.

1. EXECUTIVE SUMMARY
Project Initiator: Mr. Sultan Selamo Coffee Plantation Project.The purpose of the newly
initiated project will require 1000 hectares of land for the purpose of coffee development just as
coffee project farming.
Project cost: The total estimated cost of the coffee and spices expansion project is
53,930,520.00 birr. From the total project cost 25% of the project cost (13,482,630.00 birr) shall
be covered by the owner's equity and the rest 75% (40,447,890.00) birr shall be secured from
Ethiopia Development Bank loan.
Land Requirement: The planned development project requires 1000 hectares of land for its
project. The land will be secured from Bench Sheko Zone , Guraferda Woreda, Kometa Seferera
kebele. The land shall be used for the development of coffee for the purpose of export.

Work opportunities: The planned project shall provide work opportunities for 51 permanent
and for 350 temporary workers – a total of 500 employees.

2. INTRODUCTION
Ethiopia is the third largest country in Africa with a total area of about 113 million hectares and
with a total population of about 100 million, of the total land mass, about 85% of the population
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lives in rural areas while the remaining 15% dwell in urban centers. The labor force, between 15-
65 years of age, represents about 50% of the total population. About 50% of the land area is
regarded to be potentially suitable for agricultural production. However, only less than 15% this
potential area has been cultivated. Of the cultivated area, more than 95% is under smallholder
farming and the rest is under commercial farms. Thus, there is a reason to believe that Ethiopia is
endowed with vast and potential of agricultural development.

Agriculture dominates the Ethiopian economy accounting for about 50% of GDP, 85% of the
employment and about 90% of the export reaming. Of the agricultural GDP crop production
accounts for about 60% and livestock accounts for about 30%. The most common crops
produced in Ethiopia are Wheat, Barley, Maize, Teff, Sorghum, Pulses, Oil crops, Fruits,
vegetables and coffee. As to crop production, despite its contribution and the countries natural
endowment productivity of the sector is by far below potential. This is because lack of the
employment modern agricultural implements, in addition to this, importance of private sector
that can recognize a coordinated roll of all factors of production (labor, capital, entrepreneur
ability etc) was not given a room to take part in the development process during the past regimes.

To overcome the problem related to produce good quality coffee bean and sesame grain that
satisfy the customer’s interest, efforts should be made towards developing the agricultural sector.
This needs a shift from traditional and backward method of production to a new and scientific
method of production system that requires a coordinated roll of all factors of production. In this
process, it is the private sectors should be pushed and encouraged by the government through
adopting a favorable economic policy that allows the sector to play active role in the
development process without capital ceiling. In recognition of the important of the agricultural
sector and understanding the major reasons behind the low state of the development of the
country, the Ethiopian government has emerged with free market economic strategy and the
adoption of an economic policy, which acknowledges the role, and importance of the private
sectors investment. This economic policy is promulgated with various initiatives for those who
want to invest their resources and knowledge in any profitable sector. Initiated by this favorable
conditions, the promoter of this project Mr. Sultan Selamo coffee plantation and production in
Bench Sheko Zone , Guraferda Woreda, Kometa Seferera kebele. This business plan tries to
explain the necessary information like description of the area, project technical consideration,
total investment capital, source of fund and other basic economic points relevant to the project.
Detail information on each point is given in the subsequent pages.

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3. OBJECTIVES
3.1 GENERAL OBJECTIVE

 To established and produce quality Arabica coffee for export market

3.2 SPECIFIC OBJECTIVES OF THE PROJECT

Mr. Sultan Selamo coffee plantation project has identified several objectives for the business:

 Become a leading supplier of Arabica coffee for the world market.

 Reach the point of sustainable profitability.
 To create employment opportunity for the people of project area,
 To introduce and promote modern farming system in the area,

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4. VISION, MISSION OF THE PROJECT

4.1. Vision
The Project’s vision is ‘to be the quality coffee producer farm preference in Ethiopia.

4.2. Mission
Mr. Sultan Selamo coffee plantation development mission to become the leading provider of
Arabica coffee to the world market. This will be accomplished by providing quality product at
fair prices while exceeding customer's expectations.

4.3 PROMOTER BACKGROUND

Mr. Sultan Selamu coffee project is initiated by the owner himself. Currently, the owner, Mr.
Sultan Selamu , owns businesses activities in coffee trade ,dry coffee hulling and wet coffee
pulping project in North Bench woreda, Serity kebele and various business activities most of
which are located here in Bench Sheko Zone.

