Business Proposal For Construction

Of Mixed Use Building

Prepared For: Melaku Weldemedihin

Prepared By: Donedeal Business

Consulting Plc

November 2022
 Table of Content
1. Introduction...........................................................................................................................................1
2. Executive Summary..............................................................................................................................2
3. Project Objective....................................................................................................................................2
4. Project Description................................................................................................................................2
5. Project Rationale...................................................................................................................................3
6. Significance of the project....................................................................................................................4
7. Project Location....................................................................................................................................5
8. Market Study.........................................................................................................................................5
8.1 Market Analysis................................................................................................................................5
8.2 Demand Supply Gap........................................................................................................................5
8.3 Current Spply of Mixed use Building...............................................................................................6
8.4 Future market or Demand of commercial building rental...............................................................6
8.5 Target Customer..............................................................................................................................7
8.6 Marketing promotion and strategy..................................................................................................7
8.7 Competitors Analysis.......................................................................................................................7
9. Technical Study.....................................................................................................................................8
9.1 Project Service/Product Mix............................................................................................................8
9.2 Land use plan...................................................................................................................................9
9.3 Construction work and Technology.................................................................................................9
9.3.1 Construction Schedule............................................................................................................9
9.3.2 Area design and Lay out.......................................................................................................10
9.3.3 Structural design...................................................................................................................11
9.3.4 Reinforced concrete..............................................................................................................11
9.3.5 Foundation design.................................................................................................................11
9.3.6 Construction plan and process.............................................................................................12
9.4 Utility.............................................................................................................................................13
9.5 Project Implementation..................................................................................................................13
9.6 Organisational structure and Management...................................................................................13
9.6.1 Organisation and Management............................................................................................13
9.6.2 Man power............................................................................................................................13
9.6.3 Organisational structure.......................................................................................................13
10. Government Regulation....................................................................................................................16
10.1 Requirment and Issuance of investment permit...........................................................................16
10.2 Renewal of investment permit......................................................................................................16
11. Environmental Impact......................................................................................................................17
12. Financial Analysis............................................................................................................................18
12.1 Fixed Investment..........................................................................................................................16
12.2 Working Capital investment.........................................................................................................19
12.2.1 Work-on-going Expense at full capacity...........................................................................16
12.3 Financial study and statement.....................................................................................................20
12.3.1 Underlying Assumption.....................................................................................................20
12.3.2 Source of Fund..................................................................................................................21
12.3.3 Bank loan repayment schedule.........................................................................................21
12.3.4 Depreciation Schedule......................................................................................................21
12.3.5 Financial Statement..........................................................................................................22
12.3.5.1 Profit or Loss Statement.......................................................................................22
12.3.5.2 Cash flow Statement.............................................................................................23
12.3.6 Financial Conclusion........................................................................................................23
 1. Introduction
The current fast and dynamic economic growth of Ethiopia especially in urban area
necessitates equivalent growth of building and construction sector. The sector should
expand rapidly to support the overall economic development sustainable.
In the building sector of the economy, the multi- purpose in the one becoming rapidly
expanding in urban areas of the nation since dynamic economic development of urban
economy requires the construction of these buildings in towns to support the growing
of business service sectors like supermarkets, Beauty salon, shops, offices cinemas,
Computer Center, Cafeterias, restaurant, assembly hall, guest house and other
activities. In this regard, mixed used building expands in the all parts of the country.
Investment and property development play an important role in any emerging markets
or economies. Property generally comprises residervial houses and commercial real
estate property (mainly mixed us building) developed for rental business and sale. The
property investment market in Ethiopia remained under developed for several years.
As a consequence, the supply of residential houses and non-residential real estate that
can be used for residence, office space, shopping malls and catering services in the
urban centers of the country is disproportionately low to cope with the growing
demand in the country spinning from the average growth in GDP of 5.5 percent over
the last ten years and population increase. The relatively good performance of the
macro-economy (real growth in GDP, low inflation rate and growth in investment and
export sector) has stimulated unprecedented investment growth in the property sector
over the last five years. The growth of investment in the property market over the last
five years in consistent with the global experience suggesting that investment in the
residential and commercial property (real estate) is greatly influenced by the
performance of the macroeconomic conditions. In general, a stable macroeconomic
condition leads to economic and business growth and develops investors’ confidence.
This certainly spurs large demand in the property market for office space, shopping
malls, catering services, apartment and residential houses. Following growing demand
trends, and with the expectation of high return on their investment capital, large
number of land developers pooled their financial resources and invested in the
property market.
 The owner of the envisioned Mixed Use Building Mr. Melaku Weldemedihin was
raised in Mojo, Keftegna 02 Kebele. He has lived at the area where the
envisioned project will take place and the area is still occupied by the family. The

