KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY

COLLEGE OF AGRICULTURE AND NATURAL RESOURCES

FACULTY OF AGRICULTURE

A BUSINESS PLAN FOR AN OIL PALM FRUIT PROCESSING FIRM

(EJISU-JUABEN MUNICIPALITY)

A DISSERTATION SUBMITTED TO THE

DEPARTMENT OF AGRICULTURAL ECONOMICS, AGRIBUSINESS AND EXTENSION

BY

ANANI COURAGE KWASI 4300410

AFRIYIE DORCAS KONADU (MISS) 4299010

OSEI KWAKU OSAFO 4305910

MILLS FERDINAND KOBINA 4304510

BONSU STANLEY KOMOSA 4302410

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD FOR THE

DEGREE OF B.SC. (HONS) AGRIBUSINESS MANAGEMENT

MAY, 2014
DEDICATION

This work is dedicated to the Almighty God whose love and grace has granted us the knowledge,

wisdom and effort to bring this work to a successful end.

We also wish to dedicate this work to our parents.

 ACKNOWLEDGEMENT

This is how far the Most High has brought us. All praise, honour and thanksgiving be unto His

Holy Name.

This work would not have been successful without the contributions of our supervisor. We

therefore wish to express much appreciation to Dr. Victor Owusu of the Department of

Agricultural Economics, Agribusiness and Extension for all his efforts, fatherly advice and time

spent on our work. He is the man behind the success and the completion of this project. Words

are not enough to express our love for him. May the Almighty God richly bless him and the

generation after him.

We are grateful to all the lecturers of the Agribusiness Department for the knowledge they have

imparted unto us. We are also thankful to all the respondents who disclosed to us the needed data

for the project, especially, to Juaben Oil Mills at Ejisu-Juaben. Without data from these

wonderful people, there would not have been anything to evaluate and analyze. Our final thanks

go to our parents for their support in diverse ways.

 TABLE OF CONTENTS

CONTENTS PAGE

DECLARATION

DEDICATION i

ACKNOWLEDGEMENT ii

TABLE OF CONTENTS iii

CHAPTER ONE INTRODUCTION 1

1.1 Background 1

1.2 Problem Statement 3

1.3 Research Questions 4

1.4 Research Objectives 4

1.5 Justification of the Study 5

1.6 Organization of the Study 6

CHAPTER TWO

LITERATURE REVIEW 7

CHAPTER THREE METHODOLOGY OF THE STUDY 21

3.1 Study Area 21

3.2 Data Collection 22

3.3 Data Analyses 23

CHAPTER FOUR RESULTS AND DISCUSSIONS 25

4.1 Executive Summary 25

4.2 Mission Statement 26

4.3 Vision Statement 26

4.4 Corporate Objectives 26

4.5 Corporate Values 27

4.6 Business Description 28

4.7 Industry Overview 29

4.8 Production Plan 32

4.8.1 Production Process of Palm Oil 35

4.8.2 Production Process of Palm Kernel Oil 36

4.8.3 Indicators of Quality and Quality Assurance 39

4.8.4 Raw Material Quantity and Cost Analysis 40

4.8.5 Production Assumptions 41

4.8.6 Plant Maintenance Policy 42

4.9 Marketing Plan 42

4.9.1 Marketing Objectives 42

4.9.2 Marketing Mix 43

4.9.3 SWOT Analysis 47

4.9.4 Competition Strategies 47

4.9.5 Sales Forecast 48

4.10 Organisational and Management Plan 49

4.10.1 Employee Welfare Policy 54

 4.11 Financial Plan 55

4.11.1 Start-Up Cost 55

4.11.2 Capital Structure Decision 57

4.11.3 Summary of Financial Projections 57

4.11.4 Financial Analyses 60

4.11.5 Sensitivity Analysis 64

4.12 Risk Management 66

CHAPTER FIVE CONCLUSIONS 68

5.1 Main Findings 68

5.2 Policy Recommendation 69

5.3 Limitations of the Study and Suggestions for future Research 69

REFERENCES 71

APPENDICES 74

LIST OF FIGURES PAGE

Figure 1 Process Flowchart for Palm Oil and Palm Kernel Production 38

Figure 2 Organisational Structure of BOAMA Oils 50

LIST OF TABLES

Table 4.1 Equipment Required For Processing Palm Oil 33

Table 4.2 Equipment for Palm Kernel Processing 33

Table 4.3 Other Equipment 34

Table 4.4 Production Forecast 40

Table 4.5 Fresh Fruit Bunches Required For Production and Their Cost 40

Table 4.6 Litres of Palm Oil 41

Table 4.7 Litres of Palm Kernel Oil 41

Table 4.8 SWOT Matrix 47

Table 4.9 Price List of Palm Oil 48

Table 4.10 Summary of Sales Projections of Palm Oil and Palm Kernel Oil 49

Table 4.11 An Overview of Staff Strength 54

Table 4.12 Details of Start-Up Cost 56

Table 4.15 Projected Cash Flow Statements for Year 1 – 5 59

Table 4.16 Gross Profit Margin 61

Table 4.17 Net Profit Margin 62

Table 4:18 Net Present Value 62

Table 4.19 Internal Rate of Return 63
Table 4.20 Pay Back 63

Table 4.21 Sensitivity Analysis: 5 Percent Decrease in Sales 64

Table 4.22 Sensitivity Analysis: 5 Percent Increase in Expenses 65

LIST OF APPENDICES

Appendix 1.1 Projected Manufacturing, Trading and Profit and Loss Account For Year 1

Appendix 1.2 Projected Manufacturing, Trading and Profit and Loss Account for year 2

Appendix 1.3 Projected Manufacturing, Trading and Profit and Loss Account for year 3

Appendix 1.4 Projected Manufacturing, Trading and Profit and Loss Account for year 4

Appendix 1.5 Projected Manufacturing, Trading and Profit and Loss Account for year 5

Appendix 2.1 Projected Balance Sheet for year 1

Appendix 2.2 Projected Balance Sheet for year 2

Appendix 2.3 Projected Balance Sheet for year 3

Appendix 2.4 Projected Balance Sheet for year 4

Appendix 2.5 Projected Balance Sheet for year 5

Appendix 3.1 Questionnaires for Oil Palm Fruits Processors

Appendix 3.2 Questionnaires for Palm Oil and Palm Kernel Oil Marketers
 CHAPTER ONE

INTRODUCTION

1.1 Background

Palm oil is an edible vegetable oil derived from the mesocarp of the fruit of the oil palm. Palm

oil is naturally reddish in colour. Palm kernel oil is also derived from the kernel of the fruit of the

oil palm (en.wikipedia.org/wiki/palm_oil, accessed on 16th May, 2014). Palm oil is an important

domestic and commercial food and non-food ingredient.

According to the Food and Agriculture Organization (2002), palm oil processing began in Africa

thousands of years ago but trade in palm oil at the international level began at the turn of the

nineteenth century whiles that of palm kernel oil developed after 1832. The FAO asserts that the

establishment of trade in palm oil was mainly due to the Industrial Revolution in Europe.

Ghana was the first country where the British established oil palm plantations in the nineteenth

century (Angelluci, 2013), but the oil palm fruit processing industry in Ghana is composed

mainly of many small scale processors, using traditional methods for processing and very few

large scale processors (FAO, 2002).The industry however has bright future prospects due to the

ever increasing industrial and domestic demand for processed oil palm fruit products including

palm oil and palm kernel oil. The current population of Ghana is about 25 million based on the

2010 census. What this suggests is a wider market as each person consumes food prepared with

palm oil or palm kernel oil or uses a product produced with palm oil or palm kernel oil in

everyday life.
The Ministry of Food and Agriculture (2012), revealed that the current production of palm oil

stands around 243,852 tons annually but annual requirements is estimated at about 278,852 tons.

A deficit of about 35,000 tons are therefore needed to meet the nation’s demand.

At present, Ghana with its 305,758 hectares of area planted and a production of 243,852 tons of

palm oil has an internal unmet demand of 35,000 tons. The whole ECOWAS region has an

unmet demand of 850,000 tons (MoFA, 2012).

The implication of this low production as against the population and demand of Ghanaian

citizens is that, more palm oil of about 35,000 tons have to be imported to supplement local

production and satisfy consumers. What is obvious is that importation is very costly to the

economy as it competes with the local industries and raises the import bill of government.

Palm Oil is extracted from the mesocarp which in turn can be further refined. The refined oil and

fat is used in industrial production of non-dairy creams, ice cream powder, salad additives and

fat spread. It is used as substitute in the formulation of soaps, detergents, margarines and baking

fats. Palm oil is also a rich source of vitamins A, D and E which are indispensable in the

pharmaceutical industry. It is the second most important vegetable oil after soya. The fibre is

used in mills (boilers) as fuel and for stuffing car seats and mattresses. The shell of the palm nut

is used as fuel and as activated carbon for bleaching purposes. This product is in high demand on

the international market (Kyei-Baffour&Manu, 2002).

The kernel is a rich source of lauric acid, a vital ingredient for the soap, cosmetic and

confectionary industry. It is also used as feed for animals (i.e. palm kernel cake) (FAO, 2002).

What makes the development of palm fruit products more strategic and economically sound is

the fact that there exist in Ghana, West Africa, the rest of Africa and the world at large enormous
opportunities for palm oil and products processed from it. It is currently estimated that there is an

external market for 2.6 million tons of crude oil and allied products from Ghana and the sub-

region but only 800,000 tons is produced annually in the sub-region (PSI, 2003).

1.2 Problem Statement

Ghana’s oil palm fruit processing industry is composed of many small scale processors using

traditional technology that relies solely on manual labour and simple cooking utensils and a few

large scale processors (Poku, 2002). Small-scale operations have never able to meet demand

requirements, moreover, processing losses are always high since technology used is inefficient.

Much revenue is also lost due to losses that occur during processing as well as improper

utilization of end products from processing (Kyei-Baffour and Manu, 2008). Studies have shown

that some processing firms are able to use the kernels as fuel in their operations while others use

it in the generation of electricity, the fibre is also used to stuff mattresses as well as fuel but

many processors are not able to utilize these end products in this manner in order to cut down

production cost.

Appropriate marketing strategies and linkages have also not been adopted in marketing the

produce. Packaging and standardization has been very poor. The small scale processors usually

have their products displayed by the road side and in markets, in used and unattractive plastic

bottles or gallons, without labels. It is worth noting that consumers are very much interested in

what they consume and who produced it, how and when it was produced as well as its expiry

date but products of Ghanaian processors lack these features.

A study conducted by Kyei-Baffour and Manu (2008) revealed that, whiles the international

market standards require oil with a Free Fatty Acid (FFA) level of less than 3 per cent, that of

Ghanaian processors is between 3-5 per cent. What this suggests is that, Ghanaian producers are

not able to meet international market standards hence are not able to enter the competitive global

markets to trade their oil.

1.3 Research Questions

This study seeks to answer the following questions:

1. What is the marketing plan for an oil palm fruit processing firm?

2. What is the production and operational plan of an oil palm fruit processing firm?

3. Is oil palm fruit processing financially viable?

4. What is the organizational plan for such a firm?

1.4 Objectives of the Study

The main objective of the study is to design a business plan for the establishment of an oil palm

fruit processing firm in the Ejisu-Juaben Municipality of the Ashanti Region of Ghana. The

specific objectives are as follows:

1. To examine the production practices of oil palm fruits processing.

2. To examine the market and marketing strategies of oil palm fruits processing.
3. To determine the management and organizational structure for oil palm fruit processing.
4. To determine the costs and benefits and evaluate the financial viability of oil palm fruit
processing.
1.5 Justification of the Study

The business plan will be beneficial in that the study seeks to addresses the challenges in the

demand requirements of the country through adopting modern technologies in processing oil

palm fruits into two main products; palm oil and palm kernel oil in such quantities that are

enough to cut down the deficit and reduce the quantity the nation imports, thereby cutting down

the cost of importation of palm oil and other associated products.

The plan will also detail appropriate marketing strategies that will enable Ghana’s oil palm fruit

products sell more, both in the local and international markets and as well, make it traceable and

assess the viability of such a venture in the Ejisu- Juaben Municipality.

The study would also add knowledge to the effective processing methods that minimize

processing losses and the proper utilization of the end products of processing the oil palm fruits

to the existing knowledge whiles offering knowledge for further academic research.

Moreover, when the plan is implemented it will help the nation reduce the cost of importing oil

palm fruits products, thereby reducing the problems of balance of payment deficits.

While serving as a guide to management of the firm in their operations if it is implemented, it

will help attract investors, both foreign and local into the industry, if feasible and viable.

And finally, the plan will also serve as a means of providing a ready market for farmers of oil

palm in the study area and elsewhere in Ghana when implemented.

1.6 Organization of the Study

This study is divided into five chapters. The first chapter deals with the introduction of the study.

This is where the problem is stated, research questions, objectives of the study and justification

of the study are also stated.

Chapter two reviews the relevant literature on oil palm, oil palm fruit processing, trade in palm

oil and palm kernel oil, business planning and investment appraisal techniques.

The third chapter discusses the methodology employed in the study.

Chapter four presents the results and discussions. The various components of the business plan

are discussed in detail with our data.

Conclusions and recommendations are provided in Chapter five.

 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

Oil palm fruits contain two distinct types of oil: red palm oil and white palm kernel oil. Palm oil

is one of the most important oils in the world. It is produced from the fleshy mesocarp of the fruit

of the oil palm (Elaeis guineensis). Palm kernel oil is also extracted from the fruit of the oil

palm. Palm olein is the liquid fraction derived from the fractionation of palm oil. All the types of

oil palm products mentioned are suitable for all scales of production with the exception of palm

olein, which is suitable for medium and large scale processing (CTA, 2012).

Oil palm fruit processing firms can be categorized into micro-scale, small-scale, medium-scale

and large-scale businesses. According to CTA, 2012, a micro-scale oil business employs less

than five employees and needs a capital investment of less than $1,000.00 (CTA, 2012).

