Business Plan Wet Coffee Adane Niguse

Adane Niguse Wet Coffee Processing Industry
Executive Summary
1. GENERAL INFOMATION
 The Promoter of the project (Owner): Ato Adane Niguse Leman
 Name of the project- WET COFFEE PROCESSING INDUSTRY
 Address/site/:
 Region- Oromia
 Zone – West Guji
 District/City- Hamballa Wamana
 Kebele – T/Damu PA
 Legal form of Business : Private
 Sector of the Project : Commercial Services
 Distance from International Asphalt Road- Woreda : 27Km to East direction
 Distance from Woreda to the Project site : 7.5 Km to South direction
 Altitude of the district ranges from 1500m-2000m above sea level.
 Topography of the Project : Slightly slope
 Temperature ranges from 15oc- 30 oc
 Total area required : 0.6 Ha(6000m2)
 Total investment cost: 6,000,000ETB is required, out of which amount 1,800,000ETB (30%)
from owner equity and the rest 4,200,000(70%) will be from bank loan.
 Employment Opportunity: 11 individuals on permanent and 120 on causal basis from both
qualified and unqualified (skilled and un skilled) people.
 Social and Economic Benefit: Provides better employment opportunities for local community
income generation through taxation for the country for and foreign currency
 Labor safety: The envisaged project is assumed to be undertaken by considering workers
safety. The promoter will provide all the necessary safety materials for the permanent and
temporary employees, based on the nature of the activities.
 Environmental Considerations: the proposed project has its own environmental protection plan
and budget. So all the necessary actions will be undertaken on right timely before affecting the
environment.
Habtamu Consultancy Service for Business & Investment PLC.

Mobile 09 16 18 94 65, Email habtamuyifraw@gmail.com
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2. INTRODUCTION
Agriculture is the main stay of Ethiopian`s economy providing employment opportunities to

85% of the population and back bone of Ethiopian`s economy. Ethiopia has one of the fastest-
growing economies in the world and Africa`s second most populous country. Coffee
production in Ethiopia is a longstanding tradition and is where coffee Arabica, the coffee plant
m originates. The plant is now grown in various parts of the world; Ethiopia itself accounts for
around 3% of the global coffee market. Coffee is important to the economy of Ethiopia;
around 60% of foreign income comes from coffee, with an estimated 15 million of the
population relying on some aspect of coffee production for their livelihood.
In 2006, coffee exports brought in $350 million, equivalent to 34% of that year's total exports.
Many other economic activities depend on agriculture, including marketing, processing, and
export of agricultural products. Production is overwhelmingly of a subsistence nature, and a
large part of commodity exports are provided by the small agricultural cash-crop sector.
Principal crops include coffee, pulses (e.g. beans). In general, Exports are almost entirely
agricultural commodities, and coffee is the largest foreign exchange earner.
An approach to bring a viable project in Hamballa Wamana Woreda is chosen with special
emphasis to wet coffee processing industry (production). As an agricultural industry
endeavors the project, which here after will be promoted by Ato Adane Niguse Leman Wet
Coffee Processing Industry. In addition, most importantly it is all good a motivation: obtaining
a socio-economically acceptable and technically sound return from the invested resources.
Therefore, it has become a menu of the rational proposal to forward the likely options that
ensure a quality yield as well as satisfactory equilibrium between the investments and the
expected benefits, attractive profit for that matter. Thus, the promoter of this project is
envisaged for operations to undergo reducing of challenges without losing the available
opportunities in the proposed project area and woreda as well.
Furthermore, the project is planned to undergo different methods that will enable to overcome
the hitherto existing problems of wet coffee processing system and to transform the processing
systems of market-oriented nature with step-by- step value addition as well as processing
ventures. Generally, it serves country in generating income to the government by the form of

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taxation. Hence, its advantage can be concluded as technically, economically and financially
practicable and acceptable.
3. BACKGROUND AND OBJECTVES
Ethiopian’s economy is based on agricultural sector which employees over 85% of the
population and contributes the highest share to the GDP. Coffee export generated 41% of
foreign exchange earnings and provides income for approximately 8 million stockholder
households. Policy attention to the sector was always considerable, and its importance has
been renewed in the latest poverty Reduction Strategy, the plan for Accelerated and Abstained
Development to End poverty (PASDEP). PASDEP puts forward a development strategy based
on accelerated economic growth, part of which is hope to be achieved via increased private
commercialization and market integration.
On the average, farmers ranked 84% of their farm production overall, coffee contributed 70%
to the total value of output sold. There is, however, a high inter-household differentiation: the
85% highly coffee small holders generated over 95% of their cash income from coffee sales,
while the cotton 15% earned 63% of their cash income from Daly labor food from
preprocessing. Although in Hambela Wamana Wereda, particulary in T/Damu kebele coffee
production immense agricultural potential exists for the dry coffee processing is left inactive.
3.1. Coffee in Ethiopia Economy
When we look at Historical background of coffee in Ethiopia economy, after the downfall of
Dergue regime, coffee acreage increased tremendously. For instance, the acreage increased
three- fold from 300,000 hectares in 2006 to 704,000 hectares in 2010. Similarly, coffee
production has followed the same trend, 308,568 tons of green coffee in 2006 to 480,621 tons
in 2010 (ICO, 2009). Coffee marketing activities make coffee one of Ethiopia’s most
important sources of farm income and government revenues. Table 1 illustrates the evolution
of foreign exchange earrings as contributed by coffee and the injection of cash towards the
country in the last five years.
The Government, with strong support from development partners, has made different tragic
intervention to enhance the delivery of improved production technologies and support
services. Over the past several years, the Ethiopian Government has demonstrated strong

