ADAM HORTICULTURE PLC

FEASIBILITY STUDY
FOR
VEGETABLE EXPORT,

Prepared By:

AKIRMA INTEGRATED AGRICULTURE AND SERVICES PLC

June, 2011
 Table of Contents

1. EXECUTIVE SUMMARY
2. BACKGROUND INFORMATION
2.1 Applicant
2.2 Brief Summary of the Company
3. PROJECT TECHNICAL STUDY
3.1 General
3.1.1 Objectives of the Project
3.1.2 Project Area
3.1.2.1 Geographic Location
3.1.2.2 Land Ownership
3.1.2.3 Topography
3.1.2.4 Climate
3.1.2.5 Physical Conditions
3.1.2.6 Water Resource and Quality
3.1.2.7 Electricity
3.1.2.8 Soil
3.1.2.9 Transport and Communication
3.1.2.10 Service Provider Organizations and Institutions
3.2 Project Particulars
3.2.1 Technical Study
3.2.1.1 Irrigation Scheme
3.2.1.2 Crop Selection
3.2.1.3 Production System
3.2.1.4 Production Cycle
3.2.1.5 Harvesting and Post-harvest Handling
3.2.1.6 Disease and Pest
3.2.1.7 In-farm Roads and Path ways
3.2.1.8 Drainage System
3.2.1.9 Ecological, Human and Social Aspects
4. MARKET STUDY
4.1 Overview of Global Vegetable Trade
4.2 EU Fresh Vegetable Market
4.2.1 Market Trends
4.2.1.1 Production
4.2.1.2 Imports
4.2.1.3 Exports
4.2.1.4 Consumption
4.2.2 Supply Chain
4.2.2.1 Overview
 4.2.2.2 Retail
4.2.2.3 Importers
4.2.2.4 Wholesale and Food Service
4.2.3 Market Requirements and Standards
4.2.3.1 Tariff Barriers
4.2.3.2 Non Tariff Barriers
4.2.3.3 Logistics and Traceability
4.2.4 High Value Vegetable Markets
4.2.4.1 Green Beans
4.2.4.2 Peas
4.2.5 Structure of Key EU Markets
4.2.5.1 The United Kingdom
4.2.5.2 The Netherlands

4.3 Prospects
4.4 Production and Technical Strategy
4.5 Packaging
4.6 Labeling and Branding
4.7 Conclusion
5. PROJECT DESIGN
5.1 Buildings and Civil works
5.2 Irrigation System
5.3 Plant and Machinery
5.4 Agricultural Machinery and Equipments
5.5 Vehicles
5.6 Office Furniture and Equipments
5.7 Utilities
5.7.1 Electricity and Power Supply
5.7.2 Fuel, Oil ,and Lubricants
5.7.3 Communication Facilities
6. ORGANIZATION AND MANAGEMENT
6.1 Organizational Structure
6.2 Man Power Requirement and Costs
7. OPERATION PLAN
7.1 Production Plan
7.2 Marketing Plan
7.3 Implementation Plan
8. FINANCIAL STUDY
8.1 Investment Costs
8.1.1 Fixed Investment Costs
8.1.2 Pre-Production Costs
 8.1.3 Total Investment Costs
8.2 Operating Costs
8.2.1 Direct Operating Costs
8.2.2 Indirect Operating Costs
8.3 Financing Plan
8.4 Loan Repayment Scheme
8.5 Financial Statements and Indicators
8.5.1 Projected Balance Sheet
8.5.2 Projected Income Statement
8.5.3 Projected Cash Flow
8.6 Financial Indicators and Sensitivity Analysis
9. BENEFITS AND JUSTIFICATION
10. RECOMMENDATIONS

List of Figures

- Figure 1: Production Flow of Vegetables

- Figure 2: Organizational Structure of Adam Horticulture Plc

List of Tables

- Table 1: Capital structure of Adam Horticulture plc

- Table 2: Total land utilization of crops
- Table 3: Project life Cropping pattern
- Table 4: Seed rate
- Table 5: Maturity period of vegetables
- Table 6: Gross yield
- Table 7: Exportable yield
- Table 8: Beans supply calendar
- Table 9: France beans import price
- Table 10: Belgium beans import price
- Table 11: Netherlands beans import price
- Table 12: Italy beans import price
- Table 13: EU imports of snap and snow peas
- Table 14: Manpower requirement and cost
- Table 15: Sales plan
- Table 16: Implementation schedule
- Table 17: Fixed investment cost summary
- Table 18: Total investment costs
- Table 19: Direct operating cost
- Table 20: Indirect operating costs
- Table 21: Loan repayment scheme
- Table 22: Projected Balance sheet
- Table 23: Projected Income statement
- Table 24: Projected Cash flow

List of Annexes

- Financial annexes
- Soil test analysis
- Water test analysis
- Sales agreement
- Land lease agreement

1. EXECUTIVE SUMMARY
Adam Horticulture Plc is a joint venture established by one U.K based company
(Tenadam Produce Ltd) and three Ethiopian nationals. It is engaged in producing
export oriented vegetables (particularly green fresh peas, beans and pepper on 20 ha
of open field land in Guraghe Zone, Cheha woreda, Amora meda kebele.

The company acquired 20 ha of land from the SNNPR investment commission on

lease basis. The elevation of the land is 1,948 meters above sea level. The mean
annual rainfall of the project area is 880 mm with mean annual temperature of 20.03° c.
The farm has a borehole with a discharge capacity of 5.5 lit/sec. The soil PH ranges
from 5.0-5.7, which is suitable for vegetable production.

The project will use a drip system for irrigating the crops. The main vegetable crops
which are selected for export include peas (sugar snap peas and snow peas), beans
(fine and extra-fine beans), and pepper. The total area of land that will be covered for
each vegetable will be 6 ha for peas, 8 ha for beans and 6 ha for pepper annually
during the project life.

The main market destinations for Adam Horticulture Plc’s export will be the European
market, particularly U.K, Holland, and Belgium.

The Production of and international trade in fresh vegetables has grown by 37 per cent
in volume terms over the last decade. The volume of trade has grown more than for
any other agricultural commodity group. The annual volumes of vegetables entering
international trade is approximately 27.1 million tonnes – equal to just over 5 per cent
of production – while the value is approximately US$18.67 billion. International trade in
fresh vegetables during the last decade has increased from $11.5 billion to $18.7
billion, with the fastest growth being in the category of chillies and green peppers.
Developing countries dominate vegetable production and account for approximately a
third of global vegetable trade. However, this trade is very concentrated with
approximately two thirds of developing country exports accounted for by eight countries
only one of which is African, namely South Africa. There are no least developed
countries among leading vegetable exporters although within Africa, Egypt, Kenya and
Morocco are important exporters.
EU fresh vegetable consumption in 2010 was approximately 41.1 million tonnes.
Despite the trend towards healthier diets consumption has been relatively stable over
the past decade. Per capita vegetable consumption is often well below recommended
levels and there are wide variations between countries in consumption levels. The EU
is the world’s biggest importer and the second largest exporter of vegetables. Although
EU (and UK) consumption of vegetables has remained relatively stable over recent
years but there has been a growth of vegetables imports from developing countries
making them an increasingly important source of supply.

The majority of fresh vegetable imports in Western Europe are made via specialist fruit
and vegetable importers direct to major retail multiples. This means, in effect, that the
traditional wholesale market system of produce distribution has been bypassed as
supermarkets look to shorten supply chains and increase direct contact with growers
and exporters—although importers are used to actually handle the physical act of
importing and distribution. This is particularly the case in the U.K., where supermarkets
capture around 85 percent of the overall food retail market. In Continental Europe the
picture is more fragmented, as there is a larger role for traditional markets in the supply
of fresh vegetables at both wholesale and retail. This is due in part to consumer
preferences but also to the higher degree of liberalization, commercialization, and
investment in the grocery retail industry in the U.K.

There are some market requirements and standards in force in the E.U vegetable
market. The main issues are related with tariff and non tariff barriers (GlobalGap,
HACCP), and traceability. Recent concerns over consumer safety have underscored
the importance of tracking produce imported into the EU. Retailers must be able to
trace goods back to their producer in case of product recalls or liability cases.

The European Union is the major market for fine and bobby beans produced in Africa.
Europe’s imports of fresh beans from non-EU sources have grown significantly over
the past eight years, largely a result of increased production of high value fine, extra-
fine, and bobby beans in such countries as Kenya, Zimbabwe, Ethiopia, and Morocco.
 France and Holland are the largest European importers of fresh beans, although UK
imports are not far behind and are expanding at a much faster pace. The market
average price for beans is Euro 3.0 per Kg. The market price for loose produce varies
from Euro 2-3.5 per Kg.

In order to benefit from the vegetable export market prospects, Adam Horticulture Plc
will put in place a management system that will ensure the supply of high quality
standards for its export vegetables to gain from the existing good demand for Ethiopian
produce. The company will adopt proper production, packaging and labeling practices
to ensure its products are marketable.

The total cost of the project is estimated at ETB 5,400,000 and out of this the total fixed
investment cost is ETB 3,666,000. The project will be financed from the bank in two
ways. As an expansion of a new project the company will get ETB 3,150,000 and an
additional loan of ETB 900,000 will be financed on the basis of the existing assets
value of the farm.

The project will be profitable starting from first year. The projected income statement
indicates that the Net profit after tax will be ETB 4.5 million in the first year and ETB 9.3
million in ten years. The net present value (NPV) of the project is found to be ETB
6.5 million at 10 % discount rate and with an Internal Rate of Return (IRR) 28 %

The project is financially and commercially viable according to the financial analysis
computations carried out. It will also have technical and social benefits to the
surrounding area of the project site.

2. BACKGROUND INFORMATION
2.1 Applicant

1. Name of the Applicant: Adam Horticulture PLC

2. Address
2.1 Project: Southern Nations and Nationalities Peoples Regional State,
Wolkite Zone, Ezea Woreda, Amora Meda Kebele.
2.2 Addis Abeba Office : A.A, Nifassilk Lafto Subcity, Kebele 03,
H.No.1020, Tel. +251-11-3710604
2.3 Contact Person: Charles Sherlock
3. Type of Project: Irrigated Vegetable Export Production
4. Legal Form of Business: Private Limited Company
5. Status of the Project: Existing
6. Registering Agency: Ministry of Trade and Industry
6.1 Registration No. –EIA PC01/2130/07
6.2 Registration Date : June 7, 2011
7. Licensing Agency : Ethiopian Investment Commission
8. Investment Certificate No.: EIA-IP/20127/2010
9. Tax Payer Identification Number (TIN): 0004328503
10. Value Added Tax (VAT) Registration No. 853200002
11. Size of present Land Holding : 20 Hectares
12. Right of Occupancy: On lease basis
13. Lease Period: 25 years
14. Capital: ETB 2,000,000

2.2 Brief Summary of the Company

 ADAM HORTICULTURE PLC was legally established under the Ethiopian law on
date 06/12/2007 . The capital of the company is ETB 2,000,000 and it
has been fully paid up in cash. The whole capital is divided into four shares. The
amount and value of shares owned by members are as follows.

Table 1: Capital Structure of Adam Horticulture Plc

It is proposed that in July 2011 further ETB 2,000,000 of equity should be brought in by
the major shareholders and a loan of ETB 4,050,000 will be sought from the
Development Bank of Ethiopia.
3. PROJECT TECHNICAL STUDY

3.1 General

Adam Horticulture Plc is a foreign and local joint venture company established by one
U.K based company (Tenadam Produce Ltd) and three Ethiopian nationals. It
envisages producing export oriented vegetables (particularly fresh green peas
(sugarsnaps peas and snow peas) and extra-fine beans alternating with pepper and
rotational crops) on 20 ha of open field land to the European markets.
The demand for these types of vegetables has grown in European markets during the
last five years. Only a few commercial farms have started producing and exporting the
vegetables in small quantities, but now the area of cultivation is increasing from time to
time.
Since 209, Adam Horticulture Plc has been supplying sugarsnaps peas and snow peas
as an outgrower to Margin par farm and has been growing fine beans, tomato, pepper,
and other vegetables for local market.

3.1.1 Objectives of the Project

The main objectives of the company are:

 To make profit for shareholders
 To contribute in supplying high quality product to the ever increasing
demand for vegetables (peas and extra-fine beans) in the European
market
 To create job opportunities for the local as well as the country’s skilled
and unskilled labor force
 To contribute to the country’s foreign currency demand and income by
paying appropriate taxes.

3.1.2 Project Area

3.1.2.1 Geographic Location

Adam Horticulture Plc is located in Southern Nations Nationalities and

Peoples Regional State, Guraghe Zone, Cheha woreda, and Amora
Meda kebele, near Wolkite town, which is about 160 km from Addis
Ababa. The farm is located geographically at 0374354 N latitude and
0903021 E longitudes.

