DMD IMPORT EXPORT COFFEE PLANTATION

1. EXECUTIVE SUMMARY

Project Initiator: DMD Import and Export. Coffee plantation development project is initiated by the
DMD Import and Export..
The purpose of the newly initiated project will require 1000 hectares of land for the purpose of coffee
development just as DMD Import and Export coffee project farming.
Project cost: The total estimated cost of the coffee and spices expansion project is 39,838,130.00 birr.
30% of the project cost (11,951,439.00 birr) shall be covered by the owner and the rest 70%
(27,886,691.00) birr shall be secured from bank loan.
Land Requirement: The planned development project requires 1000 hectares of land for its project. The
land shall be used for the development of coffee for the purpose of export.
Work opportunities: The planned project shall provide work opportunities for 51 permanent and for
400 temporary workers – a total of 451 employees.

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2. INTRODUCTION
Ethiopia is the third largest country in Africa with a total area of about 113 million hectares and with a
total population of about 100 million, of the total land mass, about 85% of the population lives in rural
areas while the remaining 15% dwell in urban centers. The labor force, between 15-65 years of age,
represents about 50% of the total population. About 50% of the land area is regarded to be potentially
suitable for agricultural production. However, only less than 15% this potential area has been cultivated.
Of the cultivated area, more than 95% is under smallholder farming and the rest is under commercial
farms. Thus, there is a reason to believe that Ethiopia is endowed with vast and potential of agricultural
development.

Agriculture dominates the Ethiopian economy accounting for about 50% of GDP, 85% of the
employment and about 90% of the export reaming. Of the agricultural GDP crop production accounts
for about 60% and livestock accounts for about 30%. The most common crops produced in Ethiopia are
Wheat, Barley, Maize, Teff, Sorghum, Pulses, Oil crops, Fruits, vegetables and coffee. As to crop
production, despite its contribution and the countries natural endowment productivity of the sector is by
far below potential. This is because lack of the employment modern agricultural implements, in addition
to this, importance of private sector that can recognize a coordinated roll of all factors of production
(labor, capital, entrepreneur ability etc) was not given a room to take part in the development process
during the past regimes.

To overcome the problem related to produce good quality coffee bean and sesame grain that satisfy the
customer’s interest, efforts should be made towards developing the agricultural sector. This needs a shift
from traditional and backward method of production to a new and scientific method of production
system that requires a coordinated roll of all factors of production. In this process, it is the private
sectors should be pushed and encouraged by the government through adopting a favorable economic
policy that allows the sector to play active role in the development process without capital ceiling. In
recognition of the important of the agricultural sector and understanding the major reasons behind the
low state of the development of the country, the Ethiopian government has emerged with free market
economic strategy and the adoption of an economic policy, which acknowledges the role, and
importance of the private sectors investment. This economic policy is promulgated with various
initiatives for those who want to invest their resources and knowledge in any profitable sector. Initiated
by this favorable conditions, the promoter of this project DMD Import Export coffee plantation and
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production in Bench Sheko Zone ,south Bench Woreda. This business plan tries to explain the necessary
information like description of the area, project technical consideration, total investment capital, source
of fund and other basic economic points relevant to the project. Detail information on each point is given
in the subsequent pages.

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3. OBJECTIVES
3.1 GENERAL OBJECTIVE

 To established and produce quality Arabica coffee for export market

3.2 SPECIFIC OBJECTIVES OF THE PROJECT

The DMD Import Export coffee plantation project has identified several objectives for the business:

 Become a leading supplier of Arabica coffee for the world market.

 Reach the point of sustainable profitability.
 To create employment opportunity for the people of project area,
 To introduce and promote modern farming system in the area,

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4. VISION, MISSION OF THE PROJECT

4.1. Vision
The Project’s vision is ‘to be the quality coffee producer farm preference in Ethiopia.

4.2. Mission

It is the DMD Import Export coffee plantation development mission to become the leading provider of
Arabica coffee to the world market. This will be accomplished by providing quality product at fair
prices while exceeding customer's expectations.

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4.3 PROMOTER BACKGROUND

DMD import and export were designed to assist the country's economy by exporting and importing
goods. DMD is well-known for manufacturing various types of construction products as well as
stationary materials. DMD imports and exports electrical equipment and appliances by supplying smart
services to the private sector, government and non-government institutions, and other development
institutes. Industrial, agricultural, and construction machinery, as well as other related works Minerals &
Mineral Products
Our organization have the plan to work on different kinds of business, just for not participation rather
than improve by adding value on the following parts of businesses.
Mission
Our mission is to present our products to the larger segment of the market by providing the best quality
and reliable products that excel our customers ‘expectation; keep our margins as high as possible with
continual growth in our market share and work competitively
Vision
Our vision is dedicated to build well recognized and competitive Ethiopian company in import &export
business through providing outstanding customers service via committed and professional team.
Core Values
Integrity, Honesty, Trust, Diversity, Innovation, Accountability, Quality is all important aspects of
leadership.

