Background

Xxx Hospital Project is a private company that has been engaging in different businesses with
special focus and specialization in the private health sector. As part its business vision and goal,
it has designed this project proposal aimed at establishing comprehensive general hospital at
Harar city and provide quality and affordable health care service for the people in and around
Harari region. This hospital project is part and parcel of the PLC's grand vision to be a leading
private healthcare service in the region and improve the lives of the people through providing
affordable and quality health service using up-to-date state of arts technology and competent and
prominent medical professionals. The PLC is named Hambera business and share company,
selam general hospital project, a wordin Amharic meaning to be the first and exemplary hospital
and the company the existing healthcare service problem both at regional and country level is at
its lowest level and our hospital can contribute a great deal to the lives and betterment of the
people and the city's health care service coverage.
1.2. Rationale of the Project

Ethiopia, the second populous country in Africa, had been showing the fastest growing economy for
more than a decade (an average 10.3% a year). Regardless to such economic, political, and social
challenges that Ethiopia has been fighting against, there are newly emerging problems
thatneed adequate and coordinated efforts. These challenges resulted from the relatively lower literacy
rate, high unemployment, poor health status, low education quality, low inclusiveness
of development engagements, etc. More importantly, for development to exist and continue, citizens
should be healthy and productive. The status of our country in access, inclusiveness and quality of the
health systems had shown big gaps.

What we look in health sector in the East Ethiopian it is highly back ward and needs support of

different private investors. the available market reveals that there is a paramount demand foi the

services of the Hospital with a potentially growing mark uhich ensures the long term continuity of the

project in this regard. This is one of the main objectives ..HararGeneral I hospital P.L.0 generated the idea

of investing on 'Maw General Hospital P.L.C. General hospital is a medical facility that provides health

care to both in patients and out patients and treats many types of diseases with medical

professionzls. In Ethiopia a general hospital is supposed to serve 50,000 people and provide all types

of clinical service including surgery. The project invested in Harar town of Harari Reeion to serve

surrounding community at their local or nearest area. Improved health service coveratte and quality will

have a positive effect in improving the quality of life of the community.

3. BACKGROUND
Technological advances have further changed the basic concept of health set -. ices %here huge
investment is required on the construction of accommodation facilities: health razed material inputs

sophisticated amenities are found essential to improve the health standard in the developing
countries like Ethiopia. The government has been tried to import, the health sector as much as
possible.

Vision

 Becoming a leading credible private hospital that saves tens thousands oflives per year in the
region

Mission

Implementing highly demanded hospital projects and providehealthcare service using up-to-datestate
of arts technology at the lowestpossible service cost

Vision

 Becoming a leading credible private hospital that saves tens thousands of lives per year in the
region

Mission

 Implementing highly demanded hospital projects and provide healthcare service using up-to-
date state of arts technology at the lowest possible service cost
Although there were incredible improvements in health status of Ethiopians at the end of GTP Iand
MDG, Ethiopia has poor health outcomes even by sub-Saharan Africa's standards. This status is
characterized by weak healthcare system infrastructure, low quality and equity in healthcare delivery,
low improvement in the status of communicable diseases and epidemics, increasein none communicable
diseases and low government spending. Due to the increasing cost of healthcare delivery, governments
in developing countries, where Ethiopia is not an exception, are not able to deliver healthcare to their
citizens and are badly in need of the efforts from the private sector. Unfortunately, the involvement of
the private sector in bridging the existing gap isvery limited at country level and worse when it comes to
at our regional and city level.As there is a need for a coordinated effort to bring about holistic
improvement at all levels, it ishighly recommended to engage in a comprehensive way of dealing the
health sector with highand strong incentive and support for the private sector to let them play their
indispensable role.

2.Goal and Objectives of the Project

2.1.Goal

The main goal of the project is improving the health status of the target community through provision of
quality, accessible and affordable healthcare service through establishing of generalhospital.

2.2.Main objective

The main objective of the project is building and furnishing of general hospital which providesquality,
accessible and affordable healthcare service for all target communities.