3.1.2.2 Land Ownership

The farm has been granted 20 ha on land lease basis from the
SNNPR state investment commission in 2009 for establishment of
vegetable farm. Following acquirement of the land, the company
started construction of some essential infrastructure and land
development works .It has established stores and offices. It has also
dug one water borehole .Further it has cleared and plowed the virgin
land and made trials and production of peas and beans for export and
onions and tomato for the local market.

3.1.2.3 Topography

The average elevation of the farm land is about 1,948 meters above
sea level. With a slope of 2-4%, the land has good drainage and is
suited for irrigated farming and production of various types of warm
season as well as cool season vegetables.

3.1.2.4 Climate

The area has a good climate throughout the year and gets a mean
annual rainfall of 880 mm. The mean annual temperature is 20.03oC
with monthly maximum and minimum temperatures of 30.4oC and
8.03oC, respectively. The annual wind speed is 2.5m/s, while
 sunshine hours vary from a daily mean of 9.54 hrs in November to
5.17 hrs in July. The monthly variation in relative humidity ranges
from 39.7% in February to 71.4% in September. In general, the
climatic factors are quite suitable for the production of the intended
crops using irrigation system.

3.1.2.5 Water Resource and Quality

There is a borehole and small reservoir in the farm from which water
will be supplied to the field. The borehole has a safe field discharge
of 5.5 liters/sec, which is enough to satisfy the irrigation and other
demands of the farm. Nevertheless, the small reservoir will be
developed to increase the water holding capacity and to ensure the
water supply all year round.
The water quality of the borehole was analyzed using appropriate
samples by Water Works Design and Supervision Enterprise
Laboratory Service and the results are presented in Annex XX.

3.1.2.6 Electricity
The farm is connected to the national electric power grid with power
transmission lines.

3.1.2.7 Soil
Composite samples from the area were taken and analyzed at the
National Soil Testing Center for major soil fertility indicators.
According to the soil analysis the texture of the soil is clay which is
favorable to grow most vegetables. The pH ranges from 5.0 to 5.7 in
the optimum range of most crops.
 3.1.2.8 Transport and Communication
The road to the farm from Addis Ababa Airport is all tarmac, except for
the last 16 km from Wolkite town to the farm which is good all weather
road. The area is covered by mobile phone telecommunication
network that is established and reliable. The farm will utilize the
mobile phone E-mail connectivity for its business and e-mail
communication.

3.1.2.9 Service Provider Organizations and Institutions

The main service giving organizations in Ethiopian horticulture sector

are listed below;
- Ethiopian Horticulture Development Agency
- Ethiopian Horticulture Producers and Exporters Association
- Ministry of Agriculture and Rural Development
- Federal and Regional Investment Offices
- Ministry of Trade and Industry

The farm will have a good linkage with all organizations to

successfully achieve its project.

3.2 Project Particulars

3.2.1 Technical Study

3.2.1.1 Irrigation System

The horticulture industry in general commercial farms engaged in

vegetable export in particular, grow vegetables using drip irrigation
systems. The drip irrigation system is composed of pumps, main lines,
drip lines, fertigation unit, feeding pipes, filters and humidity control
unit. Following are some of the benefits and advantages of the
system.
 Water application efficiency level of 90%, which is impossible
to attain by other methods, can be achieved. Water slowly
drips around the root zones and losses from run-off, deep
percolation and evaporation are minimal
 The method reduces salt concentration in the root zones.
 It permits the application of fertilizer through the drip system
(fertigation). Moisture and nutrient requirements of the plants
are also closely monitored by a fully automated and centralized
computer system.

Thus, the benefits obtained from using drip irrigation system out-
weigh the high initial investment cost normally incurred. Furthermore,
the stiff competition from producers in the technologically advanced
countries of the world and their standardization of quality of produce
obligates that it is produced under modern and result tested farm
conditions

3.2.1.2 Crop Selection

 The farm has chosen vegetables that will grow well in the area
throughout the year with irrigation and can be marketable throughout
the year in Europe and generate foreign currency for the country.
Major vegetables to be grown are Sweet peas, fine to extra fine beans
and pepper. During the production of these crops crop rotation will be
used to maintain the soil fertility

Pea and beans are now being exported to Africa, Europe and the
Middle East and the demand is very high throughout the year. Price
increases from time to time and has reached CIF 3.5 Euro per
kilogram now. Thus peas are a reliable vegetable in terms of
marketability. They can be exported in bulk or in punnets to add value
to the vegetable and can be exported mixed with baby corn and
pepper as an assorted item. Pepper is consumed in the above
mentioned countries as a spice or food ingredient and can be
consumed with any kind of food thus being a vegetable not to miss at
every meal. It can be exported fresh green or fresh red which will
increase its value.

3.2.1.3 Production System

3.2.1.3.1 Peas (Snow Peas and Snap Peas)

Mange tout (“eat all” in French) is a generic name given to peas

that are eaten in pods that have not yet reached maturity.
Typically, ‘mange tout’ is used to describe a flat pea that is also
known as a ‘snow pea’ or ‘flat pea’. The sugar snap peas are also
known as ‘snap peas’ or just ‘snaps’ and they are much sweeter
than the snow pea. Both the snow pea and the snap pea are
varieties of the Pisum Sativum species.
Market preferences dictate that both the snow pea and the snap
pea are ‘string less’; however the degree of ‘string’ increases with
maturity, therefore harvesting young pods is essential.

Agronomy (Cultural practices)

Plowing and bed preparation should be done a month before

planting, to allow for weed germination and weed control. A week
before planting, all weeds should be removed.

Ridges or beds should be 1.5m apart center to center (1m bed and
50cm path). Each bed will have 2 rows of plants, 20-30 cm apart.

The planting distance within a row is 6-10 cm depending on

variety. Cover the seeds with a uniform layer of soil and water it
well. Ensure that the seeds are at a depth of 2½ cm. Do not plant
too shallow as this causes many problems with the plant crown,
reducing yields and making plants more susceptible to disease.
The average population in a hectare is between 133,000 to
222,000 depending on the variety

Irrigation
A good irrigation program is essential for a productive crop. In
addition to water’s role in photosynthesis, plants rely on water to
absorb nutrients dissolved in soil water. Over irrigation is just as
detrimental as under irrigation. Too little, results in plants wilting as
water cannot be extracted from the soil and too much, the roots
become waterlogged and die due to a lack of oxygen in the soil as
well as increased pressure from soil pathogens. Healthy roots with
a good balance of air and water in the soil are essential for high
yields.
Trellising
The trellising of the crop is the single most important cultural
operation. The advantages of trellising are:
• Ventilation of the crop to lower relative humidity in the
canopy (reduces disease incidence)
• Assists in spray penetration
• Keeps peas off the ground
• Aids harvest by keeping peas visible
• Improved crop drying in wet weather
Poles for trellising should be placed along the beds prior to
planting and should ideally be 2 to 3 meters apart. The absolute
maximum distance poles can be placed is 5m and this is only
when growing the semi leafless, determinate varieties
Nutrition
It is essential to have soil tests done every six months and to
fertilize the fields accordingly. The main limiting nutrient in peas is
usually phosphorus, but other macronutrients such as nitrogen and
potassium are also required to reach yield potentials. A productive
crop will require between 80-100 kilograms of nitrogen per
hectare. Phosphate requirements vary between 40-120 kilograms
per hectare depending on status of soil. It is advisable to apply 40
to 50 kg/ha of phosphorus as a pre-plant broadcast or if equipment
is available, this can be banded along the row for efficient uptake.
Potassium levels are similar; 40 kilograms per hectare on
potassium rich soils and up to 120 kilograms per hectare on
deficient soils. Micro nutrient requirements will depend on the
results of the soil analysis
Diseases and Pests
Major threats from disease include powdery mildew and from
pests include cutworms and thrips. These can be controlled using
biological and chemical means
Diseases can be controlled using preventative and curative
fungicides. Usually the preventative fungicides are cheaper than
the curative ones. However, effective control is not always
possible with curative applications as they have very little effect
once the fungi start producing spores. The pest can be controlled
by spraying chemicals which have less toxicity to the ecology.
Harvesting
Harvesting of snow and snap peas is the most critical and costly
part of growing the crop. The consumers require the pods to be of
maximum size but with virtually no seed development. The pods
must be completely flat in case of snow peas - at this stage they
contain no cross fibers and the whole pod can be eaten.The crop
will be ready for harvest from 60-90 days after planting, depending
on the variety and the climatic condition. Before harvest the
following activities are checked to make sure that:
• Baskets are ready for harvesters
• Crates are clean and available for transportation to cold
store
• Accurate scales are set up to record reaping weight
• In-field shelter is available
• Transport to take product to cold storage

Packaging
After the produce comes to the pack house it should be placed in a
cold room (2-4oC) for 2 to 4 hours to take out the field heat. After
field heat has been removed, the pods are taken to the packing
hall to be ‘topped and tailed’ with scissors. Care should be taken to
avoid excessive cutting of the ends of the pods – this can lead to
rapid dehydration and disease development. Excessive handling
should also be avoided.
3.2.1.3.2 Fine and Extra- fine Beans

French beans (Phaseolis vulgaris) may be known by many other

names such as green, fine or dwarf beans. They are determinate
plants with a short, erect growth habit that flourish under semi
tropical conditions. Although grown by commercial farmers for both
the fresh and processing industries, they are also an excellent
crop for the small holder farmers to produce for the local and
export market.

Agronomy (Cultural Practices)

The soil should be prepared 30 days before planting takes place.
This helps avoid any delays and allows for timely completion of all
the other pre-plant tasks. The field should have a good tithe prior
to planting and the soil be well aerated. Water logged areas are to
be avoided. Planting may be done mechanically or by hand.
Where hand planting is done, straight lines should be marked out
to a depth of 5cm if fertilizer is to be applied and then this will be
covered with soil to avoid direct contact with the seed. Actual
planting depth of the seeds should only be 2-3cm. A marked stick
should be used to ensure uniformity in spacing. Beans will
germinate approximately 7 -10 days after planting depending on
prevailing temperatures
Fertilization
Although beans are legumes that can fix atmospheric nitrogen
when the seed is properly inoculated, most commercial growers do
not inoculate and choose to rely on chemical fertilizers. All the
phosphates should ideally be applied prior to planting together with
the majority of the potassium (80%) which does not readily leach
from the soil. The remainder of the potassium and nitrogen can be
applied as spilt top dressings during the vegetative growth
beginning from 10days after germination.
Irrigation
A consistent, regular water supply is essential for French beans as
they are shallow rooted and any variation in soil moisture will affect
yield, uniformity and quality. Water stress particularly during
flowering reduces yields, as does water logging. Irrigation is
recommended at 35 mm per week and increased according to
plant height and weather conditions over the growing season

Diseases and Pests

The main diseases include rust which can be controlled by using
resistant varieties and spraying of chemicals. Diseases can be
controlled using preventative and curative fungicides. Usually the
preventative fungicides are cheaper than the curative ones.

Harvesting
Approximately 50-60 days after planting, the beans will be ready
for harvesting. Harvest frequency has to be adjusted to the type of
bean exported with extra fine beans being picked daily (sometimes
twice a day), fine beans every two days and bobby beans every
three to four days. Failure to remove the beans at the right time
will result in the plant aborting the next flush of flowers and cause
an overall reduction in yield. These harvesting intervals may need
to be adjusted depending on prevailing temperatures which will
affect the time of flowering to bean maturity
Packaging
After the produce comes to the pack house it should be placed in a
cold room and held at 4-5oC for up to 4 hours to remove the field
heat. After this has been done, the beans are taken to the packing
 hall and may be graded where those that are bent, insect
damaged and over mature are removed. They are then packed
loose into boxes or into perforated bags or ‘topped and tailed’
depending on supermarket orders. Excessive handling should be
avoided. Different varieties are not to be mixed in the same
packaging.

3.2.1.3.3 Pepper

The Hot peppers (Capsicum) or chilies’ as they are commonly

known, are small shrubs of the Solanaceous family, the same
family as tomatoes and potatoes. There are five species of
Capsicum grown but most falls into the category of Capsicum
annum. Although, peppers can be perennial in the tropics, most
are grown as annuals in Ethiopia. There is a tremendous variation
in fruit size, color, pungency and shape as well as plant growth
habit.

Agronomy (Cultural Practices)

Hot peppers are warm season crops, sensitive to freezing

temperatures at any growth stage. The rate of seed germination
decreases rapidly when soil temperatures fall below 25oC, with
germination below 20oC being exceedingly slow. Optimum day
time growing temperatures are 23 – 30oC and night temperatures
being 10 – 15oC. Although, tolerant of temperatures up to 38oC
such extreme conditions can reduce effective pollination, fruit set
and yield. Flowering and fruiting in hot peppers is not affected by
day length.

Nursery

Seedlings can either be produced in polystyrene trays in a

commercial seedling nursery or in raised beds in field nurseries.
Although seedling production in trays tends to be more costly, the
benefits far outweigh the extra production cost particularly in the
case of the more expensive hybrid varieties.

