EXECUTIVE SUMMARY Introduction KITU CO.LIMITED is a newly established company based in Dar es Salaam.

The Company registered in January, 2008 mainly dealing with grain milling of all types and selling of flour products. The Main Objective of the Firm: The main objective of the Company is to produce high quality flour at an affordable price and to be available to all customers who will be in demand for use. The Company will initially start its operations in Dar es Salaam region. The goal is to expand to up country regions like Tanga, Morogoro and Dodoma. Location The milling machines are located at Tegeta in Kinondoni District. The premises are semi developed. The area has all access of amenities such as water, electricity and access road. The Project Components The project components comprise the following items: - Completion of mill plant and office buildings - Ordering and installation of roller mill plant and equipment - Transport vehicles - Furniture and fittings - Other miscellaneous items Shareholders: KITU CO.LIMITED is a private liability company wholly owned by the following shareholders: SHAREHOLDERS M/S NAME OWNER1 NAME OWNER2 NAME OWNER2 NAME OWNER2 NO.OF SHARES 3,000 3,000 3,000 3,000

MARKET ASPECTS Taking into consideration of the current estimated milling capacity and the local supply of maize flour to both urban and rural area, the aggregate demand is still too high.The demand of maize flour is always in the increase especially in Dar es Salaam because of the increase of rural people shifting to Dar es Salaam. Beside the ever increase of the rural people in DSM, there have been an increase institutions like schools, colleges and hostels, which results to ever increasing demand of flour products. KITU Co. Limited goal is to acquire a great portion of this increasing market.

Capital Costs The total capital for establishing the mill plant is estimated at Tshs.577million including working capital of Tshs. 325 million. A summary of the costs are as given below: ITEM Land and Buildings Machinery and Equipment Furniture and Fittings Vehicle Pre Operational expenses Sub - Total Add: Initial Working Capital TOTAL CAPITAL (TSHS.000) 100,000 128,000 3,000 18,000 3,000 252,000 325,000 577,000

Debt Service Out of the total capital of Tshs.577 million, Tshs.366.5 million is a long term loan to be repaid over 3 years at an interest of 22 % . The repayment will be on quarterly basis as detailed in Append 13 Cash flow and Balance Sheet As presented in Appendices: 9 and 10 the project will be able to meet all its financial obligations without any difficulty. For the first five years there is a negative net cash flow of Tshs. 4.2 million. The project starts to generate a positive cash flow from the sixth year with cumulative cash flow of Tshs.24.98 million reaching Tshs. 147.47 million by year ten. Internal Rate of Return (IRR) The financial rate of return (IRR) after tax is 58%, indicating that the project is financially viable. The rate is above the bank prevailing lending rates which range between 12% and 30%. This shows that the project will be able to meet its financial obligations without any difficulty. Proposed Financial Arrangements Total finance required is Tshs.577 Million. The Shareholders will request from a commercial bank a long term loan of Tshs.366.5 Million to finance land and building, machinery and equipment and initial working capital. The balance of Tshs.210.5 Million will be contributed by the shareholders as equity. ( IN TSHS.000) TERM ITEM EQUITY LOAN TOTAL Land and Buildings 45,000 55,000 100,000 Machinery and Equipment 3,500 124,500 128,000

Vehicles Furniture and Fittings Pre Operational expenses Sub - Total Add: Initial Working Capital TOTAL Debt / Equity Ratio

18,000 3,000 3,000 72,500 138,000 210,500 36 %

0 0 0 179,500 187,000 366,500 64 %

18,000 3,000 3,000 252,000 325,000 577,000

A summary of financial arrangements is outlined below: a) Fixed Assets: Long term loan Shareholders equity contribution Total Tshs000 179,500 72,500 252,000

b) Initial Working Capital and Pre Operational Expenses: Equity 138,000 Loan/Overdraft 187,000 Total 325,000 CONCLUSION The project is financially and economically viable and will contribute the following development values: - Will create job opportunities for about 14 persons. - Will contribute revenue to the government through direct and indirect taxes such as import duties, corporation taxes, personal taxes etc. - Will improve distribution of food supply within the Dar es Salaam residents.

INTRODUCTION Background The foremost food consumed by Tanzanians is maize which is mostly eaten in the form of ugali stiff porridge. The work of processing the maize grain into flour at an acceptable hygienic level and quality is easily done by machinery. However, in most parts of this country the pounding is still carried out by women, denying them time to engage in more productive work, efforts are therefore being made both by the Government and the private sector to install adequate milling capacity to meet the demand of commercial maize flour for the local population.