4.4 THE PROJECT AREA

The 1000 hectare of land planned for the expansion project will be secured from in South west
Regional State in Bench Sheko Zone, Guraferda Woreda, Kometa Seferera kebele. As the vast
area of land site is considered neither as a forest area nor as farmers farm land the owner expects
will the zonal trade and industry department hand him the requested 1000 hectares from this
reserved area.

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4.5 FEASIBILITY STUDY

The ensure the project makes profit and grow sustainably to benefit all stakeholders, before
deciding to engage in the investment, DMD Import and Export coffee project farming.
undertakes feasibility study of the planned project such as availability of man power, availability
of land including expansion sites, accesses to road, electricity, telephone, and so on.

4.6 AVAILABILITY OF LAND

It is expected that DMD Import and Export coffee project farming site so far considered neither
as a forest area nor as farmers farm land. The altitude of this particular project shall range
between 1150 – 1200 meters above sea level, the temperature of the project area to fall between
18oc to 28oc and the rainfall to be adequate for coffee plantation, the project area to have fertile,
friable, loamy soil with more than 1.5m depth, The topsoil to be predominantly dark brownish in
color with a slightly sour ph.

4.7 AVAILABILITY OF MAN POWER

The farm requires both direct and indirect man power. The direct manpower, in addition to the
direct farm labor, requires head, farm management process, farm supervisors, and other
agricultural professional as well as experienced farm clerks. As Bench Sheko is one of the few
zones in the region that is known to have cheap labor, the farm will utilize existing manpower in
the zone. The presence of MizanTepi University will provides the project owner to recruit skilled
labor and professional required to run the project.

5. MARKET OPPORTUNITIES & SUPPLY AND DEMAND ANALYSIS

Coffee is produced in more than 50 developing countries providing income for approximately 25
million small holder producers and employing an estimated 100 million people. The bulk of the
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world’s coffee, however, is produced in Latin America. Ethiopia is among the top 10 Coffee
producing country and Africa's top producer. Average world coffee production in year 1977 to
1986 was 5.05 million tons, In years 1987 to 1996 it increased to an average of 5.76 million tons
and in years 2000/01 to 2011/12 it increased to 7.875 million tons.

Table1. World Coffee Production and Consumption

Quantity (000 tons)

Demand/
Years Production Consumption The Gap
2000/01 6,780 6,718 62
2001/02 6,449 6,796 -347
2002/03 7,327 6,917 410
2003/04 6,251 7,087 -836
2004/05 6,927 7,348 -421
2005/06 6,657 7,479 -822
2006/07 7,709 7,873 -164
2007/08 7,126 8,123 -997
2008/09 7,645 8,284 -639
2009/10 7,271 8,101 -830
2010/11 8,063 8,163 -100
2011/12 7,875 8,086 -211
Average 7,173 7,581 -408
Source: International Trade centre, www.tradeforum.org&www.interacen.org/eshop/welcome,
Last Updated on: The ITC’s Magazine and Publications & Products. Geneva, Switzerland
5.1 Consumption
About one quarter of world production is consumed in producing countries and the vast majority
of export goes to developed countries. Producing countries such as Latin America coffee
producing countries consume about 72%, Asia and Pacific 18% and Africa consumes about 10%
of the total consumption of coffee by producing countries. In Ethiopia, half of the coffee is
consumed by Ethiopians and the country leads the continent in domestic consumption. Out of
the importing countries consumption, 24% are consumed by the USA, 46% by Western Europe,
8% by Eastern Europe and Asia accounts about 14%. Although the top five consumers are the
USA, Brazil, Germany, Japan and France whiles the Nordic countries have the world’s highest
coffee consumption per capita.

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5.2 Demand and Supply Gap

As coffee is an internationally traded commodity, the analysis of key marketing variables would
not be meaningful unless the global situation is considered. For this reason, the three most
important marketing variables – supply, demand, and prices for coffee will be analyzed in line
with their corresponding situation at global market. Current experience by importing countries is
such that their annual import is the summation of coffee supplied by different producing
countries in the world. There is no single supplier of coffee committed to supply for a given
importing country. In similar manner, there is no single importer which exclusively import from
a specified supplier. For this reason, it would be difficult to actually determine the demand for a
specific importing country from a given supplying country. However, it is possible to show the
general demand trend of Ethiopian coffee by focusing on the world situation – world aggregate.

