IMPLEMENTATION COMPLETION AND RESULTS REPORT (COFN-C1320 and TF-94764) ON A GRANT (TF UNDER THE MULTI DONOT TRUST FUND-NORTHERN SUDAN)

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1 Public Disclosure Authorized Document of The World Bank Report No: ICR Public Disclosure Authorized Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT (COFN-C1320 and TF-94764) ON A GRANT (TF UNDER THE MULTI DONOT TRUST FUND-NORTHERN SUDAN) IN THE AMOUNT OF US$ 7.0 MILLION AND A GRANT (IFAD COFN-C1320) IN THE AMOUNT OF SDR MILLION (US$ 3 MILLION EQUIVALENT) TO THE REPUBLIC OF SUDAN FOR A Public Disclosure Authorized REVITALIZING THE SUDAN GUM ARABIC PRODUCTION AND MARKETING PROJECT Agricultural Global Practice AFCE2 Africa Region June 20, 2016

2 CURRENCY EQUIVALENTS Currency Unit = Sudanese Pound (Sudanese Guinea = SDG) At Appraisal (February 2009) US$1.00 = SDG 2.0 At Completion (June 2015) US$1.00 = SDG 5.9 FISCAL YEAR October - September ABBREVIATIONS AND ACRONYMS AFD CBS CIF CPA CSOs ESMF FNC FOB FPP GA GAC GAMIS GAPA GDP GoNU IBRD ICT IDA IFAD IGAD IMF IPF JAM LIU M&E MDTF-N MoFNE MIS MFT NGO NPV PC Agence Française de Développement (French Development Agency) Central Bank of Sudan Cost including Freight Comprehensive Peace Agreement Civil Society Organizations Environmental and Social Management Framework Forest National Corporation Free on Board Final Project Proposal Gum Arabic Gum Arabic Company Gum Arabic Marketing Information System Gum Arabic Producers Association Gross Domestic Product Government of National Unity International Bank for Reconstruction and Development Information and Communication Technology International Development Bank International Fund for Agricultural Development Inter-Governmental Authority on Development International Monetary Fund IGAD Partner Forum for Peace Joint Assessment Mission Locality Implementation Unit Monitoring and Evaluation Multi Donor Trust Fund for North Sudan Ministry of Finance and National Economy (federal) Management Information System Ministry of Foreign Trade Non-Governmental Organizations Net Present Value Project Coordinator ii

3 PCU PDO PIM PSC QER RRC SDG SPLM TA TTL Project Coordination Unit Project Development Objective Project Implementation Manual Project Steering Committee Quality Enhancement Review Rapid Response Committee Sudanese Pound Sudan People s Liberation Movement Technical Assistance Task Team Leader Senior Global Practice Director: Juergen Voegele Practice Manager: Mark Cackler Project Team Leader: Omar Lyasse ICR Team Leader: Omar Lyasse iii

4 SUDAN Revitalizing the Sudan Gum Arabic Production and Marketing CONTENTS 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Grantee/Implementing Agencies/Donors Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Grant Preparation and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Grantee's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. Summary of Gum Arabic Policy Dialogue and Policy Reforms Annex 10. List of Supporting Documents MAP iv

5 A. Basic Information Country: Sudan Project Name: Revitalizing the Sudan Gum Arabic Production and Marketing Project ID: P L/C/TF Number(s): COFN-C1320,TF ICR Date: 10/25/2015 ICR Type: Core ICR Lending Instrument: SIL Grantee: Original Total Commitment (TF 94764): Revised Amount: USD 6.996M Original Total Commitment (COFN C1320): Revised Amount: USD 3.00M Environmental Category: B GOVERNMENT OF NATIONAL UNITY OF SUDAN USD 7.00M Disbursed Amount: USD 6.996M USD 3.00M Disbursed Amount: USD 2.84M Implementing Agencies: Forest National Corporation Cofinanciers and Other External Partners: International Fund for Agricultural Development (IFAD) B. Key Dates Process Date Process Original Date Concept Review: 01/30/2008 Effectiveness: 09/30/2009 Appraisal: 07/07/2008 Restructuring(s): Approval: 07/10/2009 Mid-term Review: 09/20/2011 Closing (TF 94764): Closing (COFN C1320): Revised / Actual Date(s) 06/23/ /14/ /20/ /30/ /31/ /30/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory v

6 Risk to Development Outcome: Bank Performance: Grantee Performance: Moderate Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Moderately Satisfactory Overall Bank Overall Borrower Moderately Satisfactory Performance: Performance: Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Yes Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Sector Code (as % of total Bank financing) Crops 64 Public administration- Agriculture, fishing and forestry 36 Actual Theme Code (as % of total Bank financing) Export development and competitiveness 28 Other financial and private sector development 22 Rural markets 22 Rural policies and institutions 28 E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Carolyn Turk Kenichi Ohashi Practice Manager/Manager: Mark E. Cackler vi Karen Mcconnell Brooks

7 Project Team Leader: Omar Lyasse Assaye Legesse ICR Team Leader: Omar Lyasse ICR Primary Author: Melissa Brown F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To help increase the income of small-scale gum arabic producers in selected areas of the Recipient's gum arabic belt through improved performance of gum arabic production and marketing system. (a) PDO Indicator(s) Indicator Indicator 1 : Value quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Percentage change in the income level of beneficiary households from Gum Arabic production after project intervention 8,410 SDG, average income 20% 65% Date achieved 07/11/ /11/ /31/ % achieved. If general rise in project income among both project Comments beneficiaries and non beneficiaries is incorporated (with and without scenarios) (incl. % and discounted to real terms, actual increase in incomes is 21% (or 105% of achievement) original target). Indicator 2 : Direct project beneficiaries Value quantitative or Qualitative) 0 12,275 16,439 to 23,895 Date achieved 07/11/ /23/ /31/2015 Comments (incl. % achievement) Indicator 3 : Value quantitative or Qualitative) 205% achieved. 16,439 beneficiaries of matching grants and total of 23,895 beneficiaries of matching grants and training, capacity building services Direct project beneficiaries of which female 0 25% 24% Date achieved 07/11/ /11/ /31/2015 Comments (incl. % 96% achieved achievement) vii

8 (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) viii Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : % change in quantities of gum Arabic marketed by GAPAs Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 100% achieved achievement) Indicator 2 : % Change in the number of new entrants to the market (exporters) Value (quantitative or Qualitative) 0 200% 80% Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 40% achieved achievement) Indicator 3 : % of targeted GAPAs with effective saving and credit systems Value (quantitative or Qualitative) 2.4% 135 GAPAs 100% 97% Date achieved 07/11/ /11/ /23/ /31/2015 Comments (incl. % 97% achieved achievement) Indicator 4 : % of women in targeted GAPAs Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 100% achieved achievement) Indicator 5 : Number of Hashab seedlings produced by project nurseries (000') Value (quantitative or Qualitative) 0 1,950,000 2,708,000 Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 139% achieved achievement) Indicator 6 : Number of GAPA members who received training on financial Management

9 Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 134% achieved achievement) Indicator 7 : Number of GAPA members who received training on business Management Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 107% achieved achievement) Indicator 8 : Number of Agro forestry training session for GAPAs conducted by extension officer Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 122% achieved achievement) Indicator 9 : Number of in-country and exchange visits of GAPAs conducted to share experience Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 69% achieved achievement) Indicator 10 : Number of Matching Grants for Marketing: For Media Promotion Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 10% achieved achievement) Number of Matching Grants for Marketing: For Research and Indicator 11 : Technology Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 ix

10 Comments (incl. % 67% achieved achievement) Indicator 12 : Number of Matching Grants for Marketing: For Infrastructure support Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 187% achieved achievement) Percentage of the FOB price received by small scale gum Indicator 13 : producers after project intervention Value (quantitative or Qualitative) 10% - 15% 60% 65% Date achieved 07/11/ /11/ /31/2015 Comments (incl. % 108% achieved. Further ICR analysis finds 71% instead of 65%. achievement) Indicator 14 : Percentage change in domestic use compared to export Value (quantitative or Qualitative) 0 10% 12% Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 120% achieved achievement) Indicator 15 : Number of visitors to the dynamic website of MoFT Value (quantitative or Qualitative) 0 9,000 10,810 Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 120% achieved. System not fully functional achievement) Indicator 16 : Number of SMS text messages communicated to producers Value (quantitative or Qualitative) Date achieved 07/11/ /23/ /31/2015 Comments (incl. % 0% achieved achievement) x

11 G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 05/26/2010 Moderately Moderately Unsatisfactory Unsatisfactory /03/2011 Moderately Satisfactory Moderately Satisfactory /11/2012 Satisfactory Moderately Satisfactory /02/2012 Satisfactory Moderately Satisfactory /29/2013 Satisfactory Satisfactory 7.00 H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in USD millions 06/23/2011 N MS MS /14/2012 N S MS /20/2012 N S MS 6.83 Reason for Restructuring & Key Changes Made Level 2 restructuring, encompassing an extension of the closing date and revisions to the results framework. Closing date revised from June 30, 2011 to June 30, Level 2 restructuring to extend the project's closing date from June 30, 2012 to December 31, Level 2 restructuring to extend the project's closing date from December 31, 2012 to May 31, xi

12 I. Disbursement Profile xii

13 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. At the time of appraisal, Sudan was in the process of implementing the provisions of the Comprehensive Peace Accord (CPA) 1. The CPA included a strong focus on rural economic development in an effort to sustain peace and expand economic recovery. Around 64 percent of the population in North Sudan was classified as rural and agriculture was the major source of livelihood. Poverty in rural areas was high, particularly for those practicing traditional farming in rainfed areas and was estimated at 57 percent. 2. Gum Arabic has long been a strategic agricultural commodity for Sudan and the country has historically been the world s leading producer. Gum Arabic is a non -wood forest product used as a natural emulsifier in food and drinks that is harvested from acacia trees throughout the Sahel zone of Africa 2. To harvest gum arabic, acacia trees are manually tapped and the gum exudate collected over the course of a two month period. In Sudan the harvest period occurs in the height of the dry season and is an off-season activity highly complementary to livestock and crop production. Most gum production in Sudan is sourced from smallholders located within isolated rural communities within the Gum belt an area that roughly spans the southern part of the Sudan including West, Southern and Northern Darfur; North and South Kordofan; Sennar; Blue Nile and White Nile States. 3. Export earnings from Gum Arabic had reached up to US$100 million in 2005, however by 2009 the sector had experienced steep declines in production. By 2009 Sudan lost its place as lead producer and gum arabic exports earning totaled only US$ 33 million. Declines were attributed to a number of challenges in the sector, the most important of which was low producer incentives due to Sudan s domestic pricing policy and monopoly marketing system through the government owned Gum Arabic Company. To a lesser extent the sector also suffered from quality issues due to harvesting techniques and the need to renew the stock of Acacia trees. Following dialogue amongst stakeholders within the sector, a series of policy and institutional reforms were agreed and initiated starting in The project was financed by IFAD and the World Bank administered Multi Donor Trust Fund for North Sudan (MDTF-N), both of which sought to support the consolidation of peace and pro-poor growth within Sudan. The project was part of the IFAD country program strategy and responded to its country program strategic objective of increased access of poor rural women and men to markets and microfinance. The project was also one of 15 projects financed by the MDTF-N, a US$249 million fund financed by 10 donors including the World 1 The Sudan Comprehensive Peace Agreement was signed in early 2005 and ended Sudan s lengthy civil war. The CPA mandated a six year interim period under a Government of National Unity. Following the end of the interim period, Sudan ultimately separated into two independent states in July Gum arabic is used in the food industry as a flavor fixative and emulsifier with viscosity and adhesive properties that prevent crystallization of sugar in confections or liquids (approximately 70% of gum arabic demand is for this purpose) but can be used as a stabilizer in other food products as well. 1

14 Bank. The project was directly linked to three of the five priority focus areas of the MDTF-N: supporting state- and locality-level investment programs with high visibility in war-affected zones in the Northern States and the Three Areas; making rural development pro-poor with support for micro/small-enterprises; and laying the groundwork for good governance, in particular by opening up the private sector. A World Bank Policy Note on the gum arabic sector was also issued in 2007 and played a role in analyzing the sector and summarizing the reform agenda. 3 The Project was seen as a mechanism to implement many of these findings and recommendations. 1.2 Original Project Development Objectives (PDO) and Key Indicators 5. The PDO for the project was to help increase the income of small-scale gum arabic producers in selected areas of the Recipient s gum arabic belt through improved performance of gum arabic production and marketing system. The project intended to target improvements in the gum arabic production system through better tree management, improved harvesting techniques, and renewing the stock of gum arabic trees. Improvements to the marketing system were to be gained through improvements to producer association organization and capacity building and adoption of policy reforms to increase market participation and market functioning. 6. The project s original intermediate results anticipated an increase in equality of opportunity and competition available to market actors; better organized and empowered Gum Arabic Producer Associations (GAPAs); improved market conditions; reduction of environmental degradation issues in target areas; and better management and coordination of the sector at national, state and locality levels. 1.3 Revised PDO and Key Indicators 7. No changes were made to the PDO during implementation. A June 2011 restructuring extended the closing date of the project and revised the results framework. All original PDO level indicators were retained but two were re-classified as intermediate results indicators. A core indicator measuring direct project beneficiaries was added at PDO level. Intermediate results indicators, however, were substantially changed in the June restructuring to capture a focus on functioning of the gum arabic market and capacity building for GAPAs and related institutions at locality and central levels. Original intermediate results indicators on policy reforms, functioning of microcredit/revolving fund systems and project management were dropped. These changes were motivated by a need to simplify a complicated results framework, adjust to the changing policy environment and reflect the core focus of the project on supporting small scale producers and their organizations. 3 World Bank Policy note: Export Marketing of Gum Arabic from Sudan. Washington, DC: World Bank. 2

