PROJECT PROPOSAL FOR OIL SEED

AND CEREALS PROCESSING

INDUSTRY

PROMOTER: ATO MULUWOREK

BLACHEWE
PROJECT LOCATION: Amhara Regional State North Showa Zone,
 CONTENTS

1. SHORT NOTE OF THE PROJECT...........................................................................................1

2. EXECUTIVE SUMMARY..........................................................................................................2

3. INTRODUCTION........................................................................................................................5

4. APPROACH TO THE STUDY...................................................................................................7

4.1. DESCRIPTION OF THE STUDY...................................................................................7

4.2. OBJECTIVE OF THE STUDY........................................................................................8

5. GENERAL FEATURES OF THE WEREDA ADMINISTRATION.......................................9

5.1. LOCATION AND CLIMATE..........................................................................................9

5.2. POPULATION..................................................................................................................9

5.3. INFRASTRUCTURE......................................................................................................10

5.4. LOCAL AREA ECONOMY..........................................................................................10

6. TECHNOLOGY.........................................................................................................................10

6.1. PRODUCTION OPERATION AND MAJOR ACTIVITIES......................................10

6.1.1. Raw Materials..............................................................................................................11

6.1.2. Wheat Milling..............................................................................................................12

6.1.3. Mixing.........................................................................................................................12

6.1.4. Extruding.....................................................................................................................12

6.1.5. Drying..........................................................................................................................13

6.1.6. Packaging.....................................................................................................................13

7. MACHINERY, EQUIPMENT..................................................................................................14

8. PROJECT IMPLEMENTATION AND CIVIL WORK.........................................................15

8.1. PROJECT IMPLEMENTATION..................................................................................15

Page 2
 8.2. CIVIL WORKS...............................................................................................................16

9. RAW MATERIALS AND UTILITIES.....................................................................................16

9.1. RAW MATERIALS........................................................................................................16

9.2. UTILITIES......................................................................................................................17

10. HUMAN RESOURCE AND TRAINING REQUIREMENT..................................................18

10.1. HUMAN RESOURCE....................................................................................................18

10.2. Training Requirement.....................................................................................................19

11. FINANCIAL ANALYSIS...........................................................................................................20

11.1. UNDERLYING ASSUMPTION....................................................................................20

11.2. PROJECT COSTS..........................................................................................................21

11.3. PROJECT FINANCING................................................................................................21

12. FINANCIAL EVALUATION....................................................................................................22

12.1. PROFITABILITY...........................................................................................................22

12.2. BREAKEVEN ANALYSIS.............................................................................................22

12.3. PAYBACK PERIOD.......................................................................................................22

12.4. SIMPLE RATE OF RETURN.......................................................................................22

12.5. INTERNAL RATE OF RETURN AND NET PRESENT VALUE.............................22

12.6. SENSITIVITY ANALYSIS............................................................................................22

13. ECONOMIC AND SOCIAL BENEFIT AND JUSTIFICATION..........................................23

Page 3
Page 4
 1. SHORT NOTE OF THE PROJECT

OWNERS NAME ATO MULUWOREK BLACHEWE

NATIONALITY ETHIOPIAN

TYPES OF PROJECT PROCESSED CEREAL FOOD INDUSTRY

PROJECT TYPES PRODUCTION OF PASTA, MACARONI, PACKED BISCUTES

FIXED
35.48 MILLION BIRR
INVESTMENT
TOTAL CAPITAL 54.18MILLION
OPERATION
COST
18.72 MILLION BIRR
AMEHARA REGIONAL STATE , NORTH SHEWA ZONE
IMPLEMENTED AREA
BASSONA WORANA WEREDA, Kore Margefiya Kebele
PERMANENT 91 54 MALE WORKERS
EMPLOYMENTS
TOTAL 131
OPPORTUNITIES
TEMPORARILY 40 77 FEMALE WORKERS

REQUIRED LAND 15,000.00 m2 (1.5 hectares)

75% (BIRR 40.64 MILLION) FROM BANK LOAN

SOURCE OF FINANCE
25% (BIRR 13.55 MILLION) FROM THE OWNER EQUITY

EMPLOYMENTS OPPORTUNITIES DIVERSIFY THE ECONOMY,

SOCIO ECONOMIC
IMPORT SUBSTITUTIONS AND CONTRIBUTION OF FOREIGN
BENEFITS
CURRENCY AT THE COUNTRY LEVEL.

