PROJECT PROPOSAL ON THE ESTABLISHMENT OF FOOD

COMPLEX FACTORY

PROJECT LOCATION: BAHIR DAR,ZURIA WORDA

PROMOTER: Andualem Lmneh
PROJECT MANAGER: Andualem Lmneh
PHONE N0:+251913054739
BAHIR DAR,ZURIA WORDA
MAR,2023

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Table of Contents
I. PROJECT EXECUTIVE SUMMARY ..................................................................................................... 5
1. Brief Description of the Project ................................................................................................................ 6
2. INTRODUCTIONS AND BACKGROUND ........................................................................................... 8
2.1 Background ......................................................................................................................................... 8
2.2 Profile of the Promoter........................................................................................................................ 9
2.3 Main Expectation and rationale behind the assumption of the business ............................................. 9
3. GENERAL DESCRIPTION OF THE PROJECT AREA ...................................................................... 10
3.1 Location and Site .............................................................................................................................. 10
3.2 Topography ....................................................................................................................................... 10
3.3. Soil type and land use of the project area ........................................................................................ 10
3.4. Economic and social profile of Bahir Dar Town ............................................................................. 11
4. THE PROJECT ....................................................................................................................................... 11
4.1. Project Description........................................................................................................................... 11
4.2. Project Objectives ............................................................................................................................ 12
4.3. Technology used .............................................................................................................................. 12
4.4. Project inputs ................................................................................................................................... 12
5.MARKETING PLAN .............................................................................................................................. 13
5.1 .market study ..................................................................................................................................... 13
5.2. Supply and demand .......................................................................................................................... 14
5.3 . Factors encouraging the demand for service ................................................................................... 16
5.4. Target Market................................................................................................................................... 17
6. TECHNOLOGY AND ENGINEERING ................................................................................................ 18
6.1. Land, Building and civil works ........................................................................................................ 18
6.2. Machinery, Equipment, and Furniture ............................................................................................. 19
6.3. Production Service Program ............................................................................................................ 21
6.4 .Production Capacity ......................................................................................................................... 21
6.5. Implantation Plan ............................................................................................................................. 21
7. PRODUCTION PLAN ........................................................................................................................... 22
7.1. Manufacturing .................................................................................................................................. 22
7.2. Process description........................................................................................................................... 23
7.3. Food complex products .................................................................................................................... 27

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8. Organizational structure of the Projects .................................................................................................. 31
9. MANPOWER REQUIREMENT............................................................................................................ 31
10. Safety of project workers ...................................................................................................................... 33
11.Disseminations of new technologies for the local farmers .................................................................... 33
12. Environmental Impact Assessments ..................................................................................................... 34
13.SWOT ANALYSIS ............................................................................................................................... 35
14. Financial analyses ................................................................................................................................. 37
14.1. Repair and Maintenance Cost ........................................................................................................ 37
14.2. Depreciation and Amortization ...................................................................................................... 38
14.3. Total Revenue ................................................................................................................................ 38
14.4. Discounted Payback Period ........................................................................................................... 38
14.5 .Cash flow ....................................................................................................................................... 38
14.6. Benefit cost ratio ............................................................................................................................ 39
14.7. Internal Rate of Return................................................................................................................... 39
14.8. Net present value............................................................................................................................ 39
15.Annexes.................................................................................................................................................. 40

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List of Tables
Table 1: Material requirement and cost in birr ............................................................................. 12
Table 2:utility requirement and cost in Birr .................................................................................. 13
Table 3: List of construction and civil works, its rate (Birr/M2), and costs in Birr ..................... 18
Table 4: Machinery and Equipment for Food Complex ............................................................... 19
Table 5: Vehicle Purchasing plan ................................................................................................. 19
Table 6: office furniture and equipment ....................................................................................... 20
Table 7: activities to be undertaken for implementation/ project implementation plan / ............. 22
Table 8: Man power Requirements for the Project ....................................................................... 32
Table 9:Provide and supply nutritional food, shelter, free transport service, free medication, and
quality water to workers................................................................................................................ 33
Table 10:Provide and supply the project access to innovation and new technology to the nearby
farmers .......................................................................................................................................... 34
Table 11:Provide necessary waste management technologies and planation of seedlings ........... 35
Table 12:Summary of total initial investment Cost ...................................................................... 36
Table 13 :Repair and Maintenance Cost ....................................................................................... 37

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I. PROJECT EXECUTIVE SUMMARY
1 PROJECT TYPE Food Complex Production Factory
2 PROJECT OWNER Andualem Lmneh
3 PROJECT LOCATION Amhara National Regional State BAHIR DAR,ZURIA
WORDA
4 PRODUCT TO BE MANUFACTURED Production of different foodstuffs
5 PREMISES REQUIRED LAND 20,000M2
6 TOTAL INITIAL CAPITAL ETH Birr 95,729,596

7 SOURCES OF FINANCE Equity in percent and Birr: 30%, 28,718,878.82

Loan in percent and Birr: 70%, 67,010,717.24
8 EMPLOYMENT OPPRTURITY 8.1 Permanent
 Skilled =38
 Unskilled =58
Total 96 Persons
8.2 Temporary
 Skilled =17
 Unskilled =60
Total 77 Persons
Grand Total=96 Permanent +77
Temporary=173Persons
9 MARKET SHARE 70% Domestic and 30% for Export
10 TECHNOLOGY USE Labour intensive
11 BENEFITS OF THE PROJECT FOR 11.1 To the local community
THE REGION/COUNTRY  Create employment opportunity
 Creation of business opportunities
11.2 To the local authority
 Increase tax collection
 Reduced level of unemployment
 Improved basic infrastructure and facilities
11.3 To the local SMEs:
 Job opportunity during construction
 New business opportunity

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1. Brief Description of the Project
A food complex factory is one of the modern and vital industries that constitute the hub of
diverse industries supplying foodstuff to mankind, such as the industry processing different types
of agricultural products in different units and brings the products from different raw materials.
Accordingly, the food complex obtained through this process is recognized as a product of great
international value owing to the very wide scope of uses it can put to. The main agricultural
product producer areas of the country have food complex mills in their vicinities or usually use
village mills to process their food on a commission (tolling) basis. Farmers sell grain surpluses
left after home consumption to local wholesale traders. Agricultural products can be cultivated at
elevations ranging from sea level to 3000m. Although well-drained silt and clay loam soils are
optimal, the agricultural products will grow suitable for agricultural products will grow on a
wide range of soils. Neutral to slightly acid soil (5.5to 6.5 PH) are most suitable for agricultural
product production. An average growing season temperature of 25O C is optimal, although a
range of 3.3OC to 32OCis acceptable for spring agricultural product varieties.
Although agricultural products are annual plants: spring agricultural products are planted in the
spring have a short growing season, less than 100days, and are harvested in the fall. In contrast,
winter agricultural products are planted in the fall, in areas with no excessive freezing.
Germination of an extensive root system, growing is halted in winter and revived in the spring.
Harvest takes place in early summer.
Although agricultural product output has been steadily increasing, further production increase
faces several constraints: limited arable land and competition between grains and oilseeds for
that land: yields in developed countries are believed to be close to their biological potential, and
farmers in developing countries experience problems with access to capital and support
infrastructures. etc. The country of the former soviet union has significant production potential as
their yields are much below biological production potential agricultural product produced in the
world has been increasing largely due to plant breeding research and improved production
technologies since the 1960s. World average agricultural product yields more than doubled from
just 1961 to 2007.

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The food complex production in Ethiopia was started during the emperor regime; it was
established with the establishment and expansion of large agricultural farms in Ethiopia. The
production of food complex acquainted people in the town with food variety products, nowadays
not only peoples in the town people at rural area wants to buy food complex product. These
increments of demand attract the establishment of food complex factories. The total initial
investment cost for the project is a mounting ETH birr 95,729,596. from the total project cost
equity constitute about 30% of the project cost while the rest 70% of the project cost is a loan
from the bank through providing collateral.

