AFRICAN DEVELOPMENT BANKAFRICAN DEVELOPMENT FUND

REPUBLIC OF KENYA

KENYA LIVESTOCK (PIG) PROJECT: F/KEN/LVS/93/18

PROJECT COMPLETION REPORT

AGRICULTURAL AND RURAL DEVELOPMENT DEPARTMENT

OPERATIONS NORTH, EAST & SOUTH REGIONS 20 FEBRUARY 2002

ONAR.1

TABLE OF CONTENTS

PageCURRENCY EQUIVALENT, WEIGHTS AND MEASURES, LIST OFABBREVIATIONS AND ACRONYMS, FISCAL YEAR, LIST OF ANNEXES, BASICDATA, PROJECT RETROSPECTIVE MATRIX, EXECUTIVE SUMMARY i-x

1. INTRODUCTION 1

2. SECTOR GOAL AND PROJECT OBJECTIVES 22.1 Country’s Development Goal and Strategy 22.2 Project Objectives 32.3 Project Description 3

3. PROJECT FORMULATION 53.1 Project Genesis 53.2 Project Appraisal, Negotiation and Approval 6

4. PROJECT IMPLEMENTATION AND COSTS 64.1 Effectiveness and Start-up 64.2 Design Modifications 74.3 Implementation Schedule 84.4 Reporting 84.5 Procurement of Goods and Services 94.6 Project Costs 104.7 Sources of Finance and Disbursement 10

5. PROJECT PERFORMANCE AND RESULTS 115.1 Overall Assessment 115.2 Operating Results 12

6. INSTITUTIONAL PERFORMANCE 126.1 Management and Organizational Effectiveness 126.2 Staff Recruitment, Training and Development 136.3 Performance of Consultants/Contractors/Suppliers 146.4 Fulfillment of Loan Conditions/Covenants 14

7. FINANCIAL AND ECONOMIC PERFORMANCE 147.1 Financial Performance 147.2 Economic Performance 15

8. SOCIO-ECONOMIC AND ENVIRONMENTAL IMPACT 168.1 Socio-economic Impact 168.2 Environmental Impact 16

9. PROJECT SUSTAINABILITY 169.1 Financial Viability 169.2 Post-Project Flow of Benefits 17

10. PERFORMANCE OF THE BANK AND BORROWER 1710.1 Performance of the Bank 1710.2 Performance of the Borrower 18

11. CONCLUSIONS, LESSONS AND RECOMMENDATIONS 1911.1 Conclusions 1911.2 Lessons Learnt 2011.3 Recommendations 21

This report was prepared by Messrs Chi L. Tawah, Senior Livestock Officer and MissionLeader, O.S. Okeke, Agricultural Economist Consultant and L.M. Epie, FinancialAnalyst Consultant following their mission to Kenya from 19 October to 10 November2000. All questions on this document should be directed to Mr. L.I. Umeh, Manager,Agricultural & Rural Development Division, Operations North, East and South Regions,Ext. 4133

EXECUTIVE SUMMARY

The pig industry in Kenya went from large-scale producers’ domination in the early 80’sto the late 80s when small-scale producers started to gain prominence. However, theindustry lacked competitiveness due to the high cost of feed, shortage of high quality pigsat entry and inadequate processing facilities. The problem was compounded by themonopoly of Farmers’ Choice, especially with the collapse of Uplands Bacon Factory.Besides, the small-scale producers and processors lacked access to credit to improve theircompetitiveness. Therefore, outside investments became absolutely necessary to provideinfrastructure and institutional boost especially to large majority of small-scale producersand re-vitalize an aging industry. Hence, the pig project, whose objective to increasewhite meat availability in the market and incomes of small-scale producers andprocessors is compliant with the Government policy in the sub-sector, was proposed bythe GoK for possible Bank financing.

In February 1992 the project was appraised and on 24 June 1992 the ADF Board ofDirectors approved it. The loan agreement was signed on 17 November 1993 for a loan ofUA 4.61 million and the loan became effective on 18 January 1996, with the firsteffective disbursement to the project being 7 June 1996. The project had four componentsat appraisal, namely, credit, institutional support, rehabilitation of training and breedingcenter and technical assistance. However, during implementation the latter twocomponents were canceled because of the eminent closure of the project. Hence, theimplementation strategy, which involved support to small-scale producers and processorsin the form of credit and technical assistance and support to the extension service in theform of training and logistics (visual aid and vehicles), was modified.

Consequently, at the date of last disbursement, the credit to be on-lent to AFC stood atKsh 135 million (UA 3,315,487) but AFC had only loaned out Ksh 75,853,595 (UA1,862,900.81) of the approved loan amount of Ksh 84,567,493 (UA 2,076,906.85). Therecovery rate at close of project stood at 71%. Only 288 small-scale producers out of 553targeted had actually benefited from the credit, giving an achievement of 52.0%. Theproject had produced 76,091 out of a targeted 140,000 pigs, representing 54.3%achievement, and 2,496 tons out of 5,900 tons of white meat, representing 42.3%achievement. Incomes of smallholder pig producers had only increased by 11.7% at theclose of the project. Credit beneficiaries were able to make an annual gross profit marginof about Ksh 111,200 (UA 2,730) per pig production. The project yielded a marginalinternal rate of return of 11% compared to 29% at appraisal.

In addition, the project financed a 12-month graduate training in pig production in theUK for one staff and a six-month short-term course in various aspects of pig husbandry inthe Netherlands for 6 extension workers. Pig producers improved their skills in pighusbandry and marketing through workshops, seminars, field visits and demonstrationsorganized by the extension service in the districts. Both men and women benefited fromthe credit component and from the institutional support. The project contributed to thedevelopment of private sector in the pig industry such as the opening of restaurants,butcheries and slaughterhouses in many parts of the country. The project succeeded in re-

vitalizing the pig industry and in making available white meat at affordable prices to theconsumers.

However, the project had a late start-up and consequently suffered from a number ofsetbacks including the collapse in the tourism industry, the slump in the pork market,weak coordination, slow disbursement, poor cash flows, cancellation in the technicalassistance, cancellation of the training and breeding facility and lack of Governmentcommitment. As a result, the loan was only 42% disbursed and the project achievementwas less than 60%. The project also suffered from improper sequencing in thedistribution of credit to pig producers and processors as well as the provision of technicalassistance and credit to pig producers. As a consequence, the pig industry suffered fromtoo much pork production and few processors to transform it into value-added products.Similarly, the credit beneficiaries were not solvent enough to repay their loans on time.

BASIC PROJECT DATA

1. Loan Number : ADF: F/KEN/LVS/93/182. Borrower : Republic of Kenya3 Guarantor : Government of the Republic of

Kenya.4. Beneficiary/Executing Agency : Ministry of Agriculture and Rural

Development (MOARD) &Agriculture Finance Cooperation(AFC)

A. LOAN DETAILSAPPRAISAL

LOAN ESTIMATE ACTUAL1. Amount (UA Million) 4.61 1.962. Terms:2.1 Commitment Charge (per annum) 0.75% 0.75%2.2 Repayment Period (years) 50 502.3 Grace Period (years) 10 103. Loan Negotiation Date4. Loan Approval Date May 1992 24 June 19925. Loan Signature Date September 1992 17 November 19936. Date of Entry into Force November 1992 18 January 1996

B. PROJECT DATA

1. Table 1. Project Cost (UA Million)

Cost component Appraisal Actual

Foreign exchange (FC) 2.12 0.71Local cost (LC) 3.22 1.88Total cost 5.34 2.59

2. Table 2. Financing Plan (UA Million)

Source offunds

Appraisal Actual

FC LC Total % FC LC Total %ADF 2.12 2.49 4.61 86.3 0.71 1.25 1.96 42.5GoK - 0.73 0.73 13.7 - 0.68 0.68 93.2Total 2.12 3.22 5.34 100 0.71 1.88 2.59 48.5

Appraisal Actual3. Effective Date of First Disbursement Nov. 1992 07 June 19964. Effective Date of Last Disbursement 31 Dec.1998 31 Dec. 19995. Commencement of Project Nov. 1992 18 Jan. 19966. Project Completion Date 30 June 1997 31 Dec. 1999

C PERFORMANCE INDICATORS

1. Cost Underrun (%) NA.2. Time Underrun (%) NA2.1 Slippage on Effectiveness (months) 262.2 Slippage on Completion Date (months) 302.3 Slippage on last Disbursement Date (months) 122.4 Number of Extensions of Last Disbursement/completion Date 23. Project Implementation Status: Completed

Unsatisfactory Fair Satisfactory4. Institutional Performance: x5. Contractor Performance: x6. Consultant Performance:

APPRAISAL PCR7. Economic Internal Rate of Return (IER, %) 29 118. Financial Internal Rate of Return (IFR, %) 37 N/A

D. MISSIONS

Type ofmission/missiondates

No of persons inmission team

Missioncomposition

Man-days

Identification N/APreparation FAO/Investment

CentreAppraisal 3 Financial Analyst;

Agric. Economist;Livestock Expert

151515

Supervision8-13.3.1995 2 Financial Analyst;

Agric. Economist1010

29.10 - 10.11.1995 1 Agric. Economist 1028.11 – 11.12.1996 2 Financial Analyst;

Livestock Expert(Consultant)

1010

1-13.12.1997 2 Financial Analyst;Forestry Expert

20

30.3 – 10.4.1998 2 Agronomist;Forestry Expert

1010

12.10 – 7.11.1998(Follow-up)

4 Financial Analyst;Agric. Economist;Forestry Expert;DisbursementOfficer

3333

8-27.3.1999 4 Financial Analyst;Agric. Economist ;Agric. Economist;Livestock Expert(Consultant)

10101010

11.9 – 8.10.1999 2 Financial Analyst;Forestry Expert

1010

Mid-term Review N/AProject CompletionReport (PCR)

3 Financial Analyst(Consultant);Agric. Economist(Consultant);Livestock Expert

5

5

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E. DISBURSEMENT (Annual, UA Million)Appraisal PercentageEstimate Actual Disbursed