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4.4 THE PROJECT AREA

The 1000 hectare of land planned for the expansion project will be secured from in South west Regional
State in Bench Sheko Zone,south Bench Woreda,Kashu kebele. As the vast area of land site is
considered neither as a forest area nor as farmers farm land the owner expects will the zonal trade and
industry department hand him the requested 1000 hectares from this reserved area.

4.5 FEASIBILITY STUDY

The ensure the project makes profit and grow sustainably to benefit all stakeholders, before deciding to
engage in the investment, DMD Import and Export coffee project farming. undertakes feasibility study
of the planned project such as availability of man power, availability of land including expansion sites,
accesses to road, electricity, telephone, and so on.

4.6 AVAILABILITY OF LAND

It is expected that DMD Import and Export coffee project farming site so far considered neither as a
forest area nor as farmers farm land. The altitude of this particular project shall range between 1150 –
1200 meters above sea level, the temperature of the project area to fall between 18 oc to 28oc and the
rainfall to be adequate for coffee plantation, the project area to have fertile, friable, loamy soil with more
than 1.5m depth, The topsoil to be predominantly dark brownish in color with a slightly sour ph.

4.7 AVAILABILITY OF MAN POWER

The farm requires both direct and indirect man power. The direct manpower, in addition to the direct
farm labor, requires head, farm management process, farm supervisors, and other agricultural
professional as well as experienced farm clerks. As Bench Sheko is one of the few zones in the region
that is known to have cheap labor, the farm will utilize existing manpower in the zone. The presence of
MizanTepi University will provides the project owner to recruit skilled labor and professional required
to run the project.

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5. MARKET OPPORTUNITIES & SUPPLY AND DEMAND ANALYSIS

Coffee is produced in more than 50 developing countries providing income for approximately 25 million
small holder producers and employing an estimated 100 million people. The bulk of the world’s coffee,
however, is produced in Latin America. Ethiopia is among the top 10 Coffee producing country and
Africa's top producer. Average world coffee production in year 1977 to 1986 was 5.05 million tons, In
years 1987 to 1996 it increased to an average of 5.76 million tons and in years 2000/01 to 2011/12 it
increased to 7.875 million tons.
Table1. World Coffee Production and Consumption

Quantity (000 tons)

Demand/
Years Production Consumption The Gap
2000/01 6,780 6,718 62
2001/02 6,449 6,796 -347
2002/03 7,327 6,917 410
2003/04 6,251 7,087 -836
2004/05 6,927 7,348 -421
2005/06 6,657 7,479 -822
2006/07 7,709 7,873 -164
2007/08 7,126 8,123 -997
2008/09 7,645 8,284 -639
2009/10 7,271 8,101 -830
2010/11 8,063 8,163 -100
2011/12 7,875 8,086 -211
Average 7,173 7,581 -408
Source: International Trade centre, www.tradeforum.org&www.interacen.org/eshop/welcome, Last
Updated on: The ITC’s Magazine and Publications & Products. Geneva, Switzerland
5.1 Consumption
About one quarter of world production is consumed in producing countries and the vast majority of
export goes to developed countries. Producing countries such as Latin America coffee producing
countries consume about 72%, Asia and Pacific 18% and Africa consumes about 10% of the total
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consumption of coffee by producing countries. In Ethiopia, half of the coffee is consumed by Ethiopians
and the country leads the continent in domestic consumption. Out of the importing countries
consumption, 24% are consumed by the USA, 46% by Western Europe, 8% by Eastern Europe and Asia
accounts about 14%. Although the top five consumers are the USA, Brazil, Germany, Japan and France
whiles the Nordic countries have the world’s highest coffee consumption per capita.
5.2 Demand and Supply Gap
As coffee is an internationally traded commodity, the analysis of key marketing variables would not be
meaningful unless the global situation is considered. For this reason, the three most important marketing
variables – supply, demand, and prices for coffee will be analyzed in line with their corresponding
situation at global market. Current experience by importing countries is such that their annual import is
the summation of coffee supplied by different producing countries in the world. There is no single
supplier of coffee committed to supply for a given importing country. In similar manner, there is no
single importer which exclusively import from a specified supplier. For this reason, it would be difficult
to actually determine the demand for a specific importing country from a given supplying country.
However, it is possible to show the general demand trend of Ethiopian coffee by focusing on the world
situation – world aggregate.

