Background and Brief Description of the Project

1.1. General Background &Context

Traits and vegetables are important sources of vitamins, minerals and antioxidants useful for human
health. They are consumed directly in their raw an cooked form, as an important seasoning to add
aroma, taste, and flavour to dishes after passing through food processing industries as major
components ot neanny

numan diet. Fruits and vegetables are generally classified as root crops, such as

potato, carrot, red and white (garlic) onions, leaf crops, such as lettuce, caDDug

Spinach and fruit crops, such as tomato, pumpkin, watermelon and chill peppet

Ethiopia is endowed with favorable climate, altitude, adequate water supply, large

stock of cultivable land and suitable soils for production of high value fruits and

vegetable crops.ln spite of the vast resource base, production of fruits and vegetables

nave not been a major component of the agricultural economic activity and per capita

consumption and percentage of food budget spent on fruits and vegetables ISvery

low compared to other Sub Saharan Countries, such as Kenya, Uganda and

Tanzania'.

rrently Ethiopia's per capita consumption of fruits and vegetables

stands at 97 grams per day, which is much below from the recommended per capita

daily consumption of 400 gram or 147 kg per annum by the World Health

organization (WHO). According to the WHO report,insufificient intake of fruit and

Vegetables is a major cause of gastro-intestinal cancer deaths (14%), anemic heart

disease failures (1 1%) and deaths as a result of stroke (9%) globally.

The major diet of traditional households in Ethiopia is cereal crops that are

dominated by starchy food. However, a recent research study carried out over the

period 1996 to 2011published by International Food Policy Research Institute

indicated that the content and variety of food consumption is changing with a gradual

shift towards high-value foods, such as animal products, fruits and vegetables,

processed food with high calories intake. This shift is driven by improvement in

household level of income and increased awareness of nutrition for healthily human

diet.

In light of this background and context, this project is designed with a special focus
to improve production and marketing of high value vegetable crops through

commercialagriculture development and to promote and emphasis awareness on

nutritional attributes of fruits and vegetables for human healthy diet.

II. Brief Description of the Project Development

Per capita fruits and vegetables consumption in Kenva is 300 gram oanda 200 gram and

Tanzania 164 gram , A study report by Adam Ihuchia, 10/30/2011

International Food Policy Research Institute (2016)

4|P age

2.1. The Project Area & Required Land

The project plans to establish vertically integrated farming business, focusing

Cultivating quality vegetable products using irrigation based farming technolog8y

With modern farm maragement systemsupported by qualified horticuu

proressionals. The project aims to improve harvest management and storage systi

andpromote etficient marketing and distribution mechanism to meet and satisty the

growing market demand for fresh fruit and vegetable products for local markets.

2.2.

Vision & Goals

The vision of the project is to develop sustainable and profitable vegetabie

production and marketing business owned and operated by the promoter. Promoting

knowledge and awareness on the nutritional attributes of fruits and vegetables Tor

human healthy diet, transferring strategic farming technology to improve farming

skills of smallholder farmers in the project area and providing employment

opportunities for area residents are also the allied vision and goals of the project.

2.3.

The Project Area

The area identified for the project development is Dembia Woreda, Central Gondar

Administration,and Amhara National Regional State. The proposed location is about

50 km South of Gondar city.

Dembia woreda is one of the administrative woredas in Central Gondar Zone of

Amhara region. The woreda is located about 197 km west of Gondar, bordering
Alefa and Takusa to the West, Lake Tana to the South, Gondar Zuria Woreda to the

East and Gondar city to the North. Koladebia is the administration center of the

Woreda. It lies in semi-kola agro- ecology and the landscape is predominantly plain

with some hills. The temperature varies between 15-45 Celsius and the annual

rainfall is around 800 mm.

Based on the recent CSA census report ( 2017), Dembia woreda has a projected total

population of 311,398, of whom 157,876 men and 153,522 female. Of the total

population, 30,642 or 10 % urban inhabitants. With an area of 1,261.96 square

kilometers, Dembiya has a population density of 246.75, which is greater than the

Zone average of 63.76 persons per square kilometer.

The local economy is mixed farming with crop and livestock production. The major

crops are teft, sorghum, lentil, chick pea, finger millet, and maize. Oxen are used by

smallholder farmers for ploughing and threshing.

