Ephrem Workeye Business Proposal

Ephrem Workeye Integrated Agro
Processing Industry
Business Plan for Integrated Agro Processing

Industry
May 2014
Gambela
BUSINESS PLAN FOR THE ESTABLISHMENT OF INTEGRATED AGRO PROCESSING INDUSTRY 2014
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY ..................................................................................... 3

II. BACKGROUND ..................................................................................................... 4
2.1 THE COMPANY AND OWNER .......................................................................... 4
2.2 OBJECTIVE OF THE COMPANY ...................................................................... 4
2.3 VISION OF THE COMPANY ............................................................................... 4
2.4 MISSION STATEMENT ....................................................................................... 4
2.5 BACKGROUND INFORMATION ........................................................................ 5
2.6 PROJECT DESCRIPTION AND RATIONALE ................................................. 5
2.7 SWOT MATRIX ..................................................................................................... 6
III. MARKET PROSPECT .......................................................................................... 7
3.1 GENERAL OVERVIEW ........................................................................................ 7
Market Overview of Sesame .......................................................................................... 7
3.1 DEMAND CONSIDERATION ............................................................................ 10
3.2 SUPPLY CONSIDERATION ............................................................................. 14
Ethiopia’s Exports of Fresh vegetables ...................................................................... 18
Ethiopia export Price trend of vegetable and fruits ................................................... 19
3.3 MARKETING STRATEGY ................................................................................. 19
IV. TECHNICAL STUDY ............................................................................................... 21
4.1 PROJECT SITE ................................................................................................... 21
4.2 PROJECT DESIGN AND ENGINEERING ...................................................... 21
4.3 IRRIGATION INFRASTRUCTURE .................................................................. 21
4.4 PACKING AND STORAGE ............................................................................... 21
4.5 PRODUCTION PROCESS ................................................................................ 22
4.6 MATERIALS FOR USE ...................................................................................... 22
4.7.1 Seed ...................................................................................................................... 22
4.7.2 Fertilizer ................................................................................................................ 22
V. ORGANIZATION AND MANAGEMENT ................................................................ 23
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5.1 ORGANIZATION ................................................................................................. 23

5.2 MANAGEMENT ....................................................................................................... 23
5.3 MANPOWER REQUIREMENT ......................................................................... 24
VI. FINANCIAL ANALYSIS ...................................................................................... 25
6.1 Investment cost and Source of Finance .......................................................... 25
6.2 Operating Costs................................................................................................... 25
6.3 Revenue Estimate ............................................................................................... 26
6.4 Projected Financial Statements ........................................................................ 26
VII. ECONOMIC BENEFITS ..................................................................................... 27
VII. Environmental impact assessment and mitigation measures ...................... 27
8.1. Environmental dimensions .......................................................................................................... 27
8.2 Use of agrochemicals ................................................................................................................... 27
8.3 Use of fertilizers ............................................................................................................................. 28
8.4 Disposal of wastes......................................................................................................................... 28
VIII. CONCLUSION ..................................................................................................... 29
KEY ASSUMPTIONS IN FINANCIAL ANALYSIS..................................................... 30
 Product Mix of the Company ............................................................................. 30
 Wages and Salaries ............................................................................................ 30
Indirect Overhead Costs ............................................................................................... 30
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I. EXECUTIVE SUMMARY
The envisaged project is owned and managed by Ato Ephrem Workeye with paid up capital of 2 million.
The company has the objective to engage in sesame and vegetable production and agro processing
business on 250 hectare of land in Majang Zone, Gambela Region.
Of the total 250 hectares land that this project is claiming, (40 hectare will be allocated vegetables, 200
hectare for sesame and 5 hectares for infrastructure and the final 5 hectare which is expected to be hilly
or sloppy will be left intact or for planting trees.
The project is planned to be managed by Ato Eprem Workeye, who has the competence, vision, high
commitment, and work conduct to work diligently in order to realize the objective of the company. The
farm will create jobs for 10 skilled, professional and for 300 non-professional individuals.
The farm will use mechanized farming technique in combination of tunnel technology and flood irrigation
depending on the type of vegetable. Low and high tunnel technologies are low cost and simple among
several technologies available for off-season farming.
The initial cost of investment required for the project is estimated to be approximately Birr 2,000,882. The
cost covers initial investment costs, working capital requirements as well as pre-operating expenses.
According to projected annual revenue from sales of sesame and vegetable, the envisaged project will
generate Birr 7,437,900 during its first year of operation and raises to Birr 30,056,700 after the 240
hectare is developed and reach Birr 36,368,607 at the fifth year of operation. The project will generate a
net profit of Birr 5,084,178 during its first year of operation and Birr 30,148,969 at the end of the fifth year.
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II. BACKGROUND
2.1 THE COMPANY AND OWNER
The proposed project is established by an entrepreneur who has the enthusiasm to participate in the
development activity of the country by taking part on the agro industry sub - sector of the country which is
believed to be one of the country’s huge potential both in the form of generating foreign currency through
export and contributing for the development agenda. The company will improve lives of the local society
though employment creation and helping them develop their own land by providing trainings, special
seeds and creating market for their produces. Besides, it will improve income of the country in the form of
taxes.
2.2 OBJECTIVE OF THE COMPANY
The company has the following broad objectives.
Producing varies types of vegetable and sesame at least three times annually.
Producing a superior and enormous vegetable using modern farming technique.
Processing the products of the company to save foreign exchange by import substitution
Creating employment opportunity to the community and develop knowledge and wellbeing of
local farmers by providing varies farm related trainings, special seeds and create market link for
their produce.
2.3 VISION OF THE COMPANY
The vision of the company is to be the leading producer in vegetable and sesame sector.
2.4 MISSION STATEMENT
The mission of the company is to supply high quality, nutritional, and flavorful vegetables and sesame for
market with a competitive and reasonable price in an operation that provides a secure earning for all
employees and owners of the company and exhibit the strength and pride of the vegetable and sesame
sub – sector of Ethiopia specifically and the country’s development generally.
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2.5 BACKGROUND INFORMATION

