ABAS AGRICULTURAL DEVELOPMENT

PROJECT PROPOSAL

SUBMITTIED TO B/G/R/S LAND ADMINSTRATION

& INVESTMENT BUREAU

PROJECT LOCATION:
REGION: B/G/R/S
ZONE: ASOSSA
WOREDA: ABURAMO

Project owner: - ABAS AGRICULTURAL DEVELOPMENT

NATIONALITY; - Ethiopian

Cell pohne: - 0912401656/0938452968

TOTAL INVESTMENT CAPITAL: 1,500,000 BIRR

Januray /2022

ASSOSA

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Table of Contents
1 .Introduction..........................................................................................................................................4
1.1 PROJECT DESCRIPTION........................................................................................................................5
1.2 PROJECT OBJECTIVE............................................................................................................................5
1.3 PROJECT BENEFICIARIES......................................................................................................................6
1.3.1. PROJECT BENEFITIES ESPECIALY TO THE LOCAL FARMER................................................................6
1.4. PROJECT RATIONALE..........................................................................................................................6
1.5 PROJECT COMPONENT........................................................................................................................7
2. MANAGEMENT AND ORGANIZATIONAL SET UP....................................................................................8
3. STUDY OF THE PROJECT AREA...............................................................................................................9
3.1 THE TENURE SYSTEM...........................................................................................................................9
3.2 PHYSICAL FEATURES OF PROJECT........................................................................................................9
3.2.1 Location of the project.....................................................................................................................9
3.3 TOPOGRAPHY AND ELEVATION...........................................................................................................9
3.4 CLIMATE..............................................................................................................................................9
3.5 Soil.................................................................................................................................................10
3.6 VEGETATION......................................................................................................................................10
3.7 INFRASTRUCTURE..............................................................................................................................10
3.8 PRODUCTION PROCESS.....................................................................................................................10
3.9 LAND CLEARING................................................................................................................................10
3.10 GRUBBING.......................................................................................................................................11
3.11. LEVELLING......................................................................................................................................11
3.12 LAND PREPARATION and SOEING....................................................................................................11
3.13 FERTILIZATION.................................................................................................................................11
3.14 WEEDING.........................................................................................................................................11
3.15 DEASESE & PEST CONTROL..............................................................................................................11
3.16 HARVESTING AND THRESHING........................................................................................................12
PRODUCTION AND THRESHING...............................................................................................................12
3.17 Farming Program.............................................................................................................................13
Table 1: Farming program.......................................................................................................................13
3.18 production plan...............................................................................................................................14
Table 2: production and revenue plan....................................................................................................14

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4. Socio- economies Analysis...................................................................................................................14
4.1 social Analysis....................................................................................................................................14
4.2 Environmental Impact Mitigation......................................................................................................14
4.3 market Analysis.................................................................................................................................15
4.4 profitability........................................................................................................................................16
4.5 Financial Analysis..............................................................................................................................17
4.1.5 Source of Found.............................................................................................................................17
4.5.2 Total Investment............................................................................................................................17
4.5.3. Fixed Asset Investment.................................................................................................................19
4.5.4 Cash Flow.......................................................................................................................................20
5. Challenge & opportunities...................................................................................................................22
6. Monitoring & Evaluation (M&E)..........................................................................................................23
6.1 parameters for M&E.........................................................................................................................23
7. Conclusion...........................................................................................................................................23

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1 .Introduction
Ethiopia is the origin for different cultivated and wild plant species. The different part of the country are
endowed with conductive weather condition and soil types suitable for the cultivation of a variety of crops
including cereals, pules,oil seeds, fruits, vegetables and other industrial crops such as cotton, rubber and
the like. Despite this fact, due to the biased and in appropriate agricultural policy of the former regimes,
the country was characterized by low agricultural productivity and hunger.Concsequently, it was
compelled to import huge quantity of food grain to bridge its deficits annually.

Ethiopia is heavily dependent on the agricultural sector for both domestic and external economic
performances similarly the economic situation of Benishangul Gumuz Regional State (BGRS) is not
different from the general picture of the country; instead it was much worse for a variety of reasons. A case
in point the region, knowingly, was made distant from any development endeavors and hence remained
undeveloped.

BGRS is located northwest part of Ethiopia. Astronomically, the region is situated 9 017’-2016’ latitude and
34010’-3704’ longitude. The region administratively divided in to three zones, namely Assosa, Metekel and
kamashi, there are 20 woredas in the region of which seven of it is at Metekel zone, five of them are in
kamash and seven of them are at Assosa zone with one special woredas.

