4-Waste Managment and Disposal

Feasibility
Study
Nekemte Locality of Oromiya Region
By DICT
Submitted to: MoFED/UNDP
October 2010
[ INTEGRATED WASTE DISPOSAL AND

MANAGEMENT]
Feasibility Study Integrated Waste Disposal and Management
Executive Summary
With the support of UNDP, the Government of Ethiopia (GoE) has been implementing a project,
entitled “Local Economic Development” (LED) in 7 municipalities of 4 Big Regions (Oromiya ,
Amhara, SNNPR and Tigray). These 7 municipalities are as follows: Oromiya : Asella and
Nekemte; Amhara: Bahir Dar; SNNPR: Awassa and Sodo; and Tigray: Mekele and Adigrat. The
main objective of the project is to enhance the capacities of Regions and Woredas to promote pro-
poor economic growth and sustainable livelihoods, through investments, employment creation
and targeted economic interventions. The project has 2 main intervention areas to achieve the
objectives, these are: (1) local capacity development for creating enabling environment; and (2)
creating jobs opportunities. The project, which is being implemented since June 2009, has already
made several achievements, such as developing LED strategies of the Regions and localities;
setting up an inclusive microfinance system, providing employment opportunities to over 5,000
unemployed youth and women, providing job-related skills development training to over 3,000
youth, construction of infrastructure (road and sewage system), and others. In line with the GTP
(5 year National Development Plan), the project has been supporting the local governments for
pro-poor growth and economic development at local levels, by creating enabling environment and
promoting jobs creation.
In view of the above background, participatory assessment of the locality’s LED potential was
conducted and a five year LED strategy and viable interventions were developed for harnessing
the potentials. In this regard, six micro viable projects, which are geared towards improving the
income and employability of vulnerable youth and women groups, were identified for the year
2010 based on results of a pre-feasibility study conducted by the LED team for Nekemte. In fact,
Integrated Waste Disposal and Management Project is one of the viable projects that are identified
and endorsed by the LED stakeholders in Nekemte.
Integrated Waste Disposal and Management is mainly focus on collection and disposal of dry and
fluid waste, cleaning services, recycling, and creating awareness on biodegradable materials, use of
biogas, environmental sanitation, beautification and gardening and the like and will mainly use the
use the doo-to-door selling, word of mouth, as well as local newspapers to communicate with its
clients.
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Integrated Waste Disposal and Management is owned by about 320 (110 males and 210 females)
people from different parts of the society that will be organized in association so as to pledge their
time, labor, and financial resource so as to create jobs for themselves. These people will operate the
business and that relevant training will be given to the members about provision and management
of the waste disposal services as well the training of the ways of handling customers, and courses
on business management like record keeping, and marketing will be provided. It is expected that
Integrated Waste Disposal and Management will start its operation in the year 2010/2011.
The business investment is financially viable with an internal rate of return of 19.6835%, net
present value of birr 317,695.72 discounted at 15%, benefit/cost ratio of 1.118, and payback period
of three years and five months. These financial analysis criterions, all confirms the feasibility of the
business investment and their results indicate a promising investment opportunity. Further, the
investment sensitivity analysis, conducted under various conditions, results confirm that the
business investment is attractive to undertake.
Similarly, if we looked at the forecasted income statement, the Integrated Waste Disposal and
Management investment will generate a total sales of birr 2,169,675 in the year 2010/2011 and birr
3,176,621 in the year 2015, indicating a more than 45% increase in the sales in the operating period
of the business and ensuring that the business start generating profit in the first year of operation.
Important ratios such as profit margin (net profit to total sales), net profit to equity (return on
equity), and net profit to total assets or investment (return on total investment) show an increasing
trend during the life-time of the project. In general, the Forecasted Income Statement and the other
indicators of profitability show that the investment is viable.
As an economic benefit the investment can create employment for 320 Ethiopian in the year
2010/2011 and the job opportunities for our citizens and will increase in the successive years. In
addition to supply of the domestic needs, the investment will generate birr 1,316,794 in terms of tax
revenue to the government. Lastly, by enhancing the potential to increase productivity and,
managing or minimizing the various costs such as material cost, labor cost, fuel expense, and
others, the business will implement its investment profitably.
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Contents
Executive Summary………………………………………………………………………………………………………………………2
1. Description of the Business......................................................................................................................5
2. Industry Analysis......................................................................................................................................9
3. Production Plan......................................................................................................................................10
4. Marketing Strategy................................................................................................................................11
5. Management and Personnel..................................................................................................................12
6. Financial Feasibility Study......................................................................................................................12
6.1 Capital Investment...............................................................................................................................13
6.2 Financing Plan......................................................................................................................................14
6.3 Forecasted Income Statement.............................................................................................................14
6.4 Forecasted Balance Sheet....................................................................................................................17
6.5 Forecasted Cash-Flow..........................................................................................................................18
6.6 Investment Analysis.............................................................................................................................20
7. Sensitivity Analysis.................................................................................................................................21
8. Socio-Economic and Political Analysis....................................................................................................23
9. Conclusions and Recommendations......................................................................................................25
Annex: Action Plan and Project Summary Sheet
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1. Description of the Business

