export crops oromia
TRANSCRIPT
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OROM IA IN V ESTM EN T BU REA U
BUSSIN ES PLA N FOR C OFFEE, SESA M E A N D H A RI COT BEA N
PRODU CTI ON IN LALI STU LOPH I PEASAN T ASSOCIA TIO N OF
WEST WO LLEGA ZON E
A U GUST 2000
FINFINNE
Project owner : Habtamu Ragaa Feisa
AddressHabtamu Regaa Gen/ImpexTel: 0911220397E-mail: H [email protected] U THFinfinne/Addis Ababa
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Table of Contents pages
TU1. Background U T....................................................................................................................6
TU1.1 Introduction U T............................................................................................................... 6 TU1.3 Methodology U T ............................................................................................................. 7
TU
2. Project AreaU T
...................................................................................................................8 TU2.1 Project Location, Climate and Physical Features U T ..................................................... 8 TU2.2 Topography and Agro-ecology U T ................................................................................. 9 TU2.3 Rainfall U T...................................................................................................................... 9 TU2.4 Vegetation U T ............................................................................................................... 10 TU2.5 Road net works U T ...................................................................................................... 10
TU3. Technical Feasibility U T ..................................................................................................11
TU4.Cropping Pattern and Land Al location U T ..................................................................11
TU5. Project Components U T ..................................................................................................12
TU
5.1 Maintenance of of Roads, Office and Residential BuildingsU T
.................................. 12 TU5.2 Nursery Establishment U T ............................................................................................ 12 TU5.3 U T TUCoffee Planting U T ................................................................................................. 13
TU6. Project Man Power and Management U T....................................................................14
TU7.Crop Yield and Productivi ty U T......................................................................................15
TU8. Project Labor, Material and Office Requirement U T... Error! Bookmark not defined.
TU8.1 Labour Requirements U T............................................... Error! Bookmark not defined. TU8.2 U T TUMaterials Requirements U T .................................................................................... 16
TU8.2.1 U T TUSeed Requirement U T ..................................................................................... 16 TU8.2.3 U T TUFarm Machine and Vehicle U T ........................................................................... 17 TU8.3 U T TUOffice and Store U T ................................................................................................ 17
TU9. Socio-Economic Benefits U T.........................................................................................17
TU10. Financial Study and Analysis U T................................................................................18
TU10.1 U T TUProject Costs U T ..................................................................................................... 18 TU10.3 Project Life U T............................................................................................................ 19 TU10.4 Source of Finance U T ................................................................................................. 19 TU10.5 Revenue U T................................................................................................................ 20 TU10.6 Income Tax U T ........................................................................................................... 20 TU10.7 Financial Analysis Results U T .................................................................................... 20
TU10.7.1 U T TUCash Flow U T ................................................................................................. 21 TU10.7.2 Profitability U T .................................................................................................... 21
TU11. Project Schedule/Activity Components U T ............................................................22
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TU12. Annexes U T ......................................................................................................................23
TU Annex Table 1. Project cash flow U T ..............................................................................25
TU Annex Table 2. Coffee, sesame and haricot bean project profit & loss
statement for the year ending July 30 U T......................................................................26
TU Annex Table 3. Detailed investment costs U T..............................................................26
TU Annex Table 4. Detail operating costs U T ......................................................................27
TU Annex Table 5. Depreciation for build ing, equipment and vehicle U T ..................29
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EXECUTIVE SUMMARY
The investor is planning to invest on the production of exportable crops, which
include coffee, sesame and haricot bean. These crops are currently the major
export crops in Ethiopia and the project is inline with government interest and
policy which focuses on market oriented agricultural production. It is also inline
with agricultural strategy of the government of Oromia and contributes to the
recent undertakings of the region on agricultural development corridors plan.
Coffee, sesame and haricot bean are an important export cash crops in
Ethiopia's economy that contributes for more than 60% of the foreign exchange
earning. Coffee alone provides direct and indirect employment for over 25% ofthe country's population. In recent years oil crops particularly sesame as well as
haricot beans are becoming an important exportable crops in the Ethiopian
economy. Cognizant of this fact, the Ethiopian Government is providing
significant support as stated in the economic policy to initiate private investors to
take part in the production, processing and marketing of these valuable crops.
This project proposal is prepared to undertake production of coffee, sesame and
haricot beans in Begi woreda of West Wollegaa Zone, in Lalistu Lophii PA in a
specific locality called Fuddaa. The major objective of the project is to produce
high quality export crops under proper scientific management on a total land
area of 200 hectares.
