PROJECT PROPOSAL FOR INTEGRATED FARM

DAIRY AND MILK, POLITRY, ANIMALS FOODER AND FEED

PROCESSING PLANT

PROJECT LOCATION:- BISHEFETU TOWN

PROMOTER- SOAL BUSINES PLC

JUNE, 2024
OROMIA, ETHIOPIA

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Contents
EXECUTIVE SUMMARY ........................................................................................................................ 6
1. INTRODUCTION ............................................................................................................................ 7
1.1. Background ........................................................................................................................... 7
1.2. Profile of the Promoter ........................................................................................................ 8
1.3. Project Justifications ............................................................................................................ 8
1.4. Objective of the Project ....................................................................................................... 9
1.5. Mission ................................................................................................................................... 9
1.6. The Economic Significance of the Project ......................................................................... 9
1.7. Location and Land Use Plan .............................................................................................. 11
A. Location ............................................................................................................................... 11
B. Land Use .............................................................................................................................. 11
2. MARKET STUDY.......................................................................................................................... 13
2.1. Trends, Drivers and Structural Characteristics of the Industry ................................... 13
2.1.1. Trend and Performance of Dairy Industry .............................................................. 13
2.1.2. Consumption ............................................................................................................... 15
2.1.3. Export ........................................................................................................................... 15
2.1.4. Structure of the Industry ........................................................................................... 15
2.1.5. Value chain in the dairy industry ............................................................................. 16
2.2. Market Demand Potential ................................................................................................. 20
2.2.1. Demand Projection ..................................................................................................... 22
2.3. Marketing Strategy and Promotion ................................................................................. 23
2.4. Milk and Dairy Production and Utilization ..................................................................... 23
2.4.1. Milk production .......................................................................................................... 23
Plant CapaTOWN............................................................................................................................ 24
2.5. Production Programme ..................................................................................................... 24
3. PROJECT, PRODUCTION PROCESS AND TECHNOLOGY ............................................................ 1
3.1. Type of Technology .............................................................................................................. 1
3.2. Product Nature ..................................................................................................................... 1
3.3. Selection of Herd Size & Composition ................................................................................ 2
3.4. Cattle Management .............................................................................................................. 3
3.4.1. Housing .......................................................................................................................... 3
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 3.4.2. Reproduction Management ......................................................................................... 3
3.4.3. Animal Nutrition System (Feeding)............................................................................ 3
3.4.4. Health Care .................................................................................................................... 4
3.4.5. Rearing of Young Stock ................................................................................................ 5
3.5. Raw Materials ....................................................................................................................... 5
3.6. Dairy Production Process and Technology ..................................................................... 6
3.6.1. Milk Processing ............................................................................................................. 6
3.6.2. Butter Production ....................................................................................................... 10
3.6.3. Cheese Production ...................................................................................................... 10
3.7. Machinery and Equipment’s ............................................................................................. 11
3.8. Project Design and Engineering ....................................................................................... 12
3.9. Utilities ................................................................................................................................ 12
4. MANPOWER AND ORANIZATIONAL MANAGEMENT .............................................................. 13
4.1. Manpower ........................................................................................................................... 13
4.2. Organizational Structure and management ................................................................... 13
5. INVESTMENT COST AND FINANCIAL ANALYSIS...................................................................... 17
5.1. Total Investment Cost ........................................................................................................ 17
5.1.1. Fixed Investment ........................................................................................................ 18
5.2. Annual Production Cost ..................................................................................................... 21
5.3. Financial Analysis and Statements................................................................................... 23
5.3.1. Underlying Assumption ............................................................................................. 23
5.3.2. Sources of Fund ........................................................................................................... 24
5.3.3. Loan repayment Schedule ......................................................................................... 25
5.3.4. Depreciation Schedule ............................................................................................... 25
5.3.5. Forecasted Revenue ................................................................................................... 25
5.3.6. Balance Sheet .............................................................................................................. 26
5.3.7. Income/Loss Statement ............................................................................................. 26
5.3.8. Cash Flow Statement .................................................................................................. 27
5.3.9. Profitability ................................................................................................................. 27
5.3.10. Pay-Back Period ...................................................................................................... 28
6. ENVIRONMENTAL AND SOCIAL IMPACTS OF THE PROJECT ................................................. 28

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A. INTRODUCTION ....................................................................................................................... 31
4.3. Objective of the Project ........................................................................................................ 31
4.4. The Socio-Economic Significance of the Project ................................................................. 31
4.5. Location, Infrastructure and Land ...................................................................................... 33
C. Location ................................................................................................................................ 33
D. Land ...................................................................................................................................... 33
5. MARKET STUDY AND PROJECT CAPATOWN ................................................................... 35
5.2.1. Market Prospects .......................................................................................................... 38
5.2.2. Target customers of the project ................................................................................... 38
5.3. Production Capacity and Program ...................................................................................... 38
5.4. Pricing .................................................................................................................................. 39
6. TECHNICAL STUDY ................................................................................................................. 40
6.1. Product Nature ..................................................................................................................... 40
6.2. Raw Materials and Inputs.................................................................................................... 40
6.3. Poultry Farm Management.................................................................................................. 40
6.3.1. Housing ......................................................................................................................... 40
6.3.2. Feeding .......................................................................................................................... 41
6.3.3. Lighting ......................................................................................................................... 41
6.3.4. Drinkers ........................................................................................................................ 41
6.3.5. Litter ............................................................................................................................. 41
6.3.6. Health Care................................................................................................................... 41
6.3.7. Fumigation and Spraying ............................................................................................. 41
6.4. Production Process ............................................................................................................... 42
6.5. Machinery and Equipment’s ............................................................................................... 48
6.6. Source of technology ............................................................................................................ 49
6.7. Project Design and Engineering .......................................................................................... 49
6.8. Utilities.................................................................................................................................. 49
6.9. Regulation and control standard ......................................................................................... 50
6.10. Project Implementation Plan/ Action Plan ...................................................................... 50
7. MANPOWER AND ORANIZATIONAL MANAGEMENT ..................................................... 51
7.1. Manpower ............................................................................................................................ 51

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 7.2. Organizational Structure and management ........................................................................ 52
10. INVESTMENT COST AND FINANCIAL ANALYSIS ......................................................... 55
6.1. Total Initial Investment Cost ............................................................................................... 55
6.1.1. Fixed Investment .......................................................................................................... 55
6.2. Annual Production Cost at Full Capacity ........................................................................... 58
6.3. Financial Analysis and Statements ...................................................................................... 60
6.3.1. Underlying Assumption ................................................................................................ 60
6.3.2. Sources of Fund ............................................................................................................ 61
6.3.3. Loan repayment Schedule ............................................................................................ 61
6.3.4. Depreciation Schedule .................................................................................................. 61
6.3.5. Revenue Projection ....................................................................................................... 62
6.3.6. Balance Sheet (Beginning) ............................................................................................ 62
6.3.7. Income/Loss Statement................................................................................................. 62
6.3.8. Cash Flow Statement .................................................................................................... 63
6.3.9. Profitability ................................................................................................................... 63
6.3.10. Pay-Back Period ........................................................................................................... 63
7. FUTURE DEVELOPMENT OF THE PROJECT ..................................................................... 64
8. ENVIRONMENTAL AND SOCIAL IMPACTS OF THE PROJECT ...................................... 64

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EXECUTIVE SUMMARY

1. Project name INTEGRATED FARM

2. Project Owner SOAL BUSINES PLC
3. Nationality Ethiopian

4. Project Location Bishefetu Town ,Oromia Regional Estate

5. Project Composition Dairy Farm and Milk Processing plant ,
Poultry farm and chicken meat processing and
Animals fodder Farms and processing
6. Land requirement 100,000 m2

7. Total initial Investment For implementing this project, a total of 250,000,000.00

Capital Eth birr is required. From these 30% or 75,000,000.00
birrs will be owner’s contribution while the rest 70% or,
175,000,000.00 Eth birr will be covered by bank loan.
8. Employment Opportunity 599 workers permanently (250 unskilled and 49
skilled individuals) permanently in addition 200
unskilled workers casually.
9. Benefits of the project For The Produce and supply of quality dairy products, value
Region/ Country
add to the sector, source of government Revenue,
Employment opportunity, Save Foreign currency,
Benefit for the Local Community and Stimulate the
Local Economy
10. Market Share Both local (70%) and foreign market (30%)

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1. INTRODUCTION
1.1.Background

The Ethiopian economy is highly dependent on agriculture. Despite being more

subsistence, agricultural production plays an important role in the economy. Currently, the
increasing in productivity of agricultural sector gives a rapid growth for the sector that
ultimately brings fast and double digit economic growth for the nation. As one part of the
agricultural sector, dairy and livestock segment also increasing. Dairy production is an
important part of the livestock production systems in Ethiopia. Cattle, camel and goats are
the main livestock species that supply milk, with cows contributing 81.2% of the total milk
output. (Almaz M, 2008). However, further progress and more private sector involvement
are necessary to develop the dairy sector.

The government of Ethiopia has developed favorable investment incentives, policy

packages and other sectoral reforms at federal and regional level to attract a huge private
investment in all sectors of the economy for the prosperity and advancement of the nation
as well as for welfare of the citizens. Moreover, the ongoing five years growth and
transformation plan (2010/11-2014/15) supportive for fast economic development and
gave attention for agro-processing projects.

In line with the above economic policies, investment incentives and economic growth plan,
the Oromia regional state government has been applying its utmost endeavor to increase
investment opportunities in the region, so as to foster the economic development of the
region and subduing the region’s big enemy that is the trap of poverty. Therefore, the
regional government has been preparing a viable business environment to attract many
domestic and foreign investors so that the dream of making poverty history turns to be
true. Furthermore, this region is the largest regional state in terms of area and population.

As a result from lucrative dairy business potential, market prospectus and government
support, the promoter of the project (i.e, Dairy Farm and Milk Processing plant) interested
to engaged in dairy and milk processing project in Ginnir district Bale Zone, Oromia
Regional State and hoping to get quick and sound support from all parts of the government.

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 1.2.Profile of the Promoter
The promoter of the project Mr. Soal Busines Plc is Ethio- South African business person
who planned to invest in response of the call made by Ethiopian government to all
Ethiopian to participate in the renaissance of Ethiopia. The promoter does have ample
experience, accumulated diversified-skills in the area, and adopted working with many
people. Thus, these experiences primarily motivated the promoter to develop the inception
of this project idea.

1.3.Project Justifications

Ethiopia holds large potential for dairy development in Africa with diverse topographic and
favorable climatic conditions. Besides, the nation ranks first in Africa and tenth in the world
with its livestock population. However, the dairy sector does not seem to be developed
compared with the potential and market demand. The sector is characterized by an
insufficient and a highly fluctuating supply a highly variable demand structure along with
low and limited milk and milk products production. (SNV, 2008)

Besides, most of the milk produced is especially in the rural and peril-urban areas which
are mainly sold to nearby neighbours, customers as raw milk or local cheese and butter. It
is estimated that only 10% of the milk production is sold from the production site to
processors. Per capital consumption is one of the lowest with just 19 liters per head per
year as compared to 27 kg for other African countries and 100kg to the world per capita
consumption (FAO, 2006).

The dairy industry is essential for rural Ethiopia. In addition, dairy is potentially the largest
rural employer in the Ethiopian highlands. With continued urbanization, the Ethiopian
dairy industry could become a major player in agricultural development and has potential
to contribute significantly towards increased income and employment creation.

The development of dairy cooperative in Ethiopia indicates that there is a need to focus
interventions more coherently. Development interventions should be aimed at addressing
both technological gaps and marketing problems. Integration of crossbred cattle to the
sector is crucial for dairy development in the country. This can be achieved either through

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promotion of large private investment to introduce new technology input supply and
output in the sector such as improved genotypes, feed and processing, or promotion of
integration of crossbred cattle into the smallholder sector through improving their access
to improved cattle breeds, veterinary service, and credit.(Almaz M, 2008)

Currently, government advice and support in agricultural sector is highly attractive

including building infrastructure and providing technical service to dairy cooperatives and
the growth and transformation plan is promising in developing agro-processing businesses
by private sectors.

Therefore, the above points are the main justifications behind the initiation of the
envisioned dairy and milk processing project by the promoter.

1.4.Objective of the Project

The main objective of the project is to process dairy and milk products by collecting raw
milk from the project’s farm and collection from local producers.

1.5.Mission

Our goal is to produce healthy products for our customers. We are committed to growth
within our chosen markets and support this commitment with strong bias towards product
development and innovation as well as quality assurance.

Our ultimate goal is to serve our customers with the best quality products at a reasonable
price and good services at all times.

1.6.The Economic Significance of the Project

The project has been contributing to the economic development of the nation in general
and the region in specific. The project benefits are explained as indicated below.

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 A. Supply of Dairy and Milk Products

The envisioned project will produce quality processed milk and milk products at
reasonable market (Compare with its competitors) to the targeted market.

B. Add Value

By converting low-value roughage feed resources into high-value milk products and to
convert the raw milk in to pasteurized one, the project will add value in agriculture sector
in general and dairy sector in specific.

C. Source of Revenue

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

D. Employment Opportunity

One of the problems that our country faced is unemployment. Therefore, the current
objective of the government is working on tackling the problem of unemployment and
fostering the development process either through creating self-employment or
employment in other organization. Hence, this project will hire 99 individuals permanently
and 75 temporarily.

E. Save Country Foreign Exchange

By minimizing the market gab for dairy products in general, the project will help to reduce
the nation’s foreign exchange to import the powdered milk. This will save the foreign
exchange resource of the nation.

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 F. Benefit for The Local Community

As a corporate responsibility the company will engage in different development activities

on the surrounding areas. This will better worth the community and contribute for the
development of the region.

Stimulate the Local Economy

This project will have positive externality in the district and zone that will encourage the
economic movement of local economy.

1.7.Location and Land Use Plan

A. Location

The project will be located Oromia Regional State. Bishefetu district is found to the south
direction of the capital Addis Ababa at 40 km. The project wants to be allocated 2 hectares
of land on lease bases for the dairy farm and Milk processing plant establishment.

The main reasons to choice this location is;

 Availability of raw materials for dairy production

 Conducive investment policy and governance
 Favorable climate and topography for dairy livestock (i.e cows) development
 Environmentally and geographically very fit to dairy and milk processing

B. Land Use

The total required area of land is estimated to be 20,000 M 2. The premises required and
the land use plan is indicated in the table below;

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 Table 1 Premises Required and land Use Plan

No Description Land
Requirement(M2)
1 Production area
1.1. Production Houses 4000
1.2 Quality Control Center 1000
1.3 Total production area 5000
2 Warehouse
2.1 Raw Material storage area 4000
2.2 End Product storage area 1000
Total warehouse area 5000
3 Office 500
4 Animal shades 8000
5 Water hole 250
6 Waste Accumulation area 250
7 Parking and Green area 1000
Total 20,000

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2. MARKET STUDY

The market study for the project comprise the detail analysis of the dairy sector including
from the past to present trend, industry characteristics and structure, market demand and
supply analysis and other issues of the industry as it clearly explained in the subsequent
parts of the project document.

2.1. Trends, Drivers and Structural Characteristics of the Industry

2.1.1. Trend and Performance of Dairy Industry

Between 1961 and 1974, milk production increased by 16.6% from 637,400 to 743,100
metric tons with an average annual growth rate of 1.6%. This growth was largely due to the
economies of scale in production as well as marketing, subsidies in transport to the formal
market, secured land tenure and an active free market for feed and other inputs (Staal et
al., 1996). On a per capita basis, however, milk production declined during this period at an
average rate of 0.87% per annum. Processed milk production has stagnated in the early
1960s but expanded significantly in the second half of 1960s and early 1970s. To bridge the
gap between supply and demand, dairy imports increased significantly beginning from
1978. This was partly due to increased food aid milk powder imports by WFP, and a level of
dairy production development that lagged far behind the demand. Imports reached a peak
of 314,700 metric tons in 1986 during the drought period (Reda, 2001). During the period
between 1977 and 1989, dairy imports as a percent of total consumption increased from
4.1% to 12.8%. Commercial imports grew rapidly at 24.2% per year (Felleke and Geda,
2001). Further, it is estimated that imported milk powder accounted for 23% of Bishefetu
Town market. Post 1991 producer groups such as the Bishefetu Town Dairy Producers
Association (AADPA) emerged encompassing 90% of all urban dairy producers and a large
proportion of peri-urban producers within a radius of 100 km of Bishefetu Town (Staal
1995). Milk production grew faster in the post reform period, at an annual growth rate of
3%. Per capita milk production stagnated though grew at a positive but insignificant rate.
This represents a reversal or termination of the negative trend in the growth of per capita

13
production during the previous two phases. Using rough estimates from the FAO database
and available information from DDE and Felleke and Geda (2001), the contribution of
imported milk to total milk consumption declined from 24% in 1985 to less than 1% in
2000. At the same time, the share of government-owned enterprises in total milk
production decreased markedly. In contrast, the share of smallholder production in total
consumption increased by 30% from 71% to 97%. To sum up, total milk production in
Ethiopia increased during the 1961-2000 period at an average annual rate of 1.55% though
per capita production declined as a result of the high population growth rate. However,
during the last decade production grew at a higher rate of 3%. The increased coverage of
extension services (such as better management skills) and increased use of improved
inputs (improved breeds and feed) and policy changes promoting dairy production have
contributed to faster growth of the sub-sector. Dairy product imports during this period
were relatively smaller than the previous three decades. Most of the growth during the 90’s
is concentrated in the peri-urban and rural production systems. The emergence of private
processing industries and marketing units have stimulated producers in the peri-urban
areas and rural production systems as it offered them a new market for their milk
production. On the whole, dairy processing and marketing function was being performed at
various levels; parastatal sector (DDE) had dominated the dairy industry scene until late
90’s where private sector and cooperative sector appeared to play significant roles in
collecting and processing milk. Under the current market-oriented economic system,
private sector involvement in milk marketing was emerging alongside co-operative
marketing organizations. The privatization of DDE in 2007 marked the end of the
parasternal.

