NEGASI Feasiblity Study Final

Feasibility Study
Loan for Working Capital Loan
Businesses By: KUKUFTU TRADING PLC
Submitted to: Commercial Bank of Ethiopia Bank

(CBE)
December 2023
Contents
2.2. Background Information of the business.........................................................................5
2.3. Current status of the business........................................................................................6
2.4.1. General objective.....................................................................................................6
2.4.2. Specific objectives...................................................................................................7
2.4.3. Objective of the Business Plan....................................................................................7
2.4.4. A Rational for Bank Loan.............................................................................................7
4.1. Business Definition........................................................................................................10
4.2. General overview..........................................................................................................10
4.3. A SWOT Analysis/ Current Situation Analysis..............................................................12
4.4. Projected Demand........................................................................................................13
4.5. Marketing Arrangement and Strategy...........................................................................14
4.6. Marketing channels.......................................................................................................15
6. TECHNICAL ASPECTS OF THE PROJECT.......................................................................18
6.1. Packaging, Storage, and Shipment...............................................................................18
6.2. The trend of local situations..........................................................................................18
6.3. Additional Amount of Investment..................................................................................18
7. FINANCIAL ANALYSIS........................................................................................................19
7.1. Total Investment Cost...................................................................................................23
7.2. Working Capital.............................................................................................................23
7.3. Projected Financial statements.....................................................................................23
7.3.1. Revenue.................................................................................................................23
7.3.2. Cash flow...............................................................................................................24
7.3.3. Pay-back Period.....................................................................................................24
8. SOCIO ECONOMIC BENEFIT AND ENVIRONMENTAL IMPACT ASSESMETS OF THE
PROJECT....................................................................................................................................27
8.1. Socio- Economic benefit of the project..........................................................................27
8.2. Environmental Impact Assessments.............................................................................28
9. CONCLUSION AND RECOMMENDATIONS......................................................................29
Annex…………………………………………………………………………………………..29
KUKUFTU TRADING PLC Business Plan, December, 2023 Page 2

1. EXCUTIVE SUMMERY
Ethiopia economy is projected at 8.7 percent in 2021/22 (July 8, 2021 – July 7, 2022) compared
to 4.9 percent growth forecast for the world and 3.8 percent for Sub Saharan Africa economy.1
The textile and garment industry is one of the leading industries that contribute to rapid
economic growth. But with rapid progress comes a host of new challenges. Given the rapid
growth in the industry sector, in general, and garment and textile industry, in particular, demand
for garment products elastic. All members of communities (rural and urban) demand local made
garment, currently. Cognizing the fact, KUKUFTU TRADING PLC has been engaging in
garment business and, as any business; it contributes to the country’s Home Made Economic
Development Plan.
As many garment industries, KUKUFTU TRADING PLC objective is produce quality garment
products in different types of grade, quality, and quantities to satisfying domestic market, and
generating profit for the business. The garment business, particularly, specialized in the
production of Five types of products to satisfy the ever-increasing demand for the same. Apart
from doing the current businesses, the business has set plan to diversify its products and
maintain quality. The business will strive to improve the quality of garment products through
adopting new technologies. It plans to promote its products through handling the existing
customers who, most of them are, from different regions. It has also plan to export finished
products in the long run.
Despite financial constraint, the business has continued and become one of the dependable
business firms, which engaged in garment business. To meet the current demand and earn
profit for expansion, the business, currently in short of working capital, this business plan is,
therefore, prepared by KUKUFTU TRADING PLC to secure bank loan for the working capital of
its businesses. Objective of the project is to get bank loan for working capital to enable the
business expand and diversify its business.
The total estimated required expansion cost of the business plan is Birr 7 million. This includes
the cost of raw materials, labor marketing and promotion etc. From the total working capital,
40% (2, 20,000.00) will be covered by the owner, and the remaining (60%) 4,800,000.00 million
(partly overdraft and the remaining term loan) from bank loan.
The demand projection for the business’s product/ items is substantial and is increasing with
time. It will have demand by the current customers which currently buying the items, and will
capture other customers too. Accordingly, if the garment products/items are sold, the business
will generate a total income of Birr 48.5 million at the end of the fifth year, will capable of
repaying its loan. This is a reasonable period for the business to settle its projected and
unanticipated costs (expenses).
Apart from generating profit, the business will expand its economic and social benefits such as
increasing the level of investment, tax revenue, alleviating poverty, and employment creation.
This business plant attempts to evaluate the technical and economic aspects of the proposed
plan. Thus, the report enables CBE to grant/allow Birr 4.8 million loan for the period of five
years.
1
Ethiopia economic growth 2022 - Search (bing.com)

