The Project Proposals on ABF

CONSTRUCTION Modern RECREATION

Center

Owners’:- ABF Construction Enterprise

MSE

Location: Aweday Town

March-2021

Aweday
 1. Executive Summary

This is a feasibility study for project owner ABF Construction Enterprise Modern Recreational
center/business center. The location of the project is very attractive and ideal for running such modern
business centers. The investment under consideration is also prepared with the aim of establishing a
modern Recreation center services at Aweday town.

As the area under consideration is not very far from the center of Harar city, it has well share development
social and economical infrastructure. Such as, electric power, water, telephone and other infrastructures.
The proposed project will be managed by the owner (ABF Construction Enterprise) of the project who
have accumulated experience in Business of different construction work and management. In addition to
this, hired employees will be handled the day to day activities of the project. It will also create
employment opportunities permanently for 20 citizens.

The total investment cost of the project is estimated at Birr 1,579,000. Which will be raised by the owner's
equity and bank loans. From the total amount of money Birr 900,000 is for construction and Birr 385,000
purchase of equipments of the building. Birr is 294,000 for working capitals. In addition the remaining
project budget is expends for contingency.

Like most business venture the project aims to maximize return on invested capital.The forecasted profit
and/or loss statement computed for seven years indicated that the project would generate an average net
profit of Birr 151,412 in the first year and Birr 1,241,357 at the end of seven (7) project years. Therefore,
we can draw a conclusion that the project will be financially viable. In view of the above consideration,
the establishment of the project is highly recommended.
 2. Introduction

In Ethiopia, the current higher rate of urban growth, which is conditional by natural growth and to urban
migration, will result in continued rapid urban growth. Particularly, higher rate of growth observed in
large and medium urban centers which predominately the courtiers urbanization pattern, implies doubling
of their population in a decade. Urbanization will thus, place greater challenge on both Regional and local
governments of Ethiopia. Especially, the challenge for local governments in which capacity to deliver
socio-economic services and infrastructure has already been constrained will be much more serious.

At present Ethiopia stands predominantly an agrarian economy with urbanization level of only 17 percent
which compares very low income and economy standards. Most urban centers play predominant role as
seats of political power and administration where as they exhibit in adequate functional specialization in
modern production and service activities. Due to this and mainly because of the subsistence nature of
farming, the level of urban-rural interaction and exchange is quite weak. Urban areas primarily serve as
collection center of agricultural product (produce), which are to be channeled to large centers. The center
therefore exhibit poor economic base and increase proportion of their dwelling population is being
affected by the incidence of poverty.

It is only recently that the government has given emphasis to urban area to lounch a new initiative and
attractive policy environment that encourages private investments in urban area to contribute the
economic development and for the proper way of urbanization. Oromiya Regional State has made
constructive major to alleviate structural problem of urban areas through attracting investments.This
project is proposed in response to the needs for development of modern business market to support the
governmental policy by facilateting compitative business market and decreasing unemployment rate at
town level.

East Hararghe zone in general is a cash crop area where khat and coffee production has become an
increasingly growing and leading economic activity. With expansion of cash crop in the zone and due to
the currently low level of modern commercial business center, the growing up of urban population
overtime increasing demand in modern business Recreation centers. Aweday town is among the town in
the Zone which known by low level of modern commercial center that did notmach with the demand
exist.
More over, the favourable situation for private sector in Aweday town causes to raise performance of
investment and considerable number of projects are flourished as resent facts revelled. Relatively
presence of well-developed infrastructure and its nearness to Harar city makes Aweday town the highest
recipient of investment.

Among different projects currently operational in different status: from planning to starting production;
the modern Recreational center sector development is hardly noticed, to date. In spite of existence of
high degree, shortage of modern Recreational centerr in Aweday town. The investment is practiced neither
by government nor by private sector in the town. So that the presence of high demand gap for such
modern business Recreation center, as well as the suitability and relative advantage of Aweday town as
Recreational centerred organizational interest of the project area attracts this investment.

The purpose of this study s to present a project profile for establishment of modern Recreational centerr
that accommodate, restaurant, Fountain recreation place, for the one who celebrate their wedding at the
center and big green area (garden), for the one who recreate and celebrates their joys.

Therefore, the peroject owners’ initiated the project and to be the pioneer for the Recreational center in
the town. And along this line, that the project owner ABF Construction Enterprise Mse planned

to stabliesh ‘’ ABF Recreational center project in Aweday town at kebele 02 in genda rasho area.

