1.

Introduction

The profile envisages the establishment farm for production and processing of improved seed of
cereals and crops with a capacity of 50,000 quintals per annum.
Seed is a key input for improving crop production and productivity. Increasing the quality of
seeds can increase the yield potential of the crop by significant folds and thus, is one of the most
economical and efficient inputs to agricultural development. Generation and transfer of new
technologies are critical prerequisites for agricultural development particularly for an agrarian
based economy such as Ethiopia. Seed, especially that of improved varieties, is an essential input
for increasing crop productivity. This suggests the need to place much emphasis on sustainable
and efficient seed production systems. also create forward linkage with the horticulture sub
sector.
Seed is the most important agricultural input; it is the basic unit for distribution and maintenance
of plant population. It carries the genetic potential of the crop plant. It thus dictate the ultimate
productivity of other input such as fertilizer, pesticide irrigation water etc., which build the
environments that enable the plant to perform.

Seed and other planting materials are the farmers' most precious resources, especially for
smallholders in Sub-Saharan Africa, where agriculture is characterized by much risk and
uncertainty. Seed is generally considered to be the most affordable external input for farmers,
and many of its benefits are assumed to be ‘scale-neutral’. So investments in crop improvement
potentially can reach a wide range of farmers. While many other areas are also important for
agricultural development – such as markets, credit supply, support institutions, and policies –
access to appropriate seed is clearly the first step.
Seed processing is that segment of the seed industry responsible for upgrading seed improving
planting condition of seed, and applying chemical protectants to the seed.
Advantages of seed processing:

1. Make possible more uniform planting rates by proper sizing

2. Improve seed marketing by improving seed quality

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3. Prevent spread of weed seed

4. Prevent crops from disease by applying chemical protectants

5. Reduces seed losses by drying

6. Facilitate uniform marketing by providing storage from harvest time until the seed is needed
for planting.
Seed security is one of the most important sociological, political, economic and scientific
challenges in the country. Securing the supply of quality seed and planting materiel of the most
important food crops is the most effective way to sustain food security. In Ethiopia, the seed
demand is increasing rapidly due to the agricultural development. The establishment of
Ethiopian Seed Enterprise’s led to advent of organized seed production and supply system in the
country and remained the main supplier in the formal sector. Currently, government and private
seed enterprises are involving and combining their efforts to produce and supply seed to the
growers. In the country, the supply of improved seeds never fulfilled the need of producers. It is
in line with this the investor is planned to invest on Improved seed production and processing.

The Ethiopian seed industry is composed of formal and informal sectors as well as public and
private organization. The formal sectors include federal and regional agricultural research
establishments, universities, the regulatory organ in the MoARD, and private companies. The
informal sectors encompass millions of farmers, who continue to practice seed selection and
preservation, just as their ancestors did.

The formal system is concerned with the development and distribution of seeds of modern or
improved varieties, while local cultivars or landrace varieties are handled by the informal
system. The line between the formal and informal seed sectors can become somewhat blurred, as
seeds of modern varieties can be saved by farmers and eventually become considered a “local
variety” after some years. In addition, in Ethiopia there have been attempts made by the
government and NGOs to promote quality seed production and distribution through market
channels for landrace varieties, although until now the volume they represent is quite small.

2
1.1 Policy Framework
Ethiopia has a consistent set of policies and strategies for agriculture and rural development that
reflect the importance of the sector. The policy framework is based on the concept of the strategy
of Agricultural Development-Led Industrialization (ADLI),
Seed legislation is a regulatory mechanism put in place to protect the farmer from purchasing
seed of dubious quality. In general, the objective of seed legislation is to regulate seed commerce
including variety certification and variety protection.
In countries where there is a fairly well developed seed inspection and certification service, the
regulatory authority is vested to an autonomous or semiautonomous agency away from the main
seed producer players. This agency carries out control of all processes of seed inspection and
certification and has authority to enforce seed laws and regulations. It is answerable directly to
the Ministry of Agriculture.
Ethiopia has recently reviewed her seed legislation and is in the process of issuing a seed
proclamation. However, there is not perfect seed legislation anywhere in the world and the laws
and regulations may need to be frequently amended in response to changing circumstances. Even
sometimes the seed legislation may need to be temporarily suspended as in times of crisis due to
drought, floods, disease outbreaks etc. Looking at the future, it is recommended that Ethiopia
brings her seed legislation and regulations in conformity with the International Seed Testing
Association in order to facilitate seed imports and exports of diverse crop cultivars as it may
become necessary.
These initiatives will be supported by farmer training and measures to improve access to
agricultural inputs and product markets using cooperatives as the delivery mechanism.
To create the right condition for the establishment of strong seed system for production and
supply of good quality seed to the farming community, the government formulated the national
seed industry policy, which was issued in October 1992. The policies is instrumental to
developing a healthy national seed industry conserving and sustain genetic resource, reinforcing
crop breeding research and supplying of high quality seed to the farmers to participate in
germplasm conservation as well as in the seed production and supply system. It also has an
objective of creating a functional and efficient institutional linkage among seed industry
participants.

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A Ministerial Regulation No. 16/1997, which was enacted to cover registration of varieties, seed
producers, processors, distributors, quality control, seed trade (import-export), etc. has been
replaced by Seed Proclamation No.206/2000. The latest Proclamation is more comprehensive
and creates stronger legal framework for the protection and control of the interests of all players
in the seed industry. Moreover, field and seed standards prepared for 74 crops are officially
issued for implementation. NSIA has built the necessary capacity to implement and enforce the
standards.

1.2 Background
Agriculture is the main stay of Ethiopian economy, having a lion’s share in contributing to the
national GDP. The current agricultural policy framework of the country, which is known as
“Agricultural Development Led Industrialization (ADLI)'', sets out agriculture as a primary
stimulus to generate increased output, employment and income for the people. Moreover,
agriculture is serving as a springboard for the development of other economic sectors of the
country (Keeley and Scoones, 2000).
Transformation of the agricultural sector in the country was started in the mid of 1990s after the
formulation of a development strategy centered on agriculture, ADLI. Since then, the sector is
leading the overall economic development of the country, and eventually will transform the
economic setup to industrialization. The strategy emphasizes on promoting a green revolution in
the country through the intensification of smallholder agriculture as best approach to achieve the
transformation.
The sector, however, is still characterized largely by small‐scale subsistence farming and low
productivity. This low productivity is detrimental to the economic development and growth of
the country. Low productivity is purely due to limited use of improved seeds and associated
technologies. Cognizant of this scenario, the Government of Ethiopia has put great emphasis on
increasing the production and productivity of small‐scale farmers.

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2. The Project Area
The project area is situated in Oromia Regional State, Soth West Showa Zone, Amaya Woreda,
Omborea Aliye Kebele.

Amaya is one of the woredas in the Oromia Region of Ethiopia. Part of the Debub Mirab Shewa
Zone, Amaya is bordered on the south by the Southern Nations, Nationalities and Peoples
Region, on the west and north by Mirab Shewa Zone, on the northeast by Wonchi, and on the
east by Walisona Goro. The major town in Amaya is Gindo.

Although coffee is an important cash crop of this woreda, less than 20 square kilometers are
planted with this crop.[1]

Demographics

The 2007 national census reported a total population for this woreda of 122,056, of whom 61,578
were men and 60,478 were women; 6,257 or 5.13% of its population were urban dwellers. The
majority of the inhabitants said they practiced Ethiopian Orthodox Christianity, with 55.4% of
the population reporting they observed this belief, while 26.33% of the population were
Protestant, and 17.66% were Muslim.

