Agricultural engineering

in development:
guidelines for
mechanization systems
and machinery
rehabilitation programmes
 FAO LIBRARY AN: 313785
FAO
Agricultural engineering AGRICULTURAL
SERVICES
in development: BULLETIN

guidelines for
mechanization systems
and machinery
re-habilitation programmes

FOOD
AND
AGRICULTURE
ORGANIZATION
OF THE
UNITED NATIONS
Rome, 1990
 The designations employed and the presentation of material in this
publication do not imply the expression of any opinion whatsoever on
the part of the Food and Agriculture Organization of the United
Nations concerning the legal status of any country, territory, city or
area or of its authorities, or concerning the delimitation of its frontiers
or boundaries.

M-05
ISBN 92-5-103024-3

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted in any form or by any means, electronic, mechani-
cal, photocopying or otherwise, without the prior permission of the copyright owner.
Applications for such permission, with a statement of the purpose and extent of the
reproduction, should be addressed to the Director, Publications Division, Food and
Agriculture Organization of the United Nations, Via delle Terrne di Caracalla, 00100
Rome, Italy.

© FAO 1990
 CONTENTS

Chapter

FOREWORD AND ACKNOWLEDGEMENTS ii

I INTRODUCTION AND BACKGROUND 1

Some Definitions for the Purpose of this

Publication

II THE PROBLEM OF Pl{EMATURE FAILURE 5

The Causes of Premature Failure - Prevention

and Reduction of Premature Failure

III CONSIDERATIONS SYRROUNDING MACHINERY 13

RENOVATION PROGRAMMES

The Objectives of Renovation Programmes -

Renovation Experiences to Date - The Attitude
and Involvement of Machinery Manufacturers -
Criteria and Supporting Conditions

IV CASE STUDIES OF TRACTOR RENOVATION PROGRAMMES 19

Mozambique - Za~bia - Zimbabwe - Malawi -
Nicaragua - Tanz<!pja

V SOME CONCLUSIONS FROM THE IN-COUNTRY

EXPERIENCES 36

VI RESEARCHING, PIANNING, AND OPERATING RENOVATION 46

PROGRAMMES

Farm surveys - Surveys of Technical Aspects -

Operational Stages in Tractor Renovation -
Monitoring and Evaluation

VII LOCAL MANUFACTURE OR RECONDITIONING OF 56

COMPONENTS

ANNEXE 1 - FINANCIAL COMPARISON MODELS 60

 FOREWORD AND ACKNOWLEDGMENTS

The need for mechanization systems and machinery rehabilitation programmes is common to
nearly all developing countries, in many of which, as little as 30 per cent of the machinery park
is in operating condition. Such countries can ill afford the waste in capital investment and
reduced production potential that are implicit in this situation.

The purpose of this publication is to provide guidance which, within the context of a
mechanization strategy, will help governments to reach decisions regarding rehabilitation
programmes, and to implement them when appropriate. Unfortunately, it is not possible to
establish precise criteria that can be universally applied to planning and operating such
programmes; there are too many variables from one situation to another. Nevertheless, there are
a number of overall considerations and procedures that should be taken into account when
analysing the local situation and when planning and launching rehabilitation programmes. This
publication describes these considerations and procedures. It also provides information, of a case
study nature, on some past and ongoing machinery rehabilitation programmes.

It should be emphasized however, that rehabilitation programmes are relatively new, and still
somewhat rare. Thus, the body of actual experience remains slim, despite quite advanced
conceptual thinking on the subject. This publication, therefore, is a guide rather than a manual. It
aims to highlight issues and provide suggestions for governments to consider; it cannot,
unfortunately, provide recipes.

The first draft of this publication was prepared by the Overseas Division of AFRC Engineering,
Silsoe (UK), and staff of AFRC Engineering subsequently assisted with revisions and editing. A
paper based on this draft was discussed in detail during the Ninth Session of the FAO Panel of
Experts on Agricultural Mechanization, held in Beijing, Peoples' Republic of China, in
September, 1989.

The final version, based on earlier drafts, and on the recommendations emanating from of the
FAO Panel of Experts, was prepared by Agrisystems (Overseas) Ltd, a consultancy group.

A number of machinery manufacturers have taken an interest in this initiative from the start and
have provided information and made useful comments as the work progressed. This support has
been invaluable.

The services of all those who contributed to the preparation of this publication are gratefully
acknowledged.

Agricultural Engineering Service,

Agricultural Services Division,
FAO,ROME

ii
 I

INTRODUCTION AND BACKGROUND

Controversy continues to surround the issue of mechanization, especially with regard to the level
of mechanization appropriate to developing countries. However, few would deny that increasing
agricultural productivity is the cornerstone of rural development, and that, according to
estimates, growing populations in developing countries will require a doubling of food
production in the next 20 years. Against this background, it is widely acknowledged that the low
level of power available to agriculture is a key factor in retarding growth in agricultural
production and productivity.

The best mix of human, animal, and mechanical power is a complex issue, and it varies
according to the specific circumstances. However, without a major expansion in availability of
mechanical power, and a widespread adoption of advanced mechanization, it will not be
possible to biing about the sustainable development of agriculture required by mankind. Land
currently under cultivation must be made more productive through intensified cropping, and
new land, often in areas considered marginal hitherto, will need to be brought into production
using resource conservation techniques.

The strong urbanization trend in developing countries is also part of this scenario. The Report of
the World Commission on Environment and Development, often known as the 'Brundtland
Report' after the Norwegian Prime Minister who led the Commission, forecast that by the year
2000, more than half of the world population would be living in urban agglomerations, with a
commensurate reduction of labour availability on the land. This urbanization trend in developing
countries may also lead to situations similar to that now seen in a few industrialized countries,
where appropriate mechanization enables farmers to cultivate their land in addition to holding a
job in commerce or industry. Such part-time farming, when off-farm employment is available
nearby, is becoming increasingly popular and is generally seen as a positive factor in reducing
urban drift, and in making rational use of land and labour resources. Part of the earnings from
off-farm activities usually go into on-farm investment, particularly for the mechanization which
frees the time necessary for additional off-farm activities. China is a prime example of one
developing country where diversification out of agriculture and into rural industries has sparked
rapid growth in family part-time farming coupled with increased mechanization.

It is evident, therefore, that machinery will play a key role in the endeavour to improve
agricultural production and productivity. In fact, it was estimated by FAQ in 1986 that 30 per
cent of all the investment required in agriculture in the developing countries by the end of the
century will be for agricultural machinery, equivalent to an expenditure of US$ 40,000 million
per annum.

Much of the past experience in advanced mechanization in developing countries has been
disappointing. This, in part, has been due to the high risks which attend annual food and cash
crop farming in the tropics. These risks, coupled with the low market prices that have prevailed
for agricultural produce, militate against the successful use of sophisticated and expensive
machinery.

Typical patterns of ownership and servicing of agricultural machinery in the developing world
are also an important part of the scenario. The following broad categories of machinery users
can be identified:

Estates, plantations, and large agri-businesses that purchase their machinery

outright or with credit from commercial banks, and have their own maintenance
and repair facilities;

State farms or parastatal crop production schemes that have their own resources

1
 for equipment purchases but which, in addition, often benefit from international
loans and usually have their own maintenance and repair facilities;

Large private farms that have access to commercial bank credit for purchases and
usually have their own maintenance and repair facilities;

Medium-size farmers/contractors who have access to commercial bank credit and

are dependent upon local repair shops;

Individual contractors, who do not own land, but have access to commercial bank
credit and who depend upon local repair shops;

Government, regional, or co-operative machinery hire schemes, often financed

under aid projects, with some maintenance and repair facilities;

Small, individual farmers, mainly in Asia, who purchase their own equipment,
often with credit, and additional to their own use, hire it to neighbours.

These groups are all, in the final analysis, dependent upon the returns and profits from farming
enterprises to meet the costs of their machinery operations. Given the prevailing erratic trends in
market prices, and the fact that farming enterprises are often in remote areas where service
support is weak or non-existent, the deterioration in the machinery park is often evident at an
early stage.

The estate and plantation sector, concerned with cash crops such as sugar, oil palm, coffee, and
tea, usually have processing factories as an integral part of the enterprise, and therefore,
engineering and support services are readily available.

State or parastatal enterprises usually establish their own mechanization support services, and
examples of these are the numerous irrigated and rainfed schemes in the Sudan.

Private farmers producing food and cash crops, such as those in Kenya, Tanzania, Zimbabwe,
and Zambia rely mainly on the machinery importers for their support services, which sometimes
includes credit in conjunction with commercial banks. In Pakistan and India, many medium
sized farmers growing staple crops of wheat, rice, cotton, groundnuts, and sugar under irrigation
have been classified as "emerging farmers" by credit agencies and given special treatment and
encouragement. An excellent example is the work of the Asian Development Bank in Pakistan,
which, with support from the World Bank, financed tractors and machinery on a large scale for
many years. Given their personal involvement, individual contractors are flexible and self-
reliant in their operations, and with support from local repair agencies, they can offer low-cost
services over a wide terrain. This is in contrast to governmental and co-operative hire services
that are more centralized and offer no incentives to the machinery operator.

In effect, success in mechanization requires the highest level of management and operational
efficiency, readily available fuel and lubricants, and efficient, low-cost repair services. In
practice, these prerequisites for success have seldom been met, and only the best organized large
estates, and the most enterprising individual farmers and contractors succeed. Hence, a large
number of tractors and machines purchased with public, commercial, and private funds have
suffered premature breakdown and degradation; and this breakdown has often taken place very
early in the machinery's anticipated working life. Surveys indicate that, in many developing
countries, up to 30 per cent of tractors are lying idle through want of replacement parts and that
the reliability index is less than 50 per cent. This means that over half the time a tractor is
needed it is unserviceable.

Idle machinery and equipment equates to the loss of a costly resource, and its non-availability
for agricultural production has widespread damaging consequences. It affects farmers, employed
labour, local entrepreneurs, agricultural support services, and above all the national economy,
and thus, governments themselves.

2
It could be supposed that animal draught can easily substitute for failed and idle tractors, but
such substitution is not as straightforward as it might appear. In addition, draught animals have
yet to prove a viable alternative to tractor power under all circumstances, nor have they even
been fully exploited as a complementary form of power.

When a tractor becomes inoperative and is not repaired or replaced, the area under cultivation
attributed to that tractor will decline, at least in the short term. The farmer facing the need to
adopt an alternative source of draught power, such as oxen, will be confronted by a number of
constraints. For example, trained oxen, implements, and supporting inputs (such as veterinary
and extension services, and ox dips) may not be available; and unless the farmer had previous
experience of oxen, it is unlikely that he could become a proficient animal handler without
extensive training and support services. Furthermore, in some cases, cultural and social values
may hamper a switch from tractors to oxen, for this may be seen as a backward step. And
finally, it must be remembered that draft animals require fodder; to produce it may mean that a
farmer has to reduce the land area he devotes to vital food crops for human consumption.

It is against this broad backdrop that tractor fleets and the existing pattern of machinery and
implement use in developing countries must be viewed. On the one hand, there is a need for
more advanced mechanization, and even greater and more urgent need for planned investment in
the management of agricultural tractors and machinery, while on the other, much of the usable
machinery already in developing countries is operating ineffectively, or not at all, through lack
of such planning and support services.

Some Definitions for the Purpose of this Publication

Before going into the substance of rehabilitation programmes, and the issues that surround them,
an explanation is required concerning the meaning of some key words and phrases as they are
used in this publication.

Rehabilitation Programmes - This phrase is used to cover a wide range of interventions, in

particular:

a) Rehabilitating support services for mechanization in such

areas as planning, management of operations, replacement parts, servicing, and training,
with the overall aim of obtaining optimum use of machinery, the highest possible
level of reliability, and the longest possible economic life.

b) The process of repairing, and renovating defective machinery to return it to

operational status.

c) The process of creating local capacity to manufacture and/or recondition

components required in b) above.

Further definitions are required for the words 'repair' and 'renovate' as they are used here:

Repair - the correction of a defect, or defects, through the replacement of the

defective component(s) or through workshop procedures such as welding,
soldering, machining, etc. 'Repair' implies an intervention only on the
component(s) that are actually unserviceable.

Renovation - the rebuilding of machinery to return it to guaranteed and near-

new condition, using high-quality components fitted by skilled and conscientious
workmen. Implicit in the renovation process is that, in addition to replacing
unserviceable parts, some parts that are still serviceable will also be replaced.

Rehabilitation programmes may be applied to a wide range of equipment and structures,

3
including tractors and power units and their related implements, animal-operated equipment,
and hand tools. In this publication, however, the accent is on tractors and their associated
equipment, since they provide the greatest scope for rehabilitation programmes. The accent will
also be on the renovation aspect of rehabilitation in this publication. However, before examining
renovation programmes, the question of machinery that has failed prematurely must be
examined, for premature failure lies at the core of all considerations concerning rehabilitation
and renovation programmes.

4
 n

THE PROBLEM OF PREMATURE FAILURE

The term 'premature failure' is used here to mean the breakdown and unserviceability of
machinery before the end of its anticipated economic lifespan. Proper maintenance and
operation, in all respects, are assumed and the conditions in which the machinery is to work are
also taken into account. Thus, the anticipated lifespan of a tractor working in the harsh
conditions of the tropics, particularly in Africa, might be shorter than that of the same tractor,
operated and maintained at the same level, but working in temperate conditions, with well
prepared fields and good roads.

Premature failure is a crucial issue when considering renovation programmes, for if the root
causes of premature failure cannot be identified and corrected, the renovated machinery will
again fail prematurely - in effect a vicious circle.

The Causes of Premature Failure

These can be divided into those of an indirect nature, on the one hand, and of a direct nature, on
the other. The indirect causes result mainly from institutional and economic factors, while the
~irect causes are those linked to physical factors concerning the operation and maintenance of
~he machinery itself. Clearly, however, there is a strong relationship between them.

The indirect causes of premature failure are as follows:

The policies and strategies of governments - or perhaps more accurately, lack of

them in many cases - towards agricultural mechanization has had a profound
effect on the ability of the agricultural sector to adopt and sustain tractor-based
technology. Tractors and implements may be provided from government and
donor funds, but their operation is often unsustainable because of poor support
services.

Technical training has been neglected in many countries, and almost universally,
there have been under-estimations of the time and resources required to balance
the skills imparted by training institutions with the needs of modern agricultural
equipment.

In the majority of developing countries, networks of machinery distributors and

service centres tend to be few in number and located in urban rather than rural
areas. Service centres that do exist often lack capital equipment, skilled and
semi-skilled personnel with diagnostic abilities, service vehicles, and reliable
communication links to the main distributor. (It has been argued that these
services are underdeveloped because there is insufficient advanced mechanization
in rural areas of low income countries to warrant, economically speaking, a
network of maintenance workshops).

Agricultural machinery mechanics are often poorly trained and inadequately

managed. And in comparison with other trades, mechanics are not well treated;
the job is considered to be very lowly and it attracts salaries that seldom match
those of other, less skilled trades. It is hardly surprising that the limited number of
skilled mechanics in many developing countries often show a preference for
employment in the urban, private sector, where wages, status, and the perception
of a better quality of life are generally higher than in remote rural areas.

Low profit margins in agriculture, often resulting from government pricing

policies for agricultural commodities, coupled with high fixed costs, caused
5
mainly by low annual tractor-utilization rates, make it difficult for fa1mers to pay
the costs of services provided by workshops established in remote areas.

International aid for agricultural development often includes support for

mechanization, in part because many donors favour the inclusion of hardware.
However, such support is often short-term in outlook, aiming at rapid
development with little thought to longer term considerations of sustainability.

Donors may make their aid conditional to purchases in a specific country, so

called "tied aid", or they may stipulate procurement through international
competitive bidding. In either case this can lead - and has led in the past - to
unsuitable equipment being purchased and disbursed. If the equipment is
unsuitable in the first place, its early demise is likely to follow. The tying of aid
to products from donor countries has also been cited as a main reason for the
multiplicity of makes often found in developing countries, leading to problems of
stocking of replacement parts, specialized training of mechanics, and so on.

Reliance on a source of power coming from outside the country, with items
required for routine maintenance and repairs, (and often fuel too) paid for in
foreign currency, caITies an inherently high risk. If the equipment is imported
under a bulk tender, a low initial purchase price is usually negated by such
pressure on the profit margin for the importer that he is totally unable to finance
after-sales service over a wide geographic area, especially since there is seldom
any guarantee that he would be paid for it. Another consideration is that the farm
machinery park may be so small that servicing and repair operations are
uneconomic unless parallel work is done on vehicles and items of a general
engineering nature. This reduces the specialization that is essential for servicing
complex machinery such as the modern farm tractor. Yet another problem faced
by reputable machinery distributors who try to provide quality service is that
they are in unfair competition with repair shops that lack the skills for quality
work and charge lower prices.

In many cases of international procurement, even when the most appropriate,

high-quality equipment was supplied, lip service only has been paid to back up
and after-sale service. The inclusion of a replacement parts percentage with new
equipment has proved notoriously difficult to implement in practice, since funds
have seldom been earmarked for emergency supplies in later years.

