FEASIBILITY STUDY REPORT 2022

FEASIBILITY STUDY
FOR

THE ESTABLISHMENT OF ADVANCED DIAGNOSTIC CENTER

(HIGH-TECH MEDICAL LABORATORY SERVICES)

PROMOTER/COMPANY: ……….

DECEMBER, 2022
ADDIS ABABA, ETHIOPIA

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Table of Content

I. Executive Summery ………………………………………….………………...3

II. Background Information ……………………………...………………….…5

III. Market Analysis..…………………………………………………………….….11

IV. Technical Analysis………………………………………………………...…...23

V. Organization and Management ………………………………...........27

VI. Financial Analysis…………………………………………………………..…..30

VII. Annexes…………………………………..……………………………..…………..34

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I. EXECUITIVE SUMMARY
ABC COMPANY was legally established as a Private Limited Company in accordance with Ethiopian
Commercial Code and by fulfilling sector standards. Since its establishment in 2010 E.C.; the company has
been playing a significant role on availing in demand medical supplies specially having ethical business
management skills with best Ethiopian personality with a very rich business experience in running successful
health care support services and commercial ventures in the import trade of medical devices, instruments,
pharmaceuticals import, wholesale and retail business, targeting to increase accessibility and affordability
of quality medicines and health care products for the public as well as private health sector in Ethiopia.

The purpose of this Feasibility Study and by considering the current fast and dynamic economic growth of
Ethiopia especially in urban area, the promoters have deeply understood and inspired to engage in what the
market necessitates for equivalent growth of Health Service sector development as well as strongly
motivated to engage in the establishment of Advanced Diagnostic Center with modern technology and
unique services branding along with other trade operations in the domestic market. To this end, although
there are many established competitors with in the city administration, the trend indicates that the demand
for health care facilities and especially for health care support services like High-Tech Diagnostic Laboratory
services have been continuously increasing at rate higher than that of its supply.

Technically, the envisaged Diagnostic Center is going to be located in Addis Ababa City Administration, Yeka
Sub-city Woreda-07 within the vicinity where every required infrastructure and basic utilities are available
and already in place. Hence, by considering the economic scale of service provision and available
technology, the proposed annual capacity of the center at initial stage is to handle 150 cases per annum,
which is considered as 60% capacity utilization during the 1 st year and then it will raise its capacity to 85%
and 100% full capacity by 2nd, 3rdand above years respectively.

Besides, the Organizational set-up of ABC COMPANY DIAGNOSTIC CENTER with a total job opportunity for
about 57 permanent staffs is going to be structured professionally and will follow modern management
principles. Accordingly, the company will have three departments namely, “Admin & Finance, Operations &
Technical, and Marketing & Procurement” departments, which on top of all the General Manager is
responsible for the overall planning and coordination every department units. Whereas, employees under
each unit will be supervised by the division heads that is accountable for the senior department directors
and respective supervisors.

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Regarding investment cost on the establishment of an envisaged Diagnostic center, the total
investment cost is computed to be ETB 95,320,561, which is going to be financed by equity capital and
long-term bank loan. Accordingly, from the total investment cost stated herein, about 31% (ETB 29.82
Ml) is expected to be equity contribution and 69% of the cost, (i.e. ETB 65,000,000) will be covered by
external source as bank loan facility at prevailing interest.

Furthermore, the envisaged Diagnostic Center will generate a net profit after tax of the net benefit
starting by ETB 4.46 Ml; ETB 9.86Ml; ETB 15.30Ml; ETB 19.01Ml; ETB 21.42 ML; ETB 24.03 ML; ETB
26.87 ML; ETB 29.95 ML; ETB 33.30 ML and ETB 36.93 ML; during its 1 st, 2nd, 3rd, 4th ; 5th; 6th; 7th; 8th; 9th
and 10th of operations respectively. To this accord, Net profit to equity and net profit to total
investment or return on investment (ROI) are all attractive. Whereas, the project shows that the project
would generate positive net cash flows throughout the operation years. The cumulative cash flow
generated by the project at each year shows ETB 3.40 Ml; ETB 13.92 Ml; ETB 28.94 Ml; ETB 48.40 Ml;
ETB 72.33 Ml; ETB 95.52 Ml; ETB 119.92 Ml; ETB 145.58 Ml; ETB 172.54 Ml; ETB 200.88 Ml and ETB
230.63 Million for years-0; 1st, 2nd, 3rd, 4th ; 5th ; 6th; 7th; 8th; 9th and 10th respectively

