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Investment for sustainable livestock development in developing countries

by M.J. Walshe


Bank livestock lending peaked in the 6-year period 1974-79 when an annual average of seven free standing livestock projects and 19 projects with a livestock component were approved; costs including the cost of livestock components amounted to US$9.47 billion (1989 US dollars) and 5.15 billion (U.S.$ current). Livestock lending declined in the period 1980-85 to a yearly average of about two free-standing projects and 17 component projects; costs amounted to 5.77 billion (1989 US dollars).

Over the five year period 1986-90 the aggregate cost of Bank-assisted livestock projects and components amounted to US$3.54 billion (1989 US dollars) (Table 1). Average annual lending declined in real terms from US$1,578 billion for period 74–79 to US$962 million for period 1980 to 85 and US$708 million for period 1986–90. This means that average lending for the last two periods was only 61% and 45% of the earlier period (1974–79) in real terms.

For the first time no free standing livestock project was approved in FY90 but 11 projects were approved with a livestock component. The absence of a free standing project in FY90 is considered as a one-year anomaly and it is expected that the number of livestock projects per year will stabilize at about 2 free-standing and 12–15 component projects.

The reduction in livestock lending as a proportion of the total lending for agriculture parallels, albeit to a greater extent, agriculture's decline as a percentage of the Bank's lending operations; from 30.1% in 1980 to 16.3% in 1989 and 17.3% in 1990 (Table 3). The character of lending operations changed substantially over the last decade with greater emphasis being placed on lending instruments other than specific investment loans. IBRD and IDA lending by loan category is given below for FY90.

Lending FY90

Loan CategoryUS$Million%
Specific investment19,179.949.15
Sector investment3,957.219.11
Financial intermediary879.04.24
Sector adjustment2,543.612.28
Program lending and Structural adjustment1,434.06.92
Debt reduction1,460.07.05
Technical assistance203.00.98
Emergency reconstruction54.00.26

A decade ago Bank lending was dominated by specific investment loans but the picture has changed drastically with the increased emphasis on other types of loans, especially sector investment loans, sector adjustment loans, program lending and structural adjustment loans.


The reduction in Bank lending for livestock was caused by the relatively poor performance of livestock projects as indicated by a number of reports and papers which reviewed lending for livestock development. The most important and comprehensive of these reviews- “The Smallholder Dimension of Livestock (1985)” - was undertaken by the Bank's Operations Evaluation Department (OED) which is entrusted, by the Bank's Board of Directors, with authority and responsibility to undertake an independent review and report on the performance of all Bank lending operations. In addition to the OED report the Bank's experience with Dairy Development was reviewed in 1982 (AGR Technical Note No. 6). The Bank's experience in Dry Tropical Africa was reviewed in 1981 by Mr. Stephen Sandford (Consultant) who produced a report for internal use. These three reports provide a good independent assessment of livestock lending including problems and issues and suggested lessons. Four World Bank reports which dealt with special aspect of livestock, e.g., veterinary, dairying and integrated crop- livestock are not dealt with in this paper although they provide valuable insights on livestock lending and the sustainability of development efforts. Salient points from these papers are, however, discussed later in this paper.

OED Report.

The OED report was based on a review of 124 audited projects and 206 ongoing projects which comprised the Bank's livestock portfolio at the end of 1983. Of the 330 total, 91 were livestock projects and 239 livestock component projects. Of the 124 audited projects, 52 were livestock projects and 76 were component projects.

From modest beginnings in 1959 in Uruguay, through late 1983 early 1984 when the OED study commenced, the Bank provided some US$11.7 billion (in constant 1983 dollars) for livestock development of which almost US$6.1 billion (52%) was targeted to smallholders. The livestock sub-sector was thus significant in the Bank's lending portfolio and smallholder livestock lending was an important part.

The rate of livestock lending increased through the 60's and 70's to peak in 1979 and thereafter to decline. Smallholder lending followed a similar pattern but the percentage of total livestock investments for smallholder development showed a steady increase from the late 60's to the present and over the 70's accounted for roughly two-thirds of all Bank livestock lending. This was in response to Bank management's increasing sensitivity in that period to equity considerations which affected all agricultural sub-sectors.

There were according to the OED report regional differences in project components and their design, in species/product emphasis and in target group, depending on ecological, socio-economic, cultural and traditional factors. Credit and livestock purchase were major project components in most regions. Nearly two-thirds of all audited projects included such components. About half of all projects included components for development of on-farm infrastructure, pasture improvement, and fodder development. Projects frequently included the above activities as multiple components. About 40% included a technical assistance and/or farmer training component. Other components occurred less frequently. In general, the design of smallholder projects was similar to that found for the whole set of livestock-related projects. The ongoing projects also had larger scope than the audited projects and nearly all of the components appeared with greater frequency suggesting that each project, on average, included a larger number of livestock-related components.

In terms of species emphasis, the OED report found that investments in cattle development (beef, dairy, and dairy-beef, in that order) accounted for about two-thirds of component activity in audited projects and an even higher proportion of total funds. Substantially less attention was paid to other species, viz. sheep, poultry, and swine, each about 10%; goats, about 5%; and miscellaneous species (cameloids, rabbits, bees, etc.), about 2%. Cattle development was also emphasized in ongoing projects, but its relative importance decreased to less than one-half of the total number of interventions. Thus, while cattle development continues to be important in ongoing projects, other species are now increasingly emphasized. This emphasis on other species reflects increased efforts to support and improve existing smallholder farming systems. In such systems there is also growing emphasis on integrating livestock with agriculture, to their mutual benefit.