The region has a total area of 51,380 km 2, and is believed to have a vast area of land for investment
purpose. The topographic setup of the region is characterized by flat to gentle slope, and is altitude ranges
580-2731 meter above sea level. Climatically 99% of the region lies under tropical or kola climatic
condition, and the remaining 1% lies under woyna dega and dega climatic condition, respectively. The
region experiences an average annual temperature of 20 0250c. On the other hand, it receives an average
annual rain fall of 900-1400mm.

The economic structure of (BGRS) is predominantly agriculture and more than 95% of the population is
engaged in this sector. Crop cultivation is a long standing activity and productivity and production is
limited to subsistence level. The main crops grown in the region include sesame, sorghum, maize, finger
millets, rice, noug, cotton and pulses sesame and sorghum are mostly grown in the western low lands and
intermediate areas of the region, whereas the rest are grown in the intermediates

Benishangul gumuz region is ever green and suitable for agricultural invest as we tries to indicate in table:
1below in the map

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1.1 PROJECT DESCRIPTION
Abas Agricultural Development Project proposal is a result of years of hard working by the
promoter. The project is a mechanized rain-fed crop production enterprise. Even if it is a capital-
intensive commercial farm, it is believed that the project would contribute much to the growth of
the region in general and the district in particular. The project, was established for limited time
duration and be implemented in five phases starting from 2021 onwards.

1.2 PROJECT OBJECTIVE

The objective of the project emanates from the national objective of the country and encompass
transformation plan in the whole and also which is include success of GTP 2 enhancing foreign
exchange earing and job creation. The wider objective of the project is mainly to produce
Commercial agricultural commodities and hence generate foreign currently by exporting its
outputs.

The specific objectives of the project are:-

 To increase the income of the investor, with giving concern for environment
 To create job opportunities for the dwellers
 To create supplementary markets for small farm holders who engaged in cash crop
production
 To initiate both knowledge and technological transfer in rural areas
 To increase the production of food and commercial crops both for domestic consumption
and foreign markets
 To produce high value agricultural products for local consumption and export purpose
 To product raw materials for local industries like oil mills and textile factories
 To generate revenue for the regional as well as federal government in the form of tax and
foreign currency
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1.3 PROJECT BENEFICIARIES
The project, first and for most, benefits the owner. In addition, local inhabitants and outside
workers will benefit from the project in terms of creation of both temporary & permanent job
opportunities. Nearby farm communities can also benefit from the project in the form of
knowledge and technological transfer. Moreover, the government can collect profit and income
taxes from the project as well as wages and salaries of workers. In doing so, the project
contributes much in achieving the intended development objectives of the country. The project
also benefits small holder farmers in creating market opportunities.

1.3.1. PROJECT BENEFITIES ESPECIALY TO THE LOCAL FARMER

 The project has 85% works to change the life of local society by participating them by
inducing technical farming system in different training programmer.
 The project shows the local farmers how high production has been obtained on small land
as compared to the high size of holding and has involved infrustactural development of the
local society.
 The project has plan to do on soil and water conservation and participating the
societies on environmental management works by preparing 20,000 seeding local
adapt and environmentally friend trees.
 The project has planned to use residual of the field for father soil improvement and
production development for the local farmers.
 The project has to produce market oriented crops more than local consumption mean
for export items.
 The ability to practice the value chain commodities by creating value addition in
market chain
 To apply farming in using modern technologies such as fertilizers, combiners and
marketing available the machineries with different accessories in feature farming
time.
 To increase the production and producers more than the local producers.

1.4. PROJECT RATIONALE

Agriculture is the back bone of the national economy. As a matter of fact, its contribution to gross
domestic product in terms of job creating and foreign currency earing is highly decisive.
However, due to rapid population growth and other natural calamities, there is a mismatch
between agricultural production and food consumption in the country. Consequently, the country
is exposed to food shortages which, in turn, call for imports of food items from abroad. Moreover,

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Ethiopia’s development strategy is agricultural development led industrialization, ADLI, where
by agriculture takes the front role. In the same manner, agriculture is expected to play a lion-share
role in releasing the 5 years growth and transformation plan. In effect, the sector deserves due
emphasis and hence the participation of private investors in the sector is of immense importance
in raising the level of agricultural enterprise such as Abas Agricultural Development Project Project
proposal are instrumental and contribute much to the national development objective. The project
also plays a vital role in attaining the highly desired social and political objective of balanced
regional development.
From the analysis of the as well as the socio-economic aspects of the project area, with no doubt,
the proposed development project can be successful and exert its own role in achieving food
security and the intended development objective of the state. The proposed project area has
favorable terrain for mechanization, amiable temperature and adequate precipitation for optimum
crop growth and good pedagogical basis for cropping
The project can also contribute much to poverty alleviation through job creation for the local
residents. In addition, the project paves a way for knowledge and technological transfer, thereby
improve the life of the local people.
From environmental point of view, the project employs modern means of production through
improved and environmentally friendly production inputs. Moreover, as far as erosion and
logging are concerned, care will be employing various environmental impact mitigation
mechanisms.