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 area was the kebele’s place but given to Mr. Melaku’s parents as “Yekebele bet”
for a long year. The promoter is very ambitious and committed to realize the
project. Hence, he expects to get the necessary support from the city
administration to make the project to be operational.
2. Executive Summary
The envisioned project is a mixed use 4 story building which incorporates a meeting
hall in it. It’s a multi-purpose commercial building used for diverse businesses like
banking & insurance, super market, shops, restaurant, café, beauty salon, pharmacy,
and offices.
The overall land the project assumes is 2,000 m2 out of which 1,400 m2 will be
covered by the building and the rest will be parking area, garden and guard’s house.
The total investment required for this project is 20,017,571. The promoter will have
30% of the investment on the table and the rest 70% is going to be from bank loan.
The building will create permanent employment opportunity for 19 people and
contract employment opportunity for 80+ people. Generally speaking, the building
will provide better building service, employment opportunities, generation of income
and benefits for the local people.
3. Project Objective
The major goal of this project is to contribute towards the growth of the trade sector in
Mojo town. Its specific objectives include the following.
 To construct and develop modern shops, offices, and restaurant, bedroom &
cafeteria facilities that enable to provide standard services to visitors.
 To undertake trading and other refuted business activities that enable to generate
a reasonable to the invested capital.
 To develop modern business centre that would provide services of international
standard in order to attract foreign visitors and thereby contribute to wards the
generation of hard currency for the country.
 To create employment opportunities for the population in the town and
 Contribute towards the beautification of the town through the construction of
modern building infrastructure and facilities.
4. Project Description
The long-term goal of the project is become the best choice in Mojo town and its
surrounding areas by creating a differentiated experience capitalizing on personal
service. The proposed project will have a total area of 2000m 2, designed to reader a

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multi-purpose giving business, which will in turn plays significant role towards
solving shortage of business center in Mojo town.
The historical nature of the town as business unique location having the famous Mojo
port laid a fertile ground for future promising growth of the town. The owner plans
the project to render banking and insurance, shopping facility, cafeteria services to
create high quality class to satisfy the interest of customers in the town, and large
meeting hall that can accommodate big governmental and private meetings. Based on
environmental and other considerations, the entrepreneur has determined the type and
size of the building which is already determined by the site; conceptual planning and
preliminary analysis have been carried out by analysts.
In order to attract its clients to the service, the project will develop high standard shop
& banking rooms and office of best choices and will also save best quality restaurant
and café, national and international dish and various types of soft drinks.
5. Project Rationale
Internationally the economic growth this country is experiencing and the good
governance created, these project are the first in kind in the town, feasible and would
be a model development in promoting and attracting different urban investments.
In order to respond to the created environment the town is in need of major, basic and
feasible urban projects to be developed.
The existing promising investment opportunities, the demands of service needs along
with relatively sound investment support made by the government in such kinds of
feasible projects, compelled the project promoter to initiate the multi-purpose oriented
business project to be established. Despite the promising business opportunities of the
town, the trend on such kinds of investment found to minimal. Since there is no such
kind of modern tourist facilities and business station in the town to accommodate the
existing demand of these services in the town and the surrounding areas. The
mismatch between the demand for and supply of such kind of services in easily
observed in the town.
Therefore, the existing shortage or absence in the supply of these services, along with
its commercial and administrative access, better location and infrastructure access,
escalating trend of urbanization and business activities, thus it is with such reason that
this project is identified and proposed and assumed to be more profitable.

6. Significance of the project

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The envisaged project deemed to add to the economic development of the nation in
general and zone and town in specific with following ways:

 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 income tax and VAT are collected from undertaking
business activities. Therefore, the building will serve as sources of revenue for the
town as well as for the region.

 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 19 individuals and
more than eighty individual during construction.

 Sources of social service

In addition to serving as a source of employment and income for the region, the
project renders social services for different group of people. Hence, it also provides
the following services;
 Serve as a source of mental satisfaction for the different users,
 Since, the center encompasses different recreational areas; it will divert the
attention of the users from different evil deeds.
 It deemed to minimize the demand for shops and other bundles of services in
the area.
Furthermore, it serves as the pilot experience and ground for other investor to enter in
to such kinds of urban development. It also contributes on the efforts made on as a
character given building for physical development pattern of the townscape.
In general, the country’s decentralized state based economy, privatized and free
market economy; good governance creates a favourable environment for the
development of investment for private investors.

