PROJECT PROPOSAL

ON
PAPER AND PLASTIC PACKING
MATERIALS MANUFACTURING
INDUSTRY

PROMOTER: - ATO YONAS KASSA ABEBE

PROJECT LOCATION: SPECIAL ZONE OF OROMIA

SURROUNDING FINFINE-KOLOBO TOWN

JANUARY, 2017
ADDIS ABABA, ETHIOPIA

Contents

0
I.EXCUTIVE SUMMARY......................................................................................3
1. Background........................................................................................4
1.1 Brief History of the enterprise and the promoter.........................................................5
1.2. Scope and Objectives of the project............................................................................6
1.2.1 Project Objectives.....................................................................................................6
1.2.2 Project Justification...................................................................................................6
1.2.3 Expectations of the Project Owner............................................................................7
1.2.4 Preliminary Analysis of the availability of collaborating Institutions for the
project.....................................................................................................................7
1.2.5 Land Layout Action...............................................................................................8
1.2.6. Location Map of the area.........................................................................................8
2. Market Study for Production of Packing Materials....................................9
2.1 General Review and Analysis of Market Situations of the entire industry..................9
2.1.1 Review of the Ethiopian Trade and Industry Development Policy &
Strategy..................................................................................................................9
2.1.2 Demand & Supply Analysis of the Production of Packing Materials.....................13
2.1.5 Analysis of the prices of Packing Materials and related materials.........................14
3. Project Description and Technical Viability.............................................15
3.1 Project Goal...............................................................................................................15
3.2 Location and Physical characteristics........................................................................15
b, 16
3.4 Water and Power Supply System Works...................................................................17
3.4.1 Water Sources.........................................................................................................17
3.4 Project Design and Engineering.................................................................................17
3.4.1 Plant Lay out and Construction Works...................................................................17
3.4.2 Machinery and Equipments.....................................................................................18
3.4.3 Packing Materials Production and Processing........................................................18
3.5 Project Life.................................................................................................................20
4. Organizational Structure and Manpower..................................................20
5. Environmental Impact Assessment and Social Viability......................23
5.2 Public Consultation and Social Acceptability of the Project.....................................23
6. Financial Analysis.........................................................................................24

1
6.1. Financial Requirement....................................................................24
6.2. Budget Breakdowns.............................................................................................24
6.2.1. FIXED INVESTMENT.......................................................................................24
6.2.2. WORKING CAPITAL...........................................................................................26
Sources of Fund:...............................................................................................29
FINANCIAL STATEMENT............................................................................31
7. Future Development & Exit Strategies..........................................33
8. Environmental Impact....................................................................34

2
 I.EXCUTIVE SUMMARY
1.Project Name Buzayehu Endale Paper And Plastic Packing Materials
Manufacturing
2.Project Owners Ato Yonas Kassa Abebe
3.Nationality Ethiopian
4.Project location Oromia Regional State, Special Zone of Oromia
Surrounding Finfine-Kolobo Town

5.Project Packing Material Manufacturing

Composition

6.Primeses Required 5,000m2

7. Startup Capital The financial resource is a prime resource for

undertaking any activities. Hence, the total budget for
implementing this project is estimated at Eth birr
66,011,468.35 Out of the total budget of the project

30% or 19,803,440.505 birr will be covered by the

owner equity, while the rest 70% or 46,208,027.845 birr
will be covered by financial institutions.

8.Employment This project deemed to employ a total of 232

Opportunity individuals 132 permanent (120 skilled, 12
unskilled )& 100 temporary (72 skilled 28 unskilled)
employees
9. For The region/ Source of government revenue through taxation and
country help in import substitution policy of the government by
domestically producing packing materials.

3
Chapter One
1. Background
The manufacturing industries play a great role in total economic growth GDP of a
country. In active economic environment, like the one currently exist in Ethiopia, the
development of industry and supportive manufacturing sector has a great role to make
the overall economic growth to be persistent. The government of Ethiopia has
developed a conducive investment policy packages and other sect oral reforms at
federal and regional level to attract a huge private investment for the wellbeing of the
nation and its citizens as a whole. Besides, it is also currently implementing the five
years growth and transformation plan that gave a space for industrialization. In this
regard, the plastic industries, like carton factory has a great role in for backward and
forward linkage across the sector. The government of the country is promoting the
manufacturing project and excreting its maximum effort to expand investment
opportunities in the country by designing different policies and strategies that will
facilitate the sector through attracting both domestic and foreign investors. Likewise,
the Oromia regional state government has been working day and night to make
poverty history by making its door open to investors both (domestic country and
foreign) to come and invest in the region. Therefore, it is this ample opportunity that
attracts the promoter Ato Yonas Kassa Abebe plan to invest on Paper And Plastic
Packing Materials manufacturing project on his residential place of Oromia reginal
state Special Zone of Oromia Surrounding Finfine-Kolobo Town. The company has a
long term business experience in similar business undertaking in different fabrication
and manufacturing sector.

The present economic policy of our country is highly inviting the private sector to
respond to the government invitation, there by contributing their share to the
development process. In line with this, the envisaged project is identified by the
owner.
This project proposal is prepared based on the existing natural, financial and human
resources with reference to its marketing situation and profitability. Therefore, this
proposal tries to analysis the socio economic justifications, commercial feasibility and

4
the finical variability of Paper And Plastic Packing Materials manufacturing in
different parts of the country.