Economic empowerment of local peoples is both the means and an end of people-centered
development initiatives. In the framework of pro-poor Local Economic Development, capitalizing
on locally available resources is a key to reduce poverty and unemployment as well as enhancing
the revenue of local governments.
Meanwhile, Nekemte City Administration is one of the localities in Oromiya that is endowed with
huge but untapped potentials. Its natural resource base, accessibility to market, better infrastructure
and service, human resource as well as existence of institutions are among the most prominent
potentials for generating growth and creating gainful employment to the residents. Moreover, the
growth and development of Nekemte is believed to stimulate the rapid transformation of
surrounding rural communities. Nevertheless, a significant proportion (35 to 40%) of the residents
is below poverty line of birr 1,075 for Ethiopia. Women headed households in Nekemte, estimated
to reach 40% of the households, are mostly suffering from poverty. Moreover, out of the total
46,426 people that are economically active, 8,706 or 19% are found to be registered job seekers.
The situation of unemployment is so rampant when considering the growing number of unskilled
and unregistered youth groups in the locality.
Furthermore, HIV/AIDS, disability and poor support to elders are increasingly threatening the
city’s socio-economic development. Finally, revenue base of the city administration has been
undiversified and inadequate to respond to the needs and priorities of the residents. Albeit positive
developments in the local business enabling environment, the level of private investment and Micro
and Small Enterprises development has been far below expectation. Support provided to Micro and
Small Enterprises has been very limited and women’s involvement in the enterprises has been
marginal. Besides, the number of youth, women, elders and other groups looking for support,
mainly.
The combined effect of these problems has been perpetuating the problems of poverty,
unemployment and weak capacity to finance public expenditures. In addition, the vulnerability
situation is adding to social problems that include crime/deviance, beggary, prostitution etc.
In a nutshell, Nekemte town is not currently in a position to respond to the needs and priorities of
vulnerable groups by relying on its potentials. Among the leading causes is limited access to
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finance, business premises, and trainings for skills development. The present undeveloped
partnership and collaboration among Local Economic Development actors is also a bottleneck in
initiating successful Local Economic Development interventions geared towards creating more jobs
and revenue. This Local Economic Development project of Nekemte is, therefore, developed with
due recognition of the gravity of problems of unemployment, abject poverty and welfare among
vulnerable groups viz., youth, women, elders, the disabled and others in the town.
Integrated Waste Disposal and Management is mainly focus on collection and disposal of dry and
fluid waste, cleaning services, recycling, and creating awareness on biodegradable materials, use of
biogas, environmental sanitation, beautification and gardening and the like and will mainly use the
use the doo-to-door selling, word of mouth, as well as local newspapers to communicate with its
clients. It has an overall objective of satisfying customers by providing collection and disposal of
dry and fluid waste services, cleaning services, recycling, and creating awareness on biodegradable
materials, use of biogas, environmental sanitation, beautification and gardening and the like and
maintains a steady growth in sales volume that will sustain the business for long period.
Integrated Waste Disposal and Management is owned by about 320 (110 males and 210 females)
people from different parts of the society that will be organized in association so as to pledge their
time, labor, and financial resource so as to create jobs for themselves. These people will operate the
business and that relevant training will be given to the members about provision and management
of the waste disposal services as well the training of the ways of handling customers, and courses
on business management like record keeping, and marketing will be provided. It is expected that
Integrated Waste Disposal and Management will start its operation in the year 2010/2011.
The business will operate in Nekemte town, Oromiya Regional State, East Wollega zone. There is
no doubt that Nekemte is grouped among the fast growing cities in western Ethiopia. This growth is
measured in terms of the expansion of investment in different projects including construction of
hotels, educational institutions, business centers and availability of government and NGOs for
different purposes. City expansion is linked to increased waste production, which demands to
design projects that keep the sanitation of the city. Further waste resources could be recycles to use
it for another proposes. It is also known that garbage collection and disposal is labor intensive in
nature that utilizes the existing abundant labor force with high rate of returns. Therefore the project
is expected to create jobs, increase cleanliness of the city and contribute to the increasing
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development of the city in many aspects. The project is specifically selected for the following
reasons
 it is in line with employment creation and poverty reduction strategy
 it also increases the sanitation of the town and re-cycling (re-use) of waste materials for
another purpose
 it contributes to conducive and healthy environment
In order to provide collection and disposal of dry and fluid waste services, cleaning services,
recycling, and creating awareness on biodegradable materials, use of biogas, environmental
sanitation, beautification and gardening and the like, the Integrated Waste Disposal and
Management will acquire tractor car with curt, shovel, hoe, cart with horse, plastic shoes, gaunt
close, gaunt, plastic cleaner, hat, scarf, and other all essential equipment to carryon its activities
from Addis Ababa, Adama, Nekemte town and its surroundings. As well, the Integrated Waste
Disposal and Management will purchase essential raw materials such as spare parts, soap, and
others from Addis Ababa, Adama, Nekemte town and its surroundings.
Objectives: The overall objective of the project is to contribute to the reduction of poverty and
unemployment as well as growth generation endeavors in Nekemte. Specifically the project is
intended to improve living standard of 300 youth and women vulnerable groups, create job
opportunity, and to increase waste management and disposal service delivery in the town.
Outputs: The project is expected deliver outputs including increased employment opportunities,
increased purchasing power of target beneficiaries, and improved sanitation,
Input/Activities: Important project inputs include financial support in the form of loan, technical
support. Business plan preparation, providing training to targets, provision of business premises
and political support, establishment of business association, provision of technical and business
information support.
The project’s impact flow is briefly presented herein below in the diagram that shows the logical
connection of the input/process, outputs, and outcome and impact.
Box-1 Impact Flow of waste management and disposal Project

Results Chain/Framework
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Inputs/Processes (results relating to provision of resources and processes)
 Financial support in the form of loan with minimum interest rate

 Prepare Business plan
 Provide training on waste disposal management, ways of rendering services, ways of
handling customers, and courses on business management like record keeping, and
marketing
 Business remises, licensing and registration services provided
 Association established, coordination undertaken
 Professional/technical assistant provided
 Information on business opportunities, marketing and apprenticeships provided
Leading to…
Outputs (results relating to short-term change effects and results sought)
 Improved technical capacity (knowledge and skill) to start and run businesses
 Stimulated VGs to engage in businesses
 Improved service delivery
 Increased purchasing power of beneficiaries
 Impoved sanitation
 Decreased business failures
 Increased emergence new business
Leading to…
Outcomes (results relating to intermediate change and effects sought)
 Increased household income/ living standard of beneficiaries and their dependants