7. Project Location

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As aforementioned on the introductory part the envisioned project is intended to be
located in Keftegna area, kebele 02, Mojo town at about 70 km from Addis Ababa.
The town is selected because of geographical proximity of the town to the capital city
Addis Ababa and that it has the well known Customs Port. The town’s economic
catchment extends beyond the woreda attracting peasants who trade cereal and
potatoes for cattle and seeds at the weekly market.
8. Market Study
8.1 Market Analysis
There are a number of factors which affects the demand of standardized mixed use
building. Of these factors, the most important to have influence is population growth
and the level of income. The currently industry in the town and around the town has
been inviting skilled and unskilled labor forces to the town. In addition, the number of
both government and non government offices has been increasing. Above all the
increase in the number of population of the town increases for the provision of
different services. Nowadays, most of the private business organizations need their
own small-medium offices in order to give their services and provide their products,
and they prefer the place that found in the center of the town or close to the road.
As clearly indicated in the introductory part of this proposal. Mojo is a dynamically
growing town . Though the market demand gap for mixed use building in Mojo is not
clearly understood, there is wider gap for such demand as many merchants,
organizations are flouring to the town every day. From prior business experiences, the
demand of mixed use building in Mojo is very high and hence the demand and the
supply gap is very wide.
8.2 Demand-Supply Gap
Mojo town is also a major business center and commercial route that attracts
thousands of business travellers. These are the most important groups of potential
customers that include both the local and foreign tourists and the modern business
community who choose services that range from economic to high class standards.
These groups would also choose a healthy comfortable climate that combines a more
traditional type with that of modern shops, offices, restaurants and cafeterias. The
existing supply is far behind the growing demand for such standard service. Hence,
the project will solve the serous demand problem in the town.
Over the last decade, there has been a significant growth in the number of local and
international trades across the country. This increase is mainly associated with the

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stimulation of economic activist and partly due to an increase in the flow of
international and local traders in to the town. Since Mojo is an important commercial
center, in addition there is a significant increase in business activates and hence
increasing the number of traders to the town. Even though there is a lack of
quantitative estimates that depict the actual demand and also the annual growth rate,
office and urban commercial facilities are scarce in the city. So far in the town there is
no development of such kind of standard building and it is the first of its kind in the
town and will promote other investors from the town and the surrounding areas. They
are mostly villa type premises modified as show rooms and sailing posits. As a result
there is a large gap between the developed and that of the supply for modern office,
meeting hall, bank and cafeteria accommodation hence this project would not face
any problem of demand scarcity for it business centre and it would provide good
service to customers.
8.3 Current supply of Mixed use building
Commercial building/office sector has shown a dynamic change in the past few years.
The reason for this could be rapid economic growth and a supporting public
infrastructural development. Other factors relevant in the specific case of commercial
buildings are the large increases in national and international businesses, particularly
firms in the services sector.
The business of multi-purpose buildings in Mojo is booming highly due to the recent
rapid growth experienced in Ethiopia. As a result, a good number of local and
international organizations are coming in place. Government offices which used to
operate in limited spaces all over the city are also concentrating on leasing new and
modern buildings. Increasing numbers of international organization and NGO’s which
in the past had typically converted residences into office space are now moving
towards renting whole floors or even multiple floors in modern city-center
commercial buildings.
8.4 Future market or Demand of commercial Building rental
The demand for office space is a derived demand because firms rent space as an input
to the production of services or goods they provide to businesses and households in
the local regional or national economy.
Following our survey of office space users in Mojo are mainly firms providing
banking, cafeteria and restaurants, supermarkets service, computer center. The

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different customers for commercial buildings also include shops and offices that are
currently renting out to provide their goods and services.
Future demand for office space is actually driven from growth in number of offices in
the city which in turn is influenced by the macro-economic growth in the country.
8.5 Target customers
The target customers of this envisaged project include:-
 Business community
 Nearby business organization
 Government bureau
 Small accounts(SOHO) SME
 Non-governmental organizations
8.6 Marketing promotion and strategy
In order to penetrate and gain considerable market share, one of the major marketing
strategies for the project is consistently rendering quality service to its tenants. Due
emphasis must be placed on improving quality of service and facilities. The major
marketing strategies to promote the project and gain considerable market share
include:
 Advertising through different means focusing on the existing service and
facilities
 Promote in association to the key location and nearby business
 Working on sustained promotional work.
 Working on public relations to reach and influence key personas and organization
with a capacity of making decision.
 Keeping the quality of its service/ facilities and consistently improving with
changing situations.
 Seasonal discount pricing different others customer centric marketing strategies
will be used by the company.
8.7 Competitors Analysis
There are different forms of competition that may face the envisaged mixed use
building. These are price and non price based competition. Moreover, there are
different competitors that will compete with the project either directly or indirectly.
But the mixed use building under discussion has diversified marketing strategies that
could enable it cope up with the different competitors in the market. Moreover it will
frequently conduct competitors research which focuses on, the strength and the

