Govt at verge of E4.65bn investment recovery, to enjoy profits

Govt at verge of E4.65bn investment recovery, to enjoy profits

Economic researchers have advised that development projects such as LUSIP 1 and KDDP take time to yield desired benefits.

Therefore, the 77 cents Benefit-Cost Ratio (BCR) and negative E272.3 million net present value (NPV) mean that it is only a matter of time before ESWADE breaks even and starts generating additional income for the Kingdom of Eswatini. In fact, the negative E272.3 million net present value means discounting the projected cash flows that were made at the inception of the ESWADE projects back to the present value in 2017, at the time of the evaluation, the ESWADE was in purely accounting terms E272.3 million short of recovering the E4.65 billion that has been invested by government on the ESWADE.

The net present value is the difference between the present value of cash inflows and the present value outflows over a period of time.

“What this means is that over the period under review, ESWADE projects have made a positive contribution to the economy in terms of the difference in the money invested by government and the money generated by the ESWADE projects, that is, the return on investment is positive and it’s just a matter of time before the project breaks even,” ESEPARC explained. By 2017, the government and its development partners had expended a total of E4.65 billion – in 2017 monetary values – on the project; both on dam, roads, and irrigation canal construction and farmer development.

It should be mentioned that at inception, the activities of ESWADE focused in the KDDP, where efforts concentrated on expanding the area under sugarcane production through the establishment of farmer associations and building business management capacity amongst smallholder farmers.

Funding for the project came in different periods with the bulk of the money (about 65 per cent of the total funding for ESWADE) came between 2007 and 2011, during the construction phase of the Lubovane Dam and irrigation canals in the LUB.

Funding for the ESWADE peaked in 2008. Operational funding improved post 2011 to average E165 million (in 2017 currency values) during the five years from 2012 – 2017, compared to an average of E67 million (in 2017 currency values) during the first five years (2000 – 2004).