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2.1.2. Consumption

Milk Consumption in Ethiopia shows that most consumers prefer purchasing of raw milk
because of its natural flavor (high fat content), availability and lower price. Specific upper
income market segments prefer and can afford packaged processed milk. Packaging costs
alone may add up to 25% of the cost of processed milk depending on the type of packaging
used. Polythene sachets of processed milk are cheaper alternatives.

Ethiopians consume less dairy products than other African countries and far less than the
world consumption. The present national average capita consumption of milk is 19kg/year
as compared to 27 kg for other African countries and 100kg to the world per capita
consumption (FAO, 2003). The recommended per capita milk consumption is 200
litre/year. On the other hand, they regularly consume other dairy products such as butter,
ayib (cottage cheese) and fermented milk.

2.1.3. Export

Ethiopia is not known for export of dairy products. With insignificant quantity, milk and
butter were made to few countries. Butter was mainly to Djibouti and South Africa,
targeting the Ethiopian Diaspora abroad. Milk is solely exported to Somalia from the south
Eastern region of Ethiopia. There is a strong preference for traditional products. Ayeb, a
traditional cheese is popular and used as a condiment with many foods. Consumers add
spices and herbs to this product at home before serving. Dairy is usually consumed at home
with family and friends. Butter is consumed in more forms and in more ways than any
other market in Africa.

2.1.4. Structure of the Industry

Small portion (Less than 10%) of the national milk production is goes to the dairy industry.
90% of the sales is channeled through the informal market. Major portion of the milk
production goes to home consumption and home based traditional milk processing,
including butter and soft cheese production. Significant percentage of (47%) Cross-bred
and exotic cows are in BISHEFETU TOWN and nearby areas (Staal 2008) and coupled with
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the huge demand size, the volume of sales in BISHEFETU TOWN is much higher than other
towns in Ethiopia.

2.1.5. Value chain in the dairy industry

The main actors in the Ethiopian Dairy industry are peri-urban, urban farmers,
cooperatives, PLCs, individual collectors, processors, retailers, institutions and cafe’s.

A. Smallholders

Majority of smallholder producers may be excluded from the emerging value chain due to
capacity limitations. Small producers lack the necessary technological, organizational and
institutional capacity for successful participation in the value chain. They are less organized
and distant from market, lack economies of scale, face higher transaction costs and lack
institutions for risk management.

B. Urban and per-urban holders

Urban and peri-urban smallholders are the main supplier of raw milk in the dairy industry.
Most of milk processors do not have their own dairy farms. Even those who have their own
farms are souring mainly from small holders. For example, Sebeta Agro industry, the first
private dairy processor, is collecting 99% of raw milk from outside source though it has its
own farm.

C. Cooperatives

Politicization of cooperatives mainly in the socialist regime has created the bad ensuring
sustainable supply of raw milk to the industry by coordinating the flow of the milk from
their members and assisting of members by supplying inputs to the dairy farms. Many
cooperatives are established since 1991 for marketing of raw milks of small holders in the
urban and per-urban areas. The most successful cooperatives are Ada Dairy cooperative
and some cooperatives in Selale area (all in the radius of 100 km from BISHEFETU TOWN).
Ada Dairy Cooperative has its own processing plant. Another cooperative in Northern part

16
of Ethiopia, has recently established a processing plant targeting the consumers at Mekele
town. A project on livestock/dairy had helped a dairy coop to be organized in Gondar.

D. PLCs

PLCs are the next highest stage of cooperatives. Cooperatives are forming PLCs for better
marketing capabilities and better bargaining power. Selale PLC is among the active PLC
which is doing well. Some milk marketing cooperatives in the process of forming PLCs to
challenge mainly unfair market transactions with collectors and processors. PLCs are
supplying to different private collectors and processors.

E. Individual collectors

Individual collectors are competing with processors for the raw milk. Individual collectors
mainly supplying cafe’s, institutions and restaurants. They are responsible for the highest
portion of the milk supply in the market. Cafe’s and restaurants are opting for
unpasteurized raw milk mainly for bulk delivery and of the perception that they have
better fat and nutrients content and test than the pasteurized one. Individual collectors are
using their own transportation system in delivering the milk consistently. Some of the
individual collectors in the Selale milk shed are from Gurage tribes and there is a slight
decline in milk purchase when they are leaving for holiday vacation in the month of
September. The price of the milk will slightly lower as competition will be ease among the
buyers of the PLC.

F. Urban small holders

Urban smallholders are mainly supplying to households though house to house delivery.
Most of them are using plastic jerry can for handling the milk. The main end consumers of
house delivery are infants and children. The delivery is often on a monthly contractual
basis with minimum delivery size of half litter. Some urban smallholders are also supplying
to cafe’s and restaurants. Recently these urban smallholders are facing a pressure from the
municipality to shut off their small farms because of health and environment issues. Based
on the discussion with the chairman of EMPPA, it is estimated that 20% to 30% of these

17
farms are closed in the year 2009. Based on the information of Vet service provider of
Akaki district of Bishefetu Town, the numbers of cows vaccinated in the year 2008/09 are
about 600 as compared with that of the year 2007/08 which was about 1000 cows. The
decline in the size of smallholding urban farmers is believed to be one of the contributing
factors.

G. Commercial processors

Commercial processors are those adopting modern technology with a majority of their
output is pasteurised packed milk with the size of 500ml. Currently there are about seven
dairy processing companies operating in Bishefetu Town and nearby towns. One of the
oldest state owned dairy processing enterprise formerly called DDE or Shola is privatised
in the year 2008 and named as Lame Dairy Plc. Ada Dairy initially has attempted to
produce packed milk, but not continued with pack milk production and currently supplying
its pasteurized milk mainly to Lame and sometimes to Lemma Dairy. Genesis Farm is
producing cheese, butter and yogurts. Raw milks are sold to other processors, including
Lema. There are other two dairy processors very far away from Bishefetu. These are Dire
Dawa Dairy Enterprise (300 km away from Bishefetu) and Cooperative based processor in
Tigray region. A dairy processing company established some years ago in the town of
Dessie (250 km north of Bishefetu Town) has been recently closed down because of
managerial problems. The properties are sold to a merchandise business. There is no
indication that the acquiring company will consider entry in the dairy business.

The estimated annual production of the first three companies in the year 2008 was about
14 million litres of milk, 120,000 Kg of butter and 20,000 kg of cheese and 90,000kg of soft
cheese. Majority of the processors are depended on external milk sources. Lema has closed
its dairy farm because of the ever increasing feeding costs and now fully depended on out
growers (individual farmers, cooperatives, big farms like Genesis farm). Main customers of
processers are Supermarkets. Village shops, large in numbers, are important distribution
channel of the processors. All of the processors are delivering their products by their own
delivery truck with insulated and refrigerated cabins.

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 H. Small scale processors

Small scale processors are those who are limited them to small scale niche market like
formajo (a certain type of cheese). Small scale processors are directly buying raw milks
from PLCs, cooperatives and individuals.

I. Cafe’s , Restaurants and shops

There are large number of cafe’s, kiosks and restaurants in all towns. Hot milk and
macchiato (mix of coffee and milk) are the famous drinks which triggers the demand for
milk by cafe’s and restaurants. Kiosks, shops and supermarkets are selling packed milks to
household buyers. Butter, cheese and yoghurts are solely sold at supermarkets. During eve
of holidays soft cheeses are often sold at shops. Some cafe’s and restaurants are using
powder milk for hot milk and macchiato, which are not often chosen by consumers.

The competitors of the local dairy products at the level of supermarkets are the main
distributers of imported powder milks, butter and cheese. Imported products are recently
becoming more expensive and there is a favourable condition for local products.

J. Household

Household consumers are the middle and high income household, who can afford to buy
raw unpasteurised milk on a daily basis from collectors or urban small holders. It is
common to substitute mother breast feed with cow milk when the breast dried up and
mothers are back to work. Because of price, sustainable supply and the perception that
pasteurised milk is something that certain fats are extracted, most household buyers are
inclined to unpasteurised raw milk. Institutional buyers: These are big institutions,
colleges, hospitals. Cafe’s and restaurants of big enterprises are also categorized under
institutional buyers. Majority of them are sourcing from collectors.

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2.2. Market Demand Potential

Ethiopia is well known for its tremendous livestock potential. Yet its dairy industry still
remains undeveloped. Among other things, livestock disease, low production breed and
feed shortage has contributed to low milk production in the country. Moreover, the
perishable nature of the product, poor marketing infrastructure, lack of refrigeration and
preserving facilities are mentioned as the major impediments for the development of the
dairy industry. Consequently, the milk consumption in the country has remained very low.
According to some studies, the per capita consumption of milk in the country is about 20 kg
which is below the average for Sub-Sahara Africa.

Consequent upon the low level of milk production in the country, the gap between demand
and the supply of milk is bridged through imports of powdered milk. Besides commercial
imports, food aid has also been another source of milk supply in the country. However, food
aid is frequently associated with famine and emergency so that it is not considered as a
regular source of supply. But this project currently needs the production of the pasteurized
milk but in the future it will produce powdered milk.

In the absence of domestic production of powdered milk, imports are considered as a proxy
for demand. To estimate the present (2011) demand for the product exponential
smoothing method is, applied to the import data. Table 1 shows the commercial import of
powdered milk during the period 2000-2006 and exponentially smoothed forecast.

The Exponential smoothing Model is given by:

Y” 1+k = L1 + KT1
Where,
L1 = alpha* Y1+ (1-alpha) (L1-1+T1)
T1= beta (L1-L101) + (1-beta) T1-1

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Where
Y” 1+K stand for forecasted value,
L indicated the long-term level or based value for the time-series data, i.e. the level term,
1

T1 indicated the expected increase or decrease per year, i.e. the trend term, K stands for the

number of time periods we want to forecast, t represents time, and alpha and beta are
smoothing parameters.

Exponentially Smoothed Forecast of the Demand for Powdered Milk (Based On Import Data)

Level Trend
Year Import Term Term Forecast

2000 1,082.37 1,082.37 - -

2001 1,016.53 1023.11 -18 -
2002 1,631.16 1568.58 208 1005
2003 1,241.35 1294.82 15 1776
2004 1,149.49 1165.52 -43 1310
2005 1,215.32 1206.07 -9 1123
2006 1,887.79 1818.67 239 1197
2007 2058

Source : Customs Authority, External Trade Statistics.

According to CSA 2001 report on house hold milk consumption, the total consumption
requirement of households for milk, butter, cheese, and yoghurt is 526761355 liters,
21357750 kg, 30093056 kg, and 15946658 kg per annum, respectively. Given a total
population of 55954227 at the time the survey was conducted, the per capita consumption
of milk, butter, cheese, and yoghurt is computed to be 9.4 liters, 0.4 kg, 0.5 kg, and 0.3 kg,
respectively.

21
2.2.1. Demand Projection

The biggest dairy in the country, the private company Sebeta Agro Industry, processes
around 30 000 liters per day at present. Around 6 000 - 10 000 liters of this milk comes
from the owner’s own dairy farm with 600 cows. Some milk is also collected from other
dairy farmers in the region. Still, the major part of the milk processed is milk powder which
is reconstituted into liquid milk. Sebeta Agro Industry is in the process of establishing the
first UHT dairy processing facility in the country, which is expected to start operation in
September 2006. The new production lines will produce 500 ml carton pouches (Tetra Fino
Aseptic) and 250 ml portion packages (Tetra Brik Aseptic).

The other major dairy in the country, the state owned Dairy Development Enterprise, has
been allocated a budget to upgrade its operations and is also considering investing in UHT
technology for production of long life dairy products. At present they produce pasteurized
milk in 500 ml plastic pouches.

The demand for industrially processed milk and milk products is highly influenced by
urban population growth, income, increased household attitude towards processed foods
to save time and labor as well as the availability of the product itself. Considering the
combined effect of these factors an annual average growth rate of 6% is applied in
projecting the demand for the products. The projected demand for the product is shown in
Table below

Projected Demand for Milk and Milk Products

Year Milk Butter Cheese

(liter) (Kg) (Kg)
2007 12577200 535200 669000
2008 13331832 567312 709140
2009 14131742 601351 751688
2010 14979646 637432 796790
2011 15878425 675678 844597

22
 2012 16831131 716218 895273
2013 17840999 759191 948989
2014 18911458 804743 1005929
2015 20046146 853027 1066284
2016 21248915 904209 1130261
2017 22523850 958462 1198077
2018 23875281 1015969 1269962
2019 25307797 1076928 1346159
2020 26826265 1141543 1426929
2021 28435841 1210036 1512545
2022 30141992 1282638 1603297

2.3. Marketing Strategy and Promotion

The organization will use different promotional mix include Website, advertising (Media,
flayer and newspaper), public relations and branding.

The marketing strategy mainly focus on the satisfying the needs and the test of the
customers at reasonable price and efficient distribution.

2.4. Milk and Dairy Production and Utilization

2.4.1. Milk production

The farm will maintain the number of milking cows over its production period. On average
milk yield of 20 liter/cow/day over a period of 300 days in a year will be produced.
Besides, the project will buy raw milk per day from local suppliers. The annual milk
production of the project is given in the table below. Hence, the farm going to buy more 200
milking cows at the beginning of the year.

23
Plant Capacity

Based on the market study, capital requirement and minimum economy of scale, the milk
processing plant will have a capacity of 60,000 liters of raw milk per day. The envisaged
plant is expected to operate in double shifts of 8 hours each a day for a total of 300 working
days a year.

2.5. Production Programmed

The annual production programme is formulated based on the proposed plant capacity.
Considering the problem of market penetration and skill development of production at the
initial stage of the production period, it is planned that the plant will start production at
50% and 75% of its rated capacity in the first and second year of production, respectively.
Full production capacity (100%) shall be attained in the third year and then after.

24
Table: Production Programme

S/N Description UOM Years

1 2 3-10
I Own Farm
Number of Milking Cows Pcs 200 300 400
Productivity of Cows per day Liter 20 22 25
Expected yield per day in liter “ 4000 6600 10000
Milk Production per year “ 1200000 1980000 3000000
Calves requirement “ 85765 141513 214413
Net Milk for process “ 1114235 1838487 2785587
II Milk Collection from farmers
Expected collection per day Liter 1370 2055 2740
Total Milk Collection per year “ 500,000 750,000 1,000,000
III Grand Total Milk for processing Liter 1614235 2588487 3785587
IV Processed products
Pasteurized milk Liter 1268545 2034160 2974900
UHT treated milk “ 153763 246564 360592
Yogurt “ 9685 15531 22713
Butter Kg
30282 48558 71014
Cheese “
7264 11648 17035

25
3. PROJECT, PRODUCTION PROCESS AND TECHNOLOGY

3.1. Type of Technology

In our farm we follow the latest techniques the newest agricultural practice in cultivation.
We have a well trained staff engineers and farmers that have the sufficient knowledge of
using the latest computer software and technologies. We have complete records for each
animal’s history which help us to follow up the status of every single cattle.

We own milk filtration station to separate any solid particles from the raw milk which have
many roles like: maintain the other milking and cooling equipments; it is considered as
guide for the herds udder health and it enable us to produce milk of the highest quality and
value.

Raw milk is used to prepare processed milk and various value added products. Some of
them are:

 Pasteurized milk

 UHT treated milk

 Yogurt

 Butter

 Cheese

 Cream

3.2. Product Nature

The envisioned project of dairy and milk processing will have different dairy products
including pasteurized Soal milk, butter, cheese, cream and yogurt.

