Feasibility study of oxygen manufacturing in Uganda

Abstract

Regardless of being an essential medicine, oxygen is still inadequate and unreliable in most healthcare facilities across Uganda. This is attributed to under-investment in oxygen manufacturing plants. Currently there are about 3000 public healthcare facilities which are being served by only 17 public oxygen plants.

As a result of being inadequate, oxygen has been limited to a few areas in the hospital like operating theatres and intensive care units. Therefore, many illnesses like pneumonia which are treatable with oxygen therapy have continued to claim the lives of patients. Moreso, accessing oxygen therapy has remained costly for most patients. This is as result of healthcare facilities incurring high costs and facing logistical challenges to access the oxygen.

Therefore, it is necessary to increase investment in oxygen manufacturing to meet current and future demand. As a way of encouraging investors, this study assessed the practicality and profitability of setting up an oxygen manufacturing plant. An estimation of past and present oxygen demand was done to enable forecasting of future demand. Available oxygen supply was determined by establishing the production capacity of oxygen manufacturers. With an understanding of supply and demand, the existing market opportunity was identified and a suitable oxygen manufacturing plant was sized. Investment requirements and costs of setting up the proposed plant were detailed. After this, projected revenue from sales was established for subsequent years. Finally, business appraisal computations like net present value, internal rate of return and profitability index were utilised ascertain whether the investment is feasible.

Analysis showed that to meet projected oxygen demand in 2030, further investment in at least two oxygen manufacturing plants is required. Each of the proposed plants has a production capacity of 60m3/hr and requires an initial capital investment of UGX 2,527,521,800. The investment generates a positive net present value at year 13, has a profitability index greater than one and an internal rate of return greater than the lending rate of 19%. This indeed shows that the proposed investment is feasible.