Transplanting

The soil should be prepared 30 days before the planting takes

place as this helps to avoid any delays and allows for timely
completion of all the other pre-plant tasks. Soil preparation should
be done to a depth of at least 30-40cm and the field has to be
plowed at least once before being harrowed. Bare root seedlings
from field nurseries are lifted from the seed bed by loosening the
soil with a spade and carefully separating the roots from the
surrounding soil. Seedling selection takes place at this point by
discarding damaged or inferior plants and binding the good ones
into convenient bundles for transport to the field

Fertilization

Pre plant phosphorus (P) application of 90 – 200kg/ha P2O5 is

common. The higher rates are normally used for soils that are
more deficient and for earlier plantings. The longer the plants will
be in the ground, the higher the rate of P2O5. For soils that
require potassium (K), 55-160 kg/ha K2O will be applied
depending on soil analysis results. Regardless of the irrigation
technique, most of the P is applied pre plant and is usually
banded. This is a cheaper method than applying the P in a soluble
form through the drip. Where drip irrigation is used, nitrogen (N)
and K are usually applied in numerous fertigations throughout the
season. Nitrogen fertilization rates tend to be high with many
growers using more than 250kg/ha per season

Irrigation
The frequency of irrigation depends on soil type, environmental
conditions and crop growth stage. Although hot peppers are
moderately deep rooted, they are quite sensitive to moisture
stress. Stress during blooming can cause flower abortion and
substantial reduction in fruit set, while stress during early fruit
growth can induce blossom end rot. Soil moisture stress can also
minimize foliage cover, increasing sun burning of fruit. Drip
irrigation is the preferred form of irrigation with either one or two
drip lines per bed.

Diseases and Pests

The main pests and diseases found in hot peppers in Ethiopia are:

• Whitefly
• Aphids
• Leaf miner
• Powdery mildew
• Viruses
Diseases are controlled in a different way from insects, since their
initial infection is more difficult to detect. Sampling for diseases is
similar to that for pests, except that preventive applications of
contact fungicides such as copper or sulphur are made before we
observe the disease symptoms. Once detected, application of
systemic fungicides is begun and over and above the contact
fungicides which are continued. Application of contact fungicides
ranges from 7-10 days interval, while for systemic products the
interval is from 10-14 days. In any one season never use systemic
products of the same group for more than two times.

Harvesting
 Hot peppers may be harvested green or red depending on
supermarket orders. This normally occurs between 10 to 14 weeks
after transplanting depending on the color harvested and the
prevailing temperatures. All chilies are harvested by hand
although it is easier to pick the bigger ones than the smaller Thai
chili types. One person is capable of harvesting over 100kg per
day of Serenade chilies’ but only 10-12 kg/day of the smaller
Demon, a Thai chili. Pickers should be encouraged to harvest the
fruit with stalks attached as this is super market requirement and
reduces bacterial soft rot

Packaging

Exported fruit should be of good quality, both internally and

externally, free from dirt and foreign material such as pests and
odor’s. This can be achieved with consistent grading which
maintains a better quality. Damage caused mechanically or by
pests should be minimal and not exceed 5 percent of the surface
area. The market does not tolerate peppers showing cracks, splits
and punctures.
Packaging is dependent on supermarket requirements and chilies
may be sent loose in boxes or placed in punnets or sachets.
Colors may also be sent separately or mixed in a sachet

3.2.1.4 Production Cycle/Pattern

The project plans to develop a net area of 18 hectares and the

projected cropping mix would consist of peas, pepper and beans.
 Table2: Total land utilization of Crops

Vegetable Production/Year Total Area (Ha)

Peas 1 6
Beans 1 8
Pepper 1 6
TOTAL 20

Table3: Project life cropping pattern

Y-1 Y–2 Y- 3 Y-4 Y-5 Y- 6 Y-7 Y-8 Y-9 Y- 10

CROP

Peas 6 6 6 6 6 6 6 6 6 6

Beans 8 8 8 8 8 8 8 8 8 8

Pepper 6 6 6 6 6 6 6 6 6 6

TOTAL(Ha) 20 20 20 20 20 20 20 20 20 20

3.2.1.5 Production and Handling

The preparation for production of the above vegetables begins with

field layouts, initial land development and installation of the irrigation
structure. The field layout will be done taking into consideration the
topography of the area and size of each plot for convenience of field
activities. The proper layout and installation of the irrigation systems
would be critical in ensuring efficient and reliable use of automated
drip irrigation and fertigation applications
 Process flow out of vegetable production

Figure 1: Production flow of Vegetables

Nursery Plowing Harrowing

planting

Bed making
Daily Drip Irrigation Initial fertilization

Harvesting
Fertigation& IrrigationPlant protection
Transplanting

The production flow slightly varies for different kind of vegetables

- Drip irrigation installation

- Planting seeds on planting trays
- Plowing harrowing and bed making of land
- Initial fertilization of land
- Transplanting
- Daily irrigation &fertigation
- Weekly plant protection
- Harvesting

For peas and beans direct planting is practiced. The seeds to be used
in the farm will be F1 hybrid seeds designed for the export quality,
disease resistance, and high yield with extended shelf life. Seed
 varieties will be selected by companies which will buy the product of
the farm, to ensure best quality to end users or consumers

The companies that will supply the seeds will be Enza Zaden, Bejo
Zaden, Seminis, Kenya Highland Seeds and Pop Vriend which are all
known for their good reputation in vegetable seed production.

Seed planting, transplanting and fertilizer application should be in

accordance with the recommended practices including seed rate and
spacing.

Table 4: Seed rate /ha

Crop Seed rate/Hectare kg

Peas 60
Beans 30
Pepper 0.2

Seed rate of vegetables mainly depends on the purity and germination

percentage of the seed. Pepper needs to be planted in nursery before
transplanting so requires a proper nursery to ensure healthy seedlings
for transplant. To attain good and quality yields the right amount and
frequency of pesticide application should be applied. The required
irrigation frequency is one of the most important factors to achieve
desired yield and quality of product. Uses of supporting materials are
essential in the production process for Snow peas.

The final activity is to harvest the product. Different crops have

different maturity period.

Table 5: Maturity period of vegetables

Crop Weeks
Peas 8-9
Beans 8-9
Pepper 12
Table 6: Gross yield

Crop Yield/Hectare (kg)

Peas 10000
Beans 10000
Pepper 48000

Table 7: Exportable Yield

Crop Yield / hectare Exportable% Amount kg

Snow peas 10000 80 8000
Pepper 48000 70 33600
Fine beans 10000 80 8000

3.2.1.6 Disease and Pests

Diseases of bacterial and fungal origins were reported to be prevalent
at the farmer level on crops commonly produced around the project
area. Such problems are expected. However, the technology to be
practiced ensures containment and control of the problems. Sufficient
precautions including daily scouting and timely chemical spraying
measures will be carried out. Pests like Aphids, thrips, caterpillars
and spider mites as well as diseases like powdery mildew, downy
mildew, botrytis, grown gall and die back are expected

3.2.1.7 In-farm Roads and Path ways

All production, processing and other operations could be done cost
effectively so long as farms like this one that produce high value
 export vegetables constructs the required standard of infrastructures
of in-farm roads and path ways.

3.2.1.8 Drainage System

Water that could accumulate around the planting beds will be drained
through drainage canals built for the purpose.

3.2.1.9 Ecological, Human and Social Aspects

It is now widely believed and scientifically substantiated that heavy

usage of fertilizers, herbicides, pesticides and various other chemicals
are unfriendly and even worse, very hazardous to the natural habitat.
As a result, ecological questions are prime issues worldwide.

To minimize human and environmental risk the farm is expected to

introduce provision of protective clothing and shower service to its
workers who have direct contact with chemicals. With regard to
drainage, irrigation water will be limited to the farm plots, which will
have ditches around them.
4. MARKET STUDY

4.1 Overview of Global Vegetable Trade

The Production and international trade in fresh vegetables has grown by 37 per
cent in volume terms over the last decade. The volume of trade has grown more
than for any other agricultural commodity group. The annual volumes of vegetables
entering international trade is approximately 27.1 million tonnes – equal to just over
5 per cent of production – while the value is approximately US$18.67 billion.
International trade in fresh vegetables during the last decade has increased from
$11.5 billion to $18.7 billion, with the fastest growth being in the category of chillies
and green peppers. Developing countries dominate vegetable production and
account for approximately a third of global vegetable trade. However, this trade is
very concentrated with approximately two thirds of developing country exports
accounted for by eight countries only one of which is African, namely South Africa.
There are no least developed countries among leading vegetable exporters
although within Africa, Egypt, Kenya and Morocco are important exporters.
Factors cited for the growth in developing countries vegetable supplies include:
 Low labor and input costs;
 Improved storage techniques;
 Improved input use e.g. irrigation, seeds, fertilizer and pesticides;
 Better production techniques;
 Improved logistics and transport including refrigerated bulk sea freight services
and,
 Increased demand from developed countries.
A range of growers and production systems are involved in vegetable exports. This
can range from smallholders to very large-scale farmers employing modern crop
management systems. Larger producers are often involved in most aspects of pre-
 and post-harvest operations while smallholders adopt a range of practices
including selling their produce to local operators or traders; exporting their produce
jointly with other smallholders or undertaking outgrowing or contract farming for
larger operations.
The countries that are successful in exporting vegetables have more developed
infrastructures and mostly rely on large-scale commercial farming and an
integrated supply chain. In contrast smallholders have been less able to meet
quality standards, price, volume and delivery schedules of the developed country
buyers.
Real prices for horticultural commodities have declined over the past decade but
much less than other commodities.
.
4.2 EU Fresh Vegetables Market

EU fresh vegetable consumption in 2010 was approximately 41.1 million tonnes.

Despite the trend towards healthier diets consumption has been relatively stable
over the past decade. Per capita vegetable consumption is often well below
recommended levels and there are wide variations between countries in
consumption levels. Thus, vegetable consumption is relatively high in Italy and
Germany and low in Scandinavian countries. In the UK, vegetable consumption is
typically low but there have been divergent trends in the types of vegetables
consumed. Tropical and off-season vegetables have shown an upward trend
alongside a growing demand for convenience vegetable products (e.g. prepared
and pre- packed vegetables, and salads).
The EU is the world’s biggest importer and the second largest exporter of
vegetables. Overall EU (and UK) consumption of vegetables has remained
relatively stable over recent years but there has been a growth of vegetables
imports from developing countries making them an increasingly important source of
supply. Tomatoes are the leading imported fresh vegetable accounting for 22 per
cent of total EU vegetable imports. Developing countries account for 10 per cent of
all EU imports with Morocco as the supplier followed in order by Kenya, Turkey,
Egypt and Peru.
4.2.1 Market Trends

4.2.1.1 Production

The Most EU countries have a well-developed domestic vegetable

production industry. In the North of Europe, such as in the U.K., the
Netherlands, Germany, and the Scandinavian countries, where there
is a less favorable growing climate, production is lower, but is often
boosted by the use of greenhouses. These North European countries
have also become more dependent on imports from Southern
European producers, such as those based in Spain, Portugal, Greece,
and Italy in particular, especially for the more exotic products that
have become popular among European consumers over the past 20
years.
However, most of the EU vegetable production base relies on
relatively high-cost structures, compared to other parts of the world. In
the future, it is likely that more vegetables will be sourced from either
Eastern Europe and/or from other so-called third countries of supply,
such as Central America, North Africa, and East and West Africa—all
of which have much lower production cost structures. Many
companies work with selected partner organizations in warmer
countries, which ensures consistency of supply and good quality
produce at good prices. In the past two years, uncharacteristic
weather conditions have threatened domestic harvests of both
vegetables in various areas of Europe, such as Spain and Portugal,
which could encourage more extra-European imports in the future.

4.2.1.2 Imports

Imports of fresh vegetables have increased over recent years

throughout the main European markets. The main suppliers are Spain
 and the Netherlands, both of which have strong vegetable-producing
and -marketing sectors and who between them furnish around 60
percent of the total European supplies of fresh vegetables by volume.
The main exports from these countries are normally temperate
produce such as tomatoes, capsicum, lettuce, and onions. Unlike
extra-regional EU fruit imports, which are largely controlled by Latin
American countries such as Brazil, Argentina, and Chile, Africa
supplies a relatively high percentage of fresh vegetables that are
imported from outside the EU. Major importers from Africa are France,
the U.K., and the Netherlands. Kenya is a particularly important
African player in the supply of a wide range of vegetables to the EU—
in particular, peas and green beans.
There is a strong tendency to source fresh vegetables from
domestically based EU suppliers when produce is in season and then
import them from outside the EU at other times of the year to ensure
all year-round supply. The key months for off-season supply of fresh
vegetables to Europe are usually between November to March,
depending on the importing country, its climate, and growing and
consumption traditions. However, many countries will rely on imports
for some produce on an all year-round supply basis, especially for
more exotic, tropical products that do not grow well in Europe, such as
baby corn. It can be expected that the overall demand for fresh
vegetables will continue growing as these produce items become
more mainstream in the European vegetable market and demand for
off-season vegetables increases.