West Wellegga zone in general and the project area in particular is an ideal
geographic area for coffee, sesame and haricot bean production. The natural and
social factors at the project site have demonstrated the technical feasibility of the
project. The quality of coffee in that vicinity falls under Limu Coffee category,
which is highly demanded for its flavor and aroma on international market.
The total cost of the proposed project is estimated at Birr 1.45 million out of
which birr 1.1 million is investment capital while the rest birr 0.34million is
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working capital. Regarding the source of fund almost all of the total investment
cost shall be covered by the contribution of the promoter.
The project will start to generate profit on the seconded year and the total net
cash inflow during the project period is highly positive. The discounted Cash flow
shows that the project is viable with a Net Present Value (NPV) of Birr
374,260.00 discounted at 8.5 per cent, and the Internal Rate of Return is very
28.2 which indicates that the project is financially feasible and highly lucrative.
Furthermore, the intended project would increase the country's' foreign exchange
earnings, provide employment opportunities, transfer improved skill to the
surrounding and also generate additional income to the government. Therefore,the project is technically, economically and financially feasible and acceptable.
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1. Background
1.1 Introduction
Currently Agriculture dominates Ethiopian Economy. The sector contributes to
economic growth through providing employment for large proportion of the
population. It provides export products, food and industrial raw materials and aids
industrial expansion by providing market for domestically produced goods.
In the agricultural sector high value crops, especially coffee, sesame and haricot
bean have a great impact in providing export market. The available indicators
reveal that coffee accounts for more than 50% of the foreign exchange earning of
the country. The crop generates the largest tax share from foreign trade and
about a quarter of the country's population also directly or indirectly depends on
coffee for their livelihood.
The total area under coffee production in Ethiopia is estimated to be about
500,000 hectares with a total annual production of more than 200,000 tons.
Ninety-five percent of the total annual coffee production comes from the peasantsector while the balance is covered by large scale farms. The average national
productivity of coffee in Ethiopia is very low compared to the productivity of other
coffee producing countries. This is mainly attributed to backward production
techniques employed by smallholder farmers. The current low productivity of
coffee as well as other crops has to be changed through improved agricultural
production techniques so that the country could benefit from the sector. This
could be done through creating appropriate linkage between smallholder farmers
and private commercial farmers.
The Economic policy promulgated by the Federal Government of Ethiopia has
brought about a great opportunity to private investors in all sectors of the
economy and continually abolishing obstacles hindering investment. .
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The expansion of modern coffee farms by private investors is believed to boost
coffee production and productivity. This would highly benefit the economy as the
crop has long remained to be the single largest crop contributing over half of the
country's foreign currency earning.
The promoter of this project Capt. Habtamu Regaa is one of the beneficiaries of
the new economic policy who has been initiated to invest in exportable crops that
the government has given utmost consideration in the development strategy of
the country.
The Investor, besides planning to invest in the area of the agricultural sector, has
also previously played a significant role in the area of Import Export Trade Sectorand has already maintained a great deal of experiences in dealing with and
smoothly managing the various problems arising among Agriculture, Industry and
Trade.
1.2 Project Objectives
Objective of the project is production of high value crops, which include coffee,
sesame and haricot bean for the export market following the major government
policy frame work which gives emphasis to market oriented production. In line
with this the following are specific objectives of the project :
To develop 60 hectares of land with modern coffee plantation,
To develop 130 hectares of land with modern sesame and haricot
plants
To generate attractive return to the investor and also contribute to the
foreign exchange earning of the country and,
To introduce modern coffee, sesame and haricot bean production and
management techniques to the surrounding locality
1.3 Methodology
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Methodologies adopted in undertaking the study include document reviewing
regarding the production technologies and adapting the cultural practice of the
three crops. Coffee production packages utilized by medium to large commercial
coffee farms were also reviewed to understand the current status of coffee
production techniques. Visit has been made to the site together with the investor
and field level data were collected through observations of the site, discussions
were carried out with the community in the surrounding area and agricultural
experts and officials of the woreda were also consulted
The cultural practice experiences and improved management practices for
modern production techniques was considered in the planning of activities, cost
estimates of operations, production yields, etc for the individual operations of theproject. The organizational structure, the staffing plan and the overall manpower
requirement were also estimated based on the data collected.
2. Project Area
2.1 Project Location, Climate and Physical Features
The project site is located in Begi Woreda in West Wollega Zone of the OromiaRegional State in a Peasant Association called Lalistuu Lophii and the specific
locality is Fuddaa. It is adjacent to a wide marshy basin known in West Wellega
as Caffee Yaa-balloo.
