1.

EXECUTIVE SUMMARY
Mr.Kasahun Teshome mechanization project. Promoter Mr. Kasahun Teshome planned to promote
and Operates farm machinery (mechanization) that is intended to establish mechanization options for
the different terrains, develop supply chains governing farm power and implements, and create
demand and facilitate end- users.
The Mechanization project will be sited in the district of South West Ethiopia Peoples Regional
State,West Omo Zone,Meinit Shasaha Woreda. The current regional market for total high supply gaps
As a state-of-the-art Mr. Kasahun Teshome will provide nearby farm machinery (mechanization) for
the project areas markets.
 The total estimated cost for Mr. Kasahun Teshome is 20,331,541.62birr
 Regarding the source of finance 16,942,951.35 birr shall be loan from bank.
 The rest 3,388,590.27birr from owners' equity.
 Job opportunity : at full operation Mr. Kasahun Teshome mechanization project expected to create
7 permanent labors, most of which are to be take on from local areas.

1
2. INTRODUCTION
Farming in Ethiopia remains largely subsistence in nature. With a rapid increase in food
population, the pressure on ensuring food security is a constant challenge for the stakeholders.
Significant progress has been made in Ethiopia in the past decade with regard to over all
agricultural production. However, operational efficiency and farm productivity, and, therefore,
the prosperity of a very large proportion of the rural population, continue to be a concern.
Food security shall be enhanced by improving crop productivity and by enhancing area under
cultivation of food crops. The major limitation on the already cultivated area is the heavy reliance
on the hand hoe used by the human labor. Experience in some African countries show that labor
productivity shall be greatly enhanced by using alternate farm powers such as motorized engines
and draught animals.
Mechanization, along with other farm inputs such as fertilizers, improved seeds and pesticides,
can significantly improve agricultural productivity in Ethiopia. Mechanization is a powerful tool
in achieving sustainable agricultural production because it enhances human capacity with the
potential beneficiaries being men and women farmers. It allows timeliness, efficiency and
consistency in field operations. This is critical for land preparation especially in Ethiopia where
there is sequential cropping owing to the receipt of rainfall through two seasons a year in most
parts of the country.
The transformation from subsistence agriculture to commercial agriculture requires integration of
mechanization options in commodity chains. Farmers and potential entrepreneurs need to be
educated and trained on the various avenues of mechanization in post harvest handling, storage,
and primary- and secondary agro processing enterprises. Linkages along the continuum of
production, processing and marketing need to be strengthened through incentives and
entrepreneurial spirits. Introduction of mechanization at various stages of processing will not only
improve the agricultural commodity chains but also enhance rural employment opportunities and
profitability of farming in Ethiopia.

2
3. OBJECTIVE OF THE PROJECT:
3.1 General objective of the project
The main objective of this project is to take part in Mechanization project establishment and, provide
service to the farmer and investor to gain financial benefits and increase productivity of the project
area.
3.2 Specific objective of the project
Up on implementing its primary objectives, the project shall also accomplish the following additional
objectives:
 Maximize equipment investment (for own farm and/or via service provision)
 Maximize income by providing ploughing and other services
 Place capital in and maximize return on promising (agritech) business models (while achieving
positive social and environmental outcomes)
 Boost food production, improve rural economy, create new employment opportunities,
 Reduce poverty, reinforce environmental resilience
 Raise the power inputs of farming activities, thereby putting more land into production,
 Enhancing quality of life of rural men and women,
 Improve the timeliness and efficiency of field work,
 Facilitate crop processing and thereby improve rural economic opportunities
 Establish mechanization options for the different terrains
 Develop supply chains governing farm power and implements, and create demand
 Facilitate improved quality service to farmers
 Establish linkages along the continuum of production- processing- marketing

3
3.2 . PURPOSE OF THE LEASE FINANCING:
Financing lease is also called as full payout lease. This mechanization project lease is
economic life of the asset, the total payments over the term of the lease are greater than the
leasers initial cost of the leased asset. Mechanization project lease is to achieve; Food security,
Economic Growth and Relieving the farm labors.
3.3. STATUS OF THE PROJECT
The government to review national policy on mechanization, review the need for a national
mechanization strategy, ensure the compatibility of machinery packages and prepare action
plans for renting Tractor and Combine Harvester project. Mr. Kasahun Teshome Mechanization
project is the newly project establish in South West Ethiopia Peoples Regional State,West Omo
Zone,Meinit Shasaha Woreda.
3.4 . MARKETING STRATEGY OF THE PROJECT

Mechanization has the potential to expand production; improve timeliness of operations; widen the
application of power to crop processing and infrastructure improvement; compensate for labour
shortages; and alleviate drudgery – particularly important when the graying , feminizing workforce
continues to rely on the hand-hoe for primary cultivation.