Name: Ephrem Workeye Integrated Agro Processing Industry
Manager (Would be): Ato Ephrem Workeye
Address:
Business: Integrated Agro Processing Industry
Form of organization: sole proprietorship
Registration: On progress
Business License: On progress
Investment permit: on progress
Status of the project: New
2.6 PROJECT DESCRIPTION AND RATIONALE
The proposed project is designed to establish a sesame and vegetable farm for both local and export
market on 250 hectares of land in Majang Zone, Gambela Region. Vegetables can be cultivated using
drip irrigation technology depending on the seasonality and market need.
The rationale to establish the project is the existence of huge demand for vegetable and sesame in the
local as well as international markets like Europe and Middle East. The facility of growing off-season
vegetables also allows for growing non-conventional varieties and vegetables, which are in high demand
in the international market. Besides, the importance of vegetable and sesame cannot be denied due to
their nutritional value as these provide proteins, carbohydrates & salts that are essential ingredients for
the growth of human body. Vegetable are used in raw form as salad or cooked food according to the
taste, which provide a balanced diet and keep human being healthy. A large number of world population
now prefer vegetables in their daily diet due to the awareness that vegetables provide better source of
energy and nourishment to the body.
Owing to these facts the company has a plan to further process its raw vegetable by adding value
products and so as to obtain the optimum benefit.
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2.7 SWOT MATRIX

Before making the decision, whether to invest in any sector or not, one should carefully analyze the
associated risk factors. A SWOT analysis can help in identifying the key internal and external factors
which can play important role in making the decision and achieving objectives. These come from within
the company's unique values. On this basis the SWOT matrix of the company is presented as follows.
STRENGTH
Strong management staffs
Application of modern technology
Strong and effective marketing strategies
Striving towards satisfying the local demand through import substitution
Saving of foreign exchange outflow
WEAKNESS
Unskilled local labor
OPPORTUNITIES
Ease of getting credit facilities from financing institutions.
Government incentive for investment
Growing market in European country for the products
High demand from middle east and European market
Proximity to the potential importer countries
Ample production capacity and potential in the country
Cheap labor force in the project area.
THREATS
Strong competition in the foreign market.
Strong quality and health requirement from the importing countries.
Irregular freight transport cost due to fuel cost fluctuation.
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III. MARKET PROSPECT
3.1 GENERAL OVERVIEW
Market Overview of Sesame

Sesame is one of the world oldest spice and oilseed crop grown mainly for its seeds that contain
approximately 50% oil and 25% protein (Burden, 2005). The presence of some antioxidants makes the oil
to be one of the most stable vegetable oils in the world. The world production is estimated at 3.66 million
tones with Asia and Africa producing 2.55 and 0.95 million tons, respectively (Anon, 2008). The average
world yield of sesame is still low at 0.46 ton per hectare (FAO, 2004).
The continent of Africa is naturally endowed with favorable weather conditions that can support sesame
production. Unfortunately, the net export of African sesame is just 38% of its production despite the
favorable weather conditions to grow this crop on a large scale for commercial purpose. Nigeria is the
third largest producer of sesame in Africa after Sudan and Uganda.
Organic sesame market has been recognized as a rapidly growing market in the world with an annual
growth rate of 50% (EPOPA, 2005). At present, majority of the primary growers of sesame in Africa
produce non-certified organic sesame though most of African farmers produce conventional sesame. The
current practice of majority of farmers in Africa is crop production without the use of agro-chemicals and
hence this practice is described as “organic by default” or “a form of non-certified organic agriculture
(Alteri, 2002). Data on sesame production and trade on regional basis in the world are presented on table
1.
Table 1: Regional sesame production and trade in 2005

Region Area harvested Production Imports Export (000’
(Million ha) (000’ tons) (000’ tons) tons)
Asia 4.48 2,547 6,901 342
Africa 2.8 953 60 422
South America 0.14 79 4 54
Central America 0.13 81 32 37
North America 0 0 54 3
Europe 0.4 2 146 25
Oceania 0 0 8 0
World 7.55 3,662 996 884
2.1 Adopted from FAO, 2005
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Asia and Africa together produce 70% and 26% of the world’s sesame, respectively. About 24% of the
sesame produced in the world goes on export while 44% of Africa’s production goes on export. Asia
imports almost twice as much as produces, because the seeds are consumed as tahini or crushed into
toasted oil. It is suggested that Africa should step up her production to meet the ever increasing demand
for sesame particularly in the Asian market.
Among the world’s sixteen leading sesame producing countries, eight are in Africa, six in Asia and two
are Latin America, respectively. These sixteen countries collectively account for about 84% of the world’s
sesame production, see table 16. It could be observed that the bulk of sesame in the world is produced in
semi-arid regions where rainfall is relatively limiting. This confirms the attribute of sesame as a crop that is
drought tolerant and as such could be widely cultivated in areas where most grain crops cannot survive.
Table 2: World’s major sesame producers of 2005

