|Development Projects in the Sudan: An Analysis of their Reports with Implications for Research and Training in Arid Land Management (UNU, 1979, 58 pages)|
|3. Project analysis|
The Sag el Na'am project is the only major agricultural development project in Northern Darfur. It was introduced to a region with very limited development potential to provide a nucleus of economic activities based on irrigated agricultural production for 420 families. The livelihood of the population, which is expected to increase to 3.00 3,500 in total, was to be secured through the cultivation of aura. dukhn, and summer pulses, as well as wheat and winter pulses. In addition, a wide variety of other crops. including vegetables, citrus, and forage, was to be grown to stabilize the local supply of essential food and feed products.
The project has political importance to demonstrate the desire of the government to support local initiative of the population to remain in marginal areas, despite the high costs involved. From the beginning it was clear that exceptionally high pumping costs. because of the very deep aquifer, had to be justified by results mainly on social and equity grounds, not on economic or financial ones. In this light, the main objective of the project can be considered to be the minimizing of the costs of production at Sag el Na'am to a point which balances the financial losses of the government with the private and social benefits for the population involved.
3.3.1 Performance Analysis
The project is based upon the ground-water reservoir of the Alauna Basin, which suffers from the major disadvantage that the static water level lies about 90 meters below the surface. Pumping is therefore exceptionally expensive. Despite the very high pumping costs. a decision to proceed with a pilot scheme was taken during the early 1970s. Three wells were equipped with 100 m³/ha capacity pumps in time to irrigate 125 feddans during the 1975 kharif (rainy) season, and further development allowed 300 feddans to be irrigated in the following shita (winter) season. Forty 180 m³/ha capacity pumps have been ordered, and by June 1976 the drilling programme in preparation for these pumps was 50 per cent complete. When these pumps are fully installed. the irrigated area will increase to just under 3,000 feddans.
The main crops grown during 1975/76 were aura (sorghum), wheat, and pulses, together with a wide range of vegetables and other minor crops. Field irrigation is based upon the traditional Angaia system (practiced elsewhere in the Sudan), with each well command divided into units of five feddans each. The main disadvantage of the present layout is its unsuitability for mechanized farming. and the failure to measure the amount of water pumped must also be considered a major deficiency.
Despite these and a few other drawbacks, the development and subsequent
management of the project has been impressive. The scale of development has,
however, so far been small and with expansion, a number of problems can be
expected to emerge:
a) Pumping abstractions may approach or exceed the safe yield.
b) Continuous cultivation of the Sag el Na'am soils could lead to fertility and salinity problems.
c) It may prove difficult to maintain delivery of fuel and other supplies, given the project's isolation. d) The limited markets of Northern Darfur and the great distances to other markets will increasingly affect the ease with which agricultural output can be sold.
e) Managerial, maintenance, and operational problems will increase with scale of operations, and particular difficulties could be associated with the initiation of a settler scheme.
f) Budgetary constraints may become serious since the exceptionally high pumping costs and other factors will necessitate a rapid increase in the level of subsidy.
TABLE 11. Major Development Characteristics at Project Maturity in Sag el Na'am
|Rated Discharge |
|Capacity of Pumps
|Well Commands (No.)||3||40|
|Area Irrigated (feddans)|
|Summer pulse/winter cereal a||-||1 200|
|Summer cereal/winter pulse a||-||900|
|Summer forage/winter cereal b||-||120|
|Perennial forage/summer cereal b||-||140|
|Settler garden plotsa||-||236|
|Total area||130b||2 676|
|Water Extraction (million cubic meters)|
|Summer season (kharif)||-||13.54|
|Winter season (shita)||-||9.27|
|Fuel Consumption (Imperial gallons/year)||54000||693 000|
Source: HTS. Sag el Na 'am Evaluation. 1976. p. xii.
a. Settler areas.
b. Areas operated using directly employed labour.
TABLE 12. Capital Cost Estimates: Forty 180 m³/ha Capacity Pump Programme (in thousands of £S)
|Other capital costs b||68.6||116.7||63.4||7.9||0.5||0.0|
|Total capital costs||511.9||496.0||178.8||87.6||74.4||68.2|
|Foreign exchange portion of capital costs||350.0||281.7||117.7||81.3||74.0||68.2|
Source: HTS, Sag el Na 'am Evaluation. 1976. p. xiv.
a. Financial year to the end of June.
b. Including principal repayments and interest charges.
