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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 4665-BT

BOTSWANA

LIVESTOCK SUBSECTOR MEMORANDUM

September 14, 1983

Eastern Africa Projects DepartmentSouthern Agriculture Division

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Botswana Pula (P)

US$1.00 = P1.05P1.00 = US$0.95

(March 1983)

WEIGHTS AND MEASURES

1 meter (m) = 3.3 feet1 cubic meter (m 3 ) = 35.3 cubic feet

1 hectare (ha) = 2.47 acres1 kilometer (km) = 0.62 miles1 square kilometer (km2) = 0.39 square miles

ABBREVIATIONS

ACP - African, Caribbean and Pacific

ALDEP - Arable Lands Development ProgramANZDEC - Auckland New Zealand Development CompanyAPRU - Animal Production Research UnitBCB - Botswana Cooperative BankBCU - BoLswana Cooperative UnionBLDC - Botswana Livestock Development CorporationBMC - Botswana Meat CommissionCODEC - Department of Cooperative DevelopmentCSO - Central Statistics OfficeDAH - Department of Animal HealthFMD - Foot and Mouth Disease

IDM - Institute of Development ManagementLAC - Livestock Advisory CentersMOA - Ministry of AgricultureNDB - National Development BankNDP - National Development PlanNRZ - Nat:ional Railways of ZimbabwePDSF - Public Debt Service FundRIDS - Rural Income Distribution SurveySADCC - Southern Africa Development Coordinating CommitteeSAR - South African Railways

TGLP - Tribal Grazing Lands Policy

GOVERNMENT FISCAL YEAR

April 1 - March 31

BOTSWANALIVESTOCK SUBSECTOR MEMORANDUM

Page No.

Preface ........................................................ (i)

I. COUNTRY AND SECTOR CONTEXT ..................................... 1

II. KNOWLEDGE OF THE LIVESTOCK SUBSECTOR ........................... 4

III. SUBSECTOR SUMMARY ........................ , ............ 5

A. Introduction .............................................. 5

B. Cattle Production ......................................... 6C. Cattle Marketing .......................................... 8

D. Cattle Processing ......................................... 11E. Final Markets .............................................. 12

IV. MAIN ISSUES A.ND RECOMIOENDATIONS ................................ 13

A. Development Strategy ...................................... 13B. Fiscal Drain or Surplus ................................... 14C. The Small Cattle Owner .................................... 16D. Carrying Capacity of the Land ............................. 17E. Tribal Grazing Lands Policy ............................... 18F. Potential Offtake ......................................... 20G. Cattle Markets and Agent Commissions ...................... 21H. Cooperative Management and Advance Payment to Producers ... 22I. The Role of BLDC .......................................... 23J. Transport Requirements .................................... 24K. Processing Capacity ....................................... 25L. Abattoir Ownership and Market Structure ...... . ............. 26M. Abattoir Operations ....................................... 27N. Abattoir Gate Prices ...................................... 280. Meat Markets .............................................. 29

V. SECTORAL INVESTMENT PRIORITIES ........................ 29

VI. SUMMARY OF RECOMMENDATIONS AND DISTRIBUTIONAL IMPACT .... ....... 31

ANNEXES

1. Fiscal Analysis ........................................... 352. Cattle Production ......................................... 383. Herd and Potential Offtake Projections .................... 424. TGLP Ranch Budgets ........................................ 445. MOA Livestock Services .................................... 506. Cattle Marketing Institutions ............................. 547. Cattle Marketing Infrastructure ........................... 608. Cooperative Advance Payment Scheme ........................ 719. Large Abattoir and Final Market Requirements .... .......... 73

(i)

PREFACE

At the request of the Government, the Bank joined a team from theMinistry of Agriculture (MOA) to conduct a study of cattle marketing inBotswana. This report is the result of the work of that joint study team.To accomplish the task, and ensure overall sectoral and macroeconomicconsistency, the study team found that it was necessary to also cover thevarious backward and forward linkages with cattle production on the onehand, and abattoir capacity and final marketing on the other, as well as howall of these relate to the development strategy for the cattle industry.Consequently, the report is fairly comprehensive in scope, with an emphasison cattle marketing. However, rather than duplicate the considerable amountof background and descriptive information on the subsector that alreadyexists in various reports, including most recently in a consultant's studyon abattoir capacity, 1/ this report focuses more on the overall policyframework.

1/ ANZDEC Ltd., 'Feasibility Study on the Expansion of LivestockSlaughtering Capacity in Botswana', March 1983.

I. COUNTRY AND SECTOR CONTEXT

A. The Botswana Economy 1/

1.01 Botswana's economy is relatively small (GDP of about US$800million) and very open, with exports and imports over the last several yearsrepresenting about 50% and 70%, respectively, of GDP. Of the exports, themost important are diamonds (53%), copper and nickel (21%), and meat and meatproducts (13%). The country is heavily dependent on South Africa; about 85%of the country's imports originate in that country, as does most of Botwana'sforeign investment. Botswana's most direct access to the sea is via SouthAfrica, and nearly all of the country's beef and mineral exports travel thatroute. In addition, South Africa's economy employs approximately 30,000Batswana each year, whose remittances contribute significantly to ruralincomes. The free trade arrangement between these two countries allows thestronger South African economy to exert a major influence on costs, prices andproduction in Botswana.

1.02 Because of the impressive performance of the export sector, theBotswana economy has grown by over 13% per annum in real terms sinceIndependence. Botswana now boasts a per capita income of US$900 which is wellabove most other African countries. Despite these achievements, however, themajority of the population has not directly benefited, mainly because,although the export sector is a major factor in determining the level ofnational income, it plays a relatively small role in terms of directemployment, absorbing perhaps not more than about 15% of the total labor forceof about 500,000. Most of the population is engaged in subsistenceagricultural activities which produce a very low level of income. Ruralhousehold income in 1979 was estimated at about P 300.

1.03 Raising employment opportunities and income for the vast majority ofthe population who receive few direct benefits from the small formal sector isthe principal objective of Botswana's Fifth National Development Plan (NDP V,1979/80-1984/85). While some broad sectoral priorities have been establishedin that plan, the detailed means by which to accomplish this objective havestill to be worked out. The key problem is identifying those new investmentsthat will either increase the productivity of existing nonformal sector jobsor create new ones. In many African countries, the prescription for thisproblem would be fairly clear, if not always heeded - viz., invest moreheavily in smallholder agriculture where most of the population is engaged.For Botswana, however, with its severe climatic constraints, this developmentoption appears to offer much less promise (Section B below), and certainlycannot be expected to accomplish the structural transformation of the ruraleconomy. That is not to say, of course, that improvements in arableagriculture are not possible. For example, more research on technicalpackages, specifically adopted to the needs of the smallholder farmer, islikely to have a high payoff. Nevertheless, new employment opportunities willneed to be found if the vast majority of Batswana are to have a significantlyimproved standard of living.

1/ For more information on the economy see World Bank Report No. 3627-BT,Economic Memorandum Botswana, July 21, 1982.

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1.04 For the Government to try and create new employment opportunities,either directly through investment, or indirectly through credit, grants orsupportive infrastructure, it will require more resources. For this tohappen without shrinking the size of the private sector, which the Governmentdoes not wish to do, the economy will have to grow and the Government willhave to tax the growth sector3 (essentially the export industries) which, ifoverdone, of course, could defeat the whole process. 1/ Finding the rightbalance between export growth, taxation and the creation of new industriesthat have relatively large employment multipliers, poses a major challengefor the Government.

B. The Agricultural Sector 2/

1.05 While the country's Land area is relatively large (600,000 km2),most of it is in arid and semi-arid regions that are unsuitable for arableagriculture; about two-thirds of the country's land area is covered by thesavannah grasses and thorn bush of the Kalahari Desert. Consequently, mostof the population of 935,000 has tended to settle on about 10% of the totalland area in the catchment areas of the Limpopo River, along the country'seastern border with Zimbabwe and South Africa. However, even in these moreinhabitable areas, the climatic conditions are not particularly favorable toarable agriculture. Droughts occur regularly, often in succeeding years, andthe average annual rainfall, even in these preferred areas, ranges from onlyabout 350 mm to 550 mm. GiverL the high risks associated with crops, notsurprisingly livestock production accounts for about 80% of the value of theagricultural sector's output.

.1.06 Of the approximately 85,000 total farm families in the country, allbut about 360 are engaged in traditional farming on the country's tribal landof some 37 million ha. Most c,f these families grow crops for subsistence aswell as hold varying numbers of cattle which are grazed communally. However,an estimated 27,000 farm families, or about 32% of the total number oftraditional farm families, do not hold any cattle, even as draft power, anddepend solely on crops for their subsistence. Of the 360 commercial farms onfreehold land, approximately 200 specialize in cattle production, while theremainder raise both crops and cattle, but on most of these mixed farms,cattle production is predominant.

1.07 Some goats and sheep are also held on the tribal lands. Both theseruminants compete with cattle for forage, but their numbers have beensteadily decreasing (by 48% and 65% respectively over the last decade) ascattle have begun to replace them in the farming system, owing to the

1/ The Government's recurrent and capital budgets in 1981/82 (revisedestimates) totaled P211 million and P174 million, respectively. In thesame year, revenues from all taxes (income, goods and services,international trade and property) and from non-tax sources (mineralroyalties and dividends, other property income and interest incometotaled P208 million and P64 million, respectively. For more details,see Tables 5.2, 5.4 and 5.5 of the Economic Memorandum.

2/ For more information on the sector see World Bank, Botswana Agricultural

Sector Memorandum, December 21, 1981.

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latter's greater profitability. In 1981, the goat and sheep populationsstood at approximately 620,000 and 140,000 respectively. With the exceptionof a small and diminishing trade in Karakul sheep pelts, the production ofgoats and sheep is totally for consumption in the rural areas. Also somesmall pig and poultry enterprises serve the main population centers, but asthe bulk of feed rations has to be imported, production is limited tosupplying the urban market.

1.08 The average farm family on tribal land plants up to about 3 ha undersorghum, maize or millet. 1/ Most of these families use oxen for draft powerand yields may be as low as 150 to 200 kg/ha for sorghum, maize and millet ina normal year. It is estimated that only about 20% of the traditional farmfamilies produce enough for their own needs.

1.09 The cattle which are held on the tribal land account for about 2.5million head or about 86% of the total herd of 3 million. However, much ofthe herd, which is held and grazed on tribal land, is actually owned bypeople living outside these areas, either by freehold ranchers or by urbanresidents who depend mainly on other jobs for a living. The freeholdranchers, which own and hold about 0.5 million head of cattle, are known toown and graze large numbers of cattle on tribal land where they operatecattle posts (bore holes at which the watering of cattle takes place).

1.10 The crops which are grown on the commercial farms, while occupyingonly 3% of all land planted in crops in 1980, produced about 15% of the totalfood crops and 68% of the major cash crops grown in the country. Overall,commercial farmers harvest better than 94% of their total planted areas,compared to 75% in the traditional sector, and achieve yields over threetimes that for the traditional farms. The differences in productivitybetween the commercial and traditional crop farmers are largely attributableto the use of better land, irrigation (most of the irrigated farms are foundon an area called the Tuli Block in the vicinity of the Limpopo River) andthe more widespread use of inputs. Even so, yields on the commercial farmsof only 900 kg/ha for maize cannot be considered good. In an average year,Botswana imports about 50% of its total food grain requirements.

1.11 The main constraint on crop production in Botswana is the extremescarcity of water. There are two main sources of surface water in thecountry: the Limpopo River in the east and the Okavango Delta in thenorthwest. The Limpopo, which also runs through South Africa and irrigatesfarmers' fields there, has very limited supplies of water, and, with itspresent irrigation dams, may be close to serving its maximum area. TheOkavango Delta on the other hand, is a natural swamp, with large quantitiesof seasonal water, but it is relatively inacessible. It is malaria andtsetse infested and almost uninhabited. Also, the soils in the vicinity arenot particularly good for crops. 2/ To move water from this low area towhere the population is located in the east, would require pumping it over500 km, straight through the Kalahari Desert. Assuming it were technicallyfeasible, the cost would be extremely high in relation to the alternative ofimporting the relatively small quantity of food grain that such water is

11 Agricultural Statistics (MOA).

2/ Study of the Use, Extraction and Transfer of Okavango Water. SWECO, 1976.

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intended to produce. Also, while ground water in some areas may be tappedfor cattle, the costs of raising and distributing the much larger quantitiesrequired for irrigation, assuming such quantities were available, would beprohibitative in almost all cases. 1/ Thus, there appears to be little, ifany, scope for economically extending irrigation beyond those approximately50 farms in the catchment area of the Limpopo River, which already have it. 2/

1.12 Botswana's natural resource endowment of climate and land clearlyfavor the production of cattle over crops. From a purely efficiency point ofview, therefore, it would be f'ar more economical to specialize in livestockproduction, export the beef and import the food grains. The savings inresources from such specialization would more than cover the costs of theimports. So goes the argument of comparative advantage, and to a largeextent, this is what is happening today.

1.13 The difficulty, however, in relying exclusively on this approach tosatisfy all food requirements in the country, is that there are many ruralfarm families that grow mainly crops, have few if any cattle (except possiblyfor draft power), and are, therefore, heavily dependent on arable agriculturefor their subsistence. More can and should be done to help the smallholdersubsistence farmer. What is lacking are technical packages specificallyadapted to the dry farming conditions of the smallholder. Wnile the ResearchDepartment within MOA has received considerable foreign assistance, mostlyfor specific research projects, there does not appear to be an overallresearch strategy to address this problem.

1.14 To promote crop production in the country, the Government recentlyintroduced its Arable Lands Development Program (ALDEP). It is amulti-faceted program covering all aspects of production (research,extension, credit, input supply, etc.). Interestingly, the credit componentwas recently dropped, adding further support to the argument that the mainproblem at this stage is the lack of technical packages. ALDEP may need tobe redesigned to give this focus.

1.15 Also, it is not clear at this stage in the evolution of theGovernment's policy whether the objective of ALDEP is to achieve total foodself-sufficiency for the country, or to only increase the productivity ofthose farm families that, for the foreseeable future at least, do not reallyhave an alternative. In Botswana, total food self-sufficiency, covering boththe urban and rural populations, is likely to be very costly as well asuneconomical.

II. KNOWLEDGE OF THE LIVESTOCK SUBSECTOR

2.01 Like most significant activities in Botswana, the livestocksubsector has been the subject of numerous technical, economic, andsociological studies. The universities and research foundations, mainly inthe United States, Britain, and the Scandinavian countries, have been

1/ Wikner, "Sand Rivers of Botswana", 1980.

2/ Irrigation Potential of Soils in Eastern Botswana, ODA, 1976.

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particularly active in Botswana in conducting research and producingpost-graduate degrees. The bilateral aid agencies have also contributed tothe long list of studies.

2.02 In addition, Botswana collects good statistics in most fields,including livestock, and has been doing so for some years. The large amountof research that has been carried out has both contributed to, and benefitedfrom, this large data base.

2.03 In some respects, one could conclude that Botswana is a countrywhich is over-studied. The number of scholarly reports issued by the variousministries and the Government Printing Office on various technical subjectsprobably exceeds that of most developing countries, including those at a muchhigher level of development.

2.04 Yet, some persistent gaps in knowledge remain. These gaps tend tobe in the areas of policy formulation and implementation, including, forexample, the distribution of cattle ownership, the incidence of differentkinds of taxation in the cattle industry and their impact on incentives,methods by which to raise government revenue in the cattle industry, theimplementation of the Government's Tribal Grazing Lands Policy, and potentialexport markets.

2.05 The lack of policy orientation in much of the research that has beencarried out to date, is probably mainly explained by the fact that most ofthis research has been initiated by the researchers themselves who have quitedifferent objectives from those of the country's policy makers. While thegenerally good knowledge of Botswana, including the livestock subsector, isdue in large part to such externally-initiated research, the time is longoverdue to have Botswana's study needs represented. The recently completedGovernment-initiated Presidential Commission on Economic Opportunities was alarge step in the right direction. 1/ This joint Government-World BankSubsector Report is intended to be similarly policy-oriented.

III. SUBSECTOR SUIMHARY

A. Introduction

3.01 Botswana is, in many respects, a cattle country: its extremely aridclimate is suited for growing little else; there are more than three times asmany cattle as there are people; and many Batswana either own or hold somecattle. Even urban residents, including civil servants, from clerks tosenior officials, own cattle which are held and managed mostly by paidherdsmen or relatives on the tribal lands.

3.02 The very direct personal financial interest of many Governmentofficials in the welfare of the industry has probably produced both good andbad effects. While it probably has kept direct government intervention inthe industry to a minimum, especially in the field of livestock marketing,where private buyers, agents, traders and cooperatives operate freely and

1/ Report of the Presidential Commission on Economic Opportunities, May 1982.

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provide relatively efficient services, it also probably explains why theindustry does not contribute to producing a fiscal surplus for theGovernment, and, in fact, takes more in public expenditures than it returnsin taxes and other payments.

3.03 For almost the last fifteen years, meat exports which serve as theengine for growth in the cattle industry, have fluctuated around thecountry's constant abattoir capacity, dropping below this level in some yearsbecause of foot and mouth disease (F1D), 1/ and rising above it in droughtyears as capacity has been pressed beyond its design limits. From at leastthe mid-1970's, with the exception of those years in which FMD was a problem,the main constraint on export growth appears to have been, and continues tobe, limited abattoir capacity.

3.04 Despite the relative constancy of export volumes, income in theindustry has continued to rise as meat prices during the last ten yearsincreased by over 150%, keeping slightly ahead of the rate of inflation. Thereal returns to cattle producers increased, leaving the large owner betteroff, but the rural economy essentially unchanged. The latter effect probablycould have been expected in view of the fairly skewed distribution of cattleownership and the fact that the employment multipliers for this industry arerelatively small.

3.05 During the same period, the herd grew at an average rate of about3.5% per annum, exerting considerable pressure on the land, especially on thetribal lands, where communal grazing is practiced. 2/ The seriousness ofthis situation has only recently begun to be appreciated. Just a few yearsago, the popular view held that Botswana still had large amounts of unusedgrazing land. In fact, there are few remaining areas in the country todaywhich do not carry cattle and many of these areas will soon be reaching theirmaximum sustainable capacity. Thus, future export growth, if it is to beachieved, will have to come primarily from increased offtake, and not fromthe growth of the herd.

B. Cattle Production 3/

3.06 There are two major cattle productions systems in Botswana. One ispracticed on freehold land, where less than 1% of the farmers produce cattleon ranches enclosed by fencing. These freehold ranches comprise about 3.3

1/ The last outbreak of FMD was in 1979/80 in Ngamiland. The main sourcesof the disease are cross-border cattle movements from Zimbabwe andcontact with indigenous wild buffalos. In general, the Department ofAnimal Health (DAH) maintains a good disease prevention program, butshould an outbreak occur, DAH has the capacity to respond quickly andeffectively. For more details see Annex 5.

2/ Some of the most heavily grazed communal areas are in the Bobwira andTutume districts where soil erosion and bush encrochment are very evidentand where livestock numbers have been decreasing for the last five years.

3/ For more details see Annex 2.

million ha or about 8% of the total grazing land of 40 million ha. Theaverage cattle ranch has about 10,000 ha and about 1200 head of cattle. Theother system is characterized by the communal grazing of cattle on some 37million ha of tribal land, comprising about 92% of the total grazing land.The average size of a cattle herd under this system is about 40 head, but thedistribution is fairly skewed, with more than 50% of this herd being held byabout 10% of the farmers.

