international bank for reconstruction...

, R~R IC ED

1 .rt PA-68a

This report is for official use only by the Bank Group and specificaDy authorized organizationsor personfL It may not be published, quoted or cited without Bank Group authorization. TheBank Group does not accept responsibility for the accuracy or completeness of the report.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF

ADDIS ABABA DAIRY DEVELOPMENT PROJECT

ETHIOPIA

June 15, 1971

Agriculture Projects Department

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CURRENCY EQUIVALENTS

US$1 = Dollars (E$) 2.50E$l = us$o.4o

WEIGHTS AND MASURES

Metric System

1 kilogram (kg) = 2.20 pounds (lb)1,000 kg (1 metric ton) = 2,200 pounds1 kilometer (km) = 0.62 mile1 hectare (ha) = 2.47 acres1 square kilometer (km2) = 100 ha

= 0.39 sq ml= 247.11 acres

1 liter (1) = 0.26 gallon1,000 millimeters (mm) = 39.37 inches

ABBREVIATIONS

iErG = Imperial Ethiopian GovernmentDDA = Dairy Development AgencyAADI = Addis Ababa Dairy IndustryDBE = Development Bank of EthiopiaEIC = Ethiopian Investment CorporationAIDB = Agricultural and Industrial Development BankGDP = Gross Domestic Product

ETHIOPIA


TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ................... .i-ii

1. INTRODUCTION . ................ ........................ 1

II. BACKGROUND ....... * ... .... , , , ........* . .......* 1

A. General ............. , .,. 1Climate ............ .......... 1......Population and GDP ...................... ,. 2Exports and Imports . 2

B. The Agricultural Sector . .2......... ................. 2Contribution of Agriculture to the Economy. . 2Land Use ........... ............. ................. 3Crops ... , 3Livestock . . 3Animal Health ........... . . 4

C,. The Dairy Industry ............ 4D. Agricultural Credit ........................ , 5

LII . THE PROJECT .................... ., , , ......... . 6

A. General Description .. ..... .. ..... 6Definition and Purpose .... .................. 6Project Area .. .... ...... ................ 6

B. Detailed Features ...... ....... ....... 7On-Farm Development ........ . .. . ..... . ... 7Milk Collection and Processing Facilities. 8Technical Services .............. ..... 8

C. Cost Estimates .................. .................... 10D. Proposed Financing .................................. 11E. Procurement ................ .................. 12F. Disbursement .. 13G. Organization and Management .. 14It. Lending Operations .. 16I. Auditing .. ......... 17

This report is based on the findings of an IDA appraisal mission to Ethiopiain April/May 1970, composed of Messrs. D. N. Sutherland and M. J. McGarry(IDA) and Messrs. K. Cheriyan (FAO/IBRD) and H. Ochs (Consultant).

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Page No.

IV. MARKETS, PRICES, PRODUCER BENEFITS AND REVENUE GENEMTION 17

Markets . . ............... * ...... 17Prices .... 18Producer Benefits ... . . ........ 19Revenue Generation .... 19

V. ECONOMIC BENEFITS AND JUSTIFICATION .................. 20

VI. RECOMMENDATIONS ...... .. ....... 20

ANNEXES

1. Dairy Cattle Husbandry and Disease Control

2. Credit Institutions and Agricultuwal Credit

3. Livestock Procurement, Demand and Supply of Dairy Heifers

Table 1 - Project Demaon and Supply of Dairy CattleFigure 1 - Effect of Age and Price of Heifers en Rate of Return

4. Abermossa Cross-Breeding Ranch - 800 Cows

Table 1 - Herd Development PTojections

5. Private Cross-Breeding Ranch Model - 200 Cows

Table 1 - Herd Development ProjectionsTable 2 - Investment Costs *Aa Fixn= IgTable 3 - Projections of laeoae aed Operating CostsTable 4 - Financial Proj*ctions

6. Holleta Dairy Stud Farm - 100 Cows

Table 1 - Herd Development ProjectionsTable 2 - Investment Costs and FinancingTable 3 - Income ProjectionsTable 4 - Operating Costs ProjectionsTable 5 - Financial Projections

7. Medium Size Farm Model - 40 Cove

Table 1 - Herd Development ProjectionsTable 2 - Investments Gomas and FinancingTable 3 - Projections of Inecm and Operating CostsTable 4 - Financial Projectios

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ANNEXES (Continued)

8. Small Farm Model - 10 Cows

Table 1 - Herd Development ProjectionsTable 2 - Investment Costs and FinancingTable 3 - Projections of Income and Operating CostsTable 4 - Financial Projections

9. Shola Dairy Plant - Technical Aspects

Table 1 - Financial ProjectionsTable 2 - Projections of Income and Operating CostsTable 3 - Investment Costs and Financing

10. Phasing of the Lending Program

11. Estimated Schedule of Disbursmenent of IDA Credit

12. Dairy Development Agency

Table 1 - Technical and Administrative Staff RequirementsTable 2 - Costs of Technical and Administrative ServicesTable 3 - Breakdown of Costs of Technical and Administrative

ServicesTable 4 - Financial Projections

13. Dairy Development Agency Organization Chart

14. Milk Marketing and Prices in Addis Ababa

15. Financial Rates of Return

Table 1 - Privately Owned FarmsTable 2 - Holleta Dairy Stud Farm - 100 Cows

16. Economic Rate of Return

MAP

Ethiopia/Project Area

ETHIOPIA


SUMMARY AND CONCLUSIONS

i. This report appraises; a Project for development of dairy produc-tion in the Addis Ababa area to supply milk to that city. Present dailymilk supply to Addis Ababa, a city of about 685,000 people, varies sea-sonally between 13,000 and 25,000 liters, representing a very low per capitaconsumption.

ii. About half the present milk supply has been marketed in recent yearsthrough the Addis Ababa Dairy Industry (AADI), a section within the Ministryof Agriculture, which operated the Shola Dairy Plant and a milk collectionscheme. AADI increased its annual milk throughput from 290,000 liters in 1961to 3,070,000 liters in 1969.

iii. The Addis Ababa area is well suited ecologically to developmentof a dairy industry because of its temperate climate and moderate to highrainfall. Major constraints to such development in the past have been lackof adequate technical knowledge and services for dairy cattle husbandry andshortage of improved dairy cattle.

iv. The Project would provide for on-farm development of approximately240 small and 110 medium size dairy farms to carry a total of about 7,000dairy cows; for importation and breeding of dairy cattle for these farms; fortechnical services to farmers; for additional facilities and organizationfor collection, processing and marketing of milk; and for hiring of consultantservices to carry out feasibility studies and prepare a second livestockdevelopment project.

v. An autonomous, Government owned agency, the Dairy Development Agency(DDA), would have the major responsibility for administration of the Project.It has taken over from the Ministry of Agriculture the assets of AADI includ-ing Shola Dairy Plant and the milk collecting centers. Onlending to farmerswould be handled by the Agricultural and Industrial Development Bank (AIDB),acting as agent for the Government.

vi. Proceeds of the Credit would be passed on to DDA and AIDB by theGovernment for approved Project purposes at an interest rate of 6-1/2% perannum for a period of 20 years, including a grace period of six years. AIDBwould make sub-loans for approved Project purposes from the proceeds of theIDA Credit at an interest rate of 9-1/2% per annum for periods not exceeding14 years, including a grace period of five years.

vii. Because of the inadequacy of existing technical services within theMinistry of Agriculture, the Project would provide, through DDA, for techni-cal, veterinary and artificial insemination services to participating farmers.

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viii. The total costs of the Project are estimated at US$6.5 million.An IDA Credit of US$4.4 million is proposed. It would finanoe approximatelyUS$1.0 million of local currency expenditure as well as the foreign exchangecomponent of US$3.4 million, which is equivalent to 53% of total projectcosts. Government and DDA would finance about US$1.6 million equivalent andfarmers about US$0.5 million equivalent.

ix. The categories of Project cost are: US$2.8 million equivalent foron-farm investments, including US$1.6 million for dairy cattle prscueant;US$0.3 million equivalent for further investments in Shla Dairy Plant andmilk collection centers; US$1.8 million equivalent for technical servicesand administrative costs of DDA; US$0.5 million equivalent for iucrementalworking capital for participating farmers and DDA; US$0.4 miLllion equiva-lent for carrying out feasibility studies; and US$0.6 mil;lion jLvaleat fo-rcontingencies. In addition existing Government assets at an estJmted valueof US$0.6 million equivalent would be taken over by D=.

X. Approximately 5,500 heifers of Eurepeax dairy bxeed (principallyFriesian) would be required for Project purposes, of which sa 3,900 wouldhave to be imported. International comptitie bUWing, is not appropriatefor purchase of livestock, but adequate safebArda would bwe eafuore to en-sure that due regard would be given to pricea a" qu4ty conaidzations.

xi. The fiancial rates of return to participating faxasra are esti-mated at 17% to 21%. These estimates axe baau on retail mU pricesof US$0.20 equivalent per liter in the initial years of the Project, de-clining to US$0.16 equivalent by year 11. This latter price is na higherthan the retail milk price in most West European countries and it is con-siderably below the price in most other African cities.

xii. On the basIs of a projected retail price of US$0.16i eWmalent perliter for milk, rate of returu to the econmy on the Proj-eat is eatiamted atapproximately 12%. The Project woul4 hav important side bneafits,.in istro-ducing improved dairy production methoda and., establishing a. unclwo about7,200 dairy type cattle as a ba&Is for further expansion of- daftylag. i-sEthiopia.

xiii. The Project is suitable for an IDA Credit of US$44.4 milion.. TheBorrower would be the Imperial Ethiopian Government.

ETHIOPIA


I. INTRODUCTION

1.01 The Imperial Ethiopian Government (IEG) has requested an IDACredit to assist the financing of a dairy development Project to increasethe supply of milk to the Addis Ababa market. This would be the third IDACredit for agricultural development in Ethiopia. The two previous creditswere for the Wolamo Agricultural Development Project, 169-ET, made in Novem-ber 1969 and the Humera Agricultural Development Project, 188-ET, made inMay 1970.

1.02 This Project, the Addis Ababa Dairy Development Project, wouldinclude on-farm development of about 350 dairy farms in the Addis Ababaregion and improvement to the system of milk collection, transport, pro-cessing and marketing for Addis Ababa. Ancillary to these objectives, itwould provide for importation and breeding of dairy cattle and for technicalservices to dairy farmers. An autonomous agency, the Dairy Development Agency(DDA), has been established to execute parts of the Project.

1.03 The livestock and meat industry is also one of Ethiopia's bestprospects for development, provided a number of serious constraints can beovercome. In April/May 1970, a Bank Group mission visited Ethiopia to studyand make recommendations on an overall strategy for livestock development,to help identify projects and to make recommendations on project prepara-tion. Funds would be provided within this credit to finance feasibilitystudies for future livestock development projects.

1.04 This Project was prepared initially by a project preparationcommittee of the IEG assisted by staff of the Permanent Mission in EasternAfrica. This report is based on the findings of an appraisal mission, com-posed of Messrs. D. N., Sutherland, M. J. McGarry (IDA), K. Cheriyan (FAO/IBRD) and H. Ochs (consultant), which visited Ethiopia in April/May, 1970.

II. BACKGROUND

A. General

22.01 Ethiopia, with an area of about 1.18 million km , lies betweenlatitudes 3° and 180 N in East Africa, on an elevated plateau broken by theRift Valley, extending from the Red Sea southwest to Lake Rudolph.

Climate

2.02 The high altitude more than the latitude determines climate andland use. The highlands north of the Rift Valley are about 2,000 to 3,000m above sea level, but some mountains are higher than 4,000 m. The climate

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of the highlands generally is moderate, with only small variation duringthe year and high rainfall, but it is hot and dry in the highlands south-east of the Rift Valley, as well as in the lowlands. The country can bedivided into four climatic and ecological zones.

(a) the mountain zone above 3,200 mi where high rainfalland lo temnperatures preclude cultivation;

(b) a cool zone with average temperatures from 10' to18^C, rainfall above 1,000 on and altitudes between2,100 and 3,200 m;

(c) a temperate zone with average temperatures between16* and 20C and altitudes between 1,500 and 2,100 m;and

(d) the hot zone below 1 500 m, which has an averagetemperature above 20 C and low rainfall.

Population and GDP

2.03 The population of Ethiopia at about 25 million is increasingat approximately 2X per year. About 92% of the people ldme in mural areasbut urban population is rising rapidly. During 1961-4969, GDP grew at arate of about 4.5% per year. In 1969 it totalled US$1.5 billiou, nearly60% of which came from agriculture. Per capita income at US$63 is one ofthe lowest in the world.

Exports and Imports

2.04 In 1968, agriculture generated about 85% of total de,ptrts, whichwere valued at US$106 million. Coffee contributed about 582 of experts.,and oilseeds, vegetables and hides and skins shared second place, each withabout 9%. Although imports far exceed exports there has been uo serousbalance of payments problem due to capital inflow. However., Ethiqpia,mustdiversify her exports and replace imports by domestic production ln crier toachieve a reasonable growth of the economy.

B. The A&1cul.tural Sectar

Contribution of agriculture to the Eoon.2y

2.05 The seooney of Ethiqpia is based UaWgely on subsistence;agricul-ture. The average farm size is estimated4at 3.3 ha, but about fi0 of *he5 million UfarerS cultivate less than :.2 ha. Agriculture provides 90Z ofemiployment. The gmas value of a UinuYnural production increased over theperiod 1961 to 19&9 at a rate of smgb 2X% y year,, whereas total GDP bada growth rate of about 4.5X per "ot Muw the same period.. The growthin agriculture barely kept pace with -oulation increase.

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Land Use

2.06 Only 8% of the total land area of Ethiopia is under cultivationwhile the remainder is taken up by grazing grounds (28%), open brush andscrub (25%), open woodland (3%) and areas not suitable for plant and live-stock production (36%).

Crops

2.07 Ihe different ecological zones allow cultivation of numerous crops.Teff, wheat, barley, maize, sorghum, millet and pulses are grown in the cooland temperate zones. Conditions for the cultivation of coffee, tea andcitrus are particularly favorable. The production of a variety of fruitsand vegetables is important in view of their export potential. Use ofaround 1 million ha of potentially irrigable land would permit increasedcultivation of industrial crops such as cotton, oilseeds, sugar cane andsugar beet and of high yielding forage crops.

Livestock

2.08 With about 26 million cattle, 12 million sheep and 11 milliongoats and about 56% of the total land surface suitable for grazing, Ethiopia'slivestock represents a major national resource. This resource, however, makesa disproportionately small contribution to national income and export earn-ings due to unsatisfactory management, seasonal shortages of feed supply anddiseases.

2.09 The indigenous cattle belong to the Zebu type. Of particular im-portance are the Borana cattle in the South, which are highly valued formeat production. Under good management, the indigenous cattle show goodgrowth characteristics but poor milking abilities (400 to 700 liters perlactation of 150 to 180 days).

2.10 Of the 26 million cattle, it is estimated that between 6 and 7million are working oxen. Sample surveys indicate that, depending on thedifferent regions, only 27% to 35% of the cattle population are breedingcows. A survey in Southern Ethiopia showed that two-thirds of the calvesborn survived one year and 60% two years. Thus, with an interval of ap-proximately 18 months between calving, the number of progeny that survivedto an age of two years per 100 cows was about 40, which is considered to below. The information derived from this survey is accepted in Ethiopia asbeing generally applicable to the whole country.

2.11 Grazing is generally on a communal basis in the pastoral areas.In cultivated regions, it is mostly on an individual basis. The typicalherd in agricultural regions has five to 10 animals. Some farmers haveno cattle and up to 80% have only a few head to provide draught power andmilk for home consumption. Herds are larger in the pastoral southernprovinces but the majority of herds there contain less than 20 animals.

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2.12 Pasture management is poor and overstocking is common. Scarcestock watering facilities are often a serious limitation to efficientexploitation of the available resources, especially in the pastoral areas.

2.13 The fodder resources are natural grassland supplemented by cropresidue and stubble in the cultivated regions. Most of the r^isfall occursduring a period of three to four months, so that there are long periods ofmalnutrition. Feeding of hay during the dry season is practiced ow.dairyfarms around the larger cities; elsewhere no hay is fed. Fodder production,preparation of silage and rotational grazing are unknown.

2.14 The large seasonal variation in fodder availability results iu avery poor growth rate of animals, Cattle are generally over five-years ofage before they are ready for slaughter and have a body condition satis-factory only for the most modest standard of carcass quality.

Animal Health

2.15 The major epidemic diseases of cattle, rinderpest, foot-and-mouthdisease (types A, 0 and C) and contagious bovine pleuropneuaonias(CBPP),occur in Ethiopia. Effective vaccines are available for controlFof thesediseases. Anthrax, blackleg and haemrrbhagc sptica4ema aleo occur spora-dically but they also can be controlled by vaccination. The tkclhbornediseases, heartwater, babesiosis and anaplamosis, have bme remcrded inthe Addis Ababa area, but can be controlled by regular dipping or spraying.The most serious tick-borne disease, East Coast Fever, occurs in Ethiopiabut not in the Addis Ababa region. Internal parasites, including liverfluke, are a serious problem in cattle ih the highland areas. However,they present little problem with dairy cattle that are housed. Generally,commercial dairy farmers take adequate measures to control all chowsdisease conditions and tick infestation, while owners of native cattledo very little in this regard.

C. The _Dairy ;Idusty

2.16 Although milk is produced from-native Zebu cattle ftr homeconsumption throughout Ethiopia, cotmercial milk production has buen eastab-lished only in the Asmara and Addis Ababa areas. In the Asmara areaa thereare about 25 commercial herds with about 3,500 improved dairy cow. Thereappears to be little if any scope for increasing production in this area asthe market is not expanding.

2.17 In the Addis Ababa area4 a 8sytem of milk collection, prQoessingan,d marketing has been operated by the Addis Ababa Dairy Industry (AADI), as.ction within the Ministry of Agriculture. It operated a number of mikcollection centers and the Shola Datry ftont, vhich has capacity to pasteur-ize and bottle 30,000 liters of mi-lk per dafy on one shift. UNICEF assistedin the establishment of the dairy plant and the milk collection system. In

connection with this Project, the plant and the collection and marketing fa-cilities have been turned over to the Dairy Development Agency (DDA). Thereare approximately 40 commercial farms with herds ranging from 10 to 250 im-proved dairy cows; about 30 supply milk through DDA. Around 1,250 smallerdairy farmers also supply milk to DDA. There are, in addition, an indeter-minate number of individuals owning one or two cows and selling small amountsof milk independently. Most of the commercial herds comprise cattle ofthe European dairy breeds and their crosses, while the herds of smallfarmers are practically all native cattle. Dairy cattle husbandry anddisease control are discussed in more detail in Annex 1.

2.18 There are no reliable figures on actual milk supply to Addis Ababaas the amounts sold outside the DDA marketing system are not recorded.Sales by AADI increased by approximately 160% between 1965 and 1969. In1969, AADI's daily average sales were 8,500 liters with a range from 5,900liters in April to 11,700 liters in October. A survey in September 1969indicated that "hawkers" were supplying about 4,000 liters per day. Salesby the large commercial farmers are estimated to average about 4,000 litersper day. Overall daily milk sales probably range from about 13,000 litersduring the dry season (March-April) to 25,000 liters in the flush season(September-October).

2.19 Population of Addis Ababa is estimated at about 685,000, with anannual growth rate of 6.2%. However, only a small proportion of this popu-lation has sufficient income to be able to purchase milk regularly. DDAoperates a number of retailing booths through which it sells milk in 1/2-liter bottles at a price of US$0.20 equivalent per liter (para 4.06). Atthis price, demand exceeds supply. Milk sold by commercial farmers and"hawkers" sells at prices well above the DDA price. Towards the end of1970, DDA commenced marketing of reconstituted milk, made from importedskim milk powder, at a price of US$0.12 equivalent per liter.

D. Agricultural Credit

2.20 Non-institutional agencies, charging high interest rates, consti-tute at present the main source of agricultural credit in Ethiopia. Themajor constraints to expansion of institutional credit are the predominanceof holdings operated by tenant farmers who have little or no security oftenure and the absence of legal provisions for chattel mortgage. The Govern-ment has recently merged the former Development Bank of Ethiopia (DBE) andEthiopian Investment Corporation (EIC) into one new credit institution, theAgricultural and Industrial Development Bank (AIDB), along lines proposed bya Financial Intermediaries Reorganization Commission, appointed by Governmentto study and report on this issue. Prior to the merger, DBE advanced medium-and long-term credit to both small and large farmers. However, it had apoor record of recovery performance and consequently a weak financial position.EIC extended credit in agriculture only to relatively large farming enter-prises. The Commercial Bank of Ethiopia (CBE), another state-owned bank,deals almost exclusively in short-term credit. Certain special agencies,

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such as the Chilalu anid Wolamo Agricultural Units, functioning as part ofthe Ministry of Agriculture, and the FAO Fertilizer Program also deal inshort-term production credit in specific areas but ttae total volume of creditadvanced is low. The cooperative movement is still at a very early stageof development and, with a few exceptions, cooperatives have yet to emergeas viable institutions for channeling credit. The banking institutions inEthiopia also have very little experience in financing livestock or dairydevelopment. Agricultural credit is discussed in more detail in Annex 2.

III. THE PROJLCT

A. General Description

Definition and Purpose

3.01 The objective of the Project is to increase production of milkfor the Addis Ababa market. It would provide for on-farm development ofapproximately 240 small farms (average of 10 milking cows each), and 110medium size dairy farms (average of 40 milking cows each) including impor-tation and breeding of dairy cattle for these farms; for establishment ofabout seven ranches to breed cross-bred dairy heifers, of one dairy stud farmand one farm to be used for reception of imported dairy cattle; for technicalservices to farmers; for additional facilities and organization for collec-tion, processing and marketing of milk; and for employment of consultants tocarry out feasibility studies and prepare future livestock development proj-ects. An autonomous agency, the Dairy Development Agency (DDA), has beencreated to execute all aspects of the Project except on-lending to farmers,which will be handled by AIDB acting as agent for the Government, and thefeasibility studies on future livestock projects.

Project Area

3.02 Participating dairy farms would be located in Shoa Province with-in a radius of 120 km of Addis Ababa; ranches for breeding of dairy heiferswould be located in the highland area within a radius of 250 km of AddisAbaba (see Map of Project Area).

3.03 The altitude of the Project area is in the range of 2,200 to2,500 m. The climate, which is temperate, is quite suitable for cattle ofthe European dairy breeds or crosses between these breeds and native cat-tle. Average annual rainfall of the Project area is in the range of 800to 1,200 mm. Despite the seasonal nature of rainfall, with an annual dryseason of about six months, it is adequate for growth of productive pasturesand crops. However, seasonal effects on livestock and milk production aresigntficant.

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B. Detailed Features

On-Farm Development

3.04 An essential feature of the farm development proposals would bethe use of improved cattle of the European dairy breeds or their crossesto replace native cattle, which have very low capacity for milk production.As improved type dairy cattle are in very short supply in the Project area,provision would be made for procurement of cattle of the European dairybreeds from the Asmara area and from overseas and for breeding of cross-breddairy cattle.

3.05 Dairy Cattle Importation. In its application for finance for theProject, the IEG proposed importation of about 3,800 pregnant heifers abouttwo years old and 200 bulls from Kenya at an estimated laaded cost of US$400equivalent each. However, financial projections indicate that, in the caseof the medium size farms, purchase of weaner heifers, aged 6-10 months, islikely to give better returns than purchase of pregnant heifers (Annex 3).This system would have the added advantage of enabling farmers to gainexperience in handling exotic cattle before they come into milk. In the caseof pregnant heifers, purchase from Kenya would be much cheaper than fromalternative more distant sources. With weaner heifers, the advantage is muchless, largely because freight is a much smaller component of total landedcost. However, Kenya may be unable to supply sufficient numbers. Herd modelsand financial projections are therefore based on purchase of weaner heifersat US$240 equivalent, which is considered adequate to cover the price thatmay have to be paid to obtain them from Western European countries. DDAwould take over from the Ministry of Agriculture the Shola Dairy Farm anduse it for holding imported dairy cattle for about one month to enable themto become acclimatized before being transferred to individual farmers.

