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Ye Bechi Fire DrY coFFe Processing inDustrY
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Table of Contents
I. EXECUTIVE SUMMARY ........................................................................... 1
II. BACKGROUND INFORMATION .......................................................... 6
1) Company Profile ........................................................................................ 6
2) Macro-Economic Review............................................................................ 13
A. Ethiopia’s Economy in Retrospect ............................................................ 12
B. Ethiopia's Economy in Prospect ............................................................... 14
III. PROJECT AND PRODUCT DESCRIPTIONS ...................................... 16
1) Project Descriptions ................................................................................ 16
2) Product Descriptions ............................................................................... 16
IV. OBJECTIVES AND RATIONALES OF THE PROPOSAL .................. 18
V. MARKET STUDY ...................................................................................... 21
1) World Coffee Market Outlook ................................................................. 21
2) Coffee in the economy of Ethiopia ........................................................... 23
3) Challenges in Coffee Supply and Marketing .............................................. 31
VI. PROJECT LOCATION AND SELECTION CRITERIA ...................... 34
VII. ORGANIZATION AND MANAGEMENT ........................................... 35
VIII. FINANCIAL AND ECONOMIC ANALYSIS ..................................... 37
1) Investment Cost Breakdowns .................................................................... 37
2) Working Capital ........................................................................................ 38
3) Projected Financial Statements .................................................................. 40
IX. SOCIAL ECONOMIC AND ENVIRONMENTAL IMPACTS ............. 41
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I. EXECUTIVE SUMMARY
o The objectives of this investment proposal are to: Describe the envisage
investment (Project), Analytically present the economic, social and
environmental feasibility of the project, Present persuasive corroborative
rationales: for securing 1.0 hectare of land for development of dry coffee
processing industry at SNNPRG SHEKA ZONE at the location where the
altitude (between 1.200- 2,800 meters) is suitable for quality products harvest.
o The fact that Ato Teka Ambo;
 Had already been involved in the area of dry coffee processing works over the
past years at SNNPRG-YEKI WOREDA BECHI kebele for coffee industry
having invested for processing industry.
 managed end-to-end business processes commencing from coffee export
(coffee processing and transportation services and coffee plantation,
 acquired all infrastructures required for end-to-end coffee businesses
 contributed a lot in Brand development of washed and unwashed coffees of

various Ethiopian regions is plan to make Bechi coffee one of the well-known
coffee
 strategies for new product and market developments in foreign countries
 Owns adequate resources; human and finance,
 Carrying out social responsibilities.
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o Data gathered reveals that, in 2007, Ethiopia took ninth place with export of $100
thousand bags, which accounted for about 3.34 percent of world total. Estimates
for 2008 indicate that Ethiopia would become first in Africa and fifth in the world
next to Brazil, Viet Nam, Colombia, and Indonesia producing 5.68 percent of
total world coffee production.
o Studies indicate that thanks to the country's favorable ecological factors such as
suitable high altitude, ample rainfall and optimum temperatures, appropriate
planting materials, and fertile soil Ethiopian has high coffee production and
export potential having unique characteristics, aroma and flavor commanding
premium price
o Project area selected having been center for high coffee potential farmers in the
vicinity as well as in the kebele as well.
o The project will create employment opportunity for so permanent and 20

Temporary personnel, most (80% of which are to be take on from local areas
o The total estimated investment cost of the project is Br. 15.7 million of which
70% or Br. 11 million is to be financed by bank loan and the balance 30% or Br.
4 million by the promoters.

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II. BACKGROUND INFORMATION

1) Company Profile
A. Purpose and Descriptions of the business of the company
The traditional long life experience makes Ato Teka Ambo specialist, highly
integrated, trade and industry with core expertise in export of coffee. Capitalized on
skills of management and staff and encouraged export performance, Ato Teka
Ambo has expanded its business line in investment of coffee processing.
Core Competencies
i. Strategies and values
Developed over several years, Ato Teka Ambo crafted the following strategies and
values to achieve its objectives:
o Providing unsurpassed service level maintaining specialized product deliver
o Controlling the export and import processes using own suppliers' network and
facilities by creating backward and forward linkage
o Value passion, commitment, honoring commitments and knowledge in what

we do
o forming teams constituting individuals driven and committed and accountable

for specific objectives
ii. Critical success factors
Ato Teka is operated and managed by a seamless, strong, vibrant management team
with proven specialist skills in the services that it provides they lead the company to:

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o Engage in all its value chain partners in a respectful, personalized way as part
of an integrated team
o Provide integrated, cost effective logistical solutions locally, regionally and

internationally
o Continually seek improved solutions to improve its clients' competitiveness
Location
Strategically positioned with convenient access to facilities such as the trading house
and transport stream route services.
Investment in Infrastructures
o Land covering approximately 10,000 sq. m. the coffee processing plant and
the warehouses for coffee and coffee drying tables; sales and after sale
services,
o Secured principal sit in the trading house ECX
o Complete quality control lab for coffee testing direct control and ownership of
transport fleet for the export business
o Outstanding local retail sales, distribution and marketing knowledge
o Best of breed associations in providing end-to-end service
o Expert knowledge of Africa, USA, Europe and the Middle East
HONORING COMMITMENTS
Teka Ambo Dry Coffee Processing Industry values honoring commitments as per
terms and condition and has never defaulted. Commitments;
o Core business activities: all its business activities; producing quality coffee for
the market and contributing the domestic export amount,

