BUSSINES PLAN FOR SESAME PRODUCTION IN MATEKAL ZONE OF

BENISHANGUL GUMUZ REGIN, APRIL 2003

PROJECT OWNER: SHAIK ABDULLAH
ADDIS ABABA
EXECUTIVE SUMMARY
The investor is planning to invest on the production of exportable crop, which is sesame. This
crop is currently the major export crop in Ethiopia and the project is inline with government
interest and policy which focuses on market oriented agricultural production. It is also inline
with agricultural strategy of the Regional government of Benishangul and contributes to the
recent undertakings of the region on agricultural development corridors plan. Sesame is an
important export cash crop in Ethiopia's economy that contributes for more than 20% of the
foreign exchange earning. In recent years oil crops particularly sesame is becoming an important
exportable crops in the Ethiopian economy.

As the most responsible body for this strategy, The Ethiopian Ministry of Agriculture and Rural
Development (MoARD), has developed a master plan to enhance market-oriented production for
priority crops and livestock commodities (MoARD 2004). The oilseeds sub-sector, of which
sesame is an important product, is one of the priority crops within the master plan. According to
the master-plan document, in 2000 the total production of sesame seed was 156,600 tonnes, and
yet this volume of production could potentially increase threefold. Consistent with this, the
Ethiopian government aimed to double the production and export of oilseeds between 2005 and
2010 (PASDEP 2005)

Table: Number of sesame producers, land under cultivation, total production and productivity in
2009-10

Main No. Area in Total Yield/ Land Production

Production Farmers hectare Production hectare Holding/ Contribution%
Regions producer

East Wellega 207,901 55,679 323,724 5.81 0.27 22%

Amhara 235,323 61,347 561,143 9.15 0.26 38%
Humera 122,602 71,150 481,412 6.77 0.58 8%
Benishangul- 70,739 21,693 125,584 5.79 0.31 8%
Gumuz
Other 16,040 1,443 2,004 1.39 0.09 0%
Total 652,605 211,311 1,493,867 7.07 0.32 100%
Source: FDRE-CSA, 2007
Cognizant of this fact, the Ethiopian Government is providing significant support as stated in the
economic policy to initiate private investors to take part in the production, processing and
marketing of this valuable crop. This project proposal is prepared to undertake production of
sesame in Matakel Zone of Benishangul Gumuz. The major objective of the project is to produce
high quality export crop under proper scientific management on a total land area of 600 hectares.

Nowadays, Matekal zone in general and the project area in particular is an ideal geographic area
for sesame production. The natural and social factors at the project site have demonstrated the
technical feasibility of the project. The quality of sesame in that vicinity falls under high
category, which is highly demanded for its oil and moisture content on international market.
The total cost of the proposed project is estimated at Birr---------------- million out of which
birr--------------- million is investment capital while the rest birr---------million is working capital.
Regarding the source of fund almost all of the total investment cost shall be covered by the
contribution of the promoter.

The project will start to generate profit on the ------- year and the total net cash inflow during the
project period is highly positive. The discounted Cash flow shows that the project is viable with
a Net Present Value (NPV) of Birr 374,260.00 discounted at 8.5 per cent, and the Internal Rate
of Return is very 28.2 which indicates that the project is financially feasible and highly lucrative.
Furthermore, the intended project would increase the country's' foreign exchange
earnings, provide employment opportunities, transfer improved skill to the surrounding
and also generate additional income to the government. Therefore, the project is
technically, economically and financially feasible and acceptable.