The site diverts 27 kms from the main Begi - Gidami road. Begi town is about
250 kms and 700kms from the zonal capital Gimbi and Finfinne, respectively.
The total area of the project is 200 hectares which is entirely located in LalistuuLophii PA.
The proposed investment area is new. It is dominantly covered with open shrub
lands. The area is free from settlement and any sort of agricultural activities
including livestock and grazing land. The site can therefore be used for coffee
and sesame cultivation without any complication that could result from land use
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arrangements.
2.2 Topography and Agro-ecology
Agro-ecologically the area is characterized by sub tropical low land type of
climate. The altitude of the area is ranging from 1,400 to 1,600 meters above sea
level within the range of ecology recommended in Ethiopia for the targeted crops.
In Ethiopia coffee grows at various altitudes, ranging from 550-2,750m above sea
level. C offee arabica is ideally produced in the altitudes ranging from 1,300 -
1,800 masl indicating that the area selected is very much suitable for coffee
production. Sesame is grown from seas level to 1500m while haricot bean cangrow in altitudes ranging from 900masl to 2000masl.
With regard to topography the locality of the site falls within a slightly to
moderately gently slopping plain with suitable topography for coffee, sesame and
haricot bean production. The land is well drained and not exposed to flooding
hazards. Ragged land and steep slopes account for less than 10%.
The soil of the project locality is fertile with a high nutrient-holding capacity for
clay minerals indicating that it is friable, and loamy, with a good depth for
cultivation of coffee, which relatively requires deeper soils compared to haricot
bean and sesame. The topsoil is dominantly dark-brown or brownish in color, and
fertility is maintained by organic recycling through litter fall from the numerous
perennial plants in the project site.
2.3 Rainfall
Rainfall of the site is mono-modal type, which begins usually in mid April and
continues up to mid September and is uniformly distributed in most years and is
favorable for the production of most crops including coffee, haricot bean and
sesame. The annual rainfall is well over 1,450mm and fairly distributed in the
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year. The climatic condition of the locality is pleasant for coffee and oil crops
(sesame). Annual rainfall in the coffee-growing regions of the country varies from
1,400-2,500mm.
Coffee arabica grows best in the cool, shady environment of the forests of the
Ethiopian highlands. The ideal temperature for coffee arabica is considered 15-
25c. This temperature prevails in most of the country's coffee-growing areas and
Begi woreda is not exceptional. Haricot beans are a warm season crop; the
optimum temperature for their growth is about 24oc. Growth and fruiting of
sesame plants are favored at 20oc.
2.4 Vegetation
The vegetation cover of Begi woreda is a sub-humid tropical forest type. Among
the main tree types in the area are Patria ferruginous (Kararo), UCordia, abysinica U
(Wanza), Croton machrostachys (Bisana) and Albizzia schimperiana (Sesa).
The area is predominantly covered with dense forest and most of the tree
species in the area like Wanza and , Bisana are suitable for coffee shade and
will selectively remain on the farm to serve this purpose. In addition to thenatural trees already existing on the farmland, a more suitable shade of acacia
trees shall be artificially planted and intensified in the area. This practice at the
same time would help to maintain the ecology of the locality as well as the fertility
status of the soil.
2.5 Road net works
Begi woreda has a good conditioned gravel road in two directions. New road is
also under construction from Nejo town to Begi, which is a short cut to Ghimbi
the capital city of the zone. The new road creates the seconed option for access
to transportation from the project site to the main asphalt highway, which is a
very good opportunity for the project.
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3. Technical Feasibility
The West Wellega zone in general and the project area in particular are the most
ideal places for coffee, oil crops and beans as well as other crops production.
The average annual temperature of 24 Po Pc and sufficient annual rainfall with fair
distribution over months and short dry period created favorable condition for the
selected crops. Furthermore, altitude of about 1,400 m above sea level, the type
and quality of soil, suitability of the slope for drainage, the availability of suitable
shade trees and the permanent rivers crossing the area justifies the suitability of
the area for coffee, sesame and haricot bean growing.
On the other hand, concerned government line offices have long ago demarcatedthe area as one of the places where private investors could invest and participate
in the development endeavors already underway in the country. Agreement has
also obtained from concerned bodies at various levels to implement the intended
project.
Coffee is the main crop growing in the vicinity and the people in the area have
good experience in handling and managing the crop. This would facilitate the
possibility of getting experienced human labour for the operation of the farm.
