PROJECT PROPOSAL ON

IRRIGATION FRUIT AND VEGETABLES

PRODUCTION

PROJECT LOCATION: - OROMIA REGIONAL NATIONAL

STATE, WEST GUJI ZONE, BIRBISA KOJOWA WOREDA

PROMOTER: - ELIAHIBA GUJO TRADING PLC

APR, 2021
ADDIS ABABA, ETHIPIA
 TABLE OF CONTENTS

1. EXECUTIVE SUMMARY 1
2. INTRODUCTION 2
3. BACKGROUND 3
4. THE PROJECT AREA 4
a. Location 4
b. Topography 4
c. Soil type 4
5. THE PROJECT 5
a. Project description 5
b. Objective 5
c. Technology used 6
d. Engineering 6
e. Production capacity 8
6. MARKET PROCESS 10
7. LAND USE PLAN 26
8. ORGANIZATION AND MANAGEMENT 26
a. Organization structure 26
b. Manpower requirement with qualification 27
9. FINANCIAL STUDY 29
a. Fixed cost 29
b. Production cost 31
c. Production capital and financing sources 33
d. Revenue projection 33
e. Financial statements 34
10. SOCIO – ECONOMIC BENEFITS 35
11. ENVIRONMENTAL IMPACT ASSESSMENT 36
 Executive Summary
1.Project Name
2.Project Owners
3.Nationality
4.Project location
5.Project Composition
6.Primeses Required
7. Start up Capital
8.Employment Opportunity
9. Market Share
10. For The region/ country
2. Introduction
Fruit And Vegetables Production Farm
ELIAHIBA GUJO TRADING PLC
Ethiopia
West Guji Zone, Birbisa Kojowa Woreda
Fruit & Vegetable Production By Irrigation
100 hectar
For implementing this project a total of 0 Eth birr is required.
Owner equity( %30) and Bank Loan (%70)
This project fully employees the local individuals. Except the
general manager all other employees are used from the local area.
Hence, this project will create employment opportunities for 224
individuals from this 24 are skilled and 200 are unskilled
50 % Export Standard 50% for Local market
Source of foreign currency
Until the coming of new economic police, the acute problem of Ethiopia had been food shortage. This
has been the problem faced by all developing countries even though not chronic as ours. In countries
like Ethiopia although drought had affected the agricultural output, the overall discouraging economic
police of the time was also the one, which hindered the economic development of the country. Even
under such a condition, the agricultural sector apparently plays the decisive role in the overall
economy of the country. It accounts for about 50% of GDP 85% of the employment and about 90%
of the export earnings. Despite this agriculture has remained under development because of different
reasons, drought, poor economic base law productivity, poor technology transfer and the like. The
government has embarked on an export diversification program to reduce its dependence on coffee
and to other quality products.

Agriculture is expected to remain the major contributor to economic and growth in the coming
decades. The potential for expanding output is largely through expanded irrigation, improved in puts
supply, strengthened research and extension systems and rehabilitated infrastructure.

In general to do away the problem of food self sufficiency increase foreign currency increase of raw
material for industries efforts should be made towards developing agricultural sector. This needs a
shift from traditional and back ward method of production system that required a coordinated roll of
all factors of production. In this regards it is the private sector that can mobilize huge capital and
skilled man power.

Therefore the involvement of private sector should be pursed and encouraged by the government
through adopting a favorable economic policy that allow the sector to take part in the development
process without putting capital ceiling.

Currently, in order to encourage private investment and to attract capital technology and know-how to
the country comprehensive packages of incentives are granted to investor by the investment
proclamation. These incentives included (100%) exemption from payment of import customs duties
levied on imported capital goods (machines and equipment’s as well as spare parts up to 15% of the
value of capital exemption from income tax payment for a period market.
3. Background
This project constitutes fruit and vegetables production, which is the most tests full and the most
appreciated and stable in the domestic market. The market for these productions continues to be strong
due to the increasing demand. These account for the fact that production continues to increase the
demand for the production which pushes the price higher on the world. The total investment capital of
the project will be about 17,000,000 Birr of which 11,900,000 Birr will be for fixed investment capital
and the remaining 5,100,000 will be invested for working capital.
The proposed project will create job opportunities for more than 24 permanent & 200 temporary and
total for 224 citizens and will generate revenue which estimated to 17,000,000 per year when it
operates at full capacity, generate income for the government in the form of land rent and different
taxes payment.

