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• The total cost in column (3) is made up of the capital and the operating costs.• Column (4) shows the benefits; for years 2001-4, before the system is in placeand the estimated annual environmental costs will continue to be incurred, theyare negative benefits or "dis-benefits". In year 2005 and after the environmentalcost will be avoided counted as benefits. The dis-benefits and benefits include theestimated annual costs as in the table "Estimated annual costs of environmentalimpacts in monetary values” totalling $65 million. The amount shown for eachyear increases and is made up of the constant amount of $ 56 ($65 minus $9million representing the tourism cost) adding back the estimated cost of tourismfrom column (3) of the Scenarios Table reduced by 50% to include only valueadded.Thus, for year 2002 the dis-benefits of $75 million include $56 million plus$18.9 million ($37.8 x 0.5) = $74.9 million. The same method is followed up to theyear 2025.• Column (5) shows the Net benefits, that is for the year 2001-4 when dis-benefitsare incurred it is the total investment cost plus the annual environmental cost, andfor the rest of the period when benefits accrue it is the annual benefits minus theinvestment cost.• The last two Columns show the discounted value at 10% and 5%, adding up tothe Net Present Value at the bottom of the Table of $565 million and 1,479million respectively. As a 10% discount factor is conventionally adopted in prefeasibilitystudies the estimated 25-year NPV at 10% is $565 million.Table 15: Sensitivity Analysis ($ million)Estimated Investment Cost 222Annual Operating Cost capitalised at 10% for 25 years 91 (10 x annuity factor 9.0)Total Estimated Investment Cost 313Present Value of Estimated Benefits at 10% for 25 years 878Net Present Value (25 years at 10%) 565Benefit / Cost ratio 2.8Estimated Investment cost by 25% higher 313 x 1.25 = 391Estimated benefits by 25% lower 878 x 0.75 = 659Benefit / Cost ratio 1.77. ResultsIt is important to stress once more that the calculations underlying the CBA Study should bestbe regarded as orders-of-magnitude. Economic estimates are heavily dependent on thequality of data and the level of detail attempted. Despite possible over- or under-estimationsinherent in the quality of available data, calculations may be adjusted in the light of moreaccurate data as and when they become available, according to the methodology and thesteps demonstrated here. The simple sensitivity analysis attempted here with variance of agenerous 25% should counterbalance some possible inaccuracies or estimation errors.Nevertheless, certain key results should be emphasised:1. The Net Present Value (benefits over costs) shows the value of the net “wealth” created bythe Project available to society. It is noted that Cost-Benefit Analysis does not focus on thefinancial implications (funding and cash flows) of the proposed project from the point of viewof the implementing agency, but to the saving and quality of resources for future use bysociety.2. The Benefit/Cost ratio shows the coverage of costs by the expected benefits and, like theNet present Value, is an indicator of the social viability of the proposed Project. The ratio ofbenefits to costs is between 1.7 and 2.8 meaning that the benefits are by that much greaterthan the costs.Final Draft Report – Cost Benefit Case StudiesGPA Strategic Action Plan on Sewage, October, 200040
3. This Cost-Benefit Analysis does not include the cost of other measures on whichinformation is not available. This does not necessarily poses a major problem because, in theabsence of cost estimates, it is possible to make provision within the framework of Cost-Benefit Analysis for "other costs" (institutional and legal measures, strengthening ofdepartmental responsibilities for monitoring and research, etc), and see the difference in theNPV. In any case, (a) such measures are necessary to support wastewater initiatives and (b)institutional investments involve cost overlaps, synergies and “economies of scale” whenconsidered jointly with wastewater actions as part of an overall coastal managementprogramme. It should be clearly understood that the benefits of pollution management cannotbe fully realised by one-track