The World Bank
Agriculture Cluster Development Project (P145037)

REPORT NO.: RES59016

DOCUMENT OF THE WORLD BANK

RESTRUCTURING PAPER
ON A
PROPOSED PROJECT RESTRUCTURING

AGRICULTURE CLUSTER DEVELOPMENT PROJECT
APPROVED ON APRIL 9, 2015
TO

REPUBLIC OF UGANDA

AGRICULTURE AND FOOD

EASTERN AND SOUTHERN AFRICA

Regional Vice President: Victoria Kwakwa
Country Director: Keith E. Hansen
Regional Director: Iain G. Shuker
Practice Manager/Manager: Shobha Shetty
Task Team Leader(s): Joseph Oryokot, Jeehye Kim
The World Bank
Agriculture Cluster Development Project (P145037)

I. BASIC DATA

Product Information

Project ID Financing Instrument
P145037 Investment Project Financing

Original EA Category Current EA Category
Partial Assessment (B) Partial Assessment (B)

Approval Date Current Closing Date
09-Apr-2015 30-Nov-2023

Organizations

Borrower Responsible Agency
Republic of Uganda Ministry of Agriculture, Animal Industry and Fisheries

Project Development Objective (PDO)
Original PDO
The development objective is to raise on-farm productivity, production, and marketable volumes of selected
agricultural commoditiesin specified geographic clusters.
Summary Status of Financing (US$, Millions)

Net
Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed

IDA-56110 09-Apr-2015 26-Sep-2016 23-Jan-2017 30-Nov-2023 150.00 147.60 .33

Policy Waiver(s)

Does this restructuring trigger the need for any policy waiver(s)?
No

II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES
The World Bank
Agriculture Cluster Development Project (P145037)

1. The Agriculture Cluster Development Project (ACDP) was approved by the Board on April 9, 2015, became
effective on January 23, 2017, and was scheduled to close on March 31, 2022. The project was restructured for an 18
months no-cost extension in March 2022, extending the closing date from March 31, 2022, to September 30, 2023.
The project closing date was subsequently extended to October 31, and November 30, 2023, to enable the Recipient
to incorporate social risk management measures in project’s safeguards frameworks and instruments to ensure non-
discrimination and inclusion in project operations.

2. The Project Development Objective (PDO) is to raise on-farm productivity, production, and marketable volumes
of selected agricultural commodities in specified agricultural clusters. Despite an initial slow start to implementation,
the project significantly improved its performance since the mid-term review and is currently on track to achieving all
the PDO indicators as follows:
• The total number of direct beneficiaries reached by the project stands at 461,514 of which 45 percent are
women. This surpasses the target of 450,000 farm households with a goal of 50 percent being women.
• Two of the five commodities (beans, cassava, coffee, maize, and rice) have surpassed target yields by 48 percent
(rice) and 91 percent (coffee). The project is on track to achieve yield targets for the remaining three commodities.
• Percent production of target commodities in project area has increased by between 51 percent (beans) and 149
percent (cassava) against targets of 50% across all commodities.
• Percent increase in marketed commodities has surpassed the 300 percent mark for all five commodities against
targets of 50 percent across all commodities.

3. After a slow start in the first six months of FY23, the project implementation picked up and made good progress.
In Component 1: the percentage of farmers using improved agricultural technologies accessed through the e-voucher
scheme stands at 42 percentage with a target of 65 percent. The area under improved technologies in the target
clusters is 102,284 Ha with a target of 182,100 Ha. In Component 2: the number of participating households using
post-harvest inputs stands at 304,668, exceeding the target of 300,000. Additionally, 85 percent of Area Commodity
Co-operative Enterprises (ACCEs) have attained improved operating capacity, although the initial target was 100
percent. Among the five commodities considered, three of them have surpassed their targets for marketing. In rice
marketed volume has increased by a remarkable 450 percent of the target, while in maize and coffee marketed
volumes have increased by 230 percent, and 366 percent, respectively, surpassing the targets of 60 percent. All five
selected commodities have surpassed their targeted profit ratios. A total of 119 ACCEs supported by the project have
invested over US$ 5,000 in post-harvest handling and/or marketing facilities surpassing the target of 30, while up to
54,579 MT of additional volume of storage space has been created under the project surpassing the target of 45,000
MT. The project has also fixed a total of 224 road chokes (bottlenecks) surpassing the target of 100, with more road
chokes still under rehabilitation. Component 3: The project completed all 18 pre-feasibility studies for irrigation
schemes that were identified. However, the designs for the five prioritized irrigation schemes for rehabilitation and
expansion in future investments are not yet completed. Component 4: A total of 670,436 farmers have been reached
through ICT innovations surpassing the target of 444,000 farmers, while the level of satisfaction with ICT initiatives is
at 54 percent and short of the targeted 90 percent.

