8 TASK VI - COST BENEFIT ANALYSIS

 

8.1 INTRODUCTION

 

160. This cost-benefit analysis (CBA) is based on and supplementary to the findings stated in the previous chapters of this Study. Since the re-integration of Walvis Bay and the Off-Shore islands into Namibia was concluded on 01.03.1994, the sovereignty issue has been solved and only Strategic Context 1 will be dealt with in the CBA.

161. The CBA is intended only to be of an indicative nature and to measure the plausibility of certain stated hypotheses. It is thus in keeping with assumptions made in arriving at the base data. Of necessity, it in turn, is based on a number of assumptions. Before any decision to proceed further on the basis of the findings or recommendations of this study, a detailed Feasibility Study will have to be undertaken in order to verify and extend as appropriate the relevant data and analysis produced in the Pre-Feasibility Study [12].

162. The CBA will be tackled in different sections:

- Scope and limitations: This section selects the port development options under Strategic Context 1 to be assessed, distinguish the principal components of the required infrastructure (marine, supporting, social); and addresses relevant methodological questions.

- Analysis of port development options:

* the provision of fishing port facilities at Möwe Bay, Walvis Bay and Lüderitz;

* the provision of fishing port facilities at only Möwe Bay.

- In-depth appraisal of options: this section raises some of the questions that would need to be addressed in a more comprehensive feasibility study.

- Conclusions and recommendations: this section draws together the main conclusions and recommendations derived from the cost-benefit analysis.

 

8.2 SCOPE AND LIMITATIONS OF THE ANALYSIS

 

163. Only Strategic Context 1 will be dealt with. This means only the Möwe Bay fishing port with and without the expansion of the Walvis Bay fishing port expansion will be dealt with. Furthermore little useful purpose would be served by setting off the higher costs of overland transport against the costs of financing new port facilities. A brief comment is nevertheless required on the cost implications of the various port options and locations under Context 1.

164. The Angolan Port of Namibe: This port, although run down, possesses the only established deep-water harbour accessible to Namibia outside Walvis Bay. Its rehabilitation combined with a major upgrading of the road and partial rail links to northern Namibia [13] might afford the only partly alternative to the commercial Port of Walvis Bay. In terms of the costs of road freight, Namibe is as close to the main population centres of the north as Walvis Bay and to Windhoek as Cape Town. Joining up the southern Angolan and Namibian rail system would require a 600-700 km rail link (Lubango or Cassinga to Tsumeb) at a cost likely to be regarded as prohibitive. Investing in this transport corridor, while desirable for the purposes of regional trade and economic linkages, would from the point of view of Namibia's national interest place the expanded facilities outside Namibia's control. It would also leave the fishing industry without any base north of Walvis Bay.

165. Lüderitz: From the perspective of the fishing industry, Lüderitz could not function as a base for the pelagic industry or for landing wet fish from the central and northern sea areas.

 

TABLE 65: ROAD DISTANCES

 

To: From: Namibe Walvis Bay* Lüderitz Cape Town
Ondangwa

690

830

1 490

2 110

Tsumeb

950

570

1 240

1 920

Rundu

1 330

950

1 520

2 220

Katima Mulilo

1 830

1 450

2 020

2 700

Windhoek

1 360

390

820

1 500

Keetmanshoop

1 850

810

330

1 020

* For Möwe Bay, add 421 km to these distances (via Swakopmund).

166. This Study can only briefly deal with the benefit/cost aspect of providing additional and/or new infrastructure to any of the locations. The quantification of benefits accruing to the infrastructural aspects is a complex macro-economic exercise which falls outside the scope and intention of this Study.

167. In terms of Strategic Context 1 and to highlight funding aspects that will need to be taken into consideration, the most detailed focus will be on the viability of building a new fishing port at Möwe Bay. To establish the commercial viability of a new port on its own and thus for the purposes of this Study, the capital and recurring costs of respectively port construction and its operations will be treated separately from the costs of providing supporting infrastructure. A summary of the estimated capital costs of each port project (for all three strategic contexts) can be found in the above four tables (tables 61 to 64).