Aggregate world demand is the summation of - coffee consumption by producing countries & by
importing countries in the world. As it is shown in the table above, there is a huge gap b/n world demand
and world supply for coffee. Except in the years 2000 & 2003, the negative sign indicated in the other 8
years would show the demand deficit in those respective years. This would imply that the increase in
annual production is driven by annual increase in effective demand by importing countries. Considering
the demand for Ethiopian Coffee, the increase in demand by those 8 major buyers of Ethiopian coffee,
which totally absorb about 52% of Ethiopian coffee, has been increasing by a higher rate than the
increase in production by the former. While annual production growth, on average, in Ethiopia is 5.16%,
the demand for Ethiopian major buyers has increased up to 20%, in the past 10 years. According to the
data provided by ICO (International Coffee Organization), annual import for USA has increased by
20%, German by 15%, France, Italy, and Japan by 6%, and Canada by 3%. Considering trade statistics
of the past five years, one can see that more than 41% of the world export goes only to three importing
countries in the world: USA 20%, German 14.5%, and Japan 6.5%. Moreover, recent studies in the area
reveal that Ethiopian coffee has never suffered from lack of buyer in the world market. What is supplied

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to the world market is fully absorbed by importing countries provided there is no quality problem. Thus,
provided the right quality offered and prices are attractive, there are plenty of opportunities for getting
more demand in the world market (in both established and new markets).

The emergence of new coffee consumers is another factor affecting the world demand for coffee. Recent
information from ICO report depicts that China has decided to significantly shift from tea consumption
towards coffee. There are also other Asian countries following the same trend. This is the resultant effect
of aggressive promotion made by ICO since few years in the past.

The increase in coffee consumption by producing countries is another factor affecting demand for
coffee, for aggregate demand is compared against aggregate supply by world producers. India (the
second largest in population in the world) has declared to double coffee consumption in the coming 5-10
years, ICO report June, 2010. Ethiopia, through its consumption about 44% of the total annual
production, is categorized among the largest coffee drinking countries in the world – 3rd in Africa and
15th in the world as far as coffee producing countries are concerned. This could be regarded as an
opportunity with regard to absorbing such a significant proportion of its production; serves as a shock
absorber particularly in case world demand for coffee fails because of unknown reasons.

5.3 Target Market Identified for this Project

Currently, there are more than 50 importers of Ethiopian coffee in the world. Out of the these importing
countries, only 8 are known to be major buyers, namely; U.S.A., Italy, France, Belgium, Germany,
Saudi Arabia, Japan, and Sudan. On average, these countries import about 52% of total Ethiopian coffee
exports. As it is the case elsewhere, the major importers of Ethiopian coffee has increased their annual
import from 1% up to 20% over those years ranging from 2002-2009.

Since 2005 coffee prices have been increasing and reached the highest in a decade. As consumers in
India and China develop a taste for the drink and the demand in East Europe, Russia and Brazil
increased, prices are likely to keep rising. Moreover, something new is happening in developed markets.
Europeans, Americans and Japanese are switching to higher-quality coffee. Discerning consumers now
demand authenticity: they want stories about where their coffee beans come from. Therefore, the best
coffees will increasingly be differentiated, like fine wines and spirits, and sold at previously unthinkable
prices. Currently, the world is moving from instant-coffee powder to luxury beans. Gourmets and

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specialist roasters have pushed up expectations. Governments, activists and “ethical” coffee suppliers
have worked to get higher prices. All this is good news for coffee farmers in Ethiopia. Altitude, climate,
soil and genetic diversity give the country an inherent advantage in quality as compared to lower-grade
Latin American coffee. About 90 percent of Ethiopian coffee production is premium or organic coffee.
An agreement signed last year between Starbucks, the world's biggest coffee chain, and the Ethiopian
government has been touted as a big step forward. As a result, commercial coffee farms would gain a lot
from these opportunities. Sales of organic, fair trade, rain forest alliance, forest, and other brand sales of
natural and washed of Ethiopia is increasing.

The fact that a Specialty Coffee Association of America (SCAA); signing an agreement with the
Ethiopia Commodity Exchange (ECX), in June 2010 is an added opportunity for specialty coffee
producers in Ethiopia.

In addition to the major importers of Ethiopian coffee, through its other marketing company in Australia
(BEK Coffee International), the owner has established a new market segment in Australia and South
East Asia market with emphasis on Bench Sheko Coffee.

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6. PROCESS OF COFFEE PRODUCTION

6.1 Land Development
The activities of land development include bush clearing; tree felling, chopping and uprooting of stems
roots. Trash removals, leveling, heaping and ridge constriction are also parts of this activity.

6.2 Seedling Preparation

The nursery site of the farm is to be located at the centers of the planting fields; on a flat areas and gentle
slope not greater than 5%. It is planned to be in proximity where permanent sources of water for
irrigation is available. The project intends to purchase CBD resistant, viable and healthy seeds from
State Coffee Farms and Coffee Research centers of EARI; and will establish nurseries with the best
growing conditions to produce vigorous and healthy seedlings. Seedlings will be raised in poly tube
methods.
Varietal Selection is the basic point to be considered before Seedling preparation. The success of any
modern coffee plantation highly depends on the kind of the variety. Variety selection is just like working
a good foundation for high story buildings. Having recognized the importance of variety selection, the
promoter has already established a good relationship with – Bebeka Coffee Plantation, Office of
Agriculture, and Jimma National Coffee Research Center.
The varieties selected for this project will be based on the recommendations of the above institutions,
and considering the ecological suitability of the area, CBD-resistant and high quality coffee lines.
6.3 Coffee Planting
The coffee planting operation will spread over two months i.e. June and July.

