Contents

1. Executive summary..............................................................................................................................2
2 Introduction..............................................................................................................................................3
2.1 General Background..........................................................................................................................3
2,2. Project Objectives............................................................................................................................5
2.1 General Objective..............................................................................................................................5
2.1.1 Specific objective........................................................................................................................5
2.3 Project description.............................................................................................................................6
2.5 The significance of the project...........................................................................................................7
2.6 Project Location.................................................................................................................................8
3. MARKETING ASPECT................................................................................................................................9
3.1. Description of the Product...............................................................................................................9
3.2. Market Analysis.............................................................................................................................10
3.3. The Demand-Supply Gap...............................................................................................................10
3.4 Future market or Demand of fruits and vegetables.........................................................................11
3.5 Target customers.............................................................................................................................11
3.6. Marketing promotion and strategy................................................................................................12
3.7. Competition...................................................................................................................................12
3.8. The project facilities and Services plan...........................................................................................12
3.9. Justification of the project..............................................................................................................14
4. TECHNICAL AND PRODUCTION ASPECT.................................................................................................16
4.1 The Vegetable Production Flow.......................................................................................................16
4,2. Raw material...................................................................................................................................20
4.3. Machinery and Equipment.............................................................................................................20
4.4. Farm Size and Production Schedule................................................................................................21
4.2. Civil Engineering Cost...............................................................................................................21
5. FINANCIAL REQUIREMENT AND ANALYSIS............................................................................................22
5.1. Fixed Capital...................................................................................................................................22
5.2. Working Capital..............................................................................................................................24
5.2.1. Operating Expense at full Capacity..........................................................................................24
 5.2.1 Operating Expense....................................................................................................................25
5.2.3. Summary of investment cost.......................................................................................................26
5.3. Financial Analysis............................................................................................................................27
a. Underlying Assumption.................................................................................................................27
5.3. Financial analysis and Statements..................................................................................................28
5.3.2. Sources of Fund.......................................................................................................................28
5.3.3. Depreciation Schedule.............................................................................................................28
5.4. Financial Statement........................................................................................................................29
5.4.1. Income loss/statement..............................................................................................................29
5.4.2. Cash flow Statement................................................................................................................30
Appendix 1: Sells forecast..........................................................................................................................31
Annex 2. operating cost.............................................................................................................................32
Annex.3 income statement.......................................................................................................................33
Appendix 4 : discounted cash flow............................................................................................................34
Annex 5 undiscounted cash flow...............................................................................................................35
 1. Executive summary

PROJECT OWNER Wozan Abdulaziz

PROJECT TITLE Vegetables Farming

LAND REQUIREMENT 78 ha

PROJECT AREA Oromia region, Jimma zone,Gumay woreda, Bara rijo

kebele

PRODUCTION CAPACITY

PRODUCTS TO BE MANUFACTURED
Vegetables farm

MARKET Domestic

COST OF THE PROJECT

PROJECT LIFE 10 YEARS

NUMBER OF WORKING DAYS 365 DAYS

FINANCIAL VIABILITY ( AT 10% DISCOUNT RATE )

ANALYSIS RESULT

THE PROJECT IS TECHNICALLY FEASIBLE, FINANCIALLY AND COMMERCIALLY VIABLE

AS WELL AS SOCIALLY AND ECONOMICALLY ACCEPTABLE. HENCE, THE PROJECT IS
WORTH IMPLEMENTING.

2 Introduction
2.1 General Background
The horticultural sector in Ethiopia is growing strongly. Major part of this growth is created by
investments in the floriculture sector. Recently more and more interest from the Dutch private sector is
shown in the Ethiopian fruits and vegetable sector. In the slipstream of the floricultural boom already
more than ten, export fruit and vegetable producers have been established in Ethiopia, ranging from
tomatoes to passion fruit and green beans to table grapes. The Ethiopian government, private sector
associations (EPHEA) and donors (USAID, SNV, CFC) have identified potentials for the further
development of the fruit and vegetable sector in Ethiopia both for the domestic and export market. Also in
the Ethiopian-Netherlands Horticultural Partnership, technical support to the development of the fruit and
vegetable sector has been prioritized. A number of actors and donors have already started activities in the
area of technical production assistance, post-harvest handling and compliance to international standards.

Although horticultural crops are important for health and economy the amount and mode of
production are still weak in Ethiopia. Horticultural crops can be differentiated as fruit (permanent
crops) and vegetables (short season crops). Accordingly, permanent crops are long term crops
that occupy the field planted for a long period of time and largely harvested every year and do
not have to be replanted for several years after each harvest. These include tree crops such as
coffee, Enset, Chat, oranges, Mangoes, Bananas, papaya, Avocados…etc. The trees that yield
fruits like orange, Mangoes, Papayas, and others are known as fruit trees (CSA, 2001/02).
Ethiopia has a comparative advantage in a number of horticultural commodities due to its
favorable climate, proximity to European and Middle Eastern markets and cheap labor.
However, the production of horticultural crops is much less developed than the production of
food grains in the country. On average more than 2,399,566 tons of vegetables and fruits are
produced by public and private commercial farms, this is estimated to be less than 2 percent of
the total crop production. According to recent information obtained from the Central Statistics
Authority, the total area under fruits & vegetables is about 12,576 hectares in 2011. Of the total
land area under cultivation in the country during the same year, the area under fruits and
vegetables is less than one percent (i.e. 0.11%), which is insignificant as compared to food crops.

At present, many private commercial farms & private farmers are producing fruits and
vegetables both for domestic and export markets in the country. Processing plays an important
role in the conservation and effective utilization of fruits and vegetables. It converts perishable
fresh products to more durable processed products in cases of sluggish markets or when there is
profit- generating demands for processed products. It also helps in generating rural employment.
Besides, processed fruits and vegetables are sources of foreign exchange earnings. In Ethiopia,
the number of fruits and vegetables processing industries is limited. Currently, there are only 5
fruits and vegetable processing plants in the country. These plants presently process limited
products: tomato paste, orange marmalade, vegetable soup, frozen vegetables, and wine. Most of
the processing plants fall in the small-scale processing unit’s category. In general, processed
products are mainly geared to domestic markets.

