PROJECT PROPOSAL ON

IRREGATION FARM PRODUCTION FOR EXPORT

PROJECT LOCATION: - OROMIA REGIONAL NATIONAL

STATE, OROMIA SPECIAL ZONE SULULTA WOREDA
AKAKO MANA ABICHUKEBELE DISTRICT

PROMOTER: - H/GORGIS BIRU

SEMP, 2022
ADDIS ABABA, ETHIPIA
 TABLE OF CONTENTS

1. EXECUTIVE SUMMARY 1
2. INTRODUCTION 2
3. BACKGROUND 3
4. THE PROJECT AREA 4
a. Location 4
b. Topography 4
c. Soil type 4
5. THE PROJECT 5
a. Project description 5
b. Objective 5
c. Technology used 6
d. Engineering 6
e. Production capacity 8
6. MARKET PROCESS 10
7. LAND USE PLAN 26
8. ORGANIZATION AND MANAGEMENT 26
a. Organization structure 26
b. Manpower requirement with qualification 27
9. FINANCIAL STUDY 29
a. Fixed cost 29
b. Production cost 31
c. Production capital and financing sources 33
d. Revenue projection 33
e. Financial statements 34
10. SOCIO – ECONOMIC BENEFITS 35
11. ENVIRONMENTAL IMPACT ASSESSMENT 36
 Executive Summary
1.Project Name Fruit And Vegetables Production Farm

2.Project Owners H/gorgis Biru

3.Nationality Ethiopia

4.Project location Sululta woreda akako mana abichu kebele

5.Project Composition Fruit & Vegetable Production By Irrigation

6.Primeses Required 3. 335 Hectare

7. Start up Capital For implementing this project a total of 0 Eth birr is required.
Owner equity( %20)3,400,000 birr and Bank Loan
(%80)13,600,000 birr

8.Employment Opportunity This project fully employees the local individuals. Except the
general manager all other employees are used from the local area.
Hence, this project will create employment opportunities for 224
individuals from this 24 are skilled and 200 are unskilled
9. Market Share 50 % Export Standard 50% for Local market

10. For The region/ country Source of foreign currency

2. Introduction
Until the coming of new economic police, the acute problem of Ethiopia had been food shortage. This
has been the problem faced by all developing countries even though not chronic as ours. In countries
like Ethiopia although drought had affected the agricultural output, the overall discouraging economic
police of the time was also the one, which hindered the economic development of the country. Even
under such a condition, the agricultural sector apparently plays the decisive role in the overall
economy of the country. It accounts for about 50% of GDP 85% of the employment and about 90%
of the export earnings. Despite this agriculture has remained under development because of different
reasons, drought, poor economic base law productivity, poor technology transfer and the like. The
government has embarked on an export diversification program to reduce its dependence on coffee
and to other quality products.

Although horticultural crops are important for health and economy the amount and mode of
production are still weak in Ethiopia. Horticultural crops can be differentiated as fruit (permanent
crops) and vegetables (short season crops). Accordingly, permanent crops are long term crops that
occupy the field planted for a long period of time and largely harvested every year and do not have to
be replanted for several years after each harvest. These include tree crops such as coffee, Enset, Chat,
oranges, Mangoes, Bananas, papaya, Avocados…etc. The trees that yield fruits like orange, Mangoes,
Papayas, and others are known as fruit trees (CSA, 2001/02).
More than 47 thousand hectares of land is under fruit crops in Ethiopia. Bananas contributed about
60.56% of the fruit crop area followed by Mangoes that contributed 12.61% of the area. Nearly 3.5
million quintals of fruits were produced in the country. Bananas, papaya, mangoes, and orange took up
55.32%, 12.53%, 12.78% and 8.35% of the fruit production, respectively (CSA, 2008).

Ethiopia has a comparative advantage in a number of horticultural commodities due to its favorable
climate, proximity to European and Middle Eastern markets and cheap labor. However, the production
of horticultural crops is much less developed than the production of food grains in the country. On
average more than 2,399,566 tons of vegetables and fruits are produced by public and private
commercial farms, this is estimated to be less than 2 percent of the total crop production. According to
recent information obtained from the Central Statistics Authority, the total area under fruits &
vegetables is about 12,576 hectares in 2011. Of the total land area under cultivation in the country
during the same year, the area under fruits and vegetables is less than one percent (i.e. 0.11%), which
is insignificant as compared to food crops
At present, many private commercial farms & private farmers are producing fruits and
vegetables both for domestic and export markets in the country. Processing plays an important
role in the conservation and effective utilization of fruits and vegetables. It converts perishable
fresh products to more durable processed products in cases of sluggish markets or when there is
profit- generating demands for processed products. It also helps in generating rural employment.
Besides, processed fruits and vegetables are sources of foreign exchange earnings. In Ethiopia,
the number of fruits and vegetables processing industries is limited. Currently, there are only 5
fruits and vegetable processing plants in the country. These plants presently process limited
products: tomato paste, orange marmalade, vegetable soup, frozen vegetables, and wine. Most of
the processing plants fall in the small-scale processing unit’s category. In general, processed
products are mainly geared to domestic markets.

