Document of The World Bank FOR OFFICIAL USE ONLY Report No: 19025 IMPLEMENTATION COMPLETION REPORT ZIMBABWE FOREST RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (LOAN NO. 3179-ZW) March 11, 1999 Rural Development Operations Eastern and Southern Africa This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS AGRITEX = Agricultural, Technical and Extension Services BADEA Arab Bank for Economic Development in Africa CAs Communal Areas CAFs = Communal Area Farmers CFD Commercial Farmers Division CIDA = Canadian International Development Agency CP Cooperative Programme DANIDA = Danish Intemational Development Agency DFO District Forest Officers ERR Economic Rate of Return FA Forestry Assistants FC = Forestry Commission FCZ = Forestry Company of Zimbabwe FRMDP = Forestry Resources Management and Development Project GOZ = Government of Zimbabwe GTZ Deutsche Gesellschaft fur Technische Zusammenarbeit GmbH ICR = Implementation Completion Report IDA = International Development Association MMT = Ministry of Mines, Environment and Tourism NGOs, Non-Govemmental Organizations PCC Project Coordinating Committee PCU Project Coordination Unit RAs Resettlement Areas RAP Rural Afforestation Project RMC Resource Management Conrmittee SFD State Forestry Division TA Technical Assistance VIDCOS Village Development Committees WB World Bank CURRENCY EQUIVALENT Currency Unit =Zimbabwe Dollars (ZS) At Appraisal: US$ 1.00 =Z$ 2.00 Z$S .00 = US$ 0.50 At Completion: US$ 1.00 = Z$ 20.00 Z$ 1.00 = US$ 0.05 FISCAL YEAR Government: January I - December 31 Forestry Commission: January I - December 31 Vice President: Callisto E. Madavo Country Director: Barbara Kafka Sector Manager: Sushma Ganguly Staff Member: Caesar Chidawanylka FOR OMCIAL USE ONLY IMPLEMENTATION COMPLETION REPORT ZIMBABWE FOREST RESOURCES MANAGEMENT AN]D DEVELOPMEENT PROJECT (Loan No. 3179-ZW) TABLE OF CONTENTS PREFACE. .............................................i EVALUATION SUMRARY .. PART I: PROJECT IMPLEMENTATION ASSESSMENT ........................... .................I A. STATEMENT/EVALUATION OF OBJECTIVES ... .................................. ..1 B. ACHEVEMENT OF PROJECT OBJECTIVES ......................................3 C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT ..................................... 7 D. PROJECT SUSTAINABILITY ..................................... 10 E. BANK PERFORMANCE ...................................... 1 F. BORROWER PERFORMANCE ..................................... 12 G. ASSESSMENT OF OUTCOME .. ................................... 12 H. FUTURE OPERATIONS ..................................... 14 1. KEY LESSONS LEARNED AFFECTING THE PROJECT .................................... 15 PART EI: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS 17 TABLE 2: RELATED BANK LOANS/CREDITS 18 TABLE 3: PROJECT TIETABLE .19 TABLE 4: LOAN DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL .19 TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION 20 TABLE 6: KEY INDICATORS FOR PROJECT OPERATION .21 TABLE 7: STUDIES INCLUDED IN PROJECT .21 TABLE 8A: PROJECT COSTS ...................................................... 21 TABLE 8B: PROJECT FINANCING ...................................................... 22 TABLE 9A: ECONOMIC COSTS OF RETURN ..................................................... 22 TABLE 9B: OTHER BENEFITS ................... ................................... 23 TABLE 10: STATUS OF LEGAL COVENANTS ................................................... 24 TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS ...................................................... 26 TABLE 12: BANK RESOURCES: STAFF INPUTS .............................................. 26 TABLE 13: BANK RESOURCES: MISSIONS ...................................................... 27 APPENDICES: A. MISSION AIDE-MEMOIRE B. GOVERNMENT'S CONTRIBUTION C. MISCELLANEOUS TABLES This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. IMPLEMENTATION COMPLETION REPORT ZIMBABWE FORESTRY RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (Loan No. 3179-ZW) PREFACE This is the Implementation Completion Report (ICR) for the Forestry Resources Management and Development Project in Zimbabwe for which Loan No. 3179-ZW in the amount of US$ 14.50 million was approved on September 27, 1990 and became effective on April 17, 1991. The loan was closed on schedule on June 30, 1998, and was almost fully disbursed (99.8%). Co-financing for the project was provided by Arab Bank for Economic Development in Africa (BADEA), (US$ 4.8 million); Canadian Intemational Development Agency (CIDA), (US$ 1.5 million); and Danish International Development Agency, (DANIDA), (US$ 6.7 million). The ICR is based on a draft prepared by staff of FAO/CP and a consultant from the World Bank (WB) on behalf of the Africa Rural Development Operations Group 1 of WB. The borrower contributed to the ICR by providing comments and views which have been reflected in the mission's Aide Memoire and in the completion report, and by preparing its own evaluation on the project's execution. Comments were also solicited from the co-financiers but only DANIDA responded and their comments have been incorporated in the report. Preparation of this ICR began during the Bank's final supervision mission which took place between May 4-23, 1998. It is based on material in the project files as well as findings of the ICR mission in the field from August 17-28, 1998. IMPLEMENTATION COMPLETION REPORT ZIMBABWE FORESTRY RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (Loan No. 3179-ZW) EVALUATION SUMMARY Introduction 1. The Forest Resources Management and Development Project (FRMDP) was a follow-up to the IDA-funded Rural Afforestation Project Cr. 1368-ZW (1983-1989). It was appraised in February/March 1989, presented to the Board on March 22, 1990, and the Bank loan became effective on April 17, 1991. The project closed on schedule on June 30, 1998. Objectives 2. The project had three broad objectives: to (i) conserve forests and the environment as well as increase the production of wood for fuel and construction purposes in the Communal Areas (CAs); (ii) improve forest grazing and wildlife management; and (iii) improve the productivity and quality of the wood processing industry. During project implementation, the target area for objective (i) was expanded to include Resettlement Areas (RAs). These objectives were appropriate and realistic given the constraints that, at the time, faced the forestry subsector, particularly the decline in the area and quality of forest cover, deficits in fuelwood supplies in most of the CAs; environmental degradation in the CAs as a result of uncontrolled deforestation and livestock grazing; and the under-utilization of the country's plantation softwood resource. The objectives were also in line with the development strategies of the Government of Zimbabwe (GOZ) and the assistance strategies of the Bank and other donors. Several lessons learned from the IDA-funded Rural Afforestation Project (RAP) were applied to the Rural Afforestation Component. 3. These objectives were to be achieved through the implementation of three components namely, the Rural Afforestation, the Forest Grazing and Wildlife Management and the Commercial Forestry components. The three components were - . funded by DANIDA, CIDA and WB/BADEA, respectively. Various changes and modifications were made to the original project designs relating to all three components, mainly to respond to changing priorities of beneficiaries or to respond to emerging challenges arising from the changing economic environment. The rural afforestation component was restructured and its objectives modified in 1995 to include the resettlement areas and aspects such as capacity strengthening for the Forestry Extension Services division (FES) and enhanced support for agroforestry research. The forest grazing and wildlife component was also restructured following a review in 1996. As a result, the wildlife component was dropped as it no longer reflected the priorities of the intended beneficiaries while the forest grazing element was reduced in scope to fit with available resources. Some changes were also made to the commercial forestry component in recognition of the more competitive operating and marketing environment ushered in by the economic reform program (ESAP), adopted by the government in 1991. Restructuring of the FC, to enable it to respond adequately to the changing macro-economic environment, became a major focus of the project from 1995. On the negative side, however, the three components were implemented as separate projects as the various individual donors supervised their respective components without much co-ordination with other co-financiers. Also no clear indicators were specified in the project appraisal document as these were only developed at a very late stage during the implementation phase, thus it has proved difficult to determine precisely how far the original development objectives have been achieved. Achievement of Objectives 4. Rural Afforestation Component: The project largely achieved its objectives and, in physical terms, equaled or exceeded most of the appraisal targets. Nearly 52 million seedlings have been produced with project assistance, thereby increasing potential production of woody products by some 150,000 cubic meter per annum, plus valuable non-woody products. The woodland management and conservation program became far more extensive than the seven pilots that had been envisaged at appraisal, with 540 projects being established covering over 73,000 hectares. Project assistance has also increased potential horticultural products (from fruit trees) by 300 million fruits per year. These outputs have helped increase fuel and pole wood supply, raise rural incomes and, to some extent, ameliorate environmental degradation and deforestation in the CAs and RAs. 5. Forest Grazing and Wildlife Management Component: The original objectives of this component were only partially achieved as the wildlife sub- component was dropped while the scope of the forestry grazing sub-component was scaled down mainly as a result of delays in the release of project funds. Implementation of project activities only started in 1996 and the project has been extended to the year 2001. Satisfactory progress has been made on the component. Ten resource management committees (RMCs) have been established and these have been actively promoting initiatives covering controlled grazing in state forests and income-generating activities such as controlled thatch and broom grass harvesting, honey production, mushroom collecting and fire monitoring. - i - 6. Significant progress has been made in raising public awareness about the importance of forest conservation and woodland management, seedling production, dissemination of technical information on tree growing and the development of various forest resources management regimes, as well as developing participatory natural resourcrs management (NRM) approaches. The commercialization of the tree growing activities should ensure that they will be maintained and sustained in the future. These incremental benefits have come about through the development, supported by the project, of an innovative and well-organised forest extension service and system. 7. Commercial Forestry Component: The component largely achieved its objectives, having constructed a modern saw mill which is producing high quality products, and rehabilitated two saw mills whose productivity and product quality have significantly improved as a result. It is estimated that overall production will rise from 65% of the mill's rated capacity in 1998, to 85% in 1999 and reach 100% in the year 2000. The mill is achieving a satisfactory sawn timber recovery rate of 49%, (comparable to the 50 - 55% average achieved in Europe and North America), and is producing a superior product in terms of finish compared to other sawn timber products in Zimbabwe. Work on the rehabilitation of a third mill is on-going. The project has provided Zimbabwe with a greatly improved sawmilling industry (directly through FC and indirectly by spurning FC's local competitors to invest in improved technology). In addition to improving the efficiency of the industry and quality of timber products, the project has increased the utilization of the available pinewood resource and increased the industry's competitiveness in export markets. Kiln drying of the entire output has reduced losses previously incurred due to staining of the product, while the ability to dress and stress-grade the product has improved suitability for timber exports and enhanced ability to enter higher value markets. 8. The restructuring of the FC has reached an advanced stage. This will involve the splitting of the present FC into three autonomous entities: a wholly GOZ-owned commercial company (later to be floated on the local stock exchange) which would take over the assets and liabilities of the commercial forestry activities of FC; a commercial company, fully owned by FC, which would take over the tourism activities of Ngamo Safaris; and the slimmed down FC to cany out, on behalf of Government, the regulatory and development functions in the forestry sub-sector. Implementation Record and Factors Affecting the Project 9. The Bank loan to finance commercial forestry activities became effective nine months late because of delays in finalizing the negotiations between GOZ and BADEA for parallel financing of the component. Further delays in implementing the component were experienced largely because of poor performance of the project consultants, inadequate in-house capacity to supervise the consultants, procurement delays and a bad access road to the mill site, particularly during the rainy seasons. Construction of the mill was therefore completed 22 weeks behind schedule. - iv - 10. The implementation of the social forestry components, originally confined to the CAs, was broadened to include RAs following the realization of the high level of deforestation in those areas. The FC applied innovative techniques in implementing the project so as to minimize the unfavourable impact of some of its staffing and budgetary constraints. These included promoting a participatory approach at field level; extension staff networking with the staff of other institutions; and the involvement of schools and farm forestry promoters in project implementation. These enabled extension contacts and project activities to take place on a wider scale, in spite of constraints such as inadequate numbers of forestry extension staff; lack of credit facilities for commercial tree farming; adverse weather conditions (droughts); and lack of adequate and timely counterpart funds from GOZ to complement funds provided by donors. About 45% of the seedling production and tree planting activities were implemented by farm families; 27% by schools; and 25% by groups. In the woodland and forestry grazing management component, the, FC promoted a participatory approach involving the formation of village-level resource management committees (RMCs) which were encouraged to regulate grazing and harvesting of trees and to promote of other forest-based income generating activities in their areas. This approach appears to be relatively successful in promoting sustainable utilization of forest resources. Project Costs and Financing 11. Total project costs are estimated to be US$50.1 million compared with the appraisal estimate of US$64 million. The difference is largely attributable to the sharp decline in the value of the Zimbabwe dollar against all major currencies during the project implementation period. The actual costs are likely understated because