The major source of growth for Ethiopia is still conceived to be the agriculture sector. Hence,
this sector has to be insulated from drought shocks through enhanced utilization of the water
resource potential of the country, (through the development of small-scale irrigation, water
harvesting, and on-farm diversification) coupled with strengthened linkages between agriculture
and industry (agro-industry), thereby creating a demand for agricultural output.

In line with the above, different regions of the country are working hard so as to promote
irrigated agriculture and boost agricultural production both in quantity and quality
2,2. Project Objectives

2.1 General Objective

The major goal of this project is to contribute towards the growth of the Agricultural sector. Its
specific objectives include the following.

2.1.1 Specific objective

 To construct and develop quality and quantity product that enable to provide standard goods
to consumer.
 To undertake trading and other refuted business activities that enable to generate a reasonable
to the invested capital.
 To develop modern business centre that would provide quality product on standard.
 To create employment opportunities.
 Contribute towards the eradication of poverty.
 To establish economically viable, socially acceptable and environmentally friend farm.
2.3 Project description

Horticulture covers a wide range of products which can be grouped into vegetables, herbs,
mushroom, and flowers. jimma Zone has great potential and suitable natural resources for the
production of these groups of horticultural crops. In fact, this project refers to only essential
fruits & vegetable production which includes cabbage, Garlic, tomato, pepper and onion. These
products can be supplied as green and fresh, chilled or frozen and packed depending on the
market location and requirement. Combining different kinds of vegetable production create a
better opportunity for crop rotational practices and give the advantage of utilizing common
faculties such as washing, cleaning cooling and storage facilities. Plus marketing fruits &
vegetables facilitate an increase in marketable volume by attracting more customers.

The Jimma Zone has large areas and water resources suitable for the production of fruits and
vegetables. Compared to cereals, pulses and oil crops, fruits and vegetables are very high in
productivity per unit of land which can play a substantial role to increase the food supply area.
With a growing urban population, which is totally market dependent, and the current food supply
shortage, expansion in fruit and vegetable production will play a significant role in increasing the
food supply of the zone.

Planned land use on farm site includes the construction of the house for residence and store,
planting of different verities of permanent and annual tree and crop species. Specifically:
Avocado species (10ha) and 65ha land area set for vegetable production, 3ha for construction
and environmental protection/conservation. Besides production, the organization also plant tree
species within farm like following irrigation and drainage channel.

On the other hand, unbalanced and inadequate nutritional status of the people is still a central
problem in the zone. Deficiency of essential food elements, such as protein, vitamins, and
minerals are widely observed as basic food intake is below the minimum requirement in the area.
Increase in blindness due to ΄Vitamin A΄ deficiency is an alarming circumstance in the country.
Therefore, fruits and vegetables are important sources of vitamins and minerals.
2.4 Project Rationale

Agriculture is the cornerstone of the development policy of the Government of Ethiopia.

According to the Rural Development Policy and Strategy document, the basic ingredient and
resource the country has for agricultural development is the abundant land and labor. Most of the
western lowlands are endowed with water resources are virgin and fertile. Up to recently, the
areas were not developed due to lack of capital and technology. Therefore, there is a strong
commitment from the government to make these fertile lands available for investors that have the
capital and technology to develop.

The existing promising investment opportunities, the demands of goods needs along with
relatively sound investment support made by the government in such kinds of feasible projects,
compelled the project promoter to initiate the multipurpose oriented business project to be
established. Despite the promising business opportunities, the trend on such kinds of investment
found to not enough.

Therefore, the existing shortage or absence in the supply of these products, along with its better
location and infrastructure access, the escalating trend of urbanization and business activities,
thus it is with such reason that this project is identified and proposed and assumed to be more
profitable.

In general, the country’s privatized and free market economy; good governance creates a
favorable environment for the development of investment for private investors.

2.5 The significance of the project

The envisaged project deemed to add to the economic development of the region in general in
specific with following ways:

A. Source of Revenue

As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income
taxes, payroll income tax and VAT are collected from undertaking business activities. Therefore,
the farm will serve as sources of revenue for the city.
 B. Employment opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self employment or employment in other
organization. Hence, this project will hire 469 individuals during operation period.

2.6 Project Location

The license area is located in Oromia Regional State, Jimma Zone, Gumay district Bara rijo
kebele. The total area of the project is 78 ha.
3. MARKETING ASPECT
3.1. Description of the Product
In horticulture, vegetables are herbaceous plants that are edible in whole or part. Parts usually
eaten include roots, stems, tubers, leaf bases/petioles, entire leaves, flowers, immature and
mature fruit. Vegetables are important in the human diet because they are rich in vitamins and
minerals and supply fiber and bulk and are cheap source of protein. In Ethiopia, vegetables are
usually eaten with enjera, pasta and different eaten materials.

In Ethiopia, the most commonly grown vegetables consist of annual crops which include
solanaceous, crucifers, cucurbits, bulb crops and other indigenous vegetables. In the south west
part of Ethiopia specifically known by have large vegetable production area and have type IV
climate wherein rainfall is more or less distributed throughout the year.

Specifically, the products to be marketed include: potato, cabbage, pepper, onion, garlic and
tomatoes. These products include not just vegetables but spices as well.

Vegetable production holds potentials as an economic of the country for rural families from the
nutrition standpoint and augmentation of the farm family income. Besides, its diversity and
compatibility in most cropping systems, it requires little investment especially for a typical
subsistence farmer. Government action programs on selected vegetables have shown promise of
being profitable. Vegetables contain rich sources of Vitamin A, C, thiamin, niacin and other
elements essential for human health.
3.2. Market Analysis

Fresh and Processed Fruits and vegetables have a large domestic market in Ethiopia,
significantly higher than the exported volumes. The size of the Ethiopian population is currently
estimated at about 100 million. This is a strong indication of the existence of large potential
demand for fresh fruit and vegetable crops in the country. The other customer of Ethiopian fresh
fruits and vegetables is processing plants, i.e., tomato processing plants and vegetable canning
factories which require tomato and various types of vegetables for processing. The demand for
fruit on the local market is high. This is a strong indication of the existence of investment
opportunities in fruit supply for the local market

Ethiopia exports fresh fruits and vegetables to the international markets. The major markets for
Ethiopian fresh fruits and vegetables are the European Union, the Arab countries and the
regional markets. Thus, there is a reliable demand for these Ethiopian products during a
particular period and a great volume. Therefore there is a strong business image for vegetables
and fruit markets.

