GAFSP - Smallholder Irrigation and Value Addition Project (SIVAP)


Overview

  • Reference: P-MW-AA0-026
  • Approval date: 13/03/2013
  • Start date: 04/10/2013
  • Appraisal Date: 29/10/2012
  • Status: OngoingOnGo
  • Implementing Agency: MINISTRY OF AGRICULTURE & FOOD SECURITY
  • Location: Malawi

Description

SIVAP will be implemented in Karonga, Nkhota-kota, Salima, Machinga and Chikhwawa Districts, within the green belt zone prioritised for agricultural investments. Karonga, Salima and Chikhwawa Districts are also under National Adaptation Program of Action (NAPA). SIVAP will consist of three components: (1) Sustainable Land and Water Management Component; (2) Crop Diversification and Value Chain Development Component; and (3) Institutional Strengthening and Capacity Building Component.

Component 1:Sustainable Land and Water Management: The component will support the

(i) development of 12 new irrigation schemes and

(ii) rehabilitation of 5 existing irrigation schemes. The new schemes will cover about 1,227 ha which will be based on gravity-fed irrigation system and will benefit 4,994 farmers (plotholders). The major activities will include construction of headworks, irrigation and drainage networks including associated structures and access roads. The second intervention will cover rehabilitation of 5 (1,295 ha) existing dilapidated irrigation schemes which will include climate proofing and will benefit 3,766 farmers. The major activities will include headworks (intake-structure) protection, river training, river bank protection and land levelling (high grounds). Apart from scheme development, emphasis will also be on training farmers in scheme operation and maintenance for proper management and sustainability.

Component 2:Crop Diversification and Value Chain Development: with 4 sub-components (seed selection and multiplication, rainfed cropping, agro-processing and value addition, and support to market linkages). Seed Selection and Multiplication will involve selection of high value seeds and planting materials that are high yielding, disease tolerant and meet the specifications of the industry and end users. The Department of Agriculture Research Services (DARS) will be responsible for identification, selection of appropriate seeds/planting materials in consultation with farmer's groups, certification and training of field staff. Registered private seed breeders will be engaged for the supply of basic/breeders seed and other private individuals/groups for multiplication where necessary. The seed supply will be managed in a revolving loan arrangement whereby farmers will give back part of their harvest to the seed pool in a 1:2 ratio. Rainfed Cropping activities will be implemented in areas not covered by irrigation but clustered in proximity to irrigation schemes. The sites preparation activities including land clearing will take place in 19,350 ha allocated for rainfed cropping. The project will focus on drought tolerant crops such as cassava that will be intercropped with legumes such as pigeon peas, cowpeas, chick peas, beans, soya beans and groundnuts. These legumes will help to improve soil fertility and provide raw materials for processing into crude vegetable oil and high protein rich cakes for livestock feed in selected sites. Private companies have indicated interest in buying legumes for export provided that pre-processing meets set standards. Cassava is selected to serve as an insurance crop in the event of draught and crop failure as well as a major raw material for processing into flour to be used as an import substitution raw material. It will also serve as a cheaper starchy material for livestock feed production and other private investors. Agro Processing and Value Addition activities will take place at nine value addition centres located in clusters of sites to reduce post-harvest losses and produce value added products for higher incomes to the farmers through agroprocessing. Support to Market Linkages: This will involve providing logistical support to the Market Information System (MIS) under the ASWAp Secretariat and possible linkages with other commodity exchange systems in the country. This is to ensure availability of demand and supply information on commodities and products. Mini testing equipment and training will be provided in each centre with the support of the Malawi Bureau of Standards (MBS). MBS will provide legal specifications for processed foods, and guide the processors to meet preservation and other quality specifications.

Component 3:Institutional Strengthening and Capacity Building with 4 sub-components(support to public sector, support to farmer organisations, Monitoring and Evaluation, and project coordination): This component is cross-cutting in nature and will be setup to implement activities which will address institutional and capacity constraints in MoAFS and MoWDI through training (based on training needs assessment) and logistical support. One Non-Governmental Organization (NGO) will provide services in

(i) formation of farmer organisations (clubs, WUAs and Cooperatives),

(ii) marketing and

(iii) value chain development. Specialised training will be provided to farmer organizations (clubs, water users associations and cooperatives) in group management, production technologies, nutrition, agri-business, social and environmental management with an effort to focus on women who will also have access to project interventions. The established ASWAp results framework will be used for M&E of the project performance.

The project cost, including physical and price contingencies, is UA 29.596 (USD 44.64) million which will be financed by

(i) GAFSP Grant: UA 26.247 (USD 39.60) million covering all major activities,

(ii) ADF Grant: UA 0.253 (USD 0.38) million for detailed studies and designs of 5 existing irrigation schemes to be rehabilitated,

(iii) the GoM: UA 3.074 (USD 4.64) million through office space, salaries for staff and services such as electricity, water and telecommunication, and

(iv) beneficiaries: UA 0.022 (USD 0.03) million in-kind contribution during afforestation activities, matching grant arrangement for equipment and project meetings and trainings attendance.

