AFRICAN DEVELOPMENT FUND

REPUBLIC OF GHANA

NORTHERN RURAL GROWTH PROGRAMME

APPRAISAL REPORT

AGRICULTURE & AGRO-INDUSTRY OSAN DEPARTMENT OCTOBER 2007

TABLE OF CONTENTS Page INFORMATION SHEET; CURRENCY AND MEASURES; LIST OF TABLES AND ANNEXES; LIST OF ABBREVIATIONS; PROGRAMME MATRIX; EXECUTIVE SUMMARY i – iii

1. ORIGIN AND HISTORY OF THE PROGRAMME ..................................................................... 1

2. THE AGRICULTURAL SECTOR .................................................................................................. 1

2.1 Salient Features ....................................................................................................................... 1 2.2 Institutional Framework.......................................................................................................... 1 2.3 Donors’ Interventions in the Sector & Lessons Learned ........................................................ 2 2.4 Sectoral Policies and Strategies. ............................................................................................. 3

3. THE SUB-SECTORS ........................................................................................................................ 3

4. THE PROGRAMME......................................................................................................................... 4

4.1 Programme Concept and Rationale......................................................................................... 4 4.2 Programme Area and Beneficiaries ........................................................................................ 5 4.3 Strategic Context ................................................................................................................... 6 4.4 Programme Objectives. ............................................................................................................ 6 4.5 Programme Description:. ........................................................................................................ 6 4.6 Production, Market and Prices ................................................................................................ 9 4.7 Environmental and Social Impacts........................................................................................ 10 4.8 Programme Costs .................................................................................................................. 11 4.9 Sources of Financing and Expenditure Schedule. ................................................................. 12

5. PROGRAMME IMPLEMENTATION ......................................................................................... 13

5.1 Executing Agency ................................................................................................................. 13 5.2 Institutional Arrangements.................................................................................................... 13 5.3 Supervision and Implementation Schedules. ........................................................................ 13 5.4 Procurement Arrangements................................................................................................... 13 5.5 Disbursement Arrangements................................................................................................. 15 5.6 Monitoring and Evaluation ................................................................................................... 15 5.7 Financial Reporting and Auditing......................................................................................... 15 5.8 Aid Co-ordination. ................................................................................................................ 15

6. PROGRAMME SUSTAINABILITY AND RISKS ...................................................................... 15

6.1 Recurrent Costs ..................................................................................................................... 15 6.2 Programme Sustainability ..................................................................................................... 16 6.3 Critical Risks and Mitigation Measures. ............................................................................... 16

7. PROGRAMME BENEFITS ........................................................................................................... 16

7.1 Financial Analysis................................................................................................................. 16 7.2 Economic Analysis. .............................................................................................................. 17 7.3 Social Impact Analysis.......................................................................................................... 17 7.4 Sensitivity Analysis............................................................................................................... 18

8. CONCLUSIONS AND RECOMMENDATIONS ......................................................................... 18 This report was prepared by Messrs. D. KEITA, Chief Agronomist (Team Leader), T. BEDINGAR, Principal Agricultural Economist, R. LUBUNGA, Principal Irrigation Engineer, L. P. MOUSSEAU, Senior Environmentalist, and P. S. M. MATILA, Senior Macro-economist, following an appraisal mission to Ghana in October 2007. Inquiries relating to the report should be addressed to the authors or Mr. F. KWESIGA, Division Manager, OSAN.2.

LIST OF TABLES

Page

4.1 Summary of Programme Cost Estimates by Component 11 4.2 Summary of Cost Estimate by Category of Expenditure 11 4.3 Sources of Finance 12 4.4 Expenditure by category and source of Finance 12 4.5 Expenditure Schedule by Component 12 4.6 Expenditure Schedule by Sources of Finances 12 6.1 Recurrent Cost Schedule by Source of Finance 15

LIST OF ANNEXES Number of pages

1. Map Showing the Programme Area 1 2. Provisional List of goods and services and 1 3. Summary of Procurement Arrangement 1 4.A Bank Group Projects Portfolio by Status and Sector 1 4.B Other Donor Interventions 2

ANNEXES IN PPROJECT IMPLEMENTATION DOCUMENT

1. Programme organisational Chart 2. Programme Implementation Schedule 3. Programme Detailed Cost Tables 4. Financial and Economic Analysis 5. Terms of Reference for PIT and TA 6. Environmental and social Impacts Management Framework Summary

ABBREVIATIONS

ADB - African Development Bank ADF - African Development Fund AAGDS - Accelerated Agricultural Growth and Development Strategy AEA - Agricultural Extension Agent AFD - Agence Française de Développement AgDB - Agricultural Development Bank AgSSIP - Agricultural Services Sector Investment Programme CRI - Crops Research Institute CSD - Crop Services Directorate DA - District Assembly DANIDA - Danish International Development Agency DAENS - Directorate of Agricultural Engineering Services DAES - Directorate of agricultural Extension services DCOOP - Department of Cooperatives DCR - Directorate of Crop Resources DFID - Department for International Development DFR - Department of Feeder Roads DADU - District Agricultural Development Unit DFR - Department of Feeder Roads EIA - Environmental Impact Assessment EIRR - Economic Internal Rate of Return EPA - Environmental Protection Agency EU - European Union FAO - Food and Agriculture Organisation of the United Nations FASDEP - Food and Agriculture Sector Development Programme FFS - Framers Field School FSAP - Framework for Food Security and Action Plan GDP - Gross Domestic Product GIDA - Ghana Irrigation Development Authority GoG - Government of Ghana GPRSII - Growth and Poverty Reduction Strategy HIV/AIDS - Human Immune-deficiency Virus IFAD - International Fund for Agriculture Development MDGs - Millennium Development Goals MLGRDE - Ministry of Local Government Rural Development and Environment MOFA - Ministry of Food and Agriculture MOFI - Ministry of Fisheries MOTI - Ministry of Trade and Industry MRT - Ministry of Roads and Transport NGO - Non Governmental Organization NPO - National Project Officer PIT - Project Implementation Team PPMED - Policy Planning, Monitoring and Evaluation Directorate RADU - Regional Agriculture Development Unit SARI - Savanna Agricultural Research Institutes SMS - Subject Matter Specialist SRID - Statistics Research and Information Directorate UA - Unit of Account UNDP - United Nations Development Program VIP - Village Improvement Project

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AFRICAN DEVELOPMENT FUND (Temporary Relocation Agency)

Angle des trios rues: Avenue du Ghana, Rue Pierre de Coubertin, Rue Hedi Nouira, BP 323 – 1002, Tunis, Belvedere, Tunisia

Tel. : (216) 71 10 2197; Fax: (216) 71 253 167; Email: afdb@afdb.org

PROGRAMME INFORMATION SHEET

1. COUNTRY Ghana

2. PROGRAMME TITLE Northern Rural Growth Programme

3 LOCATION The programme will cover 32 districts of northern Ghana.

4. THE BORROWER The Republic of Ghana

5. EXECUTING AGENCY

Ministry of Food & Agriculture, MOFA P. O. Box M37; Accra, Ghana; Fax (233) 21 668245 or 667805; Email : chiefdir@mofa.gov.gh

6. PROGRAMME DESCRIPTION The proposed Programme would be implemented over a six-year period under four components: (i) Commodity Chain Development; (ii) Rural Infrastructure Development; (iii) Access to Rural Finance; (iv) Programme Coordination.

7. TOTAL COST Foreign cost Local cost

UA 68.39 Million UA 39.92 Million UA 28.47 Million

8.

ADF LOAN OTHER SOURCES OF FINANCE

UA 40.00 Million

9.

IFAD Government of Ghana Financial institutions Private investors Beneficiaries DATE OF APPROVAL

UA 16.15 Million UA 6.64 Million UA 3.16 Million UA 0.80 Million UA 1.64 Million December 2007

10. STARTING DATE AND DURATION

1 June 2008, for 6 years

11.

PROCUREMENT OF GOODS AND WORKS

Procurement of goods and works financed by ADF will be carried out in conformity with Bank Group rules of procedure.

12. CONSULTANCY SERVICES REQUIRED AND STAGE OF SELECTION

Consultancy services will be procured through competition on the basis of a shortlist: (i) Infrastructure rehabilitation design and supervision; (ii) Mid term Review; (iii) Technical Assistance; (vi) External Audit

CURRENCY EQUIVALENTS (October 2007)

UA 1 = 1.42403 GHS UA 1 = 1.55665 USD USD1 = 0.93 GHS (New Cedis) USD1 = 9300 GHC (Old Cedis)

WEIGHTS AND MEASURES

1 hectare = 10,000 m2 1 hectare = 2.47 acre 1 kilogram = 1000 gram 1 metric tonne = 1000 kg 1 centimetre = 0.3937 inches 1 meter = 3.3 feet

Fiscal Year : January 1 to 31 December

ii NORTHERN RURAL GROWTH PROGRAMME – PROGRAMME MATRIX

HIERARCHY OF OBJECTIVES EXPECTED RESULTS BY SECTOR REACH PERFORMANCE INDICATORS SOURCE INDICATIVE TARGETS TIMEFRAME ASSUMPMTIONS AND RISKS GOAL Sector Theme SECTOR THEME

Long-term outcome BENEFICIARIES

INDICATORS /SOURCE Long-term outcome

TARGET INDICATORS and timeframe

Contribute to an equitable and sustainable poverty reduction and food security

(i) Increased GDP; (ii) Reduced rural poverty; and (iii) Improved food security

Overall economy with a specific focus on the rural population.

(i) Agricultural GDP growth rate; (ii) proportion of rural population below poverty line; (iii) proportion of rural population below the food poverty line Source: National Statistics (Ghana Statistical Services; SRID reports)

- Decline of extreme poverty from 18.2% to 15.2% by 2011 and to 10% by 2015 - Decline of poverty from 28.5% to 25.5% by 2011 and to 20% by 2015. - Agricultural GDP growth rate increased from 5.25% to 6% by 2011 and to 7% by 2015

OBJECTIVE Project

Medium-Term OUTCOME BENEFICIARIES

INDICATORS /SOURCE Medium-term outcome

TARGET INDICATORS and Timeframe

ASSUMPMTIONS AND RISKS

To increase northern Ghana area rural households’ income on a sustainable basis.

Northern Ghana area rural households’ income has increased on a sustainable basis.

(i) smallholders living in northern Ghana rural areas who derive their livelihood from agricultural production; and (ii) existing and potential small-scale entrepreneurs and business associations of Northern Ghana who provide services.

(i) Increase in production and productivity; (ii) Increase of income Source: - - RIMS baseline and monitoring. - SRID reports

About 80% of programme area smallholders' productivity and production has increased by at least 7% by 2011 and 20% by 2015 About 80% of Programme area rural household income has increased in real term by at least 5% by 2011 and 15% by 2015

- Government remains committed to the implementation of the FASDEP and Food Security Action Plan.

ACTIVITIES / INPUTS Short-Term OUTCOME BENEFICIARIES

INDICATORS /SOURCE Short-Term outcome

TARGET INDICATORS and Timeframe

ASSUMPMTIONS AND RISKS

COMPONENT A: Commodity Chain Development

- Train and support POs - Establish and support IPBs - Prepare CBP; and

- Provide CDF

Capacities of agricultural sector public, private and community-based institutions are strengthen

Stakeholders of selected Commodity Chains (small producers, processors, exporters, traders, transporters and institutional buyers)

- Number of PO strengthened - Number of IPB established Source:

- MTR report - M&E reports - MOFA statistics and reports - Beneficiary assessments

- 150 Market oriented POs are fully functional by 2011 and 250 by 2015. - 2 Functional IPBs established by 2011 and 5 by 2015.

Policy framework continues to encourage private sector involvement in the rural areas All programme components are implemented

COMPONENT B Rural Infrastructure

- Rehabilitate / construct small scale irrigation schemes.

- Construct water control structures - Promote efficient rainwater

management. - Rehabilitate / construct rural roads.