 

8.2.2 ASSUMPTIONS AND METHODOLOGY

 

168. Financial viability has been determined for each of the port development projects under Strategic Context 1 considering by discounting cash-flows and determining the "Internal Rate of Return" (IRR) of an investment in only port facilities at the port in question. Detailed tabulations can be found in Volume 3: Appendices of the Pre-feasibility Study [14]. The analyses include all capital expenditure, depreciation, interest charges, operating capital, recurrent and dredging costs, while on the revenue side they include all categories of port and other income attributable to the port in question.

169. The base assumptions in these financial cost benefit analyses are that:

- Account is taken of timing and magnitude of costs and of quantified benefits, directly associated with the port facility development, implying that a time-value is placed on costs and derived benefits.

- The investment in marine and directly related shore-based engineering facilities of any port option is judged in relation to whether the development provides an internal rate of return (IRR) at least equal to the cost of capital.

170. The investment (capital expenditure (capex)) flows are assumed to be even over the period considered, obtained by dividing the total capex by that period. Whilst the period of this Study covers a time horizon of 25 years, that is from 1990 to 2015, the economic lives of the assets are substantially longer. As the assets are assumed to depreciate in a straight-line fashion over their entire economic lives, a residual value of the capital assets accrue at the end of the study period, that is, in year 2015. The residual values are treated as negative expenditure and thus included in the final year of the cash-flow projections as in-flows.

171. It is further assumed that:

- The economic life of any new or extended port facility is 40 years before it is rendered outmoded and unsuitable as a port in its initial configuration and thus requiring major capital investment and reconstruction. Depreciation is thus at the rate of 2,5 % per annum, indicating accrual of a residual value in the year 2015.

- The economic lives of existing quays and jetties at Walvis Bay and Lüderitz are also 40 years.

- The cost of capital is 5 % throughout the period.

- Annual recurrent costs are a notional 5 % of the initial capital expenditure and are further assumed to exclude all operating capital expenditure such as replacement of port civil works, vehicles and equipment, marine craft, dredging and like costs.

- Dredging at the three ports of Lüderitz, Walvis Bay and Möwe Bay occurs on a five yearly cycle at the following incremental costs, relative to the facility created:

 

TABLE 66: DREDGING COSTS

 

Prices in US $ x 106

LOCATION

2000

2005

2010

2015

LÜDERITZ

0,60

0,90

0,90

1,20

WALVIS BAY

0,90

0,90

1,20

1,20

MÖWE BAY

0,60

0,90

0,90

1,20

172. It is assumed that adequate infrastructural facilities, institutional mechanisms and investments in the required land-based infrastructure, fishing vessels and human assets are in place by the time any phase, or additional facility, is completed at the respective locations.

173. In addition to the financial viability calculations, the economic viability of developing Möwe Bay as a fishing port and township has also been determined, firstly from the point of view of development and operation by the private sector and secondly, thereafter for further development and operation by the Government of the Republic of Namibia.

174. In the analyses, discounted marginal net benefits are offset against discounted marginal net costs - relative to the equivalent facility at Walvis Bay - and the IRR for each case determined. The findings are measured against stated hypotheses to test their plausibility.

175. For these specific analyses the following assumptions are made:

For a private sector investment:

- The investment period does not exceed a notional ten years, commencing in year one (1994) and ending in year ten (2003);

- All port and certain land-based infrastructural facilities are provided, based on the difference in cost providing equivalent facilities at Walvis Bay;

- These land-based infrastructural assets are:

* all urban utilities (water, sewerage, electrical power and
        telecommunications);

* all social infrastructure (schools, health facilities and housing).

- Port facilities are depreciated totally over the ten year investment period, whereas the land-based facilities are depreciated, on a straight line basis, over 40 years, thereby implying that a residual value accrues - as an in-flow - at the end of year 2003. This in turn implies that the investor is compensated with the (marginal) depreciated value by the Government of Namibia at this juncture;

- Responsibility is assumed for operations and maintenance (Namibia Ports Authority (NamPort)) and operating and handling companies as effected as from 01. March 1994), also at the marginal cost difference between the equivalent functions at Walvis Bay;

- The cost of capital is 12,5 % per annum;

- Benefits accrue from relative fleet operational cost savings - due to Möwe Bay closer to the northern fishing grounds than Walvis Bay - and from integrated white fish on-shore processing - indicated as "additional income".

