4.1.7 Investment possibilities

It was of interest to find out whether neem pesticides and products could be offered more cheaply and subsequently gain a larger market share if the production units and volume of raw material were larger. For example the costs (especially the fixed costs/unit) would decrease if neem manufacturing were carried out on a larger scale.

Based on the data available in Kenya, Quentin (1999) calculated that 300 t of neem kernels could be processed into the following products:

· 100,000 l Neemroc
· 100,000 kg Neemros
· 6,000 l Neemsar "O"

It was assumed that only a minor portion of the products would be sold directly to the final consumers and that most of the products would be sold to wholesalers.

Based on this calculation and the availability of capital for investment, the profit would be 39% of the turnover. This would result in a good profit, despite a high depreciation in the first year. In the eighth year the profit would be even better, assuming that all frame conditions remain constant.

Such processing would enable the company to build up its own capital which is required for example to purchase 300 t of neem kernels (KSH 9 000 000) in the next harvesting season. This would be an important step in the elimination of risks such as those arising from the severe fluctuations in interest rates in developing countries.

However, even calculations based on 50% or 100% credit for the start-up and investment costs and the repayments consequently required would result theoretically in a profitable business. Even neem manufacturing based totally on credit* would enable entrepreneurs to build up their own capital.

The calculation is based on larger volumes of the product currently offered, new product lines could increase the profit more.

Interest rates of 8% based on the US dollar - Basis