Economic evaluation of the comprehensive groundwater development project, Democratic Republic of Somalia

Special evaluation, prepared by Louis Berger International, Inc., a project contractor, is based on analysis of real construction costs (1982-83) and of projected construction costs (1984-91), benefits, and operating and maintenance costs. Since project inception in 1980, 51 wells have been drilled, of which 21 (41%) have the potential of being production wells. This percentage should increase to about 60% or an average of 18 production wells per year. Construction costs have run from $200,000 to $280,000 per well; heavy equipment and tools account for more than 60% of costs, the remainder being for materials, labor, fuel, and overhead. The implications of such significant capital costs are: (1) once capital equipment has been procured, cost per additional well is relatively small; (2) attempts to cut costs should focus on equipment procurement; (3) overall costs are very sensitive to expected equipment life (a 10-year lifespan has been used in the projections); (4) high annual completion of production wells is essential for acceptable per well costs; and (5) technology choice is extremely important in determining costs. In the Bay Region, 1,500-2,500 people and a like number of livestock per well are expected to benefit from water availability, reduction in water-related disease, freeing of labor now devoted to drawing water, and increased agricultural potential. In the less populated Central Rangelands, each well should serve about 250 families and 7,000 animals. Demand will be limited almost entirely to the dry season in both regions. The GOS water tariff is sufficient to cover operating costs for one year of well service - $45,000 to $60,000 - and just over 50% of direct construction costs. Even were the tariff doubled, however, it would not be possible to recover capital costs. It is recommended, however, that the GOS consider collecting periodic lump sum (as opposed to per-unit) payments. If 18 production wells are constructed a year, equipment is well-maintained, and user fees are efficiently collected, the project can become partially self-sufficient (i.e., except for capital costs). However, the GOS is not likely to achieve these conditions without continued donor TA.