For the public sector investment:

- Supporting land-based infrastructural facilities, in the form of bulk water, power and telecommunication supplies, access and township roads and an airfield are provided in the initial ten years to the year 2003, based on the marginal cost difference of providing equivalent facilities at Walvis Bay;

- All port and land-based infrastructural facilities are provided after the year 2003, again based on the marginal cost difference of providing equivalent facilities at Walvis Bay.

176. The hypotheses against which the cost benefit analyses are tested are:

For a private sector investment:

- The provision of a fishing port at Möwe Bay affects adequate marginal benefits, in the form of relative savings (high shadow-pricing of sustainable development in this area of Namibia and creation of employment opportunities due to wet-fish processing which without a fishing port of Möwe Bay would not be possible) of present fishing fleet operational costs and integrated on-shore white fish processing facilities, which in turn allow an investment in, and operation of, the port and township for a period of ten years at an internal rate of return in excess of the cost of capital by a risk factor - assumed to be at least equal to 100 %.

For public sector investment

- The private sector investment leads to adequate benefits, in the form of increased tax revenue flows due to greater profitability of the fisheries operators (at Möwe Bay) and increased per capita earnings (high shadow-pricing of sustainable development in this area of Namibia and creation of employment opportunities due to wet-fish processing which without a fishing port of Möwe Bay would not be possible), which outweigh the costs of the public sector investments by a factor measured by the IRR which is in excess of the cost of capital.

 

8.2.3 ESTIMATION OF PORT ACCOUNTS

 

177. The estimations of future port accounts for the various port projects presented special difficulties. With the re-integration of Walvis Bay into Namibia on 01 March 1994, the books of the Namibia Ports Authority (NamPort; former Portnet of South Africa) could not be evaluated in depth to date [15]  although it is assumed that the commercial Port as well as Fishing Port of Walvis Bay is a revenue earner. However, accounts for the fishing port at Walvis Bay, which nominally falls under the control of NamPort and the Ministry for Fisheries and Marine Resources, would be of little relevance, since the port assets are privately run by the owners of the waterfront sites subject to future contracts with NamPort. Revenue and expenditure data were supplied for 1992 by TransNamib in respect of the port of Lüderitz and a breakdown into broad categories was also given. Detailed accounts were, however, not provided and it is not possible to differentiate fishing from commercial port activities in the TransNamib data.

178. Since the commercial Port of Walvis Bay was re-integrated on 01 March 1994, an assessment of the financial viability of a new commercial port (Cape Cross) was not considered necessary. By contrast, an assessment of the viability of additional fishing port facilities is highly relevant. From the approximate figures provided by TransNamib, it appears that the Port of Lüderitz barely breaks even on the current account alone, this in a year, in which charges for captured fishing vessels contributed a substantial and probably unrepeatable 30 % to revenue. In the case of Lüderitz port income cannot cover depreciation on movable assets, while the fixed assets are old and all but written off, therefore imposing only a small financial charge. Since craft licence fees can only contribute a minor part of the port's income, it is likely that if Lüderitz was functioning purely as a fishing port, it would return a proportionally greater operating loss, excluding the exceptional item of fees for captured vessels.

179. On present policy it is thus unlikely that any fishing port could return an operating surplus, let alone repay any of the investment in its engineering works. This judgement is necessarily tentative in view of lack of detailed statistics from the accounts of the ports of Walvis Bay and Lüderitz and in view of the fact that neither is at all close to the type of substantial, specialised and publicly accessible fishing port that will be required for long-term fisheries development including the high shadow-pricing of sustainable development and creation of employment opportunities. It nevertheless implies a patently absurd conclusion - that new fishing port facilities will never be deemed financially viable no matter how intense the demand for them from the fishing industry.