3.06 Dairy Cattle Breeding. To ensure a supply of cross-bred dairyheifers, provision would be made to undertake cross-breeding betweenFriesian bulls and native cows on six private ranches and one Governmentranch. For this purpose, the Abernossa ranch, owned by the Ministry of Agri-culture, would be transferred on lease to DDA for eight years from the startof the Project. Friesian bulls have already been introduced to the Abernossaherd for mating with Borana cows (Annex 4). The herd and financial projec-tions and investment schedule for a model cross-breeding ranch are givenin Annex 5. Cross-bred heifers from these sources would not be availablefor sale to participating small farmers until the fourth year of the Project.DDA would also take over from the Ministry of Agriculture its dairy stud farmat Hlolleta and increase the production of Friesian stud bulls for sale todairy farners (Annex 6).

3.07 Medium Size Farms. The average farm in this category would be de-veloped to maintain 40 milking cows of a European dairy breed. Thirty weanerheifers would be purchased in year 1 and 20 in year 2. In the herd projec-tions, fairly liberal estimates of wastage from mortality and culling havebeen made because of the initial inexperience of farmers in handling improvedtype dairy cattle. In addition, investments would be made for fencing,

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quarters for employees, dairy buildings, water facilities, dairy and otherequipment and for fodder and pasture production (Annex 7). It is expectedthat sub-loans will be made to approximately 10 existing and 100 new farmersin this category.

3.08 Small Farms. For the small farms, native cows would be replacedby cross-bred dairy heifers through purchase and by mating native cows toFriesian bulls by artificial insemination. From either of these sour.ces,cross-bred heifers would not come into milk production until the fourthyear of the Project. Investments on small farms would be for purchase ofheifers and for fencing, dairy buildings, water facilities, dairy and otherequipment. Herd and financial projections for a model of a small farm aregiven in Annex 8. The small farms to be assisted are in existence now.

3.09 Projections for both categories of farms are based on a feedingsystem involving heavy use of concentrates for milk production and for rear-ing heifers. There is a good supply of fodders such as wheat bran and pro-tein-rich oilseed cakes, which are used for compounding concentrate rationsfor dairy cattle. At the existing price, equivalent to US$0.06 per kg, thissystem of feeding for milk production is profitable. In the long torir, itmay be feasible to change over to a lower cost system of milk productionbased largely on home-grown fodders, including improved pastures, fodercrops and grain crops. The eanvironment and soils are suitable for thistype of production but further field studies are needed to determine suit-able local techniques for pasture and fodder production.

Milk Collection and Processiug Facilities

3.10 At present there are 32 centers for collection and tranp*rt ofmilk to the processing plant at. Shola operated by DDA. The Project wouldprovide for establishment of 16 new milk collection centers and replacementof eight temporary ones. The exiating facilities of the Shola Dairy Plantwere constructed with the assistance of and under supervision of UNI=EF.Proposals for purchase and installation of additional equipment to izcreae,milk processing capacity of the plant from 3Q,000 liters to 5O,000 litersper day have been drawn up in consultation with the UNICI;F BegitoXul (ticefor East Africa. Finance for these additios would be included in theProject. Details and estimated costs are given in Annex 9. inQ contractsunder this category would be awarded without the certification of an apropm-riate UNICEF representative that they are in accordance with sound engineer-ing practices. Assurances to this eff-ect were obtained durtug negotiations.

Technical Services

3.11 A Production Division would be estalhished within DDA, withresponsibilities for providing technical services to participating farmers.These would include farm plan preparation and supervision, advisory serviceson dairy cattle husbandry, disease contrcl services and an artificial insemi-nation (A.I.) service. Provision would alan be made for construction ofextra accommodation at the Holleta Dairy Stud Farm to enable DDA to con-duct short training courses for dairy farmers and dairy farm managers.

Assurances were obtained during negotiations that the above serviceswould be provided, during the life of the sub-loans to the farmers.

3.12 Because of the presence of serious infectious diseases and ofcattle ticks and several serious tick-borne diseases (para 2.15), a highlevel of veterinary services would be provided to ensure that adequate dis-ease control measures would be enforced. As the Veterinary Division of theMinistry of Agriculture is inadequately staffed to provide the requiredlevel of service, personnel would be employed under the Project for thispurpose. Assurances were obtained during negotiations that cattle on par-ticipating farms would be vaccinated at agreed intervals against rinder-pest, foot-and-mouth disease and contagious bovine pleuropneumonia and thatsatisfactory procedures for control of cattle ticks and tick-borne diseaseswould be enforced, during the life of the sub-loans to the farmers.

3.13 In the long term, the best and cheapest method of providing asupply of improved dairy cattle will be by grading up native cows by matingto bulls of European dairy breeds. To this end, an A.I. service would beprovided by the Production Division of DDA for participating dairy farmersat a fee. For small dairy farmers, A.I. would be much more economical thanmaintaining a bull. It would also have the advantage of reducing the levelof infertility in dairy herds due to infectious diseases. Semen for use inthe A.I. service could be imported at low cost (about US$0.40 per dose) andlocal technicians could be trained as inseminators.

3.14 The Agricultural Research Institute, financed by a UNDP/SF Project,has done some research work on production of improved pastures and foddersfor cattle at its field station at Holleta. An amount of US$100,000 wouldbe provided under the Project to carry out field studies and establishdemonstration plots of improved pastures and legumes within the Projectarea. It is proposed that a program of work in this field be organized byGovernment in consultation with DDA and the Agricultural Research Institute.Assurances were obtained during negotiations that approval would be obtainedfrom IDA before funds allocated for this purpose were committed. An amountof US$30,000 equivalent would be included, as part of the technical servicescosts, for employment of consultants to advise DDA on milk processing andmarketing.

3.15 The Bank Group livestock review and identification mission (paragraph1.03) identified six potentially bankable sub-projects, which could possiblybe incorporated into one or more comprehensive livestock development proj-ects. Based on its recommendations, an amount of US$350,000 equivalentwould be included in this Credit to finance feasibility studies and prepara-tion of future projects. Assurances were obtained during negotiations thatthe Government would obtain IDA approval on the consultant firms and theindividual consultants to be engaged for these studies and on the terms andconditions of their engagement.

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C. Cost Estimates

3.16 Total Project cost is estimated at approximately US$6.5 millionequivalent. This includes incremental working capital requirements duringthe disbursement phase, but excludes the value of existing assets to be takenover from the government by DDA. The estimates are based on prevailingprices in Ethiopia. A contingency allowance has been included in eachcategory. In the case of imported livestock this is based solely on.anallowance for possible price increase. For a8l other catego-ries, contin-gency allowance is based on possible increases in both price and physicalinputs. In view of the relative price stability in Ethiopia in recentyears there appears to be no reason to allow for higher price contingencyon locally procured goods than on imported goods. The foreign exchangecomponent is approximately US$3.4 million equivalent, or 53% of totalProject cost (Annex 10).

3.17 Technical services and administrative costs at US$1.8.millionrepresent nearly one-third of total Project cost. Because of the pioneer-ing nature of this Project, a high level of technical., veterinary and A.I.services would be required. These services would be applicable in thefuture to a much larger development of dairylng in the Project area and inother parts of Ethiopia. In addition, the establishment of, DDA a.a8 newentity to execute the Project necessitates meeting,fairly heavy costs foradministration. The major categories of Project cost are shown below:

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Total Project Cost

E$ 1000 US$ '000 Equivalent z /I 12CategOrc LOCal Foreign Total Local Foreiln TOtal TPC FEC

On-Farm InvestmentLivestock 1,535 2,395 3,930 614 958 1,572 25 61Other 1 715 1 475 3 190 686 590 1,276 20 45

Sub-total T3Y 37 7 1,300 1,548 2,848 ZE 5 4

New Investment inShola D5airy Plant

Buildings & Equipment 254 337 590 101 135 236 4 56Vehicles 47 111 158 19 44 63 1 70

Sub-total 40748 48T 1 79 299 5 59

Technical Services &Administrative Costs 2,020 2,595 4,615 808 1,038 1,846 29 56

Feasibility Studies 250 875 1,125 100 350 450 5 85

Total Investment Cost 5,821 7,788 13,609 2,328 3,115 5,443 83 57

Incremental WorkingCaPita1 1,191 - 1,191 477 - 477 8

ContingenciesPrice 397 502 899 159 201 360 5 56Physical 243 263 503 97 104 201 4 52

Sub-total 640 765 1,402 256 305 561 9 54

Total Project Cost 7,652 8,553 16,205 3,061 3,420 6,481 100 53

Existing Assets Taken OverShola Dairy Farm 95 - 95 42 - 42 - -

Shola Dairy Plant 919 - 919 368 - 368 - -

Holleta Dairy StudFarm 350 - 350 140 - 140 - -

Sub-total 1,364 - 1,364 550 - 550 - -

/1 Total Project Cost.7E Foreign Exchange Component.

D. Proposed Financing

3.18 The estimated Project cost would be financed as follows:

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(US$ '000 Equivalent)

Farmers DDA AIDB Government IDA TotalCategory Amount Amount Amount Amount Amount % Amount

On-Farm InvestmentPrivate Farms 400 - - 44 2,333 84 2,777

DDA Farms - 12 - - 59 83 71

Sub-total 400 __9 - -- a 2,392 83 2,848

Shola Dalry Plant - 59 - - 240 80 299

Technical Services &Administrative Costs - 808 - - 1,038 56 1,846

Feasibility Studies - - - 100 350 77 450

Incremental WorkingCapital 38 - 439 - - - 477

Contingencies 48 89 44 380 561

Total Project Cost 490 968 527 144 4,400 68 6,481

% of Total Project Cost 8 15 7 2 68 100

Existing AssetsTaken Over - - - 550 - - 550

3.19 The proposed IDA Credit of US$4.4 million equivalent would finance68% of total Project cost. US$3.4 million, or 77% of the Credit, wouldfinance foreign exchange costs while US$1.0 million or 23% would financelocal currency expenditure. Assurances were obtained during negotiationsthat funds would be provided to DDA either through the banking system orfrom the Government's own budget to enable it to meet its own working capi-tal requirements. The IDA Credit would meet the estimated foreign exchangecompontant of the cost of the consultant services to carry out the feasibilitystudies in relation to proposed future livestock development projects.

E. Procurement

3.20 All purchases of dairy cattle to be financed by the Credit would besubject to the approval of the Production Manager of DDA. Purchases of dairycattle from outside Ethiopia for Project purposes would be organized and ef-fected by DDA to fulfill firm orders by farmers taking into account pricequotations from potential suppliers in at least three different countries aswell as production standards and suitability for Ethiopian conditions. Allimportations would be subject to veterinary requirements laid down by theDirector of the Veterinary Services of the IEG. In particular, all cattlewould be certified free from East Coast Fever and vaccinated against foot-and-mouth disease (Types A, 0 and C), rinderpest and contagious bovine pleuro-pneumonia within the three months preceding arrival in Ethiopia. Assurances

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were obtained during negotiations that procurement and importation of cattlewould be carried out in accordance with the above conditions.

3.21 Any contract estimated to cost over US$20,000 equivalent for pur-chase and installation of equipment for Shola Dairy Plant and for purchaseof vehicles by DDA would be subject to international competitive bidding.Goods and services required for on-farm development would be obtained byfarmers through existing commercial channels, where they are readily avail-able and where there is adequate competition. Other expenditures by DDA,except for reimbursements of staff, would be made in accordance with pro-cedures to ensure a satisfactory degree of local competition. Assuranceswere obtained during negotiations that procurement of goods and serviceswould be carried out in accordance with these conditions.

F. Disbursement

3.22 The Credit would be used to finance:

(a) 100% of long-term sub-loans to farmers for approved Proj-ect purposes in cases where such sub-loans do not exceed90% of the total costs of the corresponding on-farm in-vestments;

(b) 90% of long-term sub-loans to farmers for approved Projectpurposes in cases where such sub-loans exceed 90% of thetotal cost of the corresponding on-farm investment;

(c) foreign exchange component of cost of technical and admin-istrative services of DDA and cif costs of vehicles andother equipment imported specifically for the Project;

(d) 80% of cost of construction of milk collection centers andmilk retailing centers and other construction for SholaDairy Plant for approved Project purposes, and 70% of thecost of equipment procured locally for the Project;

(e) 80% of expenditure for approved Project purposes on farmsoperated by DDA; and

(f) foreign exchange expenditure for feasibility studies forthe proposed livestock development projects, and 70% (theestimated foreign exchange component) of expenditure forexploratory drilling for water for purpose of these feasi-bility studies.

3.23 Disbursement of the Credit would be extended over six years asshown in the following schedule:

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Project YearCategory 1 2 3 4 5 6 Total

---------------- US 000 -------------------

On-Farm Development 480 618 458 376 280 180 2,392Shola Dairy Plant 82 34 34 57 16 17 240Technical Services &Administrative Costs 223 250 218 141 109 97 1,038

Feasibility Studies 125 125 100 - - - 350Contingencies 80 93 74 60 43 30 380

Total 990 1,120 884 634 448 324 4,400

For medium size farms, commitments would be made during the first four yearsof the Project and each subloan would normally be disbursed over three years.For small farms commitment would be made during the first three years ofthe Project and disbursement of individual subloans over four years. Plan-ning of total Project expenditure and of disbursement of the Credit byquarters are shown in Annexes 11 and 12.

G. Organization and Mknagement

3.24 As the Project would involve fairly large-scale commercial opera-tions, it would be appropriate for it to be administered by an autonomousauthority operating on a comercial basis. DDA has been set up for this pur-pose. The objectives of DDA are to develop milk production and milk market-ing in Ethiopia. It would be authorized to engage in purchase, collection,transport, processing and marketing of milk; to operate farms producing milkor breeding dairy cattle; and to provide technical, disease control and A.I.services to dairy farmers.

3.25 DDA has taken over the assets of the Addis Ababa Dairy I*dustry,namely the Shola Dairy Plant, the milk collection centers serving that plantand the equipment used in collecting, transporting, processit&g And marketingof milk. It has also taken over from the Ministry of Agricultute theHolleta Dairy Stud Farm and the Shola Dairy Farm (para 3.06).

3.26 The Board of Directors of DDA consists of the Minister for Agri-culture or his delegate as Chairman; one representative from each of theMinistries of Finance, Commerce, Industry and Tourism, National CommunityDevelopment and Social Affairs; one representative each from the Municipal-ity of Addis Ababa and the Agricultural and Industrial Development Bmnk; andone representative from the milk producers. During negotiations, it wasagreed that any changes in the charter of DDA, made without prior agreementof IDA, which would materially and adversely affect DDA's ability to executettte 1'roject, could be considered a default under the Credit Agreement.

3.27 The above organizational arrangements differ from those embodiedill the Plan of Operations between the UNICEF and the Government under which

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UNICEF financed the establishment of the dairy plant and the milk collec-tion system. However, UNICEF has agreed that the new arrangements are ap-propriate for DDA's enlarged responsibilities and UNICEF and the Governmenthave agreed that they will make appropriate amendments to their plan ofoperations. These amendments would be a condition of effectiveness of thiscredit.

3.28 The chief executive of DDA would be the General Manager. Therewould be a Production Division, under the direction of a Production Manager,responsible for provision of on-farm technical services, farmer training,veterinary services and an A.I. service; it would also be responsible fordrawing up development plans for individual farms, which would form the basisfor applications for subloans under the Project. The Processing and Market-ing Division, under the direction of the Processing and Marketing Manager,would be responsible for operation of the Shola Dairy Plant and for collec-tion, transport, processing and marketing of milk. A Financial Manager wouldbe responsible for financial management of all aspects of DDA's operations.

3.29 The staffing requirement and organization chart proposed for DDAis presented in Annex 13. A qualified and experienced Production Manager,acceptable to IDA, would be recruited on terms and conditions acceptable toIDA. IDA would also be consulted and given time to comment on the personsto be appoinited and the terms and conditions of appointment for the posi-tions of General Hanager, Financial Manager, Processing and Marketing Man-ager, Chief Veterinary Officer, Artificial Insemination Specialist andChief Dairy Development Officer. It would be a condition of effectivenessthat appointments had been made to all of the above positions, except thepositions of Artificial Insemination Specialist and Chief Dairy Develop-ment Officer. In its application, the Government-stated that a number ofthese positions would have to be filled by non-Ethiopians. The question ofrecruitment of non-Ethiopians was discussed with the Government during ap-praisal and again during negotiations. It is not expected that there willbe any difficulty in this regard. It is likely that some could be suppliedthrough bilateral aid agencies. Ethiopian counterparts would be appointedand trained to assume the duties of positions to which non-Ethiopians areappointed. Assurances on the above points were obtained during negotiations.

3.30 Assurances were obtained during negotiations that, in those caseswhere non-Ethiopian& are appointed to any of the positions mentioned in para-graph 3.29, DDA would be required to meet only the local costs of their em-ployment. These are approximately equivalent to those which would be in-curred if Ethiopians were employed in the same positions. The remainingcosts would be met by the Government as a grant to DDA from the proceeds ofthe credit as a development cost. In order to avoid delay in meeting theconditions of effectiveness (para 3.29), it was agreed during negotiationsthat we would propose that retroactive financing be provided to enable DDAto proceed with recruitment of the Production Manager and possibly some othernon-Ethiopian personnel. During negotiations it was also agreed that retro-active financinig should be proposed to enable the Government to proceed withfeasibtlity studies for a second livestock development project (para 3.15)without delay. A total amount of US$100,000 equivalent is proposed as retro-active financing from January 1, 1971.

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H. Lending Operations

3.31 Assurances were obtained during negotiations that procedures ac-ceptable to IDA would be established for on-lending of funds from the IDACredit to DDA for approved Project purposes, at an interest rate of 6-1/2%per annum repayable over 20 years, including a grace period of six years,except for that portion of the costs of employment of non-Ethiopian staff,which would be provided as a grant (para 3.30). The arrangements would beratified in a Project Financing Agreement between the Government and DDAbefore Credit effectiveness. Assurances were obtained during negotiationsthat the Government would provide an advance of not less than US$100,000equivalent as initial working capital for DDA, before Credit effectiveness.

3.32 Due to the recent establishment of AIDB and the fact that it isstill in the process of evaluation of the loans acquired from its predecessoragencies, it was decided that, at least initially, AIDB would act as an agentof the Government in making loans to participating farmers and that projectfunds would thereby be kept separate from AIDB's own accounts. the Govern-ment would open a Project Account in the National Bank of Ethiopia into whichit would deposit quarterly in advance such amounts as are estimated to be re-quired to enable AIDB to make disbursements on sub-loans for the quarter im-mediately following. AIDB would deposit repayments of principal plus interestat 6-1/2% into the Project Account. These arrangements could be modified withthe Association's approval following a satisfactory appraisal of AIDB's finan-cial prospects, in connection with a proposed Bank Group financing of AIDB,

3.33 Applications by farmers for subloans would be received initially bythe Production Division of DDA. Technicians of this Division would visit thefarm, assess the technical feasibility of the farmer's proposal and draw up

with the farmer a farm development plan and financial projection for the per-iod of the proposed subloan. Subloans would be made only on the recommenda-tion of the Production Manager on the basis of a farm development plan ap-proved by him and following a positive recommendation on creditworthiness bya senior officer of AIDB satisfactory to IDA. AIDB would not modify the termsand conditions of the loan proposed under the farm development plan withoutthe prior approval of the Production Manager. DDA would assiat AIDB inverifying that disbursements under dairy loans are in accordance with approvedfarm development plans, in providing technical and veterinary services toparticipating farmers, and in collecting repayments of principal and interestfrom the proceeds of milk sales.

3.34 It is expected that the operators in all of the medium size farmsand of most of the small farms would be landowners. Mortgage would be takenon land and inmovable property as security for subloans to landowners.Provision woultd be iaade for subloans to tenant farmers only on c*ndition that(a) thsol ,otitaii turctios from one or more guarantors providing adequatesecurity for the subloans; and (b) they enter into a written long-term leaseagreement with the landowner, satisfactory to DDA.

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3.35 Long-term subloans would be made to farmers to cover purchase ofdairy cattle; fencing; water facilities; dairy buildings; accommodation onthe farm; equipment and tools, including milking and veterinary equipment;and fodder purchase. These subloans would be at an interest rate of 9-1/2%per annum for a period not exceeding 14 years, including a grace period offive years. Of each 9-1/2% interest payment received, DDA would receive 2%as a service charge, AIDB would retain 1% and 6-1/2% would be paid to theGovernment. In cases of default on sub-loans, DDA and AIDB would share equal-ly the loss of principal and the payment of interest due to the Government.The approval of IDA would be needed in cases where an individual subloan orthe aggregate of subloans to an individual farmer exceeds US$50,000 equiva-lent. Assurances were obtained during negotiations that long-term subloanswould be made by DDA in accordance with these conditions and those listed inparagraphs 3.32 and 3.33.

3.36 In some cases, participating farmers would need short-term loansduring the first five years of their development program to cover incrementalworking capital requirements, as determined by the farm development plan,arising from increased operating costs, reduced net income and interestpayments on long-term subloans. AIDB would provide short-term loans for thispurpose on a year-to-year basis. The interest rate charged to farmers wouldbe not more than 10-1/2% per annum.

I. Auditing

3.37 Assurances were obtained during negotiations that DDA and AIDB wouldmaintain separate accounts in respect of the Project, that these accountswould be audited annually by auditors acceptable to IDA and that the auditedaccounts would be submitted to IDA within four months of the close of the fi-nancial year.

IV. MARKETS, PRICES, PRODUCER BENEFITS AND REVENUE GENERATION

Markets

4.01 There is fairly strong evidence that the Addis Ababa market isunder-supplied with milk and that demand is growing rapidly. Output ofmilk by AADI increased from 288,000 liters in 1961 to 3,070,000 liters in1969 and it has been marketed without difficulty. In fact, AADI had to main-tain a system of rationing of sales through its 41 retail centers, which sellmilk only from 6 a.m. to 9 a.m. daily (Annex 14).

4.02 Daily milk sales of the order of 13,000 to 25,000 liters, representa very low per capita intake for a population of approximately 685,000 in thecity. However, the percentage of the population with sufficient income topurchase whole milk is very small. The foreign population of 45,000 accountsfor a very large proportion of sales. Average per capita consumption in Addis

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Ababa is only about 10% of the consumption level of Nairobi and about 20%of the level of Asmara.

4.03 A feature of the present milk supply situation is the markedseasonal fluctuation in production. During the uionths preceding the wetseason -- February to May -- intake at the sShola Dairy Plant is about 25% be-low average while it is about 25% above average during the flush mqpths ofSeptember to December. If productioln were maintained throughout th, year atthe level of the flush months, overall consumption could be incre^a,d by about35%. One of the objectives of technical services to farmers would be to im-prove feeding and management standards and thus reduce seasonal fluctuations.

4.04 A study by the University of Addis Ababa indicated an iiCQgo elas-ticity of demand of at least 1.0 for milk in the city. With populationgrowth of 6.2% per year and growth of per capita income at loeat at thenational level of 2%, demand for milk can be expected to grow by at le4st6.i% annually. Taking a conservative estimate of demand at 25,OOQ litersper day, an amount marketed without difficulty in the flusb #S#Q; qf 1969,demand by 1980 would exceed 59,000 liters daily. Thus, the eptiiated in-creased supply of 31,000 liters as a result of Project investments would notexceed the increase in demand due solely to population and income growth.

4.05 In 1967, imports of milk powdgr into Ethiopia were 2,000 tons,equivalent to an average supply of 55,000 liters per day of reconstitutedmilk. At existing retail prices in Addis Ababa, its price is equivalentto US$0.22 to US$0.48 per liter. A large proportion of this milk powderis purchased by the higher income residents of Addis Ababa bec4use theyare unable to obtain a regular supply of good quality pasteurized milk.

Prices

4.06 Until late in 1970, AADI paid E$ 0.25 (US$0.10 equivalent) per literto small farmers delivering milk to collecting centers and E$ 0.28 or E$ 0.30(US$0.11 or US$0.12 equivalenit) per liter to large farmers, depending q4 theirdistance from Shola. It sold milk through its retail centers at 9$ 0.40(US$0.16 equivalent) per liter. Of the total milk sales by DDA, proq1ly athird or more is purchased by retailers or owners of bars whq resell it atconsiderably higher prices. As DDA gives first priority to qg4lig tbro-ghits own retail centers, it is not able to supply regularly tp superrkets,other large retailers, hotels and hpspitals, which therefore qhtain their sup-plies direct from large cowmercial farmers at a price of E$ 0.45 (US$0.18equivalent) per liter.