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commitment to agriculture and rural development through allocations of more than 10 per cent
of the total budget. Despite these achievements, however, the Government recognizes much
remains to be done in the agriculture sector to realize the vision to become a middle-income
country (defined as GDP/ capita of USD 1,000) by 2020.
Table 1: Share of coffee export earrings and their contribution to national income
Year 2006 2007 2008 2009 2010 1998 to 22

compressio
n%
Coffee coverage 300,000 435,000 557,000 679,000 704,000 55
(ha)
Production 308568 319145 353570 283000 480621 56
volume (tones)
Exports coffee 130.2 168.2 184.4 191 198,24 19.24
share (%)
Money injected 364,565,300 525,430,600 375,838,600 527,662,400 734,534,100 98.4
in country
(USA)
Source: ICO coffee production statics (www.ico.org) 2010.
3.2. Current policy for the development of coffee sector
3.2.1. Increased productivity
This section will describe some actions the Government is trying to implement in order to
tackle problems associated with coffee subsector performance. This policy adopted in 2006,
has two main objectives (MoFED, 2006): To achieve this objective, the current policy taken in
to account the international coffee price and coffee growers are paid accordingly. The removal
of the coffee export tax will facilitate this. This will enable farmers to be paid high prices
giving them incentives to increase production if world prices are not low. In addition, coffee
extension services will focus on regions suitable for the crop.
The number of extension workers is planned to be increased with an average of three

extension agents for on common centers (peasant associations). Research results highlight
commune that need more extension services to get the highest communes and more extension
erosion services to get the highest pay-off. Other priorities include on-going research on high

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yield varieties, disease and pests, and mulching of coffee. MoRD is planning to increase their
financial support to research activities of EARO. In addition, loans will be given to farmers’
associations to purchase pruning equipment for the maintenance of coffee trees.
3.2.2. Improve coffee quality
The challenge is to put in place an economic environment that will support the production of a
high value Coffee. The marketing system is planning to install a differential local price. so
incentives are given to produce high quality coffee. The policy does not, however, mention the
creation of grades and standards to implement the new price structure. To improve coffee
quality, the following actions are to be conducted:
 Implementing free market policy:

 The creation of EXC(Ethiopian commodity Exchange):
 Provide coffee producers with pulping machines to be used in processing the
harvest:
 Make available coffee drying trays, materials to repair existing pulping machines
and new pulping machines to be paid by coffee processers through a credit.
Currently, at least 80% of the Oromia Region population of the country’s export earnings until
the late 2003s Oromia was a major player on the world market for dried coffee and other
agricultural products, accounting for as much as much as 60% of the world exports market.
3.3 Justification of the Proposed Project
Before the decision was made, the proponent of this project Ato Adane has conducted market
assessment for long time and there were a number of reasons that led him to establish this wet
Coffee Processing industry in this area. Firstly, Ethiopa’s climate is suitable for most
producers of Arabica coffee in the world and has a well established linkage to the major global
markets. The growing trends of the establishment of manufacturing industries in the country
as a whole and coffee processing factory in particular, and their demand for raw material
inputs for manufacturing of coffee has made the business very importantly. The enabling
policy environment prevailing in Ethiopia, which is important factor to initiate this project.
Besides the suitable climate of Ethiopia coffee cultivation:

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This project has a distinct comparative advantage from the very beginning by adopting a
modern processing machine, and market opportunities to the coffee growers.
There is a quality and huge supply market for wet coffee processing around the proposed
project area. The Benefit cost, which is included in the financial feasibility section of this
plan. This has helped the promoter to choose wet coffee production industry, which have a
vast market worldwide. The establishment of ECX and its trade facilitation was also another
factor we looked at. Different articles on the production of wet coffee were used as a
reference while writing this Business plan.
3.4 The Future Expectations of Ethiopian coffee
A. Opportunities
 The country has suitable altitude, ample rainfall, optimum temperatures, appropriate
planting materials, low labor costs and fertile soil.
 The country can sustainably produce and International Coffee Organization supply
fine specialty coffee, with potential of producing all coffee types of the various world
coffee growing origins.
 Grounds for optimism, Strong potential to increase supply capacity/yields (transfer of
technology)
 Promote value addition
 Stimulate local consumption: Ethiopia is not only the birthplace, an important
producer, and a leading exporter of Arabica coffee, but also a heavy consumer.
 Ethiopians are the highest coffee consumers in Africa International Coffee
Organization Africa.
 Coffee is strongly ingrained in Ethiopian culture (“coffee ceremony”).
B. Challenges
Structural challenges:

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 Lack of competitiveness
 Productivity ;
 Poor access to market & long and weak supply chain;
 Lack of infrastructure;
 Inadequate access to services, particularly financial services, risk management etc.
 Low value addition; and International Coffee Organization
 Low value addition; and
 Inadequate technology transfer & research (coffee genome, conservation,
biodiversity etc).
3.5. Support for the project
There are some supportive roles expected from the Regional states, zone and wereda
administrative organs in ensuring smooth and effective implementation as well as long-run
sustainability of the anticipated project. Particularly important roles for the states are
establishing and adjudicating industry requirements and right of occupancy as well as
associated contractual processes and regulatory functions with farmers. This includes,
among and subsequent implementation of the project, maintaining a supportive legal
framework, providing relevant technical and organizational supports towards facilitating
effective and smooth implementation of the project.
MoFED, 2006: Building on progress: A plan for Accelerated and Sustained Development to
End poverty (PASDEP) (2005/062009/10) volume1: Main Ministry of Finance and
Economic Development (MoFED): September 2006 Addis Ababa. The overall goal of the
project is to contribute towards the economic development of Ethiopia through using the
existing investment opportunities in the Country and taking advantage of the expressed
policy incentives that emphasize on greater agricultural commercialization and enhancing
private sector development.
The project’s contribution to the economy, upon realization of a full production level within
five years; include creation of jobs and permanent employment opportunities to the local
people as well as bringing considerable annual income in foreign currency and tax revenues;

