PROJECT PROPOSAL FOR COFFEE PLANTATION

FARMING

PROJECT OWNER: Mr. BIYA HAJI

PROJECT LOCATION: TUMA TESO KEBELE GERA
DISTRICT, JIMMA ZONE, OROMIA REGIONAL STATE

FEBRUARY, 2021

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 Table of Content

Content pages

1. Executive summary..................................................................................................................................6

2. Introduction.....................................................................................................................................6

2.1. The significance of the project......................................................................................................7

2.2. Project location.............................................................................................................................8

2.3. Project objectives.........................................................................................................................9

3. MARKET STUDY......................................................................................................................................10

3.1 Market Analysis...........................................................................................................................10

3.1.1. Local Market....................................................................................................................11

3.1.2. Export Market..................................................................................................................13

3.2. Marketing strategy and plant capacity.......................................................................................14

3.2.1. Market Segmentation......................................................................................................15

3.2.2. Distribution Patterns........................................................................................................16

3.2.3 Competition and Buying Patterns.....................................................................................16

3.2.4 Main Competitors.............................................................................................................16

3.2.5. Promotion Strategy..........................................................................................................16

4. Production process and production program........................................................................................17

4.1. The Project.........................................................................................................................................17

4.1. Land development......................................................................................................................17

4.2. Surveying and land clearing................................................................................................................17

4.3. Nursery Establishment................................................................................................................18

4.4. Seedling preparation..................................................................................................................18

4.5. Land clearing...............................................................................................................................18

4.6. Thrash removal...........................................................................................................................19

4.7. Uprooting....................................................................................................................................19

4.8. Costs of land development.........................................................................................................19

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 4.9. Costs of land development.........................................................................................................19

4.10. Planting operation....................................................................................................................19

4.10.1. Lining and pegging (lay out)...................................................................................................19

4.10.2. Hulling & refilling...........................................................................................................19

4.10.3 Planting...........................................................................................................................19

5.11. Young coffee maintenance.......................................................................................................20

5.12. Harvesting and processing........................................................................................................20

5.12.1. Matured coffee maintenance........................................................................................20

5.12.2. Harvesting and processing.............................................................................................20

4.12. Production programmed..........................................................................................................21

5. Technology and engineering..................................................................................................................21

5.1. Production process.....................................................................................................................21

5.2. Source of technology..................................................................................................................21

5.3. Land use plan..............................................................................................................................22

5.4. Financial requirement and analysis............................................................................................22

5.4.1. Financial requirement and analysis..................................................................................22

5.6. Financial statement....................................................................................................................36

5.6.1. Income loss/statement....................................................................................................36

5.7. Financial analysis........................................................................................................................39

5.7.1. Profitability......................................................................................................................39

6. Environmental and social Impact of the project....................................................................................40

III
 Lists of table
Table 1 project profile.................................................................................................................................V
Table 2 Plantation program.......................................................................................................................21
Table 3 Estimated cost of construction......................................................................................................22
Table 4 material cost of nursery establishment..........................................................................................23
Table 5 labor cost of nursery establishment...............................................................................................23
Table 6 material cost of land development................................................................................................24
Table 7 labor cost for land development....................................................................................................24
Table 8 material cost of seedling...............................................................................................................24
Table 9 labor cost of seedling preparation.................................................................................................25
Table 10 loubar cost planting activity........................................................................................................25
Table 10 material cost planting activity.....................................................................................................26
Table 11 labor cost young coffee plantation maintenance.........................................................................26
Table 12 material cost of harvesting and processing..................................................................................28
Table 13 labor cost of harvesting and processing......................................................................................28
Table 14 purchasing of capital item...........................................................................................................29
Table 15 Material and Labor coast Summary............................................................................................29
Table 16 Office Equipments......................................................................................................................29
Table 17 man power requirement & their qualification.............................................................................30
Table 18. Pre-service Expenses..................................................................................................................31
Table 19 operating coast............................................................................................................................31
Table 19;Summary of total Invastment coast.............................................................................................31
Table 100 Basic Underlying assumption...................................................................................................32
Table 21.Source of fund............................................................................................................................32
Table 22.Depreciation schedule.................................................................................................................33
Table 23 Bank Repayment schedule..........................................................................................................33
Table 24 Coffee sells forecast....................................................................................................................34
Table 25 Income loss statement.................................................................................................................36

IV
Table 1 project profile

1 Project name Coffee plantation farm

2 Project owner Mr.BIYA HAJI
3 Nationality Ethiopian
4 Project location Tuma Teso Gera district Jimma zone, Oromia regional
state
5 Project composition Coffee plantation farm
6 Premises required 100 hectares
7 Initial investment A total investment of the project is estimated to be birr
cost 19.93 million, from this 30% (5,979,022.814) will be
covered by the promoter of the project while the rest 80%
(13,95,1053.23) will be covered by financial institutions.
8 Employment At full capacity the farm will hire a total of workers 150
opportunity labor force. From the total employee 52 are permanent
and 98 temporary or seasonal
9 Technology Modern plantation & seedling
1 Market share 100% for export
0
1 Benefits of the Source of income ,employment, value add in agricultural
1 project sector, foreign currency earning and transformation of
agricultural technology etc

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1. Executive summary
This proposed project belongs to Mr.Biya Haji aiming at engaging in coffee plantation farm and at full
capacity the proposed project producing about 664 quintal of processed coffee bean per annum. The total
investment coast requirement of the project including the working capital is estimated at about birr 11.93
million birr; of which 30% is owner’s equity, while the remaining 70% from bank loan. The proposed
project implemented in Gera woreda in Tuma Teso kebele. The total area of land required for the
proposed project is 100 ha of land. The project will get the yield from the total area during the fourth
years of operation and at full capacity the project will produce 15 quintal of coffee bean from 1 ha of
land.

The proposed project will earn a profit of 6,508,332.39-birr profit in it’s the 4th year of
establishment. The proposed project will create 52 permanent and 98 causal job opportunities for
the local people. The proposed coffee plantation project will target this economic advantage and
is thus striving to achieve the planned benefits from coffee plantation project by giving due
emphasis to variety selection, production process, harvesting, storing and processing of coffee
products.

2. Introduction
Coffee is one of the most important traded commodities in the world. The sector’s trade structure
and performance have large development and poverty implications, given the high concentration
of production by smallholders in poor developing countries. Coffee’s global value chains are
quickly transforming because of shifts in demands and an increasing emphasis on product
differentiation in importing countries (Ponte 100 02; Daviron and Ponte 100 05).

Ethiopia is endowed with a good production environment for growing coffee with a combination
of appropriate altitude, temperature, rainfall, soil type, and pH. Ethiopia is the center of origin for
Coffea arabica. The country possesses a diverse genetic base for this Arabica coffee with
considerable heterogeneity. Ethiopia produces a range of distinctive Arabica coffees and has
considerable potential to sell a large number of specialty coffees (Nure, 100 08). Little of the
lower-value Robusta coffee is produced in Ethiopia, being better suited for production in lower
altitude equatorial climates. Coffee production in Ethiopia is almost exclusively situated in the

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two regions of Oromia and the Southern Nations, Nationalities, and People Regions (SNNPR) in
the south and west of the country

Smallholder farmers produce 95 percent of Ethiopia’s coffee (Tefera and Tefera, 100 13). It is
produced under several types of production systems, including forest, semi-forest, garden, and
plantation coffee (Tulu, 100 08). Forest coffee is grown in the wild under natural forest cover
and is gathered by farmers from trees with minor tree maintenance. Semi-forest coffee is also
grown in forest conditions, but there is some limited maintenance by farmers, mostly annual
weeding. This type of coffee has clearly delineated boundaries of ownership, although the trees
usually are located away from agricultural plots.