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weaknesses, the different competitors’ strategies, the techniques they use in rendering
the service, their customer handling methods, and others. Generally the project has
many other projects all over Ethiopia which compete with it.
9. Technical Study
9.1 Project Service/ Product mix
The envisioned mixed purpose building will provide different rental services to the
different customer groups for different purpose. The building will have ground and
four floors. The purpose of the building explained as follows;
The ground floor, first floor and second floor designed for different business centers
like banks, supermarket, beauty salon(man and women), Computer center, pharmacy,
internet café, boutiques, different shops and other business activities. The third floor
designed for offices. The fourth floor designed for meeting hall and offices as well.
Besides, the buildings will have enough parking facility for its customers and green
area in its compound.
In order to provide mixed use business center building services of a high standard, it
has been planned to construct and develop the infrastructure and facilities that would
viable to meet the requirements of an international standard business center.
Accordingly, various buildings and facilities will be constructed phase by phase
starting with the most needed ones that are essential to commence the operation of its
business activities. With the completion of construction, the building will provide a
combined service such as shops, bedroom, restaurant and café service as well as
modern business center that primarily serve its guests and major clients.
The plan is that the ground will be partitioned in to different rooms:
Building Description UOM
Ground Supermarket, Pharmacy, Banking & Insurance M2
1st floor Beauty salon, shop, Computer Center, Cafeteria & Restaurant M2
2nd floor Different governmental, NGO & other offices M2
3rd floor Offices M2
4th floor Meeting hall and offices M2
Table 9.1 Partition of the Building
Since the project will be engaged in mixed building the main sources of its annual
revenue would be from the rental of building spaces such as shops, offices, and
banking, café & restaurant and meeting hall. Therefore, the sources of revenue have
been classified in to one category namely the rental of banking & supermarket,
offices, shops, restaurant and café, meeting hall based on these classifications.
9.2 Land Use Plan

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The total land required for the envisioned project is estimated to be 2000m 2 . The total
area for the construction of the building will be 1,400 m 2, as revealed below. The
lease cost per square meter is 198 birr and the lease is assumed to be held for 70
years.
S/N Description Land M2
Ground 1st floor 2nd floor 3rd Floor

Building (G+4)
1 Ground 1400
2 First floor 1400
3 Second Floor 1400
4 Third Floor 1400
5 Parking , Green area and 600
guard houses
Total 2000
Table 9.2 Land use plan

9.3 Construction work and Technology

9.3.1 Construction schedule
The construction project is proposed to be completed in two years from the day
construction starts. A majority of the schedule’s time is made up of five major
activities; Concrete, building enclosure, masonry, mechanical & HVAC and Electrical
installation. Concrete activities include processes such as placing foundations and slab
on deck. The Building Enclosure Phase includes erecting the scaffolding that will
allow for exterior sheathing installation and bricklaying.
Mechanical and Electrical install coincide with each other due to the need for
coordination between the two divisions. There are several periods of construction
during the schedule in which there are multiple construction activities occurring at the
same time.
The construction site must be organized accordingly as these processes take place. As
with any construction project, the goal of the schedule is to complete all construction
activities before the required Date of completion.
This date of completion is practical based on the time of year in which the building
will be completed. The team allowed a two week contingency for any setbacks.
Typically, winter construction tends to cause unforeseen delays that negatively impact
a construction project. These conditions can and will almost undoubtedly impact the
project schedule by causing unforeseen delays and project inefficiency.

9
 9.3.2 Architectural Design & Layout
Although functional spaces for the project were laid out in significant detail, the rest
of the building had designated spaces but no set layouts. It was at the discretion of the
project promoter to devise typical layouts for the non-detailed commercial and office
spaces. To make sure that the building’s layouts were practical, the project owner
researched typical architectural layouts for executive office and commercial spaces.
Further detailed lay outs will be made in the meantime.

Fig.9.3.2 Architectural design

9.3.3 Structural design

One of principle deliverables of our project is the structural design of the building.
The structural bays were coordinated with the layout of the building adjustments were

10
made to the bays if specific layouts are necessary. The frame was made up of a grid
with repeating standard structural bays. Included in the structural system are bay
sizes, shape and size of structural members, floor compositions and curtain walls.
These elements were established to resist gravity ad lateral loads as appropriate.
The gravity load design was completed for two frames; one of structural steel and one
of reinforced concrete. The structural steel frame was chosen for further design based
on cost per square foot, local availability of material and constructibility
considerations, such as erection and fabrication. The steel system was then designed
for lateral loading with necessary adjustment being made to framing.
9.3.4 Reinforced concrete
The project group prepared hand structural design calculations for a typical bay of a
reinforced concrete frame. In all reinforced concrete bay designs, a superimposed
dead load of 7.5 pounds per square foot was assumed for mechanical equipment, floor
coverings and ceilings.
Similarly, the design of the typical bay accounted for the use of different commercial
space, in which a live load of 125 pounds per square was assumed. Loads were
calculated based on the requirements of the minimum Design loads for Buildings and
other Structures.
9.3.5 Foundation Design
The design of a superstructure may be accurate, have considered all possibilities and
still fail because the substructure is incapable of distributing the applied loads to the
supporting soil.
Foundation design takes more into consideration than merely the loading from the
columns. While the main part of the project focused on the structural frame and its
alternate designs, a preliminary foundation plan was designed based upon maximum
load carried from the superstructure through the columns. The foundation design
conducted by the project team consisted of the selection of foundation type,
determination of the bearing capacity and the design for typical interior and exterior
spread footings.