The woreda is accessible by road transport from Gondar, Chilga, Delgia and Sawra

Sudan via Metema. Insurance, bank and and close to border towns of Sudan via Metema.
Insurance,Bank and COmmunications services including full access to mobile networks are availaoic

the district center.

2.4. Required Land for the Farm Development

A total of 5 hectares of land is required for setting up the farm development pro

Ot the total land, the farming land covers about 80 % of the land area and the

remaining 20 % will be used to construct farm related infrastructure and facinucs

The proposed cultivable land and efficiency of the operation will form the basis ror

determining the type and quantity of machinery and equipment to be employed lo

the development.

2.5.

Legal & Administrative Frameworks for Investment Land Requests

In accordance to the investment proclamation No 280/2002, the project is eligible to

acquire land for investment at competitive lease price, access to long-term credit witn

low interest rate, exemptions from customs duty for capital and spare parts, export

incentives and tax holiday from income taxes for five years.

In the project area, land requests for agricultural investment is handled and processed
at the Zonal and/or Regional level Environmental Protection and Land Management

Bureau. The Bureau requires investors who wish to obtain land from the woreda to

Submit a project profile document and provide bank statement that show financial

capacity and resources to undertake proposed projects. This project development

plan is developed for the purpose of requesting land for investment in accordance

with this general regulation.

2.6.

Environmental Impact Considerations

Although no immediate environmental problem is anticipated from the proposed

farming activities, the project plans to establish strategic collaboration with the local

administration and area residents to engage in activities aimed at minimizing soil1

erosion and land degradation caused by rain water flooding,

communal lands and over cultivations. The project will also allocate specific budget

for seedling /nursery development of indigenous tree species to be planted in the

farmland between blocks. The merit of this plan is to serve as wind break to the

crops, to prevent wind erosion and maintain ecological balance of the farm area.

over grazıng of

2.7. Social & Economic Benefits of the Project

In addition to the financial benefit the promoter expect to gain from the investment,

the project will create over 26 permanent and temporary employment opportunities

for skilled and unskilled area residents and will generate substantial tax revenue for

the local government tron its various business aciuvitues and ransactions.

Furthermore, the project Wili aiso activeiy support and participaie in local

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development projects to help improve the welfare and quality of life of loca

residents through sponsoring educational seminars and trainings o

nutrition and consumption culture.

2.8.Conformity to Government Policy, Strategy and Directives

The project is compatible with the present Agriculture Development Led

Industrialization (ADLI) policy and the Growth and Transformation Plan (

which emphasis in promoting and providing support for development of commercl1a

agriculture with a special focus on high value crops production for local and expor

markets.

Furthermore, the project development plan discussed and outlined in this document

fulfills and satisfies directive NO 9/2006, a directive issued by the Head and Councll

of the Regional Government of Amhara on formalities and conditions for granting

agricultural land for investment purposes.

2.9.Legal Structure of the Project

The project will be incorporated as private farming business entity according to the

commercial law of Ethiopia, obtain investment license from Ethiopian Investment

Authority and register for VAT and Tax Identification Number (TIN) with Revenue

Authority.

2.10.

Sources and Uses of Investment Capital

The total planned investment to set up the farm development program during the first

phase of the project implementation period is estimated to be Birr 2,001, 225, of

which 30 % is owner's contribution and the remaining 70 % is expected to be

financed with long term bank loan.

II.

Relevant National Development Strategies & Policy Frameworks for Investment

a) Growth and Transformation Plan ( GTP) - The strategy aims in addressing

poverty and ensuring sustainable development through effective utilization of

human and land resources as basis of rural development and speedy economic

growth in urban areas. The policy also attaches high importance to private

sector development to contribute to the national economic development and

creation of employment both in the urban and rural sectors.

b) The Council of Ministers Regulations No.270/2012 specifies the areas of

Growth& īranstormation Plan (2010-2015), GTP 11 (2015-2020), Ministry of Finance & Econoinic

Developmet (Ethiopia)

71Pag
nvestment eligible for unvestment incentives to encourage and promoe uc

intow of foreign capital and technology into country. It entitles incentives to

both domestic and foreign investors with provision of land at negotiatea in

lease rate, customs duty exemptions for capital goods and tax holiday tor

period of up to five years depending on the sector

IV. Fruits and Vegetables Market Demand & Supply Assessment

4.1.