 Increased number and quality of jobs
 Improved public health
 Revenue expenditure gap reduced
Leading to…
Impacts (results relating to long-term change and effects sought)
 Reduction in poverty and unemployment /generation of growth
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2. Industry Analysis
Nekemte is one of the best naturally endowed town in the country. Assessment results for the 2009
Local Economic Development initiative indicated that the Nekemte town is endowed with fertile
soil, water resources, forest, sufficient precipitation, hotel and resorts, abundant and cheap labor
force, livestock and animal husbandry and above all, it has abundant minerals and raw materials. In
addition, the town is uniquely favorable to open and develop integrated waste disposal and
management industries.
Moreover, The Local Economic Development Strategy of Oromiya confirms the competitive
advantage of Nekemte town and suggested that urban agriculture (such as dairy processing,
integrated waste disposal and management, horticulture, livestock fattening, beautification and
gardening, Coffee and Honey processing), industry and construction as the main areas of
investment, Local Economic Development intervention and sustainable development (Local
Economic Development Strategy of Oromiya , September 2009).
According to Central Statistic Agency, 2007, Nekemte has a total population of above 76,817
(39,167 male 37,650 female). The population of the town is increasing due to rural–urban influx,
that is, people migrate from rural to urban seeking for job opportunity and suitability of the town
for work and living condition. The rapid population growth is a potential market for integrated
waste disposal and management services. This implies that there exists huge market demand for
collection and disposal of dry and fluid waste services, cleaning services, recycling, and creating
awareness on biodegradable materials, use of biogas, environmental sanitation, beautification and
gardening and the like in the city. It also creates employment opportunities for a number of youth
and women. Hence, running the Integrated Waste Disposal and Management business shall be
feasible, lucrative and fast income generating.
There are no waste disposal and management businesses in Nekemte town at the current period.
Though the Integrated Waste Disposal and Management will gradually involve in the collection
and disposal of dry and fluid waste services, cleaning services, recycling, and creating awareness
on biodegradable materials, use of biogas, environmental sanitation, beautification and gardening
and the like and will operate in Nekemte town; the absence of waste disposal and management
businesses in the town is an opportunity by not having computational effects on the business.
Moreover, by providing collection and disposal of dry and fluid waste services, cleaning services,
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sanitation, beautification and gardening and the like at low costs, satisfying customers, using the
advertizing, and others the Integrated Waste Disposal and Management is planning to gain and
maintain the market share and become strong competitor.
3. Production Plan
Integrated Waste Disposal and Management is an important source of income in Ethiopia and is
one of the most suitable interventions to improve the livelihood of the poor. Integrated Waste
Disposal and Management is planning to participate in modern integrated waste disposal and
management system and to achieve a better yield by initially focusing on the provision of collection
and the like.
In the year 2010/2011, Integrated Waste Disposal and Management has a plan to provide collection
and the like at various costs as provided in Table 1 below:
Table 1 Production Cost Plan for the Year 2010/2011

No Services Qty Unit Cost Total Costs
1. Municipality 1 399,463 399,463
2. Society 18,000 60 1,078,542
3. Hotel 190 300 56,924
4. Cafeteria 230 200 45,936
5. Barber 80 50 3,994
6. Shops & Juice center 350 50 17,469
7. Garage 7 49 345
8. Wood work House 75 60 4,494
Total Costs Birr 1,607,167
In order to provide collection and disposal of dry and fluid waste services, cleaning services,
sanitation, beautification and gardening and the like, the Integrated Waste Disposal and
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Management will purchase essential raw materials such as spare parts, soap, and others, which are
summarized in Table 2 below.
Table 2 Raw Material Requirements and Cost for the Year 2010/2011
No Type of Raw Material Unit of Measure Qty Unit Cost Total Costs
1. Spare Parts No 120 800 Birr 96,000
2. Soap No 6,720 5 33,600
Total Yearly Raw Material Birr 129,000
4. Marketing Strategy
Given the potential of Nekemte town and its vicinity for waste disposal and that the town is
inhibited by increasing population size; those who are going to engage in this activity will
definitely get market for their services. It is with this premise that this project activity is designed.
Integrated Waste Disposal and Management will mainly use the doo-to-door selling, word of
mouth, and others to communicate with its clients. As well, in the future it will also advertise in the
local newspapers including Capital, Reporter, Fortune, and Addis Zemen. In a given year, the
business has a plan to spend up to birr 2,000 on advertising and promotion and it is planning to
spend more in the future.
Integrated Waste Disposal and Management follows a low pricing strategy to attract large numbers
of customers and benefit from the large numbers. In comparison with others, the price of the
business will be low and it will charge low prices by minimizing its costs to the minimum yet, the
business is planning to have average prices and compete on quality service in the future.
There is a potential market for Integrated Waste Disposal and Management services in the Nekemte
town and that the Integrated Waste Disposal and Management is targeting municipality, society,
hotels, cafeterias, barbers, shops, garages, wood work and furniture house, and others.
5. Management and Personnel

Most of the strategic and day-to-day business activities of the Integrated Waste Disposal and
Management will be managed by employees. In addition to this, the employees will also be
responsible for managing the overall activities of the business, coordinating the efforts of people,
and deciding on the authority and performance of other employees. The employees shall follow the
recording of the daily performance data including products production, labor requirement, costs
incurred and sales, and others.
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Regarding the personnel requirement, the business will operate with efficient and effortful
participation of the beneficiaries and hire a total of 320 youths and women vulnerable groups only
from beneficiaries, specifically 15 accountants, 15 cashiers, 15 janitors, 15 storekeepers, 15 guards,
and 245 clerical workers. Correspondingly, total labor cost is estimated at birr 822,000 for the year
2010/2011. Table 3 provides the list of manpower required and the estimated monthly as well as
annual labor costs.
Table 3 Manpower Requirement and Labor Cost for the Year 2010/2011
No. Positions Req. No. Monthly Salary Yearly Salary
1. Accountant 15 400 Birr 72,000
2. Cashier 15 250 45,000
3. Janitor 15 200 36,000
4. Store keeper 15 250 45,000
5. Guard 15 200 36,000
6. Clerical Workers 245 200 588,000
Total 320 Birr 822,000
Even though the employment of a manager who run the business profitability, enable the business
pay the loan it borrows, generate more income to the owner, and others is a necessary condition,
his/her employment is not incorporated in the feasibility study. It is the consultant’s strong believe
that the business is managed by one experienced and qualified manager.
6. Financial Feasibility Study

Integrated Waste Disposal and Management financial feasibility study depends on the assumptions
that are made below. These are annual and monthly assumptions that show the consistent growth of
the business. As well, some of the underlying and general assumptions are:
 The business assumes that it stay in line with the continuing advances in technology and
business.
 The business is expected to be self sustained in terms of finance with the payment they
obtain from their clients back from the service they provide.
 Overall activities of the business will grow from time to time and finally will be one of the
medium size industries through expanding their business from time to time.
 The interest rate assumed to be 10% over the five years.
 The profit income tax rate is assumed to be 30% in the five years.
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The financial feasibility study that incorporate the capital investment, financing plan, the
Forecasted Income Statement, the Forecasted Balance Sheet, and the Forecasted Cash Flow
Statement are provided in the parts that follow.
6.1 Capital Investment

