The Kavango East Grant: Ice, Boxes or Bursaries
Kavango East, Namibia. A village trust has won a one-off N$1.2 million development grant. It must decide at its annual meeting how to use the money, and any unspent balance is returned to the donor. Three proposals are on the table. Proposal A is a solar-powered ice plant and cold room costing N$1.15 million, with N$90,000 a year in maintenance and one trained operator. It would cut post-harvest fish losses from about 30% to 5% for 60 fishing households. Proposal B is 12 insulated transport boxes plus three days of handling training, costing N$420,000, with ice costs of about N$40,000 a year; it would cut losses to roughly 15%. Proposal C is school bursaries for eight learners at N$150,000 each. The trust can fund at most two proposals, but the ice plant alone uses almost the whole grant. Fish catches are seasonal: about 900 kg a week for five months and very little for the rest of the year. The trust has no borrowing option and must report to the donor within one month.
1. Explain the opportunity cost of choosing Proposal A, and why the trust's choice can be represented by a production possibility frontier rather than by unlimited combinations.
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Opportunity cost is the value of the next best alternative forgone, not the sum of every alternative. If the trust chooses A, it gives up B, because B is the best alternative use of the grant that would still deliver a measurable reduction in fish losses. C is also sacrificed, but it is not the opportunity cost in the strict definition because B ranks higher. The calculation must also note that A leaves only N$50,000, so B cannot be funded as well. The real sacrifice is therefore B's benefits plus whatever the remaining N$50,000 could have supported.
The choice is a PPC problem because the grant, trained labour and management time are fixed. A frontier can be drawn with current household income on one axis and future skilled labour on the other. Points on the curve are efficient combinations; points inside are inefficient, such as leaving money unspent, which must be returned. The curve is likely concave because the grant is not equally productive in both uses: ice-plant money produces quick income but little education, while bursaries produce delayed income. Choosing A moves the trust along the frontier, not beyond it. The N$90,000 annual running cost means next year's frontier could shift inward unless the plant generates a surplus, a dynamic cost that a simple static PPC does not show.
2. Recommend one option or combination, using at least two criteria and acknowledging one risk. Use the data to support your judgement.
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Using an assumed fish price of N$30/kg, the seasonal catch is about 18,000 kg a year (900 kg × 20 weeks). Proposal A saves 25 percentage points of that, or 4,500 kg, worth about N$135,000, less N$90,000 maintenance, leaving N$45,000 net. Proposal B saves 15 percentage points, or 2,700 kg, worth about N$81,000, less N$40,000 ice costs, leaving N$41,000 net. On cost per household, A costs about N$19,200 per household and B about N$7,000, so B is much cheaper per household reached.
Two criteria point towards B plus bursaries. First, cost-effectiveness and risk: B reaches all 60 households, can be repeated, and does not depend on one operator or on diesel. Second, equity and sustainability: B plus four bursaries costs N$1.02 million, leaves N$180,000 for ice and repairs, and spreads benefits between current income and future skills. The risk is that boxes are damaged or sold, so the trust should register them and require a small maintenance contribution.
A becomes the better choice only if the fish price is much higher, if losses are closer to 30% for most of the year, or if the cold room lets fishers sell in the dry season at premium prices. The recommendation is therefore conditional, not automatic.
3. The donor says the trust must show that the project is sustainable. Explain what sustainability would require in this case and how it changes the choice.
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Sustainability means the project can continue after the grant without new external money. For A, the N$90,000 annual maintenance must be covered from fish sales, and the operator must be paid and retained. With a net benefit of only N$45,000 at N$30/kg, A does not cover its own running costs unless catches, prices or loss reduction are higher. The trust would need a sinking fund or a user fee, and the seasonal catch makes monthly revenue uneven.
For B, the N$40,000 ice cost is lower and households can pay a small fee per box. However, the boxes have a limited life and may need replacement, so a replacement fund is still required. Bursaries are sustainable in a different sense: once learners qualify, the benefit continues without funding, but the trust cannot control whether graduates stay in the village.
Sustainability therefore favours B plus a reserve fund, or A only with a written maintenance plan and a price agreement with buyers. It also means the trust should not spend the whole grant on capital and leave nothing for operating costs. The judgement is that sustainability is not just an environmental idea here; it is a cash-flow test over several seasons.