4.07 In the last quarter of 1970, AADI raised its retail selling pric,eto E$0.50 (US$0.20 equivalent) per liter. This has enabled it to Qffer acaverage price of about E$U.33 (US$0.13 equivalent) per liter to suppliers.Thuh slhould attract more of the commercial producers to supply milk to theSlio4a Dalry Plant. With increasing supplies, DDA would be able to supply

ow milk regularly to lhigher priced m.kts such as supermarkets and hotels.It would also be able to offer a premiu price for quality milk suitablefor thlese higher priced markets. Assuragces were obtained during negotia-

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tions that DDA would adopt pricing policies that would enable it to operateprofitably and also offer satisfactory prices to farmers.

4.08 Financial projections for farmers, Shola Dairy Plant and DDA havebeen based on retail prices equivalent to US$0.20 per liter from years 1 to6, US$0.18 per liter from years 7 to 10 and US$0.16 per liter thereafter.

Producer Benefits

4.09 Farmers participating in the Project would derive substantialincreases in income as shown below:

Before Development YearDevelopment 6 13

Medium Size Dairy FarmNo. Milking Cows: Native 17 - -

Improved - 39 39Production of milk, Liters 8,100 88,400 103,400Cash Balance after Debt Service, US$ 432 3,054 5,844

Small Dairy FarmNo. Milking Cows: Native 4 - -

Improved - 7 10Production of Milk, Liters 1,900 8,500 17,800Cash Balance after Debt Service, US$ 156 396 883

Cross-Breeding RanchHerd Size (Animal Units) 231 554 558Cross-Bred Heifers Sold - 54 54Cash Balance after Debt Service, US$ 932 1,274 9,065

4.10 Financial rates of return are estimated at about 20% for the modelof the medium size dairy farm, about 21% for the small dairy farm and about 17%for the cross-breeding ranch at retail milk prices as stated in paragraph4.08 (Annex 15). If a retail milk price of E$0.40 per liter is assumedthroughout, financial rates of return are reduced to about 15% for the largedairy farm and about 19% for the small dairy farm.

Revenue Generation

4.11 Farmers would pay interest and repay their subloans out of revenueover a period of 14 years. The incremental cash balance after debt servicewould be positive for the medium size farm and the cross-breeding ranch fromyear 5 and for the small farm from year 4. By year 14, the aggregateincremental cash balance after debt service of farmers would be approximatelyUS$0.5 million equivalent, rising to over US$0.8 million by year 17. Atexisting rates, income tax on small farmers would be negligible and thehighest rate paid by other farmers on their projected income would be 15%.Thus, most of the extra income would be retained by farmers. It is expectedthat there would be considerable scope for further development of dairyproduction to supply the growing demand of the Addis Ababa market and it is

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likely that farmers would reinvest most of the extra income generated by theProject to further increase their production.

4.12 DDA would have a positive cash balance after debt service. Thecumulative cash balance to year 10 is estimated at US$3.2 million equivalentand from year 15 onwards the annual cash balance would be US$0.4 millionequivalent. DDA would thus be established as a viable corporation that couldcontribute to financing of future investments in infrastructure for furtherdevelopment of the dairy industry.

V. ECONOMIC BENEFITS AND JUSTIFICATION

5.01 On-farm development under the Project is expected to increaseaverage daily milk supply through Shola Dairy Plant by approximately 19,000liters by year 5 and 31,000 liters by year 10. In addition, it is expectedthat improvement to Shola Dairy Plant and the organization of milk collec-tion and marketing by DDA would stimulate further increased supplies tothe Plant. Although milk price would rise over the next six years -- as itwould do in any case without the Project -- development of production underthe Project would lead to reduction of retail price to the equivalent ofUS$0.16 per liter, which is slightly lower than the retail price in mostWest European countries and in Nairobi and considerably lower than the re-tail price in other African cities.

5.02 The Project would establish, in the Addis Ababa area, a populationof about 7,000 cows and heifers of improved dairy breeds. This would ?ro-vide a supply of dairy type heifers for further expansion of dairy productionaround Addis Ababa and in other parts of Ethiopia. It would eliminate theneed for any further importations of dairy cattle on a large scale.

5.03 The rate of return to the economy of the Project is estimated atapproximately 12%, at a retail milk price of E$0.40 (US$0.16) per liter.At a retail milk price of US$0.18 per liter, economic rate of return would beapproximately 16%. These rates of return are based on a price of US$240 forweaner heifers, which is the estimated price at which they could be procuredfrom Europe. If obtained from Kenya, they could almost certainly be deliveredat lower cost, with consequent increase in the economic rate of return.

VI. RECOMMENDATIONS

6.01 During negotiations, assurances were obtained that the Governmentwould:

(a) ensure that funds would be provided to DDA, either throughthe banking system or through the Government's own budget,

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to enable DDA to meet its own working capital requirements(para 3.19);

(b) establish satisfactory procedures for makiag nvailable fundsfrom the Credit to DDA and AIDB for approved Project purposeson terms and conditions acceptable to IDA (paras 3.31 and3.32); and

(c) employ consultants acceptable to IDA, on terms and condi-tions acceptable to IDA, to carry out feasibility studiesin relation to preparation of a future comprehensive live-stock development project (para 3.15).

6.02 During negotiations assurances were obtained from the Governmentthat DDA would:

(a) prior to award of contracts for purchase and installation ofequipment for Shola Dairy Plant, obtain the certificationof an appropriate representative of UNICEF that such con-tracts were in accordance with sound engineering practices(para 3.10);

(b) provide technical, veterinary and artificial inseminationservices of a satisfactory standard to participating farmersduring the life of sub-loans to farmers (para 3.11);

(c) ensure that all cattle on participating farms arevaccinated against rinderpest, foot-and-mouth diseaseand contagious bovine pleuropneumonia at intervals de-termined by the Chief Veterinary Officer of DDA andthat procedures laid down by the Chief Veterinary Officerare enforced for control of cattle ticks and tick-bornediseases on participating farms during the life of sub-loans to farmers (para 3.12);

(d) obtain IDA approval before commitment of any funds fromthe Credit for carrying out field studies or establishingdemonstration plots (para 3.14);

(e) undertake procurement and/or importation of cattle andprocurement of goods and services for Project purposeson terms and conditions acceptable to IDA (paras 3.20and 3.21);

(f) recruit a qualified and experienced Production Manager,acceptable to IDA, on terms and conditions acceptable toIDA; and consult IDA and give IDA time to comment onthe persons to be appointed and terms and conditions ofappointments for the positions of General Manager, Fi-nancial Manager, Processing and Marketing Manager, Chief

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Veterinary Officer, Artificial Insemination Specialistand Chief Dairy Development Officer (para 3.29);

(g) in cases where non-Ethiopians are appointed to any of thepositions mentioned in paragraph 3.29, appoint suitablyqualified Ethiopians as counterparts to be trained toassume the duties of the relevant positions (para 3.30); and

(h) adopt pricing policies for the purchase and sale of milkand related products which provide adequate incentives formilk production and which allow DDA to operate profitably(para 4.07).

6.03 During negotiations assurances were obtained from the Governmentthat AIDB would:

(a) make long-term loans to farmers for on-farm development onterms and conditions satisfactory to IDA (paras 3.32 and3.34);

(b) make short-term loans to participating farmers to coverreasonable requirements of incremental working capital asdetermined by the farm development plan, on terms and con-ditions satisfactory to IDA (para 3.35); and

(c) employ a senior officer to supervise its lending operationsunder the Project whose qualifications and experience weresatisfactory to the Association (para 3.33).

6.04 The following would be conditions of effectiveness of the Creditin addition to the customary conditions:

(a) the General Manager, Production Manager, Financial Manager,Processing and Marketing Manager and Chief Veterinary Officerhad been appointed on terms and conditions acceptable to IDA(para 3.29);

(b) the Government had provided DDA with initial working capitalin an amount of not less than US$100,000 equivaleat on termsand conditions satisfactory to IDA (para 3.31);

(c) The Government and UNICEF had amended their Plan of Opera-tions so as to be consistent with the Project (para 3.27);and

(d) the senior officer of AIDB for supervision of lending opera-tlons under the Project had been appointed.

6.05 The Project is considered suitable for an IDA Credit of US$4.4 mil-lion. The Imperial Ethiopian Government would be the borrower and wouldcarry the foreign exchange risk.

May 28, 1971

ANNEX 1Page 1

ETHIOPIA


Dairy Cattle Husbandry and Disease Control

1. Of Ethiopia's cattle population of about 26 million, less than10,000 are European-type dairy cattle, mostly Friesian. While native cattleare widely used for milk production for home consumption, Asmara and AddisAbaba are the only areas in which there are commercial dairy farms on a signi-ficant scale.

The Dairy Herd

2. There are about 25 herds, with about 3,500 upgraded dairy cows inthe relatively dry Asmara area. All these herds are housed and stall-fed.Operating costs are high and farmers are paid E$0.37 (US$0.15) per liter c.fmilk. All milk is consumed in Asmara with the exception of the output of onedairy farm with 850 cows, which sells sterilized milk to other cities. Anartificial insemination scheme commenced in the area in October 1969 andAsmara represents a potential source of dairy heifers for the Project (Annex 3).

3. In the Addis Ababa area, dairy farming has developed rapidlyduring the last decade following the installation of milk collectingcenters and Shola Dairy Plant. At present about 40 commercial dairy farms,with 10 to 250 cows each, have a total of about 2,000 dairy-type cows, mainlyupgraded Friesians. Holleta and Shola dairy farms are owned by the Govern-ment and have herds of 60 to 70 Friesian cows, respectively, originatingfrom Kenya. Cows are usually housed and investments in cow sheds and accommo-dation are necessarily high. Labor requirements are estimated at one workerfor five cows. Feeding consists of low quality hay and a fairly high rationof concentrate feed, mainly wheat bran. Green-fodder feeding is practicallyunknown and grazing is, as yet, of limited importance. However, excellentconditions exist for cultivation of fodder crops and for establishment ofhigh yielding grassland.

4. Data collected from 12 commercial dairy farms indicate that inherds comprising mainly F and F Friesian x Zebu cattle, milk productionis in the range of 1,400 to 1,808 liters per lactation, while it is in the2,500--to 3,000-liter range in two larger commercial dairy herds and inthe two Government farms, which have virtually pure Friesian cattle. Thecalving rate at 60% to 70% is low.

5. About 1,250 small farms supply milk from native cows to the milkcollecting centers. Nutrition of these cows depends exclusively on pas-tures, which is reflected in a sharp drop in milk production in the dry

ANNEX 1Page 2

season. During the night, cattle are kept in corrals beside the farmers'huts, and milk sold per cow per year is estimated at 100 to 500 liters.

The Environment

6, Farmers in the Project area are good herdsmen but they appear tohave little knowledge of dairy farming.

7. The Project area is at an elevation of 2,200 to 2,500 m abovesea level. Climate is temperate, frost is an exception and European-typedairy cattle do well under these conditions. Average rainfall at AddisAbaba is 1,070 mm per year, with a six-month dry season from October toMarch and, in most years, a short dry season in May to early June. Topo-graphy is undulating with numerous small water courses and mostly heavygrey black soils in valleys and red loams on hills.

8. Existing unimproved pastures provide on average about 2 tows peryear of mediocre quality hay, with 6% to 8% crude protein content and 2 to3 tons of green fodder for grazing. Very little experimental work has beendone on pasture improvement. However, preliminary trials carried out atHolleta under the UNDP/SF Agricultural Research project indicate that pro-ductive rye grass-white clover pastures can be established. Crops suchas oats, vetches, oats and vetches, oats and broad beans, cow pe8as, rape,fodder sorghum, green maize, berseem and Persian clover can also be grownsuccessfully. Under irrigation, highly productive stands of alfalfa couldsupply green fodder during the whole year. Trials carried out in theChilalu Agricultural Development Unit (CADU) Project indicate that a widerange of improved grasses and legumes from both tropical and temperateenvironments can be grown in the area of that project, where the environ-ment is similar to that of the region around Addis Ababa.

Some Technical Aspects for Dairy Farm Development

9. Fodder Production and Feeding. While there are excellent pros-pects for dairying based on grass and forage, feeding for the immediatefuture would have to rely heavily on concentrate feed. There is at presenta plentiful supply of cheap oilseed cake (principally nug cake) and millingby-products such as wheat bran. CADU produces a concentrate mixture ofequal parts of aug cake and wheat bran plus bone meal and salt at E$7(US$2.8 equivalent) per 100 kg. Project farmers would be able to buy amore balanced concentrate at a price of E$15 per 100 kg from a feed mixingplant being established by the Livestock and Meat Authority. At a milkprice to the farmer of E$0.33 (US$0.13 equivalent) per liter, deliveredto the collection center, the milk-to-feed-price ratio is very favorablefor milk production.

10. For the future, greater emphasis should be given to the develop-ment and utilization of grasslands for dairying as this will undoubtedlylead to lower cost milk production. As a first step, fencing of Projectfarms to protect them from grazing by stray cattle and other livestock

ANNEX 1Page 3

will increase available pasture for the farmer's own cattle. Field trialsand demonstrations proposed under the Project would have the objective ofdetermining suitable mixtures and methods of pasture and fodder crop pro-duction as well as methods for their management and utilization, e.g.,stocking rates, fertilizer application, and hay and silage making. Forthe immediate future, it is anticipated that most large farmers will estab-lish small areas (about 1 ha) of alfalfa under irrigation for hay and greenfodder as well as grow more fodder crops without irrigation.

11. Calf Rearing. In the initial years it is expected that most far-mers will rear calves by suckling, but as they attain more skills in dairy hus-bandry they could change over to bucket rearing. Friesian-type dairyheifers would require about 400 liters of whole milk and 1,400 kg of con-centrates from birth to calving at about 28 to 30 months of age. Require-ments for cross-bred heifers would only be about two-thirds of this amount.

12. Housing. Housing provided on most commercial dairy farms in theAddis Ababa and Asmara areas now is more elaborate than is needed, compris-ing completely enclosed barns with individual stalls in which all cattle aretethered and fed. Under the Project, a cheaper system of housing would beused, involving barns with loose box stalls and an attached open areawhere cattle would be fed and watered. Farmers would be encouraged tograze their herds, at least during the day. Allowance in the Project ismade for one man to handle 10 cows.

13, Training. Short training courses would be provided for futuredairy farmers at Holleta Training Center. These courses would includepractical training in milking and hygenic milk production, management ofdairy cattle and pastures, production of alfalfa and other fodder cropsand fodder conservation.

Cattle Diseases

14. Although a number of the major infections and tick-borne diseasesoccur in Ethiopia, they can be controlled by vaccination or other means.The following is a brief summary of the position with regard to the majordiseases of cattle:

Rinderpest - This disease is endemic throughout Ethiopia butit can be controlled by vaccination. Tissue culture vaccineconfers a solid immunity that lasts for a number of years.

Foot-and-Mouth Disease - Types A, 0 and C occur in Ethiopia,and vaccination twice yearly with a tri-valent vaccine isneeded for control.

ANNEX 1Page 4

Contagious Bovine Pleuopneuumonia (CBPP) - This disease isendemic tihrouglhout Africa. It is not as infectious as theabove two diseases. Losses caused by epidemics of CBPP aremuch lower than in those caused by rinderpest. In Ethiopia,KH3J vaccine i8 used against this disease because it pOtducesonly a mild reaction in vaccinated animals. As it cornfers animmunity that lasts omly for six months, vaccination must becarried out twice a year.

haemmorhagic Septicaemia, Anthrax and Blackleg - These diseustaoccur sporadically but they can be controlled by vaccination.

Tick-Borne Diseases - The most serious of the tick-bofnediseases, East Coast Fever, does not occur in the AddisAbaba area even though Rhipicephalus appendiculatus, thetick which transmits it, is present. Any cattle to beintroduced to the region, either from Kenya or other partsof Ethiopia, should be certified as being free froxi expo-sure to this disease for a period of at least two years.Iieartwater, a bacterial disease transmitted by the tick,Anbylomma hebraeum, occurs in the Project area. It can becontrolled in cattle at pasture by spraying or dippingonce weekly to control ticks. Where cattle are housedpermanently, control of tick infestation presents verylittle problem. The common tick fevers, babesiosis andanaplasmosis, also occur. Control of babesiosis presentsvery little problem. Although there is no effective pro-phylaxis or treatment for anaplasmosis, it is unlikely tocause serious losses.

Internal Parasites - Liver fluke, Fasciola hepatica, is aserious problem in grazed cattle in some parts of thedistrict. It can be controlled by draining or treatingswampy areas that harbor the intermediate host, which isa snail. Worm parasites are also a problem in grazedcattle. They can be controlled by a program of anthelmin-thic treatment and rotational grazing. In cattle that atrhoused and hand-fed, internal parasites will not prebehta problem.

Infertility - The three major infectious diseases associatedwith infertility, brucellosis, vibriosis and trichoftibabiS,are almost certainly present in the Project area. Bruieellosiscan be controlled by vaccination of all heifer calves. Theeffects of the other two diseases can be reduced to negligibleproportions if an efficient artifiCial insemination service isavailable to dairy farmers.

ANNEX 1Page 5

Mastitis - While sporadic cases of mastitis will almostcertainly occur, its effects will probably be less seriousthan in more highly developed dairy industries for tworeasons: first, cows would not be fed or managed to attainextremely high levels of production, which predispose cowsto mastitis; second, cows would be milked by hand ratherthan by machines, with each milker handling only eight orten cows.

15. The effective control of all of these disease conditions will beessential to the success of the Project. As far ag the individual farmeris concerned, failure to control diseases would lead to almost certainfinancial failure. Measures to control all these diseases are known butit is essential that the Project make provision for its own veterninaryservice to the farmers. The existing veterinary service of the Ministryof Agriculture would be inadequate for the increased needs of the Project.One veterinarian should be employed within DDA to concentrate solely ondisease control. He would have under his supervision about 12 veterinaryassistants. Because of shortage of Ethiopian veterinaries, it would benecessary to engage an expatriate veterinarian at least for the first twoyears. He should have had veterinary experience in East Africa.

Artificial Insemination (A.I.)

16. Development of an efficient artificial insemination service isimportant to the success of the Project for a number of reasons. For thesmall farmers, it would be completely uneconomic to purchase and maintaina bull of a breed such as Friesian. A system of joint ownership of a bullby a number of small farmers would certainly lead to spread of disease,such as vibrisosis or trichomoniasis, with consequent infertility. Simi-larly in large herds, the use of A.I. is more or less essential to the con-trol of these disease conditions. Provision of an A.I. service would givefarmers access to service from proven bulls, which would be of much highergenetic standard than the bulls they could afford to purchase.

17. It is proposed that a veterinarian specializing in A.I. be em-ployed within DDA for the first two years of the Project. He would haveto undertake the training of inseminaters and the organization and estab-lishment of the A.I. service in the Project area. During this two-yearperiod, he would be expected to train an Ethiopian counterpart to takeover responsibility of the A.I. service.

ANNEX 2Page 1

ETHIOPIA


Credit Institutions and Agricultural Credit

1. The State Bank of Ethiopia, created by Imperial Charter in 1942soon after the cessation of military operations in the country, carried outthe dual functions of central and commercial banking till the end of 1963.At that time, by Proclamation No. 206 for regulating the banking and monetarysystem in Ethiopia, it was wound up and replaced by two new institutions,namely, the National Bank of Ethiopia, which would function as the centralbank of the country, and the Commercial Bank of Ethiopia, which would takeover all banking business with the public previously carried out by theState Bank of Ethiopia except credit mortgage activities. These weretransferred to the Mortgage Company of Ethiopia, a fully owned subsidiaryof the Commercial Bank of Ethiopia. The National Bank of Ethi.opia exercisespowers for licensing and inspection of commercial banks. It imposes therequirements for maintenance of reserve balances and liquidity ratios anda ceiling on interest rates on deposits accepted by the banks. It alsooffers rediscount facilities to banks for eligible paper covering export ofgoods at 5% per annum and all other eligible paper at 5-1/2% per annum. Nobanking institution in Ethiopia has so far availed itself of the facilitiesfor rediscounting agricultural paper.

Banking Institutions in Ethiopia

2. The Commercial Bank of Ethiopia (CBE). Incorporated as a fullyGovernment-owned share company under the Commercial Code, the CommercialBank of Ethiopia has a paid-up share capital of E$30 million and reservesamounting to E$11 million. Its deposits amount to nearly E$300 million andit has a loan portfolio of E$228 million. Of the total loans, E$90 millionis for financing exports and imports; E$48 million for financing domestictrade, including movement of agricultural produce; E$43.8 million for financ-ing industrial activities; E$22.4 million for financing agricultural produc-tion; and E$22.8 million for financing building construction and other miscel-laneous activities. The Bank's advances for agricultural production aremainly to large firms undertaking sugar cane and cotton farming.

3. The net profits of the Bank for 1968 amounted to E$6.17 millionand it has maintained for some years now a dividend of 7% on its sharecapital. The bank had 70 branch offices at the end of 1969 and a total staffof 1,292, 66 of which belonged to the managerial and senior supervisorycategory. The bank organizes advanced management services and trainingprograms for its staff at all levels. Supervisory staff are periodicallysent abroad for specialized training in banking and management. The bankproposes to set up an Agricultural Credit Division very shortly.

ANNEX 2Page 2

4. Loans are sanctioned after obtaining full financial details of theborrower and an appraisal of the project. Loan committees have been set upat branch offices and at the head office to sanction loans. Small loans upto E$20,000 could be sanctioned by a Loan Committee headed by the CreditManager and loans above this amount by a Loan Committee headed by the GeneralManager; loans exceeding E$1 million need to be referred to the Board of theBank. The bank ordinarily restricts loans to 50% of the value of the securitybut this could be relaxed when guarantees are provided. The interest ratesvary from 7-1/2% to 9-1/2%, depending on the type of loan or advance. Thebank does not generally advance medium- or long-term loans but could do soif reimbursement facilities were provided.

5. The Agricultural and Industrial Development Bank (AIDB). AIDB wasestablished in November 1970 as a state-owned share company, with a nominalequity of E$50,000 and taking over most of the assets and liabilities of the..vw-Jefunct Dcvelopment Bank of Ethiopia (DBE) and Ethiopian Investment Cor-poration (EIC). Recent operations of these predecessor institutions aredescribed further below because, with the formation of AIDB so recent, it isnot yet possible to review AIDB's own lending program. Neither of theseinstitutions was in a strong financial position prior to its dissolution.Arrangements have been made for the International Executive Service Corporation,New York, to provide AIDB with a senior adviser for a period of three monthsto make an assessment of certain assets and liabilities taken over from DBE;to assess and advise on financing and management problems facing some of thecompanies in which AIDB has now assumed an interest (mainly from EIC) andto advise on proper management arrangements for AIDB itself.

6. Apart from its normal operating income, arrangements have beenmade for AIDB to receive, for the next five years, half of the profits ofthe National Bank of Ethiopia, which would otherwise have gone to the Minis-try of Finance. Hlowever, AIDB's present financial situation and prospectsare unclear and it is too early to complete a meaningful appraisal. Nobalance sheet is available.

7. The Development Bank of Ethiopia (DBE). The Development bankof Ethiopia was established in May 151 by a Charter. It was a state-ownedinstitution with a paid-up share capital of E$11 million and a reserve forbad and doubtful debts of E$3.28 million. Apart from this, the resourcesof DBE consisted of loans received from USAID, IBRD and the West GermanKreditanstalt fur Wiederaufbau; the amount outstanding on December 31, 1969was E$6.476 million. The bank also received funds from the Ministry ofFinance, the amount outstanding on December 31, 1969 being E$1.541 million.The bank did not offer deposit facilities.

8. From its inception, 42% of the loans advanced were for agricul-ture and 52% for industry. Of the agricultural loans, 68% was for periodsof one to five years, 30% for periods exceeding five years, and 2% forperiods of less than a year. No short-term agricultural loans were grantedin recent years.