The procurement regulations of aid agencies usually stipulate purchase directly

from the manufacturer, thus by-passing the manufacturer's importer and
distributor in the recipient country. This may not have negative consequences
where a state or parastatal organization assumes the responsibility for technical
support services for the machinery, but where such services are expected from the
distributor, the situation is quite different. Under conditions of normal
commercial purchase, the distributor receives a commission in which there is an
element to allow him - or rather to oblige him - to provide warranty services and
replacement parts back-up for the equipment. A direct purchase from a
manufacturer may create a situation that is ripe for premature failure. It can be
averted only by a clear understanding among all concerned, and by special
arrangements to compensate the distributor for providing warranty services and
replacement parts back-up, and also granting him foreign exchange allocations
for the necessary imports.

All farm tractor and implement manufacturers understand the desirability of

after-sale service and back-up support. Unfortunately, however, of the dozen or
so major manufacturers selling their products in developing countries, very few
show total commitment to the idea. From the other side, government policies do
not always recognize the point of view of the manufacturers that back-up
services must be profitable, or at least break even.

6
Government or state-run farms, schemes, or machinery hire services, frequently
in remote areas, are often expected to run independently of the commercial
importers and distributors of the equipment they use. This effectively restricts and
discourages efforts by distributors to establish countrywide service networks,
although in some cases they have to service private contractors working in the
same area, or even in the same scheme.

The remote locations in which machinery often operates in developing countries

is itself a factor in premature failure. Long distances to central servicing facilities
increases the difficulty in obtaining replacement parts, and the high costs of
transport are passed on to the customer.

State-operated machinery rarely proves efficient and often suffers premature

failure. This is because there is little or no incentive for optimum performance,
and most operators, paid a salary through the year, are not motivated to use and
maintain the equipment with care. In addition, management is often weak.

In the 1960's and early 1970's, foreign currency for the purchase of replacement
parts was often available to farmers and importers through the commercial banks,
drawing on government sectoral allocations. Today, huge external debt problems
in many developing countries have cut off that source. In any case, foreign
exchange for new equipment has too often been given priority over that for the
importation of replacement parts, allegedly to encourage local manufacture.
However, this has often been done with little reference to the capacity of local
industry, and it has created such constraints for importers and distributors that
sometimes even the most reputable have been forced to curtail their after-sale
services.

Rates of import duty levied on replacement parts are often very much higher than
on new machinery; 50 per cent on parts as opposed to 10 per cent on new
equipment is not uncommon. This encourages the premature abandoning of older
machinery, even if it could still be repaired, in favour of the purchase of new.

The organization, management, and distribution of replacement parts is weak in

many developing countries. All too often, parts availability has been insufficient
to keep up routine maintenance, let alone repairs. It is not unusual in agricultural
projects to see new machines that have never worked because they have been
robbed of parts to repair others.

Implementing manufacturers' recommendations for maintaining agricultural

machinery and equipment is a universal problem, and not one confined to
developing countries. However, it is more acute in developing countries for a
number of inter-related reasons mentioned in this section.

Farmers commonly consider preventative maintenance only in terms of its

immediate cost, rather than of its long term be11.efit, and they therefore neglect it.

Many governments with foreign exchange difficulties draw up official lists of

approved items for import. There have been cases in which lubricants for certain
types of machinery were not on the approved list, forcing the use of other
lubricants, with resultant premature failure.

7
Direct Causes of Premature Failure
The direct causes of premature failure are often linked to the indirect ones just cited. The most
common direct causes are the following:

Equipment that has been ill-chosen for the tasks required of it, and for the
conditions in which it is to work, will usually fail prematurely. Firstly, incorrect
specification of equipment may cause mechanical problems. For example, there
are combine harvesters that suffer breakage when harvesting extremely dry
maize in Africa, and agricultural trailers that are not heavy-duty enough to
withstand the rigours of transporting sugar cane day after day under certain
conditions. And incorrect specification of rear wheels and tires can also lead to
early failure. A second and quite common result of incorrect specification is
equipment that is unable to perform the tasks required of it. In consequence, and
since there is almost never any possibility of exchanging it, the equipment is set
aside. It has not failed in the mechanical sense, for it is still serviceable - at least
until lack of use and exposure to the elements degrade it.

Linked to the above consideration of faulty specification of equipment is the

mis-matching of implements to tractors, causing failures in one or the other, or
even in both.

Operators who have not been properly informed and trained, or who are not
machinery-oriented, can commit numerous mistakes that gravely affect the
reliability of machinery, and also its lifespan. Incorrect handling and setting of
machinery can subject it to stresses for which it was not designed, and even lead
to accidents. Then, there is a whole gamut of potential errors and omissions
concerned with routine maintenance. These include everything from neglecting
filter changes to using incorrect oils and lubricants, or attempting to carry out
repairs for which the operator has neither the equipment nor skills.

Poor land clearing that has left rocks and tree stumps in the ground can seriously
damage equipment. And working over hard and rough ground increases the
fatigue failure of components.

The use of spurious replacement parts that do not measure up to the

manufacturer's original specification. These may fail and in doing so cause
damage to other components, thus aggravating the situation.

Prevention and Reduction of Premature Failure

It will be clear from the causes of premature failure just cited that some of them are more easily
tackled than others. Low international prices for agricultural commodities, for example, are
beyond the control of any single government, but within the framework set by those
international prices, governments can create their own policies to ensure the maximum possible
profit to farmers, thus improving the economic environment in which farm machinery operates,
in turn making proper maintenance and repair more affordable.

The key to reducing premature failure, however, lies in correcting the first cause mentioned
above, that related to the frequent deficiencies in government policies and strategies in respect

8
of mechanization.1 Sound policy and well-formulated strategies provide an umbrella under
which almost all of the above-mentioned causes of premature failure can be eliminated, or at
least mitigated. Even those causes which might appear to be external to the situation, such as
tied aid that could lead to the provision of unsuitable machinery, can be tackled by a government
that has set clear parameters in its mechanization strategy.

The experience with State or parastatal organizations running tractor hire schemes has been so
generally negative that few funding agencies would consider supporting such a scheme today.
The ideological umbrella that gave rise to such schemes is being blown away in most parts of
the world at the time of writing. Agricultural mechanization strategies should reflect this
tendency and seek arrangements for ensuring that those using and looking after machinery have
a personal commitment to its optimum use and economic lifespan.

A sound mechanization strategy will also take the vital foreign exchange issue into account,
identifying not only the foreign exchange requirements for importing new machinery from
abroad, but also allocating foreign exchange to cover the necessary support services for the
machinery throughout its economic life, especially with regard to replacement parts. There are
established criteria for planning of this sort. For example, experience and analysis show that
throughout a tractor's economic life, between 120 and 150 per cent of the original purchase price
must be spent on repair and maintenance, and that of this figure from 60-80 per cent will be
needed for replacement parts, most of which will probably have to be imported from the
manufacturer.

However, replacement parts require more than foreign exchange allocations. Their organization
and management is a specialized field. In any country, parts are subject to mysterious
probabilities in demand which makes their management difficult; and the problems are
compounded when, as in the case of a developing country, parts have to be brought in from far
away sources. Training of all staff concerned with replacement parts is an essential element in
preventing premature failure.J

Routine maintenance, if correctly carried out, will often prevent and sometimes reduce, the
effect of catastrophic failure. (For example, the early detection of a faulty oil seal). The elements
required for correct maintenance include the following:

Knowledge of what is required;

Practice in translating knowledge into procedures and the clearcut division of

responsibilities;

Replacement parts, including filters and other consumables;

Purchasing power for correct fuel, oils, and parts;

Tools and accessories.

The absence of any of these elements or portions of them will mean that maintenance is
skimped; and eventually it may not be done at all, because if the means are lacking, those
responsible will become discouraged and not bother about it.

1. This publication does not go into depth on the subject of fomiulation of mechanization strategies. Readers are
referred to dg_ricultural Mechanization in Development: Guidelines for Strategy Formulation FAO Agricultural Sen,ices
Bulletin No. 45 (FAO 1988).

2. For detailed infom1ation concerning replacement parts, the reader is referred to Agricultural Engineering in
Development: The Organization and Management of Replacement Parts for Agricultural Machinery, FAO Agricultural
Services Bulletins Nos. 72/1 & 72/2 (FAO/G1Z 1988)

9
A major factor in premature failure is that of human omission and error. Technical training,
therefore, assumes a position of prime importance among the measures that need to be taken to
prevent or reduce premature failure. Good training is time consuming and expensive; for
instance, in the industrialized countries, it takes four years to fully train a tractor mechanic. But
training leads to fuller and more productive employment, and to a more equitable distribution of
income, particularly to the poorer and less privileged members of society. Even more germane
to our argument here, training appropriately directed to agricultural mechanization, and backed
by other essential resources such as replacement parts, is the key to ensuring sustainable
machinery operation.

Current aid donor policies show increasing concern for training and the needs of low income
members of society, while in developing countries there is a growing awareness of the need for
selected reform in technical education. However, relatively few developing countries are
willing, as yet, to accept that radical change is necessary.

There is an understandable dilemma over the funding of technical training when, as is invariably
the case, this has to be paid for from scarce government resources, and bearing in mind also that
a government has responsibility for providing technical training in numerous other disciplines
that are involved in its overall development strategy. A further commonplace problem is the
migration of trained personnel to the private sector or to lucrative assignments overseas, which
is seen as a direct drain on the economy in general and on the training budget in particular.
(However, it may be argued that repatriated earnings do compensate to some extent).

Technical training, particularly that directed at the operation and maintenance of agricultural
equipment, is expensive for a number of reasons. Among them are: the time and resources
required to reach an acceptable standard of competence when the seasonal limitations of field
activities are taken into account; the training aids that are required for the effective teaching of
practical skills; and the amount of technical and educational literature required to keep up to
date with engineering and teaching methods.

In promoting the development of human resources in the traditional and transitional sectors of
the economy - and agricultural mechanization belongs very much to the latter - the training
must be directed not only at the technical content (i.e. the requirements of the equipment in that
particular environment) but it must also be adapted to the needs of the people studying to
become proficient in their chosen subjects.

It may be argued that in some developing countries there is a surplus of engineers, usually at the
graduate level, while at the same time, there is a shortage of technicians and service mechanics.
Excessive emphasis on theoretical studies, divorced from practical applications, is a primary
cause of this. Others are the low prestige attached to vocational training, a lack of understanding
of its methodology, and a shortage of facilities and of staff with experience in the design and
application of techniques of practical training.

Training resources in many developing countries could be better utilized, qualitative training
objectives better achieved, and the wastefulness of high rates of student drop-out reduced,
through a clearer definition of training objectives.

Training syllabuses should address the true needs, and not the needs assumed by political or
academic planners, and curricula must be carefully developed to meet them. An implicit
objective should be the creation of problem-solving abilities, rather than the accumulation of
knowledge or the memorizing of information. In effect, learning by rote has little value in this
training context, and the emphasis should instead be on the development of analytical and
manual skills through repeated practice in problem solving. The numerous practical skills
required by mechanics, involving coordination of hand and eye, can only be achieved at a
satisfactory level of competence through sufficient practice spaced over time. However, these
practical skills must be integrated with the intellectual skills required to decide on the
appropriate courses of action. The training of service personnel must address both aspects. And
service engineers need to understand that their training is not concerned with the pursuit of

10
knowledge for its own sake, but rather a discipline in which diverse knowledge is used to solve
problems of the physical world.

Training of agricultural machinery technicians may be absorbed into automotive engineering

courses run by some vocational training schools. There are, of course, many similarities in the
two fields, but there are also differences, and the particular needs of the two disciplines are
seldom given enough attention. For example, it is not uncommon for tractor mechanics to be
taught the theory of independent suspension systems, whereas the hydraulic systems so common
in agricultural engineering receive little, if any, attention.

Correcting these anomalies in training for agricultural mechanization would be a first step that
governments could take without serious cost implications, although they need to be aware that
the higher the capital investment in farm machinery, the greater and more sophisticated is the
technical training required for its sustainable operation.

If maximum performance and life is to be obtained from machinery, training must begin with
operators. They need sound knowledge of optimum methods of operation, adjustment,
maintenance, and care. (They should also have, but rarely get, suitable recompense for their
labours!) Economic viability of machinery depends greatly on the skill and competence of its
operator, but unfortunately, the training that he receives is too often limited to a brief
explanation of the various controls from the manufacturer's salesman. The numerous scrap heaps
of broken and mis-used equipment, poor crop performance, and soil erosion are related to the
inadequacy of this approach.

The existence of numerous government and private sector training courses for equipment
operators in industrialized countries should give governments of developing countries some
indication of the complexity involved, as well as food for thought when considering the training
requirements in their own contexts. Furthermore, many industrialized countries legally require
that operators of certain types of machinery, for example field crop sprayers, hold a formal
Certificate of Competence, yet another indication of the importance attached to training
machinery operators.

In many industrialized countries, training also exists for mechanics and machinery workshop
technicians, and standards of competence are set on a national basis. However, training alone
will not ensure the availability of competent and conscientious mechanics and workshop
technicians. In most countries, there is social pressure to gain educational qualifications as a
means of gaining access to properly remunerated employment. But poor salaries for mechanics
and engineering technicians have minimized the effects of this when applied to agricultural
machinery.

Considering the high capital cost, and economic value to the country, of the agricultural
machinery being used and looked after by operators and mechanics, investment in more and
better training would be fully warranted. A simple form of training involves watching and
copying, and this was the basis for long apprenticeships in many craft industries. It still has a
place for training of service personnel, but it needs to be complemented with periods of formal
education. Furthermore, methods of teaching practical skills have evolved that are less time-
consuming and more easily permit the acquisition of associated knowledge. The more
sophisticated the machinery or technology, the more thought based on technical knowledge is
required to keep it in working order. A higher standard of general education is therefore needed
to facilitate adequate assimilation of the complex processes involved.

Technical training can no longer be considered as a tiresome offshoot of a particular discipline.

If farm machinery is to be sustainably used in developing countries, technical training must be
addressed as a discipline in its own right, and the starting point for this lies with the government
authorities concerned. And the notion that "People who can, do, and those who cannot, teach!"
must be eliminated for ever, as must also the idea that the only good jobs in society are those
that involve clean hands and only the occasional foray away from the office.

It will be realized from statements above that the problem of reducing and preventing premature

11
failure has many facets, and resolving it will be more or less complex according to the particular
circumstances of a country. However, until such time as a government steels itself to tackle the
issues head on, thereby creating the conditions for the sustainable use of farm machinery, any
decision to import new machinery or renovate unserviceable machinery already in the country
will lead to the same result: more resources poured down the same drain!

12
 Ill

THE CONSIDERATIONS SURROUNDING MACHINERY RENOVATION

PROGRAMMES

The Objectives of Renovation Programmes

Governments that have decided to support agricultural production by making available

additional mechanical power to farmers have to decide how to proceed. They will have several
options, but an overriding consideration is almost certain to be how to make optimum use of the
limited foreign exchange available.

The first option, appropriate only in a few cases, is local production under license from an
international manufacturer; another is import of new machinery from an industrialized country;
and finally, there is the option of renovating machinery already in the country.

Renovation programmes, from a government's viewpoint, are a way of making optimum use of a
fixed allocation of foreign exchange, taking into account that most tractors are imported into
developing countries and that manufacturers require payment in hard currency for replacement
parts and for new equipment.

All the major renovation schemes so far undertaken have been funded, at least in part, by donor
agencies. They have not, therefore, been justified by any of the interested parties on purely
commercial grounds. The donor agencies, the manufacturers, (and their franchized agents) who
implement the programmes stress that the aim of a renovation scheme is not just to create cheap
'new' tractors.

The aims and perceived benefits of renovation programmes are;

Renovating tractors is cheaper than purchasing new;

Foreign exchange requirements are reduced compared to buying comparable new

tractors;

The process provides training for technicians;

It revitalizes tractor support infrastructure, especially wo,rkshops and part stores;

It capitalizes the unused stock of immobilized tractors;

It may promote local reconditioning or production of replacement parts, with

associated benefits for the national economy.

Most of these benefits are cited in manufacturer's literature and in donors' justification of
programmes. They have thus become the conventional wisdom on the subject. However,
although some evaluation of the technical success of a renovation programme is normally
conducted, the infrastructural and training benefits too often take a back seat once a programme
is under way.

It should be borne in mind that, while aid-funded machinery renovation schemes alleviate the
short-term problems of inoperative machinery, the longer-term, and far more important,
objective is to create the environment in which mechanization can be sustained within the
country's own resources.

13
Renovation Experiences to Date

To date, the only large-scale machinery renovation programmes that have been undertaken in
developing countries have concerned tractors. (See the Case Studies in Chapter III of this
publication). There are two main reasons for this: firstly, the four-wheeled tractor is a
ubiquitous, costly, and complex piece of agricultural equipment, which because of its numbers
and central role in mechanization, offers greater scope for renovation than other types of
agricultural machinery; and secondly, manufacturers have recognized that the market for new
tractors, which has been depressed in recent years, is unlikely to recover in the short term, and
that renovation programmes allow them to make modest profits in these difficult circumstances.

From the technical viewpoint, two basic approaches to renovating machinery have been used:

The Repair-as-Necessary Approach. Under this approach, the degraded

machinery is examined and its actual specifications and tolerances are compared
with those stated in the manufacturer's technical data for new equipment. Only
those parts required to restore the working life of the machinery are replaced. In
the case of tractors, each is rebuilt according to its individual needs to restore it to
its original specifications.

The Kit Approach. This is based on the replacement of whole sub-assemblies of

the machinery, whether or not all the components in the sub-assembly are
actually defective.

