Assessing economic sustainability and resilience of tomato farming ventures in Addis Ababa: A project-based evaluation

Abstract

This study assessed the economic sustainability and contribution of tomato farming ventures to Addis Ababa's resilience. Using a project-based evaluation method, the profitability of tomato production was analyzed with and without the cost of water. The results showed that including the cost of water, the venture had a negative net present value (NPV) of 30100 USD/hectare/annum, an internal rate of return (IRR) of 0.2%, a payback period (PBP) of over ten years, and a cost-benefit ratio (CBR) of 0.83. However, without the cost of water, the venture showed a subtle profit, with an NPV of 15100 USD/hectare/annum, an IRR of 21%, a PBP of 2.9 years, and a CBR of 1.02. Sensitivity analysis revealed that an increase in sales price and yield positively affected profitability, while an increase in operating cost had a negative effect. The study concluded that when water costs are considered, the tomato venture in Addis Ababa is not profitable or sustainable, and does not contribute to the city's resilience. However, without water cost accounting, the venture's contribution to the city's resilience is minimal. The study recommends policy interventions to enhance farmers' access to the market, establish agro-industries, and improve their bargaining power.