AiINEX 2Page 3

9. The total loans outstanding at the end of 1969 amounted to E$17.7million (principal), of which E$8.588 million was for financing agriculturalproduction and processing coffee. Interest outstanding on loans at the endof 1969 amounted to E$2.524 million. At the end of 1968, E$9.254 million onaccount of principal and interest were overdue; of this, E$3.402 million wasoverdue for more than two years and E$4.653 million was overdue from threefirms, which have since gone into liquidation. The bank's auditors (Price,Waterhouse, Peat & Co.) have commented on the inadequacy of reserves to coverbad and doubtful debts.

10. About 50% of the agricultural loans was overdue. The bank's methodof appraisal of loan applications was faulty and it did not take prompt actionto proceed against defaulting borrowers in several cases, mainly due to poli-tical interference. Accounts of the bank were not maintained up-to-date andthe auditors observed that delays of over a month occurred in writing up theaccounts.

11. The bank charged interest at 8% on short-term agricultural loansand 7-1/2% on medium- and long-term agricultural loans. On industrial loans,the corresponding rates were 8% and 8-1/2%, respectively. Loans were sanc-tioned on the basis of satisfactory financial status of the borrower and theloan officer's recommendations. A loan committee in the bank made recom-mendations on the applications, and loans up to E$200,000 were sanctionedby the Managing Director; loans for higher amounts were referred to theBoard.

12. The bank had a total staff of 130, many of whom had not receivedany training in banking. At the higher and middle management levels, thebank's staff did not appear to possess the necessary competence and expertiseto deal with agricultural credit.

13. The Ethiopian Investment Corporation (EIC). Established as a fullyGovernment-owned share company in August 1963, the EIC had a paid-up sharecapital of E$29.292 million and reserves of E$0.182 million. Apart fromcapital funds, the EIC's main source of funds is a credit of E$20 million,sanctioned by USAID in August 1967; a total amount of E$8.856 million hadsince been drawn from this credit. The EIC invested E$24.370 million inequity .capital of various Ethiopian companies and advanced E$12.894 millionas loans. The auditors (Mann, Judd & Co., London) have drawn attention tothe inadequacy of free reserves.

14. The Corporation had a total staff of 30 and hardly any fixed assets(less than E$100,000). The major part of its capital funds was invested in49 different companies. Dividends received during the year amounted to onlyE$282,013, which represents a return of about 1.2% on the investment.

15. The net profit of EIC for the year ended July 1969 (EC 1961)amounted to E$354,651. The EIC was prohibited from paying dividends on itsshare capital under the loan agreement with USAID for a period of 10 yearsfollowing the date of the first disbursement.

ANNEX 2Page 4

16. About 55% of the loans advanced by EIC were for agriculture, ofwhich about 60% were to large plantations. Loans to agriculture were ad-vanced at 8-1/2%. Following an earlier Government decision to restrict LICfinancing to industry and DBE financing to agriculture, the EIC restrictedits business in agriculture in 1968/69 to the continuation of service toexisting borrowers and to agricultural enterprises closely associated withindustrial operations.

17. The Addis Ababa Bank. Established in 1964 as a share company,Addis Ababa bank has a paid-up share capital of E$5 million, of which 40%is held by the National and Grindleys Bank Ltd. and the rest by individuals.The reserves amount to E$1.6 million, deposits to E$37.2 million and loansand other advances to E$26.2 million. At the end of December 1969, the bankhad 16 branch offices and a total staff of 267.

18. Of the total loans and advances, 9% was for agriculture, 41% forforeign trade, 16% for industry, 24% for local trade and the rest for build-ing construction and other miscellaneous activities. The management of thebank is handled by a Board of eight Directors, of whom two are representa-tives of the National and Grindleys Bank.

19. The net earnings after tax in 1968 amounted to E$685,982. Theoperating expenses formed 2.5% of total assets. The bank has been declaringa dividend of 5% since 1967.

20. The Banco di Roma. Established in 1967 as an Ethiopian share company,this bank is the successor to the branch office of the Banco di Roma (Italy),which had been operating in Asmara since before World War II. The bank hasa paid-up share capital of E$4 million. The head office is in Asmara andbranch offices exist in Addis Ababa, Aseb and Mitsiwa. The bank's mainsources of funds are its share capital deposits. It advances short-termcredits in the form of overdrafts or loans against goods to be exported.The bank does not extend credit to finance agricultural production or market-ing.,

21. The Banco di Napoli. This bank, which commenced operations inAsmara as a branch office of the Banco di Napoli (Italy), has very recentlybeen incorporated as an Ethiopian share company. Its lending activitiesconsist of extending short- and medium-term commercial credit, mainly forexport and import promotion. No advances are granted for agricultural deve-lopment.

22. The Mortgage Company of Ethiopia. Established in 1965 as a fully-owned subsidiary of the Commercial Bank of Ethiopia, the Mortgage Company ofEtthiopia had, as of D)ecember 31, 1968, a paid-up share capital of E$3 million,reserves of E$0.62 million and long-term deposits of E$3.675 million. TheCompany's main resources are borrowings from CBE, which amounted to E$24.5million at the end of 1968; its loans and advances amounted to E$30.73 million,mainly for financing industrial and domestic building construction as well aspurchase of property and durable consumer goods. Its net profits in 1968 afterprovision for taxes amounted to E$482,413 and it has been declaring a dividend

ANNEX 2Page 5

of 7% on its share capital since 1967. The loans advanced are for a maximumperiod of five years and carry interest at 8-1/2%. The company also grantsthree-year special mortgage loans at 9%. The management of the company vestsin a Board of five members, composed of the General Manager of CBE as Chairman,two other representatives of CBE, one representative of the National Bank ofEthiopia and the General Manager of the Mortgage Company.

Agricultural Credit in Ethiopia

23. Although considerable potential exists in Ethiopia for anexpanded program of agricultural credit and investment through a moreintensive cultivation of the highland areas and higher land utilizationby means of settlement schemes in the lowlands, expeditious.governmentalaction is required to remove certain major constraints in land development.

24. Of the total land area of 122 million ha, about 54% is pastureland, 11% cultivated agricultural land and the rest swamps, forests, barrenland, and the like. Of an estimated population of 23.7 million (1968), about92.3% live in rural areas, and farming population accounts for 93% of thetotal. Less than 1% of the rural population seeks a living as agriculturallaborers.

25. A sample survey by Government in 14 provinces in recent years showsthat about 60% of the holdings are of less than 2 ha, which is consideredto be thie minimum economically viable size for a farm. There is also consi-derable fragmentation of holdings; nearly two-thirds of the holdings in 11provinces were found to be in more than one parcel. In Shoa Province, towhich the present Project relates, only about a third of the holdings areowner-cultivated and the rest are either entirely leased or partly ownedand partly leased. The conditions of tenancy take various forms and, inthe majority of cases, there is no written lease agreement. Tenant culti-vators have very little security of tenure; they present a poor creditrisk for institutional financing, both on account of the absence of anysecurity that they could offer in the form of property mortgage and onaccount of uncertain landlord-tenant relationships. Non-institutionalagencies formed the major source of agricultural credit for tenant farmersin Ethiopia and extremely high interest rates have been reported.

26. A number of different systems of land tenure exist in Ethiopia.Ownership rights are derived by purchase, grant or inheritance of landsleased out on long-term or permanent basis by Government or the Church.On the basis of A survey carried out in Shoa Province, it is estimatedthat about 10% to 20% of the landholders may not have mortgageable rightson land. Title deeds of land in rural areas do not exist and ownershiprights are established on the basis of tax receipts. No cadastral surveyof land has as yet been carried out and recording of ownership rights isunknown. Presentation of tax receipts for a number of years is the onlymethod of establishing ownership rights and prior encumbrance to propertyhas to be investigated by a reference to registration of earlier mortgagedeeds.

AiNNEX 2Page 6

27. The absence of any law relating to chattel mortgage makes itdifficult for banks to advance short-term loans for agricultural produc-tion and marketing oni the security of standing or halrvested crops.

28. The Government lhas submitted a land reform bill to Parliamentwhich would confer greater security of tenure cultivators and regulate thedivision of the produce of the land between landlord and tenant. Additionallegislation is under preparation concerning cadastral survey and taxatlionof unutilizedt land.

29. Tie total credit for agricultural purposes provided by the CBE,DBE1, EIC and the Addis Ababa bank, as of the end of 1969, amounted to aboutE$39.5 imiillioni, of whiclh onily about E$8 million, provided by the DBE, wasmedium or long term; the rest, mainly to large firms or the larger culti-vators, was short term. The short-term credit requirements of smallfarmers are thus not met by institutional agencies and very few of themhave perhaps availed of finance for capital investment needs in agriculture.

30. The important pre-conditions to any expansion in the provision ofagricultural credit by banking institutions in Ethiopia are a cadastralsurvey of land holdings and provision for the recording of ownership rights,security of tenure for the tenant cultivators and legal provision forchattel mortgage.

Special Arrangementsf_or Agricultural Credit

31. The Chilalo Agricultural Development Unit (CADU). The projectadministered by the Ministry of Agriculture, with technical and financialassistance from thie Swedish International Development Agency (SIDA), aimsat the economnic development of Chilalo Awraja (sub-province), Arusi Province,by creating conditions favorable for intensive farming. Started in Septem-ber 1967, CADU supplies fertilizers, improved seeds, concentrates for cattle,half-breed hleifers, fencing material, and such to farmers in the area onthe basis of farm plans. Tenant farmers cultivating more than 40 ha andowner-cultivators farming more than 25 ha do not get credit facilities. Allother farmers are required to make a down payment of 50% of the cost ofseed and payments, ranging from 25% to 75% of the cost of fertilizers,depending on the size of farm; the balance is provided as short-term loans.

32. Mledium-term credit is advanced when lheifers and fencing materialare supplied. The security for the credit would be from three sources:(1) two guarantors acceptable to CADU, (2) an agreement by the borrowerto market hiis produce through CADU or an agent appointed by CADU, and(3) the deposit of tax receipts by landowning farmers. The loan documentsare registered in the District Office. In the case of tenant cultivators,a written lease agreement has to be entered into with the landlord underwhliclh provision is made inter alia for fixation of rent and for non-termi-tit.ilon of lease, except in cases of rent default.

ANNEX 2Page 7

33. CADU provided credit to farmers in 1969/70 under reimbursementfacilities from the DBE; the DBE sanctioned E$400,000 during 1969/70 forthis purpose. Short-term credit is advanced by DBE at 8% and CADU extends

credit to farmers at 12% per annum. There are 13 Extension Agents of twotypes. Grade A Extension Agents are high school graduates in agriculturewho have undergone training in the Agricultural Research Institute; Grade BExtension Agents are those who have not graduated and who are given a seven-month training course by CADIJ.

34. In 1969, 800 families borrowed from CADU, and, so far in 1970,4,000 applications have been received. The project would cover about22,000 families in the Chilalo Awraja within a six-year period. Apartfrom credit, other services offered by CADU are creation and improvementof marketing facilities; development of model farms; training of farmers;and conducting studies on infrastructure, health and small industrial

ventures in the area.

35. The Wolamo Sodo Project. This Project provides for an integrated

attack on the problems of 6,000 subsistence farm families in the highlands,through the provision of improved roads, markets, water supplies, agricul-tural credit and extension services, as well as for the resettlement of1,050 farm families in two new settlement areas in the neighboring lowlands.The Project would supply credit to farmers in kind, as is done in the CADU

Project, but credit in cash would also be provided to farmers in the lowland

areas for payment of wages to labor.

36. FAO - Freedom from hunger Campaign (FFHC). The FFHC makes funds

available to the Ministry of Agriculture for supplying fertilizers on credit

to selected farmers. The program commenced in 1967 with 450 farmers owning20 ha or more who had agreed to use 1/5 ha for raising wheat, barley or teff,

using fertilizers. In 1968, US$4,500 was provided by FAO under this project.The rate of interest charged to the farmer was 7%. The funds are channeledthrough AIDB on agency basis. The responsibility for recovery of loan rests

with the Ministry of Agriculture.

ANNEX 3

ETIIOPIA


Livestock Procurement, Demand and Supply of Dairy Heifers

1. The estimated demand and supply of both Friesian-type and Friesian-Zebu cross-bred dairy cattle is given in Table 1. As practically all dairy-type heifers bred on dairy farms in the Project area are retained by theirowners for herd build-up, provision is made in the Project to procure allheifer requirements for the Project by importation, by purchase from Asmaraor by breeding on Project-assisted cross-breeding ranches.

2. Requirements of cross-bred heifers for small farmers would bemet by purchase from the five private cross-breeding ranches and Abernossaand by breeding on participating farms through mating to Friesian bullsby A.l. The number of heifers available through these sources would limitthe number of small farmers to be included in the Project to 240.

3. The Imperial Ethiopian Government (IEG) proposed in its applica-tion that Friesian--type in-calf heifers should be imported from Kenya,this being the cheapest potential source of supply. Estimated landed costof in-calf heifers from Kenya is about US$400 equivalent, compared to atleast US$720 equivalent from Israel, Europe or Australasia. Kenya wouldalso be the cheapest source of supply of weaner heifers, with an estimatedlanded cost of US$180 equivalent, compared to about US$240 equivalent froml.urope. The accompanying chart indicates the effect of price of eitherin-calf heifers or weaner heifers on the financial rate of return to largedairy farms.

4. Despite the fact that most dairy farmers indicate a preferencefor purchase of in-calf heifers, there are a number of technical reasonsfavoring purchase of weaner heifers 8 to 10 months old, in the case ofimports. There would be less risk of losses due to physiological stressduring transport in the case of weaner heifers and they would have greateropportunity to hecome adapted to the environment and acquire resistance tovarious diseases before being subjected to the stresses of calving andlactation. Ilis procedure would also give farmers greater opportunity togain experience in handling Friesian-type dairy cattle before they com-mence milk production.

J. Analysis of the data on which the charts shown in Figure 1 arebased indicates that Importation of weaner heifers is also likely to givebetter financial rates of return than importation of In-calf heifers. Forexample, in the case of purchase from Kenya, in-calf heifers at US$400

ANNEX 3Page 2

give a return just below 20%1., whereas weaner heifers at US$180 would givea return of 23%. In the case of purchase from other sources, in-calfheifers at US$720 give a rate of return below 13% while weaner heifers atUS$240 give a rate of return just over 20%.

6. Thus, on the basis of both technical and economic reasons, itwould be preferable that weaner heifers should be imported rather than in-calfheifers.

ANNEX 3Table 1

ETHIOPIA

ADIS ABAA DnRY IEVELOPMENT PROJECT

Project Demand and Supply of Dairy Cattle

-- - - - -- -- Tear---------------------ITEM UNIT 1 2 3 4 5 6

Demand for Breeding Friesian BDuls

Holleta Dairy Stud Farm No. - - ,2Abernossa Cross-Breeding Ranch No. 46 10 10 10Private Cross-Breeding Ranches Nc. 33 25 8 10 10 13Medium aise Dairy Farm NcI. -- - 40 27 20

Total No. 79 35 20 60 37 33

Supply of Breeding Friesian Bulls

Holleta Dairy Stud Farm No. 11 16 40 68 67 68Foreign Countries No. 68 19 - - -

Total No. 79 35 40 68 67 68

Breeding Bulls Available for Non-Project Use No. - - 20 8 30 35

Demand for Friesian Weaner Heifers

Medium Size Dairy Farms No. 1,200 1,610 1,140 1,090 460

Total No. 1,200 1,610 1,140 1,090 460

Supply of Friesian Weaner Heifers

Asmara Region in North Ethiopia No. 300 410 380 370 140Foreign Countries No. 900 1,200 760 720 320

Total No. 1,200 1,610 1,140 1,090 460

Demand for Friesian X Zebu In-Calf Heifers

Small Dairy Farms No. - - - 90 588- 762

Total No. g o - 90 586 762

Supply of Friesian X Zebu In-Calt Heifers

Abernosaa Cross-Breeding Ranch No. _ - 60 240 240Private Cross-Breading Ranches No. _ - _ - 153 2614Small Dairy Farms No. - - - 30 196 252

Total No. - - - 90 589 756

NOvember 12, 1970

ANNE-X 3ETHIO PI A FIGURE 1

ADDIS ABABA DAIRY DEVELOPMENT PROJECTEFFECT OF AGE AND PRICE OF HEIFERS ON RATE OF RETUR N

28%

27%

26%

25%

24%

FINANCIAL 23%RATE OFRETURN

22%

21%

20%

19%

18% .___ _ _-

17%300 400 500 600 700 800

PRICE OF FRIESIAN WEANER HEIFERS IN ETHIOPIAN DOLLARS

21%

20%

19%/

18%

FINANCIAL 17%RATE OFRETURN 16%

15% _ _ _ _ _

14% _ _ _ _ _ _ _ _

13%

12%1000 1250 1500 1750 2000

PRICE OF FRIESIAN IN-CALF HEIFERS IN ETHIOPIAN DOLLARS

IBRD-5042(R)

ADIB A8A8A DAr EIVICIFIT P3J?CT

a~~~~~~~~~~~~~~~~~~~~~~~~~ DOsIiin fre r j

CATEOOH7 UNIT Blefog De elon2) 1 2 3 4 5 6 7 a QLT-IRI H-r B.eOE, E_w , 1 B r B 3 B B B B 6 .B B FxB B 8 NB B PuB

BHD OCMPOSITION

Breedng Co No 656 - 656 - 656 - 656 - 656 - 656 - 656 - 656 - 656 _ 656Mated Beifws No: 14 - 144 - 144 - lb4 70 lbb 282 114 282 144 282 14b 282 144 - l14Calves Wened No. 600 - 450 150 - 600 _ 600 - 600 - 600 600 - 600 - 600 - 6008eifws 9-21 4Months No. 291 - 21 - 218 72 291 - 291 - 291 - 291 291 - 291 - 291Steers 9-24 Koths go. 291 - 291 - 218 73 - 291 - 291 - 291 - 291 291 - 291 - 291Steers 24-36 Montb No. 282 - 282 - 282 - 211 71 - 82 - 82 - 82 - 82 282 - 282Frieian Bulle No. - 12 - 48 - b8 - 48 4 48 - 15 15 - 15 -BorsiaBoll No. 36 - _ - - - - - - - 22 - 27 - 27 - 38 _ 38

Total Niber No. 2,300 12 2,114 198 1,518 793 1,011 1,371 800 1,59b 822 1,561 1,427 961 2.009 379 2.302 - 2.302

Total Animal Units go. 1,712 ,12 1,71 1,782 1,794 1,783 1,788 1,788 1,702 1,702

PUEHSES

In-C&U Heifers - B3ar No. _ _ _ _ _ _ _ l144 - 144 - 144 - 144 -Broeding Baul -riesian No. - 15 4 46 - 10 _ 10 - 10 - - - 3 - 3 -Brhdm Balls -NBorm No. _- - - -_ 27 - 9 - 5 - 18 7

Total umbers No. 15 46 _ 10 _ 10 l14 10 171 - 153 3 149 3 18 - 7

MORTALITT

Breadin Cg e No. 24 - 24 - 24 - 24 - 2b - 24 _ 24 - 24 - 24 - 24Mated Heifes No. 9 - 9 - 9 - 7 2 - 9 - 9 - 9 - 9 9 - 9Heifr m 9-24 M8ts No. 9 - 9 - 7 3 - 9 9 9 - 9 9 9 - 9 -Steers 9-24 Months No. 9 - 9 - 7 2 - 9 - 9 - 9 - 9 9 - 9 - 9steer 24-36 Mnths No. 9 - 9 - 9 - 7 2 - 9 - 9 - 9 - 9 9 - 9Buls No. 2 1 - 2 - 2 - 2 _ 2 1 1 1 1 1 1 1 - 1

Total Nueber. No. 63 1 60 2 56 7 38 24 21. 38 25 37 25 37 43 19 61 - 61

SALES

Coll Cows No. 120 - 120 - 120 - 120 _ 120 - 120 - 120 - 120 - 120 - 120In-Calf Cross-red Heifers No. _- - - - - - 60 - 240 - 210 210 - 240 -

ated Borna Heifs No. 138 - 138 - 138 _ 67 _ _ _ _ _ 138 - 138BTon Hia No. _ _ _N - - - - 10 - 42 4 12 _ 42 - 42 -Stesrs 24-36 gnths Uo. 282 - 282 - 282 - 282 _ 211 21 - 288 _ 282 - 282 - 82 282Can Bulls No. 6 2 18 8 - 8 - 8 - 8 4 8 3 2 4 2 6 2 6Breeding Blls No. - - 18 - _- -_ _ _ _ 24 - - - 13 -

Total Nmbere No. 546 2 576 8 540 8 469 8 331 349 121 596 123 566 124 566 264 379 546

PFHOWCTION DILTA

Effective Calving Bate,

a.Hmd Cows d Heifers S 75 - 75 - 75 - 75 _ 75 - 75 - 75 - 75 - 75 - 75b.Purshaed Cov and Heifwe S - - - - - - - 75 - 75 - 75 - 75 - 75

Conoeptlm Rate of Cross-breds S _- - -_ _ 85 - 85 - 85 - 85 - 85 - 85COv Culing Rate S 15 15- 15 15 15 - 15 - 15 - 15 - 15 - 15Bu2l C 1u ingRate S 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 -15

Adult Mortalit S 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 - 15

B - Bormia cattle

P - hiensi-Borona cross-bred cattle

AMIS AMU DM31 MKWOT MJICT

Pri"" wm 2m 1 - 2 o

- - - - - - - - - - - - - _, - - - - - - - - - - - - - -_ - - - - - - lbd at 7rW - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1 2 3 4 5 6 7 8 9 10BMaTe Df l1

cgr goy mtr z r z z z z z * z Fz z z z vZ z Z Z Fla z lxZ z - z z vz

HZR ODMSITICE

l Oding Cow No. 85 - 172 - 2 - 164 - 164 - 164 _ 164 - 164 - 164 - 16

4a - I&Mated H.±fws o 2 28 - 28 - 36 - 36 60 36 64 36 60 36 64 36 64 36 60 36 6CalvH Wo med lo: 6 28 113 3 130 1 _0 l4 140 15 1140 12 I6 12 14 12 140 12 14 12 6a

difws 9-24 Hontehl go. 29 - 30 - 54 - 2 62 - 67 7 67 7 67 6 67 6 67 6 67 6 67St 9-24 Nmtho go. 29 _ 31 - 54 - 1 63 - 67 6 67 7 67 6 67 6 67 6 67 6 67Ste.ru 24-36 Mctbo No. 28 _ 28 - 30 - 52 - 1 60 6 4 6 64 7 64 6 64 6 64 6 648t.rs 36-48Msnths No. 28 - 27 - 27 - 29 - 50 - 1 58 - 61 6 61 7 61 6 61 6 61Frieasn Hulls No. - _ - 10 - 10 - 10 - - - n1 2 11 - 11 _1-

Zebu U 1M^ No. 5 - - - - - - _ _ _ _- - -

Total DbOrJ go. 297 _ 429 10 368 lhO 284 275 265 405 229 471 232 474 237 474 237 4714 236 1174 236 474

Total haMnlUnits go. 231 326 375 419 516 545 554 559 559 558 so

Breg mal , - Z.ba No. - - 100 - 8 - 35 - 37 - 30 - 30 - 31 - 31 - 31 -BroodingMBalls - Frieian No. - _ _ n - 1 _ 2 - 2 - 2 - 3 - 2 - 2 - 3 - 2

Total mbus llo. _ _ 100 U 8 1 - 2 35 2 37 2 30 3 30 2 31 2 31 3 31 2

MOBOLUT

Brmding Con No. 5 - 11 - 6 _ 6 - 7 - 7 - 7 - 7 - 7 - 7 - 7 -

Mated Rhdtre go. 1 1 2 2 - _ 2 - 3 - 3 _ -3 3 - 3 3

eifers 9-24 Mnths No. 2 _ 2 - 3 - - 3 - 3 - 3 1 3 - 3 - 3 - 3 - 3

Stews 9-24 Hmths No. 2 _ 2 - 2 2 - 3 1 3 - 3 3 3 3 - 3

Stears 24-36 Nthe No. 1 1 - 1 2 - _ 3 - 3 _ 3 3 3 - 3 - 3Sters 36-48 Months I. 1 _ 1 _ 1 1 - 2 _ - 2 - 3 - 3 _ 3 - 3 - 3Balls No. _ _ _ 1 _ _ _ 1 - _ _ _ _ 1 _ _ _ _ _ 1 _ _

Total Nulbw Mo. 12 - 18 1 15 - 11 6 9 1 a 345 e 16 7 15 7 15 7 16 7 1S

SUM

can1lCos No. 10 _ 30 - 30 _ 30 _ 30 _ 30 - 30 - 30 - 30 - 30 - 30 -

r-ClCrwn-Brad Heifses Mo. - _ _ _ _ _ -_ 1 - - 54 - -54 - 54

Mated Zedn H1w. go. _ _ 16 - - - - - - - - - - - -Barr uiMf s No. - _ _ 9 _ 1o _ 10 _ 10 - 10 '. 10Stews 36-48 Joths Mo. 27 - 27 - 27 - 27 29 _50 - 1 8 - 61 6 61 7 61 6 61CU Blh 110. 1 - 5 - 1 - 1 - 1 2 - 2 - 2 - 2 - 2 - 2

Total Nubes So. 38 - 62 - 57 1 73 1 59 1 80 62 31 124 30 127 36 127 37 127 36 127

PM3WCTtM DATA

*.flmebComm, oad8 .fwe o 65 - 65 _ 6 70 - 70 70 - 70 - 70 - 70 - 70 - 70 -b. 1bed a" 0 md mefws % 140 - 40 40 - 40 40 --4 - 40 - 1_0 - 140 -4_0 -

Olho__m Iste ef Grs-br t dst S - - - - - 8- 5 - 85 - 85 - _5 - 8 85 85Co Cuhllin Rats % 15 - 15 - 15 _ 15 _ 15 - 15 - 15 - 1s - 15 - 15 - 15 -Frikeim PAU1 0.U4gRate % - 15 - 15 - 15 -- t-- 15 - 15 is S ~ - 1 - 35

Adlt ta1ty . 5 5 - _ 1S 5 5 14 1S 14 4 14 4S4 4 1S4 -1 _ 1S 1 14

Y Z .al zeb

1 q niz pal, Ceim-Za Oroeg-bid.

