Completion evaluation report
Lesotho, with a total area of around 30 000 Km2, is a landlocked country,
surrounded by the Republic of South Africa (RSA). The average annual population
growth rate is 2.63% over a population of around 1.66 million (1988),
83% of whom live in rural areas. A high proportion of male population
work as migrant labour in the mines in the RSA and remittances are a high
percentage of GNP. The population is concentrated mostly in lowlands which
range in altitude from 1 500 to 1 800 m . Long-term average annual rainfall
is about 740 mm, with a range of 550 mm in lowlands to 1 000 mm in the
mountains. The most important food crops are maize, sorghum, wheat and
beans. Some wheat is sold for cash and most of the beans are for export.
Project design and objectives
The
Agricultural Marketing and Credit Project (AMCP) was designed as complementary
to the Basic Agricultural Services Programme (BASP) which aimed to provide
small farmers with farm support services and infrastructure essential
to the increase of production of food. The AMCP appraisal team adopted
the same BASP economic justifications in appraising the project.
Target group
The appraisal report estimated that about 13 000 families, i.e. 10% of
farmers in the BASP areas would benefit directly from the AMCP through
the use of farm inputs, partly on credit. These were identified as small
farm operators, the majority of whom were women, cultivating an average
farm of about five acres each. Average per capita income of this target
group was estimated to be about USD 160, which was 60% of the national
per capita income. The production inducing agricultural services provided
by the project were expected to have particular importance to the relatively
poorer strata of the rural population not receiving remittances and therefore
totally dependent on agricultural income.
Objectives and components
Objectives. The project would contribute to the Government of
Lesotho (GOL) programme to increase agricultural production. The project
would particularly assist small farmers through provision of credit and
improvement of marketing.
Components. The project was to provide: (a) working capital to
Coop Lesotho, along with management and technical assistance; (b) a programme
of seasonal, medium and long-term credit to be administered by LADB, along
with management and technical assistance; (c) assistance for the monitoring
and evaluation of the project; (d) studies covering the development of
the cooperative sector and the feasibility of establishing a seed multiplication
unit.
As the AMCP was considered a project complementary to the BASP programme
which began in 1978 to provide services covering 75% of the cultivated
land and some 128 000 farm families, the appraisal report attributed a
portion of the benefits which would be derived from the BASP to the AMCP.
Moreover, the AMCP was, in effect, a programme aimed at developing institutional
capacity at national level. Therefore, its effect could not be confined
solely to the IFAD target group.
Expected effects
and assumptions
Expected Benefits. At the time of appraisal of BASP, the anticipated
increases in production were 60 000 tonne (t) annual increase over a twenty-five
year period (maize 24 000 t, wheat 13 000 t, beans 8 000 t, peas 1 000
t). However, two years after BASP commencement, slow project implementation
together with a reassessment of the impact of declining soil fertility
led to incremental crop production being re-estimated at half the original
quantities. The AMCP appraisal team considered it premature to make a
revised estimate for the project and estimated the economic rate of return
at 13% .
Assumptions. The project was pegged to BASP and appraised accordingly
but soon after BASP fell short of expectations. The basic assumptions
relate to development organization capacity, security of land tenure systems
and credit demand. The capacity to establish an operational and effective
delivery institutions for credit and marketing was overestimated. The
security of land tenure was lower than expected for two factors: (a) in
principle, the land is owned by the King (the state) and (b) land use
rights are dominated by male population even though 50% of them are migrant
and 75% of farmers are women. Lastly, the project assumed that there would
be effective demand for credit. In reality most customers would use LADB
for depositing remittances received from abroad rather than for borrowing.
Evaluation
The evaluation mission visited the country during March/April 1990. The
mission interviewed the authorities of LADB, Cooperative Lesotho as well
as farmers, who benefitted from the project. The mission consulted the
project completion report (CPR), about 18 supervision missions reports
covering the period 1981 to 1988, quarterly progress reports; from the
M&E section, survey reports and thematic studies.
