PROJECT PROFILE ON

VEGITABLES PRODUCTION

BY

TEAM MEMBER

APRIL, 2013

DIRE DAWA

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 Content
1. Executive Summary ……………………………………………………………………………3

2. Introduction……………………………………………………………………………………4

3. Background……………………………………………………………………………………5

4. Policy Environment and Incentives……………………………………………………….......5

. Project Rationale………………………………………………………………………………...7

6. Project Objective………………………………………………………………………………..7

7. Project Area Description………………………………………………………………………8

7.1 Land Availability……………………………………………………………………………...8

7.2 Physical Infrastructure and Facility…………………………………………………………...9

7.3 Service Facilities……………………………………………………………………………..10
7.4 Labor Force Potential………………………………………………………………………...10

8. Project Description…………………………………………………………………………….11
9. Market Situation ……………………………………………………………………………...12

9.1 Supply and Demand ………………………………………………………………...…12

9.2 Farm Capacity …………………………………………………………………………12
9.3 Raw Materials required ………………………………………………………………….13

10. Indicative Cost of the project………………………………………………………………...15

11. Conclusion …………………………………………………………………………………..20

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1. Executive Summary

The last two decades, Ethiopia has been working tirelessly to transform its economy from a
closed, highly regulated, centrally planned and public dominated sector to an open, deregulated
and market-based economy. The reform program has resulted successful economic growth rates,
significantly higher volume of exports and private investment.Thus, by realizing the current
enabling investment in Ethiopia in general and the investment opportunities in Dire Dawa
Administration in particular, the vegetable production project is promoted to implement in Dire
Dawa Administration.

The establishment of a vegetable productionproject will be established at the Gedenser farmers

association on 60,000 m2. At present there is a great demand for fresh vegetables both for
domestic and export markets.

The total investment requirement is estimated at about Birr 7,691,400 out of which
Birr5,396,800 is fixed asset and the remaining 2,294,600 is working capital. The farm will create
employment opportunities for 51 persons.

The establishment of such farm will have a foreign exchange saving effect to the country by
substituting the current imports. Moreover, there is also a considerable export potential.

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2. Introduction

Ethiopian economy is an agriculture dominated economy. Eastern Harerghe including harrari,

Diredawa Administration, Central Ethiopia (Shewa and Arsi) and south western parts are the
known cultivation zones of vegetables in the country. Production of vegetables has been
increasing since 1991.Currently some 27,800ha of land is cultivated for production of selected
vegetables, and fruits out of which, less than 10% of the production is held by large state farms,
smallholder farmers’ accounts for some 92% of land and 90% of yieldcommercialized farms in
of the of the country mainly use imported or improved varieties of seeds, while private
smallholders mainly depend on traditional or local varieties.

The majority of vegetable production is organic by nature; however none of the farms in
Ethiopia has its production process certified against international recognized organic label which
is very important to compute in the international market.

3. Background

Vegetables’ production is one of the important farm enterprise in Dire Dawa Administration and
in its the surrounding areas. Most producers derive considerable cash income from the sales of
vegetables.Dire Dawa Administration has favorable conditions that would make it possible to
produce almost all types of vegetables.Vegetables, which are valuable for their high vitamins and
mineral contents, are the diet of the domestic people.There is potential export market for high
quality and fresh vegetables. As a consequence, vegetable gardening should be improved and
expanded to meet the domestic and export market demand.

The vegetable production project will be performed considering the right vegetable crop, variety,
at the right time, with better farm management in order to get reasonable result. In this regard
producers of vegetables in the administration and surrounding areas have developed considerable
experiences and benefits.

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4. Policy Environment and Incentives

The Ethiopian government has taken significant measures to encourage and promote investment
in the country. The private sector is encouraged to invest in almost all areas of the economy. The
expanded effort to realize free market system, liberalization of trade rules, promulgation of
investment rules, the launching of urban development policy and land development and
management policies are some of the measures taken.The newly launched investment rule is the
outcome of a series of amendment of the 1992proclamation. The aim of this proclamation is to
facilitate services to the investors, to provide integrated services in one stop-shop, strengthen
institutional mechanisms to fit to the required facilitation works.