3.07 In 1975, the Government instituted its Tribal Grazing Lands Policy(TGLP), a program aimed at changing the traditional system of land tenure inthe tribal grazing areas. 1/ Under this program leasehold ranches were to beestablished within the tribal lands, while reserving the land "around thevillages" for communal grazing to ensure that "every tribesman has as muchland as he needs to sustain himself and his family". Thus, the intention wasto replace comm.unal grazing with leasehold ranching except in those areaswhich were needed to maintain the small subsistence farmer. On the ranches,which would be fenced, exclusive rights to the use of the land by individualsor groups of individuals forming syndicates, would be recognized. Preferencewas to be given to groups in the allocation of ranches and in the provisionof extension service.

3.08 Policy makers viewed TGLP as a major land reform program which woulditchange the Botswana way of life" and "affect directly or indirectlyvirtually every Batswana." 2/ Such changes were seen as desirable. Inaddition, TGLP was expected to reduce the gap between rich and poor which wasseen as growing larger under the present system in which more and moregrazing land would be taken up by the few large cattle owners who couldafford to drill boreholes and establish new cattle posts. TGLP was seen as away for the Government to administer a more equitable distribution of thecountry's land resources by providing the less wealthy, but aspiring farmers,with the opportunity to become commercial ranchers.

3.09 Since its inception, however, the thrust of the program has departedconsiderably from the original design of providing something for all users ofthe tribal lands; namely, fenced-in ranches for the commercial producers ofall sizes, and access to communal grazing for the subsistence producers.Now, the emphasis appears to be completely reversed, and aimed at leavingmost of the tribal land under traditional tenure, while establishing someranches, depending on the amount of land that is made available for thispurpose by the local land boards. Consequently, this program is nowpopularly perceived as benefitting a relatively small number of producers,fortunate enough to receive the few leases, who, some would further argue,are the relatively wealthy.

1/ Government paper No. 2 of 1975, National Policy on Tribal Grazing Land,July 1975, Gaborone, Republic of Botswana.

2/ Ibid., pg. 1. A program of such far-reaching land tenure reform isunique in Africa where the experience has been confined essentially topilot schemes and/or parastatal experiments. Botswana is probably thefirst African country to have embarked on a nation-wide program tolargely replace the traditional communal grazing system with privateranching.

3.10 As most users of the tribal lands have not been brought into theprogram, as originally intencded, broad-based support for it, especially atthe important local level, has not developed. Lacking such support, theprogram has proceeded very slowly. To date only 307 ranches have beendemarcated. 1/ Of these, on]y 148 have been allocated by the local landboards to interested applicants (about 25% of whom are organized intosyndicates or other group associations), of which only 100 (as of May 1983)have actually signed leases with the land boards. 2/ For all practicalpurposes, therefore, land ter.ure has not changed very much.

3.11 The total herd size stands at about three million head, with about500,000 cattle on the freehold ranches, and the remaining 2.5 million cattleheld on the tribal lands. Of the freehold herd, about 50% is concentrated inthe Western Region, another 25% in the Francistown Region, and the balance isdistributed among the other regions, except for Ngamiland where there are nofreehold ranches.

3.12 The regional distribution of the communally grazed herd has beenchanging. Until the mid-1960's, the main cattle concentrations were foundclose to areas which either had access to permanent water or could beserviced with hand dug wells and shallow boreholes. However, with the spreadof deep boreholes, previously ungrazed areas were opened up for livestock andsignificant increases in cattle populations occurred in regions west of theline of rail. Much of this land is designated sandveld, and, while providingexcellent grazing, its capacity to recover from heavy grazing pressure isinferior to those hardveld areas in the east. The largest concentration ofthe communally grazed herd is presently found in the Central Region (36%),followed by the Francistown Region (14%), the Gaborone Region (13%), theSouthern Region (13%), the Maun Region (12%), and the Western Region (12%).

3.13 Based on who sells cattle to the abattoir, the offtake among the twoproduction systems is estimated at 17% for the freehold ranches, and about 6%for the traditional farmers. However, these figures can be misleading sincetraditional farmers do sell some of their cattle to freehold ranchers, who inturn either fatten them or sell them directly to the abattoir. Therefore, itis virtually impossible to accurately determine the offtake rates for thefreehold and traditional sectors separately based only on the identificationof the supplier to the abattoir. Nevertheless, even if one were to adjustfor such direct transfers, the difference in offtake between the twoproduction systems is likely to remain substantial.

3.14 The offtake from the national herd can also be divided between localconsumption and export. The offtake for export is relatively easy tomeasure, since all exported beef has to date been processed through the

1/ These ranches are in two maain areas: in Ngamiland where the averageranch size is about 5,000 ha, and in the two adjacent districts ofNgwaketse and Kweneng, where the average ranch size is about 6,400 ha.

2/ The leases are signed for a period of 50 years, with an option to renewfor another 50 years, but can be sold at market value at any time,subject to the approval of the land boards. The members of the landboards are appointed by the central Government. Rent on the leasehold

ranches is currently charged by the land boards at the nominal price ofP0.04/ha/annum.

Lobatse abattoir. That offtake is presently estimated at about 8%. Localconsumption offtake, however, is more difficult to measure but variousestimates put it at anywhere between 55,000 and 90,000 animals per year(approximately 10 kg to 17 kg per capita) or about 2-3% of the nationalherd. 1/

C. Cattle Marketing 2/

3.15 Most cactle sellers have access to a fairly well developed andefficient market. If a farmer wishes to sell cattle he has a basic choicebetween selling to the Botswana Meat Commission (BMC) and receiving paymentafter the cattle are slaughtered, or selling for immediate full cashpayment. If he wishes to sell to the BMC, then he will normally be able tochoose between selling through his local marketing cooperative, through anagent, or directly to the BMC. The institutions which provide theopportunity for cash sale are individual buyers or butchers, a regular weeklyvillage market day or monthly auction sale and, in some regions, the BotswanaLivestock Development Corporation (BLDC).3/ In the east, and close to theline of rail, most farmers have access to a reasonable number of theseselling options; as one moves west, however, the options narrow and in someareas there may in fact be no choice - only a single cash buyer.

3.16 In 1982, the agents accounted for about 65% of the total sales toBMC, while the cooperatives accounted for about 20%. The remaining 15% wasaccounted for by direct sales. Because abattoir capacity is rationed by BMCthrough its quota system (para 3.24), these market shares reflect more on thegood or bad fortunes of the applicants in obtaining a quota than they do onthe relative competitiveness of agents and cooperatives. The realcompetitive test will come when there is some excess abattoir capacity in thesystem.

3.17 At present, Government regulation requires that agent commissionsnot exceed 2.5% of the gross slaughter value of the animal, whilecooperatives are permitted to charge their members 5.0%. Despite thisdifferential, however, most cooperatives are unable to offer their membersany advance payment for their cattle, which the agents because of theirstronger financial position, are able and willing to do for selectedcustomers. Part of the explanation, at least, lies in the limited trainingand experience of many cooperative managers. The cooperative movement, whosemembership has grown considerably over the last several years, whilemaintaining its grass roots character and relative independence from theGovernment, is now threatened by a serious shortage of skilled andexperienced managers.

3.18 Between about 65 and 70% of the cattle delivered to the Lobatseabattoir come by rail. There is a single railway line, which is owned andoperated by the National Railways of Zimbabwe (NRZ), extending from Zimbabwe

1/ The range of this estimate arises from the uncertainty of actual homeslaughtering.

2/ For more details see Annexes 6 and 7.

3/ BLDC was established as a buyer of last resort in the more remote areas.

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in the north, through eastern Botswana, and connecting with the South AfricaRailways (SAR). In Botswana there are sixteen railway stations where cattlecan be loaded for movement to Lobatse. Under the second Bank-assistedlivestock project (Ln. 1497BT), the facilities at most of the loading pointswere improved and are now adequate. The rolling stock that NRZ allocates tothe Botswana livestock traffic (100-110 wagons) is just about adequate tomeet requiremnents (about 50 wagons/day) when Lobatse operates at maximumcapacity. Eventually, but the date has not yet been set, Botswana isexpected to take over the operation of the railway.

3.19 The second most important mode of transport for delivering cattle tothe Lobatse abattoir is trekking. From 20 to 25% of the cattle arrive bythis means. These cattle come from the southern and western parts of thecountry. However, while only between 20 and 25% of the cattle are trekkeddirectly to BMC, most cattle, in fact, have to be trekked for some part oftheir journey to BMC - normally to a railway station. There is, therefore, alarge-scale general movement of cattle by trek from areas to the east andwest of the railway line, the rail trip often being the final leg of asometimes very long journey.

3.20 Several major trek rDutes have been developed and the Government,through the Department of Animal Health (DAH) within MOA, which has overallresponsibility for the program, and the Department of Water Affairs, which isresponsible for the boreholes, maintains several of these by providingwatering points and kraals at regular intervals. Still, however, there aresome major gaps in the trek route system, particularly between some of themore remote tribal land areas and the abattoirs and the line of rail. Inaddition, there is the risk of losing some of the existing trek routes toencroachment as the trek route boundaries are not marked for identificationand disputes with local inhabitants often arise.

3.21 Truck transport accounts for the smallest proportion of the cattlearriving at Lobatse - about 12%, which has remained fairly constant over thelast decade. Unsealed roads, long-distances, and consequent high vehicleoperating costs have limited l-he growth of this transport. The two principaltruck routes are between Lobal:se and Ghanzi and between Lobatse and theMolopo farms. 1/ In addition., cattle are trucked from the MakalambediQuarantine Camp in Ngamiland to the Francistown railway station.

3.22 Future growth in cattle movement is unlikely to exert additionalpressure on the existing heav;ily used transport facilities such as rail, ifnew abattoir capacity is provided in the north, as proposed, in closerproximity to the herd. In fact, to the extent that such additional capacityallows Lobatse to operate at levels not exceeding its optimum throughput, thepressure on the railway is likely to abate somewhat. However, the provisionof capacity in the north can be expected to create its own new transportrequirements, especially for t:he shipment of refrigerated beef throughBotswana to destinations south.

1/ ilostly freehold farmers ut:ilize this transport. A preliminary studycarried out in 1970 indicated that although the weight loss for trekkingwas no greater than for road transport, the former frequently involved a

grade loss. But this result is far from conclusive. Other studies haveshown larger weight losses for trekking.

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D. Cattle Processing

3.23 Until this year, the abattoir at Lobatse in the southeast was theonly large-scale export abattoir in the country. Although this plant'sdesign capacity has been estimated at 190,000 head/annum 1/, since themid-1970s it has been operating well above this level. In 1982, which was adrought year, throughput at Lobatse reached a record 240,000 head, pushingaverage processing costs up and seriously risking the condition and life ofthe equipment. In March 1983, the country's second major and much smallerabattoir at Maun in the north, came on stream, with an annual slaughercapacity of about 20,000 head. The Botswana Meat Commission (BMC), astatutory parastatal, with exclusive export rights, owns and operates boththe Lobatse and Maun abattoirs.

3.24 In order to ensure that cattle can be processed quickly once theyarrive at an abattoir, it is quite common practice in many countries forabattoirs to issue quotas to their suppliers, indicating when the cattleshould be delivered. This system works fairly well when there is sufficientoverall peak-period capacity, but when there is a severe shortage, as hasbeen the case in Botswana for the last several years, the receipt of a quotadetermines not just the delivery time, but also whether a supplier will beable to sell at all. 2/ Not surprisingly, under these circumstances, thereis much dissatisfaction with BMC's quota system.

3.25 In 1982, BMC introduced peak/off-peak pricing in an effort to spreadthe peak over a larger part of the year (The peak-period generally runs fromFebruary to August). This was a move in the right direction, but thedifferentials will probably have to be increased if this scheme is to beeffective.

3.26 Generally, BMC's pricing policy for Lobatse is economicallyefficient. To arrive at the Lobatse gate price, BMC deducts from its finalmarket (i.e., export) price all the costs associated with slaughtering anddelivering the meat products to the final market. An adjustment is also madeto account for differences in grade and, as mentioned, peak/off-peak pricingwas recently introduced. In 1982, the average produce price at Lobotse wasP250 per animal. Perhaps, the one fault in this system is that BMC,consistent with its own charter, does not deduct enough to cover an adequatereturn on invested capital, which probably partially explains by BMC has nottaken the initiative to expand abattoir capacity. In setting gate prices atthe newly established plant at Maun, however, BMC, apparently in an effort toreduce the price differential between Lobatse and Maun, has departed fromefficiency pricing by keeping the Maun price artificially high and therebyintroducing an element of inter-plant cross-subsidization.

1/ ANZDEC, Feasibility on the Expansion of Livestock Slaughtering Capacityin Botswana, March 1983.

2/ While a very small number of live slaughter cattle do manage to enterSouth Africa illegally, a general health prohibition on such imports,which is strictly enforced by South Africa, prevents any significantmovement across the border in search of abattoir capacity.

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3.27 A consulting firm, Auackland New Zealand Development Company(ANZDEC), was recently engaged by BMC to consider the feasibility ofexpanding abattoir capacity. Their final report, which was issued in March1983, recommended building a new abattoir in Francistown with a throughputcapacity of 88,000 cattle/annum.

E. Final Markets

3.28 In order to serve thes domestic market, about 35,000 cattle areslaughtered annually in local abattoirs, and it is estimated that another 22to 55,000 head are slaughtered on farms. In some exceptional years (e.g., in1980 when FMD prevented BMC from exporting all its throughput to its overseasmarkets), BMC also sold large quantities of beef on the domestic market.

3.29 By far the most important market for Botswana is the export market,which, on average, accounts for about 80% of the total cattle slaughteredannually in the country. Botswanats largest export market is the EEC whichin 1982 accounted for 65% of Lhe country's total boneless beef exports.South Africa, in the same year, accounted for another 20% of the bonelessbeef exports and 90% of the carcass exports. Other smaller export marketsinclude Angola and Hong Kong and, more recently, Mozambique. Since theoutbreak of FMD in 1977, EEC has restricted the import of beef from Ngamilandcattle.

3.30 As part of the African, Caribbean and Pacific (ACP) group ofcountries, Botswana has preferential access to the EEC under terms laid downin the Lome II agreement, signed on March 1, 1980 for a period of fiveyears. Under this agreement, Botswana can export to EEC up to 18,916 tons ofboneless beef without paying any customs duty and paying only 10% of avariable levy. In 1982, Botswana exported only about 11,000 tons to EEC. 1/Botswana can also export beyond its quota up to a total limit determined byapplying a 7% annual growth factor to the annual average of what was exportedto EEC over the period 1969-74. This upper limit works out to 30,000 tons in1983. However, on amounts above 18,916 tons, the total variable levy wouldbe charged, although Botswana would still be exempt from paying the customsduty. In addition, Botswana can apply annually for the use of any exportquotas that other participating countries (Kenya, Madagascar, Swaziland andZimbabwe) have been unable to fulfill. To date these other countries, whichhave a combined quota of about: 19,000 tons, have never been able to fill morethan about 30% of their quotas. Thus, there is considerable scope forBotswana to increase its sales to the EEC market even under presentagreements.

3.31 To manage its overseas marketing operation, BMC maintains an officeand a 7,300 ton cold storage facility in the U.K. In addition, BMC has

1/ This shortfall occurred despite the fact that the Lobatse abattoir wasoperating at maximum capacity (para. 3.23), essentially because the beeffrom Ngamiland cattle, which accounted for a large proportion of theabattoir's output, had to be exported elsewhere (principally toBotswana's second highest priced market, South Africa) due to EEC

restrictions on Ngamiland cattle even though there has been no outbreakof FMD since 1980.

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preferential use of 10,000 tons of cold storage space at Cape Town from whereits exports are loaded into containers and shipped to overseas markets.

IV. MAIN ISSUES AND RECOMMENDATIONS

A. Development Strategy for the Livestock Industry

4.01 In deriving a strategy for the development of the livestock industryin Botswana, the following critical factors need to be taken into account:

(a) the freehold ranchers are about twice as productive as thetraditional cattle producers both in terms of offtake rates andofftake per hectare. Although the data is not available to comparerelative efficiency as measured by input costs per unit of offtake;

(b) because traditional producers, which graze cattle communally, do notdirectly perceive the costs from using the land, they tend tooverstock, resulting in the serious degradation of the land whichhas already begun to threaten the long term potential growth of theindustry; and

(c) the employment-multipliers from livestock production are relativelysmall even under the more labor intensive traditional system wherefrom 35 to 50 cattle are managed by only one herdsmen.

4.02 These factors suggest that to try and raise incomes for the majorityof rural inhabitants directly through the cattle industry by promoting themore widespread ownership of cattle would very likely reduce the productivecapacity of the industry, further limit the industry's long term growthprospects, and, in any case, be relatively ineffective in generating newemployment opportunities. The Presidential Commission on EconomicOpportunities rejects this strategy on the grounds that "it would lead to aloss of economic efficiency and a weaker industry". 1/

4.03 In view of the above, it is recommended that the Government promotethe commercialization of the industry in order to achieve the maximumsustainable income growth possible and thereby capitalize on the industry'scomparative advantage, while simultaneously taxing the industry to the limitbefore disincentive effects set in, in order to raise government revenue forthe purpose of stimulating new economic activities and employmentopportunities in the rest of the economy. For this strategy to achieve itsintended objective (as opposed to just income growth), the taxation component(paras. 4.05-4.11) and subsequent reinvestment in new-economic activities areessential.

4.04 The most direct instrument of policy for promoting the commer-cialization of the industry is the Tribal Grazing Lands Policy (TGLP), as

1/ Report of the Presidential Commission on Economic Opportunities, May,1982, p. 41.

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originally conveived as a comprehensive program of land tenure reform in thetribal lands (para. 3.07). Unfortunately the program has departed from theoriginal TGLP concept and what is being implemented now is proceeding veryslowly (para. 3.10). Tne program needs to be put back on the right track andgiven more vigorous support by the central Government (paras. 4.24, 4.26 and4.27).

B. Fiscal Drain or Surplus

4.05 Based on the Government's receipts from, and expenditure in, thelivestock industry over the period 1978-1982, it is estimated that thelivestock industry causes the Government an average annual net loss of aboutP6.0 million. 1/ While one may wish to further refine this estimate, suchefforts are unlikely to produce significantly different results. Theconclusion remains that the livestock industry has been, and continues to be,a fiscal drain on the Government despite whatever other contributions it maymake to the economy.

4.06 If the recommended desvelopment strategy for the industry (paras.4.01-4.04) is to be achieved, it will be necessary to convert this fiscaldeficit into a fairly substantial surplus. To accomplish this result willrequire some major changes both in tax and pricing policies. At presentlivestock ranching enterprises and individuals pay income taxes which amountto a total of about P1.4 million. In addition, most livestock services(particularly those provided by the Department of Animal Health) are providedfree, and some inputs (e.g., bonemeal) are sold substantially below exportparity value. The justification for such low taxes and subsidies is indeedquestionable.

4.07 The main problem associated with using the income tax to raiseGovernment revenue is that data on cattle ownership is not collected by theGovernment. Some years ago MOA gave up trying to obtain estimates of herdsize from data on cattle ownership essentially because of the generaltendency to under-report ownership in order to avoid paying taxes.Consequently, cattle holding clata, which is considered fairly reliable, isused instead to estimate herd size. In fact, it is common knowledge that asignificant proportion of the herd being held on tribal land is actuallyowned by freehold ranchers. 2/ In addition, many urban residents own cattle

1/ Under Lome II, Botswana pays only 10% of the EEC's variable beef levy.The Government has chosen to initially tax the 90% discount by having BICwithhold this amount from the producer price and then return it to theproducer as a bonus sometime later during the year. In estimating thefiscal drain, this rebate, which reached P32 million in 1982, was simplyregarded as part of a higher producer price and not counted as agovernment expenditure.

