Cost-Benefit Analysis for Investment Decisions: Chapter 17 (Appraisal of Upgrading a Gravel Road)

Glenn Jenkins (), Chun-Yan Kuo and Arnold Harberger ()
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Chun-Yan Kuo: Queen's University, Canada

No 2011-17, Development Discussion Papers from JDI Executive Programs

Abstract: The purpose of this chapter is to illustrate how a proposed investment in upgrading a gravel road to a tarred surface should be evaluated. The project is located in the Limpopo Province of South Africa. It involves upgrading of two existing, mainly gravel, roads into a tar surface road connecting Sekhukhune and Capricorn districts. The whole route has several sections starting from Flag Boshielo to Mafefe, Sekororo, Ga Seleka and finally to Mmatladi. It has been estimated that more than 98% of the sections of gravel road are considered in either poor or fair condition. The main users of the existing gravel road are mini-buses and private vehicles transporting people from local areas to Lebwakhomo and other towns. The predominant economic activity in the region is small-scale agriculture, carried out on a number of irrigation schemes. An lesson from this case is the importance of evaluating segments of a road separately if the traffic on the segments or the cost of upgrading are significantly different across segments.

Keywords: Uncertainty; Risk; Investment Appraisal (search for similar items in EconPapers)
JEL-codes: H43 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2011-08
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