PROJECT PROPOSAL

FOR
PVC, PIPE, IRREGATION CONDUIT AND OTHERS
PLASTIC PRODUCT MANUFACTURING FACTORY

PROJECT TO BE IMPLEMENTED IN DUKEM TOWN,

O/S/Z/S/FINFINE, OROMIA REGION

PROMOTER: - NANSEE SHIMELIS

JULY, 2021 E.C

FINFINE, ETHIOPIA

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TABLE OF CONTENTS

TABLE OF CONTENTS...............................................................................................................2
EXECUTIVE SUMMARY.............................................................................................................4
1. INTRODUCTION...................................................................................................................5
1.1. Project Justification......................................................................................................................5
1.2. Objective of the Project...............................................................................................................6
1.3. The Economic Significance of the Project....................................................................................6
1.4. Location, infrastructure and land.................................................................................................8
1.5. Land Use Plan.......................................................................................................................9
2. MARKET STUDY AND PLANT CAPACITY....................................................................10
2.1. Market Study.............................................................................................................................10
2.1.1. Fast GDP Growth............................................................................................................10
2.1.2. Demand for PVC Pipe and Conduit and Fitting...........................................................13
2.1.3. Supply of PVC Pipe........................................................................................................15
2.1.4. Demand and Supply Analysis........................................................................................21
2.1.5. Global Market of UPVC..................................................................................................22
2.1.5.1. UPVC Pipes Manufacturing Industry, Global Scenario..........................................23
2.2. PLANT CAPACITY AND PRODUCTION PROGRAM.......................................................................24
2.2.1. Plant Capacity..................................................................................................................24
2.2.2. Production program........................................................................................................24
2.3. PRICING AND DISTRIBUTION......................................................................................................25
3. TECHNOLOGY, ENGINEERING PRODUCTS NATURE AND USE..........................26
3.1. Product Nature and Uses...........................................................................................................26
3.2. Raw Materials and Inputs...............................................................................................................26
3.3. Production Process....................................................................................................................28
3.3.1. General Production Process and Technology.............................................................28
3.3.2. Detail Production Process..............................................................................................28
3.4. Machinery and Equipment Requirement...................................................................................32
3.5. Civil Engineer Building and Civil Works......................................................................................33
3.6. Utilities.......................................................................................................................................33

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4. OGANIZATION, MANAGEMENT AND MANPOWER...................................................34
4.1. Organization and Management.................................................................................................34
4.2. Man Power................................................................................................................................34
4.3. Organizational Structure............................................................................................................34
5. FINANCIAL REQUIRMENT AND ANALYSIS.................................................................38
5.1. Total Initial Investment Cost......................................................................................................38
5.1.1. Fixed Investment...................................................................................................................39
5.1.2. Initial Working Capital............................................................................................................40
5.1.3. Pre -Service Expense..............................................................................................................40
5.2. Annual Production Cost at Full Capacity....................................................................................41
5.3. Financial Analysis and Statements.............................................................................................43
5.3.1. Underlying Assumption...................................................................................................43
5.3.2. Source of Fund................................................................................................................44
5.3.3. Loan Repayment Schedule............................................................................................44
5.3.4. Depreciation Schedule...................................................................................................44
5.3.5. Revenue Projection.........................................................................................................45
5.3.6. Balance Sheet.................................................................................................................45
5.3.7. Income/Loss Statement..................................................................................................46
5.3.8. Profitability........................................................................................................................47
5.3.9. Pay-Back Period..............................................................................................................47
6. ENVIRONMENTAL IMPACT OF THE PROJECT..........................................................47
6.1. Environmental Impact Assessment Of The Project....................................................................47
6.2. The Environmental Impact of Vinyl Chloride.............................................................................47

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EXECUTIVE SUMMARY

1. Project Name PVC, PIPE, IRREGATION CONDUIT AND OTHERS

PLASTIC PRODUCT MANUFACTURING FACTORY
2. Project Owner NANSEE SHIMELIS

3. Nationality Ethiopia

4. Project location Dukem town, O/S/Z/S/Finfine, , Oromia region

5. Project Composition Manufacturing of different size and type of PVC,Pipe,

Conduit, Fittings and other pipe accessories materials
foe domestic and foreign market.
6. Premises Required 18,000m2

7. Total Initial Br. 76,000,000 from this amount 30% (22,800,000)

Investment Cost
and 70%(53,200,000) from bank loan
8. Employment 260 employees (160 0n permanent and 100 on
Opportunity
temporary basis)
9. Market Share 70% for domestic

10. Benefits of the

project For The Value add, supply of quality product, employment,
region/ country
income generation, save foreign currency, technology
transfer and environmental protection through
recycling.

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1. INTRODUCTION

In dynamic economic environment, like the one currently exist in Ethiopia, the
development of industry and supportive manufacturing sector has a great role to make
the overall economic growth to be persistent.

The government of Ethiopia has a conducive investment polices and guidelines that
promote the private sectors involvement in the economic development through the
various investment and business endeavors.

In this regard, the owner of the envisioned factory planned to invest in Dukem town,
Oromia special zone Surrounding Finfine of Oromia region state and carried out this
pre-project study to check the market, technical and financial feasibility of this project.
The result of the study is very sound and promising for the owner to start the project in
this area.

The promoter is very determined to commence the project. Hence, he expects to get the
required support from the regional and local governments to make the project
operational.

1.1. Project Justification

Ethiopia has a great economic potential in Africa. The current dynamic economic growth
in all sectors supports the idea to become a great nation. Agriculture is the backbone of
the economy. High improvement in terms of productivity and efficiency of this sector will
strongly support the development of other sectors (in backward and forward linkages).

In line with the above facts, the government of Ethiopia has implementing the five years
Growth and Transformation Plan(2010/11-2012/15) that aimed to achieve wider
development spectrum in all sectors with a special emphasis to agricultural
development that will realize the formation of industrialized and middle income earned.

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In this plan, crop production and productivity, irrigation and improved water use,
technology multiplication, food security and supply and distribution are among the main
strategy for agriculture and rural development strategies.

Regarding infrastructure development, construction, education, private sector role in the

economy and environment the plan has good strategies to achieve the goal of
industrialization.

To all the above facts the parallel growth in complementary (supportive) sectors of the
economy is vital to sustain it. In relation to this, the owner of the envisioned factory
interested to engage in the sector that has government development focus apart from
huge market potentials.

Therefore, manufacturing of PVC based irrigation pipe, water supply, sewerage pipes
and conduits are taken as a promising business by the owner.

Moreover, these days, the PVC based materials are widely used in agriculture and
construction sector especially the pipes. The main reasons behind the need of these
pipes are its durability, beautiful, easy to assemble tough, insulated, long lasting, inert,
resistance (UV rays, Hit, Pests, rats, water and moisture) and have a good variety of
models with reasonable price, which make it more popular around the world.

1.2. Objective of the Project

The main objective of this factory is to manufacture, cost effective, market oriented,
client based and quality irrigation pipe, conduit, fittings and other pipe accessories for
local market and international market.

1.3. The Economic Significance of the Project

The envisaged project deemed to contribute to the economic development of the nation
in general and the region in specific with following ways:

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 1.3.1. Value Add

In the production of PVC products from virgin resin and recycling wastage PVC as raw
materials, the project will add value in the PVC industry.

1.3.2. Contribute to the Nation’s Development

By supplying customer oriented, high quality and cost-effective PVC materials it will
satisfy the demand for different purposes like building construction, agriculture, supply
and sewerages of the citizens in particular and the nation in general.

1.3.3. Source of Revenue

As public policy of any nation, the government collects different forms of taxes from
different business organizations and individuals. Among the different forms of taxes,
business income taxes, payroll tax and VAT are collected from undertaking business
activities. Therefore, the project will serve as sources of revenue for both the region and
nation as a whole.