15 1.4 Main Beneficiaries 8. The primary target group for the project were small scale producers located in the localities of Bara, Um Rawaba and En-Nahud in North Kordofan State; Dilling, Talodi and Abu Jabaiha in South Kordofan State; Tendalti in White Nile State; Dali in Sennar State; and Boutt, Baw and Gaissan in Blue Nile State. Eight localities were originally listed in the MDTF-N Final Project Proposal (FPP) and an additional 3 localities (Talodi, Baw, Gaissan) were added in the IFAD Project Document. These latter three localities were also previously under the control of the Sudan People s Liberation Movement (SPLM). Although the project did generally try to avoid areas where major conflict existed, renewed conflict took place during project implementation in these last three localities. Specific sites within localities were selected based on a criteria focused on presence of productive gum arabic trees, presence of producers associations, and geographic proximity between localities to reduce implementation costs. 9. It should be noted that project documents and reports interchangeably refer to beneficiaries as small scale producers or as members of GAPAs. This is due to the nature of gum arabic production, which is almost exclusively collected by smallholders. Large scale production is confined to forests maintained by the Forest National Corporation (FNC). Therefore beneficiaries of the project are small scale producers supported with project interventions targeted through their producer organizations. 1.5 Original Components Component 1: Gum Arabic Sector Reform and Support (US$1.70 million; phase 1: US$1.22 million, phase 2: US$0.48 million) 10. The first component was designed to finance interventions aimed at further improving the broader gum arabic sector by increasing knowledge of the local and international market opportunities, identifying further areas of policy or institutional reform and establishing a locally and internationally accessible market information system. In terms of knowledge products, the project was to finance studies to identify barriers to domestic trade and investments, analyze market opportunities and undertake research based on proposals from stakeholders in the sector. The original design anticipated the project would identify a further set of policy or institutional reforms in the sector derived from on-going policy dialogue in the sector and any recommendations emerging from the studies and analytical work financed by the project. The project was also to finance the establishment of a gum arabic market information system and a dedicated website for the Sudanese gum arabic sector. Component 2: Institutional Capacity Building and Support to Gum Arabic Producers Associations (planned: US$5.52 million; phase 1: US$4.26 million, phase 2: US$1.26 million) 11. The project s second component focused its financing on direct support to gum arabic producers with the aim of improving incomes through investments in capacity building, productive infrastructure and inputs. The component was designed to finance capacity building activities to strengthen the management and skills of GAPAs in savings, credit, marketing, quality control and production. The primary implementing modality was matching grants to 3

16 GAPAs to supplement revolving savings and credit schemes to be set up and managed by the GAPAs, or for infrastructure or related inputs (such as tractor transport). Component 3: Project Management and Supervision (US$2.77 million; phase 1: US$1.36 million, phase 2: US$1.41 million) 12. The third component was to finance costs associated with project management including the day-to-day management of project activities of the primary implementing agency Forest National Corporation (FNC) a semi-autonomous parastatal responsible for ensuring the protection and the development of Sudan s forest resources. FNC was to establish a project coordinating unit (PCU) at national level, coordination at its state level FNC offices and at locality levels through locality implementation units (LIUs). The component was also to finance M&E activities and associated baseline, mid term review and final project assessments. 1.6 Revised Components 13. No adjustments were made to component activities through restructuring. 1.7 Other significant changes 14. Project implementation largely followed the original design, however, changes did occur in the project s planned implementation period, approach to phasing, and final allocation of funds between components. Conflict in some project areas also affected implementation. 15. Phasing. As originally designed the project was to have a phased implementation arrangement to facilitate the gum arabic market reform and allow expansion to all project areas. The first phase with two years duration to be funded by MDTF-N was to support sector reform measures based on the recommendations of the analytical studies and strengthening GAPAs to benefit from the market reform measures. Implementation of the second phase to be funded by IFAD was to be contingent on the implementation of the reform measures to create equal opportunity and competition among market actors and allow for expansion of project activities in additional localities. 16. Significant reform took place in the sector immediately prior to project approval as a result of a Presidential Directive issued in June The Directive abolished all taxes and fees that related to gum arabic production and marketing, eliminated the Gum Arabic Company monopoly on trading and export of raw gum, and abolished the floor price policy. This represented a major liberalization of the sector and while a few additional sector reforms were identified they were not tabled during project implementation as a formal trigger for a second phase. Instead the second phase became primarily associated with continuation of project implementation and expansion to additional localities and GAPAs using IFAD funds. 17. Conflict within the project area. Although the project had initially targeted implementation areas outside of conflict zones, project implementation was affected by new conflicts in Blue Nile and South Kordofan States in 2010 and This led to a halt to activities in sites affected by the violence (Gaissan, Baw and Talodi localities) and the loss of some project 4

17 assets. Project activities were subsequently re-started in some cases but full fledged implementation remained difficult in those localities as the underlying conflict remained active. 18. Implementation period. The original project design envisioned an implementation period of four years. The original grant agreement established a closing date of December 31, 2011 (approximately two years of implementation) due to the closing date of the parent MDTF-N, which anticipated an extension but was not formally in place. Three Level 2 restructurings were subsequently processed to extend the project s closing the date to June 30, 2012; December 31, 2012; and finally to May 31, All MDTF-N funds were disbursed by May 31, IFAD funds were originally scheduled to be used in 2012/13 and were utilized between mid 2013 and June 30, The total implementation period became approximately 5.5 years. 19. Allocation of funds to components. Actual expenditures by end of project were higher than expected in project management costs, due in part to the longer implementation period, and lower expenditures under the sector reform component. Final expenditures under component 1 were approximately 50 percent below appraisal estimates; component 2 expenditures were 91 percent below appraisal estimates and component 3 expenditures were 144 percent above appraisal estimates. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 20. Project design, preparation and approval followed an accelerated timetable in use for the MDTF-N financed projects. The project was prepared and approved following procedures put in place under the MDTF-N including accelerated processing procedures under OP 8.0. Project preparation was initiated in 2008, a Rapid Response Committee (RRC) decision meeting was held in March 2009 for a set of MDTF-N projects and final approval took place in July The grant agreement was signed in August 2009 and the project became effective the following month. The project experienced some pressure to finalize preparation due to the timelines associated with the MDTF-N and the need to commit resources and launch implementation. 21. Project implementation and policy dialogue was embedded in the larger dialogue around the MDTF-N, the CPA and the Government s Five Year Plan. The project benefited from the larger policy dialogue launched around the gum arabic sector through previous analytical work and engagement with stakeholders in the sector by IFAD, the World Bank and international partners. Although there was limited time available for consultation and design around MDTF-N financed projects, IFAD, World Bank and other donor engagement on the implementation of the CPA, MDTF-N, and Government Five Year Plan also contributed to consensus around policy reform process and project design. Reform of the gum arabic sector was an explicit recommendation of the Joint Assessment mission 4 and followed up through CPA 4 The 2005 Joint Assessment Mission provided an assessment of Sudan s rehabilitation and transitional recovery needs and outlined a framework for reconstruction and recovery through The JAM was co-led by the United 5

18 implementation. These higher level efforts appear likely to have contributed to relatively strong ownership of the project at various levels. 22. Lessons learned from similar efforts to liberalize markets were identified. Project design incorporated lessons learned from other countries that liberalized commodity markets and moved away from government controlled monopsony arrangements. The structure of the project with its focus on sector reform, analytical work and support to organizing and capacitating producer associations was linked to lessons learned in other countries and similar projects. 23. Certain elements of project design were relatively complex given the capacity of the implementing agency and country context. Project design under the second component called for support to GAPAs through a matching grant mechanism for productive investments and GAPA savings and revolving credit schemes. FNC had a few experiences in administering micro-credit to GAPAs in the previous decade through pilots but it was a generally new approach that required the development of detailed operational procedures, modalities and testing. As part of preparation process, a micro-credit consultant provided input into project design and implementation manual. The choice to include micro-credit was a response to the sheil system, an informal lending system used in the agriculture sector that led to extremely low prices for producers. While the choice of matching grants and micro-credit was considered appropriate given the development objective and beneficiary targets, it did represent a risk to the project. 2.2 Implementation 24. Although project implementation coincided with significant market liberalization some uncertainty existed around the direction of policy reform in early days and the project contributed to consolidation of reforms. Project design was finalized while sector reforms were still under discussion. Although the issuance of the Presidential Directive ultimately occurred immediately prior to project approval there remained some uncertainty as to whether it would be fully implemented or adjusted over time. This was particularly the case for abolition of taxes and fees, which were collected at various levels and a key recommendation for policy reform. An estimated 18 different taxes and fees were levied on gum arabic at national, state and locality levels. Their removal was variable and subject of policy dialogue with the Ministry of Finance and National Economy in the first half of the project. Project implementation was also sufficiently flexible to allow the sequencing of the studies financed by the project, which took place over a period of time and accommodated the sector s knowledge needs and policy dialogue requirements. 25. Once initial reforms were consolidated, however, there was less consensus around second generation reforms. The reform agenda in the middle to latter stages of project implementation was less clear due to more complex policy and institutional issues around the remaining taxes and fees being collected at state or locality level, the structure of the gum arabic auction market, export licensing arrangements, access to finance under Islamic banking principles, promotion of Nations and World Bank, working in partnership with the Sudanese parties and the IGAD Partners Forum for Peace (IPF). 6

19 local value addition and processing, and accessing global market opportunities. Many of these issues were analyzed and discussed through project financed studies but consolidation into a concrete reform agenda was more difficult to attain. The project did invest significantly in communication and promotion activities in the latter half of implementation, one of the recommendations emerging from project supported analytical work. 26. The project invested significant resources in supporting GAPAs even in the face of conflict within the project implementation area. The core of the project was its support gum arabic producers and their communities. The project allocated resources to expand access and participation by GAPAs in the project through matching grants and through access to gum arabic seedlings. The project exceeded original targets in this area (see discussion below on number of beneficiaries). Conflict re-emerged in South Kordofan in 2010 and in Blue Nile state in 2011 and impacted the project s ability to operate in some localities. 27. Multiple layers of project coordination led to some implementation delays as the project management structure was established but eventually became quite strong. The PCU was staffed by assigned FNC staff and hired consultants, but staffing took some time to put in place at federal, state and locality levels. Initially the project was rate moderately unsatisfactory (MU) for delays in establishing the structure needed to carry out activities, particularly at the locality level. 28. Implementation of activities related to the Gum Arabic Market Information System were affected by delays and implementation bottlenecks. As part of support to sector reforms, the project anticipated support for and launching of a market information system available to producers, processors, exporters and importers. Implementation of this activity was allocated to the Ministry of Foreign Trade (MFT). A study on the design of the market information system was commissioned and completed in 2013 following significant delays. The basic architecture of the system was developed and launched online in As of project closure, however, the market information system was not functional as no price, production or other data was collected or disseminated through the system and there appeared to be a lack of consensus on the utility of the proposed design between FNC, MFT and other stakeholders. 29. Combining two sources of funding under single project umbrella was useful but was not seamless. The use of MDTF-N and IFAD sources of funds in sequential order allowed for continuity in project design and support for a longer implementation period. Although IFAD funds were committed to the project early on in 2010 through a cooperating agreement, issues arose around the details of the legal agreements (the Letter of Appointment) and the mechanics of disbursement, which took a long time to resolve. As a result, the initial disbursement of IFAD funds to the project was significantly delayed and contributed to the fourth and final extension of the closing date for the project. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 30. Definition of a relevant set of results indicators represented a challenge throughout implementation. Restructuring of the results framework was required early on. The short timeframe between the RRC decision meeting, negotiations and approval (in line with the 7

20 provisions of OP 8.0) affected the ability of the team to incorporate recommended changes to the results framework. As a result, the project was approved with a results framework that the task team and implementing agency acknowledged required immediate adjustment. The first supervision mission in May 2010 proposed adjustments and additions to the results indicators, which were formally adopted in the 2011 restructuring. Additional changes in the results framework were discussed in 2013 but ultimately not pursued. These latter changes were proposed to better capture outputs and performance from matching grants at the intermediate result level. 31. Other aspects of M&E framework were well designed particularly data collection tools. Adequate provision was made for a management information system and for a frequent set of impact assessments to cover both the MDTF-N and IFAD financed phases. Human resources required to carry out M&E functions were in place. Higher level MDTF-N related monitoring took place as well including the MDT-N monitoring agent. Initial baseline surveys also accommodated IFAD core indicator reporting requirements. 32. M&E implementation and utilization of results. While the results framework changed substantially over time, the higher level indicators remained relevant throughout and generally provided guidance in terms of monitoring project implementation and achievement of the project objective. A baseline survey was launched within six months of effectiveness and completed in the project s first year. Interim impact assessment and final impact assessment studies were also undertaken based on household surveys targeting. Technical progress reporting was consistent throughout the project implementation on a quarterly basis. M&E was rated moderately satisfactory for the duration of implementation. 33. A mid term review was discussed but delayed in part due to the frequent turnover in TTLship and uncertainty around the closing date of the project. Following the passage of time, it was felt more practical to pursue implementation closure related assessments. 2.4 Safeguard and Fiduciary Compliance 34. Safeguards. The project was initially rated as category C at appraisal stage, triggering OP4.01 Environmental assessment because it was not expected to generate significant environmental and social impacts. In all ISRs and internal Bank systems, however, the project was rated Category B. Both the Bank task team and FNC as the implementing agency operated under the assumption that the project was rated C throughout the project implementation period. A 2013 implementation support mission did raise questions as to whether the project was misclassified as a category C but the issue was not resolved. 35. Although there remains some confusion around the classification, in practice the project was governed by safeguards instruments at the category B level - the procedures and guidelines laid out in the umbrella Environmental and Social Management Framework (ESMF) for Natural Resources Projects in Sudan. This framework was utilized for project implementation and identified specific mitigation measures that could be utilized if any of the matching grants were found to include substantial environmental impacts. No matching grant activities were formally flagged as having negative impacts during implementation and the project was rated as being in 8