Garden coffee is defined as coffee from trees planted by farmers in the vicinity of their
residences. It is often intercropped with other crops or trees. Plantation coffee is grown on large
commercial farms, private as well as state farms. Modern production practices – such as
irrigation, modern input use, mulching, stumping, and pruning - are often applied in this case.
While reliable recent statistics are lacking, it is estimated that these different production systems
make up about 10, 35, 50, and 5 percent, respectively, of total coffee production in the country
(Kufa, 100 12).

There have been significant domestic policy reforms in the last decade that affected the structure
and performance of the coffee export sector. First, from December 100 08 onwards it became
mandatory for private traders to sell their coffee through the Ethiopian Commodity Exchange
(ECX), a new modern commodity exchange. ECX trades standard coffee contracts, based on a
warehouse receipt system, with standard parameters for coffee grades, transaction size, payment,
and delivery. The first level quality control is decentralized and undertaken in nine liquoring and
inspection units in major production areas.4 The establishment of the ECX has led to important
changes in the structure of the coffee value chain (Gabre-Madhin, 100 12)

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

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

B. Employment opportunity
One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. Hence, this project will hire 52 individuals in permanent and 98 casual workers.

2.2. Project location

General

Jimma zone is among the main coffee producing area or Oromia region. The total coffee
producing area is estimated to be about 100 ha. The share of state farms being 7500 hectares'
Gera is among the favorable coffee producing woreda's of jimma zone. The selected area for this
project is particularly optimum in its all condition for coffee plantation. The area is surrounded
by perennial river that could help for irrigation if needs arise. Moreover, the river is suitable to
establish coffee pulpier & coffee hulling.

Gera district is one of 21 districts of the jimma zone found at south west of the country located at
south west direction on 93 km away from capital town of Jimma zone. It covers 1443.100 KM 2
and bonded by five districts of the zone and SNNP. As information from JZPC, the Population of
the district in 2010 151106 people live in the districts from this 7478 are urban dwellers and
143628 are rural dwellers. The total surface area of the district is 1443.4 square kilometer. The
district was divided in to 31 kebeles: from this 29 kebeles are peasant association and 2 kebeles
are urban centers. Chira is the capital town of the district. The proposed project implemented in

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Gera woreda in Tuma Teso kebele. The total area of land required for the proposed project is 100
ha of land.
Topography
The physical landscape of the district`s is quite diversified. The major topographic features of the
area are composed of hilly, flat to undulating rugged topography, plain, plateau and valley with
altitude variation from 1288m a.s.l at Gojeb valley in walla kebele to 3031 m a.s.l. at Kimbibit
ridge at the north eastern part of the district`s. The topography of the project site lies on
moderately gentle slope with an elevation varying from 1906 to 1927 m.a.s.l.
Climate
The classification of climate condition of the district is kola, sub-tropical and tropical. The
tropical region covers 46.1% of the area and subtropical region covers 50.9% of the area as well
as kola covers 3%of the area. Gera is within the tropics and so experienced high incoming solar
insulation due to high angle of solar rays with over head sun twice a year. The central part of the
district has tropical agro –climatic with the mean annual temperature ranges between 14c 0-
24c0.While the vast part of the district classified to sub-tropical with mean annual temperature
ranges between 24c0-25c0. The medium temperature of the district is 10.25c0 and the higher
temperature is 27-.25co
Soils
Soil is a mixture of organic and in organic components mineral, air, water, plants and animal
materials. The major soil categories of Gera district are sandy, clay, and loam soil and its percent
content clay 45%, sandy 100% and loam soil 15% .From this percent , clay soil is contains more
amount of soil type from the district.
Vegetation
Vegetation is a plant community of a delimited are with its own characteristic varieties of species
often natural occurring. The characteristic distribution of vegetation type is controlled by both
natural human made factors. The natural factors climate, altitude and soils develop naturally in
the absence of human interference. From the total area of the district 144,3100hectare/total
coverage of the district 80,830.4 hectare covered with natural and protected vegetation56.5% of
the total area of the district. This forest known beside of the community by the name Gera forest
with different varieties of birds, wild life spices, inorganic coffee (self seeded coffee) etc.

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2.3. Project objectives
The project is basically planned to be established with an objective of generating profit for the
promoter by Planting Coffee farm. However, its initiations will benefits the public by planning
its significant part in solving the existing social and economic problems. In this respect the
project is aimed to promote the following objectives:-

 Supplying high quality of coffee bean to the world market and earning foreign currency
to the country

 To provide value adding service to the area by using coffee as primary product
 Provide direct and indirect employment to working labor force,
 Facilitate the transfer of improved technologies and bases for the national industrial
development.
 Increase government revenue through the different forms of taxes to facilitate social
economic developments

3. MARKET STUDY
3.1 Market Analysis
Encouraging the involvement of private investment in cultural sector in order to increase
agricultural production income and employment it one of the issues on which macroeconomic
policy of Coffee production and marketing had been and continues to be among the strategies
sub sector which plays an important role in the country export commodities for an income
Being the center of origin to the coffee plant climate conditions in many place of the country
including the project area allows the expansion as well as improvement of this particular crop,
In addition the current attractive market process to growers involvement of the private
investment in coffee production contributes a lot in promoting the volume of production
market. Availability of abundant labor force in the area is development opportunity for the
project. Plantation to be developed by the project farm is to 150 ha. More over there is an
availability of more than this for expansion in the future.

Poor development of infrastructures, social services and inputs like seedling due to limitation of
supplies have been foreseen as constraint that may have a certain effect on implementing the
project effectively and in a short time. Therefore, the project is designed to construct store, and

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to establish its own nursery for seedling production so as to minimize the impact of these
constraints.

Coffee is the largest commodity market in Ethiopia has remained the largest producer of coffee
in the world for two centuries. Imports of Arabica coffee in the United States have increased
ninety-four percent in the past five years and consumption of coffee within Ethiopia has seen
similar increases. In addition, demand for green coffee is above the market clearing level, and
market price and crop yield estimates are at an all-time high. The increase in the number of
independent specialty roasters in the world has contributed to and is an indicator of the increased
demand for coffee. Within the larger coffee market is our target market is the specialty coffee
bean. These discerning customers want the highest quality coffee beans. They serve the growing
"gourmet" coffee market and are represented by large American companies like Starbucks and
thousands of smaller specialty roasters. The Arabica bean is considered to be the best in the
world and as such, the demand for Arabica beans is high on the specialty roaster market.
Specialty roasters are willing to pay more for Arabica beans and attempt to distinguish
themselves via the characteristics of the bean they use i.e. the location in which it was grown,
farming methods, bean size, etc. The final consumer is relatively price insensitive if the coffee is
good, has won awards, or is compatible with a popular trend. We estimate that specialty roasting
in the U.S. alone is a ($USD) one billion market.

