Yohanes Badge Investment Project on Dairy

Farming

Project location: South Ethiopia Region (SER) Gamo Zone,

Chencha zuria Woreda

Promoter:- Yohanes Badge

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 Contents

1. EXECUTIVE SUMMARY.........................................................................................4
2. INTRODUCTION.................................................................................................... 6

2.1.2 the Promoters................................................................................................... 6

2.1.3 Economic Background and Potential in Relation to the 2.1.3.1 Proposed
Investment............................................................................................................ 7
2.4 Features of the Agriculture Sector.....................................................................8
2.5 Beneficiaries........................................................................................................ 9
2.6 Past and present intervention...............................................................................9
2.7 Justification of the project: why it is proposed?.................................................11
2.8 Support for the Project........................................................................................11
2.9 Goal and objective.............................................................................................. 12
2.9.1 Overall goal............................................................................................................................................12
2.9.2 Main and Specific Objective..................................................................................................................12
2.10 Reason for selection of investment................................................................13
3. STUDY OF THE PROJECT SITE................................................................................14
3.1 Descriptions of the Area....................................................................................14
3.2 Physical and Natural condition of Project Site....................................................14
3.2.1 Topographic Features...............................................................................................................................14
3.2.2 Climate....................................................................................................................................................14
4. Product Description and Application...................................................................15

4.1 Project Description..............................................................................................15

4.2 Products of the project......................................................................................15
4.3 Production Process............................................................................................15
4.4 Production Capacity.......................................................................................... 16
4.5 Plant Capacity....................................................................................................16
5. Technical Study.................................................................................................. 16

5.1 Land Use............................................................................................................ 16

5.2 Design of the Dairy Farm...................................................................................16

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5.3 Building and Constructions...............................................................................17
5.4 Sources of Investment Inputs...........................................................................17
5.5 Availability of Raw Materials and Auxiliary materials.....................................17
5.6 Availability of utilities, Infrastructures and Other service..............................17
6. SOCIO-ECONOMIC STUDY..................................................................................18

6.1 Socio-Economic Benefit for the Society...........................................................18

6.2 Economic Benefit for the Community..................................................................18
6.3 Economic Benefit for the Country.....................................................................19
7. Livestock Production Profile Related to the Project.........................................20
8. Environmental Consideration.............................................................................21

8.1 Environmental Impact Assessments................................................................21

9. Market Study....................................................................................................... 22

9.1 General over-view............................................................................................... 22

9.2 Production and Supply.......................................................................................23
9.3 Demand for and Consumption of Milk...............................................................23
9.4 SUPPLY AND DEMAND ASSESSMENT...............................................................23
9.5 Projected Demand......................................................................................................................................24
9.6 Market Segments...............................................................................................25
9.7 Competitiveness on the market and competitors...............................................25
9.8 Competitive Strategy...........................................................................................26
9.9 Product Pricing and Distribution Strategy..........................................................26
9.10 Promotion.......................................................................................................... 27
10. Production and Sales Plan................................................................................ 27

10.1 Production Plan................................................................................................27

10.2 Production Cost............................................................................................... 27
10.3 Sales Plan........................................................................................................ 28
11.ORGANIZATIONAL AND MANAGEMENT............................................................29

11.1 Structure of Project management and Personnel..........................................29

11.3Organization Structure..............................................................................................................................30
11.4 Manpower Requirement and Cost...........................................................................................................30
11.5Training Requirement.......................................................................................31
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12. PLANS OF OPERATION AND IMPLEMENTATION..............................................32

12.1 Plan of Operation............................................................................................. 32

12.2 Building and Civil works..................................................................................32
12.4 Vehicles........................................................................................................... 32
12.5 Office Furniture and Equipment......................................................................32
12.6 Milking Cows....................................................................................................32
12.7 Feed.................................................................................................................. 33
12.8 Vaccination & Medicine.....................................................................................33
12.9 Artificial Insemination (AI)s............................................................................33
12.10 Utilities...........................................................................................................33
12.11 Pre-Operating cost.........................................................................................33
12.12 Implementation Plan......................................................................................33
13. FINANCIAL BUDGET OF THE INVESTEMENT...................................................35

13.1 Investment Cost...............................................................................................35

12.2 Source of Finance............................................................................................35
12.3 Project Duration...............................................................................................35
13. Financial Analysis..............................................................................................36
14. PROJECT MONITORING AND EVALUATION......................................................36
15. CONCLUSIONS................................................................................................... 36
16. Key assumptions............................................................................................... 37

16.1 Production Related Assumptions....................................................................37

16.2 Cost Related Assumption................................................................................37

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1. EXECUTIVE SUMMARY
1.1. Project Title: Dairy farming Project
1.2. Promoter’s Profile
The anticipated Dairy Farming Project” is initiated and owned by Yohanes Bdage.

1.3. Location of the Project

The proposed project can be setup in South Ethiopia regional state (SER) Gamo Zone in Chencha Zuria
Woreda.
1.4. Project Goal and Purpose
The overall goal of the project is to contribute towards the economic development of Ethiopia through
using the existing investment opportunities in the Country and taking advantage of the expressed policy
incentives that emphasize on greater commercialization of agriculture and enhancing private sector
development.

The main objective of the said project is to produce milk and milk processing products for local markets
and to maximize profit so as to sustain the project.
In line with this the following are specific objects of the project.
 To introduce modern dairying farming to the surrounding locality.
 To create job opportunity for skilled and unskilled local citizens.
 To create market linkages with small holder farmers in the town and its surroundings etc
1.5. Project Component
 Total production area: 6 hector
 Types of investment Diary Farming and milk processing
 Estimated production;

Raw milk available for production in

Year k/g
1st 320,281.25
2nd 296,693.75
3rd 273,106.25
4th 386,326.25
5th 447,653.75
6th 518,416.25
7th 617,483.75
8th 801,466.25

1.6. Expected Beneficiaries:

 Permanent employee: 30
 Temporary employee: 20
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1.8 Socio-Economic benefit

2. The project will create additional means of employment for both skilled, semi-skilled and
casual laborers in the area.
3. Aside from the increase in income of the owner, the project would activate the economy
especially in the continuous production of milk and milk products. It will also encourage
entrepreneurs in the country to engage in milk processing and milk production.
4. The expected increase income of the permanent and temporary employees’ beneficiaries
would eventually contribute to good health and nutrition in the family and allow them to
access better education for their children, improve sanitation and provide for the necessities
in the household.

1.9 Duration of the project: 10 years

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2. INTRODUCTION

2.1 Company Profile

2.1.1 Name Yohanes Badge
2.1.2 Nationality: Ethiopian
2.1.3 Owner(s): Yohanes Badge
2,1.4 Type of business: Dairy Farming and Milk Processing
2.1.5 Full Address : Address: SER, Gamo Zone, in Chencha Zuria woreda

2.1.6 Project Name: Yohanes Badge Dairy Farming Project

2.1.7 Status of the Project: New
2.1.8 Proposed Site: Chencha Zuria woreda, Gamo zoneZone
2.1.9 Specific location: Within the town areas surrounding Chencha Zuria woreda
2.1.10 Size of proposed land: 6hector
2.1.11 Total estimated Investment 48,000,000.0 Birr
2.1.12 Legal Form of organize. Sole partner

2.1.2 the Promoters

This project is intended for privately owned intensive Dairy Farming and milk processing Agro-

Industry, ideally located Gamo Zone, Chencha Zuria woreda. The anticipated Dairy Farming and
Milk Processing Project” is initiated and owned by Yohanes Badge Previously, the owner was
engaged with various businesses.

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 2.1.3 Economic Background and Potential in Relation to the
2.1.3.1 Proposed Investment

Livestock production is an integral part of Ethiopian's agriculture sector and plays a vital role in
national economy. At present, livestock is contributing about 49.1% to the agricultural sector and 11.4
per cent to the GDP. Role of livestock in rural economy may be assessed by the fact that 30 to 35
million of the total rural population is engaged in livestock farming, having 2 to 3 cattle and 5 to 6
sheep/goats per family deriving 30 to 40 per cent of income from it. Most farmers (about 75%) have
small land holdings on which most of the livestock population is concentrated. Dairy farm also
creates different opportunity which includes; livestock genetic resources and production system,
access services and land inputs, agricultural extension services and technologies, income generation
and employment opportunities.
The future prospects of dairying seem to be bright because the challenges so far indicated and the
government is attempting them to address through polices and strategies. Thus, dairy farmers are on
the way to getting accesses to services and inputs that could help promote dairy production and
productivity. This mainly include feed and feeding, breeding services, credit extension, training
veterinary services and appropriate marketing system that address costumers demand. Since dairying
is labor intensive, it promotes the motto of government policy in creating employment opportunities
at house hold level. This improves employment, income and nutrition values of the family of the
producers and the other demanders/consumers. The dairy industry would address and serve as one of
the major instrument of the governments’ policy in achieving food security. This in turn promotes
dairy production due to the attention of given by the government. The development of infrastructure
like, transportation would help change the traditional thinking of fresh milk not for sale other than
exclusively intended for human consumption among the rural population. On the other side when the
rural farmers expose themselves to the market, their income will increase and be in position to buy
non-market food types in exchange and there by improve their living standard. Since the country is
an agrarian economy, dairying is much expected to be one of the major targets of the prospective
agro- processing industries in the country.
The dairy industry is highly significant and it plays a great role in creating rural employment in
highlands and pastoral/agro-pastoral areas (livestock Cooperative Agreement, 2010). Livestock
provides an enormous service in the Ethiopian household economy by providing food, input for crop
production and soil fertility management, cash income as well as in promoting savings, fuel, social
functions, and employments. With this wide array of functions, livestock can be considered as a
vehicle for improving food security and better livelihood of the rural population.
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The huge and diverse cattle population, varied and favorable agro-ecology for dairying, increasing
demand for dairy products in urban and per-urban areas, longstanding culture of dairy products
consumption, and favorable policies are indicators of the importance and potential of dairying in the
country. The policy and strategies of the federal and regional governments encourage investors to
fully participate in owning all large and medium scale business in the agriculture sector. The
strategies focus on selected high-potential areas and modern agricultural technologies to be
prioritized export livestock products like cattle, sheep and goat fattening and dairy products. The
Ministry of Agriculture and Rural Development has also identified agricultural investment areas and
prioritized investment areas for the focused interventions.

