impact of the project will be reached once the relevant capacity and institutions are strengthened;

The type of firms supported will vary, but the expected size of support for investment or for business development services will vary accordingly, and it is assumed that consequently the effect on the firm remains proportional to the size of the grant. The aggregate effect is therefore only function of the total amount.

Provision of non-financial business development services

219. For the non-financial business development services (BDS) grant activities (consultancy services), we estimate a 5 percent return, with a 1.5 multiplier effect in the local economy. The 5 percent return to financing the matching grants facility is based on results seen in other countries, such as Bangladesh, Bolivia, Mexico and Zambia, in which matching grant support consistently raised income and sales (between 28 percent and 120 percent over control groups) for recipients. 21 The 1.5 magnitude local economic multiplier is estimated on the basis that returns to investments will be earned by employees of the firms, or by employees of the firms from whom goods and services are purchased, and then a portion of that income will be re-spent in Niger’s economy. These spillovers effects will be facilitated and amplified by the infrastructure component. 1.5 is taken as a low estimate of the actual value of a multiplier. In economies where the SME beneficiaries would be more likely to purchase their supplies locally, the multiplier might typically be 2 or greater.

220. The sub-component size for non-financial BDS is US$1.6 million, of which around US$0.1 million total will be used to conduct annual audits of the appropriate governance and functioning of the BDS grant. Assuming equal disbursments of funds along the project life, and with the conservative estimates above, the ERR is estimated at 57.5 percent, well above the discount rate, with net benefits of US$0.44 million.

20 Handbook on Economic Analysis of Investment Operations, OPR, May 2006 21 Duflo, Annie and Dean Karlan. “Can management consulting help small firms grow?” In: Stanford Social Innovation Review. Summer 2012. Found on: http://www.ssireview.org/articles/entry/can_management_consulting_help_small_firms_grow. McKernan, S.M.. “The impact of microcredit programs on self-employment profits: Do noncredit program aspects matter?” Review of Economics and Statistics, 84 (1) (2002), pp. 93–115.Copestake, J. and S. Bhalotra, S. Johnson. “Assessing the impact of microcredit: A Zambian case study.” Journal of Development Studies, 37 (4) (2001), pp. 81–100.Nisttahusz, S. and G. Montaño Hernandez, M. Lavayén. « La importancia de los servicios de desarrollo empresarial en el desarrollo de la micro y pequeña empresa y su relación con las microfinanzas. » Funda-Pro, La Paz, Bolivia (2002).S.R. Halder. “BRAC’s business development services—do they pay?” Small Enterprise Development, 14 (2) (2003), pp. 26–35.

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221. A first sensitivity analysis reveals that this project subcomponent will have a positive Net Present Value even if disbursements generate a negative rate of return of 25.3 percent. This sensitivity analysis was conducted by changing the value of rate of return on project disbursements, while keeping constant the local economic multiplier with a value of 1.5. This surprising result is achieved because the existence of a local economic multiplier means that even if project disbursements generate less value than the monetary value of disbursements, the multiplied value of those disbursements in Niger’s economy will still mean that the Net Present Value is positive.

222. A second sensitivity analysis reveals that this Project subcomponent will have a positive Net Present Value even if the local multiplier is as low as 1.07. This sensitivity analysis was conducted by keeping the value of rate of return on project disbursements constant at 5 percent, while changing only the local economic multiplier.

Provision of financial business development services

223. For the financial BDS component we assume that as a result of increased investment in production technologies and therefore efficiency, sales, and capacity utilization, the supported firms would yield an increase in output at a multiple of 2 times the support provided with a lag of 2 years. This is a very conservative estimate based on experience in other countries such as Burkina Faso, in which a multiple of 10 times the grant was used.

224. In addition, similar to the above, support to these enterprises would also result in direct and indirect job creation, and generally-speaking spillovers to the local economy, facilitated by the infrastructure component., resulting in an estimated 1.5 multiplier.

225. The sub-component size for non-financial BDS is US$ 5.3 million, of which around US$ 0.2 million total will be used to conduct annual audits of the appropriate governance and functioning of the BDS grant. Assuming equal disbursments of funds along the project life, and with the conservative estimates above, the ERR is estimated at 73.2 percent, well above the discount rate, with net benefits of US$ 5.3 million.