The kit approach was pioneered for tractors by Massey-Ferguson under the trade name 'ROC'
(which stands for Rehabilitation, Overhaul, and Certification). A ROC tractor is rebuilt to
conform to the technical specification of a new tractor, including any updates such as a gearbox
with ten speeds instead of eight.

The ROC programme consists of an 'A Kit' and a 'B Kit'. The A Kit, which is mandatory, usually
comprises a new full engine, clutch, gearbox, and hydraulic system. The B Kit is not mandatory
and is made up of those parts that are desirable for the specific conditions, based on an
assessment of the models, specifications, and the degree of degeneration.

In addition to the two Kits described above, a large number of other parts may be purchased as
required.

The Attitude and Involvement of Machinery Manufacturers with Respect to Rehabilitation

Programmes

Renovation programmes for tractors have been mainly limited to two manufacturers, Massey-
Ferguson and Ford New Holland. Both of these undertook renovation programmes to counteract
decreasing sales of new equipment in specific territories and when a donor was willing to
finance the foreign exchange component of the scheme.

Had there been no problems of availability of foreign exchange, there would probably have
been little demand for renovation programmes. And it is certainly easier for a manufacturer to
sell a new unit than to renovate a damaged one. However, in recent years, manufacturers have
begun to realize that there are considerable benefits inherent in renovating their products that are
already in a country. Business from replacement parts has traditionally been profitable, but in
markets where sales of new units are declining, renovation programmes are a way for a
manufacturer to maintain a market share.

It must also be remembered that the proliferation of makes in many countries, partly resulting

14
 from tied aid and partly from the availability of subsidised products, has often led to situations
in which so little business is being done by a single manufacturer that the viability of
maintaining a franchized distributor in a country is put in jeopardy, without going into the issue
of whether he can afford proper back-up services such as the stocking of sufficient replacement
parts. In these conditions, renovation programmes can maintain a distributors business activity.
In addition, when a distributor has become run down, a renovation programme is often seen by
the manufacturer as a way of restoring the physical and manpower resources to required
standards. -For a manufacturer, these factors are the key to maintaining long-term operation
presence of their products in a country.

This said, however, it should be made clear that very few manufacturers have so far allocated
much in the way of their own resources to exploring what is, in fact, a new form of business.
The few that have done so have been rewarded over the past few years with substantial business
in the form of parts sales, much of which is aid-donor funded.

The greater proportion of tractor manufacturers, many of which are pad of multinational
corporations, have done nothing, having preferred to wait and learn from their competitors.
Others have paid scant attention to any proposals, while on the other hand and to b~ fair, some
of the smaller, and perhaps less financially secure manufacturers, have committed resources
which they could not afford.

Competition between manufacturers, which is normally very much to the forefront when new
tractor sales are concerned, hardly arises between manufacturers in respect of renovation. 111is is
because manufacturers can only renovate their own products, since they have neither the
technical expertise nor the access to parts to rehabilitate a competitors' products - even
assuming they had the will.

There are, however, multi-make parts manufacturers who will step in when; a tractor
manufacturer declines to become involved. Such schemes have been carried out in the past, and
where all other aspects of a project are equal similar benefits accrue. Questions regarding the
quality of manufacture of these non-branded components are justified, since invtstigations
suggest that the quality varies enormously. Professional advice regarding the pussibk use of
such non-branded parts is therefore essential.

Certain manufacturers have advantages over others in renovation in that their prouuct:c; have
greater commonality of parts. Unless there is a preponderance of one specific model, th.is is
advantageous in that relatively fewer items are required to renovate a range of models. For
example, a manufacturer might have produced four models of trador ranging in power from 60-
90 hp, all of which share common components. In some cases this extends even \,:; engines
which would have been originally produced with different rated power outputs, This
commonality of parts increases the scope from economies of scale within one make, and also
· gives the end-user a choice of power outputs for their rebuilt tractors.

Criteria and Supporting ComHtions for RebabiHtath:m Programl!nes

Decisions by governments and farmers concerning agricultural mechanization and rural

development may appear simple, but in reality they are notoriously difficult. The difficulty
arises from the complex inter-relationship of social, economic, and technical facto1s in any
given situation, and the political implications they involve. Decisions concerning re11uvation
programmes, and the factors that surround them, are equally difficult. What follows are some
main criteria and conditions to be taken into account in reaching decisions.

It has already been stated, but it bears repetition ad nauseam, that no decision to n.:.uovate
machinery should be taken without a concomitant resolve to address the causes of p1.;.mature
failure, through attention to the factors described earlier in this publication.

15
Towards this end, renovation programmes should be seen as part of a wider rehabilitation
process that will improve infrastrnctural support services for agricultural mechanization, rather
than as an end in themselves. In fact, renovation programmes per s~ may not always be
economically viable, but if one takes into account the long-term benefits that can accrue in
tenns of training, replacement parts supply and other support services, they often become
economically justifiable.

Clearly, decisions on rehabilitation progrnmmes will nonnally be taken by national

governments, but their implementation will need to involve some or all of the following: various
government departments and operating units, the original manufacturers of the equipment and
components and their local representatives and agents, international aid donors, and other
private sector organizations and cooperatives.

Rehabilitation programmes should be closely related to, and be a component of, an agricultural
mechanization strategy. In the planning process, governments will need to establish data
collection facilities and have access to information on available machinery and equipment
worldwide.

It is usually assumed that the renovated machinery and equipment will be returned to its original
owner, whether it be an individual farmer, government department, or cooperative. In such
cases, a contract should be established between the owner and the renovating organization.
Alternatively, the renovating organization may purchase the degraded machinery and re-sell it
when renovated, under conditions agreed with the government.

Although major rehabilitation programmes to date have dealt only with tractors, all types of
defunct machinery and equipment should be considered eligible, and programmes should be
undertaken when it is economically viable to do so. Examples of types of machinery that would
warrant rehabilitation programmes under certain conditions are:

Self-Powered Machinery

Tractors, Combines and other Harvesters, Irrigation Pumps, Crop Processing Machinery

Auxiliary-Powered Machinery

Rotary Tillage Equipment, Trailed Harvesters, Balers, Crop Protection Machinery

Implements

All types, whether Mounted, Semi-Mounted, or Trailed

Prior to deciding in favour of a rehabilitation programme, its financial and economic viability
must be carefully assessed. Detailed information will be required as a basis for this assessment.
(See Chapter V on Research and Planning for Rehabilitation and Renovation Programmes for
more details).

Rehabilitation programmes provide the best returns when the macro-economic environment is
conducive to continued repair and rehabilitation work beyond the immediate horizon of the
programme. The most important macro-economic factors that encourage machinery repair and
rehabilitation are fiscal policies related to exchange rates and interest rates.

Real interest rates in developing countries are often negative, i.e the rate of inflation is greater
than the interest rate offered by banks which, in neo-classical economic theory, reflects the
opportunity cost of capital. In such cases, farmers may still want to purchase tractors if the
investment is likely to give a greater return than investment in, for example, a bank deposit
account. For this reason, the purchase may well reflect speculative investment rather than
investment in equipment to be used productively. If this is the case, it is unlikely that the
machinery would be utilised to its maximum productive potential, and it would thereby
represent a financial gain to its owner but; on the contrary, a cost to society as a whole.

16
If the macro-economic environment is favourable, then the machinery repair industry should
have sufficient incentive to facilitate repairs in a routine manner, without need to resort to aid-
funded projects for rehabilitation schemes. 'Routine' in this case can be defined as having the
resources to repair a machine when it breaks down.

The main elements of a favourable macro-economic environment are:

An exchange rate which is not far from a free market equilibrium;

Private sector access to foreign exchange;

Low real interest rates;

An expectation of economic stability.

Improvements to the macro-economic environment would be preferable to a machinery

rehabilitation programme in the following circumstances:

If no special need has been identified for the rehabilitation of a given set of
machinery;

If infrastructure and communications in the country or region are sufficiently

good to allow businesses to grow where real demand for machinery repairs exists;

If a special need for a demonstration project has not been identified.

If there are one or more engineering companies in the country (or willing to move
into the country) who have the drive and capability to expand their repair
business to meet consumer demand and to undertake machinery renovation work.
However, this will also depend upon their being granted access to the necessary
resources.

If the government is willing or able to take the necessary steps involved.

If the above criteria are met, routine repair, and renovation facilities where they are
economically justified, can be expected to grow. This situation has the advantage of being less
susceptible to 'project cut-off, i.e. the development of facilities with international aid that
cannot be sustained once the aid terminates. However, this desirable situation is unlikely to
come about in the majority of circumstances, because hitherto, rehabilitation schemes have been
on a relatively small scale, and this is likely to continue. It is also likely that future schemes will
be perceived by local decision makers as insufficiently important to warrant changes of policy
extending beyond the sphere of influence of machinery rehabilitation per se.

As has already been noted, a central factor impinging on agricultural mechanization in

developing countries in general, and routine repair or rehabilitation programmes in particular, is
fiscal policy and the availability of foreign exchange for the purchase of replacement parts. In
certain cases, fiscal policies will hold the key to encouraging successful rehabilitation
programmes. The most important are those concerning rates of import duty. Agricultural
machinery rehabilitation schemes have not in the past had to address the question of import duty
policy in detail. This has been because they have been aid funded, and parts kits have been
imported tax free. However, the question of policy towards import duty becomes critical if either
the rehabilitation programme is run on a normal commercial basis, and not exempted from
duties, or if it is to be sustainable.

In financial terms, whether or not rehabilitation is cheaper than purchasing new will often
depend on import duty policy. Agricultural machinery parts often attract import duty at a much
higher rate than new tractors, and duty rates are usually different for different types of
components. As already mentioned, rates of 50 per cent for replacement parts are not uncommon

17
and compare with a typical rate of 10 per cent or less for the importation of new tractors and
other agricultural machinery.

The rationale behind this is that rates for new machinery are low because its purchase should be
encouraged in order to increase production. High duties on replacement parts are justified
primarily on revenue earning grounds: it is (mistakenly) assumed that price has little importance
in the demand for parts, or put differently, that there is a captive market for parts and people
have to purchase at any cost.

This policy often has the effect of preventing the necessary repair or renovation of expensive
agricultural machinery, rather than of providing revenue for government. Moreover, it
encourages the premature scrapping of agricultural machinery and replacement with new.

From the renovation viewpoint, the best import duty policy would be to have a standard rate for
all new machines and parts, and were this so, parts kits for renovation programmes would pay
duty at a rate no higher than that applied to new machinery. This would be a logical policy since
the components which go to make up the kits will only be used to recreate essentially 'new'
machines, and the alternative to parts kits would be the purchase of whole new machines.

Determining import duty rates is a matter of government policy, but there are at least two sound
economic reasons to encourage renovation schemes through appropriate duty rates. The first is
that a renovated tractor costs less in terms of foreign exchange; the second is that the purchase of
locally-made items, and the use of local labour, assist the domestic economy.

The government should also establish appropriate fiscal measures and incentives, and provide
encouragement, for the local reconditioning or manufacture of replacement parts to original
specifications. Furthermore, governments should consider the advantages of making renovated
machinery eligible for public sector purchase.

Yet another responsibility of government is to ensure that there is suitable follow-up to the
renovation process. The issue of preventing or reducing premature failure has already been
addressed, but another important consideration is the utilization of the renovation facilities. Om
they, perhaps, be turned into a practical training centre for repair and maintenance technicians,
and for operators, and can the skilled staff who carried out the renovation programme become
the instructors? A priceless national asset could grow out of a renovation programme if the
answer to these questions were positive and appropriate action taken.

A final, but important, point is that the renovating organization must be allowed sufficient profit
margin on the operation to provide financial incentive and viability.

18
 IV

CASE STUDIES OF TRACTOR RENOVATION PROGRAMMES

Five significant tractor renovation programmes have been completed, or are in progress, at the
time of writing - four in southern Africa (Mozambique, Zambia, Malawi, Zimbabwe) and one in
Latin America (Nicaragua). Another in Africa (Tanzania) has just been launched. Each of these
will be outlined in the following pages, and then some overall points and conclusions will be
drawn from those experiences.

Mozambique

Mozambique is a one party state, and since independence from Portugal in 1975 has been
governed by FRELIMO - the Frente de Libertacao de Mocambique.

The newly-independant country adopted socialist models for its development policies, but the
amount of technical, infrastructural and financial help required later led the Government to a
gradual rapprochement with Western governments and institutions, and with multi-national
corporations.

Domestic production is estimated to have fallen 37 per cent between 1981 and 1985, while the
foreign debt was estimated in 1985 to have reached $3.8 billion,! The foreign trade account has
been in persistent deficit for many years. Export earnings have fallen rapidly due to the security
situation, bad weather, lack of fuel, deteriorating capital supplies and shortages of urgently
needed imports.

Agriculture is the most important sector of the economy because it employs nearly 85 per cent
of the labour force, and it accounts for around 50 per cent of domestic production and the bulk
of exports.

The major crops grown are cashew nuts, maize, cassava, copra, sugar, cotton, tea, rice, fruit and
vegetables. Production between 1981 and 1983 fell by an estimated 50 per cent, although
performance picked up in 1984 when production of the major cash crops increased due to
improved weather and increased incentives to farmers.

The poor overall economic performance of the country has increased its dependence on
international aid and loans. Invariably, both have been provided with conditions attached, and
the Mozambique Government has had to comply with them. Normally, these conditions are in
line with IMF and World Bank policy recommendations, and the Government has revised many
of its policies to provide the private sector with the means to accelerate and sustain productivity
through a more market orientated economy. To this end the Government has changed its policy
to the private sector by: shifting land from the state farms to private, commercial and family
farmers; eliminating price controls on fruit and vegetables; and establishing higher prices on
other agricultural products.

The agencies that have to date financed the import of tractors and parts are ODA, USAID, SIDA
and the Government of the Netherlands. One manufacturing company (Massey-Ferguson), in
cooperation with its franchized distributor in Mozambique (Entreposto), has, over several years,
supplied about 70 per cent of the national tractor fleet. However, it was estimated in 1979 that
50 per cent of all tractors in the country were inoperative through premature failure.

1. Source: USAJD

19
A renovation scheme was introduced which is currently rebuilding about 700 Massey-Ferguson
tractors per year, with funding assistance from ODA (UK). Table 1 indicates the proportion of
repairs by category of severity.

Table 1 Monthly Throughput of Massey-Ferguson Tractor

Renovation in Mozambique
Number of Percent
Units of total
Major overhauls/complete rebuilds 17 24
Medium scale repairs 25 36
Small scale repairs 28 40
Monthly Total 70 100
----------------------------------------------------------
Source: Entreposto, Mozambique

A survey of Ford tractors in Mozambique indicated that a high proportion of them were
inoperative, and following a major workshop reorganisation in 1986, the local agent (Technica,
Maputo) is currently renovating about 250 tractors per month.

The monthly throughput of renovated Ford tractors was analysed according to the degree of
damage and the repairs required, and is given in Table 2.

Table 2 Monthly Throughput of Ford Tractor Renovation

in Mozambique
Number Percent
of Units of Total
Major Overhauls/complete rebuilds 10 26
Medium scale repairs 8 21
Small scale repairs 2 5
Engine only overhauls 18 48
Monthly Total 38 100
----------------------------------------------------------
Note: These figures are for Maputo only. It is thought
that figures for the main centres of the associate
companies are similar.

20
Zambia

In 1984, Zambia was suffering a severe shortage of foreign exchange. This was due primarily to
its deteriorating trade position related, in particular, to the low price of copper - which
accounted for over 90 per cent of foreign exchange earnings - and the increasing price of
essential imports, such as oil and heavy engineering equipment. This shortage of foreign
exchange limited the import of new tractors and of replacement parts fo~ existing tractors. As a
consequence, the country's aging tractor fleet was falling into disrepair with serious
consequences for commercial agriculture in the country.

Given the extensive land area and relatively small population, tractors are an appropriate source
of farm power, and crucial to the operation of the large-scale commercial farms in Zambia
which supply most of the food to the urban areas. Over 13 000 tractors were estimated to be
operating in the country at that time, although as in many African countries, the exact number
was not known.

Table 3 shows the number of tractors imported into the country in the period 1971 to 1976. It
was believed that many of these 8 to 13 year-old tractors could be economically rebuilt using
imported replacement parts and local expertise. Many of the tractors were on commercial farms,
although substantial numbers were also in parastatal organizations and within the government
network, notably in the land development units and on research stations.

Table 3 Numbers of Tractors Imported into Zambia

Manufacturer 1971/75 1977/83
Massey-Ferguson 1 396 1 374
Honda 1 000 n/a
Leyland 775 111
John Deere 754 n/a
Universal 700 n/a
International Harvester 600 n/a
Ford 585 420
Volvo 111 n/a
Total 5 920
-------------------------------------------------
Source: 1971/76 Report of Committee Investigating
Tractor and Farm Machinery Rationalisation -
National Government

It was decided to concentrate initially on the renovation of Massey -Ferguson tractors because
there were significantly more of these than any other single make in the country, and because
the manufacturer was interested in developing a renovation programme. Furthermore, the
franchised agents in the country were active in providing support servicef, and had relatively
good facilities and manpower resources. ·

With the help of Massey-Ferguson, the agents carried out a survey of numbers of units available
for renovation. The conclusion was that a viable project existed if foreign exchange could be
obtained for the importation of the necessary parts.