1. Background
1.1 Introduction
1.2 Sesame Production and Marketing in Ethiopia
1.2.1 Production
Agriculture is the mainstay of the Ethiopian economy, not only by virtue its substantial
contribution to the livelihood of a large majority of Ethiopians but also for its significant
contribution to the country’s foreign exchange earnings. Cognizant of this fact, the Ethiopian
government has pursued the Agricultural Development Led Industrialization (ADLI) strategy
since 2001 as a means of economic development. The strategy document specifically indicates
that the success of the effort is assured if the performance of the agricultural sector is
transformed from a generation’s long period of subsistence to a market-oriented commercial
production system. To this effect, all responsible ministries and agencies of the federal and
regional governments and different multilateral and bilateral collaborative efforts are in the
process of implementing the strategy. As the most responsible body for this strategy The
Ethiopian Ministry of Agriculture and Rural Development (MoARD), has developed a master
plan to enhance market-oriented production for priority crops and livestock commodities
(MoARD 2004). The oilseeds sub-sector, of which sesame is an important product, is one of the
priority crops within the master plan. According to the master-plan document, in 2000 the total
production of sesame seed was 156,600 tonnes, and yet this volume of production could
potentially increase threefold. Consistent with this, the Ethiopian government aimed to double
the production and export of oilseeds between 2005 and 2010 (PASDEP 2005).
The existing production system suffers from traditional farming practices, unimproved seed, lack
of fertilizer use, etc. This situation has caused productivity of the crop per hectare to be far below
the estimated FAO potential, which is about 16 quintals/ha. (Wijnands et al. 2007). According to
the Ministry of Agriculture and Rural Development (MoARD) master plan, the 2000 average
productivity of sesame per hectare was 4.58 quintals. However, the Ethiopian Statistical
Authority report of 2005-06 indicates that the crop’s productivity level is 7.07 quintals per
hectare countrywide, although total production is slightly less (149,400 tonnes) than what was
reported by the MoARD master plan for 2000 (156,600 tonnes). However, it is understood that
the current productivity level of sesame in Ethiopia is far below the expected average, and
therefore there is room for improvement by means of a better farming system and the
implementation of improved inputs. Moreover, since there is still land available in the
northwestern, western and southwestern areas of the country, the potential for increasing
production volume is great. Despite the potential for increasing the production and productivity
of sesame, there are also a number of challenges inhibiting sesame production and productivity.
Among the many production constraints, the most important include a lack of improved
cultivars, a poor seed supply system and a lack of adequate knowledge of farming and post-
harvest crop management. In addition, there are severe biotic stresses, such as bacterial blight
(Xanthomonas campestris pv. sesami), phyllody (Mycoplasma-like organism), Fusarium wilt
(Fusarium oxysporum), Powdery mildew (Oidium erysiphoides), Alternaria leaf spot (Alternaria
sesame) and Cercospora leaf spot (Cercospora sesame), which are the common sesame diseases
registered in Ethiopia (Daniel Endale, 2008). Caused by mycoplasm-like organisms and
transmitted through Jassid (Orosius albicinctus) bacterial blight – very common in humid and
high rainfall areas, transmitted by infected seeds and phyllody – is a highly destructive disease..
Sesame leaf roller or webworm (Antigasta catalaunalis) is also an important and widespread
insect that damages sesame in Ethiopia. Pests attack the crop in all stages of its development.
The most important storage pests of sesame in Ethiopia are the red flour beetle (Tribolium
confusum) and rice moth (Corcyra cephalonica). These are cosmopolitan insect pests that attack
a range of stored products. Moreover, sesame is a poor competitor of weeds. The crucial period
for weed competition is about four weeks after emergence (Alemayehu and Ababu, 1991).
Sesame has high agronomic importance as it has the ability to adapt to harsh environments in
which other crops cannot be cultivated. Hence, in many sesame-growing regions the crop is
indispensable not only for its economic importance but also for its suitability in such harsh areas.
Therefore, developing improved cultivars and production technology is required to increase
sesame yields and establish stability in different growing areas. More productive sesame
cultivars that have been adapted by breeding are expected to be the major strategy for increasing
yield and establishing stability in Ethiopia.
1.2.2 Marketing
Sesame is mainly produced for the market and it is wanted for its seed and for the oil in the seed.
Sesame contains up to 60% oil of a very high quality and up to 25% protein (Brar and Ahuja,
1979; Bedigian et al. 1985; and Ashri, 1998). Until very recently, almost all of the sesame
produced by Ethiopian producers (both large scale and smallholders) was exported. In the
international market, its demand comes from the oil industry and the confectionary sector. Seed
oil content is the most important parameter for determining the suitability of sesame seeds for oil
extraction, while seed coat color determines quality for the confectionary market (Ashri, 1998).
Sesame seed is rich in amino acids, especially methionine, cystine, arginine and leucine.
Sesame seed contains little vitamin A, but it is rich in vitamin E. Sesame seeds are used for
decorating bread and cakes. Sesame oil contains a significant amount of fatty acids, mainly
linoleic (39.3- 59%) and oleic (32.7-53.9%) acid (Yeramanos et al. 1972), and palmitic (9-11%)
and stearic (5- 10%) acid (Kamal-Eldin et al. 1922a). Sesame oil is unique among vegetable oils
due to the presence of natural antioxidants such as sesamin and sesamolin and their derivatives
(sesamol and sesaminol), which provide a significantly long shelf life and stable characteristics
(Brar and Ahuja, 1979; Johnson et al. 1979; Salunkhe and Desai, 1986; and Seegeler, 1983).
Sesame oil is mostly used for cooking purposes. Sesame oil is also used in soaps, paints,
perfumes, pharmaceuticals and insecticides. The cake produced after the extraction of oil from
un-hulled seeds is an excellent protein feed for poultry and ruminants (Ashri, 1985).
Having these intrinsic characteristics and unique uses, sesame is one of the most wanted oil crops
in the world. Over the last two decades, the quantity of sesame traded on the world market has
more than doubled. Japan, the European Union, South Korea, the USA and Egypt were largest
importers, while India, Sudan, Guatemala, China, Myanmar, Ethiopia and Nigeria (Comtrade
database, United Nations Statistics Division website, Wijnands et al. 2007) were major suppliers
to the world market. Currently Agriculture dominates Ethiopian Economy. The sector
contributes to economic growth through providing employment for large proportion of the
population. It provides export products, food and industrial raw materials and aids industrial
expansion by providing market for domestically produced goods. In the agricultural sector high
value crops, especially sesame has a great impact in providing export market. The total area
under sesame production in Ethiopia is estimated to be about ---------------hectares with a total
annual production of more than--------------- tons.