All regions participated in the Bank's livestock development efforts according to the OED report. The number of livestock-related projects (audited and ongoing) at that time was spread fairly evenly by region, but the bulk (three fourths) of all livestock investments were in Europe, Middle East and North Africa Region (EMENA) and Latin America and the Caribbean Region (LAC). Smallholders received the highest proportion of livestock investments in Western Africa Region (WA), South Asia Region (SA), EMENA, and East Asia and Pacific Region (EAP) in audited projects, and in Eastern and Southern Africa Region (ESA), EAP, SA, and WA in ongoing projects.

Project Performance.

The average ERR of all audited livestock activities Bank-wide was 11% (OED report). The average ERR of 46 livestock projects was 7.2% and that of 58 component projects, 14%. 1 The lower average figure for livestock projects appeared to be due to the low returns from smallholder livestock projects (average ERR -0.3%) and large holder livestock projects (average ERR 6.2%), as mixed smallholder/largeholder livestock projects performed satisfactorily on average (ERR 11.6%). Smallholder component projects (average ERR 10.7%), largeholder component projects (average ERR 18.9%) also performed generally satisfactorily. While the results suggested that livestock investments made as a component of a diversified project were most successful than as a part of a straight livestock project, there was insufficient data to support such a conclusion statistically because separate ERRs were rarely available for individual components of multi-component projects, particularly if the individual components were relatively small, as they often were for livestock investments. It was stated that additional information was needed on the performance of livestock investments within livestock component projects, particularly as such investments comprised an increasing proportion of the total ongoing livestock portfolio at the time of the OED Study.

1 These averages were not weighted for project size. The weighted averages would be higher because project ERRs were highest in those regions having the largest livestock projects and investments (EMANA, LAC and SA) and lowest in those regions with smaller projects and investments (ESA and WA).

By region the OED Report showed that, EMENA, LAC and Southeast Asia had the highest number of total projects with ERRs exceeding 10% (77%, 68% and 67%, respectively) and ESA, EAP and WA had the highest number below 10% (74%, 56% and 50%, respectively). Some 14 of 22 projects (64%) with negative ERRs were in ESA and WA. By project type, livestock projects performed particularly poorly on average in both African regions and, to a lesser extent, in East Asia and the Pacific Region (EAP). Component projects also performed unsatisfactorily on average in Eastern and Southern Africa (ESA), but performed satisfactorily overall in all other regions, particularly in EAP which had the highest average ERR (33.7%) Bank-wide.

Ex-ante appraisal projections were observed to be much more optimistic than ex-port ERRs. Ex-ante ERRs on 46 livestock projects were some 200% higher than ex-post ERRs and on 58 component projects they were some 70% higher. Only one in six of all projects has ERRs at completion equal to or greater than appraisal ERRs.

Two conclusions emerged from the OED Study. First, a large number of livestock investments were successful, particularly in the regions where lending was highest, and their success should not be obscured by the existence of problem projects, particularly those in ESA and WA. Second, the substantial variation in project performance suggested a need for improved appraisal methods, especially greater attention to the production coefficients adopted, the benefit stream projected, the project time frame and risk analysis.

The principal factors affecting project outcome identified in the OED study were the availability or lack of:

The OED report stressed that these factors were similar to those which cause problems in projects in other agricultural sub-sectors. An effort was made to identify factors specific to livestock. The risk in livestock projects appeared most closely linked to the inadequacy of applied livestock-related research in most countries, the lack of technical personnel, the weakness of livestock-related institutions and their lack of integration with agricultural institutions, the greater importance of land tenure issues, and the failure of some projects to recognize fully the inadequacy of the “base” on which projects had to build. The tendency to proceed too rapidly in terms of physical implementation, without sufficient technological, institutional and staff development, stood out.

The study also pointed out that the performance of livestock projects must also be measured in dimensions other than the simple ERRs. Many livestock projects were pioneering efforts, involving new relatively untested technologies, requiring institutional strengthening, staff development, and livestock policy formulation. Benefits achieved through improved institutions, staff development, and “learning by doing” were not revealed in the ERRs. Nonetheless, there was a strong correlation between the project ERRs and the audit reports assessments of achievements in these other areas - poor economic performance has often been accompanied by poor institutional development and the like rather than offset by improvements therein. Indeed, poor performance in these areas was a major cause of low ERRs.

The smallholder livestock and component projects examined by the OED Study fared worse than livestock projects (taken as a group). Their average ex-ante appraisal ERR was equally as high as other livestock projects, but their ex-post ERR was even lower.

The OED study concluded that the widely-held perception that the Bank's livestock development efforts have been unsatisfactory accounted, in part, for the steep decline in livestock lending since 1980.

The study found that the performance of Bank livestock was highly variable, ranging from very satisfactory to very unsatisfactory, but was satisfactory more frequently than not. It also appeared that considerable learning had taken place regarding the design and implementation of livestock projects, and it was concluded that future projects should perform better. Nonetheless, it also concluded that the evidence suggested that livestock projects overall may be more difficult than other agricultural sub-sector projects, and that livestock assistance, especially to smallholders, would probably require greater design, implementation, and supervision inputs than they had received up to that time. The study also concluded that the Bank should continue and probably increase its support for livestock development, especially to smallholders, given the high potential for raising their incomes and living standards. It pointed out that livestock were a key element in raising farm productivity and it was difficult to conceive of sustained increases especially in smallholder agriculture in most areas in the world without attention to livestock development; demand for livestock products was increasing rapidly in most developing regions, and livestock investments were expected to be increasingly economically attractive.

