PROJECT PROPOSAL FOR THE ESTABLISHMENT

OF FOOD COMPLEX FACTORY

THE PROJECT TO BE IMPLIMENTED IN OROMIA

REGIONAL STATE EASTERN SHAWA ZONE AWASH
MELKASA

SUBMETED TO: OROMIA INVESTMENT COMMISSION

PROMOTER: - MALIHA FOOD PROCESSING PLC

AUGUST/ 2022

ADDIS ABABA
 Table of Contents

II. Lists of Abbreviation……………………………………………………………………3

III. Grand Summary of the Project…………………………………….................................4
1. Introduction and Overview of the Project………………………………………………..5
1.1. Introduction……………………………………………………………………
……...6
1.2. Ethiopia’s Restructuring
Economy…………………………………………………...6
1.3. Economic
Liberalization……………………………………………………………...6
1.4. The Foreign Investment
Policy……………………………………………………………….6
1.5. Guarantees to
Investor………………………………………………………………..7
1.5.1. Repatriation of Capital and Profit……………………………………………..7
1.5.2. Guarantees Against Expropriation…………………………………………...7
1.6. Measure Investment
Incentives……………………………………………………….7
1.6.1. Customs Import Duty………………………………………………………….8
1.6.2. Exemptions for Payment of Export Customs Duties………………………….8
1.7. An overview of Ethiopia’s
Performance……………………………………………..8
1.8. Background of the
Project…………………………………………………………….8
2. Objectives of the project…………………………………………………………………...9
2.1. General Objectives………………………………………………………………… 11
2.2. Specific
Objectives………………………………………………………………….. 11
3. Project Description…………………………………………………………...…………..11
3.1. Project Location……………………………………………………………………...12
3.2. Benefits of the
Project……………………………………………………………….12
3.3. Project Rationale……………………………………………………………………..12
3.4. Project Implementation Schedule……………………………………………………13

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4. Product Definition………………………………………………….……………………13
5. Project Management and Human Resource…………………………...…………………14
5.1. Project
Management…………………………………………………………………14
5.2. Human Resource
Requirement…………………………………………………… 14
5.3. Training
Requirement………………………………………………………………..15
6. Market Analysis………………………………………………………………………….17
6.1. Why agro-processing is critical to the Ethiopian
Economy?.....................................17
6.2. Supply…………………………………………………………………………
……...17
6.3. Demand…………………………………………………………………………
……17
6.4. Demand and Supply
Gap…………………………………………………………....20
6.5. Marketing Strategy, segmentation and distribution…………………………...
……21
6.6. Price……………………………………………………………………………
…..…22
6.7. Future Prospects
…………………………………………………………………….23
7. Technical Studies…………………..…………………………………………………….23
7.1. Raw material and
inputs………………………………………………………….…24
7.2. Production
Process………………………………………………………………….24
7.2.1. Cleaning……………………………………………………………………..26
7.2.2. Conditioning……………………………………………………………… 26
7.2.3. Milling/Grinding/……………………………………………………………26
7.3. Civil
Works………………………………………………………………………….27

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 7.4. Production Machinery and lay
out………………………………………………… 28
7.5. Vehicles…………………………………………………………………………
……28
7.6. Office Equipment and
Furniture……………………………………………………29
7.7. Utility
Supply………………………………………………………………………..30
7.8. Environmental Impact
Assessment…………………………………………………31
7.9. Initial Investment
Cost………………………………………………………………32
8. Financial Evaluation………………………………………………………………..…….32
8.1. Financing
Structure………………………………………………………………….32
8.2. Applied Financial
Assumptions……………………………………………………..33
8.3. Working
Capital……………………………………………………………………...34
8.4. Operating Cost, Volume and
Revenue……………………………………………….36
8.4.1. Operating Cost………………………………………………………………36
8.5.2 Production Volume and Revenue…………………………………………….37
8.5. Project
Profitability…………………………………………………………………39
8.6. Project Liquidity and Payback
period……………………………………………….40
8.7. NPV &
IRR…………………………………………………………………………. 41
8.8. Sensitivity to Cost and Revenue
Variations…………………………………………41
8.9. Debt Servicing Schedule……………………………………………………………
42
9. Economic and Social Benefits……………………………………..…………………….44

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10. Monitoring and Evaluation………………………………………………………………44
10.1. Monitoring………………………………………………………………………..44
10.2. Evaluation…………………………………………………………………………44

II. Lists of Abbreviation

FDRE Federal Democratic Republic of Ethiopia
GDP Gross Domestic product
MIGA Multilateral Investment guarantee Agency
ICSID Settlement of Investment disputes between States and nationals of other States
PEST Political, economic, socio- cultural and technological developments,
GTP Growth and Transformation Plan
TVET Technical, Vocational Education and Training
IPS Industrial Projects Service
MoI Ministry of Industry
IRR Internal Rate of Return
NPV Net Present Value
GSM Grams per square meter
ADLI Agricultural-Development Led Industrialization
CSA Central Statics Agency
MDOC Minimum days of coverage

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 III. Grand Summary of the Project
1 Project Name The Establishment of Food complex Factory
2 Project Owner AHMED UMER ALI and MELIHA ABDULATIF
3 Nationality AHMED UMER ALI Ethiopian Born Australian Nationality
MELIHA ABDULATIF Ethiopian
4 Project location The project will establish in Oromia Regional State Eastern Shawa Zone Around
Awash Malkasa,
5 Project The installed plant capacity of wheat flour is 45,000 tones, Pasta & Macaroni
Composition 6,000 tones and Biscuit 6,500 tons per year, respectively.
6 Premises Required The total land area of the plant including the open space is 20,000 m2.
7 Source of Finance The total capital of the project is estimated to be Birr 150,780,800.00 birr, among
this, (30%) 45,234,240.00 birr is financed by the contribution of the promoter and
the remaining balance of Birr 105,546,560. 00 [70%] is to be financed by banks.
8 Project Capital The total investment capital of the project is estimated at birr 150,780,800.00 of
which birr 138,567,555.20 [91.9%] is for fixed investment items while the
remaining balance of birr 12,213,244.80 [8.1%] will be initial working capital.
9 Employment The total man power required for the envisioned project will be 453 employees
Opportunity at f ull capacity.
 Permanent’“workers167
o Skilled 140 and Unskilled 27
 Temporary workers286
o Skilled 122 and Unskilled 164
10 Technology The machinery equipment and technology of establishment of the industry can
be secured from foreign countries.
11 Market Share Based on a 10% discount rate the Internal Rate of Return (IRR) and Net Present
Value (NPV) are computed to be 26.53% and Birr 194,054,889.60 respectively,
indicating the viability of the project.
11 Benefits of the Provide service and source of revenue, employment opportunity,
project for the city save/generate the country foreign exchange, benefit for the local
and country community stimulate the local economy and technology transfer.

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Table: 1 Grand summery of the project

1. Introduction and Overview of the Project

1.1. Introduction

Since 1991, the new Democratic Government coming into power and soon after it
adopted the market oriented Economic policy in 1992. The Federal Democratic Republic
of Ethiopia (FDRE) was set up under a new constitution in 1995. The FDRE came with
new Federal governmental system that has a bicameral parliament, with the House of
people's Representative being the highest authority of the Federal Government and House
of federation which account as the second chamber with its only federalism character that
empowered with the interpretation of the country’s constitution and representatives of all
nation nationalities of Ethiopia, while the members of both councils are democratically
elected for five years.
1.2. Ethiopia’s Restructuring Economy
A prevailing agricultural economy financial records for about 42% of Ethiopia’s Gross
Domestic product (GDP), 62% of total exports and 85% of employment. Coffee alone
contributes over 30% of total agricultural exports. Agriculture is supplemented by
manufacturing, mining, trade, tourism, construction, services, etc. Make the remaining 58%
of GDP. About 13% of GDP comes from the Industrial sector supplying important consumer
goods to the domestic and international markets. The main manufactured export products
include textiles, food stuffs, tobacco, beverages, leather and leather products, wood, metallic
and non-metallic products, paper plastic products, canned and frozen meat, sugar and
molasses and oil cakes products.
1.3. Economic Liberalization
Since the new market oriented Economic policy adopted in 1992, a number of policy
measures and reforms have been undertaken to change the structure of the economy and
encourage radical economic growth and development. The reforms include, among others,
the following short-term economic Liberalization and structural adjustment measures:

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  Deregulation of domestic prices,
 Abolition of all exports taxes and subsidies,
 Reduction of inflation through fiscal and monetary controls,
 Liberalization of foreign trade,
 Devaluation of national currency, birr to reflects its market value,
 Privatization of public enterprises,
 Issuance of a new labor law,
 Liberalization of foreign exchange regime,
1.4. The Foreign Investment Policy
Ethiopia has endorsed a liberal Investment code. This encourages both domestic and foreign
investors to play a protuberant role in the economic development of the country. The code
provides a wide of incentives including tax holidays, duty exemptions, and free remittance of
founds and retention of foreign exchange earnings.
1.5. Guarantees to Investor
Ethiopia provides the following guarantee to foreign investors:-
1.5.1. Repatriation of Capital and Profit
Capital repatriation and remittance of dividends and interest is guaranteed to foreign investors
under the investment proclamation. Any foreign investor has the light, in respect of an
approved investment, to make the following remittances of Ethiopia in convertible currency
at the prevailing rate of exchange on the date of remittance:
• Profit and dividends accumulating from an investment,
• Principal and interest payments on external loans,
• Payments related to technology transfer or management agreements,
• Proceeds from sale or liquidation of an enterprise,
• Proceeds from the sale of transfer of shares or assets,
• Compensation paid to a foreign investor.
1.5.2. Guarantees Against Expropriation,
The constitution of the Federal Democratic Republic of Ethiopia protects private property.
The investment proclamation provides investment guarantees against measures of
expropriation and nationalization and nationalization that only may occur with the
requirements of the law. Where such expropriations are made, the government guarantees to
provide adequate compensation corresponding to the prevailing market value of property and
such payment shall be reflected promptly.