they do not include the contribution of the beneficiaries, estimated at US$7 million at appraisal, but which, for lack of records, the ICR mission was unable to confirm. The project was financed by loans from the WB and BADEA (US$14.5 million and US$4.8 million respectively); grants from DANIDA and CIDA (US$6.7 million and US$1.5 million respectively); and local contributions from the FC (equivalent US$18.0 million); and GOZ (equivalent US$5.4 million) in addition to constructing a tarred access road to the mill site.' Project Sustainabflity 12. Overall, project sustainability is likely because of the long-term viability of the commercial operations on which about three-quarters of the project funding was spent. FC has recently completed a supply and demand forecast for coniferous saw logs from their existing resource; these indicate adequate supplies for the. ' The road was originally to be financed by the WB loan but was eventually funded by the Departnent of State Roads as part of the national trunk road network program. The loan funds were re-allocated to other areas within the project, particularly saw mill equipment and other goods. - v - Chimanimani sawmill and the rehabilitated mills for the next 30 years. FC's commercial operations will soon be commercialized, thus ushering in a more competitive operational environment, which would be more profit-oriented. The proposed restructuring and the attendant increased autonomy should improve sustainability. With regard to the social forestry activities, FC is planning to put in place a number of measures aimed at reducing the impact of uncertainties about GOZ recurrent budget funding and extension staffing levels. These damage limitation strategies, as described in the Operation Plan, should enhance the sustainability of the for the social forestry activities supported under the project. While the sustainability of the FES is critically dependent on the implementation of this survival plan, the commercialization of the tree growing activities promoted under the project should ensure the long-term sustainability of these activities at the community level, Bank Performance 13. The Bank's performance was satisfactory throughout the project cycle. Both the concept and design of the project were appropriate, and drew upon lessons learned from the Rural Afforestation Project (RAP). However, the Bank's failure to guide the Borrower as to the most appropriate way of constructing the Chimanimani mill (on a turnkey basis, or on the basis of separate contracts for the construction of civil works and for the procurement of machinery and installation) led to procurement and construction lapses. The Bank should also have provided training to the client on Bank procurement procedures at the beginning of project implementation to avoid delays that were experienced as a result of the client's lack of familiarity with these during the initial stages of the project. Borrower Performance 14. The Borrower's performance was marginally satisfactory as the government failed to comply with two key Loan Agreement Covenants: one requiring the conversion of FC's long-term government loans into equity and the other requiring government to give FC adequate funding to carry out its services. Due to in-house capacity limitations, FC, although committed to the project, was not able to adequately supervise the consultants who were not performing satisfactorily. As a result, the Chimanimani saw mill was not completed on schedule, and a number of design and construction faults due to these lapses have since dogged mill operations and resulted in the mill not achieving the anticipated production levels and in FC incurring expenditure on additional capital investment to rectify the faults. Assessment of Outcome 15. The overall outcome of the project was satisfactory, having largely achieved its objectives and showing a reasonable chance of sustainability, at least in the medium term. The sawmill is estimated to attain an economic rate of return - vi - (ERR) of 22%. It is, however, not possible to estimate the return for the whole project because, due to lack of adequate data on costs, it is difficult to estimate the ERR for the social forestry components. The mill has also directly and indirectly created about 1,000 new jobs, and socio-economically opened up a remote and hitherto inaccessible part of the country. Future Operations 16. So as to limit the adverse impact of reduced recurrent budget funding from GOZ, FC will continue to devolve more activities to the communities, networking with other organizations providing similar services in rural areas, incorporate the forestry extension service into the mainstream FC, and explore possibilities for cost recovery for some services it renders. A medium-term plan for the commercial forestry operations has been prepared envisaging: (i) the commercialization of the operations and subsequent floating of a company on the local stock exchange; (ii) concentrating on the core business of timber production and wholesaling; and (iii) improving management controls and techniques. Lessons Learned 17. Lessons learned include: * the provision of links with markets, including market and price information, by the extension service, thereby demonstrating the commercial value of forest resources, proved to be an important incentive for promoting the production of forest products and other wood-based production, and ensuring the long term sustainability of these activities, among rural communities; * adequate farmer training and technical back-up, as well as access to a good seed bank, as provided under the project, are essential for the successful promotion of seedling production and tree planting programs; * in the absence of supervisory capacity in the executing agency, turnkey engineering packages should be considered when undertaking a complex construction operation such as the Chimanimani saw mill; * in order to minimize delays, project implementation procedures and standards, including those relating to procurement, initiation and approval, as well as modifications of technical designs, should be established early in the project and it is critical to ensure that all interested parties such as consultants, contractors, and the implementing agency (ies) are familiar with these. - vii - * synchronization of supervision missions from different donor agencies could have resulted in better co-ordination of activities, the adoption of a commron approach by donors and speedier resolution of some implementation problems. development indicators should be defined at the outset of the project to ensure consistency and accuracy in measuring the success of project activities in achieving the intended development objectives. -IrA- IMPLEMENTATION COMPLETION REPORT ZIMBABWE FORESTRY RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (Loan No. 3179-ZW) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT/EVALUATION OF OBJECTIVES 1. The Forestry Resources Management and Development Project (FRMDP) objectives were to: (i) conserve forests and the environment, as well as to increase the production of wood for fuel and construction purposes in the Communal Areas; (ii) improve forest grazing and wildlife management; and (iii) improve the productivity and quality of the wood processing industry. Although not part of the original objectives, the successful restructuring of the Forestry Commission (FC) became an additional focus of the project. 2. The above objectives were appropriate and realistic given the constraints that, at the time, faced the forestry subsector, particularly the decline in the area and quality of forest cover, deficits in fuelwood supplies in most of the CAs; environmental degradation in the CAs as a result of uncontrolled deforestation and livestock grazing; and the under-utilization of the country's plantation softwood resource. The objectives were also in line with the development strategies of the Government of Zimbabwe (GOZ) and the assistance strategies of the Bank and other donors. Several lessons learned from the IDA-funded Rural Afforestation Project (RAP) (Cr. 1368-ZW) (1983-1989) were applied to the Rural Afforestation Component. However, no clear performance indicators were specified in the project document and these were only developed at a very late stage in the implementation phase, thus it has proved difficult to determine precisely how far the original development objectives have been achieved. -2- 3. The project planned to achieve the above objectives, by supporting three components, namely (i) a rural afforestation component, aiming to promote in the CAs, the culture of tree planting and woodland management of exotic as well as indigenous species; (ii) a program to improve forest grazing and wildlife management in communal areas surrounding state forests in the Midlands and Matebeleland provinces; and(iii) a commercial component aimed at upgrading the FC's logging, extraction, and saw milling facilities and operations, mainly by rehabilitating FC's old mills and equipment and by building a new mill at Chimanimani. Several modifications (summarized in paragraph 4 and 5 below) have, however, been made during the life of the project to accommodate changing priorities. The Bank and other co-financiers of the project were quite flexible in this regard. However, the individual components of the project were virtually implemented as separate projects and were supervised by the respective donors independently without much involvement of the other co-financiers. For this reason the Bank's supervision missions were more focused on the comrnercial component which it financed, than on t4e social forestry components. 4. The government secured parallel (grant) financing from DANIDA for the rural afforestation component. In 1993, the development objectives were amended to include resettlement areas when it was realized that these areas were experiencing high rates of deforestation and rapid environmental degradation. The immediate objectives were made more specific than the SAR objectives, by including strengthening the capacity of the FES; enhanced support for agroforestry research; participatory identification, planning and implementation of indigenous woodland management projects; raised awareness and understanding regarding catchment protection. A grant agreement was signed in 1990, between the governments of Canada and Zimbabwe, to implement the forest grazing and wildlife management component (later renamed community-based natural resources management project), but full implementation was not possible until mid 1996, largely because of a lack of GOZ counterpart funds and delays in the release of project funds. Consequently, the project's objectives and activities were amended to align them with the reduced GOZ funding and community preferences. The wildlife management sub-component was dropped, largely because it no longer fitted with the communities' priorities and it would take a long time to develop methodologies for sustainable utilization of natural resources suitable for the new priorities, while the scope of the forest - 3 - 5. The Bank and BADEA provided loans grazing activities was reduced.to co- finance the commercial forestry component. The project was prepared under a controlled economic environment in which the sector was well protected in the domestic market. However, by the time project implementation started in 1991, the government had adopted an economic reform program which resulted in opening up the economy. FC had to change its operating strategies to respond to the new situation and decided to revise the mill design and technology to ensure production of higher quality products which would be more competitive in both the domestic and export markets. The original plan to install a 100,000 cubic meter/per annum sawmill based on frame saw technology, was revised and it was agreed instead to install a 55 cubic meter mill based on bandsaw technology. As a result, a number of the original inputs had to be modified with the Bank and BADEA agreeing to several reallocations, the major ones involving higher allocations for consultant services (for technical assistance) and goods, than had originally been planned. In addition, the Bank responded to a request from the FC to assist it in preparing itself for,the new challenges arising from the implementation of the economic reform program, by providing technical assistance (TA) to help FC in the preparation of its restructuring proposals. This became one of the main areas of focus of Bank supervision missions from 1995 onwards. Through this, the project has also made a positive contribution in persuading both the govemment and PC to examine possibilities for moving towards privatization as now contained in the FC's restructuring proposals. This should result in the emergence of a number of medium scale enterprises that will generate a more competitive environment in the sector. 6. Total project cost was estimated at US$64 million of which US$38 million would be in foreign exchange. The World Bank (WB) and the Forestry Commission (FC) were each to finance nearly a quarter of the costs, while the Arab Bank for Economic Development in Africa (BADEA) and the Danish International Development Agency (DANIDA) were each to finance nearly 15% of the costs. The remainder was to be financed by GOZ (12%); the target groups (11%); and the Canadian International Development Agency (CIDA) (2%). B. ACHIEVEMENT OF PROJECT OBJECTIVES 7. The project largely achieved its objectives. A comparison of physical achievements, as compared to the appraisal targets, is set out in Table 5. The achievements of individual components are discussed below. Rural Forestry Development 8. The objectives of this component were largely achieved. The various strategies and activities promoted under the project have resulted in significant improvements in woodland management and sustainable utilization of forest - 4 - resources. Covering 58 districts (SAR target 42 districts), the project, through the forestry extension service, assisted in increasing the production of wood, non-wood forest products and horticultural products in CAs and, to some extent, in RAs. Nearly 52 million seedlings were produced (SAR target 51.5 million seedlings); and 35 million trees were planted (SAR target 46.4 million), while 750 agro-forestry projects were established. Project related activities are expected to result in the production of 150,000 m3 of wood per year (SAR target 45,000 m3) and 300 million fruit trees per year. The woodland management and conservation program became far more extensive than the seven pilots that had been envisaged at appraisal, with 540 projects in operation and covering over 73,000 ha. A large number of these (190) are under individual tenure while a further 200 are under school care. This was achieved despite various tenure and sociological problems related to sharing of benefits and management that have hampered community management. In addition, the project provided short term training to nearly 21,000 people, slightly above the SAR target of 18,000. The supply of 74 motor vehicles, 22 motor cycles, 40 bicycles and 18 computer sets to the forestry extension department of FC played an important role in improving the working conditions for staff and in strengthening its capacity to provide extension services to farmers. There has also been considerable indirect positive impact among families and communities, although these families did not keep in touch with the forestry extension network. It was also realized that it was important to provide links with product markets, including information on demand, prices and means of connecting with the markets. This proved important as an incentive in the production of poles, and planting of fruit trees, but was also critical for those farmers producing seedlings for sale. The commercialization of these tree growing activities is likely to ensure that they will be maintained and sustained in the future. 