AIIk4t 5Table 2

ITHIOPIk

ADDIS AD MMI VLOMT PROJECT

Private Cross-BreeinE Rnob lodel - 200 CousInvestment Coots and Financinst

I t a a Units Unit Coat Totdl Coat

On-Farm Investment

Fencing 9J000 Dl 0.80 7,200Water Piping 3,000 x 2.25 6,750Water Tank (25,0001) 1 2,000 2s000Water Pump 1 270 270Water Trough 2 400 800Spray Race 1 3,000 3,000Crush and Working Paddock 1 2,000 2,000Small Equipmzent and Tools 500Friesian-Breeding Bulls 11 1,000 11,000Zebu-Breeding Females 100 80 80oo0Contingencies (approx. 10%) 4a. h80

Total Investment 46.ooo

Financinm

DI)A Loan-'/ 36,800Famer's Contribution 9200

Total Financing

1/ The Dairy Development Agency (DDA) loan is equivalentto 80% of the total investment cost.

i/ The farmer's contribution is equivalent to 20% of t;he total invantmntcost.

November 12, 1970

EITIOPIA

ADDIS ARBRA DAIE! DhVILPIQT PROJECT

Private Cross-Breeding anch Model- 200 Cows

ProjeCtions of Income and Operating Costs

g Before -- - - - - - -- - - - - - - -- - - - - - - - Years - - - - - - - - - - - - - - - - - - - - _

| ITEMS * UNIT Developmnt 1 2 3 4 5 6 7 8 9 10-12

CATTLLE SALESI

o Cull Cows E$ 1,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000

In-Calf Cross-Bred Heifws E$ - - 17,850 18,900 18,900 16,900 18,900 18,900

Mated Zebu Heifers Ea - - - 1,280 - - - - - - -

Barren Heifers ES - - - - - 540 600 600 600 600 600

Steers 36-48 Months E$ 4,860 4,860 4,860 4,860 5,220 9,000 12,650 13,115 14,195 14,375 14,195

Cull Blls ES 150 750 250 250 250 500 500 500 500 500 500

T?t,.L Cattle Sales E$ 6,010 8,610 8.uo 9,390 8,470 30,890 35,650 36.115 37.195 37,375 37,195

OPERATING IOSTS

Salary for Mansger 2 E$ 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800

Salaries for Labor3/ ES 1,080 1,620 1,620 1,620 1,620 2,160 2,160 2,160 2,160 2,160 2,160

Salary for Night WAtohman ES - 700 700 700 700 700 700 700 700 700 700

Feed CostW ES - 750 750 750 825 825 825 825 825 825 825

Veterinary Serflcea, Dipeand Mineral&1a ES 200 1,630 1,875 2,095 2,580 2,725 2,770 2,795 2,795 2,790 2,790

BrsedirAg Stodck -R eepacetstZebu Fml a E $ _ 560 - 2,450 2,590 2,100 2,100 2,170 2,170 2,170

Friesian Balslt/ ES - _ 1,000 1,400 1,400 1,400 2,100 1,400 1,40o 2,100 1,400

Water Equiement ruelmdLsgRepairs Y ES - 489 563 629 774 818 831 839 839 837 837

Fencing aBuilding Mainteamce2

e ES - - 750 750 750 750 750 750 750 750 750

Lend Tax ±f ES 600 600 600 600 600 600 600 600 600 600 600

Miscellaneous ES - 200 200 200 200 500 500 500 500 500 500

Total Operating Costs ES 3,680 7,789 10,41P 10,544 13,699 1I4, 661 15,136 14,269 14,539 15,232 111,532

Price Assinptions in E9: cull cow 100; in-calf cross-bred heifer 350; mated Zebu- heifer 80; barren heifer 60; fat steer- Zebu 180; fat steer- Friesian x Zebu 215;

cull bull- Zebu 150; end cull bull- Fresien 250.2/ Part-time manager.

4E540 per annum per worker.500 kg per Friesian breeding bull per annum at E$ 15 per 100 kg.A At ES 5 per A.U.per annum. IA/ t E|$ 70 per Zebu female.

/ At 2$ 1,000 per Friesian bull in year 2 and at ES 700 per Friesian bull in the following years.At ES 1.50 per A.U. per annum.

2/ At 5% of investment costs.At E$ 1 per ha.

ETHOPIA

ADDIS ABABA DAIRY DEYLOPHET PROJECT

Private Cross-Breeding Ranch Model - 200 CowsFinancisli -rgactloms

(E$)

o2 ------ - -------------------- - ---- - ~~~~~~Years ------------ -_-__d Before 1 2 3 4 5 6 7 8 9 10 U 12-15

ITEM Developent

H Cash Inflow

H Sale of Cattle 6,010 8,610 8,060 9,390 8,470 30,890 30,650 36,115 37,195 37,375 37,195 37,195 37,1954 Short-Term Loan _- - 8,357 - - - - - - - -

o Long-Term Loan - 36,800 - - - - - - - - - - -

Total 6,010 45,410 8,060 9,390 16,827 30,890 30,650 36,115 37,195 37,375 37,195 37,195 37,195

Cash Outflow

Investments: (a) Farmer's Contribution - 9,200 - - - - - - - - - - -(b) Long-Term Loan - 36,800 - - - - - - - - - - -

Operating Cost 3J680 7,789 10.418 10.544 13.699 14.868 15,136 314,469 14.539 15,232 14.532 14,532 14,532

Total 3,680 53,789 10,418 10,544 13,699 l4,868 15,136 14,J469 14,539 15,232 14,532 14,532 14,532

Annual Cash Balance Before Debt Servics 2,330 (8,379) (2,358) (1,154) 3,128 16,022 15,514 21,646 22,656 22,143 22,663 22,663 22,663

Debt Service

ntereat on Short-Term Loan , _ _ - _ _ 794 - _ _ _ _ _ _Aaortisation of Short-Term Loan - - - 8,357 - _ _ _ _ _ _

Interest on Long-Term Loan Y - 3,128 3,128 3,128 3,128 3,128 2,346 1,564 782 -Amortization of Long-Term Loan - - - - - - 9,200 9.200 9,200 9,200 - - -

Total - - 3,128 3,128 3,128 12,279 12,328 11,546 10,764 9,982 - - -

Annual Cash Balance After Debt Service 2,330 (8,379) (5,486) (4,282) - 3,743 3,186 10,100 11,892 12,161 22,663 22,663 22,663

Annual Incre.ntal Cash Balance - (10,709) (7,816) (6,612) (2,330) 1,413 856 7,770 9,562 9,831 20,333 20,333 20,333

Cumulative Incremental Cash Blnce - (10,709) (18,525) (25,137) (27,467) (26,054) (25,198) (17,428) (7,866) 1,965 22,298 42,631 123,963 kAnmual Incremental Herd Value _ 17,600 6,6o0 10,280 27,950 6,285 1,090 - - - - -

!/ 9.5% p.a.2/ 8.5% p.a. on the outstanding balance.i Total term of 10 years, including 4 years of grace.

Cwmlative incremental cash balance for year 15.

Da nZ1W - 100c

or. - - - - ------------d of her - - - - - - - - - - - - - - - -_OLTEOT WinT D-om- -1 _ 2 - - 5 6 7 B.1S

NU mNPOBITIC

Cow No. 62 61 60 59 77 77 77 77 77In-Calf NHifers No. 17 17 16 hi 23 23 23 23 23Heifer Calv,. No. 20 25 33 33 43 43 43 43 43BulU Cal. io 21 25 33 32 43 43 43 43 43Puoh" d BulCalves No - 27 6k 54 45 45 45 h5 45N fars 9-24 Nonthu No. 20 19 24 - - -Bulls 9-24 mnths No. 14 20 24 32 31 41 41 41 41Purohased Bans. 9-24 Nothe go. - - 26 52 52 43 43 43. 43Bulls Iin Suee No. 6 1 1 2 2 2 2 2_ 2

Total Numbers No. 160 195 271 305 316 317 317 317 317

Total Aniaml Unit No. 117 118 151 186 185 186 186 186 186

BIRTNS

Heifer Calves No. 24 29 39 38 S0 S0 50 So S0Bunal."a No. 24 29 39 38 S0 S0 S0 S0 50

Total Nbwe -o. 48 58 78 76 100 100 1oD 100 100

PaRcRASMS

In-Colf Heifers No.Bull Calves No. - 30 60 60 So So So So So

Total Nubers No. - 30 60 60 S0 S0 S0 S _ 50

MrTAlarT

cow No 2 2 2 2 3 3 3 3 3In-CaLf NHifw No. 1 1 1 2 1 2 2 2 2N.ifr Calves No. 4 4 6 5 7 7 7 7 7Bull Ceas No. 3 4 6 6 7 7 7 7 7Purchasd Bn B Calves No. - 3 6 6 5 6 5 5 SHeifers 9-24 Months No. 1 1 1 - - - - - -

Buls 9-24 Hmth No. 1 1 1 1 2 2 2 2

Pwrehaaed Balles9-24 KntM b No. - 1 2 2 2 2 2 2

Total Numbers No. 11 16 24 24 26 28 28 28 28

sAl

'1all Cows No. 10 16 16 15 20 20 20 20 20In-Calf Heifers No. - - - 8 6 14 14 14 14Barren Heifers No. 2 2 2 6 3 4 4 4 4Bulls for Breading (Own) No. 12 11 16 19 26 25 33 33 33Bulls for Breedirs (Pordcased) No. - - - 19 42 42 36 33.1 35Rejeoted BaU No. 2 3 10 16 16 16 16OuV1 Bollo No. - 5 - 1 - -_

Total Nubers No, 26 37 38 78 113 121 122 122 122

MIUCTIDNB DTA

COnoeptien Bate Cows 66 87 87 87 87 87 87 87 87Conoeption Rate NHeif' % 90 90 90 90 90 90 90 90 90Horta1iit

Adult %3 3 3 3 3 3 3 3 3Heifer CalvesI' 16 16 16 16 15 1S 16 15 15

Bull Ce1e& Ns 1S 16 16 16 15 11 16 16 16

Purehaed Bull Calve N - 10 10 10 10 10 10 10 10

Cmv Culling Rate 14 20 20 20 20 20 20 20 20Rejected Boll ate S 16 20 20 20 20 20 20 20 20Caloing Interval Muoth. 16 14 14 14 14 14 14 14 14

Age at irt Cal"ng Months 24-36 24-36 24-36 24-36 24-30 24-30 24-30 24-30 24-30

/ This culling of bulls In Bervice will be repeated In ear 11.g/ lnoludSng stlil-births.

No,ssber 12, 1970

A NNEX 6

ETOPIA

ADDIS ABABA DAIRY DEVELOPMENT PRSJECT

Holleta Dairy Stud Farm - 100 CowsInvestment Goste andnanns

YearITEK -------------- 1 ------------------1…-

Units Unit Cost Total Cost

On-Farm Investment

Fencing 3,000 m 0.80 2,400Manager's Howue 1 9,600 9,600Water Piping 1,500 ' a.25 3,375Water Tank (40,000 1) 1 2,500 2,500Pumping Unit 1 3,200 3,200Water Troughs 14 400 1,600Labor Cost for WaterInstallation 2,300

Large Dairy Cooler 1 900 900Spray Race 1 3,000 3,000Crush and WorkingPaddock 1 1,500 1,500

Small Equipment and Tools 3,000Contingencies (approx. 10%) 3,625

Total Investment 37,000

Financing

DDA Loan 37-000

Total Financing 37,°000

v1 Since HoUrta Dairy Stud Farm is part of the Dairy Develo1mnent Agency(DDA), thi:s is an in-ternal loan.

November 12, 1970

E T H I O P I A

ADDIS ABABA DTRY VSLOPMENT PRCJECr

Holleta Dairy Stud Farm - 100 CowskAeOMi Prg.jent4nIS

Before ---------------------------------------------------------------------- Years --------------------------------------- -------------------------------------

rmr UNIT Development 1 2 3 4 5 6 7 8 9 10 11 12-15

lMIL SALFBL"

Cows ir Milk NO. 38 40 59 58 58 75 75 75 75 75 75 75 75Heifers in Milk " 8 16 17 i6 40 22 22 22 22 22 22 22 22Milk Yield per COw l/sar 2,800 2,900 3,000 3,000 3,100 3,100 3,200 3,200 3,200 3,200 3,200 1,200 3,200Milk Yield per Heifer l/ear 2,100 2,200 2,300 2,300 2,400 2,400 2,500 2,500 2,500 2,500 2,500 2,500 2,500Total Milk "reduction - Cows 'OO 1 1,064 1,160 1,770 1,740 1,798 2,325 2,400 2,400 2,400 2,400 2,bOO 2,400 2,400Total Milk Production - Heifers 'OO 1 168 352 391 368 960 528 550 550 550 550 550 550 55DTotal Milk Prod'tiOn 'OO 1 1,232 1,512 2,161 2,108 2,758 2,853 2,950 2,950 2,950 2,950 2,950 2,950 2,950Milk Fed Calve'0- OO 1 185 360 567 562 612 612 612 612 612 612 612 612 612Milk for Sale 'OO 1 1,047 1,152 1,594. 1,546 2,146 2,241 2,338 2,338 2,338 2,338 2,330 2,338 2,338Milk Price ES/i 0.28 0.33 0.33 0.33 0.33 0.33 0.33 0.30 0.30 0.30 0.30 0.25 0.25

Total Milk Sales EB 29,316 38,016 52,602 51,018 70,818 73,953 77,154 70,140 70,140 70,140 70,140 58,450 58,450

:ATTLE sBII

Cuf Come 3S 1,500 2,400 2,400 2,250 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000In-calf Heifers SS - - - 6,C00 4,800 11,200 11,200 11,200 11,200 131,200 1,200 11,200 11,200Barren Heifers E$ 240 240 240 720 360 180 480 480 480 480 480 480 LaoBElls for Breeding 3$ 8,400 7,700 11,200 26,600 h7,600 46,900 47,600 46,200 47,600 47,600 47,600 47,600 47,600

Rejected Bulls ES 240 360 480 1,200 1,920 1,920 1,920 1,920 1,920 1,920 1,920 1,920 1,920Cull Bulls ES - i,5oo - 300 - - - 600 - - - 600 -

Total Cattle Sales S$ 10,380 12,200 14,320 37,470 q7,680 63,500 64,200 63,400 64,200 64,200 64,200 64,800 64,200

Total Incme E$ 39,696 50,216 6',922 88,488 128,498 137,453 141,354 133,540 134,340 134,340 134,340 123,250 122,650

L/ All cattle on Bolleta Muiry Stud Farm are Friesians.1 400 1 per heifer calf and 500 1 per bull calf.

Price assumptions in ES, cull cow 150; in-calf heifer 800; barren heifer 120; bull for breeding 700; reJected bull 120; and cull bUll 30O.

3 T H I O P I A

LDOS ARE&B MMs 01LO0MM FRJUCT

Holleta 1airy Stud arm - 100 Cows,A)erraw LAfojora0D

Before1034 UNIT Deelpment 1 2 3 4 5 6 7 8 9 10 11 12-15

OmATIO COSTS

Salaries and Wages

Manager U 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,60o 9,600

Clerk T3 720 720 720 720 720 720 720 720 720 720 720 720 720

oriver/Mechanic 3$ 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800

Tractor Driver 3$ 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200

pump operator 3$ 540 540 540 540 540 540 540 540 540 540 540 540 540

Cattl Headan -Cows 3$ 720 720 720 720 720 720 720 720 720 720 720 720 720

Cattle Headnan - Young Stock B$ - 720 720 720 720 720 720 720 720 720 720 720 720

ilgkers,1

E$ 5,400 5,400 5,400 5,400 6,480 6,480 6,480 6,480 6,480 6,480 6,480 6. MO 6,480

Other LaborV 3B 1,080 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620

Night Watchmanl 3$ 1,080 1,080 1,080 1,080 1,080 1,080 1,080 1,080 1,080 1,060 1,080 1,080 1,080

Sub-Total E$ 22,140 23,400 23,400 21,480 24,180 24,180 24,480 24,480 24,480 24,480 24,480 24,180 24,480

Other Coate

Feed CostaY 3B 12,420 15,405 26,085 29,070 33,420 34,440 35,085 32,175 32,175 32,175 32,175 32,175 32,175

Veterinary Spc,viceV/ ES - 2,925 4,065 4,575 4,740 4,755 1,799 1,755 1,799 1,799 4,755 4,755 4,755

A.I. ServicesW ,, _ 770 760 740 goo 970 970 970 970 970 970 970 970

Purchase of Friesian Boll Co .vesd. 3$ - 900 1,800 1,80 1,500 1,900 1,900 1,500 1,500 1,900 1,500 1,90 O 1,500

Vehicle hning and ReplirsY-. 15 4,000 1,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 14000 4,000 4,000

Tractor Running an4 Repairs?! Eg 7,500 7,500 7,500 7,590 7,500 7,500 7,500 7,950 7,900 7,500 7,500 7,900 7,900

Water and Repsirs~Y 3* 919 519 664 818 814 818 818 818 818 818 818 818 818Replacement of Machinery and Bquiwnt?/ Es 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

Fencing and hilding intaene g U 3,000 3,000 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700

Imad Tarx 3$ 220 220 220 220 220 220 220 220 220 220 220 220 220

Forap Productionl2/ !$ 900 1,000 1,200 1,200 1,900 1,500 1,500 2,000 2,000 2,0O0 2,000 2,0O0 2,000

Sub-total 6$ 38,155 46,239 59,994 63,623 68,374 69,403 70,048 67,638 67,638 67,638 67,638 67,638 67,638

Total E$ 60,295 69,639 83,394 87,023 92,854 93,883 94,528 92,118 92,118 92,118 92,118 92,118 92,118

Contingencies (approx 10%) 3$ 6,005 6,961 8,306 8,777 9,246 9,417 9,472 9,182 9,182 9,182 9,182 9,182 9,182

Total Operating Costs g$ 66,300 76,600 91,700 95,800 102,100 103,300 1041400 101,300 101,300 101,300 101,300 101,300 101,300

/ The wage for a uil3mr, laborer or nightsatchman is BS%40 per anmum./ pFr details se Table 6 A- 6.

3/ Veterinary services at I1SO per acimal per annr.

J/ Artificial isaination at zo10 per cow, including 2 repeat inseairstiom if necessary.

5/ At Et0 per b calfp.e61 20,000 kn/y0sr at 1*0.2O per km.

1/ ,500C hours per year at E$5 per hour-, Cost is U$4.40 per anisa unit per arnUIR based on the following: 60 1 of water Per ani7al unit par day and water at a oest of E$0.20 per 1,000 1.

P/ At 16.7% of 3*60,000, or 310,000 per annm.10/ At 5% of cost.

A it 311 per ba per amm.Fbr purchase of seed for green fodder prodcction.

ETHIOPIA

ADDIS ABABA DA3R!Y DEEWPM3KT PROJECT

Holleta Sar tud Farm - 100 Cows

FWaaal Pro-ib¢tions

e --- aears

a! Before 1 2 3 4 5 6 7 8 9 10 11 12-15iTmP _ Development

- Cash Inflow

b4 Sale of Cattle 10,380 12,200 14,320 37,470 57,680 63,500 64,200 63,400 64,200 64,200 64,200 123,250 122,650

Sale of Nilk 29,316 38,016 52,602 51,018 70,818 73,953 77,154 70,140 70,140 70,140 70,140 58,450 58,450

Short-Term Loan _ 26,384 56,813 73,767 57,522 31,979 808 - - _- - -

Lob-Tem Loan _ 37,000 - - - - - - - - - -

Total 39,696 113,600 127,735 162,255 186,020 169,432 142,162 133,540 134,340 1314,340 134,340 181,700 181,100

Cash Outflow

Iuveatment: Long-Term Loans 37,000 - - - - - - - - - -

Operating Cost 66,300 76,600 91.700 96,900 102.100 103,300 104,000 101.300 101.300 101,300 101,300 101.300 101.300

Total 66,300 l3, 600 91,700 96,900 102,100 103,300 104,000 101,300 101,300 101,300 101,300 101,300 101,300

Annual Cash Balance Before Debt Service (26,6014) - 32,035 65,355 83,920 66,132 38,162 32,240 33,000 33,000 33,000 80,400 79,800

Debt Service

Interest on Short-Term Loan 1/ - - 2,506 5,397 7,008 5,465 3,038 77 - - - - -

Amortisation of Short-Term Lqan _ - 26,384 56,813 73,767 57,522 31,979 808 - - - - -

Interest on Long-Term loan_/ - - 3,145 3,145 3,145 3,145 3,145 3,145 747 - - - -

Amortization of Long-Term Loan 2/ - - - - - - - 28,210 8,790 - - - -

Total - - 32,035 65,355 83,920 66,132 38,162 32,240 9,537 - - - -

Annual Cash Balance After Debt Service (26,604) - - - - - - - 23,463 33,000 33,000 80,1400 79,800

Annual Incremental Cash Balance _ 26,604 26,60L4 26,604 26,604 26,604 26,6014 26,6014 51,067 56,6014 56,604 107,004 106,404

Cummlative Incremental Cash Balance _ 26,604 53,208 79,812 106,1416 133,020 159,624 186,228 209,691 266,295 322,899 429,903 536,30714/

Annual Incremental Herd Value _ 8,000 30,800 34,100 (1,900) 700 - - - - _

I/ 9.5% p.a.2 8.5% p.a. on the outstanding balance./ Total term of 8 years, including 6 years of grace. c

GCui lati-e incremental cash balance for year 15.