However, the size of organizations and their relative capital requirements are a matter of where

the business operation is to be carried out. It is never a rule of thumb. It is based on this that the

authors paid a visit to the Juaben Oil Mills to get familiar with the oil palm fruit processing

industry. It is an undeniable fact that all agro-processing industries are highly capital intensive.

Palm oil and palm kernel oil have very different chemical and physical properties. Palm oil is

rich in carotenoids, (pigments found in plants and animals) from which it derives its deep red

colour, and the major component of its glycerides is the saturated fatty acid palmitic; hence it is a

viscous semi-solid, even at tropical ambients, and a solid fat in temperate climates (FAO, 2002).
The fruit pulp contains 40 – 62 per cent oil, and palm kernels contain 46 – 48 per cent oil, which

is chemically similar to coconut oil (CTA, 2012).

The oil palm is the highest-yielding oil plant. Typically, for tenera fruit, 100 kilograms of fresh

fruit yields 21 kilograms of red palm oil and 6 kilograms of palm kernel oil (CTA, 2012). It is

the next higher yielding oil crop after soya bean. The advantage of oil palm however is the two

distinctive oils that can be derived from it. The other has to do with how useful the end products

of oil palm are. Whiles some are used as fuels both domestically and industrially, others are also

used as feed in animal production. Any firm can utilize all these avenues to generate more

revenue and profit.

2.2 Historical Overview

It is generally agreed that the Oil Palm (Elaeis guineensis) originated in the tropical rain forest

region of West Africa. The main belt runs through the southern latitudes of Cameroon, Côte

d’Ivoire, Ghana, Liberia, Nigeria, Sierra Leone, and Togo and into the equatorial region of

Angola and the Congo (FAO, 2002).

Processing oil palm fruits for edible oil has been practiced in Africa for thousands of years, and

the oil produced, highly coloured and flavoured, is an essential ingredient in much of the

traditional West African cuisine. The traditional process is simple, but tedious and inefficient

(FAO, 2002). Among the African Center for Economic Transformation (ACET) countries,

Nigeria, Cameroon, and Ghana are the top three palm oil producers, where palm oil production

annually grew by 0.7 per cent, 1.5 per cent, and 8.5 per cent respectively. Ghana experienced the

largest production growth because it recently allocated more land to palm oil production and

adopted high yield varieties.

2.2.1 World Trade in Palm Oil

International trade in palm oil began at the turn of the nineteenth century, while that of palm

kernel developed only after 1832. Palm oil became the principal cargo for slave ships after

abolition of the slave trade. The establishment of trade in palm oil from West Africa was mainly

the result of the Industrial Revolution in Europe. As people in Europe began to take sanitation

and hygiene seriously, demand for soap increased, resulting in the demand for vegetable oil

suitable for soap manufacture and other technical uses. Tinplating required technical oil for

which palm oil was found suitable. In the early 1870s exports of palm oil from the Niger Delta

were 25,000 to 30,000 tons per annum and by 1911 the British West African territories exported

87,000 tons.

The export of palm kernels also began in 1832 and by 1911 British West Africa alone exported

157,000 tons of which about 75 percent came from Nigeria. Nigeria was the largest exporter

until 1934 when the country was surpassed by Malaysia. Africa led the world in production and

export of palm oil throughout the first half of the 20th century, led by Nigeria and Zaire. By

1966, however, Malaysia and Indonesia had surpassed Africa’s total palm oil production (FAO,

2002).

Global Crude Palm Oil (CPO) export volumes have increased almost 10 fold from 3.8 million

metric tons in 1980 to 36.2 million metric tons in 2009, with Indonesia and Malaysia being the

largest exporters. The largest importers of CPO are India, China, and the EU, accounting for 17

per cent (6.8 million metric tons), 17 per cent (6.6 million metric tons), and 16 per cent (5.8

million metric tons) of global imports respectively. Dependence on imported vegetable oils has

continued to surge in China, the EU, India, Russia, and Ukraine over the last 10 years (ACET,

undated). It is sad to observe that out of this number of African countries that are recorded in the
books of the world for their significance in oil trade over the centuries and decades, Ghana has

never been part though Ghana has a large portion of land that supports oil palm plantations and

was the first country in which the British established palm plantations in the 19th century in

Africa (Angelucci F., 2013). It is a pointer to the fact that the country’s production has been too

low to be recognized in world trade.

According to Oil Palm Review, published by the Tropical Development and Research Institute in

the United Kingdom, over 3 million tonnes of palm oil was produced by Malaysia alone in 1983,

compared with a total of about 1.3 million tonnes of African production.

The extensive development of oil palm industries in many countries in the tropics has been

motivated by the extremely high potential productivity of the oil palm. The oil palm fruit gives

the highest yield of oil per unit area compared to any other crop and produces two distinct oils -

palm oil and palm kernel oil - both of which are important in world trade (FAO, 2002).

2.3 Palm Oil Processing in Ghana

The Government of Ghana in 2002, noted that over the last 20 years, Ghana’s economic

performance has been inconsistent, with generally slow growth rates averaging 4.6%. The key

reason has been Ghana’s over-reliance on two key commodity exports and aid/grants from the

donor community to fund investment and growth. As these sources have suffered sharp

variations over the years, so has the economy moved from one crisis to another depending on the

performance of cocoa and gold prices on the world markets and the mood of donors at any point

in time. Ghana cannot continue to depend on this narrow, unreliable base to grow fast enough to

move the economy beyond its current HIPC status. The major challenge facing Ghana therefore

is to find new pillars of growth (President Special Initiative, 2002).

Several Government interventions with the support of international agencies have been

undertaken to re-launch the palm oil sector and boost production and productivity. This include

the 3,000ha out grower project ongoing in the Upper and Lower Denkyira Districts with the

support of Agence Francaise de Development (AFD), expansion of the seed nuts production

capacity of Oil Palm Research Institute from 2 million to 5 million seed nuts per year under the

World Bank sponsored Agriculture Services Sub-Sector Investment Programme (AgSSIP). And

the cultivation of over 10,000ha small-scale farms under the President’s Special Initiative (PSI)

on oil palm (Angelucci, 2013).

This should definitely bring a sigh of relief to firms already in the industry and those planning to

enter the industry for receiving such a Presidential recognition, concern and support.

The government of Ghana has also encouraged the development of non-traditional industries

over the past decade in order to diversify the country’s export base (Government of Ghana,

2002).

The encouragement of these industries is really necessary due to the fact that the nation needs to

put more export products into the export basket in order to widen the export base and rake in

more foreign exchange.

Palm oil in Ghana became a commercial crop at the beginning of the 19th century. Originally,

the sector was based on wild palm harvesting and later in 1850 oil palm plantations were

established and oil palm evolved to an agricultural crop. This lead to palm oil becoming the

principal export in the 19th century accounting for 75 percent of Ghana’s export revenues

(Angelucci, 2013). The current population of Ghana is about 25 million based on the 2010

census. The current production of palm oil stands around 243,852 tons of palm oil hence an
internal unmet demand of 35,000 tons. The whole ECOWAS region has an unmet demand of

850,000 tons (MoFA, 2012).

This requires more firms to enter the industry and produce quantities that will eliminate the

unmet demand and even produce above the local demand so that the surplus can be exported.

Ghana has excellent democratic credentials, (for instance, her successful emergence from the

landmark 2012 election petition), favourable trade relations in the sub-region, and with her stable

and attractive investment environment, conditions are right for private firms to be able to survive

and succeed in the oil palm fruit processing venture in the country (Kyei-Baffour&Manu, 2008).

2.4 Marketing of Palm Oil

The majority of palm oil produced in Ghana is sold on the local market through the domestic

marketing system and to large-scale industrial users (DIIS working paper, 2012).

Medium to large-scale mills which produce to international palm oil specifications sell to

industrial users. With respect to local industrial needs, Unilever purchases the bulk of palm oil

supplies, followed by Ameen Shangari, Appiah Menka Complex and Pater-son Zonchonis (DIIS

working paper, 2012; Foli, 2010).

According to WTO Ghana Trade Policy review (2008), the Most Favored Nation (MFN) import

tariff on palm oil is 20 per cent, with the exception of palm oil for soap production which is

subject to a reduced tariff of 10 per cent. The domestic marketing system is such that,

wholesalers and retailers buy the processed oil from the processors in huge volumes such as

20kg gallons and would have to pour them into old and unattractive plastic bottles which for

most often are not sealed with corks. It is worth noting that traceability is lost at this point as
there is no labelling and hence no information on the processing firm is made available. The

objective of improvement in packaging is lost.

2.5 Overview of Business Plan

A business plan is a formal statement of a set of business goals, the reasons they are believed to

be attainable, and the plan for reaching those goals (www.wikipedia/business plan .com,

accessed on 17th November, 2013).

It is a document that provides the full details of a particular business or venture, what it is all

about, why it is important to carry out the business and how the particular venture will be ran. It

is a document that gives details and guidance on any venture of operation.

A business plan is important because it provides a framework that enables one to make effective

business decisions to maximize the probability of success of your company (available at

http://fnbc.info/sites/default/files/documents/Business%20Plan%20Process.pdf). What this

suggests is that a business plan provides the basis for deciding the success or otherwise of any

proposed business.

A written business plan is important because it communicates the plan to potential investors and

creditors who can supply needed capital to the business. It also provides a clear and concise

guide for running a business and making decisions related to it.

In this subsection, a brief description of the various components of a business plan is given.

These include the marketing plan, financial plan, management and organizational plan and the

production and operational plan.

2.5.1 The Marketing Plan

The marketing plan should include a review of industry conditions, a precise definition of the

target market(s), an analysis of competitor advantages and weaknesses and a plan for promoting

and selling your product or service (Business plan outline, Northern Virginia Small Business

Development Center – 2000, Mason Enterprise Center - George Mason University Fairfax, VA).

The only means of achieving the objectives of profitability as spelt out in a business plan is to

sell the products and services of the business to its consumers. It is therefore prudent to devise a

plan that shows how the marketing will be done, vis-à-vis who the target consumer is, how the

target consumer will be reached, what prices are to be charged for what quantities of the product

and where to locate the consumer and sell to him or her.

Again, since no business operates on an island, there are bound to be competitors. The hurdle is

how to deal with competition in the market and be able to gain a higher market share in order to

succeed. An analysis of the market and competitors must therefore be conducted. Competitor

analysis is mostly done using the Michael Porter’s five-force model.

It is important for the entrepreneur to analyze his potential and industry together before entering

into it. According to (Stan, undated), “an industry is the collection of competitors that produce

similar or substitute products or services to a defined market”. It can therefore be inferred that an

industry is a collection of firms engaged in the same or similar production activities and serving

the same markets. The African Center for Economic Transformation in its analysis of the Sub-

Saharan Africa oil palm industry, used SWOT analysis. SWOT, which is an acronym stands for

Strengths, Weaknesses, Opportunities and Threats respectively. It is a structured planning

method used to evaluate the Strengths, Weaknesses, Opportunities and Threats in a project or a

business venture (en.wikipedia.org/wiki/SWOT_ analysis, accessed on 19th November, 2013).

Technically, it is agreed that Strengths and Weaknesses are internal or within the firm or

industry whiles the Opportunities and Threats are external to the industry or firm in question.

The Strengths represent the characteristics of the business that give the firm an advantage over

others, Weaknesses are characteristics that place the business at an advantage relative to others,

Opportunities are elements that the project could exploit to its advantage but Threats are

elements in the environment that could cause trouble for the business or project. SWOT is

important as it informs whether the selected objectives are attainable or not. If the objectives are

not attainable, they are discarded and new ones formulated.

Industry analysis can also be conducted using the PEST model (Oduro et al., 2011). PEST refers

to the Political, Economic, Social and Technological factors that affect an industry

(en.wikipedia.org/wiki/PEST_ analysis, accessed on 19th November, 2013).

Political factors basically refer to the degree of government intervention in the economy. These

factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs

and political stability. These policies have both positive and negative effects on any business

depending on the decision of the government. For instance increase in taxes reduces business

profits whiles a reduction in taxes increase corporate profits.

Economic factors also include economic growth, interest rates, exchange rates and the rate of

inflation. These factors have a great impact on how businesses operate and make decisions.
Social factors focus on the cultural aspects and include health consciousness, population growth

rate, age distribution, career attitudes and emphasis on safety. These factors affect the demand

for a company’s products and how the company operates.

Technological factors include technological aspects such as Research and Development,

automation and the rate of technological change. They can determine the barriers to entry,

minimum efficient production level and influence outsourcing decisions. Technological factors

can also affect costs, quality and lead to innovation.

2.6.2 The Financial Plan

Another important section of the business plan is the Financial Plan. The purpose of the financial

plan is to show the profitability or otherwise of the firm. It is also to proof to an external investor

that the business is worth investing into in order to inform his or her investment decision. The

Financial plan also informs any user of the business plan of as to when the firm will be able to

pay back any borrowed funds.

The balance sheet, income statement and statement of cash flows are the most important

financial statements produced by a company. While each is important in its own right, they are

meant to be analyzed together.

i. Trading, Profit and Loss Account (P&L)

A financial statement that summarizes the revenues, costs and expenses incurred during a

specific period of time - usually a fiscal quarter or year. These records provide information that

shows the ability of a company to generate profit by increasing revenue and reducing costs. The
Profit and Loss Statement is also known as a "statement of profit and loss", an "income

statement" or an "income and expense statement" (Wood &Sangster, 1999).

A Profit and Loss Statement measures the activity of a business over a period of time – usually a

month, a quarter, or a year. This basically tells the revenue, expenses, profit, and loss. The Profit

and Loss Account begins with an entry for revenue and subtracts from revenue the costs of

running the business. The objective of the profit and loss account is to determine the net income

(profit) (ICAG, 2011).

ii. Balance Sheet

A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a

specific point in time (Wood and Sangster, 1999). A standard company balance sheet has three

parts: assets, liabilities and ownership equity. The main categories of assets are usually listed

first and typically in order of liquidity. Assets are followed by the liabilities. The difference

between the assets and the liabilities is known as equity or the net assets or the net worth or

capital of the company and according to the accounting equation, net worth must equal assets

minus liabilities (CIMA, 2006).

iii. Cash Flow Statement

Cash flow can be used as an indication of a company's financial strength.

