Aksumait Tadesse Agricultural development

PROJECT PROPRIETOR: AKISUMAYIT TADESE

Project Name: Akisumayit Tadese Agricultural Development

Project

Investment land requested 1300ha (1000seasme & 300coffee)

LOCATION BENCH MAJI ZONE, MENIET GOLIDYA WOREDA

FARFACH KEBELE

March, 2016

Contents

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 Aksumait Tadesse Agricultural development

1. Executive Summary 1
1.1. Keys to Success 2
1.2. Products 2
1.3. Market plan 2
1.4. Management Team 3
1.5. Financial Plan 3
2. INTRODUCTION 4
3. Objectives 5
4. Vision, Mission and key to success 6
4.1. Vision 6
4.2. Mission 6
4.3. Keys to Success 6
5. PROJECT AREA 6
5.2. Agro-ecology of Minit Goldia woreda 7
5.3. Natural resources 7
5.5. Crops grown in the Woreda 8
6. BRIEF PROFILE OF THE PROJECT 8
6.1. Project Description 9
6.2. Products 9
6.3. Market plan 9
6.4. Surveying and Design of the Irrigation net work 10
6.5. Land Use Plan by crop Type 11
6.6. Situational & SWOT Analysis 11
7. MARKET ASSESSMENT 12
8. ORGANIZATIONS AND MANAGEMENT 13
9. FINANCIAL ANALYSIS OF THE PROJECT 13
9.1. Capital Expenditure 13
9.2. Source of capital Expenditures 14
9.3. Fixed investment 14
9.4. Working Capital 16
9.5. Operating costs 16
9.6. Project Income 19
9.7. Financial Viability 22
9.7.1. Income Statement 22

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 Aksumait Tadesse Agricultural development

1. Executive Summary
Project type Modern Irrigation Agriculture Development
Promoter Aksumait Tadesse Agricultural development
Project Location
Region SNNPR State
Zone Benchi Maji
Woreda Meinit Goldiya
Kebele Farfach
Planned land area 1300 hectares
Planned output Sesame(1000he)and Coffee(300he)

Employment Creation 72 Permanent and 800-1300 Daily workers

Aksumait Tadesse Agricultural development is a new farm dedicated to the production of organic
Arabica coffee, and sesame. The project is located in Southern Nation Nationality People Region of
Bench Maji Zone Minit Goldia Woreda. Aksumait Tadesse Agricultural development is working hard to
become a leading producer of Arabica coffee and Sesame for world market. By leveraging a well
thought out business plan executed by a skilled management team, the project will generate over
16,458,159 in year two sales.

1.1. Keys to Success

Aksumait Tadesse Agricultural development has identified three keys that will be instrumental in their
success. The first is the implementation of strict financial controls. By having the proper controls,
production efficiency will be maximized. The second key will be the never ending high quality coffee
bean and sesame grain supply to world market. The third key is the recognition and implementation of

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the philosophy that 100% customer satisfaction is required to ensure a profitable business. Profits are a
byproduct of satisfying customers, not the other way around.

1.2. Products

Aksumait Tadesse Agricultural development is a 1,300 hectare farm that concentrates on the growing of
Arabica coffee and Sesame which has significant market demand as being well suited for growth at the
respected woreda.

1.3. Market Assessment

Aksumait Tadesse Agricultural development is planning to produce high national and international
stipulated cash crops (Arabica coffee and sesame); these commodity nationally prioritized in the GTP-2
of the country as an export items. Therefore, its market demand is assumed to be very high. For instance
the coffee sub-sector is very important to the Ethiopian economy and number one export commodity. In
1999 for instance, coffee generated about 58 percent of all export earnings of the country. In 2005,
coffee export generated 41% of foreign exchange earnings. Its share in total earnings is declining which
reached about 35 percent in 2005/06 and 2006/07. Ethiopia earned $841.6 million from the export of
nearly 200,000 tons of coffee in 2010/2011. USA, Japan, Germen are the main Ethiopian coffee
importer countries.

