1.

General Information
 The Promoter of the project (Owner): Mr. Yikeber Nibiret Awoke
 Name of the project- DRY COFFEE HULLING INDUSTRY
 Address/site/:
 Region- Gambella Regional State
 Zone – Majang
 District/City- Mengeshi
 Kebele – Yeri
 Legal form of Business : Private
 Sector of the Project : Manifacturing Services
 Total area required : 1.9 Ha(19,000m2)
 Total investment cost: ETB 4,476,137.825 of which (20%) (895,227.565birr) will be covered
from owner’s contribution and the remaining balance 80% (3,580,910.26)is expected to be
covered from bank loan (Development Bank of Ethiopia) lease financing.
 Employment Opportunity: 11 individuals on permanent and 80 on causal basis from both
qualified and unqualified (skilled and un skilled) people.
 Social and Economic Benefit: Provides better employment opportunities for local community
income generation through taxation for the country for and foreign currency
 Labor safety: The envisaged project is assumed to be undertaken by considering workers safety.
The promoter will provide all the necessary safety materials for the permanent and temporary
employees, based on the nature of the activities.
 Environmental Considerations: the proposed project has its own environmental protection plan
and budget. So all the necessary actions will be undertaken on right timely before affecting the
environment.
2. Introduction

In Ethiopia, more than 85% of the population depends on agriculture for their lively hood, and it

indicate the major source of food, industrial, raw material and exportable items are as whole obtained

from it. Generally, agriculture account for 70% of total national economy and over 90% of the

country’s export. So, raising the activities of production and processing and exportable agriculture

commodity has a vital role for economic development of the country.

1
From the agricultural products, coffee is the major important commodity crop that determine the

Ethiopian export and foreign exchange earnings which contribute 52% of the national foreign

exchange earning, 30% government revenue and 25% of the population lively hood depends on the

coffee processing industry.

Ethiopia is the only country where Arabica coffee found as a wild forest species and primary

center/origin/of this species because of its diversification and high genetic variability which is found

mostly in western and southern regions.

Even though our country is the primary origin of coffee Arabica, the amount earned by country as

foreign exchange from this sector is very low due to less productivity per hectare and poor quality of

the product.

The current Ethiopian economic policy, which precisely applied by the government that stimulate the

role of private sectors has been advocated rapidly at different level and took necessary measure to

improve the situation of any investment. One of the significant economic policies which is very

attractive for investment i.e. new proclamation for the promotion and expansion of investment attract

businessmen and there have been initiated to invest on various sectors in the country. Coffee is the

leading export commodity of Ethiopian economy, which is natural endowed with good climate,

geographic factor and topography for growth, and development of tropical crop particularly coffee.

The contribution of coffee to Ethiopian economy is highly significant. About 65% of the country’s

foreign exchange earnings are from coffee and 25% of the population is depending on it for its live

hood through production, processing and marketing of coffee. Because of its superior quality,

Ethiopian coffee has enough customers. As a whole, poor quality coffee is sometimes undesired in

the world market of today. Only high price is paid for best quality coffee which determines price

structure, the demand and survival of coffee industries to produce high quality coffee.

2
Coffee, one of the most consumed beverages in the world, is cultivated in over 70 countries primarily

in Africa, Southeast Asia and Latin America. Ethiopia, the acclaimed birth place of Coffee Arabica

by many scholars, is among the top five producers and one of the leading exporting countries in the

world. As an important export commodity, coffee plays a vital role in cultural and socio-economic

life of the country as it contributes more than 60 per cent of the country's foreign exchange earnings

and influences the livelihood of nearly a quarter of the population, forcing the government to embark

on far reaching economic reform in coffee sub sector resulting in unprecedented leap frog in the

economy. As a matter of fact, coffee to play a vital role in one’s economy has to go through various

steps right from cultivation via processing, packaging, transporting to consumption. Processing itself,

deemed the crucial step in the life cycle of coffee, involves dry and dry processing. Of these, dry

coffee process, also known as washed or natural coffee, is the oldest method of processing coffee and

is used for about 95% of the coffees produced in Ethiopia becoming the potential area for investment.

The entire red cherry after harvest is first cleaned and then placed in the sun to dry on tables or in thin

layers on patios. The red cherries then stored in bulk in special soils until they are sent to the mill

where hulling, sorting, grading and bagging take place. Hulling, the first step in dry milling,

necessitate the establishment of red cherry coffee processing machines that require sizable

investment.

