A sub-sector approach to cost-benefit analysis small-scale sisal processing in Tanzania

The paper proposes a way to adapt the standard cost-benefit analysis (CBA) technique to make it more suitable for analysing the feasibility of projects in new sub-sectors, when project success hinges on simultaneous investments in complementary activities to be undertaken by different private investors. New elements in the method include an estimation of expected profitability for a prospective new sub-sector as a whole, and an assessment of the sub-sector’s technological capacity environment. The method could be used as a tool for project planners to gain insight into the likely feasibility of stimulating initiatives aimed at promoting viable private-sector investment in new economic areas. It should also help them to direct their resources to those key areas within new sub-sectors where central intervention and central coordination is most needed to overcome critical constraints on innovation by private investors. The method is illustrated with an example of a small-scale sisal processing project in Tanzania.