Economic analysis
Economic Internal Rate of Return
The results of the economic analysis indicate that, for the base model (with 6,001 ha under sugarcane and a conservative assumption for the future sugar price), an EIRR of 6.2% is obtained. The analysis was undertaken with alternative sugar
price scenarios resulting in an EIRR ranging from 7.1% (best price) to 4.6% (worst price).
In addition, the impact of alternative cropping patterns, in which sugarcane is not the main crop, was also assessed. By switching away from sugarcane production to cotton and other crops, the EIRR falls slightly. For example, if sugarcane is
halved and the land made available is distributed equally between cotton and other crops, the EIRR falls slightly from 6.2% to 5.8%; and if no sugarcane is grown, the EIRR falls to 5.3%.
Economic Internal Rate of Return of various development options
| Sugar Price Scenario |
Sugarcane (1) |
Sugarcane (2) |
| Best Price |
7.10% |
8.00% |
| Most Likely Price |
6.20% |
6.50% |
| Worse Price |
4.60% |
4.40% |
(1) 6,001 ha under sugarcane, producing 70,000 t of sugar/annum
( 2) 9,730 ha under sugarcane, producing 112,000 t sugar/annum
Notes to economic analysis
EIRR were derived using very conservative assumptions regarding both sugar prices and water efficiencies.
Less conservative assumptions would raise the EIRR.
Significant impact on the substantial disparities between regional incomes that exist within Swaziland. If the project benefits were weighted to take account of this income distribution effect, an EIRR greater than 10% could easily be
obtained.
Excursus
International sugar market
Swaziland's sugar markets
Farmers' prices
Price projections
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