3.3. The Demand-Supply Gap

There has been a significant growth in the number of local and international trades across the
country. This increase is mainly associated with the stimulation of economic activist and partly
due to an increase in the demand of fruit and vegetable production. Even though there is a lack of
quantitative estimates that depict the actual demand and also the annual growth rate commercial
facilities are scarce in the region. As a result there is a large gap between the developed and that
of the supply for fruit and vegetable production hence this project would not face any problem of
demand scarcity for it market and it would provide good goods to customers.

The price of fruits and vegetables is volatile and seasonal. Generally, fruits and vegetables are
much cheaper in rainy seasons. However, even in the rainy seasons the average price of fruits
and vegetables at major towns is estimated on average at birr 25 and 15 per kg respectively. It is
based on cost and competitors price.

2009 2010 2011

 Tomato 951,920Kg 1,509,352 Kg 1,558,240 Kg
Mixtures 339,039 Kg 980,419 Kg 1,237,883 Kg
Source: Ethiopian Customs Authority

3.4 Future market or Demand of fruits and vegetables

The future demand for fruits and vegetables is promising due to two main factors. First, an
increase in population in general and urbanization, in particular, is expected to amplify the
domestic consumption of fruits and vegetables. At the same time, an increase in income
inevitably improves the per capita consumption of fruits and vegetables in the future.
Consequently, with a conservative growth rate of 3% per annum, the future demand for
vegetables is forecasted as shown below.
Table 1: Future Demand
Year Projected Demand (qts)
2006 100,000
2007 103,000
2008 106,423
2009 109,615
2010 112,904
2011 116,291
2012 119,780
2013 123,373
2014 127,074
2015 130,886
2016 134,698
2017 139,198

3.5 Target customers

The target customers of this envisaged project include:-

 The surrounding community

 District ,regional and federal government
 Agricultural research institutes
 Agricultural technology and equipment suppliers
 Ginning factories
 Agro-processing factory
3.6. Marketing promotion and strategy

In order to penetrate and gain considerable market share, one of the major marketing strategies
for the project is consistently rendering quality service to its tenants. Due emphasis must be
placed on improving quality of service. The major marketing strategies to promote the project
and gain considerable market share include:

 Advertising through different means focusing on the existing service and products.
 Promote in association to the key location and nearby business
 Working on sustained promotional work.
 Working on public relations to reach and influence key personas and organization with a
capacity of making decision.
 Keeping the quality of its service/ product and consistently improving with changing
situations.

 Seasonal discount pricing different others customer centric marketing strategies will be
used by the farm.

3.7. Competition

There are different forms of competition that may face the envisaged Fruit and vegetable farm.
These are price and non-price based competition. Moreover, there are different competitors that
will compete with the project either directly or indirectly. But the Fruit and vegetable farm under
discussion has diversified marketing strategies that could enable it to Cope up with the different
competitors in the market. Moreover, it will frequently conduct competitors research which
focuses on, the strength and the weaknesses, the different competitors’ strategies, the techniques
they use in rendering the service, their customer handling methods, and others.

3.8. The project facilities and Services plan

In order to provide Fruit and vegetable farm of a high standard, it has been planned to construct
and develop the infrastructure and facilities that would viable to meet the requirements of an
international standard farm. Accordingly, various facilities will be constructed phase by phase
starting with the most needed ones that are essential to commence the operation of its farm
activities.
Since the project will be engaged in Fruit and vegetable the main sources of its annual revenue
would be from the domestic and international product sell. Based on the market price of Fruit
and vegetable in the area, the envisioned project set the fair price (Before VAT) for its product.

Feature of the sector

Agriculture is the backbone of the economy and the most volatile sector mainly owing to its
dependency on rainfall and the associated seasonal shocks that affect productivity. More than
85% of the Ethiopian population depends on agriculture for their livelihood. Within the context
of the Ethiopian economy, the Agriculture sector traditionally includes economic activities such
as crop and livestock production in which the crop sector has been the major driving element.

The Ethiopian economy is basically comprised of smallholder farming as well as medium and
large scale commercial farming. Relatively speaking, commercial farms are not significant in
terms of area cultivated and volume of production, even though the role has slightly increased in
view of the recent phenomena associated with the establishment of flourishing cut flower farms
in the country which is largely dominated by foreign investment.

Ethiopia is potentially a wealthy country, endowed with abundant resource conducive to

agricultural development such as fertile soil and good rainfall over large regions. Agriculture
accounts for the lion share of the foreign exchange earnings. The sector contributes about 90% of
the total export of commodities. The country’s industrial development programs are closely tied
to value-added processing of agricultural outputs with equal emphasis to both large & medium
scale as well as small scale manufacturing industries. The sector registered significant growth for
the last four consecutive years due to good climatic condition accompanied by increasing crop
productivity through agriculture input intensification and area expansion.

Beneficiaries

The country will get a contribution to its national income through domestic consumption and
export. This project will provide employment opportunity to the local population, this will raise
the living standards of the people working in this project, and they also learn the latest
technologies in crop production and also make use of them in their own farm. The regional
government will also generate revenue in the form of land rent will be an additional source of
income on land resources.

The company, which is making an investment on the land and doing a lot of agricultural
production (fruit and vegetable) activities in developing the land will be benefitted in terms of
return on their investment during the lease period.

Past and Present intervention

Fruit and vegetable production project has a technically strong, knowledgeable and experienced
team to execute the project on time. With the vast knowledge base in agri-business activities, the
company has tangible experience in making this project a success. Conflict in the area may retard
plan of project.