3.1.1. Local Market

a) Overview of the Performance of the Local Coffee Sub Sector

Ethiopia is endowed with a good production environment for growing coffee with a combination
of appropriate altitude, temperature, rainfall, soil type and pH. Ethiopia is the center of origin for
Coffee Arabica. The country possesses a diverse genetic base for Arabica coffee with
considerable heterogeneity. Ethiopia produces a range of distinctive Arabica coffees and has
considerable potential to produce number of specialty coffees. There are four types of production
systems in Ethiopia, forest coffee, semi- forest coffee, garden coffee and plantation coffee.
During the period 100 04—100 13, the land area cropped by coffee shows a significant growth;
increasing from 232,439 hectares to 528,751 hectares, registering an average annual growth rate
of 10.17%. Local production of coffee also exhibits a substantial growth increasing from 225,362

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tons in year 100 01 to 373,941 in the year 100 12, registering an average annual growth rate of
5.44%. During the period 100 00-100 13, the maximum export of coffee from Ethiopia was
211,981 tons in 100 10, while the minimum was 89,2100 tons in 100 01; however, during the
period under consideration, on average, the country was exporting about 155,785 tons of coffee
per annum. During the period under consideration (100 00-100 13), export of coffee has
registered an average annual growth rate of 6.25%. In terms of value, export of coffee has
increased from Birr 2.09 billion in 100 00 to Birr 11.39 billion in 100 13, registering an average
annual growth rate of 100 .39%. Although coffee is still the dominant foreign exchange earner to
the Ethiopian economy, considering the unique natural endowment and the special varieties of
coffee produced in the country, which are highly valued by importing countries, it can be
concluded that the country is not benefiting from its coffee resource potential. For example,
during the period 100 09- 100 13, the average unit value of coffee exported by Switzerland is
higher by nearly 10 fold as compared to the average unit value of coffee exported from Ethiopia.
In fact, West European countries are not producers of coffee but they have specialized in import
of the green coffee from developing countries where the resource is available and then
processing the product (value adding) and re-exporting. Accordingly, in order to fully exploit the
country ‘s coffee resource potential, developing local value addition capability is indispensable.

b) Past Supply Trend

The local demand for roasted and milled coffee is supplied through local production and import.
On the other hand, the local market for decaffeinated coffee; extracts and concentrates of coffee
and soluble or instant coffee is largely met through import. The finding on the trend in the past
supply of the products under consideration is summarized below.

Demand Projection

Urbanization and income are found to be the major determinants of the future demand for value
added coffee products. Hence, a growth rate of 5%, which is slightly higher than the urban
population growth rate and much lower than income growth rate, is taken to forecast the future
demand. Accordingly, the local demand for decaffeinated green coffee is projected to increase
from 10.24 tons in 100,15 to 13.07 tons and 16.69 tons by the years 100 and 100 25,
respectively. Moreover, by year 100 30 the demand is projected to reach at 21.30 tons. The local
demand for non-decaffeinated roasted and milled coffee is projected to increase from 3,126 tons

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in 100 15 to 3,990 tons, 5,092 tons and 6,499 tons by the years 100 100, 100 25 and 100 30
respectively. Likewise, the demand for decaffeinated roasted and milled coffee is projected to
increase from 11.27 tons in 100 15 to 14.38 tons, 18.36 tons and 23.43 tons by the years 100 ,100
, 100 25 and 100 30, respectively. The local demand for instant coffee is projected to increase
from 13.17 tons in 100 15 to 16.81 tons and 21.46 tons by the years 100 100 and 100 25
respectively. Moreover, by year 100 30 the demand is projected to reach 27.39 tons. Similarly,
the local demand for coffee extracts and consecrates is projected to increase from 12.12 tons in
100 15 to 15.46 tons, 19.73 tons and 25.19 tons by the years 100 100, 100 25 and 100 30,
respectively.

3.1.2. Export Market

a) Trend in Global Import and Export

During the period 100 08-100 12, global production of coffee has increased from 7.71 million
tons to 9 million tons. The major coffee producers in the world are Brazil on average accounting
for 37% of the total world production followed by Vietnam (15%), Indonesia (7%) and
Columbia (6%). Ethiopia is ranked fifth with an average share of 4%. Global total export of
coffee (in all forms), during the period 100 04--100 13, has increased from 5.7 million tons
valued at 9.17 billion USD to 8.18 million tons valued at 28.61 billion USD, registering an
average annual growth rate of about 4.15% and 15.27% in terms of volume and value,
respectively. During the period 100 04--100 13, Brazil followed by Vietnam, Colombia and
Germany were the leading exporters of coffee.
Decaffeinated Green Coffee in Global export of decaffeinated green coffee has increased from
168,058 tons in 100 04 valued at USD 347.93 million to 2100,447 tons in 100 13 valued at Birr
914.16 million, registering an average annual growth rate of 4.37% and 13.82% in terms of
volume and value, respectively. Germany followed by Mexico, Spain, Canada and France are the
leading decaffeinated green coffee exporters. USA is the leading importer of decaffeinated green
coffee. During the period 100 04—100 13, USA on average, accounts for 58.91% of the total
global import of decaffeinated green coffee. The other major importers of the product include:
Spain, Italy and Belgium.

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Project rationale

Encouraging the involvement of private investment in agricultural sector in order to increase

agricultural production, income, and employment, it’s one of the issues on which
macroeconomic policy of the country focuses. Coffee production and marketing had been and
continues to be among the strategic sub sector which plays an important role in the country's
export commodities foreign income.

Being the center of origin to the coffee plant, ago climatic conditions in many places of the
country including the project area allows the expansion as improvement of this particular crop.

In addition the current attractive market process to growers, involvement of the private
investment in coffee production contributes a lot in promoting the volume of production,
technology and also productivity of small scale peasant farms supplying nearly 80% of the total
production with age older traditional production system.

Modern private farms like this particular project would not only increase the quantity, but also
the quality of the product to the export.

3.2. Marketing strategy and plant capacity

a. Company Summary

The proposed will be a new establishment that drives from a motive of experienced investors to
bring coffee plantation and producing high quality products to local and international markets. Its
corporate governance philosophy will end over to exceed regulatory and legal requirements by
adopting several voluntary practices aimed at a high level of business ethics, effective
supervision, and enhancement of value for all stakeholders

b. Marketing Implementation Analysis

The main focus will be in reaching the new markets of the nation and of neighboring and other
African (Anglo, Arab and Franco-phone), Asia Pacific and the Middle East countries. It will also
be concerned about the competition from other firms. An advantage the company has is the
widely differentiated product range that it will develop. Producing high quality of coffee bean
helps us in getting an ease of penetrating the new markets. Human resource is one of the most
important aspects in this plan. We would always like to make sure that it has highly motivated

14
staff as this is directly proportional to good production both in the qualitative and quantitative
aspects.

It is planned to do this by coming up with schemes of rewarding the employees. It will also make
sure the personnel are the best in terms of product know-how and it is ready to carryout frequent
training towards this end.