- Total Disbursed 4.61 1.96 42.63- Amount Cancelled NONE- Undisbursed Balance 2.65

Yearly Disbursement from ADF (UA)

Year ofOperation

Mode of OperationReplenishment Direct payment

1996 657,298.26 -1997 - -1998 1,157,313.37 -1999 - 148,625.44Total 1,814,611.63 148,625.44

F. CONTRACTOR (s) /SUPPLIER (s)

- Name : IAPSO (UNDP)- Responsibility : Supply of 28 motorcycles- Date Contract Signed : 3 May 1999- Date Contract Terminated : 21 August 1999- Contract Duration : 4 months

- Amount (UA Million) : UA 39,770.93

- Name : IAPSO (UNDP)- Responsibility : Supply of one unit Mitsubishi Pajero (4WD)- Date Contract Signed : 3 May 1999- Date Contract Terminated : 21 August 1999- Contract Duration : 4 months- Amount (UA Million) : UA 31,400.31

- Name : IAPSO (UNDP)- Responsibility : Supply of Computer Equipment- Date Contract Signed : 3 May 1999- Date Contract Terminated : 10 June 1999- Contract Duration : 37 days- Amount (UA Million) : UA 8,242.78

- Name : IAPSO (UNDP)- Responsibility : Supply of Canon Photocopier & Accessories- Date Contract Signed : 3 May 1999- Date Contract Terminated : 17 June 1999- Contract Duration : 44 days- Amount (UA Million) : UA 3,943.73

CURRENCY EQUIVALENTS

FIRST QUARTER 1992

Currency Unit - Kenya Shilling (Ksh)

FUA 1 = Ksh 37.5033FUA 1 = US$ 1.31750FUA 1 = UA 0.921052US$ 1 = Ksh 28.4655Kenya Pound 1 = Ksh20.00

WEIGHTS AND MEASURES

1 metre (m) = 3.28 feet (ft)1 square metre (m2) = 10.76 square ft1 hectare (ha) = 2.47 acres1 kilometre (km) = 0.62137 mile1 square kilometre (km2) = ` 0.39 square mile (sq. m)

ABBREVIATIONS (ACRONYMS)

ADB = African Development BankADF = African Development FundAFC = Agricultural Finance CorporationEIRR = Economic internal rate of returnFAO = Food and Agriculture OrganisationFUA = Fund Units of AccountGDP = Gross Domestic ProductGoK = Government of KenyaIAPSO = Inter-Agency for Procurement Services OfficeKsh = Kenya ShillingM&E = Monitoring and EvaluationMOARD = Ministry of Agriculture and Rural DevelopmentNPV = Net Present ValueONAR = Agriculture and Rural Development DepartmentPCR = Project Completion ReportPIU = Project Implementation UnitPSC = Project Steering CommitteeUA = Units of AccountUNDP = United Nations Development Programme

LIST OF TABLES AND ANNEXES

Map Showing Area and AFC Branch OfficesTable 1 Project CostTable 2 Financing PlanTable 3 Summary of Project Cost Estimates as at AppraisalAnnex Table 4 Implementation ScheduleAnnex Table 5 Expenditure Schedule by ComponentAnnex Table 6 Expenditure by Sources of FinanceAnnex Table 7 Project Profits by Category of FarmersAnnex Table 8 Incremental Production as a Result of Project InitiativeAnnex Table 9 Production Cost EstimatesAnnex Table 10 Total Production CostsAnnex Table 11 Economic Prices of Non-traded Pig Products (1992 Constant

Prices)Annex Table 12 Analysis of Net Benefit at Project LevelAnnex Table 13 Economic Cost-Benefit AnalysisAnnex Table 14 Implementation PerformanceAnnex Table 15 Bank PerformanceAnnex Table 16 Project OutcomeAnnex Table 17 Recommendation and Follow Up MatrixSources of InformationBorrower’s PCRBorrower and Executing Agency’s Comments on Bank PCR (None Provided)

RETROSPECTIVE PROJECT MATRIX

NAME OF PROJECT : LIVESTOCK (PIG) PROJECTAPPRAISAL DATE : FEBRUARY 1992DATE OF COMPLETION : 31 DECEMBER 1999

Hierarchy of ObjectivesObjectively Verifiable Indicators

Appraisal PCR Means of Verification Assumptions/Risks

1. Sector Objective:1.1 Contribution to poverty

alleviation and foodsecurity

1.1 Increase in white meatavailability for local andexport markets

2.1 Increase in income of small-scale producers and processors

1.1 Statistical reports1.2 Quarterly progress

reports1.3 Survey reports

2. Project Objectives:2.1 Increase supply of high

quality pigs2.1 140,000 pigs produced by PY52.2 7,840 tons per year of pigmeat

produced by PY52.3 Farm income will increase by

Ksh 274 million by PY52.4 Mortality reduced from 19 to

10% by PY52.5 Time to market weight of 70

kg reduced from 10 to 6months

2.1 76,091 pigs produced by PY3.5(54.3%)2.2 3,195 tons of pigmeat producedby PY3.5 (40.7%)2.3 Farm income increased by Ksh32,025,600 by PY3.5 (11.7%)

2.1 Quarterly progressreports2.2 Supervision reports2.3 Statistical reports

2.1 Tourism industry continuedto flourish2.2 Market prices for pigsremain favorable throughoutlife of project2.3 Extension messages aresufficiently targeted2.4 Targeted farmers arewilling and able to exploit suchextension messages2.6 No major outbreak in the

pig industry2.7 Macro-economic

environment remain stable2.8 Pig producers and

processors used creditpurposefully

3. Project Outputs:3.1Credit provided to small-scale pig producers and

3.1 553 small-scale producers and6 processors benefit from credit

3.1 288 small-scale producersbenefited from credit to date

3.6 Quarterly ProgressReports

processors3.2 Institutional supportstrengthened

3.3 Extension & farmers’training strengthened

3.4 Wambugu training andbreeding centre rehabilitated

funds3.2.1 a 4-W drive vehicle, twocomputers, software and printersprocured3.2.2 28 motorcycles procured forextension workers3.2.3 a Veterinary & ProductionSpecialist trained overseas

3.3 Local seminars and workshopsand overseas training of extensionstaff organized3.4 Local training of farmers andprocessors organized3.5 Pig Production Specialistrecruited for 12 months3.6 Training materials (projectors& video aids) procured3.7 100 breeding sows and 8 boarsimported3.8 5 pens with carrying capacityof 1000 pigs rehabilitated

(52.0%)3.2 1 4-W drive vehicle, two

computers and software and 1photocopier procured viaIAPSO

3.3 28 motorcycles procured viaIAPSO for extension staff

3.4 Importation of breeding stockcancelled

3.5 Rehabilitation of Wambugutraining and breeding centrecancelled

3.7 Supervision Reports3.8 Importation/purchase

Orders3.9 Stores Inventory3.10Feedback/certificates/dip

lomas from participantsin seminars/workshopsand overseas training

4. Project Activities:4.1 Provision of credit to 553

small-scale pig producersand processors

4.2 Improvement in logisticsand training support toextension services

4.3 Procurement of technicalassistance

4.4 Rehabilitation ofWambugu training andbreeding centre

Financial ResourcesEstimate (UA million)

ADF: 4.61GoK: 0.73Total: 5.34

Actual (UA million)

1.960.682.59

Technical assistance dropped

Rehabilitation of Wambugutraining and breeding centrecancelled

4.1 Contract documents4.2 Audit reports4.3 Receipt documents4.4 Progress reports4.5 Completion reports4.6 Supervision reports

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1. INTRODUCTION

1.1 Kenya lies astride the equator in Eastern Africa, with a 1000-km coastline onthe Indian Ocean and is bordered by Somalia to northeast, Ethiopia and Sudan to thenorth, Uganda to the west and Tanzania to the southwest. It has a total surface area of582,647 km2 and total population estimated at 30.5 million and growing at a rate of3.3 percent per annum. The rapid population growth rate has contributed to increasingland fragmentation and landlessness in the high potential areas and settlement in thesemi-arid areas - ill-suited for farming. Both factors have had adverse effects onsustainable growth in agricultural production.

1.2 However, the agricultural sector continues to dominate the country’s GDP;contributing about 33% to its total GDP, with livestock accounting for about 10% ofthe total agricultural output and the pig industry about 5% to the total livestock sub-sector output. Consequently the Government is committed to sustaining theagricultural growth and improving the efficiency of public spending in the sector. TheGovernment strategy includes enhancing agricultural incentives, especially tosmallholders and women farmers and improving institutional capacity, among others.The Government intends to invest heavily in the livestock sub-sector, in general andin the pig industry in particular to increase the production of white meat by importingbreeding stock, making credit available to farmers and training extension staff todeliver correct extension messages.

1.3 Bank Group started its lending operations in Kenya in 1967 with a loan of UA2.3 million for road construction. Since then the Bank Group has committed a total ofUA313.69 million in support of 39 operations in Kenya. The first Bank Groupinvestment in agriculture in Kenya occurred in 1986 with an ADF loan of UA 14.87million approved to assist in the development of rice production in western Kenya.Additional agricultural loans worth a total of UA 55.71 million have been granted tothe country since then, with the Livestock (pig) project having received an ADF loanof UA 4.61 million.

1.4 At appraisal, the Ministry of Livestock Development, which comprisedDepartment of Veterinary Services and Livestock Production Department, wasresponsible for the technical components of the project, while the Agriculture FinanceCorporation (AFC) was responsible for the financial component. This ministry waslater transformed into the Ministry of Agriculture and Rural Development (MOARD).Still the responsibility for implementing the project rested with the LivestockProduction Department. At appraisal time the tourism industry in Kenya was themajor consumer of pork and pork products. Its collapse in 1997/98 as a result of poorgovernance (political instability and insecurity) created a market crisis for the pigproducers and processors. Similarly, the delay in rendering the project effectivefurther compounded the situation with price inflation affecting many of the inputs.

