No.200 Economic Viability of Large-scale Irrigation Construction in 21st Century Sub-Saharan Africa: Centering around an Estimation of the Construction Costs of the Mwea Irrigation Scheme in Kenya

The main reason for the success of the 20th century Green Revolution in Asia was the development of large-scale irrigation projects. But, since the late 1990s, these investments were out of the development agenda, partly because the success of the Green Revolution reduced the need for such irrigation development and partly because the lower-than-expected performance of many large-scale irrigation projects resulted from difficulties in designing, constructing, operating, and managing large-scale irrigation schemes. This was the case in sub-Saharan Africa (SSA) as well. During the past decade, however, large-scale irrigation development seems to be coming back in SSA as a means to promote a Green Revolution there. This revival has evoked heated discussion as to whether the conditions that made the large-scale irrigation projects an infeasible option have been overcome.

This paper examines whether large-scale irrigation construction in SSA is economically feasible by estimating how much it would cost if the Mwea Irrigation Scheme in Kenya, one of the best performing irrigation schemes in SSA, were to be constructed today as a brand-new scheme.

The results show that the new construction of the Mwea Scheme may be economically viable if the shadow price of rice is as high as the world price that prevailed during the mini-rice crisis in 2008-2013; however, the viability is marginal, by no means robust. The project costs per unit of beneficiary irrigated area of our hypothetical ‘Mwea Project’ and a few 21st-century large-scale irrigation projects in planning or under construction are two to four times higher than those of 20th-century counterparts. For such expensive projects to be economically viable, the agricultural performance of these projects must be two to four times higher as well, which means, in terms of rice yield, 9 t/ha/year to 20 t/ha/year. There is certainly untapped potential in SSA for large-scale irrigation development, either construction of new schemes or rehabilitation of the existing ones, but the economically feasible potential remains limited. International donor agencies and national governments wanting to plan large-scale irrigation projects are recommended to assess seriously whether their plan is economically and technologically feasible and indisputably superior to other types of irrigation development, many of which were not available during the construction boom in the 20th century but are available now.

Keywords: Cost overrun, Cost structure, Malevolent hiding hand, Internal rate of return, Project overhead costs