TARIKU G/YESS INTEGRATED AGRICULTURAL FARM

1. EXCUTIVE SUMMARY

A. Information Summary
 Project/Business Category – Agricultural Production
 Project Division – Integrated Crop Farming
 Project Type –Integrated Cereal and Oil Crops Production
 Project Name – Tariku Gebreyess Integrated Crop Farm
 Project/Business Owners/Promoters – Mr. Tariku Gebreyess
 Legal Status – Sole Proprietor
 Nationality - Ethiopian
 Project Area – Ethiopia, Gambella Region, Agnwa Zone, Abobo Woreda, Perpengo
Kebele
 Project Composition – An integrated crop farm development which produces Sesame as
a main crop, Mung bean, Maize and Soybean as secondary crops
 Products to be produced – Cereal and Oil Crops Grain
 Target Market – Domestic and International
 Premises/Land Required – 1000 Hectares
 Project Capital – ETB 29,314,938.00
 Capital Share
 Bank Loan – ETB 22,282,561.00 (75 %)
 Owners Contribution = ETB 7,032,377.00 (25%)
 Planned Employment opportunity – The Project/Business will hire a total 150 workers
during farm operation period and 300 workers during harvest time.
 Planned Technology – Improved farm technologies, including improved crop production,
harvesting, post-harvest handling and processing technologies, improved supply chain
management, and other related technologies will be implemented,
 Planned Market share – 37 % of the market under consideration.
 Benefits of the Project/Business – Profit earning for the promoters, foreign exchange
income, Employment opportunity, Tax source, Advancement on aggregate agriculture

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sector, and Economic contribution to Ethiopia’s Gross Domestic Product (GDP),

improved food security situations

B. Project Description

Ethiopia in general and Gambella region in particular has huge investment potentials for
agricultural development. Currently investment in agriculture sector is found to be more
attractive and profitable in diverse sub-sectors including crop farming. More importantly,
Agnwa zone of Gambella region is endowed with adequate water resource, suitable climate, and
virgin and fertile land. Abobo woreda has suitable agro-ecology and climate, which provides
favorable conditions for commercial production of most cereal, oil and pulse crops. In this
regard, the Ministry of Agriculture and Rural Development has identified the area as an
investment potential for cereal and oil crops, such as maize, rice, sesame, cotton, mung bean
and soybean production.

Despite the great potentiality of the area, significant portion of the cultivable land in the area is
currently not developed, and hence the potential benefit obtained from cereal/oil crops
production is not yet realized. The long history of the traditional farming system and lack of
access to improved agricultural technologies and capital has resulted in an area well known for
its poor agricultural productivity and food insecurity situation in the region. Therefore, there is
strong commitment from both the federal and regional governments to make use of these
valuable resources (fertile land) for investment that has capital and improved technologies for
developing medium to large scale commercial farms, including integrated cereal-oil crops
production.

Tariku Gebreyes Integrated Farm has investigated the feasibility of developing a commercial
cereal-oil crops integrated farm located in Perpengo Kebele, Abobo Woreda, Agnwa Zone of
Gambella Regional State. The project has allocated a total of 29,314,938.00 ETB, which aims to
increasing cereal-oil crops production in the country through producing a range of crops
including sesame, mung bean, maize and soybean. These products (i. e., cereal/oil/pulse grains)
will be properly packed and supplied to either agro-processing companies or local/international
markets depending on potential demand for domestic consumption and export. Overall, the main
objective of the proposed integrated cereal-oil-pulse crops farming project is to build a year

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round production of high quality oil seeds, cereal and pulse grains to meet domestic demand and
export surplus to export markets. In view of the main challenges or constraints facing Ethiopia’s
edible oil industry, and the growing demand for food crops, this project is very much relevant to
Ethiopia’s agricultural sector development and will have significant contribution to the country’s
economy.