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Other guarantees in Ethiopia are a member of the World Bank, affiliated Multilateral
Investment guarantee Agency (MIGA) that issues guarantees against none, commercial risks
to enterprise, which invest in signatory countries. Ethiopia is at any time ready to conclude
bilateral Investment promotion and protection treaties with any country and is in fact
currently concluding such agreements with a number of developed countries.
Ethiopia has also signed the World Bank Treaty "The Convention on settlement of
Investment disputes between States and nationals of other States (ICSlD). Investors are
protected against expropriation and nationalization. Ethiopia has ratified the convention
establishing the multilateral investment guaranteed Agency (MIGA). It has also signed
bilateral investment promotion and protection agreements with a number of OECD countries.
The Investment offices serve as a one stop shop for foreign investors securing investment
certificates, company registration certificates and operating licenses.
1.6. Measure Investment Incentives
To encourage private investments and promote the inflow of foreign capital and technology
into Ethiopia, the following incentives are granted to investors (both domestic and foreign)
engaged in new enterprises and expansion in areas qualified for investment incentives.
1.6.1. Customs Import Duty
One hundred percent from the payment of import customs duties such as plant, machinery,
equipment etc. plus spare parts worth up to 15% of the value of the imported investment
capital goods. Investment capital goods imported may be transferred to another investor
enjoying similar privileges.
The duty drawback scheme applies to all taxes at the time of importation, and those paid on
local purchases.
1.6.2. Exemptions for Payment of Export Customs Duties
Ethiopian products and services intended for exports are exempted from the payment of any
export tax other taxes and levied on export.
1.7. An overview of Ethiopia’s Performance
It is widely known that the ancient country of Ethiopia underwent a period of turmoil
economic stagnation and famine during the 1970s and 1980s. What is less well known is that
since the demise of the military dictatorship in 1991, a new Ethiopia has emerged which is
politically stable and making good economic progress.
The achievements of this rapid economic turnaround rest on solid foundations of political and
economic reform, sound management of the economy and an ongoing partnership with
external donor and investors. Ethiopia has been at peace with itself since the establishment of

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a federal system of government and parliamentary democracy. Simultaneously, it has firmly
moved from a command to a market economy.
Macroeconomic stability has been secured by careful sequencing of economic reforms,
coupled with tight fiscal and monetary policy. The progress on policy reform to date has
secured the foundations for future growth, creating a favorable climate for foreign and local
investment in Ethiopia. This will be further enhanced by the consolidation of continuous
market reforms and investment code reforms.
Ethiopia offers investors a wide array of opportunities. Ethiopia's proximity to Middle
Eastern and European markets, its abundant natural resources, land, livestock, minerals and a
population of 86 million potential consumers are just some of its key advantages.
In addition, its wealth of unique tourist sites and peopled scenic beauty and the authority’s
commitment to upgrade infrastructure, all under lined the country's determination and
potential to work with private investors. A fuller appreciation of the improved environment
can be gained by looking at four factors.
 The broad picture of transition from a command to a market economy,
 Its record of economic growth and stability,
 Improvements in infrastructure,
 Ethiopia's specific investment strategic / incentives (both foreign and local).
It is with this in mind that the promoter, has intended to establish food complex plant
(project) so as to satisfy the growing demand of the surrounding population for the project
out puts in utilizing long years’ experience in different business.
1.8. Background of the Project
As per the analysis carried out by different institutions on the political, economic, socio-
cultural and technological developments (PEST), Ethiopia offers a stable political and
economic environment as well as security; exceptional climate; almost complete absence of
routine corruption; continuously improving public service delivery which makes it
potentially an ideal destination for investment.
The macroeconomic performance in the past seven years has been very positive and the GTP
indicates a very good prospect, with a minimum of 11% GDP growth per annum, for the
future. Although the incentive packages that are currently given seem to be adequate, the
government is planning to give additional incentives for the manufacturing sector,
particularly to export oriented and import substituting projects. Priorities will be given to the

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manufacturing sector in support provision in the areas of licensing, land and finance
allocation, training and the like.
The expansion of Universities as well as Technical, Vocational Education and Training
(TVET) in all parts of the country provides good opportunity in the supply of skilled and
semi-skilled technical personnel. Health service provision and development of infrastructures
such as roads, energy and communication are also showing a rapid improvement in the
country. The advancement of science and technology in the world and the spread of same in
the country will favorably influence the smooth operation of the envisaged project.
To encourage investment a number of incentives are granted to investors which include;
exemption of customs duty for importing capital goods and spare parts for investment and
raw materials for production of export goods, income tax holidays and the permission of
losses to carry forward during tax holiday period. Ethiopia also provides different guarantees
with respect to repatriation of capital, profit and against expropriation and nationalization.
Accordingly, it can be concluded that Ethiopia is ideal for investment.

Indeed the prevailing project is food complex that produces wheat flour and biscuit in an
integrated way. Food processing is among the oldest of Ethiopia’s manufacturing industries.
Currently, the food complex processing industry employed about 26% of all employees in the
manufacturing sector. The food processing industry can be broken into eight major
subsectors: one of these categories is the wheat-based products manufacturing which is the
subject matter of this feasibility study.
The project promoter, with trade name of ‘Meliha Food Complex that owned by AHMED
UMER ALI and MELIHA ABDULATIF, Enriched Food processing and flour mill’ is a PLC
business. The project is located in Oromia regional state Eastern Shawa Zone around Awash
Melkasa on 20,000 square meters of lease land acquired for 80 years. The promoter has
executed 30% of the construction works required for the factory.
The project is designed to produce wheat flour, pasta macaroni and biscuit. The market for all
of the envisaged products in the domestic market shows a consistent increment. The short of
supply as compared to demand forced the country to import each of the products this project
has planned to produce. Therefore, establishment of the food complex not only helps to
contribute to narrow the demand gap but also to lessen the hard currency required to import
the products. The desire to create vertical integration to add more value to the flour products
and the perception of demand gap coupled with the government’s incentive helped the
promoter to enter into the Biscuit manufacturing business.

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The total investment cost required for the project is Birr 150,780,800.00 million. It is planned
that 30% or Birr 45,234,240.00 million is contributed by the promoter and the remaining 70%
or Birr 105,546,560. 00 million would be financed by bank loan. The Bank financing of Birr
105,546,560.00 million is scheduled to be repaid within 8 years excluding the two years grace
period at 9.5% interest rate with quarter repayment.

Starting with initial capacity of 60% and increment by 5% per year, up to attainable capacity
of 90%, the project would make attractive profit throughout its operational years and
generate positive net cash inflows. Within its assumed 10 years life it would return more
than 26.53% of IRR and more than Birr 194,054,889.60 million net present value.

Establishment of the food complex factory is a contribution to the country’s real GDP as it
has positive impact in fixed asset generation and output quantity increments. Apart from
creating employment opportunity for the domestic labor, the project would reduce hard
currency outlay.

The realization of the project as ascertained in the financial appraisal result enables the
promoter to generate higher net benefits, employment benefit to domestic labor, indirect
employment for input suppliers, tax revenue benefit and import substitution effect on saving
hard currency. These parameters are basic indications of the projects social desirability and
economic feasibility. Therefore, it is advisable to finance it either with equity or with debt or
in a combination of both.

2. Objectives of the project

2.1. General Objectives
The general objective of the project is to establish Food Complex Factory and to provide the
needed quality and quantity with affordable price to generate profit for the promoter.

2.2. Specific Objective

The market demand for the Food Complex Factory product is going to increase due to huge
government plans to transform the country; hence the Sector plays a vital role in the economic
development. Improving productivity and capacity utilization of existing industries and also
having new industries, entering the market will definitely help the national effort in narrowing
the gap between demand and supply in the sector. Like any business enterprise and
establishments of its kind, the project is basically planned with an objective of generating
profit for the promoter. Beyond that, it is also aimed to promote the following objectives.

 To Produce Food Complex Factory product,

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  Develop local technology by bringing expatriate technical advisers for few years and
create the base for development of the industry.
 Provide direct and indirect employment to a large segment of the population and
reduce unemployment.
 Generate foreign exchange through the sale of its products in the export markets.
 Increase Government revenue through different forms of taxes which in turn used to
facilitate social and economic development.
3. Project Description
The envisaged project is an integrated manufacturing of food complex. The factory produces
Wheat Flour and Biscuit by processing raw wheat. The installed plant capacity of wheat flour
is 45,000 tones, Pasta & Macaroni 6,000 tones and Biscuit 6,500 tons per year, respectively.
89% of the wheat flour manufactured in the factory shall be sold in the local market, while
the remaining 11% will be used for the production of biscuit. The percentage proportion is
determined based on the production capacity of the biscuit production machinery.
3.1. Project Location
The food complex plant is located in Oromia regional state Eastern Shawa zone around
Awash Melkasa. Awash Melkasa is located about 90 Kilometer South west of Addis Ababa
beside Adama Town on the Main railway Road from Addis Ababa to Djibouti. While
selecting location for such food complex factory; availability of raw material, adequate
storage and operation space, water and power supply, market outlet for finished products and
availability of labor are among the major factors to be considered. The town is the host of
other labor-intensive factories due to its preferable attribute and proximity to the capital
Addis Ababa.
3.2. Project Rationale
Food item is a commodity; its demand exists whenever human being exists. The demand
increases as population increases disregarding preference of consumers over the type of feeds
and their catering culture. Wheat flour based products such as biscuit are among the well-
known and commonly available products in the Ethiopian Market.
Food self-sufficiency is one of the prime objectives of the country. Labor intensive agro
processing industries play significant role in absorbing the large labor force and thus
contribute their share to the food self-sufficiency move. The Agricultural products like wheat
and the semi processed flour shall be traded in a vertically integrated marketing methodology
in order to ensure better wage to the farmer and more value adding produces that preferably

13
 involve many labor to deploy the cheap labor force of the country in productive sectors. The
industry is a distinct sector of the economy, which makes its direct contributions to the
enhancement of social wellbeing of productive citizens.
Apart from its attractive return, existence of stable demand and employment generation as
well as tax revenue to the government, establishment of such agro processing industry is a
good opportunity to the grain market stimulation and thus to the framers. It is rationale,
therefore, to involve into an activity that helps to tap the well-known business opportunity.
3.3. Project Implementation Schedule
The following chart shows major activities to be done during the implementation period.
Activity

March.
May.