Aggregate world demand is the summation of - coffee consumption by producing countries & by
importing countries in the world. As it is shown in the table above, there is a huge gap b/n world
demand and world supply for coffee. Except in the years 2000 & 2003, the negative sign
indicated in the other 8 years would show the demand deficit in those respective years. This
would imply that the increase in annual production is driven by annual increase in effective
demand by importing countries. Considering the demand for Ethiopian Coffee, the increase in
demand by those 8 major buyers of Ethiopian coffee, which totally absorb about 52% of
Ethiopian coffee, has been increasing by a higher rate than the increase in production by the
former. While annual production growth, on average, in Ethiopia is 5.16%, the demand for
Ethiopian major buyers has increased up to 20%, in the past 10 years. According to the data
provided by ICO (International Coffee Organization), annual import for USA has increased by
20%, German by 15%, France, Italy, and Japan by 6%, and Canada by 3%. Considering trade
statistics of the past five years, one can see that more than 41% of the world export goes only to
three importing countries in the world: USA 20%, German 14.5%, and Japan 6.5%. Moreover,
recent studies in the area reveal that Ethiopian coffee has never suffered from lack of buyer in
the world market. What is supplied to the world market is fully absorbed by importing countries
provided there is no quality problem. Thus, provided the right quality offered and prices are
attractive, there are plenty of opportunities for getting more demand in the world market (in both
established and new markets). The emergence of new coffee consumers is another factor
affecting the world demand for coffee. Recent information from ICO report depicts that China
has decided to significantly shift from tea consumption towards coffee. There are also other
Asian countries following the same trend. This is the resultant effect of aggressive promotion
made by ICO since few years in the past.

The increase in coffee consumption by producing countries is another factor affecting demand
for coffee, for aggregate demand is compared against aggregate supply by world producers. India
(the second largest in population in the world) has declared to double coffee consumption in the
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coming 5-10 years, ICO report June, 2010. Ethiopia, through its consumption about 44% of the
total annual production, is categorized among the largest coffee drinking countries in the world
– 3rd in Africa and 15th in the world as far as coffee producing countries are concerned. This
could be regarded as an opportunity with regard to absorbing such a significant proportion of its
production; serves as a shock absorber particularly in case world demand for coffee fails
because of unknown reasons.

5.3 Target Market Identified for this Project

Currently, there are more than 50 importers of Ethiopian coffee in the world. Out of the these
importing countries, only 8 are known to be major buyers, namely; U.S.A., Italy, France,
Belgium, Germany, Saudi Arabia, Japan, and Sudan. On average, these countries import about
52% of total Ethiopian coffee exports. As it is the case elsewhere, the major importers of
Ethiopian coffee has increased their annual import from 1% up to 20% over those years ranging
from 2002-2009.

Since 2005 coffee prices have been increasing and reached the highest in a decade. As
consumers in India and China develop a taste for the drink and the demand in East Europe,
Russia and Brazil increased, prices are likely to keep rising. Moreover, something new is
happening in developed markets. Europeans, Americans and Japanese are switching to higher-
quality coffee. Discerning consumers now demand authenticity: they want stories about where
their coffee beans come from. Therefore, the best coffees will increasingly be differentiated, like
fine wines and spirits, and sold at previously unthinkable prices. Currently, the world is moving
from instant-coffee powder to luxury beans. Gourmets and specialist roasters have pushed up
expectations. Governments, activists and “ethical” coffee suppliers have worked to get higher
prices. All this is good news for coffee farmers in Ethiopia. Altitude, climate, soil and genetic
diversity give the country an inherent advantage in quality as compared to lower-grade Latin
American coffee. About 90 percent of Ethiopian coffee production is premium or organic coffee.
An agreement signed last year between Starbucks, the world's biggest coffee chain, and the
Ethiopian government has been touted as a big step forward. As a result, commercial coffee
farms would gain a lot from these opportunities. Sales of organic, fair trade, rain forest alliance,
forest, and other brand sales of natural and washed of Ethiopia is increasing.

The fact that a Specialty Coffee Association of America (SCAA); signing an agreement with the
Ethiopia Commodity Exchange (ECX), in June 2010 is an added opportunity for specialty coffee
producers in Ethiopia.

In addition to the major importers of Ethiopian coffee, through its other marketing company in
Australia (BEK Coffee International), the owner has established a new market segment in
Australia and South East Asia market with emphasis on Bench Sheko Coffee.
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6. PROCESS OF COFFEE PRODUCTION

6.1 Land Development
The activities of land development include bush clearing; tree felling, chopping and uprooting of
stems roots. Trash removals, leveling, heaping and ridge constriction are also parts of this
activity.