The output of the project will never encounter any marketing problems since the demands for the out
puts of the project are high and ever increasing while the supply is far below the demand. The
promoter has every right to sell his/her production in a free market where he/she could reap the
maximum benefits.
4. Basic Features of Project Area
4.1. Location: the envisaged crop production project is planned to be located in East Guji Zone
of Oromia Regional State Government in free land area in Birbisa Kojowa woreda. The area is
very conducive for establishing such project for its good weather condition and very fertile soil.

Map of the regions and zones of Ethiopia

Altitude Between 1500-1750 and 2005, a number of woredas were separated from West Guji to
create South West Guji Zone.
4.2. Demographics
In Oromiya Region the census has covered the then existing total number of 6,889 rural and
urban Kebeles which were sub-divided into 30,585 enumeration areas. The May 2007
Population and Housing Census was the third Population and Housing Census. The first
Population and Housing Census was conducted in May 1984 whereas the second Population
and Housing Census of Ethiopia was conducted in October, 1994. In this third Census,
twenty eight of May, 2007 was used as the census day or census reference day. The census
has counted people on dejure and defacto basis. The dejure population comprises all the
persons who belong to a given area at a given time by virtue of usual residence, while under
defacto approach people were counted as the residents of the place where they found
(Shryock et al., 1976). In the census, a person is said to be a usual resident of a household
(and hence an area) if he/she has been residing in the household continuously for at least six
months before the census day or intends to reside in the household for six months or longer.
Thus, visitors are not included with the usual (dejure) population. Homeless persons were
enumerated in the place where they spent the night on the enumeration day. The 2007
census counted foreign nationals who were residing in the region. On the other hand, all
Ethiopians living abroad were not counted.

Based on the 2007 Census conducted by the Central Statistical Agency of Ethiopia (CSA), this
Zone has a total population of 2,058,676, of whom 1,028,501 are men and 1,030,175 women;
with an area of 14,788.78 square kilometers, West Shewa has a population density of 139.21.
While 242,352 or 6.10% are urban inhabitants, a further 53 individuals are pastoralists. A total of
428,689 households were counted in this Zone, which results in an average of 4.80 persons to a
household, and 415,013 housing units. The two largest ethnic groups reported in West Shewa
were the Oromo (93.82%) and the Amhara (5.15%); all other ethnic groups made up 1.03% of
the population. Oromiffa was spoken as a first language by 93.99% and 5.47% spoke Amharic;
the remaining 0.54% spoke all other primary languages reported. The majority of the inhabitants
professed Ethiopian Orthodox Christianity, with 53.84% of the population having reported they
practiced that belief, while 32.93% of the population professed Protestantism and 9.85% of the
population said they practiced Islam.
The 1994 national census reported a total population for this Zone of 2,329,699 in 480,735
households, of whom 1,153,185 were men and 1,176,514; 225,993 or 9.7% of its population
were urban dwellers at the time. The three largest ethnic groups reported in West Shewa were the
Oromo (89.78%), the Amhara (6.66%), and the Sebat Bet Gurage (1.73%); all other ethnic
groups made up 1.83% of the population. Oromiffa was spoken as a first language by 89.47%,
7.32% Amharic, and 1.16% spoke Sebat Bet Gurage; the remaining 2.05% spoke all other
primary languages reported. The majority of the inhabitants professed Ethiopian Orthodox
Christianity, with 80.6% of the population having reported they practice that belief, while 7% of
the population said they held traditional beliefs, 6.58% were Protestant, and 5.34% were Muslim.

According to a May 24, 2004 World Bank memorandum, 35% of the inhabitants of West Shewa
have access to electricity, this zone has a road density of 29.2 kilometers per 1000 square
kilometers (compared to the national average of 30 kilometers),[3] the average rural household
has 1.4 hectare of land (compared to the national average of 1.01 hectare of land and an average
of 1.14 for the Oromia Region)[4] and the equivalent of 0.7 heads of livestock. 31.8% of the
population is in non-farm related jobs, compared to the national average of 25% and a Regional
average of 24%. Concerning education, 66% of all eligible children are enrolled in primary
school, and 28% in secondary schools. Concerning health, 89% of the zone is exposed to
malaria, and none to Tsetse fly. The memorandum gave this zone a drought risk rating of 406.