1.5 At appraisal time the AFC was the largest non-bank lending institution inKenya. Consequently, its lending rates could not be based on deposit rates. The AFCwas established to be used as a vehicle to channel GoK funds to the agriculture sector.It had at the time of appraisal about 1,176 staff and a network of about 50 branchesand agencies across the country. Furthermore, the general interest rates prevailing inKenya at the time had been deregulated since July 1991 and as a result the market

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determined both deposit and lending rates. The commercial lending rates foragriculture and industry ranged from a prime rate of 17% to a more risky rate of 22%.The inter-bank rate was 19% while the official rate was 18%. However, the on-lending rates for AFC have been fixed at 12% for small producers and 14% for otheragricultural loans. This is because GoK has been transferring funds at no cost to theAFC to be on-lent to the farming community at fixed rates. The AFC has howeverbeen able to cover its average operating cost (about 5.5%) and still make some marginof profit. Interestingly, the GoK has recently fixed the interest rate at 4% aboveCentral Bank rate (Interest Rate Bill).

1.6 The objective of the Project Completion Report (PCR) is to carry out apostmortem of the project and extract any lessons from the implementation experiencefor the future. This PCR was based on information collected from various sourcesincluding the appraisal report, project files in the Bank, Borrower’s financial andtechnical reports, quarterly progress reports, Borrower’s PCR, interviews (authoritiesof the Ministries of Agriculture and Rural Development, and Finance and those of theAFC, Farmers’ Choice and beneficiaries) and farm visits during the PCR mission.

2. SECTOR GOAL AND PROJECT OBJECTIVES

2.1 Country’s Development Goal and Strategy

2.1.1 The National Strategy

Kenya’s long-term development strategy is to reduce poverty amongst the rural andurban poor by improving opportunities for the poor to improve their productivitythrough a combination of increased access to productive assets (land and water),technology, markets and supporting institutions. Similarly, economic growth willcome about as a result of increased access and positive performance of the markets, anenabling policy environment and stability in commodity prices through value adding.

2.1.2 The Agricultural Sector Strategy

The policy objectives of the agricultural sector and strategies to implement theminclude, among others: -

(a) intensification of agricultural production through extension, incentivepricing, improved marketing efficiency and input supply to ensure long-term viability of the agricultural sector and its competitiveness in thedomestic and external markets

(b) major research effort aimed at identifying new improved technologies andhigh yielding varieties

(c) prudent diversification of agricultural production based on high value cropsand livestock

(d) increased employment creation for the rapidly expanding population bothin the rural and urban areas

(e) conservation of scarce natural resources (agricultural and land resources)for future generations and strengthening the national early warning systems

(f) improvement in food security through consumption smoothing, socialprotection and diversification of food crops, livestock and fisheriesproduction

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2.1.3 The Livestock Sub-sector Strategy

Kenya’s livestock development policy is based on the fact that its present humanpopulation growth rate demands an increase in livestock and poultry products to meetthe protein requirements of the population. The strategies to implement the policyobjectives include, among others: -

(a) expansion of fodder crops production and improved grasses by individualfarmers

(b) promotion of the manufacture of animal feed locally using local materials(c) promotion of the processing and utilization of agro-industrial byproducts

such as pineapple, sunflower cake, sugar, cotton seedcake, etc.(d) maintain and improve artificial insemination and animal health services

but restructure them such that farmers can be gradually made to pay forthese services

(e) give priority to availability of drugs, vaccines and pest control dips(f) removal of subsidies and broadening the channels for drugs and chemical

distribution in order to make the services more cost effective by privatisingveterinary services and cattle dip maintenance, improving user charges andrevenue collection and increasing the participation of cooperatives andfarmers’ groups in providing these services

(g) substantial increase in production of white meat through increasedproduction of pigs, poultry and rabbits by encouraging importation ofbreeding stock, making credit available to farmers and training extensionstaff.

2.2 Project Objectives

Although at appraisal time, use of the Logical Framework Matrix was a requirementof the Bank Group, this project lacked a matrix. A noticeable omission was the sbenceof measurable and objectively verifiable indicators at the objective, output and goallevels. However, the project had three main objectives, namely:

i) increase the availability of white meat in the marketii) increase income of smallholder pig producers and processorsiii) increase the supply of high quality pigs

2.3 Project Description

2.3.1 The project as designed at appraisal and subsequently approved by the Boardof Directors in November 1993 comprised the following components:

(a) credit provision(b) institutional support(c) rehabilitation of Training and Breeding Centre(d) technical assistance

2.3.2 The credit component of UA 3.43 million was meant to address the creditconstraint to pig producers and processors. The funds were to be channeled throughAFC for on-lending to smallholder pig producers and processors. Any sub-project

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aimed at pig production on a small-scale could benefit from the credit for buyingfeeds, medication and supplies, construction of pens, etc. Smallholder pig farmer wasdefined as one owning between 5 and 20 sows and the maximum allowable loan sizewas Ksh 50,000 (UA 1,227.96) repayable within 6 to 9 months and repeatable onretirement of previous loan. Women participation was assured. Small processors ofpork and pork products could also benefit from the credit. This was limited to sixbeneficiaries, one per region and a maximum loan size of Ksh 5.5 million (UA135,075.40) repayable in 5-7 years. In addition, any processor benefiting from thesub-loan must have a butchery, a processing house capable of handling 5-10 carcassesa day and a cold storage facility with a capacity to handle at least 5 carcasses a day.The approval of sub-projects depended on their viability and was solely theresponsibility of AFC. The ADF loan was to be on-lent to the AFC at the cost of6.0% based on an ADF service charge of 0.75%, a handling charge of 1.25% and anexchange rate fluctuation risk of 4.0% (Para 4.1.1i). The AFC was to on-lend thesefunds to the small-scale pig producers at 12% and small-scale processors at 14% fixedrate (Para 4.1.1ii), although AFC was allowed to determine the final on-lending ratebased on the cost of capital and allowing for a margin to cover its operating cost andprofit.

2.3.3 The institutional support component of UA 0.55 million was designed to tacklethe problem of inadequate extension services. The MOARD was to assign to theproject a senior animal production staff to act as the project Coordinator and anadditional 28 extension staff to the project area to supplement about 200 staff thereassisting the pig farmers and processors. Part of the funds was to be used to providelogistics for the extension staff in the form of a four-wheel drive vehicle, 14motorcycles, two computers & software, two printers, office equipment and trainingmaterials (overhead projectors, slide projectors and other video aids). Another portionwas to be used to support local and overseas training, seminars and workshops forextension staff, pig farmers and processors. The project was to provide two externalcourses of six months duration to a veterinarian on disease control and an animalproduction officer on pig production and management.

2.3.4 The rehabilitation of Training and Breeding Center component of UA 0.15million was to be used to provide training and breeding facilities at the WambuguTraining and Breeding Center for pig farmers and extension agents. The project wasto provide pig-related equipment such as weighing scales, pregnancy diagnostic kits,wheelbarrows, drinking water nipples, pig feed and medications. The project was toimport 100 breeding sows and 8 boars in two batches over a two-year period andrehabilitate five pens with a total capacity of 1,000 pigs by replacing termite-damagedwooden partitions with stone blocks and galvanized pipe separators to facilitate thebreeding of improved breeding stock there.

2.3.5 The technical assistance component of UA 0.28 million was to be used toprovide pig experts to help the polyvalent extension agents who lacked sufficientknowledge and experience in pig husbandry. The funds were to be used to recruit atechnical assistant Pig Specialist to assist the project to develop training materials,conduct in-service training for pig extension agents, and prepare technical manuals foruse in the training of extension agents, pig farmers and processors. Part of the fundswas to be used to hire a short-term expert (if need be) to develop computer softwarefor data capturing and analysis and so facilitate monitoring and record-keeping,

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including assisting in preparing the midterm review of the project and other short-term services that may be deemed necessary.

3. PROJECT FORMULATION

3.1 Project Genesis

3.1.1 The project identification, preparation and appraisal focused on the issuesaffecting the pig industry in Kenya. Pig production and processing was once the mostwell organized sub-sector in the African continent prior to independence in 1963,which was dominated for a long time by large-scale farmers. It has existed since thebeginning of this century and has for the most part withstood the periodic swingscharacteristic of the pig industry. Its contribution to the total livestock output (para.1.2) seems meager but has strategic significance as it supports the tourism industry,which is Kenya’s major foreign exchange earner. Expatriates and tourists consumeover 50% of the pork and pig products. After independence, small-scale pig producersbecame actively involved and have become the most dominant, contributing as highas 90% of the market supply. Before the late 80s, the small-scale farmers carried outmost of the pig production. However, the high costs of feed, inadequate processingfacilities following the collapse of the Uplands Bacon Factory and unavailability ofcredit contributed to a significant reduction in their participation. Thus, the projectstrategy for providing credit for purchase of inputs such as feed, medications andbuilding and breeding materials was sound. Secondly, the strategy of the project tosupport both producers and processors was equally sound. However, the originalproject design did not provide for credit to feed processors.

3.1.2 Although the situation seems to be improving with the advent of large-scalecommercial processors, there is still need for support to the small-scale processors inthe rural areas. The large-scale processors, represented by Farmers’ Choice and theEast African Tanning Extract Company Ltd, are responsible for only 30% of the pigsproduced. The focus of the project on small–scale producers and processors wasconsistent with the Borrower and Bank’s policy on poverty alleviation and was aimedat addressing the imbalance in the sub-sector.

3.1.3 The Government of Kenya made efforts to satisfy the booming tourismindustry and so commissioned a number of studies to examine the malaise affectingthe Uplands Bacon Factory and proposal options for its revival. The Governmentsubsequently requested the African Development Bank Group to finance therehabilitation of this factory. The Bank Group accordingly commissioned the FAOInvestment Center to investigate and assess the viability of rehabilitating the UplandsBacon Factory. The FAO/IC fielded a reconnaissance mission in 1991 to assess theinvestment needs of the pig sub-sector in Kenya and propose a suitable project to theBank Group for financing, with a particular focus on the rehabilitation of the afore-mentioned factory.