9. The activities supported under the project have had a positive influence on some sectoral policies and programs developed recently. The development of the proposed environmental law reform bill and programs such as the on-going District Environmental Action Planning (DEAP), for example, have benefited much from approaches and methodologies developed under the project. Significant progress has also been made in raising public awareness, seedling production and dissemination of technical information and the development of various forest resources management regimes as well as participatory natural resources management (NRM) approaches. The numerous woodland management and conservation projects that have been initiated through the project have had a positive impact as indicated by the increasing use of purchased exotic poles for roof construction versus cutting of such poles from indigenous woodlands which shows the positive effect, on forest conservation, of the tree growing activities in the smallholder areas. However, the high rate of deforestation continues as a result of increasing human and livestock pressure in these areas, and the low value attached to forest resources as opposed to agriculture. In any case, reversing environmental degradation is a long-term process, and project activities must not be viewed in isolation but in conjunction with other related initiatives such as the Communal Areas Management Program for Indigenous Resources (CAMPFIRE), the national conservation and bio-mass energy strategies and other related rural development and environmental management programs. - 5 - Wildlife and Forest Grazing Management 10. The objectives of the component were only partially achieved because the full implementation of the component was not possible until 1996 due to a shortage of GOZ counterpart funding; and largely because of this delay, the project was redesigned with the wildlife sub-component being dropped while the remaining forestry grazing sub-component was scaled down following a review in 1996. Satisfactory progress has been made on the component since then. With the assistance of the Forestry Extension Service, 10 Resource Management Committees (RMCs) have been established, representing all the communities (about 14,000 households) surrounding the Mafungautsi State Forest. The RMCs now determine development priorities and are responsible for project planning, implementation, management and monitoring of projects at the community level. The RMCs have been instrumental in promoting community based sustainable utilization and resoprce management activities covering controlled grazing and income-generating activities such as controlled thatch and broom grass harvesting, bee keeping, mushroom collecting and fire monitoring. About 90,000 kg of unprocessed honey is being harvested per annum. Commercial Forestry Development 11. The component largely achieved its objectives. A modem sawmill with a rated capacity of processing nearly 54,000 m3 sawn timber per annum was built at Chimanimani (to replace three bush mills) and was commissioned in April 1997. The mill is achieving a satisfactory sawn timber recovery rate of 49%, (comparable to the 50 - 55% average achieved in Europe and North America, with even more advanced technology) and is producing a superior product in terms of finish compared to other sawn timber products in Zimbabwe. Kiln drying of the entire output has reduced losses previously incurred due to staining of the product, while the ability to dress and stress-grade the product has improved suitability for timber exports and enhanced ability to enter higher value markets. However, at the close of the project the mill was producing only about 32,000 m3 sawn timber or about 60% of its rated capacity because of downtime due to plant design faults, technical breakdowns, operational staff s unfamiliarity with the plant, and erratic electricity supply. Most of these problems (typical during the initial operational phase) should soon be resolved with firther training of staff, the development and adoption of adequate maintenance systems, and when a new power line currently under construction is connected to the mill. It is estimated that overall production will rise from 65% of the mill's rated capacity in 1998, to 85% in 1999 and reach 100% in the year 2000.' 'Recent FC reports indicate that significant progress has been made in resolving most of the initial problems and mill performance has improved accordingly. However, due to the depressed domestic market, production has been deliberately kept below mill potential to ensure that all product is marketed immediately (mainly exports). - 6 - 12. Rehabilitation of two saw mills - Gwendigwe and Stapleford - has been completed and, as a result, their productivity (sawn timber recovery rate increased by almost one third) and product quality have improved significantly. Rehabilitation work is underway on one other mill. 13. The project has provided Zimbabwe with a greatly improved sawmilling industry producing high quality timber products (directly through supporting FC and indirectly by spurring FC's local competitors to invest in improved technology). The sawmilling industry has improved during the period of the project in terms of efficiency, product quality and production capability, thereby strengthening the competitiveness of the Zimbabwean timber products in the regional and international sawn timber export markets. The private sector has expanded and introduced improved product quality in order to remain competitive. Chimanimani is the first band saw mill in the country and the quality of band sawn timber is almost a necessity to export to international markets. Band saw technology has not been introduced into the other mills as yet but, with the increasing popularity of the Chimanimani finish, this will likely come shortly. The industry has almost totally moved to kiln dried timber which, to some degree, has possibly been spurred on by the increased kilning capacity in the FC. The current depressed demand for softwood timber in the domestic and regional markets (mainly Botswana and South Africa), is not sufficient to absorb the increased output and, combined with the collapse of the South East Asian markets, this has forced the domestic timber producers to search more aggressively for new market opportunities in Europe and North America. The higher quality timber products emanating from these recent investments have enabled the industry to hold, and even expand, traditional export markets while achieving encouraging successes in new markets. In addition to improving the efficiency and quality of the product, the project has improved the utilization of the plantation softwood resource in Zimbabwe, which was not being fully utilized prior to the project. Restructuring of Forestry Commission 14. In response to a request from the FC to assist it in preparing itself for the new challenges arising from the government's adoption of the economic reform program in 1991, the Bank provided Technical Assistance (TA) to help FC in the preparation of its restructuring proposals, and this became one of the main areas of focus of Bank supervision missions from 1995 onwards. The preparation and approval process of the restructuring proposals was, however, very slow and resulted in the failure by the government to comply with a Loan covenant which required the conversion of FC's long-term government loans into equity. The proposals were only approved by GOZ in February 1998. Under the proposals, the present FC will be split into three autonomous entities: a wholly GOZ-owned commercial company (later to be floated on the local stock exchange) which would take over the assets and liabilities of the commercial forestry activities of FC; a commercial company, fully owned by FC, which would take over the tourism activities of Ngamo Safaris; and the slimmed down FC to carry out, on behalf of Government, the regulatory and development -7- functions in the forestry sub-sector. Plans to implement the first phase of the restructuring are underway, starting with the amendment of the Forestry Act expected in the first quarter of 1999. C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT Implementation Record 15. The Bank loan became effective on April 17, 1991, almost one year after the Board date because of the Iraq/Kuwait war, which adversely affected BADEA's ability to complete negotiations with GOZ regarding parallel financing for the project. The Bank loan agreement had to be amended to allow funds to be disbursed before the BADEA loan became effective. The commercial forestry component therefore got off to a late start. Further delays resulted from misunderstandings between GOZ and the Bank regarding procurement of TA, as well as the lengthy period taken to replace the FC project coordinator following the death of the incumbent in 1992. These delays also slowed down the rate of disbursement of the Bank and BADEA loans. Once these issues were resolved, project implementation progressed well except for other delays which were experienced down the line due to revisions in technical designs of the mill and conflicts between FC and the consultants regarding the latter's performance. Mill construction was therefore completed 22 weeks behind schedule. The Bank loan was fully disbursed. Only half of the BADEA loan was disbursed, and it was extended to the year 2000 to allow for the completion of the sawmill rehabilitation program and the procurement of additional equipment. 16. The implementation of the rural afforestation component was extended beyond the communal areas (CAs) and was broadened to include resettlement areas (RAs). The FC forestry extension staff applied innovative techniques in implementing the project in order to minimize the unfavorable impact of some of its institutional and financial constraints. For example, they networked with the staff of other institutions offering extension services in rural areas such as Agritex and NGOs; encouraged school outreach programmes; and utilized farm forestry promoters. This enabled forestry extension to have a wider coverage than it would have otherwise achieved given the limited numbers of FC extension staff. About 45% of the seedling production and tree planting activities were implemented by farm families; 27% by schools; and 25% by groups. In the woodland and forestry grazing management component, the FC promoted a participatory approach involving the formation of village-level resource management committees (RMCs) composed of representatives of the communities living near the forests. The RMCs have been instrumental in regulating community activities related to grazing, harvesting of trees, firewood - 8 - collection and harvesting of ancillary wild crops such as grass, mushroom and honey for personal use or for sale. This approach appears to be achieving encouraging results in promoting sustainable utilization of forest resources in the area. Factors Affecting Project Implementation 17. Rural Forestry Development activities were adversely affected by: (i) the inadequacy and high turnover of forestry extension staff (mainly due to poor conditions of service); (ii) droughts in 1992 and 1995, which reduced seedling production and the survival rate of young trees while also increasing dependency of some rural communities on wood based income sources such as firewood sales; (iii) inadequate recurrent budget from the G(OZ, which forced the curtailment or untimely undertaking of project activities; (iv) lack of suitable and affordable termite control mechanisms, which increased the mortality rate of trees and seedlings; and (v) the absence of credit facilities for smallholder tree farming, as the Agricultural Finance Corporation refused to grant loans for such activities. To some extent, the small grants provided through the project's Support Fund compensated for the lack of credit but, as these were free handouts, they are not sustainable. On the positive side, FC extension staff sensitized the smallholder farmers on the commercial and income generating potential of poles, fruits and other tree products, and promoted market linkages for them. This, along with the provision of training, technical backstopping and access to a good quality seed bank, contributed to the farmers' active participation and interest in seedling production and tree planting under the project. 18. The Wildlife and Forest Grazing Management activities were adversely affected by the lack of counterpart funds from the GOZ and a delay in the submission of an acceptable inception report and management plan to CIDA. As a result, major activities under the component did not start until mid-1996. 19. Commercial forestry operations were adversely affected by various factors. Firstly, despite the lack of in-house capacity within FC to handle a project of this magnitude, the FC chose the option of implementing the project on the basis of separate contracts for the construction of civil works and for the procurement of machinery and installation (which is more difficult and requires a lot of management and supervision) instead of opting for turnkey operations (which are simpler, minimize management requirements and reduce operational risks). Secondly, project implementation was adversely affected by the unsatisfactory performance of the project management consultants, during the detailed design and construction phases of the Chimanimani sawmill project, and the lack of firmness by FC in supervising them. Failure by the consultants to prepare procedural manuals in the early period of the mill construction, resulted in quality problems, while the late submission of drawings and specifications by the consultants and their usually slow response to basic design changes requested by FC resulted in procurement delays. Despite several recommendations from WB supervision missions for the consultants to be replaced, FC did not terminate their contract until April 1997. Thirdly, procurement delays were experienced, particularly in the early stages. This was largely due to inadequate understanding, by FC project staff, of the WB procedures that required international competitive bidding in most cases, the slow response to FC's requests for no objections by the Bank (before procurement review responsibility was devolved to the Resident Mission) and BADEA. A project launch workshop, as well as the provision of regular training support by the Bank, to familiarize project staff with the relevant procedures would have been helpful. Such support, for example related to the preparation of bid documents and specifications, could have helped to ensure that the FC avoided procurement of inferior quality goods and got the best value for money on its tenders. Fourthly, the introduction of an additional step by GOZ in the procurement review process requiring the Govemment Tender Board to submit all tenders to the Office of the President for further review, although eventually removed, caused critical delays on several tenders. Finally, in the initial stages of the project, timely delivery of materials and other goods was hampered due to a poor access road connecting the mill site to the nearest tarred road, particularly in the rainy season. A major positive factor was FC's keenness and continued commitrnent to the project, including honoring its financial obligations to the project. Project Costs and Financing 20. Costs. Total project costs are expected to be about US$50.1 million (see Table 8A) compared to the appraisal estimate of US$64 million. The differences can be attributed to: (i) the steady erosion of the value of the local currency unit throughout project implementation (e.g. US$1.00 = Z$2.00 at appraisal compared to Z$23.00 at project completion); (ii) the decline of the value of the US dollar vis-a-vis the Swedish Kroner, and delays by the consultants for the mill in fulfilling their assignment resulted in their costs increasing by over 76%; and (iii) a cut-back in the rural forestry component following a DANIDA review in 1995. The total cost figure is also under-stated because, due to lack of reliable data, it does not include the costs of inputs provided by the non-FC beneficiaries, estimated at appraisal to total US$7.0 million. 