There are sufficient social services in the nearest small town called Gunfi.
4.Cropping Pattern and Land Al location
The total land to be developed by the project is 200 hectares with an effective
plantation area of 190 hectares while the remaining 10 hectares will be used for
infrastructure development such as offices, residence, farm road and store.
Coffee plantation will be established on 60 hectares of land while sesame and
haricot bean will be grown on the remaining 130 hectares on crop rotation base
as shown on table 1 below.
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cane, etc. shall be supplied on time. The seedling will be raised on beds
prepared from a mixture of sand and forest soil. Each seedling will be
supplemented by an average of 3 gm of DAP at its later growth period for an
optimal growth.
The nursery and initial land development activities will only last two years while
other routine management of the farm continues over the project period. Most of
the farm activities will be done manually as it is relatively cheap and would also
create an employment opportunity for the area. The total labor requirement of
the operational activities like weeding, hoeing, pruning, fertilizing, harvesting shall
progressively grow and become approximately constant after the forth year .
Table 2. Nursery establishment cost
Qty Total cost (Br.)No Descriptions Unit Year 1 Year 2 Year 1 Year 2
Labor
1 Site clearing uprooting &levelingMd 70 - 420 0
2 Bed preparation andmulchingMd 100 100 600 600
3 Forest soil mixturepreparation Md 100 100 600 600
4 Shade materialspreparationM d 1,330 1,330 7,980 7,980
5 Water and weeding Md 600 600 3,600 3,6006 F ertilizing and spraying Md 30 30 180 180
Total - - 13,380 12,960
5.3 Coffee Planting
Selective land clearing and uprooting will be the major task in land preparation.
Following the land preparation, the field will be staked and holes will be dug with
appropriate spacing. The hole will be left open for one to two months for proper
aeration and then refilled with top soil.
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Based on improved coffee production recommendation package for western
zone and the experience of the surrounding, coffee seedlings will be planted at
the onset of rain between the months of April and early June. The planted coffee
area will be slashed in July and hoed in September. There is no indication of
perennial grass problem that entails the use of herbicides.
Under good management coffee plant could flower two years after planting.
However, harvesting is recommended three years after plating to avoid early
dying of young bearing plants. It is expected that project coffee yield ranges from
6-10 q/ha. In this production system, recommended seedlings are used, and
proper spacing, manuring, weeding, shade-regulation and pruning are practiced..
6. Project Man Power and Management
The project shall have nine permanent employees with different responsibilities.
The investor controls and supervises the over all activity of the project at times
while the operation and management of the farm will be entrusted to qualified
and well experienced manager. All staff members of the project are accountable
to the manager who is assigned by the investor to manage the overall activities
of the project.
A junior accountant will be responsible to keep all the financial transactions of the
project, control cash and stock movements of the farm and prepare up to-date
financial reports. He also serves as a cosignatory with the manager of the
project. The secretary cashier will handle all the payments and minor purchases
and does the secretarial works including keeping various files of the project. The
two foremen will be responsible for the routine operation and management of the
farm under close supervision and control of the farm manager. The storekeeper
will be responsible to systematically record and keep the input and outputs of the
project.
Skilled manpowers shall be recruited from Begi while the casual laborers could
be hired from Fuddaa, Falaxaa and Gunfi localities including the adjacent PAs.
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Coffee is expected to start giving production during the fourth year while sesame
and haricot bean are annual crops and production begins starting first year of the
project. The harvest for coffee will be made at an appropriate time. Proper
announcement will be made in time prior to the commencement of harvesting to
hire adequate number of casual laborers. Although there is an intention to
establish coffee pulpier and oil extraction plant at a later stage after conducting a
feasibility study, the current study is done with the assumption of preparing
coffee in dry processing method and production of sesame and haricot bean for
central market.
7.Crop Yield and Productivi ty
At any location, crop production and yield is impacted by a combination of
different factors. Among the factors soil type, the environmental situation
especially the night temperature, hour of day light and the number of cloudy days
have a significant effect on yields of coffee, sesame and haricot bean production.
The yield is assumed to have an increasing trend through the implementation
plan of the project assuming that it reaches possible optimum yield of ten quintals
per hectare for coffee by the end of the project physical implementation
considering the inherent characteristics of coffee while yield of haricot bean and
sesame will be maximized by practicing modern production techniques as shown
in Table 3..