This information tells us that, there is a good market demand for Ethiopian coffee in world market. So,
participating under this investment has a good opportunity to share big world agricultural commodity
market. Therefore the project targeted on the above biggest market.

1.4. Management Team

The project will have one general manager who is accountable for the PLC owner; he/she will be

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Economist/Agri. Economist/ agri-business management by their profession and with good experience
with the corresponding field. Besides, senior agronomist, agricultural engineer and accountant will
member of the project and who act as deputy managers and accountable to the general manager. More
over technical assistances with plant science back ground, experienced Forman and Supportive staffs are
employed. Accordingly, there will be 72 permanent employees and about 800 and 1,300 contractual
workers from first to third year respectively.

1.5. Financial Plan

The total project cost has two broad categories; these are fixed investment cost and initial operating cost.
The fixed investment cost of the project is the expenditure on the required assets. On the other hand,
operating cost is a onetime production expenditure of the project. Its estimated total capital is
73,942,545 birr; Out of this 52,824,500 birr is fixed investment cost. Moreover, the average one year
operation cost is 21,118,045 birr. The estimation is done using the current market price of materials,
assuming that there will be slight variation during time of purchase. Thus it will be compensated by
contingency cost.

Table 1: Summary of Investment cost

Description Local Cost(Br.) Foreign Total Cost (Br.)
Cost(Br.)
Machinery and Equipment 0 23,270,000 23,270,000
Building and Civil Works 20,904,500 0 20,904,500
Vehicles 0 8,400,000 8,400,000
Office Equipments 250,000 0 250,000
Total fixed Investment Cost 21,154,500 31,670,000 52,824,500
Initial Working Capital 21,118,045 - 21,118,045
Total Initial Investment Cost 73,942,545

Source of Fund

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Promoters contribution 22,860,000

Bank loan 53,340,000
Revenue at Full Production Capacity 76,200,000
Net Profit
2nd year 4,458,159
10th year 29,735,637

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.

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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 Aksumait Tadesse Agricultural development
has decide to undertake Irrigation Development for coffee, and sesame production in Bench Maji Zone
Minit Goldia 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.

3. Objectives

General objective

 To established and produce quality Arabica coffee and sesame for export market

Specific objectives of the project

The Aksumait Tadesse Agricultural development has identified several objectives for the business:

1. Become a leading supplier of Arabica coffee and sesame for the world market.
2. Reach the point of sustainable profitability.
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3. To create employment opportunity for the people of project area,

4. To introduce and promote modern farming system in the area,

4. Vision, Mission and key to success

4.1. Vision

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

4.2. Mission

It is the Aksumait Tadesse Agricultural development mission to become the leading provider of Arabica
coffee and sesame to the world market. This will be accomplished by providing quality product at fair
prices while exceeding customer's expectations.

4.3. Keys to Success

The Aksumait Tadesse Agricultural development will adhere to three keys that will be instrumental
in its success:

1. Strict financial controls.

2. The never ending pursuit of the highest quality coffee bean and sesame grain production.

3. Ensuring that all customers’ needs are met and they are satisfied with the purchased products.

5. PROJECT AREA
5.1. Background Information of the Area

The project is to be implemented in Southern Ethiopia People Nation and Nationalities Regional State of
Bench Maji Zone Minit Goldia Woreda. It is located in the west part of the southern region and bordered
by Minit Shasha,on the west by Debube bench, on the northwest by she Bench, and on the north and
east by the keffa zone. The administrative town of the woreda, Bachuma, is located 592 km away from
Addis Ababa in south west direction. Based on the 2007 census conducted by the Central Statistical
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Agency (CSA), it has a total population of 88,863 with gender aggregates of 49% male and 51% female
of which 97.23% are rural dwellers and the remaining 2.87% are urban dweller.

