TEXTILE MANUFACTURING INDUSTRY

PROJECT OWNER:
APM TRADING TEXTILE INDUSTRY PLC

DEBRE BIRHAN CITY ADMINISTRATION, NORTH SHOA

ZONE, AMHARA NATIONAL REGIONAL STATE, ANRS,
ETHIOPIA

2023

1
 TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................. 2

LIST OF TABLES AND FIGURES ........................................................... 4

List of Tables.................................................................................................................... 4
List of Figures .................................................................................................................. 4
LIST OF ABBREVIATIONS ...................................................................... 5

1. EXECUTIVE SUMMARY ...................................................................... 7

2. PRODUCT DESCRIPTION AND APPLICATION ............................. 9

3. MARKET STUDY, PLANT CAPACITY AND PRODUCTION

PROGRAM ................................................................................................. 10

3. 1. Market Study ......................................................................................................... 10

3. 1. 1. Present Demand And Supply .......................................................................... 10
3. 1. 2. Projected Demand ........................................................................................... 14
3. 1. 3. Pricing and Distribution .................................................................................. 14
3. 2. Plant Capacity ....................................................................................................... 15
3. 3. Production Program ............................................................................................. 15
4. RAW MATERIALS AND UTILITIES ................................................ 16

4. 1. Availability and Source of Raw Materials .......................................................... 16

4. 2. Annual Requirement and Cost of Raw Materials and Utilities ........................ 16
5. TECHNOLOGY AND ENGINEERING ............................................. 19

5. 1. Production Process ................................................................................................ 19

5. 1. 1. Weaving Process ............................................................................................. 19
5. 1. 2. Dyeing Process ................................................................................................ 19
5. 1. 3. Finishing Process............................................................................................. 20
5. 2. Machinery and Equipment ................................................................................... 20
 5. 3. Civil Engineering Cost .......................................................................................... 21
6. HUMAN RESOURCE AND ORGANIZATIONAL STRUCTURE . 22

6. 1. Human Resource ................................................................................................... 22

6. 1. 1. Training Requirement ..................................................................................... 24
6. 2. Organizational Structure ...................................................................................... 24
6. 2. 1. General Manager ............................................................................................. 27
6. 2. 2. Production And Technical Department ........................................................... 27
6. 2. 3. Finance and Administration Department ........................................................ 28
6. 2. 4. Commercial Department ................................................................................. 29
6. 2. 5. Quality Control And Assurance Department .................................................. 30
7. FINANCIAL ANALYSIS ...................................................................... 31

7. 1. Underlying Assumption ........................................................................................ 31

7. 2. Implementation Schedule ..................................................................................... 32
7. 2. 1. Implementation Cost ....................................................................................... 33
7. 3. Office Furnitiure and Equipment ........................................................................ 35
7. 4. Investment .............................................................................................................. 36
7. 3. Production Costs ................................................................................................... 38
7. 4. Bank Loan Repayment Schedule ......................................................................... 39
7. 5. Financial Evaluation ............................................................................................. 39
7. 5. 1. Profitability...................................................................................................... 39
7. 5. 2. Payback Period ................................................................................................ 40
7. 5. 3. Internal Rate of Return , IRR and Net Present Value, NPV ........................... 40
7. 6. Economic and Social Benefit and Justification ................................................... 40
7. 6. 1. Profit Generation ............................................................................................. 40
7. 6. 2. Tax Revenue .................................................................................................... 40
7. 6. 3. Employment and Income Generation .............................................................. 40
7. 6. 4. Import Substitution and Foreign Exchange Saving ......................................... 41
7. 6. 5. Environmental and Social Impact Assessment (ESIA) ................................... 41
7. 6. 6. Technology Transfer ....................................................................................... 41
7. 6. 7. Diversification And Inter-Sectoral Linkage. ................................................... 41
ANNEXES: FINANCIAL ANALYSIS ..................................................... 43

REFERENCES............................................................................................ 55

3
 LIST OF TABLES AND FIGURES
List of Tables
TABLE 3. 1 : ETHIOPIA’S CURRENT INSTALLED AND ATTAINED ANNUAL
CAPACITY OF TEXTILES AND APPAREL ................................................................... 12
TABLE 3. 2: IMPORT OF TEXTILE (IN TON) ............................................................... 13
TABLE 3. 3 : EXPORT OF TEXTILE (IN TON) .............................................................. 13
TABLE 3. 4 : PROJECTED DEMAND FOR TEXTILE (IN TON) .................................. 14

TABLE 4. 1 : MATERIAL AND AUXILIARY REQUIREMENT PER YEAR............... 17

TABLE 4. 2 : ANNUAL UTILITY REQUIREMENT ....................................................... 18

TABLE 5. 1 : MACHINERY AND EQUIPMENT ............................................................ 21

TABLE 6. 1 : HUMAN RESOURCE REQUIREMENT ................................................... 22

TABLE 7. 1 : CONSTRUCTION AND FINANCE; DEPRECIATION AND WORKING

CAPITAL (MINIMUM DAYS OF COVERAGE) ............................................................ 31
TABLE 7. 2 : IMPLEMENTATION COST ....................................................................... 33
TABLE 7. 3: OFFICE FURNITURE AND EQUIPMENT COST, ETB ........................... 35
TABLE 7. 4 : TOTAL INITIAL INVESTMENT (000 ETB) ............................................ 37
TABLE 7. 5 : PRODUCTION COST (000 ETB) ............................................................... 38
TABLE 7. 6 : BANK LOAN REPAYMENT SCHEDULE (X103 ETB) ........................... 39

List of Figures
FIGURE 5. 1 : FLOW DIAGRAM WEAVING PROCESS .............................................. 19
FIGURE 5. 2 : PROCESS FLOW CHART FOR MANUFACTURING OF TEXTILE .... 20

FIGURE 6. 1 : ORGANIZATIONAL STRUCTURE OF THE TEXTILE

MANUFACTURING INDUSTRY..................................................................................... 26

FIGURE 7. 1 : PROJECT IMPLEMENTATION SCHEDULE ......................................... 32

4
 LIST OF ABBREVIATIONS
ADLI : Agricultural Development Led Industrialization
AfDB : African Development Bank
AGOA : African Growth and Opportunity Act
ANRS : Amhara National Regional State
CAGR : Compound Annual Growth Rate
COMESA : Common Market for Eastern and Southern Africa
COMFAR : Computer Module for Financial Analyses and Reporting
CRGE : Climate Resilient Green Economy
CSA : Central Statistical Authority
EEU : Ethiopian Electric Utility
EIC : Ethiopian Investment Commission
EPAs : Economic Partnership Agreements
EIA : Environmental Impact Assessment
ESIA : Environmental and Social Impact Assessment
ERCA : Ethiopian Revenues and Customs Authority
EU : European Union
FDI : Foreign direct investment
FICC : Fixed Income, Credit Currency
FMI : Future Market Insight
GCI : Global Competitiveness Index
GDP : Gross Domestic Product
GTP : Growth and Transformation Plan
ITO : International Trade Organization
IAIP : Integrated Agro-Industrial Parks
IFSR : International Finance Study and Reporting
IDS : Industrial Development Strategy
IMF : International Monetary Fund
IRR : Internal rate of return
m² : Square meter
m3 : Cubic meter
MoE : Ministry of Education
NPV : Net present value
OEC : Observatory of Economic Complexity
OECD : Organization for Economic Cooperation and Development
ONRS : Oromia National Regional State
SNNPRS : Southern Nations, Nationalities and Peoples Regional State
UN : United Nation
UNIDO : United Nation Industrial Development Organization
USD : United States Dollar
WB : World Bank
WEF : World Economic Forum
WTC : World Trade Center
WTO : World Trade Organization

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 1. EXECUTIVE SUMMARY
This project profile deals with the establishment of Textile Manufacturing Industry at
Debre Birhan City Administration, North Shoa Zone in Amhara National Regional State
(ANRS). The following presents the main findings of the study.

Textiles are used in our homes to insulate them from heat and cold. The furniture, on
which we sit and sleep, is composed of various types of textile products. Textiles are
used in roofing materials, wire coverings, wall coverings, blinds, airducts and window
screens.