Based on figures published by the Central Statistical Agency in 2005, this woreda has an
estimated total population of 121,530, of whom 61,668 were males and 59,862 were females;
5,228 or 4.30% of its population are urban dwellers, which is less than the Zone average of
12.3%. With an estimated area of 945.47 square kilometers, Amaya has an estimated population
density of 128.5 people per square kilometer, which is less than the Zone average of 152.8.[3]

The 1994 national census reported a total population for this woreda of 87,579, of whom 43,404
were men and 44,175 women; 2,933 or 3.35% of its population were urban dwellers at the time.
The three largest ethnic groups reported in Amaya were the Oromo (85.4%), the Amhara
(12.71%), and the Sebat Bet Gurage (0.93%); all other ethnic groups made up 0.96% of the
population. Oromiffa was spoken as a first language by 87.56%, 11.37% spoke Amharic, and
0.59% Sebat Bet Gurage; the remaining 0.48% spoke all other primary languages reported. The
majority of the inhabitants professed Ethiopian Orthodox Christianity, with 77.17% of the

5
population reporting they practiced that belief, while 18.12% of the population said they were
Muslim, and 4.29% were Protestant.

Physical Characteristics:- The district is located in the southern part of the zone. It has an area of
906.9km2 and one urban center, i.e., Gindo town (district’s capital). Ameya district is bordered
by Tikur Inchini, ambo, Wenchi, Weliso and Nonno districts, and the Regional State of Nations,
Nationalities and Peoples of southern Ethiopia. Physiographically, it is characterized by varied
relief features, i.e., mountains, plateaus, hills, plains and valleys. Altitudinally, Ameya extends
between 1600 and 3245 m.a.s.l. Mt. Roge (3,245m) is the only known mountain in the district.
The district is drained by Walga, Rome, Kulikela, amigna Guda and Tika, Kulti Guda and Tika,
Kabana and other 7 rivers as well as several seasonal streams. Ameya is classified into dega
(40%) and woinadega (60%) agro climatic zones. Major soil types found in the district are
Chromic and Orthic Luvisols (64.3%), and chromic and Pellic Vertisols (35.7%). Woodland,
shrub and bush, savanna and man made forests are found in the district. In the absence of
protected forstes and game reserves, baboon, vervet monkey, duiker, bushbuck, warthog, lepard,
spotted hyena, Jackal, pig and civet cat are found dispersedly in the district.
Population:- As projected from the 1994 Population and Housing census, the district had about
91,640 population, of which 88,464 were rural (44,426 females) and 3,178 were urban (1,805
females populations. Young, economically active and old age populations accounted for 44.8%,
51.2% and 4.0% respectively. Rural and urban average family sizes were 4.4 and 3.9 persons
respectively. The crude population density of the district is estimated at 101 persons per km2.
Agriculture:- About 69.6%, 10.9% and 5.5% of the district’s total area were arable, grazing and
forest lands respectively, while the remaining was attributed to degraded, built-up and other
areas. There were 32 Farmers’ Associations and 15 Service Cooperatives with 16,487 (1570
females) and 16,158 (1,452 females) member farmers respectively in the district. Average
farmland and farm oxen holding sizes per farmer household were 0.3 ha and 1.7 oxen. About
24.3% of the farmers were without single farm ox. Teff, barley, maize, wheat, horse bean, vetch,
neug, enset and chickpea are the most widely cultivated crops in Ameya. The most commonly
prevalent crop pests are aphids, army worm, stalk borer, monkey, ape and warthog. Farmers are
employing fallowing, crop rotation, and application of manure and chemical fertilizers to
maintain the fertility of soil. In the year understudy, about 8,110 quintals of fertilizers (2,213

6
quintals of Urea) 28 quintals of improved seeds and 1,574 liters of agricultural chemicals were
distributed to the farmers. The district had about 96,446 cattle, 16,928 sheep, 21,344 goats, 3,121
horses, 5,541 donkeys, 1,240 mules, 112,170 poultry and 10,317 Behives (245 modern) in the
indicated year. Black leg, trypanosomiasis, internal and external parasites and pasteurelosis are
the most commonly prevalent livestock diseases. The number of vaccinated and treated livestock
population was 20,223 and 14,658 respectively.
Mining and Industry:- There were no mining activity and identified mineral deposits in the
district. Regarding industry, 31 licensed grain mills and one oil mill were found in Ameya
district. Trade and Tourism:- There were some business men who engaged in retail trading and
other different services in the district. Concerning export items, about 131 hides, and 3025 sheep
and goats skins (number) were supplied to the central market from the district in the mentioned
year. There are no income generating tourist attraction sites in the district.
Services:- The district had about 8.7 km all weather and 41.6 km dry weather roads, a manual
telephone station and an agent post office. Rivers, unprotected wells and springs are the major
sources of drinking water in order of their importance. There were no tap or potable water,
electric light service and fuel station in the district. Firewood, agri wastes, animals dung and
charcoal are the major sources of domestic energy supply in order of their usage. One
kindergarten, 18 primary and 3 junior schools with 6,462 registered students (1,415 females) and
140 teaching staffs (28 females) were found in the district in the indicated year. About 33.0% of
the total registered students had left the school before the end of academic year. Similarly, 4
clinics and 2 drug vendors with a nurse and 9 health assistants were available in the district.
Health service coverage was 21.8% in Ameya.
Development Activities:- Shortage o farmland, schools, health institutions and veterinary
services including trained man power and equipment, lack of potable water supply, deforestation,
serious soil erosion and backward infrastructural facilities are some of the major problems in the
district. On the other hand, the district has large tracts of potentially cultivable and irrigable lands
as well as large water resources.

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3. The Project
3.1 Description of the Project
This profile envisages the establishment of a farm for the production of improved seed
production for crops and cereals.
Farm is needed for undertaking production of certified seeds. In Indian conditions, contract
growing of seed has become fairly acceptable and venture being profitable, farmers are coming
forward to undertake seed production for reliable companies.

As has already been previously indicated, the proposed locality is having excellent irrigation
facility and farmers are already aware of seed production programmes in the project area, there is
no problem in identifying experienced and progressive farmers willing to undertake seed
production for the company. In the initial year, response has been very encouraging.

Owners of the project have their own farm, which would exclusively support production of
foundation seed from breeder seed, if intended or planned at later date.

Seed processing plant will be equipped with all the machines needed for successful cleaning,
grading operations. Similarly, seed storage is needed to store the seed during the period from
receipt of seed at the plant till it is supplied to the dealer/farmer for sale.

Cleaner is the basic machine in a seed processing plant. Capacity of plant is accordingly known
by the capacity of cleaners. The capacity of seed cleaners is specified in terms of wheat seed.
While handling paddy, the capacity of machine reduces to half and hence the promoter would
plan to establish a plant with sufficient capacity to process double the quantity of planned paddy
production within the available processing period.

Considering the seed production plan, the promoter requires seed processing plant of 2 ton per
hour capacity to handle present requirements as well as to handle future processing needs.

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3.2 Objectives of the Project
The objective of this project is to invest on production of improved seed production for crops and
cereals farm and their by earn return on investment in the manner that is profitable and feasible.
A) Specific Objectives:
 To inject capital on production of improved seed production for crops and cereals Farm
 To be profitable
 To earn return on investment for investor
 To contribute to an increase in the Agricultural productivity of our country and full fill
the demand for crop production and consumption of our country
 To increase the availability of improved seed for crops and cereals in the country
 To create employment opportunity to the people
 To provide a quality service with a fair chares
 To generate revenue for government in the form of different tax payment.
 To fulfill the demands of the surrounding people
B)Benefactress of the Project
 The investor in the form of Returned on investment
 The Government in the form of Tax and foreign earrings or currency from the exported
product
 The local people in the form of employment and sharing experience from the mechanized
farm and also the infrastructure developed by the investor water, road, light. Etc
 The country in general contributed to economic development of the country
 The sector agriculture in the form of improving its activities

3.3 Environment Aspect

Two types of environmental degradation affect the project or the area itself. The first relates to
the natural environmental (such as degraded soil, polluted fresh water, deforestation, depleted
zone layer) and the second to the man made environment (urban population of air through carbon
monoxide and un sustainable use of non renewable energy sources, such as oil, natural gas,
minerals and metals). The effects of environmental population are particularly felt by the poor
who tend to live in environmentally vulnerable areas. The health effects of environmental

9
damage on the area include food poising and water related diseases, ill health caused by eating
products of polluted foods.
Therefore, this project is environmentally sound. And it is not bring adverse effect on
environment. The waste produced is re-used for production of Bio-gas and compost with
conformity of any land use. Besides the promoter will take the following environmental
preservation measures. Environmental preservation measures are as follows:
1) To restore the eco-system is its natural state it is the promoter intention to plant trees.
2) By extending the irrigation channel to the project site population dells, is will encourage
the residents to plant economical trees as well as vegetables as a source of cash and food.
3) It is the desire of this agricultural promoter to observe the threshold level of pests,
diseases and weed infestations before the decisions to spray the fields with chemical
compound are made.
4) To maintain the productivity of the land and avoid salinity build up a wise irrigation
practices will be followed.
5) Thus the promoter budgeted ample of money for environmental rehabilitation.

