Wheat and oil seed Production Enterprise

PROMOTER:- Mr.WERKU ABEBE BORGA

LOCATION:- EAST BALE GOLOLCHA WOREDA

1|P age project proposal developed for desert wheat

 Wheat and oil seed Production Enterprise

Table of Contents
CHAPTER ONE ......................................................................................................................................... 7

A. Executive Summary ......................................................................................................................... 7

B. The vision and mission statement of the project ....................................................................... 7

C. Background information of the project ....................................................................................... 7

1. Background of the project ............................................................................................................. 8

1.1. Objectives of the project .......................................................................................................... 9

1.2. key to success/ opportunities .................................................................................................. 10

1.3. Present status of the project.................................................................................................. 10

1.4. Strategic opportunities ............................................................................................................ 11

1.5. Business strategies.................................................................................................................... 11

1.6. Expected Benefits ..................................................................................................................... 11

1.7. Main Component of the Project ............................................................................................... 12

Table 1 main component to be implemented during project operation ............................................. 12

1.8. Management and Organizational Set up ................................................................................. 15

1.9. Study of the Project Area ....................................................................................................... 15

Chapter two ............................................................................................................................................ 17

2. Company analysis, legality and physical condition of the farm ............................................... 17

2.1. Legal structure of;..................................................................................................................... 17

2.2. Business Name and Address..................................................................................................... 17

2.3. Project site ................................................................................................................................. 17

2.4. Land Ownership (lease, rent, etc) ........................................................................................... 17

2.5. Physical and Natural Condition of the project Site ............................................................. 18

2.5.1. Climate ..................................................................................................................................... 18

2|P age project proposal developed for desert wheat

 Wheat and oil seed Production Enterprise
2.5.2. Rainfall ..................................................................................................................................... 18

2.5.3. Soil ............................................................................................................................................ 18

2.6. Infrastructure condition of the project area....................................................................... 18

2.6.1. Communication: ....................................................................................................................... 18

2.6.2. Road: ......................................................................................................................................... 18

2.6.3. Health centre’s; ...................................................................................................................... 18

2.6.4. Financial institution; .............................................................................................................. 19

Chapter three ........................................................................................................................................ 20

3. Marketing Analysis of the project.............................................................................................. 20

3.1. Demand Analysis......................................................................................................................... 20

3.1.1. Market System Analysis; ...................................................................................................... 20

3.1.2. Market segmentation............................................................................................................. 20

3.1.3. Risk Analysis ........................................................................................................................... 21

3.1.4. Risk management systems..................................................................................................... 21

3.1.5. Distribution channels ............................................................................................................. 21

3.2. Pricing techniques ...................................................................................................................... 21

3.3. Promotional and advertising ..................................................................................................... 22

CHAPTER 4 ............................................................................................................................................. 23

4. ORGANIZATIONAL PROFILE (MANAGEMENT TEAM) ....................................................... 23

4.1. Structure of the project which could show level status..................................................... 23

4.2. Skilled and unskilled manpower ................................................................................................ 23

Table 2 human resource requirement .................................................................................................... 24

CHAPTER FIVE ...................................................................................................................................... 24

5. Production Process......................................................................................................................... 24

5.1. Land Clearing; ............................................................................................................................. 25

3|P age project proposal developed for desert wheat

 Wheat and oil seed Production Enterprise
5.2. Grubbing; ..................................................................................................................................... 25

5.3. Leveling; ....................................................................................................................................... 25

5.4. Land Preparation & Sowing ....................................................................................................... 25

5.5. Fertilization ................................................................................................................................ 26

5.6. Weeding ....................................................................................................................................... 26

5.7. Disease & Pest Control .............................................................................................................. 26

5.8. Harvesting and Threshing......................................................................................................... 26

5.9. Environmental Impact Mitigation ............................................................................................ 27

5.10. Crop Rotation: ......................................................................................................................... 27

5.11. Soil Fertility: .......................................................................................................................... 27

5.12. Soil Sanitation: ....................................................................................................................... 27

5.13. Protection of Water Bodies ................................................................................................. 28

5.14. Land Management ................................................................................................................... 28

5.15. Management of Vulnerable Areas ....................................................................................... 28

CHAPTER SIX........................................................................................................................................ 29

6. Socio-economic Analysis ............................................................................................................... 29

6.1. Social Analysis ............................................................................................................................ 29

6.2. Market Analysis ......................................................................................................................... 29

6.3. Profitability ................................................................................................................................ 30

CHAPTER SEVEN .................................................................................................................................. 32

7. Farming Program, plan, and revenue estimation ........................................................................ 32

7.1. Farming Program of the project .............................................................................................. 32

Table 3 Farming program ......................................................................................................................... 32

7.2. Production Plan and estimated yield........................................................................................ 32

Table 4 production plan and estimation of revenue for each product.............................................. 33

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 Wheat and oil seed Production Enterprise
7.3. Summary of revenue .................................................................................................................. 34

Table 5 summery Revenue........................................................................................................................ 34

CHAPETER EIGHT ................................................................................................................................ 35

8. Financial Analysis ........................................................................................................................... 35

8.1. Source of Fund ........................................................................................................................... 35

8.2. Total Investment ....................................................................................................................... 35

Table 6: Total investment cost ............................................................................................................... 35

8.3. Financing structure.................................................................................................................... 36

Table 7 Financing structure .................................................................................................................... 36

8.4. Depreciation & amortization .................................................................................................... 37

Table 8 Depreciation & amortization ..................................................................................................... 37

8.5. Fixed Asset Investment ........................................................................................................... 38

Table 9 Estimated Fixed Investment cost of the Project ................................................................. 38

8.6. Loan requirement and repayment schedule............................................................................ 38

Table 10 Repayment schedule ................................................................................................................. 38