Area Harvested Production (000’
Rank Country
(000’ ha) tons)
1 China 660 800
2 India 1850 750
3 Myanmar 1370 606
4 Sudan 1700 331
5 Uganda 210.8 121
6 Nigeria 165.1 83
7 Pakistan 135.2 75
8 Ethiopia 93.1 72
9 Bangladesh 80.1 55
10 Central African Republic 42.1 47
11 Thailand 63.9 46
12 Tanzania 104.8 45
13 Egypt 29.9 41
14 Guatemala 55.8 39
15 Chad 95.1 39
16 Paraguay 67.9 37
3.1 Adopted from FAO, 2005
The market for sesame in Asia and Europe is growing at a very high rate in the last decade because the
products from sesame readily meet the health requirements for food in the developed world and the
popular cuisine in the oriental world. Sesame seeds are demanded by a variety of markets in various
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forms like raw seeds crushed unrefined oil and refined oil. Consequently, efforts should be geared
towards producing appropriate products which can readily meet the specifications for other end
users/markets. Table 17 depicts the major exporters of sesame in 2007. As shown in table 17, Ethiopia
takes the second place following India in world sesame export market. Table 3: Top sixteen sesame
exporting Countries of 2007
Rank Area Quantity Value
(tones) (1000 $)
1 India 317015 397926
2 Ethiopia 139653 132764
3 Sudan 105464 86834
4 China 41653 57091
5 Nigeria 79860 56365
6 Myanmar 61200 49000
7 Paraguay 45511 40696
8 Guatemala 26652 26781
9 Netherlands 12741 19658
10 Tanzania 24887 17049
11 United Republic of Mozambique 19653 15793
12 Pakistan 17771 14484
13 Burkina Faso 21352 13500
14 Mexico 7972 13424
15 Bolivia 12198 11595
16 Thailand 10510 7475
4.1 Source: Global information and early warning system (GIEWS)
Market overview of vegetables
The fast growing urban population, the growing number of middle class income earners and the
improving living standard in Ethiopia opens huge market for fresh and processed vegetable and sesame.
The establishment and expansion of new educational institutions, such as Mizan-Tepi University and
Jimma University created ever increasing demand for fresh vegetables hence a potential market for the
farm.
Also, the fast growing sesame and vegetable export market in EU and Middle East countries is a huge
potential market opportunity. At present, there is a huge gap between the current supply of sesame and
vegetable all year round in the local market and export market especially when the price is high at the
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start of the season and at the end of the season. The use of modern farming technology like tunnel
technology, irrigation and mechanized farming enable us to fully utilize resources and produce all year
round hence high yield and higher profit compared to traditional farming.
Feeding the fast growing population in Ethiopia also requires increasing the productivity of the various
crops that grow at different agro ecologies in the country. This requires policy makers effect delivery of
selected and productive seeds with packages to farmers so that it is possible to produce more and thus
feed the ever increasing population in the country.
Increasing quality and usage of improved seed (along with other best practices such as irrigation, fertilizer
adoption, and mechanization) has the potential to dramatically increase Ethiopia’s annual crop
production. For example, by adopting commercial seeds in combination with best practices on a quarter
of the current crop area, research indicates that farmers could increase maize production by over 60
percent and self-pollinated crop production (such as wheat) by over 30 percent. This corresponds to a
production increase of over 7 million tons per year.
While access to and availability of seed has the potential to greatly improve smallholder productivity,
there is currently substantial gap between the country’s production of commercial seeds and farmers’
demand for, knowledge of, access to, and usage of these seeds. A series of constraints span the hybrid
maize seed systems. The shortage of hybrid maize seed in Ethiopia is a national concern, and farmers
are unable to access seed in the quantities that they demand. Supply shortages are a result of constraints
faced by both public sector operations, which account for 60 percent of hybrid maize seed production,
and private sector operations, which account for the remaining 40 percent of production. The public
sector faces inconsistent and inaccurate planning for demand, productivity gaps and financial constraints
in contract grower schemes, misalignment of processing and delivery with major seed producing areas,
unknown and poorly managed capacity, and non-flexibility of distribution model in terms of providing
farmers with choices and information
3.1 DEMAND CONSIDERATION
Sesame
Sesame crop that is produced in the country are most of the time available at various levels of woreda,
regional and terminal markets from wholesale retail shops and weekly rural market areas from producers
(farmers). A large proportion of the sesame seed produced in the country is exported through the big
wholesalers and suppliers. As is the case for any product export of sesame seed is subject quality and
other requirements of buyers.
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Demand Analysis of Sesame in Ethiopia
The demand situation of sesame can be seen from two perspectives: the demand from local industries
and the export demand of the country. Consumption at household level is not considered in this analysis
because of its insignificant impact on sesame market.
Ethiopia Sesame Export
Sesame is the major Ethiopian export commodity in Ethiopia taking second place next to coffee in terms
of foreign exchange earnings. According to the information obtained from Ethiopian Customs Authority in
the Ethiopian fiscal Year 1998 the share of sesame export was 24.7 percent from the total export while
coffee export constituted 35.6 percent of the total export earnings. In terms of the quantity and value of
export of oil seeds a five year data (2001 – 2005) obtained from Ethiopian Customs Authority indicates
that both quantity of sesame exports and the proceeds obtained have shown a geometric average
increasing trend of 16% over the stated period, see table 24. This average change is used in projection of
export for the coming five year.
Table 4: Ethiopian Sesame Export
Net Mass FOB Value Change in
Year
(Kg) (Birr) Mass (%)
2004 71,708,083 543,344,929 -
2005 197,987,766 1,345,541,638 176%
2006 265,000,000 1,814,600,000 34%
2007 235,000,000 1,724,080,000 -11%
2008 152,000,000 2,144,240,000 -35%
Geometric Average 153,615,975 21%
Source: Ethiopian Customs Authority
Ethiopian Oil Industry Demand of Sesame
According to the information obtained from Ethiopian Ministry of Industry, there are 26 large and medium
scale industries in Ethiopia. The annual oil seed requirement of these industries is estimated to be 24,364
tons of sesame in year 2007, see table 25. Out of the total oil seed requirement of the industries, sesame
share is assumed to be 20% because of high purchasing price as compared to others oil crops. The
annual average growth of the Ethiopian oil industries’ sesame demand calculated to be 0%, and hence
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the five year average requirement of sesame has been used in projection of oil industries demand for the
coming five years.
Table 5: Industrial Sesame Need

Oil Seed Consumption 20% Sesame Change in Mass
Year
(Kg) Requirement (Kg) (%)
2003 24,364,000 4,872,800 -
2004 30,410,000 6,082,000 25%
2005 27,265,000 5,453,000 -10%
2006 33,979,000 6,795,800 25%
2007 24,364,000 4,872,800 -28%
Average 5,615,280 0%
Demand Projection
Based on the above established facts, the demand for sesame in the coming five project years is
projected as follows.
Table 6: Sesame Demand Projection
Year Export Industry Requirement Total Demand