- Rehabilitate / construct market facilities.

Production and marketing infrastructure of northern Ghana are improved

(i) smallholders living in northern Ghana rural areas who derive their livelihood from agricultural production; and (ii) existing and potential small-scale entrepreneurs and business associations of Northern Ghana who provide services to rural households

Indicators: - Increase in area under irrigation - Flood recession/soil and water conservation techniques promoted. - Number of functional WUA. - Motor-able access from irrigation schemes and inland valleys to primary and secondary commodity markets.

Source: QPR, MTR & PCR, Project M&E Reports;.

- 2000 Ha of irrigated land developed by 2011 and 4500 by 2015 - 200 dugouts by 2011 and 410 by 2015 constructed for livestock. - 150 Ha of flood recession schemes by 2011 and 400 by 2015 constructed. - 800 ha moisture conservation demonstrations by 2011 and 2080 ha by 2015 successfully achieved. - 30 rain-gauges /stream gauges installed within flood catchments areas by 2011 and 100 by 2015 - 100 WUA established and functional by 2011 and 325 by 2015. - 300 km of farm access tracks rehabilitated /constructed by 2011 and 800 by 2015. 100 culverts constructed by 2011 and 270 by 2015. - 200 km of Feeder Roads rehabilitated / constructed by 2011 and 600 by 2015. - 150 km of Trunk Roads rehabilitated /constructed by 2011 and 348 by 2015 - 4 Bridges rehabilitated /constructed by 2011 and 10 by 2015

-Microfinance delivery efficiency improved. - beneficiaries provide their financial contribution, operate and maintain the developed and/or rehabilitated infrastructures -Smallholder households are willing to form economic interest groups as a way of engaging in the market economy

COMPONENT C: Access to Financial Services

Access to financial services has improved

- Small scale producers, processors and traders including women on an individual and/or group basis - Private firms willing and able to manage commodity chain infra

Proportion of CBP projects financed Source: QPR, MTR & PCR, Project M&E Reports;.

At least 80% of CBP projects are financed -Microfinance delivery efficiency improved. - Proposed investments meet the eligibility criteria

COMPONENT D: Programme Management

Programme is efficiently managed

- AWP & B process - Programme audit - Implementation schedule - Procurement process

Source: QPR, MTR & PCR, Project M&E Reports;.

- Annual Work Plans & Budgets are prepared and approved on time - Progress and Audit reports following approved formats are produced on time - Procurement and disbursement rules of procedures are followed - Programme implementation schedule is followed

CATEGORIES (‘UA000) IFAD ADF GOVT FIN BEN PRIV TOTAL Civil works 1,810 27,801 5,028 2,662 1,562 795 39,658 Goods 875 598 495 82 - 2,050 Training 5,134 8,320 1,610 - - - 15,065 Technical assistance/audit & studies 5,635 3,281 - - - 8,916 Recurrent costs 2,697 - - - - - 2,697 Total programme costs 16,152 40,000 6,638 3,157 1,644 795 68,385

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EXECUTIVE SUMMARY Programme Background: A recent study of Ghana’s political economy underlined the broad disparities between the north and the south in terms of economic development and well-being. There is a need to bridge this divide to ensure growth with equity. Conditions in northern Ghana are characterised by: (i) a high overall rural poverty level associated with low overall agricultural productivity, dependence on erratic rains and low soil fertility; (ii) seasonal hunger and systematic malnutrition; (iii) demographic pressure on natural resources, extensive production system and a sub-optimal use of water resources; (iv) limited availability of marketing outlets, and difficult access to main markets in the south and abroad. Despite efforts to increase access to irrigated agriculture, the region’s agriculture remains strongly dependent on rainfed cultivation making it highly vulnerable to climate change risks. Agricultural growth will thus have to rely on increasing both rainfed and irrigated production and promoting processing and marketing of agricultural produce of the three northern regions. GOG, with the assistance of the International Fund for Agricultural development (IFAD) and the FAO/Investment Centre (FAO/IC), prepared the Northern Rural Growth Programme (NRGP) between December 2006 to June 2007. IFAD appraised the Programme in July 2007. GOG requested the Bank to co-finance the programme with IFAD. The Bank Group considered favourably - the request and fielded an appraisal mission between the period of 24 September and 10 October 2007. NRGP is consistent with the Ghana Growth and Poverty Reduction Strategy II (GPRS II), the Ghana Food and Agriculture Sector Development Policy (FASDEP II), which now constitute the framework for donors’ support to the development of the agriculture sector, the Bank‘s Country Strategy Paper (Pillars I & II) for the period 2005 – 2009 and the Ghana Joint Assistance Strategy (GAS - Pillar 1) supported by the Bank and other development partners. This Appraisal Report is based on the reports of related previous studies and the NRGP preparation, and the findings of its appraisal mission. The Bank and other donor-funded projects implementation experiences in Ghana (cf. section 2.4) as well as lessons and recommendations of the Bank’s recent review of the Ghana agriculture and rural sector (cf. section 2.4) have significantly influenced the design of NRGP. Unlike previous interventions, which focused on production, NRGP will adopt a commodity chain approach. To ensure a sustainable growth of rural income, it will give equal attention to production and productivity improvement, value addition through processing and marketing. The Programme will be demand-driven and private sector oriented. It will select commodities based on their capacity to meet local and international demand. NRGP approach will be to address constraints to poverty reduction by improving production and marketing infrastructures (Component B), promoting outgrowers’ schemes (for industrial commodities and export fruits and vegetables) (Components A, B, & C), procurement networks managed by producers organisations and direct marketing by producer organisations (Components A). The diffusion of drought resistant varieties (Component A), irrigation development and soil and water conservation (Component B) will contribute to the preparation of the beneficiaries to climate change. Purpose of the Loan: The ADF loan of UA 40 million, amounting to 58.5% of the total Programme cost, will be used to finance 73.82% of foreign exchange (UA 29.47 million) and 37.01% of local cost (UA 10.53 million). Programme Objectives: The overall sector goal of the programme is to contribute to an equitable and sustainable poverty reduction and food security among rural households. The specific objective is to increase northern Ghana area rural households’ income on a sustainable basis. Programme Description: The Programme consists of four components: (i) Commodity Chain Development; (ii) Rural Infrastructure Development; (iii) Access to Rural Finance; (iv) Programme Coordination. The Programme Cost: is estimated at UA 68.39 million out of which UA 39.92 million (58.37%) will be in foreign exchange and UA 28.47 million (41.63%) will be in local exchange. Sources of Finance: The Programme will be financed by the ADF and IFAD on a parallel basis, and jointly with the Government of Ghana (GOG) and the beneficiaries. The ADF contribution, representing 58.50% of total costs, will be utilised to cover 73.82% of foreign exchange costs and 37.01% of local costs which represent 15.40% of the Programme cost. The Government of Ghana’s contribution of UA 6.64 million (9.70% of total Programme costs) and the contribution of the beneficiaries of UA 5.60 million (8.19%), will be used to cover the part of the costs of civil works, goods and training. Programme Implementation: The Ministry of Food and Agriculture (MOFA) will be the Executing Agency of the Northern Rural Growth Programme (NRGP). Coordination of the implementation of NRGP at national level will be carried out under the supervision of the MOFA Chief Director’s office. A National Programme Steering Committee (NPSC) will be established to provide general policy direction and orient programme implementation strategy, oversee planning, review progress and impact, and ensure effective linkages with related programmes. Conclusion and Recommendations: The programme will have positive social impact on men, women and youths in the programme area. About 372,000 rural households or three million people living in these households will directly or indirectly benefit from the programme. An estimate of 1.56 million of women will also benefit from the programme. NRGP addresses the priorities of the Government of Ghana in the pursuit of poverty reduction as describe above. NRGP will contribute to achieving the objectives of the Millennium Development Goals (MDG) and the NEPAD’s Comprehensive African Agricultural Development Programme (CAADP). Based on the above, it is recommended that an ADF loan not exceeding UA 40 millions (GHS 56.96 millions) be granted to the Republic of Ghana for the implementation of the above described Programme.

1. ORIGIN AND HISTORY OF THE PROGRAMME 1.1 A recent study of Ghana’s political economy underlined the broad disparities between the north and the south in terms of economic development and well-being. There is a need to bridge this divide to ensure growth with equity. Meeting northern Ghana’s poverty reduction targets and reducing seasonal hunger requires significant agricultural growth and creation of processing and marketing opportunities. Despite efforts to increase access to irrigated agriculture, the region’s agriculture remains strongly dependent on rainfed cultivation making it highly vulnerable to climate change risks. Agricultural growth will thus have to rely on increasing both rainfed and irrigated production and promoting processing and marketing of agricultural produces of the three northern regions. Marketing improvement will require building food and commodity chains to connect northern producers to southern markets. 1.2 GOG, with the assistance of the International Fund for Agricultural development (IFAD) and the FAO/Investment Centre (FAO/IC), prepared the Northern Rural Growth Programme (NRGP) during the period December 2006 to June 2007. IFAD appraised the Programme in July 2007 and proposed to co-finance the Programme. GOG requested the Bank to co-finance the programme with IFAD. The Bank Group considered favourably - the request and fielded an appraisal mission between the period of 24 September and 10 October 2007. This Appraisal Report is based on the reports of related previous studies and the NRGP preparation, and the findings of its appraisal mission. 2. THE AGRICULTURAL SECTOR 2.1 Salient Features 2.1.1 Agriculture is the dominant sector in the Ghanaian economy. It contributes 39% of GDP, directly employs 70% of the labour force and accounts for 57% of foreign exchange earnings. The sector is made up of 5 sub-sectors: crops other than cocoa (63% of agricultural GDP), cocoa (14%), livestock (7%), fisheries (5%) and forestry (11%). The sector plays an important role in the socio-economic development of the country. It contributes to ensuring food security, provides raw materials for local industries, generates foreign exchange, and provides employment and incomes for most of the population (especially those living in the rural areas), thereby contributing to poverty reduction. 2.1.2 Ghana’s agricultural production is predominantly rain-fed. Smallholder farmers on family-operated farms using rather rudimentary technology produce about 80% of the total agricultural production in the country. Women are the predominant producers of the food crops. Non-traditional crops including fruits, pineapple, mango, and cashew nuts are increasingly becoming important in the Ghanaian economy. Livestock is an important component of the farming system especially in northern Ghana. Crop residues are utilized to feed the animals while animal manure is used to restore and improve soil fertility. Livestock population comprises of 1.1 million cattle, 2 million sheep, 2.1 million goats, 0.4 million pigs and 13.1 million poultry. Permanent pastureland is estimated to be 8.4 million ha. The fisheries sub-sector accounts for an annual production of 400,000 tones mainly of marine source. The main food crops are roots and tubers (cassava, yam), cereals (maize, rice, sorghum, millet) and pulses (cowpea and groundnut). 2.2 Institutional Framework 2.2.1 The Ministry of Food and Agriculture (MOFA) is decentralized in 10 Regional Agricultural Development Units (RADUs) and 138 District Agricultural Development Units (DADUs). At district level, MOFA activities are implemented by front line staff (FLS) and Subject-Matter Specialists (SMS). Weaknesses are high turnover of effective staff because of

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low remuneration as well as the weak financial and logistical capacity. Based in MOFA, the Ghana Irrigation Development Authority (GIDA) is the main institution in charge of irrigation. It is entrusted with irrigation development. It provides extension services.

2.2.2 Ministry of Local Government, Rural Development and Environment (MLGRDE): Ghana has engaged in a decentralized local-government system. Regional Coordinating Councils (RCC) are responsible for coordinating all ongoing development programmes in the region. The District Assemblies (DA), Area Councils (AC) and Unit Committees (UC) are the governance structures in that order below the RCC. Each DA prepares a development plan and has a Common Fund into which central government allocates a portion of national revenue according to criteria based on need, population, responsiveness and equity aspects. Since mid 2006, the Environmental Protection Agency (EPA) is under the MLGRDE and is entrusted with the responsibility of overseeing environmental problems. The Ministry of Fisheries (MOFI) is in charge of fisheries development. The Ghana Export Promotion Council of the Ministry of Trade and Industry and President’s Special Initiative (MOTI/PSI) will be an important partner in commodity development programmes. It will play a facilitation role especially for export crops.