6.2 Seedling Preparation

The nursery site of the farm is to be located at the centers of the planting fields; on a flat areas
and gentle slope not greater than 5%. It is planned to be in proximity where permanent sources of
water for irrigation is available. The project intends to purchase CBD resistant, viable and
healthy seeds from State Coffee Farms and Coffee Research centers of EARI; and will establish
nurseries with the best growing conditions to produce vigorous and healthy seedlings. Seedlings
will be raised in poly tube methods.
Varietal Selection is the basic point to be considered before Seedling preparation. The success of
any modern coffee plantation highly depends on the kind of the variety. Variety selection is just
like working a good foundation for high story buildings. Having recognized the importance of
variety selection, the promoter has already established a good relationship with – Bebeka Coffee
Plantation, Office of Agriculture, and Jimma National Coffee Research Center.
The varieties selected for this project will be based on the recommendations of the above
institutions, and considering the ecological suitability of the area, CBD-resistant and high
quality coffee lines.
6.3 Coffee Planting
The coffee planting operation will spread over two months i.e. June and July.

6.4 Young Coffee Maintenance

The operations involved in the maintenance of young coffee up to 4 years after planting are
capping and pruning for multiple stem formation, infilling of dead trees, slashing, weeding and
mulching. In addition paths & tracks will have to be maintained and trees guarded from
destruction by wild animals certain amount of per tree of compost, DAP and UREA are applied
for fertilizing the young trees.

6.5 Mature coffee maintenance

The mature coffee trees i.e. 4 years old or more will need all the cultural practices of young
coffee except capping but more pruning. The additional coffee practice is picking. Some
activities like composting and weeding and mulching will require more manpower than the
young coffee trees.

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6.6 Harvesting and Processing

The harvesting and processing operation comes first in the 4 th year of operation, which is
expected, from September to December every year. The production from the project is expected
to be 100% sundried.

6.7 Thin piece picked

The entire crop is harvested at one time. This can either be done by machine or by hand. In either
case, all of the cherries are stripped off of the branch at one time.

6.8 Selectively preferred

Merely the ripe cherries are harvested and they are picked individual by hand. Pickers rotate
among the trees every 8-10 days, choosing only the cherries which are at the peak of ripeness.
Because this kind of harvest is labor intensive, and thus more costly, it is used primarily to
harvest the finer Arabica beans.

In Most coffee-growing countries, there is one major harvest a year; though in countries like
Colombia, where there are two flowerings a year, there is main and secondary crop. A good
picker averages approximately 100 to 200 pounds of coffee cherry a day, which will produce 20
to 40 pounds of coffee beans. At the end of a day of picking, each worker’s harvest is carefully
weighed and each picker is paid on the merit of his or her work. The day’s harvest is then
combined and transported to the dispensation stand.

6.9 IMMODERATION THE CHERRIES

Even as there are several coffee species, most coffee is made from the seed or bean of either
Coffee Arabica (Arabica coffee) or Coffee canephora (Robusta coffee). Arabica trees normally
produce berries 8-15 mm in diameter, and Robusta produce berries approximately 10 mm in
diameter. Commercially, Robusta is regarded as having inferior quality to Arabica coffee and is
used mainly as filler in instant coffee blends. Coffee berries are picked when they ripen to bright
deep red color, though there are a few cultivars that ripen to a deep yellow color. The coffee or
green bean lies within the fruit, and is surrounded by the parchment membrane, pulp or mucilage
and outer skin. Coffee processing in the home is very time consuming. Small-scale processing
equipment is now available in Australia. Equipment is also available from the United Kingdom
at considerable expense. Processing involves six main steps outlined below.

6.10 The dry system

The age-old technique of dispensation coffee and is still used in many countries where water
resources are limited. The freshly picked cherries are simply spread out on huge surface to dry in
the sun. In order to prevent the cherries from spoiling, they are raked and turned throughout the
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day, then covered at night, or if it rains, to prevent them from getting wet. Depending on the
weather, this process might continue for several weeks for each batch of coffee. When the
moisture content of the cherries drops to 11 percent, the dried cherries are moved to warehouses