It is this stage of coffee life cycle that interested Mr. Yikeber Nibiret Awoke Dry Coffee Hulling
Industry to invest with the objective of contributing to the final quality of green coffee which would
increase foreign exchange earnings by increasing export product in the first place and given its
tremendous demand of labor to create job opportunity on top of the income it earn the owner. With
this general notion, Mr. Yikeber Nibiret Awoke Dry Coffee Hulling Industry, conducted a pre
proposal survey and figured out Gambella Regional State , Majang Zone ,Mengeshi Wereda ,
Yeri Kebele to be an ideal place to achieve all the objectives mentioned above. Mengeshi Wereda,
one of the coffee producing districts in Majang Zone, is located 645 kilometers from the capital city,
Addis Ababa. To materialize the proposed project two aspects were looked thoroughly in to viz.
3
suitability of project area and environmental impact of the project. As stated, being a major coffee
producing district, lacking adequate dry coffee processing industry that match up the production,
having causal man power, infrastructures, and appeasing investment protection scheme, Mengeshi
Wereda , Yeri Kebele according to the pre survey conducted undoubtly is suitable

3. BACKGROUND INFORMATION

Ethiopian’s economy is based on agricultural sector which employees over 85% of the
population and contributes the highest share to the GDP. Coffee export generated 41% of foreign
exchange earnings and provides income for approximately 8 million stockholder households. Policy
attention to the sector was always considerable, and its importance has been renewed in the latest
poverty Reduction Strategy, the plan for Accelerated and Abstained Development to End poverty
(PASDEP). PASDEP puts forward a development strategy based on accelerated economic growth,
part of which is hope to be achieved via increased private commercialization and market integration.

On the average, farmers ranked 84% of their farm production overall, coffee contributed 70% to the
total value of output sold. There is, however, a high inter-household differentiation: the 85% highly
coffee small holders generated over 95% of their cash income from coffee sales, while the cotton
15% earned 63% of their cash income from Daly labor food from preprocessing. Although in
Mengeshi Wereda, particulary in Yeri kebele coffee production immense agricultural potential
exists for the dry coffee processing is left inactive.

Majang zone is characterized by a rolling topography and steep slopes at higher altitude. The area is
generally highly dissected by several small streams, which drain into the Gilo, Akobo and Alwero
Rivers. Areas below 1000 m a.s.l are relatively flat. The landscape in the area is also dotted by
numerous small wetlands and marshes. Wetlands on the highlands are dominated by ferns, grasses
and bamboo, while the lowland wetlands are dominated by palm trees. The lowland woodlands are
often characterized by clusters of lowland bamboo thickets.
The biosphere reserve area is endowed with diverse species of plants and animals. The area is

important for the conservation of the genetic diversity of many useful plants, and most notably ensete

(Ensete ventricosum) and yam (Dioscoria bulbifera). Over 130 species of birds were recorded from

the area. Characteristic mammals that occur in the area are leopard (Panthera pardus), caracal (Felis

4
caracall), Colobus Monkey (Colobus guereza), and anubis baboon (Papio anubis). Majang zone has a

suitable environment for growing coffee and other agricultural products. It is well know districts by

producing coffee and often a larger area of the district (more than 85%) is covered by coffee, wild

life, minerals and bigger rivers are found in the district.

This area is also known by its organic coffee. Agro forestry is the main activity in producing coffee in
the area. Large numbers of the peasant associations are producing coffee, so; there is a large amount
of coffee production for processing activities of coffee. Sustainability of the economic policy and the
favorability of the location for a large amount of coffee production invited Mr. Yikeber Nibiret
Awoke Dry Coffee Hulling Industry, the investor to invest in the area.

Mr. Yikeber Nibiret Awoke Dry Coffee Hulling Industry is planned to be established and become
operation in Majang Zone ,Mengeshi Wereda , Yeri Kebele.

3.1 Coffee in Ethiopian Economy

When we look at Historical background of coffee in Ethiopia economy, After the downfall of Dergue
regime, coffee acreage increased tremendously. For instance, the acreage increased three- fold from
300,000 hectares in 2006 to 704,000 hectares in 2010. Similarly, coffee production has followed the
same trend, 308,568 tons of green coffee in 2006 to 480,621 tons in 2010 (ICO, 2009). Coffee
marketing activities make coffee one of Ethiopia’s most important sources of farm income and
government revenues. Table 1 illustrates the evolution of foreign exchange earrings as contributed by
coffee and the injection of cash towards the country in the last five years.

The Government, with strong support from development partners, has made different tragic
intervention to enhance the delivery of improved production technologies and support services. 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

5
sector to realize the vision to become a middle-income country (defined as GDP/ capita of USD
1,000) by 2020.

Table 2: share of coffee export earrings and their contribution to national income
Year 2006 2007 2008 2009 2010 1998 to22
compression
%
Coffee coverage (ha) 300,000 435,000 557,000 679,000 704,000 55
Production volume 308568 319145 353570 283000 480621 56
(tones)
Exports coffee share 130.2 168.2 184.4 191 198,24 19.24
(%)
Money injected in 364,565,300 525,430,600 375,838,600 527,662,400 734,534,100 98.4
country (USA)

Source: ICO coffee production statics (www.ico.org) 2010.