1.3.4. Employment opportunity

One of the problems that our country faced is unemployment. Therefore, the current
objective of the government is working on tackling the problem of unemployment and
fostering the development process either through creating self employment or
employment in other organization. Hence, this project will hire 260 citizens.

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 1.3.5. Save/Generate the Country Foreign Exchange

All types of the envisioned products (Produced by the project) are mostly imported from
abroad. By producing in Ethiopia, the factory will save the foreign currency of the nation.

By minimizing the market demand and supply gab for these products, the factory will
help to reduce the nation’s foreign exchange cost to import these products. This will
save the foreign exchange resource of the nation.

Moreover, the nation can generate foreign currency when the factory start exports these
products to international market.

1.3.6. Benefit For The Local Community

As a corporate responsibility the company will engage in different development

activities on the surrounding areas (Dukem town). This will better worse the community
and contribute for the development of the nation.

1.3.7. Environmental benefits

The factory uses both virgin resins and recycling of wastage PVC materials, the factory
will benefit the region as well as the region in environmental conservation.

1.3.8. Stimulate The Local Economy

This factory has positive externality in the zone that will encourage the economic
movement of local economy. There will be economic relationship and transactions
among different actors.

1.3.9. Technology Transfer

By producing PVC products, the project will train and develops the capacity of the
technical staffs. By doing this, the company will add value in technology transfer for the
nation/region in this area.

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 1.4. Location, infrastructure and land

1.4.1 Location

The envisaged project is established in Dukem town. The town is located at a distance
of 28 km far from Addis Ababa to the west.

1.4.2 Infrastructure

The town is bisected by an asphalted road from Addis Ababa to Ambo city. Supplies
such as potable water and electric power are available in the town. The available
electric power, water supply, telephone service & transportation facilities are
dependable to undertake industrial development in the town.

1.4.3 Economic activity of Area

Most of the residents of the town earn its living means from business activity, even
though the number of civil servants can’t be under mined. The location of the town on a
get way to many zonal towns facilitated by types, quantity of transactions being under
taken, & different types of private industries are allocated in the town. Bars, restaurants,
hotels, pastry & recreation centers are flourishing as well as response to demand from
the business community. This is further facilitated by the number of daily arrivals from
different enroot to Addis Ababa.

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 1.5. Land Use Plan

The factor planned to acquire a total of 10,000 m2 areas of land. This land planned to
use as follow indicated in table below.

Table Premises Required and Use Plan

SN Description Land Requirement (M2 )

1 Factory Building 8,000.00

2 Warehouse 4,800.00

3 Office Building 1,350.00

4 Waste Accumulation area 1,250.00

5 Green Area, Parking and Buffer Zone 2,600.00

  Total 18,000.00

2. MARKET STUDY AND PLANT CAPACITY

2.1. Market Study

The Plastic industry in Ethiopia consists of manufacturing of PE, PVC pipes, fittings and
conduits. The overall economic growth of the nation that reflects in booming in the
agriculture sector, industry sector, construction sector and infrastructure development of
the government increasing the market demand and supply of PVC based pipes and
conduits for irrigation, drainage, water supply, sewerage, building construction and
other purposes.

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 2.1.1.Fast GDP Growth
The Ethiopian economy has been experiencing dynamic and double digit growth that
experienced annual average growth of 11.4% in past 8 years. According to Ministry of
Finance and Economic Development (MOFED), the forecasted economic growth the
economic growth (GDP at constant basic price) for 2011/2012 is estimated to be 10.4
%. As per the estimates, annual growth rates of the major sectors, i.e. Agriculture,
industry and service were 7.6 %, 10.6 % and 13.0 %; respectively and their shares out
of the total GDP were 42%, 13% and 45 %, respectively. This continuous and a-two-
digit high growth would place Ethiopia among the fast growing countries in the world.

As sectors of the economy, the agriculture and construction sector also grows with
double digit with the average annual growth 10.31% and 12% respectively in the past
8 years. As shown in the table below the growth of the sectors directly related with the
economy as parts of the economy.

Table Major Economic Indicators

 
Trends in Performance of the Economy: Growth Rates (%)
 
Item 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
GDP in
1999/00 Prices -2.1 11.7 12.6 11.5 11.5 11.6 10 10.4
Agriculture -10.5 16.9 13.5 10.9 9.4 7.5 6.4 7.6
Industry 6.5 11.6 9.4 10.2 10.2 10.4    
O/w:
Manufacturing 0.8 6.6 12.8 10.6 8.3 7.1    
Construction 13.6 19.5 7.5 10.5 10.9 11.3 11.7 10.9
Services 6 6.3 12.8 13.3 14.3 17    
O/w: Banking
and insurance 10.8 19.7 24.2 28.7 15.1 24.9 16.5 13.7
Distributive
services 5.5 6.4 14.7 14.2 16 15.2    
Other
services 6.5 6.1 10.9 12.5 13.1 14.2    
Real GDP per
capita GDP -4.6 10.7 9 8 7.5 7.6    
Inflation 15.1 8.6 6.1 10.6 15.8 25.3    
Source: MOFED & NBE

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This fast growth of these sectors resulted from different bodies like government, non
government and private activities in Ethiopia is growing in the fastest rate. Moreover,
the current five years Ethiopian Growth and transformation plan will expand the current
agriculture, infrastructure, residential (Condominium) and buildings in paramount level.

The enhancement of productivity, expansion of irrigation scheme and water use

increases the economic performance of the agriculture sector. Expansion of water
supply and hygiene bring betterment in public health of the citizens. Moreover, the
demand of housing by private sector and demand for building by private business will
expand the construction sector more.

There exists direct relationship between sectoral development and complementary

equipments and materials. As economic science proved the demand for complementary
goods (goods that will consume together like fuel and car) have positive relationship.
This means when the demand for one good increase the corresponding complementary
good demand also increase automatically with different rate depending on the nature of
good.

The fastest growth of agriculture and construction sector created the fast and bulk
demand for agriculture and construction (building) materials. Since pipes, fittings and
conduits are among the main complementary materials for these sectors particularly,
the corresponding demands for these products are also increase. Therefore, as a part
of these materials PVC based pipes for irrigation, water supply and sewerage and
conduits have the highest demand.

Furthermore, the investment in infrastructure road, water supply and town and rural
electrification and the like have ever increased in the recent years. According to the
Ethiopian census report the housing units those constructed with bricks, blocks and
stone as their wall; get access of water, electricity and telephone line has been grown
by 9%, 7.84%, 6.69% and 13.22%respectively. Thus the development of each sector is

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the critical base for plastic, pipe and conduit and fitting market as they are the end users
of the commodities
Furthermore, as witnessed from observation (for the sake of this specific project) of new
modern business complex building and constructions in Addis Ababa , most of them use
PVC pipes and conduits.

Havening huge population and good nature of the PVC product can further strength a
demand for these products.

2.1.2. Demand for PVC Pipe and Conduit and Fitting

The demand for PVC and conduit and fitting is derived from the demand in construction
and building, water supply, irrigation development, electrification and telecommunication
line distribution sub sectors that consume them for their development. The development
of construction and building and the access of water supply, electrification and
telephone line to the country housing unit have been increasing. According to the two
census in 1994 and 2007, the housing unit has increased from 10, 766, 729 to
15,103,135 in the respective years and their average annual growth is found to be
2.64%.
The consumption of PVC pipe and conduit fitting in the country is expected to enhance
as the construction and infrastructure development boost. The registered consumption
data for PVC pipe and conduit and fitting is not obtained and hence, the consumption
trend for the past five years is calculated by summing up the production and import and
subtracting the export.
Table Consumption (Production+ Import-Export)

YEAR Pipe and Conduit (Kg) Fitting (Kg)

2007  13,881,371  -
2008  6,842,774.54  871,003.07
2009  4,680,154.59  943,506.70
2010  17,498,725.13  1,546,743.00
2011  419,233.75  148,650.40
2012  21,184,007.20  4,687,159

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The per capita Consumption (PCC)

The per capital consumption of PVC pipe for the last six years has been grown
by 6% per annum as shown in the table below.