3.9. Justification of the project

Ethiopia has huge investment potentials for agricultural development. Currently, investment in
the agriculture sector is found to be more attractive and profitable in diverse sub-sectors ranging
from food products, industrial raw materials to bio-fuel. The agriculture sector accounts for 47%
of the Gross Domestic Products of the country, provides 85% of employment and 90% of foreign
currency earning.

Moreover, the country has a huge market potential for crop and livestock produced with
comparative advantage to the Middle East, Europe, and Asia. For the past five consecutive years,
the agriculture sector was growing faster with more than 11% average annual growth. In addition
to the contribution to the national growth, the growth has triggered the increase in the domestic
market has for both livestock and food crops.

Looking at the agro-climatic condition i.e. average temperature, rainfall, physic-chemical

properties of the soil and the distribution of the rainfall give an indication that the proposed land
is suitable for cultivation of various crops but especially fruit and vegetables. The physic-
chemical properties of the soil indicated in the information sheet provide further confidence for
the success of the project. Moreover, the planning on the financial part of the project i.e.
investment, cash flow, return on investment, profitability and the cost-benefit ratio will show a
positive trend.

The expertise in the marketing of farm-produced in the international market will provide an
additional benefit to improve the financial health of the organization. The statistic indicated in
the financial report will provide us confidence in the project. It justifies the investment and
returns on the investment.

Support for the project

The financial support i.e., the equity infusion in the form of cash and kind for this project on
investments shall be received from promoters. The company shall receive equity infusion in the
form of cash or kind from any of these mentioned companies hereby for its project. The
company shall take the financial support in the form of project loan from either development
bank of Ethiopia or commercial bank of Ethiopia. In addition to our in-house team, we are also
interacting with the Ethiopian Institute of Agriculture Research to get timely support and
valuable advice in this project based on their experiences.

We are also expecting support from Agricultural office and responsible government officials for
identification of suitable land and facilitation of the documentation and import of farm
machinery and equipment, farm inputs for the success of this project. It appears to be a joint
project of Fruit and vegetable production farm project and Ministry of Agriculture, Government
of Ethiopia, as we need lots of support from the Ministry of Agriculture at various level of
implementation of activities in this project. Without their help and support, it will not be
possible to make this project a success.
4. TECHNICAL AND PRODUCTION ASPECT
4.1 The Vegetable Production Flow
While production and cultural practices vary from one type of vegetable to another, the general
cultural practices for vegetable production discussed below apply:

a. Land Preparation

Prepare the field at least one month before planting by plowing and harrowing the area for
several times. Follow each plowing with harrowing to efficiently prevent weeds from growing.
Prepare furrows at a distance required by each vegetable type to be grown. For wet season
cropping, prepare raised beds instead of furrows. In low and mid elevation areas, make deep
furrows with 0.5m wide. In high elevations, seed beds are prepared according to the width
requirement of each type of vegetable.

b. Seedling Production

Seedling production is necessary for those proposed vegetables which cannot be directly seeded
like tomato, eggplant, cabbage and others. These can be produced through seed bed methods and
tray methods. Seed bed methods require incorporation of manure and rice hull ash or wood ash
for better seedling growth results.

c. Planting and Transplanting

after the seedling is matured for planting and transplanting, all of the proposed vegetable’s for
the project are transplanting and planting. There are vegetables that can be either sown directly
in soil or be transplanted. Direct seeding is carried out by broadcasting or by sowing the seeds in
row, then covering the seeds through spreading additional top soil.

To facilitate transplanting, there is a need to water the seed beds and gently uprooting the
seedlings and transplant it in lower at a distance required by each type of the vegetables,

d. Fertilization and Weeding

Applying the newly transplanted vegetable seedling with starter solutions using organic
fertilizers at the rate of 2t/gallon of H2O. However, there are vegetables that requires larger
application o f organic fertilizer at planting to be followed with side dressing applications
especially on the vegetative stages of the grown vegetables. Fertilizers are best applied after
weeding to facilitate maximum utilization of NPK contents of fertilizers by the plants.

e. Trellising/ Vine Training/ Pruning

For those creeping and climbing vegetables, use trellis to protect the fruits from rotting and
malformation. Construct vertical and overhead trellis using Ipil-ipil or bamboo poles, abaca
twines or straw wires are done.

f. Pest Management and Maintenance

An integrated pest and disease management is encouraged nowadays. IPM can be applied by
pruning and burning old infected leaves at regular intervals. Virus spread can be prevented by
using healthy seeds. Avoid nematode damage through crop rotation and use of organic manure.

Another method for pest management is to use botanical pesticides or soap solutions which is
found effective to control aphids and cabbage looper worms. Hot pepper extracts are sprayed to
leafy vegetables (petchay/lettuce) to control damping off, soft root and club root diseases.
Today’s generation of farmers used organic pesticides in controlling the occurrence of peace and
disease of plants.

g. Harvesting

Harvesting is done when vegetables have reached its full maturity growth stage. Some vegetables
are harvested with mature, green or fully ripened fruits or harvesting is done just before fruits are
fully ripe or when the peduncle starts to dry up (e.g., squash). Some mode of harvesting is done
according to the number of days after planting (DAP) or when 75% of the leaves turn yellow or
leaves would begin to fold over (e.g., garlic).