Page 5
 2. EXECUTIVE SUMMARY

Ethiopia is a country endowed with diverse ecological and climate basis suitable for agricultural
development the vast natural resource base the land livestock and human population provides ample
opportunity for economic activity the current policy of the government of Ethiopia encourage of
private investment largely in the areas of food processing industries. In oil seed and cereals processing
sub-sector is very important to the Ethiopian economy – in 2005, cereal foods export generated 41%
of foreign exchange earnings – and provides income for approximately 8 million smallholder
households. Policy attention to the sector was always considerable, and its importance has been
renewed in the latest Poverty Reduction Strategy, the Plan for Accelerated and Sustained
Development to End Poverty (PASDEP). PASDEP puts forward a development strategy based on
accelerated economic growth, part of which is hoped to be achieved via increased smallholder
commercialization and market integration.

Oilseed flaking and cereals processing industry project will be implemented soon on a need land
of 1Hectar, in Amhara National Regional State, North Showa Zone, Basso Wereda, Kore
Margefiya Kebele at a distance of 130km to the north East of Addis Ababa.

Oil seed and cereals processing industry project will be run by Ato Muluwork Blachewe with
total investment capital of Birr 54 million. It has mission to provide safe and sustainable agro-
industrial products to consumers in an efficient way at reasonable price. Oilseed and cereals flaking
and processing project is a proposed business whose primary objective will be an average annual
production of 1000-1200 ton of processed cereal foods and oilseed, of which is 700 tons of cereals
and 500 ton of oilseed per year respectively, of which 60% to local market & 40% for foreign market
per year .

The project also to be efficient intends to create job opportunity for total of 131 employees which
is 91 permanent employees and 40 temporary employees of, on the other hand, consideration of
gender assortment show form the total of 131 employees which is 77 female employees and the left
54 employees are males.

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 besides applies and a daily production time of 8hr up to 10hr transferring modern technology of
waste recycling and environmentally sustainable production.

The project area is accessible to raw material, market, ground water, and major infrastructure
facilities at shorter distance. The total investment cost including cost incurred at the start-up is
estimated at Birr 55 million of which greater than 65.48% for capital investment (procure fixed
assets such as Oil seed and cereals processing machine, Issue truck, pickup among others) and the
remaining 34.52% balance will be used for operation cost. In terms of source of funding, 75%will be
derived from the loan of Development bank of Ethiopia and the remaining 25% will be derived from
the owner equity.

The project applies different technologies throughout its 50 year life span for mitigating
environmental, social and economic inefficiency impacts, such as disease transmission and invasion,
overgrazing, air pollution (dust and bad smell which may result from lack of neatness),safety dress for
health protection,

The driving force to encourage this type of investment is intensive employments opportunity,
creating trade network to domestic and international market, waste material as input and chance to
develop infrastructure, which contribute to achieve goal of transformation policy.

The consultant address, the Feasibility study document is prepared to be used to reduce the
negative impacts of the project activity on the Investment, increase project acceptance, reduce health
cost, better compliance with standards, saving capital and operating costs and to bring sustainable
development in the area to proponent, stakeholder and local community.

Generally, the response of consulted stakeholder and community as mitigation for mentioned
negative impact were application of advanced technology of environmentally friend, economically
visible and socially acceptable like giving training to employee and local community will have great
chance for sustainable utilization and safe-guarding future generation.

Finally, the activity, methods, parameter, guideline, stockholder participated, time schedule, cost
and responsible body for monitoring and evaluation of development project to reduce the risk
associated and to cheek its efficiency in terms of Investment activities, social and economy as
proposed on Investment, well express.

Page 7
 3. INTRODUCTION

In Ethiopia, Most people live on rural farm communities. About 84 percent (2005) of the
Ethiopian population is rural and occupations in agriculture support 78 percent of total population.
Most of the rural community engaged in traditional crop harvesting and processing. Currently,
Ethiopian governement plan for accelrated and sustained developement to reduce and ultimately
alleviate poverty in transformation (agricultural leading industry) policy. The investement polices and
proclamations are encouraging new investement and the business developemnet in sustainable
way.Most legal guidelines including lease proclamation support and garnts extensive period of
holding for the investors to get the best out of it.

In This study row materials needed for the production of cereal food production, are available
in the area where this project is intended to be worked.