4.2.1.3 Exports
Exports of fresh vegetables from EU countries are similar in value to
imports, both accounting for around US$10.9 billion; both figures have
increased in recent years. This reflects the fact that the majority of
fresh vegetables grown within the EU are also traded within the EU.
 Only around 14 percent of such produce is exported to outside the
EU.

4.2.1.4 Consumption

European consumers eat a hugely diverse range of fresh vegetables

from all over the world, delivered on the basis of the supply calendars
of international growers and the seasonal supply of the European
homegrown production. On the whole, throughout Europe,
populations are getting older, there are smaller households as families
have fewer children, and there is an increase in single-person
households. Prosperity has risen across Europe over the years, which
has, in turn, changed eating habits and increased the sophistication of
the highly competitive food and drink market. Apart from the traditional
requirements, such as price and quality, that still govern most buying
decisions, European consumers are now increasingly looking for food
that is:
Convenient
With increasingly busy lives, less time devoted to preparing long
meals, and more single-person households, many European
consumers now want or even demand quick, easy-to-prepare food.
This has led to more ready-to-eat vegetables, pre-prepared and
prepackaged, as well as to products like baby vegetables, which also
make preparing meals easier.
The fresh-cut prepacked vegetables represent a growing segment
(especially the more complex packs), and processing vegetables
fresh at the source has some key advantages. Apart from adding
more value, one advantage of producing high-care fresh vegetable
products is that it allows the producers to use a higher percentage of
their yield.
Health
European consumers have been placing increasing importance on a
healthy diet. There is rising concern among both governments and
consumer nongovernmental organizations (NGOs) about the overall
diet of many consumers especially in relation to the amount of
additives, fat, salt and sugar consumed in many processed foods.
Many groups see this as a serious threat to EU consumers’ health
over the next 5, 10, or even 20 years. There is special concern over
the diet of children and young consumers, many who have gotten out
of the habit of consuming fresh fruits and vegetables. A number of EU
countries have implemented generic marketing schemes to
encourage the population to eat more fresh fruit and vegetables.
Ethical and Organic
Demand is growing (albeit from a relatively low base, in most cases)
for sustainable food sources, environmentally and ethically sound
food supply chains, and local sourcing as consumers become more
aware of how food is produced and sourced. Retailers, foodservice
operators, and consumers all show increasing interest from in
stocking and consuming organic produce, due both to the perception
that it is healthier (although there is ongoing debate over how much
healthier organics really are) and to an underlying concern for the
impact of conventional agriculture on the environment. In the EU, the
vegetable sub-sector is right at the forefront of the organic food
sector, along with meat, dairy, and cereal based products.
Exotic/Fashionable/ Premium
The internationalization of the food supply chain, as well as greater
awareness of international cuisine and a desire to try new things
among many EU consumers, has led to an increase in demand for
exotic produce. This is not to mention the ever-growing populations of
non-European ancestry found across the EU that demand different
food than the indigenous population. Chinese consumers living in the
 U.K., for example, purchase large amounts of “Asian” vegetables
imported from Kenya.

4.2.2 Supply Chain

4.2.2.1 Overview

The majority of fresh vegetable imports in Western Europe are made

via specialist fruit and vegetable importers direct to major retail
multiples. This means, in effect, that the traditional wholesale market
system of produce distribution has been bypassed as supermarkets
look to shorten supply chains and increase direct contact with growers
and exporters—although importers are used to actually handle the
physical act of importing and distribution. This is particularly the case
in the U.K., where supermarkets capture around 85 percent of the
overall food retail market. In Continental Europe the picture is more
fragmented, as there is a larger role for traditional markets in the
supply of fresh vegetables at both wholesale and retail. This is due in
part to consumer preferences but also to the higher degree of
liberalization, commercialization, and investment in the grocery retail
industry in the U.K. There are still some 30 wholesale markets in the
U.K., for example. Most major cities have one; London has one large
and several small ones. But in many cases their role has been
confined to supplying independent retailers and catering
establishments. The physical condition of many of these wholesale
markets is often quite poor, and a number of them are in the process
of being revamped into modern facilities more appropriate for fresh
food distribution
4.2.2.2 Retail

The EU food market is dominated by major retail chains, which

exercise huge control over the rest of the supply chain. In the U.K.,
just five supermarkets account for about 85 percent of the overall food
market. The same basic picture applies in all the main EU markets. In
most cases, they are looking to shorten the supply chain and
rationalize the number of suppliers of any particular category of
products that they deal with. Although they might have some direct
contact with growers and exporters in countries of supply, the actual
task of importing and getting produce to their stores—via a network of
regional distribution centers—is delegated to nominated importers.
As a result of the huge influence and commercial power of the major
retailers in all major EU markets, there has been a massive tendency
towards concentration and consolidation throughout the fresh produce
supply chain, both at the level of buyer and supplier level. The
supermarkets, hypermarkets, and hard discounters that have grown to
dominate the European market for all fresh produce, including
vegetables, consistently demand high volumes of top-quality fresh
produce, and as a result place huge importance on supply chain
efficiency and best practice procurement methods. The huge growth
and concentration of large retail chains in Europe has increased the
tendency to want to trade directly with suppliers to simplify processes
and “cut out the middleman.” This is all ultimately aimed at greater
efficiency and the protection of margins, with the current downward
pressure on food retail prices. The consolidation has meant that
buyers want to create strategic partnerships with suppliers, ensuring
that large volumes of quality produce come from trusted suppliers
regularly. This in turn has led to consolidation among producers, since
they aim to provide increasing volumes to valuable, powerful
European customers. This is especially the case as many smaller
 growers are losing their contracts to supply export organizations,
since they are unable to keep up with high EU standards on
production methods. Major European growers and exporters are often
expanding operations and looking to start up production in countries
such as Kenya, Egypt, and Central America to ensure that they can
supply their target market with sufficient all year round volume.
Increasingly, the big prize for producers, regardless of where they are
based in the world, is a major contract with a large U.K. and/or
continental European retail chain. But to secure this, producers must
be big enough to supply large volumes regularly and reliable enough
not to endanger the efficiency of the supply chain.

4.2.2.3 Importers

European fruit and vegetable importers are responsible for the import
formalities, such as customs and excise clearance, and often are
responsible for redistributing fresh produce, either in their own country
or by re-exporting to other countries within the EU. This is particularly
common in a number of key centers around the EU. Key importers
often look to add value to products by undertaking tasks such as
ripening, portioning, repackaging, and re-palletizing produce before
they are redistributed. Much of this work is being pushed back up the
supply chain as exporters are becoming more involved in preparing
and packing vegetables ready for supermarket shelves.
In most cases, importers have long-standing relationships with key
suppliers and work with them directly or through agents to advise on
aspects of quality control, such as produce size, levels of maturity,
and packaging. Agents are often used as intermediaries to establish
contacts between exporters and importers, frequently working for
wholesalers by maintaining contact with a number of foreign suppliers
and taking commission on the final sales.
4.2.2.4 Wholesale and Food Service

The wholesale distribution sector in Europe, in effect, no longer

supplies to the major retail operators, due to the rationalization of the
supermarket supply chain and the current trend to develop close
technical and commercial relationships with suppliers. As a result,
wholesale markets in Europe now tend to focus their business on
smaller, niche, independent retail operations and the foodservice
sector, particularly small and medium-sized hotel, restaurant, café
establishments. Given the level of forward planning carried out by
most category managers in terms of supply and delivery, traditional
wholesalers are only used by U.K. supermarkets to top up their
orders. Opportunities in the foodservice and wholesale industry are far
smaller in the U.K. due to the high level of consolidation in the supply
chain. In Germany and France, there is greater fragmentation in the
fresh produce subsector, and wholesale markets are more important.
These smaller agents—importers and wholesalers—may be more
approachable, but this would be for significantly smaller volumes than
supplying the large supermarket chains. With more short-term market-
based trading in these markets, as opposed to long-term
relationships, volumes and prices vary widely, thus greatly reducing
the markets’ attractiveness.
The main end market for the premium fresh sector would be the
higher end of the foodservice industry (perhaps the top 25 percent of
hotels and restaurants in terms of menu prices). For new varieties of
baby vegetables, key contacts would be smaller, high-quality
foodservice suppliers specializing in vegetables, as well as selected
catering wholesalers/distributors. Volumes supplied to the foodservice
sector are likely to be far lower than to the retail sector, but buyers are
often more prepared to trial smaller volumes and more exotic products
due to the innovative nature of high quality restaurants and hotels and
 their chefs. As an example, the foodservice sector in the U.K.
accounts for around 35 percent of overall fruit and vegetable demand,
compared to the 65 percent of trade that passes through the retail
sector.

4.2.3 Market Requirements and Standards

4.2.3.1 Tariff Barriers

The EU has a complex import tariff regime that has traditionally aimed
to protect the domestic EU production of fruits and vegetables during
the European growing season. Tariffs are generally higher for
vegetables, as the majority can be grown within the EU. The highest
tariffs are generally applied to exports from developed countries such
as New Zealand, Australia, Canada, the United States, and Japan.
Most developing country suppliers have been able to negotiate at
least some degree of preferential access to the EU market. This
allows them to export to the EU at rates of either very low or even
zero duty (as opposed to regular 7 percent tariff) for a whole range of
agricultural and food products, including off-season fruits and
vegetables.
As a signatory to the EU–African, Caribbean, and Pacific (ACP) Free
Trade Agreement, Ethiopia enjoys duty-free access to the EU market,
as do all of the other key suppliers from East and Southern Africa,
such as Tanzania, Zimbabwe, Uganda, Zambia, Uganda, and Kenya.
In this respect, Ethiopia is at neither a disadvantage nor an advantage
versus its competitors in other developing countries.
Interestingly, Kenya will lose its status as a Least Developed Country
when the current Lomé Agreement comes to an end. This will force
Kenya to negotiate a separate economic partnership agreement with
the EU, likely less favorable than that for its neighbors and reducing
its competitiveness. This may prompt new investments to shift from
 Kenya to neighboring countries. Leading horticultural exporters in
Kenya have already been hinting at this possibility, especially for the
flower industry.

4.2.3.2 Non Tariff Barriers

The situation regarding formal tariff barriers is reasonably

straightforward and should not deter the development of Ethiopian
exports of vegetables to the EU market. Of more concern would be
the ability of growers and exporters to meet a plethora of other
requirements that can be grouped under the heading “nontariff
barriers.” To ensure the quality of fresh produce on the European
market, marketing standards provide specific legally binding
requirements for certain fresh produce on the EU market and to
exports. Where EU statutory standards do not exist, standards of the
United Nations Economic Commission for Europe (UNECE) or Codex
Alimentarius are initially consulted for internationally accepted product
standards. Of far greater importance are the specifications as set out
and laid down by the commercial buyers at retail level (GlobalGAP
and retailer specific standards). These standards normally take the
EU and/or the UNECE standards as the starting point, but add a
whole range of other quality specifications, both related to pre- and
post-harvest handling, as well as other process and social
requirements. These standards are normally developed jointly by the
technical team of the retail chain and their nominated importers and
distributors—and, in some cases; their own suppliers based in-
country.
The ability to meet the minimum standards stipulated by groups such
as GlobalGAP (formerly EurepGAP), the International Organization for
Standardization (ISO), and the British Retail Consortium (BRC), as
well as Hazard Analysis and Critical Control Point (HACCP)
standards, is now required by the leading supply organizations
worldwide, while individual retailers are imposing still higher standards
(e.g., Tesco’s Nature’s Choice, Marks & Spencer’s Field to Fork).
Though less developed in this respect, the foodservice industry is
beginning to move in the same direction. As a result of the intense
competition in the food and drink supply chain, especially at the retail
level, some of these non-legislative (voluntary) requirements have de
facto become mandatory for growers and exporters, if they are to
stand any chance of winning or keeping contracts with European
importers. Though most pronounced among the big retailers, this
trend increasingly applies at lower levels as well.
GlobalGAP membership admits organizations and companies into a
“club” of respected and proven operators in the supply chain. Many
countries outside Europe, such as Kenya, Mexico, and China, have
signed a memorandum of understanding (MOU) with the GlobalGAP
organization in order to give their growers and exporters more
credibility with leading produce importers and major EU retailers. The
MOUs have led to the emergence of consolidated national GAP
standards that are benchmarked on GlobalGAP and/or other GAP
standards. These standards take country-specific considerations into
account, such as the integration of smallholder producers. Examples
here are KenyaGAP and ChileGAP.
Ethiopia would benefit hugely from a close involvement and
participation with the GlobalGAP organization. The Ethiopian
Horticulture Development Agency is going to launch soon a National
Code of Practice for Fruit, Vegetables, and Herbs.
It is true that due to its expense and sophistication, some argue that
GlobalGAP excludes smaller growers from supplying major exporters
in African countries. However, the market for produce that is not
certified by GlobalGAP (or an equivalent) is now quite small in
Western Europe, as even wholesale markets require information on
 agricultural practice to satisfy their customers as to the quality and
safety of produce. How small the market for noncertified produce
might be is open to some debate; estimates of around 10–20 percent
of produce are often used. But whatever the actual figure is, it will only
get smaller over the next few years.