Although coffee is an important cash crop of this woreda, less than 20 square kilometers are
planted with this crop.
The 2007 national census reported a total population for this woreda of 97,243, of whom 48,593
were men and 48,650 were women; 6,072 or 6.24% of its population were urban dwellers. The
majority of the inhabitants said they were Protestant, with 53.43% of the population reporting
they observed this belief, while 37.1% of the population practised Ethiopian Orthodox
Christianity, and 8.2% were Muslim

Based on figures published by the Central Statistical Agency in 2005, this woreda has an
estimated total population of 82,575, of whom 42,056 are men and 40,519 are women; 3,197 or
3.87% of its population are urban dwellers, which is less than the Zone average of 12.3%. With
an estimated area of 667.19 square kilometers, Birbisa Kojowa has an estimated population
density of 123.8 people per square kilometer, which is less than the Zone average of 152.8.

The 1994 national census reported a total population for this woreda of 59,559, of whom 29,385
were men and 30,174 women; 1,789 or 3% of its population were urban dwellers at the time. The
two largest ethnic groups reported in Birbisa Kojowa were the Oromo (92.24%), and the Amhara
(7.56%); all other ethnic groups made up 0.96% of the population. Oromiffa was spoken as a
first language by 94.43%, and 5.53% spoke Amharic; the remaining 0.04% spoke all other
primary languages reported. The majority of the inhabitants professed Ethiopian Orthodox
Christianity, with 77.17% of the population reporting they practiced that belief, while 23.2% of
the population said they were Protestant, 5.04% were Muslim, and 2.41% practiced traditional
beliefs.

4.3. Soil and Topography

The location/soil where this project is planned to be executed is very fertile and suitable for fruit
and vegetables production. With respect to topography, the major part of the land has got the
altitude of the area lies in the altitude suitable for mechanized farm in general and the above
products in particular.

4.4. Climate
The project area dominantly characterized by dry weynadega agro-climatic zone. The area has
one rainy season from June to September

4.5. Economic activity

The major economic base of the peoples living around the project area is depending on
traditional mixed farming. They grow crops of different type like maize, barely, haricot bean,
and fruit and vegetables production supplemented with animal rearing.
 4.5.1. Irrigation scheme layout
 One reservoir whose storage capacity enables to develop 100 hak of irrigable land will be
constructed.
 Distribution box:- the main function of the distribution box is guiding irrigation water to
various unit farms. These boxes are located on main irrigation canals. The box is usually
constructed from masonry, mass concrete. It also serves as check structure to raise water
level in the secondary canals.
 Pumps: - for the envisaged 200ha scheme the total volume of water to be delivered to the
farm will be 200 liter to 300 liter per minute. If pump has capacity to deliver 300 liters per
minute it needs to install one unit of pump.

5. The project
5.1. The project Description
The country’s agricultural led development strategy, the project under consideration has a
paramount importance of contributing to the supply of food and generates foreign exchange
earnings through export of its product. The project makes use of river water by irrigation and
produces:-
 Potato,
 Onion,
 Tomato,
 Pepper,
 Cabbage,
 Carrot,
 Papaya,
 Avocado
 Banana other related production.
The project is envisaged to develop 100 hectares of land under modern management and
production systems. The project will start its activates by simple clearing the land, farm
road construction, building constructive purpose, guard house, store, bore hole drilling,
procurement of machinery and equipment, vehicles and hiring skilled and semi skilled
employees from local market.
5. 2. The overall objectives and Specific objective
5.2.1 over all objectives
The main objective of the project is to produce different type of fruit and vegetables production
to meet the increasing demand for these types of output and it also important as a source of raw
material for different industries and for the growing demand in local market for that matter.

In addition to this the overall objective of the project under consideration is to contribute to the
development process in the country by taking part in the agricultural farm with fruit and
vegetables production.

5.2.2 Specific objective

The Specific objective of this project is to generate profit to the promoter over the invested
capital by growing quality products. And other objectives are:-
 To create job appointees specifically for the local people and the citizen
 To generate revenue for the country in the form of taxes
 To change the system of agriculture farming from traditional to modern system of
farming
 Install modern irrigation facilities in order to increase productivity of the land
 It has important demonstration effect in encouraging the peasant to use irrigation to grow
their crops.