3.5 Technology and Engineering

The selected technology for this new project is modern and environmentally friendly by taking a
variety of consideration in to account including plant capacity, principal inputs (Suitable for raw
material and labor), that match with the investment out lay and production cost (financial
ability), product variety, market condition. More over it is suitable for local economy, social and
cultural condition. The Technology will be acquired through outright purchase from abroad.
The structure and civil works of this new project is the trends commonly used (i) site preparation
works (ii) construction of different buildings: Raw material store and warehouse, finished
product packing, store and distribution, Administrative and welfare building such cafeteria and
first aid medical service building and so on.

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4. MARKET ANALYSIS
4.1 Demand and Supply Analysis
Past Supply
Ethiopia is an agrarian economy with a very small industrial base. The bulk of the population
(about 85%) lives in rural areas. Out of the estimated 66% of the suitable land for agriculture
only 16.5 % is under cultivation. Agriculture accounts for about 50 % of the GDP, it provides
employment for about 85 % of the population generates about 90% of the export earnings and it
supplies about 70 % of the raw material requirements of agro-based domestic industries.
Hence, the performance of the economy as a whole is largely influenced by what happened in the
agricultural sector. However, the productivity of the agricultural sector has remained very low
due to rudimentary farming system and low utilization of modern inputs such as improved seeds.
Improved seed is a crop variety which gives a significantly higher yield and better quality as
compared to locally produced variety of seeds. However, Small holder farmers traditionally use
their own seed throughout the country. Nevertheless, the use of improved seed is increasing in
the past few years due to the expansion of extension packages. Table 3.1 shows the total crop
cultivated area and the area and quantity of improved seeds applied by private small holder
farmers in Ethiopia. Study made recently indicate that the national annual agricultural product
demand was increased by 50% while the average annual agricultural production growth was
estimated at 1.8-2%.

11
 Table TOTAL CROP CULTIVATED AREA, IMPROVED SEED APPLIED AREA AND
QUANTITY OF IMPROVED SEED APPLIED

As could be seen from Table above, the quantity of improved seed applied during the period
2000-2005 has been consistently increasing from year to year. The amount of improved seed
applied in 2000 was 130.56 thousand quintals. This has increased to 265.86 thousand quintals in
the year 2005. This indicates that on the average the use of improved seed has increased by about
18.56 % annually.
According to CSA, Agricultural Sample Survey on Farm Management Practices, during 2005 a
total 913,209 hectares of land was cultivated in SNNPRS with cereals. The area upon which
improved seed applied is 49,075 hectares which is only 5.37 % of the total cultivated area. The
total quantity of improved seed used was 34,542 quintals.

12
In order to determine the present effective demand for improved seed in Oromia, the amount of
improved seed applied in 2005 has been taken as a starting base. On the other hand, the average
growth rate of improved seed used at national level has been considered which was about 18.56
% . Taking the objective condition of the region, i.e, the awareness of the peasant community
and the capacity of concerned institutions, an annual average growth rate of 10% is assumed.
Accordingly, the present (2007) effective demand for improved seed in SNNPRS is estimated at
41,796 quintals.
Projected Demand
The future demand for improved seed depends on the increase of farmers awareness, availability
of improved seed and extension services.
The Ethiopian government has adopted agricultural-led industrialization as central plank of its
development programme, with a focus on productivity growth on small farms. Increased
agricultural productivity will be achieved primarily through an extensive extension programme.
Hence, in view of the above, it would be reasonable to conclude that the future demand for
improved seed will show a very fast growth. However, to be on the conservative side, the future
demand for improved seed in Oromia is assumed to grow by 10 per cent per annum. Table below
shows the projected demand for improved seed.

13
 Table PROJECTED DEMAND FOR IMPROVED SEED

Pricing and Distribution

Based on the average prices of the last two years a farm-gate price of Birr 4 per kg is
recommended. The envisaged farm is recommended to distribute its products by establishing
own distribution stores in major towns. Moreover, it can distribute the product through making
arrangements with Farmers Associations and Service Cooperatives that exist in the region.

4.4 Market Strategy

The marketing strategy will be by sharing the existing consumer and searching for the substitute
consumer. The promoter will have a capacity to supply a quality product and compete at local
market. In addition to this the investor will make price reduction and product differentiation,
increasing quality and quantity of the product in order to attract more customers.

14
Connection with direct buyers and are lucky to secure markets, which normally take a longer as
is well known in the cash and industrial crops for export industry there are two major marketing
channels: the commission agent and the direct sales to other impendent importers. This will
give them big support while having an immediate feedback from the markets and even sum
tolerate from the buyers in the first steps. The price level for the produces that can be achieved
by direct sales is higher and the commissions paid relatively low. The main advantage of direct
sales, though, is that the price is known and cash flow can be better managed.
4.5 Market Operational Dimension
The marketing tools of this product will be a marketing mix of the 4 P’s product, promotion,
price reduction and product distribution. Maintaining the quality of the product and maintaining
warranty after sale of the product and so on. The product promotion will be starting the
supplying of few and simple to extensive supply of product.
The investor has marketing strategy and operational dimension for implementing the project
strategy. Free sample distribution, conducting key persons at the target region, town and a
promoter will also be used. The investor will make price reduction for the first 2 to 3 years in
order to inter into the market and attract many costumers. The project promoter will have
different channel of distributions at different region.
4.6 Marketing Information System

The phenomenal growth in information technology represents both a challenged and opportunity of any
business organization. Therefore, marketing information system of this project, in order to be benefited
forum opportunities uses the following sub-system for collecting analysis and utilization of data.
1.1 Internal Accounting system

1.2 Marketing intelligence system

1.3 Marketing intelligence system

1.4 Market research

2. General Accounting Manual

This manual enables the farm to employ, as much as possible uniform accounting terminology, effective
control procedures, efficient budgeting, recording and reporting system.
3. General Corporate policy: Includes

3.1 Analysis of strength and weakness

3.2 Important Goals and area of effectiveness

3.3 Environmental threat and opportunity matrix

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5. Plant Capacity and Production Program
5.1 Plant Capacity
The envisage project will operate based on the projected demand and supply gap and the
technology recommended. Under this circumstance this project is planned to operate at 70
percent capacity in the first year and 80, 90 in the second and 3 rd year and rich its full capacity in
the fourth year.
The market study shown above indicates that the projected demand for improved seed in Oromia will
be 45,975 quintals in 2008. This figure will grow to 89,593 quintals and 174,592 quintals in 2015 and
2022, respectively. In view of this growth rate, and considering the startup of improved seed
processing at small scale level, the envisaged plant will have annual processing capacity of 50,000
quintals (or 5000 tonnes, assuming one quintal is equivalent to 100 kgs). The processing plant will
operate double shift 16 hours a day and for 300 days a year.