The new conducive legal framework and efficient licensing procedures should facilitate the
rapid development of agro-industries and industries related to quality insurance for exporting and
national market. As a result of demand assessment there is scarcity of the product on market will be
necessary to encourage on the sectors, to shoot the countries transformation policy. In addition it is
very encouraging investment as it could consume the large numbers of labor. Supporting household
income of the rural people who are poor and backward and mostly vulnerable to recurrent draught and
feminine, such labor intensive project is encouraged by government.

The company has long term vision of becoming the best agro-industry company in the
country. Nowadays, even though progress processed Oilseed flaking and cereals processing compare
with the previous periods, a number of food processing industries producers are falling rapidly
resulting from lack of higher degree of protection for the sector, economically vulnerable position of
small producers, lack of high technology. For success of the sector; give emphasis and provide access
to bank loan and good variety, training on capacity building in component interaction, waste
recycling, on appropriate utilization and conservation of natural resource and artificial input are
unquestionable issue (Chantalakhan.C and Falvey .L, 1999).

Many researcher stresses on the importance of diversification of processed Oilseed and

cereals product production, which introduce symbiotic relation of man-land- ecosystem. It includes
the distinctive feature of system in integrated system of money generating and enhancing rural
nutrition in developing country (Chantalakhan.C and Falvey .L, 1999).

Together with the above fact the constantly growing size of the agro-food processing
industries at federal and regional levels is also playing the major role to reinforcing employment
opportunities to most of the urban/rural unemployed work force, more than half of the population of
the urban unemployed force is the rural migrants to towns for search of subsistence income sources.
These parts of the community are with little skills to work in urban areas except being serving as
cereal food production. Agro-Industrial productions are currently dynamic to provide quality product

Page 8
to national and international market Supply gap of process packed cereal food on national and
international market encourage the proponent of this project.

This project is now planning to actively involved in the industrial processing to producing

wide range of oilseed products and processed cereals foods so as to fill the huge gap that exist in the
country and abroad and there by boost up the role of production fabrics in the country's economy. The
major areas of intervention of the project will be oilseed flaking and cereals foods processing, and The
Company will set a strategy to implement this project phase by phase since the resources are divisible.

This project aim to bring green development in the area onward at start of its activity, in
Amhara national regional state, North Showa Zone, Basso Woreda, industry area , about 145 km
along north of Addis Ababa, on a need of 1hectar of the land area.

The primary objective of the project include:- to establish efficient processing cereals and oil
seed products that harmonized with and environmental component via increase production and
profitability, maintain sustainability and assist nearby oil seed and cereals processing industrial
companies, which helps to foster innovations in the sector, to remain a float and to achieve ultimate
target of industrial profitability will strength technical capability, ensure financial security and
increase the market penetration ability, encourage oil seed and cereals processing industries and other
interested group of the community in participating and developing modern industrial companies that
combine economic development and environment protection, which provide a wide range of benefits
to the investor, farmers, the consumers and nation in the form of a source of raw material market,
income generation, foreign currency, transfer of technology and means of year round employment,
and ensuring social sustainability by providing carbon free environment.

The hospitability of the area in terms of climate, topography and accessibility of

infrastructure, have alternative like; diversify utilization of resource, reduce risk on production. The
time schedule/ logistic of the activities pre-operation phase to full cycle of the project express in the
form of table on table 4, under description of the proposed project.

4. APPROACH TO THE STUDY

The extension approach applied to identifying, predicating and evaluating of impacts,

alternatives, mitigation measures was participatory approach, specifically bottom-up in a way local
community, stakeholder, IAP express their feeling about organization with enthusiasm.
4.1. DESCRIPTION OF THE STUDY

The cumulative effect of emission from industry of developed country identified by some
scientist in the late 1940’s and early 1950’s as it results climate impact/ change. As time go on the
impact has been issue of everybody and leading to enforce the world community to discuss on it and
the first earth submit was held in Stockholm Sweden with an agenda of human and environment, then
after as the impact are more sever, the issue get more focus and different protocols, conventions and
earth submit have been carry out including latest of Copenhagen Denmark, Cancun Mexico, and

Page 9
South Africa submit, to find out mitigation and adaptation measure for climate change and agree on
the way it implemented.