3. Historical Backgrund

Aweday town is located in the most structurally cash crop producer areas in the zone where most of the
population is living in a good land and majority of the people are setteled in mid and high altitudes where
rain fall is reliable both in terms of quantity and distribution pattern. Besides, the livilyhood of the rural
mass surrounded wereda, is minly dependes on the merit of Agriculture.Aweday town with its
growinghistory and It is claimed that the present area of the town had permanent settlers and the name
'Aweday' was applied only to the area. Aweday is an Afan Oromo term that literally comes from ‘awo-
weday’. As to why this term was applied to the town, group of informants argues that it was because of
the name of the person who is lived in the area. After 1991, as part of the administrative reforms made
by the restored government, Aweday was founded in this period. Aweday town is found 10 km from
Harar city to the direction of west. It is the proximity to the most productive and fertile parts of the zone,
attractes the attention of many investers including the owners of the project, the exsisting favorable
condtion with cash cropproducer nature of the haramaya wereda especially vegetables which highly
generate income for the peoples, the gap to provide modern Recreational center is inductive potential of
the selected project.

As in the other weredas of the Eastern Hararghe zone, the agricultural sector in Haramaya wereda is
characterized by traditional farming and small amount of livestock raring practice that are entirely
dependent on the merit of nature. The agricultural production which is bleved to be a major output of
cash crops situation can be attributed to the development ofurbanization.Major problems mainfisted in
the wereda are lack of appropriate market structure, lack of modern business center and poor level of
awernass among society on the mixsed use business market.

4. The Project Area

4.1 Location

The modern Recreational center, which basically serve as recreation activities is located in Aweday town
which located in Haramaya wereda. In the Eastern Hararghe zone, Haramaya werad is shares about 3%
of the total area of the zone. Haramaya wereda is only with woina-daga, Daga and kola cilimetic condition
with estimated population of 160,912 people in which majority of Haramaya wereda are rural inhabitant.
Accordingly, the projection of the 2011 population of rural Haramaya wereda is estimated to be 138,080
people from the total and about 21,248 people are semi urban dwellers. The mean annual temperature of
the wereda is about22.5 degree celcies and mean annual rainfall is about 1000mm.

4.2 Topography

The project site is located in Aweday town which about 10km away from Harar city to the direction of
west. The town is situated at an altitude of about 2,000 meters above sea level and majority of the
wereda’s agro ecology falls in the woina Dega wether condition which is suitable for life. Inaddition the
general topography of the town is on a good flatted surface area.

4.3 Soil type

The study of soil type in Aweday town indicates as the soil type in the town is favorable and good soil to
construct and building. So our project is also chanceful no more challenged by soil type problems.

4.4 Economic Activitie

The rural community of the wereda mainly depends on mixed farming system where crop production is
the major economic activity supplemented by animal husbandary. The urban community of the wereda
are mainly depend on small trading and different economic activities while the wereda is well known by
irrigated cash crop production especially khat, vegetables mainly potato crop at rural and urban
community focuses on the trade of such commodities. The main problems of the wereda is lack of
structurally attractive and competitive modern Recreational center. Citizen’s opportunity to employee
and investment determine the development of rural-urban relation and way of modernization of things.
This may be realized through development of competitive Recreation center and good structure of trade
and demand based. To achieve this goal the present economic policy in Ethiopia is not doubtfully the
appreciation policy especially in the field of investment of urbanization and construction.

Our modern business Recreation center in Aweday town and close to the Haramaya TVET college which
enroll over 2000 students annually and there is access rural road to the Aweday town that can be enable
the project to easily utilized by different sectors as well as traders.

5. The Project

5. 1 Justification of the Project

According to Ethiopia Economic policy, the government intends to revitalize the modern Recreational
center by privatization. The economic policy issued 1991, in its sub-article 1-5 provide a provision for
private sector participation in the area of urban development including modern Recreation center. The
policy allows the participation of private capital, individual or collective in the construction of
Recreational center with encouragement replacing old and slum houses as well as newel y proposed
recreation land use area in the town. Despite the fact that such encouragement and a shift of policy are
made, there is still a high demand for modern Recreational center.

One of the obvious consequences of urban development is increase demand for urban service. Miss
much between supply and demand of Recreational center is much problems. Recreation center problem
is seriously felt in any urban centers of the country both quantitatively and qualitatively. As it is
common to Ethiopia towns, Aweday town suffer from such problems as there is a large gap between
the demands on the one hand and the lack of supply and stock to services on the other hand.