5.2 Nursery Site Capacity

Based on the market study, the nursery will have a capacity of multiplying or propagating of
about 25,000 asexually propagated seedlings of peach, apple, plum and pear at its full capacity
per annum.
Nursery Site Establishment
Nursery establishment includes fencing, land clearing, construction of stores and offices as well
as irrigation canals
 Orchard Establishment
In order to get scion materials and root stocks for seedling propagation, orchard should be
established well ahead of time. The scions and the rootstocks could be purchased from farmers in
North West Shoa of the Oromia Regional State.
• Seedbed Preparation: The rootstock seedlings from mother tree orchard are required to be
transplanted to nursery beds. Hence, standard seedbeds should be prepared prior to transplanting.
• Managing Seedlings : After transplanting, the rootstock seedlings should be handled carefully
in order to get strong root stocks required for asexual propagation.
• Grafting: The process of bringing the scion materials and the rootstock together in the nursery
beds is known as grafting. Grafting is the asexual propagation technique of fruit tree seedlings
after the rootstock seedlings attain their developmental stage for propagation.

16
• Post graft seedling Handling: As a whole, checking the graft age union between the scion and
rootstock, desuckering, height regulation, cultivation, plant protection, irrigation are among the
most important post graft handling cares to be carried out timely and periodically.
A nursery to be established for fruit trees seedlings will have no negative environmental impacts.
Source of Technology
Usually, temperate fruit seedlings propagation does not require high technologies rather it could
be carried out with simple equipment that could be supplied by local trading companies
operating in Addis Ababa.

17
6. Raw Material inputs and supplies
6.1 Raw Materials Requirements

The raw and auxiliary materials required for processing plant are crop and cereal seed, jute bag,
canvas and chemicals for seed treatment. Now that you have a good idea of the production level
you want to achieve, find out the type, quality and quantity of raw materials needed. Find out
the input-output ratio or conversion ratio, e.g., how many raw would be required to produce the
required output of products per day. These should be specified according to square meter, kg,
ton, pieces, etc., which will be used per month.

6.2 Costs of Raw materials

After determining the quality and quantity of raw materials needed, find out their unit costs and
list these costs next to the material and prepare a list of average monthly raw materials
requirement and their costs. Include duties and relevant taxes, if raw materials are imported.
This is depending on the in-depth study made by the promoters.

6.3 Sources of Raw materials

The sources of raw material would be from Oromia improved seed enterprise and Ethiopian
Improved seed institute and other local suppliers. In sourcing raw materials, at least three
factors are critical. Firstly, the price should be as low as possible. Secondly, their source should
be as close as possible to the production site to reduce transport costs. Thirdly, the source
should be reliable.

If raw materials are not available throughout the year, at least two alternatives are possible -
either the project will have to reduce production, or it must build up a stock of raw materials
when they are plentiful so that production can be continuous. If the latter is chosen, additional
working capital is required and should be included in the calculation of your cash needs and
determination of your project's investment requirement so that the business can cope with this
situation. For example, think of the problem to obtain fruits for a fruit processing plant during
off-season.

Details of the raw material requirements and its cost per each project output for these project is
presented in the subsequent section of this project proposal tables.

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7. ORGANIZATION AND MANAGEMENT
A. Organizational Structure
7.1 Organisation of the Project

The promoter of the project will be the General Manager of the Project and Technical Farm
Manager. Each unit section had its own professional technical and production department head,
section head, service head and advisors. The project will had also legal service head, audit
service head, Human resources section head, finance and administrative section head.

7.2 Management and Operation of business

For the business to operate smoothly and efficiently, there must be some structure of authority
and responsibility (chain of command), division of labour (job distribution), and definition of
what each one must do in the business (job description). Therefore, the business needs an
organisational structure. This is mostly depicted through an organisation chart.

In designing the organisational structure, it is important that the various functions of the
enterprise (marketing, production, organisation and management and finance) be performed. In a
small business, one person can handle several functions.

In small businesses, it is also common to have family members hold responsibility in the
business or even perform production work. For instance, the wife may be the treasurer and
marketing manager, while the older children help out as part-time production workers. The
following is the organisational structure for this project.

The General Manager, will be responsible for the overall activities of the project and under
his/here there are the Technical Farm manager at the project office and Forman manager at the
project site.

B. Manpower Requirements
The required skilled and semi-skilled labor force will recruited from surrounding areas of the
project. One of the most important factors for success in agricultural production is the offering of
continuous on-the job training to workers as well as short and medium professional and reporting
systems are best symbolize by the company management.

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 Project Organizational Structure

General
Manager
Legal Service
Audit Section

Technical and Administrative Finished Product Dep’t Market, Sales and Promotion
Raw Material supply dep’t
Farm Dep’t and Finance Dep’t

Warehouse and storage Marketing research Section

Crop Production Section staff Personnel Officer stafee
Promotion & Advertising sec
Budget Section
Animal Prediction Staff Distribution Section
Sales Section
DDESTRIBUTION

General Service
Fruit and Vegetable Section

Product Processing Section

20
 Table 7.1 Wage and Salaries

S.N Description Manpower with Quantity Monthly Salary in Annual Salary In

Qualification Birr Birr
I General Farm Management        

General Manager 1 5,000.0 60,000.0

BSC Agricultural Eng 0 0
 
Secretary 1 750.0 9,000.0
Diploma in Sec. Science 0 0
 
Administrative and Finance -
Department
II      
Head Administrative and Finance 1 4,500.0 54,000.0
BA in Accounting 0 0
 
Accountant 3 1,500.0 54,000.0
BA in Accounting 0 0
 
Casher 2 1,000.0 24,000.0
Diploma in Book Keeping 0 0
 
Drivers 2 1,800.0 43,200.0
Public Driving License
  0 0
Market, Sales and Promotion 3 1,500.00 54,000.0
BA in Commerce
III Department 0
IV Improved Seed Farm Staff       -
Farm Manager 1 5,000.0 60,000.0
BSC Agricultural Eng.
  0 0
Agricultural Monitor(CAPPO) 5 4,500.0 270,000.0
BSC Agricultural Eng. 0 0
 
Irrigator 5 1,000.0 60,000.0
BSC in Irrigation Dev.
  0 0
Canal Repair, Maintains and Operation 5 1,000.0 60,000.0
Staffs BSC In Hydraulic Eng. 0 0
 
Mechanic 3 1,000.0 36,000.0
BSC in Mechanical Eng. 0 0
 
Machine Operator Diploma in Mechanical 5 1,000.0 60,000.0
  Eng. 0 0
Farmer 5 1,000.0 60,000.0
Reading and Writing
  0 0
Foreman 5 1,500.0 90,000.0
Dip in General Agriculture 0 0
 
Temporary Employee 20 150.00 30,000.0
Different
  0
Improved Seed Processing Unit     -
 
V
Conditioning and Pre Cleaning, 36 1,000.0 36,000.0
Cleaning, separating and Bagging   0 0
 

21
 storage, tc staff
  Total   75 33,550.00 1,060,200.00

8. Financial Analysis

8.1 Total Capital Requirements

Total capital requirement, also known as total project cost or total investment requirement, is
composed of three items: fixed assets, pre-operating expenses and working capital.

Fixed assets is the sum total of all costs of land and improvements, building, machinery,
furniture and fixtures, vehicle, etc.

Pre-operating expenses are those necessary expenses which are incurred before the business
starts operating. These include registration fees and licenses, training costs, cost of preparing
business plan, trips to raw material and equipment suppliers, etc.

Working capital is the amount of money permanently needed in cash or in kind to keep the
business operating while it is awaiting full payment for goods sold to customers.

Working capital can be calculated by adding five factors:

1) The cost of maximum raw material stocks that will have to be stored to ensure continuous
production. In some cases this may be three to six months worth, if the raw material is
difficult to obtain or has to be imported, whereas in other cases (where raw materials are
readily available) only one or two weeks’ worth may be needed;

2) The cost of finished goods which will be kept in stock awaiting distribution to the
customers;

3) The cost of work-in-process which are on the project floor but have not yet been
converted into a final product or finished goods;

4) The cost of goods already distributed to customers but which have not yet been paid for
(accounts receivable);

5) The amount of ready cash needed to pay workers and overheads.