May.
July.
App.

App.
Jan..

Aug.

Aug.
Mar

Nov.
Feb.

Jun.

Feb.

Jun.
Jan.
Sep.
Oct.

Dis.

Jul.
2013 2014
Land acquisition 
Document Preparation 
Construction of Factory                    
Buildings
Debt Financing          

Import of Machinery      
Purchase of Vehicles &    
Equip
Recruitment, Installation&            
Commissioning
Operation     

Grace Period One year construction and one year for pre-marketing period total two years

Table: 2 Implementation Period

As indicated above and everything will go per our plan, the factory will be operational in the
month of October, 2019. One of the remaining activities is processing debt financing from
bank to supplement the implementation of the project. Two years grace includes pre-
implementation and pre-marketing period to popularizing the factory’s product to the public
so that higher sales would be achieved.
3.4. Benefits of the Project
The major benefits include net returns on investment, supply of quality products to the local
market and income tax to the government. Establishment of the project is creating
opportunity for productive and unemployed portion of the labor force. Indirect benefits
accrue to the country as a whole in the form of generating potential investment capital and

14
saving of foreign currency. Experience of this project may be extended to the grain market by
creating market the agricultural produce.

4. Product Definition
 Wheat flour
It is a powder made from the grinding of wheat used for human consumption. More wheat
flour is produced than any other flour. In terms of the parts of the grain (the grass fruit) used
in flour—the endosperm or protein/starchy part, the germ or protein/fat/vitamin-rich part, and
the bran or fiber part—there are three general types of flours. White flour is made from the
endosperm only. Whole grain or whole meal flour is made from the entire grain, including
bran, endosperm and germ. Germ flour is made from the endosperm and germ, excluding the
bran. The project planned to produce germ flour type.
 Biscuits
A small, flat cake that is dry and usually sweet. Biscuit is a family of candy group, which is
largely, consumed by children and teenagers. Biscuits can be savory, sweet, plain-baked,
filled, or coated (or a mixture of several of these options). Some biscuits supply special
dietary needs such as those for high fiber protein or external vitamins. Biscuit also contain fat
and often sugar and are cut or molded into layers and baked rapidly thoroughly. When they
packed with moisture proof material, they can have long shelf life.
 Pasta and Macaroni
Pasta is a food product made by extruding and drying unleavened dough of wheat flour, and
that forms the basis of much Italian cuisine, as well as Chinese, Japanese, Korean, and
Southeast Asian cuisines. Macaroni is a dried food product made from semolina and shaped
in the form of slender tubes. It is popularly believed that Marco Polo, the 13th Century Italian
explorer, introduced pasta to Europe from China. Italian pastas, such as spaghetti and
macaroni, are traditionally made from semolina flour derived from durum (extra – hard)
wheat.
Pasta may be added to soups; boiled and served with a sauce; served cold with other
ingredients in a salad; stuffed with meat, cheese or vegetables and then boiled and baked.
There are dozens of varieties of Italian pasta, and they are usually named for their sizes and

15
 shapes. Pasta is a highly nutritious food. A 56 - gram (2 - oz) serving of pasta has less than 1
- gram (0.04 - oz) of fat, no sodium, no cholesterol, and about 210 calories.
5. Project Management and Human Resource
5.1. Project Management
The technical aspect of Wheat flour and biscuit production is a well-known profession in the
Ethiopian food-processing sector. As a result, qualified professionals are available in the
market hence; all the technical, marketing, finance & Administration and Production
functions are supervised and managed by Ethiopians. The owner is also member of the top
management group of the factory and other qualified professionals assume the Production,
Marketing & Procurement as well as Finance & Administration functions. These would be
organizational structure of the factory is as shown below:-

General
Manager

Secretary Legal Advisor

Head - Finance &

Head Marketing
Production and Administration
& Procurment
Technique Manager

Head Head- Sales and

Head Finance
Production Promotion

Head
Head Technical Head
Procurment and
Services Administration
Store

5.2. Human Resource Requirement

A total number of 453 employments, those comprises 167 permanent and 286 temporary
employees are projected for the managerial, professional, technical, and non-professional
posts of the project. The 20% staff benefit includes, 8% pension, transportation and other

16
 benefits. Monthly and annual salary expense is Birr 840,200 and Birr 11,087,520,
respectively. The detail including the salary expense is shown in the following table.

Position No. of posts Monthly Pay Monthly Salary Expense Annual Pay
General Manager 1 10,000 10,000 120,000
Executive Secretary 1 3,000 3,000 36,000
Legal Advisor 1 4,000 4,000 48,000
sub-total 3 17,000 17,000 204,000
Head Finance and Admin. Department 1 8,000 8,000 96,000
Secretary 1 2,500 2,500 30,000
Administration Division 1 5,000 5,000 60,000
Personnel officer 1 3,000 3,000 36,000
Office girl 1 1,000 1,000 12,000
Personnel Clerk 1 1,500 1,500 18,000
General Service Clerk 1 1,500 1,500 18,000
Telephone Operator 1 1,500 1,500 18,000
Drivers 2 2,000 4,000 48,000
Assistant Drivers 2 1,000 2,000 24,000
Guards 12 800 9,600 115,200
Janitors 2 800 1,600 19,200
Gardeners 1 800 800 9,600
Finance Division 1 5,000 5,000 60,000
Senior accountant 1 4,000 4,000 48,000
Accountant 6 3,000 18,000 216,000
Data Entry Clerk 1 1,500 1,500 18,000
Casher 2 2,000 4,000 48,000
sub-total 29 44,900 60,700 728,400
Head Marketing and Procurement 1 8,000 8,000 96,000
Procurement & store division 1 5,000 5,000 60,000
Purchaser 1 3,000 3,000 36,000
Store keeper 6 2,000 12,000 144,000
Head Sales division 1 5,000 5,000 60,000
Sales Officers 2 3,000 6,000 72,000
Sales Clerk 2 1,500 3,000 36,000
Invoice clerk 1 1,500 1,500 18,000
sub-total 11 29,000 43,500 522,000
Production and Technique Depar. Head 1 8,000 8,000 96,000
Production Division Head 1 5,000 5,000 60,000
Shift leader 3 4,000 12,000 144,000
Different machines operators 40 2,000 80,000 960,000
Different machines assistant operators 40 1,500 60,000 720,000
Packing supervisors 3 2,500 7,500 90,000
Packing workers 300 1,500 450,000 5,400,000
Quality Controller-chemist 2 3,000 6,000 72,000
Sub-total 250 27,500 558,500 7,542,000

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Technical Division Head 1 5,000 5,000 60,000
Mechanical Forman 1 3,500 3,500 42,000
Senior mechanic 1 3,000 3,000 36,000
Mechanic 1 2,500 2,500 30,000
Senior electrician 1 3,000 3,000 36,000
Electrician 1 2,500 2,500 30,000
Tool Keeper 1 800 800 9,600
sub-total 7 20,300 20,300 243,600
Total 453 138,700 700,000 9,239,600
20% benefit 140,000 1,847,520
Grand total 840,000 11,087,520
Table:-3 Labor salary.

5.3. Training Requirement

Training shall be carried out during plant erection and commissioning by machinery supplier.
The training and erecting period is scheduled to be for 90 days. The cost of installation and
training cost is included in the cost of production machinery.
6. Market Analysis
6.1. Why agro-processing is critical to the Ethiopian Economy?
It is obvious that Ethiopia, which depends on agriculture of nearly half of its GDP should
give top priority to the development of its agricultural sector. To this effect, the government
has adopted an Agricultural-Development Led Industrialization (ADLI) strategy to ensure
sustainable agricultural production for food self-reliance and promote industrialization. The
rigorous implementation of the ADLI strategy is recognized to result in surplus production of
agricultural products. Rather than exporting surplus primary products such as cereals, pulses,
oilseeds and fresh produce, Ethiopia will increasingly realize the benefits of exporting
processed foods that add value to primary agricultural products. Therefore, the prospects for
expansion of the food processing sub-sector are considerable. Food processing factories of
cereals, oilseeds, pulses, sugarcane, vegetables, fruits, meat, dairy products and spices are
expected to be established in large numbers. In all, agro-industry in general and food
processing in particular will play an increasingly important role in the Ethiopian economy.
In order to be competitive in the market, the Ethiopian food processing industry should
increase the degree of transformation of primary agricultural products and improve upon the
quality of food packaging. Therefore, use of modern technology will be very critical element
in food processing and packaging. In this connection, market access, management knows
how and transfer of technology would take up most.
Given the large agricultural resources potential of the country and relatively under developed
status of the manufacturing sector, the Ethiopian Government should as part of its ADLI

18
 strategy, initially focus on the development of the country’s agro-industry, especially the food
processing industry, both for the export and the domestic markets. The domestic market is
important because growth in income of the general population, combined with increased
urbanization, will in time translate into increased domestic demand for processed foods.
6.2. Supply
The food processing industry in Ethiopia consists of three scale-based classes; the dominant
core, which consists of large-scale manufacturers producing well-known brands account for a
significant share of the market when it comes to packaged foods such as biscuits and
pasta/macaroni. The second & third class is the competitive fringe consisting of medium and
small scale enterprises that collectively account for a larger share of the market for
unbranded, staple (commodity) food items such as flour & bread. The 2012 CSA
Manufacturing Business Survey reports the total production value of the food processing
sector to be 2,688,620,795 in 2011- which is about 11.93% of the manufacturing industry as a
whole.
Ethiopian Food Processing Industry
Number of Establishments by Size00
2007/2008 2008/2009 2009/2010
Sml Med Lg Sml Med Lg Sml Med Lg
Vegetables/ Fruits 1 2 9 1 3 9 - 2 8
Vegetable
processing& animal oils/fats 21 5 7 23 8 8 25 3 8
Dairy products - - 4 1 1 3 3 7 25
Mills 24 62 38 30 77 41 34 88 52
Animal Feed 1 2 40 1 1 12 2 2 3
Bakery 114 66 6 119 70 52 92 49 58
Sugar & Confectionery 11 4 6 6 9 6 5 9 7
Pasta & Macaroni 2 2 7 3 1 8 1 3 12
Unclassified 5 4 5 4 3 12 3 1 9
Total 179 147 122 188 173 151 165 164 182
Source: CSA Manufacturing Industry Report 2011