1.5 PROJECT COMPONENT

The project has the following components:

1. Production component
 Utilization of fertilizers
 Utilization of farm machineries
 Utilization of pesticides
 Utilization of local and improved seeds
2. Production support component
 Construction of camp
 Construction of store
 Extension service
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  Transportation facilities

The construction of office, storages, tractor shed and shelter for daily labourers, as a component,
is included in the project.

When the project is fully developed, the intention is that it would be a model farm where nearby
farmers can also benefit in acquiring modern agricultural knowledge in the form of crop rotation,
utilization of fertilizers and pesticides, agro-forestry, soil and water conservation mechanisms
which, in turn, enhance soil fertility and environmental suitability.

The intention of the project is to develop 300 hectares of land. The crops to be cultivated are of
different varieties including sesame, maize, cotton, paper and mash. Initially, local varieties

Which have high productivity will be selected and applied. Later, based on productivity and
market demand, other research recommended varieties could be introduced.

2. MANAGEMENT AND ORGANIZATIONAL SET UP

The proposed organizational and managerial set up of the project comprises management and
technical divisions. The project comprises of managerial, production, financial and administrative
division. Is Mr. Abas Albesher, serves as a project manager the duty & responsibility of each
division is heighted below

General Manager:-the general manager, manages the entire business. Moreover, he deals with
strategic planning and decision making matters.

Production division:
 Is responsible for crop production, supervision and provision of farm input and outputs,
 Conduct regular follow up and evaluation with regard to farm operation,
 Supervises the overall operation of the enterprise,
Finance and admin division:
 Works directly under the manager and is responsible to him,
 Consist of different section that handle a variety of responsibilities,
 Keeps different books of records,
 Prepares periodic financial plans and reports for the manager as well as external users &
 Manages the logistics and human resource aspects of the project.
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3. STUDY OF THE PROJECT AREA
As stated above, the project area is located in the Benishangul Gumuz Regional State one of its
woredas the project area experiences wayina dega or tropical temperature and in term of agro-
climatic zone it lies in mid-land. The area is selected for investment because it satisfies the
following criteria employed by Ethiopian investment authority.
 The area is not occupied by peasant communities,
 The area is not covered by both forest and animal species of ecological importance,
 For the sake of conserving, developing and properly utilizing the woreda’s agriculture,
the project area is suitable for the envisaged purpose in term of environment.

3.1 THE TENURE SYSTEM

The land for the project is acquired through lease system and the lease period lasts for 25 years of
time. Even though the rent price is amendable on the basis of existing facts, it is fair and
affordable for the investor.

3.2 PHYSICAL FEATURES OF PROJECT

3.2.1 Location of the project

Abas Agricultural Development Project proposal with an area of 300 hectares, is located in
Benishangul Gumuz Regional State, Asossa zone, Asossa woredas and Asossa zone is one of the
three zones in the region and is located in the North-east part of the region. It is divided in to
seven administrative woredas, among which, Asossa woredas is the one and where the project is
situated.

3.3 TOPOGRAPHY AND ELEVATION

Topographically, the project area is predominantly flat or undulating and, due to this, the project
area is suitable for mechanized agricultural. On the other hand, as far as its elevation is concerned,
the project area lies at an elevation ranging 1668-1680 meters above sea level.

3.4 CLIMATE
Asossa woredas where the project area is found, experiences wayina dega or tropical temperature
condition the woredas, with slight variation, receives an annual rainfall ranging 1000-1400 mm.
the rainfall in the area is monomodal type falling May to October. The woredas receive more than
60% of its June to August. In contrast, months from November to April have virtually no rain or
relieve insignificant showers in a rare case. Despite some change in recent years, the average

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annual temperature of the woredas is expected to reach 200c -300c commonly, January, February,
March, and April have the maximum temperature and considered as the hottest monthly in the
woredas. The relative humidity is high during the rainy months and low at the tail end of the dry
season, i, e. April.
Generally, the rainfall pattern is well distributed and sufficient enough to grow crop type grown in
high-land, and there is no fear of drought hazard in the region as s whole and the project area in
particular.

3.5 Soil
The project area is generally a single land unit and predominantly covered by sandy loam soils.
The soils harden during dry, and get sticky and slippery when wet. The fertility status of the soils
in terms of phosphorous and potassium is high to medium. In general, the soils are bestowed of
high agricultural potential, deep and uniform profile, good physical properties and water retention
capacity.