Ethiopia is one of the strategic site for textile manufacturing and export to the
international market. The supply of textile was increasing in the last decades at Ethiopia
due to the expansion and development of cotton farming, fashion industry, population,
and modernization. Demand projection divulges that the domestic demand for textile is
substantial and is increasing with time at local and international market. Accordingly, the
planned plant is set to produce 3,000,000. 00 meter of textile (817. 44 tons of textile)
tons annually and export 65% of it to the global market.

The principal raw materials required are cotton yarn, dye stuff, sizer, and finishing
chemical agent. The packaging materials are auxiliary materials. All materials are
available locally. All utilities are local available around the factory.

The total investment cost of the project including working capital is estimated at ETB
121. 50 million at 15,000 square meter of land and creates 154 jobs and ETB 17. 73
million of income for the low-income community in Ethiopia per year.

The financial result indicates that the textile production project will generate profit
beginning from the first year of operation. Moreover, the project will payback fully the
initial investment less working capital in 4 years and 2 months. The result further shows
that the calculated IRR of the project is 17. 91% and NPV discounted at 12% of ETB 29.
84 million.

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The establishment of such textile industry will have a foreign exchange saving effect to
the country by substituting the current imports and export huge products to the world.
The project will also create backward linkage with sizer production, finishing chemical
agent production, dye production, cotton yarn, cotton farming, silk farming, and
packaging sub-sector and forward linkage with the fashion, shelter, garment, decoration,
and other manufacturing sub sectors. The industry can be a technology transfer center
after working with research centers and universities. The project also generates income
for the Government in terms of tax revenue and payroll tax.

8
 2. PRODUCT DESCRIPTION AND
APPLICATION
Textiles are used in our homes to insulate them from heat and cold. The furniture, on
which we sit and sleep, is composed of various types of textile products. Textiles are
used in roofing materials, wire coverings, wall coverings, blinds, airducts and window
screens.

Textile is one of the common fiber-based materials processing product. Textile is

important for day to day activities of the human beings. Textile industry is one of the few
basic industries, which is characterized as a necessary component of human life. One
may classify it as a more glamorous industry, but whatever it is, it provides with the basic
requirement called clothes. There are numerous kinds of fibres and other raw materials,
which are used to produce a cloth. The main raw materials of most textiles are nylon,
olefin, acrylic and natural materials like silk and cotton.

Textiles are varios materils made from fibers and yarns. The most commonly used fabric
forming methods are weaving. Textile industry is used in various industries like fashion
industry, garment industry and other related services.

Manufacturing process involved include weaving, dyeing, and finishing with the state-
of-art-technology. The project has backward linkage with cotton farming, yarn factories
(raw material suppliers) and forward linkage with product garment and fashion
industries.

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3. MARKET STUDY, PLANT CAPACITY AND
PRODUCTION PROGRAM
3. 1. Market Study
3. 1. 1. Present Demand And Supply
The population of the world is ever growing and almost reaching seven billion at this
point in time. Besides this, the economy of majority of the world population is also seen
increasing from time to time. This was due to the economic policy improvements adopted
by most part of the world continents like Africa, East and Middle Asia, and South
America to increase the prosperity of their people. And it is obvious that the more
improved the economic welfare of people, the more they expend on purchase power of
apparel. Therefore, as long as the people’s expending capacity continues improving
parallel with population growth, it makes this time the most strategic for textile
industries.

World textile commodity trade grew by 2. 9% in quantity in 2018, but fell by 0. 1% in

2019 due to trade wars and slowing economic growth. On the other hand, world trade
volume, on value basis, has decreased by 2. 9% in 2019 compared to the previous year
to 38. 1 trillion USD and in this period, global exports were calculated to be 18. 9 trillion
US Dollars while imports were calculated to be 19. 2 trillion US Dollars (WB, 2019).
China was the leader with 106 billion Euros in overall textile exports on 2020, followed
by 28 EU member countries with 66 billion Euros and India with 16 billion Euros.

Since the return to a market economy in 1991, the Government of Ethiopia has identified
the Textile and Clothing sector as a priority for poverty reduction and economic
development, given its labor intensity. From 2000 onward, the Government began to
privatize state cotton farms and ginneries and to sell or lease state textile mills. However,
it is only in the last few years that the sector has truly started to grow according to its
potential.

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As production costs in Asia continue to rise and Western buyers become more interested
in ensuring ethical working conditions, a number of sourcing companies have turned
away from Asia and towards Africa. Brands including H&M, Tesco and Primark have
all begun to source from Ethiopia over the last few years as they seek to increase control
of the entire supply chain from cotton to garment. They are drawn not only by low labour
costs but also by the availability of raw materials and by the geographical proximity;
Europe can be reached easily via the Suez Canal, reducing delivery times by a third when
compared with the Far East. In addition, many companies are drawn to the perceived
social responsibility of the sector in Ethiopia; Ethiopian labour laws conform to
International Labour Organization standards. 9 Nowhere is Ethiopia’s potential more
evident than in trade statistics since the turn of the century. Over the last decade, Textile
and Clothing exports have grown by a CAGR of 26 %, reaching US $ 82 million in 2014.
During the same period, Textile and Clothing subsector exports grew by CAGRs of 37
% and 19 % respectively (ITC, 2020).

Almost all Ethiopian wear traditional clothes- such as netela, gabi, kutta, buluko and
others- made from cotton textile by traditional weavers using traditional or semi-modern
weaving machines. Besides, Ethiopian wear traditional dresses (Ye Habesha Libse)
woven by traditional weavers made from cotton yarn. Such demand for cotton textile in
Ethiopia is met mainly from local suppliers who spin cotton manually in a very small
scale at a household level. Moreover, currently, large numbers of newly emerging cottage
industries (which are working on diversifying, upgrading and modernizing Ethiopian
traditional costumes) are demanding large amount of textile as their major input. These
fashion industries are being supplied by the existing textile factories. The gap between
the demand for textile and the domestic supply is filled by local production and imports;
particularly in the recent year there is a huge surge in the cotton textile imports. The
industry has a huge export potential in case of Ethiopia. Unless there additional textile
plants will be established in the country the export and import growth seems to continue
in the future.

Ethiopia’s textile industry is relatively diverse and can be divided broadly into four main
areas of production: spinning, knitting and weaving, finishing and garmenting. The

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Ethiopian textile industry produces a wide range of products, such as yarn, grey knitted
and woven fabric, finished fabrics and made-ups.

The installed capacity of each section of the sector is 72 million kilograms of yarn, 122
million meters of woven fabric, 30 million kilograms of knitted fabric, 18 million
kilograms of processed knitted fabric, 49 million meters of finished woven fabric, 62
million pieces of knitted garments and 18 million pieces of woven garments.

TABLE 3. 1 : ETHIOPIA’S CURRENT INSTALLED AND ATTAINED ANNUAL

CAPACITY OF TEXTILES AND APPAREL
Sr. Section Installed Annual Attained Annual Utilization
No. Capacity Capacity of Capacity
1 Ginning 106,164 Tons Of Lint 37,300 Tons Of Lint 35%
Cotton Cotton
2 Spinning 72 Million Kg Of Yarn 50. 4 Million Kg Of Yarn 70%
3 Weaving 122 Million Meters Of 61 Million Meters Of 50%
Woven Fabric Woven Fabric
4 Knitting 30 Million Kg Of Knitted 13. 5 Million Kg Of 45%
Fabric Knitted Fabric
5 Knitting 18 Million Kg Of 8. 64 Million Kg Of 48%
Processin Processed Knitted Fabric Processed Knitted Fabric
g
Source: ACTIF Benchmarking reports, 2016

Available demand data show that there is ample demand for textile in the country. As
seen in Table 3. 1, the current domestic production of Ethiopia is more than 22,140. 00
tons textile per year. As the data of ERCA shows that the average value of export and
import of textile are 5,181. 63 tons (See Table 3. 3) and 13,000. 93 tons (See Table 3. 2
) in the last few years. Thus, it is assumed that most of Textile Manufacturing Industry
that exist in Ethiopia have no potential to cover domestic market as seen in Table 3. 2.
Additionally, there is a potential of export of the textile to many nations as is presented
in Table 3. 3 below.