2/ Although no data is available, the study team judges that as much as 30%of the traditional herd might be owned by freehold ranchers.

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which are also held and grazed on tribal land. The extent of this type ofabsentee urban ownership is not accurately recorded anywhere but couldaccount for as much as 25% of the herd on the tribal land. Even among theresident owners of cattle on the tribal lands, there is the practice (mafisa)of having others, quite often a relative, hold and graze their cattle. Inshort, ownership of cattle in Botswana is extremely difficult to determineand attempts to increase the income taxes of cattle owners either byincreasing tax rates or raising standard values, without at the same timeimproving the basis for recording ownership, is likely to lead only to moreunder-reporting.

4.08 In view, therefore, of the difficulties associated with trying toraise a large amount of additional revenue from the income tax, it isrecommended that primary reliance be placed instead on a sales tax at theslaughter facility. At the same time, however, it is recommended thatefforts be made to establish a reliable system for regularly recording cattleownership. If the establishment of this system proves successful, thenreliance could be shifted from the sales tax to the income tax. In themeantime, however, and, at least during the next several years, aprogessively increasing slaughter sales tax should be introducedat all (export and local) abattoir facilities. It has been estimated thatsuch a tax, if levied at an initial 7% and increased by 1% annually to 12%,would in six years, create an annual surplus of P12 million. Whatever theexact level chosen, it is clear that a substantial revenue generation ispossible and will be needed simultaneously to Government's pursuing theneeded investments and service improvements in the sector and other economicgrowth objectives in Botswana.

4.09 In addition, the supply of livestock inputs such as bonemeal at lessthan export value constitutes a subsidy to the largest producers who couldeasily afford to pay the full opportunity cost. Eliminating this subsidy andintroducing user charges for the provision of trekking services (para 4.40)would produce additional revenue. 1/

4.10 Allowing for all of the above tax increases and price policy changesand projecting government expenditures in the livestock sector over the nextseveral years, produces a net fiscal surplus for the first time in 1987 ofP10.0 million, rising to almost P17.0 million in 1990 (Annex 1).

4.11 It should also be noted that for a large number of those urbanresidents who own cattle, such ownership, to the extent that it is reported,serves as a very effective means by which to avoid paying taxes on theirprincipal income. Almost invariably such individuals are reporting a bookloss against these side-line ranching investments which enables them todeduct sizeable amounts from their main taxable income. It is recommendedtherefore, that the tax law be changed to allow only those whose main sourceof income is farming, to deduct farming losses for tax purposes.

1/ The subsidy on bonemeal is estimated at P 500,000 at present. The netrevenue to be obtained from charging for trek services still needs to beestimated. DAH's accounting system does not allow one to readilyidentify the costs of its different activities.

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C. The Small Cattle Owner

4.12 There is no general concensus as to where the dividing line isbetween large and small owners of cattle. The Rural Income DistributionSurvey (RIDS) of 1974/75 divided the herd into two parts - a subsistence herdand a commercial herd, with the threshold between the two being roughly 40'nead. 1/ Herds smaller than this, were believed to be maintained as asource of draft power, a store of wealth, and as a contingency againstunforeseen cash needs, and herds above this size were thought to be largeenough to be operated on a commercial basis, providing an annual cash incomefor the owners. Unfortunately, even if one were to accept this definition oflarge and small owners, which seems reasonable, it is not possible toprecisely determine how many owners of cattle fall into these two categories,since the data that is collected relates herd size to cattle holdings and notto ownership which is quite different (para. 4.07).

4.13 Many studies, including those from the Bank, have mistakenly drawnerroneous conclusions regarding ownership from holdings data. For example,in 1980, some 42,000 households out of a total of 58,000 households held lessthan 40 head of cattle. From holdings data of this kind, it is often claimedthat the small subsistence owner comprises the vast majority of the totalcattle producing households. However, many, in fact probably the majority,of these smallholders are onl caretakers of someone else's cattle, while,perhaps, holding a few cattle of their own. One important conclusion whichemerges from this distinction is that it is probably incorrect to assume thatmost smallholders are not governed by commercial interests since many ofthese smallholders are, in fact, accountable to commercially-minded owners.

4.14 For the actual small resident-owner of cattle with less than 40head, who may account for not more than about 35% of the total cattleproducing households and aboul: 10% of the total national herd, it is probablycorrect to assume that his behavior is essentially described by the RIDSdefinition. His offtake is mainly determined by such non-regular cashrequirements as school fees, celebrations, etc., and until the economic basein the rural areas is made substantially stronger and more diversified thanit is today, any attempts to change his behavior are not likely to have anappreciable effect in aggregate. Furthermore, attempts to gear policyspecifically towards this relatively small group would be difficult tojustify on equity grounds and could possibly retard the growth of thecommercially oriented producers. For example, to increase offtake one couldargue that this could be accomplished by lowering producer prices, sincesubsistence producers would have to sell more cattle than they wouldordinarily wish to in order to maintain their income. While this policymight induce some subsistence producers to sell an additional animal duringthe year, the effect on commercial producers, big and small, would be tolower profits and, hence, reduce the incentive to produce and supply cattleto the abattoir.

4.15 Beyond ensuring that subsistence producers have enough communalgrazing land around their villages to meet their customary needs and those oftheir families, as recommended under TGLP (para 3.07), and receive adequate

1/ The Rural Income Distribution Survey in Botswana, 1974/75, CentralStatistics Office (CSO), Gabarone, 1976.

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veterinary services, there appear to be few livestock-related measures thatcould be taken for this particular sub-set of producers that would be botheffective and beneficial to the economy as a whole. On the other hand,public policy has a potentially major role to play with regard to thecommercial producers, both large and small, which account for at least 90% ofthe national herd and the majority of the cattle producers. Thedistributional impact of the total program of recommendations is assessed inparas 6.33-6.35.

D. Carrying Capacity of the Land

4.16 The long term maximum sustainable carrying capacity of the land, asmeasured by the number of hectares per animal unit, is estimated at about9 ha for the Southern Region, 14 ha for the Gaborone Region, 11 ha for theCentral Region, 37 ha for the Francistown Region, 29 ha for the Maun Regionand 16.0 ha for the Western Region. 1/ Actual stocking rates have alreadyreached the estimated optimum capacity in the Gaborone Region and, within afew years, given present growth rates, all the other regions, with theexception of the Western Region and a few districts in the western parts ofthe Central and Southern Regions, will have reached their estimatedsustainable levels. It is estimated that at most an additional 290,000 headof cattle could be carried in those as yet underpopulated western areas.Thus, the maximum sustainable national herd size is only about 3.3 millionhead.

4.17 The question which arises is whether the industry is going todevelop in such a way that this limit is maintained over time in a stablemanner and, perhaps, expanded slightly with better management practices, orwhether herd growth is going to be characterized by a downward spiralingratchet effect. Under the latter, the herd grows, the land becomesoverstocked, the number of deaths increase, growth rates decline, the cattleto land resource ratios become favorable again, the herd increases and thecycle is repeated; however, always returning at the end of each cycle to aprogressively lower carrying capacity as the recuperative qualities of theland are diminished from this essentially destructive process. In fact,evidence from the number of cattle deaths in recent years would suggest thatthis cycle has already begun in some areas.

4.18 Realistically, there is probably little that Botswana can do tocompletely avoid the negative ratchet effect that is likely to take hold inthe next several years if it has not already begun. Because the problemessentially arises from the communal grazing system, in which land is treatedas though it were a free resource, this problem is not likely to disappearuntil the dominant land use system changes from communal to demarcated(including group) ranching. Nevertheless, the force of this effect can bemoderated and the long-term sustainable carrying capacity of the landstabilized within the medium-term if steps are taken now to implement TGLP asoriginally conceived (paras. 4.19-4.27).

l/ Study team estimates derived from research conducted by the AnimalProduction Research Unit (APRU). Seen Annex 3.

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E. Tribal Grazing Lands Policy (TGLP)

4.19 The main issue associated with TGLP is that the program seems tohave shifted (if not by explicit intent, at least in practice) from theoriginal policy, which was to address the needs of all tribal land users in acomprehensive manner by creating ranches for all commercial cattle producersnow using the tribal lands and reserving the communal grazing land around thevillages for the subsistence producers (para. 3.07). In dealing so far withonly a small fraction of the users of the tribal lands, the program has beenunable to garner broad-based local support, and, consequently, progress hasbeen slow.

4.20 The ranch component of the program is still regarded by many in theGovernment as important, as, in fact, it is still Government policy.Nevertheless, most acknowledge that the program is unlikely to attain a scalein the foreseeable furture that is large enough to have a significant impacton range management. There appears to be a general resignation in theGovernment to continue the program along present lines and realisticallyaccept a slow rate of progress. However, there are those who feel that TGLPshould now focus less on ranch development and more on improving rangemanagement practices under the traditional land tenure system. Exactly howthis would be accomplished, however, without resorting to externally imposedcontrols and regulations, whizh have not worked elsewhere, is not known.

4.21 The study team recommends that, instead of proceeding with TGLPalong the same lines as has been tried for the last eight years with onlyslow progress, or completely zhanging the emphasis to try and make theexisting traditional system work better, the Government should return to itsoriginal TGLP concept of creating ranches for all commercial producers nowusing the tribal lands, while retaining adequate grazing land around thevillages for the substence producers. Thus, all the producers would beconsidered under the program, and at the same time, while promoting ranchingunder TGLP for commercial producers, the incentives for the same commercialproducers to invest in the communal grazing areas (e.g., NDB's program ofproviding credit to such producers to buy breeding cattle) need to bewithdrawn.

4.22 To illustrate the feasibility of such a program, the study team hasworked out one of many possibLe TGLP development scenarios that would beconsistent with the original policy. To derive such a scenario, first it ishelpful to know the minimum economic scale of a ranch in typical Botswanaconditions. Based on the ranch budget analysis that has been carried out(para. 4.23), the minimum sca:Le appears to be around 360 AUs or about 500head of cattle. This works out to a ranch size of between 4,500 and 6,000ha, depending on the carrying capacity of the land. Below this scale ofoperation, net operating income dips to a level which is probably too low tointerest prospective ranchers. This implies that those commercial producerswith less than 500 head would probably be well advised to organize themselvesinto syndicate or other group-type ranches, while those with more than thisminimum number should consider operating their own individual ranches.Assuming that this is what actually happens, and using cattle holdings data(since the preferred data on cattle ownership is not available), thefollowing distribution of lancd use within the tribal areas is obtained:

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No. of Households No. of Cattle Grazing Land(000) (ha million)

Communal Grazing

Subsistence Producers a/ 42,100 724 11.6

Leasehold RanchesGroup Ranches

5-12 families b/ 10,300 638 10.43-5 families c/ 2,900 358 5.6

Individual and group 2,400 775 12.4ranches of 2-3 families d/

57,700 2,495 40.0

a/ Those holding 40 head or less. This figure is probably an overestimateof the number of subsistence producers since many of these are holdingcattle for other commercial producers.

b/ Those holding more than 40 and less than 100 head.

c/ Those holding more than 100 and less than 150 head.

d/ Tnose with 150 head or more. The data is not disaggregated above 150head to allow one to show the individual and group ranches separately.

4.23 The financial rate of return analysis (ratio of annual net operatingincome to invested capital) shows that when the minimum ranch size isachieved the rate of return at full development reaches 6%. This returncompares favorably with that estimated to be presently obtained on thefreehold ranches (6.5%). The freehold ranchers appear to be quite satisfiedwith a return on assets of this magnitude, especially in view of the factthat over the last decade the value of such assets has been increasing atrates slightly faster than the rate of inflation. In fact there are probablyvery few investments in Botswana today which could yield comparably highreturns while providing a satisfactory income and hedge against inflation.The annual cash flow for these ranches, the annual net income and the ratesof return are presented in Annex 4.

4.24 To get a program as described above implemented will require arenewed and concerted commitment to TGLP. It is recommended that the centralGovernment, through the Ministry of Local Government and Lands, assume a muchgreater share of the direct responsibility for the implementation of TGLPthan it has to date. In particular, the central Government should determinenow what land would be reserved for ranches and for communal grazing. Thisparticular action needs to be taken in one major step. The land boards couldpresumably still decide who receives the leases, and under what conditions,as well as do the actual leasing and collection of the rent. However, thepresent nominal TGLP land rental rates should be brought into alignment withmarket values. 1/

1/ The financial rate of return analysis that has been carried out (para4.23) already takes into account the present market values for land.

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4.25 With regard to the actual demarcation, allocation and leasing ofranches, the initial thrust will also need to be large to ensure that acritical mass is achieved early to avoid any posible spillovers to communalgrazing. 1/ A goal of leasing enough land by 1990 to supply at leastone-fourth of the commercial producers in the tribal lands (almost 4,000families) with individual and group ranches seems reasonable. Localpolitical,support from the land boards should emerge once it is recognizedthat the coverage of the program is comprehensive as recommended.

4.26 The central Government should also provide additional extensionassistance to help organize syndicate and other group ranches. The successof these ventures will depend critically on the quality of the management.The Ranch Management Training Center at Ramatlabama, initiated under thesecond livestock project (Ln 1497-BT), is presently capable of trainingapproximately 40 ranch managers a year and should be able to meet this need.In addition, the central Government will need to provide guidance to landboards in regard to issues of national significance. For example, recentlyin two long awaited decisions, the central Government maintained that (1) theleasee is responsible for compensating any displaced former occupants of theland and (2) individuals would not be allowed to hold more than two leaseholdranches. Other directives, particularly in regard to eligibility, need to begiven as well as further clarification on some of the existing decisions(e.g., the level or adequacy of compensation) for displaced residents. Inregard to the displacement issue, it is recommended that a survey be carriedout as soon as possible to detennine, for the initial large block of ranchesat least, the extent to which displacement could create problems and whlatsteps could be taken now to avoid them. 2/

4.27 As in the past, the Government's credit support for TGLP shouldcontinue to be channelled through a credit institution (such as NDB), andthen onlent to TGLP ranchers. More financial resources will be needed forthis purpose. Consideration should also be given to extending credit, notonly to help such ranchers esltablish themselves, but also to enableprospective ranchers to purchase cattle so that they may come in at afinancially viable scale.

F. Potential Offtake

4.28 Potential offtake rates for each of the country's six regions havebeen forecast through the year 1998, based on the growth and physicalcharacteristics of the herd in relation to the carrying capacity of the land(Annex 3). The herd is projected to level off at about 3.3 million head by1990, while potential offtake is estimated to gradually increase over thewhole period from 11.5% at present to 13.5% by 1998. Whether or not these

1/ For example, if there is tribal land bordering a ranch it is very easyfor the rancher to overstock on his own ranch, knowing full well that hecan always graze his cattle on the adjacent tribal lands. To reduce thisrisk, the ranches, to the extent possible, should be demarcated in largecontiguous blocks.

2/ One coule envisage situations in which it would be in the nation'sinterest to have the Government compensate individuals in order to break

certain implementation bottlenecks that affect the whole program.

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offtake rates can be achieved depends essentially on the efficiency of thelivestock marketing system in reaching all potential suppliers (paras4.31-4.42), the adequacy of abattoir capacity (paras 4.43-4.47) and theextent to which the final meat products can be sold in the local and exportmarkets (paras 4.60-4.62). The realization of the projected offtake ratesfor the late 1990s and further increases, can probably only be accomplishedthrough additional improvements in animal husbandry practices that therecommendations for TGLP (paras 4.24-4.27) are designed to support. In yearsof moderate and severe drought, the potential offtake rates could increase byas much as 3% and 6%, respectively, of the national herd. 1/

4.29 The evidence would suggest that for at least the last ten years,with the exception of those years in which FMD was a problem, it has beenmainly limited abattoir capacity that has prevented the potential offtakefrom being realized. Over this period, the herd grew by about 40%, yet,offtake from the herd, hence exports, remained fairly constant at levelsslightly exceeding the design capacity of Lobatse in drought years andfalling below this level in FMD years. The shortfall between actual andpotential offtake is estimated to have risen from about 10,000 head in 1973to about 52,000 head in 1982. Had the capacity existed to process thesecattle, there would have been little problem in finding a final market (paras4.60-4.61).

4.30 Why then, has capacity not been increased? Part of the answer, atleast, would seem to lie in the fact that BMC does not retain sufficientearnings to finance its own investments. Unlike public utility monopolies inmany countries, BMC is not required by its charter to earn a return oncapital which could be reinvested in the industry. However, one might stillask why BMC, which certainly has the political power, did not suggestchanging its charter or at least petition the Government to make theseinvestments. It did neither and only reluctantly agreed to manage the newabattoir at Maun after it was built by the Government. Generally, BMC hasbeen content to allow earnings to increase as meat prices have risen withoutincurring any of the additional risks and pressures of establishing newplants and expanding markets. In effect, BMC's management has been verycompetent in performing a prescribed task but has tended to be undynamic aswell, as it preserved the status quo, without risk of market loss from anycompetition.

G. Cattle Markets and Agent Commissions

4.31 Cattle markets operate relatively efficiently and generally free ofGovernment controls. Most cattle producers have access to a considerablenumber of selling options, and producer prices reflect reasonably competitiveconditions. However, as one goes further from the line of rail, the numberof market options decreases, as there are fewer agents, cooperatives, buyers,and traders serving these less accessible areas. To better serve theseareas, the market needs to be extended. Extra-market solutions to thisproblem, such as the Government providing subsidized services, which do nottake into account the inescapable economic fact that these more remote areas

1/ G.P. McGowan and Associates, "A Study of Drought Relief and ContingencyMeasures relating to the Livestock Sector in Botswana", 1979.

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are more costly to reach, are, as the experience from many other countriessuggests, often far less efficient and more costly to the producer in whoseinterest such intervention is allegedly made. In effect, what is needed ismore of the same present policy of relying on the market and competitionamong many buyers and sellers which, for the vast majority of cattleproducers in Botswana, has worked relatively well.

4.32 One way in which the market could probably be extended would be toremove the financial disincentive that agents face in entering higher costmarkets. At present the maximum commission an agent can charge for hisservices is 2.5% of the gross value of the cattle sold to BMC. Tniscommission ceiling tends to discourage the small agent, who does not have alarge volume of business to cover overheads, from entering the market, anddissuades even the large agents from going into these less accessible, highercost areas. 1/

4.33 As long as there is reasonably free entry to the market, hencecompetition, the regulation of commissions is unnecessary and could lead toinefficiency. With a view to eventually deregulating these commissions bysuch time as it is judged that the market has become sufficiently competitiveto provide its own control, it is recommended that the agent's maximumallowable commission be increased to a level equal to what the cooperativesare permitted to charge their members (i.e., to 5%). Such a change would bea move in the right direction, and, for the time being at least, would verylikely extend the coverage of the market to those few remote areas in thecountry today which are relatively unserviced. The Government may wish tofirst experiment with higher commission ceilings in the more remote districts.

H. Cooperative Management and Advance Payment to Producers

4.34 The main problem facing the cooperatives is the limited supply ofexperienced managers. While it would not be desirable to try to artificiallyexpand the market share of the cooperatives beyond what human and otherresource constraints would economically permit, there are some things thatcan be done to improve the management of the cooperatives without resortingto undue Government intervention.

