Project Profile of Wheat Flour

By: Team Members

May, 2013

Dire Dawa

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 Table of Content

1. Executive Summary ……………………………………………………….3

2. Introduction…………………………………………………………………3

3. Background ………………………………………………………………...4

4. Policy Environment & Incentives ………………………………………...5

5. Project Objectives & Rational…………………………………………….7

6. Project Area Description…………………………………………………..8

a. Land Availability……………………………………………………8

b. Infrastructure………………………………………………………..9

c. Service facilities…………………………………………………….9

7. Project Description…………………………………………………………10

8. General Market Description……………………………………………….12

9. Required Machinery………………………………………………………..17

10. Indicative Project cost………………………………………………………18

11. Conclusion ………………………………………………………………….19

12. Appendix……………………………………………………………………..20

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1. Executive Summery

Wheat flour is a powder made from the grinding of wheat used for human consumption. Flour
has been used for centuries as vital ingredient of daily diet. The target customers for the
proposed product would primarily be individuals, whole sellers & retailers, confectionary and
home users. Initially the project will be focusing on influence area communities, and opportunity
for expansion could be capitalize depending successful marketing of product.

The land required size for this project is estimated at 4,000m2. It creates job opportunity for the
27 persons. And the total investment cost is 42,929,700 birr.

2. Introduction

In order to bring the fast economic development, the role of private sector is indispensable. It is
clear that the private investment has a direct contribution to the growth of the economy and
poverty reduction. To make the investment more effective it is better to identify the important
sectoral priority and linkage between the sectors. Currently, the manufacturing sector especially
the agro processing subsectors is the one which get more emphases in the policy. The proposed
wheat flour project is the main agro processing which has got contribution to the economy.

Wheat flour is common or may including as stable food in the Dire Dawa city and the influence
area. By using wheat flour they make variety food in regular and cultural ceremony. Because of
these it has got wide range of demand in the eastern Ethiopia. Therefore, wheat flour investment
is very profitable in all scale of investment. The necessary step to establish this project indicates
in this profile.
Generally this project profile concerned document is going to accommodate seven major and
concrete sections. The first one describe the project background briefly, the second one related to
policy environment & incentives project, objectives & rational, project area description, project
description, general market description and finally the indicative project cost.

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3. Background

The main economic activity of the Dire Dawa city is predominately industry and trade. The city
is serving as a center of trade, industry and service. On the other hand the rural part of the
Administration is agrarian. Regard to the city geographical location, it is far from Addis Ababa
about 510 k.m. It is bounded by the Oromyia Regional state to the South and East and by the
Somali regional state to the North and West. The geographical coordinates of Dire Dawa
Administrative are between 41o 38’ E and 42o 19’E longitude and 9o 27’ N 9o 49’N latitudes. Dire
Dawa is placed in the Awash River basin, at the bottom of the northern side of the Amhar
mountain chain, in the eastern part of the country. It extends down up to boarders of the Somali
lowlands. The Dire Dawa Administrative consists the Dire Dawa town and 38 peasant
associations (PAs). It has at present an estimated total population of 377,000 Out of this about
256,774 (70%) are urban population and 120,220 (30%) rural populations. It is very ideal place
to invest on various projects due to the existence of enormous raw materials and its strategic
location for market and nearness to Djibouti port. Currently, in addition to the existing different
factory the various mega projects such as cement and textile factory have been established. All
the present establishing factory projects have both forward and backward linkage each other.
Because of this many other projects pulled and established as small and medium factory. Wheat
flour is one of these projects which established as new plant. Flour has been made & eaten since
the prehistoric times of Egyptian era over 6000 years before. The earliest method used for
producing flour involved grinding grain between stones, which is usually operated by hands.
Wheat flour is a powder made from the grinding of wheat used for human consumption. Wheat
varieties are called "clean," "white," or "brown" or "hard" if they have high gluten content, and
they are called "soft" or "weak" flour if gluten content is low. Hard flour, or bread flour, is high
in gluten, with 12% to 14% gluten content, and has elastic toughness that holds its shape well
once baked. Soft flour is comparatively low in gluten and so results in a finer or crumbly texture.
Soft flour is usually divided into cake flour, which is the lowest in gluten, and pastry flour, which
has slightly more gluten than cake flour.