Base year 153,615,975 5,615,280 159,231,255
2009 185,875,330 5,615,280 191,490,610
2010 224,909,149 5,615,280 230,524,429
2011 272,140,070 5,615,280 277,755,350
2012 329,289,485 5,615,280 334,904,765
2013 398,440,276 5,615,280 404,055,556
2014 482,112,735 5,615,280 487,728,015
Vegetables
The export market is believed to be the major target market of the company fruits and vegetable products.
In this instance, trends which have an impact on the demand for food products, and in particular on the
demand for fruit and vegetables include brand loyalty and labeling, increasing preference for safe and
healthy food, the need for traceability of the product, increased fruit and vegetable consumption,
increasing interest in foreign and national food.
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Developed countries Consumers have a strongly increased interest in a healthy life-style and
consumption of health food. Health food refers to food products, which are low in fat and have limited
sugar and self content; this includes functional foods, which have specific health-promoting properties
and food products with added vitamins and minerals or bacterial supporting the intestinal function. Fruits
and vegetable are low in fat, contain natural sugars vitamins and natural antioxidants, which are
supposed to have properties preventive of heart diseases and cancer.
For instance as table 2 illustrates world consumption of vegetable shown for a 20 percent growth from the
year 1999 to 2003 implying a boost up in demand for same as result of world population and income
growth. Asia accounts around 70 percent of the world vegetable consumption followed by Europe, North
& Central America and Africa. The lion share of world vegetable consumption goes to China with almost
rd
50 percent of the share followed by India, USA and Russia. Ethiopia ranked the 63 consumer out of 176
countries in the world implying the existence of abundant local market for vegetables in the country.
Table 7: Vegetable consumption of major regions of the world (Tons)

Year
Regions
1999 2000 2001 2002 2003
Africa 42,519,910 43,383,542 42,915,075 44,643,083 45,767,944
Asia 421,225,128 460,250,608 489,297,313 512,219,457 539,955,153
Europe 84,337,290 84,456,483 83,478,279 82,439,604 84,989,679
North & Central
50,673,140 49,760,250 48,764,551 51,004,100 50,324,198
America
South America 16,150,247 16,319,086 16,081,648 16,971,782 17,248,137
Russia 26,131,088 26,572,573 28,296,703 28,869,284 30,403,389
World 617,627,646 657,070,819 683,628,185 710,253,025 741,149,499
Source: Food and Agricultural Organization (FAO)
Regarding world import of fruit and vegetable, in the year 2005, USA is the leading importer in all
categories of fruits and vegetables from the world footwear import followed by Germany. World import of
fruit and vegetable showed an average growth of 60 percent and 10 percent respectively from the period
2001 to 2005. The detail of world import is presented below.
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Table 8: World import of fruits and vegetables (USD ‘000)

Year
Items 2001 2002 2003 2004 2005
Vegetables, roots and
tubers, prepared or
preserved 10,054,121 10,748,306 12,431,558 14,256,823 14,612,273
Vegetables, fresh,
chilled, frozen or simply
preserved 23,113,999 23,881,946 24,528,507 27,346,356 21,907,381
Source: International Trade Center
3.2 SUPPLY CONSIDERATION
Sesame
The only source of sesame supply in Ethiopia is local production. Among the major oil seeds grown in
Ethiopia, sesame seed commands a unique position mainly due to the fact that it is highly adapted to arid
and semi-arid low land environment and yields fairly well. It is the major oil crop in North-west Tigray
(Humera and its surroundings), North Gonder (Metemma and the surroundings) and Oromia (East
Wellega). There is vast opportunity to expand sesame production in SNNPR (Bench-Maji, Arbaminch,
South Omo), Gode and Kelafo (Somali Region), Gambella, Tendaho and Melkaworer areas.
The whitish Humera type (including Metema type) and wellega type (including Pawi type) which is mixed
brownish are the two dominating varieties in the country. The Whitish Humera type has very good
demand in the world Market and is known for its quality by major importers and is also used as a
reference for grading in the international markets. Table 27 indicates cultivated land and production of
sesame produced in the country using the national average yield of 9qt/ha. The geometric average of
annual production growth per year over the year under review shows that 26% increment, and it is taken
in supply projection.
Table 9: Cultivated land and production
Year Area (ha) Production (Kg) Change in Production
2003 57,717 51,945,300 -

2004 91,527 82,374,300 59%
2005 136,220 122,598,000 49%
2006 205,150 184,635,000 51%
2007 211,000 189,900,000 3%
2008 186,000 167,400,000 -12%
Average 149,381,460 26%
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Source: Central Statistical Authority
Supply Projection of Sesame

Based on the existing production of sesame in Ethiopia and facts established above, the following supply
of sesame seed is projected for the coming five years.
Table 10: Supply projection of sesame

Year Supply Projection
Base year 149,381,460
2009 177,763,937
2010 211,539,086
2011 251,731,512
2012 299,560,499
2013 356,476,994
2014 424,207,623
Vegetables
As it was said earlier the country has huge potential to produce vegetable and fruits however the
production is at infant level and most of the products are commonly practiced by the rural private
peasants and holder living near to urban centers. Vegetables took up about 1 percent of the area under
all crops at national level. Of all the area under vegetables 68 percent and 21 percent was under red
peppers and Ethiopian Cabbage, respectively. As to production of vegetables, 31 percent and 47 percent
was that of the same crops followed by tomatoes.
Some root crops like onion and garlic are indispensable to improve the taste and scent of the food we eat.
Others like potatoes, sweet potatoes and taro/ Godere among the list of major food crops that are
consumed across the country. Root crops covered more than 1.54 percent of the area under all crops in
the country. Potatoes, sweet potatoes and taro added 33%, 23% and 21% of the area to the root crop
total. The same crops and onion contributed 32%, 22%, 19% and 12% to the root crop production in the
same order.
With regard to the fruit production of the country banana contributed about 61 percent of the fruit crop
area followed by mangoes that contributed 13 percent of the area. More than 3.5 million quintals of fruits
was produced in the country and Bananas, Papayas, mangoes and oranges took up 55 of the lion share
of production.
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Table 11: Ethiopia’s Production in quintals of vegetable, roots and fruits