The owner of the envisioned Paper And Plastic Packing Materials factory planned to
invest in Special Zone of Oromia Surrounding Finfine-Kolobo Town, Oromia
regional State, and carried out this pre-project study to check the market, technical
and financial feasibility of this project. The result of the study is very sound and
promising for the owner to start the project in this area.

The promoters are very determined to commence the project. Hence, they expect to
get the required support from the regional and local governments to make the project
operational.

1.1 Brief History of the enterprise and the promoter

Yonas Kassa Abebe is a private investor involved on different business activities in
Batu area more over he is experienced on field of agriculture and manufacturing. The
envisaged Packing Material Paper And Plastic Packing Materials Production
Company will established by Ato Yonas Kassa Abebe, from their long years
experience acquired from working on such business enable them to establish the
business. Consequently, he has developed an interest to bring some of the ideas which
make him very impressive and share to our people and the country. They are very
pleased to establish modern Packing materials Production Project at Special Zone of
Oromia Surrounding Finfine-Kolobo Town .
Yonas Kassa Abebe Packing Materials Company is highly dedicated to work in
promoting export of Ethiopian products, where Ethiopia can have various
comparative advantages through availing quality packing materials that assists
holding of both the exported items and other products in the country. By this specific
project, Yonas Kassa Abebe Packing Materials Production company wants to produce
quality Packing Materials that properly holds the producers of the country and
hinders loss of products due to lack of proper packing materials. Having proper
packing materials ensure the gain of Ethiopia by avoiding any loss that would have
been occurring during storing, holding, distribution or transportation of a product
either to abroad or within a country. It also encourages the owner, manufacturing
sectors and producers as well as other industries with continuous linkages of receiving
and giving of raw materials to and from many of these customers and vice versa.

5
The project will have significant contribution towards the development of social and
economic aspects of the country. The proposed plant project will create employment
opportunities for a number of workers and it is expected to recruit more number of
employees when the implementation program is completed.

1.2. Scope and Objectives of the project

1.2.1 Project Objectives

The foreseen project has primary and secondary objectives. The Primary objective is
to carry out Packing materials production and marketing while the Secondary
objectives are to generate additional revenue for the country through increasing the
tax base and additional income for the owner, to identify other additional markets for
the products and increase values for the Ethiopian products by increasing value added
through packing materials industry, better handling and packaging, that meets to the
required phytho-sanitary standards, to generate additional employment among the
rural poor, and to enable the country supply healthy and quality products.

1.2.2 Project Justification

Even though there is a paradigm shift in Ethiopia’s development policies, and export
promotion strategies that enabled Ethiopian produce increased volume of agricultural
and industrial products, however, Ethiopia is not getting the proportionate advantages
of its increased production and productivity. The main reason for this, among many
factors is that the yield or product loses resulted from lack of proper packing
materials, loss of yield by pests and rodents, lack of clean and proper storage. All of
the aforementioned bottlenecks are in one or the other way related with lack of
appropriate packing materials. This is to say proper packing materials can
significantly reduce product loses that occurred due to lack of clean and proper
storage, or it reduces the damage occurred by pests and rodents and/ or it can avoid
loses or damages occurred on products during transporting the products from one end
of the country to the other end.
Packing materials production project is one of the most viable alternatives to achieve
this end. Some of the main favorable environmental and other conditions which make

6
the implementation of the project feasible include: availability of suitable climate that
made it possible to possess higher number of inputs to produce Packing materials,
availability of water , proximity to international markets like Middle east markets, and
existing of best economic policy in the country that encourages private investments in
general and investing in Packing materials in particular are few of the existing
favorable conditions in the country that makes the project feasible.

1.2.3 Expectations of the Project Owner

From various discussions conducted with the owner of the project, the followings are
squeezed from his expectations:
 The owner has high interest to produce quality and appropriate packing
materials of Paper And Plastic Packing Materials, in type, size, thickness,
quantity and other requirements based on the demands of customers.
 The promoter also expecting to have adequate credit access from the
national financial institutions to produce quality and appropriate packing
materials at reasonable interest rate. He is also expecting that the existing
attractive investment initiatives for private sector will continue.
 It is also envisaged to work in environmentally friendly manner through
reduction of the release of wastes to the environment.

1.2.4 Preliminary Analysis of the availability of collaborating

Institutions for the project

The most important institutions/services related to Packing materials Project can be

listed as: The Ethiopian Agricultural inputs Promotion Agency, The Ministry of
Agriculture and Rural Development, The Oromia Bureau of Agriculture and Rural
Development, The pastoralist development Commission, The Oromia investment
commission, The federal investment agency, The National Marketing agency of
livestock and livestock products, and The Ministry of Trade and Industry
Development. The mentioned eight institutions seem to have had strong impact on
packing materials production and marketing project.

Therefore, the institutions have strong desire to the establishment of this new project
that will work in the area of packing materials development. They all are committed

7
to provide all possible assistances to make the vision of the project real enough so that
Ethiopia shall realize the gain of Ethiopia on sustainable basis.

