SFE Commertial Agriculture

Project proposal for commercial agricultural development
Commercial Agriculture in Gambela national regional state
FOR
INTEGRATED ARGICULTURAL FARMING PROJECT proposal
BY
MERWA Agricultural Development Plc.
FOR PRODUCTION OF SESAME, MAIZE AND OTHER INDUSTRIAL

CROPS
SUBMITTED TO: G/P/N/R/S Investment Agency
Location-
Project Promoter: MERWA agricultural development Plc.
Consultant- Tewelde Berhe consulting service (+251-0925949565)
Gambela, Ethiopia,
May, 2020
Contents
1. Executive summery.................................................................................................................4
2. Introduction..............................................................................................................................6
2.1. BACKGROUND..............................................................................................................6
2.2. Brief description of the company......................................................................................9
2.3. Objective of the project...................................................................................................10
2.4. Current situation of the project.......................................................................................11
2.5. Promoter profile and credit history.................................................................................12
2.6. Purpose and amount of loan...............................................................................................13
3. Market analysis......................................................................................................................14
3.1. General analysis of the commercial cereals marketing in Ethiopia................................14
3.2. Competitions...................................................................................................................14
3.3. Demand analysis.............................................................................................................15
3.4. Supply analysis...............................................................................................................16
3.5. Demand-supply analysis gap..........................................................................................17
3.6. Marketing strategy..........................................................................................................18
3.6.1. Product Strategies....................................................................................................19
3.6.2. Pricing Strategies.....................................................................................................19
3.6.3. Distribution Strategies.............................................................................................19
3.6.4. Promotion Strategies:-.............................................................................................20
3.7. SWOT analysis...............................................................................................................20
3.7.1. STRENGTH............................................................................................................20
3.7.2. WEAKNESSES.......................................................................................................21
3.7.3. OPPORTUNITIES..................................................................................................21
3.7.4. OUR THREATS......................................................................................................22
4. Technical analysis..................................................................................................................23
4.1. Location..........................................................................................................................23
4.1.1. Biophysical features.................................................................................................23
4.1.2. Demographic & socio –economy............................................................................23
4.1.3. The climate of the region.........................................................................................24
4.1.4. Natural resource base...............................................................................................24
4.1.5. Livelihood system of the region (zone)...................................................................25
4.1.6. Pattern of local climate (temperature and precipitation).........................................27
4.1.7. LAND AND WET LAND DEGRADATION.........................................................27
4.1.8. ECONOMICS OF THE REGION...........................................................................28
4.1.9. AGRICULTURE SECTORS...................................................................................28
4.2. Civil work and construction............................................................................................30
4.2.1. Live fence and garden..............................................................................................30
4.2.2. Civil work................................................................................................................30
4.2.3. Infrastructures..........................................................................................................30
4.2.4. Areas for other activities..........................................................................................30
4.3. Technology, machinery, equipment’s and tools.............................................................31
4.4. Production raw materials, utility, machineries and equipment demand.........................32
4.4.1. Production raw material...........................................................................................32
4.4.2. Utility.......................................................................................................................33
4.5. Project capacity, program, justification and quality control...........................................34
MERWA Project proposal for commercial agricultural development
4.6. Product quality................................................................................................................36

4.7. Environmental and Social impact assessment................................................................37
4.8. RISK ANALYSIS...........................................................................................................38
4.8.1. major risks...............................................................................................................38
4.8.2. STRATEGIES TO MITIGATE OUR RISKS.........................................................38
5. Project management, organization and man power requirement...................................39
5.1. Man power requirement..................................................................................................39
5.2. Management structures...................................................................................................40
5.3. Training and capacity development............................................................................43
6. Annual sales plan...................................................................................................................44
7. Financial plan.........................................................................................................................45
7.1. Expected costs and schedules.........................................................................................45
7.1.1. Expected assumptions and costs..................................................................................45
7.1.2. Financial schedule...................................................................................................46
7.2. TOTAL INITIAL INVESTMENT COST......................................................................46
7.3. FINANCIAL and ECONOMIC EVALUATION...........................................................47
6.3.1. Financial analysis.....................................................................................................47
6.3.2. Economic and social benefits of the project............................................................50
7. Environmental and social Impact assessment (EIA).............................................................52
7.1. General:...........................................................................................................................52
7.2. Objective of the Environmental & Social Impact Assessment Study.............................52
7.3. Approaches and Methodology........................................................................................53
7.4. Environmental Scoping...................................................................................................53
7.5. Limits of the Study Area.................................................................................................53
7.6. Relevant Policies, Legislative and Institutional Framework..........................................54
7.6.1. Environmental Policies and Strategies....................................................................54
7.7. Environmental impacts and mitigation measures of the project.....................................55
7.7.1. Positive impacts:......................................................................................................55
7.7.2. Negative impacts:....................................................................................................55
PART TEN: Annexes....................................................................................................................57
Project owner:- MERWA agriculture development Plc. Page 3

1. Executive summery
The agricultural sector greatly influences economic performance in Ethiopia. According to the
report of the ministry of agriculture (2010), About 11.7 million smallholder households account
for approximately 95 per cent of agricultural GDP and 85 per cent of employment. With a total
area of about 1.13 million km2 and about 51.3 million hectares of arable land, Only about 11.7
million hectares of land are currently being cultivated. Nearly 55 per cent of all smallholder
farmers operate on one hectare or less. The agricultural sector accounts for roughly 43 per cent
of GDP, and 90 per cent of exports. Cereals dominate Ethiopian agriculture, accounting for about
70 per cent of agricultural GDP.
Ethiopian government have welcomed large scale commercial farming considering an
opportunity for transforming agricultural sector, which hitherto has been dubbed as ‘backward,’
subsistence‐based smallholder farming, particularly through technology transfers, the expansion
of local infrastructure, rural employment generation and towards achieving national food security
(Salami et al., 2010, von Braun and Meinzen‐Dick 2009). Accordingly, these earmarked lands
for investment is found mainly in lowland areas of Benishangul‐Gumuz, Gambella, Oromia and
SNNP administrative regional states. These regions have in particular become the main
destinations for many of the investors for vast commercial farming.
But, the major constraints impeding development commercial agriculture according to an
assessment of Operation and performance of commercial farmers in Ethiopia conducted by
UNDP (2013) are:
 In general, very few investors have the knowledge, skill and capacity to establish
commercial farms. In many instances, the required staff composition is sufficient to
obtain the license – better qualified and therefore higher paid staff are then immediately
fired to reduce expenditures. It is reported that most of Ethiopia’s commercial farms do
not have qualified farm managers and technicians for operating and maintaining farm
machinery; as a result, it is common to see farm machinery out of operation shortly after
farming operations are established.
 Most of Ethiopia’s commercial farms still operate in a traditional way, limiting their
expected contributions to (i) productivity, (ii) linking smallholder farmers with
technologies and markets, and (iii) creation of job opportunities for rural youth;

 The existence of opportunistic investors, who snap up the available finance, without
putting the land allocated to effective us, has crowded out genuine investors. This makes
access to land and finance more difficult.
This commercial agriculture project is established in Gambela - region Abobo woreda on an area
of 500 ha .
The General objective of the project is developing a large scale commercial agriculture project
for supplying food and raw materials to Ethiopian people and industries respectively. Detailed
As directly and indirectly earning foreign exchanges for our country, create a higher return on
investment for the business owner, provision of products for the market, Create job opportunity
for citizens, To provide high quality service at reasonable price .
The owner of this project is MERWA agricultural development Plc. It is an Ethiopian company
and all the collaborator of the plc. are resident in Ethiopia living in GAMBELLA,GAMBELA
TOWN.
The project will create employment opportunity for about 79 permanent and 1256 contract
employers.
The total initial investment cost of the project including working capital is estimated at about
Birr 15,000,000.00 ( fifty million birr), out of which birr 4,500,000.00 ( four million five
hundred thousand birr) or 30.30 % of the total cost is the equity of the promoter and birr
10,500,000,500 (ten million five hundred thousand birr) or 69.70 % of the total cost is loan from
bank.
The financial result indicates that the project will generate profit beginning from the third year of
operation. Moreover, The NPV of this project at the specified discount rate is birr 5,658,607.00
and birr 7,049,202.00 at an operation year of 5 and 10 respectively and At the current discount
rate 12.5 %, the benefits/cost ratio of the project is 1.12 at a period of five year and 1.18 at a
period of 10 years. Therefore, the project is profitable as it has positive NPV and B/C ratio is
greater than one. The financial internal rate of return (FIRR) of the project after tax is 34.15 %,
which is much higher than the discounting rate of 12.5 % used in the analysis. The project is
expected to do more lucrative. Generally the project is technically feasible, economically and
commercially viable as well as socially and economically acceptable.

2. Introduction
2.1. BACKGROUND
The agricultural sector greatly influences economic performance in Ethiopia. According to the
report of the ministry of agriculture (2010), About 11.7 million smallholder households account
for approximately 95 per cent of agricultural GDP and 85 per cent of employment. About 25 per
cent of rural households earn some income from non-farm enterprises, but less than three per
cent rely exclusively on income from such enterprises. With a total area of about 1.13 million
km2 and about 51.3 million hectares of arable land, Ethiopia has tremendous potential for
agricultural development. Only about 11.7 million hectares of land, however, are currently being
cultivated; just over 20 per cent of the total arable area. Nearly 55 per cent of all smallholder
farmers operate on one hectare or less. The agricultural sector accounts for roughly 43 per cent
of GDP, and 90 per cent of exports. Cereals dominate Ethiopian agriculture, accounting for about
70 per cent of agricultural GDP. Livestock production accounts for about 32 per cent of
agricultural GDP and draught animal power is critical for all farming systems. Over the past
decade, cereal production has more than doubled to nearly 15 million tons, as a result of
horizontal expansion and increased yields. Nevertheless, food security remains a critical issue for
many households, and for the country as a whole. Moreover, expansion of the cropped area to
more marginal lands has led to severe land degradation in some areas.
Ethiopian government have welcomed large scale commercial farming considering an
opportunity for transforming agricultural sector, which hitherto has been dubbed as ‘backward,’
subsistence‐based smallholder farming, particularly through technology transfers, the expansion
of local infrastructure, rural employment generation and towards achieving national food security
(Salami et al., 2010, von Braun and Meinzen‐Dick 2009). Hence, the government have been
substantial in terms of promoting investor‐friendly land market environments such as very small
land rents, tax waivers, limited restrictions on production and exports, and so on (Moreda, 2013).
Thus, Ethiopia is recently transferring agricultural land to domestic and foreign corporate
investors. Ethiopia owns about 51.3 million hectares of arable land, out of which only about 11.7
million hectares are currently being utilized and this agricultural land potential is assumed to
exist in the peripheral lowland areas (MoARD 2010). Accordingly, these earmarked lands for
investment is found mainly in lowland areas of Benishangul‐Gumuz, Gambella, Oromia and

SNNP administrative regional states. These regions have in particular become the main
destinations for many of the investors for vast commercial farming.
In contrast to previous government initiatives, Ethiopia’s Growth and Transformation Plan II
(GTP II: 2015–2020) clearly promotes the commercialisation of the agricultural sector. In so
doing, policymakers have officially recognised the potential for commercial farming to increase
agricultural production and create rural employment opportunities. The initiative also aims to
promote the development of the sector through close engagement with smallholder farmers,
particularly through contract farming and out grower schemes. Government support for
commercial farming in Ethiopia therefore displays three primary objectives: (i) to boost
productivity, (ii) to link smallholder farmers with new technologies and markets, and (iii) to
create of job opportunities for rural youth.
Various regulatory and investment-oriented policy measures, in the form of both fiscal (tax
holidays, tax exemption, etc.) and non-fiscal (land allocation, one-stop-shop services, etc.)
support have been put in place, in order to bolster the government’s capacity to support to
medium and large commercial farms. This blog presents the deliberations of a workshop that was
held in Addis Ababa on 4 August 2018. The workshop was convened to discuss the status of
existing policies promoting commercial farming in particular (including, though not limited to,
the GTP II Plan), and agricultural business investment in Ethiopia in general.
But, the major constraints impeding development commercial agriculture according to an
assessment of Operation and performance of commercial farmers in Ethiopia conducted by
UNDP (2013) are.
Public support-related issues:
 A distinct lack of coordination among diverse actors, though primarily among the federal
and regional governments, financial institutions, investment promotion agencies, and
implementing agencies. In this regard, the then Ministry of Agriculture and Natural
Resources’ aim to meet every three months with investors – to discuss major challenges
facing investors – was commendable, though was ultimately not sustained.
 A lack of monitoring and evaluation mechanisms following the provision of investment
licenses. This means there is no database compiling agricultural investments in the
country, which creates an information gap in the status of licensed investments and their
implementation.