Year
Items
2003/04 2004/05 2005/06 2006/07 2007/08
Vegetables 3,879,469 4,320,041 4,501,996 3,451,306 4,719,664
Lettuce - - 19,349 - -
Head cabbage 85,776 152,082 128,823 101,240 117,650
Ethiopian cabbage 2,135,915 2,624,554 1,808,433 1,591,925 2,383,603
Tomatoes 548,107 361,549 354,073 - 338,381
Green peppers 413,870 442,729 401,034 374,683 623,209
Red peppers 669,078 724,655 1,790,283 1,017,238 1,223,997
Swiss chard 14,746 6,801 - - 4,273
Root crops 16,055,245 16,152,041 13,374,684 14,095,463 15,309,489
Beetroot 140,955 164,801 162,911 144,485 169,480
Carrot 100,232 178,954 68,815 66,941 -
Onion 2,166,993 2,296,776 1,759,193 1,784,742 1,751,062
Potatoes 5,097,150 5,097,155 4,499,958 5,256,568 4,025,080
Garlic 1,353,939 1,967,414 1,071,719 683,083 1,035,417
Taro / 'Godqe' 2,224,646 1,926,110 1,724,128 2,271,506 2,882,637
sweet potato 4,971,428 4,520,833 4,087,961 3,888,137 5,264,870
Source: CSA Agricultural sample survey
Since the company is planned to be establish in SNNPRS, observing the production capacity of the same
is essential. Accordingly, the production of fruit and vegetables excluding root crops has shown enormous
growth from year 2003 to 2008 implying the production capacity of the region is growing so that it can
compete with other production units of the country and foreign companies.
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Ethiopia’s Exports of Fresh vegetables
The contribution of fruits and vegetables to the country’s export earnings is relatively small compared to
the country potential for producing fruit and vegetables. Nearly all the fruits and vegetables produced are
consumed domestically. Besides more than 60 percent of the exports that take place are mainly going to
Djibouti. Other destinations of Ethiopia’s fruits and vegetables during off seasons are Yemen, Sudan,
Germany, Netherlands, Japan, Italy, Saudi Arabia, France and Russia.
When we consider exports of fresh fruits and vegetables, the total value of export earnings is also
relatively small. As table 5 shows the export figures of fresh fruits and vegetables in the period 2002 to
2008 observed 18 percent and 60 percent growth in volume and value respectively, However, the pattern
vary heavily with the fluctuation in rainfall. Beans, Potatoes, Tomatoes, Onions and Oranges are the most
important export products with the exception of beans the main destination is Djibouti.
Table 12: Exports of fresh fruits and vegetables 2002 to 2008
Year Quantity tons Value in Birr Growth
2002 20,350 53,512,033

2003 19,199 40,830,187 -24%
2004 30,363 69,459,524 70%
2005 25,696 53,893,488 -22%
2006 26,637 67,389,170 25%
2007 32,992 123,596,812 83%
2008 24,099 85,578,526 -31%
Source: Ethiopia Custom Authority
Ethiopia trades freely with its neighboring countries Sudan, Somalia, Kenya and Djibouti and the country
is a member of the common market for Eastern and Southern Africa (COMESA) which contains 21
member countries. Ethiopia made a 10 percent tariff reduction on goods coming from member countries.
The country is also a member of the Intergovernmental Authority on Development (IGAD), which consists
of Djibouti, Ethiopia, Eritrea, Sudan, Somalia, Uganda and Kenya. The priority areas of IGAD include
infrastructure development, food security, environmental protection, humanitarian affairs, and conflict
prevention, management and resolution. Besides, the country was also designated as one of the 35 sub-
Saharan Africa countries eligible to receive African Growth and opportunity Act (AGOA).
The domestic market for vegetable and fruits is growing rapidly; this can be further justified by the
growing cities and towns and the corresponding growth of town dwellers and retail shops that vend fruits
and vegetable, changes in consumption habit of town dwellers towards fruits and vegetable; coupled with
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these the price offered to banana is somewhat affordable by every income bracket of the population of
the country so as to push forward the domestic demand.
Ethiopia export Price trend of vegetable and fruits
Fruits and vegetables showed an increase in their export prices during 2003 over 2006. Being specific to
the company’s planned produces tomato, onions, sweet melon and banana price has grown by 48%,
39%, 72% and 33% at the period under consideration.
Table 13: Price of produces per quintals
Item 2003 2004 2005 2006

Tomatoes 126 123 167 186
Onions 195 215 227 272
Sweet melon 155 167 172 266
Bananas 82 94 93 109
Source: Food and Agricultural Organization (FAO)
Demand Supply Gap of Sesame
Demand supply gap analysis depicted that the existence of sufficient market for major crop of the farm
(sesame), see table 29.
Table 14: Demand-supply gap analysis
Year Total Demand (Kg) Total Supply (Kg) Demand-Supply Gap (Kg)
Base year 159,231,255 149,381,460 9,849,795

2009 191,490,610 177,763,937 13,726,672
2010 230,524,429 211,539,086 18,985,343
2011 277,755,350 251,731,512 26,023,838
2012 334,904,765 299,560,499 35,344,266
2013 404,055,556 356,476,994 47,578,563
2014 487,728,015 424,207,623 63,520,392
3.3 MARKETING STRATEGY
Marketing strategy is a system by which the firm sales its products to consumers. Such system is a
system that require periodic assessment of behavior of customers their sensitivity to price, quality and
operation of competitors. It also includes assessment of market entry timing. Various Products and
Services have high dependence on their commercialization timing and delivery to the Customers but the
19
vegetable and fruits production can be started at any time during the year due to the non specific timing
demand of the product.
In this instance, the company has planned to utilize the following marketing strategies.
Producing quality product beyond the expectation of the export and local demand and charge
reasonable price in order to break the market and build its own reputation.
Advertise its product to the export and local market by using varies media instruments and
participating on local and international trade fairs.
Distribute the product directly to consumers in order to avoid unnecessary margins by middle
agents.
Further the company planned to process its raw export of vegetable and fruit so that it can
expand its market by adding value on the products.
20
IV. TECHNICAL STUDY
4.1 PROJECT SITE
The suitability of the site for development and operation of the proposed project is an important
consideration affecting the viability of the project. Factors such as location, site topography, accessibility,
visibility, surrounding area characteristics, proximity to market have an impact on the project. On this
basis project is located in Majang Zone, Gambela Region, which is proven to be one of the major
vegetable and sesame cultivation zones of the country. Besides, the project is located near to South
Sudan which is the alternative target market of the company’s produce.
4.2 PROJECT DESIGN AND ENGINEERING

