GAGE UNIVERSITY COLLEGE DEPARTMENT OF MASTER OF

BUSINESS ADMINISTROTAR
ASSIGNMENT OF ADVANCED PROJCET MANAGEMENT &
ANALYSIS
ASSIGNMENT 1
Section 2
1ST YEAR SECONDE SEMESTER
Prepared by group of student

R/NO NAME ID NO

1 ASHENAFI BENTI AYANO MBAR/1433/2013

2 FIKIRTE DESSIE TEMESEGEN MBAR/554/2013
3 HARGEWOYEN HAILE KEFO MBAR/553/2013
4 SAMUEL SHEWANGIZAW WOLDE MBAR/548/2013
5 WONDIMU ASEFA WLDESENBET MBAR/715/2013

Submission date:
June 06/09/2021 Submission to
By: Berhanu G. (Ass. Prof., Ph.D. candidate)
PROJECT TITLE:-FEASIBLITY STUDY FOR PRODUCTION OF
VEGETABLES AND FRUITS

PROJECTOWNER:-INTOTO PARKE

ADDRESS: - Addis Ababa, Sub-city: Gullele,

Woreda: - , House No……..

Phone: - ……………………

PROJECT AREA: - ADDIS ABABA, GULLELE SUB-CITY INTOTO PARK

DATE: June, 2021G.C.

 1. Executive Summary
Contemporary Business ideas should rely on the development of the innovative concept to
guarantee long term relationships with the customers and providing them value and satisfaction
to retain them. This study has been conducted with an aim of examining the feasibility to set up a
Feasibility study for production of vegetables and fruits concept Addis Ababa, Gullele sub-city
Intoto Park. It uses survey method and regression analysis for the purpose of testing and a
sample size of almost 5,005,524 According to World Population Review people in Addis Ababa
was taken and according to the results, while discussing on previews work in order to have a
clear understanding on other author’s opinions.
The project is technically feasible, financially and commercially viable as well as socially and
economically acceptable. Hence, the project is worth implementing

KEY INFORMATION HIGHLIGHTS

KEY INFORMATION HIGHLIGHTS

PROJECT OWNER INTOTO PARK
PROJECT TITLE Vegetables production and Fruits
LAND REQUIREMENT 100,000 M2
PROJECT AREA Addis Ababa, Gullele sub-city Intoto Park
PRODUCTS TO BE MANUFACTURED
PRODUCTS TO BE MANUFACTURED Vegetables and Fruits
MARKET Domestic and International
COST OF THE PROJECT
PROJECT LIFE 5 YEARS
FINANCIAL VIABILITY ( AT 10% DISCOUNT RATE )
NPV (NET PRESENT VALUE) 8,249,752.739 BIRR

IRR ( Internal Rate of Return ) 21.98%

PBP ( PAY BACK PERIOD) 3 year and 3 months

ANALYSIS RESULT

Table 1: KEY INFORMATION HIGHLIGHT

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Table of Contents
1. Executive Summary ............................................................................................................................. ii
List figure and tables .............................................................................................................................. iii
2 Introduction .......................................................................................................................................... v
2.1 General Background ...................................................................................................................... v
2 Project Objectives................................................................................................................................. 1
2.1 General Objective .......................................................................................................................... 1
2.2 Specific objective........................................................................................................................... 1
2.3 Project description ......................................................................................................................... 1
2.4 Project Rationale............................................................................................................................ 1
2.5 The significance of the project ....................................................................................................... 2
2.6 Project Location ............................................................................................................................. 2
3 The market Study ................................................................................................................................. 3
3.1 Market Analysis and marketing strategy ......................................................................................... 3
3.2 The Demand-Supply Gap ............................................................................................................... 3
3.4 Future market or Demand of fruits and vegetables .......................................................................... 4
3.5 Target customers............................................................................................................................ 4
3.6 Marketing promotion and strategy .................................................................................................. 4
3.7 Competition ................................................................................................................................... 5
3.8 The project facilities and Services plan .......................................................................................... 5
4 .Technical Feasibility ............................................................................................................................ 7
4.1 Description of the project product .................................................................................................. 7
4.1.1 Land Use Plan ......................................................................................................................... 7
4.2 Construction work and Technology ................................................................................................ 7
4.2.1 Construction schedule ............................................................................................................. 7
4.2.2 Architectural Design & Layout ................................................................................................ 8
4.2.3 Structural design ..................................................................................................................... 8
4.2.4 Reinforced concrete ................................................................................................................ 8
4.2.5 Foundation Design .................................................................................................................. 8
4.2.6 Construction Plan and process ................................................................................................. 9

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 4.3 Utilities .......................................................................................................................................... 9
5. Engineering and civil works............................................................................................................... 10
5.1 Land, Building and Civil Works ................................................................................................... 10
5.2 Manpower and training requirement ............................................................................................. 11
5.2.1 Manpower requirement ......................................................................................................... 11
5.2.2 Labor Availability ................................................................................................................. 11
5.3 Project implementation ................................................................................................................ 12
5.4 Organizational Structure .............................................................................................................. 12
5.4.1 Organization and management .............................................................................................. 12
5.6 Financial Requirement and Analysis ............................................................................................ 14
6. Financial analysis .............................................................................................................................. 17
6.1 Repair and Maintenance Cost ....................................................................................................... 17
6.2 Depreciation and Amortization .................................................................................................... 17
6.3 Total Revenue.............................................................................................................................. 17
6.4 Discounted Payback Period .......................................................................................................... 18
6.5 Cash flow .................................................................................................................................... 18
6.6 Benefit cost ratio .......................................................................................................................... 18
6.7 Account Rate of Return (ARR) ......................................................... Error! Bookmark not defined.
6.8 .Net present value ........................................................................................................................ 19
6.9 .SWOT analysis Ethiopian fruit and vegetable business ................................................................ 19
7. Conclusions and Recommendations ................................................................................................... 20
Conclusion ........................................................................................................................................ 20
Recommendations ............................................................................................................................. 20
References............................................................................................................................................. 21