Ninety-five percent of the total annual sesame production comes from the peasant sector while
the balance is covered by large scale farms. The average national productivity of sesame in
Ethiopia is very low compared to the productivity of other sesame producing countries. This is
mainly attributed to backward production techniques employed by smallholder farmers. The
current low productivity of sesame as well as other crops has to be changed through improved
agricultural production techniques so that the country could benefit from the sector. This could
be done through creating appropriate linkage between smallholder farmers and private
commercial farmers. The Economic policy promulgated by the Federal Government of
Ethiopia has brought about a great opportunity to private investors in all sectors of the
economy and continually abolishing obstacles hindering investment. The expansion of
modern sesame farms by private investors is believed to boost sesame production and
productivity. This would highly benefit the economy as the crop has long remained to be
the single largest crop contributing over half of the country's foreign currency earning.

The promoter of this project, Sheik Abdullah, is one of the beneficiaries of the new economic
policy who has been initiated to invest in exportable crops that the government has given utmost
consideration in the development strategy of the country The Investor, besides planning to invest
in the area of the agricultural sector, will also need to play a significant role in the area of Import
Export Trade Sector and has already maintained a great deal of experiences in dealing with and
smoothly managing the various problems arising among Agriculture, Industry and Trade in his
home country.
1.3 Project Objectives
Objective of the project is production of high value crop, which sesame for the export market
following the major government Policy frame work which gives emphasis to market oriented
production. In line With this the following are specific objectives of the project:
 To develop 600 hectares of land with modern sesame production,
 To generate attractive return to the investor and also contribute to the
foreign exchange earning of the country and,
 To introduce modern sesame production and management techniques to the
surrounding locality
1.4 Methodology
Methodologies adopted in undertaking the study include document reviewing regarding the
production technologies and adapting the cultural practice of this crop. Sesame production
packages utilized by medium to large commercial sesame farms were also reviewed to
understand the current status of sesame production techniques. Visit has been made to the site
together with the investor and field level data were collected through observations of the site,
discussions were carried out with the community in the surrounding area and agricultural experts
and officials of the woreda were also consulted.

The cultural practice experiences and improved management practices for modern production
techniques was considered in the planning of activities, cost estimates of operations, production
yields, etc for the individual operations of the project The organizational structure, the staffing
plan and the overall manpower requirement were also estimated based on the data collected.
2. Project Area
2.1 Project Location, Climate and Physical Features
The project site is located in Matekal Werada of Benishangul Gumuz Regional State in the area
called Gilgal balas Zone- and the specific locality is –Pawi- The site diverts -250kms from the
main road around which –Koso bar town is located. –Gilgal Balas/ Jawi-Town is about 1250
kms and 750kms from the zonal capital Assossa and Addis Ababa, respectively. The total area
of the project is 600 hectares which is entirely located in this site. The proposed investment area
is new. It is dominantly covered with open shrub Lands. The area is free from settlement and any
sort of agricultural activities including livestock and grazing land. The site can therefore be used
for sesame cultivation without any complication that could result from land use arrangements.