21 compliance with applicable Bank policies and safeguards instruments by Bank implementation support missions. An external safeguard review for MDTF-N projects found no major issues and safeguards implementation was rated moderately satisfactory for the duration of the project. 36. Financial Management. At appraisal FNC was judged to have acceptable financial management systems to implement the project. Financial management compliance was rated moderately satisfactory or satisfactory for most of the implementation period. The project started with a manual accounting system and relatively limited use of software but ultimately moved towards a fully electronic accounting system to manage funds. Audits were provided on time and no major issues identified. Capacity to manage funds increased over time and the ceiling of the designated account was raised to support scaling up of matching grants activities. 37. Procurement. Procurement risk was rated high at appraisal due to systemic country issues as well as capacity issues at FNC and project level. These were to be corrected through early capacity building and training for the Procurement Officer appointed for the project. Procurement was rated moderately satisfactory and satisfactory for most of project implementation with delays in procurement as the primary reason for the moderately satisfactory rating. Most procurement was centralized at PCU level, with LIUs responsible of some small shopping (office furniture and stationary). Training was provided at both PCU and LIU levels. 38. Communities undertook a number of small scale procurement activities as part of their matching grants through community procurement committees. The total amount of community procurement was estimated at 4.3 million SDG 5, of which 1.9 million SDG was for the procurement of works and 2.4 million SDG for the procurement of goods. An external assessment of performance of the community procurement in 2014/15 and rated overall performance as 86 out of Post-completion Operation/Next Phase 39. An institutional architecture is in place to sustain project investments through FNC and GAPAs. The project developed a formal exit strategy and FNC will continue to operate and maintain training centers and nurseries financed by the project, all of which are located within larger FNC stations or centers at state and locality level. GAPAs will be responsible for the operations and maintenance of productive investments (water points, pumps, tractors) and have received training as part of their matching grant. The Gum Arabic Board, which is Sudan s umbrella organization for gum arabic producers, processors and exporters, will also continue to provide an institutional home for dialogue around the sector although producers have also indicated interest in formation of independent higher level producer organizations. 5 Around US$1 million based on an average exchange rates over the project life - matching grants provided by the project totaled US$0.86 million but were accompanied by 20% additional contribution from GAPAs 6 The procurement assessment was based on ten standard compliance indicators rated as follows: organization and functions of the system (rating: 95 out of 100); defining plan and requirements (96.5); preparation of specifications (68); assessment of procurement options (85); preparation of the bid documents (73); bid evaluation & contract award (90.5); contract management (80); basis for transparency (85); basis of accountability (94); and record keeping (95). 9

22 40. Additional support for gum arabic sector reform and producers is proposed through Government and other donor resources but there remains scope for mobilizing additional funding to scale up project achievements. Government counterpart funds have been provided to finance the PCU for the remainder of 2015 following closure of the IFAD grant but further funding is not yet certain. The project s model of capacity building and matching grant investment support to GAPAs will be replicated in additional localities through new funding from Agence Française de Développement (AFD) with implementation by FNC. Although this project will only cover a small number of GAPAs it represents a successful upscaling that FNC would like to replicate a larger scale. FNC has also proposed an additional Gum Arabic Commodity exchange and Warehouse Receipt System project to further develop the gum arabic value chain and support higher level producer organization development. Financing has yet to be secured at the time of ICR development. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 41. Gum Arabic policy reform and sector revitalization was relevant to the country s development priorities and remained so over the implementation period. The project directly responded to the Government s own initiatives within the agriculture sector and the Government s Executive Program for Agricultural Revival which was launched in April As a source of consistent export earnings, gum arabic also represented a strategic agricultural commodity and was aligned with Government strategies to expand and diversify its export base, which remains highly reliant on oil. In 2014 gum arabic exports were valued at approximately US$97 million and were Sudan s third largest agricultural export earner after livestock and sesame. 42. Project implementation also spanned a period of intense change for Sudan, including the implementation of the CPA and Government of National Unity (GONU), the separation of the country into two sovereign nations, renewed conflict, and international economic sanctions and isolation. Sudanese gum arabic is currently exempt from sanctions and represents one of the few economic sectors around which widespread international engagement and dialogue currently takes place. 43. The project was highly relevant to IFAD and MDTF-N objectives to support economic growth and poverty reduction among poor and conflict affected populations. The project responded directly to the objectives of the IFAD country strategy and MDTF-N objectives through its target group of beneficiaries and focus on rural economic growth and market development. The project was also complementary to other initiatives within the MDTF-N agricultural portfolio including the MDTF-N financed Improving Livestock Production and Marketing Project. 44. While not the main source of livelihood for many producers, gum arabic is an important source of cash income in the off-season. The project s development objective and focus on increasing income for producers was relevant to the livelihood priorities of producers. Most gum arabic producers rely on a mixture of livestock and crop production for their primary 10

23 livelihood. Gum arabic harvesting is a complementary off-season activity to crop production and for some producers, can contribute up to 50 percent of total household cash earnings during the year. 3.2 Achievement of Project Development Objectives 45. Achievement of the PDO is based on three inter-related outcomes increased income, improved production, and improved marketing among small scale producers targeted by the project. Change in incomes among gum arabic producers PDO Indicator: Percentage change in the income level of beneficiary households from Gum Arabic Production after project intervention. 46. The target is considered fully achieved. The change in beneficiary household income was the most direct measurement of the project s development objective. Analysis of the baseline survey and end of project survey in the impact assessment indicate that the original target of 20 percent was met. The 65 percent increase in gum arabic income reported by the project, however, should be adjusted downward so that it reflects the actual net impact of the project given income changes in the control group (including both before and after and with and without scenarios). 47. Incomes among gum arabic producers rose across the board among both project and non project beneficiaries during implementation due to liberalization in the sector. There was a consistent and gradual increase in producer prices during project implementation as producers were no longer required to sell at fixed prices to the Gum Arabic Company and taxes and fees were reduced. As a result both control and project beneficiary income increased. ICR analysis on the net increase in incomes among direct project beneficiaries after discounting the general rise in income for all gum arabic producers shows the increase is approximately 21 percent in real terms. This is still above target levels established by the project. Table 1: Changes to gum arabic price and incomes among project and non-project beneficiaries 2014 Control group Project beneficiaries 2010 % % Net benefit change change to project SDG SDG from from beneficiaries Average price of gum/kantar 57.4 to 74.5 SDG 704 (236 in 2010 SDG) 390% 854 (286 in 2010 SDG) 494% 104% Average income from gum arabic in current SDG 6,026 to 10,867 SDG 21,417 (9,823 in 2010 SDG) 16% 25,283 (11,596 in 2010 SDG) Source: Gum Arabic Project Baseline and Impact assessment, real SDG calculations based on CPI 37% 21% 11

24 Change in gum arabic production 48. Change is gum arabic production contributed to increases in income realized by project beneficiaries and is based on the following: 49. Increased utilization of tree resources. Increases in household income among project beneficiaries were also generated by increases in the volume of gum arabic production. Data from beneficiary studies indicates significant increases in the amount of gum arabic harvested from producer fields and that project beneficiaries used more land and tapped more trees than non-beneficiaries Access to inputs and finance to mobilize labor. Increases in production experienced by project beneficiaries were also directly related to the ability of producers to mobilize labor for gum arabic harvesting. Casual or household labor is needed to tap trees and collect gum, however producers often face a number of constraints due to limited availability of cash for daily wages and access to the transport and water necessary to sustain work in fields located far from village centers. Matching grant investment in tractors and water points allowed GAPA members to organize transportation of both labor and water to the field, while increased savings or access to credit could be used to finance wage costs of casual labor 8. Table 2: Changes in Gum Arabic production, marketing and profitability Impact Assessment Survey Baseline Survey Control group Households Project beneficiaries % of respondents indicating price of gum 3.5% 54% 71% arabic was profitable % engaged in collective marketing of gum 8.1% 12% 62% arabic % of gum sold that was cleaned and sorted 20% 13% 23% % of utilization of owned (gum arabic) land 43% 44% 79% % of gum arabic marketed directly no data no data 68% Source: Project Impact Assessment Original PDO Indicator/Restructured Intermediate Results Indicator: Number and percentage of GAPAs with effective savings and credit systems. 51. This target is considered mostly achieved, however the definition of effective savings and credit systems does not appear to have been formally defined at appraisal or during implementation. In practice the definition used by the project was whether a functional revolving savings and credit system continued to operate over multiple seasons. In this respect the project reported attaining 97 percent of the 100 percent target. The impact assessment survey found that of the 194 GAPAs that benefitted from the project, 97% or 188 had functional savings 7 Acacia trees mature over a five year period therefore any increase in gum production in the project period is due to increased utilization of existing trees. In general estimates of maximum yields are not known and yields are dependent on the number of trees tapped, tapping technique, tree age and other environmental factors. 8 Microfinance grants to GAPAs totaled US$ 2.8 million under the project. 12

25 and credit systems that either utilized funds own funds or the seed grant for microfinance provided by the project. 52. Project investments in microfinance grants and training appears to have increased access to and use of banking services. The baseline survey found relatively few GAPAs had formal savings in Banks (2.2%) or access to credit (around 17% - 20%), which subsequently increased among project beneficiaries. According to the impact assessment survey the average capital of GAPAs increased from SDG 46,478 in 2011 to SDG 104,571 in Table 3: Change in access to credit and savings 2010 Baseline Survey 2014 Impact Assessment Survey Project beneficiaries 2014 Impact Assessment Survey Control group Households % indicating have savings with banks 2.2% 29% 19% % and # of GAPAs with savings and 2.4% 97% Not assessed credit system (5 GAPAs)* (188 GAPAs) % with access to formal credit 17% - 20% Not assessed Not assessed (within GAPA our outside) * 2011 data from PCU data and 2014 the impact assessment based on interviewee recall 53. Within GAPAs, revolving fund accounts were managed by elected committees who decided on credit allocations, defined collateral, and controlled the repayment of loans. On average GAPAs received 56,000 SDG per GAPA (approximately US$10,000). The project credit officer and LIUs extension staff provided support to committees and members on the management of the scheme. Repayment rates within GAPAs were included as an intermediate results indicator at appraisal but the indicator was removed in the restructuring of the results framework. The project did, however, continue to monitor and selectively report on repayment rates in quarterly progress reports based on monitoring missions. No comprehensive report was available from the project on repayment performance for all GAPAs. Nonetheless, based on limited reporting, repayment appears high although there are some instances of low repayment, particularly in the first installment of funds. Table 4: Sample of GAPA revolving fund repayment rates Locality # of GAPAs # of members Total microfinance funds received (SDG) Repayment rate - first installment Repayment rate - second installment Bara 14 1, ,600 93% 94% Tandalti ,000 51% 92% Abujubaiha 27 1,762 1,428,800 82% 88% Source: July September, 2014 Quarterly Progress Report PDO Indicator: Number of Direct project beneficiaries and Number of Direct Project Beneficiaries of which female. 54. This target was fully achieved in terms direct project beneficiaries and mostly achieved with respect to the percentage of female beneficiaries. Within the original 11 localities targeted by the project, an initial 132 GAPAs were targeted at appraisal (110 for micro-finance and 25 for 13

26 matching grants). The longer time frame available for implementation allowed the project to reach more GAPAs. The Government Implementation Completion Report (ICR) of March, 2015 indicates 236 GAPAs had been reached by the project 180 with micro-finance support (grants and/or training) and 56 with matching grants. The impact assessment, which assessed progress up to December 2014, indicates 194 GAPAs had been supported 129 with microfinance support (grants only), and 56 with matching grants. The difference in number appears to be related to inclusion of GAPAs that benefitted from capacity building training but did not benefit from matching grants or micro-finance grants. Both sources of data demonstrate the project exceeded its targets for direct beneficiaries. 55. The project also reported an increase in the size of GAPAs. Membership increasing from an average of 120 members per GAPA in 2011 to 189 in 2014 compared an average of 83 members for non-beneficiary GAPAs in The total number of individual beneficiaries within participating GAPAs is estimated by the Government ICR at 17,080 for microfinance, 5,315 matching grants and 1,500 for training and capacity building. In terms of female beneficiaries, the project targeted participation of 25% and achieved 24 %, based on a calculation number of female members in targeted GAPAs. 56. The project also reached a number of indirect beneficiaries. Indirect beneficiaries included individuals within the project area who benefitted from investments in infrastructure and access within communities where beneficiary GAPAs were located 20 of the 56 matching grants financed water points or water storage structures used by the community at large as well the larger population of gum arabic producers who benefitted from policy reforms and access to services through capacity building investments in FNC. A total of 550 GAPAs were registered in the 11 localities where the project operated and there were approximately 2,000 GAPAs country-wide. Table 5: Capacity building and matching grant investments Activity Unit Target Achieved Capacity building support to producers associations (training on: improved production techniques, credit, financial management, Marketing; business/organizational skills and gender mainstreaming) Training for ToT, Forestry Extension officers and locality coordinators on community organizational skills, credit- marketing and gender mainstreaming Training of GAPA executive officers on marketing, credit, financial management; business administration (3 members per association.) # of GAPAs persons member Training for GA Unions at locality and state level wshop Seasonal credit and Micro finance grants # of GAPAs Support infrastructure/productive investment (matching grants) # of GAPAs Source: Impact assessment 57. Other indirect beneficiaries include laborers employed in the gum arabic sector, private sector processors, exporters as well as institutions supporting the sector such as the Gum Arabic Board, state and local government, and FNC itself, through infrastructure investment in tree nurseries and training facilities and training provided to FNC staff. The project estimates 14