4.35 To a large extent the Department of Cooperative Development (CODEC)within MOA has outlived its usefulness. Its promotional work is no longerneeded, and the Botswana Cooperative Union (BCU), which has a much closerinterest in the welfare of its member associations, is in a better position,if suitably strengthened, to assist its members. Consequently, it isrecommended that CODEC be disbanded and the Government provide BCU with alimited number (two) managemenit/training advisors to assist cooperatives andhelp nominate candidates for training at existing institutes. The Instituteof Development Management (MDM) in Gabarone and the Managa Training Institutein Swaziland offer a range of relevant courses and both institutions, uponrequest, provide lecturers to conduct in-house training. Also, BCU shouldassume the responsibility for monitoring the accounting and audit activities

1/ Rough preliminary calculations indicate that the profits (before taxes)

for the average agent are quite small.

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of the individual societies to determine if and when and in what areas,assistance may be needed.

4.36 To further increase the competitiveness of cooperatives, which maynot be so important now, but will be, once additional abattoir capacity isprovided (para 3.16), it is recommended that BCU introduce and manage anadvance payment scheme for interested member associations. To implement thisscheme BCU may wish to explore the possibilities of obtaining credit fundsfrom two alternative sources: the Botswana Cooperative Bank (BCB) whichwould have to borrow its funds from the Government through the Public DebtService Fund (PDSF), or a commercial bank. Under this scheme, BCB or acommercial bank would lend funds to BCU, which in turn would onlend to thecooperatives to make advance payments to the producer. The interest cost tothe producer would then be deducted at the time when full payment is made.The cost to the producer in 1982, had this scheme been in effect, would havebeen only about P5.0 or P4.0 per head depending on whether BCB or acommercial bank had lent the initial funds. (The details are presented inAnnex 8). In either case the cost to the producer is quite small compared tothe average producer price after deducting his delivery costs to the abattoir(P165/head). This scheme could be operated totally on a commercial basis,and therefore, no grant money from the Government, as was once considered,should be needed. 1/ Furthermore, as experience elsewhere has shown, itwould be desirable to maintain the separation between the Government and thecooperatives, which, so far in Botswana, has worked relatively well.

I. The Role of BLDC

4.37 The Botswana Livestock Development Corporation (BLDC) was originallycreated to act as a public livestock buyer from cattle producers in remoteareas. With the establishment of the abattoir in Ngamiland (BLDC's mainoperational area) buying competition has increased from agents and privatebuyers, and this raises the questions as to whether or not BLDC is stillneeded. BLDC and the private buyers essentially compete in the same markets,mostly in the more remote areas where the competition from agents is less.BLDC appears to be offering prices which are comparable to those paid by theprivate buyers.

4.38 In principle, as long as BLDC is able to compete with private buyerson the same terms, then it is in Botswana's interest that BLDC continue itsoperations. However, until recently, BLDC was in difficult financial straitsdespite the fact that it had received considerable infusions of capital, inthe form of new ranches, from the Government at no cost. The Governmentprovided this capital as equity. BLDC's cash flow position onlysignificantly improved beginning in 1981, when, after receiving exclusiveexport rights from BMC, it sold 40,000 breeding heifers in two installmentsto Angola at a very favorable price (about twice the national average). Thisenabled BLDC to pay off its accumulated short term debts and to pay a bonusof 10% to the producers. However, no new contracts have been negotiated.

1/ It is understood that grant funds up to P500,000, may be available from

the EEC through its Services to Livestock Owners in Communal Areas(SLOCA) Project.

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4.39 It is recommended that BLDC not be given any further specialadvantages over its private competitors. BLDC is already benefitting fromits more advantageously located ranches (e.g., at Makalambedi) that have beenprovided by the Government free of cost. If BLDC can compete effectivelyunder these conditions, then it should continue to exist; if it is unable tocover all its costs at competitive prices, and if it runs into furtherfinancial difficulty, then probably it should be abolished.

J. Transport Requirements

4.40 Probably the most important transport bottleneck at present is thelack of adequately maintained trek routes from some of the more remote triballand areas to the abattoirs and line of rail. The Government's trek routeprogram, which is the responsibility of the Department of Animal Health (DAH)within MOA, is small in comparison to the need. It is recommended that thisprogram be expanded and that a trek route user charge system be introduced torecover these costs as well as the costs of maintaining existing trekroutes. The charge could be assessed when the producer applies to the vetsfor an inter-zonal permit to move his cattle via a particular route to theabattoir. These assessed charges could then be easily collected at theabattoir by deducting them along with other trransport charges, from theslaughter value of the animal. Thus the costs of administering the systemshould be relatively small. Also, the demarcation and gazetting of trekroutes is recommended to prev(ent any further encroachment by local farmerswhich in some areas has caused serious overgrazing. Furthermore,consideration should be given to creating a separate Trek Route Authority,which would enable the DAH to concentrate more on veterinary services and,hopefully, because of the Authority's specialization, provide a betterborehole service than the one currently provided by the Department of WaterAffairs which has been unable to meet the industry's peak-periodrequirements. Whether the proposed Trek Route Authority should be anindependent organization or included as a department within, for example, theMinistry of Works, would need to be decided based on the relative advantagesand costs.

4.41 While transport, apart from trekking, does not appear to be aserious problem for the cattle industry today, transport movements can beexpected to change in the near future, especially if plans to provideadditional abattoir capacity in the north, go ahead as proposed (para 3.27).In particular, the demand for transporting beef in refrigerated trucks andrailways wagons from abattoirs in the north to markets and transshipmentpoints in the south can be expected to increase substantially. In meetingthe road transport demand, the experience from many other countries suggeststhat normally it is far cheaper if private operators, rather than theabattoirs themselves, provide these services. There are private operators inBotswana who would be willing to make the necessary investments in the fleetsif they were reasonably assured of getting at least a two or three-yearcontract with one of the abattoirs. For the railway wagons, the abattoirsmay wish to buy these to ensure their availability, and then contract therailways to operate and maintain them. Thus, it is neither necessary nordesirable for the abattoirs to enter the transport business. In general, thefewer the lines of activity for the abattoirs, the more efficient they are

likely to be.

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4.42 Regarding the railway service presently provided by the NationalRailways of Zimbabwe (NRZ), it is understood by both countries thateventually Botswana will take over the operation and ownership of thisservice. Presently, however, Botswana does not have the capacity to operateand maintain the railway. Furthermore, for Botswana to try and becomeself-sufficient in the provision of this relatively small railway operationis likely to be far more costly than buying these services, as at present,from NRZ which can draw on the capacity and resources of a very largeorganization. Therefore, if and when the transfer of ownership of therailway does take place, it is recommended that, for at least the initialyears, Botswana enter into a maintenance contract with NRZ for the repair andmaintenance of the locomotives and rolling stock, and if necessary, for theright-of-way as well.

K. Processing Capacity

4.43 On the assumption that the provision of additional abattoir capacityshould enable the country to efficiently handle potential peak period offtakeunder normal rainfall conditions through at least 1995 (para 4.28), it isestimated that additional capacity of 163,000 head/annum is needed. Thisestimate already takes into account the expected effects from peak/off-peakpricing (para 4.55) and is based on the assumption that Lobatse would notexceed its design capacity of 190,000 head/annum.

4.44 The determination of the location of this additional capacity iscomplicated by the fact that the EEC market will not accept beef fromslaughtered Ngamiland cattle because of the past incidence, and high risk, ofFMD. Other markets, similar to the EEC, are likely to impose the sameregional restrictions. Therefore, there are definite advantages in beingable to process Ngamiland cattle in separate abattoirs which would serveother markets. If this were to be done, it is estimated that for inside andoutside Ngamiland, additional capacity of 30,000 and 130,000 head/annum,respectively, would be needed (Annex 9). These estimates would suggest thatthe new plant, which recently opened at Maun in Ngamiland, is less thanone-half the size it should have been, and that the proposed new plant forFrancistown (ANZDEC's recommendation is for 88,000 head/annum) if it goesahead, would require expansion in the late 1980s/early 1990s.

4.45 It is recommended that the additional capacity outside Ngamiland beprovided in two stages, with the first stage starting now at a capacity of88,000 head/annum, while allowing in the design of this first stage for aneventual total capacity of 130,000 head/annum. The evidence suggests that itwould not be economical to build two plants of the scales proposed for thetwo stages at two different locations. 1/ Francistown, as recommended byANZDEC, would probably be the best location for this new plant.

4.46 For Ngamiland, the additional capacity is needed urgently. It isunderstood from ANZDEC that the Maun plant was designed to be able toeconomically accommodate expansion. A study should be carried out todetermine the feasibility of attaching a beef canning factory to these worksto achieve greater flexibility.

1/ Based on data furnished by ANZDEC to the study team.

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4.47 Additional income and employment opportunities could result from theprocessing of cattle by-products. Unlike beef, many of the existingby-products (hides, horns, hair, etc.) have to compete openly on the worldmarket. More marketing expertise is needed to realize this potential. Theestablishment of joint operations between local private companies andoverseas companies, which are already involved in this type of production,could be beneficial. In this regard the Ministry of Commerce and Industry,through its external trade officers, could play a catalytic role by bringingthese two groups together. The prospects of offering financial incentives tooverseas companies investing in these areas in Botswana, also need to beexplored.

L. Abattoir Ownership and Market Structure

4.48 While BMC, a statutory parastatal, has ovned and operated Botswana'sonly large abattoir at Lobatse since 1965 and has just recently taken overthe new works at Maun, there is no reason to assume that BMC should continueto manage all the large abattoirs in the country, especially in the nearfuture when some new abattoirs are expected to come on stream, unless, ofcourse, there are definite advantages to recommend the present monopsonisticsystem. However, this does not appear to be the case. All the existing andproposed new abattoirs are indlividually sufficiently large to take advantageof any economies of scale in the procurement of spares and equipment.Furthermore, even if BMC were to own and operate all of these plants,management contracts would still have to be let out for each individualplant.

4.49 However, while there are no apparent advantages in maintaining BMC'smonopsonistic position, there are some major disadvantages. First, thissystem would require a much larger and far more complicated administrativesuper structure to oversee and coordinate the various different works, thusputting a premium on perhaps one of the country's scarcest resources -experienced management. Secondly, a single central management for thecountry's entire abattoir capacity increases the risk that problemsencountered in any one of the plants or in the overall administrativesuper-structure could have industry-wide repercussions. The diversity ofownership and management could minimize this risk. And thirdly, with onlyone central management, there would be no basis with which to compareperformance.

4.50 In view of the above, it is recommended that: all the abattoirs beseparately owned and managed; consideration be given to establishing these asmixed companies with the participation of both Government and privateinvestor (including farmer andl cooperative) equity capital; the prices andlevels and standards of service of these abattoirs be regulated by a newAbattoir Regulatory commission to be established; each abattoir be requiredto earn a prescribed rate of return on revalued fixed assets; and that BMC'sLondon-based external marketing operation be spun-off and serve as thenucleus for an External Meat Marketing Board, capable of serving all theabattoir companies without preference to any one. The abattoirs would befree to sell directly as they do now, to the many private wholesalers servingthe domestic market.

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4.51 The Abattoir Regulatory Commission is needed because of theindustry's natural oligopsonistic structure. Given the fairly large minimumeconomic size plant relative to the limited size of the market, the number ofabattoirs is not likely to be large enough to produce the degree ofcompetition needed to allow the market to be self-regulating.

4.52 To meet the demand for qualified technical and management personnelin the abattoirs, it is recommended that a specialized institute be set up inBotswana for this purpose. Botswana has already received funding offers forsuch an institute from several donors under the Southern Africa DevelopmentCoordinating Committee (SADCC). The training institute would be expected tosupply the personnel to initially complement the expatriate management teamsthat would be contracted at each of the abattoirs and to eventually replacethem.

4.53 In order to set up the new companies, as well as establish theAbattoir Regulatory Commission and External Meat Marketing Board, the detailsstill need to be worked out. It is recommended that the necessaryorganizational studies be initiated as soon as possible.

M. Abattoir Operations

4.54 Since at least the mid-1970s, the severe shortage of abattoircapacity has continued to affect abattoir operations. Lobatse has had tooperate well above its estimated optimum level of throughput, and BMC'ssystem for allocating quotas to its customers to ration the availablecapacity has been heavily criticized. In fact, neither BMC nor its customersare happy with the present quota system. However, until additional capacityis provided, there is probably very little that can be done to significantlyimprove the present situation. The ANZDEC proposal to allocate quotas basedon the assessed reliability of applicants to deliver cattle to the abattoiron schedule, appears to be a good one, but whether sufficient data exists tomake this assessment, and whether, if it could be implemented, it would makea significant difference, remain somewhat doubtful. The problem, as long ascapacity remains severely constrained, is essentially that of a zero-sum gamein which one applicant's gain (the receipt of a quota) is another's loss.Under such circumstances, one can expect disappointment and claims offavoritism. One, in fact, finds very little to fault, except perhaps thatBMC has not taken the time to explain to its customers the bases for itsdecisions.

4.55 Probably the most effective and least administratively complicatedtool for rationing the available supply of capacity is peak/off-peak pricing,which was introduced by BMC in 1982. Unfortunately, 1982 was a drought year,and, therefore, it is impossible to determine how much of the fairlysignificant spreading out of the peak that did occur in that year was due topricing and how much to the drought and the need to sell throughout the yearto avoid abnormally high death rates. Nevertheless, based on BMC's announcedmonthly prices for 1983, there does appear to be a financial advantage forthe cattle owner in deferring sales from the peak to the off-peak months.For example, if a producer sells in October instead of July and during thisperiod the animal loses no weight, drops a grade and costs about P 2.0/monthto maintain, then the producer stands to gain approximately P 7.0/head.However, a weight loss of only 10 kg would completely offset this advantage.

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To provide an adequate incentive for producers to sell in the off-peakperiod, it is recommended that the peak/off-peak price differential beincreased by an amount sufficient to offset a weight loss of about 15 kg.Probably only those with the resources to reserve grazing and to providesupplemental mineral feed are likely to take advantage of this pricingscheme.

4.56 The idea of the abattoirs providing live cattle storage in order toregulate the flow of cattle through the abattoirs has also been proposed.However, there are some practical limitations to introducing such a scheme.First, sufficient grazing land would have to be available in close proximityto the abattoir. For example, to provide only one-month's storage capacityat Lobatse, it is estimated that approximately 180,000 ha of grazing landwould be needed. Such land is clearly not available. Secondly, to manage aranch of this size, the abattoir would need to rely on expertise it presentlydoes not have. Such diversification of activities could prove very costly.Alternatively, the abattoirs could lease the land from nearby ranchers.However, if the abattoir and ranchers were to find this arrangement mutuallybeneficial, it would imply that the ranchers could just as well buy directlyfrom the producers, and then later resell to the abattoir at the higheroff-season gate price, thereby completely eliminating the need for theabattoir to enter into this transaction. For all of the above reasons,therefore, it is recommended that abattoirs stay out of the ranching businessand that peak/off-peak pricing be used instead to stimulate interest amongcattle buyers to buy cattle during the peak season, hold and maintain themfor a few months and then sell them to the abattoir during the off-peakseason.

N. Abattoir Gate Prices

4.57 At Lobatse, BMC determines prices by deducting all its costs fromthe export price. In principle, this is an economically efficient policy.However, not enough is deducted to cover an adequate return on investedcapital. The result is that BMC does not have the resources to finance itsown expansion and/or modernization. To eliminate the need for the Governmentto finance the industry's capital expenditures, it is recommended that thegate price be set so as to allow each abattoir to earn a prescribed rate ofreturn. Within this framework, grade differences and seasonal peak andoff-peak variations could be established.

4.58 The anomaly of the Maun gate price deserves special mention. TheMaun gate price has been set by BMC somewhere between the higher Lobatseprice and the lower price one would use if the same efficiency pricingprinciples that have been applied to Lobatse were also applied to Maun. Onewould expect a lower gate price at Maun because of the lower valued market itnow serves and the higher production costs. Nevertheless, BMC has chosen tokeep the Maun gate price artificially high, but not as high as Lobatse, inorder to keep price differences between the two works to a minimum. In sodoing, BM.C has introduced inter-plant cross-subsidization.

4.59 The main problem with this pricing policy is that it provides thewrong financial signals to producers and management alike, which normally

leads to a misallocation of resources. Maun, like other abattoirs, needs to

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have the incentive to develop its markets and keep its production costs low.It is recommended, therefore, that each of the abattoirs be run asfinancially self-sufficient enterprises.

0. Meat Markets

4.60 Having not yet reached its own quota (18,916 tons), not to mentionthe unfulfilled quotas of other countries that it may use (up to a further19,000 tons) as well as the maximum it can export over and above its ownquota and still receive the exemption from the customs duty although not fromthe variable levy (30,000-18,916 tons in 1983), there appears to beconsiderable scope for expanding Botswana's beef exports to the EECcountries. In addition, the prospects for expanding the regional African anddomestic markets need to be explored. Developing all these markets isessential if the Botswana cattle industry is to realize its full potential.

4.61 For example, in 1990 the potential offtake from the herd isestimated at 415,000 head. If 22% are slaughtered for domestic consumption,then 323,000 head or the equivalent of 43,000 tons of boneless beef wouldhave to be exported (Annex 9). Assuming the continuation of the LomeAgreement on the same terms, and assuming for the sake of the analysis thatother export markets remain fairly constant, then the EEC market would haveto take about 30,000 tons, all of which could be covered using the existingBotswana quota and some of the unfulfilled quotas of the other participatingcountries. To further expand exports, Botswana would probably have toapproach its maximum EEC quota and receive a price without the variable levyexemption, but if Botswana can penetrate some of the more lucrativespecialist markets within the EEC countries, the final price to Botswanashould still be economic.

4.62 So far, however, BMC has not had to seriously concern itself withexpanding existing, or entering new, markets. However, if new abattoircapacity is added in order to realize the industry's potential, a far moreaggressive marketing posture than has hitherto been seen will need to betaken. As recommended previously (para 4.50), an External Meat MarketingBoard should be set up, building on BMC's already existent U.K. operation.The Board would comprise marketing and technical specialists capable ofworking with the individual abattoirs and final customers in meeting specificcontracts.

V. SECTORAL INVESTMENT PRIORITIES

5.01 The foregoing suggests that the main investment priorities in theagricultural sector are in those areas which lead to the promotion of TGLP,the extension of the cattle trek route system, the expansion of abattoircapacity, and the establishment of a crop research strategy and program thatis directed towards developing technical packages for the small farmer. Inaddition, there are the organizational and policy changes, which need toaccompany these investments.

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A. TGLP

5.02 From its inception in 1975, TGLP has proceeded slowly. In fact, itis essentially because of this lack of progress that the Bank-financedsecondlivestock project (Ln. 1497-BT) experienced various problems. 1/However, it would be wrong to conclude from this experience that there issomething inherently wrong with the TGLP concept, since, TGLP, as originallyconceived, remains essentially untested. If TGLP were implemented accordingto the stated policy, it is highly probable that the program would have thebroad-based popular support which it needs to succeed. Furthermore, theanalysis clearly shows that the TGLP ranches are financially viable at sizesgenerally exceeding approximately 360 AUs, thus, offering opportunities forboth individual and group fanns.