22
  To determine the cost of raw material stocks, simply multiply the quantity needed
by its purchase price;

 To determine the cost of finished goods stock, multiply the number of units to be
kept by the unit production cost

 To determine the cost of work-in-process, first estimate the number of days it takes
to convert the raw material into finished goods, then multiply this by the daily
production level, then multiply the figure obtained by the unit production cost
determined.

 To determine the cost of goods already distributed but not yet paid for, estimate the
quantity that will be given on credit and multiply this number by the unit production
cost.

 To determine the amount of cash needed in the business, add the monthly  labour
cost and overheads to the monthly  marketing expenses and the administrative
expenses.

Add these five cost elements together to arrive at the total capital requirement of this project.
To calculate the total capital requirement, add the following:
+ Fixed Assets
+ Pre-Operating Expenses
+ Working capital
= Total Capital Requirement
Table 8.1 Total Initial Investment Capital of the Project
S.N Description Total

1 Fixed Capital Cost 17,587,797.74

2 Working Capital 752,202.26

  Sub Total 18,340,000.00

  Preliminary and Pre-Operating Expenses 1,660,000.00

  Total 20,000,000.00

23
 A. Fixed Investment Costs
Table8.2 Fixed Investment Capital of the Project

S.N Description Total

1 Fixed Capital Cost 6,101,250.00

2 Working Capital 3,180,717.39

  Sub Total 9,281,967.39

  Preliminary and Pre-Operating Expenses 84,698.61

  Total 9,366,666.00

Table8.3 Building and Civil Work

Description QTY Unit Price Total
S.N
Land and Site Development/Land Leveling 1 200,000.0 200,000.0
1 0 0
Irrigation and Canal Development 1 500,000.0 500,000.0
2 0 0
Finished Product Processing factory Building 1 300,000.0 300,000.0
3 0 0
Stores and Warehouse 1 250,000.0 250,000.0
4 0 0
Office and Administrative Building 1 200,000.0 200,000.0
5 0 0
Fencing 1 50,000.0 50,000.0
6 0 0
Others     250,000.0
7 0

  Sub- Total     1,750,000.00

8.2 Machinery and Equipment’s

At the stage of its earlier development, the project requires the following production items.

24
a. Two pumps with a capacity of 400 1t/sec discharge are sufficient enough to irrigate each
hectare fortnightly or 1.3 Lt/s/ha. With the pump as stand by both pumps can deliver
irrigation water amounting to 2160 m3-2880 m3/hr gross. With the theoretical value of
50% efficiency the total discharge is reduced to 10550-14440 m3/10 hour pumping.

b. Two tractors with the capacity to work on double shift are needed to cultivate the 3000 ha
in 45 days. Turbo driven tractors with the minimum 80 horse power will do the job
efficiently & machine accessories such as flour mill. Small irrigation pumps, threshing &
shelling of grains etc. are preferred.

c. Implement that the appropriate to the soils of the Amaya valley are those that can
withstand wear & tear effect of the heavy soils, of the area. Good implements are mostly
with few attachments and made up of still iron. The most important implements relevant
to the irrigable agriculture of the Awash valley are:-

a) Mold promoter plow: Just good for virgin lands or fields under relative development.

b) Disc plow: The most common plow in the valley

c) Disc harrow of 4.8m. in width

d) Land leveler

e) Planters with various size of plate opening

f) Milestone cultivator

g) Siphons

h) Trailer

1) Radio: Large scale farm are big and worst centrally administered. Thus an efficient
means of communication and transportation system is essential to run a profitable
agriculture enterprise. In the case of this farm, communication through CB Radio may
not be as important as purchasing two dependable 4 wheel vehicles. The vehicles, if
efficiently used can travel within and outside the project area when necessary.
Incidentally there is more or less reliable telephone system in the capital of the project

25
 area. In addition a truck and 3 motor bikes could increase the mobility of the
personnel in the farm. As part of equipment a heavy duty grader will also be required.

2) The use of plastic siphons to admit the pre-measured water quickly and efficiently
into the field requires some investment as well. See the following table for detail.

Table 8.4 Machineries and Equipments

Description QTY Unit Price Total
S.N
Machineries and Equipment’s      
I
1 Manual sewing machine 2 180,000.00 360,000.00

2 Disk harrow and Plow 2 129,000.00 258,000.00

3 Ridge 2 118,000.00 236,000.00

4 Like stone Cultivator 1 180,000.00 180,000.00

5 Land Leveler 2 132,000.00 264,000.00
6 Trailer 1 20,000.00 20,000.00
7 Generator(75Kv) 1 12,000.00 12,000.00
8 Pumps and accessories(400 Lt/Sec) 1 50,000.00 50,000.00
9 Radio 1 3,000.00 3,000.00
25,000.0
Weightings scale 5 125,000.00
10 0
Pre-cleaner 45.0
45 11,025.00
11 0
Seed Cleaner 45.0
45 11,025.00
12 0
Indent Cylinder 40.0
45 9,800.00
13 0
Specific gravity separator 1,500.0
14 21,000.00
14 0
Elevator up to 5 m height 2,000.0
14 28,000.00
15 0
Vacuum cleaner 1,000.0
35 35,000.00
16 0
Electronic moisture meter (Wet type) 50.0
66 3,300.00
17 0
Bag closer heavy duty 50.0
67 3,350.00
18 0
Weighing machine 100.0
25 52,500.00
19 0
Diesel generating set 25.0
50 26,250.00
20 0
1,500.0
Tanker 7 10,500.00
21 0
Sub Total     1,719,750.00
 
II Vehicles      
500,000.0 500,000.0
Pick-up 1
1 0 0
800,000.0 800,000.0
Freight Truck 1
2 0 0
3 Tractor 1 1,000,000.0 1,000,000.0

26
 0 0
30,000.0 90,000.0
Motor Bicycle 3
4 0 0
Others(Spare Parts etc) LPSM   100,000.0
5 0
  Sub-Total Vehicle LPSM   2,490,000.00
  Sub-Total -   4,209,750.00
Table 8.5 0ffice Furniture and Fixture

S.N Item Qty Unit cost Total cost

1 6,000.0 6,000.0
Executive Table 1
0 0
2 3,000.0 3,000.0
Swivels Chair 1
0 0
3 600.0 9,000.0
Office Chairs 15
0 0
4 2,000.0 10,000.0
Office table 5
0 0
5 5,000.0 20,000.0
Shelves 4
0 0
7 15,000.0 15,000.0
Lap Top Computer 1
0 0
8 5,000.0 10,000.0
Desc Top Computer 2
0 0
9 6,250.0 12,500.0
Printer 2
0 0
10 300.0 6,000.0
Calculator 20
0 0
Total 91,500.0
0

Table 8.6 Preliminary and Pre-Operating Expenses

Description QTY Unit Price Total
S.N
1 Consultancy Work and Commission 1 29,698.61 29,698.61
2 Land Rent/Lease 1 50,000.00 50,000.00
3 License Fee 1   5,000.00
84,698.6
  Sub- Total     1

B. Working Capital Requirements

Table 8.7 Initial Working Capital Requirements

27
 S.N Description Local Cost Foreign cost Total

1 Raw Materials (3 month) 2,482,519.60 - 2,482,519.60

2 Utilities (3 months) 166,666.67 - 166,666.67

3 Wage and Salaries (2 176,700.00 - 176,700.00
month)
  Others Operating Expense 65,675.00   65,675.00
(3months)
  Sub total 2,891,561.27   2,891,561.27
  Contingencies (10%) 289,156.13   289,156.13

  Net working capital 3,180,717.39 - 3,180,717.39

8.3 Wage and Salaries
The Proposed farm being small in size (50 ha in the first hectare) can be handled by a technical
Farm manager with the overall responsibility of technical and administrative matters. He in turn
can be assisted by an administrator whose job it is to see the smooth and efficient running of
promoter property, finance, workshop, transport, the clinic. His direct involvement in the area of
hiring causal labor, communication and security make him an important staff member. Vacancy
posts are filled as soon as necessity arises. A bookkeeper and store keeper is indispensable
beginning the early stage of the project.
1. To assist the technical manager a host of well experienced skilled workers will be assigned
to perform specific jobs. It is therefore, imperative that the following post are filled as soon
as field operation commences.