27 approximately 175,000 total indirect beneficiaries were reached by the project from the full range of stakeholder groups. Change in gum arabic marketing 58. Links between income change and project interventions. There is a reasonable case for attributing changes in income seen in the impact assessment to specific project interventions based on the following factors: 59. Improved marketing. GAPAs supported by the project benefitted from efforts in collective marketing to obtain better prices and avoid low prices in the peak marketing season. These efforts were directly facilitated by training for GAPAs which allowed for more effective collective action as well as the project s matching grant investments in storage and transport 9, which allowed GAPAs to sell in bulk at a time when prices were highest. Project investments in savings and credit systems also allowed individual gum arabic producers to access credit and reduce their reliance on the sheil system, which in turn increased the amount of gum marketed directly rather than transferred as repayment to moneylenders 10. Evidence from impact assessment survey indicate a higher number of producers in the project are now directly marketing their gum in comparison to non project beneficiaries (see Table 6). Table 6: Changes in Gum Arabic production, marketing and profitability Impact Baseline Assessment Survey Survey Control group Households % of respondents indicating price of gum arabic was profitable % engaged in collective marketing of gum 2014 Impact Assessment Survey Project beneficiaries 3.5% 54% 71% 8.1% 12% 62% arabic % of gum sold that was cleaned and sorted 20% 13% 23% % of utilization of owned (gum arabic) land 43% 44% 79% % of gum arabic marketed directly no data no data 68% Source: Project Impact Assessment Original PDO Indicator/Restructured Intermediate Results Indicator: Percentage of FOB price received by small scale gum producers after project intervention. 60. This target is considered fully achieved. Both the 2007 Policy Note and FPP noted that producers received as little as 10 percent to 15 percent of the FOB price under the pre-liberalized system where the Gum Arabic Company had monopsony purchasing power. Whether producers received a higher share of FOB price was seen as a key indicator of policy changes within the 9 The 56 matching grants financed tractors (23 grants), water reservoirs (15 grants), gum stores (13 grants), hafirs (underground rainwater storage structures 2 grants), and artisan wells (3 grants). 10 The sheil system is a type of informal agricultural credit that provides cash loans to producers to be repaid in kind at an agreed upon price set at the time of the loan. This sheil price is typically much lower than the eventual market price. 15

28 sector and the mechanism by which higher incomes would be achieved by project beneficiaries. All producers experienced significant increases in prices following liberalization in the sector and evidence from project surveys indicate project beneficiaries did achieve higher price levels. 61. In the project s 2010 baseline assessment, producers reported an average price of 57 SDG per kantar (100 lb bag). At the time of the impact assessment project beneficiaries reported prices of 854 SDG/kantar while non-project beneficiaries reported average prices of 704 SDG/kantar (equivalent to 286 SDG/kantar and 236 SDG/kantar in real terms if discounted to 2010 SDG) a difference of 87 percent between project and non-project households. Although international CIF and Sudan Free on board (FOB) prices for gum Arabic did fluctuate during the project period, prices in 2014 remained very similar to 2007/2008 levels. As a result, higher producer prices have also resulted in a higher share of the FOB prices than non-beneficiaries. 62. Project M&E reports indicated producers received 65 percent of the FOB price by project end. Although the ICR analysis was not able to replicate this number due to the lack of disaggregated price data for various grades of gum, project estimates are credible and it is likely project beneficiaries received competitive market prices very near average FOB prices. Official trade statistics indicate FOB prices for Hashab in 2013 were around US$3,300/ton or US$148/kantar. Average farmgate producers prices for project beneficiaries in 2014 impact assessment were equivalent to US$412/MT or US$105/kantar around 71 percent of the FOB price reported by project while non-project beneficiaries reported prices around 59 percent of FOB prices 11. Higher price premiums received by project beneficiaries compared to non-project beneficiaries are credibly attributed to better marketing efforts and higher quality gum production - as discussed in the sections above. Table 7: Estimated FOB Price Received by Producers Average Producer Price (project surveys) Average FOB price US$/kantar SDG/Kantar US$/Kantar (Central Bank of Sudan) 2010 Baseline Survey 2014 Control group Households % of average FOB price received (236 in 2010 SDG) (2013 data) Project beneficiaries 854 (286 in 2010 SDG) (2013 data) 71 Notes: 1 kantar = 100 lb, 2010 FOB price is average across Hashab and Talh gum, 2014 FOB price is Hashab price only, US$ exchange rate based on unofficial market exchange during the season 11 Sudan and global price data for various qualities and grades of gum is not easily available so average prices mask the quality premium received by higher grade gum. Hashab gum from Acacia senegal trees is of higher quality than Talh gum from Acacia seyal trees. Disaggregated price data for the two types of gum is not consistently reported in Sudan and global trade data. 16

29 Gum Arabic Farmgate, FOB and CIF Prices $3,500 $3,000 Hashab FOB price Sudan (US$/MT) $2,500 $2,000 $1,500 Average CIF price France (US$/MT) Average FOB price Sudan (US$/MT) Average beneficiary farmgate price (US$/MT) Average control farmgate price (US$/MT) $1,000 $500 Baseline average farmgate price (US$/MT) Talh FOB price Sudan (US$/MT) $ * 2010* Source: UN Comtrade Database, Central Bank of Sudan, Sudan Central Bureau of Statistics, project surveys *all 2009/2010 Sudan data sourced from the UN Comtrade due to lack of in country data Source: Project surveys and Central Bank of Sudan Summary of Performance against PDO Outcome indicators 63. The June 2011 restructuring, which simplified and re-organized the results framework, reduced the original set of PDO indicators by downgrading two indicators to intermediate results indicators. Because they were still measured for the life of the project and are outcome rather output indicators, they are still reported here. Project M&E data show most targets were achieved or nearly achieved. Table 8: PDO Indicator Reporting PDO Indicator Baseline Original target Actuals reported by Project Percentage change in the income level of beneficiary households from Gum Arabic production after project intervention 0 (baseline avg. income SDG 8,410 20% 65% Direct project beneficiaries 0 12,275 23,895 % of beneficiaries female 0 25% 24% Number and % of GAPAs with effective saving and credit systems* 2.4 % 100% 95% Percentage of the FOB price received by small scale gum producers after project intervention* 10% 15% 60% 65% * changed to an intermediate results indicator in June 2011 restructuring 17

30 3.3 Efficiency 64. Appraisal assumptions. The FPP did not include any detailed economic and financial analysis and because the project was prepared under OP8.0, no ex ante net present value (NPV) or economic or financial rates of return were calculated. A basic analysis of expected economic impact of the project was presented in the FPP, however, and estimated the expected increase in export revenues for Sudan as a result of the project and increased producers incomes in target areas. 65. ICR analysis: producer profitability. Detailed gross margin analysis was not undertaken due to data constraints, however project surveys provided data on the income changes and allowed for comparison between project beneficiary and control households. Based on survey data there were significant positive changes in income for both control and project beneficiary households. The net increase incomes among direct project beneficiaries after discounting the general rise in income for all gum arabic producers shows an increase in income among project beneficiaries of approximately 1,773 SDG in real terms, equivalent to a net incremental increase in income of 21 percent. 66. ICR analysis: internal rate of return: A basic financial internal rate of return was calculated based on the estimated increase in revenue generated by gum arabic sales among project beneficiaries using assumptions on the average production levels, number of direct beneficiaries and the average price premium realized by project beneficiaries as found in project surveys and ICR analysis. 67. If only direct beneficiary net revenues are compared to total project costs, the internal rate of return for the project is estimated at 7 percent, which is generally considered below the opportunity cost of capital. This rate of return represents a conservative estimate, however, since additional income from indirect beneficiaries may be attributable to project investments in policy dialogue and capacity building. Given the lack of data on available to quantify indirect benefits the internal rate of return was also calculated using a more narrow set of costs more directly associated with provision of services to direct beneficiaries. Under these different assumptions, the internal rate of return rises to 21 percent. This latter estimate likely represents an upper bound estimate and the project s internal rate of return could be considered somewhere between these upper and lower estimates. 3.4 Justification of Overall Outcome Rating Rating: Satisfactory 68. The project is rated satisfactory based on an assessment of the relevance of the project to Sudan s post conflict economic and poverty reduction goals, satisfactory achievement of its stated development objective in raising gum arabic producer incomes and evidence of the generally net positive return generated by the project, all within an emergency, post-conflict context. 18

31 69. An independent evaluation of the MDTF-N was carried out in 2013 and included a case study on the project. It was provisionally rated as moderately satisfactory 12 with an indication that was a likelihood the project would attain its PDO, in depth evidence on project outcomes was not yet available and the project was still under implementation. 70. The results framework analysis demonstrates nearly all performance indicators were fully achieved. Despite good performance, it should be noted the relevance of some of the intermediate results indicators to the PDO can be considered weak. The changes to the results framework proposed in 2013 identified better metrics to capture intermediate results, particularly with respect to measuring GAPA capacity and functioning of the gum arabic market. These indicators were not adopted, however, and no reporting provided against them. Nonetheless, the existing results framework reporting and available evidence is considered sufficient to measure achievement of development objective. 71. One area of poor performance within the project relates to implementation of the market information system. The implementation performance of a gum arabic market information system (GAMIS) under component 1 can be considered moderately unsatisfactory. Although design was completed and hits on the website show a number of visitors, the system has not been fully established and there remains significant uncertainty as to whether it will be fully functional or operational. 72. While market information was considered an important aspect of the project, the support provided to consolidation of sector policy reforms, investments in institutional capacity building, producer organization development, credit facilities, productive investments and restocking of gum arabic trees made substantial contributions to improving the production and marketing systems as whole. Because the project s development objective focuses on raising producer incomes and were largely achieved, weaknesses in GAMIS implementation can be classified as minor and as a result, the project is rated satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 73. The project s design was poverty focused from the start given its focus on raising incomes among gum arabic producers. Income provided by gum arabic also represents a key source of cash income in the dry season. Sudan s national poverty rate is estimated at 46.5 percent based but rural poverty was much higher in the states where the project operated 67 percent in North and South Kordofan, 64 percent in Blue Nile and 61 percent in White Nile. The beneficiary characteristics reported in the project s impact assessment show that 78% of the direct beneficiaries GAPA members were classified as either very poor, poor or less poor. 12 World Bank Independent Evaluation of the World Bank Administered Multi-Donor Trust Fund in Sudan: final evaluation report. Washington DC; World Bank /02/ /independent-evaluation-world-bank-administered-multi-donor-trust-fund-sudan-final-evaluationreport 19

32 74. Because gum arabic producers are almost exclusively located in isolated rural communities that have limited access to basic services, project investments in storage facilities, water points and transport also had an indirect poverty impact for communities in addition to the direct productivity and marketing improvements. 75. In terms of gender, project implementation focused on meeting its 25 percent target for gender participation, which was almost fully achieved. There were ten all female GAPAs supported by the project. While data was not systematically captured, information on GAPA membership indicates that the project contributed to an increase in the share of female membership over time in some cases project supported GAPAs experienced an increase in female membership from levels below 20 percent to 25 percent by project end. (b) Institutional Change/Strengthening 76. Gum Arabic producer organizations. A key benefit of the project has been building stronger producer organizations. Project investments provided training and capacity building for GAPAs and facilitated exchanges between GAPAs to foster knowledge sharing and coordination. Development of higher level producer organizations and more formal coordination in marketing among groups of GAPAs is under consideration among more mature GAPAs. 77. Forest National Corporation. Project investments have made substantial contributions to the longer term capacity of FNC to deliver services to gum arabic producers through the rehabilitation of FNC nurseries and training facilities. Seedling production capacity for FNC has increased as a result of nursery development and training capacity has expanded. The project developed training modules and built the technical capacity of extension workers and FNC staff, which provide a sound basis for scaling up training to additional GAPAs if resources are available. 78. Gum arabic sector reform. The project s knowledge and communication products have contributed to the larger stock of knowledge around gum arabic market opportunities, expanded market promotion and communication activities and identified issues for continued policy dialogue. Project investments in market information systems, if fully operationalized, would provide a long term benefit for producers within the sector and the creation of more efficient and transparent marketing systems. 79. Market liberalization also resulted in sustained institutional changes within the sector as the Gum Arabic Company s role in marketing was eliminated and new institutions emerged to provide coordination in the sector. The government established the Gum Arabic Board in 2009 to facilitate reforms and it continues to operate as the primary coordinating body within the sector. (c) Other Unintended Outcomes and Impacts (positive or negative) 80. Increased productive potential and additional environmental benefits. The project produced 2.7 million seedlings as a result of investments in tree nursery rehabilitation and support for the operational costs of seedling production through FNC stations. This is expected to boost the long term productive potential within the localities where the project operated and across the gum belt in general. Gum arabic trees play an important secondary role in agro- 20