 Considerable bureaucracy in the provision of investment incentives. In general, approved

investment incentives are often improperly implemented. For instance, processing tax-
free imports of machinery may take more than a year, which discourages investors to
begin operations.
 Limited availability of required infrastructure – mainly road and electricity – which are
often promised during the licensing process. This hinders the operationalization of
investments.
 The existence of diverse public institutions engaged in promoting agricultural investment
and frequent reorganisation, both at regional and federal level. Some of these institutions
include: Agricultural Investment Promotion Agency, Horticulture Sector Investment
Agency, Land Administration Authority, Ethiopian Investment Agency, Export
Promotion Agency, etc, which may or may not have parallel institutions at regional level.
 Lack of a clear national agricultural trade policy. The country is yet to develop a clear
trade policy that will serve as a guiding framework for trade-related issues that are
pertinent to agricultural investment.
 Land policy challenges, primarily related to the lease period, which can be from 25 to 40
years. In addition, lack of information about the quality of land and its use potential
during licensing is a serious disincentive to investors.
Investor-related issues
 In general, very few investors have the knowledge, skill and capacity to establish
commercial farms. In many instances, the required staff composition is sufficient to
obtain the license – better qualified and therefore higher paid staff are then immediately
fired to reduce expenditures. It is reported that most of Ethiopia’s commercial farms do
not have qualified farm managers and technicians for operating and maintaining farm
machinery; as a result, it is common to see farm machinery out of operation shortly after
farming operations are established.
 Most of Ethiopia’s commercial farms still operate in a traditional way, limiting their
expected contributions to (i) productivity, (ii) linking smallholder farmers with
technologies and markets, and (iii) creation of job opportunities for rural youth;

 The existence of opportunistic investors, who snap up the available finance, without
putting the land allocated to effective us, has crowded out genuine investors. This makes
access to land and finance more difficult.
Despite numerous challenges, trends in agricultural investment and commercial farming in
Ethiopia shows steady growth. Recent policies also indicate that the role of commercial farming
in transforming the agriculture sector is well-recognised by those with the influence to enact
change, especially in relation to the promotion of agro-industries.
Accordingly the promoter of this project plans has established a large scale commercial
agriculture development and agro processing industries having projects of improved agricultural
development and processing in different parts of the region.
PROJECT PROFILE
PROJECT TYPE: Commercial agricultural development
PROJECT OWNER: Merwa agricultural development Plc.
LOCATION: Abobo woreda
ORGANIZATION TYPE: Plc.
TOTAL COST: 15,000,000.00 ET birr
SOURCE OF FUND: OWNER’S EQUITY 30 %;
LOAN FROM BANK 70 %
PROJECT AREA: 500 ha
PROJECT STATUS: Expansion
PROJECT PERIOD: 20 YEARS
Owner of the project: Name – MERWA PLC
Address – GAMBELLA
Telephone - 0917487716
2.2. Brief description of the company
The project will lie on 500 ha of land located at Abobo – woreda of Gambella national regional
state. The project is a commercial agricultural development for the production of different
commercial products of cotton, rice, maize, sorghum and other products with a capacity of
producing 2000 tons of products in an improved way of irrigation and agronomic technologies to
become a model and demonstration site for the nearby farmers and producers.

The project will create employment opportunity for about 79 permanent and 1256 temporary
persons.
Birr 15,000,000.00 (fifty million birr), out of which birr 4,500,000.00 ( four million five
hundred thousand birr) or 30.30 % of the total cost is the equity of the promoter and birr
10,500,000,500 (ten million five hundred thousand birr) or 69.70 % of the total cost is loan from
bank. Objective of the project
The mission, vision and objectives are basic elements of a company that can draw the future
dreams and development by describing where to go in the future, what roles can play in the
market and society and purposes of existence of the company. Accordingly the vision, mission
and objective of this MERWA agricultural development Plc. commercial agriculture
development project is explained below clearly.
Vision
To see that MERWA agricultural development Plc .commercial agriculture development project
is the customer’s first choice in fruit, edible crops, vegetable production system and processing
in east Africa through the provision of customer oriented crops, fruit and vegetable productions
with reasonable price and reliable supply so that earn sustainable profit and maintain good will.
Mission
To provide quality products to customers with fair price, create job opportunity for citizens,
generate income to the owner and income tax to the government, and participate on social
wellbeing and related affairs of the community.
Objective
The General objective of the project is establishing a commercial agriculture development
project with improved service provision system for directly and indirectly earning foreign
exchanges for our country.
Short term objective
o Foreign currency earning
o As a business oriented entity, create a higher return on investment for the business owner
o Provision of quality production for maintaining the market.
o Create job opportunity for citizens

o To provide high quality service at reasonable price

o To undertake other relate activities.
Long term objectives
o To assure alternative product at reasonable price
o To develop good will and assure sustainable market
2.3. Current situation of the project

From the time that the Gambela national regional state have provides the large scale
commercial farming considering an opportunity for transforming agricultural sector through
technology transfers, the expansion of local infrastructure, rural employment generation and
towards achieving national food security, our have been engaged early in the 2019 by the
agricultural land for the production of different types of crops. The detailed production area,
yield and employment opportunity created every year are described IN ANNEX.
2.4. Promoter profile and credit history
The effectiveness and efficiency of any project is mainly affected by the effectiveness, academic
back ground, experience, commitment, knowledge and intellectual analyzing capability of the
promoter and managers of the Projects. In either case, project will perform best if the project
promoter passes through various business activities or assign competent employed manger to run
the business in an effective and efficient manner.
The promoter for this proposed project is Merwa agricultural development Plc. The owner has
passed owning and managing through so many business and investment projects including
following main business areas:
 Agricultural developments
 Grains and oilseeds trading;
 Trade agent;
The plcs has a deep experience in business in the last ten years in different fields and one of
those who endeavors to contribute in the development of this project. Using this experience and
entrepreneurial capacity, now the owner is planning to invest in large scale commercial
agriculture development. This commitment of investment will have vital role to the region as a
whole and to the city in specific regarding solving the existence limitation on providing

technology transferring, agricultural transforming, job opportunity and foreign exchange

currency through export and import substitutions on other supports.
The promoter have does not have any credit history from development bank of Ethiopia.
2.6. Purpose and amount of loan
The project is applying for financial assistance to the amount of birr 80,917,920.00 in order to
execute the operations of the business. The detailed plan of the loan envisaged is described
below.
s/n Items Total cost Source of finance
Bank loan Equity
1 Business premises
- Construction or purchase of building 10,270,000.00 7189000 3,081,000.00
- Land lease 50000 50,000.00
- Machinery, equipment, Furniture’s, 38,645,240.00 27051668 11,593,572.00
2 Working capitals
- Purchase of electronics material 9,508,000.00 6,655,600.00 2,852,400.00
- Custom and duty payment 1,360,000.00 952,000.00 408,000.00
- Shipping, transportation, loading
1,440,000.00 1,008,000.00 432,000.00
unloading
3 OPERATIONAL EXPENSES
- Utility 9,546,000.00 6,682,200.00 2,863,800.00
- Marketing and promotion 1,200,000.00 840,000.00 360,000.00
- Man power and wage 8,398,680.00 5,879,076.00 2,519,604.00
- Over head 200,000.00 140,000.00 60,000.00
- Pre operation cost 300,000.00 300,000.00
Total 80,917,920.00 56,397,544.00 24,520,376.00
Table 2.2:- loan utilization plan of the project
3. Market analysis
3.1. General analysis of the commercial cereals marketing in Ethiopia
Economic development, coupled with rising per capita incomes, technological change, and
urbanization is causing significant changes in food markets in developing countries (Reardon and
Timmer, 2005). Ethiopia is not an exception. Commercialization of subsistence agriculture is a
process and commercializing subsistence farmers do not instantly move on to high value crops.
Often times, increased market orientation of staple crop production offers a more pertinent
option to small holders, at least in the medium term until infrastructural facilities are developed

to accompany the production, processing, transportation and marketing of high value crops.
Commercial transformation of subsistence agriculture cannot be expected to be a frictionless
process, as it is likely to involve substantial equity issues (Pingali and Rosegrant, 1995).
3.2. Competitions
While there have been a number of positive developments in the agricultural sector, the private
market's capacity to meet localized food deficits is uneven and limited by poor market
information and poor access to credit. That said, even if domestic supplies increase, the flow of
goods to deficit areas would remain hampered by weak price signals due to lack of consumer
purchasing power especially among the rural poor. While the longer-term solutions to enhancing
market performance will rely on overall investment in agriculture, infrastructure, and
development of income-generating opportunities, in the near-term, continued in-kind support
through the PSNP will be necessary. According to the report Ethiopia Performance Monitoring
and Evaluation Service (EPMES) for USAID (2018) domestic production covers nearly 90
percent of the food requirements of the Ethiopian population. Food deficit ranges from 6.2
percent in 2015/16 to 21.4 percent in 2013/14. The level of food self-sufficiency through local
production has been fluctuating during 2012/13 to present. The food gap was wider in 2012/13
at 16.3 percent and 21.4 percent in 2013/14. We also note that food imports (both concessional
and food aid) were instrumental in narrowing this food gap. In 2017/18, food supply is estimated
at 31.45 million MT and only 19.5 million MT is available for human consumption. This level
of consumption will be possible if the government and donors import 987,314 MT - of cereal
equivalent food grains. The annual per capita amount of food supplied is estimated at 202.6kg
which is lower than the minimum requirement threshold of 218kg. The single most concerning
aspect of imports is their current level of insufficiency. If the anticipated level of import is not
attained, then food supply will be inadequate and will most seriously affect those who depend on
food aid transfers.
3.3. Demand analysis

Earlier discussions and supply data presented reveal that grain production has been increasing
throughout the 2009/10 to 2016/17 period. However, the growth rate between the years varied. It
is also noted that drought is one of the principal constraining factors for sustained grain
production growth in Ethiopia. Agricultural production in the country is dependent on rain which

is unpredictable. It also varies greatly across geographic locations. Domestic grain production is
utilized in many distinct ways; quantities for export, animal feed, seed, food use and non-food
use processing, and human consumption. Losses during storage and transportation occur and are
a component of food crop utilization. Food Needs and Supply Assessment According to
production data obtained from CSA, more than 62 percent of the domestic grain production was
used for human consumption in the past five years. Cereals constitute 87 percent of the total
grain crops production. Pulses and oilseeds account for 10 percent and three percent respectively.
Local production of cereals, pulses, oilseeds, and starchy roots including enset/Kocho are the
major source of food that makes up the staple food basket in Ethiopia. The following table
presents the required food demand, and local grain crop production for human consumption and
then calculates the level of food self-sufficiency in the country for the 2012/13-2016/17 period.
The amount of food imports, both commercial and food aid, is presented in the table and its role
in narrowing the food gap is reviewed. Based on the food supply and demand situations observed
in the past five years, food requirement for the 2017/18 is projected.
Table 15: Trends in Local Grain Crops Production and Demand during 2012/13-2016/17 period
Year 2012/13 2013/14 2014/15 2015/16 2016/17
Population 85,838,000 87,952,000 90,074,000 92,205,000 94,352,000
Grain production (MT) 25,105,002 27,442716 29,148,155 29,849,531 28,813,467
Domestic Production 15,663,010 15,069520 17,984,412 18,426,116 17,457,619
consumed (MT)
Per capita consumption 182.5 171.3 199.7 199.8 185.0
per year (kg)
Food Needs (MT) 18,712,684 19,173,536 19,636,132 19,636,132 20,568,736
Deficit/surplus (MT) (-3,049,673) (-4,104,016) (-1,651,720) (-1,210,016) (-2,622,456)
Deficit/surplus (percent) -16.3 -21.4 -8.4 -6.2 15.1
Total Food imports (MT) 788,644 845,872 913,076 1,934,123 763,533
Per capita import (kg) 9.2 9.6 10.1 21.0 8.1
Per capita grains available 191.7 180.9 209.8 220.8 190.2
including imports (kg)
 Food needs is estimated based on the following assumptions:

 The basic requirements, assuming all energy comes from cereals, is set at 2,100
kilocalories/person/day, on average, which translates to about 218 kg of cereal
equivalents/person/year, assuming about 3,000 kilocalories from 1kg of cereal.
 Production and demand quantities are recorded in grain equivalent.

