5. COST-BENEFIT ANALYSIS(Contd.)

5.9 Duck-cum-fish option

In the duck-cum-fish option, the farmer breeds and raises ducks until they reach market size. Ducks fertilize the ponds either directly when they are in the water or indirectly, with labor carrying the manure to the ponds. The ratio is 500 ducks/ha. Male breeders are replaced every year; female breeders every second year.

TABLE 5.24

DUCKS POPULATION ON 5 HA FISH-FARM

NUMBER OF DUCKS/HA: 500

FEMALE/MALE RATIO: 160/40 = 4

NUMBER OF DUCKLINGS PER FEMALE PER YEAR: 45

PRODUCTION CYCLE (EXCLUDING INCUBATION PERIOD OF 28 DAYS): 8 WEEKS

POPULATION BREAKDOWN

F: Number of female / M: Number of males / D: Number of ducklings

Optimal number of ducks on 5 Ha fish-farm: 2,500

2,500	= F + M + D
	= F (1 + 0.25 + 7.58954)

NUMBER OF DUCKS PRODUCED IN ONE YEAR: 329 × 45 × 0.95 × 0.91 = 12,800

TABLE 5.25

FEED AND LITTER REQUIREMENTS FOR DUCKS, QUANTITIES AND COSTS

FEED

Broilers (For 100)

Average number of broilers: 2089

Breeders

Feeding requirement: 25 kg/day/200 ducks

Liter requirements (maize bran)

2.015 kg/m² of sheltered space, every two weeks

322 m² × 2.015 kg × 26 = 16,870 kg

Cost @ K0.15: K2530

TABLE 5.26
COST OF REPLACING BREEDERS

FEMALE ARE REPLACED AFTER TWO YEARS, SOLD AT 2.5 KG @ K2.00

MALE ARE REPLACED AFTER ONE YEAR, SOLD AT 2.5 KG @ K2.00

FEMALE:		616.875
MALE:	82 × 2.5 (3.5 - 2.00) =	307.5
TOTAL		924

TABLE 5.27
OPTION IV: DUCK-CUM-FISH

FIXED CAPITAL:

WORKING CAPITAL

TABLE 5.28
OPTION IV: DUCK-CUM-FISH

PROJECTED PROFIT AND LOSS STATEMENT

TABLE 5.29
PROFIT TAX COMPUTATION, 5 HA FISH-FARM, 5,000 m² PONDS, DUCK-CUM-FISH

* POND CONSTRUCTION, FENCE, BUILDINGS, AT 100%

** FURNITURE CARTS & OXEN, WHEEL-BARROWS, AT 50%

TABLE 5.30
FINANCIAL RATE OF RETURN, 5 HA FISH-FARM, 5,000 m² PONDS, DUCK-CUM-FISH

TABLE 5.31
FINANCIAL RATE OF RETURN, 5 HA FISH-FARM, 2,500 m² PONDS, DUCK-CUM-FISH

TABLE 5.32
FINANCIAL RATE OF RETURN, 5 HA FISH-FARM, 1,500 m² PONDS, DUCK-CUM-FISH

5.10 10 HA fish-farm

The rate of return of a 10 ha fish-farm with 5000m² ponds using direct feed was computed, to see whether a larger farm would bring significantly higher returns.

TABLE 5.33
10 HA FISH-FARM, DIRECT FEED, 5,000 m² PONDS

TABLE 5.34
10 HA FISH-FARM, 5,000 m² PONDS, DIRECT FEED

PROJECTED PROFIT & LOSS STATEMENT

TABLE 5.35
PROFIT TAX COMPUTATION, 10 HA FISH-FARM, 5,000 m² PONDS, DIRECT FEED OPTION

* POND CONSTRUCTION, FENCE, BUILDINGS, AT 100%

** FURNITURE CARTS & OXEN, WHEEL-BARROWS, AT 50 %

TABLE 5.36
FINANCIAL RATE OF RETURN, 10 HA FISH-FARM, 5,000 m² PONDS, DIRECT FEED

5.11 Analysis of fish-farming options

The analysis of fish-farming options proceeds by comparing the assumed yields on which the expected returns of alternative options are based, by comparing them with the range of results observed in Zambian commercial and governmental fish-farms. This comparison allows to appraise the likelihood of the different results and should make possible the choice of option for fish-farm development (pond size) and management.