33 ecological systems through contributions to restoring soil fertility, providing dune or wind breaks to reduce erosion and providing both fuel and fodder. Trees can also be expected to contribute global environmental and climate benefits through carbon sequestration. 81. Private sector development. Liberalization of the sector has resulted in new private sector entrants into export and processing activities. Although sustained activity appears variable not all new participants sustained activities across multiple seasons project data indicates that more private sector entities are active within sector in terms of export as well as basic marketing and processing activities than was the case prior to sector reforms. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 82. A stakeholder workshop was held as part of project closure. General discussion took place around the following topics: Project location as initially piloted in the 11 localities The vision for the project expansion in the potential states of the gum arabic belt The values of constraints and the lessons learned from the project implementation to help the FNC in setting policies to sustain the sector reform and assist in rural development planning The role played by the project in the sector policy reform The importance of information, data collected on the project activities The project legal framework and staff remuneration 83. Participants highlighted the need for continued work on marketing and storage issues, land tenure, association development and strengthening, and access to finance. Key points are summarized in Annex Assessment of Risk to Development Outcome Rating: Moderate 84. Institutional and policy risk. This risk assessed as moderate. Rollback of policy reforms represents the primary policy risk to sustaining gains achieved under the project. While market liberalization following the Presidential Directive appears to be well established, revenue pressure may affect government commitment to sustaining the reform. The split with South Sudan and low oil prices have resulted in lower revenues and growing budget deficits, which could create an incentive for re-imposition of taxes and fees, particularly at state or locality level. The risk of re-imposition of the floor price policy or monopsony arrangements through the now defunct Gum Arabic Company, however, is low. Additional reforms or market development activities will require further policy dialogue particularly if auction markets are to function more effectively. 85. Institutional capacity risks are also moderate. Inter-ministerial/agency coordination between FNC, MFT and the Gum Arabic Board needs continued attention in order to fully operationalize a market information system for the sector. 21

34 86. Financial risks. Financial risks are substantial. While loan repayment within GAPAs supported by microfinance matching grants appears high, performance is reported to be variable across GAPAs. There remains a moderate to substantial risk that microfinance grant investments may not be sustained in the long term if lower repayment levels erode the principal maintained by GAPAs. Continued monitoring of GAPAs is planned by FNC and should be followed up with technical support as needed. 87. Environment and Social development risks. Environmental risks are low. Project investments in better tree management and harvesting techniques as well as gum arabic seedling production have created a net positive environmental impact. Matching grant investments in storage structures and water points are likely to have limited environmental impact and maintenance plans have been put in place as part of the matching grant training. 88. Social development risks are moderate, due to the larger country risk around potential conflict and violence. An outbreak of conflict did affect the project during implementation and could represent a risk to development outcomes in the future. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 89. Although the project was prepared under OP 8.0, more time and resources were devoted to project design than other MDTF-N supported projects. This was aided by the Bank s involvement in preparation of and dialogue around the 2007 Policy Note on Gum Arabic as well as a project preparation process that was initiated in the year prior to approval by the RCC. The PCN was reviewed in January 2008, a QER held for the project in May 2008 and the project was provisionally approved by the RCC in March The preparation team brought in technical design support for gum arabic reform and the project s microfinance support. Engagement with IFAD on project design also took place and both the IFAD program document and the Bank s FPP were consistent and well aligned. Nonetheless, the time between RCC decision meeting and negotiations/ finalization was relatively short and as noted above, suggestions by the RCC to strengthen the project s results framework were not fully taken on board prior to approval. (b) Quality of Supervision Rating: Moderately Satisfactory 90. The Bank undertook regular supervision with task team leader TTL and staff based within the region in neighboring countries. The Bank had a relatively small office in Khartoum at the start of implementation but increased capacity over time as the portfolio of projects expanded. The 2013 MDTF-N evaluation found that in-country staffing was a challenge for the Bank and had an impact on the implementation of MDTF-N projects at the start but improved substantially by the mid-point of MDTF-N implementation. 22

35 91. TTL turnover was high and the project was led by four TTLs. Frequent change in TTL ship may have led to a loss of institutional memory and affected the extent of the Bank s engagement on policy dialogue over the course of implementation. The supervision team was generally responsive to dealing with issues, however, including M&E and planning for transition arrangements. Restructuring of the results framework was planned and discussed early on. Further refinement of the results framework was judged useful and follow up took place in 2013, however no formal restructuring took place. No major changes to project design were required over implementation, a mid-term review was discussed but not held because it was deemed too close to project closure. While there was not a strong need for course corrections or adjustments to design, a timely mid term review process could have provided an opportunity to more formally re-assess the sector reform agenda with Government and implementation performance of matching grant activities. 92. Because the project was thought to be rated category C no dedicated safeguards supervision took place outside what was in place for the larger environmental and social safeguard framework for natural resource projects in Sudan. A wider review of safeguards undertaken for MDTF-N projects in 2012 found that while no adverse environmental or social effects resulted, the MDTF-N missed an opportunity to strengthen environmental protection and social sustainability for the future. This largely mirrors the experience of the project. While no evidence exists of negative impacts and there are clear conservation and environmental benefits from the project there may have been an opportunity for further strengthening existing systems within FNC and GAPAs. The Bank team should have also identified the inconsistency in safeguards categorization between the original FPP and Bank implementation status reports. 93. Supervision was candid in ratings of project shortcomings and constraints. The project was rated marginally unsatisfactory at the start due to delays in establishing implementing capacity and revised upwards when performance improved. Development of implementation modalities for matching grants and microfinance took time to finalize and were reviewed in detail during early supervision missions. The market information system received input from the Bank s information and communication technology (ICT) team. Supervision of the IFAD funds proceeded smoothly and supervision was often undertaken as joint-bank-ifad missions. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 94. The rating is based on a moderately satisfactory rating for both quality at entry and quality of supervision. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 23

36 95. Achievement of project development objectives would have been difficult had the Government not followed through on implementation of the Presidential Directive on reforms and market liberalization. The policy environment changed markedly following reform and has remained largely the same with no retrenchment in policies. Following the Directive, two ministerial committees were established to ensure the decree was implemented and address barriers to implementation of the liberalization policy. A decision was also taken to establish the Gum Arabic Board to coordinate reform measures and support the revival of gum arabic production and exports. The objectives of the Gum Arabic Board were somewhat similar to the former Gum Arabic Company, but without monopoly power. Since then, the Gum Arabic Board has fulfilled its mandate for promotion of gum arabic export, opening new markets, providing finance services and quality control. 96. Government policies were less consistent in terms of macroeconomic stability. During the project period Sudan had a significantly overvalued exchange rate and a parallel exchange market. The real exchange rate was estimated to be overvalued by as much as 65 percent in 2008, which reduced only slightly to 50 percent and 40 percent in 2010 and The nominal exchange rate was devalued by almost 100 percent in 2012/13 but real exchanges rates remained overvalued for the duration of project implementation. High inflation and growing budget deficits also had an impact with monetization of the budget deficit contributing to high inflation levels in 2013 and Monthly inflation peaks exceeded 45 percent occurring at times. Trade was also substantially affected by the existence of sanctions which complicated cross border payments. 13 (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 97. Implementing agency performance is rated moderately satisfactory. While the project took some time to fully launch in 2009 and 2010 resulting in a moderately unsatisfactory rating, project coordination did improve and remained satisfactory for the remaining project period. The project coordinating unit oversaw project implementation by localities and performed central functions while locality implementation units provided main frontline implementation support. The project had a reporting system based on monthly and quarterly progress reports prepared by LIUs and submitted to central coordinating unit. Quarterly progress reports were then prepared by the PCU for submission to the Bank and were provide on a timely basis throughout the project implementation period. 98. While most of the project implementation responsibility was delegated to FNC, the responsibility for launching and implementing the market information system was delegated to MFT. As noted above, MFT experienced delays in finalizing the market information system and it was not fully operationalized by project end. 99. A Project Steering Committee and the Project Technical Committee were constituted to provide implementation support and technical guidance to ensure effective management of the 13 Sudan Country Economic Memorandum, forthcoming 24

37 project. The Project Steering Committee provided a mechanism to coordinate with the line ministries and was intended to facilitate the sector policy reform initiatives. Both committees remained active throughout the project and are expected to continue as sector coordinating committees part of the sustainability plan. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 100. Overall borrower performance is rated Moderately Satisfactory based on moderately satisfacotry ratings for both Government and Implementing Agency performance. 6. Lessons Learned 101. Addressing policy reforms together with interventions targeting production, marketing and finance constraints can generate substantial gains for producers. The project s dual focus on sector reform and interventions designed to address issues around production, marketing and access to finance created a dynamic that allowed producers organizations to quickly benefit from market liberalization. While all gum arabic producers benefitted from sector reform, those with additional access to training in production and harvesting, and productive infrastructure, transport and microfinance were able to more quickly take advantage of the improved marketing and price environment Using producer organizations as the primary entry point for support can be an effective means of improving market access by small scale producers in a newly liberalized sector. Prior to market liberalization Sudan s gum arabic sector was controlled through the Gum Arabic Company and producers had very limited marketing and negotiation power. Following liberalization significant changes took place with a number of new actors entering the sector as buyers, processors and exporters. Collective marketing through GAPAs offered an effective tool for small scale producers to attain competitive prices and establish new, more profitable marketing channels Creating a logical results chain in a post conflict setting and uncertain policy environment requires continued attention and iterative processes. As a project that was processed under OP8.0 that also targeted sector reforms, the project faced an initial challenge in articulating a results chain that accurately identified outputs, intermediate outcomes and results. Revisions to the results framework were required as the impact of sector reforms were better understood and the specific investments in GAPA capacity building were finalized. An iterative process of refining results can address gaps in knowledge in uncertain policy environments and/or post conflict settings where ex ante analysis may be limited by time, available information and levels of client or stakeholder engagement Triple bottom line benefits can be attained even in challenging country contexts. The project generated social, environmental and financial benefits a triple bottom line - given its focus on regenerating and expanding the stock of gum arabic trees, investing in community infrastructure, improving sustainable harvest methods, and increasing profits from gum arabic sales. Although the policy and post-conflict environment presented a challenge to 25

38 implementation, an opportunity existed to address a key livelihood intervention that also generated longer term environmental and climate benefits as well Sustained engagement is required to move beyond first generation sector reforms but may be more difficult to achieve in a post-conflict setting. The project s contribution to consolidation of the initial set of policy reform in the gum arabic sector were followed by a longer term dialogue on policy and institutional changes to improve market access and expand processing and export opportunities. The institutional and policy issues around second generation gum arabic sector reforms were more complex and difficult to generate consensus around. The level of sector reform in a post conflict setting may be constrained as policymakers faced a number of competing concerns Market information systems are better located with organizations directly controlled by beneficiaries. Having the market information systems anchored within a line ministry has proved challenging in other country contexts and appears to have faced similar challenges under the project. Lessons from other countries have shown market information systems should be hosted and managed by the direct beneficiaries who need information and have interest to share information. The need for information should be determined by producers and private operators and they could create their own association to manage the system. The Ministry of Foreign Trade does not have the same needs and interest to access quick and reliable market information. 7. Comments on Issues Raised by Grantee/Implementing Agencies/Donors (a) Grantee/Implementing agencies (b) Cofinanciers/Donors (c) Other partners and stakeholders 26

39 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate (USD millions) Actual/Latest Estimate (USD millions) Percentage of Appraisal Component 1: Gum Arabic Sector Reform and Support Component 2: Institutional Capacity Building and Support to Gum Arabic Producers Associations Component 3: Project Management and Supervision Total Baseline Cost Physical Contingencies Price Contingencies Total Project Costs Project Preparation Costs Total Financing Required (b) Financing Source of Funds Type of Cofinancing Appraisal Actual/Latest Estimate Estimate (USD millions) (USD millions) Percentage of Appraisal Trust Funds International Fund for Agriculture Development Multi-donor Trust Fund for North Sudan

40 Annex 2. Outputs by Component Component 1: Gum Arabic Sector Reform and Support. 1. Studies on policy reform. The following three flagship studies were completed under the project: Gum Arabic Value Chain Analysis (2011); World Demand Structure and Market for Sudanese Gum Arabic (2012); and Gum Arabic Auction Markets and Marketing Information Systems (2011). All studies were contracted to consultants and firms with international experience and were completed and approved by the project technical committee. Presentations and discussion of analysis and recommendations were scheduled with major stakeholders in a workshop. 2. Market promotion, research and development grants: The project funded research studies on a variety of topics around improving quality and value addition through national research institutes and universities. Matching grants were awarded to conduct six specialized studies for strengthening gum arabic quality, marketing and promotion. The studies focused on the following topics: Promotion and Utilization of Gum Arabic as a Functional Ingredient in the Local Food Industry Variation in gum arabic viscosity and its potential effect on grading and marketing enhancement of gum arabic Development of a mechanized gum tapping tool Establishment of a network system for local gum arabic markets Inter and intra species grafting of Acacia Senegal Gum arabic quality control and efforts to improve marketing and promotion of gum arabic 3. The studies were undertaken by a range of researchers in the sector including the Sudan Nutrition Centre for Training and Research, Ahfad University for Women, and Sudanese Forestry Society, among others. Studies were disseminated through national workshops and events. 4. Market information systems. A study on the design of the market information system was completed in 2013 and the basic architecture of the system was developed and launched online in As of project closure, however, the market information system was not functional as no price, production or other data was collected or disseminated through the system. MIS training was conducted for gum local market officers. 5. Promotion Media Grant: The project also made one grant to develop a communication and media strategy to promote gum arabic. This strategy was also put into use thorugh production of communication and media materials. 28