Train the vines on the vertical trellis (e.g., bitter gourd). Lateral shoots may be pruned leaving
only the main vine. Removing all female flowers below the overhead trellis enhanced full
development of well-formed fruits.
4,2. Raw material
The main raw material required for the proposed vegetable farming is;

 Seedlings; the seeds for the proposed vegetable farm will be purchased from mellkesa
Agricultural research institute,
 Compost; will be acquired from local farmers, this includes animal manure
 Organic fertilizer: the main organic fertilizers used for the project will be DAP and urea
 Water: water also required as the main raw material for the project it will be used nursery
development, irrigation purpose and for sanitation of the product.

vegetable Area fertilizer kg/ha total fertilizer (kg)

Tomato 15 100 1500

Onion 15 100 1500
garlic 15 100 1500
cabbage 15 100 1500
red pepper 15 100 1500
Total 75 7500

4.3. Machinery and Equipment

Basically, the planting and harvesting of vegetable do not require much machinery and
equipment. Tractor is used while preparing the land for the first planting period and therefore,
the envisaged project shall use hired tractor while preparing the land. The plant however, needs
to acquire 12 medium capacity water pumps and the associated equipments for irrigation
purpose. In addition, small agricultural tools such spade, rakes, disks, auger, mower, sprayers
and etc are required. The cost of the machinery and equipment is estimated to be Birr
1,382,940.00. The water pumps and equipments can be purchased from local suppliers

Total cost in
SN Description Measurement Qty Unit cost in Birr
Birr.
1 Plow no 3 5,000 15,000.00
2 spade, no 2 200 400.00
  water pump no 2 300,000 600,000.00
3 rakes no 2 450 900.00
4 disks no 2 300,000 600,000.00
 5 mow no 2 5,000 10,000.00
6 sprayers no 4 5,000 20,000.00
7 weighting scale no 2 10,000 20,000.00
8 Harrow no 3 800 2,400.00
9 Carabao no 3 6,000 18,000.00
10 Bolo no 3 180 540.00
11 Shovel no 2 300 600.00
12 Hoe no 2 300 600.00
13 Pail no 3 300 900.00
14 Scythe no 2 300 600.00
15 Knife no 2 250 500.00
16 Kegs no 5 500 2,500.00
23 Refrigerator no 3 30,000 90,000.00
  Total       1,382,940.00

4.4. Farm Size and Production Schedule

a. Farm size

The total farm size allocated for the proposed vegetable project is 78 ha. In which the owners
have rural land use certification from the wereda Land Administration and Use office. The main
products of the proposed project Vegetable farming will be tomato, onion, garlic, cabbage and
red pepper.

vegetable Area

Tomato 15
Onion 15
garlic 15
cabbage 15
red pepper 15
others 3
Total 78

b. Production Schedule
 3.1 Seasonal calendar for selected vegitable

Month Jan Feb March April May June July Aug Sept Oct Nov Dec
1 Order seedlings/ x x x x
seed
2 Preparing soil x x x x x x x x x x x x
3 Planting & staking x x x x x x x x x x x x
4 Watering x x x x x x x x x x x x
5 Weeding, x x x x x x x x x x x x
thinning, pest
control,
6 Fertilizing
7 identify and select x x x x x x x x x x x x
size for harvesting
Periods of low (-) + + + + + + + + + + + +
and high market
prices (+) for this
product?
Periods with labor - - -
shortage at the farm
(-) and with labor
surplus at the farm
(+)?

Periods with enough - - - + + + + + + + - -

water (+) and with
shortage of water (-)
Seasonal variation in + + + + + - - - - + + +
variety of veg
available

4.2. Civil Engineering Cost

The proposed project will undertake Storage, Office and irrigation canal development. To under
take the construction the proposed project uses locally available raw materials. The Total coast
required for the construction is 2,201,160.00 bir.
5. FINANCIAL REQUIREMENT AND ANALYSIS
The financial resource is a prime resource for undertaking any activities. Hence for
implementing the project is a total of 13,411,090.00ETB is required. From this 30% 4023327

birr will be covered by the promoter of the project while the rest 70% 9387763

will be covered through loan from bank at the prevailing interest rate. Therefore the said amount
of finance is needed for undertaking the following.

5.1. Fixed Capital

A. Land development, buildings and Construction

The total land area required for coffee washing plant is 23,000m 2. The cost of buildings and
construction is estimated at 2,201,160.00 detailed financial requirement presented in the
following table.

Table 10: Land development, buildings and Construction

A. Land, Building & Construction

S.N Description of works Total Cost in birr

1 Building construction 2,000,000.00

  Store 500,000.00
  Office 500,000.00

  irrigation canal construction 1,000,000.00

 2 Site Development 200,000.00
1st Year land lease & (10%)
4 1160
down payment
  Total 2,201,160.00

B. Machinery and Equipment

The total cost of machinery and equipment is estimated at 427,940.00

birr.
Table 10: Machinery and Equipment

Unit cost in Total cost in

SN Description Measurement Qty
Birr Birr.
1 Plow no 3 5,000 15,000.00
2 spade, no 2 200 400.00
  water pump no 2 10,000 20,000.00
3 rakes no 2 450 900.00
4 disks no 2 100,000 200,000.00
5 mow no 2 5,000 10,000.00
6 sprayers no 4 5,000 20,000.00
7 weighting scale no 3 15,000 45,000.00
8 Harrow no 3 800 2,400.00
9 Carabao no 3 6,000 18,000.00
10 Bolo no 3 180 540.00
11 Shovel no 2 300 600.00
12 Hoe no 2 300 600.00
13 Pail no 3 300 900.00
14 Scythe no 2 300 600.00
15 Knife no 2 250 500.00
16 Kegs no 5 500 2,500.00
23 Refrigerator no 3 30,000 90,000.00
  Total       427,940.00

C,Vahicle

SN Description UOM Qty Unit Cost in Total cost Remark

Fr. in Birr
 1 Minibus Unit 1 700,000.00 700,000.00 Duty Free
2 Isuzu   2 1,000,000.00 2,000,000.00
3 pickup   1 1,500,000.00 1,500,000.00
4 Tractor Unit 1 1,000,000.00 1,000,000.00
  Total       5,200,000.00

D. Office Equipment

SN Description Measurement Qty Unit cost in Total cost in

birr Birr
1 Managerial tables Unit 1 3,600.00 3,600.00
2 Managerial Unit 1 2,000.00 2,000.00
chairs
3 Office table with Unit 1 3,000.00 3,000.00
chair
  Desktop   1 20,000.00 20,000.00
Computer
6 Shelf Unit 1 4,500.00 4,500.00
9 Fax & Telephone Unit 1 2,500.00 2,500.00
machine
  Total       35,600.00

5.2. Working Capital

5.2.1. Operating Expense at full Capacity
a. salary Expense
The Wet coffee Hauling plant will create job opportunity for more than 469 labor force. From
the total employee 19 are permanent and 450 are causal workers that are planned to be drawn
from local community. Accordingly, from permanent workers 3 are female and 16 are male
employee. The proposed manpower requirement and the estimated annual labor cost including
fringe benefits is presented in the table below.