2.2.3 NGOs: Most major international NGOs are present in Ghana. Many national NGOs have significant capacity and outreach. Important partnership possibilities exist on issues such as capacity building, market and credit linkages, micro-credit development, and agricultural extension. Northern Ghana has numerous NGOs, many of which are highly competent and which operate on a large scale.

2.3 Donors’ Interventions in the Sector & Lessons Learned 2.3.1 A large number of development partners, including ADB, IFAD, the World Bank, FAO, WFP, UNDP, CIDA, DFID, AFD, GTZ, KFW, JICA, USAID and the Millennium Development Challenge Corporation support Ghana’s agricultural sector. A summary of on-going donors’ funded projects is presented as Annex 4. The African Development Bank Group co-finances 14 projects including three multinational operations. In line with the ADF mandate, the Bank’s vision and strategic plan, which give priority to poverty reduction and food security in low income RMCs, the Bank Group projects focus on food security and poverty reduction. In 2006, the Bank undertook a review of the agriculture and rural sector. This review provided operational lessons and strategic orientation for its future interventions. The IFAD’s current assistance amounts to USD 75.3 million for six operations. 2.3.2 A major lesson learned from the 2006 review of the agriculture sector was that for smallholders, the best way to reduce poverty without additional risk exposure is to improve returns from existing enterprises through use of improved planting materials and farming practices, soil and water conservation, and improved access to inputs and outputs markets. The review recommended: (i) support to smallholders agriculture; (ii) strengthening agricultural services operations, addressing identified shortcomings in the advisory, input supply, machinery and marketing functions; (iii) improved natural resources management; and (iv) capacity bulding for strategies, and programmes formulation, implementation, monitoring and evaluation. 2.3.3 Lessons from past and on-going projects (cf. Annex 4.B include): (i) strong community participation in design, planning and implementation is essential for sustainability and impact; (ii) in order to improve access for the rural poor to financial services, there is a need to further strengthen the Rural and Micro-finance Institutions (RMFI), especially the rural banks, and to expand their outreach to the rural poor; (iii) building strong pro-poor institutions is the most sustainable way for combating poverty with respect to all areas of

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action including rural finance (Apex Bank or Rural Banks and RMFIs), micro-enterprise development (trade organizations), agricultural production, marketing and processing (POs, WUAs, Interprofessional bodies) and CBOs; (iv) northern Ghana has numerous NGOs; some of these NGOs have the required capacity to provide technical assistance to rural communities. 2.4 Sectoral Policies and Strategies: The Food and Agriculture Sector Development Policy (FASDP) is developed as a policy of the Government of Ghana to guide development and interventions in the agriculture sector. It emphasises the sustainable utilisation of all resources and commercialisation of activities in the sector with market-driven growth in mind. The Government of Ghana is currently preparing a Sector-Wide Approach for Agriculture (Swap). By March 2008, the roadmap will result in a memorandum of understanding between the Ministry of Food and Agriculture (MOFA), the donor community and other stakeholders to deliver FASDEP through a six-year action plan. 3. THE SUB-SECTORS 3.1 The Crops sub-sector includes: cereals (maize, rice, sorghum and millet); roots and tuber (cassava, yams, cocoyam and sweet potatoes); industrial crops (tobacco, cotton, kola nuts, oil palm, rubber, groundnuts, copra cashew, soybean and sugar cane); horticultural crops (pineapples, mangoes, avocado, peppers, onions, ginger, lime, oranges and exotic vegetables ant other perishables crops (plantain, banana, beans, tomatoes, papaw etc.), cocoa, coffee and sheanuts. Cocoa is the dominant tree crop in the country accounting for over 20% of the export earnings and over 3% of the total GDP. Maize and cassava remain the two major staple food crops in the country. There are about 2.74 million small farm holdings in Ghana, which directly support a rural population of about 10.64 million people. Yields for all cultivated crops are by all standards very low. It is 12 t/ha for cassava; 7.8 t/ha for plantain; 13 t/ha for yam; 1.5 t/ha for maize; 1.0 t/ha for sorghum and millet; and 0.8 t/ha for cashew. The crop sub-sector has the potential to contribute to poverty reduction and economic growth. 3.2 The Livestock industry is an important sub-sector of the agriculture sector in Ghana and includes ruminants (cattle, sheep and goats), pigs, poultry (chicken, guinea fowls, ducks, turkeys, ostriches, etc), and the non-conventional (game) species (grass cutters, snails, guinea pigs, rabbits, etc). Its population is estimated at approximately 24.3 million poultry, 2.9 million sheep, 3.2 million goats, 1.3 million cattle and 0.3 million pigs. Domestic meat production is estimated at 18.3 million metric tons (Mt) from cattle, 13.1 million Mt from sheep, 12.6 million Mt from goats, 10.4 million Mt from pigs and 19.4 million Mt from poultry, and combined domestic milk production is about 27 million Mt. Ghana imports about 50% of the livestock products to supplement the production levels and meet the local demand. The imports are estimated at about 10 million Mt of frozen beef and 70,000 live animals. An estimated 70% of animals slaughtered in Ghana originate from outside the country, particularly along the northern border. 3.3 The development of Irrigation is a priority in Ghana’s effort to satisfy the country’s food needs and production of industrial raw materials. Ghana has a potential irrigable area of about 2.5 million hectares. Of this, only about 11,000 ha are equipped with water management infrastructure. Annual rice production peaked to 18,400 tons. in 2001 from a low of 5200 in 1995, and has fluctuated between 18,700 and 11,000 tons during the last five years (GIDA Annual Report, 2006). The improvement in production is attributable to the rehabilitation effort supported by the Bank, JICA, DFID, IFAD, World Bank and USAID. Interventions to improve farmer managed irrigation through the ADF funded SPFS in Ghana went as far as facilitating the poor farmers to obtain pumping equipment and this has had a positive impact in terms of production, productivity and income. Sensitizing farmers on the benefits of saving water versus the potential dangers of over-irrigation, in addition to facilitating the farmers to integrate appropriate efficient water distribution and application

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methods such as medium pressure drip irrigation and low pressure drip kits will contribute to the sustainability of irrigation schemes. 3.4 The Roads Sector Development Programme (RSDP) is a coordinated and integrated programme of trunk, feeder and urban road maintenance, rehabilitation and re-construction funded by (GOG) and various donors agencies with the overarching objective of directly supporting the effective implementation of GPRSII. The country’s Feeder Roads Network is 41,000 km of which 55% is engineered, 15% is partially engineered while 30% is un-engineered. Only 1323 km of the feeder roads network is tarred with the three northern regions accounting for only 3%, 22,044 km are gravel roads with the three northern regions accounting for 25%, while the remaining 17,622 km are earth tracks. 3.5 Rural Finance: The overall policy framework for microfinance in Ghana is informed by the poverty reduction strategy, which seeks to balance growth and macroeconomic stability with human development and empowerment in such a way as to positively reduce the country’s poverty levels in the medium term. The overall strategy emphasizes the reduction of inflation and the need to sharply reduce the fiscal deficit, as a key step to reduce the extent of the public sector’s crowding out of the private sector in the financial markets, and to help lower interest rates. Ghana has a small financial sector, consisting of 17 commercial banks, 121 rural banks, 39 non-banking financial (NBF) institutions, and an emerging stock market. Progress has been made towards improving the framework for prudential regulation. A major challenge facing the sector is strengthening the financial soundness of banks, and improving the access of resources to SMEs. The major sources of agricultural credit are the Agricultural Development Bank (AgDB) and rural banks. 3.6 Constraints and Opportunities: The constraints include low use of inputs including fertiliser and over-dependency on rainfall, inadequate farming and natural resources management practices, lack of credit, use of low yielding and susceptible to pests and diseases genetic materials, insufficient and poor conditions of production and marketing infrastructures, limited value addition and high post-harvest losses, and limited access to inputs and outputs markets. Increasing levels and multiplicity of standards (food safety and phytosanitary) in international trade present a growing challenge to market access, especially of high-value agricultural export commodities. On the domestic front, a low consciousness of quality of the majority of consumers does not engender a culture of following Good Agricultural Practices (GAP) among farmers, processors and traders. 3.7 Agricultural potentials include Ghana’s abundant natural resources, a coastline and well trained human capital. Its water resources, hydro-electric potential, agricultural lands, and minerals are yet to be fully exploited; it has an enormous capacity to generate employment, income and foreign exchange. Soil characteristics vary significantly, with total arable and irrigable land estimated at 13.6 million ha. Only about 6.3 million ha of land is currently cultivated annually, of which only 12,000 ha is the formal irrigated land. Irrigation potential in the country is estimated at 2.5 million ha. The country has equally very varied climate that is influenced by different agro-ecological zones, and hence allowing diversified agricultural production. In addition, the country has a considerable potential in agro-processing to increase its market access and it has the skilled human resources. 4. THE PROGRAMME 4.1 Programme Concept and Rationale 4.1.1 NRGP will be the main instrument for integrating and consolidating the various ADF investments in northern Ghana (i.e. the Livestock Development project; the Cashew Development Project; and the Small Scale Irrigation Development project) and

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operationalising the emerging agriculture sector-wide programme approach. Synergies and complementarities with on-going projects and programmes (cf. section 2.4 and Annex 5) will be in the fields of capacity building for the agricultural sector public, private and community-based institutions (establishing and strengthening, through training and orientation, producers’ organisations and inter-professional bodies, entrepreneurial training), adaptive research, extension, access to credit and equipments, establishing outgrowers’ schemes for both industrial crops, fruits and vegetables, production and marketing infrastructure development, and providing support in all aspects of production, processing and marketing, as well as supporting producers in accessing international markets (certification, traceability). The NRGP will adopt a commodity chain approach. To ensure a sustainable growth of rural income, it will give equal attention to production and productivity improvement, value addition through processing and marketing. The Programme will be demand-driven and private sector oriented. It will select commodities based on their capacity to meet demand.

4.1.2 A limited number of commodity chains have been selected, based on their market potential, financial viability, outreach, women preferences and risks. These commodity chains have been grouped into five categories: (i) the industrial crops characterised by high outreach and low risk; (ii) crops of particular interest for women characterised by medium outreach, high poverty alleviation potential and low risk; (iii) the export fruits and vegetables with low direct outreach but high income generating and employment potential; (iv) four animal based commodities (small ruminants, pigs, guinea fowl and fish farming); and (v) improved seed. A strong emphasis will be placed on addressing marketing constraints, which include lack of commodity chain infrastructure and insufficient support for meeting market requirements. NRGP approach will be to address these constraints by improving production and marketing infrastructures (Component B), promoting outgrowers’ schemes for industrial commodities and export fruits and vegetables Components A, B, & C), procurement networks managed by producers organisations and direct marketing by producer organisations (Components A). The diffusion of drought resistant varieties (Component A), irrigation development and soil and water conservation (Component B) will contribute to mitigate climate change. 4.2 Programme Area and Beneficiaries 4.2.1 The Programme area covers 32 districts located in Ghana northern regions, namely Northern Region, Upper East Region, and Upper West Region. In addition, the participation in, and benefits from the programme may extend to those smallholders and rural small-scale entrepreneurs and business associations in nearby districts located in the same agro-ecology, the northern savannah of Ghana. The programme area has a combined population of about three million. More than 70% of the area population is engaged in subsistence agriculture. The target group of the proposed programme would include: (i) smallholders living in rural areas who derive their livelihood from agricultural production; and (ii) existing and potential small-scale entrepreneurs and business associations who provide services to rural households. 4.2.2 In the programme area, agriculture is characterised by subsistence farming with low level of production technology. The predominance of rainfed subsistence agriculture explains the low productivity, production and incomes in the area. Yields for all cultivated crops are by all standards very low (cf. section 3.1) due to the wide spread shifting cultivation combined with the use of traditional implements such as hoes and machetes, the low level of fertilizer use and limited use of improved seed by small scale farmers. The potential for irrigation and integrated water management is not sufficiently developed. Many households keep livestock. The northern regions have a clear comparative advantage within Ghana for livestock production. Livestock represents a significant source of livelihood in the northern regions. It also plays an important rural saving role, as standing capital and in food production through the provision of both manure and draft power. Improved breeds of small ruminants and guinea fowl under previous donors supported projects in the area.

