SETP No. 14 The Economic Value of Incremental Employment in the ...

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7.13 The cost of equipment-based extraction is determined by the following factors: • Hourly hire rate • Bucket capacity • Load cycle time • Operator efficiency, and • Soil and other operating conditions. 7.14 Table 7.4 allows for these factors and is divided into three parts – soft ground (easy working conditions), average ground with normal efficiency and hard ground where the going is heavy. Under these conditions and assumptions the cost of soil moving using the specified wheeled loaders will vary between R5m 3 under good soil conditions with an efficient operator and R9m 3 when ground conditions are heavy going and the operator is less than efficient.This conclusion must be tempered by two caveats: • Continued use of labour-based methods will boost labour productivity and management productivity. Phillips reports on labour productivity in the building of the railways in Britain in the nineteenth century of 12 cubic metres per man-day for excavating and loading (Phillips 1995 p85). • The wheeled loader rental rates are for use in and around Cape Town. Projects in rural and remote rural areas will face escalated transport cost. 7.15 We suspect that both of these factors are major contributors to the demonstrated financial superiority of labour-based methods to equipment-based methods for earthwork excavation in Namibia (Table 7.2). 7.16 We draw the following conclusion from Tables 7.3 and 7.4. On a direct cost comparison the digging of earth using labour techniques is more expensive than using a wheeled loader. It is only with daily wages of R25 and where the ground is relatively soft (or other factors boost labour productivity) that labour-based techniques compete on a cost basis. As working conditions deteriorate (harder ground, etc) so the cost of labour over equipment widens Repayment of capital costs 7.17 One of the calculations that was made in this part of the investigation was to estimate how long it will take to repay the capital cost of a wheeled loader that is fully employed at some normal rate. This is an exercise in calculating opportunity cost where the wheeled loader is imported or partially imported. The results to this exercise are presented in Tables 7.5 and 7.6 below. 7.18 In order to make a comparative calculation the full period of capital amortisation we allow three factors to vary – the purchase price of the machine, the hourly hire rate and the hourly running costs. Based on the values shown in Table 7.5 a Komatsu 470 can repay its capital in just under two years of full time operation (based on a single daily shift and no overtime). The Caterpillar 988 takes the longest period of little under four years. The three Bell wheeled loaders take between 2.5 and 3.7 years. 53
Table 7-5 Capital cost amortisation Hourly running No. of years to Machine type: Cost of new machine (Rm) Bucket size M 3 Hourly hire rate costs pay capital cost Komatsu WA 250 0.72 2.1 160 70 4.30 Komatsu WA 320 0.87 2.4 250 85 2.86 Komatsu WA 470 1.43 4.1 500 98 1.92 Caterpillar 914 0.55 1.4 160 70 3.31 Caterpillar 988 3.00 5 500 88 3.94 Bell 1204 0.62 1.9 160 70 3.72 Bell 1706 0.73 2.4 250 85 2.40 Bell 2208 1.17 3.5 300 98 3.14 7.19 In Table 7.6 we estimate the number of years needed to repay the imported capital component of the Bell wheeled loaders. As before, the estimates are made for differing costs of production, hire rates and running costs. In addition we allow for four different import components – fully imported, 48% import component, 71% import component and a 77% import component. 7.20 Where Bell wheeled loaders are 48% imported and fully employed (single shift) the import share of the capital component can be repaid between 1.15 years and 1.78 years. A machine with an imported component as high as 77% will take between 1.85 years and 2.9 years to amortise the imported part of the capital cost. Table 7-6 Capital cost ammortisation Hourly running No. of years to Machine type: Import component Cost of new machine (Rm) Hourly hire rate costs pay import component Bell 1204 100% 0.62 160 70 3.72 Bell 1706 100% 0.73 250 85 2.40 Bell 2208 100% 1.17 300 98 3.14 Bell 1204 48% 0.62 160 70 1.78 Bell 1706 48% 0.73 250 85 1.15 Bell 2208 48% 1.17 300 98 1.50 Bell 1204 71% 0.62 160 70 2.64 Bell 1706 71% 0.73 250 85 1.70 Bell 2208 71% 1.17 300 98 2.23 Bell 1204 77% 0.62 160 70 2.87 Bell 1706 77% 0.73 250 85 1.85 Bell 2208 77% 1.17 300 98 2.42 The Macro Economic Impact of Equipment-based Construction 7.21 The final section of this chapter estimates the macro economic impact of equipment-based construction and compares it to the same impact from labourbased construction. As before we focus on only one operation – earthwork excavation – and on one piece of capital equipment – the wheeled loader. 7.22 In the calculations the imported component of both manufacturing and operating a wheeled loader had to be estimated. This allows two separate comparisons to be made between labour and equipment-based construction. The first is an imported adjusted cost per m 3 . This is based on the proposition that expenditure 54
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SETP No. 14 The Economic Value of I
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Copyright © International Labour O
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Table of Contents PREFACE .........
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List of Abbreviations CBPWP GDP ILO
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Structure of the Report This report
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8. It is shown in the forth area of
Page 17 and 18: 1.8 In order to achieve this object
Page 19 and 20: 3 A Labour Focussed Profile of the
Page 21 and 22: Figure 3-2 Employment in the Constr
Page 23 and 24: construction. Real wages are higher
Page 25 and 26: Table 3-3 Construction industry Ave
Page 27 and 28: Figure 3-7 1997 October Household S
Page 29 and 30: 3.23 There are four possible reason
Page 31 and 32: Figure 3-8 Number of persons by inc
Page 33 and 34: 3.35 Estimates of average provincia
Page 35 and 36: 3.41 Table 3.11 reports on the prov
Page 37 and 38: 3.45 An attempt was made to verify
Page 39 and 40: Summary 3.50 The construction indus
Page 41 and 42: A profile of income and expenditure
Page 43 and 44: Figure 4-1 Percentage of expenditur
Page 45 and 46: Table 4-3 Expenditure increases for
Page 47 and 48: Table 4-5 Expenditure increases for
Page 49 and 50: 4.18 Here we find that grain mill p
Page 51 and 52: • Labour and capital are in unlim
Page 53 and 54: Figure 5-1 Schematics of the Mechan
Page 55 and 56: slightly higher additional income a
Page 57 and 58: Table 5-9 Indirect job creation Num
Page 59 and 60: 6 The Macro Economic Impact of the
Page 61 and 62: Standard Industrial Classification
Page 63 and 64: Table 6-6 Macro economic impact of
Page 65 and 66: Figure 7-2 Cost of Gravel Road Cons
Page 67: • When adverse soil or other cond
Page 71 and 72: Table 7-8 Local and Import costs of
Page 73 and 74: • In the first five years of oper
Page 75 and 76: 7.41 Table 7.4 is sourced from Tabl
Page 77 and 78: 8.10 Second, the analysis did not t
Page 79 and 80: References Bulmer-Thomas, V. (1982)
Page 81 and 82: practical feasibility alone, labour
Page 83 and 84: domestic industry to set against th
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