The land, which is planned for this project, was suitable for Recreation purpose. It is owned by the project
owner having an area of 650 m2. And also the newly revised master plan of the city changes the land use
to mixed residential and business purpose and hence this is the prime motive of this project to act in line
with the master plan. And so to act on business project to wards constructing business Recreation center
project and provision of related service that guarantee minimum living environment. Implementing the
project contributes Recreation center in that it provides business services, which are interactive, each
other.

The project aims to construct modern business Recreation center, which will be use full for eight
different business ventures. This is to create business corner with in the proxy of the resident of the
community. Lack of recreation place, greenery services, pool services and the changing culture of the
community to have modern business Recreation center in nearby is the deriving force to think for the
establishment of modern business Recreation center. So the envisaged project is a stereotype of the
above mentioned approach.

On the basis of the above ration: existence of high level demand and the current land use approach
motivates the planned project in addition the personal need to changed people by such business
Recreation center.
 5.2 Objectives of the Projects

The main objective of the project is to establish a traditional recreation center which reflects the Oromo
culture specifically the living identity of central part of Oromia. All facilities starting from construction to
service delivery are built and organized from traditional materials.

In addition to the stated above, the project have the following objectives:

 Create job opportunities for a number of employees during construction and its full operation

 Generate reasonable return on planned investment

 To create additional source of revenue for the municipality of the town, and

 To Contribute to the over whole socio-economic development of the town and region as well.

5.3 Description of the Project

The project will be planned on the existing 650 m2 of land, which is miss used to date. The project in
its 1st phase starts by removing wastage disposal and clearing site. In addition, the project also planned
to have recreation centers that will took about 90% of land from the total area. The project has the
component of: modern Recreational center with pool area, cafeteria and Internet services, and
fountain for wedding service and others. Half components of the project will be run by the owner
himself and/or leas out for other business firms on rental basis.

The land is found in kebele 02, which is just adjacent to terminal road. The place is accessible and
furnished with major infrastructural facilities. Asphalt road, water line, electric light and telephone
lines are already supplied utilities that add value for the land. Planning modern Recreational center
project on a plenty of land would bring down the cost of access roads, power telephone line and water
lines and other infrastructure. This out weights the project to establish modern business Recreation
center firm.

The project owner’s are going to build modern recreation center on a mass scale, so his prices
plummeted further. As already mentioned the project will have rooms which will be serve as a
cafeteria, rests and other service. And also rental offerings will be provide on attractive proposition
 to those looking for the purposes mentioned above. The business corners also serve both the local
community and other needy segment of the community.

In addition to 1st phase of project, because the land is possessed by governments which is availed by
the Aweday town urban land development and administration office the project want to expand and
concentrate itself in recreational and resort sector in the future. As to the vision of the project owner’s
there want to expand the current business as well as he shall be participate in others development.
And also in long run the project will expand its product to include higher value recreational and
resorts.

6. Land Utilization Plan

Out of 650 m2 of land 85 m2of about (38.4%) of the land will be allocated for the main modern
Recreational center of G+0, fountain, recreation seats. The rest 61.6% of the land will be used for
greenery. In general the planned project will respect the town rules and master plan instruction and acts
accordingly. And the over all land use pattern is described as follows:

Almost all of the business components will have more than 3 rooms and depending on the architectural
and structural design there is leeway for modification.

7. Market Assessment

Generally Modern Recreational center has been in a good turn over for the last more than three decades
in most of Ethiopia cities. But having high level capital turn over and low risky business limited multi
purpose building developers has been struggling since EPRDF controlled the country in 1983 E.C. This
very few Recreation center oriented companies limit themselves in Finfinne while the problem is
common to most of the cities with varying magnitude. In the case of Aweday town there is high demand
for Recreation center services.

The business Recreation center demand in Aweday shows at increasing rate, some individuals renting
substandard shops and business centers with high price due to supply gap. The increment in demand for
modern business center forever-expanding recreational area and absence of recreation and greenery place
and the like utility service are common in Aweday. The renting price for such type of recreation place
will have better price as compared to the resident houses.
 Table: - 1 Expected Income of The project

SN Component Monthly Income Annual Income

In Birr
In Birr

1 Wedding program preparations 15,000 180,000

2 Restaurants 25,000 300,000

3 Pool rooms 3000 24,000

4 Other services 5,000 36,000

Total 48,000 540,000

8. Organization and Manpower

To make the project effective and efficient having competent management practice and prompt decision
making is essential. The planning, coordinating, directing and supervision of the project will be the
responsibility of the promoter who is an educated and experienced person in different field of business.
Further workers that are more technical like schematic designing of buildings, preparation of building
quantity and construction supervision activities will be delegated by building engineer employed on
contractual basis of one year. Relevant staff and workers will be employed to assist the owners and the
engineer. On permanent and casual terms. Apart from this different calibre building construction
technicians like masonry, carpenter, plumber and electricians will be employed as the project demands.