5.2. Agro-ecology of Minit Goldia woreda

Minit Goldia woreda possess 45% of intermediate highlands (Woynadega), of and 55% of semi-dry
lowlands (Kolla). Its altitude ranges between 1000-2200 meters above sea level (masl). Rainfall occurs
in two distinct rainy seasons, namely ‘Kiremt’ rains ( also called the big rains) occurring in summer
(roughly in June, July August and September) and ‘Belg’ rains (also called the smaller rains) occurring in
spring (roughly the mid February to mid May period). Mean annual rainfall in the area varies between
900 mm and 1400 mm. Average temperature varies between 13 to 25οC in the woreda.

5.3. Natural resources

Minit Goldia woreda is one of the potential woreda with diverse and conducive environmental
condition, for crop and livestock production. It is known by its coffee potential producing areas in
South Nation Nationalities and People’ Region (SNNPR). Moreover it has a potential of all season 4
rivers all are potential resources for developing small to large scale irrigation schemes. The soil, natural
vegetation, topography and weather condition of Minit Goldia woreda are the major natural resources of
which livelihood of the majority of the rural dwellers depends on it.

Furthermore, the Woreda is also very rich both in surface and ground water resources. It has ample
annual rivers and more than 35 springs. The Woreda is unique in its wetland potential in the region and
hence immense ground water sources. In addition to this it has modest climatic and agro ecological zone
for human settlement and agriculture. Therefore, these make the Woreda an ideal place for agricultural
investment in the region.

5.4. Infrastructures
The infrastructure of the woreda would be in the direction of positive development. The asphalt road
construction was started from Sawula town, Gamo Gofa zone to Bench majji zone passing through the
woreda. This can be creating a good opportunity to transport agricultural products to central market.

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5.5. Crops grown in the Woreda

The first seven top annual crops grown in ‘Meher’ season in Bench Maji Zone Minit Goldia Woreda,
based on production area are maize, sesame, teff, barley, Sorghum, sweet potato and haricot bean,.
Others minor crops grown include vegetables, Hours bean, field pea. Major perennial crops grown are
coffee, Enset, Corundum, banana, and Mango. The Woreda's office of agriculture development have
tried in promoting some improved maize, wheat, haricot bean, teff, potato and coffee. However, the
overall productivity is low as compared to the potential of varieties.

Regardless of these potential the Woreda has very few investors particularly in agricultural sector. On
the other hand, the National Growth and Transformation Plan (GTP) promote local investors
involvement in all service and economic sectors to play their role. Despite all these efferent, local
investors are almost absent as compared to other woredas in the region mostly due to its remoteness and
fragile access to infrastructure facilities until the recent past. Therefore, jobless youth and women
associated socioeconomic problems are very rampant now days. The owners of Aksumait Tadesse
Agricultural development is dedicated to engage to invest on agriculture so as to play their role to
increase agricultural production of the Woreda.

6. BRIEF PROFILE OF THE PROJECT

The project Study has planned to produce as main product coffee bean and sesame for export market.
The total project area is 1,300ha. Out of this amount of land 30 ha will be planned for construction. The
project will starts with 150 ha of land with coffee seedling plantation, 300 ha of land for sesame
development and attain full land development capacity of 1270 ha by adding 150 ha for coffee
plantation at the second year, 300 and 370 ha for sesame at second and third years. While developing the
crops, civil works, acquisition of machinery and equipments and office furniture's will be done. Hiring
of employee (permanent and temporary) is also under taken at this phase.

6.1. Project Description

The project is aimed at establishing modern agricultural development project with Arabica coffee, and
sesame grain production. The project will intend to start with the main objectives of increasing coffee
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and sesame production for export market, so as to generate income, foreign currency and strengthen
financial capacity of the owner from the sale of this products. The total area allocated for project is
1,300 ha. In general, the availability of good land, the adequacy of water for irrigation development and
cropping possibilities are all indicators of the potential of the project area for the mentioned objectives.