6.11 In Wet Procedure

In wet procedure dispensation, the Hull is detached from the coffee cherry after harvesting and
the bean is dried with only the parchment skin left on. There are several actual steps involved.
Firs the freshly harvested cherries are passed through a pulping machine where the skin and pulp
is separated from the bean. The pulp is washed away with water. Usually to be dried and used as
mulch. The beans are separated by weight as they are conveyed through water channels, the
lighter beans floating to the top, while the heavier, ripe beans sink to the bottom. Next they are
passed through a series of rotating drums which separate them by size. After separation, the
beans are transported to large, water-filled fermentation tanks, depending on a combination of
factors such as the condition of the beans. The climate and the altitude they will remain in these
tanks for anywhere from 12 to 48 hours. The purpose of this process is to remove the slick layer
of mucilage (called the parenchyma) that is still attached to the parchment; while resting in the
tanks, naturally occurring enzymes will cause this layer to dissolve. When fermentation is
complete the beans will feel rough, rather than slick, to the touch. At that precise moment, the
beans are rinsed by being sent through additional water channels. They are then ready for drying.
6.12 Drying the beans
If the beans have been processed by the wet method, the pulped and fermented beans must now
be dried to approximately 11 percent moisture to properly prepare them for storage. These beans,
still encased inside the parchment envelope (the endocarp), can be sun dried by spreading them
on drying tables or floors, where they are turned regularly. Or they can be machine dried in large
tumblers, once dried these beans, referred to as parchment coffee, and are warehoused in sisal or
jute bags until they are readied for sell abroad.
6.12.1 Milling the beans
Previous to it is exported parchment coffee is processed in the following manner; Machines are
used to remove the parchment layer from wet processed coffee.
6.12.2 Hulling
Equipments are used to remove the parchment layer (endocarp) from wet processed coffee.
Hulling dry processed coffee refers to removing the entire dried husk the exocarp, Mesocarp &
endocarp of the dried cherries.

6.12.3 Polishing
An optional process in which any silver that remains on the beans after hulling is removed in a
polishing machine.

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While polished beans are considered superior to unpolished one, in reality there is little
difference between the two.
6.12.4 GRADING & SORTING
Previous to being exported, the coffee beans will be even more precisely sorted by size and
weight. They will also be closely evaluated for color flaws or other imperfections.

Typically, the bean size is represented on a scale of 10 to 20. The number represents the size of
round holes diameter in terms of 1/64’s 0f an inch. A number 10 bean would be the approximate
size of a hole in a diameter of 10/64 of an inch and a number 15 bean, 15/64 of an inch. Beans
are sized by being passed throng passed through a series of different size a series of different
sized screens. They are also sorted pneumatically by using an air jet to separate heavy from light
beans. Next defective beans are removed. Though this process can be accomplished by
sophisticated machines, in many countries, it is done by hand while the beans move along an
electronic conveyor belt. Beans of unsatisfactory size, color, or that are otherwise unacceptable,
are detached.
This strength includes over-fermented beans, those with insect damage or that are unshelled. In
many countries, this process is done both by machine and hand, insuring that only the finest
quality coffee beans are exported.
6.12.Tasting the coffee
By each stage of its production, coffee is repeatedly tested for quality and taste. This process is
referred to as cupping and usually takes place in a room specifically designed to facilitate the
process. First, the taster usually called the cupper carefully evaluates the beans for their overall
visual quality. The beans are then roasted in a small laboratory roaster, immediately ground and
infused in boiling water, the temperature of which is carefully controlled. The cupper “noses” the
brew to experience its aroma an integral step in the evaluation of the coffee’s quality, After
letting the coffee rest for several minutes, the cupper “breaks the crust” by pushing aside the
grounds at the top of the cup. Again the coffee is nosed before the tasting begins. To taste the
coffee, the cupper “slurps” a spoonful with a quick inhalation. The objective is to spray the
coffee evenly over the cupper’s taste buds, and then “weigh” it before spitting it out. Samples
from a variety of batches and different beans are tasted daily. Coffee is not only analyzed this
way for their inherent characteristics and flaws, but also for the purpose of blending different
beans or determining the proper roast. An expert cupper can taste hundreds of samples of coffee
a day and still taste the subtle differences connecting them.
6.13 EXPORTING THE BEANS
Milled beans, currently referred to as green coffee, are ready to be loaded onto shipped for
transport to the importing country. Green coffee is shipped in either jute or sisal bags which are
loaded into shipping containers, or it is bulk shipped inside plastic-lined containers. About seven
million tons of green coffee is produced world each year.

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6.14 Transporting processed clean coffee

At the initial stages the project will use rented vehicles to transport coffee from the farm area to
the local sites as well as processing plants. Transport to port is considered to be through hiring
external transport facilities.

7. Land Use Plan and production capacity

The project under reference has a total area of 1000 ha for coffee plantation. Full plantation of
1000 ha with coffee seedling.

Table1: Land use plan of the project

Developed /ha/ Year Total
1 2 3 4
1 Coffee 333 ha 555 ha 703 ha 1000 ha 1000 ha
Total 333 ha 555 ha 703 ha 1000 ha 1000
ha
7.1 Production capacity

As shown on table:1 above it is expected that Mr. Sultan Selamo coffee project farming is going
to undertake is coffee and spices farming for the purpose of supplying the product to foreign
markets. The expected annual yield to be collected from the farm is shown on table 7 below.
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Table2 Annual production capacities for Mr. Sultan Selamo coffee project farming.