5.03 The focus of TGLP must now be on getting the program back on theoriginal track. It is with this concern that the report has recommended thatthe central C-overnment assume a much more active role and, in particular,identify now, the land which would be made available for ranching and forcommunal grazing.

5.04 The focus must now be on eliminating the implementation bottlenecks,especially now that there is a much better idea as to what these are. It iswith this concern that the report has recommended shifting much greaterresponsibility to the central government, which is in a better position tooversee a nation-wide land tenure program and to offer needed assistance tothe local land boards in its implementation.

B. Trek Routes

5.05 While it is recommended that the cost of extending the trek routesystem be recovered from user charges, the initial investment will still haveto be made by the Government. A trek route development plan needs to beprepared. The demarcation and gazetting of trek routes are also essential.

C. Abattoirs

5.06 The expansion of abattoir capacity would probably contribute morethan any other single investment to the growth of the cattle industry. Theinvestment requirements are large but part of these costs could be borne bythe companies themselves from retained earnings. Studies are needed to workout the details of setting up these new companies and for creating aRegulatory Commission and External Meat Marketing Board.

l/ The Project was rated as having serious problems by supervision missionsfor the last two years and has only recently been given an improved

rating due to some modest progress on other components.

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D. Crop Research

5.07 Technical packages specifically adapted to the needs of Botswana'ssmall farmers are lacking. Many projects are underway, most of thesereflecting the particular interests of the donor agency. The prioritizationand coordination of the crop research program are urgently needed.

VI. SUYIMARY OF RECOMMENDATIONS AND DISTRIBUTIONAL IMPACT

Development Strategy and Fiscal Policy

6.01 Promote the commercialization of the cattle industry to achievemaximum sustainable income growth, while simultaneously taxing the industryto raise Government revenue to stimulate new economic activities andemployment opportunities in the rest of the economy (para 4.03).

6.02 Foster the commercialization of the industry by facilitating theimplementation of TGLP as originally conceived as a program aimed at creatingindividual and group ranches of various sizes for all commercial producersusing the tribal lands, while retaining adequate grazing land around thevillages for the subsistence producers (paras. 4.04 and 4.21)..

6.03 Simultaneously, while promoting ranching under TGLP for commercialproducers, withdraw the tax and credit incentives for the same producers toinvest in the communal grazing areas (para. 4.21).

6.04 Facilitate the implementation of TGLP by having the centralGovernment assume much more responsibility for the implementation of TGLP,including, in particular, the determination now of what land would bereserved for ranches and for communal grazing (para 4.24).

6.05 Move the current nominal TGLP land rental rates into alignment withmarket values (para 4.24).

6.06 Demarcate the TGLP ranches in areas, as much as possible, adjacentto each other and in large blocks (para 4.25).

6.07 Set as a goal for 1990, the leasing of enough land to supply atleast one-fourth of the commercial producers now using the tribal lands witha mix of individual and group ranches (para 4.25), and carry out a survey assoon as possible to determine the extent to which displacement of presentresidents could create problems and what steps could be taken now to avoidthem (para 4.26).

6.08 Continue to support TGLP by channeling credit through NDB to beonlent to TGLP ranchers, the resources for which will need to increase asTGLP gets underway, and consider extending such credit, not only for ranchdevelopment but also to enable prospective TGLP ranchers to purchase cattleso that they may come in at a financially viable scale (para 4.27).

6.09 Generate a significant fiscal surplus for the industry by:

introducing a sales tax at all local and export abattoirs on the slaughter

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value of the animal; eliminating the subsidy on bonemeal; having theabattoirs finance their own investment either from borrowing or retainedearnings; and by introducing user charges for the provision of trekkingservices (paras 4.08 and 4.09).

6.10 Establish and implement a reliable system for recording cattleownership before considering the income tax on cattle producers as a majoradditional or alternative source of raising government revenue (para 4.08).

6.11 Change the tax law to allow only those whose main source of incomeis farming, to deduct farming losses for tax purposes (para 4.11).

Cattle Marketing

6.12 Continue to rely on the market and competition among many buyers andsellers to serve cattle producers and to determine producer prices (para4.31).

6.13 Allow agents to raise commissions to the level now charged bycooperative (5%) with a view 1:o eventually deregulating these commissions bysuch time as it is judged thai: the market has become sufficiently competitiveto provide its own control (paras 4.32 and 4.33).

6.14 Disband CODEC as soon as possible and strengthen BCU by providing itwith two management/training advisors (para 4.35).

6.15 Introduce a commercially run advance payment scheme at BCU forinterested member societies and explore the possibility of borrowing thesefunds either from BCB or a cormercial bank (para 4.36).

6.16 Do not give BLDC any further advantages, including exclusive exportprivileges, over its private competitors; if BLDC can compete effectivelyunder these conditions, then it should continue to exist as a self-financingpublic institution (para 4.39).

6.17 Further extend the trek route system and recover these and the othercosts of maintaining the exist:ing system from user charges (para. 4.40).

6.18 Demarcate and gazette trek routes to prevent further encroachment(para 4.40).

6.19 Establish a Trek Route Authority, combining the functions nowperformed by both DAH and the Ministry of Water Affairs (para 4.40).

6.20 If and when the transfer of the railway from NRZ to Botswana takesplace, for at least the initial years, enter into a maintenance contract withNRZ (para 4.42).

Meat Processing

6.21 Provide as soon as possible, additional abattoir capacity inside andoutside Ngamniland of 30,000 and 130,000 head per annum, respectively, withthe latter being provided in t:wo stages: the first stage starting now at thecapacity level recommended by ANZDEC (88,000 head per annum), while allowing

in the design of this first st:age for a total capacity of 130,000 head/annumto be installed by the early 1.990s (paras 4.44 and 4.45).

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6.22 Carry out a study to determine the feasibility of attaching a beefcanning factory to the Ngamiland works (para 4.46).

6.23 Establish each abattoir with separate ownership and management, andconsider setting these up as mixed companies with both Government and privateequity capital (para 4.50).

6.24 Establish an Abattoir Regulatory Commission to approve abattoir gateprices, and regulate standards and levels of service (paras 4.50 and 4.51).

6.25 Establish a specialized institute in Botswana to train qualifiedtechnical and management personnel for the abattoirs (para 4.52).

6.26 Carry out the necessary studies to provide the organizationaldetails needed to actually set up the abattoir companies and the RegulatoryCommission (para 4.53).

6.27 Require each abattoir to earn a prescribed rate of return onrevalued fixed assets, with each abattoir being run as a financiallyself-sufficient enterprise (para 4.50).

6.28 Continue the peak/off-peak pricing system but widen thedifferentials to ensure that there is still an advantage for the producer todefer cattle sales even when weight losses reach up to about 15 kg/animal(para 4.55).

6.29 Keep the abattoirs out of other lines of activity, such as transportand the storage of live cattle, which are more efficiently handled by privatetransporters and ranchers (paras 4.41 and 4.56).

6.30 Encourage the processing of cattle by-products (hides, horns, etc.)by the private sector in conjunction with end-user companies in theestablished overseas markets by having the Ministry of Commerce and Industry,through its external trade officers, sponsor the needed forums. Alsoconsider providing financial incentives for overseas companies investing inthese areas in Botswana (para 4.47).

Final Markets

6.31 Spin-off BMC/UK and establish an External Meat Marketing Board,comprising marketing and technical specialists capable of working with theindividual abattoirs and final customers in meeting specific contracts.Carry out the necessary organizational study (paras 4.50 and 4.62).

6.32 Explore the possibilities of using the unfulfilled quotas of othercountries which have preferential access to the EEC market under the Lome IIAgreement (para 4.60).

Distributional Impact

6.33 The principal direct beneficiaries from the total program ofrecommendations in this report are likely to be the commercial producers

presently using the tribal lands. Within this group it is the small to

- 34 -

intermediate producers with more than 40, but probably less than a thousandhead, that potentially have the most to gain. They are the ones that couldtake advantage of a Tribal Grazing Lands Policy that is aimed at providingranches for aspiring farmers and changing the status quo in which thetendency is for only the very large to gain control over more and more triballand. It is also this small l-o intermediate group of producers that probablyencounters the most difficulty in obtaining abattoir quotas and in gainingaccess to markets and, therefore, also stands the most to benefit fromadditional abattoir capacity, more extensive coverage by agents, and strongercooperatives.

6.34 But to focus only on the direct beneficiaries is to see only a partof the story. The strategy that is recommended is aimed at ensuring that theindustry is able to sustain itself over the long term and thereby produceenough income to make a continuously significant contribution to the rest ofthe economy and, hence, the welfare of the entire population, including thosewho do not own any cattle. In this regard the tax component is essential.Although, the abattoir sales tax that is recommended is less preferable inprincipal than a progressive income tax, for the time being at least, thelatter is not administratively feasible due to the lack of reliable cattleownership data. Under these circumstances, it is far more equitable to taxall producers proportionately than to rely on the present tax structure or toraise cattle income taxes, the effects of which would be to leave governmentrevenue essentially unchanged and the largest producers virtually untaxed asat present. Opposition to a sales tax, in effect, becomes protection for thelargest cattle producers.

6.35 For all of the above reasons, the program of recommendations needsto be seen as a total package. The implementation of any major part byitself (e.g., the tax program, TGLP, processing capacity or final markets)when not accompanied by the others, is likely to produce both unfulfilledexpectations as well as considerable distributional inequities.

ANNEX 1- 35 - PPage 1

FISCAL ANALYSIS

1.01 The results of this analysis, which are presented in Table 1.1,indicate that, with certain, tax changes, the industry goes from a deficitposition of P 5.0 million at present to one of surplus for the first time in1987 of P 10 million, rising to almost P 17 million in 1990. The details arepresented below.

A. Expenditures

1.02 Government expenditures in, or in support of, the cattle industry aremainly channelled through the Ministry of Agriculture (MOA) and its associatedparastatals (BMC and BLDC). The Ministries of Water Affairs and LocalGovernment also support the cattle industry but to a much lesser degree.Because data on cattle-related expenditures outside MOA are not readilyavailable, the fiscal analysis that has been carried out focuses on MOA, whichprobably accounts for at least 90% of the Government's total support for thecattle industry.

1.03 Because the cattle-related functions and services provided by thevarious departments of MOA are not separately costed, it is very difficult, ifnot impossible, to precisely determine their amounts. Thus, judgement had tobe used in apportioning these costs.

1.04 MOA Headquarters. It is assumed that 50% of MOA headquarter costsare related to the cattle industry. In view of the predominance of cattleactivities in the Ministry's operations this estimate can be considered veryconservative.

1.05 Department of Animal Health (MOA). The Livestock Advisory Centers(LACs) which this department operates, are believed to recover their costs.While there may be some small overhead costs which are not covered, for themost part this operation appears to be financially self-sufficient. TheDepartment's other costs, which include all the veterinary services, arealmost solely related to cattle. Consequently, 90% of the Department's costs(excluding the LACs) have been changed to cattle activities, with the balanceassumed to be related to small stock work and tsetse control as it relates tohuman protection.

1.06 Department of Field Services (MOA). Although extension work appearsto be heavily weighted towards cattle, to be on the conservative side, andbecause the Department now has responsibility for ALDEP, a 50:50 split ofdepartmental costs has been assumed.

- 36 - Annex 1Page 2

1.07 Department of Agricultural Research (MOA). The Animal ProductionResearch Unit (APRU) with its central staff and eleven demonstration ranchesis by far the largest employer of staff within the Department. To be on theconservative side again, 40% of the Department's costs were assumed to beattributable to cattle production research.

1.08 CODEC and the Botswana Agricultural College (MOA). Approximately 25%of the recurrent budgets of each of these organizations is assumed to berelated to the cattle industry. Consistent with the report's recommendation,CODEC is assumed to be disbanded and, therefore, no future expenditures forthis agency have been projected after 1984.

1.09 Government Investment Expenditures. Public investments in the cattleindustry are identified in NDP VI (1985/86 - 1990191). These investmentsinclude abattoirs, trek routes, tsetse fly control, a veterinary diagnosticlaboratory, and cordon fences. The largest investment (P 26 million) is forabattoirs. These public investment expenditures have been incorporated in theprojection. Any additional abattoir investment is assumed to be met eitherfrom private capital or the abattoir company's retained earnings.

B. Revenues

1.10 At present, the major source of Government revenue from the cattleindustry comes from the 10% tax on BMC's gross sales, less selling anddistribution costs. Tnis revenue as well as the revenue from the payroll taxat the abattoirs, is expected to increase with the development of new abattoirfacilities. The revenue from the income tax on farming companies andindividuals is forecast to inc'rease in proportion to cattle sales.

1.11 Bonemeal is presently sold by BMC to the LAC's at 25% export parity.This subsidy is assumed to be eliminated. The Botswana Vaccine Institute isforecast to break even although it may be a few years before this is achieved.

1.12 The major additional source of revenue, that has been projected, isthe recommended sales tax at all (local and export) slaughter facilities. Thetax would be initially set at 7% in 1984, increasing to 12% by 1989.

GOVERNMENT EXPENDITURES AN1) REVENUE FOR THE CATTLE INDUSTRY(Pula '0003 n(2mstanC-in Pi82 Prices

EXPENDITURE 1/ 1983 1984 1985 1986 1987 1988 1989 1990 1991

MOA 2/ - lleadquarters 840 840 840 840 840 840 840 840 840

- Departmenit of Veteriniary Services 10610 11066 11209 11364 11530 11710 11915 12115 12341

- Department of Field Services 3220 3220 3220 3220 3220 3220 3220 3220 3220

- Departmenit of Agric. Research 1040 1040 1040 1040 1040 1040 1040 1040 1040

- DepartmRent of Coop. Development 3/ 153 76 0 0 0 0 0 0 0

SuAb-total J6150 16522 16596 16751 16917 17097 17302 17502 17728

Development Program (excluding abbattoirs) 4/ 3850 4000 4000 4000 4000 4000 4000 4000 4090

Abbattoir Investment 5/ 8600 8600 8600

Total Expeniditure 20il0Oi i 29122 29196 29351 20917 21097 21302 21502 21728

REVENUE

MOA - Department of Veterinary Services 1330 1786 1929 2084 2250 2430 2625 2835 3(061

- Department of Field Services 130 130 130 130 130 130 130 130 130

- Department of Agricultural Research 250 250 250 250 250 250 250 250 250

Abattoir - Corporate Tax 10625 10925 10925 11300 12050 12800 13550 14820 15846

- Payroll Tax 8G0 850 900 955 1020 1085 1190 1250 1331

- Loan Capital 860 1720 3420 3200 3200 3200 3200

Cattle Export Levy Fund 520 530 530 540 550 560 570 580 600

Income Tax - Farming Companies 360 382 405 429 454 482 511 541 574

- Farming Individuals 1200 1272 1348 1429 1515 1606 1702 1804 1913

Slaughter Sales Tax 6/ - 5632 6458 8262 9315 10395 12135 12733 12798

Total Revenue 15215 7 2315 27099 30954 32938 35863 38143 39622

Deficit/Surplus -(4785) -(7365) -(5401) -- (2252) 10037 11841 14561 16641 17894

'-3

cr~1/ Cattle-related expendtturts in the Ministries of Local ivernrment anid Lantds, and Mineral Resources and Water Affairs, bave not been D z

incrlided. Na provisionol has been In eiLher the expenditure or revenie tables for the Botswana Vaccine Institute as Governmentanticipates it will be a 'break-even' operationt.

2/ Proportionis for MOA costs relating to cattle Industry assessed a)t 1l1 50%, DVS 90%, DFS 50%, DAR 40%, DCD 25%, BAC 25%.3/ DCD phased ouL in 1984.4/ Estimates froin NDI' V anid commitmenits for NDP VI. Sotirce: 1983/84 budget estinates. Includes SLOCA, Tsetse fly conitrol, cordon

fences, Veterinary Diagnostic Laboratory and trek routes.5/ Abbattoir investment of P26 nillioni projected to he provided as a loan at 10% interest for 15 years. Futiure abbattotr expansion

at Francistown anid Maun (P16 million) assumed to he funded from retained earninigs of the industry and/or privatecapital investment.

6/ Slaughter sales tax at 7% of marketed (domestic and export) sales in 1984. 8% in 1985, 9% In 1986. 10% in 1987, 11% in 1988,12X in 1989 anid thereafter.

Annex 2- 38 - Page 1

CATTLE PRODUCTION

A. Factors Affecting Production

2.01 Land and Water Resources. Out of a total land area of 58 million ha,about 40 million ha comprise the country's potential grazing area, with thebalance made up of national parks, game and forest reserves, swamps, permanentwater, and urban and industrial areas. Under TGLP, a total of 27 millionhectares have been designated for grazing, but much of this land is likely toalready have significant cattle populations. There are, however, areas wherecattle have been restricted, either by the Government to reduce the risk ofFMD infection from game animals, or by the difficulty of locating watersources.

2.02 Some limited unpopulated areas do exist in Ngamiland, east of theMakalemabedi fence, in the Francistown region north of Nata, and in KgalagadiDistrict, but at full development these "new" lands are not likely to providegrazing for more than about 50,000 to 80,000 cattle.

2.03 The problem of overgrazing is not a new phenomenon in the country,and agricultural reports over the last 50 years continually mention rangedegradation. There is limited research information on what actually happensto carrying capacity on regularly overgrazed pastures, and this enables bothalarmists and status-quo-advocates to promote their respective views. Itwould appear that while hardveld soils can sustain considerable abuse, thesandy soils, in areas west of the line of rail, suffer long-term damage whenovergrazed.

2.04 The Animal Production Research Unit (APRU) needs to develop programsto monitor the effect of continuous heavy grazing on carrying capacity andproduction under different management systems. As the country nears the limitof its sustainable carrying capacity, and available areas for cattlerelocation diminish, management of grazing and water resources will becomemore critical and tenure reform, as proposed under TGLP, will becomeimperative.

2.05 Drought. The high variability of rainfall over much of Botswanamakes localized drought a frequent event. Although, statistically speaking,serious country-wide droughts are expected to occur only once in a decade, thecumulative effects of several years of below average rainfall can have thesame effect. Furthermore while moderate droughts rarely cause heavy stocklosses, unless accompanied by shortages of grazing, they do lead tosignificant losses in production.

2.06 Although the resiliency of the national herd to "bounce back" fromdrought years is clearly demonstrated by statistics in the 1960's and early1970's, note should be taken of herd changes in the 1979-82 period. 1979 wasa below average rainfall year that preceded a year when slaughter sales were


restricted by FMD restrictions. The national herd fell by 2.2%, and although1980 and 1981 were reasonable rainfall years, herd growth did not surge backto the previous average of 5% per annum. This may indicate that the nationalcarrying capacity is close to sustainable levels and slight setbacks causedeither by drought or slaughter restrictions can now have serious effects onproductivity.

2.07 McGowan's study used a 10.5% offtake as a norm for the country andpredicted a need to increase this by 3.4% in a year of moderate drought and by5.7% in a year of severe drought. It further showed that if two drought yearsfollowed each other, optimum offtake would need to rise to a total of 20% inthe second year to avoid serious stock losses. All calculations were appliedto a herd that still had the potential to grow, implying reserve carryingcapacity on available grazing land.

2.08 Tne effects of drought when stocking rates are in excess of carryingcapacity can be catastrophic. 1/ For example, in Kenya a regional herd wasreduced by 50%, and five years later livestock numbers were still only 70% ofprevious levels. In Botswana significant stock deaths are being reportedannually. These are warning signs that sustainable carrying capacities arealready being exceeded in several districts in Botswana (i.e. Bobwira, Tutume).