Cash inflows usually arise from one of three activities - financing, operations or investing. Cash

outflows result from expenses or investments. This holds true for both business and personal

finance.
An accounting statement called the "statement of cash flows", shows the amount of cash

generated and used by a company in a given period. It is calculated by adding noncash charges

(such as depreciation) to net income after taxes. Cash flow can be attributed to a specific project,

or to a business as a whole.

Investment Appraisal Techniques

The above financial statements seem to report on the profitability and the financial position of

the business at any point in time without showing whether it is worth investing into the business

or not and how long it will take to pay back creditors. Therefore other indicators should be used

to appraise the investment. These are known as investment appraisal techniques. Investment

appraisal is used to look at a potential capital investment by a firm and measure its potential

value to the firm (NGFL, September, 2008).

There is more than one method of Investment Appraisal, and each different method allows the

potential return on the investment to be examined in a different way (NGFL, 2008). The most

commonly used ones are the Net Present Value (NPV), the Internal Rate of Return (IRR) and

Benefit Cost Ratio (BCR).

i. The Net Present Value

Present value is the value of today’s dollar or cedi.Net present value (NPV) is the difference

between today’s value of the added returns and today’s value of the added costs (USDA, 1996).
What this definition suggests is that Net Present Value represents the present net cash inflows

and outflows of a particular investment. The Net Present Value is important as an investment

appraisal technique because it takes into account the time value of money as well as the benefits

of a project after its lifetime.

Mathematically, NPV = ∑PV cash inflows - ∑PV cash outflows (ICAEW, 2009).

The result of this computation can be positive, zero or negative. A positive answer is an

indication that the proposed business venture is profitable and worth investing into, a zero result

means a break-even whiles a negative answer means the venture is undesirable and unprofitable

hence should be rejected.

ii. Internal Rate of Return (IRR)

The IRR is the rate of return or yield of the investment, expressed as a percentage. It is the

discount rate which generates a Net Present Value of zero. The higher the IRR, the more

desirable it is to undertake the business venture. IRR that is greater than the interest rates of

financial markets is worth accepting since it is more profitable to invest in the venture rather than

in the financial markets.

The purpose of IRR to the authors is to inform investors that investing into the business is more

profitable than investing in financial markets.

Mathematically,

IRR  LDR  ( HDR  LDR)*(( NPV @ LDR) | NPV @ LDR  NPV @ HDR |)) (ICAG, 2010)

Where, LDR = Lower Discount Rate and HDR = Higher Discount Rate.
Overall, a sensitivity analysis is conducted to find out how sensitive the performance indicators

are when certain factors such as interest rates, inflation rates, and operational costs among others

change. This is done to test whether the appraisal techniques will still show the profitability of

the enterprise when these factors, which have direct impact on the NPV, BCR or IRR change

over time or after the planning process. Generally, when BCR is 1, NPV is negative and IRR is

very low, the venture is highly sensitive meaning it is risky and unprofitable to invest into it

(en.wikipedia.org/wiki/Sensitivity_ analysis accessed on 20th November, 2013).

2.5.3 Production and Operational Plan

This section of the business plan discusses the various activities that take place in producing a

product. The section describes the equipment that are needed for production, the raw materials

and other materials that are used as well as the production process. According to CTA (2012),

the production process is best represented by a process flow chart.

2.5.4 The Management and Organisational Plan

This section explains the levels of management, levels of authority, forms of communication and

who is responsible for what in the organization. Lanquaye et al., (2013), used an organisational

structure to represent the management and organisational plan.

 CHAPTER THREE

METHODOLOGY OF THE STUDY

This chapter discusses the methodology of the study. These include the description of the study

area, and how the data employed in the study was collected and analyzed.

3.1 The Study Area

The study area is the Ejisu-Juaben Municipality of the Ashanti Region of Ghana. Ejisu-Juaben

Municipality is one of the administrative districts in the Ashanti Region of Ghana. The

Municipality is known for its rich cultural heritage and tourists attractions notably the booming

kente weaving industry.

The Municipality stretches over an area of 637.2 km2 constituting about 10% of the entire

Ashanti Region and with Ejisu as its capital (www.ejisujuaben.ghanadistricts.gov.gh, accessed

on 19th July, 2013). Currently it has four urban settlements namely, Ejisu, Juaben, Besease and

Bonwire. The Municipality is located in the central part of the Ashanti Region and provides

enormous opportunity for creating an inland port for Ghana to serve the northern section of the

country. It lies within Latitude 1° 15’ N and 1 ° 45’ N and Longitude 6° 15’W and 7° 00’W.

Ejisu-Juaben Municipality shares boundaries with six (6) other Districts in the Region

(www.ejisujuaben.ghanadistricts.gov.gh, accessed on 19th July, 2013). To the North East and

North West of the Municipal are Sekyere East and Kwabre East Districts respectively, to the

South are Bosomtwe and Asante-Akim South Districts, to the East is the Asante-Akim North

Municipal and to the West is the Kumasi Metropolitan. (www.ejisujuaben.ghanadistricts.gov.gh,

accessed on 19th July, 2013)

The 2010 National Population Census put the population of the Municipality at 143,762

comprising 68,648 males and 75,114 females. With an average 1984 – 2000 inter - censual

growth rate of 2.5 per cent, the municipality will by 2013 have an estimated population of

189,744. The local economy exemplifies the national micro economy. Even though it is

agriculture dominated, it is increasingly becoming service and commerce based. (Republic of

Ghana, the composite budget of the Ejisu-Juaben municipal assembly for the 2013 fiscal year).

The municipality was chosen as the study area because according to Kyei-Baffour& Manu

(2008), it has the highest number of oil palm hectares under cultivation and is as well the highest

producer of fresh fruit bunches in the Ashanti region. The municipality is also a commercial hub

for major trading activities given its excellent proximity to Kumasi, the capital of the Ashanti

region. The study area also has tax advantages to enjoy from government in terms of agro-

processing (Section 11; Part II Section (1) (2) of the Internal Revenue Act, 2000, Act 592). Tax

rebates and holidays are available for agro-processing firms located outside regional capitals and

hence the need to take advantage of it. The target population are the oil palm fruit processors and

marketers of palm oil in the Ejisu-Juaben municipality.

3.2 Data Collection

Primary data was collected from one oil palm fruit processing firm through purposive sampling

whiles data from ten marketers of oil palm was collected using the simple random sampling

technique. Primary data on the processing firm focused on the production and operations,

organization and management, marketing and financing.

Both close and open ended questionnaires were used to collect primary data for the study.
3.3 Data Analyses

3.3.1 Marketing Strategies and Marketing Plan

The marketing plan was analyzed using the marketing mix, SWOT matrix and the competition

strategies. The PEST model was also used to analyze the industry.

3.3.2 Production and Operational Plan

The production and operational practices and processes were determined with a flow chart using

the various stages in the extraction of palm oil and palm kernel oil.

3.3.3 The Financial Plan

The financial plan comprises of the Profit and Loss Account, Cash flow statement and the

Balance Sheet. The financial indicators computed are the net present value, internal rate of

returns, the payback period and sensitivity analysis:

1. The profitability ratios comprise of the gross profit margin and net profit margin

These are computed as:

Gross profit
• Gross profit margin = Turnover(sales)x 100%

Net profit
• Net profit margin = Sales
x 100%

2. Net Present value (NPV) = ∑PV cash inflows - ∑PV cash outflows

Where ∑PV cash inflows is the summation of discounted cash inflows and

∑PV cash outflows is the summation of the discounted cash outflows.

3. Internal rate of return (IRR)

IRR  LDR  ( HDR  LDR)*(( NPV @ LDR) | NPV @ LDR  NPV @ HDR |))
 Where LDR = Lower Discount Rate, HDR = Higher Discount Rate and |NPV@LDR-

NPV@HDR| = the absolute difference between the NPV@LDR and NPV@HDR

Capital Investment
4. Pay Back period = Net annual cash flows

Net annual cash flows = cash Inflows - cash outflows

5. Sensitivity analysis was conducted to determine the effect of changes in expenses, and

sales on NPV and IRR.

3.3.4 The Management and Organizational Plan

The management and organizational plan will be represented with an organizational structure.
 CHAPTER 4

RESULTS AND DISCUSSIONS

This chapter discusses the industry of oil palm fruits processing firms, production and

operational plan, marketing strategies and marketing plan, the management and organizational

plan and the financial plan. The chapter also discusses the risks and risk management strategies

of the proposed oil palm fruits processing firm.

4.1 Executive Summary

BOAMA oil mills is a proposed oil palm fruit processing firm which will process palm oil and

palm kernel oil for sale in the Ejisu-Juaben municipality, Ashanti region, Ghana and elsewhere.

The mission of our firm is to process and sell, in line with international standards, high quality,

conveniently packaged and affordable palm oil and palm kernel oil. Our vision is to be the

leading palm oil and palm kernel oil business in Ghana in the next ten years.

BOAMA oil mills would be a partnership business with five main partners. It will be located at

Ejisu-Juaben in the Ashanti Region of Ghana. The target markets are retailers, wholesalers,

schools, hospitals and industries. The business intends to embark on various marketing strategies

such as the use of various media avenues, personal selling, promotion and advertisement to

create awareness of its product.

Our financial analyses results portrayed for a five-year period, an NPV of GHC 18,026,141.12

and an IRR of 28 per cent. A sensitivity analysis conducted indicated an increase in NPV and

IRR.

BOAMA oil mills will hit a production level of 30Tonnes/month of palm oil in the first year and

will hit 100Tonnes/month in the fifth year. With that of palm kernel oil, production level will be
1.5Tonnes/month and in the first year and will hit a production level of 5Tonnes/month in the 5th

year of operation and fresh fruit bunches are the raw materials which will be used.

Start-up capital of GHC 1,460,883.20 is needed and the source of fund to finance the business

will be equity and loan in the proportion of 30 per cent loan at 26 percent interest rate and equity

of 70 per cent.

The business is expected to commence full scale operations from January 1st, 2015.

4.2 Mission Statement

The mission of our firm is to process and sell, in line with international standards, high quality,

conveniently packaged and affordable palm oil and palm kernel oil.

4.3 Vision Statement

Our vision is to be the leading palm oil and palm kernel oil business in Ghana in the next ten

years.

4.4 Corporate Objectives

4.4.1 Short to Medium Term Objectives (1 to 5years)

 To provide products that satisfy the needs of our consumers; both households and

industry.

 To put a healthy-looking bottle of palm oil and palm kernel oil in every household in

Ashanti, Greater Accra, Western, Eastern and Brong Ahafo regions within 5 years of

operation.

 To create a profitable venture that will ensure high returns for investors.
  To open up a processing facility that will ensure high productivity, minimize processing

losses and ensure efficiency.

 To recruit, train and develop a workforce that will help create and add value to the

business.

 To develop a new product line every two years and add value to existing products as

often as possible.

 To hit a production level of 100T/day of palm oil and 5T/day of palm kernel oil in the 5th

year of operation.

4.4.2 Long Term Objectives

 To effectively utilize the end products of processing in order to derive extra revenue from

them or for reducing production cost.

 To establish an oil palm estate

 To export palm oil and palm kernel oil to other countries.

4.5 Corporate Values

Our values among other things are:

1. Healthy products;

2. Consumer satisfaction;

3. Quality;

4. Environmental sustainability;

5. Integrity and creativity;

6. Protection of workforce and the general public.

4.6 Business Description

4.6.1 Business Name: BOAMA OIL MILLS (aka BOAMA Oils)

Basis for the business name: the first premise for adopting this name is to present a simple name

that would stick in the minds of our prospective customers and the second is to make our

customers feel and know that the firm is a Ghanaian firm. It was derived from the acronyms of

names of owners of the business.

B – Bonsu

O – Osei

A – Anani

M – Mills

A – Afriyie.

4.6.2 Location of business

The business is to be located at Ejisu in the Ejisu- Juaben Municipality.

4.6.3 Reasons for choosing the location:

Ejisu is the capital of the municipality, and hence easy access to market, the town also has a very

excellent road linking Kumasi and Accra, it is also not far from Boankra (the proposed site for

the inland port of Ghana) and that would aid in the exportation of our products in the future.

Ejisu-Juaben is also the municipality in the Ashanti Region with the highest production of fresh

fruit bunches.
4.6.4 Type of Business

BOAMA Oils is a manufacturing concern. It exists to process fresh fruit bunches into two main

products: palm oil and palm kernel, and other products in the future.

4.6.5 Status of Business

BOAMA Oil Mills is a start-up business.

4.6.6 Registration and Licenses

BOAMA Oils would be a partnership and would be registered under Section 5 of the

Incorporated Private Partnerships Act 1962 (Act 152). Upon registration as a partnership,

BOAMA Oils would assume the status of separate legal entity and would have the powers of a

natural person capable of entering into contracts. As a partnership, BOAMA oils has no tax

obligation towards the government of Ghana except for the individual partners as stated under

Section 40(1) of the Internal Revenue Act, 2000 (Act 592).

Other licenses would be from the Ghana National Fire Service (Fire Certificate), Food and Drugs

Authority, Standards Board, Roundtable on Sustainable Palm Oil (RSPO), Environmental

Protection Agency and the Ejisu-Juaben Municipal Assembly.

4.7 Industry Overview

The oil palm industry is composed of large scale processors, small scale processors and other

projects financed by the government, thus the President Kuffuor special Presidential Initiative for

the development of the oil-palm industry. The oil palm industry is mainly made up of locally

produced oil palm and imported ones.

The industry however has bright future prospects due to the ever increasing industrial and

domestic demand for processed oil palm fruit products including palm oil and palm kernel oil.

In order to determine the various components and characteristics of the industry, a PEST analysis

has been conducted as below.

4.7.1 PEST (Political, Economic, Social and Technological) Analysis

Political Factors

There is a stable political environment in the country which will not affect the operation of the

business. Elections are always conducted in a peaceful manner each year, there are no ethical or

tribal conflicts, any conflicts that arise are always solved amicably. The only problem will be

change of government policies which will occur when there is a change in government to another

political party with its own policies. Governmental policies such as the President Kuffuor special

Presidential Initiative for the development of the oil-palm industry is also in progress.

