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Background and Brief Description of the Project

1.1. General Background &Context

Traits and vegetables are important sources of vitamins ,minerals and antioxidants useful for human
health. They are consumed directly in their raw an cooked form, as an important seasoning to add
aroma, taste, and flavour to dishes after passing through food processing industries as major
components of healthy human diet. Fruits and vegetables are generally classified as root crops, such
as potato, carrot, red and white (garlic) onions, leaf crops, such as lettuce, cabbage, Spinach and fruit
crops, such as tomato, pumpkin, watermelon and chilli pepper.

Ethiopia is endowed with favourable climate, altitude, adequate water supply, large stock of
cultivable land and suitable soils for production of high value fruits and vegetable crops. In spite of
the vast resource base, production of fruits and vegetables have not been a major component of the
agricultural economic activity and per capital consumption and percentage of food budget spent on
fruits and vegetables is very low compared to other Sub Saharan Countries, such as Kenya, Uganda
and Tanzania'. currently Ethiopia's per capita consumption of fruits and vegetables stands at 97
grams per day, which is much below from the recommended per capita daily consumption of 400
gram or 147 kg per annum by the World Health organization (WHO). According to the WHO report,
insufficient intake of fruit and Vegetables is a major cause of gastro-intestinal cancer deaths (14%),
anemic heart disease failures (11%) and deaths as a result of stroke (9%) globally.

The major diet of traditional households in Ethiopia is cereal crops that are dominated by starchy
food. However, a recent research study carried out over the period 1996 to 2011published by
International Food Policy Research Institute indicated that the content and variety of food
consumption is changing with a gradual shift towards high-value foods, such as animal products,
fruits and vegetables, processed food with high calories intake. This shift is driven by improvement in
household level of income and increased awareness of nutrition for healthily human diet.

In light of this background and context, this project is designed with a special focus to improve
production and marketing of high value vegetable crops through commercial agriculture
development and to promote and emphasis awareness on nutritional attributes of fruits and
vegetables for human healthy diet.

II. Brief Description of the Project Development

1
Per capita fruits and vegetables consumption in Kenya is 300 gram Uganda 200 gram and

Tanzania 164 gram, A study report by Adam Ihuchie, 10/30/2011

2
International Food Policy Research Institute (2016)
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2.1. The Project Area & Required Land

The project plans to establish vertically integrated farming business, focusing Cultivating quality
vegetable products using irrigation based farming technology with modern farm management
system supported by qualified horticulture professionals. The project aims to improve harvest
management and storage system and promote efficient marketing and distribution mechanism to
meet and satisfy the growing market demand for fresh fruit and vegetable products for local
markets.

2.2. Vision & Goals

The vision of the project is to develop sustainable and profitable vegetable production and
marketing business owned and operated by the promoter. Promoting knowledge and awareness on
the nutritional attributes of fruits and vegetables for human healthy diet, transferring strategic
farming technology to improve farming skills of smallholder farmers in the project area and
providing employment opportunities for area residents are also the allied vision and goals of the
project.

2.3. The Project Area

The area identified for the project development is Dembia Woreda, Central Gondar

Administration,and Amhara National Regional State. The proposed location is about

50 km South of Gondar city.

Dembia woreda is one of the administrative woredas in Central Gondar Zone of

Amhara region. The woreda is located about 197 km west of Gondar, bordering

Alefa and Takusa to the West, Lake Tana to the South, Gondar Zuria Woreda to the

East and Gondar city to the North. Koladebia is the administration center of the

Woreda. It lies in semi-kola agro- ecology and the landscape is predominantly plain

with some hills. The temperature varies between 15-45 Celsius and the annual

rainfall is around 800 mm.

Based on the recent CSA census report ( 2017), Dembia woreda has a projected total

population of 311,398, of whom 157,876 men and 153,522 female. Of the total

population, 30,642 or 10 % urban inhabitants. With an area of 1,261.96 square

kilometers, Dembiya has a population density of 246.75, which is greater than the

Zone average of 63.76 persons per square kilometer.