2.09 Disease. Due to the country's semi-arid climate, Botswana escapesmost of the serious cattle diseases that affect many of the other cattleproducing countries in eastern and Southern Africa. Tick-borne diseases arelimited to minor occurrences of babesiosis and heart water, both of which canbe effectively controlled through vaccination. Clostridia infection andAnthrax are similarly controlled through a national annual vaccinationprogram. Boutulism does cause stock losses through animals eating bones tosatisfy a need for phosphorous, but deaths do not reach serious levels. Themost significant disease is FMD, and although infection causes productivitylosses, the major impact is through restricted export slaughter sales to EEC.The country is physically divided up by cordon fences and stock movement iscarefully controlled at all times by the Veterinary Services. Tne two majorsources of FMD appear to stem from the endemic sub-clinical infections thatexist in buffaloes in the northern regions and from cross-border movements ofanimals from Zimbabwe.

2.10 After a ten-year clear period, FMD was confirmed in 1977 in Ngamilandand export slaughter sales to all markets were restricted from that region foralmost three years Another outbreak in the eastern part of the country in1980 was more quickly brought under control but restrictions reduced thenumber of slaughtered animals by 190,000 in the affected period. The net lossto producers from those two outbreaks was in excess of Pula 18.0 million. Ascattle numbers are estimated to grow at a more rapid rate in the central andnorthern regions (Annex 2), and as these are more susceptible to FMDinfection, any future disease outbreaks would have equally serious effects.

1/ This is well documented in a study by McGowan and Associates.


B. Herd Growth

2.11 Between 1966 and 1982, the national herd increased by 240% (from 1.24million to 2.98 million head). The growth rate has been uneven, reflectingthe various influences of good and poor rainfall seasons, borehole developmentand FMD/ From 1966 to 1972, despite rainfall being below average, the herdgrew at a compound rate of 5.6%. This was primarily due to the introductionof boreholes in the Kalahari Sandveld areas west of the line of rail, whichopened up previously unutilized grazing areas.

2.12 In 1973, the whole country experienced a major drought (50% of normalrainfall) which caused substantial stock losses, and a reduction of 1.8% inthe national herd. For the next five years, climatic conditions were close topast averages and a sustained herd growth rate of 5% was achieved.

2.13 The 1977 outbreak of FMD in Ngamiland restricted slaughter sales froma wide area in 1978 and the herd increased by 8%. Although the Botswana MeatCommission (BMC) worked at maximum capacity during 1979, the moderate droughtof that year (70% of normal rainfall) caused stock losses and a decrease intotal cattle of 2.2%.

2.14 Both, 1980 and 1981, were average rainfall years and there wasanother FMD outbreak in 1980 in the eastern part of the country. Despitethese factors, the rate of herd growth slowed. The growth rate fell to under1% in 1982, as a result of poor rains and increased stock deaths were reportedfrom Ngamiland and the Bobirwa area. The quality of livestock statistics hassteadily improved during the period under discussion and the coefficient ofvariance on the size of the national herd is now estimated at between 6% and7%. It is essential for policy and planning purposes that the accuracy oflivestock statistics be maintained.

C. Herd Composition

2.15 Tswana cattle are the most prevalent breed in the country. Itcompares very favorably with other African breeds in size, conformation,fertility, growth rate, heat tolerance, grazing ability, and particularly,hardiness to adverse and arid environmental conditions. The Animal ProductionResearch Unit (APRU) conducted a systematic comparison of the Tswana to theTuli from Zimbabwe, Africander from South Africa, and cross breeds usingBrahman and Simmentaler. As a result, the Tuli was judged to be marginallysuperior to the Tswana but Brahman/Tswana cross breeds outproduced all otherbreeds and their cross combinations. The results of this work have beenaccepted by farmers, and an adequate supply of improved bulls are now producedprivately within the country.

2.16 Production coefficients show a wide variation between communallygrazed cattle and those farmed under a fenced ranching system.

- 41 - Annex 2

Page 4

Communal GrazingCoefficient System Ranch

Calving percentage 47% 75%Calf mortality 10% 8.5%Adult mortality 6% 3%Weaning weight 123 kg 180 kgPost weaning gain (7-18 months) 89 kg 106 kgWeight of 1.5-year animal

produced per cow per year 90 kg 195 kgAge of heifers at first calving 3-4 years 2-3 yearsSteer slaughter age 3.5-6.5 years 2.5-3.5 yearsTotal Offtake 8% 17%Offtake plus growth 12% 18%

Source: APRU publications

2.17 Although ranch herds tend to be of better genetic potential, thesignificantly higher production parameters registered on ranches are mainlydue to management techniques made possible by the control of animals andgrazing/water resources. Fencing allows the correct number and type of bullsto be bred with cows at the right time and the subsequent calves/weaners to begiven preferential feed treatment. Animal health problems are identifiedquickly as rotational grazing d.emands more human contact with animals andofftake can be consistent with feed resource planning.

D. Production Systems

2.18 In the last 15 years, little or no change has taken place in the waycattle are produced. There are essentially two systems: the traditional andthe freehold.

2.19 Cattle farmed on freehold/leasehold land are restricted by fences androtational grazing is practiced to a greater or lesser degree. Access towater is normally from one or more boreholes or in farm reticulation.

2.20 The traditional system, revolving around the 'cattle post' on triballand, is characterized by a single water source with a kraal from which cattlegraze the surrounding area. In the remote areas, cattle are usually restrictedto the cattle keeper's borehole and only move to other cattle posts when thewater supply breaks down. However, in the more densely stocked districts,there is continuous intermingling of herds at cattle posts and the stockingrate on the available grazing land varies considerably. Some of the smallercattle keepers have access to a village borehole (or well) or have groupedtogether into a syndicate to provide their own water source.

2.21 The new leasehold cattle farms being developed under the TGLP aresimilar to existing freehold/leasehold farms with perimeter fences, limitedinternal fences, and water reticulation.

- 42 - ANNEX 3

HERD AMID POTENTIAL OFFTAKE PROJECTIONS

3.01 Herd projections have been developed for each region and thenaggregated to obtain the national figures. Because in most of the regions thefactors which have affected herd growth in the past are not expected to changesignificantly in the short-term, trend extrapolation has been used andadjusted in the case of Ngamiland and Francistown, where previous outbreaks ofFMD and severe drought (in Ngamiland) are likely to distort the projection.The resulting growth rates were applied, up to a limit determined by thesustainable carrying capacities in each region (paras. 3.03-3.04). Based onthis methodology, the national herd is forecast to grow at an average annual

-rate of 1.5% over the next several years, stabilizing at approximately 3.3million head by about 1990. Most of this growth is expected to occur in theWestern and Ngamiland regions and in the western parts of the Francistown,Central and Southern regions (Table 3.1).

3.02 Potential offtake for each region was derived from experienceduring those years in the early 1970s when the herd was growing and offtakewas not constrained by limited abbatoir capacity. On this basis potentialofftake from the national herd is forecast to initially grow at 11.5% and thento gradually increase to approximately offset the slowing down and eventualstabilization of the herd. Potential offtake is projected to reach 13.5% by1998 (Table 3.1).

3.03 To obtain regional estimates of carrying capacity, data fromexisting research was adjusted to reflect regional conditions. The APRUresearch shows capacity figures which range from about 12 ha/animal unit (au)on eastern sandveld soils to about 9.0 ha/au on hardveld soils. The RangeEcology Unit of MOA estimates capacity to be much lower, about 20 ha/au, inthe low rainfall western sandveld grazing areas.

3.04 The factors which are most important in limiting carryingcapacity in the regions are the availability of portable water sources, cordonfences which restrict grazing, and poisonous plant species. The shortage ofwater is particularly constraining in the Ngamiland, Western, Francistown andGaborone regions. After adjusting the research results for these factors, theregional carrying capacities are estimated as follows: Southern 9; Gaborone14; Central 11; Francistown 16; Maun 29; and Western, 37.

8erd Crowth and Pbtential Offtake('000 Iwad of cattle)

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

REGION

Cattle Poqilationsawthem 385 388 395 402 4C8 414 421 425 428 428 428 428 428 428 428 428 428Gab>rome 386 386 385 384 383 383 382 381 380 380 380 380 380 380 380 380 380CeKitrzil 1,062 1,071 1,(B4 1,098 1,111 1,125 1,13E 1,144 1,149 1,149 1,149 1,14'J 1,149 1,149 1,14-9 1,149 1,149Francistmn '403 406 412 418 423 428 434 438 44i1 441 441 441 441 441 441 441 4411Atbun 345 347 356 365 373 385 395 402 4C6 406 406 406 406 406 406 406 406Western 398 402 413 424 439 449 459 463 465 465 465 465 465 465 465 465 465

Total 2,979 3,000 3,045 3,091 3,137 3,184 3,231 3,253 3,269 3 3,269 3,269 3,269 3,269 3,269 3,269 3 ,269

RION i

OEftake (X): 11.5 11.5 11.5 11.5 11.5 11.5 11.5 12.2 12.7 12.8 12.9 13.0 13.1 13.2 13.3 13.4 13.5Southern 44 45 45 46 47 A4s 49 52 54 55 55 56 56 57 57 5a 91CGabarone 44 44 44 44 44 44 44 46 48 '0 49 49 50 50 5S 51 51Central 122 123 125 126 128 129 131 140 146 147 148 149 150 151 153 153 155Vrancsltown 46 46 47 48 49 50 51 53 56 56 57 57 58 58 58 59 59MaLum 40 40 41 42 43 44 45 48 52 52 53 53 53 54 55 55 55Westerm 46 47 48 /9 50 51 52 56 59 59 60 61 61 61 62 62 63

Total 342 345 350 355 361 366 372 397 415 418 422 425 428 432 435 438 441

>H Z(D M

w >j

. N

- 44 - ANNEX 4

TGLP R-ANCH BUDGETS

4.01 An assessment of the financial profitability of ranch developmentunder TGLP has been carried out. That analysis shows that the minimumeconomic scale of operation is about 360 AUs or about 500 head of cattle, witha ranch size ranging from 4,500 ha to 6,000 ha, depending on carryingcapacity. Sizes below this level produce insufficient net income to attractprospective ranchers. The budgets for this minimum economic scale arediscussed below.

4.02 To derive these budgets, the herd projection model used by the BankAppraisal Mission for the second livestock Project was applied and adjustedfor the study team's slightly lower estimates of productivity. In the earlyyears, productivity on the new ranches is estimated to be about 75% of thatpresently attained on the freehold ranches, gradually rising to the samelevels by the 12th year, when the herd is expected to have reached fulldevelopment. In the analysis which follows, all prices are expressed inconstant 1983 prices. The significance of price changes is discussed in para.4.05.

4.03 The required ranch investments, phased over a three year period, areshown in Table 4.1. The TGLP rancher is expected to borrow, on commercialterms, about 78% of this amount and to supply the rest himself. His operatingcosts over the development period are shown in Table 4.2. Operating revenues,obtained from the sale of cattle, are shown in Table 4.3. The resulting cashflow (Table 4.4), which takes debt servicing into account, is positive in allyears and the farmer's net income rises from t 2,500 initially to t 7,000 inthe 12th year.

4.04 The ranches' assets consist of land, fencing, water supply, livestockhandling facilities and cattle. The return on these assets (the ratio ofoperating revenue minus operating costs to revalued fixed assets) is estimatedto rise from 4% during the first few years, to 5% in the 9th year and to 6.2%in the 12th year. The rates of return are shown in Table 4.5.

4.05 These returns compare quite favorably with those presently obtainedon freehold ranches. The return on revalued fixed assets on the averagefreehold ranch is estimated at about 6.5%. To the freehold ranchers, thesereturns are considered very satisfactory. Earning 6.5% on assets which havebeen increasing in value over the last decade at rates much faster than thegeneral rate of inflation, would have to be considered good by moststandards. In fact, there are probably very few investments in Botswana todaywhich could yield comparably high returns while providing a satisfactoryincome and hedge against inflation. The slightly lower returns on the newTGLP ranches should provide an equally attractive opportunity for prospectiveinvestors.

4.06 While meat prices (the driving force in valuing ranch assets) are notexpected to rise as fast as they have in the past, they are likely to continueto at least keep pace with, if not slightly exceed, the rate of inflation inBotswana. Consequently, ranch investments, in addition to providing a quitesatisfactory income, are likely to remain a good hedge against inflation.

- 45 - ANNEX 4

Table 4.1

RANCH - INVESTMENT COSTS(Pula)

YEAR 1 YEAR 2 YEAR 3UNIT

UNIT COST NO. COST NO. COST NO. COST TOTAL

1. Water 1SupplyBorehole Item 10000 1 10000Pump & Engine Item 8000 1 8000Reservoir Item 2000 1 2000Trough Item 20C0 4 800

20800 20800

2. Tracks andFirebreaks

Perimeter Km 5C 32 1600Internal Km 50 16 800

2400 2400

3. Fencing

Perimeter Km 650 24 15600Internal Km 650 7 4500 7 4500

4500 15600 4500 24600

4. Buildings &Other

Pumphouse +Storage Item 2500 1 2500

Tools Set 1000 1 1000Handling Yard Item 2000 1 2000

5500 5500

33200 15600 4500 53300

1/ Existing Water Supply will require replacing in Yr 10 with Pump Engine= P8000, Reservoir = P2000, Troughs 4 x 200 P800Total Cost = P10800.

RANCH - OPERATING EXPENSES

YEAR 1 2 3 4 5 6 7 8 9 10 11-20

1. Variable Costs

Costs/Animal (P 9.45) 1/ 9.45 9.45 9.45 9.45 9.45 9.45 9.45 9.45 9.45 9.45 9.45Number of Animals 520 510 510 510 530 550 570 580 600 610 620

Total Variable Costs 4914 4820 4820 4820 5009 5198 5387 5481 5670 5765 5859

2. Maintenance Costs

Fencing 2/ 210 960 1140 1140 1140 1140 1140 1140 1140 1140Firebreaks 3/ 720 720 720 720 720 720 720 720 720 720Water 4/ 432 432 432 432 432 432 432 432 800 4Building/Yards 150 150 150 150 150 150 150 150 150 150 O0

Tools & Equipment 50 50 50 50 50 50 50 50 50 50

Total Maintenance Costs - 1562 2312 2492 2492 2492 2492 2492 2492 2060 2492

3. Labour 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200

4. Bulls 5/ 600 600 600 600 600 600 600 600 600 600 600

Total Operating Costs 6714 8182 8932 9112 9301 9490 9679 9693 9970 9605 10519

1/ Salt & Minerals 1.50 2/ Maintenance @ P15/km 3/ 48 kms @ P15/kmVeterinary Expenses 3.20 Year 2 7 kms 4/ 8% of capital costWater 3.75 Year 3 32 kms 5/ 2 Bulls @ P300 eachOther 1.00 Year 4-20 48 kms

P 9.45 vD

Ranch Operating Revenue

YEAR 1 2 3 4 5 6 7 8 9 10 11 12-20

Bulls:No. 2 2 2 2 2 2 2 2 2 2 2 2Average Unit Value Pula 300 300 300 300 300 300 300 300 300 300 300 300

Total Value Pula 600 600 600 600 600 600 600 600 600 600 600 600

1eiffers:No. 2 2 3 3 6 4 6 10 10 12 12 17Average Unit Value Pula 200 200 200 200 200 200 200 200 200 200 200 200

Total Value Pula 400 400 600 600 1,200 800 1,200 2,000 2,000 2,400 2,400 3,400

Steers (3-4 years): INo. 5 16 22 31 35 41 45 50 50 54 54 58Average Unit Value Pula 260 260 260 260 260 260 260 260 260 260 260 260 1

Total Value Pula 1,300 4,160 5,720 8,060 9,100 10,660 11,700 13,000 13,000 14,040 14,040 15,080

Steers (4-5 years):No. 53 20 22 13 7Average Unit Value Pula 300 300 300 300 300

Total Value Pula 15,900 6,000 6,600 3,900 2,100

Fattening Cull Females:No. 37 16 17 21 21 23 23 25 25 27 27 27Average Unit Value Pula 220 220 220 220 220 220 220 220 220 220 220 220

Total Value Pula 8,140 3,520 3,740 4,620 4,620 5,060 5,060 5,500 5,500 5,940 5,940 5,940

Total Value of Sales Pula 26,340 14,680 17,260 17,780 17,620 17,120 18,560 19,360 21,100 22,980 11,980 25,020

H

, - \ ~~~~~~~~~~~~U4S

l . >~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t-

:9.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P

CASH FLOW PROJECTION

Iu a)

YEAR I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 9 20

Inflow

- Sales 26340 14680 17260 17780 17620 17120 18560 19360 2110() 22980 22980 25020 25020 25020 25020 25020 25020 25020 25020 25020

- Pe-nelopment Loan 20800 15600 4500 10800

- Equity Contrtbuition 12400

Total 59540 30280 21760 17780 17620 17120 18560 19360 21100 33780

(h tflowi

- OpeLating Costs 6714 8182 8932 9112 9301 9490 9679 9693 9970 9605 10519 10519 10519 10519 10519 10519 10519 10519 10519 10519 CO

- Investment 33200 15600 4500 10800

- I)bt Service 3984 5856 5745 5745 S745 5745 5745 5745 7656 7656 7656 7656 7656 7656 7656 7656 7656 7656 5745

Total 39914 27766 19288 14857 15046 15235 15424 15438 15715 28601 18175 18175 18175 18175 18175 18175 18175 18175 18175 16264

* Surplus 19626 2512 2472 2923 2574 1885 3136 3922 5385 5719 4805 6845 6845 6845 6845 6845 6845 6845 6845 8756

* Not Including tax or land rent

4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-

(DH10>

h Z

RANCI ASSETS AND FINANCIAL RETURN

YEAR 1 2 3 4 5 6 7 8 9 10 11 12-20

ASSETS (Pula)

Land 11 57500 70300 83130 9600 96000 96000 96000 6000 96000 96000 96000 9600

Cattle 104200 102000 101800 102200 106200 110000 114400 116200 120200 122000 124000 124000

P. 161700 172300 184930 198200 202200 206000 210400 212200 216200 218200 220000 220000 4.

Net Operating Income P. 19626 6496 8328 8668 8319 7630 8881 9667 11130 13375 12461 14501

Financial Return X 2/ 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 5.0% 6.0% 6.0% 6.5%

1/ Land in Year 1 valued e P 9/hectare (Land with water supply), Year 4 - Year 20 valued @ P 15/hectare (Fully improved with fencing,

tracks and firebreaks).

2/ Financial return expressed as a ratio - Net Operating IncomeAssets

H3

(D -e

Ui 4-

- 50- ANNEX 5Page 1

MOA LIVESTOCK SERVICES

5.01 MOA provides numerous livestock services through its four majordepartments, including: Veterinary Services, Field Services, AgriculturalResearch, and Cooperative Development. Each of these are discussed below:

A. Department of Animal Health

5.02 About 34% of agriculture's total recurrent budget is utilized by theDepartment of Animal Health. The Department's activities encompass animaldisease and control measures, tsetse fly control, animal health servicecenters, meat inspection at the abattoirs, and a hide improvement program.Despite two recent outbreaks of FMD (1977-80), the performance of theVeterinary Services has been of the highest standard over the last twentyyears, and must be regarded as one of the most efficient in Africa.