ETBIOPIA

6338 _ABABA DAJ3 NOW TNJ~

-4 N T,d.ea

- - - - -N--1-6-16 - - - - - - - -bd of Ye - - - - - - - - - - - - - -

HeTfeRD . C.Y . . , C. I S. i'. M. C. B. C. 3 4 5 -

RNRD NOSITrOI

Retire C .ttl e

Com. No. - 20 - - 2 1 2 2 3 3 3Tn-Caif Heirer No. S - - - _ 1 - - 1 N - 9 9Boll Cc 16 - 16 - . - - - - - -Heifer 9-24 Montho No. 7 T -Streg l N. 13 - - - - - - 1 1 1 1

o -l o No. 2 - - - - - - - - 9 9 9 S

Sub-Totl No. 63 _3 4f _ 1 _ 9 _ 9 _9

ftroSim Type Cattle

cm l i No. __ 22 31 25 26 32 31 31 31In_Colf H*tfer No. __. 25 _ 17 - e 11, 0 9 9 9Heifer Calve. No. 9 _ 9 _ 10 16 12 17 18 20 18 18Bull Cal"ve No - - -- 9 1 1 6 1 2Heir r 9-24 M-teh. o 10 15 _ _3F oriin Bullo No. 8 _ 8 - 8 2 3 1 1 1 1 1' 1

Sub-Totel No. 25 4 0 57 61 56 SS 59

Tot l NNob r -. 63 73 49 57 61 56 59 59 59 59

TrH Animl its No. 47 57 31 41 41 41 41 41 41 41

Heif. C.lve No. 9 - 1 9 13 20 13 17 20 20 20 20Bol Calve. No. 9 - 9 9 12 6 16 20 20 20 20

eTotal N91 bero _ No. 18 18 - 18 25 39 31 33 40 40 40 40

PURCHASES

Po2 6. 1 He Mfrhl No. _ 30 1 20 1- - 3

Sleare = 7aNo. 1 -1 -- - -_ - - - -

otal Nw-bera No. . - _ 30 _ 20 - 8 - _ _

Cows No. 1 _ 1 21 1 6 1 6 7 1 2 1tn-Calf Heifes No. 1 _ 1 _ . _ 10 - 6 Htarr ir e(o ) H o. 1 . 1 _ 1 3 4 3 2 2 2 2 2ittll e 9-2 No. I _ 1 _ 1 1 2 2 1 1 1 1 1Heifers 9-2C Maltv No. I _ 1 _ 1 _ _ 1Bullha No. - . _ 2 _ 1fer

Ster. No. -

Totl Numbers No. 1 5 _ 6 2 4 6 8 8 3 4 5 6 5

C.ol Bt- o No. 4 - 4 - 24 2 6 5 6 7 8 7 8In-Cr Hifdt No. 1 _ _ _ 6 _ _10 5 6 6 6Harr n Heifers (OCrn) No. 1 _ 1 10 1 2 2 2 2 2bacrren Helf ,s (Purch..ed) No. - -- 3 - 2rc.tle 9024 H1 0ths No . _ _ _ 15 _ HetSfr Celv,at N - - - 8Cull Calve Nc.. 8 11 17 14 15 19 19 11 19Bung N o . - _ 2 _ - . - - - - - 1-3 -St"r/ No. 5 - 20 _attle.

Total Nbire No. 11 - 27 3 62 15 23 20 33 3 35 35 35

i/RDUCTION DATA

Cmoneption R t* CouS S 75 _75 - - 87 87 87 87 87 87 87 87Gonoepticn Rate -Heifers % 85 - fiS 9° 90S 90 - 90 90 90 90 90xortality,

Heifer C.valv/ % 30 10 - ;0 20 20 20 10 10 10 10 101ka Caivey S 1C _ 10 _10 10 10 10 5 5 5 5 5

Cow CUintg Rate %i 1S _ _ _ 10 1S 17 17 17 20 20 20Calstrg Interva t Noth. 18 18 _- - 34A 14 14 14 14 14 314JLg at First Caving Nonths 30-36 - 30.36 -_ 24-30 24-36 24-36 24-36 24-36 24-36 24-36 24-36

I/ N. C. Natin Catte..

L/ E. C. - uNpopa Type Cattle.

I/ A Friesiano bull in purohased med mototr sold In year. 8 nd 12.

V looluding still-births .

Noomeb*r 12, 1970

NrHIOPIA

AMIS A3BARA DAIRr DEVELOPWNT PROJECT

Medium Size Far Model - 40 CowsInveatments Obsts and Financing

Total

Units Unit Cost Tota Goat Units Unit CoCta2 Total Cost Coat_ --

On-Farm Investment

Fencing 1,300 in 0.80 1,040 2,700 a 0.80 2,160 3,200Covahad 250 M 30 7,500Manager's House 50 m

2 60 3,000 - 3,000Water Piping 1,000 m 2.15 2,150 - 2,150Water Trough 1 200 200 _ _ 200Water Pump 1 270 270 _ - 270Spray Pump 1 80 80 - - 80Milk Cows (30 1) - 12 60 720 720Milk Buckets - 8 15 120 120Nilk Filter - 1 50 50 50Surface Cooler _ - 1 180 180 180Cart 1 780 780 - 780Small Equmaent and Tools - 100 _ 100 200Establishebnt of Alfalfa V 1 ha 245 245 - 245Friesian Reifer,s

170-190 kg Yf 30 600 18,000 20 600 12,000 - 30,000Contingencies

(approximately 10%) 3,635 1,340 330 5.305

Total Investment 37,000 15,500 1,500 54,000

DDL Loan 3/ 26,200 15,500 1.500 143,200Farmar's Contribution - 10.800 - 10.800

Total Financing 37,000 15,500 1,500 54,000

V The cost of establiiing 1 ha of alfalfa was based on the foflowing assumptions: (a) soil preparation cost E$ 52 per ha; (b) fertilizer cost for establishmnutof 1 ha E$ 73; and (c) seed cost E$ 120 per ha.

2/ The ag of Friesian beifers weighing 170 to 190 kg should be aproxintotely 9 months. The ry Development Agency (DDi) loan is equivalent to 80% o te totl investment ost.

4The farmsra contribution is equivalent to 20% of the total inrestment cost, but it is made entirely in the first year.

ADDIS ABA ]DI DEMLOP1E41T P30JECT

lNr Rie sa .'Iadel - 10 Gows

Prje zt_oso ns, nd0ffEVet

iF i3~~~~~~~~~~~~~~~~~efore ----------------------------------------------------------------- Years -------------------------------------------------------------------- __:=-___rrcK UPNIT Devel- i 2 3 h 5 6 7 8 9 10 U 12 13-15

R ~~~~~~~~~~~~opmentMILK sALES

Cows in k - T.t.1 No. 13 12 12 21 30 24 26 31 30 30 30 30 30 3DCsw in Milk - atwve No. 13 12 12 - - - - - - - - - -Cows in Milk - Friesisn No. - - - 21 3r 2!1 26 31 30 30 30 30 30 3DHeifers in Yilk -Total No. 4 5 29 16 - 8 13 8 9 9 9 9 9 YH.eifsrs in MilkH ive No 4 5 5 - - - - - - - -Heifers in Milk -Friesian No. - - 24 16 _ 8 13 8 9 9 9 9 9 9Milk Yield per Cow - N3tiv 1/year 500 5°° 500 - - - - - - - - - - -Xilk Yield per Cow - Friesian 1/year - - - 2,400 2,400 2,500 2,500 2,600 2,600 2,700 2,700 2,800 2,800 2,800NIlk Tied per Heifer - IAtive 1/year 400 400 400 - - - - - _ - - - - -KIlk Yield per Heifer - Friesian 1/year - - 1,800 1.8_O - 1,800 1,800 1,900 2,000 2,100 2,100 2,200 2,200 2,200Total Klk Pr.dictiqo '00 1 81 80 512 792 720 744 884 958 960 999 999 1,038 1,038 1,038Milk Fed to 0alves '00 1 32 32 72 64 48 60 72 72 72 72 72 72 72 72Milk for Ssle '001 49 48 440 728 672 681 812 886 888 927 927 966 966 966Milk P rice 16/1 0.29 0.33 0.33 0.23 0.33 0.33 0.33 0.30 0.30 0.30 0.30 0.25 0.25 0.25

TotAl Milk Sales 5* 1,421 1,584 14,520 24,021 22,176 22,572 26,796 26,580 26,640 27,810 27,810 21,150 24,150 24,150

CATTLg SAjM/

Cull Ow ES 240 240 1,740 900 750 900 1,090 1,200 1,050 1,200 1,200 1,200 1,200 1,200Di-Golf Heifere 3* 70 - 420 - - 8,000 4,000 4,800 4,600 4,o800 ,800 4,800 1,800 1,80Barren Hafers E$ 60 420 240 - 120 240 240 240 240 240 240 2420 2409-24 Ibath Old Young Zattla 3$ - - 600 - - - - - - - - - -Retlve Calms 320 - - - - - - - - -Friesian Boll Calves 3$ - - 330 510 420 450 570 570 570 570 570 570 570 570G1U1 Ball a/Steer. 3 750 3,00o - - - - - - 300 - - - 300 -

Total Cattle Sales 3$ 1,120 3,660 3,650 1,l1O 1,290 9,590 9,860 6,810 6,960 6,810 6,810 6,810 7,110 6,810

Total Innome ZS 2,541 5,244 18,170 25,431 23,466 32,162 32,656 33,390 33,600 34,620 34,620 3D,960 31,260 3D,960

ORLITM 000TS

Salar7 for Na ger Zt - 3,500 3,500 3,500 3,500 3,500 3,500 3,900 3,500 3,500 3,900 3,500 3,500 3,500Salaries for Jbo:;/ 3$ 1,200 1,800 1,800 2,400 2,400 2,400 2,400 2,400 3,000 3,000 3,000 3,O00 3,000 3,000

Feed COtsV 3$ - 2,940 5,250 4,995 5,280 5,115 5,685 5,490 5,733 6,030 6,030 6,315 6,315 6,315Veterinary Irvice5/ Z$ - 375 735 855 915 840 885 885 885 885 885 885 885 885A.I. Servie 3 _ 280 133 370 300 320 390 390 380 390 390 390 390 390?archase/P.eplaceaant of a Btl Ut - - - - 700 - - - 700 - - - 700 -I,ard Ta ES 60 60 60 60 60 60 60 60 60 60 60 60 60 60Fwage Production / 3E - no 220 333 440 550 880 880 1,100 1,100 1,100 1,100 1,100 1,100Mieellanesoe including Repairs and

HaintAnce Z$ 200 400 400 S00 600 700 900 1,100 1,100 1,100 1,100 1,1M0 1,100 1,100

Total Operating Ocets 5S 1,460 9,465 12,395 13,010 14,195 13,105 11,700 14,705 16,455 16,065 16,065 16,350 17,050 16,350

/ 200 1 per native calf and 400 1 per Friesian heifer calf.2/ Price easeuptione int 3ES ntive coil sow 60; Friesian cull cow 150; native in-calf heifer 70; Friesian in-calf heifer 800; ntive tarren heifer 60; Friesian barren heifer 120; 9-24 wantbB old rative cattle 40;

native clf 20; Friesian bull calf 30; native call bull! steer 150 and Friesian coll bull 300.2 One farm worker at %*$0 per annu..

For details ame Table S Annex ?7.Veterinary services at IS per anil per ca ms.Artificial inaemination at 3*10 per cow or heifer, including 2 repeat insesiamtons if necessary.A/Jt Ea per ha.wP rce assumptions for the establishmnt of 1 ha of mate and vetchea or broad beans or passa

(a) soil preparatlon and sowing , 3*25.00(b) 100 kg of iasonieso-ho.phate Zt3836.50(c) 50 kg of Or. E, 18.50(d) Seed , 3*30.00