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4. Policy Environment & Incentives

The existing formulated national police consider the country’s development potential which lies
on the huge work force, arable land and natural resources. Related to these resources the
identified sectors are the one which utilized this resource. Agro processing sub sector is the one
which utilize this resource effectively. In order to materialize this, good investment climate is
necessary that encourage the private investors. Investment is the engine for growth and poverty
reduction. It creates business opportunities and jobs for people. It expands the variety of goods
and services available and reduces their cost to the benefit of consumers. The existence of good
policy may facilitate this private investment by utilize the potential in this sector.
The Dire Dawa administration also has taken the federal development objective as frame work
in the administration GTP mainly include the higher growth of industry sector, the optimal use
of material and human resources, higher levels of income and employment, and significant
improvement in living condition and living standards.
In particular, the basic objectives of the industrial policy should be to achieve an accelerated
pace of competitive and sustainable industrial growth within a framework of increased market
orientation and private sector development. Such growth should also bring about greater socio-
economic development, including increased employment and incomes, and thereby improved
living standards. And also the industrial development strategy focuses on export manufacturing
with priority given to textile and garments, leather and leather products, agro-processing, and
small and micro-enterprises.
The very rational of the manufacturing project lies in the strategy of the government that is being
used for implementation of the policies to achieve the overall government goals. The success of
any policy demands for private sector investment, which in turn leads to the inevitability of
industrial development.
The foremost and basic step to make effective this policy is the government incentives to
encourage the investors by various ways. The incentive which the government implements by
investment proclamation includes the following main issue:
 100% exemption from the payment of import duties and other taxes levied on
imports of capital goods, equipment and spare part up to 15% of the value of
capital invested;

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  Exemption from the payment of import duties levied on the import of raw
material for production of export- orientated goods;
 Income tax exemption for periods ranging from three to eight years; this is a
function of where the investment is located and also the priority accorded to that
particular good; All research and development expenses are tax deductible; and
 Remittance from the proceeds of the sale or transfer of shares or assets upon
liquidation of enterprises to domestic investors is exempted from the payment of
any tax.
In general, in regard to the wheat flour industry our economic policy considers it directly since
the industry absorbs large number of human power and use agricultural product as raw materials.

5. Project Objectives & Rational

a) Project Objective
Wheat flour is one the important agro processing sectors which has role in daily food stuff of the
eastern Ethiopia community. Since this factory use wheat product as a raw material in large
amount, the surrounding individual farmers and commercial farms engaged in participate in
producing and supply the wheat. Therefore, the general objective of this project is to contribute
the growth of the agricultural and the agro processing subsector. The specific objective of the
project listed below:
a) To satisfy the demand of the influence area people
b) To create large job opportunity
c) To link the agricultural and manufacturing sector.

b) Rationale

Flour has been used for centuries as vital ingredient of daily diet. Wheat flour is an important
source of complex carbohydrates with a balance mixture of calories, proteins B-vitamins,
calcium, folacin, iron, magnesium, phosphorus, potassium, zinc, minimal amounts of sodium and
other trace elements. It is used in variety of the modern & traditional baked dishes both at home
and commercial level. The common practices for flour are yeast breads, quick breads, cakes,
cookies, pastries and noodles etc. The products made by flour can be eaten by hand or mixed

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with other traditional and modern dishes. Such all factors contribute to make it the most nitrous
food for the individual and commercially very importance for any economy. Dire Dawa and the
influence area have been characterized as densely populated area. Over the past years, people
preference is changed towards more quality food. However, Roti & other wheat products remain
essential items in daily diet. Hence factors like high demand, diversified uses and people
preferences indicate a strong potential market for quality to remain sustainable in the market.
Consequently, the wheat flour has good advantage for the investors in terms of its good profit. In
regard to the socio economic side, it creates job opportunity for the influence area. Beside this, it
supports a sustainable source of tax revenues to fund other important social goals.