Ethiopia is one of the developing countries and around 85% of the total population depends on
agriculture most of the agricultural practice is rain fed crop production. However, due to the
backward method of farming, unreliable rainfall, including population and drought, the nation
faced a series of food shortage. These food shortages were followed by severing famines that
resulted in the loss of the lives of millions of citizens.

Most of Ethiopia’s cultivated land is under rain-fed agriculture. Due to lack of water storage and
large spatial and temporal variations in rainfall, there is not enough water for most farmers to
produce more than one crop per year and hence there are frequent crop failures due to dry spells
and droughts which have resulted in food shortage currently facing the country.

The major source of growth for Ethiopia is still conceived to be the agriculture sector. Hence,
this sector has to be insulated from drought shocks through enhanced utilization of the water
resource potential of the country, (through the development of small-scale irrigation, water
harvesting, and on-farm diversification) coupled with strengthened linkages between agriculture
and industry (agro-industry), thereby creating a demand for agricultural output
In line with the above, different regions of the country are working hard so as to promote
irrigated agriculture and boost agricultural production both in quantity and quality.

Ministry of Water, Irrigation and Energy have been widely engaged in promoting irrigation to
make true the country dream. The ministry is working on the development and application of
water resources for sustainable development. Identifying irrigation projects, undertaking
feasibility studies and going to implementation are among the duties considered helpful in using
the water resources.

In parallel, the Ministry of Water, Irrigation and Energy and Ministry of Agriculture have been
widely allowing investors to participate in farming investment whereby the investors together
with the existing farmers feed the fast-growing and hungry industrialization of the country. The
investors play a wide role in transforming the agriculture-based economy of our country to
industry based economy.

It is not only about transforming the economy but also the government is working very hard on
quality production to make our country competing in international markets. In this point of view,
the investors also play a very great role.

Hence, it is obvious that the agricultural system has to be improved and irrigation practice should
be spread extensively to bring about sustainable food self-sufficiency and to earn foreign
exchange. Ethiopia has ample source of surface and subsurface water, resulting from this it is
named as” The water tower of East Africa.” Moreover, the irrigation potential is estimated to be
about 4025 million hectares of which only 5.8% is irrigated. (Source; a study carried out by
international water management institute-IWMI
Agriculture is expected to remain the major contributor to economic and growth in the coming
decades. The potential for expanding output is largely through expanded irrigation, improved in
puts supply, strengthened research and extension systems and rehabilitated infrastructure.

In general to do away the problem of food self sufficiency increase foreign currency increase of
raw material for industries efforts should be made towards developing agricultural sector. This
needs a shift from traditional and back ward method of production system that required a
coordinated roll of all factors of production. In this regards it is the private sector that can
mobilize huge capital and skilled man power.

Therefore the involvement of private sector should be pursed and encouraged by the government
through adopting a favorable economic policy that allow the sector to take part in the
development process without putting capital ceiling.

Currently, in order to encourage private investment and to attract capital technology and know-
how to the country comprehensive packages of incentives are granted to investor by the
investment proclamation. These incentives included (100%) exemption from payment of import
customs duties levied on imported capital goods (machines and equipment’s as well as spare
parts up to 15% of the value of capital exemption from income tax payment for a period market.

A. Source of revenue

As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income
taxes, VAT and payroll taxes are collected from undertaking business activities. Therefore, the
plant will serve as sources of revenue for both the region and nation in general.

B. Employment opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self employment or employment in other
organization. Hence, this plant will hire around 224 persons.

C. Save the country’s foreign exchange

By minimizing the market gab for dairy products demand and supply, the plant will help to
reduce the nation’s foreign exchange cost to import these products. This will save the foreign
exchange resource of the nation.

D. Benefit for the local community

As a corporate responsibility the company will engage in different development activities on the
surrounding areas. This will better worse the community and contribute for the development of
the region.

E. Stimulate the local and national economy

This factory has positive externality in the zone that will encourage the economic movement of
local economy. Hence, there will be economic relationship and transactions among different
actors.

F. Technology transfer

By dairy industry, the project will train and develops the capacity of the staffs. By doing this, the
plant will add value in technology transfer for the nation.

Background

This project constitutes fruit and vegetables production, which is the most tests full and the
most appreciated and stable in the domestic market. The market for these productions continues
to be strong due to the increasing demand. These account for the fact that production continues
to increase the demand for the production which pushes the price higher on the world. The total
investment capital of the project will be about 17,000,000 Birr of which 13,600,000 Birr will be
for fixed investment capital and the remaining 3,400,000 will be invested for working capital.

The proposed project will create job opportunities for more than 24 permanent & 200 temporary
and total for 224 citizens and will generate revenue which estimated to 17,000,000 per year when
it operates at full capacity, generate income for the government in the form of land rent and
different taxes payment.

The output of the project will never encounter any marketing problems since
the demands for the out puts of the project are high and ever increasing while
the supply is far below the demand. The promoter has every right to sell
his/her production in a free market where he/she could reap the maximum
benefits.