The study highlighted the point that livestock project design initially placed heavy emphasis on meat and milk and largely ignored other outputs such as traction and manure. This approach was strongly influenced by livestock systems in developed countries, and by an emphasis on larger commercial producers. The move toward smallholder livestock development had encouraged a shift toward more diversified use of livestock and the integration of livestock and agricultural production activities. It emphasized the need for this shift to be more fully reflected in project design, e.g., greater cognizance should be taken of joint livestock outputs when assessing the demand for and the benefits of livestock production, and greater effort should be made to coordinate the efforts of livestock and agricultural development agencies.

Milk was considered to merit greater emphasis relative to meat production. The primary need was seen as the organization of marketing, processing and distribution facilities, especially in regions where milk production was dominated by smallholders. Small-scale dairying was seen as undoubtedly one of the most promising avenues for future Bank lending.

It concluded that livestock development efforts suffered from a “cattle bias”. Additional emphasis should be placed on swine and poultry, small ruminants and other animals, especially through research, technical services, and market development.

The study made special mention of livestock-related projects in the African regions because of the difficulties which were experienced there. It pointed out that many of the countries in ESA and WA were newly independent with ill-defined policies and priorities, limited infrastructure, weak skilled manpower and material resources, widespread poverty, and a high prevalence of drought and pestilence. Many governments were overly centralized and urban oriented. Not only livestock investments fared poorly in such countries, but indeed all agricultural-related activities. Nevertheless, in several countries, livestock development appeared crucial to overall economic development and, in others, it would have a high positive impact. It emphasized that a substantial amount had been learned regarding livestock development, and there was evidence that where such lessons had been applied in ongoing projects the situation was improving.

Finally, it was evident from the study that smallholder livestock projects performed unsatisfactorily overall. The review indicates that efforts were often made to develop individual projects which were innovative, but these were also often ambitious in scope and size, were generally weak technically, and were implemented in a largely unfavourable economic climate in countries where government sometimes showed limited sensitivity to smallholder development potential and needs. Target groups sometimes failed to involve themselves in project design and implementation out of misunderstandings or from distrust of government intentions, and were other times excluded either for paternalistic or political reasons. The Bank may have been too ready to finance such ambitious projects, particularly where institutional support was weak, where land tenure problems were apparent, and where government commitment was questionable. In a number of instances, an exploratory pilot phase would have been more appropriate instead of a large, demanding and high-risk effort. The study mentioned that a number of operational staff hold the view that pressures of the lending program were a contributing factor in this context.


In 1982 the Bank prepared a comprehensive review of Bank/IDA-financed Dairy Projects (AGR Technical Note No. 6). The paper lists and reviews 75 projects which were either exclusively for dairying or had a dairy component. The total cost of these projects amounted to US$6,533 millions, the dairy components amounted to US$1,034 million and the loan/credit amounted to US$1,999 million.

Latin America (LAC) Dairy Projects.

The study concluded from a review of 30 dairy programs in LAC that the projects “successfully attained production targets, improved the institutional support structure and contributed towards the establishment of effective livestock credit systems”.

A feature of the region was the traditional preference for raw milk (which is boiled before use) and this enabled smaller producers to dispose of surplus milk directly to consumers without concern for an accessible processing facility. Low priced imports were a constant threat but it is concluded that “the livestock industry throughout the area had adjusted to the low price import option by developing a dual purpose production system, by utilizing natural pastures, by upgrading cattle and by increasing the carrying capacity of the land”. Project officers considered that marketing patterns did not need changing and processing facilities, especially for pasteurized milk, were adequate although increased investments would be required as dairying expanded. The report draws attention to the deleterious effect of low cost imported milk products on investment and production in many LAC countries but concludes “in the LAC area it is doubtful that there is a country or group of countries which could be described as marginal for dairy production in terms of the possible financial advantages of imported milk projects”.

Europe, Middle East and North African (EMENA) Dairy Projects.

Fifteen dairy or projects with dairy components were assisted in six countries (Morocco, Turkey, Yugoslavia, Ireland, Spain and Romania). Total project costs were US$2.47 billion and dairy development components amounted to US$778.01 million and Bank loans amounted to US$597 million. Projects are judged to have performed satisfactorily in all cases with the exception of large public sector farms in Yugoslavia. They encountered serious management, overstaffing and price problems. Yugoslavia changed its policies as a result of this negative experience and subsequent projects supported smallholders only. Dairy programs in virtually all countries emphasized pasture, forage and feed production. Successful dairy cattle importations were a feature in the case of Turkey and Morocco (Friesian and Brown Swiss). Another feature of these latter countries is the prevalence of raw milk consumption which enables producers to sell directly to consumers and traders without incurring processing costs. The Rumanian projects main objective was to improve yields and labour productivity by modernizing existing large public sector units (involving feeding, housing and milking). With the exception of Ireland, which exported most of its milk as manufactured products under EEC arrangements, production in the EMENA projects was almost entirely for home consumption to meet increasing consumer demand.

The report concludes: “Assessment of overall performance of EMENA dairy development projects provides evidence among most projects of measurable success in achieving project goals and governments' major objectives. The diversity of project design grew out of the need to develop approaches best suited for particular social, economic, and ecological conditions country by country. Successive programs in Turkey, Morocco and Yugoslavia built on earlier experiences, revising where necessary, and in the case of Yugoslavia, making a major shift from large social sector production units to emphasis on smallholder production. This shift of emphasis had also occurred in Turkey and Morocco and represented a welcome development which appeared to be the trend in all regions. The Rumanian experience represented an isolated set of conditions and as noted above was probably limited to one country”.