Besides, the financial measurement and decision parameters (i.e., NPV and IRR) Calculated on the
projection are both attractive and acceptable with IRR before Tax = 31%; IRR before Tax = 25% and NPV
of ETB 75.12 Million respectively, and further implies that the pay-back period of invested cost will be
recovered during 3.6 years of its operations.

Finally, the establishment of High-Tech Diagnostic Center and uses of this new service technology has
reliable positive impacts on the overall development of the sector and the country in many aspects, and
hence, it is advisable to finance and work with such kind of viable investment.

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II. GENERAL INFORMATION

2.1 ESTABLISHMENT
 Registered Name: …………ABC COMPANY Prv.Ltd.Co.

2.2 COMPANY AND PROJECT SUMMARY

The Company, ABC COMPANY Plc is a business firm legally established as a Private Limited
Company in accordance with Ethiopian Commercial Code and by fulfilling sector standards. Since the
day of establishment, in 2011/12 E.C the company has been playing a significant role on availing in
demand medical devices and supplies having ethical business management skills with best Ethiopian
personality. Although currently operating with limited capital outlay and lesser performance, the
location of envisaged import business activity is in Addis Ababa city, Yeka Sub city, woreda-7 within
the vicinity where abundant streets enables customers’ access to company’s warehouses. In this regard,
the company has been undertaken its operations of importation and distribute of a wide array of Medical
Devices and Equipment sourced from different manufacturers (brands) from abroad USA, China, India,
and multiple European countries.

On one hand, ABC COMPANY PLC has set-forth its short and long term strategic plan to operate at
full capacity by availing medical supplies and devices through import which mostly in necessitated for
all round health care service providers. However, by considering supply of medical devices through
importing to the country of Ethiopia is expensive and, hence, as a future plan it is the aim of the company to
engage in manufacturing of most equipment in need for medical centers and to create a socially sustainable
solution to the problem, while saving the lives of individuals who require resuscitation.

On the Wing, the company has gone through different assessment on existing health care service
facilities in the country and specifically in Addis Ababa City Administration. Hence, during the
assessment and market investigation, identified that Existence of continuous and process oriented
germinations of critical and perplexing health care problems and weak institutional capacities of both
government and private Laboratory test service providers and inability to meet the ever growing
potential market demand for quality diagnostic services has been identified as a potential market gap.
Accordingly, in view of multiple facts and by considering the current fast and dynamic economic growth
of Ethiopia especially in urban area, the firm has deeply understood and inspired to engage in what the
market necessitates for equivalent growth of health care service facilities as well as strongly motivated to

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engage in the establishment of Advanced Diagnostic Center/Laboratory with a capacity of 150 Cases to be
tested per day by availing modern diagnostic technology and unique service branding along with other trade
operations in the domestic market.

To this end, the management of ABC COMPANY believed that quality health-care service is one of the
tools that will generally empower the country in different aspects of development, and hence, the decision
become the root causes for establishment initiation of an envisaged Advanced Diagnostic Center/Laboratory
mainly based on:

 Existence of government and environmental policies which support all efforts being exerted on health
care services quality and capacity improvements,
 Existence of strong belief, commitment, internal capability and outstanding theoretical and practical
knowledge, skills and experiences of the project promoter are some among others.

Thus, the project establishment is intended to create a scientific, all-inclusive, and value-adding diagnostic
culture of excellent, timely test results conforming to world-class testing standards and benchmarks for
swifter and better disease detection, in addition consistent service in all future expansion activities.
Generally, the purposes of Laboratory tests are often part of a routine checkup to look for changes in
individuals’ health situation and also help doctors diagnose medical conditions, plan or evaluate treatments,
and monitor diseases.