3.1.4 FAO/IC undertook a thorough assessment of the extent of dilapidation of thebuildings and the equipment and the funds needed to rehabilitate this facility andconcluded that its rehabilitation was uneconomical. Following a series of consultativemeetings and discussions with all the stakeholders in the sub-sector and the BankGroup, they recommended the strengthening and expansion of not only the marketing

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outlets but also the production and processing aspects of the pig industry in Kenya.There is however no record to justify that the project was identified and preparedbefore being appraised. The project programmed for a midterm review and formonitoring and evaluation through the assistance of a short-term consultant who wasnever recruited.

3.1.5 The formulation of the project lacked a Logical Framework Matrix and noprovision for a baseline study, and so did not facilitate its management andmonitoring. The project design did not carry out an adequate analysis of theinstitutional and managerial strengths and weaknesses. Another deficiency of theproject design was the setting up of two independent institutions without adequatemechanisms for collaboration to manage the technical and financial components ofthe project. Still, another deficiency was the fact that the project was designedprimarily to respond to the tourism industry, which depends heavily on goodgovernance and prevailing security situation the country. These deficienciescontributed to the delay in project implementation arising from over ambitious targetsset at appraisal and over-estimation of the capacity of the Borrower to deliver bothfinancial and technical services to the small-scale producers and processors. Delays inimplementation also arose from delays in procurement of goods, works and servicesand disbursement of loan proceeds due to the both the inadequate understanding of theBank’s rules and procedures for procurement and disbursement by the Borrower andthe Bank’s lengthy internal approval procedures. This situation was compounded bythe fact that the project was never launched. The Bank subsequently offered trainingto some of the project staff in the Bank’s rules and procedures, but still this did notimprove the situation.

3.2 Project Appraisal, Negotiation and Approval

3.2.1 A team comprising a Livestock Specialist, an Agricultural Economist and aFinancial Analyst carried out the appraisal of this project in February 1992. Theappraisal mission was fairly constituted considering the issues that needed to beaddressed at appraisal.

3.2.2 The project was formulated and appraised with the participation of theBorrower and taking into consideration the borrower’s capacity to manage the projectand to adopt the proposed technology. The project was submitted to the ADF Board ofDirectors for consideration and the Board approved a loan of UA4.61 million forKenya on 24 June 1992. The loan was signed on 17 November 1993 and was declaredeffective on 18 January 1996, about two years after loan signature.

4. PROJECT IMPLEMENTATION AND COSTS

4.1 Effectiveness and Start-up

4.1.1 The project had five loan conditions precedent to the entry into force, namely,(i) the Borrower shall have concluded a subsidiary loan agreement with

AFC for on-lending the credit component of the loan at a rate thatcovers the Fund service charge of 0.75%, Government handlingcharges of 1.25% and exchange rate fluctuations risk of 4.0%;

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(ii) the Borrower shall have caused the AFC to on-lend the sub-loans at12% per annum for loans on pig production and 14% per year onprocessing loans. These rates shall be reviewed from time to time inconsultation with the Fund;

(iii) the Borrower shall have caused AFC to submit for the Fund’s reviewthe audited financial statements for the financial year 1990/91;

(iv) the Borrower shall have undertaken to make suitably qualifiedextension staff available for the implementation of the project; and,

(v) the Borrower shall have caused Ministry of Livestock Development toappoint a Project Coordinator whose qualifications and experienceshall be acceptable to the Fund.

4.1.2 The loan conditions were fulfilled in November 1995 and the loan wasdeclared effective on 18 January 1996, about two years and two months (about 26months) after date of signing the loan agreement, which was 17 November 1993. Thedelay in fulfilling the loan conditions was responsible for the delay in declaring theloan effective. The conditions i and ii above took almost two years to be fulfilled asAFC did not want to treat some farmers with preference because all their loans aregiven to farmers at an interest rate of 20%, while those proposed by the project were12% for farmers and 14% for processors (see Government PCR). Consequently, ittook them over two years to agree to sign the subsidiary loan agreement.

4.1.3 From effectiveness to first disbursement of funds for credit, it took almost 5months and about 25 months for second disbursement of funds for institutionalsupport. As a result, the project suffered from a late start-up of about 31 months forcredit facility and almost 56 months for the institutional support. This late start-upwas also due to GoK withholding funds disbursed by the Bank to the Special Accountof the AFC for up to one year before releasing them. Such delays led to majordepartures from the implementation schedule and erosion in the number of potentialproject beneficiaries due to the slump in pork market and price inflation affecting thecosts of inputs into the project.

4.2 Design Modifications

4.2.1 During the life of the project (1996-1999), there were major changes both inthe design and scope of the project. As a result of the late start-up and other factors,two components of the project were canceled and changes introduced in the creditfacility and institutional support as follows:

4.2.1.1 Rehabilitation of Wambugu Training and Breeding Center: As indicatedin para. 2.3.4 this Center was to be rehabilitated for the training of pig producers andprocessors as well as extension staff and for the production of replacement breedingstock. However, because of delay in the tendering process, both the GoK and theBank agreed to cancel it and re-allocate the funds to the credit facility for on-lendingto ten carefully selected interested pig breeders for the production of high qualitybreeding pigs. The decision to drop this component was poorly conceived, as it failedto recognize the complexity and standards required in breeding for high quality pigs.

4.2.1.2 Provision of Technical Assistance: As indicated in para 2.3.5 a technicalassistance was to be supported to provide assistance in training of extension staff and

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pig producers and processors (12-person months) and in designing software forhandling project data (short-term). However, because of delay in the tenderingprocess, both the GoK and the Bank agreed to cancel this component in order to allowfor smooth closure of the project. The decision to cancel this component deprived theproject of the opportunity to benefit from expert assistance, which was judged to beabsolutely essential at appraisal.

4.2.1.3 Credit Scheme: The Bank approved modifications in the loan amounts fromKsh 50,000 to Ksh 370,000 (UA 9,086.89) for small-scale pig producers and fromKsh 5.5 million to Ksh 11.6 million (UA 284,886.29) for small-scale pig processors.These changes were prompted by high costs of inputs. Similarly, the correspondinglending rates were also revised upwards from 12 to 14% and 14 to 16%. The decisionto revise the interest rates was however not consistent with loan condition (see para.4.1.1 (ii)), which required the Fund to be informed of such changes. The type andnumber of credit beneficiaries were also modified to include six feed processors andten pig breeders so as to address the problem of high cost of feed and lack of qualitybreeding stock.

4.2.1.4 Training: As indicated in para 2.3.3, two staff members – production officerand a veterinarian - were to undergo a six-month short-term training abroad in pigproduction and disease control, respectively. However, during projectimplementation, only the production officer underwent a Masters’ degree training inpig production in the UK and six extension workers attended short-term training invarious aspects of pig production in the Netherlands.

4.3 Implementation Schedule

4.3.1 The implementation schedule was revised in December 1997 (Annex Table 3)because of the time it took for the loan to become effective. The preparation oftenders for the procurement of vehicles and equipment only started in 1996 whilethose for civil works and consultancy services did not commence until 1997 and thosefor drugs, vaccines, feeds, sows and boars only started in 1998. The granting of creditstarted immediately after receiving the first disbursement in 1996 while the training offarmers and extension staff did not start until 1998 when it received financial supportfrom the Bank. External training did not start until 1997. Although the project hadbudgeted for a midterm review about two and half years after loan effectiveness, thiswas never conducted, probably because of the decision to close the project soon afterloan effectiveness. The delay experienced in implementing the project in accordancewith the implementation schedule was due to the late start up, weak coordination ofproject activities, poor appreciation of Bank’s procurement rules of procedures andslow disbursement of funds.

4.3.2 The final disbursement deadline for the project was modified from 31December 1998 to 30 June 1999 and again to 31 December 1999. The revision wasmeant to enable the project to wind up smoothly.

4.4 Reporting

4.4.1 According to the Appraisal Report, two separate accounts were to be operatedone for credit component under AFC management and the other for the technical

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components of the project such as institutional support, breeding and technicalassistance. Similarly, monitoring and evaluation and reporting of the creditcomponent was the responsibility of Livestock Credit Division of the AFC, while thatof the technical component was to be done by the Division of Animal Production ofthe MOARD. The project was to recruit a short-term technical assistance to assist indeveloping M& E indicators and guidelines for the Management Unit. The consultantwas never recruited and so the services were never provided.

4.4.2 Submission of annual work plans and budgets, quarterly progress reports andannual audit reports of the project to ADF are conditions within the loan agreement.Thirteen (13) quarterly progress reports were prepared and submitted during the lifeof the project. The timely submission of these reports and their contents weresatisfactory.

4.4.3 One audit report was prepared and submitted by the AFC, while the PIU neversubmitted any audit reports on the project accounts during the life of the project. It isimportant to note that funds for institutional support were only received in July 1998.The project never prepared any annual work plans and budgets. The performance ofthe project in this regard was unsatisfactory.

4.4.4 The Borrower’s PCR was only completed and forwarded to the Bank afterrepeated interventions (copy attached). There was no monitoring and reporting systemas far as project activities per se were concerned due to the absence of an M&EOfficer in the PIU. The project design did not foresee this position.

4.5 Procurement of Goods and Services

4.5.1 Consulting Services: The technical assistance was to be procured by shortlistof qualified consulting firms from ADF member countries in accordance with ADFguidelines for the use of consultants. The recruitment process started in June 1997 andcontract was awarded to Base Consulting Services. Because of a technicality in theevaluation report (Danagro Advisers were more qualified and more experienced thanBase Consulting Services), the Bank did not approve this report. As indicated in para4.2.1.2, both the Borrower and the Bank agreed to discontinue the recruitment processin view of the eminent closure of the project.

4.5.2 Works Contracts: The rehabilitation works was to be procured by nationalcompetitive bidding in accordance with ADF procurement rules of procedures.Drawings and tender documents were prepared and approved in July 1997. Asindicated in para 4.2.1.1, both the Government and the Bank agreed to cancel the civilworks and transfer the funds to the credit component for on-lending to ten interestedand qualified pig breeders.