C. SWOT Analysis

We shall be in a highly lucrative market in a growing economy. We foresee our strengths as the
ability to respond timorously to customer's orders and provide them with the correct quantity.
Our key personnel will be well trained in the actual production of our products so as to ensure on
time deliveries to the client. this will go a long way towards penetrating the market.

i. Strengths

Relationship selling: We intend to get to know our customers, one on one. Our
direct sales efforts will seek to maintain a relationship with our customers.
Diversified customer base: We intend to obtain orders for our products from a
wide customer base. This will ensure lack of dependency on one customer.
Low production costs: The costs of our products will be approximately a quarter
less than the famous brand names and end user prices.

ii. Weaknesses

The introduction of new organizational practices and personnel who have not previously worked
together presents a challenge to the organization. Our infancy in Ethiopia dictates that
wholesalers and other intermediaries might be skeptical about our products.

iii. Opportunities

 Population:- We are at a one hundred million plus market place.

 Service- As our intended target markets are in relatively accessible areas weintend to be
able to meet their requirements in the shortest possible time.
 Current drive by government towards encouraging the import substitution and export
diversification of the economy presents an opportunity that we may fully utilize.

15
  Presently there is high level of farmers participating in coffee farming that is the main
input of raw materials for the project.

iv. Threats

 Existing competition, from similar project around the project area, wholesalers and
institutions.

3.2.1. Market Segmentation

The potential customer groups for the proposed project are:

 American, Europe and Middle east importers of green Arabica beans: Market research
suggests that there are approximately 100 0 importers of green Arabica coffee on the
West and East Coasts of the United States that would be able to handle the quantities of
our shipments and are in our target market. Combined, they import a total of four to five
millions /60kg bags of Ethiopian coffee per year.
 Ethiopian green coffee wholesalers: This market serves as a safety valve for our export
business. By maintaining relationships with Ethiopian wholesalers we have an alternative
market with established distribution channels.

3.2.2. Distribution Patterns

All of the coffee produced for exportation by proposed project is approximately eighty-five
percent of all coffee produced for exportation in Ethiopian shipment Porto coffee is shipped.
Distribution charges are assumed by proposed project up to the arrival of the shipments.

3.2.3 Competition and Buying Patterns

The purchase decision for our customer is based on trust in our process and bean selection. We
have established relationships with our customers which extend beyond that of the buyer/seller.
The proposed project label means that the product has been chosen and prepared with the highest
quality standards in mind. Our beans are priced up to nine percent higher than similar products.
Our customers are willing to pay more for our product because they are familiar with us and trust
in the quality of our beans. This is the result of their success in the marketplace with our product.

16
3.2.4 Main Competitors
There are approximately 150 exporters of green Arabica beans in Ethiopia. According to the
Ethiopian Coffee Exporters Association, fifty percent (50%) of all green coffee exports come
from their 45 members. There are a number of coffee processing plans around the proposed
project area but our product differentiated based on the quality.

3.2.5. Promotion Strategy

The promotion strategy shall initially revolve around informing customers of our existence, the
products we produce, and how to order them. The intention will be to highlight the following key
benefits of ordering our products instead of competitors, including:

 Our lower production costs which will convert to lower order prices.
 Quality products able to compete with the top brands.
 Faster order fulfillment times.

We intend to be well known by all our stakeholders in particular wholesalers, industries and
other such institutions that may utilize our products, as well as. Hence we shall leverage our
presence using introductory letters, brochures and other sales literature. we intend to spread the
word about our business through the following;

4. Production process and production program

4.1. The Project
The company organic coffee plantation is there in Gera district. Jimma zone regional state of
Oromia south western Ethiopian at a distance of 465 km from Addis Ababa and 15 kms from the
town of Chira ( capital town of Gera).

The project is designed to develop 100 ha of coffee plantation under a modern management
production and processing systems. It also includes establishment and procuring force to run the
project activates. Land development, nursery establishment and production of seedlings
maintenance of young coffee plantations with the necessary agronomic practices is the main
tasks during the first phase of the investment period. Whereas maintenance of mature coffee
plantation harvesting and processing of the production will be performed up to the end of the
project life. Being private investment project the following are objectives of the project

17
1. Producing and marketing better organic quality coffee for profit & Export.

2. Creating job opportunity to the community and there by

3. Contributing to the foreign currency earning of the country are the specific objectives of the
establishment of this project.

4.1. Land development

The land development process in chides major activities like land surveying and parceling land
clearing thrash removal stamp. Uprooting Ridge construction and minor activities like shade tree
regulation

4.2. Surveying and land clearing

The land area to be developed by the project especially the land that would make the coffee area
has presently a bush land cover. Therefore to establish a modern plantation that would be
convenient for general management mobility of workers and family supervision of different form
activities the entire land under the project should be surveyed parceled in to blocks and the net
coffee area should be identified Parceling is performed by dividing the plantation area in to
square blocks for managing the farm. Blocks would be up to 6m wide and leveled so that they
allow vehicle depending on the importance of the path.

4.3. Nursery Establishment

For the 1st project year the project would establish its own nursery with a size of 1 ha and with a
capacity to raise about 3,240,000 ready seedlings to gather with the possible losses.

A suitable nursery site would be selected with in the project areas. The seeding preparation
process can be categorized in to three parts depending on stapes of activities to be preferred.

 Nursery establishment: includes, land clearing, plowing and fencing

 Seedling preparation: soil heaping mixing soil with compost, cutting filling and arranging
polythene tubes, sowing, mulching, and shade construction.

 Seedling maintenance: watering weeding spraying, fertilizer application and guarding.

18
Therefore, the project performs activities nursery establishment during the 1 year. All seedling
preparation costs are categorized in the investment cost and costs per seedling is estimated at birr
0.45-2.0. A detail of costs for activities described in this section is presented in financial analysis

4.4. Seedling preparation

The project requires a total of about 3,240,000 seedlings after assumptions of various losses, to
establish 100 ha net coffee plantations. During the second year the project would fulfill its
seedlings requirement by its own nursery in this phase. Because the operation requires, 9-12
months and the first project year has lost few months for this operation. Per hand assessment of
seedlings availability would be performed to obtain the required amount of seedlings.

4.5. Land clearing

After surveying and complete parceling, bush clearing is carried out. Gorges, stream banks,
marshy and stony land packets are left with their vegetation cover.

4.6. Thrash removal

This operation would be carried out by the time at which the cleared thrash is dried out and easy
to remove.

4.7. Uprooting
Stump uprooting would be carried out to avoid regeneration of stumps that would become wood
in the future and completion for planting space as well as to avoid increase of root disease from
rotten stems in the future.

4.8. Costs of land development

Ridge construction carried out on slopes more than 16%

4.9. Costs of land development

All labor and material costs for activities described in this section are added in to cost of land
clearing except that of ridge construction. Details of costs for land development are summarized
in financial analysis

4.10. Planting operation

The project is designed to establish a total of 100 ha of coffee plantation. Major activities in
plantation are lining and pegging, Hulling and refilling replant weeding and finally planting.

19
4.10.1. Lining and pegging (lay out)
Topography of the project farm exhibits variation of slope. Especially, field lay out in slopes
above 16% needs much care and planting in these parts of the land would be in contour rows for
soil and moisture conservation purposes. The project starts to harvest the first crop in the fourth
year after establishing the 1year plantation by applying proper management:

4.10.2. Hulling & refilling

Planting holes with a size of 30cm diameter and 60cm depth would be prepared manually
according to recommendations applied in coffee agronomy. The holes are refilled after period of
one month.

4.10.3 Planting
Pre-plan weeding, seedling transition, and distribution seedlings with in the plantation are
operations carried out after land preparation is complete. Intensive follow up is undertaken in
this operation to ensure planting of healthy and strong seedling, and to avoid loss of seedlings.
Details and summary of the planting cost is described in table.