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o Bank Loans: credit facilities secured to finance business activities have to be
repaid as per the terms and conditions
o Tenders: as a means of enhancing revenues and its bases, Teka Ambo Dry
Coffee Processing Industry uses tenders dishonoring might lead to serious
consequence
B. Recent operational History of the company
i. Export
Teka Ambo Dry Coffee Processing Industry uses the modern commodity exchange
house of the country i.e., Ethiopia Commodity Exchange (ECX) by securing a
principal sit. As a result, it guarantees the quality of coffee ordered by the buyers and
payment to the suppliers.
Since establishment, it has fostered a strong relation with major trading industries,
brokers and rosters in East Africa, Asia, and the Middle East and Africa.
Pursuing a differentiation strategy, it is also engaged in export of specialty coffee

prepared as per customers' request which enables it fetch high premium price.
ii. Coffee Processing

Coffee Processing plant: covering 5,000 sq. m, the coffee warehouse
provides coffee processing services using own plant. Acquired at Br. 24
million, the plant is a well-known European brand called CIMBRIA HEID
having a processing capacity of five tones per hour. As a fully bonded
facility it provides seamless, quick handling. The facility is operational 365
days a year and operates around the clock. CIMBRIA HEID is designed
and manufactured to the highest engineering qualities and standards. This
incorporate expertise in the most modern processing technology and plant

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design which ensure optimum processing at low energy consumption
guarantying reflection of state of the art in performance efficiency and final
product quality.
The plant comprises among other things, pre-cleaner, dry stoner, huller,
polisher, delta grader, gravity table separator.
Continuous power supply is guaranteed via a dedicated transformer and
standby generator, capable of generating the 200kw/hr. electricity supply
required to power the entire site.
Duty operations and maintenance staff are available 24 hours, ensuring the
best possible continuity and operational control.
C. Assets and Revenue
As depicted in figure 1 below- its revenue and assets grown by 63% and
+1%, respectively during 2010 E.C fiscal year.
Figure 1: Revenue and Assets (In thousands Birr)

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1) Macro-Economic Review
A. Ethiopia's Economy in Retrospect
The Ethiopian economy continued to register a notable growth. In FY

2014/15 (NBE, 2016), the real GDP grew by 10.2 percent relative to 11.2
percent growth target set in the first GTP for the fiscal year. The growth of
the economy has also been remarkable compared to the 1.4 percent growth
estimated for Sub-Saharan Africa in 2015 (World
Economic Outlook Update, July 2015).
This impressive growth was mainly attributed to service sector (10.2

percent), agricultural sector (6.4 percent) and industrial sector (21.6
percent).
Nominal GDP per capita went up to USD 691 from USD 639.6 and real per
capita GDP to USD 418 against the preceding year. Generally, the
Ethiopian economy recorded 10.1 percent average growth rate per annum
during the GTP period (2010/11-2014/15). The Ethiopian economy is
projected to grow by 11 percent in FY 2015/16 in contrast to 3.8 and 5.1

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percent growth by IMF for the world and SSA respectively (WEO, July
2015).
Industrial sector showed a 21.6 percent growth; over the previous year and
accounted for 15.2 percent of GDP. The sector contributed 29.4 percent to
the overall economic growth during the fiscal year. This indicates that
despite its rapid growth relative to agriculture and service sectors, the
share of industrial sector in GDP was very low, calling for enhanced
investment in manufacturing sector taking into account the country's
competitive advantage.
Manufacturing sector increased by 15.8 percent and constituted about 31.8

percent of industrial output growth and 4.6 percent of real GDP
growth Construction industry, on the other hand, contributed more than

half (56.1 percent) to industrial sector growth and 8.5 percent to GDP
growth. This implies that construction sector is currently the leading
industry due to expansion in construction of roads, railways, dams and
residential houses.
Meanwhile, electricity & water and mining & quarrying contributed 6.5
and 5.6 percent to industrial growth, respectively. Service sector has also
become relatively a dominant sector in Ethiopia since it overtook the
agricultural sector in 2010/11. In 2014/15, its growth rate was 10.2 percent;
and its share in GDP rose to about 16 6 percent. Its contribution to GDP
growth was about 46.1 percent in the same period
B. Ethiopia's Economy in Prospect

Overall, GTP II, built on the progress and achievements of GTPI, is aimed
at achieving the following macroeconomic objectives (NPC, 2016):
 Maintaining double-digit average economic growth rate of 11%

(eleven percent) per annum. (Base case scenario).

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 Ensure structural transformation of the economy.
 Maintaining Macroeconomic Stability:
 Keeping annual average inflation rate within single digit,
 Enhancing export competitiveness through creating conductive

environment within a stable foreign exchange regime,
 Maintaining budget deficit below 3% of GDP on average,
 Increasing the share of domestic revenue in GDP to 19.1 percent by

the end of the plan period.
 Increasing the share of gross domestic saving in GDP 06 percent and

by so doing increasing the share of gross domestic investment in
GDP to 11.3 percent by the end of the plan period
During the GTP II period, it is projected that GDP will grow on average by
11 percent per annum under the base case scenario. Albeit challenging, this
level of growth is believed to be attainable given the growth trend
sustained during the last 12 years ending in 2014/15. At the level of sectors,
average growth rate of the value added is projected to increase at 8 percent
per annum for agriculture, 20 percent for industry and 10.1 percent for
services.
Table 1 GDP Growth Rate under Base Case scenario (in %) valued at 2014/15 price
Avg.
Base
Sector Performa Forecast Average
Year
nce
2010/11- 2015/1 2016/1 2019/ 2014/15-
2014/15 2017/18 2018/19
2014/15 6 7 20 2019/20
Agriculture and 6.6 6.4 8.2 8.0 7.9 7.9 7.8 8.0
allied activities