On the basis of this conclusion, and the results of a feasibility study carried out by ODA
technical and regional advisers, it was decided to establish a project to rebuild 60 tractors in the
first year and 60 in the subsequent year. If the project proved successful, wider application to

21
other makes of tractor would be considered. On the basis of estimated costs supplied by the
manufacturer, it was expected that renovating older tractors could provide a replenished tractor
fleet at a lower cost than the purchase of new equivalent units.

An independent assessment was made of the manufacturer's agent's suitability to carry out the
renovation programme with aid-donor funding. This assessment showed that the company had
been incorporated in Britain in 1909 and had a history of commercial activity in Zambia since
1964. Substantial local share holding existed and, in line with many African farm machinery
distributors, the company also held franchised agencies with other major European and North
American vehicle and earth-moving equipment manufacturers. The company showed every sign
of being well-established and reasonably profitable. It was providing good services to
agriculture and other industries in the country and had the necessary financial security to handle
such a project under programme aid.

Estimated sales potential for new Massey-ferguson tractors in Zambia at the time was in the
region of 400 units per year, but the agents were only able to obtain sufficient foreign exchange
to cover very limited quantities of replacement parts. This reduction in business had resulted in a
surplus of workshop capacity in terms of space and skilled labour. Local labour laws prevented
staff redundancy, and indeed the company was anxious to keep its staff both in the hope of an
improvement in the foreign exchange situation, and to maintain their long-standing good labour
relations.

Fifty-seven people were employed in the workshop. Of these, 70 per cent were mechanics or
other workers whose time would be directly chargeable. Utilization efficiency of the workshop
staff was in the order of 82 per cent, a low level caused by the downturn in business resulting
from the shortage of foreign exchange, rather than from internal inefficiency.

Skills and specialist product knowledge were good because many of the mechanics and
technicians had been trained by the manufacturer. Standards of shop floor discipline appeared to
be good, with work being undertaken in a practical and orderly manner. Nevertheless, to ensure
quality control and a smooth start to the programme, it was decided that the manufacturer would
provide the services of a senior product specialist.

The physical facilities were also considered adequate. The main workshop was a clear-span
building approximately 50 metres long and 12 metres wide, partially open on one side and
equipped with two 3-tonne overhead gantry cranes. Tool stores, specialised work rooms and
offices were annexed to the side and ends. The main parts store, offices and show room area
were in a separate building, the two separated by a large, enclosed yard. Tooling was adequate,
and the two overhead cranes were an important asset because they allowed easy handling of
heavy components anywhere in the workshop.

The project was based on a formalised renovation scheme which the manufacturer was
introducing at the time. It was intended that the renovated tractors would be considered as a
separate product and distinct from the manufacturer's range of new machinery, but with each and
every renovated tractor conforming to a minimum standard quality of specifications.

The manufacturer organised the scheme through a separate franchised agreement with its agents.
This required them to renovate each tractor according to company instructions, and to provide a
guarantee to the end user. In effect, the quality of the renovated tractors had to be guaranteed as
equivalent to a new unit. Certain technical improvements were incorporated, although the
tractors remained substantially original in specification. Reliability and longevity were to be
much the same as a new unit, with all components, systems and sub-assemblies free from
defects, and all wearing parts within the manufacturer's stated tolerances.

The replacement of certain major sub-assemblies was mandatory. This was to ensure that
severely stressed items would in fact be completely replaced and - quite literally - as new, and
to update certain detailed specifications of the tractors. As an aid to quality control, the project
was supplied with a dynamometer to measure the power output of renovated tractors at the
Power Take-Off Shaft.

22
The sub-assemblies where sold as a kit and formed the basis of each renovated unit coming out
of the workshop. The . kit comprised a new short engine, clutch, current specification
transmission, and hydraulic system. In addition, other components considered at the time less
critical could be replaced or reconditioned locally as required. For the warranty to be valid, all
the parts had to come from the tractor manufacturer, or at least from an approved original
equipment manufacturer, e.g. electrical components. This subsequently created considerable
difficulty for the aid-donor's purchasing agent.

In common with most African countries there was no legislation in Zambia at the time
concerning the fitting of safety cabs or Roll-Over Protective Structures (ROPS). In countries
where legislation requires the retrospective fitting of ROPS, the incidence of death and serious
injury to the driver in the event of an overturn has been markedly reduced. It was therefore
decided that all tractors rebuilt by this project would be suitably equipped with a structure that
conformed to the 1974 OECD standards.

It was recognized from the start that the standards of shop floor discipline and the skill and
integrity of the technicians in charge of the work would be of paramount importance. Slovenly
workmanship would result in faults, excessive warranty claims, and a short working life. Some
form of quality incentive scheme might have been an appropriate way of maintaining high
standards of workmanship, but since these are notoriously difficult to put into practice, none
were included in the project.

The time required to complete the individual renovation tasks (Table 4) was estimated by the
manufacturer and their agents, in consultation with the aid donor's agricultural engineering
adviser. The hourly rates for the staff involved were identical to those used for normal
commercial activity.

Table 4 Analysis of Typical Labour Inputs per

Tractor Renovated
Job Description %of Time
Cleaning and dismantling 7
Engine auxiliari~, fitted 6
Front axle and support frame overhaul 6
Gearbox 4
Steering box 6
Hydraulics 6
Rear axle, brakes and differential 6
Rebuild into a skid unit 29
Drawbar and hydraulic linkage 2
Electrical wiring 6
Panel work, instruments and cosmetic parts 3
Run-up and pre-delivery inspection 3
Sub total 84

Contingency for unforeseen problems,

e.g. removal of broken studs.
16
TOTAL 100
----------------------------------------------------

23
From the labour input requirements to renovate a tractor (Table 4) it was estimated that the
agents had the capacity to renovate about 12 tractors per month. To achieve this, six teams, or
15% of the direct labour force, would be engaged in renovation work at any one time. An initial
batch of 60 units could thus, theoretically, be rebuilt in 20 days, or say one month. That was not
however to be construed as a target, particularly as the company would initially be gaining
experience. It did however suggest that the workshop would not be overstretched by the initial
phase of the programme.

Table 5 Analysis of Typical Parts Usage and Parts Cost per

Tractor Renovated
UK Local
Pounds Sterling Currency
(Ii) (Ji)*
uammmaammmammmuammmmmmmmmmmmmmmuammmammmumummammmmmmmmmmmmmamma

Renovation Kit comprising:

---------------------
Short engine
Clutch
Transmission 1 950
Hydraulics
Steering
Panelling
ROPS (Safety Frame) 200
Submtotal 2 150
Additional Parts Required:
mummmammmmmmmummummmmmaum

Cylinder head reconditioning 100 25

Fuel system 60 140
Cooling system 70 30
Front axle and support frame 140
Starter motor and generator 150
Rear axle, brakes and differential 300
Lighting kit 65
Wiring harness 20
Tyres 500
Instruments and switches 50
Battery 80
Paint and painting material 25
Miscellaneous hardware 400
Drawbar and hydraulic linkage 400
Sub-total 2 105
-------
450
Freight charges@ 15 units per
container 200
TOTAL COST 4 455 450
--------------------------------------------------------------
--------------------------------------------------------------
* Local contribution includes goods and services, costed in
local currency and converted to Sterling at 200 = Jil.00

24
The unit parts cost (Table 5) was made up of, firstly the mandatory components and, secondly,
the quantities of additional parts estimated as necessary. The local contribution included services
and goods with proprietary items being returned to local agents for reconditioning. The fuel and
electrical system components were the main items in this category, with a warranty provided by
the reconditioning organisation. In order to support local industry, some items such as batteries,
paint and tyres were to be purchased locally, although it was recognised at the time that supplies
might be unreliable.

As can be seen from Table 5, the components provided in the kit made up about half of the total
parts cost of renovating a tractor. It could be argued that this is a high proportion, but one
advantage was that no detailed inspection or quality control was required for those factory-
produced sub-assemblies. In any case, attempts to cut costs by refitting worn or defective
components would have given a product that would have been unreliable and short-lived.

On completion of the work, each and every tractor was examined by an inspector nominated by
the manufacturer. This was carried out against a detailed inspection sheet which later formed
the basis for the guarantee and future machine records. On satisfactory completion of this
inspection, which covered details down to the standard of paint finish, the tractor was issued
with a special decal and a new identification number. (The old serial number was also
maintained for future parts reference). It was then covered by the scheme warranty.

However, it was also recognized that final proof of the quality of the rebuilt tractors would lie
with the farmers. The field performance of as many tractors as possible particularly in the early
stages, was carefully monitored with the assistance of the end-user. A tractor weekly record
sheet and quarterly summary were prepared for the purpose. Each customer was requested to
participate in the monitoring process by keeping a record of performance which would be
followed up with visits from the aid-donor advisers to determine the level of satisfaction with
the tractor, and to resolve any problems which might arise.

The renovation service was publicized by the agents and was open to private, government and
parastatal organisations, although it was expected initially that participation by the private sector
would predominate.

Originally it was thought that the tractors would be renovated in one of two ways:

Agents would purchase tractors as time expired units after inspecting them in the
field and negotiating a price with the owner. New imported components would be
used to renovate the tractors which would subsequently be offered for resale at a
fixed retail price agreed with the aid donor.

Alternatively, tractor owners who wished to retain the unit after renovation could
ask the agents to do the work on a contract basis. In this case, a fixed contract
sum would be agreed with the aid donor.

As it turned out, the second option was the only one which proved to be acceptable to the
farmers. A full 12-month warranty and free servicing was to be provided on the renovated units
which would be identical to that of a new Massey-Ferguson tractor. The price to the farmer was
to be considerably less than a new tractor. Aid funds were to be used to finance the foreign
exchange costs of the work with the agents providing the full local cunency equivalent to the
government. A normal profit element was built in to the project costing.

25
 Zimbabwe

In 1982, Zimbabwe was in an economic decline due to increasing prices of essential imports
and depressed prices for its exports. In addition, a severe drought was seriously affecting the
agricultural sector of the economy. One result was that the shortage of foreign exchange
limited the import of new tractors and of replacement parts for the existing tractors. As a
consequence, the country's tractor fleet was aging and falling into disrepair, and this put further
constraints on commercial agriculture.

The prolonged drought ended in 1984/85, and conditions favourable to an increase in

agricultural production returned. However, this potential could not overcome problems in other
sectors of the economy, with a result that the agricultural infrastructure of the country was
further starved of essential foreign exchange allocations.

With its extensive land area and relatively small population, tractors are an appropriate source of
farm power in Zimbabwe, and they are crucial to the commercial farming sector, upon which the
country depends largely for its food production and export commodities.

An estimated 20 000 tractors existed in the country in the mid-1980's, of which the predominant
make was Massey-Ferguson with about 38 per cent of the total, i.e. 7-8 000 units. Table 6
shows the distribution of the main makes and models.

Despite extensive entrepreneurial activity and expertise within the country, it was
estimated that about 4 000 of these tractors where either out of action or in need of major
overhaul, and so many could be available for renovation.

Table 6 Numbers of Tractors in Zimbabwe

(by Make mid 1980s)
m

Make Number %of Total

Massey-Ferguson 7 600 38
Ford 3 500 17.5
Fiat 2 500 12.5
Deutz 2 200 11
Others (9 Makes)l 4 200 21
TOTAL 20 000 100
Source: Agricultural Dealers and Manufacturers
Association 2

The Government of Zimbabwe was anxious to limit the number of tractors imported into the
country and had asked the Agricultural Dealers and Manufacturers Association (ADMA) to
develop a policy for rationalising imports and parts supply. The Massey-Ferguson distributor, as

1. Other makes were mainly John Deere, International Ha,vester, Leyland, Landini, Marshall, David Brov.111, Case,
Fendt, Kubota. Import restrictions, currency allocations, and customer preferences have reduced to six the number of
makes currently imported into the country. They are: Case/International, Deutz, Fiat, Ford, John Deere, Massey-
Ferguson.

2. These figures are impossible to verify.

26
a· member of that organisation, was involved in developing this rationalisation policy and was
naturally anxious to maintain its share of the market. Tractors from western industrialized
countries have a high capital cost and, although competitive with products from other parts of
the world when costed out over a life time, are at a disadvantage when competing for initial
purchase against lower quality or lower cost, or subsidised machines.

ADMA was unable to convince the Zimbabwe government that it should limit tractor imports to
those makes and models that had proved themselves sufficiently robust to stand up to the harsh
conditions in the country. Aid-subsidised tractors of well-known makes were arriving from a
number of countries, and at the time of allocating funds for these, some 10-15 percent extra was
allowed for the purchase of replacement parts to be shipped with the tractors. Problems began to
arise when the parts purchased with the tractors were exhausted and no further funds were made
available to replenish the supply. Tractors of other, and less-known makes were donated by
governments, without replacement parts, and no funds were made available to purchase them,
thus compounding the problems.

The more far-reaching and damaging effects of those years on tractor mechanisation in the
country have yet to be felt.

The Massey-Ferguson agent, Farmec, was of the opinion that a renovation programme would
offer the farmer a viable alternative, provided the finished product was of good quality and
financially attractive. Drawing on the experience of their colleagues in the region, and from
their knowledge of conditions in Zimbabwe, they believed that there was scope for a major
tractor rebuilding programme. And they had the necessary resources to carry it out.

A study was carried out by ODA advisers, with assistance from Farmec to examine the technical
and economic feasibility of rebuilding Massey-Ferguson tractors in Zimbabwe. The proposed
scheme differed from previous schemes in that the tractors were to be rebuilt to contemporary
rather than original specifications, i.e. they were to be upgraded from the previous to the current
series of tractors. This would allow the programme to benefit from:

On-going technical improvements;

Economies of scale in component manufacture;

Continued long term availability of parts for the rebuilt tractors;

The psychological effect on the operator of receiving a rebuilt tractor which

would be indistinguishable from new.

On the basis of cost estimates supplied by Massey-Ferguson, it was expected that tractors could
be renovated to provide a replenished fleet at a lower cost than the purchase of new units. It was
therefore decided by ODA and the Zimbabwe Government to establish a project under
Programme Aid to renovate 140 tractors over a two-year period.

A wider application to other makes of tractors was also considered, and manufacturers were
invited to submit proposals where they thought they could offer appropriate services.

The renovation programme was advertised and was open to both private and public sector users.
The tractors would be rebuilt on a contract basis at a fixed contract price. An inflation factor
was built in to allow the price to be revised as the cost of local labour and raw materials
increased. The contract provided a full 12-month warranty and free servicing, identical to that
for a new tractor. In addition, the contract set criteria for the condition of the old unit being
returned for rebuilding. These covered aspects such as the completeness of the tractor and the
condition of certain components. Such criteria were considered necessary to avoid being offered
tractor skeletons for renovation.

The tractors would be renovated to a strict standard of quality and specification. All current
modifications and improvements would be incorporated, and it was expected that, apart from the

27
decals, the tractors would look and perform exactly as new units. ROPS were to be fitted to each
tractor.

Estimates of the costs of the programme suggested savings to the end user of around 20 per cent
on the retail price of a new tractor. Part of this saving would arise from a differential sales tax
which classes a rebuilt tractor as a "replacement parts sale". This is subject to a lower rate of tax
than that on a new tractor.

A survey of the facilities of the agents confirmed their ability to carry out the work and noted the
good resources and high-quality staff available. There were no apparent shortages in tooling,
apart from a Power-Take-Off dynamometer, which was included in the first shipment of parts
to allow each renovated tractor to be tested under load prior to delivery to the farm.

The renovation work was to be carried out in an area set aside exclusively for the purpose.
High-quality, local reconditioning services were available, but such were the economies of scale
that local currency prices were frequently higher than the alternative of imported parts. The
programme aimed to complete 5-6 tractors per month, with numbers gradually increasing as
further experience was acquired.

Under the agreement, the agent had to lodge the local currency equivalent of the hard currency
component with the Zimbabwe Govemmwent. This, together with the opportunity cost of the
buildings set aside for the work and the extra labour employed, represented a considerable
investment in the programme. Although some interest charges were included in the financial
analysis, delays in the arrival of parts placed an unplanned financial burden on the agent. This
delay was caused by the Zimbabwe customs authorities. They could not understand how the
project would work, nor how it was costed, and hence delayed clearing the parts into the
country.

By late 1987, 26 tractors had been rebuilt to prescribed standards and current production was
running at 6 - 8 per month, using two teams of two men each, supported by other specialised
workshop staff, clerical staff, and stores personnel. Records showed that the time involved per
tractor amounted to 80 team-hours, i.e. 160 man-hours, with a further 55 hours of other staff
time, giving a total of 215 man hours. This was somewhat less than the estimate of time for
other, but similar, projects in the region and indicated that the operation was efficient.

The quality of the renovated tractors was proving to be very good, and the programme
was understandably popular amongst commercial farmers. There were no warranty
claims on the first 26 tractors.

The comparative costs of new and renovated tractors in Zimbabwe is shown in Table 7.

The contract stipulated that old components removed from the tractors would remain the
property of the agent. Gradually, with selected items (at ratio of about 1 to 5), some use was
made of these parts to start a service exchange scheme. This was absorbed into the company's
normal commercial activity.

To reduce the risk factor, the company preferred to keep most of the work under its own roof,
although where practical, some parts were manufactured locally. Particular examples were
exhaust pipes, foot plates and similar hardware, batteries and a proportion of the tyres used for
the programme. ·

Unfortunately, the economies of scale of manufacture meant that, as predicted, many of the
components could be imported at substantially lower cost than they could be overhauled or
manufactured in the country. In addition, the reliability of supply was better and the risk of
receiving unusable products was lower. Nevertheless, national economic benefits did accrue
from local manufacture, and the agent was anxious to balance this with the provision of good
service to the farmer. At the time of writing, local manufacture accounts for about 7 per cent of
the total parts value.