Moreover, the project has an intension to contribute on responding national demands of having a high level
of health-care at all levels and being a citizen who can play a significant role in national development goal
strategy for the health sector.

2.3 VISION, MISSIONS, ROLES AND VALUE STATEMENTS

 The Vision

To be the center of excellence and being a leader in providing a world class medical diagnostic services
to the nation and beyond

 Mission Statement

The strategic Mission is to provide top quality Diagnostic Laboratory Services that enables to achieve
excellence in health professionalism, technology and customer satisfaction. So, believed that this
strategy enables us to promote the health of the nation in curative, preventive, monitoring and public

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health decision making by providing accessible, affordable, appropriate and equitable quality medical
diagnostic services and deliver dependable results in the best possible turnaround time.

 Roles

To bring radical changes and improvements in the health care industry by adopting highest level service
standards and Strive to improve customer care through excellence in Medical laboratory services

 Value Statements

 Commitment to quality services with Customer focus continuous skill improvement

 Patient centered, customer orientation and societal satisfaction
 Concern for better and improved health environments
 Integrity, Confidentiality and Teamwork
 Ensure accessible and affordable service,
 Take responsibility to manage requests/complaints first time every time
 Quality service assurance by raising a culture of performance excellence
 Providing safe working conditions and encourage continuous staff development ·
 Acknowledge each specimen as part of a human being and Treat everyone fairly and
consistently as family.

2.4 CORPORATE OBJECTIVES

With this feasibility study document, the intention of the project is to raise financial capital in
connection with the proper implementation of setting-up planned Advanced Diagnostic Center. Hence,
the Primarily Objective is fulfilling capital requirement partially by equity contribution and partly by
securing bank credit facility for total amount ETB 65,000,000. Although it intends to undertake
expansion activities in the future, the current project by securing the said fund that enables to implement
and start operation in line with the national and international standard set for the establishment of High-
Tech Diagnostic Laboratory is expected to attain the following specific objective:

 Designing and developing sound organizational structure which will be compatible with project
mission and role statements
 Outstanding and effective use of clearly identified and defined, span of control, lines of
communications and information flows among various structural levels
 To provide health care support service facilities for economically lower group in accessible
manner and at affordable price.

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 To embark on a sustainable plan to achieve a reliable Medical Diagnostic Services for the central and
regional community in Ethiopia.
 Exploration, accumulation and transfer of positive impact generating services for wider public use
 To avail advanced medical diagnostic services in a shortage to meet the domestic market demand
and minimize the financial, time, travel and cost burdens of the target market customers
 To Provide Tourist focus health care support service facilities, especially for neighboring east
African nations, which in turn to enable the country enhancing hard currency generation.
 To create access of Ethiopian professionals and others to income and employment opportunities
and stabilize the health industry
 To generate sustainable income for the company in order to expand the operation and other
development activities in the country.
 To increase the automated and top quality laboratory/sample testing services delivery capacity
from 70% of initial plan to 100% in third year and implement further expansion to other areas
 To earn adequate and reasonable return from the medical diagnostic service provision in general
and recover initial investment cost in less than five years operations period.

2.5 QUALITY POLICY STATEMENT

Founders and Management of ABC COMPANY Diagnostic Laboratory are acutely aware that client need
high quality of services (accurate, reliable and timely laboratory test results) and fully committed to fulfill
requirements of customer, Regulatory bodies and Company`s mission and vision. Thus, ABC COMPANY
Diagnostic Laboratory is intended to offer services that comply with the requirements as specified in the
standard ISO 15189, Medical Laboratories Particular requirements for Quality and Competence, Regulatory
Bodies and other standards. Accordingly, the Quality Management System will be implemented and enable
all staffs to share the policy statement and means of quality policy implementation and their responsibility
through at all time.