A. Free market economy: In contrast to the socialist oriented command economic system
pursued by the previous Derg regime, the government is now following policies, which are in
line with the principles of market economic system.The role of the private sector in the economic
development process of the country is recognized and the government practically expressed its
readiness for dialogues with representatives of the business community and work hand-in-hand
with the private sector. This situation will allow a timely detection of constraints in the sector
and proposal of appropriate remedial measures and consequently, create a favorable condition
for the development of the trade and industry sector.

B. Industrial Development Strategy: The industrial development strategy of Ethiopia is

formulated with the objective of offering

better opportunity for the development of industrial and trade sector especially for agro-
processing and other export-led industrial developments. It has been found necessary to
encourage the integration of domestic and foreign investors in the industrial development of the
country and the involvement of the society for industrial development.

C. Rules and Regulations: Besides, the various conditions that create conducive
atmosphere for the industrial and trade development, the Proclamation No. 280/2002 i.e.
Reenactment of the Investment Proclamation, is another important stepping-stone to lure
investment opportunities in the city. Council of Ministers Regulations No. 84/2003, i.e.
Regulation of Investment Incentives and Investment Areas Reserved for Domestic Investors on

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the other hand also provides incentive by exempting from income tax for a certain period
conditioned on some aspects.

5. Project Rationale

Dire Dawa is the ideal place for vegetable production investment because Dire Dawa
Administration has conducive agro-climatic condition,existence of local and foreign markets,
strong linkages with the surrounding regions and the nearby countries (Djibouti, Somalia and
Somali land), availability of land both in quantityand quality for vegetable production and other
development activities. The existence of specialized services related to customs service, shipping
and logistic service, quarantine service, banking and insurance services, increased trend of
information technology based services utilization capacity and coverage, the compact nature of
the administrative hierarchy (two layer administrative system) that minimizes bureaucratic
lines,are the main conducive environments for the project implementation.

6. Project Objective

6.1 General Objective

The primary objective of vegetables production project is to play role on the eradication of
poverty.

6.2 Specific Objectives

The project has the following specific objectives.
 To supply vegetables productsto the domestic and export market,
 To create additional job opportunities in the administration,
 To transfer knowledge to the surrounding farmers
 To support the government in livelihood improvement efforts
 To generate additional foreign currency to the country
 To contribute to the development of the region

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7. Project Area Description

According to the statistical abstract report of Dire Dawa of year 2011 the potential land area for
the rain fed agriculture is 22,450 hectares; out of which about 12,007 hectares are presently
cultivated.

7.1 Land Availability

There is sufficient fair priced Agricultural land resource, especially in North West part of the
Administration which can be accessed for vegetable production investment to be used with
supplementary irrigation. The project site is very near (in a range of 3 to 7 km) to
Melkajebdu,which is one of Dire Dawa city urban kebele. In this area, underground water
resource is availability that could be extracted for irrigation. The alluvial soil of the project area
is very conducive for vegetable production.
The land lease price and period for different uses is already set in which for commercial
activities it has been set as 70 years.The arrangement of the lease payment is based on advance
payment (20 percent of lease price). The rest of the payment will be accomplished up to 20 years
with a bank interest included.
Table 1: Dire DawaAdministration Lease Period Description

Purpose Lease periods

Housing 99

Manufacturing and industry 80

For education, health, science and technology, culture, sport, 99

research and study and nonprofit making philanthropist
institutions

For commercial purpose 70

For urban agriculture 15

For other purposes 70

Source: Dire Dawa Provisional Administration lease regulation No. 3/1996

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Currently the city Dire Dawa administration has embarked re-development schemes that intend
to recycle urban land, which would invariably require employing a land and property valuation
system to pay adequate compensation for previous developments as well as to allocate land for
new developments. Besides, it has delivered considerable land to developers in pocket,
transitional and expansion areas.