There agricultural monitors (CAPPO) each looking after 50 hectares of cultivable land.
2. One irrigation water monitor (CAPPO) responsible for the entire irrigation system and the
irrigation crew.

3. One foreman to monitor all field activities.

4. One mechanic

5. Plant Protection personnel: The project is also obliged to put in its payroll a few selected
elders and bal bats of their services as promoters of peace and harmony for mutual-benefits.

Table 8.10 Skilled, Sami Skilled and Unskilled Man Power Classification
28
S.N Description Quantity Price Total

  Skilled 6 5000 330,000.00

  Semi-Skilled 11 2000 264,000.00

  Unskilled 39 450 207,705.96

  Total 55   1,060,200.00

Table 8.11 Other Overhead Expenses

S.N Description Total

1 Environmental Protection and Rehabilitation 25,000.00

1 Maintenance and Repair 61,012.50

2 Factory and Vehicle Insurance 61,012.50

3 Others 50,000.00

  Total Overhead Expenses 197,025.00

Table: Summary of Operating Expenses

S.N Description 1st Year 2nd Year 3rd Year 4th Year
Materials and Input s
1 6,951,054.88 7,944,062.72 8,937,070.56 9,930,078.40
Utilities
2 350,000.00 400,000.00 450,000.00 500,000.00
Wage and Salaries
3 742,140.00 848,160.00 954,180.00 1,060,200.00
Other Operating
4 Expenses 183,890.00 210,160.00 236,430.00 262,700.00
  Sub Total
8,227,084.88 9,402,382.72 10,577,680.56 11,752,978.40
  Contingencies (10%)
822,708.49 940,238.27 1,057,768.06 1,175,297.84
  Total Operating
Expenses 9,049,793.37 10,342,620.99 11,635,448.62 12,928,276.24

29
9. Financing of the Project/ Loan Requirements
How the total capital requirement is going to be sourced is called the financing plan. Bankers
want to know these sources and what different project cost components are being funded by
these various financial sources. After determining the total capital requirement, the next step is to
see whether the amount required is too much for you to finance on your own, or beyond your
capability to finance. If this is the case, then a loan will be needed.

The promoter is almost always expected to make an equity (owner’s capital) contribution to the
project

Table 9.1 Financial Sources of the Project

S.N Sources of Percentage Total fund (‘000)
Finance Share

1 Owner Equity 30% 2,809,999.8

0
2 Bank Loan 70% 6,556,666.2
0
  Total 100% 9,346,666.00

Table 9.2 Loan Repayment Schedule

No Years Installment Interest Principal

  0 - - 6,556,666.2
0
  1 655,666.6 557,316.6 5,900,999.5
2 3 8
  2 655,666.6 501,584.9 5,245,332.9
2 6 6
  3 655,666.6 445,853.3 4,589,666.3
2 0 4
  4 655,666.6 390,121.6 3,933,999.7
2 4 2
  5 655,666.6 334,389.9 3,278,333.1
2 8 0
  6 655,666.6 278,658.3 2,622,666.4
2 1 8
  7 655,666.6 222,926.6 1,966,999.8
2 5 6
8 655,666.6 167,194.9 1,311,333.2
  2 9 4
9 655,666.6 111,463.3 655,666.6
  2 3 2

30
 10 655,666.6 55,731.6 0.
  2 6 00

Table 9.3 Annual Depreciation

No Description Total Fixed Depreciation Total Cost

Cost Rate
1.0 Building and Civil 0.0 87,500.0
0 Work 1,750,000.00 5 0
2.0 Machinery and 0.0 210,487.5
0 Equipment 4,209,750.00 5 0
3.0 Furniture and fixture 0.0 4,575.0
0 91,500.00 5 0
4.0 Other Fixed Assets 0.0 6,051.2
0 605,125.00 1 5
  Annual Depreciation     308,613.7
5

C. Financial Forecast
10. Profit and Loss Statement

We now have all the data for preparing a profit and loss statement, also known as income
statement.

Start with sales which are derived from multiplying the unit selling price by the volume of
expected sales during the year. From the annual sales revenue figure, step by step, subtract all
the yearly expenses. They are as follows:

1) Raw Material Cost - This is the sum of all raw materials used to produce the products
that were sold.

2) Labour Cost - This is the sum of all direct labour costs for the whole year.

31
 3) Project Overhead - This is the sum of all miscellaneous costs such as minor raw materials,
indirect labour, maintenance and repair cost, depreciation of production machinery, electricity,
water, supplies, etc. associated in producing the product for the whole year.

The three items above are known as Cost of Goods Sold. Sales minus these three items results
in Gross Profit.

4) Marketing Cost - This is the sum of all selling and promotional costs, including distribution
cost to retail shops, commissions, etc.

5) Administrative Cost - This is the sum of all administrative costs, including office supplies,
security guard's salary, accountant/bookkeeper’s salary, telephone bills, entertainment
expenses, and depreciation of office equipment and furniture, etc.

Gross Profit less marketing and administrative costs results in Operating Profit.

6) Financial Cost - This is the sum of interest paid to banks on the amount of borrowing.

Operating Profit less financial cost results in Net Profit before Tax. Net Profit before Tax less
the relevant business income tax results in Net Profit after Tax. If you are borrowing money
from the bank, the latter would usually require you to project your profit and loss statement
(and other figures) corresponding to the life of the loan. That is, if you intend to pay the loan in
five years, the bank will ask you to project your figures (e.g., sales forecast, profit and loss
statement, cash flow statement, balance sheet, loan repayment schedule, etc.) for five years and
above. The following Table summarizes the projected Income statement of this project.

Table 10.1 Estimated Annual Production and Annual Sales

Total Unit Sales Total Annual
Total
product per Price(Birr/Q Revenue Per
Type of crop Area in ha. Yield/ha (qt.) product in
cropping uintal) Year
qt./year
period (qt.)
2,100,000.00
Maize 20 100 2000 350
6,000.00
2,400,000.00
Sorghum 20 100 2000 400
6,000.00
12,000,000.00
Soybean 20 100 2000 2000
6,000.00
3,000,000.00
Tefe 20 100 2000 500
6,000.00
Other Farm    
14.466      
Facilities
Total 94.466         19,500,000.00

32
 Table 10.2 Estimated Annual Sales forecast for five years

S.N Sources of Revenue 1st Year 2nd Year 3rd Year 4th Year 5th Year

Maize
1 2,100,000.00 2,400,000.00 2,700,000.00 3,000,000.00 3,428,571.43
Sorghum
2 2,400,000.00 2,742,857.14 3,085,714.29 3,428,571.43 3,918,367.35
Soybean
3 12,000,000.00 13,714,285.71 15,428,571.43 17,142,857.14 19,591,836.73
Tefe
4 3,000,000.00 3,428,571.43 3,857,142.86 4,285,714.29 4,897,959.18
Sub Total
5 19,500,000.00 22,285,714.29 25,071,428.57 27,857,142.86 31,836,734.69
Other Crops
6 975,000.00 1,114,285.71 1,253,571.43 1,392,857.14 1,591,836.73

  Total Annual Revenue 20,475,000.00 23,400,000.00 26,325,000.00 29,250,000.00 33,428,571.43

33
34
 Table 10.3 Projected Income Statements of the Project

S.N Description Project Years  

0 1 2 3 4 5 6 7 8 9 10

I Total Sales -
29,250,000.0 37,142,857.1 50,950,421. 56,611,579.
20,475,000.00 23,400,000.00 26,325,000.00 0 33,428,571.43 4 41,269,841.27 45,855,379.19 32 25