The project is financially viable with an internal rate of return (IRR) of 38% and a net present
value (NPV) of Birr 54,439,417.00million, discount at 12%. The factory will have a backward
linkage effect with the forest and sugar factory and petroleum industries. The project will start to
generate profit in the tenth year and the total net cash inflow after ten years is positive. This
indicates that the project is financially feasible and lucrative.

Therefore, taking into account the feasibility and acceptability of the project and opportunities
made by the government of the Federal Republic of Ethiopia for private developers/ investors
and analyzing the potential of the area, the owner of this project decided to construct a modern
four-star luxury food complex. This project proposal is hence prepared for securing the land and
related support for realizing the project idea.

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2. INTRODUCTIONS AND BACKGROUND

2.1 Background
In Ethiopia, about 38% of the population lives under the poverty line that cannot meet their
basic needs. The majority of the population lives in rural areas and depends on agriculture, which
employs 90% of the people, most of them subsistence activities. Poverty is also linked to
recurrent unemployment. The industrial sector is rudimentary and industrial growth has been low
due to the small size of the domestic market and to the lack of capital investment and
competencies. Industrial production is mainly carried out by the agro-industries and by industries
where production aims at substituting some imported products.

Most of the foundation of work for modern food complex factories in Ethiopia was laid down at
the early stage of 1960. The country has got maximum large-scale private farming during 1964-
1966 to engage in food complex factory and agricultural product export market. After the
revolution many private factories were nationalized; more emphasis was given to cooperatives
and state factories. These factories were designed to assist the country’s economy. After the
overthrow of the Derg regime, the government of the federal republic of Ethiopia was
encouraged.

Due to the agrarian nature of the economy, the agriculture development-led industrialization
strategy (ADLI) was adopted in 1993 and it is believed this strategy necessary step to reduce
poverty, promote industrialization and ensure dynamic and self-sustaining growth of the country.
Thus, the rationale for its high in starting the beginning of 1990’s Ethiopia is exercising issuing
the necessary development policies and arrangement of the institution which is mainly based on
decentralization for the economic and social development of the country. Based on the need and
economic reform of the country various policies were issued and implementation strategies were
formulated in the past decade and promising development activities were achieved in the plan
period the Government’s program also focus on strengthening the manufacturing enterprises, as
they are the foundation for the establishment and intensification of medium and large scale
industries besides creating employment opportunities and accelerating urbanization.

The main agro-processing industry sub-sectors namely, food processing and beverage alone
accounted for approximately about 30%. This pattern of industrialization led to the inability of
the industrial sector to provide the necessary input for its growth, thereby inhibiting the process

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of self-sustained industrialization. However, the economic policy of the Federal Democratic
Republic of Ethiopia and regional government supports the private investors/entrepreneurs in
every sector of the economy. It emphasizes the Agro-Industrial sector with the target of self-
sufficiency industrial productions within the next few years. The country’s investment policy and
incentives are suitable for the production of diversified industrial production. The promoter of
this factory is attracted by this encouragement, privileges, and wide market opportunity for the
agricultural product producer food complex.

2.2 Profile of the Promoter

The promoter of this project is an Ethiopian nationality who has rich experience for the past
decades in business development; he is a talented entrepreneur with extensive involvement in
different business areas such as grain trading, promotion of large cotton farms, etc… in the past
two decades. Their company wants to use the opportunity given by the government of the federal
democratic republic of Ethiopia to invest in attractive businesses such as the construction of food
complex factories.

2.3 Main Expectation and rationale behind the assumption of the business
The main expectation and rationales behind the assumption of this proposal are to obtain
20,000M2 of land from the Bahir Dar Zuria worda local government for the establishment of a
mixed food complex factory by a lease contract.In addition to this the followings are some of the
reasons behind for the selection of the project sites

 Proximity to the major potential market for the output

 Availability of relatively well developed infrastructure facilities
 Availability of skilled and semi-skilled labor forces
 Peace and stability of the area
 Expected Availability of land
 Future developed prospect of the area

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3. GENERAL DESCRIPTION OF THE PROJECT AREA

3.1 Location and Site

The project site for the establishment of the proposed factory is located in Amhara national
regional state, Bahir Dar zuria worda on an area of 20,000M2 (200M by 100M). The main
reason for selecting the present project site is due to climate condition favorable for workers
working condition and Bahir Dar zuria worda were the ideal for the establishments of food
complex factory since there is ample raw materials were available and the market also wide-
ranging for this project.

3.2 Topography
The elevation of the project site is at about 2500 m.a.s.l. the site is flat with a minor slope to the
southeast. The mean annual rainfall is about 2100mm, during the rainy season the surface runoff
flows to the southeast following the road drainage ditch to a considerable distance to the east.
The primary type of land use pattern in factory areas was suburb settlement. The area is rich with
surface spring and groundwater during the rainy season. The springs are draining from the high
land to Abay River and Lake Tana which not dying during the long dry season. The vegetation
varies with the climate from tall forest trees on the slope of the west to eucalyptus to shrubs and
bushes of the local trees. Many studies suggest that before the extensive depletion of the natural
vegetation the tree shrub vegetation types in the area junipers, podocarpus, and other indigenous
trees have been dominant types.

3.3. Soil type and land use of the project area

The sub-surface geological information obtained from water boreholes drilled around Debre
Bahir Dar zuria worda indicates that the surface geology to be composed of non-basaltic rock
that can be considered as high permeability material. The topsoil is black cotton clay while in a
few meters depth porous stone is available. The primary types of land use patterns in all the
kebele around the project site are for farming and grazing. The dominant settlers in the area are
mixed farmers. A study on livestock density, human population, and land use pattern has shown
that there was a positive relationship between livestock unit and human population and cultivated
area and that between total livestock unit and forest area was negative.

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3.4. Economic and social profile of Bahir Dar Zuria Worda
The principal economic activity which provides life support to most of the people in Bahir Dar
town is linked to agriculture, factory establishments, Abattoirs, Micro and Small Enterprises, and
different service organizations. Basic social services like health and education services are
available in the area while some people use private schools and clinics for their families. The site
for the proposed factory is found in a place where there is no officially declared archaeological
and historical site. The background noise level in the project area is again undistributed and more
or less at its natural level.

4. THE PROJECT

4.1. Project Description

The proposed food complex produces different types of food including wheat and corn/Maize
flour detailed of the main services to be provided by the food complex including different types
of Macaroni, Biscuit, pasta, Bread different size and color, baby food, fruits, vegetable, and
syrup products.

The project seeks to achieve strong growth in sales and profits in two ways. The first is by
increasing its emphasis on customer service. The second is by using efficiencies to a broader
focus that includes the input of a wider variety of services and reduce overhead cost, thus
increasing the project competitiveness in the marketplace. The project values are organized into a
set of the following guiding principles:

I. Quality: the consumer is our boss, quality is our work, and value for money is our
goal
II. Responsibility: as individuals, we demand total responsibility from ourselves, as
associates we support the responsibilities of others.
III. Mutuality: a mutual benefit is a shared benefit; a shared benefit will endure.
IV. Efficiency: resources are used fully, waste nothing and do only what we can do best.
V. Freedom: we need the freedom to shape our future; we need profit to remain free.

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4.2. Project Objectives
Objectives of the projects are:-

 To produce different quantity and quality food products

 To generate continuous income for the promoter
 To create employment opportunity

4.3. Technology used

The technology used by the company is simple, Labour intensives, easy knowledge transfer and
adopted, economically low cost, environmentally friendly, etc… instead which will not
compromise the quality, standard of products and hinder the creativity of the workers.