Table per capital consumption of PVC pipe & conduit

Pipes
Year conduit(kg) Housing unit PCC
13,881,317 14,340,585 0.97
2007
6,842,775 14,719,176 0.46
2008
4,680,146 15,103,135 0.31
2009
17,498,725 15,501,857.76 1.13
2010
489,634 15,911,106.81 0.03
2011
21,186,823 16,331,160.o3 1.30
2012
AAGR 6%

The per capita consumption 0f PVC fitting for the last six years has been increased by
47%, as shown in table below

Table the per Capital consumption of PVC fitting

Year Fitting(kg) Housing unit HUPCC
871,003.07 14,719,176 0.06
2007
943,506.70 15,103,135 0.10
2008
1,546,743.00 15,501,857.76 0.01
2009
148,650.40 15,911,106.81 0.28
2010
4,687,159 `16,331,160.03 0.42
2011
AAG 63%

Therefore, the dead for PVC pipe & conduit and PVC fitting for the next projected years
is the sum of PVC pipe & conduit and fitting consumption by each housing unit

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Forecasted Demand

The demand for PVC pipe conduit and PVC fitting will increase from
23 and11million kilogram in 2011 to 49 million and 1.178 billion
kilogram in the end of forecasted year respectively.

Table Forecasted Demand for PVC pipe and conduit

Pipe PCC Demand for pipe &
Year Housing Unit of HU Conduit (Kg)
2014 18,125,233.41 1.64 29,686,286.67
2015  18,603,739.57  1.74  32,298,204.92
2016  19,094,878.30 1.84 35,139,930.18
2017 19,598,983.08 1.95 38,231,681.80
2018 20,116,396.24 2.07 41,595,458.09
2019 20,647,469.10 2.19 45,255,192.88
2020 21,192,562.28 2.32 49,236,925.77

Table Forecasted Demand for PVC Fitting

Pipe PCC of Demand for PVC

Year Housing Unit HU Fittings (Kg)
2014 18,125,233.41  2.96 53,650,691
2015  18,603,739.57  4.83 89,856,062
2016  19,094,878.30  7.88 150,467,641
2017 19,598,983.08  12.84 251,650,943
2018 20,116,396.24  20.93 421,036,173
2019 20,647,469.10  34.11 704,285,171
2020 21,192,562.28  55.61 1,178,518,388

2.1.3.Supply of PVC Pipe

The domestic supply of PVC pipe and conduit and fitting is the sum of total production
by all established in the country and the import from international market.

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 Production
There are twenty seven factories those producing PVC pipe and conduit and fitting are
imported. The production capacity of the products: pipe (PVC, PPR, and HDPE),
conduit and fitting of the factories are presented in the table below

Table PVC Pipe and conduit and fitting production capacity (Kg/hr)
Ser
. Type of Product
No. Company product range(mm) Production Capacity
Current
Designed Attainable Production % capacity
        Capacity Capacity capacity utilization
Oromia pipe
1 factory UPVC pipe  75-63  2730  2184  1866.4  85
2  GIW UPVC pipe  20-400  1100  880  748  85
    HDPE pipe  20-63  300  240  204  85
3  Amhara UPVC pipe  20-400  1100  0  0  0
    HDPE pipe  20-63  300  0  0  0
4  EXCCEL UPVC pipe  13-400 1300  1040  416  40
    HDPE pipe  20-400  800  640  256  40
    PPR pipe  20-63  250  200  80  40
 Ethio-
5 Plastic UPVC pipe  13-400 700  560  476 85
    HDPE pipe  20-300  300  240  204  85
    PPR pipe  20-63  250  200  170  85
    Cable  Cable  100  80  68  85
6  Birutesfa  HDPE pipe  20-400  1300  1040  832  80
 Ethio
7 polymers UPVC pipe  13-250  700  560  112  20
 Plastech
8 PLC UPVC pipe  13-110  150  120  24  20
    HDPE pipe  13-160  550  440  176  40
9  Tana PVC UPVC pipe  16-350  700  560  336  60
    HDPE pipe  20-75  250  200  10  5
Dari
Business
10 Group UPVC pipe 16-350 500 400 80 20
      20-110 250 200 10 5
    UPVC pipe 40-200 50 40 16 40

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  Taffo
11 Plastic   20-110 250 200 0 0
 MA
12 thermo.P. UPVC pipe 16-110 40 32 12.8 40
13  Alemegenet UPVC pipe 13-200 250 200 120 60
    PPR pipe 20-63 200 160 64 40
    PPR fitting 40-200 50 40 16 40
 Black
14 Diamond pe Conduit 13-16 100 80 32 40
 Unique
15 Plastic UPVC pipe 16-60 150 120 48 40
    UPVC fitting   50 40 16 40
16  AB Plast UPVC pipe 16-200 250 200 32 40
    PPR pipe 20-63 150 120 48 40
    UPVC fitting   150 120 72 60
 Tilahun
17 G/Micheal UPVC pipe 16-160 600 480 288 60
 Temesgen
18 Chaka UPVC pipe 16-250 200 160 64 40
19  Nati PVC UPVC pipe 13-160 250 200 80 40
20  Natran UPVC pipe 13-200 600 480 307.2 64
    PPR pipe 20-75 200 160 88 55
    UPVC pipe 20-63 150 120 72 60
21  Yimerdin UPVC pipe 16-200 200 160 64 40
22  Bekrobe UPVC pipe 16-110 250 200 160 80
23  Yoki UPVC pipe 16-250 250 200 40 20
24  Afacto UPVC pipe 16-110 200 160 64 40
25  Ermias HDPE pipe 13-32 100 80 48 60
26  Euro Cable cable 300T 100 80 32 40
 Elsewedy
  Ethiopia cable 5000T 200 160 64 40
 Electrical
  World cable 150T 50 40 12 30
27  HAKAMAZ PPR pipe 16-200 250 200 80 40

Source: Ministry of Industry

As shown in the table above all twenty seven factories have an attainable per hour
production capacity of 8696kg of PVC pipe, 1000kg of PPR pipe,3440 kg of HDPE pipe,
440 kg of conduit and 240kg of PVC pipe fitting, while the actual production capacity per
hour is 5256.4kg of PVC pipe, 514kg of PPR pipe, 1828kg of HDPE pipe, 208kg of

17
conduit and120kg of PVC pipe fitting, thus their capacity utilization rate is 60%, 51%,
53%, 47%, and 50% for PVC pipe ,PPR pipe, HDPE pipe conduit and PVC fitting
respectively.

According to the information from ministry of Industry and central statistical agency of
Ethiopia the production of PVC pipe and conduit has grown by 4% per annum. The
production amount for fitting in the past series years is not found however, according to
the ministry of industry the total amount of production of 2010 is put to 264,000 kilogram
as shown in the table below.