Supply side levers (equipment owners): Build a new user base in both supply and demand side
(Decentralized Mechanization Centers), Building the business case for ownership and provision of
rental services, Aggregating demand and maximizing tractor uptime
Demand side levers (farmers): Reinforcing interest in and justification for farm mechanization,
Fostering access to, trust in and usage of mechanization rental services, Making farm mechanization
affordable and effective.
High Agricultural Production/ Potential, Ideal topographic and soil conditions for mechanization (e.g.
flat, soft soil),Total size of the production area (not each plot) – farm machinery can work a lot, Low
risk of natural/ climatic disasters, Good access to market and transport infrastructure, Prevalence of
intensive/ market-oriented farming (cash crops/high value crops.

4
 3.5 APPROPRIATENESS OF PRODUCTION AREA AND SHADE

The mechanization of agriculture is recognized as an important factor for the development of the
agricultural sector, which absorbs the majority of the labor force in the project area of Meinit Shasha
Woreda; High Agricultural Production/ Potential, Ideal topographic and soil conditions for
mechanization (e.g. flat, soft soil),Total size of the production area (not each plot) – farm machinery
can work a lot, Low risk of natural/ climatic disasters, Good access to market and transport
infrastructure, Prevalence of intensive/ market-oriented farming (cash crops/high value
crops),Existence of private service providers – Functional mechanization chain (e.g. mechanization
service providers, banks, workshops -maintenance work, spare parts providers),Concentration and
Good Shape & Size of farm plots (e.g. Plots not scattered, and each plot is large and rectangle),Good
Rural Infrastructure(e.g. rural road – easy entry),High labor cost and/or Scarce labor force.
3.5. MANAGEMENT CAPACITY
The promoter's Mr. Ksahun Teshome will be the manager of the project to lead a successful and
profitable mechanization project. In addition to this ,the local government and concerned stakeholders
will have a chance to coordinate ,train and create marketing conditions for the successfulness of the
project. Mr. Ksahun Teshome Mechanization project is a privately owned project. As a general
manager of the project the person in charge shall have full power to manage the affairs of the project
within the specified business objectives. He will also have the power to delegate part of the authority
vested up on him to other management members with in the project. The owner is Mr. Ksahun
Teshome responsible for the general management. The project supervisor will be responsible for the
general operation ,control and administration of properties, and other related tasks.
ORGANIZATIONAL STRUCTURE

General manager

Operation manager/supervisor Administration /rent service provider

Tractor operator Machine mechanic Guards

5
3.6. THE PROJECT'S INVESTMENT
3.7 INVESTMENT CAPITAL
The total estimated investment cost for Mr. Kasahun Teshome Mechanization project Owners’ is
20,331,541.62birr. . Regarding the source of finance 16,942,951.35 birr birr shall be
development bank of Ethiopia. The loan creates the capital goods of the project and the rest
3,388,590.27birr from the promoters (Owners equity)/ covers the working capital of the project.
Period of The Project: At full Mr. Kasahun Teshome Mechanization project promoters’ expected to
create 7 labors, most of which are to be take on from local area.
Financial support: One parts of the estimated cost required for running the project shall be secured
for the promoter, Mr. Kasahun Teshome the rest from bank loan.
Implementing organization: The person in charge of this project is Mr. Kasahun Teshome, shall be
responsible to lead and administer the project throughout its life time some of the enter areas where the
person in accuse of this planned project is required to involve in:
 Engage in lease financing (Development Bank of Ethiopia) concurrence.

 Make contacts with the concerned authorities when ever required.

 Assigns the required personnel in all enter areas within the period.

 Allocates and releases the budget required to run the project frame work.

 Receives and releases and investigates reports from the financial units of the industry.

3.9. SOURCE OF FINANCE

From the total Amount 20,331,541.62 birr
Debt - 16,942,951.35birr (Development Bank of Ethiopia)
Equity – 3,388,590.62 birr (promoter's)

6
3.10 EXPECTED FINANCIAL RESULTS
Description Year (initial) Year (final)
Sales Revenue 00 17,376,000.00
Profit (loss) 5,167,460.8 8,479,055.58
Cumulative Cash Balance 20,416,117.15 23,727,711.93