180. It is not the mandate of this Study to address the issue of user charges and levies for fishing port facilities, except to recommend that it be given an early place on the planning agenda. It is reasonable to anticipate nevertheless that for projects where at minimum substantial additional net revenue can be shown to accrue to the State, it will be public policy for the port at least to break even on its recurrent costs. Such a policy would also be required if any privately financed schemes are not to be undercut by subsidised user charges at state-owned ports.

181. It is of course open to the Government to subsidise port development, whether by the public sector or the private sector, from general taxation. However, since all fishing vessels are required to land their catches at Namibian ports and since their activities generate a large revenue flow from quota levies, it is assumed for the purpose of this Study that the levy income is set against the residual costs of fishing port development which cannot be covered from direct port income, under consideration of high shadow-pricing of sustainable development in the Möwe Bay area of Namibia and creation of employment opportunities due to wet-fish processing which without a fishing port of Möwe Bay would not be possible. Increases in other sources of state revenue from the fishing industry, such as company and personal taxation, are excluded from this calculation.

 

8.3 FINANCIAL VIABILITY CASH-FLOW ANALYSIS

 

182. In the financial viability cash-flow analyses, direct port income derives from:

- fishing vessel licence fees, which are set at an average level well above the present actual rates and related to the total length of vessels using the port in terms of the fishing fleet projections as set out in Volume 3: Appendices of this Final Report [16];

- other user charges on fishing vessels, as set at 50 % of the licence fee;

- income from other charges and services, including a limited quantity of freight traffic.

183. When set against recurrent and operating capital expenditure plus interest charges, it is immediately evident that the net cash flow is strongly negative in every single fishing port project in Namibia. This is the case even for the low-cost expansion of the Walvis Bay Fishing Port where a large expansion in the fishing fleet based there is assured. For a port serving the entire central and northern sea areas and a doubled fishing fleet, and with existing fixed assets largely written off, the income generated over 25 years would cover less than half the outlays with a capital cost as little as US $ 14 millions.

184. For each fishing port project the total attributable levy income is therefore assessed. For a given IRR between zero and a ceiling 25 %, the proportion of the levy income required to supplement the direct port revenue is calculated.

185. Deriving the "attributable levy income" requires a fairly complex calculation for which the methodology is detailed in earlier sections of the Pre-Feasibility Study [17]. In brief, the annual quantities of fish expected to be landed at the fishing port in question over the planning period is estimated by species under the expected growth scenario. The 1992 quota and research levy rates per ton are then applied, with certain revisions, to the landed quantities, taking account of rebates and vessel ownership. The results for different combinations of fishing port projects are summarised in table CBA-3 in Volume 3 (Appendices) of the Pre-Feasibility Study [18].

186. The catch quantities, their species composition and the levy returns all vary according to the combination of port projects. In particular, less port development means slightly lower catches and less shore processing. Not surprisingly, the "null option" (no port development whatsoever) generates the highest levy returns because there is little shore processing of white fish and therefore fewer rebates. But, it is noticeable that the development of Möwe Bay yields slightly higher levy returns despite the higher rebates. In other words, the greater wet fish trawling and shore processing facilitated by a northern fishing base would not necessarily reduce the overall levy returns despite the incentives built into the present levy structure. The total levy returns attributable to port projects are pictured in the following table:

 

TABLE 67: TOTAL LEVY RETURNS ATTRIBUTABLE TO PORT PROJECTS

 

Levy Returns (US$) from:

1995

2000

2005

2010

2015

Northern Port
Landings at Möwe Bay

6,7

8,7

12,7

14,0

16,3

Northern Zone Catch to Möwe Bay and Walvis Bay

19,0

18,3

19,3

21,3

24,3

Northern Zone Catch to Walvis Bay only

16,0

16,0

18,3

20,0

21,7

Central Port
Landings at Walvis Bay, Möwe Bay built

30,3

33,0

36,7

37,3

40,3

Landings at Walvis Bay, Möwe Bay not built

36,3

40,0

46,0

48,3

52,3

Landings at Walvis Bay and Möwe Bay

37,0

41,7

49,7

51,3

56,7

All Fishing Ports
No Port Development (0 Option)