1.2.5 Land Layout Action

S.N Description Land Size/M2
1 Production Hall
1.1 Workshop 650
1.2 Quality control 550
1.3 Production Hall 1000
1.4 Boiler and Utilities section 500
Total production hall area 2700
2 Warehouse
2.1 Raw Material & Input 400
2.2 End Products and packing room 400
Total warehouse area 800
3 Office Building 400
4 loading un loading space 900
5 Waste Accumulation area 200
Total 5,000.00

1.2.6. Location Map of the area

Kolobo

8
Chapter Two

2. Market Study for Production of Packing Materials

2.1 General Review and Analysis of Market Situations of the entire

industry

2.1.1 Review of the Ethiopian Trade and Industry Development Policy &
Strategy

The Industrial development in Ethiopia is still in its infancy and has a narrow base.
Moreover, its linkage with the agricultural sector is weak. Nevertheless, due to an
array of reforms and the opening up of the economy and the creation of conducive
investment environment, a steady growth of industrial and trade has been registered in
the past years. Some notable results have also been achieved during the last four
years. There has been a surge in investment, a sustained growth in exports and
increased employment generation.

According to various reports, with the return of peace and economic stability in the
country, there has been renewed confidence, and a surge in business activity. For
example, value-added in industrial output grew by 7% and in services by 6.7% on
average during in the last three years (2002/03 to 2004/05).

The same report underlined that the integration and interdependence between the
agricultural and industrial sectors play a key role to accelerate the country's economic
development and to bring about socio-economic transformation. As indicated above,
under the prevailing circumstances, the linkages between the two productive sectors
have remained very weak; and the industrial base of the economy has continued to be
very limited. The share of the industrial sector including manufacturing, construction,
hydropower, and mining, has not exceeded 14% of GDP on average; of which the
manufacturing sub-sector (cottage industry, small and micro enterprises and medium
and large scale manufacturing industries) accounts for 5.5% of GDP on average. The

9
average share of manufactured products to total exports does not exceed 5% of GDP
on average as well.
The agricultural sector plays a major role in supplying inputs to the industrial sector
as well as creating the market for outputs of the industrial sector. The on-going ADLI
strategy, designed to address the underlying structural problems is aimed to achieve
critical objectives.

The strategy, in addition to improving the condition of food security in the country,
supports the provision of the required raw materials and inputs to the industrial sector.
Furthermore, the foreign exchange earned from export of agricultural products serves
as a means to import the necessary inputs, raw materials and machineries for the
industrial sector. Likewise, as the income of the farming population improves, it
becomes the main user of industrial consumption goods, agricultural machineries, and
investment goods. This will in turn create opportunities for further expansion of the
industrial sector.

The linkages between the agricultural and industrial sector also provides the
opportunity for the expansion of the service sectors i.e., domestic trade, transport,
banking and finance, and the tourism sectors. The overall outcome of the above
features is the major contributing factor for the envisaged accelerated development
and social and economic transformation. Hence, the overall strategic framework is
comprised of the government’s Industrial Development Strategy, implementation of
the findings of the Diagnostic Trade Integration Study (DTIS), the ongoing
Privatization Program, and the National Micro and Small Enterprises Development
Strategy.

The industrial and trade development policy of the country has emphasized that a
sustainable and fast industrial development can only be ensured if the sector is
competitive in the international market. Hence, it needs to be exposed to the rigorous
of the international market. Apart from its linkage with agriculture, it should be export
oriented and led by the industrial export sector. So far, useful experience has been
gained by implementing the strategy. It also underlined that in order to successfully
implement the strategy; the state has focused on three areas, namely: Providing

10
support to the private sector; Coordinating & guiding the activities of all stakeholders;
and, addressing market failures.

The same document has stressed that as limitations on implementing capability and
shortage of finance are the major challenges to be faced, the appropriate polices and
strategies must be manifested in. To alleviate shortage of finance, domestic banks will
be strengthened to be efficient and effective in loan disbursement and re-collection. In
addition to earning more foreign exchange through export, seeking additional sources
of credit facilities could also be pursued to address problems of finance.

One of the strategies of the Government to accelerate economic development and to

improve the living standards of the people is the Industrial Development Strategy.
The strategy is prepared based on ADLI and is being implemented since 2001/02. The
underlying objective of the strategy is to increase the benefits earned from economic
integration with an ultimate goal of becoming an industrialized country. This involves
strengthening of inter-sectoral linkages (between agriculture and industry) on the
domestic front and through exploiting the potentials and opportunities of regional and
global economic integration. The rural-centered ADLI within the framework of a free
market economy is the principal driving force of the strategy.

A major increase in export earnings (20-25% per annum) is central to the strategy.
Equally important is the diversification of exports, to move away from the traditional
reliance on coffee and other agricultural products to reduce vulnerability to price
swings, and to increase the range of options for future potential growth. Diversifying
export item and imposing value added on export products help to stabilize the
country's annual export revenue.
As a result, of the implementation of proper policies, the activities undertaken during
the past three years contributed for better performance of the export sector. The
objective is to expand this kind of experience to other sectors. Accordingly, the
Government is undertaking sector and product specific studies to help identify market
opportunities and constraints, and to provide fuller information to potential exporters.

Moreover, the government has underlined to create conducive environment for

industrial development and investment, through maintaining macroeconomic stability;
Maintaining security, a stable environment for sustainable investment; Building a

11
functioning and well-regulated financial sector; Investing in infrastructure; transport
and telecommunications that lower the cost of business, and provision of reliable
water supply, and power that are essential inputs to any industrial activity; Ensuring
the availability of land; Establish agricultural information system to support
development efforts and Establish an efficient legal framework and contract
enforcement, and other administration systems;

By the end of (2009/10), export earnings from goods and services are
expected/targeted to reach 15 to 20% of GDP. While the supply response needs to
come from the private sector, the Government can assist by engaging in private-public
dialogue to help identify external constraints, and negotiate to mitigate them. Among
the initiatives, improving the reliability of transport and telecommunication links and
thereby reducing cost, policy reforms, and provision of support to manufacturing
export enterprises are the most notable ones.