5.2.3. Beneficiaries of the project

The highest share of the project benefit accrues to the owner in the form of net profit earned from
its operation. The establishment of this project on the area would also benefit various groups.
 The workers reap the benefit in the form of wage and salaries rewarded for their labor input.
 the government would also benefits in raising revenue in the form of tax
 The society would be able to get increased supply of fruit and vegetables in the market and
therefore enjoy its availability.
 Generally, the project would add to the welfare of the country in increased domestic
production, income and possibly in helping to earn foreign exchange.
 5.2.4. Technology used
The planned project uses the most important technologically produced machineries and
equipment which produce more production with low energy and low cost. These machineries and
equipments are Germany, Indian, China and Saudi Arabia made technology.

6. Market prospect and assessment

6.1. The input supply
The major inputs that are demanded by the project include seeds, fertilizer, herbicides and
pesticides. The project could easily purchase these inputs from local suppliers and government &
non government seed supplier agency. Therefore, the supply of farm inputs will not be a problem
for the project under consideration.
6.2. Output market
The proposed project is planned to distribute its products 50% for foreign and the remaining for
local market. The country’s dependency on the Export of few primary products like coffee, hides
and skins has resulted in low level export income. In order to change this rate the promoter this
project planned to produce quality fruit and vegetables.
Regarding market, Ethiopian exports large quantities of fresh fruits and vegetables to Djibouti,
Yemen, Saudi Arabia and other Middle East countries. The project under consideration fruits
like papaya and Banana, vegetables like onion, Tomato, pepper, cabbage and carrot which are
highly demanded in the local markets and in the foreign market at large and food crops like
maize and sorghum to meet the increasing demand.
7. Land use plan
S/No Description Area in he
I Vegetables 90 hectares
1 Tomato 20 hectares
2 Onion 20 hectares
3 Potato 15 hectares
3 Cabbage 15 hectares
4 Pepper and Strawberry 10 hectares
5 Carrot 10 hectares
II Fruit 10 hectares
1 Banana 2.5 hectares
2 Papaya 2.5 hectares
3 Avocado 2.5 hectares
4 Mango and Zetun 2.5 hectares
Total 100 hectares

As clearly indicated in the land use plan of the project the fruit and vegetables are produced at
least three times a year.

8.1 Sales Plan

The Revenue of the Project is assumed to be generated from the sales of the different fruit &
vegetables. Thus in this project,

Plot Qty Unit

No Description in Unit product Yearly price Total Price
Hek Per Hek. productio Quintal
n
1 Tomato 20 Quintal
40 4,800 1,500 7,200,000
2 Onion 20 “
50 6,000 1,000 6,000,000
3 Potato 15 “
30 2,700 1,000 2,700,000
4 Cabbage 15 “
25 2,250 8,000 18,000,000
 5 Pepper and 10 “
Strawberry 60 3,600 3,000 10,800,000
6 Carrot 10 “
100 6,000 2,000 12,000,000
7 Banana 2.5 “
50 750 1,500 1,125,000
8 Papaya 2.5 “
40 600 1,200 720,000
9 Avocado 2.5 “
40 600 1,500 900,000
10 Mango and Zetun 2.5 “
40 600 1,500 900,000
Total “
100 475 27,900 22,200 60,345,000

Remember that at the first cycle of production the project plan is to sale its products to
60,345,000 birr within the 2rd and 3rd cycle the sales plan is going to be increased.
8.2. SWOT analysis Ethiopian Fruit and Vegetable Business
8.2.1. Strengths
 Climate
Ethiopia has a beneficial climate for growing a wide range of fruits and vegetables
throughout the year. The good soil and water conditions are enabling the agricultural
potential further.
 Supportive government policies
Investments are encouraged by the Government of Ethiopia through several incentives
for example through beneficial tax schemes for export investments. Government offices
work according to procedures resulting in a relatively low level of corruption compared to
other African countries.
 Costs of production
Land lease costs are low and labor is cheap.