3.6 VEGETATION
A combination of three vegetation types, namely Acacia Savannah and Acacia woodland, are
observed in the project area. Even through other combinations can also be mentioned, they are
insignificant and are sparsely distributed along with the three vegetation types. In addition, other
indigenous and economically useful vegetation species exist in it.

3.7 INFRASTRUCTURE
In regard to communication, the area is well connected with the rest of the country through
telephone connections. In the same manner, the woreda is well connected by all-weather roads to
other woredas of the region as well as other woredas.

3.8 PRODUCTION PROCESS

As far as production pattern is concerned, the 1000 hectare will be proportionally allocated for the
production of sesame, maize, and soybean and other. However, as per the prevailing market
demand and the dynamic of nature, the planned production pattern will be readjusted.

3.9 LAND CLEARING

Prior to land leveling, removing heavy vegetation growth is advantageous. Clearing land
encompasses removing of some vegetation types such as trees, bushes, trashes and boulders form
the area to be cultivated. This is done either manually and mechanically.

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3.10 GRUBBING
Grubbing is the process of removing stumps, deep-set stones & old roots as per required. This
will be done by using human labour as well as some machinery.

3.11. LEVELLING
As mentioned earlier, the project area was virgin and hence covered with a variety of
vegetation types. In order to bring the area in to level, in the long run, land clearing & grubbing
will be carried out in an environmentally in friendly manner.

3.12 LAND PREPARATION and SOEING

It is advisable that the preparation of crop fields should be carried out several weeks prior to
planting as such an activity helps the pre-germination of unwanted or weed crops. Otherwise, a
delay of the last tillage until the germination of those weeds is desirable. Appropriate planting
dates should be chosen so as to avoid risky environmental conditions such as delay or extension
of rainfall. Planting is recommended after a through preparation of field crops which, in turn,
ensures the rapid germination of seeds as well as crop development. Crop fields should be well
ploughed and prepared so as to ensure proper harrowing and fine filth production. Planting depth
should coincide with common practices of the area in which the project is situated.

3.13 FERTILIZATION
The application of fertilizers is to achieve maximum production while considering social,
economic and environmental factors. Appropriate fertilization depends on soil types,
environmental pollution.

3.14 WEEDING
Proper control of weeds, insect pests and diseases is an integral part of crop production. Proper
weed control is it largely facilitates aeration, proper growth of crops, high yield, and improper
weed control results in undesirable competition for sunlight, water & minerals. On the other hand
improper weed control results in undesirable disease and insect which leads to reduced yield and
quantity.

3.15 DEASESE & PEST CONTROL

Control of the surface and underground insects is important in crop production. Most
underground pests are controlled either by crop treatment or granular insecticides application. The
application of chemicals is essential for controlling insects which feed particularly the silks, ears

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 and tassels of crops. An integrated pest management program (IPM), including proper scouting, is
recommended. In the same manner, proper disease control is vital for both quantity and quality
crop production. In addition, proper disease control mechanisms avoid the spread of Crop borne
pathogens. Genetic resistances in parental lines is preferable but sometimes out siding lines are
susceptible to particular pathogens present in production fields.

3.16 HARVESTING AND THRESHING

Late harvesting results in dropping of eares, stalk lodging ear rot development, shelling of ears
and other related negative effects. As a result, harvesting should be done immediately after
maturity when crops form brown layer at the point attachment with cobs and the content of
moisture is reduced to 20-25%. Harvesting is possible both manually and mechanically. However,
in developing countries like Ethiopia, the former is more suitable as human labour is abundant
and cheap.

PRODUCTION AND THRESHING

Crop type Yr1 Yr2 Yr3 Yr4 Yr5 Total revenue
per crop
Sesame
Area in Ha 30 40 30 40 30
Yield/Ha/Qt 7 7 7 7 7
Total production quintal 210 280 210 280 210
Price per quintal 4000 4500 4000 4500 4000
Revenue 840,000 180,000 840,000 180,000 840,000 2,880,000
Sorghum
Area in Ha 50 40 50 40 50
Yield/Ha/Qt 200 1,600 2000 1,600 2000
Total production in 600 600 600 600 600
quintal
Revenue 1,200,00 960,000 1,200,000 960,000 1,200,000 5,520,000
Maize
Area in Ha 100 110 100 110 100
Yield/Ha/Qt 50 50 50 50 50
Total production in 5000 5,500 5000 5,500 5000
quintal
Price per quintal 700 700 700 700 700
Revenue 3,500,000 3,850,00 3,500,000 3,850,000 3,500,000 18,200,000
0
Soya bean
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 Area in Ha 60 50 60 50 60
Yield/Ha/Qt 20 20 20 20 20