3.2 Current policy for the Development of Coffee Sector

3.2.1. Increased productivity
This section will describe some actions the Government is trying to implement in order to tackle
problems associated with coffee subsector performance. This policy adopted in 2006, has two main
objectives (MoFED, 2006): To achieve this objective, the current policy taken in to account the
international coffee price and coffee growers are paid accordingly. The removal of the coffee export
tax will facilitate this. This will enable farmers to be paid high prices giving them incentives to
increase production if world prices are not low. In addition, coffee extension services will focus on
regions suitable for the crop.
The number of extension workers is planned to be increased with an average of three extension agents
for on common centers (peasant associations). Research results highlight commune that need more
extension services to get the highest communes and more extension erosion services to get the highest
pay-off. Other priorities include on-going research on high yield varieties, disease and pests, and
mulching of coffee. MoRD is planning to increase their financial support to research activities of

6
EARO. In addition, loans will be given to farmers’ associations to purchase pruning equipment for
the maintenance of coffee trees.
3.2.2. Improve coffee quality
The challenge is to put in place an economic environment that will support the production of a high
value Coffee. The marketing system is planning to install a differential local price. so incentives are
given to produce high quality coffee. The policy does not, however, mention the creation of grades
and standards to implement the new price structure. To improve coffee quality, the following actions
are to be conducted:
 Implementing free market policy:
 The creation of EXC(Ethiopian commodity Exchange):
 Provide coffee producers with pulping machines to be used in processing the harvest:
 Make available coffee drying trays, materials to repair existing pulping machines and new
pulping machines to be paid by coffee processers through a credit.
3.3 Justification of the Proposed Project

The indigenous coffee trees (which some exports say, are the only native coffee trees in the world)
first grew in Ethiopia. The tree blossomed inane area called ‘’ kafa’’ and the trees were called ’kafa’’,
which may as well be the root word for coffee.
Currently coffee is produced almost all over the country and the major coffee growing regions in
order of the production importance are Oromia, SNNPR, Gambela and Benshangul-Gumuz.
Cultivation of coffee is almost performed by smallholders working either coffee farm or else picking
semi-wild or wild coffee. The land area under coffee plantation and volume of annual production is
difficult to determine because peasant coffee plots are fragmented and intercropped with other crops.
It is estimated, however, that Ethiopia has over 605,600 hectares of coffee plantation and the annual
production ranges from 300,000 to 350,000 metrical tone (about 600kg/ha) depending on weather
condition (MoARD of the total estimated 605,600 hectares of land cropped with coffee today:
Approximately 350,000 (58%) hectare of coffee cultivation is on semi-forest/forest, or
semi-wild/wild land; found in south and southwestern Ethiopia (Bale, West Wolega, Bench-Maji,
Keffaa ,Sheka, Metu and Jimma).
An estimated 235,600 (39%) hectare is under smallholder is cultivation, called ’garden’ or ‘cottage’.
Garden coffee is found in all regions, but especially in the south and eastern parts of Ethiopia (Guji,

7
Western Guji, Sidamo, Gedeo, South and North Omo, Hararghe, Wolega and Gurage Zones) and it is
generally inter-cropped with food staples.
There is also about 2,000 (3%) hectare of coffee plantation under the state farms. In this production
system, recommended agronomic practices like improved seedlings, spacing, proper mulching,
manuring, weeding, shade regulation and pruning are practiced.
It is difficult to accurately estimate the annual coffee production since part of the harvest is gathered
from semi- wild/wild forests and, unlike in most other coffee-producing countries, a good proportion
of output is consumed near its origin. For garden-grown coffee it is also difficult to know the exact
annual production, but estimated on average 0.6 tons per hectare of clean coffee each year. For
forest/semi-forest coffee and commercial farms an estimated average yield of 0.3 to 0.5 tons and 0.80
tons per hectare is harvested each year. Totally about 650,600 hectare from which 332,360 tons of
clean coffee is harvested. As indicated in table blow.
Table1:- Cultivated Area Production and Productivities
Yield (t/ha) Total production
Plantation type Cultivated Area
(HA) % (Tones) %
Forest/semi-forest 350,000.00 58% 0.5 175,000.00 53%

Garden/ cottage 235,600.00 39% 0.6 141,360.00 43%

Commercial farms 20,000.00 3% 0.8 16,000.00 5%

Total 605,600.00 100% 0.63 332,360.00 100%

Ethiopia is famous as the origin of coffee and is the largest producer in Africa and the sixth largest

Arabica coffee producer in the world. Coffee is Ethiopia’s most important industrial and export

commodity and accounts for about 25% of the GDP, 35-40% of the total export earning, 10% of the

total government revenue and absorbs both the rural and urban dwellers directly or indirectly or

depend on coffee for this living.