4.4. Project inputs

4.4.1 Material

According to the market study and the economic scale of food, the complex is rated to the
capacity of the plant: Wheat, Corn, Soya beans, pulse crop, Rice, salt, oil fruits and vegetables,
and others are the main inputs. The capacity level of the working days has been estimated based
on market demand and discounting. The production capacity is 300 working days, 2 shifts of
eight hours per day per annum. The rest of the calendar days are left for rest calendar cleaning
and maintenance.

Table 1: Material requirement and cost in birr

No Description Unit Qty Unit cost Total cost in Birr

1 Wheat Qt 7,000 2,000 14,000,000
2 Corn Qt 4,000 1850 7,400,000
3 Soya beans Qt 1,500 2,100 3,150,000
4 Pulse Qt 1,000 2,000 2,000,000
5 Rice Qt 1,000 3,200 3,200,000
6 Salt Qt 2,300 600 1,380,000
7 Oil Lt 1000 75 75,000
8 Fruit Qt 850 800 680,000
9 Vegetables Qt 850 800 680,000
10 Others Qt 850 800 680,000
Total 33,245,000

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 4.4.2. Utilities

The utilities required for the service provision are electricity for lightning, for running of facility
and equipment and cold water for all services available, gardening, drinking, etc. diesel and
petrol fuel for diesel generators and running vehicles, and telephone internet service for both
local and international communication. Based on past trends of utility consumption by the
existing facilities of similar food complexes, the annual requirement of utilities by the same type
as the proposed food complex is estimated at Birr 1,031,600. The details of the utilities are
shown in Table 2 below.

Table 2:utility requirement and cost in Birr

Total cost in
No Description Unit Qty unit cost
Birr
1 Electricity supply kWh 150,000 1.3*150000 195,000
2 Water M3 100,000 3.15*100000 315,000
3 Fuel, oil and lubricant Lt 20,000 25 500,000
lump
Telephone and Internet Broadband 21,600
sum
4 Total 1,031,600

5.MARKETING PLAN
Marketing is the opportunity of selling a product /service. The management of the business is
responsible for identifying and satisfying customers’ needs and wants of its customers through
providing quality service at a rational cost. The market for services providers will not anticipate
any problem, since the company provides quality service for all customers.

5.1 .market study

The project has assessed the requirement of different services in the country and plans to provide
thousands of customers with the best quality and fair price. The market survey conduct in big
towns shows that there are ample markets for the recommended types of products which can be
verified by the growth of development indicators such as growing population and increasing of
income that creates purchasing power.

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5.2. Supply and demand
Information obtained from the ministry of agriculture shows, the total number of food processing
industries in the country is increasing from day today. The market for food products in Ethiopia
is closely linked to the development of towns and the service industry.

5.2.1. Marketing mix assessment

All marketing decision-making can be classified into four strategy elements, sometimes referred
to as the marketing mix or the four P’s: product/ service, price place, and promotion. While these
four factors are important individually, their real significance lies in the mix, the unique way
they are combined into a care plan or strategy. The combination of these four factors is the
foundation of any marketing plan.

a) Pricing
Pricing a service is a critical activity since it is the major factor in determining revenue. If a
lower price is fixed it will affect the profitability of the company and if a higher price is fixed the
product will not be able to stand in market competition and may be forced out of the market.
Therefore the right price has to be fixed. In general; price setting is done by selecting one of the
two frequently used pricing approaches. The simplest method is the cost-based approach (cost-
plus pricing), which involves adding a standard mark up to the cost of the product, and the
competition-based approach (going-rate pricing) which bases its prices largely on competitors’
prices.At present, many food complexes have to work within a competitive environment. In a
competitive market, straight cost-plus pricing is not desirable as it is not sensitive to demand and
competitors' prices. Furthermore, the Ethiopian market is by –and- large, price-conscious, and
consumer demand is very much sensitive to price. The pricing of food items increases from raw
material to processed food. It depends considerably on the quantity and quality of supply.

b) Promotion
Market promotion is an important part of the marketing mix, as it is required to create and
increase consumer awareness, knowledge, and readiness to buy through media communications
(advertising and through special offers to trade and or consumer (sales promotion). However, it
is important to realize that, on its own; market promotion will not replace selling, change long-
term trends, or build long-term customer loyalty. It has to be supported by quality and
distribution efficiency. The following are the type of promotional efforts made by the company

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  Sponsoring trade fairs, bazaar entertainment programs;
 Calendars, pamphlets; and poster advertisement
c) Advertising

Advertising is a potential tool of marketing and a component of overall promotion activities. It

serves as a communication link between the service provider and consumer. It does not simply
provide service information but also attempts to influence people by an overt appeal to reason or
emotion. Advertisement does not end with the flow of information from the seller to the buyer; it
goes further to influence and persuades people to action or belief. An advertisement would be
effective only if the target audience accepts the message and is motivated to take the required
action. Thus, the sequence of events and advertisements should trigger is:- attract attention, rouse
interest, build desire, obtain buying action, build brand image and maintain brand loyalty.

Initially, the objective of advertisement should concentrate on attracting attention to the service.
Once product acceptance has been achieved, advertisement usually concentrates on building
brand image and loyalty. However, to be successful and advertisement campaigns have to
convey the right information to the right people in the right way. Thus, message creation and
media selection should be considered carefully. While the message or content of an
advertisement is because of the target audience's culture, age, sex, and lifestyle, the words,
pictures, associations, and images to be used should carefully be selected. The advantages,
benefits, and use of the product to be advertised should be relative to the target audience.

Selection of the media channel involves choosing among available advertising media and
deciding how they can be used; given the types of message, target audience, and budget
available. Currently, in Ethiopia, various media channels are available such as print media
(newspapers and magazines), outdoor media (potters and metal stands), especially media (T-
shirts, buttons, caps, stickers, badges, and Bazaars), and points of purchase or in-shop media
(Banners, Hanging, Packing, and Painted signs).

An advertiser can use one or a combination of the media channels available. However, it should
achieve an optimum combination of “coverage” and “frequency” within a given budget. In other
words, whichever channel or channels used the advertisement should reach as many prospects as
possible within the target group (coverage), while at the same time each of the prospects should
be reached by a sufficiently large number of advertisements (frequency).For both TV and radio

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advertisements, the commercial building should use special occasions such as public holidays
and sponsor sport programs. In calendar advertisement, the commercial building should focus
not only on its attractiveness but also on its fair distribution and wide coverage. Participation in
the exhibition as well as preparing special exhibition and display is very important for
advertising the products.

5.3 . Factors encouraging the demand for service

Various factors encouraging demand for a specific service in the market. Some of them may be
controlled internally while others are beyond the control of the service provider. Among others,
the following are the most influential factors that encourage the demand for food complex
services.

a) Population Growth, Income, and Urbanization

As the population grows, aggregate demand for rises of the service. Moreover, urbanization
brings about an expansion of economic activities in urban centers, which also improves the
disposable income of the people. Hence, with urbanization, quantity demand for quality services
increases per capital use of service, and hence, the aggregate demand for service also rises with
the rise in income until the income elasticity of demand reaches zero.

b) Selling Price

Price is also another factor determining the quantity and quality demand for a service the lower
the price of service of a given quality, the higher the demand for it, and hence enables the
supplier to penetrate the market and enlarge its share. On the other hand, an attempt to sell a
specific product of a given quality above the ongoing price will lead to failures. To enable
competition with other competitors on prices aspect the company should employ the right
economies of scale and appropriate capacity of the center, efficient managing and ways of
operation and thereby adopt appropriate pricing.

