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Copenhagen Consensus Center

Best buys for Africa: SME training on agro-processing equipment fabrication from scrap metal

Fast-track Analysis

The industrial base of African countries is largely weak and fraught with a large number of micro and small enterprises with low productivity and weak growth prospects. This brief discusses the benefit cost ratio of training and provision of credit to one micro or small enterprise in scrap and metal fabricators as an intervention to increase the capacity and productivity base as a way of further boosting their long term growth and survival prospects. The estimates show that the intervention yields a benefit cost ratio (BCR) of 2.04 over a 2 year period using Ghana as a case. This is comprised of a cost estimate of USD 841 as cost of competency based certificate training in electrical/automotive engineering, a USD 50.5 sensitization cost and the opportunity cost to the participants (USD 641.89). It also has a USD 400 credit, with an operation cost of USD 140, a financing cost of USD 16 and default cost of USD 2.8. The benefits from this intervention amount to USD 2612 arising mainly from a 10% increase in sales and returns in credit (3%). There is the potential to scale-up this intervention by increasing the coverage of training and credit access. The potential for scaling across Africa is also possible albeit with some variation in terms of BCR-Kenya (BCR of 2.11) and Malawi (BCR of 1.48). Overall the benefits are substantially higher and the intervention costs are spread thin when one estimates with a 5 year horizon.