6.4 Young Coffee Maintenance

The operations involved in the maintenance of young coffee up to 4 years after planting are capping and
pruning for multiple stem formation, infilling of dead trees, slashing, weeding and mulching. In addition
paths & tracks will have to be maintained and trees guarded from destruction by wild animals certain
amount of per tree of compost, DAP and UREA are applied for fertilizing the young trees.
6.5 Mature coffee maintenance
The mature coffee trees i.e. 4 years old or more will need all the cultural practices of young coffee
except capping but more pruning. The additional coffee practice is picking. Some activities like
composting and weeding and mulching will require more manpower than the young coffee trees.

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6.6 Harvesting and Processing

The harvesting and processing operation comes first in the 4 th year of operation, which is expected, from
September to December every year. The production from the project is expected to be 100% sundried.

6.7 Thin piece picked

The entire crop is harvested at one time. This can either be done by machine or by hand. In either case,
all of the cherries are stripped off of the branch at one time.

6.8 Selectively preferred

Merely the ripe cherries are harvested and they are picked individual by hand. Pickers rotate among the
trees every 8-10 days, choosing only the cherries which are at the peak of ripeness. Because this kind of
harvest is labor intensive, and thus more costly, it is used primarily to harvest the finer Arabica beans.

In Most coffee-growing countries, there is one major harvest a year; though in countries like Colombia,
where there are two flowerings a year, there is main and secondary crop. A good picker averages
approximately 100 to 200 pounds of coffee cherry a day, which will produce 20 to 40 pounds of coffee
beans. At the end of a day of picking, each worker’s harvest is carefully weighed and each picker is paid
on the merit of his or her work. The day’s harvest is then combined and transported to the dispensation
stand.

6.9 IMMODERATION THE CHERRIES

Even as there are several coffee species, most coffee is made from the seed or bean of either Coffee
Arabica (Arabica coffee) or Coffee canephora (Robusta coffee). Arabica trees normally produce berries
8-15 mm in diameter, and Robusta produce berries approximately 10 mm in diameter. Commercially,
Robusta is regarded as having inferior quality to Arabica coffee and is used mainly as filler in instant
coffee blends. Coffee berries are picked when they ripen to bright deep red color, though there are a few
cultivars that ripen to a deep yellow color. The coffee or green bean lies within the fruit, and is
surrounded by the parchment membrane, pulp or mucilage and outer skin. Coffee processing in the
home is very time consuming. Small-scale processing equipment is now available in Australia.
Equipment is also available from the United Kingdom at considerable expense. Processing involves six
main steps outlined below.

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6.10 The dry system

The age-old technique of dispensation coffee and is still used in many countries where water resources
are limited. The freshly picked cherries are simply spread out on huge surface to dry in the sun. In order
to prevent the cherries from spoiling, they are raked and turned throughout the day, then covered at
night, or if it rains, to prevent them from getting wet. Depending on the weather, this process might
continue for several weeks for each batch of coffee. When the moisture content of the cherries drops to
11 percent, the dried cherries are moved to warehouses.

6.11 In Wet Procedure

In wet procedure dispensation, the Hull is detached from the coffee cherry after harvesting and the bean
is dried with only the parchment skin left on. There are several actual steps involved. Firs the freshly
harvested cherries are passed through a pulping machine where the skin and pulp is separated from the
bean. The pulp is washed away with water. Usually to be dried and used as mulch. The beans are
separated by weight as they are conveyed through water channels, the lighter beans floating to the top,
while the heavier, ripe beans sink to the bottom. Next they are passed through a series of rotating drums
which separate them by size. After separation, the beans are transported to large, water-filled
fermentation tanks, depending on a combination of factors such as the condition of the beans. The
climate and the altitude they will remain in these tanks for anywhere from 12 to 48 hours. The purpose
of this process is to remove the slick layer of mucilage (called the parenchyma) that is still attached to
the parchment; while resting in the tanks, naturally occurring enzymes will cause this layer to dissolve.
When fermentation is complete the beans will feel rough, rather than slick, to the touch. At that precise
moment, the beans are rinsed by being sent through additional water channels. They are then ready for
drying.

6.12 Drying the beans

If the beans have been processed by the wet method, the pulped and fermented beans must now be dried
to approximately 11 percent moisture to properly prepare them for storage. These beans, still encased
inside the parchment envelope (the endocarp), can be sun dried by spreading them on drying tables or
floors, where they are turned regularly. Or they can be machine dried in large tumblers, once dried these
beans, referred to as parchment coffee, and are warehoused in sisal or jute bags until they are readied for
sell abroad.
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6.12.1 Milling the beans

Previous to it is exported parchment coffee is processed in the following manner; Machines are used to
remove the parchment layer from wet processed coffee.

6.12.2 Hulling

Equipments are used to remove the parchment layer (endocarp) from wet processed coffee. Hulling dry
processed coffee refers to removing the entire dried husk the exocarp, Mesocarp & endocarp of the dried
cherries.

