In 1977 the Board of Governors of the World Bank approved Bura Irrigation and Settlement Project (BISP) in Kenya. The project area is situated just South of the Equator in the Lower Tana Basin. It lies on the west bank of the Tana River and falls within the administrative area of Tana River County. The project was an ambitious attempt of the government of Kenya, the World Bank and a few other donors to develop a remote area, create employment for thousands of people with a reasonable income and earn foreign exchange. Bura project would develop about 6,700 net irrigated ha over a 5 year period and settle on smallholdings about 5,150 landless poor families selected from all parts of Kenya. Physical and social infrastructure would be provided to support the settler and satellite population, expected to reach a total of 65,000 persons by 1985. The total cost of the project was estimated at 92 million dollars in 1977 prices.World Bank 1977. Actual construction started in 1978. During implementation the costs exploded from $17,500/= per family to $55,000/=, a new record for the World Bank. The largest cost increase was for the irrigation network (615%). The donors were not willing and the government was not able to raise the additional funds and subsequently the size of the project was scaled down from 6,700 ha to 3,900 and later to 2,500 ha, although the irrigation structures were completed for 6,700 ha. In this period 2,100 landless households from all over Kenya were settled in the scheme. They were allocated two plots of 0.625 ha and a garden of 0.05 ha. Each year they were to grow 1.25 ha cotton and 0.625 maize intercropped with cowpeas. Soon it was evident that the project would fail to achieve its objectives. Job creation was only 40% of the target, the economic rate of return was negative and the annual operating and maintenance costs exceeded the benefits. Even with net farm incomes of about 40% of the appraisal estimates in real terms, annual government subsidies amounted to about 1,000 dollars per settler. The project had an unreliable water supply and many buildings had foundation problems.World Bank 1990 and 1990a. After cotton crop failures due to pests in 1990 the project came virtually to a standstill as the management lacked the funds to finance cotton and maize crops. Most settlers deserted and only the ones with nowhere to go remained in the scheme, living on famine relief and odd jobs. In the period 1993-2005 the government tried a number of times to revive the project, but all in vain. After 2005, rehabilitation and crop growing started in phases and since 2009-10 the tenants have been growing crops, although the cropping pattern fell to no more than 50% of the projected crop intensity and the settlers have low incomes, if any. This is partly caused by the fact that the original cash crop, cotton, is no longer a profitable crop.NIB 2013 and NIB website.
Background
During the later 1930s and 1940s the colonial government was already concerned about population pressure and soil erosion. Irrigation was seen as a means to reduce land pressure and the Tana River Basin was seen as the natural area to start irrigated settlements.Unlikely as it sounds in 2016, but soil erosion due to overpopulation was one of the main concerns of the colonial government. Chambers (1969): 20-25. As early as 1934 Harris and Sampson published their ‘Report on the Tana River Expedition’. In 1948 the colonial government published a study on two 40,000 ha schemes between Bura and Grand Falls. Due to the remoteness and poor soils these projects were uneconomic. In 1956 the government started Hola Pilot Irrigation Project about 40 km south of Bura. From 1963 to 1967 the FAO oversaw the Lower Tana River Basin study. This study was carried out by Ilaco and Acres (two engineering firms) and they proposed to start an irrigation project of minimally 100,000 ha. However, with an economic rate of return of 10% the study showed that the project was economically marginal. One recommendation was to start a research and training centre. Later it was decided that this centre should be a pilot project at Bura and Ilaco was given a contract to carry out a feasibility study.De Leeuw, 1986. That study, as was the case with most Ilaco studies, was financed by the Netherlands.
Studies and appraisal
Ilaco feasibility studies In 1973 Ilaco presented its first feasibility study on Bura. It proposed to develop 4,000 ha for 3,000 tenants. The economic rate of return was calculated at 13.5%.Ilaco, 1973. In the meantime feasibility studies in other areas in Kenya had shown disappointed rate of returns for irrigation projects and the Government of Kenya, therefore, proposed that Ilaco makes an even more detailed study for 14,000 ha so that a project that was eligible for financing by the World Bank could be produced. In 1975 Ilaco submitted its report. This report became the basis of the project that eventually materialized. This study envisaged the settlement of 11,000 families on 14,000 ha. The implementation period would take 11 years and the economic rate of return was calculated at 16%. Although the report raised some questions about the quality of the soils, the Ilaco feasibility study was optimistic and foresaw a bright future for the area.Ilaco, 1975. NIB, 1975.
Appraisal by the World Bank Late 1975 a World Bank appraisal mission visited Kenya and in June 1976 the first appraisal report (White Cover) was presented.At that time the World Bank had a sequence of four appraisal reports: White Cover (first report, often incomplete), Yellow Cover (improved White Cover), Green Cover (used during the negotiations) and the Grey Cover (final report). The document proposed a 14,000 ha project with an economic rate of return of 11%. Internally the World Bank had classified Bura as a "potential difficult and contentious project" because of the level of external financing, incomplete preparation, high cost per family, cost recovery, remote area and settler selection.World Bank (1990): 14. Interesting enough the soils were not seen as a problem, but a few months after the publication of the White Cover report this issue erupted, when World Bank staff reviewed the details of the soil studies and concluded that the classification of these soils by Ilaco was too optimistic and not justified.