Total production in quintal 1,200 1000 1,200 100 1,200

Price per quintal 1500 1500 1500 1500 1500
Revenue 1,800,000 1,500,000 1,800,00 1,500,000 1,800,000 8,400,000
0
Pepper
Area in Ha 20 30 20 30 20
Yield/Ha/Qt 20 15 20 15 20
Total production in quintal 400 450 400 450 400
Price per quintal 3,000 3,000 3,000 3,000 3,000
Revenue 1,200,000 1,350,000 1,200,00 1,350,000 1,200,000 6,300,000
0
Masho
Area in Ha 20 10 20 10 20
Yield/Ha/Qt 15 15 15 15 15
Total production in quintal 300 150 300 150 300
Price per quintal 4,500 4,500 4,500 4,500 4,500
Revenue 1,350,000 675,000 1,350,00 675,000 1,350,000 5,400,000
0
Cotton
Area in Ha 10 20 10 20 10`
Yield/Ha/Qt 10 10 10 10 10
Total production in quintal 100 200 100 200 100
Price per quintal 5000 5,000 5000 5,000 5000
Revenue 400,000 1,000,000 500,000 1,000,000 500,000 1,500,000

3.17 Farming Program

The project, with Full capacity, will commence production. In 2021 production season. In doing
so, the project tries to fully develop the 300 hectare of land within 5 years. Land clearing
activities will be accomplished accordingly.

Table 1: Farming program

Production Areal coverage per season
2021 50
2022 70
2023 100
2024 50

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 2025 30
total 300

3.18 production plan

The development project has an area of 300 hectare lade and tentatively planned to produce a
mixture of crops such as sesame. Cotton, pepper, Soya bean, Masho and sorghum However,
as mentioned above, the planned production pattern will be readjusted as per the prevailing
market demand and the dynamics of nature.

Table 2: production and revenue plan

Note: application is made based on conventional production practices. As a result, it is
understood that yield per hectare in quintal can cither increase or decrease depending on the.

4. Socio- economies Analysis

4.1 social Analysis

If the area in which the project is located is poor in terms of infrastructural provision as well as
supply of daily labourers, the project tries to handle such setbacks in a hand- in hand manner with
the regional as well as federal government development endeavors. As far as daily labourers are
concerned, the project tries to employ 130 daily workers of which 25 percent’s are constant

Works from the indigenous community and, if not fetches from nearby localities of other regions.
Forever, in addition to the various endeavors made by both the regional & federal governments,
transportation problems shall be alleviated by the project. The farming system of indigenous
community is by far traditional and benched the project contributes much to the improvement of
such practices.

4.2 Environmental Impact Mitigation

Experiences have that large scale mechanized agriculture has caused massive environmental is
degradation such as deforestation, soil corrosion and the like. Environmental degradation is
largely caused by unwise use of natural resources. Vegetative wise, at present. The project area is
mainly covered by savannah vegetation type with flat and gentler topography. In order to
minimize the adverse environmental damages and loss of soil fertility in sustainable manner. Crop
potation and wind break mechanisms will be employed.

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Crop Rotation: As opposed to the monoculture, crop rotation is mix of cropping on rotational
basis and has the following merits.

Soil Fertility A rotation of different crops ensures soil fertility for a sustained period of time as
compared to single crop grown on the same plot year after year Even though man made fertilizers
like crop residue and compost are believed to be applied immediately after the commencement of
the project, chemical fertilizers such as urea and dap will be applied immediately after the
commencement of the project, chemical fertilizers such as urea and dap will be employed as per
the demand arises, i.e. when the land loses its virginity and fertility and after the approval of
agricultural research.

Soil Sanitation: growing the same crop on the same plot continuously accelerates infestation with
diseases, insects and weeds resulting reduction in production and higher cost of cultivation.

A diligent follow up will be carried out in this respect so as to control the possible adverse effects

Protection of water bodies: The project gives due emphasis to the protection of water bodies
such as rivers & streams. In doing so the project moves in accordance with the regional land
administration & use legal frameworks.

Land Clearing: Land clearing activates will be carried out in line with idea agro forestry
practices. In effect, surely, no complete clear out and destruction of trees shall be made and hence
trees of high agro- forestry and economic importance will be left out.

Land Management: In the project area. Land management will be ensured by the application of
organic fertilizers and other improved agricultural practices. In addition, when the need arises, the
application of chemical fertilizers will be in effect. Nursery practices will also be undertaken side
by side.