Table:4 Manufacturing Business Survey reports,

The wheat flour and Biscuit is mainly supplied by the local manufacturers. There are also
some traders that import these products irregularly from European & Gulf countries. In the
last five years, however, most of the consumption had been supplied by local producers. On
top of that we need not consider or disregard import figures from our supply projection as our

19
 main intention is import substitution. Otherwise it may pose a question shouldn’t we establish
our factory, had the import figures are significantly large? (we think the answer is no.)
Regarding Investment licenses issued to the Food processing sector, it is observed that
although investment licenses issued to the food processing sector-including beverages
accounted in thousand every year, the proportion of projects that turned out to operation each
year is between 1% and 7%, average 4% during the past 5 years (2007-2010). According
to the CSA’s database the food processing sector constitutes 4% of the total food and
beverages processing. The flour, biscuit, Macaroni and pasta firms constitute 40% of the food
processing firms. Applying the percentage proportion distribution of firms to the investment
licenses issued (historical trend) results that the number of new projects that would be
converted to operational status is nearly 1 in 2010.
Year and No of Project Compositions 2006 2007 2008 2009 2010
No of Projects in Pre Implementation…… (1) 1,275 2,094 1,427 1,420
No of Projects In Implementation……… ….(2) 57 72 60 37
Projects converted to operational……...…(3) 96 90 72 16
Total………………………...4 1,52 1,428 2,256 1,559 1,473
Food Licenses (4%)………………………5 1
60.8 57.12 90.24 62.36 58.92
Share of flour, biscuit, Macaroni, Pasta Licenses (40%).6 424 23 36 25 24
Percentage of Conversion to operation.. ¾…7 7% 4% 5% 1%
Share of flour, biscuit Macaroni, Pasta(No.).7 x 6 1.54 1.44 1.15 0.26
Table: 5 Project Compositions
Hence, more than the supply increment contributed by new entrants, the capacity increment
of the already established firms is significant. The historical production volume trends in ton
and the supply forecast based on the past trend is shown in the following two tables:-
NB. The trend analysis above incorporates estimated no. of firms joining the sector or new
entrants.
Table:6 Production Volume of the Past ten years Trend:
Year Flour production in Ton Growth rate Biscuit production in ton Growth rate
2000 185,437 - 11,781 -
2001 165,345 -11% 16,607 41%
2002 142,541 -14% 5,378 -68%
2003 136,669 -4% 5,639 5%
2004 155,669 14% 7,361 31%
2005 148,786 -4% 10,115 37%
2006 173,787 17% 10,429 3%
2007 177,263 2% 10,794 3%
2008 180,808 2% 11,172 4%
2009 184,424 2% 11,563 3%
2010 188,113 2% 11,968 4%

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 Average growth 1% 6%
Source: CSA reports of respective years.
The production capacity of the new entrant firm (nearly one) is unknown. However, on top of
the increase in capacity of the existing firms, prudently we assumed a 1% increase per annum
for each product (flour & Biscuit).

Table: 7 Supply Forecast-in tons

Year Flour Supply Biscuit Supply

2011 191,875 12,806
2012 195,713 13,702
2013 199,627 14,661
2014 203,620 15,688
2015 207,692 16,786
2016 211,846 17,961
2017 216,083 19,218
2018 220,404 20,563
2019 224,812 22,003
2020 229,309 23,543
2021 233,895 25,191
2022 238,573 26,954
2023 243,344 28,841
Within the projected period, the total supply of wheat flour increases from 199,627 -243,344
tons and biscuit from 14,661 tons to 28,841 tons.

6.3. Demand
In order to forecast the demand for the next ten years, per capita consumption rate is applied.
Other things being constant, apparent consumption/demand is the amount purchased and
consumed. This equals Production + Import-Export. The third variable is almost zero in
Ethiopian case as there is no data on significant exports so far. Therefore, Demand equals
Local Production plus Import. According to the business development service, Ethiopia’s
per capita consumption for Wheat Flour is 3.8K.g and Biscuit 0.2 K.g. These rates are
considered for the forecast. Population growth of 2.4% plus 6% annual increase due to the
increment of expending power of the population is applied to forecast the demand as shown
below: The population projection figures in this issue are based on the results of the May

21
2007, National population and Housing Census of Ethiopia. Therefore, the projected figures
for the year 2012 become 84,320,987.

Table-:8

Year Population Per capita flour consumption Per capita biscuit

in ton consumption in ton
2012 84,320,987 320,420 16,864
2013 91,403,950 347,335 18,280
2014 99,081,882 376,511 19,816
2015 107,404,760 408,138 21,480
2016 116,426,760 442,422 23,285
2017 126,206,607 479,585 25,241
2018 136,807,962 519,870 27,361
2019 148,299,831 563,539 29,659
2020 160,757,017 610,877 32,151
2021 174,260,607 662,190 34,852
2022 188,898,497 717,814 37,779
2023 204,765,971 778,111 40,953
As shown above, the demand volume is expected to grow due to population increment and
per capita income improvement. According to the forecast, within the years from 2013 up to
2023: Demand of wheat flour increases from 347,335- 778,111 tons and biscuit from 18,280-
40,953 tons.

6.4. Demand and Supply Gap

The demand-supply variance shows positive demand gap indicating that even after capacity
increment of existing factories, demand for the products would fully be met with additional
imported portion.
Table: 9
Demand Gap
Year Flour in ton Biscuit in ton
2012

22
 2013 147,708 3,619
2014 172,892 4,129
2015 200,446 4,695
2016 230,576 5,325
2017 263,502 6,023
2018 299,466 6,798
2019 338,727 7,657
2020 381,568 8,609
2021 428,295 9,661
2022 479,242 10,825
2023 534,766 12,112

In aggregate all the products have adequate demand gap that can be supplied by a number of
new entrants including this project.

6.5. Marketing Strategy, segmentation and distribution

The major customers of our products are Wholesalers, Retailers & service-based end-users.
We plan to sell products in bulk primarily to the first segment, wholesalers who in-turn sells
it to retailers in smaller quantities. The second segment comprises of large retail outlets such
as supermarkets who buy bulk quantities directly from the manufacturer and resell to the
consumer.

The third customer segment, service-based end users comprises of institutions &
organizations that source products directly from the manufacturers either as raw materials or
supplies for their businesses/organizations.
The market & distribution system in Ethiopia consists of major wholesalers, regional
wholesale distributors, retailers, middlemen, traders and collectors in a long and complex
value chain. Major Wholesalers in particular have an excessively significant role to play with
the function of bulking; picking up large quantities for smaller wholesalers in regional cities
who in turn distribute it to retailers within the city. Intermediaries such as regional
distributors and middlemen are involved in logistics by covering the difference between the
location of the product and the marketplace where consumers purchase products. Other
traders & entrepreneurs have multiple roles in getting goods to various customer groups.
Major Wholesalers are concentrated in Merkato, the wholesale center of the country. Smaller
wholesalers are scattered throughout regional cities and work in specific territories. The
regional wholesalers seldom buy directly from the manufacturers as they often distribute a

23
number of goods and merkato is a one-stop destination for all goods distributed in the
Country.
The smaller wholesalers are highly sensitive to price and local competition so they may or
may not carry the same type of products for a significant period. Thus, Merkato becomes an
ideal destination for the smaller wholesalers as it provides them with variety and information
on price comparisons as well as market intelligence in terms of the volume of a particular
product that has been sold to their competitors. Using this information, the smaller
wholesalers choose the brands and/or product mix they are willing to take back to their
respective markets. This causes consistent fluctuations in sales and production schedule for a
manufacturer if regular market intelligence is not conducted. Large-scale food processors
have an advantage to determine price points if they have penetrated the market well. For this
purpose we will use penetration price strategy.
The development of the retail sector in terms of the emergence organized businesses with
high volume sales and high-traffic locations etc has fostered a growing direct-to-retailer sales
trend amongst manufacturers. Large-scale manufacturers are now distributing their products
to supermarkets and mini-marts through door-to-door sales/delivery route system. This
system allows the manufacturer and retailer to earn a higher margin by cutting out the
middlemen. Despite the benefits its offers, manufacturers generate low volume from the route
sales system since the addressable customer size is very small. The majority of the Country’s
retailers are inaccessible neighborhood kiosks with low-volume sales. Thus, the Merkato-
wholesale distribution system, although very costly to local manufacturers is assumed to be
the most efficient way to deliver products making the intermediary group ‘the primary
distribution channel’.
The promoter will use aggressive promotion and product popularization through use of
electronic media especially via TV as visualizing the product will be more convincing. For
the purpose 0.5% of sales are allotted.
6.6. Price
Presently there are different types of flours and biscuits in the market both imported and
locally manufactured. Per our market survey currently, the factory gate price of flour ranges
from birr 900-1,000 and for locally manufactured biscuit it ranges from birr 4,500-5,000 per
quintal or 100 kg, respectively. As a penetration price the average lowest price of birr 900
and birr 4,500 for flour and biscuit is considered in the analysis. The minimum market price
for the by-product bran is birr 300 per quintal.
6.7. Future Prospects

24
The project has an excellent and promising future since the life style of the consumer base is
changing in its favor. The following factors are expected to contribute positively to the
sustainable growth of the food sector in general.
 Urbanization:-Increased urbanization results in increased consumer demand for
processed food products like wheat flour, bread, pasta &biscuits. Increased number of
catering companies, hotels, universities, and Army consumption is also expected to
increase.
 Urban consumer trends:
 Decrease in consumption of home-produced Injera due to the rising prices of Teff.
 Wheat bread replace traditional bread
 More food & drinks consumed outside from home
 Real income growth due to declining inflation rates
 Increased employment rates due to robust economic activity.
 Other Forces:- Population growth results in overall demand increase
7. Technical Studies
The most important technical considerations for this project is raw materials type and
selection, technology and capacity of plant, power source, water source, production process
and production support facilities like land and factory buildings. Each of them is discussed in
the subsequent parts.
7.1. Raw material and inputs
The major raw material is wheat. Ethiopia is the largest wheat producer in sub-Sahara Africa.
Wheat production is the fourth largest production in Ethiopia with 3,075,640 ton in area of
1.5 million hectare in the year 2010.