6. Project Area Description

6.1 Land Availability

The proposed project may obtain land by two options. The first option is by lease contract for
certain years. In Dire Dawa Administration land development and administration managed by
the newly established bureau ‘Land development and management bureau.’ This bureau provides
land for investor in the already prepared investment village. This industry village covered total
area 110 ha. It has the entire necessary infrastructure such as electric power, water and
telecommunication line. The other option is that if the investor may purchase the land through
land bid or have for its own land, it is possible to change the land use permit to the intended
purpose but it should be compatible with the local development plan. In general the land
provision for the wheat flour project is very simple and it is available every time especially with
first option.

The land required size for this project is estimated at 4,000m2, from this total estimated land the

built up area should be 1500m 2. Regarding to the city Cost of building construction, at a unit

cost of Birr 4000 per m2, is estimated at Birr 6 million. Total land lease cost, for a period of 80

years with cost of Birr 9.78 per m2, is estimated at Birr 3,129,600.00. The total investment cost
for land, building and civil works, assuming that the total and lease cost will be paid in advance
is estimated at Birr 9,129,000.

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6.2 Infrastructure
To facilitate the production and the market activity of the proposed project there is well
organized infrastructure in sufficient amount. In regard to the road access of the Dire Dawa
administration has good level of passenger transport interaction with influence areas and with
other towns particularly Nazareth and Addis Ababa. And on the other hand there are Ethio-
Djibuti and Ethiopian train corporation train which will serves from Djibouti to Addis Ababa via
Dire Dawa so that it helps the project to transport the raw material and workers place to place.
Beside this the other fast transport for passenger and commodity is airline transport which serves
as international standard. The other best infrastructure which is available in sufficient amount
for this project is electrical power supply, water supply and telecommunication which is may
provide as the project request.

6.3 Service Facilities

In Dire Dawa city there are 20 bank and insurance financial institution which give networked
strong and fast service for the manufacturing sector. In line with the financial service foreign
trade office which gives service for any exportable and import product with the collaboration of
revenue and costume service. In related to standardization the Quality and Standards Authority
of Ethiopia has a regional branch office in Dire Dawa gives certification give the laboratory
testing certification based on the international standard.

7. Project Description

Wheat flour is a powder made from the grinding of wheat used for human consumption. Flour
has been made & eaten since the prehistoric times of Egyptian era over 6000 years before. The
earliest method used for producing flour involved grinding grain between stones, which is
usually operated by hands. Wheat varieties are called "clean," "white," or "brown" or "hard" if
they have high gluten content, and they are called "soft" or "weak" flour if gluten content is low.
Hard flour, or bread flour, is high in gluten, with 12% to 14% gluten content, and has elastic
toughness that holds its shape well once baked. Soft flour is comparatively low in gluten and so
results in a finer or crumbly texture. Soft flour is usually divided into cake flour, which is the
lowest in gluten, and pastry flour, which has slightly more gluten than cake flour.

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The production process of flour is mainly subjected to machine/method used particular to the
desired output product. However a brief summary of the general operations in any particular
production line can be described under the following headings:

 Cleaning & Storing

As wheat arrives in the mill it is passed through a cleaning process to remove coarse impurities
and is then stored according to its quality. This is mainly determined by the hardness, protein
content and gluten quality of the wheat.

 Washing & Sorting

Washing begins with screening to remove coarse, fine materials and the grain is separated by
size, shape and weight. The finished product is then passed into conditioning bins.
 Conditioning
Conditioning takes place before milling to produce uniform moisture content throughout the
grain. Moistening helps to prevent break-up of the bran (hard outer layer) during milling and
improves separation from the floury endosperm (the mass that forms the white flour of the
grain).

 Gristing
After conditioning, different batches of wheat grain are blended together (gristed) to make a
mixture capable of producing the desired flour.

