Dairy goats appear to be the most suitable milk producing animal species for the arid parts of the Eastern Cape Province. Dairy goats fetch high net returns to a small-scale farmer. A study was carried out to evaluate the long-term economic viability of investments in dairy goats, in the Eastern Cape Province of South Africa. Results of the study show that commercial production of dairy goats, together with a milk processing plant in the region, would be profitable and would have benefits from both economic and social points of view as well as for the environment. With a discount rate of 15%, the Net Present Worth (NPW), Benefit/Cost ratio (B/C) and Internal Rate of Return (IRR) were found to be R4.3 million, 1.44 and 54% respectively. Further, a sensitivity analysis to changes in benefits and costs of inputs was conducted. This found the above proposal to be viable, even when benefits are reduced by 25%. The project proposal was still viable when cost of inputs was inflated by 25%. In both cases, the Benefit/Cost ratio is greater than 1 and IRR is greater than the current market rate of interest. However, the combined effect of reducing the benefit by 25% and inflating costs by 25%, would result in negative NPW. Results from a survey carried out further show the possibility and viability of producing satisfactory levels of milk from dairy goats in the Eastern Cape.