4.5.3 Goods: The procurement of 100 breeding sows and 8 boars by limitedcompetition was canceled as the civil works component was also dropped and thefunds re-allocated to the credit component. The procurement of vehicles,microcomputers and accessories, motorcycles, processing equipment and veterinarysupplies by national competitive bidding was delayed. The delay was due to non-compliance with the Bank’s procurement rules of procedures. Most of these itemswere subsequently reduced to the basic minimum (1 vehicle, 2 microcomputers, 28

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motorcycles, 1 photocopier and 2 printers) needed to complete the essential activitiesof the project and facilitate its orderly closure. In addition, their mode of procurementwas changed to United Nations IAPSO because of time constraints. Following anagreement with the Bank, the GOK engaged the services of UN IAPSO to supplythese items, which were procured and delivered after the project had closed on 31December 1999.

4.6 Project Costs

4.6.1 The total cost of the project at appraisal in 1992 was estimated at FUA 5.80million (UA 5.34 million at a rate of 1 FUA = 0.921052 UA), of which the local costwas UA 3.22 million (Ksh 131.26 million).

Table 3. Summary of Project Cost Estimates as at Appraisal

ComponentUA (million)

FE LC TotalKsh (million)

FE LC Total %FECredit 1.30 2.13 3.43 52.88 86.63 139.51 40Institutional. Support 0.12 0.43 0.55 4.87 17.63 22.50 22Breeding 0.11 0.04 0.15 4.50 1.50 6.00 75TA 0.26 0.02 0.28 10.50 0.75 11.25 93Base cost 1.79 2.62 4.40 72.75 106.51 179.26 40Physical cont. (10%) 0.17 0.26 0.43 7.13 10.50 17.63 40Price cont. (4%). 0.16 0.35 0.51 6.38 14.25 20.63 31Total cost 2.12 3.22 5.34 86.26 131.26 217.52 40

4.6.2 At the time of the PCR mission, the actual costs of the project as originallydesigned was UA 1,963,237.07 (42.63%), with the foreign cost being UA148,625.44(7.57%). The modifications in the scope and design of the project did not change thetotal project costs as most of the funds were transferred to the credit component. Notethat actual project costs by expenditure schedule are outlined in Annex Table 5. Themajor reason for the low disbursement was the delay in replenishing the specialaccount of the credit facility with Ksh 80 million (UA 1.96 million at a rate of 1UA =Ksh 40.718) and the institutional support with Ksh 15,712,380 (UA 385,882.90).

4.7 Sources of Finance and Disbursement

4.7.1 Sources of Finance: As depicted in Table 2 the ADF was to finance 86.3% ofthe loan amount while GOK was to provide the balance. In terms of actual expenses,ADF and GOK spent UA1.96 million and UA 0.68 million, respectively. The actualexpenses by source and schedule are shown in Annex Table 6.

4.7.2 Disbursement: Generally, the disbursement lagged behind schedule set atappraisal. At appraisal, it was estimated that FUA 2.8 million (UA 2.58 million) willbe expensed in the first year of the project. Actual disbursement was only UA 0.66million. The same applied in year two with actual expenditure being UA 0.26millionas compared with FUA 1.05 million (UA 0.97 million). Also, disbursement was madesome three to seven months after request by the GoK. In one case the delay was dueto the submission of insufficient justification by the GoK, while in another case thefunds disbursed by the Bank were released but in bits and in six-month intervals toAFC by the Central Bank. In another situation, the ADF deliberately withheld Ksh 80million replenishment to the credit facility because of concerns about the slump in the

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pork market. Besides, the project documentation system was generally inadequatebecause of the poor accounting system and internal controls in place.

5. PROJECT PERFORMANCE AND RESULTS

5.1 Overall Assessment

5.1.1 The project took long to become effective and this delay had negativeconsequences on its performance and financing. This is reflected in the price inflation,the slump in the pork market, the decline in the number of beneficiaries, the default inloan repayment and the modification in the scope of the project. The adherence totime and cost schedules was therefore problematic and highly unsatisfactory.

5.1.2 The delay in procurement of goods, works and services due to non-respect ofBank’s rules of procedures and the subsequent cancellation of most of these activitiesimpacted negatively on the project performance. It was only in June 1999 that the UNIAPSO was requested to supply a four-wheel drive vehicle, 28 motorbikes and officeequipment for the PIU and 28 extension workers. This delay substantially affectedproject performance by limiting communication and mobility. The cancellation in thetechnical assistance and civil works at Wambugu meant that the beneficiaries andextension staff could not receive quality training.

5.1.3 The institutional support only received UA150,269 (22%) of its allocationalthough MOARD assigned 28 extension workers to assist the pig farmers andprocessors as provided for in the appraisal report. Because of limited flow of fundsand lack of logistics, extension delivery was not equally successful in all the districts,although institutional support was strengthened with the supply of 28 motorcycles andsix extension workers trained for six months each overseas. However, this trainingand supply of mobile logistics only arrived towards the close of the project. Thisproblem was further compounded by weak coordination between the technical andfinancial implementers.

5.1.4 The credit component only received UA 1,865,990 (43.7%) of the total amount(UA 4.27 million) allocated to it. It has on-lent about UA1,862,900 of this amount toabout 288 pig producers, of which UA272,560.51 was in repayment arrears, giving adelinquency rate of 29% and a recovery rate of 71%. The recovery rate is far belowthe best practice standard of 95% and so the performance of the credit is notsatisfactory. The poor delivery rate has been attributed to the late establishment (31December 1999) of new AFC Board to approve loans of over UA9,086.89 and delayto replenish the AFC Special Account with UA 1,964,733 by the ADF.

5.1.5 Reporting was not completely satisfactory because of either delays in auditingor no auditing at all. Monitoring and evaluation were non-existent, hence, thedifficulty to disagregate physical achievements of the project from the ordinaryactivities of the MOARD in the districts. Therefore, the overall projectimplementation performance was unsatisfactory (Annex Table 14).

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5.2 Operating Results

5.2.1 Objectives: The objective of increasing the availability of white meat in themarket was achieved. This is reflected in the decline in the price of pork in themarket. In fact, 76,091 out of a targeted 140,000 pigs, representing 54.3%achievement, and 3,195 tons out of 7,840 tons of white meat, representing 40.7%achievement, were produced in the life of the project However, the objective ofincreasing the income of smallholder pig producers and processors was notcompletely achieved. The income of pig producers increased only about 11.7% overthe life of the project. The low performance was as a result of the slump in the porkmarket due to the collapse in the tourism industry and the price inflation due to thedelay in declaring the project effective. The delay in granting credit to the pigprocessors did not help the situation of the pig producers either. The objective ofincreasing the supply of high quality pigs was never even attained as the facilities(rehabilitation of training and breeding center, the importation of 100 sows and 8boars, the provision of technical assistance) necessary to assist in the generation ofimproved pigs were canceled.

5.2.2 Credit Availability: About 288 smallholder pig producers out of 553 targetedactually benefited from the credit, giving an achievement of 52.0%. About UA1,862,900 of the total amount of credit (UA 2,076,906.85) approved for disbursementby the AFC Board was on-lent to pig farmers. The available profile of 263 of the 288credit beneficiaries shows that 221 owned at most 5 sows, 41 owned between 6 and10 sows and only 1 owned over 10 sows compared to expected figures in AnnexTable 7. The AFC was only able to achieve a recovery rate of 71%, which is far belowinternational standard as indicated in para 5.1.4. Therefore, the performance of theAFC in managing the credit was not satisfactory.

5.2.3 Institutional Support: Although the project was able to train a pig specialistand six extension workers overseas, the delivery of extension messages was notequally successful in all the project districts. This was primarily because of limitedtransport logistics in the districts coupled with the cancellation of the technicalassistance and the rehabilitation of training and breeding center.

5.2.4 Socio-economic Benefits: The project beneficiaries benefited from the projectas reflected in their annual profit margin per pig farmer estimated at Ksh 111,200(UA2,730.98). The re-estimated internal rate of return was only 11% compared to thatat appraisal of 29%, which may be attributed to the absence of high quality pigs andthe collapse in the pork market in the early years of the project, coupled with thecancellation of technical assistance.

6. INSTITUTIONAL PERFORMANCE

6.1 Management and Organisational Effectiveness

6.1.1 The organisational structure has not changed since the inception of the projectalthough the name of the executing agency has changed (see para 1.4). The overallresponsibility for implementating the project rested with the MOARD. TheDepartment of Livestock Production in the MOARD was to oversee theimplementation of the technical components while AFC was to be in charge of credit

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component. A project steering committee (PSC) was established during the life of theproject under the chairmanship of the Permanent Secretary, MOARD to providepolicy and leadership guidance to the project. A loans committee was also establishedin each of the project districts during the life of the project with representatives fromAFC and MOARD to appraise and recommend credit beneficiaries for approval andto ensure effective collaboration between the two implementers. Also to consolidatethis collaboration, three workshops were organised with the participation of AFC andMOARD.

6.1.2 The project suffered from weak coordination resulting in slow implementationof decisions as reflected in the delays in applying Bank’s rules and regulationsregarding procurement and disbursement and weak staffing caused by delays inrecruiting technical assistance and accounts clerk. The project implementation unit(PIU) was not adequately equipped to enable it function efficiently - it lacked directcommunications facilities (fax machine, photocopier, direct telephone line, computer).The supply of computer, fax machine and photocopier was delayed until the lastmonths of the project due to procurement difficulties. Besides, the lengthy andunwieldy communication network (Ministry of Finance <–> MOARD <–> PIU)between the project and the Bank, coupled with the in-built delays in relayingmessages, only compounded the problem of communcication and decision-making inthe project. Also the fact the coordinator did not have the authority to approveexpenditures in the project contributed to the slow flow of funds to the districts.