4. BRIEF HISTORY OF THE PROMOTER/PROJECT

Agriculture is the second largest contributor to the overall economic growth and a significant
contributor to reducing poverty. In 2012-13, it accounted for about 42.9% of national GDP (only
slightly behind the service sector at 45.2%) (MOFED, 2012/13), almost 90% of foreign exchange
earnings and 85% of employment.
While agricultural productivity in Ethiopia is improving, there are still major gaps in productivity
when compared with the rest of Africa in some crop areas, and almost universally, when compared
with the global output level. (FAO, 2014). For example, the African average production of wheat is
approximately 10% more per hectare, and the global average is about 50% higher than Ethiopia (as
detailed Exhibit 1). In countries like China, there have been a significant correlation between increased
use of agricultural mechanization and increased productivity. Even with significant improvement in
productivity in recent years, Ethiopia is still a net wheat importer. In addition to this, approximately
only 12% of the total arable land is utilized for agriculture, with an expectation that this percentage
will grow, both in relative and absolute terms.
Despite the long history of agriculture in Ethiopia and the start of using some sort of mechanization,
still the country’s agriculture is characterized by the use of traditional farming implements and
practices with very low energy inputs. The entire field operations at small scale agriculture are
performed with very simple farm tools with mainly human and animal power sources.
Animal traction is the main farming technology of the smallholder farmers who, in terms of total
arable land, dominate crop production in Ethiopia. The introduction of drought animal power
into the smallholder farming system dates as back as century ago. However, in recent years, the use of
tractor farm technology is increasingly becoming important among the smallholder farmers at the
expense of drought animal. While in the early 1970s only 4% of total smallholder farming households
used tractors for ploughing, this figure rose dramatically to 17% and 39%, respectively, by 1980 and
1990s.

7
4.1 HISTORY OF TRACTORS IN ETHIOPIA

Ethiopia has a long history of involvement with the 4WT. To nurture agricultural mechanization, state
farms both irrigated and rain fed have played a very big role, especially during the second period of
“socialist experimentation”, when large mechanized state farms were established totaling about
200,000 hectares, out of which about 47,000 hectares were irrigated. (FAO Vol. 20, 2013)

Another mechanization approach tried in the 70s to 90s period was government operated tractor hire
schemes. These were later abandoned; partly due to heavy financial burden on the government as a
result of subsidizing the service (Sims, 2006). Furthermore, timeliness of the agricultural operations
was difficult to achieve because of conflict among users of the service. Studies on the economic
benefits of these schemes were also carried out during this period and it was concluded, based on the
various shortfalls identified, that government managed and operated tractor hire schemes were not
successful and were consequently largely abandoned in the late 1990s.

In Ethiopia, an estimated 5,090 tractors were in use as of 2010, a significant increase since 2004
when the number was about 3,000. The 2010 figure increases to about 6,000 when “walking” or
pedestrian tractors are included. The number of tractors per 100 square km of arable land was about
4.0 and 4.7 respectively with and without the pedestrian tractors. This steady increase in the
number of tractors is primarily attributable to the growing number of foreign private investors
engaged in large commercial agriculture in Ethiopia, mainly from China, India and Saudi Arabia
(WB report, No. 68237)

4.2. TRACTORS AND IMPLEMENTS

In terms of agricultural technology, tractors are the most important and versatile type of equipment
used by farmers wanting to mechanize some or all of their farm operations. Apart from providing
an important means of transporting heavy farm inputs and produce to and from the farms, tractors are
useful in coupling other motorized and non-motorized implements for the efficient and timely land
preparation that is necessary for achieving high yields and minimizing postharvest losses (FAO
2008b). Unfortunately, human labor is not adequately equipped to grapple effectively with these
changes in ecosystem and production landscapes.

Implements: this range from simple hand tools to animal-drawn or tractor-mounted implements to
condition seedbeds by turning the soil, burying weeds and crop residues, and bringing nutrients to the

8
surface, all to achieve the benefits of weed control, improved soil aeration, and optimized soil fertility,
temperature, and moisture. In Ethiopia, 90% of tillage operations in smallholder farming are carried
out using marsha, a traditional wooden plough pulled by a pair of oxen, which is not capable of
inverting the soil and thus is of little use in burying weeds and crop residues. The moldboard plow, an
improved tillage implements developed by the Melkassa Agricultural Research Center (MARC), is
designed to address this shortcoming and effectively inverts the soil; use of the moldboard plow has
been found to increase grain yield by over 50% compared to marshal, and has been demonstrated to
reduce required tillage frequency and bury weeds more effectively. FAO conducted several trials on
small farm implements in the 1950s. The Jimma and Alemaya Agricultural Colleges, also conducted
trials on implements between 1955 and 1965. The Chilalo Agricultural Development Unit (CADU)
started research on farm implements in 1968 and had some success stories but could not go far.