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TABLE 3. 2: IMPORT OF TEXTILE (IN TON)

Year Import Growth Rate, %

2015 51,180. 38 (60. 78)

2016 20,074. 90 (97. 49)
2017 503. 08 1,133. 50
2018 6,205. 44 (99. 33)
2019 41. 58 (99. 47)
2020 0. 22 (60. 78)
Average 13,000. 93 112. 74

TABLE 3. 3 : EXPORT OF TEXTILE (IN TON)

Year Export Growth Rate, %
2015 3,224. 18
2016 3,954. 24 22. 64
2017 4,314. 46 9. 11
2018 4,161. 38 (3. 55)
2019 6,210. 24 49. 24
2020 7,088. 57 14. 14
2021 7,318. 31 3. 24
Average 5,181. 63 13. 55
Source: ERCA, 2023

The above table shows that the average annual demand for textile is growing in that
derived from domestic production and decreasing that derived from import from abroad.
For the six years under consideration (2015 to 2021), the textile industries have a gap to
cover the market. Although the trend of import exhibited ups and down movements
initially, it continuously slow in the last few years. This is likely related to the growth in
production goods in the industrial and agricultural sector. However, the trend of export
exhibited ups and down movements initially, it continuously grow progressively in the
last few years.

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3. 1. 2. Projected Demand
Most of the textile industries are found in big cities of Ethiopia especially at Addis
Ababa, ONRS, and ANRS. The demand for textile is directly depends on the growth of
population in the world. As the last five years the growth of population in the world is 1.
00% (Worldometer, 2023). With more expected investment in the industrial sector in the
future, the demand for textile will also grow considerably. However, if we conservatively
assume that demand continues to grow only by 1. 00%, we obtain the following forecast
result (Table 3. 4 ). The present demand is reached to 22,585. 01 tons at 2024.

TABLE 3. 4 : PROJECTED DEMAND FOR TEXTILE (IN TON)

Year Projected Demand

2024 22,585. 01
2025 22,810. 86
2026 23,038. 97
2027 23,269. 36
2028 23,502. 06
2029 23,737. 08
2030 23,974. 45
2031 24,214. 19
2032 24,456. 33
2033 24,700. 90

The result points out that the overall demand for textile will substantially grow in the
future. For example, by 2033, demand will reach 24,700. 90 tons. Thus, the result
obtained with conservative assumption asserts that there is attractive demand for textile.

3. 1. 3. Pricing and Distribution

In 2023, producers’ price of domestic production of textile has been on average ETB 85.
00 per kg while it was ETB 100. 00 per kg for the imported item. The 3. 67m length of
the size of textile equals to 1kg of textile that processed in this industry from cotton yarn.

14
In view of this and also based on the market research result and the capacity of the
envisaged plant, the selling price of textile has been estimated at ETB 75. 00 per kg.

This product is selected to attract various target industries. The plant can also produce
other textile sizes on demand. The target customers are garment manufacturers and
suppliers to fashion industry. The available retail and wholesale network shall be used
by the envisaged plant.

Most of the textile product will exported to EU, USA, Middle East and Asian nations.
The company will export 65% of the textile product to the world market. The remaining
35% of the product will present to the domestic market.

3. 2. Plant Capacity
Considering the expected demand for textile as presented earlier, and the planned
technology, the envisaged plant is set to annually produce 3,000,000. 00 meter of textile.

This proposed production amount is equivalent to 3,000,000. 00 meter of textile (817. 44

tons of textile), which is less than 5% of the local production reported in 2024.

3. 3. Production Program
The program is scheduled based on the consideration that the envisaged plant will work
300 days in a year in 1 shift 8 hours, where the remaining days will be holidays and for
maintenance. During the first year of operation the plant will operate at 70% capacity,
growing to 80% and 90% in the 2nd and 3rd year respectively. The capacity will grow to
100% starting from the 4th year. This consideration is developed based on the assumption
that market and logistics barriers would take place for the first three years of operation.

15
 4. RAW MATERIALS AND UTILITIES
4. 1. Availability and Source of Raw Materials
The raw materials used in producing textile are cotton yarn, dye stuff, sizer and finishing
chemical agent. The common finishing chemical agent in textile industry is antistatic
agents such as ammonium salts, amine oxides, etc. Antistatic agents are substances
required to prevent loose particles from becoming attached to the surface of a textile.
oxides, etc. The auxiliary materials are packaging to wrap-up products. All of the raw
materials are locally available.

Ethiopia is one of the African countries that produce and export cotton. It has a long
tradition of cotton cultivation with an estimated area of 2. 6 million hectares suitable for
this product. Of these 65% is found in 38 high potential cotton- producing areas and the
remaining 0. 9 million hactare or 35% is in 75 medium potential districts. Of the total
land under cotton cultivation, 33% is cultivated by small holders, 45% by private farms
and 22% are state-owned farms. Ethiopia cultivates only 3% of the total suitable land for
cotton production. Ethiopia produces an average of 33,842. 11 tons in the year 2000-
2018. The country also participates on the export market of cotton in the last decade.
Cotton market has also some constraints like price disincentives and lack of market
information (Zeleke et al. , 2019). Despite its inefficiency the cotton sector still has its
own vital economic role on textile industry and employment creation. It employs many
low-income communities in Ethiopia. In terms of employment, the government has
planned to create 174,000 job opportunities in Textile and Apparel sector (FDRE GTP,
2016).

4. 2. Annual Requirement and Cost of Raw Materials and

Utilities
The annual raw material and utility requirement and the associated cost for the envisaged
plant are listed in Table 4. 1 and 4. 2 here under.

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TABLE 4. 1 : MATERIAL AND AUXILIARY REQUIREMENT PER YEAR
Raw Unit Total Cost
Material Cost Per Unit per Year in
and Inputs Quantity in ETB Local Cost 000 ETB
Raw
Materials
Yarn Ton 138,171. 03 118,890. 89 118,890. 89 118,890. 89
Dye Stuff Ton 381,700. 00 1,876. 79 1,876. 79 1,876. 79
Sizer Ton 90. 00 8,470. 00 762. 30 762. 30
Finishing Ton
Chemical
Agents 2. 10 257,000. 00 539. 70 539. 70
Auxiliary
Material 0. 00
Lum
p
Packaging Sum 1,519. 32 1,519. 32
Total Cost 123,589. 00

The total cost of raw materials at full capacity of production is estimated to be ETB 123.
59 million per year. Furthermore, the production requires electricity, water, fuel oil and
lubricant oil for the smooth process. The cost of utilities item are detailed in the following
Table 4. 2. The total cost related to utilities are ETB of 18. 48 million per year.

Energy and water are important in textile production. The electrical energy consumption
and waster utilization that required to process textile is 5. 6 kWh/kg and 0. 15 m3/kg
respectively. The total running cost for raw materials and utilities reaches to ETB 142.
07 million per year.

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TABLE 4. 2 : ANNUAL UTILITY REQUIREMENT
Quantity Price Per Local Cost in Total Cost
Utility Unit Unit in ETB ETB in 000 ETB
Electricity kWh 4,577,656. 68 3. 40 15,564. 03 15,564. 03
Furnace
Kg 15,420. 56 107. 00 1,650. 00 1,650. 00
Oil
Lubricant
Kg 10. 00 550. 00 5. 50 5. 50
Oil
Water m3 122,615. 80 10. 00 1,226. 16 1,226. 16
ITC 33. 00 33. 00
Total Cost 18,478. 69 18,478. 69

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 5. TECHNOLOGY AND ENGINEERING
5. 1. Production Process
The envisaged plant is set to produce textile from yarn of cotton. The main processes are
divided into three processes that are weaving, dyeing and finishing.

5. 1. 1. Weaving Process
The technique of fabric forming starts with weavingof the yarn of the cotton. Weaving
process contains these steps warping, sizing and final weaving. The flow diagram of
weaving process is shown in Figure 5. 1.
1. Warping : This process is also known as beaming. A beam contains large number of
individual threads parallel to each other. The resulting package is a warper's beam.
2. Sizing: It is the heart of weaving. In the sizing process, coating of a starch based
adhesive is applied to the sheet of yarn to improve its weavability. Sizing increases yarn
strength, reduces hairiness, which minimize the abrasion that occur between the warp
thread and various parts of the loom.
3. Weaving : A woven cloth consists of two sets of yarns namely warp and weft. The
yarns that are placed lengthwise or parallel to the selvedge of the cloth are called warp
yarn and the yarns that run crosswise are called weft yarns. Each thread in the weft is
called a pick.