8. Project Labor, Material and Offi ce Requirement
8.1 Labour Requirements
Labor requirements for the envisaged farm has been formulated in accordance
with crop growing periods considering the successive farm operations from land
preparation to harvesting. Labor requirements of the farm vary depending on the
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Table 3 .Estimates of crop yield by years of development periodYearsDescription
1 2 3 4 5 20-JunCoffee area in ha 30 60 60 60 60 60Sesame area in ha 30 65 65 65 65 65Haricot bean area 30 65 65 65 65 65Produc tivi ty cof fee q/ha 0 0 0 4 6 10
Produc tivit y sesame q/ha 5 7 7 7 7 7Productivity of haricotbean in q
10 16 16 16 16 16
total producti on sesamein q
150 455 455 455 455 455
total productio n of coffeein q
0 0 0 240 360 600
total producti on h. beanin q
300 1040 1040 1040 1040 1040
type of activities prevailing in a particular time of the growing season and the
maximum number of labor required for each operation. The daily wage variesaccording to the types of operations which is in the range of 5-10 birr/day.
8.2 Materials Requirements
8.2.1 Seed Requirement
Available information on seeding rate indicates that seeding rate for haricot bean
is on average 70kg/ha, 8kg/ha for sesame and 1.8kg per hectare for coffee.
Accordingly the cost for seed purchase is 50 birr/kg (coffee), 10birr/kg for haricot
bean and fifteen birr per kg for sesame. Improved seeds of sesame and haricot
bean will be purchased from Ethiopian Seed Enterprise (ESI) while coffee berry
disease resistant varieties of coffee seeds will be purchased from Haru Coffee
Research Center.
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8.2.2 Fuel Requirements
Fuel requirements for machineries is determined by the total working hours
required to perform different operational activities and the consumption on fuels
based on the actual selling price of fuel at Begi town.
8.2.3 Farm Machine and Vehic le
The requirement of vehicles and motorcycles are considered with the optimum
norm of the existing practice. During the project time one tractor, and one motor
cycles are envisaged.
8.3 Office and Store
The construction of office, residence and store buildings are to be made. These
buildings are to be constructed on sites identified for construction purpose as
mud barracks. The construction estimate at year 0 is Birr 224,750.
9. Socio-Economic Benefits
Coffee, sesame and haricot bean are of vital economic importance to the nation.
Coffee is the biggest source of foreign exchange earning that can enable the
country import capital and consumable goods. It is also an important source of
employment. Sesame and haricot bean are also becoming high value exportable
crops and the country has significant potential to benefit from these crops. The
establishment of the plantations is meant to increase the country's foreignexchange earnings by producing quality products.
The proposed project is expected to offer an employment opportunity to a
minimum of 110 persons (9 permanent and the rest temporary). The
employment of casual laborers during pick seasons could be as many as 300.
The project is expected to transfer improved crop management skills to the
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surrounding farmers through the demonstration effect of the plantation and partly
through the employment opportunity to be generated. The improvement of
access rural road would also be beneficial to the community in various forms.
The project furthermore has the intention of distributing high quality Coffee Berry
Disease resistant coffee seeds and high productivity quality sesame and haricot
bean to the neighborhood farmers to improve the productivity of the sub sector
and thereby income of the farmers.
The Federal as well as the Regional governments would also receive substantial
amount of revenue in the form of different taxes including profit tax. The land
rent is also another income to the region.
10. Financial Study and Analysis
10.1 Project Costs
As shown in Table 4 below, the total project investment cost is 1, 111, 275 birrr
of which the major share 45.17 percent is for purchase of farm machinery,
vehicle and equipment. The table also indicates that of the total operating
expenses wage accounts for the largest proportion.