Ethiopia is ecologically suitable where there is enough manpower, potential of good market, well
fertile soil to produce animal feed and suitable climatic condition for the production of good quality
and quantity products. Milk production is given priority over other livestock production systems due
to ecological conditions (rainfall, temperature, and soil types are conducive to forage production) and
the population pressure that favor commercial dairy production and milk processing.

In view of this background, Yohanes Badge has been interested to invest on the dairy farming and
milk processing in Chencha Zuria Woreda, Gamo Zone.

2.4 Features of the Agriculture Sector

The agricultural sector greatly influences economic performance in Ethiopia Approximately
95 per cent of agricultural GDP and 85 per cent of employment, and 90 per cent of exports. Cereals
dominate Ethiopian agriculture, accounting for about 70 per cent of agricultural GDP. Over the past
decade, cereal production has more than doubled to nearly 15 million tones, as a result of horizontal
expansion and increased yields.

The agricultural sector has performed strongly over most of the last decade, but there is still
substantial potential to improve productivity and production. Since 1996/97 the average growth rate
of the agricultural GDP has been about 10 per cent per annum, and since 2004-05 the sector has been
reported to have expanded at around 13 per cent per annum. On the other hand, the share of
agriculture in GDP declined from 53 per cent to 43 per cent between 1995/96 and 2008/09, reflecting
strong growth in other sectors of the economy. The contribution of livestock and livestock products to the
agricultural economy is significant, accounting for 40% excluding the value of draft power, fuel, manure and
transportation. They are a source of income, which can be used by rural populations to purchase basic needs
and agricultural inputs. Livestock comes second to coffee in foreign exchange earnings. Its contribution can
equally well be expressed at household level by its role in enhancing income, food security and social status. A
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country endowed with such enormous livestock resources and climatic situations conducive to livestock
production should not be allowed to continue importation of dairy products and other livestock products. Self-
sufficiency in cattle, sheep and goat meat and dairy products should be encouraged to optimize the use of
available resources to fill the gap between demand and supply. To bridge this gap, it is necessary to design
appropriate and sustainable Milk Production [Dairy farming] development strategies based on 'felt' needs of the
public sectors.

The Government, with strong support from development partners, has made different strategic interventions to
enhance the delivery of improved production technologies and support services thereto. Over the past several
years, the Ethiopian Government has demonstrated strong commitment to agriculture and rural development
through allocations of more than 10 per cent of the total budget. Despite these achievements, however, the
Government recognizes much remains to be done in the agriculture sector to realize the vision to become a
middle income country (defined as GDP/capita of USD 1,000) by 2020.

2.5 Beneficiaries
The project can create permanent employment for 30 persons. The establishment of such factory will
have a foreign exchange saving effect to the country by substituting the current imports. The project
will create forward linkage with the agro industry sub sector and contribute to the mitigation of the
adverse environmental impact created by the project. The project will also generate income for the
Government in terms of payroll tax.

2.6 Past and present intervention

Ethiopia has the largest livestock population in Africa estimated at about 90 million tropical livestock
units. The major production systems are: Settled Mixed Crop–Livestock System. and Pastoral and
agro-pastoral production systems. There are other production systems that are not currently practiced
widely but have a future are: Ranching and Urban and per-urban (landless) Meat and Milk dairy
farming system. Ethiopia’s livestock resources consist of 53.9 million cattle, 24 million goats, 25
million sheep, 1 million camels, 1 million horses. Mules and 6 million donkey (CSA 2015).
Production is estimated at 97,000 ton of beef, 510,000 tons (510 million liters) of cow milk, 41,000
of sheep meat, 16,000 ton of goat meat, and limited amounts from various other animals. Per capita
meat and milk consumption is estimated at just 6 kg per capita and 19.16 k/g per capita respectively,
which is below the FAO minimum per capita requirements of 50 kg and 200 litter of meat and milk,
respectively. It is expected that rural consumption is lower than urban, reflecting different levels of
income. Livestock husbandry is becoming increasingly common and it has been argued that livestock
is increasingly replacing other crops production as a major asset and source of income for rural
livelihoods.
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The livestock plays an indispensable role in the traditional agriculture and largely subsistence
economy, the sub-sector contributes about 15.3% of the total agricultural sector (CSA, 2015). The
sector is undergoing a massive transformation fueled by high demand for meat and milk and milk
product, which is likely to double in the past years and near future, the major forces behind this, is the
combination of population growth, urbanization and income growth.

In the recent past, there is a greater emphasis on sustainable beef production through private sectors
cattle, sheep and goats beef fattening and milk production which has its focus on the long-term health
of the environment while maintaining the economic viability of the farm and addressing consumers’
concern about beef and milk they eat.

However, milk production is very low and is estimated at about 1.2 million tons per annum,
increasing at a rate of 1.2% for milk produced from indigenous stock and 3.5% for milk produced
from improved stock Conversely, the human population of Ethiopia is estimated at about more than
90 million, increasing at a rate of 3% per annum; values projected for the year. To this effect the per
caput consumption of milk is 19 kg/year; this value is lower than African and world per capita
averages, which are 27 kg/year and 100 kg/year respectively. Accordingly, about 495 thousand tones
and 5 million tons of milk are required annually to feed the Ethiopian population as per the African
and world averages, respectively. This indicates the probability of a wide gap between the current
supply of and the demand for milk in Ethiopia.

Today the government support the private sectors by the continuing the development of agro-
industrial estates in urban areas and small towns, and to provide the necessary locations for large and
medium-scale livestock industrial development.

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 2.7 Justification of the project: why it is proposed?
There are a number of reasons that led Yohanes Badge to opt for this specific project, Dairy Farming
Project Firstly, a country endowed with such enormous livestock resources and climatic situations
conducive to livestock production. Secondly, the Country is among the first producers of livestock in
the Africa and has a well-established linkage to the major global markets,

 Increasing population, urbanization and income and trend towards consuming more animal
products

 Ethiopia has opted to raise milk production through genetics, feed and health interventions to
improve traditional family cow dairy production and expand and improve specialized dairy
production units over the GTP II period (2015-2020);

 Dairy farmers in urban, per-urban and rural dairy production system demonstrated strong
interest to expand dairying as one of the means of income generating activity. This is a great
opportunity for the entrants to collect and process raw milk into different milk products, and
supply for domestic and export markets.

 There is political stability, conducive investment climate, government policy reforms, and
market orientation that is favorable for dairy investment.

The future of the dairy sector in Ethiopia is more positive especially taking the domestic market
growth, potential and production enhancement initiative in the country is also another important
factor to initiate the project.

This helped Yohanes Badge to choose Dairy Farming, which have a vast market in the region and the
country as whole.

2.8 Support for the Project

There are some supportive roles expected from public and non-governmental organizations that are
supporting to ensuring smooth and effective implementation as well as long-run sustainability of the
anticipated project.

Zonal and Woreda agriculture/livestock offices: organizations like Woreda livestock and fishery
offices, Chencha zuria woreda agriculture sector provide veterinary and other extension services. The
service includes, (i) treatment, vaccination and laboratory services; (ii) AI services; (iii) facilitate
forage seed and feed market linkage, equipment supply for producers; (v) provide training services

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 for producers; (vi) provide advice and support for producers in their dealing with other sector office
like environmental protection Office, trade and industry Office.

National Artificial Insemination Centre: the center established to collect and distribute improved
breeds and to provide training for AI service providers. It supplies Siemens for AI service providers
either private or government.

Non-Governmental Organizations; NGOs are engaged in direct provision and facilitating the service
development. Training related to dairy production, marketing and dairy products processing.

Financial Institutes; Financial services for dairy is a critical issue to expand its business and to run day to
day operation with enough working capital.

Generally, the above mentioned actors have a great roll towards facilitating effective and smooth
implementation of the project. Furthermore, woreda’s Agriculture and Animal office will give
technical advice on dairy and milk processing technologies and control the quality of milk processed.

2.9 Goal and objective

2.9.1 Overall goal
The overall goal of the project is to contribute towards the economic development of Ethiopia
through using the existing investment opportunities in the Country and taking advantage of the
expressed policy incentives that emphasize on greater commercialization of agriculture and
enhancing private sector development.