The construction of the project is fully given to legal contractor through legal bid and supervised by the
resident engineer who will be recruited by the investor. The implementation of the project is fully
managed by the investors himself or their legal representative.

When its construction is fully completed and the center commence its service delivery, it will have one
project administrator who will follow up the day to day activities of the project. The general manager
will also prepare weekly/biweekly/monthly report on the performance progress of the center and submits
to the investors as required and demanded by them. The general manager will be responsible to monitor
and control the overall financial flow and responsible for monitoring and controlling of the service
delivery and security of the center properties.
 The proposed project, therefore, will no face any management and organizational risks. Besides its
creation of vast employment opportunity during its construction phase for both daily labourers and
professionals, the project will create permanent employment opportunity for about 20 citizens, with the
annual salary of 248,600 Birr.

Table 2:- Man Power Requirement Plan of the Project

SN Description Unit Qualification Quantity Monthly Annual salary

Salary/head Expense

1. General Manager No B.A. in 1 1000 12,000

management

2. Marketing officer " Dip. in Purchasing 2 1600 19,200

3. Restaurant staff " Grade 10 5 4,000 48,000

4. Cashiers " Dip. in Accounting 2 2000 24,000

5. Gardening and other " Grade 10 4 2000 24,000

site workers

6. Cleaners " 3 1500 18,000

7 Guards " Grade 10 3 1200 14,400

Total 20 13,300 132,000

9. Financial Analysis
9.1 Fixed Investment cost Estimates (birr)
The fixed capital component that is expenditure be required for fixed asset. The expenditure on building,
machinery and equipment’s amounts to as summarized follow.
a. Building construction and civil Work =900,000
b. Machinery and equipment =250,000
c. Furniture and greenery =135,000
Total Fixed Investment 1,285,000
9.2 Initial Working Capital

The project is assumed to have the initial working capital of Birr 328,800. As we know any investment
needs operating cost to start its work. The operating cost different from project to project. That means
some of them not need high operating cost. The project investigated estimate annual operating cost
mention as follows.

9.2.1 Repair and maintenance

Is assumed to cost about 2% of the fixed cost = birr 25,700

9.2.2 Property Insurance

This premium is estimated to be about birr 2000 annually

9.2.3 Utilities expense

These include electric, water, postal and telecommunication service charges and other office utilities, too.
These are also estimated to cost about birr 300 per month = 4000/year.

9.2.4 Depreciation

Depreciation expense of the building is expected to be 55,000 annually.

9.2.5 Administrative

These expenses include operating cost such as promotion of the building, salary of staffs, guards and cleaners
with all utilities. These are also estimated to cost about birr 13,300 per month = 132,000/year.

9.2.6 Other miscellaneous expenses

These may include expenses such as license payments and other unanticipated costs that are estimated to be
about birr 2800/year.
 Annual Operating cost estimate and working capital requirement (Birr)

No Description Yr-1 Yr-2 Yr-3 Yr-4 Yr-5 Yr-6 Yr-7

1 Administrative
132,000 158,400 190,080 228,096 273,715 328,458 394,150
expenses

2 Repair and maintenance 18000 21600 25920 31104 37324.8 44789.8 53747.7

3 Depreciation 55000 55000 55000 55000 55000 55000 55000

4 Property Insurance 2000 2400 2880 3456 4147.2 4976.64 5971.97

5 utility expenses 4000 5040 6048 7257.6 8709.12 10450.9 12541.1

6 Land Lease payment 15000 15000 15000 15000 15000 15000 15000

7 Other miscellaneous
2800 3360 4032 4838.4 5806.08 6967.3 8360.76
costs

Total operating cost 228,800 260,800 298,960 344,752 399,702 465,643 544,771

8 Other working capital 100,000 120,000 144,000 172,800 207,360 248,832 298,598

Total 328,800 394,560 473,472 568,166 681,800 818,160 981,792

9.3 Total Initial Project cost components (birr)

Finance requirement is composed of fixed investment cost and annual operating cost and initial working
capital estimated to birr 1,613,800 out of this total capital fixed cost accounts about birr 1,285,000 and
initial working capital estimated to be 328,800 Birr.