2. BACKGROUND AND DESCRIPTION OF THE BUSINESS
2.1. Background
Garment buyers are always on the lookout for economically viable sourcing destinations
having abundant and cheap labor. Unlike Bangladesh, China, India, Vietnam, Indonesia
and Sri Lanka – which are getting costlier due to increasing labor and infrastructure
costs, Ethiopia – considered Horn of Africa with an estimated 120.3 million population
(2021) – is emerging as one of the destinations of choice being the fastest growing
economy in Africa with abundant cheap labor. 2 Even the Government of Ethiopia is
putting focused and honest efforts in order to encourage investments in textile and
garment sector, which has resulted into a number of investments from countries such as
Turkey, India, South Korea and China in cotton cultivation and other diverse industries.
Until recently, the country provides a promising investment environment to the textile,
garment sector, and is all set to become one of the preferred garment-manufacturing
hub in the near future.
The fifth fastest growing economy of Africa, with an average real GDP growth fell to
5.3% in 2022 from 5.6% in 2021 but remained above East Africa’s average (4.7% in
2021 and 4.4% in 2022). Supply-side drivers of growth were industry and services, and
demand-side drivers were private consumption and investment.3
Competitive and Comparative Advantage of Garment Industry in Ethiopia
 Abundant easily trainable and low wage labor force/More than55%Young

population/
2
https://www.google.com/search?
q=Ethiopia+population&rlz=1C1YTUH_enET1077ET1077&oq=Ethiopia+population&gs_lcrp=EgZjaHJvbWUyDAgAEE
UYORixAxiABDIGCAEQIxgnMgoIAhAAGLEDGIAEMgwIAxAAGBQYhwIYgAQyBwgEEAAYgAQyBwgFEAAYgAQyBwgGEA
AYgAQyBwgHEAAYgAQyBwgIEAAYgAQyBwgJEAAYgATSAQg3MDM4ajBqN6gCALACAA&sourcei
3
Africa Economic Outlook, (AEO), 2023.

 The cheapest and reliable energy supply /Mainly hydro-power/
 Abundant water supply/River and ground/
 Untapped raw material potential, particularly cotton
Though the sector is the largest industry in the country, it does not expand scaled up
adequately. Despite the business have been starting their operation for years, most
remaining in micro and small-scale levels. Even though micro and small enterprises of
garment industries have begun flourishing and their contribution to satisfy domestic
market, there is a long way to go to meet the existing demand for domestic garment.
‘Efoyta’market’ areas are areas where micro and small garments production are
located. It is in the Addis Ketma sub city and both raw material and sales of the finished
goods undertaken. KUKUFTU TRADING PLC garment is located in the same area, and,
currently, in the process of diversify and expanding the current products so as to fill the
existing and future gaps of producing and promoting import substitution products to
narrow the foreign currency gaps while importing. The main objective of the business is
to produce different types of garment products and earn profit as any business
endeavors.
2.2. Background Information of the business

KUKUFTU TRADING PLC initially was established by the current Managing Directtor of the
ffirm Ato Negasi G/Libanosand W/ro Letemicale G/gbregeizabher June 10, 2022 legally
registered as private limited company in Addis Ababa City Administration in accordance with the
commercial code of Ethiopia. It has business and investment licenses.
The initial capital was Birr one million thousands, and gradually reached. The Ato Negasi
G/Libanos.is a Managing Director of the business. He has extensive experience in different
businesses especially in garment business (production and sales). Besides, skilled and
professional work force employed, including garment specialists and personnel in the areas of
sales and finance. It also has its own organizational and managerial structure. The business
has also put at place a room to utilize professionals in different line of studies, when
required. The detail of management profile annexed with this plan.
Taking this opportunity in to consideration, KUKUFTU TRADING PLC has already been
engaged in the business, and has already the necessary facilities, including the

machines/equipment to process or produce different types of products . It has domestic
customers (whole sellers from the regions and within Addis Ababa). This business plan,
therefore, presents the plan for expanding and diversifying the current businesses.
2.3. Current status of the business

The business is located at Addis Ababa City the production center is situated in Addis
Ketema sub city Woreda 10, house number 036/05. It is legally got registered and has
business license that allows the business to engage in garment businesses. It also
registered and has Tax Identification Number-00569t works to expand and diversify its
product by utilizing “state-of-Art machines. It also has set plan to expand its business
through investing on that meet foreign markets.
Table 1: Type and Number of machineries
No Types of Machine Quantity Remarks

1 Sweeping Machine 40 Latest type
2 Cutter 2 Latest type
3 Ironing tools 3 Latest type
4 Heat Compressor 3 Latest type
Currently, the firm produces T-shirts, Jump suits, sport wears, women and girls body dress,
traffic wears, in different size and quality.
2.4. Descriptions
2.4.1. General objective
The general objective of the business is to produce quality garment products in different
types, quality, quantities and packaging and satisfying domestic market, and generate
profit for the business as many commercial investments.
2.4.2. Specific objectives
The specific objectives include:

 Increase profit through expanding and ensuring the quality and quantity of
current products.
 Protect the limited foreign currency of the country by importing high
quality/world standard products.
 Reduce the one of the country problems-unemployment through expanding
its business.
 Improve the technology and experience knowledge sharing to similar firms
in the country.
2.4.3. Objective of the Business Plan
The general objective of this business plan is to enable the business get access to bank
loan for exporting required for working capital in order to produce garment products in
different types, size, quality, quantities and packaging as much as to satisfying local
clients’ requirements
2.4.4. A Rational for Bank Loan

This business shows the best characterization of modern business; standard quality that
would create a difference in the garment business of the country. The reasons behind
requesting the loan are mainly three: (1) to expand the business to meet the unmeet
local demands, and earn profit, (2) safe foreign currency of the country by producing
high quality import substitution products, and (3) create job opportunity for unemployed
youth.
3. ORGANIZATIONAL STRUCTURE AND MANAGEMNT

The business has a two tire structure, consisting of the shareholders and the
secretariat. The owners/shareholders are the supreme decision makers. The
secretariat, headed by manager under which executive staff/employees consisting of
key personnel is organized is responsible to follow up and implements day to day
activities of the business. They are largely categorized under two major parts-direct
and indirect labor/staff.

The organization has head offices in Addis Ababa with total employees 71 and
structurally well organized to carry out its activities. The business has long time
experience in the field.
Technical employees are comprised of different line of studies such as sweeping,

cutting, designing, finance and marketing. They have extensive hand-on experiences in
each field. Large number of staff does not require in the side of the Business.
Additional direct labor will be recruited, and this loan for working capital is part of the will
be used to cover the intended cost. The Managing Director, sales person, ogistic,
finance officer are responsible to managing the day-to-day activities/operation of the
business. Total list of approximate manpower required for the business is listed in the
table below.
Table 2: Types and Number of Employee
No Employees Types Number of Qualification

employees
1 Production-Sweeping machine 40 Above secondary school

workers and have special training
in sweeping
Production-Cutter achene operator/
2 workers 4 BA
Finishing (Ironing, overlook etc)

3 25
Production manager/supervisor
4 1 BA
5 Sales person 1 BA
The key staffs are those in the direct labor (the majority who directly involve in the
production). The Managing Director will administer and manage the operation, man
power and assets of the business. The support staffs are responsible to provide
operational services and supervise the project activities. Organizational structure
indicates, the project is managed by the Ato
Negasi-Managing Director.

Apart from the key staff, the business will make use of external professionals such as
business consultants, finance professionals, legal advisors as required/needed etc.
To enhance the capacity of employees and the leadership/owners, need-based capacity

building activities in the form of training, workshop, experience visits will be undertaken.
See the detail form annex. For organizational structure, profile of key management staff.
4. MARKETING PLAN

4.1. Business Definition
Garment- The garment is the most common term used to name our clothes. Other
forms of garments are apparel, attire, dress, uniform, and clothes. The article we wear
to cover our body is known as a garment. A fabric sheet is a cloth but not a garment.
The garment is defined as an article of clothing by the free dictionary. (Source:
com/garment).
Garments are made from fabrics by cutting the fabric and stitching garment patterns
together. Other than textile fabrics, garments can be made from leather.
Import substitution- Import substitution is the idea that blocking imports of

manufactured goods can help an economy by increasing the demand for domestically
produced goods.
Import substitution industrialization- is an economic theory adhered to by

developing countries that wish to decrease their dependence on developed countries .
Marketing- The activity or business of promoting and selling products or services,

including market research and advertising.4 It also defined as activities a company
undertakes to promote the buying or selling of a product or service. Marketing
includes advertising, selling, and delivering products to consumers or other businesses.
Some marketing is done by affilates on behalf of a company. 5
4.2. General overview

In general marketing is the flow of goods and services from the area of production or
service delivery to the area of consumption or utilization of these services with a
mutually agreed price and situations and the final exchange between the producer and
service provider, or sellers and buyers with a give time, price, place and condition can
referred as market.
4
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q=marketing+definition&rlz=1C1YTUH_enET1077ET1077&oq=marketing+defi&gs_lcrp=EgZjaHJvbWUqCQgAEAAYQ
xiKBTIJCAAQABhDGIoFMgYIARBFGDkyBwgCEAAYgAQyBwgDEAAYgAQyDAgEEAAYFBiHAhiABDIHCAUQABiABDIHCA
YQABiABDIHCAcQABiABDIHCAgQABiABDIHCAkQABiABKgCALACAA&sourceid=chrome&ie=UTF-
5
https://www.investopedia.com/terms/m/marketing.asp

In this part of the business plan, the market aspect (contemporary and projected
demand and supply, contemporary and future demand-supply gaps, marketing
arrangement of the business market, trend, and other related issues will be addressed.
In the context of the document, it is the procurement of inputs and sales of products,
and production of garment products will be explained.
Market for garment products is depend on or determined by different factors such as:
 Faster growth in the sector,