The local economy is mixed farming with crop and livestock production. The major

crops are teft, sorghum, lentil, chick pea, finger millet, and maize. Oxen are used by

smallholder farmers for ploughing and threshing.

The woreda is accessible by road transport from Gondar, Chilga, Delgia and Sawra

Sudan via Metema. Insurance, bank and and close to border towns of Sudan via Metema.
Insurance,Bank and COmmunications services including full access to mobile networks are availaoic

the district center.

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2.4. Required Land for the Farm Development

A total of 5 hectares of land is required for setting up the farm development project the total land,
the farming land covers about 80 % of the land area and the remaining 20 % will be used to
construct farm related infrastructure and facilities. The proposed cultivable land and efficiency of the
operation will form the basis for determining the type and quantity of machinery and equipment to
be employed lo the development.

2.5. Legal & Administrative Frameworks for Investment Land Requests

In accordance to the investment proclamation No 280/2002, the project is eligible to acquire land
for investment at competitive lease price, access to long-term credit with low interest rate,
exemptions from customs duty for capital and spare parts, export incentives and tax holiday from
income taxes for five years.

In the project area, land requests for agricultural investment is handled and processed at the Zonal
and/or Regional level Environmental Protection and Land Management Bureau. The Bureau requires
investors who wish to obtain land from the woreda to Submit a project profile document and
provide bank statement that show financial capacity and resources to undertake proposed projects.
This project development plan is developed for the purpose of requesting land for investment in
accordance with this general regulation.

2.6. Environmental Impact Considerations

Although no immediate environmental problem is anticipated from the proposed farming activities,
the project plans to establish strategic collaboration with the local administration and area residents
to engage in activities aimed at minimizing soil erosion and land degradation caused by rain water
flooding, over grazing of communal lands and over cultivations. The project will also allocate specific
budget for seedling /nursery development of indigenous tree species to be planted in the farmland
between blocks. The merit of this plan is to serve as wind break to the crops, to prevent wind
erosion and maintain ecological balance of the farm area.

2.7. Social & Economic Benefits of the Project

In addition to the financial benefit the promoter expect to gain from the investment, the project will
create over 26 permanent and temporary employment opportunities for skilled and unskilled area
residents and will generate substantial tax revenue for the local government form its various
business activities and transactions.

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Furthermore, the project Will also actively support and participate in local development projects to
help improve the welfare and quality of life of local residents through sponsoring educational
seminars and trainings on nutrition and consumption culture.

2.8. Conformity to Government Policy, Strategy and Directives

The project is compatible with the present Agriculture Development Led Industrialization (ADLI)
policy and the Growth and Transformation Plan (GTP) which emphasis in promoting and providing
support for development of commercial agriculture with a special focus on high value crops
production for local and export markets.

Furthermore, the project development plan discussed and outlined in this document fulfills and
satisfies directive NO 9/2006, a directive issued by the Head and Council of the Regional Government
on formalities and conditions for granting agricultural land for investment purposes.

2.9 Legal Structure of the Project

The project will be incorporated as private farming business entity according to the commercial law
of Ethiopia, obtain investment license from Ethiopian Investment Authority and register for VAT and
Tax Identification Number (TIN) with Revenue Authority.

2.10. Sources and Uses of Investment Capital

The total planned investment to set up the farm development program during the first phase of the
project implementation period is estimated to be Birr 2,001, 225, of which 30 % is owner's
contribution and the remaining 70 % is expected to be financed with long term bank loan.

III. Relevant National Development Strategies & Policy Frameworks for Investment

a) Growth and Transformation Plan (GTP) - The strategy aims in addressing poverty and ensuring
sustainable development through effective utilization of human and land resources as basis of rural
development and speedy economic growth in urban areas. The policy also attaches high importance
to private sector development to contribute to the national economic development and creation of
employment both in the urban and rural sectors.

