Financial Analysis of Building and Operating Composting Facilities in the Accra-Tema Tetropolitan Area

ABSTRACT
As the quantity of waste streams increases and grows in complexity in the Accra-Tema Metropolitan Area (ATMA), waste management has become a major environmental management problem in the area. This study examines the possibility of establishing municipal solid waste (MSW) composting facilities in the ATMA through the lens of economics. Using the review of literature, data analysis and economic reasoning, the study endeavours to: perform a comparative cost analysis of waste treatment methods in ATMA; determine the most economically feasible levels of MSW composting in the ATMA, determine the profitability and financial viability of compost projects in the ATMA; and investigate the constraints that are likely to militate against the establishment of composting facilities in the ATMA. The results of the comparative cost analysis show that incineration is the most expensive method in ATMA, followed by landfilling and then by composting. The analysis further shows that the overall cost of building and operating composting facilities in the area at the base year (2001) is 76% and 3.5% of the overall costs of landfilling and incineration respectively. Using the German Agency for Technical Co-operation (GTZ) computer programme, all the options considered at the base year are found to record negative profits. From the investment analysis viewpoint, composting projects are not financially viable at the current interest rate of 45%. The study financial analyses of project A (i.e. 75% of the total waste generated in the ATMA) and Project B (i.e. 25% of the total waste generated in the
ATMA). The projects (A and B) analysed shows negative Net Present Values (NPVs) at the discount rate of 45%. The internal rates of return of the projects analysed are found to be 41% and 43% respectively, indicating that the former has a greater revenue earning capacity than the latter. On the sensitivity of the projects, the study reveals that the projects are not very sensitive to changes in the cost variables analysed such as initial capital cost overrun, and increases in fuel prices, labour costs and input costs. The projects are, however, sensitive to decreases in the sales prices of compost. The study also reveals that the primary cause of under-development of the composting industry in the study area is as a result of a web of endogenous and exogenous factors such as high interest rate; lack of appropriate technologies, research and development, land, and policy framework; ignorance on the part of waste producers and compost consumers;
and preference of chemical fertilizers to compost products. It seems likely that, idealistic strategies for promoting the compost industry notwithstanding, government traditional roles and limitations in the compost industry will necessarily remain. Subsidisation, reduction in
interest rates and provision of loan guarantees to compost entrepreneurs may be needed to sustain the compost industry in the area. The study recommends that future research programs should focus on aspects of societal well being (welfare economics), interrelationships between outputs and inputs, modelling of cost-effective transportation routes, and design and construction of composting facilities within the ATMA using available local resources.