226. A first sensitivity analysis reveals that this project subcomponent will have a positive Net Present Value even if disbursements generate a multiplier effect of 0.84. This sensitivity analysis was conducted by changing the value of rate of return on project disbursements, while keeping constant the local economic multiplier with a value of 1.5. This surprising result is achieved because the existence of a local economic multiplier means that even if project disbursements generate less value than the monetary value of disbursements, the multiplied value of those disbursements in Niger’s economy will still mean that the Net Present Value is positive.

227. A second sensitivity analysis reveals that this Project subcomponent will have a positive Net Present Value even if the local multiplier is as low as 0.63. This sensitivity analysis was conducted by keeping the value of rate of return on project disbursements constant at 2 times the support provided, while changing only the local economic multiplier.

Sub-component 2.3: Infrastructure Development

228. Sub-component 2.3 will support the identification, financing and management of infrastructure to support the development of specified agricultural value chains in Zinder and Diffa areas.

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229. Elements of infrastructure to be supported would include collective infrastructure for storage and marketing, which have shown high economic returns. The economic analysis of the PRODEX project (P095210) showed in particular that the introduction of commodity warehouses has played a large role in positively influencing producer prices through storage and minimizing the impact of delayed income streams with the provision of credit.

230. There would also be an element of key transport infrastructure elements, which by reducing transportation costs, facilitating the provision of inputs, and increasing access to markets, including exports, to the selected value chains and all activities geographically proximate, will facilitate an increase in revenues, reduction in costs, increase in market opportunities, and in the end create growth and jobs.

231. As mentioned above, the economic benefits have been factored in the multiplier effect used for the matching grant component. For example the development of commodity warehouses will leverage the BDS component by allowing the storage of additional production obtained though the investment support BDS component and the satisfaction of higher standards through the non investment BDS part.

Overall quantitative effects of 2.2 and 2.3

232. Overall, taking into account the cost of the infrastructure component, the NPV of components 2.2 (financial and non-financial BDS) and 2.3 (infrastructure development) is US$ 2.19 million, giving an ERR of 26.8 percent, well above the discount rate.

In US$ million Present Value of Flows

Net Present Value of 2.2 and Benefits of 2.3 5.76

Net Present Cost of 2.3 3.57

Net Present Value of 2.2 + 2.3 2.19

ERR (%) 26.8%

Qualitative analysis of remaining components

Subcomponent 1.1. Implementing Investment climate reforms

233. Sub-component 1.1 will support the strengthening of the existing one stop shop for business registration and licensing, streamlining of cross border trade procedures and the establishment of a simplified regime for the micro and small enterprises (Ohada Entreprenant Regime). By supporting the creation and operationalization of a Commercial Court and the development of alternative dispute resolution mechanisms it will reinforce the enforcement of contracts.

234. The relationship between the characteristics of the business regulatory environment and the performance of firms has been well documented. Also documented is the effect on business environment of the specific indicators that will be affected by the establishment of the one stop shop.

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235. A recent study finds that barriers to starting a business are negatively and significantly correlated with business density and entry rate. Fewer procedures are associated with greater number of registered firms and higher entry rates (Klapper, 2006). A similar relationship can also be found with the cost of starting a business. It is estimated that for every 10 percent decrease in entry costs, density and the entry rate increase by about 1 percent (Klapper, 2006). Simpler entry encourages the creation of new companies. Easier start-up is also correlated with higher productivity among existing firms. A study which analyzes data in 157 countries, finds that there is a reduction in entry costs raises output per worker by an estimated 29 percent22 The 2008 WBG Entrepreneurship Survey (WBGES 2008) includes new data on the impact of modernization of business registries on business creation. It gathers extensive data on the functioning and structure of business registries in 71 countries from the registrar of companies, as well as complementing data on the number of total and newly registered businesses in over 100 countries. This empirical evidence suggests that greater ease in starting a business and better governance are associated with increased entrepreneurial activity. After controlling for economic development (GDP per capita), higher entrepreneurial activity is significantly associated with cheaper, more efficient business registration procedures (as measured by the Doing Business 2009 “Starting a Business” indicators) and better governance (as measured by Kaufmann and others, 2008).

Subcomponent 1.2. Enabling institutions for private sector development

236. Sub-component 1.2 aims at improving the public private dialogue in Niger and support the operationalization of the export promotion agency (ANIPEX). The objective of this assistance is to support and improve institutions to reduce the information and coordination failures between the public and private sector, especially to improve the business environment, and between the local private sector and global players and opportunities.