1
3.3. Selection of Herd Size & Composition

To start with the dairy farm, pure exotic dairy heifers and cow closer to heifers will be
selected and purchased from different sources including state and private local farms.
Heifers with high potential production, preferably Holstein or jersey hybrids will be
purchased. Such heifers will be selected and purchased from the best farms with pedigree
records and a genetic potential according to the project goals. The initial foundation stock
will buy 200 cows each 25000 birr total cost of 5,000,000 birr.

 Herds mix 30% heifer and 70% cows are recommended to get maximum production
life and milk production round the year. Combination of herd is selected because
mature cows produce about 25% more milk than 2-year-old heifers.
 The Cattle breed for the project have been selected according to target market
requirements, better fertility, better adapted to heat-stress and other stressful
conditions, along with overall economic performance.
 Calving Interval is taken as 13 months.
 Fertility rate 80%
 It is a key assumption for this feasibility that 80% of lactating cow will produces
calves after insemination.
 Milk to day cow ration=80:20
 Mortality

 Cow 3%
 Young Heifer 5%
 Calves 10%

 Culling

 Cow 10%
 Young Heifer 5%

 Calves sex ratio probability is 50:50

2
3.4. Cattle Management

3.4.1. Housing

Well ventilated appropriate dairy barns for different categories of cattle will be
constructed. The structures will include separate units for cows, heifers, calves, milking
parlor, and isolation rooms. To protect the herd from the surrounding indigenous cattle
and others, the area will be fenced.

3.4.2. Reproduction Management

We are interested in the genetic improvement of our herd. We use the artificial
insemination (AI) for livestock breeding using the German Semen to improve the quality of
the breed. We care to determine the optimum insemination time which increases the
chance of the buffalo conceiving.

3.4.3. Animal Nutrition System (Feeding)

The animals are fed using TMR (Total mixed ration); we have feeding stations as a result
each buffalo is fed with the correct feed ration. We use the most efficient feed system and
equipment’s, which helps the herd to be healthier. In addition we use feeding system and
strategies that adjust the quantity and type of feed concentrate according to the milk
production which improve the herd health. We use different feed types at the same time.
We correctly feed our animals therefore it produce more milk.

Our system manages the milking, feeding and breeding as one efficient process. Our
objective is that all calves gain the full nutritional value by using the most efficient feeding
system that give the exact quantity of milk for each calve during the day.

3
 A. Milking Cow

 2kgs head/day-for maintenance

 .5 kg/lt of milk production


B. Dry Cow

 2kgs head/day-for maintenance

 2kg/head/day-for the last two pregnant months

C. Heifers

Pregnant 2kg/head/day

Young Heifers--2kg/head/day-for maintenance

Calves--1.2/head/day for three month

Bull—3kg/head/day

3.4.4. Health Care

One of the major causes of poor performance of dairy cattle in this country is prevalence of
diseases. The major ones are foot and mouse disease, render pest, black leg, TB mastitis etc.
To minimize the loss through the occurrences of these diseases, preventive measures
through vaccination and curative approaches will practiced as necessary.

We provide all adequate sources of comfort for the animals including space, water, air,
nutrition, light, ventilation, pest controls and hygiene, which leads to healthier and longer
lives.

We monitor activity level and performance of animals it’s strong indicator of herd health.
We develop benchmarks for each cow and herd which help in monitoring any changes that
could happen. We also monitor the udder health regularly.

4
We have the latest cooling system which helps the buffalo stay active, control the humidity,
buffalo feed and bedding not to get wet; we apply the most efficient methods of ventilation
which affects positively the cattle health and it’s productivity.

3.4.5. Rearing of Young Stock

The success of dairy will depend upon the attention given to young stock including calves.
If proper attention is given, heifers will come early into production. The delay (elongated)
in the age of first calving, there will be loss in the number of calves harvested and milk
yield.

3.5. Raw Materials

The average composition of cow's milk is 87.2% water, 3.7% milk fat, 3.5% protein, 4.9%
lactose, and 0.7% ash. This composition varies from cow to cow and breed to breed. For
example, Jersey cows have an average of 85.6% water and 5.15% milk fat. These figures
also vary by the season of the year, the animal feed content, and many other factors.

Vitamin D concentrate may be added to milk in the amount of 400 international units (IU)
per quart. Most low fat and skim milk also has 2,000 IU of Vitamin A added. Milk is a
perishable commodity. For this reason, it is usually processed locally within Dairy cows are
milked twice a day using mechanical vacuum milking machines. The raw milk flows
through stainless steel or glass pipes to a refrigerated bulk milk tank.

The project will get the raw milk from two source, i.e, from own dairy farm and buying
from local supplier.

5
3.6. Dairy Production Process and Technology

3.6.1. Milk Processing

a. Collecting

Dairy cows are milked twice a day using mechanical vacuum milking machines. The raw
milk flows through stainless steel or glass pipes to a refrigerated bulk milk tank where it is
cooled to about 40° F (4.4° C). A refrigerated bulk tank truck makes collections from dairy
farms in the area within a few hours. Before pumping the milk from each farm's tank, the
driver collects a sample and checks the flavor and temperature and records the volume. At
the milk processing plant, the milk in the truck is weighed and is pumped into refrigerated
tanks in the plant through flexible stainless steel or plastic hoses.

b. Separating

The cold raw milk passes through either a clarifier or a separator, which spins the milk
through a series of conical disks inside an enclosure. A clarifier removes debris, some
bacteria, and any sediment that may be present in the raw milk. A separator performs the
same task, but also separates the heavier milk fat from the lighter milk to produce both
cream and skim milk. Some processing plants use a standardizer-clarifier, which regulates
the amount of milk fat content in the milk by removing only the excess fat. The excess milk
fat is drawn off and processed into cream or butter.

6
c. Fortifying

Vitamins A and D may be added to the milk at this time by a peristaltic pump,

A clarifier removes debris, some bacteria, and any sediment that may be present in the raw
milk. The milk is then fortified and pasteurized, which automatically dispenses the correct
amount of vitamin concentrate into the flow of milk.

d. Pasteurizing

The milk—either whole milk, skim milk, or standardized milk—is piped into a pasteurizer
to kill any bacteria. There are several methods used to pasteurize milk. The most common
is called the high-temperature, short-time (HTST) process in which the milk is heated as it
flows through the pasteurizer continuously. Whole milk, skim milk, and standardized milk
must be heated to 161° F (72° C) for 15 seconds. Other milk products have different time
and temperature requirements. The hot milk passes through a long pipe whose length and
diameters are sized so that it takes the liquid exactly 15 seconds to pass from one end to
the other. A temperature sensor at the end of the pipe diverts the milk back to the inlet for
reprocessing if the temperature has fallen below the required standard.

7
e. Homogenizing

Most milk is homogenized to reduce the size of the remaining milk fat particles. This
prevents the milk fat from separating and floating to the surface as cream. It also ensures
that the milk fat will be evenly distributed through the milk. The hot milk from the
pasteurizer is pressurized to 2,500-3,000 psi (17,200-20,700 kPa) by a multiple-cylinder
piston pump and is forced through very small passages in an adjustable valve. The shearing
effect of being forced through the tiny openings breaks down the fat particles into the
proper size. The milk is then quickly cooled to 40° F (4.4° C) to avoid harming its taste.

f. Packaging

The milk is pumped into coated paper cartons or plastic bottles and is sealed. The bottles,
plastic or cartons are stamped with a "sell by" date to ensure that the retailers do not allow
the milk to stay on their shelves longer than it can be safely stored.

The milk cartons or bottles are placed in protective shipping containers and kept
refrigerated. They are shipped to distribution warehouses in refrigerated trailers and then
on to the individual markets, where they are kept in refrigerated display cases.

g. Cleaning

To ensure sanitary conditions, the inner surfaces of the process equipment and piping
system are cleaned once a day. Almost all the equipment and piping used in the processing
plant and on the farm are made from stainless steel. Highly automated clean-in-place
systems are incorporated into this equipment that allows solvents to be run through the
system and then flushed clean. This is done at a time between the normal influx of milk
from the farms.

8
Dairy Production Process Flow Diagram

Processing of raw milk mainly involves heat treatment operation usually known as
pasteurization and sterilization. These processes are discussed in detail as follows.

A weighed amount of raw milk is pumped to a clarifier by means of the milk pump, where it
is removed of microscopic impurities. Clarified milk is next sent to the cooler where it is
cooled to about 2-5oC, then pumped to the storage tank. The milk is, then, preheated and
pasteurized to a temperature of about 80oC by heat exchange. Further, by the effect of
ultra-high temperature sterilizer, the fatty ingredients are homogenized in the
homogenizer and recycled to the ultra-high temperature sterilizer where it is pasteurized
instantly in about 2 seconds at high temperature of 135oC.

9
Finally, cooling is achieved by means of chilled water to lower the temperature to 3oC, after
which the milk is stored in the surge tank for filling into suitable containers for various
uses. After such a process, a specified quantity of the milk is sold as a pasteurized product
while the remaining portion is further processed in the plant for the production of other
milk products such as butter and cheese. The details of the production processes are stated
as follows.

3.6.2. Butter Production

Whole milk is partially or totally separated to produce standardized whole milk with
3.25% milk fat, low fat milks, 1-2% milk fat, and skim milk. After separation, cream is held
in stainless steel tanks and refrigerated at (4-7oC).

The separated cream is pasteurized in order to destroy bacteria. Following pasteurization,

rapid cooling is conducted to facilitate the formation of butter by a churning process. By
continuous churning, the entering will be pasteurized and tempered cream is agitated
vigorously by beater bars. This action causes stripping of the fat globule membrane and
aggregation of the fat into chunks. Finally, a continuous ribbon of yellow butter streams
from the end of the continuous churn. Butter as a product drops into a hopper, where it is
transferred to packing machinery.

3.6.3. Cheese Production

Cheese is made from pasteurized skim milk, and in form of discrete particles classified as
small or large curd. A curd forms when the increasing lactic acid of milk during
fermentation attains the isoclectric point of casein at pH 4.6. This soft curd additionally
contains lactose, salt and water. Latter, the curd matrix is cut and cooked to about 126 oF
(52oC). Separation of whey from the curd is rapid, and is followed by two or three water
washings at warm to chill temperatures. Washing removes whey from residues and acts as
a cooking medium. After drainage of the last wash water, the chilled curd is blended with a
viscous, salted cream dressing to give 4.2% fat and 1% salt, and is packaged.

10
3.7. Machinery and Equipment’s
The project needs the following machinery and equipment’s

A. Processing machinery and equipment’s

 Milk reception unit
 Milk storage tanks
 Milk pasteurizing line
 Chiller
 Medium/High pressure steam generator
 Cooling tower
 Equipment’s for laboratory
 Milk Filling machine PET
 Packing equipment’s;
B. Auxiliary Equipment’s
 Laboratory and clinical equipment’s
 Workshop equipment’s
 Spare parts
C. Agricultural and Farm Equipment’s
D. Mechanical Slaughterhouse
E. Cooling tunnel(-40oC) cooling rooms

11
3.8. Project Design and Engineering

The proposed project comprises stock of different components to be executed at different

phases of the project life. These activities include: Design and Construction of various
buildings (workshops), importing of machineries, additive chemicals and other raw
materials, Import of product transporting medium vehicle.

3.9. Utilities

The project needs to have the following utilities;

 Water Supply,

 Steam

 Fuel

 Supplementary Electricity supply,

 Telephone line

 Paved Road Transportation,

 Drainage Facility

12
4. MANPOWER AND ORANIZATIONAL MANAGEMENT

4.1. Manpower

At the top of the organizational structure, there will be a general manager with the
responsibility of supervising the overall activity of the company. Depending up on the
nature of the center and the amount of work to be performs; there will be auxiliary units
under the general manager. Employees under each unit will be supervised by the
department head that is accountable for the general manager.

The company will use efficient trained staffs in the area of marketing to be competitive
supplier of dairy products to the market. The opportunities of being serviced by well
skilled professionals well enable the company to evaluate the internal weakness and
strength of the company as well as to assess the global opportunity and risks in the world
market so that the company can cope up with the dynamics of the market situation. The
project will hire 174 employees.

The detail human power requirement, monthly and yearly salary is indicated in part 5
financial part.

4.2. Organizational Structure and management

The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be a
general manager with the responsibility of supervising the overall activity of the plant.
Employees under each unit will be supervised by the department head that is accountable
for the general manager. General Manager is accountable to the owner of the company as
indicated in figure below

13
Fig Organizational Structure

Owner/s

General
Secretary
Manager

Dairy Farm Production Admin. & Marketing &

Dept. Dept. Finance Dept. Sales Dept.

Hence the following section deals with the duties and responsibilities of some
departments.

1. General Manager
Duties and responsibilities

 She/he will plan, organize, direct and control the overall activities of the project
 She/he will devise policies and strategies that will enable the project to be
profitable.
 She/he will incorporate modern technological innovation that will facilitate the
service delivery of the project center and increase customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human resources
of the plant so as to achieve the short and long run objectives of the organization.

14
2. Production Department
It is the core department of the project center. It has the following responsibilities.

 Design and produce dairy on the company standard and customer preferences
 Use modern manufacture, processing technologies that will enhance the quality of
dairy products.
 Produce quality dairy mix that will enable the company to be competent in the
market.
 Control on the quality of raw milk, inputs, quality of the dairy product and also the
overall production process.
 Produce dairy products in least cost so that the profitability of the company is
guaranteed.
 Moreover control over the quality of the final processed dairy products.
3. Dairy Farm Department
Duties and responsibilities:-

 Responsible for the feeding cows

 Control health status of the livestock’s(cows)
 Prepare the necessary need of the livestock’s
 Collection of milk from the farm
4. Administration and Finance Department
Duties and responsibilities:-

 Will plan, organize direct and control the financial transaction of the project by
using the entire necessary document.
 Will develop sound financial control system by developing modern financial control
systems.
 Will prepare the annual financial statements and prepare condensed reports for the
general manager, owner and other concerned government body.
 Will control the human and non-human resources of the project, which include:
effective handling of the different inventories of the machineries, equipment’s, raw

15
 materials, finished products, and devise strategies of controlling against fraud and
damage.
 Manage and execute the company national and international procurement
procedure
 Administer and control the company logistic resource
 Provide and manage general supportive service to the project.

5. Marketing and Sales Department

Duties and responsibilities:-

 Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
 Provide pricing inputs for the company based on competitor price
 Gather information on new product mix
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales(distribution)
 Will develop effective customer handling strategies
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of the
project

16
5. INVESTMENT COST AND FINANCIAL ANALYSIS

5.1. Total Investment Cost

The Financial analysis include insight to the total capital outlay required for the project
which would consist of total fixed investment cost, and pre- production costs; the source of
finance for the total planned initial investment cost requirement and other parameter of
feasibility analysis including projection of profit/loss statement, cash flow statement and
payback analysis. The total initial investment cost that is required to establish the
envisaged dairy farm and milk processing plant is estimated to be ETB 150,000,000.00

Table: Total Initial Investment Capital

No Description Cost in birr

1 Land, Building & Construction 15,075,000

2 Machinery & Equipment’s 45,500,000
3 Equipment for Animals and Farm 8,000,000
4 Life Animals 10,000,000
5 Vehicles 8,350,000
6 Office Equipment 286,000
Total Fixed Investment Cost 87,211,000
7 Raw material 20,080,000
8 Salary 3,721,920
9 Other operating expense 3,092,090
10 Pre service expense 210,000
sub.Total 27,104,010
Grand total 114,315,010
Contingency 35,684,990
Total Investment Cost 150,000,000

17
5.1.1. Fixed Investment
The fixed investment cost of the project consists of land acquisition and development,
construction costs of building and civil works, costs for purchase of plant machineray and
equipment, cost of purchase of vehicles, purchase of other fixed asset and other pre
production capital expenditure. Accordingly the fixed investment cost constitute the the
resource ruquired for land acquisition, site preparation and development, design and
engineering cost, building construction cost, civil works(service facilities), purchase of
plant machinery and equipment, purchase of transportation vehicles, purchase of office
furniture and equipment and capital costs required for other fixed assets.

i. Building & Construction

No Description Total cost in birr

1 Milk Processing halls 3,600,000.00

2 Barn warehouses(Cows, Heifers & Calves) 1,750,000.00
3 Office 1,600,000.00
4 Animals houses 1,250,000.00
5 Isolation ward 750,000.00
6 Maternity Stall 750,000.00
7 Concentrated 750,000.00
8 Calf Box 750,000.00
9 Milk collection Center 750,000.00
10 Cooling rooms 1,500,000.00
11 Construction Site Development 300,000.00
12 Design and Supervision 450,000.00
13 Fence and others 600,000.00
14 Land lease Initial Fee 275,000.00
Total 15,075,000

ii. Machinery And Equipment

The list of required machinery and equipment is indicated here below. The total cost of
machinery and equipment is estimated at Birr 45,500,000.00

The project needs the following machinery and equipment’s

18
 a. Processing machinery and equipment’s
 Milk reception unit
 Milk storage tanks
 Milk pasteurizing line
 Chiller
 Medium/High pressure steam generator
 Cooling tower
 Equipment’s for laboratory
 Milk Filling machine PET
 Packing equipment’s;
b. Auxiliary Equipment’s
 Laboratory and clinical equipment’s
 Workshop equipment’s
 Spare parts
iii. Equipment for Animals and Farm
No Description Unit Qty Unit cost in Total cost
Br. in Br.
1 Animal feeding equipment No 3000 1833 5,500,000
2 Water Tanker “ 100 10000 1,000,000
3 Miscellaneous equipment’s 1,500,000
Total 8000,000
iv. Life Animals
Year Description Unit Qty Unit cost in birr Total cost in
1 Animals No 200 50,000 10,000,000
Total 200 10,000,000
v. Vehicles
No Description Qty Unit Price in Br Total Price in Br.
1 Pick up 1 700,000 700,000
2 ISUZU Refrigerator Track 2 1,500,000 3,000,000
3 Generator 1 250,000 250,000
4 ISUZU FSR 2 1,500,000 3,000,000
5 Mid bus 2 700,000 1,400,000
Total 9 8,350,000

19
 vi. Office Equipment’s
No Description Qty Unit cost in Br. Total cost in br.
1 Managerial Tables with chair 10 5000 50,000
2 Secretarial chair with table 4 3000 12,000
3 Office Chairs with tables 30 2000 120,000
4 Computer with its accessories 5 15000 75,000
5 Shelf 5 4500 22,000
6 Filing Cabinets 2 3500 7,000
Total 286,000

vii. Pre-Service Expense

No. Cost Items Unit Qty Unit Cost in Total Cost
Br. in Br.
1 Business Plan Set 1 2,000 2,000
2 Feasibility Study Set 1 8,000 8,000
3 Environmental Impact Assessment Set 1 25,000 25,000
4 Market Study and processing with Set 2 20,000 20,000
suppliers
5 Workers Training 50,000 50,000
6 License and other processing Set 1 5000 5,000
7 Billboards Set 5 12,000 60,000
8 Management and Financial manuals and Set 1 10000 10000
systems
9 Developing Administrative, logistics and Set 1 30,000
financial formats 30,000
Total 210,000

20
5.2. Annual Production Cost

a. Raw Materials and Inputs

The basic raw material for milk, butter, and cheese and yogurt production is raw milk.
Other materials such as milk coagulating enzymes and salts are also required in relatively
small quantity. In addition to raw materials, auxiliary materials like containers and glycine
papers are required. Except glycine paper and coagulating enzymes, the other major raw
materials can be obtained from the local market.