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4.2.3 Beneficiaries: The low productivity of the farming system is responsible for marked seasonal hunger and malnutrition experienced in the area. This makes the population particularly susceptible to diseases. Adult literacy rate in the area is very low throughout northern Ghana. According to the 2000 National Census, the literacy rate in Upper East Region and Upper West Region was 57%. Both income and non-income indicators of poverty in the area are in all cases below the national averages. 4.3 Strategic Context: NRGP addresses the priorities of the Government of Ghana in the pursuit of poverty reduction. It is consistent with the Ghana Growth and Poverty Reduction Strategy II (GPRS II), the Ghana Food and Agriculture Development Policy (FASDEP II), which now constitute the framework for donors’ support to the development of the agriculture sector, the Bank ‘s Country Strategy Paper (Pillars I & II) for the period 2005 – 2009, and the Ghana joint Assistance Strategy (G-JAS - Pillars 1) supported by the Bank and other development partners, as well as the Bank Group Policy for Agriculture and Rural Development. NRGP will contribute to achieving the objectives of the Millennium Development Goals (MDG) and the NEPAD’s Comprehensive African Agricultural Development Programme (CAADP). 4.4 Programme Objectives: The overall sector goal of the proposed programme is to contribute to an equitable and sustainable poverty reduction and food security among rural households. The specific objective of the programme is to increase northern Ghana area rural households’ income on a sustainable basis. 4.5 Programme Description: The proposed programme would be implemented in 32 districts located in northern Ghana over a six-year period under four components: (i) Commodity Chain Development; (ii) Rural Infrastructure Development; (iii) Access to Financial Services; and (iv) Programme Coordination. The following is a brief summary of the Programme description. COMPONENT A: COMMODITY CHAIN DEVELOPMENT

4.5.2 The objective of this component is to build a long term and sustainable physical and social capital needed to link agricultural supply in northern Ghana to demand in the centre and south of the country and abroad. It will empower rural communities to form competent and effective organisations to sustainably manage community-based development programmes. Essential expected outcomes under this component include: (i) 250 market oriented producers’ organisations strengthened and fully functional; (ii) two functional commodity inter-professional bodies established; (iii) commodity business plans prepared and implemented; and (iv) a commodity development fund established. NRGP will support registration for informal producers’ organisations (PO), 64 training workshops for PO representatives and 900 meetings of the District Food Security Networks. Training and extension programme (255 sessions) for POs, which will be elaborated based on the outcome of the CBP, should include advocacy, governance, accountancy, literacy, business and network management as well as technical agricultural issues such as good agricultural practices, quality control, use of chemicals, storage and post harvest handling. 396 radio broadcast programmes will be funded to improve information dissemination. NRGP will also support the formalisation of producers’ commodity professional bodies (CPB).

4.5.3 The Programme will support the improvement of the legal framework of professional organisations (Inter-Professional Bodies IPBs). It will support the process of Commodity Business Plans (CBP) preparation. NRGP will also fund IPBs capacity building activities (406 workshops). The selection of the geographic areas of interventions (district and below) will be done by the PIT based on consultation with local authorities (districts and councils as well as District Food Security Networks). The selection of producers groups will

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be carried out in two phases: (i) a pre-selection based on performance criteria (to be elaborated in the implementation manual); and (ii) a second selection to be done with the private operators that have expressed interest in collaborating with NRGP to set up outgrowers schemes in the Programme area. The actual elaboration of CBPs will require 54 workshops for stakeholders to discuss CBP related issues, and drafting of CBPs. For that purpose, NRGP will contract a Facilitating Agency (FA) that will provide specific facilitation functions for the preparation of CBPs using a participatory approach including all partners in the chain. 4.5.4 The rationale for using a Commodity Development Fund (CDF) is based on the following three factors: (i) the content of a CBP is not known ex ante and a fund will allow sufficient flexibility to fund and implement CBPs; (ii) it will provide a framework for building a basis for the financial sustainability of the commodity chain (through commodity specific professional levies or taxes that will allow funding of investment priorities within the commodity chain after Programme closure); and (iii) it will operationalise FASDEP and meet its recommendation of increasing the demand driven nature and competition among agricultural services providers. The objective of the CDF is, among others, to increase agricultural production and productivity on a sustainable basis. This will be achieved through the design and implementation of an extensive outreach programme focusing on participatory on-farm testing of improved technologies, agricultural extension and training, production and distribution of improved seeds/planting materials. The outreach programme will promote: (i) efficient natural resources management (conservation agriculture, land and water conservation, integrated water management, woodlot establishment, agro-forestry, watershed management, integrated farming for diversification of farm income, etc.); (ii) value addition through processing; and (iii) post-harvest loss reduction technologies.

COMPONENT B: RURAL INFRASTRUCTURE DEVELOPMENT 4.5.5 The approach to rural infrastructure development takes into consideration the limited technical capacity in the engineering sub-sector in the three northern regions and relies on strict enforcement of existing technical design, construction and supervision criteria in irrigation schemes and rural roads construction, as well as, the promotion of labour based technology (combination of high labour intensive methods with small and appropriate mechanised equipment) by construction SMEs for on-farm work and feeder roads. This component will have the following two sub-components: (i) Small Scale Irrigation Development; and (ii) Marketing Infrastructure Development. 4.5.6 Small Scale Irrigation Development: The rehabilitation or construction of small scale irrigation schemes will be guided by compliance with a series of strict technical criteria, in depth site technical studies and designs and cost effectiveness (10 000 to 12 000 USD/ha). NRGP will finance: (i) the construction study and works for small scale irrigation schemes for a total area of at least 4500 ha; (ii) the establishment of communal / public owned water distribution and drainage systems; and (iii) the sensitization of potential beneficiaries and strengthening of water users’ association. Considering the high cost of oil and issues associated with its procurement, NRGP, in collaboration with the African Development Bank Financing Energy Services for Small-Scale Energy Users (FINESSE), will undertake a study of alternative source of energy for irrigation. The study will explore the option of using solar pump instead of diesel pump in NRGP small scale irrigation programme. The project will support the development of small farmer managed irrigation schemes utilizing simple technologies such as motorized pumps (solar powered where feasible) for the abstraction of ground and/or surface water and field water management using the appropriate techniques (surface, sprinkler and drip).

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4.5.7 Inland Valley Development/Flood Recession Schemes: Farmers’ groups mobilized during the first year of the project will be assisted to construct simple water control structures, such as dykes and/or bunds and open earth drains for crops, and/or fisheries production. The design and construction of the water control structures which will be undertaken by consultants and contractors under the overall supervision of the PIT. 4.5.8 Improving Rainwater Productivity: The project will support the adoption of rainwater water management and soil and water conservation technologies through demonstrations and training of farmers (FFSs) in appropriate land preparation techniques and utilization of mulch and livestock manure. Mechanisation of land preparation (contour or semicircular bunds, micro-basins & conservation tillage) through the use of animal traction and/or tractors will also be promoted depending on farmers’ choice and ability. This activity will be closely linked to small scale irrigation and where viable, water harvesting ponds will be constructed for water storage and supplementary irrigation. 4.5.9 Marketing Infrastructure Development: The objective of this sub-component is to increase smallholders’ access to agricultural inputs and outputs markets. It will involve the improvement of rural roads and markets facilities. Rural Roads: The Project will finance construction of (i) 800 km of farm access tracks for existing and newly developed small scale irrigation schemes and inland valley rice schemes; (ii) improve 600 km of feeder roads and construct 270 culverts to open-up areas with high agricultural production potential; (iii) upgrade 348 km of trunk roads with bitumen surfacing; and (iv) construction of 10 bridges. Consultants will be engaged to undertake detailed designs of the roads, which will be selected in the order of the priority ranking produced by the earlier EU feeder roads study. Local and international contractors will be engaged for the road works. Appropriate specifications including enhanced soil binders will be used to withstand extreme weather events due to climate change. Lots for local contractors will not exceed more than 20 km. per contract for the construction farm access tracks and feeder roads under the direct supervision of the consultant. The DFR will be facilitated by the project to enable perform their due obligations in respect of the project. Environmental impact and design studies will be completed by 2009 and road construction will commence in 2010 and end in 2012. Routine maintenance will be undertaken thereafter until the end of the project. Routine maintenance will be gradually phased out over the remaining two-year project period while allowing uptake by the DFR.

4.5.10 Markets Facilities: The handling, transportation and storage of produce, especially meat, horticulture and vegetables, is an impediment to the efficient transaction of trade in produce and current methods result in high transaction costs and losses to the farmers. Most rural markets lack basic facilities such as concrete aprons, covered areas, water supply and sanitation, fencing. The project will help farmers to acquire appropriate group transport facilities and construct simple storage facilities at existing market centres and other appropriately selected locations. Investment in improved market infrastructure, linked to rural roads, would reduce the high marketing transaction costs and losses, thereby increasing rural incomes. Farmers will be assisted to acquire donkey cart units and cold vans through the Commodity Development Fund (CDF). Storage facilities including water supply and sanitation facilities will also be constructed by the project. Producer Organisations and Inter-professional Bodies will mobilize their members for provision of labour for construction of the facilities for which design and supervision will be undertaken by the Public Works Department and District Agriculture Development Units (DADU) with support of the RCC Infrastructure Advisor. The facilities will be managed by Producer Organisations (PO) and/or Commodity Chain Interprofessional Bodies.

COMPONENT C: ACCESS TO FINANCIAL SERVICES 4.5.11 Under this component, the NRGP will provide: (i) institutional strengthening of Participating Financial Institutions (PFIs), FNGOs and Inter-professional bodies in the

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programme area; and (ii) funding arrangements including adapted lending instruments. Institutional strengthening will involve: (i) capacity building for loan officers in the area of credit appraisal, credit management and products development; accredited trainers under the Rural Financial Services Project (RFSP) would be engaged to train credit officers using adapted modules developed under the RFSP; for clients under the NRGP, the Credit With Education (CWE) module would be used by Freedom From Hunger Ghana (FFHG) during the scaling up of the model to all RCBs Banks in the programme area; (ii) training supervisory staff of Inter-professional Bodies such as ARB, Apex Bank and Credit Unions Association (CUA) in the programme area; and (iii) logistic support would be provided to Implementing Partners (IPs) involved in the implementation of these activities. The logistics would include: motor bikes for loan officers to follow-up on clients and bicycles for Community Agents (CAs) that would be engaged by the PFIs to follow-up on their clients to ensure effective recoveries and higher loan assets quality. Matching Grants Funds (MGs) and Micro Leasing (ML) will be adapted from RTIMP to suit clients acquiring productive assets such as pumps, construction of aquaculture ponds and housing for livestock, donkey carts, and processing equipments. At least, 80% of CBP projects will receive funding.