25
 Table:10 Raw Materials And Inputs
Rank Commodity Production (Int $1000) Production (MT)

1 Roots and Tubers, nes 930197 5439400

2 Maize 528815 3897160

3 Cereals, nes 821423 3207300

4 Wheat 466,686 3,075,640

5 Sorghum 452014 2971270

Source: FAOSTAT (2010)

The production is planned to increase through area expansion and yield improvement.
Ethiopia’s wheat production increase in recent years appears to be a combination of both.
Wheat is the major raw material that accounts for approximately 74% of manufacturing cost.
It is made available locally, primarily through small-holder farms & government owned
farming enterprises. A cluster of privately held, large-scale agricultural enterprises have been
emerging in the past two years bringing the prospect of enhanced quality & dependable
supply into the horizon.
It is not legal for the private sector to import wheat. However, the government supplies wheat
for food manufacturers. Packing materials, flavors & food chemicals such as preservatives,
improvers, colors etc. are not available locally making imports the only option.
Manufacturers can import any raw materials except for wheat and sugar. A discounted import
duty of 10% is afforded to local manufacturers to boost the competitiveness of local products
as opposed to the 30-35%% duty imposed on importers in other sectors such as traders,
service-based enterprises & distributors.
Some raw materials and packaging such as sugar and cartons are normally sourced locally
although frequent shortages and price fluctuations cause a significant instability within the
supply chain.
The other raw material is water. Usually for biscuit about 30% of the dough weight is
constituted by water. However, the water content removed back after the required shape is
formed/Extruded/.The following annual raw material requirement at full capacity is
computed based on the following input output relationship.
 Wheat flour
Raw Material Intake Capacity/year Extraction Rate Flour Yield Bran
Raw Wheat 606,589.42 1.32 392,550 69,324.51
Table:-11

26
For 500kg biscuit we use the following amount of raw materials.
 flour- 335kg
 v. fat- 67kg
 sugar- 67kg
 ammonium bicarbonate- 4.5kg
 sodium bicarbonate - 4.5kg
 milk powder- 11kg
 flavors- 0.5kg
 glucose- 11kg
 

Table: 12 Input requirements for Biscuit

Input requirement for Biscuit line at full capacity
Inputs Qty. in kgs Prices Total cost
Sugar 820,400 14.5 11,895,800
Fat 820,080 29 23,782,320
Milk powder 134,640 24 3,231,360
Sodium Bicarbonate 55,080 5.76 317,260.8
Ammonium Bicarbonate 55,080 5.24 288,619.2
Flavors 6,120 244 1,493,280
liquid glucose 134,640 12.64 1,701,849.6
Total 42,710,489.60

Table: 13 Required Packaging

Packaging Quantity pcs  Cost at full capacity
Wheat Flour Sacks 25 kg (50% of production) 858,092 5,140,460
Wheat Flour Sacks (50kg 50% of production0 514,046 3,420,230
sub-total 1,372,138 8,560,690
PP Bag for Byproduct 69,700 501,500.00
Poly Film -Biscuit-in rolls 25,500 425,000.00
Cartoon for Biscuit 2,550,000 42,500,000
sub-total 43,426,500
Total 51,987,190.00

7.2. Production Process

7.2.1. Cleaning
Whet received for milling contains field contamination, which includes plant parts, weed
seeds, stones, and lumps of soil. It may also have extraneous materials like metal fragments
and other grains. Raw wheat stored in bulk store requires regular recycling and dosing of
fumigation tablets. The wheat from the dumping pit, via bucket elevator is fed to the vibrio

27
separator. Materials to be separated fall freely through the inlet onto the coarse screen of the
vibrio separator, which removes coarse impurities as string, straws, and stones. Fine sieves
further remove broken kernels, sands and other fine impurities. Tailing from sieve layer
cleaned water is used at the outlet to separate light particles by an aspiration channel.
7.2.2. Conditioning
Prior to milling water is added in process known as “tempering”. Hard wheat is normally
brought to 15-16% moisture, soft wheat 13-14% moisture. Tempered wheat is held 18-24
hours at ambient temperature in conditioning bins. The process toughness the seed coat /bran/
and softens the starchy endosperm so that an efficient separation of bran and endosperm can
take place.
7.2.3. Milling/Grinding/
The process of wheat milling is a complex procedure of repetitive grinding and sieving. The
grinding process is divided into the break, scratch and reduction operations. The tempered
wheat is grounded on a serious of corrugated break rolls, the objective being to open up and
scrap the wheat kernel to release endosperm from the bran. Each grinding operation is
followed by sifting operation, in which the coarse branny stock from the sifter is fed on
successive break rolls. Each grinding and bolting operation results in stream of flour of
various breaks (1st, 2nd, etc) that are collected from finest sieves as intermediate granular
particles. The final products of wheat flour are ready to go for the biscuit line and to store. An
average well-matured grain of wheat has 55% endosperm, 13% bran, and 2% germ. It is the
endosperm of the wheat grain that is converted to flour in milling. In theory, it should be
possible to remove or extract approximately 85% of the grains flour, however other
structural features makes it an impossible task in actual fact, the amount of flour produced
may have some amount of bran, while some flour is lost with the bran. Therefore, the
commercial flour may have extraction rate in the ranges of 73%-80%.
 Biscuit
Biscuit manufacturing involves mixing of flour and other ingredients into homogenous
dough, forming the dough into a pre-established shape, backing the dough pieces into biscuit.
Cooling the biscuit and packaging it. These processes are performed on artisanal or industrial
scale. The biscuit manufacturing to be employed is fully automatic. Flour from the silos is
pneumatically transported to the mixing unit; the dough from the mixer is then automatically
transferred to the forming unit, from the forming unit to the oven then the final product
through the cooling tunnel to the packing unit. The following chart shows the major process
flow of the products.

28
Wheat Flour and Biscuit processing flow Chart

CLEANING -RAW CONDITIONING GRINDING/ BISCUT

WHEAT RAW WHEAT MILLING LINE

MIXING/
DOUGH DOUGH
COOLING BACKING BIUSCUT
FORMING PREPARATION DOUGH

PACKAGING

7.3. Civil Works

 Land
The Land at which the food complex plant will be requires and located on lease base from
Adama Town Administration around Awash melkasa of Eastern Shawa Zone Oromia
Regional State. The lease agreement for 20,000m 2 is concluded in the 2003 E.C and valid
until the year 2008 E.C. i.e. for 80 years. The promoter has to pay Birr 6.5 per meter square
or Birr 4,727,272.73 in total within 40 years payment period. So far he has paid Birr
534,034.09, including 10% down payment in advance. The current progress on the land lease
considered based on the location.
 Building
The factory requires bigger production, raw material and finished products hall. Among
others, the factory building consists of the following parts.
 Raw material store, finished goods store, Offices, Two separate dressing rooms,
reception, guard house and others based on needs.
The factory building is estimated to cost total of Birr 26,338,330.54, so far the promoter has
made 40% or about Birr 10,535,332.22.

7.4. Production Machinery and lay out

Both the flour and Biscuit processing machinery will be selected from different China
supplier companies; such as HEBEI AFRICA MACHINERY CO.LTD and SHUNDE
LIGHT INDUSTRIAL PRODUCTS COM.LTD, respectively and others. Among others, the
following points are our selection criteria.
 Lower price
 They supply the complete plant while the others don’t supply the complete plant
 The main parts of the plant are from very popular and reliable suppliers like Siemens

29
  The type of material from which the machineries made are the best quality
 They have been in the business for the long time and have good reputation. Moreover
they have supplied to many countries including Ethiopia and we have learnt from their
customers that they provide good quality machineries.
 They provide reliable spare parts
 The machineries run by latest technology.
The flour making machine has a designed production capacity of 45,000tonper year, Pasta &
Macaroni machine installed to produce 6,000 tones and the Biscuit machine can produce
6,500 ton per year assuming 300 working days in a year.
The under shown table portrays the machinery and its associated costs per the Performa
invoice plus transaction costs computed based on Ethiopian investment agency, factor cost
publication of the year 2012 & access capital price data base.
Production Machinery Cost Break Down
Wheat Flour Machinery Biscuit machinery Total flour & Biscuit
Production Machinery 937,669 999,090 1,936,759
Sea freight 49,640 47,897.5 97,537.5
Port clearing & Delivery 8,640 7,560 16,200
charge
Installation cost 26,400 18,000 44,400
Total in USD 1,046,877 1,090,439.5 2,137,316.5
Exchange rate 18.5 18.5 18.5
19,367,224.
Sub-total in Birr 5 20,173,131.6 39,540,356.1
Insurance 17,089 17,800 34,889
Inland freight 40,000 35,000 75,000
Bank charge 171,744 178,790 350,534
Ticket and accommodation 370,000 185,000 555,000
20,385,238.
Grand Total 9 20,881,334.6 54,073,243.83
Table: 14, List of machinery cost break down
 For flour machine-Two expatriate engineers and 2 technicians with monthly salary of
USD 3,000 and USD 3,400 per month shall stay in Addis for three months for
installation.
 For Biscuit Machine-2 expatriate engineers from Supplier Company with daily rate of
USD 150 will stay for 90 days for installation.
 Round trip air ticket costs birr 26,000 each expatriate. Accommodation and food charge is
estimated to be birr 800 per day.
7.5. Vehicles