  Operating Expenses - 9,049,793.37 10,342,620.99 11,635,4

48.62
12,92
8,276.24
12,928,
276.24
12,928
,276.24
12,928,276
.24
15,960,834. 17,734,260.
14,364,751.38 86 96

  Administrative and Sales

Expenses
- 1,023,750.00 1,170,000.0
0
1,316,
250.00
1,4
62,500.00
1,67
1,428.57
1,85
7,142.86
2,063,492.
06
2,292,7
68.96
2,5
47,521.07
2,83
0,578.96

  VAT(15%)   3,071,250.00 3,510,000.0

0
3,948,7
50.00
4,38
7,500.00
5,01
4,285.71
5,5
71,428.57
6,190,47
6.19
7,642,563. 8,491,736.8
6,878,306.88 20 9

II Total Cost of Good Sold   13,144,793.37 15,022,620.99 16,900,448.62 18,778,276.2

4
19,613,990.53 20,356,847.67 21,182,244.49
26,150,919. 29,056,576.
23,535,827.22 13 81

  Operating profit - 7,330,206.63 8,377,379.01 9,424,551.38 10,471,723.

76
13,814,580.90 16,786,009.4
7
20,087,596.78

24,799,502. 27,555,002.
22,319,551.97 19 44

  Less Depreciation - 308,613.75 308,613.7

5
308,
613.75
3
08,613.75
308
,613.75
30
8,613.75
308,61
3.75

381,004. 423,338.4
342,904.17 63 8

  Interest - 557,316.63 501,584.9

6
445,8
53.30
3
90,121.64
334,
389.98
27
8,658.31
222,926
.65
275,218. 305,797.8
247,696.28 09 8

  Sub Total   865,930.38 810,198.71 754,467.05 698,735.3

9
643,003.73 587,272.06 531,540.40

656,222. 729,136.
590,600.45 72 35

  Profit Before Tax - 6,464,276.25 7,567,180.29 8,670,084.33 9,772,988.3

7
13,171,577.1
8
16,198,737.4
1
19,556,056.37

24,143,279. 26,825,866.0
21,728,951.53 48 8

  Less Income Tax (40%) - 2,585,710.50 3,026,872.1

2
3,468,0
33.73
3,9
09,195.35
5,268,
630.87
6,479
,494.96
7,822,422
.55
9,657,311. 10,730,346.4
8,691,580.61 79 3

  Net Profit - 3,878,565.75 4,266,422.33 4,693,064.56 5,162,371.0

2
5,678,608.12 6,246,468.93 6,871,115.82 7,558,227.41 8,314,050.
15
9,145,455.
16

35
 10.4 Cash Flow Statement

In this part of the business plan, the Cash Flow Statement is calculated and included. While the profit and loss statement gives the
results of financial transactions of a business during a certain period (e.g. month or year), the cash flow statement shows the sources
(inflows) and applications (outflows) of the cash in the business during the year. The cash flow statements for this project is as follows

Table 10.4 Cash flow Statements of the Project

Description Projected years        
No  
0 1 2 3 4 5 6 7 8 9 9
10
  Cash Inflow                      
 
  Equity 2,809,9
99.80
- - - - - - - - -  
 
  Bank Loan 6,556,
666.20
- - - - - - - - -  
 
  Net Profit -
3,878,565.75
4,266,4
22.33
4,693,0
64.56
5,162,
371.02
5,678,608.1
2
6,246,46
8.93
6,87
1,115.82
7,55
8,227.41
8,314,
050.15 9,145,455.16
9,145,455.
16

  Depreciation -
308,613.75
308,
613.75
308,
613.75
308,
613.75
308,613.7
5
308,
613.75
308
,613.75
30
8,613.75
308,614 308,614 308,614

  Total 9,366,666.00
4,187,179.50
4,575,
036.08
5,001
,678.31
5,470,9
84.77
5,987,221.8
7
6,555,0
82.68
7,17
9,729.57
7,86
6,841.16
8,622,664 8,622,664 8,622,664

  Cash out Flow                      

 
  Fixed investment 6,101,
250.00
- - - - - - - - - -

 
  Working Capital 3,265,
416.00
- - - - - - - - - -

 
  Total Cost of Capital 9,366,6
66.00
- - - - - - - - - -

 
  Loan Repayment -
655.67 655.67 655.67 655.67
655.
67 655.67 655.67 655.67
656 656 0

  Total 9,366,666.003
655.67
655.67 655.67 655.67 655.67 655.6
7
655.67 655.
67
656 656 656

  Net inflow (0.00) 4,186,

523.84
4,574,380.4
1
5,001,022.64 5,470,329.10 5,986,566.20 6,554,427.0
1
7,179,073.9
1
7,866,185.
49
8,622,008 8,622,008 8,622,008

36
 11. The Project Feasible

Now that all questions related to the four aspects of the business project - that is, marketing,
technical, organisation and finance - have been answered, a conclusion should be made on the
feasibility of starting the business. Is the profit on the first year sufficient to meet the loan and
interest repayments. Can marketing or raw material supply problems be overcome? What
happens to project profitability, if raw material cost increases by 10%? What if sales forecast is
only 80% realised? Any further outstanding questions should be dealt with in this last section.

You also have to decide for yourself whether the profit you expect to make is worth all the risks
you are taking in the business.

11.2 Return on Investment (ROI)

One important issue that should be looked into when deciding whether or not to go ahead with your
business is to answer this crucial question "Will my money be better off in this business or in the bank
where it can earn a fixed interest in long term bonds or savings or time deposits?" To answer this
question, calculate the project’s return on investment (ROI) which is one of the measures of
profitability.

This is done by dividing Net Profit by the total capital requirement: It is better to use Net Profit after
Tax, if this is applicable.

Net Profit x100

Return on Investment =  Total Equity

A variation in the profitability measure is the Return on Owner's Investments (ROI). This is derived by
dividing Net Profit before Taxes by the Owner’s Equity (Capital or Investment), as shown below:

Net Profit
Return on Owner’s Investment =  Owner’s capital x 100

If the percentage is greater than the bank’s rate on long term deposits, including allowances for the
country’s inflation rate during the same period, then the project appears financially viable. If it is below
the bank rate, then you may consider several alternatives which could include measures like increasing

37
 production level (provided the market is sufficient), looking for ways to reduce costs, or even
abandoning the project altogether.

11.2 Profit Margin Ration

As a later stage if the project is to be supported by a loan from government agencies, lending
institution; or enterprises the recovery of the loan is assured for the following good reasons.

1. The crops intended for cultivation are those of high valued cash and food crops. Research results
of the past three decades show that it is not only possible to grow industrial crops such as cotton,
sesame, broom sorghum, but also food crops such as cotton, sesame, broom sorghum, but also
food crops such as wheat, bean, maize, sorghum, groundnut, and all sorts of vegetables and fruit
trees. Thus the opportunity of cultivating wide range of high value crops insures the solvency of
the enterprise.

2. Crop yields in the Awash valley exceptionally good by world standard. Under optimum
management conditions it is possible to score yields as much as 9.1 quintals of raw cotton per
hectare. Similarly a yield of 60, 10, and 50 quintals per hectare for maize, sesame, and groundnut
respectively is achievable. Haricot bean one of the exportable crops grown in the coal season can
give seed yield ranging from 15-20/qt/ha.

3. The farm being operated on a commercial scale its interest is ultimately tied up with the lending
agencies such as banks & insurance companies or the regional government.

4. The project area is conveniently located for easy monitoring and evaluation of farm activities.

5. The Awash valley in general the project area in particular represents the highest stage of
Ethiopian large scale commercial farming. The Awash Valley contains valuable resources such as
all types of machineries, skilled and conscious workforce, professional personnel, and vibrant
traders.

6. The potential of hydropower, telephone communication and good transport system is an

additional advantage to invest in the area.