Row planter: A tractor-mounted or animal-drawn implement used to sow seed in rows at regular
intervals, thus helping to control and optimize seed rate and plant density. The use of row planters in
Ethiopia is almost at infant stage, and most seeds were typically sown through manual broadcasting.
Research in other countries has suggested that potential exists to mechanize planting using
implements ranging from tractor-mounted row planters to animal- or human- drawn small-scale
implements. The optimum choice of row planter varies based on environmental conditions,
particularly soil type and socioeconomic factors. Hence, further research efforts are required to
identify economically and technically feasible row planters for smallholder farmers.

Harvester and thresher: In Ethiopia, most crops are typically harvested by manual uprooting,
resulting in loss of quality and reduced nitrogen-fixing benefits due to sticky soils attaching to the
roots and being harvested with the crop. After harvesting, the crop is left to air dry, and then threshed
on poorly-prepared ground with animals, leading to further loss in quality and the introduction of
foreign matter.

Mechanizing both harvesting and threshing operations will improve the quality of produce,
reduce post-harvest loss, and replace manual labor. Two types of mechanical harvester – the swathe,
which cuts crops off at the stem and deposits the cut crops into a windrow, and the combine harvester,
which combines harvesting operations of reaping, threshing, and winnowing – may be adopted for
different crops. Hence, there will be an increasing need for mechanized harvesting and threshing to
meet productivity and quality standards.

9
4.3. POMOTER BACKGROUND (HISTORY OF THE PROMOTER)

South West Ethiopia Peoples Regional State,West Omo Zone is potential to provide access
Mechanization to implements through rental schemes. The promoter Mr. Kasahun Teshome have
500 hectares of land and successful investor in Meinit Shasha Woreda for the last 6 (six) years in
Agricultural business sector. Now a days , the promoter Mr. Kasahun Teshome plan the new
agricultural mechanization project to increase productivity of the project areas and the border zones.
4.4 PAST PERFORMANCE OF THE PROJECT

Ethiopia has a long history of involvement with the 4WT. To nurture agricultural mechanization, state
farms both irrigated and rain fed have played a very big role, especially during the second period of
“socialist experimentation”, when large mechanized state farms were established totaling about
200,000 hectares, out of which about 47,000 hectares were irrigated.

Another mechanization approach tried in the 70s to 90s period was government operated tractor hire
schemes. During this period and it was concluded, based on the various shortfalls identified, that
government managed and operated tractor hire schemes were not successful and were consequently
largely abandoned in the late 1990s.

In Ethiopia, an estimated 5,090 tractors were in use as of 2010, a significant increase since 2004 when
the number was about 3,000. The 2010 figure increases to about 6,000 when “walking” or pedestrian
tractors are included. The number of tractors per 100 square km of arable land was about 4.0 and 4.7
respectively with and without the pedestrian tractors.

This project is the new project South West Ethiopia Peoples Regional State,West Omo Zone is
potential to provide access Mechanization to implements through rental schemes.

4.5 SUMMARY OF FINANCIAL PERFORMANCE

The promoter Mr. Kasahun Teshome have 500 hectares of land and successful investor in Meinit Shasha
Woreda for the last 6 (six) years in Agricultural business sector. Now a days , the promoter Mr. Kasahun
Teshome plan the new agricultural mechanization project to increase productivity of the project areas and the
border zones. The promoter has strong financial performance, he leads various business sectors.
4.6 THE LEASE
Lease financing is one of the popular and common methods of assets based finance, which
is the alternative to the loan finance. Lease is a contract. A contract under which one party,
the leaser (owner) of an asset agrees to grant the use of that asset to another leaser, in
exchange for periodic rental payments.
Now a days, most of the Development Bank of Ethiopia and financial institutions are
providing lease finance to the industrial concern.
5. MARKET AND MARKETING:

10
 5.1 DEMAND AND SUPPLY ANALYSIS ON PRODUCT(S) OF THE PROJECT;

A conducive policy and institutional environment is critical to stimulate tractor use in Ethiopia; national policies
should be in place to create the market conditions necessary to foster a competitive and sustainable private-
sector led tractor market. The key components of such a policy framework are: a stand-alone mechanization law
that establishes a clear and efficient process for the governing and operations of the mechanization market;
enforcement of the law through a clearly-defined regulatory body; abolition or at least minimization of tariffs
and taxes on tractors to allow companies to better predict the cost structure of machineries and keep prices low
for farmers; a clearly articulated and predictable tractors subsidy policy at least for the beginning; provisions to
improve credit availability for agricultural machinery suppliers and farmers; incentives to promote local
manufacturing as appropriate to support the tractor supply chain. Output markets, which generate the revenues
that enable farmers to invest in tractors, are the major driver for expansion of tractors consumption are a must to
have for the promotion of agricultural technologies to the smallholder farmers.

To assess the ease of obtaining tractor services in Ethiopia, the availability of tractor rental services and the cost
of plowing farm land in the country needs to examine in details. But as per the data from field survey and
literatures, few tractor rental services exist in Ethiopia.