TOTAL ESI10.00

ADDIS ABLBA DAIRY DEVBLPMENT PROJECT

editm Size Farm Model - 40 Cows

Financias Pro'ections

- ~~~~~~~~~~~~~~~~----------------------------------------------------- Years ------------------------ __________-- ___________-_

Before 1 2 3 4 5 6 7 8 1' ii 12 13-15

a ITEM - Developsent

' Cash Inflow

Sale of Cattle 1,120 3,660 3,650 1,4iO 1,2Su 5,590 5,866 6,810 6,960 6,810 6,810 6,810 7,110 6,810

H Sale of Milk 1,421 1,584 1L,52G 24,G24 22,176 22,572 26,716 26,58u 26,640 27,810 27,810 24,7,50 24,150 24,150

'° Short-Term Loan - 13,0U0 11,768 5,688 1,053 - - - - - _ _ _ _

° Long-Term Loan - 26

,2uu 15,500 1,506 - - - - - _ - _ _

Total 2,541 44,444 45,438 32,022 24,51> 32,162 32,656 33,390 33,600 34,620 34,62G 30,960 31,260 30,560

Cash Outflow

Investment: (a) Farmer's Contribution - 10,800 - - - - - - - - - - -

(b) Long-Term Loan - 26,200 15,500 1,50J - _ - - - -

Operating Cost 1,460 9,465 12,395 13,010 14,195 13,485 14,700 14,705 16,455 16.065 16,065 16,350 17,050 16,350

Total 1,460 46,465 27,895 14,510 14,195 13,485 14,700 14,705 16,455 16j065 16,06. 16,350 17,050 16,350

Annual Cash Balance Before Debt Service 1,081 (2,021) 17,543 17,512 10,324 18,677 17,956 18,685 17,145 18,555 18,555 14,610 14,210 14,610

Debt Service

Interest on Short-Term Loan 1/ - - 1,235 1,118 483 100 - - - - - - - -

Amortization of Short-Term Loan - - 13,000 11,768 5,o88 1,U53 - _ - - - - - -

Intereat on Long-Term Loan V - - 2,227 3,545 3,672 3,672 3,060 2,448 1,836 1,224 612 - - -

Amortization of Long-Term Loan 3/ - - - - - 7,200 7,200 7,2Gu 7,200 7,200 7,200 - - -

Total - - _6,462 16,431 >,243 12,025 lu,26u ,648 9,036 8,424 7,812 - _ _

Annual Cash Balance After Debt Service 1,081 (2,021) 1,681 i,081 1,081 6,652 7,726 9,037 8,109 10,131 13,743 14,610 14,210 14,610

Annual Incramental Cash Balance (3,102) - - - 5,571 6,645 7,556 7,.A8 9,05- ,,662 13,529 13,129 13,529

Cumulative Incremental Cash Balancea - (3,1u2) (3,102) (3,1u2) (3,102) 2,46j 9,114 17,070 24,098 33,148 42,810 56,339 69,468 110,055 4/

Annual Incremental Herd Value - 18,140 14,890 (500) 3,000 1,700 70O0 - - - - - - -

1/ 9.5% p.a.2/ 8.5% p.a. on the outstanding balance.2/ Total tarm of 10 years including 4 years of grace.4/ Cumulative incremental cash balance for year 15. 1r

AWI3 ABfB3 DAt DKZ T MWET

small ram - 10 GUIe_

Before - - - - - - --- d of lear - - - - - - - - - - - - - - - - - - - - - - - - - - - - _cT T nlllTT Deoerlnt 1 2 3 4 5 6 7 8 9 i9 11 12 13 14 15

N Native Stoek H1EDKFo8TO1

Cowe No. 5 4 4 5 1 - - - - - - - - _n Io-Salf Reifera so. 1 2 2 1

S Calves go. 3 2 - - - - - - - - - - - - -Heifers 9-24 bonths No. 2 2 2 - - - - - - - - - _- _Bulla go. 1 - - - - - - - - - - - _ _Osme No. 2 2 2 2 2 2 2 2 2 7 2 2 2 2 2 2

Sb-Total *o. 14 12 10 8 3 2 2 2 2 2 2 2 2 2 2 2

Ir,Ved Stock

cowo Wo. - - - - 4 5 5 5 S 5 6 8 a B 8 aTn-CalfStfHr No. - - - ? 2 2 2 2 ? 4 2 2 2 2 2Heifer Calvea No. - , 2 2 3 3 3 2 3 2 3 4 4 4 4 4Hifars 9-24 llotb No. - - 2 2 2 3 3 2 3 - - - -

Sub-Total No. - - 2 4 U 12 13 12 12 12 13 14 1I4 14k 14 14

Tota aN*ers go. 14 _ 12 12 12 14 lk 15 1k 14_ 14 15 16 16 16 16 16

Total IM-1 A D ts go. 11 10 10 10 1 1 12 12 1U 12 12 12 12 12 12 12

Totl Nxbere go. 4 6 6 6 7 7 L7 7 7 7 10 10 10 10 10

In-Calf Beaifws -Friesian x Zebu go. - - - _ 4 - _ _ _ _ _ _ _

O,x_ __ __u _ ___ Jo. - - 1 _ . - 1 1 - - 1 1 _- - 1 1 -

total N,ubw - No. I _ - 4 1 1 - 1 1 - - 1 1

MMALI?7

Co" No. - - 1 - - - - 1 - -I - 1 - 1 -In-Calf Heifer, No. _ - - - - - I1Calves No. 1 1 1 2 1 1 1 1 1 1 1 2 1 2 1 2Hdier 9-24 Hoct.s No. - 1 - - - 1 - - - - - - - - -

Total uNmbwe No. 1 2 2 2 1 2 1 1 1 1 2 3 2 2 2

Oall am. No. 1 2 1 1 51/ 2 2 1 2 2 1 2 1 2 1 2fn-talf Heifer, No. - - _ - - - - - - 1 1 1 2 1DBrren eifere No. - - - 1 - - - - 1 1 - 1 - 1Bull Cy, Nogo. 1 3 2 2 3 3 k 3 4 3 k5 4 5 4C0ue Bu1le/0xw Ko. 1 1 1 - - 1 1 - - 1 1 - - 1 1 -

Total. umbers No. 2 4 5 4 7 6 6 5 6 7 6 7 7 9 9 8

DUCT1M0 DATA

COcaptio Rate of Co- f 80 80 80 SO 80 85 85 85 85 85 87 87 87 87 87 87Omnceptim Rate of Hfers % 90 90 90 90 90 90 90 90 90 90 90 90 90 9p 90 90mortalitY

Adult %5 5 5 3 3 3 3 3 3 3 3 3 3 3 3 3Heifer Calve.4 B 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20BSu Calves e S 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10

Covw Glling Rate S 17 17 17 17 17 17 17 17 17 17 17 20 20 20 20 20Barren Heifer Rat. t 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 laCalving Interval Kmoth, 18 14 14 14 14 14 14 14 14 14 14 14 14 14 14 1k 1:

1/ Foor of these are in-calf. obp Includn ati3-1-irtba.

E TH I O P I A

ADDIS ABRAA DAIR! DFVELODPIMT PROJECT

Small Farm Model - 10 CowsInvestment Costs and Financing

0

1o2 3 Total

C DITE Units Unit=oTota Cost Units Unit Cost Total Cost Units UJnit Cost Total Cost Units Unit Cost Total Cost Cost

On-Fann Investment

gf Fencing 700 m 0.80 560 _ - 1400 m 0.80 1,120 1,680Cowshed 1/ - - 0.25 600 150 0.75 600 450 600Watering Facilities / 1,100 - - - 1,100

Spray PMp - 1 30 30 -30

Milk Cans (10 1) _ _- 6 25 150 150

Milking Buckets - - - 3 ?5 45 45Small Equipment and Tools - - - 100 100

In-Calf Half-bred Heifers - - - 4 35C 1,400 1,400

Contingencies (approx. 10 ) 140 - 20 335 495

Total Investment 1,800 _ 200 3,600 5,600

Finan¢ing

DDA Loan3/ 1,500 200 3,300 5,000

Famner's Contribution 300 _ 300 600

1/ Cowshed size is 4 x 11 meters.

2/ For piping, water tank, water pump and trough.

3/ The Dairy Der'elopment Agency (DDA) loan is equivalent to 90% of the totalinvestment cost. C

dYIlioptA

IIS 61AR6 DUN DE8OP1OT PEOJMOT

S11 ._0 MedeI - 10 3o.Pro ectiopa of Ioneo and Coerating G00te

° Se~~~~ ~ ~~~~~~~~~~~~for- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Yr _- - -_ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -_

- IlMIT U3NiT D-n:lp=ot 1 2 4 b 5 6 7 8 S 10 11 12 13 '4 15

°MI-LK SiLES

Coec ir. ilk- Thal MN. 3 3 3 4 2 5 5 4 5 5 5 6 7 S 7 8

Go. i NMilk -MatA.c Ih. 3 3 3 4 2 1 - - -

Co- i. Nilk-F1 No. - - - - - 4 5 4 3 2 1 - - - _

Coe in ilk - F2N.. - - - 2 3 4 5 4 2 1

C"e ir ylk -7 3/1l Mc. - - -- - -- 1 3 6 6 8

Heifere iD Milk- T4t.i No. 1 1 2 2 4 2 2 2 2 2 4 2 2 2 2

lfeir ir. tlk -ati-e No. 1 1 2 2 - -- - - - - - - '

Heifelr i. Milk - F1 No. - - - - 4 2 2 -

Heifer. ir. ilkk 218o. . - - - - _ _ 2 2 2 1 1 _ _ _ _

Eeifere in lilk -F 3 /F4 No. - - - 3 _ _ _ _ _ _ 1 2 2 2

Milk Yield per Cow - ti I/ar, ;0 500 S0 500 500 500 Soo - - - -_Milk Tield per Cow.. P -1ye 1 200 1,300 1,300 1,403 16C i400

Milk Yield per Cov - F2 l/yeax _ - , , 1,400 1,500 1,602 1,600 1,700 1 ,00 1,700

Yilk Tield per Cow - FF4 -/y. _ _ ,- , 1,800 1,00 1900 2,00 2,0DO

Milk Yield per Heifer - Native l/yer 400 400 400 420 -Milk Yield per Heifer - F1 - 900 goo 1,000 -Milk Yield par Hefer- 2

Or -- _ - - - - 1,100 1,100 1,200 1 200 1, --

Milk Yield per Reifer- 73/74 - - - - - - - - - - 1,100 I o 1,500 1,600 1,600

Total Milk Produotiot '01 19 19 23 28 46 71 85 74 92 97 104 152 155 178 169 182

Nilk Pad toCelre./ '00 1 6 4 8 8 12 122 12. 8 12 8 12 16 16 t6 16 16

Milk fr hore Coe,eaptioe '001 3 3 3 3 4 4 4 4 4 4 6 6 6 6 6 6

Milk for Sale '00 1 10 12 12 17 30 55 69 62 76 85 86 130 133 156 167 170

ilUk Priee 2$/j. 0.25 0.33 0.33 0.33 0.33 0.33 0.33 0.30 0.30 0.30 0.30 0.25 0.25 0.25 0.25 0.25

Total Milk Sale, 9$ 250 396 396 561 990 1,815 2,277 1,860 2,260 2,550 2,580 3,250 3,325 3,900 3,675 4,250

CArTs ASLAS 2/

Ctll COYS B$ 60 120 60 60 60 180 240 120 240 240 120 2f0 120 240 120 240

Native In-cal.f Breding Co - - - - 480 - - -

In-Ceif Heifero k' _ _ _ - - _ _ _ _ _ _ 350 350 350 700 350

BerrenHeitere H5 i -$ 60 - - - - 80 - 80 - I 80 80Bull C;al a s$ - 50 75 50 50 75 75 100 75 100 75 100 125 100 125 100

CMll B411,/Oaeo E$ 150 150 150 - - 150 150 - - 150 150 - - 150 150 -

Total Cattle Sale. E$ 210 320 285 170 590 405 465 220 395 490 425 690 595 920 1,095 770

Total Inco=5 $ 460 716 681 731 1,580 2,220 2,742 2,080 2,675 3,040 3,005 3,940 3,920 4,820 4,770 5,020

OPERATING COSUO

Feed Cots1/ V E- - 60 120 240 285 368 345 435 653 765 870 938 1.05 1103 1.200

Veteriaary- S-rviec 2$ - 20 40 110 120 130 120 120 120 130 146 160 140 130 140

A.I. Service 5/ 5$ _ 60 70 70 110 90 90 80 100 90 120 130 120 ¶60 130 160

Replaceet o? Oe 6/ s$ - - 150 - - 150 i5o - - 150 150 - - 150 150

Led T- I/ 8$ 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

Mi.cellan.oooc 8 50 5E 50 50 80 80 80 80 100 100 100 i5o 150 150 150 150

Total Operating C.ota 1* 70 130 370 300 560 745 838 645 775 1,133 1,285 1,310 1,368 1,695 1,693 1,650

1/200 1 .per etie calf and 400 1 per ieproved heifer calf.

/P.1rioe amepti..o On i $: ea.tle eul1 eeu, . 60; improved cull -ou 1201 native in-calf brooding coo- 120; in-ealf orcee-bred heifer - 350; otiee beaven heifer - 60; ijproed berren heifer - 80;

Obuclf - 251 ed .011 bIa1/o= - 150.],or bet~1 ileec Tble S Racer 8 wo

eiclery terrieh*t SS 0 pr ieprftd tcital per r.frOitf l tt1iase ation at 11$ l0 per cow or heifer, including 2 repeat lest:dnations if aceesary.

_ wriee t t2en pr cxc -1150.tAt 4 Iperb..

EThOPIA

AMDIS ARARA DAIRY DVELPXMNT POJECT

,Sm,ll Farm Model - 10 CowsFinancila Projiections

(Se)

--------------- Years -…------------------------------…-_________________________

ram Before 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Development

Cash Inflow

Sale of Cattle 210 320 285 170 590 405 465 220 395 490 425 690 595 920 1,095 770I. Sale of Milk 250 396 396 561 990 1,815 2,277 1,860 2,280 2,550 2,580 3,250 3,325 3,900 3,695 4,250'1 Short-Term Loan - - - - - - - - - - - -

Log-rarm Loan - 1,800 - 200 3.600 - - - - - _ - - - - -

Total 460 2,516 913 1,297 5,180 2,220 2,742 2,080 2,675 3,040 3,005 3,940 3,920 4,820 4,790 5,020

Cash Outflow

Investments Long-Term Loan - 1,800 - 200 3,600 - - - - - - -Opeeating Cost 70 130 370 300 560 745 838 645 775 11133 1,285 1.310 1.368 1.695 1,693 1,650

Total 70 1,930 370 500 4,160 745 838 645 775 1,133 1,285 1,310 1,368 1,695 1,693 1,650

Annual Cash Balance Before Debt Service 390 586 543 797 1,020 1,475 1,904 1,435 1,900 1,907 1,720 2,630 2,552 3,125 3,097 3,370

Debt Service

Intereat on Short-Term Loan -_ _ 22 35 - - - - - -Amortization of Short-Term n 232 366- - - - -Interest on Long-Term Loan _ _ _ 153 153 170 476 439 398 354 306 255 199 138 72 -Amortization of Long-Term Loan 3/ _ - - - - 439 476 517 561 609 660 716 777 845 -

Total _ _ 153 407 571 915 915 915 915 915 915 915 915 917 - -

Annual Cash Balance After Debt Service 390 586 390 390 449 560 989 520 985 992 805 1,715 1,637 2,208 3,097 3,370

Annual Incremental Cash Balance - 196 - - 59 170 599 130 595 602 415 1,325 1,247 1,818 2,707 2,980

Cumulative Incremental Cash Balance 196 196 196 255 425 1,024 2,154 1,749 2,351 2,766 4,091 5,338 7,156 9,863 1 2 , 8 4 3 W

Annual Incrasental Herd Value _ (190) 140 230 1,810 20 200 (100) (100) 100 700 200 - - -

VY 9.5% p.a.2/ 8.5% p.a. on the outstanding balance.3/ Total term of 10 years including 4 yeara of grace.

/ Cumulative cash balance for year 15. C.

MANEX 9

ETHIOPIA


Shola DaiPlant - Technical Aspects

1. The present value of Shola Dairy Plant is estimated at E$900,000,comprising buildings, E$300,000: machinery and equipment, E$400,000; andvehicles, E$200,000. Buildings have been financed by Government loan;UNICEF has financed machinery, equipment and vehicles; and UNICEF andFAO have provided scholarships and technical advisors. Table 1 showsthe amortization of the UNICEF loans, to be repaid in milk supplied toselected groups of beneficiaries (such aa schools and hospitals) over a10-year period, and projections of income and operating expenses of thePlant.

2. Shola's daily throughput in the peak season is expected toexceed its 30,000-liter capability by Project years 4 or 5. Additionalinvestments are required and proposed for financing under this Project.These investments (Table 2) have been determined in consultation withthe UNICEF Regional Office for East Africa.

3. Machinery and equipment would represent more than half of theproposed investments. Particularly important would be the installationof a stand-by generator because of power breakdowns that occur occa-sionally. In year 1 and in year 4, another 10,000-liter milk storage tankwould be needed, and in year 4 an additional bottling line. A biggermilk separator would replace the old one in year 2 and a small plasticbag filling unit would allow packaging of cream and other fresh milkproducts. In year 5, the installation of an automatic butter wrappingmachine would be necessary. Equipment for extending milk stores and somesmall installations for cheese production are needed for storage and pro-cessing of an expected increase of unsold milk. Capital necessary for smallmilk plant equipment would be E$8,000 in years 1, 2 and 3 and E$12,000 inyears 4, 5 and 6. More flexible distribution of milk and other dairy pro-ducts would be made possible by installation of eight refrigeration unitsin selected selling centers.

4. Shola Dairy Plant lies about 5 km outside the capital. Therefore,housing for five key technicians near the plant would be required, espec-ially for those working on double shift during the night. Shola needsabout 300 m of water Ser day, which at present comes from the publicsupply at E$0.50 per m . To be independent of this fairly expensive andoften insufficient supply, the financing of a water supply for the plant

ANNEX 9Page 2

is justified, especially as it would greatly reduce costs. In the courseof expanding milk collection and distrlbution, the number of collectingand selling centers should be raised as proposed. During the Project'sduration, eight additional milk trucks and three minibuses would bepurchased. Replacement costs for vehicles are included in Shola's opera-ting costs.

5. Projection of income and operating costs of the Plant are shownin Table 3.

EIHIOPIA


Shola Dairy PlantFinancial Prections

_ _______ Years- --- …- …~~~ ~~~Before 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Cash InflowSale of Yilk and Butter 1,563 2,888 3,851 4,814 6,161 7,124 8,087 8,196 8,893 9,416 9,765 9,061 9,373 9,686 9,998 10,311Long-Term Loan from ADDC 1/ - 279 110 109 198 56 57 - - - _ _ - - -_

Total 1,563 3,167 3,961 4.923 6,359 7,180 8,144 8,196 8,893 9.416 9,765 9,061 9,373 9,686 9,998 10,311

Cash Outflow

Investment: Long-Term Loan - 279 110 109 198 56 57 - - - - - - - - -

Payment to Farmers for Milk 986 1,807 2,409 3,011 3,8514 4,457 5,059 5,147 5,585 5,913 6,132 5,293 5,475 5,658 5,840 6,023Operating Costs 442 611 813 961 1,191 1,353 1,530 1,831 1,962 2,059 2.12lL 2,188 2.253 2.316 2.379 2j

Total 1,428 2,697 3,332 4,081 5,243 5,866 6,646 6,981 7,547 7,972 8,256 7,481 7,728 7,974 8,219 8,467

Annual Cash Balance Before Debt Service 135 470 629 842 1,116 1,314 1,498 1,215 1,346 1,4414 1,509 1,580 1,645 1,712 1,779 1,844

Debt Service

I. On Borrowings Before Takeover by DDA:(a) UNICEF Loa

Interest - 92 82 73 64 55 46 36 27 18 9 -

Amortization 115 115 115 115 115 115 115 115 115 110 -

(b) GoversuIne/LoanInterest - 28 25 22 20 17 114 11 8 6 3 - _ _ _ _ _Amortisation 35 35 35 35 35 35 35 35 35 35 -

II. On Borrowingsa r5 er Takeover by L0A:Interest _ - - 24 33 42 59 64 60 45 30 15Amortization of Long-Ter Joan-4/ - - - - - - 109 175 175 175 175 - - - - -

Total 270 257 269 267 264 269 370 420 394 362 190 - - -

Annual Cash Balance After Debt Service (135) 213 360 575 852 1,045 1,128 795 952 1,082 1,319 1,580 1,645 1,.;2 1,779 1,844

Annual Incremental Cash Balance - 348 495 710 987 1,180 1,263 930 1,087 1,217 1,454 1,715 1,780 1,847 1,914 1,979

Cumulative Incremental Cash Balance - 348 843 1,553 2,540 3,720 4,983 5,913 7,000 8,217 9,671 11,386 13,166 15,013 16,927 18,906

1/ Shola Dairy Plant is part of the Dairy Development Agency (DDA), therefore, this is an internal loan.2/ 8.0% p.a. on outstanding balance.'5/ 8.5% p.a. on outstanding balance.JT/ Total term of 10 years including 5 years of grace.

IT

Noveemher 12, 1970

E T 0 I O P I A

ADDIS ABAEtA nIR1 fLV9.OPM! PFRWT

Shola DLiry PlsatPr,,3oti0 of 1nS s, l d Op-tigx Costs

X 2dore ~ ~~~~~~~~~~~~~~~~~ -------------- _-----------___-------_------___------------------------------_-- Y- -------------- --------------.---------------------------------------------- ______ _____:_

£ ITEM UIIIT Dpopeat 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15

- SAL3 OF DIMU PRODUCTS

,. lfk Th,ghpt por y 000 1 10 15 20 25 32 37 42 47 51 54 56 '3 60 62 64 66

J IYlk R8t,tl Prtcn 8$ par 1 0.40 0.50 0.50 0.50 0.50 0.50 0.50 0.45 0.45 0.45 0.45 j.40 0.40 0.40 0.40 0.40

0 S..8 of c 1 MI/ 000 Et 1,453 2,724 3,632 4,540 5,811 6,719 7,627 7,681 8,335 8,825 9.152 8.26 8,716 9,007 9,297 9,588

51,, of 14ttmr- '000 38 l1 164 219 27h 350 405 460 515 558 591 613 635 657 679 701 723

9ctsl Tn0,G. '000 E5 1,563 2,888 3,851 4,814 6,161 7,124 8,087 8,196 8,893 9,46 9,765 9,061 9,373 e'.6 9,998 10,311

OP2RJTINO COSTS

L'rlect Cost of Pr s1rg1 000 PS 146 219 292 365 467 540 613 686 745 788 818 847 876 905 934 964

Tranwport of 'Om Z $000 91 137 183 228 292 338 383 429 465 493 511 529 548 566 584 602

Yffrkstig Co.teg' a 000 8$ 55 82 110 137 175 203 230 257 279 296 307 .8 329 339 350 361

Ad.instratire Ios *rd Sa.riesw 8000 F$ 54 60 65 70 75 75 75 75 75 75 75 75 75 75 75 75

Printing, 8tationary, Tsep6o,pc 000 E$ 8 9 9 10 10 10 10 10 10 10 10 10 10 10 10 10

Rsplacesst of CfirT Pla5 snd Lbsbor toryYadinscey and lquisetsf '000 E3 - - - - - - - 130 130 130 130 130 130 130 130 130

Raplacoent of Mlk Trcks'7/ 000 E$ 48 48 80 64 64 64 80 80 80 80 SO 80 80 80 80 80

Contt.gendna (approx 10%)E/ :000 E$ 40 56 74 87 108 123 139 167 178 187 193 199 205 2.. 216 222

Sob-Total '000 E$ 442 611 813 961 1,191 1,353 1,530 1,834 1,962 2,059 2,124 2,188 2,253 2,316 2,379 2,444

Payent to Fa-cer, for Milk 0ooo E$ 986 1,807 2,409 3,011 3,854 4,457 5,059 5,147 5,585 5,913 6,132 5,293 5,475 5,658 5,840 6,023

70tal Op-rotlig Costs 000 Z$ 1,428 2,418 3,222 3,972 5,045 5,810 6,589 6,981 7,547 7,972 8,256 7,481 7,728 7,974 8,219 8,467

I/ At s 6 per 4.2-/ Process..g cost, ocldiog dcp-oooation, is 8$ n.04 per 1 of m:Lk.

3/ fronport cost, escludlo deprsdato2 3

,n, is 8$ '^^5 p-r 1 of nilk./ 9$ 60.015 pcr 1 of rilk.

I/ Includes cis]k. of milk -c1o1.tiag cnnters.6/ Appro-stcly 10% of diry plant and loborotory -. chios,7 and npipae-t.

7 At s$ 16,0-0 per mlk t-ock./ Iaclodes s,intemnice of buildings and silk coIlectitg centers.

ANNEX 9Table 3

ADDBS ARABA fA DSEV7LOPMENT PROJET

TotalITEM Unit!Cost 1 2 3 4 5 6 Cost

Milk throuihput per Day ('000 1) 15 20 25 32 37 42

Investment

(a) BdreadConstructionl(a) ea8 (5) 40 - - - - - (5) 40

New Milk Collecting Centers 5 (8) 40 (4) 20 (4) 20 , (16) 80Replacement of TeMporary

Centers 5 (4) 20 4) 20 , , _ _ (8) 40Milk Selling Oanters 0.6 (5) 3 5 3 ( (5) 3 - (5) 3 (20) 12Water (borehole) 18 (1) 18 - - (1) 18

Sub-Total 121 43 20 3 - 3 190

Refrigeration Units orSelected Selling Centers 6 (2) 12 (2) 12 (2) 12 (2) 12 - - (8) 48

Laboratory Bquipment 1 1 1 1 1 1 1 6Milk Plant Equipsent 8 8 8 12 12 12 60milk Storage Tank (10,000 1) 25 (1) 25 - - (1) 25 - - (2) 50Stand-by Eleotric Generator 40 (1) 40 - - - (l1 40Milk Separator 9 - (i) W - _ _ (1 9Plastic Bag Filling Unit 3 - (1) 3 - _ _ _ (1) 3Conversim Parte for

Peateurising Machii 2 _ (1) 2 - - - - (1) 2Bottling Line 105 _ -- (1)105 - (1)1o5Automatio Butter Wrapping

Machine 16 - - - - (1) 16 _ (1) 16Equipsent for Extendingthe Milk Store 10 - (1) 10 - - - (1) 10

Cbheee Vat 3 - - - - - (1) 3 (1) 3Air-Condition for Cheoee Store 1 _ _ - (1) 1 (1) 1Xilk Can. (50 1) 0.03 (160) 5 (200) 6 (200) 6 (200) 6 (200) 6 (200) 6 (1160) 35

Sub-Total 91 41 37 161 35 23 388

(o) Vehioles(R°uoks 16 (2) 32 (1) 16 (2) 32 (1) 16 (1) 16 (1) 16 (8)128Minibus 10 (1) 10 (1) 10 - - (1) 10 (3) 30

Sub-Total 42 16 42 16 16 26 158

Sub-Total 254 100 99 180 51 52 7S6

Contingencies (anproximatelyr 10%) 25 10 10 18 5 5 73

Total Investment 279 110 109 198 56 57 809

Financingz-

DDA Loan 279 110 109 198 56 57 809

.1/ In the bodcy of the Table the figures in brackets represent the number of units of the item in question purchased in that year.

j/ The Dairy Development Agency (DUa) Loan is equivalent to 100% of the total investment cost.

Noveber 12, 1970

ffBOPIA

ADDIS ABABA DlIu DEVIIORW P10JET

Phasing of the Len,ding Prw.m

Phasine of Investmernt and Finncing Number and Phasing of Loan Ca,.tments

(E$ 1000)

- - - - - - - - Teare - - - - -- - -Years - - - - - - -- - - - - - - -

ITEM 1 2 3 4 5 6 Total 1 2 3 4 5 6 Total

Inveutment

Snall Dairy Farms 27 176 232 74 378 457 1,344 15 98 127 - - - 2I0Medium Size Dairy Farms 1,480 1,619 1,218 1,201 387 35 5,940 40 27 20 2 _ 110Private Cross-Breeding

Ranches 138 92 - _- - 230 3 2 - - - - 5Honleta Dairy Stud Fam, 37 - - - - - 37 1 - I _ - _ 1DDA Investment in

Abermossa 250 - - - - - 250 1 _ _ _ _ _ 1Shola Dairy Plant 279 110 109 198 56 57 809 1 _- - I

S&b-Total 2,211 1,997 1,559 1,473 821 549 8,610 61 127 147 23 - - 358

Costa of Technical

Adini4strative Services g9o 1,020 960 790 710 690 5,080 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Total 3,121 3,017 2,519 2,263 1,531 1,239 13,690 61 127 147 23 _ _ 358

Financing of Investment

Farirs 460 10 216 248 - - 1,234DDA 347 372 403 412 Y 423 52Goverzment 200 - - - 200IBED/mA. 2,11h 2,412 1,931 .1,612 1,119 816 10,004

Total 3,121 3,017 2,519 2,263 1,531 1,239 13,690

The Government contribution to investment of E$ 200,000 is a loan in kind ( cattle ) to DDA for cattle for Abernossa Cross-Breeding Ranch. 10n.a.- not applicable.

%o.ver 12, 1970

ANNEX 11

ETHIOPIA

ADDIS ABABA DAIRY DEVELMPMENT PROJECT

Estimated Schedule of Disbursement of IDA ---edit

- - - - Estimated - - - -Amount Balance

Project End of Disbursed of CreditYear Quarter ---- US$OOO ---------

1 0 0 h,4001 150 4,2502 400 4,ooo3 690 3,7104 990 3,410

2 1 1,270 3,1302 1,550 2,8503 1,830 2,5704 2,110 2,290

3 1 2,331 2,0692 2,552 1,8483 2,773 1,6274 29994 1,406

14 1 3,153 1,2482 3,311 1,0903 3,470 9324 3,628 772

5 1 3,740 6602 3,852 5483 3,964 4364 14,076 324

6 1 4,157 2432 14238 1623 4,319 814 4,hoo 0

November 12, 1970

ADDIS ABAPA DAli! 3VWEHDEW PROJECT

Dairy Develovaent nauey (MA)

Tecbnical and Administrative Staff Nauqdrents

--- -- --Years - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

o 1 2 3 4 5 6FH CATE3ORY Nuer Wit Cost Nwmber lunit Ue*t NwAber Unit Coat Number Unit Coet Number Unit Cost Number unit Cost

(0 E$) (000 E$) (000 S$) (000) .) (000 E$) (ooE Es)

Oenral Manater 1 25 1 25 1 25 1 25 1 25 1 25Lowyer 1 12 1 12 1 12 1 12 1 12 1 12

PRWOCTIIN DIVISION