21. Financing. The project was financed by a mix of external loans and grant finance and local contributions from the FC, GOZ and project beneficiaries. The rural forestry component was financed by a DANIDA grant; the forest grazing management component by a CIDA grant; and the commercial forestry component by WB and BADEA loans. The WB loan of US$14.5 million was almost fully disbursed (99.8%), and financed only components of the Chimanimani saw mill in the following manner: (i) Works - mainly sawmill buildings and related civil works (US$3.43 million), (ii) Goods - including sawmill and logging equipment (US$6.63 million), and (iii) Consultants Services - engineering consultants for preparing the feasibility study and supervising the construction of the mill and installation of equipment (US$4.4 million). DANIDA provided DKK46.2 million (US$6.7 million) out of the original comnnittment of DKK62.4 million (US$9.4 million) for the rural afforastation component, including support for FES. BADEA provided US$4.8 million out of the original loan of US$9.4 million for the Chimanimani sawmill and rehabilitation of other mills (the loan has been extended for another 2 years). CIDA - 10- provided US$1.5 million for the forest grazing component, compared to the original commitment of US$1.0 million (the closing date for the grant is now end of the year 2001); the FC provided the equivalent of nearly US$18.0 million compared to the original commitment of US$15.0 million; and, in addition to building the access road to the new mill, GOZ provided US$5.4 million compared to the original commitment of US$7.8 million. The non-FC project beneficiaries also contributed in cash and in kind but due to the lack of reliable data, the monetary value of their contribution cannot be reliably estimated. D. PROJECT SUSTAINABILITY 22. Overall, project sustainability is likely, particularly because of the inherent strength of the commercial forest activities on which about three-quarters of the project funding was spent. 23. Rural Forestry and Forest Grazing Management Activities. Sustainability is uncertain beyond the short to medium term because of uncertainties regarding recurrent budget funding from GOZ, and potential staffing difficulties within the FES. DANIDA has agreed to finance field operations in rural forestry development for the next three years, but uncertainties remain about the level of future budgetary allocations from GOZ. Restructuring of the Forestry Extension Service is planned and should result in greater security of tenure for extension staff, but staff numbers may still be inadequate. CIDA funding of the forest grazing management activities does not close till the year 2001, but faces similar issues regarding GOZ counterpart funding and extension support services. FC is trying to address these issues through various innovative strategies, including devolving some activities to the communities, strengthening linkages with other organizations providing similar services in rural areas, mainstreaming of the forestry extension service into the FC, and exploring cost recovery for some services so as meet to part of the recurrent budget. While the sustainability of the FES is critically dependent on the implementation of this survival plan, the commercialization of the tree growing activities promoted under the project should ensure the long term sustainability of these activities at the community level, particularly such activities as seedling production, tree planting and other income- generating activities started under the project. 24. Commercial Forestry Operations. The sustainability of the commercial forestry activities is likely because the operations are financially viable, particularly when the current operational bottlenecks regarding the running of the mill (typical during the first year of operation) and staff training are sorted out, and the current depressed domestic and regional timber marketing situation improves. Additionally, the operations will soon be commercialized, thus ushering in a more competitive operational environment, which would be more profit-oriented. FC has recently - 11 - completed a supply and demand forecast for coniferous saw logs from their existing resource; these indicate adequate supplies for the Chimanimani sawmill and the rehabilitated mills for the next 30 years. E. BANK PERFORMANCE 25. World Bank performance was generally satisfactory throughout the life of the project. Both the concept and design of the project were appropriate and sound as well as in agreement with the Government's and WB's strategy for the forestry sub- sector, and drew upon lessons learned from the Rural Afforestation Project (RAP). The WB assessed the commercial aspects of the project reasonably well. Loan disbursements were generally made on time. However, the borrower complained about the long turn-around time in the review process for ICB procurements. The WB also shares responsibility for some lapses in the procurement process, particularly its failure to advise the Borrower to follow the turnkey option for the construction of the mill. The Bank should also have provided training to the project staff on Bank procurement procedures at the beginning of project implementation to avoid delays that resulted from the client's lack of familiarity of these during the initial stages of the project. 26. The project was actively supervised and 11 supervision missions reviewed it2. The missions not only monitored the project; they also provided advice to the Project Co-ordination Unit (PCU) on procurement, technical problems and project management. Their timely interventions and guidance favourably affected project implementation. There was, however, little synchronization between these missions and those sent by BADEA, DANIDA and CIDA, respectively, to review the components they financed in parallel. As a result, for all intents and purposes, the rural forestry components appeared to be implemented as separate projects. Although this did not have any adverse effect on project implementation (as it easily could have), synchronization of supervision missions from the different agencies would have been desirable. Joint supervision with BADEA, for example, could have resulted in better co-ordination of activities and speedier resolution of some implementation problems encountered in the sawmill component. 2 In addition to the 11 full supervision missions, 8 portfolio status updates were prepared by the task manager in the field. - 12 - F. BORROWER PERFORMANCE 27. Borrower performance was marginally satisfactory. Although GOZ complied with most covenants under the WB loan agreement, it failed to honour an important covenant requiring the conversion of government debt to FC into equity. As a result of this, the FC-'s liquidity was weakened as the organization was forced to use up most of its reserves or to rely on bank overdrafts to sustain its operations while various planned investments, such as replanting of forests, had to be postponed. The GOZ also substantially failed to meet its budgetary obligations to finance recurrent costs for the rural forestry and forest grazing management components. Even on occasions when funds were available, because of bureaucratic procedures involving the Ministry of Mines, Environment and Tourism and the Ministry of Finance, the lead time between FC requesting and receiving the funds was often 2-4 months. In the procurement operations, GOZ introduced another layer in the procurement chain (tenders to be cleared by the Office of the President) which contributed to further delays in the process. 28. The FC showed continuous commitment to the project throughout. It was aggressive in pursuing ways and means of developing an effective extension organization and systems for achieving the project's objectives; the initiatives shown by them have greatly contributed to the positive outcome of the project. With regard to project management and supervision, failure by FC to be firmer and more decisive in dealing with, and monitoring the performance of, the consultants for the Chimanimani mill was a major flaw. However, taking into account that the PCU staff had limited experience in imnplementing a project of this magnitude and complexity, they performed reasonably well and their confidence and capability developed significantly during the project. G. ASSESSMENT OF OUTCOME 29. The overall outcome of the project was satisfactory, having largely achieved its main objectives and showing a reasonable chance of medium to long-term sustainability for the major activities of the project. Rural Forestry Development. 30. The outcome was satisfactory when the impact of extension on seedling production, tree planting and the promotion of woodland management, is considered in the light of the financial and staffing constraints which the component faced. As a result of the project, there has been a successful establishment and operation of decentralized community and private nurseries; an increase in the production of woody and non-woody products; a relatively successful woodland management and - 13 - environmental conservation and rehabilitation program; and the development of institutional capacity for forestry extension. Forest Grazing Management. 31. The outcome of this component cannot be properly assessed at this point as activities began late and, therefore, so far, only limited results (though quite positive, such as the development of participatory methodologies in natural resource management and the establishment of RMCs) have been realized. Commercial Forestry Development. 32. The outcome of this component was satisfactory. A modem and financially viable (estimated financial rate of return 16%) mill, reportedly themost advanced in Southern Africa, has been established, is operational, and there is a marked improvement in productivity (as evidenced by a high timber recovery rate of nearly 50% and the improved logging operations) and product quality. Demand for its timber, both locally and in export markets, is rising. Nevertheless.the efficiency of the mill is still not up to the required standard, and FC still needs to perfect its operating and maintenance techniques to realize the level achieved in similar operations elsewhere in the world. The refurbishment of FC's older mills has enabled these mills to improve productivity (timber recovery rates have improved from around 30% to nearly 40%) and product quality. 33. On the institutional side, in the PCU, the project has helped build in-house capacity in project management and co-ordination, which the FC may call upon to implement similar projects in the future. 34. On the socio-economic side, the Chimanimani mill has transformed a backward area into a vibrant growth area. About 300 new jobs have been created at the mill, another 100 in the logging operations and possibly another 500-600 in downstreamn operations, such as in transport businesses, produce marketing etc., associated with the project. The 12 km tarred road, constructed by GOZ largely to provide good access to the mill, has opened up a hitherto inaccessible area and brought about concomitant benefits such as improving niral commerce and encouraging agricultural production in the area. 35. The outcome of project assistance with the restucturing of the FC was marginally satisfactory largely because FC did not get adequate and timely support for the process from the parent ministry. The FC's proposals, under preparation and consideration since 1995, were only approved by the Cabinet in February 1998 and the fornal restructuring will be implemented during the first half of 1999 following the Parliamnentary approval of the amendment of the Forestry Act. - 14- Economic Rates of Return (ERR) 36. The commercial forestry operations are estimated to achieve an ERR of 22% (SAR estimate of 30%). The return is less than the SAR estimate largely because of the late start of saw milling operations and the below-capacity mill production in the initial period of operations. Due to lack of reliable data on costs, it is not possible to estimate the rates of return for the rural forestry component and, therefore, for the project as a whole. H. FUTURE OPERATIONS Rural Forestry Development 37. So as to limit the adverse impact of reduced recurrent budget funding from GOZ, and to enhance the sustainability of activities initiated under the project, FC will continue to devolve more activities to the communities, as well as networking with other organizations providing similar services in the rural areas. There are also plans to institutionalize the forestry extension service into the mainstream FC and to explore possibilities of cost recovery for some services so as to meet part of the recurrent budget of the extension activities. Commercial Forestry Development 38. In preparation for commercialization and eventual privatization, FC has prepared a medium-term plan for the commercial forestry operations. This envisages floating the company on the Zimbabwe Stock Exchange about two years down the line; concentrating on its core business of timber production and wholesaling; reducing the number of products produced, better synchronization of production with market requirements; cost reduction and rationalization; more efficient debts (accounts receivable) management; and technical staff training. - 15 - 1. KEY LESSONS LEARNED 39. The following lessons have been learned: Rural Forestry Development and Grazing Management * By demonstrating the income generating potential for poles, fruits and other forest products through promotion of market linkages and information, thereby creating awareness of the commercial value of trees, the extension staff successfully promoted interest in,tree planting and forest resource management among rural communities. * The provision of adequate training and technical backup, as well as access to a good seed bank, as was provided under the project, is essential for the successful development of private or community nurseries. Commercial Forestry Development * When undertaking a complex construction operation such as the Chimanimani saw mill, consideration should be given to a limited number of turnkey engineering packages, whereby the supplier would be responsible for everything within the package. This would minimize management and supervision demands on the part of the recipient institution, while at the same time placing the burden of design and start- up problems on the equipment supplier. The concept of a large number of equipment suppliers, although an acceptable practice in the saw mill industry in industrialized countries, places a cumbersome burden on the procurement of goods and supervision of activities, including quality control particularly of consulting engineers. It also results in a large