Planned land use on farm site includes integrated production of different crop species of social
and economic importance. The project aims to develop a total of 1000 hectares of land during its
life time. Specifically, the project will produce high quality sesame seeds on 500 ha as a main
commodity, and the remaining 500ha of land will be allocated for improved production of
different crops such as mung bean, maize and soybean. Although sesame production is the
primary objective of the project, crops such as mung bean, maize and soybean will also be
produced as a means for crop intensification and/or to generate additional revenue for the
company. Besides, the target area has a suitable agro-ecology and adequate water resources
(mainly surface water from adjacent rivers) for irrigated rice and wheat productions, which
further contribute to domestic food supply and export potential

C. Cost of The Project

The total investment capital of the project is estimated at ETB 29,314,938.00 of which birr
75% is for fixed investment cost of the farm development, construction of infrastructures,
production facilities and processing plants.

COST OF THE PROJECT

SN Particulars Description Amount
Planned by the Owners
Source Of Finance
1 Working Capital 7,032,377.00
Total 7,032,377.00
Planned by Loan
1 Farm Development_ 13,957,847.00
2 Agricultural Machineries 4,012,703.00
Bank Loan (75%)
3 Vehicle_Tractor 4,312,011.00
Total Planned 22,282,561.00
Total Cost Description
Bank Loan and Owner`s
1 Farm Development_ 13,957,847.00 Contribution
2 Vehicles 4,312,011.00

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3 Agricultural Machineries 4,012,703.00

Total Planned Asset 22,282,561.00
4 Working Capital 7,032,377.00
Total Planned Cost 29,314,938.00

D. Project Viability

Profitability: The financial analysis of the envisaged project is carried out for the following 10
years. Based on the 10 years financial projections using the income statement, cash flow
statement and financial internal rate of return (FIRR), the following results are obtained.

Income statement: According to the projected income statement, the project will generate profit
beginning from the first year of operation. Based on the 10 years financial projections the
projected accumulated net profit after payment of bank interest, depreciation and tax amounts to
birr 80,873,735.00

Cash flow statement: The cash flow statement also shows a substantial amount of cash surplus
right from the first year of project operation life. The cash balance grows from birr 3,373,
483.04 in the first year to cumulative balance of birr 75,835,619.28 during the 10th year of
operation indicating the capacity of the project to finance itself and generate cash surplus for
further investments.

FIRR Computation: The computation of the project FIRR shows that the project will profitably
generate reasonable return on investment. Before tax financial internal rate of return is calculated
to be 35%. This indicates the project is financially viable with an internal rate of return (IRR) of
27% and net present value (NPV) 37.3 million at discount rate 10 %.

SN Ratio Category Description Ratio

Current Ratio 3.71
Quick Ratio 3.20
1 Liquidity
Inventory Turnover 7.31
Asset Turnover 0.54
Return on Sales 23%
2 Profitability Cash Flow Margin 27%
Gross Profit Ratio 39%
Pay Back Period 5 Years
3 Non Discounting Criteria Accounting Rate of Return 1.20
IRR After Tax 27%

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IRR Before Tax 35%

Increasing Investment by 10%

IRR After Tax 25%
IRR Before Tax 32%

Increasing Operating Cost by 10%

Sensitivity IRR After Tax 24%
IRR Before Tax 32%

Decreasing Sales by 10%

IRR After Tax 20%
IRR Before Tax 29%

 Socio economic benefits: The socio economic benefit of the project is also very high.
The project will provide:- 150 permanent employs and 300 causal workers, Generate
revenue to government in the form of taxes, Facilitate and give a good product for local
and foreign market.
 Conclusion and recommendation: The Project is found to be operationally profitable,
viable & has significant socio-economic benefits. We recommended that according to
this attractive financial and economic benefit of the project all concerned offices &
financial institutions should give their support to facilitate the implementation of this
plan.