Eastern Africa Region (EA) Dairy Projects.

Bank-assisted dairy development in EA, six projects in four countries (Ethiopia, Kenya, Tanzania and Zambia) and a modest component in a Malawi rural development project, was small. Total project costs amounted to US$88.5 million, total dairy components amounted to US$65.4 and IDA credits amounted to US$56.6 million. The Ethiopian project was greatly affected by major political changes and was generally unsuccessful although the country has a good potential for dairying. The dairy components of three Kenya smallholder credit projects were highly successful. The extent of success is indicated by a consumption level of 75 litres/capita, by smallholders supplying 75% of the total market supply. The Tanzania project supported large units (350 cow units) under parastatal management and since 13 out of the proposed 17 units established did not cover operating costs, because costs were high and production coefficients were much lower than appraised estimates, the project was a failure. Although a smallholder component was included in the Tanzania project, it was seriously constrained by a shortage of grade cows. The Zambia project was drastically revised downwards after a review and the revised project involving 150 smallholders instead of the original 1,800 performed satisfactorily.

South Asia (AS) Dairy Projects.

Total investment in dairy development has amounted to US$547 million, total project costs amounted to US$556 million and loans and credits amounted to US$250. Four dairy projects in India2 and one in Sri Lanka were supported. In addition two livestock projects in Burma and Pakistan had dairy components. The Indian dairy projects have been singularly successful. Dairying in India is characterized by the development of well-managed cooperatives which handle collection, processing and marketing, and provide support services efficiently to existing small dairy farmers, who typically own one or two milking buffalo. Although production conditions in Pakistan are similar but generally superior to those in India and although the project aimed at replicating the Indian Amul model as far as possible, its performance has fallen far short because the project was not as well managed and was not as successful at institution building, at commanding government support or at defining and implementing appropriate pricing and marketing policies. The Sri Lanka project was drastically revised after initial disappointing experience to replicate the Indian/Amul model as far as possible. After revision, the performance was fairly satisfactory. A project feature was the poor performance and high mortality of heifers imported from Australia. The Burma project had limited success because the Socialist government showed little interest in supporting and developing the smallholder dairy sector despite its considerable potential.

2 The Indian dairy projects were highly successful and subsequent dairy projects also performed satisfactorily.

East Asia Pacific Region (AE) Dairy Projects.

The regions total investment in dairy production was US$50.3 million, total project costs were US$122.6 million land Bank loans amounted to US$62 million. Two dairy projects were assisted in Korea. A smallholder coconut development in Malaysia had a fairly substantial dairy component costing US$13 million and under the Philippines Second Livestock Project a small pilot dairy component costing US$0.225 million was supported. The Korean projects were highly successful in financial terms and production coefficients in most cases reached or exceeded appraisal expectations. However, they were judged to have negative economic rates of return by the Bank when opportunity costs of imported products were taken into consideration.

Under the dairy component of the Malaysian project the importation of 6,600 heifers for Government raising centres was envisaged. Serious problems were encountered with imported heifers, pasture development was much slower than expected and government tended to support large scale public and private enterprises over smallholders. A Bank supervision mission recalculated the ERR and showed that it was negative. It was shown that milk, reconstituted from imported ingredients, cost US$0.22/litre compared with US$0.24/lither for local milk delivered to the processing plant. On the basis of this analysis, government was advised to slow dairy development and most of the available funds were not used. Malaysia has an extremely humid tropical climate and Bank staff consider that the potential for dairy development is extremely limited. The Philippines pilot dairy component had limited success. Although the Philippines has some potential for dairy development despite the humid tropical climate, Bank staff are of the opinion that dairy development there will be slow.


The 1981 “Review of World Bank Livestock Activities in Dry Tropical Africa” covered 34 livestock and 37 mixed livestock/crop projects in 26 Sub-Saharan countries. It was undertaken by Mr. Stephen Sandford 3 who had considerable experience of livestock development in Africa. The review dealt primarily with 30 “livestock only” projects (in 22 different countries) and only cursory reference was made to 37 mixed projects. Although the review was based on information in Bank Documents, the author drew heavily on his independent knowledge and broad experience of livestock production and pastoralist in arid and semi-arid regions.

The report concluded that “ranching” projects or ranching components failed dismally. It also concluded that components to improve marketing and livestock movement, slaughtering and processing “have an abysmal record” and that veterinary components and off-range fattening by smallholders have a “generally good record”. Sandford was unable to show any statistical relationship between failure and the size and complexity of projects, but nevertheless concluded “… it is my belief that projects are too big, too complex and excessively dependent on expatriates”. He further concluded “… that the increasing size of projects during the 1970's was more related to the Bank's own desire to spend more on agricultural sectors than on a realistic assessment of the absorptive capacity of the livestock sub-sector”. He also argued that the Bank emphasizes what happens at the top -- on the performance of the bureaucracy -- and underemphasizes what happens at the bottom -- actual performance at the field level.

3 Presently Head of the Livestock Economics Division, International Livestock Centre for Africa (ILCA), Addis Ababa, Ethiopia.

Role of the Bank.