Export tax on coffee has been important source government revenue, and local taxes on processors

are becoming increasingly important in financing local governments. The transport industry is

largely Benefited from coffee, involved in moving it from producers/ processors to auction for

marketing, and from auction to for port for export. In terms of its importance to the total population,

8
over a million coffee farming households and more than 20% of the total population, are dependent

on coffee production, processing, distribution and export.

3.4 Goal and Objectives

3.4.1 Goal
 To establish and develop financially viable dry coffee hulling plant

 To address the continuous increasing demand for coffee with better quality

3.4.2 Objectives
The main objective of the project is to establish modern dry coffee processing factory that would

supply best quality of exportable clean coffee to central market.

The specific objectives of the project:-

 To contribute the supply of the best quality coffee that can be exported to the world market.
 To benefit the country by raising its foreign exchange earnings.
 To create source of income for the owner of the project
 To create additional source of revenue for the government by paying tax
 To create employment opportunity for skilled and unskilled labor of the surrounding area of
project.
4. Study of the Project Area
Majang zone is characterized by a rolling topography and steep slopes at higher altitude. The area is
generally highly dissected by several small streams, which drain into the Gilo, Akobo and Alwero
Rivers. Areas below 1000 m a.s.l are relatively flat. The landscape in the area is also dotted by
numerous small wetlands and marshes. Wetlands on the highlands are dominated by ferns, grasses
and bamboo, while the lowland wetlands are dominated by palm trees. The lowland woodlands are
often characterized by clusters of lowland bamboo thickets.
The biosphere reserve area is endowed with diverse species of plants and animals. The area is
important for the conservation of the genetic diversity of many useful plants, and most notably ensete
(Ensete ventricosum) and yam (Dioscoria bulbifera). Over 130 species of birds were recorded from
the area. Characteristic mammals that occur in the area are leopard (Panthera pardus), caracal (Felis

9
caracall), Colobus Monkey (Colobus guereza), and anubis baboon (Papio anubis).The site is in
Mengeshi Wereda , Yeri Kebele, and around 650 km from Addis Ababa

4.1 Description of the Project Area

The regions existing investment environment encourage the investors on export related products and

the growing needs of Arabica coffee made the region to be selected for inviting large number of

investors. The number of dry coffee processing industry is less respect to large amount of coffee

product in the area created for this project. Availability of casual laborers, infrastructures, good look

and interest of the people around the project area was the project to be suitable

4.2 Reasons for Preference of this Project

The reasons for selection of the investment include:-

 Availability of suitable coffee production with good combinations of topography, climate and

soil characteristics that allow optimal production of these crops.

 Minimal requirement 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.

 No visible adverse effects on the community and settlement patterns in the project area.

 Profitability of the business

10
5. Socio- Economic Benefit
5.1 Socio- economic benefit for the society

The socio-economic impact of the project is expected to be positive, as the operation area is devoid of
major settlements, precluding any potential displacement or conflicts. The positive impact is more
pronounced in view of the development of an abandoned and uninhabited rural area, bringing large
employment opportunities to the surrounding of industry. As the project required labor for
undertaking its operational activities, a number of people will create new employment opportunity for
about 11 individuals on permanent basis and for up to 80 casual laborers per day for 8 months though
a year.
5.2 Poverty Alleviation
The project will undoubtedly play its role in alleviating the existing poverty level through the creation
of employment opportunity, provision of husk for compost preparation and other social benefits for
the community around the project.
5.3 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-growers’ linkages with the surrounding farmers and the use of the projects
facilities, knowledge and experience, thereby increasing the economic activities of the inhabitants of
the area
5.4 Economic Benefit for the Country
This project will have significant socio-economic benefits, both to the national economy of the

country at large, as well as the zone in particular in which the project is to be established. The direct

benefits will include;

 Supply of the agricultural commodities to the national and export market.

 Substantial increase in zonal government revenue, through taxation.

11
6. General Overview of the Project

Majang Zone in general and the project area in particular are the most ideal places for planting dry

coffee processing industry.The average annual temperature of 25 degree centigrade and sufficient

annual rainfall with fair distribution over months and dry period created favorable condition for

coffee production. Furthermore, altitude of about 1,500m-2,000m above sea level, the type and

quality of soil, suitability the area for construction, the availability of suitable shade trees and the

permanent rivers crossing the area justifies the suitability of skilled and unskilled man power made

the area unbelievable suitable to implement this project.

On the other hand, concerned government line offices have long ago advertised the area as one of the

places where private investors could invest and participate in the development endeavors already

underway in the country. Agreement has also been obtained from concerned bodies at various levels

to implement the intended project. Coffee is the main crop produced and planting the hulling coffee

in the vicinity and the people in the area have good experience in handling and managing the crop.

This would facilitate the possibility of getting experienced human labor for the effective

implementation of the project.