41 Component 2: Support to GAPAs 6. GAPA Coverage. Over the course of the project 194 GAPAs participated in the project in eight localities five in phase one in 2011 (Um Rawaba, El-Dilling, En -Nahud, Al-Dali and Bout) and three in phase two starting in 2013 (Bara, Abu-Gebeiha and Tendalti). Selection of the GAPAs was in accordance with the Implementation Manual prepared by the project. 7. Training and Capacity Building to Small-Scale Producers Associations. The project organized capacity building programs for 189 GAPAs and its members in different fields as shown in the Table 2.1. Approximately 1,152 of GAPA's executive officers and GA Union members were trained in marketing, credit, financial management and business administration. The project also provide financing to train 28 extension cadres as a training of trainers exercise in community organizational skills, credit, marketing and gender mainstreaming. Table 2.1: Summary Training courses for the GAPAs Members No. Title of the Training Dates Venue Participants Number Male Female 1 Microfinance July 2010 Umrawaba Gum Producers Microfinance July 2010 Umrawaba Gum Producers Advanced October Umrawaba GAPAs Executive Microfinance 2011 Officers 4 Gum Arabic Quality October Umrawaba Gum Arabic Control Techniques 2011 Producers 5 Microfinance 3 Damazin Gum Arabic Business Management Bookkeeping & Accounting 7 Gum Arabic Quality Control Techniques 9 Forestry Extension Techniques 10 Agroforestry Techniques 11 Advanced Microfinance 12 Gum Arabic Quality Control Techniques 7/10/ /5/ /10/ /6/2012 October /10/ /10/ Microfinance 28/7 1/8/ Microfinance 28/7 1/8/ Gum Arabic Quality Control Techniques 16 Agroforestry Systems Workshop Damazin Producers Gum Arabic Producers Damazin Gum Arabic Producers Damazin GAPA members & FNC Officers Damazin Participating GAPAs Sennar Gum Arabic Producers Sennar Gum Arabic Producers Dilling Gum Arabic Producers Dilling Gum Arabic Producers Dilling Gum Arabic Producers 1-2/8/2012 Dilling Gum Arabic Producers & Forestry Officers 25 29/9/ Advanced Microfinance 18 Microfinance 28/7 3/8/ Dilling GAPAs Leaders Elnuhood GAPAs Leaders

42 No. Title of the Training Dates Venue Participants Number Male Female 19 Microfinance and 27/10/2010 Elnuhood GAPA Leaders Contract writing 20 Advanced Nov.2011 Elnuhood GAPA Leaders Microfinance 21 Gum Arabic Quality November Elnuhood Gum Arabic Control Techniques 2011 Producers and FEOs/ 22 Training course for March 2012 Khartoum Gum Arabic Union GAPU Leaders Leaders 23 Agroforestry Systems 1 2 October 2012 Damazin GAPA leaders and FEOs The joint training programme for Elnihood GAPAs 24 Financial Management, Marketing, Business Administration, Credit, and Microfinance Nov November Agroforestry Training 1-3 April Agroforestry Training 3 6 May Role of cooperatives 22 April 2014 Elnihood GAPAs Elnihood 48 Abujubaiha and Bara GAPAs of Abujubaiha, Bara and Tandalti 120 Umrawaba GAPAs Abujubaiha and FEOs 47 Kosti GAPAs of Bara & 47 Tandalti and FEOs Damazin GAPAs 25 Table 2.2: Exchange visits No. Participating GAPAs Location/GAPAs visited Duration 1 Dali GAPAs Umrawaba 20 21/12/ Bout GAPAs Dali & Umrawaba 23 25/1/ Dilling GAPAs Elnuhood 18 19/3/ Umrawaba Sennar 13 14/6/ GAPAS 5 Dilling GAPAs Nabag Forest 29/9/ Reserve 6 Elnuhood Hillat Ismail 30/9/ GAPAs GAPA 7 Dali GAPAs Wadelnaial 29/9/ Elnuhood Umrawaba GAPAs Locality /11/ Blue Nile Jandail Acacia 10/12/ GAPAs Project, Damazin 10 Dilling GAPAs, Umrawaba 29-30/12/ Tandalti Umrawaba 30/12/ No of Participating GAPAs Productive investments for GAPAs. The project provided approximately 129 seasonal credit and micro finance grants to GAPAs as well as the provision of 56 matching grants to support GAPAs infrastructure. The 56 matching grants financed tractors (23 grants), water 30

43 reservoirs (15 grants), gum stores (13 grants), hafirs (underground rainwater storage structures 2 grants), and artisan wells (3 grants). 9. Microfinance. The project provided approximately 129 seasonal credit and micro finance grants to GAPAs worth about SDG 5.0 million with the selected 110 GAPAs. The methodology used was built upon group-based lending and was dependent on ownership and management at the GAPA level. The revolving fund accounts were managed by elected committees, who decided on credit allocations, defined collateral, and controlled the repayment of loans. The project credit officer and LIUs extension staff provided intensive support to committees and members on the management of the scheme. 10. The methodology was also based on Islamic banking principles which rely on in-kind payment and profit sharing to make the program financially sustainable. The design focused on funding against mutually agreed-upon performance standards related to technical, institutional and financial aspects and fulfillment of basic requirements of each GAPA, all of which were captured in a Grant Agreement between the PCU and each GAPA executive committee. The funding was designed to mimic borrowing from commercial sources including a pledge to pay back in-kind in the form of a signed contractual agreement. That approach provided incentives to GAPAs to strengthen their institutional and financial performance to meet the standards and develop appropriate internal policies and procedures that helped them to ensure sustainability of the saving and revolving credit scheme. 11. Investments in FNC physical infrastructure to support GAPA capacity building activities. Project funds were used to build the capacity of FNC to expand training support to producers the project financed the construction and equipping of 9 training centers, 9 offices, 7 rest houses and 11 tree nurseries which are completed, operational and functioning. Table 2.3: Physical Achievements of the Institutional Capacity Building and Support to GAPAs Activity Unit Target Achieved Achievement % Support to Small-Scale Producers Associations: a. Capacity Building Support to producers Associations (training on: improved production techniques, credit, financial management, Marketing; business/organizational skills and gender mainstreaming; - phase one - phase two b. Training for ToT, Forestry Extension officers and locality coordinators on: community organizational skills, credit- marketing and gender Mainstreaming GAPA GAPA persons c. Training of GAPA's Exec. Office on: - Marketing, credit, financial management; Business administration (3 member. per association.) member d. Training for GA Unions at locality and State level worksh op e- Seasonal credit and Micro finance No f- Support infrastructures (matching grants) No

44 Component 3: Project Management and Supervision 12. Project coordination units. The Project Coordination Unit was established at the FNC headquarters in 2010, with a senior staff from FNC recruited to head the unit as a project coordinator. Other assistant staff were also recruited (a procurement officer, two accountants and secretary). At each of the eight localities a locality coordinator, financial manager, forestry extension officers were recruited. The project also paid for financial management training and procurement. 13. The project financed operational, logistical support and transportation to the project implementation units at federal and locality level. The support included construction, rehabilitation and furnishing of 9 offices (PCU and 8 offices in localities). 14. Monitoring and evaluation work and other studies. The project financed regular monitoring and evaluation work and a baseline household survey that was used to benchmark project beneficiary households and also identify major priorities for investments under the project. An impact assessment survey of a sample of project beneficiaries and control group households was completed in The project also financed two additional end of project studies: a sustainability study and an exit strategy. Table 2.4: Intermediate Results Framework Reporting Indicator Baseline Value Intermediate Result Component 1: Gum Arabic Sector Reform and Support Percentage change in quantities of Gum Arabic marketed by GAPAs Percentage change in the number of new entrants to the market (exporters) Project Targets End of project Intermediate Result Component 2: Institutional Capacity Building and Support to GAPAs Percentage of targeted GAPAs with effective saving and credit systems Percentage of women in targeted GAPAs Number of Hashab seedlings produced by project nurseries (in 1000s) Number of GAPA members who received training on financial management Number of GAPA members who received training on business management Number of Agro forestry training session for GAPAs conducted by extension officers Number of in-country and exchange visits of GAPAs conducted to share experience Number of Matching Grants for Marketing: For Media Promotion Number of Matching Grants for Marketing: For Research and Technology 0 1,950 2, NA

45 Indicator Number of Matching Grants for Marketing: For Infrastructure support Baseline Value Intermediate Result Component 3: Project Management and Supervision Percentage of the FOB price received by small scale gum producers after project intervention Project Targets End of project % 65 Percentage change in domestic use compared to export 0 NA 12 Number of visitors to the dynamic website of MoFTNE 0 NA 10,810 Number of SMS text messages communicated to producers 0 NA 0 33

46 Annex 3. Economic and Financial Analysis I. Appraisal stage assumptions 1. No detailed economic analysis was undertaken as part of project preparation, however a basic analysis of expected economic impact of the project was presented in the FPP. The analysis projected expected changes generated by the project in terms of increased export revenues for Sudan and increased producers incomes in target areas. 2. Export Revenue. The analysis assumed that implementation of the reform package and complementary support measures would increase prices received by farmers and gradually allow for development of the processing industry. In addition, studies and promotion activities financed by the project would contribute to increased demand for Sudan gum arabic in global markets. The analysis estimated that gum arabic revenues would approach US$100 million dollars by Table 3.1: Appraisal stage assumptions on Gum Arabic Exports Exports Sudan ( ) Exports Sudan (2012) Exports Sudan (2015) Gum Type(+) Export volumes f.o.b. price/mt(*) Revenue (US$ mill) Export Volumes F.o.b. price/ MT Total Revenue Export volumes F.o.b. price/m T Total Revenue (US$ mill Clean Grade 3, , HPS 2, , Kibbled 14, , Spray dried , Mech. Powder , TOTAL 20, , (+) the Dust grade is not accounted for; it is a by product that represents very limited export volumes. (*) 2008 prices in US$ - export prices have been kept constant. 3. Producer incomes. A basic gross margin analysis was presented in the FPP and found small-scale producers revenues would increase by 60 to 130 SDG a year, or 30 to 65 dollars. This potential increase was estimated to represent 5 to 10 percent of the total household s yearly income (around 600 dollars for poor rural households in central Sudan). II. ICR Analysis 4. A basic financial and economic analysis was undertaken for the ICR at the time of project completion. This analysis focuses the same two factors analyzed at appraisal. Based on the 34

47 project s estimated net income gains to producers, an internal rate of return for project investments is also generated. Evolution of gum arabic exports 5. While appraisal stage projections were not fully accurate the expected increase in both exports and revenue did occur. Sudan s gum arabic sector rebounded significantly over the project implementation period. Despite limited changes in global prices, gum arabic exports expanded rapidly during the project implementation period and the sector recovered from lows experienced in the late 2000 s. Export quantities and values have increased dramatically with 2014 almost twice the level attained in 2007/08 and Sudan s share of the global market has also increased following a low or 46 percent in 2009 to the historical average around 68 percent. Table 3.2: National and Global Trade Data Sudan trade statistics Export Quantity (MT) 30,875 32,217 36,636* 51,624* 45,633 36,351 60,342 59,734 Export Value (US$ '000s) 51,873 60,909 60,808 * 66,248* 81,780 67, ,800 96,976 Average FOB price (US$/MT) Hashab FOB price (US$/MT) Talh FOB price (US$/MT) UN Comtrade Sudan share of global raw gum arabic exports Gum Arabic Average CIF 1,680 1,891 1,806* 1,390* 1,792 1,846 2,234 1,623 no data 3,262 3, ,306 67% 46% 57% 58% 68% no data no data 1,651 1,864 1,806 1,390 1,708 1,719 1,687 1,670 price - France (US$/MT) * In country data available but with inconsistencies or possible errors, UN comtrade data used for 2009/10 Sources: Central Bank of Sudan, UN Comtrade Database, 6. Appraisal stage analysis projected substantial increases in revenues due to structural changes in the sector that would lead to production of higher quality gum and value addition through spray dried gum production and export. No project resources were provided for value addition and processing activities, however, and spray dried gum production did not expand substantially due to more rigorous export quality standards. Instead, the primary driver of exports was a significant increase in volume of production across all grades of gum. Appraisal estimates on the value of exports were largely correct, however, and Sudan has realized 59 percent increase in export earnings from gum arabic between the start of the project and project end. Table 3.3 presents a comparison of appraisal and ICR stage analysis on export data. 35