Cone Sizing [Weaver's Weaving

Warping Beam] [Warper's [Cloth Roller
[Warper's Beam] Beam]
Beam] [Weavers'
Beam]

FIGURE 5. 1 : FLOW DIAGRAM WEAVING PROCESS

5. 1. 2. Dyeing Process
The dyeing process, it takes several piece dyeing methods under high pressure in either
rope or open width. It also has bank-dyeing machines for yarn dyeing.

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Dyeing and printing are the steps that impart color to a fabric, making finished products
such as garments much more attractive. Dyeing and printing is highly complex, requiring
years of study and/or experience. Only the highlights will be summarized here.

5. 1. 3. Finishing Process
In finishing process, the dyed fabrics in accordance with the specified width, length,
density and handle etc by heat setting and adding chemical agents.
Mechanical and chemical treatments or finishes may be added to fabrics to enhance
appearance and/or performance of the finished apparel product. Common treatments or
finishes include physical treatments such as calendaring, napping, brushing, sanding, and
chemical treatments such as permanent press, water repellant, and/or flame retardant finishes.
The process flow chart for manufacturing of textile is given below in Figure 5. 1.

YARN

Weaving Machine

Dyeing

Finishing

FIGURE 5. 2 : PROCESS FLOW CHART FOR MANUFACTURING OF TEXTILE

5. 2. Machinery and Equipment

The machineries and equipment required for producing textile is detailed in Table 5. 1
below.

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TABLE 5. 1 : MACHINERY AND EQUIPMENT
Sr. No. Description Quantity
1 Weaving Machine 6
2 Dyeing Process Machine 5
3 Finishing Process Machine 2

The total cost of machinery and equipment including freight, insurance and bank cost is
estimated to be about ETB 40. 91 million.

The following are some of the machineries suppliers’ address for the envisaged project
1. Kin Wah Machine Co. Ltd.
Linhai Industrial Park, Dafeng Road Dani Industrial District
Dongguan -523 980, China.
2. Kin Wah Machine Co. Ltd.
Linhai Industrial Park, Dafeng Road Dani Industrial District
Dongguan -523 980, China.
2. Suntech Textile Industry
Shimao Wisdom Power, No. 09k, Jiangnan Ave.
Hangzhou, China

5. 3. Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 15,000 m2. The major
buildings and civil works include buildings for production, offices, workshops and
warehouses. Total cost of building and other civil works is estimated at ETB 36. 86 million
including 5% contingencies.

21
 6. HUMAN RESOURCE AND
ORGANIZATIONAL STRUCTURE
6. 1. Human Resource
The list of required manpower for the envisaged plant is stated in Table 6. 1 below. The
envisaged plant therefore, creates 154 jobs and about ETB 17. 73million of income. The
professionals and support staffs for the envisaged plant shall be recruited from the
surrounding region of the Debre Birhan City.

TABLE 6. 1 : HUMAN RESOURCE REQUIREMENT

Monthly Annual Salary (In
Sr. No. Position No.
Salary (ETB) 000 ETB)
1 Overhead Labour
1. 1 General Manager Office

1. 1. 1 General Manager 1 25,000. 00 300. 00

1. 1. 2 Executive Secretary 1 15,000. 00 180. 00
Sub-Total 2 480. 00
Finance And Administration
1. 2
Department
1. 2. 1 Department Head 1 15,000. 00 180. 00
1. 2. 2 Senior Accountant 2 12,000. 00 288. 00
1. 2. 3 Junior Accountant 4 7,500. 00 360. 00
1. 2. 4 Senior Cost Accountant 3 10,000. 00 360. 00
1. 2. 5 Personnel 4 7,000. 00 336. 00
1. 2. 6 General Service 5 7,000. 00 420. 00
1. 2. 7 Driver 3 14,000. 00 504. 00
1. 2. 8 Security Head 1 10,000. 00 120. 00
1. 2. 9 Guard 6 7,000. 00 504. 00
1. 2. 10 Janitors 17 6,000. 00 1,224. 00

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1. 2. 11 Gardner 5 6,000. 00 360. 00
Sub Total 51 4,656. 00
1. 4 Commercial Department
1. 4. 1 Department Head 1 15,000. 00 180. 00
1. 4. 2 Purchaser 5 10,000. 00 600. 00
1. 4. 3 Salesperson 7 10,000. 00 840. 00
1. 4. 4 Storekeeper 2 7,000. 00 168. 00
1. 4. 5 Assistant Store Keeper 3 6,000. 00 216. 00
Sub Total 18 2,004. 00
Total 71 7,140. 00
Employee’s Benefit And Expense
(20% Of Basic Salary 1,428. 00
Total Overhead Labour 71 8,568. 00
2 Direct Labour
Production And Technical
2. 1
Department
Department Head/Specialized In
2. 1. 1 1 15,000. 00 180. 00
Food Science
2. 1. 2 Production Supervisors 1 13,000. 00 156. 00
2. 1. 3 Textile Processing 6 9,000. 00 648. 00
2. 1. 4 Textile Expert 7 8,000. 00 672. 00
2. 1. 5 Assistant Operators 33 7,000. 00 2,772. 00
2. 1. 6 Operators 20 6,000. 00 1,440. 00
2. 1. 7 Mechanic 5 10,000. 00 600. 00
2. 1. 8 Electrician 5 10,000. 00 600. 00
Sub Total 78 7,068. 00
Quality Control And Assurance
2. 2
Service
Service Head Specialized In Textile
2. 2. 1 1 15,000. 00 180. 00
Science/Engineering
2. 2. 2 Quality Controller Technologist 2 8,000. 00 192. 00

23
 2. 2. 3 Laboratory Technician 2 8,000. 00 192. 00
Sub-Total 5 564. 00
Employee’s Benefit And Expense
(20% Of Basic Salary) 1,526. 40
Total Direct Labour Cost 83 - 9,158. 40
Grand Total Cost 154 - 17,726. 40

6. 1. 1. Training Requirement
Training of key personnel is very essential and shall be conducted in collaboration with
the suppliers of the plant machineries. The training should primarily focus on the
production technology and machinery maintenance and trouble shooting. It is suggested,
to train production and technical manager, production and technical head, and quality
control head, mechanics, electricians and operators on-the-job training at the actual site
on the actual working condition by competent expert of the machinery and technology
supplier for about one month during erection and commissioning period.

6. 2. Organizational Structure
There are numerous reasons why having an organizational structure is key for a textile
processing business:
 Provides a management planning tool: An organizational structure can help a
company plan more strategically for the future so it can meet its goals. It can help
determine the hiring process and how it plans to expand in the future.
 Improves decision-making: It creates a company-wide understanding of how
information flows throughout the business, whether it's from executives to manager
to employee or employee to employee.
 Helps employee engagement: Having an organizational structure gives each
employee a specific role within the company. It can help employees understand how
their work fits with the company's vision and may enable more effective teamwork
and management expectations.
 Provides a visual: Many companies that use an organizational structure create a chart
that they can use as an employee.

24
The company organizational structure shall consist of the following five departments
related to Textile Manufacturing Industry:
 General Manager Department,
 Production and Technical Department,
 Finance and Administration Department,
 Commercial Department, and
 Quality Control And Assurance Department.
The organizational structure of the industry is shown in Figure 6. 1.