Production and Cultivation of Fruits and Vegetables

According to CSA Agricultural Sample Survey (2014/15), the total area covered by

fruits and vegetable crops was reported to be 2,008,988hectares or 13.2 % of the total

country level crops covered land area, The survey also indicates cultivation is

focused on traditional vegetable crops and yield per hectare was lower compared to

the potential output level that could be obtained from improved cultivation

methods.From the total output, a small amount of vegetables consisting of potatoes,

tomatoes and onions are exported to neighboring Djibouti, Somalia and other Middle

Eastern countries.

Table 1(a): Cultivated Land under Vegetable and Fruits (CSA 2014/2015)

Crop

Total Hectare

Source ot Pmance

Commercial farm

Private farm

139,449

Vegetable

146,240

6,791

217,585

216,374

1211

KOOt crops

11,297,395
11,653,218

347,768

1,645,163

Permanent cropS

355,770

|Total

2,008,988

Table 1 (b): Crops Output by Private and Commercial Holdings (CSA 2014/2015)

Crop

Output (quintal)

Source of Finance

Private farm

Commercial farm

8,113,786

7,288,937

884,849

Vegetable

54,856,075

54,554,894

301,181

Root crops

147,999,023

80,181,583

67,817,440

Permanent crops

210,968,884

142,025,414

69,003,470

Total

The total cultivated land under irrigation was 179,000 hectares or l1.3 % of the total

cultivated land under all food crops. Of the total irrigated land, 60 % was covered
under vegetable crops and the remaining 40 % covered with cereal crops.

In Amhara region, the total cultivated land under truit and vegetable farms is 8,638.73

nectares, primarıly culuvated by small hotding peasant. Lettuce. head cabbage, tomato81Page

rea pepper, carrot, onion, fotato, garlic and sweet potato are among tne maor

harvested vegetable crops.

Table 2: Cultivated Land under Fruit and Vegetable Crops and Output in Amhara

Region (Agriculture Sample Survey 2014/2015 CSA)

Crop

Number of

holders

Cultivate land

Output (quintal)

(Ha)

39,566

Vegetable

1,407,199

53,019

Root crops

1,561,507

32,525

4,539

Permanent crops

413,180

4,550.03

272,575

Total

3,381,886

76,641.03

1,030,133

Table 3: Cultivated Land Under Fruits and Vegetables Crops in Central Gondar

(formerly known as North Gondar)

In North Gondar Zone, the total cultivated land under vegetable crop (excluding fruit

crop) was 9,638 hectares or 13.3 % of the regional cultivated land under vegetable and

root crops and total output obtained was 569,469 quintals.

Crop

Number of

holders

Output (quintal)

Cultivated land

ha)

5,850

Vegetable

246,880

97,155

210.336

3,788

472,314

Root crops

28,701

N/A

N/A

Permanent crops

Total

485,917

9,638

S69,369

Although some experts claim up to 30% of harvested vegetable crops to be lost due

to poor post-harvest handling, from the total cultivated land tomato represents 30 %,

red pepper 22 % and onion 26 %.,

4.2.Fruits and Vegetables Consumption and Supply Trends

The major markets for vegetable products are urban households, hotel and restaurant

businesses and institutional customers, such as schools, hospitals and military

training centers. According to the recent CSA report, the city of Gondar has a

population of about 254,583. In addition, 42,133 persons reside in the recently

incorporated eleven rural kebeles. There are a total of 47,720 households with an

average family size of five people per household

about 5.2% per annum, rural to urban migration constitutes the larger share of the

irncrease. Additionally, the city is homne for tihe oidesi medical school and referra

hospital, namely the University Of Gondar Medical School, teacher training college,

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a major center of trade and commerce, one of the main tourism destinations in

Amhara region andit hosts a wide range of seminars and meetings on a regular basis

In spite of the vast resource base, production of fruits and vegetables has not been a

major component of the agricultural economic activity and per capita consumption

and percentage of food budget spent on fruits is very low. Like anywhere else in the

country, per capita consumption of fruits and vegetables is very low. However, there

is a growing shift towards consumption of high protein dishes, fresh fruits and

vegetables and processed food items by the middle income group. The change is

highly associated with improvement in household level of income and increase

awareness of health and nutrition.