8.7. Project cost estimation............................................................................................................. 39

Table 11 project cost estimation ............................................................................................................ 39

8.8. Project Cash Flow ...................................................................................................................... 42

Table 12 Project Cash Flow...................................................................................................................... 42

8.9. Project Income Statement....................................................................................................... 42

Table 13 Project Income Statement...................................................................................................... 42

CHAPTER NINE..................................................................................................................................... 43

9.1. Challenges & Opportunities ...................................................................................................... 43

9.2. Monitoring & Evaluation (M & E) .............................................................................................. 43

9.3. Parameters for M & E ............................................................................................................... 44

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 Wheat and oil seed Production Enterprise
9.4. Conclusion .................................................................................................................................... 44

Content of tables

Table 1 main component to be implemented .................................................................................. 12

Table 2 human resource requirement ............................................................................................. 24

Table 3 Farming program .................................................................................................................... 32

Table 4 production plan and estimation of revenue for each product .................................. 33

Table 5 summery Revenue................................................................................................................... 34

Table 6: Total investment cost ......................................................................................................... 35

Table 7 Financing structure ............................................................................................................... 36

Table 8 Depreciation & amortization .............................................................................................. 37

Table 9 Estimated Fixed Investment cost of the Project ...................................................... 38

Table 10 Repayment schedule............................................................................................................ 38

Table 11 project cost estimation ...................................................................................................... 39

Table 12 Project Cash Flow ................................................................................................................ 42

Table 13 Project Income Statement ............................................................................................... 42

6|P age project proposal developed for desert wheat

 Wheat and oil seed Production Enterprise

CHAPTER ONE

A. Executive Summary

MR. Wheat AND OIL SEED Production Enterprise ; formed for lease of 200 hectares

of land for its agricultural project. The project mainly focuses on the area of producing

wheat and cotton. The farm will create job opportunities for 52 permanent and more

than 200 temporary persons. The total capital requirement for to the farm will be

estimated For implementing this project a total of 34,000,000.00 Eth birr is required.

From this 30% or 10,200,000.00 birr will be owner’s contribution while the rest 70%

or, 23,800,000.00 Eth birr will be covered by bank loan

B. The vision and mission statement of the project

Vision:- To be the main and competitive seed producer and supplier as well as wheat crop

producer and supplier company in the region, there by empowering the local community

with modern farm business, agricultural technologies, to enhance their farmproduction.

Beyond this the enterprises participate in social infrastructure development of kebele

and woreda levels.

Mission: - Produce and supply high quality cash crops to the local markets and

international markets.

C. Background information of the project

Name Mr. Werku Abebe Wheat and oil seed Production Enterprise

Project Address

o Region Oromia Regional state

o Zone EAST BALE zone,

o Woreda Gololcha Woreda

o Kebele will be stated in future

7|P age project proposal developed for desert wheat
 Wheat and oil seed Production Enterprise
Type of project integrated farm

Total area 200 hr

Initial capital 34,000,000Birr

1. Background of the project

This is the business plan for activation and operation of legal project of Mr.Werku

Abebe Wheat and oil seed Production farm. It purposes to function as domestic

investor in our country. This document is prepared by the founder of the enterprise.

The exciting economy strategy and concentration of the governments is to enhance the

food security as well as utilize the resources of the country to improve the living

condition of the citizen, by promoting the investment opportunity to domestic investor

as well as foreign investment by providing different type of incentives promised overall

economic climates.

The founder of the project propose to be beneficiary by current economy police and to

take to project as citizen of the country by rebuilding the country economy and hope to

bring change by utilizing the resource with technology in establishing modern farm. As

modern business, the ultimate purpose is operating this project at the profit.

Management at this project will pursue sound, will define policies and execute as an

effective and efficient marketing plan that will optimize profitability.

The major economic importance, farming is typically undertaken by subsistence farmers

on small plots of land. The generally luck capital, proper tools, good economic police,

integration with finance organization like banks and have little or no access to outside

market and technology. Thus, large scale farming and production are still conspicuously

8|P age project proposal developed for desert wheat

 Wheat and oil seed Production Enterprise
elusive to our country agro-industry, and the advantages they bring are

9|P age project proposal developed for desert wheat

 Wheat and oil seed Production Enterprise

not being realized. adequate infusions of capital and injections of vitalizing technology,

this industry that represents the heart of our economic structure will continuous at it

slow rate of development. As the life’s blood of socio economic development, agriculture

must be nurtured on a scale not seen before and rewards that follow must be dispersed

to the benefits of the larger rural populations.

Hence, there is an evident needed to promote farm development, improve the condition

of rural poor, and the overall economy of this land. There for, it is necessary to increase

the quantity and quality of food in the country, to create employments, to generate

foreign exchange, and to introduce modernizing technologies. In an effort of fulfill these

needs, Mr Wheat and oil seed Production is established with clear view of its in place

in society within which it will operate. It embraces its moral responsibility to help this

fertile land nourish to our people.

Mr.Werku Abebe Wheat oil seed Production: formed for leasing 31 hectares ofland

for its agricultural project. The company will produce wheat, wheat and cotton and others

in all the request land.

1.1. Objectives of the project

We are by providence placed in a position to provide an oil product specially wheat to the

world market and onion to the local.

