MEMO SCILaid

From: Francois Damba

Date: 09 May 2024

RE: UNIT 6 - TASK 7 – IMPORT PARITY PRICE ANALYSIS AND HYBRID RESPONSES

We just received the attached price information from the Assessment Team and Gareth Rau from the Head
Office in Homeland sent the attached international price information. Gareth said we should do an ‘import
parity price analysis’, but I’ve never heard of that before.

1. Can you explain what an import parity price is and why we should know what it is?

2. Can you please do a comparison, taking into account any delivery costs?

3. For each commodity in the food basket, is it more cost-effective to purchase internationally, wholesale
or locally. By how much?

David Tatlock said that if the options are effectively cost neutral (less than 5% difference), then he thinks
SCILaid should probably use CTP. But if there are big savings to consider, then he wants to know about it! He
wants to be prepared to answer any donor questions about SCILaids' consideration of value-for-money.

4. What would the total costs be for the entire food basket, if it were purchased internationally, locally,
or using CTP?

5. Is there any potential benefit from using different approaches for each commodity (for example,
choosing international for one or two items while using CTP for the balance)?

Note that all calculations should be completed in USD.

Note that the Cash Transfer Programme prices are set against local market cost when purchased by the
beneficiary.

By the way, I believe Jake Mulryan did similar analyses previously, but for Deltaland. You may want to check
his handover notes for tips.

Regards Francois

To answer this task, you will find the following learning material section helpful:

6.1. Assessments, Analyses, & Building to Modality Decision

6.3. The Procurement Options Analysis
FROM: Romana Abari

SUBJECT: Jake Mulryan’s Hand-Over Notes

 MEMO SCILaid

I remembered after I sent you the previous memo with your assignment that Jake Mulryan, the former
Logistics Officer, completed an import parity price analysis for Deltaland during his time with SCILaid. I called
Francois Damba, his former boss, and he confirmed that. Francois also said Jake had included a few notes on
doing an import parity price analysis in his hand-over notes. Francois was kind enough to forward the relevant
parts…

MINIMUM EXPENDITURE BASKETS

A ‘minimum expenditure basket’ (MEB) is defined as the cost of what a household needs to meet basic needs.
The programs I’ve worked with have supported food, so the minimum expenditure basket was the value of
the minimum food requirements according to their local market cost. Thus, the MEB is useful for import
parity price analysis as an effective representation of the retail market cost when purchased by the
beneficiary.

CALCULATING IMPORT PARITY PRICES

Calculating import parity prices doesn’t have to be hard. Below is the process I use. Also, remember, if we
purchase items either whole sale or internationally, we will have to re-pack them before they can be
distributed to households.

1. Using the minimum expenditure basket, figure out how many metric tonnes of each commodity are
distributed per month
2. Calculate the total retail value of the commodities distributed each month (multiply the number of
beneficiaries by the retail cost)
3. Figure out the estimated retail price per metric tonne – divide the total value by the total tonnes
distributed
4. Calculate the total cost per metric tonne for each commodity to the organization if purchasing from
the wholesaler (price + expenses)
5. Multiply the total cost for each commodity if using wholesalers (multiply the price per metric tonne
by volume)
6. Calculate the total cost per metric tonne for each commodity to the organization if purchasing from
international suppliers (price + expenses)
7. Multiply the total cost for each commodity if using international suppliers
8. Compare the total costs per commodity between the various options - what are the price
differences?

REPACKAGING
Items purchased wholesale or internationally by SCILaid for subsequent distribution often come in bulk
formats. These items need to be re-packed into appropriate house-hold sized packages prior to distribution.
In Deltaland, re-packing costs are approximate $100/MT, which is competitive regionally.

TRANSPORT
 MEMO SCILaid
If the commodities are purchased from a wholesaler in the capitol Iferdez, transport costs from Iferdez to the
Segrouane axis route are approximately $30/MT

IMPORT
If the commodities are purchased internationally and imported, SCILaid would bring them through Dakoua
port. Port costs are $45/MT (includes: customs inspection and clearance, port surcharges, handling,
stevedoring, fumigation – if required, terminal handling)
Transport costs from Dakoua port to the Segrouane axis route are approximately $55/MT