The list and costs of the above mentioned materials are indicated in table below. The total
cost of raw material is estimated at Birr 20,160,000 at full capacity at third year of
commencing operation.

SN Description Unit Unit cost in Total cost in

br Br
1 Plastic bags (200cc) Pcs 0.9 2,800,000
2 Glycine paper (40 g) Kg 120 340,000
3 Coagulating enzymes Kg 50 260,000
4 Concentrated feed Quintal 6,690,000
5 Roughage LS 2,870,000
6 Medical cost 1,200,000
7 Milk Purchased from local producers Liter 5,000,000
8 Other supplies 1,000,000
Grand Total 20,160,000

21
 b. Salary Expense

No. Description No Qualification Monthly Annual

in Br. Salary in Br
1 General Manager 1 BA in Management 8,000 96,000
2 Accountant 4 BA in Accounting 4000 192000
3 Admin and 1 BA in mgt/Acct 5000 60,000
finance head
4 Cashier 4 10+2 in Accounting 1500 72,000
5 Dairy Farm 2 BA in Animal Science 5000 120,000
Managers
6 Secretary 3 Diploma in Secretarial 1500 42,000
Science
7 Marketing Head 1 BA in Marketing 5000 50,000
Management
8 Agronomist 1 BSc in Agronomy 4000 48,000
9 Storekeeper 3 10+2 in logistic management 1500 42,000
10 Animal feeders 75 Unskilled 900 810000
11 Purchaser 3 10+2 Pur. & Supplies mgt. 1500 54,000
12 Salesperson 5 Diploma in salesmanship 2000 120,000
13 Cleaner and 6 8th grade 800 57,600
Messenger
14 Guards 4 Basic 800 38,400
15 Production Head 1 BSC in industrial Chemistry 4000 48,000
16 Chemist 3 BSC in Chemistry 3000 108,000
17 Operator 30 10+2 in industrial 2000 720000
technicians technology
18 Assistant 15 10 completed 1500 270000
Operators
19 Driver 8 10 completed 1200 115200
20 Gardener 4 Unskilled 800 38400
Total 174 3,101,600

Benefit (20% of Basic 620,320

Salary)
Grand Total 3,721,920

22
 c. Other Operating Expenses

Sr. Description Annual Cost in

No br Assumption Used
1 Property Insurance 529,110 1% of fixed Investment cost
2 Audit 24,000 2000 per month
3 Advertisement cost 300,000 Lump sum
4 Uniforms 240,000 1200*200br
5 Telephone, fax and postal 24,000 2000 per month
6 Cleaning goods supplies 24,000 2000 per month
Stationery and other office
7 supplies 24,000 2000 per month
8 ElectriTOWN 188,000 0.47*400,000KW per year
9 Water 75,000 M3 per year
10 Fuel 441,600 24000 lit*18.4 per year
11 Oil and lubricant 44,160 10% of fuel cost
2% of the Fixed Investment
12 Repair and Maintenance cost 1,058,220 Cost
13 Miscellaneous Expense 120,000 10000 per month
3,092,090
Total

5.3. Financial Analysis and Statements

5.3.1. Underlying Assumption

The financial analysis of the envisioned project is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

Construction period 30 months

Source of finance 30% equity and 70% loan

Bank interest rate 10 %

23
 B. Depreciation

Building 5%

Machinery and equipment 10%

Animal equipment’s 10%

Office furniture 10%

Vehicles 20%

C. Working Capital

Accounts receivable 30 days

Raw material local 30 days

Work in progress 5 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

5.3.2. Sources of Fund

No Description % share Amount(in birr)

1 Owners Share(Equity) 30 45,000,000
2 Bank Loan 70 105,000,000
Total 100 150,000,000

24
5.3.3. Loan repayment Schedule
Yea Principal Interest Total Annual Remaining
r Payment (10%) Payment Balance
0 0 0 0 105,000,000
1 10,500,000 10500000 21,000,000 94,500,000
2 10,500,000 9450000 19,950,000 84,000,000
3 10,500,000 8400000 18,900,000 73,500,000
4 10,500,000 7350000 17,850,000 63,000,000
5 10,500,000 6300000 16,800,000 52,500,000
6 10,500,000 5250000 15,750,000 42,000,000
7 10,500,000 4200000 14,700,000 31,500,000
8 10,500,000 3150000 13,650,000 21,000,000
9 10,500,000 2100000 12,600,000 10,500,000
10 10,500,000 1050000 11,550,000 0

5.3.4. Depreciation Schedule

S Description Original Value Depreciatio Depreciatio
N in Birr n rate in % n Per year
1 Land, Building & Construction 15,075,000 5 753750
2 Machines & Equipment’s 45,500,000 10 4,550,000
3 Equipment for Animals and farm 8,000,000 10 800,000
4 Vehicles 8,350,000 20 1,670,000
5 Office Equipment 286,000 10 28,600
Total 7,802,350

5.3.5. Forecasted Revenue

Qty(Lt/KG Sales in Years
SN Description UOM
) 1 2 3-10
I Processed Milk Products
Pasteurized milk Liter 1268545 19028175 30512400 46854675
UHT treated milk “ 153763 2306445 3698460 5679324
Yogurt “ 9685 164645 264027 405427
Butter Kg 30282 3028200 4855800 7456470
Cheese “ 7264 290560 465920 715470
Sub total 24818025 39796607 61111366
II Male Calves Pcs 90 270000 693000 567000
Sub total 270000 693000 567000

25
 Total 61,678,36
25,088,025 40,489,607
6

5.3.6. Balance Sheet

Asset
Current Asset
Cash 8000,000
Inventory of raw materials and inputs 37,000,000
Total Current Asset 45,000,000
Fixed Asset
Land, Building & Construction 15,075,000
Machines & Equipments 45,500,000
Equipment for Animals 3,700,000
Life Animals 5,000,000
Vehicles 8,350,000
Office Equipment 286,000
Total fixed asset 87,211,000
Total Asset 132,211,000
Liability
Account payable 105,000,000
Owners’ Equity
Capital 45,000,000
Total Liability & Owners’ Equity 150,000,000

5.3.7. Income/Loss Statement

Revenue Year 1 Year 2 Year 3-10
Sales Revenue 25,088,025 40,489,607 61,678,366
Purchase of Raw and Inputs Material 10,080,000 15,120,000 20,160,000
Gross Profit 15,008,025 25,369,607 41,518,366
Expenses
Salary Expense 1860960 2791440 3,721,920
Other Operating Expenses 1546045 2319067.5 3,092,090
Deprecation Building 753750 753750 753750
Deprecation Machineries & Equipment’s 2,050,000 2,050,000 2,050,000
Deprecation Equipment for Animals and 370000 370000 370000
farm
Deprecation of Vehicles 1670000 1670000 1670000
Deprecation Office Equipment’s 28,600 28,600 28,600
Interest Expense 5146103 4631493 2573053
Lease payment 180,000 180,000 180,000
Total Expense 13605458 14794350.5 14,439,413
Profit Before Tax 1,402,567 10,575,257 27,078,953
Tax(30% ) 420770 3172577 8123686
Net Profit 981,797 7,402,680 18,955,267

26
5.3.8. Cash Flow Statement

Year Year 0 Year 1 Year 2 Year 3-10

Equity Capital 22,054,728
Loan principal 51,461,033
Sale(revenue) 25,088,025 40,489,607 61,678,366
Total cash in flow 73,515,761 25,088,025 40,489,607 61,678,366
Cash payment -
Raw materials & Inputs for the 0 20,160,000
farming 10080000 15120000
Salary expense 1860960 2791440 3,721,920
Investment 52,911,000 0 0 0
Other Operating cost 0 1546045 2319067.5 3,092,090
Pre operating cost 210000 0 0 0
Loan repayment 0 10292206 9777596 7719156
Lease payment - 180,000 180,000 180,000
Tax payment 0 420770 3172577 8123686
Total payment 53121000 24379981 33360680.5 42,996,852
Cash surplus / Deficit 20,394,761 708,044 7,128,927 18,681,514
Cumulative Balance 20,394,761 708,044 7,836,971 26,518,485

5.3.9. Profitability
According to the projected income statement, the project will start generating profit in the
first year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total
investment) show an increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is
viable.

27
5.3.10. Pay-Back Period
The investment cost and income statement projection are used to project the pay-back
period. The project's initial investment will be fully recovered at the 6 year of operation.

6. ENVIRONMENTAL AND SOCIAL IMPACTS OF THE PROJECT

Currently the issue of Environment and development has got a due emphasis and the
government has enshrined environmental policy within the constitution. In line with this
environmental policy the envisaged project deemed to mitigate the different impacts that
may be caused by actions of the project.

The Dairy farm will employ a wide range of environmentally sound practices, ranging from
basic manure management programs to high-tech systems that convert cow manure to
electricity.

Water Conservation

• The project will use water responsibly in their milking parlors and in manure
management and storage. For example, wastewater is recycled to flush feed alleys and
irrigate fields.

Waste Management

 Manure is spread on crop fields according to detailed nutrient management plans.

These plans take into account the types of soil on the farm, the terrain of the fields, soil
moisture levels, and the amount of nutrients the next crop on that field will need.
 New methane digester technology converts manure into methane-rich biogas, a
renewable fuel that can be used to generate electricity. Farms with this technology may
generate more than enough electricity to run their operations, and the project will sell
the excess energy back to the local utility company.

28
 Air Quality

 The project protects air quality by following proper manure storage practices and
maintaining clean facilities. When applying manure to their fields, farmers work to
schedule around their neighbors’ plans
Therefore, the envisioned project will undertake a separate Environmental Impact
Assessment to see the detail impacts with their mitigations.

29
 NEXT PROJECT

POULTRY FARM, MEAT PROCESSING, POULTRY FEED

MANUFACTURING PLANT

30
 A. INTRODUCTION
Developing countries economy is mainly dependent on Agriculture. In Ethiopia agriculture
sector is the main livelihood for the majority of the people and it is the backbone of economy in
which the country’s economy is totally dependent accounts for almost 60% of the GDP, provides
employment opportunity for about 85% of the population, supplies raw materials for 70% of the
agro-industries, and contributes about 90% of the country’s foreign earnings.

There exist abundant resource, ample market and favorable investment climate to engage in
agriculture and agro processing business in Ethiopia. Because of these reasons, the promoter of
the envisioned project planned to invest in Bishefetu Town in the area Poultry farm and meat
processing.

Hence, this project proposal is carried out to check the market, technical and financial feasibility
of this project. The result of the study is very sound and promising for the promoters to establish
the project in this area. The promoter is very determined to start the project by expecting the
necessary support that will be gained from the regional and local governments to make the
project operational.

4.3. Objective of the Project

The main objective of the project is to undertake the Poultry farm and meat processing business
with good quality and fair price for domestic market (50%) and export market (50%) in the
future.

4.4. The Socio-Economic Significance of the Project

The project has been contributing to the economic development of the nation in general and the
region in specific. The project benefits are explained as indicated below.

31
 G. Supply of Hen, Egg and Slaughter Chicken Meat

The envisioned project will produce chicken, egg and slaughter meat (broiler meat) at reasonable
market (Compare with its competitors) to the market. In that it will plays an important role in
improving essential element and vitamin deficiencies.

H. Add Value

By converting low-value roughage feed resources into high-value meat products, the project will
add value in agriculture sector in general and poultry sub-sector in specific.

I. Source of Revenue

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

J. Employment Opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. Hence, this project will hire 137 persons.

K. Generate Foreign Exchange

By exporting meat cattle and processed meat in international market, the project will generate
foreign currency for the nation in the future.

L. Benefit for The Local Community

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

32
 M. Stimulate the Local Economy

This project will have positive externality in the district and zone that will encourage the
economic movement of local economy specially by purchasing of cattle from local community
and will create an additional income for them. In that it will plays a viable roll in the
region/country’s economic transformation, and poverty alleviation.

N. Profit

The project will generate profit for the promoters.

4.5. Location, Infrastructure and Land

C. Location

The envisaged project will be located in Bishefetu Town which is from the capital City 40 km,
Oromia Regional State. The main justifications behind the selection of this location are:

The main reasons to choice this location is;

 Strategically located to the central and largest market of the nation relatively advanced
development in infrastructure (Power, Water, Telephone internet, road etc.
 All road to the nearest market outlets
 Availability of huge skilled labor force
 Availability of raw materials for dairy production
 Conducive investment policy and governance
 Favorable climate and topography for poultry farm and meat process

D. Land

The total required area of land is estimated to be which is equivalent to 1,463m2. The premises
required and the land use plan is indicated in the table below;

33
Table 1: Premises required and land Use Plan
SN Description Land
Requirement(M2)
1 Poultry Farm Section
1.1 Poultry House(Parent, Layer & broiler) 100
2000 m2 each
1.2 Grinding house 100
1.3 Incubator house 80
1.4 Store 100
1.5 Office 100
1.6 Waste accumulation area 70
1.7 Parking and Green area 100
Sub Total 650
2 Meat Processing Section
2.1 Slaughtering house 100
2.2 Processed meat storage area 50
2.3 Quality Control center 50
2.4 Office 100
2.5 Waste accumulation area 50
Sub Total 350
3 Poultry feed
2.6 Pulverize 650
2.7 Ribbon blender 350
2.8 Weighing machine 200
2.9 Fans 200
2.10 Installation /misc

Total 1,463

34
5. MARKET STUDY AND PROJECT CAPATOWN

The market study for the poultry farm and meat processing took the data for Bishefetu Town
market in general and the specific project location in specific. The Bishefetu Town market is
taken here since it is the biggest targeted market for the project as indicated below;

5.1. Past Supply and Current Demand

Poultry products such as egg and poultry meat are the central diets of Ethiopian’s. “Doro Wet”
which is prepared from poultry meat and eggs is one of the favorite dishes of the local population
which is prepared especially during religious festivals and holidays, virtually in every household
in the country. Moreover, eggs as they are easy to prepare and digest, have good test and nutrient
are becoming the favored breakfast items in urban areas like Bishefetu Town. Accordingly, due
to the traditional consumption habit and as the awareness of the population on the nutritional and
other advantages of poultry products increases the market for the products is also expected to
expand.

Most of the chickens and egg that are supplied to the City Administration’s market come from
other regional states and, according to the study made by Livestock Marketing Authority in
2004, the number of eggs and chicken that entered the City was estimated to be 56 million, and
2.1 million, respectively.