50,3

55,3

64,3

69,7

75,7

Möwe Bay, Walvis Bay and Lüderitz developed

45,0

51,7

60,7

63,7

70,0

Landings at Walvis Bay and Möwe Bay

43,7

48,7

56,7

59,3

63,7

 

8.4 A FISHING PORT AT MÖWE BAY

 

8.4.1 PORT INFRASTRUCTURE

 

187. The planning and construction of a conventional fishing port at Möwe Bay is scheduled in three phases: an initial phase in 1994-1995 leading straight into phase 2 over 1996-2005, with a later extension over 2006-2015. Its estimated capital costs is US $ 80,94 millions (see table 61: Engineering Cost Estimates: Port Facility Developments: Option MB1), of which some US $ 68,80 millions would be for construction costs, whereas the remaining costs would cover planning and design but exclude any feasibility studies, exploratory drilling, wave and wind monitoring study or like costs.

188. An alternative Flexiport design could be extended at intervals in response to demands. The total capital costs of US $ 61,88 millions (see table 61: Engineering Cost Estimates: Port Facility Developments: Option MB1-F1) is some 24 % cheaper than the conventional design. For the sake of simplicity, it is scheduled in the tables to be completed over a single five year period from 1995 to 1999.

189. The port would be designed to provide a base for a fleet landing the bulk of the catch taken in the northern sea zone. Some of the white fish and horse mackerel caught by large freezer trawlers would continue to be landed at Walvis Bay. Small and medium sized wet fish trawlers, purse seiners and line boats would predominate. Much of the fish would be delivered to shore processing, which would require integrated off-loading facilities and factory sites at or near the port.

190. Over the planning period the total running costs amount to US $ 30,5 millions, the operating capital cost to US $ 59,4 millions and interest charges to US $ 66,6 millions. Deducting the aggregate depreciated value of fixed assets, the net capital and operating expenditure is US $ 186,1 millions.

191. Revenue from craft licence fees and other vessel charges comes to only US $ 1,6 millions and from other port income to US $ 35,6 millions, making US $ 37,2 millions in all. The deficit gap to break-even point is thus a massive US $ 148,9 millions.

192. The total levy income attributable to fish to be landed at Möwe Bay under the expected growth scenario is US $ 238 millions over the whole period. If all of this revenue flow were applied to financing the port, it could generate an IRR of 8,9 % for a conventional design and 8,5 % for a Flexiport design [19].

193. The income from vessel licences and charges covers less than 1 % of net expenditure and all port income covers only 20 %. Even massive hikes in port user charges are unlikely to do much to bridge the gap and would anyway drive fishing vessels south to the cheaper facilities at Walvis Bay.

194. The financing of a northern port would therefore depend heavily on the application of levy income and all of it would be required over the whole period to sustain a fairly moderate IRR. Development of a fishing port at Möwe Bay if financed entirely by the public sector, is not financially viable on the basis of these results.

195. For this case any fishing port project could therefore only be justified on broader development grounds.

196. However, economic viability is indicated for the case where a mix of private and public sector investments is considered. The results of the analyses are contained in Volume 3: Appendices of the Pre-Feasibility Study [20]. The principal benefit would derive from easier and faster access to the northern fishing grounds and its impact upon quality and derived subsequent benefits of value-adding by on-shore processing in terms of the Namibian fishing policy. Vessel operating costs would be reduced and it would become technically possible to run smaller boats, especially purse-seiners and wet fish trawlers, landing good quality fish for shore processing. Higher profit rates would generate increased tax revenues and a more competitive edge in export markets.

197. The net gain is, however, rather less assured. The foreign markets for canned pelagic fish, especially pilchard, are limited and it is probable that the processors will be able to catch most of all their requirements in the central zone for landing at Walvis Bay. A partial relocation to Möwe Bay might improve profits but the net gain would be marginal. More promising is white fish processing and this would be the mainstay of a northern fishing port, the net gains in value added and employment being considerable. On the other hand, economic linkages to the hinterland would be negligible and the higher transport and living costs would run at a marked premium over those at Walvis Bay.