Table Summary of PVC pipe and conduit and Fittings production(KG)

Description 2005 2006 2007 2008 2010 AAGR

Pipe and
Conduit 13,881,317.00 4,256,681.00 2,044,090.00 913,091.00 16,786,880.00 4%
Fitting 264,000.00
Source: CSA and Ministry of Industry

The production projection for the next ten years has been carried out using the average
annual growth rate for PVC pipe and conduit.
Table Productions Forecast (Kg)

Year Pipe and Conduit

2014 19,638,275.00
2015 20,423,806.00
2016 21,240,759.00
2017 22,090,389.00
2018 22,974,004.00
2019 23,892,965.00
2020 24,848,683.00

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As shown in the table the production of PVC pipe is forecasted to reach 24.84 million
kilogram at the end of the projection while the production amount for PVC fitting remains
constant throughout the projection.
Import
As to the other less developed countries Ethiopia is one of the importers of chemical
products beside machinery and equipment from developed nations. The importer
amount of PVC pipe and conduit and PVC fitting has shown an increasing rate in the
past years that despite the import substitution strategy of the government. The growth in
the sector of construction and building, water supply, electrification and expansion
telephone lines has i a lot in an increment of imports throughout the last five years.
According to the data from Ethiopian custom authority the import of pipe and conduit
and fitting and conduit has been increased by 14% and 50% respectively.

Table Import of PVC pipe and conduit (kg)

Year Pipes & Conduit Fitting
2006 2,586,093.54 871,003.07
2007 2,636,055.59 943,506.70
2008 16,585,634.13 1,546,743.00
2009 419,233.75 148,650.40
2010 4,397,127.20 4,423,159.00
2011 14% 50%
Source: Ethiopian Custom Authority
Import Projection
The import of the PVC pipe and conduit and PVC fitting for the next ten years is
forecasted using the average annual growth rate of the last five years 14% and 50%
respectively, as shown in the table below.

Import Projection (kg)

Year Pipes and Conduits Fitting
2014 7,426,573 22,392,242
2015 8,466,293 33,588,364
2016 9,651,574 50,382,545
2017 11,002,794 75,573,818
2018 12,543,185 113,360,727

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 2019 14,299,231 170,041,091
2020 161,301,124 255,061,673

As shown in the table the import of PVC pipe and conduit and PVC fitting is expected to
reach 16million and 255million kilogram respectively, by the end of year 2020.

Since the past series production amount for PVC fitting is not obtained, the maximum
attainable amount that can be produced by all existing factories (660,000kg/annum) is
added to the import amount throughout the projection years. Thus the national supply of
PVC pipe and conduit and fitting has grown from 6.84 and 1.26 million kilograms in
2006 to 21.18 and 4.82 million kg 2010. Both the existing and projected supply is made
by summing the production and import and subtracting export.

Table Supply (Production + Import-Export)

Year Pipe and Tube (kg) Fitting (kg)
2006 6,842,774.54 12,670,003.07
2007 4,680,145.59 1,339,506.70
2008 17,498,725.13 1,942,743.00
2009 419,233.75 544,650.40
2010 21,184,007.20 4,819,159.00

Table Supply Projection (Production + Import-Export)

Year Pipe and Tube (kg) Fitting (kg)
2011 22,638,245.00 7,294,738.50
2012 24,220,571.00 10,612,107.75
2013 25,945,143.00 15,588,161.63
2014 27,827,917.00 23,052,242.44
2015 29,886,880.00 32,248,363.66
2016 32,142,334.00 51,042,545.48
2017 34,617,202.00 76,233,818.23
2018 37,337,387.00 114,020,727.34
2019 40,332,179.00 170,701,091.01
2020 43,634,717.00 255,721,636.51

20
As shown in the above table the supply of pipe & conduit and fitting are increased from
22.6 and 7.29 million kilogram in the year 2011 to 43.6 and 255.72 million Kg in the year
2020 respectively.

2.1.4.Demand and Supply Analysis

Table PVC pipe and Conduit Demand-supply Gap (KG)

Demand-Supply
Year Demand for Pipe & Conduit Supply of Pipe and Conduit Gap
2014 29,686,286.67 27,827,917.00 1,858,448
2015  32,298,204.92 29,886,880.00 2,422.325
2016 35,139,930.18 32,142,334.00 2,997,596
2017 38,231,681.80 34,617,202.00 3,614,480
2018 41,595,458.09 37,337,387.00 4,258,071
2019 45,255,192.88 40,332,179.00 4,923,014
2020 49,236,925.77 43,634,717.00 5,602,209

The demand supply gap analysis of PVC pipe and conduit shows that there is high and
increasing unsatisfied demand for PVC pipes and conduits. Hence, the gap is
increasing throughout the forecasted year from 0.4 million kilogram in the year 2014 to
5.6 million kilogram in 2020.

Table PVC Fitting Demand-Supply (KG)

Demand-Supply
Year Demand for PVC Fittings Supply of PVC Fittings Gap
2011  11,398,366 7,294,738.50 4,103,627.5
2012 19,269,407 10,612,107.75 8,657,299.3
2013 32,139,443 15,588,161.63 16,551,281.4
2014 53,650,691 23,052,242.44 30,598,448.6
2015 89,856,062 32,248,363.66 55,607,698.3
2016 150,467,641 51,042,545.48 99,425,095.5
2017 251,650,943 76,233,818.23 175,417,124.8
2018 421,036,173 114,020,727.34 307,015,445.7
2019 704,285,171 170,701,091.01 553,584,080.0
2020 1,178,518,388 255,721,636.51 922,796,751.5

21
The demand supply gap analysis of PVC fittings shows that there exists high and
increasing unsatisfied demand for the PVC fittings. Thus, the gap is increasing
throughout the forecasted year from 4 million kilo gram in the year 2011 to 922 million
kilograms in 2020.

2.1.5.Global Market of UPVC

Vinyl’s low cost, versatility, unique set of properties and performance makes it the
material of choice for dozens of industries such as health care, communications,
aerospace, automotive, retailing, textiles and construction. In the product form it can be
as rigid as a pipe or as pliable as a PVC wrap. Over the past few years the market for
UPVC is on a steady rise. The major driver for the growth is the increased penetration
of UPVC in insulation cables and pipes. However, the building and construction
industries are the basic marketplaces for pipes and the pipes industry usually finds itself
firmly ensconced among those boom and bust industries which ride the coattails of our
nation's economic fortunes. Another factor of growth in UPVC pipes is innovations in
pipe resins, pipe structures and pipe processing technology.

In the global market UPVC pipes and fittings constitute the largest volume application at
36% of the marketplace. Worldwide demand for these pipes is forecasted to increase
more than four percent per year through 2007. In the European pipe market, PVC pipes
rank first among other materials and globally PVC pipes are used at about 54% of the
total pipes used. Polyvinyl chloride (PVC) takes the lion's share at around 62% of the
global market. Polyethylene (PE) has 33.5%, while polypropylene (PP) takes about
4.5%. In Europe, 1.5 million tons of UPVC was used in 2002 to make pipes. Similarly in
case of USA pipe demand is projected to grow 2.5% annually to 15.5 billion feet in
2007.

2.1.5.1. UPVC Pipes Manufacturing Industry, Global Scenario

Table Major Importing Countries of UPVC Pipe

22
 Value in US $ "000"
 
Top Importers 2004 2005
France 120,662 120,663
USA 83,360 92,950
Mexico 76,411 82,760
Ireland 44,415 49,911
Canada 38,370 41,831
UK 38,043 37,533
Belgium 37,127 33,181
Spain 34,699 38,432
Germany 24,991 20,395
Austria 22,296 19,261
Source; PCTAS, HS Code 391723
France, USA and Mexico have been the top importers of UPVC pipes over the past few
years, contributing to approximately 35% of world imports.