The lists of various types of fixed assets (equipment and property) or capital assets or capital
investment, which will be needed, are provided as follows and summarized in Table 4:
 The business will construct building at a total cost of birr 540,000 at the beginning of the
year 2010/2011. It is assumed that the building will have 5 years useful life and estimated
salvage value of birr 40,000.
 The business will acquire tractor at a total cost of birr 1,896,820 at the beginning of the year
2010/2011. It is assumed that the tractor will have 5 years useful life and estimated salvage
value of birr 296,000.
 The business will acquire equipment and machine at a total cost of birr 116,200 (shovel at
birr 12,000, hoe at birr 16,500, cart with horse at birr 8,200, plastic shoes at birr 18,000,
gaunt close at birr 30,000, gaunt at birr 7,500, plastic cleaner at birr 12,000, hat at birr
3,000, and scarf at birr 9,000) at the beginning of the year 2010/2011. It is assumed that the
equipment and machine will have 5 years useful life and estimated salvage value of birr
15,000.
 The business will acquire other assets at a total cost of birr 150,000 at the beginning of year
2010/2011. It is assumed that the other assets will have 5 years useful life and zero
estimated salvage value.
Table 4 Capital Investment Cost

No. Type of Equipment Qty Unit Cost Total Costs
1. Tractor Car With Curt 2 948,410 1,896,820
2. Shovel 300 40 12,000
3. Hoe 300 55 16,500
4. Cart with Horse 4 2,050 8,200
5. Plastic Shoes 300 60 18,000
6. Gaunt Close 300 100 30,000
7. Construction of Shade 30 18,000 540,000
8. Gaunt 300 25 7,500
9. Plastic cleaner 300 40 12,000
10. Hat 300 10 3,000
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11. Scarf 300 30 9,000

12. Others 150,000
Estimated Total Capital Investment Cost Birr 2,703,020
6.2 Financing Plan

In order to start the business operation and to acquire equipments, raw materials, working capital,
to be prepared ahead to be able to provide services to customers and others the business needs
money. Since customers are very receptive and if they do not obtain quality services and timely,
they may not be interested to come again, the business shall need funds to provide quality service
and satisfy its customers.
The Integrated Waste Disposal and Management generally requires a total of birr 2,700,000 to meet
estimated capital requirements as well as to cover various costs incurred to start and run the
operation. Hence, to meet estimated capital requirements as well as to cover various costs incurred
to start and run the operation, the business expects to borrow birr 2,700,000 from financial
institutions (such as microfinance or banks) at the beginning of year 2010/2011, at 10% interest rate
that will be repayable in five years on monthly basis.
6.3 Forecasted Income Statement

The Forecasted Income Statement for the five years (2010/2011 to 2015) is prepared using the
forecasted sales and the costs. Hence, the sales are estimated based on the economic forecasts
(considering the economy of the region, country and industry), effect of competition, market share,
and pricing policy or elasticity of demand (competitive response). In the year 2010/2011, the
Integrated Waste Disposal and Management expects a Total Sale of birr 2,169,675 by providing the
collection and disposal of dry and fluid waste services, cleaning services, recycling, and creating
awareness on biodegradable materials, use of biogas, environmental sanitation, beautification and
gardening and the like to the municipality, society, hotels, cafeterias, barbers, shops, garages, wood
work and furniture house, and others as provided below:
No Services Qty Unit Price Total Sales

1. Municipality 1 539,275 Birr 539,275
2. Society 18,000 81 1,456,032
3. Hotel 190 404 76,847
4. Cafeteria 230 270 62,013
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5. Barber 80 67 5,392
6. Shops & Juice center 350 67 23,582
7. Garage 7 67 466
8. Wood work House 75 81 6,067
Total Sales Birr 2,169,675
In the year 2012 and successive years, the business expects a 10% increase in the total sales.
The forecasted costs and expenses for the year 2010/2011 and successive years for the business are
provided in the parts that follow. Note that, for the purposes of various analyses, the costs and
expenses are treated in the same way.
1. Material cost. In the year 2010/2011, the business estimated to incur a total of birr 96,000
material cost and that the material cost is expected to increase by 2% per year for the
successive years.
2. Labor cost. In the year 2010/2011, the business estimated to incur a total of birr 822,000
labor cost and that the labor cost is expected to increase by 2% per year for the successive
years.
3. Transportation cost. In the year 2010/2011, the business estimated to incur a total of birr
25,000 transportation cost and that the transportation cost is expected to increase by 2% per
year for the successive years.
4. Repair and maintenance. In the year 2010/2011, the business estimated to incur a total of
birr 50,000 repair and maintenance of business facilities and that the repair and maintenance
is expected to increase by 2% per year for the successive years.
5. Utility expense. In the year 2010/2011, the business estimated to incur a total of birr 35,000
utility expenses for the electricity, water, and telephone and that the utility expense is
expected to increase by 2% per year for the successive years.
6. Advertising and promotion. In the year 2010/2011, the business estimated to incur a total
of birr 2,000 advertising and promotion and that the advertising and promotion is expected
to increase by 2% per year for the successive years.
7. Insurance expense. In the year 2010/2011, the business estimated to incur a total of birr
55,000 insurance expenses to insure the business properties and that the insurance expense
is expected to increase by 2% per year for the successive years.
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8. Supplies expense. In the year 2010/2011, the business estimated to incur a total of birr
25,900 supplies expenses and that the supplies expense is expected to increase by 2% per
year for the successive years.
9. Fuel expense. In the year 2010/2011, the business estimated to incur a total of birr 120,000
fuel expenses for car and that the fuel expense is expected to increase by 2% per year for the
successive years.
10. Other costs and expenses. Other costs and expenses including the compensation and
severance, stationery and office supply, professional fee, legal fee, consultancy fee, cleaning
and sanitation, revenue stamp, uniform expense, per-diem, license and renewal fee, and
others are assumed to be birr 15,000 in the year 2010/2011 and expected to increase by 2%
in the successive years.
11. Depreciation. The depreciation expense is computed for the year 2010/2011 and coming
years using the deprecation rate of Federal Inland Revenue Authority on the book value of
the assets.
12. Interest expense. From the birr 2,700,000 bank loan that the business will request, interest
expense of birr 270,000 in the year 2010/2011, birr 243,000 in the year 2012, birr 186,300
in the year 2013, birr 126,630 in the year 2014, and birr 66,663 in the year 2015.
13. Income taxes. Since we expect no changes in either tax law or tax position, we will use the
same tax rate as last year; that is income taxes of 30%.
The Forecasted Income Statement for the five years (2010/2011 to 2015) depending on the
Forecasted revenue/sales and the costs of sales and expenses provided in the earlier parts are
prepared and presented as follows:
Integrated Waste Disposal and Management