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Industry 20.2 21.7 21.8 20.6 20.0 19.1 18.4 20.0
Manufacturing 14.7 15.8 20.2 21.3 22.0 22.7 23.4 21.9
Large and medium 19.2 20.3 20.0 21.3 21.8 22.6 23.4 21.8
scale manufacturing
Small and micro 4.2 2.9 21.0 21.3 22.6 23.0 23.5 22.3
manufacturing
Service 10.8 10.2 10.3 10.2 10.1 10.0 9.6 10.1
Gross Domestic 10.1 10.2 11.2 11.1 11.1 11.0 10.8
11.0
Product (GDP)
Source: (NPC, 2016)
III. PROJECT AND PRODUCT DESCRIPTIONS

1) Project Descriptions
The Project envisages development of Dry Coffee Processing Industry at
SNNPR, SHEKA ZONE at the location where the altitude is suitable for
quality coffee product as recommended by agriculturalist.
2) Product Descriptions
The attributes of products coffee and processed coffee are pretty much the
function of the location which uniquely identifies ecological factors such as
soil, temperature, rainfall, humidity etc.

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In effect, the products will have their own 'kefa-sheka' brand. Look- alike
is highly unlikely especially in coffee where strong attachment in attribute
determination is attached with the environment.
With regard to production system, the project will implement the

processed coffee industrial system.
Coffee production systems and location -unique nature of products vis-à-

vis the potential for new products development and benefits thereon are
discussed in length and depth in the following box.

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In Ethiopia, there are four types of coffee production system: forest coffee, semi-forest coffee,
garden coffee, and plantation coffee. Forest coffee accounts for about 10 percent, semi forest
coffee for about 35 percent, garden coffee for about 35 percent, and plantation for about 15
percent (3% government, 15% private) of total coffee production in Ethiopia. Ninety five
percent of the coffee produced under these systems is organic. Coffee production using
chemicals fertilizers and herbicides account for about only about five percent of total
production.
Thanks to the country's favorable ecological factors such as suitable altitude, ample rainfall,
optimum temperatures, appropriate planting materials, and fertile soil Ethiopian coffee is
known for its unique characteristics, aroma and flavor. This shows that there is very high
potential for coffee production in Ethiopia and generate premium prices. Ethiopia has a broad
genetic diversity among its coffee varieties. The country has also become particular interest to
the world for its inherent quality and coffee production potential due to its Arabica coffee, an
indigenous variety. Coffee Arabica has been grown in the wild forests of the southwestern
massive highlands of the Kaffa and Buno districts of the country. Ethiopia is the primary
center of origin and source of genetic diversity of the Arabica coffee plant. More than any other
country, Aroma and flavor are among the unique characteristics found in Ethiopian coffee.
Nine different bean varieties are cultivated in the four growing areas of Ethiopia, all with
distinctive tastes, sizes, shapes and colors at various altitude ranges from 550-2750 meters
above sea level.
The quality standards of Ethiopian coffee are classified according to their origin of production.
Among the best known coffee varieties in Ethiopian are Harar, Wellega, Limu, Sidama and
Yirgacheffee take the priority. The first type, Harar is the highest premium coffee in Ethiopia
as well in the world. Harar coffee has medium size bean, with a greenish yellowish color with
medium level of acidity and a distinctive mocha flavor. The second well known variety of
Ethiopian coffee is Wollega (Nekempt), which is produced in western Ethiopia. The beans of
Wollega has medium to bold bean with fruity taste. The third type, Limu is known for its spicy
and wine flavor, and good acidity. It is most preferred and popular in Europe and the U.S.
Washed Limu is one of EthiopiaOs premium coffees. The fourth type of Ethiopian coffee is
Sidamo, which has greenish grayish color and medium sized beans. According to the sources,
Sidamo accounts for 30 percent of all Ethiopian coffee production. Washed Sidamo, called
sweet coffee is known for its balanced taste and good flavor. It has fine acidity and good body.
It is always blended for gourmet or specialty coffee. The fifth Ethiopian coffee quality type
known with an intense flavor known as flora is Yirgacheffee. It is one of the best highland

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grown coffees. The washed coffee is paid a premium. Yirgacheffee has fine acidity and rich
body

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IV. OBJECTIVES AND RATIONALES OF THE PROPOSAL
The objectives of this investment proposal are to:
1) Describe the envisage investment project)
2) Analytically present the economic, social and environmental

feasibility of the project
3) Present persuasive corroborative rationales;
For securing 1.0 hectares of land for development of dry coffee processing
industry and to afford the necessary machinery, equipment installments at
SNNPR SHEKA ZONE at the location where the altitude is suitable for
quality coffee products.
Rationales
1) Why Ato Teka Ambo is the preferred investor to have the right to
develop coffee processing industry
a) He had been already developed the skill of how to process dry