In Sandford's view, the Bank, apart from providing capital, provides three other important elements: (a) pressure on governments not to neglect their livestock sectors; (b) specific pressure in favour of particular policies, programs and components; and (c) technical advice on particular points. Overall he felt that little of the increased meat and milk production during the previous 20 years could be attributed to Bank projects or government programs if rinderpest measures and water development were excluded. He considered that what development there was came from a growth in livestock populations, required and made possible from growth in the human population and some expansion in livestock forage (crop residues). Despite this, he cautioned that livestock production and the welfare of livestock owners will decline further “… unless more effective and more wide-scale government sponsored programs are undertaken” because of the decreased availability of land for extensive production systems and the encroachment of cultivators on grazing land.

Despite his criticisms, he believed that the effect of the Bank's involvement on livestock development had “been beneficial” although over-influenced by “fashions” such as ranching in the '60s, fattening in the early ‘70’s and group formation more recently. He concluded “… Bank-financed projects are usually better oriented, as well as better financed, than other livestock programs implemented by governments, and the visits of Bank appraisal and sub-sector review missions are often the occasion on which government think most deeply about their livestock policies and programs”. Although he concluded that “… Bank expenditures (US$750 million) on livestock development will not be justified by production increases in the short term, important lessons can be learned from the experience” and management cadres in African countries are being slowly build up”. Livestock programs in Africa should be less capital-intensive, smaller amounts should be spent more slowly and much greater flexibility should be permitted. From the viewpoint of African welfare and economic growth he felt that it would be a pity “… if the Bank were to conclude that if it cannot spend very large sums fast, then it has no proper role in the future in African livestock development”.


Sandford feels that there is little reliable evidence “…indicating either that widespread degradation is going on in African rangelands or that, if it is, it is due to livestock development programs”. However, he felt that continued caution over the development of water supplies was warranted, but as much for social as for environmental reasons. He considered the Bank's increased willingness to finance veterinary components favourably because of the positive effects on the welfare of poor and rich stock owners and because he does not accept the environmental danger argument. He condemns “ranching” as opposed to pastoralist systems on many grounds including:

Sandford does not agree despite many claims to the contrary “that the know-how already exists to improve range and pasture productivity in African arid regions (less than 600 mm)”. Although he appears to agree that technology exists to improve rangelands and productivity in the higher rainfall areas (over 600 mm) major questions remain to be resolved, e.g., is technology cost effective and how can the management capability needed to successfully implement it be developed? (In view of the Bank's experience with ranches, and its justifiable reluctance to support them, the question is probably moot at this stage except for smallholders). Sandford placed considerable emphasis on the need for increased support for livestock research and attention was drawn to the smallness of research components in Bank projects (about 1.4% of total project costs). A recommendation was made “that the Bank should allocate a substantially higher proportion of its livestock programs for research” and it should adopt a more active policy of assisting research units in major livestock countries.

In view of the Bank's negative experience with livestock marketing and processing components Sandford recommended a special study on these. Much more attention should, in his view, be given to ranch records and information on ranch performance, in the Bank's records, is judged to be grossly inadequate. Emphasis was placed on the need to make greater use of “competent anthropologists” in project preparation and implementation. Although he refers to the use of anthropologists in 30% of livestock projects, there appears to have been no measurable difference between projects whether or not anthropologists were used. Sandford considered that veterinary components of livestock projects were successful although the extent to which costs were recovered was not clear. Producers put high priority on animal health inputs and the evidence available showed that they were prepared to pay for drugs, vaccines and medicines if given the chance to do so. He recommended that considerably more support should be given to veterinary research to fill the gap in coverage between the research programs of ILCA and ILRAD, to provide guidelines on how veterinary services should be improved and how field delivery systems should be organized and developed.

Pastoral Associations.

Although the recent emphasis on pastoral associations (Sandford includes group ranches in this category) was considered “a move in the right direction”, he cautions against seeking some “universal model”. Since he was sceptical about the value of grazing management or controls on animal numbers, except to the extent that pastoralist may themselves handle these matters, he was against their use as vehicles for implementing government controls on grazing or stocking rates. Association's main functions, in his view, embraced land tenure, resource management, provision of services, communication of information, external relations and the building and maintenance of community cohesion and morale. He made the point that associations have land tenure and land reform implications and they should be treated like land reform projects.

General Problems.

Staff-related problems, such as the inability to recruit suitably qualified staff occurred in 90% of the projects analyzed (by Sandford) and political policy-related problems in about 70%. In Eastern and Southern Africa, government policies were one of the most frequently cited problems. Formal project coordination committees worked badly, especially if established at a senior level. Project management costs, although difficult to estimate, appear to have been excessively high in some cases.

The Sandford review takes issue with the project approach towards livestock development in Africa and argues for a program approach. It also argues for flexibility in design and implementation of projects in dry regions to enable management to deal with unforeseen circumstances such as droughts. Sandford believes that the Bank becomes over-involved in detail and that Bank project appraisal methodology “has more to do with Bank ritual than with the effective design of projects”.


Present Status of Livestock Projects.

The performance of livestock projects is still a cause for concern. On the Bank's internal rating system, mandated for all projects under supervision, the performance of 40% of livestock projects in 1989 was unsatisfactory. Only Fisheries projects have a worse performance record and even area development projects, although bad, are rated somewhat better than livestock. This rating refers to free standing livestock projects and must be interpreted with some caution because one cannot infer from it that livestock components in broader based agriculture projects are performing less satisfactorily than other components. Since the rating system applies to the overall project we must assume (unless otherwise stated) that the performance of the livestock component is fairly represented by the overall rating. It is important to keep this in mind when one realizes that most of the lending for livestock is now made under component projects (Tables 1 and 2).

