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         Fourth Irrigation Project

The Senegal Fourth Irrigation project, supported by Credit 1855-SE for US$33.6 million equivalent, was approved in FY88. The credit was fully disbursed and closed in FY96 after two extensions, eighteen months behind schedule. The project was cofinanced by Kreditanstalt für Weideraufbau (KfW), (US$9.2 million equivalent), Caisse française de développement economique and the French Ministère de la coopération, (US$11.35 million equivalent) and Banque Arabe pour le développement economique en afrique (BADEA), (US$4.7 million equivalent). The Implementation Completion Report (ICR) was prepared by the FAO/World Bank Cooperative Program and finalized by the Africa Regional Office. The borrower’s comments are attached as an annex. The cofinanciers were consulted during finalization of the ICR.

The goal of the project was to create the conditions for sustainable irrigation development in the Senegal valley. Specific objectives were to improve the performance, operation and maintenance (O&M) of existing irrigation designed for smallholder farmers; reform and downsize the Société d’aménagement et d’exploitation des terres du delta du fleuve sénégal et des vallées du fleuve sénégal et de la falémé (SAED) to strengthen its planning and managerial capabilities and allow room for the private sector to grow; and foster crop diversification. The project had eight components: (a) modernization and expansion of 7,000 ha of irrigation in three subprojects; (b) training to enable SAED to cope with its reduced role; (c) development of a credit structure within Caisse nationale de crédit agricole du sénégal (CNCAS) to fill the void left by SAED’s withdrawal from provision of rural credit; (d) financing, on a decreasing basis, of SAED’s operation expenses; (e) provision of O&M equipment; (f) studies of opportunities for crop diversification, market improvement and incentives to attract new forms of irrigation farming; (g) technical assistance to SAED; (h) agricultural research; (i) reforestation; and (j) health.

This complex and ambitious project had mixed results. The multiplicity of donors delayed credit effectiveness by 18 months and created implementation problems. While the project substantially achieved its physical objectives, there were significant cost overruns partly due to inadequate civil works design, government’s contracting procedures and delays caused by the cofinancier’s differing views. It was very successful in reducing SAED’s public sector involvement in irrigation, agricultural production and credit activities, but failed to facilitate a commensurate growth in private sector activities, particularly markets. Despite SAED’s significant downsizing, government reneged on payments of SAED’s debts, and it is financially non-viable. The most notable failure of the project was provision of a viable agricultural credit system through CNCAS. In part, this was due to overoptimistic assumptions that smallholders would easily transfer from an in-kind payment system used by SAED to a cash system, and that repayment of credit would reach 90 percent. Unfortunately, lack of sanctions allowed loan repayments to fall to about 50 percent and US$10 million had to be written-off. This, allied with CNCAS’s low capitalization meant that, by the project’s end, only a small number of farmers had access to credit and this constrained production. Lack of credit also reduced funding for O&M because water users associations (WUAs) established by the project used irrigation service fees to meet credit needs. Agricultural research to encourage crop diversification and marketing was unsuccessful, and smallholders, also discouraged by low prices as a result of structural adjustment, have reverted to subsistence farming. As a result, the ICR calculates that the Economic Rate of Return (ERR) has fallen from the 10 percent estimated at appraisal to less than 5.2 percent.

The Operations Evaluation Department (OED) agrees with the ICR in rating the project outcome as unsatisfactory and institutional development as modest. OED downgrades the ICR’s rating of sustainability from uncertain to unlikely and Bank performance from satisfactory to unsatisfactory. Sustainability is unlikely because essential technical support for WUA growth is not in place, the credit system is not viable, marketing is problematic and funding for O&M is inadequate. Bank performance is unsatisfactory because appraisal incorrectly assumed the private sector would fill the void left by SAED’s downsizing, and supervision paid insufficient attention to mitigating the effects of this oversight and the failing credit system.

The main lesson from this project is that despite agreement to implement a new sectoral policy, inadequate attention to the details of how it was to be achieved led to the project’s failure. Downsizing of SAED was not synchronized with the growth of alternative support services, and a deeper understanding of the private sector’s capabilities was required to design incentives to enhance their role.

The ICR is unsatisfactory. While it gives a clear and candid account of the project, it contains a number of minor errors and the recalculated ERR is not transparent. There is no plan for the operation of the project. An audit is planned.

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