In Ethiopia underemployment and unemployment -especially in urban areas and

among the youth- are serious challenges. The working age population (labor force)
stood at 54% of the population in 2004/05. Therefore, the challenges faced by the
Government in fulfilling the demand for increased employment are thus two-fold:
managing the dynamics of population growth, and expansion of labor-intensive
productive activities.

Therefore, creating employment and income-earning opportunities in the modern

sector, private sector and the informal sector, and on farms is thus central to the effort
to accelerate growth.

In addition to this, the Government of Ethiopia has recently initiated the process of
Ethiopia's accession to the World Trade Organization (WTO), which facilitates the
integration of the Ethiopian economy with the international trading system through
developing skills in bilateral and multilateral trade negotiations. In addition, efforts
are being strengthened to gain maximum benefit from AGOA and Everything But
Arms (EBA) initiatives. To this end, trade agreements will be reviewed in line with
the country's development strategies and policies. In order to facilitate trade activities,
the Government is planning to establish dry ports within the country so as to use them
as transitory ports.

12
2.1.2 Demand & Supply Analysis of the Production of Packing
Materials
Paper And Plastic Packing are made from Paper And Plastic Packing Materials which
have a row of air columns. The air acts as a cushion while the paper and plastic
column makes the material strong. Each box is made to hold something just right,
protect it from banging around and keep it from spilling. Moreover, Paper And Plastic
Packing Materials are made with important information about the consignment
printed on them. They are eco-friendly, recyclable, light weight products available in
variety of shapes and sizes.
Because of its inherent advantages, corrugated packaging is used practically for every
purpose. In various industries like food, textile, pharmaceuticals, cigarette, soaps,
cosmetics and consumer durables Paper And Plastic Packing Materials are the most
suitable to pack consignments. Recently, diversified application like long-time
weather resistant boxes is being manufactured creating a promising future for
packaging. is supplied by both domestic producers like Ethiopian Pulp and aper Share
Company, Burayu paper and plastic Factory and others as well as by foreign
companies through import. Data on the domestic production is provided only on
aggregate production of paper and plastic. Annual average domestic production of
paper and plastic in the period 1999-2002 was 6,422 tons while the six years average
imported supply of corrugated Paper boxes alone was 276 tones. However, a closer
investigation of the data set reveals that the imported figure for the year 2004 was
exceptionally low. Thus, excluding the year 2004, annual average import for the five
years amounts to 321 tones.
For the purpose of this study, the imported is considered as a gap between the
domestic supply and the overall demand for
Corrugated boxes in the country. Therefore, the unsatisfied demand by the local
production of Paper And Plastic Packing Materials is estimated on the basis of the
1999-2003 import data and the annual domestic paper and plastic production growth
rate of 7 %. Accordingly, the current effective demand for paper box is estimated at
362 tones.

13
2.1.5 Analysis of the prices of Packing Materials and related
materials

Prices of Packing Materials over Var-

ious Seasons of the year
7
6
5
4 Madabara Bag(100kg)
3 Madabara Bag(50kg)

2 Carton

1
0
Nov-Febu March-June July-Oct

Prices of Packing Materials over Various Seasons

of the year
7

4 Madabara Bag(100kg)
3 Madabara Bag(50kg)
Carton
2

0
Nov-Febu March-June July-Oct

14
Chapter Three
3. Project Description and Technical Viability

3.1 Project Goal

The owner of the project proposed this project having an overall goal of taking advantage
of the opportunities existing in the Packing Materials production and Marketing and
come out as a successful producer of Packing Materials production avoiding loses
encountered during transportation, storing and handling of products, substituting imports
and saving of foreign currencies.

3.2 Location and Physical characteristics

The proposal presented for this project requires the consideration not only of technical,
commercial and financial factors only, but also of the social & environmental impact the
project might encounter. For selecting proper locations and site the following factors
must be considered infrastructure service, existing industrial infrastructure, economic and
social infrastructure & institutional frame work, urbanization, ecological and
environmental impact of the project.
Most projects have environmental impact that creates serious or irreparable pollution and
damages that results the close down of the plant. The potential risk related to the location
of this project with the negative environmental impacts are seriously considered and it is
risk free.
Oromia region is located in the central part of the country. It is Ethiopia’s geographically
largest (366,910 square kilometers) region, and, with 27 million residents (2007), is most
populous. The region is subdivided administratively into 18 zones, nine town
administrations, 284 woredas, and 7,000 peasant associations and urban dwellers
associations (or kebeles).
The planned project will be established in Oromia Regional State, Oromia Special Zone
surrounding kolobo town, which is 38 kms from Addis Ababa . The project is located at
the main root for northern part of the country. In addition to the existing workers of
governmental offices and other peoples from other places come to the town to enjoy
themselves natural beauties of the town like mountain terrace and other official meetings
and conferences make the project location lucrative.

15
 b, Infrastructural Development
The level of development in infrastructure is one of the major point in selecting location
and site for establishing any business activities. Development of roads, availability of
water, power, communication facilities and availability of social services are included in
this category. The project area, kolobo town and its surrounding have a well developed
net work of the mentioned roads and facilities.
C, Labor Availability
As Compared to capital availability, which is accessed with difficulty, human labor is
abundantly available in the town and nearby rural settlements. This shows that our
organizations can carry out labor intensive works rather than capital intensive ones. In
this respect, the town is fostering well-educated and, well-experienced professionals,
wage laborers, etc.