4.2.3.3 Logistics and Traceability

It is critical that imported produce reach the market in the EU via the
fastest, most economical transport method to allow the produce to
arrive in the destination country in the best possible condition. The
main points of entry into the EU market for air-freighted produce are at
London, Heathrow, Amsterdam Schiphol in the Netherlands, and
Frankfurt International in Germany. Paris, France, also features as a
“gateway to Europe,” but to a lesser extent. All these airports have
state-off the-art produce handling facilities and are well serviced by
the leading international airlines connecting East Africa and the EU
market. Logistics and direct air freight links are likely to be one of the
bigger challenges for building up the industry for Ethiopian vegetable
exports. Air freight is the key cost element in vegetables from East
Africa, making up around 50 percent of the EU CIF (cost, insurance,
freight) price.
Sea freight is technically an option for vegetables from East Africa. It
is significantly cheaper (maybe 50 percent). For some countries, the
quality of produce can be better preserved using sea freight than air
freight, because the cold chain can be more consistently maintained.
Air freight from East Africa usually implies several hours on the (hot)
tarmac before the produce is loaded on the plane. However, the
goods would take about 21–28 days to reach Europe—a long time
compared with the 7–9 day boat trip from Egypt. Hence, sea
 transportation of fresh vegetables from East Africa remains a little-
explored option.
Recent concerns over consumer safety have underscored the
importance of tracking produce imported into the EU. Retailers must
be able to trace goods back to their producer in case of product
recalls or liability cases. Traceability systems that can identify
products’ origin and their path along the supply chain help to reassure
consumers, importers, retailers, and governments alike. With
increasing pressure from the transparency requirement , growers and
exporters interested in the EU market need to make sure they are
taking issues of labeling and traceability seriously and that they are
communicating information clearly and regularly to key market
contacts.

4.2.4 High Value Vegetable Markets

Since full market data for chillies in the EU is not available, only a market
analysis for beans and peas are described below.

4.2.4.1 Green Beans

The European Union is the major market for fine and bobby beans
produced in Africa. Europe’s imports of fresh beans from non-EU
sources have grown significantly over the past eight years, largely a
result of increased production of high value fine, extra-fine, and bobby
beans in such countries as Kenya, Zimbabwe, Ethiopia, and Morocco.
France and Holland are the largest European importers of fresh
beans, although UK imports are not far behind and are expanding at a
much faster pace. German imports from non-EU sources are relatively
low, but significant imports from the Netherlands also make it an
attractive market. The French bean market is still growing. EU imports
increased by 15 % from more than 166,000 tons to more than
191,000 tons between 2007 and 2009. Moroccan bean exports to
Europe increased by 22 % and Kenyan exports by 23 %, while
exports from Egypt increased by only 3 %. The largest increase in
2007-2009 was scored by Burkina Faso, whose exports increased by
more than 80% from 514 tons to a little more than 925 tons. Exports
to Europe from all the other major sources decreased, with the most
marked case being Mali, which ceased all exports in 2007. Ethiopian
exports decreased by more than 30%.

EU SUPPLY CALENDAR

European production periods vary according to the country, running

roughly from 15 June to 15 October. So -called counter- season or off
season supply from African countries runs from November to April.
Kenya was the leading supplies of the EU market till 2000. Morocco is
currently the EU market s leading supplier and together with Egypt,
has succeeded in extending the production period all year round by
using greenhouses.

Table 8: Beans Supply Calendar

 French Beans EU Supply Calendar
J F M A M J J A S O N
Morocco
Kenya
Egypt
Senegal
Ethiopia
Burkina Faso
Madagascar

MARKET PRICE

Price movements are examined on four markets, each of which plays

a fairly important role during the off season. It was seen that the
period displays an increasing tendency to become shorter. The
reason given most frequently is either the late start of exports to
certain markets or the early stopping of a season because of quality
concerns. The four markets chosen for their importance are those of
France, Belgium, the Netherlands and Italy.

FRANCE

This is the bean market par excellence, even if Bobby beans are also
sold. The prices of beans from sources other than Kenya were fairly
high in the order of EUR 3.00 per Kg. Kenya batches remained the
benchmark for the quality of Very fine filet beans.
 Table 9: France beans import price
French Beans - France Import Price (euro/Kg)
Minimum Maximum
Very fine type
Burkina Faso 1.75 3.1
Kenya 3.55 4.15
Morocco 1.35 2.5
Senegal 1.25 2.75
Bobby type
Morocco 1 2.15
Senegal 1.25 2.1
Source: FruitTrop

BELGIUM

Even if a small niche (supermarkets) does exist for filet beans, most
trade is in Bobby bean. Three sources share the market: Senegal,
Morocco, and Egypt. Generally the same price ranges for all sources.

Table 10: Belgium beans import Price

French Beans - Belgium Import Price (euro/Kg)
Minimum Maximum
Bobby type
Egypt 1.38 1.9
Morocco 1.38 1.9
Senegal 1.4 2.75
Source: FruitTrop

NETHERLANDS

This market is the European reference for Bobby beans. The

steadiness of prices and the distinction made by operators between
sea and air batches seem to have standardized sales price. The price
offered for Ethiopian beans is higher than the other sources because
of its quality.
 Table 11: Netherlands beans import price
French Beans - Netherlands Import Price (euro/Kg)
Minimum Maximum
Bobby type
Egypt 2.25 2.3
Ethiopia 2.5 2.5
Senegal 1.6 2.43

Source: FruitTrop

ITALY

This market is mainly interested in Bobby beans and is supplied by

three sources: Senegal, Egypt, and Ethiopia. Produce from Senegal
and Ethiopia are still much appreciated for their quality, outclassing
that shipped from Egypt. Even if the quality image remains, it may
have been damaged by the general impression of unevenness.

Table 12: Italy beans import price

French Beans - Italy Import Price (euro/Kg)
Minimum Maximum
Bobby type
Egypt 1.58 2.1
Ethiopia 2 2.45
Senegal 2 2.15
Source: FruitTrop

4.2.4.2 Peas

Sugar snap and Snow peas (mangetout) are widely eaten in Europe,
but snow peas are at a later stage of development. Snow peas began
as a specialty item, but are now increasingly becoming main-stream
due to their year-round availability, and are particularly popular with
restaurants. Sugar snap peas are slightly more developed in the
market than snow peas, and many people recognize them as different
 from mangetout. As snow peas and sugar snaps can both be eaten
whole, and are good whether raw or cooked, these versatile
vegetables suit the demand for convenience by modern European
consumers.

ORIGINS 2006 2007 2008 2009 2010

Morocco 50321 105674 116242 155764 225857
Kenya 7698 8467.8 9314.58 8383.12 9305.27
Zimbabwe 2194 219.4 223.788 326.73 751.48
Guatemala 4086 8989.2 20675 25430 36366
Ethiopia 0 14.1 18.2 28.9 37.5
TOTAL 66305 125372 148481 191942 274327

Table 13: EU imports of Snap and Snow peas from 2006 to 2010 in MT, Source EUROSTAT

The crop is a tempered crop and does not need high temperature.
The climate allows growing it in Europe, there is a spring production in
Spain and a summer production in South of France. Nevertheless the
European production is low, mainly due to the importance of the labor
costs. The volume of production is furthermore low and main of the
consumption is imported from Africa.
The market price for loose produce varies from Euro 2-3.5 per Kg

4.2.5 Structure of Key EU Markets

4.2.5.1 The United Kingdom

The U.K. is a key target market for exports of high-value vegetables.

The market for fresh, exotic vegetables is significant and growing.
Also, Ethiopia’s main rivals—Zambia, Zimbabwe, Tanzania, and
Kenya—have all had their biggest success with high-value
vegetables in the U.K. market.
 The U.K. market has other attractions as well:
• The market is concentrated at the retail point of sale, and once
established, most suppliers are able to build meaningful business
with the leading retailers.
• The foodservice market is still growing and consolidating.
• U.K. quality standards are high—but meeting them can be used to
leverage into other markets.
• Demand for exotic fruits and vegetables as well as organic, fair
trade, value-added, and baby vegetables are predicted to keep on
growing.
• The physical distribution network is well developed—a number of
airports are equipped to handle fresh produce imports, especially at
London’s Heathrow and Gatwick facilities.
• The U.K. has a reputation of importing from all around the world.
Over a period of time a number of countries have started from a
small base but have gone on to build a significant business on the
back of the U.K. market. The classic case, of course, is Kenya, but
others include Chile, Turkey, Peru, and to a certain extent Zambia.
• The U.K. has less interest in protecting its local vegetable sector
from external competition than tends to be the case in France and
Germany.

4.2.5.2 The Netherlands

As in the U.K., there are five big specialized wholesalers who

represent 100 percent of supermarket supplies. Supermarkets
represent 70 percent of these wholesalers’ sales. The other 30
percent is regionally exported to Belgium, Scandinavia, Germany, and
others countries in Europe. These five leading firms get around 70
percent from farms directly (domestic and imported) and 30 percent
from smaller Dutch wholesalers, who rely 100 percent on imported
produce. However, most of these wholesalers do not import directly,
but rather get their produce through small importers or import agents
who get the produce directly from farms or from exporters.
Ethiopian vegetable exports have found some success in the
Netherlands. However, this has probably as much to do with the
availability of air freight connections to the Netherlands from Ethiopia
and the role of the Netherlands as a key re-export center, as with a
specific targeting of the Dutch market per se.
The Netherlands is also following the U.K. trend to more pre-prepared
and -packaged vegetables to meet the market and consumer
requirements for added convenience, one of the major drivers of
growth in high-value and baby vegetable consumption. Nevertheless,
the fact that there is more loose bulk sale in the Netherlands makes it
a prime target (having a slightly lower threshold entry point) for
vegetable exports
There are four main reasons to target the Dutch market: 1) air-freight
connections already exist (via daily flights from Addis Ababa Airport to
Liege, Belgium) and offer a useful link with the flower industry (which
needs the heavier legumes to balance out the planes and is further
developed in Ethiopia than the vegetable subsector); 2) the Dutch
market is easier to penetrate than the U.K. market; 3) this market is
the main throughput market for Germany, Scandinavia, and several
other European markets; and 4) this market offers a basis for building
volume and establishing as a reliable supplier, which would provide
the foundation on which to build exports to more demanding (and
rewarding) markets such as the U.K. and other secondary markets.
4.3 Prospects

Adam Horticulture Plc is a new entrant into the export market. Being a new
entrant, the company will take time to build a brand name and attract good prices.
The company’s selection of vegetable types and the use of optimal production and
management practices will ensure the vegetables produced are of high quality. It
is important that the company strives to sustain the production of high quality
vegetables and provides professional services to the clients to speed up its
attainment of brand recognition and attainment of good prices. The future of the
Ethiopia's share of the international vegetable market is bright. Ethiopia is known
as quality suppliers of vegetables and continues to grow in importance. Adam
Horticulture Plc has to put in place a management system that will ensure
aggressive marketing and high quality standards for its export vegetables to
benefit from the existing good demand of Ethiopian produces.

4.4 Production and Technical Strategy

The proposed vegetable types have been selected on the basis of:

 Climatic conditions,
 Buyer preference,
 Potential production per unit area,
 Most of the vegetables are relatively has stable market and therefore attracting
favorable prices and
These considerations will be maintained in future selection of vegetable types for
expansion and replacement of existing types. All vegetables produced are
expected to be, of appropriate quality standards, fresh, free of parasites,
mechanical damage, residues and defects of development. These factors form the
basic requirements of the target market. The technical production team will
comprise of technically competent personnel to ensure these are attained. Regular
consultation with a technical consultant will be maintained to ensure up to date
technologies are adopted at the farm.
4.5 Packaging

Packaging is used to protect the produce against mechanical damage and to

create a more favorable microclimate. The company will utilize corrugated cartons
for packaging its vegetables. Paper in direct contact with the vegetables will always
be new and capable of protecting the produce adequately. The project will use the
standard loose 2 kg boxes for packaging and export. Produce arrangements in the
boxes as well as handling will be aimed at maintaining quality and enhancing
presentation. All materials used will meet the EU recommended standards. High
quality packaging materials are available in the local market.

4.6 Labeling and Branding

Each box will bear the company’s logo to be developed, bearing the brand name
“Adam Horticulture Plc and "Produce of Ethiopia".

The following information will be printed clearly:-

 Company name and address;

 Vegetable type and Variety
 Harvest date;
 Block No;
 Gross weight and net weight;

4.7 Conclusion

It is the opinion of the Consultant that a market for Adam Horticulture Plc
vegetables exists. The company will strive to be knowledgeable on the
requirements of this market and will put in place systems that enable it meet the
market demands. The export vegetable market is already well developed and new
entrants have had comfortable access. The strategic plan is to develop a reliable
production cycle, produce high quality vegetables, and continuously undertake
effective market and prices trends analysis. The industry has grown tremendously
within east, central and South African region over the last decade promising Adam
Horticulture Plc a similar opportunity to succeed. The consultant therefore
recommends that the project is viable from a marketing perspective.
5. PROJECT DESIGN

5.1 Buildings and Civil works

The main planned building and civil work for the project is a standard packhouse for
packing the vegetables. The packhouse will have a Grading hall, store, toilet,
shower rooms, office, and coldstore. The cost of the packhouse is estimated at
ETB 1,100, 000.