coffee and had the experience of producing the product for export
market eventhough traditional for the past atleast ten years.
b) Over the past ten years Ato Teka Ambo managed end-to-end
business processes commencing from coffee export coffee processing
c) Ato Teka Ambo has acquired all infrastructures required for end-
to- end coffee businesses by investing in coffee plantation (input), coffee
processing (service), ECX seat (transaction) and transport facilities
(logistics). (Birr 5 million in Assets, 2017/18)
d) In addition to engaging in specialty coffee, Ato Teka Ambo plans

product and market developments in foreign countries to directly

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engage with consumers to manage price volatility severely impacting
the coffee business at times of over production and supply.
e) Ato Teka Ambo has adequate resources; human and finance

required for the realization of the project.
f) Ato Teka Ambo has carried out its social responsibilities. For
example, in Sheka zone different kebeles, provides community services.
2) Merits of the investment development of coffee processing industry

for the requested resource (land) and machineries.
a) Support realization of government industrialization policy through the

supply of quality and adequate inputs.
b) Generate foreign currencies by commanding premium prices through the

provision of value-added products
c) Generate both rural and urban employment;
d) Generate new sources of income for farmers/artisans;
e) It would be a means for the transfer of technological and best practices to the
community for the development of coffee and spices plantation.

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V. MARKET STUDY
1) World Coffee Market Outlook
Significance of Coffee in the world Economy
Coffee is one of the most important agricultural commodities in the world.

It is estimated that over 600 Billion cups are consumed every year. For
North Americans only, this is estimated to be 64 liters per person per
annum. After crude oil coffee is the second most important export
commodity on which several national economies depend. Coffee is
produced and exported by more than 80 countries in the world. Coffee is
exported in its raw, roasted, or soluble product forms to more than 165
countries worldwide by more than 121 countries. About 17 of these
countries get 25 percent of their foreign exchange earnings from coffee.
More than 50 developing countries, 25 of them in Africa, depend on coffee
as a major source of export earnings. In Burundi for instance, coffee
constitutes nearly 79 percent and Uganda 43 percent of the entire export.
Coffee production by its nature is more labor-intensive activity than
alternative activities. In the world today about 25 million small producers
cultivate coffee for their livelihoods. Thus it directly or indirectly supports
many people in their livelihoods. According to FAO, for example in Brazil
alone, more than 5 million people are employed in the cultivation and
harvesting of over 3 billion coffee plants. The largest coffee-producing
region of the world is Latin America and Caribbean. In 2006 Brazil, for
instance, produce almost one-third of all Worlds' coffee production. In the
same year, other countries in Asia such as Vietnam, Indonesia and India

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together produce about 23 percent of world's production and Ethiopia
produce only 3.5 percent of World production. African countries also
supply.
Significant amounts of coffee to world market. In 2006/07, African

countries produced about 12.1 percent of the world total (which is about
14,944 bags) and exported about 11.82 percent of world total exports (see
table below). According to this figures Africa is the third producer and
exporter of coffee next to South America and Asia (see table 2 below).
Table 3 World Coffee Supply and Distribution for Producing Regions 2006/07
Region Total % Share in Domestic % Share in Total % Share Rank

Production Total World Use Bags * Total Export in Total Volume
Bags * Production Production Bags * World of
Exports Exports
South 71733 58.0 18947 26.41 43016 46.34 1

America
South East 23728 19.2 4637 19.54 20235 21.80 2

Asia
Africa 14,944 12.1 2902 19.42 10972 11.82 3
Central 11267 9.1 1374 12.19 10193 10.98 4

America
North 4354 3.5 1510 34.68 3500 3.77 5

America
South Asia 4700 3.8 1470 31.28 3457 3.72 6

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Oceania 1201 1.0 2 0.17 1253 1.35 7
Caribbean 1521 1.2 1349 88.69 136 0.15 8
Middle East 195 0.2 138 70.77 57 0.06 9
World Total 123643 100.0 32329 26.15 92819 100.00

Source: Multi Commodity India Limited (MCX) *Note: one bag is equal to 60 kg.
Coffee Marketing World Trends.
Several evidences show increasing trends in world consumption of coffees.

Projections confirm that consumption of coffee is expected to increase by
0.4 percent annually from 2000 to 2010. Following this increases in world
demand for coffee, volume exported by different countries is expanding.
For instance, in 2007, Brazil takes the lion share (rank first) of world
exports, which account for about 30 percent of the total exports, followed
by Vietnam, Colombia, Indonesia and Mexico taking 14.05, 11.7, 5.14, and
3.80 percent of world exports. In 2007, Ethiopia took ninth place according
to this data, which accounted for about 3.94 percent of world total with
export of 3 100 thousand bags. Estimates for 2008 indicate that Ethiopia has
become first in Africa and fifth in the world next to Brazil, Viet Nam,
Colombia, and Indonesia producing 5.68 percent of total world coffee
production.
2) Coffee in the economy of Ethiopia
Significance of Coffee in the Ethiopian Economy
As the economy is dependent on agriculture, which accounts for about 45

percent of the GDP, 90 percent of exports and 80 percent of total

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employment, coffee is one of the most important commodities to the
Ethiopian economy. It has always been the country's most important cash
crop and largest export commodity. Coffee accounts for significant amount
of Ethiopian export earnings. In 1999 for instance, coffee generated about
58 percent of all export earnings of the country though recently, because of
diversification of exports, its share in total earnings is declining which
reached about as percent in 2005/0s and2006/07 (see table 3).
Among the coffee varieties produced in Ethiopia, coffee Arabica, which is

indigenous dominates Ethiopians coffee exports. Evidences indicated that
Ethiopia's annual coffee production has been increasing in recent years.
About 50 percent of this production is exported to other countries (Italy,
United Kingdom, Netherlands, Djibouti, Germany, Japan, Saudi Arabia,
France and the United States). In addition to its generation of foreign
exchange and creation of social value, the coffee sector is the major source
of employment in most rural areas, especially for women for a large
segment of the population is engaged in the coffee industry. It is estimated
that more than 15 million people are directly or indirectly engaged in the
production, processing and trading of coffee
Table 3 Percentage Contributions of Coffee for the Ethiopian Export