Year Description Land to be Expected Total annual

developed /ha/ yield /ha expected yield(qt)
YEAR 4 Coffee 333 8 2,664
YEAR 5 Coffee 555 8 4,440
YEAR 6 Coffee 703 10 7,030
YEAR 7 Coffee 1000 11 11,000
YEAR 8 Coffee 1000 11 11,000

7.2 ANNUAL REVENUES FROM PRODUCT SALES

As shown on Table : 1 above, at full scale development, it is assumed that for Mr. Sultan
Selamo coffee project farming collects 11,000 quintals of coffee per year at full operation. The
expected annual revenue from the sales of coffee is shown on table 3 below.

Table: 3 Annual production capacity for Mr. Sultan Selamo coffee project farming

Year Crop harvested Total annual Price/qt Revenue from sales

(qt) expected yield
YEAR 4 Coffee 2,664 17,500 46,620,000.00

YEAR 5 Coffee 4,440 17,500 77,700,000.00

YEAR 6 Coffee 7,030 17,500 123,025,000.00

YEAR 7 Coffee 11,000 17,500 192,500,000.00

YEAR 8 Coffee 11,000 17,500 192,500,000.00

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7.3 Calendar for the main activities of the project

The main activities to be accomplished and the tentative schedules for implementing the
activities is shown below

Table: 4. Time table of the farm

Description Starting date Complete date

Preparation and submission of business july,2022 Augest,2022
plan
Acquiring land Jan,2023 Feb ,2023
Development of infrastructure March ,2023 April ,2023
Land clearing, lowing, cultivation, and harvesting April , 2023 May,2023
Production and sales May ,2027 -

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7.5 ORGANIZATIONS AND MANAGEMENT

The organizational structure of the project will be designed based on how best the services could
reach the services seekers with minimum expenses and high efficiency. The project is fully
owned and managed by General Manager of the project who is a qualified and well-experienced
person to run the business. Besides the project will be adequately staffed with qualified and
experienced personnel who could effectively execute their duties and responsibilities.

Organizational Chart

General Manager

Finance head Agronomist

Technical assistant

Supportive staff
Forman

Daily laborer

8. FINANCIAL ANALYSIS OF THE PROJECT

8.1 Capital Expenditure

Capital expenditure is equivalent to the total financial requirements of the project. In other
words, they are initial investment outlays required to enter operational stage. These capital
expenditures are constituted of fixed investment costs and initial working capital.

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8.2 FIXED INVESTMENT

Fixed investment costs are expenditures on the required fixed assets. The major components of
fixed costs are constituted of expenditures on machinery and equipment. The rest will go to
construction of civil works and the acquisition of office facilities. According to estimates made
by this project70.69% fixed cost will be birr 38,126,500.00

Table 6: Fixed Investment of the Project

No Type of fixed Investment cost Unit Quantit Unit Cost Total Cost
y
A Machinery and Equipment
1 Tractor Pcs 1 3,500,000 3,500,000
2 Hulling machines Pcs 1 2,000,000 2,000,000
3 pulping machines Pcs 1 2,000,000 2,000,000
4 Chemical Sprayer Pcs 200 1000 200,000
5 Farm Tools Bulk - - 300,000
6 Generator Pcs 2 500,000 1,000,000
7 Workshop Equipments Set - - 250,000
Sub Total 9,250,000.00

B Building and Civil Works

1 Office M2 1000 2500 2,500,000
2 Residential houses M3 3000 2500 7,500,000
3 Launge and M3 400 1000 400,000
4 Workshop M3 400 1000 400,000
5 Pack house M2 600 1000 600,000
6 Shed house for pulping machines M2 400 1000 400,000
7 Input Store M2 400 1000 400,000
8 Coffee Store M2 1000 1500 1,500,000
9 Fermentation tank M2 200 2000 400,000
10 Water recirculation system 2,000,000
11 Construction of lagoons No 3 60,000 180,000
3
12 Reserve weir construction M 100 2000 200,000
13 Machinery Shed M2 200 400 80,000
2
14 Generator/ Pump House M 240 1000 240,000
2
15 Shower and Toilet M 9 500 4,500

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16 Guard House M2 200 500 100,000

17 Access and Farm Road km 10 200,000 2,000,000
Sub Total 18,904,500.00

C Vehicles
1 Pick-up (D4D) Pcs 2 3,500,000 7,000,000
2 Track Pcs 1 2,500,000 2,500,000
Motor Cycle Pcs 2 150,000 300,000
Sub Total - - - 9,800,000.00

D Office Equipments
Chairs No. 32 500 16,000.00
Tables No. 32 1000 32,000.00
Computer No. 4 10,500 42,000.00
Printer No. 2 10,000 20,000.00
Shelf No. 6 5,000 30,000.00
Safe box No. 8 4000 32,000.00
Sub Total 172,000.00