Forecasted Income Statement (in birr)
For the Year Ended December 31, 2010/2011-2015
Revenue: 2010/2011 2012 2013 2014 2015
Sales 2,169,675 2,386,642 2,625,307 2,887,837 3,176,621
Total Revenue 2,169,675 2,386,642 2,625,307 2,887,837 3,176,621
Costs and Expenses:
Material Cost 96,000 97,920 99,878 101,876 103,913
Labor Cost 822,000 838,440 855,209 872,313 889,759
Transportation Cost 25,000 25,500 26,010 26,530 27,061
Repair and Maintenance 50,000 51,000 52,020 53,060 54,122
Utility Expense 35,000 35,700 36,414 37,142 37,885
Advertising and Promotion 2,000 2,040 2,081 2,122 2,165
Insurance Expense 55,000 56,100 57,222 58,366 59,534
Supplies Expense 25,900 26,418 26,946 27,485 28,035
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Fuel Expense 120,000 122,400 124,848 127,345 129,892

Other costs and Expenses 15,000 15,300 15,606 15,918 16,236
Depreciation Expense 440,404 352,323 281,859 225,487 180,389
Interest Expense 270,000 243,000 186,300 126,630 66,663
Total Costs and Expenses 1,956,304 1,866,141 1,764,393 1,674,276 1,595,655
Income Before Tax 213,371 520,501 860,914 1,213,562 1,580,966
Less: Profit Tax 64,011 156,150 258,274 364,068 474,290
Net Income 149,360 364,351 602,640 849,493 1,106,677
6.4 Forecasted Balance Sheet

The Forecasted Balance Sheet for the five years (2010/2011 to 2015) is prepared considering the
management’s expertise, future economic conditions, and the following assumptions:
╬ Cash on hand is taken from Forecasted Cash Flow Statement.
╬ The business will maintain an optimal stock balance of supplies and other items of birr
82,540 at the end of each year.
╬ In order to attract customers, the business will provide the services on credit and will have
Accounts Receivable balance of birr 176,450 in the year 2010/2011, birr 86,570 in the year
2012, birr 26,780 in the year 2013, birr 15,670 in the year 2014, and birr 12,900 in the year
2015.
╬ Assuming that there will be no major fixed asset sales and retirements, the balance of fixed
assets is stated at net book value for the coming years.
╬ The business will buy various items including equipments, office supplies, and other items
on credit and will have Accounts Payable balance of birr 10,111 in the year 2010/2011, birr
1,928 in the year 2012, birr 7,496 in the year 2013, birr 48,672 in the year 2014, and birr
87,731 in the year 2015.
╬ Bank loan balance. It is assumed that, from the loan balance of birr 2,700,000, the business
expects to pay a total of the principal and interest of birr 810,000 in the year 2010/2011, birr
783,000 in the year 2012, birr 726,300 in the year 2013, birr 666,630 in the year 2014, and
birr 606,663 in the year 2015. As a result, the outstanding bank loan balance is birr
2,160,000 in the year 2010/2011, birr 1,620,000 in the year 2012, birr 1,080,000 in the year
2013, and birr 540,000 in the year 2014.
╬ Paid-up-capital is equal to birr 0 and remain the same in the coming years.
╬ In the year 2010/2011, the estimated retained earning will increase by the net profit and no
dividend will be paid, while in the successive years, the retained earning will increase by
60% and the remaining 40% will be paid as dividend.
Page 17
Hence, using these assumptions, the Forecasted Balance Sheet for the five years (2010/2011 to
2015) are prepared as shown below:
Page 18

Forecasted Balance Sheet
December 31, 2010/2011 – 2015 (in birr)
ASSETS
Current Assets: 2010/2011 2012 2013 2014 2015
Cash on Hand 178,865 315,496 503,496 766,324 1,124,836
Accounts Receivable 176,450 86,570 26,780 15,670 12,900
Stock 82,540 82,540 82,540 82,540 82,540
Total Current Assets 437,855 484,606 612,816 864,534 1,220,276
Fixed Assets:
Building 400,000 320,000 256,000 204,800 163,840
Tractor 1,280,656 1,024,525 819,620 655,696 524,557
Equipment and Machine 80,960 64,768 51,814 41,452 33,161
Other Assets 120,000 96,000 76,800 61,440 49,152
Total Fixed Assets 1,881,616 1,505,293 1,204,234 963,387 770,710
Total Assets 2,319,471 1,989,898 1,817,050 1,827,922 1,990,986
LIABILITIES AND CAPITAL
Liabilities
Accounts Payable 10,111 1,928 7,496 48,672 87,731
Bank Loan 2,160,000 1,620,000 1,080,000 540,000 0
Total Liabilities 2,170,111 1,621,928 1,087,496 588,672 87,731
Capital:
Paid-up-Capital 0 0 0 0 0
Retained Earning 149,360 367,970 729,554 1,239,250 1,903,256
Total Capital 149,360 367,970 729,554 1,239,250 1,903,256
Total Liabilities and Capital 2,319,471 1,989,898 1,817,050 1,827,922 1,990,986
6.5 Forecasted Cash-Flow