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List figure and tables
TABLE 1: KEY INFORMATION HIGHLIGHT .......................................................................... II
TABLE 2: SOURCE: ETHIOPIA CUSTOMS AUTHORITY .....................................................................3

TABLE 3: FUTURE DEMAND...........................................................................................................4

TABLE 4: LAND UTILIZATION PLAN ...............................................................................................7
TABLE 5: UTILITIES ......................................................................................................................9
TABLE 6: LIST OF BUILDING AND CIVIL WORKS AND THEIR COST .................................................. 10
TABLE 7: MANPOWER REQUIREMENT AND ANNUAL LABOR COST ............................................... 11
TABLE 8: PROJECT IMPLEMENTATION SCHEDULE ......................................................................... 12
TABLE 9 OR FIGURE 1: ORGANIZATIONAL STRUCTURE ................................................................. 14
TABLE 10A. LAND, BUILDING & CONSTRUCTION........................................................................ 15
TABLE 11:B. BUILDING MACHINERIES AND EQUIPMENT’S .......................................................... 15
TABLE 12:C. VEHICLE ................................................................................................................ 15
TABLE 13: D. OFFICE EQUIPMENT’S ............................................................................................ 15
TABLE 14: OPERATING EXPENSES............................................................................................... 16
TABLE 15: PRE-SERVICE EXPENSES ............................................................................................ 16
TABLE 16: SUMMARY OF TOTAL INITIAL INVESTMENT COST ........................................................ 16
TABLE 17: FINANCIAL ANALYSIS ................................................................................................ 17
TABLE 18: REPAIR AND MAINTENANCE COST ............................................................................. 17
TABLE 19: SWOT ANALYSIS ...................................................................................................... 19

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2 Introduction
2.1 General Background

Horticultural crops can be differentiated as fruit (permanent crops) and vegetables (short season
crops). Accordingly, permanent crops are long term crops that occupy the field planted for a long
period of time and largely harvested every year and do not have to be replanted for several years
after each harvest. These include tree crops such as coffee, Enset, Chat, oranges, Mangoes,
Bananas, papaya, Avocados…etc. The trees that yield fruits like orange, Mangoes, Papayas, and
others are known as fruit trees (CSA, 2001/02 ).

More than 47 thousand hectares of land is under fruit crops in Ethiopia. Bananas contributed
about 60.56% of the fruit crop area followed by Mangoes that contributed 12.61% of the area.
Nearly 3.5 million quintals of fruits were produced in the country. Bananas, papaya, mangoes,
and orange took up 55.32%, 12.53%, 12.78% and 8.35% of the fruit production, respectively
(CSA, 2008).

On average more than 2,399,566 tons of vegetables and fruits are produced by public and private
commercial farms, this is estimated to be less than 2 percent of the total crop production.
According to recent information obtained from the Central Statistics Authority, the total area
under fruits & vegetables is about 12,576 hectares in 2011.

Ethiopia is one of the developing countries and around 85% of the total population depends on
agriculture most of the agricultural practice is rain fed crop production. However, due to the
backward method of farming, unreliable rainfall, including population and drought, the nation
faced a series of food shortage. These food shortages were followed by severing famines that
resulted in the loss of the lives of millions of citizens.

Nowadays, the implementation of small and medium scale irrigation scheme is being given
priority in the water sector development strategy of Ethiopia. These are the reasons where the
government provided farmland in a different part of the country including proposed area exists in
Addis Ababa, Gullele sub-city Intoto Park

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2 Project Objectives

2.1 General Objective

The major goal of this project is to contribute towards the growth of the Agricultural sector. Its
specific objectives include the following.

2.2 Specific objective

 To construct and develop quality and quantity product that enable to provide standard goods
to consumer.
 To undertake trading and other refuted business activities that enable to generate a reasonable
to the invested capital.
 To develop modern business center that would provide quality product on standard.
 To create employment opportunities.
 Contribute towards the eradication of poverty.
 To establish economically viable, socially acceptable and environmentally friend farm.

2.3 Project description

Horticulture covers a wide range of products which can be grouped into vegetables, herbs,
mushroom, and flowers. The Addis Ababa, Gullele sub-city Intoto Park has great potential and
suitable natural resources for the production of these groups of horticultural crops. In fact, this
project refers to only essential fruits & vegetable production which includes mango, papaya,
tomato, and onion. These products can be supplied as green and fresh, chilled or frozen and
packed depending on the market location and requirement. Combining different kinds of fruit &
vegetable production create a better opportunity for crop rotational practices and give the
advantage of utilizing common faculties such as washing, cleaning cooling and storage facilities.
Plus marketing fruits & vegetables facilitate an increase in marketable volume by attracting more
customers.