2.3.Specific Objectives

The establishment of the hospital shall address the following specific objectives:

·
Building of a general hospital with a capacity of 80 beds, which fully comply withnational and
international standards;

Furnishing of a general hospital with all required hospital equipment and furniture for acapacity of 80
beds, which fully comply with national and international standard

After the construction and furnishing of the hospital, promotive, preventive, curative andrehabilitative
health services in its general hospital that require diagnostic facilities andtherapeutic interventions for
the community, with a special attention and free service toelderly, orphans, street children and people
with disabilities;

1.Targets Service Users of Project Beneficiary

1.1.Target Service Users of the Project

Hambera business group share company ,selam hospital projectwill provide quality, accessibleand
affordable healthcare service for the people residing in Wokite city and surrounding areaswho are in dire
need of the hospital service. Accordingly, the hospital is expected to providehealth care service for an
average of 360,000 people in ten years with an average of 100 in bedand outpatient services.

1.2.Employment Opportunities

After completion of the and at operation level the project creates 300 temporary and
260 permeant employment opportunities which improves the life of the -would-be employeesthrough g
enerating income from the employment. It also creates employment opportunities for hundreds of
temporary job opportunities that will be created for construction workers. Likewiseit also reduces
unemployment problem of the city and the region by the same amount.

1.3.Health education

Besides the above number of beneficiaries, the project will also create access to healtheducation for
about 50,000 health students and contribute for the region's as well as countrylevel shortage of health
professionals.

1.4.Market linkage

Upon completion of the construction and starting of its service, the hospital will create servicelinkages
with potentially larger employment opportunities in these related services provision businesses.

2.Project Duration

The project is going to be implemented in two phases. The first phase of the project will be fromJuly
2020 – April 2022 which is the construction phase and the second phase which is thefurnishing and
staffing will be from May 2022 to December 2022.

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3.Project Description

The proposed project is the construction, furnishing and establishment of a comprehensivegeneral

hospital in Wokite town that can provide healthcare service for hundred thousand of people in and
around
cities.The project will be implemented in two interrelated phased. Namely, the construction andfurnishin
g and staffing phase.The proposed hospital will lay in a 200,000 m2 area, and has different buildings (see
figures).The PLC has already assigned a 160 million ETB for its first phase from its shareholders.

Figure 1: Site plan for HAMBRA BUISNESS GROUP SHARE COMPANY,(SELAM HOSPITALPROJECT)
General Hospital;

Pag

TYPE OF SERVICE PROVIDED

The envisaged hospital provides services to in-patients and outpatients. Thehospital has the total
number of 72 beds for inpatients. It has also planned toconstruct 6 additional beds, fully monitored
service run by an Emergency doctor

24 Hours Emergency Service

24 Hours Laboratory Service

24 Hours Ambulance ServiceThe envisaged hospital provides general therapeutic, diagnostic, care,
counselingand rehabilitation services. Accordingly, the range of medical services provided by the
envisaged hospitals include the following;

Emergency services

Internal and Gastroenterology medicine



Pediatrics

Gynecology and Obstetrics

General Surgery

Laparoscopic Cholestectomy

Dentistry

Ophthalmology

Dermatology,

Orthopedic

VI. TECHNICAL STUDYVI.1.Location

The proposed project is to be located in Addis Ababa. Although Addis Ababa is the capital city of
Ethiopia, the core and center of social, political, commercial and cultural activities of the country and
found at the fourth level next to Washington D.C, New York and London cities that have several
international organizations and embassies, there is an acute shortage of hospital facilities to meet the
increasing demand for quality medical services. Hence, the expansion of the proposed hospital in the
city is well justice.

VI.2. Land

The proposed project envisages providing all the services expected in aninternational standard hospital
facility. In order to provide all medical
facilitiesat one place, the hospital has already started the construction of additional building in the
existing premises.