Total 38,126,500.00
8.3 Working Capital
Working capital is part of annual operating costs and is required to make the project operational.
Except for some operational costs whose yearly expenses were taken as they are, some limited
Monthly expenses were taken to forecast the working capital requirement of the project.
Working capital include all project expenses other than fixed investment. They are expenditures
to be spent on annual operating items. As it will be seen letters in this document, working costs
in the year of the project life are estimated to be 15,804,020.00birr 29.31 % of the total capital.
In estimating operating costs, it has been tried to depend on current market information and on
the experiences of similar projects.

Table 7: Summary of production cost

No Description Value birr
1 Daily Labor 8,505,000.00

2 Coffee Seed 100,000.00

3 Fertilizer DAP 450,000.00
Urea 390,000.00
4
Packing Material 20,000.00
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5 Fuel, Oil and Lubricant 450,000.00

6 Salary 1,654,800.00

7 Other operating costs 4,234,220.00

Total 15,804,020.00

Table 8 : Manpower Requirement of The project

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No Description Quantity Monthl Annual

y Payment
Salary
1 General Manager 1 10,000 120,000
2 Farm Manager 1 7500 90,000
3 Administration 1 7500 90,000
Financial Manager
4 Unit Farm Head 4 4500 216,000
5 Accountant 2 4500 108,000
6 Foremen 10 2,500 300,000
7 Secretary 1 2500 30,000
8 Purchaser 1 2500 30,000
9 Cashier 1 2500 30,000
10 Seales person 1 2500 30,000
11 Storekeeper 2 2500 60,000
12 Chief Mechanic 1 3500 42,000
13 Assistant Mechanic 2 2500 60,000
14 Truck Driver 2 2,500 60,000
15 Pick-up Driver 2 2,000 48,000
16 Electrician 2 1800 43,200
17 Tractor Operator 2 2000 48,000
18 Water Pump Operator 2 1400 33,600 T
19 Assistance Tractor 2 1,500 36,000 a
Operator b
20 Guards 10 1000 120,000 l
21 Office Boy 1 1000 12,000 e
22 Cleaners 4 1000 48,000 9
Sub Total 51 1,654,800.00 :
D
23 Temporary worker 350×90×270d 90/day 8,505,000.00 e
ays p
Sub Total 350 8,505,000.00 r
Total 401 10,159,800.00 e
c
i
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ation Schedule
No Description Original Rate Depreciation
value
(Br.) % Per year
1 Machinery and equipments 9,250,000 10 925,000.00
2 Construction and Civil 18,904,500 5 945,225.00
works
3 Vehicles 9,800,000 10 980,000.00
4 Office furniture’s 172,000 10 17,200.00
Total 2,867,425.00

Table 10: Other operating costs of the project

No Description Annual Assumptions used
cost
1 Repair and maintenance
∙ Machinery and farm equipments 165,000 2% of original value
∙ Construction and Civil works 189,045 1% of original value
∙ Vehicles 130,000 2% of original value
∙ Office furniture’s 1,720 1% of original value
2 Stationery and office supplies 72,000 Birr6,000 /month
3 Par time and Traveling 99,480 5% of Annual salary
4 Land rent 49,000 1000 ha x 49Br.
5 E-mail, Telephone, Fax and Postage 24,000 2,000 Br./month
6 Audit, license and legal fee 25,000 25,000 Br/ year
7 Miscellaneous expenses 16,000 4000 Br./month
Total cost 771,245.0
0

Table 11: Summary of Investment cost

No, Description Total Cost (Br.)

1 Machinery and Equipment 9,250,000.00

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 .

2 Building and Civil Works 18,904,500.00

3 Vehicles 9,800,000.00
4 Office Equipments 172,000.00
Total fixed Investment Cost 38,126,500.00

5 Initial Working Capital 15,804,020.00

Total Initial Investment Cost 53,930,520.00

9. FINANCIAL EVALUATION

The planned investment cost needed to run the project will be secured from equity and from bank
loan. Of the total 53,930,520.00 birr required to run the project, 25% or 13,482,630.00 birr will
be contributed by the promoter and the rest 75% or 40,447,890.00 birr from bank loan.