7. The track record of the managing director on whose responsibility the investment venture is
carried spotless clean.

Various financial analyses are carried out to see the ratability of the venture, and the results are the
following

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 a) Profit Margin = Net Profit

Net sales

11.3 Financial Internal Rate of Retune

Discounted measure performed for both the stream of benefit and costs, and the computation
these-of indicated the capacity the venture to generate a FSRR of 36% total expense employed
indicates that the project is financially viable and quite attractive indeed.

FSRR = Net Income + Interest payment

Initial Investment

The pay-back period: the time needed for the project to recover its total investment cost through
its net cash earning is about 2 years.
PP = Initial Investment

Net Income + Depreciation

b) Financial worthiness (NPV and Benefit-Cost Ratio)

Net present value (NPV) of the project that is discounted at 8.5% rat (Opportunity cost of capital)
interest is calculated at ETB 750, 000 Cost Benefit Ratio (CBR) is found to be 1.5

12. Social Benefits

We believe the involvement of the enterprise in the area would greatly benefit the clans and to a
modes extent the entire valley in the following ways: -

1. By assisting the clan utilizes its essential resources, i.e. abundant water and the land.

2. The region in general and the project area in particular are known to be a food deficit
area. Therefore the company will do its utmost to ensure that lack of food will be thing of

39
 the past. Not only does food crops such as maize, groundnut, beans will be grown in
proposed concession but also assist interested clan members to grow vegetables raised in
their residential quarters.

3. The opening of first aid clinic with the capacity to handle malaria cases, dress wounds,
apply antibiotic eye ointment is in the promoter top priority list. After all healthy
workforces contribute to promoter prosperity. The clinic at the project site will serve all
the people living in the scheme. The enterprise will support any idea or proposal aimed at
establishing a health center that can deal with patient referrals for the entire valley.

4. Similarly, with educated workforce the promoter farm is likely to become efficient,
highly developed and responsive to its immediate environment as well as the region.
Thus, through time both primary and secondary schools will either be established at
promoter own expense or the company may contribute to its realization. Despite the
definite commitment by the company to creating self-motivated and educated workforce,
there is a limit to what a private investor can do. It must be noted here that education is a
public domain and is mainly run by taxes levied from citizens of a region or a country.

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15 Conclusion and Recommendations
In conclusion, the agricultural Fruits and Vegetables farm business is not a mystical enterprise. It is a
business requiring all of the sound business judgment; sound business management practices, and sounds
technological systems that any other business requires.

The market potential is examined in section four and expected share of market potential is also estimated
together with price level. Soon after the project is accepted a further in-depth study of the market and
irrigation scheme has been carried out. The investment required to produce the planned cash and
industrial crops products for the market is estimated in section six based on the offers of foreign suppliers
and price of improved seeds. For the purpose of the feasibility study the maximum possible costs are
taken. It should be noted that cost saving in the investment would make the project more attractive. The
project will accumulate Birr 1,378,479.00 at the 5th year in the form of excess cash and will also pay Birr
2,100,000.00 from 2013-2023. The financial simple rate return is 36% which is very attractive. The
payback period indicate the project takes a reasonable period of time to recover its total investment costs
through its net cash earning. In the long- run the project shall further generate an indirect employment
around the factor sit and neighboring loads. The effect of additional earned and spent the beneficiaries
would create corresponding employment in other sectors supplying the goods and service on which the
income is spent.

A preliminary analysis suggests that the project is worthier while investment venture. Its benefit to the
locality in particular and the region in general is considerable. A future demand is clearly seen, party from
the present big buyers in local market and partly from export opportunity.

The conclusion made are based on the fact that some time to come one has to depend on the existing
agricultural project will be additionally needed and with the constraints normally existing in a developing
country like Ethiopia. I consider the project feasibility and recommend its implementation without delay.
Delaying the implementation of the project would mean giving chance to other potential investors
especially in the product lines.

14. IMPLEMENTATION PROGRAMME

The implementation period is the time from approval of the project and formation of the
company to start of production. Due to market and production reason it is financially feasible to

41
implement the project in phase. In both alternatives the major civil and building works are
implemented during the 1st phase, year 0. The first implementation period will star 2014.

Technical Farm Project Manager

The main tasks of the project Manger are to specify duties and responsibilities for the project
team. Budget and controls, approval of main activities and investment and reporting to the
involved partners are as well important function of the promoter.

Project Team for the 1st Implementation Phase

The project manager is the owner and runner of his project and assign the technical farm manger
should have capability, authority and responsibility to manage and supervise the first phase of
the project implementation within limits set forth by the promoter.

The project Technical Farm manager should write a project manual for the team. The manual
should contain job description, budget and cost control system, detail time schedules,
instructions, etc. the project manager should after approval of the promoter appoint personnel
directly responsible to him. Works preferably should be carried out by local experienced
designer, supervisor and contractors. For the performance of the farm the installation of
irrigation related works are vital. It is therefore suggested that the project engineer for these
installation should be appointed by the help from consultant. The purchasing of equipment may
be done by help from consultant. The administration should be handle, follow-up, finance, local
recruitment, secretarial matters, etc.

To get a smooth start of the new company and transfer knowledge from the first implementation
phase some employee of the company should participate already during the later part of year 0.
The suggested employees are: -

- General manager
- Technical Farm manager
- Supervisor(CAPPO)
- Secretary of the general manager.

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Annex 1. Assumption
1. Credit period of the project is 10 years
2. The dollar Birr exchange rate is assumed to be 16.78
3. Profit Tax = 40% of Gross profit
4. Value Added Tax = 15%
a) 70% = 1st year
b) 80% = 2nd year
c) 90% = 3rd year
6. Production will start in 2014 and it will reach its maximum production in 2018.
7. Raw materials
a) Purchase of improved seeds
b. Farm inputs
i. Fertilizer
ii. Chemicals
F. Packing: sack

43
 10.Annexes
A. Land Use Plan
Improved Seed type and pattern of cropping

Crop Typ Size (Hectare) 1st round 2st round

  3rd round (Dec-March)
(April-July) (April-July)

Maize 20 Maize   Maize Soybean

Sorghum 20 Sorghum   Sorghum Maize
Soybean 20 Soybean   Soybean Sorghum
Tefe 20 Tefe Plantation
Other Farm Facilities 13.466 Seedling production Improved Seed
Total 93.466  

B. PROJECT IMPLENTION SCHEDULE

S.N Activities 20014 2014

Jan Feb Mar Apr May June July A Sep Oct N Dec
il ug ov
1 Acquisition of Land
2 Site Clearance
3 Farm Establishment
4 Where house and Storage
5 Administrative and Office
Building
6 others
7 Acquisition and Installation of
Machinery and Equipment
8 Preparation of Machinery
9 Acquisition of Raw Materials
10 Start Up of the Project

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 Project Proposal on Crops and Cereals Selected Seed Development Farm
Establishment by Irrigation

PROMOTER: Geatacho Tafasa

Project Location: The National Regional State of Ormiya South West

Showa, Aamaya Woreda, Hobore Aliyiee Kebele

September , 2013
Addis Ababa
 I. Executive Summary

1. Project Background

 Title of the Project: Crops and Cereals Selected Seed Development

Farm
 Owner of the Project: Getacho Tafasa

 Project Location: Amaya Woreda Hobore Aliye Kebele

2. Total Investment Cost of the Project

 Fixed Investment Cost 6,081,250.00

 Working Capital 3,180,717.39

 Preliminary and Pre Operating Expenses 84,698.61

 Total Cost of the Project 9,346,666.00

3. Financial Sources of the Project

 Owner Equity (30%) 2,809,999.80

 Bank Loan(70%) 6,542,666.20

 Total 9,346,666.00

4. Estimated Annual Net Profit of the project

 Over Ethiopian Birr 3 Million

5. Employment Opportunity of the Project

 At Total of 75 20 Permanent and 55 Temporary employment

opportunity

6. Land Required for this Investment 93.4666 Hector