COMPONENT D: PROGRAMME COORDINATION 4.5.12 The objective of this component is the efficient management of the Programme. Coordination of the implementation of the Northern Rural Growth Program at national level will be carried out under the supervision of MOFA Chief Director’s office. To this effect, this office will be strengthened through the appointment of a Programme Implementation Team (PIT). This team will include a National Programme Coordinator (NPC), a Financial Controller, a M&E Specialist, a Marketing Specialist, a Rural Infrastructure Specialist, an Environmentalist, a Sociologist specialized in Pos and IPBs, a Gender Specialist, a Rural Financial Service Officer, a Procurement Specialist and support staff will be competitively selected from relevant implementing agencies. Its members will be competitively selected. The team will be stationed in Tamale. It will coordinate NRGP activities, which will be carried out by implementing partners including relevant line ministries. Purchase of office furniture and equipments, purchase and operating costs of means of transport, payment of salaries and allowances of the PIT staff and other operating costs will be financed from IFAD loan. In addition, NRGP will finance a broad range of workshops and training intended to strengthen policy, strategy, project and programmes formulation, implementation, monitoring and evaluation capacity of MOFA. NRGP will also finance activities of the National Programme Steering Committee (NPSC) and of the Programme Development and Implementation Partnership (PDIP). It would cover the costs of a thorough mid-term review, a project completion review, annual external audits, and contributions towards the cost of external evaluations, impact assessments and thematic studies. The Programme will contribute to the costs of monitoring, evaluation and review missions as well as required consultancy services for FASDEP. It will, in particular, strengthen the capacity of MOFA and MOFEP to undertake efficiently its functions of external monitoring and evaluation of the food and agriculture sector, as provided for by FASDEP II. 4.6 Production, Market and Prices

4.6.1 Production: At full development of the programme, there will be incremental production per year under rainfed of: 2,112 tones of sorghum; 2,112 tones of sesame; 10,004 tones of groundnut; 12,500 tones of sheanuts; and 8,991 tones of soybean. The incremental productions under irrigation are: 826 tones of rice; 3,097 tones of maize; 169 tones of sorghum; 7,290 tones of other vegetables; 1,071 tones of onion; and 788 tones of tomato. 4.6.2 Markets: In general, these food crops are sold in rural markets to itinerant traders and transported to the urban centres. Itinerant traders of whom the majority are women dominate

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the food crop marketing system. Marketing services to farming community are extremely limited due to lack of communication and marketing infrastructures such as roads and market facilities. Thus, food crop marketing is largely confined to local markets. Investments in rural feeder roads, market facilities and transit stores will lead to improvement of the access to agricultural inputs and outputs markets, especially for women. 4.6.3 Prices: All prices in the food crop sub-sector, in line with the general economic price policy, have been liberalised. Inputs subsidies have been completely removed. Market forces determine the prices of the target food crops and their trends dependent largely on the scarcity and the fragility of the produce. There is an opportunity for increasing food crop production in the northern regions due to increased demand for targeted food crops from urbanised cities of the south. As such, the additional production will not have negative impact on prices of targeted food crops. The average price of the products under consideration are: GHC 6500/kg of sesame; GHC 2018/kg of sorghum; GHC 3336/kg of maize; GHC 3196/kg of paddy rice; GHC 3049/kg of groundnut; GHC 2135/kg of sheanuts; GHC 1800/kg of okra; GHC 2260/kg of soybean; GHC 4109/kg of onion; and GHC 2308/kg of tomato.

4.7 Environmental and Social Impacts 4.7.1 The NRGP is classified as Category 2 under the Bank’s Environmental and Social Assessment Procedures. Due to its demand-driven approach, the specific sub-projects investments will only be determined during programme implementation. An Environmental and Social Management Framework (ESMF) has been developed in order to establish a mechanism to determine and asses the potential environmental and social impacts of the NRGP’s sub-projects and to define the mitigation, monitoring and institutional measures to be taken during their construction and operational phases. The ESMF has been posted on the Website www.afdb.org. Worthwhile to mention that the NRGP’s sub-projects are not expected to trigger the requirements for an EIA Study under the Ghana’s Environmental Protection Act (1994) and its Environmental Assessment Regulations (1999, amended in 2002). However, the overall NRGP will undergo a Strategic Environmental Assessment (SEA) Study in accordance with the EPA Regulations and the Public Policy Management and Public Sector Reforms focus area of the GPRS II (2006-09). 4.7.2 Expected physical program activities under the Commodity Development Fund and the Rural Infrastructure Component include supply chain facilities, packing sheds, processing equipment, small-scale irrigation scheme, dams and water retention structures, rural roads and bridges, fish farming. All the construction works will be of small scale. Preliminary screening and resulting positive and negative environmental and social impacts are expected to be few and of minor significance. These impacts are presented in Section B of the Executive Summary of the Environmental and Social Management Framework (ESMF). 4.7.3 Four main mitigation/enhancement measures are being proposed within the scope of this programme: (i) preparation of two Strategic Environmental Assessment (SEA) studies (one for FASDEP and another one for NRGP); the scope of these SEA studies will encompass key policy objectives, including the implementation of the Multilateral Environmental Agreements (e.g. Biodiversity, Climate Change, Desertification and Persistent Organic Pollutions Conventions), food security and emergency preparedness, watershed management and enhanced institutional coordination; (ii) institutional strengthening of MOFA’s Environmental Unit (to ensure the implementation of the SEA’s recommendations) and of the three EPA’s Regional Offices (to ensure the enforcement of strict design and construction criteria for river-based small-scale irrigation, small dams, roads, and markets facilities); (iii) training of staff of Micro-Finance Institutions (MFIs) on environmental and social risk management; and (iv) assignment of a full-time national Environment Management Specialist (EMS) to the PCM. The EMS will support, among other, the

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coordination and follow-up of the SEA studies and the implementation of their respective EMF, develop training program for MOFA/EPA at national, regional and district levels (screening of irrigation programmes, watershed management, water monitoring, pesticide management, sustainable land management, etc.), monitor the application of the environmental screening process for the CDF and the infrastructure’s sub-projects, establish MOU with EPA, Water Resources Commission, Forestry Commission, the Ministry of Health, etc., coordinate the watershed management planning process with District Assemblies, support EPA and the District Assemblies in the establishment and operation of the District Environmental Management Committee, prepare the annual work plan for the implementation of the ESMF and the quarterly reporting, and monitor the incidence and prevalence of malaria and guinea worms around the small-scale irrigation schemes. 4.7.4 The preparation of the ESMF has been done through a participatory process and has taken into account the existing and planned investment initiatives in the northern regions of Ghana. Due to the modest institutional capacities of the MOFA’s Environmental Unit, the Environmental Specialist in the will be responsible for the definition of a detailed monitoring framework for the overall programme. On a day-to-day basis, the MOFA and EPA’s Regional and District Technical Officers will be responsible for the monitoring of implementation of the ESMPs for all sub-projects, including the compliance of the mitigation measures during construction and operation phases. 4.8 Programme Costs 4.8.1 The total cost of the programme, excluding taxes and duties, including physical and price contingencies, is estimated at UA 68.39 million (GHS 97.38 million as at the October 2007 exchange rate). The foreign exchange portion is estimated at UA 39.92 million (GHS 56.84 million) representing 58.37% of the total programme cost. The local costs of the programme are estimated at UA 28.47 million (GHS 40.54 million), which is equivalent to 41.63% of the total cost. A local inflation rate of 10.5 % has been considered. A summary of costs by component and by category of expenditure is provided in tables 4.1 and 4.2 below.

Table 4.1: Summary of Project Cost Estimates by Component

(‘GHS000) (‘UA000) % Components LC F.E. Total L.C F.E. Total F.E. (A) Commodity Chain Development 16,070 8,718 24,789 11,285 6,122 17,407 35(B) Rural Infrastructure Development 18,792 42,906 61,709 13,195 30,139 43,334 73(C) Access to Rural Finance 869 172 1,041 611 121 731 16(D) Programme Coordination Unit 3,567 842 4,410 2,505 592 3,097 19Base cost 39,298 52,638 91,936 27,596 36,964 64,560 60Physical contingency 350 2,962 3,312 246 2,080 2,326 89Price contingency 894 1 240 2 135 628 871 1 499 58Total programme cost 40,542 56,840 97,382 28,470 39,915 68,385 61

Table 4.2: Summary of Programme Cost Estimates by Category of Expenditures

Categories (‘GHS000) (‘UA000) %

L.C. F.E. Total L.C. F.E. Total F.E. 1. Works 19,359 32,771 52,130 13,586 23,012 36,999 672. Goods 2.1 Vehicles and Motorbikes 303 516 818 213 362 575 63 2.2 Irrigation equipment 416 1,284 1,700 292 902 1,194 76 2.3 Office equipment & supplies 165 374 539 116 262 378 693. Services 3.1 Training, workshops & meetings 14,215 7,683 21,898 9,982 5,396 15,377 35 3.2 T. assistance/audit & studies 1,865 9,615 11,479 1,309 6,752 8,061 844. Personnel 2,248 - 2,248 1,578 - 1,578 -5. Operating expenses 740 395 1,136 520 278 798 35Base cost of the project 39,311 52,638 91,936 27,596 36,964 64,960 59 Physical contingency 350 2,962 3,312 246 2,080 2,326 89 Price contingency 881 1,240 2,122 628 871 1,499 58Total programme cost 40,542 56,840 97,382 28,470 39,915 68,385 61

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4.8.2 The Programme cost estimates are based on the prevailing prices in Ghana in July 2007. Unit rates for locally procured goods, services, and for civil works are also based on prevailing rates in July 2007. The exchange rates used on imported goods and services were those of the new Ghana Cedis (GHS) to a Unit account of October 2007. 4.9 Sources of Financing and Expenditure Schedule: The programme will be financed by the African Development Fund (ADF) and IFAD on a parallel basis. The component B related to “Rural Infrastructure” will be jointly financed by ADF, the Government of Ghana (GoG) and the beneficiaries. The total ADF financing will be UA 40.00 million, representing 58.50% of the total programme costs. The ADF resources will finance UA 29.47 million (73.83% of the foreign exchange costs) and local costs amounting to UA 10.53 million (15.40% of total programme local costs). The IFAD contribution, amounting to about UA 16.15 million (23.61% of total programme cost), will finance the components related to “Commodity Chain Development”, “Access to Rural finance” and “Programme coordination Unit”. The Government contribution, amounting to UA 6.64 million (9.70% of total programme cost) will cover the part of the costs related to feeder road rehabilitation, feeder spot improvement, HIV/AIDS, Malaria and Guinea worm sensitisation and awareness. The contribution of the beneficiaries, estimated at about UA 5.60 million (8.19% of total programme cost) will cover their counterpart on the infrastructure. The financing plan of the programme by source of finance and by category of expenditures ADF and the Government is shown in Table 4.3 and 4.4 below.

Table 4.3: Source of Finance

Sources (‘GHS000) (‘UA000) L.C. F.E. Total L.C. F.E. Total %ADF loan 15,013 41,962 56,975 10,533 29,467 40,000 58.50IFAD 14,485 8,514 22,999 10,172 5,979 16,151 23.62Government 4,968 4,471 9,439 3,489 3,140 6,638 9.70Beneficiaries 6,076 1,893 7,969 4,267 1,329 5,596 8.18Total project cost 40,542 56,840 97,382 28,470 39,915 68,385 100

Table 4.4: Expenditure by category and source of Finance (‘UA00)

CATEGORIES IFAD ADF GOVT FIN BEN PRIV TOTAL Civil works 1,810 27,801 5,028 2,662 1,562 795 39,658 Goods 875 598 495 82 - 2,050 Training 5,134 8,320 1,610 - - - 15,065 Technical assistance/audit & studies 5,635 3,281 - - - 8,916 Recurrent costs 2,697 - - - - - 2,697 Total programme costs 16,152 40,000 6,638 3,157 1,644 795 68,385

Table 4.5: Expenditure Schedule by Component (‘UA000)

Components 2008 2009 2010 2011 2012 2013 2014 2015 Total

(A) Commodity chain Devel 873 2 657 2 046 2 061 4 094 2 394 2 090 1 667 17 882(B) Rural Infrastructure 1 277 10 857 10 655 10 482 8 566 4 634 110 - 46 581(C) Access to rural finance 148 158 166 118 49 49 49 7 744(D) Program Coordination 634 335 337 498 342 344 337 353 3 179Total 2 931 14 007 13 204 13 159 13 050 7 421 2 586 2 026 68 385

