(introduction...)

The case studies presented in Chapter 3 include different improved processes for extracting shea nut butter and oil from sunflower seed and oil palm fruit as applied in current projects in Mali, Zambia and Togo. In the present chapter, these projects are financially analyzed in their specific local contexts, which means that all costs and prices involved were taken from recent field experience. It also means, that the results presented are not necessarily the same for other countries or for other times in the future; since, for example, margins between rawmaterial and sales prices, wages and other variables might change considerably.

For each of the case studies, alternatives were calculated, using the same costs for variables like local wages, sales price of oil and by-products, etc. In this way, the profitability of the processes described as case studies can be compared with the technical alternatives.

Finally, for all the case studies and their alternatives a sensitivity analysis has been made, the results of which indicate the profitability of each process in relation to certain critical assumptions. Keeping all others constant as originally, the variables that were modified for this analysis are in each case:

- shea butter/oil recovery of the process,
- capacity utilization of the equipment,
- local wages.

The results are illustrated in graphical form (see Figures 22, 23 and 24). As a guide to interpreting these figures, one might say that the steeper the curve, the more sensitive is the process to a modification of a specific variable.

For all calculations, the same procedure was applied and the same indicator used. The procedure is described in the “Manual for the Preparation of Industrial Feasibility Studies" by the United Nations Industrial Development Organization (UNIDO). Following this procedure, the input-data for all the cases was entered into the computer programme COMFAR (Computer Model for Feasibility Analysis and Reporting), which computes a whole set of output tables. Computations were done for a 10 year project period in each case. For reasons of space and simplicity, the output tables have been reduced to only one indicator.

As the indicator for the results of all case studies, the so-called "internal rate of return" (IRR) was chosen, which is a percentage figure and can - in simple terms- be compared with the long-term interest for a bank deposit. For any investor (i.e. in equipment for oil processing), the IRR is an indicator of whether it is more profitable to put his money in a bank account or to invest in this or that kind of technology and start production under given assumptions. An explanation on how to calculate the IRR is given as Annex 3.

One might argue that the procedure and the indicator are neither appropriate nor relevant for a traditional context where usually no money value is attached to inputs like labour, energy, etc. Nevertheless, a proper financial calculation even for the traditional technologies can introduce a scale on which all alternatives can be measured. In this way, the IRR can serve as a uniformly comparable figure which allows the analysis of profitability. However, it must be kept in mind that it is a capital-based indicator.