237. The experiences and lessons learned from public-private dialogue across different countries and sections have shown that not only significant reforms can be associated to these dialogues but also these dialogues demonstrate a strong measurable economic impact.

Sub-component 2.1. Support to the Maison de l’Entreprise (ME)

238. Sub-component 2.1 aims to build the capacity of the Maison de l’Entreprise (ME) as well as private sector organizations to offer a suite of services tailored to different types of businesses involved in agricultural value chains. This sub-component will therefore directly help leverage and sustain subcomponent 2.2 relating to the provision of financial and non-financial business development services to such businesses. These two effects might have been measured by respectively increasing the return and the time horizon for the expected gains from this matching grant subcomponent. This was not done as a conservative estimate.

Sub-component 2.4: Improving the Business environment for selected agricultural value chains

239. Sub-component 2.4 will improve the business environment for the specific value chains considered, with the same positive effect as documented for sub-component 1.1, but with results more easily attributable to the reforms because of their specificity.

Conclusion

22 Barseghyan, L “Entry Costs and Cross-Country Differences in Productivity and Output.” Journal of Economic Growth 13 (2008).

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240. In summary, significant economic benefit is expected to be derived from this project. The project will create a business environment conducive to private investment, enterprise creation and growth. Enhancing the competitiveness of the selected agricultural value chains will generate value-added and create more jobs, and increase the contribution of the agricultural sector to sustainable development. Thanks to this assistance, Niger can be expected to both expand agricultural investment flows and optimize their contribution to sustainable development, including improving revenue collection. In the long term, this should strengthen fiscal sustainability of the Project.

241. The project will also contribute to increase governance and public sector capacity. Reforms aimed at reducing barriers to economic growth through an improved investment climate and improved infrastructure will contribute to both objectives of the strategy by supporting the attainment of a higher growth trajectory and the diversification of the economy.

242. Ultimately, through its economy-wide demonstration effect, the project is likely to generate benefits for a much larger number of SMEs, with wider implications for private sector growth job creation and poverty reduction.

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Annex 8: Details on the High-Potential Value Chains in the Zinder and Diffa regions

Potential of the Selected Value Chains

Red Peppers

243. The production of red pepper is concentrated around the region of Diffa, which accounts for 75 percent of the national cultivated area. There is also some production in Zinder (Matameye), which accounts from 4.7 percent of areas cultivated. National production has been increasing rapidly, being almost multiplied by four since 2009/10 (table 3). In both regions, the production of pepper concerns about 5000 producers, employing about 25000 persons. 56 percent of young people and 13 percent of women are involved in the sector.

Table 3. National production of red pepper in tons2009/10 2010/11 2011/12 2012/13 2013/14

64,270 172,032 121,134 237,131 233,156

Source: Agriculture Ministry, various years

244. Processing of pepper is traditionally done small scale. Red pepper is sold dried (in bags of 17 kg), and generally easily sun-dried directly by farmers. There is at present little processing into pepper powder (paprika). Pepper is an important condiment and seasoning used in home cooking, but it is also an important ingredient for commercial uses, such as for Fast Moving Consumer Goods (FMCG), institutional and “fast food” establishments, ready-to-eat prepared foods, etc.. The commercial uses of pepper is expanding rapidly in urban centers and in Nigeria, in particular. Bulk demand is growing significantly year-on-year and is spawning industrial pepper farms and processing units in the sub-region23. Given its climate and location, Diffa and, to a lesser extent, Zinder are well poised to exploit this market opportunity. Identifying and marketing to appropriate market segments are essential to realizing this value chains potential and to competing alongside producers from the sub-region. The government, through the Regional Chamber of Agriculture provides technical support to producers. Distribution is organized through collection markets, and then wholesale markets.