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 c) Market Strategy

The effectiveness of the market strategy that a given provider adopts in selling its product
determines the quantity demand or the market share that will have for its product. Thus,
developing own proper marketing strategy is one of the factors that assure market penetration
and secure a significant volume of sales in a specific market. Hence, the envisaged project ought
to adopt a suitable and workable marketing strategy in selling its product. It would be worth
nothing so that identifying potential markets, full knowledge of the nature of each market,
identifying the product mix of each of the potential markets, undertake market promotional
works, among others, are some of the points that the food complex should look into devising its
marketing strategy.

d) Service Quality

There are different parameters explaining service quality. Thus, the envisaged food complex
will give at most care in supplying the desired high-quality services packaging to attract
consumers buying interest as well as protects the service against losing its quality. Therefore, the
project should address these requirements and compete on quality aspects in the target markets.

5.4. Target Market

The food complex’s services are targeted the national and international market. The incentives
providing by the government of Ethiopia for the food complex sector have shown their effect on
the growth observed in revenue increases.

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 6. TECHNOLOGY AND ENGINEERING

6.1. Land, Building and civil works

Land requirement by the visualized project is estimated at 20,000M2; among the total land 6500
M2 of land will be used for factory building: factory area for the plant and different types of
machinery for different products: flour, Bread, Biscuits, Fruit juices, syrup…etc., 3700 M2 of
land will be used for the construction of different stores for the project, 150 M2 of land will be
allocated for the office restroom, 4000M2of land will be provided for loading and unloading
area,150 M2 of land will be available for walkways, 20m2 for laboratory inspections and
showroom,800 M2 of land will for green area, 30 M2 for Guardroom and 400 M2 fencings. The
rest land will be used for the expansion of the project. The types of building and their
corresponding civil construction cost are given in table 3

Table 3: List of construction and civil works, its rate (Birr/M2), and costs in Birr

Total area in Total cost in

No Building Rate per M2 in Birr
M2 Birr
Factory building: factory area for the
plant and different types of machinery
1 6,500 2,500 16,250,000
for different products: flour, Bread,
Biscuits, Fruit juices, syrup…etc.
2 store 0
2.1 Store for raw material 2,500 2,000 5,000,000
2.2 Store for finished products store 1000 2,000 2,000,000
2.3 Store for Waste 200 1,000 200,000
3 Office Rest Room 150 2,500 375,000
4 Loading and unloading area 4,000 280 1,120,000
5 Walkways 150 1200 180,000
Laboratory inspections and Show
6 20 2,500 50,000
room
7 Green area 800 500 400,000
8 Guard room 30 2,500 75,000
9 Fencing 400 200 80,000
Total 15,750 25,730,000
The total cost of building and civil work is estimated at Birr 25,730,000.

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6.2. Machinery, Equipment, and Furniture
6.2.2. Machinery and Equipment

The list of machinery and equipment required for the manufacture of food in the food complex is
given in Table 4 below. The total cost of machinery and equipment is estimated at Birr
14,652,500. A different set of machines are used for the production of different products the
following are detailed types of machines for production.

Table 4: Machinery and Equipment for Food Complex

No Description of item Measurement Qty Unit cost Total cost

1 Flour production machines Pcs 1 4,200,000 4,200,000
2 Bread baking machine Pcs 1 1,000,000 1,000,000
3 Biscuits baking Pcs 1 1,200,000 1,200,000
4 Pasta, macaroni and others production Pcs 1 5,000,000 5,000,000
5 Juices making Pcs 1 1,250,000 1,250,000
6 Syrup making Pcs 1 1,100,000 1,100,000
7 Generator Unit 1 650,000 650,000
8 Carpentry tool box Set 1 27,000 27,000
9 Electrician tool box Set 1 18,500 18,500
10 Plumber tools kit Set 1 15,000 15,000
Fire extinguisher(security
11 Unit 12 16,000 192,000
equipment’s)
Total 14,652,500

6.2.3. Vehicles

The plant owns one vehicle before with legal ownership documents for transportation of finished
products. In addition, the project has planned to purchase the following types of vehicles, and the
budget is allocated from the Table below and it accounts for 4,390,000.00 birrs.

Table 5: Vehicle Purchasing plan

No descriptions unit quantity unit price total price

1 ISZU car no 1 1,500,000.00 1,500,000.00
2 Land cruiser field car no 1 1,400,000.00 1,400,000.00
3 mini bus no 2 745,000.00 1,490,000.00
Total 4,390,000.00

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6.2.4. Furniture

Table 6: office furniture and equipment

No Description Quantity Unit cost Total price

1 Office furniture
1.1 Sofa set 5 40,000 200,000
1.2 Executive table 2 25,000 50,000
1.3 Top level high back chair with arm 5 30,000 150,000
1.4 Executive conference table 5 23,434 117,170
Office desk with three lockable
1.5 5 10,000 50,000
drawers
1.6 Shelf with two lockable glass 5 10,500 52,500
1.7 Coat hanger 1 2,000 2,000
1.8 Guest chair without arm covered 10 1250 12,500
1.9 Guest chair, leather 5 7,500 37,500
2 Coffee table 2 3,500 7,000
2.1 Conference chair with writing table 10 2,500 25,000
2.2 Fax and Telephone Machine 1 13,500 13,500
2.3 Subtotal 717,170
2.4 VAT (15%) 107,576
Grand Total 824,746

20
6.3. Production Service Program
According to the market study, the service program of the food complex is300 days per annum
2shifts of 16 hours every day. At the initial stage of the service provision period, the factory
would require some years to penetrate the market and capture a significant market share.
Therefore, the service capacity utilization is based on the time required for the adjustment of
feedstock, Labour, and equipment to the technology selected. Accordingly capacity utilization is
set as follows:-70% of plant capacity during the 1st year ,80% of plant capacity during the 2nd
year, 90% of plant capacity during the 3rd year and 100% of plant capacity during the 4th
year.The finished products are packed with gunny sack the annual requirement of these raw
materials.

6.4 .Production Capacity

From the market study, it is observed that there is a great demand gap between the demand and
supply of international tourist standard food complex service. Therefore, taking into account the
market study and economic scale of service provision the envisaged international tourist standard
food complex will have capacities as shown below:

6.5. Implantation Plan

Implementation of the project takes about 18 months beginning from the date of securing the
land and finalizing the necessary preparation. Commencement of construction fencing and site
clearing starts immediately after obtaining land, while construction and other activities follow.
The construction of the plant, office, and store is designed to have enough space to pass the
largest piece of equipment and trucks, contain enough floor area to accommodate the equipment,
and permit easy access on all sides for production, load, and unloading.

21
Table 7: activities to be undertaken for implementation/ project implementation plan /

No Description of activities Implementation period

1st6month 2nd6month 3rd6month
1 Design work
2 Construction of civil work and associate building
3 Procurement, Erection of types of machinery and
equipment
4 Purchase of raw material
5 Commencement operation

7. PRODUCTION PLAN
7.1. Manufacturing
Production/ manufacturing is the wealth-creating sector of an economy, and closely connected
with engineering and industrial design, and provides important material support for national
infrastructure. It involves the mechanical or chemical transformation of materials or substances
into new products. It makes products from raw materials by the uses of manual Labour or
machines and is usually carried out systematically with a division of Labour. In a more limited
sense, manufacturing is the fabrication or assembly of components into finished products on a
fairly large scale. This is to means that the manufacturing industry refers to those industries
which involve in the manufacturing and processing of items, creation of new commodities, or
value addition. Manufacturing industries came into being with the occurrence of technological
and socio-economic transformations and were widely known as the industrialization revolution.

Manufacturing takes turns and twists under different types of economic systems. In a free-market
economy, manufacturing is directed toward the mas manufacturing of products for sale to
consumers at a profit with some degree of government regulation. Yet, it is after all often thought
of as the heart and soul of a country’s economy and is critical in employing a huge part of the
Labour force and producing materials of strategic importance.