However it must be kept in mind that financial rates of return calculations are based on present input and output prices obtained in Zambia and more important, on construction prices quoted by Brunelli Construction (Lusaka). Those quotations for different farm sizes (5 ha and 10 ha) and pond sizes (5,000 m², 2,500 m² and 1,500 m²) are high compared to actual costs. One project by the same company, within 30 km of Lusaka, included the construction of fish ponds of and average size of 464 m² on a less than 1 ha fish-farm, for a cost per ha of K58,050, which is 39% less than the quotation price for 1,500 m² ponds for a 5 ha fish-farm. Therefore, development costs quoted by Brunelli Construction should be considered rather as list prices, and financial rates of return computed are underestimated. This consideration should be kept in mind before ruling out any option which would not bring a sufficient rate of return under the chosen set assumptions.

The analysis of rates of return table brings the following remarks.

1. With the construction costs quoted by Brunelli Construction, small size ponds do not appear to be preferable to large size ponds even if they bring higher yields. Even if using 1,500 m² ponds was helping to obtain 8 T/ha which is difficult to reach on a regular basis, the increment in internal rate of return would be from 23.0% to 27.4% for pig-cum-fish option and from 24.1% to 28.8% for duck-cum-fish option, compared to rate of return with 5,000 m² ponds assuming 4 T/ha yields. Yet obtaining average yields of 4 T/ha on 5,000 m² ponds is much more realistic (it has been realized, in Zambia even with suboptimal management methods) than obtaining 8 T/ha on a regular basis on 1,500 m² ponds. Therefore, a would-be fish-farmer should study carefully the cost increment involved in building 1,500 m² ponds, rather than 2,500 m² or 5,000 m² ponds.

2. Associated husbandry, whether with pigs or ducks, will always provide better return than direct fertilizing or direct feeding methods, provided that it pays for itself, since with associated husbandry, the cost of fertilizing the ponds is nil and the yields are better or as good. The only situation where direct feeding or fertilizing could be financially more attractive would be if it would bring such higher yield that the value of the additional yields would more than offset the cost directly feeding or fertilizing the ponds. This could only be possible with chicken manure since this fertilizing method has brought yields of up to 12 T/ha in the Copperbelt area. Yet the cost of chicken manure (KO. 10/kg in the Lusaka area, K4.00–5.00/kg in the Copperbelt) reduces the advantage of this option, even for a fish-farm raising its own chickens. In a country where the cattle industry generates a strong demand for chicken manure, there is an opportunity cost in using chicken manure in fish ponds. As there is no similar market for pig manure or duck manure, the opportunity cost for those fertilizers can be considered as nil.

   TABLE 5.37
   COST OF POND CONSTRUCTION PER HA, IN KWACHA

   Brunelli quotation (30 km range from Lusaka)

   	5 ha Fish-Farm	10ha Fish-Farm	% Difference
   5000 m2 ponds	56,130	52,459	6.5%
   2500 m2 ponds	75,769	67,177	11.3%
   1500 m2 ponds	94,680	91,774	3.1%

   Fish-Farm project (25 km west of Lusaka), to be implemented by Brunelli Construction

   Ponds dimensions	N	Total area (m2)
   28m × 15m = 420m2	6	2,520
   40m × 15m = 600m2	3	1,800
   15m × 30m = 450m2	10	4,500
   		8,820m2

   Average size of ponds: 464m² = 4.64 ares

   Total cost of pond construction: K51200

   Cost per ha: K58050

   TABLE 5.38
   POTENTIAL RATES OF RETURN OF FISH FARMING OPTIONS, 5 HA FISH-FARM

   POSSIBLE YIELDS		4T/HA	6T/HA	8T/HA
   OPTIONS
   FEED	5,000 m2 PONDS	5.5%	16.1%	26.1%
   	2,500 m2 PONDS	3.7%	12.5%	20.6%
   	1,500 m2 PONDS	2.7%	10.2%	17.1%
   CHICKEN MANURE	5,000 m2 PONDS	6.6%	17.2%	27.3%
   	2,500 m2 PONDS	4.7%	13.3%	21.6%
   	1,500 m2 PONDS	3.5%	10.9%	17.9%
   PIG-CUM-FISH	5,000 m2 PONDS	23.0%	30.6%	38.1%
   	2,500 m2 PONDS	19.0%	25.4%	31.8%
   	1,500 m2 PONDS	16.3%	21.9%	27.4%
   DUCK-CUM-FISH	5,000 m2 PONDS	24.1%	33.2%	42.3%
   	2,500 m2 PONDS	19.2%	26.8%	34.2%
   	1,500 m2 PONDS	16.0%	22.5%	28.8%