4. Basic Features of Project Area

4.1. Location: the envisaged crop production project is planned to be located in Oromia special
Zone Sululta woreda of Oromia Regional State Government in free land area in Akako mana
abichu kebele The area is very conducive for establishing such project for its good weather
condition and very fertile soil.
TOPOGRAPHY

The topography of the area varies from chains of mountains around Entoto ridge in the south to
plain lands in the East, North-west, and north. Slope is also another topographical aspect that
influences the land use planning and management.The steepest slope in the area is situated in the
elevation
range of 2640m to 2800m almost around the southern ridge of Entoto and north-eastern fringes.
By implication high run off and lateral erosion is high in these areas compared to the gentle slope
locations. The gentle slope lies mostly in the central part of the study area within 2580m to
2700m altitude where the existing built up area lies.
The flat area of the Town is found in the altitude of
less than 2580m in the east and north-west of the study area. This area is one of the likely water
logging area during the rainy season and potential grazing land in dry season
4.2. Demographics
This woreda is characterized by the Sululta plain, which is a wide, shallow valley with an
elevation of 2500 meters above sea level, almost completely surrounded by mountains with
numerous small rivers which drain into the Muger. The plain is swampy with some quite large
areas of open water in the rainy season, but it reverts to grazing land during the dry months. The
surrounding mountainsides were covered with forest dominated by Juniperus procera, and the
lower slopes supported groves of Acacia, but now most of the hillsides are covered with
plantations of Eucalyptus with only the odd native tree remaining, except for the groves
protected by the presence of a churc

The 2007 national census reported a total population for this woreda of 129,000, of whom 64,516
were men and 64,484 were women; 15,145 or 11.74% of its population were urban dwellers. The
majority of the inhabitants said they practised Ethiopian Orthodox Christianity, with 94.34% of
the population reporting they practiced that belief, 2.76% were Protestant, and 2.07% were
Muslim.[6]

Based on figures published by the Central Statistical Agency in 2005, Mulona Sululta had an
estimated total population of 188,124, of whom 95,156 were men and 92,968 were women;
17,748 or 9.43% of its population were urban dwellers, which is about the same as the Zone
average of 9.5%. With an estimated area of 1,520.32 square kilometers, Mulona Sululta had an
estimated population density of 123.7 people per square kilometer, which is less than the Zone
average of 143.[7]

The 1994 national census reported a total population for this woreda of 133,950, of whom 66,523
were men and 67,427 women; 9,944 or 7.42%% of its population were urban dwellers at the
time. The two largest ethnic groups reported in Mulona Sululta were the Oromo (93.59%), and
the Amhara (5.73%); all other ethnic groups made up 0.22% of the population. Oromo was
spoken as a first language by 94.8%, and 4.82% spoke Amharic; the remaining 0.68% spoke all
other primary languages reported. The majority of the inhabitants professed Ethiopian Orthodox
Christianity, with 98.17% of the population reporting they practiced that belief, while 1.04% of
the population said they observed traditional beliefs which was the largest group of this faith in
the Zone.[8]

Based on the 2007 Census conducted by the Central Statistical Agency of Ethiopia (CSA), this
Zone has a total population of 2,058,676, of whom 1,028,501 are men and 1,030,175 women;
with an area of 14,788.78 square kilometers, north t Shewa has a population density of 139.21.
While 242,352 or 6.10% are urban inhabitants, a further 53 individuals are pastoralists. A total of
428,689 households were counted in this Zone, which results in an average of 4.80 persons to a
household, and 415,013 housing units. The two largest ethnic groups reported in West Shewa
were the Oromo (93.82%) and the Amhara (5.15%); all other ethnic groups made up 1.03% of
the population. Oromiffa was spoken as a first language by 93.99% and 5.47% spoke Amharic;
the remaining 0.54% spoke all other primary languages reported. The majority of the inhabitants
professed Ethiopian Orthodox Christianity, with 53.84% of the population having reported they
practiced that belief, while 32.93% of the population professed Protestantism and 9.85% of the
population said they practiced Islam.

The 1994 national census reported a total population for this Zone of 2,329,699 in 480,735
households, of whom 1,153,185 were men and 1,176,514; 225,993 or 9.7% of its population
were urban dwellers at the time. The three largest ethnic groups reported in West Shewa were the
Oromo (89.78%), the Amhara (6.66%), and the Sebat Bet Gurage (1.73%); all other ethnic
groups made up 1.83% of the population. Oromiffa was spoken as a first language by 89.47%,
7.32% Amharic, and 1.16% spoke Sebat Bet Gurage; the remaining 2.05% spoke all other
primary languages reported. The majority of the inhabitants professed Ethiopian Orthodox
Christianity, with 80.6% of the population having reported they practice that belief, while 7% of
the population said they held traditional beliefs, 6.58% were Protestant, and 5.34% were Muslim.

According to a May 24, 2004 World Bank memorandum, 35% of the inhabitants of West Shewa
have access to electricity, this zone has a road density of 29.2 kilometers per 1000 square
kilometers (compared to the national average of 30 kilometers),[3] the average rural household
has 1.4 hectare of land (compared to the national average of 1.01 hectare of land and an average
of 1.14 for the Oromia Region)[4] and the equivalent of 0.7 heads of livestock. 31.8% of the
population is in non-farm related jobs, compared to the national average of 25% and a Regional
average of 24%. Concerning education, 66% of all eligible children are enrolled in primary
school, and 28% in secondary schools. Concerning health, 89% of the zone is exposed to
malaria, and none to Tsetse fly. The memorandum gave this zone a drought risk rating of 406.
Although coffee is an important cash crop of this woreda, less than 20 square kilometers are
planted with this crop.
The 2007 national census reported a total population for this woreda of 97,243, of whom 48,593
were men and 48,650 were women; 6,072 or 6.24% of its population were urban dwellers. The
majority of the inhabitants said they were Protestant, with 53.43% of the population reporting
they observed this belief, while 37.1% of the population practised Ethiopian Orthodox
Christianity, and 8.2% were Muslim