2.4 Project Rationale

Agriculture is the cornerstone of the development policy of the Government of Ethiopia.
According to the Rural Development Policy and Strategy document, the basic ingredient and
resource the country has for agricultural development is the abundant land and labor. Most of the
western lowlands are endowed with water resources are virgin and fertile. Up to recently, the
areas were not developed due to lack of capital and technology.

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Therefore, there is a strong commitment from the government to make these fertile lands
available for investors that have the capital and technology to develop.

The existing promising investment opportunities, the demands of goods needs along with
relatively sound investment support made by the government in such kinds of feasible projects,
compelled the project promoter to initiate the multipurpose oriented business project to be
established. Despite the promising business opportunities, the trend on such kinds of investment
found to not enough.

2.5 The significance of the project

The envisaged project deemed to add to the economic development of the country in general in
specific with following ways:

A. Source of Revenue

As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income
taxes, payroll income tax and VAT are collected from undertaking business activities. Therefore,
the farm will serve as sources of revenue for the city.

B. Employment opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. Hence, this project will hire 50 individuals and more than 65 individual during
every season.

2.6 Project Location

The license area is located in Addis Ababa, Gualala sub-city Intoto. The total area of the project
is 15ha.

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3 The market Study

3.1 Market Analysis and marketing strategy

Fresh and Processed Fruits and vegetables have a large domestic market in Ethiopia,
significantly higher than the exported volumes. The size of the Ethiopian population is currently
estimated at about 118,077,060 according Worldometer review. This is a strong indication of the
existence of large potential demand for fresh fruit and vegetable crops in the country. The other
customer of Ethiopian fresh fruits and vegetables is processing plants, i.e., tomato processing
plants and vegetable canning factories which require tomato and various types of vegetables for
processing. The demand for fruit on the local market is high. This is a strong indication of the
existence of investment opportunities in fruit supply for the local market Ethiopia exports fresh
fruits and vegetables to the international markets. For these Ethiopian products during a
particular period and a great volume. Therefore there is a strong business image for vegetables
and fruit markets.

3.2 The Demand-Supply Gap

There has been a significant growth in the number of local and international trades across the
country. This increase is mainly associated with the stimulation of economic activist and partly
due to an increase in the demand of fruit and vegetable production. Even though there is a lack of
quantitative estimates that depict the actual demand and also the annual growth rate commercial
facilities are scarce in the region. As a result there is a large gap between the developed and that
of the supply for fruit and vegetable production hence this project would not face any problem of
demand scarcity for it market and it would provide good goods to customers.

The price of fruits and vegetables is volatile and seasonal. Generally, fruits and vegetables are
much expensive in rainy seasons. However, even in the rainy seasons the average price of fruits
and vegetables at major towns is estimated on average at birr 30 and 25 per kg respectively. It is
based on cost and competitors price.

2010 2011 2012

Tomato 951,920Kg 1,509,352 Kg 1,558,240 Kg
Mixtures 339,039 Kg 980,419 Kg 1,237,883 Kg

Table 2: source: Ethiopia customs Authority

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3.4 Future market or Demand of fruits and vegetables
The future demand for fruits and vegetables is promising due to two main factors. First, an
increase in population in general and urbanization, in particular, is expected to amplify the
domestic consumption of fruits and vegetables. At the same time, an increase in income
inevitably improves the per capita consumption of fruits and vegetables in the future.
Consequently, with a conservative growth rate of 3% per annum, the future demand for
vegetables is forecasted as shown below.

Year Projected Demand (qts)

2014 116,291
2015 119,780
2016 123,373
2017 127,074
2018 130,886
2019 134,698
2020 139,198

Table 3: future demand

3.5 Target customers

The target customers of this envisaged project include:-

 The surrounding community

 District ,regional and federal government
 Agricultural research institutes
 Agricultural technology and equipment suppliers
 Ginning factories
 Agro-processing factory

3.6 Marketing promotion and strategy

The major marketing strategies to promote the project and gain considerable market share
include:

 Advertising through different means focusing on the existing service and products.
 Promote in association to the key location and nearby business
 Working on sustained promotional work.
 Working on public relations to reach and influence key personas and organization with a
capacity of making decision.

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  Keeping the quality of its service/ product and consistently improving with changing
situations.
 Seasonal discount pricing different others customer centric marketing strategies will be
used by the farm.

3.7 Competition
There are different forms of competition that may face the envisaged Fruit and vegetable farm.
These are price and non-price based competition. Moreover, there are different competitors that
will compete with the project either directly or indirectly. But the Fruit and vegetable farm under
discussion has diversified marketing strategies that could enable it to cope up with the different
competitors in the market. Moreover, it will frequently conduct competitors research which
focuses on, the strength and the weaknesses, the different competitors’ strategies, the techniques
they use in rendering the service, their customer handling methods, and others.

3.8 The project facilities and Services plan

In order to provide Fruit and vegetable farm of a high standard, it has been planned to construct
and develop the infrastructure and facilities that would viable to meet the requirements of an
international standard farm. Accordingly, various facilities will be constructed phase by phase
starting with the most needed ones that are essential to commence the operation of its farm
activities.

Feature of the sector

Agriculture is the backbone of the economy and the most volatile sector mainly owing to its
dependency on rainfall and the associated seasonal shocks that affect productivity. More than
85% of the Ethiopian population depends on agriculture for their livelihood. Within the context
of the Ethiopian economy, the Agriculture sector traditionally includes economic activities such
as crop and livestock production in which the crop sector has been the major driving element.