9.3.6 Construction Plan and process

The project team developed a coordinated project schedule and construction plans that
would reflect the expectations for an actual construction project. The project schedule

11
was developed using the preliminary designs given to the project team. Additionally,
the group considered typical construction activities and durations taken from similar
construction projects as well as realistic constraints on building development. For
instance, it is necessary for the structural frame to be completed before concrete can
be placed for the slab on deck. Hand drawn construction plans detailing site entrances
and storage areas were coordinated with the project schedule to give the reader
visualizations of the construction site set up through various periods of the
construction process.
The construction process for this project is normally a disjointed three images
development by which the conceptualized need of the promoter of this project is
translated into a functional facility that will meet their needs in terms of time, cost and
quality.
Based on a general program of the project owners the consultant who is going to be
hired makes site studies, develops structural designs, prepares drawings and
specifications, determines quantities involved and estimated the resultants costs. All
these activities will be done in the first phase of the project which is the design stage
after the document are produced by the designers have been received, and the works
secured the project is supposed to enter the tendering stage. At this stage contractors
study the project document analyse and subsequently determine the construction
methods, built up their unit rates and submit their bids for the works. The promoter of
this project intends to compare the bids and award the contract for the lowest
responsible bidder. This, is of course, presupposes that the favorable proposal does
not exceed the allocated budget.
After the award is made and the contract signed between this project owner and the
contractor, the project constructor is expected to prepare and submits a detailed
construction program which includes material schedule, manpower requirement and
cash flow forecast.
After the award is made and the contract signed between this project owner and the
contractor, the project constructor is expected to prepare and submits a detailed
construction program which includes material schedule, manpower requirement and
cash flow forecast.

9.4 Utilities

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A number of utilities world be put in place in order to ensure smooth functioning of
the project. These utilities include:
 Water Supply,
 Supplementary Electricity supply.
 Telephone line Internet Broadband
 Fuel, Oil and lubricant
 Drainage Facility
9.5 Project implementation
The project’s implementation is expected to take 24 months. The major activities
include Bank loan processing construction of the building, cleaning the area around
the building, Procurement of equipments and start rendering services. The time
schedule for the above matured major activities is presented below:
S/N Activities Duration
1 Land request processing Month 1
2 Land approval Month 2
3 Bank loan processing Month 3-Month 4
4 Site Development Month 4
5 Building and construction work Month 5-Month 10
6 Preparation for service Month 11
7 Service execution Month 12-Month 24
Table 9.5 Project Implementation Schedule

9.6 Organizational Structure and Management

9.6.1 Organization and management
The organizational structure should be in a way that the company able to achieve its
objectives as well as the satisfaction of standard requirement. In addition to this, the
structure should fit the dynamics of all customers in the building ranging from small
business to large tenants.
9.6.2 Man Power
The total manpower required for the building will be 19 persons. The manpower list
and the corresponding labor cost are shown in part five of this document.
9.6.3 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 manager with the responsibility of supervising the overall activity of the building.

13
Depending up on the nature of the center and the amount of work to be performed;
there exist auxiliary units under the general manager.
Employees under each unit will be supervised by the department head that is
accountable for the general manager. General manager is appointed by owner.

Owner

General
Manager

Building Finance Marketing HR Manager Technical

Admin and
maintenance
manager

Cashier

IT, Electricity
and plumper

Figure 9.6.3.1 Organisational Structure

As clearly shown in the organizational structure, the center organization has one
general manager and three main sections. Under the general manager there are the,
marketing Department, maintenance and building administration department. Under
building admin department there exist two sections i.e., HRM & finance and general
service. Further sub sections are also organized under technical and maintenance
manager. The following section deals with the duties and responsibilities of each
department.

A. The General Manager’s Duties and Responsibilities

 He/she will plan, organize, direct and control the overall activities of the building.
 He/she will devise policies and strategies that will enable the center to be
profitable.

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 He/she will incorporate modern technological innovation that will facilitate the
service delivery of the building to increase customer’s satisfaction.
 He/she will plan, organize, direct and control the human and non-human resources
of the building so as to achieve the short and long run objectives of the
organization.
B. Building Administration Department
The building Administration Department is a multi-purpose department. It is
responsible for undertaking the following activities;
 Manage the human resources and control employee’s activity
 Well non human resources of the project, which include; effective handling of
the different resources of the building, and devise strategies of controlling
against fraud and damage.
 Will provide the right material or inventory to the center with right price at the
right time.
 Will plan, organize direct and control the financial transaction of the building
by using all the necessary documents.
 Accountant and cashier that will collect money from the customers.
 Will develop sound financial control system by developing modern financial
control systems.
 Will prepare the annual financial statements and prepare condensed reports for
both the General manager and other concerned government body.
 Follow the overall status of the business and provide maintenance and repair
services
C. 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 multi-purpose building
development
 Will develop effective customer handling strategies.
 Execute the promotion methods.
D. Technical and maintenance manager
 Will handle the overall physical maintenance and related issues
 Will make sure electricity and back up is organized.
 Follow up security issues and educate tenants