Growth& transformation Plan (2010-2015), GTP 11 (2015-2020), Ministry of Finance & Econoinic

Developmet (Ethiopia)
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b) The Council of Ministers Regulations No.270/2012 specifies the areas of investment eligible for
investment incentives to encourage and promote the inflow of foreign capital and technology into
country. It entitles incentives to both domestic and foreign investors with provision of land at
negotiated land lease rate, customs duty exemptions for capital goods and tax holiday for period of
up to five years depending on the sector.

IV. Fruits and Vegetables Market Demand & Supply Assessment

4.1. Production and Cultivation of Fruits and Vegetables

According to CSA Agricultural Sample Survey (2014/15), the total area covered by fruits and
vegetable crops was reported to be 2,008,988 hectares or 13.2 % of the total country level crops
covered land area, The survey also indicates cultivation is focused on traditional vegetable crops and
yield per hectare was lower compared to the potential output level that could be obtained from
improved cultivation methods. From the total output, a small amount of vegetables consisting of
potatoes, tomatoes and onions are exported to neighbouring Djibouti, Somalia and other Middle
Eastern countries.

Table 1(a): Cultivated Land under Vegetable and Fruits (CSA 2014/2015)

Crop Total hectare Source of finance

Private farm Commercial farm

Vegetable 146,240 139,449 6,791

Root crops 217,585 216,374 1211

Permanent crops 1,645,163 11,297,395 347,768

Total 2,008,988 11,653,218 355,770

Table 1 (b): Crops Output by Private and Commercial Holdings (CSA 2014/2015)

Crops Output (quintal) Source of finance

Private farm Commercial farm
Vegetable 8,113,786 7,288,937 884,849
Root crops 54,856,075 54,554,894 301,181
Permanent crops 147,999,023 80,181,583 67,817,440
Total 210,968,884 142,025,414 69,003,470

The total cultivated land under irrigation was 179,000 hectares or l1.3 % of the total cultivated land
under all food crops. Of the total irrigated land, 60 % was covered under vegetable crops and the
remaining 40 % covered with cereal crops.
Although some experts claim up to 30% of harvested vegetable crops to be lost due to poor
post-harvest handling, from the total cultivated land tomato represents 30 %,red pepper 22
% and onion 26 %.,
4.2. Fruits and Vegetables Consumption and Supply Trends
 Vegetables like onion, tomato, potatoes, cabbage, salad and peppers are used by the
average Ethiopian on a daily basis. It is the essential input for creating Ethiopian
dishes in every household, the other segments are Hotel, restaurants and
international communities use more types of veggies. There will always be a market
for vegetables in Ethiopia. Additionally, Djibouti, Somalia, and Sudan are consumers
of Ethiopian farm products thus it has potential as a profitable to export.
 The price of vegetables has sky-rocketed in the past ten years as an increasing
amount of Ethiopian farmland is being used to grow crops for export rather than
domestic use. Vegetable prices will remain steady or rising.
 Fresh 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 110 million. This is a strong indication of the existence of large potential
demand for fresh
vegetable crops in the country.

Ethiopia a major centre of trade and commerce, one of the main tourism destinations in
Africa and it hosts a wide range of seminars and meetings on a regular basis.
In spite of the vast resource base, production of fruits and vegetables has not been a major
component of the agricultural economic activity and per capita consumption and
percentage of food budget spent on fruits and vegetables is very low. In the country, per
capita consumption of fruits and vegetables is very low. However, there is a growing shift
towards consumption of high protein dishes, fresh fruits and vegetables and processed food
items by the middle income group. The change is highly associated with improvement in
household level of income and increase awareness of health and nutrition.
Presently, smallholder farmers and per-urban cooperatives as well as backyard growers with
traditional production techniques and harvest management practices dominate the fruit
and vegetable product market (mainly traditional vegetables, such as red onion, spinach,
lettuce, and green peppers). Furthermore, extracted fruit and vegetable products, such as
mango and mixed fruit juices, are offered and supplied by small scale business operators,
such as cafes and juice houses, and supply of industrial processed vegetable products, such
as tomato paste and tomato juice are dominated by Merti products (government owned
enterprise) and a few imported brands from the Middle East.
In spite of expanding demand, the local vegetable market generally suffers from seasonal
supply fluctuations due to traditional production system characterized by low productivity,
fragmented and uncoordinated product marketing and distribution mechanism and absence
of well-developed market infrastructure aimed at promoting sustainable product
development. For these reasons, demand surpasses supply throughout the year, reaching its
peak during the lent season; while supply tend to be moderately high during the rainy
season only.