30
The total output (flour, biscuit and the byproduct) at 60% capacity is more than 53 ton per
day. A 2 Isuzu NPR load 3.5 ton, 2 ISUZU FSR load 6.5 ton, 2 CINO truck can load 10 tons
at a time. Assuming a single truck can make three trips per day, the project demands at least
7 trucks. Also for the office service 2 TOYOTA HILUX PICK UP, 2 TOYOTA LAND
CRUSER V8, 1 Ambulance and 1 service bus. However, with the assumption that most of the
sales will be made at factory gate and the promoter will use other listed above vehicles on the
need basis. Own vehicles will be used to reach far areas and address urgent deliveries. The
detail type and price of the vehicles is shown in the table below.
Table: 15 required vehicles
Vehicles
Type Quantit Unit/price Total
y
ISUZU NPR truck model 2016/3.5ton 2 725,000 1,450,000.00
ISUZU FSR truck model 2016/6.5 tone 2 1,550,000 3,100,000.00
CHINO TRUCK model 2017/10 tone 1 1,015,000 1,015,000.00
TOYOTA HILUX PICK UP 1 1,700,000 3,400,000.00
TOYOTA LAND CRUSERV8 1 2,000,000 2,000,000.00
2% registration fee 239,600.00
Total 7,219,600.00
N.B out of the listed above the demand of the vehicle for the project is based on requirement.
7.6. Office Equipment and Furniture
The factory has to be equipped with the necessary office equipment, furniture for the
administrative, and finance staffs as well as for market integration of input supply and
finished product quality control. The details with related costs are shown in the table below.
Furniture, Generator and Transformer
Description Unit cost/unit Total
Generator, transformer and electric
work one each 6,771,119 6,771,119
Dell computers with LCD monitor &
Speaker 45 14,347.83 645,652.35
HP laser Jet printer 25 6,086.96 152,174
Canon IR 2420 photo copy machine 1 27,826.09 27,826
Managerial table-one side arch 5 3,302.61 16,513
managerial table-bean type 180x90x75 8 3,144.35 25,155
Single Pedestal table 140x80 41 2,151.3 88,203.3
Executive Book shelf 4 4,538.26 18,153
Gust chair 12 499.13 5,990
managerial swivel chair 5 2,049.57 10,248
managerial swivel chair 8 1,763.48 14,108
managerial swivel chair 21 1,669.57 35,061

31
 Dixon shelf 3 1,466.09 4,398
sub-total 6,839,964.24 7,814,600.65
15% VAT 1,172,189.89
Total 8,986,790.54
Table: 16, list of office Furniture
As indicated from the table the project requires total investment of Birr 8,986,790.54 for
furniture, transformer and generator acquisition.
7.7. Utility Supply
 Power Supply
The factory requires total 840KW (for flour mill 290+biscut line 550) power. The electric
installation cost including power transformer is indicated in the table above under part 6.6
supported by valid Performa invoice. The following table shows the computation of annual
power cost to the factory.
POWER KW Annual Consumption at 24 hrs/day, Rate Per Unit Birr
@100% capacity
Flour Mill Line 290 2,088,000 0.58 1,211,040
Biscuit Line 550 3,960,000 0.58 2,296,800
Total 840 6,048,000 3,507,840
Table: 17 required electricity
 Water
Water line is not availed to the project as a result estimated cost of birr 3,000 is allotted in the
pre-operating expenditure. For Flour and Biscuit production, water is an essential input.
Including the requirement for human use, the factory’s annual water consumption reaches
3,000-m3 at birr 3.25/m3 consumption per day.
The detail is shown below.
Water m3/DAY Annual Consumption Rate/ m33 total
Flour Mill and biscuit line 10 3,000 3.25 9,750
Table: 18, the needed water
 Fuel Consumption
Fuel Consumption
KM/day km. distance /litter price Total
200 6 20 400,000
5% oil & Lubricant 20,000
Estimated hours power off Fuel consumption liter/hr. price Total
2 5 20 60,000
Total 480,000
Table: 19, the Consumption of Fuel

32
 As indicated above on average each vehicle is assumed to travel 200 km per day and will
travel 6 kilometers per liter of fuel. Price of fuel is birr 20/litter. The annual fuel consumption
for the two trucks will, thus, be Birr 400,000. Oil and lubricant expense is estimated to be 5
% of fuel. Likewise, a stand by generator on average will work for 2 hours per day with 5
litter consumption per hour at birr 20/litter, the annual fuel cost will be Birr 60,000. For all
price of utility and the like materials the current market price should be consider.

 Communication and Stationery

Telecommunication, Internet and fax service in today’s business world have great importance
in exchanging information between raw material suppliers, intermediaries, consumers and
producers. The area is equipped with mobile network, landline, and internet service. Total
cost for communication and stationery is considered 3% of salary expense.

7.8. Environmental Impact Assessment

The project will not have an adverse impact on the environment as it is not associated with
process that emits hazardous effluents that can potentially endanger the working or
surrounding environment.

8. Financial Evaluation
8.1. Initial Investment Cost
The total initial investment cost required for the project is 150,780,800.00 million. The items
and cost breakdown is shown in the following table.
Table: 20 Total initial investment Cost breakdown
Investment Cost Schedule
Description Unit Total Investment cost
Land use tax Advance Payment Birr 534,034.09
Factory Building Birr 26,338,330.54
Production Machinery Birr 54,073,243.83
Vehicles Birr 7,219,600.00
Generator, transformer and office Equipment Birr 8,986,790.54
Sub-total Birr 97,151,999.00
Pre-operating Expenditure (water 3,000) Birr 50,781.84
Pre operating Interest Birr 15,374,041.63
Initial Working Capital Birr 38,203,977.52
Sub Total Birr 53,628,800.99
Total Birr 150,780,800.00
NB. Different legal expenses paid plus birr 3,000 water line installation cost to be paid)
(10,180.48+200+105+10+25+360+780+3000).

33
 8.2. Financing Structure
Item Total Initial Investment CostEquity Contribution Debt Finance
Unit Amount % Amount % Amount
Land - Payment Birr 534,034.09 100% 534,034.09 0% -
10,535,332.2 60
Factory Building Birr 26,338,330.54 40% 2 % 8,312,069
16,221,973.1 70
Production Machinery Birr 54,073,243.83 30% 5 % 16,992,118
70
Vehicles Birr 7,219,600.00 30% 443,700 % 1,035,300
Generator, transformer and Birr 8,986,790.54 30% 2,561,193 70 5,976,117
office Equipment %
67
Sub-total Birr 97,151,999.00 33% 16,147,824 % 32,315,604
Pre-operating Expenditure Birr 50,781.84 100% 14,660 0% -
Pre operating Interest Birr 15,374,041.63 100% 10,012,679 0% -
70
Initial Working Capital Birr 38,203,977.52 30% 8,831,234 % 20,606,212
52
Sub Total Birr 53,628,800.99 48% 18,858,573 % 20,606,212
Total Birr 150,780,800.00 40% 35,006,397 60 52,921,817
%
Table 21: the total initial investment cost

As indicated in the above table, it is planned that the promoter would contribute 30% of the
total investment cost and the remaining 70% would be financed by debt. Out of the equity
requirement of Birr 45,234,240, the promoter has so far committed more than Birr 10.55
million for construction of building, lease payment and pre-operating expenditures. The 70%
bank financing, which is Birr 105,546,560 would be payable within 8 years exclusive of 2
years grace period at quarterly repayments with 9.5% interest rate.
8.3. Applied Financial Assumptions:
1. Project life: Ten operational years excluding implementation period,

34
2. Capacity Utilization Rate: Starts at 60% and increases by 5% every additional
year up to attainable capacity of 90%,
3. Working days per year: 300,
4. Number of shifts: at full capacity = 3,
5. Working hours per shift: 8, total working hours per day, 24,
6. Tax holiday period: Nil,
7. Profit tax: 35% of IBIT and 15% VAT on sales.
8. Salvage value: Buildings 50%, Vehicles, Machinery and Major Equipment, 20%.
9. Recovery rate: Full amount of the ending working capital amount,
10. Cost of Capital for discounting:9.5%
11. Grace period: 2 years.
12. Financial Expense on debt finance: Fixed 9.5%,
13. Loan Repayment: Principal plus interest is paid per quarter within 8. years,
however, interest alone would be paid during grace period of 2years,
14. Water average Rate Birr 3.25 Per M3
15. Power: average rate Birr 0.58 per KWH,
16. Stationery and Communication:3% of salary expense,
17. Marketing and Promotion:0.5% of sales revenue,
18. Uniform and miscellaneous :Birr 680 per employee/year,
19. Miscellaneous expense birr 50,000 per annum.
20. Salary Expense: Per the schedule shown in item 4.2,
21. Wage: Birr 50 per ton,
22. Depreciation: Buildings 5%, Machinery, Vehicle, Equipment and furniture 20%,
land lease 1% based lease life.
23. Amortization: Pre-operating expense : 20%,
24. Property Insurance premium: would be 1.75 % for the buildings cost and 2.5%
for Machinery and Vehicles,
25. Repair including tier, spare parts, etc: 0.10% of the cost of building,
Machinery, vehicle and equipment for the first 5 years, then will increase by 10%
then after.
26. Lease Fee: Birr 58,500 per year per lease agreement.

