Annex_C_-_Economic_Model_for_ENP_Activity.pdf

User's Guide

Tourism Sector Project Infrastructure and Management Reforms at Etosha National Park

SPREADSHEET VERSION -

AMOUNT OF MCC FUNDS $34 million total for Etosha National Park restructuring.

PROJECT DESCRIPTION

MCC funding will be used to upgrade the experience at Etosha National Park, including increasing management capacity and promotion of private sector investment.

BENEFIT STREAMS INCLUDED IN ERR

Increased tourism visits and value added to the Namibian economy, as well as increased income/receipts at Etosha National Park itself.

COSTS INCLUDED IN ERR (OTHER THAN

COSTS BOURNE BY MCC)

Recurrent/maintenance costs

ESTIMATED ERR AND TIMELINE 11% over 20 years

Namibia: Namibia: Etosha National Park Activity

WORKSHEETS IN THIS FILE

LAST UPDATED:6/5/2008

MILLENNIUM CHALLENGE CORPORATION

Value added of new tourists by origin

A brief summary of the project's key parameters and ERR calculations.

Value Added per Tourist

Activity Description One should read this sheet first, as it offers a summary of the project, a list of components, and states the economic rationale for the project.

ERR Calculation

ERR & Sensitivity Analysis A brief summary of the project's key parameters and ERR calculations.

PROJECT NAME

Activity Description

COMPONENTS

1. Performance targets supported by technical assistance to achieve management reform and promote investment consistent with newly adopted ENP management and business plans.

2. Infrastructure investments in management centers and staff housing in strategic locations

3. Provision of road building/maintenance and game translocation equipment

*Note: Minor changes were incorporated into this ERR model between the Investment Memo stage and Compact signing.

MILLENNIUM CHALLENGE CORPORATION

Namibia: Etosha National Park Activity

ECONOMIC RATIONALE

SUMMARY

The MCC investment will seek to support and accelerate institutional and infrastructure improvements to position ENP and Namibia to be more competitive in the regional ecotourism market.

Specifically, MCC Funding will support:

LAST UPDATED: 6/5/2008

This activity aims to improve the management capacity in Etosha National Park to catalyze private sector investment, increase tourism revenue and generate benefits for rural communal conservancies. In modeling the impact of MCC’s tourism investments on economic growth and incomes, we include the increased tourism visits and value added to the Namibian economy, as well as increased income/receipts at Etosha National Park itself. The Economic Rate of Return for the combined activities is approximately 10.6* percent (with an 80 percent confidence of being between 5 and 16 percent). The main areas of uncertainty reflected in this range are: (1) the degree of success in achieving improved management of the park; (2) average expenditures of new tourists to Namibia; and (3) the degree of macroeconomic spillover effects from additional tourism.

ERR & Sensitivity Analysis

NOTES:

All summary parameters set to initial values? Y Y

User Input MCC Estimate Plausible range Values used in

ERR

computation

Summary Actual costs as a percentage of estimated costs 100% 100% 80% - 120% 100%

Summary Actual benefits as a percentage of estimated benefits

100% 100% 80% -120% 100%

Specific Value added ratio1 0.45 0.45 0.29 - 0.48 0.45

Specific N$ - US$ exchange rate 7.0 7.0 5.6 - 8.4 7.0

Specific Indirect macro spillover 1.4 1.400 0.972 - 1.458 1.4

Economic rate of return (ERR): 9.8% More Info Activity Description

MCC Estimated ERR*: 10.6% User's Guide

MILLENNIUM CHALLENGE CORPORATION

1Fraction of expenditures per trip that constitute value added by participants.

Namibia: Etosha National Park Activity

LAST UPDATED: 6/5/2008

ERR and Sensitivity analysis

Parameter type

Parameter Values

Description of Key Parameters

*Note: Minor changes were incorporated into this ERR model between the Investment Memo stage and Compact signing.

Change the "User Input" cells in the table below to see the effect on the compact's Economic Rate of Return (ERR) and net benefits (see chart below). To reset all values to the default MCC estimates, click the "Reset Parameters" button. Be sure to reset all summary parameters to their original values ("MCC Estimate" values) before changing specific parameters.

-40000

-30000

-20000

-10000

10000

20000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

T h o u s a n d s o f U

S

Year

Annual Net Benefits From Etosha National Park Activity

Distribution of ERR Given Uncertainty in Key Parameters (as of 7/15/2008)

ERR & Sensitivity Analysis

6.37% 8.41% 10.46% 12.50% 14.54% 16.38%

F re qu en cy

ERR Calculation

Ratio of new tourists by origin1 Overseas: 0.66 South Afr. 0.17 Namibian: 0.17 N$ - US$ exchange rate 7.00

Expenditures per trip (US$)2 Overseas: 3,130 South Afr. 873 Namibian: 509

Value added ratio3 0.45 Overseas: 0.45 South Afr. 0.45 Namibian: 0.45 Indirect macro spillover 1.40 Direct value added per trip (US$) Overseas: 1409 South Afr. 393 Namibian: 229 Expenditures per visit to Etosha 4500

Blended direct value added per new trip, foreign tourists (US$)4 1681

Long run Project Attributable growth rate in tourism numbers, assumed5 2.0% Increase in gate receipts and concession fees due to project 6