The findings of the three studies which I referred to are still valid and describe the main problems which underlie poor project performance. Overall performance is heavily biased downwards by poor performance, especially for Africa and to a lesser extent the East Asia and Pacific Region (Table 4). It is important to note that the performance of Livestock projects in all other regions was similar to Agriculture projects in general. The bias is considerable because the volume of lending and the size of projects are relatively small in these regions. In response to past deficiencies the lending program is now paying more attention to supporting smallholders, improving technical support services (i.e., extension, research, veterinary) institution building, cost recovery and privatization. Considerable emphasis is being placed on strengthening and restructuring veterinary services, on extension and research and encouraging the formation of Pastoral Association (for veterinary and resource management) in the Sub-Saharan Africa. Dairying is receiving renewed emphasis; dairy projects are under consideration, for example, in Sudan, Kenya, Madagascar, Uganda and Zambia. Furthermore, livestock have an important role in the “Bank's Areas of Special Emphasis”, namely: poverty alleviation, food security, protecting the environment, private sector development/public sector reform and women in development. There are, for example 26 Sub-Saharan African countries with extension and 17 with research projects, although the primary focus in these projects is on agriculture and not livestock. Much more needs to be done to strengthen livestock extension and research.

In addition to new initiatives in project design more efficient economic policies are being emphasized in structural and sectoral adjustment lending. These include more realistic exchange rates, free market policies, privatization and cost recovery.



It is important that long-term markets are available (and verified) to ensure profitability. Financial projections and rate of return calculations should be conducted with care. Although the World Bank places great emphasis on project analysis it is surprising how often projects fail because of inadequate profitability. Since livestock development is a long term activity, inflation and as a consequence high interest rates cause serious cash flow problems during the earlier project years. In addition to problems with prices and markets (which should be verified with care) technical and production coefficients are often over-optimistic. Unless judgements are made by experienced operators they are inclined to reflect what is technically feasible, or what is feasible in the developed world, without due allowance been made for differences in management capabilities, technical services or the availability, cost and quality of input supplies. For example, in African ranching or dairy projects it was assumed by all donors in earlier years that parastatals could achieve production coefficients similar to those obtained on good commercial (settler) farms. With hindsight we know this was not the case -- parastatal coefficients were similar to those achieved in the traditional sector and in addition parastatals suffered from political interference, overstaffing and price regulation as well as poor management (including financial management).

Profitability is also determined by the level of capital investment. Smallholders have a substantial advantage in most cases over large commercial farms. Combined with low opportunity cost labour (family) this can give smallholders a distinct advantage over large farms and parastatals. Consequently their financial viability is considerably less threatened by low production coefficients, prices or management skills.

Economic Justifications.

Even if an enterprise is financially attractive this may not mean that it is economically attractive as measured by the economic rate of return (ERR). The ERR omits subsidies and taxes. Border prices (free world market prices) are used to value inputs and outputs. Consequently, a satisfactory ERR is a much better indicator of long-term sustainability than the FRR. The ERR is particularly important in countries where free markets are not permitted to operate and where the exchange rate and prices are seriously distorted.

Government Economic Policies.

An overvalued currency is without doubt the most serious constraint on orderly sustainable livestock development in many countries. It is particularly serious for countries with an export surplus or the potential to develop exports. There is for example, an excellent market in the Middle East for live animals (especially sheep and goats) but Somalia, Sudan and Ethiopia have not been able to exploit this market, except to a limited extent, because exchange rates have been grossly overvalued. Conversion of earnings at the official exchange rates can be equivalent to a tax of 100% – 300% on livestock exports.

When one considers the stimulus that a 100% real increase in livestock prices would have on producers willingness to use new techniques and increase production, one begins to appreciate the magnitude of the overvalued foreign exchange problem. Governments are reluctant to move to a more realistic exchange rate because this would affect local consumer prices, especially for city consumers who wield a disproportionate political influence.

If the exchange rate is grossly overvalued the conditions are automatically created for a flourishing smuggling trade. Large numbers of animals (especially sheep and goats) are presently smuggled live to the Middle East from East African countries and large numbers of cattle are smuggled (walked) into Kenya from adjacent countries. If these conditions are not corrected, projects, which are aimed at improving livestock and meat marketing are doomed from the outset. This is usually true even if the actual marketing operation is in the hands of private traders with the public sector role confined to the provision of marketing and processing facilities on a fee for services rendered basis.

Although, it can be argued that smuggling has positive economic features it is a costly and inefficient way to conduct business. Government is denied access to revenue and foreign exchange which could have been generated by official exports.

A grossly overvalued exchange rate has an additional negative effect in that the real costs of inputs that require foreign exchange are not reflected in the price paid by farmers and are therefore, not recovered even if a full cost recovery policy (local currency) is in place. This is an important issue and common difficulty with revolving funds for veterinary drugs and medicines in donor supported projects. The adoption of a realistic exchange rate appears to be the solution to this problem. The Bank is addressing the exchange rate issue through its structural adjustment program, albeit with mixed results. Sustainable livestock development will, in many countries, depend on the success of these efforts especially if success is directly related to the availability of foreign exchange as would, for example, be the case for a veterinary project importing drugs and medicines. There will always be a problem of this nature unless a country's currency is freely convertible at realistic exchange rates.