The Ethiopian economy is basically comprised of smallholder farming as well as medium and
large scale commercial farming. Relatively speaking, commercial farms are not significant in
terms of area cultivated and volume of production, even though the role has slightly increased in
view of the recent phenomena associated with the establishment of flourishing cut flower farms
in the country which is largely dominated by foreign investment.

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Beneficiaries

The country will get a contribution to its national income through domestic consumption and
export. This project will provide employment opportunity to the local population, this will raise
the living standards of the people working in this project, and they also learn the latest
technologies in crop production and also make use of them in their own farm. The regional
government will also generate revenue in the form of land rent will be an additional source of
income on land resources.

Past and Present intervention

Fruit and vegetable production project has a technically strong, knowledgeable and experienced
team to execute the project on time. With the vast knowledge base in agri-business activities, the
company has tangible experience in making this project a success. Conflict in the area may retard
plan of project.

Justification of the project

Ethiopia has huge investment potentials for agricultural development. Currently, investment in
the agriculture sector is found to be more attractive and profitable in diverse sub-sectors ranging
from food products, industrial raw materials to bio-fuel. The agriculture sector accounts for 47%
of the Gross Domestic Products of the country, provides 85% of employment and 90% of foreign
currency earning.

Support for the project

The financial support i.e., the equity infusion in the form of cash and kind for this project on
investments shall be received from promoters. The company shall receive equity infusion in the
form of cash or kind from any of these mentioned companies hereby for its project. The
company shall take the financial support in the form of project loan from either development
bank of Ethiopia or commercial bank of Ethiopia. In addition to our in-house team, we are also
interacting with the Ethiopian Institute of Agriculture Research to get timely support and
valuable advice in this project based on their experiences.

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4 .Technical Feasibility

4.1 Description of the project product

The envisioned fruit and vegetable farm will provide different products to the different customer
groups for different purpose. The product will have tomato, onion, mango and papaya.

4.1.1 Land Use Plan

The total land required for the envisioned project is estimated to be 1174m2. The total area for the
construction of the building will be 1100m2, as revealed below.

No Description Land M2
Basement Ground First floor-Twelve floor
1 Building (G+12)
1.1 Basement 1100
1.2 Ground 1100
1.3 First floor-Twelve floor 1100
Total 1100
Table 4: land utilization plan

4.2 Construction work and Technology

4.2.1 Construction schedule

The construction project is proposed to be started on July 2021, and is expected to be finished on
July 2026. As seen in the abbreviated construction schedule above, a majority of the schedule’s
time is made up of five major activities; concrete, building Enclosure, masonry, mechanical and
Electrical install. Concrete activities include processes such as placing foundations and slab on
deck. The Building Enclosure Phase includes erecting the scaffolding that will allow for exterior
sheathing installation and bricklaying.

Mechanical and Electrical install coincide with each other due to the need for coordination
between the two divisions. There are several periods of construction during the schedule in
which there are multiple construction activities occurring at the same time.

The construction site must be organized accordingly as these processes take place. As with any
construction project, the goal of the schedule will to complete all construction activities before
the required Date of completion.

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4.2.2 Architectural Design & Layout

Although functional spaces for the project were laid out in significant detail, the rest of the
building had designated spaces but set layouts. It was at the discretion of the project promoter to
devise typical layouts for the non-detailed commercial and office spaces. To make sure that the
building’s layouts were practical, the project owner researched typical architectural layouts for
laboratory and executive office spaces. The walls and partitions throughout the floor will
congruent with the structural frame and column locations.

4.2.3 Structural design

One of principle deliverables of the project is the structural design of the building. The structural
bays were coordinated with the layout of the building adjustments will be made to the bays if
specific layouts are necessary. The frame will be made up of a grid with repeating standard
structural bays. Included in the structural system are bay sizes, shape and size of structural
members, floor compositions and curtain walls. These elements were established to resist gravity
ad lateral loads as appropriate.

The gravity load design will completed for two frames; one of structural steel and one of
reinforced concrete. The structural steel frame will chose for further design based on cost per
square foot, local availability of material and constructability considerations, such as erection
and fabrication. The steel system will then designed for lateral loading with necessary adjustment
being made to framing.

4.2.4 Reinforced concrete

The project group prepared hand structural design calculations for a typical bay of a reinforced
concrete frame. In all reinforced concrete bay designs, a superimposed dead load of 8 pounds per
square foot will be assumed for mechanical equipment, floor coverings and ceilings.

Similarly, the design of the typical bay accounted for the use of different commercial space, in
which a live load of 1000 pounds per square was assumed. Loads will be calculated based on the
requirements of the minimum Design loads for Buildings and other Structures.

4.2.5 Foundation Design

The design of a superstructure may be accurate, have considered all possibilities and still fail
because the substructure is incapable of distributing the applied loads to the supporting soil.

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Foundation design takes more into consideration than merely the loading from the columns.
While the main part of the project focused on the structural frame and its alternate designs, a
preliminary foundation plan was designed based upon maximum load carried from the
superstructure through the columns. The foundation design conducted by the project team
consisted of the selection of foundation type, determination of the bearing capacity and the
design for typical interior and exterior spread footings.

4.2.6 Construction Plan and process

The construction process for this project is normally a disjointed three mages development by
which the conceptualized need of the promoter of this project is translated into a functional
facility that will meet their needs in terms of time, cost and quality.