The overall limits of this programme are based upon the current intentions of
the Ministry of Agriculture. The estimates can be discussed as follows:
a) Tenant farmers will be settled on 35 commands, cultivating two main cereal/pulse rotations and subsidiary garden plots. There are few demand constraints on the main summer crops (sorghum, millet, and groundnuts), but after allowing for pumping costs, the returns, especially for the cereals, are heavily negative. In contrast, the winter pulses. and to a lesser extent wheat. face limited markets but provide relatively favourable returns.
b) Labour employed directly by the project will be used for forage, horticulture (other than on garden plots). and the units commanded by the 100m³/ ha pumps, the latter being cropped as at present. Horticulture is relatively profitable but faces severely limited markets. Forage production gives a heavily negative return but is included for general developmental purposes.
c) Water extraction will rise to an estimated 23.7 million cubic meters per year. which is close to the estimated safe yield. Any expansion beyond this programme would therefore run the risk of mining the aquifer with a consequent continuous increase in the pumping costs.
d) Fuel requirements will rise to about 750,000 imperial gallons. The project will therefore require almost four times as much diesel as the total current needs of the province of Northern Darfur.
e) Each settler family will have five feddans of main crops and half a feddan of garden crops. This would result in the settlement of 420 families upon completion of the programme. Allowing for dependents and a direct labour force of 20 250, the total population in the scheme could rise to about 3,500. giving rise to a demand for housing, education. and other services.
Table 12 summarizes the estimated capital costs of the programme for the construction of 40 wells equipped with larger 180 m³/ha pumps. It excludes the costs associated with the smaller pumps and aims to be representative of any further expansion. The phasing assumes that all the wells will be constructed by the end of 1976/77 but that the pumps, although delivered in 1976/77, will not be fully operational until the 1979 kharif season. The payment schedule agreed upon with the pump suppliers forms the basis for the estimate given. Other capital costs include canalization. buildings, vehicles, and equipment. An element for engineering and supervision is included in wellconstruction costs, although this is on the conservative side and may understate actual charges of the Rural Water Corporation.
Table 13 summarizes the economic analysis for the forty 180 m³/ha capacity pump programme. Costs and returns are adjusted to reflect their real resource cost to the national economy through the exclusion of taxes and reflect the lack of other work opportunities during the dry season. The opportunity cost of capital is taken to be 8 per cent and the project life to be twenty years, with the pumps being replaced after ten years. Overhead costs include those costs which cannot be attributed to particular agricultural activities (for instance, management costs). Agricultural returns are given for both the present system of agriculture and for a possible system assuming that high yields are achieved (for instance, through the use of fertilizer). In practice, settlers are unlikely to achieve a level of agriculture much above that achieved at present. The increase in agricultural activities reflects the development schedule discussed earlier.
TABLE 13. Summary of Economic Analyses:.a Forty 180 m³/h Capacity Pump Programme (in thousands of £S)
|Present Value in 1975/76 at 8 per cent|
|Present System||Intensive System|
|Capital costs b||-1 415||- 1 415|
|Overhead costs||-455||- 455|
|Irrigation costs||-2 909||- 2 909|
|Net agricultural benefits c||+ 1 755||+ 3 063|
|Including capital costs||-3 024||- 1 716|
|Excluding capital costs||-1 609||- 301|
Source: HTS. Sag e/ Na 'am Evaluation 1976. pg. xv.
a. Medium price, yield, and cost assumptions. valued at ''social'' prices.
b. Excluding costs of vehicles and equipment included in farm costs in the form of a depreciation allowance.
c. Net labour. machinery, and farm input costs. but exclusive of irrigation costs.
The following conclusions can be drawn from the financial analysis.
a) A large current account deficit will occur. The annual subsidy required, on medium assumptions. rises to about £S 300.000 for present agricultural practices. and to £S 260,000 if intensive agricultural systems are achieved. Capital costs represent. of course. an additional subsidy.
b) The method suggested for charging the farmer is a compromise designed to be practicable and to maintain financial incentives. It would give an annual income of about £S 190 with present yields. and £S 400 if high yields are achieved. These compare with an annual income of about £S 40-50 from rain-fed agriculture. Higher charges could be made, but even so, settlers could not possibly pay for the full farm and irrigation costs.
c) The example illustrated in Table 13 indicates that total current costs (excluding settler labour) could amount to more than six times as much as the income accruing to the settlers. In other words, £S 6 or more will be spent (mainly on imported fuel) for every £S 1 of settler income created.
These analyses demonstrate that the Sag el Na'am project cannot be justified on economic or financial grounds. It is expensive to construct and operate, and a continuing annual subsidy of about £S 260,000300,000 will probably be required from central government funds. The project will benefit only about 3,000 to 3,500 people, and even if the money involved was to be given away, many more people could be assured of a comparable standard of living at less cost to the balance of payments.