In the past the investment failed to feature in holistic manner in the development endeavors of
the country, since project evaluation and decision-making mechanisms were unwarrantedly made to
focus on short-term technical feasibility and economic benefits.
4.2. OBJECTIVE OF THE STUDY

The general objective of the project is that establishing of a firm promoting processed cereals
and oilseed products processing plant, consequently, an Investment serves to bring about:

 administrative transparency and accountability,

 Popular participation in planning and decision taking on development that may affect the
communities and their investment, and Sustainable development.

The objective of investment can be also short and long term, to discriminate the major
consequence of the business on investment, health, and safety and associated socio-economic. Based
on gathered information and review the study team developing/proposing mitigation measures that
reduce or alleviating the identifying significant negative impacts.

The Short- Term Objective Comprise:-

 Assess the nature, intensity, magnitude and duration of negative and positive impacts of oil seed
and cereals processing plant on the local and trance boundary investment components.
 Consider critical social and cultural issues during design of the project.
 Provide methodology for protection and mitigation of impact resulted from implementation of
activity in different phase of business.

The Long-Term Also Include:-

 To facilitate and to provide artificial insemination to cereal foods production and ultimately to
maintain technology dissemination
 Conservation and sustainable use of natural resource to bring green economy.
 Protection and enhancement of next generation life quality, by safe guarding resource in project
area.
 Integrate Environment in development planning and safe guard clean and hospitable
environment for future generation.

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  To facilitate and provide artificial insemination to produce and possess cereal foods and oil
product production for the ultimately to maintain technology dissemination.
 To promote cereal foods and oil product production in the surrounding districts to maintain the
sustainability established cereal foods products and initiate the establishment of new processing
unities in the area.
 Judicious use and provision of natural incrimination service for the surrounding farmers.
 To produce, collect process and market cereal foods and oil and ultimately create market
opportunity for the production sectors such as youth association, private producers and farmers
of the surrounding.
 To produce quality cereal foods and oilseed Products and supply healthy product for the
surrounding customers and residence
 To utilize the available ample cereal foods production resource in the proposed area and it’s
surrounding.
 Finally to scale up the financial capacity of the promoter and preparing for further investment.

5. GENERAL FEATURES OF THE WEREDA ADMINISTRATION

5.1. LOCATION AND CLIMATE

The project location is located 120km north cast of Addis Ababa along Addis – Dessie high
way road, near to Deber Birhan town. Astronomically, the area is located at 9⁰4⁰ north latitude and
39⁰ 4’ cast of longitude, having an altitude of 2750m.a.s.i the climate of the particular area is
classified as Dega climate zone which is best characterized by low temperature and high rainfall
which ranges from 17.82⁰c on July to 22.2⁰c on June and 1.6⁰c on November to 8.86⁰c to July
respectively.
5.2. POPULATION

According to the recent from center statistics agency {CSA} shows that 40,000 people are
dwelling in the Woreda.
5.3. INFRASTRUCTURE

The project area has well developed infrastructure as compared to other towns. Regarding to
basic infrastructures it has gravel road networks, which have connect the nearby abuttal Weredas, the
area also receives 24 hours electricity service and has good water supply throughout the year.

In relation to other service, which are regarded as social services such as educational
institution both in public and private and private ownership are found in the area, which is publically
owned.

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 5.4. LOCAL AREA ECONOMY

Available data, which is limited to farming, trade, and commerce in on that area for the local
economy shows that wholesale and retail activities, take the lion share of the economy, which
accounts for more than 50 percent that coming dominant. About 81 percent is in the community
agriculture. In which government takes the highest coverage. The second largest employer is the trade
and commercial sector which stands for about 11 percent. Manufacturing sector 3 percent,
construction and transport accounts 5 percent the largest workforce establishment is small. i.e. 4.3
employer’s Establishment [NUPI, 1996]

The average income level of the population is estimated to be 610 birr per annual which is
below 75$ while the national average is 100$. total land of 1hectare. Hence, it is adjusted to have 1
hectares land out of industry village and 10,000m² lands in the industrial village.

6. TECHNOLOGY
6.1. PRODUCTION OPERATION AND MAJOR ACTIVITIES

Pasta and Macaroni products are produced by mixing milled wheat, water, eggs (for egg
noodles or egg spaghetti), and sometimes optional ingredients. These ingredients are typically added
to a continuous, high capacity auger extruder, which can be equipped with a variety of dies that
determine the shape of the Pasta and Macaroni. The Pasta and Macaroni is then dried and packaged
for market.