Based on a general program of the project owners the consultant who is going to be hired makes
site studies, develops structural designs, prepares drawings and specifications, determines
quantities involved and estimated the resultants costs. All these activities will be done in the first
phase of the project which is the design stage after the document are produced by the designers
have been received, and the works secured the project is supposed to enter the tendering stage.
At this stage contractors study the project document analyze and subsequently determine the
construction methods, built up their unit rates and submit their bids for the works.

4.3 Utilities

A number of utilities world be put in place in order to ensure smooth functioning of the project.
These utilities include:

No Description Qty. Unit cost Cost (Birr)

1 Electricity supply, kwh 100,000 1.30*10,000 130,000
2 Water Supply m3 50,000 10*500,000 500,000
3 Telephone and Internet Broadband 20,000
4 Fuel, Oil and lubricant 2000 19*2000 38,000
Total 1,188,000

Table 5: Utilities

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5. Engineering and civil works

5.1 Land, Building and Civil Works

The Mixed use building has a total site area of 1174 m2. The building floor area has covered 74
m2 and the remaining 1100 m2 is left for construction. The type of buildings and its
corresponding civil construction cost is given on Table 6.

No Description Total price

A. SUB-STRACTURE
1 excavation and earth works 279,570.67
2 concrete work 1,936,546.34
Sub total 2,216,117.01
B. SUPER STRACTURE
1 Concrete work 7,753,358.45
2 Block work 551,534.40
3 Roofing 171,108.00
4 Carpentry and joinery 323,760.00
5 Metal works 820,860.00
6 Finishing 3,111,379.44
7 Painting 275,798.88
8 Electrical installation 7,236,330.00
9 Sanitary installation 1,151,022.00
Subtotal 21,395,151.17
A+B 23,611,268.18
Vat (15%) 3,541,690.23
Grand total 27,152,958.40
Table 6: list of building and civil works and their cost

As shown on Table 6, the total cost of building and civil work is estimated at Birr 27,152,958.40
and out of which the proponent has worked more than birr 23.6 million.

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 5.2 Manpower and training requirement

5.2.1 Manpower requirement

The list of manpower and the annual cost of labor is indicated in Table 7.

Position No Qualification Monthly salary Annual salary in

SN in Birr Birr
1 General manager 1 BA in management 10,000 120,000
2 Building admin 1 BA in Acct/Mgt 8,000 96,000
3 Secretary 1 10+2 in secretariat science 3,000 36,000
4 HRM Officer 1 10+2 in HRM/Management 4,000 48,000
5 Technical and 1 Diploma in building 8,000 96,000
maintenance manager maintenance
6 Finance head 1 BA in Accounting 6,000 72,000
7 IT Technician 1 Diploma in computer 6,000 72,000
science/IT
8 Marketer 1 Diploma in marketing 5,000 60,000
9 Accountant 1 Diploma in accounting 4,000 48,000
10 Guards/Security 4 Basic 2,500 30,000
11 General Service head 1 Diploma in Management 6,000 72,000
12 Purchaser 1 Diploma in purchasing &Sup 3,500 42,000
Mgt
13 Electrician 1 10+2 in general electricity 4,000 48,000
14 Plumber 1 10+2 in general mechanic 3,500 42,000
15 Casher 1 10+1 in bookkeeping 3,500 42,000
16 Cleaner 5 Unskilled 3,000 36,000
17 Maintenance officer 1 10+2 in General mechanic 3,500 42,000
18 Driver 1 10 completed 2,500 30,000
Total 26 86,000 1,032,000
Benefit (20%) 17,200 206,400
Grand Total 103,200 1,238,400

Table 7: Manpower Requirement and Annual Labor Cost

5.2.2 Labor Availability

Workers for this type of plant are available throughout the year. No foreseeable problems are
expected as most of the work requires no previous skills.

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5.3 Project implementation

The project’s implementation is expected to take 24 months. The major activities include Bank
loan processing construction of the building, cleaning the area around the building, Procurement
of equipment’s and start rendering services. The time schedule for major activities is presented
below:

SN Activities Date
1 Preparation Project Proposal May 2021
2 Bank loan processing June-July 2021
3 Site Development July 2021
4 Building and construction work August, 2019-July 2026
5 Preparation for service July, 2026
6 Service execution February, 2026

Table 8: project Implementation schedule

5.4 Organizational Structure

5.4.1 Organization and management

Organizational Structure

The organizational structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be a manager with
the responsibility of supervising the overall activity of the building. Depending upon the nature
of the center and the amount of work to be performed; there exist auxiliary units under the
general manager.

Employees under each unit will be supervised by the department head that is accountable for the
general manager. General Manager is appointed by the owners

As clearly shown in the organizational structure, the central organization has one general
manager and three main sections. Under the general manager, there are the Marketing
Department, Maintenance and Building administration department. Under building admin dept.
there exist two sections i.e., HRM & finance and general service. The following section deals
with the duties and responsibilities of each department.

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A.The General Manager’s Duties and Responsibilities

 He/she will plan, organize, direct and control the overall activities of the building.
 He/she will devise policies and strategies that will enable the center to be profitable.
 He/she will incorporate modern technological innovation that will facilitate the service
delivery of the building to increase customer’s satisfaction.
 He/she will plan, organize, direct and control the human and non-human resources of the
building so as to achieve the short and long run objectives of the organization.