25
FIGURE 6. 1 : ORGANIZATIONAL STRUCTURE OF THE TEXTILE MANUFACTURING INDUSTRY

GENERAL MANAGER

QUALITY CONTROL DEPARTMENT

ADMINISTRATION AND PRODUCTION AND TECHNICAL COMMERCIAL

FINANCE DEPARTMENT DEPARTMENT DEPARTMENT

Finance Division Production Division Procurement and Stores

Division
Personnel and General Service Technical Division
Division Market Research and Sales
Division

26
Functional description of each of the above units is as summarized below.

6. 2. 1. General Manager
The General Manager1 discharges all the duties and responsibilities vested on him the
managing director. Besides strategic and policy directing role, the General Manager is in
charge of the following main duties and responsibilities.
 Develops strategic and operational plans and organizes, administers and controls
the overall operation of the plant in line with Company policy,
 Manages the day to day affairs of the plant,
 Represents the plant before courts of law and all other parties, and delegates his
power as may be necessary,
 Draws, signs, endorses, accepts and negotiates any commercial documents in
accordance with the internal regulations of the industry,
 Authorizes expenditures, sign checques and authorize signatories on checques as
appropriate,
 Ensures the accomplishment of the enterprise objectives, plans and policies set,
 Issues policy guidelines to the various managerial staff, and
 Chairs management and other higher committee meetings of the industry.
6. 2. 2. Production And Technical Department
The major duties and responsibilities to be performed by the Production and Technical
Department include:
1. Planning, organizing, directing, coordinating and supervising the production and
technical operations of the plant;
2. Ensures that the necessary manpower, equipment and facilities that are organized for
industry and maintenance operations;
3. Assess the requirements in relation to production capacity and performance,
manpower availability and materials supply;
4. Sets industry processing and performance targets in consultation with top
management;

1 The General Manager of the company has to have at least Bachelor Degree in
Mechanical Engineering or Related field

27
5. Ensures that the required type, quality and quantity of raw materials are available to
maintain continuous and optimum level of operation;
6. Ensures that plant plan and program, records etc are properly maintained for future
reference;
7. Studies equipment developments and improved plant techniques;
8. Devises inspection program to control quality and develops plant reporting
procedures;
9. Ensures that all equipment and machinery are operated and maintained in accordance
with the required standards;
10. Develops and recommends equipment management system for efficient operation,
usage maintenance and replacement of equipment and machinery
11. Assists management in establishing criteria, policies and procedures for replacement,
disposal or obsolesce of equipment and vehicles
12. To carry out the above activities, the Production and Technical Department will have
two functional divisions, namely
13. Production Division, and
14. Technical Service Division

6. 2. 3. Finance and Administration Department

The major duties and responsibilities to be performed by the Finance and Administration
Department include:
 Plans, directs, coordinates, organizes and controls the overall activities of personnel,
man power planning and development, health and safety and general service
activities;
 Ensures that personnel policies, regulations and procedures of the company are
compiled;
 Develops an efficient human resource planning and development system and on
approval, ensures its implementation;
In consultation with concerned departments, performs personnel actions such as
recruitment, placement, promotions; and demotions;
 Ensures that maintenance of vehicles are properly carried out;
 Provides efficient office services in the areas of communications (telephone),
transport, safety protections, and cleanliness;

28
 Makes sure that, the properties of the plant are identified, well protected, safely
handled and guarded;
 Makes sure that each personnel file is up-to-date and well documented with the
pertinent information. Handles also the general archives and records management
system;
 Ensures that the plant has modern accounting and costing systems and fiscal policies
and procedures; also ensures their implementation;
 Keeps up-to-date and reliable accounting and cost records;
 Coordinates the preparation of annual budgets and controls its allocations and
utilizations;
 Checks and ensures the regularity and authority of requests for payment and effects
disbursements;
 Sends bills and statement of accounts to clients and ensures their prompt payment;
 Receives cash and deposits daily collections intact in the plant’s Bank Accounts;
 Ensures timely reconciliation of bank accounts, creditors, debtors and other accounts;
 Effectively manages the working capital of the company and with the approval of the
Board of Directors and/or Management, arranges short and long-term bank credits;
and
 Prepares and issues daily, monthly and annual financial reports.
The Finance and Administration Department is internally structured comprising
divisions including:
 Finance Division and
15. Personnel and General Service Division.

6. 2. 4. Commercial Department
The major duties and responsibilities to be performed by the Procurement and Marketing
Department include:
 Plans, organizes directs, coordinates and controls the overall activities of the
domestic and foreign sales and purchase and the store and property administration;
 Develops systems and procedures necessary for the efficient and effective operation
of the sales, purchasing and storage functions of the plant;
 Promotes the business of the company through sales campaigns and advertisements;

29
 Identifies suitable supply markets for local and foreign purchases on the basis of
established systems and procedures and bargains prices; ascertains the delivery of
supplies on time;
 Ensures that all supplies purchased are of the required type, quality and standards;
 Initiates and prepares operational directives and guidelines governing procurement,
sales and store and property administration of the company;
 Ensures that all materials (raw materials, spare parts, office supplies and finished
products) are properly received and kept in stores as per established rules and
regulations; and
 Exercises inventory control and materials programming that ensures an effective
materials management system
The Procurement and Marketing Department is internally structured comprising division
including:
1. Procurement division and
2. Market research and sales division

6. 2. 5. Quality Control And Assurance Department

The major duties and responsibilities to be performed by the Quality Control and
Assurance include:
 Select easy quality control and assurance methods for textile production process,
 Responsible to prepare environmental management plan per year,
 Develops a standard of the raw materials for textile processing and over all activities
in written document to other department,
 States the quality of the inputs and outputs of the systems of textile processing,
 Branding the quality of its products for local and global customers with the state-of-
art-technology, and
 Training the staff of the plant in consideration of global standard related to textile
processing.

30
 7. FINANCIAL ANALYSIS
7. 1. Underlying Assumption
The financial analysis of Textile Manufacturing Industry is based on the data provided
in the preceding sections and the following assumptions as seen in Table 7. 1-7. 3.

TABLE 7. 1 : CONSTRUCTION AND FINANCE; DEPRECIATION AND

WORKING CAPITAL (MINIMUM DAYS OF COVERAGE)
Construction And Finance Unity Value
Construction Period year 1
Tax Holidays year 2
Source Of Finance (Equity) % 30%
Source Of Finance (Loan) % 70%

Bank Interest Rate % 11. 5%

Discount For Cash Flow % 12%

Depreciation Unity Value
Building % 5%
Machinery And Equipment % 10%
Office Furniture % 10%
Vehicles % 15%
Working Capital Unity Value
Raw Material Local day 10
Factory Supplies In Stock day 50
Spare Parts In Stock And Maintenance day 50
Cash In Hand day 5
Accounts Payable day 30
Work in progress day 2
Finished products day 30
Accounts receivable day 30

31
7. 2. Implementation Schedule
The implementation schedule covers the activities starting from the project construction
to operation period, bid-purchase-trial run of machineries, and commissioning. It is
envisaged that the complete implementation program requires a total of 12 months as
seen in Figure 7. 1.

FIGURE 7. 1 : PROJECT IMPLEMENTATION SCHEDULE

Item Activities Month
Sr. No. 1-2 3-5 6-9 10 11 12
1 Preparatory Period, 1. Approval Of xxxx
Feasibility Study, 2. Financial
Arrangement
2 Tender Document Preparation For xxxxx xxxx
Machinery Supply
3 Tendering For Machinery Supply xxxxx xxxx
4 Tender Evaluation, Negotiation,, xxx
And Contracting
5 Design of Installation of Machinery xxxxx
And Equipment
6 Equipment Delivery xxx
7 Erection xxx
8 Manpower Recruit And Training xxx
9 Trial Run And Commissioning xxx
10 Start Of Operation xxx

The formation of implementation team, employment of the implementation consultant

and financial arrangement will be carried out within one month after the approval of the
feasibility study.
Machinery and Equipment: Tender document preparation for production machinery and
equipment will start a month after project approval and will take 2 month period. Tender
floating will start 2 month after the approval of the project study and will be completed
within 2 month. Tender evaluation, contract negotiation, signing and LC opening, which
will also start 2 months after the approval of the project, will be completed within 1

32
month. Installation textile manufacturing machinery and equipment will start after 4
months from project approval and supply will be completed within 5 months’ time frame
from contract is signed.
Erection of machinery and equipment will start after completion of the machinery and
equipment delivery and will take one month. Delivery of raw materials will be arranged
before of erection of machinery and equipment is completed.
Rent of Warehouse: Finalizing of the renting of warehouse from industrial park will
commence after 2 months from approval of the project in consideration of machine
arrival to the park.
Recruitment and training of human resource will start 6 months after the project approval
and before the start of erection of machinery and equipment and will continue up to
commissioning and start up. The production will start commissioning 11 months after
the project approval and will be completed in 1 month. Similarly, technology and
knowhow transfer will be conducted starting from together with the erection and
commissioning activities for one-month duration.
Finally, the industry will start production at the end of 12th months from the approval of
the project and be operational then after. Moreover, project activities will be handled by
project management tools so as to optimize time and project cost utilization towards
realization of the project on the ground with minimum project implementation cost and
time as per the planned duration. Many activities of the project may undertake in similar
period if it does not need sequential work plan.