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 6.1.1. Raw Materials

Pasta and Macaroni products contain milled wheat, water, and occasionally eggs and/or
optional ingredients. Pasta and Macaroni manufacturers typically use milled durum wheat (semolina,
durum granules, and durum flour) in Pasta and Macaroni production, although farina and flour from
common wheat are occasionally used. Most Pasta and Macaroni manufacturers prefer semolina,
which consists of fine particles of uniform size and produces the highest quality Pasta and Macaroni
product. The water used in Pasta and Macaroni production should be pure, free from off flavors, and
suitable for drinking. Also, since Pasta and Macaroni is produced below pasteurization temperatures,
water should be used of low bacterial count. Eggs (fresh eggs, frozen eggs, dry eggs, egg yolks, or
dried egg solids) are added to Pasta and Macaroni to make egg noodles or egg spaghetti and to
improve the nutritional quality and richness of the Pasta and Macaroni. Small amounts of optional
ingredients, such as salt, celery, garlic, and bay leafs, may also be added to Pasta and Macaroni to
enhance flavor. Disodium phosphate may be used to shorten cooking time. Other ingredients, such as
gum gluten, glycerin monostearate, and egg whites, may also be added. All optional ingredients must
be clearly labeled on the package.

6.1.2. Wheat Milling

Durum wheat is milled into semolina, durum granular, or durum flour using roll mills.
Semolina milling is unique in that the objective is to prepare granular middlings with a minimum of
flour production. Grain milling is discussed in AP-42 Section 9.9.1, Grain Elevators and Processes.
After the wheat is milled, it is mixed with water, eggs, and any other optional ingredients.

6.1.3. Mixing

In the mixing operation, water is added to the milled wheat in a mixing trough to produce
dough with a moisture content of approximately 31 percent. Eggs and any optional ingredients may
also be added. Most modern Pasta and Macaroni presses are equipped with a vacuum chamber to
remove air bubbles from the Pasta and Macaroni before extruding, if the air is not removed prior to
extruding, small bubbles will form in the Pasta and Macaroni which diminish the mechanical strength
and give the finished product a white, chalky appearance.

6.1.4. Extruding

After the dough is mixed, it is transferred to the extruder. The extrusion auger not only forces
the dough through the die, but it also kneads the dough into a homogeneous mass, controls the rate of
production, and influences the overall quality of the finished product. Although construction and
dimension of extrusion augers vary by equipment manufacturers, most modern presses have sharp-
edged augers that have a uniform pitch over their entire length. The auger fits into a grooved extrusion
barrel, which helps the dough move forward and reduces friction between the auger and the inside of
the barrel. Extrusion barrels are equipped with a water cooling jacket to dissipate the heat generated
during the extrusion process. The cooling jacket also helps to maintain a constant extrusion
temperature, which should be approximately 51°C (124°F), If the dough is too hot (above 74°C
[165°F]), the Pasta and Macaroni will be damaged. Uniform flow rate of the dough through the

Page 13
extruder is also important. Variances in the flow rate of the dough through the die cause the Pasta and
Macaroni to be extruded at different rates. Products of nonuniform size must be discarded or
reprocessed, which adds to the unit cost of the product. The inside surface of the die also influences
the product appearance. Until recently, most dies were made of bronze, which was relatively soft and
required repair or periodic replacement. Recently, dies have been improved by fitting the extruding
surface of the die with Teflon® inserts to extend the life of the dies and improve the quality of the
Pasta and Macaroni.

6.1.5. Drying

Drying is the most difficult and critical step to control in the Pasta and Macaroni production
process. The objective of drying is to lower the moisture content of the Pasta and Macaroni from
approximately 31 percent to 12 to 13 percent so that the finished product will be hard, retain its shape,
and store without spoiling. Most Pasta and Macaroni drying operations use a preliminary drier
immediately after extrusion to prevent the Pasta and Macaroni from sticking together. Pre-drying
hardens the outside surface of the Pasta and Macaroni while keeping the inside soft and plastic. A
final drier is then used to remove most of the moisture from the product. Drying temperature and
relative humidity increments are important factors in drying. Since the outside surface of the Pasta
and Macaroni dries more rapidly than the inside, moisture gradients develop across the surface to the
interior of the Pasta and Macaroni. If dried too quickly, the Pasta and Macaroni will crack, giving the
product a poor appearance and very low mechanical strength. Cracking can occur during the drying
process or as long as several weeks after the product has left the drier. If the Pasta and Macaroni is
dried too slowly, it tends to spoil or become moldy during the drying process. Therefore, it is essential
that the drying cycle be tailored to meet the requirements of each type of product. If the drying cycle
has been successful, the Pasta and Macaroni will be firm but also flexible enough so that it can bend
to a considerable degree before breaking.