 Improvement in knowledge and skills of competitors in the sector and end
users of the products.
 Easy access for quality products with a reasonable prices
 Availability and price of the substitutes, i.e. other garment products such
as imported garment, cost and the like.
 Experiences and changes in preferences of users for such types of
products.
 Life style of the population/consumers.
 Domestic supply capacity of quality of products trade policies and trends
 Promotion and advertising strategies of the business.
 The socio-economic and political situation of the country.
Generally, there are four main factors that make the use of the domestic garment
products attractive:
(1) It enhances the business interest of customers/business men and women; (2) It
expands alternatives for users/consumers (3) It safes foreign currency of Ethiopia and
(4) It is one of the basic products for consumers or the country.
Due to the government emphasis on promoting small business, in general, and garment
industries, in particular is coming up very fast in the country. This creates to increase
the demand of the local garment products with the increase of tendency of buyers.
KUKUFTU TRADING PLC’s Garment almost fulfill the determinate factors for market for
garment products listed above/

4.3. A SWOT Analysis/ Current Situation Analysis
The population of the world is growing at alarming rate, and there are eight billion at this
point in time. Before the COVID-19 pandemic, in general, the economy of majority of the
world population is also seen increasing from time to time. There are, however, differ-
ences among countries and within the same country countries as well as among people
in the same country. The propensity to consume for most world population is signifi-
cantly wide the international trade remains favorable for the so called “developed coun-
tries”-western countries. Most developing countries, particularly African countries, ex-
port primary products which in most cases have less return, and import high value prod-
ucts. This is one of the reasons for the existence of unfavorable balance of trade for
such countries..
If we consider the Garment industries in Ethiopia, in general, despite the COVID-19

pandemic, internal war and conflicts, there is increasing demands for home-made
garment products in Ethiopia.
Taking into account the contribution of home-made garment products for the country
economy, after the reform (during 2018 and 2019), the Ethiopia government tries to
create conducive infrastructure, legal and policy environments. These policy and legal
reforms as well as the efforts made to improve system and government structure has
made improvement in the quantity industrial products in general, and the garment
products, in particular. Very recently, the Ethiopia industry sector, including garment
industries has managed to resist the impacts of COVID-19 and improve performances.
Similarly, despite the internal conflicts and war, garment industries strive to perform
better. But it should be noted, the situations prevailed, particularly for the last three
years challenged the industries, if not significantly.
4.4. Projected Demand

The outcomes of the analysis on the socio-economic situation of the country demand for
home-made garments increase in the coming years. The general economic
development of the country as well as the world is more likely recover from the conflict,
and resulted in increase for Ethiopia economy, including the garment industry. Despite

internal war and conflicts, the demand for home-made garment products will increase in
the coming years as well.
When looking into the determinate factors for garment products include, but not limited
to: quality of products, cost, sales price, sales price of importer communities/products, ,
government tax policy etc. It is observed that, in general, life style of the population,
including the rural communities is changing and the preference for home-made garment
products will increase.
Moreover, the business will utilize multiple marketing strategies. Above all, the
reputation and the quality and less price of the home-made garment products will
largely have great bearing on the demand. Ethiopia community, in general, and youth,
in particular inclined to physical exercise and sport, which, in turn, largely increase the
demand.
Moreover, in terms of price, in most or all cases, price of the home-made garment
products determined by the raw materials cost which mostly are imported. However,
compare to imported garment, the price of home-made garment is by far lower than the
export ones. Therefore, if one considered the demand for garment products, the
domestic market is anticipated to increase at growing rate.
A number of factors contribute or will also contribute in the future for next three to five
years for the demand. These include, among other:
 Rising e-commerce retail sales,

 Increase the disposable income Ethiopians,
 Increasing ready-made garments preference,
 The share of the demand for imported garment products will likely decline as
home-made garment products’ quality improved.

Taking the contributing factors for the increased demand for home-made garment
products, it can be draw projection to portrait the future demand of KUKUFTU
TRADING PLC Garment. The projection would provide one clue on the demand of
home-made garment products.
The anecdotal information and news release from government revealed that here is, in
general, a huge demand for home-made garment products of Ethiopia. In nutshell,
currently, the demand is believed to be elastic. It is expected that the unsatisfied
demand for home-made garment products will increase in the coming years.
4.5. Marketing Arrangement and Strategy

Home-made garment products marketing focuses on marketing of products in the
country. Although it applies strategies that are similar to international marketing,
home-made garment products marketing tends to be more challenging, since one must
appeal to different cultures, ideals and tastes of different community groups. Laws and
regulations are also different from place to place. Home-made garment products
marketing may entail a greater risk and effort and may require substantial financial
resources.
Theoretically, marketing strategy includes a plan of action design to promote and sale a
product or service. It is a long term forward looking approach to planning with
fundamental goal of achieving a sustainable competitive advantage.
Thus, when looking into the marketing strategy to be employed in garment and textile
garment products which the business is rely on the past and existing marketing trend
and other marketing related practices internationally, knowledge about how these
garment products will reach the desired market and thus fulfill the business goal, is a
crucial. In line with this, the current market arrangement dominated by a whole sale
market.