16
3.4 Water and Power Supply System Works
3.4.1 Water Sources
The water source of the proposed project is from gafarssa lake and ground water
developed by the owner from the project compound.

3.4.2 Power Supply

The primary source of power is electricity from the main gird lines; the project is located
adjacent to the main power grid making electricity easily accessible. A supply of
electricity is always necessary.

3.4 Project Design and Engineering

The proposed project comprises stock of different components to be executed at different

phases of the project life. These activities include: Design and Construction of various

buildings, importing of additive chemicals and other raw materials, Import of product

transporting medium vehicle.

3.4.1 Plant Lay out and Construction Works

The buildings are planned to accommodate production houses, storage and other utility
requirements as well as offices and a social rooms/constructions. In general the buildings
must be capable of being kept clean and provision should be made for keeping the
sewerages drained out properly and room temperature is attained to keep healthy
environment. In most environments, equipment should be totally enclosed in a light
structure: where the climate is suitable. A concrete floor, which can be swept, is usual. In
the site plan is also included a common garage, storage and workshop building together
with an effluent treatment plan and gate mans’ house. The loading and offloading areas
together with incoming and outgoing roads are proposed to be paved to ensure a clean
environment around the project site. The site will be encircled by a chain linked fence
fastened to concrete posts.

17
3.4.2 Machinery and Equipments
The machinery planned for this project includes the following production lines,
equipments and materials:

A. Processing machinery and equipments

 Corrugators,
 Slitter scorer,
 Printer slotter, and
 Folder gluer.
B. Auxiliary Equipments
 Workshop equipments
 Spare parts
C. Equipment for utility supplies
 water supply system Equipments
 power supply
 Stand by generator
 Air compressor
 Steam supply Boiler

3.4.3 Packing Materials Production and Processing

3.4.3.1 Raw materials
The basic raw materials for Production are: kraftliner paper and plastic, flutting paper and
plastic, test liner paper and plastic, corn starch, and other adhesive chemicals.

3.4.3.2 Details of Production Process and Technology

Recycling of paper and plastic

TECHNOLOGY AND ENGINEERING

1. Production Process
The conventional technology of production is a batch process where four major
operations are involved, namely:-
- Corrugator,
- Slitter scorer,
- Printer slotter, and Folder gluer.

18
The fluting medium leaves its winding reel, passes over heated rolls and goes through
steam showers; and then passes between two corrugated rolls to get "U" shape of a flute.
The Kraft liner rolls are unfounded and continuously drawn over heated drum that comes
in contact with the glued flute tips. The adhesive applied at this Paper And Plastic
Packing Materials points with an applicator roll is used to form a bond between the
corrugated medium and the single face liner. The web is then guided to the
Paper And Plastic Packing Materials double facer unit where the test liner is glued to the
other face of the flute medium and this completes the process of single -walled
corrugated board. The single - walled board (3 - ply) board produced in such a way is
directed to the slitter - scorer for sizing and finally to the printer - slotter for specific box
(carton) designs and necessary printing patterns.

3.4.3.3 Plant Capacity

Based on the market study, capital requirement and minimum economy of scale, the
packing materials production plant will have a capacity of 2520 tons of Paper And
Plastic Packing Materials at full capacity per annum.
3.4.3.4 Production Schedule

The annual production Schedule is formulated based on the proposed plant capacity.
Considering the problem of market penetration and skill development of production at the
initial stage of the production period, it is planned that the plant will start production at
75% and 85% of its rated capacity in the first and second year of production,
respectively. Full production shall be attained in the third year and then after.

Production schedule of the packing materials

S/no Description Unit Production year

2007 2008 2008-16
1 Production ton 1890 2142 2520
2 Capacity % 75% 85% 100%
Utilization

19
 Sales Plan

Year Description Unit Qty Unit cost in Total cost

birr
1 Paper and TON 1890 27,000 51,030,000
plastic box
2 " 2142 28,000 59,976,000

3.5 Project Life

Experience taken to the Ethiopian condition and worldwide have shown that the Packing
materials production and processing plant has the life of 25 years with proper
management and maintenance. But for the matter of simplicity, and pessimistic point of
view, only 10 years is assumed to be the life of the project, in cash flow analysis.

Chapter four

4. Organizational Structure and Manpower

At the top of the organizational structure, there will be a general manager with the
responsibility of supervising the overall activity of the plant. Depending up on the nature
of the center and the amount of work to be performs; there will be auxiliary units under
the general manager. Employees under each unit will be supervised by the unit head that
is accountable for the general manager.

The company will use efficient trained staffs in the area of marketing to be competitive
supplier of packing materials to the market. The opportunities of being serviced by well
skilled professionals well enable the company to evaluate the internal weakness and
strength of the company as well as to assess the global opportunity and risks in the world
market so that the company can cope up with the dynamics of the market situation.

The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be
a general manager with the responsibility of supervising the overall activity of the plant.
Depending up on the nature of the center and the amount of work to be performs; there
will be auxiliary units under the general manager. Employees under each unit will be
supervised by the unit head that is accountable for the general manager.

20
 CEO

Advisor Internal Auditing &

Inspection
General Manager

Production
Department Marketing Department
General Administration Department

As clearly shown in the organizational structure, the Packing Material production project
has CEO three Departments under the general manager, Advisor and the internal
Auditing and Inspection. These departments are the Production Department, The
Marketing Department, and The General Service Department. Under each Department
there are different sections which are undertaking different activities.

