Why invest in minor projects in sub-Saharan Africa? An exploration of the scale economy and diseconomy of irrigation projects

Abstract

It is well-known that major irrigation projects have a strong scale economy, handicapping irrigation development in sub-Saharan Africa (SSA) because of the difficulty in formulating large-scale projects. Using project-level investment cost and performance data of major and minor irrigation projects, this paper examines the causes of the economy of scale phenomenon. We find that strong scale economy exists not only for major but also for minor projects, i.e., small- and micro-scale, projects. This is largely because of the existence of indivisible overhead costs such as high-opportunity-cost human resources for planning, designing and engineering management and supervision. We also find that large differences between major and minor projects in the absolute level of overhead as well as construction costs creates a strong scale diseconomy and results in better performance of minor projects. The advantage of minor projects holds even when their higher risk associated with the water source is taken into consideration. We argue that there is an urgent need to promote irrigation development in SSA through developing minor projects, and to reduce the heavy burden of overhead costs by developing the capacity of human resources at the national, local and farmer levels in the fields of irrigation engineering, irrigation agronomy, institutional development, and micro water management technologies.