Page 1 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB1592 Project Name Mozambique Smallholder Development in the Zambezi Valley Region AFRICA Sector General agriculture, fishing and forestry sector (20%); Animal production (20%); Irrigation and drainage (20%); Crops (20%); Agricultural extension and research (20%) Project ID P093165 Borrower(s) GOVERNMENT OF MOZAMBIQUE Implementing Agency Ministry of Finance Maputo, Mozambique Ministry of Agriculture Maputo, Mozambique Zambezi Valley Development Authority (GPZ) Mozambique Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared June 21, 2005 Estimated Date of Appraisal Authorization October 26, 2005 Estimated Date of Board Approval April 18, 2006 1. Key development issues and rationale for Bank involvement From 1996-2003, rural poverty in Mozambique declined from 71.3% to 55.2%. This was primarily due to the impact of post war returning refugees to the rural areas that provided much needed labor to expand area under cultivation which helped to accelerate agricultural growth. It is estimated that about 3.2 million smallholder farms (average of 1.4 hectares holding size) account for the vast majority of the country’s agricultural production and exports. Agriculture contributes about 25% to GDP and is critical to future economic growth and for reducing rural poverty. Mozambique’s agricultural productivity is one of the lowest in the region. Recent studies have shown that growth in the sector maybe plateauing. Apart from the end of major area expansion, other factors contributing to low productivity include: traditional farming practices, with low input usage; adverse weather related shocks; lack of infrastructure and market accessibility; negligible value addition; and high post harvest losses. Additionally, the absence of grassroots institutions, such as farmer organizations, inhibits rural communities from taking full advantage of the economic and social development opportunities. Page 2 2 The agriculture sector has been primarily supported through PROAGRI (US$ 130 million). This sector-wide adjustment program (SWAP) is funded largely by donors, including the Bank. The centrally-led development supported by this program has strengthened institutions responsible for the provision of some public services at the national level (i.e., research, extension and animal health care). The program also supported de-concentration of services by channeling resources to provinces and districts. While progress was made in some areas, such as the adoption of on-farm approaches by the research and extension services, the overall orientation of the services remained mainly supply-driven with weak linkages with farmers. The Bank, together with other donors, has been involved in formulation of the second phase of the SWAP (PROAGRI 2) which is expected to focus on three areas: (i) core functions including continued support for institutional development, (ii) strategic activities, such as research an extension, and (iii) new activities, covering public investments in rural infrastructure and public-private partnership ventures. The Bank expects to pursue a three-pronged strategy: (i) continue supporting PROAGRI 2 through general budget support under the PRSC series, (ii) support policy advice through analytical activities and (iii) stand alone operations that address demand-side activities that are primarily community driven, and with clear links with PROAGRI 2 and Government sector policy. The investment program will also satisfy the request made by the Government of Mozambique for activities that impact at a community level. To make the public services more demand-driven, substantial investments would be needed in strengthening of local institution, includin g farmer’s organizations, basic infrastructure and promotion of market accessibility. This would also require enhanced support for the decentralization process, allocation of greater priority and resources to agricultural development in the district planning process and local initiatives to reform the public services to make them more accessible and accountable to the farming communities. In recognition of the need to provide focused attention to an area-based decentralized agriculture development operation, the Government of Mozambique (GOM) has requested for assistance in the Zambezi Valley Region. The focus would be on building local institutions, testing innovative approaches, and empowering farming communities in line with the newly approved legislation on decentralization (the Law of Local Institutions). The government’s request takes in to account the keen interest shown by the Zambezi Valley Development Authority (GPZ) in such an operation. It is supported by both the Minister of Agriculture as well as Planning and Development. The GoM sees the Bank as an important partner in this venture due to its multi-sector mandate, experience in decentralized community- based operations, and its ability to attract and coordinate with other development partners. 2. Proposed objective(s) The main project development objective is to increase the income of smallholder farmers in selected districts by empowering communities, building community organizations, increasing on- and off-farm production and productivity, and facilitating farm access to markets. Project activities would be demand-driven, and closely linked to government's decentralization strategy, agricultural policies, and other donor activities in the project area, as appropriate. Page 3 3 The proposed project would be consistent with objectives of the CAS (2004-2006) which supports the PARPA and identifies agricultural growth as key element of the Government’s strategy for overall economic development. 