The total fixed investment cost of the proposed project is estimated at birr
1111275 . This investment cost spreads over two while the substantial part will
be committed at the time of project commencement. Of the total investment cost
Birr 138,000 is planned to be used for access and farm road construction, birr
147,000 for land development (plantation) including nursery establishment, birr
224,997 for various buildings and other structures (office, residence, store, drying
floor, bore hole, etc.) and birr 507,000 is allotted for farm machinery including
office facilities and equipment. Regarding the source of fund, the total required
investment cost, birr 1.5mn shall be covered from own contribution
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Table 4. Financial investment and project cost summary
Annual distributionTotal
No Description Year 0 Year l Year 2 Year 3 Year 4 Year 5
1 Road maintenance 128,500 9,500 0 0 0 0 138,0002 Land development 147000 0 0 0 0 0 147,000
3 Building 224,750 20,247 0 0 0 0 244,997
4 Farm machinery and vehicle
502,000 5,000 0 0
0 0 507,000
5 Office equipment 8,000 0 0 0 0 0 8,0007 Wage 0 69,900 110,160 99,120 155,520 155520 590,2208 Agricul tur al inputs 0 24,050 47,150 82,450 40,600 40600 234,8509 Fuel and lubricant 0 63,965 64,215 64,215 64,215 64215 320,825
10 Repair & maintenance 0 10,280 10280 18780 10280 10280 59,90011 Vehicle insurance 0 7,800 7800 7800 7800 7800 39,00012 Travel and peridiem 0 10,000 10000 10000 10000
12000 52,00013 Stationery 0 5,000 5000 5000 5000 5200 25,20014 Land rent 0 11,850 11,850 11,850 11,850 11840 59,24015 Salary 0 46,725 46,725 46,725 46,725 46725 233,625
S. totla 1,010,250 284,317 313,180 345,940 351,990 354,180 2,659,857
Contingency 101,025 28431.7 31318 34594 35199 35418 265,986
Total 1,111,275 312,749 344,498 380,534 387,189 389,598 2,925,843
10.3 Project Li fe
The complete implementation of the project is going to take three years (from
year 0 to year two) and full capacity operation will be gradually attained in the
third year. Therefore the project will involve both production and investment
during the first two years. Zero year of the implementation is considered to be the
construction phase. Production phase will cover 20 years starting from the first
year.
10.4 Source of Finance
The investment requirement of the project is assumed to be financed by the
project owner (promoter) .
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10.5 Revenue
The major crops to be cultivated by the project are coffee, sesame and haricot
bean. As could be observed from table 5 below the project will generate sales
revenue of about birr 858, 000 in the first year of project implementation and
reaches to 1,546,000 at the end on annual base.
Table 5. project revenue in birr over project years
YearsDescription1 2 3 4 5 20-Jun
Selling of
Coffee 800birr/q 0 0 0 192000 288000 480000
Sesame 1200 birr/q 180000 546000 546000 546000 546000 546000
Haricot bean 500birr/q
150000 520000 520000 520000 520000 520000
Total revenue 330000 1066000 1066000 1258000 1354000 1546000
10.6 Income Tax
According to the Investment Incentives Council of Ministers Regulations
No.7/1996, the project is entitled to the following incentives:
Income tax exemption for 5 years
Losses carry forward for 5 years, and
Exemptions from payment of custom duty on machineries and
equipments.
For the rest of projects life, a 30% tax rate is applied on the taxable income.
10.7 Financial Analysis Results
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The financial analysis of this project is carried out based on the results of the
investment and operational costs discussed in previous sections as well as the
assumptions mentioned earlier.
Based on the assumptions and the financial costs and benefits discussed in
previous sections of this report, the financial analysis results are as discussed
below.
10.7.1 Cash Flow
As could be observed from the cash flow table attached in Annex Table 2 the
project will generate positive cash flow through out its life excluding the initialyear.-68659 which will immediately raised up to 569040 in the next year. By the
end of the project life, cumulative cash flow will be about birr 701,026.
The discounted Cash flow shows that the project is viable with a net present
value (NPV) of Birr 374,260.00 discounted at 8.5 per cent, with 28.2 Internal Rate
of Return indicating that the project is very lucrative and profitable.
10.7.2 Profitability
As it could be seen from the annexed financial projections the project is
financially feasible (Annex Table 1 and 2). Based on the projected profit and loss
statement, the project will generate a profit through out its operation life. Annual
profit, net of tax, fluctuates between Birr 518,698 in the next year to Birr 612,577
at the end of the project. The profit and loss statement of the project shows that
the proposed project shall start generating net profit starting year two. This is to
say that the project shall start earning net profit just from its onset. The
cumulative cash balance is also expected to be highly positive for the years
under consideration. By the end of the project period the farm shall generate a
net profit of over 10 million birr (undiscounted).