750kms/ 2 days
Gilgal balas/ Matekal zone
Chagni
Koso bar

Addis Ababa
Pawi
Wallega

Fig. Roots to project site

Asossa

350kms 1250kms/ 3 days

2.2 Topography and Agro-ecology
Agro-ecologically the area is characterized by sub tropical low land type of climate. The altitude
of the area is ranging from 1,400 to 1,600 meters above sea level within the range of ecology
recommended in Ethiopia for the targeted crops. In Ethiopia Sesame is grown from seas level to
1500m. With regard to topography the locality of the site falls within a slightly to moderately
gently slopping plain with suitable topography for sesame production. The land is well drained
and not exposed to flooding hazards. Ragged land and steep slopes account for less than 10%.
The soil of the project locality is fertile with a high nutrient-holding capacity for clay minerals
indicating that it is friable, and loamy, with a good depth for cultivation of sesame. The topsoil is
dominantly dark-brown or brownish in color, and fertility is maintained by organic recycling
through litter fall from the numerous perennial plants in the project site.
2.3 Rainfall
Rainfall of the site is mono-modal type, which begins usually in mid April and continues up to
mid September and is uniformly distributed in most years and is favorable for the production of
most crops including sesame. The annual rainfall is well over 1,450mm and fairly distributed in
the year. The climatic condition of the locality is pleasant for oil crops (sesame). Growth and
fruiting of sesame plants are favored at 20oc.
2.4 Vegetation
The vegetation cover of Matekal zone------- woreda is a sub-humid tropical forest type. Among
the main tree types in the area are Patria ferruginous (Kararo), UCordia, abysinicaU (Wanza),
Croton machrostachys (Bisana) and Albizzia schimperiana (Sesa).
The area is predominantly covered with dense forest and most of the tree species in the area like
Wanza and , Bisana are suitable for coffee shade and will selectively remain on the farm to serve
this purpose. In addition to the natural trees already existing on the farmland, a more suitable
shade of acacia trees shall be artificially planted and intensified in the area. This practice at the
same time would help to maintain the ecology of the locality as well as the fertility status of the
soil.
2.5 Road net works
Metakal zone has a good conditioned gravel road in two directions. New road is also under
construction from Pawi town to Jawi, which is a short cut to Metakal the capital city of the zone.
The new road creates the second option for access to transportation from the project site to the
main asphalt highway, which is a very good opportunity for the project.

3. Technical Feasibility
The Metakal zone in general and the project area in particular are the most ideal places for oil
crops (sesame) as well as other crops production. The average annual temperature of 24PoPc and
sufficient annual rainfall with fair distribution over months and short dry period created
favorable condition for the selected crops. Furthermore, altitude of about 1,400 m above sea
level, the type and quality of soil, suitability of the slope for drainage, the availability of suitable
shade trees?? and the permanent rivers?? Crossing the area justifies the suitability of the area for
sesame growing.
On the other hand, concerned government line offices have long ago demarcated the area as one
of the places where private investors could invest and participate in the development endeavors
already underway in the country. Agreement has also obtained from concerned bodies at various
levels to implement the intended project.

Sesame is the main crop growing in the vicinity and the people in the area have good experience
in handling and managing the crop. This would facilitate the possibility of getting experienced
human labor for the operation of the farm. There are sufficient social services in the nearest
small town called ------------.
4. Cropping Pattern and Land Allocation
The total land to be developed by the project is 600 hectares with an effective production area of
590 hectares while the remaining 10 hectares will be used for infrastructure development such as
offices, residence, farm road and store.
Table: Land development plan for Sesame growing in hectare
S. n Crop type Years
1 2 3 4 5
1 Sesame 590 590 590 590 590
Total 590 590 590 590 590

5. Project Components
5.1 Maintenance of Roads, Office and Residential Buildings
The project infrastructure and land development commences as soon as the legality process is
completed. At the initial stage of the project that is during year zero of project implementation
maintenance of ------kms of feeder road, construction of and -------km farm road will be carried
out and the total cost is estimated at-------- birr. The project will construct 100m2 office, 200m2
staff residence, 60m2 laborers residence, and one cafeteria and two stores with a total cost of
birr---------------- as shown in Annex Table .3.