Production Nanager / 1 100 1 100 1 100 1 100 1 100 1 100Asistant Production

Nanager - - - - - - 1 12 1 12 1 .12Ve. a'd (Disease

cOirnol) Y 1 80 1 80 1 80 - - - - - -

eterinaran (DiseaseControl) - - 1 12 1 14 1 14 1 14 1 14

Artificial 1 80 1 80 - - - - -

Artificial Insenation 1 7 1 7 1 8 1 8 1 8 1 8specialit 2

Dary Devel)pmst 0fficarS - 1 80 1 80 1 80DuiryDevelpAmt, cfioer 2 8 2 8 3 8 3 8 3 10 3 10Veter?ne7 Assiatsats 1 7 2 7 3 7 3 7 4 8 4 8Dairy tendon Officers - - 1 7 2 7 4 7 5 8 6 8Principal, Farmers'

Training Center 1 7 1 7 1 7 1 7 1 7 1 7Inseminatore 2 3 4 3 7 4 7 4 7 4 7 4

FINANCIAL DIVISION

Financial mnager I 1 100 1 100 1 100 - -

Finan.rial uager _- - - - 1 1 5 1 15Assistant Financial Manager 1 12 1 12 1 12 - - - - -

Chef Accountant 1 12 1 12 1 12 1 12 1 12 1 12Loan officers 2 7 3 7 3 7 3 A8 3 8 3 8Accouts Clerke 3 5 4 5 4 5 4 6 4 6 4 6

PEOCESI & NLFINO DIMSION

Processing & NarttingManager 1 15 1 15 1 15 1 15 1 15 1 15

MISC]IANEOUS

Drivers 4 2 4 2 4 2 4 2 4 2 4 2Mewermployees 5 3 7 3 8 3 10 3 10 3 10 3

1/ ept for the Marketing & Processing Manager all staff of Shola Dairy Plant and Holleta Dairy Stad Farn are excluded frmn this table.

IntaernatonaJ.y recruited personnel.

ITa1OPIA

ADDIS ADA DM1 fLIOPST PRojECT

1Rir Dovekpment Agency (DDA)Coeta Of Tebhial and ksraIstrative Services 1/

- - - years- - - - - - - - - - - - - - - - - - - - - - - - --r- Years- - - - - - - - - - - -CA7StoRr 1 2 3 4 5 6 Total 1 2 3 4 5 6 Total

E0s W( US I000 Equi)v.

Foreian zc143nae Costs

DDA Technical and Ajsinis-trative staffrr/ 349.o 446.0 374.0 162.0 90.0 90.0 1,511.0 139.6 178.4 149.6 64.8 36.o 36.o 604.4

Travol 25.0 25.0 5.0 - - - 55.o 10.0 10.0 2.0 - - - 22.0TranD ort Vehicles 3/ 63.0C/ 18.0 10.0 14.0 - -- 1o5.o 25.2 7.2 4.0 5.6 - - 42.0opernting Ccats of Transport

Vehicloo _W 32.0 43.0 47.0 63.0 63.0 6g o 31t 10.8 17.2 1B.8 25.2 25.2 25.2 124.4Tehoica. Egqtdpment 15.0 9.0 6.o 6.o 6.0 6.0 : 6.0 3.c 2.4 2.4 2.4 2.4 19.2Offico Eqcisment 15.0 5.0 - - -- - 20.0 6.o 2.0 - .- - - 8.0Semen and Liquid Nitrogen 14.4 33-3 52.0 59.2 63,8 66.5 289.0 5.7 13.3 20.8 23. 25.5 26.6 115.6Training Center Equipmect 5.0 - - - - - 5.0 2.0 - - - - - 2.0Offiac E ,2enMA 5.- 5.0 5.0 5.0 5.0 5.0 30.0 2.0 2.0 2.0 2.0 2.0 2.0 12.0Field Studies5/ 15.0 40.0 40.0 40.0 4o.o 15.0 190.0 6.o 16.0 16-o 16.^ 16.0 6.0 76.0Contingencioal>approX. 10%) 61.6 60.7 48.5 38.3 29.8 22.1 261.0 24.7 24.3 19.4 15.3 11.9 8.8 104.4

subtotal 600.0 685.0 587.5 387.5 297.6 267.6 2,825.0 240.0 274.0 235.o 155.0 119.0 107.0 1,130.0

Local Cofst

DDA Technical apd Admifla-31;atit7e Staff 21 185.o 243.0 278.0 302.0 323.0 331.0 t1662.0 74.0 97.2 111.2 120.8 129.2 132.4 664.8

Transport Vehicles 27.0 7.0 5.0 6.o - - 45.0 10.8 2.8 2.0 2.4 - - 18.0Operating Cocts of Transport 4

Vebiolon 12.0 13.0 17.0 13.0 13.0 13.0 81.0 .8 5.2 6.8 5.2 5.2 5.2 32.4Teebnical EquLpment 5.0 3.0 2.0 2.0 2.0 2.0 16.o 2.0 1.2 0.8 0.8 0.8 0.8 6.4Offico Nqtzp±nt 15.0 5-0 - - - - 20.0 6.o 2.0 _- - - 8.0Semen and Liquid Nitrogen 1.6 3.7 3.0 3.7 4.2 4.8 21.0 o.6 1.5 1.2 1 .5 1.7 1.9 8.4~Triing Center Equipmeat 7.0 - - - - - 7.0 2.8 - - - - - 2.8Offioc Expenses 5.0 5-0 5.0 5.0 5.0 5.0 30.0 2.0 2.0 2.0 2.0 2.0 2.0 12.0Rent for DTilding 15.0 15-0 15.0 15.0 15.0 15.0 90.0 6.o 6.o 6.o 6.o 6.o 6.o 36.0Field Sgudics 10.0 10.0 10.0 10.0 10.0 10.0 60.0 4.0 4.o 4.o 4.o 4.o 4.o 2o.0Contingencies (approx. 10%) 27.4 30.3 37.5 45.7 40.2 41.9 223.0 11.0 12.1 15.0 18.3 16.1 16.7 89.2

Subtotal 310.0 335.0 372.5 402.4 112.4 122.6 2,255.0 164.o 134.0 149.0 161.0 165.0 169.0 902.0

Total Coots 910.0 1,020.0 960.0 790.0 710.0 6so.o 5,080.0 364.o 408.0 384.0 316.0 284.0 276.0 2,032.0

y/ Holleta Dairy Stud Farm and Shola Dairy Plant arm excluded from this table.2/ Irncludig p25,000 in year 1 and E$ 50,000 in each of the years 2 a2Wd 3 for technieal serrices :v rdlc marketing and processing.J Purch1c of 7 jeeps and 4 sall cars in year 1, 2 jeeps and 1 small car in year 2, 1 jeep and 1 siall car in year 3, and 1 jeep and 2 small cars in year 4.

/ AssuAing 20,000 km per jeep per annus 0 200 per km, and 40,000 km per small car per annum S 100 per km./ 3acntia.137 research on grassland and forage crop production.

r °Exeluding the salary of the Marketing and processing Manager, which is included under Shola Dairy Plant.

ANNEX 3Table3

ETHIOPIA


Dairy Development Agency (DDA)Breakdown of Costs of Technical and Administrative Services

DDA Veterinary 4ad TechnicalCATEGORY Administration A.I. Services Services Total

- -E$!OOO - - - - - - - - - --Salaries 545 801 1,827 3,173

Travel 5 15 35 55

Vehicles 5 45 100 lo

Vehicle Operating Costs 6 130 256 392

Technical Equipment - 22 42 64

Office Equipment ho - _ 40

Semen and Liquid Nitrogen 310 _ 310

Training Center Expenses - - 12 12

Office Expenses 60 - - 60

Rent for Buildings 90 - _ 90

Field Trials and Demonstrations - - 250 250

Contingencies 79 140 265 48

Total 830 1,463 2,787 5,080

November 12, 1970

ANNU 12EMKIOPIA T%b'i 4

ADDIS ABABA DAIR D1UWLFAMT FBtU !

D irY D.velopt Ageacy (DDA)

piretal F!deetl

---------------------------------------------------- ______________ ProAv: Y - ----------- ~- ~------------------------------- ------------------------------

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

CASH ii1W

Prar JDA Credit fo,

De,el.o.nt of DDA Fa 90 78-- - - -_-_ ._ - _ - - _ _ _Sh.l. Dairy Plnt 279 110 109 198 56 57 _ _ _ _ _ _ _ _ _ _ _ _ _Adeini.t0.ti-o/T.,hnIcal

Servmic Cost 298 315 282 P32 213 182Fo,.I,v C00t. of 0.1.-00. c i/ 302 372 306 1I5 85 85

S9b-Tatal 969 865 697 595 354 324

5oflnmlt Lo-.0 to P-rchuteAb..Do... Cattl, 200 -- - - - - - - - -

10n. for Workirg CapttOl 189 145 112…- - - - - - - - - -

Soroic. Ch-,g. -. D.iry L-,aby AIDS t 2%: - 25 5i 84 106 122 129 123 114 102 88 74 59 44 30 18 19 4 1

Inet fro-

Arti1ia.l In-1n -t-on 9-rojo. 13 32 48 55 60 64 62 63 65 67 69 75 75 75 75 75 75 75 75 75OcteflOary bor40,ic 23 53 79 108 128 142 146 145 145 145 146 148 150 150 150 150 150 150 150 150Cottle 001., eo bberno,,a 74 64 57 98 153 137 137 333

C.lh SOopl0. f00.:

Ho11.t ralry Stud F-a _ _ _ _ 23 33 33 80 80 80 80 80 80 00 80 80 80Shol. Dairy naDt 470 629 942 1,116 1,314 1.498 1.215 i.346 1.444 1.509 1.580 1.645 1,712 1,779 1.884 1,884 1,84 1,884 11884 1.884

T.t.1 C6.h Inflo. 1,937 1,813 1,993 2,046 2,115 2,287 1,689 2,033 1,801 1,856 1,963 2,722 2,076 2,128 2,219 2,207 2,208 2,193 2,190 2,189

CASE OUTFWW

OnoestIteot or

'IDA P- 90 78 - - _ - _ _ _ _Ahol. 2nlry PIant 279 110 129 198 56 37 _ _ _ _ _ _ _ - _ _ _ _ _ _

Qora-lr, C..,.

Adi,lnior0-tleTerob.10 08-D-eo 910 1,020 960 0 7 7o 690 6670 67 640 670 670 670 740 740 740 740 740 740 740 740Ab.rno--. P-1, 95 55 52 66 6 1 60 49 _ _ - - _ _ _ _ _ _ _

8ub_tot.1 1,374 1,263 1,121 1,254 831 788 730 ng 640 670 670 670 740 740 740 740 740 740 740 740

Debt Seroice

nt re, t.00:

Pu.dM C,0, tDA C-rdit, -. e 1/2% - 43 75 101 129 146 162 159 153 145 135 123 110 96 82 68 55 41 27 14Ioee fror Wo-ling Capltel at

9 1/2% - 18 i4 11…- - - -_ _ _ _ _ _I-.0, to Purcha-e Abe-tosa

Cat ]r*t6 /29 - 13 13 13 13 13 13 13 - - - - - - - - -

Repoynefl ar:

fPnd, frr IDA Credit --- 48 85 119 157 184 211 211 210 211 210 211 211 210 211Loan. fr. Wo-king Capital - 189 145 112 … …… L-a. to Paroahe Alorno- o C.ttle - 0 …- - - -- - - - - -

Total C--h Outflo. 1,374 1,525 1,368 1,291 943 949 953 976 1,112 972 989 1,004 1,061 1,046 1,033 1,018 1,006 992 977 965

C-ah B2l-D:, 400Cr 2f40 SD-rtio 563 288 525 755 1,172 1,340 736 1,057 689 884 974 1,718 1,015 1,092 1,186 1,189 1,202 1,201 1,213 1,224

Coot of Loppinig-p -op.trlate tpocielit. .alrDo -ad other cnolr ,.t. .re Cot repaid by ADDC to 0G-.ene*t.

Jar- 15, 1971

ETHIOPIAADD!S ABABA DAIRY DEVELOPMENT PROJECT

DAIRY DEVELOPMENT AGENCYORGANIZATION CHART

BOARD OF DIRECTORS

GENERAL MANAGER

FNNIAL DIVISION llPRODUCTION DIVISION |IRCESNG 3. MARKETING DIVISION

F~ ~~~~O -N J m a FARMIIA TEHIA aNTX 8 2MK4Ir -

zz3<

ANNEX 14

ETHIOPIA


Milk Marketing and Prices in Addis AbaIba

1. At the end of 1968, the population of Addis Ababa was estimated atabout 685,000. of whoin.i about 45,000 were foreigners, Q,' being European.Population growth over the period 1961 to 1968 was estimated at 6.2% perannum, with natural growth accounting for 2.2% and immigration 4.0%. Thisrate of growth is expected to continue for some years.Milk uSIppl

___y

2. Milk is supplied to the Addis Ababa market through three channels:

(a) the Dairy Development Agency (DDA), an autonomous agency whichhas taken over the assets of the Addis Ababa Dairy Industry(AADI), a section of the Ministry of Agriculture, which operateda milk collection,processing and marketing system;

(b) approximately 10 large dairy farms that sell milk directto consumers and retailers; and

(c) at least 400 hawkers selling small quantities of milk.

3. AADI was established in 1966 and it took over a milk plant witha capacity of 10,000 liters per day, built in 1962 with UNICEF assistance.Again with UNICEF aid, the Shola Dairy Plant was completed in 1969 with acapacity to pasteurize and bottle 30,000 liters of milk per day.

4. A system of milk collection has been built up since 1961 withina radius of 130 kmi of Addls Ababa on three main roads. Development of thissystem is shown in the following table:

No. of Collecting Total Milk Average Milk per CenterYear Centers _terj/day) _ (liters/day)

1961 5 155 311962 6 590 981963 15 1,140 761964 16 2,400 1501965 15 2,025 1351966 24 1,850 771967 29 3,020 1041968 32 4,060 1271969 32 4,350 136

ANNEX 14Page 2

5. In addition to milk from these centers, DDA po>zahabes dailyan average of about 4,000 liters of milk from about 30 large dairy farms and500 to 1,200 liters, which is delivered to the Shola Plant by the ChilaluAgricultural Development Unit. Growth in milk througlput of the systemnow operated by DDA is shown below:

MilkYear ('000 liters) IncreaLe, %

1961 288 -1962 466 61.81963 669 43.61964 1,081 61.61965 1,168 8.01966 1,236 5.81967 1,854 50.01968 2,481 33.81969 3,070 23.7

6. In 1969 value of sales of dairy production by AADI were:pasteurized milk, E$1,077,000 (US$430,800); butter, E$146,000 (US$58,400);cheese, E$10,000 (US$4,000); and cream and yoghurt, E$4,000 (US$2,400).The bulk of the butter and cream is derived from the reduction of fatcontent of milk to 3%. Unsold milk. which represents a very small pro-portion of intake, is converted into cheese.

7. As can be seen from the following figures, AADI experiencedsharp seasonal fluctuations in milk supply:

1967 1968 1969-'000 liters …

Total Milk Collections 1,853.6 2,480.6 3,069.9Average Milk per day 5.1 6.9 8.5Average Milk per day:

Lowest Month 3.2 (Feb.) 4.9 (May) 5.9 (April)flighest Month 7.9 (Oct.) 9.5 (Sept.) 11.7 (Oct.)

8. No reliable data are available on output and sales of the 10large commercial farmers selling milk outside the AADI/DDA system. However,the manager of AADI estimated that in 1969 their sales totaled about 3,300liters per day with a range from 50 liters for the smallest producer to900 liters each for the two largest.

ANNEX 14Page 3

9. In a study on the Addis Ababa market for dairy products, datedOctober 1969, the Batelle Advisory Group Technical Agency carried out a

survey of marketing of milk by hawkers in September 1969. The survey

covered 399 hawkers who purchased milk from about 1,500 farmers for sale

in Addis Ababa. Total milk sales were 4,050 liters per day, of which

3,180 liters were purchased from farmers and 870 liters were produced bythe hawkers' own cows.

Milk Prices

10. Until late 1970, AADI paid small dairy farmers E$0.25 (US$0.10)

per liter for milk delivered to collecting centers. To the larger dairy

farmers, it paid E$0.28 to E$0.30 per liter, depending on the distance from

the Plant and method of delivery. It retailed milk at E$0.40 per liter

through 41 selling booths in the city. It has one selling center, equipped

with refrigeration, that operates throughout the day. The remaining centers

operate only from 6 a.m. to 9 a.m. daily. Demand for milk from MADI at E$0.40

per liter exceeded supply and a system of rationing to individual consumerswas imposed. However, it is estimated that one-third of AADI's sales was

to retailers and owners of milk bars, through which milk is resold at much

higher prices.

11. The prices obtained by the large commercial farmers sellingoutside the AADI/DDA system are generally in the range of E$0.45 to E$0.50per liter. These farmers supply supermarkets and hotels, which have aregular demand for milk for resale to the higher income groups. In thesupermarkets, unpasteurized fresh milk sells at E$0.75 per liter, sterilized

milk from Asmara at E$1.30 per liter and ultra-high temperature milk from

Kenya at E$1.60 per liter. AADI was unable to capture any part of these

markets because it did not have sufficient milk to guarantee supply in

addition to supplying its own selling booths. The Batelle survey found

that the average price paid by hawkers to farmers was E$0.25 per liter

while selling price was E$0.40 per liter.

12. In late 1970, AADI increased the retail price of its milk from

E$0.40 to E$0.50 per liter and its average price to producers from E$0.28

to E$0.33 per liter. At this price, it is expected that DDA will be ableto induce more commercial farmers to sell to it rather than delivering their

milk to Addis Ababa. At the same time that it increased the retail price of

whole milk, AADI commenced selling reconstituted milk, made from imported

milk powder at a price of E$0.28 per liter.

Demand for Milk and Dairy Products

13. Although milk throughput of the AADI milk collection and market-ing system has increased more than tenfold from 1961 to 1969, there hasbeen no difficulty in marketing virtually all of the milk available. Large

queues at AADI's selling booths and the fact that it has had to impose

ANIJX 14Page 4

rationing of its output indicate that larger quantities z!Ji1A be,eold atpresent prices. Average jals f01om Saptmber -though Deaember 1969 wereof the order of 11 ,400 liters by A4DI and total sAles were probably a.4out25,000 liters per day.

14. In addition to fresh milk sales, ;here are fairly large salesof milk powder. Imp.orts to ftbiopia were just .under 2,000 tons ln 1967,the last year for dbich figures could be obtained. At a convewsin rateof 6 liters of renonsAttute.d ntlk -per kg -of powder, this waould be aquivalentto an average of about 55,000 liters per day, casting E$0.55 to E.$1 .20 perliter at re-tail prices charFgad li Addis Ababa. A large :proportSnfl f this-milk powder is purchased by fo=Uzers s1xth 4h ;iucomes U74,ug u;Adi

Ababa because they are unable *So btab A ,a V4Ar Aupply .of p4e;tetgrizedmilk.

ADDIS A.UL MD¢II 231 P XOJES'l

Ploeial Rate, of Retem ta Frivately Osod rez,,tt

ITUS 01#TU 1 2 3 4 5 6 _9 _ O 11 12 13 14 IS

Med:k= sine fta 1� 1oe ~-W 1g40 3

unoweuntal Milk r1s1ao '001 (1) 391 67T 623 635 7e3 837 ' e, E' 91e r7 917 917 917 917!nD antal llk 3$e^. 2 (33) 12,903 22,407 20,559 20,955 25,172 25,110 05,179 06j ll4 26,3340 22Z925 22 925 22,925 22,925 22,925Xoarzeuntal Cattlett Slam $ 2,540 2,530 290 170 8,4Wo 4.740 5,6so 5, 91i ,jrc 5,690 5,690 5,690 5,690 5,69o 31,120)]

ktb-Total E3 2,507 15,433 22,697 20,729 29,1425 29,919 30,800 31,010 32,30Y 32,030 28,615 28,915 28,615 28,615 54a,045

etaotmnt cos1ts I , r10 I i2 -15- 0Ilnravutol 09.rfttiog Coat, 14 8,c5 10,935 21,550 12,735 12,025 13,210 13,2145 114,995 14,605 14,605 1l4,890 15,590 14,890 1,890 14,890Dmtersst on Short-Term Dobt as - 1,235 l,118 483 l00 - ---

Sub-Ttol 0$ lt5,005 27,670 314,168 13,218 12,125 13,210 13,2145 30,99r 11 r 6c5 14,605 214,890 15,590 14,890 114,890 14,9

Not loremntal Cash -Flor 3$ (142,498) (12,237) 8,529 7,511 17,300 16,709 17,555 16,015 17,4.25 17,1A25 13,725 13,325 13,725 13,725 39,155

2lneWnial Rate of Return, 20.1%

gM11 an,r Dairy Devei.aopmet odel=- 10 Covw

,o,,,fits

imoremsntal lilk4 Prod.,ctio,, '00 1 2 2 7 20 45 59 52 66 75 76 120 123 146 137 160Inr.,msotal 0l81k Production B$ 66 66 231 660 1,1485 1,947 1,560 1,980 2,250 2,280 3,000 3,075 3,650 3,425 I4,000Cormuntal. Cattle Sai.or F7 110 75 (35) 380 195 255 10 15 280 215 480 385 710 885 3,6701/

Sub-Total B3 176 11,1 196 1,0140 1,68O 2,202 1,570 2,165 2,530 2,495 3,1480 3,460 4,360 4,310 7,670

Cotat,

InVeSt,UOlt Cost00 E 1,89G - 200 3,600 - - - - - - - - - -Inoreeu,tal Oaprating Costa 3$ 60 300 230 490 675 768 575 705 1,063 1,215 1,2140 1,290 1,625 1,623 1,580Intrest on Short-Too, ioOt 06 r 22 35 - - - - - - - -

Sub-Total El 1,860 300 452 4,125 675 768 575 705 1,03 1,215 1,240 1,298 1,625 1,623 1,580

let Inoretntal Cash Flow 8* (1,684) (159) (256) (3,085) 1,005 1,434 995 1,460 1,1467 1,280 2,240 2,162 2,735 2,687 6,090

rinaniLel Rate of Return, 213%

Privte Croae-Brradit, Rawnh Iodel - 200 One.

Deftite

Iuoraeoetal Cattle Sales 3* 2,600 2,050 3,380 2,460 24,S80 29,640 30,105 31,185 31,365 31,165 31,185 100,870)] -

Costs

Invest,ennt Cost, Ns 146,000 - - - - - - - - _ - -Inoremental OpratingC Costs Fs 14,109 6,738 6,864 10,019 11,188 31,456 10,789 10,859 11,552 10,852 10,852 10,852Interest on Short-T.rm2 Debt 3 - - - - 7914 Sb-

Sub-Tota,l i. 50,109 6,738 6,864 10,019 11,982 11,456 10,789 10,859 11,552 10f,852 10,852 10,852 -

It t 2*orommtal Otb_r'_ 3$ (147,509) (4,668) (3,144) (7,559) 12,898 18,184 19,316 20,326 1,8013 20,333 20,333 90,018 -

PinanoflAl Rat. of Rt-,

] DCludst incrano.tal had ioaloo.

November 12, 1970

ROp A

A.D522 kAB&B .I3DY MLq0f21r I92D EMrT

Holleta Daix7 Stuid2 - 100 God

cixaCial P.,ktp of ReatIa

! - ~~ ~~ ~ ~ ~ ~~ ~ ~ ~~ ~ ~ ~ ~~ ~ ~ ~~ ~ ~ ~ - - - - - -e r t - - - - *- -- - - - - - - - - - -_e r

a 2' r 7 _ M 2 3 4 9 ID 1 __3 1'

Benefits

Incrernta1 Milk Sales '00 1 105 547 499 1,099 1,194 1,291 1,291 1,291 1,291 1,291 1,291 1,291 1,251 1,291 L5C!

° Incrematal Milk Oales X$ 3,1465 18,051 16,467 36,267 39,402 1h2,603 38,730 38,730 38,730 38,730 32,275 32,275 32,275 32,275 38.2;t

Incremental Cattle Sales B$ 1,820 3,9140 27,090 J47,300 53,120 53,820 53,020 53,820 53,820 53,820 54,120 53,820 53,820 53,820 103 iht_

Sub-Total 13 5,285 21,991 43,557 83,567 92,522 96,423 91,750 92,550 92,550 92,550 86,695 86,095 86,095 86,o95 135,9715

Coats

Ineeatemnt Costs 2$ 37,000 - - - - - - - - - - - - -

Incremental Operating Costs Z$ 9,200 24,300 29,500 34,700 35,900 36,600 33,900 33,900 33,900 33,900 33,900 33,900 33,900 33,900 33, 9-C0

Interest on Short-Term Debt 9$ - 2,506 5,397 7,008 5,465 3,038 77 - - - - - - -

Sub-Total E$ h4 6,200 26,806 34,897 41,708 I41,365 39,638 33,977 33,900 33,900 33,900 33,900 33,9x7 33,900 33,900 33,!oe

N!t Tncruiaital Cash low E$ (40,915) (4,815) 8,660 41,859 51,157 56,785 57,773 58,650 58,650 58,650 52,795 5?3195 ;2,19195 ,,l5195 :

Financial Rate of Return: 53.2%

1/ Includes incremental hard value.

ETHIO?IA

ADDIS ABABA DAIRY' DEVELORET PROJECT

Econoemic Rate Of Returs(13 'Q300

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Years - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -InEM 1 2 3 4 5 6 7 8 9 10 11 12 13 114 15.19 20

I Evestmenrts

vSmall Dairy Farms 27 176 232 74 378 457 - - _ _ _ _ _ _Medium Sise Dairy Farms 1,480 1,619 1,218 1,201 387 35 - - - - - - - - _H, Private Cross-Breeding Ranches 138 92 - - - - - - -_ -_ _ _14° Holleta Dairy Stud Farm 37 -° Abernossa Cross-Breeding Ranch 250 - - - -

Shola Dairy Plant 279 110 109 198 56

Sub-Total 2,all 1,997 1,559 1,473 821 549 - - - - - - - - -Costs of Technical and Administrative

Services 910 1,020 960 790 710 690 670 670 640 670_ 670 670 740 7ho 740 740

Sub-Total 910 1,020 960 790 710 690 670 670 640 670 670 670 740 740 740 740Incremental Operating Costs

Snall Dairy Farms 1 10 40 68 87 140 170 164 158 212 273 295 309 ct 389 389HediumSize DairyFarms 320 654 917 1,224 1,307 1,373 1,420 1,498 1,558 1,583 1,627 1,654 1,650 1,652 1,654 1,654Private Cross-Breeding Ranches 12 28 34 44 54 57 55 54 56 56 54 54 - - - -olloteta Dairy Stmad?ara 9 24 30 35 36 37 3h 34 34 34 34 34 34 34 34 314Abernossa Cross-Breeding Ranch 95 55 52 66 65 61 60 49 - - - - -Shola Dairy Plant L' 1 167 367 498 643 791 976 1025 1,083 1,132 1,169 1,228 1,291 1,318 1,337 1,337

Sab-Total 438 938 1,440 1,935 2,192 2,459 2,715 2,824 2,889 3,017 3,157 3,265 3,284 3,352 3,411s 3,414Total Incremental Ccots Including

Investmets 3,559 3,955 3 9 4,198 3.723 8 3,385 3.494 3529 3,687 3,827 3 4,024 h4,92 4,154 4,154

Incremental Cattle Bales

Ssall Dir Farsia 2 12 21 12 w6 71 50 36 24 54 64 80 109 132 132 932Medium Stie Dairy Farns 102 170 131 124 4y, 428 529 677 608 629 629 638 634 632 632 3,430Private Cross-Breeding Ranches 8 11 14 14 80 139 150 154 156 156 156 504 - - -Holleta Dair Stud Farm 2 4 27 47 53 54 53 54 54 54 54 54 54 54 54 1004Abernossa Cross-Breeding Fanch 74 64 57 98 153 137 137 333 - - - - - - -

Sub-Total 188 261 250 295 729 829 919 1,254 842 893 904 1,276 797 817 817 4,465Incremental Milk Salets 2/ 4 655 1,550 2,136 2,780 3,395 3,787 4,036 4,302 4,521 4,692 4,950 5,230 5,3 5,1461 5,461

Earnings froam Artificial Inseminationand VetersaryServices 36 85 127 163 188 206 208 208 210 212 215 223 225 225 225 225

Total Increrental Income 228 10o01 1,927 594 3,697 4,430 4,914 51498 5,354 626 5.811 649 652 1 0,151

Balance (3,331) (2,9514) (2,032) (1,614) (26) 732 1,529 2,004 t,825 1,939 1,984 2,514 2,226 2,316 2,249 5,9?7

Economic Fate of Return ll.

D Etoluding payments made for milk to farmers br ShoIa Dairy Plant.2/ includes incremwntal herd values.

r/ Calculatton is based on. a wholesale price cf rd2k of Z-$ 0.40 per liter, whtch is an estimite cf the price at cuich recon5t4tuted ghole aillk cculd be sald in Addia Abato.the ekbj miLk pc-vier is imported from NE-, Zealand.

j/ Figure in parentbosis are negative.

To Goiom

To Asn,oro

\Gebre G.r.che * 6_ _ Fs---> /i~~~~~~~~~~~~~~~~~~~~~~~~~ebre

Birbon

i60 4*5 t

| Asr-sr! 0' > sm,R,|\3t

As,nor.o0

Or~ t~dS U D a N g ". 'i4

-120 / ) -2

Addis Abory 00?Ar.

\ E T H I O P I A \f_6- '< , e > e > ETHIOPIA

._. / ,r E k S \- j20 MALIA ADDIS ABABA DAIRYA . * ,.DEVELOPMENT PROJECT

Holetx Orairy A A ABABA EPermanent & Proposed Milk Collecting Centers

A r<A Bigger forms supplying to ADDC

To Leke,pt inci, * Permanent collecting centers

\ ADDIS ABABA Doiry Industry

A? / /6 \ ^ 1]0 Proposed new collecting centers

< JZ 0 i Os ~~~~~~~~~All weather roads

-- A;[1-~~~~~~~~~~~Der Z\i

To Jimmo - ul Bob j0 10 7.0 30 40 50

XILOMETERS To Hoso.a(cppro.imat3 scale) ToHosono To Chilalo

To Abcrnosso Ranch

JlLY 1970 . 2_

international bank for reconstruction...

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