A Cost Benefit Analysis of Two Alternative Traffic Lights Systems for the Colourful City of Zamzam

ABSTRACT: Zamzam Infrastructure Bank has been approached by the country’s third largest city to finance the upgrading and expansion of its traffic lights system. Since the project is social in nature, the Bank intends to justify the borrowing on the basis of Colourful City’s ability to service the loan from its consolidated cash flows. A pre-requisite however, is the need to confirm the project’s socio-economic viability through economic cost benefit analysis. The Bank assessed and is satisfied with council’s ability to pay the loan. This thesis examines the merits of undertaking project on the basis of its economic and social impacts as well as choosing a cost effective option of procuring it. The project can be procured through Solar Powered or Alternative Current (AC) Powered traffic lights both with twelve hour battery backup. In undertaking cost benefit analysis reliance was placed on, amongst other information sources, traffic studies, traffic counts, accident statistics, power outage statistics and cloud cover statistics obtained from relevant institutions as well as case studies on BLEG Electricity Project and Kampala Hilton Hotel Project. The economic analysis showed that the AC powered option is more cost effective as it has a higher Economic Net Present Value of $5.1 million when compared to $4.7 million for solar power option. All road users, heavy vehicles users, light vehicles users and Government benefit from project in that ranking order. Risk analysis shows that project is not sensitive to power cuts, cloud cover and battery life. Although sensitive to annual growth in traffic and minimum wage rate, the risk parameters do not pose a significant threat to the economic viability of the project. Keywords: Colourful city, traffic lights project, stakeholders, risks. ……………………………………………………………………………………………………………………………………………………………………………………………………………………