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part of the letter particularly involves access and use of data/information and technical
advice from government institutions and line bureaus / agencies.
3.6. Goal and Objective
3.6.1. Overall goal
The overall goal of the project is to contribute towards the economic development of
Ethiopia through using the existing investment opportunities in the Country and taking
advantage of the expressed policy incentives that emphasize on greater commercialization of
agriculture and enhancing private sector development.
The project’s contribution to the economy, upon realization of a full production level within
five to seven years: include creation of jobs and permanent employment opportunities to the
local people as well as brining considerable annual income in hard currency and tax
revenues: part of which will be reinvested in the immediate community infrastructure.
3.6.2. Objectives of the project
The main objective of this project is Purchasing red cherry directly from producers, to
process and supply high quality and quantity coffee products to central and global markets
like USA, Japan, Europe etc.... Through this process, this project is aimed to improve the
standard of coffee products.
The specific objectives of the project are:

 The production of wet coffee in a socially and environmentally acceptable manner:
 To make coffee traceable through transparent and accountable processing:
 To raise the standard and quality of coffee through collaboration with regional
concerned bodies( Oromia’s government )
 Reduce the environmental impact of our operation by devised methods of Modern
coffee processing machine.
4. STUDY OF THE PROJECT AREA
4.1. Descriptions of the area

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Hambela Wamana is one of the woreda`s in West Guji zone, Oromia Region of Ethiopia. The
project is planned to be established in T/Damu PA. The administrative center of Hambela
Wamana is Dimtu. Hambela Wamana is located in 458Km from capital City of Ethiopia, Addis
Ababa in southern part of oromia and 67 Km from zonal capital city Bule Hora to the North
direction and 27 km from main road Asphalt to the East direction. The 2007 national census
reported a total population for this woreda of 70,365 of whom 35,032 were men and women
35,333 were women; 3,502 or 4.91% of its population were dwellers. The majority of the
inhabitants said they were Protestant with 76.47% of the population reporting they observed b/n
502 ＇ 29 ＂ -5058 ＇ 24 ＂ northing lattés beliefs, 4.09% practiced Ethiopian Orthodox Christianity and
1.72% were Muslim.
The project site is far 3.5km south west away from T/Damu PA. The project site is bounded from
west and East direction by Ato Hirbaye Gobu, from South by Badey River and from North by
Roads. Hambela Wamana wereda is one of the known and major sources for the production of
best known test coffee. The site area is ideal and more selective for such coffee processing
industry at easily accessible distance for collection of wet coffee cherry from farmers.
The proposed project is planned to be established on o.6 hectares of land. During the
establishment of the project, different construction will be undertaken for the sake of better
functioning and management of the project. The proposed constructions are warehouse, storage
for products and inputs, and offices according to proposed plan. At least 2(two) deep ponds will
be prepared for solid and liquid waste management purpose and recycling system could be used.
This project is planned to create job opportunity for more than 11 skilled and unskilled permanent
and 120 daily labors workers especially for those who are living surrounding and locality of the
project area. The recommended crops products will be supplied to local and central market.
Socio Economic Activities of the Area

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About 90% of the population depends on subsistence agriculture and cash crop production. The
majority of the surrounding area people of the projects area are farmers relaying on the coffee and
other agricultural activities
4.2. Reasons for preference of this project
The reasons for selection of the investment include:
 Availability of raw materials (red cherry) with good combinations of topography,

climate and environmental characteristics that allow optimal production of these
crops:
 The project is going to be established in the area that is surrounded and dominated by
the coffee growers.
 Minimal requirements for infrastructure development because of the topography and
visible prospects of on-going development initiatives in the area including Health,
Road, Electric power, telecommunication network, and other basic infrastructures:
 No visible adverse effects on the community and settlement patterns in the project
area:
 Accessibility of the area by all weather roads ease of making choices between
marketing options (e.g. transporting to the major terminal market in Awassa and
Addis Ababa ECX: and
 Regarding Profitability of the business Land ownership
The project is planned to be established on than 0.6 hac of land, which wand surrounding
community have no problems to safe drinking water specifically in the project area. The
Government and others concerned bodies has established different safe water generating
schemes such as hand dug well, hand pump, and developing spring water to alleviate the
further problems.
5. SOCIO-ECONOMIC BENEFIT

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5.1. Socio-economic benefit for the society
The socio-economic impact of the project is expected to be positive, as the operational area
is devoid of major settlements, precluding any potential displacement/ eviction. The positive
impacts are more pronounced in view of the development of an abandoned and uninhabited
rural area, bringing large employment opportunities especially to the community
surrounding of industry.
As the project requires labor for undertaking its operational activities, a number of people
will have the opportunity of being employed in the project. In this regard, the project will
create new employment opportunity for about 11 skilled and unskilled individuals on
permanent basis and for up to 120 and above casual laborers at different operation phase
5.2 Poverty Alleviation
The project will undoubtedly play its in alleviating the existing poverty level through the
creation of employment opportunity, provision of training on the uses of compost
preparation/ or application, and other social benefits for the unemployed youth, women and
the poor sector of the community around the project area.
5.3 Economic Benefit for the community
The creation of substantial direct and indirect employment opportunities with potential for
out-growers will have impact for increasing incomes and skill of the rural community. It
minimizes the burden of local community carrying coffee products to long distance for
market. There will also be good opportunities for out-growers linkages with the surrounding
farmers and the use of the project’s facilities, knowledge and experience, thereby increasing
the economic activities of the in habitants of the area.
5.4 Economic Benefit for the Country
This investment project will have significant socio-economic benefits, both to the local and
national economy of the country at large, and Region and zone in particular in which the
project is to be established.
The specific direct benefits will include:

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 Development of uninhabited part of the country and exploitation of hitherto

abandoned physical resources of the particular area through the establishment of
modern industrialization.
 Supply of a agricultural commodities to the national and export to global markets,
thereby enlarging the domestic basket of food items and contributing to the foreign
exchange balance of the country, both through generation of foreign exchange
revenue, through direct & indirect taxation.
 Upon realization of its full production stage within first year, the project’s economic
contribution to the country’s economy ‘which provide direct employment
opportunities.
 The project will also generate significant tax revenues.
In view of its anticipated commitment to ascertain high standard and quality of its
productions: the project would likely grasp a share among the high value markets in the
ECX. This will apparently influence production and quality standards other producers’
relevance: which in turn improves the country’s production quality standards: and therefore,
enhances its share of export market supplies.
6. GENERAL OVERVIEW OF THE PROJECT
The Planned project
This project is planned to benefit the promoter of the project, local communities in and around the
project area, Region and Country at large by processing and supplying improved and high value
exportable Arabica coffee products to central and global markets to meet and satisfy domestic
consumption and export to earn foreign currency. So that the investor and the country will be
benefited from revenue and value added tax (VAT) taxes.
The project encompasses three major components:
1. Process and supply clean coffee to central and global markets
2. Create employment opportunity to local skilled and unskilled people
3. Supporting and solving the prior problems of the local community
7. THE PLANT

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7.1 The Commodity

Agriculture is the main sources of food and raw material in Ethiopia. It is the major
employment sector as well as generator of foreign currency. Of the exported commodities,
coffee is on the top followed by hides and skin and oil crops.
Coffee grows in the Western, Southern and Eastern parts of the country. The suitable growing
areas fall between an altitude ranges of 1500-1800 masl. The optimum growth temperature is
in between 20-25.50c. And annual mean rainfall requirement is about 1300-1600mm. Well
drained soil having loamy and clay texture with PH of 5-5.5 is highly suitable. It is because of
full filling the above conditions that Oromia Regional State is the major coffee producer in
Ethiopia.
7.2 Technology
Pulping of red cherry is expanding in the coffee growing areas of the country as
demand for washed coffee is rising. Procured red cherry will be pre-graded, sorted out
and pulped in order to separate pulp from the coffee. Pulped coffee is washed and
fermented for 36-64 hours. To remove sticking material, fermented coffee will be
repeatedly washed. During this process, broken coffee and floating particles will be
separated using water forces. Coffee passed through fermentation and washing stages
is spread on skin drying meshed bed. At this stage, poor quality coffee is transferred to
drying beds where it is exposed to sunshine for 3 days.
In the last stage of drying, coffee is spread under sunshine covered by polythene sheets
to protect against direct heart etc. After testing for optimum level of moisture content
(10.5% to 11.5%) the coffee will be stored and packed.
7.3 Production Plan
The wet coffee-treating machine that is available in the market has a capacity of
pulping 3 ton/hour. Because of seasonality in coffee harvest, the coffee pulping period
in a year is relatively short. Taking this into account, annual working period of 90 days
is considered. Thus, the input out plan is given in table 1 here under:
8. ENVIRONMENTAL IMPACT ASSESSMENT

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This project is designed to Process and promote the production of high value wet coffee by
maintaining the existing environmental system. It also intends to protect the environment
from the potential negative impacts. Thus, in order to establish environmental friendly
processing, the new project site has been thoroughly scrutinized particularly for its
vegetation cover and agro ecology to identify the expected negative impacts of the project.
The major expected threats in red cherry processing are the noise during hulling process and
some of water pollution may occur. However, the designed project area 3-4 apart from other
industries in all direction. Therefore, the environmental management plan realized and
minimized the miss balance effect on the project area of agro-ecology. The by-product of
coffee pulp disposed on coffee farm for the use of compost by supplying to the individual
small holder coffee farmers. Furthermore, the project will apply integrated coffee processing
waste management, which is more environmentally friend form of west control rather than
simply disposed to the project surrounding area.
9. MARKET STUDY
9.1. General Review
Coffee products in Ethiopia are suppliers, cooperatives and individual (private sectors) coffee
producers concentrated in the southern and western regions of Kefa, Guji, Sidamo, Ilubabor,
Gamo, Gofa, Welega, and Harerge. The current size of the coffee export market is the country
shares the larger one from others commodities. Production has tripled in the last few years.
There is a study conducted forecasting this sector to grow by three fold. The creation of ECX
(Ethiopian commodity Exchange) and its warehouse facilities plus congregation of buyers and
sellers under one roof has brought conducive environment for the market. Therefore, coffee
market is well organized and it has a good track no need of market study.
9.2. Demand Analysis
According to federal trade minster, 2011 annual report Arabica coffee is the leading export
crop by production, coverage and trade in the world. The area under production in the world is
still in constant growth as demand of the crop for coffee beverage consumption is increasing.
In Ethiopia, the production supply of coffee was reached 3.73% (160,000 tons) in 2011 in
volume in the world market and 3% export from world export share, which ranks 5 th and 12th
respectively. Therefore, no need of detail demands study.
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10. FINANCIAL BUDGET OF THE INVESTEMENT
A. Total Investment cost
The total Investment cost of the proposed agricultural enterprise is estimated at Birr
1,109,880. The fixed investment component is estimated at about Birr 897,880 and the pre-
production expenditure is 122,500. The following table briefly summarizes the total
investment cost of the project.
Table3: Summary of Investment costs Plan (in Birr)
Investment costs Preparation Operation phase Total