Presently, smallholder farmers and per-urban cooperatives as well as backyard

growers with traditional production techniques and harvest management practices

dominate the fruit and vegetable product market (mainly traditional vegetables, such

as red onion, spinach, lettuce, and green peppers). Furthermore, extracted fruit and

vegetable products, such as mango and mixed fruit juices, are offered and supplied

by small scale business operators, such as cafes and juice houses, and supply ot

industrial processed vegetable products, such as tomato paste and tomato juice are

dominated by Merti products (government owned enterprise) and a few imported

brands from the Middle East.

In spite of expanding demand, the local vegetable market generally suffers from

seasonal supply fluctuations due to traditional production system characterized by

low productivity, fragmented and uncoordinated product marketing and distribution

mechanism and absence of well-developed market infrastructure aimed at promoting

sustainable product development. For these reasons, demand surpasses supply

throughout the year, reaching its peak during the lent season;while supply tend to be

moderately high during the rainy season only.

4.3. Vegetable Market Value -Chain Analysis

The formal vegetable market value chain is defined as peri-urban and rural vegetable

farmer cooperatives, registered and licensed wholesale and retail distributors and

consumers or end users.The informal vegetable market value chain includes

smallholding farmers, backyard growers, street vendors (Gulet operators) and

consumers or end users.

4.4. Vegetable Product Marketing Practices

Modern marketing and distribution channels for vegetable and other consumer

goods, such as supermarkets and chain food storeswith larger assortment of locally

produced or imported products are in the early stage of development.

The bulk of fresh fruits and vegetable produced by agri business cooperatives and

backyard growers are marketedto ur ban consumers, such as n0usehold5, hoteis,

coffee shops and the like, either through doOr-to-door sales orthrough fruits and

10Pa ge

getable wholesale and retail stands in major market places. Most households and

Ow income consumersS also purchase vegetable products from informal market

stands, such as neighborhood "gulets and street side vendors.

There is no uniform size or standard packaging of vegetable products supplied in thee

Tocal market. As plastic or wood crates are in short supply due to higher prices, truits

and vegetable packaging for local markets use rudimentary packagıng practices. For

example, baskets are used to contain leafy vegetables, while jute and plastic sacks are

used for marketing onions, potatoes, carrots, and head cabbages. Grovers of leaty

vegetables near urban areas do not use any containers, but instead tie the product into

bundles.

Although, some farmers produce and market good quality vegetables, hygieniC

condition of most vegetables marketed in the formal and informal production and

distribution channels are questionable quality.

4.5. Prices of Fresh Fruits and Vegetables

Prices for fresh fruits and vegetables is steadily increasing due to several tactors

including demand from higher urban population growth, high inflation, and increases

in cost of fuel and transportation. Although price varies from place to place, the

Current average pricesof fresh traditional vegetable crops in Gondar market are Birr

20/kg, Birr 30/kg, Birr 120/kg and Birr 20/kg for tomato, onion, garlic and potato

respectively'.

V.

Farm Operation Development Plan

The proposed farm will be vertically integrated fruit and vegetable farm business

development. The vertically integrated business model comprises growing high

quality vegetable products supported by appropriate farming technology, improved

harvesting and storage system, value addition in the form of cleaning and crate

packaging and efficient marketing and distribution channels to generate more sales

revenue in the local markets and to further enhance and contribute to the social and

economic development of the region in particular and the country in general

5.1.Planned Cultivable VegetableCrops /Products (Types)

From the broad category of horticulture products, red onion, garlic, spinach, cabbage,

carrot, potato, tomato, lettuce and cabbage are most popular fresh vegetable items

consumed by the urban consumers.