Economic Factors

The economy in the country is not stable as prices of commodities and interest rates keep

changing. The inflation rate for December 2013 stood at 13.5 per cent according to the Ghana

Statistical Service. There was a 0.3 per cent increment from November 2013’s rate of 13.2 per

cent. What this suggests is that, though prices are unstable, the rate of changes in general price

level of goods and services is very marginal and that means that price increments in raw

materials and other goods and services would not be too significant as to affect our operations.

Exchange rates have also increased significantly with our major trading partners and that is likely

to affect trade especially the importation of equipment and machinery and in venturing into
foreign markets. The unemployment rate in the country is high which constitutes undergraduates

and diploma holders. These unemployed would make employees available or make it easy for

outsourcing employees.

Access to credit would not be too difficult as Banks and other lending institutions are ready to

advance loans to firms of manufacturing or processing concern due to the increased growth of

the sector. Interest rates also keep varying due to changes on the stock market. What it means is

that, though credit is accessible, it is rather expensive to borrow. Changes in interest rates can

affect the firm’s cost of capital whiles changes in exchange rates can affect the cost of exporting

goods, and the supply and price of imported goods in the country.

However, due to globalization, some foreign countries now aid African countries in the agro-

processing and agribusiness sectors. Therefore there can be easy funds to support the venture.

In terms of taxation, the nation’s tax laws are a bit favourable to the agro-processing sector,

allowing for rebates and concessions. The firm would tap all this opportunities especially, the

five –year tax holiday.

The business would be in partnership with other countries like Malaysia to outsource some raw

materials, tools or equipment and even training and manpower development.

Social Factors

The Ghanaian population consumes palm oil in one way or the other, either by preparing it at

home to include it in meals or to buy food outside the home which is prepared with palm oil or

the palm kernel oil. Examples of food prepared with palm kernel oil are fried rice, jollof rice,

stews and the likes and those prepared with the palm oil are the, gari and beans, stews etc. The

population keeps increasing and market for palm oil and palm kernel oil will also increase.
People are becoming health conscious creating the alarm to consume palm oil free from

chemicals. Farmers are also gradually becoming aware of the importance of the use of

modernised tools and methods of processing the palm fruits which is gradually shifting from the

traditional methods to the modernised methods. There are no social or religious taboos against

the consumption of palm oil and palm kernel oil produced. The production of palm oil is

environmentally friendly and will help recycle waste, improve the health of consumers, sustain

the land and contribute to better health. Social values would be incorporated into the business

values.

Technological Factors

In terms of technology, Ghana imports almost all her equipment and this can affect our firm due

to unstable exchange rates. Roads in our area of location are of good shape. There are good

communication networks hence such resources would be tapped by the company to enable

research and development. The government is also striving to improve infrastructure in the

country such as roads, electricity and water.

Our challenges still remain the ever increasing prices of fuel, electricity, water and other goods

and services. To avert this anomalies, the firm would strive to generate its own electricity, water

and utilise its end products effectively.

4.8 Production Plan

This section discusses how the available resources would be used to produce a product of

consumers’ choice. The resources include raw materials, labour, plant and machinery and other

important resources.
4.8.1 Direct materials required for production

1. Fresh fruit bunches

2. Palm kernels (to be obtained from the processed FFBs).

Table 4.1 Equipment for processing palm oil

Name of Equipment Function

Weighing bridge For weighing the fresh fruit bunches
Fork lift For lifting the ffbs into the sterilizer
Sterilizer For sterilizing
Stripper For stripping the fruits from the bunches
Milling tank For milling the palm fruits
Settling tank For separating the sludge, palm oil and nuts
Centrifuge For separating the oil from water
Clarified oil tank Clarifies oil from other impurities
Vacuum dryer For drying the clarified oil
Measuring tank For measuring the clarified oil
Storage tank For storing the final oil
Bottle fillers For filling bottles and gallons with the oil
Source: Field survey (2014)

Table 4.1 above lists the equipment needed to extract palm oil from oil palm fruits. Though the

equipment are listed distinctively, they make up a complete process layout in a factory such that

the product moves from one stage to the other automatically.

Table 4.2 Equipment for palm kernel processing

Name of equipment Function

Steam dryer Dries the kernel
Crusher Cracks the kernels and separates the kernels
from the shells
Bucket elevator Lifts the cracked kernels into the cooker
Cooker Cooks the kernels
Oil expeller Expels oil from the cooked kernels
Filter tank Filters the expelled oil
Pump Pumps the oil from the filter tank
Compressor Presses out all the oil
Measuring and storage tank Receives, measures and stores the oil
Bottle fillers For filling bottles and gallons with oil
Source: Field Survey (2014)

The equipment listed in table 4.2 are those required to extract palm kernel oil from palm kernels.

Though the equipment are listed distinctively, they make up a complete process layout in a

factory such that the product moves from one stage to the other automatically.

Table 4.3 Other equipment

Name of equipment Function

Turbine Provides power for the boiler
Induced drying fan For fanning fire
Force dry fan
Freeze water pump (automatic) Freezes the boiler
Feed water pump Feeds the boiler with water
Softener Softens water to the boiler since the boiler does
not use hard water
Boiler chimney Discharges smoke
Incinerator For processing empty fruit bunch into potash
ash (for the purposes of fertilizer production)
Borehole Water supply
Source: Field survey (2014)

Table 4.3 lists other equipment needed for the factory.

4.8.2 Sources of Raw Materials and Procurement

The sources of materials (FFBs) are private farmers and the presidential special initiative on oil

palm. Raw materials would be sourced from the Ejisu-Juaben municipality, other parts of the

Ashanti region, the Kwaebibrim district of the Eastern region and parts of the Brong Ahafo

region.
Procurement of the fresh fruit bunches (FFBs) would be the sole responsibility of the Marketing

and Supply Chain department; procurement officers would be in charge.

4.8.3 The Production Process of Palm Oil

Bunch Reception

This is the first stage at the factory level where the FFBs arrive at the factory and are received.

The fruits purchased must be devoid of bruises as that will increase the free fatty acid level. At

arrival, the consignment would be weighed at the Weighing Bridge and then transferred to the

sterilizer.

Sterilization

At this stage, the palm bunches would be loaded by the forklift into the sterilizer for sterilization.

The fresh fruit bunches would then be subjected to steam-heat treatment. The steam would be

saturated at a pressure of 3kg/cm2 and at a temperature of about 1400C. The FFB would be

heated for 75 to 90 minutes. The following factors make sterilization very important: stop further

formation of free fatty acids by stopping enzyme action, facilitate stripping of fruits, and

minimize kernel breakage during nut cracking.

Stripping

Upon completing sterilization, the FFB would be transferred into a rotary drum-stripper for the

fruits to be separated from the bunch stalks. The rotation of the drum-stripper and the lifting and

dropping of the bunches repeatedly would cause the stripping. The empty bunch stalks would be

collected at the end of the stripper and sent into the incinerator for processing into potash ash.

Milling
This is where the milling of the fruits would take place. The fruits would be mashed and digested

at this stage. The milling tank or digester would be kept full at a temperature of 900C. The

collected mixture of palm oil, water and sludge would then be transferred to continuous settling

tank.

Clarification

The oil is separated from the sludge and water in the centrifuge and the oil is clarified in the

clarifier or clarification tank. From here, the oil would be transferred to the vacuum dryer for

drying and then to the measuring tank for measuring the quantity of oil produced in tons.

Storage

Measured oil is transferred into the storage tank for storage. This would then be used to fill the

bottles and gallons by the bottle fillers.

Packaging

This is where the oil is filled into bottles and labelled. The packed and labelled oil of 300ml,

1liter, 2liters are packed into cartons and together with the other ones in gallons sent to the

warehouse for sale and distribution.

4.8.4 The Production Process of Palm Kernel Oil

Nut drying

Nuts would be dried first after their separation from the fibre and the sludge. The nuts are dried

in a steam dryer. After this process, the dried nuts are transferred into the crusher for cracking.
Nut cracking

This is the process of cracking the nuts in order to get the kernels out of the nuts and separate

them from the shells.

Cooking

Cracked kernels are cooked and roasted in a cooker to soften and break the oil cells in order to

get the oil out of the kernels.

Milling and Expelling

In the miller and the expeller, the kernels are first milled and the oil in the cake expelled.

Compression

This is done in the compressor in order to compress and force out all the oil from the cake. Oil is

then transferred into the measuring and storage tank, to be measured and stored. The oil-less

cake is discharged and can be used as palm kernel cake to feed livestock.

Measuring and storage

The clean oil is measured and stored in the measuring and storage tank to await packaging.

Packaging

The oil is filled into bottles and gallons and sent to the warehouse for sale and distribution.

A process flowchart indicating the various processes and stages explained above is indicated

below.
 RECEPTION OF FFB

STERILIZATION

STRIPPING
INCINERATOR
FIBRE
DIGESTION& PRESSING
CLARIFICATI
OR MILLING
ON AND
DRYING NUT DRYING

STORAGE
SLUDGE SHELLS NUT CRACKING

COOKING

PACKAGING
MILLING AND
PALM OIL
EXPELLING

COMPRESSION

MEASURING
AND STORAGE

PACKAGING
PALM KERNEL OIL

Figure: 1 Process flowchart for palm oil and palm kernel production

Source: Juaben Oil Mills

4.8.5 Indicators of Quality and Quality Assurance

i. Free Fatty Acid (FFA) Index must not exceed 3 per cent

How to achieve it: farmers of fresh fruit bunches would be given education and criteria for

harvesting and handling of the fresh fruit bunches in order not to bruise the fruits as that would

increase enzyme activity and aid free fatty acid accumulation. Transporters from buying fields

would also handle carefully the fresh fruit bunches during transportation. Processing of fresh

fruit bunches procured would occur within 24 hours upon arrival at the factory. Samples of oil

would be taken for analysis by laboratory technicians to ensure that standards are met (Juaben

Oil Mills).

ii. Moisture and Impurities

The oils produced would be devoid of any kind of impurities and moisture. All machines would

be checked to ensure that they are functioning efficiently and effectively. Samples would also be

tested for impurities and moisture (Juaben Oil Mills).

iii. Taste and flavor of oil

As an edible oil, we would ensure that the taste and flavor is very appealing and appetizing and

this would be done by using the appropriate raw materials. Whiles palm oil would have the real

“dzomi” taste, palm kernel oil would have its usual flavoured taste (Juaben Oil Mills).

iv. Colour

Palm oil must have its natural red-yellowish colour whiles palm kernel oil would have a clean

transparent colour (Juaben Oil Mills).

 Table 4.4 PRODUCTION FORECAST

YEAR PALM OIL (Tons) PALM KERNEL OIL (Tons) PERCENTAGE

INCREMENT
QUANTITY/MTH QUANTITY/YEAR QUANTITY/MTH QUANTITY/YEAR (%)

1 30.00 360.00 1.50 18.00 --------

2 45.00 540.00 2.25 27.00 50.00

3 55.00 660.00 2.75 33.00 22.20

4 75.00 900.00 3.75 45.00 36.4

5 100.00 1200.00 5.00 60.00 20.00
Source: Authors’ computations (2014).

From Table 4.4, production of palm oil is projected to be 30tons and 1.5tons of palm kernel oil in

the first year. These would however increase yearly by the respective percentages and hit

100tons of palm oil and 5tons of palm kernel oil in the fifth year.

4.8.6 Raw Material Quantity and Cost Analysis

Table 4.5 Fresh fruit bunches required for production and their cost

YEAR QUANTITY/month QUANTITY/YEAR COST OF FFB PER

(Tons) (Tons) YEAR (GHC)
1 200.00 2,400.00 528,000.00
2 300.00 3,600.00 831,600.00
3 366.67.00 4,400.00 1,067,220.00
4 500.00 6,000.00 1,528,020.0
5 666.67 8,000.00 2,139,200.00
Source: Field Survey (2014)

Table 4.5 indicates the raw materials required to process palm oil and palm kernel oil. Only one

raw material, the fresh fruit bunches, are required to produce the palm oil and palm kernel oil.

The raw material for palm kernel oil is automatically derived from the palm fruits, hence not

bought. According to the table, 2400 tons of fresh fruit bunches valued at GHC220 and totaling
GHC528000 would be needed for production in the first year. The cost of the fresh fruit bunches

is expected to increase by 5 percent annually thereby bringing 8000tons of fresh fruit bunches to

GHC2,139,200 in year five.

4.8.7 Production Assumptions

i. Production levels would increase over that of the prior year by the respective

percentages shown in table 4.5 for palm oil and palm kernel oil.

ii. There would be Oil Extraction Rate (OER) of 15 per cent.

iii. Liters of palm oil and palm kernel oil to be produced would stand at the figures

indicated in the tables below:

Table 4.6 Palm oil

YEAR LITERS/MONTH LITERS/YEAR

1 171,600.00 2,059,200.00
2 257,400.00 3,088,800.00
3 314,600.00 3,775,200.00
4 429,000.00 5148000
5 572,000.00 6,864,000.00
Source: Authors’ computations (2014)

From table 4.6, a total of 2,059,200 liters of palm oil would be produced in the first year and this

would more than triple to 6,864,000 liters in the fifth year.

Table 4.7 Palm kernel oil

YEAR LITERS/MONTH LITERS/YEAR

1 8,580.00 102,960.00
2 12,870.00 154,440.00
3 15,730.00 188,760.00
4 21,450.00 257,400.00
5 28,600.00 343,200.00
Source: Authors’ computations (2014).
Table 4.7 shows that palm kernel oil production would increase from 102,960 liters in year one

to 343200 liters in the fifth year.

iv. 1Tonne of oil is equal to 286gallons (US standard).

v. 1gallon of oil is equal to 20liters.

4.8.8 Plant Maintenance Policy

BOAMA oils intends to adopt the Preventive maintenance policy. Plant and machinery would

have planned and periodic maintenance in order to prevent their breakdown during use or

production or bring it to the barest minimum. Inspection schedules would be prepared and the

engineers and technicians would do the maintenance as and when due.