It is on realizing this role the sponsors of this project are intending to establish a modern maize mill under the locally registered company Ms KITU COMPANY LIMITED. Initially the plant will be installed in Dar es Salaam to cater for the city and upcountry population. Shareholders of KITU COMPANY LIMITED have commissioned this feasibility study to work out the plant parameters and investment thereof. The study is expected to also assist the company to seek long term loan from the bank and assist in processing relevant Government permits for the project. Also for the purpose of getting the investment approval certificate issued by the National Investment Promotion Center. KITU COMPANY LIMITED KITU Company Limited is newly established local company which is in the process of installing small and medium scale grain mills. The machinery and equipment are intended to be imported from South Africa. The roller mill with four screened sieve are of special type as they are able to convert maize to high quality special sifted mealiemeal and also can mill other grains such as millet, sorghum and wheat. The main business of the sponsors is milling of grain and marketing of the product at small scale level. The sponsors intend to expand this business to larger scale and enable to supply at least the whole country including Zanzibar and Pemba. The company business initially be centered in Dar es Salaam and latter establish plant in Mbeya and Iringa Municipality. Mbeya and Iringa region are among the four biggest maize producing regions in the country. SHAREHOLDERS The project will be initially wholly owned by the following shareholders: SHAREHOLDERS M/S UNAME OWNER1 NAME OWNER2 NAME OWNER2 NAME OWNER2 NO.OF SHARES 3,000 3,000 3,000 3,000

The Shareholders have a vast of experience in the milling industry as well as trading in maize and wheat flour and the associated transportation, logistics involved to the respective market centers or main consumption areas. Their financial background and the afore mentioned experience will be an invaluable asset in this undertaking, hence the Shareholders are confident to implement this project without any difficulty. ACKNOWLEDGMENT The study team wishes to express its thanks and appreciation to all those who in one way or the other assisted in the successful completion of the work. MARKET ANALYSIS

INTRODUCTION This chapter on market analysis assesses the market for maize flour to determine the viability of investing into a maize mill M/s KITU Company Limited. The contents of this chapter are mainly a result of field research work using authentic published documents, visit to selected existing milling plants in the country and supplemented by information obtained through telephones, telex, e-mail, internet as well as visit to relevant firms which are in Dar es Salaam. PRODUCTS DESCRIPTION There are two main products from the maize grain i.e. flour and bran. The maize grain is made of three main parts enveloping skin (brain) or husk, the embryo or germ and the endosperm. DEMAND Markets Major users of maize flour comprise households and institutions Demand for Maize Flour Basis The market for maize flour has been established based on the estimated assumption of the households and institutions. Private Households According to the latest household budget survey (1991/92) carried out by the Bureau of Statistics the consumption of maize flour in private households on the mainland was put at 430kgs per household per annum. Current average consumer price of maize is Tshs. 600/= per kg; thus calculated annual consumption of maize flour per household is Tshs.258, 000 /= Population Figures The size of population has a direct relationship on the consumption of maize flour. Current estimated population for Tanzania mainland and major regional market segments is given in Table 2.1.below:

Area Tanzania Mainland: Population Household Dar es salaam Population Households Shinyanga Population Households Arusha Population Households Mbeya Population Households

1988 Census 22,533,758 4,377,288

Current Population Estimate 28,900,000 5,557,700

Gross Rate (%) 2.8 -

1,360,850 314,304 1,772,549 279,690 1,351,675 249,436 1,476,199 297,637

2,075,200 482,600 2,292,600 363,900 1,890,800 350,150 1,943,000 396,500

4.8/8 2.9 3.8 3.1 -

Source: Bureau of Statistics and Consultants Estimates Estimated Current Demand By House Holds

On the basis of the above analysis estimated demand for maize flour by the households is indicated in Table 3.2 below. Table 3.2: Estimated Demand for Maize Flour by Households Current Estimate Market Segment (000 tons) % of Total National demand 2,390 100 Dar es Salaam Region 208 9 Shinyanga Region 156 7 Arusha Region 151 6 Mbeya Region 170 7