The farm project will focus and concentrate on producing selected high quality

vegetables that have high local market potentials with improved seedlings developed

Oniniy Produccr Price Survey, Central Sialics Agcncy (October, 2019)

111Pag

n a modem nursery beds on the farm field. The lists of planned cultivable vegetabies

include

a) Onion:contains natural sugar, vitamins A, B6, C andE. minerals such as

sodium, potassium, iron and good source of folic acid. Mostly consumed

cooked and serves as seasoning to add aroma and taste with all kind of dishes.

b) Lettuce: is a nutritious leafy vegetable, rich in minerals and vitamins. It s

consumed in a raw form and used as the base for salad.

c) Garlic:is important sources of vitamins, such as vitamin BI and B6, and

minerals such as copper, mangan ese, calcium, selenium, and phosphorous.

Garlic is an important seasoning to add aroma, taste, and flavor to dishesin

addition to the nutritional value and health benefits, such as reducing the risk

of heart disease and lowering cholesterol levels.

d) Spinach: is leafy vegetable with excellent source of vitamin A, K and E and

contains key minerals, such as manganese, iron, cooper and potassium.

e) Tomnato: is one of the most important vegetable grown in many parts of the

country. It is rich in vitamins. It is consumed cooked or raw with salad or

processed into tomato paste, sauce and pure.

Carrot: is a root vegetable, exceptionally rich source of carotenes, vitamins

and dietary fiber. It also contains health level of minerals, like copper,

calcium, potassium, and manganese and phosphorous.

g) Green peppers(Jalapeno): is a medium sized chili pepper with rich sources

of vitamin C and other useful antioxidants.

h) Cabbage: is a cool season leafy vegetable belonging to "Brassica" family. It

is an excellent source of natural antioxidants, vitamins and contains minerals,

such as potassium, manganese, iron and magnesium.

5.2. Farming Technique and Technology

The envisioned project is designed to be a commercial farm, which intends to use

modern agricultural techniques and best local and international farming practices to

enhance quality and improve yield.

Land preparation, planting, harvesting, collection, sorting, packing, and transporting

to the market will follow Good Agricultural Practices (GAP).

Nutritional contents of products is reprinted from Joumal of Biology, Agriculture and Healthcare, Vol

5,# 21 (2015)

121Page

vegetables are highly perishable food products and require high level of care, the

perature of the storage area will be maintained at low humidity and inspected

Tcquently to check for spoilage and damage that could affect quality, aroma and

ste of products. Uniform size or standard material will used for packagıng products

for the local markets.

Quality control system will be installed to ensure planting, harvesting, collection,

Sortung, cleaning, weighing, packaging, storing and transporting process meet the

required standards at satisfactory level.

5.3.Farm Infrastructure

The farm facility requires a total of 500m2 area of land to construct farm related

service facilities, which include farm office, equipment maintenance workshop,

locker room, farm clinic, store room for raw inputs, employee lounge, and shower

and toilet facilities.

Vegetables collected from the farm field will be cleaned, weighed and packed in

varying S1ze sacks and crates and transported to the storage facility using tractor

driven trailer.

The product storage facility will be kept clean and maintained at low or cool

temperature using solar vapor system to minimize spoilage and wastage resulting

from high temperature.

Transporting vegetable from the farm to market outlets will be done by tractor driven

trailers or truck.

Prior to loading, the trailer shall be fully clean from debris and

other elementsto avoid contamination during transportation

A small farm clinic equipped with basic supplies will be established to provide first

aid care services for farm employees and the surounding community. Budget for

pharmaceutical supplies and health professional is incorporated in the operating

budget.

A signage containing information, such as farm name, operation hours and contact

information shall be posted at the facility. The signage will be sufficient size and

prominently displayed in a main traffic passageways so that visitors and input

Suppliers can easily identity the site and its operation.

5.4.Planned Investments on Farming Tools & Equipment

The required farm machinery and equipment and corresponding

below. The proposed cultivable land and the etficiency of the machinery formed the

basis for determining the type and quantity of machinery and equipment.

quantity are listed

Table 3: List of Farm Machinery & Equipment

13|Page

Oty

No Description

Tractor (110 hp)

|Disc plough with farrow

Planter

Sprayer

Trailer

Hand tools, such as hoe, pick, shovel, hose, etc

Generator/Solar cooling system

Water Pump

|Pickup truck (4x4)

5.5. Production Cycles and Capacity Utilization Program

During the first year, the project will operate at 80% of its installed capacity with two

production cycles per year, harvesting and collecting an average of 43 ton mixed

traditional vegetable crops. Full capacity is expected to be attained at the third year

with total production capacity of 54 ton mixed vegetable,

The project plans to increase yield per hectare in the third production year by means

of employing high quality seed, improved farming techniques and harvest

management techniques.