 The breakdown of the calorie intake is based on the average Ethiopian food basket
including:
 Cereals = 63.5%;
 Pulses =10%;
 Oil crops =8%;
 Enset and Root Crops =6.5%;
 Livestock and livestock products =6%; and Sugar=6%.
3.4. Supply analysis

The CSA data with recommendation from the Ministry of Agriculture and Natural Resources and
from the Regional Agricultural and Natural Resources Bureaus. CSA production data appears to
be the only systematically collected and analyzed data available for the country.
The yearly growth in grain production is correlated with use of improved and better performing
farm inputs and practices like fertilizers and improved seeds. For instance, the amount of
fertilizer supplied to farmers has been increasing over years.
In the 2015/16 belg crop production, CSA had reported that 29.8 Million MT of grain was
produced.
A total grain production of 28.81 million MT food grain was estimated for 2016/17. Though the
Meher season production was good, owing to poor performance of the rains, the belg season crop
production is expected to be low. FEWS NET (June 2017) predicts that the 2017 belg crop
production will likely be below average in most belg-producing areas, particularly in
northeastern Amhara, southern Tigray, and southern SNNPR, because of erratic and below-
average rainfall and the prevalence of extended dry spells.
Due to the fact that:
1) the 2016/17 (the last) belg was not a complete failure;
2) improved seed supply was low for 2017/18, not 2016/17 ( Usually MoANR do not supply
inputs for belg season), and the Fall Army Worm infestation was mainly an issue for the
main season producing areas in the western block of the country, the 2016/17 belg grain
production is expected to be lower than of the preceding year (2015/16), which was
reported as a normal year in terms of rainfall performance, input supply and overall

production. Commercial farm production, which showed fast growth over the preceding
years, is estimated to be higher than the previous year’s growth rate.
3.5. Demand-supply analysis gap

Consumption requirement for the country for 2017/18 is forecasted based on past trends
discussed above and some pertinent assumptions. Due to lack of reliable information on effective
demand estimates among rural and urban population, we used the ‘apparent per capita
consumption or the status-quo level of consumption’ as the proxy to estimate the next year
consumption requirement. The status-quo estimate (SQE) method assumes that people should eat
as much in the coming year as they have in the last few years. Thus, the stable food requirement
for next year is derived from the past trends or the status –quo for staple food per capita
multiplied by the estimated total population. As mentioned earlier, food grain crops in general
and key cereal crops are the dominant diets for majority of Ethiopians. More than 60 percent of
the daily calorie intake in Ethiopia is derived from five cereal crops namely, teff, barley, wheat,
maize and sorghum.
The daily minimum energy requirement of 2,100 calorie (218 kg) was used as a threshold to
estimate demand for food during 2012/13-2016/17 period. The same assumption holds to
estimate consumption requirement for the country’s population in 2017/18. We further assumed
the following to calculating the forecasted food demand:
• Projected production data for 2017/18 and population growth projection by CSA of 2.3
percent.
• The amount of food to be imported for 2017/18 is 987,314MT.
• The carryover stock from last year will serve as opening stock for the 2017/18
• Export of food grain through both formal and informal trades will be the same as previous
year
• Barley and maize used as raw materials for local alcohol drinks is assumed to constitute 3
percent of supply
• Feed will take another 3 percent;
The Food Balance Sheet for 2017/18 is summarized in the following table
Table 2.3: demand and supply gap of grain food
year population food need domestic food gap
production
2016 94,352,000.00 20,568,736.00 17,457,619.00 3,111,117.00

2017 96,522,096.00 21,041,816.93 17,981,347.57 3,060,469.36
2018 98,742,104.21 21,525,778.72 18,520,788.00 3,004,990.72
2019 101,013,172.60 22,020,871.63 19,076,411.64 2,944,459.99
2020 103,336,475.57 22,527,351.68 19,648,703.99 2,878,647.69
2021 105,713,214.51 23,045,480.76 20,238,165.11 2,807,315.66
2022 108,144,618.45 23,575,526.82 20,845,310.06 2,730,216.76
2023 110,631,944.67 24,117,763.94 21,470,669.36 2,647,094.58
2024 113,176,479.40 24,672,472.51 22,114,789.44 2,557,683.07
2025 115,779,538.42 25,239,939.38 22,778,233.12 2,461,706.25
2026 118,442,467.81 25,820,457.98 23,461,580.12 2,358,877.86
2027 121,166,644.57 26,414,328.52 24,165,427.52 2,248,900.99
2028 123,953,477.39 27,021,858.07 24,890,390.35 2,131,467.72
2029 126,804,407.37 27,643,360.81 25,637,102.06 2,006,258.75
2030 129,720,908.74 28,279,158.11 26,406,215.12 1,872,942.99
3.6. Marketing strategy

Due to increasing competitions and demanding consumers for better food products, food
processing firms have been forced to adopt marketing strategies that has been confined to other
industries. Commercial Food project firms practice market segmentation, product differentiation,
and positioning of their value-added, branded products in order to succeed in the market. Food
producing firms employ different competitive marketing strategies in satisfying customers’
needs and wants more than their competitors. These marketing strategies revolve around the four
marketing mix elements i.e. product, price, place (distribution), and promotion strategies. The
Food and Agricultural Organization (FAO) puts the marketing mix as parts of core strategy that
an organization uses to create a preference for its products and services in the market place.
This proposed project will use marketing strategies as described below
3.6.1. Product Strategies

Deal with such matters as number and diversity of products, product innovations, product scope,
and product design (Jain, 2000). Product strategies in commercial agriculture incorporate such
aspects of product bundles as quality, convenience, packaging, nutrition, innovations, or even
price as the key marketing idea (Kohl and Uhl 2002,). Branding is the most important product
strategy of food processors that can earn them brand loyalty or a consumer-franchise from
customers thus contributing to market dominance and better performance. This project will have

its own special brand for the special product of the processed products with its own special
quality, convenience, packaging, nutrition, innovations, or even price.
3.6.2. Pricing Strategies

Competition of companies varies according to the resources and capability endowed for a
particular factory. Our company do not inter in to price war rather a systematic mechanisms
beyond price war through best distribution channel system provision of promotional item and
credit facility for customers and transportation service will be used. In nut shell, our company
will have lion share in similar product sales due to the following reasons:
 The price will be lower up to 10% from the existing factories due to mass
production and lower unit cost of production through economies of scale.
 Quantity discount will also be applied, which is not currently introduced in the
competing companies.
 High quality product due to specialization
 Attractive credit facility that can relief whole sellers from capital shortage and
tied up
 Providing transport facility that can acquire place possession
Therefore, our company believes that application of such benefits will attract customers that can
boost our sales volume and this in turn results in profit maximization through customer
satisfaction.
3.6.3. Distribution Strategies

These are concerned with the channels a firm may employ to make its goods and services
available to customers. Channels are organized structures of buyers and sellers that bridge the
gap of time and space between the manufacturer and the customer (Jain, 2002). Distribution
strategies for food processors include selling through conventional food stores, selling food in
nonfood stores, selling to the foodservices market, selling in vending machines, mail or catalog
selling, home delivery, and even selling doo-to-door by high school or scouting organization.
This investment project operate their own sales offices, warehouses, and professional sales forces
in addition to the channels structures organized through conventional food stores, selling food in

nonfood stores, selling to the foodservices market, selling in vending machines, mail or catalog
selling, home delivery, and even selling doo-to-door by high school or scouting organization
3.6.4. Promotion Strategies:-

These are concerned with planning, implementing, and control of persuasive communication
with customers that may be designed around advertizing, personal selling, sales promotion, and
any combination of these (Jan, 2000). Food manufacturers have many choices to make here in
selecting the goal of the promotion (to remind, inform, or persuade); the theme or appeal (price,
quality, etc.) of the promotion; the types of promotion (advertisement, sales promotion, personal
selling, publicity); which media (print, broadcast, direct mail, point-of-purchase, etc) will carry
the promotion;
Provision of Market information is crucial to reduce information gaps and uncertainties
that exist in the agricultural sector. It is required by buyers in their planning of production
and way of marketing the product. as most get market information from their neighbors,
by visiting market, from traders, and both visiting market and from neighbor. In this
project Different market promotion Activities will be executed through broad casting,
multimedia, newspaper, and sign board, leaf let and others for effective provision of
market information for buyers of animal product.
3.7. SWOT analysis

The SWOT Analysis of the project proposal gives a short but concise overview of the Strengths,
Weaknesses, Opportunities and Threats for the commercial agricultural development plant .
3.7.1. STRENGTH
The project envisaged will have the following strengths
 Strong financial cash flow of the promoter from many projects in Ethiopia
 Extensive experience of the promoters in different businesses in the country and outside
the country.
 The customization of our products and services will make our customers demand more of
our products in the environment.
 The promoter has an innovative entrepreneurship skill which could create new product,
market, method of production and solve any obstacles occurred in the business.

 The company also intends to establish a cordial relationship with customers which would
lead to maintaining our customers.
 Considering the number of stockholders, there would be inflow of capital. Using
entrepreneurial management skills, a linkage created with a number of investors who
would invest in our business.
 Our business location is also our strength. Located around Gambela which have four
major outlets to export and roads to all regions.
 Our company will have well-trained skilled man power for takeoff.
 The qualities of our product and its moderate price will create high rate of demanding our
product.
3.7.2. WEAKNESSES
The major weakness for the project is
 The project does not really require special training, therefore it would be simpler and
easier for local consumers to produce similar product.
 Little chance of recognition in the market environment due to our new presence in the
business environment.
3.7.3. OPPORTUNITIES
The project will use the following opportunities
 Political stability, peace and security of the region.
 Promising investment policies of the federal and regional governments that permit many
incentives.
 High market demand of the products.
 Huge natural resource potential of the region
 Favorable ecological condition of the region
 Availing, committed, ethical and relatively cheap labor force.
 Relatively low competition since we have less Electric equipment and lamps any project
companies in our business environment.
 Online shopping and advertisement thereby allowing customers from other states to have
access to our products and service.
 The company is located at a great proximity to the market.

 As an indigenous company, we are likely to receive support and approval from the local
government because it would serve as a platform to develop the local government.
3.7.4. OUR THREATS
 Competition from other companies.
 New market strategy from our competitors.
 Tremendous change in demand and supply of the products in future by customers.
 Political Instability of east Africa.