6.1.3 The project also suffered from a lack of coordination between its technical andfinancial (credit) components. As a result, support for credit beneficiaries laggedbehind credit granting by AFC leading to substandard houses for pigs. Secondly, thecredit to pig processors also lagged behind that for pig producers. Consequently,many credit beneficiaries produced a lot of pigs which they could not sell, especiallyduring the period of the slump in pig prices in the market. To ensure efficientcoordination of the technical and financial assistance to the project beneficiaries, itwas agreed that a loans committee be set up in each district. It was also agreed thtregular contacts be initiated between the AFC and PIU. It was also agreed with theBorrower that the PSC meet regularly to provide leadership guidance to theimplementers of the project.

6.2 Staff Recruitment, Training and Development

6.2.1 The project was adequately staffed by the MOARD with coordinator, pigspecialist, pig breeder, accounts clerk, livestock assistant, a secretary and threedrivers. The coordinator was there from start to end of project while the accountsclerk was recruited following Borrower’s request during the last two years of theproject. He was terminated just before arrival of PCR mission. The pig breeder diedtwo years before project termination. Two of the drivers were transferred after 1997.It is important to note that staff turnover since project inception in 1993 has beenrelatively low.

6.2.2 The pig specialist received a Masters’ degree training in the UK. Six field staffattended a short course on pig production, processing and marketing in theNetherlands. The project lacked a veterinarian. Also the project formulation lackedsome key staff such as an M&E officer, a gender specialist, pig processing specialist

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and pig marketing expert. The technical assistance that was intended to assist in thetraining of staff locally was canceled. Consequently, very few workshops wereorganised for local staff training.

6.3 Performance of Consultants, Contractors, and Suppliers

6.3.1 Performance of Consultants: As indicated in para. 4.5.1, the recruitment oftechnical assistance was canceled.

6.3.2 Performance of Contractors and Suppliers: As pointed out in para. 4.5.2,the project did not engage the services of any contractors for the civil works atWambugu. The procurement of a vehicle, 28 motorcycles, a photocopier, and micro-computers and accessories was delayed (para. 4.5.3) but still UN IAPSO executed thiscontract without delay and to the satisfaction of the GoK. They therefore performedcreditably well.

6.4 Fulfilment of Loan Conditions/Covenants

6.4.1 The Government fulfilled all conditions prior to entry into force of the loanwhich was declared effective on 18 Janaury 1996. Although there was compliancewith all the loan conditions with the exception of transforming AFC into anautonomous and economically-oriented banking institution, the process was veryslow.

6.4.2 The delay in the fulfilment of the conditions precedent to entry into force ofthe loan was due to some misunderstanding between the technical and financialimplementers over interest rates to charge for loans to the beneficiaries. Consequently,the implementation performance was highly unsatisfactory.

7. FINANCIAL AND ECONOMIC PERFORMANCE

7.1 Financial Performance

7.1.1 At appriasal, the Internal Rate of Return (IRR) of the meat processing plantwas estimated at 37 percent. As at the project completion report mission date, no meatprocessing plant had benefitted from the project. Therefore, there is no data fromwhich to compute the actual IRR of the plant.

7.1.2 Data on the profit margin of farmers is scanty because of the poor recordkeeping. However, cost and revenue estimates from farmers were Ksh 3,800 (UA93.32) and Ksh 6,580 (UA 161.60), respectively, producing a profit per animal ofKsh 2,780 (UA 68.27).

7.1.3 Average annual sales per pig farmer of 5 sows is about 40 porkers, assumingthat each sow produces on average 10 piglets and farrows twice a year. Accordingly,the annual profit margin is about Ksh 111,200 (UA 2,730.98) per farmer. This is as aresult of the reduced mortality rate, use of improved feed (supplied by FarmersChoice to its contract farmers), and reduced transportation cost (as Farmers Choicecollected pigs from contract farmers’ premises), among others.

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7.2 Economic Performance

7.2.1 The essence of re-estimating the economic rate of return (EIRR) at project closureis to determine whether the project produced the desired effects anticipated at appraisal.The level to which this agrees with the appraisal estimate is an indication of projectperformance. At appraisal, it was anticipated that the project would produce incrementaloutput amounting to 140,000 pigs and 5,900 tons of pig meat based on an offtake of 60%a dressed carcass weight of 70 kg at the end of the investment phase (i.e. PY5). Thisexpectation was predicated on effective training of farmers, efficient input deliverysystems and improved pig husbandry practices. The main thrust of project initiative was asmall-scale credit scheme, designed to empower pig farmers to expand stock andpurchase additional inputs. The project was however, implemented for only three and halfyears and given the circumstances under which this occurred, it was only able to achievea production level at project closure of 76,091 pigs and 2,496 metric tonnes of meat(Annex Table 8)

7.2.2 Pig products are considered as non-traded items as there were no records ofexport of pork products. The economic prices of pigmeat were determined by shadowpricing with the standard conversion factor of 0.82. Production costs were based onaverage value per stock (Annex Table 9). Credit costs were taken as part ofproduction costs as stated in the appraisal report. To make the re-estimate comparablewith the appraisal estimate, both current costs and prices were deflated to 1992constant prices (Annex Tables 10 and 11). Estimation of benefits was based onnumber of pigs that were slaughtered, and thus marketed, as assumed duringappraisal. The projected level of benefits was based on 1992 constant prices. Theeconomic net benefits at project level based on the values of investment andproduction costs are shown in Annex Table 12. The re-estimated EIRR and NPV aregiven in Annex Table 13. Net benefits after deduction of project costs have beendiscounted at 12% over a 20-year project life with the assumption that project costswould maintain current output levels.

7.2.3 On the basis of the above scenario, the re-estimated EIRR was 11%, which ismarginally below the market cost of capital. It is however much less than the EIRRestimate (29%) at appraisal. There is every indication that had efforts been made toimprove the marketing of pigs, the rate of return would have been better. Note that theestimation was limited to only those benefits, which could be quantified withavailable data. It is also worth noting that the project was appraised in 1992 buteffective implementation did not commence until 1996. But before then, the PIU wasin place and was partially implementing project activities using GoK funds (WithoutProject Situation). In other words, these values could have been exceeded had projectimplementation not experienced some problems and had all the data been madeavailable. However, necessary assumptions were made to take care of these problems.The collapse of the tourism industry during 1997/1998 was deemed to have alsoaffected the level of marketable surplus, resulting in the destruction of some pigs.

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8. SOCIO-ECONOMIC AND ENVIRONMENTAL IMPACT

8.1 Socio-economic Impact

8.1.1 The increase in availability of white meat in the market meant that thepopulace could have access to cheap meat, thereby contributing to improved foodsecurity. Higher pig productivity translates to higher living standards and expandedeconomic capacity, spurring further growth. Overall the income of projectbeneficiaries was estimated at Ksh 55.4 million (UA 1,360,577.63) at an offtake rateof 53% compared to the figure at appraisal of Ksh 334 million (UA 8,202,760.45) at arate of 60%. Some of the young pig farmers were able to procure vehicles andpurchase land in choice places, thereby improving their standard of living as a resultof their involvement in the project. Still others were able to make a turnover of aboutKsh200,000 (UA 4,911.83) a month.

8.1.2 The project also contributed to employment creation as reflected in the numberof butcheries and pig-meat restaurants in and around the urban and peri-urban centersin the project area. These results suggest that the project may have contributed topoverty reduction in Kenya. Additionally, the project contributed to a re-vitalizationof the pig industry in Kenya, improved delivery of extension messages and improvedpig husbandry skills amongst the farmers and staff of the MOARD.

8.1.3 The project planned to put major emphasis on the participation of women pigproducers in the credit component. According to the Appraisal Report, AFC has apolicy of lending to women cooperatives to avoid the problem of lack of collateral,which is an impediment to the womenfolk getting credit from financial institutions.Unfortunately, there was no emphasis by AFC on extending credit to sub-projects bywomen groups. Consequently, very few women actually benefited from the credit. Infact, only about 41 of the 288 credit beneficiaries (about 14%) were women whobenefited from about UA 304,201.75 of the total loan disbursed.

8.2 Environmental Impact

At appraisal it was noted that AFC has satisfactory guidelines and checklist forassessing the environmental impact of subprojects proposed for financing. In addition,the Bank was to give its environmental policies and guidelines to AFC to reinforcetheirs. It was indicated that sub-projects with negative environmental impacts duringappraisal should have mitigating measures included in the cost estimates or elsealternative measures recommended to the beneficiaries to address such an adverseeffect. Despite the measures, it was observed that some of the pig houses weresubstandard. Mitigating measures were recommended to redress the situation.

9. PROJECT SUSTAINABLITY

9.1 Financial Viability

9.1.1 Financial viability is the ability of an institution to meet the needs of itsclientele without reliance on external assistance. If an institution hopes to provideassistance over the long term then financial viability is critical. Based on availableevidence, the long term viability of the institutional support component of the project

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is highly questionable. Project staff have already been integrated within the MOARD.Project has no income generating components and without direct government support,it will not be viable. In this regard, the Government has already budgetedKsh55,810,160 for extension and training within the 2001-2003 three-year rollingplan for this project. Already, project assets e.g., vehicle and Motor cycles, computers,photocopier,and printers, have been assigned to the GoK.

9.1.2 The AFC is still part of the Government. To that respect, it will continue tosurvive. As regards the Line of Credit managed by the AFC, the current recovery rateis 71%. With an average loan period of two years, a 71% recovery rate translates intoa 29% loan loss rate, suggesting that the total portfolio will be lost in about sevenyears after 31 December 1999 if no more resources are injected into the fund. In fact,a review of the figures as at 31 August 2000 revealed that the loan recovery rate hasreduced to 70%, thus implying that the total portfolio will disappear within six years ifthere is no further injection of funds from outside.