5.03 Animal Disease Control. FMD has been the focal point in animaldisease control since independence and substantial physical infrastructure, inthe form of cordon fences and quarantine camps, has been provided both toprevent the disease, and limit its effects if an outbreak does occur. The twoprimary sources of infection are cross-border cattle movements from Zimbabwe,and contact with indigenous wild buffalos whose sub-clinical infection of thedisease can be transmitted to domestic cattle.

5.04 Vaccination has been carried out at intervals since 1965. While theoriginal batches of vaccine produced in the field were successful against FMD,subsequent imported vaccines have been less effective. In 1977, when seriousoutbreaks in Ngamiland and Makgadakgadi proved initially uncontrollable, theGovernment decided to establish its own vaccine laboratory in cooperation withIFFA Merieux of France. The Laboratory is now in full production with acapacity of 22 million doses/annum. Botswana's investment in vaccineproduction has been recognized by the South African Development CoordinatingCommittee (SADCC), and a vaccine bank has been proposed for the whole regionbased on the Gaborone installation.

5.05 Preventive free vaccinations are carried out on an annual basis forAnthrax and Blackquarter, both of which now show a low level of incidence.Brucellosis is a major cause of abortion in Botswana, but because the requiredfoetal material seldom reaches the diagnostic laboratory in fresh condition,it has been difficult to assess the extent of the disease. Free vaccinationis available against Brucellosis where the disease has been positivelyidentified. Due to the arid environment, many of the "killer" diseasesassociated with the region are either absent from Botswana or do not causesevere economic losses. Haemorrhagic septicaemia, lumpy skin disease, heartwater, anaplasmosis, babesiosis, blue tongue, and rift valley fever do occur,and farmers can purchase vaccines from the veterinary service for treatment.In the northern and eastern areas of the country, tick control is consideredimportant by many cattle owners and acaricides can be purchased from the

-51- ANNEX 5Page 2

Livestock Advisory Centers. Botulism does cause cattle deaths where animalseat bones in their craving for minerals, and control rests with the individualfarmer to remove the potential]ly dangerous debris.

5.06 Tsetse Fly Control. Infestation of potential grazing land by tsetsefly is limited to Ngamiland, writh the Okavango Delta providing the largestsource of flies. While ground control measures, including the slaughter ofgame animals, have been used fior several decades, large scale aerial sprayingbegan in 1973. The residual dangers of organochloride insecticides (Dieldrin,DDT) have been recognized and initial aerial spraying used endosulphan, atsetse-specific insecticide. Over the last ten years, the area being aeriallysprayed has increased with varying amounts of endosulphan and decamethrin.

5.07 In 1981, the DAH proposed a 6-year program (costing P 6 million) tospray the entire infested area in order to achieve total eradication. Theprogram also included the erection of a veterinary cordon fence around thewestern and southern borders of the Delta to prevent contact between buffaloand cattle. Justification for the program was that eradication costs werelower than continual spraying and that human sleeping sickness would beeliminated. Although the proposal was accepted in principle, budgetaryconstraints have delayed implementation; approximately 200 km of the cordonfence have been completed by March 1983.

5.08 Livestock Advisory Centers (LACs). This scheme began in 1973; it wasdesigned to provide veterinary requisites and other goods to livestock ownerswho in the past had experienced difficulty with regular suppliers. The rangeof goods offered include vaccirnes, medicines, anthelminthics, acaricides, feedsupplements (bonemeal, salt, mineral licks), insecticides, veterinaryinstruments, and fencing materials. Distribution is through LivestockAdvisory Centers in the major towns and villages. With the exception ofbonemeal, all goods are procured through tender, and this price plus 30% ischarged to farmers. The success of the scheme is reflected in the rise insales from P 152,000 in 1974/73 to P 1,153,000 in 1981/82.

5.09 The recent proposal to create a new pricing structure for"essential", "'non-essential", and "discouraged" supplies with a procured costplus mark-up of 5%, 10%, and 20%, respectively, would introduce an unnecessarysubsidy. The other anomaly in the scheme is the retail price of bonemealwhich is marketed at much less than the export parity price. BMC producesapproximately 50,000 bags/annum, and this is sold to the LAC's at P 1.50 perbag, and retailed at P 3.00 per bag. The market price in South Africa isapproximately Pula 12.00 per bag.

B. Department of Field Services

5.10 The Department of Field Services is responsible for all fieldextension work and is organized. into field staff and two major technicalsupport divisions: animal production and crop production. In addition, theDepartment provides several oth,er services (agricultural information and land

- 52 - ANNEX 5Page 3

use planning for TGLP ranches) and maintains a ranch management trainingcenter.

5.11 The main thrust of MOA's cattle production program is through theregional and district extension staff. There are over 200 certificate-levelextension workers.

5.12 The Division of Animal Production comprises nine units, four of whichare specifically concerned with cattle production. These include theArtificial Insemination Service, the Bull Subsidy Scheme, the LivestockMarketing Unit and the Ranch Extension Unit.

(a) Artificial Insemination Service. Artificial insemination camps,spread throughout the country, are used to hold cattle for insemination.Brahman, Simmental, Tuli, and Hereford bulls are used. Some export sales havetaken place in the past, and there remains a potential market for qualityBrahman and Tuli straws.

(b) Bull Subsidy Scheme. Up to 1980, considerable numbers of bullswere purchased locally, and then resold at lower prices to small farmers. Dueto budget constraints, this program is not fully operational.

(c) Livestock Marketing Unit (IX21). In addition to promoting livecattle auction sales, this unit is responsible for up-grading cattle handlingfacilities at railway sidings. The IMU monitors all livestock movement andsales within Botswana and produces detailed annual statistics.

(d) Ranch Extension Unit (REU). The REU provides extension servicesto TGLP ranches. Advice on ranch development, design, and management isoffered to farmers who receive TGLP ranch allocations. The Unit provides aneffective liaison between farmers and the National Development Bank. TheNgwaketse Pilot Group Ranching Project is administered by the REU where groupsof small farmers have formed Agricultural Management Associations to operatethe ranches. Ranch and Extension Officers are located in five regions andthese plus Field Assistants provide support for regional field staff.

5.13 Other services provided by the Department of Field Services include:ranch management training, land use planning and agricultural information:

(a) Ranch Management Training Center. Established under the IBRDLivestock Project II, it has been designed to provide practical ranchmanagement personnel for TGLP ranches. Reflecting the slow progress inimplementation of TGLP, only two trainees from the initial courses were ableto find employment on ranches. Hlowever, it is expected, as the Programgathers momentum, more jobs will become available for trainees. The Center ispresently providing training for Ranch Extension Field Assistants.

(b) Land UJtilization Section. This section carries out all thedemarcations for TGLP ranches, essentially by default since the Department ofSurveys and Lands has not undertaken this responsibility. Sperry navigatorsmounted on land rover vehicles are used, and despite early setbacks with

- 53 - AiNNEX 5Page 4

calibration problems, by Deceuber 1982 the teams have been able to demarcateapproximately 307 ranches. However, should TGLP acquire increased momentum,it is doubtful that the Unit could cope with the demand, and this should berecognized in a planned acceleration program.

(c) Agricultural Information Unit. The Agricultural InformationUnit acts as a public relations mechanism for the MOA and a support servicesupplying extension workers with technical and topical data. Despite somestaffing constraints, the Unit is well equipped through its broadcasting,publications and campaign sections to disseminate information to all thoseinvolved in agricultural production. In the future, as abattoir capacity isadded, information on meat schedule prices, seasonal prices, seasonal pricedifferentials, and live cattle auctions should become a regular feature of theUnit's programs, and coordination with the Division of Animal production wouldensure that extension workers and farms are kept up to date with industryactivities.

C. Department of Agricultural Research

5.14 The Research Department's activities are divided into Crop and AnimalResearch Units. Animal Production Research Unit (APRU) operates sixteenranches throughout the country. Research has concentrated on carryingcapacity, management systems and improving cattle breeds. More recently thefocus has been on range management under communal grazing.

D. Department cf Cooperative Development (CODEC)

5.15 This Department's main functions are to administer the CooperativeAct, to provide technical advice and training to cooperatives and to superviseand audit the cooperative societies. All of these functions could beperformed by the BCU, the BCB and existing private training institutions.

Annex 6Page 1

CATTLE MARKETING INSTITUTIONS

6.01 If a farmer wishes to sell cattle he has a basic choice betweenselling to the BMAC or selling for immediate full cash payment. If he wishesto sell to the BMC then he will normally be able to choose between sellingthrough an agent, the local marketing cooperative or directly to the BMC.Average producer prices, working back from the final meat price, are shown inTable 6.1. The institutions which provide the opportunity for cash sale areindividual buyers or butchers, a regular weekly village market day or monthlyauction sale, and, in some regions, the Botswana Livestock DevelopmentCorporation (BLDC).

A. Sales to BMC

6.02 The arrivals at BMC by category of supplier are shown below for theperiod 1973-1982:

Arrivals at B.M.C. - Analysis by Categoryof Supplier: 1973 - 1982

PercentageYear Agent Cooperative Direct

1973 75 10 151974 71 12 171975 70 15 151976 70 16 141977 66 19 151978 67 16 171979 70 16 141980 59 16 251981 n.a. n.a. n.a.1982 65 20 15

Source: Botswana Meat Commission.

6.03 Agents. The agents provide the most significant channel throughwhich cattle are sold to BMC, accounting for about 65% of total sales in1982. Agents are registered by the Ministry of Agriculture and pay an annuallicence fee of P500. They undertake all the organisational services forfarmers who wish to sell cattle to the B.M.C. and charge a commission of 2.5%of the gross value of the cattle. Their offices and representatives tend tobe clustered along the line of rail and until recently they had norepresentation in the more remote areas of the country.


6.04 The services provided by an agent include:

(a) Cattle handling

- application for a quota on farmers' behalf;- informing farmers of quota approval, and when he should deliver

cattle either to BMC, a loading point or quarantine camp;- receipt of cattle at quarantine camp or loading point, and

assisting with documentation and cattle loading. (At quarantinecamps agents will sometimes assist with watering and herdingduring quarantine);

- unloading and sorting cattle on arrival at BMC, and- paying and posting checks to owner (normally within one week of

slaughter).

(b) Other services

- Providing an advance payment to selected/established clients(normally upon receipt of cattle at the loading point). Large,or long-term advances are charged at bank overdraft rates; thereis normally no charge for short-term or small advances; and

- purchasing farm inputs (fertilizer, pumps, remedies, vehiclesetc); some agents charge for these services, others do not.

6.05 There are a total of eleven registered agents (companies) in thecountry; two serve only their own ranches, four operate regionally, threeoperate only along the railway line, and two operate nationwide These are asfollows:

Serving their own ranches: R. A. Bailey (Pty) Ltd., PalapyeBozswana Auctioneers (Pty) Ltd. Francistown

Regional: Marang Cattle Agency Pty. Ltd., Selebi PhikweTswelelo Cattle Agency Pty. Ltd., Mahalapye,Francistown SeroweLechana Cattle Agency Pty. Ltd., Mahalapye, SelebiPhikwe, Gaborone, LobatseBot:hasitse Cattle Agency Pty., Ltd. Maun

Along Railway Line: Gert du Toit and Megan, Mahalapye, Palapye,Francistown, Phala Road, Mochudi, Selebi Phikwe,LobatseG. P. du Plessis, Mochudi, Mahalapye, Francistown,Serowe, Selebi Phikwe, LobatseThusano Cattle Agency, Selebi Phikwe, Lobatse,Francistown, Serowe, Molepolole, Mahalapye

National: K. N. Grobler, Mahalapye, Palapye, Francistown,Serowe, Selebi Phikwe, Maun, Gaborone, Serule,LobatseJ. Pickles & Son, Mahalapye, Palapye Francistown,SeLebi Phikwe, Gaborone, Maun, Serowe, Lobatse


6.06 The only indication of the agents' clientele is based on MOA 1974data. This shows that 98 percent of the agents' clientele are traditionalcattle owners and 88 percent send fewer than 5 head/year. However, 64 percentof the cattle handled by agents is from the 2 percent of their clientele - thefreehold ranchers. This indicates the dependence agents have on freeholdfarmers for their throughput. This clientele distribution described for 1974is unlikely to have changed significantly and could be regarded as areasonable indication of the present situation.

6.07 Cooperatives. The first livestock marketing cooperative wasestablished in 1964. After a slow beginning, the movement underwent rapiddevelopment during the early 1970's. At present, there are 64 societiesserving approximately 20,000 members. The Department of Co-operativeDevelopment (CODEC), which is part of the Ministry of Agriculture, hasprovided a good deal of the direction, support and guidance during thisdevelopment period. Cooperative societies are registered with the Ministry ofAgriculture.

6.08 Although effective in promoting a "front line" point of sale, theco-op furthest from BMC faces greater organizational problems and receivesless servicing from parent bodies. The coops have provided farmers with aneffective alternative to agents and buyers. However, it should be noted thatwhile expansion was very rapid during the period 1970-76, performance levelledoff from 1976-81. In 1981, there was a slight increase in performance, duemainly to the coops beginning operations again in Ngamiland after the removalof the FMD restriction in that area. This performance was sustained in 1982.

6.09 The Botswana Cooperative Union (BCU), an umbrella organization, withoffices located at Gaborone, Palapye Selebi-Phibwe, Francistown and Maun, actsas:

a wholesaler of consumer goods and farm inputs, maintaining awholesale warehouse in Lobatse,

- an intermediary and coordinator in livestock marketing assisting thesocieties and representing their interests with BMC,

- a source of information and publicity for members.

6.10 The Botswana Cooperative Bank is a source of finance for the movementand

- accepts deposits from societies,- is a source of loans for societies (present rate of interest is

14.5%),- coordinates agricultural credit schemes, and- assists and acts as a coordinator for thrift and loan societies.

6.11 Coop societies are allowed to charge a commission of 5.0% of thegross BMC value of their members' cattle. Of this amount, BCU takes 1percentage point for the following services:

57 ANNEX6Page 4

quota application to BMC;reception of cattle at BMC;identification of carcases and supervision through BMC;receipt of payment from BMC;calculation of deductions and payments to be made to each cattleowner;dispatch of payments to societies;liaison between societies and BMC;calculation of annual BMC bonus for each society member;notification of BMC quota list to each society;holding ground facilities (one holding ground); andacts as guarantor to the railways for the freight accounts ofsocieties

6.12 Societies retain the balance (usually 4%) for the followingorganizational services:

- quota application to ]3CU Lobatse;- registration, collection, marketing, identification, and dispatch of

cattle to the BMC;- arranging the transport of cattle to BMC,- in the case of some larger established, more affluent societies, an

advance payment (P. 30-70/head);- receiving the payment calculation and BMC check; and- making final payment t:o members.

6.13 The success of a coopeerative and the standard of services offereddepends largely on the quality of the management. There are few Batswana withthe expertise required, and the rate of attrition of experienced managers ishigh. In more remote areas, it is particularly difficult to attract peoplewho have the required expertise.

6.14 Auditing for societies is handled by a section CODEC and is aprincipal means of control and for the identification of problems. Accountsfor societies for the year ende!d December 31, 1981, have been audited andthose for the year 1982, are under action and due for completion in November1983. External assistance has been provided to strengthen the audit sectionbut this terminated in 1983.

6.15 Direct Sale to BMC. The number of cattle sold directly to the B.M.C.has remained relatively constant over the years at around 15 percent of totalthroughput. It is an option exercised mainly by larger farmers but recentlysmaller farmers from the Southern and South-East Districts have begun to sellin this way. This change probably arises from improved farmer knowledgeconcerning sale procedures and it is a trend which will undoubtedly grow.

-58- ANNEX 6Page 5

B. Selling for Cash

6.16 For the farmer the advantages of selling live cattle to a cash outletare twofold: Firstly he receives cash-in-hand and secondly he passes onvarious risks to the buyer (including condemnation at the B.M.C. and the riskof death or loss en route). The disadvantage is that the price is usuallylower than the price which he would receive had he sold to the B.M.C.

6.17 Sale to a Local Trader or Butcher. In many parts of Botswana afarmer who wishes to sell his cattle for cash can sell to the owner of a localtrading store or butchery. He can usually bring his animals to the store onany day of the week and after negotiation a price is either agreed or notagreed upon.

6.18 Sale to a Visiting Cattle Buyer or at an Auction Sale. In manyvillages the tribal administration puts one or two days of each week aside forthe issuing of livestock sales permits. These days then become "market days"on which registered livestock buyers come to the village to buy cattle andfarmers wishing to sell bring their cattle. All bargaining is done privatelywith agreement being reached between a single buyer and a single seller.

6.19 In some villages there is a monthly auction sale. A registeredauctioneer will hold the sale which is usually attended by up to half-a-dozenbuyers. Normal auction procedures are followed with the auctioneer callingfor bids and the farmer either accepting or refusing the final offer.

6.20 These two kinds of cash outlet are common at villages adjacent tofreehold farms with the freehold farmers acting as buyers.

6.21 Sale to the B.L.D.C. The B.L.D.C. is a parastatal organisation whichpurchases cattle in remote areas. It normally purchases cattle over aweighing scale and at present has three buying points in Ngamiland and one inthe northern Kgalagadi. It also purchases cattle at the cattle auctions inXanagas (Ghanzi District). In 1982 it purchased 7,237 head.

PRICE MAP (PRICES IN PULA/IIEAD)

LOCAL- PRICE TO INTERNAL PRE BMC EX BMC EXTERNALITY PRODUCER TRANSPORT LOBATSE BMC LOBATSE TRANSPORT MARKET

982 96.8 .316 BIQUE-

MAUN

:301

96.8

BMC

145 operating, 1 316 RSAL9taxation/l 302|

13 o/head3's 14 .- I

50-5 Li3144.5 356

197.5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

CiIANZII cr-

61.35 (j t4186,65

. XIrt9 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~F ' w>


CATTLE MARKETING INFRASTRUCTURE

A. Introduction

7.01 The major livestock movements are eastwards and (from the north)south to BMC for slaughter. In addition there are two significant eastwardmovements to commercial farms for fattening

- from Western and South Western Botswana to Nolopo farms.- from North Eastern and Central districts to Tuli farms.

7.02 The main methods of movement are trekking, truck and rail. Therelative importance of each mode is shown below:

Arrivals at BNC

Trek Truck RailNo. % No. x No. x

1982 50726 22 18977 8 162629 70

1982 44772 22 16563 8 139754 69

1980 65395 47 19618 14 55379 39

1979 59771 26 24412 11 141467 63

Source: BMC.

B. The Railway

7.03 The railway is an essential transport system for the carriage ofcattle, in quarantine, from northern areas to the slaughter facility atLobatse in the south. The railway is a north-south single line of railconnecting systems in Zimbabwe and South Africa. Two branch lines off themain route connect Selebi Phikwe 59 km to the east of Serule, and Morupule 16km to the west of Palapye. The main north-south line is 641 km long.

7.04 Owned by the National Railways of Zimbabwe (NRZ), the system isadministered and serviced from its center in Bulawayo. NRZ sets user chargesand freight rates in Zimbabwe currency which are converted to Pula andadjusted regularly for exchange rate changes. The freight rates were lastrevised on July 1, 1982 and are presented below.


Table 1: Freight Rates - Charges for moving cattle byrail to Lobatse (rates as at February 1983)

(Pula)

Pula per head

Ramakgwebane 33.63Tshesebe 32.09Bosoli 31.73Francistown 31.00Shashe 29.22Serule 25.25Selebi Phikwe (Serule + 0.982) 35.07Palapye 21.36Radisele 19.64Mahalapye 17.45Phala Road 15.35Dibete 12.51Artesia 10.92Mochudi 8.30Sebele 7.76Notwane 7.70

Note: Maximum loading of 22 per whole truck

Source: NRZ Lobatse, Febr. 1983

7.05 In turn, NRZ pays "way leave" to the GOB for the right to operate themain line and receives payment from GOB for operating the branch lines. Thebranch lines are owned by the GOB.