VI. Marketing and Promotion Plan

The project's marketing plan will capitalize on its improved cultivation, quality

production,

timely delivery to local markets.

efficient harvest management techniques, value addition activities and

In the short term, the farm product will be marketed and distributed through local

vegetable wholesalers and retailers.In the long run, after establishing contacts and

securing agreements with high volume customers, such as hotels, restaurants and

institutional customers, the project will directly distribute and deliver farm products
using its own transportation vehicles.

The overall marketing plan will comprise of:

.Focused mass communication via billboards, printed materials, sponsorship

of educational seminars and workshops to promote nutritional attributes of

14|P age

fruits and vegetables for human health and daily diet/

Product differentia:ion through introduction of packaging, labeling and on

time delivery.

Establishing revolving credit sales, delivery, billing and invoicing system

with standard terms and payment modality for high volume customers and

businesses.

Offering wholesalers/retailer discounts for bulk purchases.

Attending in significant national and regional trade shows to establish good

Working relationships, cooperation and business networks.

VIl. Farm Management & Stafing Pan

The envisioned project will be established as business entity according to the

commercial code of Ethiopia. The promoter/business owner has substantial

experience in local and overseas business operations, business management, and

leadership skills with credit worthiness records of accomplishment.

The owner decides on the overall business directions, management and operations

plans, budget allocations and approval of production, sales and marketing plans and

strategies.

The day-to-day business activities of the farm development will be handled by a

general managersupported by administration, finance and sales & marketing staff.

The farming activities will be managed by professionals with farm management

training and skills.

The project will create employment opportunity for over 26 full time skilled and

unskilled professionals. Upon employment, all employees will be provided sufficient

orientation and training on basic farming techniques and the required operational

standards to ensure safe, productive and pleasant work environment. They will be

required to follow high standard production and safety procedures in disposing their
job assignments to achieve the highest performance levels possible.

Table 4: List of Manpower

S/N Description

Qualification

Qty

Farm Manager( Horticulture/ Agronomist)

BA degree

|Finance/Accountant

BA degrec

Marketing & Sales Manager

Office Manager/Secretary

BA degree

Diploma

Plant Inspector

Diploma

Tractor Operator

Diploma

15|Page

Certificate

Store Keeper

12

semi-skilled

Permanent farm labor

semi-skilled

Guards

Total

26

VIl. Financial Feasibility Study (Plan)

The total planned investment to set up the farm program during the first phase ot the

project implementation period estimatedat Birr 3,751,250, of which 70 % is owner's

contribution and 30% is expected to be financed with long-term bank loans.

Table 5:Planned Investment

Total (Birr)

Source of Finance

Description

Owner'sS

Bank Loan

Equity

1,050,000

105,000

840,000

450,000

Tractor

1,500,000

Trailer & Other Eqip.

150,000

45,000

360,000

1,200,000

300,000

Vehicle

210,000

90,000

Building/ Civil Works

Working Capital

546,702

382,691

164,010

26,510
28,038

Pre operating Cost

26,510

Pre operating interest

Total

28,038

3,751,250

2,642,239

1,109,010

100

detailed calculations for

Basic parameters and assumptions used for the study and

each cost category is presented separately as part of the financial feasibility study.