In nutshell, the business will employ accepted marketing strategies to promote sales of
the products, including oonline marketing such as websites and email marketing. Facebook
and Google ads are some of the most common online marketing strategies, and people in
most regions in the countries and countries have access to them. KUKUFTU TRADING PLC
Garment will use digital-marketing, including online sales strategy when the business grow
and the desire for such market strategies become crucial. Currently the business will largely
focus on whole sales for retail business.
4.6. Marketing channels

To plan about garment products distribution, knowledge on two different aspects is a
must:
(i) The marketing channel that is available in the garment products Market.
(Ii) The most appropriate channel is to link the garment products with domestic
operations to the local channels.
The criterion chosen to assess the appropriate marketing channels for the business
garment products is focused on locally and internationally accepted channel this
channel may allow the business takes comparative advantages for price and volume of
sales. From the nature of the products, the business will use direct channel (such as
selling to whole sales which is popular for sell such products.
Assumptions
Garment products- T-shirts, Jump suits, sport wears, women and girls body dress, traffic
wears,
According to the report of the business, the garment has been produced different
garment products which the total annual cost of annual average sales and revenue in
the year 2022/23 in tenth million was 13 million.
4.7. Competitive Advantages

One of the competitive advantages for the garment products is the long period hands-on
experience of the business in garment products, and the potential to expand. The

organizational management and the simplicity of market strategies, low sales price, and
channels employed by the business will be contributing its competitive advantages.
This increases the competitiveness, and hence demands for the garment products. The
business is located in the centre of the city nearer to ‘‘merkato’ one of the biggest
market in Africa, and ‘Kolfe Efoyta’ market located around Kolfe where large number of
whole sellers comes from different regions. This will create demand for garment
products, and can be one the competitiveness advantages of the building.
5.SWOT ANALYSES
A. Strength

The ample experiences of the owner and managing director and management, and
employees of the business; the business’s commitment and experiences gained in
garment products; the quality of the garment products of the business which satisfied
the demand for the middle class segment of the population; and the capacity to be
competitive in the Market are the strengthen of the business.
B. Weakness
Low or absence of standard pricing for the products as well as the inability to diversify
and start processing garment products for foreign markets. Can be considered as
weaknesses of the business.
C. Opportunities
As many businesses, particularly, micro and small businesses, and the garment
business has wider opportunities, including:
 Availability of cheap labor

 Growing demand for products
 A considerable change in the way of life of the people of Ethiopia
communities, including communities of rural areas in consuming the
products,
 The government support and conducive legal environment and other
business development (BDS) supports
D. Threats
 Price fluctuation: the garment product inputs costs is fluctuated from

time to time may leads the business to exert higher efforts to collect
information in determining fair price for the products.
 Price of garment products is highly volatile in the world market as well in
the country. This leads the business to invest more than the current
capital to get return because of increasing the volume of production,
hence sales.
 Internal war and conflicts may protect free movements of business men,
particularly whole sellers who come from different regions.

6. TECHNICAL ASPECTS OF THE PROJECT
6.1. Packaging, Storage, and Shipment
A part from production, finishing quality, packaging, and storage, will contribute to the
quality garment products. The Ethiopia Micro and Small Enterprise Development
Agency and other relevant government office provide back-up services to small scale
garment producers to take care of the finishing quality, packaging, and storage, of
garment products. The business, in this regards, is aware the fact that technical
considerations are vital to increase the volume of garment products and revenue and
has been working harder.
6.2. The trend of local situations

The market study indicates that the unsatisfied demand for the business’s garment
products require to be scale up and sustained. This due to the fact that the population
of the country is growing at alarming rate and reached near to 115 million which
demand garments products as the basic need. The life style of most people will be
changed and demand garment products than traditional clothes. As the result, this
demand is projected to grow in the coming years. Based on the information obtained
from the market situations, the product will have reasonable share of national market in
the first year and will increase starting from the second year, including in the
international markets. The assumption for determining volume of sales is determined
based on average annual in the domestic market.
6.3. Additional Amount of Investment

Theoretical for expanding and diversifying the garment products, the business should
have enough amounts of working capital that enables it to undertake the business
efficiently. Based on the capacity utilization of this particular business plan a total of Birr
6 Million is determined as part of investment/capital to be owned through bank loan to
serve as working capital and promote its business.