B. Building Administration Department

The building Administration Department of the multipurpose building has two main sections
(HRM and Finance and General Service section). It has responsibility for undertaking the
following activities;

 Manage the human resources and control employee’s activity

 Well, non-human resources of the project, which include; effective handling of the
different resources of the building, and devise strategies of controlling against fraud and
damage
 Will provide the right material or inventory to the center with the right price at the right
time.
 Will plan, organize direct and control the financial transaction of the building by using all
the necessary documents.
 Accountant and casher that will collect money from the customers
 Will develop sound financial control system by developing modern financial control
systems.
 Will prepare the annual financial statements and prepare condensed reports for both the
General Manager and another concerned government body.
 Follow the overall status of the business and provide maintenance and repair services

C.The Marketing Department

 Will handle the overall marketing activities of the organization which includes planning,
organizing, directing, and controlling.

13 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

  will develop the marketing strategies for future multipurpose building development
 Will develop effective customer handling strategies.
 Execute the promotion methods.

A Technical and maintenance manager

 Will handle the overall physical maintenance and related issues

 Will make sure electricity and back up is organized.

 Follow up security issues and educate tenants

 Works in collaboration with general service to make sure tenants are well served

Table 9 or Figure 1: organizational structure

5.6 Financial Requirement and Analysis

The financial resource is a prime resource for undertaking any activities. Hence for
implementing this mixed use building a total of 34,512,183.20 ETB is required. From this 30%
10,353,655 birr will be covered by the promoter of the project while the rest 70% (24,158,528)
will be covered through loan from bank at the prevailing interest rate. Therefore the said amount
of finance is needed for undertaking the following.

14 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

 Fixed Investment
A. Land, Building & Construction
S.N Description of works Total Cost in birr
1 Building construction 27,152,958.40
2 Site Development 50,000
3 Design and supervision 120,000.00
4 1st Year land lease 422,640
Total 27,745,598.40

Table 10A. Land, Building & Construction

B. Building Machineries and Equipment’s

SN Description Measurement Qty Unit cost in Birr Total cost in Birr.
1 Generator Unit 1 300,000.00 300,000.00
2 Carpentry tool box Set 1 27,000.00 27,000.00
3 Electrician tools box Set 1 18,500.00 18,500.00
4 Plumber tools kit Set 1 12,300.00 12,300.00
5 Fire extinguisher (Security Equipment) Unit 12 16,000.00 192,000.00
6 Elevator Unit 1 750,000 750,000
Total 1,123,800 1,299,800
Table 11:B. Building Machineries and Equipment’s
C. Vehicle
SN Description UOM Qty Unit Cost in Fr. Total cost in Birr Remark
1 Mini-Bus Unit 1 300,000.00 300,000.00 Duty Free
Total 300,000.00

Table 12:C. Vehicle

D. Office equipment’s
SN Description Measurement Qty Unit cost in birr Total cost in Birr
1 Managerial tables Unit 1 12,600.00 12,600.00
2 Managerial chairs Unit 1 19,500.00 19,500.00
3 Office table with chair Unit 7 12,000.00 12,000.00
4 Secretarial table with chairs Unit 1 8,500.00 8,500.00
5 Computer with chairs Unit 1 15,000.00 15,000.00
6 Shelf Unit 3,500.00 3,500.00
7 Filing cabinets Unit 1 1,500.00 1,500.00
8 Guest chairs Unit 1 4900 4900
9 Fax & Telephone machine Unit 1 1,300.00 1,300.00
10 Carpet and Curtain LS 1 23,000.00
Total 101,800.00

Table 13: D. Office equipment’s

15 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

Working Capital

Operating Expenses

SN List of Items Annual cost in birr Assumptions Used

1 Audit and legal fee 48,000.00 4000 br/per ,month
2 Stationery supplies 12,000.00 1000 br/month
3 Promotional Cost 40,000.00 Lump sum annual cost
4 Property Insurance 84,009.00 1% of the building
5 Cleaning Supplies 12,000.00 1000 br. Per month
6 Uniforms 12,000.00
7 Water consumption 5,000.00 2500 m3 by 3.15 br
8 Electric consumption 130,000.00 100,000KWH By Br.1.30
9 Fuel 38,000.00 2000 lit per year by Br.19
11 Telephone & fax 20,000.00 1800 per month
12 Repair expense 72,018.00 2% of building cost
13 Miscellaneous costs 40,000.00 6000 per month
Total 513,027.00

Table 14: Operating Expenses

Pre-service Expenses
SN Description Cost in birr
1 Project proposal 100,000.00
2 Licensing fee and others
Total 100,000.00

Table 15: Pre-service Expenses

Summary of Total initial investment cost

SN Description Cost in Birr Percentage Share

1 Land, building & construction 27,745,598 80.39%
2 Building machines & Equipment’s 1,299,800.00 3.77%
3 Vehicle 300,000.00 1%
4 Office Equipment 101,800.00 0.29%
5 Total fixed investment cost 29,447,198.00 85.32%
6 Salary expense 1,238,400.00 3.59%
7 Operation Expense 513,027.00 1.49%
8 Pre service Expense 100,000.00 0.29%
9 Total Working capital 731,836.00 2.12%
10 Sub total 4,604,532.00 7.49%
11 Contingency (10%) 460,453.20
Total initial investment capital 34,512,183.20

Table 16: Summary of Total initial investment cost

16 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

6. Financial analysis
The financial analysis of this mixed use project is based on the data presented in the previous
chapters and the following assumptions: -

Finishing period 3 years

Source of finance 40 % equity
Debt finance 60 % loan
Bank interest 13%
Discount cash flow 10%
Accounts receivable 30 days
Raw material (perishable) 3 days
Raw Material (nonperishable) 30 days
Cash in hand 5 days
Accounts payable 30 days
Repair and maintenance 5% of equipment cost

Table 17: Financial analysis

6.1 Repair and Maintenance Cost

The annual repair and maintenance cost of the plant is estimated based on the following rates.