9.2 Post Project Flow of Benefits

9.2.1 Although current assessment shows that the Project may be capable ofcontinuing to sustain and consolidate the gains made so far, post project investmentphase, the capacity to maintain project facilities - vehicle, motor cycles, computers,photocopier, printers, etc. without reliance on external assistance is poor. Thebreeding component that would have been generating income was closed down.However, to be able to remain on this critical path, new blood must be injected intothe management of the project in terms of staff that possess the skills, drive and visionto make things happen. The stakeholders must be carried along in a participatorydevelopment approach.

9.2.2 The facilities earmarked for the project were not provided during projectinvestment phase, but with determination and the political will to perform, theborrower should be able to provide and maintain the required facilities especially atthe Wambugu Training Center. Funds under the credit component are still revolvingand with improvement in recovery rate, credit to the pig farmers and processors wouldnot be a constraint. The staff members of the project have been reabsorbed in theMinistry of Public Service, indicating that recurrent budget requirements will not poseany problem.

10 PERFORMANCE OF THE BANK AND BORROWER

10.1 Performance of the Bank

10.1.1 The Bank performance in the implementation of the project has been mixed.At the project formulation stage, the Bank responded with a balanced team of expertsto the needs of the GoK. The Bank adequately interpreted the objectives andjustifications of the project and sought the assistance of the FAO Investment Centre atentry to ensure that these were consistent with the sector goals of the GoK. The Bankalso responded to the needs and problems of the project during implementationsatisfactorily by fielding supervision missions regularly. In fact, a total of 8 missionsvisited the project. According to the GoK (see Government PCR), the Banksupervision missions were useful and of goo quality, especially as they were helpful

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in addressing some of the implementation problems of the project, considering thatthe Bank Group does not have a presence in Kenya and communication has beenproblematic between the Fund and the project. Some of the problems requiredstructural changes and so could not be solved during the life of the project such asseparating project funds from other Government funds flowing to the districts.

10.1.2 However, the skills mix of the supervision missions was always not sufficientto address the technical and financial problems encountered by the project. Forexample, the missions lacked micro-finance expert and gender specialist. Hence, theproblems related to this specialist disciplines were not adequately addressed. Theappraisal mission did not adequately examine the capacity of the GoK to handle theaccounts of the project- especially the accounting system and control measures put inplace to ensure transparency and accountability. The supervision missions identifiedthis constraint during project implementation and raised it each time but the GoK wasincapable of doing any thing to resolve it. The Bank should have been proactive inaddressing the problems of non-submission of audit reports and work plans.

10.1.3 The majority of the disbursed funds went to the AFC but it only submitted oneaudit report to the Bank. In this regard, the Bank should have been more proactive.During appraisal, the Bank’s review of the line of credit with the AFC only focusedon the quality of its portfolio of loans as measured by the delinquency ratio.However, the sustainability of this line of credit is highly dependent on the quality ofthe loans. Although delinquency ratio is also used by in the management of funds,the risk to the Bank and to its funds is much higher with the institution that managesthe funds rather than the small borrowers who normally want to repay their loans inanticipation for repeat lending. The Bank therefore did not adequately analyse thegovernance structure of the AFC nor did it analyse the consequences of anindependent management of the credit component, which is an integral part of theproject . The performance of the Fund in this regard was therefore unsatisfactory.

10.1.4 Although Midterm Review of the project after two and half years wasbudgeted for, it was never implemented because of the delay in declaring the loaneffective and the imminent closure of the project soon after take-off. Consequently,decisions were taken to cancel two components of the project and to modify its scopewithout proper analysis.

10.1.5 Besides these shortcomings, the Bank was rated as satisfactory based on theconduct of the appraisal and supervision missions (Annex Table 15).

10.2 Performance of the Borrower

10.2.1 The Executing Agency was the Department of Livestock Production inMOARD. The performance of the Executing Agency is reflected in the frequency ofthe meeting of the PSC and the decisions taken during such meetings and how thosedecisions were implemented to ensure the smooth execution of the project. This bodymet only three times since its creation and yet the project was suffering from weakcoordination especially between its technical and financial implementers. TheDepartment of Livestock Production was responsible for assigning qualified andseasoned staff to manage the technical components of the project It did just that butfailed to sufficiently empower the project coordinator to provide the expected

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services. As a result, the project coordination was weak. The performance of the GoKin this respect was therefore unsatisfactory.

10.2.2 The project suffered from liquidity problems in the districts because financialresources from various donors were pooled and managed together. Several Bankmissions recommended the separation of these funds to no avail. Secondly, The GoKdelayed releasing funds earmarked for the AFC Special Account for on lending toproject beneficiaries. This slowed down the start-up of the project and so affected itsoverall performance. In addition, the GoK did not follow the Bank’s rules ofprocedures for procurement of goods, works and services as reflected in itsunsuccessful attempts to procure contractors for civil works, services of a technicalassistance and supplies for the project. As a result, the project suffered considerablybecause of lack of the necessary resources (materials, human and financial) to move itforward. The GoK was therefore rated unsatisfactory in this regard.

10.2.3 The AFC was in charge of the credit facility, which represented about 88% ofthe loan proceeds. The performance of the AFC regarding loan administration andrecovery was not satisfactory. The AFC delayed administering credit to processorsbecause of the late constitution of its new Board to approve sub-loans of over Ksh200,000 (UA 4,911.83) as per its lending procedures. The managerial performance ofthe AFC was also not satisfactory. The relationship between the AFC and theMOARD remained poor despite efforts (e.g. setting up loans committees with theparticipation of AFC and MOARD, workshops, etc.) at smoothening it and so affectedthe smooth implementation of both the technical and financial components of theproject.

10.2.4 The prolonged process in the fulfillment of loan conditions delayed loaneffectiveness. This delay led to a series of other problems like price inflation andslump in pork market when the loan finally became effective. Overall therefore theGoK performance in the project implementation was not satisfactory.

11. CONCLUSIONS, LESSONS LEARNT AND RECOMMENDATIONS

11.1 Conclusions

The Livestock (Pig) project in Kenya suffered from cash flow problems as reflected inthe low disbursement rate of 42.63%, procurement problems as reflected in thecancellation of two of its major components – training and breeding center andtechnical assistance and the late supply of vehicles, computer equipment, andmotorcycles. Consequently, the extension component suffered a major setback. It wasunable to provide quality training to both the farmers and its staff as previouslyenvisaged. The credit facility also suffered from cash flow problems although it wasable to avail about 288 households with credit to improve their socio-economicwellbeing by investing in pig production. The project was however able to re-vitalizethe pig industry in Kenya and to generate employment in such areas as butchery,restauration, pig husbandry, etc. in the project area. In addition, it was able to increasethe availability of white meat in the market in Kenya. A number of people receivedtraining in pig husbandry and should therefore continue to support the industry togrow and sustain itself. The objectives of the project were realistic and the project was

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quite focused but the lack of commitment on the part of the GoK thwarted all effortsat achieving results, including close supervision by the Bank.

11.2 Lessons Learnt

There are several important lessons from this project:

11.2.1 Lending Collateral: The collateral system attached to formal lendinginstruments still hinders access by the poor to credit facilities, necessitating a need forthe application of non-formal credit systems or a combined of both systems in projects(para. 8.1.3).

11.2.2 Weak Institutional Analysis: The outcome of the project/programme can becompromised without careful planning and in-depth analysis of the weaknesses andstrengths of the institutions in the borrower’s country (para. 6.1.2). Such a careful andelaborate analysis should be accompanied by measures to address any weaknessesduring project implementation.

11.2.3 Complexity in Projects: Even though this is a single commodity project, theassumption of easy implementation has been was shown to be incorrect (para. 6.2).The lesson is that both the Donor and the Borrower should demonstrate greatercommitment to every project.

11.2.4 Institutional/Implementation Arrangements: Where project management isassigned to two or more independent institutions such as the technical and financialinstitutions, provision should be made for sound co-ordination mechanisms through amemorandum of understanding that would minimise conflict management andpromote smooth project implementation (para. 6.1.3).

11.2.5 Poor Governance: Project implementation is likely to suffer from poorgovernance such as political instability or prevailing insecurity if good governanceissues are not taken into accountant during project formulation (para. 1.4).

11.2.6 Credit sustainability: Lending rates in the micro-finance components ofprojects ought to be determined by market rates rather than fixed at lower rates (para.4.1.2). This does not provide for sustainability and operational effectiveness of theprojects.

11.3 Recommendations

For the Fund

11.3.1 Provide sufficient funds to improve quality at entry through early and carefulplanning of the National Livestock Development Programme to incorporate all theelements necessary for a rigorous evaluation of the project impacts such as baselinestudy, monitoring and evaluation, etc.

11.3.2 Ensure that supervision missions adequately staffed with the appropriate skillsmix and that they are capable of providing immediate solutions to operationalproblems in the field.

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11.3.3 Review critically all loan conditions as well as keep them to the barestminimum to ensure their timely fulfilment in order to minimise delays in loaneffectiveness.

11.3.4 Avoid designing a project with two independent institutions to manageseparate components without a Memorandum of Understanding on the co-ordinationmechanisms.

11.3.5 Examine the option of opening a country office in Kenya to speed upcommunications and decision-making or strengthen the ADB Desk Office in theMinistry of Finance.

11.3.6 Streamline the procurement process especially the approval stages to reducethe time of procurement of goods, services and works.

11.3.7 Advise the Borrower to cancel the remaining loan balance.

For the Borrower

11.3.8 Improve on the political commitment shown during the execution of theLivestock (Pig) Project so as to create an appropriate enabling environment andregulatory framework for private sector involvement in the livestock sub-sector inKenya.

11.3.9 Encourage the producers and processors to form associations so as tocontribute to regulating the livestock industry and apply advocacy pressure on thedifferent players in the industry to apply fair market prices.

11.3.10 Improve on the financial arrangements for channeling project funds to theDistricts.

11.3.11 Encourage good governance in the form of political stability, participation,accountability and transparency.

11.3.12 Sustain the level of Government financial commitment to the Livestock (Pig)Project through regular provision of counterpart funding.

11.3.13 Continue to provide more training in pig production and processors to staff ofthe MOARD

11.3.14 Ensure the credit accounts are regularly audited and that the outstanding auditreports and management letters are finalized. In this regard, liaise with the AuditorGeneral’s Office to ensure the adequacy of the internal audit control system.