Table 6: Determination of Operating and Working Capital

Year

Description

Direct cost

Seeds

Fertilizer

Weed killer

Other Costs

Transportation

5,000

2,000

5,000

10,000

10,000

5,500

2,268

5,250

10,500
31,185

6,050

2,495

5,775

11,550

34,304 |

6,353

2,620

6,064|

6,670

2,751

6,367

12,128

12,734

36,019 37,820

Working capital =Operatıng cost depreciation

161Page

Sub Total

Total Direct Cost

32,000

32,000

54,703

54,703 |

60,173

60,173

63,182 66,341

63,182 66,541

402,159 422,267

1,005

Indirect cOst

Wage& Salary
Land Rent

Insurance

Employee Benefits

Office Supplies

Travel &Peridiem

Repair &&

Maintenance

Tel& Postage

Marketing &

Promotion

Legal &Audit_

Fuel & Lubricant

Depreciation

Miscellaneous

Total indirect coSt

Total Operating

Cost

Working capital

383,009

1,005

4,875|

11,490|

16,538

33,075 |

364,770

1,005

875

347,400

1,005

4,875

10,422
15,000 |

30,00 0

1,005

4,875

4,875

12,668

10,943

15,750

31,500

12,065

17,364 18,233

34,729 36,465

21,000

21,000

1,000|

20,000

21,000

21,000

21,000|

22,050|

23,153 24,310

68,214

25,000

10,000

20,000

149,910 |

10,000

664,612

51,250

10,500|

21,000
149,910 |

10,000|

713,503

56,375

11,025

22,050

,910

22,050

149,910 149,910

10,000 10,000

771,898 803,151

62,013

11,576|12,155

22,050

14

10,000

742,401

696,612

546.702 L

768,206

618,296 |

802,574

652,665

835,080 869492

685,170 719,583

Kevenue forecast is dependent on production volumes and sales prices in each

production year. In this financial study, the total revenue from production and

marketing of the farm product is estimated to be Birr 1,000,000Oin the first production

year and Birr 2,196,150 in the fifth production year. In anticipation of future

production cost increases, an average of 10% increase is added to costs of production

and an equal percentage increases is added in sales revenue projections.

Table 7: Profit & Loss Projections

Year

Description

1,000,0C0

1,237,500

1,875,000

1,996,500

2,196,150

Revenue

Less: Operating

Cost

696,612

743,623

804,586

837,091

871,504

Profit before

interest

Interest on Loan

Profit before Tax

Profit Tax

303,388

30,779

272,6C9

493,877

36,854

457,023

1,070,414

37,795

1,032,619

1,159,4099|
25,197

1,134,212 1,312,048

1,324,6466|

12,598|

(35%)

Net Profit

457,023 1,032,619 1,134,212 1,312,048

272,609

Assuming the investment falis With the tive-year tax exemption category, the

protitability assessment excluded the 55 % protit tax and includea 9.5 % cost of bank

17|P age

inancing in the net profit calculation. Accordingly, the project's net profit wil o

be

Birr

the first production year and Birr 1,312,048 in the fifth production

respectively.

nc cash flow forecast shows incremental cumulative cash balance of Birr 269,50I in

would not face any cash shortage to finance its debt obligations and to meet ltsS

1u Birr 4,345,989 in the fifth projection year, implying that the project

operational costs.

icient

ancial viability study indicated that the project expected to generate su

tof net profit starting from its first year of operation. The cash floW roreeas

wS the proposed project will be liquid throughout its life. The discounted casn lo

wellas the sensitivity test analysis for adverse impacts (decreasing revenue nd

casing operating costs by 10%) shows greater than the current rate ot intlation

(7%) and real interest rate of 5% offered by commercial banks.

IX.

Summary & Conclusions

vegetables are important sources of vitamins and minerals and major components of

human diet. They also offer and provide a wide range of business opportunities to
improve household income and to contribute for local and regional economy.

Presently, while demand is considerably increasingin urban areas because of

improvement in household disposable income and increased awareness for healthy diet

food, supply is lagging behind and constrained by traditional production methods and

inferior quality harvest management practices.

Smallholder farmers living near and around major urban centers of Amhara region

largely practice vegetable production on small pockets of land to supplement

household food consumption or for commercial purposes to generate sales to

complement household incomes.

Conclusions

Fruits and vegetables are important components of human diet. Production of the crops

are seasonal, less capital intensive and yield per hectare is greater than most cereal and

grain crops, for example vegetables like tomato and onion provides higher quantity of

food per unit area of production. Therefore, having all these advantages coupled with

the recent expanding demand make fruits and vegetables production and marketing

more beneficiary and attractive to growers as well as to the urban economy. Moreover,

due to their high nutritional and market values, vegetables are classified among

exportable agricultural commodities' with high potentials to generate considerable

amount of foreign currency earnings in the export market.