6.12.3 Polishing

An optional process in which any silver that remains on the beans after hulling is removed in a polishing
machine.

While polished beans are considered superior to unpolished one, in reality there is little difference
between the two.

6.12.4 GRADING & SORTING

Previous to being exported, the coffee beans will be even more precisely sorted by size and weight.
They will also be closely evaluated for color flaws or other imperfections.

Typically, the bean size is represented on a scale of 10 to 20. The number represents the size of round
holes diameter in terms of 1/64’s 0f an inch. A number 10 bean would be the approximate size of a hole
in a diameter of 10/64 of an inch and a number 15 bean, 15/64 of an inch. Beans are sized by being
passed throng passed through a series of different size a series of different sized screens. They are also
sorted pneumatically by using an air jet to separate heavy from light beans. Next defective beans are
removed. Though this process can be accomplished by sophisticated machines, in many countries, it is
done by hand while the beans move along an electronic conveyor belt. Beans of unsatisfactory size,
color, or that are otherwise unacceptable, are detached.

This strength includes over-fermented beans, those with insect damage or that are unshelled. In many
countries, this process is done both by machine and hand, insuring that only the finest quality coffee
beans are exported.

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6.12.Tasting the coffee

By each stage of its production, coffee is repeatedly tested for quality and taste. This process is referred
to as cupping and usually takes place in a room specifically designed to facilitate the process. First, the
taster usually called the cupper carefully evaluates the beans for their overall visual quality. The beans
are then roasted in a small laboratory roaster, immediately ground and infused in boiling water, the
temperature of which is carefully controlled. The cupper “noses” the brew to experience its aroma an
integral step in the evaluation of the coffee’s quality, After letting the coffee rest for several minutes, the
cupper “breaks the crust” by pushing aside the grounds at the top of the cup. Again the coffee is nosed
before the tasting begins. To taste the coffee, the cupper “slurps” a spoonful with a quick inhalation. The
objective is to spray the coffee evenly over the cupper’s taste buds, and then “weigh” it before spitting it
out. Samples from a variety of batches and different beans are tasted daily. Coffee is not only analyzed
this way for their inherent characteristics and flaws, but also for the purpose of blending different beans
or determining the proper roast. An expert cupper can taste hundreds of samples of coffee a day and still
taste the subtle differences connecting them.

6.13 EXPORTING THE BEANS

Milled beans, currently referred to as green coffee, are ready to be loaded onto shipped for transport to
the importing country. Green coffee is shipped in either jute or sisal bags which are loaded into shipping
containers, or it is bulk shipped inside plastic-lined containers. About seven million tons of green coffee
is produced world each year.

6.14 Transporting processed clean coffee

At the initial stages the project will use rented vehicles to transport coffee from the farm area to the local
sites as well as processing plants. Transport to port is considered to be through hiring external transport
facilities.

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7. Land Use Plan and production capacity

The project under reference has a total area of 1000 ha for coffee plantation. Full plantation of 1000 ha
with coffee seedling.

Table1: Land use plan of the project

Developed /ha/ Year Total
1 2 3 4
1 Coffee 333 ha 555 ha 703 ha 1000 ha 1000 ha
Total 333 ha 555 ha 703 ha 1000 ha 1000
ha
7.1 Production capacity

As shown on table:1 above it is expected that DMD Import and Export coffee project farming is going
to undertake is coffee and spices farming for the purpose of supplying the product to foreign markets.
The expected annual yield to be collected from the farm is shown on table 7 below.

Table2 Annual production capacities for DMD Import and Export coffee project farming.

Year Description Land to be Expected Total annual

developed /ha/ yield /ha expected yield(qt)
YEAR 4 Coffee 333 8 2,664
YEAR 5 Coffee 555 8 4,440
YEAR 6 Coffee 703 10 7,030
YEAR 7 Coffee 1000 11 11,000
YEAR 8 Coffee 1000 11 11,000

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7.2 ANNUAL REVENUES FROM PRODUCT SALES

As shown on Table : 1 above, at full scale development, it is assumed that for DMD Import and Export
coffee project farming collects 11,000 quintals of coffee per year at full operation.

The expected annual revenue from the sales of coffee is shown on table 3 below.