In short terms:

safe and clear the designated farm land,

make permanent residence farm house buildings,

acquisitions seeds,

acquire transport and equipment,

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target regional markets,

expands distribution networks to neighboring region

transfer new technology to the local community/ farmers

In long terms:

make the permanent farm residence office building,

purchase additional farm equipment ,

establish infrastructure ,

create crop seed multiplication and plant nursery in the site

expands distribution networks to neighbouring countries

Generate income for the government in the form of taxation

1.2. key to success/ opportunities

The key to success/opportunities in the projects are:

sub_ tropical climate _ it characteristics adequate annual rain fall, temperature

and fertile soils,

providing environments conductive to produce agricultural products

high level of ground water resources deemed suitable for irrigation

flat topography of the land which is suitable for mechanized farming methods

the absence of industrial pollutants existing in the soil ,ground water, and air

around the project site

conducive political stability around the site currently

1.3. Present status of the project

Mr.Werku Abebe Wheat and oil seed Production Enterprise; starts its operational

activities immediately after the land is given and approved by the regional government
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and has the plan to finish 31 hectares of the land in five production years.

1.4. Strategic opportunities

Resource advantages; - the enterprise will own the sufficient hectares of land

which is virgin, very fertile land and able to produce different crops. The lease

of the time is long and the lease cost is also least.

Marketing strategies:- the enterprise has the following market advantages

The ever increase of demand of oil seed crops to domestic and international

market

The enterprise also rent tractors for farmers by buying additional tractors.

1.5. Business strategies

Market lead production; - which is strongly supported by continuous market

research assessment and analysis demand and supply of the market based on

existing market situation. The project produces and supplies the oil seeds and cash

crops by studying the gap of the markets.

Production based on highest per hectares productivity level; - the enterprise

will select the type of crops which have high market demand for production and

ability to produce highest yield per hectare.

Resources Requirements; - the project required non related and related resource

to operate the day to day operation of its farm business. Some of this resources

are;

Human power both professional and daily labors

Financial resource

Raw material such as; improved seeds, fertilizers, sacks, chemicals and etc.

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Machineries and equipments such as tractors, hand tools, vehicles etc.

1.6. Expected Benefits

Some of the direct financial benefit are;- very progressive, potential and

attractive profit to the owner. For financial institutions give interest for their

loan, export earnings for the government and increase domestic market supply,

the firm provides competitive selling prices of the produced crops.

Some of the most vital non financial benefits are;- create on farm and off job

opportunities to the local community, adopting and diffusion of modernfarming

technologies and inputs, achieve food self sufficient and so on

1.7. Main Component of the Project

Table 1 main component to be implemented during project operation

No_ Main component The activities under the component

of the project
1) A. Technology transfer for local societies

The project will farm by modern technology and mechanized

way and it will promote for societies.

Contribution of
B. Infrastructure development
the Project for
The projects will old road maintaining and constructing new
societies
road which serve both for the societies and the project.

supporting health post in material and financially

supporting primary school both by material and financially

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2) Environmental protection plan of the project

Seedling indigenous plants and distributing for societies

The project plan produce indigenous and economically important

Develop Environmental Impact Mitigation on the project

Environmental
Soil Sanitation
protection plan
Protect Water Bodies which is in the project

Land Management; which is not suitable for mechanized farm

forestation ; covering areas in the project by the forest

Protecting soil erosion by planting trees

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Using waste material as fertilizer (composting)

3) Out growing plan of the project

The project plan to develop training center collaborating with

government body like Agricultural and rural development bureau,

Out growing plan
specially establishing Farmer Training Center (FTC) in the

kebele where the project will established and train the local

societies the way they increase productivities in small land

(out growing).
4) Capacity and commitment

To operate the project success fully, owner has the following

Loan from bank ------ 23,800,000Birr

Owner equity 10,200,000 Birr

Total capital 34,000,000birr

will purchase farm machinery in the future like;

4 tractors with full machinery

1FSR ISUZU
Capacity and 1Pick up
commitment 1Tracker

1 Dozer

1 combiner

1 planter

1 chemical spry machine

1 transport vehicle

2 motor cycle

2 generator

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5) The overall production plan of the project

The overall The project will export 70% of the total production output

production plan /edible oil/ and it distribute 30% for international and local

market respectively.
6) The experience of the investor

The experience The owner have experience on producing edible oil and also it

of the investor will be managed by experts those graduates in Agronomist and

other related fields.

7) Value adding of plan of the project

after the project will be operational and transfer to production

the investor plan in two way

Short run plan; in short run the production product will be

value adding plan
used as raw material for the factory planted in Addis Ababa.

And producing standardized edible oil.

Long run plan; in long run the project will establish Agro
industry and process the product into edible oil which will

be distributed to local and international market.

8) The project plans on working environment

The project plan to construct shelters for permanent and

Creating
temporary worker
conducive
The project plan to establish health post, restaurant hall,
working
entrainment area for the employees
environments
The project plan to pay attractive salary

Practically advising the worker to deposit the salary they earn

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1.8. Management and Organizational Set up

The proposed organizational and managerial set up of the project comprises management

and technical divisions. The project comprises of managerial, production, financial and

administrative divisions. The project manager, Mr.Werku Abebe will serve both as a

manager and contact person. The duty & responsibility of each division is highlighted

below.

General Manager: The general manager manages the entire business. Moreover, he deals

with strategic planning and decision making matters.

Production division:

is responsible for crop production, supervision and provision of farm inputs and

outputs,

conducts regular follow up and evaluation with regard to farm operations,

supervises the overall operations of the enterprise,

Finance and administration division:

Works directly under the manager and is responsible to him,

Consists of different sections that handle a variety of responsibilities,

Keeps different books of records,

Prepares periodic financial plans and reports for the manager as well as external

users &manages the logistics and human resource aspects of the project.

1.9. Study of the Project Area

Mr.Werku Abebe Wheat and oil seedProduction Enterprise will be established in

Oromia Regional State, East Bale Zone, Gololcha Woreda, and kebele's will be stated in

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the future. The project area experiences sub-tropical temperature and lies in low land

agro- climate zone. The area is selected for investment as it satisfies the following

criteria employed by Ethiopian investment authority.