7. 2. 1. Implementation Cost
The textile production project implementation cost for which comprises project office
running and follow-up expenses, and erection and commissioning is estimated at ETB 2.
27 million the breakdown of which is indicated in Table 7. 2.

TABLE 7. 2 : IMPLEMENTATION COST

Sr. Duration Cost ( In 1000 ETB)
Position No.
No. (Month) Monthly Annual
I Project Staff
1. 1 Project Manager 1 12 20,000. 00 240. 00
1. 1. 1 Project Coordinator 1 12 10,000. 00 120. 00

33
1. 1. 2 Executive Secretary 1 12 10,000. 00 120. 00
Finance And
1. 2 0. 00
Administrative Team
1. 2. 1 Accountant 1 12 8,000. 00 96. 00
Personnel And General
1. 2. 2 1 12 5,000. 00 60. 00
Service
1. 2. 3 Driver 0 12 15,000. 00 0. 00
1. 2. 4 Security Guards 1 12 5,000. 00 60. 00
Procurement And Supply
1. 3 0. 00
Team
1. 3. 1 Procurement Expert 1 12 8,000. 00 96. 00
Supplies And Store
1. 3. 2 1 12 5,000. 00 60. 00
Management Expert
1. 3. 3 Store Keeper 1 12 5,000. 00 60. 00
Engineering, Technical
1. 4 And Quality Control 0. 00
Team
1. 4. 1 Coffee Expert 1 12 10,000. 00 120. 00
1. 4. 2 Civil Engineer 1 12 12,000. 00 144. 00
1. 4. 3 Mechanical Engineer 1 12 12,000. 00 144. 00
Electrical And
1. 4. 4 1 12 12,000. 00 144. 00
Automation Engineer
Sub Total 1,464. 00
Ii Project Supplies And Office Running
Sr. Descriptions Qty. Unit Unit Cost Amount
1 Fax 1 Pcs 16,000. 00 16. 00
2 Telephone 1 Pcs 17,500. 00 17. 50
3 Printer 1 Pcs 20,000. 00 20. 00
4 Office Furniture 5 Set 21,500. 00 107. 50
150,000.
5 Office Running Cost 1 Set 150. 00
00
Sub Total 311

34
 Iii Detailed Design, Supervision, Erection And Commissioning

Engineering, Erection
1 And Commissioning 130. 00
Service
Sub Total 130. 00
Iv Erection Machineries Rent
Sr. Rate/ Duration
Descriptions Quantity Cost
No. Day Days
30,000.
1 Crane 12 1 360. 00
00
Grand - Total 2,265. 00

7. 3. Office Furnitiure and Equipment

The office furniture and equipment are vital component of the initial investment for
conducive environment of the production processes. The details of the furniture and
equipment are presented in Table 7. 3. The cost of furniture and equipment is estimated
at ETB 3. 15 million.

TABLE 7. 3: OFFICE FURNITURE AND EQUIPMENT COST, ETB

Total Price
Sr. Quantit Unit Price
Item Description Unit (In 0000
No. y (ETB)
ETB)
Presidential High Back Gas
1
Lift Swivel
Chair (Genuine Leather) And
Set 1 167,000. 00 167. 00
Executive

Desk, Hanging Side Cabinet

Conference Table And 8

2 Set 3 130,000. 00 390. 00
Standard Chairs

4 High Quality Guest Chair Pcs 11 10,500. 00 115. 50

35
 Executive Managerial Table
5 And Chair With High Back Set 4 40,000. 00 160. 00
Gas Lift Swivel, Side Cabinet

6 Office Chair And Table Pcs 23 20,000. 00 460. 00

7 Shelves Pcs 4 15,000. 00 60. 00

8 Filing Cabinet Pcs 4 15,000. 00 60. 00

9 Guest Chairs Pcs 14 13,500. 00 189. 00

10 Laptop Pcs 13 21,000. 00 273. 00

Personal Computers With

11 Pcs 7 20,000. 00 140. 00
Accessories

12 Printer Pcs 2 16,000. 00 32. 00

13 Copy Machine Pcs 2 40,000. 00 80. 00

14 Scanner And Fax Machine Pcs 2 22,000. 00 44. 00

15 Telephone System Set 1 75,000. 00 75. 00

Cafeteria Furniture And

16 Set 2 450,000. 00 900. 00
Equipment

Total Cost 3,145. 50

7. 4. Investment
The total investment cost of the project including working capital is estimated at ETB
121. 50 million as shown in Table 7. 4 below. The Owner shall contribute 30% of the
finance in the form of equity while the remaining 70% is to be financed by bank loan.
The foreign component of the project accounts for 30. 41% of the total investment cost.
Most of the total investment goes machineries and equipment cost (40. 91 million or 33.
67%), building and civil work cost (36. 65 million or 30. 17%), and working capital cost

36
(30. 86million or 25. 40%). The remaining cost goes to office equipment and furniture
(2. 42 million or 1. 99%), vehicles (3. 15 million or 1. 99%), and pre-operation cost (2.
27 million or 1. 86%),.

TABLE 7. 4 : TOTAL INITIAL INVESTMENT (000 ETB)

Foreign
Sr. No. Cost Items Local Cost Total Cost %
Cost

1. 0 Fixed Investment

1. 1 Land 5,250. 00 5,250. 00 4. 32

1. 2 Building And Civil Work 36,653. 40 36,653. 40 30. 17

1. 3 Machinery And Equipment 3,719. 00 37,190. 00 40,909. 00 33. 67

Office Furniture and

1. 4 2,421. 05 2,421. 05 1. 99
Equipment

1. 5 Vehicle 3,145. 50 3,145. 50 2. 59

Sub -Total 51,188. 95 37,190. 00 88,378. 95 72. 74

2. 0 Pre-Operating Cost

2. 1 Pre-Expenditure2 2,265. 00 2,265. 00 1. 86

Interest During First

2. 2 0. 00 0. 00 0. 00
Year/Construction

Sub -Total 2,265. 00 2,265. 00 1. 86

Total Investment 90,643. 95 37,190. 00 90,643. 95 74. 60

3. 0 Working Capital 30,856. 05 30,856. 05 25. 40

Grand Total 84,310. 00 37,190. 00 121,500. 00 100. 00

2
Pre-production capital expenditure includes - all expenses for pre-investment studies,
consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest
expenses during construction.

37
 Foreign Currency 30. 61

* Pre-operating cost includes project implementation cost such as installation, start-up,

commissioning, project engineering, project management etc. and capitalized interest
during construction.
** The total working capital required will reach to ETB 44. 08 million. However, only
the initial working capital of ETB 30. 86 million during the first year of production, after
the project is assumed to be funded through external source. During the remaining years,
the working capital requirement will be financed by funds generated internally (for detail
working capital requirement see Annex 1).

7. 3. Production Costs
The total production cost at full capacity operation is estimated at ETB 179. 59 million
as detailed in Table 7. 5 below. Most of the cost goes to raw materials and inputs i. e.
ETB 123. 59 million that is 68. 82% of the production costs.

TABLE 7. 5 : PRODUCTION COST (000 ETB)

Items Cost %

Raw Material And Inputs 123,589. 00 68. 82

Utilities 18,478. 69 10. 29
Maintenance And Repair 6,605. 28 3. 68
Labor Direct 9,158. 40 5. 10
Labor Overheads 8,568. 00 4. 77
Administration Costs 550. 00 0. 31

Cost of Marketing And Distribution

300. 00 0. 17
Land and Utility Development
15. 00
Renewal Payment Cost 0. 01
Total Operating Costs 167,264. 36 93. 14
Depreciation 5,479. 99 3. 05
Cost of Finance 6,846. 53 3. 81
Total Production Cost 179,590. 88 100. 00

38
7. 4. Bank Loan Repayment Schedule
The total amount of bank loan including interest will be fully paid back within ten years’
time (See Table 7. 6).