number of operating and maintenance manuals of varying quality. For developing countries, which may lack supervisory and managerial capacity, greater consideration should be given to using a limited number of equipment suppliers and the supply of large integrated packages. * In order to minimize delays, project implementation procedures and standards, including those relating to procurement, initiation and approval, as well as modifications of technical designs, should be established early in the project and it is critical to ensure that all interested parties such as consultants, contractors, and the implementing agency (ies) are familiar with these. - 16- General * Synchronization of supervision missions from different donor agencies would have been desirable. Although this did not have any adverse effect on project implementation (as it easily could), joint supervision with the other three donors supporting the project, could have resulted in better co-ordination of activities, the adoption of a common approach by donors and speedier resolution of some implementation problems. * Development indicators should be defined at the outset of the project to ensure consistency and accuracy in measuring the success of project activities in achieving the intended development objectives. - 17- PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS A. Achievement of objectives Substantial Partial Negligible Not Applicable Macro policies E7 Fl I F7 Sector policies E E E E Financial objectives l E l E Institutional development E El 0 0 Physical objectives | E E El Poverty reduction E1 Fl /] E Gender issues E E El E Other social objectives El E E E Environmental objectives E E E E Public sector management E [] E E Private sector development E E [I Other (specify) l l E E B. Project sustainabilit Likely Unliely Uncertain C. Bank performance satisfactory Satsfactory Deficient ( ) ( ) (I ) Identification E E E Preparation assistance E El Appraisal Supervision W i n [ - g18- D. Borrower performance satisfactory Satisfactory Deficient Preparation Z W7 Implementation Covenant compliance /1 [ Operation (if applicable) I(marginally satisfactory) Highly Highly E. Assessment of outcome satisfactory Satisfactory Unsatisfactorv unsatisfactory TABLE 2: RELATED BANK LOANS/CREDITS Loan/credit title Pmrpose Year of approval Status Preceding operations 1. Rural Afforestation Forestry Development 1983 Closed 03/89 Project (Cr. 13680 ZW) Following operations 1. Agricultural Services Institutional Development 1998 Effective 12/28/98 and Management Project (Cr; 3080 ZW) - 19- Table 3: Project Timetable Steps in project cycle Date planned Date actual Identification (Executive Project Summary) Preparation 03/88 1) 09/88 2) Appraisal 02/89 02/16/89 Negotiations 11/89 11/16/89 Board presentation 09/89 03/22/90 Signing 09/27/90 Effectiveness 07/90 04/17/90 Midterm review (if applicable) 06/94 06/94 Project completion 06/98 06/30/98 Loan closing 060/98 10/31/98 Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ Millions) FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 Appraisal estimate 1.7 4.9 8.7 11.3 12.5 13.5 14.5 14.5 Actual - 0.6 1.0 1.62 3.96 12.04 14.37 14.48 Actual as % of estimate 0 12% 11% 14% 31% 89% 99% 100% Date of final disbursement: November 9, 1998 - 20 - Table 5: Key Indicators for Project Inplementation a) Rural Afforestation Indicator SR Target ActuallEstimate Remarks Seedlings Produced 51.5 million 51.98 million Virtually all production from farmers' I nursenes Trees Planted 46.4 million 35 million + 1 Target allows for 10% culls. | Seedlings planted outside CAs and as | few-tree-plantings not counted. PilotPole aTmeabnnt Plants 17 2 Demand for treatment plants _____________________ ______ _____ ______ __dim inished Potential Wood Production 45,000 150,000 m3/yr. i Mainly poles and posts |Potential Fruit Production N/A | 200 million fruits/yr. Mangos, avocados, papaws, citrus Number of Woodland 7 540 Majority undff schools or individuals Management Projects AreaIof Woodlaad Mngt N/A 73s000 ha 72,500 under communities or rural district councils Non-wood Forest Products N/A 90,000 kg/year of Associated mainly with woodland honey, mushrooms, management, but honey production medicines & fodde. also in woodlots. In-service Short Courses I N/A 82 860 participants .~ ~ ~ ~ ~~~~~~~~eiie . ,odr aloi.odos [External Short Courses N/A 20 35 participants Long Term Training N/A 30 participants Both in Zimbabwe and overseas Farmer & Exten Aid 118,100 20,900 participants Includes training for AGRITEX, Training INGOs and farmers. Resource Centre 1 3 videos, 2 slide series, T video and 4 leaflets translated into Productions 1 3 handbooks, 4 leaflets. j Shona and Ndebele. Motor Vehicles _ _ ] 122 Motor Cycles L Bicycles ____________l_10__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Computers (with pnters) 1 | _ b) Commercial Forestry Development Indicator i SAR Target Actual/Estimate Remarks [New Sawmills Established 1 1 Completed 22 months behind schedule. 1 Sawmills Improved 4 3 Inprovement works to continue till _~~~~~~~~~~~~~~~~~~ya 2000. - 21 - Table 6: Key Indicators for Project Operation I. Key operating indicators in SAR/President's Report Estimated Actual Not Applicable Table 7: Studies Included in Project Purpose as defined Study at appraisal/redefined Status fInpact of study 1. Market Study To assess tthe expected product Completed in 1993 Indicative product acceptance from the new mill distribution. 2. Mid-term Review Project review Done in 1994 Slightly modified project objectives Table 8A: Project Costs Appraisal estimate (US$M) Actual/latest estimate (US$M) ITEM Local Foreign Total Local Foreign Total costs costs costs costs 1. Rural Forestry 12.6 4.0 16.6 7.1 5.0 12.1 2. Wildlife & Forest Grazing 0.6 0.5 1.1 0.3 0.5 0.8 3. Commercial Forestry 5.1 29.9 35.0 14.7 22.5 37.2 Development 4. Contingencies 7.6 3.8 11.4 TOTAL 25.9 38.2 64.1 22.1 28.0 50.1 1I = Including contingencies. - 22 - Table 8B: Project Financing Appraisal estimate US$M) Actual/latest estimate (US$M) ITEM Local Foreign Total Local Foreign Total costs costs costs costs IBRD 3.3 11.2 14.5 5.4 91 14.5 Co-financing institutions - DANIDA 2.6 6.8 9.4 1.7 4.3 6.0 - BADEA - 9.4 9.4 - 4.8 4.8 'I - CIDA 0.2 0.8 1.0 0.3 1.2 1.5 Domestic contribution - FC 7.8 7.2 1.5.0 9.3 8.6 17.9 - GOZ 5.0 2.8 7.8 5.4 - 5.4 - Target GPs 7.0 - 7.0 TOTAL 25.9 38.2 64.1 22.1 28.0 50.1 'I = Loan extended till the year 2000 Table 9A: Economic Costs of Return (%) SAR Estimate ICR Estimate Whole Project 30 N/A- Rural Afforestation 1 9 N/A The underlying assumptions and ERR calculation details are set out in Appendix 3, Table 4. The IRR for the whole project cannot be calcalated because of lack of cost and benefit data for the ural afforastation and forest grazing activities. - 23 - Table 9B: Other Benefits The project had substantial social-economic benefits - Government constructed a 12 kn tarred road to the new Chimanimani Sawmill. This opened up the area and greatly improved accessibility for rural commerce and stimulated agricultural production in the area. Additionally, about 1000 jobs directly or indirectly associated with the new mill were created. -24 - Table 10: Status of Legal Covenants LOAN COVENANT PRESEN AGREEMENT SECTION TYPE T DESCRIPTION OF COVENANT COMMENTS STATUS 4.01 (a) i I C Maintaini or cause to be nuintainied in accordance with sound accounting practices, records aund accounts I conilfliance retlecting suc h expenditure. 4.01 (a) ii 1, 5 C Ensure that all records (contracts, orders, inlvoices, bills, receipts aud ofiler docunicuits) evidentcing suci IhI cimlianice expenditures are retainied, witil at lcast one yuwar ultr (lite Duik has received the audit report ibr the lY in whiiih the last withdrawal from the Loan Account was made. 4.01 (a) iii 1, 5 C Enable the Bank's represeatatives to examine such records. 1 compliance 4.01 (b) i I C The Borrower shall: have the records and accounts referred to in para. (a) (i) Luad those for Special Accouwit for ln compliance each fiscal year audited in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank. 4.01 (b) ii I C Furnish Bank as soon as possible and not later thaii 6 months after the end of each sucb year the report ol'such In compliance audit by said auditors, of such scope and in such detail as Bank shall have reasonably requested, including separate opinion by said auditors as to whe ther SOE subnitted dusinig such FY, along with procedures and internal controls involved in preparation can be relied upon to support related withdrawals 4.01 (b) iin I C Furnish to the Bank such other infonmialioin concemning said records aid accounts and the audi thiereof as the In compliance Bank sbad frc m tirrte reasonably request. 4.02 S NC The Borwer shall, by not later than October 1, 1990, take all necessary action to convert the outstanding debt Not Complied with. Compliance owed by FC to the Borrower into equity. deadline extended to.... Conversion of FC debt to equity was delayed pending approval and implementation of' restructuring including chanige in legal status ol'fC from a parastatal to a wholly owned government company. Now expected to happeni by December 1999 and conversion ol'debt to equity will be ef17ected innuediately thereaftler. -25 - LOAN COVENANT PRESEN AGREEMENT SECTION TYPE T DESCRIP7ION OF COVENANT { COMMENTS STATUS 4.03 3 CP Without any linmitation or restriction upon any ol'its obligations under the l omi Agrecenwit, the Borrower shall Partial compliance continue to provide to FC all the funds, racilities and other resources required by FC to carry out services to the public on behalf ofthe Borower and the Borrower shall assume any and all liabilities arising out of the carrying out of such services. 4.02 9 C FC shall undertake a review each year the stumpage rates it charges for ditTeriwt species ol'trees and shall adjust In compliance such rates to ensure that such rates cover the replacement costs Ibr such species. 4.03 (a) 9 C Except as the Bank shall otherwise agree, FC shall: carry out every 3 years a revaluation of its assets and In compliance liabilities, to such extent as shall be necessary to retilect adequately, at the time of suchi revaluation, the curneiit value thereof, in accordance with a sound and consistently applied practice, the first such revaluation to be completed by June 30, 1991. 4.03 (b) 9 C Incorporate and utilize the results of such revaluation in its annual deterniniation of tinanicial perforimance ln comnpliance Sch. I - 3 (b) 5, 9 C Payments made for expenditures under category (2) of the table in par. 1 above, uniless and until FC has II compliance procured and taken delivery of the sawmill equipment (saws, dry mill and storage, mobile equipment, product transport and product depot) to be financed under the B3ADEA Loaii Agreement. PROJ. 9 C Not later than December 31 each year, FC shall prepare and turnish to the Banik fbr its review and commucits, a hi compliance AGREBMNT - work plan covering the period of 12 months commencing on fbilowing July 1I 2.06 09 2.07 10 C Without any limitation/restriction upon its obligation wuider Sec. 2.01 oflthis Agreemenit, FC shall prepare and In compliance 10 fiunish Bank and Borrower, no later thani 6/30/94, detailed assessnent of implementation of Project on the basis of Terms of Reference satistractory to Bank. Atler review by FC, Borrower, Bank and FC shall implemenit suci changes as needed to ensure achievement of obj. of Proj. asset tbrth in introductory pard of Sch. 2 ol'PA. 3.04 2, 9,10 C FC shall prepare and furnish to the Bank, by not later than 12/31/90, a research program covering its 1991, 1992 icompliaice and 1993 ftancial years. Following review and comments by the Bank, FC shall adopt and implement a research program satislt'atory to the Bank. Covenant Type: 1. Accounts/audit 6. Environmnental covenants I1. Sectoral or cross sectornl budgetary or other resource allocation 2. Financial performance/generate revenue from beneficiaries 7. Involuntary resettlement 12. Other 3. Flow and utilization of Project finds 8. Indigenous people Status: CD = Complied with; NC = Not C'omplied with, 4. Counterpart finding 9. Monitoring, review & reporting CP = Comnplied with partially 5. Management aspects of the Project or of its executing agency 10. Implementation - 26 - Table 11: Compliance with Operational Manual Statements Statement number and title Describe and comment on lack of compliance Basically, there was compliance with the applicable Bank Operational Manual Statements. Table 12: Bank Resources: Staff Inputs Stage of project cycle Planned Revised Actual 1/ Weeks US$ Weeks US$ Weeks US$ Preparation to N/A - N/A 81.7 92,200 appraisal N/A - N/A 20 50,200 Appraisal N/A - N/A 13.4 32,800 Negotiations through Board approval NA - NA 149 409,300 Supervision 13.2 37,200 Completion I__ _ _ _ _ _ _ _ _ __ _ _ _ _ _ __ _ _ _ TOTAL - - - - 277.5 621,700 1/ Include travel costs (Direct costs only) NA=Not available-not recorded in the Bank's FACT system. - 27 - Table 13: Bank Resources: Missions Stage of Number Specialized project cycle Month/ of Days in Stafflskills Performance Types of _ year persons field Represented rating Problems Preparation I 2 Appraisal 02/89 8 Supervision 11/90 2 10 A S L 06/91 2 7 A S L 2 12/91 1 15 F, P S' D 07/92 3 12 F, P S M, T 4 10/93 3 10 F, P, R S M 04/94 1 8 F S T 6 09/94 1 5 F S P 7 06/95 2 10 F, C S P, D 8 11/95 5 15 R, F, C, P, D S P 9 10 05196 3 11 R, F S 12/96 5 12 F, F, C, M S T 11 06/97 3 21 R,F,N S T 12 10/97 2 16 R, F S T 05/98 3 16 R, F, C S T 14 Implementation 08/98 3 15 F, A Completion KEY a) Specialisation: A=Finance; C=Privatisation; D=Disbursement; F=Forestryincluding Sawmilling; M=Marketing; N=Natural Resources; P=Procurement; R=Rural Development b) Performance Rating- S=Satisfactory c) Types of Problems: D=Disbursements; L=Legal/Loan effectiveness; M=Management; P=Procurement; T=TechmicaL -28 - ZIMBABWE FORESTRY RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (Loan No. 3179-ZW) IMPLEMENTATION COMPLETION REPORT APPENDIX A AIDE-MEMOIRE TABLE OF CONTENTS INTRODUCTION .............................................................. 29 PROJECT OBJECTIVES .............................................................. 29 IMPLEMENTATION EXPERIENCE AND RESULTS ............................................................... 30 FACTORS AFFECTING PROJECT IMPLEMENTATION ........................................................... 30 PROJECT COSTS AND PHASING .............................................................. 33 BANK AND BORROWER PERFORMANCE ................................... ........................... 34 PROJECT SUSTAJNABILrrY .............................................................. 35 KEY LESSONS LEARNED ............................................................... 36 FUTURE OPERATIONS .............................................................. 37 NEXT STEPS ................................................................ 37 TABLE 1. Rural Afforestation Targets and Achievements ATTACHMENT 1. List of People Met by the Mission - 29 - IMPLEMENTATION COMPLETION REPORT ZIMBABWE FORESTRY RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (Loan No. 3179-ZW) APPENDIX A AIDE MEMOIRE Introduction 1. A FAO/World Bank Cooperative Program (CP) mission composed of F. Bitanihirwe (Investment Officer, Mission Leader), P. Ryan (Rural Forestry Specialist), and J. Easton (Industrial Forestry Specialist) worked in Zimbabwe 17 August to 4 September 1998 to prepare the Implementation Completion Report (ICR) for the above project. The mission worked closely with Mr C. Chidawanyika, WB Task Manager in charge of the project and met officials of the Danish International Development Agency (DANIDA) and the Canadian International Development Agency (CIDA) which co-financed the project. Meetings were held with the Ag. General Manager of the Forestry Commission (FC) and his staff. Field visits were made to Mutoko, Mutare, Masvingo, Bikita, Gokwe, and Zvimba districts to look at the rural forestry operations financed by the project and hold discussions with beneficiaries; visits were made to Mutare and Chimanimani to look at the saw milling operations which were constructed or rehabilitated by the project. 