7.2Physical Infrastructure and Facility

a) Road: Dire Dawa Administration has about a total road length of 346.24 km with different
hierarchy and types and extended to different parts of the city. From this 249.9 km is gravel,
56.94 km coble stone and 39.40 km asphalt road of different standards. Other than this, the city
is connected to surrounding regions, other parts of the country and neighboring countries with
gravel and asphalt roads. Therefore, the area is internally and externally accessible and has
proper links.
b) Telephone: According to Dire Dawa Administration Statistical Abstract, DireDawa, (2011),
the current telephone service users exceed 113,000. The GSM prepaid and post paid users are
110,539 while the fixed telephone users are about 12,300. Dial up internet users are 393. Both
private and business users have the larger number of the constituents. The provider of this
service is Telecom Ethiopia at a fair price. The existing service providing capacity is also higher
to accommodate diversified Telecom users. Therefore, Telecom service is accessible to fulfill the
project requirement to the standard.
c) Electricity: The major source of Dire Dawa city electricity supply is the connected lines of
the national grid system. According to Dire Dawa Administration Statistical Abstract (2011),
there are 25,066 private, 259 industrial, 338 government and 3,613 commercial customers of
electric from Dire Dawa substation. Based on the 200m 2 transformer coverage assumption, the
total coverage of electricity in the built up area of the city is estimated at 53.3%. The inner part
of the city has more access than the expansion areas.

7.3 Service Facilities

Among the major services required by the project, transport, training, financial, and market are
important elements. The city is highly benefiting from road, rail way and airline transport
services. Both freight and passenger transport services rendered to different parts of the country

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and to the neighboring counties. Therefore, there is proper accessibility for input and output
markets.There is TVTSchool administered by the government. Besides, there is one big public
university. Different private colleges and training centers are found in the area. Therefore,
necessary manpower capacity building supports can be availed at the spot. Regarding the
financial institutions there are 20 banks and insurances in the city. Therefore, loan and risk
transfer supports can be found within the project area.In addition to this the existence of
specialized services related customs services, shipping and logistic, conformity assessment,
quality inspection, quarantine, banking and insurance services, available trained and untrained
man power. The strong linkages of the city with the surrounding region and the nearby countries
(Djibouti, Somalia and Somali land) increased access to trade, existence of improved IT services,
effective health coverage and good practice in health extension serviceare among the main
services to be mentioned.

7.4 Labor Force Potential

Labor is an important element of the project requirements. The unemployment situation of Dire
Dawa city is higher compared to the situation of the major towns of the country and the overall
country total. Currently the unemployment rate of DireDawaCity is estimated at 22.9%. This
includes educated unemployed too and hence, the job seeker has a significant number. On the
other hand there are numerous public and private training centers engaged in offering different
short and medium term technical trainings. The labor mobility to the city for seeking better
opportunity was experienced from the surrounding areas, the hinterlands and from other parts of
the country. Therefore, the labor market is considered to be competitive and the potential is
found to be better. In general, it is accessible to obtain trained, semi trained and untrained man
power within the city with a required size.

8. Project Description
The vegetable production project is assumed to be implemented on a total of 6 hectares of land
out of which 5 hectares are for vegetables production while the remaining one hectare of land is
for built up area. The project components include site selection, crop and variety selection, land
preparation, including manure,seeding, thinning, transplanting, weeding, cultivation, frequent

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irrigation, disease and pest control, harvesting, transportation, storing and marketing. The
selected vegetables of the projects include tomato, pepper, cole cabbage, onion, garlic, and
potato. The production of the vegetables is performed in rotation bases taking to consideration
the appropriate time and market demand value.The project land preparation, cattle dung manure,
other inputs and harvested yield are transported using tractor purchased for the farm.Under
ground water is extracted from dug well to be pumped by generator power to be used for
supplementary irrigation.