3. Preliminary description Area: The proposed project would be located in the central region of the Zambezi Valley, possibly encompassing four districts in three provinces: Mutarara (Tete Province), Morrumbala and Mopeia (Zambézia Province), and Caia (Sofala Province). It would complement investments of the Bank and other donors in the area, namely, the ‘Sena Railways Line’ and the ‘Moatize Coal Mining’ operations, thus contributing to the rapid economic development of the area. A final decision will be made during preparation, taking into account the project area’s growth potential, socio-economic and institutional factors, and synergies with other donor activities. Proposed Components: In order to achieve the development objectives, the proposed project would apply innovative mechanisms for integrating location-specific inputs for the acceleration of agricultural growth through decentralized institutional development, technological change, support to small-scale infrastructure development; and increased private sector participation. However, the project would not finance all the sub-components and activities listed below. The strategy will be to look for partnerships with relevant organizations active in the region. The nature of the project implies that there would be a heavy emphasis on concurrent monitoring and evaluation of the project impact and outcomes. · Component 1: Institutional Development The focus of this component would be to strengthen local institutions and develop capacity and introduce participatory processes to accelerate the decentralization process. This component entails the following sub-components: (i) develop grass-roots or self-help farmer associations, (ii) promote savings mechanisms amongst groups supported by the project, i.e. drawing upon successful experiences in Mozambique and explore linkages to the IFAD Rural Finance Support Program, (iii) support to local civil society organizations, (iv) enhance the district level planning capacity, and (v) address risks related to HIV/AIDS. · Component 2: Infrastructure Provision To ensure viability and sustainability of farming operations, smallholders need access to a range of infrastructure facilities. This factor is generally quoted as the key constraint to productivity, and includes the risks associated with variation in rainfall and access to rural roads linking production areas to markets. The objective of this component would be to provide critical infrastructure to smallholders to reduce their risks and increase their productivity . Sub-components are: (i) small dams for irrigation, (ii) access roads, (iii) wholesale and retail market facilities, (iv) market information and communication network, and (v) private sector linkages. Page 4 4 · Component 3: Agricultural Technology The main thrust of this component would be to increase availability of cost-effective technologies to enable farmers to intensify and, where appropriate, diversify production systems in a sustainable manner. Specific activities to be supported would include the following sub-components: (i) demand-led technology adaptation, (ii) community-based seed production systems, (iii) value addition through improved post-harvest management systems, (iv) small-scale mechanization and (v) on-farm water management. · Component 4: Community Investment Fund The project would encourage communities to submit proposals for financing from a Community Investment Fund. The focus of this component would be to finance demand- driven agricultural activities in the project area, including the following sub-components: (i) institutional support to producer organizations, (ii) agriculture related goods and services, and (iii) training opportunities for on-farm and non-farm income generating activities (for example, agricultural extension, processing and marketing activities, development of small enterprises). It is expected that this approach would encourage competition between districts and provinces for additional funds. Communities would be actively encouraged and assisted in preparing proposals based on their needs. Funds would be allocated in response to demand generated and the expected effectiveness of utilization by the participating groups. 4. Safeguard policies that might apply Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) X An ESMF is anticipated to ensure that minor civil works are implemented according to good environmental practice, and to consolidate requirements under other OPs – i.e., 4.04, 4.09, 11.03, 4.12 screening (if needed), and 4.37. Natural Habitats (OP/BP 4.04) X Impacts to natural habitats are not expected. Provisions to ensure protection of natural habitats will be included in the ESMF. Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Project activities may involve the use of pesticides and promotion of IPM. The need for PMP is anticipated. It will be included in the ESMF. Cultural Property (OPN 11.03) X Impacts to cultural property are not expected. Provisions to ensure protection of cultural property will be included in the ESMF. Indigenous Peoples (OD 4.20) X Involuntary Resettlement (OP/BP 4.12) X Minor civil works (small dams, market facilities) may involve land acquisition and compensation if it is done involuntarily. The need for an RPF will be determined during project preparation. Safety of Dams (OP/BP 4.37) X Small dams for irrigation may be funded by the project. Provisions to ensure they are properly Page 5 5 Safeguard Policies Triggered Yes No TBD engineered and built will be included in the ESMF. Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X Safeguards policies requirements will be confirmed during the first project preparation mission, and followed up as appropriate. Members of the safeguards team are included in the project preparation team. Previous Bank safeguards mitigation instruments and frameworks (in particular resettlement policy frameworks) prepared for Bank funded projects in Mozambique will be used and adjusted to this project to the extent feasible. The Sector Manager will be responsible for clearance of s afeguard requirements, as the project is labeled a “transferred project.” Environmental Category: B = Partial Assessment. 5. Tentative financing Source: (US$ million) BORROWER/RECIPIENT 2 INTERNATIONAL DEVELOPMENT ASSOCIATION 20 AFRICAN DEVELOPMENT BANK 3 Total 25 6. Contact Point Contact: Ms. Jeeva A. Perumalpillai-Essex Title: Lead Operations Officer Tel: (202) 458-9057 Fax: (202) 473-8185 Email: jperumalpillaies@worldbank.org