 Milling
In the Milling step, flour is produced by a sequence of breaking, grinding and separating
operations until the desire flour type is produce. Milling is simply the separation of the bran and
germ from the endosperm and the grinding for producing flour. The quality & type of the wheat
grain going into the mill will determine the types of flour to be produced. The whole process is
divided into grinding and purification. In addition to flour, many by products such as Suji, mada
can be produced by further processing
through installation of required machinery.

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  Packaging & Dispatching
The final product is packaged in standards bags of 25 & 100 kgs. Then it is forwarded for either
storage & transportation.

8. General Market Description

8.1. Present Demand and Supply

The proposed project product is slowly and steadily gaining popularity. The target customers for
the proposed product would primarily be individuals, whole sellers & retailers, confectionary and
home users. Initially the project will be focusing on influence area communities, and opportunity
for expansion could be capitalize depending successful marketing of product. Regarding the
market entry the proposed project can be established any time due to the high demand. But
keeping in vie the harvesting season, the project is proposed to establish in any time between
March to June or bulk purchases of raw material should be done during harvest season to exploit
cost benefit. However, round the year processing will be done using store raw material.

Over the past years, people preference is changed towards more quality food. However,
Regarding the demand growth, the influence area community income changed over the last
years. Consequently their preference is changed towards more quality food. In every quality food
the product of wheat flour are there. Therefore due to the preference change and the increased
number of population the demand of wheat increased.

The production of wheat flour increased for the last five years as described in table -1. Roti &
other wheat products remain essential items in daily diet. Hence factors like high demand,
diversified uses and people preferences indicate a strong potential market for quality to remain
sustainable in the market.

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 Table 1: Production of wheat flour (In Tons)
Production Year in E.F.Y Quantity produced in tones
1997 148786
1998 173,787
1999 140,128
2000 152,103
2001 261,409
2002 314053
Average 198378

The imported wheat amount is very fluctuating from year to year. The five year average amount
of imported wheat is 47968.2. The average growth rate is 19.6 %. Therefore the forecasted production
of 2003, 2004 and 2005 is 375597, 449201 and 537229 consequently. In order to determine the effective
demand of the year 2005 is the production and the import amount of that specific year i.e 585196.73 tone.

The growth of the demand of wheat flour is expected to be 5%. Based on this the ten year forecasted
demand listed in table-2.

Table2: PROJECTED DEMAND FOR WHEAT FLOUR (TONNES)

Year in EFY Projected Demand Un satisfied Demand

2006
614456.6 77227.57
2007
645179.4 107950.4
2008
677438.4 140209.4
2009
711310.3 174081.3
2010
746875.8 209646.8
2011
784219.6 246990.6
2012
823430.6 286201.6
2013
864602.1 327373.1
2014
907832.2 370603.2
2015
953223.8 415994.8

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8.2. Man power, Raw Materials and Utilities
8.2.1 Man power

The proposed project manpower including the skilled and unskilled labor which engaged in the
different job based on their profession. But the proportion of the unskilled manpower is greater
than the skilled man power. The total manpower required is 27 persons. A detail of manpower
requirement and their profession is listed in the following table.

Table 3: Man Power Requirement

No Description Req.No
1 General manager 1
2 Executive secretary 1

3 Production and technical head 1

4 Account 1
5 Purchaser 1
6 Store keeper 1
7 Sales man 1
8 Quality controller 1
9 Technician 2
11 Cashier 1
12 Cleaner 1
13 Operator 1
11 Electrician 1
12 Driver 1
14 Laborer 10
15 Guard 2
Total 27