Government price controls are a major cause of failure for projects which rely on Government or parastatal production, processing and marketing; they can also affect the private sector if rigorously implemented. Overall effects can even transcend national boundaries. Livestock projects in East Africa were negatively affected, to a major extent, by government price control policies -- even private sector ranches as well as parastatals. Livestock specialists and planners should not feel too guilty about parastatal failures because these policies had their origins in economic management theories and embraced all sectors (e.g., coal mining, car manufacture, and transport (in European countries) in those heady economic planning days.


Sustainable technology must take the realities of the country in question into consideration. Too often attempts are made to transfer technology from developed countries without realizing that they are unsustainable because labour/capital ratios are completely different and support services less developed; not only technical ones but also electrical, mechanical, manufacturing, communications and transport.

Investment in large commercial state or parastatal dairy production and processing in Africa and elsewhere is a good example of inappropriate technology. Smallholder dairying requires very little capital investment and, in addition, can usually utilize low opportunity cost labour. Consumers in many countries are not prepared to pay the extra costs of heat treating, packaging and distributing milk. Systems which are based on the sale of unprocessed milk (either fresh or sour), distributed from door to door by farmers or local vendors, are much more robust from an economic standpoint. Consequently dairy projects based on pasteurization and sale of milk in bottles or packages can only be justified if the milk shed is located at a considerable distance (at least 50 km) from the city market. Even where pasteurization is justified by transport distances considerable savings can be made by selling bulk milk to local vendors; as an alternative to a marketing system which may be doomed from the outset by heavy packaging and distribution costs.

The key mistake in attempting to transfer modern dairying practices to the developing world, arises from a lack of appreciation of relative costs of labour and size of incomes which by comparison with the developed world are usually 50 to 100 times smaller. The relative cost of labour must also be kept in mind when designing appropriate Artificial Insemination and other technical and input supply services. When one considers that the average workers daily wage is only equal to about 2-3 litres of milk, it is clear that every effort must be made to utilize cheap labour and economize on fixed capital (buildings, machinery and vehicles) as well as economizing on foreign exchange expenditures. These issues are discussed in more detail in a World Bank report entitled “Dairy Development in Sub-Saharan Africa” which will be published shortly in the World Bank's Technical Paper series.

The importance of grading-up, by crossbreeding, to achieve good dairy merit, must be emphasized. Crossbreeding is the cheapest and least risky approach. It avoids problems associated with acclimatization and minimizes the disease risk.

The record shows that mortality rates are unacceptably high for European breeds imported to tropical/sub-tropical regions and the number of animals imported should not exceed what is needed to establish an efficient crossbreeding program.

Processing technology, for milk and dairy products, should concentrate on simple manual system or ones with minimal mechanization -- for milk separation, butter churning and small scale village cheese manufacture. Butter and cheese manufacturing is particularly important in areas which have a pronounced seasonal milk surplus and that are located far from liquid milk markets. Milk powder manufacturing plants can rarely, if ever, be justified because of their high capital and operating costs and the availability of subsidized milk powder on world markets. Large processing plants for meat and poultry are also difficult to justify. Small abattoirs that provide slaughtering facilities for a fee are the best solution if the number of animals involved can justify moving beyond the private butcher. Housewives would usually prefer to use their own labour to dress fowl rather than pay high processing charges. Furthermore, live chickens are much easier to store and can be killed when needed. It is interesting to note that this system is still operating in Taiwan where per capita incomes are several times higher than in most developing countries. In my experience we should look to Asia for appropriate models for processing and marketing livestock. Furthermore, there is now ample evidence to support the proposition that responsibility for marketing live animals and livestock products should be delegated to the private sector. If the public sector has any role it should be confined to the provision of infrastructure (markets, railway stockyards and lairage at ports) and, in addition, help to facilitate these activities by reducing red tape, improving telephone and telex services, abolishing taxes, and facilitating veterinary certifications for exports. The working capital that is needed in the livestock and meat trade is extremely large and Governments must ensure that adequate amounts are available through the banking system.

Feed Supplies

The sustainability of smallholder livestock depends, in large measure, on feed supplies. Virtually, all smallholders produce forage and crop by-products and therefore dairying and cattle/sheep fattening enterprises can be undertaken by virtually all farmers. Furthermore, even if the quantity of feed is small it usually has little if any cash value (except when sold or bartered to nomads). Since home produced feed costs little, if anything, smallholder livestock farming is unburdened of one major risk-that associated with large fluctuations in feed prices and reliance on purchased feeds.

Likewise smallholder pig and poultry systems flourish on farms producing grains (e.g., maize, rice) and crops and cereal by-products (e.g., rice bran). Robust smallholder pig production was a feature of Danish agriculture until very recently (a flourishing pig production industry based on home grown barley) and robust smallholder pig production still flourishes in Poland (based on home grown potatoes and cereals) and in Yugoslavia (based on home grown maize and wheat pollard from home grown wheat). Likewise smallholder pig and poultry production flourishes in Asia because all smallholders have access to cheap rice bran. Rice milling is usually dispersed through numerous small villages and farmers receive or buy back most of the rice bran from their own crop; rice bran stores badly because its oil content is high and it is therefore unattractive to feed compounders. It must be fed fresh and since rice milling is a continuous process rice bran is constantly available to smallholders.

These traditional smallholder livestock systems are virtually risk free and will survive (as they did in Western Europe) until wage levels are such that their contribution to family income becomes insignificant or when they are incapable of providing an economic labour wage. For example, in Asian rice systems, a man can manage a flock of about 150 ducks grazing on rice paddies. This system persists when the cost of feed saved, by scavenging, is sufficient to justify a man's wage but the practice has collapsed in countries where wages have surpassed this level. These examples are given in order to stress the point that one needs to be vigilant and fully understand the implications of the underlying economic realities as well as their influence on switching points in farming systems (e.g., from manual to machine milking).