VI.3.Buildings and Civil Works

The promoter has started the construction of G+1 additional building which isaimed at providing world
class health service in the country. At present, thehigh-income population and also patients who require
some type of specializedprocedures are forced to travel abroad to countries such as Thailand and India

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for treatment, draining the precious hard currency reserve of the country, whichcould have been used
for other pressing development endeavors. Therefore, theestablishment of such hospital will
substantially reduce this problem.The total cost of building and civil work is estimated at Birr

18,680,622.24. The supplier of the medical equipment is ElsMed Health Care Solution LTD. It isa

known supplier and has been supplying dierent medical equipment in thecountry such Blackline
hospital, Ayder Referal and teaching hospital, WudassieDiagnostic Center and Saint Gabriel Hospital
itself, etc.The Company has been supplied for more than 15 years for our hospital (SaintGabriel hospital.
So, Saint Gabriel Hospital has good relationship with ElsMedHealth Care Solution LTD and as a result of
this the hospital is enjoying adiscount.

VI.5.Motor Vehicles

The project will have one vehicle, which have direct relation with daily
operationof the hospital activities. It will be used for transporting doctors and staspecially at night. The
hospital had bought a Mercedes brand fully furnishedAmbulance (Financed by the previous construction
and Business Bank). The totalcost of the vehicle is estimated to be birr 3.21 million

Finance Sources and StructureThe investment cost of the project will be nanced from two sources:
bank loanand equity capital in the ratio of 34:66. Accordingly, a loan of Birr 23.35 millionwill be obtained
from bank and the remaining balance of Birr 44.4 million will benanced from equity. The detail of the
nancing structure is indicated in thefollowing table

Financial Results

Based on the assumptions made on expected revenue and associated operatingexpenses, the following
results have been deduced to help investment decisionfor the investor and other concerned parties.

VII.3.1.Profitability
Based on the projected prot and loss statement shown in Annex 10, the projectwill generate a prot
throughout its operation life. Annual net prot after taxranges from Birr 8.85 million to Birr 72.6 million.
Net prot as % of sales revenuelies between 10% and 29% which is outstanding.

VII.3.2.Cash Flow

The projected cash ow of the envisaged project shows that the project wouldgenerate positive net cash
ows throughout the operation years. Cumulativecash ow generated by the project towards the rst of
the operation will amountto Birr 12.82 million. At the end of the project life, this amount will rise to
400.9million. Details are shown in Annex 11.

VII.3.3.Discounted Cash Flow

a)Internal Rate of Return

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The internal rate of return (IRR) is an indicator of the eciency or quality of aninvestment. A project is a
good investment proposition if its IRR is greater thanthe rate of return that could be earned by alternate
investments or puing themoney in a bank account. Accordingly, the IRR of the project is computed to
be39% indicating the viability of the project. (See Annex12)

b)Net Present Value

Net present value (NPV) is dened as the total present (discounted) value of atime series of cash ows.
NPV aggregates cash ows that occur during dierentperiods of time during the life of a project in to a
common measuring unit i.e.present value. It is a standard method for using the time value of money
toappraise long-term projects. NPV is an indicator of how much
value aninvestment or project adds to the capital invested. In principle a project isaccepted if the NPV is
non-negative.Accordingly, the net present value of the project at 11.5% discount rate is foundto be Birr
131.75 million which is acceptable. (See Annex 12)

c) Payback Period
The payback period, also called pay – o period is dened as the period requiredrecovering the original
investment outlay through the accumulated net cashows earned by the project. Accordingly, based on
the projected cash ow it isestimated that the project’s initial investment will be fully recovered within
fouryears, which considering the huge investment cost is a reasonably short period oftime.