The total land requirement for the project is 250 hectares of which 85 hectares will be developed in the
first year. Of the total 250 hectares land that this project is claiming, (40 hectare will be allocated
vegetables, 200 hectare for sesame and 5 hectares for infrastructure and the final 5 hectare which is
expected to be hilly or sloppy will be left intact or for planting trees.
PROJECT MACHINERY AND EQUIPMENT REQUIREMENT
The machinery and equipment related with the project planned to cost Birr 1,800,000 which includes
purchases of pumps, complete drip irrigation system, tractor with accessories, major farm tools, electric
line installation and generator in three phases. Out of the total machinery and equipment cost Birr
250,000 will be invested on the first year of operation and the remaining Birr 1,550,000 will be utilized at
the second phase.
4.3 IRRIGATION INFRASTRUCTURE
Vegetables can be cultivated in off-season, with the application of drip irrigation technology. The
production of vegetables all around the year enables the company to fully utilize its resources and
supplement income from vegetable growing as compared to other normal agricultural crops.
Benefits from year-round production using drip irrigation technique include year-round income, retention
of old customers, gain in new customers, and higher prices at times of the year when other seasonal
growers do not have produce. Other potential benefits of season extension technologies are higher yields
and better quality. In addition, with year-round production you can provide or extended year-round
employment for employees whom you might otherwise lose to other jobs at the end of the growing
season.
4.4 PACKING AND STORAGE

Strict caution is needed during packing and storage of vegetable and fruits in order to avoid moisture,
which affects quality of the product. The products will be stored in a cold room until they are ready for
21
transportation. Usually cartoons are recommended for exporting the product and also the packaging will
be done according to the preference of the buyer.
4.5 PRODUCTION PROCESS

General production process of selected fruit and vegetables include land preparation which includes land
clearing, leveling, primary and secondary tillage followed by sowing seeds, transplanting and cultivation
which involves irrigation, weeding and pest control then Harvesting and transporting to the processing
plant for grading and packaging.
4.6 MATERIALS FOR USE
4.7.1 Seed
Hybrid and improved seed will used for planting the selected fruits and vegetables and crops because
they have the ability to resist multiple diseases and result improved yield. In addition basic seeds will be
used in maize and rice seed multiplication. The hybrid seeds cost more than the ordinary seeds but the
productivity and quality of the crop is ensured from quality of these seeds. In this instance hybrid seeds
have above 90 percent germination capacity as compared to that of ordinary one and the yield achieved
from hybrid seeds is 3 to 4 times more than to the ordinary seeds and is also less prone to diseases.
Therefore, for every crop that will be planted a new hybrid seed will be in use.
Besides the company planned to develop nursery for its own future production and intended for providing
surrounding farmers so that they can produce an improved and similar quality products with the company.
This has advantages for both the company and farmers. The farmers can benefit from sales of their
product at the reasonable price and the company on the other hand benefit from the continuous supply of
the product in the exporting market so that it can develop its own reputation.
4.7.2 Fertilizer
Using fertilizers containing Nitrogen, Phosphorus and Potash the yield of the crop can be maximized.
Appropriate quality and quantity of fertilizer plays a great role in the production and quality of products. In
this case, fertilization should be done at the soil bed preparation stage and the second fertilization after 3
weeks interval the third after 6 weeks and finally during the harvesting period.
22
V. ORGANIZATION AND MANAGEMENT
5.1 ORGANIZATION
The company will be organized in a way that it operates successfully. The top organ in the organizational
structure is the General Manager who will be assisted by the project manager and three department
managers namely Administration & Finance, production & Technical and Marketing & commerce.
The organizational structure of the project is presented in the figure 1 as follows.
FIGURE 1: ORGANIZATIONAL STRUCTURE OF THE COMPANY
GENERAL
MANAGER
SECRETARY
PROJECT
MANAGER
PRODUCTION AND MARKETING AND ADMINISTRATION

TECHNICAL COMMERCE AND FINANCE
MANAGER MANAGER MANAGER
23
5.2 MANAGEMENT
Ato Ephrem Workeye, General Manager of the company, will supervise and monitor the overall activity of
the company and will be responsible to lead, organize and coordinate the overall operation of the project.
He has acquired a BA Degree in Accounting and has vast experience in Finance and Administration
sector.
The project manager, will be responsible for the whole activities regarding the production and processing
of the product and will assist the General Manager of the company in any aspect expected of him to run
the business in the most profitable way.
The Administration and Finance will handle the accounts and personnel activity of the organization. The
production and Technical Department will undertake the production operation of the project and related
maintenance works and undertake the quality control issue of the final product. The marketing and
commerce will be responsible for the promotional works, product marketing, sales and procurement of the
required raw materials.
5.3 MANPOWER REQUIREMENT
The company planned to recruitment a qualified and experienced manpower both from domestic market.
Of the total employees 10 are management and administrative staff and there will be more than 300
temporary and permanent direct laborers which will be recruited from the project site.
24
VI. FINANCIAL ANALYSIS
The basic assumption for financial analysis of the project is presented in key assumption part of this
study. The financial study of the project is conducted by taking into account the current changes of price,
technology and systems of productions.
6.1 Investment cost and Source of Finance

As shown in table 8 the initial cost of investment required for the project is estimated to be approximately
Birr 2,000,882. The cost covers initial investment costs, working capital requirements as well as pre-
operating expenses.
Table 15: Total investment over the period of 3 years
Investment Items Phase I Phase II Phase III Total value

Building & Construction 150,000 150,000
Land development 750,000 1,000,000 650,000 2,400,000
Machinery & Equipment 250,000 1,550,000 1,800,000
Vehicles 370,000 20,000 390,000
Office Furniture & Equipment 29,776 29,776
Pre-production Cost 10,000 10,000
Water well drilling 450,000 450,000
Sub Total 1,559,776 3,020,000 650,000 5,229,776
Working capital 441,106 1,049,227 1,383,754 2,874,087
Total 2,000,882 4,069,227 2,683,754 8,103,863
The sources of finance for the first year of the project will be company’s equity capital paid by
shareholders. After the second year of operation the company will apply for loan for expansion.
6.2 Operating Costs