Earnings (yearings are Ethiopian Calendar)
Commodity 2002/03 2003/04 2004/05 2005/06 2006/07
Coffee 34.22 37.22 39.57 35.42 35.78
Oil seeds 9.55 13.77 14.76 21.13 15.82
Pulses 4.13 3.76 4.18 3.70 5.92
Subtotal 47.90 54.75 58.52 60.25 57.53

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Others 52.10 45.25 41.48 39.75 42.47
Grand total 100.00 100.00 100.00 100.00 100.00
Source. National Bank of Ethiopia: Annual Report for 2006/07.
Coffee Production Potential of Ethiopia
Studies indicate that thanks to the country's favorable ecological factors

such suitable altitude, ample rainfall and optimum temperatures,
appropriate planting materials, and fertile soil Ethiopian coffee is known
for its unique characteristics, aroma and flavor. This shows that there is
very high coffee production and export potential in Ethiopia and earn
premium prices. The country has also become of particular interest to the
world for its inherent quality and coffee production potential due to its
Arabica coffee (as its origin). Coffee grows in Ethiopia in several places at
various altitudes ranging from 550 -2750 meters above sea level. More than
any other country, Ethiopia has a broad genetic diversity among its coffee
varieties. It is the center of origin and source of genetic diversity of the
Arabica coffee plant for the world. Nine different bean varieties are
cultivated in the four growing areas of Ethiopia, all with distinctive tastes,
sizes, shapes and colors. It is reported that coffee arabica has been grown in
the wild forests of the southwestern massive highlands of the Kaffa and
Buno districts of Ethiopia. Evidences show that the bulk of coffee Arabica is
produced in the Eastern, Southern and Western parts of the country, which
have altitudes ranging from 1300 - 1800 meters above sea level. All the
coffee-growing regions have fertile, favorable, loamy soils. For this reason,
aroma and flavor are among the unique characteristics found in Ethiopian
coffee. The variability of coffee Arabica character is very wide in Ethiopia.
This made possible coffee planting materials, which are disease-resistant,
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high-yielding and top quality. Many agree that, this is a gift of nature to
Ethiopia in particular, and to the world in general which require special 7
care and proper utilization. Shade, which combines with these ecological
factors, is another factor that plays an important role in coffee production
potential of the country. Another promising potential of Ethiopian coffee is
its diversity of variety and quality. According to Luxner's report (2001)
quoting Ethiopian Tea and Coffee Authority report, Ethiopia has the most
diversified coffee types. The major five of these are the following.
Wollega (Nekemt). It is known for its fruity taste has medium-to-bold sized
beans, a greenish-brownish color.
The beans are greenish-bluish in color and mostly round in shape, and
have a medium-sized.
Coffee Supply in Ethiopia
Recognizing its crucial importance, the Ethiopia Commodity Exchange has

planned to include coffee as one of the commodities traded on the
platform. As an organized and self-regulated market established for all
market actors to participate keeping the rule of the game, ECX is expected
to create price transparency, introduce a mechanism of price discovery,
assist reduce transaction costs and risk through the introduction of
organized spot and futures trade. In doing so it is also expected to create
market integrity through: introduction of viable products with certified
grade and standards; membership based trading; enforcement of
standardized terms and conditions for enforcement of contracts in
accordance with trading rules. However, is it necessary to introduce coffee
in ECX trading system? In other words, are there necessary and sufficient

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conditions? These decisions require inputs and approval from the
Ethiopian Commodity Exchange Authority (ECEA).
Decision as to whether or not to include a commodity to be traded on the

exchange has to be based on thorough investigation about the adequacy of
supply and demand, quality and standards, the available warehouses visa
its other marketing preconditions. ECEA, a young institution, should make
base-line analysis of all commodities being traded and to be traded so as to
give sound decisions in every aspect regarding this commodity when it
comes to Ethiopia Commodity Exchange. Thus the intension of this
analysis therefore is to investigate basic fundamental patterns of coffee
supply and marketing in Ethiopia. Coffee supply to the market in a given
year may come from: production, stock carried-over, and imports. In
Ethiopia import of raw or processed coffee is prohibited. Therefore,
marketable and/or consumable coffee supply in a given year in Ethiopia
comes only from production and stock-carried-over. Ethiopia produces
more than 33 thousand tons of coffee every year (2007). About 79 percent of
the supply to the market during a given year comes from production while
the rest 21 come from carried-over stock. Production supply is seasonal and
fluctuates due to the climatic variations and so does with prices. Coffee
production is estimated to expand by 3.91 percent annually over the period
1990-2008, on average. This growth in coffee production supply in the
country could mainly be attributed to improvement in productivity
(increase yield per hectare) and partly due to good distribution and
amount of rainfall. The growth is also partly due to increase in the area of
land-covered with coffee that started to give production. The quantity of
coffee supplied to the Coffee Auction Centers at Addis Ababa and Dire
Dawa as well as to the entire local and international market has been
growing continuously in past. The coffee supply increases from 155,377
tons in 1998 to 236,712 tons in 2007 with average annual growth rate 6.13