The area is fully investment site specially for agricultural sector,

The area is not covered by both forest and animal species of ecological

importance,

For the sake of conserving, developing and properly utilizing the woreda’s

agriculture, Gololcha woreda were suitable for the envisaged purpose in terms of

environment.

Chapter two

2. Company analysis, legality and physical condition of the farm

2.1. Legal structure of; -

Mr.Werku Abebe Wheat Production Enterprise is formed as private limited company

by the Ethiopian citizen. The company will get its legal registration from B/G/regional

state.

2.2. Business Name and Address:

The Name of the project;Werku Abebe wheat and oil sedProduction

The Owner Address; England London

Project offices;- proposed to open in either Addis Ababa town

Project Address;- Gololcha woreda

2.3. Project site

The project site is found in Oromia Regional state East Bale Zone, Golollcha woreda, the

kebele will be stated in the future. The total area of the project is 200 hectares out of

which around 5-7 hectares assumed covered by forest, stone, hill, valley and which not
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suitable for crop cultivation.

2.4. Land Ownership (lease, rent, etc)

The land farm obtains from B/G/regional state in either Gololcha woreda. The land

lease from regional government for 25 years for lease rent 154.50 birr per hectares

annually. Once the land is leased, demarcated and handed over by the concernedauthority

to the project, it will carry out different activity like land development, construction and

building, inter farm development etc.

2.5. Physical and Natural Condition of the project Site

2.5.1. Climate

The project areas are categorized sub tropical, hot low land to warm sub humid moist

low land which is kola. The Golocha woreda are district has average minimum temperature

(25, 27 degree celcues).

2.5.2. Rainfall

The average annual rainfall of the study area ranges from 1000mm to1600mm.

2.5.3. Soil

In Golocha district, the soil would be sandy clay to loamy clay. The texture is clay with

strong angular blocky structure. These soils have the potential to produce different oil

seeds, cereals crops and vegetable like onion and other.

2.6. Infrastructure condition of the project area

2.6.1. Communication:

In regard to communication, the project area is not connected with telephone

connections, but we hope that, the government will plan to expand the telecommunication

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service to all area in Ethiopia in these five years.

2.6.2. Road: -

Golocha woreda’s were connected roads to region capital city bale .

2.6.3. Health centre’s;

In Golocha woreda, health post and clinics are constructing and the health service

coverage is increasing gradually. In order to protect the well being/safety of the worker

and the society around the project, an owner of the project is willing to open his own

clinic in the farm site or should ready to afford any medicines before from nearby

government clinic.

2.6.4. Financial institution;-

The enterprise can get financial services from commercial bank Golocha .

Chapter three

3. Marketing Analysis of the project

3.1. Demand Analysis

Ethiopia demand for grain continued to increase because of the population pressures,

while supply remain short, and largely for increasing the foreign currency especially from

oilseeds and the domestic demand also increase for those crops. Oil seeds are the

second largest foreign currency earning sector of the country next to coffee. Ethiopia

government has also an ambitious plan to boast different factories that require

agricultural product as input. Ethiopia at the moment is also importing huge quantity of

edible which could have been substituted if the local factories weredeveloped. Export

of wheat has grown from year to year. Due to the above point there exists enough

demand for oil seeds and cereals crops both in domestic and international market.
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3.1.1. Market System Analysis;-

Market situation for oilseeds and cash crops

The indicators of oilseeds market are;-

The market for oilseeds and cash crops are expending in international market

Ethiopia being expand its export market destinations through time to time

Local production improves and the supply of the crop increase

3.1.2. Market segmentation

The enterprise has the following market segmentation

To the government and private organization for industry with Ethiopia commodity

exchange. ( ECX)

To whole seller for exporter or domestic market

To regional and individual customers

3.1.3. Risk Analysis

The major anticipated risks of the enterprise will face the following factors

Absence of rain fall and erratic nature

Pest and insect migrations

Crops failure

Wild fire

Infrastructure problems, especially water, electric power, road and financial

institutions

3.1.4. Risk management systems

Doing experiment and research during cultivation periods

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The enterprise get insurance for any risks

Clear the surrounding place to prevent wild fire

Digging ground water hole in the project site

Install generator to the project site

Use chemical and pest acid inputs for the farm

3.1.5. Distribution channels

The enterprise use different distribution channels to makes its product available and

accessible to every end user and trader or Ethiopian commodity exchange (ECX) and in

the future plan to export the product for international market.

3.2. Pricing techniques

The enterprise has several competitive cost advantage and topographic benefit for the

production of different crops. Due to this, the enterprises use the following pricing

techniques.

Market penetration price technique i.e. set competitive lower price to the product

to get larger quantities sales volumes

Quantity discount pricing techniques;- give discount advantages for large quantity

buyers to achieve advantages.

3.3. Promotional and advertising

The enterprise uses the following promotional techniques to penetrate market and to

achieve its forecasted sales targets;

Personal selling promotions; use sales force to present the crops to target

customer

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Trade fairs and expansions as means of promotions

Donations and free technological services to the local community.

CHAPTER 4

4. ORGANIZATIONAL PROFILE (MANAGEMENT TEAM)

4.1. Structure of the project which could show level status

It is structure of the project that shows how day to day operations are organized in

such a way that could enable to run smoothly the project activities effectively and

efficiently.

General Manager

Financial section and admin

manager
Production and technology
section manager

 Accountant  General  Driver

 Cashiers services  Guards Crop protection Technology
 Purchaser officer  Operator and production section
 Office  cooker
secretary

4.2. Skilled and unskilled manpower

The farm required 52 permanent and more than 200 casual labourers on average for
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each production season.