According to the unpublished data of the City Administration’s Urban Agriculture Department
(2005), the per capita consumption in Bishefetu Town was about 2.28 kg of eggs and 2.5 kg of
poultry meat. Accordingly, considering the total population size of Bishefetu Town in 2008 the
total consumption of the products is give in the Table below;

35
Table 2: Total Egg and Poultry Meat Consumption of Bishefetu Town (2008)

Egg consumption per person ( kg) 2.28

Population size (head) 3,400,000
Total consumption ( Kg) 7,752,000
Poultry meat consumption per person ( kg) 2.5
Population size (head) 3,400,000
Total Consumption( kg) 8,500,000

As can be seen from the table above, the total current consumption of egg and poultry meat in
Bishefetu Town is 7,752 tons for egg and 8,500 tons for poultry meat.

It is estimated that the poultry population in the Bishefetu Town Is about 350,000 where most of
the chicken are raised on small scale level in the backyards. The poultry population is
insignificant as compared to the national poultry population, which is estimated at about 63
million. The existing chicken’s population in the City is estimated to produce about 2,342 tons of
egg and 705 tons of poultry meat.

The present unsatisfied demand for poultry meat and eggs in Bishefetu Town is estimated at
7,750 tones and 5,410 tons, respectively.

5.2. Projected Demand

The demand for poultry meat is mainly influenced by population growth and income rise. The
1961, 1967 and 1978 population sample survey for Bishefetu Town revealed that the population
of Bishefetu Town was 0.4, 0.7 and 1.2 million, respectively. The 1984 census put the population
of Bishefetu Town at 1.4 million while the 1994 census recorded 2, 112.737 people. There is an
increase of 0.7 million or 50 % increase over a decade period. The annual increase over the
period 1984-1994 is 5 %. The total population of Bishefetu Town in 2007 is estimated to be
about 3.4. The population grows at an average annual growth rate of 2.9%. The Town population
is estimated to reach 4.4 million in year 2015. Accordingly, the rapidly increasing population of
the Town will augment the demand for poultry products such as egg and poultry meat.

36
With increasing income or purchasing power, people demand more diversified food products like
poultry products. Therefore, the level of poultry products consumption has a strong association
with the growth of income.

One of the indicators that measure the economic performance of a country and the well being of
the population is GDP. During the period 1995-2005 real GDP growth averaged 5.8% a year,
export grew by about 5% a year, annual inflation averaged about 4% and in year 2005
investment had risen to 16% of GDP. The positive performance of the Ethiopian economy is
expected to continue in the future. As a result, the market for poultry products may also be
expected to increase as economic expansion lead to a raise in the income level of the population.

Accordingly, the demand for the products is estimated to grow at 2.9% per annum which is
equivalent to the population growth. As shown in the table below shows the projected demand
for eggs and poultry meat in Bishefetu Town computed by taking the estimated present demand
as a base and applying an average annual growth rate of 2.9%.

Table 3: Projected Demand (In Tons)

Projected Demand
Poultry
Year Eggs Meat
2011 6,065 8,689
2012 6,241 8,941
2013 6,422 9,200
2014 6,609 9,467
2015 6,800 9,741
2016 6,997 10,024
2017 7,200 10,315
2018 7,409 10,614
2019 7,624 10,922
2020 7,845 11,238

37
 5.2.1. Market Prospects

From the above market demand and supply analysis for poultry meat, there exist huge market
gab in Ethiopian market. Besides, there exists high demand for these products in international
market. Hence, the envisioned project will be successful by entering in to this market.

5.2.2. Target customers of the project

The envisioned project targeted its product for domestic (50%) and international market (50%) in
the future. In general, the project will have the following target customer’s for its live hen and
processed meat. These target customers are mainly located in Bishefetu Town and surrounding
area,

Bishefetu Town Town Administration,

 Household user
 Hotels & exporters
 Supermarkets
 Universities

5.3. Production Capacity and Program

Based on the market condition and capacity of the project, the Fidel Integrated Agro Industries
planned in four phases (1st year 60%, 2nd year 80%, and 100 % in 3rd years) to reach full capacity
and then with ultimate goal to get on average 10,000 egg per day from 12,000 layers, to produce
50,000 old day chick (male and female) per 21 days to rear 12,000 broiler and slaughter after 55
days (when it reach 2 kgs). Besides, with the assumption 10% mortality rate and 360 working
days per year, the production capacity of the company per annum is calculated at full capacity
as indicated in the table below;

38
Table 4: production capaTOWN and program
SN Description UOM Production year
Year 1 year 2 Year 3-10
Capacity Utilization % 60 80 100
1 Table egg Unit 2,160,000.00 2,880,000.00 3,2,000,000.00
2 Day Old Chicken male Unit 180,000.00 240,000.00 300,000.00
3 Day old Chicken Female Unit 180,000.00 240,000.00 300,000.00
4 Broiler for slaughter Unit 46,800.00 62,400.00 78,000.00

5.4. Pricing

It would be important to examine the possible level of price based on the competitor’s action. In
this connection, the existing average retail prices of similar companies in and around project area
were assessed for the benefit of comparison. Based on the existing price in the market the project
stetted the price as follows;

Table 5: Pricing of the Project with VAT

Product UOM Price of project in Br. With
VAT
Table egg Unit 2.65
Day Old Chicken male Unit 7.00
Day old Chicken Female Unit 28
Broiler for slaughter Kg 115

5.5. Marketing Strategy and Promotion Methods

The company will follow the following promotional methods:

 Website Development

 Advertising(Media, flayer and news paper)

 Public Relations

 Branding The marketing strategy mainly focus on the satisfying the needs, order and the
requirement of the customers.

39
6. TECHNICAL STUDY

6.1. Product Nature

Poultry are large domestic fowl (e.g. hens, ducks, geese, turkey) reared for meat or egg. The
consumption of poultry has increased considerably owing to the speed at which fowl mature and
to the small amount of feed required per kg of meat produced.

The project will have a quality and good nature, day old chicken, table egg, 2 kg slaughtered
chicken1 meat (Broiler). In the expansion phase the project will provide different type of Chicken
meat processing.

6.2. Raw Materials and Inputs

The major raw materials and inputs for the envisioned project are chicken for breeding (parent
stock), layers, poultry feed (it is a mixed type), medicines, vitamins and plastic bag.

Most raw materials are available in international and local market. However, the parent stock
may be imported from abroad.

6.3. Poultry Farm Management

6.3.1. Housing

Poultry houses are designed for growing pullet (egg layers), broilers (birds of meat), parent stock
(birds for breeding) and each cage house is equipped with automatic feeders, drinkers, controlled
heating and light system where temperature and humidity are controlled.

The chicks should be kept in a clean, dry and well-ventilated room. The house should have
proper ventilation as this provides the chicken Soal air and carries off moisture. The entire
building including litter and all equipment should be fumigated.

40
 6.3.2. Feeding

Feed composition for chicken are typically 70% corn, 20% soy, and 10% other ingredients such
as vitamins and minerals.

6.3.3. Lighting
Most broiler growers provide 24 hours light during brooding and early growing period. Recent
research conducted in windowless buildings, using intermittent lighting of 1-2 hours period, has
indicated significantly improved feed efficiency. Initially, for first fifteen days, light intensity
should be 40-60 watts per 200 sq. ft of space and this can be replaced by 15 watts bulb in the
beginning of third week.

6.3.4. Drinkers

Adequate drinking space should also be provided to the birds. The drinker should contain Soal,
clean and cold water. It is necessary to provide extra water during summer.

6.3.5. Litter
Litter is spread on the floor to prevent the direct contact with the floor. Straw, ricehusk and
sawdust are generally used for making the litter. It should be dry and free of moulds. Caked or
moldy material should be removed and refilled with Soal materials. Extensively wet and dusty
litter should also not be used. Using new litter for each flock is good for raising disease-free
broiler.

6.3.6. Health Care

Vaccination can be provided to chicks through injections, can also be mixed in the water and
also through eye drops.

Sick chickens are treated with antibiotics or other medications. These chickens then go through a
withdrawal period before slaughter, to make sure no medication residue remains in their meat.
The chickens are usually watered through nipple drinkers, so that they don't spill and wet their
bedding.

6.3.7. Fumigation and Spraying

It is essential to check all equipment and walls of the broiler house carefully that they are clean,
and washed with disinfectant solution, and dried. The rooms should be white washed and
sprayed before the arrival of birds.

Disinfectant solution can be prepared with Phenol, Potassium Permanganate, Carbolic Acid and
Formalin. A solution of Sodium Hydroxide/Caustic Soda with warm water can also be used to
clean the house.

41
To sanitize the broiler house from germs and insects, it is fumigated with Formaldehyde Gas,
which is produced by putting Formalin on Potassium Permanganate. The rooms should be vacant
and sealed for 30 minutes after the fumigation so that the gas infiltrates in every corner of the
room.

6.4. Production Process

6.4.1. Poultry Farm section

Initially the parent stocks will be purchased at the age of day old. These chicks will be reared by
getting electrical heat for 3 weeks. During the 5 months of rearing the chicks will be fed with
feeds that have high protein content so that their growth will be fast. Starting the end of the fifth
month the hens will start laying. The eggs will be collected carefully and stored in a cool and dry
place. After doing this the average sized eggs will be incubated for 18 days. After the 18th day
the eggs will be transferred to the hatchery where the hatching process will take place. The baby
chicks will be sexed and distributed for customers at their own choice. If they are to be
distributed as pullets and cockerels they will be treated to the age of 3 months.

In the modern world, it has been possible to control all problems that are bound to affect any
developmental endeavors. With this regard all places in the country are suitable or could be made
suitable for poultry production. The enterprise can have an adverse effect on the environment
unless mitigating measures are taken. Poultry manure can pollute the environment if proper
management practices are utilized.

Because of high Nitrogen content poultry manure is excellent natural fertilizer if, it is composted
properly. Besides the composted manure can also be sold and be taken as another source of
income.

6.4.2. Meat processing section

The most popular processed products from chicken meat are chicken frankfurters, hotdogs,
chicken hams and the various breaded and fried products of the chicken nugget type. However,
the envisioned project will only slaughter for this time and will have various mix of chicken mat
processing in the future.
For the production of meat from chicken for processing, the same principles apply as in the beef
and pork sector. Either the entire carcass meat is used for further processing, or some of the cuts
go in Soal meat sales and the remaining into the manufacture. Chicken carcasses are usually cut
in wings, legs and breast in the fig below. Legs can be further subdivided into thighs and
drumsticks. The breast consists of the larger superficial breast muscle and the smaller profound
breast muscle, the latter is also called “filet”

42
Fig. Muscle meat of chicken carcass a/b leg (a=thigh, b= drumstick); c1/c2 breast meat
(c1=breast, c2=filet); d=wing

Examples for chicken cutting

Industrial method

In large industrial operations, chicken are usually cut in the hanging position. Carcasses are
suspended by the neck on a conveyor and pass though working stations. At each station a
specific cut is made and a certain part removed, until finally only the bone-carcass structure
remains.

The following is a widely practiced industrial cutting method: First the skin is incised around the
body above the legs (See Fig below). Then the wings are loosened, by cutting between wings and
carcass through the wing joint. Following minor incisions using a knife, the wings are pulled-off
together with the breast meat. The legs are then pulled off the carcass and finally the fillets are
removed (See Fig. below). Only the bone-carcass structure with neck remains.

43
Small-scale method

In small-scale operations more attention is usually paid to obtaining intact parts for individual
sales. Conveyor systems are in most cases not available and therefore chicken carcasses are
usually cut-up on a cutting board or table. Many different cutting styles have been developed.
The following is one example.

First the chicken carcass is positioned on the cutting board with the breast muscle facing
downwards. Then a deep cut is made just above the legs following the leg line The two carcass
parts are pulled apart and the legs are separated with a knife by splitting the backbone. Next the
wings are cut off through the lower wing joint If the breast and filets muscles are wanted
separately, they are now removed from the upper carcass part and trimmed

Lean meat can now be trimmed off the carcass parts for further processing; skin and fat are also
obtained.

44
Grading of chicken meat for large operations

Chicken manufacturing-meat for larger processing operations is usually categorized in four

different grades. The four grades of chicken meat are either used for pure chicken meat products
or for mixed products. In Halal products made from red meat (beef, mutton), the fat portion may
partially or fully be chicken skin.

Also in customary mixed red meat products (like frankfurter, bologna, breakfast sausages,
luncheon meat, etc.) normally made of lean pork and beef or lean pork only, and pork fat, part of
the lean pork may be substituted by lean chicken meat. This is usually done for cost-cutting
reasons i.e. when cheaper chicken meat is available), but also to satisfy the growing demand for
lower fat meat products.

The four grades are described below (See fig below Fig.):

GRADE Chicken 1 (CH1) Chicken white muscle meat with visible fat, connective tissue and
skin removed

For this grade mainly breast and filet meat is used. As meat of this grade is used for reconstituted
chicken hams and chicken sausages with visible coarse meat parts, all fat and skin must be
removed from the lean meat.

GRADE Chicken 2 (CH2) Chicken muscle meat with adhering subcutaneous and intramuscular
fat

Deboned and skinless meat from all chicken cuts (breast, legs, and wings) can be used. This meat
is usually ground or chopped during further processing. Smaller quantities of subcutaneous and
intramuscular fat are usually not removed and incorporated in the final product.

GRADE Chicken 3 (CH3) Chicken skin/fat

Chicken skin is removed from the carcass or individual cuts and collected separately. Chicken
skin has a high fat content and is ground prior to being added to processed meat products.
Chicken fat serves as the fat portion in all-chicken processed meat products such as chicken
frankfurters or chicken bologna. It can also be used as fat in lean beef or mutton products, such
as Halal frankfurters etc. Chicken skin is added to meat products for the same purpose as pork fat
in pork/beef products, namely to contribute to product flavor and softer product texture.

45
GRADE Chicken 4 (CH4) mechanically deboned chicken meat (MDM)

This grade is manufactured in industrial chicken plants by mechanically separating remaining

muscle tissue from the chicken carcasses after removing legs and wings and the breast muscles
including skin. Chicken necks are also used for MDM. MDM contains muscle meat, connective
tissue and some fat remaining on the bones after removing the meat cuts. MDM is a typical
industrial product and not produced in small operations. However, it is available on the meat
market and can be purchased by smaller producers as frozen blocks for further processing.

Chicken MDM is an ingredient for lower-cost meat products for partial substitution of the lean
meat. However, MDM addition is limited as high amounts of chicken-MDM will affect the
quality of products (deficiencies in texture and taste) and may in some countries result in
products which are not in line with national food regulations.

Fig. Grading scheme for chicken meat (industrial scale)

46
Grading of chicken meat for small operations

In small-scale operations, more emphasis is given to sales of Soal chicken parts. Therefore
usually only three grades of processing meat are obtained (See Fig. below):

GRADE 1: Trimmed lean breast and filet muscle meat (light color)

GRADE 2: Leg meat (darker color) and trimmings from carcass

GRADE 3: Skin/fat

Fig. Grading scheme for chicken meat (small-scale)

47
 6.5. Machinery and Equipment’s

6.5.1. Poultry Farm Section

The project needs the following machinery and equipment’s for Poultry farm section;

 Incubator2

 Egg room cooler

 Egg tray

 Drum Heater

 Small Drinkers

 Large Drinkers

 Small Feeder

 Large Feeder

 Shifting Box

 Manure handling system

6.5.2. Slaughter section

The project needs the following machinery and equipment’s for Chicken slaughtering section;

 Boiler

 Compressor

 Water treatment set

 Conveyor

 Feather removing equipment

2
Capacity of 3500 chicken at a time

48
  Vacuum lung aspirator

 Cooling water tank

 Automatic weighing scale

 Freezing room

 Autoclave

 Digester

 Other Slaughter equipment’s

6.6. Source of technology

The source of technology for the envisioned machineries and equipment’s will be imported from
china.

6.7. Project Design and Engineering

The proposed project comprises stock of different components to be executed at different phases
of the project life. These activities include: Design and Construction of various buildings
(workshops), importing of few machineries and medical cares.

6.8. Utilities

The project needs to have the following utilities;

 Water Supply,

 Fuel

 Supplementary Electricity supply,

 Telephone line

 Paved Road Transportation,

 Drainage Facility

49
 6.9. Regulation and control standard

The project will meet all the regulation standard and control of ministry of agriculture, ministry
of health and other concerned bodies regulation and standard towards poultry farm and Chicken
meat slaughtering.