5.11. Young coffee maintenance

Right after completion of the planting of the planting operation various activities will be
performed under the cost of category of young coffee maintenance until the plantations attains
the age of bearing the first crop at the fourth year. The important agronomic practices that is
essential a production mature coffee in this period include manual and chemical weed control,
fertilizer application and mulching. Details of labor costs for this operation are presented in in
financial analysis

5.11.1. Shade tree selection

The most important activity that requires care is selection of ideal shade trees. Albisia
gummifera, Milletia ferrugenia croton macrostaclys and acacia spp include ideal shade trees in
the project farm to be maintained during clearing since the area has only a woody crown cover of
100 -100% most of the big trees would be maintained.

5.12. Harvesting and processing

5.12.1. Matured coffee maintenance
Most of the agronomic practices in young coffee maintenance are similar applicable to mature
plantation. But operations like handling and desuckering (pruning) are carried out in addition to

20
weeding (chemical & manual) fertilizer application and others. Handling are desuckering is
performed to protect the health and sustained yield of the coffee trees. Since the plantation is in
the sufficient guarding is required productive age.

5.12.2. Harvesting and processing

The project starts to harvest the first crop in the fourth year after establishing the 1st year
plantation by applying proper management:

The project will be able to process about all of its production in to dry clean hulled coffee and
wet processing. Activities involved in this operation are picking red cherry for dry clean coffee
processing. All other activities to prepare the product for transportation and marketing are also
included.

4.12. Production programmed

The annual production program is formulated on the basis of the market forecast and selected
plant capacity and production potential of the project locality. It is assumed that the Farm will
achieve 70% and 100% capacity utilization rate in the in the third and fourth year. Full capacity
will be reached in the third year and onwards. The plantation program for coffee plantation is
shown in below table.

Table 2 Plantation program

S/n Description Production program

    Year1 Year2 Year3 Year 4

1 Coffee Plantation (ha) 30 50 70 100

2 Capacity utilization rate % 30 50 70 100

5. Technology and engineering

5.1. Production process
Coffee plantation involves different operations such as land preparation, seedling area
preparation, wetting and aeration, sorting, hauling, packing and storing. Coffee Plantation will be
milled and sorted out with desired proportions. Based on the agreement to be reached with the

21
owner and service takers, the milled coffee will be owned and kept in the store by the promoter
to offer to the central market and customers.

On the other hand, certain proportion of service taker is expected to take back the milled product
to display to the local market for local consumers at ongoing price. However, the amount to be
produced at full capacity of 664 quintals will be owned by the investor and offered to the market
under its full control to sustain the hauling service to the community and to earn viable income.

5.2. Source of technology

Even though, the promoter is expected to assess the different potential suppliers of the envisaged
technology for while a company based in Ethiopia will be among potential client to avail the
intended technology.

5.3. Land use plan

The major portion of the plot will be allocated to coffee plantation, warehouse, camp and shade
with opens pace to work comfortably. The Farm will be parceling with an area of 10 of land
which is important for management activity

5.4. Financial requirement and analysis

5.4.1. Financial requirement and analysis
The financial resource is a prime resource for undertaking any activities. Hence for
implementing this coffee plantation farm a total of 19.93 million ETB is required. From this 30%
birr will be covered by the promoter of the project while the rest 70% will be covered through
loan from bank at the prevailing interest rate. Therefore the said amount of finance is needed for
undertaking the following.

I. Fixed capital
A. construction

The total land area required for coffee plantation farm is 150 ha of land. The cost of buildings
and construction is estimated at 3.81 million birr.

22
Table 3 Estimated cost of construction

S.N Description of works Total Cost

in birr
1 Building construction 1,800,000.00
  Store 1,000,000.00
  Office 500,000.00
  workers Dormitory 300,000.00
2 Irrigation Cannel Construction 1,000,000.00
3 Road Construction 1,000,000.00
4 Design and supervision 10,000.00
  Total 3,810,000.00
B. Material Coast
Table 4 material cost of nursery establishment

For the
Unit Total Price project
No Description Unit Qty/ha Price of nursery 3ha
1 watering cane No 10 60 600 1800
2 pruning sheer No 5 150 750 2250
3 pruning kniife No 5 70 350 1050
4 Saw No 3 75 225 675
5 knapsack No 2 340 680 2040
6 mattock No 5 50 250 750
7 Weeding hoe No 5 30 150 450
8 Spade No 3 55 165 495
9 Spade fork No 5 40 200 600
10 Rake No 5 40 200 600
11 Wheel barrow No 3 400 1200 3600
12 Sickle No 10 40 400 1200
13 Mater(cement) No 2 250 500 1500
14 Hammer (small) No 2 60 120 360
15 Hammer (bigl) No 1 90 90 270
16 Suita No 5 70 350 1050
17 Axe No 3 70 210 630
18 Bosket No 3 50 150 450
19 Barrel(200lt) No 2 175 350 1050
20 Weigh balance(20kg) No 1 1000 1000 3000
21 Treated poles No 16 10 160 480
22 Barbed wire Roll 12 270 3240 9720
23 Nail Kg 5 30 150 450
24 Store(3x5) No 1 10000 10000 30000
25 Zap No 0.5 52 26 78

23
 26 Nylon string(50m) No 0.02 240 4.8 14.4

27 Basket No 0.1 11 1.1 3.3

28 Gesso No 0.5 60 30 90
  Total     13788 21551.9 64655.7
Table 5 labor cost of nursery establishment
total
Time Total price of
taken unit price of 1
No Description period/day price nursery nursery
1 Fence constraction Man/day 20 200 200
2 Land preparation Oxen/day 26 260 260
3 Lay out May/day 20 1400 1,400
  Sub Total 1860
  Contnigency 10% 186
  Total 2046

Table 6 material cost of land development

N Quantity required per For the project
o Description unit ha unit price Total (*100)
  Axe No 8 70 560 56000
  Matched No 6 35 210 21000
  Flat file No 4 45 180 18000
Nylon
  string(50mt) No 0.12 240 28.8 2880
  Zap No 3 52 156 15600
  Total      0  0 113480

Table 7 labor cost for land development

Total for For the
the project
No Operations unit Md/ha Birr MD project (*100)
  Parceling ha 1 20 20 2000
  uprooting ha 40 20 800 80000
  flat file ha 40 20 800 80000
  nylon st ha 15 20 300 30000
  Zap ha 29 20 580 58000
  other ha 6 20 120 12000
  Total 262000

24
Table 8 material cost of seedling

Quantity For the

require project
No Description unit per ha (*100)
1 polythene tube kg 2400 96000
2 Insecticide lit 3.6 15120
3 Fungicide kg 30 84000
4 Fertilizer(TSP) kg 3200 3520000
5 Fertertilizer(by tonal) lit 8.4 25200
6 Purchase of seeds kg 1.11 4440
Total 0