4. Technical analysis
4.1. Location
4.1.1. Biophysical features

Gambella People's National Regional State (GPNRS) is located at south west Ethiopia between
the Geographical coordinates 6028'38" to 8034' North Latitude and 330 to 35011‟11" East
Longitude, which covers an area of about 29,782.82 km2 about 3% of the nation. The Region is
bounded to the North, North East and East by Oromiya National Regional State, to the South and
South east by the Southern Nations and Nationalities People's Regional State and to the
Southwest, West and Northwest by the Republic of South Sudan. The regional capital city is
Gambella which is about 767km from Addis Ababa, the capital city of Ethiopia. The region is
divided into 3 Ethnic zones (i.e. Nuer Zone, Anywuak Zone and mejenger zone) and 13
administrative Districts that include one special district with 5 indigenous ethnic Groups and
many highlanders. Topography is an integral part of the land surface. It influences soil
formation, drainage, runoff, erosion, exposure, accessibility etc. The topography of the Region is
divided in to two broad classes, i.e. the Lower Piedmonts between 500 to 1900 masl and the
Flood Plains of below 500m contours.
4.1.2. Demographic & socio –economy

2007 Census showed that the Region has total population of 306,916, consisting of 159,679 men
and 147,237 women; urban inhabitants number 77,878 or 25.37% of the population. With an
estimated area of 29,782.82 square kilometers, the region has an estimated density of 9.57 people
per square kilometer. The average HH of the region is estimated to be 5. The main ethnicities of
the region are the Nuer (46.65%), the Anywuak (21.17%), Amhara (8.42%), Kafficho (5%),
Oromo (4.83%), Kambaata (1.44%), Mejenger (4%), Shakacho (2.27%), Tigrean (1.32%) and
other ethnic groups predominantly from southern Ethiopia were 4.9% According to CSA (2007),
among the population aged 10 years and over, 34.4% are economically inactive and 64.4% were
economically active. Based on the distribution of the age, among the male, 73.3% were
economically active, while in case of female it is 55.1%.
In all zones, the percent economically active males were higher than females. This is true mainly
because housewives are mostly engaged in activities that are not considered economic. As
observed from the census data, in rural areas of Gambella region, more active persons were
recorded as compared to urban. In all age groups, the activity rates for rural is higher than urban.
Specifically in the age group 10-14 years, the difference was much wider, where the activity rate
was 5.9% for urban areas while it is 37.7% for rural areas. The major reasons for such variation
was that in the rural areas young children rather than going to school at an early stage, get
usually engaged in farm activities such as herding cattle and helping parents in weeding and
harvesting.
4.1.3. The climate of the region

The climate of the Region is formed under the influence of the tropical monsoon from the Indian
Ocean, which are characterized with high rainfall in the wet period from May to October and has
little rainfall during the dry period from November to April. Temperature and rainfall are
important factors in soil formation and range of crops that can grow in a particular environment.
For instance, the Godere district has enormous variation in terms of soils, vegetation and crops,
because of variations in temperature and rainfall from the rest of the districts of the Region. The
mean annual temperature of the Region varies from 17.30C to 28.30C and annual monthly
temperature varies throughout the year from 270C to 330C. The absolute maximum temperature
occurs in mid-March and is about 450C and the absolute minimum temperature occurs in
December and is 10.30C. The annual rainfall of the Region in the lower altitudes varies from
900-1,500mm. At higher altitudes it ranges from 1,900-2,100mm. The annual evapo-
transpiration in the Gambella reaches about 1,612mm and the maximum value occurs in March
and is about 212mm.
4.1.4. Natural resource base

The region endowed with a vast marginal land which is suitable for agriculture and other
economic activities. The existing land cover (vegetation) types of the region are identified as
cultivated land, forest land, wood land, bush land, shrub land, grass land, bamboo, wet (marsh
land), etc. The major rivers within Gambella region are the Baro, Alwero, Gilo and Akobo with
their tributaries originating from the highlands which have immense potential for diversified
seas. The eastern foothills that lie below the main escarpment are between 1,300 and 600mask
and the plains to the west of the foothills between 450 to 600masl. Rainfall generally increases
with altitude, from 850 mm in the west to over 2,000 mm at the highest parts of the escarpment.
Temperature is inversely related to altitude, with mean annual temperatures of 220C to 270C.

Four major soil types are found in the region. Fertile but poorly drained Vertisols covering 47
percent of the Region are found on the low-lying alluvial plains. On the interfluves between the
plains are relatively infertile well-drained orthic Acrisols on 14 percent of the area. On the gently
sloping foothills below the escarpment are relatively fertile eutric Fluvisols, occasionally with
high water tables, with 27 percent of the area. On the escarpment with 11 percent of the area are
deep well drained dystric Nitosols of moderate fertility. The natural (i.e. undisturbed) vegetation
patterns are closely related to patterns of rainfall and temperature, with local variations due to
soil and drainage factors. In the upper parts of the foothills a mixed broadleaf montane forest
occurs, with increasing species diversity to the west. Between 600 and 450masl a lowland forest
occurs which has affinities with the Guinea-Congo plant realm. Between about 1,300 and 600
masl a transitional type of forest occurs with species of both the highland and lowland forest
types. The woodlands can be divided into the Acacia-Commiphora woodlands in the drier
southern lowlands and broadleaf Combretum-Terminalia woodland found in the wetter areas of
the western lowlands. The western part of the Region is covered by vast areas of permanent and
seasonal swamps.
4.1.5. Livelihood system of the region (zone)
1. Mixed agriculture livelihood zone
Gambella Mixed Agriculture (GMA) livelihood zone is found in Gambella regional state, which
is located in the lower and central part of the region. It encompasses districts of Dimma, Gog,
Abobo, Itang and Gambella. This livelihood zone economy is based on mixed agriculture (crops
and livestock) with some fishing, mining and wild food collection. The topography of area is
dominated by flat plain land. The agro ecology of the area is kolla/ lowland. April to October is
the rainy season having annual average rain fall 1500-2000 mm and temperature in the range of
24- 44o C. Gold, forest, wild food, game animals and construction stone are natural resources
available in the LZ. Maize, sorghum, rice and sweet potato are crops grown for consumption and
maize, sorghum and sesame grown for sale. Cattle, goats and sheep are the main livestock reared
in the LZ. All households get most of their annual food requirements from their fields. Fish and
wild foods make important contributions to food intake, dietary diversity and income. Drought,
flood, crop pests and livestock disease are chronic hazards that affect the LZ.

2. Coffee, Honey and Cereal livelihood zone

Gambella, Coffee, Honey and Cereal (GCHC) LZ is one of the livelihood zones located in
Gambella region that found in the south west part of region. Godere and Mengeshi- Mejenger are
districts located in the LZ. The LZ is isolated from main roads and Mengeshi District is
inaccessible during the rainy season and its population density is moderate. Mixed agriculture is
the mainstay dominated by coffee production particularly for settlers but the natives are more
involved in honey production in the forests and followed by livestock production. The major
economic activities LZ are cultivation of maize, sorghum and enset for consumption and coffee
and honey for cash. The GCH LZ is well known for coffee and honey production. Own crop,
purchase and wild roots/ fruits are source of foods in the order of importance. The significant
annual incomes for all wealth groups come from own crop sale followed by livestock and its
product sale and wild fruits which increase across the wealth groups. Its rain fed agriculture and
highly potential nature of the area coupled with fertile soil the LZ is a self-sufficient and there is
an instance when it is labeled as surplus producing LZ.
3. Agro -pastoral livelihood zone

Gambella Agro- Pastoral livelihood zone (GAPLZ) is located in the western part of the region. It
encompasses Itang, Lare, Akobo, and Jikaw, Wanthoa and Jor districts. This agro-pastoral
livelihood zone is a low lying plain, and an agro-ecology described as Bereha/extremely hot. The
main category of the Livelihood zone agro-pastoral (livestock and crop production), fishing,
hunting and wild food collection in which the livelihood of the community depends on. The
major economic activities are livestock rearing mainly cattle, goats and sheep, respectively. Crop
production (maize and sorghum) both rain fed and recessional cultivation is important. The main
food sources are own crops, purchase and livestock product supplemented by wild fruits, fish,
and game meat. Flood (water logging), erratic rainfall and pest infestation are chronic hazards
affecting production of the Livelihood zone. Flooding affects livestock grazing land result in
movement from river side to upland
The main economic activities in the region are subsistence agriculture, pastoralism and fishing.
Recession agriculture is common, particularly maize and sorghum production along the Baro,
Gilo and Akobo rivers. As the region is not cereal sufficient, alternative income sources such as

fishing are important sources of food. Along the Ethio-Sudanese border, where it is too dry for
rain-fed agriculture, livestock constitutes the primary source of income (Sewonet, 2003).
4.1.6. Pattern of local climate (temperature and precipitation)

The agro- climate of Gambella is fall under Arid, Semi-arid and humid conditions. This region is
divided in to two distinct climatic zones including mid altitude and low land areas. The minimum
temperature of the low land area is about 15.5oc where as in the eastern highlands is 10 o c and
the extreme maximum temperature in the low land area is about 44.5 o c whereas in the mid
altitude is 23 oc. the mean annual temperature of the low Land area is about 27oc and the annual
temperature in the high land areas is about 21oc. The rainfall is also very variable and is
becoming increasingly unpredictable and this trained affect the livelihoods of traditional farmers
and agro- pastoralists. The occurrence of rainfall was highly erratic and uneven in its distribution
in time and space. The total amount of rain varies greatly from year to year resulting droughts in
some years and change of cropping seasons. Moreover, temperatures are high throughout the
region and in most of the months in the year (BoARD, 2009). Rainfall of the region ranges from
800mm-1200mm in low land area. The annual total rain fall recorded about 1200mm-1800mm at
mid altitude. Near the equator, location and the altitude varying from 390m to more than 2500
meters above sea level influence a rich variety of local climates, ranging from tropical climate
along the Republic of South Sudan boarder to warm temperate and high plateaus on the
mountain peaks from the Eastern part of the region
4.1.7. LAND AND WET LAND DEGRADATION

According to BISPP (2001), the main types of land degradation in the region are soil erosion by
water in the high land and mild altitude part of the region. Physical degradation of soil involves
leaching of important nutrient (nitrogen and phosphorus). The region is relatively free of soil
erosion when compared with Northern Ethiopia and other regions of the country due to the low
ling topographic feature of the region. High temperature and erratic rain fall (flood and drought
hazards) causes negative impact on wet land ecosystem of the region. Flood affects wetland by
transporting suspended soil particles from the highland areas and silted on the lowland wetlands
since the slops of most wetlands nearly flat. This results on reducing in both size and volume of
wetland areas. Drought (increasing temperature) is another impact of climate change affecting
the wetland areas through evapo-transpiration from the surface of the wetland. This resulted in

Reducing and disturbs the wetland ecosystem. In all the grass land of the region, forage
vegetative growth is seasonal. During the rainy season there is lash and palatable forage almost
everywhere in the region. However; during the dry season the abundance, succulence and
palatability of the grass species will be reduced except the land closer to banks of rivers and
swamps. This leads to reduce the existing quantity and quality of the grass. Fire occurrence, over
grazing of green pasture Around the water body, bush encroachment which reduced grass quality
and quantity; in addition it increases contamination and transmission of animal diseases.
WATER STRESS
Water is becoming a scarce resource in most regions in the country because of increased
expectations and the rising demand for water due to increasing in temperature. Water demand for
both domestic water supply and irrigation is rising at an ever-increasing rate, therefore; both
surface and groundwater resources should get increased attention. In many cases climate change
is expected to increase current water stress. The rural and urban water supply coverage in the
region is not match with the increased demand. In rural areas, water supply scheme condition is
mal-distributed and the non-functional water points exceed the functional water points.
According to the water status assessment made in 2000, 56.47% are non-functional while 41.7%
are functional from the existing water point (Yeshi- Ber Consult .2003).
4.1.8. ECONOMICS OF THE REGION

Animal husbandry is one of the main economic activities of the western Woreda in the region
and also subsistence agricultural farming, traditional fishing, hunting, gathering of wild animals
and plants are used as source of living in the rural parts of the region (GRDPPA, 2006).
4.1.9. AGRICULTURE SECTORS