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11. Project Schedule/Activity Components
SN Activ ity Period
1 Finalizing the necessary formalities and
securing the land
August 2008
2 Acquiring investment certificate August/2008,
3 Recruitment of personnel September/ 2008,
4 Office and residence construction October/2008
5 Access road improvement November/2008,
6 Land preparation for nursery establishment January/2009,
7 Land clearing for planting April/2008,
8 Nursery management, June/2009,+9 Planting field preparation, pitting, refilling June/2009
10 Planting of seedlings July/2009
11 Plowing Jan-March 2009
12 Sowing and weed management April to August 2009
13 Harvesting and post harvest activities Nove. to January
2009
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12. Annexes
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Annex Table 1. Project cash flow
Project year
Description 1 2 3 4 5 6 7 8 9 10
Inflowgross value of production 330000 1066000 1066000 1258000 1354000 1546000 1546000 1546000 1546000 1546000
Incremental residual value
Total inflow 330000 1066000 1066000 1258000 1354000 1546000 1546000 1546000 1546000 1546000
Outflows
Investment 58,253 111,747 140,000 0 0 0 0 0 0 0
operating expenditure 275,352 347,633 389,389 394669 404969 406900 407965 408000 408560 409670
incremental operating exp. 72,281 41,756 5,280 10,300 1,931 1,065 35 560 1,110 -3,997
incremental working capital 65,053 37,580 4,752 9,270 1,738 959 32 504 999 -3,597
Tax 0 0 0 377,400 406,200 463,800 463,800 463,800 463,800 463,800
Total out flow 398,658 496,960 534,141 781,339 812,907 871,659 871,797 872,304 873,359 869,873
Net Cash (68658) 569,040 531,859 476,661 541,093 674,342 674,204 673,696 672,641 676,127
Description 11 12 13 14 15 16 17 18 19 20
Inflowgross value ofproduction
1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000
incremental residualvalue 24499Total inflow 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1570
499Investment
Operating expenditure 405673 405673 405673 405673 405673 405673 405673 405673 405673 405673
incremental operatingexp.
0 0 0 0 0 0 0 0 0 0
incremental workingcapital
0 0 0 0 0 0 0 0 0 0
Tax 463,800 463,800 463,800 463,800 463,800 463,800 463,800 463,800 463,800 463,800
Total out flow 869,473 869,473 869,473 869,473 869,473 869,473 869,473 869,473 869,473 869,473
Net Cash 676,527 676,527 676,527 676,527 676,527 676,527 676,527 676,527 676,527 701,026
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Annex Table 2. Coffee, sesame and haricot bean project profit & lossstatement for the year ending July 30
Project year
Description 1 2 3 4 5 6 7 8 9 10s revenue 330000 1066000 1066000 1258000 1354000 1546000 1546000 1546000 1546000 1546000
rating exp 275,352 347,633 389,389 394669 404969 406900 407965 408000 408560 409670reciation 63,950 63,950 63,950 63,950 63,950 63,950 63,950 63,950 63,950 63,950
fit before interesttax
-9302 654,417 612,661 799,381 885,081 1,075,150 1,074,085 1,074,050 1,073,490 1,072,380
0 0 0 377400 406200 463800 463800 463800 463800 463800
Profit (9302) 654,417 612,661 421,981 478,881 611,350 610,285 610,250 609,690 608,580
Project year
Description 11 12 13 14 15 16 17 18 19 20ales revenue 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000 1546000
Operating exp 405673 405673 405673 405673 405673 405673 405673 405673 405673 405673Depreciation 63,950 63,950 63,950 63,950 63,950 63,950 63,950 63,950 63,950 63,950
rofit beforenterest and tax
1,076,377 1,076,377 1,076,377 1,076,377 1,076,377 1,076,377 1,076,377 1,076,377 1,076,377 1,076,377
Tax 463800 463800 463800 463800 463800 463800 463800 463800 463800 463800
Net Profit 612,577 612,577 612,577 612,577 612,577 612,577 612,577 612,577 612,577 612,577
Annex Table 3. Detailed investment costs
Total Annual distrib ution
No Descript ion Unit Qty. cos t Initial Year 1 Year 21 Road construction-Access roadimprovement
Km 15 100,000 100,000
- Bridges No 3 19,000 19,000-Farm road Km 6 19,000 9,500 9,500
Sub Total 138,000 128,500 9,5002 Land development 147,000 147000- 03 Building & structures
Office 1 M2 40 12,958 12,958-staff residence (2) M2 100 32,396 32,396
Office 2 M2 60 19438 19438- Laborers residence(2)
M2 200 40496 20247 20,247
- Cafeteria M2 40 16,198 16,198- Hand dug well M2 120 24,298 24,298- Main store M2 40 8,099 8,099- Material store M2 40 8,099 8,099- Drying floor M2 100 2,025 2,025- Fence (office & Store) M 500 80,992 80,992
Sub total - - 244,999 224,750 20,247 0
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- Generator with line No 1 43,000 43,000-Water pump No 1 50,000 50,000- Sprayers No 10 4,000 4,000-Farm tools Ls Ls 10,000 5,000 5,000
Sub totl 507,000 502,000 5,000 05 Office equipment No 10 800 800
-Chairs No 4 1,600 1,600- Desks No 2 400 400- Shelves No 2 1,200 1,200- Filing cabinets No 1 4,000 4,000
Sub total 8,000 8,000 0 0
Total investment cost
897,999 863,250 111,747 70000
N.B.