4.3. Vegetable Market Value -Chain Analysis

The formal vegetable market value chain is defined as peri-urban and rural vegetable farmer
cooperatives, registered and licensed wholesale and retail distributors and consumers or
end users. The informal vegetable market value chain includes smallholding farmers,
backyard growers, street vendors (Gulet operators) and consumers or end users.

4.4. Vegetable Product Marketing Practices

Modern marketing and distribution channels for vegetable and other consumer goods, such
as supermarkets and chain food stores with larger assortment of locally produced or
imported products are in the early stage of development.
The bulk of fresh fruits and vegetable produced by Agri business cooperatives and backyard
growers are marketed to urban consumers, such as households, hotels, coffee shops and
the like, either through door-to-door sales or through fruits and

Vegetable wholesale and retail stands in major market places. Most households and low
income consumers also purchase vegetable products from informal market stands, such as
neighbourhood "gulets” and street side vendors.
There is no uniform size or standard packaging of vegetable products supplied in the local
market. As plastic or wood crates are in short supplies due to higher prices, fruits and
vegetable packaging for local markets use rudimentary packagıng practices. For example,
baskets are used to contain leafy vegetables, while jute and plastic sacks are used for
marketing onions, potatoes, carrots, and head cabbages. Growers of leafy vegetables near
urban areas do not use any containers, but instead tie the product into bundles.
Although, some farmers produce and market good quality vegetables, hygienic condition of
most vegetables marketed in the formal and informal production and distribution channels
are questionable qualities.

4.5. Prices of Fresh Fruits and Vegetables

Prices for fresh fruits and vegetables is steadily increasing due to several factors including
demand from higher urban population growth, high inflation, and increases in cost of fuel
and transportation. Although price varies from place to place, the Current average prices of
fresh traditional vegetable crops in “atikelt tera” market are Birr 15/kg, Birr 22/kg, Birr
130/kg and Birr 15/kg for tomato, onion, garlic and potato respectively'.

V. Farm Operation Development Plan

The proposed farm will be vertically integrated fruit and vegetable farm business
development. The vertically integrated business model comprises growing high quality
vegetable products supported by appropriate farming technology, improved harvesting and
storage system, value addition in the form of cleaning and crate packaging and efficient
marketing and distribution channels to generate more sales revenue in the local markets
and to further enhance and contribute to the social and economic development of the
region which the farm operate in particular and the country in general

5.1.Planned Cultivable Vegetable Crops /Products (Types)

From the broad category of horticulture products, red onion, garlic, spinach, cabbage,carrot,
potato, tomato, lettuce and cabbage are most popular fresh vegetable items consumed by
the urban consumers.
The farm project will focus and concentrate on producing selected high quality vegetables
such as zucchini, cauliflower, broccoli, and eggplant that have high local market potentials
with improved seedlings developed In a modem nursery beds on the farm field.