4. The project has achieved 99.78 percent disbursement, but the utilization rate stands at 83.4 percent due to the
project facing budget constraints in FY23. Progress towards achieving the PDO is rated as Satisfactory, while
implementation progress is Moderately Satisfactory. Performance on financial management, procurement
management, and overall safeguards management are rated as Moderately Satisfactory.

Financial Management
The World Bank
Agriculture Cluster Development Project (P145037)

5. There are no pending audit reports nor outstanding fiduciary or safeguard issues. The quarterly Interim Financial
Reports have been submitted on time and quality of these reports is satisfactory and meets Bank standards. The
external audit has been conducted in line with International Audit Standards. Audit reports have been submitted on
time as indicated in the Financing Agreement, and the reports were unqualified with no major reservations.

Previous Restructuring
6. The project has been restructured six times. The first Level 2 restructuring was undertaken in November 2016,
to modify the effectiveness condition related to the appointment of an electronic Voucher Management Agency(e-
VMA). The second Level 2 restructuring took place in July 2018 and it involved several key changes, including: (i)
reorganizing project components and activities to simplify technical design and realigning it with then-current sector
strategies and priorities; (ii) revising the sequence of project activities within components and synchronizing
implementation between them; and (iii) making changes to institutional and implementation arrangements to
streamline decision-making processes and improve implementation performance. The third Level 2 restructuring
followed the mid-term review (MTR) mission of October 2019, with the primary objective of accelerating
implementation pace. The fourth Level 2 restructuring was undertaken in March 2022 in response to the
Government’s request for an extension of the project closing date by 18 months to account for the 21-month delay in
project effectiveness and the COVID-19 impact on implementation, and to reallocate project proceeds in a manner
that would better achieve the PDO. The fifth Level 2 restructuring for one month was undertaken in September 2023
to ensure that the proposed measures under the social risk management framework with respect to non-
discrimination and inclusion are incorporated in the project’s operations to allow for processing the six-month
extension request. This was necessitated by the signing into law of the Anti-Homosexuality Act (AHA). The recent sixth
Level 2 restructuring for one month was undertaken in October 2023. As in the fifth Level 2 restructuring, this was to
ensure that the proposed measures under the social risk management framework with respect to non-discrimination
and inclusion were incorporated in the project’s operations. This process has not yet been finalized.

Rationale for Restructuring
7. This Level 2 restructuring is being undertaken to: (a) enable the project to complete on-going activities and
contractual commitments that were curtailed by the inadequate budget space provided in the FY23 national budget;
(b) reallocate project proceeds by categories to allow reporting of expenditure by activity; and (c) ensure that the
proposed measures under the social risk management framework with respect to non-discrimination and inclusion are
incorporated in the project’s post-closure third party monitoring (TPM).

8. While the project has successfully disbursed 99.8 percent of project funds, due to budget limitations in FY23
explained above there are substantial unutilized project funds in the project accounts as of July 20, 2023, totaling US$
23.12 million (UGX 85.25 bn). In the fiscal year 2024, the Government has appropriated adequate budget space of UGX
85.7 bn to the project for completion of on-going activities and contractual commitments. These include the following:
i. Completion of 46 on-going rehabilitation works contracts on 345 priority road choke points identified in 1,118
km of community farm access roads in the 57 project districts, to enhance farmers access to agricultural markets. All
these contracts are signed, and works are on-going at various stages of implementation. The total outstanding balance
of these contracts is Ush. 30.30 bn. (equivalent to USD 8.19 million).
ii. Completion of rehabilitation work on the National Seed Laboratory at Kawanda with an outstanding contracted
balance at Ush. 1.46bn (equivalent to USD 395,554).
iii. Completion of the construction of storage facilities, connection of power supply, and installation of equipment
and machinery for value-addition for the remaining 143 of the 358 beneficiary farmer producer organizations (Area-
based Commodity Cooperative Enterprises (ACCEs) under the project’s Matching Grants Scheme, with an outstanding
balance of Ush. 5.54bn (equivalent to USD 1.498 million).
The World Bank
Agriculture Cluster Development Project (P145037)