phase
Fixed Investment cost 897,380 0 897,380
Land rent/leased (pre-production) 212,500 0 212,500
Total Investment cost 1,109.880 0 1,109.880
B. Operating cost
The total operating cost is estimated at Birr 137,957,542 for 10 years project life. Operating
costs are recorded on a year basis. It is divided into overheads (fixed costs) and variable costs.
The fixed cost component is estimated at about Birr 7, 75,407 and Birr 162,919,279 is variable
cost. Summary of operating costs are presented on the following table.
Table 4: Summary of operating costs (in Birr)
Item Operating costs Preparation Operation phase

1st year (yr1 to 10)
phase
1 Fuel & lubricants 0 29,657 367,151
2 Stationary 0 8,500 96,900
3 Labor operation 0 188,802 2,470,486
4 Red cherry cost 0 8,112,000 121,680,000
5 Transport 0 91,625 1,198,907
6 Maintenance 0 45,540 455,400
Sum 0 8,476,124 126,268,844
7 Fixed cost 0 8,357,324 118,314,872
8 Salary& wage 0 118,800 1,188,000
9 Contingency (5%) 0 118,800 6.569,407
Sum 0 8,594,924 7,757,407
Total operating cost 0 9,024,670 133,829,686

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N.B- The purchasing power of the project/industry is assumed to increase by 5% every year.
 During hulling process, (Cleaning) 15% of Yield /quintal assumed to be broken or will be
out of actual size.
 Investment costs are estimated with a certain margin of errors. To allow physical and
financial contingencies, a percentage of the initial total cost estimate usually between 5
and 15% generally used. For the current project is estimated by using 5% contingencies.
C. Project Status
The promoter of the project is in the process of securing land on lease basis. The required
amount of loan is expected to be obtained shortly; the implementation of the project would
not take more than a year. The industry will start commercial production as immediately
acquired fully license from concerning body.
D. Source of fund
The promoter of the project has planned to finance the project through a long-term loan from
the Development Bank of Ethiopia: and partially from own contribution. The debt equity ratio
is assumed to be 70/30. The following table briefly summarizes the project financing by
source of funds.
Table 5: project Investment cost plan (in Birr)
Description Source of fund

Equity contribution Bank loan Total
Land rent/ lease (pre-production 121,500 0 212.500
charges)
Building& Construction 120,464 242,096 362.500
Processing Machinery and motors 0 304,000 304,000
Office Furniture and Equipment 0 0 44,600
Product drying and storing materials 0 213,000 186.280
Total fixed Investment cost 332,964 759,096 1,109.880
% share 30.00% 70,00% 100%

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11. FINANCIAL AND ECONOMIC ANALYSIS
11.1. Price for input and out put
The prices for input and output are used as of current prices obtained from local and
international market. Price of coffee as is mainly influenced by the export market and
domestic supply of the crop. Current market price of coffee in ECX is Birr 1435-2235/17kg
washed coffee with parchment from the gigging to the last years of the project. Assuming
processing facilities like transportation, labor and other utility price costs, of Birr 1200-
150/17kg washed coffee with parchment is assumed for the project.
11.2. Credit and Borrowing System
The depreciation schedule shows the annual amount of depreciation for all project assets, the
total of which is deducted from the net profit. The straight-line method is employed to
calculate depreciations of the different project assets. Depreciation schedules of the project are
shown in the table below.

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Table 6: Depreciation schedule (Birr)
Description Year 1 Yr-2 Yr-3 Yr-4 Yr-5 Yr-6 Yr-7 Yr-8 Yr-9 Yr-10
Buildings 40,30 40,30 40,30 40,30 40,30 40,30 40,30 40,30 40,30 40,30
Coffee processing 25,00 25,00 25,00 25,00 25,00 25,00 25,00 25,00 25,00 25,000
machine 0 0 0 0 0 0 0 0 0
Generator (20KVA) 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500
Dynamo 500 500 500 500 500 500 500 500 500 500
Motor cycles 2100 2100 2100 2100 2100 2100 2100 2100 2100 2100
Total 75,40 75,40 75,40 75,40 75,40 75,40 75,40 75,40 75,40 75,400
0 0 0 0 0 0 0 0 0

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11.3. Financial and Economic Analysis
Under this section the various Performa financial statements and performance indicators
of the investment project are measured to examine the profitability and soundness of the
envisaged investment. The outcome of the financial analysis includes the following the
following pro forma financial schedules and business results.
i. Cash flow statement

ii. Projected net income statement
iii.Discounted cash flow, NPV& IRR
iv. Break even Analysis
Data concerning all aspects of the project including fixed investment cost. Production, sales
revenue, and financial conditions are provided in the appropriate sections. For the sake of
convenience, these data are organized and annexed as part of the financial analysis section.
11.3.1. The financial condition & assumptions
The financial condition for the project and assumption used in the financial analysis is
described as follows
i. Debt/equity
The proportions of debt and equity are forecasted to be 70/30 respectively for the initial
investment cost.
ii. Loan:
As indicated above the medium-term loan requirement of the project is estimated at Birr
1,154.100. one of the local Banks will proved 70% of the initial investment with annual
interest rate of 10.5% to be repaid on a half yearly basis for a period of 10 years.
iii.Opportunity cost of capital:
The cost of capital is assumed to be 15% for total investment and 20% for equity. The equity
share has a time horizon of 5 years for short NPV calculation.
iv. Corporate Taxes:
Profits are taxed at x a flat rate of 35% of net income.
v. Planning Horizon:
The planning Horizon comprises one year development and 10 years of operation (production
stage). Actual production is scheduled to begin in September 2015.
Page 19
vi. Product & Revenue:

The planned production & Expected Revenue: washed coffee processing industry daily
processing capacity of 780,000 kg red cherry for each year which expected to produce
163800 kg for each year of parchment coffee & 7500kg of floater coffee year annually
during the first to10 year respectively. The production expected to increase. The production
expected to increase. The revenue earned out of the sales of clean and floater coffee grows
from 14,157,529,17,092,235 20,026,942 in year 1 to 3 respectively and 21,534,882 Birr for 4
to 10year respectively.
Table 7: Revenue Determination
Description Production year

st
1 yr 2nd yr 3rd yr 4th -10th years
Red cherry (kg) 624.000 624.000 624.000 624.000
Local primary price/kg 13 16 19 21
Red cherry price (kg) 8,112,000 9,984,000 11,856,000 13,104,000
Parchment coffee (kg) 124,800 124800 124800 124800
ECX price/17kg 1435 1735 2035 2235
Revenue-1 10,534,588 12,736,941 14,938,035 16,407,135
Floater (kg) 6240 6240 6240 6240
ECX price 17kg 750 850 950 1000
Revenue -2 275,294 312,000 348,650 367,000
Total revenue 10,809.88 13,048,941 15,286,685 16,774,135
Conversion = 1.00kg cherry = 20kg clean coffee

2.100kg Red cherry =1kg of floater coffee
vii. Initial working capital:

Page 20
The initial working capital, to be financed as part of the fixed capital structure of the project
is estimated based on the initial stock raw material and other input required to start operation
of the coffee processing.
11.3.2. Cash flow statement and net income statement
The net income statement of the project for the entire period of its operation is computed and
annexed. According to the projected net income statement, the industry will generate more
than a net profit of ETB 1.244million during the first year, 1,420 for the second and Birr 1.6
million from third year operation. The net profit of the enterprise is forecasted to Birr 1.744
million-during the final projection year.
11.3.3 Cash-generating capacity
The cash generating capacity of the project for each period is found to be significant, I,e the
amount of cash generated by the project for each period is computed by adding the
depreciation over the net profit of the business.
11.3.4. Discount cash flow and discount rate
This involves the process of calculating the present value of a future amount, based on time
value of money i,e preference for the present. Accordingly, discounted cost and benefits are
calculated using the relevant opportunity cost of capital 10.5% loan interest rate.
11.3.5. Non-discounted measure of project worth
A. Payback period
The payback period is simply defined as the period (I.e., the number of years) required
recovering the original investment cost. The Business Result obtained reveals that the
investment is financially viable and has a healthy cash flow forecast. The outcome of the
financial analysis reveals that
 The payback period for total investment = 5 years and for Equity = 3 year only.
B. Breakeven Analysis:

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The Breakeven Analysis is shows that first year, the breakeven monthly sale is 315,288 and
for the second year breakeven point is 152.237, and the thrived year breakeven point is
527,389 and for the final year, the monthly breakeven point falls to 144,072.
The breakeven ratio, the ratio of breakeven sales toss planned production for the entire period
is between 0.35 and 0.10 the breakeven ratio of the project is not only low but it also steadily
declines throughout the operation period. This low breakeven ratio means low risk to the
investment: the business has great level of security against unforeseen operational difficulties.
For details see the annexed tables.
11.4. Sensitivity analysis
Risk and Uncertainty
The following risks and uncertain incidents that might affect the project could occur during
operating period of the project.
 If the global economic crisis and inflationist prolonged and intensified, it will
affect the project cost benefits analysis. Besides, it may also affect the production
cost and both inland and offshore markets.
 Unforeseen natural climatic hazards such as crop failure due to draught or long
period of rain will be a problem of wet coffee processing.
12. ORGANIZATION AND MANAGEMENT
The complexity of such a project with environmental challenges is certain to require rational
manpower and resource allocations. The administrative and the technical sections manage
and lead the overall project operations. Furthermore, seasonal workers that account to reach
over 60 per day for the 3 month will be employed. With this under consideration, the
following list of permanent staff is designated. The list, however, should be taken as a check
list which may serve as a base line for the years to come in which more work forces will be
needed in expanded endeavors of Ato Adane Nuguse washed coffee Industry in the long run.
The manpower and its expenditures are listed hallow.
Table 8: Salary and wage

Page 22
Description No Qty U /payment T /payment

Manager No 1 3000 100 36,000
Secretary No 1 1000 1000 12,000
Industry man No 1 2000 2000 24,000
Scale man No 2 2000 4000 48,000
Time keeper/capo No 1 500 5000 6000
Accountant & cashier No 1 2500 2500 30000
Store man No 1 1500 1500 14400
Driver No 1 1200 1200 14400
Guards No 2 1200 2400 9600
Sub- total 400 118,800
13. IMPLEMENTATION SCHDULE
It is expected that total time of about 9 months will be taken from the date of approval of the
scheme for complete implementation. Breakup of the activities and relative time for each of
them is shown in the table below. The activities indicated in the table consist of different
tasks to make the project in to operation. This implies that to start operation on time, approval
of the project by oromia investment board is very crucial.
14. CONCLUSION
As shown and deeply discussed in this document, the project is expected to be financially
profitable and will be conducted in environmental friendly way. In addition to creating both
permanent and temporary employment opportunities for local communities and some others
professionals, it also will generate income for the government in terms of maximizing income
tax in a considerable manner considerably