Gambella region is a flood-prone region with the wide range of ecological and socio-economic
diversities which influence agriculture. The region used sedentary farming system with erratic
rainfall pattern, high incidence of diseases, pests and weeds and flood hazards which causes food
insecurity in the region The agricultural activity of the local farmers was highly depending on
rain fed and recession crop production which made the region‟s economy extremely vulnerable
to the effects of weather and climate, which are highly variable both temporally and spatially.
Most of the rural population depends on subsistence agriculture for their livelihood and if the
rain stops for one season farmers unable to satisfy their needs. Climate variability and change is

likely to intensify the desertification of arable areas. It‟s also predicted that the humid agro-
climatic zones are likely to shift south east ward, rendering areas of the west increasingly
unsuitable for agriculture. Crop production is predicted to decline substantially specially for both
maize and sorghum rain fed crops, due to increasing temperature and variable rainfall. This
climate variability cause shifting of seasonal rain fall and reduce the length of a growing period
for both endogenous and adapted crops, which leads to crop growth and yield reduction.
The main environmental issue in the region is land degradation mainly due to soil erosion and
deforestation (Merid, no year stated!). Overgrazing is an environmental issue in the livestock
dependent areas of the region and as the matter fact that the western part of the region is register
as seasonal food insecure due cattle raiding from cross border south Sudan and some internal
conflict that leave them into vulnerable life which drive them to seasonal migrate. Lare district is
one of the 13 districts of Gambella region of Ethiopia. It is located in the western part of the
region, It‟s 85 km from Gambella city, Eastern part of Nuer Zone & jekow district, South-east
and Southern part of Itang special district, and at its north is the Republic of South Sudan. Based
on figures published by the Central Statistical Agency in 2007, this district has an estimated total
population of 32,241 with an estimated area of 685.17 square kilometer. According to estimation
made in 2012 by the Central Statistical Agency the district has the total population of 38,985,
which shows the rapid growth of population in the district.. Lare district is found in the Agro-
pastoral livelihood zone (GAPLZ). This Agro-pastoral livelihood zone is a low lying plain and
its agro-ecology is described as extremely hot (bereha). The main category of the Agro-pastoral
livelihood zone in which the livelihood of community defends on is livestock, crop production,
fishing, hunting, and wild food collection. The major economics activities are livestock rearing
mainly cattle, goats and sheep. And also crop production mainly maize and sorghum. The main
food sources are own production, purchase and livestock product supplemented by wild fruits,
fish and game meat (hunted meat). Flooding affects livestock grazing land and result in
movement from river side to upland Flood (water logging), recurrent flash flood, erratic rainfall
and pest infestation are chronic hazard affecting production of Agro-pastoral livelihood zone in
general and lare district in particular. The district is believed to be one of the chronically and
seasonally food insecure areas in the Region. It has been repeatedly exposed to recurrent flash
flood hazard, recurrent erratic rainfall, drought and famine and was in fact labeled as the
epicenter of the flash flood hazard in the region. The total production is persistently inadequate

to cover food requirement of the population. This is mainly due to high population growth,
poorly developed infrastructure, flash recurrent flood hazard and drought. Due to such reasons, it
has long been a food deficit district with widespread and deepening seasonal food insecurity
situation.
The regional governments have undertaken several initiatives to attract additional foreign direct
investment to the region. The regional Investment commission (RIC) helps to facilitate the
investment process for domestic and foreign investors. The city and region have also started
business process reengineering (BPR) programs to improve efficiency, promote development,
and create opportunities for public/private partnerships.
4.2. Civil work and construction

The land required for the proposed plant project is 500 ha. The regional government and zone
administration has secured the land. This land is part of the reserved land for investors. In the
project there are different physical and biological civil works and constructions. The detailed
descriptions of the civil works and construction that will be implemented in the project are
explained below.
4.2.1. Live fence and garden

The area is fenced and divided in different parts using an trees which is managed and trimmed
evenly by tree scissors. These tree planted will be managed well to reach the desired height in at
least two years. Totally more than 300,000 tree seedling will be planted in line at the fence of the
project and partitions of the project.
4.2.2. Civil work

Construction of totally 7 sheds, 3 warehouses, 2 buildings of office and show rooms will be
done using modern and industrial materials.
4.2.3. Infrastructures
The project needs 5 deep walls, for water resources, electric power line and access road for
facilitate the overall farm production and processing activities.

4.2.4. Areas for other activities

The total area required for recreation center is about 800 ha. Building area of stores, offices,
waste disposal area, waste treatment areas required are described in the Table 3.1. The total cost
buildings and civil works is estimated as in table 3.2 totally the cost of construction and civil
work is birr of 10,270,000.00
Table 3.1: Area needed by the project
S/n Area Description Unit quantity

1 Crop production area ha 770
5 Main store M2 5
6 Product store M2 5
7 Office, resident and rest room M2 3
8 Garage M2 2
9 Road and facilities M2 6
10 Waste disposal area M2 2
11 Waste treatment M2 2
12 Miscellaneous areas M2 5
Total M2 800
Table 3.2:-Construction expenses
No Description Unit Quantity Unit Price Total cost Birr) Remark

(Birr)
1 Deep wells no 5 850,000 4,250,000.00
2 Pump house no 5 70,000 1,350,000.00
3 Store Warehouses no 3 1,500,000 2,500,000.00
4 Farm sheds no 5 500,000 1,450,000.00
5 Waste disposal area L-sum 1 1,200,000 120,000.00
6 Waste treatment L-sum 1,000,000 100,000.00
7 Road and transportation L-sum 500,000.00
Total cost 10,270,000.00
4.3. Technology, machinery, equipment’s and tools

The quantity and cost of each type of tool, machinery and equipment is described. These
machineries will be imported and could also be gained from importers. There is no difficult or
special machinery to be imported.
The efficiency and effectiveness of production is assured by the existence of technology in use.
Technology can be expressed in terms of type of machinery, workshop lay out, inventory and

quality control etc. The level of technology to be introduced by the owners of the project will be
the latest machineries in the world.
The required to machinery, equipment and tools are used for managing, handling, feeding,
treating and transporting of the project are described below. The quantity and cost of each type
of tool, machinery and equipment is described.
Table 4.3 tools, Machinery and Equipment needed by the project in Birr
No Description Unit Qty (No.) Unit Price Total cost
1 Motor pump /electric pump/ Set 5 1,560,000 7,800,000.00
2 16 bar HDP pipe/ 3 inch / m 1500 1160 1,740,000.00
3 12 bar HDP pipe /2 inch / m 12000 980 1,176,000.00
4 Agricultural tools L- sum 1,729,240.00
Multipurpose tractor and ploughing L- sum 3 1,800,000 5,400,000.00
5
materials
6 pick up car no 2 1,250,000 2,500,000.00
7 Heavy tracker no 2 2,400,000 4,800,000.00
8 Combiner harvester no 2 3,200,000 6,400,000.00
9 Mobile sprinkler system no 2 2,800,000 5,600,000.00
10 Electric transformer no 1 1,500,000 1,500,000.00
Grand Total cost 38,645,240.00
4.4. Production raw materials, utility, machineries and equipment

demand
4.4.1. Production raw material
The project is a 50 years project, starting from 2020 to 2070. The farm will work all the year
round. The farm will start at 60 % of its rated capacity in the third year and full capacity in the
fifth year and thereafter. The raw materials for the production of the project are described below
in table 4.1
Table 4.1 Production raw materials

S/N Type of equipment Unit Qua Unit Total cost Remark
Cost
1 Cereals and crop seeds

Maize Tons 50 40,000 2,000,000.00
Sorghum Tons 52 32,000 1,664,000.00

Cotton Tons 45 36,000 1,620,000.00

Rice Tons 28 28,000 784,000.00
sesame Tons 20 42,000 840,000.00
2 Fertilizer and Manure
A. Urea Qtl 500 1500 750,000.00
B. DAP Qtl 500 1500 750,000.00
C. Green Manure Qtl 20000 250 500,000.00
3 Pesticide and insecticide Liter 60000 100 600,000.00
Grand total 9,508,000.00
4.4.2. Utility
The major utilities required are:
 water for general purpose,
 Electric power for lighting and heating
 Fuel and lubricants
 Stationary and office facility
 Communication
The total yearly consumption of utilities at 100% capacity utilization rate and their estimated
costs are given in Table 4.2 below. The total annual cost of utilities is estimated at Birr
11,806,000.00.
Table 4.2:- utility cost
s/n Description Unit Quantity unit cost Total cost
1 Electricity KWH 1,800,000 0.95 1,710,000.00
2 Cost of water supply M3 850,000 0.8 680,000.00
4 Transportation cost birr 920,000.00
3 Fuel Lt 180,000 19 3,420,000.00
4 Lubricant Kg 14,800 120 1,776,000.00
5 Stationary and office facility L-sum 560,000.00
6 Public relation and communication L-sum 480,000.00
Total 9,546,000.00
4.5. Project capacity, program, justification and quality control

A variety of crops are grown in Ethiopia and maize and sorghum are by far the most important,
both in terms of volume value and export earnings.

The crops produced are supplied to the domestic and international markets, and some has
become a major foreign currency earner for Ethiopia, with exports worldwide, especially to
China, India and the European Union (EU). 10 2010/11 2011/012/13 2013/14
The potential for Ethiopian sesame on the world market is still significant because of the high-
quality seed varieties produced that are suitable for a wide range of applications.
Thus, the need for affordable grains cannot be met by domestic production alone, however
efforts to develop Ethiopian production of grain is a crucial.
This profile envisages the establishment of a farm for the production of oil seeds on an area 500
ha of land in of the region. The annual production capacity of each seed is described in table 4.2
below.
Table 4.2: annual production of the project
s/n Oil Seed Unit Average area Average Annual total
of production production per ha production
per year
1 Maize Tons 200 7.5 1500
2 Sorghum Tons 200 6 600
3 cotton Tons 100 4.5 450
4 Rice Tons 100 4.5 450
5 Sesame tons 200 2.4 480
Total 800 3480
Therefore, the selected project activities are in the profitable ventures in the project area.
The following are additional reasons to justify the implementation of the project.
 The use of potential water resource for irrigation purpose is substantial and the
experience of crop and vegetable production is remarkable in the area, Thus, the project
is going to utilize the potential use of cultivation using the potential of underground water
for dairy, fattening, horticulture, high value crops and spices products to the society in the
near market.
 The other justification for establishing such farm is availability of underutilized land
which will be given to the owners of the project for investment activities.
 The project area is the center of agriculture and processing investments and attracts local
and foreign entrepreneurs.

 The economic, social, and financial aspects of the project prove that it is technically
feasible in all parameters and environment analysis of the project indicates there will not
be negative impact on environment. Therefore, based on these findings, the project is
found to be viable and feasible in all factors.
 As per the analysis carried out by different institutions on the political, economic, socio-
cultural and technological developments (PEST), Ethiopia offers a stable political and
economic environment as well as security; exceptional climate; continuously improving
public service delivery which makes it potentially an ideal destination for investment.
The macro economic performance in the past seven years has been very positive and the
GTP indicates a very good prospect, with a minimum of 11% GDP growth per annum,
for the future. Although the incentive packages that are currently given seem to be
adequate, the government is planning to give additional incentives for the Agro-Industry
sector, particularly to export oriented and import substituting projects.
 The expansion of Universities as well as Technical, Vocational Education and Training

(TVET) in all parts of the country provides good opportunity in the supply of skilled and
semi-skilled technical personnel. Health service provision and development of
infrastructures such as roads, energy and communication are also showing a rapid
improvement in the country. The advancement of science and technology in the world
and the spread of same in the country will favorably influence the smooth operation of
the envisaged project. To encourage investment a number of incentives are granted to
investors which include; exemption of customs duty for importing capital goods and
spare parts for investment and raw materials for production of export goods, income tax
holidays and the permission of losses to carry forward during tax holiday period. Ethiopia
also provides different guarantees with respect to repatriation of capital, profit and
against expropriation and nationalization. Accordingly, it can be concluded that Ethiopia
is ideal place for investment. As a result, as Addis Ababa city is also an ideal place for
the envisaged plant profitability, since the any project of food oil any project is still
unsatisfied demand and more competitor plant in the study area and the region at all.