9.1 FINANCIAL AND ECONOMIC ANALYSIS

Table: 12.1 Assumptions used in the financial evaluations of Mr. Sultan Selamo coffee project
farming

Construction period 2 year

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Source of finance 25 % equity 75 % loan

Loan duration 5 years
Tax holidays 5 years
Bank interest 9.5%
Depreciation 10% in the initial year with 1% decrease per year there after
Repair and maintenance 5% of the total farm machinery & equipment and buildings
Farming materials and inputs Incur 5% additional cost each year
Labour cost Incur 5% additional cost each year
Utilities Incur 5% additional cost each year
Tax 20% of the gross profit
Work in progress 270 days 270 days
Cash in hand 5 days
Accounts payable 30 days

9.2 LOAN REPAYMENT SCHEDULE

As mentioned above 75% of the investment cost or birr 40,447,890.00 birr will be secured from
loan granting banks. Depending on the time duration and the rate of interest, the project may
consider for securing the loan it requires for its development activities. The Ethiopia
development bank of Ethiopia and the various private banks in the country would be considered
as options for securing the loan.

Table:13 Loan repayment schedule

Loan Duration: 5 Years

Number of Payments: 60

Interest Rate: 9.5%

Monthly Payment: 674,131.5birr

Year Beginning Principal Interest Ending Balance

Balance payment Payment
0 40,447,890.00 - - -

1 32,358,312.00 8,089,578.00 3,842,549.55 11,932,127.55

2 24,268,734.00 8,089,578.00 3,074,039.64 11,163,617.64

3 16,179,156.00 8,089,578.00 2,305,529.73 10,395,107.73

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4 8,089,578.00 8,089,578.00 1,537,019.82 9,626,597.82

5 00 8,089,578.00 768,509.91 8,858,087.91

10. REVENUE ANALYSIS

Based on the projected income statement, the project will generate profit beginning from first
year of operation. Annual government tax will also grow during the life of the project. The detail
analysis is tabulated below

Table 14. Profit or Loss projection

Description Y-0 Y- Y-2 Y-3 Y-4 Y-5 Y-6 Y-7
1
Sales Income - - - - 46,620,000. 77,700,000.0 123,025,000. 192,500,000.0
00 0 00
Expenses - - - - - - - -
Fixed Cost 38,126,500.00

Variable Costs 15,804,020.00 15,804,020.00 15,804,020.00 15,804,020.00 15,804,020.00

Depreciation 2,867,425.00 2,867,425.00 2,867,425.00 2,867,425.00

Maintenance & 771,245.00 771,245.00 771,245.00 771,245.00

repair
Bank interest 3,842,549.55 3,074,039.64 2,305,529.73 1,537,019.82

Total Expense 53,930,520.00 23,285,239.55 22,516,729.64 21,748,219.73 20,979,709.82

Gross Profit 23,334,760. 55,183,270.3 101,276,780. 171,520,290.1

45 6 27
Tax 20% 4,666,952.09 11,036,654.072 20,255,356.054 34,304,058.036
Net Profit 18,667,808.36 44,146,616.288 81,021,454.216 137,216,232.144

Remark: There is No revenue from Year 1 to year 3 (2023-2025)

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 .

11. Environmental Impact assessment

11.1 Environmental Dimensions of Coffee production

The way coffee is grown and processed has profound environmental importance both locally and
internationally. This section focuses on four themes intimately related and which the project will put
measures in place: biodiversity and conservation of forest ecosystems; agro-chemical use; water pollution
from coffee processing; and soil quality. Each of these factories is critical to the environment and the
quality of coffee.

11.2 Biodiversity &Conservation of forest ecosystems

Deforestation trends are serious throughout the coffee-producing lands of Africa and Latin America.
Ethiopia is one of the coffee producing countries in the world where high deforestation rates are
encountered. By the late 1980s, for example, only an estimated one-fourth of the primary moist tropical
forest has been cleared for the purpose of different agricultural activities including coffee and cereals.

Bench Sheko´s forests are critical in protecting the atmospheric dynamics, water quality, and wildlife
species, as well as economically as reservoirs of germplasm which has multiple applications for food,
medicine, and industrial products. To preserve the Biodiversity & Conservation of forest ecosystems, the
project will employ a method of Traditional shade coffee systems.

Traditional, shade coffee production has been shown to be highly beneficial to biodiversity conservation
in tropical forest ecosystems. In South west Ethiopia, traditional coffee covers very significant areas with
closed canopy, fauna and flora species unique to the zone.

Traditional coffee is often integral to agro-forestry systems in which tree species are cultivated together
with the coffee and other agricultural commodities. Where geographic and market conditions are
favorable, economic returns can be achieved through sustained-yield timber production in association
with coffee. Agro-forestry systems, including those involving coffee, have potential to enhance the
economic and ecological stability of the area.

By providing an alternative to deforestation, traditional coffee systems constitute an important

check against greenhouse gas emissions that contribute to global warming.

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