28
 Table 7 Comparative Co~ts of Renovated and New
Tractors in Zimbabwe
(Figures updated in 1990)
No Tax and No With Tax and
Import Duty Import Duty
NEW tractor
60kW (83hp) 71 000 84 000
Renovated Tractor 47 300 56 000
(plus old unit) 9 000 9 000
56 300 65 000
Saving on renovated
Tractor 14 700 19 000
(As Percentage 20% 23%)
-------------------------------------------------------
Sales Tax on both new tractor units and replacement
parts is 12.5%

Support for the programme from farmers has been excellent, and the demand for renovated
tractors far exceeds the current capacity of 6 - 8 per month.

29
Malawi

The rate of economic growth in Malawi has slowed considerably since 1980, and in common
with other countries in the region, it is facing economic difficulties that have resulted in a
shortage of foreign exchange. Agriculture, which is dominant in the economy and supports over
85 per cent of the population, can be divided into two main sectors:

Small holder production which concentrates on food crops and accounts for 85
per cent of total agricultural output;

Estate and commercial production of three main crops; tobacco, sugar and tea.
These account for only 15 per cent of agricultural output, but provide nearly 75
per cent of total exports.

These revenue-earning commodities are heavily influenced by both world market prices and
high transport costs. The latter are mainly a result of Malawi's land-locked situation.

Tractor use in Malawi is confined almost entirely to the estate and commercial farming sectors,
and hence, any shortages in tractor power have a detrimental effect on export earnings. The
market for tractors in the country is small and does not generally attract large numbers of
subsidised products. Massey-Ferguson and Ford are the dominant makes with typical total sales
of 100 new units each per year. Taking into account Malawi's growing foreign exchange
problems, both companies have looked into the feasibility of renovating existing tractors,
although to date only Massey-Ferguson have actually put this into practice.

By the end of 1987, the Massey-Ferguson franchised distributor, Farm & Engineering Services
Ltd. (FES), had renovated a total of about 80 tractors, mostly to MF-prescribed standards. All
these had been funded through normal commercial channels. Output averaged about one tractor
per week.

FES investigated and put into practice, on a limited scale, the renovating of 'specials' to
individual customers' specifications. A typical example was tractors rebuilt solely for sugar
cane haulage. These were equipped with strengthened towing hitches and extra driver
protection, but the hydraulic system and power-take-off components were removed.

Unfortunately to date it has not proved possible to use aid funds to exploit any training and
regional cooperation.

One major fleet user, the Malawi Government, is currently considering using aid funds to
renovate its own fleet of Massey-Ferguson tractors. This would be carried out as a normal
commercial activity with the total cost borne by an aid donor. A modest programme to renovate
40 tractors per year is planned, and this could be easily absorbed into the current renovation
activities.

30
Nicaragua

To date, Nicaragua provides the only example of a tractor renovation programme in Latin
America. It occurred in the period directly following the civil war, which severely damaged
much of the agricultural and industrial infrastructure. The retreating forces ransacked numerous
tractors, both new and used, removing valuable components from them and leaving them
unserviceable. However, their associated implements were hardly touched.

After the war, the Government introduced emergency measures to meet the immediate needs of
the people. Its development programme was divided into two parts: an immediate programme
for rehabilitation, and a longer-term development programme.

In view of acute and widespread malnutrition, especially among the rural poor, an immediate
priority was agricultural production. Tractor mechanisation was seen as a means of addressing
the immediate problems, and so, a special department was set up with the task of developing
agricultural mechanisation on a national scale. Its professional staff decided that the following
services should be provided:

A contract hire service for the small and medium farmers (up to about 30
hectares) with priority given to helping the poorest.

A mechanisation extension service. This was to include farm planning and

incorporate an advisory function, not only to the poor farmers, but also to the
managers of large state-owned enterprises.

The organisation was also responsible for developing the agricultural engineering industry in
the country. This included the rationalisation of imports and a limited amount of farm
machinery manufacture. An agricultural engineering section was quickly established and began
attempting to rehabilitate tractors.

Some 600 tractors were originally involved, and within the first year, 400 of them had been put
back into service using parts and resources that existed within the country. Further progress was
not possible without international aid and the direct import of parts.

The newer tractors were relatively straightforward to bring back into service, although careful
attention to cataloguing serial numbers was necessary to ensure correct parts provisioning. In
addition to the missing components, a great deal of hardware and slow moving items, such as
brackets and mud-guards which had either been lost or damaged during the looting, were also
required. These were difficult to identify.

Two different makes of tractor were involved, with two or three models of each make. For this
reason, a relatively small number of a large variety of different parts were required.

The 170 older tractors remaining after the initial restoration activities all required what
amounted to a major overhaul, particularly of the engine, although other systems, such as the
steering, brakes, and hydraulics, also required attention. A multiplicity of makes and models
was involved among these older tractors, and some of them were 20-25 years old. It was
therefore necessary to prepare a comprehensive list of requirements for each tractor, and to
include quite large quantities of general workshop consumables such as gasket material and
fasteners. General hand tools and special service equipment were also required. Lubricating
oils were scarce, and until normal commercial lines of supply could be established, barrels of
universal tractor oil and quantities of gear lubricants, hydraulic fluids and greases were included
with the parts consignment. The quantities supplied reflected not only the immediate
requirements but also included the lubricants and parts required for servicing over the medium
term. The supply of parts, which was put out to tender, had a total cost, in 1980, of about
£200 000 or an average of about £1 000 per tractor.

No economic analysis was carried out because the project was funded from the ODA Disaster

31
Relief Fund. However, from the observations of the technical adviser, there can be no doubt
that renovation was by far the preferred option for alleviating the tractor power shortage. The
project was seen mainly as a short term solution to an immediate and acute problem, but
nevertheless, long-term benefits would accrue from improvement to mechanization support
services and from the exposure of Ministry staff to the renovation process.

Moreover, without immediate mechanisation, food production targets for the year could
probably not have been achieved, and thus the project could be justified on humanitarian
grounds alone. Other forms of draught power, such as oxen or mules, would not have been able
to provide a viable alternative within the time available. The renovation targets set were realistic
because there was high quality technical expertise to hand. Fuel, competent operators, and other
resources for utilising the renovated tractors were available, so there was little risk that they
would remain idle.

There were so many tractor makes and models involved in the renovation that no single
manufacturer was sufficiently well represented to justify specialised technical assistance. Parts
supply had to be from a multi-make manufacturer. A British manufacturer was awarded the
contract, and the quality of the replacement parts supplied was closely monitored.

32
Tanzania
At the time of writing, a renovation programme for Ford tractors in Tanzania had been recently
launched, following a study carried out in 1988.

It was difficult to assess the tractor population in Tanzania in 1988. An FAO estimate of 19831
put the total at just over 18 700 units. In the intervening years, and with limited new inputs, the
total tractor fleet was likely to be of the order of 15 000 units, but with many less actually
operational.

1.onhro, the conglomerate corporation which owns Riddoch Motors, the franchized Ford agent
in Tanzania, made an assessment of the number of Ford tractors ih the country, based on
available data and backed up by a customer survey. They estimated the number at about 2 000.
About half of the farmers thought to possess Ford tractors, however, were not known to 1.onhro
and were not contacted during the survey. Thus, it was possible that the figure of 2 000
represented a 50 per cent underestimate, suggesting a Ford tractor population of about 4 000.

This figure of 4 000 Ford tractors seemed to be confirmed by work done by the Tanzanian
Motor Services Corporation (TMSC) to verify another manufacturer's estimate, made in 1985,
which put the total tractor population at 16 000. There appeared to have been little change
between 1985 and 1988, and since Ford tractors occupy about 25 per cent of the market, the
figure of 4 000 appeared more or less correct. Massey-Ferguson, with a market penetration
.estimated at 38 per cent, would have had of about 6 000 tractors in the country.

The Government of Tanzania, in conjunction with its agent GOPA Consult Plc, had been
negotiating with the EEC to obtain its financial support for a renovation programme. GOPA
Consult believed that funds to renovate 600 tractors would be made available, but there was no
indication at that stage of how this figure had been calculated. It was intended to renovate both
Ford and Massey-Ferguson tractors, as detailed in Table 8.

There was no evidence that any other manufacturers were interested in a renovation programme,
though the door was left open for them to become involved should they so desire.

Most of the tractors were owned by large estates and by individual farmers-cum-businessmen.
The latter usually carried out their own work and in addition worked on contract, including rural
transport, for others.

Table 8 Tanzanian Tractor Population and Proposed

Renovation Programme (1988)
Ford Massey-Ferguson Other Total
Estimated
Total Units 4 000 6 000 6 000 16 000

To be renovated 240 360 600

-----------------------------------------------------------------
---------Q·------------------------------------------------------

Farmers were keenly interested in the likely cost of renovating tractors, particularly in terms of
value for money. They appeared willing to accept renovation costs of 80 percent of new price,

1. FAQ World Agricultural Statistics: FAQ Statistical Pocketbook, 1983. Food and Agriculture Organization, Rome.

33
provided that they knew exactly what replacement parts would go into the renovation work.

Their ability to pay for renovation did not seem to be in doubt; most farmers had other interests
such as road transport, garages, shops, etc. and their tractors were used partly for these other
interests. None of the farmers interviewed expressed concern about expenditure of local funds,
but they were acutely aware of the foreign exchange problem and its influence on the
availability of replacement parts. Many stated that they would buy more tractors, or replacement
parts, or renovation services if they could pay for them in local currency.

Throughout most of the 1980s, there had been an almost complete lack of investment in
replacement parts and new units. Hence, both the Ford and Massey-Ferguson fleets were aging
and well worn. However, there were no discernible differences in the condition of the tractors
from region to region, and no regional variations in the pattern of wear.

In Tanzania, compared to Europe, there was a completely different level of expectation

regarding tractor life and serviceability; at 10-years old, a tractor was still relatively new in the
eyes of its owner. On the other hand, tractor owners expected to have to carry out major repairs
every 1-2 years from new. Engine overhauls predominated, at intervals of every 1500 - 2 000
working hours. This was due largely to a combination of poor operation, high sulphur content in
the fuel, lubricating oils of dubious quality, and lack of regular maintenance. The desirability of
preventative maintenance was understood by owners, but the resources to put it into practice
were sadly lacking.

There was also a wide gap between the viewpoint of farmer and the engineer on what
constituted 'good condition'. Farmers did not appear to hold the concept of 'wear' or 'finite
design life'. Tractors that were 15-20 years old were considered to be in perfect working order,
despite audible indications to the contrary.

Prior to the study concerning a tractor renovation programme in Tanzania, a similar programme
for trucks had been in operation for some time, and most farmers knew about this programme.
GOPA Consult was involved with the truck programme, and the differences between tractor and
truck renovation were not immediately apparent to them. Truck renovation is more labour
intensive and there is more scope for repair to non-wearing components such as the body and
chassis.

GOPA Consult expected that the renovation programme could cover tractors that only requited a
minimum of attention. In fact, however, most of the tractors inspected had done 15 GOO -
20 000 hours, some over a 20-year lifespan or more, in conditions as harsh as anywhere in
Africa. The 'minimum of attention' in such circumstances was nothing short of a complete
rebuild, apart from s()me non-wearing items. Even major castings and housings needed attention
in many cases.

GOPA Consult were initially reluctant to accept the supply of replacement parts in kit form.
Presumably, they believed that kits would contain parts that might not be necessary, and not
everyone is informed regarding the economics of replacement parts provisioning.

In particular, there is a vital economic fact of importance about replacement components: when
they are taken from a manufacturer's production line - in so-called PKD (Partial Knock Down)
state - they usually bear a completely different, and lower, price structure to individual parts
sold through the normal replacement parts distribution network.

Ultimately, it was decided to import the replacement parts in kit form, but the kits could be
broken down into sub-assemblies so that the tractor owner would have the option of selecting
the items required. At the same time GOPA Consult would be satisfied that only essential work
was carried out, thereby maximizing the number of tractors put through the renovation process.

The EEC agreed to finance a test batch of 20 Ford tractor renovations, and the work began in the
last months of 1989. The total value of the replacement parts financed by the EEC for the first
20 tractors was just under £115 000, CIF Dar es Salam, or about £5 350 per tractor. The EEC

34
assistance also provided two kits of special tools and the services of an expatriate technician to
oversee the work and ensure training for local staff.

At the time of writing, batches of three tractors at once are being brought in for renovation, and
they are being worked on by three technicians. The tractors remain the property of the original
owners, who are expected to make a down payment when the tractor is brought in. The work
and parts required are then agreed, the cost calculated, and a contract drawn up. Assemblies that
are completely replaced, for example the engine, are covered by a 1-year warranty, whereas
individual parts that are replaced are covered for 6 months.

35
 V

SOME CONCLUSIONS FROM THEIN-COUNTRY EXPERIENCES DESCRIBED

The four ,completed or well:...advanced schemes in Africa had the following characteristics:

Each had an established large-scale mechanized farming sector and consequently

a large tractor park.

Each market was dominated by one or two makes of tractor.

Many tractors had become immobilised due to a lack of foreign exchange for the
import of replacement parts and to a reduction in the purchasing power of
agricultural producers.

There was no reason to expect a radical reversal in the falling trend in new tractor
sales.

As is indicated in Table 9, most of the tractors (40%) were inoperative because of relatively
small faults. Only a quarter required major overhauls.

Table 9 Type of Repairs Required

(Africa)
Small Repairs 40%
Medium Repairs 35%
Large Repairs/Overhauls 25%
~-------~~---~-----------~------------
-~c-~-------~---------------~---------

With regard to costs and benefits, a primary justification for tractor renovation schemes is that it
is cheaper to renovate a tractor than to purchase one new. Certainly, this appears to be true for
medium and large tractors of Western European manufacture, using the kit approach.

The question of kits versus repair-as-necessary using individual parts was touched on in the
Tanzanian Case Study. It requires a brief further examination. According to the information
prepared for the Tanzanian renovation programme, based on experience elsewhere, renovation
of seriously degraded tractors is only economical if the replacement parts are provided in kit
form. More specifically, if it is assumed that the fitted cost of a basic kit amounts to about 80
per cent of the cost of a new tractor, using individual parts and fitting them to the same level of
replacement as that of the kit, would cost more than a new tractor.

Clearly, it is the degree of degradation, and the quantity of replacement parts required, that will
determine the benefit or otherwise of procuring parts in kit form, not forgetting either that the kit
approach provides guarantees in respect of quality of the renovated unit that can never be
equalled in a unit that has been repaired-as-necessary.

Cost comparisons for renovating tractors in Southern Africa have been made by the
manufacturing companies themselves and by various donor agencies. Table 10, below, seems to
show that a tractor can be renovated for between 70 per cent and 80 per cent of the cost of
purchasing a new machine.

36
 Table 10 Cost Comparison of New and Renovated
84hp Tractors in 1987 (US$)
Country New Renovated Renovated as%
Tractor Tractor of New Tractor
Zambia 37 826 28 028 74
Zimbabwe 36 655 26 087 71 1
Malawi 28 001 19 602 70 -
Mozambique 28 234 23 513 83

Notes:
1. Costs include all offshore charges, insurance and
handling, interest on capital, assembly costs, warranty
shortfall and dealers profit, but not import duties and
taxes.
2. Due to rapid devaluation occurring in some of the
above countries, the rehabilitated tractor costs are not
necessarily the actual prices that were being charged to
farmers at the time. They have been adjusted, where
appropriate, to the price that would have to be charged
if the tractor renovation kits were imported at the same
exchange rate as the tractors.
------------------------------------------------------------------

Table 11 provides a breakdown of sample costs of a new versus a renovated tractor in a country
of Southern Africa. It is expressed in a local currency and refers to late 1987.

The point must be made, however, that these apparently straightforward tables of comparative
costs mask several complicating factors, notably in respect of the price of a new tractor. The
price to the consumer of the same tractor varies by over 35 per cent from US$ 28 000 in Malawi
to US $37 800 in Zambia. In part, these prices reflect differences in the costs associated with
each market (shipping costs, sales, marketing and warranty costs). However, it is interesting to
strip out these costs and compare the FOB costs for tractors destined for these markets. The
figures in Table 12 relate to one make of tractor, and show a 28 per cent variation in price.

It becomes clear, therefore, that the calculated cost saving on a renovated tractor is dependent on
the manufacturer's pricing policy for rtew equipment, and also for parts kits, for that particular
country. If a manufacturer's price for a given parts kit is the same, irrespective of the country in
which it is to be used, the FOB prices for a new tractor largely determines the cost saving. For
example, if the FOB price for Mozambique were the same as that of Zambia, a renovated tractor
would cost 70 per cent of the cost of a new one, rather than the 81 per cent actually calculated.
Conversely, if the FOB price for Zambia was set at the Mozambique level, a renovated tractor
would work out at 87 per cent of the cost of a new one, rather than the 74 per cent actually
calculated.