9. Market Situation

9.1 Supply and Demand

Vegetable crops
Vegetables such as tomato, onion, pepper, compact cabbage, bulb crops onion and potato are
produced in the administration. The average area covered by vegetable crops in Dire Dawa
Administration is about 374 hectares and from which about 38,752 quintals was produced.
Productivity in Dire Dawa is 103.5 Qtls./ha (Table 6). Productivity and production of vegetable
crops in Europe and Asia is 330 Qt/h and 244 Qt/ha, respectively. Vegetable market has big local
and foreign market demand. Crops like tomato, onion, garlic, potato, compact-cabbage and green
pepper are highly demanded crops for fresh use. locally and abroad on the one hand, and Some
are used as a raw material for processed and canned industrial product at medium level for export
on the other hand. The yearly production of vegetables for the neighboring regions is also huge.
Vegetable crop production In Dire Dawa and neibouring region for the last ten years and for the
next five years are shown in Tables below
Table 1: Vegetable crop production in Dire Dawa for the last ten years.
Crop (000 Qtl) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ethiopian 10.6 9.4 10.4 9.8 9.0 6.4 5.2 8.0 9.8 11.9
cabbage
Tomato 16.2 9.2 10.5 17.3 17.2 5.1 9.3 20.5 98.0 80.2
Green pepper 2.9 1.8 1.4 1.3 0.4 0.2 4.9 4.9 5.4 4.8
Source: RGDP (regional growth domestic production) study report. Policy study, plan and development co-
operation office.CSA,2011.Area production for major crops.Agricultural sample survey, Addis Ababa.

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Table 2: Vegetable crop production in Dire Dawa for the next five years
Crop (000Qt) 2012 2013 2014 2015 2016
Ethiopian cabbage 13 14.3 14.3 15.7 15.7
Tomato 88 96.6 105.9 116.2 127.5
Green pepper 5.3 5.8 6.4 7.0 7.7

Table 3: Vegetable production of neighboring regions for the next five years
Crop (000Qt) 2012 2013 2014 2015 2016
Lettuce 8.6 9.52 10.56 11.73 13.02
Head cabbage 14.5 16.12 17.88 19.85 22.03
Ethiopian cabbage 103.98 115.4 128.10 142.2 157.8
Tomato 6.5 7.3 8.05 8.9 9.9
Green pepper 36.7 40.7 45.23 50.2 55.7
Red pepper 131.6 146.0 162.1 179.9 199.7

Generally, production of vegetables in the administration and the neighbouring regions has been
increasing since 1991, due to high market demand.However, the current vegetable production
couldnot satisfy the domestic and export demand.

Projected Demand

The demand for vegetable product is mainly influenced by population growth and income raise
the present value for each Kgs of vegetables increased enormously proving the shortage the
product. Hence by taking the estimated unsatisfied domestic and export demand as a base, great
effort should be applied to address the future unsatisfied demand for the products.

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9.2Farm Capacity

Considering the agro-climatic condition, pest,disease occurrence, and market demand the project
is planned to produce six types vegetable crops namely tomato, sweet pepper,compact cabbage,
onion, potato with outcome 2,420 tones of vegetables per annum .

9.3Raw Materials Required

9.3.1 Raw Materials of the project

The vegetable production of the project can be undertaken when two basic conditions are met:
the availability of six hectares of land, water supply for irrigation, In addition 80 horse power
tractor, six types of vegetable crop seeds, the pesticides and other Auxiliary materials required .
The raw materials requirement of the envisaged project is indicated in Table 4.

Table 3: Raw Materials Requirements

No Unit of Measures Qty Cost (‘000 birr)

Raw Materials
1. Tomato seed kg 10 5,000

2. Sweet pepper seed Kg 20 6,000

3. Compact cabbage seed Kg 15 7,500

4. Onion seed Kg 40 6,000

5. Garlic seed kg 20 5000

6. Potato seed kg 20 5000

7 Pesticides Litter 1000 150,000

Total 184,500

10 Indicative Cost of the project

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10.1 Fixed Cost

Land, Building and Civil Works

The total land requirement of the project is 6 hectare, out of which one hectare is a built-up area
which can accommodate product and raw material stores, offices and fences. The lease value of
land at a rate of Birr 9.78 per m 2 and for 60 years is estimated to be Birr 586,800 and the cost of
building and civil works is Birr1, 600,000 making a total birr 2,186,800, The cost breakdown for
the project is shown in the annex.