Table 9 labor cost of seedling preparation

labour labour For the

requirement/h frequenc cost/h project
No Activity unit a y Birr/MD a (*100)
A Seed bed preparation            
1 soil heaping N.ha 40   20 800 80000
2 mixing soil with compost N.ha 50   20 1000 100000
3 cutting poly-then tube N.ha 40   20 800 80000
4 filling poly then tube N.ha 150   20 3000 300000
5 Arranging poly-then tube N.ha 150   20 3000 300000
6 preparing & sorting seeds N.ha 11   20 220 22000
mulch material
7 preparation N.ha 40   20 800 80000
8 sowing N.ha 32   20 640 64000
9 mulch material   16   20 320 32000
shade material
10 preparation N.ha 32   20 640 64000
11 shade construction N.ha 32   20 640 64000
12 mulch removal N.ha 20   20 400 40000
B Maintenance of nursery           0
1 watering N.ha 20   20 400 40000
2 spraying chemicals N.ha 3   20 60 6000
3 spraying toiler N.ha 3   20 60 6000
4 weeding & clearing beds N.ha 16   20 320 32000
5 Hoeing & fertilizing N.ha 60   20 1200 120000
6 sorting seedlings N.ha 60   20 1200 120000
7 gurading N.ha 60   20 1200 120000
167000
  Total 0

25
Table 10 loubar cost planting activity

labour Labour for the

requirement/h cost/h project(*10
No Activity unit a Birr/MD a 0)
1 page preparation ha 6 20 120 12000
2 lining and pegging ha 6 20 120 12000
3 hole digging ha 84 20 1680 168000
4 pre-plant weeding ha 16 20 320 32000
5 refiling ha 25 20 500 50000
6 transporting seedling ha 10 20 200 20000
7 distributing seedling ha 25 20 500 50000
8 planting ha 25 20 500 50000
  Total         394000
  contingency 10%         39400
  Total         433400

Table 11 material cost planting activity

Quantit
y for the
required unit project
No Description unit per ha price total (*100)
1 Matched No 0.48 35 16.8 1680
2 flat file No 0.12 45 5.4 540
3 fork No 1.029 45 46.305 4630.5
4 nylon string (50mt) No 0.02 240 4.8 480
5 pruning sheer No 0.15 150 22.5 2250
6 Fertilizer       0 0
  DAP Qt 18 70 1260 126000
  UREA   1.2 650 780 78000
7 Herbicide       0 0
  leaf bread   10 90 900 90000
  killer weed Lt   58 29 2900
  weed killer grass   5 80 400 40000
  Total         346480.5
  contingency 10%       0 34648.05
381128.5
  Total 5

26
Table 12 labor cost young coffee plantation maintenance
labour
requir
e labour for the
per Frequnc cost/day(birr project(*100
No Activity unit /ha y ) Total )
1 Manual weeding ha 12 1 20 480 48000
2 Chemical weeding           0
  brad leaved ha 3 1 20 60 6000
  grass weed ha 3 1 20 60 6000
3 Hoeing & frilling ha 20 1 20 400 40000
mulch material
4 preparation ha 44 1 20 880 88000
5 mulching ha 13 1 20 260 26000
6 Infilling ha 12 1 20 240 24000
  sub total           238000
  contigency 10%           23800
  Total 261800

Table 14 Material cost matured coffee plantation mainatainace

Qty For the
N required project
o Description unit per ha unit price Total (*40hac)
1 Matched ha 0.48 35 16.8 672
2 Flat file ha 0.12 45 5.4 216
3 Bow saw ha 0.02 70 1.4 56
4 Bow saw blade ha 0.2 20 4 160
5 Nylon string(50mt) ha 0.15 240 36 1440
6 Pruning sheer ha 0.15 150 22.5 900
7 Fertilizer qt     0 0
  DAP qt 2.4 700 1680 67200
  UREA qt 1.6 650 1040 41600
8 Hearbiciede lit     0 0
  Broad leaf lit 5 90 450 18000
  Grass weed killer lit 5 80 400 16000
  Sub Total 146244
  Contengency 10% 14624.4
  G.Total 160868.4

27
 Table 15 labour cost of matured coffee plantation maintenance

labour for the

N Uni requirment labour cost Tota project
o Activity t per ha(mp) Frequancy per mp(birr) l (*40)
1 Manual Weeding ha 12 2 20 480 19200
2 Chemical weeding           0
3 Broad Leaved ha 3 1 20 60 2400
4 Grass weed ha 3 1 20 60 2400
5 Hoeing and fertilizing ha 20 1 20 400 16000
6 Mulch material prep ha 44 1 20 880 35200
7 mulching ha 13 1 20 260 10400
8 infiling ha 12 1 20 240 9600
  Sub Total 95200
  Contingency 10% 9520
  G.Total 104720
Table 13 material cost of harvesting and processing

for the
Qty unit project
No Description unit perqt (birr) cost per qt (*100)
  Bascket No 0.6 4 2.4 240
  Chicken wire Roll 0.1 1550 155 15500
  Hussein cloth M 0.5 4 2 200
  Poly plastic sheet No 1.1 45 49.5 4950
  Nylon brush No 0.01 18 0.18 18
  Sacks kg 1.2 12 14.4 1440
  Fiber sting birr 0.05 9 0.45 45
  Hulling cost   5 4 20 2000
  sub total       0 24393
  containgency 10%       0 2439.3
  Total       0 26832.3

28
Table 14 labor cost of harvesting and processing

labour
labour cost For
requiremen map project
No operation unit t per qt(md) (birr) Total (*100)
1 Picking red cherry Qt 3 20 60 6000
2 picking dry cherry Qt 5 20 100 10000
3 pulping &drying Qt 0.5 20 10 1000
4 Drying dry cherry Qt 0.1 20 2 200
weighing packing loading
5 & unloding Qt 0.1 20 2 200
  sub total         17400
  containgency 10%         1740
  total         19140

Table 15 purchasing of capital item

capacit unit project

No Description unit y price quantity total cost
1 Animal drawn cart No 2 wheel 600 10 6000
2 Knapsack sparyer No 151y 3000 3 9000
3 Ground balance No 500kg 3000 2 6000
  Total         21000

Table 16 Material and Labor coast Summary

S Measuremen Material Labourcoas Total cost in

Description
N t Coast t Birr.
1 Nursery establishment Unit 64655.7 2046 66701.7
2 seedling preparation Unit 3744760 1670000 5414760
3 land development meter 113480 262000 375480
4 planting activities unit 381128.55 433400 814528.55
Young Coffee 523600
    261800 261800
maintenance
matured coffee 265588.4
5 Unit 160868.4 104720
plantation
6 cost of hurvesting Unit 26832.3 19140 45972.3
  Purchasing of Capital   200,000 0 200000

29
 Items
  Total   4953524.95 2753106 7,706,630.95

S Description UOM Qty Unit Cost in Total cost in Remark

N Fr. Birr
  Isuzu FSR Unit 1   1,500,000  
  Pick up   1   1,000,000  
1 Tractor Unit 1   600,000.00 Duty
Free
  Total       3,100,000.00

Table 17 Office Equipments

S Description Measurement Qty Unit cost in Total cost in

N birr Birr
1 Office table with Unit 7 3,000.00 21,000.00
chair
2 Shelf Unit 1 4,500.00 4,500.00
3 Filing cabinets Unit 1 3,500.00 3,500.00
4 Guest chairs Unit 1 2000 2,000.00
5 Fax & Telephone Unit 1 2,500.00 2,500.00
machine
  Total       33,500.00