 Institution Demand Maize flour is also consumed by institutions such as schools, colleges, hospitals, hotels and restaurants. According to the 1996 the input and output table for Tanzania; non - household consumption of maize flour was about 14 percent of household. Adding 14 percent to the figures we will have in table 3.2 above, we get estimated total demand flour in the selected major market segments as shown in Table 2.3 below: Table 3.3 Total Estimated Demand for Maize Flour in Selected Market Segments (000 tons) Private House Market Segment Holds Institutions Total Other regions 2,390 335 2,725 Dar Es Salaam Shinyanga Arusha Mbeya 208 156 151 170 29 22 21 24 237 178 172 194

Table 3.5: Projected Population (Millions)

Projections Market Segment

Tanzania Mainland

2008 35.0 5.7 2.2 0.51 2.30 0.36 1.90

2009 35.945 5.9 2.4 0.56 2.40 0.38 2.00

2010 36.92 6.0 2.6 0.60 2.50 0.40 2.10

2011 37.91 6.2 2.8 0.65 2.60 0.41 2.20

2012 38.94 6.4 3.0 0.70 2.70 0.43 2.30

- Population - Households Dar es Salaam: - Population - Households Shinyanga: - Population - Households Arusha: - Population

- Households Mbeya: - Population - Households

0.35 2.00 0.41

0.37 2.10 0.43

0.38 2.2 0.44

0.40 2.30 0.47

0.42 2.40 0.49

(ii) Increased Household Final Consumption Expenditure Household final consumption expenditure recorded an impressive increase from Tshs. 84 billion in 1994 to Tshs. 117.6 billion in 2004, with a growth rate of 40 percent. The personal income thereby obtained from this expenditure in turn increases the financial ability of individual to pay for food requirements, maize flour inclusive. (iii) Good Supply of Maize Grain Good supply of maize grain which is basic raw materials for the proposed project ensures an interrupted production reliable availability of the finished product and consequently stimulates the demand for the same (maize flour). Trend of the past production (2003 - 2007) and projected production (2008 2014) of maize is indicated in Table 3.6 below assuming a growth rate of four percent. Table: Trend of Maize Production and projected Level (2003-2012) (000 Tons) Past Production 2003/4 2004/5 2226 2282 2.5 (5) 2005/6 2159 19 2006/7 2638 2.8 2008 2970 4 Projections 2009 2010 2011 3090 3210 3340 4 4 4 2012 3470 4

%
change

Source: Marketing Development Bureau and Consultant Projection Iringa, Mbeya, Rukwa and Ruvuma which will be the main source of supply of raw materials (maize) account for approximately 50% of the total maize production. Projected Demand (i) Projected Households

The projected demand for maize flour by private households is indicated in Table 3.7 below. Total demand at national level varies from 2.4 million tones in a year one (1) to 2.58 million tones in year three (3) and 2.75 million tones in year five (5) onwards. Table 3.7 Projected Demand for Maize Mills by Private Households (000 tones)

National Demand Dar es Salaam region Shinyanga region Arusha region Mbeya region

Year 1 2,451 219 155 151 176

Year 2 2,537 241 163 159 185

Year3 2,580 258 172 163 189

Year 4 2,666 280 176 172 202

Year 5 2,752 301 185 181 211

Given an estimated institutional demand of 14 percent of the private household demand projected national demand for maize flour is calculated as follows (000 tons) Year 1 2,451 343 2,794 Year 3 2,580 361 2,941 Year 5 2,752 385 3,137

Demand by private households Demand by Institutions (14%) Total Demand PRODUCTION PROCESS

Maize grains are made up of three parts: the envelope skin, the embryo or germ and the endosperm. When the germ is not removed the oil content of the meals is relatively high. This tends to encourage rancidity and short shelf life. In this modern process, the germ is removed and the flour milling process extract as much of the endosperm as possible. There are two major methods for maize flow production. The first method is the dry milling of maize in which the flour is directly available as a food product. The second method is the wet milling in which maize is used as chemical raw materials for industries and food products. The dry milling process of the maize is the most common methods for maize flour production. The main basic stages are: Cleaning of the grain Conditioning Breaking and Dressing and packing