Implementation context
The project components were implemented by three implementing agencies:
Coop Lesotho, LADB and Planning and Evaluation Division (PED). Project
coordination amongst the implementing agencies, was supposed to be undertaken
by a Project Coordination Committee (PCC). The lack of a firm policy framework
in which the project could operate hindered its effectiveness.
The recipient lack of compliance with the various conditions of the Financing
Agreement did not help to produce an environment in which the project
objectives could be readily achieved. LADB role was initially hampered
by the confusion over government policy in relation to credit and the
perceived duplication of effort in credit delivery under the Food Self-Sufficiency
Project (FSSP). This was subsequently resolved by the government, with
LADB being the agency appointed to disburse rural credit for the FSSP.
In addition, LADB's impact in rural areas was weakened by its having no
branches outside Maseru. This constraint was addressed by the LADB and
increased ita rural branches to nineteen.
Coop Lesotho was required by government to manage more depots than the
sixteen agreed upon, despite earlier assurances. These peaked at fifty-eight
in 1983 and have never gone below thirty-eight. Furthermore, Coop Lesotho
was required to undertake other activities which undermined its commercial
viability, such as providing subsidised inputs to farmers under the FSSP.
Project achievements
Project Management. The financial and managerial performance of
both LADB and Coop. Lesotho never reached the levels indicated at appraisal.
Both agencies have registered significant losses. However, LADB has recovered
its position at the time of evaluation, partly as a result of being authorised
to accept public deposits without government restriction. Coop Lesotho
handled increased volumes of inputs to farmers, particularly fertilisers,
the annual quantities of which increased threefold. However, Coop Lesotho
has continuously faced liquidity problems, and in 1987, IFAD financed
a Capitalisation and Rationalisation Plan, thereby reprogramming AMCP
funds undisbursed in the credit component. The capital injected was quickly
eroded and the government eventually took a decision to privatise Coop
Lesotho.
Agricultural Credit. LADB has significantly expanded its operations
and has increased its lending capacity since the start of the Project.
Since the beginning of the Project, in 1981, the LADB loan portfolio had
increased manyfolds form M 2.3 million to M 16.7 million by 1989. Deposits
also rose from M 0.63 million in 1985 to M 30.3 million in 1989, reversing
the situation when loans were exceeding deposits initially. The latter
is considered to have been determined by the increase in the number of
LADB branches and the relatively high interest rates encouraging the deposit
of remittances and savings in the bank. Loan recovery improved during
the later years of the project and the LADB attributed this partly to
having established branches outside Maseru.
LADB's financial losses have been significant in the recent project years.
The last income and expenditure statement of LADB indicates a loss of
M 1.4 million in 1989. LADB puts these losses down to a number of factors,
including making provision for covering potential losses, investing in
the opening and operating of new branches and agencies and being obliged
to pay higher interest rates on deposits made with the bank. Moreover,
LADB was not able to apply the higher interest charges to outstanding
loans, but only to new loans.
The short-term loans disbursed by the LADB during the project period
far exceeded in value terms the estimates made at appraisal (334%). However,
the number of beneficiaries fell short by 49%. Thus more resources were
made available to fewer borrowers. Drawings from the medium-term credit
facilities for oxen contractors were never made and all other medium-term
drawings were negligible. Long-term loans for tractor reconditioning were
hardly utilised: seven loans were made throughout the project life. Reported
reasons for the weak demand from oxen contractors were the growing farmer
preference for power tillage and the fact that many farms are managed
by women who are unable to operate ox-drawn plows, as well as for reasons
of status.
Agricultural Input and Marketing. The volume of inputs marketed
by Coop Lesotho increased markedly during the project. The quantity of
fertilisers increased more than threefold, between 1982 and 1989. This
increase occurred despite the removal of fertiliser subsidies in 1987/88.