6.2. Products
Aksumait Tadesse Agricultural development is a 1,300 hectare farm that concentrates on the growing of
Arabica coffee and Sesame which has significant market demand as being well suited for growth at the
respected woreda. Sesame is an important oil-seed crop. It is grown in Africa, Asia and parts of Latin
America for its edible seeds which are source of sesame oil. The semi-drying oil is of high quality and
is used as a substitute for olive oil as a salad and cooking oil. The oil is used in the manufacture of
margarine and compound cooking fats and poorer grades in soap and paints, and as a lubricant and
illuminant. It is used as a vehicle for medicinal drugs and perfumes. Sesame is highly demanded crop
in the international market and is consumed by existing domestic large and small-scale oil mills.

6.3. Market Assessment

Aksumait Tadesse Agricultural development is planning to produce high national and international
stipulated cash crops (Arabica coffee and sesame); these commodity nationally prioritized in the GTP-2
of the country as an export items. Therefore, its market demand is assumed to be very high. For instance
the coffee sub-sector is very important to the Ethiopian economy and number one export commodity. In
1999 for instance, coffee generated about 58 percent of all export earnings of the country. In 2005,
coffee export generated 41% of foreign exchange earnings. Its share in total earnings is declining which
reached about 35 percent in 2005/06 and 2006/07. Ethiopia earned $841.6 million from the export of
nearly 200,000 tons of coffee in 2010/2011. USA, Japan, Germen are the main Ethiopian coffee
importer countries.

During the past six years, i.e, from 1997/98 up to 2002/03, the annual average production of all
types of oil seeds in the country was 1,9 ,200 quintals. Of the total annual production of oil seeds, the

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share of sesame is about 12%. Although total production of oil seeds fluctuates from year to year, it has
generally grown by about 4% in the past six years.

The production of sesame in the past six years has shown a tremendous increase. The production, which
was 98,250 quintals in the year 1997/98 has reached to 388,995 quintals and 362,720 quintals in
the year 2001/02 and 2002/03, respectively. This means that domestic production of sesame in the past
six years has almost quadrupled. On the other hand, export of oil seeds in the past four years, i.e, from
1999/00 to 2002/03 has almost doubled. Export of oil seeds which was 431,310 quintals in
1999/00 has grown to 822,010 quintals in the year 2002/03. In general, of the total production of oil
seeds about 33% has been exported in the past six years.

This information tells us that, there is a good market demand for Ethiopian coffee and sesame in world
market. So, participating under this investment has a good opportunity to share big world agricultural
commodity market. Therefore the project targeted on the above biggest market.

6.4. Surveying and Design of the Irrigation net work

The lay out for irrigation network to be adopted is primarily by gravity. Other high-tech irrigation
system will be used at a later stage. This method involves the sitting of the canals and field furrows in
conformity with the natural features of the field to minimize the earth works required for leveling. The
lay out design works, canal crossings with necessary culverts, the location of the feeder canals, control
structures and off-takes and the probable location of the major cheeks on canals will be under-taken in
detail.

Land Development

Most of the project area is uniform however small portion of the field needs leveling for the construction
of the canal network. The slope of the land is suitable for irrigation development. Few bushes of Acacia
trees need to be cleared.

Water Controlling Structures

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For proper control and management of water the following hydraulic structures will be constructed.
These structures include off-takes structure from canals, pipe, culverts, drop structures, etc.

Earth works

Main canals, secondary canals, tertiary canals and field canals will be constructed. The canals that need
to be raised from the existing found will be compacted for proper and efficient irrigation system.

6.5. Land Use Plan by crop Type

The project under reference has a total area of 330 ha for coffee plantation. Out of which it is planned to
develop 130 ha for coffee in the first year and full plantation of 330 ha with coffee seedling will be
attain at third year and while plantation of coffee seedling the remaining 250 ha will be developed for
sesame production every year.