4.9 Marketing Plan

4.9.1 Marketing Objectives

1. To be able to cover five regions (Ashanti, Brong Ahafo, Eastern, Western and Central),

made up of 3,329,182 households (GSS, 2010) of Ghana in the first five years of

operation. The objective is to reach at least 75 per cent of the total household number.

2. To sell 75 per cent of total production of the first year in the first year.

3. To sell all the closing stock of the prior year and 80 per cent, 85 per cent, 90 per cent and

90 per cent of current year’s production in the second, third, fourth and fifth year

respectively.
BOAMA Oil Mills has decided to invest a lot of effort in marketing its products in order to gain

commercial success. Various marketing strategies are to be adopted in order to achieve

profitability.

Target Market

The target market for BOAMAH Oils are retailers, wholesalers, schools, hospitals and industries.

This market growth is fueled by a more quality conscious consumers. These active consumers

represent a demographic group of well-educated individuals. The most patronizing target groups

are households and their incomes are better but are very price conscious and consistently seek

value in their purchases. That is consumers in this target market are more particular about the

package of a product and want value for their money. Therefore, they are better informed about

the effects associated with the consumption of palm oil to their health. Few of the consumers

demand palm oil and palm kernel oil on occasions but the products are mostly purchased

frequently.

4.9.2 Marketing Mix

Product

The current status of palm oil is not well packaged. The local market sellers do not make any

effort to take note of correct percentage of FFA and also the way it is packaged. The main

products of BOAMA Oil will be palm oil and palm kernel oil. BOAMA Oil intends to sell palm

oil which will be packaged in a more hygienic environment to its target market. This will be the

main activity of the company. BOAMA oils will have a well-designed label with eye catchy

colours. The palm oil will be in a very attractive bottles and gallons which will be easy to handle.
BOAMA Oil will have different sizes ranging from mini - bottle (300ml), bottle (1 liter and

5liters) and gallons (10liters and 20 liters).

BOAMA oil is different and contains the following benefits;

1. BOAMA Oil is trans-fat free.

2. BOAMA Oil is a quality guaranteed product.

3. BOAMA Oil gives the normal percentage of free fat acid, less than 3 percent.

Pricing

BOAMA products are priced with the competition in mind. The firm is not concerned with

setting high prices to signal luxury or prestige, nor is it attempting to achieve the goals of

offsetting low prices by selling high quantities of products. Instead value pricing is practiced so

that consumers feel comfortable purchasing new palm oil and palm kernel products to replace the

other products which are already in existence, even if it is just because they like how the

products are branded. BOAMA Oils has clearly defined its target market and has differentiated

itself by offering unique solution to its customer needs. Therefore since BOAMA Oil is price

sensitive, it will use price penetration strategy to pass into the market. With this strategy,

BOAMA Oil intends to differentiate it’s product by quality and affordable price. The products

are packaged at 5litres, 10litres, and 20litres in gallons which are sold at GHC18, GHC30 and

GHC50 respectively. There is also the availability of 1litre and 300millilitres in bottles and

priced at GHC3.00 and GHC1.00 respectively for palm oil whiles palm kernel oil packaged in

same volumes go for GHC14.00. GHC26.00, GHC50.00, GHC2.50 and GHC0.80.

Promotion

Personal Selling
BOAMA Oils intends to use personal selling as its main promotional tool to promote the

product. We will use this strategy because it is the only way to evolve strong brand awareness,

personal relationship with our target market, send message about BOAMA Oils specifically to

the target customers and receive immediate feedback, to know what they need and so that the

company can act according to their needs and wants. To make the personal selling successful we

will adopt direct marketing which will enable us to reach the workers in the various institutions.

With personal selling it entails face-to- face contact which will enable us to engage directly with

our customers, and it is also cost effective which is far cheaper than the mass communication.

With the specific value offered by our hygienic and nutritious products, we intend to develop

personal relationships with lecturers of all tertiary institutions in the regions of focus as well as

hospital, school and other government staff who are more enlightened and conscious of what

they consume as food. The game is to take the products to their door steps.

Advertising

‘Doing business without advertising is like winking to a girl in the dark, you are the only one

who knows you are winking at her, she doesn’t see you winking at her so she doesn’t respond to

you’ S. H. Britt (1970).

In order for BOAMA oils to reach the target market, we will use these advertising strategies

which include radio, posters and billboards to create awareness of the product. The billboards

and posters which will feature BOAMA Oils and contacts of the firm will be placed at potential

areas to attract attention. This will be supported by radio advert for the out of reach customers to

be captured.
Place

Since BOAMA Oils is targeting retailers, wholesalers, schools, hospital and industries. We

intend to use an appropriate distribution channel which will give us the best result for our

product whiles reducing cost of selling and distribution. Therefore we will use intensive

distribution as this will give BOAMA Oils maximum exposure and since some of our customers

will be workers and students who shop mostly in the supermarkets and other retail shops. This

distribution will be done directly to the schools by our sales force while the distribution for the

household will be done through the supermarkets and other retail shops. We will also open our

doors to any customer who will walk to our premises to make orders.

Distribution

BOAMA oils’ products will be marketed through regional and local shops and the market places

as well scattered along Ghana and also much effort will be needed to operate at the international

market. It has been observed that Climate and season do not dictate the sales for palm oil and

palm kernel oil, they are mostly demanded frequently. We have obtained much information

about overall industry trends in different geographic areas and at different market places within

the region.

In addition, BOAMA plans to offer sales online by offering customized products via Internet

only, thus distinguishing between Internet offerings and market offerings. Eventually we may be

able to place internet kiosks at some of the more profitable store outlets so consumers could

order customized products from the stores. Regardless of its expansion plans, BOAMA fully

intends to monitor and maintain strong relationships with distribution channel members.
4.9.3 SWOT Analysis
Table 4.8 SWOT Matrix
Strengths
 Importation of equipment that has an
Oil Extraction Rate (OER) of 15 per
cent as against the 12 per cent that
persist in the industry in Ghana.
Weaknesses
 We see no weaknesses in what we are
about to venture into except they
should appear as our threats.
Source: Field Survey (2014)
From Table 4.8, the SWOT matrix is employed in analyzing the internal Strengths, Weaknesses
and the External Opportunities and Threats that BOAMA oils would encounter as a start-up firm.
4.9.4 Competition Strategies
1. Price: BOAMA offers very affordable products to all people of all levels of income.
Opportunities
 Closeness to a proposed inland port at
Boankra means easy access to the port
for exportation when the time comes to
export.
 Access to a competent workforce.
 Opportunity to benefit from the
President Special Initiative on Palm oil.
 Access to a wide and well informed
market.
 Opportunity to widen portfolio into
palm kernel cake, palm kernel pellets,
soap, margarine, palm olein, palm
stearing, oleo chemicals and butter fat
production.
Threats
 Poaching of trained staff by other firms.
 Lack of perfect knowledge about the
industry.
 No market share as our competitors
have.
 Rising prices and unstable power
supply.
 2. Quality: the quality of our oil in terms of packaging, hygiene, FFA index, moisture, taste

and flavor is second to none. Our motive is to offer quality for its equivalent reward in

price.

3. Customer service, especially, using the complaint, suggestion and feedback sections.

4. Adverts and special promotions: these would be done to win new markets and to reward

existing loyal customers.

5. Dealer networks: this is for establishing a tight customer base and a net that works. This

motive is to connect with every customer that comes our way so that product

improvements would be the direct results of our customers’ dictates.

6. Product innovation: our products in terms of size, flavor, taste, colour, type among other

characteristics would never remain static. Product innovation would be aggressively

pursued in order to offer only preferred products to customers.

4.9.5 Sales Forecast for Years 1 – 5

Table 4.9 Price List of palm oil

Package Palm Oil(GHC) Palm Kernel Oil (GHC)

300ml 1.00 0.80
1L 3.00 2.50
5L 18.00 14.00
10L 30.00 26.00
20L 50.00 50.00
Source: Field Survey (2014)

Table 4.9 above shows the prices of palm oil and palm kernel oil on the market.
Table 4.10 Summary of sales projections of palm oil and palm kernel oil

Year Amount of sales (GHC)

1 4,864,860.00
2 9,405,396.00
3 12,054,042.00
4 16,468,362.00
5 21,081,060.00
Source: Authors’ Computation (2014).

Table 4.10 shows the sales forecast of BOAMA oils for five years. According to the table, the

firm projects to sell its products to the tune of GHC4864860 in the first year and this would

increase to a total of GHC21081060 in the fifth year.

4.10.0 Organisational and Management Plan

The internal organisational structure of our firm is Functional. Our employees fall into a

particular functional or departmental areas of the business. Roles and responsibilities as well as

lines of reporting and communication flow exactly the way the organization is structured in order

to avoid any authority override. Partners of the firm constitute the Top Management. There is a

General Manager and each department is to be headed by the head of that department.

Below is the organizational structure of BOAMA Oil Mills

 Top
Management

General
Manager

Supply
Human
Accounts Production Chain &
Resource
Department Department Marketing
Department
Department
Figure 2: The Organisational Structure of BOAMA oils

Source: Juaben Oil Mills

Figure 2 shows a very simple functional organizational structure. The structure shows that there

would be less bureaucracy in communication and decision.

The Human Resource manager: shall be the head of the Human Resource Department.

The Human Resource personnel: shall assist the head of department in formulating and

implementing all policies affecting all employees.

The Accountant shall be the Head of the Accounts Department as well as the finance officer. He

shall be assisted by Accounts officers and a Cashier.

There shall be the head of the Production department. Other heads of the Department shall be the

heads of Engineering/Technical and Transport. Other employees in the department would

include those handling packaging, storage, drivers, quality controllers/laboratory technicians and

electricians.
The Supply Chain and Marketing Department would be headed by the Head of Marketing and

Supply. Other employees would include sales personnel, Procurement officers, Research and

Development, Management Information System Officer, and product development and

improvement officers.

The management of the firm would be responsible for the day to day operations of the business.

Their objective must be the maximization of the worth of the investment of the owners of the

business. As a result of this, managers of the firm include all heads of departments and those

employees who would handle very key aspects of the business. In light of this, requirements for

the employment of these managers or heads would be very high and demanding.

Job Analysis

1. Position: Manager

Job Title: Human Resource Manager

Job Purpose: To be in charge of the HR department. Immediate Superior: General

Manager

Immediate Subordinate: HR personnel

Duties: Human Resource planning, Recruitment and selection of new employees,

Training and Development, Performance Appraisal of existing employees, welfare

services and benefits, employee compensation and labour relations.

Job Specification

This is a senior management role. Applicants to this position must possess an MBA in

Human Resource management and must have acted in a similar capacity as a Human
 Resource Manager for not less than 10 years. A Professional qualification in Human

Resource Management and membership thereof would be highly considered.

2. Position: Accountant/Finance Officer

Job Title: Accountant

Job Purpose: Provide professional accountancy services to the firm

Immediate Superior: General Manager

Immediate Subordinate: Accounts Officer

Duties: Drawing of budgets, supervision of payroll activities, preparation& reporting of

firm’s financial performance to management, financial management decisions.

Job Description

The personnel must be a Chartered Accountant under the Chartered Accountants Act

1963 (Act 170) and a member of the Institute of Chartered Accountants (Ghana).

He must have sound financial management skills and a proven record of ability to raise

funds, he must have knowledge in Microsoft Office Suite together with either Tally,

QuickBooks or any other accounting software. A working experience of 8 years is

required.

3. Position: Manager

Job title: Production Manager

Job Purpose: To coordinate all production activities

Immediate Superior: General Manager

Immediate Subordinates: Heads of Engineering and Technical Operations

 Duties: Supervision of all production activities, quality control, determination of efficient

production methods, reporting to management on production activities.

Job Description

The production manager must be a graduate in any of the following disciplines of

engineering: Chemical, Mechanical, Agricultural and Electrical. A graduate in Food

Science and Technology or Industrial Chemistry is also qualified. An applicant for the

position must have worked in a similar capacity in an Agro-processing firm for not less

than 7 years.

4. Position: Manager

Job title: Marketing and Supply Chain Manager

Job Purpose: To oversee all marketing and supply of firm’s produce.

Duties: Develop a comprehensive marketing programme for the firm’s products, arrange

and source the firm’s raw materials, supervise research and development activities for

new products.

Job Description

The Applicant should be a graduate in Agribusiness Management, Supply Chain

Management, Marketing or Agriculture. The person must have varied expertise and

experience in marketing and supply chain activities. A working experience of 8 years is

required.

5. General Manager: One partner shall hold the position of General Manager for a period of

two years.
 He/she shall earn an additional salary equal to half of the salaries of other functional

managers.

Table 4.11: An Overview of Staff Strength

Department Functions Number of

Employees
Human Resource Human Resource Management 3
Accounts Accounting and financial management 4
Production Production, Packaging and storage 53
Marketing and Supply chain Raw material sourcing and output marketing 57
Internal Audit Auditing 2
Partners (Top Management) Strategic management 5
Security Security over property 2
TOTAL 126
Source: Authors (2014)

Table 4.11 is an overview of staff strength in each department. The number in each department is

based on the volume of work that is available to be done. The marketing and supply chain

department has the highest number of employees which means that the department is very crucial

to the financial and commercial success of the firm. The production department is also staffed as

high as fifty-three employees since production entails so much work and more hands are needed

to get the job done.

4.10.1 Employee Welfare Policy

BOAMA oil Mills would adhere strictly to the provisions of all labour laws of Ghana,

particularly the following:

1. Labour Act 2003, Act 651 (spelling out the rights and responsibilities of employers

and employees);
 2. The Factories, Offices and Shops Act 1970 (spelling out protection of workforce in

factories, offices and shops);

3. Workmen Compensation Law 1987, PNDCL 187 (Compensation of injured or

incapacitated employees in the course of work).

4. There would also be internal welfare policies and packages for employees such as

regular medical check-ups and payment of hospital expenses.

5. Prompt payment of salaries and allowances.

4.10.1.1 Training and Development

In line with our vision and objectives, each employee would go through training in order to be

abreast with current best practices in the business environment although our firm is a strategic fit

firm. Trainers would be both internal, from top management and external from other industry

experts. Key employees may also be sponsored for training in countries such as Malaysia and

Indonesia who are very adept in the oil palm business.