The Ethiopian manufacturing sector, which is at its early stage of development accounts for less
than 15% of both GDP and employment, reported in the annual bulletin of NBE. According to
the information collected from the CSA, the total number of large and medium scale

22
manufacturing industries reported in 2009/4/10 (2002E.C) was 2,172. More than 40% of the
manufacturing industries were located in Addis Ababa followed by Oromiya with almost 21%
and S.N.N.P with 13% of the industries. The number of manufacturing industries by industrial
classification in the same year also varied from one group to another.

More than 26% of the manufacturing industries fell in the category of food products and
beverages followed by non-metallic mineral products with more than 22% and the furniture
industry with almost 13%. The establishment classified under other non-metallic mineral
products manufacturing industrial group constituted the largest share accounting for 25.3% of the
total, which is followed by manufacturing of food products and beverage and manufacturing of
furniture, which represented 25.1 and 15.5% of the total number of establishment respectively.
That means the share of the three industrial groups combined was 65.9% of the total
manufacturing industries which indicates that the Ethiopian large and medium scale
manufacturing industry is characterized by a high concentration of a limited range of
manufacturing activities. The food complex factory is part of the agro-processing industry
motivated by the government of Ethiopia.

7.2. Process description

The process involved in the manufacture of food complex and other by-products from material
agricultural product producer may be roughly divided into the following three processes:
Cleaning, Conditioning, and blending of material agricultural product producer, milling, and
finishing.

23
7.2.1. Grain Producer Intake
Incoming agricultural product producer is weighed, sampled, and analyzed, passed through a
preliminary cleaner and magnet, then stored according to class, grade, and protein content.

7.2.2. Cleaning and Tempering

This is the process to separate and eliminate sand, pebbles, broken grains, and other impurities
from material agricultural product producers. The separation is achieved by utilizing the
following physical properties:

a) Differences in the specific gravities between agricultural product producers and mixed
impurities
b) Differences in the volume, width, shape, and other physical properties between
agricultural product producers and mixed impurities
c) The difference in repulsive forces between wheat and mixed impurities
d) The difference in the critical floatation speeds between wheat and mixed impurities in the
air

Besides, the dust and other impurities adhering to the surface of wheat grains are removed by
water washing and by scouring. During tempering, water is added to toughen the outer bran coats
for easier separation from the endosperm and to mellow the endosperm for grinding.

7.2.3. Conditioning
Depending on where the wheat is produced as well as on the kind of wheat a wide difference will
exist in the physical properties of the wheat, as:

a) The difference in brittleness of the wheat covering.

b) The difference in the separability of endosperm and outer covering of the wheat
c) Differences in the hardness (softness) of the endosperm part
Accordingly, the conditioning process is adopted to condition the wheat grains to suitable
conditions. That is, the wheat is suitably dampened to prescribed water content following the
water content of the agricultural product producer, and tempered in a tank for about 20-40 hours
to allow the moisture to permeate into the inner part of the agricultural product producer. In
general, damping is achieved to provide a water content of 14-15% too soft wheat and water
content of 15-16% to hard wheat process.

24
7.2.4. Blending
The wheat thus conditioned is next blended. That is, since the qualitative characteristics of wheat
such as the protein content, endosperm color, and odor as well as enzyme activation, will differ
according to the kind of agricultural product producer, blending is achieved to make the best use
of the independent characteristics of different kinds of agricultural product producer as a means
of raising the product value.

7.2.5. Milling
In the milling process, several tens of roller-type milling machines are employed to successively
separate and reduce wheat grains into smaller and smaller particle sizes by a gradual process.
That is, the gradual milling system is adopted for milling.This system consists of the breaking,
scalping and grinding, purification, reduction, and dressing processes.

a) Breaking
In the primary stages of milling, the wheat grains are broken down into comparatively large
particles. Namely, the inner endosperm is extracted without crushing the wheat grains.

b) Scalping and grading

Semolina generated by the breaking process is separated from the outer covering part by
scalping. The fine powder containing semolina is also removed as much as possible during this
stage. This is known as the grading process.

c) Purification
The minute fragments of outer covering which are found mixed in semolina obtained by the
preceding process, are next separated by the purification process. Namely, the fragment's outer
covering is floated by a stream of air directed at right angles to the sieve surface from the
undesired of the sieve. As a result, semolina is purified and at the same time, particle size
classification is advanced further.

d) Reduction
The process of obtaining food complex of desired particle size by crushing semolina, middling,
and dust, which have been passed through the scalping, grading, and purification processes, is
known as the reduction process. In this reduction process, smooth rolls are used to prevent
damage to starch, protein, and other substances which compromise the basic composition of the
endosperm part.The reduction process is achieved in several stages, for rapid milling of

25
endosperm under excessive milling pressure will result in the generation of flaky stock or the
degradation of endosperm quality. In other words, the endosperm of differing particle size and
purity levels are partially milled at some suitable milling pressure by separate rolls, while the
remaining endosperm is further sifted and sent to subsequent milling rolls for further milling.

7.2.6. Dressing
The endosperm is milled into fine particles when stock is reduced in the reduction process.
However, the outer covering of the wheat grains remains either in its original shape or exists in
the form of large fragments, so a sifter or fine mesh is used to separate it from the food complex.
The mesh size adopted in the sifting process directly determines the particle sizes of the food
complex produced or the quality of the food complex. Milling is essentially a process of grinding
and separating. Grinding is done on break rolls, sizing rolls, and reduction rolls to reduce the
endosperm into the food complex. Separation of the different sized food complex particles is
done using machines called sifters and purifiers.

7.2.7. Finishing
Different food complex separations may be combined to produce many different types of food
complex, including household food complex, bakers’ food complex, and noodle food complex.
Food complex can be produced either by blending wheat at the milling stage or by milling
agriculture product producers separately and blending the resulting food complex to meet
customer specifications. The food complex obtained using the breaking and reduction processes
(raw food complex) features characteristics all its own in points of purity, protein content, and
quality. Accordingly, several finished food complexes are suitably mixed to obtain a product that
combines the merits of a variety of finished food complexes and possesses the desired properties
and characteristics.

The food complex is further bleached, its protein content is increased, its enzyme activity is
adjusted and nutrients are added before it is obtained as the finished product. The milling
capacity of a single processing line is limited. Here, we shall concern ourselves with a food
complex mill having a milling capacity of 5 tons/hour and producing product food complex
containing 8% food complex and 200% additives.

26
7.2.8. Food complex Treatment
In some mills, the food complex is bleached immediately after it is milled. Food complex may
also be enriched to put back vitamins and minerals removed in the refining process. The food
complex is now ready to be packaged and sent to the bakery, store, or warehouse.

7.2.9 .By-products
Most of the endosperm is recovered as a food complex. Germ, bran, and unrecoverable
endosperm are sold as by-products, usually for animal feed.