The conclusion must be that, given the wide price range of new tractors of the same make and
model in different markets, a manufacturer's pricing policy for a country is of extreme

1. Further cost analysis carried out in 1990 in Zimbabwe seems to show that this figure for renovated price as
percentage of new tractor was optimistic. 77 per cent would be more accurate. (See Table 7)

37
 Table 11 Sample Cost Analysis and Comparison of New and Renovated
84hp Tractors in a Southern African Country.
New Renovated
mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmammmammmmmummmmmmmmmmmmmmmmmmmm

Basic cost FOB 37 612 1 30 654

ROPS 663 - n/a
Shipping@ 4 Tractors/or
8 kits per container I 4 290 1 755
Sub Total 42 565 32 409
.............. ..............
Insurance, Clearing, Handling
and Delivery charges 4 358 1 060
Sub Total, Capital Outlay 46 923 33 469
Interest on Capital Outlay~ n/a n/a
Sub Total, landed cost 46 923 33 469
................. ...........
Assembly and POI! 850 n/a
Labour to strip and rebuilt n/a 1 625
Overhaul front and rear axle
castings and linkage n/a 1 800
Spray painting n/a 550
Oil and Lubricants n/a 420
Number plates and Sundries n/a 185
Sub Total, Cost Price 47 773 38 049
Warranty Shortfall and Allowance
for free service@ 25% 995 617
Mark up@ 25% (new)10% (renovated)~ 11 943 7 610
TOTAL RETAIL PRICE 60 671 46 276

Renovated Tractor Price as% of New= 76%

----------------------------------------------------------------------

1. Figures in local currency

2. Shipping cost based on CIF value and converted from US$

3. New tractors are paid for on delivery, hence no interest charge

4. Pre-Delivery Inspection

5.A mark up of 18-20% on renovation kits is usually agreed between the manufacturer and the distributor. In addition,
all workshop charges for stripping and rebuilding, overhauling components, painting, etc. carry their own mark up.

38
importance in determining the cost savings resulting from a rehabilitation programme. Only if
the manufacturer's pricing policy for parts kits for a certain country is a reflection of the prices
set for new tractors in that same country, will the cost savings brought about by rehabilitation
programmes be more or less the same everywhere.

Table 12 1987 FOB Price of a New 84hp Tractor

Country Price (US$)
Zambia 20 120
Zimbabwe 18 040
Malawi 17 360
Mozambique 15 770
------------------------------------------------

Three reasons are usually quoted for differential pricing by manufacturers:

Differences in tractor specifications for particular markets;

Differences in marketing and servicing costs borne by the manufacturer;

Differences in manufacturer commitment to particular markets, and the price of

competitors' tractors.

fu effect, tractor manufacturers, like manufacturers of many other goods, often set their prices
according to what they think a particular market will stand, or because of a strategy decision
they have made for that market. Quite frequently, manufacturers' pricing may appear irrational;
for example, countries in which it is difficult to operate and which have high costs may not be
those in which tractor prices are the highest.

The final selling price of both new and renovated tractors is also affected by the profit margins
of local agents. In several cases, agents have - at least initially - operated on a lower profit
margin for renovated tractors than for new ones.

One undisputable benefit of renovating tractors rather than buying new is that it saves on
shipping costs. Typically, it is possible to ship four 75hp tractors or twelve complete kits in a
single 20-foot container. Of course, the actual amount saved on shipping costs will depend on
how comprehensive the tractor kits are - the more comprehensive the less the saving - as well
as on the size of the tractors involved. Actual shipping costs per tractor from Europe to Africa
are given in Table 13. As can be seen, the shipping costs for the renovation kits are always less
than half those for a new tractor.

Table 13 Per-Tractor Shipping Costs 1987 (US$)

Country New Parts
Tractor Kit
Zambia 1 980 495
Mozambique 1 044 540
Malawi 1 980 810
Zimbabwe 2 160 1 080
-------------------------------------------------

39
Price distortions also occur in centrally planned economies and these can affect the viability of a
renovation programme. For example, in Mozambique, due to a fixed-price allocation system of
tractors to farmers, a secondhand tractor can be sold on the open market for up to 150 per cent of
the price of a new tractor. Such distortions make it very difficult to assess the real cost
effectiveness of renovation schemes.

The quality of a renovated tractor also has to be considered when assessing the cost
effectiveness of renovation versus buying new. A comparison of new prices is only adequate in
cases where the specification, lifespan and operating costs of a renovated tractor are similar to
those of a new tractor. This assumption can only be made for ROC-type renovated tractors.
Tractors which are brought back into operation by schemes which repair-as-necessary, or
which replace some assemblies as a matter of course but still undertake some repair-as-
necessary, should not be considered equivalent to 'new' for costing purposes.

Improvements in specifications brought about through renovation should, where possible, be

accounted for by adjusting the price of the new or renovated tractor accordingly. For example, if
all the tractors under renovation in a scheme are being fitted with ROPS, then the comparative
new tractor price should also include a ROPS, even if this is not normally included in the
specification for the market in question.

It is much more difficult to account for the different specifications of tractors of different ages.
Often ten- or fifteen-year-old models under renovation are no longer being produced by the
manufacturer. Sometimes, tractors are renovated up to present day specification, but when this
is not done, one cannot compare prices of like with like. In such cases, one should compare the
renovated tractors with the closest comparable new tractor of that make and horsepower.

Of more material importance than minor differences in specification are the differences in
economic lifespan and in operating costs. These factors are so important that differences in
initial capital cost are not necessarily a reliable guide to the cost effectiveness of any particular
renovation programme. Renovated tractors with a cost of up to 80 per cent of the price of a new
tractor are likely to prove cost effective. Thus, unless the price of new tractors was producing
distortions, the programmes described in this publication were, or are, cost effective.

If the multiple factors that influence the cost-benefit ratio of renovation programmes are
considered, it could be concluded that such programmes are less likely to be viable in Asia than
they are in Africa. There are two main reasons for this conclusion:

New tractor prices are very low in much of Southern and South Eastern Asia,
because the traditional market leaders from Europe want to preserve their
dominant position in the face of Japanese inroads;

The relatively skilled labour force, and low wage rates in most countries of
Southern and South Eastern Asia lead to a high salvage value for defunct and
unserviceable tractors, and this further reduces the cost benefits of a formal
renovation programme for tractors.

However, notwithstanding these general considerations concerning Asia, it should be noted that
Ford New Holland supplied 60 tractor renovation kits to Thailand in 1989 and expected to
increase this number in 1990.

Training benefits are listed as one of the major advantages of machinery rehabilitation schemes,
and it is therefore important to examine what benefits have accrued in this field as a result of the
renovation programmes described in the Case Studies.

In Mozambique, there has been an expanded training programme related to the renovation
scheme. However, no significant training programmes have been undertaken as part of any of
the other schemes. This may be due, in part, to the fact that they were, or are, all relatively

40
small schemes, but even so, it is a serious weakness. It is true, however, that any renovation
programme which has to recruit technicians will provide an element of on-the-job training. But
in the case of the smaller schemes undertaken in Southern Africa, this has involved perhaps half
a dozen mechanics.

It is therefore concluded that, with the notable exception of Mozambique, the programmes have
not undertaken significant training. Nor does there appear to have been any study which has
attempted to assess the effectiveness of the training which has been undertaken. Two questions
need to be addressed:

First, is the quality of the training good enough, and are the potential
motivational benefits of linking training with a practical work programme being
realised?

Second, are the people who have been, or are being, trained in a position to use
their newly-acquired skills?

Any country embarking on rehabilitation and renovation programmes should give serious
attention to an integral and carefully planned and executed training component.

As has already been stated in this publication, governments have an important role to play in
tractor rehabilitation programmes, even when the foreign exchange component of the cost of the
programme is provided by an external donor - as is usually the case.

There must be a willingness on the part of government to support the programme. And
Government departments must be informed so that they do not obstruct the programme, for
example, by delaying the import and customs' clearance of replacement parts. Rehabilitation
programmes must cater to the possibility of the role of government being passive rather than
active, but that passive support, at least, is a prerequisite for embarking on them.

41
BROKEN DOWN AND CANNIBALIZED TRACTORS

42
BROKEN DOWN AND CANNIBALIZED TRACTORS

43
TRACTORS BEING REHABILITATED

44
TRACTORS BEING REHABILITATED

45
 VI

RESEARCHING, PLANNING, AND OPERATING RENOVATION PROGRAMMES

Farm Surveys
Much specific and localized information will be required when considering renovation
programmes. Data needs to be collected at the pre-feasibility stage to assess whether or not a
scheme is a viable proposition. This requires a systematic approach, and what follows is a
suggested survey methodology and an outline of the information which needs to be gathered.

The survey methodology advocated here is much influenced by what is known as the Farming
Systems Perspective (FSP). Taken from Bumage (1989), it adopts the FSP concept using a
three-pronged approach, covering: technical factors, agricultural factors, and political and
socio-economic factors. 1

FSP differs significantly from a systems model in that it does not require complete numerical
data for all included variables. It is a style of thinking which encourages the concept of a farm as
a system. It is particularly appropriate to understanding and handling the complexity of
agricultural research in developing countries.

The style of thinking of FSP determines that actual or potential rehabilitation schemes cannot be
properly assessed unless they are seen in the wider context of the systems within which they
function, or are intended to function. A tractor is a part of an On-Farm System which, due to
variations in agro-climatic conditions and cropping practices, is highly location-specific. And
On-Farm Systems exist in the wider context of the nation's socio-economic sub-systems,
which in tum are linked into the world economic and political systems. FSP explicitly examines
the interrelationships that exist between systems.

FSP is not a replacement for discipline-centred research, but rather a complementary approach
which encourages researchers to appreciate and consider the wider issues which may affect, or
be affected by, a given technology. FSP permits identification and definition of the systems that
impinge on the research in hand. Once identified, research can be carried out in sufficient detail
to allow rational policy decisions to be made - provided, of course, that the political climate is
conducive to the change. Research based on this approach is essentially "bottom-up" in nature.

The farmer's decision-making process is directly affected by his perception of the multiple
constraints that he faces both on-farm (e.g. agro-climatic conditions) and off-farm (e.g.
changes in the prices to producers fixed by the government). Farmers have the be~t perception
of their own environment. They may not be economists or trained agronomists, but are still
specialists in their own right. It is therefore necessary to carry out part of the research in the
farmer's environment.

Crucial to assessing and establishing a rehabilitation scheme is to identify all the factors that
relate to it, and the FSP approach is of value in this respect. For example, the location, type and
demand for physical facilities will be affected by a number of socio-economic factors such as
the spatial location and population densities of tractor owners.

The inter-relationships between the sub-systems which affect the operation of tractors should

1. The technical factors will be identified and discussed later. The scope of this publication does not lend itself to
detailed treatment of agricultural and political/socio-economic factors, although many of the essentials have been
mentioned in earlier sections dealing with the reduction of premature failure and the criteria for rehabilitation
programmes.

46
also be recognised. For example, in tractor management, the necessary break-even annual
tractor utilization rates will be a function of the relative prices of the elements and quantities of
production inputs and outputs.

Before beginning the field work for a survey, it will usually be possible to find existing and
relevant information in available reports and census data. A desk search should therefore be
carried out initially to minimize the time spent on primary data collection in the field.

Ideally, the survey should be carried out by persons with a multi-disciplinary perspective of
agricultural development, but who also have technical knowledge of agricultural machinery. The
task involves making judgments based on interviews with farmers and on a quick appraisal of
the condition of their machinery.

Assistance from government departments, such as the local extension service, may be required
to locate tractors. The survey should aim to:

Identify the sources and limitations of secondary (i.e. existing) data;

draw up a list of the outstanding data which are not available from secondary
sources;

collect the needed primary data from field surveys undertaken to establish
farmers needs; and

determine the main reasons for the demise of the tractors, e.g. premature failure
due to poor maintenance or operator abuse, so that remedial action can be taken
within the holistic rehabilitation programme once the tractor has been renovated.

It is important also to identify the characteristics of the farming enterprises where renovated
machinery is expected to operate and to recognise its owners and their characteristics precisely.
Without this information, research will not reflect the true circumstances of the client group, and
policies to provide remedial action may be misguided. Answers are needed to questions such as:

Why do some tractors last much longer than others?

Why can some farmers gain access to credit to pay for a tractor to be renovated
while others cannot?

A specific classification of farming enterprises must be drawn up, based on their characteristics.
Ruthenberg (1980) points out that, 'No farm is organised exactly like any other, but farms
producing under similar natural, economic and socio-institutional conditions tend to be
similarly structured'. Therefore, farms with similar structural characteristics should be grouped
into classes using relevant criteria. The classification should reflect the type of farming system,
the scale of operation and the efficiency at which resources are used. Faimers should be
classified using the following criteria:

The power source;

The size of the total farm enterprise (total cultivated area);

The type of crops grown;

The degree of commercialisation;

The way in which resources are organised.

In countries where broad farmer classifications have already been drawn up for agricultural
planning purposes, these may be a useful basis, but specific characteristics relevant to

47
agricultural mechanization will need to be highlighted.

The constraints faced by farmers should be determined to gain an understanding of the particular
reasons for the premature degeneration of their tractors and other machinery. The general
reasons for premature failure have already been covered in this publication, but it is instructive
to see how they affect different types of farmers, as revealed by a recent survey (Bumage 1989)
for a rehabilitation programme in Zambia.

For large-scale commercial farmers in Zambia - as would probably be the case in most
developing countries - the constraints were found to be:

The frequent non-availability of replacement parts and the rapid escalation in

prices;

Lack of skilled drivers;

Lack of skilled mechanics willing to work on the farm;

Declining gross profit margins due to large increases in input prices

(especially non-regulated commodities) in relation to increases in prices paid to
farmers for their produce.

The main constraints facing medium-scale commercial farmers were found to be:

The frequent non-availability of replacement parts and the rapid escalation in

prices;

Lack of service support in rural areas and provincial capitals away from the line
of rail (the main concentration of urban settlement);

Long distances to Lusaka to obtain replacement parts. This problem was often
compounded by poor diagnostic skills, poor communications, and frequent parts
shortages. If the wrong part was ordered or was not in stock, more than one
journey had to be made to obtain the correct part, increasing its real cost;

High price of tractor dealer support services;

Low prices for farm produce and high input costs;

Low annual tractor utilization rates, resulting in high fixed costs and total costs
per hectare, often compounded by erratic fuel supplies and the need to drive the
tractor long distances to collect it;

Limited ability to carry out preventive maintenance;

Low crop yields;

Inadequate service in respect of input supplies and crop collection.

It can be seen that in this case in Zambia very few of the constraints would be resolved by an
agricultural machinery rehabilitation programme, and very few farmers within this group could
be clients of such a programme.

48
Survey of the Technical Aspects

Still in the assessment phase prior to a rehabilitation programme, the tractor population and the
available infrastructure must to be surveyed. The survey of the tractor population follows a
logical sequence of events. Data sources need to be identified so that the quantity of inoperative
and performance-impaired tractors, the makes, models and the level of degeneration of each
can be established. They can be ranked into three broad categories:

Type 1: completely worn out and in need of a major overhaul. This normally involves
the replacement of all major sub-assemblies to restore performance and the working life
of the asset. A degree of updating may also be desirable.

Type 2: requires major attention to some sub-assemblies to restore performance and

working life.

Type 3: needs only modest attention to restore performance.

The spatial distribution of the tractors that are potential candidates for renovation must be
established. If the country has more than one suitable workshop site to carry out renovation
work, the best site will, of course, be that which is closest to the greatest number of tractors.
Alternatively, in vast countries such as Nigeria or Mozambique, it may be necessary to establish
workshops at a number of locations in order to overcome the logistical problems of transport
over long distances. Such decentralization would also allow recipient farmers better access to
on-going service support after the renovation of their machinery than would otherwise have
been the case.

During the field survey, the likely demand for rehabilitated tractors should also be assessed.
Criteria likely to affect the demand are :

The market price of a renovated tractor versus a new, equivalent tractor of the
same make and/or other make;

Availability of a renovated tractor versus new tractors of the same make and/or
other makes;

The effectiveness of the local distributor's marketing policy towards the potential
client group;

The farmer's perception of the distributor's competence to carry out renovation to

a high standard;

The farmer's perception of the likely level of service support after the rebuild.

The ability of the farmer to provide sufficient funds or gain access to sufficient
credit to pay the renovation price.

Experience shows that in all of the African countries where surveys have been carried out, the
level of the market price was the most important single criterion.

It would be pointless to consider renovating a fleet of tractors without paying attention to their
associated implements. A survey, similar in nature to the tractor survey and made at the same
time, can assess the available implements. In the event that many different makes and types of
implement are found, a renovation project for all implements becomes virtually impossible to
organise and manage. The survey should try, therefore, to establish any commonality which
exists between component parts of implements of different manufacture in order to identify
those which can be easily renovated.

The survey of the infrastructure for a rehabilitation scheme should assess both private and

49
public sector institutions. The purpose should be identify organizations that would be capable of
carrying out a renovation programme, and of prime importance, also have the facilities needed
for subsequent support of the renovated machinery. It is usually found that the most suitable
organization is a manufacturer's distributor.

Assessments should be made of the facilities under the headings listed below. At the same time,
any improvements necessary to bring them up to an acceptable standard should be specified,
allocating responsibility for carrying out the improvements, and estimating the costs so that they
can be included in the financing package for the project. The areas for assessment are as follows:

Workshop facilities

location
size and condition of buildings
special tools
general tools
machine tools
mechanics available - quantity and quality
supervisory staff
reception area
secure outside storage yard

Warehouse facilities

location
size and condition of buildings
storage space
security
management systems
microfiche/replacement parts catalogues
store personnel

Service support

vehicles
location and standard of rural workshops

An objective should be to ascertain the additional overheads that will be involved for a
rehabilitation scheme. From this additional overhead, it will be possible to calculate the
minimum number of tractors that have to be rehabilitated for the organization to cover these
additional costs, and make a profit.