   One could raise the question of whether it would be attractive for a farmer who wants to raise pigs or ducks to combine fish-farming, with that activity. In other words, is the extra income from raising fish worth the extra investment in pond development, or should the farmer be content with raising pigs, or ducks only? In the case of ducks the question is less pertinent since in a sense ducks benefit from the fish ponds as well as the fish benefit from the presence of ducks. In the case of pigs, it is less obvious. What can be done is assume that the after tax revenues from fish sales are an extra income, to be compared with the cost of investing in fish-farm. In such a case, just putting a steady flow of K680,000 (K80,000 revenues from sales of fish at 4 T/ha yield, after 15% income tax) against a base investment of K331,639 (5,000 m² ponds) with each component lasting 20 years and assuming no salvage value of assets, the internal rate of return would be 20%. In other words even if the pig-farmer had only capital cost to incur for adding a fish-farming operation to his existing activities, the internal rate of return of this addition would only be 20% again, based on development costs figure quoted by Brunelli Construction. This exercise shows how critical is the cost of development in the decision to undertake fish-farming operations. Beyond a certain treshold which the stated costs of construction are probably approaching, the advantage of adding a fish-farming operation to an existing animal husbandry operation becomes marginal.

3. Assuming equal yields per hectare, chicken manure option will bring returns only marginally higher than direct feed option, the required quantity of chicken manure is 15% less expensive than the required quantity of feed. However, conversion ratios of chicken manure have appeared much more favorable so far in Zambia than those of feed, bringing yields of up to 8 T/ha and 12 T/ha, at CPC farms, while direct feed mix of maize bran and sunflower cake gave yields of 2.11 T/ha at best at Chilanga fish-farming station. Yet under the stated assumptions the chicken manure option can bring returns superior to 20% only if 8 T/ha yields were possible, with production ponds of 2,500 m² or 5,000 m². Such performances would be difficult to achieve on regular basis. Therefore, chicken manure option is not likely to bring attractive financial returns, with the development costs quoted by Brunelli Construction.

   In the Copperbelt area, chicken manure can be obtained at a lower price of K4.00–5.00/kg. Yet, this cost reduction, which would bring direct costs from K47,200 to K33,200 is more than offset by the fact that fresh fish prices are around K3.00/kg in that area rather than K4.00/kg, which would bring fish sales revenues from K80,000 to K60,000 (at 4 T/ha yields). Therefore there is a relative advantage in using chicken manure in the Copperbelt area but this advantage does not garantee attractive financial returns beyond a certain level of development costs.

4. With the feed requirements proposed for this analysis, the only situation where direct feed option could bring financial returns exceeding 20% would be the case of a fish-farm with 2,500 m² or 5,000 m² ponds getting yields of 8 T/ha and over. This would imply a conversion ratio of 3:1. Similar level of conversion rates have been obtained at Chilanga but with mixed species stocking, with less intensive feeding rates (69.25 kg//100 m² for 275 days) and with mineral fertilizers added; yields were then 15.3 kg/100 m² to 21.1 kg/are. Still in Chilanga when more intensive rates of feeding were used (127.4 kg/100 m², 178.65 kg/100 m²), yields could even decrease to 13.8 kg/100 m² and 16.7 kg/m². Only in highly intensive systems like the one in use at Zambia Sugar Company in Nakambala can get conversion ratios of 1.5–2:1 which can bring yields that can be compared to 8 T/ha in pond system. But those results are obtained using a different production system with hybrid species in water tanks. In pond systems, sustained yields of 8 T/ha have not been even approached and appear unlikely. Therefore, the direct feed option does not appear attractive for development of commercial fish-farming.