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percent. Even though, there was a decline of about 10.7 percent in supply
in 2005/06 in all the other years (2001/02 to 2006/07) supply has shown an
increase of about 1 to 16.8 percent. In the years considered during 2001/02
through 2006/07) 51 to 65 percent of coffee inspected originated from
Oromia region while 35.7 to 43.7 percent came from percent to 24 percent.
Currently, there are about 27 coffee supplying zones in the country, 11 of
them are found in Oromia and 14 in SNNPR. The remaining two zones are
found in Gambella. There are four zones each of which originates more
than 10 percent of coffee supply: West Wellega and Jimma from Oromia;
and Sidamo and Gedio from SNNP. llubabor, West Harerghe, Borena,
Benchmaji and sheka zones have also remarkably consistent and
considerable amount of supply with increasing trend from year to year.
There are also many others with ample potential. The coffee supplied to the
auction centers is mainly two types: wet-processed coffee and sun-dried
coffee. The sun-dried coffee is large in proportion with respect to
production and supply as Compared to wet-processed coffee. If we see
region-wide distribution of origin of wet-processed coffee, SNNP region
takes the highest share about 69 percent (about 48, 531 tones) in 2006/07.
The next highest share goes to Oromia, 29 percent (20,748). Similarly, about
71 percent of the sun-dried coffee in 2006/07 is supplied by Oromia region.
The SNNPR region supply about 28 percent from the total sun-dried coffee
in the country. The coffee supplied to the auction centers from the different
part of the country is inspected at the centers to set standards and grades.
The grades and standards are used to categorize the coffee supplied based
on its quality by coffee quality inspection center laboratory. The quality
certification is designed to create value throughout the supply chain,
particularly giving sellers a tool to enhance the credibility of their quality
statements, communicate with potential buyers using a common language
for quality, and to better promote and differentiate their offerings. This will
help coffee to be traded on the auction centers. About 55 percent of the sun-

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dried coffee supply inspected is grade-s. Grades and local consumption
coffee contribute about $1 and percent, respectively. Similarly, around 6
percent of wet-processed coffee supply is categorized in grade-s and
followed by grader and grades having percentage share 14 and 14,
respectively.
Domestic Trends
Being the principal cash crop in Ethiopia, coffee is the oldest and the first of
most highly marketed commodities. Coffee used to be exported from
Ethiopia (the oldest exporter of coffee as a commodity in the world) earlier
than 1500 years. However, modern coffee marketing based on coffee
standard classification, grading and licensing was started in 1950s,
following the establishment of the National Coffee Board of Ethiopia
(NCBE) in 1957. NCBE were established to regulate coffee marketing in the
country and improve the quality of Ethiopian coffee for export. The NCBE
have centers for coffee inspection, grading and auction in Addis Ababa and
Dire Dawa with its own operational rules, regulations, and modalities,
which are operating till now. The supply chain consists of producers (small
holders/ cooperatives/ commercial farms), intermediary traders (small
and large product collectors/ cooperatives), suppliers (those who deliver
coffee to auction centers) and exporters and processors. The coffee
assembled by farmers, local private traders, farmers and cooperatives in
different Zones which are located in different Zones is transported to local
processors if it is wet- processed and to the central market in Addis Ababa
and Dire Dawa for further inspection and auction sale. The Coffee
Standard and Quality Inspection and Auction Centers of Ethiopia monitor
the production and exportation of all coffee through the system. The
domestic consumption, and export trend show declining patterns for
domestic consumption starting 2001 while coffee export grew. Coffee price
declined until 2004 starting from the late ninetieth and it has increased

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since 2005 locally and internationally. When we come to the amount sold
for export at the auctions centers from 2002/03 through 2006/07 averaged
about 87.32 percent while the rest was delivered to domestic uses. The
amount sold for export was increasing by about 7.55 percent in the five
years considered more than the supply to the auction center for sale. There
was a negative growth of sale for export, 2005/06, which was a decline by
about 7.21 percent more than the decline in the total volume sold at the
centers. The highest growth in this respect was observed in 2006/07, 14.57
percent. The type of coffee sold at the auction centers for export (by type of
processing method) was both Wet-Processed and Sun-Dried. About 71.5
percent of coffee sold for export at the auction centers in 2005/06 and 73.8
percent in 2006/07 were sun-dried while the 28.5 and 26.2 percent in
2005/06 and 2006/07 respectively were wet-processed. Export price of
Ethiopian coffee fluctuates together with international coffee supply and
price patterns and movements. The highest price is paid to wet-processed
coffee depending on the quality or grade and standards. Observation of
average prices of wet-processed and sun- dried coffee per 17 kg of was
about 300.3 Birr in 2004/05, 350.8 in 2005/06 and 397.7 in 2006/07 which
increased by about 17 percent from 2004/05 to 2005/06 and by 13.4 percent
from 2005/06 to 2006/07. Sun-dried coffee was paid an average price of
Birr 241.8 in 2004/05 (19.4 percent lower than wet-processed), 278 in
2005/06 (20.7 percent lower than wet-processed) and 292.6 in 2006/07 (26.4
percent lower than wet-processed), which was increased by 15 percent
from 2004/05 to 2005/06 and 5.3 percent from 2005/06 to 2006/07.
The supply of Ethiopian coffee (both wet-processed and sun-dried) to local

and international market faces some basic quality problems. This quality
problem makes the Ethiopian coffee unable to adequately compete in the
international coffee market and earn reasonable price. The major quality

