gpa_east_africa_case.. - GRID Africa GeoPortal - UNEP

2. Capital cost. The capital cost used concerns the estimated investment for theconstruction of the proposed Sewerage System for the whole Mombasa District based ona combination of cost indicators and data provided from national sources.3. Operating cost. The estimated operating cost is capitalised and added to the capital costto arrive at the total cost.4. Estimated benefits. The estimated annual benefits over the next 25-year period areexpressed in terms of Present Value for comparison with the total capital cost.5. Net Present Value. The Net Present Value (benefits minus costs) shows the net value ofthe Project (or the net “wealth” created for society). It is noted that Cost-Benefit Analysisdoes not focus on the financial implications (funding and cash flows) of the proposedproject from the point of view of the implementing agency, but to the saving quality ofresources for future use by society.6. Benefit / Cost ratio. The Benefit / Cost ratio shows the coverage of costs by theexpected benefits and, like the Net Present Value, is an indicator of the social viability ofthe proposed Project. The ratio of benefits to costs is 3.0 meaning that the benefits arethree time the costs.7. Sensitivity Analysis. A simple sensitivity analysis is attempted to show the changes tothe results from higher costs and lower level of benefits. The percentage of 25% may beconsidered too high but it is wise to used it when cost estimates are broad and benefitestimation contain possible errors an inaccuracies inherent in the data.8. Lack of cost information on measures and administrative expenditure. This Cost-Benefit Analysis does not include the cost of other measures on which information is notavailable. There are data problems that should be mentioned. First, it is difficult toestimate the cost of institutional and legal measures and expenditure for strengthening ofdepartmental responsibilities for monitoring, research, etc. Many measures may havecost overlaps, synergies or “economies of scale”. Lack of such information does notnecessarily pose major problems, for it is possible to take account of "other investmentcosts" by the difference between cost and benefits and the extent to which additionalcosts would still be covered by the benefits from wastewater infrastructure. In any casethe sustainability of the benefits from wastewater infrastructure pre-supposes effectivecoastal zone management, legal enforcement of environmental standards, capacitybuilding, etc.9. Capacity building support. It should be clearly understood that the benefits of pollutionmanagement cannot be fully realised by one-track infrastructure investment in buildingand operating a sewerage system, even though it may be the single most importantinvestment cost. Integrated environmental management programmes, coastal zoneplanning and commitment to sustainable development are essential constituentcomponents of pollution management.10. The Cost of other Investment. How does this Cost-Benefit Study help in taking intioaccount "other investment"? How may this apparent gap be tackled? The above analysisshows a NPV of $291 million, or at least $145 million. It is possible to suggesttherefore that additional management, institutional, legal, research and otherinitiatives, which are in any case required to support the long-term objectives ofinfrastructure projects, should be implemented even if they cost up to $145 – 291million. In CBA terns such level of expenditure over time would be justified. Of course,the separate question of financing such expenditure remains.Final Draft Report – Cost Benefit Case StudiesGPA Strategic Action Plan on Sewage, October, 200027