6.1.6. Packaging

Packaging keeps the product free from contamination, protects the Pasta and Macaroni from
damage during shipment and storage, and displays the product favourably. The principal packaging
material for noodles is the cellophane bag, which provides moisture-proof protection for the product
and is used easily on automatic packaging machines, but is difficult to stack on grocery shelves. Many
manufacturers utilize boxes instead of bags to package Pasta and Macaroni because boxes are easy to
stack, provide good protection for fragile Pasta and Macaroni products, and offer the opportunity to
print advertising that is easier to read than on bags.

7. MACHINERY, EQUIPMENT
Machinery and equipment required for the envisaged project are conventional. The list of
equipment, quantity and associated costs are given in Table blow. As shown in the tables, the total
cost of machinery and equipment is estimated at Birr 1,300,000.00 of which Birr 1,050,000.00 is
required in foreign currency and the remaining Birr 250,000.00 is in local currency.

Table 7.1. Cost Of Machinery

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NO TYPE OF MACHINERY QUANTITY DIAGRAM

1 Puff Making Machine 2

2 Noodling Machine 2

3 Mine Oil Speller Machine 2

4 Flour Mill-type 1 1

5 Flour Mill-type 2 1

6 Oil Separating Machine 2

Chapatti roti making-

7 2
machine

Page 15
 Table 7.1. Cost Of Machinery

TOTAL COST
FUNCTIONAL SECTIONS QUANTITY UNITE COST REMARK
(BIRR)

A MACHNERY LIST
1 Puff Making Machine 2 120,000.00 240,000.00
2 Noodling Machine 4 70,000.00 280,000.00
3 Mine Oil Speller Machine 2 40,000.00 80,000.00
4 Flour Mill-type 1 1 120,000.00 120,000.00
5 Flour Mill-type 2 1 150,000.00 150,000.00
6 flour mixer 2 45,000.00 90,000.00
7 Oil Separating Machine 2 45,000.00 90,000.00
8 Other Equipment -- ------------- 250,000.00
TOTAL MACHINERY COST 1,300,000.00
SUPPLIERS ADDRESS SUN DONG MACHINERY CO.LTD

Sensigraphics, Inc. Quanzhou Maoyuan Stone Co., Ltd.

Changfu Industrial Area, Xiamei
1501 Grandview Avenue Nanan
PO Box 595 Quanzhou, Fujian
Thorofare, NJ 08086 China
USA

8. PROJECT IMPLEMENTATION AND CIVIL WORK

8.1. PROJECT IMPLEMENTATION

The project’s implementation is expected to take 24 months. The major activities include
Bank loan processing construction of the building, installing of machineries, Procurement of
equipment’s and start rendering services. The time schedule for the above matured major activities is
presented below:
Table 8.1 work breakdown
DESCRIPTION 1 2 3 4 5 6 7 8 9 10
Site and Construction work
Installing of machineries
Purchase of raw materials and
equipment’s
Worker employing
Repair and maintenance
Running the business

Page 16
CIVIL WORKS

The total site area for the envisaged plant is estimated to be 15,000m2 (1.5 hectare) where
6,000m2 is allocated to the production, stores, office buildings and facilities. The land lease cost is
estimated at Birr 300,000; the building and civil works are estimated at Birr 32.3 million.

Such kinds of factory, in order to provide high standard facilities, they have been planned to
construct and develop best infrastructure, building service and facilities that would viable to meet the
requirements of an international service standard. Accordingly, various buildings and facilities will be
constructed phase by phase starting with the most operational ones that are essential to commence of
its business activities. The first table (table 8.2.) different sectional facilities:

Table8.2. Cost Of The Civil Work

TOTAL
QUANT LUMPU TOTAL COST
FUNCTIONAL SECTIONS AREA
ITY M (BIRR) (BIRR)
(M.SQ)
A STAFF SECTION
1 Head Office 1 200 4,000.00 800,000.00
2 Staff Facility And Canteen 1 100 4,000.00 400,000.00
3 Changing And Locker 2 20 4,000.00 160,000.00
B ANIMAL FOOD PRODUCTION SECTION
4 Production Hall 1 3,400 4,000.00 13,600,000.00
5 Raw Material Store 1 2,500 4,000.00 8,000,000.00
6 Finished Goods Store 1 2,500 4,000.00 10,000,000.00
7 Maintenance Store 1 1,500 4,000.00 6,000,000.00
TOTAL SERVICE AREA 38,960,000.00