There are some logistical and practical points that require attention when assessing a suitable
workshop for a tractor rehabilitation scheme. Ideally, the workshop should be located so that it is
close to the tractors to be renovated, thereby reducing transportation distances and costs, but at
the same time, it should, ideally, be close enough to the port of entry for replacement parts to
minimize the complication and expense of moving those parts to the workshop. This ideal
location will have an electricity supply, and moreover, it will have enough amenities to attract
and keep skilled labour in the area.

These requirements are somewhat theoretical because, in practice, suitable workshop facilities
usually exist, are owned by the local distributor of the manufacturer's product, and are located in
an urban area. It is also likely that the limited scale of operation of a typical rehabilitation
scheme could not justify, economically speaking, the construction of a workshop with the
optimum logistical location. And even if a new workshop could be justified on economic
grounds, in an ideal rural location, the practical considerations of the proximity of support

50
facilities, such as engineering workshops, cannot be ignored.

The buildings should be of a solid and secure construction in order to safeguard against theft of
parts and equipment. If a kit-type renovation approach is being adopted, enough area should be
made available to set up a flow-line assembly system. In addition, this area should be out of
direct sunlight in order to ensure a favourable working environment.

A full set of the special service tools recommended by the manufacturer should be available and
in a condition which allows their safe and efficient used by mechanics. The same requirements
apply to any general hand tools. Machine tools may also be required. The number and type will
depend on the renovation approach to be adopted. Required equipment may include a Power
Take-Off dynamometer to run-up and test engines, a lathe, and a radial arm drill.

The level of competence of supervisory staff and mechanics should also be assessed, taking into
account both general mechanical skills and specialised knowledge of the type and make of
machinery to be renovated. This assessment will enable the training requirements of staff to be
identified. Training inputs may range from setting up on- the-job training, with mechanics
periodically attending a technical college to learn about the theoretical aspects of engineering, to
sending supervisory staff on short courses at the manufacturer's premises. In most cases, it will
also be necessary to arrange for a product specialist from the manufacturer to spend some time
with the mechanics and supervisory staff. Although initially his main function may be to oversee
the launch of the renovation, his primary longer-term function will be impart knowledge about
the technical and managerial aspects of the renovation work.

No renovation programme can proceed without a well-organized supply and storage of

replacement parts, whether in the form of kits or individual items. The parts warehouse should
be located next to the workshop. The building should be in a safe and secure condition, with
sufficient space to store parts in an organised way and at the scale of operation that is planned
for the scheme. Sufficient storage bins should be available, and a microfiche system, or a range
of parts catalogues, will be required for the correct ordering and provisioning of parts.

The level of competence of stores personnel should also be assessed to ensure they have
sufficient ability and skills to manage the stores efficiently. Any training needs should be
planned on the basis of this assessment.

The service activities in the field, especially for continued on-going repair and maimenance,
will call for reliable transport. Suitable vehicles, in good condition, should be provided to move
both parts and personnel over rugged terrain. Tractors should not be driven over long distances,
and therefore trucks may be required to bring the tractors in to the renovation workshop and to
deliver them back to their owners. These trucks must be purposely designed for tractor
transport, and the drivers appropriately trained, because tractors are potentially hazardous
freight.

After an assessment of the infrastructure and the location and condition of the tractors for
renovation, a decision can be taken as to where a project could be set up, and whether a kit
approach or a repair-as-necessary approach would be most appropriate. This decision will also
be influenced by the price and availability of comparable tractors from competing
manufacturers. In fact, the market for renovated tractors and their price tag have to be seen in
the context of alternative choices available to the farmer.

Typically, renovation programmes are most successfully carried out using a comprehensive kit
approach, even if some parts may be replaced that theoretically still have some remaining
service life. With the kit approach, it is easier to ensure 100 per cent availability of replacement
components for each and every machine to be renovated. Midway through a rebuild is no time to
discover that certain essential parts are out of stock and need to be ordered from the
manufacturer - especially when lead times in ordering, and delay in delivery, are increased by
the need to apply for foreign currency allocations and other bureaucratic procedures.

In addition, a kit approach requires less investment in sophisticated machining equipment, since

51
the need for reconditioning of individual components decreases. Furthermore, as many sub-
assemblies are replaced as a matter of course, a comprehensive kit approach calls for less
diagnostic skills from the mechanics, skills that are often lacking in developing countries.

The planning of programmes following the repair-as-necessary approach will depend largely on
the existing production facilities, and quality of work, in the organisations to which
reconditioning of components could be sub-contracted. Any proposed investment in new
machine tools should be evaluated using a discounted cash-flow analysis, based on an
assessment of the type of reconditioning tasks that could be carried out, and the likely number of
components that could be handled over the project life.

With both the kit and repair-as-necessary approach, certain further other modifications may
also be needed to make the tractor more suitable for operation under local conditions. For
example, NIAE (1984) recommended that Roll-Over Protective Structures (ROPS),
incorporating a sun canopy, should be included in Massey-Ferguson ROC kits for the Zambian
market in order to increase operator safety and also to improve productivity. In other examples,
the existing electrical starting system and ancillary components could be replaced with a spring
starter system in order to improve the medium-long term starting reliability of the tractor
engine.

If the renovation scheme is to be based on a kit approach, it is essential to test the proposed kit
for comprehensiveness and compatibility against a typical tractor. This is especially important
when the kit includes components to update the tractor specifications, for example a ten-speed
transmission instead of the original eight. Without this pre-test, the chances of there being
shortages in the kits, and incompatibility of replacement parts, increases considerably. The most
suitable way to carry out the test is to is to strip a typical tractor and rebuild it using the trial kit.
This should be carried out under the manufacturer's supervision and before kits are consigned to
the project in operational quantities.

In most cases, renovation schemes are run in conjunction with the original manufacturer of the
machinery, who supply kits and/or individual parts, and who is also expected to guarantee the
final product. It is unreasonable to expect a manufacturer to sanction the use of non-branded
parts in such circumstances. In other cases, however - and the Nicaragua experience described
earlier is an example - there is such a variety of makes and models of machinery involved, with
such small numbers of each, that is unlikely that all of the individual manufacturers will become
directly involved; and even if they did, for the scheme to deal with them separately for
procurement of inputs would be difficult and costly.

In such cases, a procurement agency may be contracted for purchasing and supplying inputs.
They will normally work through multi-make parts suppliers for most of the components
required. In this type of procurement, a number of factors can influence the initial cost
advantage of renovation versus new equipment. As Wrighton (1988) argues, cost savings of 10-
40 per cent can be achieved by: avoiding over specification, choosing the best source of parts,
obtaining the best price, paying attention to contract conditions, and choosing the best transport
opportunities. However, when parts are procured from a number of sources, initial costs should
not become the ultimate selection criterion. Quality of the components should be taken very
much into account. As in most aspects of life, a trade off between quality and price will have to
be made. The option which offers the lowest cost over the projected life of the renovated
equipment should be chosen.

A range of second-hand components may be used in the renovation of a tractor, although this is
not desirable on a large scale. Using parts from other broken-down tractors is merely another
act of cannibalization. An exception to this is where parts removed from a tractor which is
undergoing a comprehensive kit-approach renovation are used. Some parts, although still
serviceable, are mandatorily replaced as part of a kit. Using these parts for keeping other tractors
operative is an effective use of existing resources, saving the country foreign exchange.

Before implementing a renovation programme based on a kit approach, a series of phased

management procedures must be drawn up to ensure that the work is implemented effectively

52
and efficiently. A realistic renovation schedule needs to be established, based on the resources
available at the outset. The throughput of tractors in a given time period must also be
established. The supply of parts can then be phased into the operation in a timely manner,
avoiding bottlenecks, while still keeping the costs of holding stocks of components to a
reasonable level. Speed of production should not be the ultimate criterion for the renovation
programme. As has already been mentioned, the objectives of a renovation programme should
include improving the existing infrastructure and levels of competence of technical and
managerial personnel, and to improve the longer-term institutional support for the technology.
A training function should, therefore, take a high priority in project design.

At the outset of the rehabilitation programme, it should be clear whether the farmer or the
renovating concern is to be responsible for transporting the old unit to the workshop. The latter
provides more control, but the costs have to be incorporated into the financial analysis.

A tractor renovation programme should be run as a separate function and in isolation from other
activities in the workshop. Ideally, a separate building should be allocated to the programme,
incorporating the workshop and stores. If this is not possible, it is essential to allocate a section
of the existing workshop to the programme, to be supplied by a stores system that caters solely
for the renovation work. For if stores facilities are shared with those used by routine workshop
operations and parts sales, shortages of essential items for the rebuild programme will occur.
Parts that were imported solely for use in renovation will be 'borrowed', with the best intentions
of replacing them from the next stock order. However, experience has shown that this rarely
happens, resulting in hold ups in the renovation work due to the absence of essential parts at
critical times. An interface between the mechanics and the parts 'pickers' is also required.

The renovation of the tractor is broken down into a series of stages, (see below) each comprising
a further series of operations. This procedure has proved to be effective, and it is possible to
maintain close supervision over quality control. Each mechanic in the team has identified tasks,
;md the parts supply flow from stores to workshop can be set up to supply all the parts for each
operation with minimum delay.

A new serial number should be allocated to the renovated tractor. The reasons for this are
twofold. Firstly, the serial number provides identification for possible warranty claims;
secondly, the number may be essential for ordering replacement parts in the future, especially
when specifications have been updated.

The Operational Stages in Tractor Renovation

It is easier and more efficient to follow a sequence of operations during a renovation programme
than to proceed on an ad hoc basis. A sequence along the lines of the following is recommended.
It is based on the management procedure adopted by Farmec of Zimbabwe.

Stage 1

Fit engine flywheel and clutch assembly

Fit gearbox to engine

Stage 2

Fit final-drive components and brakes to rear axle housing

Fit internal hydraulic components
Fit engine and gearbox to rear axle housing

Stage 3

Fit top covers

Fit steering box

53
Stage 4

Fit front axle housing

Fit front axle, steering, and road wheel components
Fit cooling fan
Fit radiator
Fit brake and clutch pedals and operating rods/lines

Stage 5

Fit external hydraulic components and three-point linkage

Fit PTO shaft
Fit drawbar support frame

At this point in the procedure, the assembled unit should be painted.

Stage 6

Fit electric wiring harness, alternator, and starter motor

Fit fuel tank
Fit fuel lines and filters
Fit dashboard assembly and steering wheel
Fit engine throttle and stop controls
Fit air cleaner
Fit ROPS
Fit footsteps/platforms
Fit front grill, fenders, and sheet metal
Fit lights
Fit seat
Fit wheels
Fit exhaust system
Affix emblems/decals
Fit miscellaneous items

At the planning stage, a system of parts management should be adopted under which parts are
given a number that is specific only to the renovation programme, and therefore, different from
the manufacturer's part numbers. On the cardex or computer system, a record can be made of
both numbers, so avoiding confusion if parts are being procured from alternative sources, or if
manufacturers change their part numbers.

Parts should be stored in sections which correspond with the stages of the renovation work
outlined above. For example, in Stage 1, following the drawing of the engine from the stores, the
next items to be delivered by the storeman would be the flywheel and the clutch assembly.

All parts drawn should be entered on the job card and be signed for by the mechanic and the
storeman as a way of making both parties accountable for their use. Further parts should not be
drawn from the stores until the foreman has checked that the earlier ones have been properly
fitted, and he has signed the job card to that effect. Only with the job card signed to certify
correct fitting, and on presentation of the card to the storeman, should he release the parts the
mechanic needs for the next operation.

When a number of mechanics are working on the same tractor, each mechanic should be issued
with paint of a specific colour which he/she should use to mark with a spot all the parts, nuts,
and bolts that he/she is responsible for fitting. This makes mechanics more accountable and
allows tighter quality control of the work. A bonus scheme should be considered in order to
encourage productivity and quality workmanship.

54
Monitoring and Evaluation

The overall purpose of monitoring and evaluation is to learn from current experience so that the
implementation of future rehabilitation schemes can be carried out in a more efficient and
effective manner.

To be effective, continuous monitoring and· evaluation should be pursued throughout the

programme. They are necessary to generate data against which the initial stated objectives and
expected results of the project can be measured. (For example, to assess whether the provision
of replacement parts was sufficient or whether the tractors lasted as long as anticipated). In
many countries, too little is known about what tractors are actually used for, or the costs
incurred during operation. To be meaningful, an evaluation must be based on carefully collected
data.

Ongoing monitoring will confirm that the project is being implemented as planned, and ensure
that any problems that do arise are identified and can be dealt with before they cause too much
damage. By chronologically recording events as they happen, it is possible, in a final evaluation
of the programme carried out later, to indicate both internal and external factors and events that
affected its implementation and overall impact. Once these factors and events have been
identified and recorded, anybody implementing a similar project in the future can gain from the
experience and avoid repeating mistakes.

During the renovation programme, the findings from the ongoing monitoring and evaluation,
from a holistic perspective, should be fed into the institutional hierarchy, identifying any
constraints so that the necessary resources can be directed to the project when required.

In practice, there will be two distinct aspects for the monitoring and evaluation of machinery
rehabilitation: the first will cover the programme as a series of clearly identifiable activities
connected to the rebuilding work, with expected results over a given timespan; the second will
take place after the actual renovation work on the machinery to establish, from the end-user's
viewpoint, what overall economic and technical benefits were achieved, and how these relate to
the national economy.

To facilitate the evaluation from the end-user's viewpoint and from that of the national
economy, each unit of renovated machinery should be returned to its owner with a logbook for
the recording of information concerning performance, failures, cost of repair and the like. Such
information will be crucial to the final evaluation, and it should lead to general conclusions
concerning:

Whether the tractors have performed in a satisfactory and reliable manner over
their anticipated lifespan;

Whether or not the tractors have lasted as long as anticipated at the onset of the
programme, and whether they have been used for the purposes intended at the
outset of the programme;

Whether or not the farmer has been satisfied with the product.

Any problems the farmer has experienced with support services for the tractor should be noted,
as should any modifications that can be incorporated into future renovations to make tractors
more suitable for operation under local conditions. This information can be gathered by a
combination of interviews with end users. and a review of the tractor logbooks. Where possible,
this information should be compared with the results of other surveys carried out of tractors
under similar circumstances.

55
 VII

LOCAL MANUFACTURE OR RECONDITIONING OF COMPONENTS

The idea that existing or newly-established local industries could become involved in the
manufacturing or reconditioning of components for machinery rehabilitation programmes is
particularly attractive. Given the foreign exchange problems of so many developing countries,
the need to create productive employment opportunities, and the quantities of machinery that are
lying idle for want of replacement parts, the local manufacture or reconditioning of such parts
appears, at least at first sight, to provide a golden opportunity for local entrepreneurs and for the
national economy. However, first some background considerations.

The economies of all the industrialised countries have developed with an integral domestic farm
machinery industry. In many cases, this has released labour from the land and so provided a
workforce for urban industries. However, circumstances in much of the developing world are
very different, and commonly, the reverse of historical economic development is now desirable,
that is to say, rural labour should be retained and any development initiative should aim at
increasing labour utilisation. Labour is relatively cheap in developing countries, while capital is
scarce.

Modem manufacturing techniques for components which make up sophisticated agricultural

machinery are capital-intensive rather than labour-intensive. In addition, such manufacture is
almost certain to rely on sophisticated, imported machine tools. These are expensive and require
lengthy production runs to be profitable.

In most developing countries, the industrial base is weak, with resulting deficiencies in terms of
engineering skills. It is, therefore, unlikely that the more sophisticated items of machinery, such
as tractors, would be wholly manufactured within a developing countries' resources. Of course,
this is a generalization, and there is certainly a potential for sophisticated manufacturing in a
number of countries that are still formally considered as "developing" but which have made
astonishing industrial progress in very recent decades. Some countries in Asia and Latin
America spring to mind in this context, but it should also be added that in countries where the
engineering base has strengthened, the problem of premature failure of farm machinery has
usually become less acute. In Africa, there are examples of agricultural machinery manufacture
e.g. in Kenya and Zimbabwe, where a modest farm machinery industry has grown up, but the
development of more sophisticated engineering production in the foreseeable future remains a
matter of conjecture.

As tractor power and sophistication increase, the potential for component manufacture in a
developing country decreases. In fact, for technical reasons, it would usually be difficult to use
a wide range of locally-produced components in the place of imported ones.

In this connection, it is worth noting that manufacturers of tractors are locked into an eternal
struggle to persuade owners of their machines to use only their own, so called 'genuine' or
'original', replacement parts, as opposed to those made by competitors and known variously as
'aftermarket', 'will-fit', 'non-branded', or more informally and critically, 'spurious', 'bogus' or
'pirate' parts. Replacement parts manufactured and marketed as non-branded are usually sold at
a considerably lower price than original parts that come through the manufacturer's distribution
network. Hence, these non-branded parts are a serious threat to the rather profitable replacement
parts operation run by a manufacturer. And this explains much of their typical hostility towards
'aftermarket' parts, and the large sums they spend on advertizing the virtues of their 'genuine'
parts.