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Table 2 human resource requirement

No- Description Qty Monthly Total Total salary

Salary/ salary per per annual

individual month

1. General manager 1 4,000 4,000 48,000

2. Financial section manager 1 3,000 3,000 36,000

3. Technology and production 1 3,000 3,000 36,000

manager

4. Accountant 2 1,500 1,500 18,000

5. Casher 2 1,000 1,000 12,000

6. Office secretary 1 700 700 8,400

7. General service officer 2 1,000 1,000 12,000

8. Driver 4 1,500 3,000 36,000

9. Guard 4 1,000 2,000 24,000

10. Cooker 4 600 1,200 14,400

Total 22 244,800

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CHAPTER FIVE

5. Production Process

As far as production pattern is concerned, the 200 hectare will be proportionally

allocated for different types of production like wheat and others. However, as per the

prevailing market demand and the dynamics of nature, the planned production pattern

will be readjusted.

5.1. Land Clearing;

Prior to land levelling, removing heavy vegetation growth is advantageous. Clearing land

encompasses removing of some vegetation types such as trees, bushes, trashes and

boulders from the area to be cultivated. This is done either manually or mechanically. As

far as this project is concerned, land clearing shall be carried out both manually and

mechanically.

5.2. Grubbing;

The process of removing stumps, deep-set stones & old roots as per required. This will

be done by using human labour as well machinery.

5.3. Leveling;

As mentioned earlier, the project area will be virgin and covered with a variety of

vegetation types. In order to bring the area under cultivation, in the long run, land

clearing & grubbing activities will be carried out in an environmentally friendly manner.

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5.4. Land Preparation & Sowing

It is advisable that the preparation of crop fields should be carried out several weeks

prior to planting and as such an activity helps the pre-germination of unwanted or weeds

crops. Otherwise, a delay of the last tillage until the germination of those weeds is

desirable. Appropriate planting dates should be chosen so as to avoid risky environmental

conditions such as delay or extension of rainfall. Planting is recommended after a

thorough preparation of field crops which, in turn, ensures the rapid germination of

seeds as well as crop development. Crop fields should be well ploughed and prepared so

as to ensure proper harrowing and fine filth production. Planting depth should coincide

with common practices of the area in which the project is situated.

5.5. Fertilization

The application of fertilizers is to achieve maximum production while considering social,

economic and environmental factors. Appropriate fertilization depends on soil types,

environmental conditions and the type of the crop to be produced. The application of

fertilizers should be on the basis of expertise knowledge and this avoidscontamination

and environmental pollution.

5.6. Weeding

Proper control of weeds, insect pests and diseases is an integral part of crop production.

Proper weed control is instrumental as it largely facilitates aeration, proper growth of

crops, high yield, and avoids undesirable competition for sunlight, water & minerals. On

the other hand, improper weed control results in undesirable disease and insects which

leads to reduced yield and quality.

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5.7. Disease & Pest Control

Controlling of both surface and underground insects is important in crop production.

Most underground pests are controlled either by crop treatment or granular insecticides

application. The application of chemicals is essential for controlling insects which feed

particularly the silks, ears and tassels of crops. An integrated pest management program

(IPM), including proper scouting, is recommended. In the same manner, proper disease

control is vital for both quantity and quality crop production. Inaddition, proper disease

control mechanisms avoid the spread of crop borne pathogens. Genetic resistance in

parental lines is preferable but sometimes outstanding lines are susceptible to particular

pathogens present in production fields. In general, the project shares the responsibility

of abandoning the application of the internationally abandoned chemicals.

5.8. Harvesting and Threshing

Late harvesting results in dropping of ears, stalk lodging ear rot development, shelling

of ears and other related negative effects. As a result, harvesting should be done

immediately after maturity when crops form brown layer at the point of attachment with

cobs and the content of moisture is reduced to 20-25%. Harvesting is possible both

manually and mechanically. However, in developing countries like Ethiopia, the former is

more suitable as human labour is abundant and cheap.

5.9. Environmental Impact Mitigation

Experiences have shown that large scale mechanized agriculture has caused massive

environmental degradation such as deforestation, soil erosion and the like. Environmental

degradation is largely caused by unwise use of natural resources. Vegetative wise, at

present, the project area is mainly covered by savannah vegetation type with flat and

gentler topography. In order to minimize the adverse environmental damages and loss of

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soil fertility in sustainable manner, crop rotation and wind break mechanisms will be

employed.

5.10. Crop Rotation:

As opposed to the monoculture, crop rotation is a mix of cropping on rotational basis and

has the following merits:

5.11. Soil Fertility:

A rotation of different crops ensures soil fertility for a sustained period of time as

compared to a single crop grown on the same plot year after year. Even though man made

fertilizers like crop residue and compost are believed to be applied immediately after

the commencement of the project, chemical fertilizers such as urea and dap will be

employed as per the demand arises, i.e. when the land loses its virginity and fertilityand

after the approval of agricultural research.

5.12. Soil Sanitation:

Growing the same crop on the same plot continuously accelerates infestation with

diseases, insects and weeds resulting reduction in production and higher cost of

cultivation. A diligent follow up will be carried out in this respect so as to control the

possible adverse effects.

5.13. Protection of Water Bodies:

The project gives due emphasis to the protection of water bodies such as rivers &

streams. In doing so, the project moves in accordance with the regional land

administration & uses legal frameworks.

5.14. Land Management:

In the project area, land management will be ensured by the application of organic
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fertilizers and other improved agricultural practices. In addition, when the need arises,

the application of chemical fertilizers will be in effect. Nursery practices will also be

undertaken side by side.

5.15. Management of Vulnerable Areas:

The project gives due emphasis for the protection & conservation of easily vulnerable

areas such as sloppy, swampy and rugged areas. In doing so, such areas, instead ofbeing

cultivated, shall be left out or else managed and protected through terracing, plantation

and other conservation mechanisms.