Based on figures published by the Central Statistical Agency in 2005, this woreda has an
estimated total population of 82,575, of whom 42,056 are men and 40,519 are women; 3,197 or
3.87% of its population are urban dwellers, which is less than the Zone average of 12.3%. With
an estimated area of 667.19 square kilometers, Birbisa Kojowa has an estimated population
density of 123.8 people per square kilometer, which is less than the Zone average of 152.8.

The 1994 national census reported a total population for this woreda of 59,559, of whom 29,385
were men and 30,174 women; 1,789 or 3% of its population were urban dwellers at the time. The
two largest ethnic groups reported in Birbisa Kojowa were the Oromo (92.24%), and the Amhara
(7.56%); all other ethnic groups made up 0.96% of the population. Oromiffa was spoken as a
first language by 94.43%, and 5.53% spoke Amharic; the remaining 0.04% spoke all other
primary languages reported. The majority of the inhabitants professed Ethiopian Orthodox
Christianity, with 77.17% of the population reporting they practiced that belief, while 23.2% of
the population said they were Protestant, 5.04% were Muslim, and 2.41% practiced traditional
beliefs.

4.3. Soil and Topography

The location/soil where this project is planned to be executed is very fertile and suitable for fruit
and vegetables production. With respect to topography, the major part of the land has got the
altitude of the area lies in the altitude suitable for mechanized farm in general and the above
products in particular.

4.4. Climate
The project area dominantly characterized by dry weynadega agro-climatic zone. The area has
one rainy season from June to September

4.5. Economic activity

The major economic base of the peoples living around the project area is depending on
traditional mixed farming. They grow crops of different type like maize, barely, haricot bean,
and fruit and vegetables production supplemented with animal rearing.

4.5.1. Irrigation scheme layout

 One reservoir whose storage capacity enables to develop 0.35hak of irrigable land will be
constructed.
 Distribution box:- the main function of the distribution box is guiding irrigation water to
various unit farms. These boxes are located on main irrigation canals. The box is usually
constructed from masonry, mass concrete. It also serves as check structure to raise water
level in the secondary canals.
 Pumps: - for the envisaged 200ha scheme the total volume of water to be delivered to the
farm will be 200 liter to 300 liter per minute. If pump has capacity to deliver 300 liters per
minute it needs to install one unit of pump.

5. The project
5.1. The project Description
The country’s agricultural led development strategy, the project under consideration has a
paramount importance of contributing to the supply of food and generates foreign exchange
earnings through export of its product. The project makes use of river water by irrigation and
produces:-
 Potato,
 Onion,
 Tomato,
 Pepper,
 Cabbage,
 Carrot,
  Papaya,
 Avocado
 Banana other related production.
The project is envisaged to develop 100 hectares of land under modern management and
production systems. The project will start its activates by simple clearing the land, farm
road construction, building constructive purpose, guard house, store, bore hole drilling,
procurement of machinery and equipment, vehicles and hiring skilled and semi skilled
employees from local market.

5. 2. The overall objectives and Specific objective

5.2.1 over all objectives
The main objective of the project is to produce different type of fruit and vegetables production
to meet the increasing demand for these types of output and it also important as a source of raw
material for different industries and for the growing demand in local market for that matter.

In addition to this the overall objective of the project under consideration is to contribute to the
development process in the country by taking part in the agricultural farm with fruit and
vegetables production.

5.2.2 Specific objective

The Specific objective of this project is to generate profit to the promoter over the invested
capital by growing quality products. And other objectives are:-
 To create job appointees specifically for the local people and the citizen
 To generate revenue for the country in the form of taxes
 To change the system of agriculture farming from traditional to modern system of
farming
 Install modern irrigation facilities in order to increase productivity of the land
 It has important demonstration effect in encouraging the peasant to use irrigation to grow
their crops.

5.2.3. Beneficiaries of the project

The highest share of the project benefit accrues to the owner in the form of net profit earned from
its operation. The establishment of this project on the area would also benefit various groups.
 The workers reap the benefit in the form of wage and salaries rewarded for their labor input.
 the government would also benefits in raising revenue in the form of tax
 The society would be able to get increased supply of fruit and vegetables in the market and
therefore enjoy its availability.
 Generally, the project would add to the welfare of the country in increased domestic
production, income and possibly in helping to earn foreign exchange.

5.2.4. Technology used

The planned project uses the most important technologically produced machineries and
equipment which produce more production with low energy and low cost. These machineries and
equipments are Germany, Indian, China and Saudi Arabia made technology.