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8.2.2. Raw materials

Wheat has been used as primary source for making flour, There are basically six different classes
of wheat: Hard Red Winter, Hard Red Spring, Soft Red Winter, Hard White, Soft White and
Durum. The end products are determined by the wheat’s characteristics, especially protein and
gluten content. The harder the wheat, the higher the protein content in the flour. Soft or low
protein wheat having 8 –11 percent protein are used in flour making ideal for cakes, pastries,
cookies, crackers and Oriental noodles. Hard flour containing 11 – 18 percent proteins are made
from high protein wheat, used in breads and quick breads. Durum is used in pasta and egg
noodles. In addition, mixing of small amount of additives is also practiced globally. Bleaching
agents such as benzoyl peroxide are added to make the flour whiter. Oxidizing agents (also
known as improvers) such as potassium bromate, chlorine dioxide, and azodicarbonamide are
added to enhance the baking quality of the flour. These agents are added in a few parts per
million. Selfrising flour contains salt and a leavening agent such as calcium phosphate. It is used
to make baked goods without the need to add yeast or baking powder. Beside this, some
producers add vitamins and minerals to replace those lost during milling. The most important of
these are iron and the B vitamins, especially thiamin, riboflavin, and niacin. In general the major
raw materials required to produce wheat flour is different species of wheat crop and chemicals.

8.2.3. Utilities
Beside the raw materials the project operation required the different utilities. The amount and
timing id depends to the size of the production. Since the proposed
flourmill is an electrical appliance used to grind flour from grains like wheat, one of the major
utility cost if electricity. The other utilities are water and telephone. The type and cost of the
utility which required in every operation listed below.

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Table 4 : UTILITIES REQUIREMENT

No Utility Requirement (Annual) Unit price

1 Electricity 1000MWH 10
2 Water 1100 m3 0.5
3 Telecommunication
- Fixed line
- Mobile
- Fax
- Internet

9. Required Machinery
In order to produce wheat flour in the required amount the selected machinery is very important.
In the market there are too much technology options. But for the proposed project the selected
technology machinery component listed as follows.

Table-5: MACHINERY AND EQUIPMENT REQUIREMENT

No. Description Quantity No.

1 Screw conveyor for wheat 5
2 Separator 2
3 Weigher 5
4 Oieur cylinder for wheat 1
5 Scourer 2
6 Bucket elevator for wheat 6
78 Roller mill 16
9 Plansifter 3
10 Purifier 2
11 Bran finisher 4
12 Flour cyclone with airlock 16

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 13 Flour filter 2
14 Detacher 10
15 Pneumatic Conveyor 2
16 Screw conveyor for flour and bran 4
17 Bucket elevator for flour 2
18 Pneumatic duct, set 1

10.Indicative Project cost

The wheat flour cost project may have different cost component.
 Land lease value
 Building and civil work
 Plant machinery and equipment
 Office furniture and equipment
 Vehicle
 Pre-production expenditure
 Working capita
A. Underlying Assumption

The financial analysis of wheat flour producing plant is based on the data provided in
the preceding chapters and the following assumptions.
Table 6: Construction and Finance
Construction 2 years

Source of Finance 30% Equity and 70% Loan

Tax Holidays 5 years

Bank interest Rate 12%

Value of Land 9.78/m.sq

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Table-7: Depreciation
Building 5%

Machinery And Equipment 10%

Office Furniture 10%

Vehicles 20%

Pre-production (Amortization) 20%

 Land lease value ………………………….. 3,129,600

 Building and civil work ………………….. 6,000,000
 Plant machinery and equipment …………. 7,203,000
 Office furniture and equipment ………….. 175,300
 Vehicle …………………………………… 2,500,000
 Pre-production expenditure ………………771,800
 Working capital ……………………………23,150,000
Based on the above cost component the indicative total investment cost is 42,929,700 birr.

11. Conclusion

Flour Mill as compare to a traditional large scale structure would be much easier to manage for
small scale investors due to low capital and operational cost. Moreover, characterization of
modern technology, hygiene environment, standardized processed product and professional staff
would create a difference. Therefore the proposed project is categorized in the middle scale and
modern factory. This factory has high demand in the influence area. So that the investor who
establishes this factory can get good profit in relative to others investment. And also it creates
high job opportunity in the city.

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Appendix

Table-1
Dire Dawa Administration lease period description

Activity Lease periods

Housing 99

Manufacturing and industry 80

Education, health, science and technology, culture, sport, 99

research and study and nonprofit making philanthropist
institutions

For commercial purpose 70

For urban agriculture 15

For other purposes 70

Source: Dire Dawa Provisional Administration lease regulation No. 3/1996

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