The cash-flow for the five years (2010/2011 to 2015) has been forecasted based on the Forecasted
Income Statement prepared earlier, other assumptions made in the earlier parts, and using the
following assumption:
╬ The beginning cash balance is zero as of January 1, 2010/2011.
╬ The cash received from provision of waste disposal services is taken from the Forecasted
Income Statement.
╬ The depreciation tax shield for each year is computed by multiplying the depreciation
expense of each year by a tax rate of 30%.
╬ The cash payments for costs and expenses are taken from the Forecasted Income Statement.
╬ Bank loan repayment. It is assumed that, from the loan balance of birr 2,700,000, the
business expects to pay a total of the principal and interest of birr 810,000 in the year
2010/2011, birr 783,000 in the year 2012, birr 726,300 in the year 2013, birr 666,630 in the
year 2014, and birr 606,663 in the year 2015.
Page 19
╬ It is assumed that, the business will construct building at a cost of birr 540,000, acquire
tractor at a cost of birr 1,896,820, equipment and machine at a cost of birr 116,200, and
other assets at a cost of birr 150,000 on January 1, 2010/2011.
╬ The business will pay no dividend to the owners in the year 2010/2011, while it will pay
40% of net profit as dividend in the successive years.
The Forecasted Cash Flow Statement for the five years (2010/2011 to 2015) is provided as follows:
Forecasted Cash Flow Statement
December 31, 2010/2011 – 2015 (in birr)
Cash Inflows: 2010/2011 2012 2013 2014 2015
Beginning Cash Balance 0 178,865 315,496 503,496 766,324
Sales 2,169,675 2,386,642 2,625,307 2,887,837 3,176,621
Depreciation Tax Shield 132,121 105,697 84,558 67,646 54,117
Borrow from Bank 2,700,000 - - - -
Total Cash Inflows 5,001,796 2,671,204 3,025,360 3,458,979 3,997,062
Cash Outflows:
Material cost 96,000 97,920 99,878 101,876 103,913
Labor cost 822,000 838,440 855,209 872,313 889,759
Transportation cost 25,000 25,500 26,010 26,530 27,061
Repair and maintenance 50,000 51,000 52,020 53,060 54,122
Utility expense 35,000 35,700 36,414 37,142 37,885
Advertising and promotion 2,000 2,040 2,081 2,122 2,165
Insurance expense 55,000 56,100 57,222 58,366 59,534
Supplies expense 25,900 26,418 26,946 27,485 28,035
Fuel expense 120,000 122,400 124,848 127,345 129,892
Other costs and expenses 15,000 15,300 15,606 15,918 16,236
Bank Loan Principal Repayment 540,000 540,000 540,000 540,000 540,000
Bank Loan Interest Repayment 270,000 243,000 186,300 126,630 66,663
Construction of Building 540,000
Acquisition of Tractor 1,896,820 - - - -
Acquisition of Equipment and Machine 116,200 - - - -
Acquisition of Other Assets 150,000
Profit Tax 64,011 156,150 258,274 364,068 474,290
Dividend Payment - 145,740 241,056 339,797 442,671
Total Cash Outflows 4,822,931 2,355,709 2,521,864 2,692,655 2,872,226
Net Cash Balance 178,865 315,496 503,496 766,324 1,124,836
6.6 Investment Analysis

The investment analysis using the payback period, net present value, internal rate of return, and the
benefit/cost ratio are provided in the parts that follow in order to confirm the feasibility of the
business investment. For the computation of the payback period, net present value, internal rate of
Page 20
return, and the benefit/cost ratio, the concept of relevant cash flow or incremental cash flow is
determined, which is central to the investment analysis. Note that, relevant or incremental cash
flow for project evaluation consists of any and all changes in the firm’s future cash flows that are a
direct consequence of taking the project. Considering this definition, the relevant cash flow or
incremental cash flow for the purpose of the computation of the payback period, net present value,
internal rate of return, and the benefit/cost ratio is provided in Table 5 below:
Table 5 Relevant Cash Flow Statement

Years 0 2010/2011 2012 2013 2014 2015
Income Before Tax 213,371 520,501 860,914 1,213,562 1,580,966
Add: Depreciation 440,404 352,323 281,859 225,487 180,389
Less: Income Tax (30%) 64,011 156,150 258,274 364,068 474,290
Capital Spending (2,700,000) 0 0 0 0 351,000
Total Incremental Cash Flow (2,700,000) 589,764 716,674 884,498 1,074,980 1,638,066
Moreover, note that, the business is expected to operate for five years and that the business
assumed a 15% rate of return to evaluate the business investment. Hence, the payback period, net
present value, internal rate of return, and the benefit/cost ratio are calculated using the Forecasted
Cash Flow Statement provided in the prior parts as follows:
1. The payback period was estimated at three years and five months, which is shorter than the
five years that the business will operates, indicating that the business will return its
investments in the shorter period.
2. The net present value at discount factor of 15% was estimated to be a positive value of birr
317,695.72. The birr 317,695.72 net present value is positive; therefore based on the net
present value rule; we should accept the business investment.
3. The internal rate of return reached about 19.6835%. The internal rate of return of 19.6835%
is far greater than the prevailing market rate of return of 15%, again implying that, it is
advisable to undertake the business investment.
4. The benefit/cost ratio at discount factor of 15% was estimated to be 1.118. Since the
benefit/cost ratio of 1.118 is greater than one, we can argue that the business investment is
estimated to provide a positive net return implying that the business investment is attractive
to undertake.
If we looked at the four criterions: the payback period, net present value, internal rate of return, and
the benefit/cost ratio, all confirms the feasibility of the business investment and the results indicate
Page 21
a promising investment opportunity, and such business investment could be a great success if well
managed.
Moreover, according to the Forecasted Income Statement, the Integrated Waste Disposal and
Management investment will start generating profit in the first year of operation. Important ratios
such as profit margin (net profit to total sales), net profit to equity (return on equity), and net profit
to total assets or investment (return on total investment) show an increasing trend during the life-
time of the project. In general, the Forecasted Income Statement and the other indicators of
profitability show that the investment is viable.
7. Sensitivity Analysis
Risk and uncertainty are the most common features of business activities. These features make it
difficult to know exactly what will be the services of the Integrated Waste Disposal and
Management, its costs, and returns levels, even in the near future. There are risks and uncertainties
about the services integrated waste disposal and management the business is planning to operate
due to many factors such as unexpected changes in cost of input, input availability and quality,
electric power blackouts, and others.
Moreover, the business may face other risks while striving to achieve its objectives including
frequent price fluctuations of goods and services, low commitment of the targets beneficiaries, high
competitiveness of the surrounding market, willingness and readiness of line departments to give
support, funds from the external sources might have their own conditions which may affect the
implantation of projects, and others. Further, there are associated risks in projects of such types.
Given the current attitude of people towards engaging in waste disposal activities, targeting and
convincing people to exert their maximum efforts could be a challenge. In addition, the community
at large might not actively cooperate with the association in safely disposing wastes coming out
from the households.
All of these risks and uncertainties and others could affect the business profitability. If the changes
in business profit are positive, as a result of these risks and uncertainties, then there is no need to
recalculate the feasibility measures, but if they are negative, business investment feasibility must be
retested, and this is the role of the sensitivity analysis. Hence, to conduct the sensitivity analysis of
the business investment, three scenarios are taken into consideration to test business profitability:
the increase of total revenue by 7.5% rather than a 10% increase assumed earlier, the increase of
costs and expenses by 3% rather than a 2% increase assumed earlier, and both occurring together.
Page 22
Scenario 1. Total Revenue increase by 7.5% from year 2012 up to 2015