Table Major Exporting Countries of UPVC Pipe

Value in US $
"000"
Top Importers 2004 2005
USA 136,505 139,214
Germany 88,082 85,168
Canada 72,313 79,031
UK 76,687 76,446
Italy 79,173 72,891
Netherlands 31,505 70,086
Spain 53,684 51,461
China 25,992 50,720
Ireland 25,782 29,277
Denmark 23,744 26,195
Source; PCTAS, HS Code 391723

USA, Germany and Canada are the top three exporters of UPVC pipes, contributing to
32% of world exports.

23
Therefore, from the above market demand and supply analysis for the PVC Pipes,
conduits and fittings there exist very huge market gab in Ethiopia. Hence, the
envisioned factory will be successful by entering in to this Industry .

2.2. PLANT CAPACITY AND PRODUCTION PROGRAM

2.2.1.Plant Capacity

Based on the assumption of machine capacity (one Extrusion Production line) ,

employee 2 shift systems per 8 hrs and 315 working day in year the factory will produce
a total of 2,700,000.00 kgs capacity out of this amount 18.52% PVC conduits, 18.52%
PVC pipe, 18.52 % of PVC Fittings and 44.44 % of irrigation pipe each will be
produced.

2.2.2.Production program

Considering the gradual growth of demand and the time required to develop the
required skill the rate of capacity utilization during the first, second and third year of
production will be 70%, 80% and 100% respectively. Full capacity utilization will be
reached during the third year of operation.

Table Production program

Year
Description
1 2 3-10
Capacity utilization (%) 70 80 100
PVC Pipe in Kg 350,000.00 400,000.00 500,000.00
PVC Conduits in kg 350,000.00 400,000.00 500,000.00
PVC Fittings in kg 350,000.00 400,000.00 500,000.00
Irrigation Pipe 840,000.00 960,000.00 1,200,000.00
Total 1,890,000.00 2,160,000.00 2,700,000.00

24
 2.3. PRICING AND DISTRIBUTION

It would be important to examine the possible level of price based on the competitor’s
action in domestic and foreign market. In this connection, the existing average retail
prices of similar factory were assessed for the benefit of comparison. Based on the
existing price in the market the envisioned factory stetted the price as follows;

Table Pricing of the Factory

Product Average price in Price of the factory

Int'l market in Birr in Birr
PVC Pipe in Kg 30 22
PVC Conduits in kg 21 13
PVC Fittings in kg 24 19
Irrigation Pipe 33 21

3. TECHNOLOGY, ENGINEERING PRODUCTS NATURE AND

USE
3.1. Product Nature and Uses

PVC is used for producing high quality leakage free pipelines for conveying water,
sewerage or effluent, insulating material for electric cables in construction industry,
covering for floors, Door & Window Profiles, Toys, Food packaging, Furniture,
Automobile industry, Electronics, Medical usage and shoe manufacturing industry.

Different Properties of PVC like thermoplastic, lightweight, toughness and durability, low
thermal conductivity, good insulation properties, variety of colors, corrosion and
abrasion resistance, weather ability and fire retardant properties

PVC pipe can be used in many purpose, in general the PVC Pipes are being used in
four major areas: Water supply, drainage, conduits, fittings and tube wells. The main
products constitute of Polyvinyl Chloride and UPVC Un-plasticized Polyvinyl Chloride.
UPVC is used in the drinking water supply system. PVC is used in agriculture, drainage
and sanitation.

25
The Plant will produce different size, diameter and characteristics of PVC Irrigation
Pipe, PVC Conduits, fittings and PVC Sewerage Pipe. In general these products are
planned by the company as standard and widely demanded in the market.

3.2. Raw Materials and Inputs

PVC manufacturing on the basis of derivation can be grouped as raw material or reused
plastic as raw materials. The basic raw material for the production of those products is
PVC Resin: Vinyl (Polyvinyl Chloride or PVC) is composed of two simple building
blocks: Chloride and ethylene. After going through the processes of cracking and
polymerization a fine powder-vinyl resin is produced.

Polyvinyl chloride, commonly abbreviated PVC, is a thermoplastic polymer. It is a vinyl

polymer constructed of repeating vinyl groups (ethenyls) having one hydrogen replaced
by chloride. Polyvinyl chloride is the third most widely produced plastic, after
polyethylene and polypropylene. PVC is widely used in construction because it is
cheap, durable, and easy to assemble.

The three most important characteristics which affect the processing and use of specific
resins are molecular weight, particle size and particle configuration. Its commercial
value results from these characteristics: Chemically inert; water, corrosion and weather
resistant; high strength-to-weight ratio; tough, dent-resistant; an electrical and thermal
insulator; and maintains properties over long periods of time. PVC resin can be of
various types: suspension grade, paste resin and the synthetic resin.

The main raw material used in PVC pipes manufacturing is the suspension grade used
in the extrusion process. Normally certain additives are also used in PVC pipes
manufacturing to facilitate production process and quality concerns. The additives like
lubricant, stabilizer, antioxidant, plasticizers and colorants are added according to the
requirement to increase the mechanical impact strength and easy processing. Raw

26
material for PVC Pipes constitutes 95% of PVC resin while other agents are only used
as 5% of total mixture.

Common agents (Inputs) used in the production of PVC pipes are as follows:
 Filler: Calcium Carbonate
 Color: LT Black
 Color Fading Agent: Titanium
 Stabilizer

The factory will use the virgin suspension grade/resin as well as plastic wastage through
recycling.

3.3. Production Process

The factory will use the following production steps in manufacturing to produce those
products.

3.3.1.General Production Process and Technology

In general, PVC pipes are produced by the conventional extrusion process. Depending
on its end use application, PVC resin is compounded with several additives, stabilizers,
lubricant, and filler in a high-speed mixer. This compound is fed into a twin screw
extruder, where it is plasticized and forced through a die to form a pipe. The sizing of
pipe is done through calibration equipment. The pipe is then cooled off by passing it
through a water bath. The Haul off unit is responsible for pulling the pipe. A rotary cutter
can be employed to cut the pipe into standard predetermined lengths.

27
 3.3.2.Detail Production Process

Typically manufacturing process consists of the following steps:

i. Raw Material Preparation:

This is the process where PVC is initially mixed with additives. Additives are essential in
PVC processing in order to take care of adverse reaction during heat application in
extrusion process. During the process of mixing the polypropylene is mixed with dyes
and other additives for a fixed time over heat. This causes the raw materials to infuse
into each other and form a clamp product that is further granulized.

PVC powder is weighted quantity is discharged batch wise into the high-speed mixer.
Before starting the mixer additives are added into the batch.
Typically a batch of the material for PVC pipe would consist of: PVC 100.0 Kgs, K –
Values 65 to 67, Stabilizer 2.0 to 2.5 Kgs, Filler 0 to 2.0 Kgs and Color 0.5 Kgs

Stabilizer protects PVC from heat degradation during extrusion and consists of metal
co-precipitates. Quality filler may be added to reduce some cost but not at the expense
of physical strength. It consists of coated calcium carbonate now available locally.

Color is essentially titanium dioxide and carbon block to give the PVC Pipe its traditional
grey shade and also some protection against visible light, which causes growth of
fungus.

High-speed mixer is started and by friction the temperature is raised to 110 0C after
which the mixed batch is discharged to cooler where it is cooled to 50 0C. This mixture is
called dry blend and is ready for extrusion process.

ii. Extrusion Process:

These granules are fed into twin screw extruder through a hopper and a dosage feeder,
are heated in different stages between the ranges of 150°-230° C. Dosage feeder

28
controls the feed rate to extruder. Material is heated, compressed, air vented by vacuum
and metered in the extruder barrel (containing twin screws) before entering into die. The
two types of extruders used in PVC pipes manufacturing are single screw and double
screw. The envisioned factory will use twin screw extruders because of the following
reasons:
 Their segmented screw design gives flexibility in screw and barrel layout and
enables changes for future processes.
 The variable screw speed gives process flexibility.
 The co-rotating twin screw; mixes the raw materials horizontally and vertically
simultaneously.
 The self-cleaning effect of the intermeshing screws.
 Large numbers of components can be incorporated, including powders.
 Up to 20 per cent of blowing agent can be incorporated, including non or partly
soluble blowing agents.