 Geographic location
Ethiopia has a favorable geographic location as it is close to Djibouti and the Middle
Eastern markets.
 Security
Compared to other countries in the region Ethiopia’s private security and safety situation
is very good.
 Private sector service provision
The rapid growth of the floriculture sector leads to a growing critical mass of service
provision level by private sector parties also relevant to the F&V sector.
 New initiatives
Many new companies have started or are in the process of starting in the F&V sector.
And there is a broad interest from private sector parties, public organisations and NGO’s
for the F&V sector.
  Potentials for irrigation
Potential for irrigated production with improved water-saving techniques (drip-irrigation)
is high.
 Transport
Although landlocked a good domestic, major road network exists between the main F&V
production centres and Addis; airfreight is available and capacity constantly increasing.
 Code of Practice in floriculture sector
Experiences gained in the development of a Code of Practice by the floriculture sector
will benefit the fruits and vegetable sector
8.2.2. Weaknesses
 Constant high quality supply in sufficient quantities
Apart from beans, a fragmented and non-constant supply of F&V with limited quantities and
high variation in quality, leads to a weak position compared to competitors like Kenya; Ethiopia
yet lacks the critical mass and reputation of a high potential source of
F&V.
 Varieties
Limited knowledge and availability of the proper varieties with respect to local climatic
conditions and consumer demand.
 Packaging
Low quality of locally produced packaging material.
 Cold Storage
Limited capacity of appropriate cold storage capacity.
 Technical Know-How
Limited technical know-how for production and handling of high quality F&V for export
markets.
 Research and extension
Limited research and extension programmes focused on the export oriented F&V sector.
 Input supply
Problems in acquiring the appropriate types of fertilisers and pesticides.
 Land Tenure
Insecurity due to lack of land tenure causes constraints for investments.
  Market Information
Information about export markets, especially Middle East, is limited.
 Domestic market
Low consumption rates of fruits and vegetables, which give limited options for selling
non-export grades.
 Banking
The regulation of the banking system is a major constraint. There is no free exchange of
foreign exchange, which hampers international financial transactions.
 Bureaucracy
Government procedures (including customs, repayment of VAT etc.) are sometimes
slow and unclear and require regular follow-up.
 Communication
The mobile phone network is over-stretched and internet connections are relatively slow.

8.2.3. Opportunities
 Demand in Europe and Middle East
In both Europe as in the Middle East there is a high and growing demand for fruits and
vegetables. The objective of importers to diversify sourcing from main suppliers like Kenya,
provides an opportunity for Ethiopia. For European importers Ethiopia is very interesting in
order to have a year round delivery of fruits and vegetables.
 Demand for processed fruits and vegetables
Processed fruits and vegetables have a high demand in the European and Middle Eastern
markets; also import substitution in the domestic market provides good opportunities. Demand
for tomato concentrate in the Middle East and Sudan is increasing.
 Ecological and fair trade production
Demand in the European market for ecological and fair trade products is increasing. Also
major retailers like the UK based TESCO is demanding high social standards of their
imported products. Ethiopia offers a good scope for ecological and fair trade production.
 8.2.4. Threats
 Increased competition in European and Middle East Market
High competition of countries with already a strong position (e.g. Kenya in the European market)
and countries with a growing position (Morocco, Egypt in Europe; Turkey, Jordan in Middle
East). China may also become a competitor for processed products

2.6.1. The input supply

The major inputs that are demanded by the project include seeds, fertilizer, herbicides and
pesticides. The project could easily purchase these inputs from local suppliers and government &
non government seed supplier agency. Therefore, the supply of farm inputs will not be a problem
for the project under consideration.

2.6.2. Output market

The proposed project is planned to distribute its products 30% for foreign and the remaining for
local market. The country's dependency on the Export of few primary products like coffee, hides
and skins has resulted in low level export income. In order to change this rate the promoter this
project planned to produce quality fruit and vegetables.

Regarding market, Ethiopian exports large quantities of fresh fruits and vegetables to Djibouti,
Yemen, Saudi Arabia and other Middle East countries. The project under consideration fruits
like papaya and Banana, vegetables like onion, Tomato, pepper, cabbage and carrot which are
highly demanded in the local markets and in the foreign market at large and food crops like
maize and sorghum to meet the increasing demand. With in the country the promoters try’s to
distribute to the capital city of the country and other parts of the countries region
 9. Organization and Management
9.1 Organization structure
The promoter’s effort is appreciable and it has to be supported by a proper organizational
structure which will enable the planned business enterprise achieve its objectives.

The organization structure presented below is envisaged to have taken the activities fruit and
vegetables production and the manpower requirement of the project is determined based on this
structure.