Repair and Maintenance Cost

Item Rate
Machinery and equipment 5% of the total cost or Book value

Building and civil works 2% of the total cost or Book value

Utilities 5% of the total cost or Book value
Table 18: Repair and Maintenance Cost

6.2 Depreciation and Amortization

The following depreciation rates are applied to depreciate the assets of the project:

 Buildings and associated Civil works 5%, linear to scrap Value

 Machinery and Equipment’s 10%, linear to scrap Value

6.3 Total Revenue

Based on the projected profit and loss statement, the project will generate a profit throughout
its operation life. Annual net profit after tax increases from Birr 8,810,480.70 the beginning of
the project to Birr 22,168,049.3 during birr the last year of operation year. The detail is
presented in Annex.

17 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

6.4 Discounted Payback Period

The payback period, also called pay–off period is defined as the period required recovering the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial
investment will be fully recovered within 3 year 3 months.

6.5 Cash flow

The projected cash flow of the envisaged project shows that the project would generate
positive net cash flows throughout the operation years. Cumulative cash flow generated by the
project towards the end of the first operation year will amount to Birr 9,259,139. At the end of
the project life, this amount will rise to Birr 22,168,049.3. The detail is presented in Annex.

6.6 Benefit cost ratio

The BCR is defined as the ratio of the sum of the project’s discounted benefits to the sum of its
discounted investment and operating costs.

When BCR > 1, accept the project n

 (1  r ) t
Bt
When BCR < 1, reject the project t 0
BCR  n
 (1  r ) t
When BCR = 1, be indifferent Ct
t 0

BCR is 1.5568 and positive this indicates this project would return 1.5568 birr in benefits for
each birr spent.

6.7 Internal Rate of Return

The internal rate of return (IRR) is an indicator of the efficiency or quality of an investment.
A project is a good investment proposition if its IRR is greater than the rate of return that could
be earned by alternate investments or putting the money in a bank account. Accordingly, the IRR
of the project after tax is computed to be 21.98% indicating the viability of the project.

18 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

6.8 .Net present value

Net present value (NPV) is defined as the total present (discounted) value of a time series of
cash flows. NPV aggregates cash flows that occur during different periods of time during the
life of a project into a common measuring unit i.e. present value. It is a standard method for
using the time value of money to asses’ long-term projects. NPV is an indicator of how much
value an investment or project adds to the capital invested. In principle a project is accepted if
the NPV is non-negative. Accordingly, the net present value of the project at 10% discount rate
is found to be Birr 8,249,752.739 which is acceptable.

6.9 .SWOT analysis Ethiopian fruit and vegetable business

SWOT analysis
Strengths Weaknesses
 Climate  Constant high quality supply in sufficient
 Facilitating government policies quantities/lack of critical mass
 Costs of production  Crop varieties
 Geographical location  Packaging
 Security  Cold Storage/logistics
 Private sector service provision  Technical Know How
 New initiatives  Research and extension
 Potentials for irrigation  Input supply
 Transport  Land Tenure
 Code of Practice in floriculture  Market Information
sector  Domestic market
 Banking
 Bureaucracy
 Communication

Opportunities Threats
 Demand in Europe and Middle East  Increased competition in European and Middle
 Demand for processed fruits and East Markets
Vegetables  Regional politics
 Ecological and fair trade production  Stringent requirements on food safety and
sustainability standard

Table 19: SWOT analysis

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7. Conclusions and Recommendations

Conclusion

The objective of this proposed feasibility study is primarily to facilitate the entrepreneur with
investment information and provide an overview of the project. The proposed feasibility may
form the basis of an important investment decision and in order to serve this objective, the
document covers various aspects of Concept Development, Start-up, Production, Marketing,
Finance, and Business Management.

The feasibility is based on the information obtained from various agricultural sources as well as
discussions with businessmen. For financial model, since the forecast/projections relate to the
future periods, actual results are likely to differ because of the events and circumstances that
don’t occur frequently as expected.

The project is accessible and has the necessary infrastructure such as road, telephone, water, and
electric power. The proposed project clearly identifies all the necessary equipment, inputs,
management of the company and the required manpower. The highest authority in the project
will be vested in the hand of the owner. He will control the overall activities of the proposed
project. Demand projection divulges that there is high demand for feed production in the country.
Accordingly, the planned project is set to provide quality products in the area.

Recommendations

Financial sensitivity analysis shows that the project is highly sensitive to a decrease in sales
revenue but relatively less sensitive to an increase in raw material and investment costs.
Therefore, it is recommended that the company should give great attention to the possible
reasons for sales reduction. In this case, different mechanisms should be selected and
implemented to increase sales. In addition to this, the company should decrease its cost that
lowers profitability. The project must utilize modern promotional styles to capture the planned
market share. To do so, it has to design an effective strategy to achieve this plan.

Although due care and diligence have been taken to compile this document, the contained
information may vary due to any change in any of the concerned factors, and the actual results
may differ substantially from the presented information.