Table 18 man power requirement & their qualification

S Position Qualification no Monthly salary Annual salary

N in Birr in Birr
1 General 60,000
manager AB degree in mgt 5 5000
2 48,000
BA diploma in plant
Farm Manager science 6 4000
3 Secretary Dip in science 2 1000 12,000
4 Agronomist Dip in plant science 3 1400 16,800
5 19,200
Agronomist CIP traning (12 grade) 5 1600
6 Accountanat 12 grade 2 2100 25,200
7 Store keeper 10 grade 2 1200 14,400
8 Cashier 12 grade 4 900 10,800
9 Purchaser 12 grade 3 1600 19,200
10 sales man 12 grade 5 1400 16,800

30
 11 Cook 8 grade 2 1000 12,000
12 maid men 4 grade 2 1400 16,800
13 cleaners 1-3 grade 1 1200 14,400
14 Guards men 2-4 grade 3 60000 720,000
15 other farm 105,000
worker write & reading 5 8750
16 Guards men 2 2 1000 12,000
  Total 2 5   1,122,600
2
  Benefit       224,520
(20%)
  Grand       1,347,120
Total

Table 19. Pre-service Expenses

SN Description Cost in birr

1 Project proposal & EIA 50,000.00

2 Licensing fee and others

  Total 100 ,000.00

Table 20 operating coast

S List of Items Annual List of Items Annual cost Assumptions

N cost in in birr Used
birr
1 Promotional 2 Promotional 5,000.00 Lump sum
Cost Cost annual cost

2 Property 3 Property 18,000.00 1% of the

Insurance Insurance building
3 Fuel 8 Fuel 100,000.00 3000 lit per
year by Br. 21
4 Oil & 9 Oil & 10,000.00 10% of fuel
Iubricants Iubricants cost
5 Telephone & 10 Telephone & 2,000.00 166 per month
fax fax
6 Repair 11 Repair 36,000.00 2% of building
expense expense cost

31
 7 Miscellaneous 12 Miscellaneous 100,000.00 1666.6 per
costs costs month
  Total 13 Total 271,000.00  

Table 21;Summary of total Invastment coast

SN Description Cost in Birr
1 Land, building & construction 5,610,000.00
2 Material Coast 4,953,524.95
3 Vehicle 3,100,000.00
4 Office Equipment 33,500.00
  Total fixed investment cost 13,697,024.95
6 Salary expense 1,347,120.00
7 Operation Expense 3,024,106.00
8 Pre service Expense 50,000.00
  Total Working capital 4,421,226.00
  Sub total 18,118,250.95
11 Contingency (10%) 1,811,825.10
  Total initial investment capital 19,930,076.05

5.5. Financial analysis and statements

5.5.1. Underlying assumption
The financial analysis of the coffee plantation is based on the data provided in the preceding
sections and the following assumptions.
A. Construction and finance
Table 22 Basic Underlying assumption

Total years required for plantation 2 years

source of finance 30% equity and 70 loan

Bank interest rate 10%

Depreciation 10%
Building machinery and equipment 10%
office equipments 10%
5.5.2. Sources of fund

32
The source of fund to finance the project is planned to be from two sources. These are
promoter’s equity and bank loan. The loan is expected to be obtained from one of the local
lending institutions. Since the project is expected to take some times to repay all its debts, the
bank loan is assumed to obtain on long term credit basis. Taking the financial position of the
promoters into account, equity contribution and bank loan to finance the total investment outlays
of the project are assumed to be 70% and 70% respectively. Accordingly, the total financial
requirement from the two sources will be;
Table 23.Source of fund

Owners
equity 30% 5,979,022.814
Bank loan 70% 13,951,053.23
Total 100% 19,930,076.05

5.3.3. Depreciation schedule

Table 24.Depreciation schedule

SN Description Original Depreciation Depreciation

Value in Birr rate in % per year in Birr
1 Construction and Building 5,610,000.00 10 561,000.00
2 Bldg. machines & Equipments 0.00 10 0.00
3 Vehicle 3,100,000.00 5 155,000.00
4 Office Equipment 33,500.00 10 3,350.00
  Total 8,743,500.00   719,350.00

5.5.4. Bank Repayment schedule

Table 25 Bank Repayment schedule

Total annual
Principal year ending
year intrest rate(8.5%) Payment in
payment balance
ETB
0       13951053.23
1 1395105.32 1185839.52 2580944.85 12555947.91
2 1395105.32 1067255.57 2462360.90 11160842.59
3 1395105.32 948671.62 2343776.94 9765737.26
4 1395105.32 830087.67 2225192.99 8370631.94
5 1395105.32 711503.71 2106609.04 6975526.62

33
 6 1395105.32 592919.76 1988025.09 5580421.29
7 1395105.32 474335.81 1869441.13 4185315.97
8 1395105.32 355751.86 1750857.18 2790210.65
9 1395105.32 237167.90 1632273.23 1395105.32
10   118583.9525   0
5.3.4. Coffee sells forecast
Table 26 Coffee sells forecast
Revenue Year 1 Year 2 Year 3 year 4 year 5
Coffee sell 0.00 0.00 0.00 8,640,000.0
0 15960000
           
Expenses          
Salary Expense 1,347,120.00 1,347,120.00 1,347,120.00 1,347,120.0 1,347,120.00
0
Operating Expenses 3,024,106.00 271,000.00 271,000.00 271,000.00 271,000.00
Deprecation Bld. 719,350.00 719,350.00 719,350.00 719,350.00 719,350.00
Machineries ,Equiq &
vehicle
Interest Expense3 0.00 0.00 0.00 1,185,839.5 1,067,255.57
2
Material coastNursery 64,655.70        
establishment
labour coastNursery 2,046.00 2,046.00 2,046.00 2,046.00 0.00
establishment
material coast of 3,744,760.00 0.00 0.00 0.00 0.00
seedling
labour coast of seedling   1,670,000.00 1,670,000.00 1,670,000.0  
0
material coast of land 113,480.00 0.00 0.00 0.00 0.00
development
labour.C. of land 262,000.00 0.00 0.00 0.00 0.00
development
material coast of 0.00 381,128.55 0.00 0.00 0.00
planting
Labour coast of planting 0.00 433,400.00 433,400.00 433,400.00 433,400.00
material coast of 0.00 0.00 160,868.40 0.00 0.00
Matured coffee
maintenace
labourcoast of Matured 0.00 0.00 104,720.00 104,720.00 104,720.00
coffee maintenace
material coast of 7,000.00 7,000.00 26,832.30 26,832.30 26,832.30
hurvesting
labour coast of 13,100.00 13,100.00 19,140.00 19,140.00 19,140.00
hurvesting
Total Expense 9,297,617.70 4,844,144.55 4,754,476.70 5,779,447.8 3,988,817.87
2

34
Profit before Tax - - - 2,860,552.1
9,297,617.70 4,844,144.55 4,754,476.70 8 11,971,182.13
Tax (30%) - - - 858165.652
2,789,285.31 1,453,243.37 1,426,343.01 6 3591354.638
Net profit - - - 2,002,386.5
6,508,332.39 3,390,901.19 3,328,133.69 2 8,379,827.49