No Description Unit Qty. Total Annual distribution

cost Initial Year1 Year2 Year3 Year4 Year 5
1 Road
construction
-Access road km
improvement
-Bridges No
-Farm road Km
Sub total
2 Land
development
Building &
structures
Office 1 M2
-staff M2
residence (2)
Office 2 M2
-Laborers’ M2
residence(2)
- Cafeteria M2
-Hand dug M2
well
- Main store M2
Material M2
 store
-Drying M2
floor
-Fence M
(office&
Store)
Sub total
-Generator No
with line
-Water pump No
- Sprayers No
-Farm tools Ls
Sub total
Office No
equipment
-Chairs No
- Desks No
- Shelves No
-Filing No
cabinets
Sub total
Total
investment
cost

N.B.
All Farm Machineries and equipment, except farm tools, are to be imported. The foreign
purchase cost is thus estimated at birr-----------------------------------.

6. Project Man Power and Management

The project shall have ------- permanent employees with different responsibilities. The investor
controls and supervises the over all activity of the project at times while the operation and
management of the farm will be entrusted to qualified and well experienced manager. All staff
members of the project are accountable to the manager who is assigned by the investor to
manage the overall activities of the project.
A junior accountant will be responsible to keep all the financial transactions of the project,
control cash and stock movements of the farm and prepare up to-date financial reports. He also
serves as a cosignatory with the manager of the project. The secretary cashier will handle all the
payments and minor purchases and does the secretarial works including keeping various files of
the project. The two foremen will be responsible for the routine operation and management of
the farm under close supervision and control of the farm manager. The storekeeper will be
responsible to systematically record and keep the input and outputs of the project.
Skilled man powers shall be recruited from Matekal woreda while the casual laborers could be
hired from -----, -------- and ------ localities including the adjacent surroundings. Sesame is
annual crop and production begins starting first year of the project. The harvest for sesame will
be made at an appropriate time. Proper announcement will be made in time prior to the
commencement of harvesting to hire adequate number of casual laborers if need be.
7. Crop Yield and Productivity
At any location, crop production and yield is impacted by a combination of different factors.
Among the factors soil type, the environmental situation especially the night temperature, hour
of day light and the number of cloudy days have a significant effect on yields of sesame
production. The yield is assumed to have an increasing trend through the implementation plan of
the project assuming that it reaches possible optimum yield of the sesame will be maximized by
practicing modern production techniques.
8. Project Labor, Material and Office Requirement
8.1 Labor Requirements
Labor requirements for the envisaged farm has been formulated in accordance with crop growing
periods considering the successive farm operations from land preparation to harvesting. Labor
requirements of the farm vary depending on the type of activities prevailing in a particular time
of the growing season and the maximum number of labor required for each operation. The daily
wage varies according to the types of operations which is in the range of 20-30 birr/day.
8.2 Materials Requirements
8.2.1 Seed Requirement
Available information on seeding rate indicates that seeding rate is on average 8kg/ha for
sesame. Accordingly the cost for seed purchase 20 birr per kg for sesame. Improved seeds of
sesame will be purchased from Ethiopian Seed Enterprise (ESI).

8.2.2 Fuel Requirements

Fuel requirements for machineries is determined by the total working hours required to perform
different operational activities and the consumption on fuels based on the actual selling price of
fuel at nearest town.

8.2.3 Farm Machine and Vehicle

The requirement of vehicles and motorcycles are considered with the optimum norm of the
existing practice. During the project time at least four tractors, and two motor cycles are
envisaged.
8.3 Office and Store
The construction of office, residence and store buildings are to be made. These buildings are to
be constructed on sites identified for construction purpose as mud barracks. The construction
estimate at year ------ is Birr -----------------.
9. Socio-Economic Benefits
Sesame is of a vital economic importance to the nation next to coffee.
Sesame and haricot bean are also becoming high value exportable crops and the country has
significant potential to benefit from these crops. The establishment of the growing is meant to
increase the country's foreign exchange earnings by producing quality products. The proposed
project is expected to offer an employment opportunity to a minimum of ------- persons (----
permanent and the rest temporary). The employment of casual laborers during harvesting seasons
could be as many as ------.
The project is expected to transfer improved crop management skills to the surrounding farmers
through the demonstration effect of the growing and partly through the employment opportunity
to be generated. The improvement of access rural road would also be beneficial to the
community in various forms. The project furthermore has the intention of distributing high
quality sesame seeds. Disease resistant and high quality sesame will be provided to the
neighborhood farmers to improve the productivity of the sub sector and thereby income of the
farmers.
The Federal as well as the Regional governments would also receive substantial amount of
revenue in the form of different taxes including profit tax. The land rent is also another income to
the region.
10. Financial Study and Analysis
10.1 Project Costs
As shown in Table 4 below, the total project investment cost is ---------------- birr of which the
major share -------------- percent is for purchase of farm machinery, vehicle and equipment. The
table also indicates that of the total operating expenses wage accounts for the largest proportion.
The total fixed investment cost of the proposed project is estimated at be--------------. This
investment cost spreads over two while the substantial part will be committed at the time of
project commencement. Of the total investment cost
Birr ----------------- is planned to be used for access and farm road construction, birr, for land
preparation, birr------------- for various buildings and other structures (office, residence, store,
etc.) and birr ------------- is allotted for farm machinery including office facilities and equipment.
Regarding the source of fund, the total required investment cost, birr -----------mln shall be
covered from own contribution.