7.3. Food complex products

7.3.1 .Bread
Bread baking plant involves mainly the following machinery:

i. Air sifter with pneumatic conveyor: flour will flow into the air sifter to be sifted and
to eliminate foreign materials and is conveyed to the hopper of the mixer by a
pneumatic conveyor.
ii. Mixer: dough is made from flour and such materials as yeast, sugar, salt, fat, yeast
food, etc. the mixer has two steps of speed, low and high. For the mass production
process flow sheet for the baking plant, a high-speed horizontal mixer will be
suitable. The dough is fermented in the first fermentation room for 2-4 hours and
again mixed at this stage.
iii. Dough divider mixed dough is weighed and cut by this machine
iv. Rounder the weighed and cut dough pieces are carried by the conveyor belt of the
dough divider and are rounded with this machine.
v. Machine rounded dough pieces are conveyed by a bucket conveyor to this proofer to
be fermented under an ideal condition for about 15 minutes
vi. Molding machine fermented dough pieces are transferred by the shooter and molded
by this machine
vii. Second fermentation room cased dough pieces on racks are carried into this room
which has a temperature of 38-40oC and relative humidity of 80-85%
viii. Oven fermented dough pieces are baked
ix. Cooling conveyor baked products are conveyed by this machine and are cooled
during conveying
x. Cooling products are sliced and warped automatically
27
7.3.2. Biscuits
Biscuits are generally classified into soft biscuits, hard biscuits, and crackers. In making soft
biscuits, a large amount of sugar fat and oil, milk and eggs, etc. Therefore, wheat flour
containing less protein (6-8 percent) is used. However, in making hard biscuits, the amounts of
sugar, fats and oil, milk, and eggs to be used are comparatively small. Therefore, the protein
content of wheat flour for hard biscuits is higher (8-10 percent). On the other hand, crackers
feature. Biscuit cutting machine and laminator smaller amounts of such additives as sugar, fat,
and oil, and a large amount of wheat flour. In making crackers, yeast is used. Because
fermentation is required. The protein contents of wheat flour should be high (8-11 percent). As
for the water to be used in the manufacturing process, if city water is used it will raise no
problems at all. In case, however, well water has to be used, excessively hard water does not suit
the purpose .it is recommended that PH of water be kept in the range of 5-8.

7.3.2.1. Process Description

i. All materials except flour are preparatory mixed in a cream mixer. Even though there are
some differences according to the kind of biscuit, materials used at this stage are sugar,
shortening, salt, millet jelly, glucose, starch, skim milk, etc.
ii. Materials pre-mixed in the previous stage are put into the mixing machine with the flow
and undergone fermentation for some products. The dough is to be rolled by laminator
and dough sheet is made and it is automatically punched in a molded design by a cutting
machine for making soft biscuit and the mixed dough is put into the rotary molding
machine for making biscuit design molded dough and sent to the oven automatically.
Biscuit is baked on a steel belt (or wire mesh belt) running in the oven for some minutes.
The speed of the belt running can be adjusted according to the kind of biscuit and after
baking, biscuits are cooled on a cooling conveyor which is connected with the oven, and
biscuits are stacked before packing.

28
7.3.3. Pasta
Pasta is commonly made by kneading semolina or wheat flour and water and other
substances can be added to modify the pasta. Eggs, gluten, and casein are often used to
modify the composition of pasta, spinach; tomatoes and carrots are used to alert the test. It is
possible to use raw materials other than semolina or wheat flour. Using locally available raw
materials such as cassava or maize would make the importation of semolina or wheat flour
unnecessary, and would produce pasta more adapted to the taste of the local people. The
manufacturing of pasta is quite simple but it requires a high degree of cleanliness and
perfectly adjusted machines. The stages involved in making pasta are as follows:
a. raw material purification
b. kneading and homogenization which takes place in a mechanical kneader
c. pressing and drawing which gives the pasta for the desired shape by pushing it through
the dies of a mold then the press can be done by as crew press, hydraulic press, or a three-
phase continuous press, which carries out all three operations of kneading,
homogenization, and drawing.
d. On leaving the machine the pasta is cooled by ventilation and for long pasta, the pasta is
delivered onto rods called canes and then taken to the drivers.
e. Drying evaporates the excess water from the pasta and must follow immediately after the
drawing and pressing phase. Based on these there are three phases
i. Pre-drying -surface evaporation removing 30-35% water.
ii. Softening –pasta is left to re-establish a moisture balance.
iii. Final drying- reduces the moisture content to a normal 12-13%long pasta is dried
in canes drier and
f. Packing takes place after the pasta leaves the driers. Carton boxes of about 250 grams are
commonly used.

29
7.3.4. Fruit Processing
The manufacture of pasteurized fruit juice has three stages:
 Fruit treatments
 Juice treatments
 Product packing
The plant is suitable for producing pasteurized juice from citrus-type fruits. After pasteurization,
the juice is treated aseptically such that it can be stored for a long period in a tank without
suffering any damage. The juice can be filled into bottles and jars as well as plastic pots. The
equipment and the plant can be easily tailored to suit different requirements, ranging from plants
using production methods that require a high proportion of manual works to manual works to
others equipped with automatic machinery lines which require relatively small amounts of labor.
The capacity of the plant for fruit processing is medium-sized and the fruit is fed into the brush
washing machine. The remaining impurities are then removed by an air-injection washing
machine. It then passes to the sorting lines where damaging fruit is eliminated. The citrus fruit is
transported to the fruit extraction device, which is connected to the oil separating device and the
oil expeller device. After this whole fruit is sorted according to size and the fruit passes in groups
into the juice maker. From there the juice is delivered by pump to the clarification device where
solid impurities are removed then mixed with syrup, the purified fruit juice is pumped to the
homogenizer. It passes through a preheater an aerator and a condenser and is delivered to the
homogenizer by a screw pump. The homogenizer makes the micro-structure of the juice more
homogeneous and improves its quality. The juice is then delivered to the pastured and pumped in
and it is sterilized by being kept for a period at the proper temperature and on leaving the
pasteurizer the juice passes either to the juice store or to the filling and bottling section.

30
 8. Organizational structure of the Projects

Owners

General Manager

Building Maintenance Marketing Quality Control

administration Department Department Departments

Promotion
Personnel Finance
&Property Officers

IT, Supervisors
Electricity

Figure 1.organizational structure

9. MANPOWER REQUIREMENT
The factory requires skilled manpower to run the proposed activities. This can be accomplished
by staffing the required labor in different functional areas of the factory. The total manpower
required to operate the factory is 96 workers, direct and 77 temporaries, a total of 173 workers
production head, chemist, machinist and quality control need basic training during the
commissioning period to be responsible for operation and quality control. A detail of the
manpower requirement for the factory is listed in the table below:

31
 Table 8: Man power Requirements for the Project

Salary in Birr
No Position Qualification Unit Qty
Monthly Annually
1 Administration staff
1.1 Manager Bsc. In industrial Engineering No 1 10,000 120,000
1.2 Finance and Admi. head Bsc in Mgt/Accounting No 1 7,500 90,000
1.3 Accountant Bsc. In Accounting No 2 6,000 144,000
1.4 Personal Clark BSc In Mgt No 1 4,500 54,000
1.5 Secretary Diploma in Secretary No 2 2,500 60,000
1.6 Chemist Bsc in industrial chemistry No 1 6,500 78,000
1.7 Quality control Bsc in product control No 2 5,500 132,000
1.8 HRM officer BSC in HRM/Management No 2 5,500 132,000
1.9 IT Technician Bsc in computer science No 1 5,500 66,000
Technical and maintenance manager Diploma in building management No 1 5,500 66,000
2 Flour unit 0
2.1 Production Forman with experience TEVT graduate No 1 5,000 60,000
2.2 Mill operator with experience TEVT graduate No 5 4,500 270,000
2.3 Assistant mill operator TEVT graduate No 5 3,580 214,800
2.4 Labourers Grade 10 completed No 4 2,000 96,000
3 Food production unit 0
3.1 Bakers TEVT graduate No 20 2,000 480,000
3.2 Labourers Grade 10 completed No 2 2,000 48,000
4 Juices & Syrup processing unit 0
4.1 Bakers TEVT graduate No 3 2,000 72,000
4.2 Labourers Grade 10 completed No 1 2,000 24,000
5 Supporting staff 0
5.1 Mechanic and Electrician TEVT graduate No 2 2,000 48,000
5.2 Sales TEVT completed No 2 2,800 67,200
5.3 Cashier TEVT completed No 1 2,800 33,600
5.4 Store keeper TEVT completed No 1 2,800 33,600
5.5 Driver Grade 10 completed No 2 2,800 67,200
5.6 Guard Grade 10 completed No 4 2,000 96,000
5.7 Cleaner Grade 10 completed No 2 1,850 44,400
5.8 Messenger Grade 10 completed No 4 1,850 88,800
5.9 Daily Labourers Grade 10 completed No 100 1,500 1,800,000
Total 173 4,485,600
Employee benefit 10% 448,560
Total 4,934,160