TABLE 7. 6 : BANK LOAN REPAYMENT SCHEDULE (X103 ETB)

Year Repayment Interest Total
Disbursement Debt Balance Payment
Interest Payable
Per Year
Year 0 85,050. 00
Year 1 8,505. 00 76,545. 00 9,780. 75 18,285. 75
Year 2 8,505. 00 68,040. 00 8,802. 68 17,307. 68
Year 3 - 8,505. 00 59,535. 00 7,824. 60 16,329. 60
Year 4 - 8,505. 00 51,030. 00 6,846. 53 15,351. 53
Year 5 - 8,505. 00 42,525. 00 5,868. 45 14,373. 45
Year 6 - 8,505. 00 34,020. 00 4,890. 38 13,395. 38
Year 7 - 8,505. 00 25,515. 00 3,912. 30 12,417. 30
Year 8 - 8,505. 00 17,010. 00 2,934. 23 11,439. 23
Year 9 - 8,505. 00 8,505. 00 1,956. 15 10,461. 15
Year 10 - 8,505. 00 - 978. 08 9,483. 08
Total 85,050. 00 85,050. 00 382,725. 01 53,794. 13 138,844. 13

7. 5. Financial Evaluation
7. 5. 1. Profitability
According to the projected income statement attached in the annex part (see Annex) the
project will generate profit beginning from the second year of operation. Ratios such as
the percentage of net profit to total sales, return on equity and return on total investment
rises in the subsequent years. Furthermore, the income statement and other profitability
indicators show that the project is viable.

39
7. 5. 2. Payback Period
Investment cost and income statement projection are used in estimating the project
payback period. The projects will payback fully the initial investment less working
capital in 4 years and 2 months.

7. 5. 3. Internal Rate of Return , IRR and Net Present Value, NPV

Based on cash flow statement described in the annex part, the calculated IRR of the
project is 17. 91% and the NPV at 12% discount is ETB 29. 84 million.

7. 6. Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits which promote the socio-
economic goals and objectives stated in the strategic plan of the ANRS. It also boosts
inter-sectoral linkage between the cotton farm, agricultural and industrial sectors. At the
same time, therefore, it helps diversify the economic activity of the region.
The other major benefits are listed as follows:

7. 6. 1. Profit Generation
The project is found to be financially viable and earns on average a profit of ETB 327.
18 million within the project life. Such result induces the project promoters to reinvest
the profit which, therefore, increases the investment magnitude in the region.

7. 6. 2. Tax Revenue
In the project life under consideration, the region will collect about ETB 115. 34 million
from corporate tax payment alone (i. e. excluding income tax, sales tax and VAT). Such
result creates additional fund for the regional government that will be used in expanding
social and other basic services in the region.

7. 6. 3. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of
the region. That is, it will provide permanent employment to 154 professionals as well
as support staff. Consequently, the project creates income of ETB 17. 73 million per year.
This would be one of the commendable accomplishments of the project.

40
7. 6. 4. Import Substitution and Foreign Exchange Saving
In line with the volume of production and the import volume, it is assumed that this plant
substitutes one-third of the import volume. Accordingly, we learn that in the project life
an estimated amount of US Dollar 24. 55 million will be saved as a result of the proposed
project. This will create room for the saved hard currency to be allocated to other vital
and strategic sectors.

7. 6. 5. Environmental and Social Impact Assessment (ESIA)

The proposed manufacturing industry is one of the polluting industries that need that
needs full ESIA according to the regulation of the Ethiopian government and
international standards. In textile dying, one tones of fabric production could result in
200 tons of water. Based on cleaner production principles, an ESIA has to be conduct for
the envisaged plant with the objectives of identification of effects or impact of production
of textile on the environment. The negative impacts has to be identify for proposing
possible measures that could compensate for the damaging consequences. The following
environmental regulations must be observed in Ethiopia for operation of industries.
These are Environmental Policy of Ethiopia (1997); EIA Proclamation (2002),
Environmental Pollution Control Proclamation (2002), Regulation to Provide for the
Prevention of Industrial Pollution (2008) and Solid Waste Management Proclamation
(2007).

7. 6. 6. Technology Transfer
As the technology is related to textile industry, it will transfer basic application and
production of textile and garment related sciences. The industry will work with research
centres related to textile and garment processing concepts. The universities are the main
stockholders to transfer the technology to communities.

7. 6. 7. Diversification And Inter-Sectoral Linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy related textile
and apparel. It contributes to industrialization of the region as well as the county’s
economy. The project will also create backward linkage with cotton farming, chemical
production for finishing textiles, sizer production, yarn, dye, packaging, and silk farming

41
sub-sector and forward linkage with the fashion, tent production, house production,
decoration, and other manufacturing sub sectors.

42
ANNEXES: FINANCIAL ANALYSIS

43
ANNEX 1 : NET WORKING CAPITAL (IN 000 ETB)
Constr Producti Producti Productio Productio
Item Production
uction on on n n

Year1 Year 2 Year 3 Year 4 Year 5

49,600. 56,686. 63,771. 70,857.

Total inventory (A) 0 70,857. 69
38 15 92 69
Accounts receivable 11,123. 12,358.
0 8,651. 23 9,887. 12 12,358. 90
(B) 01 90

Cash-in-hand (C) 0 1,441. 87 1,647. 85 1,853. 83 2,059. 82 2,059. 82

Total Current Asset 39,507. 45,151. 50,795. 56,438.

0 56,438. 98
(D= (A+B+C ) ) 28 18 08 98
11,123. 12,358.
Accounts payable (E) 0 8,651. 23 9,887. 12 12,358. 90
01 90
Total Current 11,123. 12,358.
0 8,651. 23 9,887. 12 12,358. 90
LIABILITIES (F) 01 90
Net Working Capital 30,856. 35,264. 39,672. 44,080.
0 44,080. 08
G= (D-F) 05 06 07 08

44
Production Production Production Production Production Production

Year 6 Year 7 Year 8 Year 9 Year 10 Year 11

70,857. 69 70,857. 69 70,857. 69 70,857. 69 70,857. 69 70,857. 69

12,358. 90 12,358. 90 12,358. 90 12,358. 90 12,358. 90 12,358. 90

2,059. 82 2,059. 82 2,059. 82 2,059. 82 2,059. 82 2,059. 82

56,438. 98 56,438. 98 56,438. 98 56,438. 98 56,438. 98 56,438. 98

12,358. 90 12,358. 90 12,358. 90 12,358. 90 12,358. 90 12,358. 90

12,358. 90 12,358. 90 12,358. 90 12,358. 90 12,358. 90 12,358. 90

44,080. 08 44,080. 08 44,080. 08 44,080. 08 44,080. 08 44,080. 08

45
ANNEX 2 : PRODUCTION COST (IN 000 ETB)

Item year 0 year 1 Year 2 Year 3 Year 4 Year 5

Raw 111,230. 123,589. 123,589.

