1.

Introduction
One of the important variables for economic development and growth is the
mobilization of domestic savings and availability of funds for production
purposes.

The slow process of economic development in the third world today is attributed to
the shortage of capital funds, in such countries most of the capital fund is generated
from agriculture sector. Small holder farmers dominate agriculture. The sector is
predominately primitive and production processes are carried out by hand tools and
back work farming practices, hence, capital fund for further investment national
economy are very limited. Ethiopia is believed to be highly endowed with vast
natural resources. However, due to the shortages of investment capital and in
ability to utilize its natural resources, country was affected by famine, mass
poverty and unemployment.

During past government, the country was spending its meager investment capital
on military expenditures, unproductive sector and on luxurious consumption items;
investment on productive activities was, therefore, very low.

Now in Ethiopia the potential livestock development is enormous, which can be

viewed as an opportunity area for exploiting. Such a vast economic resource with
this regards currently Ethiopia is placed one up to tenth in the Africa and the world
respectively in its livestock population. Ethiopia is currently supposed to have
stock of 53.99 million cattle, 24.06 million Goat, 25.5 million Sheep and more than
0.92 million camel population in the country.

In spite of an abundant livestock and nature resource endowment factors like

malnutrition, prevalence of livestock disease, poor breeding and management
practices, physical constraints and technology backwardness have kept the
livestock development sub-sector at an extremely low level of development.

The livestock sub-sector is not an exception to the general backward production

technology in Ethiopia agricultural. There is various traditional livestock
production system ranging from low land to highland settlers, however, all are
found at poor standard of breeding, feeding and health management. The
traditional animal husbandry is characterized by under nutrition and malnutrition
and is often seriously affected by some endemic disease. This is because the
peasant considers livestock resource as asset of quantity rather than asset quality. It
is not accustomed for the peasant to provide prepared animal feed except the
animals to shortage of grass and water leading ultimately to loss of their lives
veterinary services is either not available of not accustomed by the herders, due to
the factors problems discussed above the contribution of livestock to farm, income
is low, physical and value of productivity of livestock is low. This low level of
production for dairy products from domestic production, compelling the country to
import dairy products from abroad.

While this is the actual status of livestock development in the country, there exists
a tremendous potential in improving livestock productivity. There is already large
livestock population from which the prospect starts. There are also some nature
breeds that indicate existence of the capacity to produce better quality milk.

In this regard, introducing modern dairy development farm and processing would
contribute to domestic supply of milk and milk products. In addition, the present
government policy is encouraging in providing incentives of different type. To
make use of such opportunity, the promoter of this project, has planned to establish
dairy development farm and processing in Oromia region West Shoa Zone, Ejersa
Lafo Woreda, Qela Imbortu Kebele.

2. PHYSICAL CONDITION OF THE PROJECT AREA

2.1 LOCATION

The project under the study is located in Oromia regional state West Shoa Zone,
Ejersa Lafo Woreda, Qela Imbortu Kebele. The Woreda is located about 63km
from Addis Abeba. The total planned land area is 5000sq.m to be secured based on
the rural land lease policy of the region.

2.2 CLIMATED

The project area with an average altitude of 1940 meters above sea level has a sub-
tropical type of climate. The area in general has adequate rainfall and shortage has
not been encountered in the past. The major crops growth in the project area
include teff, wheat and pulses, livestock rearing especially cattle and poultry
occupy a substantial portion of the economy of the peasant in the area.
 2.3TOPOGRAPY

As indicated from evaluation of the land Ejersa Lafo is located on nearly high
lands which have given great expectation in free of natural disaster like, earth
quick and environmental degradation.

2.4INFRASTRUCTURE SERVICES

Since the feasibility/site/ of the project is 5m from town of Woreda and nearer to
the road, this road are connect to zonal city (Ambo) and capital city of the country
Addis Abeba which mean many customers are exposed to buy products, the project
has an advantage over its competitors, while others start such similar project nearer
to this project. In the same manner, facilities like Tele, Fax internet services are
fully accepts which make the owner more informative to current technologies.

