SOKOINE UNIVERSITY OF AGRICULTURE

FACULTY OF AGRICULTURE

DEPARTMENT OF AGRICULTURAL ECONOMICS AND AGRIBUSINESS AEA: 305 (AGRIBUSINESS PROJECT APPRAISAL AND EVALUATION)

INDIVIDUAL ASSIGNMENT PROJECT PREPARATION PROJECT TITTLE; establishment of milk collection centre in Dodoma municipality

STUDENTS NAME MWENDA, Salum. M AEA/D/08/T.9121 SUBMITION DATE; 21st FEBRUARY 2011

ESTABLISHMENT OF MILK COLLECTION CENTRE IN DODOMA MUNICIPALITY Introduction Market is critical for better performance of agricultural firm by itself, for this case marketing should be considered the most contributing factor for development of agriculture. Many efforts have been done to support agriculture which includes technological innovations such as introduction of mobile phones where by farmers use to communicate so as to sell their products.

In Dodoma municipality there is no perfect market for milk from cattle, this make farmers inefficient to produce enough milk from their cattle. If the true market for cattle will be introduced in Dodoma municipality then automatically farmers will produce efficiently and there will be increase in milk production and income to farmers. So this project will contribute more to the development of milk production in Dodoma. Description of the project This project will be conducted at Dodoma municipality with the aim of establishing the milk collection centre where by farmers from different wards in Dodoma municipality will be invited to sell their fresh milk. The milk bought will be sold as a second hand product to other customers and others will be value added and sold as well cleaned and packed to the other customers. The project has cash capital of 28 millions. The project aims at increasing the income of livestock keepers in Dodoma municipality and transforms them from traditional agriculture to modernized one. Stakeholders of this project Livestock keepers Government CRDB bank limited Milk consumers

Project objectives

General objective The general objective of this project is to construct the large milk collection centre for livestock keepers in Dodoma. Specific objectives To provide education to small farmers. To help farmers forming groups so as to have a power to say. To help farmers earning more income.

Project preparation This project will take five years till its end; it will be from 1st January 2012 to 31st December 2017 where Ex-post evaluation will be made. This project is divided into five phases. Phase one In this phase there will be provision of education to farmers so that they can produce milk with high quality and quantity and can only be achieved if they will move from subsistence to modernized agriculture i.e. using non traditional cattle, using standardized feeds, better health treatments etc. also making farmers be able to find information about their products. Phase two The formation of farmers groups in all 30 wards, at least one group from each ward. These groups will help them decide on what price to charge and where exactly to sell their milk since they will have access of market information from different parts of Dodoma municipality

Phase three

In this phase the project will be connected to the sources of fund; donors and lenders are involved in this phase where by a loan of 12 millions will be taken from CRDB, so that the project can have all required amount of money to be developed. Phase four Different buildings to be used by the project are constructed in this phase which includes storage area, offices etc. Phase five After the preparations have been done then a centre starts to buy milk from farmers and sell to the milk demanders in Dodoma municipality and outside, in this phase is were farmers start to get income and enjoy the economies of project. Finally raising standards of living and improve livestock keeping. Resources needed Five change agent trained personnel who will train the livestock keepers in all 30 wards in Dodoma municipality where by each change agent will have six wards to train in a whole year. In this training they will also provide information about new innovations. Fund to be used to pay these change agent which is approximately six millions Five motor cycles so that the change agents can go to their destination easily and train farmers. Different stationery materials that will be used when training farmers A piece of land to be used to construct buildings for the project (approximately 2 acres)

Management and organization The project will be of community level, all livestock keepers will participate but operation and management activities will be done by the change agent in association with the entrepreneurs who started the business. The organization structure will be as follows;

One project manager. One field manager. One marketing and sales manger. Two security officers. One driver. Other normal staffs.

Financial aspects of the project The project needs 40 millions to be implemented and expected finally it will help livestock keepers raise their income and standards of living also increase the contribution of milk to the national income. From all that it will improve the livestock keeping method from traditional to modernized. Sources of fund The own capital is 28 millions and other 12 millions will be loan from CRDB. Cash flow of the project COSTS/YEAR own initial capital loan from CRDB purchase of land construction of buildings purchase of motor cycles electricity services purchase of storing tools transport costs payment to workers interest on loan purchase of milk stationery costs 0 28000000 12000000 3000000 20000000 6000000 1 150000 180000 2 210000 3 240000 4 300000 3500000 2400000 20400000 1440000 281700000 5

1750000 2100000 2450000 2800000 936000 2400000 2400000 2400000 20400000 20400000 20400000 20400000 1440000 1440000 1440000 1440000 156500000 181540000 206580000 231620000 1200000

TOTAL COSTS BENEFITS sales of milk TOTAL SALES NET CASHFLOW

69000000 182376001 208060000 233480000 258900000 187800000 225360000 262920000 300480000 187800000 225360000 262920000 300480000 (69000000) 5423999 17300000 29440000 41580000

309740000 375600000 375600000 65860000

Discounted cash flow COSTS/YEAR

own initial capital loan from CRDB purchase of land construction of buildings purchase of motor cycles electricity services purchase of storing tools transport costs payment to workers interst on loan purchase of milk stationery costs TOTAL COSTS discounting factor(10%) discounted costs BENEFITS sales of milk TOTAL SALES discounted benefits NET CASHFLOW NPV 0 28000000 12000000 3000000 20000000 6000000 150000 1750000 936000 20400000 1440000 156500000 1200000 69000000 182376001 1 0.9091 69000000 165798022.5 180000 2100000 2400000 20400000 1440000 156500000 210000 2450000 2400000 20400000 1440000 156500000 240000 2800000 2400000 20400000 1440000 15650000 0 300000 3500000 2400000 20400000 1440000 156500000 1 2 3 4 5

183020000 0.8264 151247728

18378000 183400000 0 0.7513 0.683 137788420 125521740 18780000 0 30048000 0 205227840 17495826 0 11949649 2

184540000 0.6209 114580886

187800000 187800000 170728980 -69000000 22001977.49

187800000 225360000 186237504 74112272

187800000 262920000 197531796 125131580 94011356. 1

187800000 375600000 233210040 261019114 162066768

-69000000 20001997.74 61246381.6

Net present value (NPV)

NPV= B-C/ (1+i) n -A = 20001997.74 + 61246381.6 + 94011356.1 + 119496492 + 162066768 - 69000000 = 387822995 BCR= b/ (1+i) n/c/ (1+i) n + A = 992936160/763936797 = 1.2998 From the results since the NPV is positive and the BCR is greater than 1 then a project is worth implementing. And if every will take his/her responsibility then there will be great impact. Commercial aspects of the project Since demand for milk is high in Dodoma and also there is high supply of milk then there is a large opportunity of farmers winning the market and also the project will benefit from the business Social aspects consideration This project mostly aimed at improving standard of living of livestock keepers who produce enough milk and no market for it and also those consumers who need milk and there is no enough milk in the market. Environmental aspects The danger of environmental pollution may appear through wastes from the milk products but this will be handled in a best way by making sure that there are enough facilities for storing wastes Risks involved The project might have a risk of insufficient supply of milk from farmers or pour respond of farmers to the project, also might have low demand of milk but all these can easily solved by using different business techniques. Conclusion As the project is important to farmers, to the government and also an integrated one so each part will make sure do the best for the success of the project.