Table 4 Financial investment and project cost summary

No Description Annual distribution Total

Year0 Year1 Year2 Year3 Year4 Year5
1 Road
maintenance
2 Land
development
3 Building
4 Farm
machinery
and vehicle
5 Office
equipment
6 Wage
7 Agricultural
inputs
8 Fuel and
lubricant
9 Repair &
maintenance
10 Vehicle
insurance
11 Travel and
 peridiem
12 Stationery
13 Land rent
14 Salary
15 S. total
16 Contingency
17 Total

10.3 Project Life

The complete implementation of the project is going to take--------- years (from year 0 to year
two) and full capacity operation will be gradually attained in the ------------- year. Therefore the
project will involve both production and investment during the first two years. Zero year of the
implementation is considered to be the construction phase. Production phase will cover five
years starting from the first year.

10.4 Source of Finance

The investment requirement of the project is assumed to be financed by the project owner
(promoter).
10.5 Revenue
The major crop to be cultivated by the project is sesame. As could be observed from table 5
below the project will generate sales revenue of about birr ---------in the first year of project
implementation and reaches to------------------ at the end on annual base.

Table5. Project revenue in birr over project years

Description Years
1 2 3 4 5
Selling of
Sesame
2000/quintal

10.6 Income Tax

According to the Investment Incentives Council of Ministers Regulations
No.7/1996, the project is entitled to the following incentives:
• Income tax exemption for 5 years
• Losses carry forward for 5 years, and
• Exemptions from payment of custom duty on machineries and equipments.
For the rest of project’s life, a 30% tax rate is applied on the taxable income.
10.7 Financial Analysis Result
The financial analysis of this project is carried out based on the results of the investment and
operational costs discussed in previous sections as well as the assumptions mentioned earlier.
Based on the assumptions and the financial costs and benefits discussed in previous sections of
this report, the financial analysis results are as discussed below.
10.7.1 Cash Flow
As could be observed from the cash flow table attached in Annex Table 2 the project will
generate positive cash flow through out its life excluding the initial year. ------------------ Which
will immediately raised up to -----------------in the next year. By the end of the project life,
cumulative cash flow will be about birr--------. The discounted Cash flow shows that the project
is viable with a net present Value (NPV) of Birr---------------- discounted at-------per cent, with
------- Internal Rate of Return indicating that the project is very lucrative and profitable.
10.7.2 Profitability
As it could be seen from the annexed financial projections the project is financially feasible
(Annex Table 1 and 2). Based on the projected profit and loss statement, the project will generate
a profit through out its operation life. Annual profit, net of tax, fluctuates between Birr
-------------- in the next year to Birr -------- at the end of the project. The profit and loss statement
of the project shows that the proposed project shall start generating net profit starting year -----.
This is to say that the project shall start earning net profit just from its onset. The cumulative
cash balance is also expected to be highly positive for the years under consideration. By the end
of the project period the farm shall generate a net profit of over ---------- million birr
(undiscounted).

Annex Table 1. Project cash flow

Description Years
1 2 3 4 5
Inflow
gross value of production
Incremental residual value
Total inflow
Outflows
Investment
operating expenditure
Incremental operating exp.
Incremental working capital
Tax
Total out flow
Net Cash
Table 6.Project schedule

SN Activity Period

Finalizing the necessary formalities and

securing the land
Acquiring investment certificate
Recruitment of personnel
Office and residence construction
Land preparation for plowing
Plowing
Sowing and weed management
Harvesting and post harvest activities

Annex Table 2. Sesame statement for the year ending July 30

Description Year
1 2 3 4 5
Sales
revenue
Operating
exp
Depreciation
Profit before
interest
and tax
Tax
Net Profit