4
Monthly Producer Price Survey, Central Sialics Agcncy (October, 2019)

The lists of planned cultivable vegetables include

a) Onion: contains natural sugar, vitamins A, B6, C and E. Minerals such as sodium,
potassium, iron and good source of folic acid. Mostly consumed cooked and serves as
seasoning to add aroma and taste with all kind of dishes.
b) Lettuce: is a nutritious leafy vegetable, rich in minerals and vitamins. It’s consumed in a
raw form and used as the base for salad.
c) Garlic: is important sources of vitamins, such as vitamin BI and B6, and minerals such as
copper, manganese, calcium, selenium, and phosphorous. Garlic is an important seasoning
to add aroma, taste, and flavour to dishes in addition to the nutritional value and health
benefits, such as reducing the risk of heart disease and lowering cholesterol levels.
d) Spinach: is leafy vegetable with excellent source of vitamin A, K and E and contains key
minerals, such as manganese, iron, cooper and potassium.
e) Tomato: is one of the most important vegetable grown in many parts of the country. It is
rich in vitamins. It is consumed cooked or raw with salad or processed into tomato paste,
sauce and pure.
f) Carrot: is a root vegetable, exceptionally rich source of carotenes, vitamins and dietary
fibre. It also contains health level of minerals, like copper, calcium, potassium, and
manganese and phosphorous.
g) Green peppers (Jalapeno): is a medium sized chili pepper with rich sources of vitamin C
and other useful antioxidants.
h) Cabbage: is a cool season leafy vegetable belonging to "Brassica" family. It is an excellent
source of natural antioxidants, vitamins and contains minerals, such as potassium,
manganese, iron and magnesium.

5.2. Farming Technique and Technology

The envisioned project is designed to be a commercial farm, which intends to use modern
agricultural techniques and best local and international farming practices to enhance quality
and improve yield.
Land preparation, planting, harvesting, collection, sorting, packing, and transporting to the
market will follow Good Agricultural Practices (GAP).

5
Nutritional contents of products is reprinted from Joumal of Biology, Agriculture and Healthcare, Vol

5,# 21 (2015)

As vegetables are highly perishable food products and require high level of care, the
temperature of the storage area will be maintained at low humidity and inspected
frequently to check for spoilage and damage that could affect quality, aroma and taste of
products. Uniform size or standard material will used for packagıng products for the local
markets.
Quality control system will be installed to ensure planting, harvesting, collection, Sorting,
cleaning, weighing, packaging, storing and transporting process meet the required standards
at satisfactory level.

5.3. Farm Infrastructure

The farm facility requires a total of 500m2 area of land to construct farm related service
facilities, which include farm office, equipment maintenance workshop, locker room, farm
clinic, store room for raw inputs, employee lounge, and shower and toilet facilities.
Vegetables collected from the farm field will be cleaned, weighed and packed in varying Size
sacks and crates and transported to the storage facility using tractor driven trailer.
The product storage facility will be kept clean and maintained at low or cool temperature
using solar vapour system to minimize spoilage and wastage resulting from high
temperature.
Transporting vegetable from the farm to market outlets will be done by tractor driven
trailers or truck. Prior to loading, the trailer shall be fully clean from debris and other
elements to avoid contamination during transportation
A small farm clinic equipped with basic supplies will be established to provide first aid care
services for farm employees and the surrounding community. Budget for pharmaceutical
supplies and health professional is incorporated in the operating budget.
A signage containing information, such as farm name, operation hours and contact
information shall be posted at the facility. The signage will be sufficient size and prominently
displayed in a main traffic passageways so that visitors and input Suppliers can easily
identity the site and its operation.

5.4. Planned Investments on Farming Tools & Equipment

The required farm machinery and equipment and corresponding quantity are listed below.
The proposed cultivable land and the efficiency of the machinery formed the basis for
determining the type and quantity of machinery and equipment.

Table 3: List of Farm Machinery & Equipment

No Description Qty
1 Tractor (110hp) 1
2 Disc plough with farrow 1
3 Planter 1
4 Sprayer 4
5 Trailer 1
6 Hand tools, such us hoe ,pick, shovel,hose,etc
7 Generator /solar cooling system 1
8 Water pump 2
9 Pickup truck (4*4) 1

5.5. Production Cycles and Capacity Utilization Program

During the first year, the project will operate at 80% of its installed capacity with two
production cycles per year, harvesting and collecting an average of 43 ton mixed traditional
vegetable crops. Full capacity is expected to be attained at the third year with total
production capacity of 54 ton mixed vegetable, The project plans to increase yield per
hectare in the third production year by means of employing high quality seed, improved
farming techniques and harvest management techniques.