SN Position No Qualification Monthly Annual

 salary in salary in
Birr Birr
1 project manager 1 Agronomist 3500 42000

2 Marketing 1 BA in 3000 36,000

management
3 Agronomy 3 Diploma in 2000 72,000
accounting
4 Guards/Securit 4 Basic 1000 48,000
y
5 Quality control 1 Horticulture 2000 24,000
6 field workers 5   800 48,000
7 machine 2 auto 1500 36,000
operator mechanics
8 Driver 3 10 completed 2000 72,000

9 causal laborer’s 450 capable 30*50 702,000

  Total 469     1,080,000

  Benefit (20%)       216,000
  Grand Total       1,296,000

5.2.1 Operating Expense

Table 15: Operating Expense

S List of Items List of Items Annual cost in

N birr

1 material cost for Seedling Seedling Coast 80,000.00

2 labor cos of seedling  labor 100,000.00

3 labor cost of Transplanting  labor 50,000.00

4 Fertilizer DAP & Urea 300,000

5 Chemical  For wed control 200,000.00

6 Labor coast   50,000.00

7 material cost of harvesting labor 7,000.00
8 Transportation coast    
 9 Stationery supplies Stationery supplies 1,200.00
10 Promotional Cost Promotional Cost 10,000.00
11 Property Insurance Property Insurance 20,000.00
12 Cleaning Supplies Cleaning Supplies 8,000.00
13 Electric consumption Electric consumption 5,000.00
14 Fuel Fuel 100,000.00
15 Oil & Lubricants Oil & Lubricants 10,000.00
16 Telephone & fax Telephone & fax 18,000.00
17 Repair expense Repair expense 40,000.00
18 Miscellaneous costs Miscellaneous costs 12,000.00
  Total Total 1,011,200.00

5.1.1   Pre-service Expenses

SN Description Cost in birr
1 Project proposal & EIA 30,000.00
2 Licensing fee and others
  Total 30,000.00

5.2.3. Summary of investment cost

The total initial investment cost of the project including working capital is estimated at Birr 13.4
million. The major breakdown of the total initial investment cost is shown in Table 7.

Table 17: Summary of Total initial investment cost

SN Description Cost in Birr

1 Land, building & construction 4,201,160.00
2 machines & Equipment 427,940.00
3 Vehicle 5,200,000.00
4 Office Equipment 35,600.00
  Total fixed investment cost 9,864,700.00
6 Salary expense 1,296,000.00
7 Operation Expense 1,011,200.00
8 Pre service Expense 20,000.00
  Total Working capital 2,327,200.00
   Sub total 12,191,900.00
11 Contingency (10%) 1,219,190.00
  Total initial investment capital 13,411,090.00

5.3. Financial Analysis

a. Underlying Assumption
The financial analysis of Vegetable and dairy farming is based on the data provided in the
preceding chapters and the following assumptions.

A. Construction and Finance

Land Preparation Period 6 months

Source of Finance 40 % Equity and 60 % Loan

Tax Holidays 2 Years

Bank Interest Rate 12 %

Discount for Cash Flow 18 %

Based on Land Rent Rate of

Value of Land ANRS

Spare Parts, Repair & Maintenance 3 % of the Fixed Investment

B. Depreciation

Building 5%

Machinery and Equipment 10%

Office Furniture 10%

Vehicles 20%

Pre-Production (Amortization) 20%

 C. Working Capital (Minimum Days of Coverage)

Spare Parts In Stock and Maintenance 30 Days

Accounts Receivable 30 Days

Cash In Hand 30 Days

Accounts Payable 30 Days

5.3. Financial analysis and Statements

5.3.1. Underlying Assumption

5.3.2. Sources of Fund

The source of fund to finance the project is planned to be from two sources. These are
promoter’s equity and bank loan. The loan is expected to be obtained from one of the local
lending institutions. Since the project is expected to take some times to repay all its debts, the
bank loan is assumed to obtain on long term credit basis. Taking the financial position of the
promoters into account, equity contribution and bank loan to finance the total investment outlays
of the project are assumed to be 30% and 70% respectively. Accordingly, the total financial
requirement from the two sources will be

Owners equity 30% 4,023,327

Bank loan 70% 9,387,763
Total 100% 13,411,090.00

5.3.3. Depreciation Schedule

Table 19: Depreciation Schedule

Original Value in Depreciation Depreciation per

SN Description
Birr rate in % year in Birr
Construction and
1 4,201,160.00 10 420,116.00
Building
Bldg. machines
2 427,940.00 10 42,794.00
& Equipment
 3 Vehicle 5,200,000.00 5 260,000.00
Office
4 35,600.00 10 3,560.00
Equipment
  Total 9,864,700.00   726,470.00

5.3.4. Bank Repayment schedule

Table 20: Bank Repayment schedule

year Principal interest rate (8.5%) Total annual Payment year ending
payment in ETB balance
0       9387763
1 938776.3 797959.855 1736736.155 8448986.7
2 938776.3 718163.8695 1656940.17 7510210.4
3 938776.3 638367.884 1577144.184 6571434.1
4 938776.3 558571.8985 1497348.199 5632657.8
5 938776.3 478775.913 1417552.213 4693881.5
6 938776.3 398979.9275 1337756.228 3755105.2
7 938776.3 319183.942 1257960.242 2816328.9