E. Keys to Success

 Produce and Supply High Quality and Quantity of cereal/oil/pulse grains

 Abide by the rules and regulations of governmental regulatory bodies
 Implement strong and strict financial controls
 Gives priority for Project/Business partners and alliances need and bylaws.

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2. INTRODUCTION
2.1. Background of The study
Poor performances of agricultural markets in terms of output and input have been recognized as
a major impediment to growth in agriculture and the overall economy of Ethiopia (EIAR, 2015).
The weakness of the agricultural marketing system poses a serious challenge for the country’s
objective of achieving a modern, commercialized, agricultural sector, as laid out in its Rural
Development Strategy. The government of Ethiopia views the modernization of agriculture as
the shift from subsistence to commercial production. This implies that farmers’ access to markets
in which they can sell their surpluses, along with other factors such as higher input use,
mechanization, more commercial management systems, is central to the agricultural
transformation and poverty eradication objective in Ethiopia (EIAR, 2015). Although Ethiopia is
situated in the tropical zone, its wide range of altitude, from below sea level to over 3000m
above sea level, gives it a wide range of climate from humid tropics to alpine climates, where
most types of cereal and oil crops could be successfully grown (Jackson et al. 1985).

Ethiopia’s crop farming is complex involving substantial variation in cops grown across the
country in different region and ecologies. There has been substantial growth in cereals, in terms
of area cultivated, and production since 2000, but yields are general low compared to
international standards. Thus, both raising production levels and reducing its variability are
essential aspects of the agriculture sector in Ethiopia, both to help ensure adequate food
availability as well as to increase household income earning.

Agriculture in Ethiopia has a major influence on all development processes in the country. As
some 85% of the total employment and 90% of the country export are based on agriculture
(Environmental policy. 199) it also contributes about 50% of the country s gross domestic
product (GDP) and supports around 85% of the raw material requirements of agro – industries.
This high proportion of the country’s economic gains made from agriculture depends mainly on
the existing diversity of indigenous crops/plants and livestock. Crop production is estimated to
contribute on average about 60% livestock 27% and forestry and forestry and other subsectors
around 13% of the total agricultural value (Ministry of water Resource 2016).

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The agricultural strategy stipulated in the two GTP Plans revolves around the support in the
intensification of marketable farm products - both for domestic and export markets, and by both
small and large farmers. Elements of the strategy include the shift to higher-valued crops;
promoting niche high-value export crops, focus on selected high-potential areas, facilitating the
commercialization of agriculture, supporting the development of large scale commercial
agriculture where it is feasible; and better integrating farmers with markets – both locally and
globally (MoFED, 2015).

Based on the stated strategy, cereal & oil crops, and fruits and vegetables have been identified as
commodities that have the potential for a high growth impact through commercialization. In the
area of export promotion, the strategy sets a target to expand the success story in the cut flower
industry, which was achieved through adequate support in the form of ensuring access to
permits, to land, and to finance, and to other sectors. Among the most promising in the near
future are the export of selected specialized crops – that can be grown in Ethiopia’s environment
and/or at times of the year when they cannot be produced elsewhere like cardamom and other
spices, selected cereals and oil crops, vegetables and fruits. The most important fruit that can be
successfully grown in the country is banana, which is now getting due attention by the
government and the private sector (EIAR, 2015). Other oil and cereal crops such as Sesame,
Maize, Mung bean, Soybean, Sunflower and Peanut are also getting due attention in the
international market and local market.

2.2. Justification of the Study

Although Ethiopia lies within the tropics temperatures range from a mean annual high of 86
degrees Fahrenheit to mean annual low of 50 degrees Fahrenheit and government of Ethiopia has
favorable investment policies and regulations that further attract the private sectors involvement
in the economic development through the various investment and business endeavors there exist
not much commercial farms. To this effect the owners of the envisaged project has planned to
invest in Gambella Region, Angwa Zone, Abobo Woreda, Perpengo Kebele in high value
integrated oil, cereal and pulse crops production.