The results of the investment feasibility under this assumption are still positive where:
1. The payback period is three years and eight months; therefore based on the payback period;
we should accept the investment.
2. The net present value is a positive value of birr 94,073.50; therefore based on the net
present value rule; we should accept the investment.
3. The internal rate of return reached about 16.4473%, which is far greater than the prevailing
market rate of return of 15%, again implying that, it is advisable to undertake the
investment.
4. The benefit/cost ratio is 1.035, which is greater than one that indicates that the business
investment is estimated to provide a positive net return and that the investment is attractive
to undertake.
Scenario 2. All costs and expenses increase by 3%

1. The payback period is three years and six months; therefore based on the payback period;
investment.
to undertake.
Scenario 3. Sales increase by 7.5% and all costs and expenses increase by 3%
1. The payback period is three years and nine months; therefore based on the payback period;
Page 23
investment.
to undertake.
8. Socio-Economic and Political Analysis

As a socio-economic benefit the investment can create employment for 320 people from different
parts of the society in the year 2010/2011 and the job opportunities for our citizens will increase in
the successive years mainly addressing the pro-poor and vulnerable part of the society. As well, as
a result of the Integrated Waste Disposal and Management investment, the living standards of
target groups will be improved.
Moreover, when the project is implemented, it will benefit the town from different angels including
improved health, increase the attractiveness of the town for further investment, employment
creation, use of waste resources for energy and fertilizer purposes, etc. It is also expected to
improve positive attitude towards work in the society. Since waste disposal engages different
sectors of the economy, the indirect beneficiaries are many folds: families of those who are
employed in the activities, the community at large that enjoys clean environment, the tourism sector
that enjoys clean environment, the agricultural sector, and the energy sector. In addition to supply
of the domestic needs, the investment will generate birr 1,316,794 in terms of tax revenue to the
government in the five years.
Furthermore, if the Integrated Waste Disposal and Management investment takes place, it is
expected to result in decrease in unemployment, increase the purchasing power of target groups,
increase the inward investment to the town, increased contribution of the private sector to the
municipal budget and local economy, and improved business enabling environment (favorable to
new investments). In short, the business is expected to have a positive impact on the lives of the
target group, families of thereof and on the community at large.
Specifically, the investment in the Integrated Waste Disposal and Management will result in an
increased income of the partners resulting from the sales of Integrated Waste Disposal and
Management services that will ultimately result in increased purchasing power of the local societies
mainly the direct and indirect beneficiaries. Moreover, the proposal enhances and promotes peace,
Page 24
harmonies and good team spirit and relationship between the partners and other indirect
beneficiaries.
In addition, it encourage other private enterprises which are currently involved in Integrated Waste
Disposal and Management to go for providing quality services as they will be in competition with
the newly established enterprise. Success of this project will encourage other unemployed
individuals for establishing new enterprise. As a result of the investment on average, households
will earn a monthly income of birr 500 up to birr 1,200 and that bad smells in the town minimized,
and incidences of diseases associated to polluted environment decreased. Finally, the business
investment will enhance trust and confidence between the local authorities and communities.
In general, the project is expected to have positive impacts from different perspectives. Firstly, it
creates job opportunities, and hence increases the income of those who are currently unemployed
and that it contributes to improve the livelihood of the target groups. It also has positive impact on
the environment by enhancing the assimilative capacity of the environment. Hence, improves
health of the society by increasing the cleanliness of the town. In so doing, it increases the inflow of
tourists to the town, which is an engine for town development and further creates jobs to the
unemployed. It also makes the town attractive for investment, and hence inward investment will
improve. Moreover, the business has little or no negative effect on environment. Last but not least,
it improves the attitude of people towards work. In sum, the project is with far reaching
implications to the success of the country’s/region’s five year GTP by way of meaningfully
contributing towards reducing unemployment and poverty as well as through generating growth at
various levels.
9. Conclusions and Recommendations

Generally, results of the assessment offered ample evidences on the viability of the project as
viewed from the financial, technical, economic, socio-political, and environmental dimensions of
feasibility. The fact that the project is labor intensive and encourages the involvement of women
and unemployed youth groups also demonstrated its strong linkage to the growth and poverty
reduction goal stipulated in the locality’s LED strategy of. Most outstandingly, financial and
economic feasibility indicators showed that the project is rewarding and with meaningful
contributions towards stimulating economic growth.
Page 25
The business investment is financially viable with an internal rate of return of 19.6835%, net
present value of birr 317,695.72 discounted at 15%, benefit/cost ratio of 1.118, and payback period
of three years and five months. These financial analysis criterions, all confirms the feasibility of the
business investment and their results indicate a promising investment opportunity. As an economic
benefit the investment can create employment for 320 Ethiopian in the year 2010/2011 and the job
opportunities for our citizens and will increase in the successive years. In addition to supply of the
domestic needs, the investment will generate birr 1,316,794 in terms of tax revenue to the
government. Generally, the project contributes to the development of the industry sector which ally
with the ongoing equity and efficiency-oriented growth and transformation plan of the country.
Making the most out of the recently active business and other factors, Integrated Waste Disposal
and Management will achieve the estimated revenue as well as the profit. As well, by enhancing the
potential to increase productivity and, managing or minimizing the various costs such as material
cost, labor cost, fuel expense, and others, the business will implement its investment profitably. In
addition, the business recognizes the fact that by differentiating its services, it can strongly compete
with established industry players and will be successful if it pursues the proposed investment.
Considering the earlier conclusions and others, the following sets of recommendations should be
taken into considerations:
1. Series of training on waste management practices and to actively cooperate with the
association in safely disposing wastes coming out from the households, and on the
importance of the activity in terms of creating wealth should be provided for the target
groups and to the community at large.
2. The cost of the business should properly be identified and managed as the excess or
uncontrolled costs result in failing to achieve the proposed investment. Specifically, the
material cost, labor cost, fuel expense, and others with large amount should be managed and
controlled to achieve the proposed investment.
3. A statistical system for business data used in the feasibility study should be designed and
implemented for monitoring, evaluation, and planning purposes. More attention should be
paid to accurate economic data collection, preparation, and analysis.
4. Integrated, customized, and quality services that will satisfy business’s customers at
competitive prices should be considered and pursued.
Page 26
5. Maintaining open communication between Integrated Waste Disposal and Management and
its customers as well as employees and other stakeholders in order to ensure the highest
level of customer satisfaction and long lasting reputation within the community.
6. To continue to expand the volume of waste disposal services and packages, while also
increasing the level of profits for Integrated Waste Disposal and Management as well as the
owner.
7. Last but not least, the business management must ensure the risk management by taking a
proactive approach to identifying possible risks, weighing up the costs and benefits of
different actions and developing a range of adaptation and responses.
Page 27
Annex
NEKEMTE LED PROJECT SUMMARY _2010