6.1 The Planed Project

This project is planned to benefit the promoter of the project, local communities in and around the
project area, Region and Country at large by processing and supplying improved and high value
exportable Arabica coffee products to central and global markets to meet and satisfy domestic
consumption and export to earn foreign currency. So that the investor and the country will be
benefited from revenue and value added tax (VAT) taxes.
The project encompasses three major components:
1. Process and supply clean coffee to central and global markets
2. Create employment opportunity to local skilled and unskilled people
3. Supporting and solving the prior problems of the local community

12
7. PRODUCTION CAPACITY

The proposed project has an installed capacity of hulling Working Days per Annum assumed to be

250 days ,Net-working Days per month is assumed to be 26 days, Working month per year assumed

to be 8 months, One shift per day is considered, Working Hours per day is 8 hours, Production

capacity of the hulling machine is 1200kg/hr-1,500kg/hr ,Working capital requirement is

considered for one months.

8. Environmental Impact Assessment

This project is designed to Process and promote the production of high value wet coffee by
maintaining the existing environmental system. It also intends to protect the environment from the
potential negative impacts. Thus, in order to establish environmental friendly processing, the new
project site has been thoroughly scrutinized particularly for its vegetation cover and agro ecology to
identify the expected negative impacts of the project.

The major expected threats in red cherry processing are the noise during hulling process and some of
water pollution may occur. However, the designed project area 2-4 apart from other industries in all
direction. Therefore, the environmental management plan realized and minimized the miss balance
effect on the project area of agro-ecology. The by-product of coffee pulp disposed on coffee farm for
the use of compost by supplying to the individual small holder coffee farmers. Furthermore, the
project will apply integrated coffee processing waste management, which is more environmentally
friend form of west control rather than simply disposed to the project surrounding area.

13
9. Market Study
9.1 General Review
The hulling expected to operate intensively 8 months though a year during its peak season; January to
September. The customers are 34 Traders 4 cooperatives registered in Mengeshi woreda Marketing
and cooperative office as dry processed coffee suppliers for central market at Ethiopia commodity
exchange (EXC).
These dry coffee suppliers opt to use this processing industry for its advanced technology and
operating system. On the other hand the accessories and spare parts will be supplied from Mengeshi
or Meti town.
The Ethiopian government in collaboration with regional state let the coffee market to be governed by
free market and international price. This boosts coffee farmer’s real income which in turn stimulates
increased production and quality. According to trade minister 2011 annual report Arabica coffee is
the largest leading crop by production, coverage and trade in the world. The Area under production in
the woreda is still inconstant growth where as the demand of the crop for coffee beverage
consumption is also increasing. In Ethiopia, the production supply of coffee was reached 3.73%
(160000 tons) in 2012 in volume in the world market and 2% export from world export share; which
rank 5th and 12th respectively.
9.2 Demand Analysis
The market for coffee is dictated by quality of final product. Attention to maintenance of quality

during the primary production and processing operations is critical and the quality of the coffee bean

is closely related to the processing technique employed.

The coffee roasters have a wide choice (acidity, beans size and shape, and balanced flavor coffee)

when buying Ethiopian coffees. This diversity of flavors makes Ethiopian coffee unique and it is one

of the best coffees in world. The global specialty coffee market is growing rapidly with an average

annual growth rate of 7.5%. Endowed with tremendous indigenous coffee varieties, Ethiopia can

significantly benefit the growing global demand for specialty coffee.

Ethiopians have various special cultural ceremonies related to coffee and it is traditionally prepared

and drunk two to three times a day and annual per-capita is estimated to about 2.5 kilograms. This

14
culture/ per-capita consumption represents a strong heritage for the country’s sustainable coffee

production, currently consumed more than 40% of the domestic product. This is comparable to the

consumption level of the leading coffee consuming countries hence; coffee in Ethiopian is not

produced for export purpose only, but also to full filling the domestic huge demand.

10. ORGANIZATION AND MANAGEMENT

The organization structure of the organization is arranged in such a way to address business

cooperative principle and practice. To this end the organizational structure needs to have a general

manager, auditor team and a technical department to perform production and marketing roles (see

also above possible structure for market link or chain).

To carry out the day to day activities of the business, however, there will be a separate office

management by a general manager which may consist of technical and administrative staffs under the

operational structure. Although, size of the organization is going to be depend on size of the business

and hence the business cooperative do have a clear organizational structure in order to properly run

and control (manage) the business as depicted here under.

The number and quality of staff members to be recruited will depend on the volume of work for

production and marketing. Under the overall guidance of the board of directors, the general manager

will have full authority to run the business and recruit relevant staff as per the required standard,

demand of production and marketing strategies of the firm. Though the market assessment made

shows that the demand for the product is showing an increasing trend, it is wise also to promote and

create contract farming arrangements so as to make the market more sustainable. For this end, the

farm will introduce quality management systems to continually improve, production outputs, strange

and the marketing process.