4.6. Product quality

Quality is the rated ability of a product to perform its functions. It is a summarized term for the
product durability, reliability, precision, ease of operation and other valued attributes. Some of
these and other attributes can be measured objectively. But, from a marketing point of view,
quality should be measured in terms of buyer’s perception of quality. The survey carried out in
connection with this study has revealed that the majority of the respondents confirmed that a
locally produced product and the whole process will meet the ISO 9001 quality standards.
Accordingly, the envisaged project will avoid the existing weakness of locally produced products
and achieve its aims through producing the leading quality products. Consequently, the quality
policy of the envisaged plant will be:
To manufacture and produce high quality products
To meet customers requirement and satisfaction and
To meet regulatory requirement
The envisaged factory shall fulfill the above quality policy through;
Adopting state of the art any project technology and appropriate testing and laboratory
equipment
Periodically assessing customers and regulatory requirement and upgrading products and
any project process
Adopting and implementing quality management system adhering to international
standards
Employing the best available personnel and training them periodically to update skill and
knowledge
4.7. Environmental and Social impact assessment

Economic development can have major impacts on the environment by degrading soil s,
polluting bodies of water, altering landscapes and threatening biodiversity, in some cases driving
species into extinction. In turn, environmental impacts can impose significant economic and
social costs on society, especially with regard to human health.
As per the requirements of the governments of Ethiopia to providing land for investment-
guideline (EPA, 2004), The Environmental and Social Management Plan (ESMP) places strong
emphasis on the preparation and implementation of any project. The environmental impact

assessment proclamation and related procedures thus require any investor and their consultants to
prepare an ESIA as a major output of the project.
ESIA can predict development’s negative effects and reveal strategies to avoid and mitigate
them, and ESIA can also point to possibilities to enhance the positive effects of development
activities. ESIA arose in response to the pollution and the unnecessary degradation of natural
resources caused by rapid and unsustainable industrialization, agricultural development, and
technological progress. ESIA recognizes that natural resources are finite and incapable of
absorbing the unchecked demands of modern society
Environmental and social impact assessment (ESIA) is a tool which helps to identify, predict and
evaluate environmental impacts assessment at an early stage of project planning, find ways and
means to avoid and reduce adverse impacts, and present the predictions and options to decision-
makers.
ESIA report for this project will be prepared by the promoter of this project in a separate
document as per the requirements of the governments of Ethiopia for providing land for
investment- guideline (EPA, 2004). The ESIA report will
 Examine the project in terms of its major activities and identify the aspects associated with
the project construction which generate environmental impacts,
 Identify the environmental issues associated with the major activities,
 Develop mitigation measures for the aspects identified as having environmental impacts,
 Incorporate environmental mitigation measures into construction schedules and activities and
develop corrective actions and ensure monitoring.
 Develop further environmental provisions through a series of Site Environmental
Management Plans and procedures,
 Define the specific actions required, roles and responsibilities for these actions, timetable for
implementation, and associated costs.
 Define a proposed institutional structure to govern the implementation of the ESIA.
 Comply with existing national environmental regulations.
Thus, the ESIA assessment report will identifies the aspects of construction and operation
activity which have environmental and social issues associated with them; it proposes mitigation

to minimize resultant impacts and serves as a basis to further examine and improve
environmental construction and operation performance of this project.
4.8. RISK ANALYSIS
4.8.1. major risks

The major risks for the project are
 The prices of our competitors might likely reduce therefore making our customers run to
them.
 Inexperienced management team of the company may lead to slowing down the rate at
which the company sales.
 Low sales of our products leading to reduction of our profits.
 Advance in technology.
 Unstable economy situation might also turn out to be a risk, because in the future due to
the economic situation customers might prefer wall tiles to electronic material of Electric
equipment and lamps application.
4.8.2. STRATEGIES TO MITIGATE OUR RISKS

 The company will maintain market fair price with adequate distribution channel.
 Our main tactics include; application expertise, excellent training and developing of
our management team before starting off the business.
 The company would apply different marketing strategies in order to make more sales
yielding to profits.
 Our company would import the improved machines that would stand the thirst of
time.
The company would also be flexible in enrolling in the current trends by going on continuous
quick environmental scan to gather basic information about our environment so as to adjust.
5. Project management, organization and man power requirement
5.1. Man power requirement

The overall operations of the project are governed by the project owner SFE agricultural
development Plc. The owner has passed managing through different business. His experience
with his educational back ground will make the project to move forward. In addition, the project

will have general managers and other different workers, such as, production, marketing, finance
and administration, etc. the contributions made by each section of the project are of paramount
importance for the overall success of the lodge objectives. The staff members at different levels
of the organization always strive for the achievement of the company goals though effective and
efficient success of their respective departments. The harmony among the employees and their
devotion towards the success of the company is the secret behind the company’s great
achievements in its previous operations. This success strength will continue to be maintained and
improved in the future operations of the business.
In the initial time of a project have a manager which have at least a bachelor degree or above
with an experience of managing relative projects. The project will recruit a planner, designer,
sales person, promotion expert, any project supervisor, and experts with a capacity of MSc, BSc,
technical, vocational education and training (TVET) Graduated in level III. Guards and daily
laborers will also be recruited by the project.
Table 4.1:- Man power requirement of the project
No Description Req. Qualification work Monthly Annual salary

salary,
Person experience (Birr)
1 Farm managers 1 MA in business 10 years 30,000 360,000.00
administration
2 Planning heads 1 MA in economics 10 years 20,000 240,000.00
3 Production heads 1 Msc. Agri. economics 10 years 20,000 240,000.00
4 Finance heads 1 MA in finance 10 20,000 240,000.00
administration
5 HRM heads 1 MA in HRM 10 20,000 240,000.00
6 Sale and promotion head 1 MA in marketing 10 20,000 240,000.00
7 Supply head 1 MA in supply chain 10 20,000 240,000.00
management
8 Support staff head 1 MA in public relation 10 20,000 240,000.00
9 crop and agronomic 2 Msc. In crop 6 12,000 288,000.00
production supervisors production
10 crop production expert 8 BSc. In agronomy 5 4,000 384,000.00
11 Irrigation experts 4 BSc. In irrigation 5 6,000 288,000.00
12 Agronomic expert 4 BSc. In irrigation 5 6,000 288,000.00
13 Horticulture expert 2 BSc. In irrigation 5 6,000 144,000.00
14 Planning experts 4 Project planning 8 years 5000 240,000.00
15 Maintenance engineer 4 Mechanical engineering 2 years 5000 240,000.00
16 Senior accountants 02 BSc. In accounting 6 years 5000 120,000.00
17 Junior accountant 4 BSc. Accounting 4 years 4000 192,000.00

18 Casher 4 Diploma in Accounting 4 years 2500 120,000.00

19 Machine operators 12 Diploma in GM 2 years 4000 576,000.00
20 Sales experts 3 BSc. Marketing 6 years 5000 180,000.00
21 Promotion expert 2 BSc. In public relation 4 years 3000 72,000.00
22 Supply and logistic 4 BSc. In supply and logistic 4 years 5000 240,000.00
23 Store keeper 4 Supply and logistic 2 years 2000 96,000.00
24 laborer 1256 - - 1200
1,507,200.00
26 Guards 8 3000 288,000.00
Sub-Total 7,303,200.00
Employee's Benefits (15%) 1,095,480.00
Grand Total 1335 8,398,680.00
The investment will recruit 79 permanent and 1256 contract employers as described in the table
4.8 above.
5.2. Management structures

The project will have five departments of production department, purchasing and sales
department, supply and logistics, finance and HRM department and planning and designing
department.
The project will recruit a qualified and experienced manager as described in the table 4.7 above.
The manager will report to the project owner and will lead the project team through the planning
and delivery of the Project activities. The duty station of the manager will be at the project
implementing site and have the authority to run the project on a day-to-day basis on behalf of the
Implementing Partners, within the constraints laid down by the owner of the project. The
Manager’s prime responsibility is to ensure that the project produces the results specified in the
project document, to the required standard quality and within the specified constraints of time
and cost. The manager will be responsible for financial management and disbursements, with
accountability to the owner of the project. The manager will work closely with government
sector offices, input providers and purchasers, respective Regional Bureaus.
Responsibilities of the manager
 Day-to-day oversight and coordination of implementation of project activities
 Ensuring effective partnership working between the national, sub-national implementing
Bureaus and the participating national agencies.
 Managing human and financial resources in consultation with the owner of the project to
achieve results in line with the outputs and activities outlined in the project document.

 Monitoring project activities, including financial matters, and preparing weekly, monthly
and quarterly progress reports, and organizing monthly and quarterly progress reviews.
 Coordinating the distribution of responsibilities amongst team members and organizing
the monitoring and tracking systems.
 Reporting and providing feedback on project activities, progress, and barriers to owner

Project management structures
General assembly
Auditor
Board of Directors
General Manager
Operational Support and service

department manger department manager
Agricultural
development
division
Supply and Human Finance Marketing

logistics Resource and and
Development planning purchasing
Technical
division
Maintenance
and machinery
operation
5.3. Training and capacity development

Almost all developing countries like Ethiopia suffer from serious shortage of qualified personnel
at all levels in all key points in industry. The same is true in the undertaken spare parts any
project operators. The adoption of new technology and utilization of skill manpower will enable
for sustainable increase in production quality, reducing the cost of production, increase market
and profit margin to business operators. This project will accomplish and allow the following
capacity development activities for the employers if the project:
 Provide training by engaging training institution
 Assign experts according to their skill and based on experience.
 Pay for skill training need by the project
 Upgrade the capacity managers, supervisors, experts, wood and metal workers and
laborers
 Assess the training need assessment of the company
 Provide more emphasis for quality and design.
 Provide training on quality assurance services
 Exposure to better and improve techniques in the country and abroad
 Improve the knowhow of employers on entrepreneurship
 Improve their awareness on material resource management and other related trainings
and capacity development activities will be undertaken.
The annual training and capacity development plan of the project will be birr 200,000.
6. Annual sales plan

The annual sales plan of the project are fatten cattle and green manure. At attaining full capacity
of the project will produce 3000 tons of different grain products of maize, sorghum, cotton, rice
as described below in the table 5.1
s/n Oil Seed Unit Annual production Unit cost Total cost
1 Maize Tons 1500 8000 12,000,000.00
2 Sorghum Tons 600 7500 4,500,000.00
3 cotton Tons 450 40000 18,000,000.00
4 Rice Tons 450 12000 5,400,000.00
5 Sesame Tons 480 40000 19,200,000.00
Total 59,100,000.00

7. Financial plan
7.1. Expected costs and schedules
6.1.1. Expected assumptions and costs
The plant will incur the following project costs based on the data presented in the previous
chapters and the following assumptions.
I. Fixed costs
Table 6.1 depreciation cost of the project
s/n Description of depreciated items cost
1 Land lease 50,000.00
1 Building 10,270,000.00
2 Machinery, vehicle, office facility and equipment 38,645,240.00
Total 48,965,240.00
II. Depreciation
Table 6.2 depreciation cost of the project
s/n Description of depreciated items Total cost % of Cost of
depreciation depreciation
1 Building 10,270,000.00 5 513,500.00
2 Machinery, vehicle and equipment 38,645,240.00 10 3,864,524.00
Total 4,378,024.00
III. Production cost
Table 6.2 production cost of the project
s/n Items Cost
1 Raw materials 9,508,000.00
2 Utilities 9,546,000.00
3 Wages and Salaries 8,398,680.00
4 Machinery Maintenance (5 % of cost of machinery ) 2,445,762.00
5 Office facility and furniture 480,000.00
6 Cost of promotion and advertising 1,200,000.00
Factory costs 31,578,442.00
7 Depreciation 4,378,024.00
8 Loan repayment 11,916,304.95
Total Production Cost 47,872,770.95
IV. Foreign currency needed
Table 6.4 local and foreign currency requirement of the project
No Description Local currency Foreign currency Total
1 Row material expense 9,508,000.00 9,508,000.00
2 Utility expense 9,546,000 9,546,000.00
3 Construction cost 1,540,500.00 8,729,500.00 10,270,000.00
4 Machinery, tools and equipment 38,645,240.00 38,645,240.00

5 Man power requirement 8,398,680.00 8,398,680.00

6 Over head 3,000,000.00 1,200,000.00
7 Cost of marketing and promotion 1,200,000.00
Grand Total 33,193,180.00 47,374,740.00 80,567,920.00
9.1.2. Financial schedule

 Construction period - 2 years
 Source of finance - 30 % equity of investor
- 70 % loan
 Tax holidays - 5 years
 Bank loan amortization period – 8 years
 Bank interest - 12.5%
 Discounted cash flow - 12.5%
 Land value - for free Based on policy of the region
 Repair and maintenance - 5 % of the total plant and machinery
 Accounts receivable - 30 days
7.2. TOTAL INITIAL INVESTMENT COST

Birr 80,917,920.00 ( eighty million nine hundred seventeen thousand nine hundred twenty
birr), out of which birr 24,520,370.00 (twenty four million five hundred twenty thousand three
hundred seventy birr) or 30.30 % of the total cost is the equity of the promoter and birr
56,397,544.00 (fifty six million three hundred ninety seven thousand five hundred forty four
birr) or 69.70 % of the total cost is loan from bank.
Table 6.5:- summery of expenditures
No Description Total expenses Remark

I Fixed cost
1 building 10,270,000.00
2 Machinery, tools and equipment expenses 38,645,240.00
3 land lease payment 50,000.00
sub total 48,965,240.00
II working capital
1 Raw material 9,508,000.00
2 utility 9,546,000.00
3 man power (salary and benefit package) 8,398,680.00