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  Works in collaboration with general service to make sure tenants are well
served
10. Government Regulation
10.1 Requirement and Issuance of Investment Permit
1) The following investors shall be required to obtain investment permits:

a) Foreign investors;

b) Domestic and foreign investors investing jointly;

c) Investors investing as domestic investors pursuant to Article 2 Sub-article (5)

paragraphs (f), (g), (h) and (i) of this Proclamation;

c) Domestic investors who, investing in areas eligible for incentives, seek to be

beneficiaries of such incentives; and

e) An investor seeking to expand or upgrade an existing investment, provided that the

investment is eligible for incentives and the investor seeks to be beneficiary of such
incentives.

2) Notwithstanding the provision of Sub-article (1) paragraph (c) of this Article, a

foreign national of Ethiopian origin treated as a domestic investor shall have the right
to invest without acquiring investment permit in areas not eligible for incentives, or,
in areas eligible for incentives, by waiving his right to claim incentives.

3) Notwithstanding the provision of Sub-article (1) of this Article, a foreign investor

seeking to buy an existing enterprise in order to operate it in its current state or to buy
shares of an existing enterprise shall obtain prior approval from the Commission. The
Commission shall not deny or delay the approval sought without sufficient cause.

4) No investor may, at any time, hold domestic and foreign investor permits
simultaneously.

10.2 Renewal of Investment Permit

1) An investment permit shall be renewed annually until the investor commences
marketing his products or services. There shall be no need for renewal of investment
permit after issuance of business license.

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2) An application for renewal of investment permit shall be submitted within one
month after the end of a period of one year for which the permit was valid.

3) An investment permit shall be revoked if an investor fails to commence

implementation of his project within two years of being issued the permit or has
delayed the completion of the project by two years from the time that will be agreed
with the appropriate investment organ.

4) Notwithstanding the provision of Sub-article (3) of this Article, the appropriate

investment organ may renew the investment permit if it is convinced of the existence
of sufficient cause prompting delay in the commencement or completion of the
project.

11. Environmental Impact

The EIA of the project activities was determined by identifying the environmental
aspects and then undertaking an environmental risk assessment to determine the
significant environmental aspects. The environmental impact assessment has included
all phases of the project namely construction phase and operational phase.
The building has both positive and negative impact
 Positive impact of the project
 Generation of employment opportunity
 Source income for the government through business income tax
 Income generation for the promoter
 Being exemplary for other investors who want to engage in the same business
line.
 Negative impact of the project
 Noise and Dust emission during Construction
There are some noises during the construction due to the construction
operation and the company will use construct the construction during the day
time. Again there is the emission of dust which will be mitigated by sprinkling
water on the service.
 Problem on workers on construction
During construction there are some problems that will materialize on workers.
These are: damage on operation by using machines, construction materials and

17
 others. To mitigate such impact the company will provide safety insurance and
safety equipments.
 Sewage during operation
During operation there are some wastes emitting from the mixed use building.
These are wastes from the latrine and will be mitigated by using modern waste
treatment technology.

12. Financial Analysis

The financial resource is a prime resource for undertaking any activities. Hence for
implementing this mixed use building a total of 20,017,571 ETB is required. From
this 30% , 6,005,271 , birr will be covered by the promoter of the project while the
rest 70% will be covered through loan from bank at the prevailing interest rate.
Therefore the said amount of finance is needed for undertaking the following.
12.1 Fixed Investment
A. Land, Building & Construction
S/N Description of works Total Cost in birr
1 Building construction 80,000,000
2 Site Development 200,000
3 Design and supervision 250,000
4 1st Year land lease & (10%) down payment 209,916
Total 80,659,916
Table 12.1.1 Land, Building and construction cost

B. Building Machineries and Equipments

S/N Description Measurement Qty Unit cost in Total cost in
Birr Birr.
1 Generator Unit 1 130,000 130,000
2 Carpentry tool box Set 1 15,000 15,000
3 Electrician tools box Set 1 15,000 15,000
4 Plumber tools kit Set 1 15,000 15,000
5 Fire extinguisher and Unit 10 12,000 120,000
security equipments
Total 227,800
Table 12.1.2 Machinery and Equipment cost

C. Office Equipments
S/N Description Measurement Qty Unit cost in Total cost in
birr Birr
1 Managerial tables Unit 2 8,000 16,000

18
 2 Managerial chairs Unit 2 2,000 4,000
3 Office table with chair Unit 7 2,500 17,500
4 Secretarial table with Unit 1 4,000 4,000
chairs
5 Computer with chairs Unit 3 18,000 54,000
6 Shelf Unit 1 4,000 4,000
7 Filing cabinets Unit 1 1,500 1,500
8 Guest chairs Unit 2 2,000 4,000
9 Telephone machine Unit 3 1,000 3,000
10 Carpet and Curtain LS 1 20,000 20,000
Total 128,000
Table 12.1.3 Office Equipment Cost