Hence the following section deals with the duties and responsibilities of each division.
3.1. The General Manager’s Duties and Responsibilities
 He will plan, organize, direct and control the overall activities of the production
center.
 He will devise policies and strategies that will enable the project to be profitable.
 He will incorporate modern technological innovation that will facilitate the
service delivery of the project increase customer’s satisfaction.
 He will plan, organize, direct and control the human and non-human resources of
the project so as to achieve the short and long run objectives of the organization.

21
 3.2. General Administration and Finance Department
Is responsible for undertaking the following activities
 Will plan, organize direct and control the financial transaction of the project by
using necessary document.
 Will develop sound financial control system by developing modern financial
control systems.
 Will prepare the annual financial statements and prepare condensed reports for
both the General Manager and other concerned government body.
 Will control the human and non human resources of the project, which include:
effective handling of the different inventories of the project, and devise strategies
of controlling against fraud and damage.
3.3 . The Marketing Department
 Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
 Will develop the marketing strategies for center’s development.
 Conduct both foreign and domestic market research for expanding the sales
of the company
 Will develop effective customer handling strategies
3.4. The Production Department
It is the core department of the project as it handles and administer over all the production
scheme of the company and it encompasses sections like:
Thus it undertakes the following activities:
 Produce products with less prices so as to make the company more competent.
 Produce products in different products so that customers have diversified choices.
 Produce quality product that will enable the center to be competent in the
domestic market.
 Control on the quality of raw materials, quality of the product and also the overall
production process.
 Produce products in least cost so that the profitability of the center is guaranteed.

22
Chapter Five

5. Environmental Impact Assessment and Social

Viability
5.1 Socio-Economic Environment
The owner requested the land to be provided on lease bases, and all required
compensation was already paid by the project owner. During the survey no complaint for
the land from local surrounding people was observed by the team. The Livelihood of the
local peoples around the project area is urban dwellers of various occupation and
economic background. The team has asked some people whose houses are nearby to the
project to be established on the environmental impacts the project can bring. They have
replied that no any damaging impact from the previous experiences of projects which are
found adjacent to this new project and the site is industrial zone which is clustered by
investment stock.

5.2 Public Consultation and Social Acceptability of the Project

Public Consultation was undertaken in two phases, one for identifying issues (scoping)
and the other one during impact study. During the impact study, discussion was made
with representatives of the local communities through informal survey. The consultation
involved residents living in the area close to the project site. The participants were men,
women, and also the youth living in the target community.

Due to the large number of unemployed persons and the long distance they are traveling
to get a job, during the public consultation it was noticed that the local peoples have a
positive attitude to the implementation of the proposed project.

23
Chapter Six

6. Financial Analysis
6.1. Financial Requirement
The financial resource is a prime resource for undertaking any activities. Hence, the total
budget for implementing this project is estimated at Eth Birr 66,011,468.35 as indicated
in the tables below. Out of the total budget of the project 30% or 19,803,440.505 birr will
be covered by the owner equity, while the rest 70% or 46,208,027.845 birr will be
covered by financial institutions.

6.2. Budget Breakdowns

Therefore the said amount of finance is needed for undertaking the following:
6.2.1. FIXED INVESTMENT
a. BUILDING & CONSTRUCTION
No Description Land Cost/m2 Total cost
Requirement
1 Production Hall
1.1 Workshop 300 1,000 300,000.00
1.2 Quality control 200 1,000 200,000.00
1.3 Production Hall 1600 800 1,280,000.00
1.4 Boiler and Utilities 500 800 400,000.00
section
Total production hall 2600 2,180,000.00
area
2 Warehouse
2.1 Raw Material & Input 400 700 280,000.00
2.2 End Products and packing 400 700 280,000.00
room
Total warehouse area 800 560,000.00
3 Office Building 400 900 360,000.00
4 loading un loading space 1000 150 150,000.00
5 Waste Accumulation area 200 100 20,000.00
Total 5,000.00 9,270,000.00

24
 b. MACHINERY AND EQUIPMENT
The list of required machinery and equipment is indicated in Table below. The total cost
of Processing Machineries that produces quality and quantity of required products just-in-
time is estimated at Birr 27,473,000.00. The project requires the purchase and installation
of the following essential machineries and equipments as the following details:
No Machineries Quantity Type Cost/USD Cost/Birr
1 Hydraulic Mill Roll Stand 12 W01 36,800.00 2,944,000.00
2 Linear Pre- 6 W21 12,000.00 480,000.00
heater(Dia.600mm)
3 Medium Preheater (Dia.600) 6 W21 11,600.00 464,000.00
4 Fingerless Single 6 W02E 52,800.00 2,112,000.00
Facer(Dia.320)
5 Overhead Bridge Conveyor 3 W03 21,000.00 420,000.00
6 Tiplex Preheater (Dia.600m) 3 W22 11,200.00 224,000.00
7 Double Glue Machine 3 W04 11,750.00 235,000.00
8 Double Facer (16pcs Heating 3 W05 42,000.00 840,000.00
plate)
9 Slitter Scorer (5 Slitter 8 3 W06 11,300.00 226,000.00
scorer)
10 N.C Ccut 3 W07 27,400.00 548,000.00
11 Staker 3 W14 23,000.00 460,000.00
12 Glue Making Machine 3 W15 8,200.00 164,000.00
13 Internal Steam pipe system 3 W00 5,300.00 106,000.00
14 Compress Air System 3 W19 3,200.00 64,000.00
15 Scrap Extracting system 3 W16 4,800.00 96,000.00
16 Electric System 3 W0D 4,500.00 90,000.00
66 552,900.00 27,473,000.00