10.1 ORGANIZATIONAL STRUCTURE

15
 GENERAL MANAGER

FINANCE MANAGER PRODUCTION MANAGER LOGISTICS AND HR MANAGER

MACHINE OPERATOR
CASHIER CASUAL LABORE
GUARDS

General manager: Mr. Yikeber Nibiret Awoke responsible for overseeing the project,
purchase of equipment and resources, motivation and performance monitoring

10.2 Man power requirement with qualifications

16
Table 4, Manpower requirements

Mr. Yikeber Nibiret Awoke DRY COFFEE PROCESSING INDUSTRY

Indirect Costs
Salary
Position Qualification Requirement Salary Scale Monthly salary Annual

General manager BSC in in management 1 3,000 3,000 36,000

Finance manager Diploma in accounting 1 2,000 2,000 24,000

Production
1 3000 3,000 36,000
manager Diploma in mechanics
Machine operator Diploma in mechanics 1 2,500 2,500 30,000
Logistics and HR
Manager Diploma in HRM 1 2,500 30,000
2,500
secretary and 10th grade plus training
1 1,000 12,000
cashier 1,000
Store keeper 10th grade plus 1 1,000 1,000 12,000
Janitor Grade 8 complete 2 800 1,600 12,800
Guards Grade 8 complete 2 800 1,600 19,200

Total 11 -
18,200 212,000

Table 5, Temporary manpower requirement

Position Qualification No Sex Monthly Salary Annual Salary

Casual employees Unskilled 32 M 24,000 192,000

Casual employees Unskilled 48 F 36,000 288,000

Total 480,000

17
11. Financial Budget of the Project

Total investment cost: ETB 4,476,137.825 of which (20%) (895,227.565birr) will be

covered from owner’s contribution and the remaining balance 80% (3,580,910.26) is
expected to be covered from bank loan (Development Bank of Ethiopia) lease
financing.

11.1 FIXED COSTS

Table 6, Machinery & Equipment Cost

MACHINERY PRICE (1 USD @56.56)

18
 Description UOM Qty Unit price
USD(56.56) ETB
Equipment (Capital Good)
53,651.0
Combined Coffee processing Equipment pcs 1 0 3,034,314.85
Spare part pcs 1 2,451.00 138,620.053
Inland handling Expense in Brazil pcs 1 1,141.00 64,531.00
Sub Total 57,243.00 3,237,465.90

Special discount 14,224.00 804,460.072

Total cost of hulling machine 43,000 2,433,005.828

Diesel Generator 14,124.00 798,804.419
3,231,810.25
Total cost of Hulling Machine and Generator
contingency(10%) 323,181.025
3,554,991.275
Total -

19
11.2 WORKING COST

Salary
Table 7.Indirect Costs

Position Qualification Requirement Salary Scale Monthly salary Annual

General manager BSC in in management 1 3,000 3,000 36,000

Finance manager Diploma in accounting 1 2,000 2,000 24,000

Production manager Diploma in mechanics 1 3000 3,000 36,000

Machine operator 1 2,500 30,000

Diploma in mechanics 2,500
Logistics and HR
Manager Diploma in HRM 1 2,500 30,000
2,500
secretary and cashier 10th grade plus training 1 1,000 12,000
1,000
Store keeper 10th grade plus 1 1,000 12,000
1,000
Janitor Grade 8 complete 2 800 12,800
1,600

Guards Grade 8 complete 2 19,200

800 1,600

Total 11 -
18,200 212,000

N.B:- Salary is assumed to increase 5% per annum

20
Table 8. Insurance
Description Value(Birr) Insurance Rate (%) Insurance Cost

Machinery 2,379,372.963 0.1% 23,793.73

Diesel Generator 876,000.00 0.1% 8,760.00

Total 3,255,372.96 32,553.73

Table 9. Repair and Maintenance

Description Value (in Birr) Rate Cost

Hulling Machinery
2,379,372.963 5% 118,968.648

Diesel Generator 876,000.00 5% 43,800.00

Total 3,255,372.96 162,768.65

Table 10. Depreciation and Amortization

Description Value (in Birr) Rate Cost

Hulling Machinery 237,937.2963

2,379,372.963 10%
Diesel Generator 876,000.00 10% 87,600.00
Total 3,255,372.96 325,537.30

ANNUAL UTILITIES REQUIREMENT AND ESTIMATED COST

Sr. Description Unit of Measure Required Qty Unit Price, Cost( Birr)
No. Birr/Unit
L.C. Total

1 Electric power kWh 20000 1.5 30000 30,000

2 Water m3 150 10.00 1500 1,500

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 Total 31,500 45,000

Table11 .Other costs

Description Annual costs (In Birr)