VI. Marketing and Promotion Plan

The project's marketing plan will capitalize on its improved cultivation, quality production
efficient harvest management techniques, value addition activities and timely delivery to
local markets.
In the short term, the farm product will be marketed and distributed through local
vegetable wholesalers and retailers. In the long run, after establishing contacts and securing
agreements with high volume customers, such as hotels, restaurants and institutional
customers, the project will directly distribute and deliver farm products using its own
transportation vehicles.
The overall marketing plan will comprise of:
 Focused mass communication via billboards, printed materials, sponsorship of
educational seminars and workshops to promote nutritional attributes of fruits and
vegetables for human health and daily diet.
 Product differentiation through introduction of packaging, labeling and on time
delivery.
 Establishing revolving credit sales, delivery, billing and invoicing system with
standard terms and payment modality for high volume customers and businesses.
 Establishing direct farm product out let in different locations to serve the consumers.
 Offering wholesalers/retailer discounts for bulk purchases.
 Attending in significant national and regional trade shows to establish good Working
relationships, cooperation and business networks.

VIl. Farm Management & Staffing Pan

The envisioned project will be established as business entity according to the commercial
code of Ethiopia. The promoter/business owner has substantial experience in local and
overseas business operations, business management, and leadership skills with credit
worthiness records of accomplishment.
The owner decides on the overall business directions, management and operations plans,
budget allocations and approval of production, sales and marketing plans and strategies.
The day-to-day business activities of the farm development will be handled by a general
manager supported by administration, finance and sales & marketing staff.
The farming activities will be managed by professionals with farm management training and
skills.
The project will create employment opportunity for over 26 full time skilled and unskilled
professionals. Upon employment, all employees will be provided sufficient orientation and
training on basic farming techniques and the required operational standards to ensure safe,
productive and pleasant work environment. They will be required to follow high standard
production and safety procedures in disposing their job assignments to achieve the highest
performance levels possible.

Table 4: List of Manpower

S/N Description Qualification Qty
1 Farm Manager (Horticulture/agronomist) BA Degree 1
2 Finance/Accountant BA Degree 1
3 Marketing & Sales Management BA Degree 1
4 Office Manager /secretory Diploma 1
5 Plant Inspector Diploma 1
6 Tractor operator Diploma 1
7 Store Keeper Certificate 1
8 Permanent farm labour Semi-skilled 12
9 Guards Semi-skilled 4
Total 26

VIl. Financial Feasibility Study (Plan)

The total planned investment to set up the farm program during the first phase of the project
implementation period estimated at Birr 3,751,250, of which 70 % is owner's contribution and 30% is
expected to be financed with long-term bank loans.

Table 5: Planned Investment

Description Total (birr) Source of Finance
Owners’ Equity Bank Loan
Tractors 1,500,000 1,050,000 450,000
Trailer & other Eqip. 150,000 105,000 45,000
Vehicle 1,200,000 840,000 360,000
Building/civil works 300,000 210,000 90,000
Working capital 546,702 382,691 164,010
Pre operating cost 26,510 26,510
Pre operating interest 28,038 28,038 0
Total 3,751,250 2,642,239 1,109,010
% 100 70 30

Basic parameters and assumptions used for the study and detailed calculations for each cost
category is presented separately as part of the financial feasibility study.