South West Ethiopia Peoples Regional State,West Omo Zone is potential to provide access Mechanization to
implements through rental schemes
5.2 MARKET PROSPECTS AND MAJOR MARKETING AREAS OF THE PROPOSED
PRODUCT(S);
Conditions should be created so that businesses can develop. Market conditions, particularly the profitability
of agriculture, will determine the extent and technical level of the industry. Conditions for successful
mechanization in agriculture:
 High Agricultural Production/ Potential
 Ideal topographic and soil conditions for mechanization (e.g. flat, soft soil)
 Total size of the production area (not each plot) – farm machinery can work a lot
 Low risk of natural/ climatic disasters
 Good access to market and transport infrastructure
 Prevalence of intensive/ market-oriented farming (cash crops/high value crops)
 Existence of private service providers – Functional mechanization chain (e.g. mechanization service
providers, banks, workshops -maintenance work, spare parts providers)
 Concentration and Good Shape & Size of farm plots (e.g. Plots not scattered, and each plot is large and
rectangle),Good Rural Infrastructure(e.g. rural road – easy entry)
5.3 TECHNICAL ASPECT OF THE PROJECT

11
 Technical Aspect
 Suitable machinery (e.g. Specification, size, type of attachment
 Sufficient capacity of mechanization stakeholders ( e.g. operators, repair & maintenance
service providers)
 Decent quality of locally produced farm machinery/ attachments/ tools)
 Mechanization is likely to gain profit in the lower stream of value chain (e.g. processing,
packaging)
 Mechanization is more likely to gain profit by introduction of multi-purpose/ multi-crop
machinery (e.g. Tillers, Tractors)
6. ORGANIZATION AND MANAGEMENT:
a. ORGANIZATIONAL STRUCTURE

General manager

a.
b.
c.
Operation manager/supervisor Administration /rent service provider
d.

Guards
Tractor Machine mechanic

b. TECHNICAL CAPACITY OF MANAGEMENT OF PROJECT;

Mr. Kasahun Teshome Mechanization project is a privately owned project. As a general manager of
the project the person in charge shall have full power to manage the affairs of the project within the
specified business objectives. He will also have the power to delegate part of the authority vested up
on him to other management members with in the project. The owner is Mr. Kasahun Teshome
responsible for the general management. The project supervisor will be responsible for the general
operation ,control and administration of properties, and other related tasks.

7. PRODUCTION CAPACITY AND SALES REVENUES

12
7.1 PRODUCTION CAPACITY
Assumptions used in the financial evaluations of Mr. Kasahun Teshome mechanization project
S/N Item Unit Price/ha Annual Working (75% at 1St year)
Annual usage of tractors hiring unit Nos.
1 Agricultural Operations of tractors Birr/ hour 2,250 Hrs 2,160
2 Tractor working per day 4.5ha or 9hrs/day
3 Price of tillage/ploughing per ha or 2hrs 4500birr
4 Price of harrow per ha or 2hrs 1,250birr
5 Price of transportation 5km 1,000birr
6 Price of combiner per ha or 1 hrs 3,500birr
7 Price of sprayer per ha 1,00birr
8 Price of planting per ha 1,200birr
6 Working capacity /week
6.1 Tractor tillage/ploughing 45 hrs
6.2 Tractor harrow 45 hrs
6.3 Tractor transportation 50km
6.4 Combine harvester 45 hrs
6.5 Sprayer 100 ha
6.6 Planting 22.5 ha
7 Working capacity /month
7.1 Tractor tillage/ploughing 180 hrs
7.2 Tractor harrow180 hrs
7.3 Tractor transportation 200km
7.4 Combine harvester 180hrs
7.5 Sprayer 400 ha
7.6 Planting 90 ha
8 Working capacity /year
8.1 Tractor tillage/ploughing 2,160 hrs
8.2 Tractor harrow 2,160 hrs
8.3 Tractor transportation 2,400km
8.4 Combine harvester 2,160hrs
8.5 Sprayer 4,800 ha
8.6 Planting 1,080 ha
9 Annual income generating
9.1 Tractor tillage/ploughing =4,860,000.00 birr (2,160/2×2,250) (75% 1st year the after full operation)
9.2 Tractor harrow = 2,700,000.00 birr ( 2,160/2×1,250 ) (75% 1st year the after full operation)
9.3 Tractor transportation =480,000.00 birr (2,400/5×1000) (75% 1st year the after full operation)
9.4 Combine harvester = 7,560,000.00 (2,160×3,500) (75% 1st year the after full operation)
9.5 Sprayer = 480,000.00 (4,800×1000) (75% 1st year the after full operation)
9.6 Planting = 1,296,000.00 (1,080 ha) (75% 1st year the after full operation)