5. The duck-cum-fish option appears slightly more attractive than the pig-cum-fish option, under the given set of assumptions (only in one instance, for 1,500 m² ponds, assuming yields of 4 T/ha in pig-cum-fish financially as attractive as duck-cum-fish. However, the duck-cum-fish option includes the import of 4 incubators whose cost could increase significantly with a probable devaluation of the Kwacha. Pig-cum-fish however depends on variations in pig cycles. Pig slaughtering have known strong variations in the past 15 years, the level reached in 1983 (31,455 heads) being the same as the 1970 level (31,930) after reaching a peak of 55,465 in 1975. At the time of this mission, it was getting difficult to buy weaners in the Lusaka area and the supply of weaners was reported to be a problem in the Mwekera area as well. This situation calls for caution in planning for pig-cum-fish farming operations unless a farmer is breeding his own pig or can count on a secure supply of weaners. Otherwise the long term prospects for growth in pig demand appear favorable, provided that the favorable economic conditions which brought the peak demand of the mid-seventies would come back. Yet in all cases, pig- raising remains an activity particularly liable to cyclical variations.

   Duck does not have a market as important as pig but even if no study can yet confirm it for Zambia, there seems to be a good potential for growth. At the present level of production, ducks produced by Chilanga, Chipata and Mwekera are easily sold, at the same prices as chicken. So far this have been sold in urban and peri-urban areas, to higher incomes market as well as lower incomes (Chilanga market absorbs most of the production at the Chilanga station). Ducks are better processors of cellulose than chickens and over their 8 week cycle period, 43% of their feed intake consist of maize bran.

   Under the present set of assumptions, duck-cum-fish option is only marginally more attractive than pig-cum-fish, the maximum margin between internal rates of return for both options being 4.2% (8 T/ha with 5,000 m² ponds). This margin could be slightly increased if housing for ducks was made in less durable materials. Yet the saving would be less than 5% investment costs in all areas.

5.11.1 Economies of scale with 10 ha fish-farm

Quotations for construction costs of 10 ha fish-farm were also given by Brunelli Construction. The savings on cost per ha are 6.5% with 5,000 m² ponds, 11.3% with 2,500 m² ponds and 3.1% for 1,500 m² ponds. It was also assumed that the same office and furniture could do for a 10 ha fish-farm. On the running costs, it was assumed that management cost would be the same for a 10 ha farm than for a 5 ha farm. All other costs were assumed proportional to the size of the farm. The internal rates of return for 5 ha and 10 ha fish-farms for 5,000 m² ponds with direct feed option are as follows.

Although the savings on investment and running costs for a 10 ha fish-farm have a positive impact on the internal rate of return, thus difference is marginal. It would be slightly higher in the case of fish-farms with 2,500 m² production ponds. For other management options, the difference would be the same since the cost specific to each particular option are proportional.

5.11.2 Impact of learning period

In all computations made, it was assumed that the fish-farmer was achieving stable results at his first year in production. Such a situation would really be optimal and would assumed that management and labor would be well prepared right at the start of operations. Such an assumption is optimistic but since the main purpose of the overall exercice, is to compare the expected results of different construction and management options, making additional assumptions on the learning periods for all different options would have been an element of confusion. Yet, the impact of learning period is quite significant on the rate of return of a project since it happens at begining of a stream of cash-flows. For instance for a 5 ha fish-farm with 5,000 m² ponds using chicken manure option, a learning period which would materialize in terms of nil cash-flow for the first two years would reduce the internal rate of return in the following manner:

The decrease in internal rate is more important at medium and high yields assumption because in those case, a zero cash-flow situation means a level of production which is 39% and 29% respectively, of expected level of production; for the low yields assumption, zero cash-flow means a level of production of 59% of expected level of production. Thus, a more realistic analysis should make assumptions on the impact of learning period. But above all, this exercice proves the importance and the value of adequate technical back-up for reducing the impact of this adjustment period so that operation reach their cruising performance as soon as possible.

5.12 Fish-farm man development using labor intensive methods

Project management did not think that man-made fish-farm development was a viable solution for a 5 ha operation. Just for the sake of comparison, it is possible to compare the rate quoted by Brunelli Construction which is K6/m³ for earth movements to the ones obtained for one dam built in the Copperbelt area by a team of 10 men working with picks, shovels and wheel barrows. In that case, a 2,400 m³ earth dam was built in 6 months by a team of 10 men working 7 days per week for K3/day. Although, due to lack of records, all those figure are approximate and some overtime was paid, it can be deducted that the cost per m³ was between K2.3 and K3. However, keeping the same parameters, a 5 ha fish-farm with 5,000 m² ponds and thus involving 16,500 m³ of earth movement would figure some 12,550 man days is the equivalent of 100 men working four months and one week on a full time basis. This effort would only cover the earth movement and not the other components of fish-farm development. It would cost K495000 or close to K10000/ha.