We recommend the dry method for proposed maize mill. A brief of each stage is as below: CLEANING In this stage maize passes through mechanical cleaners designed to separate unwanted substances such as pieces of cob, sticks, husks, metals and stones. The cleaners agitate

the grain over a serious of perforated metal sheets, the smaller foreign heavy particles drop through the perforations, while a blast of air blows away chaff and dust, and electromagnets draw out nails and bits of metal. The grain can be given a second cleaning before going into next stag of operation. CONDITION (TEMPERING) Is this stage moisture is added and distributed through the grain to a physical condition that gives optimum milling result. The brainy skin must be sufficiently friable to undergo pulverization and facilitate easy sieving. Hot or cold water or steam is used as the moistening medium, as well as other process variables. Faster results are obtained when warm conditioning is applied. Warm condition cuts down time and space and the process is easily controlled. Another simplification method is the use of an attrition device developed especially for the degerminating task, whereby prior tempering can be eliminated. BREAKING The breaking operation is divided into parts: degerminating and the actual grinding. From the conditioning process, the softened kernels go through degerminating mill that are designed not for fine grinding, but rather for tearing the soft kernels apart into course particles, freeing the rubbery oil-bearing germ without crushing it, and loosening the bran, the wet, macerated grain is then sliced into components of the kernel, other components float to the surface and are skimmed off. The resulting coarse particles undergo further breaking a process performed by a serious of corrugated rollers, which resolves in opposite direction at a different speed. The roller clearance reduces progressively from one pair to another. The corrugations and the differential speed give the break rolls a shearing action. Their purpose is to split the grain and to scrape the endosperm from the bran, which being large and light, is easily separated from the smaller, denser endosperm particles by the combination of sieving and air drag. The coarsest particles go to the next break rolls. DRESSING AND PACKING After the last break roll materials undergone final scalping. This process is known as dressing and is done through centrifuges or plan sifters. The material that remains after this last scalping is bran. The flour is ready to be packed. 5.0 RAW MATERIAL AND OTHER PROJECT INPUTS The single major raw materials required for maize flour production is maize. Secondary inputs include packing materials and utilities mainly power and water. 5.1 MAIZE

Maize will be the only raw material to be used in flour milling. The rated capacity of the plant is 500 kg of maize per hour (i.e. 12 tons in 24 hours). Annual maize requirement (i.e. in 300 working days) will be 3,600 tones (i.e. 300days x 12 tons). 5.2 PACKING MATERIALS The project will produce two products, flour and bran. Both will be packed in variety of materials, this includes jute bags, plastic and paper bags and sacks. All these materials are locally available. The bags will be used to pack flour in 25 kg and above. Lower weights such as 1 kg, 2 kg, 5 kg, and 10 kg will be packed in paper bags. Taking these factors into consideration the number of sacks bags required at the anticipated production capacity have been calculated accordingly. 5.3 UTILITIES 5.3.1 Water About 50 liters of water are required for every ton of maize milled The water is however recoverable and can be recycled. The daily water needs are about 3,000 liters and about 75m per month To avoid any water shortage that is a common feature experienced in Dar es Salaam especially during the dry season, it is recommended to construct a water reservoir for a weeks production and a shallow borehole for emergencies. Water table in the project area is quite high. 5.3.2 ELECTRICITY The maize milling plant will require an installed electric power of about 300 kVA, equivalent to 240 kW. This will be tapped from TANESCO, an electric supply line passing nearby the site. A standby power generator of 250 kVA will be installed as precaution against any unexpected TANESCO power cuts. 6.0: ORGANIZATION AND MANPOWER 6.1: Organisation: Based on the production volume envisaged and the requirements of the machines to be ordered the company will have a simple organization structure The factory department will comprise two sections:

i) Production: Production section will be responsible for actual production and for the repair and maintenance of the machinery and equipment ii) Administration: The administration and finance department will comprise three sections: The administration section which will be responsible for the general administrative matters of the company as well as personnel issues. The finance section will be responsible for finance issues. It will also be responsible for the proper maintenance of books of accounts and financial planning. The purchasing section will be responsible for the purchases of raw materials, spare part and equipments. This department will also be responsible for the receipt, storage and issues of the purchased material.