PVC Pipe dies have many parts/die sets, which can be changed to produce different dia
pipes with, desired wall thickness. For example one die would have die sets or parts to
produce pipes from ½” to 4” dia pipes. Die has thickness control bolts for control of
circumferential thickness of pipes. The resulted molted paste is passed through the dye
to obtain a very unstable hot end product. At this point the product is viable to damage
due to unsuitability for which it needs cooling down.
iii. Calibration and Hauling Off
Exact diameter of pipe is formed in the water bath where calibration bush is installed.
Cooling water and vacuum is applied for exact control of pipe diameter according to
standards. The pipe is continuously balanced by the haul off speed through which
minimum thickness of pipe is controlled.
iv. Cooling
The obtained product needs to be cooled down immediately to strengthen it. For this
purpose the pipe/product is passed through the room temperature water. The cooling
provides strength and toughness to the product.

29
 v. Printing
After the product has been prepared as per the requirements the brand name of the
factory, size, density is printed on to the pipe. In normal practices the text is printed
three times on a single pipe. Sometimes the printing is done after the product has been
prepared and tested per the customer’s requirements.
vi. Cutting
The pipes need to be cut into appropriate sizes. Cutting is done either manually or
automatically. The cutter cuts the pipe at pre determined lengths depending to the size.
Furthermore it also typically chamfers one end for ease of joining.

vii. Bell Ending/Socketing

As per the requirements these pipes are reheated and then molded (expanded, bent,
sealing etc) into the final product. Two types of socket ends are produced in PVC pipe
length. At the requirement of the buyer plain ends can also be supplied. Two types of
socket ends are;
 Solvent weld joints: These are plain bell end joints usually popular from ½” to 4”
dia. However on customer’s requirement bigger dia also are sometimes
produced for some industrial and tube well applications.
 Z joint: This is a rubber ring method joints and is produced with grooved socket
where the rubber ring Z cross section is placed. This is a popular joint for pipes in
dia 3” to 24” ranges for pressure water supply and distribution.

viii. PVC Pipe Testing

A sample of each batch is tested for Opacity, Gravity, Fracture toughness, Heat
reversion and Hydrostaticity. However at this point in Ethiopia only limited factories are
testing their products. Typically following tests are carried out during production of PVC
Pipes for basic quality control.
ix. Storage
These pipes are packed and stored in warehouses, and are subject to their delivery.
Fig Process flow chart of PVC pipes, fittings and conduit manufacturing

30
Figures below shows a typical extruder machine used in PVC pipes manufacturing and
the detailed version of the screw.

Quality Assurance
The top line manufacturing units will set up an international standard laboratory for its
products.

3.4. Machinery and Equipment Requirement

The factor will have two Extrusion production line. The list of machineries and
equipments are listed as shown below.
 Twin screw extruder with powder loader
 Mould
 Vacuum Thank
 Hauling Off
 Automatic cutting machine
 Stacker
 Scrap line(Recycling machine)
 Oil- Ink Printer
 Compressor

31
  Chiller unit
 Generator (300 KVA)

Fig Typical Extrusion Production Line

3.5. Civil Engineer Building and Civil Works

As indicated in part 1 the total land requirement for the project is estimated to be
10,000M2.The buildings are planned to accommodate production houses, storage and
other utility requirements as well as offices and a social rooms/constructions.

In general the buildings must be capable of being kept clean and provision should be
made for keeping the sewerages drained out properly and room temperature is attained
to keep healthy environment. In most environments, equipment should be totally
enclosed in a light structure: where the climate is suitable. A concrete floor, which can
be swept, is usual. Besides, the loading and offloading areas together with incoming
and outgoing roads are proposed to be paved to ensure a clean environment around
the project site. The site will be encircled by a chain linked fence fastened to concrete
posts. The project construction is designed by professional engineers and construction
will be done under close supervision and collaboration of the engineers.

32
 3.6. Utilities

A number of utilities would be put in place in order to ensure smooth functioning of the
factory. These utilities include:

A. Water Supply,
B. Supplementary Electricity supply,
C. Paved Road Transportation,
D. Drainage Facility

4. ORGANIZATION, MANAGEMENT AND MANPOWER

4.1. Organization and Management

The organizational structure should be in a way that the company able to achieve its
objectives as well as the satisfaction of standard requirement.

4.2. Man Power

The total manpower required for the factory will be 260 persons (160 0n permanent
and 100 on temporary bases). The manpower list and the Corresponding labor cost
are shown in part 5 on the financial part.

4.3. Organizational Structure

The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be
manager with the responsibility of supervising the overall activity of the plant.
Depending up on the nature of the center and the amount of work to be performs; there
exist auxiliary units under the general manager.

33
 Employees under each unit will be supervised by the department head that is
accountable for the general manager. General Manager is appointed by the owner.

Owner

General Manager

Executive
Secretary

Manufacturing
Admin & Finance Commercial
Department
Department
Department

Fig: Organizational Structure

Hence the following section deals with the duties and responsibilities of some
departments.
1. General Manager
Duties and responsibilities
 She/he will plan, organize, direct and control the overall activities of the factory
 She/he will devise policies and strategies that will enable the factory to be
profitable.
 She/he will incorporate modern technological innovation that will facilitate the
service delivery of the project center and increase customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human
resources of the plant so as to achieve the short and long run objectives of the
organization.

34
2. The Manufacturing Department
Duties and responsibilities:-
It is the core department of the project center and has the following responsibilities.
 Design and prepared prototype for irrigation pipe, conduit, fittings and
accessories based on the plant standard and customer preferences
 Use modern manufacture, processing and technologies that will enhance the
quality of those products.
 Produce quality product that will enable the center competent both in the
domestic and international market.
 Use appropriate technology to manage its products.
 Produce some of the project products from recycled PVC materials
 Control on the quality of raw materials, inputs, quality of the product and also the
overall production process.
 Produce products in least cost so that the profitability of the center is guaranteed.
 Moreover control over the quality of the final products

3. Administration and Finance Department

Duties and responsibilities:-
 Will plan, organize direct and control the financial transaction of the plant by
using the entire necessary document.
 Will develop sound financial control system by developing modern financial
control systems.
 Will prepare the annual financial statements and prepare condensed reports for
the general manager, owner and other concerned government body.
 Will control the human and non human resources of the plant, which include:
effective handling of the different inventories of the machineries, equipments, raw
materials, finished products, and devise strategies of controlling against fraud
and damage.
 Manage and execute the company national and international procurement
procedure
 Administer and control the company logistic resource

35
  Effectively administer the company Procurement process domestically as well as
internationally.
 Manage the public relation of the company/factory with external
parties/stakeholders
 Provide and manage general supportive service to the plant.
4. Commercial Department
Duties and responsibilities:-
 Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
 Provide cost estimates in preparation for securing ...
 Gather information on new product design, profile
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales.
 Will develop effective customer handling strategies
 Will design and implement effective advertisement and promotion schemes
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of
the company

The production employees of the factory expected to take basic metal pipe and PVC
pipe, fitting production skill training for 5 days. In addition training could be given to the
mechanic and to the supervisor will also take skill training.

36
5. FINANCIAL REQUIRMENT AND ANALYSIS

5.1. Total Initial Investment Cost

The total amount of initial investment capital money that is required to establish the
envisaged factory is estimated to be Br. 76,000,000.