Implementation Arrangements: the Project will be under ASWAp within MoAFS, and will be implemented through the existing GoM structures. While MoAFS will be the Executing Agency, both MoAFS and MoWDI will jointly implement the project with clear responsibilities for each, to ensure adequate coordination. Consequently, MoWDI will directly be responsible for technical and financial execution of project activities under Component 1 whilst MoAFS will be responsible for executions of activities under Component 2 and Project Coordination Team will be responsible for Component 3 since it has cross cutting activities. The ASWAp Executive Management Committee chaired and co-chaired by the Principal Secretary MoAFS and MoWDI respectively, will act as Project Steering Committee with overall decision making responsibility. Cross cutting issues: Environment: SIVAP has been classified as Category 2, according to the Bank's Environmental and Social Assessment Procedures (ORQR.3 - 22nd September 2012). Gender: The Project will empower women and support larger quota (at least 50% of beneficiaries) for their participation in management and training activities. The MoAFS established a Gender Focal Point (GFP) responsible for providing advice and support services on gender and HIV/AIDS. The Project will support the GFP in the implementation of gender mainstreaming activities.


Objectives

Project development goal is to contribute to reducing poverty and ensuring sustainable food security. The specific project objectives are to

(i) improve crop production and productivity, and

(ii) improve net farm incomes of project beneficiaries.


Rationale

As one of the active Development Partners in the agricultural sector, the Bank is supporting the implementation of ASWAp. SIVAP falls under ASWAp and GoM requested the Bank to be the supervising entity, as it sought financial support from GAFSP. The Bank has gained valuable experience in the irrigation sub-sector in the country through financing projects such as the Rural Income Enhancement Project (RIEP), Smallholder Out-grower Sugarcane Project (SOSCP), Smallholder Irrigation Project (SIP), Horticulture and Food Crops Development Project (HFCDP), Smallholder Crop Production and Marketing Project (SCPMP) and Agriculture Infrastructure Support Project (AISP). The Bank has learned adequate lessons from the aforementioned projects which provided valuable inputs to the preparation of SIVAP. These include the need to have designs ready prior to implementation, designation of specific unit to manage the project and appropriate financing mechanism. For the Bank's active portfolio in Malawi, the average CPI rating was 3.2 for 2011 (3rd Quintile) which is expected to improve with the change of Government. The new Government has repealed all laws which contributed to the low rating on governance and has introduced fiscal policies that may help to improve the CPI rating. The rating from the five completed projects ranged from 2.0 to 4.0. The ratings for Implementation Progress (IP) are Satisfactory whilst for Development Objectives (DO) range from Satisfactory to Highly Satisfactory (December 2012).

SIVAP supports the Bank's Agriculture Sector Strategy (AgSS: 2010-14) with agriculture infrastructure and natural resources management as main pillars. SIVAP is also in line with the Bank's forthcoming Long Term Strategy (LTS: 2013-2022) on infrastructure development, private sector, HEST, inclusive growth and green growth. SIVAP will support Government's efforts in promoting irrigation development for diversified crop production, agro-processing and value addition thus enhancing household food security and increasing smallholder farmers' income. An analysis of the ASWAp showed that Water and Land Management focus area had the highest financial gap followed by capacity building and value addition. This therefore underscores the importance of SIVAP to address financial gap.


Benefits

The Project will directly build institutional and technical capacity for about 58,700 farm families (about 18,000 female headed households) within participating Districts who will have improved food and nutrition security and incomes. The project will also indirectly benefit about 436 ,600 people (at least 150,000 women) through generation of employment along the value chains who will include suppliers, local traders, casual labourers, agro-processors, millers, packaging industries, transporters and exporters. Financial viability: The annual net income per participating farming household (under irrigation schemes) is expected to increase from USD 487 to USD 1,194 with the Project. Net incomes for smallholder farmers participating under the rain-fed agriculture are expected to increase from USD 249 to USD 432. The financial internal rate of return (FIRR) to the Project is calculated at 54%, the net present value (NPV) at 18% and the opportunity cost of capital is estimated at USD 46 million. The economic internal rate of return (EIRR) to the project is estimated at 58% and the net present value (NPV) at 12% opportunity cost of capital is estimated at USD 91 million.


Key contacts

OLADAPO Olagoke - OSAN3


Costs

Finance source Amount
ADFUAC 253,000
GovernmentUAC 3,095,500
Co-financierUAC 26,500,000
DeltaUAC 151,500
TotalUAC 30,000,000