6. Market prospect and assessment

6.1. The input supply
The major inputs that are demanded by the project include seeds, fertilizer, herbicides and
pesticides. The project could easily purchase these inputs from local suppliers and government &
non government seed supplier agency. Therefore, the supply of farm inputs will not be a problem
for the project under consideration.
6.2. Output market
The proposed project is planned to distribute its products 50% for foreign and the remaining for
local market. The country’s dependency on the Export of few primary products like coffee, hides
and skins has resulted in low level export income. In order to change this rate the promoter this
project planned to produce quality fruit and vegetables.
Regarding market, Ethiopian exports large quantities of fresh fruits and vegetables to Djibouti,
Yemen, Saudi Arabia and other Middle East countries. The project under consideration fruits
like papaya and Banana, vegetables like onion, Tomato, pepper, cabbage and carrot which are
highly demanded in the local markets and in the foreign market at large and food crops like
maize and sorghum to meet the increasing demand.
 1.1.2 Location and premises required

1.1.2.1 Location
The envisaged project is planned to be established in OSZSF zone, Sululta Town, Oromia
National Regional State. Sululta is center of Special zone is situated at about 35 kms away from
Addis Ababa. it is accessible all year round with all types of motor vehicles. The area is
conducive social and investment situations, ease of future development and increase number of
private investment in the area are some of the reasons behind selecting the area for the proposed
project.

Table 1: Map of Oromia National Regional State O/S/Z/S/Finfine sululta Town

3
8
k
m

1.1.4.2 Infrastructure

Supplies such as road, potable water and electric power are available in the town. The available
electric power, water supply, telephone service & transportation facilities are also in the town.
 1.1.4.3 Economic activity of Area
Even though there are few/sparsely people living around the project the major economic base of
them is farming supplemented with animal rearing.

7. Land use plan

S/No Description Area in he
# office 0.335hectare
I Vegetables 1.5 hectares
II Fruit 1.5hectares
Total 3.335 hectares

As clearly indicated in the land use plan of the project the fruit and vegetables are produced at
least three times a year.

8.1 Sales Plan

The Revenue of the Project is assumed to be generated from the sales of the different fruit &
vegetables. Thus in this project,

Qty Unit
No Description Unit product Yearly price Total Price
Per Hek. productio Quintal
n
1 Tomato Quinta
l 40 4,800 1,500 7,200,000
2 Onion “
50 6,000 1,000 6,000,000
3 Potato “
30 2,700 1,000 2,700,000
4 Cabbage “
25 2,250 8,000 18,000,000
5 Pepper and “
Strawberry 60 3,600 3,000 10,800,000
6 Carrot “
100 6,000 2,000 12,000,000
7 Banana “
50 750 1,500 1,125,000
8 Papaya “
40 600 1,200 720,000
 9 Avocado “
40 600 1,500 900,000
10 Mango and Zetun “
40 600 1,500 900,000
Total “
  475 27,900 22,200 60,345,000

Remember that at the first cycle of production the project plan is to sale its products to
60,345,000 birr within the 2rd and 3rd cycle the sales plan is going to be increased.

8.2. SWOT analysis Ethiopian Fruit and Vegetable Business

8.2.1. Strengths
 Climate
Ethiopia has a beneficial climate for growing a wide range of fruits and vegetables
throughout the year. The good soil and water conditions are enabling the agricultural
potential further.
 Supportive government policies
Investments are encouraged by the Government of Ethiopia through several incentives
for example through beneficial tax schemes for export investments. Government offices
work according to procedures resulting in a relatively low level of corruption compared to
other African countries.
 Costs of production
Land lease costs are low and labor is cheap.

 Geographic location
Ethiopia has a favorable geographic location as it is close to Djibouti and the Middle
Eastern markets.
 Security
Compared to other countries in the region Ethiopia’s private security and safety situation
is very good.
 Private sector service provision
The rapid growth of the floriculture sector leads to a growing critical mass of service
provision level by private sector parties also relevant to the F&V sector.
 New initiatives
Many new companies have started or are in the process of starting in the F&V sector.
And there is a broad interest from private sector parties, public organisations and NGO’s
for the F&V sector.

 Potentials for irrigation

Potential for irrigated production with improved water-saving techniques (drip-irrigation)
is high.
 Transport
Although landlocked a good domestic, major road network exists between the main F&V
production centres and Addis; airfreight is available and capacity constantly increasing.
 Code of Practice in floriculture sector
Experiences gained in the development of a Code of Practice by the floriculture sector
will benefit the fruits and vegetable sector
8.2.2. Weaknesses
 Constant high quality supply in sufficient quantities
Apart from beans, a fragmented and non-constant supply of F&V with limited quantities and
high variation in quality, leads to a weak position compared to competitors like Kenya; Ethiopia
yet lacks the critical mass and reputation of a high potential source of
F&V.
 Varieties
Limited knowledge and availability of the proper varieties with respect to local climatic
conditions and consumer demand.
 Packaging
Low quality of locally produced packaging material.
 Cold Storage
Limited capacity of appropriate cold storage capacity.
 Technical Know-How
Limited technical know-how for production and handling of high quality F&V for export
markets.
  Research and extension
Limited research and extension programmes focused on the export oriented F&V sector.
 Input supply
Problems in acquiring the appropriate types of fertilisers and pesticides.
 Land Tenure
Insecurity due to lack of land tenure causes constraints for investments.
 Market Information
Information about export markets, especially Middle East, is limited.
 Domestic market
Low consumption rates of fruits and vegetables, which give limited options for selling
non-export grades.
 Banking
The regulation of the banking system is a major constraint. There is no free exchange of
foreign exchange, which hampers international financial transactions.
 Bureaucracy
Government procedures (including customs, repayment of VAT etc.) are sometimes
slow and unclear and require regular follow-up.
 Communication
The mobile phone network is over-stretched and internet connections are relatively slow.