198. The net benefit of what remains a high cost venture must be doubted and has to be verified by a comprehensive economic feasibility study for the Fishing Port of Möwe Bay. The above assessment is based on the assumption that fishing enterprises will be attracted by the necessary incentives to the new port and utilise it fully from the outset. It may well be considered that the developmental gains from a northern fishing port are outweighed by the probable need for the long term mortgaging of a sizeable proportion of the State's fisheries revenue.

199. As the hypothesis set for the economic viability cost benefit study are validated - an IRR of some 30 % is indicated for the private sector investment and equal to the cost of capital for the subsequent full public sector investment - a full feasibility study for the Fishing Port of Möwe Bay is thus indicated.

 

8.4.2 SOCIAL AND SUPPORTING INFRASTRUCTURE

200. Any northern fishing port would have to be built from scratch at a remote desert site. The capital cost of supporting and social infrastructure would be very high. Supporting infrastructure, which would of necessity include a black-top 350 km highway to Möwe Bay via Cape Cross as first stage (upgraded roads to the hinterland to Khorixas and/or Sesfontein have to follow), a bulk water supply scheme and trunk power line, would cost US $ 222,2 millions or nearly three times the cost of the fishing port. Social infrastructure would cost nearly as much at US $ 194,8 millions for a town of 30 000 at the end (See: tables 61 to 64). 

201. Since the net increase in employment in the fisheries sector deriving from a northern fishing port would be modest, a direct comparison with the equivalent costs at Walvis Bay provides a rough indicator. There, for a population increase of 30 000 the costs of supporting and social infrastructure are estimated at US $ 26,0 millions and US $ 142,3 millions respectively, in aggregate some US $ 249,0 millions, less than 40 % of the cost at Möwe Bay.

 

8.5 EXPANDED FISHING PORT FACILITIES AT WALVIS BAY

 

8.5.1 PORT INFRASTRUCTURE

 

202. The planning and construction of an expansion within the existing fishing port at Walvis Bay is scheduled over a single five year phase and an early start in 1994. Its estimated capital cost is US $ 11,50 if Möwe Bay is built and US $ 14,00 if not. This expansion hinges on a reversion of the waterfront to public access and the building of a waterfront quay enabling further private sector investment in off-loading facilities. Flexiport technology could cheapen the cost further.

203. If reconstruction of the waterfront does not become possible, an alternative northern extension would cost a marginally more for the same capacity (US $ 12,7 millions and US $ 25,3 millions respectively).

204. The port would be designed to provide a base for a fleet landing all the catch taken in the central sea areas plus part of the catch, taken mostly by freezer trawlers, in the south and the north as well. If Möwe Bay is not built, all the northern catch would be landed at Walvis Bay, mostly by large trawlers. Apart from the freezer trawlers, small and medium sized wet-fish trawlers, purse-seiners and line-boats would predominate. Much of the fish would be delivered to shore processing, which would require integrated off-loading facilities and factory sites at or near the port.

205. Over the planning period the total running costs of an expanded port amount to US $ 35,1 millions (US $ 51,1 millions without Möwe Bay), the operating capital cost to US $ 13,8 millions (US $ 16,3 millions without Möwe Bay) and interest charges to US $ 14,5 millions (US $ 17,1 millions without Möwe Bay). Deducting the aggregate depreciated value of fixed assets, the net capital and operating expenditure is US $ 71,4 millions (US $ 93,5 millions without Möwe Bay).

206. Revenue from craft licence fees and other vessel charges comes to only US $ 4,6 millions (US $ 6,1 millions without Möwe Bay) and from other port income to US $ 29,8 millions (US $ 38,4 millions without Möwe Bay), making US $ 34,4 millions (US $ 44,5 millions without Möwe Bay) in all. The deficit gap to break-even point is thus a fairly modest US $ 37,0 Millions (US $ 49,0 millions without Möwe Bay).

207. The total levy income attributable to fish to be landed at Walvis Bay under the expected growth scenario is US $ 804 millions ((US $ 995,0 millions without Möwe Bay) over the whole period. If just 7% of this revenue flow were applied to financing the port expansions, it could generate an IRR of 25,0% (17,5% without Möwe Bay).

208. The income from vessel licences and charges covers only 6,5% of net expenditure, but all port income covers nearly half (48,0%).