c. VEHICLES

No Description Qty Unit Price Total Price

1 Midi Bus Service 2 450,000.00 900,000.00
2 Trucks (FSR) 2 750,000.00 1,500,000.00
3 Pick-up 4wd 1 450,000.00 850,000.00
Total 3,650,000.00

d. OFFICE EQUIPMENTS

25
 No Description Qty Unit cost Total cost
1 Managerial Tables and chairs 8 14,000.00 112,000.00
2 Secretarial chairs 2 8500 17,000.00
3 Computer with its accessories 4 26,500.00 106,000.00
4 Shelf 4 4,000.00 16,000.00
5 Filing Cabinets 20 1000 20,000.00
6 Others 30,000.00
Total 343,700.00

6.2.2. WORKING CAPITAL

a. RAW MATERIAL PURCHASE
The basic raw materials for this project are different plastic and paper that will be
collected from different suppliers from other areas. The list and costs of these raw
materials are indicated in table below. The total cost of raw material is estimated at
420,000Birr
1. Basic raw materials
Sr. Description Unit Qty Unit cost in Total cost
N birr In birr
1 Kraftliner paper and plastic tone 640 14,890.00 9,529,600.00
(140GSM)
2 Flutting Medium (112- No 690 13,450.00 9,280,500.00
140GSM)
3 Testliner Paper and plastic 560 13,750.00 7,700,000.00
(140GSM)
Grand Total - 1900 26,510,100.00

2. Auxiliary Raw Materials

Sr Description Unit Qty Unit cost in Total cost
. birr
No In birr
1 Adhesive (Corn Starch) tone 33 7200 237,600.00
2 Inks and other finishing tone 4 120,000 480,000.00
materials
Grand Total - 717,600.00
N.B. the cost of the row material is taken for 3 months basis

b. SALARY EXPENSE

26
 No. Description No. of Qualification Monthly Annual
Salary
Persons
1 General Manager 1 BA 4,500.00 54,000.00
2 Production Head 1 B.Sc. 4,000.00 48,000.00
3 Marketing Manager 1 BA 3,000.00 36,000.00
4 General Administration 1 BA 3,500.00 42,000.00
5 Forman 3 Dip in Manuf 3,000.00 108,000.00
6 Machine Technician 5 10+3 Mac. 2,000.00 120,000.00
Tech
7 Electrician 5 10+3 in Ele. 2,000.00 120,000.00
Tec
8 Accountant 3 BA 2,000.00 72,000.00
9 Cashier 1 10th grade 1,200.00 14,400.00
11 Secretary 1 Dip 900 10,800.00
12 Storekeeper 1 10th grade 600 7,200.00
13 Daily Laborers 70 Basic 500 420,000.00
16 Salesperson/Purchaser 8 Dip 1,000.00 96,000.00
19 Cleaner and Messenger 8 8th grade 550 52,800.00
20 Guards 3 4th grade 700 25,200.00
21 Production workers 120 Level-II 750 1,800,000.00
Total 232 23,250.00 3,026,400.00

The project will employ 132 permanent and 100 temporary and a total of 232
individuals.

c. OTHER OPERATING EXPENSES

27
No List of Items Qty Unit Unit cost Total
annual
cost
1 Computer paper and plastic 20 Pack 80 240
2 Staples 10 “ 7 21
3 Pens, pencils, and others 5 Pack 60 300
4 Detergents 100 Pcs 15 225
5 Uniforms 100 Pcs 100 2500
6 Water 4000 M3 4 6516
7 Electricity 30,000 KWH 0.35 3500
8 Fuel oil litter 255000
9 Telephone - - - 10000
10 Repair expense - - - 10000
11 Miscellaneous Costs - - - 7500
Total 295,802.00

d. PRE -SERVICE EXPENSE

No Description Cost
1 Project proposal 10,000.00
2 Environmental Impact Assessment 30,000.00
3 Licensing fee and others 20,000.00
4 Other pre operating cost 75,000.00
Total 135,000.00

6.2.3. Summary Of Financial Requirement And Source Of Fund

No Description Cost in birr

1 Fixed Investment

28
 1.1 Building &Construction 9,270,000.00
1.2 Processing Machineries 27,473,000.00
1.3 Office Equipment 343,700.00
1.4 Vehicles 3,650,000.00
Total Fixed Investment Cost 40,736,700.00
2 Operating Expenses
2.1 Raw Material Purchase 6,806,925.00
2.2 Salary Expense 3,026,400.00
2.3 Other operating Expense 295,802.00
2.4 Pre- Service Expense 135,000.00
Total operating cost 10,264,127.00
Total cost 51,000,827.00
Contingency (5%) 15,010,641.35
Total Investment cost 66,011,468.35

Sources of Fund:
Source of fund to the project is planned to be from two sources. These are owner’s equity
and bank loan. The loan is expected to be obtained from one of the local lending
institutions. Since the project is expected to take some times to repay all its debts, the
bank loan is assumed to obtain on long term credit basis. Taking the financial position of
the owner into account, equity contribution and bank loan to finance the total investment
outlays of the project are assumed to be 30% and 70%, respectively. Accordingly, the
total financial requirement from the two sources will be
Source of fund
No Description % share Amount(in birr)
1 Owners Share 30 19,803,440.505
2 Bank Loan 70 46,208,027.845
Total 100 26,011,468.35