CONTINGENCY (5%) 1,948,000.00

GROTH TOTAL CIVIL WORK 32,382,000.00

9. RAW MATERIALS AND UTILITIES

9.1. RAW MATERIALS

Major raw materials are available in the local market although some forms of arrangements
might be required with the of Agriculture Bureau and farmer Commercial firms. In this project profile
even the agricultural raw materials are assumed to be imported partially.

The raw materials required to Business launch, there is depicted in the table below. Table
9.10 below presents requirements and corresponding costs of raw materials at full sell capacity.

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 Table 9.10. Cost Of The Raw Material
QUANTITY UNITE COST TOTAL COST
RAW MATERIALS REMARK
(TONES) BIRR /TONES (BIRR)
1 Different types of oilseed 200 15,000 3,000,000.0
2 Fine Semolina (Durum) 200 10,000 2,000,000.0
3 Wheat Flour (HW) 800 10,000 8,000,000.0
4 Non-Wheat Flours & Pulses (Gluten 2,000,000.0
200 10,000
Free)
5 Ingredients 50 10,000 500,000.00
TOTAL RAW MATERIAL COST 15,500,000.00
9.2. UTILITIES

Utilities required by the plant are comprised of electricity, fuel and water. Steam is required for
pressing. The table below present’s annual requirement of utilities and corresponding cost at full
production capacity.

Page 18
 ANNUAL REQUIREMENT OF UTILITIES AND COST
UNIT
NO DESCRIPTION UNIT QUANTITY TOTAL AMOUNT
PRICE
1 Electricity kwh 5,000 10 50,000.00
2 Water litter 50,000 5 250,000.00

3 Fuel for Transportation M3 10,000 20 200,000.00

GRAND TOTAL UTILITY COST 500,000.00

10.HUMAN RESOURCE AND TRAINING REQUIREMENT

10.1. HUMAN RESOURCE

The plant will be able to employ 131 persons. Annual salary requirement, including employee’s
benefit, will be Birr 2,352,000.00. The mix of production and administrative manpower required for
the envisaged plant is shown in Table.

General Manager
NO POSITION NUMBER OF MONTHLY ANNUAL
EMPLOYEES SALARY PER SALARY
NEEDED INDIVIDUAL EXPENSE
TOTA EMPLOYEE
M F
L
1.1 1. General Marketing
Manager Head 1 0
Legal 1 Medical 8000 Secretary 96000
Head
2.
Production Machine Operator
head technical 4 2 6 2500 180000
security
head 3. Salesman 1 1 2 2000 48000
4. Production Operator 3 1 4 3000 144000
5. Cashier 0 2 2 2000 48000
6. Marketing Manager 0 2 2 3000 72000
7.
Producti Motor Pool Accountan
Supervisor 2
Maintenan 0 2 2500 Office 60000
Guard
Nurse 28800
on 8. Secretary t ce 0 2 2 1200 attendant
9.
Supervis Maintenance Service Supervisor 2
supervisor 0 2 2500 60000
or 10. Purchaser 0 1 1 3500 42000
11.
Chemi Driver 4 0 4 1000 48000
12. Guard Purchaser Machine
3 0 3
Biochemist 1000 Janitor
36000
st
13. Lower operator
0 2 2 1200 28800
(cleane
14. Chemist 1 1 2 1500 r)36000
15. Co-Machine
Roastin 2 0 2 1500 36000
g and 16. Janitor (Cleaner)
Seals man
0
Mechanic
5 5 1000 60000
17. Accountant
grinding 0 2 2 1500 36000
18.
specialis Roasting And Grinding Expert 3 0 3 1500 54000
t 19. Mechanic 3 2 5 1500 90000
20. Nurse 0 1 1 1200 14400
Casher
Daily21. Office Attendant Driver0 2 2 1000 24000
labor22. Process inspection 10 25 35 1500 630000

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23. Others (Temporary) 15 25 40 1000 480000
Total 54 76 131 2,352,000.00
Among the total of 131 employees 91 of them are permanent and the remaining 40 are on contract or seasonal , of
which 76 are females and the other 54 are males

10.2. Training Requirement

Training of key personnel is indispensable. The training should primarily focuses on the
production technology and machinery maintenance and trouble shooting. Birr 100,000 is allocated in
the working capital as training expense.