2.6 NEED OF THE PROJECT

Although the project concept/has initiated for being profitable service delivery business among competitors,
it’s main implementation role is emphasizing on achieving success delivery of Specialized and High-Tech
Diagnostic Center with a strong quality and reliable service delivery program based upon high expectations
for every patient. There is a safe, caring climate of respect and cooperation. Moreover, the priority need of an
envisaged Diagnostic Laboratory project is to have a Unique Center which will join hand with the
government’s policy effort enhancing requirement of ‘Highly Specialized and World Class Services.

To this accord, ABC COMPANY Advanced Diagnostic Center is a startup project that aimed at the
improvement of access to laboratory tests and investigations of the Ethiopian population. The project is to
begin in the capital of the country, Addis Ababa, the most populated city in the country. Since the population
of the country is constantly increasing, there is the need for high-quality service providing the necessary test
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to improve the level of the population access to healthcare facilities. The center provides the opportunity to
control the major health indicators independently, without direct contact with healthcare providers. It can be
useful for people who work long hours and do not have enough time for a detailed examination. Broad
access to tests and investigations is an investment into the nation’s health and ABC COMPANY Advanced
Diagnostic Center will use innovative equipment which automates the samples’ procession.

Moreover, the center will follow a system enables to reduce the cost of a separate test which is an advantage
for the population with low incomes. The laboratory will provide all kinds of test and investigations. It will
also help to save the patients’ time since there is no need to visit several facilities that will save their money
due to the flexible discount system. It will be of particular interest for customers who need regular
investigations such as blood test to check blood sugar for patients with diabetes or for pregnant women who
pass complex tests monthly.

Generally, the rationale behind establishment of Medical Diagnostic laboratory with modern equipment and
well-trained staff is found that a basis for the healthcare system. Exact and fast laboratory tests and
examinations provide a timely and accurate diagnosis which in it turns is the key to successful treatment
process. Hence, since healthcare is not properly organized in the developing countries, they can be a ground
for quickly growing and profitable medical laboratory business. For example, Ethiopia is one of the world
countries with steady and rapid population growth with annual increase by 3.26%. In case this rate of growth
does not slow down, the country wills double its population as of 2060. Such rapid population growth
together with poor economics may lead to the deterioration of access to healthcare support facilities
including medical laboratories and consequently, there is the need for new facilities to meet the growing
demand of the population.

Therefore, the perspective of ABC COMPANY Advanced Diagnostic laboratory is the development of
a network throughout the country in the next few years of project implementation. Whereas, the profit is
expected to exceed the expenses after three years of project development along with the fact that long
period is explained by the additional technologies to be purchased and added to the center which
gradually further reduce costs and expected to benefit low-income community

2.7 SERVICES DESCRIPTION BY LEVEL

High-tech diagnostic laboratory testing service is essential to the basic management of patient care,
allowing physicians to detect disease earlier, make diagnoses, prescribe therapies and monitor results.
Although major progress has been made in diagnosing diseases that affect people living in affluent

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societies, diseases that annually kill millions in developing countries, tend to go undiagnosed. There is
an urgent and unmet need for more-accurate, cost-effective diagnostic technologies. To overcome these
obstacles requires new or adapted diagnostic tools. Medical treatment procedures have become
highly dependent on diagnostic service to provide measured and accurate inputs.

In this regard, Services of ABC COMPANY Diagnostic Center will encompass most diagnostic
services from visual and aural observation, tasting of body fluids, primitive testing with basic
chemicals and heat to advanced atomic level measurements at present. This advanced Medical
diagnosis presents a truer picture of the nature of disease, status of penetration of the disease,
degree of cure and the health of the cellular components of the body. More specifically, services at
the center will include:

 Bio Chemistry: It includes Sugar/Glucose, Uric Acid, Urea and Cholesterol identification tests.
 Hematology: Hematology includes CBC, Co-ebullition Profile and platelets identification tests.
 Serology: It comprises of Hepatitis A, Hepatitis B & Hepatitis C, HIV, Venereal Disease
Research Laboratories, and Remitted Arthritis Factor and so on.
 Histopathology: This includes Biopsies, Pap smear, Malignant Cell and Cytology tests.
 Micro Biology: All kinds of Culture and Sensitivity tests are included in microbiology.
 Chemical Pathology: The category includes Urine DR, Stool DR and Pregnancy tests
 Diagnostic Imaging: Such as, RMI, CT-Scan, Digital X-Ray, and so many others