Annex Table 3. Detail operating costs in birr

No Description Unit Annual distribution

Year1 Year2 Year3 Year4 Year5
1 Sesame 1st
Weeding
Sesame 2nd
Weeding
Sesame
harvesting
Sesame threshing,
packing and
storing
2 Materials
sesame seed
8kg/ha
Fertilizer
fertilizer cost in
birr
Chemical in lt
chemical cost in
birr
Sacks
sacks cost
Total plantation
operation
Cost
Annual supplies
Fuel
Tractor
Generator
Water pump
Motor cycle
Sub total of fuel
5 - Oil & lubricant
(10% of fuel cost)
Repair &
maintenance (2%
of machinery
cost)
Vehicle insurance
(2% of vehicle
cost)
Maintenance of
building (2% of
building cost)
Travel and
Peridiem
Miscellaneous
Total
Land rent-Annual
Expense
Salary & benefits
Project manager
Junior accountant
Secretary cashier
Forman
Store keeper
 Guard
Sub total
Provident &
others (10%
salary)
Total
Total (1-4)
Contingency
(10%)
Total operating
expense

Annex Table 4.Depreciation for building, equipment and vehicle

No Item Purchase/construction Years Annual depreciation

year of
service
0 1 2 Year1 Year2 Year3 Year4 Year5
1 Building
2 Tractor and
Farm
machinery,
Equipments
3 Office
equipment
Total
Organizations Related to Sesame Production, marketing and transaction
1. Ethiopian Investment Agency(EIA)
2. Ethiopian Seed Enterprise(ESE)
3. Ethiopian Commodity Exchange(ECX)

1. Ethiopian Investment Agency

The Ethiopian Investment Agency (EIA) is the government organ responsible for
promoting, coordinating and facilitating foreign investment in the country. It is a one- stop-shop
for all investors in Ethiopia, and renders the following services:

• Provides the necessary information required by investors;

• Approves and issues investment permits to foreign investors;
• Provides trade registration services to foreign investors;
• Issues operating licenses to approved foreign investments;
• Notarizes Memorandum of Association and Articles of Association;
• Grades construction contractors;
• Approves and registers technology transfer agreements;
• Registers export-oriented non-equity based foreign enterprise collaborations;
• Provides advisory and aftercare services to investors;
• Approves expatriate posts and issues work permits to foreign employees; and
• Facilitates the acquisition of land and utilities by foreign investors.

Foreign participation in investments may be carried out either through the establishment of
branches or through locally incorporated enterprises. All foreign investors intending to invest in
Ethiopia are required to obtain investment permits. Foreign investments are governed by a
number of codes, proclamations and regulations.
The Ethiopian investment regime identifies three types of investors:
• Domestic investors;
• Foreign investors (wholly owned); and
• Investors in joint ventures.
The legal regime makes a distinction among the different classes with regard to areas of
investment and capital requirements during licensing. In all other respects, the law treats all
classes of investors in the same manner during and after licensing.

In all cases of proposed foreign investments, the following documents will have to be
submitted in order to secure an investment permit and other certificates and licensees:
 A completed application form;
 A project profile;
 A draft memorandum and articles of association, if the investment
participation is through a locally incorporated enterprise;
 A list of machinery and equipment intended to be exempted from duty;
 In the case of planned employment of expatriates, a schedule for their
replacement by Ethiopians and details of the training program leading to
the replacement; and
 Technology transfer agreements, if any.
If the applicant is a company, the following documents are also required:

 Certificate of incorporation of the parent company;

 Statute or memorandum of association of the company;
 Annual report and financial statement of the company;
 A resolution passed by the owners or the board of the company
authorizing the establishment of a branch office in Ethiopia and
indicating the capital of the branch, its activities and the name of the
manager; and
 A power of attorney for the person authorized to sign on
behalf of the company.

2. Ethiopian Seed Enterprise(ESE)

 3. Ethiopian Commodity Exchange (ECX)

The Ethiopian Commodity Exchange (ECX) is designed to be a marketplace where buyers and
sellers come together to trade, assured of quality, delivery and payment. ECX is a national multi-
commodity exchange with the aim of providing market integrity, by guaranteeing the product
grade and quantity and operating a system of daily clearing and settling of contracts; enhancing
market efficiency by operating a trading system where buyers and sellers can coordinate on the
basis of standardized contracts; enabling market transparency by disseminating market
information in real time to all market players; and allowing risk management by offering
contracts for future delivery, providing sellers and buyers a way to hedge against price risk.