6.10. Project Implementation Plan/ Action Plan

The major activities include Bank loan processing, construction of the building, cleaning the area
around the building, procurement of equipment’s and start rendering services. The time schedule
for the above mentioned major activities is presented below:

Table 6: Project-Implementation-Schedule
SN Activities Date

1 Land Approval June 2024

2 Bank loan processing July –August 2024

3 Site Development September 2024

4 Building and construction work October – November 2024

5 Purchasing of Machines and Equipment’s December 2024

6 Production execution January 2025

50
7. MANPOWER AND ORANIZATIONAL MANAGEMENT

7.1. Manpower

At the top of the organizational structure, there will be a general manager with the responsibility
of supervising the overall activity of the project. Depending up on the nature of the center and
the amount of work to be performs; there will be auxiliary units under the general manager.
Employees under each unit will be supervised by the department head that is accountable for the
general manager.

The company will use efficient trained staffs in the area of marketing to be competitive supplier
poultry products to the market. The opportunities of being serviced by well skilled professionals
well enable the company to evaluate the internal weakness and strength of the company as well
as to assess the global opportunity and risks in the world market so that the project can cope up
with the dynamics of the market situation.

The total manpower required for the plant will be 137 employees at full capacity.

 Permanent workers 94
 Skilled 56
 Unskilled 38
 Temporary workers 43
 Skilled 5
 Unskilled 38

The detail human power requirement, monthly and yearly salary is indicated in part 5 financial
part.

51
 7.2. Organizational Structure and management

The organizational structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be a general
manager with the responsibility of supervising the overall activity of the project. Employees
under each unit will be supervised by the department head that is accountable for the general
manager. General Manager is accountable to the owner of the project as indicated in figure
below ;

Fig Organizational Structure

Owner/s

General
Secretary
Manager

Production Dept. Marketing &

Admin. &
Sales Dept.
Finance Dept.

Poultry Farm Meat Processing Quality Control

Section Section

Hence the following section deals with the duties and responsibilities of some departments.

52
6. General Manager
Duties and responsibilities

 She/he will plan, organize, direct and control the overall activities of the project
 She/he will devise policies and strategies that will enable the project to be profitable.
 She/he will incorporate modern technological innovation that will facilitate the service
delivery of the project center and increase customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human resources of the
plant so as to achieve the short and long run objectives of the organization.

7. Production Department
It is the core department of the project center and its has three main sections (Poultry farm, meat
processing and quality control). It has the following responsibilities.

 Select and order for purchase good old day chick and control the quality of meat
processing.
 Produce/ quality hen and processed meat that will enable the project to be competent in
the market.
 Control on the quality of raw materials, inputs, quality of the meat product and also the
overall project process.
 Responsible for the feeding of Chicken
 Control health status of the chicken and meat
 Moreover control over the quality of the final output of the project (Hen and Chicken
meat).
8. Administration and Finance Department
Duties and responsibilities:-

 Will plan, organize direct and control the financial transaction of the project by using the
entire necessary document.
 Will develop sound financial control system by developing modern financial control
systems.

53
  Will prepare the annual financial statements and prepare condensed reports for the
general manager, owner and other concerned government body.
 Will control the human and non-human resources of the project, which include: effective
handling of the different inventories of the equipment’s, raw materials, chicken, and
devise strategies of controlling against fraud and damage.
 Manage and execute the company national and international procurement procedure
 Administer and control the company logistic resource
 Provide and manage general supportive service to the project.
9. Marketing and Sales Department
Duties and responsibilities:-

 Will handle the overall marketing activities of the organization which include planning,
organizing, directing, and controlling.
 Provide pricing inputs for the company based on competitor price
 Gather information on new product mix
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales(distribution)
 Will develop effective customer handling strategies
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of the
project

54
10. INVESTMENT COST AND FINANCIAL ANALYSIS

6.1. Total Initial Investment Cost

The total amount of money that is required to establish the envisaged project is estimated to be
birr 15,000,000
Table 7: Total Initial Investment Capital
No Description Cost
1 Fixed Investment
1.1 Land, Building and Construction 15,000,000
1.2 Machines and Equipment’s 12,000,000
1.3 Vehicles and Motors 3,000,000
1.4 Office Furniture and Equipment 1,200,000
Total Fixed Investment Cost 31,200,000
2 Operating Expense
2.1 Raw Materials Purchase and Products 20,500,000
2.2 Salary Expense 15,000,000
2.3 Other Operating Expense 3,600,000
2.4 Pre-operating Expense 2,200,000
Total Operating Expense 15,800,000
Contingency (Lump sum) 10% 14,000,000
Total Investment Cost 105,000,000

6.1.1. Fixed Investment

A. Building & Construction
Land Unit cost Total cost in
SN Description
Requirement(M2) in br br
1 Poultry Farm Section
Poultry House(Parent, Layer
1.1 1,800.00 3,800.00 6,840,000.00
& broiler) 2000 m2 each
1.2 Grinding house 150 3,900.00 345,000.00
1.3 Incubator house 800 2,800.00 520,000.00
1.4 Store 800 2,600.00 1,760,000.00
1.5 Office 150 2,700.00 420,000.00
1.6 Waste accumulation area 75 1,500.00 112,500.00
1.7 Parking and Green area 175 1,200.00 810,000.00
2 Meat Processing Section
2.1 Slaughtering house 500 8,200.00 1,550,000.00
2.2 Processed meat storage area 300 8,200.00 1,050,000.00
2.3 Quality Control center 40 4,200.00 128,000.00
55
 2.4 Office 160 5,200.00 512,000.00
2.5 Waste accumulation area 50 2,200.00 60,000.00
Electric line and water line
3 2,000,000.00
Installation
4 Fence and Site Development _ _ 325,000.00
5 Design and Supervision _ _ 650,000.00
6 Land lease initial 800,400.00
Total 5,000.00 16,666,945.08

B. Machinery And Equipment

Unit Price in Total price in
SN Item UOM Qty
Br. Br.
1 Incubator(2 setter & 1 hatcher) Set 2 955,000.00 1,910,000.00
2 Grinder Unit 2 470,000.00 940,000.00
3 Egg room cooler Set 2 500,000.00 1,000,000.00
4 Egg tray Unit 100 6,500.00 650,000.00
5 Drum Heater Set 3 190,000.00 570,000.00
6 Small Drinkers Set 40 5,000.00 200,000.00
7 Large Drinkers Set 20 5,960.00 119,200.00
8 Small Feeder Set 50 5,500.00 275,000.00
9 Large Feeder Set 20 8,100.00 162,000.00
10 Shifting Box Set 20 5,000.00 100,000.00
11 Manure handling system Set 14 8,000.00 112,000.00
12 Boiler & Compressor Unit 1 690,000.00 690,000.00
13 Water treatment System Set 1 675,000.00 675,000.00
14 Conveyor Unit 1 235,000.00 235,000.00
15 Feather removing equipment Set 4 75,000.00 300,000.00
16 Vacuum lung aspirator Unit 4 45,000.00 180,000.00
17 Cooling water tank Unit 1 35,000.00 35,000.00
18 Automatic weighing scale Unit 3 5,000.00 15,000.00
19 Freezing room Set 1 450,000.00 450,000.00
20 Autoclave Unit 1 85,000.00 85,000.00
21 Digester Set 2 90,000.00 180,000.00
22 Other Slaughter equipment Ls 550,000.00
23 Generator(400 KVA) Unit 846,832.40
Total 10,280,032.40

56
 C. Vehicle
Unit Price in
SN Description Qty Total Price in br. Remark
br.

1 Pick up 1 900,000 900,000 Duty free

2 Worker Service Bus 2 1,750,000 3,500,000 Duty free
3 FSR Isuzu Truck 2 1,2,000,000 3,200,000 Duty free
4 Mini Van 2 541,100.05 1,082,200 Duty free
Total 7 8,682,200.00

D. Office Equipment

SN Description Qty Unit cost in Br. Total cost in Br.

Managerial Tables with
1 6 9500.00 57,000.00
chair
2 Secretarial chairs 2 7500.00 15,000.00
3 Office Chairs with tables 18 4000.00 72,000.00
4 Computer 7 15000.00 105,000.00
5 Printers 4 19564.43 78,257.71
6 Shelf 5 7000.00 35,000.00
Telephone and fax
7 2 1800.00 3,600.00
machine
8 Filing Cabinets 3 5500.00 16,500.00
9 Decoration and others 100,000.00
Total 482,357.71

E. Initial Working Capital

The initial working capital is estimated to be birr 6,745,607.29

F. Pre-Service Expense
SN Description Total Cost in br
1 Project proposal preparation 35,000
2 Environmental Impact Assessment Study 40,000
3 Promotion and billboard 160,000
4 Licensing fee and others 12,000
Total 247,000.00

57
6.2. Annual Production Cost at Full Capacity3

c. Raw Materials and Inputs

SN Description Unit Qty Unit cost in Total cost in

br Br
1 Parent Stock Unit 2,100 150 315,000
2 Layer Unit 12,000 80 960,000
3 Fertile Egg Unit 2,000 5.17 10,340
4 Animal Feed(Mix) Ton 1120 3020 3,382,400
5 Other Animal Feed Ton 410 4100 1,681,000
6 Medication cost LS 250,000
7 Plastic packages LS 500,000
Grand Total - 7,098,740.00
d. Salary Expense
SN Description No Qualification Monthly in Br. Annual Salary
in Br
I Permanent Worker
1 General Manager 1 MSC in Animal Science 10,000.00 120,000.00
2 Accountant 3 BA in Accounting 3,500.00 126,000.00
3 Admin and Finance 1 BA in mgt/Acct 6,000.00 72,000.00
head
4 HRM officer 1 BA in HRM 3,000.00 36,000.00
5 Cashier 3 10+2 in Accounting 1,800.00 64,800.00
6 Poultry Farm Head 1 BSC in Animal Science 7,000.00 84,000.00
7 Secretary 2 Diploma in Secretarial Science 2,000.00 48,000.00
8 Marketing Head 1 BA in Marketing Management 7,000.00 84,000.00
9 Storekeeper 3 10+2 in logistic management 2,000.00 72,000.00
10 Feed Specialist 3 Diploma in Animal Science 2,100.00 75,600.00
11 Feeder 18 Unskilled 900.00 194,400.00
12 Slaughter head 1 BSC in Animal Science 7,000.00 84,000.00
13 Veterinarian 2 BSC in Vet. Science 3,500.00 84,000.00
14 Purchaser 2 10+2 Pur. & Supplies mgt. 2,100.00 50,400.00
15 Salesperson 6 Diploma in salesmanship 2,000.00 144,000.00
16 Cleaner 10 Unskilled 900.00 108,000.00
17 Lab technician/Quality 2 BSC in Chemistry 3,000.00 72,000.00
18 Driver 5 10 completed + license 1,800.00 108,000.00
19 Slaughters 21 Basic 1,300.00 327,600.00
20 Guards/security 6 Basic 1,000.00 72,000.00
21 Gardener 2 Unskilled 900.00 21,600.00
Sub Total 94 68,800.00 2,048,400.00
II Temporary Worker
1 Electrician 2 Diploma in General 2300 55,200

3
@Third year of operation

58
 ElectriTOWN
2 Auto Mechanic 2 Diploma in Automotive 2350 56,400
technology
3 Plumber 1 10+2 in Plumbering 1300 15,600
4 Laborer 38 Unskilled 900 410,400
Sub Total 43 6850 537,600
Total 137 75,650.00 2,586,000
Benefit (20 % of Basic 517,200
Salary)
Grand Total 137 75,650.00 3,103,200

e. Other Operating Expenses

SN Description Annual Cost in br Assumption Used

1 Property Insurance 305,792.00 1% of fixed Investment cost
2 Audit & Legal service 42,000.00 Br. 3500 per month
3 Advertisement cost 250,000.00 Lump sum
4 Uniforms(work cloth) 38,000.00 200*Br. 190
5 Telephone, fax and postal 24,000.00 Br. 2000 per month
6 Cleaning goods supplies 30,000.00 Br. 2500 per month
7 Stationery and other office supplies 18,000.00 Br. 1500 per month
8 Electricity 187,500.00 Br. 0.75*250,000KW per year
9 Water 12,000.00 Br. 2 .*5,000m3 per year
10 Fuel 392,700.00 18700 lit @ br 21
11 Oil & Lubricant 39,270.00 10% of cost of Fuel
2.5% of the Fixed Investment
12 Repair and Maintenance cost 764,480.00 Cost
13 Miscellaneous Expense 120,000.00 Br. 10000 per month
Total 2,223,742.00

59
6.3. Financial Analysis and Statements
6.3.1. Underlying Assumption

The financial analysis of the envisioned project is based on the data provided in the preceding
sections and the following assumptions.

D. Construction and Finance

Construction period 16 months

Source of finance 30% equity and 70% loan
Bank interest rate 14 %
Duration of loan 10 Years
Operating Costs increase by 3% after year 3

Raw materials and inputs increase by 3% after year 3

Salary and wages increase by 2 % after year 3
Sales revenue increased by 3 % after year 3

E. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%

F. Working Capital

Accounts receivable 30 days

Raw material local 30days
Work in progress 5 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days

Mortality of Chicken 5%
60
6.3.2. Sources of Fund
Description % share Amount(in birr)

1 Owners Share(Equity) 30 31,500,000

2 Bank Loan 70 73,500,000
Total 100 105,000,000

6.3.3. Loan repayment Schedule

Year Principal Interest (@14%) Total Paid Balance
2021 $839,524.13 $2,421,071.04 $3,260,595.17 $29,160,475.87
2022 $1,607,693.71 $3,981,898.01 $5,589,591.72 $27,552,782.16
2023 $1,847,789.95 $3,741,801.77 $5,589,591.72 $25,704,992.21
2024 $2,123,742.64 $3,465,849.08 $5,589,591.72 $23,581,249.57
2025 $2,440,906.70 $3,148,685.02 $5,589,591.72 $21,140,342.87
2026 $2,805,436.66 $2,784,155.06 $5,589,591.72 $18,334,906.21
2027 $3,224,406.26 $2,365,185.46 $5,589,591.72 $15,110,499.95
2028 $3,705,945.64 $1,883,646.08 $5,589,591.72 $11,404,554.31
2029 $4,259,399.07 $1,330,192.65 $5,589,591.72 $7,145,155.24
2030 $4,895,506.39 $694,085.33 $5,589,591.72 $2,249,648.85
2031 $2,249,648.85 $79,346.50 $2,328,995.35 $0.00
Totals $10,500,000 $25,895,916.00 $55,895,916.00

6.3.4. Depreciation Schedule

Original Value Depreciation Depreciation Per
SN Description
In Birr rate in % year

Land, Building &

1 16,666,945.08 5% 833,347.25
Construction
2 Machines & Equipment 10,280,032.40 10% 1,028,003.24
3 Vehicle 8,682,200.09 20% 1,736,440.02
4 Office Equipment 482,358.00 10% 48,235.77
Total 36,111,535.28 13,646,026.28

61
6.3.5. Revenue Projection
Based on the price and the capaTOWN program of the project indicated in previous chapter
(chapter 2), the revenue of the factory projected as indicated in the table below;
SN Description Year 1 Year 2 Year 3-10
1 Table egg 5,724,000.00 7,632,000.00 9,540,000.00
2 Day Old Chicken male 1,260,000.00 1,680,000.00 2,100,000.00
3 Day old Chicken Female 5,040,000.00 6,720,000.00 8,400,000.00
4 Broiler for slaughter 5,382,000.00 7,176,000.00 8,970,000.00
Total 17,406,000.00 23,208,000.00 29,010,000.00

6.3.6. Balance Sheet (Beginning)

6.3.7. Income/Loss Statement

Asset
Current Asset
Cash 5,000,000
Inventory of raw materials and inputs 4,500,000
Total Current Asset 31,500,000
Fixed Asset
Land, Building and Construction 3,000,000
Machineries and Equipment’s 1,500,000
Office Equipment 800,000
Vehicles 200,000
Total fixed Asset 73,500,000
Total Asset
Liability
Account payable 10,500,000
Owners Equity 4,500,000
Capital
Total Liability & Owners’ Equity 105,000,000

62
6.3.8. Cash Flow Statement
Year Year 0 Year 1 Year 2 Year 3-10
Equity Capital 30,000,000
Loan principal 12,857,143
Net Profit 0 1,981,799.57 4,325,902.77 8,549,653.96
Depreciation 3,646,026.28 3,646,026.28 3,646,026.28
Total cash in flow 42,857,143 5,627,826 7,971,929 12,195,680
Cash payment
Purchase of Raw materials & Inputs 0 4,259,244 5,678,992 7,098,740
Loan Principal Payment 839,524.13 1,607,693.71 1,847,789.95
Investment 36,111,535 0 0 0
Total payment 36,111,535.28 5,098,768.13 7,286,685.71 8,946,529.95
Cash surplus / Deficit 6,745,607.29 529,057.72 685,243.34 3,249,150.29
Cumulative cash flow 6,745,607.29 529,057.72 1,214,301.07 3,934,393.64

6.3.9. Profitability
According to the projected income statement, the project will start generating profit in the 1st
year of operation. Important ratios such as profit to total sales, net profit to equity (Return on
equity) and net profit plus interest on total investment (return on total investment) show an
increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is viable.