Table1: Land use plan of the project

No Crop Type Unit Year and Amount
Year 1 Year 2 Year 3
1 Coffee Ha 150 300 300
2 Sesame Ha 300 600 970

6.6. Situational & SWOT Analysis

Table 2: SWOT analysis and strategy development

STRENGTH
Sales & Marketing – Currently holds largest
market share from the export items
Location- suitable agro-ecology for coffee,
sesame and maize production and under
construction of asphalt road national coffee
market centers
Skills – knowledge, skills and experience of
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STRATEGY
Maintain and grow market share by improving
marketing and promotions both within and out of the
country.
Provide quality products in large amount to attract the
coffee buyer
Train and develop staff to deliver superior quality of
 Aksumait Tadesse Agricultural development

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 Expand marketing and promotion and maintain prices
of a strong economy, low interest rates and at current market levels
high disposable income
Physical Factors- public transport and Increase advertising to attract new clients
infrastructure in the direction of progress

7. 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

Irrigation expert Finance head Agronomist

Technical assistant

Forman
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Supportive staff

Daily laborer

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 local Bank. The promoter of the project plans to raise
30% of the total capital while the remaining 70% assumed to be obtained from the local Banks. In
summary, the promoter's contribution and bank loan will be;

1. Equity capital = 22,860,000 birr

2. Bank loan = 53,340,000 birr

Total = 76,200,000birr

8.3. Fixed investment

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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 project, the total fixed cost will be Br 52,824,500.

Table 3: Fixed Investment of the Project

No Type of Unit Quantity Unit Cost Total Cost
Investment
A Machinery and Equipment        
1 Tractor Pcs 8 1,500,000 12,000,000
2 Disc Plough Pcs 8 150,000 1,200,000
3 Disc Harrow Pcs 8 120,000 960,000
4 Planter Pcs 8 70,000 560,000
5 pulping machines Pcs 2 2,000,000 4,000,000
6 Trailer Pcs 8 100,000 800,000
7 Riger Pcs 8 50,000 400,000
8 Chemical Sprayer Pcs 200 1000 200,000
9 Farm Tools Bulk - - 300,000
10 Generator Pcs 2 500,000 1,000,000
11 Water Pump Pcs 4 250,000 1,000,000
12 Pipe and Fittings Set - - 200,000
13 Fuel Tanker Pcs 2 100,000 200,000
14 Water Tanker Pcs 2 100,000 200,000
15 Workshop Equipments Set - - 250,000
  Sub Total       23,270,000
B Building and Civil Works        
1 Office M2 1000 2500 2,500,000
2 Residential houses M3 3000 2500 7,500,000
3 Launge and M3 400 1000 400,000
4 Workshop M3 400 1000 400,000
5 Pack house M 2
600 1000 600,000
6 Shed house for pulping machines M2 400 1000 400,000

7 Input Store M2 400 1000 400,000

8 Grain Store M2 1000 1500 1,500,000

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9 Fermentation tank M2 200 2000 400,000

10 Water recirculation system       2,000,000
11 Constriction of lagoons No 3 60,000 180,000
12 Reserve weir construction M 3
100 2000 200,000
13 Machinery Shed M2 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 Construction of Irrigation Structures.       2,000,000
18 Access and Farm Road km 20 100,000 2,000,000
Sub Total       20,904,500
C Vehicles        
1 Pick-up (D4D) Pcs 4 800,000 3,200,000
2 Track Pcs 6 800,000 4,800,000
  Motor Cycle Pcs 10 40,000 400,000
  Sub Total - - - 8,400,000
D Office Equipments Set - - 250,000
  Total       52,824,500

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. According to the forecast
made in detail, the amount of initial working capital is found to be Br 21,118,045.

8.5. Operating costs

Operating costs 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, annual operating costs in the
first year of the project life are estimated to be 21,118,045 birr. Because of increase in capacity
utilization, annual operating costs are expected to rise to 25,602,223 birr when the project attains full

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capacity operation. In estimating operating costs, it has been tried to depend on current market
information and on the experiences of similar projects.