4.11 FINANCIAL PLAN

4.11.1 Start-Up Cost

Agro-processing businesses by their nature are highly capital intensive. They require huge initial

investments in machinery and other equipment in order to profitably operate them.

Table 4.12 Details of start-up cost

ITEM COST (GHC)

CAPITAL EXPENDITURE:
Palm oil processing equipment 40,187.50
Palm kernel oil equipment 69,212.50
Lab equipment and bottle fillers 15,200.00
Motor vehicles 110,000.00
Land 20,000.00
Buildings 80,000.00
Computers 1,750.00
Borehole 15,000.00
Furniture& Fittings 5,000.00
TOTAL INVESTMENT COST 356,350.00
OPERATIONAL EXPENDITURE:
Salaries and wages 558,000.00
Fuel 4,608.00
Electricity 82,125.00
Insurance 675.00
Telephone 615.00
Training and Development 1,550.00
Research and Development 1,400.00
Office supplies 945.00
Business registration 500.00
Maintenance 15,504.00
Advertising 10,400.00
Freight Charges 17,750.00
Lubricants 27,450.00
Bottles and Gallons 383,011.20
TOTAL OPERATIONAL COST 1,104,533.20
TOTAL START-UP COST 1,460,883.20
Source: Field Survey (2014)

From table 4.12, total start-up capital for the firm is projected at GH1460883.20 with operational

expenditure alone taking as much as GHC1104533.20 of the start-up cost whiles investment cost

stands at GHC356350.00.
4.11.2 Capital Structure Decision

Partners of BOAMA Oils have decided to blend equity with loaned funds for the business. With

an initial cost of GHC1, 460,883.20, partners tend to contribute take up 70 percent of the initial

capital equally. The remaining 30 per cent is to be sourced from any interested investor or as a

loan from any financial or non-financial institution at the rate of 26 per cent per annum. The

reason is to diversify part of the risk and to access enough funds to run the business.

CAPITAL STRUCTURE

30%

70%

EQUITY LOAN (DEBT)

4,864,860.00 9,405,396.00 12,054,042.00 16,468,362.00 21,081,060.00
(32,358.80) (2,752,225.30) (3,913,732.53) (5,308,233.30) (3,806,706.98)

4,832,501.20 6,653,170.70 8,140,309.47 11,160,128.70 17,274,353.02

(276,370.89) (377,960.88) (498,598.18) (162,742.72) (169,563.42)

4,556,130.31 6,275,209.82 7,641,711.29 10,997,385.98 17,104,789.60

285,080.00 285,080.00 285,080.00 285,080.00 285,080.00

5,808,535.75 3,329,608.96 2,528,780.41 12,735,350.78 18,511,221.60

(76,602.24) (312,586.56) (412,251.84) (562,161.60) (230,628.80)

6,017,013.51 3,302,102.40 2,451,608.56 12,458,269.18 18,565,672.80

 1,022,618.24 1,022,618.24 1,022,618.24 1,022,618.24 1,022,618.24

4,556,130.31 1,841,219.20 990,725.36 10,997,385.98 17,104,789.60

438,264.96 438,264.96 438,264.96 438,264.96 438,264.96

6,017,013.51 3,302,102.40 2,451,608.56 12,458,269.18 18,565,672.80

Table 4.15 Projected Cash flow Statements for Year 1 – 5

YEAR 1 2 3 4 5
GHC GHC GHC GHC GHC
CASH
INFLOWS:

Sales 4,864,860.00 9,405,396.00 12,054,042.00 16,468,362.00 21,081,060.00

CASH
OUTFLOWS
Fixed Assets 356,350.00 0 0 0 0

Raw 528,000 831,600.00 1,067,220.00 1,528,020.00 2,139,200.00

Materials

Expenses 956,620.89 1,059,977.38 1,211,689.51 879,986.62 1,224,463.42

Packaging 383,011.20 1,562,932.80 2,061,259.20 2,810,808.00 1,153,144.00

Materials

Total Cash 2,223,982.09 3,454,510.18 4,340,168.71 5,218,814.62 4,516,807.42

Outflow
NET CASH 2,640,877.91 5,950,885.82 7,713,873.29 11,249,547.38 16,564,252.58
FLOWS
FROM
OPERATING
ACTIVITIES

Cash flow 438,264.96 0 0 0 0

from
financing
activities
Loan 0.00 219,132.48 219,132.48 0 0
Repayment
NET CASH 3,079,142.87 5,731,753.34 7,494,740.81 11,249,547.38 16,564,252.58
FLOWS
Source: Authors’ computation (2014)

Table 4.15 shows the cash flow statement. The only source of funds is the sales of the firm’s

products. The funds are however used in financing operating expenses with much of it going into

the packaging materials. According to the table, loaned funds would be spread equally and paid

over two years in years two and three.

4.11.4 FINANCIAL ANALYSES

Assumptions Underlying the Financial Estimates

1. Production would increase in accordance with our forecasts in tables 4.5 and 4.6.

2. Based on the December 2013 inflation figure of 13.5 per cent compared with that of

November 2013 of 13.2 per cent, operating expenses are projected to increase by 5 per

cent over that of the previous year for five years.

3. Sales would increase in accordance with our forecasts in tables 4.12, 4.14 and 4.16.

4. Wages and salaries would increase by 5 per cent every two years.
 5. Depreciation would be charged on all Non-Current Assets at 20 per cent straight-line

method.

6. Debtors would be at 5 per cent of our total sales and there would be no bad debts in the

first five years.

7. Creditors would be 20 per cent of the cost of bottles and gallons (packaging material).

8. Cost of raw materials (Fresh Fruit Bunches) would increase at 5 per cent every year after

GHC220.00 in the first year.

9. Prices of outputs would remain constant.

Profitability ratios

Table 4.16 Gross profit margin

YEAR 1 2 3 4 5
GROSS 4,832,501.20 6,653,170.70 8,140,309.47 11,160,128.70 17,274,353.02
PROFIT 4,864,860.00 9,405,396.00 12,054,042.00 16,468,362.00 21,081,060.00
MARGIN
= 99.3% = 70.7% = 67.5% = 67.8% = 81.9%
Source: Authors’ computation (2014)

From the above computations in Table 4.16 above, projected sales are high enough to cover cost

of sales in each of the five years to result in high gross profits.

 Table 4.17 Net profit margin

YEAR 1 2 3 4 5
NET 4,556,130.31 6,275,209.82 7,641,711.29 10,997,385.98 17,104,789.60
PROFIT 4,864,860.00 9,405,396.00 12,054,042.00 16,468,362.00 21,081,060.00
MARGIN

= 93.7% = 66.7% = 63.4% = 66.8% = 81.1%

Source: Authors’ computations (2014)

From the computations in Table 4.17, projected sales are high enough to cover all operational

expenses in each of the five years to result in high degrees of profit.

Table 4.18 Net Present value (NPV)

YEAR NET CASHFLOWS DISCOUNT FACTOR PRESENT VALUE

GHC (26%) GHC
0 (1,460,883.20) 1.00 -1,460,883.20
1 3,079,142.87 0.794 2,444,839.44
2 5,731,753.34 0.630 3,611,004.6
3 7,494,740.81 0.500 3,747,370.41
4 11,249,547.38 0.397 4,466,070.31
5 16,564,252.58 0.315 5,217,738.56
NPV 18,026,141.12

With a positive Net Present Value of GHC18026141.12 in Table 4.18, it suggests that the

business is profitable since cash flows would be able to adequately cover cash outflows in all the

first five years of operation.

Table 4.19 Internal Rate of Return

YEAR NET DISCOUNT PRESENT DISCOUNT PRESENT

CASHFLOWS FACTOR VALUE FACTOR VALUE
GHC (26%) GHC (30%) GHC
0 (1,460,883.20) 1.00 -1,460,883.20 1 -1,460,883.20
1 3,079,142.87 0.794 2,444,839.44 0.769 2367860.88
2 5,731,753.34 0.630 3,611,004.6 0.592 3393197.98
3 7,494,740.81 0.500 3,747,370.41 0.455 3410107.07
4 11,249,547.38 0.397 4,466,070.31 0.350 3937341.58
5 16,564,252.58 0.315 5,217,738.56 0.269 4455783.94
NPV 18,026,141.12 13,028,311.25
Source: Authors’ computations (2014

IRR  LDR  ( HDR  LDR)*(( NPV @ LDR) | NPV @ LDR  NPV @ HDR |))

IRR = 26% + (30% - 26%) * ((18,026,141.12) ÷ | 18,026,141.12 - 13,028,311.25|))

IRR = 0.26 + (0.04)*(0.5805) = 28.322

IRR = 28%.

From projections, returns of BOAMA Oils are high enough to pay off the cost of capital at 26%.

The firm would be able to pay off its creditors and still yield as much as 28% for its investors.

Table 4.20 PAY BACK PERIOD

YEAR CASH FLOWS (GHC)

0 (1,460,883.20)
1 4,864,860.00
2 9,405,396.00
3 12,054,042.00
4 16,468,362.00
5 21,081,060.00
Source: Authors’ computations (2014)

NB: cash flow in year 0 refers to total initial investment.

Payback period = 1year.

 From Table 4.20, the business would be able to earn enough revenue in the first year alone to pay

off its financiers. What this suggests for potential investors is that investing in BOAMA Oils is

less risky since capital would not be locked up and its value reduced by inflation and ither

economic pressures.

4.11.5 Sensitivity Analysis

Sensitivity analysis was conducted on two scenarios. In Scenario 1, sales were made to fall by 5

per cent and in Scenario 2, expenses were made to increase by 5 per cent.

Table 4.21 Sales Decreased by 5 Per Cent

YEAR NET CASH DISCOUNT NET DISCOUNTED DISCOUNT NET DISCOUNTED

FLOWS FACTOR CASHFLOWS FACTOR CASHFLOWS
@26% @30%
0 (1,460,883.20) 1.00 (1,460,883.20) 1.00 (1,460,883.20)
1 2,397,634.91 0.794 1,903,722.12 0.769 1,843,781.25
2 5,480,616.02 0.630 3,452,788.09 0.592 3,244,524.68
3 7,111,171.19 0.500 3,555,585.60 0.455 3,235,582.89
4 10,426,129.28 0.397 4,139,173.32 0.350 3,649,145.25
5 15,510,199.58 0.315 4,885,712.87 0.269 4,172,243.69
NPV 16,476,098.80 14,684,394.56
Source: Authors’ computations (2014)

IRR  LDR  ( HDR  LDR)*(( NPV @ LDR) | NPV @ LDR  NPV @ HDR |))

Where;

LDR = Lower Discount Rate

HDR = Higher Discount Rate

|NPV@LDR-NPV@HDR| = Absolute difference between NPV@LDR and NPV@HDR

IRR = 26% + (30% - 26%) * ((16,476,098.80) ÷ |16,476,098.80 – 14,684,394.56|))

IRR = 0.26 + (0.04)*(0.5275) = 28.115

IRR = 28%

From Table 4.21, the business is sensitive towards the Net Present Value since a five percent

increase in sales would both reduce the Net Present Values at 26 percent and 30 percent but not

sensitive towards the internal rate of return since it remains constant at 28 percent.

Table 4.22 Expenses Increased by 5 Per Cent

YEAR NET CASH DISCOU NET DISCOUN NET

FLOWS NT DISCOUNTED T DISCOUNTED
FACTOR CASFLOWS FACTOR CASHFLOWS
@26% @30%
0 (1,460,883.20) 1.00 (1,460,883.20) 1.00 (1,460,883.20)
1 2,529,678.81 0.794 2,008,564.97 0.769 1,945,323.01
2 5,778,160.31 0.630 3,640,240.99 0.592 3,640,240.99
3 7,496,864.85 0.500 3,748,432.43 0.455 3,411,073.51
4 10,988,606.65 0.397 4,362,476.84 0.350 3,846,012.33
5 16,338,412.21 0.315 5,146,599.85 0.269 4,395,032.88
NPV 17,446,074.09 15,776,799.52
Source: Authors’ computations (2014)

IRR  LDR  ( HDR  LDR)*(( NPV @ LDR) | NPV @ LDR  NPV @ HDR |))

IRR = 26% + (30% - 26%) * ((17,446,074.09/|17,446,074.09 – 15,776,799.52|))

IRR = 26% + (0.04)*0.5251 = 26.02

IRR = 26.02%

From the analyses in table 4.22 above, the business is very sensitive when expenses increase.

This is because whiles the internal rate of return reduces to almost the cost of capital, meaning

investors can either choose to invest in the business or not since the the market rate is just equal

to the internal rate of return, the net present value rather falls only marginally.
4.12 Risk Management

4.12.1 Risks of BOAMA Oils

Our industry is faced with a lot of risks that could result in unexpected outcomes both at the

macro level and the micro level. However, different firms in the industry face different levels of

unsystematic risks and different measures are undertaken to diversify away or mitigate those

risks.

Common risks such as unstable power supply are a major headache to the industry. Whiles

efforts have been made to curb them by using generator sets or plants to mitigate the risk,

another unfortunate situation of continuous rise in fuel prices has offset the likely benefits of

those efforts. Apart from these risks, other common risks include fire outbreaks, theft and

burglary, and accidents. Other risks are output price risk which refers to the risk of changes in

the prices that a firm can demand for its goods and services, on the other hand, input price risk is

the risk of changes in the prices that a firm must pay for labor, raw materials and other inputs.

The main output and input price risk that would be faced by BOAMA Oils is commodity price

risk. The commodity price risk which arises from fluctuations in the prices of the raw material

used is a very big problem, since we do not have an oil palm estate, we depend solely on farmers

and other suppliers, if they change their prices, it will definitely affect our cost of production and

eventually our output price will change.

4.12.2 Risk Management Strategies of BOAMA Oils

In order to reduce the impact of the above risks, BOAMA oils has decided to adopt the following

strategies:
 1. Precautionary measures to prevent the occurrence of the most likely risks such as fire,

theft and burglary and accidents. Fire extinguishers would be fixed at vantage points in

the firm with strict adherence to their use. The firm would also employ competent

security personnel to take security over business assets and property. To prevent

accidents, there would be no compromise on safety dressing and movement of people and

staff around the premises of production. Well experienced drivers would be employed to

drive our vehicles, frequent servicing and maintenance of plant and equipment and other

movable assets would also be ensured. Other precautionary measures would include

training and seminars relating to safety at work.