4 Overhead, port charge, transportation 2,000,000.00
5 Marketing and promotion 1,200,000.00
sub total 34,652,680.00
III Pre operation cost
1 Pre operation cost 300,000.00
Grand Total 80,917,920.00
7.3. FINANCIAL and ECONOMIC EVALUATION

6.3.1.Financial analysis
The valuation of physical input and output quantities follows the established CBA principles.
Once, the physical input and output quantities of the project were valued then all costs and
benefits are discounted to obtain their present values. In this study all project benefits accruing
every year are multiplied by the appropriate discount factor to give the present value (PV) of the
benefits and all project costs allocated every year are multiplied by the appropriate discount
factor to give the present value (PV) of the costs. The PV is given by general formula as shown
below:
------------------------------------------------------------------------------ 1
Where:
FV = Future value of money at time t
PV = Initial amount (present value of money)

i = Interest rate
n = Number of years
= Discounting factor (DF)
The viability or worthiness of the project that takes the timing of costs and benefits into account
can be measured, using the following cost benefit indicators:
 Net Present Value (NPV)

 Benefit/Cost (B/C) ratio

 Internal Rate of Return (IRR)
 Payback period
I. Net present value (NPV)

The NPV is defined as the present worth of the net benefits (= benefits - costs) of the project. In
the financial analysis, it is the present value of the net income (benefit) stream accruing to the
entity from whose point of view the analysis is being undertaken. To calculate the NPV, one
must determine a discount rate. This should be the rate below which it will be unacceptable for
the return to capital to fall. For the purposes of this project a discount rate of 10.5 % is used.
If the project cannot generate an income (benefit) stream sufficient to pay back the loan plus the
interest, then it is not worth undertaking.
The NPV is described by formula as bellow:
NPV = PV (B) – PV(C) ……………………………………………………………..2
Where:
NPV = Net Present Value (the sum of all the present values for the project life).
PV(B) = Present Value of Benefit
PV(C) = Present value of Costs
The NPV is positive, which means that, at the chosen discount rate, the investment will be more than
recovered and it will be profitable to go ahead with the project. If the NPV had been negative, it
would mean that the return of the investment would not be acceptable and one would have to look
elsewhere to invest money.
According to the projected income statement, the project will start generating profit in the second
year of operation. The NPV of this project at the specified discount rate is birr 17,658,607.00
and birr 47,049,202.00 at an operation year of 5 and 10 respectively. This shows that the project
is viable.
II. Benefit /cost ratio

The B/C ratio is the ratio between the PV of the benefit stream and the PV of the cost stream. It
is an indication of how much the benefits exceed the costs. Dividing the sum of the PV of the
benefits by the sum of the PV of the costs gives the B/C ratio.

The B/C ratio is described by formula as shown below:
B/C = ………………………………………………………………………..3
Where:
B/C = Cost Benefit ratio
PV (B) = Present Value of Benefit
PV(C) = Present value of Costs
This ratio being greater than 1 shows that, at the current discount rate, the benefits exceed the
costs. This means that it would be profitable to go ahead with this project. If the ratio had been
below 1, the project would not be viable.
At the current discount rate 10.5 %, the benefits/cost ratio of the project is 1.12 at a period of five
year and 1.18 at a period of 10 years. This means that it would be profitable to go ahead with this
project.
III. Internal Rate of Return (IRR)

The IRR can be described as the rate of growth of an investment. This rate can be interpreted as
the highest rate of interest an investor could pay, without losing money, if all the funds to finance
the investment are borrowed and if the debt service (loan and accrued interest) was repaid by use
of cash proceeds from the investment. Using the formula described below, Asian development
bank formula for calculating IRR, and calculated net present value at different discount rates as
described in annex 12.4
IRR = ldr + ……………………………………..……………….4
Where:
IRR = Internal Rate of Return
hdr = Higher discount rate
ldr = Lower discount rate
NPV = Net Present Value

IRR calculated is 34.15 % that is higher than the discount rate used for the project which is the
cost of borrowing then the project is viable.
IV. Payback period

This is the period it takes for annual net benefits to equal initial investment. It shows how long it
takes for the project to generate benefits to cover costs incurred in the investment. For instance,
this project gives a payback period of 8 years using discounted costs and benefits. After 8 years
the discounted net benefit is more than the initial investment. This means that the costs are paid
back in about 8 years.
6.3.2.Economic and social benefits of the project

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier.
These benefits are listed as follows
A. Profitability
Profit and loss statement projected for 10 years indicates a continuous increment in net profit of
the project from birr 8.96 million in the 3rd project year to birr 16.51 million at the 10th year.
B. Profit Generation
The project is found to be financially viable and earns a total net profit of 97.08 billion in ten
years. Such result induces the project promoter to reinvest the profit which, therefore, increases
the investment magnitude in the economy
C. Tax Revenue
With an increase in profit, both tax revenue and the tax base of the economy improves. Such
result create additional fund for the government that will be used in expanding social and other
basic services in the economy. Excluding the multiplier effect, this project alone will generate
Birr 28.93 million tax revenue for the government in ten years.
D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 79 citizens and temporary job
opportunity to 1256 citizens by expending birr 75.59 million throughout ten year period of the
project.

7. Environmental and social Impact assessment (EIA)
7.1. General:
The main purpose of the Environmental impact Assessment (EIA) study is to assess the
biophysical and socio-economic impact associated with the proposed project under the study
with the view to develop appropriate safe guarding measures to be incorporated during the
implementation of the project. Therefore, the study will enable to design attractive and
sustainable mitigation measures for the animals, people and environment affected as a result of
project undertakings. It is important to give emphasis and maintain an open dialogue with the
people residing around the project, building confidence of the people and enhancing community
partnership and participation in all the process of project implementation. The depth of EIA
study differs with respect to the impact the proposed project bears to the society and
environment. Hence this project, commercial Agricultural Development in Gambella region,
Abobo woreda, can be categorized as a project where separate environmental impact assessment
is required owing that environment is not the major focus of the project preparation. However, if
needed it can be provided with in-depth study on the area.
7.2. Objective of the Environmental & Social Impact Assessment Study

The fundamental objective of the environmental impact assessment is to ensure that the proposed
project is environmentally sound and socially acceptable, and hence contributes to the
development of environmental and social functions of local communities. It is also expected to
provide a means whereby the overall environmental performance and social benefits of the
project can be enhanced through:
 Identification of sensitive environmental components likely to be affected by the
proposed firm,
 Defining positive social and economic benefits where local communities can derive from
the proposed project implementation,
 Identification, prediction and synthesis of the potential environmental impacts associated
with the project implementation and;
 Designing subsequent operation, and preparation of plans and recommendations
regarding measures that will minimize adverse impacts and enhance beneficial impacts.

7.3. Approaches and Methodology

The methodology adopted for conducting the environmental and social impact assessment study
of Integrated Agricultural Development project follows the conventional methods that meet the
requirements of the Federal and Regional Environmental Protection Organs’ Environmental
Impact Assessment Guidelines. The collection of primary data, baseline information and
secondary data on environment and social components, relevant documents and literature
sources, desktop study, impact analysis, choosing mitigation and enhancement measures using
different optimization tools and developing environmental protection, monitoring and
management plans were made. Focus groups discussions, meetings, questionnaires and
interviews were common techniques by which local community consultations conducted.
The proponent collected and reviewed published national and regional state policies, legislatives,
regulations and guidelines ratified by the Federal Democratic Republic of Ethiopia (FDRE),
Central Statistical Authority (CSA) Census Reports and Performance Standard on social and
environmental sustainability documents.
7.4. Environmental Scoping

In the aim of defining the limits of the study area for the project and drawing lists of activities
and impacts to be studied during the assessment, the Consultant carried out an initial
environmental examination and scoping. The scoping exercise has been carried out with the
following main objectives:
 To define the limits of the study area,
 To define lists of activities, type and magnitude of the proposed project, and
 To assess and include views and concerns of key stakeholders on the scope of EIA study.
7.5. Limits of the Study Area

The Environmental Impact Assessment study is conducted for those areas that would be
influenced or impacted by the project implementation. The project site is defined as the project is
located in Gambella region, Abobo zone. The study also considers peasant association
surrounding the project area which could be directly or indirectly affected by the implementation
of the project.

7.6. Relevant Policies, Legislative and Institutional Framework

This section covers the policy, legislative and institutional issues that are most relevant to
service sector projects in general and the integrated agricultural development project in
particular.
7.6.1. Environmental Policies and Strategies

7.6.1.1. Constitution of the Federal Democratic Republic of Ethiopia
The Constitution is the supreme law of the country, whose provisions all other policies,
regulations and institutional frameworks must comply with. The Constitution of the FDRE
(Proclamation No. 1/1995 as amended) is the foundation for human rights, and natural resources
and environmental management. The Constitution states that:
 Government and all Ethiopian citizens shall have the duty to protect the country’s
environment and natural resources,
 Design and implementation of programs and projects of development shall not damage or
destroy the environment,
 The People have the right to full consultation and expression of views in the planning and
implementation of environment policies and projects that affect them directly.
7.6.1.2. The Environmental Policy of Ethiopia

The major policy framework document with respect to environmental management of Ethiopia is
the Environmental Policy (EPE) of the FDRE approved by the Council of Ministers in April
1997. The Policy was prepared under the joint-effort of the Environmental Protection Authority
(EPA) and the Environmental Planning Unit (EPU) of the then Ministry of Economic
Development and cooperation (MEDaC). The policy contains elements that imply the
importance of main streaming socio-ecologic aspects in development programs.
7.6.1.3. Environmental Impact Assessment Guideline Document

The guide to EIA document that was prepared by EPA provides a background to EIA and
environmental management in Ethiopia. In effect the document aims at being a reference
material to ensure effective environmental assessment and management practice in Ethiopia for
all parties who engage in the process. The basic objectives of the guide are:
 Providing all interested parties with a consistent approach in EIA

 Providing background information for the context of EIA in Ethiopia

 Assisting proponents in identifying their EIA responsibility
 Assisting communities and NGO groups in realizing their environmental rights with
regard to EIA
 Assisting the authority in determining their roles and responsibility as decision makers in
the EIA process: and
 Assisting in decision-making with regard to cost and benefits of proposed development
projects.
7.7. Environmental impacts and mitigation measures of the project

The potential impacts of the project on environment can be categorized in to: positive and
negative impacts.
7.7.1. Positive impacts:

The economic and social positive impacts are:
 Employment (job) opportunity and transfer of skill and technology to workers
 Government revenue increased from the different taxes paid by the project
 Consumer satisfaction from the products available at local market
7.7.2. Negative impacts:

Table 1: detail negative impacts and their mitigation measures
SN Negative impacts Mitigation measures
1 Environmental impact as a result of absence Improved sewerage system should be introduced
of sewerage for dung removal and continuous maintenance and follow up of
the sewerage
2 Deforestation as a result of land clearance About 40 trees should be planted in one hectare
and continuous management of the tress
3 Loss of fertility as a result of intensive Trees compatible with crops should be planted
utilization of the land and minerals washed Deep ploughing for about 20 cm depth
away
4 Air pollution as a result of chemical use Expertise advise in type and amount of chemical
utilization
5 Reduction in quality of air as a result of Varieties of tress in uncultivable areas and

degradation of forests partitions should be planted and continuous care

6 Social conflicts as a result of differences in There should be continuous expert advice on the
social manner of the workers since they are behavior of the society and work with local
coming from different places administrative bodies for peaceful coexistence
7 Quality of underground water reduction as a Expert oriented and planned use of the water-
result of use of Crop Production inputs shade area and limited use of inorganic inputs
9 Prevalence of Contagious (transmittable) There should be solid and waste removal system
diseases such as malaria, TB and others due and sensitization of workers on environmental
to polluted water, food, soil, etc health by partners
PART TEN: Annexes

10.1. Project implementation calendar

s/n Description of activities Implementation month remark

J F M A M J J A S O N D
1 Submission of application letter and X
project proposal to Development bank
of Ethiopia, Gambella National
regional branch
2 Approval of the project proposal and X X
accessing the credit
3 Conducting Pre Implementation X X X X
activities.
4 Implementation of the agricultural X X X X X X
production activities
5 Construction of sheds, store, office X X X X X X X X X X X X
and other facilities for each activities
in the project
7 Purchase and preparation of materials X X X X X X X X X X X X
and inputs for the factory.
8 production the planned agricultural X X X X X X X X X X X X
products
9 Selling the products X X X X X X X X X X X X
10 Conducting annual auditing and X Annually
financial settlements