All Farm Machineries and equipment, except farm tools, are to beimported. The foreign purchase cost is thus estimated at birr497,000.00
Annex Table 4. Detail operating costs in bi rr
Annual distributionNo Description Unit Year l Year 2 Year 3 Year 41 Plantation
Management- coffee weedingand hoeing
Mds/ha 1,500 3,000 3,000 3,000
- coffee cappingand pruning
Mds/ha 0 1,000 2,000 2,000
- Crop guarding Mds/ha 150 300 300 300 - coffee picking
and transportingMds/ha 0 0 0 3,000
Sesame 1stweeding
MD/ha 800 800 240 800
Sesame 2ndweeding
,, 800 800 240 800
Sesame harvesting ,, 1200 1200 360 1200 Sesame threshing,
packing andstoring
,, 200 200 60 1200
Haricot beanweeding
,, 0 240 800 240
Haricot beanharvesting
,, 0 360 1200 360
Haricot beanthreshing, packing
,, 60 200 60 60
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4,710 8,100 8,260 12,960
Total man days9,420 16,200 16,520 25,920
Wage cost (Sub total)56,520 97,200 99,120 155,520
2nursery cost inbirr
(wage labor)13,380 12,960 0 0
3 Materials
coffee seed Q 0.55 0.55 0 0 birr 2750 2750 0 0 sesame seed
8kg/haQ 8 8 2.4 8
birr 12000 12000 3600 12000 haricot bean seed
70kg/haQ 0 21 70 21
birr 0 21000 70000 21000 fertilizer qt/ha 5 5 0 0 fertilizer cost in
birr
birr 5000 5000 0 0
Chemical in lt lt 10 10 10 10 chemical cost in
birr800 800 800 800
Sacks No 700 1120 1610 1360 sacks cost birr 3500 5600 8,050 6,800
Total plantation operationcost
24,800 50,000 90,500 47,400
4 Annual supplies
Fuel Tractor 26,000 26000 26000 26000
Generator 17,250 17500 17500 17500 Water pump 9,200 9200 9200 9200 Motor cycle 5,700 5700 5700 5700
Sub total of fuel58,150 58,400 58,400 58,400
5 - Oil & lubricant(10% of fuel cost)
5,815 5815 5815 5815
Repair &
maintenance (2%of machinery cost)
10,280 10280 10280 10280
Vehicle insurance(2% of vehicle cost)
7,800 7800 7800 7800
Maintenance ofbuilding (2% ofbuilding cost)
0 0 8500 0
Travel andperidiem
10,000 10000 10000 10000
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Miscellaneous 2,000 2000 2000 2000 Total 38,895 38,895 47,395 38,895 Land rent-Annual
expense11,850 11,850 11,850 11,850
Salary & benefits 0 0 0 0 Project manager 10,200 10,200 10,200 10,200 J unior accountant 6,000 6,000 6,000 6,000 Secretary cashier 4,800 4,800 4,800 4,800 Forman 9,600 9,600 9,600 9,600
Store keeper 3,600 3,600 3,600 3,600Guard 7,200 7,200 7,200 7,200Sub total 53,250 53,250 53,250 53,250
Provident &others (10%salary)
5,325 5,325 5,325 5,325
Total 58,575 58,575 58,575 58,575Total (1-4) 250,320 316,030 353,990 358,790
Contingency (10 )25,032 31,603 35,399 35,879
Total operating expense
275,352 347,633 389,389 394,669
Annex Table 5. Depreciation for bui lding, equipment and vehic le
.
Purchase/construction year Annual depreciationNo I tem
0 1 2
Yearsof
service Year 1 Year 2 Year 3Year 4-20
1 Building 100,000 100,000 45,000 20 12250 12250 12250 208,250
2
Tractor andFarmmachinery,Equipments
400000 107000 - 10 50700 50700 50700 861900
3 Office
equipment
10,000 - - 10 1,000 1,000 1,000 17,00
0Total 510000 207000 45,000 - 63950 63950 63950 1,087,15 0