48 Table 3.3 Changes in Gum Arabic Export Volume and Value under Appraisal and ICR stage analysis Appraisal estimates ICR analysis average 2015 projection % change 2008 actual 2014 actual % change Export volume (MT) 20,000 30, ,217 59, Export Value (US$ million) Average FOB price (across all grades) (US$/MT) 3,050 3, ,890 1, Note: Appraisal estimates are based on Hashab prices, ICR analysis based on average of Hashab and Talha prices Producer level profitability 7. Detailed gross margin analysis was not attempted due to data constraints given the substantial variability in gum arabic production among both control households and project beneficiaries. Gum arabic production is influenced by a range of factors: the natural density of trees in the landscape, plot size, the number of trees selected for harvesting and the age and productivity of individual trees. Survey data and project reports show a wide variation in average productivity ranging from low rates of 4 kantar/feddan (0.2 MT/feddan) to 400 kantar/feddan (18 MT/feddan). Of the 40 participating GAPAs members covered by the project s impact survey average productivity increased from 621 kantar/feddan to 1,213 kantar/feddan or by 95 percent. Table 3.4 Average Production Levels in Project Survey Sample # of (all values in Metric Tons) Gum Arabic Locality GAPA Production Pre members Project Average Total Annuhod 2,400 Per member Umrwaba 3,190 Bot/Bau 1,095 Aldali 1,568 Total 8,253 Total Per member GAPA Total Per member GAPA Total Per member Per member average Source: Impact assessment household survey % Change 44% 223% 80% -2% % 8. Project surveys on average prices and production levels do allow for a picture of the project s impact and comparison between project beneficiary and control households. The project s impact assessment collected data from representative household in nearby locations and from direct project beneficiaries. The impact assessment also shows that there were significant positive income changes for both control and project beneficiary households. 9. ICR analysis of baseline survey and impact assessment data was used to generate a before and after project gum arabic income estimates for both control and project beneficiaries. Because 36

49 Sudan experience significant inflation between 2010 and 2014, income and price data is discounted to 2010 levels using CPI data. The net increase incomes among direct project beneficiaries after discounting the general rise in income for all gum arabic producers shows an increase in income among project beneficiaries of approximately 1,773 SDG in real terms, equivalent to a net incremental increase in income of 21 percent. Table 3.5: Changes to gum arabic price and incomes among project and non-project beneficiaries 2010 Control group % change from Project beneficiaries % change from 2010 Net change to project beneficiaries over control (%) Average price of gum/kantar 57.4 to 74.5 SDG 704 (236 in 2010 SDG) (286 in 2010 SDG) Average annual income from gum arabic 6,026 to 10,867 SDG 21,417 (9,823 in 2010 SDG) 16 25,283 (11,596 in 2010 SDG) Source: Gum Arabic Project Baseline and Impact assessment, real SDG calculations based on CPI Estimated Internal Rates of Return 37 1,773 in 2010 SDG (21% over 2010 values) 10. A basic financial internal rate of return was calculated based on the estimated increase in revenue generated by gum arabic sales among project beneficiaries. Internal rates of return were calculated using assumptions on the average production levels calculated above, the actual number of direct beneficiaries and the average price premium realized by project beneficiaries as found in project surveys and ICR analysis. 11. If net revenues are compared to total project costs, the internal rate of return for the project is 7 percent. This rate of return represents a conservative estimate, however, since additional income from indirect beneficiaries may be attributable to project investments in policy dialogue and capacity building. If only component 2 costs are used in the analysis, the internal rate of return rises to 21 percent. This latter estimate likely represents an upper bound estimate as it does not include full costs of project coordination. The project s internal rate of return could be considered somewhere between these upper and lower estimates. Table 3.6 Financial Internal Rate of Return Analysis Direct beneficiaries - 9,875 12,066 16,120 17,080 23,895 Net increase in production (MT) ,110 1,753 2,222 3,108 Net revenue based on project beneficiary incremental increase in farmgate prices - $317,095 $457,139 $722,158 $915,343 $ 1,280,569 Internal rate of return on total project cost: 7% Internal rate of return on Component 2 cost only: 21% 37

50 Annex 4. Grant Preparation and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending/Grant Preparation Antonio J. Cittati Consultant GEEDR Nestor Coffi Country Manager AFMNE Christine E. Cornelius Program Coordinator AES - HIS Thomas Yves Couteaudier Consultant AFTA1 - HIS Mohamed Osman Hussein Consultant DECSI Azza Abdel Magid Imam Abd Alla Team Assistant AFMSD Assaye Legesse Senior Agriculture Economist GFADR Almaz Teklesenbet Program Assistant AFTA1 - HIS Supervision/ICR Mohamed Yahia Ahmed Said Abd El Karim Sr Financial Management Specia GGODR Jamal Abdulla Abdulaziz Senior Procurement Specialist GGODR Evarist F. Baimu Senior Counsel LEGAM Nestor Coffi Country Manager AFMNE Azza Abdel Magid Imam Abd Alla Team Assistant AFMSD Berhane Manna Sr Agriculturist AFTA3 - HIS Elisabeth Mekonnen Program Assistant LCC3C Hawanty Page Sr Program Assistant GFADR Responsibility/ Specialty (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending Total: 0.00 Supervision/ICR Total:

51 Annex 5. Beneficiary Survey Results Not applicable 39

52 Annex 6. Stakeholder Workshop Report and Results 1. A beneficiary workshop was a selection of GAPAs and FNC staff. A summary of key discussion areas and priorities going forward is summarized below. Challenges, constraints and success faced the project during implementation 2. General discussion took place around the following topics: Project location as initially piloted in the 11 localities The vision for the project expansion in the potential states of the GA belt The values of constraints and the lessons learned from the project implementation to help the FNC in setting policies to sustain the sector reform and assist in rural development planning The role played by the project in the sector policy reform The importance of information, data collected on the project activities The project legal framework Staff remuneration Stakeholders contribution: Beneficiaries All ten GAPAs participating in the workshop have very good production, although there was a delay in receiving the financing in the first year. A request is made for the project to extend beyond the specified closing date, especially after the GAPAs being empowered and acquired more knowledge dealing with GA as a fast growing commodity GAPAs acquired negotiation skills dealing with GA exporters. Due to the project interventions, communities started to look after Hashab trees which was reflected in increase of plantation density and flourishing of Hashab gardens/forest The project document excluded cooperative associations as a part of the existing institutions hence, a request to include them The marketing part of the project was not well addressed at GAPAs levels, because of the lack of marketing packages (full coverage of transport, grading and storage) Shortage in working force (Most of the young men replaced gum tapping with gold mining) GAPAs micro financing was very limited (only 56,000 SDG per association) Very good results were obtained from the matching grants sub-projects e.g. provision of drinking water where it was scarce There was a vast need for water tankers to supply those GAPAs who invest the Matching Sub-grants in the form of water reservoirs 40

53 The project intervention in localities and the success achieved encouraged the issue of GA in community evidenced by applications for financing by the project by the unfunded GAPAs Project financing was not enough as most GAPAs members produce surpluses that the GAPAs could hardly buy, thus they sell to traders after the GAPAs funds were depleted The current and the former LIU Coordinators made strenuous efforts to assist in the storage of GA in order to control the prices The Matching Grants do not come timely and always late The GAPA sub-project act as a source of income generating activities to beneficiaries The implemented projects used to be gender sensitive with remarkable women contribution Some GAPAs were established early e.g. 2005, but became effective only after the project intervention In the following years, using the microfinance as a portfolio GAPAs started to gain profits and out of those profits the GAPA achieved the followings: o Supply GAPA members with gas cylinders. o Forming a saving fund that helped the producers in their social events and also worked as income generating source Remarkable increase in the GA price (From st year, from nd year, from rd year and from th year. GAPAs are still small producers and would collectively contribute towards setting GA prices through networking. The ability of some GAPA members to produce up to 30 or 40 Kantar of GA was very encouraging to small producers With the assistance of FNC the community initiated a GA tree protection program. There is a need for GA Belt states specially Kordofan, White Nile and Blue Nile to harmonize their efforts towards GA production and marketing. LIU perspectives Major changes engaged the sector after project intervention including: o The production cost for small producers was decreased. o There is a knowledge gab regarding storage and warehousing. o More attention and care towards GA Hashab tree. o Higher ambitions ceiling of the producers after project intervention. GA, being a seasonal crop there is a need to provide the sub-project financing in the appropriate timing. Collective marketing will get better prices. More intermediate markets are needed in order to fight the long chain of GA mediators Lot of experiences was shared during implementation and exchange visits. Provision of direct services via Matching Grants Sub-projects. Pests and fires are existing risk to the GA tree, and this is reflected negatively to the project portfolio. The studies carried out by the project were not disseminated to project levels other than the federal level. 41

54 Rehabilitation of the GA tree resources by adopting a seedling program to compensate for the aging trees. Introduction of intermediate technologies to assist in gum tapping operation. Provision of safety measures, safety tools for the workers. Some achieved 800 SDG per kantar but Um-Rwaba ahieved 1200/kantar, in other conditions with easy access to roads and markets we would have achieved better prices than that. Adding new GA potential states e.g. Gedarif state and Darfur states would be considered in any project up scaling or extension. The Micro finance was considered not enough and there a need for additional financing for existing GAPAs. The amount received by GAPAs as micro finance is a seed money, it is the responsibility of GAPAs to develop this amount and to invest it in a proper way Being one of the first financed GAPAs the budgeted amount for the micro finance activities was adequate; but those GAPAs who came late were affected negatively by the currency inflation rates PCU perspectives The main weakness in the project document was the marketing section and product quality The matching sub-grants financing were considered inadequate to meet full demand. Using revolving credit funds for investment was impeded by Auditing during project implementation because the project had to conform to AGC regulations. The current issue of investment must be addressed to give GAPAs more investment opportunities during GA dead season 3. However, the project has the potential to address the current issues facing the project through: Auction Markets study. Product quality and SSMO Website and MFT (GAMIS) A joint project with Sudan University to introduce intermediate technology to the sector Next Steps 4. Participants identified a range of follow up steps for the project: Table 6.1: Beneficiary Workshop Recommendations for Next Steps, Future Priorities Sector Summary of Recommendations/Priorities Going Forward Governmental/ Formation of an independent organ for Gum Arabic. Sector Reform Legal Legalization of land tenure. Review and revise by-laws. Develop and issue an act to protect and conserve the Gum Arabic tree 42

55 Sector Summary of Recommendations/Priorities Going Forward Technical A request to consult with the targeted project beneficiaries during the project appraisal.(technical) Enhancement of monitoring and evaluation operations..close follow-up to the project procurement activities. Elimination of the discrepancies in staff remunerations. Stating clear roles to the different stakeholders. Intensify quality management programs. Policies/ Formation a mechanism to develop the gum arabic marketing and storage Infrastructure Establishing Gum Arabic Warehouses with international specifications. Provision of storage and packaging facilities. Link project activities with storage operations Training and Expand community empowerments and capacity building programs Capacity Building Training programs for GAPA board members in basics of CBOs management. Increase number of exchange visits. Intensify training programs in the fields of micro financing and marketing. Economic Explore manufacturing of Gum Arabic to created added value Formation of different partnerships Institutional Work closely with state authorities to apply reform measures to Gum Arabic plantations and to take more care towards Gum Arabic small producers. Include the Gum Arabic reseedings to the project activities. Social Formation of new GAPAs with regard to the socioeconomics aspects Information/ Communication Establish a national Gum Arabic network to assist in knowledge sharing and to protect the small producers from the market sharks Promotional campaigns at national and international levels. Provision of a comprehensive data base for Gum Arabic, and to make use of the GAMIS. 43

56 Annex 7. Summary of Grantee's ICR and/or Comments on Draft ICR Government ICR Executive Summary 1. The MDTF-NS grant agreement for Gum Arabic project was signed on August 20 th, 2009, and became effective on September 30 th, The funding sources for the project included MDTF-NS (US$7.0 million) and an IFAD co-financing (US$3.0 million). The project targeted 11 localities in 5 selected states of the gum belt. The MDTF part of the financing was scheduled to close on June 30 th, 2012 while IFAD co-financing was supposed to continue until June 30 th, However, due to the approval of a no cost extension to the project by the Oversight Committee on May 7 th 2012, the actual closing dates were changed to be June 30 th, 2013 for MDTF financed activities and June 30 th, 2015 for IFAD co-financing which was fully administered by the World Bank 2. The project has had a phased implementation arrangement. Under phase one (two years), the project provided support through conducting analytical studies to bridge the gaps in GA sector knowledge to identify and facilitate implementation of reform measures. Moreover, the project focused on preparatory activities including training and capacity building, formulation of the M&E system, and establishment of Market Information System. It initiated support to GAPAs in five states and seven selected localities to address their production and marketing problems. Under phase two (two years), the project monitored the sector reform process and continued analytical work on policies and regulations. Promotion activities were conducted to rehabilitate the sector, and also to strengthen and expand its support to targeted GAPAs in five states and eleven selected localities. Actually, implementation was 1 st phase and 2 nd phase by IDA and IFAD while the extension one by IFAD. 3. The project development objective was stated as Increase the production and income of small scale gum producers in selected areas of the gum belt through improved performance of the production and marketing systems. However, the project was implemented in Bara, Um Rawaba and En -Nahud localities in North Kordofan; Dilling, Talodi and Abu Jebaiha localities in South Kordofan; Tandality locality in White Nile State; Dali locality in Sinnar State; and Bout, Baw and Gaisan localities in Blue Nile State 4. The project embraced three components: Gum Arabic Sector Reform and Support; Institutional Capacity Building and Support to Gum Arabic Producers Associations, Project Management and Supervision 5. The gum Arabic project is designed to be managed by a Project Coordination Unit (PCU) at the federal level. At locality levels the project has established five locality implementation units (LIUs) to manage and facilitate implementation of the project. The PCU is housed at the Forestry National Corporation (FNC) to coordinate sector reform component of the project and supervise the implementation of project activities in the targeted five localities. 44