2.9.2 Main and Specific

Objective Main objective
The main objective of this project is to produce dairy products for local markets and to maximize profit
so as to sustain the project.
In line with this the following are specific objects of the project.
 To introduce modern dairying farming technologies to the surrounding locality.
 To create job opportunity for skilled and unskilled local citizens.
 To create market linkages with small holder farmers in the town and its surroundings
 Reduce the environmental impact of our operation by devising methods such as supplying of
animal’s waste for farming and use of Bio-fuel;

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2.10 Reason for selection of investment
 The reasons for selection of the investment include:
 Availability of suitable topography for milk production with good combinations of, climate
and market that allow optimal production of these farming;

 No requirements for infrastructure development because of the topography and visible

prospects of on-going development initiatives in the area including power supply,
telecommunication and other basic infrastructures available;

 Accessibility of the area by all-weather roads and ease of making choices between marketing
options;

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 3. STUDY OF THE PROJECT SITE
3.1 Descriptions of the Area
The area identified for implementing the anticipated project is located in Chencha Town
Administration of Gamo zone, SER State. As aforementioned on the introductory part the envisioned
project is intended to be located in Chencha (also known as Dincha) is a town in southern Ethiopia
Located in the Gamo Zone of the Southern Ethiopia Region. 37 kilometers north of Arba Minch.
Chencha has a longitude and latitude of 6°15′N 37°34′E and an elevation of 2732 meters above sea
level. Chencha is bordered on the south by Arba Minch Zuria, on the west by Dita & Gofa on the
north by Kucha and Boreda, and on the east by Mirab Abaya.

Chencha had been the capital of Gamo-Gofa province until those offices were transferred to the more
accessible city of Arba Minch in 1962. It has been the administrative center of Chencha woreda since
at least 1964. Chencha is currently divided into Chencha town administration and Chencha Zuria
woredas (the surrounding as a new woreda with its full governmental structures) and Ezo woreda,
formerly among the kebeles in the chencha woreda. The town of Checha is known for traditional
clothing of Shema as it includes the Dorze and other communities with traditional weaving
undertakings. Chencha is a temperate climate zone with the potential and current production capacity
of fruits and vegetables, different kinds of root plants, cereals, and timber trees. The town of Chencha
is a tourist attracting place with the endowed beauty of nature and the topography of the town.
Dejazmach Beyene Merid had established his seat as governor of Gamo-Gofa at Chencha by 1935,
when he was visited by missionaries and a German expedition. Chencha is known for its tall bamboo
houses. Especially older ones can be up to 5 metres. In former times an ostrich egg used to be placed
at the top. The life span of a bamboo house is about 60 years and more.

3.2 Physical and Natural condition of Project Site

3.2.1 Topographic Features
The topographic features of the proposed project area are characterized by slightly to gently sloping
terrain. The topography of the project area generally indicates availability of favorable opportunity
for low cost installation of infrastructures and site development requirements.

3.2.2 Climate
The agro- climatic zone of Chencha zuria woreda is categorized as weyna dega. The annual rainfall
varies from 900-1,200 mm and the annual average minimum and maximum temperature varies from
15 to 20 degree centigrade.

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4. Product Description and Application
4.1 Project Description

Milk is a traditional constituent of the Ethiopian diet, especially areas where the livelihood is based
on cattle production. Liquid milk handled traditionally has a very limited shelf-life. In modern dairy
production exotic cross breeds or pure breed castles are used and the milk is processed to have longer
shelf-life.
The project will start a breeding arrangement with 50 heads of exotic cross breeds pregnant heifers.
These heifers would give birth in two to three months’ time and production of milk will be started
nearly of the first year. The dairy farm will have milk processing and packing facilities. The project
will also collect milk from small holder farmers around the town to supply the processing plant.
Finally, the product will be distributed by establishing own distributing stores in major towns or by
using commissioned agents.

4.2 Products of the project

Taking the existing opportunity in to account, the project intends to offer major dairy products
including: Raw milk, Butter and Cheese (Ayib). Thus, the main course of activity is focuses on milk
production and processing involving a range of value addition on the main product.

4.3 Production Process

After the fresh milk is received it is filtered and pumped into the dump tank; it is then chilled with help of
a chiller so that the growth of bacteria is minimized. One percent of the fat content is separated and
chilled in a cold store. Then, the cream in either churned to butter or sold as it is depending on the
availability of local market. After the end of cream separation process, the milk will then undergo
different value added products like milk, Butter and cheese. Milk products undergo pasteurization
process; the pasteurized milk is filled in the cooling tanks for delivery to urban milk distribution centers.
Pasteurized milk would be packed into 500 mille liter plastic containers, so two plastic containers
would be used to package one liter of pasteurized milk and distributed to the market. Cheese and
butter would be packed into 250 and 500gram paper packages. After separation, cream is held in
stainless steel tanks and refrigerated at (4oC).

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 4.4 Production Capacity
The dairy farm will have 50 milking cows, which are exotic breeds, with better milk production
capacity. The farm size will increase to approximately 272 animals within 10 years. Average yield per
cow is estimated to be 17 liters per day and the cows will give milk for at least ten months. Overall
daily total production is about 850 liters per day. In addition, so as to supply more milk for
processing, daily 250 liters of milk will also be collected from surrounding farmer. Overall annual
raw milk production is about 346,250 liters in the first year of production. The farm milk production
will increase with the growth in herd size in subsequent years.

4.5 Plant Capacity

Processing raw milk produces a number of products such as, pasteurized milk, cream, yoghurt,
cheese and butter, and investment could be on pasteurizing plants with a capacity of processing
10,000 liters per day. The processing plant will start production at 75% of its installed capacity initial
year, thereby increasing the capacity by 5% until it reaches 95% in the fifth year.

5. Technical Study

5.1 Land Use

Dairy Farm has extensive facility requirements. The basic dairy facility requirements are a milking
parlor, open area, feed storage, waste storage, Calves and heifer development facilities.
Cows spend most of their time in the pasture or in free. Feed storage facilities are another
requirement for dairy operations because of the large amount of feed fed to each cow. Upright silos
and pit silos hold corn silage or haulage. Most dairies also have grain and bulk bins that hold
prepared feeds or supplements. Most dairies also require waste storage facilities because of the
amount of production that takes place in confinement in barns, which generates a lot of manure
finally; dairy farms usually raise their own replacement females. Producers usually raise heifers in
hutches where each is kept individually until weaning. After weaning, they are moved to group pens
to be raised. Tool/machinery shed on the farm for storage, Office etc. The details Land Use Plan is
annexed

5.2 Design of the Dairy Farm

The design of most recently established dairy farm and milk processing plant have many similarities
in common Development of housing and feedlot facilities requires integration of space, shelter, feed,
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water, waste management and handling facilities. These requirements will be adapted to natural
features of the site and organized for efficient operation. The feedlot design must be simple and pen
layout should be rectangular pens should be arranged using double row arrangement. A double row
arrangement requires feedlot construction on both sides of the feed alley. The major investment items
designed to establish the project are the following;

5.3 Building and Constructions

The major civil works to be built as part and parcel of the dairy farm include; Dairy barn or shed,
calves room, water and feeding troughs, Isolation pen, water system and latrine. Other building and
construction facilities needed at the site are- fence including gates, Guard room and Office.

5.4 Sources of Investment Inputs

The construction activity will be carried out by local Contractors. Construction materials such as
sand, Gravel, masonry, Cement, and corrugated sheets are easily available in Chencha town.

5.5 Availability of Raw Materials and Auxiliary materials

The principal raw material required for the production of pasteurized milk, butter, cheese and cream
is raw milk. Raw milk is available from the project dairy farm and also acquired from surrounding
farmer. The auxiliary materials required for the envisaged plant comprise packing materials like
plastic bags, paper and carton box. The plastic bags and carton boxes can be acquired from the local
market.

5.6 Availability of utilities, Infrastructures and Other service

Road; The project area can be accessed by all-weather roads up to Chencha Zuria woreda. The area
is connected all sides with all-weather roads, so the project can transport inputs and output
easily.

Electric Power; Chencha Zuria woreda of the project area has access to hydroelectric power.
Currently, the government has setup additional power station at Chencha Zuria woreda. This power
station will help us to reduce the cost of operation with better efficiencies and will ensure
uninterrupted availability of power.

Water Resources; by now, access to safe drinking water is not a problem in the project area.

Telecommunication; According to the data collected from the Bureau of Finance and Economy, the
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town administration and all PAs in the project area have access to different telephone services, such
as, mobile telephone service, and wireless.

Educational Services; Chencha Zuria woreda has good access to educational services especially
from kinder Garden to high school.

Financial Institutions; There are government and private banks in the project area and surrounding.
Hence, the project can get bank services nearby.

Health Services; the project area can access hospital service nearby Hospitals and Health center
which is not far from project area

6. SOCIO-ECONOMIC STUDY
6.1 Socio-Economic Benefit for the Society
The socio-economic impact of the project is expected to be positive, as the operational area is devoid
of major any potential displacement/ eviction or conflicts. The positive impacts are more pronounced
in view of the development of an abandoned and uninhabited rural area, bringing large employment
opportunities to the surrounding peoples.

 As the project requires labor for undertaking its operational activities, a number of people will
have the opportunity of being employed in the project. In this regard, the project will create
new employment post for about 30 individuals on permanent basis and for up to more than 20
casual laborers. Since the project use own dairy production and rely on milk collected from
surrounding farmers, the farmers would have a guaranteed buyer from which, they could get
consistent and better financial gains as far as they could engage in such business.

 Important social aspect of the project is that it would increase supply of milk and related
products which consumptions is beneficial in many ways and helps in battling various
diseases
 The expected increase in income of the permanent & temporary employees would eventually
contribute to good health & nutrition in the family and allow them to access better education
for their children, improve sanitation and provide for the necessities in the household.