7.2 SALES REVENUES

Year Item Total annual revenues

13
 75%(1st year operation )
2023 Tractor tillage/ploughing , Tractor harrow, Tractor 13,032,000.00
transportation ,combine harvesting ,spraying and planting
2024 Tractor tillage/ploughing , Tractor harrow, Tractor 17,376,000.00
transportation ,combine harvesting ,spraying and planting
2025 Tractor tillage/ploughing , Tractor harrow, Tractor 17,376,000.00
transportation ,combine harvesting ,spraying and planting

2025 Tractor tillage/ploughing , Tractor harrow, Tractor 17,376,000.00

transportation ,combine harvesting ,spraying and planting

2026 Tractor tillage/ploughing , Tractor harrow, Tractor 17,376,000.00

transportation ,combine harvesting ,spraying and planting
Grand 82,536,000.00
total

8. FINANCIAL ANALYSIS
8.1 Investment cost

14
The total estimated investment cost for Mr. Kasahun Teshome Mechanization project is

20,331,541.62birr. Regarding the source of finance 16,942,951.35 .00 birr shall be loan from bank and
the rest 3,388,590.27birr from the promoters.
Period of The Project: At full Mr. Kasahun Teshome Mechanization project promoters’ expected to
create 7 jobs labors, most of which are to be take on from local area.
Financial support: One parts of the estimated cost required for running the project shall be secured
for the promoter, Mr. Kasahun Teshome the rest from bank loan.
Implementing organization: The person in charge of this project is Mr. Kasahun Teshome, shall be
responsible to lead and administer the project throughout its life time some of the enter areas where the
person in accuse of this planned project is required to involve in:
 Engage in lease financing (Development Bank of Ethiopia) concurrence.

 Make contacts with the concerned authorities when ever required.

 Assigns the required personnel in all enter areas within the period.

 Allocates and releases the budget required to run the project frame work.

 Receives and releases and investigates reports from the financial units of the industry.

8.1.1 FIXED INVESTMENT COST

s/n Item Qt Unit price Total price

15
 y
1 Essential Agricultural Tractor 1 4,750,000.00 4,750,000.00
2 MOUNTED DISC PLOUGH 1 370,000.00 370,000.00
3 TRAILED OFFSET DISC HARROW 1 1,200,000.00 1,100,000.00
4 TRACTOR MOUNTED SPRAYER 1 350,000.00 350,000.00
5 COMBINE HARVESTER 1 9,000,000.00 9,000,000.00
6 PLANTER 1 922,951.35 922,951.35
7 TRAILER 1 450,000.00 450,000.00
SUB TOTAL 16,942,951.35
8.1.2 OPERATING COSTS
Operating costs need to be estimated next. These will commonly consider, for example, fuel
expenses, labour to operate the equipment a, and so forth. Other costs relate to maintenance and repair
costs, changing oil and parts etc. Importantly such costs will need to be made for hourly, daily
or weekly usage, depending on the type of service offered.
COST
Sl. ITEM Full capacity 75% during 1st year
No Utilisation
1 TRACTOR AND COMBINE HARVESTER
Salary @ birr.3,500 per month 153,000.00 114,750.00
Fuel Cost 488,800.00 488,800.00
Lubricants @10%. of fuel cost 48,880.00 48,880.00
Repair and maintenance charges @ 10 % of 1,694,295.135 1,694,295.135
cost of tractor and equipment
Sub Total 2,384,975.14 2,346,725.14

2 Other recurring cost

Insurance premium @ 2% of machinery cost 338,589.02 338,589.02
Sub Total 338,589.02 338,589.02
3 CONTIGENCY 665,026.11 498,769.58
TOTAL RECURRING COST 3,388,590.62 3,184,083.74

9. SOURCE OF FINANCE
16
The finance for the planned project shall be contributed both from owner’s equity and from
Development bank of Ethiopia. The bank loan is predictable to finance 16,942,951.35 birr of the total
first phase investment cost, while it will make available the fund required to cover 20% of the total
machineries cost will be working capital from its owner's equity 3,388,590.27birr.Accordingly, of the
total investment cost 20,331,541.62birr.