Construction cost

Lease Values of land hectare 6 586,800

Wire house 20x10mt unit 1 800,000

Fencing by angle iron and barbed wire mt 2400 480,000

Three 4x4 rooms number 3 120,000

Shallow water well digging number 1 200,000

Sub-total 2,186,800

A. Machineries and Equipment

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 No. Machinery Qty Unit Total price

1 Tractor with disk plough and trailer 1 900,000 900,000

2 Generator 1 500,000 500,000

3 Hand Tools/and other materials

 Pick axe 100 200 20,000

 Spade 100 200 20,000

 Rack 100 200 20,000

 Balance 1 200,000 200,000

 sprayers 100 400 40,000

Total cost 3180000

B. Office Equipment

The estimated cost of office furniture and equipment required by the proposed project office is
nearly birr 1,440,000.

No. Description Unit Qty Unit Price Total Cost

1 Tables Unit 8 40,000 320,000

2 Chairs Unit 32 20,000 640,000

3 Computers Unit 4 20,000 80,000

4 photocopier unit 1 400,000 400,000

Sub-total 1,440,000

10.2 Operational Cost

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A. Manpower Requirement

Man power requirement cost includes all the necessary expenditure required for the project on a
day today activity, which labor cost and input expenses are the main ones. As it has been
described on the previous sections, the nature of the project is not seasonal and it has 365
effective working days within a year. It is with the consideration the estimated required cost is
birr 1,806,000 for the project life (see Table XXX).

Table.XXXManpower Requirement for the project

Monthly Salary Annual Salary

No Description Req. No.
(Birr) (Birr)

1. General Manager 1 5,000 60,000

2. Secretary 1 1500 18,000

3. Accountant 1 3000 36,000

4. Accounting clerk 1 2000 24,000

5. Production Head 1 3,000 36,000

6. Store keeper 1 1500 18000

7. salesman 1 1500 18,000

8. Guard 12 700 108,000

9. Laborers 100 600 720,000

10. Mechanic 1 2000 24,000

11. Driver 1 2000 24,000

Total Cost 221 1,086,000

Utility costs/expenses
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Power water requirement will be covered by generator energy operating by 14,000 litter of fuel
per annum including the need for tractor fuel consumption costing birr 280,000 (see Table …).

No Description Required unit Qty utilized per year Unit cost Cost per year
Fuel cost litter 14,000 20 280,000

Total cost 280,000

Summary of Initial Investment Cost

No. Cost Items Total Cost (‘000 Birr)

Fixed Cost 5,396,800

 Land lease value 586,800

 Building and Civil Work 1,600,000

 Infrastructure Installation -

 Plant Machinery and Equipment 1,770,000

 Office Furniture and Equipment 1,440,000

Operating cost 2,294,600

 Salary 1,806,000

 Utilities 280,000

 Working capital 10% 208,600

7,691,400
Total Investment Cost

11. Conclusion

Vegetable production in Dire Dawahas a great advantage for producer from the facts that the
administration strategic location being nearer to export market. The availability human labor

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force of quarantine and other services will make the ideal place for the project. The financial
analysis of this vegetable production project profile indicates that it will invest the total cost of
birr 7,691,400. From this total investment cost birr 5,396,800 wiil be allocated for fixed
investment and the remaining birr 2,294,600 will be allocated for working capital during its
project life. The project also provides socio-economic benefits to the region: alleviating the
existing shortage of production, creating jobs and thereby reducing unemployment, and hence
contributing its share to the growth of the regional economy through taxes paid on revenue and
others.

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