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VII.3.4.Sensitivity Analyses

The sensitivity of the project to various parameters was assessed by varying themost signicant
parameters to determine their implications on the protability ofthe project. Accordingly, the impact of
decrease in the revenue of the product by10%, increase in operating cost by 10% and increase in
investment costs by 10%were considered. The results are shown in the table

As can be seen from the table above, the project is not sensitive to changes inrevenue, operating cost
and investment cost. Decrease in revenue by 10% willreduce IRR to 33%. Increase in operating cost by
10% also decrease IRR to 32%and increase in investment cost by 10% will reduce the IRR to 36%. In all
theabove cases, the IRR is in the acceptable range.Likewise, any positive change in selling price and
decrease in operational costwill tremendously improve the nancial performance of the project.

CONCLUSION

Even though the number of hospitals in the city has exhibited a substantialgrowth in the past few years,
considering the political and economic role of thecity, the existing number of hospitals, particularly with
respect to world classhospitals is inadequate. The projected demand as compared to existing
hospitalsshows that there is a large and progressively growing supply demand gap.The nancial analysis
conducted shows that the project will accrue a net presentvalue of Birr 131.75 million and its internal
Rate of Return (IRR) will be 39%.The proposed project envisages providing medical services which are
mainlynew to the country. It is expected that the realization of such project will reducepatients to from
going abroad for searching specialized procedures and also savethe precious hard currency reserve of
the country.The promoters of the project have a long and practical experience in managingsuccessful
business ventures. Hence, given the conducive business environmentin the country and the wide
experience of the project promoter, the success of theenvisaged project is certain.The local market for
health service is huge which is evidenced by the demandand supply gap indicated in this study.
Moreover, considering the exceptionallygood performance of the country’s economy, population size
and growth rateand the Government’s commitment to improve health services the demand
can be expected to grow rapidly in the future. The envisaged project will also
retainthe foreign currency that the country is spending on medical travels by

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providing world class medical service locally. Therefore, from market point ofview the project is viable.As
per the dierent computations worked out the project is manically viable. Inaddition, it is economically
and socially benecial to the
country.Therefore, a thorough review of prole of the promoters, market potential,technical soundness,
organization and management and nancial viabilitydemonstrate that the project is viable and justied
for full implementation.

BASIC ASSUMPTIONS UTILIZED IN THE FINANCIAL PROJECTIONS

1.The project life is assumed to be 10 years,2.Working Days per annum is considered to be 300 days for
other operationsexcept bedroom
facilities3.The hospital has 72 existing beds for the inpatient customers 6 additional bedrooms under
construction,

a.Existing Bedrooms

Type of bedroom Number of BedsAverage Rate/Day Exclusive high class41800 First Class 11925 Second C
lass 2 bedrooms each10850 Economy class 16600 Delivery 101000 Pediatrics-One bedroom2925

Pediatrics-5 beds 4600 Intensive CareUnit(ICU)101500 Intensive CareUnit(ICU)-Private11900 Emergency

41900 Total 72

b.New -under construction

Emergency Rooms 61,900 Total4.Capacity Utilization5.Revenue from Bedrooms@ Full Occupancy

a.Existing

Type of bedroomNumber of BedsAverageRate/DayAnnual revenue

at 100% occupancy Exclusive high class 418002,628,000 First Class119253,713,875

YearCapacity UtilizationYear 160%Year 270%Year 380%Year 490%Year 5-10100%

Second Class 2 bedrooms each 108503,102,500 Economy class 166003,504,000 Delivery 1010003,650,0
00 Pediatrics-One bedroom 2925675,250 Pediatrics-5 beds 4600876,000 Intensive Care Unit(ICU) 10150
05,475,000 Intensive Care Unit(ICU)-Private 11900693,500 Emergency 419002,774,000 Total 7227,092,1
25

Revenue from Bed-New

Emergency Rooms 61,9004,161,000 Total 31,253,125

6.Other revenue assumptions

Types of ServicesCharge per person/serviceVisited patients per dayAnnual Revenue @Full