6.2 Economic Benefit for the Community

The creation of substantial direct and indirect employment opportunities with potential for out-
growers will have impact for increasing incomes and skill of the rural community. There will also be
good opportunities for out-grower’s linkages with the surrounding farmers and the use of the
project’s facilities, knowledge and experience, thereby increasing the economic activities of the
18
inhabitants of the area. Promotion and transfer of new agricultural technology that could be adaptable
to the surrounding farming community and improve their skills through training and sharing of the
project experiences will also be another benefit for the community.

6.3 Economic Benefit for the Country

This Proposed project will have significant economic benefits, both to the national economy of the
country at large, and the region in particular in which the project is to be established.

The specific direct benefits will include;

 Development of uninhabited part of the country and exploitation of hitherto abandoned

physical resources of the particular area through the establishment of modern livestock
agriculture.
 Aside from the increase in income of the owner, the project would activate the economy
especially in the continuous production and supply of processed milk & milk products. Being
efficient in terms of business returns and thus considered as a role model, we hope, this
project will also encourage other entrepreneurs in the country to engage in milk processing
industry.
 Supply of agricultural commodities to the national and export markets, thereby enlarging the
domestic basket of food items and contributing to the foreign exchange balance of the
country, both through generation of foreign exchange and import substitution.
 Provision of physical and social infrastructure, thereby creating conducive and suitable
environment for regional development.
 Substantial increase regional government revenue, through direct & indirect taxation.

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7. Livestock Production Profile Related to the Project

This investment project is intending to production of milk and milk products. This farm project will
entirely apply a modern farming system. Different species of livestock have been reared in all of the
production systems of Ethiopia by pastoralists, agro pastoralists, and crop/livestock farmers. Based
on climate, land holdings and integration with crop as criterion, dairy production systems are
classified into three main systems :( 1) rural, (2) peri-urban and urban and (3) commercial dairy
systems.
Rural milk production: Majority of livestock keepers rely on rural dairy system which is part of the
subsistence farming system that contribute up to 98% of the total milk production of in Ethiopia and
includes pastoralists, agro-pastoralists, and mixed crop–livestock producers
The system is not commercial based and most of the milk produced in this system is left for home
consumption (Ahmed et al., 2003). In the highlands of Ethiopia, small scale farmers keep mostly
zebu cattle which have lower milk produce on ranging from 400 to 600 lit for a two hundred day lacta
on period (2 – 3 lit/day/head) and well suited to the existing environment (Land O'Lakes, Inc.2010).
Livestock are subjected to graze on communal pastures although a considerable amount of fodder
production for both on-farm use and sale is increasing using bulls as common for breeding purposes
except near to national artificial insemination center. In these areas, milk is processed on farm using
traditional technologies to produce products like butter, ghee, ayib and sour milk, which can be sold.
The bulk of butter and ayib in the highlands is channeled through the informal market. Farmers,
mainly women, take the products on a weekly or monthly basis to market places or sell at the farm
gate to brokers who take the commodities to local or, more distant markets where there is a demand.
In pastoral areas, diet is based on fresh/sour milk and leftover milk is poorly utilized. The herd size
per household is large and hence there is a. greater surplus of milk/person than in the highlands.
Market access in this production system is a critical factor. Subsequently, due to crossbreeding
program has been underway in the country the government is delivering semen for AI services at
subsidized cost for milk production increment.
During the past two decades, to offset the shortfall in milk production, the import dependency of
Ethiopia for milk and milk products has increased. A country endowed with such enormous livestock
resources and climatic situations conducive to livestock production should not be allowed to continue
importation of dairy products. Self-sufficiency in dairy products should be encouraged to optimize
the use of available resources to minimize between demand and supply. Considering this effect, the
dairy has intended in production of milk to fill the gap.

20
Peri-urban milk production: Peri urban milk production has been performed in areas where the
population becomes high and the agricultural land is scares due to urbanization around major cities
like Addis Ababa and other regional becoming prominent in the highlands among mixed crop-
livestock farmers. Dairy farmers and cooperatives involved in milk production in the peri-urban and
urban areas are selling milk to consumer in the nearby town and city. Dairy Producers in this
production system have a better understanding of dairy management and processing facilities. Urban
dairy farming is a highly specialized dairy farming owned by state or businessmen and is mainly
concentrated in major cities of the country. Pure exotic and cross bred cows have been used in this
produce on system comprising 40,000 pure exotic and crossbred cows in urban and peri urban areas
of the country. In Addis Ababa alone, there are about 5200 dairy farms with some 58,500 cattle
(almost 50 percent crossbred).
Commercial Milk Production: Dairy Producers would rely almost exclusively on AI for good
semen and keep breeding records with paying for the more expensive imported genetics and breeding
supplies. In around Addis Ababa there are an estimated 5,000 dairy producers with pure and cross-
bred cows producing 34 million lit per year.

8. Environmental Consideration
8.1 Environmental Impact Assessments
This project is designed to cultivate and promote the production of quality milk by maintaining the
existing environmental system. It also intends to protect the environment from the possible risks. The
project will have no negative environmental impact in the areas as shown under:

Run-off control:
The dairy products plant does not have any pollutant emitted from the production process, except the
washing water, which has to be connected to appropriate sewerage line to get rid of. Thus, the
envisaged project is environment friendly. A grass/forage filter composed of elephant grass will be
planted in area of 1 times the feedlot area to take care of the effluents as such type of grass plants
could be used to filter liquid wastes.
Animal waste/Manure management:
During the 2nd half of the first year of the project, biogas digester with a volume of 100 m 3 will be
constructed so that, all manure wastes from the barns will be used to produce biogas fuel for the
project consumption. So as to do so, during construction of the barns, floor slope will be made
appropriate for gravity flow of liquid manure to the digester, and in addition, the remaining manure,
which could not flow as liquid, will be daily collected and dumped in the digester so as to keep the

21
barns clean as well as to alleviate the environmental problems associated with manure wastes.

Air Pollution:

dust and odor problems will be minimized by proper site selection. Prevailing winds and habitable
structures will be considered to avoid air pollution problems

9. Market Study
9.1 General over-view
The future of the dairy sector in Ethiopia is more positive with different driving factors, which
includes positive economic outlook and life style changes. Ethiopia has an estimated population of
approximately 99.4 million in 2016, up from 2015's estimate of 98.9 million, the second- most
populous country of Africa after Nigeria (CSA, 2013). National real GDP growth averaged 10.1%
per annum during the period of GTP I and real GDP growth during the last 12 years averaged 10.8
percent per annum. The economy expected to remain robust from 2016 to 2019 at 7.6% as per IMF
projection and above 11% as per GTP II. In line with the economic growth, the emerging middle
class consumer segments are willing to embrace new products and services that include agricultural
products. With the increase in income, it is expected that consumption pattern shifts to high value
food items that demands encouraging supply of livestock products.

In addition to the purchasing power increase, urbanization, population growth and consumer
awareness will increase the demand for quality, volume, graded and standardized products and
traceability of sources. Life style changes call for more of fresh and finished ready to eat products
with appropriate packaging and labelling. As per research findings of Land O’ Lakes in 2010 showed
that the top 10% earners in Addis Ababa consumed about 38% of milk, while the lowest income
group, approximately 61% of the population consumed only 23%. The high milk price for pasteurized
milk in supermarkets, considered high to afford for middle and low- income consumers. The growing
demand for milk and milk products offers a good opportunity for producers (and other actors in the
dairy chain) in high-potential, peri-urban areas to enhance their livelihoods through increased
production. Ethiopia exported an amount less than 300,000 USD per annum during the last five years.
Majority of the export destined to Somalia and traditional spiced butter export for Ethiopian
community and other consumers to USA and other countries. With the expansion of the sector the
volume exported to Somalia can be increased and to other destinations like Sudan, South Sudan and
Djibouti can be expanded.

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 9.2 Production and Supply
From the 2015/16 CSA survey estimate of 57.83 million total cattle, the female cattle constitute about
55.38 percent (CSA, 2016). When classified with purpose it is estimated that there are 6.74 million
dairy cows and 11.34 million milking cows. The total volume of milk produced in Ethiopia increased
over the last 15 years from less than 1 billion litters to 3.06 billion litters in 2015/16. The dairy sector
contribution to the national Gross Domestic is expected to increase in the years to come too. The
overall country milk production expected to surpass existing milk demand as per GTP II period (2015–
2020) projection with about 2501 million litters that is 47% above (LMP, 2015). As per the plan the
surplus of milk could then be substituted for imported milk products and used domestically for new or
additional industrial uses (e.g. in the baking industry), or exported as milk powder to raise foreign
exchange earnings. The milk is produced by 11.34 million milking cows are kept within five different
dairy farming systems: (i) Urban and peri-urban systems that is the emerging smallholder dairy
farming; (ii) Specialized commercial intensive dairy farming; (iii) Mixed crop livestock system, the
traditional highland mixed farming; (iv) Pastoral livestock Farming, (v) Agro-pastoral system, that is
the lowland mixed livestock farming. The rural dairy system, which includes the last three groups,
contributes 98% of total production, while the first two groups contribute only 2% of the total national
milk production but main sources for big cities milk consumption.

9.3 Demand for and Consumption of Milk

Although, the contribution of cow milk is dominant, milk from camels and goats are also consumed
in Ethiopia, especially in pastoral and agro-pastoral systems of production. In Ethiopia there is long
standing and strong culture of consumption\ of dairy products. In addition to row milk, milk products,
such as butter, cottage cheese, fermented milk (yogurt) and whey are also commonly consumed

9.4 SUPPLY AND DEMAND ASSESSMENT

Present supply and demand

There is inadequate supply of milk and milk products to urban consumers. The bulk of the increased
demand for milk is in urban areas, particularly for processed, i.e. pasteurized milk and milk-products.
There is also unstable supply of milk and milk products to urban consumers due to inefficient
delivery system and inadequate market outlet for milk and milk products from rural areas. The
contribution of imports of milk and milk-products to total consumption of milk has been rising over
23
the past several years, due to lack of quality milk production.