No. Project Title UNDP Local Total Number of Beneficiaries
contribution Government Budget (Birr)
(Birr) Contribution
Male Female Total
1. Garment and Tailoring

738,000 117,000 855,000 20 30 50
2. Wood and Metal Work
1,425,000 120,000 1,545,000 90 20 110
3. Food Processing
1,370,000 180,000 1,550,000 30 110 140
4. Integrated Waste Disposal
and Management
2,700,00
0 553,000 3,253,000 110 210 320
5. Poultry Farming
820,000 111,000 931,000 20 30 50
6. Integrated Tourism Services
651,000 130,000 781,000 8 12 20
7. Developing the Capacity of
All LED Actors in Nekemte
855,781 130,000 985,781 -
8. Establish BDRC
1,235,380 247,245 1,482,625 -
Total
9,795,161 1,588,245 11,383,406 278 412 690
Page 28
Project Action Plan for Nekemte_2010

Waste Disposal and management
Project: # 4 Program Type(s): Level Two

GARBAGE COLLECTION MANAGEMENT
Short Description of the Project
Garbage Collection and Management is project which will focus on dry and fluid waste collection and disposal, cleaning
services, recycling, and creating awareness on biodegradable materials, use of biogas, environmental sanitation,
beautification and gardening and the like.
Expected Results: Target Group(s):

 Reduce unemployment  110 Male and 210 female ( 320 in total)
 Increased contribution of the private sector to the local  Existing entrepreneurs that wish to expand their
economy businesses
 employment opportunity is created for marginalized
women and youth,
 Income of the members of the cooperatives increased,
 People with business need training & development to
increase their knowledge of business
 Casual employment opportunity is created
Possible stakeholders Possible contribution to the project:
Town Administration , Steering & Technical committee, Material contribution: - equipment and other expertise.
LED experts
Local government Offers direct support: premises, political support, and

expertise.
Women and children affairs , youth and sport affairs Screening beneficiaries
Social affairs
Finance & Economic Development Office Disburse the transferred grant for the beneficially
Facilitate the accounting & financial mgmt systems
Purchasing Auditing advice
Etc
Oromiya Credit & Saving Share Company Gives saving service
Revolving fund management
MSE Development Agency  Organizing the beneficiaries into micro & small scale
enterprises association
 Training,
 business development services etc.
Assela TVET and Adama University, Rift Valley University  They may contribute by giving technical advises
College  They may provide job matching service for the trainees.
 Give practical assistance for SME Development as well
as for the target groups
Prerequisites: Risk Factors:

 Screening of beneficiaries  Lack of business awareness
 Registering & organizing the beneficiaries to the  Some members may shift to other business
SME'S  Limited financial or other resources for business
 Giving training to the groups
 Fulfilling the necessary materials
 Deciding on Work place
 Available financial resources Running costs: Br 5000 annually
 Availability of financial resources Stock holders may contribute in cash or in kind
Equipment, volunteer work for special events(training
 Specialists are available to provide services
conferences)additional fund should be voiced,
Page 29
Estimated Costs:
UNDP : Birr 2,700,000

Locality : Birr 553,000
\Total : Birr 3,253,000
Outputs:
52% of applicants granted
43% of all assisted business increase their revenue
Page 30

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Feasibility

[ INTEGRATED WASTE DISPOSAL AND

5. Management and Personnel..................................................................................................................12

6. Financial Feasibility Study......................................................................................................................12

6.1 Capital Investment...............................................................................................................................13

6.2 Financing Plan......................................................................................................................................14

6.3 Forecasted Income Statement.............................................................................................................14

6.4 Forecasted Balance Sheet....................................................................................................................17

6.5 Forecasted Cash-Flow..........................................................................................................................18

6.6 Investment Analysis.............................................................................................................................20

8. Socio-Economic and Political Analysis....................................................................................................23

9. Conclusions and Recommendations......................................................................................................25

Annex: Action Plan and Project Summary Sheet

1. Description of the Business

Box-1 Impact Flow of waste management and disposal Project

Inputs/Processes (results relating to provision of resources and processes)

 Financial support in the form of loan with minimum interest rate

Outcomes (results relating to intermediate change and effects sought)

 Increased household income/ living standard of beneficiaries and their dependants

 Reduction in poverty and unemployment /generation of growth

Table 1 Production Cost Plan for the Year 2010/2011

5. Management and Personnel

6. Financial Feasibility Study

6.1 Capital Investment

Table 4 Capital Investment Cost

11. Scarf 300 30 9,000

6.2 Financing Plan

6.3 Forecasted Income Statement

No Services Qty Unit Price Total Sales

Integrated Waste Disposal and Management

Fuel Expense 120,000 122,400 124,848 127,345 129,892

6.4 Forecasted Balance Sheet

Integrated Waste Disposal and Management

6.5 Forecasted Cash-Flow

6.6 Investment Analysis

Table 5 Relevant Cash Flow Statement

Scenario 1. Total Revenue increase by 7.5% from year 2012 up to 2015

Scenario 2. All costs and expenses increase by 3%

8. Socio-Economic and Political Analysis

9. Conclusions and Recommendations

NEKEMTE LED PROJECT SUMMARY _2010

Male Female Total

1. Garment and Tailoring

Project Action Plan for Nekemte_2010

Project: # 4 Program Type(s): Level Two

Expected Results: Target Group(s):

Local government Offers direct support: premises, political support, and

Facilitate the accounting & financial mgmt systems

Purchasing Auditing advice

Oromiya Credit & Saving Share Company Gives saving service

Revolving fund management

Prerequisites: Risk Factors:

UNDP : Birr 2,700,000

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