86,512. 30 98,871. 20
material 10 00 00
16,630. 18,478. 18,478.
Utilities 12,928. 62 14,780. 31
82 69 69
Repair and
maintenanc
e 6,602. 28 6,603. 28 6,604. 28 6,605. 28 6,606. 28
Direct
Labour 6,410. 88 7,326. 72 8,242. 56 9,158. 40 9,158. 40
overhead
Labour 5,997. 60 6,854. 40 7,711. 20 8,568. 00 8,568. 00
Administrat
ive costs 385. 00 440. 00 495. 00 550. 00 550. 00
Marketing
costs 210. 00 240. 00 270. 00 300. 00 300. 00
Land and
Utility
Developme
15. 00 15. 00 15. 00 15. 00 15. 00
nt Renewal
Payment
Cost
Total
151,198. 167,264. 167,265.
Operating 119,061. 67 135,130. 91
96 36 36
Costs
Depreciatio
66. 01 6,595. 41 6,009. 33 5,479. 99 5,001. 55
n
Cost of
9,780. 75 8,802. 68 7,824. 60 6,846. 53 5,868. 45
Finance

46
 165,032. 179,590. 178,135.
Total Cost 128,908. 43 150,528. 99
88 88 37

47
Year 6 Year 7 Year 8 Year 9 Year 10

123,589. 00 123,589. 00 123,589. 00 123,589. 00 123,589. 00

18,478. 69 18,478. 69 18,478. 69 18,478. 69 18,478. 69

6,607. 28 6,608. 28 6,609. 28 6,610. 28 6,611. 28

9,158. 40 9,158. 40 9,158. 40 9,158. 40 9,158. 40

8,568. 00 8,568. 00 8,568. 00 8,568. 00 8,568. 00

550. 00 550. 00 550. 00 550. 00 550. 00

300. 00 300. 00 300. 00 300. 00 300. 00

15. 00 15. 00 15. 00 15. 00 15. 00

167,266. 36 167,267. 36 167,268. 36 167,269. 36 167,270. 36

4,568. 79 4,177. 04 3,822. 16 3,500. 43 3,208. 54

4,890. 38 3,912. 30 2,934. 23 1,956. 15 978. 08

176,725. 53 175,356. 71 174,024. 75 172,725. 95 171,456. 98

48
ANNEX 3 : INCOME STATEMENT (IN 000 ETB)
Item Year0 Year1 Year 2 Year 3 Year 4 Year 5
- 157,500. 180,000. 202,500. 225,000. 225,000.
Sales revenue
00 00 00 00 00
106,197. 119,472. 132,747. 132,747.
Less variable costs 92,923. 18
92 66 40 40
Variable Margin - 64,576. 82 73,802. 08 83,027. 34 92,252. 60 92,252. 60
in % of sales
41. 00 41. 00 41. 00 41. 00 41. 00
revenue
121,500.
Less fixed costs 26,138. 49 28,932. 99 31,726. 30 34,516. 97 34,517. 97
00
(121,500.
Operational Margin 38,438. 33 44,869. 09 51,301. 04 57,735. 64 57,734. 64
00)
in % of sales
24. 41 24. 93 25. 33 25. 66 25. 66
revenue
Financial costs

Depreciation 9,780. 75 8,802. 68 7,824. 60 6,846. 53 5,868. 45

Gross Profit 66. 01 6,595. 41 6,009. 33 5,479. 99 5,001. 55

in % of sales (121,500.
28,591. 57 29,471. 01 37,467. 12 45,409. 12 46,864. 63
revenue 00)
Income (corporate)
18. 15 16. 37 18. 50 20. 18 20. 83
tax
Net Profit 11,240. 14 13,622. 74 14,059. 39

in % of sales (121,500.
28,591. 57 29,471. 01 26,226. 98 31,786. 38 32,805. 24
revenue 00)

49
Year 6 Year 7 Year 8 Year 9 Year 10

225,000. 00 225,000. 00 225,000. 00 225,000. 00 225,000. 00

132,747. 40 132,747. 40 132,747. 40 132,747. 40 132,747. 40

92,252. 60 92,252. 60 92,252. 60 92,252. 60 92,252. 60

41. 00 41. 00 41. 00 41. 00 41. 00

34,518. 97 34,519. 97 34,520. 97 34,521. 97 34,522. 97

57,733. 64 57,732. 64 57,731. 64 57,730. 64 57,729. 64

25. 66 25. 66 25. 66 25. 66 25. 66

4,890. 38 3,912. 30 2,934. 23 1,956. 15 978. 08

4,568. 79 4,177. 04 3,822. 16 3,500. 43 3,208. 54

48,274. 47 49,643. 29 50,975. 25 52,274. 05 53,543. 02

21. 46 22. 06 22. 66 23. 23 23. 80

14,482. 34 14,892. 99 15,292. 57 15,682. 22 16,062. 91

33,792. 13 34,750. 31 35,682. 67 36,591. 84 37,480. 12

15. 02 15. 44 15. 86 16. 26 16. 66

50
ANNEX 4 : CASH FLOW FOR FINANCIAL MANAGEMENT (IN 000 ETB)
Item Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Total Cash Inflow
Inflow Funds
36,450.
Equity
00
85,050.
Bank Loan
00
157,500. 180,000. 202,500. 225,000. 225,000.
Inflow Operation -
00 00 00 00 00
Other Income - - - - - -
121,500. 157,500. 180,000. 202,500. 225,000. 225,000.
Sub Total
00 00 00 00 00 00
Total Cash Outflow
Increase In Fixed 88,378.
- - - -
Assets 95
Pre-Production Costs 2,265. 00
Initial Working 30,856.
Capital 05
119,061. 135,130. 151,198. 167,264. 167,265.
Operating Costs -
67 91 96 36 36
11,240. 13,622. 14,059.
Income Tax - - -
14 74 39
Financial Costs - 9,780. 75 8,802. 68 7,824. 60 6,846. 53 5,868. 45
Loan Repayment - 8,505. 00 8,505. 00 8,505. 00 8,505. 00 8,505. 00
121,500. 137,347. 152,438. 178,768. 196,238. 195,698.
Sub Total
00 42 58 69 63 21
20,152. 23,731. 28,761. 29,301.
Net Cash Flow - 27,561. 42
58 31 37 79
Cumulative Cash 20,152. 51,292. 52,492. 58,063.
47,714. 00
Balance 58 73 68 17

51
Net Cash Flow For (121,500.
NPV and IRR 00) 20,152. 58 27,561. 42 23,731. 31 28,761. 37 29,301. 79

52
Year 6 Year 7 Year 8 Year 9 Year 10

225,000. 00 225,000. 00 225,000. 00 225,000. 00 225,000. 00

- - - - -
225,000. 00 225,000. 00 225,000. 00 225,000. 00 225,000. 00

- - - - -

167,266. 36 167,267. 36 167,268. 36 167,269. 36 167,270. 36

14,482. 34 14,892. 99 15,292. 57 15,682. 22 16,062. 91
4,890. 38 3,912. 30 2,934. 23 1,956. 15 978. 08
8,505. 00 8,505. 00 8,505. 00 8,505. 00 8,505. 00
195,144. 08 194,577. 65 194,000. 16 193,412. 73 192,816. 35
29,855. 92 30,422. 35 30,999. 84 31,587. 27 32,183. 65
59,157. 71 60,278. 26 61,422. 18 62,587. 10 63,770. 92
29,855. 92 30,422. 35 30,999. 84 31,587. 27 32,183. 65

53
ANNEX 5 : DISCOUNTED CASH FLOW (IN 000 ETB)
Item year0 Year 1 Year 2 Year 3 Year 4 Year 5
121,500. 157,500 180,000 202,500 225,000 225,000
Total Cash Inflow
00 . 00 . 00 . 00 . 00 . 00

Total Cash Outflow 121,500. 137,347 152,438 178,768 196,238 195,698

00 . 42 . 58 . 69 . 63 . 21
20,152. 27,561. 23,731. 28,761. 29,301.
Net Cash Flow -
58 42 31 37 79
Net Cash Flow for
20,152. 27,561. 23,731. 28,761. 29,301.
NPV & IRR (121,500
58 42 31 37 79
Calculation . 00)

Year 6 Year 7 Year 8 Year 9 Year 10

225,000. 00 225,000. 00 225,000. 00 225,000. 00 225,000. 00
195,144. 08 194,577. 65 194,000. 16 193,412. 73 192,816. 35
29,855. 92 30,422. 35 30,999. 84 31,587. 27 32,183. 65

29,855. 92 30,422. 35 30,999. 84 31,587. 27 32,183. 65

54
 REFERENCES
ICT (International Trade Center), 2021. Ethiopia Textile and Clothing Value Chain
Roadmap 2016-2020. Geneva.
FDRE GTP, 2016. Growth anfd Transformation Plan Of Ethiopia.
Zeleke et al. , 2019. Cotton Production and Marketing Trend in Ethiopia: A Review.
Cogent food & agriculture (2019), 5: 1691812. ISSN : (print) 2331-1932.
ERCA, 2023. Import and Export Data.

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