Page 23
15.ANNEX
Annex 1: Buildings & Constriction
No Description Unit Qty unit cost Total cost

(Birr) (Birr)
2
1 Office complex m 32 1,500 48,000
2 warehouse M2 72 1,00 72,000
3 staff Residence M2 50 1,5000 75,000
4 water reservoir tanker M2 30 2500 75,000
5 Cherry hopper & motor M2 25 2500 37,500
house
6 washing channel & M2 20 1500 30,000
fermentation tank
7 Sub Total 337,500
No Description Unit Qty unit cost total cost

1 3-disc Agade pre-grader coffee no 1 125,000 125,000
processing machine
2 Generator (20KVA) no 1 90,000 90,000
3 Motor cycles no 1 42000 42000
4 Dynamo no 1 30,000 30,000
5 Moisture tester no 1 17,000 17,000
Sub Total 304,000 304,000
Annex 2 Machinery
Annex 3: Office Furniture and Equipment’s
No Description Unit Qty unit cost Total cost

1 Table no 2 2,000 4,000
2 Chair no 14 500 2,000

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3 Shelf no 11 500 2,500

4 cash box no 11 2,500 3,500
5 Calculator no 13 3,500 600
6 computer with printer no 1 200 32,000
Total 32,000 44,600
Annex: 4 Production drying, storing and transporting equipment and materials
No Description Unit Qty unit cost year 1

1 Drying treys no 200 120 24,000
2 Parchment drying bed no 30 296 8,880
3 Complete Drying bed no 150 296 44,400
4 Bedding suck rolled 4 12000 36,500
5 Mesh wire rolled 22 400 9,000
6 Polyethylene sheet rolled 7 2500 17,500
(40mmm)
7 Bagging sucke “ 738 50 36,900
8 Electrical wire “ 10 800 8000
(rolled)
9 Plastic hose m 50 10 500
10 Fire extinguisher pcs 3 2,000 600
Sub total 186,280

Page 25

Page 26
Description year 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
Investment cost 1,109.880
operating costs 0 9,024,670 11,055.416 13,048,705 14,385,842 14,385,842 14,385,842 14,385,842 14,385,842 14,385,842 14,385,842
Total cost 1,109.880 9,024,670 11,055.416 13,048.705 14,385,842 14,385,842 14,385,842 14,385,842 14,385,842 14,385,842 14,385,842
Sales /Revenue 0 10,809.882 13.048.941 15,286,685 16,774,135 16,774,135 16,774,135 16,774,13 16,774,135 16,774,135 16,774,135
5
net Revenue 1,109.880 1,785,212 1,993,525 2,237,980 2,388.293 2,388.293 2,388.293 2,388.293 2,388.293 2,388.293 2,388.293
discount factor 1 1,105 1,221 1,349 1,491 1,448 1,82 2,012 2,223 2,456 2,714
(10.5%)(1+D)
PVC 1,109.880 8,167.122 9,054, 9,672,872 9,648,452 8,729,273 7,904,309 7,150,021 6,471,364 5,857,428 5,300.6
395 05
PVB 1 97826 10687 11331864 11250258 10178480 9216558 8337045 754520 6829860 618059
99 093 5
PVC=pvc=79,065, PVB=
721
∑ pvb=91,340,172
NPV=pvb-
pvc=12,274,4451
B/C ratio =
PVB/PVC=1,
16

Page 27
Annex 5: projected Net Income statement of the project
Working years of the project

Description year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
sales Revenue
washed coffee with 10,534,588 12,736,941 14,938.035 16,407,135 16,407,135 16,407,135 16,407,135 16,407,135 16,407,135 16,407,135
parchment
Washed coffee floater 275294 312000 348650 367000 367000 367000 367000 367000 367000 367000
Total sales 10,809,882 13,048,941 15,286,685 16,774.135 16,774.135 16,774.135 16,774.135 16,774.135 16,774.135 16,774.135
Variables cost
Fuel & lubricants 29,657 31,733 34,588 38.739 38.739 38.739 38.739 38.739 38.739 38.739
stationary 8,500 9,400 9,700 9.90 9.90 9.90 9.90 9.90 9.90 9.90
Labor operation 188,802 244.201 244,201 258,416 258,416 258,416 258,416 258,416 258,416 258,416
Red cherry cost 8,112,000 11,856.000 11,856.000 13,104.000 13,104.000 13,104.000 13,104.000 13,104.000 13,104.000 13,104.000
Transport 91,625 118,509 118.509 125,407 125,407 125,407 125,407 125,407 125,407 125,407
Maintenance 45540 45540 45540 45540 45540 45540 45540 45540 45540 45540
Total variables cost 8,476,124 12,308,538 12,308,538 13,582,002 13,582,002 13,582,002 13,582,002 13,582,002 13,582,002 13,582,002
Gross profit 2,333,758 2,978,147 2,978.147 3,192,133 3,192,133 3,192,133 3,192,133 3,192,133 3,192,133 3,192,133
Operating Expenses
Fixed costs (salary & wage) 118,800 118,800 118.800 118.800 118.800 118.800 118.800 118.800 118.800 118.800
Depreciation 75,400 75,400 75.400 75,400 75,400 75,400 75,400 75,400 75,400 75,400
Total Operating expenses 194,200 194,200 194.200 194,20 194,20 194,20 194,20 194,20 194,20 194,20
Operating Income 2,139,558 2,444.573 2,783.947 2,997,933 2,997,933 2,997,933 2,997,933 2,997,933 2,997,933 2,997,933
Interest on loan 224,653,59 256,680.17 292.314.44 314,78297 314,78297 314,78297 314,78297 314,78297 314,78297 314,78297
Income (Loss) Before Taxes 1,914,904 2,187,893 2,491,633 2,683,150 2,683,150 2,683,150 2,683,150 2,683,150 2,683,150 2,683,150
Income Taxes 670,217 765,762 872,071 939,103 939,103 939,103 939,103 939,103 939,103 939,103
Net Income (Loss) 1,244,688 1,422,130 1,619,561 1,744,048 1,744,048 1,744,048 1,744,048 1,744,048 1,744,048 1,744,048
Cumulative Net income 1,78,809 3,160,939 4,780,501 6,524,548 8,268,596 10.012.643 11.756,691 13,500,738 15,244,786 16,988,833
(loss)