6.3.10. Pay-Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered at the 8.6 years of operation.

63
7. FUTURE DEVELOPMENT OF THE PROJECT

The project has an expansion step in phase two that will produce process different mix of
processed chicken meat using modern and advanced food technology.

8. ENVIRONMENTAL AND SOCIAL IMPACTS OF THE PROJECT

Currently the issue of Environment and development has got a due emphasis and the government
has enshrined environmental policy within the constitution. In line with this environmental
policy the envisaged project deemed to mitigate the different impacts that may be caused by
actions of the project.

The main impacts from poultry rearing are the effects of ammonia, odor and dust emissions
from housing, and from land spreading of litter. Other activities such as inappropriate litter
utilization and poor management of the site can result in contaminated run-off entering
watercourses and contaminating soil. Because the poultry industry is relatively homogenous in
nature, it is practicable to list the main activities likely to affect the environment.

Quantifying environmental effects is dependent on the number, type and proximity of sensitive
receptors, but a generic assessment of the potential effects of emissions can be made by listing
the main emissions from the installation and outlining their potential effects on air, water, soil,
ecosystems, people etc.

Therefore, the envisioned cattle fattening and meat processing project will undertake a separate
Environmental Impact Assessment to see the detail impacts with their mitigations.

64
 NEXT PROJECT

ANIMALS FOODER FARMS AND FEED

PROCESSING

65
1. INTRODUCTION
1.1 Background
Animal feed is food given to domestic animals, especially livestock, in the course of animal
husbandry. There are two basic types: fodder and forage. Used alone, the word feed more often
refers to fodder. Animal feed is an important input to animal agriculture, and is frequently the
main cost of the raising or keeping of animals. Farms typically try to reduce cost for this food, by
growing their own, grazing animals, or supplementing expensive feeds with substitutes, such as
food waste like spent grain from beer brewing.
Animal wellbeing is highly dependent on feed that reflects a well-balanced nutrition. Some
modern agricultural practices, such as fattening cows on grains or in feed lots, have detrimental
effects on the environment and animals. For example, increased corn or other grain in feed for
cows, makes their more acidic weakening their immune systems and making cows a more likely
vector for E.coli. While other feeding practices can improve animal impacts. For example,
feeding cows certain kinds of seaweed, reduces their production of methane, reducing the
greenhouse gases from meat production.
When an environmental crisis strikes farmers or herders, such as a drought or extreme weather
driven by climate change, farmers often have to shift to more expensive manufactured animal
feed, which can negatively effect their economic viability. For example, a 2017 drought in
Senegal reduced the availability of grazing lands leading to skyrocketing demand and prices for
manufactured animal feed, caused farmers to sell large portions of their herds. Additionally
agriculture for producing animal feed puts pressure on land use: feed crops need land that
otherwise might be used for human food and can be one of the driving factors for deforestation,
soil degradation and climate change.
Maize is an annual grass in the family Gramineae, which includes such plants as wheat, rye,
barley, rice, sorghum, and sugarcane. There are two major species of the genus Zea (out of six
total): Zea mays (maize) and Zea diploperennis, which is a perennial type of teosinte. Animals
Fodder Farms is central to food security, especially as global population is predicted to surpass
the 9 billion mark by 2050. Adverse conditions for Animals Fodder Farms resulting from a
changing climate, such as increasing temperatures, frequent droughts, soil salinization, changing
intensities and frequencies of disease and pest incidence and their transboundary spread, are all

66
factors that further threaten food security. Genetic diversity of crop species achieved through
breeding, and optimal soil and water conditions in the growing environment through
management, constitute the essential requirements for increasing Animals Fodder Farms .
Breeding improvements in crops include increasing crop yields, improving quality, and
enhancing resilience to adverse conditions such as diseases, pests, and environmental stress
including drought, heat, salinity etc. Management and agronomic practices address soil, water
and nutrient requirements of the crop to ensure increased and sustained production. This chapter
discusses nuclear, isotopic and related techniques used in creating new genetic diversity for crop
improvement, and in the management of soil, water and nutrients for Animals Fodder Farms .
Our country Ethiopia is one of the East African countries with the diversified climatic
conditions, natural scenery and resource bases. Currently the country has a total population of
about 100 million of which more than 40 million is found in Oromia regional state. Bishefetu is
one of the regional states of Ethiopia with very fertile land, very conducive weather condition
both for Animals Fodder Farms and animal husbandry. The country’s Gross Domestic Product
or GDP (was 19.39 billion US$ in 2007 with per capita income of 245 US$. In the same year,
agriculture accounted for almost 47 percent of GDP and about 85 percent of exports. Ethiopia is
the third largest populated country in Africa with a total population number of 77.4 million
(2005), out of which 84% of the populations reside in the rural area. About 80 percent of the
economically active population is engaged in agriculture. The cultivated area covered in 2005/06
was about 11.3 million ha, of which 10.5 million ha and 0.77 million ha covered with annual and
permanent crops respectively.
Agriculture in Ethiopia has a major influence on all development processes in the country, as
some 85% of the total employment and 90% of the country’s export are based on agriculture
(Environmental Policy, 1997). It also contributes about 50% of the country’s gross domestic
product (GDP) and supports around 70% of the raw material requirements of agro-industries.
This high proportion of the country’s economic gains made from agriculture depends mainly on
the existing diversity of indigenous crops/plants and livestock. Animals Fodder Farms is
estimated to contribute on average about 60%, livestock 27% and forestry and other subsectors
around 13% of the total agricultural value (Ministry of Water Resource, 2001).

67
PART TWO
THE MARKET DEMAND POTENTIAL
2.1. Market Situation
Since the adoption of the new economic policy in 1991, agricultural markets have been reformed
and prices of commodities are determined through market mechanisms. However, due to the
weak bargaining power of producers and harvest fluctuations, the “price free” notion of markets
have been found to affect producers (EEA, 2004). Agricultural product markets in Ethiopia are
characterized by seasonal gluts and shortages which in turn affect the marketing behavior of
producers, traders, and consumers. A year of bumper harvest might be followed by a year of
severe drought, for example in the years 2002 and 2003 (EEA, 2004).
Only 40 years ago, Ethiopia exported an average of 90,000 tons of grains and legumes to its
East African and Arabian Peninsula neighbors annually (Hailu 1991). Cereals production has
remained flat since the early 1970s, however. With more than a doubling of population between
1970-90, available food per capita has declined. Ethiopia is endowed with a wealth of natural
resources: diverse agro ecological systems, many with adequate rainfall and soils fertile enough
to sustain a wide variety of crops. Only 40% of potential arable land, and less than 5% of
irrigable land, is currently being used (Faught 1988, cited in Stroud and Mulugetta 1992).
Policies affecting agricultural development and in particular agricultural exports in developing
countries have undergone two major changes in the 1980s and 1990s. Initially during the 1980s,
the structural adjustments programed (SAP) of the World Bank (WB) and International
Monetary fund (IMF) focused on stimulating an increase in foreign exchange earnings through
reduction in structural constraints in developing countries. These included policy reforms in
monetary, fiscal, trade and domestic policies. The measures included devaluation of currencies to
create incentives for reallocation of resources towards international trade and/or tradable
commodities, removal of export taxes on agricultural commodities, domestic market
liberalization and reduction of the government’s role in production and marketing of agricultural
commodities. During the 1990s, the policy reforms on trade were enhanced with the conclusion
of the Uruguay Round of the general agreement on tariffs and trade (GATT) negotiations which
culminated with the establishment of the new World Trade Organization (WTO) and subsequent
signing of agreements by member countries in 1995. For agriculture, the negotiations led to the
establishment of the agreement on agriculture (AOA), which for the first time introduced a set of

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rules that emphasized liberalization in international agricultural trade. The main elements of the
AOA were to improve market access, reduce domestic support and export subsidies.
As clearly indicated from the above export data, Ethiopia has not yet producing for export and
thus, this project is primarily deemed to export to different countries of the world. Therefore, the
envisaged project will export 20% of its products to different countries and sells 80% of its
products to the domestic market.
Hence to reach customers, different marketing vehicles will be used. Among the different
marketing strategies and tools for promotion and controlling the market the center will use:
 Both printed and non printed forms of advertising,
 Effective and customer centric marketing strategies that are the marketing strategies
that focuses on effectively handling customers.
 Electronic advertising through internet, faxes and other technologies.
2.2. Competition
There are different forms of competition that may face this project. These are price and non price
based competition. Moreover, there are different competitors that will compete with the project
under discussion either directly or indirectly both in the domestic and foreign market. But the
project under discussion has diversified marketing strategies that could enable it cope up with the
different competitors in the market. Moreover the Project will frequently conduct competitors
research which focuses on, the strength and the weaknesses, the different competitor’s strategies,
the techniques they use in rendering the service, their customer handling methods, their product
quality and others.

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2.3. The Production of Crops
2.3.1 Production Hygiene
Crop mean that which is cropped, cut, or gathered from a single field, or of a single kind of
grain or fruit, or in a single season; especially, the product of what is planted in the earth; fruit;
harvest. In production, farmers are faced with many challenges. They must be efficient in order
to remain in business and their production systems must be sensitive to environmental concerns.
These requirements are in addition to the usual challenges of weather, pests and uncertain
markets. A "Sustainable Animals Fodder Farms System" is a term often used to describe a
management philosophy that will be adopted by those farmers who are going to remain as the
future producers of our food, feed and fiber.
It is this combination of productivity and responsibility that most accurately describes the term
"Sustainable Animals Fodder Farms Systems." The production process of this project is
environmentally benign as it produces organic crops. Different types of cereal crops are grown
and harvested under a wide range of climatic and diverse geographical conditions, using various
agricultural inputs and technologies, and on farms of varying sizes. Biological, chemical and
physical hazards may therefore vary significantly from one type of production to another. In each
primary production area, it is necessary to consider the particular agricultural practices that
promote the production of cereal crops, taking into account the conditions specific to the primary
production area, type of products, and methods used.
2.3.2 Agricultural input requirements
Agricultural inputs should not contain microbial or chemical contaminants (as defined under the
Recommended International Code of Practice – General Principles of Food Hygiene (CAC/RCP
1-1969, Rev 3 (1997) at levels that may adversely affect the safety of cereal crops and taking into
consideration the WHO guidelines on the safe use of waste water and excreta in agriculture and
aquaculture as appropriate.

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2.2.2.1 Water for primary production
• Growers should identify the sources of water used on the farm (municipality, re-used irrigation
water, well, open canal, reservoir, rivers, lakes, farm ponds etc.).
They should assess its microbial and chemical quality, and its suitability for intended use, and
identify corrective actions to prevent or minimize contamination (e.g. from livestock, sewage
treatment, human habitation).
• Where necessary, growers should have the water they use tested for microbial and chemical
contaminants. The frequency of testing will depend on the water source and the risks of
environmental contamination including intermittent or temporary contamination (e.g. heavy rain,
flooding, etc.). If the water source is found to be contaminated corrective actions should be taken
to ensure that the water is suitable for its intended use. Therefore this project is take in to account
all this.
 Water for irrigation and harvesting
The envisaged plc will use both sprinkler and drip irrigation. Water used for agricultural
purposes should be of suitable quality for its intended use. Special attention to water quality
should be considered for the following situations:
• Irrigation by water delivery techniques that expose the fruits of the crops directly to water (e.g.
sprayers) especially close to harvest time.
• Irrigation of crops that have physical characteristics such as leaves and rough surfaces which
can trap water.
• Irrigation of crops that will receive little or no post-harvest wash treatments prior to packing,
such as field-packed produce.
 Water for fertilizers, pest control and other agricultural chemicals
Water used for the application of water-soluble fertilizers and agricultural chemicals in the field
and indoors should not contain microbial contaminants at levels that may adversely affect the
safety of Soal fruits and vegetables. Special attention to the water quality should be considered
when using fertilizer and agricultural chemical delivery techniques (e.g. sprayers) that expose the
edible portion of Soal fruits and vegetables directly to water especially close to harvest time.

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 Hydroponic water
Plants grown in hydroponic systems absorb nutrients and water at varying rates, constantly
changing the composition of the re-circulated nutrient solution.
Because of this:
• Water used in hydroponic culture should be changed frequently, or if recycled, should be
treated to minimize microbial and chemical contamination.
• Water delivery systems should be maintained and cleaned, as appropriate, to prevent microbial
contamination of water. Therefore, the owner has deep rooted experience in this area.
2.2.2.2 Manure, bios lids and other natural fertilizers
The use of manure, biosolids and other natural fertilizers in the production of crops should be
managed to limit the potential for microbial, chemical and physical contamination. Manure,
biosolids and other natural fertilizers contaminated with heavy metals or other chemicals at
levels that may affect the safety of crops should not be used. Where necessary, in order to
minimize microbial contamination the following practices should be considered:
2.2.2.4. Bio diversity
As a general rule, diverse ecosystems in nature have a higher degree of stability than those with
only a few species. The same is essentially true for agro ecosystems. Farms with a diverse mix of
crops have a better chance of supporting beneficial organisms that assist in pollination and pest
management. Diversity above ground also suggests diversity in the soil, providing better nutrient
cycling, disease suppression, tilt, and nitrogen fixation. Good organic farmers mimic the
biodiversity of nature through practices like intercropping,
Companion planting, establishment of beneficial habitats, and crop rotation (sometimes referred
to as companion planting across time).
The effort to increase biodiversity works hand-in-hand with enterprise diversity, which is often
(but not necessarily) an objective on organic farms.

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2.2.2.5. Natural Plant Nutrition
Even though we require the same basic “stuff” to live, it is somewhat challenging to draw simple
comparisons between the nutritional needs and processes of plants and those of animals. Plants
are able to photosynthesize to make sugars, which are ultimately synthesized into proteins and
other plant constituents. Humans and other animals, by contrast, can obtain energy foods,
proteins, and vitamins only by consuming plants or other animals. Both plants and animals also
require minerals.
Humans and other animals extract minerals, along with sugars and proteins, from the food they
eat. Plants, too, obtain minerals — and a wide range of vitamins, antibiotics, and other useful
compounds— through digestion. However, plant digestive systems are not internalized as they
are in animals. Plants must rely on the external digestive processes of the soil system within
reach of their roots — a TWON called the rhizosphere.
2.2.2.6. Natural Pest Management
Whether conventional or organic, all farmers are concerned with pests. They spend a lot of time
and resources controlling them. However, in the organic “world view,” pests — whether weeds,
insects or diseases — are not simply scourges. They are indicators of how far a production
system has strayed from the natural ecosystems it should imitate. Certain weeds, for example,
tend to predominate when soils are too acidic or too basic; some become a problem when soil
structure is poor and conditions become anaerobic; others may be stimulated by excessive
fertilizer or manure salts. Organic proponents also believe that insect pests are attracted to
inferior or weak plants — the result of poor crop nutrition. Their logic continues by asserting that
pests are naturally repelled by vigorous, well-nourished plants. This belief is often challenged,
and significant research remains to be done. As scientific understanding has grown, insect pest
outbreaks are also being understood as imbalances in the whole agro ecosystem and how it is
managed. In nature, massive pest outbreaks are relatively rare and short-lived, due to the
presence of natural predators, parasites, and disease agents that quickly knock the pest numbers
back down to a moderate level. In farming

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2.2.2. 7. Minoring and Composting
Livestock manures are the most traditional and widely recognized organic fertilizers. Under ideal
circumstances, livestock enterprises are integrated into the whole farm operation, and minoring
becomes part of a closed system of nutrient recycling. This is still strongly encouraged in organic
operations. In reality, however, crops and livestock production are often divorced from each
other, and manures must be imported. This has created some concerns in the organic community,
since much manure is now generated by large, industrial agriculture feeding operations called
CAFOs (Confined Animal Feeding Operations). Not only are there concerns about contaminants
(heavy metals, antibiotics, pesticides, hormones) but many in the organic community also object
to any “partnering” with this segment of conventional agriculture, which is considered at odds
with the environmental and social values represented by organic farming. Nonetheless, the
National Organic Program does not differentiate between CAFO and other livestock manure
sources. However, the NOP regulations do require that livestock manure not contain any
synthetic substances not included on the National List of synthetic substances allowed for use in
organic Animals Fodder Farms .
2.2.2.8. Biological Pest Control
Organic farming relies heavily on populations of beneficial insect predators and parasites, pest
disease agents, insect-eating birds and bats, and other creatures, to help manage pest problems.
These biological controls help keep pest numbers at levels where further cultural activities or
relatively mild pesticides are (usually) adequate to assure a crop. In some instances, biological
control can be so effective that no additional action is even needed by the farmer. Some see
biological control as a default benefit of the soil fertility practices of organic farming. The
diversity of crops in a soil-building rotation, the use of cover crops, and other practices build a
diverse soil biology that works to keep soil pests in check. They also provide substantial
aboveground habitat for beneficial.