Management of vulnerable Areas: The project gives due emphasis for the protection &
conservation of easily vulnerable areas such as sloppy, swampy and rugged areas. In doing so
such areas, instead of being cultivated, shall be left out or else managed and protected through
terracing plantation and other conservation mechanisms.

4.3 market Analysis

According to ministry of finance & Economic Economies Development, MOFED, agriculture is
the most contributors to GDP; for instance, in 2014/15 agriculture accounted for 685% of the
GDP pre annum and the contribution of crop production to GDP was the dominant one. Grain
production is the mainstay of the rural population as the economy of the state.
Commercial crops especially sesame is the 2nd largest export earner for the country and a great
deal of small holders are involved in its production. The project has planned to produce both
commercial and consumable crops as the demand for both is increasing at domestic
&international markets.

15
Despite the difficulty of quantifying and determining the exact demand-supply gap in the
agricultural sector, due to an increase in population size, consumption pattern, income, import-
export transactions and other factors, one can easily imagine that there is unmet demand-supply
gap in the sector. Consequently, market wise, the product of the project of the project are
demanded both locally as well as internationally. From the view point of the nation’s import-
export trend, in 2015/16, the total export value of Ethiopia, driven by high international prices of
agricultural products, grew by 46.65%. According to annual report of NBE, 215/16, the value of
major agricultural products such as coffee, sesame, flowers, pules, live animals and chat has
shown an increase of 23.65%, 57.7%, 105.5%, 11.12% and 16.5%, respectively. An increase in
the price of commodities in global markets has resulted in an increase in the value of exported
items. In the same period, the share of major agricultural products, namely, coffee, sesame, pules,
flowers and chat from the total value of exports was 35.8%, 14.9% 7.6% and 7.4%, respectively.

In general, the existing market environment is quite favorable for the sale of farm produce and
purchase of input. In both cases the project can have access to local national market centers of the
country. Since the project is located in food deficit area, it has a vital role in stabilizing the price
of food crops in the region. Therefore, the project can sell its product to market centers of the
ASSOSA implemented woredas and Addis Ababa. Moreover, the sale of the produce at nearby
markets is profitable even immediately after harvesting is completed.

4.4 profitability
According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as the percentage of net profit to total sales, net profit to
equity (return on equity) and net profit plus interest to total investment (return on total
investment) will show an increasing trend throughout the production life of the project. The
income statement and other profitability indicators show that the project is viable. In the with this,
the break-even point of the project is stimulated by using income statement protection as

BE= Fixed cost = 20%

Sales -VC
The investment cost and income statement protection are used to project the pay-back period. The
project’s initial investment will be fully recovered within 5 years. Based on the cash flow
statement, the calculated IRR of the project is 18% and the net present value at 5.4%.as far as the

16
liquidity of the project is concerned, the project is free from any liquidity problem throughout its
life.

Sensitivity analysis is among the crucial elements of project evaluation. In the with this, the
project under consideration has been evaluated from three points of view: if price/benefit
decreases by 10%, its IRR will be 10%. Similarly, if investment costs are increased by 10%, its
IRR will be 13%. Consequently, the project is feasible even conditions unfavorable to it

4.5 Financial Analysis

4.1.5 Source of Found

The total investment of the project is estimated to be Ethiopian Birr 6, 00,000 of which 70%
(1,100,000) will be financed by the development Bank of Ethiopia in long term loan. The
remaining 30 %( 400, 00) will be covered by the project owner.

Other major assumption for financial analysis of the project is summarized hereunder. For the
sake of simplicity and financial analysis purpose, the life time of the project is assumed to be 5
years. The project bears costs to a number of central facilities to support the implementation of it.
All fixed assets shall be replaced at the end of the expected economic life based on three
respective depreciation rates. A straight line depreciation method is adopted for cumulative
annual depreciation changes.

4.5.2 Total Investment

The overall investment required by the project includes fixed asset investment, production cost,
administration cost and working capital, and working capital, and estimated to be Birr 1, 00,000
EB
Table 3: Total Investment cost

Description Equity Bank loan Total

Amount % Amount %
Land development 211,560 30 67,500 70 211,560
Pick up vehicle 211,560 30 20,000 70 211,56
Motorbike 50,560 30 12,000 70 50,560
Tractor with accessories 1000,560 30 600,000 70 1000,560
Building & construction 200,000 30 30,000 70 200,000
Office equipment 10,560 30 60,000 70 211,560
Pre-operating expenditure 30 70 987,000
Working capital 211,560 30 423,000 70 987,000
Contingency 10% 200,000

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 Total 1500,000

Note: The cost estimations are made based on current market price. Therefore, they are not
exhaustive & hence they subject to change due to inflation and related factors.