8 938776.3 239387.9565 1178164.257 1877552.6

9 938776.3 159591.971 1098368.271 938776.3

10   79795.9855   0

5.4. Financial Statement

5.4.1. Income loss/statement

Project revenue and production costs are listed and compared to see whether the
project generate profits or not. Starting from first year of the project operation, the
project will generate a reasonable amount of net profit for the owners throughout its life period.
Profit and loss statement shows that the project will generate net profit of ETB 21,697,559.90in
the first year and increase to ETB3, 22,390,131.47 in the fourth year of the project life and hence

it is found to be profitable.
Table 21. income/loss statement

Revenue Year 1 Year 2 Year 3 year 4 year 5

sell 34,830,000.00 34,830,000.00 35,205,000.00 35,580,000.00 41,430,000.00
            
Expenses          
Salary Expense 1,296,000.00 1,296,000.00 1,296,000.00 1,296,000.00 1,296,000.00
Operating Expenses 1,011,200.00 1,011,200.00 1,011,200.00 1,011,200.00 1,011,200.00
Deprecation Bld. 726,470.00 726,470.00 726,470.00 726,470.00 726,470.00
Machineries ,Equiq
& vehicle
Interest Expense3 797,959.86 718,163.87 638,367.88 558,571.90 478,775.91
Lease payment4 1,856.00 1,856.00 1,856.00 1,856.00 1,856.00
Total Expense 3,833,485.86 3,753,689.87 3,673,893.88 3,594,097.90 3,514,301.91
Profit before Tax 30,996,514.15 31,076,310.13 31,531,106.12 31,985,902.10 37,915,698.09
Tax (30%) 9,298,954.24 9,322,893.04 9,459,331.83 9595770.63 11374709.43
Net profit 21,697,559.90 21,753,417.09 22,071,774.28 22,390,131.47 26,540,988.66

5.4.2. Cash flow Statement

Table 22: Cash flow Statement

Equity Capital 4023327        

Loan principal 9387763        
35,205,000.0
Net sale 0 34,830,000.00 34,830,000.00 35,580,000.00
0
Total Cash in 35,205,000.0
13,411,090 34,830,000.00 34,830,000.00 35,580,000.00
flow 0
Cash payment          
Salary Expense 0 1,296,000.00 1,296,000.00 1,296,000.00 1,296,000.00
Investment 9,864,700 0 0 0 0
Pre operating
20,000 0 0 0 0
Expense
Operating Cost 0 1,011,200.00 1,011,200.00 1,011,200.00 1,011,200.00
Loan repayment 0 1,736,736.16 1,656,940.17 1,577,144.18 1,497,348.20
Lease payment 0 1,856.00 1,856.00 1,856.00 1,856.00
Tax payment 0 9,298,954.24 9,322,893.04 9,459,331.83 9,595,770.63
12,049,532.0
Total payment 9,884,700.00 12,048,746.40 11,992,889.21 12,106,174.83
2
Cash surplus/ 23,155,467.9
3,526,390.00 22,781,253.60 22,837,110.79 23,473,825.17
deficit 8
Cumulative cash 23,155,467.9
-496,937.00 22,781,253.60 22,837,110.79 23,473,825.17
flow 8
Appendix 1: Sells forecast

Yea Cabbage Tomato Pepper onion Garlic total sell

r
Marketabl Price Total Marketable Price/k Total Marketabl Price/k Total Marketabl Price/k Total Marketabl Price/k Total
e yeld per/K g e yield g e g e g
g
   
1 600000 10.00 6000000.0 2250000 10.00 22500000.0 75000 70.00 5250000.0 15000.00 12.00 180000.0 15000.00 60 900000 34830000.0
0 0 0 0 0
2 600000.00 10.00 6000000.0 2250000.00 10.00 22500000.0 75000.00 70.00 5250000.0 15000.00 12.00 180000.0 15000.00 60 900000 34830000.0
0 0 0 0 0
3 600000.00 10.00 6000000.0 2250000.00 10.00 22500000.0 75000.00 75.00 5625000.0 15000.00 12.00 180000.0 15000.00 60 900000 35205000.0
0 0 0 0 0
4 600000.00 10.00 6000000.0 2250000.00 10.00 22500000.0 75000.00 80.00 6000000.0 15000.00 12.00 180000.0 15000.00 60 900000 35580000.0
0 0 0 0 0
5 600000.00 12.00 7200000.0 2250000.00 12.00 27000000.0 75000.00 80.00 6000000.0 15000.00 12.00 180000.0 15000.00 70 105000 41430000.0
0 0 0 0 0 0
6 600000.0 12.00 720000 2250000.00 12.00 27000000.0 75000.00 90.00 6750000.0 15000.00 15.00 225000.0 15000.00 70 105000 42225000.0
0 0 0 0 0 0 0
7 600000.0 12.00 720000 2,250,000.0 12.00 27000000.0 75000.00 90.00 6750000.0 15000.00 15.00 225000.0 15000.00 70 105000 42225000.0
0 0 0 0 0 0 0 0
8 600000.0 12.00 720000 2,250,000.0 12.00 27000000.0 75000.00 90.00 6750000.0 15000.00 15.00 225000.0 15000.00 70 105000 42225000.0
0 0 0 0 0 0 0 0
9 600000.0 12.00 720000 2250000.00 12.00 27000000.0 75000.00 90.00 6750000.0 15000.00 15.00 225000.0 15000.00 70 105000 42225000.0
0 0 0 0 0 0 0
10 600000.0 12.00 720000 2,250,000.0 12.00 27000000.0 75000.00 90.00 6750000.0 15000.00 15.00 225000.0 15000.00 70 105000 42225000.0
0 0 0 0 0 0 0 0
Annex 2. operating cost
Operating years of the project
Description 1 2 3 4 5 6 7 8 9 10
A. Direct cost                    
Raw Material 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20
Cost 0 0 0 0 0 0 0 0 0 0
Sub-total 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20
0 0 0 0 0 0 0 0 0 0
Total Direct 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20 1,011,20
cost 0 0 0 0 0 0 0 0 0 0
B. Indirect                    
cost
w  Wages and 1,296,00 1,296,00 1,296,00 1,296,00 1,296,00 1,296,00 1,296,00 1,296,00 1,296,00 1,296,00
Salary 0 0 0 0 0 0 0 0 0 0
w  Repair and 40,000.0 40,000.0 40,000.0 40,000.0 40,000.0 40,000.0 40,000.0 40,000.0 40,000.0 40,000.0
Maintenance 0 0 0 0 0 0 0 0 0 0
w  Property 20,000.0 20,000.0 20,000.0 20,000.0 20,000.0 20,000.0 20,000.0 20,000.0 20,000.0 20,000.0
Insurance 0 0 0 0 0 0 0 0 0 0
w  Utility 0 0 0 0 0 0 0 0 0 0
w  Land lease 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856
w  Advertising 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0 10,000.0
and Promotion 0 0 0 0 0 0 0 0 0 0
w  12,000.0 12,000.0 12,000.0 12,000.0 12,000.0 12,000.0 12,000.0 12,000.0 12,000.0 12,000.0
Miscellaneous 0 0 0 0 0 0 0 0 0 0
Expense
Total 2,391,05 2,391,05 2,391,05 2,391,05 2,391,05 2,391,05 2,391,05 2,391,05 2,391,05 2,391,05
operating cost 6 6 6 6 6 6 6 6 6 6
                     