It is estimated that Coop Lesotho now supplies 70% of the country's fertiliser
requirement. Sales of seeds increased in a slower but constant way. There
was, however, an unjustified expansion in depots, particularly since a
number of them were unviable. In contrast, crops marketed never reached
appraisal estimates, even though these were modest. This was a result
of a shift in the agricultural policy of the GOL, when private traders
were allowed to compete in the market. In fact, the market has developed
to such an extent that the Government has taken the view that a parastatal
organisation is no longer necessary and embarked on a privatisation programme
for Coop Lesotho.
Despite the shortfall in sales targets, Coop Lesotho's turnover increased
significantly over the project period. However, the capital base did not
increase in commensurate terms and the capital turnover ratio increased
dramatically, causing Coop Lesotho to experience severe liquidity problems.
The erosion of liquidity forced the cooperative to borrow on costly terms
further exacerbating its position. This serious financial position was
ultimately retrieved by an injection of funds from the GOL, as well as
donors including IFAD.
Monitoring and Evaluation. The project design did not include
systematic M&E framework. However M&E implementation programme
was defined by IFAD consultants in the early stages of the project. The
proposed activities proved too extensive following the withdrawal of funding
from the BASP. In 1983 IFAD reviewed the programme and simplified the
M&E reporting requirements. However, the implementation of the M&E
component was hampered from the initial stages of the project due to (a)
a misperception of the nature of the M&E, being considered as an eye
on management instead of a tool of management, (b) the lack of precise
information on the Project's target group, and (c) lack of financial and
human resources.
Effects assessment
and sustainability
In 1981 donors reduced their support to the BASP because of their dissatisfaction
with progress made on economic restructuring. As a result AMCP was adversely
affected since certain complementary activities in crop production and
extension were not implemented.
Beneficiaries and theirs Incomes. The LADB estimates that by the
end of 1988 loans had been made to 14 400 farmers as against the 13 000
at appraisal. However, no records were provided by the LADB to indicate
beneficiary names or their location and, moreover, there is no analysis
by farm size, income, or gender of borrower. There are no records at all
as to beneficiary numbers from inputs sourced from Coop Lesotho. Various
reports anticipated that the beneficiaries of the input supply component
were most likely to be amongst the better off group of farmers.
Food self-sufficiency. Food self-sufficiency has not changed significantly
during the course of the project, with the exception of wheat, where the
ratio has declined from 36% in 1981 to 20% in 1988.
Specific Effects on Women. The appraisal report did not analyse
the possible impact of the project on women, though it acknowledged that
women were likely to be beneficiaries of the project lending programme.
The legislation prevailing in Lesotho in the 1980s certainly added an
institutional barrier for women to overcome, since some were not able
to obtain their husband's signature for logistical or for cultural reasons.
Furthermore, without a baseline survey the extent to which women were
affected by this constraint or how they benefitted from the project could
not be determined.
Environmental Effect. The environmental impact of the project
was projected to be positive in that the adoption of fertiliser recommendations
would result in improved soil fertility, increase vertical productivity
and reduce the pressure for clearing more land. However, it is not possible
to make any assessment as to the projects impact on the environment.
Sustainability of Institutions. LADB financial position at the
time of evaluation is causing grave concern. There may also be a cause
for concern as to whether it is the type of institution IFAD would have
wanted to support. The weak financial position of Coop Lesotho and its
privatization indicate that the institution could not be sustained in
its existing form.
Participation. The target beneficiaries were never consulted during
the design process, though the later credit survey during implementation
involved interviewing potential credit beneficiaries.
Monitoring and Evaluation. The national staff in charge of M&E
had no specific training nor experience in this field. The management
of the project implementing agencies largely ignored the quarterly reports
prepared by the monitoring unit. There were some attempts to improve cooperation
and communication amongst the concerned parties, but with no apparent
success. The M&E unit had not scored much success in the field of
evaluation. An evaluation of the socio-economic situation of the beneficiaries
after project completion has not proved possible, due to the absence of
appropriate identification of the beneficiaries by the implementing agencies
and the lack of socio-economic data on the target population. Information
generated through the base-line survey conducted by the BASP M&E team
was insufficient to allow detailed assessment impact.