Cowpea

245. CowpeaCowpea is a rain-fed cash crop inter-cropped with millet and sorghum. Niger is the second largest producer of cowpea globally after Nigeria and produces over twice as much as the third largest producer, Burkina Faso. About 90 percent of family farms in Niger cultivate cowpea, and cowpea is the country’s fourth most important export product after uranium, livestock and onion. Exports were estimated at US$68 million in 2006 and are expected to double by 2017.24 Production in Zinder accounts for a quarter of national output (table 4). Production in Diffa is more modest at 13,000 tons. Cowpea

Table 4. National production of cowpea in thousand of tons2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

23 A good example of a pepper and other spice and seasoning processor in AACE Foods in Ogun State, Nigeria, on the outskirts of Lagos. The company sources mainly from Nigerian SMEs chili peppers which it processes and packages in bulk to market to industrial manufacturers as well as in smaller sizes for retail clients.24 PRODEX PAD

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1,001 1,548 787 1,773 1,569 1,330 1,790 1,586

Source: Agriculture ministry, various years

246. Cowpea cultivation also provides a valuable environmental service, by fixing atmospheric nitrogen to fragile and sandy soils, typical of Niger. Cowpea’s high nutritional value also makes it an important source of dietary protein, far less expensive than animal protein.

247. Cowpea is transformed mainly by women at artisan level in various products such as wassa-wassa (a subregional variety of couscous and thecommon processed form), enriched flour for porridge, cakes and pasta which are more suitable for urban modes of consumption, and can be used as substitutes for products that are currently imported or

transformed from imported products (such as wheat). Transformation also provides more value added for the sector: generating a gross profit margin of 48 percent.25 While Niger is a large producer of cowpea little processing of the product takes place: only 632 tons of cowpea was processed in Niger. INRAN is currently working on the usage of cowpea flour as a 20 percent substitute for wheat in bread making.26

248. According to recent estimates, Zinder is the region where the highest level of processing of cowpea takes place, representing 39 percent of the national production (Figure 1). Processing is exclusively done at the individual level and by cooperative as there is no industrial operation. The cooperative HASKE in Zinder is currently the biggest processor. The participation of women stands at 34 percent and youths at 48 percent in the processing sector.27 The sector benefits from the existence of cooperatives that appear to have good governance practices, and with good know-how of processing. A noteworthy example of producers group is the regional Arisans Federation of Zinder (FRAZI). Created in 2000, FRAZI contains 83 professional organizations an a network of women artisans.

25 Niras (2013).26 Seydou, Ramatou, 2014. « Diversification de l’utilisation du Cowpea pour promouvoir sa consommation au Niger ». Presentation to the 4ème Semaine Scientifique Agricole de l’Afrique de l’Ouest et Centre, 16-20 June 2014. CORAF.27 Niras (2013).

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Zinder Niamey Maradi Dosso Tillabéri Total

246,075170,620

147,74747,344

20,659

632,445

Figure 1. Quantity of processed cowpea (Kg)

source: Seydou (2014)

249. Cowpea offers significant upside opportunities in both domestic and regional markets. Processed cowpea is gaining popularity in urban households for its relative ease of preparation, in government institutions and as a relief food. In the sub-region, Niger, including the region of Zinder, is the main exporter of cowpea in West Africa: 50 to 74 percent of the national production goes to Nigeria, Togo, Benin and Ghana. The women members of the FRAZI are now selling their products not only sub-regionally but as far afield as Gabon and Saudi Arabia28.

Groundnut

250. Groundnut production had been important in Niger as a cash crop in the 1970-80s under the State company Sonara in the 1970-80s. Groundnut can be transformed in peanut, peanut paste, oil, oilcake (both for human and animal consumption). In Zinder, transformation is done at the artisan level by producer organizations and households and gross profit margin is estimated at 11 percent.29 The main cooperatives are in Matameye and Bandé. A number of oil processing plants targeting the domestic market had been set up in the regions of Maradi and Zinder, but these went into near disuse. This was a consequence of the lack of competitiveness of the groundnut oil as compared to imported oil palm (from Cote d’Ivoire mainly)..

251. With about 160,000 tons produced in 2011, Zinder is the leading region in the production of groundnut with a bit more than 40 percent of national production (table 5) and 35.6 percent of areas under cultivation. The growth of production in the region of Zinder is paralleled by the reduction of productions in the region of Maradi, the traditional growing area for groundnuts. On the other hand the production is very small in Diffa (slightly over 2,000 tons). Goundnut is widely cultivated in West Africa, with Nigeria accounting for 30 to 35 percent of the region’s production in volume terms. Niger’s volume production in the sub-region ranks below Chad and Ghana, of which a significant quantity is exported informally to Nigeria.