2. The mission wishes to express its appreciation to the FC for the hospitality, excellent organization of field visits and efforts made to provide the information needed by the mission. Project Objectives 3. The main objectives of the Forestry Resources Management and Development Project (FRMDP) were to (i) conserve forests and the environment as well as increase the production of wood for fuel and construction purposes; (ii) improve forest grazing and wildlife managernent; and (iii) improve the productivity and quality of the wood processing industry. These objectives were appropriate and realistic given the constraints that, at the time, faced the forestry subsector. 4. In order to achieve the above objectives, the project planned to (i) promote tree planting and woodland management in the Communal Areas (CAs) of exotic as -30 - well as indigenous species; and (ii) upgrade the logging, extraction, saw milling and manufacturing facilities and operations. 5. Several lessons learnt from the IDA-funded Rural Afforestation Project (Cr. 1368-ZIM) (1983-1989) were applied to the Rural Afforestation Component. These included the rejection of the premise that perceived or actual rural wood fuel deficits would encourage the growing of trees for fuel; the realisation that centralised nurseries were expensive to operate and that decentralised village, farmer or school nurseries provided both greater sustainability and the opportunity for farm family revenue earning. However, the objectives as well as activities and expected outputs for the rural forestry operations could have been more specific on the need to establish a long-term capability to foster and support wood production and non-wood forestry-based production, the conservation and sustained yield management of forests, and the amelioration of environmental damage in CAs. Partially as a result of this definition GOZ tended to regard the project activities, including the establishment of the forestry extension service, as a project-related finite operation, thus hindering their sustainability. Implementation Experience and Results General 6. The project was generally satisfactorily implemented and met the desired objectives. Factors Affecting Project Implementation 7. Rural Forestry Development activities were affected by the following factors: Lack of sufficient forestry extension staff in the districts and the high turnover of such staff. This seriously curtailed project operations. Although the Forestry Extension Service of the FC adopted flexible and innovative approaches to overcome this impediment such as developing linkages with other agencies such as NGOs and encouraging school outreach programmes and farm forestry promoters, the lack of sufficient technical base remained a major constraint. Lack of credit facilities. This hampered the development of farm family and community-based forestry production activities. To some extent, the project's Support Fund compensated for the lack of credit but as these were free handouts, it is not sustainable. Droughts. The country experienced two serious droughts during project implementation. These reduced seedling production and the survival rate of trees previously planted, particularly in the period 1991 - 93. - 31 - Lack of suitable and affordable termite control mechanisms. This was an on-going problem in many areas causing considerable mortality of young trees. Inadequate GOZ recurrent budget. The government did not meet its fmancial commitment for the recurrent costs of the project. The funds were inadequate and were usually remitted late thus forcing the project to curtail or re-arrange its operations. Commercial potential for trees. Recognition by extension staff and farmers of the commercial potential for poles and posts and the promotion of linkages with markets for these as an incentive helped foster tree growing as an income generating activity. 8. The Wildlife and Forest Grazing Management activities were affected by the lack of counterpart funds from GOZ. Therefore, activities of the component did not start till mid-1996. 9. Commercial forestry operations were affected by the following factors. Poor Performance by Consultants. The performance of the consultants selected to update the feasibility study and carry out the detailed technical designs for the Chimanimani saw mill was not up to standard. They took annual leave as and when they desired irrespective of what work was in progress; did not consistently document and clear with FC the design details and specification changes agreed between the consultants and the suppliers; failed to provide operating and maintenance planning systems for the mill; and did not provide the report on the construction phase activities as specified in the contract. The consultant's contract was subsequently terminated by FC in April 1997. However, their failings resulted in inordinate delays to start and complete the construction of the mill. In addition, a number of design and construction faults attributable to both the consultants and some suppliers which came to light with the mill start-up, have caused a delay in achieving anticipated production levels and resulted in unforeseen additional capital investment. Poor Project Management. Project management assistance was included in the consultants' role because at appraisal it was recognized that FC did not have the in-house expertise to handle a project of this magnitude. However, the consultants failed to perform this function satisfactorily. The FC project team had to therefore carry out much of the project management and cost control tasks. The consultants did not prepare a site management procedure document, as required prior to starting construction, designating lines of authority on site until the FC, with Bank assistance, issued their own document. This resulted in some quality problems and delays in the early construction period. Procurement Delays and Supplier Selection: Procurement was handled by the FC project personnel. In general, the choice of supplier was based on - 32 - the lowest bidder rather than product quality. Also there were too many suppliers, leading to incompatibility of equipment and subsequent problems in sourcing spare parts. Now and then, procurement delays were encountered due to delays in specifications and drawings from the consultants; basic design changes requested by FC; GOZ subsequent insistence that all tender documents be cleared by the President's Office; protracted WB procedures with which the FC management team were not familiar, and BADEA's slow response times which sometimes resulted in procurement delays of up to 7 months. Saw Mill Location. The Chimanimani saw mill was located in an area which was difficult to access due to poor roads. GOZ experienced delays in up-grading the road leading to the site. Therefore, during the heavy rains access to the site by heavy vehicles was curtailed. Weather-related problems delayed the project, in total, by about 8 months. Project Results 10. The project attained most of its objectives both in terms of rural development, environmental amelioration, commercial operations and institutional development. 11. Rural Forestry Development. The project substantially achieved its objectives. Covering 58 districts, the project has assisted with the sustainable production of wood, non-wood forest products and horticultural products in Communal Areas and, to some extent, in Resettlement Areas. This production, together with private or community seedling production has helped to raise rural incomes. Conservation and management of woodlands has built on traditional systems, and, although it was slow to become a major extension activity, a sizable area of woodlands being managed can now be attributed to the project. In addition to directly attributable impacts on tree growing, woodland management and other production or conservation achievements, a 1997 evaluation showed there has been considerable indirect impact among families and communities not directly in touch with the forestry extension network. The physical achievements of the project as compared to appraisal estimates are set out on the Table 1. 12. The project beneficiaries were mainly farm families are above the poorest income strata as they received a greater proportion of extension inputs because they are more accessible and likely to succeed. This situation was also partly due to the priorities of the poorest families, which do not often include the growing of trees or wood production, with land being a very limiting factor. 13. The project effect on the amelioration of the environment in the communal areas has been minimal to date, but a start has been made and, in any case, reversing environmental degradation is a long-term process. 14. Wildlife and Forest Grazing Management. Full implementation of the component was not possible till 1996 because of a shortage of GOZ counterpart funding. Satisfactory progress has been made on the component since then, with 10 - 33 - Resource Management Comnnittees (RMCs) having been established, representing all the communities surrounding the Mafungabusi State Forest. Resource management and sharing activities have been underway for two years, including controlled thatch and broom grass harvesting, bee keeping, mushroom collection and fire monitoring. Incomes are accruing from the grass harvesting are accruing to the RMCs to finance local development initiatives. Grazing is being undertaken under FC regulations, though grazing plans have yet to be finalized. Following the review of the component in 1996, the wildlife sub-component was dropped and the remainder sub-component reduced in scope because of low priority, limited funds and the long time it would take to develop appropriate and sustainable methodologies. 15. Comunercial Forestry Development. The project constructed a modem saw mill at Chimanimani which was commissioned in April 1997. The mill is producing a superior product in terms of finish compared to other sawn timber in Zimbabwe. The timber is kiln dried which has reduced in staining of the product. T,he ability to dress and stress grade the product has improved suitability for timber export and enhanced ability to enter higher value markets. The mill is currently producing only up to about 60% of its rated capacity because of downtime due to plant design faults, technical breakdowns, operational staff unfamiliarity with the plant, and electricity supply problems. This will improve with further training of staff and putting in place adequate maintenance systems. 16. The project is rehabilitating 3 smaller saw mills whose equipment is antiquated. It is expected that when the rehabilitation works are complete, the quality of their products will improve significantly. 17. On a socio-economic side, the project has transformed a backyard place into a vibrant growth point. About 200 jobs have been created at the mill, another 250 in the logging operations and possibly another 500- 600 in downward operations, like in transport business, associated with the project. 18. Restructuring of FC. The project supported the restructuring process of the FC through the provision of TA and reviewing of the proposals. The restructuring proposals were approved by GOZ in February 1998 and plans to implement the finst phase are underway. These involve the split of the FC into three independent organizations: a commercial company to be called the Forestry Company of Zimbabwe (FCZ) incorporated under the Companies Act which would take over the assets and liabilities of the commercial activities of the FC; a commercial company, fully owned by FC, to take over the operations of the Ngamo Safaris; and the slimmed down FC to carry out regulatory and development functions for the forestry sub-sector. There were, however, delays in fulfilling the Loan Agreement Covenant, which stipulated the conversion of government debt to equity. Project Costs and Phasing 19. Total project costs are expected to be in the region of US$ 50 m compared to the appraisal estimate of US$ 64 million. The cost variations are due to (i) the steady - 34- erosion of the value of the local currency unit throughout project implementation; (ii) lack of information to estimate the cost elements financed by the target groups / beneficiaries; and (iii) a cut back in the rural forestry component following a DANIDA review in 1995. 20. The project was financed by a mix of external loan and grant finance and local contributions from the FC, GOZ and project beneficiaries. The rural forestry component was financed by a DANIIDA grant; the forest grazing management component by a CIDA grant; and the commercial forestry component by WB and BADEA loans. The World Bank loan of US$ 14.5 m was fully disbursed. DANIDA provided DKK 41.2 m (equivalent US$ 6.0 m) out of the original commitment of DKK 62.4 m (equivalent US$ 9.4 in); BADEA provided US$ 4.8 m out of the original loan of US$ 9.4 m (the loan has been extended for another 2 years); CIDA provided US$ 1.5 m (original commitment US$ 1.0 m; the closing date for the component is now end year 2001); the FC provided the equivalent of nearly US$ 18.0 m compared to the original commitment of US$ 15.0 m; and GOZ provided US$ 5.4 m compared to the original commitment of US$ 7.8 m. Bank and Borrower Performance The Bank 21. WB performance was generally satisfactory throughout the life of the project. Both the concept and design of the project were appropriate and sound as well as in agreement with the Government's and WB's strategy for the forestry sub-sector. Loan disbursements were made on time. However, the borrower complained about the protracted procurement procedures of the WB. The project was actively supervised and 14 supervision missions reviewed the project. There was however little synchronization between these missions and those sent by DANIDA and to review the components they financed with the result that those components appeared to be implemented as a separate projects. - 35 - The Borrower 22. GOZ met all covenants under the WB loan except one requiring the conversion of government debt into equity. It also failed to meet all its budgetary obligations to finance recurrent costs for the rural forestry and forest grazing management components. In the procurement operations, it introduced another layer in the procurement chain, which delayed the procurement processes. 23. The FC showed continuos commitment to the project throughout. It was aggressive in pursuing ways and means of developing an effective extension organization and systems and achieving the project's objectives; the initiatives shown by them have greatly contributed to the positive outcome of the project. Their efforts in implementing the rural forestry development and forest grazing management activities were frequently frustrated by lack of adequate budgetary support from GOZ and limited extension staff resources. The SAR intention of each 4istrict having one extension officer, plus an additional 10 district extension officers, did not materialize. 