Table 4: Summary of production cost

No Description Years
    1 2 3 4 to 10
1 Daily Labor 11,232,000 14,040,000 14,040,000 14,040,000
2 Coffee Seed 15,000 15,000 0 0
3 Sesame seed 100,000 200,000 350,000 350,000
 4 Fertilizer DAP 450,000 900,000 1,455,000 1,455,000
  Urea 390,000 780000 1,261,000 1,261,000
5 Packing Material 20,000 35,000 50,000 65,000
6 Fuel, Oil and Lubricant 450,000 900,000 1,200,000 1,200,000
7 Salary 1,989,600 2,089,080 2,193,534 2,303,211
8 Other operating costs 2,234,220 657,892 690,787 690,787
  Total 16,880,820 19,616,972 21,240,321 21,364,998

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table 5: 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 Manager 1 7500 90,000
4 Irrigation Agronomist 1 7500 90,000
5 Unit Farm Head 4 4500 216,000
6 Accountant 2 4500 108,000
7 Foremen 10 2,500 300,000
8 Secretary 1 2500 30,000
9 Purchaser 1 2500 30,000
10 Cashier 1 2500 30,000
11 Sealesperson 1 2500 30,000
12 Storekeeper 2 2500 60,000
13 Chief Mechanic 1 3500 42,000
14 Assistant Mechanic 2 2500 60,000
15 Truck Driver 4 2000 96,000
16 Pick-up Driver 4 1500 72,000
17 Electrician 2 1800 43,200
18 Tractor Operator 8 1600 153,600
19 Water Pump Operator 2 1400 33,600
20 Assistance Tractor Operator 8 1200 115,200
21 Guards 10 1000 120,000
22 Office Boy 1 1000 12,000
23 Cleaners 4 1000 48,000
Total 72   1,989,600

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Table 6: Depreciation Schedule

No Description Original Rate Depreciation
value
(Br.) % Per year
1 Machinery and equipments 23,270,000 10 2,327,000
2 Construction and Civil 20,904,500 5 1,045,225
works
3 Vehicles 8,400,000 10 840,000
4 Office furniture’s 250,000 10 25,000
  Total 52,824,500   4,237,225

Table 7: Other operating costs of the project

No Description Annual Assumptions used
cost
1 Repair and maintenance    
  ∙ Machinery and farm equipments 465,400 2% of original value
∙ Construction and Civil works 209,045 1% of original value
∙ Vehicles 418,090 2% of original value
∙ Office furniture’s 2,500 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 Property Insurance 528245 1% of fixed
Investment
5 Land rent 175,500 1300 ha x 135Br.
6 E-mail, Telephone, Fax and Postage 24,000 2,000 Br./month
7 Audit, license and legal fee 25,000 25,000 Br/ year
8 Medical expense 99,480 5% of annual salary
9 Working cloths 99,480 5% of Annual salary
10 Miscellaneous expenses 16,000 4000 Br./month
  Total cost 2,234,220  

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Table 8: Summary of Investment cost

Description Local Foreign Total Cost
Cost(Br.) Cost(Br.) (Br.)
Machinery and Equipment - 23,270,000 23,270,000
Building and Civil Works 20,904,500 - 20,904,500
Vehicles - 8,400,000 8,400,000
Office Equipments 250,000 - 250,000
Total fixed Investment Cost 21,154,500 31,670,000 52,824,500
Initial Working Capital 21,118,045 - 21,118,045
Total Initial Investment 73,942,545
Cost

8.6. Project Income

The project earns its revenue by selling the proposed out-put (coffee bean and sesame grain). To be
competitive in the market, the selling prices of the project out puts are determined in such a way that it
does not impose higher prices on ultimate consumers. Accordingly, the project expects total revenue of
25,000,000 birr when it starts operated at full capacity.