35
36
5.6. Financial statement
5.6.1. Income loss/statement
Project revenue and production costs are listed and compared to see whether the project generate profits or not. Starting from first year
of the project operation, the project will generate a reasonable amount of net profit for the owners starting from 4 rd year. Thus the
project will earns ETB 2,736,942.08 in the 4th year’s years
Table 27 Income loss statement
5.6.2. Cash flow Statement
Year Year 0 Year 1 Year 2 Year 3 year 4 Year 5 6 7 8 9 10
Equity 5979022.                
Capital 814    
Loan 1395105                
principal 3.23    
Net sale 0 0.00 0.00 0.00 8,640,000 15,960,00 24,000,00 26,000,00 30,800,00 33,600,00 35,000,00
.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 19,930,0 0.00 0.00 0.00 8,640,000 15,960,00 24,000,00 26,000,00 30,800,00 33,600,00 35,000,00
Cash in 76 .00 0.00 0.00 0.00 0.00 0.00 0.00
flow
Cash                  
payment    
Salary 0 1,347,12 1,347,12 1,347,12 1,347,120 1,347,120 1,347,120 1,347,120 1,347,120 1,347,120. 1,347,120.
Expense 0.00 0.00 0.00 .00 .00 .00 .00 .00 00 00
Investme 13,697,0 0 0 0 0 0 0 0 0 0 0
nt 25
Pre 50,000 0 0 0 0 0 0 0 0 0 0
operatin
g
Expense
Operatin 0 3,024,10 271,000. 271,000. 271,000.0 271,000.0 271,000. 271,000. 271,000. 271,000.0 271,000.0

37
g Cost 6.00 00 00 0 0 00 00 00 0 0
Loan 0 0.00 0.00 2,580,94 2,462,360
repayme 4.85 .90 2343776. 2225192. 2106609. 1988025. 1869441.1 1869441.1
nt 94 99 04 09 3 3
Lease 0 4,640.00 4,640.00 4,640.00 4,640.00 4,640.00 4,640.00 4,640.00 4,640.00 4,640.00 4,640.00
payment
Tax 0 - - - 858,165.6 3,591,354 3,591,354 3,591,354 3,591,354 3,591,354. 3,591,354.
payment 2,789,28 1,453,24 1,426,34 5 .64 .64 .64 .64 64 64
5.31 3.37 3.01
Material 0 64,655.7 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
coastNur 0
sery
establish
ment
labour 0 2,046.00 2,046.00 2,046.00 2,046.00 0.00 0.00 0.00 0.00 0.00 0.00
coastNur
sery
establish
ment
material 0 3,744,76 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
coast of 0.00
seedling
labour 0 1,670,00 36,000.0 36,000.0 36,000.00 36,000.00 36,000.00 36,000.00 36,000.00 36,000.00 36,000.00
coast of 0.00 0 0
seedling
material 0 113,480. 113,480. 113,480. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
coast of 00 00 00
land
develop
ment
labour.C 0 262,000. 262,000. 262,000. 262,000.0 262,000.0 0.00 0.00 0.00 0.00 0.00
. of land 00 00 00 0 0

38
develop
ment
material 0 0.00 381,128. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
coast of 55
planting
Labour 0 0.00 433,400. 433,400. 433,400.0 433,400.0 0.00 0.00 0.00 0.00 0.00
coast of 00 00 0 0
planting
material 0 0.00 0.00 160,868. 0.00 0.00
coast of 40
Matured
coffee
maintena
ce 0.00 0.00 0.00 0.00 0.00
labourco 0 0.00 0.00 104,720. 104,720.0 104,720.0 104,720.0 104,720.0 104,720.0 104,720.0 104,720.0
ast of 00 0 0 0 0 0 0 0
Matured
coffee
maintena
ce
material 0 7,000.00 7,000.00 26,832.3 26,832.30 26,832.30 26,832.30 26,832.30 26,832.30 26,832.30 26,832.30
coast of 0
hurvesti
ng
labour 0 13,100.0 13,100.0 19,140.0 19,140.00 19,140.00 19,140.00 19,140.00 19,140.00 19,140.00 19,140.00
coast of 0 0 0
hurvesti
ng
Total 13,747,0 239,460. - 1,430,24 3,596,166 6,210,771 6,092,187 5,973,603 5,855,019 5,736,435. 5,736,435.
paymen 24.95 69 1,177,60 1.84 .55 .58 .63 .68 .72 77 77
t 3.37
Net Cash 6,183,05 - 1,177,60 - 5,043,833 9,749,228 17,907,81 20,026,39 24,944,98 27,863,56 29,263,56

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 flow 1.10 239,460. 3.37 1,430,24 .45 .42 2.37 6.32 0.28 4.23 4.23
69 1.84
Beginning   6,183,05 5,943,59 7,121,19 5,690,951 10,734,78 20,484,01 38,391,82 58,418,22 83,363,20 111,226,7
cash 1.10 0.41 3.77 .93 5.38 3.80 6.17 2.50 2.77 67.00
balance
Ending
Cash 5,943,59 7,121,19 5,690,95 10,734,7 20,484,0 38,391,8 58,418,2 83,363,2 111,226,7 140,490,3
Balance   0.41 3.77 1.93 85.38 13.80 26.17 22.50 02.77 67.00 31.23

5.7. Financial analysis

5.7.1. Profitability
According to the projected income statement, the farm will start generating profit in the 1 nd year of operation. Important ration such as
profit to total sales, net profit to equity (return on equity) and net profit plus interest on total investment (return on total investment)
show as increasing trend during the lifetime of the project. The income statement and the other indicators of profitability show that the
project is viable.

    year 1 year 2 year 3 year 4 year 5 Avrage

Net Income/ -70.00 -70.00 -70.00 34.65 210.08 -133.34
Return on
Investment Total Capital
Req't.
          0.00

Net Profit Net Profit #DIV/0! #DIV/0! #DIV/0! 23.18 52.51 #DIV/0!
margin Sales           0.00
Total Capital
Req't.
-1.43 -1.43 -1.43 2.89 0.48 -1.30
Cash paybuck
period Net Income            

NPV
The project has the NPV of 50,553,918.02

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IRR
The internal rate of return of the project is 100 %
Pay-back periods The investment cost and income statement projection are used to project the pay-back period. The building’s total
investment will be fully recovered at the 5.2 year of operation.

6. Environmental and social Impact of the project.

There is different Environmental and social Impact of the project. The impact will raise in pre operation and operation of the proposed
project. The impact will be o

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n Forest, Water bodies, Soil, aquatic animals, wildlife and on employers’ health. Therefore,
whatever we do to achieve a good performance and an optimum worker performance has a
significant impact on farm productivity. It is people that make the organization a success; it is
often human error which may compromise the viability of a coffee organization. Some aspects
that affect the productivity of the people, is training to develop their skills and abilities to do the
job, as well as the conditions to motivate them for a good work performance. The social aspects
are also related to measures to ensure that the work on the farm is done in a safe manner,
minimizing the health risks of the workers and their families. The sustainable management of
natural resources of the farm is a necessary condition to allow the coffee producing farm to be
viable on the long term. The destruction of natural resources not only compromises the capacity
of the coffee farm, but produces an economic deterioration of the farm and the region.
Implementing routine, preventive and conservation practices at the end is more economic and
viable than trying to solve complex problems which occur when not taking the necessary
measures on time, such as water shortages, loss of top soil, among others. Adopting measures for
forest conservation, wildlife and native flora brings benefits to the producer and its cultivation, as
this is the habitat for biological control and natural enemies of pests and diseases.

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