TABLE 14. Present Valuea of Costs, Benefits, and Net Return in 1975/76 (in thousands of £S)
|Present Value||Present Value/
|Capital and Overhead Costs|
|Capital costs||40||- 1 415||- 1 346||- 1 218||- 35.4|
|Overhead costs||40||- 455||- 394||- 290||- 11.4|
|Agricultural Benefits: Present System|
|Summer pulse/winter cereal||20||- 578||- 489||- 338||- 28.9|
|Summer cereal/winter pulse||15||- 370||-313||- 215||- 24.7|
|Total on settler holdings||35||- 944||- 799||- 551||-27.0|
|Summer forage/winter cereal||2||- 102||- 86||- 60||- 51.0|
|Perennial forage||2||- 110||- 92||- 60||- 55.0|
|Total on project as a whole||40||- 1 154||- 976||- 670||-28.9|
|Agricultural Benefits: Intensive System|
|Summer pulse/winter cereal||20||-9||-8||-5||-0.5|
|Summer cereal/winter pulse||15||- 3||- 1||+2||-0.2|
|Total on settler holdings||35||+244||+208||+148||+7.0|
|Summer forage/winter cereal||2||-83||- 71||- 49||- 41.5|
|Perennial forage||2||- 102||- 85||- 56||- 51.0|
|Total on project as a whole||40||+154||+133||+101||+3.9|
|Net Present Value of Project|
|Including capital costs:|
|Present system||40||- 3 024||- 2 716||- 2 178||- 75.6|
|Intensive system||40||- 1 716||-1 607||- 1407||- 42.6|
|Excluding capital costs:|
|Present system||40||- 1 609||- 1 370||- 960||- 40.2|
|Intensive system||40||- 301||- 261||- 1 89||- 7.5|
Source: HTS. Sag el Na 'am Evaluation. 1976. p. 177.
a. Based on medium yield. price, and wage assumptions
TABLE 15. Returns for a 5.5 Feddan Settler Holding (fS per holding)
Present (Non-intensive) System
Summer/ Forage Wheat
Sorghum/ Ful masri
Summer Forage/ Wheat
|Farm Costs: Excluding Labour Costs|
|Summer crops||119.0||48.0||22 5||45.0||155.5||113.0||47.8||95.5|
|Winter crops||-8.25||+ 5.0||- 82.5||-18.0||+212.5||- 18.0|
|Garden crops||+12.0||+12.0||+12.0||+12.0||+87.0||+ 87.0||+87.0||+87.0|
|Total||- 392.0||- 244.5||- 568.1||- 674.5||- 79.0||+ 56.0||- 391.4||- 525.0|
Source: HTS. Sag el Na 'am Evaluation, 1976. p. 186.
If the project goes ahead, it will be important to ensure that the costs and difficulties of implementation are minimized. Nothing can be done about the great depth from which the water must be pumped, but there are other measures which could be taken to support the project to assure that, if it continues, it is as successful as possible.
3.3.2 Economic Evaluation
Table 14 summarizes the results of the economic evaluation. The life of the
project is taken to be twenty years, with Year 0 in 1975/76 and Year 20 in
1996/97. Three alternative interest rates are used to illustrate the sensitivity
of the results to changes in the assumed opportunity cost of capital. Eight per
cent probably reflects conditions in the Sudan most closely and is used in
subsequent sensitivity tests. A number of general conclusions can be drawn:
a) The project as a whole gives a heavy negative return, equivalent to a present value of £S 3.0 million at 8 per cent for the present system of agriculture, and £S 1.7 million for the intensive system: these are equivalent to an annual average loss of £S 118 and £S 67 per feddan for the whole area over the life of the project. For the settlement area alone, the-annual losses are equivalent to £S 626 and £S 337, respectively, for a 5.5 feddan holding. When it is recalled that the annual average income of a family on the Goz amounts to only £S 40-50, such losses are clearly exorbitant.
b) If capital costs are excluded (on the grounds that these have already been incurred or are committed), then at 8 per cent the annual losses for the whole area are equivalent to £S 62 and £S 11 per feddan. In other words, even excluding capital costs, the benefits fail to cover overhead. In the settlement area, the equivalent annual losses are £S 325 and £S 37 per 5.5 feddan holding.
c) Considerable variations occur in the returns from different rotations. At one extreme. the two-forage rotations show a heavy loss, which is only slightly reduced if intensive practices are adopted. At the other extreme, horticulture (and hence garden plots) is marginal under present conditions but is substantially in surplus under intensive conditions. In between. the main summer pulse/winter cereal and summer cereal/winter pulse rotations show negative returns under existing conditions and are marginal under intensive conditions: these. however. disguise significant seasonal differences. since heavy losses during the summer (especially for summer cereals) are offset by more favourable returns from the winter crops. Although horticultural returns are taken to represent the returns from the garden plots, this may prove optimistic and it is unlikely that more than the present returns will be achieved by settlers.
The Sag el Na'am Irrigation Project shows impressive results of producing agricultural crops under adverse environmental conditions. The price to be paid is a very high pumping cost with an internal rate of return of the project well below zero. This means that the gross returns from the present system fail to cover farm and irrigation costs by a wide margin. Even if higher yields could be achieved.