III. MARKET ANALYSIS

3.1 INDUSTRY TREND/BACKGROUND
Laboratory diagnostic service is required for providing effective diagnosis of the disease
suffered by the patient, measure the quantum of medicines to be provided, quantify the extent
of cure effected, identify the medical sensitivities of the patient to avoid wrong/under/over
medication resulting in adverse effects and to extend the research and development
capabilities of the medical process. Medical laboratories form the backbone of health systems, as test
results are critical for diagnosing diseases, guiding treatment, determining drug resistance and
identifying diseases of public health significance through surveillance. An integrated, tiered, functional
and sustainable laboratory system is necessary in order to address this health system needs.

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3.2 ETHIOPIAN HEALTH SECTOR AT A GLANCE

3.2.1 Health Sector Landscape

The Ethiopian Health Sector has a landscape that demonstrates the wide range of actors both
domestic and international as well as state and non-state which play an active role in health.
Although not exhaustive, the new health sector landscape offers a more complex and nuanced
perspective of the full range of actors that need to be involved when designing policies and plans to
improve health. Key discoveries include:

 Although the MOH is the lead government agency responsible for health policies and
regulation, there are other government entities, like the Ministry of Finance and the
Prime Minister’s Office that play an important role in health.
 Development Partners are a key player in health contributing an estimated 33% of total
health expenditures.
 The private sector goes beyond health services and is engaged in a wide range of
activities including medical training, commodity manufacturing and distribution, etc. that
can be leveraged to complement health initiatives of Ethiopian MOH.
 Health consumers are an important stakeholder in health and are engaged during
strategic and annual planning processes.

3.2.2 Strategy to Address Health System Gaps

The GOE is committed to addressing the health challenges confronting the Ethiopian population. The
recent HSTP (2015-2020) lays out the GOE’s health priorities and strategies. The HSTP sets out ambitious
goals to improve equity, coverage and use of and enhance quality of essential services while strengthen
implementation capacity. The plan focuses on four pillars of excellence to operationalize these goals:

 Increase access and equity of health services

 Improve safety, responsiveness and quality of health services
 Enhance leadership and governance of the health sector, and
 Strengthen key health systems to deliver essential health services (e.g. infrastructure,
supply chain, HRH, heath financing, resource mobilization)

3.2.3 Public-Private Mix of Health Infrastructure

The total number of public health facilities in Ethiopia has increased significantly between 2010/11 to
2020/21. Most the growth has been mainly in public health facilities. During the same time period, the
private health sector expanded its health infrastructure but not at the same rate as the public sector.

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Based on the annual report by MOH and EPHA, the total number of health care facilities in Ethiopia had
reached more than 28,500 different facilities as of December 31, 2021. Accordingly, proportional
distributions among public and private institutions were identified as:

 Out of total health facilities in Ethiopia, the public sector owns 3 out of 4 (MOH 73%
compared to private for-profit and not-for-profit facilities combined- 27%).
 Growth in private sector health infrastructure has concentrated in primary clinics, medium
clinics as well as retail pharmacies, drug stores and drug vendors, laboratory services, etc.
 Distribution of both public and private health facilities is inequitable and the majority of
public and private health facilities are concentrated in Addis Ababa, Oromia, South and
Amhara regions.
3.2.4 Private Sector Engagement in Health Care Industry