6.2 Man power requirement: The plant will employ a total of 14 people out of which 8 will be operators. The different categories of manpower and the wage bill are as given in Appendix 7 6.2.1: Responsibilities: The management and administration of the company will be under the Plant Manager who will be the chief executive of the plant. He will be answerable to the Board of Directors. 6.2.2: Factory Manager: Will be responsible for production planning including design, overseeing that daily production activities are carried out. He will be involved in all administrative matters. The factory manager will also be responsible for controlling the quality of the product. 6.2.3: Accountant/ Sales Officer: Will be responsible for overseeing of financial aspects of the company. He will also be responsible for purchasing raw material, spare parts and equipment as well as supervising the day to day sales of products. 6.3.0: Source of manpower and wage bill: Manpower for the proposed projects will be employed from local source. The personnel for the factory department will be employed from the companies, like Jogoo Milling Company which has available workers who are about to be laid off or retrenched due to undergoing privatization exercise. The staff will need minor on-the-job training to familiarize them with the new machinery and equipment. 7.0: INVESTMENT AND FINANCE

7.1: Assumptions: In order to work out the investment costs for the proposed maize milling the following assumptions have to be in mind: - Prices: The prices of inputs have to remain unchanged (constant) for the first 10 years of the project expected life. In case of any change in prices of in puts, should be followed with the proportionate change in selling prices so that the percentage of profit margin is maintained. - Exchange rate: The exchange rate used is US $ 1 = Tshs.1, 250. 7.2: Investment Structure: The total initial investment cost is estimated at Tshs.577 million (equivalent to US $ 461.60 million) out of which Tshs. 124.5 million will be in foreign currency for imported assets and the balance local currency for items and/or services. Below is a summarized investment structure: (VALUE IN TSHS.000.) LOCAL CURRENCY ITEM FIXED ASSETS: - Land and Building - Machinery and Equipment - Vehicle for Transportation - Furniture and Fittings Pre Operational Expenses Sub - Total Add: Initial Working Capital TOTAL INVESTMENT 100,000 3,500 18,000 3,000 3,000 127,500 325,000 452,500 0 124,500 0 0 0 124,500 0 124,500 100,000 128,000 18,000 3,000 3,000 252,000 325,000 577,000 FOREIGN CURRENCY TOTAL

Below is the break down of the above investment costs: 7.2.1: - Civil Works and Buildings: Tshs.000 - Land acquisition In 30,000

- Fence wall, washing and drying floor, water & electricity supply 20,000 - The mill and factory buildings 50,000 TOTAL 100,000 7.2.2: - Plant machinery and equipment: All necessary equipment and machinery to enable the milling project will have to be imported from a reputable supplier abroad. Below is the cost estimates for plant and machinery basing quotations received: ITEM Milling and hulling: - Roller Mills and Generating set - Grain Dehuller - Bag stitcher & Damping Auger - Pre cleaning machine - Sieving & Weighing Scales - Accessories - Installation costs - Equipment and Spare parts - Clearing and forwarding Total Machinery and Equipment Total Cost (In Tshs.000) 44,000 28,000 6,000 3,000 2,000 1,500 5,000 5,000 30,000 124,500

7.2.3: Furniture and Fittings: The office and factory will be fitted with furniture, equipment and other necessary fittings in total estimated to be Tshs.3, 000,000. 7.2.4: Vehicle for Transportation: For office use a three and half ton light truck is intended to be acquired locally. Its cost is estimated at Tshs.18, 000,000. 7.2.5: Pre Operating Expenses: Pre operational expenses will include expenses like hire of temporary offices and a vehicle, recruitment of workers, training expenses, registration and license fees, traveling and other sundry expenses during project implementation prior to the start of the operations. Pre operating expenses are estimated to be Tshs. 3, 000,000. 7.2.6: Initial Working Capital: The initial Working Capital requirements have been carried out on the basis of the assumptions as presented in Appendix In view of this, Tshs.325 Million will be required as Working Capital.

7.4.0: PROPOSED FINANCE ARRANGEMENT: The shareholders of this project envisaged to raise finance required to finance the above investment from two sources: Shareholders equity TSHS. 210,500 Million Long term loan from Commercial banks. TSHS. 366,500 Million (IN TSHS.000) EQUITY LOAN 45,000 55,000 3,500 124,500 18,000 3,000 3,000 72,500 138,000 210,500 0 0 0 179,500 187,000 366,500

ITEM Land and building Machinery and equipment Vehicle Furniture and Fittings Pre Operation Expenses Sub - Total Add: Initial Working Capital Total Funds Required