Table 4: Financing Structure.

Description Equity Bank loan Total

Amount % Amount %
Land development 211,560 30 67,500 70 211,560
Pick up vehicle 211,560 30 20,000 70 211,560
70
Motor bike 50,560 30 12,000 70 50,560
Tractor with accessories 1000,560 30 600,000 70 1000,560
Building & construction 200,000 30 600,000 70 200,000
Office equipment 10,560 30 30,000 70 10,560
Pre operating expenditure 211,560 30 60,000 70 211,560
Working capital 211,560 30 423,000 70 987,000
0
Contingency 10% 200,000
Total 1,500,000

Table 5: Repayment Schedule

Loan amount Principal repayment Interest Out bal

9628262 9628262 9628262
1928262 19256524 9628262 19256524
19256524 19256524 19256524 19256524
19256524 19256524 19256524 19256524
19256524 19256524 19256524 19256524
28884786 19256524 19256524 28884786

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 Note: A term of four years loan repayment period and a grace period of nine months are taken in
to account. Plus, 9.5% lending rate is used.

Table 6: Revenue

Revenue type Yr1 Yr2 Yr3 Yr4 Yr5 Total

revenue
Revenue 840,000 180,000 840,000 180,000 840,000 2,880,000
Revenue 1,200,000 960,000 1,200,000 960,000 1,200,000 5,520,000
Revenue 3,500,000 3,850,000 3,500,000 3,850,000 3,500,000 18,200,000
Revenue 1,800,000 1,500,000 1,800,000 1,500,000 1,800,000 8,400,000
Revenue 1,200,000 1,350,000 1,200,000 1,350,000 1,200,000 6,300,000
Revenue 1,350,000 675,000 1,350,000 675,000 1,350,000 5,400,000
Revenue 500,000 1,000,000 500,000 1,000,000 500,000 3,500,000
Total 10,390,000 9,515,000 10,390,000 9,515,000 10,390,000 50,200,000
Note: Revenue from each crop is estimated on the basis of current market prices. Consequently,
such prices are subject to market fluctuations such as inflation and other related factors.
Table 7: Depreciation & Amortization

Description Cost Rate 1-5 yr.

Land development 2,2250,000 20% 450,000
Pick up vehicle 1000,000 20% 200,000
Tractor with accessories 40,000 10% 4,000
Building & construction 2,000,000 5% 100,000
Office equipment 2,000,000 2% 40,000
Pre-operating &working expenditure 100,000 20% 20,000
Total 814,000

Note: The project is assumed to settle its bank loan within five years.

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 4.5.3. Fixed Asset Investment
The major investment items of the project include:

Purchase of tractor with accessories such as disc plough, ridge, driller & planter,
4wd double pickup,
Purchase of office equipment,
Construction of office and residence.

Table 8: Estimated Fixed Investment Cost Of the Project

Description Quantity Unit price Total

Building & construction Lump sum 15,000 250,000
Tractor with accessories 1 1000,000 1000,000
Vehicles 1 40,000 40,000
4wd pickup 1 2,000,000, 700,000
Motorbike 1 2000,000 20,000
Office equipment & furniture Lump sum 100,000 10,000,
Total fixed asset investment 1,500,000
Note: The cost estimations are made based on current market prices. Therefore, they are not
exhaustive and hence they are subject to change due to inflation and related factors.

Table 9: Manpower Requirement and Annual Labour Cost

No Description Qty Monthly salary in birr Total Annual Salary in Birr

1 Farm Manager 1 300 3600
2 Agronomist 2 6000 7200
3 Accountant & Cashier 1 2500 3000
4 Chief Mechanism 1 300 36000
5 Driver 2 300 72000
6 Guard 1 1000 12000
7 Waiter 1 1000 12000
Grand Total 8 19500 27000
Note: The estimation are made based on current salaries. Therefore, they are not exhaustive
and hence subject to change due to inflation and other related factor.

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4.5.4 Cash Flow
The cash flow of the project reveals that the project, including its loan, can easily settle its
financial obligation without difficulties. Even if the project shows short of cash the in the first
year of operation due to pre-production expenditures, it turn in to liquidity after the 1 st year of
operation. Details are shown below.