5.2 Irrigation System

The irrigation system that will be installed in the farm will include a drip system,
fertigation system, and control heads. The total cost for the whole system is ETB
1,100,000

5.3 Plant and Machinery

The main plant that is required for the project is the installation of a refrigerators,
ventilators, and fans for the packhouse and generator for the farm. The total cost is
estimated to be ETB 550,000

5.4 Vehicles
The main vehicle required for the project is a cold truck with a capacity of 3.5 tons
that can transport the produce from the farm to airport. The cost of the cold truck is
ETB 650,000.

5.5 Office Furniture and Equipments

The office furniture requirement of the farm has been determined based on the
proposed number of offices and manpower required in the farm. The current market
price of each item is used in estimation of the total cost of office furniture and
equipment. Two desktop computers, a printer, scan and photocopier machine will
be required and the total cost is ETB 41,000.
5.6 Utilities

5.6.1 Electricity and Power Supply

The electric power will provide power for the farm and light for the offices.
The annual cost of electricity bill is estimated at ETB 80,000
5.6.2 Fuel, Oil, and Lubricant
The total cost for the fuel and lubricant is estimated at ETB 100,000 per year.
The cost of oil and lubricant for vehicle, and generator is assumed a 5%
incremental every year.

5.6.3 Communication facilities

The area under which the project will undertake is not included in the land
telecommunication services. And the farm will install a wireless telephone
connection at the farm as well as mobile phones to be used until the
telecommunication networks are extended to the area. The annual estimated
cost for communication is ETB 30,000.
6. ORGANIZATION AND MANAGEMENT

The conventional form of vegetable exporting farm organization will be adopted for the
farm which reflects, the different functions required by the various activities. The form
of organization permits the efficient use of resources, both human and machinery
resources aimed at optimizing the expected return from the farm. It also increases the
rate of development of professional and technical skills by constant contact and
interaction of staff in each department, unit and section which will contribute to
improvement of farm productivity.

The management of vegetables is different form of other businesses as it depends on

the climate and available natural resources at the farm. Further, the cultural practices
possess their own calendar which differs from one type to another. Thus, it always
requires immediate decision at the spot based on the existing situation.

The farm organization structure is developed in line with the various activities of the
farm during its design life. The development and operation of Adam Horticulture Plc
focuses on exportable vegetables and some cereals as well as pulses as crop rotation.
The planning and operation of the farm will be coordinated by the farm manager but
run independently by Agronomists and supervisors. Hence, it requires dynamic
management team starting at the implementation phase that will keep abreast the
current production technology. The administration structure includes the farm manager
and other department heads/supervisors. When the farm operates at its full capacity, it
will provide job opportunity for more than 45 permanent workers and about 9000 per
year daily laborers for operational activities. This will be one of the major contributions
to the socio economics of the area. The farm manager will also be assisted by
professional consultants, general and deputy managers and commercial head.
Furthermore, professional and experienced individuals will be employed for the
accounts, administrative and technical departments of the company. Similarly, all the
required skilled, semi-skilled and casual laborers will also be employed. Availability of
such workers is not going to pose any problem since there is an abundant work force in
Wolkite and around the project site.
6.1 Organizational Structure

The type of vegetable lines and extent of the farm operation is considered as the
major criteria to formulate the farm organization. Accordingly, the farm will be
organized into four departments; Production, Finance and Administration,
Commercial, and Logistics. Each department will have its own team headed by a
manager. The farm will be managed by a farm manager at the project site.

The head office will provide the overall planning and management. The main line
departments of the company that execute the main functions of the farm, the
general manager, deputy manager, commercial, logistics and finance department,
will be located in the head office, Addis Ababa.

The organizational structure of the farm is depicted in Figure 1

Figure 2: Organizational structure of Adam Horticulture Plc

General Manager

Farm Manager Finance Head Commercial Head Logistics Head

Packhouse
Manager

Production Head
Agronomist

Protection Head
Agronomist

Irrigatio Head

Supervisors, &
General Services
6.2 Manpower Requirement and Costs

The permanent staff required to develop and operate the farm has been prepared
on the farm organizational plan. The number of the required staff depends on
activities to operate the whole farm efficiently to render it profitable. The staff
requirement and cost is presented in Table14.

Table 14: Manpower Requirement and Cost

DESCRIPTION QTY MONTHLY (ETB) ANNUAL (ETB)

General Manager 1 6,000 72000
Deputy Manager 1 4,000 48000
Office Manager 1 1,500 18000
Farm Manager 1 3,000 36000
Finance Head 1 3,000 36000
Commercial Head 1 3,500 42000
Logistics Head 1 2,500 30000
Secretary 1 1,500 18000
Packhouse Manager 1 3000 36000
Agronomists 2 2000 48000
Supervisors 4 1,000 48000
General services 5 600 36000
Guards 5 600 36000
Driver 2 2,000 48000
TOTAL COST PER YEAR (ETB) 552000
7. OPERATION PLAN

The main export production season of the farm in a year calendar will start in October
and ends in June
7.1 Production Plan
The production plan for each type of vegetables is described below
PEAS
The planting program for peas is 2 ha per month and continues for three months. It
will start in October ends in March and the total area covered by peas will be 6 ha
BEANS
The planting program for beans is also 2 ha per month and extends for four
months. The time of planting beans starts in October till December and the total
area covered per year will be 8 ha.
PEPPER
Pepper will be planted for three months starting in February till April at 2 ha per
month. The total area covered by pepper per year will be 6 ha.

The area and yield of each vegetables is summarized in the following table

CROP AREA (Ha) YIELD (Kg) PACKOUT% MARKETABLE YIELD (Kg)

Peas 6 60,000 80% 48,000
Beans 8 80,000 80% 64,000
Pepper 6 288,000 70% 201,600
TOTAL MARKETABLE YIELD/YEAR 313,600
 7.2 Marketing Plan

The annual revenue that can be obtained from the marketable yield of each
vegetable type is presented below in table.

Table 15: Sales plan

CROP Yield Pack % Exportable Yield (KG) FOB Price/KG (ETB) Annual Revenue (ETB)
Peas 60000 80% 48000 36.75 1,764,000
Beans 80000 80% 64000 36.75 2,352,000
Pepper 288000 70% 201600 31.85 6,420,960
TOTAL ANNUAL SALES (ETB) 10,536,960

7.3 Implementation Plan

The exact time to finalize loan process application with the Development Bank of
Ethiopia is not known. But the promoters of this project will expect to start production
during this year (2011). Accordingly the following activities are planned for
implementation of the project.

Table 16: Implementation Schedule

8. FINANCIAL STUDY
8.1 Investment Costs
The financial analysis is made on the assumption that all planned investments are
made at the same time and during the initial year.

8.1.1 Fixed Investment Costs

The fixed investment costs are Buildings and Construction, irrigation system,
plant and machinery, agricultural machinery and equipments, vehicle, and
office furniture and equipments. Most of the investments will be made during
the first year. The total fixed investment cost is estimated to be about ETB
3,666,000. The summary of the required fixed investment costs is presented
in table 17 below.

Table 17: Fixed Investment Costs Summary

Description Total Cost (ETB)

Land Prep & Development 0

Buildings & Construction 1,100,000

Irrigation System 1,200,000

Plant and Machinery 550,000

Agricultural Machinery & Equipment 125,000

Vehicles 650,000

Office Furniture & Equipments 41,000

TOTAL 3,666,000

Contingency (0%) 0

TOTAL FIXED INVESTMENT COST 3,666,000

8.1.2 Pre-Production Costs

 Pre-production costs include expenses for feasibility study,
environmental impact and other technical study and services and
interests as well as other technical study costs. The total pre-production
cost for this project is ETB 712,167.

8.1.3 Total Investment Costs

The total investment costs include the estimated fixed investment costs and
pre-production costs. As the project is new, working capital is also included.
The total investment cost including working capital is estimated to be ETB
5,400,000. The details are shown in table 18.

Table 18: Estimated Total Investment Costs

8.2 Operating Costs

 8.2.1 Direct Operating Costs
The direct operating cost items of the project are land preparation, labor
operation, and input materials (chemicals, seed, fertilizer, poles, strings, and
packaging. The total cost for the first years is ETB 1,633,500 and it is
assumed that this cost will increase by 5 % annually.

Table 19: Direct Operating Cost

COST (ETB)
DIRECT OPERATING COST Peas/ 6 Ha Beans/ 8 Ha Pepper/ 6 Ha TOTAL/Year
Labor Operation 36000 36000 22500 94500
Land Prep 27000 36000 27000 90000
Seed 30000 16000 33600 79600
Cultural practice Material 204000 0 144000 348000
Fertilizer 24000 32000 27000 83000
Chemical 24000 28000 24000 76000
Packaging 240000 320000 302400 862400
Air Freight 0 0 0 0
TOTAL DIRECT OPERATING COST/YEAR 1633500

8.2.2 Indirect Operating Costs

The indirect costs of the project are those costs which do not vary with the
production scale of the project. The annual indirect cost is ETB 1,432,000
and it is assumed this will increase by 5 % each year.

Table 20: Indirect Operating Costs

INDIRECT OPERATING COST ANNUAL COST (ETB)
1. Salary and Wages 552,000
2. Travel and Per diem 30,000
3. Stationery 20,000
4. Land Rent Charges 2,000
5. Repair and Maintenance 50,000
6. Fuel, Oil and Lubricant 100,000
7. Electricity and Power Cost 80,000
8. Uniform and Protective 18,000
9. Communication Costs 30,000
10. Consultancy Fee 500,000
11. GlobalGap Certification &Audit 40,000
12. Miscellaneous 10,000
TOTAL INDIRECT OP. COST 1,432,000

8.3 Financing Plan

Out of the total project cost 25 % will be contributed from the company owner’s
equity, which is ETB 1,350,000 and 75 % will be financed from the Bank in medium
term loan, ETB 4,050,000.

8.4 Loan Repayment Scheme

The total proposed loan shall be repaid in 5 years and 10 semi-annual installments
which includes one and half year of grace period.

An interest rate of 7.5% per annum will be charged on the outstanding loan
balance and a service charge of 0.75% per annum shall be charged on the
outstanding loan balance and will be paid together with the interest. The annual
principal loan repayment including interest payable is shown in the following table.
 Table 21: Loan Repayment Scheme
Repayment Date Serv.Charge (0.75%) Interest (7.5%) Principal Repayment Outstanding Balance
Year-0 4,050,000
Year-1 7,594 75,938 4,050,000
Year-1 15,188 151,875 4,050,000
Sub-Total 22,781 227,813
Year-2 15,188 151,875 4,050,000
Year-2 15,188 151,875 405,000 3,645,000
Sub-Total 30,375 303,750 405,000
Year-3 13,669 136,688 405,000 3,240,000
Year-3 12,150 121,500 405,000 2,835,000
Sub-Total 25,819 258,188 810,000
Year-4 10,631 106,313 405,000 2,430,000
Year-4 9,113 91,125 405,000 2,025,000
Sub-Total 19,744 197,438 810,000
Year-5 7,594 75,938 405,000 1,620,000
Year-5 6,075 60,750 405,000 1,215,000
Sub-Total 13,669 136,688 810,000
Year-6 4,556 45,563 405,000 810,000
Year-6 3,038 30,375 405,000 405,000
Sub-Total 7,594 75,938 810,000
Year-7 1,519 15188 405,000 0

8.5 Financial statements

Business results include the projected balance sheet, income statement, and the
cash flow. Each of the business results are described in the following sections

8.5.1 Projected Balance Sheet

The balance sheet projected for ten years shows that the total assets of the
project will increase from ETB 6.1 million to ETB 19.3 million. The detailed
balance sheet is shown below in table.
 Table 22: Projected Balance Sheet