Table 4.6: Expenditure Schedule by Source of Finance (‘UA000) Sources of finance 2008 2009 2010 2011 2012 2013 2014 2015 TotalADF Loan 637 5,366 9,352 9,155 8,101 5,456 1,910 23 40,000IFAD 827 1,900 2,008 1,931 2,433 2,458 1,945 2,650 16,152Government 2 679 1 386 1 423 1 431 1 151 495 71 6,638Financial Institution - 318 477 320 661 686 330 365 3,157Private Investors - 109 135 52 169 174 62 94 795Beneficiaries - 98 248 302 309 311 261 116 1,644Total 1,466 8,469 13,606 13,182 13,105 10,236 5,004 3,319 68,385

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5. PROGRAMME IMPLEMENTATION 5.1 Executing Agency (EA): The Ministry of Food and Agriculture (MOFA) would be the Executing Agency of the Northern Rural Growth Programme (NRGP). The day-to-day management of the Programme will be carried out by a Programme Implementation Team under the supervision of MOFA Chief Director’s office. To this effect, MOFA will be strengthened through the appointment of a Programme Implementation Team (cf. Para. 4.5.12). In order to facilitate decentralisation, the selected national team will relocate to project area and take over the management of the programme, with Tamale as their duty station. The PIT shall facilitate and coordinate activities of the Ministries, Departments and Agencies (MDA) activities at regional and district levels. 5.2 Institutional Arrangements: A National Programme Steering Committee (NPSC) will be established to provide general policy direction and orient programme implementation strategy, oversee planning, review progress and impact, and ensure effective linkages with related programmes. The NPSC membership would include: (i) one representative each from the relevant ministries (MOFA, MOFEP, MOH, MWWH, MOTI, MOFI, MMYE, MOPSD/PSI, MLGRDE, Ministry of Transportation, Ministry of Justice and the Attorney General's Department; (ii) one representative from selected public-sector agencies and institutions (GIDA, EPA); (iii) two representatives from the NGOs collaborating with NRGP as IPs; (iv) five representatives for the POs; (v) three representatives for large-scale private sector traders/processors; and (vi) four representative for private investors and management firms of commodity chains facilities (bulking and processing). NPSC meetings would be chaired by the Hon. Minister of MOFA or his designated representative, with the Coordinator of PIT as secretary. The NPSC would meet at least twice a year. All programme coordination costs will be financed from IFAD loan.

5. 3 Supervision and Implementation Schedules: The Bank, together with IFAD and GOG will carry out joint implementation reviews (JIR)of the programme twice a year. The overall purpose of the review is to assess the programme progress against its objectives; evaluate implementation progress against work plan targets; assess the implementation of any policy initiatives or institutional reforms that may have been agreed upon in the work programmes; and identify specific actions that will facilitate future implementation. A mid-term review (MTR) will be carried out during year three to review the programme achievements, its objectives, scope and resources requirements. A programme completion report (PCR) will be prepared by both the Borrower and the Donor Partners at the end of the programme. The Bank’s Ghana Field office (GHFO) together with the other stakeholders (MOFA, other donors) will assist in the day to day monitoring of the programme. GHFO will also participate in the JIR, MTR, and PCR. 5.4 Procurement Arrangements 5.4.1 A summary of procurement arrangements is presented as Annex 3. All procurement of goods, works and acquisition of consulting services financed by the Bank will be in accordance with the Bank’s Rules of Procedure for and Procurement of Goods and Works or, as appropriate, Rules of Procedures for the Use of Consultants, using the relevant Bank Standard Bidding Documents. 5.4.2 Civil Works: Procurement of Civil Works valued in total at UA 13,809 million will be carried out under International Competitive Bidding Procedures (ICB). Four such contracts will be awarded for dams, boreholes with solar pumps, trunk roads, and bridges works. Procurement of Civil Works valued in total at UA 15,986 million will be undertaken through National Competitive Bidding (NCB) procedures. Eighteen such contracts will be awarded, for boreholes,

14

hand dug wells, dugouts, on-farm earthworks, water conservation, feeder roads and farm tracks. The nature, location and scope of these works are unlikely to attract foreign competition. 5.4.3 Goods: Procurement of irrigation equipment involves the procurement of equipment by several individual farmers. All irrigation equipment valued at a total amount of UA 0,820 million will be procured through National Shopping (NS). Procurement of environmental equipment, valued at UA 0,133 million will be procured through NS. Procurement of computer materiel valued at UA 0,068 million will be procured through NS procedures. There are adequate number of national suppliers and agents of qualified foreign suppliers in the country to ensure competitive prices. 5.4.4 Consulting Services and Training: Procurement of consulting and training services will be undertaken in accordance with the Bank's "Rules of Procedure for the Use of Consultants". Services including studies, design and supervision, valued at UA 3,062 million, HIV & malaria sensitization, and training valued at UA 7,991 million, labour based technologies training, valued at UA 1,421 million, community irrigation awareness, valued at UA 0,154 million, will be procured through shortlist mode of procurement. The selection procedure will be based on technical quality with price consideration. 5.4.5 Short term services of individual consultants, valued at UA 0,242 million will be procured through shortlist in accordance with the Bank’s procedure for the selection of individual consultants. These services include small dam monitoring and evaluation, strategic environmental assessment studies, specific contract to certification body. Services of individual consultants for less than two months, valued in total at UA 0,141 million will be procured through direct contract. These services include Independent construction quality assessment, workshops and seminars, environmental and social risk management micro-finance Institutions, support to Environmental Unit in MOFA, monitoring and evaluation system. Specific irrigation training, valued at UA 0,06 million, will be undertaken by GIDA through direct contract. 5.4.6 General procurement Notice: The text of the general procurement (GPN) will be agreed with the Executing Agency and it will be issued for publication in the ‘Development Business, upon approval of the loan agreement by the Board of Directors. 5.4.7 Review Procedures: The following documents require Bank review and approval before promulgation: (i) specific procurement notices; (ii) tender documents or request for proposals from consultants; (iii) tender evaluation reports or reports on evaluation consultants’ proposals, including recommendations for contract award; (iv) draft contracts, if these have been amended from the drafts included in the tender invitation documents. The bank no-objection for the technical evaluation before proceeding to the financial evaluation is not required. 5.4.8 Post-Review: Contracts for goods and works up to an amount of UA 100,000 will be approved by the EAs, and will be subject to post review by ADF. Procurement documents, including solicitations of price quotations, evaluation sheets and contract awards will be kept at the EAs for periodic review by ADF supervision missions. The procurement post review audits to review the correctness of the procurement activities will be carried out during the first supervision mission after the procurement activities are completed. However, the Bank reserves the right to conduct its procurement audit at any time during the project implementation. This review will determine the need for modifications and improvement of the procurement arrangements. Information on procurement processing will be collected by the EAs quarterly and shall be included in detail in the Project Quarterly Progress Report to be submitted to ADF.

15

5.5 Disbursement Arrangements: The Programme funds will be disbursed according to the expenditure schedule by component and by source of finance shown in tables 4.4 and 4.5 respectively. The Government will open a special account in the name of the Programme for the funds provided by ADF. The ADF funds will be disbursed according to an annual work programme, which will be approved beforehand by the Government and ADF. Initial request for disbursement of the special account will be submitted to the Bank for approval and shall cover a period of four months. The disbursement of subsequent funds will be subject to justification of the utilisation of the preceding funds. Other disbursements under the Programme will be made in accordance with the procedures in force. The contribution of the Government to the programme costs will be deposited quarterly in a special account.

5.6 Monitoring and Evaluation: Monitoring and evaluation of the Programme activities will be carried out as a regular management function by the PIT and MOFA. The PIT will prepare quarterly and annual progress reports and a mid-term review (MTR) report.. The overall Programme monitoring and evaluation systems will be the logical framework, a series of key performance indicators and the Programme operational manual and Working Documents. The monitoring indicators will compare Programme performance each year with the targets set in the AWP/B for that year. The programme outputs and outcomes will be reviewed at mid-term and at the of the programme. Provision has been made to generate required data for monitoring and evaluation, including base-line studies. 5.7 Financial Reporting and Auditing: The Programme will keep financial records in accordance with sound accounting practices and will ensure that all project accounts are audited annually by an independent auditor acceptable to the GOG and the Bank and the corresponding reports will be regularly submitted to the Bank for review. Fully audited certified financial statements for the preceding financial year shall be submitted to the Bank not later than six months after the closing of the financial year. 5.8 Aid Co-ordination: The Government is leading the effort to ensure streamlining of resources in line with the Food and Agriculture Sector Development Policy (FASDEP) and the Ghana Growth and Poverty Reduction Strategy II (GPRS II). In January 2006, MOFA indicated its commitment to adopt a SWAP for the agricultural sector and established a road map, whose milestone include: (a) Obtaining shared understanding of the SWAP process; (b) Building Government and development partners capacity for developing and implementing programme-based approaches; (c) Strengthening inter-ministerial linkages; (d) Consulting Development Partners on their possible commitment to the SWAP; (e) Reviewing the Food and Agricultural Sector Development Plan (FASDEP); (f) Developing a Six-year Sector Plan; and (g) Finalizing the implementation arrangements for an Agriculture SWAP. The process is expected to culminate in the signing of an MOU between stakeholders to deliver the FASDEP and the Sector Plan through a SWAP in 2008. Under GPRS II and FASDEP, proper coordination of donors’ interventions is reinforced through regular sector coordination groups meetings including the sector coordination group monthly meetings, the MOFA – Development Partners’ Group quarterly meetings, the annual sector performance review sessions, and the Multi-Donors Budget Support process. The agricultural sector donors include African Development Bank, European Union, World Bank, IFAD, Japan cooperation (JICA), the Netherlands cooperation, French cooperation (AFD), Canadian cooperation (CIDA), German technical cooperation (GTZ), British cooperation (DFID), American cooperation (USAID), FAO, UNDP, and WFP. 6. PROGRAMME SUSTAINABILITY AND RISKS 6.1 Recurrent Costs: Recurrent expenses are estimated at about UA 2.70 million during the eight-year implementation period. All the recurrent costs related to the project are financed under the IFAD contribution and comprise staff salaries, office utilities, operation and maintenance of

16

vehicles and motorbikes for the field staff and allowances. At the end of project implementation, the departments that are participating in the implementation of the project will carry out the various activities, under their existing recurrent expenditures. These departments will assume their respective roles in training, maintenance of feeder roads and buildings, as well as extension services. The Feeder Roads Department and district assemblies will allocate resources for the maintenance of feeder roads and farm tracks respectively, while Water User Associations and farmer associations will be responsible for the maintenance of boreholes, dug-outs and other community infrastructure established by the programme.

Table 6.1: Recurrent Cost Schedule by Source of Finance (‘UA000) Sources of Finance 2008 2009 2010 2011 2012 2013 2014 2015 Total

IFAD 346 333 334 336 338 340 333 335 2 697TOTAL 346 333 334 336 338 340 333 335 2 697

6.2 Programme Sustainability: The programme design was based on a demand-driven and participatory approach. Through the implementation of component C (Capacity building) the Programme beneficiaries will be prepared to undertake their own development activities. In line with existing national strategies, they will form users committees to prepare development plans, manage and monitor their implementation as well as participate in their evaluation. The improved crop varieties and animal breeds to be promoted will be selected on the basis of their adaptability to the agro-climatic zones and the consumers’ preferences. The use of improved inputs and cultural practices, and appropriate technology will improve soil fertility and structure, leading to sustained production and productivity. The crop budgets indicate that income gains from growing the crops with improved management are substantially higher than traditional practices, which makes it very attractive thus providing adequate incentives for farmers to adopt the improved varieties. In addition, individual farmers, farmer groups and entrepreneurs will be accustomed to savings mobilization, formal banking practices and access to credit. 6.3 Critical Risks and Mitigation Measures: The Programme seeks to commercialise smallholders’ agriculture. There is a risk that these small producers generally lack the understanding of the markets and the bargaining power to effectively negotiate with large buyers. This risk will be addressed by: (i) establishing outgrowers schemes and enhancing small producers capacity to meet market requirements by improving post-harvesting practices (bulking, cleaning, grading and packing) under the technical guidance of professional operators that will manage these facilities; (ii) designing pro-poor commodity chains; (iii) endowing producers organisations with partial ownership of the commodity chains facilities; (iv) creating inter-professional bodies around specific commodities; and (v) adopting a participative market chain assessment as the main tool for identification of commodity chains innovations with commodity business plans. Another risk of the Programme lies in the insufficient technical capacity and cost effectiveness of the present delivery system of rural infrastructure (especially small dams and feeder roads). Mitigation measures for this risk include: (i) compliance with a series of strict technical criteria, in depth site technical studies and designs which will have to provide a cost effective solutions; and (ii) building of local civil engineering capacity for small scale infrastructure construction by developing an efficient local network of small civil engineering companies and engineering consultancies that would be trained in labour-intensive technology for construction of feeder roads and on-farm works.