10. FINANCIAL AND ECONOMIC ANALYSIS

Assumptions used in the financial evaluations of Mr. Kasahun Teshome mechanization project
17
 Sl. Item Unit Renta Annual
No. l / Working
Cost
Annual usage of tractors hiring Nos.
unit
1 Agricultural Operations Birr Per hour 2,250 Hrs 2,160
2 Annual usage of combine harvester Birr Per hour 3,500 Hrs 2,160
3 Diesel Price Birr Per lit. 60
4 Lubricant Cost Birr Per lit. 180
5 Diesel Requirement for tractor litres per 3
hour
6 Diesel Requirement for litres per 1
combine harvester hour
7 Lubricant requirement % of Diesel 2.5
8 Interest on term loan (% p.a.) 11.50%
*Fuel
and
labour arranged by the beneficiary who rent the machinery from the renting Centre
** Fuel is arranged by the beneficiary who rent/hires the tractor from the rent/Hiring Centre

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11. BANK LOAN REPAYMENT SCHEDULE

Loan Duration: 5 Years

Number of Payments: 60
Interest Rate: 11.5 %
Monthly Payment: Birr 282,382.51

No. Payment Total Amount Principle Interest Total

Year Bank Loan Payment Payable Payment
0 2023 16,942,951.35
1 2024 13,554,361.08 3,388,590.27 1,948,439.365
5,337,029.64
2 2025 10,165,770.81 3,388,590.27 1,558,751.52
4,947,341.79
3 2026 6,777,180.54 3,388,590.27 1,169,063.64
4,557,653.91
4 2027 3,388,590.27 3,388,590.27 779,375.73
4,167,966.00
5 2028 00 3,388,590.27 389,687.88
3,778,278.15

Note: the proceed is assumed to be granted with six months elegance period; hence a small variation
in the loan schedule is predictable

19
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12. . PROFIT AND LOSS ANALYSIS
Description Y-0 Y-1 Y-2 Y-3 Y-4 Y-5
Sales Income 13,032,000.00 17,376,000.00 17,376,000.00 17,376,000.00 17,376,000.00

Expenses - - -  -  - 
Fixed Cost 16,942,951.35 - - -  -  - 
Variable Costs 3,388,590.27 3,184,083.74 3,388,590.27 3,388,590.27 3,388,590.27 3,388,590.27
Depreciation
- 1,694,295.13 1,694,295.13 1,694,295.13 1,694,295.13 1,694,295.13
Repair & Maintenance - 1,694,295.13 1,694,295.13 1,694,295.13 1,694,295.13 1,694,295.13
Total Expense 20,331,541.62 6,572,674.00 6,777,180.53 6,777,180.53 6,777,180.53 6,777,180.53

Gross profit - 6,459,326.00 10,598,819.17 10,598,819.17 10,598,819.17 10,598,819.17

Tax @20% - 1,291,865.2 2,119,763.89 2,119,763.89 2,119,763.89 2,119,763.89
Net profit - 5,167,460.8 8,479,055.58 8,479,055.58 8,479,055.58 8,479,055.58

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13. CASH FLOW STATEMENT
Description Y-1 Y-2 Y-3 Y-4 Y-5

Cash from operation 13,032,000.00 17,376,000.00 17,376,000.00 17,376,000.00 17,376,000.00

Principal payment 3,388,590.27 3,388,590.27 3,388,590.27 3,388,590.27 3,388,590.27

Interest payment 1,948,439.365 1,558,751.52 1,169,063.64 779,375.73 389,687.88
Debt service 5,337,029.64 4,947,341.79 4,557,653.91 4,167,966.00 3,778,278.15
Cash flow 7,694,970.36 12,428,852.45 12,818,346.09 13,208,034 13,597,721.8
5
Cap ex growth 847,147.55 847,147.55 847,147.55 847,147.55 847,147.55
Net cash flow 6,847,822.81 11,581,704.9 11,971,198.54 12,360,886.4 12,750,574.3
5
14. BALANCE SHEET
Assets liabilities
Current assets 3.7m Equity 3.4m
Fixed assets 16.6m Debt 16.9m
Total 20.3m Total 20.3m
15. ORGANIZATIONAL STRUCTURE AND MANAGEMENT
Mr. Yohanes Kasahun Mechanization project is a privately owned project. As a general manager of
the project the person in charge shall have full power to manage the affairs of the project within the
specified business objectives. He will also have the power to delegate part of the authority vested up
on him to other management members with in the project. However, the project shall have the
following main divisions.