209. The ratios are very similar in the alternative case of a northern extension to the fishing port of Walvis Bay. The deficit gap to break-even point is still a fairly modest US $ 35,4 millions (US $ 77,0 millions without Möwe Bay). It would require 7% (10% without Möwe Bay) of the revenue flow to generate an IRR of 20,0%.

210. The financing of expansion in the Walvis Bay fishing port would therefore depend on the application of a small proportion of levy income attributable to the port. The expansion is financially viable on the basis of these results.

 

8.5.2 SOCIAL AND SUPPORTING INFRASTRUCTURE

 

211. Even in the "null option" case, a fairly substantial investment would be required in supporting and social infrastructures to cater for slow industrial expansion and urbanisation. Supporting infrastructure would benefit from the existing well established base in Walvis Bay and cost US $ 26,0 millions. Social infrastructure would cost much more at US $ 142,3 millions for a population increase of 30.000.

212. If the port and fishing industry is fully developed and Möwe Bay is built, the total respective costs for an additional population of 40.000 are US $ 33,3 millions and US $ 188,5 millions, or US $ 53,6 millions more than the null option. If Möwe Bay is not built and all development is concentrated at Walvis Bay, the respective costs will be much higher at US $ 57,3 millions and US $ 328,0 millions. This expenditure would, however, be based on rapid urban growth of 70.000 over 25 years to a total population of 100.000.

213. If the current national trend persists it can be expected that most of the anticipated population increase at Walvis Bay would alternatively migrate to other towns, notably Windhoek. Sustained industrialisation in the fishing industry would establish Walvis Bay as a second major economic growth pole in the national economy of Namibia.

 

8.6 EXPANDED FISHING PORT AT LÜDERITZ

 

8.6.1 PORT INFRASTRUCTURE

 

214. The planning and construction of a fishing port extensions to the existing port at Lüderitz is scheduled over three phases: 1994-1995, 1996-2005 and 2005-2015. Its estimated capital costs is US $ 10,34 millions.

215. The port would be designed to provide a base for a fleet landing some of the catch taken in the southern sea areas, mainly of white fish. Apart from a small number of freezer trawlers, small and medium sized wetfish trawlers and line-boats would predominate. Much of the fish would be delivered to shore processing, which would require integrated off-loading facilities and factory sites near to the port.

216. Over the planning period the total running costs of an expanded port amount to US $ 32,6 millions, the operating capital costs to US $ 9,4 millions and interest charges to US $ 9,8 millions. Deducting the aggregate depreciated value of fixed assets, the net capital and operating expenditure is US $ 57,1 millions.

217. Revenue from craft licence fees and other vessel charges comes to only US $ 1,5 millions and from other port income to US $ 38,5 millions, making US $ 39,5 millions in all. The deficit gap to break-even point is thus a modest US $ 17,6 millions.

218. The total levy income attributable to fish to be landed at Lüderitz under the expected growth scenario is US $ 184 millions over the whole period. IF 15% of this revenue flow were applied to financing the port, it could generate an IRR of 17,0%.

219. The income from vessel licences and charges covers only 2,5% of net expenditure, but all port income covers more than two-thirds (69%).

220. The financing of expansion at Lüderitz would therefore depend on the application of a small proportion of levy income attributable to the port. The expansion is financially viable on the basis of these results.

 

8.6.2 SOCIAL AND SUPPORTING INFRASTRUCTURE

 

221. In the "null option" case, little additional investment would be required in supporting and social infrastructures to cater for the slow industrial expansion and urbanisation. 

222. If the port and fishing industry is developed more rapidly the total respective costs for an additional population of 10.000 are US $ 9,7 millions and US $ 47,3 millions (US $ 23,6 millions under the null option), or US $ 56,9 millions in all.

 

8.7 TWO ALTERNATIVE PORT DEVELOPMENT PROGRAMMES

 

223. In integrating the analysis it is useful to combine the various port projects into indicative port development programmes for comparison, first with and then without Möwe Bay (PDP1 and PDP2 respectively).