24. On the commercial forestry side, the FC project coordination team performed well although they should have monitored the performance of the consultants more closely. Poor supervision of the consultants resulted in delays in starting and completing the construction of the saw mill as well as defective design and construction of some parts of the mill. The confidence and capability of the team developed significantly during the project. Project Sustainability 25. Although DANIDA has agreed for the next three years to assist with financing field operations in rural forestry development, the sustainability of this component is unlikely because of uncertainties about the level of continued counterpart funding from GOZ and the likelihood that the already limited number of extension staff available may be further reduced. The same applies to the sustainability of the forest grazing management activities although the component does not close till the year 2001. FC is trying to address these issues by devolving some activities to the hands of the communities as well as networking with other organizations. While these will help, the organization will also need to institutionalize the forestry extension service into the mainstream FC and make re-doubled efforts at cost recovery so as to meet part of its recurrent budget. On the other hand, the sustainability of the commercial forestry activities is likely because the operations will soon be commercialized and, when the current operational bottlenecks regarding the running of the mill and staff training are sorted out and the timber marketing situation improves, the enterprise should be viable in the medium and long run. The FC has the ability to operate the new and rehabilitated mills and logging operations effectively. FC has recently completed a supply and demand forecast for coniferous saw logs from their existing resource; they indicate adequate supplies for the foreseeable future. - 36 - Key Lessons Learned Rural Forestry Development and Grazing Management 26. Several lessons have been derived: The realisation of the commercial value of tree products is an important incentive for tree production by farmers especially when extension staff provide the links with markets, including market price and demand information. The methodologies for forestry extension messages to be disseminated through collaboration with other extension agencies, NGOs and the use of para-extensionists. On-farm credit is essential if extension is to have its full impact. Involvement of farmers in the extension planning and project design provides for much greater sustainable impact from extension inputs. Decentralised private or community nurseries can be successful provided adequate training and technical backup is provided and good seed genetics are maintained. Commercial Forestry Development 27. Most lessons relate to procurement of goods and services. When undertaking a complex construction operation such as the Chimanimani minimize management and supervision demands on the part of the recipient institution while at the same time placing the burden of start-up and design problems on the equipment supplier. The concept of a large number of equipment suppliers, although an acceptable practice in the saw mill industry in industrialized countries, consideration should be given to turn-key packages so as, places a cumbersome burden on the procurement and stocking of spares. It also results in a large number of operating and maintenance manuals of varying quality. For developing countries, greater consideration should be given to using a limited number of equipment suppliers and the supply of large integrated packages. When negotiating lengthy contracts such as this with the main consultants, the contract should be negotiated in the currency of the loan so as to avoid foreign exchange risks. The design of auxiliary equipment such as conveying equipment must be checked to ensure that they adequately meet the local species and operating conditions. - 37- Procurement of equipment and machinery should not solely be based on price; quality and suitability for local conditions should also be taken into consideration. During negotiations with contractors, it should be ensured that their working methods are in accord with the proposed schedule and that suitable erection equipment will be available. The bid documents should include a description of the proposed approach to the project and erection methods and equipment to be used and included in the contract. Future Operations 28. Under the Afforestation Component of the Agricultural Sector Support Project, DANIDA will, over the next three years, finance the field operations for rural forestry development while CIDA will finance the forest grazing management activities till the year 2001. The medium term continuity of these operations is therefore fairly secure except for the uncertainties regarding staffing levels and the availability of counterpart funds from GOZ. 29. A medium term plan has been drawn up for the commercial forestry operations following their commercialization and eventual privatization. This envisages floating the company on the Zimbabwe Stock Exchange about two years down the line, better synchronization of production with market conditions, a close watch on costs, and more efficient collection of debts (accounts receivable). 30. The FC has expressed interest in donor assistance for staff training, particularly saw mill personnel, and for strengthening and institutionalizing the forestry extension system so that it becomes part of the mainstream FC. Next Steps 31. The mission will prepare a draft ICR to be forwarded to the WB by the middle of September 1998. GOZ, through FC has promised to have its own observations on the project ready by the middle of October 1998. The WB will submit the ICR to the Government by the end of October for comments. These would be forwarded to the WB by the end of November 1998. The final (gray cover) version of the report is scheduled to be presented to the WB Board in December 1998. - 38 - TABLE 1 Rural Afforestation Targets and Achievements [OutputlBenefit SARTarge Achievement/Estimate Remarks Seedlings Produced 51.5 51.98 million Virtually all million production from Trees Planted 46.435million+:fanmers' nurseries Trees Planted 46.4 35 million + Target allows for million 10% culls. Seedlings planted loltside Cas and as few-tree-plantings not counted. Pilot Pole Treatment 7 2 Demand for Plants treatment plants I__________________ _diminished Potential Wood 45,000 150,000 r3iyr. Mainly poles and Production I 5 /_ _ anposts Potential Fruit I N/A J 200 million fruits/yr. Mangos, avocados, Production papaws, citrus Number of Woodland 7 540 Majority under Management Projects schools or l_________________ _________I j individuals Area of Woodland N/A 73,000 ha 72,500 under Mngt communities or rural district councils Non-wood Forest N/A Honey, mushrooms, Associated mainly Products medicines, fodder. with woodland management, but honey production also in woodlots. In-service Short N/A 82 860 participants Courses External Short Courses N/A 20 35 participants Long Term Training N/A 30 participants Both in Zimbabwe I . ~~~~~~~~~~~~~~and overseas Farmer & Exten Aid 18,100 20,900 participants Includes training for AGRITEX, NGOs and farners. Resource Centre .13 videos, 2 slide series, 3 1 video and 4 Productions handbooks, 4 leaflets. leaflets translated -39- into Shona and Ndebele. :- 74 Target not specified Motor Vehicles in SAR 22 Target not specified Motor Cycles in SAR 40 Target not specified Bicycles in SAR IS Target not specified Computers (with in SAR printers) _ _ -40 - ATTACHMENT 1 List of People Met by the Mission 1. P. Kariwo Ag. General Manager, Forestry Commission 2. D. Sithole Coordinator, Commercial Activities, FC 3. L. Gondo Coordinator, Rural Forestry Activities, FC 4. A. Ncube Corporate Services Manager, FC 5. L. Baker Manager, Specialist Services, FC 6. C. Phiri Project Coordinator, FC 7. H. Chihwayi Financial Controller, FC - Commercial 8. W. Zinyama Project Coordinator - Commercial 9. D. Chibata Chinanimani Sawmill Manager 10. E. Zvizwai Forestry Manager, Southern Region Commercial 11. 0. Nyadundu FC/GTZ Project Coordinator 12. A. Skydt Project Officer, DANIDA -41 - ZIMBABWE FORESTRY RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (Loan No. 3179-ZW) IMPLEMENTATION COMPLETION REPORT APPENDIX B GOVERNMENT'S CONTRIBUTION P.2 . H~~~~~~~~~~~A .,~- ,..._ ;"*. . , < '.W~~~~~~~~~~~~~~. i'.S'~~~~~~~~~' , ;X' 2^ )_ __-_ " 'f -.. . ,i- - best available copy:Illigible Original (MSI/PFM, 1999-04-13) 1.0 AhimmIeL of objectve The Forest Resources Management and Development Project generally achieved its objectives as follows:. (a) Conseving forsts and the environment as well as increasing the production of wood for fuel and constuction purposes in promoting tree planting and woodland management in the Communal Areas. The programme largely focused on seedling production and tree plantig. Initl plans were for the production of tree seedlings in central nurseries. However, the decentralisation of seedling producton resulted in an case in the number of farmer and school nurseries with an inevitable increae in, the number of seedlings prduced. While seedling production has yielded impressive results, not all seedling produced wer planted in the communal and resetement areas. A lot of the seedlings were sold to commerial ffarmers as seedling production became a viable enterprise in its own right. In general, the pro3ect saw an incroase in tree planting in all land tenure categories, especialy in high ranfIll areas. Vegetation resources inventories indicate a eral increase in the area under Eucalyptus plantations in the communal areas, despite the general decline in the extnt of naturl woodlands. Furthermore, woody biomass production was not commensurate hith the tree planting efforts because of the low survival rates of the tsees planted. The affrestation effort did not reduce pressure on the natural woodlands as communities contiu to dmaw multiple goods and sevices from these woodlands. The non use of the gum as a fel wood spees means that wood is sill obtained fom the natural woodlands. Reduction of environmental damage to forest, agricultual and gazing lands was addressed thrugh various progmmmes which included woodland management, agroforey and afforestion. On the whole, the project succsahly fulfilled its broad objecdves relating to the eh ent of the quaity of life of the communities in the communal and resettemnt areas. Ob) Improving forest grazg and wildlife management. A start on the forest gazig has been made through formation of resouce management comrnmittes. development of forest resources in communal areu adjace to Mafungabusi Forest srve and constuction of a resource management cent. expected to be completed in early 1999. The aspect of wild life mangemn did not take off E because the poor development of the objective did not addrem the needs of the locals in and around the gazetted forest aes. (c) The objective of improving productivity of the Forestry Commission's wood processing industries by upgrading the loggng, processing, sawmiiing and manufacturing facilities and operations was largely achieved. 2 PERa MQE __ _SA HOLD_= 2.1 The WorldBank 2.1.1 Project Conception At project appraisal, the project document was written as if all fuding was coming in from one source. Although it assisted in identifying potetial donors, the World Bank was not pa2t of tho bilateral agreements entered into between the Government of Zimbabwe and the bilateral donors. The impact of this was reduced funding and delayed implementation of the forest grzing and wildlife management components. The forest grazing components will now close in the year 2001. The wildlife component which was not appropriately conceptualised to cater for the interests of the locals was abandoned when the Govenment of Zimbabwe intpetated counter part finding to read Zimbabwe S5.1 million instead of Canadian S5.1 million. The assumption tha the Government of Zimbabwe was to provide USS 7.0 million as its contribution could have been corct at the time of appraisal. However, this did not take place because of other pressing needs on the fiscus. The Poresty Commission ended up incuing unplanned ependitmre resuing in an unfavourable fnsmcial position for the organiation that stil perst today. The World Bank should be realistic in determining the ability of recipiet governments to provide counterpat funding. In thei desperation to get donor suppot, recipient gvemt fnd thM3selves in siaions wbee they commit themselves only to discover they cannot meet the oblitions demanded frm them 3 2.1.2 Project Supervision While supervision of the component to assist in the improvement in the productivity of wood proessing industres by upgrading the loging exaction, sawmilling and ufactuing facilities and operations, which the World Bank was co-financing was timely and appropriate, the banks' supevision and paricipation by the World Bank in the other components was disjointed. There was no co-ordination with the other co-financiers in the supervision and fiacing processes which led to questioning of its input in these components. For the component where they gave timely and appropriate supervson, the following observations were made in the World Bank's performance:- wo* lThe Bank's performance was a hindrance during the initial stages of the project All Bank decisions were being made from Washington and this reslted in many project delas. There was significant improvement when the Bank delegated some of its decisions to their local office. (a) The delay betwn Phase I (Feasibility Study) and Phase 2 (Detail Design) of the project could be attibutable to the Bank's processes. (b) The Bank refused to take advantage of the rigorous checldng mechanism in the Zimbabwe Govermnent Tender Board to minimise bureaucraey and expedite business. The Bank could have considered relaxing some of their requirements in view of the Govemment's rigorous procedures. (c) During procurement, where competiive bidding *as involved, the price rather than the-technical superiority of equipment became the issue It was very difficult to bu higher priced equipment for technical or quality reasons where therm was another cheae offer. It can be argued that many of the bad purchases were due to poor specificaions by the Forestry Commiion and management consultn. The Bank hen only looked at the price and ignored other important apects such as quality, durilit and technical back up, since the specifications opened the bidding 4 process to a wide range of equipment that could be purchased. (d) The Bank's supervsion mission played a major role in helping project management resolve its problems with the relevant authorities. This is greatly appreciated and ackmowledged. However, closer supervision should have been carfied out at the beginning of the project as manment had no experience in project implementation of this nature. This is where it mattered most!! 2.2 UDEA (a) BADEA linked the loan to its other loas to the Govenment of Zimbabwe and this resulted in delayed disbursement of fuda for the project (b) Mamy suppliers werc not familia with BADEA procurement procedures. Several mont were lost with the Forestry Commission negotiating with such suppliers to modify their bank guaatees to be in line with BADEA requirements. Some suppliers had to wait a long as eight (8) months for payment. The suppliers in turn withheld their foundation details and the civil conactor therefore also delayed by the same period of eight months. (c) Communicaton wnth BADEA was quite a problem. At project commencement, BADEA simply did not respond to any Foresty Commission written communication. The Forstty Commission had to resort to sandig a representaive to BADEA headquarters m Khartoum in order to get approval of tender evaluato by BADEA. (d) Processing of disbursements often took more tan eight weeks. (e) BADEA pcmlnt procedures are too rigid - its a take it or leave it situatio. (f) However, once the prou procedureo had been clearly understood by all and followed, the proces was much quicker. 