8.2.3. Opportunities
 Demand in Europe and Middle East
In both Europe as in the Middle East there is a high and growing demand for fruits and
vegetables. The objective of importers to diversify sourcing from main suppliers like Kenya,
provides an opportunity for Ethiopia. For European importers Ethiopia is very interesting in
order to have a year round delivery of fruits and vegetables.
 Demand for processed fruits and vegetables
Processed fruits and vegetables have a high demand in the European and Middle Eastern
markets; also import substitution in the domestic market provides good opportunities. Demand
for tomato concentrate in the Middle East and Sudan is increasing.
 Ecological and fair trade production
Demand in the European market for ecological and fair trade products is increasing. Also
major retailers like the UK based TESCO is demanding high social standards of their
imported products. Ethiopia offers a good scope for ecological and fair trade production.

8.2.4. Threats
 Increased competition in European and Middle East Market
High competition of countries with already a strong position (e.g. Kenya in the European market)
and countries with a growing position (Morocco, Egypt in Europe; Turkey, Jordan in Middle
East). China may also become a competitor for processed products

2.6.1. The input supply

The major inputs that are demanded by the project include seeds, fertilizer, herbicides and
pesticides. The project could easily purchase these inputs from local suppliers and government &
non government seed supplier agency. Therefore, the supply of farm inputs will not be a problem
for the project under consideration.

2.6.2. Output market

The proposed project is planned to distribute its products 30% for foreign and the remaining for
local market. The country's dependency on the Export of few primary products like coffee, hides
and skins has resulted in low level export income. In order to change this rate the promoter this
project planned to produce quality fruit and vegetables.

Regarding market, Ethiopian exports large quantities of fresh fruits and vegetables to Djibouti,
Yemen, Saudi Arabia and other Middle East countries. The project under consideration fruits
like papaya and Banana, vegetables like onion, Tomato, pepper, cabbage and carrot which are
highly demanded in the local markets and in the foreign market at large and food crops like
maize and sorghum to meet the increasing demand. With in the country the promoters try’s to
distribute to the capital city of the country and other parts of the countries region

9. Organization and Management

 9.1 Organization structure
The promoter’s effort is appreciable and it has to be supported by a proper organizational
structure which will enable the planned business enterprise achieve its objectives.

The organization structure presented below is envisaged to have taken the activities fruit and
vegetables production and the manpower requirement of the project is determined based on this
structure.

Project Manager

Production Marketing Administration &

Department Departme finance

Purcha
Agronom Superviso Administr Accounting
ser
y r ation Section

9.2 Manpower Requirement

The general manager at the top to manage frequently visits and supervises the farm site. Under
the general manager there will be different department which is assigned for different activities.
Other supporting staffs that have the essential skill relevant for the various support activities of
the project will be employed.

The total manpower requirement for the project outlay, their qualification, wages and
salaries are depicted in the following table below.
No Work title Qualification Monthly
salary Total
Number head (Annual)
1 Manager Bsc in plant science
2 4,000 96,000
2 Secretary Dep.Sec. science
5 1,500 90,000
3 Agronomist BA in Agronomy
5 2,500 150,000
4 Administrator Pup.admnistration.
5 3,000 180,000
5 Accountant Accounting
3 2,500 90,000
6 Purchaser & sales man Purchasing Magt.
3 3,000 108,000
7 Irrigation specialist Bsc in agricultural eng.
and irrigation 5 3,500 210,000
8 General agriculturalist Bsc in agricultural
economics 5 3,000 180,000
9 Cashier Dep. In accounting
5 2,000 120,000
10 Store keeper Grade 7 5 2,500 150,000
11 Supervisor BA in management
4 4,000 192,000
12 Teck.Head(chief TVET Level 4
mechanic) 3 1,500 54,000
13 Ass. mechanic TVET Level 3
2 2,000 48,000
14 Tractor operator Grade 12
2 3,000 72,000
15 Ass. Tractor operator Grade 10
2 2,000 48,000
16 Driver Grade 12+3rd level license
4 2,000 96,000
17 Laborers Grade 4-7
15 1,500 270,000
18 Electrician TVET Level 4 in
electricity 2 2,500 60,000
19 Tire and fuel man Grade 10
3 2,000 72,000
20 Guards Grade 5
10 1,500 180,000
21 cleaners Grade 6
10 1,500 180,000
22 Unskilled labor -
(Irrigation Workers) 100 800 800,000
Total - 200 - 1,700,000
N.B. The above salary expense includes the salary of both skilled and unskilled labors.
 10. PART FOUR

10.1. FINANCIAL REQUIREMENT

The financial resource is a prime resource for undertaking any activities. Hence for
implementing this project a total of 17,000,000.00 Eth birr is required. From this 20% or
3,400,000birr will be owner’s contribution while the rest 80% or, 13,600,000Eth birr will be
covered by bank loan. Therefore the said amount of finance is needed for undertaking the
following:
10.1.1. Fixed Cost Estimates