Page 28

Page 29
TABLE OF CONTENTS
Title Page
1. Executive summary ………………………………………………………………

2. Introduction ………………………………………………………………………..,
3. Background Information …………………………………………………………
3.1 Coffee in Ethiopian Economy ………………………………………………….
3.2 Current policy for the Development of Coffee Sector ………………………..
3.3 Justification of the Proposed Project ………………………………………….
3.4 The Future Expectation of Ethiopian Coffee ………………………………….
3.5 Support for the Project ………………………………………………………..
3.6 Goal and Objectives …………………………………………………………….
4. Study of the Project Area …………………………………………………………
4.1 Description of the Project Area ………………………………………………..
4.2 Reasons for Preference of this Project ………………………………………
5. Socio- Economic Benefit …………………………………………………………..
5.1 Socio- economic benefit for the society ……………………………………….
5.2 Poverty Alleviation ……………………………………………………………..
5.3 Economic Benefit for the Community ………………………………………….
5.4 Economic Benefit for the Country ………………………………………………
6. General Overview of the Project …………………………………………………….
6.1 The Planed Project ………………………………………………………………
7. The Plant ……………………………………………………………………………..
7.1 The Commodity ………………………………………………………………….
7.2 Wet Coffee Pulping Technology ………………………………………………..
7.3 Production Plan ………………………………………………………………….
8. Environmental Impact Assessment ………………………………………………….
9. Market Study ………………………………………………………………………
9.1 General Review ………………………………………………………………….
Page 30
9.2 Demand Analysis ………………………………………………………………..

10. Financial Budget of the Project ……………………………………………………
11. Financial and Economic Analysis ………………………………………………………..
11.1 Price for Inputs and Outputs ……………………………………………
11.2 Credit and Borrowing System ……………………………………………..
12. The Financial Statement ……………………………………………………………….
12.1 The Financial Statement …………………………………………………………
12.2 Cash flow statement and Income statement …………………………………….
12.3 Cash generating capacity ……………………………………………………….
12.4 Discount cash flow and discount rate ……………………………………………
12.5 Non- discounted measure of project worth ………………………………………
12.6 Sensitivity analysis ……………………………………………………………….
13. Organization and Management ………………………………………………………….
14. Conclusion ………………………………………………………………………………..
15. Annex …………………………………………………………………………………….

Page 31
Project Proposal for
Wet Coffee Processing

Industry
Promoter: Ato Adane Niguse

Project Location:
 Oromia Region,
 West Guji Zone,
 Demtu Hambela District,
 T/ Damu Kebele
Prepared by: Habtamu Consultancy Service for Business & Investment PLC.
Contact: Mobile 09 16 18 94 65/09 49 26 11 08
Email habtamuyifraw@gmail.com
Sep, 2010

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Ethiopia, Abaya

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Business Plan Wet Coffee Adane Niguse

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Business Plan Wet Coffee Adane Niguse

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Adane Niguse Wet Coffee Processing Industry

Habtamu Consultancy Service for Business & Investment PLC.

Agriculture is the main stay of Ethiopian`s economy providing employment opportunities to

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3. BACKGROUND AND OBJECTVES

3.1. Coffee in Ethiopia Economy

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Year 2006 2007 2008 2009 2010 1998 to 22

3.2. Current policy for the development of coffee sector

3.2.1. Increased productivity

The number of extension workers is planned to be increased with an average of three

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3.2.2. Improve coffee quality

 Implementing free market policy:

3.3 Justification of the Proposed Project

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3.4 The Future Expectations of Ethiopian coffee

planting materials, low labor costs and fertile soil.

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3.5. Support for the project

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3.6. Goal and Objective

3.6.1. Overall goal

3.6.2. Objectives of the project

The specific objectives of the project are:

4. STUDY OF THE PROJECT AREA

4.1. Descriptions of the area

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Socio Economic Activities of the Area

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4.2. Reasons for preference of this project

The reasons for selection of the investment include:

 Availability of raw materials (red cherry) with good combinations of topography,

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5.1. Socio-economic benefit for the society

5.2 Poverty Alleviation

5.3 Economic Benefit for the community

5.4 Economic Benefit for the Country

The specific direct benefits will include:

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 Development of uninhabited part of the country and exploitation of hitherto

6. GENERAL OVERVIEW OF THE PROJECT

The Planned project

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7.1 The Commodity

7.3 Production Plan

8. ENVIRONMENTAL IMPACT ASSESSMENT

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9.1. General Review

9.2. Demand Analysis

10. FINANCIAL BUDGET OF THE INVESTEMENT

A. Total Investment cost

Table3: Summary of Investment costs Plan (in Birr)

Investment costs Preparation Operation phase Total

Table 4: Summary of operating costs (in Birr)

Item Operating costs Preparation Operation phase

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Table 5: project Investment cost plan (in Birr)

Description Source of fund

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11. FINANCIAL AND ECONOMIC ANALYSIS

11.1. Price for input and out put

11.2. Credit and Borrowing System

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