7. PROGRAMME BENEFITS 7.1 Financial Analysis: Crop models have been elaborated for the main rainfed (millet, sorghum, maize, groundnut, cowpea, soybean, yam, cassava) and irrigated crops (rice, onion, tomato, and banana). On rainfed crops, increase in yields and incomes would be achieved mainly through the use of improved varieties/cultivars and reasonable increases in fertilizer

17

use as well as soil and water conservation measures. In valley bottoms, rice yield would be increased as compared to the present situation and vegetables would be possible in the dry season on a small portion of the developed land (12 percent). River banks are not cropped at present or in some cases used as grazing land; small scale pumping irrigation will allow beneficiaries to crop vegetables (tomato or onion) and maize. Recession lake shore farming will be improved with sorghum as the main crop and some vegetables on part of the developed area (10 percent). It is also expected that about 20,000 farmers will adopt new technologies and good agricultural practices in both rainfed and irrigated agriculture. Increases in yields and net incomes by targeted crops are summarized in the implementation document.

7.2 Economic Analysis: An economic analysis has been carried out over 25 years, using constant prices and exchange rate of GHS=0.93 USD. Replacement cost of irrigation infrastructure and equipment, according to their respective lifetime (varying from 5 to 10 years) has been accounted for. The main benefits considered in the analysis are as follows: (i) incremental net margins derived from increased agricultural production, both from newly irrigated areas and from improved rainfed cropping practices on 3 percent of total cropped area in the three northern regions; (ii) incremental value of production following better quality and shorter linkages with major and remunerative markets (niche markets, supermarkets, exports, and institutional buyers). Unquantified benefits include: better access to water for livestock and villagers as well as environmental benefits derived from small scale irrigation/rehabilitation; better access to social services and potable water as well as information and technology following the rehabilitation and construction of major trunk roads, feeder roads, bridges and farm tracks. At full economic costs, the EIRR of the programme was found to be 18 percent with a present value of US$ 16.02 million and at 75 percent of the infrastructures, the economic internal rate of return (EIRR) was found to be 23% with US$ 23.26 million. 7.3 Social Impact Analysis: The programme will have positive social impact on men, women and youths in the programme area through: (i) increased crop production and productivity; (ii) improved rural infrastructure and water facilities; (iii) improved access to financial services; and (iv) capacity building. The sensitisation and training activities under the Capacity Building component will enhance the awareness and capability of the programme beneficiaries to make better business decisions. In addition, the HIV/AIDS awareness campaigns, malaria and Guinea worms prevention activities are expected to contribute to improved health of the population. Increased production will create more employment in the rural and urban areas and lead to increased incomes for smallholder men and women producers and the private investors. 7.3.1 About 372,000 rural households or three million people living in these households will directly benefit from the programme. An estimate of 1.56 million of women will also benefit from the programme. Training of women farmers in good agricultural practices will enable them to increase crop and livestock production which will lead to increased incomes of the women farmers in the programme area. The increase in incomes for women will contribute to improved standard of living for entire households, improved household food security, as women spend most of their earnings on their families, especially on their children and thereby contributing to poverty reduction. 7.3.2 Training of Association elected leaders and administrative staff will avail the communities with leadership skills which would further foster cooperation around economic and social activities. This would also contribute to minimising conflict in this area. The programme will, therefore create the capacity for the communities to self-promote rural development operations Therefore, the project will have a positive impact on rural organization by making farmers more accountable.

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7.4 Sensitivity Analysis: The results of the sensitivity analysis are the following: (i) a 10% increase in costs gives an EIRR of 16%; (ii) a 10% reduction in benefits leads to an EIRR of 16%; (iii) a 30% reduction in benefits or a lag of two years in the benefits of the programme leads to an EIRR of 12% or 13% respectively. 8. CONCLUSIONS AND RECOMMENDATIONS 8.1 The programme will have positive social impact on men, women and youths in the programme area. NRGP addresses the priorities of the Government of Ghana in pursuit of poverty reduction. It will also contribute to achieving the objectives of the MDGs and the NEPAD’s comprehensive Africa Agricultural Development Program (CAADP). 8.2 Based on the above, it is recommended that an ADF loan not exceeding UA 40 millions (GHS 56.96 millions) be granted to the Republic of Ghana for the implementation of the above described Programme subject to the following conditions: A. Conditions Precedent to Effectiveness

The effectiveness of the loan agreement will be subject to the satisfaction of clauses

indicated under Section 5.01 of the General Conditions Applicable to ADF Loan and Guarantee Agreements. B. Conditions Precedent to First Disbursement

The obligations of the Fund to make the first disbursement shall be conditional upon

the entry into force of the Loan Agreement and the fulfilment by the Borrower of the following conditions. The Borrower shall, to the satisfaction of the Fund:

(i) provide evidence to the Fund of the opening with the Bank of Ghana, of a special account in foreign currency into which the proceeds of the loan shall be deposited (Para. 5.5);

(ii) constitute the Programme Implementation Team, acceptable to the Fund, comprising the following: a Programme Coordinator, an Environmentalist, a Gender Specialist, a Financial Controller, a Monitoring & Evaluation Specialist, a Rural Finance & Marketing Specialist, a Rural Infrastructure Specialist, a Sociologist, a SME/CBO Institutional Specialist and a Procurement Specialist (Para. 4.5.11); and

(iii) provide a written undertaking that it shall ensure, at all times, that adequate resources are available for the proper and timely implementation of the programme. (Para. 4.9).

C. Other condition

In addition, the Borrower shall, to the satisfaction of the Fund establish, within six (6) months after first disbursement, the Programme Steering Committee (PSC) chaired by the Minister of Food & Agriculture or his designated representative, comprising the (i) one representative from the relevant ministries (MoFA, MoFEP, MOH, MWWH, MoTI, MOFI, MMYE, MoPSD/PSI, MLGRDE, Ministry of Transportation, Ministry of Justice and the Attorney General's Department); (ii) one representative from GIDA; (iii) EPA; (iv) two representatives from the NGOs collaborating with NRGP as IPs; (v) five representatives for the POs; (vi) three representatives for large-scale private sector traders/processors; and (vii) four representative for private investors and management firms of commodity chains facilities (Paragraph 5.2).

Annex 1

GHANA - NORTHERN RURAL GROWTH PROGRAMME

This map was provided by the African Development Bank exclusively for the use of the readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank and its members any judgement concerning the legal status of a territory nor any approval or acceptance of these borders.

ADF Provisional List of Goods and Services

Annex 2

Categories (‘UA000)

Local Costs Foreign Exchange. Total 1. Works 5,494 19,806 25,300 2. Goods 2.1 Vehicles and Motorbikes - - - 2.2 Irrigation equipment 138 377 515 2.3 Office equipment & supplies - 62 62 3. Services 3.1 Training, workshops & meetings 4,014 4,613 8,627 3.2 T. assistance/audit & studies 470 2,298 2,768 4. Personnel - - - 5. Operating expenses

Base cost of the project 10,115 27,157 37,272

Physical contingency 205 1,736 1,941 Price contingency 213 574 787 Total project cost 10,533 29,467 40.000

Annex 3

Summary of Procurement Arrangement (UA '000)

Categories ICB NCB Other Short List N.B.F. Total 1, Civil works 1.1 Various Civil Works 5 582 5 5821.2 Dams 2 672(2 672) 2 672 (2 672)1.3 Boreholes 651 (651) 651 (651)1.4 Hand dug wells 679 (679) 679 (679)1.5 Dugout 2 739 (2 739) 2 739 (2 739)1.6 Boreholes with solar pumps 3 487 (3 487) 3 487 (3 487)1.7 On-Farm earthworks 791 (791) 791 (791)1.8 Water conservation 852 (700) 852 (700)1.9 Trunk roads 5 091 (5 091) 5 091 (5 091)1.10 Bridges 2 559 (2 559) 2 559 (2 559)1.11 Feeder Roads 4 395 (3 728) 4 395 (3 728)1.12 farm Tracks 5 879 (4 703) 5 879 (4 703)2. Goods 2.1 various goods 5 439 5 4392.2 Computer materiel 68 (68) 68 (68)2.3 Environment equipment --------- 133 (133) 133 (133)2.4 Irrigation equipment -------- 820 (527) 820 (527)3. Services 3.1 Various Services including audit 10 781 10 7813.2 studies, design and supervision 3 062 (3 062) 3 062 (3 062)3.3 HIV, MALARIA Sensit.& training 7 991 (6 393) 7 991 (6 393)3.4 Labour-Based Technology Train. 1 421 (1 421) 1 421 (1 421)3.5 Community Awareness for irrigat. 154 (154) 154 (154)3.6 irrigation training by GIDA 60 (60) 60 (60)3.6 Short term consultant /a 242 (242) 242 (242)3.7 Less than two months services 141 (141) 141 (141)4, Miscellaneous 4 1 Recurrent Costs 2 697 2 697Total 13 809 15 986 1222 12930 24 499 68 385 (13 809) (13 992) 929 (11332) (40 000)

Annex 4.A AFRICAN DEVELOPMENT BANK

Date : 06.11.2007BANK GROUP PROJECTS PORTFOLIO BY STATUS AND SECTOR

Country Name: Ghana

Project name Sta- Source Approval Signature Closing Effective. Approved Cancelled Undisbursed Total Net Loan % Disb. % sect.tus of Finance Date DAte Date Date Amount Amount Balance Disbursed Amount

Sector : AgricultureSMALL-SCALE IRRIGATION DEVELOPMENT PROJEC OnGo ADF Loan 04.12.1997 29.05.1998 30.09.2007 25.01.2001 15.000.000,00 0,00 6.405.742,74 8.594.257,26 15.000.000,00 57,30FOOD CROPS DEVELOPMENT PROJECT OnGo ADF Loan 10.12.1997 29.05.1998 30.06.2007 05.02.2001 10.000.000,00 0,00 2.528.957,57 7.471.042,43 10.000.000,00 74,71CASHEW DEVELOPMENT PROJECT OnGo ADF Loan 31.10.2000 08.03.2001 30.06.2008 03.12.2002 9.890.000,00 0,00 4.978.046,56 4.911.953,44 9.890.000,00 49,67INLAND VALLEY RICE DEVELOPMENT PROJECT OnGo ADF Loan 18.05.2001 23.05.2001 31.12.2007 17.05.2004 15.000.000,00 0,00 12.826.940,41 2.173.059,59 15.000.000,00 14,49LIVESTOCK DEVELOPMENT PROJECT OnGo ADF Loan 10.10.2001 02.08.2002 31.12.2008 03.06.2003 19.580.000,00 0,00 13.899.439,70 5.680.560,30 19.580.000,00 29,01GOPDC Oil Palm Expansion Project OnGo ADB Loan 12.12.2002 19.02.2003 25.12.2005 30.01.2004 7.140.000,00 0,00 0,00 7.140.000,00 7.140.000,00 100,00RURAL ENTERPRISES PROJECT OnGo ADF Loan 12.12.2002 16.04.2003 31.12.2011 28.01.2004 7.500.000,00 0,00 5.733.803,86 1.766.196,14 7.500.000,00 23,55COMMUNITY FORESTRY MANAGEMENT PROJECT OnGo ADF Loan 03.07.2002 16.04.2003 31.12.2008 04.12.2003 7.000.000,00 0,00 4.161.697,81 2.838.302,19 7.000.000,00 40,55NERICA DISSEMINATION PROJECT - GHANA OnGo ADF Loan 26.09.2003 07.10.2003 31.12.2010 30.03.2005 2.650.000,00 0,00 2.132.835,84 517.164,16 2.650.000,00 19,52GHANA - CREATION OF SUSTAINABLE TSETSE A OnGo ADF Loan 08.12.2004 15.04.2005 31.12.2011 23.01.2006 6.640.000,00 0,00 6.153.940,50 486.059,50 6.640.000,00 7,32EXPORT MARKET AND QUALITY AWARENESS PROGOnGo ADF Loan 13.07.2005 29.07.2005 31.12.2011 08.12.2006 17.000.000,00 0,00 16.788.982,46 211.017,54 17.000.000,00 1,24AFRAM PLAINS RURAL DEVELOPMENT PROJECT OnGo ADF Loan 31.05.2006 29.06.2006 31.12.2012 02.02.2007 19.970.000,00 0,00 19.587.740,72 382.259,28 19.970.000,00 1,91