No Description Cost  
1 Fixed Investment    
1.1 Land, Building and Construction 4,760,000 0.00
1.2 Machines and Equipment’s 3,740,000 0.00
1.3 Vehicles and Motors 1,360,000 0.00
1.4 Office Furniture and Equipment 340,000 0.00
Total Fixed Investment Cost 9,350,000 0.00
2 Operating Expense   0.00
2.1 Raw Materials Purchase and Products 3,400,000 0.00
2.2 Salary Expense 1,700,000 0.00
2.3 Other Operating Expense 1,360,000 0.00
2.4 Pre-operating Expense 340,000 0.00
Total Operating Expense 5,950,000 0.00
  Contingency (Lump sum) 10% 1,700,000  
Total Investment Cost 17,000,000 0.00

The contingent costs will used for covering all other costs which are not stated in the financial
summary. For example all the costs related indirectly tot the irrigation scheme of the company.
Sources of Fund: source of fund to finance the project is planned to be from two sources,
owner’s equity and bank loan. The production site will produce 3 times a year and the costs for
working capital per annum is and others will be covered by the owner of the project, while the
rest of funds to run the project will be financed by the bank.
 4.1.1 Building & Construction
No Description Plot in m2 unit cost in birr Total cost
1 Office and Residences 500 2,000
1,000,000
2 Stores and warehouses 200 1,000
200,000
3 Green area and green belt Dev’t 500 1,600
800,000
4 Clear site 2,760,000
Total 3760000

4.1.2. Farm Tools and Equipments

N0 Description Unit Qty Unit cost Total cost

1 Hoes no 50 100 5,000
2 Spades “ 50 100 5,000
3 Axles “ 50 200 10,000
4 Water pump “ 5 12,000 60,000
5 Different tools and equipments “ 920,000
6 Janitors 1 1,000,000
7 Spink water machine 1,760,000
Total 12400

4.1.3. Vehicles

No Description Qty Unit Price Total Price Note

1 Tractor 2 255,000 1,360,000 Duty Free
Total 1,360,000

The company requires the above vehicles and farm machines. Currently, the company is using a
hired tractor for undertaking its harvesting schemes.

4.1.4. Office Equipments

No Description Qty Unit cost Total cost

1 Managerial Tables 2 6,000 12,000
2 Managerial chairs 2 1,500 3,000
3 Computer Tables 3 700 2,100
4 Secretarial chairs 2 450 900
5 Computer with its accessories 4 5000 20,000
6 Shelf 4 4000 16,000
7 Filing Cabinets 4 1,500 6,000
8 Guest chairs 16 500 8,000
9 Cash register 2 6,000 12,000
10 TV set 3 5000 15,000
11 Photo copy Machine 1 15,000 15,000
12 Reserved 240,000
Total 47   340,000

4.2 Expenses

4.2.1 Raw Material Purchase

Since the production of crops is divided in phases, the estimated and the production yield per
year will be 3 time a year since it is through irrigation. Labor cost, selected seeds, chemical
fertilizers and pesticides and any other costs related to the irrigation scheme of the company.
However the land under consideration is very fertile and as such does not consume excessive
chemical fertilizers. Moreover, the company itself will produces its own selected seeds and thus
reduce the cost of selected seeds used in the production.

Therefore, the unit cost of production is as follows.

No Description Hectare Unit cost/ Total cost

hectare (in birr)

1 Selected Fruit and Vegetables Seeds, 100 24,000 2,400,000

Chemical fertilizers ,Direct Labors ,
pesticides and others irrigation
schemes
2 Miscellaneous costs 1,000,000

Total 100 3400000340000

0

Moreover, all the crops are not equally consuming the inputs. Therefore the company will work
on reducing costs by designing tightened cost reduction strategies. Additionally the fruit and
vegetable does not consume excessive fertilizer and thus it only need different pesticides at the
time of blooming. Again, the owners will implement the project after three months of taking the
land, and he will do the project phase by phase so as to use the working capital from the project.

4.2.2 Estimated costs of salary expense

As indicated in part 4.1 (manpower) of this study, the total cost of salary and wages is estimated
to be 1,700,000.00 Birr for Fruit and Vegetables production Farms.

4.2.3 Other Operating Expenses

No List of Items Qty Unit of Unit cost Total cost
 Measure Per annum
1 Computer paper 10 Pack 400 4,000
2 Staples 10 “ 15 150
3 Pens, pencils, and others 20 pack 75 1,500
4 Detergents 100 pcs 40 4000
5 Uniforms 20 pcs 200 4,000
6 Water - - - 10,000
7 Electricity - - - 50,000
8 * Fuel Expense - - - 500,000
9 Telephone - - - 12,000
10 Repair expense - - - 50,000
11 **Lubricants 6400
11 Miscellaneous Costs - - - 5000
12 Computer and Printer 10 no 10,000 10,000
13 Reserve 10,000
Total 1,360,000

4.2.4 Pre -Service Expense

No Description Cost
1 Project proposal 10,000
2 EIA 30,000
2 Licensing fee and others 10,000
3 0thers related for fruit and 300,000
vegetable pre cost
Total 0

3.1. Loan Repayment Schedule 70% Bank Loan (2020-2030 G.C)

Yea Principal Interest Total Annual Remaining

r Payment (10%) Payment Balance
0 0 0 0 5,100,000
1 1,360,000 1,360,000 1,020,000 4,590,000