2. Aside the above measures, the firm would take a comprehensive insurance policy that

would cushion the firm of its losses upon the occurrence of any such risks.

3. To counter our commodity price risks, the firm would ensure bulk purchases and

increased production whenever the raw materials are available and cheaper to offset the

impact of periods of scarcity and higher prices.

4. Power generation by the firm through the use of its solid wastes would help counter

unstable power supply and reduce the impact of ever-increasing fuel prices.

Risk Insurance

Our firm would take a comprehensive insurance policy over property as indicated above. We

would take the insurance policy from the State Insurance Company (SIC) because of its

reputation.
 CHAPTER FIVE

CONCLUSIONS

This chapter provides the concluding remarks on the study. These comprise of the main findings

from the study, policy recommendations, limitations of the study and suggestions for future

research

5.1 Main Findings

The main findings from the study are:

Oil palm fruits processing is profitable since projections and calculations based on our financial

analyses resulted in a positive Net Present Value of GHC18026141.12, a high Internal Rate

Return of 28 percent which is above the interest rate of 26 percent and high net profit margins.

Again, as in the other subsectors of agro-processing, oil palm fruits processing is highly capital

intensive as projected Investment cost alone was GHC 356,350.00 with operational cost in the

first year also totaling as much GHC1104533.20.

There is also an opportunity to increase product portfolio in oil palm fruits. This is based on the

SWOT analysis conducted which revealed that other products such as palm stearing, palm olein,

margarine and palm kernel pellets can be further produced from the same oil palm fruits.

The study also realized that the cost of the bottles and gallons that are used to package the oil

constitutes the greater percentage of the operational cost. This is because it varies directly with

the output of oil processed.

The study also indicated, based on the financial projections that the business would be able to

generate revenue to pay back its financiers’ capital in the first year of operation. This is because
net profit amounted to GHC4556130.31 as a against the total initial start-up cost of

GHC1460883.20.

5.2 Policy Recommendations

From our study, we realized that processing oil palm fruits is a profitable venture, many products

can be processed from the same fruits which would widen the revenue base of the firm. We

therefore recommend the business of oil palm fruits processing to prospective investors.

Moreover, since the study indicates that investing into oil palm fruits processing is capital

intensive, it is recommended that financial institutions and other investors should extend credit to

those who are interested in venturing into the oil palm fruits processing business.

Again, Investors and financial institutions should not fear financing oil palm fruits processing

firms since they yield returns above market rates and would be able to pay off loans in the first

year of operation, thereby making investment less risky.

Finally, since the cost of bottles and gallons seems to take the greatest percentage of the

operational cost, oil palm fruits processing firms should consider producing the bottles and

gallons themselves if it would be less costly.

5.3 Limitations of the Study and Suggestions for Future Research

The research was conducted in the Ejisu-Juaben Municipality alone with limited number of

respondents hence. Generalizations are therefore based on only the Municipality and not the

whole Ghana. The findings may not be true for other areas of the country. Again, the study
employed its data from an existing oil palm fruits processing firm with its own oil palm farm.

The study failed to indicate whether a processing firm without its own oil palm farm would be

profitable since it has no reliable source of fresh fruit bunches.

The financial projections in the study were only based on current market prices, however, these

prices are likely to change due to changes in macro-economic performance indicators such as

inflation or exchange rates. This might not give the same financial results realized in the

analysis.

Finally, the assumptions for the financial projections and other analysis were based on the

personal decisions of the researchers with uncertainly and imperfect information. The

assumptions may not be made and accepted by every business and the assumptions are also

likely to be unrealistic due to the ever-changing business environment.

Based on the limitations, we recommend that further research in the subject area should be done

in other areas of the country so as to provide a platform for comparison. Further research can

also be done to investigate whether firms without their own oil palm farms would be as

profitable as those having oil palm farms.

REFERENCES

African Center for Economics and Transformation, The Oil Palm Value Capture Opportunity in

Africa (n. d.): available at: http://acetforafrica.org/wp-

content/uploads/2013/09/130806LongPalm.pdf

Angelucci F., (2013). Analysis of incentives and disincentives for palm oil in Ghana. Technical

notes series. Rome: MAFAP, FAO (draft version). Available at:

http://www.fao.org/fileadmin/templates/mafap/documents/technical_notes/GHANA/GHANA_T

echnical_Note_PALM_OIL_EN_Jun2013.pdf

CIMA (2006). Fundamentals of Financial Accounting. USA: Elsivier Ltd.

en.wikipedia.org/wiki/Sensitivity_ analysis accessed on 20th November, 2013

en.wikipedia.org/wiki/SWOT_ analysis, accessed on 19th November, 2013.

en.wikipedia.org/wiki/PEST_ analysis, accessed on 19th November, 2013.

FAO corporate document repository (2002). Small-scale palm oil processing in Africa. Available

at: www.fao.org (last accessed: 5th June, 2013).

Fellows, P.J. and Axtell, B. (Eds), 2012. Setting up and running a small-scale cooking oil

business, Opportunities in food processing series, ACP-EU Technical Centre for Agricultural

and Rural Cooperation (CTA).

http://www_fnbc.info/sites/default/files/documents/Business%20Plan%20Process.pdf

http://www.statsghana.gov.gh/docfiles/2010phc/Census2010_Summary_report_of_final_results.

pdf
Incorporated Private Partnership Act, 1962 (Act 152). Available at: www.ghanalegal.com

Internal Revenue Act, 2000 (Act 592), Section 11, 40(1) & Part II Section 1(2). Available at:

www.gra.gov.gh/docs/info/amendment_to_irs_act_2000.pdf

Institute of Chartered Accountants (Ghana) (2010). Financial Accounting Fundamentals, Accra:

Blackmask Ltd.

Institute of Chartered Accountants (Ghana) (2010). Financial Management Strategy, Accra:

Blackmask Ltd.

Institute of Chartered Accountants in England and Wales (March 2009), Financial Management,

chapter 2, Investment Appraisal (available at: http://sfacoaa.com/wp-

content/uploads/2012/06/FM-02.pdf ).

Kyei-Baffour and Manu C., (2008). Small scale palm oil process improvement for poverty

alleviation and national development. Published by the Third International Conference on

Appropriate Technology.

Lanquaye et al., (2013). Business Plan for organic fertilizer production (unpublished).

Ministry Of Food And Agriculture (MAY, 2011), Statistics, Research and Information

Directorate (SRID) Agriculture in Ghana, facts and figures (2010).

Ministry of Food and Agriculture (November 2011) “Master plan Study on the Oil Palm Industry

in Ghana”. Final Report. Accra: MASDAR. Available at: www.mofa.gov,gh.

Ministry of Science, Technology and Environment, Malaysia (1999), Industrial Processes and

the Environment Handbook (No. 3) Crude palm oil industry. Available at:

http://cdm.unfccc.int/filestorage/B/0/R/B0R4MOIF3AQ8HY956TLNP1GDV27KSW/Industrial
%20Process%20and%20the%20Environment%3A%20Crude%20Palm%20Oil%20Industry.pdf?

t=Skd8bXcyOWRtfDC_UfbYQnC6ZdbkguN6AdQG

Palm oil processing, available at www.fao.org/DOCREP/005/Y4355E/y4355e04.htm (accessed:

5th June, 2013).

Poku K., (2002) Small-scale palm oil processing in Africa. Agricultural Services Bulletin #148,

Rome: FAO.

Ministry of Food and Agriculture (November 2011) “Master plan Study on the Oil Palm Industry

in Ghana”. Final Report. Accra: MASDAR. Available at: www.mofa.gov,gh.

Ministry of Science, Technology and Environment, Malaysia (1999), Industrial Processes and

the Environment Handbook (No. 3) Crude palm oil industry. Available at:

http://cdm.unfccc.int/filestorage/B/0/R/B0R4MOIF3AQ8HY956TLNP1GDV27KSW/Industrial

%20Process%20and%20the%20Environment%3A%20Crude%20Palm%20Oil%20Industry.pdf?

t=Skd8bXcyOWRtfDC_UfbYQnC6ZdbkguN6AdQG

Palm oil processing, available at www.fao.org/DOCREP/005/Y4355E/y4355e04.htm (accessed:

5th June, 2013).

Poku K., (2002) Small-scale palm oil processing in Africa. Agricultural Services Bulletin #148,

Rome: FAO.
APPENDICES

APPENDIX 1: Projected Manufacturing, Trading and Profit and Loss Account

Appendix 1.1

BOAMA OIL MILLS

MANUFACTURING, TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST DECEMBER, 2015 (YEAR ONE)
GHC GHC GHC

Sales 4,864,860.00
COST OF SALES:
Purchases of raw materials 528,000.00
Direct Wages 525,600.00
Direct Expenses 383,011.20
PRIME COST 1,436,611.20
FACTORY OVERHEADS:
Depreciation of Plant &Eq't 24,920.00
Depreciation of Land &Buildings 20,000.00
Salaries and wages 32,400.00
Maintenance of plant and eq't 47,880.00
Lubricants 27,450.00 152,650.00
1,589,261.20
Closing Work In Progress (567,567.00)
Production Cost 1,021,694.20

Closing Stock of Finished goods (1,054,053.00) (32,358.80)

GROSS PROFIT 4,832,501.20

REVENUE EXPENDITURE
Fuel 82,125.00
Electricity bills 4,608.00
Insurance 675.00
Telephone bills 615.00
Training and Development 1,550.00
Research and Development 1,400.00
Office supplies 945.00
Depreciation 26,350.00
Registration fees 500.00
Maintenance 15,504.00
Advertising 10,400.00
Freight charges 17,750.00

Interest on loan 113,948.89 (276,370.89)

NET PROFIT 4,556,130.31

APPENDIX 1.2

BOAMA OIL MILLS

PROJECTED MANUFACTURING, TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST DECEMBER, 2016 (YEAR 2)
GHC GHC GHC
Sales 9,405,396.00
COST OF SALES
Purchase of raw materials 831,600.00
Direct Wages 525,600.00
Direct Expenses 1,562,932.80
PRIME COST 2,920,132.80
FACTORY
OVERHEADS
Depreciation of
plant&eq't 24,920.00
Depreciation of land
&Buildings 20,000.00
Salaries and wages 32,400.00
Maintenance of plant and
eq'pt 50,274.00
Lubricants 28,822.50 156,416.50
3,076,549.30
WORK IN PROGRESS
Opening Work in
Progress 567,567.00
3,644,116.30
Closing Stock of work in
progress (681,080.40)
PRODUCTION COST 2,963,035.90
FINISHED GOODS:
Opening Stock of
Finished Goods 1,054,053.00
4,017,088.90
Closing Stock of
Finished Goods (1,264,863.60) (2,752,225.30)
GROSS PROFIT 6,653,170.70

REVENUE
EXPENDITURE
Fuel 86,231.25
Electricity Bills 4,838.40
Insurance 708.75
Training and
Development 1,627.50
Research and
Development 1,470.00
Office Supplies 992.25
Maintenance 16,279.20
Advertising 10,920.00
Interest On Loan 227,897.78
Depreciation 26,350.00

Telephone bills 645.75 (377,960.88)

NET PROFIT 6,275,209.82
APPENDIX 1.3

BOAMA OIL MILLS

PROJECTED MANUFACTURING, TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST DECEMBER, 2017 (YEAR 3)
GHC GHC GHC

Sales 12,054,042.00
COST OF SALES:
Purchases of raw materials 1,067,220.00
Direct Wages 551,880.00
Direct Expenses 2,061,259.20

PRIME COST 3,680,359.20

FACTORY OVERHEADS
Depreciation of plant&Eq'pt 24,920.00
Depreciation of
Land&Buildings 20,000.00
Salaries and wages 33,240.00
Maintenance of plant and
eq't 52,787.70

Lubricants 30,263.63 161,211.33

3,841,570.53
WORK IN PROGRESS

Opening Work In Progress 681,080.40

4,522,650.93

Closing Work In Progress (655,823.70)

Production Cost 3,866,827.23

Opening Stock of Finished
Goods 1,264,863.60

5,131,690.83
Closing Stock of Finished
Goods (1,217,958.30) (3,913,732.53)

GROSS PROFIT 8,140,309.47

REVENUE
EXPENDITURE
Fuel 5,080.32

Electricity bills 90,542.81

Insurance 744.20

Telephone bills 678.04

Training and Development 1,708.88

Research and Development 1,543.50

Office supplies 1,041.86

Depreciation 26,350.00

Maintenance 17,595.90

Advertising 11,466.00

Interest on loan 341,846.67 (498,598.18)

NET PROFIT 7,641,711.29

APPENDIX 1.4

BOAMA OIL MILLS

PROJECTED MANUFACTURING, TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31ST DECEMBER, 2018 (YEAR 4)
GHC GHC

Sales 16,468,362.00
COST OF SALES:
Purchases of raw materials 1,528,020.00
Direct Wages 551,880.00
Direct Expenses 2,810,808.00
PRIME COST 4,890,708.00
FACTORY OVERHEADS
Depreciation of Plant and Equipment 24,920.00
Depreciation of Land& Buildings 20,000.00
Salaries and wages 33,240.00
Maintenance of Plant and Equipment 55,427.09
Lubricants 31,776.81
5,056,071.90
WORK IN PROGRESS
Opening Work In Progress 655,823.70
5,711,895.60

Closing Work In Progress (567,567.00)

Production Cost 5,144,328.60
Opening Stock of Finished Goods 1,217,958.30
6,362,286.90

Closing Stock of Finished Goods (1,054,053.00) (5,308,233.30)

GROSS PROFIT 11,160,128.70

REVENUE EXPENDITURE
Fuel 5,333.34
Electricity bills 95,069.95
Insurance 781.41
Telephone bills 711.94
Training and Development 1,794.32
Research and Development 1,620.68
Office suppliers 1,093.96
Depreciation 26,350.00
Maintenance 17,947.82