CHAPTER SIX

6. Socio-economic Analysis

6.1. Social Analysis

The area in which the project is located is slightly poor in terms of infrastructural

provision as well as supply of daily labourers. However, the project tries to handle such

setbacks in a hand-in-hand manner with the regional as well as federal government

development Endeavour’s. As far as daily labourers are concerned, the project tries to

employ daily workers from the indigenous community and, if not, fetches from nearby

localities of other regions. Moreover, in addition to the various endeavour’s made by both

the regional & federal governments, transportation problems shall be alleviated by the

project. The farming system of indigenous community is by far traditional and hence the

project contributes much to the improvement of such practices.

6.2. Market Analysis

According to Ministry of Finance & Economic Development, MoFED, agriculture is the

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most contributors to GDP. For instance, in 2008/09, agriculture accounted for 42.5%

of the GDP per annum and, the contribution of crop production to GDP was 2%.

Grain production is the mainstay of the rural population as well as the economy of the

state. Commercial crops especially wheat is the 2nd largest export earner for the country

and a great deal of smallholders are involved in its production. The project has planned

to produce both commercial and consumable crops as the demand for both is increasing

at domestic & international markets.

Despite the difficulty of quantifying and determining the exact demand-supply gap in

the agricultural sector, due to an increase in population size, consumption pattern,

income, import-export transactions and other factors, one can easily imagine that

there is unmet demand-supply gap in the sector. Consequently, market wise, the

products of the project of the project are demanded both locally as well as

internationally. From the view point of the nation’s import-export trend, in 2007/08, the

total export value of Ethiopia, driven by high international prices of agricultural

products, grew by 23.7%. According to annual report of NBE, 2007/08, the value of

major agricultural products such as coffee, wheat, flowers, pulses, live animals and chat

has shown an increase of 23.65%, 16.9%, 57.7%, 105.5%, 11.12% and 16.5%,respectively.

An increase in the price of commodities in global markets has resulted in an increase in

the value of exported items. In the same period, the share of major agricultural

products, namely, coffee, wheat, pulses, flowers and chat from the total value of exports

was 35.8%, 14.9%, 7.6% and 7.4%, respectively.

In general, the existing market environment is quite favorable for the sale of farm

produce and purchase of inputs. In both cases the project can have access to local and

national market center of the country. Since the project is located in food deficit area,

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it has a vital role in stabilizing the price of food crops in the region. Therefore, the

project can sell its produce to market centers of ARSI, Chagni, Bahir Dar, and Addis

Ababa. Moreover, the sale of the produce at nearby markets is profitable even

immediately after harvesting is completed.

6.3. Profitability

According to the projected income statement, the project will start generating profit in

the first year of operation. Important ratios such as the percentage of net profit to

total sales, net profit to equity (return on equity) and net profit plus interest to total

investment (return on total investment) will show an increasing trend throughout the

production life of the project. The income statement and other profitability indicators

show that the project is viable. In line with this, the break-even point of theproject is

estimated by using income statement projection as

BE = Fixed Cost = 20 %

Sales – VC

The investment cost and income statement projection are used to project the pay-back

period. The project's initial investment will be fully recovered within 5 years. Based on

the cash flow statement, the calculated IRR of the project is 18 % and the net present

value at 5.4%. As far as the liquidity of the project is concerned, the project is free

from any liquidity problem throughout its life. Sensitivity analysis is among the crucial

elements of project evaluation. In line with this, the project under consideration has

been evaluated from three points of view: if price/benefit decreasesby 10%, its IRR will

be 10%. Similarly, if investment costs are increased by 10%, its IRR will be 13%.

Consequently, the project is feasible even under conditions unfavorable to it.

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CHAPTER SEVEN

7. Farming Program, plan, and revenue estimation

7.1. Farming Program of the project

The project, with full capacity, commenced production in 2024/25 production season.

In doing so, the project tries to fully develop the estimated 31 hectare of land within 5

years. Land clearing activities will be accomplished accordingly.

Table 3 Farming program

No Type of Unit Yield/ Land development And patricianly production plan

crops ha
2024/25 2025/26 2026/27 2026/27 2027/28

1. Wheat Quintal 6 16 20 26 29 31

7.2. Production Plan and estimated yield

The enterprise has an estimated area of 31 hectare of land and tentatively planned to

produce a mixture of crops such as Wheat, cotton, Maize, haricot bean, Soya bean, and

Sorghum. However, as mentioned above, the planned production pattern will be

readjusted as per the prevailing market demand and the dynamics of nature.

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Table 4 production plan and estimation of revenue for each product

Crop Yr1 Yr2 Yr3 Yr4 Yr5

1. Wheat

Area in Ha 120 200 300 400 600

Yield/Ha/Qt 6 6 6 7 7

Total production in 760 1200 1800 2,800 4,200

Quintal

Price per quintal 2,800 2,800 2,800 3,000 3,000

Revenue 2,016,000 3,360,000 5,040,000 8,400,000 12,600,000

2. Wheat

Area in Ha 110 170 225 280 280

Yield/Ha/Qt 40 40 45 45 45

Total production in 4,400 6,800 10,125 12,600 12,600

Quintal

Price per quintal 4,500 4,500 4,500 4,500 4,500

Revenue 19,800,000 30,600,000 45,562,500 56,700,000 56,700,000

3. Cotton

Area in Ha 30 30 75 120 120

Yield/Ha/Qt 15 15 15 15 15

Total production in 450 450 1,125 1800 1800

Quintal

Price per quintal 1,500 1,500 1,500 1,500 1,500

Revenue 675,000 675,000 1,687,500 2,700,000 2,700,000

4. Irrigation of

vegetable /

mango, lemon,

avocado, orange

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& others

Area in Ha 45 50 60 70 80

Yield/Ha/Qt 120 120 125 125 130

Total production in

Quintal 5,400 6,000 7,500 8,750 10,400

Price per quintal 1,000 1,000 1,000 1,000 1,000

Revenue 5,400,000 6,000,000 7,500,000 8,750,000 10,400,000

Total revenue

production year 10,216,000 13,260,000 18,697,500 25,205,000 31,055,000

Note: Yield per hectare in quintal estimation is made based on conventional production