Project Manager

Production Marketing Administration &

Department Departme finance

Purcha
Agronom Superviso Administr Accounting
ser
y r ation Section

9.2 Manpower Requirement

The general manager at the top to manage frequently visits and supervises the farm site. Under
the general manager there will be different department which is assigned for different activities.
Other supporting staffs that have the essential skill relevant for the various support activities of
the project will be employed.

The total manpower requirement for the project outlay, their qualification, wages and
salaries are depicted in the following table below.
No Work title Qualification Number Monthly Total
 salary
head (Annual)
1 Manager Bsc in plant science
2 4,000 96,000
2 Secretary Dep.Sec. science
5 1,500 90,000
3 Agronomist BA in Agronomy
5 2,500 150,000
4 Administrator Pup.admnistration.
5 3,000 180,000
5 Accountant Accounting
3 2,500 90,000
6 Purchaser & sales man Purchasing Magt.
3 3,000 108,000
7 Irrigation specialist Bsc in agricultural eng.
and irrigation 5 3,500 210,000
8 General agriculturalist Bsc in agricultural
economics 5 3,000 180,000
9 Cashier Dep. In accounting
5 2,000 120,000
10 Store keeper Grade 7 5 2,500 150,000
11 Supervisor BA in management
4 4,000 192,000
12 Teck.Head(chief TVET Level 4
mechanic) 3 1,500 54,000
13 Ass. mechanic TVET Level 3
2 2,000 48,000
14 Tractor operator Grade 12
2 3,000 72,000
15 Ass. Tractor operator Grade 10
2 2,000 48,000
16 Driver Grade 12+3rd level license
4 2,000 96,000
17 Laborers Grade 4-7
15 1,500 270,000
18 Electrician TVET Level 4 in
electricity 2 2,500 60,000
19 Tire and fuel man Grade 10
3 2,000 72,000
20 Guards Grade 5
10 1,500 180,000
21 cleaners Grade 6
10 1,500 180,000
22 Unskilled labor -
(Irrigation Workers) 100 800 800,000
Total - 200 - 1,700,000
N.B. The above salary expense includes the salary of both skilled and unskilled labors.
 10. PART FOUR

10.1. FINANCIAL REQUIREMENT

The financial resource is a prime resource for undertaking any activities. Hence for
implementing this project a total of 17,000,000.00 Eth birr is required. From this 30% or
5,100,000 birr will be owner’s contribution while the rest 70% or, 11,900,000 Eth birr will be
covered by bank loan. Therefore the said amount of finance is needed for undertaking the
following:
10.1.1. Fixed Cost Estimates

No Description Cost
1 Fixed Investment
1.1 Land, Building and Construction 4,760,000 0.00
1.2 Machines and Equipment’s 3,740,000 0.00
1.3 Vehicles and Motors 510,000 0.00
1.4 Office Furniture and Equipment 340,000 0.00
Total Fixed Investment Cost 9,350,000 0.00
2 Operating Expense 0.00
2.1 Raw Materials Purchase and Products 3,400,000 0.00
2.2 Salary Expense 1,700,000 0.00
2.3 Other Operating Expense 510,000 0.00
2.4 Pre-operating Expense 340,000 0.00
Total Operating Expense 5,950,000 0.00

Contingency (Lump sum) 10% 1,700,000

Total Investment Cost 17,000,000 0.00

The contingent costs will used for covering all other costs which are not stated in the financial
summary. For example all the costs related indirectly tot the irrigation scheme of the company.
Sources of Fund: source of fund to finance the project is planned to be from two sources,
owner’s equity and bank loan. The production site will produce 3 times a year and the costs for
working capital per annum is and others will be covered by the owner of the project, while the
rest of funds to run the project will be financed by the bank.
 4.1.1 Building & Construction
No Description Plot in m2 unit cost in birr Total cost
1 Office and Residences 500 2,000
1,000,000
2 Stores and warehouses 200 1,000
200,000
3 Green area and green belt Dev’t 500 1,600
800,000
4 Clear site 2,760,000
Total 3760000

4.1.2. Farm Tools and Equipments

N0 Description Unit Qty Unit cost Total cost

1 Hoes no 50 100 5,000
2 Spades “ 50 100 5,000
3 Axles “ 50 200 10,000
4 Water pump “ 5 12,000 60,000
5 Different tools and equipments “ 920,000
6 Janitors 1 1,000,000
7 Spink water machine 1,760,000
Total 12400

4.1.3. Vehicles

No Description Qty Unit Price Total Price Note

1 Tractor 2 255,000 510,000 Duty Free
Total 510,000

The company requires the above vehicles and farm machines. Currently, the company is using a
hired tractor for undertaking its harvesting schemes.