Table 5. National production of groudnut in thousand of tons2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

28 SNV, Agriculture in Niger, Case Study-2012.29 Niras (2013).

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Zinder Niamey Maradi Dosso Tillabéri Total

246,075170,620

147,74747,344

20,659

632,445

Figure 1. Quantity of processed cowpea (Kg)

source: Seydou (2014)

147,676 308,510 253,497 406,245 395,669 291,763 342,743 403,365

Source: Agriculture ministry, various years

252. The sector benefits from good governance practices in the cooperatives, as well as a good knowledge of processing techniques. However, cooperatives are small and actors in the value chain are not well organized. For processing, most is artisanal and there is no factory, and thus no modern processing techniques (except in Maradi). In Zinder transformation is done at the artisan level by producer organizations and households and gross profit margin is estimated at 11 percent. The main cooperatives are in Matameye and Blandé.

253. Strategically, support to the groundnut sector under the project will focus on other agro-processing options than oil( peanut, peanut paste, oilcake.)

254. Groundnut is an important value chain in terms of its nutritional content and multiple end-market uses. It is used in cooking, as a condiment and as snack food. It can be transformed in peanut paste, peanut oil, oilcake (both for human consumption and an animal feed). Its value and opportunities for market expansions domestically and sub-regionally rests, therefore, not in a single use but its multiple uses, agricultureal and technical knowledge built-up over decades and employment.

Poultry

255. Zinder is the main region for chicken farming in Niger, representing, according to the Recensement général de l’agriculture et du cheptel 2008, 29.4 percent of the total number of chicken raised in the country30. Diffa represents a much smaller percentage of total chicken raised in the country, at 4.7 percent. Chicken, both broiler and laying hens, comprise about 56 percent of all poultry raised, with the remaining 34 percent consisting of guinea fowl (27 percent of total poultry), of which the region of Zinder is by far the country leader, representing about one-third of the total guinea fowl farming, at the time of the census. The vast majority of poultry production (97.2 percent) is “back yard” farming in villages but also in larger towns. The farming of poultry heavily involves women and youths.

256. Poultry products in the traditional sector are mainly sale of broiler chicken, grilled meat and eggs for the local market. Profit margins for each of these two latter activities are estimated to be 7.6%.31 Imports of generally frozen chicken broiler meat (whole and cut parts), transiting from Benin, have been rising rapidly from a low base in 2009 to reach 2,171 tons in 2012 according to INS. The demand for chicken meat and eggs is strong but is unmet largely due to supply and economic constraints32. The annual per capita consumption of egg in Niger in 200933 was 0.3 kilograms, compared with a continental Africa average of 2.3 kg/p.c./p.a. (Burkina Faso’s and Nigeria’s annual per capita consumption of egg is 2.3 kg and 3.7 kg, respectively). Niger’s low per capita consumption and the highly nutritional benefits of egg suggest an upward demand for egg in Niger. Poultry meat consumption (2011) is similarly low at 1.0 kg/p.c./p.a. compared with 2.4 and 1.8 kg/p.c./p.a. in Burkina Faso and Nigeria, respectively34. Zinder is optimally placed to serve this need,

30 FAO, version of 2010. Revue du Secteur Avicole.31 Niras (2013).32 Meat consumption in Niger has also traditionally favored that of small ruminants (sheap and goats).33 FAO (2013) & Global Poultry Trends, The Poultry Site. More recent data for 2010 and 2011 indicates that consumption has been maintained at his level..34 FAO & Global Poutry Trends, The Poultry Site (2014)

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given that necessary feed, farming and distribution conditions could be put in place, as to be addressed by the project.

257. Despite attempts in the past to develop an industrial poultry segment35, Niger’s intensive chicken farming is limited, representing only 2.8 percent of total national production in 200836. It is broken down roughly evenly between broiler meat and egg farming and was notably linked in the past with mining activity. The number of modern poultry farms in Niger is estimated at around 50 to 60. Modern poultry development requires, access to chicks, vaccines and feed as are they are often imported.

258. Demand for poultry is strong in neighboring Nigeria and represents a potential market opportunity for, notably, meat exports from Zinder. While egg is more difficult to export, the Nigerian FMCG industry is looking to expand its egg processing facilities. Such units would help to provide a fresher product and also alleviate cyclical gluts in the local markets. Imported egg could not only be used for personal consumption but also as an additive to foods such as noodles, spaghetti and confectionery, potentially higher margined segments. Due to the recent avian flu outbreak Nigeria and Niger have banned import of poultry products from the neighboring countries.This temporary barrier to the Nigerain market offered also opportunities from Niger’s percpective opportunities to satisfy local demand.

259.