Capacity Consultation 300404,200,000 Dental Unit 1,50052,625,000 X-Ray 750307,875,000 Ultrasound 5
50101,925,000 CT Scanner 2,15021,505,000 Minor Surgical Procedure 275032,887,500 Major Surgical Pr
ocedure 1100027,700,000Laparoscopic surgery 2000017,000,000 Laboratory 15502010,850,000 ENT 400
7980,000 Gynecology Operation 1500015,250,000 Delivery 10,00013,500,000 Pediatrics 300151,575,000
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Pediatrics Surgery1500015,250,000 Orthopedics 4005700,000 Orthopedic Surgery 20,00017,000,000 Op
hthalmic Unit 4005700,000 Dialysis Unit 3,00088,400,000Urology300151,575,000Diabetes & Endocrinol
ogy300101,050,000Oncology 4003420,000 Physiotherapy Unit 80051,400,000 Sales of Pharmacy Supplie
s -Existing500366,300,000Sales of Pharmacy Supplies-New50010017,500,000 Medical Screening 200021,
400,000Ambulance Services250,000

Total 109,817,500

7.Other assumptions for operating cost

Cost of medical, surgical, and laboratory account 40% of the grossrevenue,

Food expense for patients is calculated on the bases of Birr 200/inpatient admied per day,

Maintenance costs are assumed 2% of the initial xed investmentcost.

Insurance expense;

Building 0.75% of the total xed investment cost

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

Perdiem and transportation cost account 4% of the expense onsalary,

Marketing cost is assumed to be 0.5% of revenue per annum

Cost of utility, communication expense, uniform and outts,cleaning and sanitary, fuel and lubricants,
rent, printing andstationary, and communication expenses are assumed based onhistorical cost

Audit and legal fee is assumed to birr 100,000 per annum.

Professional fee and license and registration is assumed to be Birr300,000

Depreciation and amortization


Building and civil works 5%

Medical Equipment new 10%

Medical Equipment existing 20%

Vehicle 20%

Generator 10%

Oce furniture 10%

Pre-operating expense 20%

VI.4. Required Medical equipment

The Medical Equipment required for the expansion hospital project is presentedon the following table
3.1.The proposed General Hospital

The general hospital will be G+ 0 complexes which provides primitive,

preventive, curative andrehabilitative services that require diagnostic facilities and

therapeutic interventions with acapacity of 80 in-patient beds. It will provide

gynecology and obstetrics, pediatrics, internalmedicine, surgery, psychiatry and

emergency services. In addition, it shall provide laboratory,imaging and pharmacy services

and other related services. This hospital will be constructed andfurnished and staffed in the first and
second phase of the project.The medical equipment, materials and supplies shall be fulfilled as per
the standards set by theFMOH and Ethiopian Standards Agency. The hospital's construction, furnishing
and equippingwill be financed by the PLC itself.With the consideration of providing adequate specialized
services, the human resource andmaterials shall be fulfilled above the expected standards. When this
hospital come to effect, it is believed to create permanent job for 260 individuals and a temporary
job for 300 individuals
(for an average employment duration of 3 months) excluding hundreds of temporary jobopportunities
that will be created for construction workers.

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Figure 2
፡

General Hospital Design (Front & Side Views)

3.2.Implementation Phases of the Project

Prior two these phases, the project documents will be officially submitted to the relevantgovernment
offices, in order to build consensus on the significance of the project and
availingresources (including identification and securing of land for the construction). With theassumptio
n that the local government will be convinced of the project's impact on the
town'shealth service, economic and employment contribution and its contribution for the targetcommu
nity, the hospital will be constructed, furnished, equipped and staffed as per the following phases.The
operation of the project shall be started soon after receiving the required size of land for thegovernment
and all related requirements are met.

1.Phase One

Bidding and awarding of the construction work for competent local contractors

Finalizing the construction activities of the hospital

2.Phase Two

Furnishing of the hospital will all required furniture

·
Equipping of the hospital with all required medical and administrative equipment

Staffing of the hospital will all types of required medical and administrative staff

Launching the hospital and Starting the service provision

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4.Project Inputs, Activities, Outputs and Outcomes

The project inputs, activities, outputs and outcomes are presented in the following diagrams, based on
the consecutive steps to be performed the project (phase-I and phase-II).