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 13.1 THE GENERAL MANAGER
It is responsible for the general personnel management.
13.2 The project finance /service provider
It will be responsible for the general operation ,control and administration of properties, and other
related tasks.
ORGANIZATIONAL STRUCTURE

General manager

Operation manager/supervisor Administration /rent service provider

Guards
Tractor operator Machine mechanic

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16. FEASIBILITY & JUSTIFICATION
Ethiopian economy largely depends on the agricultural sector.
17. TECHNICAL STUDY
15.1 Infrastructure (electric power, road, and telephone services)
Currently, the Ethiopia electric power corporation has stretched hydro electric power lines to the area.
The required power to run warehouse and machines thus, shall easily be stretched to the site through
negotiation with the authority. The all whether gravel road, accesses to regular and mobile telephone
services, makes the site an ideal place to run the project efficiently.
15.2 Man power
Industrial development activities require both skilled and unskilled man power. The fact that there is a
relatively cheap but yet efficient labor in Bench Sheko Zone ; where this project is to be set makes it
in advantageous position in minimizing the cost of operation required for its activities.
15.3 FINANCE SOURCES
As the Private sector is believed to play the key role in the social and economic development activities
in the country, the government of Ethiopia is encouraging the sector in many ways; one of which is provision of
long and short term loans to those engaged in the agricultural sector. Those who are licensed for the sector and
who are under operation can secure enough money either from the development banks of Ethiopia .
18. WORK OPPORTUNITIES
The type and number of workers required by the project is shown in the table below
Table4. Type and number of man power required by the project
S.n Position Educatio Requi Employm Monthly Annual
nal red ent type salary salary
status
1 Tractor operator 12 compl 1 Permanen 2,000 24,000.00
t
2 Hiring Service Provider 12 compl 1 Permanen 1,750 21,000.00
t
3 Service and 12 compl 1 Permanen 1,500 18,000.00
Maintenance t
Technician-Farm
Machinery
4 Tractor Mechanic 12 compl 1 Permanen 2,000 24,000.00

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 t
5 Supervisor 12 compl 1 Permanen 1,750 21,000.00
t
6 Guard /parking 12 compl 1 Permanen 2,000 24,000.00
t
Grand total 6 132,000.00

19. ENVIRONMENTAL IMPACT ASSESSMENT REPORT

Mechanization can have both positive and negative impacts on the environment although it is the
negative ones that tend to be most frequently highlighted. The positive effects include more timely
field operations which will allow farmers to avoid having to work in fields when conditions are poor,
more efficient use of water particularly in rice production, and better weed control. At the same time
mechanization must be recognized as having the potential to create a negative environmental impact.
Examples are the potential of mechanized agriculture to extend arable cropping into soils and climates,
which are unsuitable, and the negative impact of land preparation technologies that are easy to
implement but result in soil erosion. The availability of machines also makes possible such practices
as the mass promotion of the use of potentially hazardous chemicals for pest control. During the initial
study it will not be possible to consider all of the potential environmental issues. However, those
relating to specific types of mechanization should be identified, and possibilities for their amelioration
considered.
People who earn their livelihood from working as agricultural laborers may get a negative impact from
agricultural mechanization. The social impact study asked 36 agricultural laborers what they would do
if demand for agricultural labor decreases. About half the respondents said that they would cultivate
their own land, while 22.2 per cent of respondents said that they would start a small business. 19.4 per
cent said that they would be laborers in other areas.
A new irrigation scheme has been constructed in the study area. If agricultural laborers can get their
own irrigated land thanks to the new irrigation scheme and can shift from being agricultural laborers
to farmers, the negative impact of agricultural mechanization, e.g. loss of work opportunities as
agriculture laborers, can be mitigated. Otherwise entrepreneur training could help the workforce to
change from agriculture laborers to entrepreneurs, which could be more productive for the economy.

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The loss of work for agriculture laborers is a sensitive issue. Careful attention needs to be paid to the
social impact.

20. SUMMARY & CONCLUSION

Government should have clear idea on why they want agricultural Mechanization - Mechanization
should be promoted only when it is the right and reasonable means. Mechanization is an complicated
issue, so should be looked at from multiple angles (Not only technical, but also socio-economic and
policy). Profitability is the most important key for mechanization - All stakeholders in the chain
should gain a certain profit for sustainability. Mechanization can not happen across the country, at
least for a short run. Therefore, mechanization efforts should start in areas with high
profitability .Contexts surrounding agricultural mechanization differ, so policy & interventions should
be specified for each country, and Government should focus on creation of business environment
Public sector has more important roles to lead agricultural mechanization with sound competitiveness
in the private sector through PPP, especially at early stage of mechanization.
Mechanization happens easier in areas with high agricultural production, low climate risk, good
market access, adequate rural infrastructure, and ideal topographic and soil condition. Functional
machinery supply chain by private is necessary in the target areas to mechanize.
Mechanization is easier at postharvest and processing operations that has high value-addition, than at
field operations Profitability is higher for multi-purpose and/or multi-crop machineries (e.g. tractors
that can be used not only for, but also transport, harvesters for multi-crop use) Important to select
adequate mechanization approaches in terms of ownership, and business models
Successful/profitable business calls for good business plan and sufficient operation/management
capacity – Interventions can be made to support stakeholders in these areas

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