2.5SOCIO-ECONOMIC CONDITION

The majority of the population in the project area is engaged in business activity
and agriculture to make their life. The activities of agriculture include production
of crops and animal husbandry varieties of crops are grown at the area including
teff, wheat, barley and other stable crops. Farming is predominantly characterized
by traditional system of production. That is, manual tools and animal draft power
are used in land cultivation and harvesting.

With regard to the livestock sub-sector, number of animals that one possesses in
one of the measures of his/her wealth. It is traditionally preferred by the peasant to
have a greater number of animals handled in more power ways, livestock resource
is used for the peasant as source of food and income. It provides them with food in
the form of meat and milk products and the animals and sold when cash is needed
for other purposes.

The rest of the population in the project area is partly earning their livelihood from
small trading activities.

3. THE PROJECT DESCRIPTION

The proposed project is to established modern dairy farm and processing in

Oromia regional state West Shoa Zone, Ejersa Lafo Woreda, Qela Imbortu Kebele.
The project will start in planned development with 20 selected Friesian/cross breed
pregnant cows of the total volume of milk planned to be produced 60% will be sold
as whole milk and the remaining 40% will be processed to produce butter, cheese
and cream and supply to local market.

4. OBJECTIVE OF THE PROJECT

The dairy farm and processing project is established to promote the following
objectives.

1. To create employment opportunities to the surrounding population specially

women and increase their earning as well as change their working norm and
way of life.
2. To contribute the supply of better quality milk and products, and thereby
enabling consumer of the produce to get its increase supply.
3. To create source of income for the owner and his family.
4. To improve dairy development activity of the region.
5. To create additional source of income for the government.

5. MARKET ASSESSMENT

Market of the project output will mainly be the domestic market. Milk is used as
immediate available animal products to be purchased specially from price point of
view next to start. Rapid population growth and the expansion of urbanization
create high demand for milk dairy products in urban area. The main target market
of the intended venture is Ejersa Lafo and other surrounding area such as Ginchi,
Ambo, Addisalem, Holota, Addis Abeba and other towns where there is large
potential market for the livesock products.

5.1 MARKETING STRATEGIES

The company intends on using a number of marketing strategies that will allow the
project to easily target new users within the target of market. These strategies
include traditional print advertisements, FM Radios and TV. Below is a description
of how the business intends to market its services to the general public. The
company will also develop its own online website showcasing the service offered
by the hotels.
 5.2 BENEFICIARIES OF THE PROJECT

Different groups may be benefited from the successful implementation of the

projects, the surrounding peasant and potential investors in the field will be able to
learn gainful experience from the project. The promoter of the project and the
employees will have an important sources of income. The government will have an
additional source of tax revenue and foreign currency. Finally, the supply of milk
and milk product will increase and be available for consumers at competitive
prices.

6. MANAGEMENT AND ORGANIZATION

Shimelis Lulu will be the proprietor of this project. The proprietor’s academic
background and business experiences reveals as he has completed grade 10 and
has work experience in different business activity.

The proprietor project will use technology innovations, and operates with
certain amount of borrowed capital. Since the project in the world of limited
resource, decision-making how to use this resource in their best possible way is
an essential matter. To make these decisions, skilled and competent
management body is required.

The project will follow efficient management procedures. The project will be
run the day to day operation by consisting of skilled, semi- skilled and unskilled
workers to be employed by the project with attractive monthly salary.

Each operation of the project, therefore, will run under close supervision of the
owner and the manager. The term leader and the manager will carry decision-
making, administration and technology matters of the project, with the
awareness of the owner.

Therefore, the management of the project will be competent enough and will
not face problem.

More specifically, the duties and responsibilities of the farm manager will be:

1. To prepares rules and regulations that are practical for projects

administrations.
2. To checks constantly if staffs are functionally employed.
 3. To prepares the monthly and annual budget, and present to the proprietor for
approval.
4. To organize strategies and means to promote sales.
5. To be responsible to purchase and sign cheque when delegated by the
proprietor.
6. To check the date of sales report.
7. To check if tax and liabilities are paid on time.
8. To check if the project is profitable, output quality is maintained and prices
are when a competitive range, and
9. To check bank loans and other payment are affected on time.
6.1 MANPOWER REQUIREMENT OF THE PROJECT

The project under consideration will create permanent employment opportunity for
about 10 employees and 15 temporary workers. Manpower requirement and annual
salary of the project is given in the following table.