Table Total Initial Investment Capital

SN Description Total Cost in birr Ratio(%)
1 Land, Building & Construction 20,000,000 26
2 Machines & Equipments 17,548,200 23
3 Vehicles 5,600,000 7
4 Office Equipment 3,500,000 5
Total Fixed Investment Cost 46,648,200 61
5 Pre service Expense 2,616,800 3
6 Raw material cost 12,661,852 17
7 Salary 5,000,000 7
8 Other operating cost 1,473,148 2
Initial Working capital 21,751,800 29
Contingency 10% 7,600,000 10
Total Initial Investment Capital 76,000,000 100

---

37
 5.1.1. Fixed Investment

The initial fixed capital required is estimated to be Br. 20,000,000

A. Land, Building & Construction

SN Description Land Unit cost in Br. Total cost in

Requirement(M2) Br.
1 Factory building 500 2,000 3,000,000
2 Warehouse 1,500 1,000 500,000
3 Office Building 5,000 2,600 13,200,000
4 Waste Accumulation area 500 1,000 500,000
5 Green area, Parking and Buffer 500 1,200
Zone 600,000
7 Fence and others 500 1,200 600,000
8 Site Development 500 1,200 550,000
9 Design and Supervision 500 1,100 550,000
10 Land lease Initial Fee and others 500 6.5br per M2 for 60
years 500,000
Total 10,000.00 20,000,000

B. Machinery and Equipment

SN Description Measurem Qty Unit Total Price in

ent Price in Br.
Br
1 Single screw extruder with power loader Unit 3 1,000,000 3,000,000
2 Mould Unit 4 850,000 3,400,000
3 Vacuum Thank Unit 3 632,000 1,896,000
4 Hauling Off Unit 4 250,000 1,000,000
5 Automatic cutting machine Unit 4 650,000 2,600,000
6 Stacker Set 3 265,000 795,000
7 Scrap line(Recycling machine) Set 4 450,000 1,800,000
8 Oil- Ink Printer Unit 3 376,000 1,128,000
9 Compressor Set 3 145,000 435,000
10 Chiller unit Unit 3 120,000 360,000
11 Generator Unit 2 567,100 1,134,200
  Total       17,548,200

38
 C. Vehicles

SN Description Qty Unit Price Total Price

1 Isuzu Truck 2 1,300,000.00 2,600,000.00

2 Pick Up 2 3,000,000.00 1,500,000.00

3 Service 1 1,500,000.00 1,500,000.00

Total 5,600,000.00

D. Office Equipments

SN Description Qty Unit cost Total cost in Br.

in Br.

1 Managerial chair with tables

1 7,500.00 7,500
2 Secretarial chairs with table
1 3,500.00 3,500
3 Office Chairs with tables
3 1,500.00 4,500
4 Computer with printer
3 500.00 1,500
5 Shelf
1 3,000.00 3,000
7 Telephone machine set
1 1,000.00 1,000
8 Filing Cabinets
1 2,000.00 2,000
9 Assembly chair and table
1,970,000
10 Decoration(Carpet & Curtain)
7,000
11 Reserved

1,500,000
Total
3,500,000.00

39
 5.1.2.Initial Working Capital

The initial working capital is estimated to be Br. 21,751,800.60

5.1.3.Pre -Service Expense

SN Description Cost in br.

1 Project proposal
30,000.00
2 Environmental impact Assessment
50,000.00
3 Staff Capacity Building
1,800,000.00
4 Licensing fee and others
100,000.00
5 Reserved
700,000.00
Total 2,600,000

5.2. Annual Production Cost at Full Capacity1

i. Raw Materials and Inputs

SN Description Unit Qty Unit cost

measure in birr
Total Cost in
birr
1 Virgin suspension grade(PP, PVC Ton 560.00 14,000.00
& HDDP)
7,680,000.00
2 Plastic for Recycle Ton 216.00 3,900.00
1,490,400.00
3 Other Additives Ton 181.33 16,000.00
2,984,000.00
Total
12,661,200

1
At third year of Operation

40
 ii. Salary Expense

SN Description No Qualification Monthly

Annual
Salary in Br.
Salary in Br.
1 General Manager 1 BA in Business Management 6,000.00 72,000.00
2 Production Manager 1 BSC in industrial Engineering 4,000.00 48,000.00
3 Shift supervisor 4 BSC in Production Technology 3,000.00 144,000.00
4 Secretary 4 Diploma In Secretarial Science 1,200.00 57,600.00
5 Public Relation 1 Degree in Social Science 2,500.00
Officer 30,000.00
7 Personnel 4 BA in HRM 2,500.00 120,000.00
8 Planning Officer 3 BA in Economics/Statistics 2,500.00 90,000.00
9 General service 2 BA in management 2,500.00 60,000.00
10 Color Operator 7 Diploma in Chemistry/ Chemical 1,750.00
Engineer 147,000.00
11 Hydraulic Technician 5 10+2 in general Mechanic 1,750.00 105,000.00
12 Machine Operators 20 10+2 in general Mechanic 1,750.00 420,000.00
13 Helper and laborers 95 10 completed(95*90*50) 1,200.00 427,500.00
14 Marketing head 1 BA in Marketing management 3,000.00 36,000.00
15 Purchaser 4 Diploma in Pur. & Supplies 1,750.00
management 84,000.00
16 IT officers 3 BSC in Computer Science 2,500.00 90,000.00
17 Administer 1 BA in Management 2,500.00 30,000.00
18 Sales person 7 Diploma in sales management 1,750.00 147,000.00
19 Finance head 1 BA in Accounting 3,000.00 36,000.00
20 Accountant 4 Diploma in Accounting 1,750.00 84,000.00
21 Electrician 3 10+2 in general electricity 1,750.00 63,000.00
22 Cashier 4 10+2 in bookkeeping 1,750.00 84,000.00
23 Store keeper 6 10+2 in logistic management 1,750.00 126,000.00
24 Cleaner 5 Unskilled 800.00 48,000.00
25 Office Boy 1 10 Completed 1,000.00 12,000.00
26 Driver 4 10 completed 1,200.00 57,600.00
27 Gardner 4 Unskilled 800.00 38,400.00
28 Guards/Security 8 Basics 900.00 86,400.00
Total 203 44,870.00 2,743,500.00
Grand Total 5,000,000

iii. Other Operating Expenses

41
 SN Description Annual Cost in Assumption Used
Br.
1 Property Insurance 665,834.00 1% of fixed Investment cost
2 Audit & legal fee 18,000.00 1500per month
3 Uniforms 13,300.00 70*190br
4 Advertisement & Promotion 400,000.00 % of Sales
5 Telephone, fax and postal 10,800.00 900 per month
6 Cleaning goods supplies 12,000.00 1000 per month
7 Maintenance & Repair 131,668.00 2% of Fixed Investment Cost
8 Stationery and other office supplies 8,400.00 700 per month
9 Electricity 50,250.00 0.45*150,000W per year
10 Water 40,000.00 2*2000 m3 per year
11 Fuel 62,000.00 6500 lit*20 per year
12 Oil and lubricant 6,200.00 10% of fuel cost
13 Miscellaneous Expense 60,000.00 5000 br month
Total 1,478,452

5.3. Financial Analysis and Statements

5.3.1.Underlying Assumption

The financial analysis of the envisioned factory is based on the data provided in the
preceding sections and the following assumptions.
A. Construction and Finance

Construction period 2 years

Source of finance 30% equity and 70% loan
Tax holidays 2 years
Bank interest rate 10 %
Utilities and operation expense increase 5% per annum after 3rdyr
Wages and Salary increase Increase 5% Per annum after 3 rd yr