12.2 Working Capital Investment

12.2.1 Work-on-going expenses at full Capacity
A. Salary Expense
S/N Position Qualification Qty Monthly Annual salary in
salary in Birr Birr
1 General manager BA in management 1 10,000 120,000
2 Building admin BA in Acct/Mgt 1 6,000 72,000
3 Secretary Diploma in 1 3,500 42,000
secretariat science
4 HR Manager BA in management/ 1 6,000 72,000
business
administration
5 Technical and BA in related field 1 5,000 60,000
maintenance
manager
6 Finance head BA/Masters in 1 6,000 72,000
Accounting
7 IT Technician Diploma in 1 4,000 48,000
computer science/IT
8 Marketer BA in marketing 1 4,000 48,000
management
9 Accountant BA in accounting 1 4,000 48,000
10 Guards/Security Basic 3 1,500 54,000
11 General Service head Diploma/BA in 1 5,000 60,000
Management
12 Purchaser Diploma in 1 2,500 30,000
purchasing &Sup
Mgt
13 Electrician 10+2 in general 1 1,500 18,000
electricity
14 Plumber 10+2 in general 1 1,500 18,000
mechanic
15 Cashier Diploma in 1 3,000 36,000
bookkeeping
16 Cleaner Unskilled 2 1,500 36,000
Total 19 65,000 834,000
Benefit (10%) 83,400

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 Grand Total 917,400
Table 12.2.1.1 Office Equipment Cost
B. Operating Expenses
S/N List of Items Assumptions Used Annual cost in birr
1 Audit and legal fee 1000 br/per month 12,000
2 Stationery supplies 800 br/month 9,600
3 Promotional Cost Lump sum annual cost 10,000
4 Property Insurance 0.05% of the building 8,805
5 Cleaning Supplies 500 br. Per month 6,000
6 Uniforms 300 per pes for 16 people 4,800
7 Water consumption 2500 m3 by 5.15 br 12,875
8 Electric consumption 10000KWH By Br.2.4736 24,736
9 Fuel 1032 lit per year by Br. 58 59,856
10 Oil & Iubricants 10% of fuel cost 5,986
11 Telephone 500 per month 6,000
12 Repair expense 0.05% of building cost 8,805
13 Miscellaneous costs 1000 per month 12,000
Total 181,462
Table 12.2.1.2 Operating Expenses
 Total Initial Investment Cost
S/N Description Cost in Birr
1 Land, building & construction 17,609,691
2 Building machines & Equipments 227,800
4 Office Equipment 128,000
Total fixed investment cost 17,965,491
6 Salary expense 917,400
7 Operation Expense 181,462
Total Working capital 1,098,862
Sub total 19,064,353
9 Contingency (10%) 953,218
Total initial investment capital 20,017,571
Table 12.2.1.4 Total initial investment capital
12.3 Financial Study and Statements
12.3.1 Underlying Assumption
The financial analysis of the mixed use building is based on the data provided in the
preceding sections and the following assumptions.
 Construction period lasts for Two(2) years
 Source of finance is taken as 30% from owner’s equity and 70% from bank loan
 Bank interest rate is considered as 16%

20
 Depreciation of building, machinery and equipment, and office equipments are
taken as 10% using the IFRS law.
 Revenue from rent and operational expenses as well are assumed to inflate in
10% yearly.
12.3.2 Source of Fund
The source of fund to finance the project is planned to be from two sources. These are
owner’s equity and bank loan. The loan is expected to be obtained from one of the
local lending institutions. Since the project is expected to take some times to repay all
its debts, the bank loan is assumed to be obtained on long term credit basis. Taking
the financial position of the promoters into account, equity contribution and bank loan
to finance the total investment outlays of the project are assumed to be 30% and 70%
respectively. Accordingly, the total financial requirement from the two sources will
be;
S/N Description Percentage share Amount
Owners Share 30% 6,005,271
Bank Loan 70% 14,012,300
Total 100% 20,017,571
Table 12.3.2.1 Investment contribution from owner’s equity and bank loan
12.3.3 Bank loan Repayment Schedule
Year Principal Interest (16%) Total annual Remaining Balance
Payment Payment in ETB
0 - - - 14,012,300
1 1,401,230 2,241,968 3,643,198 12,611,070
2 1,401,230 2,017,771 3,419,001 11,209,840
3 1,401,230 1,793,574 3,194,804 9,808,610
4 1,401,230 1,569,378 2,970,608 8,407,380
5 1,401,230 1,345,181 2,746,411 7,006,150
6 1,401,230 1,120,984 2,522,214 5,604,920
7 1,401,230 896,787 2,298,017 4,203,690
8 1,401,230 672,590 2,073,820 2,802,460
9 1,401,230 448,394 1,849,624 1,401,230
10 1,401,230 224,197 1,625,427 -0
Table 12.3.3.1 Bank Loan Repayment Schedule