infrastructure action focused on building and operatingSewerage Systems, although this may be the single most important investment cost.Integrated environmental management programmes, coastal zone planning and commitmentto sustainable development are essential constituent components of pollution management.The cost of policies and administrative actions are not reflected in this Case Study due to lackof cost data. This parameter needs to be taken into account.4. How then could the cost of "other measures" be taken into account wthin the framework ofthis CBA? The above analysis shows a NPV of $565 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 $565 million or$22-23 million a year. In terns of CBA such level of expenditure over time would be justified.Of course, the separate question of financing such expenditure remains crucial.5. CBA Case Study also provides the context for identifying preliminary design options atleast from the cost point of view to ensure affordability and application of sociallyacceptable cost-recovery tariff mechanism. The investment cost of the Project isestimated at $222 million to serve a population of 3.5 million. This should be furtherscrutinised to investigate additional cost-saving technical options and land use planningpriorities to target actions to the most polluted areas first. It would seem important toprioritise the locations with the most immediate pollution hot spots problems and target onthose areas where the benefit will be higher per unit of investment, or more accurately tomaximise net marginal benefit.Final Draft Report – Cost Benefit Case StudiesGPA Strategic Action Plan on Sewage, October, 200041
Page 2 and 3: TABLE OF CONTENTSPageTable of Conte
Page 4 and 5: The Report includes four Annexes wi
Page 6 and 7: 4.2 Programme ObjectivesTo facilita
Page 8 and 9: TERMS OF REFERENCEThis Report has b
Page 10 and 11: CHAPTER 1. ECONOMIC ANALYSIS AND EN
Page 12 and 13: aesthetic and recreational value, i
Page 14 and 15: marginal benefit of pollution reduc
Page 16 and 17: loss of labour force productivity.
Page 18 and 19: Population connected to sewerage in
Page 20 and 21: Threats to the Coastal and Marine E
Page 22 and 23: fall disposal in deep sea at Kilind
Page 24 and 25: There are three main categories of
Page 26 and 27: Child mortality, and death in gener
Page 28 and 29: 6. Estimated Annual Cost of Environ
Page 30 and 31: 2.2 DAR ES SALAAM CASE STUDY2.2.1 I
Page 32 and 33: Dissolved solids 83,940 45,280 9,83
Page 34 and 35: 4. Institutional Capacity Building
Page 36 and 37: Table 8: Classification of ValuesTy
Page 38 and 39: infrastructure. As shown above, the
Page 40 and 41: 6. MangrovesMangroves are an exampl
Page 44 and 45: 2.3 BEAU VALLON (SEYCHELLES) CASE-S
Page 46 and 47: In the marsh areas, various species
Page 48 and 49: Dissolved inorganic nitrogen: The t
Page 50 and 51: TourismSeychelles• Number of tour
Page 52 and 53: lossesHuman Health Indicator: Treat
Page 54 and 55: Dose-response data are not availabl
Page 56 and 57: Table 13: Estimated Potential Annua
Page 58 and 59: CHAPTER 3. ACTION PROGRAMME INPUTS3
Page 60 and 61: Property impacts are widely known t
Page 62 and 63: 3. Wastewater Treatment in Ismailia
Page 64 and 65: • Health costs• tourism income
Page 66 and 67: Annex IRegional OverviewThe Western
Page 68 and 69: • Degradation of coastal and mari
Page 70 and 71: • Resource over-exploitation• S
Page 72 and 73: Annex IIMombasa Regional and City P
Page 74 and 75: Population covered by sewerage infr
Page 76 and 77: Source: Mwaguni & Munga 1997Sewage
Page 78 and 79: 1628 people tested positive for cho
Page 80 and 81: Annex IIIDar-es-Salaam Regional and
Page 82 and 83: are extensively exploited by small-
Page 84 and 85: Solid wastes. It is estimated that
Page 86 and 87: Pollution load to surface water res
Page 88 and 89: Mtoni and Pugu. Existing lakes incl
Page 90 and 91: Annex IVSeychelles (Beau Valon Area
Page 92 and 93:
labour force generating the major p
Page 94 and 95:
Vacoa Village ST Algal growth Water
Page 96 and 97:
sea grass beds are able to soak up
Page 98 and 99:
Sewerage ManagementSewerage managem
Page 101 and 102:
REFERENCESA. Background Regional En
Page 103 and 104:
7 GOK 1997: Mombasa District Fisher
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