B. Depreciation

SN Description Depreciation rate in %

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 1 Construction and Civil Work 5
2 Machines & Equipments 10
3 Vehicles 20
4 Office Equipment 10
Total

5.3.2. Source of Fund

SN Description % share Amount(in birr)
1 Owners Share 30 22,800,000.00
2 Bank Loan 70 53,200,000.00
Total 100 76,000,000

5.3.3.Loan Repayment Schedule

Year Principal Payment Interest (10%) Total Annual Remaining
Payment Balance
0 0 0 0 58,991,925.02
1 5,899,192.50 5,899,192.50 11,798,385.00 53,092,732.52
2 5,899,192.50 5,309,273.25 11,208,465.75 47,193,540.02
3 5,899,192.50 4,719,354.00 10,618,546.50 41,294,347.52
4 5,899,192.50 4,129,434.75 10,028,627.25 35,395,155.02
5 5,899,192.50 3,539,515.50 9,438,708.00 29,495,962.52
6 5,899,192.50 2,949,596.25 8,848,788.75 23,596,770.02
7 5,899,192.50 2,359,677.00 8,258,869.50 17,697,577.52
8 5,899,192.50 1,769,757.75 7,668,950.25 11,798,385.02
9 5,899,192.50 1,179,838.50 7,079,031.00 5,899,192.50
10 5,899,192.50 589,919.25 6,489,111.75 0.00

5.3.4.Depreciation Schedule

SN Description Original Value In Depreciation rate in Depreciation

Birr % Per year
1 Construction and Civil
22,090,000.00 5 1,104,500.00
Work
2 Machines & Equipments 40,680,000.00 10 4,068,000.00
3 Vehicles 4,500,000.00 20 900,000.00
4 Office Equipment 813,400.00 10 81,340.00
Total 68,083,400.00 6,153,840.00

5.3.5.Revenue Projection

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 Based on the assumption of plant capacity, production program and pricing as indicated in part
2 of this paper, the revenue of the project is projected in the table below;
year 1 Year 2 Year 3
Description
Price/kg Sales(birr) Price/kg Sales(birr) Price/kg Sales(birr)
PVC Pipe in Kg 19 6,650,000.00 21.00 8,400,000.00 22 11,000,000.00
PVC Conduits in kg 10 3,500,000.00 12.00 4,800,000.00 13 6,500,000.00
PVC Fittings in kg 16 5,600,000.00 18.00 7,200,000.00 19 9,500,000.00
Irrigation Pipe 18 15,120,000.00 20.00 19,200,000.00 21 25,200,000.00
Total sales 30,870,000.00 39,600,000.00 52,200,000.00

5.3.6.Balance Sheet

Asset
Current Asset Value in Br.
Cash 16,190,778.60
Total Current Asset 16,190,778.60
Fixed Asset
Land, Building and Construction 22,090,000.00
Machineries and Equipments 40,680,000.00
Office Equipment 4,500,000.00
Vehicles 813,400.00
Total fixed Asset 68,083,400.00
Total Asset 84,274,178.60
Liability
Account payable 25,282,253.58
Owners Equity
Capital 58,991,925.02
Total Liability & Owners’ Equity 84,274,178.60

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 5.3.7.Income/Loss Statement

Descriptio Year
n 1 2 3 4 5 6 7 8 9 10
Gross sales 30,870,000.00 39,600,000.00 52,200,000.00 54,810,000.00 57,550,500.00 60,428,025.00 63,449,426.25 66,621,897.56 69,952,992.44 73,450,642.06
Purchase of
Raw 12,734,920.00 18,523,520.00 23,154,400.00 24,312,120.00 25,527,726.00 26,804,112.30 28,144,317.92 29,551,533.81 31,029,110.50 32,580,566.03
Material
Gross
18,135,080.00 21,076,480.00 29,045,600.00 30,497,880.00 32,022,774.00 33,623,912.70 35,305,108.34 37,070,363.75 38,923,881.94 40,870,076.04
profit
Expenses
Salary
1,810,710.00 2,633,760.00 3,292,200.00 3,456,810.00 3,629,650.50 3,811,133.03 4,001,689.68 4,201,774.16 4,411,862.87 4,632,456.01
Expense
Other
Operating 1,473,148.60 2,142,761.60 2,678,452.00 2,812,374.60 2,952,993.33 3,100,643.00 3,255,675.15 3,418,458.90 3,589,381.85 3,768,850.94
Expenses
Pre-
operating 172,000.00 - -
Expense
Deprecation
1,104,500.00 1,104,500.00 1,104,500.00 1,104,500.00 1,104,500.00 1,104,500.00 1,104,500.00 1,104,500.00 1,104,500.00 1,104,500.00
Building
Deprecation
4,068,000.00 4,068,000.00 4,068,000.00 4,068,000.00 4,068,000.00 4,068,000.00 4,068,000.00 4,068,000.00 4,068,000.00 4,068,000.00
Machineries
Deprecation
900,000.00 900,000.00 900,000.00 900,000.00 900,000.00 900,000.00 900,000.00 900,000.00 900,000.00 900,000.00
Vehicles
Deprecation
81,340.00 81,340.00 81,340.00 81,340.00 81,340.00 81,340.00 81,340.00 81,340.00 81,340.00 81,340.00
office Equip
Interest
5,899,192.50 5,309,273.25 4,719,354.00 4,129,434.75 3,539,515.50 2,949,596.25 2,359,677.00 1,769,757.75 1,179,838.50 589,919.25
Expense
Total
15,508,891.10 16,239,634.85 16,843,846.00 16,552,459.35 16,275,999.33 16,015,212.27 15,770,881.82 15,543,830.81 15,334,923.22 15,145,066.20
Expense
Profit
2,626,188.90 4,836,845.15 12,201,754.00 13,945,420.65 15,746,774.67 17,608,700.43 19,534,226.51 21,526,532.94 23,588,958.72 25,725,009.83
Before Tax
Tax(30% ) 0 0 3,660,526.20 4,183,626.20 4,724,032.40 5,282,610.13 5,860,267.95 6,457,959.88 7,076,687.62 7,717,502.95
Net Profit 2,626,188.90 4,836,845.15 8,541,227.80 9,761,794.46 11,022,742.27 12,326,090.30 13,673,958.56 15,068,573.06 16,512,271.11 18,007,506.88

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 5.3.8.Profitability
According to the projected income statement, the project will start generating profit in
the 1st year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total
investment) show an increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is
viable.

5.3.9.Pay-Back Period
The investment cost and income statement projection are used to project the pay-back
period. The project's initial investment will be fully recovered at the 4 years of operation.

6. ENVIRONMENTAL IMPACT OF THE PROJECT

6.1. Environmental Impact Assessment Of The Project

Environmental aspects are fundamental for the sustainability assessment of the current
and novel designs of plastic related plant. In this regard the factory will undertake a
separate and detail Environmental impact Assessment.

6.2. The Environmental Impact of Vinyl Chloride

Virtually no (< 1 ppm) monomer is emitted from the finished product, but monomers can
be released in minute quantities through such activities as burning the polymer.
Monomer emission is always below what are classified as “harmful” levels. Generally
speaking, all manufacturing processes generate emissions. Studies have sampled vinyl
chloride levels in the air near PVC factories. They demonstrated that levels were lower
than the worker health protection standards set by the health authorities. If minimal
monomer emissions are present in the atmosphere near production sites, the vinyl

46
chloride monomer tends to remain in the air for two days because it breaks down very
quickly. Its impact on stratospheric and greenhouse impact is thus negligible. The
potential impact of this monomer on tropospheric ozone has not yet been assessed.

In this regard the factory will undertake a separate and detail Environmental impact
Assessment.

47