7. FINANCIAL ANALYSIS
The financial analysis of the project is based on the information, data, and assumptions
presented in the previous chapters and the following assumptions. The financial
analyses are designed to provide the overall financial position and performance of the
business at a time. Market assessment has been conducted to identify the price of each
item. In order to give this overall picture, major financial reports that used on the regular
base are important and reviewed to show the financial status like projected profit and
loss in addition, market assessment to determined purchase cost and selling price.
Assumptions
 Income from existing and additional capital are assumed to be doubled in the
expansion year, and increase by 30% per annum for five years due to securing
loan to working capital and increase in volume of inputs.
 Expense is assumed to be increased by 15% per annum for the first three years.
 From the total quantity purchased 20% will remain unsold, the remaining remain
as stock/inventory of items. Only 80% of the quantity sold
 The quantity of the each year is determined by assuming 20% increase in each
taking the 2022/2023. base year
 The quantity of raw material used is 40% of the total purchase
Table 1: Types and Cost of raw materials of

Garment Products
Value of raw
unit Unit of Quantity materials
No Types of Raw Materials price measurement purchased purchased
1,125,
2500 000.00
1 Pollster 450 Kg
1,260,
3000 000.00
2 Cotton 420 kg
2,160,
4500 000.00
3 Politer cotton 480 kg
855,
2250 000.00
4 Sport wear material 380 kg
3,000,
200 000.00
5 Packing material 15000 pieces

195,
Shining traffic clothe 7500 000.00
6 material 26 mt
1,650,
200 000.00
7 Waste plastic 8250 Pack
10,245,0
00.00
Total
Table 2: Selling price of Garment Products
No Types of Sport Wears unit price Unit of Quantity

measurement
1 T-shirts 1600.00 Dozen 1

2 Jump suits 2640.00 Dozen 1
3 Sport wears 1740.00 Dozen
4 Women and girls body clothes 1440.00 Dozen
5 Traffic wears 960.00 Dozen
Table 3: Summary of Total annual purchase
Annual
Quantity
Types of raw unit purchase Total value of
material price unit (Dozen) purchase
T-shirts 1600.00 Dozen 1300 2,080,000.00
Jump suits 2640.00 Dozen 1800 4,752,000.00
Sport wears 1740.00 Dozen 2000 3,480,000.00
Women and girls body 1440.00 Dozen 1320 1,900,800.00

clothes
Traffic wears 960.00 Dozen 900 864,000.00
Total annual sales 1600.00 Dozen 13,076,800.00

Items Base year year 1 Year 2 year 3 4 5 Total
Purchase cost
1,125,000.00 1,350,000.00 1,620,000.00 1,863,000.00 3,726,000.00 4,471,200.00 5,365,440.00

Pollster
1,260,000.00 1,512,000.00 1,814,400.00 2,086,560.00 4,173,120.00 5,007,744.00 6,009,292.80

Cotton
Pollster 1,125,000.00 1,350,000.00 1,620,000.00 1,863,000.00 6,359,040.00 7,630,848.00 9,157,017.60
Cotton 1,260,000.00 1,512,000.00 1,814,400.00 2,086,560.00 3,146,400.00 3,775,680.00 4,530,816.00
Politer cotton 1,920,000.00 2,304,000.00 2,764,800.00 3,179,520.00 7,452,000.00 8,942,400.00 10,730,880.00
Sport wear
material 950,000.00 1,140,000.00 1,368,000.00 1,573,200.00 516,672.00 620,006.40 744,007.68
Packing material 2,250,000.00 2,700,000.00 3,240,000.00 3,726,000.00 8,552,412.00 10,262,894.40 12,315,473.28
Shining traffic
clothe material 156,000.00 187,200.00 224,640.00 258,336.00 33,925,644.00 40,710,772.80 48,852,927.36
Waste plastic 2,582,250.00 3,098,700.00 3,718,440.00 4,276,206.00 3,726,000.00 4,471,200.00 5,365,440.00
14,750,280.0
10,243,250.00 12,291,900.00 0 16,962,822.00 4,173,120.00 5,007,744.00 6,009,292.80
Total purchase
Revenue from
Garment
Products
- -
T-shirts 2704000.00 3515200.00 4569760.00 5940688.00 7722894.40
2,080,000.00 2,080,000.00
Jump suits 4,752,000.00 6177600.00 8030880.00 10440144.00 13572187.20 17643843.36 4,752,000.00
Sport wears 3,480,000.00 4524000.00 5881200.00 7645560.00 9939228.00 12920996.40 3,480,000.00
Women and
girls body
clothes 1,900,800.00 2471040.00 3212352.00 4176057.60 5428874.88 7057537.34 1,900,800.00
Traffic wears 864,000.00 1123200.00 1460160.00 1898208.00 2467670.40 3207971.52 864,000.00
Total annual 13,076,800.0

purchase 13,076,800.00 16999840.00 22099792.00 28729729.60 37348648.48 48553243.02 0

Total revenue
22,099,792.0
from Garment 16,999,840.00 28,729,729.60 37,348,648.48 48,553,243.02 67,829,361.60
13,076,800.00 0
products/cash
inflow
Total Net cash
flow before 4,707,940 7,349,512 11,029,394 16,108,245 23,064,759 -23,642,041
expenses 2,833,550.00
4,640,120.75 7,394,438.86 11,228,562.29 14,895,802.22 21,801,929.17 23,263,121.90

Expenses 1,904,983.00
4,640,121 7,394,439 11,228,562 14,895,802 21,801,929 23,263,122