Y E A R S
DESCRIPTION
0 1 2 3 4 5 6 7 8 9 10
ASSETS
CURRENT ASSETS
Cash 1,021,833 1,421,793 2,859,151 4,340,936 5,943,345 7,674,611 9,543,571 11,625,520 13,922,493 16,376,885 18,588,891
Inventory 0 1,310,174 5,220,978 4,630,641 3,918,212 3,414,646 2,841,663 1,987,223 1,277,197 609,175 0
Total Current Assets 1,021,833 2,731,967 8,080,129 8,971,577 9,861,557 11,089,257 12,385,234 13,612,743 15,199,690 16,986,060 18,588,891
FIXED ASSETS
Land Development 0 0 0 0 0 0 0 0 0 0 0
Building and Constr. 1,100,000
Irrigation Material 1,200,000
Plant & Machinery 550,000
Agri Machinery & Equit 125,000
Vehicles 650,000
Office Furniture & Equit 41,000
Total Fixed Assets 3,666,000 3,666,000 3,369,400 3,072,800 2,776,200 2,479,600 2,183,000 1,886,400 1,589,800 1,293,200 996,600
Accum Depreciation 0 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600
Book Value of Fix Assets 3,666,000 3,369,400 3,072,800 2,776,200 2,479,600 2,183,000 1,886,400 1,589,800 1,293,200 996,600 700,000
TOTAL ASSETS 4,687,833 6,101,367 11,152,929 11,747,777 12,341,157 13,272,257 14,271,634 15,202,543 16,492,890 17,982,660 19,288,891
LIABILITIES & Capital
CURRENT LIABILITIES
1. Accounts Payable 1,021,833 250,594 334,125 284,006 217,181 150,356 83,531 16,706 0 0 0
Total Current Liability 250,594 334,125 284,006 217,181 150,356 83,531 16,706 0 0 0
LONG TERM LIABILITIES
1. Fixed Investment Loan 0 405,000 810,000 810,000 810,000 810,000 405,000 0 0 0
Total Long Term Liabilities 0 405,000 810,000 810,000 810,000 810,000 405,000 0 0 0
EQUITY
1. Owners Equity 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000
2. Profit of Previous Period 0 0 4,500,773 4,563,031 4,740,740 5,223,236 5,738,664 6,289,438 7,141,398 8,001,493 8,631,168
3. Current Profit 0 4,500,773 4,563,031 4,740,740 5,223,236 5,738,664 6,289,438 7,141,398 8,001,493 8,631,168 9,307,723
Total Equity 1,350,000 5,850,773 10,413,804 10,653,770 11,313,976 12,311,901 13,378,103 14,780,836 16,492,891 17,982,660 19,288,891
TOTAL LIABILITIES & EQUITY 6,101,367 11,152,929 11,747,777 12,341,157 13,272,257 14,271,634 15,202,543 16,492,891 17,982,660 19,288,891

8.5.2 Projected Income Statement

The projected income statement indicates that the Net profit after tax will be
ETB 4.5 million in the first year and ETB 9.3 million in the tenth year.
 Table 23: Projected Income Statement
Description Project Years
1 2 3 4 5 6 7 8 9 10
Gross Revenue 10,536,960 11,274,547 12,063,766 12,908,229 13,811,805 14,778,631 15,813,136 16,920,055 18,104,459 19,371,771
Less Operating Costs
- Direct Production Cost 1,633,500 1,715,175 1,800,934 1,890,980 1,985,529 2,084,806 2,189,046 2,298,499 2,413,423 2,534,095
- Indirect Production Cost 1,432,000 1,503,600 1,578,780 1,657,719 1,740,605 1,827,635 1,919,017 2,014,968 2,115,716 2,221,502
Revenue Before Int. and Depr. 7,471,460 8,055,772 8,684,052 9,359,530 10,085,671 10,866,190 11,705,073 12,606,589 13,575,319 14,616,175
Less: Depreciation and Amort. 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600
:Financial Costs 250,594 739,125 1,094,006 1,027,181 960,356 893,531 421,706 0 0 0
Revenue Before Tax 6,924,266 7,020,047 7,293,446 8,035,748 8,828,714 9,676,059 10,986,766 12,309,989 13,278,719 14,319,575
Less: Profit Tax 2,423,493 2,457,017 2,552,706 2,812,512 3,090,050 3,386,621 3,845,368 4,308,496 4,647,552 5,011,851
Net Profit 4,500,773 4,563,031 4,740,740 5,223,236 5,738,664 6,289,438 7,141,398 8,001,493 8,631,168 9,307,723
Retained Earning 1,125,193 1,140,758 1,185,185 1,305,809 1,434,666 1,572,360 1,785,350 2,000,373 2,157,792 2,326,931

8.5.3 Projected Cash Flow

The cash flow analysis shows surplus for all of the years and the volume is
affected by different cash flow components mainly of operating costs. As
financial costs and loan repayment diminish, the volume of surplus
concomitantly grows. At the end of the project period, the cumulative cash
balance reaches ETB 19.0 million.
 Table 24: Projected Cash Flow
Description Project Years
0 1 2 3 4 5 6 7 8 9 10
Cash Inflows
Owner's Equity 1,350,000
Bank Loan 4,050,000
Sales 0 10,536,960 11,274,547 12,063,766 12,908,229 13,811,805 14,778,631 15,813,136 16,920,055 18,104,459 19,371,771

Total Cash Inflow 5,400,000 10,536,960 11,274,547 12,063,766 12,908,229 13,811,805 14,778,631 15,813,136 16,920,055 18,104,459 19,371,771
Cash Outflows
Investment on Fixed Assets 3,666,000
Pre-Production & Interest 712,167
Direct Operating Cost 0 1,633,500 1,715,175 1,800,934 1,890,980 1,985,529 2,084,806 2,189,046 2,298,499 2,413,423 2,534,095
Indirect Operating Cost 0 1,432,000 1,503,600 1,578,780 1,657,719 1,740,605 1,827,635 1,919,017 2,014,968 2,115,716 2,221,502
Tax 0 2,423,493 2,457,017 2,552,706 2,812,512 3,090,050 3,386,621 3,845,368 4,308,496 4,647,552 5,011,851
Loan Repayment 0 250,594 739,125 1,094,006 1,027,181 960,356 893,531 421,706 0 0 0
Dividend 0 3,375,580 3,422,273 3,555,555 3,917,427 4,303,998 4,717,079 5,356,049 6,001,120 6,473,376 6,980,793
Total Cash Outflow 4,378,167 9,115,167 9,837,190 10,581,981 11,305,820 12,080,539 12,909,672 13,731,186 14,623,082 15,650,067 16,748,240
Ending Cash Balance 1,021,833 1,421,793 1,437,358 1,481,785 1,602,409 1,731,266 1,868,960 2,081,950 2,296,973 2,454,392 2,623,531
Cumulative Cash 1,021,833 1,421,793 2,859,151 4,340,936 5,943,345 7,674,611 9,543,571 11,625,520 13,922,493 16,376,885 19,000,416

8.5.4 Financial Indicators and Sensitivity Analysis

The net present worth of benefits and the internal rate of return (IRR) of the
project have been measured by discounting the cash flow of the project at 10
%, which is nearly equal to the prevailing bank interest rate. The net
present value (NPV) of the project is found to be ETB 6.5 million at the
given cut of rate.
The internal rate of return (IRR) of the project with respect to committed
resources has been also computed to be 28%, which is higher than the
prevailing cost of capital (discount rate) and reveals viability of the
project.
A sensitivity analysis has been conducted to test the strength and
viability of the project with respect to major changes in the discounted
benefits. The IRR and NPV of the project at 10 % increase are 31 % and
ETB 7.7 million, and at 10 % decrease the result is 25 % and ETB 5.4
million respectively.
9. BENEFITS AND JUSTIFICATIONS

In addition to the project’s financial benefits, the following will also be gained from the
implementation of the project.

 Employment opportunities for permanent and daily laborers.

 Income to the national/regional/state by way of taxation.
 Generation of foreign currency to the country
 Transfer of skills and technology.

It is believed that the project is financially and commercially viable according to the
financial analysis computations carried out. Moreover, it is also technically feasible
and socially beneficial.
Based on the overall viability of the project, Adam Horticulture Plc proposes a loan of
ETB 4,050,000 from Development Bank of Ethiopia.
10. RECOMMENDATIONS

The employment and assignment of a qualified and experienced staff in farm

management in the initial phase of the project development is crucial for the effective
and efficient implementation of the plan as envisaged.

The implementation of the crop production plan will have to be consistent with
commercial orders from the buyers as this will affect the future relationships with them
and it is also a basic foundation for the company.
 ANNEXES

FINANCIAL ANNEX

ASSUMPTIONS

Fixed Investment Costs

All fixed investment costs were taken from the proformas submitted
Direct Operating Costs
Labor Operation
The total Labor operation required for each crop per hectare is as follows:
Peas: 400 MD/ha
Beans: 300 MD/ha
Pepper: 250 MD/ha
And the cost of labor for one MD is assumed ETB 15
Land Preparation
The cost of land preparation for one hectare is assumed to be ETB 4,500 using
rented machinery.
Seed
The seed cost for peas, beans, and pepper are assumed to be ETB 5,000, ETB
2,000, and ETB 5,600 respectively
Trellising
The trellising cost for peas is ETB 34,000 per ha and for pepper is ETB 24,000 per
ha. There is no need of trellising for beans.
Fertilizer
Fertilizer cost for peas and beans is ETB 4,000 per ha and ETB 4,500 per ha for
pepper.
Chemical
The protection cost for Peas and pepper is ETB 4,000 per ha and ETB 3,500 per
ha for beans
Packaging
The packaging cost is assumed ETB 10 for peas and beans and ETB 6 for pepper.
Direct Operating Cost

COST (ETB)
DIRECT OPERATING COST Peas/ 6 Ha Beans/ 8 Ha Pepper/ 6 Ha TOTAL/Year
Labor Operation 36000 36000 22500 94500
Land Prep 27000 36000 27000 90000
Seed 30000 16000 33600 79600
Cultural practice Material 204000 0 144000 348000
Fertilizer 24000 32000 27000 83000
Chemical 24000 28000 24000 76000
Packaging 240000 320000 302400 862400
Air Freight 0 0 0 0
TOTAL DIRECT OPERATING COST/YEAR 1633500

Project Years
Description 1 2 3 4 5 6 7 8 9 10
1. Land Preparation 90,000 94500 99225 104186.25 109395.563 114865.341 120608.608 126639.038 132970.99 139619.539
2. Labour Operations 94,500 99225 104186.25 109395.563 114865.341 120608.608 126639.038 132970.99 139619.539 146600.516
3. Input Materials 1,449,000 1521450 1597522.5 1677398.63 1761268.56 1849331.98 1941798.58 2038888.51 2140832.94 2247874.58
4. Freight Costs 0 0 0 0 0 0 0 0 0 0
SUB TOTAL 1,633,500 1,715,175 1,800,934 1,890,980 1,985,529 2,084,806 2,189,046 2,298,499 2,413,423 2,534,095
Indirect Operating Costs

INDIRECT OPERATING COST ANNUAL COST (ETB)

1. Salary and Wages 552,000
2. Travel and Per diem 30,000
3. Stationery 20,000
4. Land Rent Charges 2,000
5. Repair and Maintenance 50,000
6. Fuel, Oil and Lubricant 100,000
7. Electricity and Power Cost 80,000
8. Uniform and Protective 18,000
9. Communication Costs 30,000
10. Consultancy Fee 500,000
11. GlobalGap Certification &Audit 40,000
12. Miscellaneous 10,000
TOTAL INDIRECT OP. COST 1,432,000

Salary and Wages

DESCRIPTION QTY MONTHLY (ETB) ANNUAL (ETB)

General Manager 1 6,000 72000
Deputy Manager 1 4,000 48000
Office Manager 1 1,500 18000
Farm Manager 1 3,000 36000
Finance Head 1 3,000 36000
Commercial Head 1 3,500 42000
Logistics Head 1 2,500 30000
Secretary 1 1,500 18000
Packhouse Manager 1 3000 36000
Agronomists 2 2000 48000
Supervisors 4 1,000 48000
General services 5 600 36000
Guards 5 600 36000
Driver 2 2,000 48000
TOTAL COST PER YEAR (ETB) 552000
 Project Years
Description 1 2 3 4 5 6 7 8 9 10
1. Salary and Wages 552,000 579,600 608,580 639,009 670,959 704,507 739,733 776,719 815,555 856,333
2. Travel and Per diem 30,000 31,500 33,075 34,729 36,465 38,288 40,203 42,213 44,324 46,540
3. Stationery 20,000 21,000 22,050 23,153 24,310 25,526 26,802 28,142 29,549 31,027
4. Land Rent Charges 2,000 2,100 2,205 2,315 2,431 2,553 2,680 2,814 2,955 3,103
5. Repair and Maintenance 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566
6. Fuel, Oil and Lubricant 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
7. Electricity and Power Cost 80,000 84,000 88,200 92,610 97,241 102,103 107,208 112,568 118,196 124,106
8. Uniform and Protective 18,000 18,900 19,845 20,837 21,879 22,973 24,122 25,328 26,594 27,924
9. Communication Costs 30,000 31,500 33,075 34,729 36,465 38,288 40,203 42,213 44,324 46,540
10. Consultancy Fee 500,000 525,000 551,250 578,813 607,753 638,141 670,048 703,550 738,728 775,664
11. GlobalGap Certification &Audit 40,000 42,000 44,100 46,305 48,620 51,051 53,604 56,284 59,098 62,053
12. Miscellaneous 10,000 10,500 11,025 11,576 12,155 12,763 13,401 14,071 14,775 15,513
SUB TOTAL 1,432,000 1,503,600 1,578,780 1,657,719 1,740,605 1,827,635 1,919,017 2,014,968 2,115,716 2,221,502