32
10. Safety of project workers
The effectiveness of the one project is measured by its facilities that provided for the safety of
the project staff. This project will provide the following things and the necessary budget will be
allocated.
Table 9:Provide and supply nutritional food, shelter, free transport service, free medication, and
quality water to workers
Total Price in
Item Measurement Plan Price/quantity birr

Provide nutritional foods to workers number 173 350.00 60,550.00

provide medical service to workers number 173 180.00 31,140.00

provide free transport service to
workers number 173 225.00 38,925.00

provide quality water to workers number 173 145.00 25,085.00

Total 155,700.00

11.Disseminations of new technologies for the local farmers

As mentioned in the introduction parts the main raw material source of these projects will be
agricultural products. Thus to create a sustainable source of raw materials this project will
provide improved seeds for the farmers and will familiarize new technologies for farmers. Based
on this the project will allocate the following budgets to accomplished the proposed activities
properly.

33
 Table 10:Provide and supply the project access to innovation and new technology to the
nearby farmers
SN Item Measurement Plan Price/quantity Total Price in birr
Provide and supply innovative and new
1 technology to the farmers number 100 450.00 45,000.00
Provide and supply innovative hybrid crop
2 seeds on agricultural research centers quintal 15 4,500.00 67,500.00
Provide and supply training to out-growers
3 to furnish quality seed to market number 100 450.00 45,000.00

Total 157,500.00

12. Environmental Impact Assessments

Environmental management is concerned with the implementation of the measures necessary to
minimize or offset adverse impacts and to enhance beneficial impacts. Unless the mitigation and
benefit enhancement measures identified in the EIA are fully implemented the prime function of
EIA, which is to provide a basis for shaping the project so that overall environmental
performance is enhanced cannot be achieved.

To be effective environmental management must be fully mixed food factory processing

development with the overall levels, which itself should be aimed at providing a high level of
quality control, leading to a project which has been properly designed and constructed and
functions efficiently throughout its life. Hence the overall goal of the environmental management
plan (EMP) of Shuakua plc mixed complex food processing factory is ready to minimize the
adverse impacts of the project by managing and implementing the proposed impact alleviation
measures and good working practices. In general Shuakua plc is allocated the following budgets
to adverse and treat the waste properly and to make an environmentally friendly project.

34
 13.SWOT ANALYSIS
STRENGTH OPPORTUNITIES
 Exellent and stable staff  Increase demand for food products
 Provide good service for customers  Availability of land at an affordable price
 Good location for easy access to potential  Favorable government policy Measures
customers  Availability of raw materials in the
 Create good relationship with the surrounding area
surrounding community  Suitable agro-ecological condition to meet the
 Use of new technology objective of the project.
 Production of more marketable products.  The high wide gap b/n demand and supply of
 Planned to provide his product with fair project products
price to the customers  Availability of infrastructure near to the
 Providing of transportation service for the project area like water,road etc
customers.  Availability of cheap labors;technical
 High founder loyality in managing fund assistance,professionals and non-proffessional
and resources of the company person
 The company planned to produced large  Growth and transformation policy of the
scale products government

THREAT WEAKNESS
 High price increase for raw materials  High price fluctuation
 High investment cost due to current price
increase
 Stiff competition

35
 Table 11:Provide necessary waste management technologies and planation of seedlings

No Descriptions measurements quantity Unit cost Total cost

1 Waste treatment technology no 1 25000 25000
2 Waste recycling technology no 1 50000 50000
3 Seedling plantation no 2500 10 25000
sum 100000

Table 12:Summary of total initial investment Cost

No Descriptions Total costs percentage share
1 materials for factory(inputs needed) 33,245,000 38.2
2 Building construction and civil works 25,730,000 29.6
3 machinery and equipment’s 14,652,500 16.8
4 vehicles 4,390,000.00 5.0
5 Office supplies 824,746 0.9
6 salary 4,934,160 5.7
7 pre-service expense 37,000.00 0.043
8 working capitals 2,800,300.00 3.2
provide nutritional food, shelter, free transport
service, free medication and quality water to
9 workers 155,700.00 0.2
10 waste management 100,000.00 0.1
Provide and supply the project access to innovation
11 and new technology to the nearby farmers 157,500.00 0.2
sub total 87,026,905.50
Contingency (10%) 8,702,690.55
Grand total 95,729,596

36
14. Financial analyses
The financial analysis of this mixed food complex is based on the data presented in the previous
chapters and the following assumptions: -

Finishing period 2 years

Source of finance 30 % equity
Debt finance 70 % loan
Bank interest 11.5%
Discount cash flow 10%
Accounts receivable 30 days
Raw material (perishable) 3 days
Raw Material (nonperishable) 30 days
Cash in hand 5 days
Accounts payable 30 days
Repair and maintenance 2% of building cost
Property insurance 1% of building cost
Sales revenue of the project is increased by 10%

14.1. Repair and Maintenance Cost

The annual repair and maintenance cost of the plant is estimated based on the following rates.

Table 13 :Repair and Maintenance Cost

Item Rate
Machinery and equipment 2% of the total cost or Book value
Building and civil works 2% of the total cost or Book value
Utilities 2% of the total cost or Book value

37
14.2. Depreciation and Amortization

The following depreciation rates are applied to depreciate the assets of the project:
 Buildings and associated Civil works 2%, linear to scrap Value
 Machinery and Equipment’s 5%, linear to scrap Value
14.3. Total Revenue
Based on the projected profit and loss statement, the project will generate a profit throughout
its operational life. Annual net profit after tax increases from Birr 74,584,000 at the beginning
of the project to Birr 190,788,625.97 during the last year of operation year. The detail is
presented in Annex.

14.4. Discounted Payback Period

The payback period, also called pay–off period is defined as the period required to recover the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial
investment will be fully recovered within 3 years 9 months.

14.5 .Cash flow

The projected cash flow of the envisaged project shows that the project would generate
positive net cash flows throughout the operation years. Cumulative cash flow generated by the
project towards the end of the first operation year will amount to Birr 23,918,164.97 at the end
of the project life; this amount will rise to Birr 89,536,362.91. The detail is presented in
Annex.

38
14.6. Benefit cost ratio
The BCR is defined as the ratio of the sum of the project’s discounted benefits to the sum of its
discounted investment and operating costs.

When BCR > 1, accept the project

When BCR < 1, reject the project

When BCR = 1, be indifferent

n
Bt
 (1  r ) t
t 0
BCR  n
Ct
 (1  r ) t
t 0

BCR is 5 and positive this indicates this project would return 5 birrs in benefits for each birr
spent.

14.7. Internal Rate of Return

The internal rate of return (IRR) is an indicator of the efficiency or quality of an investment. A
project is a good investment proposition if its IRR is greater than the rate of return that could be
earned by alternate investments or putting the money in a bank account. Accordingly, the IRR of
the project after tax is computed to be 34.13% indicating the viability of the project.

14.8. Net present value

Net present value (NPV) is defined as the total present (discounted) value of a time series of
cash flows. NPV aggregates cash flows that occur during different periods during the life of a
project into a common measuring unit i.e. present value. It is a standard method for using the
time value of money to assess long-term projects. NPV is an indicator of how much value an
investment or project adds to the capital invested. In principle, a project is accepted if the NPV
is non-negative. Accordingly, the net present value of the project at a 10% discount rate is
found to be Birr 54,439,417 which is acceptable.