With the appraisal on the verge of collapse, a phased development programme was proposed. Phase I consisted of a project of 6,700 ha with mainly good soils, but also with poorer soils (31%) in order to gain practical experiences with these soils.World Bank, 1977, annex 2: 5-8. If the poorer soils proved to have potential, then phase II of about 6,000 ha with poorer soils would be developed. At this moment the World Bank also introduced Stage II, which was for about 25,000 ha irrigation development on the east bank of the Tana River. Under normal circumstances the consultants who prepared the feasibility study and the designs would automatically be engaged to supervise the construction. However, the World Bank was not satisfied with the work of Ilaco and insisted on tendering for the position of project consultants. In December 1976 a British consortium, Sir M. MacDonald and Partners and Associated Firms was appointed. Part of the job of the firm was to prepare an implementation report (Project Planning Report), review the Ilaco studies, reformulate the project at a reduced scale and provide essential data to the appraisal report.World Bank, 1977: annex 17. Indeed, the new consultants confirmed the cost estimates given by the World Bank.World Bank, 1990: 4 and De Leeuw, 1985: 90-94.
The new proposal envisaged 6,700 ha irrigated land for 5,150 landless families from all parts of Kenya. The plan was to construct a diversion structure on the Tana River 46 km above the project. A principal town and 23 villages were to be built along with education, social and administrative facilities and the physical infrastructure (roads, water, electricity) for a population of 65,000 people. Settlers were allocated tenancies of 1,3 ha of which 1,25 ha were for field crops and 0,05 for garden vegetables. An ingenious cropping pattern would make it possible for the tenants to grow 1,25 ha cotton and 0,625 ha maize intercropped with cow peas each year. The total cost of the project was US$91,7 m (Kshs 766 m). Financiers were the IBRD (US$34m), IDA (US$6m), EDF (US$12m), Netherlands (US$8,8m), ODM (US$8,5m) and CDC (US$8,5m). The remaining US$20,6 m was to be financed by Kenya. The tenants were to earn Kshs 7,000 (US$840) yearly and the economic rate of return was calculated at 13%.World Bank, 1977: i - iii and 11 - 32.
The National Irrigation Board (NIB) would be overall responsible for the implementation of the project. However, the World Bank argued that its experience and implementation capacity was limited and therefore experienced consultants should be employed to complete the design, supervise the construction and assist in coordination of all activities.World Bank, 1977: 33.
Project Planning Report In September 1977, after many delays the new consultants submitted part of the six volumes comprising Project Planning Report (PPR). Even though the consortium had confirmed the World Bank estimates (based on the Ilaco studies) before the appraisal report was published, MacDonald and partners gave a total cost of US$112,1m (Kshs936 m), an increase of 22%. The cost increase was largely due to much higher consultancy cost and, to a lesser extent, the irrigation works. This surprised, if not shocked, Kenya and the other financiers. Two months after the appraisal, the project was thus already seriously underfunded. Surprisingly, despite the higher cost, the economic rate of return of the project remained at 13%.
One feature of the Project Planning Report was that it linked the implementation of Stages I and II. For instance, the river diversion structure was to be redesigned so that it could serve both Stages. This despite the fact that there existed very little evidence that Stage II could be a viable project.
Comparison of key documents
A comparison of the unit costs from 1975 to 1977 gives the following:Dewar, 1984. Description ILACO 1975 World Bank 1977 MacDonald PPR 1977 Area proposed (ha) 14,560 6,700 6,700 Investment per ha (Kshs) 23,850 114,300 139,700 Investment per ha (US$) 3,400 13,700 16,700 Total settler families 10,785 5,150 5,150 Investment per family (Kshs) 32,200 148,680 181,700 Investment per family (US$) 4,500 17,800 21,800 Economic Rate of Return 16% 13% 13%
In its studies Ilaco argued that a cost increase of 10% would lower the economic rate of return with one percentage point. As the table above shows, however, cost increases of 600% resulted only in a minor change of the economic rate of return. The following parameters were changed to keep the economic rate of return, despite huge cost increases, at an acceptable level: Shadow pricing of the Kshs at a value of 11 Kshs as compared with the official dollar rate at that time of 8.35. Shortening the implementation period.The economic rate of return can easily manipulated. For details about manipulation see Tiffen and De Leeuw (1985). Huge increases in the yield of the main crops in the early years even though there was no new evidence that could justify such increases. Defining a number of investment cost as non-project and hence excluding them, at least partly, from the cost benefit analysis. For instance, the World Bank defined only 75% of the social infrastructure as project costs. Many other, often minor changes, which almost always resulted in a higher rate of return.De Leeuw, 1985.