Travel & Perdium (5% of salary expense) 10,600

Uniform & Protective 5,600
Medical Expense (1% of annual salary) 2,120
Telephone, Postage and Internet 4,000

Audit and Legal Fee 5,000

Miscellaneous Expense 7,000

Total 34,320

11.3. Cost Summery of the Project

Table 12:- Cost summery

Description Unit Amount

Fixed Cost Birr

Machinery & Equipment “ 3,580,910.26

Initial Working Capital “ 895,227.565

Total “ 4,476,137.83

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12. Financial and Economic Analysis

Table 13:- Financing Structure

Equity Share Loan
Description Total Cost % Birr % Birr
Machinery 3,580,910.26 80% 3,580,910.26
Sub – Total 3,580,910.26 3,580,910.26

Initial Working Capital 895,227.565 20% 895,227.565

Total cost 4,476,137.83

12.1 BANK LOAN SCHEDULE

Table: 15. Bank Loan Schedule

Loan Duration: 5 Years

Number of Payments: 60

Interest Rate: 11.5%

Monthly Payment: Birr 78,753.56

Schedule of Payments

Year Beginning Balance Principal Interest Payment Total Payment

Payment

0 3,580,910.26

562,261.55 382,781.10 945,042.65

1 3,018,648.71
630,441.00 945,042.65
2 2,388,207.71 314,601.65
3 1,681,319.88 706,887.83 238,154.80 945,042.63
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 4 888,714.42 792,604.58 152,438.06 945,042.64

5 00 888,715.29 56,327.35 945,042.64

Equal payment system

12.3 BASIC ASSUMPTIONS

Assumptions used for financial estimation

 Working Days per Annum assumed to be 208 days

 Net-working Days per month is assumed to be 26 days

 Working month per year assumed to be 8 months

 One shift per day is considered

 Working Hours per day is 8 hours

 Production capacity of the hulling machine is 1780/hr.

 Working capital requirement is considered for one months.

 The service cost for coffee hulling per Kesha is Birr 300, one kesha equal to 85kg

13. THE FINANCIAL STATEMENT

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13.1 PLANNED ANNUAL HULLING SERVICE

The Market share

Expected
Annual target per Annual target per based on the coffee
Description of Hulling
tone for based on tone for based on production will
Product capacity/
the capacity the capacity assumed to be
Variance
increased by

Processed coffee 2,962 2,962 0.0 10%

Sub Total 2,962 2,962 0.0 10%

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13.2 PLANNED PRODUCTION (PROCESSING SERVICE) FOR THE PROSPECT 5 YEARS

Annual
Annual
Production Production Service Total revenue by
Type of Product Production dry
Year dry coffee per price full capacity
coffee per kasha
tons
Processed coffee year 1 2,962 34,847.059 300 10,454,117.7
Processed coffee year 2 3,258.2 38,331.76 315 12,074,504.4
Processed coffee year 3 3,584.02 42,164.94 330.75 13,946,053.905
Processed coffee year 4 3,942.422 46,381.44 347.29 16,107,810.29
Processed coffee year 5 4,336.67 51,019.65 364.66 18,604,825.56
Processed coffee year 6 4,770.33 56,121.52 382.89 21,488,521.37
Total 268,866.37 92,675,833.23
22,854

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13.3 REVENUE

Annual Production
Type of Product
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Dry coffee
2,962 3,258.2 3,584.02 3,942.422 4,336.67 4,770.33
Total
2,962 3,258.2 3,584.02 3,942.422 4,336.67 4,770.33
13.4 PRODUCTION AT DIFFERENT CAPACITY UTILIZATION RATE

Hulling Years
Service Price
Service Price Year 1 Year 2 Year 3 Year 4
per kasha
per kesha Year 5 Year 6
300 300
10,454,117.7 12,074,504.4 13,946,053.905 16,107,810.29 18,604,825.56 21,488,521.37
Total
Revenue Total Revenue 10,454,117.7 12,074,504.4 13,946,053.905 16,107,810.29 18,604,825.56 21,488,521.37
Hulling Service prices is300 birr per Kesha and service price is going to be increased by 5%.

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13.5 Operating cost projection

Description Project Years

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

1.Direct Costs
Raw materials

Daily laborer wage - - - - - -

Sub-total 480,000 504,000 529,200 555,660 583.443 612,615.15

2.Indirect Costs

Salary 212,000 222,600 233,730 245,416.5 269,958.15 283,456.0575

Insurance 32,553.73 32,553.73 32,553.73 32,553.73 32,553.73 32,553.73

Repair & Maintenance 162,768.65 162,768.65 162,768.65 162,768.65 162,768.65 162,768.65

Travel & Perdium (5% of salary expense) 10,600 10,600 10,600 10,600 10,600 10,600