practices. As a result, it is understood that yield per hectare in quintal can either

increase or decrease depending on the application of modern farming inputs and the

prevailing rainfall pattern

7.3. Summary of revenue

Table 5 summery Revenue

Revenue type Yr1 Yr2 Yr3 Yr4 Yr5

Revenue from wheat 2,016,000 3,360,000 5,040,000 8,400,000 12,600,000

Revenue from wheat 19,800,000 30,600,000 45,562,500 56,700,000 56,700,000

Revenue from cotton 675,000 675,000 1,687,500 2,700,000 2,700,000

Revenue from irrigation 5,400,000 6,000,000 7,500,000 8,750,000 10,400,000

Total revenue 27,891,000 40,635,000 59,790,000 76,550,000 82,400,000

Note: Revenue from each crop is estimated on the basis of current market prices.

Consequently, such prices are subject to market fluctuations such as inflation and other

related factors.
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CHAPETER EIGHT

8. Financial Analysis

8.1. Source of Fund

The total investment of the project is estimated to be an Ethiopian Birr 34,000,000birr.

Of which 70% (23,800,000) will be financed by the development Bank of Ethiopia in long

term. The remaining 30% (10,500,000) will be covered by the project owner. Other major

assumptions for financial analysis of the project are summarized hereunder. For the

sake of simplicity and financial analysis purpose, the life time of the project is assumed

to be 5 years. The project bears costs to a number of central facilities to support the

implementation of it. All fixed assets shall be replaced at the end of the expected

economic life based on three respective depreciation rates. A straight line depreciation

method is adopted for cumulative annual depreciation changes.

8.2. Total Investment

The overall investment required by the project includes fixed asset investment,

production cost, administration cost and working capital, and is estimated to be

34,000,000Ethiopian birr.

Table 6: Total investment cost

Description measurement Quantity Unit price Total

Land development Hectare 1,000 5,000 5,000,000

Pick up vehicle No. 1 3,500,000 3,500,000

Motorbike No. 2 35,000 70,000

FSR ISUZU No. 1 1,500,000 1,500,000

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Generator No. 2 45,000 90,000

Tractor with accessories No. 2 1,400,000 2,800,000

Dozer No. 1 2,000,000 2,000,000

Combiner No. 1 1,750,000 1,750,000

Planter No. 1 1,500,000 1,500,000

Building & construction Lump sum - - 300,000

Office equipment Bulk 200,000

Infrastructure cost Bulk 2,000,000 4,000,000

Working Pre-operating Bulk 11,629,930

Expenditure

Total 34,000,000

Note: The cost estimations are made based on current market prices. Therefore, they

are not exhaustive and hence they are subject to change due to inflation and related

factors.

8.3. Financing structure

Table 7 Financing structure

Description Equity Bank loan Total

Amount % Amount %

Land development 1,500,000 30 3,500,000 70 5,000,000

Pick up vehicle 1,050,000 30 2,450,000 70 3,500,000

FSR 21,000 30 49,000 70 70,000

Motorbike 450,000 30 1,050,000 70 1,500,000

Generator 27,000 30 63,000 70 90,000

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Tractor with accessories 840,000 30 1,960,000 70 2,800,000

Dozer 600,000 30 1,400,000 70 2,000,000

Combiner 525,000 30 1,225,000 70 1,750,000

Planter 450,000 30 1,050,000 70 1,500,000

Building & construction 90,000 30 210,000 70 300,000

Office equipment 60,000 30 140,000 70 200,000

Infrastructure cost 1,200,000 2,800,000 70 4,000,000

Working Pre-operating 6,188,979 30 14,440,951 70 20,629,930

expenditure

10,500,000 23,800,000 43,339,930

8.4. Depreciation & amortization

Table 8 Depreciation & amortization

Description Cost Rate 1-5 yr

Land development 1,000,000 20% 200,000

Pick up vehicle 500,000 20% 100,000

Tractor with accessories 800,000 10% 80,000

FSR 1,000,000 20% 200,000

Generator 90,000 10% 9,000

Building and constructions 300,000 20% 60,000

Office equipment 200,000 5% 10,000

Working Pre-operating 1,040,000 2% 20,800

expenditure

Total 679,800

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8.5. Fixed Asset Investment

The major investment items of the project include: Purchase of tractor with accessories,

4wd double pickup, FSR and Purchase of office equipment, Construction ofoffice and

residence.

Table 9 Estimated Fixed Investment cost of the Project

Description Quantity Unit price Total

Building & construction Lump sum 300,000 300,000

Tractor with accessories 2 1,400,000 2,800,000

FSR 1 1,500,000 1,500,000

4wd pickup 1 3,500,000 3,500,000

Generator 2 45,000 90,000

Motorbike 2 35,000 70,000

Office equipment & Lump sum 200,000 200,000

Furniture

Total fixed asset investment 8,460,000

Note: The cost estimations are made based on current market prices. Therefore, they

are not exhaustive and hence they are subject to change due to inflation and related

factors.