Advertising 12,039.30 (162,742.72)

NET PROFIT 10,997,385.98

Appendix 1. 5

PROJECTED MANUFACTURING, TRADING AND PROFIT AND LOSS

ACCOUNT
FOR THE YEAR ENDED 31ST DECEMBER, 2019 (YEAR 5)
GHC GHC GHC
Sales 21,081,060.00
827,820.00
Purchases of raw materials 2,139,200.00
Direct Wages 827,820.00
Direct Expenses 1,153,144.00
PRIME COST 4,120,164.00
FACTORY OVERHEADS
Depreciation of plant and Equipment 24,920.00
Depreciation of Land and Buildings 20,000.00
Salaries and wages 49,860.00
Maintenance of plant and equipment 98,937.28
Lubricants 33,365.70
4,347,246.98
WORK IN PROGRESS
Opening Work In Progress 567,567.00
4,914,813.98
Closing Work In Progress (756,756.00)
Production Cost 4,158,057.98
Opening Stock of Finished Goods 1,054,053.00
5,212,110.98
Closing Stock of Finished Goods (1,405,404.00) (3,806,706.98)
GROSS PROFIT 17,274,353.02
REVENUE EXPENDITURE
Fuel 99,823.45
Electricity bills 5,601.06
Insurance 820.49
Telephone bills 747.54
Training and Development 1,884.04
Research and Development 1,701.71
Office suppliers 1,148.66

Depreciation 26,350.00
Maintenance 18,845.21
Advertising 12,641.26 (169,563.42)
NET PROFIT 17,104,789.60
APPENDIX 2 Projected Balance Sheet

Appendix 2.1

BOAMA OIL MILLS

BALANCE SHEET AS AT 31ST DECEMBER, 2015 (YEAR 1)
NET BOOK
COST ACC. DEPRECIATION VALUE
GHC GHC GHC

Non-Current Assets 356,350.00 71,270.00 285,080.00

CURRENT
ASSETS:
STOCKS:
Work In Progress 567,567.00
Finished Goods 1,054,053.00 1,621,620.00
Debtors 243,243.00
Bank 2,563,387.29
Cash 1,380,285.46
5,808,535.75
CURRENT LIABILITIES
Creditors (76,602.24)

NET CURRENT ASSETS 5,731,933.51

CAPITAL EMPLOYED 6,017,013.51

FINANCED BY:

Capital 1,022,618.24

Net Profit 4,556,130.31

5,578,748.55

26% Loan 438,264.96

6,017,013.51
Appendix 2.2

BOAMA OIL MILLS

PROJECTED BALANCE SHEET AS AT 31ST DECEMBER, 2016 (YEAR 2)
NET BOOK
COST ACC. DEPREC'N VALUE
GHC GHC GHC

NON-CURRENT ASSETS 356,350.00 71,270.00 285,080.00

CURRENT ASSETS
STOCKS:
Work in progress 681,080.40
Finished Goods 1,264,863.60 1,945,944.00
Debtors 470,269.80
Bank 593,706.85
Cash 319,688.31
3,329,608.96

CURRENT
LIABILITIES
Creditors (312,586.56)

NET CURRENT ASSETS 3,017,022.40

CAPITAL EMPLOYED 3,302,102.40

FINANCED BY:

Capital 1,022,618.24

Net Profit 1,841,219.20

2,863,837.44

26% Loan 438,264.96

CAPITAL EMPLOYED 3,302,102.40

Appendix 2.3

BOAMA OIL MILLS

PROJECTED BALANCE SHEET AS AT 31ST DECEMBER, 2017 (YEAR 3)
NET BOOK
COST ACC. DEPREC'N VALUE
GHC GHC GHC
NON-CURRENT
ASSETS 356,350.00 71,270.00 285,080.00
CURRENT ASSETS
STOCKS:
Work In Progress 655,823.70
Finished Goods 1,217,958.30 1,873,782.00
Debtors 602,702.10
Bank 33,992.60
Cash 18,303.71
2,528,780.41
CURRENT
LIABILITIES

Creditors (412,251.84)
NET CURRENT
ASSETS 2,116,528.56
CAPITAL
EMPLOYED 2,451,608.56

FINANCED BY

Capital 1,022,618.24

Net Profit 990,725.36

2,013,343.60

26% Loan 438,264.96

CAPITAL EMPLOYED 2,451,608.56

Appendix 2.4

BOAMA OIL MILLS

PROJECTED BALANCE SHEET AS AT 31ST DECEMBER, 2018 (YEAR 4)
NET BOOK
COST ACC. DEPREC'N VALUE
GHC GHC GHC

Non-Current Assets 356,350.00 71,270.00 285,080.00

CURRENT ASSETS:
STOCKS:
Work In Progress 567,567.00
Finished Goods 1,054,053.00 1,621,620.00
Debtors 823,418.10
Bank 6,688,703.24
Cash 3,601,609.44
12,735,350.78
CURRENT
LIABILITIES
Creditors (562,161.60)

NET CURRENT ASSETS 12,173,189.18

CAPITAL EMPLOYED 12,458,269.18

FINANCED BY

Capital 1,022,618.24

Net Profit 10,997,385.98

12,020,004.22

26% Loan 438,264.96

CAPITAL EMPLOYED 12,458,269.18

Appendix 2.5
BOAMA OIL MILLS
PROJECTED BALANCE SHEET AS AT 31ST DECEMBER, 2019 (YEAR 5)
NET BOOK
COST ACC. DEPREC'N VALUE
GHC GHC GHC
NON-CURRENT
ASSETS 356,350.00 71,270.00 285,080.00
CURRENT ASSETS:
STOCKS:
Work In Progress 756,756.00
Finished Goods 1,405,404.00 2,162,160.00
Debtors 1,054,053.00
Bank 9,941,755.59
Cash 5,353,253.01
18,511,221.60
CURRENT
LIABILITIES
Creditors (230,628.80)
NET CURRENT
ASSETS 18,280,592.80

CAPITAL EMPLOYED 18,565,672.80

FINANCED BY

Capital 1,022,618.24

Net Profit 17,104,789.60

18,127,407.84

26% Loan 438,264.96

CAPITAL EMPLOYED 18,565,672.80

APPENDIX 3 Questionnaires

Appendix 3.1: Questionnaires for processors

SECTION A: COMPANY DETAILS

NAME……………………………………………………………
LOCATION………………………………………………………
ADDRESS……………………………………………………….
TELEPHONE…………………………………………………….
LEGAL FORM OF BUSINESS…………………………………..
NAME OF INTERVIEWER: ……………………………………
DATE: ……………………………………………………………

SECTION B: PRODUCTION AND OPERATION DETAILS

1. What are the major products you produce?

..............................................................................................................................................

2. What are the raw materials you use?

........................................................................................................................................

3. Are the raw materials readily available all year round? a. Yes [ ] b. No [ ]

4. Who are the suppliers of the raw materials?

..............................................................................................................................

5. What is the cost of each raw material?

No. TYPE OF RAW MATERIAL Weight/volume COST IN GHS

per unit

6. How often do you buy your raw materials?

a. Daily [ ] b. Weekly [ ] c. Fortnightly [ ] d. Monthly [ ]
7. What is the average quantity bought per order?................................................
………………..................................................................................................

8. Are any additives used? a. Yes [ ] b. No [ ]

9. If yes,
No. Name of additive Purpose or function
10. What is the lead time when order for the supply of raw materials is placed?

a. within few hours [ ]

b. Less than a week [ ]
c. Less than 2 weeks but after a week [ ]
d. Above 2 weeks but less than a month [ ]
e. After a month [ ]

11. What is your average production capacity per day?

................................................................................................................................................
12. What is the weight or volume per package of your product?
………....................................................................................................................................
13. Please give an outline of the production process or stages…………………….

14. What are the challenges encountered in the production process?

..................................................................................................................................
15. What are the names and cost of your production equipment?
No. Equipment Name Function Cost in GHC

16. Are there any set standards by government that must be adhered to?
a. Yes [ ] b. No [ ]
17. What are these specific
standards?...............................................................................................................................
................................................................................................................................................
18. Are there any quality controls in place? a. Yes [ ] b. No [ ]

19. If yes, what is/are these controls? .................................................................. ……………

20. Do you have a warehouse? a. Yes [ ] b. No [ ]

21. If yes, do you own it or it is rented? ………………………………………..

22. If rented, what is the rent per annum? GHS............................................................

23. How many employees are employed? ............................................................

24. How many employees are permanent workers? .............................................

25. How many employees are casual workers? ...................................................

26. How much is paid as wages or salaries per month?

GHS ……...............................................

SECTION C: MARKETING DETAILS

27. How do products get to your consumers? ………………………

28. What are the terms of sales of your products to consumers?

a. Cash [ ] b. Credit [ ]

29. What is your target

market?...................................................................................................................................
......................................................................................................
30. Which target market patronizes your product most? (local or
international)........................................
31. Where is the target market located?
………………………………………………………………………………………………
32. How often do they buy your product? a. Daily [ ] b. Weekly [ ] c.
Fortnightly [ ] d. Monthly [ ]
33. Which packaged volume is the most patronized? ..................................

34. What pricing strategy do you use? .............................................................

35. What is /are the price(s) of each unit of your product?

GHS.......................................................................................................................................
36. What is your sales target per
a. Day? GHS…………………………….
b. Week? GHS ………………………….
c. Month? GHS…………………………
d. Year? GHS……………………………
37. What level of sales per year results in
a. Break-even? GHS..................................................................................................
b. Profit? GHS..........................................................................................................
38. Do you have known competitors? a. Yes [ ] b. No [ ]
39. If yes, how many are they? ................................................................................
40. What are your competitive strategies?
……………………………………………………………………………………………
41. Do you consider SWOT analysis in each department? a. Yes [ ] b. No [ ]
42. What are your
Strengths Opportunities

Weaknesses Threats

43. Are there any promotional strategies in place to create awareness about your product?
a. Yes [ ] b. No [ ]
44. If yes, what are these strategies?
………………………………………………………………………………………………
 45. How much do you spend on these strategies?
GHS.......................................................................................................................................
SECTION D: FINANCIAL DETAILS
46. What was the start-up cost? GHS.............................................................................
47. What was/ were your sources of capital?
SOURCE AMOUNT IN GHS

48. What is the current capital structure?

EQUITY DEBT
VALUE
GHC
%

49. List of fixed assets and cost of acquisition?

50. Operating expenses per year.

ITEM OF EXPENDITURE AMOUNT IN GHS

SECTION E: ORGANIZATIONAL PLAN

51. Give an outline of your organizational structure.

………………………………………………………………………………………………

SECTION F: OTHERS

52. When was the firm established? …………………………………………

53. What was the state of the industry then?
………………………………………………………………………………………………
54. What is the current state of the industry?
……………………………………………………………………………………………
55. Are there any tax holidays, exemptions or obligations in this industry?
.................................................................................................................................
56. What is so strategic about your location?
.................................................................................................................................
57. What risks are inherent in this firm?
……………………………………………………………………………………
58. What insurance policies are in place to mitigate the risks?
……………………………………………………………………………………………..
59. Are there any special incentives for firms in this industry both from government and
private agencies? …………………………………………………………………
THANK YOU!
 Appendix 3.2: Questionnaires for Marketers

INTERVIEWER’S NAME: ………………………………………………………

QUESTIONNAIRE NUMBER: …………………………………………………………………
DATE OF INTERVIEW: ……………………………………………………………………….
CONTACT OF INTERVIEWEE: ……………………………………………………………..

A. DETAILS OF MARKETER
Name……………………………………………………………………………..
Sex: [ M ] [ F ] Age: 1. [ ] Less than 20 years 2. [ ] 20 – 25years
3. [ ] 26 – 30years 4. [ ] 31- 39years 5. [ ] Above 40 years
Location…………………………………………………………………………
Address…………………………………………………………………………

B. MARKETING DETAILS:
1. What is your scale of operation? [ ] Wholesale [ ] Retail [ ] Distribution
2. Which product do you normally sell? [ ] Palm oil [ ] Palm kernel oil
3. Which one is the most patronized? [ ] Palm oil [ ] Palm kernel oil
4. What has been the purchasing trend of the product?
Seasonal [ ] Frequent [ ] Other [ ]
5. Who constitute your target market?
[ ] Schools
[ ] Hospitals
[ ] Household consumers
[ ] Industries
[ ] Other ……………………
6. Which of the target groups patronize the most? ...………………………….
7. Do you have known competitor(s) in the palm oil marketing industry?
Yes [ ] No [ ]
8. If ‘Yes’, for question 5, how many are the competitors? …………………….
9. What are your

Strengths? Opportunities?

Weaknesses? Threats?

10. What promotional strategy/strategies did you use to make customers aware
of the product (s)? ..................................................................................................
11. How much did you spend on promotion? …………………………………
12. Why did you choose this location for the business? ………............................

C. OPERATIONAL DETAILS
14. Who are the suppliers of the palm oil or palm kernel oil?
[ ] Processors of palm oil
[ ] Distributors
[ ] Others

15. In what packages do you sell your oil?

[ ] 1 litre
[ ] 2 litres
[ ] 20kg
[ ] Others
16. Which package is the most patronized?
[ ] 1 litre
[ ] 2 litres
[ ] 20kg
[ ] Others
17. What is the selling price for each package of the product? GHS…………
18. Do you have employees? [ ] Yes [ ] No
19. If yes in 18 above, how much is paid, on the average, as labour cost or salaries per
month?
GHS………………………………….
20. How much do you pay yourself on the average as your personal labour cost per

month? GHS …………………………………………

21. What is your average daily sales? GHS ..........................................
22. Do you have any quality control measures in place? [ ] Yes [ ] No
23. If yes, what quality control measures have you put in place?
..............................................................................................................
24. Do you have a warehouse? Yes [ ] No [ ]
25. If yes, do you own it or it is rented? Owned [ ] rented [ ]
26. If rented, what is the rental charge for a stated period of time? GHS.......................

27. Do you have any employees? [ ] Yes [ ] No

28. If yes, how many are they? ………………………………….

THANK YOU!