TOTAL 100,000 128,000 18,000 3,000 3,000 252,000 325,000 577,000

7.4.1: Long Term Loan: Foreign component of the project is to be financed through a bank loan. Thus Tshs. 366.5 Million will be borrowed at an interest rate of 22% p.a. 7.4.1: Equity: The Shareholders are prepared to contribute as part of equity to the acquisition of the local component on investment cost for Fixed Assets and Pre Operational expenses amounting to Tshs.199 Million or 35% of the total Capital. 8.0.0: PRODUCTION COSTS: Appendix 5 provides details of production cost estimates on monthly basis and annually. 8.1.0: Basis of the Production Costs: 8.1.1: Maize: Maize and other grains required for production will be procured locally. The main suppliers will be Southern Highland Regions of Ruvuma, Iringa, Mbeya and Sumbawanga.Maize prices in those regions fluctuate between Tshs.150 and Tshs.200 per kg. 8.1.2: Transportation:

Transportation to Dar es Salaam (average 800 km away) is about Tshs.120 per ton per km. 8.1.3: Packaging: Maize flour and bran will be packaged in polyethylene bags with inner film lining. According to recommendations for , 50% flour will be packed in 50 kgs.bags, 20% in 25kgs.bags, 20% in 10kgs.bags and 10% in 5kgs,bags. Bran will be marketed in 100kgs.bags. As presented in Appendix 6 annual bags requirements will cost the Company Tshs.27, 055 Million. 8.1.4: Vehicle running expenses: Vehicle running expenses include fuel, spares, tires and services. Total annual expenses are estimated to be Tshs.60 Million. 8.1.5: Repairs and Maintenance: The estimated annual cost of repairs and maintenance for machinery and equipment is estimated at 10% of total Machinery costs i.e. Tshs.12.45 Million. Where as that of buildings and civil works is estimated at 1% i.e. Tshs.1.0 Million. For furniture and fittings, repair expenses are at 10% of cost which is Tshs.0.3 Million. Total annual repair and maintenance costs will be Tshs.13.75 Million. 8.1.6: Electricity: Installed power will be about 400Kva = 250Kw. Working on 3 shifts per day for 300 days. The annual consumption of is estimated at Tshs.15.315 Million. Refer Appendix There will be also charges on diesel for the generator with consumption of 101ltrs. per hour at Tshs.1, 650 per liter. It is estimated to be used for 25% of the total annual production hours which is 75 days a year. The cost for fuel will be Tshs.2.970 Million. (75dys x 24hrs. x 101ltrs. x Tshs.1, 650/=) Electricity for general use is estimated to be Tshs.8.4 Million per annum. 8.1.7: Water: The estimated annual water consumption is 0.54 Million liters. At the rate of Tshs.10/= per cubic meter, the total annual water bills will Tshs. 5.40 Million. 8.1.8: Salaries and Wages: It is estimated that the mill plant will employ a total of 14 people. According Appendix 7 the total annual wage bill, will be Tshs. 26,400 Million. 9.0.0: Administration Overheads: Total of Tshs.43.442 Million has been allowed for administration overheads as detailed below: Item - Labor Tshs.000 9,542

- Communication (Telephone, Telex, Fax & Postage etc.) - Insurance - Business License - Consultancy (Legal & Audit) - Sundry expenses TOTAL

16,400 5,000 500 6,000 6,000 43,442

9.1.0: Depreciation: The Assets of the Company will be depreciated using diminishing value method at the following rates: Item - Land and Building - Machinery and Equipment - Vehicles - Furniture and Fittings - Pre Operating Expenses Depreciation Rate 4% 6.5 % 25 % 6.5 % 20 %

9.2.0: Financial charges: The following financial charges will be adopted and applied: - Interest on long term loan 22 % - Interest on bank overdraft 30 % 10.0.0: FINANCIAL ANALYSIS: The financial viability and economic contribution of the project is based on the assumptions and findings of investment, sales and operating costs as discussed in previous chapters. The financial analysis has been performed on monthly basis for one year and for 10 years of project operations. 10.1.0: Projected Revenue: Revenue will consist of sales of maize flour and maize bran from milling operations. Maize flour (sembe) will be sold at Tshs.350/= per kg while the bran will be sold at Tshs.80 /= per kg. Therefore, at full production (i.e.100 %) 6,144,000 tons of flour will be produced. Total revenue is expected to be Tshs.2, 059.548 Million in the first year, which will increase to Tshs.2, 206.606 Million in year ten. Refer to Appendix 4. 10.2.0: Projected Production Cost: Production cost projections is as given in Appendix 5 which amounts to Tshs. 1,206.567 Million in the first year and Tshs.1, 213.306 Million subsequent years. 10.3.0: Projected Administration expenses: As provided in Appendix 8, administration expenses will be Tshs. 135.861 Million annually.