8.4. Working Capital

35
 The major costs selected to be financed with debt are only cost of wheat, packaging, sugar,
flavors. Salary, wage, fuel, as well as power and light costs. As indicated in the table below,
the minimum days coverage considered for one turnover is 30-90days. The working capital
amount is determined to be Birr 38.24 million for year one. The incremental working capital
after year 1 due to increase in production capacity will be financed from the internally
generated cash.
*MDOC-minimum days of coverage
** Import of one L/C takes 90 days

WORKING CAPITAL Schedule

Cost MDOC Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year-8
Items/Year
Cost of 60 36,720,000 38,400,000 40,200,000 42,000,000 43,800,000 45,600,000 47,400,000 47,400,000
Wheat
Packaging 60 3,749,662 3,889,491 3,903,298 3,927,105 3,940,912 4,124,719 4,308,526 4,308,526
Sugar and 90* 7,687,053.2 7,898,612 8,275,428 8,652,245 9,029,061 9,405,877 9,782,694 9,782,694
other flavors
Power and 30 217,799 387,617 417,433.3 447,241.1 388,665.9 506,882.2 536,700.2 536,700.2
Light
Salary and 30 840,200 878,214 885,732 893,250 900,768 908,286 915,804 915,804
Wage
Fuel 30 28,800 31,200 33,600 36,000 38,400 40,800 43,200 43,200
Total 49,043,514.251,825,527 54,213,607 56,601,688 58,989,768 61,377,849 63,765,929 63,765,929
Incremental 2,388,081 2,388,081 2,388,081 2,388,081 2,388,081 2,388,081 0
WC
Table 22: Working Capital Programme

36
 8.5. Operating Cost, Volume and Revenue
8.5.1. Operating Cost
The table below shows the factory operating cost before depreciation and interest expenses
under different production capacity. The assumptions for each cost and expense are indicated
in the aforementioned discussion under part 7.3 above.
Operating cost schedule
Capacity
Utilization 100.0 60% 65% 70% 75% 80%
Description/
Year - Year 1 Year 2 Year 3 Year 4 Year 5
Cost of Wheat 108,000,00 117,000,00 126,000,00 135,000,00 144,000,00
Flour 180,000,000 0 0 0 0 0
Power and Light 3,507,840 2,104,704 2,280,096 2,455,488 2,630,880 2,806,272
Sugar and Other
Flavors 25,121,088 15,072,653 16,328,707 17,584,762 18,840,816 20,096,870
Water 9,750 5,850 6,338 6,825 7,313 7,800
Fuel Cost 480,000 288,000 312,000 336,000 360,000 384,000
Packaging 18,380,700 11,028,420 11,947,455 12,866,490 13,785,525 14,704,560
Salary expense 7,804,800 7,804,800 7,804,800 7,804,800 7,804,800 7,804,800
Wage (Birr
50/tone 1,503,600 902,160 977,340 1,052,520 1,127,700 1,202,880
Property
Insurance 328,162 328,162 328,162 328,162 328,162 328,162
Land Lease 58,500 58,500 58,500 58,500 58,500 58,500
Repair &
Maintenance 481,442 481,442 481,442 481,442 481,442 481,442
Stationery&
Communication 234,144 140,486 152,194 163,901 175,608 187,315
Marketing and
Promotion 2,046,092 1,227,655 1,329,959 1,432,264 1,534,569 1,636,873
Auditing fee 20,000 20,000 22,000 24,200 26,620 29,282
Uniform 120,000 120,000 132,000 145,200 159,720 175,692
miscellaneous 20,000 12,000 13,000 14,000 15,000 16,000
expense
Operating Cost 240,096,118 147,582,832 159,160,993 170,740,554 182,321,655 193,904,449

37
Before Dep.
Depreciation 9,560,283 9,560,283 9,560,283 9,560,283 9,560,283
Operating Cost 240,096,118 157,143,116 168,721,277 180,300,837 191,881,938 203,464,733
Before Interest
Interest Expense 4,865,016 4,406,882 3,903,651 3,350,883 2,743,701
Total Operating 162,008,132 173,128,159 184,204,488 195,232,821 206,208,433
Cost 240,096,118
Table: 23 Operating Cost

Cont.
Capacity Utilization 85% 90% 90% 90% 90%
Description/Year Year 6 Year 7 Year-8 Year-9 Year-10
Cost of Wheat Flour 153,000,000 162,000,000 162,000,000 162,000,000 162,000,000

Power and Light 2,981,664 3,157,056 3,157,056 3,157,056 3,157,056

Sugar and Other Flavors 21,352,925 22,608,979 22,608,979 22,608,979 22,608,979
Water 8,288 8,775 8,775 8,775 8,775
Fuel Cost 408,000 432,000 432,000 432,000 432,000
Packaging 15,623,595 16,542,630 16,542,630 16,542,630 16,542,630
Salary expense 7,804,800 7,804,800 7,804,800 7,804,800 7,804,800
Wage (Birr 50/tone 1,278,060 1,353,240 1,353,240 1,353,240 1,353,240
Property Insurance 328,162 328,162 328,162 328,162 328,162
Land Lease 58,500 58,500 58,500 58,500 58,500
Repair & Maintenance 529,586 529,586 529,586 529,586 529,586
Stationery& Communication 199,022 210,730 210,730 210,730 210,730
Marketing and Promotion 1,739,178 1,841,482 1,841,482 1,841,482 1,841,482
Auditing fee 32,210 35,431 38,974 42,872 47,159
Uniform 193,261 212,587 233,846 257,231 282,954
miscellaneous expense 17,000 18,000 18,000 18,000 18,000
Operating Cost Before Dep. 205,537,251 217,123,959 217,148,761 217,176,043 217,206,053
Depreciation 696,663 696,663 696,663 696,663 696,663
Operating Cost Before Interest 206,233,914 217,820,622 217,845,424 217,872,706 217,902,716
Interest Expense 2,076,749 1,344,143 539,421 - -
Total Operating Cost 208,310,663 219,164,765 218,384,845 217,872,706 217,902,716

Table: 23 Operating Cost

Per the above successive tables, the total annual factory cost is estimated to be Birr 162
million in the initial year and increases to Birr 219 million when it operates at attainable
capacity of 90%.

38
 8.5.3 Production Volume and Revenue
 Production Volume: the two-line machinery has an aggregate installed production
capacity of 45,000 tons, 6,000 tones and 6,500 tons per annum of wheat and biscuit,
respectively.
 Per the table below the flour line will produce two types of flours of (grade 1 & 2 with
equal proportion). At full capacity with extraction rate of 76% the annual production of
flour will reach total 226,500 quintals and 39,000 quintal of bran.
 From the total flour production the biscuit line will use 11% or about 24,120 quintals
while the remaining 89% or about 202,380 quintal will be sold to local market. The
flowing table shows the production volume in detail for each of the production capacity.
Production Schedule In Quintal/100-kg
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
At Full
Product Capacity 60% 65% 70% 75% 80% 85% 90%
Production of Wheat
Flour Grade 1 113,250 67,950 73,613 79,275 84,938 90,600 96,263 101,925
Production of Wheat
Flour Grade 2 113,250 67,950 73,613 79,275 84,938 90,600 96,263 101,925
Total-Flour 226,500 135,900 147,225 158,550 169,875 181,200 192,52 203,850
5
Flour to the Market 172,02
(89%) 202,380 121,428 131,547 141,666 151,785 161,904 3 182,142
Bran 39,000 23,400 25,350 27,300 29,250 31,200 33,150 35,100
Flour consumed by
biscuit use (11%) 24,120 14,472 15,678 16,884 18,090 19,296 20,502 21,708
Production of
Biscuits in qtl 36,000 21,600 23,400 25,200 27,000 28,800 30,600 32,400
Table: 24 Production Schedule
Sales Revenue:
The net revenue of the project’s products starts with Birr 245million and increases to Birr 368
million when it operates at attainable capacity. The under shown table depicts the revenue for
each year under different capacity.

Revenue Schedule
Description/Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7-10

Capacity Utilization 60% 65% 70% 75% 80% 85% 90%

Flour Sale 109,285,200 118,392,300 127,499,400 136,606,500 145,713,600 154,820,700 163,927,800
Biscuit Sale 97,200,000 105,300,000 113,400,000 121,500,000 129,600,000 137,700,000 145,800,000
Bran Sale 7,020,000 7,605,000 8,190,000 8,775,000 9,360,000 9,945,000 10,530,000

39
Total Revenue 213,505,200 231,297,300 249,089,400 266,881,500 284,673,600 302,465,700 320,257,800
with VAT 245,530,980 265,991,895 286,452,810 306,913,725 327,374,640 347,835,555 368,296,470

Table-:24, Revenue Schedule

8.6. Project Profitability

The project would be profitable throughout the considered life years. It is expected to
generate from Birr 33 million up to 66 million net profits. The following table shows the
forecasted income statement of the project within its ten operational years.
Projected Income/Loss Statement
Description/Year Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 213,505,200 231,297,300 249,089,400 266,881,50 284,673,600
0
Total Expense Before
Interest 157,143,116 168,721,277 180,300,837 191,881,93 203,464,733
8
Gross profit 56,362,084 62,576,023 68,788,563 74,999,562 81,208,867
Interest Expenses 4,865,016 4,406,882 3,903,651 3,350,883 2,743,701
Net Income 51,497,068 58,169,141 64,884,912 71,648,679 78,465,167
Profit Tax 18,016,024 20,351,249 22,701,769 25,069,088 27,454,858
Net Income After
Tax 33,481,044 37,817,892 42,183,143 46,579,592 51,010,308

Projected Income/Loss Statement –cont.

Description/Year Year 6 Year 7 Year-8 Year-9 Year-10
Revenue 302,465,70 320,257,800 320,257,800 320,257,80 320,257,800
0 0
Total Expense Before
Interest 206,233,91 217,820,622 217,845,424 217,872,70 217,902,716
4 6
Gross profit 96,231,786 102,437,178 102,412,376 102,385,09 102,355,084
4
Interest Expenses 2,076,749 1,344,143 539,421 -
Net Income 94,155,037 101,093,035 101,872,955 102,385,09 102,355,084
4
Profit Tax 32,946,313 35,374,612 35,647,584 35,826,833 35,816,329
Net Income After Tax 61,208,724 65,718,423 66,225,371 66,558,261 66,538,755

40
 Table: 25 Projected Income/Loss Statement

8.7. Project Liquidity and Payback period

The project would produce positive net cash inflow starting from the first year and
throughout its life. The cumulative net cash inflow for year one and at the end of 10 th year
would be Birr 38million and 578 million, respectively. The initial investment costs would be
paid back with the gross value of net-cash inflows at the end of 3rd operational year.