Project proposal for integrated agricultural development
Annex 10.2 projected net working capital (in birr)

Description Year (0-2) Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
sales revenue
- Sales revenue 47280000 47,280,000.00 53,190,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00
47,280,000.00 47,280,000.00 53,190,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00
Total sales revenue

VARIABLE COSTS
9,546,000.00 9,546,000.00 9,546,000.00 9,546,000.00 9,546,000.00 9,546,000.00 9,546,000.00 9,546,000.00 9,546,000.00
Utility
2,445,762.00 2,445,762.00 2,445,762.00 2,445,762.00 2,445,762.00 2,445,762.00 2,445,762.00 2,445,762.00 2,445,762.00
Repairs (Equipment
&building
5,704,800.00 7,606,400.00 8,557,200.00 9,508,000.00 9,508,000.00 9,508,000.00 9,508,000.00 9,508,000.00 9,508,000.00
inputs
cost of finance (loan and interest) 11,916,304.95 11,916,304.95 11,916,304.95 11,916,304.95 11,916,304.95 11,916,304.95 11,916,304.95 11,916,304.95 11,916,304.95
Cost of marketing and promotion 1,200,000.00 1,200,000.00 1,200,000.00 1,200,000.00 1,200,000.00 1,200,000.00 1,200,000.00 1,200,000.00 1,200,000.00
8,398,680.00 8,398,680.00 8,398,680.00 8,398,680.00 8,398,680.00 8,398,680.00 8,398,680.00 8,398,680.00 8,398,680.00
over head labor cost
Total variable cost 39,211,546.95 41,113,146.95 42,063,946.95 43,014,746.95 43014747 43014747 43014747 43014747 43014747
Net Income Over Variable Costs 8,068,453.05 6,166,853.05 11,126,053.05 16,085,253.05 16085253 16085253 16085253 16085253 16085253
FIXED COSTS
513,500.00 513,500.00 513,500.00 513,500.00 513,500.00 513,500.00 513,500.00 513,500.00 513,500.00
Building Depreciation
3,864,524.00 3,864,524.00 3,864,524.00 3,864,524.00 3,864,524.00 3,864,524.00 3,864,524.00 3,864,524.00 3,864,524.00
Equipment Depreciation
4,378,024.00 4,378,024.00 4,378,024.00 4,378,024.00 4,378,024.00 4,378,024.00 4,378,024.00 4,378,024.00 4,378,024.00
TOTAL FIXED COST
TOTAL VARIABLE AND FIXED COST 43,589,570.95 45,491,170.95 46,441,970.95 47,392,770.95 47392771 47392771 47392771 47392771 47392771
NET INCOME OVER VARIABLE & 3,690,429.05 1,788,829.05 6,748,029.05 11,707,229.05 11707229 11707229 11707229 11707229 11707229
FIXED COSTS LISTED ABOVE
Annex 10.3: Projected income statements

description year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
Sales revenue 0.00 47,280,000.00 47,280,000.00 53,190,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00
Less variable costs 0.00 21,064,758.00 19,163,158.00 24,122,358.00 29,081,558.00 29,081,558.00 29,081,558.00 29,081,558.00 29,081,558.00 29,081,558.00
VARIABLE MARGIN 0.00 26,215,242.00 28,116,842.00 29,067,642.00 30,018,442.00 30,018,442.00 30,018,442.00 30,018,442.00 30,018,442.00 30,018,442.00
in % of sales revenue #DIV/0! 55.45 59.47 54.65 50.79 50.79 50.79 50.79 50.79 50.79
- 8,634,760.00 42,817,976.00 48,727,976.00 54,657,176.00 54,657,176.00 54,657,176.00 54,657,176.00 54,657,176.00 54,657,176.00
Less fixed costs 10,270,000.00
OPERATIONAL - - 14,701,134.00 19,660,334.00 24,638,734.00 24,638,734.00 24,638,734.00 24,638,734.00 24,638,734.00 24,638,734.00
10,270,000.00 17,580,482.00
Project owner:- SF agro industry Plc. Page 57

MARGIN
in % of sales revenue 0.00 0.00 0.00 36.96 41.69 41.69 41.69 41.69 41.69 41.69
Financial costs( interest ) 0.00 5,744,923.09 5,286,293.32 4,770,334.83 4189881.53 3,536,871.58 2,802,235.37 1,975,769.64 1,045,995.69
- 8,956,210.91 14,374,040.68 19,868,399.17 20,448,852.47 21,101,862.42 21,836,498.63 22,662,964.36 23,592,738.31
GROSS PROFIT 22,866,775.32
in % of sales revenue 0.00 0.00 0.00 27.02 33.62 34.60 35.71 36.95 38.35 39.92
Income (corporate) tax 0.00 0.00 0.00 0.00 0.00 6,134,655.74 6,330,558.73 6,550,949.59 6,798,889.31 7,077,821.49
0.00 - 8,956,210.91 14,374,040.68 19,868,399.17 14,314,196.73 14,771,303.69 15,285,549.04 15,864,075.05 16,514,916.82
NET PROFIT 22,866,775.32
in % of sales revenue 0.00 -48.36 18.94 27.02 33.62 24.22 24.99 25.86 26.84 27.94
Annex 10 .4:- Project cash flow (in birr)

Description Year 1 Year 2 Year 3 Year 4 Year 5
Total cash inflow 19,391,980.00 105,455,940.00 47,280,000.00 53,190,000.00 59,100,000.00
- promoter equity 19,391,980.00 0.00 0.00 0.00 0.00
- bank loan 58,175,940.00 0.00 0.00 0.00
- Inflow operation 0.00 47,280,000.00 47,280,000.00 53,190,000.00 59,100,000.00
Total cash out flow 10,330,000.00 57,652,305.20 27,532,071.72 36,850,179.06 43,107,372.65
- Increase in fixed assets 10,270,000.00 38,645,240.00 80,869.00 101,079.00 101,079.00
- Increase in current assets 60,000.00 60,000.00 60,000.00 86,000.00 92,000.00
- operation cost 0.00 18,947,065.20 22,104,909.40 25,262,753.60 31,578,442.00
- annual land lease payment 12,800.00 12,800.00 12,800.00 12,800.00 12,800.00
- corporate tax 0.00 0.00 0.00 0.00 0.00
- financial cost 0.00 0.00 5,286,293.32 4,770,334.83
- loan repayment 0.00 0.00 6,630,011.63 7,145,970.12

surplus 9,061,980.00 47,803,634.80 19,747,928.28 16,339,820.94 15,992,627.35

cumulated amount 9,061,980.00 56,865,614.80 76,613,543.08 92,953,364.02 108,945,991.37
Annex 10.4:- Project cash flow (in birr)…. Continued

Description Year 6 Year 7 Year 8 Year 9 Year 10
Total cash inflow 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00
- promoter equity 0.00 0.00 0.00 0.00 0.00
- bank loan 0.00 0.00 0.00 0.00 0.00
- Inflow operation 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00 59,100,000.00
49,154,271.74 49,270,548.47 49,409,109.81 49,571,741.31 49,751,451.75
Total cash out flow
- Increase in fixed assets 81,879.00 81,879.00 81,879.00 81,879.00 81,879.00
- Increase in current assets 96,000.00 98,000.00 108,000.00 126,000.00 143,000.00
- operation cost 31,578,442.00 31,578,442.00 31,578,442.00 31,578,442.00 31,578,442.00
- annual land lease payment 12,800.00 12,800.00 12,800.00 12,800.00 12,800.00
- corporate tax 6,134,655.74 6,330,558.73 6,550,949.59 6,798,889.31 7,077,821.49
- financial cost 4,189,881.53 3,536,871.58 2,802,235.37 1,975,769.64 1,045,995.69
- loan repayment 7,726,423.42 8,379,433.37 9,114,069.58 9,940,535.31 10,870,309.26
surplus 9,945,728.26 9,829,451.53 9,690,890.19 9,528,258.69 9,348,548.25
cumulated amount 118,891,719.63 128,721,171.16 138,412,061.35 147,940,320.05 157,288,868.29

Annex 10.5: Calculation of the Present Value of benefit and costs projection at different discount rate (birr)
Year Year Total year Total
S/n description 1 2 year 3 year 4 year 5 5 year year 6 year 7 year 8 year 9 10 10 year
1 at R = 5.5 %
present value of benefit 0 44815166 42478830 45297331 47706510 180297836 45219440 42862029 40627515 38509493 36501889 384018203
present value of cost 0 41317129 40871652 39550617 38256238 159995637 36261837 34371410 32579535 29271162 29271162 321750743
Net present value 0 3498037 1607178 5746714 9450271 20302200 8957603 8490619 8047980 9238331 7230727 62267461
benefit cost ratio #DIV/0! 1.08 1.04 1.15 1.25 1.13 1.25 1.25 1.25 1.32 1.25 1.19
2 at R = 12 %
3 at R = 20 %


SFE Commertial Agriculture

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Project proposal for commercial agricultural development

Commercial Agriculture in Gambela national regional state

MERWA Agricultural Development Plc.

FOR PRODUCTION OF SESAME, MAIZE AND OTHER INDUSTRIAL

SUBMITTED TO: G/P/N/R/S Investment Agency

Project Promoter: MERWA agricultural development Plc.

Consultant- Tewelde Berhe consulting service (+251-0925949565)

4.6. Product quality................................................................................................................36

Project owner:- MERWA agriculture development Plc. Page 3

Project owner:- MERWA agriculture development Plc. Page 4

Project owner:- MERWA agriculture development Plc. Page 5

Project owner:- MERWA agriculture development Plc. Page 6

Project owner:- MERWA agriculture development Plc. Page 7

 Considerable bureaucracy in the provision of investment incentives. In general, approved

Project owner:- MERWA agriculture development Plc. Page 8

Project owner:- MERWA agriculture development Plc. Page 9

Project owner:- MERWA agriculture development Plc. Page 10

o To provide high quality service at reasonable price

2.3. Current situation of the project

Project owner:- MERWA agriculture development Plc. Page 11

technology transferring, agricultural transforming, job opportunity and foreign exchange

Project owner:- MERWA agriculture development Plc. Page 12

3.3. Demand analysis

Project owner:- MERWA agriculture development Plc. Page 13

 Food needs is estimated based on the following assumptions:

Project owner:- MERWA agriculture development Plc. Page 14

3.4. Supply analysis

Project owner:- MERWA agriculture development Plc. Page 15

3.5. Demand-supply analysis gap

2016 94,352,000.00 20,568,736.00 17,457,619.00 3,111,117.00

3.6. Marketing strategy

3.6.1. Product Strategies

Project owner:- MERWA agriculture development Plc. Page 17

3.6.2. Pricing Strategies

3.6.3. Distribution Strategies

Project owner:- MERWA agriculture development Plc. Page 18

3.6.4. Promotion Strategies:-

3.7. SWOT analysis

Project owner:- MERWA agriculture development Plc. Page 19

Project owner:- MERWA agriculture development Plc. Page 20

Project owner:- MERWA agriculture development Plc. Page 21

4.1.1. Biophysical features

4.1.2. Demographic & socio –economy

4.1.3. The climate of the region

4.1.4. Natural resource base

Project owner:- MERWA agriculture development Plc. Page 23

Project owner:- MERWA agriculture development Plc. Page 24

2. Coffee, Honey and Cereal livelihood zone

3. Agro -pastoral livelihood zone

Project owner:- MERWA agriculture development Plc. Page 25

4.1.6. Pattern of local climate (temperature and precipitation)

4.1.7. LAND AND WET LAND DEGRADATION

Project owner:- MERWA agriculture development Plc. Page 26

4.1.8. ECONOMICS OF THE REGION

4.1.9. AGRICULTURE SECTORS

Project owner:- MERWA agriculture development Plc. Page 27

Project owner:- MERWA agriculture development Plc. Page 28

4.2. Civil work and construction

4.2.1. Live fence and garden

4.2.2. Civil work

Project owner:- MERWA agriculture development Plc. Page 29

4.2.4. Areas for other activities