8.3

8.3

Benefit-Cost Analysis of Small-Scale Pump Irrigation in Somali Region of Ethiopia

SEADS Handbook Location: Chapter 8 (book p. 113, PDF p. 120)

In the Somali region of Ethiopia, a humanitarian project funded by United States Agency for International Development’s (USAID) Office for Foreign Disaster Assistance supported small-scale irrigated crop production along the Shabelle River. The project provided pumps, fuel, seeds, tools, and training to crop producers who were organized into groups of up to 50 households. Crops grown included maize, sesame, onions, and tomatoes, and plot sizes were approximately 0.5 hectares per household. An impact assessment and benefit-cost analysis (BCA) was requested by USAID. The BCA considered benefits and costs that occurred during project implementation and that arose from a single harvest. It also predicted the benefits and costs over three years, including a two-year period after the project ended.

The impact assessment of the project reported that:

“… the project produced substantial gains in terms of the volume of agricultural production, and income from the sales of produce. These trends corresponded with increases in household consumption of produce, and more expenditure on health and education. These findings pointed to an overall benefit to those households which continued to farm, relative to the pre‐project period. However, these benefits were compared with the costs of the project, and the increased costs incurred by households (for example, for fuel and spare parts) for using pump irrigation. Not all project participants maintained their plots, and local informants described the various risks of crop production and marketing, and associated impacts on harvests. These risks were numerous and included crop diseases, crop damage by wild animals, flooding, high winds, salinity problems, human diseases, fuel price increases, storage problems, market instability, and conflict” (p. ii).

These issues were captured in the BCA. When only the project period was considered, the benefit-cost ratio was only 0.4:1 (Table 1). But even when a longer period was considered, covering three crop plantations, the benefit-cost ratio was still only 0.7:1.0. Although the benefits increased over time as more crops were produced and sold, the costs also increased over time as the water pumps became less efficient and required more fuel and spare parts. In addition, it was evident that water pumps could be acquired locally and privately at approximately half the cost of the pumps that were supplied by project.

Table 1 . Benefit-cost analysis of pump-based irrigation, Somali Region, Ethiopia

Type of CBA	Amount (US$)
CBA for one plantation (2008)
Costs
Project costs
Cost of seed provided – seed cost, plus transport	5,918
Cost of pumps – 12 pumps x $1,698/ pump	20,385
Cost of fuel provided to groups – 20 barrels x $213/barrel	4,260
Cost of agricultural tools provided to groups	4,441
Training for group members	333
NGO technical and admin. staff costs	2,790
Project vehicle rent and fuel costs	3,686
NGO overhead costs	1,889
Sub-total project costs	43,702
Community costs (first plantation)
Initial contribution by groups	1,364
Transportation of produce to market	109/td>
Sub-total community costs	1,473
Total costs	45,175
Benefits
Estimated value of produce sales from 1st plantation	16,394
Benefit-cost ratio	0.4:1
CBA for three plantations (2008–2010)
Costs
Project costs	43,702
Community costs: reported total costs for three plantations	5,818
Total costs	49,520
Benefits
Estimated value of produce sales from three plantations	34,636
Benefit-cost ratio	0.7:1