Smallholders are economically more robust than large commercial producers because they are much less subject to feed and product prices. They should be encouraged to the fullest whenever possible and will persist until gradually surpassed by economic development. Feed is normally the binding constraint on smallholder production and projects designed to assist this sector should always incorporate a well thought-out feed and/or forage component.

Commercial sustainable pig and poultry industries can be developed on imported feeds in countries with a deficit in these products (e.g., Taiwan, the Philippines and Korea). This is possible because it is much cheaper to transport feed grains than meat and poultry products. However, if the industry is to survive in the deficit country production standards and efficiency must be comparable with those found in developed countries. Developing countries usually has a substantial advantage in labour and construction costs and, in addition, the fertilizer value of waste products is usually much higher and as a consequence the waste disposal problem is minimized.

Although somewhat surprising, it is worth noting that few countries have a well thought out strategy for meeting their short, medium and long term feed supplies (energy and protein feeds). One needs only to look to the continuing chronic feed protein deficit in Eastern European and Asian countries to realize the full magnitude of the problem. Perhaps FAO and the World Bank could play a more substantial role in rectifying this situation. The gains that can be achieved, if enlightened policies are put in place, are phenomenal and clearly evident from the expansion of pig and poultry production, on imported feeds in many developed and developing countries.

Sustainable Support Services.

Sustainable smallholder development depends on sustainable technical and other services. Sustainability of services is largely a function of cost recovery. Even where the principles of cost recovery and privatization are accepted the task of developing sustainable institutions to deliver these services is a formidable one. Considerable investment will be needed in institution building, technical assistance, management training and staff training at all levels. Grass-root farmer organizations (i.e., pastoral association and cooperatives) need in most cases to be established and farmers trained to own, operate and manage them. This is a task that goes much beyond the life-span of the typical livestock project. One should look to Operation Flood in India and village agriculture/livestock cooperatives in Taiwan to see what can be achieved in the mature stage, and to initiatives for restructuring veterinary services and establishing pastoral associations in Sub-Saharan Africa to see what can be achieved at the earlier development stages.

In recent years the Bank has placed much more emphasis on institution building and the provision of services (e.g., extension, research and veterinary), in full cognizance of the importance of these to sustainable development. Although this is not the place to discus these important services, it is pertinent to point out, that in most developing countries livestock services are either non-existent, weak, non-effective or absent. The design of efficient affordable services is a difficult task which calls for innovation, the rejection of old nostrums and careful cost/benefit analysis to establish affordability, a pre-requisite for sustainability. While donor agencies can assist this process, governments must ensure that coherent policies and strategies are implemented to avoid confusion and to save time and resources. Donors must ensure that their activities and projects are consistent with the policies and strategies which have been set by Government.

Animal Health Services are of paramount importance to the sustainability of smallholder system but especially to dairy farmers using disease susceptible crossbreds. Although good progress has been made on conceptualizing restructuring and cost recovery most livestock farmers in Sub-Saharan Africa have still to ‘make do’ with, at best, a rudimentary and, at worst, a totally ineffective service. In Ethiopia, for example, the expenditure on veterinary drugs and medicines is only about 5% of the amount veterinarians estimate would be economically justified on the basis of epidemiological studies. It will be extremely difficult to rectify this situation even though the principles of restructuring and privatization are fully accepted. A major effort is needed to train veterinary field assistants that will be employed by service cooperatives, the front line institutions. Systems of bookkeeping and cost recovery must be developed and demonstrated which require time and a massive training program. A mechanism is needed to enable payments in local currency to be converted to foreign exchange to replenish imported veterinary stocks. In addition procurement and distribution must be streamlined.

Although one must assume that these problems can eventually be resolved one should question if the contribution or the role of farmers in administering drugs and medicines is adequately taken into account in present Sub-Saharan Africa models where veterinary assistants, selected from and paid by the traditional village community or pastoral association, are responsible for administering drugs, medicines and vaccines to livestock. When one considers that probably 90% of the veterinary drugs and medicines are administered by farmers in developed countries (as represented by farmer's expenditure), albeit in most cases under the veterinarian's instructions one begins to realize the importance of training the African farmer to play a much greater role in the administration of veterinary products. It would take an enormous increase in manpower, travel time and cost to replace the farmer's legitimate function in, for example, ‘drenching’ for stomach worms and liver fluke. Study and analysis is needed to sharpen the focus on these matters - perhaps FAO could help by establishing badly needed guidelines.

Environmental Sustainability

Despite some common misconception livestock projects normally make a substantial beneficial contribution to sustainable agriculture. In arid areas there is now ample evidence that irreversible degradation is not taking place on a large scale as a consequence of over-grazing. Rangelands generally recover when droughts give way to a wetter cycle of annual precipitation. The public clamour and fear of irreversible degradation appears to follow a similar cyclic pattern. The real environmental problem in arid areas is caused by erosion brought about by increased and continuous cropping as well as bush cutting (for fuel) which is, in turn, a consequence of population pressure. Overgrazing does exist and can cause erosion on slopes, but these effects are minor compared to those caused by human population pressure. Furthermore, grasses, forage, legumes and legume trees, introduced to provide livestock feed, are important builders of soil fertility and, in addition, provide ground cover which prevents or lessens wind and water erosion in susceptible areas (e.g., Ethiopian highlands).

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