11. FINANCIAL ANALYSIS

11.1. UNDERLYING ASSUMPTION

The financial analysis of food processing plant is based on the data provided in the preceding
chapters and the following assumptions.
A. Construction and Finance

Construction period 2 year

Source of finance 30% equity and 70% loan

Tax holidays 2 years

Bank interest rate 15%

Discount for cash flow 18%

Value of land Based on lease rate of ANRS

Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

Building 5%

Machinery and equipment 10%

Office furniture 10%

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 Vehicles 20%

Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30

Raw Material-Foreign 120

Factory Supplies in Stock 30

Spare Parts in Stock and Maintenance 30

Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

11.2. PROJECT COSTS

The total project cost amounts birr 54,034,000.00, the Fixed investment cost accounts around
35,332,000.00 birr, this means 65.48 percent of the total project cost and the rest 18,702,000.00 birr
which means 34.61 percent out of the total project cost will be allotted for operating cost.

SUMMARY OF THE PROJECT COST

NO DESCRIPTION PROJECT COST IN %
A FIXED INVESTMENT 65.39%
1 pre investment (Land) 150,000.00
2 building 32,382,000.00
3 processing machineries and equipment 1,300,000.00
4 Vehicles 1,500,000.00
TOTAL FIXED INVESTMENT COST 35,332,000.00
B OPERATING COSTS 34.61%
1 Raw Materials 15,500,000.00
2 Salary 2,352,000.00
3 Training 100,000.00
4 Electricity, Fuel And Water 500,000.00
5 Maintenance And Spare Parts 150,000.00
6 Other 100,000.00
TOTAL OPRATIONAL COST 18,702,000.00
TOTAL INVESTMENT COST 54,034,000.00 100%

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 11.3. PROJECT FINANCING

Now a day’s public and private banks extends loans to viable projects. Thus the project promoter
wishes to present two financial options for financing the proposed integrated agro industry.

An equity capital will be instrumental through an issuance of shares that accounts about 25% of
the total project cost.

Bank loan on other side to finance the whole project that accounts for 75% of the whole project
cost on long term loan basis for 10 consecutive years at 8.5% interest rate and the project cost is
disburses as shown in the table below.

12.FINANCIAL EVALUATION
12.1. PROFITABILITY

According to the projected income statement attached in the annex part (see annex 3) the project
will generate profit beginning from the first year of operation. Gross Profit/Sales is 46.54%, Net
Profit after Tax/Sales - 46.54%, Return on Investment 102.80% and Return on Equity 205.78% in
the first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

12.2. BREAKEVEN ANALYSIS

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 8.10% of capacity utilization.
12.3. PAYBACK PERIOD

The projects will pay back the initial investment less working capital in one year.

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 12.4. SIMPLE RATE OF RETURN

For the envisaged plant the simple rate of return equals to 88.2%.
12.5. INTERNAL RATE OF RETURN AND NET PRESENT
VALUE

Based on cash flow statement described in the annex part, the calculated IRR of the project is
87.3% and the net present value at 18 % discount is Birr 171.9 million.
12.6. SENSITIVITY ANALYSIS

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in the
sector.

13.ECONOMIC AND SOCIAL BENEFIT AND JUSTIFICATION

The envisaged project possesses wide range of benefits where it promotes the socio-economic goals
and objectives stated in the strategic plan of the Amhara National Regional State. These benefits are
listed as follows

A. Profit Generation

The project is found to be financially viable and earns Birr 507.56 million within the project life. Such
result induces the project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.

B. Tax Revenue

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In the project life under consideration, the region will collect about Birr 171.9 million from corporate
tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create additional fund
for the regional government that will be used in expanding social and other basic services in the
region

C. Import Substitution and Foreign Exchange Saving

Based on the projected figure we learn that in the project life an estimated amount of Birr 1244.5
million will be saved as a result of the proposed project. This will create room for the saved hard
currency to be allocated on other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create 131 jobs. This is one of the commendable
accomplishments of the project.

E. Diversification and Intersectional linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the ANRS as well as the country as a whole. It also has a potential to strengthen
the linkage between the manufacturing and the trade sub-sectors.

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