Fixed investment items including constriction/civil work/cost, machinery cost, and different equipment,
while annual operating cost estimated including the cost expending per annum for the operation of the
project to be cover-running cost of the principal income generating unit. The existing total project costs
requirement of this unit is calculated as follows.
 S.N Description Total cost

1 Fixed Investment cost 1,285,000

1.2 Construction & civil Works 900,000

1.3 Equipments & Material 385,000

2 Initial Working Capital including Lease payment 328,800

INITIAL PROJECT CAPITAL 1,613,800

10. Financial Sources plan

As stated above the total finance required to implement the project amounts Birr 1,613,800. Out of the
total 40% which is equal to 645,520 is from owner equity and the rest 60% (=968,280) is covered by
bank loan.
 Promoter’s equity share (40%) = birr 645,520

 Expected bank loan (60%) = birr 968,280 Total = birr 1,613,800.

Bank Loan repayment period is 7 years.

Outstanding
Years Principal Bank Interest (7.5%) Total repayment
balance

0 - - - 968,280

1 138,325.71 72,621.00 210,946.71 829,954

2 138,325.71 62,246.57 200,572.29 691,629

3 138,325.71 51,872.14 190,197.86 553,303

4 138,325.71 41,497.71 179,823.43 414,977

5 138,325.71 31,123.29 169,449.00 276,651

6 138,325.71 20,748.86 159,074.57 138,326

7 138,325.71 10,374.43 148,700.14 0

11. Annual Revenue Projection

According to the study of the project it will generate reasonable amount of net profit for the owner
through out its life period starting from the first year of operation and also create a substantial
employment opportunity both during its construction and operational period.

The source of revenue of the project will be from rent of recreation site for wedding ceremony and
restaurant and children corners, fountain, big green area (garden) . Therefore the expected revenue is
Birr 48,000 per month. Accordingly the project is assumed to generate annually 540,000 Birr .
 Forecasted Income statement of the project (in br.)

Project Years
Description
1 2 3 4 5 6 7

Gross Revenue 540,000 648,000 777,600 933,120 1,119,744 1,343,693 1,612,431

Less: Operating
228,800 274,560 329,472 395,366 474,440 569,328 683,193
costs

Income from
311,200 373,440 448,128 537,754 645,304 774,365 929,238
Operation

Less:
55000 55000 55000 55000 55000 55000 55000
Depreciation

: Interest 71055 60904 50754 40603 30452 20301 10151

Profit before tax 366,200 428,440 503,128 592,754 700,304 829,365 984,238

Less: Profit tax 54,930 64,266 75,469 88,913 105,046 124,405 147,636

NET PROFIT 311,270 364,174 427,659 503,841 595,259 704,960 836,602

12 The payback Period

The project worthiness can easily be tested using the simple pay back period calculation. Thus, The pay back
period of the project is calculated as the ration of the total investment cost to the sum of the net profit and
total depreciation cost as shown below.

Total Investment cost

Pay back Period =

Net Profit + Depreciation

= 1,613,800/(366,270)

= 4.4 years
 13 Conclusion.

As shown in the above simple analysis, the project will pay back for itself in about 4.4 years and create a job
opportunity for not less than 20 nationals. It also Contribute to the government significant revenue in the
form of income tax and VAT. There fore the project is beneficiary both to the owner and to the government
and is recommended.
Table of content Pages

1.Executive Summary of project…………………………………………………………..…2

2.Introduction……….……………………………………………………………....................3
3.Historical Background…………………………………………………………..................4

4. The project area………………………………...................................................................5

4.1.Location……………………………………………………………………….….5
4.2Topography……………………………………………………………………….5

4.3.Soiltype…………………………………………………………………...............6
4.4.Economic activities of the area………………………………………….............6

5.The project………………………………………………………………………………...6

5.1.Justification of the project…………………………………………………..6

5.2.Objective of the Project ……………………………………………………..8

5.3 Description of the Project ……………………………………...................8

6. Land utilization Plan…………………………………………………………………........9

7. Market Assessment …………………………………..……….………………………….9

Table: - 1 Expected Income of The project………………………………………………9

8. Organization and Management ……………………………………………….................11

9. Project Facilties....................................................................................................................13

Table 2:- Man Power Requirement Plan of the Project…………….……….....…..12

11. Financial Sources plan ………………………………………………………...................14

11 Annual Revenue Projection...............................................................................19

12. The payback Period......................................................... ..................................................19

13. Conclusion ….................................................................................................................................20