224. The estimated capital cost of PDP1 is US $ 103,9 millions. It comprises Möwe Bay fishing port (MB1), the northern extension to the Walvis Bay fishing port (WB1-C) and the fishing port extension at Lüderitz (L1).

225. The programme would be designed to optimise fishing base facilities for a fleet landing the maximum quantity of fish for shore processing. Apart from a small number of freezer trawlers, small and medium sized wetfish trawlers and line boats would predominate. Much of the fish would be delivered to shore processing, which would require integrated off-loading facilities and factory sites at or near to the ports.

226. Over the planning period the total running costs amount to US $ 98,2 millions, the operating capital costs to US $ 87,8 millions and interest charges to US $ 92,1 millions. Deducting the aggregate depreciated value of fixed assets, the net capital and operating expenditure is US $ 321,4 millions.

227. Revenue from craft licence fees and other vessel charges comes to US $ 107,8 millions, making US $ 115,5 millions in all. The deficit gap to break-even point is thus a substantial US $ 205,9 millions.

228. The total levy income is US $ 1.226,0 millions over the whole period. It would require 25% of this revenue flow to generate an IRR of 15,5%.

229. The income from vessel licences and charges covers only 2,4% of the net expenditure, but all other port income covers more than one-third (36%).

230. The financing of fishing port facilities would therefore depend on the application of a quarter of all levy income.

231. The estimated capital cost of PDP2 is US $ 35,6 millions. It comprises a larger northern extension to the Walvis Bay fishing port (WB1-D) and the fishing port extension at Lüderitz (L1).

232. The programme would be designed to optimise fishing base facilities for a fleet landing the maximum quantity of fish for shore processing from the central and southern sea areas while trading off the high costs of a northern fishing port against a greater dependence on large freezer trawlers to fish the northern sea areas. Less of the white fish would be delivered to shore processing.

233. Over the planning period the total running costs amount to US $ 83,7 millions, the operating capital costs to US $ 37,0 millions and interest charges to US $ 38,8 millions. Deducting the aggregate depreciated value of fixed assets, the net capital and operating expenditure is US $ 121,1 millions.

234. Revenue from craft licence fees and other vessel charges comes to US $ 7,5 millions and from other port income to US $ 76,0 millions, making US $ 83,6 millions in all. The deficit gap to break-even point is thus a much smaller US $ 37,5  millions.

235. The total levy income is US $ 1.180,0 millions over the whole period. It would require 12% of this revenue flow to generate an IRR of 16,8%.

236. The income from vessel licences and charges covers only 6,2% of the net expenditure, but all other port income covers nearly two-thirds (63%).

237. The financing of fishing port facilities would therefore depend on the application of just over a tenth of all levy income.

238. Comparing the two programmes, it is apparent that the much lower capital cost of PDP2 brings it much closer to financial viability than PDP1. For a similar IRR, the proportion of the levy income required is less than half. This result highlights the conclusion that only if the wider developmental and economic gains including the creation of additional employment from a fishing port at Möwe Bay are adjudged to be significant on a national scale can the large extra costs be justified.

 

Endnotes

[12] Klein, W.A.; Moorsom, R.J.B.; edited by Dr.-Ing. Klaus Dierks: A Pre-Feasibility Study of Future Port Facilities in Namibia, Windhoek, 20 August 1993

[13] Dierks, Klaus: Appendix to Cabinet Submission No. dated 12 August 1990 concerning a proposal for the Lubango-Oshikango Segment of the Namibe Port Transport System (SATCC Project No.0.0.010), Windhoek, 1990

[14] Klein, W.A.; Moorsom, R.J.B.; edited by Dr.-Ing. Klaus Dierks: A Pre-Feasibility Study of Future Port Facilities in Namibia, Windhoek, 20 August 1993

[15] 09th March 1994

[16] Klein, W.A.; Moorsom, R.J.B.; edited by Dr.-Ing. Klaus Dierks: A Pre-Feasibility Study of Future Port Facilities in Namibia, Windhoek, 20 August 1993

[17] See endnote 16

[18] See endnote 16

[19] Note that the IRR for a Flexiport design would be somewhat higher if the capital cost were spread out over the planning period on the same basis as for the conventional design.

[20] See endnote 16

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