9 *d 2.3 DAN DAN]DA showed flexdbility in the supervision and implcmtation of the project However, there was a reduction in the DANIDA fundin guter the 1995 project review which revealed under expenditmre. 2.4 CI12A CIDA also showed some flexibility when they released some fmnds they had reserved to cater for foregn purchases when the project was conceptualised ding the time the Zimbabwe Government had foreign currency restrictions. The funds were then used to cover short fals in some activities that had been originally under budgeted. The decision to rely on counter part funding from Votes of Credit given to the Government of Zimbabwe proved to be costly to the project as evidenced by the reduced funding made available to the project by the Goverent 2.5 THEWM O IW The Government of Zimbabwe could not meet its funding obligations from its fiscus. The additional funding the Forestry Commission had to provide for its commercial opations resulted in the orgaruisatlon dirupting its intenal iancing mechansm resuting in a bad financial position-for the orgsaiatsion. The lack of suervion capacity in the Forestry Commission for the commercial component of its activities was evident durng the implemenion process. Te purchase of poor quality equipment forced on the Forestry Codmiiusion can be attribed to lack of expeaience in writng speciications by Fostry Commission staff. The high staff tum over and poor delegtion to fgeld level proved costly as the field staffcould not quickly com t grips to dcisionmaking with regrds to specificadon and aproprite supavision of the m a t consultants when the saeor staff at Head Quarts lef. 6 V 'd 2.6 MAAEMMQ The managemt consultancy who were to take the lead role in the ismpl~en.tation of the Chinianini Sawmill Project left a lot be desired in the execution of their mandate. This resulted in the Forestry Co on not benefiting from their experience. The consultant wrote poor specifications for equipment eulting in adjudications favouring the purchas of poor quality equipment which was quoted cheaply. The project ended up being vay expensive as compard to the onal budget Equipment degms wer very poor reulting in modificaon aftr the suppliers had lef the site. Poor documentation for desig chages and opeational manuals stll re=ain a headache for contiud opeation. Sustaned maintenance of the equipment was not built in during the constucton, resulting in major stppags when the mill was commissioned. 2.7 CONlCTORS T'he work of the cators wa negadvely effected by base soil problems durig. compation. fequent breakdowns and the delay in linldag the dte to the main road. The contctor relied on manual methods resulting i delays m the iplementation process. 3. ~YLMILEA&~ 3.1 Wbhn implemendng projects that are co-financod, all resources should be puled togete ito a pool fund to ensur smnooth co-ordinton of the projes fincing and activities. 3.2 Coveats to be signed must be throughly inveigatd to cnsr they can be achieved beore they are sed for. Each to be treated a a component fr easm of supevson. 3.3 Staff capaties need to be in place not only at Head Offices, but at the project Icvel. Detalision to project levol in es ial fbr successf monitorng and implementaton of projects 7. aLe .c .c X s] Si 1 ~~~10 XX e~ a ~e I!i1 P1 jI *1 I i~~~~~~~~~~~~~~~~~~~~~~~ -50- ZIMBABWE FORESTRY RESOURCES MANAGEMENT AND DEVELOPMENT PROJECT (Loan No. 3179-ZIM) IMPLEMENTATION COMPLETION REPORT APPENDIX C MISCELLANEOUS TABLES TABLE OF CONTENTS TABLES 1. The Zimbabwe Forestry Commission - Balance Sheets for the Period 1990-97 2. The Zimbabwe Forestry Commission - Cashflow Statements for the Pexiod 1990-97 3. The Zimbabwe Forestry Commission - Income Statements for the Period 1990-97 4. Commercial Forestry Component - Economic Analysis - Economic Rate of Return -51 - TABLE 1. THE ZIMBABWE FORESTRY COMMISSION - BALANCE SHEETS FOR THE PERIOD 1990 - 97 1997 1996 1995 1994 1993 1992 1991 1990 FUNDS EMPLOYED GOVERNMENT OF ZIMBABWE LOANS 238,595,345 177,498,550 140,707.377 106,110o925 93,836,839 67,081,440 5s,245,009 50,339.612 INTERESTACCRUED ON LOAN 117,011,154 90,461,462 72,634,661 59,768,080 49.375,671 40,730,244 34,383,200 29,075,552 GRANTS FROM GOVERNMENT - . - - 4.000.000 - GRANTS FROM OTHER SOURCES 311,628 311,628 311,628 311,628 311,628 311.628 311,628 311.628 VEHICLE AND EtaUPMENT SINKING FUNDS 49,897,958 45,904,499 41,354,345 31.787,620 27.127,385 23.399.684 15,891,086 10,371,888 FOREST RESERVE FUND 86,328.820 79,140,595 70,950,318 47,990,179 36,805,616 27,859,134 16,714,625 8,875,836 VALUATION RESERVE 150,933,055 156.688,567 156,688,567 52,994.776 52,994,776 54,036,305 2,739,797 2.739,797 643,077,960 550,005,301 482,646,896 298,963,208 260,451,915 217,418,438 126,285,345 101,514.313 RETAINED PROFITS 31,604,846 26,812,696 21,352,512 15,612,478 12,816.337 10,579,716 7.793,589 5,783,892 674,882,808 576,817,997 503,999,408 314,575.686 273,268,252 227,998,151 134,078,934 107.298,205 PLANTATIONS 304,503,821 294,986,108 267,958,334 147,496,711 132,066,271 122,197,874 60.773,707 52,265.954 FIXED ASSETS 339,729,510 273,901.055 188,38.1 13 100,566,676 79,389.249 52,95,818 31,584,822 19,310.431 INVESTMENTS 375,000 375,000 375,000 2,376,000 2,586.090 1,501,571 375,002 375,002 LONG TERM DEBTORS - - 31,838 34,038 35,509 83,557 111,632 419,396 - 52 - 644,608.331 559,262,163 456.753,2a5 250,471,925 214,077,t19 176,378,820 92,845,163 72,370,783 CURREINT ASSETS Stock 36,239,311 29,369,845 25,268,275 26,214,806 23,795,696 19.453,351 12,029,224 8,324,311 Debtors 44,483,955 42,057,264 40,147,256 25,118,485 18,414,999 10,999.721 7,065,089 9,458,050 Tempomry advances 32,812,019 31,631,586 4,598,260 8,317,826 1.749,029 5,936,001 i 1,372,339 231,620 Short tarn inveosments 2,137,142 11,263.377 13,779,988 24,304,687 33,416,552 29,293,524 29,160,059 24,200,610 Bank and cash balances 991,178 2,340.930 (14,726) 7,935,310 3,208,832 2,163,400 2,749,207 2.344,606 116,83.605 116,663,022 83,779,053 91,891.114 80,585,108 67,845,997 5Z,375.918 44,559,197 CURRENT UABILITIES Temrpoary advances - - - - - 938,564 Shott tern loans 21,609,716 15,307,641 - - Credilon 21,303,828 16,850,379 13,683,308 11,175,094 7,716,086 4,902,587 2,845,299 2,529,825 Leave pay provison 2,293,575 1,815,209 1,497,110 999,781 861,552 744,363 503,269 379,494 GovernmenrdZof Zohabwe 31,604,846 26,812,696 21,352,612 15,612,478 12,816,337 10,579,716 7,793,689 5,783,892 Bank ovedraft 9,777.165 38,321,263 - - - - 86,589,130 99,107,188 36,632,930 27,787,353 21,393,975 16.226.666 11,142,147 9,631,775 NETCURRENTASSETS 30,074,475 17,555,834 47,246,123 64,103,761 59,191,133 51,619,331 41,233,771 34,927,422 874,882,808 578.817,997 603.999,408 314,575,886 273,268,252 227,998,151 134,078,934 107,298,205 Schedule 2 - 53 - TABLE 2. THE ZIMBABWE FORESTRY COMMISSION - CASHFLOW STATEMENTS FOR THE PERIOD 1990-97 1997 1996 1995 1994 1993 1992 1991 1990 REVENUE Sale of limber 155,646,604 127,316,450 176,961,382 65.135,608 38,684,002 35,754,667 28,307,773 17,374,691 Roof trusses 9,2256,512 3,928,867 3,357,247 2.176,878 1,753,035 - - Manufactured Products 20,648,156 21,941,917 11,294,618 10,763,189 6,360,336 12,081,185 10,173,855 6,137,237 Doors 6,475,213 4,597,886 8,233,465 2,117,165 - - - Safaris - - 10,756,496 7,943,696 5,465,407 4,229,072 1,916,472 1,828,299 Other revenue 9,511,062 13,371,657 4,590,411 3,490,874 5,595,308 3,331,285 1,770,592 901,459 201,606,447 171,166,777 215,193,619 91,627,410 57,858,088 55,396,209 42.168,692 26,241,686 OPERATING PROFIT 16,973,834 18,200,615 38,266,898 18,640,939 14,910,804 18,574,182 13,397,981 4,691,410 After Charging: Depreciation 11,946,671 4,847,152 4,038,149 2,720,098 1,674,560 1,295,574 1,322,166 1,406,982 Interesl 199,174 195,799 1,620,189 1,587,072 1,887,106 1,317,796 698,760 792,109 Stumpage 11,801,584 6.273,496 5,314,653 5,790,582 4,597,142 2,428,985 2,291,708 1,906,392 After crediting: (Surplus)/Loss on disposal of fixed assets (29,113) (49,642) (1,518,165) (193,203) (8,000) 15,857 (770) (25,210) interest received (1,145,862) (1,163,771) (5,116,905) (7,274,600) (7,757,532) (1,792,201) (527,040) (827,048) -54 - MOVEMENTS ON RESERVES OPERATING PROFIT FORTHE YEAR 15,973,834 18,200,615 38,266,898 18,840,939 14,910.804 18,574,182 13,397.981 4,591,410 TAXATION - - DEDUCT APPROPRIATIONS: Sinldng Fund 3,993,459 4,550,154 9,566,725 4,660,235 3,727,701 4,643,546 3,349,495 1,161,003 Forest Reserve Fund 7,188,225 8,190,277 22,960,139 11,184,563 8.946,482 11,144,509 8,038,789 2,058,244 11,181,684 12,740,431 32,526,864 15,844,798 12,674,183 15,788,055 11,388,284 3,219,247 Retained Profits for the year 4,792,150 5,460,184 5,740,034 2,796,141 2,236,621 2,786,127 2,009,697 1,372,163 Retained Cumulative Profits 26,812,696 21,352,512 15,612,478 12.816,337 10,579,716 7,793,589 5,783,892 4,411,729 RETAINED PROFITS 31,604,846 26,812,696 21,352,512 15,612,478 12,816,337 10,579,716 7,793,589 5,783,892 Schedule 3 - 55 - TABLE 3. THE ZIMBABWE FORESTRY COMMISSION - INCOME STATEMENTS FOR THE PERIOD 1990-97 1997 1996 1995 1994 1993 1992 1991 1990 CASH FLOW FROM OPERATIONS Promi for the year 15,973,834 18,200,615 38,266,898 18,640,939 14,910,804 18,574,182 13,397,981 4.691,410 Adjusted for: DOepreciaon 11,946,671 4,847,152 4,038,149 2,720,098 1.674,560 1.295,574 1,322,166 1,406,982 Cost of timber felted 6,046.072 12.290,521 5,314,653 5,790,582 4,597,142 2,428.985 2,291,708 1,906,392 (Surptus)Loss on disposal of fixed assets & Investmients (29.113) (49,642) (1,518,165) (193,203) (8,000) 15,857 (770) (25,210) Operating cashflow before wortdng capital changes 33,937,464 35,288.646 46,101,535 26,958,416 21,174,506 22,314,698 17,011,085 7,879,574 Dectease/(Inrrease) In stock (6,869,466) (4,101,570) 946,531 (2,419.110) (4,342,345) (7,424,127) (3,704,913) (3.216,279) Decrease/(lncrease) In Debtors (2.426,671) (1,910.028) (15,028,771) (6,703,486) (7,415,278) (3,934,632) 2,392,961 (4,878,835) Decrease/(lncrease) In temporary advances (1.180.433) (27,033,326) 3,719,566 (6,568.797) _ 4,186,972 (4,563,662) (2.079,283) 4.230,094 (Decrrase)lncrease In creditors and provisions 4,931,815 3,485,170 3,005,543 3,597,237 2,930,688 2,298,392 439,239 698,144 NET CASH INFLOW FROM OPERATIONS 28,392,709 6,728,892 38,744,404 14,864,260 16,534,643 8,690,569 14,059,089 4,712.698 CASH FLOW FROM INVESTING ACTIVITIES Dacrease In long term debtors - 31,838 2,200 1,471 48,048 28,075 307,764 257,919 Plantation Developrnent expend9ure (31,319.297) (29.318,295) (22,082,485) (21,221,022) (15,384,215) (12,392,102) (10,665,839) (8,347,854) - 56 - Purchases of fixed assets (78,384.588) (90,416,247) (109,428,125) (24,121,108) (28,590,844) (22,530,075) (13,734,618) (6,451,984) Purchases of investment - - 211,090 (1,084,519) (1,126,571) (375,000) Proceeds from disposal of fixed assets ardinvestments 195,217 105,795 6,473,726 417,286 8,000 2,908.163 2,174,912 1,575,409 NET CASH USED IN INVESTMENTACTMTIES (109,508.668) (119,596,909) (126,034,684) (44,712,283) (45,003,530) (33,112,510) (21,917,781) (13,341,510) CASH FLOW FROM FINANCING ACTMTIES Goverrment loans receIved 66,888,946 42.251,357 55,948,964 15,070,227 24,992,020 13,622.553 7,918,094 9,137,933 Govemment grants received - - - - - 4,000,000 Interest payableon Government loans 26,993,049 17,826,801 12,866,581 10,392,409 8,645,427 6,347,044 5,307,648 4,392,944 Short term loans ramsed 6,302,075 15,307,641 - - - - - - NET CASH FROM FINANCING ACTMTIES 99,184,070 75,385,799 68,815.545 25,462,636 33,637,447 23,969,597 13,222,742 13,530,377 NET (DECREASEYINCREASE IN CASH EQUIVALENTS 18,068,111 (38,482,218) (18,474,735) (4,385,387) 5,168,460 (452,342) 5,364,050 4,902,065 CASH AND CASH EQUIVALENTS (24,716,956) 13,765,262 32,239,997 36,625,384 31,456,924 31,909,266 26,545,216 21,643,151 CASH AND CASH EQUIVALENTS (6.648,845) (24,716,956) 13,765,262 32,239,997 36,625,384 31,456,924 31,909,266 26,545,216 - 57 - TABLE 4. COMMERCIAL FORESTRY COMPONENT - ECONOMIC ANALYSIS Chimaninani Forest and Sawmill Component including Incremental Impact of Projects on Stapleford, Erin and Gwendingwe ECONOMIC RATE OF RETURN Capital Total Total Total Capital Investment Export Local Residual Incremental Investment Sawmills & Total Incremental Year Income Income Value Income Forestry Logging Cost Benefits zs,,000 zs"000 z$,,000 zs$"000 z$X000 z$000 z$"o000 z$"000 1993 10,52 10,152 (10,152) 1994 21,164 21,164 (21,164) 1995 0 64,196 64196 -64196 1996 684 11016 11700 95450 108767 -97067 1997 9330 20942 30272 29,632 57,122 (26,850) 1998 43666 40405 84071 31,160 74,868 9,203 1999 72372 47850 120222 8,396 21,236 80,203 40,019 2000 90950 53010 143960 7,120 6,163 69,861 74,099 2001 95832 65733 161565 4,312 6,121 71,431 90,134 2002 100314 67309 167623 3,647 6,120 71,874 95,749 2003 105451 71216 176667 10,434 6,120 81,327 95,340 2004 104870 71782 176652 9,258 6,120 80,119 96,533 2005 104318 72362 176680 15,869 6,120 87,005 89,675 2006 104040 72608 176648 2,530 6,120 73,940 102,708 2007 103655 72859 176514 6,781 6,120 77,829 98,685 2008 103612 73115 176727 8,652 6,120 80,589 96,139 2009 103317 73376 176693 4,956 6,120 76,625 100,068 2010 101875 74789 176664 6,505 6,120 78,330 98,334 2011 100404 76231 176635 7,527 6,120 79,480 97,155 2012 98904 77701 176605 10,477 6,120 82,451 94,154 2013 97415 79200 176615 17 6,120 72,082 104,533 2014 96235 80348 176583 4,141 6,120 76,186 100,398 2015 95055 81512 176567 3,443 6,120 75,511 101,056 2016 93826 82694 176520 5,492 6,120 77,548 98,972 2017 92607 83893 176500 11,639 6,120 83,673 92,827 2018 91297 85111 176408 3,565 6,120 75,304 101,104 2019 90026 86347 176373 8,098 6,120 79,910 96,463 2020 88736 87601 176337 6,711 6,120 78,528 97,809 2021 87427 88874 176301 14,085 6,420 85,897 90,404 2022 86098 90166 66627.25 242891.25 3,570 6,120 75,337 167,554 Economic Internal Rate of Return 22% Main Assumptions: (see next page) - 58 - Main Assumptions for the Analysis The sawmill would have an economically useful life of 30 years. At full production, the mills would produce 52104 m3 of structural timber, 9183 m3 of crating timber, and 67011 m3 of furniture timber per annum giving a total of 128,297 m3. Production period would be 330 days per annum and 2 shifts per day. After 1998, green sawn recovery rates would be 40% for the rehabilitated mills and 51 % for the Chimanimani mill. An economic price of Z$ 2283 per m3 has been used (see calculation below). A conversion factor of 0.85 has been used to convert financial prices for non- tradeable goods. Unskilled labour has been valued at 0.75 of the prevailing rural wage rate. Calculation of the Economic Price for Sawnwood Price -cif UK port UKP/m3 115.00 Exchange Rate US$/UKP 1.65 Price - cifLUK Port US$/m3 189.75 Agents Commission US$/m3 9.49 Ocean Freight US$/m3 55.00 Price - fob Beira US$/m3 125.26 Loading at Beira US$/m3 3.30 Storage at Beira US$/m3 3.99 Off-loading from Rail US$/m3 3.30 Handling Agent Charge US$/m3 2.74 Price - for Beira US$/m3 111.93 Exchange Rate Z$/US$ 23.00 Price - for Beira Z$/m3 2574 Rail Freight to Beira Z$/m3 165 Transhipment at Mutare Z$/m3 10 Price - for Mutare Z$/m3 2399 Transport - Chibanimani/Mutare Z$/m3 116 Price - Chimanimani Saw Mill Z$/m3 2283 Sandra Bulls P:\!UNITS\AFTR1\ADMIN\FORMER\ZFRPICRdoc 03/04/99 12:10 PM MAP SECTION IBRD 21601R -'~~~~~~~~~~~~~~~~8 0 32 - ZIMBABWE ) ~~~~~~~FOREST RESOURCES MANAGEMENT -t t ~r4Zl' ).2M°O ZA SOPEAND DEVELOPMENT PROJECT ,0.e BOl&/T-SW*Wfl.C -rR LAND CLASSIFICATION EOTSWANA 0 6 m } A s t n g b~~~~M 216' 28° 30° g \ , 32- MARCM 1699