Loan Repayment Schedule

29
 Total
principal Interest Annual Remaining
Year Payment (10%) Payment Balance
0 0 0 0 19,803,440.51
1,980,344.5
1 1 1,980,344.51 3,960,689.01 17,823,096.00
1,980,344.5
2 1 1,782,310.05 3,762,654.56 15,842,751.50
1,980,344.5
3 1 1,584,275.60 3,564,620.11 13,862,406.99
1,980,344.5
4 1 1,386,241.15 3,366,585.66 11,882,062.49
1,980,344.5
5 1 1,188,206.70 3,168,551.21 9,901,717.98
1,980,344.5
6 1 990,172.25 2,970,516.76 7,921,373.48
1,980,344.5
7 1 792,137.80 2,772,482.31 5,941,028.97
1,980,344.5
8 1 594,103.35 2,574,447.86 3,960,684.47
1,980,344.5
9 1 396,068.90 2,376,413.41 1,980,339.96
1,980,344.5
10 1 198,034.45 2,178,378.96 0.00

30
FINANCIAL STATEMENT
1. BALANCE SHEET
Meskerem 01, year 1 E.C
Asset
Current Asset
Cash 4,695,843.35
Inventory of raw materials
6,806,925
Total Current Asset
11,502,768
Fixed Asset
Building and Construction 9,270,000.00
Processing Machineries 27,473,000.00
Office Equipment 343,700.00
Vehicles 3,650,000.00
Total fixed Asset 40,736,700.00

Total Asset
Liability
Account payable 46,208,027.845
Owners Equity
Capital 19,803,440.505
Total Liability & Owners’ 66,011,468.35
Equity

31
2. INCOME LOSS STATEMENT
Profit /loss statement, projected for year 1-3
Revenue 2008 2009 2010-2019
Sales Revenue 51,030,000 59,976,000 73,080,000
Sales cost (2%) 1,020,600 1,199,520 1,461,600
Purchase of Raw Material 6,806,925 7,487,618 8,236,379
Gross Profit 43,202,475 51,288,863 63,382,021
Expenses
Salary Expense 3,026,400 3,329,040.00 3,661,944.00
Operating Expenses 295,802 325,382 357,920
Pre-operating Expense 135,000
Deprecation Building 163,500 171,675 180,259
Deprecation Vehicles 330,000 396,000 475,200
Deprecation office
Equipment 13,437 23,140 46,280
Deprecation Machineries 27,473 956,773 966,341
Interest Expense 1,820,802.78 1,638,722.51 1,456,642
Lease payment 6,936,530.07 6,806,530.07 6,806,530.07
Total Expense 13,666,904.85 13,647,262.58 13,951,115.78
Profit Before Tax 29,535,570.15 37,641,599.92 49,430,904.97
Tax(30% ) 8860671.044 11292479.98 14829271.49
Net Profit 20,674,899.10 26,349,119.95 34,601,633.48

From this income it is possible to deduce that the project will cover its initial
investment cost within 3 years time.
Assumptions
 Salary expense starts to grow by 10 % starting from 2009-2018 onwards.
 Purchase of raw material increase by 10% during 2009-18
 Cost of row materials taken 3 months bases
 Operating Expense by 5% during 2008-15
 Deprecation of building 5%
 Deprecation of Vehicles 20%
 Deprecation of office and animal equipments 20%
 Deprecation of Machineries 12.5.
3. CASH FLOW STATEMENT

Year Year 0 Year 1 Year 2 Year 3-10

32
 Equity Capital 19,803,440.505 32,482,487 35,886,661 42,144,859
Loan principal 46,208,027.845 0 0 0
sales 0 51,030,000 59,976,000 73,080,000
Total cash in flow 66,011,468.35 51,030,000 59,976,000 73,080,000
cash payment 0
Raw materials
purchase 0 6,806,925 7,487,618 8,236,379
Sales expense 0 1,020,600 1,199,520 1,461,600
Salary expense 0 3,026,400 3,329,040 3,661,944
Investment 66,011,468 0 0 0
Pre operating expense 0 135,000
Operating cost 0 295,802 325,382 357,920
loan repayment 0 1,820,802.78 1,638,722.51 1,456,642.23
Lease payment 0 6,936,530.07 6,806,530.07 6,806,530.07
Tax payment 0 8860671.044 11292479.98 14829271.49
Total payment 28,902,730.90 32,079,292.05 36,810,287.04
Cash surplus / Deficit 12,695,843.35 22,127,269.10 27,896,707.95 36,269,712.96
Cumulative Balance 12,695,843.35 22,127,269.10 27,896,707.95 36,269,712.96

7. Future Development & Exit Strategies

Any business undertakings be it large or small should have future development
plan. It is a plain fact that business activities are undertook in a dynamic and
turbulent environment. Hence, to overcome or minimize the risks of uncertain
future businesses should devise effective strategies that enable them to be
successful in their operation. Likewise the project has devised strategies to
overcome the future risk of operation. The first strategy is diversification of its
activities to different other business forms. The second future development plan
of the project is expanding its branches in many other parts of the region. The
third strategy of the center is making a joint venture with other similar business
undertakings either in the domestic country or from abroad. The final strategy of
the center is selling to other organization or individuals.

33
 8. Environmental Impact
The envisaged project will have a positive impact on the environment as it collect
waste plastic and paper from the environment and recycle it. Moreover, the
project will prepares EIA document before implementing the project and the
packing industry has a minimal impact on the environment.

34