24
 9.5 Projected Demand
Demand for standard dairy products from the modern sector is met by domestic production and
through imports. The demand for milk depends on many factors including consumer preference,
consumer’s income, population size, price of the product, price of substitutes and other factors. In
general, increasing population growth (as in the following Table) and rising real income are expected
to expand the demand for milk and milk products. Therefore, increase in population growth and
consumer income in the future is expected to increase the consumption of milk products.
Table 1 Projected Demand
Year Population in 000 Milk production, In Milk available Demand for Gap between
projected milk
Based on current million liters based on for consumption milk, in million
available for
growth rate current growth rate (68 %) of the liters based on consumption and
demand base on
(2.27% ) (4.15% ) produce)in FAO
FAO, s
Million liters recommendation recommendation in
(62.5 k/g ) million liters
2011 82,102 3,061 2,081 5,131 3,050
2012 84,335 3,186 2,166 3,271 3,105
2013 86,629 3,317 2,256 5,414 3,158
2014 88,985 3,453 2,348 5,562 3,214
2015 91,406 3,594 2,444 5,713 3,269
2016 93,892 3,742 2,545 5,868 3,323
2017 96,446 3,895 2,649 6,028 3,379
2018 99,069 4,055 2,757 6,192 3,435
2019 101,764 4,221 2,870 6,360 3,490
2020 104,532 4,394 2,988 6,533 3,545
Source: Yilma et al., 2011
The annual demand in Ethiopia for dairy products is increasing. This is as a result of the current high
population and future growth trends, a growing number of urban centers and urbanized lifestyles, and
finally steadies economic growth rates registered by the country and visible increased income levels
of the general population. In Ethiopia, the demand for milk products is increasing while supply is
lagging. As a result, imports have surged in recent years, which consist primarily of processed milk,
including cheese and milk powder.

9.6 Market Segments

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There are a number of marketing methods which are used in the marketing of milk and milk products.
The main target customers for our dairy products include but not limited to:

 Small kiosks: - these kiosks are already experienced at selling raw milk and milk projects like
yogurt, ice cream, butter, and cheese to the general public. These kiosks do not require
sophisticated packaging and have good product handling skills.
 Individual consumers, Hotels, Guest houses, and Restaurants: these are to be used to provide a
meaningful linkage.
 Direct General Markets: milk products will be brought to the general markets where to be sold
to the general public.
 Dealers: independent operators who buy raw milk and milk products. The dealing is
usually done at the shop level.
 Order buyers: Acts as agents for distribution of dairy products and other processed milk.

9.7 Competitiveness on the market and competitors

Since agricultural market is a proxy for competitive market, the expected market for the products of
the project will get high competition from local farmers, local private farms, and private farms
engaged in similar activities in South Ethiopia regions(SER).

In Ethiopia, Milk and milk products are channeled to consumers through both formal and informal
marketing systems. Recently, however, private businesses have begun collecting, processing,
packing, and distributing milk and other dairy products. Still, the proportion of total production being
marketed through the formal markets remains small. Formal milk markets are particularly limited to
peri-urban areas and to Addis Ababa. The informal market involves direct delivery of fresh milk by
producers to consumer in the immediate neighborhood and sale to collectors or traders nearby towns.
In the informal market, milk may pass from producers to consumers directly or it may pass through
two or more market agents. The informal system is characterized by no licensing requirement to
operate, low cost of operations, high producer price compared to formal market and no regulation of
operations. The informal (traditional) market has remained dominant in Ethiopia.

The traditional processing and trade of dairy products dominate the Ethiopian dairy marketing sector.
Since the dairy products from these informal processing and marketing sectors are not pasteurized
and appropriately packed, they could not stay fresh for considerable time durations. For this reason,
the dairy products from such sectors could not give practical solution for the marketing challenges
associated with seasonality in demand for milk and milk products which is identified, as one of the
major problems by 10.5% of the rural and 75% of the urban dairy producers, respectively. However,

26
for this marketing challenge created due to seasonality in demand for milk and milk products, modern
business projects involved in dairy farming, processing, and marketing, which could use modern
processing technologies (like those technologies to be used in this business project) to extend the
shelf-life of dairy products so as to remedy the problem. With this limited number of modern dairy
farming projects in Ethiopia, this project intended to fill the huge gap between demand and supply by
contributing its share in alleviating the insufficient milk supply to the urban milk demand through
producing better quality of milk and milk processing products for the market.

9.8 Competitive Strategy

Marketing functions or services include many phases such as collecting higher quality milk from
supplier, processing, & managing them to attain the required product types with standard qualities,
transporting to potential markets, and distributing them to customers, such as Super markets, hotels,
individual consumers, and restaurants. In economic terms, the utility or time, place and form will be
added so that acceptable products will be offered to the ultimate consumer at the required time.

9.9 Product Pricing and Distribution Strategy

The main objective of the project is producing milk and milk processing products to maximize profit
and make the project sustainable. To achieve this objective, consideration of production and other
costs that determine profitability is necessary. In addition, the profit from such kind of dairy business
is attained by minimizing production costs which account nearly half of the total cost of products.
Any attempt to improve production and increase its efficiency, therefore, needs to focus on better
utilization of available resources. The planned project will rely on using locally available materials
and agro-processing byproducts to feed cows including molasses, concentrate made from maize,
bean, wheat, barley. Feedlots will also have to be devised as mechanisms to source feeds by-passing
middlemen and other profiteers who charge high prices for these feeds relative to the lower products
prices. Through using these resources, the cost of production will be lower than other commercial
dairy and milk processing farms in the country. In addition, the project will adjust the price of
products supplied to the consumers based on market situations.
. Distribution of the products could be undertaken through small retail outlets as well as large
wholesalers and catering establishments. The product can be distributed by establishing own
distributing stores in towns or the products will be delivered directly to the customers to avoid
unnecessary price increment which will affect the purchasing power of customers.

27
 9.10 Promotion
To promote its products, the project will use different promotion means such as hand bills and posters
and radio & TV advert air times. In addition, seasonal promotions will be done especially for
religious holidays, on which such promotions will be based on particular types of products prepared
for each occasion.

10. Production and Sales Plan

10.1 Production Plan

For processing facility, the financial projection assumes the total raw milk available for value addition will be divided
into pasteurized milk and cheese production, Of the total production, 80 percent will be pasteurized milk and 20 percent
will be cheese. During milk processing, cream is left over. In order to use the cream, butter will be produced. It is
assumed that 75 percent of cream will be processed to butter.

The actual raw milk production will therefore begin at 346,250 litters (320,281.25k/g) in the first year
of production and the milk production will increase with the growth in herd size in subsequent years.
The production plan of milk, cream, butter and cheese for the project years will be depicted in the
following table.
Table 2 Production Plan of raw milk, Cheese & Butter

Year Raw milk available for

production in litter cheese in k/g butter in
k/g
1st 320,281.25 64,056.25 3783.30
2nd 296,693.75 59,338.75 3504.70
3rd 273,106.25 54,621.25 3226.00
4th 386,326.25 77,265.25 4563.45
5th 447,653.75 89,530.75 5287.91
6th 518,416.25 103,683.25 6123.75
7th 617,483.75 123,496.75 7294.00
8th 801,466.25 160,293.25 9467.25
9th 1,046,776.25 209,355.25 12365.00
10th 1,367,566.25 273,513.25 16154.25

10.2 Production Cost

The production cost includes; feeds, veterinary, salary &wage, water electric power, purchase of raw
milk, dairy supplies etc. Annual production cost requirement with the corresponding estimated cost is
annexed.

28
 10.3 Sales Plan

The major source of revenue for the farm would be the sale of milk or products made from milk. As
would be expected, processing milk into finished products will add value to each kilo-gram of milk

produced. In addition of the sale of milk and milk products, the other source of revenue for the farm
would be the sale of culled cows, bull calves and heifers not kept as a milk replacer.
In this study, it assumed that the price of each cull cows, bull calves & heifers is Birr 50,000, 20,000
& 50,000 respectively.
Revenue could be generated by selling 80% of the milk as fluid milk, 20% of the milk processed into
cheese and the left over cream is processed into butter. The diversification of products would help
buffer the enterprise from volatility in the product markets. Prices can vary depending on the market
outlet that a producer is selling through.
When selling through a retail outlet, a producer will receive a wholesale price. When selling directly
to consumers; the producer receives a retail price. In this study it assumed a wholesale price, that the
price of raw milk, cheese, butter per k/g is Birr 80, 120, 700 respectively.
The financial projection assumes that total raw milk available for value addition will be divided into
milk and cheese production. Therefore, the total raw milk available for value addition, 80 percent will
be pasteurized milk and 20 percent will be cheese. During milk processing, cream is left over. In
order to use the cream, butter will be produced.

29
11.ORGANIZATIONAL AND MANAGEMENT

11.1 Structure of Project management and Personnel

The highest executive body of the project management organ is Yohanes Badge Dairy Farming
and Milk Processing which is privately owned. The Owner controls and supervises the overall
activity of the project at times while the operation and management of the farm will be entrusted
to qualified and well experienced manger. All staff members of the project are accountable to the
General manger who is assigned by the investor to manage the overall activities of the farm. He
also serves as a cosignatory with the owner of the project.