Increasingly, many low- and middle-income countries are exploring private sector engagement as a
strategy to spur economic growth and development. Ethiopia has successfully engaged the private sector
primarily in agriculture, manufacturing, construction and trade. Indeed, the private sector has become an
engine for growth, increasing from virtually no private sector activity in 1980s to contributing 80% of
gross domestic product (GDP) when including the informal sector. Government recognition of the
private sector in the early 1990s, followed by specific plans to harness the private sector like the Growth
and Transformation Plan II have helped create an enabling environment for a productive role for the
private sector. However, currently the private sector engagement is increasing at an alarming rate both
from domestic and international investors with the government policies that highly promotes private
sector engagement as a strategy to address several of the challenges found in the Ethiopian health sector.
Thus, the private health care facilities are include but not limited to the following services.
 The private health sector owns and manages a wide range of health facilities offering diverse
health services and products.
 The private health sector is present across all levels of health care in Ethiopia, ranging from
primary level facilities such as private pharmacies and drug stores, non-government health
facilities and civil society organizations, and primary clinics/medium clinics; to secondary
level facilities including private for profit specialty clinics; to tertiary level facilities like non-
government and private for profit hospitals and specialty centers like, medical diagnostic
center, laboratory, rehabilitation center, etc.
 The Ethiopian private for-profit sector serves mostly the high- and middle-income groups in
both urban and rural areas while the non-government organizations and charities, together
with MOH, serve the working poor and poorer income groups mainly in rural areas.
 The private sector also serves the poor while the MOH heavily subsidizes the middle-and
upper-income groups who can afford to pay for healthcare in the private sector.
 The Ethiopian private sector is relatively small and fragmented (approximately 20% of
total market share) compared to other countries in the region 

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3.3 MARKET TRENDS FOR DIAGNOSTIC SERVICE SUB-SECTOR

3.3.1 Supply Side Analysis

In Ethiopia, majority of medical treatments about (70%) are based on laboratory diagnostic
tests, thus making it one of the most promising sectors in the healthcare industry. Hence, the
medical diagnostics industry accounts for almost 15% of the healthcare sector’s revenues. With
the growth in income and health insurance coverage, there is an increasing demand for better
healthcare services among the growing population of the country. The sector’s growth will be
driven by the country’s growing middle-class, which can afford quality healthcare.

Table-1: Health Care Service Provision Facilities Nation Wide (2011/12-To-2020/21)

Table-2: Main Health Care Facilities By Ownership As Of December 2021

Source: Special Bulletin of Annual Report by EMOH (2015; 2018 and 2021)

IV. ECHNICAL ANALYSIS

The envisaged Diagnostic Center establishment strategy on top of all things is to become community
focused health care Support service delivery. As one part the Diagnostic Center business line is to
consolidate its good client by making proper service deliveries, hiring the best health professionals and
having a competitive pricing structure. On the other hand, service product differentiations of the
company will be undertaken in different forms and styles with multiple specializations to become
leading health care Support facility in the market.

4.1 PROPOSED LOCATION AND SITE

4.2 LAND/SPACE REQUIRMENT AND ALLOCATION

4.2.1 Land Use Allocation
4.3 SERVICE CAPACITY AND PROGRAMME
4.4 PLANNED INVESTMENT ACTIVITIES AND COSTS

4.4.1 Building/Premises Innovation Works

4.4.2 Diagnostic Center Technology And Engineering

4.4.3 Vehicles And Power Generator

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V. ORGANIZATION AND MANAGEMENT

5.1 ORGANIZATIONAL CONCEPT DEFINITION

5.2 DESCRIPTIONS OF STRUCTURAL LEVELS
5.2.1 Board/The Top Level
5.2.2 Managing Director
VI. FINANCIAL ANALYSIS

6.1 BASIC FINANCIAL ASSUMPTIONS

6.2 RESULT OF FINANCIAL ANALYSIS

6.2.1 Fixed Investment Cost

6.2.2 Working Capital Summary

VII. ANNEXES
 ANNEX-I: Investment Break-down
 ANNEX-II: Working Capital Determinations
 ANNEX-III: Loan Amortization and Repayment Schedule
 ANNEX-IV: Capacity Utilization And Revenue Projection
 ANNEX-V: Projected Financial Statement
- Income Statement
- Statement of Cash Flow
- Balance Sheet
 ANNEX-VI: Projected Financial Ratios and Parameters
 ANNEX-VII: Consulting Firm’s Legal Document

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