2 1,360,000 459,000 969,000 4,080,000

3 1,360,000 408,000 918,000 3,570,000

4 1,360,000 357,000 867,000 3,060,000

5 1,360,000 306,000 816,000 2,550,000

6 1,360,000 255,000 765,000 2,040,000

7 1,360,000 204,000 714,000 1,530,000

8 1,360,000 153,000 663,000 1,020,000

9 1,360,000 102,000 612,000 1,360,000

10 1,360,000 51,000 561,000 0

10.3 Annual depreciation schedule of the fixed Asset (000’ birr)

S Original Value Depreciation Depreciation
Description
N In Birr rate in % Per year
Construction and
1 4,760,000 5 238,000
Civil Work
Machines &
2 3,740,000 15 561,000
Equipment’s
 3 Vehicles 1,360,000 20 102,000
4 Office Equipment 340,000 15 51,000
  Total 9,350,000   952,000
11. Financial Statement analysis
Income Loss Statement
Fruit and Vegatable production Farm Profit /loss statement, projected
For year ended August 30, 2021
Balance Sheet
Asset
Current Asset  
Cash 2,550,000
Inventory of raw materials and inputs 3,400,000
Total Current Asset 5,950,000
Fixed Asset  
Land, Building and Construction 4,760,000
Machineries and Equipment’s 3,740,000
Office Equipment 340,000
Vehicles 1,360,000
Total fixed Asset 9,350,000
Total Asset  
Liability  
Account payable 11,900,000
Owners Equity 5,100,000
Capital  
Total Liability & Owners’ Equity 17,000,000

*sales expenses include all costs pertinent to sales that include: promotional costs,
transportation of products, commissions and other sales discounts.

Income Loss Statement

Revenue Year 1 Year 2 Year 3-10
Sales 1,500,000 1,575,000 1,653,750
Sales expenses (5%)* 75,000 78,750 82,688
265,075,09
Purchase of Raw Material 3,400,000 265,075,095
5
Gross profit -1,900,000 - -
 263,421,34
263,500,095
5
Expenses    
Salary Expense 1,700,000 1,785,000 1,874,250
Operating Expenses 1,360,000 535,500 562,275
Pre-operating Expense 340,000 357,000 374,850
Deprecation Building 238,000 238,000 238,000
Deprecation machine 561,000 561,000 561,000
Deprecation Vehicles 102,000 102,000 102,000
Deprecation office Equip 51,000 51,000 51,000
Lease Expense 3,000,000 3,000,000 3,000,000
Interest Expense 1,360,000 459,000 51,000
Total Expense  7,012,000 7,088,500 6,814,375
Profit Before Tax 1,500,000 1,575,000 1,653,750
Tax(30% ) 450,000 472,500 496,125
Net Profit 1,050,000 1,102,500 1,157,625

Cash Flow Statement        

         

Particulars Year0 Year I Year II Year III-XI

A. Cash Inflow 0      
 ·  Own equity 5,100,000      
·  Bank loan 11,900,000      
·  Depreciation 0 952,000 952,000 952,000
·  Net profit 0 1,050,000 1,102,500 1,157,625
Total inflow
17,000,000 2,002,000 2,054,500 2,109,625
B.  Cash outflow    
0  
·   Fixed capital    
9,350,000  
·  Working capital    
5,950,000  
. Contingency (Lump sum) 1,700,000    
10%  
·  Loan repayment
  1,360,000 459,000 51,000
Total outflow
17,000,000 1,360,000 459,000 51,000
Net inflow (A-B)
0 1,492,000 1,595,500 2,058,625
Cumulative balance
0 1,492,000 1,595,500 2,058,625

11.1 Capital expenditure

Capital expenditures are equivalent to the total financial requirements of the project. In the other
words they are initial investment outlays required to enter operational stages these capital
expenditures are constituted of fixed investment cost and initial working capital.

11.2 Fixed investment capital

Fixed investment costs are expenditures on the required fixed asset. The major components of
fixed cost are constituted of expenditures on machinery and equipment. The rest will go to
construction of civil works and the acquisition of office facilities.

11.3 Working capital

Working capital is part of annual operating cost and is required to make the project operational.
Expert for some operational costs whose yearly expense were taken as they are some limited
months expenses were taken as forecast the working capital requirement of the project.
According to the forecast made in detail the amount of initial working capital is founded to be
1.5 mill. birr.
11.4 Source of Investment capital
The forecasted investment capital is planned to rise from the owner’s equity/ promoter’s equity
30% contribution only.

11.5 Project income

The project earns its revenue by selling the proposed output by competitive in the market, the
sales of the projects output are determined in such a way that it does not impose higher price on
ultimate consumers. Accordingly, the project expects total sales revenue of 450,200 birr during
the first year and 1,500,000 when it starts operates at full capacity.

12. Financial viability

As it is a private firm established with the primary objective of generating profit the project
should be financially viable for the promoter. These financial measures for this study are
income statement cash flow analysis.

12. 2. Cash Flow Analysis.

The liquidity position of the project can be seen from the project cash flow statement. According
to this projection the project will be healthy financial position to repay all its debts. This is
because the analysis shows that the project will have positive cash flow throughout the
anticipated life.