Under the General Manager three section will be organized, Farm manager, Marketing Manager
and Finance and Administration Manager. The responsibility bounded to the farm site would be
delegated to the farm manager who will direct different animal husbandry practices at the farm
e.g. feeding, watering, and milking and care of animals etc. Under the farm manager, farm
supervisor, barn workers, milk processor, Laboratory analyst & Barn workers will be organized.
Under Finance and Administration Manager Accountants, store keepers, drivers and office
workers will be organized. Under marketing expert, sales mane, shop keeper will be organized,
Marketing Finance and Human resource sections. Each worker is responsible to their respective
job descriptions provided by the respective section head. The store keeper will be responsible to
systematically record and keep the input and outputs of the project respective working areas.

30
 11.3Organization Structure
The project will have its own organizational set up (structure) to run the production, finance &
Administration and Marketing of the farm. The organizational chart, shall serve as a fundamental
guide to the reporting responsibilities of the senior officers and the work force. The proposed
organizational structure for startup of the project is as shown below.

Yohanes Badge Dairy Farm and Milk Processing Organization Structure

11.4 Manpower Requirement and Cost

The farm will engage a team of professional, highly qualified and experienced management
personnel. Initially the farm will employ a total of 30 full time staff including a General Manager
with qualifications in Business with experience. Staff employed in the technical team will be

31
responsible for cattle induction, dispatch, storage and handling of feeds, and general maintenance
activities within the feedlot, including pen cleaning, feeding and animal health.
The Marketing team will be responsible for coordinating, and recording daily farm transactions,
marketing and advertising of the farm products. Other responsibilities will include managing the
logistics of the facility to ensure timely delivery to clients as well as maintaining an adequate supply
of production on hand. Accounting team Establish an appropriate accounting system and procedures.
They will also perform regular internal audits to ensure that the company's accounting procedures are
implemented correctly. As the flock size increases, in the fifth year the organization will hire 6
additional labors for milking, feeding and manure removal
. Manpower requirement for the farm & the corresponding labor costs are shown in below
Table 3 Manpower Requirement and Labor Costs

Monthly
Required salary Annual salary
No Description
number (Birr)
(Birr)
1 General manager 1 10,000 120,000
2 Farm Manager 1 10,000 120,000
3 Marketing Manager 1 8,000 96,000

4 Finance & Administration Manager 1 10,000 120,000

5 Farm supervisor1 1 10,000 120,000

6 Veterinary 1 10,000 120,000
7 Accountant 2 7,000 168,000
8 Barn workers 10 6,000 720,000
9 Marketing and sales man 2 6,000 144,000
10 Driver 1 5,667 68,000
11 Guards 2 3,000 72,000
12 Store Keeper 2 5,500 132,000
SUB- total 25 2,000,000
Employees benefit (50%) 1,000,000
Grand Total 3,000,000

11.5Training Requirement
In each year a five days training will be provided for the managers, farm supervisor, veterinary and
other four workers of the farm at the site of the project by senior animal production expert. Total cost
of training will be Birr 20,250 per year.

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 12. PLANS OF OPERATION AND IMPLEMENTATION

12.1 Plan of Operation

The major investment required to establish the project include civil works, purchase of cows, feeds
, different machinery and equipment, vehicles and purchase of animal feed from surrounding farmers.

12.2 Building and Civil works

The civil works that this dairy farm and milk processing plant include are primarily the relays of
structure for milk production and processing activity indicated above. The engineers estimate for
these items and for other construction facilities needed at the site are valued at Birr 13,000,000

12.3 Equipment

According to the Performa invoices submitted from local suppliers, the aggregate cost of the
machinery and equipment is summed up to Birr 11,390,000 and other milk equipment is estimated to
be Br. 610,000. The list and cost of Machinery and equipment required for dairy farm is annexed.

12.4 Vehicles

The farm would utilize an I suzu (milk tankers installed) as a farm vehicle. According to the Performa
invoices submitted from local suppliers, the aggregate cost of the vehicles is summed up to Birr
8,000,000.

12.5 Office Furniture and Equipment

According to the Performa invoices submitted from local suppliers, the aggregate cost of the office
furniture & equipment is summed up to Birr 500,000.

12.6 Milking Cows

Initial herd sizes of 50 cows, which are cross breeds, with better milk production are considered.
A total cost of the cows is Birr 7,000,000 The farm will not need to purchase any cows.
. The flock would be “bred up” by increasing the percentage of dairy blood in the cow flock
over time.

33
 12.7 Feed

. Dairy animals will be fed 5 kilogram of concentrate along with 10 kilogram of roughage per head
per day. These feed ingredients when mixed according to feed formula will provide adequate energy
according to energy and protein requirements of animal in production. The total cost of feed for the
first production year estimated to be Br.1,500,000. The list and cost of feed required for dairy farm is
annexed.

12.8 Vaccination & Medicine

Vaccination & medicine is required to prevent any disease outbreak in the animal herd. Each new animal
will be vaccinated before entering the farm. The vaccines and medicine are obtained from the Government
institutes on payment. It will cost Br. 100,000.00 for the first production year.

12.9 Artificial Insemination (AI)s

The Farm will also obtain Artificial Insemination (AI)s on payment according to prescribed schedule
from the government institutes, the charges will be Br 50.00 per cow for a total cost of.Br. 2,500.00
for the first production year

12.10 Utilities
Annual requirements of water and electricity of the dairy farm is estimated to be 20,000 and 500,000
birr respectively. Total cost of utilities for the first year of production is estimated Birr 520,000.00
. The list and cost of utilities required for dairy farm is annexed.
12.11 Pre-Operating cost
The pre-operating activities of the business were for the preparation of bid document, building design
& bill of quantity, license & permit. The total cost of pre- operating cost is Br. 26,000.00. The details
annexed

12.12 Implementation Plan

The Project required 5,000 m2 of land in Chencha Zuria woreda, which is an ideal place for serving
the purpose. The required amount of loan is expected to be obtained in short period of time; the
implementation of the project would not take more than Seven months. The enterprise will start
commercial production as of July, 2024 Action plane of the activities of the project is presented
34
below.

Table 4; Implementation Schedule

No. Activity Time Table

1 Finalized design Apr 2024
2 Bank loan requisition May. 2024
3 Contractual agreement with local April – May 2024
contractor Construction of buildings and
shed
Arrangements of supply of water pipeline, telephone and
electric power line installation
4 Recruitment of personnel &Training for employees June, 2024
5 Purchase of animals feed & dairy supplies July , 2024
6 Purchasing of dairy animals & vehicles August, 2024
Purchase of office equipment
7 Promotion Sep, 2024 and on wards

8 Obtained business license September, 2024and on wards

Start to selling the product for customers

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 13. FINANCIAL BUDGET OF THE INVESTEMENT
13.1 Investment Cost
Investment costs of a project are categorized as fixed and working capital. Fixed investment costs are
costs incurred for construction of fixed assets and/or to acquire asset that are fixed in nature. Working
capitals are to supply inputs required to produce the proposed product items in the production year
and pre operational. The overall investment cost includes fixed cost, pre- operating cost & working
capital estimated at Birr 48,000,000 for details see below

Table 5 INITIAL INVESTMENT COST

No Description Grand Total in ETB
1 Land Building & Civil Works 13,000,000
2 Vehicle 8,000,000
3 Milking processing Equipment 12,000,000
4 Office Furniture and Equipment 500,000
5 Dairy Heifers/cows 7,000,000
6 Pre-Production Expenses* 500,000
7 Total Investment Cost 41,000,000
8 Working Capital 7,000,000
Total Investment cost 48,000,000

12.2 Source of Finance

The total investment cost of the project Birr 48,000,000.00 will be financed from two sources: equity
of the owner and a loan from Bank of Ethiopia. By this, about 70% of the project cost (33,600,000
Birr) will be financed from the Bank, while the remaining balance (14,400,000 Birr) will be from
owner’s equity.

12.3 Project Duration

The life time of the project will be 10 years. The project might be extended above the given period
depending on the profitability of the first 10 years by following the investment rule of the region.

13. Financial Analysis

36
Profit maximization is the overriding factor in most management decisions. Thus, an economic
profitability analysis is necessary to determine whether investing in a dairy farm will result in profit
in the long run. Considering the implementation of the project as planned, the project will remain
profitable right from the beginning., the net profit at initial will be Birr 884,800 which is projected to
increase to about Birr 9,222,083 at the end of the fifth year (with all loan repayment amounts
deducted from the net cash inflows). The cash generating capacity of the project for each period is
found to be significant
Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus
interest on total investment (return on total investment) will show an increasing trend during the life
time of the project. The projected financial statement shows that the project will remain profitable
throughout its life. The details are annexed

14. PROJECT MONITORING AND EVALUATION

Monitoring of the project will be carried out as a continuous process to provide qualitative and
quantitative information & data on the management and technical aspects. The monitoring system
will not only focus on providing data on inputs, outputs and effects but also considers the processes
involved in project implementation. The information so generated in the process will be used to
improve management through guiding management decisions to ensure effective implementation of
the project. The monitoring tool will be monthly report; business report will be done a regular
manner. As a result, monthly reports on the progress business implementation will be prepared from
bottom to top level of management, and a follow up activities according to the schedule.
Yohanes Badage Dairy Farming will conduct evaluation of the project at the end of each phase of the
project implementation. The project management shall establish indicators for monitoring and
evaluation to verify the success of the investment.
The result of the evaluation should be incorporate in to the next project planning and lessons learned
from experience.