4.1.4. Office Equipments

No Description Qty Unit cost Total cost

1 Managerial Tables 2 6,000 12,000
2 Managerial chairs 2 1,500 3,000
3 Computer Tables 3 700 2,100
4 Secretarial chairs 2 450 900
5 Computer with its accessories 4 5000 20,000
6 Shelf 4 4000 16,000
7 Filing Cabinets 4 1,500 6,000
8 Guest chairs 16 500 8,000
9 Cash register 2 6,000 12,000
10 TV set 3 5000 15,000
11 Photo copy Machine 1 15,000 15,000
12 Reserved 240,000
Total 47 340,000

4.2 Expenses

4.2.1 Raw Material Purchase

Since the production of crops is divided in phases, the estimated and the production yield per
year will be 3 time a year since it is through irrigation. Labor cost, selected seeds, chemical
 fertilizers and pesticides and any other costs related to the irrigation scheme of the company.
However the land under consideration is very fertile and as such does not consume excessive
chemical fertilizers. Moreover, the company itself will produces its own selected seeds and thus
reduce the cost of selected seeds used in the production.

Therefore, the unit cost of production is as follows.

No Description Hectare Unit cost/ Total cost

hectare (in birr)

1 Selected Fruit and Vegetables Seeds, 100 24,000 2,400,000

Chemical fertilizers ,Direct Labors ,
pesticides and others irrigation
schemes
2 Miscellaneous costs 1,000,000

Total 100 3400000340000

0

Moreover, all the crops are not equally consuming the inputs. Therefore the company will work
on reducing costs by designing tightened cost reduction strategies. Additionally the fruit and
vegetable does not consume excessive fertilizer and thus it only need different pesticides at the
time of blooming. Again, the owners will implement the project after three months of taking the
land, and he will do the project phase by phase so as to use the working capital from the project.

4.2.2 Estimated costs of salary expense

As indicated in part 4.1 (manpower) of this study, the total cost of salary and wages is estimated
to be 1,700,000.00 Birr for Fruit and Vegetables production Farms.

4.2.3 Other Operating Expenses

No List of Items Qty Unit of Unit cost Total cost
 Measure Per annum
1 Computer paper 10 Pack 400 4,000
2 Staples 10 “ 15 150
3 Pens, pencils, and others 20 pack 75 1,500
4 Detergents 100 pcs 40 4000
5 Uniforms 20 pcs 200 4,000
6 Water - - - 10,000
7 Electricity - - - 50,000
8 * Fuel Expense - - - 500,000
9 Telephone - - - 12,000
10 Repair expense - - - 50,000
11 **Lubricants 6400
11 Miscellaneous Costs - - - 5000
12 Computer and Printer 10 no 10,000 10,000
13 Reserve 10,000
Total 510,000

4.2.4 Pre -Service Expense

No Description Cost
1 Project proposal 10,000
2 EIA 30,000
2 Licensing fee and others 10,000
3 0thers related for fruit and 300,000
vegetable pre cost
Total 0

3.1. Loan Repayment Schedule 70% Bank Loan (2020-2030 G.C)

Yea Principal Interest Total Annual Remaining

r Payment (10%) Payment Balance
0 0 0 0 5,100,000
1 510,000 510,000 1,020,000 4,590,000