Annex.3 income statement

Operating years of the project
Description 1 2 3 4 5 6 7 8 9 10
Sales
Revenue 34,830,000 34,830,000 35,205,000 35,580,000 41,430,000 42,225,000 42,225,000 42,225,000 42,225,000 42,225,000
Less: 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056
Operating
cost
Income 32,438,944 32,438,944 32,813,944 33,188,944 39,038,944 39,833,944 39,833,944 39,833,944 39,833,944 39,833,944
before
Depreciatio
n and
interest
Less: 797,959.86 718,163.87 638,367.88 558,571.90 478,775.91 398,979.93 319,183.94 239,387.96 159,591.97 79795.9855
interest
Income 31,640,984 31,720,780 32,175,576 32,630,372 38,560,168 39,434,964 39,514,760 39,594,556 39,674,352 39,754,148
before
Depreciatio
n
Less: 0 0 726,470 726,470 726,470 726,470 726,470 726,470 726,470 726,470
Depreciatio
n
Profit /Loss 31,640,984 31,720,780 32,175,576 32,630,372 38,560,168 39,434,964 39,514,760 39,594,556 39,674,352 39,754,148
Before Tax
Less: Tax 9,492,295.24 9,516,234.04 9,652,672.83 9,789,111.63 11,568,050.4 11,830,489.2 11,854,428.0 11,878,366.8 11,902,305.6 11,926,244.4
(30%) 3 2 2 1 1 0
Net Profit 22,148,688.9 22,204,546.0 22,522,903.2 22,841,260.4 26,992,117.6 27,604,474.8 27,660,332.0 27,716,189.2 27,772,046.4 27,827,903.6
or Loss 0 9 8 7 6 5 4 3 2 1
After Tax
Appendix 4 : discounted cash flow
Investmen
Project Life years
Description t Year
0 1 2 3 4 5 6 7 8 9 10
INFLOW                      
Net sales
0 34,830,000 34,830,000 35,205,000 35,580,000 41,430,000 42,225,000 42,225,000 42,225,000 42,225,000 42,225,000
revenue
TOTAL
0 34,830,000 34,830,000 35,205,000 35,580,000 41,430,000 42,225,000 42,225,000 42,225,000 42,225,000 42,225,000
INFLOWS
OUTFLOWS                      

Investment cost 9,864,700 - -

- - - - - - - -
Operating cost 0 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056
Income tax 0 9,492,295 9,516,234 9,652,673 9,789,112 11,568,050 11,830,489 11,854,428 11,878,367 11,902,306 11,926,244
TOTAL
9,864,700 11,883,351 11,907,290 12,043,729 12,180,168 13,959,106 14,221,545 14,245,484 14,269,423 14,293,362 14,317,300
OUTFLOWS
NET CASH
FLOW -1120940 22,946,648.76 22,922,709.96 23,161,271.17 23,399,832.37 27,470,893.57 28,003,454.78 27,979,515.98 27,955,577.19 27,931,638.39 27,907,699.60
 Annex 5 undiscounted cash flow
Project Years
Investment
Year Operating years
Description 0 1 2 3 4 5 6 7 8 9 10
INFLFOWS                      
Inflow Funds                      
Own Equity 4,023,327                    
Long-term Loan 9,387,763 0 0                
Inflow
Operations   34,830,000 34,830,000 35,205,000 35,580,000 41,430,000 42,225,000 20,000,000 20,000,000 20,000,000 20,000,000
Sales revenue 0 34,830,000 34,830,000 35,205,000 35,580,000 41,430,000 42,225,000 20,000,000 22,000,000 22,000,000 22,000,000
TOTAL
INFLOWS 13,411,090 34,830,000 34,830,000 35,205,000 35,580,000 41,430,000 42,225,000 20,000,000 20,000,000 20,000,000 20,000,000
OUTFLOWS                      
Investment cost 9,864,700 0 0 0 0 0 0 0 0 0 0
Operating cost 0 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056 2,391,056
Financing Cost                      
· Principal 0 0 0 0 938,776 938,776 938,776 938,776 938,776 938,776 938,776
·Interest 0 797,960 718,164 638,368 558,572 11,568,050 398,980 319,184 239,388 159,592 79,796
Income Tax 0 9,492,295 9,516,234 9,652,673 9,789,112 478,776 11,830,489 11,854,428 11,878,367 11,902,306 11,926,244
TOTAL
OUTFLOWS 9,864,700 12,681,311 12,625,454 12,682,097 13,677,516 15,376,659 15,559,301 15,503,444 15,447,587 15,391,730 15,335,873
NET CASH
FLOW 0 22,148,689 22,204,546 22,522,903 21,902,484 26,053,341 26,665,699 4,496,556 4,552,413 4,608,270 4,664,127
BEGINNING 114,831,96 150,546,63
CASH BALANCE 0 0 22,148,689 44,353,235 66,876,138 88,778,622 4 141,497,662 145,994,218 1 155,154,901
ENDING CASH 141,497,66 155,154,90
BALANCE 0 22,148,689 44,353,235 66,876,138 88,778,622 114,831,964 2 145,994,218 150,546,631 1 159,819,028