8.6. Loan requirement and repayment schedule

Table 10 Repayment schedule

Loan amount Principal repayment Interest Out ball

23,800,000 23,800,000

23,800,000 3,033,795.1 3,640,554.1 27,304,155.9

27,304,155.9 3,033,795.1 3,276,498.7 24,270,360.8

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24,270,360.8 3,033,795.1 2,912,443.3 21,236,565.7

21,236,565.7 3,033,795.1 2,548,387.9 18,202,770.6

18,202,770.6 3,033,795.1 2,184,332.5 15,168,975.5

15,168,975.5 3,033,795.1 1,820,277.1 12,135,180.4

12,135,180.4 3,033,795.1 1,456,221.6 9,101,385.3

9,101,385.3 3,033,795.1 1,092,166.2 6,067,590.2

6,067,590.2 3,033,795.1 728,110.8 3,033,795.1

3,033,795.1 3,033,795.1 364,055.4

Note: A term of four years loan repayment period and a grace period of nine months are

taken in to account. Plus, a 9.5% lending rate is taken in to account.

8.7. Project cost estimation

The cash flow of the project reveals that the project, including its loan, can easily settle

its financial obligation without difficulties. Even if the project shows short of cash in

the first year of operation due to pre-production expenditures, it turns in to liquidity

after the 1st year of operation. Details are shown below.

Table 11 project cost estimation

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Cost items Year 1 Year 2 Year 3 Year 4 Year 5

Seed 412,400 514,800 618,000 720, 597 823, 597

Chemicals 42,000 52,500 62,800 73,250 83,500

Spare parts 44,420 110,450 116,725 128,061 139,464

Wage 542,000 562,000 572,000 576,000 585,000

Fuel 112,500 117,500 122,500 222,500 322,500

Land rent 154,500 154,500 154,500 154,500 154,500

Packing materials 115,000 117,000 122,000 125,000 130,000

Salary 114,000 246,000 244,800 244,800 244,800

Repair & maintenance 5,000 14,400 26,970 40,970 50,970

Insurance 20,000 20,000 20,000 20,000 20,000

Office supply 15,000 30,000 30,000 35,000 40,000

Oil & lubricant 140,000 180,000 200,000 212,000 221,000

Travel &per diem 10,000 15,000 20,000 20,000 20,000

Depreciation & amortization 43,313 86,626 129,939 259,878 346,504

Tractor 2,400,000 2,400,000 400,000 400,000 -

4D pick up 2,750,000 - - - -

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Motor bike - 35,000 - 35,000 -

Generator 250,000 45,000 - - 45,000

FSR ISUZU 1,500,000 - 1,500,000 - 1,000,000

Dozer - 2,000,000 - - 1,500,000

Total operational cost 8,670,133 6,700,776 4,340,234 4,046,959 6,226,835

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8.8. Project Cash Flow

Table 12 Project Cash Flow

Description Yr1 Yr2 Yr3 Yr4 Yr5

Total revenue from

Sales 27,891,000 40,635,000 59,790,000 76,550,000 82,400,000

Total cost
8,670,133 6,700,776 4,340,234 4,046,959 6,226,835

Annual loan payment 3,033,795.1 3,033,795.1 3,033,795.1 3,033,795.1 3,033,795.1

Interest payment 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5

Revenue before tax 12,182,462 26,895,819 48,411,361 65,464,636 69,134,760

Income tax

4,263,861.8 9,413,536.8 16,943,976.5 22,912,622.7 24,197,166.1

8.9. Project Income Statement

Table 13 Project Income Statement

Description Year 1 Year 2 Year 3 Year 4 Year 5

Total revenue 27,891,000 40,635,000 59,790,000 76,550,000 82,400,000

Operating cost 8,670,133 6,700,776 4,340,234 4,046,959 6,226,835

Annual loan 3,033,795.1 3,033,795.1 3,033,795.1 3,033,795.1 3,033,795.1

payment

Interest 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5

payment

revenue before 12,182,462 26,895,819 48,411,361 65,464,636 69,134,760

tax

Income tax 4,263,861.8 9,413,536.8 16,943,976.5 22,912,622.7 24,197,166.1

Net profit 7,918,601 17,482,283 31,467,385 42,552,014 44,937,594

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CHAPTER NINE

9.1. Challenges & Opportunities

The project is viable to natural catastrophes such as climate changes like delay or

extension of rainfall. In addition, it is subject to market dynamics such as inflation which,

in turn, affects the import-export Endeavour’s of the project. Plus, the rise and fall of

market prices may also affect the project both negatively and positively.

At international level, the demand for agricultural products, both commercial & food

crops, is increasing at an alarming rate. This, in turn, leads investors to be beneficiary

& competent in the area. In other words, investors in question will be encouraged to

produce more in terms of both quantity and quality, and hence benefit from the

international arena.

The Ethiopian government has given due attention to the sector and has developed a

conducive investment policy together with a variety of incentives. In connection to this,

as the country is witnessing a double digit growth, different industries are expanding

which, in turn, creates a back-forth linkage between the sector & industries.

9.2. Monitoring & Evaluation (M & E)

The day-to-day activities of the project will be monitored by the agronomist. The general

manager shall visit the project site when necessary. The physical and financial plans as

well as reports of the project will be prepared and submitted to the general manager on

time. According to the reports submitted, the project will check and verify through

supervision. The financial and physical audits will be undertaken at the end of each year

either by internal or external auditors. In general, both heads of the management and

technical divisions, assisted by other relevant sectors, are the main responsible bodies

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for monitoring and evaluation of the project and a variety of

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criteria shall be taken in to account. In other words, the monitoring and evaluation part

will be carried out in an integrated manner.

9.3. Parameters for M & E

As per the stages of the project, the parameters to be monitored and evaluated

include project establishment, project implementation & progress, post implementation,

environmental management, data management, camp set up, protection of water

management, land management, application of modern agricultural inputs, and composition

of machinery and so on.

9.4. Conclusion

According to the study made, the aggregate and planned cost required to establish the

project is estimated to be 34,000,000Ethiopian birr. Out of the total financial

requirement, 30% will be covered by the investor and the remaining 70% will be covered

by loan from banks. In addition, the project is financially, socially, politically and

environmentally viable. In other words, the establishment of the project has immense

importance in this regard.

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