15. CONCLUSIONS

37
The future prospect of dairying in Ethiopia is bright since the entry of private firms in the dairy
production will have a significant development indicating the profitability.

Investing on dairy processing in Ethiopia is a profitable business since financially viable with having
a high internal rate of return.
 The financial results show that the project is profitable, although there will be some dependence
on bank for long term loans.
 The proposed Dairy farming project is a viable and could target the identified niche
market in the short term and the regional export market in the long term.
 The strength of the proposed project lies on its strategy aimed at exploiting the interaction
between value addition technologies and opportunities offered by different market players.
 Emphasis on consumer preference to complement the value addition activates is another unique
feature of the project.
It is therefore concluded that the proposed project is financially viable. The demand for quality
milk production is strong and growing, a situation that will ensure adequate milk production
levels and sufficient return to investment.

16. Key assumptions

The financial analysis of the project where based on the data presented in the previous chapters and
the following assumptions: -

16.1 Production Related Assumptions

Two alternative production systems of milk production and dairy are considered in the project. Under
operating costs, the primary component is working capital cost which has been estimated separately
for the milk production and dairy units. There are no feed mills that produce concentrate dairy and so
the project has to source all ingredients/ crop by- products/ to supplement production unit

The project will initiate with 50 pregnant cows in single production year. Over the years the size of
the project will increase gradually reaching the limit of 272 cows in production year. Dairy animals
will be fed 3 kilogram of concentrate along with 7 kilogram of roughage per head per day. The cost
of concentrate and roughage feed per kilogram is estimated to be 5 and 3 birr respectively.

16.2 Cost Related Assumption

38
 Cost Assumptions Price ETB
Purchase price of pregnant heifers 50,000.00 Birr per Head
Revenue estimates are derived mainly from sales of Raw milk

Expected sales Price ETB

Production of milk/ days/head 17 liters/day
Total Number of cows* 50
Number of considered Days in a year 365 Days
Milk selling price per liter amt 50.00 Birr
*Purchasing expense for Dairy animals is kept under fixed costs.
The total cost of land, at the rate of Birr 87 per meter squire, and for 70 years of land holding is
estimated at birr 435,000.00
I. Building and Civil Works
Construction period 7 months
All buildings and construction costs needed for the project are taken from engineers’ estimation
reports or bill of quantities.

II. Equipment, office furniture and equipment and vehicle.

The cost of equipment’s and furniture’s was considered based on Performa invoices submitted by the
owner from concerned suppliers.

Depreciation Rates
Building infrastructure 5% straight line
Machinery and Equipment 10%
Vehicle 20%
Other furniture and other equipment’s 10%
Amortization
Pre-operating cost 15%

Land lease hold amortized over the lease period of 70 years.

The investor will contribute 30% of his own capital as equity and secure a term bank loan (70% of
the total capital payable in 5 years) to finance the project
A grace period of two years will be allowed before loan repayment starts.
 Interest rate: 10% per annum on declining balance and due on quietly basis.

39
 Annexes

Annexed 1 projection of Cost of Production 1- 10 Yr.

4th 6Y 8Y 9Y
Cost 1st Yr. 2nd Yr. 3rd Yr. 5th Yr. 7 Yr. 10 Yr.
Yr. r r r

Feed 1,241,949 1,299,217 1,178,219 1,772,147 2,900,648 2,538,319 3,261,895 4,359,100 5,823,648 7,748,572

Raw milk 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750
Vat
15,000 24,000 23,400 33,000 38,700 47,100 62,400 82,000 110,400 147,300
&Medicine
Artif &
2,500 4,000 3,900 5,500 6,450 7,850 10,400 13,800 18,400 24,550
Inseminate
Water &
103,250 158,000 154,350 212,750 247,425 298,525 391,600 515,700 683,600 908,075
elec.
Labor 459,540 482,517 506,642 531,974 630,572 662,100 695,205 729,965 766,463 804,786
Training
20,250 20,250 20,250 20,250 20,250 20,250 20,250 20,250 20,250 20,250
expense
Cleaning
2,500 2,550 2,601 2,653 2,706 2,760 2,815 2,871 2,928 2,986
supplies
Operating
4,544,895 4,572,572 4,353,534 5,608,625 7,183,807 7,267,849 8,630,924 10,830,036 13758669 17593531
expenses
Promotion 80,000 247,192 227,540 321,870 372,965 430,667 509,194 657,966 872,128 1,136,365
Repairs&
147,277 154,640 162,372 170,490 179,014 187,964 197,362 207,230 217,591 228,470
maintain
Insurance 15,000 16,500 18,150 19,965 21961 24,157 26,572 29,229 32,151 35,366

Fuel & oil 180,000 207,000 238,050 273,757 314,820 362,043 416,349 478,801 550,621 633,214
Rental
26,460 26,460 26,460 26,460 26,460 26,460 26,460 26,460 26,460 26,460
expense
Miscell.
15,000 15,300 15,606 15,918 16,236 16,561 16,892 17,229 17,573 17,924
Supplies
Production 15,572,82 18,728,42 37,538,61
9,827,277 10,085,986 9,668,996 12,319,460 15,857,300 23,350,737 29,507,612
Cost 0 7 1
Depreciatio
273,668 273,668 273,668 273,668 273,668 273,668 273,668 273,668 273,668 273,668
n exp.
Interest
536,044 428,835 321,627 214,418 107,209
expense
Amortize
4,625 4,625 4,625 4,625 4,625 4,625 4,625 4,625 4,625 4,625
for pre. Ope
Amortize for
6,214 6,214 6,214 6,214 6,214 6,214 6,214 6,214 6,214 6,214
land lease
Gen .admi
820,551 713,342 606,134 498,925 391,716 284,507 284,507 284,507 284,507 284,507
& selling ex
Total
10,647,82 15,964,53 19,012,93 37,823,11
production 10,799,328 10,275,130 12,818,385 16,141,807 23,635,244 29,792,119
8 6 4 8
cost

40
 Annexed 2 The Sales Plan of Raw milk, Cheese, butter

Items 1st Yr. 2nd Yr. 3rd Yr. 4th Yr. 5th Yr.
Raw Milk 6,661,850 7,994,220 9,593,064 11,511,677 13,814,012
Cheese 3,843,375 4,612,050 5,534,460 6,641,352 7,969,622
Butter 756,660 907,992 1,089,590 1,307,508 1,569,010
Sub total 11,703,270 14,043,924 16,852,709 20,223,251 24,267,901
Sale of bull calves 69,000 82,800 99,360 119,232 143,078
Sale heifers 175,000 210,000 252,000 302,400 362,880
Sub total 244,000 292,800 351,360 421,632 505,958
Total revenue 11,947,270 14,336,724 17,204,069 20,644,883 24,773,859

Annexed 3 Projection Income Statement

Revenue Year 1 Year 2 Year 3 year -4 year -5
Revenue Generated 11,947,270 14,336,724 17,204,069 20,644,883 24,773,859
Expenses
Direct cost 2,625,699 2,625,699 2,625,699 2,625,699 2,625,699
indirect cost 5,596,672 5,596,672 5,596,672 5,596,672 5,596,672
Pre-operating Expense 500,000 500,000 500,000 500,000 500,000
Deprecation cost 1,863,668 1,863,668 1,863,668 1,863,668 1,863,668
10,586,039.0
Total Expense 10,586,039.00 10,586,039.00 10,586,039.00 10,586,039.00
0
Profit Before Tax 1,361,231 3,750,685 6,618,030 10,058,844 14,187,820

Tax (35%) 476,430.85 1,312,739.75 2,316,310.43 3,520,595.25 4,965,737.03

Net Profit 884,800.15 2,437,945.25 4,301,719.37 6,538,248.31 9,222,083.05

14,162,713.0
Cumulative 884,800.15 3,322,745.40 7,624,464.77 23,384,796.13
8

41
Annexed 4 Projected Cash Flow Statement

Cash Flow Statement

Particulars Year O Year I Year II Year III YearIV Year V
A. Cash Inflow
Own equity 14,400,000
Bank loan 33,600,000
Depreciation 1,863,668 1,863,668 1,863,668 1,863,668 1,863,668
2,437,945.2
Net profit 884,800.15 4,301,719.37 6,538,248.31 9,222,083.05
5
Total inflow 48,000,000 2,748,468 4,301,613 6,165,387 8,401,916 11,085,751
B. Cash outflow
Fixed capital 41,000,000
Working capital 7,000,000 500,000 500,000 500,000 500,000 500,000
Loan repayment 3,360,000.0 3,360,000.00 3,360,000.00 3,360,000.00 3,360,000.00
Total outflow 48,000,000 3,860,000.0 3,860,000.00 3,860,000.00 3,860,000.00 3,860,000.00
Net inflow (A-B) (1,111,531.8) 441,613.25 2,305,387.37 4,541,916.31 7,225,751.05
13,403,136.1
Cumulative balance (1,111,531.8) (-669,918.6) 1,635,468.77 6,177,385.08
3

Annexed 5. Plan of Land Use

The total area required for Dairy Farm and Milk Processing is about 6hector.
Structure unit Size
Main Dairy / Cows /Barn hec 0.75
hec
Young Heifers Facility 0.5
hec
Calf Hutches 0.5
milk extraction house hec 0.5
hec
Milk Room 0.25
hec
Shed 0.75
non- legume hay shad/ feed store / hec 0.5
chopped straw shad hec 0.5
tool/machinery shed hec 0.25
Office hec 0.5
hec
Open Area 0.75
hec
Guard Room 0.25
hec
Total 6

42
 Annex 6 Land, Building & Construction
S.N Description of works Total Cost in birr
1 Site Development 100,000.00
2 Design and supervision 120,000.00
3 1st Year land lease & (10%) down payment 100,000.00
Total 320000.00

Annex 7 Building & Construction

S.N Description of works Total Cost in birr
1 Main Dairy / Cows /Barn 3000000
2 1000000
Young Heifers Facility
3 1000000
Calf Hutches
4 milk extraction house 1000000
5 1000000
Milk Room
7 feed store 1000000
9 tool/machinery shed 2500000
10 Office 2000000
11 500000
Guard Room
Total 13000000

Annex 6: Estimation Cost of Milking Equipment (ETB)

Description Unit U/ cost Total

50,000. 100000
2 00
Water Tank (10,000 Lts)
200,000 200000
standby power supply 1 .00
3 100,000.00 300000
Refrigeration for finished product
Cow Spray Unit 5 2000.00 10000
Total 610000

43
Annexed 7 Cost of milk processing Equipment
It produces more than one dairy product. Dairy processing equipment costs per liter of milk decrease
quickly as the size of a farm increases. A milk process plant that can process 10,000 liter of milk per
day was estimated to cost Br.11,390,000.00 million based on the Performa invoices submitted from
local suppliers.