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Table 9: Planed Output of the Project

No Description Total Area (Ha) Output Per Total Output (qt)
Ha ( qt)

Year 1 Year 2 Year 3-10 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6-10

1 Coffee Bean 150 300 300 14 0 0 0 1500 3600 4200

2 Sesame 300 600 970 10 6000 12000 19400 19400 19400 19400

Table 10: Revenue Estimate of the Project

No Description Selling Total Output (qt)
Price
  Year 1 Year 2 Year 3 Year 4 Year 5 Year 6-10
1 Coffee Bean 5000 0 0 0 7,500,000 18,000,000 21,000,000
2 Sesame 3000 18,000,000.00 36,000,000.00 58,200,000.00 58,200,000 58,200,000 58,200,000
Total 18,000,000 36,000,000.00 58,200,000.00 65,700,000 76,200,000 79,200,000

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 Aksumait Tadesse Agricultural development

Table 11: Source of Fund

% Share Total Fund

No Source
1 Equity Contribution 30 22,860,000
2 Bank Loan 70 53,340,000
Total 100 73,200,000

The repayment of loan will start at the 3rd year and it has 8 years return back period.

 Total Loan 53,340,000

 Repayment Period 10 years
 Annual Interest Rate 9.5 %

Table 12: Loan Repayment Schedule

Year Disbursement Repayment Year Interest
(principal) Ending Rate
Balance
0 40,355,780.5 - 40,355,781
1 4,035,578.05 36,320,202 3,833,799.15
2 4,035,578.05 32,284,624 3,450,419.23
3 4,035,578.05 28,249,046 3,067,039.32
4 4,035,578.05 24,213,468 2,683,659.40
5 4,035,578.05 20,177,890 2,300,279.49
6 4,035,578.05 16,142,312 1,916,899.57
7 4,035,578.05 12,106,734 1,533,519.66
8 4,035,578.05 8,071,156 1,150,139.74
9 4,035,578.05 4,035,578 766,759.83
10 4,035,578.05 0 383,379.91

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 Aksumait Tadesse Agricultural development .

8.7. Financial Viability

As it is a private farm established with the primary objective of generating profit, the project should be
financially viable for the promoter and the lending institution. To this end, some financial statements
were selected to compare project costs and benefits throughout the project life. This financial measure
for this study is income statement.

8.7.1. Income Statement

Here, project revenue and production costs (operating costs, depreciation costs and Bank interest) are
listed and compared to see whether the project generates profit or lose. According to the forecasted
income statement table, the project is found profitable at the 5 th year. The amount of the net profit,
generated by the project varies from 4,458,000 birr at the end of the 2nd year to 29, 735,000 birr at the
end of the 10th year.

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 Aksumait Tadesse Agricultural development .

Table13. Income statement of the project (‘000Br.)

Description Years

1 2 3 4 5 6 7 8 9 10
Revenue 18,000 36,000 58,200 65,700 76,200 79,200 79,200 79,200 79,200 79,200

Less: Operating cost 21,118 23,854 25,477 25,602 26,114 26,636 27,169 27,712 28,266 28,832

Operating profit -3,118 12,145 32,722 40,097 50,085 52,563 52,030 51,487 50,933 50,367

Less: Depreciation cost 4,237 4,237 4,237 4,237 4,237 4,237 4,237 4,237 4,237 4,237

Less: Bank interest 3,833 3,450 3,067 2,683 2,300 1,916 1,533 1,150 766 383

Profit before Tax -11,189 4,458 25,418 33,176 43,548 46,409 46,259 46,099 45,929 45,747

Less: Income Tax 35% 0 0 0 11,611 15,241 16,243 16,190 16,134 16,075 16,011

Net Profit -11,189 4,458 25,418 21,564 28,306 30,166 30,068 29,964 29,853 29,735

Accumulated Profit -11,189 -6,730 18,687 40,252 68,558 98,724 128,793 158,758 188,612 218,348

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 Aksumait Tadesse Agricultural development .

General Asset Inventory

1. Cash at hand…………………………………….…….. 118,348,000.00

2. Depreciation ……………………………………………. 4,237,225.00

3. Sub Total ………………………………………………..122,585,225.00

Residual Value

4. Machineries and Buildings(35%) ………………….…... 18,488,575.00

Grand Total………………………………………....141,073,800.00

The grand total indicates that at the end of the 10th year the project will have 141,073,800 birr total
capital at hand. The coffee and shed tree price will not included in general asset inventory of the project.

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