Net cash flow 1,904,983

The initial Investment of the businesses was Birr 30,000, which rose in cash from
owner.
The business currently needs estimated Birr of 6 million (Birr 1,200,000.00 from owners
and Birr 4,800,000.00 bank loan (as overdraft and term loan) for raw materials labor,
and other running costs/working capital.
7.1. Total Investment Cost

The total investment cost of the project including working capital is estimated at Birr 6
million. The rate to be covered by the business is 40% and the remaining (60%) from
bank loan. see the details below.
Table 3: Total Working capital need and Sources

Description Owner's Share of Bank Loan Total Project's
Share
(Birr) (Birr) Working capital
Berth Garment 1,200,,000 4,800,000 6,000,000
Percentage 40% 80% 100%
7.2. Working Capital

Working capital is a measure of both a business’s efficiency and its short term financial
healthiness. Acceptingly, working capital calculated as current asset minus current
liability of a business firm or organization. The data and the information obtained from
the business indicate that the business has Birr 12,486,181.00 current assets, and Birr
no liabilities and Birr 426,994 Cash at bank. As stated in the previous sections, the
demand for the products is elastic. Working capital will utilize for direct operation,
administrative expenses, advertisement and promotion and for unforeseen
payments/expenses. Therefore, the current working capital cannot afford the costs,
and that is why the business request a loan amounted to 4.8 million. .
7.3. Projected Financial statements

7.3.1. Revenue
The total revenue expected from this project is assumed to drive from the business. The
projection for the income statement is primarily derived from national/domestic market

trend. The financial statement annexed with this business plan portrays the projection
for the three years (loan period).
7.3.2. Cash flow

The cash flow projection
The cash flow projection shows the net cash balance of Birr 12.07 million at the end the
first year which is expected to grow, and this indicates business will have surplus cash
over the first three years its operation. In projection the cash flow, care is taken to
include all items (inflow and outflow of cash), including:
 As financing is the source of cash, the loan from the bank is considered as cash
inflow.
 Financing can be also come from the owner equity, thus we include as Cash
inflow.
 We also include cash out flow re payment of loan.
 The cash generated from sales of products

Thus, the net cumulative cash flow during the loan period is amounted to Birr 66.5
million.
7.3.3. Pay-back Period

The pay- back period, also called pay-off period is defined as the period required for
recovering the original investment outlay through the accumulated net cash flows
earned by the project. Accordingly, based on the projected cash flow it is estimated that
the project’s initial investment will be fully recovered within or before three years.
Financial Evaluations
Profitability
Based on the projected profit and loss statement the Business will generate a profit
beginning from the first year of operation and increase on wards throughout its
operation life. Annual net profit before tax will grow from birr 8.4 million to birr 27.3

million end year. Moreover at the end of the project life the accumulated cash flow
amounts to birr 66.5 million.
Break –even Analysis
The break-even analysis establishes a relationship between operation cost and

revenues .It indicates the level at which are in equilibrium .to this end ,the break –even
point of the project including cost of finance when it starts to operation at all full capacity
(year) is estimated by using income statement projection. As it can be read from the
excel file, the business will reach more than breakeven point at the first year of the
project financed.

Partial view of the Garment Production Centre

8. SOCIO ECONOMIC BENEFIT AND ENVIRONMENTAL
IMPACT ASSESMETS OF THE PROJECT
8.1. Socio- Economic benefit of the project
As stated in Ethiopia Economy Outlook, real GDP growth fell from 10.5% to 5.3% in
2022 from 5.6% in 2021 but remained above East Africa’s average (4.7% in 2021 and
4.4% in 2022). Supply-side drivers of growth were industry and services, and demand-
side drivers were private consumption and investment. Inflation rose to 34% in 2022
from 26.6% in 2021. Both growth and inflation were adversely impacted by internal
conflict, drought, and the effects of Russia’s-Ukrine, and Israle-Hamas wars of Ukraine
on commodity prices. The fiscal deficit widened to 4.2% of GDP in 2022 from 2.8% in
2021 due to higher defense spending and weak revenue performance. 6 Cognizing the
fact, the government of Ethiopia strives to grow the economy by issuing different
directives that allow private sector to largely involve in the investment. To increase the
economic growth, very recently, the government issued “Home-Made Economic Growth
Plan”. Therefore, the development and expansion in the business sector is very
important to form a practical change in the sector. As such there will be a number of
reasons to be stated that the project can achieve in the economy of the country. Among
these socio economic benefits one can easily state the followings:
a) Create Job Opportunity: The contribution of such project in job opportunity
creation for a lot of service work and there by salary income generation for
the employees is also significant. The project is expected to create new
permanent employments for semi-skilled and unskilled job seekers. As cut
large logs into custom wood pieces for any project demand for more labor or
employees the contribution of the business, in this regards, is significant.
b) Source of Government Income: government get income in the form of
income tax from employees, and profit tax from the business.
c) Forgone currency Contribution: This sector will safe foreign currency, in
the short-run, and increase in the long-run which contribute to economic
growth of the nation and also. So, this project has its own contribution in
6
https://www.afdb.org/en/countries/east-africa/ethiopia/ethiopia-economic-outlook

attaining the huge plan of the country in two main directions. The primary
contribution is that the project can add its own value on the economy.
Generally, the project can create employment. The project will safe foreign currency,
and also generate tax revenue-generate income for the Government in terms of payroll
tax from employees of the business.
8.2. Environmental Impact Assessments

Due to the nature of the investment, except the business, the project has no
potential negative impacts.