Table: 3 Annual production capacity for DMD Import and Export coffee project farming

Year Crop harvested Total annual Price/qt Revenue from sales

(qt) expected yield
YEAR 4 Coffee 2,664 17,500 46,620,000.00

YEAR 5 Coffee 4,440 17,500 77,700,000.00

YEAR 6 Coffee 7,030 17,500 123,025,000.00

YEAR 7 Coffee 11,000 17,500 192,500,000.00

YEAR 8 Coffee 11,000 17,500 192,500,000.00

7.3 Calendar for the main activities of the project

The main activities to be accomplished and the tentative schedules for implementing the activities is
shown below

Table: 4. Time table of the farm

Time table for implementing main activities of the projec t

Description Starting date Complete date

Preparation and submission of business Feb,2022 March,2022
plan
Acquiring land Jan,2023 Feb ,2023
Development of infrastructure March ,2023 April ,2023
Land clearing, lowing, cultivation, and harvesting April , 2023 May,2023
Production and sales May ,2027 -

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7.4 SITUATIONAL & SWOT ANALYSIS

Table 5: SWOT analysis and strategy development

STRENGTH STRATEGY
Sales & Marketing – Currently holds largest Maintain and grow market share by improving
market share from the export items marketing and promotions both within and out of the
country.
Location- suitable agro-ecology for coffee Provide quality products in large amount to attract the
production and under construction of asphalt road coffee buyer
national coffee market centers
Skills – knowledge, skills and experience of Train and develop staff to deliver superior quality of
managers in running successful coffee farm products and services
businesses previously
Financial – owners’ access 30%to financial Fund training, marketing
resources and strong cash flow from operations
WEAKNESS STRATEGY
Location – capped capacity due to limited Investigate the option of negotiating acquisition of
investment land. additional land from adjoining area.
OPPORTUNITY STRATEGY
Economy – Well positioned to take advantage of Expand marketing and promotion and maintain prices
a strong economy, low interest rates and high at current market levels
disposable income
Physical Factors- public transport and Increase advertising to attract new clients
infrastructure in the direction of progress

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7.5 ORGANIZATIONS AND MANAGEMENT

The organizational structure of the project will be designed based on how best the services could reach
the services seekers with minimum expenses and high efficiency. The project is fully owned and
managed by General Manager of the project who is a qualified and well-experienced person to run the
business. Besides the project will be adequately staffed with qualified and experienced personnel who
could effectively execute their duties and responsibilities.

Organizational Chart

General Manager

Finance head Agronomist

Technical assistant

Supportive staff
Forman

Daily laborer

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8. FINANCIAL ANALYSIS OF THE PROJECT

8.1 Capital Expenditure

Capital expenditure is equivalent to the total financial requirements of the project. In other words, they
are initial investment outlays required to enter operational stage. These capital expenditures are
constituted of fixed investment costs and initial working capital.

8.2 Source of capital Expenditures

The above forecasted project capital is planned to be raised from two sources. These two sources are the
promoter's equity contribution and loans from Ethiopia development Bank. The promoter of the project
plans to raise 30% of the total capital while the remaining 70% assumed to be obtained from the
Ethiopia development Bank. In summary, the promoter's contribution and Ethiopia development Bank
will be; Equity capital 11,951,439.00 birr, Bank loan 27,886,691.00 birr, total investment capital
39,838,130.00 birr.

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8.3 FIXED INVESTMENT

Fixed investment costs are expenditures on the required fixed assets. The major components of fixed
costs are constituted of expenditures on machinery and equipment. The rest will go to construction of
civil works and the acquisition of office facilities. According to estimates made by this project70.9%
fixed cost will be Birr 28,245,234.00
Table 6: Fixed Investment of the Project
No Type of fixed Investment cost Unit Quantity Unit Cost Total Cost

A Machinery and Equipment        

1 Tractor Pcs 1 2,500,000 2,500,000
2 Hulling machines Pcs 1 1,000,000 1,000,000
3 pulping machines Pcs 1 1,000,000 1,000,000
4 Chemical Sprayer Pcs 200 1000 200,000
5 Farm Tools Bulk - - 300,000
6 Generator Pcs 1 500,000 500,000
7 Workshop Equipments Set - - 250,000
Sub Total 5,750,000.00

B Building and Civil Works

1 Office M2 1000 1500 1,500,000
2 Residential houses M3 3000 1,806.3 5,418,734
3 Launge and M3 400 1000 400,000
4 Workshop M3 400 1000 400,000
5 Pack house M2 600 1000 600,000
6 Shed house for pulping machines M2 400 1000 400,000
7 Input Store M2 400 1000 400,000
8 Coffee Store M2 1000 1500 1,500,000
9 Fermentation tank M2 200 2000 400,000
10 Water recirculation system       2,000,000
11 Construction of lagoons No 3 60,000 180,000
12 Reserve weir construction M3 100 2000 200,000
13 Machinery Shed M 2
200 400 80,000
14 Generator/ Pump House M2 240 1000 240,000
15 Shower and Toilet M2 9 500 4,500
16 Guard House M2 200 500 100,000
17 Access and Farm Road Km 10 200,000 2,000,000
Sub Total 15,823,234.00

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 DMD IMPORT EXPORT COFFEE PLANTATION

C Vehicles        
1 Pick-up (D4D) Pcs 2 2,000,000 4,000,000
2 Track Pcs 1 2,200,000 2,200,000
  Motor Cycle Pcs 2 150,000 300,000
  Sub Total - - - 6,500,000.00