Major costs of goods sold are Seedling, Fertilizer, labor cost and fuel and lubricant. The detail of
operating cost is tabulated hereunder.
Table 16: Operating Cost of Production
25
Years
DESCRIPTION 1 2 3 4 5
Seedling 101,150 299,200 408,700 449,570 494,527
Fertiliser 749,250 1,748,250 2,397,600 2,637,360 2,901,096
Labour cost 151,800 372,000 694,800 764,280 840,708
Fuel and lubriricant 736,061 736,061 736,061 809,667 890,634
Wage and salaries 236,400 260,040 286,044 314,648 346,113
Land Rent 7,500 7,500 7,500 8,250 9,075
Indirect overhead costs 219,617 241,578.58 265,736 292,310 321,541
Total Cost of Goods Sold 2,201,778 3,664,630 4,796,442 5,276,086 5,803,694
N.B: Operating cost is assumed to increase by 10% annually
6.3 Revenue Estimate

Projected annual revenue from sales is estimated based on sales of sesame and vegetables.
6.4 Projected Financial Statements

Projections are made based on assumptions. Based on these assumptions, a complete set of financial
projections are provided in this section. These projections include profit/loss statement, and statement of
cash flow and balance sheets. The projections are prepared on an annual basis.
According to projected annual revenue from sales of sesame and vegetable, the envisaged project will
generate Birr 7,437,900 during its first year of operation and raises to Birr 30,056,700 after the 240
hectare is developed and reach Birr 36,368,607 at the fifth year of operation. The project will generate a
net profit of Birr 5,084,178 during its first year of operation and Birr 30,148,969 at the end of the fifth year.
Table 17: Summary of Profit and Loss Statement (for the first 5 years)
Project years
Description
1 2 3 4 5
Gross Revenue 7,437,900 19,137,200 30,056,700 33,062,370 36,368,607
Less: Operating Costs 2,201,778 3,664,630 4,796,442 5,276,086 5,803,694
Income Before Depreciation 5,236,122 15,472,570 25,260,258 27,786,284 30,564,913
Less: Depreciation and income tax 151,944 383,444 415,944 415,944 415,944
Net Profit 5,084,178 15,089,126 24,844,314 27,370,340 30,148,969
26
VII. ECONOMIC BENEFITS
The project will create a permanent employment opportunity for 10 individuals and 300 additional casual
workers as required. It also contributes in supply of fresh fruits and vegetables to the ever increasing
demand of local and overseas markets. Additionally, the project will generate Tax Revenue, which will
help the current fast growing economy of the Ethiopia. The project has a forward linkage effect with food
processing and hospitality industries.
On a national scale, estimates show that by adopting commercial seeds and improved agricultural
practices on a quarter of the crop land in Ethiopia, farmers could increase maize production by over 60
percent from approximately 22 quintals/ ha to 40–80 quintals/ha and increase self-pollinated crop
production, such as wheat, by over 30 percent. Taken together, this corresponds to a potential crop
increase of over 7 million tons of maize and wheat per year.
The proposed farm will have an area of 250 ha at its initial development. At this site, agro economically
integrated farming will be established and the direct effect of this project will be the significant creation of
job opportunities.
Secondly the farm will support the surrounding farmers for the production rice maize, fruits and
vegetables and spices like ginger which are marketable in the area with limited supply. Once the project
embarks to full production phase, the surrounding farmers will be made out growers for the farm after
provision of training and extension service by the farm.
Thirdly the farm will also be a demonstration farm in the development and evolution of good commercial
farmers and will cooperate with Mizan Tepi University to support students with adequate practical
agricultural attachment programs .thus students in the university will get the opportunity to develop in to
practical and commercial –minded experts.
VII. Environmental impact assessment and mitigation measures
8.1. Environmental dimensions
Integrated agriculture is the one of the recently developed concept of farming in rural areas and when
dealing with environmental dimensions, conservation of the environment, use of agro-chemicals, use of
fertilizers, disposal of wastes, and irrigation (fustigation schemes) are the pillars.
8.2 Use of agrochemicals
Agricultural Productions will be effective by the use of agrochemicals in combined with IPM (integrated
pest management, the use of cultural practices) .The use of agrochemicals will be based on the current
27
rules and regulations of the country where there are only allowed lists with the recommended rates , and
target pests (diseases) which makes limited impact on the environment.
The target of production in the short run is to develop and acquire experience to penetrate the
international market thus, the EU regulations on use of plant protection products (chemicals), MRL, &
MPS black lists will be applied.
8.3 Use of fertilizers
There will be use of only two basic fertilizers (DAP & Urea) in the normal production of vegetables to
increase productivity. The use of these fertilizers will be based on the result of soil analysis (to know
which quantity of elements are available in sufficient quantity. and will be based on the recommendations
of MOARD and some guidelines of vegetable productions beside expertise consultation in the farm.
8.4 Disposal of wastes
The possible wastes on the planned farm are Organic wastes (plant materials) left over, and empty
chemical containers.
Organic wastes (plant materials) will be subjected for decay and be used as a compost fertilizer on the
farm thus will not have effect on the environment
Empty plant protection product containers (chemical containers) – use of chemicals is vital in the
normal production of any crop. So far there is no an official system of collection of empty containers in the
country after use. However as a regulation, rinsing at least three times (the reinstate will be used in the
spray tank again) and parsing (no use of containers) will be used
One of the environmental concerns related to Fruits and Vegetables farming is the use of water. Even
though water is abundantly available in Ethiopia with the current trend of growing modern farming it needs
to be used wisely and efficiently.
In order to address efficient use of water the proposed project will use various methods including, drip
irrigation in combination of flood irrigation though small-scale river diversions, construction of small ponds
and wells.
The other concern is potential salinization (accumulation of soluble salts) which can affect the suitability of
soil for farming certain crops. The farm will establish adequate drainage infrastructure during land
development so the salt deposit can be washed from the soil. Also, it will use clean source of irrigation in
drip irrigation and farm salt-tolerant vegetation in saline soil areas such as melons and tomato.
28
VIII. CONCLUSION
The results of the business plan conducted indicate that the project has strong potential to be a
successful enterprise if the necessary assistant from different organizations. The market for vegetable
and sesame is projected to grow at rapidly in the coming years. The products will be supplied to high
demanding foreign market and generate foreign currency to the country and improve the lives of the local
community through employment creation. Further, the company has a plan to help the farmers by
providing the required knowhow, input and facilitate market for their product.
29
KEY ASSUMPTIONS IN FINANCIAL ANALYSIS
Product Mix of the Company
Year 1 Year 2 Year 3

Vegetables 20 40 40
Sesame 65 135 200
Total 85 175 240
Wages and Salaries
Position No of workers Monthly salary Annual salary

General Manger 1 5,000 60,000
Secretary/casher 1 900 10,800
Marketing 1 3,000 36,000
Accountant 1 1,800 21,600
Agronomist 1 4,000 48,000
Tractor operator 2 1,000 24,000
Guard 5 500 30,000
Janitor 1 500 6,000
Total 13 236,400
Indirect Overhead Costs
 Insurance is assumed to be 0.75% of the fixed investment.