However, to be fair, there is also the very serious matter of quality at stake, and even allowing
for manufacturers' self-interest in being critical of 'aftermarket' replacement parts, there are
some compelling arguments to the effect that these parts may lack the quality, and hence the
durability, of the manufacturer's own parts.

56
For example, a spokesman for the Caterpillar Tractor Company, referring to engine cylinder
liners and piston rings is on record with the following statement: "At Cat we engineer
everything, and we know exactly how hard components have to be in the (cylinder) bore. But
our tests show different hardness specifications among will-fit (e.g. spurious) liners and rings. If
you have one outfit making the liners, and another making the rings, how much oil control and
engine life can you expect?"

Furthermore, the same spokesman said, "Customers sometimes ask me why they should pay a
premium for Caterpillar anti-friction bearings. Some of them seem to think that all we are doing
is buying the part from someone else, putting it in a Caterpillar box and marking up the price.
What these customers don't realize is that most Caterpillar bearings are made with special
characteristics. We'll use a standard bearing if it will work. But if the application requires a
special bearing - with more precise tolerances, special heat treating, or more strength - we work
with the manufacturer to produce that unique part".

The point of including those quotations here is to illustrate an attitude, common among
manufacturers, towards the quality of replacement parts not made by themselves or by one of
their normal suppliers. It is also interesting to note that manufacturers work closely with their
suppliers to obtain the characteristics required of a component. The costs of this research and
development have to be recovered, whereas a spurious parts manufacturer does not have to bear
such costs.

Hence, unless a tractor maker has a subsidiary manufacturing company in the developing
country in question, the highly-engineered components required in a renovation programme will
almost certainly have to be imported. Thus, the prospects for local manufacture or
reconditioning of highly-engineered components for tractors do not appear good.

We must also bear in mind that the typical tractor manufacturer is unlikely to look with much
favour upon a proposal for the local manufacture of components, for several reasons:

Manufacturers have usually embarked on renovation programmes because the

market for new machinery is slack, and they are unlikely to be willing to hand
over production responsibility to another company or institution while their own
facilities, and those of their regular component suppliers, are not running at full
production levels. And, of course, each replacement part not provided by the
manufacturer would reduce their gross profits on a renovation project.

From a technical viewpoint, if manufacturers are expected to provide a warranty

for the renovated product, it is a forgone conclusion that only replacement parts
provided by them, or approved by them, will be acceptable. In theory, they could
approve parts made locally, but the process of consultation and verification for
specifications, and the quality control aspects, would probably be cumbersome
beyond reason for the small production runs that would normally be involved.
And the question remains, what could the incentive be for the manufacturer to
become involved with a local supplier?

Not all the components of a tractor are highly-engineered, however. For example, radiators,
electrical systems, water pumps, clutch assemblies, brake shoes, and fuel injection equipment
are all items that could quite easily be reconditioned by local repair shops. However, the repair
shops would need to be specialized, have appropriate inputs of technical data to ensure the
required specifications, and pay careful attention to quality control.

In many industrialized countries, there are so-called service exchange schemes, under which
items such as electrical components and fuel injection pumps that require overhaul are
exchanged for a reconditioned unit. Rehabilitation schemes can be used to promote this concept
by establishing the necessary resources of machine tools and trained staff.

57
In addition, there are replacement parts that are relatively simple to construct. or have multi-
product application, such as tyres, batteries, and fanbelts. These may be produced and available
locally. Unfortunately, however, experience shows, that such local items may be more expensive
to the farmer than the imported equivalent, and be of lower quality, but their use in a renovation
programme will save foreign exchange, and this is usually an undeniable imperative.

Much of the above presupposes that the original manufacturer of the equipment is involved in
the renovation programme, and that for the most part, a kit approach is to be adopted. This was
the case in the experiences described earlier, with the exception of Nicaragua. And it is
experiences such as that of Nicaragua that open up new areas of consideration in respect of the
local manufacture or reconditioning of components. It will be remembered that the multiplicity
of makes and models in Nicaragua was such that no one manufacturer was sufficiently well
represented to justify specialized technical assistance, and a repair-as-necessary approach was
adopted with replacement components being provided by a multi-make parts manufacturer in an
industrialized country. The foreign exchange component to acquire these parts was provided by
a bilateral donor.

The manufacturing and reconditioning capability vary both between countries and between
organisations within a country. And there is a relationship between the availability of machine
tools and the level of engineering of components to be reconditioned. However, in some
developing countries, and in some cases, it should not be beyond the possibility of local
industries to assume, at least in part, the role of multi-make parts manufacturers, if they were
provided with appropriate incentives and support by the government. Manufactured or
reconditioned components could be used in repair-as-necessary renovation schemes, as well as
in more routine preventative maintenance and repair operations.

It may also be possible to recondition some components and sub-assemblies by using a

combination of imported parts and local materials and resources. In Zambia, for instance, there
is a large engine remanufacturing facility. Provided that parts, such as pistons, rings, and
bearings, which cannot be manufactured locally, can be imported, then the constant
reconditioning of engines in that plant is almost unlimited.

Future development of parts manufacturing industries will depend heavily upon the domestic
market size and the prospects for export. And fundamental also will be the commitment by
governments to industrialised expansion in general, and to the allocation of resources of raw
materials, skilled labour, energy, and capital in particular.

However, if a government does decide to promote such a programme of multi-make parts

manufacture or reconditioning by local industries and workshops, as a means of saving foreign
exchange and improving parts availability for the national tractor fleet, the question of quality
should remain of paramount importance. A realistic and rigorous analysis should be made of the
components that could actually be manufactured or reconditioned locally to the correct
specifications with existing facilities, and also with certain inputs of technical training and
economically justifiable machine tools. Outside expertise should be called in to assist in this
process if necessary. It should be clearly borne in mind that sub-standard replacement parts are
a false economy in the long run. In addition, the failure of a sub-standard item, such as a gear
pinion, can result in catastrophic failure of the whole gearbox, with very high cost implications
for the owner. Therefore, where there is any reasonable doubt as to the quality levels that can be
achieved locally for a given component, especially for one which, were it to fail, would have
serious collateral consequences of cost or safety, the correct decision is to continue to import the
original from the manufacturer.

It will be realized from what has gone before that the question of local manufacture or
reconditioning of replacement parts for sophisticated machinery will, in most cases, be
surrounded by numerous problematic factors. However, the same is less true for implements, for
which modest parts manufacture is feasible in both urban and rural areas of many developing
countries. It requires only limited tools and the skilled manpower to use them. In fact, this type
of work is quite often suited to the infrastructure of blacksmiths and artisans in rural areas.

58
Some implement components require the use of sophisticated materials, for example, medium
carbon steels for soil engaging parts. These materials can be imported economically provided
that the subsequent manufacturing costs are kept low.

Transport equipment to move farm inputs and produce are a basic requirement for agriculture
everywhere, and in developing countries in particular, farm tractors and trailers assume an
enormously important role in rural transport generally. Hence, scope exists in many countries for
the manufacture of trailers, and this is widely exploited already in many developing countries.
Unfortunately, insufficient technology is invested in this useful aspect of local manufacture,
with the result that trailers are often poorly designed and poorly made. Better designs, and the
use of some imported components, e.g. wheels and axles, could offer a more valuable
contribution to the economy. The renovation of trailers, whether imported or locally made, could
also offer opportunities for local industries.

In general, a lack of formal skills is a major constraint to local manufacture and reconditioning.
In addition, in few cases will there be a large enough demand for new implements to warrant
setting up a proper manufacturing plant. For this reason, people with the necessary capital and
the skills required are not being attracted into the venture.

It is usually more appropriate, therefore, for manufacture and reconditioning to start in an

informal way. For instance, a local blacksmith or tractor dealer may allocate just one man to
make or renovate one trailer a month.

An effective mechanism is needed to lift this type of ad hoc manufacture and reconditioning on
to a sounder engineering and business basis. This could best be achieved by having trained
agricultural engineers linked to small businesses; and mobile training workshops, or
demonstration participatory research projects, could help to promote the initiative.

59
 ANNEXE!

FINANCIAL COMPARISON MODELS

Case Studies, with costs, have been presented, and some general conclusions have been drawn
from them. This Annexe will provide some financial comparison models of tractor renovation
versus purchasing new.

Financial Comparison Model

This model was developed for the financial analysis of aid-funded machinery renovation
programmes. However, it is also applicable to commercial programmes, provided that the prices
used include all the relevant duties and taxes. The data in the model are illustrative only and do
not relate to any particular country.

The financial cost of a new machine is taken as the cost of a comparable aid-funded tractor
procured directly from the manufacturer. As a rule of thumb, this will be 10-15 per cent below
the normal retail price paid by the farmer (exclusive of any import duties). The capital costs of
new and rebuilt tractors are compared according to the following factors:

Capital cost (less salvage value of old tractor where appropriate);

Anticipated economic life of the tractor;

Salvage value at end of tractor's life.

The model is also based on the assumption that provision for a replacement tractor be treated as
part of the annual cost. This replacement is taken as being a new tractor because it is assumed
that a second renovation would not be possible.

The tables on the following pages have costs expressed in constant 1988 US Dollars and a Local
Currency (US$1 = LC34). All the figures are approximate rather than absolute and are provided
for comparative purposes. Furthermore, it is not possible to specify costs of every item because
of local variations. Instead, total average costs are provided on the basis of experience to date,
and the tables can serve as a matrix to help identify individual items and their cost when
assessing the viability of a proposed renovation programme.

60
Table 14 FINANCIAL COST OF LOCALLY MANUFACTURED
OR PURCHASED REPLACEMENT PARTS
(Per tractor in 1988 constant US$)
ITEM UNIT PRICE QUANTITY TOTAL PRICE
Front tyre 41 2 82
Front tube 7 2 14
Rear tyre 136 2 272
Rear tube 19 2 38
Battery 43 1 43
Filter 9 1 9
Paint 68 68
Fuel/solvents 29 29
Consumables 60 60
Sub Total 615
Procurement Agent's Fees (3%) 19
TOTAL COST (IN LOCAL CURRENCY) EQUIVALENT
TO US$ 634
:: :: :: :: :: ==: =:::::::: :::: :: =:::::: =:::: :::: :: =:: =:::: =:::::::::::::::::: =:::::::::::: =·=

Table 15 FINANCIAL COST OF RENOVATING ONE TRACTOR

(in constant 1988 US$ and Local Currency)
US$ Local Currency
Equivalent (LC)
OFFSHORE COSTS
Cost of spares kit 6 531
Freight 119
Insurance 65
Procurement agents fees 202
Cost CIF 6 917
Sub-Total Offshore Costs
(in Local Currency Equivalent) 235 178
LOCAL COSTS
Local replacement parts/supplies (Table 14) 21 556
Import Duties at 30% offshore cost 70 553
Clearing charges 3 000
Rebuilding charge
- 250 hours at LC 70/hr 17 500
Transport costs 1 000
Sub-Total Local Costs 113 609
-------
... -... ---...
TOTAL COST PER TRACTOR 348 787
---------------------------------------------------------

61
Table 16 FINANCIAL COST OF IMPORTING ONE TRACTORS
(In constant 1988 US$ and Local Currency)
US$ LC
OFFSHORE COSTS
FOB 9 239
Freight 255
Insurance 76
Procurement agent's fees 287
Cost CIF 9 857
Sub-Total Offshore Costs
(in Local Currency Equivalent) 335 138
LOCAL COSTS
Import Duty (5% of offshore cost) 16 757
Clearing charge 3 000
Assembly charge 5 500
Clearing charges
Transport costs 1 000
Dealer commission (5% of offshore cost) 16 757
Sub-Total Local Costs 43 014
TOTAL COST 378 152
-------------------------------------------------------

62
 Table 17 FINANCIAL COMPARISON OF RENOVATION VERSUS PURCHASING A
NEW TRACTOR
(Constant 1988 Local Currency)
NEW TRACTOR RENOVATED TRACTOR
Initial Cost (Year 1) 378 152 348 787
Less salvage value of old unit (50 000)
....................... ....................
Net Cost (Year 1) 328 152 348 787
Depreciation Cost (Year 1)
New tractor· 10 year life (10%) 32 815
Renovated tractor· 8 year life (12%) 41 854
-------- =======
Comparative Cost (Year 1) 360 967 390 641

Alternative Comparisons
1. If import duties were the
same for the new tractor as
for the replacement parts to
renovate the old, at say 5%
for both instead of 5% and 30%
respectively (See Tables
15,16), the comparative cost
in Year one would be: 360 967 331 846
2. If, in addition, both
tractors were assumed to have
the same working life of 10
years, the comparative cost in
Year 1 would be: 360 967 323 177
----------------------------------------------------------------

It becomes clear from an analysis of Tables 15, 16 and 17 that a main factor in determining the
financial advantage of tractor renovation is government policy on import duties. If replacement
parts were to carry the same rate of duty as new equipment, renovation programmes could bring
considerable financial gains, in addition to the other benefits described in the body of this
publication.

63
 1. Farm planning in the early stages of development, 1968 (E' Rep. 1982 - F' S')
2. Planning for action in agricultural development, 1969 (E' F' S')
3. Karakul processing, 1969 (E')
4. Bread from composite flour, 1970 (E" F' S')
5. Sun-drying of fruits and vegetables, 1970 (E' F' S')
6. Cashew nut processing, 1970 (E' F')
7. Technology for the production of protein food from cottonseed flour, 1971 (E' F' S')
8. Cassava processing. (New edition (1977) available in E, F and S in the FAO Plant
Production and Protection Series)
9. World list of food technology institutions, 1971 (E/F/S")
10. Technology for the production of protein foods from groundnut, 1971 (E' F' S')
11. Technology for the production of protein foods from soybean, 1971 (E' F' S')
12. Guide for instructors in organizing and conducting agricultural engineering training
courses, 1971 (E' F' S')
Sup. 1 - Elements of agricultural machinery, Vol. 1, 1977 (E' S')
Sup. 2 - Elements of agricultural machinery, Vol. 2, 1977 (E' S')
13. Fruit juice processing, 1972 (E' S')
14. Environmental aspects of natural resource management - agriculture and soils, 1972 (E' F' S')
15. Sericulture manual: Vol. 1 - Mulberry cultivation, 1976 (E' F')
Vol. 2 - Silkworm rearing, 1973 (E' F')
Vol. 3 - Silk reeling, 1972 (E' F')
16. Use of aircraft in agriculture. (New edition (1974) available in E, F and S in the FAO
Agriculture Series)
17. Airtight grain storage, 1973 (E' F'S')
18. Rice testing - methods and equipment, 1973 (E')
19. Cold storage - design and operation, 1973 (E' F' S')
19/2. Design and operation of cold stores in developing countries, 1984 (E' F')
20. Processing of rural rubber, 1973 (E')
21 Rev. 1 - Agricultural residues: world directory of institutions, 1978 (E/F/S')
21 Rev.2 - Agricultural residues: world directory of institutions, 1982 (E/F/S')
22. Rice milling equipment - operation and maintenance, 1974 (E')
23. Rice drying (E'")
24. World list of textile research institutes, 1974 (E/F/S')
25. Utilization of molasses, 1975 (E' F' S')
26. Tea processing, 1974 (E')
27. Some aspects of earth-moving machines as used in agriculture, 1975 (E')
28. Mechanization of irrigated crop production, 1977 (E')
29. Non-mulberry silks, 1979 (E')
30. Machinery servicing organizations, 1977 (E')
31. Rice husk conversion to energy, 1978 (E')
32. Animal blood - processing and utilization, 1982 (E' S')
33. Agricultural residues: compendium of technologies, 1978 (E/F/S')
33Rev. 1 - Agricultural residues: compendium of technologies, 1982 (E/F/S')
34. Farm management data collection and analysis, 1977 (E' F' S')
35. Bibliography of agricultural residues, 1978 (E/F/S')
36. China: rural processing technology, 1979 (E')
37. Illustrated glossary of rice-processing machines, 1979 (Multi I.')
38. Pesticide application equipment and techniques, 1979 (E')
39. Small-scale cane sugar processing and residue utilization, 1980 (E' F' S')
40. On-farm maize drying and storage in the humid tropics, 1980 (E')
41. Farm management research for small farmer development, 1980 (E' F' S')
42. China: sericulture, 1980 (E')
43. Food loss prevention in perishable crops, 1980 (E' F' S')
44. Replacement parts of agricultural machinery, 1981 (E')
45. Agricultural mechanization in development: guidelines for strategy formulation,
1981 (E' F')
46. Energy cropping versus food production, 1981 (E' F' S')
47. Agricultural residues: bibliography 1975-81 and quantitative survey, 1983 (E/F/S')
48. Plastic greenhouses for warm climates, 1982 (E')
49. China: grain storage structures, 1982 (E')
50. China: post-harvest grain technology, 1982 (E')
51. The private marketing entrepreneur and rural development, 1982 (E' F' S')
52. Aeration of grain in subtropical climates, 1982 (E')
53. Processing and storage of foodgrains by rural families, 1983 (E' F' S')
54. Biomass energy profiles, 1983 (E')
55. Handling, grading and disposal of wool, 1983 (E' F' S')
56. Rice parboiling, 1984 (E' F')
57. Market information services, 1983 (E' F' S')
58. Marketing improvement in the developing world, 1984 (E')
59. Traditional post-harvest technology of perishable tropical staples, 1984 (E')
60. The retting of jute, 1984 (E' F')