D Office Equipments
Chairs No. 32 500 16,000.00
Tables No. 32 1000 32,000.00
Computer No.  4 10,500  42,000.00
Printer No. 2 10,000 20,000.00
Shelf No. 6 5,000 30,000.00
Safe box No. 8 4000 32,000.00
Sub Total 172,000.00

Total 28,245,234.00

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 DMD IMPORT EXPORT COFFEE PLANTATION

8.4 Working Capital

Working capital is part of annual operating costs and is required to make the project operational. Except
for some operational costs whose yearly expenses were taken as they are, some limited Monthly
expenses were taken to forecast the working capital requirement of the project. Working capital include
all project expenses other than fixed investment. They are expenditures to be spent on annual operating
items. As it will be seen letters in this document, working costs in the year of the project life are
estimated to be 11,592,896.00birr 29.1 % of the total capital. In estimating operating costs, it has been
tried to depend on current market information and on the experiences of similar projects.
Table 7: Summary of production cost
No Description Value birr
1 Daily Labor 7,560,000.00

2 Coffee Seed 100,000.00

3 Fertilizer DAP 450,000.00
Urea 390,000.00
4
  Packing Material 20,000.00
5 Fuel, Oil and Lubricant 450,000.00
6 Salary 1,654,800.00

7 Other operating costs 968,096.00

  Total 11,592,896.00

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 DMD IMPORT EXPORT COFFEE PLANTATION

Table 8 : Manpower Requirement of The project

No Description Quantity Monthly Annual
Salary Payment

1 General Manager 1 10,000 120,000

2 Farm Manager 1 7500 90,000
3 Administration Financial 1 7500 90,000
Manager
4 Unit Farm Head 4 4500 216,000
5 Accountant 2 4500 108,000
6 Foremen 10 2,500 300,000
7 Secretary 1 2500 30,000
8 Purchaser 1 2500 30,000
9 Cashier 1 2500 30,000
10 Seales person 1 2500 30,000
11 Storekeeper 2 2500 60,000
12 Chief Mechanic 1 3500 42,000
13 Assistant Mechanic 2 2500 60,000
14 Truck Driver 2 2,500 60,000
15 Pick-up Driver 2 2,000 48,000
16 Electrician 2 1800 43,200
17 Tractor Operator 2 2000 48,000
18 Water Pump Operator 2 1400 33,600
19 Assistance Tractor Operator 2 1,500 36,000
20 Guards 10 1000 120,000
21 Office Boy 1 1000 12,000
22 Cleaners 4 1000 48,000
Sub Total 51 1,654,800.00

23 Temporary worker 400×70×270days 70/day 7,560,000.00

Sub Total 400 7,560,000.00

Total 451 9,214,800.00

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 DMD IMPORT EXPORT COFFEE PLANTATION

Table 9: Depreciation Schedule

No Description Original Rate Depreciation
value
(Br.) % Per year
1 Machinery and equipments 5,750,000.00 10 575,000.00

2 Construction and Civil 15,823,234.00 5 791,161.7.00

works
3 Vehicles 6,500,000 10 650,000.00
4 Office furniture’s 172,000 10 17,200.00
  Total   1,242,200.00

Table 10: Other operating costs of the project

No Description Annual Assumptions used
cost
1 Repair and maintenance    
  ∙ Machinery and farm equipments 115,000 2% of original value
∙ Construction and Civil works 158,232.34 1% of original value
∙ Vehicles 130,000 2% of original value
∙ Office furniture’s 1,720 1% of original value
2 Stationery and office supplies 72,000 Birr6,000 /month
3 Par time and Traveling 99,480 5% of Annual salary
4 Land rent 49,000 1000 ha x 49Br.
5 E-mail, Telephone, Fax and Postage 24,000 2,000 Br./month
6 Audit, license and legal fee 25,000 25,000 Br/ year
7 Miscellaneous expenses 16,000 4000 Br./month
  Total cost 690,432.00  

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 DMD IMPORT EXPORT COFFEE PLANTATION

Table 11: Summary of Investment cost

No, Description Total Cost (Br.)

1 Machinery and Equipment 5,750,000.00

2 Building and Civil Works 15,823,234.00

3 Vehicles 6,500,000
4 Office Equipments 172,000.00
Total fixed Investment Cost 28,245,234.00

5 Working Capital 11,592,896.00

Total Initial Investment Cost 39,838,130.00

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 DMD IMPORT EXPORT COFFEE PLANTATION

9. FINANCIAL EVALUATION

The planned investment cost needed to run the project will be secured from equity and from bank loan.
Of the total 39,838,130.00 birr required to run the project, 30% or 11,951,439.00 birr will be contributed
by the promoter and the rest 70% or 27,886,691.00birr from bank loan.