Main issues and recommendations
Project design
a) Introduce flexibility in project design to accommodate changes in
policy during project implementation and monitor policy environment
very closely to suggest necessary changes timely;
b) Avoid over dependence on the implementation of activities which
are not financed and not controlled by the project;
c) Conduct necessary surveys to generate data needed for proper design
of targeted components;
d) Consider an implementation time-frame longer than five years, particularly
for institution -building projects.
The role of supervision
a) Ensure that loan conditions which directly affect the implementation
of the project are met;
b) IFAD should maintain a close involvement in supervision to ensure
that its specificity criteria are met;
c) Ensure that in the supervision teams, expertise appropriate to the
changing needs of the project, as they evolve, is provided.
Project management processes
a) When a number of implementing agencies are involved in a project,
and it is not feasible for one agency to take the lead role, a coordinator
should be appointed;
b) For effective guidance and coordination make certain that the PCC,
is performing its designated functions as agreed;
c) To allow the implementers to associate the project objectives and
goals with implementation process and to provide precise and realistic
indicators for the assessment of project achievements, a M&E system
should be designed in detail to meet these objectives.
Credit Delivery
The implementation of credit indicated that the provision of loans is
not a sufficient condition for the development of agricultural production
and the improvement of farm family life. Three variables deserve special
attention to ensure the success of the credit programme. First, security
of land tenure to ensure that users have legal rights on land. Second,
extensive share-cropping arrangements would limit investments, since share
croppers give up part of the incremental product to owners of land rights.
Thirdly, for a woman to obtain a loan she needs the consent of the male
head of household, but males are normally absent (migrant labour). The
decision-making capacity is severely constrained by these factors, especially
for credit with medium and long term liabilities on the households.
Lessons learned
The need to adjust project design to accommodate changing policy environment,
for diligent implementation of project and realization of its benefits.
The AMCP was linked to the BASP, which has been supported by donors on
specific macro-economic framework. Logically, the loss of support to BASP
hindered the implementation of AMCP. Moreover, during the 1980s there
were serious macro-economic distortions: high rate of inflation, high
price subsidies on inputs and an economy dominated by parastatals. In
the course of project implementation, the GOL attempted some corrective
steps, such as privatization of markets, directly affecting AMCP. It would
be more appropriate to adjust the project during implementation to overcome
structured difficulties caused by changing policy environment.
Credit effectiveness could be enhanced if the factors specific to
the country/project area are given due attention. A common wisdom
is that credit services should be demand-driven. In Lesotho, most rural
households needed the LADB services to deposit remittances received from
migrant labour than to obtain credit. Small-farmers and female headed
households who are by their nature risk-averse shied away from borrowing
and loans were left for the better off farmers. Those were not interested
in animal traction (and as well because it was socially unaccepted), which
the project thought to promote. But on the other hand deposit rates are
kept low on the face of prevailing high inflation rates which did not
encourage savers to deposit, thus endangering the viability of the credit
institution. When deposit rates were increased, the lending rates on old
loans could not be corrected which negatively impacted LADB.
Beneficiaries Participation should be pursued at design and implementation.
There was little or no consultation with potential beneficiaries during
project design. Planned medium- and long-term loans for animal traction
and tractor repair were not requested by farmers. More attention to their
actual needs and discussion as to how the project could service these
would have altered the design and scope of AMCP. Similarly, there was
little or no consultation with beneficiaries during project implementation.
This would have improved coordination, focussed the project on beneficiary
needs and resulted in the AMCP having a more positive impact on IFAD's
potential target group.
Monitoring and Evaluation should be viewed as a management tool.
The M&E system should be designed, prepared and appraised in detail
as an integral part of the work programme of the project. In so doing,
project designers are forced to examine the project objectives against
the practicalities of achieving these objectives and to specify indicators
for measuring the achievements. These indicators should be clearly defined
in order to allow the identification of the target group and project beneficiaries,
to monitor project implementation and to assess project impact. The inclusion
of beneficiary consultation in the M&E of project activities will
provide information on the impact of the project.