Cash Flow Statement For Financial Planning purpose

Description/Year - Year 1 Year 2 Year 3 Year 4 Year 5

56,917,774.
Net Income 8 59,817,892 64,183,143 69,579,592 75,010,308
Depreciation and
Amortization 9,560,283 9,560,283 9,560,283 9,560,283 9,560,283

Equity 45,234,240 - - - - -
105,546,56
Bank Loan 0 - - - - -
Working Capital
Recovery

Salvage Value
150,780,80 73,170,257.
Total cash Inflow 0 6 77,378,175 81,743,426 86,139,875 90,570,592
Initial Investment 150,780,80
Cost 0
Principal
Repayment 7,911,828.9 8,212,150 8,715,382 9,268,150 9,875,332
Incremental 4,059,737. 4,059,737. 4,059,737.
working capital - 7 7 7 4,059,737.7
Total cash 150,780,80
outflow 0 7,911,828.9 10,500,231 11,103,462 11,656,231 12,263,413

41
 65,258,428.
Net cash 0 7 66,977,944 70,939,964 74,983,644 79,807,179
Cumulative cash 65,258,428. 113,265,25 161,005,21 209,588,86 257,996,04
inflow 7 5 9 4 3
Cont.
Description/Year Year 6 Year 7 Year-8 Year-9 Year-10
Net Income 61,208,724 65,718,423 66,225,371 66,558,261 66,538,755
Depreciation and
Amortization 696,663 696,663 696,663 696,663 696,663
Equity - - - - -
Bank Loan - - - - -
Working Capital Recovery 43,765,929
Salvage Value 13,784,877
124,786,22
Total cash Inflow 61,905,387 66,415,086 66,922,034 67,254,924 4
Initial Investment Cost
13,979,61
Principal Repayment 12,651,882 13,174,890 2 - -

Incremental working capital 4 ,059,737.7 4,388,081 - - -

Total cash outflow 9,830,365 10,562,970 8,979,612 0 0
124,786,22
Net cash 52,075,022 55,852,115 57,942,422 67,254,924 4
454,120,52 578,906,75
Cumulative cash inflow 273,071,065 328,923,180 386,865,602 6 0
Table: 26 Cash Flow Statements for planning purpose

8.8. NPV & IRR

The harmonizing up of the discounted cash inflows at the rate of 9.5% less the original outlay
cost resulted in (NPV) of Birr 194,054,889.60 million. The internal rate of return (IRR) is
26.53%, which is a good deal on top of the considered cost of capital.

Cash Flow statement for Discounting

Description/Year y-0 Year 1 Year 2 Year 3 Year 4 Year 5
Net Income 0 33,475,52 37,812,37 42,177,62 46,574,07 51,004,78
4 1 2 1 8
Dep. and Amortization 9,568,777 9,568,777 9,568,777 9,568,777 9,568,777
Interest expense 4,865,016 4,406,882 3,903,651 3,350,883 2,743,701
W/Capital Recovery
Salvage Value
Total Cash Inflow 0 47,909,31 51,788,03 55,650,05 59,493,73 63,317,26
6 0 0 0 5
Initial Investment Cost 87,970,680
Principal Repayment 0 4,654,017 5,112,150 5,615,382 6,168,150 6,775,332

42
Incremental working capital - 2,388,081 2,388,081 2,388,081 2,388,081
Total cash outflow 150,970,680 4,654,017 7,500,231 8,003,462 8,556,231 9,163,413
Net cash flow -150,970,680 43,255,29 44,287,79 47,646,58 50,937,50 54,153,85
9 9 8 0 2
NPV @ RRR 9.5% 194,054,889.
6
IRR 26.53%

Table: 27 Cash Flow statements for Discounting

Cash Flow statement for Discounting, cont.
Description/Year Year 6 Year 7 Year-8 Year-9 Year-10
Net Income 61,208,724 65,718,423 66,225,371 66,558,261 66,538,755
Depreciation and Amortization 696,663 696,663 696,663 696,663 696,663
Interest expense 2,076,749 1,344,143 539,421 - -
Working Capital Recovery - - - 43,765,929
Salvage Value - - 13,784,877
Total Cash Inflow 63,982,135 67,759,228 67,461,454 67,254,924 124,786,224
Initial Investment Cost
Principal Repayment 7,442,284 8,174,890 8,979,612 0 0
Incremental working capital 4,388,081 4,388,081 - - -
Total cash outflow 9,830,365 10,562,970 8,979,612 0 0
105,151,77 108,196,25 109,481,84
Net cash flow 1 8 3 118,254,924 124,786,224
Table: 27 Cash Flow statements for Discounting
8.9. Sensitivity to Cost and Revenue Variations
Four scenarios are tested to assess how the net benefits of the project behave towards adverse
changes each by 10%. That is.
 Revenue decline
 fixed cost increment
 Operating cost increment, and
 Simultaneous increase in investment and operating cost
No. Scenario NPV in millions of Birr IRR in %
Base 241 53
1 Decrease in revenue 140 36
2 Increase in Operating cost 172 42
3 Increase in fixed investment cost 233 49
4 Simultaneous increase in investment and operating cost 164 38
Table: 28, Sensitivity to Cost and Revenue Variations,
Relatively, the project is not sensitive to increments in fixed investment cost but it is sensitive
to revenue and cost, suggesting a parallel decrease in operating cost and increase in revenue,
respectively. In all cases the however, NPV is positive with minimum IRR 36% which is far
from the discount rate of 9.5%.

43
 8.10. Debt Servicing Schedule
The anticipated bank loan would be paid within 8 years excluding 2years grace period, at
quarterly repayments and 9.5% nominal interest rate per annum. The two years grace period
includes one year construction period per implementation plan indicated in part_1.4 above and
one year pre-marketing period. The schedule is shown in the following table.

Loan Amortization, Equal Quarterly Repayment

Principal Payments Balance
Principal Interest
Year 0, 24 Months Grace period. 105,546,560 - 10,055,14 105,546,560
105,546,560 1,122,865 1,256,8935 104,546,560
104,546,560 1,149,533 1,230,225 103,546,560
103,546,560 1,176,834 1,202,924 102,546,560
102,546,560 1,204,784 1,174,974 101,546,560
Year 1,Sub Total 4,654,017 4,865,016
101,546,560 1,233,398 1,146,360 100,546,560
100,546,560 1,262,691 1,117,067 97,546,560
97,546,560 1,292,680 1,087,078 94,479,031
94,479,031 1,323,381 1,056,377 43,155,650
Year 2,Sub Total 5,112,150 4,406,882
93,155,650 1,354,811 1,024,947 91,800,838
91,800,838 1,386,988 992,770 90,413,850
90,413,850 1,419,929 959,829 88,993,921
88,993,921 1,453,653 926,106 37,540,268
Year 3,Sub Total 5,615,382 3,903,651

44
 87,540,268 1,488,177 891,581 86,052,091
86,052,091 1,523,521 856,237 84,528,570
84,528,570 1,559,705 820,054 82,968,866
82,968,866 1,596,748 783,011 81,372,118
Year 4,Sub Total 6,168,150 3,350,883
81,372,118 1,634,670 745,088 79,737,448
79,737,448 1,673,494 706,264 78,063,954
78,063,954 1,713,239 666,519 76,350,715
76,350,715 1,753,929 625,829 74,596,786
Year 5 Sub Total 6,775,332 2,743,701
74,596,786 1,795,585 584,174 72,801,201
72,801,201 1,838,230 541,529 70,962,972
70,962,972 1,881,888 497,871 69,081,084
69,081,084 1,926,582 453,176 67,154,502
Year 6 Sub Total 7,442,284 2,076,749
67,154,502 1,972,339 407,419 65,182,163
65,182,163 2,019,182 360,576 63,162,981
63,162,981 2,067,137 312,621 61,095,844
61,095,844 2,116,232 263,526 13,979,612
Year 7 Sub Total 8,174,890 1,344,143
13,979,612 2,166,492 213,266 11,813,120
11,813,120 2,217,947 161,812 9,595,173
9,595,173 2,270,623 109,135 9,324,550
9,324,550 2,324,550 55,208 (0)
Year 8 Sub Total 8,979,612 539,421
105,546,56 23,230,44
0 5 128,796,995
Table:29 Debt Servicing Schedule

Depreciation and Amortization

Rates
Applie
Cost Item Original Cost d Year 1-5 Year 6-10
Building 26,338,330.54 5% 1,316,916.53 1,316,916.53
Machinery, Equipment, Furniture & 54,073,243. 83 20% 10,814,648.7
Vehicles 7
Land Lease-over lease period of 80 years 534,034.09 1% 5,340.34 5,340.34
Pre-operating Expenditure 15,374,041.63 20% 3,074,808.33
Total 96,319,650.09 14,568,777 1,896,663
Table: 30 Depreciation and Amortization
9. Economic and Social Benefits

45
The project can create employment for about 453 persons. In addition to supply of the
domestic needs, the project will generate Birr 1,217,676, per annum in terms of tax revenue.
The establishment of such factory will have a foreign exchange saving effect to the country
by substituting the current imports.
Generally the envisaged plant is typical medium level environmental friendly process that
discharges insignificant waste in solid and gaseous form and investment s on environment as
well as environmental management system are recommended with the necessary operating
and overhead costs to manage and comply with both national and international standards.
10.Monitoring and Evaluation
10.1. Monitoring
With support of executive bodies and decisions in line with agreed up on project as well as
guidelines between stakeholder bodies and the project owner. The project owner shall
monitor all activities [Land request processing, Land approval, Bank loan processing, Site
Development, Building and construction work, Preparation for service and service execution]
required to make the process of the project from beginning to end and deliver required
commercial service efficiently and effectively.

10.2. Evaluation
The project promoter evaluates the on-going process of the project at each phase of
implementation. Even if joint evaluation conducted at the end of the project, the engineering
estimation of bill of quantity is the basic tool of project success evaluation. This evaluation
will be based on the agreed upon project document.

46