57 6. A Project Steering Committee (PSC) was formed after the project was declared effective in August 2009 by the Minister of Agriculture, to provide operational guidance and oversight of the project. The PSC is chaired by the State Minister of Agriculture and comprised members from stakeholder organizations. The PSC has also formed a technical committee from the members to support and provide technical backstopping on key technical and operational matters. 7. The design features of the project were said to have not considered state level PSC. It was noted that the decentralized system of the government structure, with different levels of decision making responsibilities, was calling for the formation of SPCU to monitor implementation progress of the project and provide the required political and institutional support to the key sector reform measures the project was supporting. 8. However; the project helped through a continued process of capacity building to create a competent staff at all levels of management, financial and procurement aspects; monitoring and evaluation and fiduciary aspects; including capacities of GAPAs, stakeholders and beneficiary communities. Moreover, the project managed to complete 13 studies including sector reform studies, baseline survey, impact assessment, sustainability and exit strategy; it met its deadlines and responded efficaciously to the TORs. All implementation supervision/support missions (ISMs) and assessment missions were conducted timely. The project performance was reputed for being satisfactory by the WB Monitoring Agent in all project aspects. 9. Sector Reform component utilized US 791, of the total budget comprising (7.9%), while institution and capacity Building utilized 5,586, comprising (56%) and project management and supervision utilized 3,287, (32.8%). The total budget utilized by all the components amounted to USD 9,665, comprising 96.7% for both at appraisal and at completion. 10. Finally, the PCU has established a Communication Unit aiming at coordination communication and GA promotion activities externally. However, there were no visible outputs from that unit. For instance, the missions noted that there were no clear strategy for promotion/communication on GA has been developed. 11. The policy reform in the gum Arabic sector has positively contributed to its revitalization as reflected in the percentage of FOB price received by producers, which amounted to about 50% in 2011, an increase from only 10% prior to the policy reform. Export of gum Arabic reached more than 57,000 MT in 2011 production year and 7,000 MT consumed by domestic industries, an increase of 250%. The component financed studies to identify barriers to domestic trade and investments; analyze the world market and demand structure; determine new market opportunities. Moreover the project technical and analytical studies on auction markets and value chain have helped the government, through the Gum Arabic Commodity Council to take appropriate measures for the policy reform, as well as provided some guidance on the available opportunities for opening new markets. 12. The Ministry of Foreign Trade has been mandated to host and run the Gum Arabic Marketing Information System (GAMIS), while the project has been mandated to provide 45

58 equipment, IT, training; technical assistance from a private company, the MFT received the required support from the project to: Recruit a company to develop and establish the system, Purchase needed equipment and IT to run the system, Training of staff from the Trade Information Center (TIC) on how to operate the system Identify and train 10 enumerators in the 5 supported GA markets to enter the data and update the system 13. However; despite the support from the project the system is not fully operational yet and that affected project results, as some indicators from the Results Framework were linked to GAMIS. Moreover, as of today, the system is not functioning properly and stakeholders are not benefiting from it. 14. However, MFT was recommended to work together with the selected company (NEXT) to link the MIS with the GAMIS website to: Avail market information to the interested stakeholders Fix the software issues that were detected by TIC staff Follow up with the communication/mobile company selected to operate the data text message system (Data net) to assess their availability to provide MFT with the expected service. 15. The Institutional support and capacity building component financed 180 GAPAs supported through micro-finance mechanism and 58 GAPAs who had received matching grants for implementation of their priority intervention, such as water, tractors, or GA storage facilities. Those activities directly benefited more than 17,000 beneficiaries, including 24% of which were women. Out of the 180 GAPAs that received grants for micro-finance 10 were implemented by pure female members. In addition, about 1,110 GAPAs members or technical staffs have been trained since the beginning of the project on different topics including agro-forestry, FM, business management, etc and 165 GA producers participated in 11 exchanges visits to learn from other GAPAs experiences. 16. As part of the physical capacity building and strengthening of vital service provision efforts, the project financed the construction and equipping of 9 training centers, 9 offices, 7 rest houses and 11 tree nurseries which are now completed, operational and functioning. Summary of ICR Key Ratings 17. Based on the satisfaction with relevance of the project objective, design and implementation; achievement of the development objective and efficacy of project implementation; project efficiency was satisfactory as could be supported by the cost effectiveness of management and most of project operations. Examples could include the following successes: Liberalization of the GA sector 46

59 Creation of powerful GAPAs that will exist after the project is closed Improved tapping methods advocated that certainly will replace the conventional method (using axes) which will also improve grading of GA Improving storage of GA will help GAPAs to sell GA at their preference Water tanks and reservoirs alleviated the hardship of the small producer, saved time and cost The tractors helped in transporting GA and most of the GAPAs are investing them in agricultural activities e.g. plowing, sowing and harvesting other agricultural crops in the GA dead season Income generation, investing the revolving credits in buying other agricultural crops and selling them later before the GA season commences e.g. durra, sesame and ground nut or their oils etc Relevance of Original Objective and Design 18. The relevance of the original objective and design could be evidenced by the following facts: The PDO was not changed all through project implementation Project design was not changed, however, component 2 was scaled up for better performance upon receiving IFAD co-financing The results framework was revised and updated following the original arrangements for M, E&L plan Efficacy 19. The main factor to consider relating to efficacy of implementation was that, the GAMIS faced some challenges resulted in the delay of the functionality of the system. The main challenges were: Solve the hanging issue of approving the consultant s report by MFT Establish the linkage between the system and website and finally, Regarding SMS messages, the National Communication Corporation needed to negotiate with the consultant in order to make the system operational and functional. Efficiency Staff capacities at all project levels and extension officers were built and tested by implementation of GAPM project and still exist at completion Community structures such as GAPAs and FNC network were capacitated and active at completion Legal frameworks and contractual agreements with related partners do exist and so far respected by the cooperative act The sub-projects of the sub-grants were economically viable at completion and investment opportunities from small microfinance institutions were initiated and advocated by the 47

60 project to replace project grants and some GAPAs had already started utilizing them to augment the ongoing activities or create new IGA initiatives All project funds were depleted at completion except SDG 135,000 (0.8135% of total GAPM project budget), authentically, earmarked for procurement before project closure Evaluation of project operations Parameter Relevance Efficacy Efficiency Impact Sustainability Studies and applied research Matching Grants Met priority of sector reform and GA quality. Met priority and choice of communities Outcome targets achieved Outcome targets achieved Cost effective Cost effective Support and validation of sector reform Seed money to invest in GA production and marketing, income generation Dissemination and implementation at the grass root level GAPAs legally registered, grant motion Revolving Credits Sub projects Renovation of offices Construction of training centers and guest houses Construction of nurseries Met priority and choice of communities Met priority and choice of communities Met Institutional support Met Institutional support Met GA sector revitalization Outcome targets achieved Outcome targets achieved Outcome targets achieved Outcome targets achieved Outcome targets achieved Cost effective Cost effective Cost effective Cost effective Cost effective Lucrative business, services improved, more GAPAs members attracted Income generation opportunities Empowering the FNC Accommodation, capacity building and training Availed seeds and seedlings and technical support Legal contracts registered, credit motion, link to microfinance institutions Legal contracts of the sub-grants, and recovery Establishing Hashab unit within FNC Avail funds for maintenance and capacity building and training by GAPAs after weaning Sell seeds and seedlings on cost recovery to GAPAs 48

61 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders No comments provided. 49

62 Annex 9. Summary of Gum Arabic Policy Dialogue and Policy Reforms Box 1: Gum Arabic Policy Note 2007: Proposed Gum Arabic marketing Reforms Changes in rules governing marketing and export of gum Arabic could improve the livelihoods of the small-scale gum arabic producers, the quality of the environment and Sudan s export trade balance. Such changes should aim to (a) achieve higher producer prices to stimulate production and boost producer incomes; (b) increase the level of domestic value-added through processing. The following actions are envisaged as a package of integrated measures to achieve a more efficient gum arabic production, and marketing system with benefits to most stakeholders in the sector: Concerning the Gum Arabic Company: Additional concessions for export of raw gum are tendered out, If GAC is bankrupt, its stock could be transferred to a liquidating institution independent of the government that would auction them in a manner that would not deter gum producers. To support the processing industry: Provide a transparent business environment, i.e. removal of barriers to entry by granting gum processing and export licenses based on transparent requirements applying to all investors, avoid policy decisions that would reintroduce restrictions on the processors ability to operate. Support research into global market opportunities, understand changing structure on the demand side, monitoring breakthroughs in substitute development, Bring taxation on gum at the same level as other agricultural commodities and enforce legislation against illegal taxation. In order to oversee the implementation of the measures listed above, a gum arabic marketing governance structure independent from the government could be created. It would oversee the tendering of raw gum export concessions, and sponsor market research. It could also act as the liquidating institution responsible for auctioning GAC stocks. To increase incomes of small-scale producers: Support voluntary producers organizations. Forming producers organizations or cooperatives 14 and helping them access new technologies to increase yields and tapping, and credit would enable producers to fetch higher prices at auction markets or to negotiate direct contracts with processors/exporters, 14 The National Forest Corporation (Ministry of Agriculture and Forestry) has supported the development of such cooperatives but absence of credit to finance production and marketing operations impedes their development. 50

63 In addition to providing up to 6 million individuals with substantially increased incomes, setting a transparent and enabling business environment for private processors could result in gum arabic export value amounting to around $US 150 million annually. In July 2007, with the support of the Multi-Donor Trust Fund National, the Forest National Corporation (FNC) organized a national workshop to discuss the future of gum arabic. In his opening speech, the GNU Minister of Finance and National Economy stressed the inadequacies of the current marketing arrangements, called for decontrol and suggested that an independent entity be set up to oversee the decontrol process. In order to support the decontrol, senior spokesmen in GNU have reaffirmed their commitment to implement the following activities: To allocate additional temporary concessions for export of raw gum arabic (through a transparent competitive bidding process); To establish an independent regulatory body to monitor the decontrol process; To revitalize the gum arabic production base through support to producers associations. Proper implementation of the above mentioned activities would require that additional analytical activities be conducted to understand better the characteristics of the sub-sector, especially the current structure of the domestic market and gum-related taxes. Box 2: Summary of Policy Changes Taxes, Fees and Royalties prior to Presidential Directive: 1. Ushoor 8% / Kantar Price 2. Business Profit Tax 2% / Kantar Price 3. Alms(zakat) 8% / Kantar Price 4. FNC Royalty 5% / Kantar Price 5. City beautification 1% / Kantar Price 6. Self development support 2% / Kantar Price 7. Market Services 0.3 SDG / Kantar 8. Gibana/Market 0.5 SDG / Kantar 9. Rural development 0.2 SDG / Kantar 10. Service of the loading day 0.2 SDG / Kantar 11. Municipality Support 0.3 SDG / Kantar 12. Hospital support 0.5 SDG / Kantar 13. farmer Union 0.2 SDG / Kantar Levy on the Gum arabic after the presidential directive in South and North Kordofan, Alms(Zakat) 10% / Price per kantar 2. FNC Royalty 5 SDG/ Kantar 3. Market Service 2 SDG/ Kantar 4. SSMO for exported gum 2 SDG/MT 5. Locality Fee (for some localities) 1.5 SDG/ Kantar 51

64 Levy on the Gum arabic after the presidential directive in the Blue Nile Area, Alms(Zakat) 10% / Price per kantar 2. FNC Royalty 5 SDG/ Kantar 3. Market Service 2.5 SDG/ Kantar 4. SSMO for exported gum 3 SDG/MT 5. Locality Fee 2.5 SDG/ Kantar 6. Profit Tax 2.5 SDG/ KantarN Source: SOFRECO Value Chain Analysis and Gum Arabic Project, March 2011 Other reform measures Removal of floor price policy Removal of restrictions on export licenses 52

65 Annex 10. List of Supporting Documents 1. Final Project Proposal (May/2009) 2. Project Implementation Manual (May/2009, Revised May/2010) 3. Grant Agreement between Government of Sudan and IDA (August/2009) 4. Subsidiary Grant Agreement between Government of Sudan and FNC (July/2009) 5. IFAD Proposed Grant to the Republic of Sudan (President s report) September/ First Amendment to the Grant Agreement (December/2012) 7. Baseline Survey (August/2009) 8. 1 st ISM Aide Memoire (May/2010) 9. 2 nd ISM Aide Memoire (February-March/2011) 10. Project Intervention and Effect/Impact Report (HH Assessment Survey/October 2011) 11. Restructuring paper (June, 2011) rd ISM Aide Memoire (April/2012) th IDA Review Mission (January/2013) th ISM Aide Memoire (April/2013) th ISM Aide Memoire (August-September/2014) 16. Project Quarterly Progress Reports ( ) 17. Gum Arabic Extension-Reallocation of IFAD Financing Agreement (January/2014) 18. Gum Arabic Project Exit Strategy (2015) 19. Gum Arabic Project Sustainability Study (2015) Project studies 20. Gum Arabic Auction Markets and Markets Information 21. Gum Arabic - Promotion and Communication Plan 22. Gum Arabic Value Chain Analysis 23. Gum Arabic - World Demand Structure/Market Opportunities 24. Matching Grant Assessment Report 25. Microfinance Assessment Study 53

66 MAP 54