No Description Qty Total cost

Milk process Equipment
1 Tank insulated 1 1000000
2 External reservoir 1 1000000
3 Parallel filters (set) 1 900000
4 Regulator 1 30000
5 Compact plate pasteurizer 1 2000000
6 Butter mold 4 1000000
7 Butter churn for churning 1 1000000
8 Spiral air compressor 1 2000000
9 Water refrigerator 1 100000
10 Centrifugal pump 1 1000000
11 Connecting pipes, valves, 1 10000
12 Laboratory equipment 1 1000000
13 Balance instrument 1 50000
Automatic filter –sealer
14 1 300000
for plastic bags
Total 11390000

Annexed 8 Vehicles

The vehicles required for the project to transport raw milk from farms to plant and processed milk for
distribution from plant to selling points. The cost of vehicles was considered based on Performa
invoices submitted by the owner from concerned suppliers

Cost / Unit
Vehicles type Nn Total Cost
(Br)

Isuzu(milk tankers installed) 1 3,000,000 3,000,000

Pickup 1 2,000,000 2,000,000

Refrigerated Vehicle 1 3,000,000 3,000,000

Sum 8,000,000.00

44
Annex 9: Estimation the Cost of Office Equipment & Furniture’s
Description Unit Quantity Unit Cost Total cost
Table pcs 10 7,000.00 70,000.00

Chair pcs 18 2,000.00 38,000.00

Cup board pcs 5 1200.00 6,000.00

Shelf pcs 5 10,000.00 50,000.00

Cash box pcs 2 30,000.00 60,000.00

Calculator pcs 4 1000.00 4,000.00

Computer pcs 6 10,000.00 60,000.00

Printer pcs 2 30,000 60,000

Cell phone pcs 2 1000 2000

Lap top pcs 3 50,000 150,000

1 500,000.00

Annexed 10 The Estimated Cost of each Pre- Operating Item & Cost.

No Description Total in ETB

1 Project document preparation fee 20,000.00
2 Building design and bill of quantity 200,000.00
3 Investment licensing fee 10,000.00
4 Construction permit fee and other related services 100,000.00
5 Trailing Cost 50,000.00
6 Site Development 100,000.00
8 1st Year land lease & (10%) down payment 100,000.00

Sub- Total 580,000.00

45
Annexed 11 The Estimated Cost Working Capital Per Month
No Description Total in ETB
1 Purchase of Milk from farmers 200,000.00
2 Animal Feed 1,500,000.00
2 Water 20,000.00
3 Electric city 500,000.00
4 Vaccinations and medicine 100,000
5 Plastic packaging 5birr per kg 300,000
6 Laboratory supplies 100,000
7 Fuel & oil 1000,000
8 Cleaning supplies 10,000
9 Promotion expense 20,000
11 Salary & Benefits 3000000
12 Insurance 5000
13 Tele 5000.00
14 Per-diem 95,000.00
15 Stationary 100000.00
16 Miscellaneous 50,000.00
Total Working Capital for one Month 7,000,000

Annexed 12 Loan repayment schedule

46
The investor will contribute 30% of his own capital as equity and secure a term bank loan 70% to
finance the project Interest rate: 15% per annum on declining balance and due on annual basis.

Principal Total Annual Remaining

Year Interest (15%)
Payment Payment Balance

0 33,600,000.00
1 3,360,000.00 5,040,000.00 8,400,000.00 30,240,000.00
2 3,360,000.00 4,536,000.00 7,896,000.00 26,880,000.00
3 3,360,000.00 4,032,000.00 7,392,000.00 23,520,000.00
4 3,360,000.00 3,528,000.00 6,888,000.00 20,160,000.00
5 3,360,000.00 3,024,000.00 6,384,000.00 16,800,000.00
6 3,360,000.00 2,520,000.00 5,880,000.00 13,440,000.00
7 3,360,000.00 2,016,000.00 5,376,000.00 10,080,000.00
8 3,360,000.00 1,512,000.00 4,872,000.00 6,720,000.00
9 3,360,000.00 1,008,000.00 4,368,000.00 3,360,000.00
10 3,360,000.00 504,000.00 3,864,000.00 0.00

47
Annex 13: Annual Feeding requirement & estimation of feeding cost for cattle(ETB)
4th 8Y
Cost 1st Yr. 2nd Yr. 3rd Yr. 5th Yr. 6Yr 7 Yr. 9Yr 10 Yr.
Yr. r

Feed 1,241,949 1,299,217 1,178,219 1,772,147 2,900,648 2,538,319 3,261,895 4,359,100 5,823,648 7,748,572

Raw milk 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750 1,368,750
Vat
15,000 24,000 23,400 33,000 38,700 47,100 62,400 82,000 110,400 147,300
&Medicine
Artif &
2,500 4,000 3,900 5,500 6,450 7,850 10,400 13,800 18,400 24,550
Inseminate
Water &
103,250 158,000 154,350 212,750 247,425 298,525 391,600 515,700 683,600 908,075
elec.
Labor 459,540 482,517 506,642 531,974 630,572 662,100 695,205 729,965 766,463 804,786
Training
20,250 20,250 20,250 20,250 20,250 20,250 20,250 20,250 20,250 20,250
expense
Cleaning
2,500 2,550 2,601 2,653 2,706 2,760 2,815 2,871 2,928 2,986
supplies
Operating
4,544,895 4,572,572 4,353,534 5,608,625 7,183,807 7,267,849 8,630,924 10,830,036 13758669 17593531
expenses
Promotion 80,000 247,192 227,540 321,870 372,965 430,667 509,194 657,966 872,128 1,136,365
Repairs&
147,277 154,640 162,372 170,490 179,014 187,964 197,362 207,230 217,591 228,470
maintain
Insurance 15,000 16,500 18,150 19,965 21961 24,157 26,572 29,229 32,151 35,366

Fuel & oil 180,000 207,000 238,050 273,757 314,820 362,043 416,349 478,801 550,621 633,214
Rental
26,460 26,460 26,460 26,460 26,460 26,460 26,460 26,460 26,460 26,460
expense
Miscell.
15,000 15,300 15,606 15,918 16,236 16,561 16,892 17,229 17,573 17,924
supplies
Production 15,572,82
9,827,277 10,085,986 9,668,996 12,319,460 15,857,300 18,728,427 23,350,737 29,507,612 37,538,611
Cost 0
Depreciation
273,668 273,668 273,668 273,668 273,668 273,668 273,668 273,668 273,668 273,668
exp.
Interest
536,044 428,835 321,627 214,418 107,209
expense
Amortize for
4,625 4,625 4,625 4,625 4,625 4,625 4,625 4,625 4,625 4,625
pre. ope
Amortize for
6,214 6,214 6,214 6,214 6,214 6,214 6,214 6,214 6,214 6,214
land lease
Gen .admi &
820,551 713,342 606,134 498,925 391,716 284,507 284,507 284,507 284,507 284,507
selling ex
Total 15,964,53
10,647,828 10,799,328 10,275,130 12,818,385 16,141,807 19,012,934 23,635,244 29,792,119 37,823,118
production cost 6

48
 Annexed 14. Fixed Assets depreciation
The depreciation schedule shows the annual amount of depreciation for all project assets, the total of
which is deducted from the net Profit. The straight line method is employed to calculate depreciations
of the project assets. Depreciation schedule of the project is shown in the table below.

Annexed 14: Depreciation Schedule (Birr)

Description Cost Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Building 3,200,000 160000 160000 160000 160000 160000
Milk process equip. 700,000 70,000 70,000 70,000 70,000 70,000
Office Equipment
98,000.00 9,800 9,800 9,800 9,800 9,800
&fu
Vehicles 8,000,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000
Milking equipment 238,680.00 23,868 23,868 23,868 23,868 23,868
depreciation cost 12,236,680 1,863,668 1,863,668 1,863,668 1,863,668 1,863,668

Annexed 15 Amortization

Land lease holding amortized over the lease period 70 years and Pre operational Expenses amortize
10% straight line

Description Cost Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

Land Lease Holding 435,000.00 6,214.28 6,214.28 6,214.28 6,214.28 6,214.28

Pre operational Expense 46,250.00 4,625.00 4,625.00 4,625.00 4,625.00 4,625.00

Total 481,250.00 10,839.28 10,839.28 10,839.28 10,839.28 10,839.28

49