This business plan is done to confirm the market, technical and financial viability of this project.
The result of the study is very sound and promising to the owners to commence the project in the

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area. In addition, the soil of the proposed area is very suitable for oil and cereal crops production.
The promoters are very dedicated to commence this project and they expect to get the necessary
support from the regional and local government to make the project functional.

Thus, this study was conducted to analyze Sesame, Maize, Mung bean, and Soybean integrated
production viability by investigating the demand-supply gaps, current and future demand for
domestic consumption and export markets, and the marketing channels, marketing constraints
and opportunities.

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3. THE PROJECT

3.1. Project Summary

Southwest parts of Ethiopia in general and Gambella region in particular is one of the cereal-
pulse production potential areas in the country. The area is endowed with adequate water
supply, good soil fertility and suitable climate conditions. In most places the natural
environment remains relatively intact. Sufficient and longer rainfall distribution of the area
favors for extended periods of cereal crops production. Depending on the types of species; the
production periods are in succession one after the other which allows multiple crop harvestings
within the same season.

Despite the great potentiality of the area; the benefits obtained from cereal crop farming is very
low. In the area, the level of cereal crop farming is mainly traditional to primitive that pass from
generation to generation with little or no changes. In the area traditional cereal crop farming are
dominantly practiced. The way of handling cereal crops and harvesting products is very primitive
and sometimes very brutal in which farmers partially destroy products due to poor postharvest
management. Such type of harvesting practice is contributing for the declining quality of cereals
in the area. In general, due to lack of knowledge and practical skills on improved cereal crop
farming methods coupled with lack of improved cereal crop farming technologies, the
productivity and the quality of edible cereal crops produced in the area are low.

Tariku Gebreyes Integrated Farm has investigated the feasibility of developing a commercial
cereal-oil crops integrated farm located in Perpengo Kebele, Abobo Woreda, Agnwa Zone of
Gambella Regional State. The project has allocated a total of 29,314,938.00 ETB, which aims to
increasing cereal-oil crops production in the country through producing a range of crops
including sesame, mung bean, maize and soybean. These products (i. e., cereal/oil/pulse grains)
will be properly packed and supplied to either agro-processing companies or local/international
markets depending on potential demand for domestic consumption and export. Overall, the main
objective of the proposed integrated cereal-oil-pulse crops farming project is to build a year
round production of high quality oil seeds, cereal and pulse grains to meet domestic demand and
export surplus to export markets. In view of the main challenges or constraints facing Ethiopia’s
edible oil industry, and the growing demand for food crops, this project is very much relevant to

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Ethiopia’s agricultural sector development and will have significant contribution to the country’s
economy.

3.2. Project Cost

The total investment capital of the project is estimated at ETB 29,314,938.00 of which birr
75% is for fixed investment cost of the farm development, construction of infrastructures,
production facilities and processing plants.

COST OF THE PROJECT

SN Particulars Description Amount
Planned by the Owners
Source Of Finance
1 Working Capital 7,032,377.00
Total 7,032,377.00
Planned by Loan
1 Farm Development_ 13,957,847.00
2 Agricultural Machineries 4,012,703.00
Bank Loan (75%)
3 Vehicle_Tractor 4,312,011.00
Total Planned 22,282,561.00
Total Cost Description
1 Farm Development_ 13,957,847.00
2 Vehicles 4,312,011.00
Bank Loan and Owner`s
3 Agricultural Machineries 4,012,703.00
Contribution
Total Planned Asset 22,282,561.00
4 Working Capital 7,032,377.00
Total Planned Cost 29,314,938.00

3.3. Project Viability

Profitability: The financial analysis of the envisaged project is carried out for the following 10
years. Based on the 10 years financial projections using the income statement, cash flow
statement and financial internal rate of return (FIRR), the following results are obtained.

Income statement: According to the projected income statement, the project will generate profit
beginning from the first year of operation. Based on the 10 years financial projections the

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