9.1 FINANCIAL AND ECONOMIC ANALYSIS

Table: 12.1 Assumptions used in the financial evaluations of DMD Import and Export coffee project
farming

Construction period 2 year

Source of finance 30 % equity 70 % loan
Loan duration 5 years
Tax holidays 5 years
Bank interest 9.5%
Depreciation 10% in the initial year with 1% decrease per year there after
Repair and maintenance 5% of the total farm machinery & equipment and buildings
Farming materials and inputs Incur 5% additional cost each year
Labour cost Incur 5% additional cost each year
Utilities Incur 5% additional cost each year
Tax 20% of the gross profit
Work in progress 270 days 270 days
Cash in hand 5 days
Accounts payable 30 days

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 DMD IMPORT EXPORT COFFEE PLANTATION

9.2 LOAN REPAYMENT SCHEDULE

As mentioned above 70% of the investment cost or birr 27,886,691.00birr will be secured from loan
granting banks. Depending on the time duration and the rate of interest, the project may consider for
securing the loan it requires for its development activities. The Ethiopia development bank of Ethiopia
and the various private banks in the country would be considered as options for securing the loan.

Table:13 Loan repayment schedule

Loan Duration: 5 Years

Number of Payments: 60

Interest Rate: 9.5%

Monthly Payment: 464778.18Birr

Year Beginning Balance Principal payment Interest Payment Total payment

0 27,886,691.00

1 22,309,352.8 5,577,338.2 2,649,235.645 8,226,573.85

2 16,732,014.6 5,577,338.2 2,119,388.516 7,696,726.72

3 11,154,676.4 5,577,338.2 1,589,541.387 7,166,879.59

4 5,577,338.2 5,577,338.2 1,059,694.258 6,637,032.46

5 00 5,577,338.2 529,847.129 6,107,185.33

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 DMD IMPORT EXPORT COFFEE PLANTATION

10. PROFITABILITY

Based on the projected income statement, the project will generate profit beginning from first year of
operation. Annual government tax will also grow during the life of the project. The detail analysis is
tabulated below

Table 14. Profit or Loss projection

Y-5 Y-6 Y-8
Description Y-0 Y-1 Y-2 Y-3 Y-4 Y-7
- - - 46,620,000.00 77,700,000.00 123,025,000.00 192,500,000.00 192,500,000.00
Sales Income -
- - - - - - - -
Expenses -
Fixed Cost 28,245,234.00 - - -
11,592,896.00 11,592,896.00 11,592,896.00
Variable Costs 11,592,896.00 - - - 11,592,896.00 11,592,896.00
1,242,200.00 1,242,200.00 1,242,200.00 1,242,200.00 1,242,200.00
Depreciation - - - -
690,432.00 690,432.00 690,432.00 690,432.00 690,432.00
Maintenance - - - -
2,119,388.516 1,589,541.387 1,059,694.258 529,847.129
Bank interest - - - - 2,649,235.645
15,644,916.52 13,525,528.00 13,525,528.00 13,525,528.00

16,174,763.65
Total Expense 39,838,130.00
Gross Profit - - - - 30,445,236.35 62,055,083.48 109,499,472.00 178,974,472.00 178,974,472.00
Tax 20% - - - - 6,089,047.27 12,411,016.696 21899894.4 35,794,894.4 35,794,894.4
49,644,066.784 87,599,577.6 143179577.6
Net Profit - - - - 24,356,189.08 143,179,577.6

Remark: There is No revenue from Year 1 to year 3 (2023-2025)

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 DMD IMPORT EXPORT COFFEE PLANTATION

11. Environmental Impact assessment

11.1 Environmental Dimensions of Coffee production

The way coffee is grown and processed has profound environmental importance both locally and
internationally. This section focuses on four themes intimately related and which the project will put
measures in place: biodiversity and conservation of forest ecosystems; agro-chemical use; water
pollution from coffee processing; and soil quality. Each of these factories is critical to the environment
and the quality of coffee.

11.2 Biodiversity &Conservation of forest ecosystems

Deforestation trends are serious throughout the coffee-producing lands of Africa and Latin America.
Ethiopia is one of the coffee producing countries in the world where high deforestation rates are
encountered. By the late 1980s, for example, only an estimated one-fourth of the primary moist tropical
forest has been cleared for the purpose of different agricultural activities including coffee and cereals.

Bench Sheko´s forests are critical in protecting the atmospheric dynamics, water quality, and wildlife
species, as well as economically as reservoirs of germplasm which has multiple applications for food,
medicine, and industrial products. To preserve the Biodiversity & Conservation of forest ecosystems, the
project will employ a method of Traditional shade coffee systems.

Traditional, shade coffee production has been shown to be highly beneficial to biodiversity conservation
in tropical forest ecosystems. In South west Ethiopia, traditional coffee covers very significant areas
with closed canopy, fauna and flora species unique to the zone.

Traditional coffee is often integral to agro-forestry systems in which tree species are cultivated together
with the coffee and other agricultural commodities. Where geographic and market conditions are
favorable, economic returns can be achieved through sustained-yield timber production in association
with coffee. Agro-forestry systems, including those involving coffee, have potential to enhance the
economic and ecological stability of the area.

By providing an alternative to deforestation, traditional coffee systems constitute an important check

against greenhouse gas emissions that contribute to global warming.

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