20 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

References
Addis Fortune, Resettled Farmers Cripple Green Focus' Plans. www.agf.nl/nieuwsbericht, Fruit
World Breda importeert aardbeien uit Ethiopië.2 July 2008.
BBC, 2008, Country profile Ethiopia, www.news.bbc.co.uk, 3 June 2008.
Cehmeda, D. (EPD), D. Hordofa (EPD) and A. van Duijvenbode (CBI), The juice of the
economy? Export potential of Ethiopian Processed Fruits and Vegetables, Addis Ababa. January
2005.
Central Statistical Agency (CSA), Ethiopian Development Research Institute, In ternational Food
Policy Research Institute, Atlas of the Ethiopian Rural Economy.ISBN: 0 89629 155 3. 2006.
Emana, B. and H. Gebremedhin, Constraints and Opportunities of Horticulture Production and
Marketing in Eastern Ethiopia, DCG Report No. 46. 2007.
ETHIOPIA: Trade and Transformation Challenges, Annex 8, Agriculture and trade, diagnostic
trade integration study. April 2003.

21 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

 Annex 1. Sales Revenue

Description Project year 5

1 2 3 4 5
Ground floor Rent 9,240,000 10,164,000 11,180,400 12,298,440 13,528,284
Size 1110 1110 1110 1110 1110
unit price 350 385 424 466 512
Rent for shop and office 1-3 floor 2,956,800 3,252,480 3,577,728 3,935,501 4,329,051
Size 1110 1110 1110 1110 1110
unit price 224 246 271 298 328
Rent for shop and office 4-7 floor 2,890,800 3,179,880 3,497,868 3,847,655 4,232,420
Size 1110 1110 1110 1110 1110
unit price 219 241 265 291 321
Rent for shop and office 8-12 floor 1,980,000 2,217,600 2,439,360 2,439,360 2,683,296
Size 1110 1110 1110 1110 1110
unit price 150 165 182 200 220
Parking 91,250 100,375 110,413 121,454 133,599
Size 1110 1110 1110 1110 1110
unit price 5 5.50 6.05 6.66 7.32
Total Sale 17,165,348 18,920,927.5 20,812,467.05 22,649,221.66 24,913,588.32

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 Annex 2. operating cost

Operating years of the project

Description 1 2 3 4 5
A. Direct cost
Raw Material Cost 513,027 538678 565,612 593,893 623,588
Sub-total
Total Direct cost
B. Indirect cost
Wages and Salary 1,238,400 1,300,320 1,365,336 1,433,603 1,505,283
Repair and Maintenance 667,449.00 667,450.00 667,451.00 667,452.00 667,453.00
Property Insurance 4,275.00 4,275.00 4,275.00 4,275.00 4,275.00
Utility 1,188,000 1,247,400 1,309,770 1,375,259 1,444,021
Land lease 422,640 422,641 422,642 422,643 422,644
Advertising and Promotion 50,000.00 50,001.00 50,002.00 50,003.00 50,004.00
Miscellaneous Expense 40,000.00 40,001.00 40,002.00 40,003.00 44,003.30
Total operating cost 4,123,791 4,270,766 4,425,090 4,587,131 4,761,271.3

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 Annex.3 income statement

Income statement

Operating years of the project

Description 1 2 3 4 5
Sales Revenue 17,165,348 18,920,927.5 20,812,467.05 22,649,221.66 24,913,588.32
Less: Operating cost 4,123,791 4,270,766 4,425,090 4,587,131 4,761,271.3
Income before Depreciation 13,041,557 14,643,569 16,380,679 18,055,279 20,145,379
and interest
Less: interest 448,658.00 448,658.00 448,658.00 448,658.00 448,659.00
Income before Depreciation 12,586,401 14,194,911 15,932,021 17,606,621 19,696,720
Less: Depreciation 0.00 0.00 667,449 667,450 667,451
Profit /Loss Before Tax 12,586,401 14,194,911 15,264,572.00 16,939,171.00 19,029,269.00
Less: Tax (30%) 3,775,920.30 4,258,473.30 4,579,371.60 5,081,751.30 5,708,780.70
Net Profit or Loss After Tax 8,810,480.70 9,936,437.70 10,685,200.40 11,857,419.70 13,320,488.30

24 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS

 Annex 4. Discounted cash flow

Investment
Project Life years
Description Year
0 1 2 3 4 5

INFLOW
Net sales revenue 0 17,165,348 18,920,927.5 20,812,467.05 22,649,221.66 24,913,588.32
TOTAL 17,165,348 18,920,927.5 20,812,467.05 22,649,221.66 24,913,588.32
0
INFLOWS

OUTFLOWS
- - - - -
Investment cost 34,512,183.20
Operating cost 0 4,123,791 4,270,766 4,425,090 4,587,131 4,761,271.3

0 3,775,920 4,258,473 4,579,371 5,081,751 5,708,780

Income tax

TOTAL 34,512,183 7,899,711 8,529,239 9,004,461 9,668,881 10,470,051

OUTFLOWS

NET CASH 10,850,695.00 9,259,139.00 10,385,096.00 11,801,308.00 12,973,528.00 14,436,599.00

FLOW
NET PRESENT VALUE (NPV)
8,249,752.739
Internal Rate of Return (IRR)
21.98%
DISCOUNTED PAYBACK PERIOD (DPBP)
3.3 years

25 | P A G E FEASIBLITY STUDY FOR PRODUCTION OF VEGETABLES AND FRUITS