4.1.Phase one: Inputs, Activities, Outputs and Outcome

Figure 3: Inputs, activities, outputs and outcomes of the phase I of the PLC's Hospital Project

Phase Two: Inputs, Activities, Outputs and Outcome

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LandFinanceHumanResourceConstrucondesignapprovalBiddingBid
AwardingConstrucngApprovedconstruconlicenseSelected andawardedcontractorConstructed andfully
nishedHospital BuildingComplexFurnitureEquipmentMedical andAdmin Sta FinanceDomesc
andInternaonalProcurementFurnishingEquippingStangInaugurangFully furnished,equipped,
staedand inauguratedhospitalHospital ServiceProvision Started andcontributed for thetarget
communies'health and economicwellbeing BuildingComplex
Figure 4: Inputs, activities, outputs and outcomes of the pre-construction phase of HAMBRA
BUISNESSGROUP SHARE COMPANY,(SELAM HOSPITAL PROJECT)

5.Organization and Management

The project shall be Business Hospital of HAMBRA BUISNESS GROUP SHARE COMPANY,(SELAM HOSPITAL
PROJECT). It will have its own governing board and management thatwill be directly linked to the PLC's
management. The general organogram of the project is presented in the bellow:

Figure 5: Organogram of HAMBRA BUISNESS GROUP SHARE COMPANY,(SELAM HOSPITALPROJECT)

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PLC Chief Execuve Ocer
(CEO)Other Business Unit Hospital General Manager Other Business UnitMedical Director Admin and Fin
ance DirectorMedical Sta HR OcerProcurement and Logisc OcerFinance Ocer

AccountantCashiers
6.Monitoring, Evaluation and Reporting Strategy

To enable effective monitoring, evaluation and learning in the project, specific plans shall
bedeveloped at each phase of the project. The hospital management team under the
PLC isresponsible for coordinating the monitoring, evaluation and reporting about the project. Aconsulta
nt will be employed for the construction phases for technical support and approval of the project
implementation.At each level, a remedial action plan will also be developed for any possible drawbacks
andfollowed up in subsequent PLC's top management visits. The aforementioned activities shall
beundertaken at the pre-construction, during construction phases and the implementation phases ofthe
project

.Risk Analysis, Assumptions and Sustainability7.1.AssumptionsFor the effective implementation of the

project, we assumed that the government will avail therequired size of land on time which is very crucial
for the realization of the project and anyfailure to secure the land from the government will jeopardize
the whole project.7.2.Risks and Proposed SolutionsHaving risks, that may hinder the successful
implementation and delivery of results, is natural inany project. As to our risk analysis results, we
identified inflation of costs of materials,equipment and service, as the main risk for this project
pertaining to the economic situation of Ethiopia. We considered a 10% contingency in our plan to cope
with the expected inflation andother uncertainties in terms of financial expenditure.In addition, political
instability will also be a risk for this project. This problem has been achallenge for implementation of
various business projects in the country in past few years. Inorder to reduce this risk, we will try our best
to ensure the participation and benefit of thesurrounding community, the youth and other relevant parts
of the community from the beginning.The third identified risk in our risk analysis is not completing the
projects as to the estimatedtime. Projects, especially those with construction, are not completed in time
in Ethiopia. We willhave a project management team based at the PLC, in addition to the consultants we
are going toemploy, to reduce the impact of this risk.In addition to the risk-based measures planned, we
will have a proactive risk assessing team for effective management of risks rofitability and Feasibility of
the project In order to stay in the business and achieve stated goal and objectives, the proposed project
hasto be feasible and profitable. In this regard, HAMBRA BUISNESS GROUP SHARECOMPANY,(SELAM
HOSPITAL PROJECT) has undertaken regressive feasibility and profitability analysis and annexed to this
project. Accordingly, the project will gain its capitalinvestment cost within seven and half years and enjoy
reasonable and higher profit then after thatenables the company to expand its business and services
across different parts of the region in particular and the region in general. 15 |Page