 Repair and maintenance cost is assumed to be 2% of the fixed investments
Description Total value

Travel & per diem 15,000
Office supplies and other costs 5,000
Utilities 20,000
Employee benefit 10,000
Protective 5,000
Insurance 39,441
Miscellaneous Expenses 10,000
Legal & Audit Fee 10,000
Repair, Maintenance and spare parts 105,176
Total 219,617
30
Financial Analysis Projections
Cash Flow projection
Project Years
Description
- 1 2 3 4 5
Cash Inflows
Owner's Equity 2,000,881.62 4,069,227.09 2,683,754.46
Net Profit 5,084,177.86 15,089,126.17 24,844,314.31 27,370,340.14 30,148,968.55
Depreciation 151,944.00 383,444.00 415,944.00 415,944.00 415,944.00
Total Cash Inflows 2,000,881.62 9,305,348.95 18,156,324.63 25,260,258.31 27,786,284.14 30,564,912.55
Cash Outflows
Investment on Fixed Assets 1,559,776.00 3,020,000.00 650,000.00
Rplacement Cost 29,776.00 370,000.00
Working capital 441,105.63
Increase in working capital 608,121.46 334,527.37 138,375.45 152,212.99
Withdrawal(10% of net profit) 508,417.79 1,508,912.62 2,484,431.43 2,737,034.01 3,014,896.86
Total Cash Outflows 2,000,881.62 3,528,417.79 2,767,034.08 2,818,958.80 2,905,185.46 3,537,109.85
Net Cash Flow - 5,776,931.16 15,389,290.55 22,441,299.50 24,881,098.68 27,027,802.71
Cumulative Cash Balance 5,776,931.16 21,166,221.71 43,607,521.22 68,488,619.90 95,516,422.60
Retained Earning 4,575,760.07 13,580,213.55 22,359,882.88 24,633,306.13 27,134,071.70
Cummulative Retained Earning 4,575,760.07 18,155,973.62 40,515,856.50 65,149,162.62 92,283,234.32
31
Working Capital Requirement
Years
DESCRIPTION 1 2 3 4 5
Seedling 20,230 89,760 122,610 134,871 148,358
Fertiliser and chemicals 149,850 524,475 719,280 791,208 870,329
Labour cost 30,360 111,600 208,440 229,284 252,212
Fuel and lubriricant 147,212 220,818 220,818 242,900 267,190
Wage and salaries 47,280 52,008 57,209 62,930 69,223
Land Rent 2,250 2,250 2,250 2,475 2,723
Indirect overhead costs 43,923 48,315.72 53,147 58,462 64,308
Total Working capital 441,106 1,049,227 1,383,754 1,522,130 1,674,343
Increase in working Capital 608,121 334,527 138,375 152,213

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Ephrem Workeye Integrated Agro

Business Plan for Integrated Agro Processing

I. EXECUTIVE SUMMARY ..................................................................................... 3

5.1 ORGANIZATION ................................................................................................. 23

2.1 THE COMPANY AND OWNER

2.2 OBJECTIVE OF THE COMPANY

The company has the following broad objectives.

Producing a superior and enormous vegetable using modern farming technique.

2.3 VISION OF THE COMPANY

2.4 MISSION STATEMENT

2.5 BACKGROUND INFORMATION

2.6 PROJECT DESCRIPTION AND RATIONALE

2.7 SWOT MATRIX

Strong management staffs

Application of modern technology

Strong and effective marketing strategies

Striving towards satisfying the local demand through import substitution

Saving of foreign exchange outflow

Unskilled local labor

Ease of getting credit facilities from financing institutions.

Government incentive for investment

Growing market in European country for the products

High demand from middle east and European market

Proximity to the potential importer countries

Ample production capacity and potential in the country

Cheap labor force in the project area.

Strong competition in the foreign market.

Strong quality and health requirement from the importing countries.

Irregular freight transport cost due to fuel cost fluctuation.

III. MARKET PROSPECT

3.1 GENERAL OVERVIEW

Market Overview of Sesame

Table 1: Regional sesame production and trade in 2005

Table 2: World’s major sesame producers of 2005

Market overview of vegetables

3.1 DEMAND CONSIDERATION

Demand Analysis of Sesame in Ethiopia

Ethiopia Sesame Export

Ethiopian Oil Industry Demand of Sesame

Table 5: Industrial Sesame Need

Table 6: Sesame Demand Projection

Year Export Industry Requirement Total Demand

Table 7: Vegetable consumption of major regions of the world (Tons)

Source: Food and Agricultural Organization (FAO)

Table 8: World import of fruits and vegetables (USD ‘000)

Source: International Trade Center

3.2 SUPPLY CONSIDERATION

Table 9: Cultivated land and production

Year Area (ha) Production (Kg) Change in Production

2003 57,717 51,945,300 -

Source: Central Statistical Authority

Supply Projection of Sesame

Table 10: Supply projection of sesame

Table 11: Ethiopia’s Production in quintals of vegetable, roots and fruits

Source: CSA Agricultural sample survey

Ethiopia’s Exports of Fresh vegetables

Table 12: Exports of fresh fruits and vegetables 2002 to 2008

Year Quantity tons Value in Birr Growth

2002 20,350 53,512,033

Source: Ethiopia Custom Authority

Ethiopia export Price trend of vegetable and fruits

Table 13: Price of produces per quintals

Item 2003 2004 2005 2006