260. To effectively exploit the market opportunities for poultry and, in particular, chicken most notably raised in Zinder, the private sector must actively participate and adopt, with government and donor support, a value chain approach. The project‘s intervention could help increase the incentive to invest in some “links” along the value chain with high potential for growth and employment by improving the competitiveness of strategic clusters, and complement the impact of other interventions sharing similar objectives. With regard to the poultry sector, key value chain investment needs and opportunities at both the SME and industrial levels include: feed production (most notably the cultivation and milling of maize), cost efficient procurement of feed supplements and veterinary products, dissemination of more modern poultry farming techniques (both managerial and technical) and economy-wide improvements to infrastructure. Further, the existence of sales opportunities and distribution channels (including transport) need to be better diffused. While Nigeria presents a potential “windfall” for Niger, the two countries need to persist in their efforts to harmonize trade.

Livestock

261. Livestock, of which cattle and cattle products are the most important in value terms, is one of the main foundations of Niger’s economy. Niger has the largest herd

35 In 1985, a substantial national program, the ’’Projet filière avicole moderne’’, established the poultry center (centre avicole) of Goudel with a hatchery with a capacity of 1,500,000 chicks per year, two feed factories (in Niamey and Zinder) with a capacity of 11,000 T/year and offered subsidies to the poultry cooperative of Niamey. This program failed and most operations folded. FAO (2010) ibid.36 FAO, version of 2010. Revue du Secteur Avicole.

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population in the Sahel (10.5 million tropical livestock units) and the livestock sub-sector contributes significantly to national GDP (13 percent of GDP and 40 percent of agricultural GDP). Animal husbandry is practiced by over 87 percent of the country’s workforce. Pastoralists and agro-pastoralists supply 80 percent of the meat and milk consumed inside the country and exported to neighboring countries. The meat products take many forms from live to butchered meats for wholesale and retail markets, offal (lungs, heart, liver, intestine and tripe) and heads and feet (the latter generally sold cooked)37. Milk is generally consumed unpasteurized in the countryside with small quantities marketed in more urban areas. The regions of Zinder and Diffa play a critical role in the production and export of meat, especially as it relates to the dominant market of Nigeria.

262. Demand for meat is growing both domestically and in Nigeria, and the Government of Niger is seeking to increase value-addition through increased processing. The competitive advantages and opportunities in Niger’s meat and butchery industry are multifaceted and include: (i) the high quality of Niger meat which is highly sought by consumers in local and regional markets; (ii) the existence of and greater potential for livestock fattening; (iii) the high and growing demand from Nigeria and (iv) the existence of centuries old knowhow in butchery that is appreciated in regional markets. The Government on Niger wants to reduce the flow of live cattle which is “undervalued” and often subsequently fattened in regional markets in favor of locally-fattened cattle and processed meat. Processed meat could include butchered, dried, cured, tinned and otherwise packaged. Processed meat not only offers in many cases higher-profit margins but is also easier and safer to store and transport and, in a more modern setting, has longer shelf-life. Moreover, there is significant potential in the formalization of the country’s butchery industry. The development of a formal private sector in meat production offers substantial opportunities, given the large number of small and informal butcheries and the availability of livestock and, generally, the higher meat yield per animal in Niger compared to other meat producing countries.

Export of live cattle and meat represents nearly 12 percent of Niger total exports of which 90 percent goes to Nigeria, in large part from staging points in Zinder and Diffa 38. Nigeria represents 80 percent of Niger non mining trade and offers the greatest potential for export growth, including for meat, because of its size, diversified economy, improving transportation infrastructure and rising middle class which seeks higher quality and safer food products and demonstrates a willingness to pay commensurately higher prices. Meat consumption in Nigeria is growing at 6-7 percent annually and only about 60 percent of Nigeria’s local consumption in covered by local production. According to the 2008 Country Economic Memorandum (CEM), Nigeria contributes significantly and increasingly to Niger’s GDP growth; its contribution is estimated at 26 percent. Furthermore, Niger’s geography (with a 1500 km border) and community ties facilitate trade with Nigeria. Accelerating regional integration and reinforcing Niger’s trade relations with Nigeria are key priorities and challenges given the opportunities which the large Nigerian market offers.

Business Environment Constraints for the selected value chains

263. The Project will focus on five value chains where Zinder and Diffa have presumed comparative advantages arising from the preexistence of the value chains, some relatively

37 Additionally, there is significant trade of hides and skins both domestically and cross-border, primarily to Nigeria.38 Remaining key export markets for cattle and meat are Cote d’Ivoire, Gabon, Ghana and Benin.