SUB-TOTAL : Agriculture 137.370.000,00 0,00 95.198.128,17 42.171.871,83 137.370.000,00 30,70 14,48

Sector : TransportANYINAM-KUMASSI ROAD CONSTRUCTION OnGo ADF Loan 22.11.1985 20.12.1985 31.12.2007 12.08.1986 23.671.036,00 0,00 1.589.592,67 22.081.443,33 23.671.036,00 93,28ACHIMOTA-ANYINAM ROAD REHABILITATION PROJEOnGo ADF Loan 15.12.1997 29.05.1998 15.12.2007 26.12.2000 10.000.000,00 0,00 2.442.775,95 7.557.224,05 10.000.000,00 75,57TETTEH QUARSHIE CIRCLE MAMFE ROAD REHABILIOnGo ADF Loan 11.12.2000 08.03.2001 31.12.2007 17.09.2002 25.000.000,00 0,00 8.061.361,40 16.938.638,60 25.000.000,00 67,75TEMA-AFLAO ROAD REHABILITATION PROJECT OnGo ADF Loan 17.04.2002 02.08.2002 31.12.2007 14.09.2005 14.700.000,00 0,00 14.608.018,23 91.981,77 14.700.000,00 0,63AKATSI-DZODZE-NOEPE ROAD(AKATSI-AKANU) OnGo ADF Loan 20.12.2002 18.07.2003 30.12.2009 14.09.2005 12.720.000,00 0,00 12.674.868,50 45.131,50 12.720.000,00 0,35ROAD INFRASTRUCTURE PROJECT 2003 OnGo ADF Loan 17.09.2003 01.04.2004 31.12.2009 22.12.2004 18.000.000,00 0,00 17.879.045,17 120.954,83 18.000.000,00 0,67ROAD INFRASTRUCTURE PROJECT 2003 OnGo ADF Grant 17.09.2003 01.04.2004 31.12.2006 22.12.2004 800.000,00 0,00 552.026,53 247.973,47 800.000,00 31,00

SUB-TOTAL : Transport 104.891.036,00 0,00 57.807.688,45 47.083.347,55 104.891.036,00 44,89 11,05

Sector : Water Sup/SanitRural Water and Sanitation Programme OnGo ADF Grant 08.09.2004 13.10.2004 30.06.2009 23.09.2005 12.800.000,00 0,00 11.540.266,25 1.259.733,75 12.800.000,00 9,84ACCRA SEWERAGE IMPROVEMENT PROJECT (ASIP APVD ADF Loan 26.04.2006 19.05.2006 31.12.2011 06.09.2007 46.000.000,00 0,00 46.000.000,00 0,00 46.000.000,00 0,00

SUB-TOTAL : Water Sup/Sanit 58.800.000,00 0,00 57.540.266,25 1.259.733,75 58.800.000,00 2,14 6,20

Sector : FinanceRURAL FINANCIAL SERVICES PROGRAMME OnGo ADF Loan 11.10.2000 08.03.2001 31.12.2007 27.03.2002 3.580.000,00 0,00 109.488,04 3.470.511,96 3.580.000,00 96,94LINE OF CREDIT TO CAL MERCHANT BANK OnGo ADB Loan 10.07.2002 17.12.2002 31.12.2004 18.06.2003 5.000.000,00 0,00 0,00 5.000.000,00 5.000.000,00 100,00

SUB-TOTAL : Finance 8.580.000,00 0,00 109.488,04 8.470.511,96 8.580.000,00 98,72 0,90

Sector : SocialHEALTH SERVICES REHABILITATION III OnGo ADF Loan 30.10.2002 04.06.2003 31.12.2008 30.03.2004 17.640.000,00 0,00 16.113.741,65 1.526.258,35 17.640.000,00 8,65HEALTH SERVICES REHABILITATION III OnGo ADF Grant 30.10.2002 04.06.2003 31.12.2008 30.03.2004 1.000.000,00 0,00 847.585,61 152.414,39 1.000.000,00 15,24SENIOR SEC. SCHOOL SUPPORT PROJECT - III OnGo ADF Loan 24.09.2003 01.04.2004 31.12.2008 12.11.2004 20.000.000,00 0,00 16.888.974,13 3.111.025,87 20.000.000,00 15,56SENIOR SEC. SCHOOL SUPPORT PROJECT - III OnGo ADF Grant 24.09.2003 01.04.2004 31.12.2008 12.11.2004 5.000.000,00 0,00 4.922.238,13 77.761,87 5.000.000,00 1,56Urban Poverty Reduction Project OnGo ADF Loan 12.10.2005 23.11.2005 30.12.2011 27.04.2006 25.000.000,00 0,00 24.118.226,93 881.773,07 25.000.000,00 3,53

SUB-TOTAL : Social 68.640.000,00 0,00 62.890.766,45 5.749.233,55 68.640.000,00 8,38 7,23

Sector : Multi-SectorINSTITUTIONAL SUPPORT TO THE MINISTRY OF FINOnGo ADF Grant 28.10.1998 13.01.1999 31.12.2005 09.05.2000 2.000.000,00 0,00 328.149,80 1.671.850,20 2.000.000,00 83,59CAP.BUILDING, GOVERNANCE & POVERTY RED. OnGo ADF Grant 14.11.2001 07.02.2002 31.12.2007 20.06.2003 3.000.000,00 0,00 504.111,17 2.495.888,83 3.000.000,00 83,20

SUB-TOTAL : Multi-Sector 5.000.000,00 0,00 832.260,97 4.167.739,03 5.000.000,00 83,35 0,53

OTHER DONOR INTERVENTIONS Annex 4.B

Cooperating Partner(s) Programme/Project Main Objectives period (millions) Location World Bank Community Based Rural

Development Raise the incomes and the quality of life of beneficiaries by improving their productive assets, rural infrastructure and access to key support services from both private and public sources.

2005-2008 US$95 Countrywide

World Bank Agricultural Services Sub-sector Investment Programme (AgSSIP)

A three phase program that aims at a) initiating and accelerating policy and institutional reforms for the strengthening of Government's capacity; b) decentralizing the planning and implementation of agricultural development programs to the regions and districts; c) promoting cost-effective demand-driven agricultural and extension systems to generate and disseminate technologies on a contracting and/or cost sharing basis;

2001-2007 US$123.73 Countrywide

World Bank/KfW/IFAD Village Infrastructure Project Support Government’s efforts to reduce poverty and enhance the quality of life of the rural poor through the increased transfer of technical and financial resources for the development of basic village-level infrastructure (water, transport, & post-harvest infrastructure) that could be maintained by the beneficiaries. It also supported the capacity building of District Assemblies to better plan and manage these investments.

1998-2004 WB:US$30IFAD: US$10

KfW: US$7GoG: 7.1/ Ben. 2.9

Countrywide (4 million in 1,295 Communities)

Agence Française de Développement (AFD)

Low Land Rice Development Project Monitoring the irrigation of rice fields by constructing bunds, producing selected seeds, making available herbicides and fertilizers to growers, developing animal traction farming, improving processing of the paddy, mainly handled by rural women and supporting farmers’ associations.

1999-2004 US$ 2.25

Northern Region)

Agence Française de Développement (AFD)

Coconut Sector Development Project To disseminate technical advice for replanting and increase production capacity for the seed garden, increasing production on 2000 ha of existing plantations not yet devastated by the disease, through the use of fertilizers, development of a 400 ha of inter-crops; development of research programme and increasing the productivity of the traditional method of processing used by the women, by means of technical improvement and support.

1999-2004

FF33.8m

Western and Central Regions

Agence Française de Développement (AFD)

GREL Rubber Out growers Phase 2 To develop 400 ha of land for new rubber outgrowers plantation, benefiting 900 farmers, with a potential annual production of 5200 tons of rubber.

1999-2004 Total: EU 7.553 AFD: EU 6.094m

Western Region

Canadian International Development Agency (CIDA)

Community Driven Initiatives for Food Security (CIFS)

To help communities discern their best entry points for support and to allow for a rationalization of service delivery among government, NGOs, the private sector etc. in ways that are sustainable in the long term.

2003-2007 Cnd$12.0m Eastern Corridor of the Northern Region

CIDA Food Security and Environmental (FSEF)

To support Ghanaian organizations in addressing some issues outside immediate FASDEP priorities. 2004-2009 Cnd15.0m Upper East, Upper West and Northern Regions

Canadian International Development Agency

Monetized Food AID To provide financial support to MOFA for implementation of AgSSIP and FASDEP 2002-2004

Cnd$15.0m

National

CIDA Farmer Responsive Mechanism for Extension and Research

To increase availability of access to and utilization of food. To improve access to and use of demand-driven agricultural information and technology.

2003-2009 Cnd$10.0m Northern Ghana

CIDA Measuring Impact of Food Security To improve information based-decision making related to food security. To evaluate the effectiveness of CIDAs Food Security Programming in northern Ghana. To strengthen the monitoring and evaluation capacity of MOFA.

2001-2006 Cnd$1.1m National

CIDA Farmer Based Organization To provide funds to support the Ministry of Food and Agriculture’s FBO Development Fund. 2001-2004 Cnd$1.5m National CIDA Food Security Advisory Support To analyze policies affecting food security outcomes in response to government request. 2002-2005 Cnd$3.0m National Danish International Development Agency (DANIDA)

Land and Water Management Project Phase II

The sustenance of livelihoods through the prevention of land degradation in agricultural communities, achieved through introduction of improved land and water conservation and also creation of capacity within.

2000-2003 DKK 8.50m

National

DANIDA/IDA/GEF/DFID/ AfDB/EU/Netherlands

Natural Resource Management Project

To protect rehabilitate and sustainably manage national land, forest and wildlife resources and to sustainably increase the income of rural communities who own these resources, improvement in policy and regulatory environment for high forest management and timber industry.

1999 – 2004

US$9.3m National

Department for International Development – UK (DFID)

DFID Component of Land Administration Programme

CLSs established and or strengthened in pilot areas, in partnership with government, land sector agencies, improved quality of records and accessibility of information of CLSs level on land use and holdings, land transactions and availability, and associated financial and cadastral rec.

Jan 2004 – Jan 2008

US$9m National

DFID DFID Component in support of AgSSIP Policy Support Facility

MOFA enabled to plan, implement and monitor social, institutional and budgetary reforms, livestock service proposals that respond to livelihood needs, animal health service proposals.

1999 – 2004

£1m

National

DFID Poverty Social Impact Assessment of Agriculture

To assess the effects of policies for the “Economic Transformation of the Agricultural Sector” on growth, population and poverty reduction.

Oct 2003 – Dec 2003

£0.808m

DFID Poverty Social Impact Assessment. To assess the effects of policies for the “Economic Transformation of the Agricultural Sector” 2003 £0.808m