Table 6: Determination of Operating and Working Capital

Description Year
1 2 3 4 5
Direct cost

Seeds 5,000 5,500 6,050 6,353 6,670

Fertilizer 2,000 2,268 2,495 2,620 2,751
Weed killer 5,000 5,250 5,775 6,064 6,367
Other costs 10,000 10,500 11,550 12,128 12,734
Transportation 10,000 31,185 36,304 36,019 37,820
Sub total 32,000 54,703 60,173 63,182 66,341
Total Direct cost 32,000 54,703 60,173 63,182 66,341
Indirect cost
Wage & salary 347,400 364,770 383,009 402,159 422,267
Land rent 1,005 1,005 1,005 1,005 1,005
Insurance 4,875 4,875 4,875 4,875 4,875
Employee benefits 10,422 10,943 11,490 12,065 12,668
Office supply 15,000 15,750 16,538 17,364 18,233
Travel & periderm 30,000 31,500 33,075 34,729 36,465
Repair &maintenance 21,000 21,000 21,000 21,000 21,000
Tel & postage 20,000 21,000 22,050 23,153 24,310
Marketing & 25,000 51,250 56,375 62,013 68,214
promotion
Legal & Audit 10,000 10,500 11,025 11,576 12,155
Fuel & 20,000 21,000 22,050 22,050 22,050
lubricant
Depreciation 149,910 149,910 149,910 149,910 149,910
Miscellaneous 10,000 10,000 10,000 10,000 10,000
Total indirect 664,612 713,503 742,401 771,898 803,151
cost
Total operating 696,612 768,206 802,574 835,080 869,492
cost
Working capital 546,702 618,296 652,665 685,170 719,583

6
working capital = operating cost – depreciation

Revenue forecast is dependent on production volumes and sales prices in each production year. In
this financial study, the total revenue from production and marketing of the farm product is
estimated to be Birr 1,000,000 in the first production year and Birr 2,196,150 in the fifth production
year. In anticipation of future production cost increases, an average of 10% increase is added to
costs of production and an equal percentage increases is added in sales revenue projections.
Table 7: Profit & Loss Projections
Description Year
1 2 3 4 5
Revenue 1,000,000 1,237,500 1,875,000 1,996,500 2,196,150
Less: operating 696,612 743,623 804,586 837,091 871,504
cost
Profit before 303,388 493,877 1,070,414 1,159,409 1,324,646
interest
Interest on loan 30,779 36,854 37,795 25,197 12,598
profit before Tax 272,609 457,023 1,032,619 1,134,212 1,312,048
Profit Tax (35%) - - - - -
Net Profit 272,609 457,023 1,032,619 1,134,212 1,312,048

Assuming the investment falls with the five-year tax exemption category, the profitability
assessment excluded the 55 % profit tax and included 9.5 % cost of bank financing in the net profit
calculation. Accordingly, the project's net profit will be Birr 272,609 in the first production year and
Birr 1,312,048 in the fifth production respectively.

The cash flow forecast shows incremental cumulative cash balance of Birr 269,501 in the first year
and Birr 4,345,989 in the fifth projection year, implying that the project would not face any cash
shortage to finance its debt obligations and to meet its operational costs.

The financial viability study indicated that the project expected to generate sufficient amount of net
profit starting from its first year of operation. The cash flow forecast shows the proposed project will
be liquid throughout its life. The discounted cash flow as well as the sensitivity test analysis for
adverse impacts (decreasing revenue and increasing operating costs by 10%) shows greater than the
current rate of inflation(17%) and real interest rate of 5% offered by commercial banks.

IX .

Summary & Conclusions

Vegetables are important sources of vitamins and minerals and major components of
human diet. They also offer and provide a wide range of business opportunities to improve
household income and to contribute for local and regional economy.
Presently, while demand is considerably increasing in urban areas because of improvement
in household disposable income and increased awareness for healthy diet food, supply is
lagging behind and constrained by traditional production methods and inferior quality
harvest management practices.
Smallholder farmers living near and around major urban centres of all regions largely
practice vegetable production on small pockets of land to supplement household food
consumption or for commercial purposes to generate sales to complement household
incomes.
Conclusions
Fruits and vegetables are important components of human diet. Production of the crops are
seasonal, less capital intensive and yield per hectare is greater than most cereal and grain crops, for
example vegetables like tomato and onion provides higher quantity of food per unit area of
production. Therefore, having all these advantages coupled with the recent expanding demand
make fruits and vegetables production and marketing more beneficiary and attractive to growers as
well as to the urban economy. Moreover, due to their high nutritional and market values, vegetables
are classified among exportable agricultural commodities' with high potentials to generate
considerable amount of foreign currency earnings in the export market.