12.3.4 Depreciation Schedule

SN Description Original Value Depreciation Depreciation per
in Birr rate in % year in Birr
1 Construction and Building 17,609,691 10 1,760,969

2 Bldg. machines & 227,800 10 22,780

Equipments
4 Office Equipment 128,000 10 12,800

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 Total 3,872,679 1,796,549
Table 12.3.4.1 Depreciation Schedule

12.3.5 Financial Statement

12.3.5.1 Profit/Loss Statement
Project revenue and production costs are listed and compared to see whether the
project generate profits or not. Starting from first year of the project operation, the
project will generate a reasonable amount of net profit for the owners throughout its
life period.

Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue(Renta 7,994,000 8,793,40 9,672,740 10,156,377 10,664,196 11,197,406 11,757,276 12,345,140 12,962,397 13,610,517
l Income) 0
Expenses

Salary Expense 917,400 1,009,14 1,110,054 1,221,059 1,343,165 1,477,482 1,625,230 1,787,753 1,966,528 2,163,181
0
Operating 181,462 199,609 219,569 241,526 265,679 292,247 321,472 353,619 388,981 427,879
Expenses
Deprecation 1,796,549 1,796,54 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549
9
Interest 2,241,968 2,017,77 1,793,574 1,569,378 1,345,181 1,120,984 896,787 672,590 448,394 224,197
Expense 1
Lease payment 44,691 5,091 5,091 5,091 5,091 5,091 5,091 5,091 5,091 5,091

Total Expense 5,182,070 5,028,16 4,924,838 4,833,603 4,755,665 4,692,353 4,645,129 4,615,602 4,605,543 4,616,897
0
Profit before 2,811,930 3,765,24 4,747,902 5,322,774 5,908,531 6,505,053 7,112,147 7,729,537 8,356,854 8,993,620
Tax 0
Tax (30%) 843,579 1,129,57 1,424,371 1,596,832 1,772,559 1,951,516 2,133,644 2,318,861 2,507,056 2,698,086
2
Net profit 1,968,351 2,635,66 3,323,532 3,725,942 4,135,971 4,553,537 4,978,503 5,410,676 5,849,798 6,295,534
8
Table 12.3.5.1 Projected Profit or Loss Statement

12.3.5.2 Cash flow Statement

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Year Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Equity Capital 6,005,271

Loan 14,012,300
principal
Net sale 7,994,000 8,793,400 9,672,740 10,156,377 10,664,196 11,197,406 11,757,276 12,345,140 12,962,397 13,610,517

Less: 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549 1,796,549
Depreciation
Total Cash in 20,017,571 6,197,451 6,996,851 7,876,191 8,359,828 8,867,647 9,400,857 9,960,727 10,548,591 11,165,848 11,813,967
flow
Cash payment

Fixed 17,965,491
Investment
Initial 1,098,862
Working
Capital
Investment
Investment 953,218
Contingency(
10%)
Salary - 917,400 1,009,140 1,110,054 1,221,059 1,343,165 1,477,482 1,625,230 1,787,753 1,966,528 2,163,181
Expense
Operating - 181,462 199,609 219,569 241,526 265,679 292,247 321,472 353,619 388,981 427,879
Cost

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Interest - 3,643,198 3,419,001 3,194,804 2,970,608 2,746,411 2,522,214 2,298,017 2,073,820 1,849,624 1,625,427
expense and
principal
payment
2,241,968 2,017,771 1,793,574 1,569,378 1,345,181 1,120,984 896,787 672,590 448,394 224,197

Lease - 48,195 48,195 48,195 48,195 48,195 48,195 48,195 48,195 48,195 48,195
payment
Tax payment - 843,579 1,129,572 1,424,371 1,596,832 1,772,559 1,951,516 2,133,644 2,318,861 2,507,056 2,698,086

Total 20,017,571 7,032,223 6,693,716 6,366,197 6,050,766 5,748,631 5,461,122 5,189,701 4,935,977 4,701,721 4,488,878
payment
Cash surplus/ - -834,772 303,135 1,509,994 2,309,062 3,119,016 3,939,735 4,771,026 5,612,613 6,464,127 7,325,089
deficit
Cumulative - -834,772 -531,637 978,357 3,287,419 6,406,435 10,346,170 15,117,196 20,729,809 27,193,935 34,519,024
cash flow
Table 12.3.5.2 Statement of Cash Flow

12.3.6 Financial Conclusion

 Pay-Back period
The investment cost and income statement projection are used to project the pay-back
period. The building’s total investment will be fully recovered at the 6.02 year of
operation.
of sufficient cause prompting delay in the commencement or completion of the
project.

24