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problems that have observed on Ethiopia coffee include problems related
to:
• Coffee harvesting,
 Processing and warehousing,
 Inability to take care of the coffee production properly,
• Inability to control the moisture content of the coffee,
 Mixing high quality coffee with low quality or coffee of one origin
with or coffee with relatively better quality; this is usually done by
coffee collectors or assemblers and whole sellers.
The inspection, grading and auction sale of coffee is located vary from the
supply centers at only two central places. Thus, it has been many times
criticized for being highly centralized and located far apart from the major
producing areas, with little improvements from time to time. The central
market is entirely auction based which have several drawbacks. Some of
these are warehousing problems, improper sampling and quality
inspection, problems associated with brokers and suppliers, poor
processing, high transportation cost, inadequate coffee market financing
and unfair distribution of marketing margins. Even if there is high demand
for Ethiopian coffee in the international market, most of the suppliers do
not want to sell their coffee for export at the auction.
Generally, Ethiopia coffee export is constrained by the following major

problems: -
• Unfavorable coffee international price,
• Relatively high transaction cost,

• Lack of adequate local standard processing and handling facilities,

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• Centralized coffee inspection and grading system,
• Lack of export marketing skill,
• Inconsistency in coffee quality and other problems.
These are mainly related with and/or affect and coffee quality, proper
spatial, time and quality distribution due to:
• Handling during harvesting and storing,

• Processing and warehousing,
• Inability to take care of the coffee plantation properly,
• Inability to control the moisture content of the coffee,
• Mixing high quality coffee with low quality, or coffee of one origin
with or coffee with relatively better quality usually; this is usually
done by coffee collectors or assemblers and whole sellers.
All these problems exert a negative influence on quality of coffee and made
it not to be competitive and earn desirable prices in both local and
international markets. The main sources of these problems among others
include: Inadequate capacity and awareness of coffee producers and
processors on quality due to lack of technical support for coffee producers
and processors; Lack of sufficient standard coffee processing machine in
the major coffee producing areas due to lack of capacity and awareness, or
sometimes improper installation of coffee processing machine, Lack of
proper place for coffee processing, inadequate inspection and supervision
of responsible bodies in the assembling, processing or preparation of coffee
during harvesting. This may be due to negligence or lack of sufficient
awareness, Lack of proper regulatory and controlling system on coffee
harvesting, assembling, storing,

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transporting and processing activities; lack of proper storage with adequate
facilities.
Evidences show that, Ethiopia's coffee is the least promoted in the world
market. There are also inadequate information centers and information on
coffee supply, qualities, prices, roasters, etc. For more understanding and
deeper investigation of the problems and potential solutions, this analysis
has to continue till Woreda levels including the institutions involved in
coffee marketing and inspecting.

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VI. PROJECT LOCATION AND SELECTION

CRITERIA
Growing quality coffee beans require the following:
• Equatorial regions between tropic of cancer and Capricorn
 Latitude lower than 10
 Altitude between 1,200-3, 100 meters
• Climate
 Temperature between 15-24°C throughout the year
 1,200-1,800 mm rainfall over a nine-month period with a three

month dry season coincide with the harvest
• Soil
 PH 6.0-6.50
 Cation exchange capacity of 40-50%
Project area selected as per the required altitude, climate and soil attributes
for growing quality coffee is Keffa, Sheka, and Majang Zones villages are
feeders of this industry. The area:
 Has 100,000 hectares of land for farming
 Located at an altitude of ranging 1200 to 1800-meter top above sea level.
 has mean annual temperature is 15.1 to 27.5 °C with the average annual
rainfall about 3400 mm

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 soil is rich in organic matter with high content of Nitrogen, Phosphorus and
Calcium and PH rages from 6 to 7 which conforms the suitability of the soil
for growing of coffee and others farms.
VII. ORGANIZATION AND MANAGEMENT

The Proposed project will have appropriate management system through
which the project could operate smoothly. At the top of the ladder there
will be a general manager that will control and supervise the overall
activities of the project. The general manager is appointed by owner of the
company, Ato Teka Ambo Dry Coffee Processing Private Limited
Company's. Under the general manager, there are an operation Manager
who will be in charge for the remaining work force and the even operation
of the farm. Depending on the activities to undertake the project requires
both skilled and unskilled labors. Employee salary cost is projected with a
5% annual increment. The project will employ additional casual workers as
required. The manpower required by the farm and salary are shown below.
Chief Executive (Owner)
General Manager
Operation Manager Executive Secretary
Quality Adm& Finance Drivers

Dry Coffee Processing Industry Mechanics Tele. Purchasing
Page 30 staf
Supervision Division Head
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Figure 3 Organizational Structure
Table 4 Man power requirement and Annual cost
No Position Qualification Experience Quantity Monthly Annual
Salary Salary(birr)
1 General Manager Bsc in Min 2 years 1 8000 96000
Agronomist
2 Operational Diploma in Min 2 years 5 5000 300000

manager horticulture
3 Cashier Certificate Min 1 years 3 1500 54000
4 Truck driver 8th grade 4 2000 96000
5 Assistant driver Certificate 4 1500 72000

operator
6 Quality Bsc in Min 2 years 5 3000 180000

supervision Agriculture
7 Admin. & 10+3 college Min 3 years 3 5000 180000

Finance Division diploma
Head Management
Guard X>4 16 1200 230400
Total Quality 1,208,400