9. CONCLUSION AND RECOMMENDATIONS
The business plan is prepared to provide financial access to one of the top priority
businesses/sectors of the national economy. The involvements of private investors
in such kind of businesses are welcomed and contribute to higher return of the
country development.
This business plan objective is attainable, and very supportive to the overall
development goal of the country in saving foreign currency creation, job creation,
income generating to the government to the society in line with the market study of
the project shows the existence of demand for such products this, in turn, indicates
that is found economically, financially and technical feasible.to finance the business
through financing the business for working capital
Based on the above facts the easiest forwarded the following recommendations.
 The business should exert maximum efforts to avail adequate technical
staff and other inputs. It is equally important to organize periodic training
so that technical staff to have skill that go in line with changes in the
fashion industries.
 To narrow the challenge in the market the business need to properly
identify potential market destinations.
 Maximum effort should be exerted to diversify and maintain the quality of
the garment products as per the international standards. Here, proper
finishing and packaging required.
 As the business plan indicates the business is economically, socially,
financially and technically feasible and plays significant role in Home-
made Economic Growth Policy of the country, as one of actors of the
development, CBE advised to approve the request working capital.
In general, the business opportunity to fill the demand gap would be quite profitable.
Thus all concerned parties, including CBE and government relevant ministries,

bureaus expected to exert maximum efforts for such types of business to be viable.
In this regards, CBE expected to allow loan required for the business.
APPENDIX
Annex me: Organizational structure
KUKUFTU TRADING PLC has a mission to contribute to the country

economy/development through quality, and quantities of garment products and
satisfying, mainly domestic clients’ requirements, and generate profit for the business as
many commercial investments.
The business is founded by W/ro and Ato Negasi W/Libanos Letemicale

G/gbregeizabher as PLC and has head office in Addis Ababa. It has professionals in
different line of studies and has ample experiences in different areas including textile
industries management, finance, marketing etc. Ato Negasi W/Libanos is a Managing
Director, and has direct or pertinent experiences in the business.

Annex III: Organizational Structure
Share holders
Managing Director
Property
Marketing Dept. Garment Finance &
Management
processing Dept. Administration Dept.
Dept.
General Service.


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Feasibility Study

Loan for Working Capital Loan

Businesses By: KUKUFTU TRADING PLC

Submitted to: Commercial Bank of Ethiopia Bank

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 2

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 3

Competitive and Comparative Advantage of Garment Industry in Ethiopia

 Abundant easily trainable and low wage labor force/More than55%Young

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 4

2.2. Background Information of the business

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 5

2.3. Current status of the business

Table 1: Type and Number of machineries

No Types of Machine Quantity Remarks

3 Ironing tools 3 Latest type

4 Heat Compressor 3 Latest type

2.4.2. Specific objectives

The specific objectives include:

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 6

2.4.3. Objective of the Business Plan

2.4.4. A Rational for Bank Loan

3. ORGANIZATIONAL STRUCTURE AND MANAGEMNT

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 7

Technical employees are comprised of different line of studies such as sweeping,

Table 2: Types and Number of Employee

No Employees Types Number of Qualification

1 Production-Sweeping machine 40 Above secondary school

Finishing (Ironing, overlook etc)

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 8

To enhance the capacity of employees and the leadership/owners, need-based capacity

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 9

Import substitution- Import substitution is the idea that blocking imports of

Import substitution industrialization- is an economic theory adhered to by

Marketing- The activity or business of promoting and selling products or services,

4.2. General overview

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 10

 Faster growth in the sector,

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 11

If we consider the Garment industries in Ethiopia, in general, despite the COVID-19

4.4. Projected Demand

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 12

 Rising e-commerce retail sales,

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 13

4.5. Marketing Arrangement and Strategy

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 14

4.6. Marketing channels

4.7. Competitive Advantages

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 15

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 16

 Availability of cheap labor

 Price fluctuation: the garment product inputs costs is fluctuated from

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 17

6.2. The trend of local situations

6.3. Additional Amount of Investment

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 18

Table 1: Types and Cost of raw materials of

KUKUFTU TRADING PLC Business Plan, December, 2023 Page 19

Table 2: Selling price of Garment Products

No Types of Sport Wears unit price Unit of Quantity

1 T-shirts 1600.00 Dozen 1

3 Sport wears 1740.00 Dozen

4 Women and girls body clothes 1440.00 Dozen

5 Traffic wears 960.00 Dozen