Uniform & Protective (Birr 800 birr/year for 7 5,600 5,600 5,600 5,600 5,600 5,600
person)
Medical Expense (1% of salary) 2,120 2,120 2,120 2,120 2,120 2,120
Telephone, Postage and Internet 4,000 4,000 4,000 4,000 4,000 4,000

Audit and Legal Fee 5,000 5,000 5,000 5,000 5,000 5,000
Miscellaneous Expenses 7,000 7,000 7,000 7,000 7,000 7,000

Sub-total 441,642 452,242 463,372 499,600.53 513,098.44

475,058.88
Total 921,642 956,242 992,572 1,030,718.88 1,083,043.53 1,125,713.59

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 13.6 INCOME STATEMENT

Description Projection year

year 1 year 2 year 3 year 4 year 5 year 6

Total Revenue 10,454,117.7 12,074,504.4 13,946,053.905 16,107,810.29 18,604,825.56 21,488,521.37

Less Operating Costs 921,642 956,242 992,572 1,030,718.88 1,083,043.53 1,125,713.59

Gross Profit 9,532,475.7 11,118,262.4 12,953,481.905 15,077,091.41 17,521,782.03 20,362,807.78

Less Depreciation 325,537.30 325,537.30 325,537.30 325,537.30 325,537.30 325,537.30

Profit Before Interest and 9,206,938.4 10,792,725.1 12,627,944.305 14,751,554.11 17,196,244.73 20,037,270.48
tax
Less Interest Expense 382,781.10 314,601.65 238,154.80 152,438.06 56,327.35 -
Profit Before tax 8,824,157.3 10,478,123.45 12,389,789.505 14,599,116.05 17,139,917.38 20,037,270.48
Less Profit tax 3,088,455.055 3,667,343.20 4,336,426.32 5,109,690.61 5,998,971.083 7,013,044.668
Net Profit 5,735,702.245 6,810,780.25 8,053,363.185 9,489,425.44 11,140,946.297 13,024,225.812

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 13.7 CASH FLOW

Desciption Years
0 1 2 3 4 5 6
Equity 895,227.565
Loan 3,580,910.26
Net profit 5,735,702.245 6,810,780.25 8,053,363.185 9,489,425.44 11,140,946.297
13,024,225.812
Depreciation 325,537.30 325,537.30 325,537.30 325,537.30 325,537.30 325,537.30

Total Inflow 4,476,137.825 6,061,239.55 7,136,317.55 8,378,900.49 9,814,962.74 11,466,483.60 13,349,763.11

Cash Outflow
Fixed asset 3,580,910.26
loan repayment 945,042.65 945,042.65 945,042.63 945,042.64 945,042.64 -
working capital 895,227.565

Increase in working - 71,618.2 78,780.026 79,496.21 79,567.82 79,574.98

capital
Withdrawal (10%) 606,123.955 713,631.755 837,890.049 981,496.274 1,146,648.36 1,334,976.31

Total Cash Outflow 4,476,137.825 1,551,166.61 1,730,292.61 1,861,712.71 2,006,035.12 2,171,258.82 1,414,551.29

Net Cash flow 4,510,072.94 5,406,024.94 6,517,187.78 7,808,927.62 9,295,224.78 11,935,211.82

Cumulative Cash flow 4,510,072.94 9,916,097.88 16,433,285.66 24,242,213.28 33,537,438.06 45,472,649.88

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13.8 BALANCE SHEET

Description Project Years

0 1 2 3 4 5 6

A. ASSETS

Current Assets

Cash 4,510,072.94 9,916,097.88 16,433,285.66 24,242,213.28 33,537,438.06 45,472,649.88

Inventory
Total Current
Assets
Fixed Assets
Hulling Machinery 2,617,310.256
Generator 963,600.00
Total Fixed Asset 3,580,910.26

B. LIABILITY

DBE Loan 3,580,910.26 1,681,319.88 888,715.29 - -

3,018,648.71 2,388,207.71
Total Liability 3,580,910.26 1,681,319.88 888,715.29 - -
3,018,648.71 2,388,207.71
C. CAPITAL
Equity contribution 895,227.565 716,182.052 716,182.052 716,182.052 716,182.052 716,182.052 716,182.052
Retained earning 4,510,072.94 9,916,097.88 16,433,285.66 24,242,213.28 33,537,438.06 45,472,649.88

Total Capital 4,476,137.825 5,226,254.99 10,632,279.93 17,149,467.71 24,958,395.33 34,253,620.11 46,188,831.93

Total Liab. & capital 4,476,137.825 8,244,903.7 13,020,487.64 18,830,787.59 25,847,109.75 34,253,620.11 46,188,831.93

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14

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 13.9 CONCLUSION

As shown and deeply discussed in this document, the project is expected to be financially
profitable and will be conducted in environmental friendly way. In addition to creating both
permanent and temporary employment opportunities for local communities and some others
professionals, it also will generate income for the government in terms of maximizing income
tax in a considerable manner considerable.

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