Table 11: Estimated Production Cost

Cost items
Direst labor Year 1 Year 2 Year 3 Year 4 Year 5
Seed 45000 50000 60000 70000 100000
Chemical 10000 15000 20000 22000 25000
Wage 140000 175000 262500 720000 900000
Fuel 50000 70000 90000 11000 130000
Land rent 35000 35000 35000 35000 35000
Packing materials 30,000 45,000 50,000 55,000 60,000
Subtotal 275000 357000 482500 980000 1200000
Indirect labor
Salary 234000 23400 234000 234000 234000
Repair & maintenances 53800 53800 53800 53800
Insurance 26900 26900 26900 26900
Office supply 6000 8000 10000 12000 14000
Spare parts 75,000 75,000 75,000 75,000
Oil & lubricant 10500 13500 16500 19500
Sub total 240000 408200 413200 418200 423200
Operating & admin cost
Travel &predium 10000 10,000 10,000 10,000 10,000
Deprecation 393757 3937557 393757 393757
Financial cost 219,450 175,560 131,670 87,780 43,890
Sub total 229450 579,317 535,427 491,537 447,647
Total operational cost 744450 1344517 1431127 1889737 2070847

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 Table 12: project Cash flow

Description Yr. 0 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5

Total cash inflow
Sales 2302500 6225000 9787500 13050000 16313
Owner equity 950,000
Bank loan 2,216,667
Working capital
recovery
Total cash inflow 3166667 2302500 6225000 9787500 13050000 16313
Total cash outflow 2216667 744450 1344517 1431127 1889737 20708
Investment cost 3166667
Incremental
working capital
Loan repayment 2216667 443333 443333 443333 443333 44333
Financial cost 219,450 175,560 131,670 87,780 43,890
Income tax 467415 1464145 2506912 3348079 4272646

Table 13: Project Income Statement

Description Year 1 Year 2 Year 3 Year 4 Year 5
Sales 2302500 6225000 9787500 13050000 1631300
Operating expense 744450 1344517 1431127 1889737 2070847
Interest expense 221667 16867 126350 84233 42117
Operating income 1558050 4880483 8356373 11160263 1424153
Income tax 424,830 804,245 1410812 21823379 2817296
Net profit 911553 3907771 6819211 8893651 11382740

5. Challenge & opportunities

The project is viable to natural catastrophes such as climate changes like delay or extension of
rainfall. In addition, it is subject to market dynamics such as inflation which, in turn, affects the
import-export endeavors of the project. Plus, the rise and fall of market price may also affect the
project both negatively and positively.

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At international level, the demand for agricultural products, both commercial & food crops, is
increasing at an alarming rate. This, in turn, leads investors to be beneficiary & competent in the

area. In other words, investors such Yusuf Mohamed Agricultural Development PLC Project proposal
will be encouraged to produce more in terms of both quantity and quality, and hence benefit from
the international area.
The Ethiopian government has given due attention to the sector and has developed a conductive
investment policy together with a variety of incentives. In connection to this, as the country is
witnessing a double digit growth, different industries are expanding which, in turn, creates a back-
forth linkage between the sector & industries.

6. Monitoring & Evaluation (M&E)

The day-to-day activities of the project will be monitored by the agronomist. The general manager
shall visit the project site when necessary. The physical and financial plans well as reports of the
project will be prepared and submitted to the general manager on time. According to the reports
submitted, the project will check and verify through supervision. The financial and physical audits
will be undertaken at the end of each year either by internal or external auditors. In general, both
heads of the management and technical divisions, assisted by other relevant sectors, are the main
responsible bodies for monitoring and evaluation of the project and a variety of criteria shall be
taken in to account. In order words, the monitoring and evaluation part will be carried out in an
integrated manner.

6.1 parameters for M&E

As per the stage of the project, the parameters to be monitored and evaluated include project
established project implementation & progress, post implementation, environmental management,
data management, camp set up, protection of water management, land management, application of
modern agricultural inputs, and composition of machinery and so on.

7. Conclusion
According to the study made, the aggregate and planned cost required to establish the project is
estimated to be 1,500,000 Ethiopian birr. Out of the total financial requirement, 30% (400,000)
will be covered by the investor and the remaining 70% (1,100,000) will be covered by loan from
banks. In addition, the project is financially, socially, politically and environmentally viable. In
other words the establishment of the project has enormous importance in this regard.

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Annex 1: Key Assumptions
 Admin cost
 Travel & perdium: 10,000 birr year
 Insurance coverage: 1% of fixed cost
 Interest rate:9%
 Mileage per annum
Tractor: 2000km
Fuel consumption: 0.5lt/km
Truck & pick up: 15,000km
Fuel consumption: 0.25lt/km
 Oil & lubricant: 15% of fuel cost
 Spare part consumption: 5% of machinery cost
 Repair & maintenance: 2% of total fixed investment cost
 Tax rate: 30% of annual profit
 Depreciation & amortization
Land development: 20% per annum
Building & construction: 5% per annum
Vehicles: 20% per annum
Pre-operating expenditure: 20% per annum

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