ECX and Sesame: the role in reducing transaction and coordination risks
Transaction and coordination risks in the sesame market

The key actors under the current sesame marketing system are producers (small-scale and
commercial farms), agricultural marketing cooperatives and their unions, agents/brokers,
wholesalers, and exporters. Even though, the commodity exchange has been operational since
May 2008, sesame was not yet traded. This is mainly due to the seasonality of the production and
marketing. Critical period for Sesame sale and purchase is in the months of November,
December, and January.
In order to identify the role of ECX in reducing transaction costs and coordination risks, it is
important to understand the possible costs and risks of the current marketing system.

ECX mechanisms of reduction of transaction costs and coordination risks

The ECX marketplace is designed to bring order, integrity, transparency, and efficiency to the
sesame and traded commodity markets. Market order is established through an organized trading
platform, formal rules and procedures, standardized contracts and standardized products, a
system of Membership based participation, monitoring and enforcement of compliance to the
rules, and managing risks to the market. Market integrity is achieved through grading and
certification of the quality and quantity of products traded, warehouse receipting of commodities
traded, enforcing fair competition and ethical business conduct, and clearing all payments
between buyers to sellers. The markets become transparent through a system of industry-
accepted product grades and standards, rapid and reliable dissemination of market information to
all actors, and enforcing disclosure and audit reporting requirements for its Members. The
market efficiency is ensured through use of information technology to automate the End-to-End
system from warehousing to trading to clearing and settlement of payments to delivery of
commodity, and through a centralized trading platform offering low-cost service to all market
users.

Specifically, the major bottlenecks that have created high transaction and coordination risks in
the sesame market chain can be addressed through trading through ECX due to the following
specific features of ECX:
(1) Warehouse and receipt with quality and standards is an integral part of the system.
(2) The physical transfer of the product is made once the product is sold, which reduces the
transportation cost
(3) Marker information system is already established within ECX accessible to different
markets and also to the general public through different media. This is expected to put all
market actors on equal footing and creates fair market competition. This is expected to
help cooperatives and their unions in improving their timely market decision making.
 (4) ECX guarantees payment against delivery through an internal system for clearing and
settlement of contracts, in collaboration with partner banks.

Costs of trading through ECX

The costs of trading through ECX are related to warehousing costs (storage and handling) and
ECX service fee. However, there are costs that are incurred during the pre-ECX trade, which are
related to cost of brokerage that are agreed based on member-client agreement and transportation
to ECX warehouses.
ECX trade
The costs of trade through ECX are related to warehousing costs (storage and handling) and
ECX service fee and these are:
Exchange fee for ECX: 0.002 % of the value of each transaction
Warehouse Storage cost: 0.04 birr/day/quintal (1.20 birr/month/quintal) (includes
fumigation, crop rotation, and other storage services
Handling and product certification fee: 1.45 birr/quintal (Handling fee includes sampling,
grading, weighting, loading and unloading)
Re-bagging cost if there be a need.

Once the product intended for sale through ECX is stored in the ECX designated warehouse, the
product is insured by ECX. The physical structure where the product is stored is also insured but
it by the warehouse owner. Currently, all the warehouses designated by ECX are owned by the
Ethiopian Grain Trade Enterprise (EGTE). Thus, the warehouses are insured by EGTE.
AREAS OF INVESTMENT FOR DOMESTIC INVESTORS

 Radio and television broadcasting services.

 Retail trade and brokerage.
 Wholesale trade (excluding supply of petroleum and its by-
products) as well as wholesale by foreign investors of their
 Locally produced products.
 Import trade.
 Export of raw coffee, oilseeds, pulses, hides and skins, and
export of live sheep, goats and cattle not raised or fattened on own
farm.
 Construction companies, excluding grade one contractor.
 Tanning of hides and skins up to crust level.
 Hotels other than star-designated hotels, motels, pensions, tearooms,
coffee shops, bars, nightclubs and restaurants (excluding international
and specialized restaurants).
 Tour operations, travel agency, commission agency and ticket offices.
 Car hire and taxicab transport.
 Commercial road transport and inland-water transport services.
 Bakery products and pastries exclusively for the domestic market.
 Grinding mills.
 Barber shops, beauty salons, smith workshops and tailoring (excluding
garment factories).
 Building maintenance services, repair and maintenance of vehicles.
 Sawmills and manufacture of wood products exclusively for the
domestic market.
 Customs clearance services.
 Museums, theatres and cinema hall operations.
 Printing industry.
 Artisan mining.