10.4.0: Projected Profit: After making allowance for capital charges, the project is expected to remain with net profit after tax of Tshs.410.497 Million in the first year of production, Tshs.935.383 Million in year two, Tshs.1,483.596 Million in year three. Appendix 11, shows projected net profits in subsequent years up to year ten. 10.5.0: Projected Cash flow: The assumptions made on the sources and uses of funds during the evaluation period show the ability of KITU COMPANY LIMITED to meet long term loans and Capital requirement. The Company operations starts with a cash balance of Tshs.78.465 Million in the first year, and keeps on increasing to Tshs.4,634.615 Million in year ten. Therefore it means that the long term liquidity of the project is healthy and warrant credibility with financiers. Refer to Appendix 14. 10.6.0: Loans Repayment Schedule: The loans and overdraft repayment schedule is presented in Appendix 13 .The loan requirement amounting to Tshs.366.500 Million with interest of 22%, will be repaid by the end of third year. Repayment will be on quarterly basis at equal installments of Tshs.36.650 Million each. The loan has a grace period of six months. 10.7.0: Projected Balance Sheet: The projected balance sheet for the project is presented in Appendix 12.It shows a Company net worth of Tshs.914.197 Million in year one which increases to Tshs.5,697.714 Million in year ten, with 100% Equity Shareholding. 10.7.1: Fixed Assets: At the beginning of the operations, cost of capital investment will be Tshs. 249 Million: - Land and building ...Tshs. 100 M - Machinery & Equipment......Tshs. 128 M - Vehicles..Tshs. 18 M - Furniture and FittingsTshs. 3 M Total Cost...Tshs. 249 M 10.7.2: Working Capital: Working capital will amount to Tshs. 325 M, to be contributed by Shareholders tshs. 138 M and Tshs. 187 M from loan. 10.7.3: Source of Finance: As already provided, total finance required amounts to Tshs.577 Million. Shareholders will contribute Tshs.199 Million as equity and the balance (Tshs.378 Million) will be a bank loan at an interest rate of 22 %.

11.0.0: IMPLEMENTATION SCHEDULE: 11.1.0: Registration of the Company: Shareholders will apply for registration of the company with BRELLA and Tanzania Investment Centre (TIC). Registration with TIC will help the Company to get the investment incentives currently offered by the Government. Registration is expected to be completed within one month. 11.2.0: Financial Mobilization: It is expected that the project will be financed through bank loans and Shareholders equity contribution. Normally finance mobilization takes a long time but in this case it will be shortened by the prevailing competition within the banking industries. It is expected that the project appraisal and the decision to finance will be accomplished within two months from the TIC approval is received. 11.3.0: Bill of Quantities and Ordering of Machines and Civil Works: Efforts should be made to get as much details as possible on appropriate technology and machines for the proposed products. Once adequate information has been received a detailed engineering design and bill of quantities will be work out. During this period, it might be necessary for the consultant to visit the identified supplier and other reputable overseas machinery and technology. There after quotations will be sought and orders confirmed. This process is expected to be completed within 3 months after the funds are committed. 11.4.0: Factory Premises: Design of building, assigning a contractor and clearing land will be followed by actual construction work. The whole process is expected to take 3 months. 11.5.0: Receipt and Installation of Machinery: After confirmation of the order, it will take a further one to two months for the machines to be delivered and received. The building for the factory should be in its final stage of construction when machines arrive. 11.6.0: Machine Installation: Installation of the machines will be carried out immediately after they are cleared from the port. Installation and commissioning will be completed within a month. 12.0.0: CONCURRENT ACTIVITIES: A number of activities overlap. For example application for investment incentives, mobilization of funds and review of technologies, could take place simultaneously. i.e. within the first three months. Ordering, delivery, installation

and commissioning of the machines would need about two months more. Therefore, the whole project could be accomplished within less than a year. 13.0.0: CONCLUSION: All indicators of economy show that, the project is in a position to repay its financial obligation without any difficult. As far as the milling industry is concerned, it is a viable project; therefore the Shareholders should strive to ensure that it takes off smoothly.