No Description Unit Quantity Monthly Total Total

salary monthly annual
salary salary
1 Manager no 1 5000.00 5000.00 60,000.00
2 Accountant no 1 1500.00 1500.00 18,000.00
3 Milkman &feeder no 1 1000.00 1000.00 12,000.00
4 Veterinarian no 1 2000.00 2000.00 24,000.00
5 Cleaners no 1 600.00 1200.00 14,000.00
6 Driver no 1 1500.00 1500.00 18,400.00
7 Processing workers no 1 1200.00 1200.00 14,000.00
8 Store keepers no 1 950.00 950.00 11,400.00
9 Guards no 1 600.00 600.00 7,200.00
Total 10.0 14,350.00 14,350.00 14,950.00 179,400.00
0

7. FINANCIAL ANALYSIS
7.1 CAPITAL EXPENSES

Capital is defined here as money used for the purchase of capital items, construct
the structure and purchase other farm inputs, cover other costs of the project.
Capital expenditures are equivalent to the total financial requirements of the
project. Capital expenditures are equivalent to the total financial requirements of
the project. In other words, they are initial investment out lays required to enter
operational stage. These capital expenditures are constituted of fixed investment
costs and initial working capital, which is equal to 2,000,000.00.

7.2 FIXED INVESTMENT

Fixed capital costs are expenditures on the required fixed assets. The major
components of fixed costs are constituted of expenditures on machinery and
equipment. The rest will go to construction of civil works purchase, if stock and
the acquisition of office facilities. According to estimate made by this project, the
total fixed cost will be 1,600,000.00.

Summary of statement cost

No Description Local Cost (birr) Total Cost(birr)

1 Machinery and equipment 850,000.00 850,000.00
2 Building and civil cost 180,000.00 180,000.00
3 Office equipment 70,000.00 70,000.00
4 Foundation stock 500,000.00 500,000.00
Total Fixed 1,600,000.00 1,600,000.00
5 Initial working capital 400,000.00 400,000.00
Total initial investment 2,000,000.00 2,000,000.00

7.3 WORKING CAPITAL

Working capital is part of annual operating costs and is required to make the
project operational. Except for some operational costs whose yearly expenses were
taken as they are, some limited month’s expenses were taken to forecast the
working capital requirement of the project. According to the forecast made in
detail, the amount of initial working capital is found to be 400,000.00

7.4 SOURCE OF CAPITAL EXPENDITURES

The forecasted project capital is planned to be raised from two sources. These two
sources are the proprietors. Equity and Loan from one of local banks. The owners
of the project plans to raise 20% of the total capital while the remaining 80% is
assumed to be obtained from one of the local bank. Total capital plans are
2,000,000.00.

Sources of fund

No Source % Total Fund

1 Owners’ Equity 20 400,000.00
2 Bank Loan 800 1,600,000.00
Total 100 2,000,000.00

7.5 OPERATING COSTS

Operating costs include all project expenses other than fixed investment they are
expenditures to be spent on annual operating items. Annual operating costs in the
first year of the project life are estimated to be birr 508,282 because of increase in
capacity utilization; annual operating costs are expected to rise to birr 1,224,002 at
the end of 10th year. In estimated operating costs, it has been fried to.

Depend on current market information and on the experiences of similar projects.

7.6 PROJECT INCOME

The project earns its revenue by selling the proposed output. To be competitive in
the market, the selling price of the projects outputs is determined in such a way
that it does not impose higher price on ultimate consumer. Accordingly, the project
expects total revenue of birr 10,147,400 at the end of 10th year.

7.7 FINANCIAL VIABILITY

As it is private firm establishes with establish with the primary objective of

generating profit, the project should be financially viable for the proprietors, and
lending institution. To this end, some financial statements were selected to
compare project costs and benefits throughout the project life. This financial
measure for this study is income statement.

7.8 INCOME STATEMENT

Here, project revenue and production cost (operating costs, depreciation and ban
interest) are listed and compared to see whether the project generates profit or lose.
According to the forecasted income statement table, the project is found profitable
throughout its life. The amount of the net profit to be generated by the project
varies from birr 1,281,922 at the end of the first year to birr 3,162,037 at the end of
tenth year.