Investment Costs

DESCRIPTION Total Cost(ETB)

Land Prep & Devnt 0
Buildings & Construction 1,100,000
Irrigation System 1,200,000
Plant and Machinery 550,000
Agricultural Machinery & Equipment 125,000
Vehicles 650,000
Office Furniture & Equipments 41,000
Pre-Production Costs & Working Capital 1,734,000
TOTAL 5,400,000
Contingency (0%) 0
GRAND TOTAL 5,400,000

Financing Plan

DESCRIPTION TOTAL INFLOW %

Equity Capital 1,350,000 25%
Meduim-term Loan on New Project (70:30) 3,150,000
Medium-Term Loan on Existing Project (60:40) 900,000
Total Medium Term Loan 4,050,000 75%
TOTAL SOURCES OF FINANCE 5,400,000
 Sales Plan

ANNUAL SALES ESTIMATE

CROP Yield Pack % Exportable Yield (KG) FOB Price/KG (ETB) Annual Revenue (ETB)
Peas 60000 80% 48000 36.75 1,764,000
Beans 80000 80% 64000 36.75 2,352,000
Pepper 288000 70% 201600 31.85 6,420,960
TOTAL ANNUAL SALES (ETB) 10,536,960

Working Capital Determination

Direct Operating Costs

YEARS
Description COST (ETB) 1 2 3 4 5 6 7 8 9 10
1. Land Preparation 90,000 30,000 99,225 104,186 109,396 114,865 120,609 126,639 132,971 139,620 146,601
2. Labour Operations 94,500 31,500 104,186 109,396 114,865 120,609 126,639 132,971 139,620 146,601 153,931
3. Input Materials 1,449,000 483,000 1,597,523 1,677,399 1,761,269 1,849,332 1,941,799 2,038,889 2,140,833 2,247,875 2,360,268
4. Freight Costs 0 0 0 0 0 0 0 0 0 0 0
SUB TOTAL 1,633,500 544,500 1,800,934 1,890,980 1,985,529 2,084,806 2,189,046 2,298,499 2,413,423 2,534,095 2,660,799
Indirect Operating Costs

Description COST (ETB) COST (ETB)

1. Salary and Wages 552,000 184,000 608,580 639,009 670,959 704,507 739,733 776,719 815,555 856,333 899,150
2. Travel and Per diem 30,000 10,000 33,075 34,729 36,465 38,288 40,203 42,213 44,324 46,540 48,867
3. Stationery 20,000 6,667 22,050 23,153 24,310 25,526 26,802 28,142 29,549 31,027 32,578
4. Land Rent Charges 2,000 667 2,205 2,315 2,431 2,553 2,680 2,814 2,955 3,103 3,258
5. Repair and Maintenance 50,000 16,667 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566 81,445
6. Fuel, Oil and Lubricant 100,000 33,333 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133 162,889
7. Electricity and Power Cost 80,000 26,667 88,200 92,610 97,241 102,103 107,208 112,568 118,196 124,106 130,312
8. Uniform and Protective 18,000 6,000 19,845 20,837 21,879 22,973 24,122 25,328 26,594 27,924 29,320
9. Communication Costs 30,000 10,000 33,075 34,729 36,465 38,288 40,203 42,213 44,324 46,540 48,867
10. Consultancy Fee 500,000 166,667 551,250 578,813 607,753 638,141 670,048 703,550 738,728 775,664 814,447
11. GlobalGap Certification &Audit 40,000 13,333 44,100 46,305 48,620 51,051 53,604 56,284 59,098 62,053 65,156
12. Miscellaneous 10,000 3,333 11,025 11,576 12,155 12,763 13,401 14,071 14,775 15,513 16,289
SUB TOTAL 1,432,000 477,333 1,578,780 1,657,719 1,740,605 1,827,635 1,919,017 2,014,968 2,115,716 2,221,502 2,332,577
GRAND TOTAL 3,065,500 1,021,833 3,379,714 3,548,699 3,726,134 3,912,441 4,108,063 4,313,466 4,529,140 4,755,597 4,993,376
INCREASE IN WORKING CAPITAL 1,021,833 1,336,047 1,505,033 1,682,468 1,868,774 2,064,397 2,269,800 2,485,473 2,711,930 2,949,710
 Depreciation and Amortization

Description Depr. Rate Project Years

% 0 1 2 3 4 5 6 7 8 9 10
Building and Construction 5 1,100,000 1,045,000 990,000 935,000 880,000 825,000 770,000 715,000 660,000 605,000 550,000
Depreciation Amount 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Irrigation System 5 1,200,000 1,140,000 1,080,000 1,020,000 960,000 900,000 840,000 780,000 720,000 660,000 600,000
Depreciation Amount 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000
Plant and Machinery 10 550,000 495,000 440,000 385,000 330,000 275,000 220,000 165,000 110,000 55,000 0
Depreciation Amount 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Agr. Machinery and Equipment 10 575,000 517,500 460,000 402,500 345,000 287,500 230,000 172,500 115,000 57,500 0
Depreciation Amount 57,500 57,500 57,500 57,500 57,500 57,500 57,500 57,500 57,500 57,500
Vehicles 10 650,000 585,000 520,000 455,000 390,000 325,000 260,000 195,000 130,000 65,000 0
Depreciation Amount 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000
Office Furniture 10 41,000 36,900 32,800 28,700 24,600 20,500 16,400 12,300 8,200 4,100 0
Depreciation Amount 4,100 4,100 4,100 4,100 4,100 4,100 4,100 4,100 4,100 4,100
Investment Cost - 4,116,000 3,819,400 3,522,800 3,226,200 2,929,600 2,633,000 2,336,400 2,039,800 1,743,200 1,446,600 1,150,000
Total Depr. Amount 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600

Projected Cash Flow

Description Project Years

0 1 2 3 4 5 6 7 8 9 10
Cash Inflows
Owner's Equity 1,350,000
Bank Loan 4,050,000
Sales 0 10,536,960 11,274,547 12,063,766 12,908,229 13,811,805 14,778,631 15,813,136 16,920,055 18,104,459 19,371,771

Total Cash Inflow 5,400,000 10,536,960 11,274,547 12,063,766 12,908,229 13,811,805 14,778,631 15,813,136 16,920,055 18,104,459 19,371,771
Cash Outflows
Investment on Fixed Assets 3,666,000
Pre-Production & Interest 712,167
Direct Operating Cost 0 1,633,500 1,715,175 1,800,934 1,890,980 1,985,529 2,084,806 2,189,046 2,298,499 2,413,423 2,534,095
Indirect Operating Cost 0 1,432,000 1,503,600 1,578,780 1,657,719 1,740,605 1,827,635 1,919,017 2,014,968 2,115,716 2,221,502
Tax 0 2,423,493 2,457,017 2,552,706 2,812,512 3,090,050 3,386,621 3,845,368 4,308,496 4,647,552 5,011,851
Loan Repayment 0 250,594 739,125 1,094,006 1,027,181 960,356 893,531 421,706 0 0 0
Dividend 0 3,375,580 3,422,273 3,555,555 3,917,427 4,303,998 4,717,079 5,356,049 6,001,120 6,473,376 6,980,793
Total Cash Outflow 4,378,167 9,115,167 9,837,190 10,581,981 11,305,820 12,080,539 12,909,672 13,731,186 14,623,082 15,650,067 16,748,240
Ending Cash Balance 1,021,833 1,421,793 1,437,358 1,481,785 1,602,409 1,731,266 1,868,960 2,081,950 2,296,973 2,454,392 2,623,531
Cumulative Cash 1,021,833 1,421,793 2,859,151 4,340,936 5,943,345 7,674,611 9,543,571 11,625,520 13,922,493 16,376,885 19,000,416
 Projected Income Statement

Description Project Years

1 2 3 4 5 6 7 8 9 10
Gross Revenue 10,536,960 11,274,547 12,063,766 12,908,229 13,811,805 14,778,631 15,813,136 16,920,055 18,104,459 19,371,771
Less Operating Costs
- Direct Production Cost 1,633,500 1,715,175 1,800,934 1,890,980 1,985,529 2,084,806 2,189,046 2,298,499 2,413,423 2,534,095
- Indirect Production Cost 1,432,000 1,503,600 1,578,780 1,657,719 1,740,605 1,827,635 1,919,017 2,014,968 2,115,716 2,221,502
Revenue Before Int. and Depr. 7,471,460 8,055,772 8,684,052 9,359,530 10,085,671 10,866,190 11,705,073 12,606,589 13,575,319 14,616,175
Less: Depreciation and Amort. 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600
:Financial Costs 250,594 739,125 1,094,006 1,027,181 960,356 893,531 421,706 0 0 0
Revenue Before Tax 6,924,266 7,020,047 7,293,446 8,035,748 8,828,714 9,676,059 10,986,766 12,309,989 13,278,719 14,319,575
Less: Profit Tax 2,423,493 2,457,017 2,552,706 2,812,512 3,090,050 3,386,621 3,845,368 4,308,496 4,647,552 5,011,851
Net Profit 4,500,773 4,563,031 4,740,740 5,223,236 5,738,664 6,289,438 7,141,398 8,001,493 8,631,168 9,307,723
Retained Earning 1,125,193 1,140,758 1,185,185 1,305,809 1,434,666 1,572,360 1,785,350 2,000,373 2,157,792 2,326,931

Projected Balance Sheet

Y E A R S
DESCRIPTION
0 1 2 3 4 5 6 7 8 9 10
ASSETS
CURRENT ASSETS
Cash 1,021,833 1,421,793 2,859,151 4,340,936 5,943,345 7,674,611 9,543,571 11,625,520 13,922,493 16,376,885 18,588,891
Inventory 0 1,310,174 5,220,978 4,630,641 3,918,212 3,414,646 2,841,663 1,987,223 1,277,197 609,175 0
Total Current Assets 1,021,833 2,731,967 8,080,129 8,971,577 9,861,557 11,089,257 12,385,234 13,612,743 15,199,690 16,986,060 18,588,891
FIXED ASSETS
Land Development 0 0 0 0 0 0 0 0 0 0 0
Building and Constr. 1,100,000
Irrigation Material 1,200,000
Plant & Machinery 550,000
Agri Machinery & Equit 125,000
Vehicles 650,000
Office Furniture & Equit 41,000
Total Fixed Assets 3,666,000 3,666,000 3,369,400 3,072,800 2,776,200 2,479,600 2,183,000 1,886,400 1,589,800 1,293,200 996,600
Accum Depreciation 0 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600 296,600
Book Value of Fix Assets 3,666,000 3,369,400 3,072,800 2,776,200 2,479,600 2,183,000 1,886,400 1,589,800 1,293,200 996,600 700,000
TOTAL ASSETS 4,687,833 6,101,367 11,152,929 11,747,777 12,341,157 13,272,257 14,271,634 15,202,543 16,492,890 17,982,660 19,288,891
LIABILITIES & Capital
CURRENT LIABILITIES
1. Accounts Payable 1,021,833 250,594 334,125 284,006 217,181 150,356 83,531 16,706 0 0 0
Total Current Liability 250,594 334,125 284,006 217,181 150,356 83,531 16,706 0 0 0
LONG TERM LIABILITIES
1. Fixed Investment Loan 0 405,000 810,000 810,000 810,000 810,000 405,000 0 0 0
Total Long Term Liabilities 0 405,000 810,000 810,000 810,000 810,000 405,000 0 0 0
EQUITY
1. Owners Equity 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000
2. Profit of Previous Period 0 0 4,500,773 4,563,031 4,740,740 5,223,236 5,738,664 6,289,438 7,141,398 8,001,493 8,631,168
3. Current Profit 0 4,500,773 4,563,031 4,740,740 5,223,236 5,738,664 6,289,438 7,141,398 8,001,493 8,631,168 9,307,723
Total Equity 1,350,000 5,850,773 10,413,804 10,653,770 11,313,976 12,311,901 13,378,103 14,780,836 16,492,891 17,982,660 19,288,891
TOTAL LIABILITIES & EQUITY 6,101,367 11,152,929 11,747,777 12,341,157 13,272,257 14,271,634 15,202,543 16,492,891 17,982,660 19,288,891
Net Present Value (NPV) and Internal Rate of Return (IRR)

IRR AND NPV

Project Years COST & BENEFIT 10% Increase 10% decrease
0 -5,400,000 -5,400,000 -5,400,000
1 1,421,793 1,563,973 1,279,614
2 1,437,358 1,581,093 1,293,622
3 1,481,785 1,629,963 1,333,606
4 1,602,409 1,762,650 1,442,168
5 1,731,266 1,904,393 1,558,139
6 1,868,960 2,055,856 1,682,064
7 2,081,950 2,290,144 1,873,755
8 2,296,973 2,526,671 2,067,276
9 2,454,392 2,699,831 2,208,953
10 2,623,531 2,885,884 2,361,178

IRR 28% 31% 25%

NPV 6,578,522 7,738,700 5,418,344