11.3.15 Ensure that more women benefit from credit in future projects on the basis ofpeer pressure rather than physical collateral.

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KENYAMAP SHOWING AREA AND AFC BRANCH OFFICES

This map was provided by the AfricanDevelopment Bank exclusively for the use ofthe readers of the report to which it isattached. The names used and the borders

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Annex Table 4. Implementation Schedule

Activity/Action

AppraisalStarting Date

ActualStarting Date

Loan Approval 05/1992 05/1992Loan Signature 09/1992 17/11/93Declaration of Loan Effectiveness 11/1992 18/1/96Preparation and submission of tenderdocuments for consultants’ vehicles

11/1992 Deleted

Preparation and submission of tenderdocuments for civil works

09/1992 Deleted

Award of contracts for civil works 01/1993 N/AArrival of Consultants 02/1993 N/ADelivery of Vehicles 03/1993 11/03/00Preparation and submission of tenders forsupply of breeding sows & boars

03/1993 Deleted

Award of Contracts for supply of animals 05/1993 DeletedPreparation of short- and long-term trainingprograms

05/1993 Deleted

Beginning of staff/farmers’ training 05/1993 DeletedProject Midterm Review UndoneEnd of Project & Preparation of PCR 06/1997 31/12/99

Annex Table 5. Expenditure Schedule by ComponentProject Years

Component 1995 1996 1997 1998 1999 TotalUA UA UA UA UA UA

Credit 657,298 1,007,044 1,664,342Institutional Support 199,127 199,127 258,278 153,357 170,555 982,044Total 199,127 856,425 258,278 1160401 170,555 2,646,386

Annex Table 6. Expenditure by Sources of FinanceProject Years

Source 1995 1996 1997 1998 1999 TotalUA UA UA UA UA UA

ADF 657,298 1,157,313 148,625 1,963,236GOK 199,127 199,127 258,278 3,088 21,930 683,150

TOTAL 199,127 856,425 258,278 1,160,401 170,555 2,646,386

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Annex Table 7. Project Profits by Category of FarmersBeneficairycategories

Number Projected profitfirst year (Ksh)

Projected profitlater years (Ksh)

5 Sows Farmers 276 21,064 60,03910 Sows Farmers 111 50,712 95,23715 Sows Farmers 111 60,064 222,18620 Sows Farmers 55 123,271 249,771Meat Processor 6 382,750 382,750

Annex Table 8. Incremental Production as a Result of Project Initiative

Year No. of pigs produced No. of pigs slaughtered Meat equivalent (MT)*

1996 7,238 4,342 3041997 14,838 8,903 6231998 22,818 13,691 9581999 31,197 18,718 1,310Total 76,091 35,654 2,496

*CDW = 70 kg (appraisal)

Annex Table 9. Production Cost Estimates

YearAverage unit cost

(KSh)Total no. of

pigs producedProduction cost

(KSh’000)Production cost(constant prices)

1996 1,037 7,238 7,506 3,6091997 766 14,838 11,366 4,9201998 3,000 22,818 68,454 27,8271999 3,800 18,718 118,549 46,490

Annex Table 10. Total Project Cost (KSh’000)

Year Investment cost(constant prices)

Production cost(constant prices)

Total projectcost (financial)

Total project cost(economic)*

1996 8,105 3,609 11,714 9,6051997 9,352 4,920 14,273 11,7041998 4,952 27,827 32,779 26,8791999 5,045 46,490 51,535 42,259

*Standard conversion factor = 0.82

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Annex Table 11. Economic Prices of Non-traded Pig Products (1992 Constant Prices)

Items 1996 1997 1998 1999

Domestic CPI deflators 2.08 2.31 2.46 2.55Current pork prices (KSh/kg) 65 68 70 94Economic prices of pork (KSh’000) 25.63 24.14 23.33 30.23Total pork meat production (MT) 304 623 958 1310Value of production (KSh’000) 7,792 15,039 22,350 39,601

Annex Table 12. Analysis of Net Benefit at Project Level

YearTotal project cost

(KSh’000) Total benefit (KSh’000) Net benefit (KSh’000)

1996 9,605 7,792 -1,8141997 11,704 15,039 3,3361998 26,879 22,350 -4,5291999 42,259 39,601 -2,658

Annex Table 13. Economic Cost-Benefit Analysis.Project Total project Total benefit Net benefitYear Cost (KSh’000) (KSh'000) (KSh'000)

1995 0 0 01996 9605 7792 -18141997 15803 15039 -7641998 26879 22350 -45291999 42259 39601 -26582000 38122 39601 14802001 38122 39601 14802002 38122 39601 14802003 38122 39601 14802004 38122 39601 14802005 38122 39601 14802006 38122 39601 14802007 38122 39601 14802008 38122 39601 14802009 38122 39601 14802010 38122 39601 14802012 38122 39601 14802013 38122 39601 14802014 38122 39601 14802015 38122 39601 14802016 38122 39601 1480

IRR 11%NPV (KES 582.77)

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Annex Table 14. Implementation Performance

Component indicators Score (1-4) Remarks

1) Adherence to time schedule 1 Delay exceeded 9 months2) Adherence to cost schedule 1 Disbursement less than 50%3) Compliance with loan covenants 1 Most covenants fulfilled4) Adequacy of monitoring andevaluation and reporting

1 Absence of M&E; quarterlyprogress reporting regular; auditreporting poor; PSC ineffective

5) Satisfactory operations (ifapplicable)

2 Promotion of local consumptionof pork

Total 6Overall assessment ofimplementation performance

1.2 Unsatisfactory

Annex Table 15. Bank Performance

Component indicators Score (1-4) Remarks

1) At identification Nil2) At preparation of project - Prepared by FAO Investment

Center3) At appraisal of project 3 Project lacked project matrix4) At supervision of project 3 Composition and time duration

sometimes inadequateTotal 6Overall assessment of Bankperformance

3 Satisfactory

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Annex Table 16. Project Outcome

Component indicators Score (1-4) Remarks

1) Relevance and Achievement ofObjectives(i) Macro-economic policy 2(ii) Sector policy 2(iii) Physical (inc. production) 3(iv) Financial 2(v) Poverty alleviation & social &Gender

3 Improvements in farmhousehold incomes

(vi) Environment 2 Substandard pig houses(vii) Private sector development 3 Pig slaughter houses and

restaurants opening up(viii) Other (specify)2) Institutional Development (ID)(i) Institutional framework &restructuring

1 PIU lacked authority to incurexpenditures

(ii) Financial & Managementinformation systems including auditsystems

1 Poor accounting and internalcontrols systems

(iii) Transfer of technology 1 Breeding and TA componentsdropped

(iv) Staffing by qualified persons (incl.Turnover), training & counterpart staff

2

3) Sustainability(i) Continued Borrower commitment 2(ii) Environmental policy 2 Policy just been enacted(iii) Institutional framework 2 Organization setup poor(iv) Technical viability and staffing 2 Need for trained staff(v) Financial viability including costrecovery systems

2 Lack of income-generatingactivities within the project likethe breeding unit

(vi) Economic viability 2(vii) Environmental viability 2(viii) O&M facilitation (availability ofrecurrent funding, foreign exchange,spare parts, workshop facilities, etc.)

2

4) Economic Internal Rate of ReturnTotal 38Overall assessment of outcome 2 Unsatisfactory

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Annex Table 17. Recommendations and Follow-Up MatrixMain findings & conclusions Lessons learned/recommendations Follow-up actions

Formulation and ProjectRationale: Project formulation didnot take in accountant politicalrealities (e.g. governance &stability)

Governance issues should be taken intoconsideration in designing projects.

Address Governance issues in tbe NationalLivestock Development Programme

Project Implementation:(1) Weak coordination because of

independent institutionsauthorized to managementtechnical and financialcomponents of the project

(2) Cost under-utilization becauseof inefficient disbursement andpoor utilization of projectfunds

(3) PIU lack of qualified andexperienced staff in pigproduction, processing andmarketing

(1.1) Project formulation should carry outin-depth analysis of weaknesses andstrengths of key institutions andincorporate measures to address theirweaknesses

(1.2) Project formulation should avoidconferring project management totwo independent institutions withproper coordination mechanisms

(2.1) Project formulation should ensurethat project coordinators have theauthority to incur expenditures

(2.2) Project formulation should ensurethat accounting and internal controlsystems are efficient andtransparent

(3.1) Project formulation should ensure thatthere are qualified and experienced staff tostart the project even if training wouldprovide for additional staff and experience.

(1.1) Provide an in-depth analysis ofthe institutions in the borrower’scountry in relationship to theproject and recommend measuresto strengthen any weaknesses.

(1.2) Provide coordination mechanismswherever many implementers areinvolved in project execution.

(2.1) Provide financial and managerialauthority to project management units byassigning qualified accountants to the PIU.

(2.2) Provide for in-depth analysis ofaccounting procedures andinternal control system of theborrower.

(3.1) Ensure the availability of qualifiedand experience staff in the borrower’scountry to handle the project

Compliance with LoanConditions & Covenants: Loanconditions are not realistic andoften do not consider the reality ofthe country

Project formulation should consider simple,realistic loan conditions taking intoaccountant the realities of the country andthe time frame for fulfilling them

Only provide simple, realistic and easilyimplementable loan conditions (entry intoforce conditions)

Sustainability: Provision of crediton a subsidized basis is not likelyto be sustainable

Project design should ensure that differentcredit instruments are used to avoidsubsidies and ensure targeting of the needee

Ensure different credit models areincorporated in the project formulation totake care of all targeted beneficiaries.

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SOURCES OF INFORMATION

The following documents were consulted in processing this PCR report:

1. The ADB Appraisal Report

2. Quarterly Progress Reports ( project)

3. Project files in the Bank

4. Annual Audit Reports

5. Files and Accounts of the project provided by GoK

6. Economic Survey 2000

7. GoK PCR report