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favorable costs of production (mainly labor) to supply both domestic and export markets and the two regions’ proximity to the export markets (principally, Nigeria). The five selected value chains are chili peppers (dried and powdered/paprika), niebe (cowpea), peanut (oil and animal feed cake) and poultry (mainly chick broiler meat and eggs), and livestock (mainly Butchery, milk/cheese, and fodder).

264. The five value chains share several common constraints which require upgrading in order to exploit domestic and regional market opportunities. These improvements are in addition to the policy reforms and improved investment climates discussed in detail above. The main constraints related to the selected agriculture value chains can be grouped around: institutional and technical capacity (value chain association, private sector market champions); cost of production and economies of scale (i.e., sustainable profitability); inadequate chains of supply; food quality (sanitation, health, product quality); and infrastructure (roads, warehouses, cross-border facilities); marketing (preservation, presentation, linkages to markets). In addition, the following constraints have to be considered:

a. Limited technical capacity: The five value chains, symptomatic to the agribusiness sector generally in Niger, are informal and artisan. Activity is carried out generally by individual farmers, small scale SMEs and, in some cases, cooperatives. Such organizations lack managerial capacity and skilled labor, required to manage and operate efficiently value-added and processing activities. Often training is performed by the SMEs themselves and qualified staff churning is high. Value chain associations and industrial operators are underrepresented.

b. Cost of production. The government and the project are placing a premium on increasing value-addition and processing; for example in case of processing chili peppers to powder, niebe to pasta substitutes, and crshing penuts into vegetable oil and animal feed cakes. In those rare cases where processing occurs, the firms have limited production equipment and or production bottlenecks, resulting in uneconomic capacity utilization of their production lines. Cost of imported factors, like fuel, is high. Power often depends on standby generators.

c. Supply chains. Diffa accounts for 75 percent of Niger’s national cultivated area of chili peppers. Zinder produces about one-quartr of the country’s niebe harvest and about 40 percent of the country’s peanut production. Notwithstanding, supply and storage of agricultural raw materials is not consistent, resulting in volatile prices. In most cases, traditional seeds are planted resulting in poor yields. Industrialized poultry requires a steady supply and inventory of feed (primarily yellow maize and veterinary products). Efforts are required to improve the production and organization of supplied materials. Storage of both inputs and outputs is inadequate often resulting in high levels of loss. To capture higher margins, raw materials and finished products need to be stored where dryness, temperatures, aeration and anti-insect and rodent conditions are favorable.

d. Markets are looking for improved food safety and quality. This involves not only the inherent characteristics of the product but also its freshness, presentation, sizes and quality of packaging. The food processing industry in

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Nigeria is rapidly expanding to meet growing popular demand and, in some cases, shift to small and larger retail outlets and supermarkets. Whether the product is an input (e.g., chili pepper paprika, niebe flour) or a retail product (e.g., eggs, peanut oil). The processor or retail buyer must feel confident in the origin, safely and quality of the merchandize. Moreover, pricing needs to be competitive with other offerings on the market.

e. Infrastructure challenges are major. Most of Zinder and Diffa’s agriculture is rainfed. Irrigation is limited. Feeder, secondary and primary roads are inadequate. Collection and storage facilities are poor and do not allow for the consolidation of harvests which promote buyers’ interests are result in improved margins. Cold storage is essential for the poultry industry and has limited availability in both Zinder and Diffa. Transport delays can result in high spoilage levels.

f. Market linkages are weak. While Nigeria offers a great opportunity, the supply of product is generally informal. There is a general lack of information about formal channels. Nigeria is known for creating obstacles to protect its home grown industries, especially in the case of poultry import. Border crossing is slow and often abusive. Lack of contractual relations is part and parcel to the overall investment climate referred to throughout this document. The past lack of enforceable contracts has often been cited as a critical obstacle for livestock traders. Herders have been reluctant to expand their sales networks to unknown buyers. Letters of credit or similar instruments can facilitated larger and, especially, export related commerce.

g. Niger is one of the least banked countries in West Africa. Financing for working capital and investments and instruments to transfer funds are critical to the smooth operation of any industrial sector, including agriculture and livestock. Opportunities for mobile banking have yet to be well exploited.

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