iv. Completing payments for e-voucher Management Agency costs, and arrears to agro-input dealers that supplied
agro-inputs to farmers under the e-voucher subsidy program with an outstanding balance of Ush. 2,151,508,892
(equivalent USD 581,489).
v. Completion of investment studies for agricultural water management, including feasibility studies, detailed
engineering designs and environmental and social impact studies for five (5) identified irrigation schemes, and
completion of establishing 49 smallholder coffee irrigation models at Ush. 4,760,924,990 (equivalent USD 1.287
million).
vi. Deployment, and operation and maintenance of ICT platforms developed under the project in participating
districts, including the National Food and Agricultural Statistics System (NFASS), e-extension system, mobile soil testing
application, and the e-markets platform. This is valued at Ush 581 million equivalent to USD 157,047.
vii. Providing support to on-going key project activities including end-of-project impact evaluations, PCU operations,
the rollout of the National Food and statistics system to 57 districts and undertaking start-up activities for the Uganda
Climate Smart Agricultural Transformation Project (UCSATP). All these are valued at Ush. 23.45bn (equivalent to USD
6.17 million).

The risks of closing the project now are as follows:

a. The project will not achieve its intended results.
b. Over 112,855 farmers that belong to project established cooperatives who have contributed the equivalent of
US$10,140,000 of their own funds to the matching grant scheme provided by the project will not be able to utilize
those agro-processing facilities that were not completed, because the project’s financial obligations to the farmers will
not have been met. This will be a heavy investment loss for the smallholder farmers from which, they are unlikely to
recover economically.
c. Incomplete infrastructure will limit continued smallholder access to markets, inputs, and services. These include
121 road chokes spread over 310 Km of roads under rehabilitation; the National Seed Laboratory currently under
rehabilitation, and agro-processing and value addition infrastructure all valued at US$ 10.4 million.
d. In addition to reputational risks, efforts to incorporate non-discrimination and inclusion measures currently
being finalized will not be possible without the extension. This will be a lost opportunity to strengthen the principle of
non-discrimination and inclusion in the use of project provided facilities.
e. Due to undocumented expenditures and uncompleted contracts and activities, the liability to the Government
of Uganda is USD 38,387,597.92 as the amount reported in the Designated Account (comprising of USD 18.28 million
of on-going contracts and activities, and USD 20.11 million of undocumented payments). The proposed reallocation of
project proceeds that is being requested in the restructuring paper is to enable the project team to submit eligible
expenditure documentation to ensure an orderly loan closure, given that the project has disbursed 99.77%. This will
not be possible if the project closing date is not extended.

9. In view of the serious budget constraints that the Uganda Government faced in FY23, it will not be able to
complete these on its own. The six-month extension requested is critical for completion of all the on-going activities
and strengthen safeguards compliance for the sustainable use of these facilities (investments).

10. The proposed restructuring will entail extending the project closing date by six months from the current closing
date of November 30, 2023, to May 31, 2024, and reallocation of project proceeds between disbursement categories
as per the Table below.
The World Bank
Agriculture Cluster Development Project (P145037)

III. DETAILED CHANGES

LOAN CLOSING DATE(S)

Original Revised Proposed Proposed Deadline
Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal
Applications
30-Sep-2023, 31-Oct-
2023, 30-Sep-2023,
IDA-56110 Closed 31-Mar-2022 31-Jan-2024 31-May-2024
31-Oct-2023, 30-Nov-
2023

REALLOCATION BETWEEN DISBURSEMENT CATEGORIES

Current
Current Actuals + Proposed Disbursement %
Ln/Cr/TF Expenditure
Allocation Committed Allocation (Type Total)
Category
Current Proposed

IDA-56110- eVouchers Pt 1a
43,987,420.00 31,059,091.01 44,740,441.28 100.00 100.00
001 Trg Pt1b& 1c(i)
Currency: Gds,Ncs,Cs,Tr,O
XDR 25,695,643.00 25,704,012.26 25,808,265.94 100.00 100.00
c,prt1cii,2a,3,4
Wrks,Cs,OC
16,866,937.00 9,834,282.18 16,051,739.78 100.00 100.00
under part 2(c)
Matching Grants
19,850,000.00 12,513,809.44 19,799,553.00 100.00 100.00
Pt 2(b)(ii)
Total 106,400,000.00 79,111,194.89 106,400,000.00