7.06 Discussions are underway for the nationalization of the railway.Consideration is being given to the acquisition of all existing railwayinfrastructure, the establishment of workshops, administration andcommunication facilities at Francistown, and additional rolling stock.

7.07 There are sixteen points where cattle can be loaded for dispatch toLobatse. Some of these loading points are stations staffed by NRZ personnel,while others are no more than sidings without attendants. At each, are cattleloading facilities consist of holding yards, watering trough and loadingshute. Originally constructed by NRZ, many of the facilities becameinadequate as the number of cattle being transported increased. Improvementswere made by the GOB using funds from the World Bank - assisted SecondLivestock Project Loan during the period 1979-82 and cattle loading facilitiesare now considered adequate in terms of design, holding capacity, ease ofloading, drafting, and marking. New loading facilities were built in SelebiPhikwe in 1978. A working arrangement has been reached whereby the NRZmaintains the water supply while the MOA maintains the rest.


7.08 Rolling stock for cattle comprise 120 wagons each with twocompartments capable of holding 11 head. Approximately 100-110 wagons are inuse at any one time, others being under repair. Travelling time fromFrancistown to Lobatse is approximately 14 hours, and wagons are used on thefollowing basis.

Day 1: Dispatch to sidingDay 2: LoadingDay 3: Cattle transport to Lobatse

7.09 Wagons are adequate in terms of size and condition, and are repairedduring the monthly visits by NRZ gangs from Bulawayo.

7.10 The railways have a working arrangement with BMC to supply 50 wagonsper day. These are dispatched daily to sidings according to quotas andloadings determined by BMC. At sidings, wagons are loaded by agents, co-opsor farmers on a first-come, first-served basis. Overloading of wagons anddisputes can occur. Control of cattle loading is achieved by the system ofquotas, each quota being checked by a representative of the VeterinaryDepartment before he issues an inter-zonal removal permit, and also by therailways in Lobatse who will not accept cattle not covered by a quota permit.In cases of dispute, shippers usually look to the Veterinary Departmentrepresentative as the final arbiter.

7.11 Payment for cattle shipment is made by the shippers at the loadingpoint, or at Lobatse. All agents have accounts with NRZ at Lobatse, and arebilled monthly for cattle shipped by them. Co-ops are at times in default ofpayment and NRZ will impound cattle at Lobatse until payment is made. BCUacts as guarantor for the societies. The cost of moving cattle by rail isshown below:

Cost of moving Livestock by Rail

Distance from Price/Head Price/Head/kmStation Lobatse (km) (Thebe) (Thebe)

Notwane 51 776 15.21Sebele 80 776 9.70Mahalapye 273 1,745 6.39Palapye 331 2,136 6.45Serule 403 2,524 6.26Selebi-Phikwe 463 3.506 7.57Francistown 494 3,100 6.27Ramakgwebane 566 3,363 5.94

Source: NRZ Lobatse station.


7.12 The majority of cattle arriving at BMC arrive by rail and thesignificance of rail transport: is shown below.

Table 3: Arrivals at BMC by rail 1973-82

% of all cattle receivedYear Number at BMC

1973 140,245 671974 122,923 651975 122,608 661976 148,296 701977 131,873 681978 80,376 53 1/1979 141,467 631980 55,379 39 1/1981 139,754 691982 162,629 70

Source: Botswana Heat Commission.

1/ Note: Tne effect of closure of northern areas due to FMD.

C. Road Transport

7.13 Road transport is the least significant of the main forms of cattlemovement. Unsealed roads, high vehicle maintenance costs and long distancesover which stock are carried limit the growth of this form of transport. Thenumber of cattle arriving at B4C by road motor transport is as follows:

Arrivals at BMC by RMT

Year Number % age of Total

1973 22,316 111974 20,138 111975 13,911 81976 22,588 101977 16,121 81978 19,031 131979 24,412 111980 19,618 141981 16,563 81982 18,977 8

Source: Botswana Meat Commission.


7.14 Although the use of road motor transport is not important nationally,there are significant routes: from Ghanzi/Kgalagadi to Lobatse, and fromMolopo to Lobatse.

7.15 One other significant use of road motor transport that is notindicated in the information from the Botswana Meat Commission, is on thenorthern route between quarantine camps and the railheads at Francistown.When cattle movement was allowed following the FMD outbreak in 1980, theVeterinary Services organized the movement of cattle by truck to maintaintheir quarantine status. The movement of cattle ex Ngamiland throughMakalamabedi Quarantine Camp to Francistown numbered 27,308 in 1981.Information for 1982 was not available.

7.16 The cost of road motor transport is shown below:

Cost of Road Motor Transport (1983)

Rate/Head Distance Rate/Head/kmRoute (Pula) (km) Thebe

Makalamabedi-Maun 3.50 70 5.00 1/Makalamabedi-Francistown 45.0 450 10.00Orapa-Francistown 25.0 235 10.60Thalamabele-Francistown 18.0 180 10.00Dukwe-Francistown 14.0 120 11.60Ghanzi-Lobatse 50.0 650 7.70Tsabong-Lobatse 50.0 403 12.40Molopo (West)-Lobatse 25.0 275 9.10Molopo (East)-Lobatse 18.0 170 10.60Kang-Lobatse 25.0 270 9.25

1/ This price has been established for Government transport and is considereduneconomic. A Ministry of Agriculture spokesman recommended a figure of P8.50-9.00/head (12.1-12.8 thebe/head/km) as being necessary to cover costs.

Source: BLDC; K.M. Grobler (Pty.) Ltd., Ministry of Agriculture, BMC.

7.17 On southern routes, most of those trucking cattle to Lobatse arefreehold farmers, although an increasing number of smallholders are making useof this form of transport. The 16-18 hour trip from Ghanzi to Lobatse saves a6-7 week trek over the same route. A saving in animal losses is also seen asan advantage. Preliminary investigations in 1969/70, while not conclusive,indicated that, although weight losses were no less than for trekking, a lowergrading loss could be expected with animals transported by road. However,observers have noted a high degree of bruising with some operators and on someroutes. It is significant that commercial farmers truck their finished cattleto Lobatse rather than trekking which suggests they see an economic advantagein doing so.


7.18 There are no specialist cattle transporting companies, and it isunlikely that any trucks are used for carrying cattle only. Most are used tocart general cargo most of the time, with cattle as back loads. Of 2,684heavy lorries registered in 1976, perhaps 1,000 were capable of carryingcattle, and this proportion is unlikely to be significantly different in1983. Those wishing to transport cattle by road along the more significantroutes have no difficulty obtaining trucks and it would appear that the demandis being met.

D. Trek Routes

7.19 Trekking is a traditional method of moving cattle to a market point.With the most significant point of sale located at Lobatse, several major trekroutes have developed:

- Ngamiland to a railhead at Francistown,- Ghanzi to Lobatse with feeder routes to Xanagas, Ncojane,

Tshane, Molopo and Kuke,- Tshabong to Lobatse,- Xanagas/Ghanzi to Molopo,- Ngamiland to Palapye.

7.20 Cattle on the major trek routes is shown below:

Traffic on major Trek Routes

Annual Cattle Heads moving inRoute Main Direction 1975-78

Makalamabedi-Francistown 3,000 - 5,000Rakops-Palapye 10,000Ghanzi-Ngolagadi-Phunandu 12,000 - 15,000Phuduhudu-Molopo 4,000 - 10,000Phuduhudu-Lobatse 5,000 - 10,000W. Ngwaketse-Lobatse 3,000 (1977)Molopo-Lobatse 12,000

ca. 10,000

Source: McGowan & Assoc. Report 1979 Annex 5.

7.21 In other areas cattle are moved towards the line of rail and Lobatseby filtering through communal areas and by following other cattle posts,available water, and kraals. In some of the traditional areas where themajority of the national herd is reared, trek routes are virtuallynon-existent.


7.22 Cattle emanating from traditional areas suffer from:

- Straying on route - although most of these are recovered at alater stage,

- weight and grading losses due to long daily trekking distancesand to trekking through overgrazed area,

- stress due to distances covered, difficulties with watering andfeeding,

- delays affecting their scheduled arrival at BMC.

7.23 The Government has assumed responsibility for several of the trekroutes, and have provided watering points and kraals at regular intervals.The routes maintained are:

- Ghanzi-Lobatse (including the feeder routes to Xanagas, Ncojane,Tshane, Molopo and Kuke),

- Shakawe-Maun (including feeder routes),- Maun-Francistown,- Mopipi-Makoba,- (a southern route from the south of Tshabong to the

Ghanzi-Lobatse route is under development but initial efforts toestablish boreholes have not been successful),

- (the Maun-Francistown route is not in use since the FMD outbreakin 1979, and cattle are now trucked along the route).

7.24 A reasonable daily trekking distance is considered to beapproximately 20-22 km. At present, the common interval between boreholes onGovernment maintained routes is 29-32 km, although intervals may vary from7-58 km. Further boreholes to reduce daily trekking distances are necessary.The facilities to be found at a borehole consist of: borehole, engine (diesel)and pump, reservoir, kraal, dwelling for a pump attendant.

7.25 A pump attendant is employed to operate the pump and to ensure (intheory at least) that the facilities are utilized by cattle being trekked andnot by squatters. The pump attendant is paid by the Ministry of Agriculture,and is supervised by the District Veterinary Officer (DVO). There is usuallyone pump attendant per borehole, but in some cases one attendant may servicetwo boreholes. There are no attendants on the Makalambedi-Francistown routeand those attendants at Makoba, service boreholes on the Mopipi-Makoba route.


7.29 The estimated (1982) cost of establishing a borehole is as follows:

- Borehole Pula 14,000- engine and pump Pula 3,000

- fittings, tank etc. Pula 500- reservoir Pula I,750- kraal " 1,200- houses " 1,600 (asbestos pre-fab)- labor 1/ " 800

- sundriespumphouse " 700

- trough " 350- other 1/ " 300

Total Pula 24,200

Source: Trek Route Office, Ministry of Agriculture.

7.27 The Government's policy in maintaining trek routes is to provide anational system of access whereby farmers have the means to move cattle freelyto market/slaughter at a minimum cost. The purpose is to

- remove cattle from being trekked through heavily utilizedcommunal lands,

- remove the temptation to trek cattle down the main roads withattendant surface damage,

- minimize the risk of vehicle/animal collision,- provide adequate grazing and water for trekked cattle.

7.28 The cost of maintaining trek routes could not be determined and thelast cost analysis carried out was for 1970. The Ministry of Agriculturemaintains all facilities except: the bore hole and pumping equipment, which aremaintained by the Department of Water Affairs, (DWA). In 1982, DWA budgettedP 80.00 per borehole for maintenance. The service provided by the Ministry ofWater Affairs is often slow and causes problems during peak periods of trekroute usage. The Ministry of Agriculture has considered taking over thisfunction but has not done so because of the high cost of establishing theinfrastructure required to provide an adequate service.

7.29 A Trek Route Officer has been appointed. He is responsible forplanning, constructing and maintaining the national trek route system andinfrastructure.


7.30 The number of animals arriving at BMC by trek remain relativelyconstant as shown below.

Table : Arrivals at BMC by Trek

Year Total % of Total

1973 46,524 221974 46,309 241975 48,760 261976 40,420 191977 46,411 241978 50,408 341979 59,771 261980 65,395 471981 44,772 221982 50,726 22

Source: BMC.

7.31 Trek route planning is undertaken by the Ministry of Agriculture todetermine livestock catchment areas, offtake numbers, routing for the trek,width of trek route etc. An approach is made to the Lands Board for theirapproval of the route. The route is then surveyed by the District Officer(Lands) from the District Commissioner's Office after which negotiation withlocal occupants begins.

7.32 The width of the trek route varies between 0.5 - 5.0 kms dependingon the human and cattle population pressure of the area and the number ofcattle estimated to use the route. Trek route boundaries are not marked foridentification, and disputes with local occupants often arise over theboundaries. Land ownership remains with the local land board The demarcationand gazetting of trek routes to protect future use is presently underconsideration by the Ministry of Agriculture.

7.33 Trekking can be undertaken by an owner or a number of cattle ownerswho group their cattle together. On most routes contract trekking is alsoavailable. The costs are shown below.

Trekking Costs

(a) ContractPula/head

Xanagas-Kang 7.50Ghanzi-Lobatse 12.50Molopo (Eastern side) 5.00Molopo (Western side) 8.00Nokaneng-Maun 5.00

Source: BLDC, K.M. Grobler (Pty) Ltd.


(b) Farmer-OrganizedPula/head

Shakawe-Nokaneng 6.00Ghanzi-Lobatse 12.50-13.00

Source: Calculations based on information receivedfrom the Trek Route Officer and VeterinaryDepartment Staff, Maun.

Note: These costs are the actual financial costs and do not include weight,grade or animal losses.

7.34 Comparative trek/truck costs on the Ghanzi-Lobatse route are shownbelow:

Ghanzi-Lobatse

PulaTrek Road

Average weight at start 210 210Grade at start G 1 (Price) 148.5Value at start 311.85 311.85Weight loss (%) 9 9Weight loss (kg) 19 19net weight 191 191Value at G 2 (1 grade loss) 260.04Value at 1/2 grade loss 271.83Different in value (GO.5-GI) 11.79Cost contract trek/truck 12.50 50.00

Losses (of depreciated animal value)2% 5.20 0.5% 1.36

Total 29.49 51.36

Cost to Farmer

Different in value start/finish 51.81 40.02Cost of trek/truck 12.50 50.00Losses 2% 5.20 0.5% 1.36

69.51 91.38

7.35 Trucking appears to be much more costly, but the fact that around9000 head are trucked on this route, mainly by commercial farmers, raises thequestion of how reliable the inEormation on trek route losses really is.


7.36 Payment for the use of trek routes was enforced until around 1970when this was discontinued. From the Ministry of Agriculture trek route filethe following comment from the Rural Development Consultant is noted.

"If a system of holding camps, trek route boreholes, and trek routegrazing camps is to be maintained, this should be done by anorganization which has commercial management capacity, and capacityto manage grazing, and which sees the management of these assets asone of their most important objectives. Grazing and water arevaluable goods - even more valuable on trek routes than elsewhere.This is no reason why anyone should receive them free, and if theyare provided free, it is almost axiomatic that they will be misused.

It is desirable that the organization concerned should be acommercial entity, at arm's length from Government. Such a body isin a much better position than any Government department to hold outagainst pressures from individuals who are short of grazing andwater, because if it does give into these pressures it will make aloss." (RDC 18/11/80).

- 71 - Annex 8

Page 1

COOPERATIVE ADVANCE PAYMENT SCHEME

8.01 It is recommended that BCU introduce and manage an advance paymentscheme for interested member associations. To implement this scheme BCU maywish to explore the possibility of bbtaining credit funds from either of twoalternative sources: the Botswana Cooperative Bank (BCB), which would have toborrow its funds from the Government through the Public Debt Service Fund(PDSF) or directly from a commercial bank. Under this scheme, BCB or acommercial bank would lend funds to BCU, which in turn would onlend to thecooperatives to make advance payments to producers. The principal andinterest cost to the producer would then be deducted at the time when fullpayment is made.

8.02 It is recommended that the advance payment be limited to the averagevalue at BMC of a Grade 4 carcass and that two months be the maximumoutstanding time for the advance. Based on 1982 figures of cattle supplied toBMC by the cooperatives, the funds required for this scheme would be asfollows:

Month Cattle (Numbers) x P 110 (in Pula) (2 Months Cumulative Pula)

January 1,335 146,850February 3,685 405,350 552,200March 5,027 552,970 958,320April 7,092 780,120 1,333,090May 5,433 597,630 1,377,750June 3,246 357,060 954,690July 4,408 484,880 841,940August 4,563 501,930 986,810September 1,977 217,470 719,400

8.03 A fund of P1.4 million would be needed to cover sales from 8-9 monthsof the year. If borrowed from PDSF, the scheme would operate as a revolvingfund, but additional borrowing would be required to offset increases in cattleprices, higher sales through cooperatives, and the repayment of principal tothe Government.

8.04 On the assumption that BCU borrows from PDSF at an annual interestrate of 10%, the annual interest payments would amount to P 140,000. Based onthe above flow of funds, and BCB's own service charge, estimated at 4%, theon-lending rate to BCU would be 24%. 1/ Allowing for a 2% handling fee forboth BCU and the LMCs, the final cost to the producer would be P 5.14/animal[P 110 x 28% x 2/121.

1/ The reason for the difference of some 14 percentage points between BCB'sborrowing rate of 10% and its onlending rate of 24%, is that, in additionto covering its handling costs, estimated at 4%, it must also recover thesame annual interest cost that it pays to the Government from much smallerloans given to the LMCs for a maximum period of only two months.


8.05 If a commercial bank were used to finance the advance payment scheme,it is assumed that the interest rate charged to BCU would reflect currentoverdraft rates, now set at 18%. The final cost to the producer would be P4.04/animal.

8.06 It needs to be mentioned, however, that any advance payment schemeregardless of the source of financing will require considerable administrativeinput from BCU. It may turn out that a 2% service charge to cover the costsis not sufficient and may have to be increased.

Large Abbattoir and Final Market Requirements

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

A. Large Abbattoir Requirement('000 head)

1. Potential Offtake in Ngamiland 40 4,0 41 42 43 44 45 48 52 52 53 53 53 55

Less home slaughter 2 2 2 3 3 3 3 3 3 3 3 3 3 3

38 38 39 39 40 41 42 45 49 49 50 50 50 52

Present salughter capacity - 15 22 22 22 22 22 22 22 22 22 22 22 22

Processing deficit -(38) -(23) -(17) -(17) -(18) -(19) -(20) -(23) -(27) -(27) -(28) -(28) -(28) -(30)

2. Potential Offtake OutsideNgaml laiid 302 305 309 313 318 322 327 349 363 366 369 372 375 377

Less hone slaugiter andsmall abbattoir 54 54 54 54 55 55 56 56 57 57 57 57 57 57 _

248 251 255 259 263 267 271 293 306 309 312 315 318 320

Present slaughter capacity 240 240 240 240 215 190 190 190 190 190 190 190 190 190

Processing deficit -(18) -(11) -(15) -(19) -(48) -(77) -(81) -(103) -(116) -(119) -(122) -(125) -(128) -(130)

B. Final Market Requirement

Potential offtake (carcasstonnes) 68,710 69,325 70,350 71,327 72,532 73,538 74,737 79,862 83,506 84,283 84,877 85,496 86,451 86,863

Domestic demaind (carcasstonnes) 1/ 13,182 13,640 14,121 14,614 15,134 15,635 16,239 16,772 17,357 17,969 18,592 19,242 20,009 20,621

Export (carcass tonnes) 55,528 55,685 56,229 56,713 57,398 57,903 58,498 63,090 66,149 66,320 66,285 66,254 66,352 66,242(boneless meat tonnes) 36,093 36,195 36,549 36,863 37,296 :37,637 38,024 "41,008 42,997 43,108 43,086 43,065 43,129 43,057

1/ Estimated at 13Kgs/head of population exclusive of animals slaughtered tn anticipation of death witih population growth at 3.5% anium. (D

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