Cost

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Grand total
1,208,400
VII. FINANCIAL AND ECONOMIC ANALYSIS

Table 6 Assumptions used in the financial evaluations
Construction period I year
Source of finance 30 % equity 70 % loan
Loan duration 1-.Ni 10 years
Tax holidays 6 years
Bank interest 10.0%
Depreciation 10% in the initial year with 1% decrease per year there after
Repair and maintenance 5% of the total farm machinery & equipment and buildings
Labour cost Incur 5% additional cost each year
Utilities Incur 5% additional cost each year
Work in progress 270 days 270 days
Cash in hand 5 days
Accounts payable 30 Days
1) Investment Cost Breakdown

Description Refer Estimated Cost (Birr)

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Building and civil works ANNEX 1 4,520,000
Machinery and Equipment ANNEX 2 5,800,000
Working Capital Item 2 below 2,908,400
Pre-operating Costs (coffee Roughly 2,500,000
and spices seeds) Estimated
Grand Total 15,728,400
2) Working Capital
Description Refer Estimated Cost (Birr)
Salary Table 4 1,208,400
Fuel (50,000 L @Birr 33) 1,650,000
Oil and grease (500kg @Birr 100) 50,000
Total 2,908,400

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IX. SOCIAL ECONOMIC AND ENVIRONMENTAL
IMPACTS
a) Support realization of government industrialization policy through the
supply of quality and adequate inputs.
b) Generate foreign currencies by commanding premium prices through the

provision of value-added products
c) Generate bait rural and urban employment;
d) Generate new sources of income for farmers/ artisans;
e) It would be a means for the transfer of technological and best practices

to the community for the development of coffee and coffee products.

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Annex 1 Cost of Buildings

SN. Item Amount (ETB) Remark
01 Warehouse 2,500,000
02 Store 1,200,000
03 Coffee Drying Field 820,000
Grand-Total 4,520,000
Annex 2 Cost of Machinery and Equipment

SN. Item Amount (ETB) Remark
01 Coffee Crusher 1,300,000
02 Loading Truck 4,500,000
Grand Total 5,800,000

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Ye Bechi Fire DrY coFFe Processing inDustrY

Dry Coffee Processing Industry Page i

o The fact that Ato Teka Ambo;

 contributed a lot in Brand development of washed and unwashed coffees of

 Owns adequate resources; human and finance,

 Carrying out social responsibilities.

Dry Coffee Processing Industry Page 1

o The project will create employment opportunity for so permanent and 20

Dry Coffee Processing Industry Page 2

II. BACKGROUND INFORMATION

A. Purpose and Descriptions of the business of the company

i. Strategies and values

o Providing unsurpassed service level maintaining specialized product deliver

o Value passion, commitment, honoring commitments and knowledge in what

o forming teams constituting individuals driven and committed and accountable

ii. Critical success factors

Dry Coffee Processing Industry Page 3

o Provide integrated, cost effective logistical solutions locally, regionally and

o Continually seek improved solutions to improve its clients' competitiveness

o Secured principal sit in the trading house ECX

o Outstanding local retail sales, distribution and marketing knowledge

o Best of breed associations in providing end-to-end service

o Expert knowledge of Africa, USA, Europe and the Middle East

Dry Coffee Processing Industry Page 4

B. Recent operational History of the company

Pursuing a differentiation strategy, it is also engaged in export of specialty coffee

ii. Coffee Processing

Dry Coffee Processing Industry Page 5

C. Assets and Revenue

Figure 1: Revenue and Assets (In thousands Birr)

Dry Coffee Processing Industry Page 6

The Ethiopian economy continued to register a notable growth. In FY

Economic Outlook Update, July 2015).

This impressive growth was mainly attributed to service sector (10.2

Dry Coffee Processing Industry Page 7

Manufacturing sector increased by 15.8 percent and constituted about 31.8

growth Construction industry, on the other hand, contributed more than

B. Ethiopia's Economy in Prospect

 Maintaining double-digit average economic growth rate of 11%

Dry Coffee Processing Industry Page 8

 Maintaining Macroeconomic Stability:

 Keeping annual average inflation rate within single digit,

 Enhancing export competitiveness through creating conductive

 Maintaining budget deficit below 3% of GDP on average,

 Increasing the share of domestic revenue in GDP to 19.1 percent by

 Increasing the share of gross domestic saving in GDP 06 percent and

Dry Coffee Processing Industry Page 9

III. PROJECT AND PRODUCT DESCRIPTIONS

Dry Coffee Processing Industry Page 10

With regard to production system, the project will implement the

Coffee production systems and location -unique nature of products vis-à-

Dry Coffee Processing Industry Page 11

Dry Coffee Processing Industry Page 12

Dry Coffee Processing Industry Page 13

1) Describe the envisage investment project)

2) Analytically present the economic, social and environmental

3) Present persuasive corroborative rationales;

a) He had been already developed the skill of how to process dry

d) In addition to engaging in specialty coffee, Ato Teka Ambo plans

Dry Coffee Processing Industry Page 14

e) Ato Teka Ambo has adequate resources; human and finance

2) Merits of the investment development of coffee processing industry