Discounted economic value of assumed increase in gate receipts, $5 per head, initial6 615

Current visitors to Etosha7 223,755

IN USD 1000's:

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Baseline predicted tourism growth rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Etosha (foreign "holiday") visitors to Namibia without project 223,755 234,942 246,689 259,024 271,975 285,574 299,853 314,845 330,587 347,117 364,473 382,696 401,831 421,923 443,019 465,170 488,428 512,850 538,492 565,417 593,688

Etosha (foreign "holiday") visitors to Namibia with project 223,755 234,942 246,689 260,751 274,393 288,747 303,851 319,743 336,465 354,059 371,762 390,350 409,868 430,361 451,879 474,473 498,197 523,107 549,262 576,725 605,561

Gate receipt increase due to increased visitors 0 0 0 17 24 32 40 49 59 69 73 77 80 84 89 93 98 103 108 113 119

Increased gate receipts due to higher quality experience 615 627 640 653 666 679 693 706 721 735 750 765 780 796 811 828 844 861 878 Project attributable growth rate - Total Project 0.0% 0.0% 0.7% 0.9% 1.1% 1.3% 1.6% 1.8% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% (Fraction of total visits)

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 New holiday visitor trips expected - RD&M Number: 0 0 1,738 2,439 3,208 4,051 4,974 5,982 7,081 7,435 7,807 8,197 8,607 9,038 9,489 9,964 10,462 10,985 11,535 12,111 Fraction of total

TRIP BENEFITS

Direct value added 0 0 2,922 4,099 5,392 6,809 6,915 7,038 7,179 7,322 7,469 7,618 7,770 7,926 8,084 8,246 8,411 8,579 8,751 8,926

OTHER BENEFITS

Game income (RD&M) 0 0 0 28 28 773 773 922 922 922 922 922 922 1033 1867 1867 1867 1867 1867 1867 Asset Residual Value 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL BENEFITS 0 615 3566 4791 6104 8288 8416 8711 8877 9038 9202 9370 9541 9827 10840 11022 11208 11398 11592 11790

222052

COSTS Totals MCA investment - RD&M 31722 624 2497 9287 13307 5816 191 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Recurrent/maintenance costs 3% 19 94 372 538 946 952 952 952 952 952 952 952 952 952 952 952 952 952 952 952 Implementing Entity assistance 66 234 167 178 114

Management Reform and Investment Promotion 184 194 188 245 382

Management Centers and Staff Housing 99 316 791 5781 35502

Maintenance and Game Translocation Equipment 1166 1730 0 0 Total Costs 2158 5064 10805 20049 42760 1143 952 952 952 952 952 952 952 952 952 952 952 952 952 952 Benefits - Costs -2158 -4449 -7239 -15258 -36655 7145 7464 7760 7925 8086 8251 8418 8590 8875 9888 10070 10256 10446 10640 10838 TOTAL NET BENEFITS -2158 -3834 -6611 -14618 -36003 7811 8143 8452 8631 8807 8986 9168 9355 9655 10684 10882 11084 11290 11501 11716

Economic rate of retrun (ERR): 9.8% 25,306,529 39528000

0.70

2Namibia tourist exit survey 2012-2013 Survey Report 3Namibia tourist exit survey 2012-2013 Survey Report

ERR CALCULATION FOR Improved Management & Infrastrcutre at ENP

NOTES:

*All values are Namibian dollars unless otherwise specified. (US$'000, 2006)

*Scenario assumes no increased presence in park by NWR and dramatic increase in private sector operations within the park.

*80% confidence range: 5.1-16.1

MILLENNIUM CHALLENGE CORPORATION

7This number needs to be checked against recent data

*Economic benefits from Namibian tourists are excluded to focus on the attractiveness to foreigners

Namibia: Etosha National Park Activity

1Namibia tourist exit survey 2012-2013 Survey Report

LAST UPDATED:685/2013

4Current gate receipts. Source: Etosha business plan 5 2 percent considered reasonable increase by Turpie et al. Feasibility Study from private management of National Protected Area System 6This assumes an increase in admission price to foreigners DUE TO THE PROJECT. Krug paper shows willingness to pay for park entrance of 10 USD under government management, and 15 for private (improved) management. Increase of 6 dollars in real terms. ENP is already planning to increase gate receipts. I assume an additional 5 dollars per visitor in revenues due to project.

Value Added per Tourist

Overseas: Southern African: Namibian:

Ratio of new tourists by origin 0.45 0.40 0.15

N$ - US$ exchange rate 6.87 - - Expenditures per trip per person (US$) 3,130 873 509 Value added ratio 0.48 0.48 0.48 0.48 Direct value added per trip (US$) 1502 419 244 Income multiplier 1.00 1.00 1.00 2.21 Total value added per trip (US$) 1502 419 540 Consumer surplus per trip (US$) 0 0 143 Blended direct value added per new trip

(US$) 884.85216 - -

Blended total value added per new trip (US$) 928.90061 - - Blended total economic value per new trip

(US$) 928.90061 - -

Namibia: Etosha National Park Activity

LAST UPDATED:8/5/2013

MILLENNIUM CHALLENGE CORPORATION