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2.2.2.9. Sanitation
Sanitation can take on many forms:
• Removal, burning, or deep plowing of crop residues that could carry plant disease or insect pest
agents
• Destruction of nearby weedy habitats that shelter pests
• cleaning accumulated weed seeds from farm equipment before entering a new, “clean” field
• sterilizing pruning tools
As in human and animal health, sanitation practices can go a long way in preventing crop pest
problems. However, many practices— such as clean cultivation, deep plowing, and burning crop
residues — can increase erosion and reduce biodiversity. Thus, they may conflict with
sustainability. Good organic growers recognize this and treat those practices as transitional or
rescue options, rather than relying on them on an annual basis.
2.2.2.10. Tillage and Cultivation
Tillage and cultivation are tools that can accomplish a variety of objectives in farming systems:
weed control, crop residue management, soil aeration, conservation of manures and other
fertilizers, hardpan reduction, sanitation to destroy pest and disease habitat, etc. While
conventional farmers rely on chemicals to accomplish many of these objectives, organic growers
focus more on improving tillage and maximizing its benefits. Guidelines for primary tillage, for
example, are intent on conserving crop residues and added manures in the upper, biologically
active TWONs of the soil, rather than burying them deeply where decomposition is anaerobic
(oxygen-starved). Leaving soils completely bare and vulnerable to erosion is discouraged; fall
moldboard plowing is certainly frowned upon. Cultivation in organic systems often rises to the
level of art. Row-crop farmers frequently use blind cultivation —shallow tillage, which largely
ignores the crop rows—beginning shortly after seeding until the plants are but a few inches high.
Rotary hoes, wire-tooth harrows, and similar equipment can be used for blind cultivation,
delaying the first flush of weeds and giving the crop a head start.

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2.2.2.11. Conservation Tillage and Organic Farming
Organic agriculture is often characterized as addicted to maximum tillage — with growers using
every opportunity to lay the land bare with shovel, plow, or rototiller. This image has been
magnified through the popularity of small-scale organic systems like the French Intensive and
Biointensive Mini Farming models that espouse double- and triple-digging to create deep rooting
beds. While appropriate to such intensive systems, this degree of cultivation is not characteristic
of organic agriculture in general. It may surprise some to learn that a large number of organic
producers are not only interested in conservation tillage, they have adopted it. This will be a
surprise because many believe that conservation tillage always requires herbicides. Mulching is a
practice often used by organic growers. Traditionally, it entails the spreading of large amounts of
organic materials — straw, old hay, wood chips, etc. — over otherwise bare soil between and
among crop plants. Organic mulches regulate soil moisture and temperature, suppress weeds, and
provide organic matter to the soil.
2.2.2.12. Supplemental Fertilization
In many organic systems, crop rotation, minoring, green minoring, along with enhanced
biological activity in the soil, provide an abundant supply of plant-essential minerals annually.
This is especially true on naturally deep and rich prairie soils. It is less true on poorer soils and
on those that have been heavily exploited through non-sustainable farming practices.
To correct mineral deficiencies in organically managed soils, organic growers often apply
ground or powdered rock minerals. The most commonly used rock mineral is high calcium
aglime. Dolomitic limestone, various rock phosphates, gypsum, sulfate of potash-magnesia, and
mined potassium sulfate are also common. These are all significant sources of primary (P, K)
and/or secondary (Ca, Mg, S) plant nutrients. The savvy organic grower applies significant
amounts of these materials only with the guidance of regular soil testing. Less common are other
rock powders and fines that are limited sources for the major nutrients but are rich in
micronutrients or have some other soil improving characteristic.

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 2.3. Schedule of production plan
The production scheme of the company is twice a year.
No Description Plot in hectare Unit Qty per Hect. Yearly production
1 Animals Fodder farms 44 quint 40
2,000
2 Selected Seeds Production 1
Total 45 3,155
As clearly indicated in the production plan of the project the crops are produced within three
months period, which is it deemed to be produced twice a year.

2.3. Sales Plan

The Revenue of the Project is assumed to be generated from the sales of the different crops. Thus
in this project,
No Description Plot in hek Unit Yearly product Unit price Total Price

1 Maize Production 44 Tone 8000 7000 7,600,000

2 Office 1
Total 45 1,6925 14,530,000

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PART THREE
ORGANIZATIONAL STRUCTURE
The organizational structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be a CEO with the
responsibility of supervising the over all activity of the plant. Depending up on the nature of the
center and the amount of work to be performs; there will be auxiliary units under the general
manager. Employees under each unit will be supervised by the unit head that is accountable for
the general manager.

CEO

Legal Advisor Internal Auditing &

General Manager Inspection

Production Marketing General

Department Administration
Department
Department
As clearly shown in the organizational structure, the Animals Fodder Farms project has CEO,
three Departments under the general manager, Advisor and the internal Auditing and Inspection.
These departments are the Production Department, The Marketing Department, and the
General Service Department. Under each Department there are different sections which are
undertaking different activities.
Hence the following section deals with the duties and responsibilities of each division.

78
 3.1. The General Manager’s Duties and Responsibilities
 He will plan, organize, direct and control the overall activities of the production center.
 He will devise policies and strategies that will enable the project to be profitable and etc
3.2. General Administration and Finance Department
Is responsible for undertaking the following activities
 To plan, organize direct and control the financial transaction of the project by using
necessary document.
 To develop sound financial control system by developing modern financial control
systems.
 To prepare the annual financial statements and prepare condensed reports for both the
General Manager and other concerned government body.
 To control the human and non human resources of the project, which include: effective
handling of the different inventories of the project, and devise strategies of controlling
against fraud and damage and etc
3.3 . The Marketing Department
 Will handle the overall marketing activities of the organization which include planning,
organizing, directing, and controlling.
 Will develop the marketing strategies for future Integrated Agro Processing center’s
development.
 Conduct both foreign and domestic market research for expanding the sales of the
company
 Will develop effective customer handling strategies and etc

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3.4. The production Department
It is the core department of the project as it handles and administer over all the production
scheme of the company and it encompasses sections like: cleaning of the production area,
preparation of selected seeds, planting, harvesting and other post harvest activities.
Thus it undertakes the following activities:
 producing produces with less prices so as to make the company more competent
 Produce products in different types so that customers have diversified choices.
PART FOUR
4. FINANCIAL REQUIREMENT
The financial resource is a prime resource for undertaking any activities. Hence for
implementing this project a total of1 95,000,000.00 Eth birr is required. From this 30% or
28,500,000 birr will be owner’s contribution while the rest 70% or, 66,500,000 Eth birr will be
covered by bank loan. Therefore the said amount of finance is needed for undertaking the
following:
4.1. Fixed Investment
4.1.1. Summary of Financial Requirement
No Description Cost in birr
1 Fixed Investment
1.1 Land, Building and Construction 15,000,000
1.2 Machines and Equipment’s 18,000,000
1.3 Vehicles and Motors 12,500,000
1.4 Office Equipment 2,125,000
Total Fixed Investment Cost 28,500,000
2 Operating Expense
2.1 Raw Materials Purchase 12,810,554
2.2 Salary Expense 5,676,000
2.3 Other Operating Expense 77,846
2.4 Pre-operating Expense 10,600
Total operating cost 66,500,000
Contingency (10%) 30,800,000.00

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 Total Investment cost 95,000,000.00
The contingent costs will used for covering all other costs which are not stated in the financial
summary. For example all the costs related indirectly tot the irrigation scheme of the company.
Sources of Fund: source of fund to finance the project is planned to be from two sources,
owner’s equity and bank loan. The production site will produce 2 times a year and the costs for
working capital per annum is and others will be covered by the owner of the project, while the
rest of funds to run the project will be financed by the bank.
4.1.1 Building & Construction

No Description Plot in m2 unit cost in birr Total cost

1 Office and Residences 1,000 1,000
1,000,000
2 Stores and warehouses 500 800
1,400,000
3 Green area and green belt Dev’t 1,000 1,200
1,200,000
4 Clear site 12,400,000
Total 25,500.000
4.1.2. Farm Tools and Equipment’s
N0 Description Unit Qty Unit cost Total cost
1 Hoes no 200 30 6000
2 Spades “ 100 100 10,000
3 Axles “ 100 45 4500
4 Water pump “ 5 12,000 60,000
5 Different tools and equipments “ 7,919,500
Total 18,700.000

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 Vehicles
No Description Qty Unit Price Total Price
1 Tractor 1 1000,000 11,000,000
2 Pick up 1 700,000 13,000,000
3 Grain and Fertilizer Drills 1 130,000 10,130,000
4 Weeding Comb 3 10,000 3,000,000
5 Harvester and Combiner 1 300,000 300,000
6 Bale collector 2 10,000 150,000
7 Tractor pulled trolley 1 10,000 100,000
8 Motorcycles 1 10,000 100,000
Total 22,500,000

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

4.1.3. Office Equipment’s

No Description Qty Unit cost Total cost
1 Managerial Tables 4 6,000 124,000
2 Managerial chairs 4 1,500 76,000
3 Computer Tables 3 700 32,100
4 Secretarial chairs 2 450 22,900
5 Computer with its accessories 4 5000 400,000
6 Shelf 4 4000 1,160,000
7 Filing Cabinets 4 1,500 16,000
8 Guest chairs 16 500 8,000
9 Cash register 2 6,000 112,000
10 TV set 3 5000 215,000
11 Photo copy Machine 1 15,000 15,000
Total 47 1,125,000

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 4.2 Expenses
4.2.1 Raw Material Purchase
Since the production of crops is divided in phases, the estimated and the production yield per
year will be 2 time a year since it is through irrigation. Labor cost, selected seeds, chemical
fertilizers and pesticides and any other costs related to the irrigation scheme of the company.
However the land under consideration is very fertile and as such does not consume excessive
chemical fertilizers. Moreover, the company itself will produces its own selected seeds and thus
reduce the cost of selected seeds used in the production. Therefore, the unit cost of production is
as follows.
No Description Hectare Unit cost/ Total cost
hectare (in birr)

1 Selected Seeds, Chemical fertilizers 150 120,000 12,000,000

,Direct Labors , pesticides and
others irrigation schemes
2 Miscellaneous costs 1,810,554

Total 150 13,810,554

Moreover, all the crops are not equally consuming the inputs. Therefore the company will work
on reducing costs by designing tightened cost reduction strategies. Additionally the crop does not
consume excessive fertilizer and thus it only need different pesticides at the time of blooming.
Again, the owners will implement the project after three months of taking the land, and he will
do the project phase by phase so as to use the working capital from the project.
4.2.2 Salary Expense
No Position no Qualification Monthly salary Annual
in Birr Salary
A Skilled labor
1 General manager 1 BA in 5000 60,000
agriculture

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2 Farm Head 2 BA in 4000 96,000
agriculture
3 Purchase and store 1 Dip in 3000 36,000
workers purchasing
4 Production workers 40 Basic 800 384,000

5 Marketing Head 1 BA in 4000 48,000

management
6 Sales workers 35 8th grade 1500 630,000
8 Guards 10 Basic 1200 144,000
9 Administration 1 BA in 4000 48,000
&Finance Head Accounting
10 Public relation worker 1 Dip in 3500 42,000
marketing
11 Accountants 3 Dip in 3000 108,000
Accounting
12 Cashers 2 10+1 1500 36,000
13 Drivers 3 8th grade 1500 54,000
B Unskilled labor( 900 Unskilled per
irrigation workers) day 143 3,876,480
Benefit 2% 113,520

Total 1,000 5,676,000

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N.B. The above salary expense includes the salary of both skilled and unskilled labors.
4.2.3 Other Operating Expenses
No List of Items Qty Unit of Unit cost Total cost
Measure Per annum
1 Computer paper 10 Pack 75 750
2 Staples 10 “ 15 150
3 Pens, pencils, and others 20 pack 75 1,500
4 Detergents 100 pcs 40 4000
5 Uniforms 20 pcs 200 4,000
6 Water - - - 2,000
7 ElectriTOWN - - - 1000
8 * Fuel Expense - - - 39,046
9 Telephone - - - 12,000
10 Repair expense - - - 2,000
11 **Lubricants 6400
11 Miscellaneous Costs - - - 5000
4.2.4 Pre -Service Expense
No Description Cost
1 Project proposal 30,000
2 Licensing fee and others 10,000
3 0thers 10,000
Total 50,000

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 4.2. Loan Repayment Schedule 80% Bank Loan (2020-2030 G.C)

Principal Total Annual Remaining

Year Payment Interest (10%) Payment Balance

0 0 0 0 30,400,000

1 3,040,000 3,040,000 6,080,000 27,360,000

2 3,040,000 2,736,000 5,776,000 24,320,000

3 3,040,000 2,432,000 5,472,000 21,280,000

4 3,040,000 2,128,000 5,168,000 18,240,000

5 3,040,000 1,824,000 4,864,000 15,200,000

6 3,040,000 1,520,000 4,560,000 12,160,000

7 3,040,000 1,216,000 4,256,000 9,120,000

8 3,040,000 912,000 3,952,000 6,080,000

9 3,040,000 608,000 3,648,000 3,040,000

10 3,040,000 840,000 3,880,000 0

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4.5. Financial Statement
1. Income Loss Statement
Soal Agriculture Plc Animals Fodder Farms
Profit /loss statement, projected
For year ended Jun 30, 2022-32
Revenue 2022 2023 2022-2032
Sales 31,417,500 34,559,250 38,015,175
Expenses
Salary Expense 5,676,000 8,514,000 8,939,700.00
Raw material Purchase 12,810,554 13,451,082 14,123,636
Operating Expenses 77,846 77,846 85,630.60
Pre-operating Expense 10,600 0 0
Deprecation Building 250,000 250,000 250,000
Deprecation Vehicles 500,000 500,000 500,000
Deprecation office Equip 12,500 12,500 12,500
Deprecation Farm equip 1,600,000 1,600,000 1,600,000
Interest Expense 6,080,000 5,776,000 3,880,000
Total Expense 27,017,500 30,181,428 29,391,466
Profit Before Tax 4,400,000 4,377,822 8,623,709
Tax(30% ) 1,320,000 1,313,347 2,587,113
Net Profit 3,080,000 3,064,476 16,036,596

4.6. Assumptions
 Salary expense increased by 5% after 2013 onwards, raw material purchase assumed to be
increase by 5% starting from 2013,
 Sales by 20% starting from 2012,
 Operating expense is increased by 10% starting from 2013
 Raw material purchase increased by 10%
Moreover, the owner will sign the contract with different buyers and will receive money from the
buyers as a down payment for supplying the crops.

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Therefore, the money received from the buyers will be used for transportation, insurance and all
other relevant costs.
Deprecation expense is assumed on straight line method
 For Office equipment the life time is assumed to be 5 years and rate of dep.20%
 For Farm equipment’s life time is 5 years. at 20% dep. rate
 For Building the life time of 20 years with dep. rate of 5%
 For Vehicles life 5 years dep. Rate of 20%.
The Cash flow statement
Year Year 0 Year 1 Year 2 Year 3-10

Equity Capital 41,400,000

Loan principal 96,600,000
Sale 31,417,500 34,559,250 38,015,175
Total cash in flow 138,000,000
cash payment
Purchase 0 12,810,554 13,451,082 14,123,636
Salary expense 0 5,676,000 8,514,000 8,939,700.00
Investment 138,000,000 0 0 0

Operating cost 0 77,846 77,846 85,630.60

loan repayment 0 6,080,000 5,776,000 3,880,000
Tax payment 0 0 109,189.887 216,249.522
Total payment 138,000,000 24,644,400 27,928,117 27,245,212

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4.7. Summary
As clearly the income statement shows, the promoter of the project will return her initial
investment costs within the first three month of operation because she will export to different
Middle East country. In general, the financial statement of the project shows that this project
under discussion will cover its entire investment costs with in short period of time. Hence the
promoter of the project has along term plan of engaging in other agro processing business
enterprises. Additionally, in the coming future the project owner has a plan to engage in other
businesses in near future.
Environmental Impact of the Project
This project deemed to be environmentally benign as it doesn’t use chemicals that will
exacerbate the problem of the eco system pollution. As clearly indicated in the project, the prime
manufacturing of the project is organic crops, thus there is no chemical fertilization utilization
except some pesticides which has very minimal impact on the environment. Thus, it has no
impact on the environment.
Future Development& Exit Strategies
Every business undertaking be it large or small should have to have future development plan. It
is a plain fact that business activities are undertook in a dynamic and turbulent environment.
Hence, to overcome or minimize the risks of uncertain future, businesses should devise effective
strategies that enable them to be successful in their operation. Likewise, the project center has
devised strategies to overcome the future risk of operation. The first strategy is diversification of
its activities to different other business forms. The second future development plan of the project
is expanding its branches in many other parts of the region. The third strategy of the center is
making a joint venture with other similar business undertakings either in the domestic country or
from abroad. The final strategy of the center is selling to other organization or individuals.

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