39
 15.Annexes

Annex 1: Total initial capital of the project

S.N Types Amount in Birr Percent

1 Capital 95,729,596.05 100
1.1 Equity 28,718,878.82 30
1.2 Bank loan 67,010,717.24 70

Annex 2: Sales Revenue

Project year
Description
No 1 2 3 4 5 6 7 8 9 10
1 sales
12,000,000.00
1.1 Bread 13,320,000.00 14,785,200.00 16,411,572.00 18,216,844.92 20,220,697.86 22,444,974.63 24,913,921.83 27,654,453.24 30,696,443.09
15,784,000.00
1.2 Biscuit 17,520,240.00 19,447,466.40 21,586,687.70 23,961,223.35 26,596,957.92 29,522,623.29 32,770,111.85 36,374,824.16 40,376,054.81
10,900,000.00
1.3 Juice 12,099,000.00 13,429,890.00 14,907,177.90 16,546,967.47 18,367,133.89 20,387,518.62 22,630,145.67 25,119,461.69 27,882,602.48
10,900,000.00
1.4 syrup 12,099,000.00 13,429,890.00 14,907,177.90 16,546,967.47 18,367,133.89 20,387,518.62 22,630,145.67 25,119,461.69 27,882,602.48

pasta and 25,000,000.00

27,750,000.00 30,802,500.00 34,190,775.00 37,951,760.25 42,126,453.88 46,760,363.80 51,904,003.82 57,613,444.24 63,950,923.11
1.5 Macaroni
Total Sale 74,584,000
82,788,240.00 91,894,946.40 102,003,390.50 113,223,763.46 125,678,377.44 139,502,998.96 154,848,328.84 171,881,645.02 190,788,625.97

40
 Annex 3: Operating Cost
Operating years of the project
Description
1 2 3 4 5 6 7 8 9 10
A. Direct cost
Raw Material Cost 33,245,000 34,907,250 36,652,613 38,485,243 40,409,505 42,429,981 44,551,480 46,779,054 49,118,006 51,573,907
Sub-total
Total Direct cost
B. Indirect cost
Wages and Salary 4,934,160 5,180,868 5,439,911 5,711,907 5,997,502 6,297,377 6,612,246 6,942,859 7,290,002 7,654,502
Repair and
325,000.00 341,250 358,313 376,228 395,040 414,792 435,531 457,308 480,173 504,182
Maintenance
Property Insurance 162,500.00 170,625 179,156 188,114 197,520 207,396 217,766 228,654 240,087 252,091
Utility 1,031,600 1,083,180 1,137,339 1,194,206 1,253,916 1,316,612 1,382,443 1,451,565 1,524,143 1,600,350
Land lease 1,000,000 1,050,000 1,102,500 1,157,625 1,215,506 1,276,282 1,340,096 1,407,100 1,477,455 1,551,328
Advertising and
40,000.00 42,000 44,100 46,305 48,620 51,051 53,604 56,284 59,098 62,053
Promotion
Miscellaneous
7,200.00 7,560 7,938 8,335 8,752 9,189 9,649 10,131 10,638 11,170
Expense
Total operating cost 40,745,460 42,782,733 44,921,870 47,167,963 49,526,361 52,002,679 54,602,813 57,332,954 60,199,602 63,209,582

41
 Annex 4: income statement
Operating years of the project
Description
1 2 3 4 5 6 7 8 9 10
Sales Revenue 74,584,000 82,788,240 91,894,946 102,003,391 113,223,763 125,678,377 139,502,999 154,848,329 171,881,645 190,788,626
Less: Operating
40,745,460 42,782,733 44,921,870 47,167,963 49,526,361 52,002,679 54,602,813 57,332,954 60,199,602 63,209,582
cost
Income before
Depreciation 33,838,540 40,005,507 46,973,077 54,835,427 63,697,402 73,675,698 84,900,186 97,515,375 111,682,043 127,579,044
and interest
Less: interest 770,623.25 684,698.76 608,354.84 540,523.28 480,254.93 426,706.51 379,128.73 336,855.88 299,296.45 265924.8947
Income before
33,067,917 39,320,808 46,364,722 54,294,904 63,217,147 73,248,992 84,521,057 97,178,519 111,382,747 127,313,119
Depreciation
Less:
0 0 358,313 376,228 395,040 414,792 435,531 457,308 480,173 504,182
Depreciation
Profit /Loss
33,067,917 39,320,808 46,006,409 53,918,676 62,822,108 72,834,200 84,085,526 96,721,211 110,902,574 126,808,938
Before Tax
Less: Tax (30%) 9,920,375.03 11,796,242.47 13,801,922.82 16,175,602.79 18,846,632.31 21,850,260.02 25,225,657.75 29,016,363.40 33,270,772.16 38,042,681.29
Net Profit or
23,150,102.9 27,526,841.4 32,206,508.5 37,744,869.6 43,977,071.6 50,985,358.2 58,861,128.1 67,705,967.5 77,632,796.4 88,767,140.2
Loss After Tax

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 Annex 5: discounted cash flow
Investment
Project Life years
Description Year
0 1 2 3 4 5 6 7 8 9 10
INFLOW
Net sales
0 74,584,000 82,788,240 91,894,946 102,003,391 113,223,763 125,678,377 139,502,999 154,848,329 171,881,645 190,788,626
revenue
TOTAL
0 74,584,000 82,788,240 91,894,946 102,003,391 113,223,763 125,678,377 139,502,999 154,848,329 171,881,645 190,788,626
INFLOWS
OUTFLOWS
Investment
cost 95,729,596 - - - - - - - - - -
Operating cost 0 40,745,460 42,782,733 44,921,870 47,167,963 49,526,361 52,002,679 54,602,813 57,332,954 60,199,602 63,209,582
Income tax 0 9,920,375 11,796,242 13,801,923 16,175,603 18,846,632 21,850,260 25,225,658 29,016,363 33,270,772 38,042,681
TOTAL
95,729,596 50,665,835 54,578,975 58,723,792 63,343,566 68,372,994 73,852,939 79,828,471 86,349,317 93,470,374 101,252,263
OUTFLOWS
NET CASH
10,850,695.00 23,918,164.97 28,209,264.53 33,171,153.93 38,659,824.58 44,850,769.86 51,825,438.07 59,674,527.89 68,499,011.45 78,411,271.17 89,536,362.91
FLOW
NET PRESENT VALUE (NPV) 54,439,417.00
INTERNAL RATE OF RETURN (IRR) 34.13%
DISCOUNTED PAYBACK PERIOD (DPBP) 3.9years

43
 Annex 6: Bank Loan Repayment Schedule

Year Principal payment 11.5% interest Total payment(P+I) Outstanding loan

0 0 0 0 67,010,717.24
1 6,701,071.72 770,623.25 7,471,694.97 59,539,022.26
2 5,953,902.23 684,698.76 6,638,600.98 52,900,421.28
3 5,290,042.13 608,354.84 5,898,396.97 47,002,024.31
4 4,700,202.43 540,523.28 5,240,725.71 41,761,298.60
5 4,176,129.86 480,254.93 4,656,384.79 37,104,913.80
6 3,710,491.38 426,706.51 4,137,197.89 32,967,715.91
7 3,296,771.59 379,128.73 3,675,900.32 29,291,815.59
8 2,929,181.56 336,855.88 3,266,037.44 26,025,778.15
9 2,602,577.82 299,296.45 2,901,874.26 23,123,903.89
10 2,312,390.39 265,924.89 2,578,315.28 0

44