2 510,000 459,000 969,000 4,080,000

3 510,000 408,000 918,000 3,570,000

4 510,000 357,000 867,000 3,060,000

5 510,000 306,000 816,000 2,550,000

6 510,000 255,000 765,000 2,040,000

7 510,000 204,000 714,000 1,530,000

8 510,000 153,000 663,000 1,020,000

9 510,000 102,000 612,000 510,000

10 510,000 51,000 561,000 0

10.3 Annual depreciation schedule of the fixed Asset (000’ birr)

S Original Value Depreciation Depreciation
Description
N In Birr rate in % Per year
Construction and
1 4,760,000 5 238,000
Civil Work
Machines &
2 3,740,000 15 561,000
Equipment’s
3 Vehicles 510,000 20 102,000
4 Office Equipment 340,000 15 51,000
Total 9,350,000 952,000
11. Financial Statement analysis
Income Loss Statement
Fruit and Vegatable production Farm Profit /loss statement, projected
For year ended August 30, 2021
Balance Sheet
Asset
Current Asset
Cash 2,550,000
Inventory of raw materials and inputs 3,400,000
Total Current Asset 5,950,000
Fixed Asset
Land, Building and Construction 4,760,000
Machineries and Equipment’s 3,740,000
Office Equipment 340,000
Vehicles 510,000
Total fixed Asset 9,350,000
Total Asset
Liability
Account payable 11,900,000
Owners Equity 5,100,000
Capital
Total Liability & Owners’ Equity 17,000,000

*sales expenses include all costs pertinent to sales that include: promotional costs,
transportation of products, commissions and other sales discounts.

Income Loss Statement

Revenue Year 1 Year 2 Year 3-10
Sales 1,500,000 1,575,000 1,653,750
Sales expenses (5%)* 75,000 78,750 82,688
265,075,09
Purchase of Raw Material 3,400,000 265,075,095
5
Gross profit -1,900,000 - -
 263,421,34
263,500,095
5
Expenses
Salary Expense 1,700,000 1,785,000 1,874,250
Operating Expenses 510,000 535,500 562,275
Pre-operating Expense 340,000 357,000 374,850
Deprecation Building 238,000 238,000 238,000
Deprecation machine 561,000 561,000 561,000
Deprecation Vehicles 102,000 102,000 102,000
Deprecation office Equip 51,000 51,000 51,000
Lease Expense 3,000,000 3,000,000 3,000,000
Interest Expense 510,000 459,000 51,000
Total Expense 7,012,000 7,088,500 6,814,375
Profit Before Tax 1,500,000 1,575,000 1,653,750
Tax(30% ) 450,000 472,500 496,125
Net Profit 1,050,000 1,102,500 1,157,625

Cash Flow Statement

Particulars Year0 Year I Year II Year III-XI

A. Cash Inflow 0
· Own equity 5,100,000
· Bank loan 11,900,000
· Depreciation 0 952,000 952,000 952,000
· Net profit 0 1,050,000 1,102,500 1,157,625
Total inflow
17,000,000 2,002,000 2,054,500 2,109,625
B. Cash outflow
0
· Fixed capital
9,350,000
· Working capital
5,950,000
. Contingency (Lump sum) 1,700,000
10%
· Loan repayment
510,000 459,000 51,000
Total outflow
17,000,000 510,000 459,000 51,000
Net inflow (A-B)
0 1,492,000 1,595,500 2,058,625
Cumulative balance
0 1,492,000 1,595,500 2,058,625

11.1 Capital expenditure

Capital expenditures are equivalent to the total financial requirements of the project. In the other
words they are initial investment outlays required to enter operational stages these capital
expenditures are constituted of fixed investment cost and initial working capital.

11.2 Fixed investment capital

Fixed investment costs are expenditures on the required fixed asset. The major components of
fixed cost are constituted of expenditures on machinery and equipment. The rest will go to
construction of civil works and the acquisition of office facilities.

11.3 Working capital

Working capital is part of annual operating cost and is required to make the project operational.
Expert for some operational costs whose yearly expense were taken as they are some limited
months expenses were taken as forecast the working capital requirement of the project.
According to the forecast made in detail the amount of initial working capital is founded to be
1.5 mill. birr.
11.4 Source of Investment capital
The forecasted investment capital is planned to rise from the owner’s equity/ promoter’s equity
30% contribution only.

11.5 Project income

The project earns its revenue by selling the proposed output by competitive in the market, the
sales of the projects output are determined in such a way that it does not impose higher price on
ultimate consumers. Accordingly, the project expects total sales revenue of 450,200 birr during
the first year and 1,500,000 when it starts operates at full capacity.

12. Financial viability

As it is a private firm established with the primary objective of generating profit the project
should be financially viable for the promoter. These financial measures for this study are
income statement cash flow analysis.

12. 2. Cash Flow Analysis.

The liquidity position of the project can be seen from the project cash flow statement. According
to this projection the project will be healthy financial position to repay all its debts. This is
because the analysis shows that the project will have positive cash flow throughout the
anticipated life.